Friday October 17 Housing and Economic stories

TOP STORIES:

Ship Rates Plunge as Credit Freeze Strands Cargo, Demand Slumps - (www.bloomberg.com) Commodity shipping rates plunged to the lowest in more than five years as a lack of trade finance left cargoes stranded and the global economic slowdown limited raw material demand. Traders are finding it harder to get letters of credit that guarantee payments for goods, shipping executives said. Together with a slowdown in trade, that has contributed to this year's 82 percent drop in shipping costs for grain, coal and other commodities. Rates are so low that Zodiac Maritime Agencies Ltd., the line managed by Israel's billionaire Ofer family, announced today it may idle 20 of its largest ships. ``Letters of credit and the credit lines for trade currently are frozen,'' Khalid Hashim, managing director of Precious Shipping Pcl, Thailand's second-largest shipping company, said in Singapore yesterday. ``Nothing is moving because the trader doesn't want to take the risk of putting cargo on the boat and finding that nobody can pay.'' The Baltic Dry Index fell 11 percent today to 1,615, the lowest since February 2003. Rates for larger ships of the type Zodiac intends to idle fell 17 percent today, taking this year's plunge to 85 percent, according to the London-based Baltic Exchange. Banks are leery of financing commodities and shipping transactions. Rio Tinto Group, the world's second-largest aluminum producer, may delay the planned sale of $10 billion of assets and Sterlite Industries (India) Ltd. shelved its $2.6 billion purchase of Asarco LLC. Ship owners can't find cash to finance the construction of new ships.

Here are some good overviews explaining the credit crisis and why the markets tanked. Mostly common sense, but most of the lemmings were too busy believing each other’s bullshit to use common sense:
· Panic of 2008 Explained: Too Much Debt! - (PDF - cassandra-chronicles.com)
· How Credit Crises Begin and End - (www.marketoracle.co.uk)
· Derivatives: The Great Unwind - (www.blownmortgage.com)

Bush: We had to destroy the free market to save it - (business.timesonline.co.uk) Free markets can only weep as Bush, Cheney, Greenspan, Bernanke, and Paulsen have destroyed the free markets. The US Government is to spend up to $250 billion buying direct stakes in banks and other financial institutions under a controversial emergency plan which President Bush insisted today was "not intended to take over the free market but to preserve it". In a rescue scheme modelled on that announced for British banks by Gordon Brown last week, the partial nationalisation of companies such as Wells Fargo or JP Morgan Chase will be accompanied by a package to unblock the credit logjam paralyzing the system. It is a painful move in a country that prides itself on being the home of market capitalism - as Mr Bush's Treasury Secretary, the former Wall Street CEO Hank Paulson, was the first to admit. "Government owning a stake in any private US company is objectionable to most Americans, me included," Mr Paulson said today. "Yet, the alternative of leaving businesses and consumers without access to financing is totally unacceptable. When financing isn’t available, consumers and businesses shrink their spending, which leads to businesses cutting jobs and even closing up shop."

Iceland Stock Market Drops 77% As Trading Resumes - (globaleconomicanalysis.blogspot.com) Here's what a real bear market looks like: Icelandic Stocks Drop 77% as Trading Resumes After 3-Day Halt. Iceland's benchmark stock index plunged 77 percent, the biggest decline on record, as trading resumed after a three-day suspension and the nationalization of the country's largest banks.

What it would take to trigger stock market timeout - (www.idahostatesman.com) As harrowing as the stock market's plunges have been in recent days, they still haven't been enough to trigger the "circuit breaker" mechanisms that result in an automatic timeout in trading. The Big Board implemented the automatic halts after the stock market crashed in the late 1980s to force traders to take a break from frenzied selling. The Dow Jones industrial average would have to fall 1,100 points in a day to trigger the first halt. If that point is reached before 2 p.m., the market would shut down for an hour. If the threshold is breached between 2 p.m. and 2:30 p.m., the halt will last 30 minutes. No trading stops will take place if the plunge occurs after 2:30 p.m. Based on Thursday's Dow close of 8,579, the threshhold number to cause the market stop in one day would be 7,479. If the index were to fall 2,200 points before 1 p.m., the market would close for two hours. If such a decline took place between 1 p.m. and 2 p.m., there would be a one-hour pause. The market would close for the day if stocks sank to that level after 2 p.m. In the event of a 3,350-point decline, the market would close for the day, regardless of the time.

