Friday October 10 Housing and Economic stories

TOP STORIES:

Lehman CEO Punched at Gym - (www.businessandmedia.org) Network verifies reports Richard Fuld was attacked for financial institution's bankruptcy. It seems anxiety from the financial crisis is reaching new highs, but the tipping point for one individual came at the Lehman Brothers gym in the midst of the company’s collapse. While former Lehman CEO Richard Fuld was testifying before the House Oversight Committee Oct. 6, CNBC reported he had been punched in the face at the Lehman Brothers gym after it was announced the firm was going bankrupt. CNBC and Vanity Fair contributor Vicki Ward said Fuld was attacked at the gym on a Sunday following the bankruptcy. “Frankly, I sat there and listened and I’m with the guy who apparently, the day before Barclays announced they were coming in and Lehman had already filed for bankruptcy, went over to him in the gym and punched him because that’s how I feel when I, you know, when I watched that,” Ward said on the Oct. 6 “Power Lunch.” “I didn’t think he was contrite at all, I thought he was arrogant.” Ward confirmed previous reports about the incident that reportedly occurred Sept. 21 and said the information came from “two very senior sources.” “From two very senior sources – one incredibly senior source – that he went to the gym after … Lehman was announced as going under. He was on a treadmill with a heart monitor on. Someone was in the corner, pumping iron and he walked over and he knocked him out cold. And frankly after having watched this, I’d have done the same too.”

Retirement accounts have lost $2 trillion so far - (seattlepi.nwsource.com) Americans' retirement plans have lost as much as $2 trillion in the past 15 months - about 20 percent of their value - Congress' top budget analyst estimated Tuesday as lawmakers began investigating how turmoil in the financial industry is whittling away workers' nest eggs. The upheaval that has engulfed financial firms and sent the stock market plummeting is also devastating people's savings, forcing families to hold off on major purchases and even delay retirement, Peter Orszag, the head of the Congressional Budget Office, told the House Education and Labor Committee. As Congress investigates the causes and effects of the meltdown, the panel pressed economists and other analysts on how the housing, credit and other financial troubles have battered pensions and other retirement funds, which are among the most common forms of savings in the United States.

Russia, Indonesia, Ukraine Shut Exchanges as Stock Rout Worsens - (www.bloomberg.com) Russia, Indonesia, Ukraine and Romania shut their stock exchanges after shares plummeted in the worst week for emerging-markets in at least two decades. Russia's Micex Index dropped 14 percent, having already slumped 20 percent this week, before trading stopped at 11:05 a.m. in Moscow. The exchange won't reopen until Oct. 10 unless the Federal Financial Markets Service says otherwise, Micex spokesman Alexei Gerasyuk said by phone. The Jakarta Composite index fell 21 percent in its biggest weekly slump in at least 25 years, according to data compiled by Bloomberg. Investors are fleeing on concern the worsening global credit crisis will cause more banks to collapse and push the global economy into recession, lowering the price of the commodities that drive developing nation economies. The benchmark MSCI Emerging Markets index is headed for its worst weekly decline since it was established in 1987 after falling 21 percent. ``The market is in survival mode,'' said Ralph Sueppel, chief economist at BlueCrest Capital Management Ltd. in London, which manages $2 billion in emerging-market assets. ``Concerns over liquidity, counterparty risk, and mark-to-market risk limits prevent institutional investors from doing what they are supposed to do: correcting misaligned asset prices by seeking a profit.''

Some state unemployment funds drying up - (www.cnn.com) The demand for unemployment benefits across the country has put a strain on state unemployment funds, with such funds in at least 10 states facing insolvency in 2009, according to a policy group. The group, which tracks legislation and activity related to state and federal unemployment benefits, says that California, Michigan, Missouri, New York, Ohio, South Carolina, Wisconsin, Indiana, Kentucky and Arkansas have less than six months' worth of unemployment trust fund reserves, putting the funds at high risk of insolvency.On Tuesday, California state officials told lawmakers in a hearing that their unemployment reserve fund was on track to run dry by March based on the state's forecast unemployment rate, which hit 7.7 percent in August. Last month, South Carolina Employment Security Commission chief Ted Halley said his state's fund was also projected to run out by January. As of August, the state's unemployment rate was 7.6 percent. Eight more are on the cusp, based on a formula that projects the amount of money the state would need in a recession. "These states are not ready for a recession, and they're going to see a big hit if we have a protracted job slump," Stettner said. "We're going to see them seriously in the red, but they can take some action and not be swimming in red ink."

