Saturday October 18 Housing and Economic stories

TOP STORIES:

Turning Japanese - (www.ml-implode.com) - Whatever their squabbling in Washington this week, one thing Democrats and Republicans were able to agree on was the apparent novelty of the country's current financial woes. "We have an unprecedented crisis," said House Minority Leader John Boehner, in a phrase frequently invoked by other congressional leaders. But, in truth, the dire situation in the United States does have a precedent: It looks remarkably like the crisis that struck Japan 20 years ago, when a stock market meltdown exposed years of speculative lending, mostly dependent on real estate, and led to an economic collapse. In response, Japan's government launched a strategy that actually made the problem worse, leading to ten years of stagnation, which became known as Japan's "lost decade. " The bad news is that, today, the United States may be making some of the same mistakes; the good news is that, just as Japan ultimately righted its economy, so can we.

AIG executives still blowing bailout money - (www.sfgate.com) A handful of top executives from American International Group Inc. spent thousands of dollars during a recent English hunting trip, even as the New York-based insurer asked for an additional $37.8 billion loan from the Federal Reserve. The news comes as New York Attorney General Andrew Cuomo on Wednesday told the insurance giant to do away with golden parachutes for executives, golf outings and parties while taking government money to stay afloat. Cuomo said he has the power under state business law to review and possibly rescind any inappropriate AIG spending as long as the Federal Reserve is propping up the huge insurer with almost $123 billion in loans announced since Sept. 16. "This was an annual event for customers of the AIG property casualty insurance companies in the U.K. and Europe, and planned months before the Federal Reserve Bank of New York's loan to AIG," company spokesman Peter Tulupman said Wednesday morning. In a prepared statement later in the day, the company said, "We will continue to take all measures necessary to ensure that these activities cease immediately. AIG's priority is to continue focusing on actions necessary to repay the Federal Reserve loan and emerge as a vital, ongoing business." AIG officials declined to say which AIG executives attended the trip, which reports have said racked up an $86,000 tab. News of the hunting trip surfaced just days after AIG received an additional $37.8 billion loan from the Federal Reserve, on top of a previous $85 billion emergency loan granted last month. The company said last week it would stop "all non-essential conferences, meetings and activities that do not clearly maximize value and service given the current conditions."

Interest in homestead exemption rises - (www.lvrj.com) A homestead exemption prevents a creditor from forcing a court-ordered sale of your primary residence to satisfy a debt. It will also protect up to $550,000 in equity on the home you own and live in full time. But there's some confusion about how homestead exemptions work. First, they don't protect you from all bill collectors. Second, there's no time limit on filing, despite what those mailers said, and you don't need someone else to fill out the simple, one-page document for you. That means you can take your time filing and submit the documents to Clark County officials yourself. Observers offered mixed testimony on whether the faltering economy has increased the number of consumers querying about homesteads. Statistics from the Clark County Recorder's Office, which accepts and files homesteads, show a drop in requested exemptions, from 34,548 homesteads in 2006 to 16,655 filings year-to-date as of Tuesday. But that falloff could come from a big dip in home sales in the market. Susan Wohlbrandt, a public information officer for the recorder's office, declined to speculate on reasons behind the decline in homestead filings, but she noted that 2004's white-hot market brought big gains in submissions.

Bailout money to pay millions to failed and corrupt CEOs - (www.bloomberg.com) Goldman Sachs Group Inc.'s Lloyd Blankfein, whose $70.3 million paycheck made him Wall Street's most highly compensated chief executive officer last year, could still earn tens of millions annually under the bank-rescue plan run by his former boss, Treasury Secretary Henry Paulson. Executive-pay packages will be restricted for the nine banks receiving a $125 billion infusion of U.S. funds to restart lending, said Paulson, who earned $37.8 million in 2005, his last full year as Goldman's CEO. The investment is part of a $700 billion bailout plan approved by Congress this month. Blankfein, 54, was Wall Street's best-paid CEO in 2007, according to data compiled by Bloomberg. He ``could still make tens of millions of dollars if he continues to receive stock grants and Goldman's stock rises,'' said David Schmidt, a senior consultant for New York-based compensation firm James F. Reda & Associates.

Builder Sentiment Hits All Time Low - (www.ml-implode.com) Reflecting profound uncertainties tied to the financial market shocks of recent weeks, builder confidence in the market for new single-family homes receded to a new record low this month. The National Association of Home Builders/Wells Fargo Housing Market Index (HMI) declined three points to 14 in October after having edged up slightly in the previous month.

America's Rich Feel Bite of Financial Crisis - (www.cnbc.com) For the past two weeks, Kathryn Morrison and her husband have been shaken awake at night by visions of crashing stock markets and evaporating retirement plans. Harvey Goldberg liquidated his account when the Dow Jones industrial average was at 12,300, but his financial advisor persuaded him to reinvest. Since then, the Dow has fallen about 20 percent. Wealthy Americans like Morrison and Goldberg were relatively insulated from the global financial crisis until just a few months ago. Now, falling stock markets are slashing their investments, and some are even starting to panic. "I'm a little angry that I didn't trust my own gut, my own instinct to stay on the sidelines and wait," said Goldberg, 57, an executive coach who lives in Washington. "I'm angry at myself." Of course, reaction to the financial crisis differs from person to person and even from husband to wife.