Brave New World To "Preserve" Free Markets - (globaleconomicanalysis.blogspot.com) Key phrase: President Bush just proven without a doubt he does not understand free markets. Of course he has long since proven he does not understand anything else either.
In what may be the most Orwellian comment in history, President Bush just stated: "Bank buyout needed to preserve free market". The US Government is to spend up to $250 billion buying direct stakes in banks and other financial institutions under a controversial emergency plan which President Bush insisted today was "not intended to take over the free market but to preserve it". It's A Brave New World: Professor Jeffrey Cooper made an interesting comment on Minyanville today. Treasury Secretary Hank Paulson Jr. told nine leading bankers they would have to accept government investment for the good of the U.S. financial system. It's a brave new world.I'm also waiting for word as to when the implanting of chips in newborns is done 'for the good of the country'. What hath they wrought? One Does Not Take Over Free Markets To Save Them. President Bush just proven without a doubt he does not understand free markets. Of course he has long since proven he does not understand anything else either.

Calpers fund down 25 percent for year - (www.bloomberg.com) This is the story I have been waiting for as I have not seen much written about these guys who had tons of Bear Stearns and Lehman investments. The largest public pension fund in the U.S. lost almost $67 billion in 12 months, more than 25 percent of its value, as stock markets tumbled. The market value of the California Public Employees' Retirement System declined to $193.7 billion as of Oct. 9, from $260.6 billion a year earlier. Between Sept. 15, when Lehman Brothers Holdings Inc. filed for bankruptcy, and last week, the fund's stock holdings declined by $12.4 billion to $36.8 billion, according to data compiled by Bloomberg. "The U.S. economy is experiencing the biggest financial crisis since the Great Depression," the fund said in a statement released to its members Oct. 8. "Calpers and other pension funds are not exempt."
Pensions and retirement accounts, which tend to be heavily invested in stocks, may have lost as much as $2 trillion since 2007, the Congressional Budget Office reported Oct. 7. In the 12 months through Friday, the Dow Jones Industrial Average dropped 40 percent, the Standard & Poor's 500 Index, 42 percent. Calpers reported that it lost 2.6 percent for the fiscal year ended June 30, its worst performance in six years. Retirement benefits promised to retired state workers in California are guaranteed and won't change when stock markets declin

Banks dictate conditions of US financial bailout - (www.infowars.com) - The 936 point rise on the US stock market yesterday was the American ruling elite’s initial verdict on the extraordinarily favorable terms the government is granting to financial firms in the $700 billion bailout passed by Congress on October 3. Far from heralding improving economic conditions for working people, the Wall Street surge reflects the financial establishment’s success in extorting massive sums of money from taxpayers.

The Woman Who Could Have Prevented This Financial Mess Was Silenced by Greenspan, Rubin and Summers - (www.alternet.org) - Break the Glass" was the code-name high-level Treasury Department figures gave the $700 billion bailout; it was to be used only as a last-resort measure. Now millions have been sprayed and damaged by broken glass. But more than a decade ago, a woman you're likely never to have heard of, Brooksley Born, head of the Commodity Futures Trading Commission -- a federal agency that regulates options and futures trading -- was the oracle whose warnings about the dangerous boom in derivatives trading just might have averted the calamitous bust now engulfing the US and global markets. Instead she was met with scorn, condescension and outright anger by former Federal Reserve Chair Alan Greenspan, former Treasury Secretary Robert Rubin and his deputy Lawrence Summers. In fact, Greenspan, the man some affectionately called "The Oracle," spent his political capital cheerleading these disastrous financial instruments. On Thursday, the New York Times ran a masterful and revealing front page article exposing the culpability of Greenspan, Rubin and Summers for the era of dangerous turbulence we live in. What these "three marketeers" -- as they were called in a 1999 Time magazine cover story -- were adept at was peddling the timebombs at the heart of this complex crisis: exotic and opaque financial instruments known as derivatives -- contracts intended to hedge against risk and whose values are derived from underlying assets. To cut to the quick, Greenspan, Rubin and Summers opposed regulating them. "Proposals to bring even minimalist regulation were basically rebuffed by Greenspan and various people in the Treasury," recalls Alan Blinder, a former Federal Reserve board member and economist at Princeton University, in the Times article.

