Wednesday September 17 Housing and Economic stories

TOP STORIES:

Fed funds jump to 6 pct in mkt, tripling Fed's target (signaling crash) - (www.forbes.com) Federal funds traded in the U.S. interbank lending market were indicated to have jumped to 6 percent on Monday, tripling the target rate of 2 percent which the Federal Reserve sets. The move happened even after the Federal Reserve earlier added $20 billion of temporary reserves to the banking system via overnight repurchase agreements. Early Monday, at around 7:10 a.m. EDT in New York, federal funds had traded at 2.0625 percent. When market inter-bank lending rates shoot up, that often reflects distrust among financial institutions of lending to some other counterparties. Global market participants' risk aversion has surged on Monday as the U.S. banking crisis has escalated, analysts say. The last time the Fed Funds target rate got this out of line with the effective rate was in 1987, and from a base of over 6% not 2%. On a percentage basis, at three times the target rate the spread is unprecedented. It happened today

Why The Fed Won't Cut Interest Rates - (www.cnbc.com)

Moody's, Fitch, S&P, SEC are Useless - (Mish at globaleconomicanalysis.blogspot.com) Naked shorting played no rile in the demise of Bear Stearns or Lehman. The former is a long held belief, the latter is a fact. Inquiring minds might be asking for proof. Proof is actually easy to find. There was not a single willing buyer in the weekend poker games with Lehman as the pot. Merrill Lynch (MER), J.P. Morgan Chase (JPM), Goldman Sachs (GS), Citigroup (C), Bank of America (BAC), Barclays, and others were all players at the table. No one would risk a dime without Fed guarantees. Lehman's market cap is now $129 million. Anyone of the players could have had it yesterday for a mere $2 billion. No one would make a bid. All the players knew Lehman was worthless. Exactly how is it that naked shorting is responsible for no bid by the players? If Lehman had any worth, wouldn't someone have seen it? If by some miracle naked shorting is responsible, the shorts should be thanked for getting Lehman to its proper valuation: zero.

Pimco's Gross: Global Credit Crunch Is Worsening - (www.cnbc.com) Gross said the Fed will probably not trim its federal funds rate target, currently at 2.00 percent, after its policy-makers meet on Tuesday. But he hopes there will be language in the group's statement that suggests it will be open to such a move. This is probably due to the previous story (Fed Funds Rate jumps to 6 percent)

Pimco, Vanguard Are Biggest Lehman Bond Fund Losers - (www.bloomberg.com) - We are crying crocodile tears around here!! Pimco Advisors LP, Vanguard Group Inc. and Franklin Advisers Inc. are among investment companies that may face losses of at least $86 billion stemming from the collapse of Lehman Brothers Holdings Inc., the biggest bankruptcy in history. Mutual fund companies' filings show they hold more than $143 billion of bonds, led by Newport Beach, California-based Pacific Investment Management Co., manager of the world's biggest bond fund, and Valley Forge, Pennsylvania-based Vanguard, according to data compiled by Bloomberg as of June 30. ``The losses look set to be widespread, hurting the public through their mutual and pension funds,'' said Ciaran O'Hagan, a credit strategist at Societe Generale SA in Paris. ``It's clearly a disaster for public confidence.

In typical Accounting Gimmick Fashion, NY Governor and State Regulators Let AIG Borrow From Itself to Meet Capital Requirements – (www.nytimes.com) Funny, each time you read a positive story (like AIG gets lifeline to raise $40B cash), you find out it is all through accounting gimmicks. Basically, the governor of NY and the state regulators are allowing AIG to borrow money from itself (subsidiaries) in order to raise $20B to say they are adequately capitalized. Its seems like for the past 10 years, whenever there is a potential issue, the government, politicians, Fed, SEC, and all other regulators allow rules to be skirted rather than addressed. As usual , this will never really address the problem and will most likely fail in the end, as has all Fed tricks thus far.

