Friday September 19 Housing and Economic stories

TOP STORIES:

MEDIA AND POLITICIANS NOW LOOKING FOR SOMEONE TO BLAME:
· Washington Wants to Hear From Fuld - (www.nytimes.com) A lot of people these days would like a word with Richard Fuld Jr., the chairman of Lehman Brothers. But the pugnacious veteran of Wall Street has been pretty quiet since his firm slumped into bankruptcy protection in the wee hours of Monday morning, leaving shareholders all but wiped out and employees wondering if they still had a job. Now, some people on Washington are asking to hear from Mr. Fuld — specifically, members of the House Committee on Oversight and Government Reform. The committee, led by Henry A. Waxman, a California Democrat, sent a letter to Mr. Fuld on Tuesday requesting his testimony at a hearing next week, which will examine the “regulatory mistakes and financial excesses” that led to Lehman’s downfall.
· In Washington, Pointing Fingers and Finding Blame - (www.nytimes.com) Amid the recriminations and finger-pointing, Democrats and Republicans voiced concern for American taxpayers as they reacted to the bailout. The government’s rescue of A.I.G. stemmed “from failed regulation, reckless management and a casino culture on Wall Street,” said Senator John McCain of Arizona, the Republican presidential candidate, in a statement that sounded like those uttered by several Democrats. The Democratic presidential candidate, Senator Barack Obama of Illinois, said Mr. McCain’s remarks reflected “his 11th-hour conversion to the language of reform,” and that, as a Washington insider, Mr. McCain was part of the problem, not the solution. “This crisis serves as a stark reminder of the failures of crony capitalism and an economic philosophy that sees any regulation at all as unwise and unnecessary,” Mr. Obama said, alluding contemptuously to “Washington lobbyists” and “special interests” who rake in dollars and hope, perhaps not too fervently, “that prosperity trickles down to the rest.”
· Who Can I Blame? - (www.npr.org)
· Whom to punish? - (www.guardian.co.uk)
· It's time to name names - (www.alternet.org)

AND GOVERNMENT AND FINANCIAL MEDIA BLAMING THOSE UNSCRUPULOUS SHORTS:
· Cramer: Financial Terrorism in the Shorts? - (www.cnbc.com)
· House passes anti-speculation bill - (money.cnn.com)
· UK Slaps Ban on Short-Selling Financial Stocks - (www.cnbc.com) UK regulators imposed a temporary ban on shorting financial stocks, in a bid to prevent further instability in the sector.

US Weighing Plan to Set Up Facility to Hold Bad Debts - (www.cnbc.com) Treasury Secretary Henry Paulson is working on a plan that would set up a government facility to take on bad debts from financial institutions, preventing a worsening of the global credit crisis, Wall Street sources have told CNBC.

Sen. Schumer to outline bank deal - (money.cnn.com) Sen. Schumer to outline bank deal: Sen. Schumer to outline bank deal: The New York senator will propose offering banks a lifeline if they renegotiate mortgages for those people close to losing their homes.

Banks Now Permitted to Count Goodwill as Capital - (www.nakedcapitalism.com) As banks are forced to lever down, the regulators are encouraging them to keep levering up. Simply amazing -- the regulators still have not learned. They place preserving the status quo higher than remedying the systemic risk. But we always knew that. It seems they will not rest until there isn't a penny of real capital on deposit for every hundred dollars of positions

Trading suspended on Russian stock exchanges - (business.timesonline.co.uk) Russia's stock exchanges suspended trading yesterday as panic selling sent the value of shares plummeting. The rouble-denominated Micex fell almost 18 per cent to 888.17 points, its largest percentage decline since the meltdown triggered by Russia's financial default in 1998. Officials suspended trading for an hour in an attempt to halt the crash, but selling resumed as soon as the market reopened. The dollar-denominated RTS index also suspended trading for an hour. It ended the day down by 11.47 per cent at 1,131.12, its lowest for two years. Interbank lending rates shot up to11 per cent, their highest since 2004, compared with 8 per cent on Monday and 4.5 per cent before last month's conflict with Georgia.

Alabama County Sued by Bond Insurers Amid Stalled Debt Talks - (www. bloomberg.com) Jefferson County, Alabama, was sued by bond insurers Syncora Guarantee Inc. and Financial Guaranty Insurance Co., seeking to strip local officials of control over the sewer system that has pushed the county toward bankruptcy. The companies filed the lawsuit in U.S. District Court in Birmingham yesterday asking that a receiver be placed in charge of the sewer system, which doesn't make enough money to cover the interest on $3.2 billion of debt, the two said in a statement. The insurance companies guarantee $2.8 billion of the bonds against default. The lawsuit is intended to pressure officials of Alabama's most-populous county following months of talks with insurers and banks led by JPMorgan Chase & Co. over the debt, whose interest costs have tripled in the past year. County commissioners scrapped a plan to divert tax money to the sewer system and are preparing to file for bankruptcy should talks falter.