'Smart Money' Stays on the Sides - (online.wsj.com) - In recent days, Steven Cohen, the hedge-fund manager who runs the $14 billion SAC Capital Advisors, moved about half his funds, or about $7 billion, into money-market and other short-term securities, eliminating much of his fund's exposure to the stock market, says a person close to the fund. Mr. Cohen plans on sitting on the sidelines for the rest of the year -- trading a small portfolio himself but keeping shuttered most of the stock portfolios of his other managers. Israel Englander, who runs the $14 billion Millennium Partners fund, has shifted about $6 billion from the stock market into cash, a person close to the fund says. Meanwhile, John Paulson, manager of $35 billion Paulson & Co. -- who made a spectacularly successful bet against the housing market last year -- has much of his fund in cash equivalents

California Foreclosure Activity Slumps Thanks to New Law - (www.thetruthaboutmortgage.com) - Notice of default filings fell a whopping 61.8 percent during September in the state of California, largely due to new legislation that makes it more difficult for lenders to foreclose on borrowers. The new law, SB 1137, requires mortgage lenders to attempt to make contact with their borrowers, and then wait 30 days after satisfying specific due diligence requirements before initiating foreclosure proceedings. If a notice of default was filed before the bill was enacted, the lender would need to provide evidence that attempts were made to contact the borrower before taking action. The sudden impact of the bill is clear, with only 16,352 NODs filed last month, down from 42,790 in August and 36.4 percent less than in the same period a year earlier. Notice of trustee sales, the final step in the foreclosure process, also decreased 47.3 percent from August to just 19,116, but were still up 33.9 percent from September 2007. A total of 23,409 properties were taken to sale at auction during the month, a 163.2 percent increase from the same period a year earlier, but 12.4 percent below August’s numbers. “CA State Senate Bill 1137 has rendered analysis of current activity against prior foreclosure levels useless in understanding market conditions,” said Sean O’Toole, founder of ForeclosureRadar, who provided the September numbers.

A desert doom town goes dust - (www.guardian.co.uk) Victorville was a desert boomtown. Up until a year ago, it was the second-fastest growing city in the US. There are still signs of the boom everywhere. Driving into town, there are signs pointing to new developments, and as you get closer, people stand on the street corners waving signs to try to entice buyers to model homes. But now, 11% of the homes in the city are in foreclosure, and the city recently was part of a $13m grant to help buy some of the homes before they are abandoned. Realtors know the signs. One realtor, who I spoke to who but would not give her name because she didn't have clearance from her employer, said, "Dead grass is the give away that the bank has foreclosed." Just as in Riverside, some blocks have three or four foreclosures each, she said. People took out "80/20" loans. They not only got a mortgage but also an additional loan for the 20% down payment. The foreclosures started two years ago, and just as in Riverside, they are seeing more home auctions as banks just want to sell the homes.


OTHER STORIES:

Europe to US: You messed up the rescue, too - (money.cnn.com)
Europe stuns with €1.5 trillion bank rescue, as France plays role of saviour - (www.telegraph.co.uk)
Volcker warns of "considerable recession" in US - (biz.yahoo.com/ap)
Fed Releases Flood of Dollars, Market Rates Fall - (www.bloomberg.com)
Stocks Soar on Pledges of New Capital - (www.nytimes.com)
Credit squeeze literally hits home as card limits, equity lines pared - (www.signonsandiego.com)