The Biggest Financial Story of the Past 50 Years - (www.fool.com) Bigger than the dot-com bust? Yep. Bigger than Black Monday in 1987? Yep. Bigger than the oil shock of the 1970s? Mmmhmm. NYU economics professor Nouriel Roubini, George Soros, and the International Monetary Fund have all called the overall credit crisis the worst since the Great Depression.

Wilbur Ross: Possibly a Thousand Banks Will Close - (www.cnbc.com)
Lehman After Chapter 11: Where Can Employees Turn? - (www.cnbc.com)

Greenspan Says Financial Crisis May Be `Once in Century' Event - (www.bloomberg.com) Yes, arrogant Alan, and you are one of the primary players that caused this once in a century event.
Fannie, Freddie Kept Off Federal Budget, Attempt To Fool Taxpayers - (www.washingtonpost.com)
Fannie, Freddie paid off Congress to mask dangers - (msnbc.msn.com)

How housing bill helps banks, not taxpayers - (www.sfgate.com) To understand how it works, you must first put yourself in the shoes of Bank of America, Countrywide Financial, or any of the many U.S. banks facing big losses on delinquent mortgages. If you are a bank, you probably make loans to people to buy homes. You give the borrower money, and the borrower gives you a signed promise to repay - a mortgage - which is secured by the house. Over the past five years, you got to sell a lot of your mortgages to Wall Street banks that then sold them to international investors. Wall Street paid you well for those mortgages. Because you didn't think you'd get stuck with them on your books, you started loaning anything to anyone. But as the housing market's parabolic ascent stalled, you got stuck with a lot of mortgages you hadn't yet sold to Wall Street banks. And some Wall Street banks and investors may have forced you to buy back other mortgages, sticking you with hundreds of billions in bad debt. You also know that some of the mortgages that were sold to investors are packed with lies about the appraised value, the borrower's income and other information that may allow investors to force you to buy them back after foreclosure. You've wisely been dragging your feet on sending out delinquency and foreclosure notices. Foreclosures are recorded on your books, and you're expecting a government bailout, so you are waiting sometimes more than a year to initiate foreclosure proceedings. You don't even know if some of these folks are living in their homes anymore. You have a lot of friends in Congress. You paid them a lot of money to be your friends. But you know that if they start talking about passing a law that will give you a lot of taxpayer money to make up for your losses, voters might get angry and scare the representatives, who then may refuse to vote for your bill because they're worried about getting voted out of office.

Senators Schumer and Menendez Unqualified for Office - (Mish at globaleconomicanalysis.blogspot.com) U.S. Senate Banking Committee members urged Fannie Mae and Freddie Mac, the mortgage companies placed under federal control this week, to freeze foreclosures on loans in their portfolios for at least 90 days. "This action would provide immediate relief to many homeowners" and let the companies "turn these non-performing loans into performing assets to minimize losses," Senators Charles Schumer, Robert Menendez and other panel Democrats said today in a letter to the companies and the Federal Housing Finance Agency, which is overseeing them under the government conservatorship. may be proven wrong but the economic asininity of those statements is unlikely to be topped, ever. If one could turn non-performing loans into performing assets by halting payments, why not just stop collecting mortgage payments everyone in the county? Every loan would be current and think of all the money consumers would have to buy things. Of course taxpayers would be immediately on the hook for a mere $5 trillion, but who cares about small details like that? Senators Charles Schumer, Robert Menendez, and any other fool who signed that letter is unqualified to be in Congress. It is as simple as that. I urge everyone to vote against Senators Charles Schumer and Robert Menendez the next time they are up for reelection. They are an economic disgrace to the country and unqualified for public office.


