Monday October 27 Housing and Economic stories

TOP STORIES:

KeyCorp, Zions Bankcorp, and Capital One to receive bailout/cash infusion: source - (www.reuters.com) KeyCorp (KEY.N: Quote, Profile, Research, Stock Buzz), Zions Bancorp (ZION.O: Quote, Profile, Research, Stock Buzz) and Capital One Financial Corp (COF.N: Quote, Profile, Research, Stock Buzz) are some of the banks that will receive cash under the U.S. government's second round of capital infusions, a source familiar with the Treasury Department's thinking said on Sunday. Four banks, including PNC Financial Services Group Inc (PNC.N: Quote, Profile, Research, Stock Buzz), have already announced they are participating in the second round of capital injections.

YES, HEDGE FUNDS MADE GREAT RETURNS FROM 2004-2006 BUT WHAT GOOD IS IT IF THEY WILL NOT LET YOU TAKE OUT YOUR MONEY AND HAVE LOST 20% OF ALL ASSETS THIS YEAR?:
· Hedge funds stop cash withdrawals - (business.timesonline.co.uk) Investors fume as they are barred from pulling their money out of struggling firms. ONE of Britain’s best-known hedge funds, RAB Capital, has stopped investors cashing out of a second of its flagship funds. Investors in RAB’s Energy fund - which has lost more than 50% of its value this year - have been told they will not be able to liquidate their holdings. Those who want to quit will be handed “redemption shares” instead of cash - a promise on behalf of the fund to pay back investors as and when it can sell out of enough stocks. The fund, run by Gavin Wilson and Mark Redway, is entitled to do this under existing agreements with investors. Those who opt to stay in are being offered the chance to lock up their money for three years in exchange for a reduced management fee. The proposal is based on the deal offered to investors in RAB’s Special Situations fund, run by former chief executive Philip Richards.
· Fed questions counterparties about Citadel: report - (www.reuters.com) Examiners with the Federal Reserve have questioned Wall Street counterparties about their exposure to debt and other holdings of Citadel Investment Group, The Wall Street Journal said on Saturday, a report Citadel denied. Citing people familiar with the matter, the Journal said the Fed questioned the counterparties in at least two instances in recent days. But Katie Spring, a spokeswoman for Citadel, denied the rumors that the Fed had spoken to the hedge fund's counterparties specifically about Citadel and possible problems with its debt. "We deny these rumors," she told Reuters on Saturday. She said that Citadel continues to have more than 30 percent of its investment capital in cash. The Journal's report came a day after Citadel, one of the world's largest hedge funds, said it had more than $10 billion in available credit. The Chicago-based fund company, which manages $18 billion, held a conference call to quell rumors it was facing liquidity issues.
· Hedge Fund Withdrawals Stress Market; Citadel Reassures Clients - (www.bloomberg.com) Hedge funds are aggravating the worst market selloff in 50 years as they dump assets to meet investor redemptions and keep lenders at bay. U.S. hedge-fund managers may lose 15 percent of assets to withdrawals by year-end while their European rivals shed as much as 25 percent, Huw van Steenis, a Morgan Stanley analyst in London, wrote yesterday in a report to clients. Combined with investment losses, industry assets may shrink to $1.3 trillion, a 32 percent drop from the peak in June. With the average hedge fund down 18 percent this year, as measured by the HFRX Global Index, managers are selling assets to repay departing investors and meet demands from lenders for more collateral. Others including Paulson & Co. and Winton Capital Management LLC are hoarding cash to soothe nervous clients and wait for signs the worst is over. When stocks rally, hedge funds take advantage to unload what they can. ``I have never seen a market as full of panic as I've seen in the last seven or eight weeks,'' Kenneth Griffin, founder of Citadel Investment Group LLC, a Chicago-based hedge-fund firm, said yesterday.
· World’s biggest hedge fund restructures amid turmoil - (www.telegraph.co.uk) Highbridge Capital Management, which is majority owned by JP Morgan Chase and has $25bn under management, is axing 10 per cent of its New York-based staff and plans cuts in Europe and Asia. The volatility in global stock markets has savaged the performance of some of the world’s best-known hedge funds, raising fears of a collapse in the sector, which could cause a fresh crisis in the financial system. Big names including Deephaven, Marshall Wace, Citadel Investment Corp, Lansdowne Partners, Third Point and Harbinger, have in recent weeks sustained losses of as much as 20 per cent in some funds. Investors pulled at least $43bn (£25bn) from US hedge funds in September, according to TrimTabs Investment Research. This is nearly five per cent of the global sector’s estimated $2 trillion in total assets.