Derivatives: The Great Unwind – (www.blownmortgage.com) - The market was up strong yesterday. Other than the shares of bank stocks, you have to wonder why. The worldwide central bank ba...
Plan B - The Paulson plan will not work. This one has a chance. - (www.ml-implode.com) - The beauty of this approach is threefold. First, it recapitalizes the banking sector at no cost to taxpayers. Second, it keeps ...
Bush Defends Government Bank Investment - (www.ml-implode.com) - With the government poised to invest $250 billion of taxpayers' money into private banks, Bush and top economic policymakers tri...
FDIC Moves to Increase Deposit Insurance Coverage for Servicers - (www.housingwire.com) The decision to simplify the rules comes on the heels of the failure of IndyMac Bank, which maintained a relationship with its own huge mortgage servicing platform, according to HW sources. FDIC officials have had a difficult time determining what funds were insured and what deposited funds were not. “This simplification of the coverage rules for mortgage servicing accounts will help prevent losses to otherwise insured depositors and prevent withdrawals of deposits for principal and interest payments from depository institutions,” said FDIC chairman Sheila Bair. “Thus, we believe the new rule will benefit both mortgage security-holders and insured institutions.” It also means that servicing accounts are largely fully insured, which is the ultimate net effect of the rule change.

How To Fix Our Depreciating Money - (www.ml-implode.com)
Billings, MT -- Peaked? - (www.ml-implode.com)
Money Markets Still Stressed; - (www.ml-implode.com)
Capital Injection Dollars Announced - (www.ml-implode.com)
Mr Mortgage - September CA Foreclosure Report - (www.ml-implode.com)
How Congress set the stage for a fiscal meltdown - (www.ml-implode.com)
Agent sentenced to 14 Years for mortgage fraud - (www.ml-implode.com)
Golden Opportunity - (www.ml-implode.com)
My Plan to Save The World - (www.ml-implode.com)

Fed's helicopter economics may not boost housing - (lansner.freedomblogging.com)
Are states next in line for federal bailout? - (www.csmonitor.com)
Volcker warns of "considerable recession" - (biz.yahoo.com)
"That's as good as money sir. Those are I.O.U.s" - (intuitiveblogger-intuition.blogspot.com)
House prices may plummet, but property taxes won't - (money.cnn.com)
Kashkari admits bailout's executive pay caps are a joke - (www.freedomsphoenix.com)

Move Up? Move Out? Families Squeeze In - (www.nytimes.com)
World economy: When fortune frowned - (www.economist.com)
How the Credit Default Swap Scam Works - (Charles Hugh Smith at www.oftwominds.com)
Who really owns your money? DTCC - (yourmortgageoryourlife.wordpress.com)
Taleb's Black Swan' Investors Post Gains as Markets Dive - (www.bloomberg.com)
Gigantic Swiss Banks Hold Steady -- For Now - (www.spiegel.de)
At Indian Call Centers, Another View of U.S. - (www.washingtonpost.com)
After The Bailout - (www.npr.org)

Citadel Hedge Fund Falls 30% on Bond, Stock Losses - (www.bloomberg.com)
Bank funding costs prompt debt concerns - (www.ft.com)
US hedge fund withdrawals hit $43bn in September - (www.ft.com)
For Fast Cash, Firms Tap Revolving Loans - (online.wsj.com)
Hedge Fund Woes: Troubles at Citadel, Highland - (www.cnbc.com)
What went wrong - (www.washingtonpost.com)
Demanding a say on huge executive pay packages - Houston Chronicle
At Moment of Truth, U.S. Forced Big Bankers to Blink - (online.wsj.com)
Hedge Funds: How the Smart Money Looked Dumb - (www.time.com)
ECB Leads Push to Flood Banks With Dollars in Unlimited Tenders - (www.bloomberg.com)
UK jobless rise at fastest rate in 17 years - (www.ft.com)
U.K.'s Rising Food Prices Hamper Economic Policy - (online.wsj.com)
Forex Derivatives Become Achilles Heel For Brazil Exporters - (online.wsj.com)
Europe car sales down 8.2% in September - (www.ft.com)
ECB pumps more than $270bln into money markets - (news.yahoo.com/s/afp)
Bleak Numbers Stoke Fears of Recession in Europe - (www.nytimes.com)
Ukraine seeks IMF assistance amid economic crisis - (www.ap.com)