Gold Stages Biggest Gain Ever in Bid For Safety - (www.cnbc.com) Gold staged its biggest one-day move ever Wednesday, with investors flocking to the metal amid a tidal wave of stock market uncertainty.
The price of gold [US@GC.1 866.0 85.50 (+10.95%) ] skyrocketed more than $80 an ounce, or 10.74 percent, easily besting the previous largest dollar move of $63 on Jan. 29, 1980, and past the largest percentage gain of 10.24 on March 19, 1980.

Fed running out of Money? US Treasury raises Fed funding - (www.ft.com) The US Treasury is selling $40bn of bills to allow the Federal Reserve to expand its balance sheet The US Treasury announced it was creating a supplemental funding programme to ensure that the Federal Reserve has the cash it needs and its ability to provide emergency liquidity support for the markets is not constrained by the size of its own balance sheet. The move was intended to deal with fears that the US central bank’s balance sheet was overstretched following its loan to AIG.

Fed Repaid JPMorgan $87 Billion for Lehman Financing - (www.cnbc.com) The New York Federal Reserve intervened aggressively to shore up the U.S. financial system this week, providing at least $87 billion to help underpin trades with bankrupt Lehman Brothers, court documents show. The Fed's action is the latest sign of how U.S. authorities have been seeking to prop up financial markets following the failure of Lehman and as big insurer American International Group [AIG ) ] fights for survival. While the government had pledged not to fund a rescue of Lehman [LEH ) ] , the disclosure Tuesday showed authorities that were taking other financial steps to prevent markets from descending into chaos. JPMorgan Chase [JPM ) ] advanced $87 billion to Lehman on Monday to help clear and facilitate securities transactions with customers and clients of Lehman "to avoid disruption of financial markets," according to documents filed in the U.S. Bankruptcy Court for the Southern District of New York. Lehman and the New York Fed had requested the advance, known as a "commencement date advance" and the New York Fed repaid it, according to filings. In effect, the New York Fed lent Lehman the funds.

Schwarzenegger Sets Budget Veto; Record-Long Impasse Continues - (www.bloomberg.com) Schwarzenegger rightfully rejects budget after Dems and Republicans try to use accounting maneuvers to balance the budget (borrowing against future revenues). Politicians all trying to push current debt to future generations. ``The budget they passed takes our problems and makes them even worse,'' Schwarzenegger told reporters in the capitol in Sacramento yesterday. ``It takes billions of dollars from the paychecks of hard-working families just to get us through this year and pushes our big deficit into next year. Worst of all, this budget includes a flawed rainy day fund that would do nothing to stop this from happening again and again and again.''

Reserve Primary Fund Drops Below $1 a Share - (www.cnbc.com) Reserve Primary Fund, a money-market mutual fund whose assets have tumbled 65 percent in recent weeks, fell below $1 a share in net asset value, because of its losses on debt issued by Lehman Brothers Holdings. In the industry, money money funds whose net assets drop below $1 a share are said to have "broken the buck". The Reserve Primary Fund had about $23 billion in assets on Tuesday, down from about $65 billion in assets as of Aug. 31, said fund spokesman Ming Lee Hatch. Investor redemptions will be delayed as long as seven days, the fund's owner, New York-based Reserve Management Corp., said Tuesday in a statement. The fund's chairman, Bruce Bent, is known as the "father" of money funds, after creating the first money market mutual fund in 1970 with a partner.

Policyholders mob AIG office in Singapore - (www.financialweek.com) Hundreds of anxious investors thronged the Singapore office of a unit of American International Group to redeem their policies on Tuesday, on fears the U.S. insurance giant could be the next financial firm to tumble. American International Assurance, a wholly owned subsidiary of AIG, pinned up an article from a local paper headlined “AIA policy holders get assurance” at its entrance, but that did not deter wary investors who are facing a deluge of bad news after Lehman Brothers filed for bankruptcy protection on Monday


OTHER STORIES:

Helicopter Ben Starts the Printing Press - (www.nakedcapitalism.com) Needless to say, expanding the Fed's balance sheet is inflationary. The Federal Reserve chairman is employing the remedy he has long recommended, that a determined central banker can always reflate. If he is right, bye bye dollar, but in 1930, the central bank increased bank reserves but money supply contracted nevertheless because consumers and business hoarded cash due to distrust of failing banks. If the run on the shadow banking system continues, we may see similar results even though traditional bank will (hopefully) not see a cash exodus.