General Motors, Driven to the Brink - (www.nytimes.com) IN late May, senior executives at General Motors confronted a decision that few thought they would ever face: whether to continue developing the next generation of one of the most successful products in G.M.’s 100-year history — the full-size sport utility vehicle — or to punt the program entirely. It’s rare for an automaker to pull the plug on high-profile initiatives, much less one involving a $2 billion, top-to-bottom overhaul of a high-volume vehicle that once helped it rake in cash. This was also G.M.’s flagship platform, code-named CXX, which would underpin popular models like the Escalade, Yukon and Suburban, brawny tanks that had defined the auto giant’s image for more than 15 years. The executives killed the CXX project without a single dissenting vote. And with that, the era of the big S.U.V. was as good as dead, done in by soaring gasoline prices and consumers fleeing to smaller, more fuel-efficient cars.

Greenspan denies blame for crisis, admits 'flaw' - (www.azcentral.com) Payback time for “bubbles” Greenspan. The formerly honorable Alan Greenspan is completely disgraced in front of the clueless politicians that used to kiss his ass. Badgered by lawmakers, former Federal Reserve Chairman Alan Greenspan denied the nation's economic crisis was his fault on Thursday but conceded the meltdown had revealed a flaw in a lifetime of economic thinking and left him in a "state of shocked disbelief."Greenspan, who stepped down in 2006, called the banking and housing chaos a "once-in-a-century credit tsunami" that led to a breakdown in how the free market system functions.

Slow Economy Takes Toll on Shipping Firms - (online.wsj.com) Transportation companies are reporting sharply lower freight volumes, a sign that the pipelines of global commerce have begun to slow. Goods shipped by truck, train and ship have all fallen off in volume, and freight companies are now forecasting a slump as the credit crisis slows manufacturing and puts the brakes on consumer spending. Shipping companies are considered a barometer of economic health, which makes the current downturn particularly worrisome. The autumn months ordinarily bring a surge in preholiday shipping. On Thursday, package-delivery giant United Parcel Service Inc. said it had "precipitous declines" last month in volume of next-day-delivery products

Federal cash may be needed for GM-Chrysler deal - (ap.google.com) So government is now in the business of bailing out failed companies so they can buy other failed companies. All this is doing is propping up inflated wages for union and management instead of helping wages and inflation get back to market levels. Like much of middle America, Mike McCarthy doesn't think taxpayers should have to pay $700 billion to bail out Wall Street. The second-shift worker at a Chrysler engine plant also doesn't think the government should pay to save his own company, although he's a lot less sure about that one. McCarthy would like to see Chrysler's jobs and pensions preserved, but that directly conflicts with his opposition to a bailout. His dilemma is one that could soon be facing every member of the U.S. House and Senate. Talks toward General Motors Corp.'s possible acquisition of Chrysler LLC may involve going to Congress for cash, according to a person involved in the financing discussions. The person, who asked not to be identified because the talks are private, said he was unsure if the government has been approached yet. Cash-desperate GM is said to be interested in Chrysler first for its pile of money. Chrysler, whose sales have dropped 25 percent during the first nine months of the year, reportedly has about $11 billion available. It also has debt, but the amount isn't available because Chrysler a private company, 80.1 percent owned by the private equity firm Cerberus Capital Management LP.