AIG hits up Fed for billions more - (money.cnn.com) Three weeks after an $85 billion bailout, AIG is turning to the New York Fed for additional funding. The New York Federal Reserve is lending up to $37.8 billion to American International Group to give the troubled insurer access to much-needed cash. In exchange, AIG is giving the New York Fed investment-grade, fixed-income securities that it had previously lent out to other institutions for a fee. Those institutions are now returning these securities and want their money back. The new program, announced Wednesday, is on top of the $85 billion the federal government agreed to lend to AIG last month to prevent the global company from collapsing. AIG said last Friday it had drawn down $61 billion.

And then AIG execs hold $440K post-bailout retreat - (www.washingtontimes.com) Top executives at the failed insurance giant AIG spent more than $440,000 at a company retreat days after the federal government bailed out the company with $85 billion in taxpayer funds. American International Group (AIG) paid the exclusive St. Regis resort in Monarch Beach, Calif., more than $200,000 for rooms — some costing as much at $1,000 a night — as well as more than $150,000 in meals, according to released documents an testimony during a hearing of the House Committee on Oversight and Government Reform Tuesday on Capitol Hill. "Less than one week after taxpayers rescued AIG, company executives could be found wining and dining at one of the most exclusive resorts in the nation," said committee Chairman Henry A. Waxman, California Democrat. The invoice also included almost $25,000 in spa and salon charges for pedicures, manicures, facials, massages and other services. "If a company is drowning and you're going to spend that kind of money, that's crazy," said Rep. Elijah E. Cummings, Maryland Democrat, at the hearing's morning session. "The American people are paying for that."

House Hears, Ignores AIG Party With Bailout Cash - (www.businessweek.com) There’s plenty here to fuel taxpayer anger over government aid to Corporate America. Exhibit A: a $443,343.71 bill for a subsidiary’s executive retreat taken just days after the New York Fed came to the company’s rescue with an emergency $85 billion line of credit. Hosted at the St. Regis Resort Monarch Beach in Dana Point, California, the event racked up nearly $7,000 in golf fees and $23,280.00 was spent at the Spa Gaucin, where massages start at $175 and facials can cost as much as $350. Equally damning, the termination agreement with the former head of AIGFP, Joseph T. Cassano, outlining a 9-month consulting contract under which he continues to be paid $1 million a month.

U.S. Stocks Drop; S&P 500, Dow Post Worst Retreats Since 1937 - (www.ml-implode.com) - Thank God For the Bailout (rescue)! The S&P 500 slid 60.66 points, or 5.7 percent, to 996.23, extending its 2008 tumble to 32 percent in the market's worst yearly slump since 1937. The Dow Jones Industrial Average dropped 508.39, or 5.1 percent, to 9,447.11, giving it a 29 percent retreat in 2008 that would also be the worst in 71 years. The Nasdaq Composite Index lost 5.8 percent to 1,754.88. ``We've approached the edge of the cliff,'' Leon Cooperman, 65, who manages $6 billion at hedge fund Omega Advisors Inc., said at the Value Investing Congress in New York. ``Do we go over the cliff or begin to recede? History says we recede, but there's no guarantee. This is the most difficult financial environment I've lived through.''

Your company is bankrupt, you keep $480m. Is that fair? - (www.guardian.co.uk) It was a showdown to cherish for critics of Wall Street's culture of enrichment. The grim-faced boss of the bankrupt bank Lehman Brothers was left squirming yesterday as a veteran Democrat roasted him over his multimillion-dollar pay. With the startled look of a man unaccustomed to sharp examination, Lehman chief executive Richard Fuld clashed bluntly with the chairman of the House oversight committee, Henry Waxman, on Capitol Hill. Called on to explain why Lehman collapsed last month, Fuld began with a note of humility, saying he felt "horrible" over the demise of the 158-year-old institution. "I want to be very clear," Fuld said. "I take full responsibility for the decisions I made and for the actions I took." In a brief speech which was heard in silence, Fuld told legislators that if he could turn back the clock he would do many things differently. As soon as he finished speaking, sparks began to fly. The chairman of the committee held up a chart suggesting that Fuld's personal remuneration totalled $480m (£276m) over eight years, including payouts of $91m in 2001 and $89m in 2005. "Your company is now bankrupt and our country is in a state of crisis," said Waxman, a liberal from California. "You get to keep $480m. I have a very basic question: Is that fair?" After a long pause, Fuld said the figure was exaggerated: "The majority of my compensation, sir, came in stock. The vast majority of the stock I got I still owned at the point of our [bankruptcy] filing."