OTHER STORIES:

Obama-backer Oprah says no Sarah Palin on her TV show -(www.latimes.com).
Lehman And The End Of The Era Of Leverage - (www.ml-implode.com) - The failure of Lehman and Bear Stearns does not reflect the breakdown of a particular kind of corporate culture. As noted, the ...
No Golden Parachutes for Fannie and Freddie Bosses - (www.ml-implode.com) - In a statement released Sunday, the agency said it had informed the pair that they would not receive their so-called “golden par...
Markets plunge worldwide after Lehman bankruptcy, Merrill acquisition - (www.ml-implode.com) - ``Stocks posted big losses in markets across much of the globe as investors absorbed bankruptcy plans at Lehman and Merrill Lync...
Industrial production implodes - (www.ml-implode.com) - ``The real economy in the US is already in recession, even as we fight the effects of a financial market meltdown. Industrial pr...
Wake-Up Call: Lehman's Mortgage Marks - (www.ml-implode.com)
Get ready for a bruising day on Wall Street - (www.ml-implode.com)
WaMu Failure Could Trigger Extension of Deposit Guarantees - (www.ml-implode.com)
New lending facilities (that won’t help) - (www.ml-implode.com)
The Paradigm Shift: Too Big to Bail Out - (www.ml-implode.com)
AIG: looking to raise $20 billion - (www.ml-implode.com)

Fed Widens Collateral for Loans to Investment Banks - (www.bloomberg.com)
Fed to Meet on Rates, Look Down the Road - (online.wsj.com)
Federal Reserve Offers No Cash but Loosens Standards on Emergency Loans - (www.nytimes.com)
Financial hardships for most cities to grow in '09 - (www.rockymountainnews.com)
Lehman Files for Biggest Bankruptcy as Suitors Balk - (www.bloomberg.com)
Banks Roll Out $70 Billion Loan Program - (online.wsj.com)
Wall Street banks fight for life - (www.ft.com)
Lehman to File for Bankruptcy Protection - (www.nytimes.com)
A.I.G. Seeks $40 Billion in Fed Aid to Survive - (www.nytimes.com)
Bank of America Reaches Deal for Merrill - (online.wsj.com)
Rush Is On to Prevent A.I.G. From Failing - (www.nytimes.com)
`Tectonic' Shift on Wall Street as Lehman Fails, Merrill Sold - (www.bloomberg.com)
Lehman CEO Fuld's hubris contributed to meltdown - (www.reuters.com)
At 100, General Motors works to maneuver through crisis - (www.dallasnews.com)
Electronic Arts ends campaign to buy Take-Two - (www.ft.com)
5 Days of Pressure, Fear and Ultimately, Failure - (www.nytimes.com)
AIG Said to Be in Talks to Raise Capital From KKR, J.C. Flowers - (www.bloomberg.com)
No 'Golden Parachutes' at GSEs - (online.wsj.com)
Jittery Road Ahead - (www.nytimes.com)
Hubris – is thy name Richard Fuld? - (www.ft.com)
Stocks stumble amid new Wall Street landscape - (www.ap.com)
Banks Discuss Forming Fund to Invest in Troubled Finance Firms - (www.bloomberg.com)
Ultimatum by Paulson Sparked Frantic End - (online.wsj.com)
In Frantic Day, Wall Street Banks Teeter - (www.nytimes.com)
Dealers try to limit financial fallout - (www.ft.com)
Wall Street in turmoil as banking sector rocked - (www.ft.com)
Wilbur Ross sees about 1,000 bank closures: report - (www.reuters.com)
Fidelity to buy back $300m in auction-rate securities - Boston Globe
S&P warns foreclosure discounts to rise - (www.ft.com)
Some homeowners seem in denial on home values - (www.latimes.com)
ECB, BOE to Pump Cash Into Markets - (online.wsj.com)
China Cuts 1-Year Lending Rate; Reduces Lending Curb - (www.bloomberg.com)
World May Face `Japan-Like' Economic Stagnation, GIC's Tan Says - (www.bloomberg.com)
Credit crunch leaves masters of the universe thinking the unthinkable - (www.guardian.co.uk)
EU Shuns U.S.-Style `Active Role' on Growth, Banks - (www.bloomberg.com)