Fed takes $2.7bn loss on Bear - (www.ft.com) Almost $3B of $30B lost already, after Treasury and government said this could benefit taxpayers. The Federal Reserve on Thursday said it had suffered a $2.7bn paper loss on the $29bn portfolio of toxic assets it took over from Bear Stearns in March as part of JPMorgan Chase’s government-brokered takeover of the stricken investment bank. News of the unrealised losses, revealed in a filing that also showed that American Insurance Group has already used up three-quarters of a $123bn Fed loan, could fuel the political and public backlash over the use of government funds to rescue financial institutions. However, the Fed is unlikely to recognise any losses on the Bear portfolio, which is managed by BlackRock, for several years. The monetary authorities have stressed they will not sell any assets for at least two years. Under the cut-price takeover that pulled Bear back from the brink of bankruptcy, JPMorgan has agreed to shoulder the first $1bn of losses on the portfolio.



OTHER STORIES:

Currencies Fall as Fears Spread and Stocks Slip - (www.nytimes.com)
Hedge funds face collateral pressure - (www.ft.com)
Bond Risk Surges by Record on U.K. Recession, Auto Sales Slump - (www.bloomberg.com)
Recession fears deepen global rout - (money.cnn.com)

Gloomy Forecast On Hedge Funds - (www.washingtonpost.com)
Citadel Chief Denies Rumors of Trouble - (www.nytimes.com)
OPEC Orders Cut in Oil Production - (www.nytimes.com)
Another Bubble Bursts - (online.wsj.com)

Denmark Raises Main Rate Half a Point to 5.5% to Boost Krone - (www.bloomberg.com)
U.K. GDP Shrinks, First Recession Since 1991 Looms - (www.bloomberg.com)
Asia Backs Sarkozy Push for Financial-Market Revamp - (www.bloomberg.com)
Financial crisis: Hedge Fund turmoil is hitting millions of savers, experts say - (www.telegraph.co.uk)
South Koreans reliving nightmare of last financial crisis - (www.iht.com)
Tight Credit Curbs Growth in India - (www.nytimes.com)
Russia's Micex Halts Trading Until Next Week After Stocks Slump - (www.bloomberg.com)
States' Tax Receipts Fell Sharply in Latest Quarter - (online.wsj.com)
U.S. Home Resales Rose in September to One-Year High - (www.bloomberg.com)
Squeezed banks borrow record amount from Fed - (www.boston.com)

Greenspan Says He Was Wrong On Regulation - (www.washingtonpost.com)
Stockton, Calif., tries digging out - (www.usatoday.com)
Insurers Are Getting in Line for Piece of Federal Bailout - (www.nytimes.com)
Georgia's Alpha Bank & Trust Fails; Toll Rises to 16 - (www.bloomberg.com)
Chrysler Plans to Cut 25% of Salaried Jobs by Dec. 31 - (www.bloomberg.com)
U.S. Mulls Widening Bailout to Insurers - (online.wsj.com)
Wall Street layoffs could surpass 200,000 - (www.latimes.com)
AIG Has Used Much of Its $123 Billion Bailout Loan - (www.washingtonpost.com)
Companies hunkering down for long recession - (www.chicagotribune.com)
Restaurant industry is starving for customers - (www.latimes.com)

Ingersoll-Rand to Eliminate `Several Thousand' Jobs - (www.bloomberg.com)
Shipping Firms Gear Down as Slow Economy Takes Toll - (online.wsj.com)
Drug reactions at record pace - (www.boston.com)
They’re Shocked, Shocked, About the Mess - (www.nytimes.com)
Crisis caused by negligence and incredible stupidity - (www.ft.com)

‘A Full-Blown Crisis’ - (www.newsweek.com)
China's Wen calls for 'every means' against crisis - (ap.google.com)

Gulf Bank May See Loss as Derivatives Contracts Sour - (www.bloomberg.com)
Financial Meltdown Worsens Food Crisis - (www.washingtonpost.com)
Spending Stalls and Businesses Slash U.S. Jobs - (www.nytimes.com)
Uses for $700 billion bailout money ever shifting - (biz.yahoo.com/ap)
Seattle-area house prices decline - Seattle Times
Recession's dark cloud looms over earnings season - (biz.yahoo.com/ap)
GE Will Cut Costs, Jobs, Immelt Says - (online.wsj.com)
The Price of Optimism - (www.nytimes.com)
But Have We Learned Enough? - (www.nytimes.com)