Libor Rise to Boost Subprime ARM Defaults 10%, Citigroup Says - (www.bloomberg.com) America's homeowners are going to get uncomfortably familiar with 'LIBOR' starting next month,'' the New York-based Citigroup analysts wrote. Libor rates have soared since the bankruptcy of Lehman Brothers Holdings Inc. last month as financial companies hoard cash. The average subprime borrower facing an adjustable payment for the first time next month would face a monthly payment increase of about 18 percent based on Libor rates as of Sept. 30, rather than the 10 percent that would have occurred based on the rates on Sept. 15, the analysts wrote. The payment would be $1,951, instead of $1,807, they said. Fannie Mae and Freddie Mac loans would be boosted to $1,021 on average, instead of $904. `Payment Shock' : Their report didn't quantify the effect of higher Libor rates on any of the $361 billion of mortgages underlying bonds whose rates have already begun tracking benchmarks, changing monthly, semi-annually or annually. The report also didn't address whether higher potential ``payment shock'' may lead to increased efforts to rework mortgages by loan servicers, even though mortgage modifications are rising amid record foreclosures. The seizure in global credit markets, sparked by the U.S. housing downturn, has been deepening on speculation central bank attempts to revive lending between financial institutions won't work, resulting in more failures. The Libor rate for overnight loans in dollars between banks rose 1.57 percentage point today to 3.94 percent, the British Bankers' Association said.

Willem Buiter: Banking System in North Atlantic Probably Insolvent - (www.nakedcapitalism.com) Buiter suspects that the banks as a whole are insolvent even if they hold assets to maturity... Assuming that Buiter is correct, then efforts to relax mark-to-market accounting are completely counterproductive. As discussed here and in the financial media, it serves to heighten mistrust by making financial statements less verifiable, and worse, even trying to put a fig leaf over this mess will not improve the picture sufficiently


OTHER STORIES:

Update: Citi Wholesale Sends Notice To 8,500 Brokers - (www.ml-implode.com) - Several of the letters sent to brokers by Citi AE's refer to a decision to downsize the company's existing base of 9,500 brokers...

Bank of America Brand Seriously Infected by Countrywide Loans - (www.ml-implode.com) - This is just the tip of the toxic mortgage ice berg for Bank of America newly purchased banking and mortgage servicing problems....
Mortgage Losses to Top $1.4 Trillion: IMF - (www.ml-implode.com) - "Signaling a worsening financial and mortgage-led crisis, economists with the International Monetary Fund said Tuesday they now ...
Vanishing Act Timeline - (www.ml-implode.com) - "This brings to mind the fact that our banks are being dangerously consolidated, making things even more unstable."
Fannie Mae to Purchase Mortgages From FHLB of Chicago - (www.ml-implode.com)
Catastrophe Hedge - (www.ml-implode.com)
CitiMortgage Wholesale Cuts AE's, Brokers - (www.ml-implode.com)
Gold Prices May Spike - (www.ml-implode.com)
Fears of Recession? - (www.ml-implode.com)
California Officials Try to Avoid Second Housing Hit - (www.ml-implode.com)
Capitulation and Relief? - (www.ml-implode.com)
Lenders Lost More than $500 per Loan Last Year - (www.ml-implode.com)

Why We Should Let Housing Prices Keep Falling - (economix.blogs.nytimes.com)
Investor Jim Rogers predicts lost decade to USA - (english.pravda.ru)
How to Ruin the U.S. Economy - (finance.yahoo.com)
Derivatives: The Art of Gaming the U.S. Financial Sytem - (knol.google.com)
The "unexploded bomb" of credit default swaps - (www.economist.com)

In a weak climate, U.S. dollar has muscle - (www.iht.com)
Fed Plan to Buy Companies' Unsecured Debt - (www.nytimes.com)
Why Housing Is Far from Bottoming - (Charles Hugh Smith at www.oftwominds.com)
Libor Rise to Boost Subprime ARM Defaults 10% - (www.bloomberg.com)
Mainstream Business Press Failed To Warn Public - (www.washingtonpost.com)
Hawaii Prices Falling - (www.starbulletin.com)
Florida houses could nearly halve in value - (blogs.tampabay.com)
The Buyerless Market - (realestate.msn.com)
Don't Buy Stuff You Can't Afford - (www.hulu.com)
The Pope: Goldbug - (optionarmageddon.ml-implode.com)
Economist Cover - (view discretion advised) - (cache.gawker.com)