Unthinkable Happens: Manhattan Prices Fall - (www.nysun.com)
Liar Nation: Reaping What We Have Sown - (Charles Hugh Smith at www.oftwominds.com)
A financial crisis built one bad loan at a time - (www.tampabay.com)
Magic Piggy Banks - (www.marketwatch.com)
Wall Street's Unraveling - (www.washingtonpost.com)
How to prevent the next Wall Street crisis - (www.cnn.com)

New home construction at 17-year lows T - (www.ml-implode.com) - "The Commerce Department reported new home construction fell to levels last seen in 1991, housing starts plunging below the seas...
Regulators Testing The Waters For Interest In WAMU Buyout - (www.ml-implode.com) - Washington Mutual Inc. may be the next government-engineered Bear Sterns style "bailout" coming down the pike.
Fed bails out AIG with $85 billion loan - (www.iht.com)
Henry Paulson's Frankenstein - (dealbook.blogs.nytimes.com)
Will AIG plan cost taxpayers money, or just sleep? - (news.yahoo.com)
Let's Start by Finding Some People to Behead - (www.bloomberg.com)
Why the Financial Crisis is a Blow to Tech - (www.businessweek.com)
Global Financial Seizures Continue, Gold Soars - (www.ml-implode.com) - "Gold bulls have something to smile about today as it is soaring by more than $50 in the wake of renewed financial seizures. The...
Radio Free Wall Street 9/17/08 - (www.ml-implode.com) - ``Lee Adler, Russ Winter, and Aaron Krowne are joined by a special guest expert in the AIG matter to analyze the impact of the e...
Mortgage Rates Soaring: Remember the Good Old Days When .gov Didn’t Run the Show? - (www.ml-implode.com) - Lehman is peeling off parts of their business. For example, Barclay’s reportedly purchased their investment bank and trading ope...
Barclays gets "core Lehman" assets - (www.ml-implode.com)
Housing construction plummets 6.2 pct. in August - (www.ml-implode.com)
U.S. to Take Over AIG in $85 Billion Bailout; Central Banks Inject Cash as Credit Dries Up - (www.ml-implode.com)
Fitch Downgrades Aurora's RMBS Servicer Ratings; Remain on Watch Negative - (www.ml-implode.com)
Originations to Improve in '09 - (www.ml-implode.com)
WALL STREET'S STORMY WEEK - (www.ml-implode.com)
AIG Bailout: Fed Loophole 13.3 - (www.ml-implode.com)
Money Market Fund Breaks $1, Suspends Withdrawals - (www.ml-implode.com)

Lending Among Banks Freezes - (online.wsj.com)
We Need Better-Capitalized Institutions - (online.wsj.com)
Money Market Fund Says Customers Could Lose Money - (www.nytimes.com)
U.S. Government Debt Risk Jumps to Record After AIG Bailout - (www.bloomberg.com)
The boring is biting with a vengeance - (www.ft.com)
Hedge fund market's growth in doubt - (www.ft.com)
Accounting experts push fair value rules - (www.ft.com)
Hedge Funds Left in Bind by Collapse of Lehman - (online.wsj.com)
Lloyds TSB Is in Talks to Buy Mortgage Lender HBOS - (www.bloomberg.com)
Russia Offers Sberbank, VTB, Gazprombank $44 Billion of Loans - (www.bloomberg.com)
U.S. Builders Began Work in August on Fewer Homes Than Economists Forecast - (www.bloomberg.com)
U.S. Looks Likely to Drive Into Recession - (online.wsj.com)
Fed Eschews Markets, Picks Winners and Losers in AIG, Lehman - (www.bloomberg.com)
Is the U.S. going overboard on bailouts? - (www.latimes.com)
Fed Close to Deal to Give A.I.G. $85 Billion Loan - (www.nytimes.com)
Fed’s $85 Billion Loan Rescues Insurer - (www.nytimes.com)
Fed Takes Control of AIG With $85 Billion Bailout - (www.bloomberg.com)
Government lining up possible buyers for WaMu: report - (www.financialweek.com)
U.S. regulators try to find WaMu buyer: report - (www.reuters.com)
Home Depot plans price cuts to bring back shoppers - (www.chicagotribune.com)
GM Cuts Outlook for China Sales - (online.wsj.com)
Thornburg Warns of Another Cash Crunch - (online.wsj.com)
Midas sales slide as drivers defer car repairs - (www.chicagotribune.com)