Stock futures erase gains after coordinated cuts - (www.marketwatch.com)
Libor for Dollar Surges; Central Banks Coordinate Rate Cuts - (www.bloomberg.com)
World stocks down despite central bank cuts - (www.reuters.com)
Gold Gains in London as Investors Seek Haven From Stock Markets - (www.bloomberg.com)
Yen Climbs to Six-Month High as Stocks Drop, Carry Trades Cut - (www.bloomberg.com)
Oil falls on economic slowdown fears - (www.ap.com)
Dollar Falls Versus Euro on Joint Rate Cuts by Central Banks - (www.bloomberg.com)
Australian, New Zealand Dollars Fall to Lowest in Five Years - (www.bloomberg.com)
Losses on Bad U.S. Assets Could Top $1.4 Trillion - (online.wsj.com)

Credit market to price $500bn in bad deals - (www.ft.com)
Funds' Flight From Commercial Paper Forced Fed Move - (www.bloomberg.com)
Credit markets point to strains in rich economies - (www.ft.com)
Massachusetts Delays $750 Million Note Amid Turmoil - (www.bloomberg.com)
U.S. retirement accounts fall $2 trillion in 15 months - (www.latimes.com)
Treasurys Tied to Inflation Gain Appeal - (online.wsj.com)
Hedge funds losses balloon in September: HFR - (www.reuters.com)
Tokyo Shares Lose 9.4 Percent as Europe Slides in Early Trading - (www.nytimes.com)
Darling unveils bank rescue - (www.ft.com)
U.K. Banks Get Unprecedented Government Bailout; Stocks Fall - (www.bloomberg.com)
Brazil Scraps Bond Sale as Real Sinks to Two-Year Low - (www.bloomberg.com)
Russia Halts Shares as Medvedev Funding Plan Fails to Stem Rout - (www.bloomberg.com)
Britain Announces Bank Bailout Worth Hundreds of Billions - (www.nytimes.com)
Iceland's Krona Quoted 95 Percent Below Peg; Regulator Steps in - (www.bloomberg.com)
Asian Stocks Plunge on Credit Concern; Nikkei Average Tumbles - (www.bloomberg.com)

European financing squeeze intensifies - (www.ft.com)
Iceland, in a Precarious Position, Takes Drastic Steps to Right Itself - (www.nytimes.com)
Mexico fears U.S. buying slump - (www.chicagotribune.com)
Fed, ECB, Central Banks Lower Rates in Coordinated Reduction - (www.bloomberg.com)
Joint Statement by Central Banks - (www.federalreserve.gov)
Fed to Purchase U.S. Commercial Paper to Ease Crunch - (www.bloomberg.com)
With Bonds in Trouble, States Seek Federal Help - (www.nytimes.com)
Fed Will Lend Directly to Corporations - (online.wsj.com)
Housing Pain Gauge: Nearly 1 in 6 Owners 'Under Water' - (online.wsj.com)
States Push Subprime-Loan Servicers to Ease Terms - (online.wsj.com)
'Underwater' Home Loans Pressure Economy - (online.wsj.com)
Bernanke Signals Fed May Cut Rates as Crisis Deepens - (www.bloomberg.com)

Retirement Savings Lose $2 Trillion in 15 Months - (www.washingtonpost.com)
California, States Seek Relief With U.S. Commercial Paper Plan - (www.bloomberg.com)
Mortgage applications up 2.2% last week - (www.marketwatch.com)
Consumer borrowing falls at 3.7% rate - (www.latimes.com)
Schwarzenegger May Seek Emergency Budget Session - (www.bloomberg.com)
Winter heating costs to jump sharply - (www.chicagotribune.com)
Target posts lower same-store sales, warns on 3Q - (www.ap.com)
Wal-Mart September sales miss view; keeps forecast - (www.reuters.com)
Alcoa Profit Falls by Half as Aluminum Demand Slumps - (www.bloomberg.com)
ITW lowers outlook as demand slows - (www.chicagotribune.com)
Big Insurer’s Spending Habits Disclosed - (www.nytimes.com)
With Credit Drying Up, Car Buyers Bring Cash - (www.nytimes.com)
Toyota executive says US, European sales in serious trouble, denies lowering goals - (www.chicagotribune.com)
Airlines Losing High-End Customers - (online.wsj.com)
Linens 'n Things seeks to speed up remaining store closings - (www.latimes.com)