UBS agrees Swiss bail-out plan - (ukpress.google.com) Switzerland's UBS has became the latest banking giant to agree a multi-billion government bail-out. The firm is transferring 60 billion US dollars (£34.7bn) in toxic debts to a fund owned by the Swiss National Bank (SNB). UBS will be putting up 6 billion US dollars (£3.5bn) to absorb any losses on the "assets", although the fund will be financed by a 54 billion US dollar (£31bn) loan from the SNB. The move came as rival Credit Suisse announced plans to boost its balance sheet by 10 billion Swiss francs (£5.1bn) without the need of Government aid. UBS chief executive Marcel Rohner said the move de-risked the bank's balance sheet and "gives comfort in UBS's future". The rescue will allow UBS to rid itself of unwanted investments hit by the crunch such as mortgage-backed bonds, sub-prime debt and bonds backed by student loans.

Tokyo stocks dive 11.4 percent, worst loss in two decades - (news.yahoo.com/s/afp) Tokyo's Nikkei stock index plunged more than 11 percent Thursday, the biggest loss in two decades, as growing fears of a global recession hammered world markets. The benchmark index lost 1,089.02 points, or 11.41 percent, to end at 8,458.45, wiping out most of its gains earlier in the week. It was the Nikkei's second-largest percentage loss ever and the steepest fall since the "Black Monday" crash in October 1987.

In Scramble for Cash, Pakistan Turns to China's Deep Reserves - (www.washingtonpost.com) Pakistan has reached a critical new phase in its long-deteriorating financial situation, as investor flight and bleeding of national reserves force the country to scramble for international funds to shore up its economy. With the global financial crisis draining coffers in the United States and Europe, the key U.S. ally in the war on terrorism is seeking help from an old friend newly flush with cash: China. U.S. military and intelligence officials fear that Pakistan's increasingly precarious economy will compound an already unstable political situation and undermine military cooperation. Both al-Qaeda and the Taliban leadership are located in the rugged, economically depressed region along Pakistan's western border with Afghanistan. The Bush administration and Congress have been shaping a long-term economic and military assistance package for Pakistan, but there is no indication the United States is able to step in with a short-term financial lifeline.

For Fast Cash, Firms Tap Revolving Loans - (online.wsj.com) Cash-strapped companies aren't waiting for the U.S. banking bailout to free up credit. Instead, dozens are draining billions of dollars from "rainy day" revolving loans arranged previously with banks. The mass drawdowns reflect another weak spot for the ailing banking industry. And they show businesses' mounting anxiety about the broader economy. Some are borrowing out of a sense of caution and prudence, hoping to allay jitters about their access to funding. Others simply appear desperate for cash. Lear drew down $400 million this week. Last week it warned on profit. Among the latest examples: On Wednesday, Lear Corp., the auto-parts maker, said it drew down $400 million from its revolving credit facility "to protect against possible short-term disruptions in the credit markets." Lear announced its new borrowings along with an aggressive cost-cutting plan. Last week, the Southfield, Mich., company warned that its 2008 performance would be worse than expected. Meanwhile, crafts retailer Michaels Stores Inc., controlled by private-equity firms Bain Capital and Blackstone Group LP, said it would draw down a $120 million revolving loan on Wednesday.


OTHER STORIES:

Countrywide Home Loans Barred In Illinois - (www.ml-implode.com) Illinois’ top banking regulator is barring Countrywide Home Loans Inc. from making any new mortgages in the state until his agency is convinced the lender is complying with terms of a new settlement requiring workouts of existing mortgages that otherwise would be headed for foreclosure.
AIG Still Spending Money to Lobby For Softer Controls in Lending - (www.ml-implode.com) - Even after receiving an emergency loan that gave the government an 80% ownership stake, American International Group Inc. is spending money to lobby states to soften new controls on the mortgage industry. AIG is currently working to ease some provisions in a new federal law establishing strict oversight of mortgage originators, according to state regulators. The law requires that originators be licensed by the states, and that they supply comprehensive information so state regulators can track their activities

Staring down the 21st - (www.ml-implode.com) - ``The $6 billion figure is low, but not impossible at all. Nobody really had any idea how much credit protection was written on ...
The $3 trillion man - (www.ml-implode.com) - According to a report by Merrill Lynch's David Rosenberg (hat tip JN), the Fed's balance sheet might reach as high as $3 trillio...
CDOs Imperiled by Collapse of Iceland Banks, S&P Says - (www.ml-implode.com)


GE's 'Honey Pot' Properties Turn Sour - (www.ml-implode.com) - GE purchased many properties at the top of the market. According to Real Capital Analytics, a research firm in New York, the com...
S&P Doing the Nasty on $280 Billion in Alt-A…Largest Ever - (www.ml-implode.com) - "S&P remains ahead of the impending Alt-A and Jumbo Prime Implosions with their largest potential downgrade ever. Just to clarif...
Truth? Where? (Why Credit is Locked) - (www.ml-implode.com) - ``The automated-underwriting game is alive and well, as are high-DTI loans with all the agencies.''
Deutsche Bank Sold Massive Amounts of Phantom Stock - (www.ml-implode.com) - Predictably, the SEC has not gone after anyone in the Deutsche Bank case. Instead, it leaves the NYSE to render its “largest eve...
Bernanke Weighs Limiting Consolidation, Asset Bubbles - (www.ml-implode.com) - Federal Reserve Chairman Ben S. Bernanke said the central bank will consider discarding its long- standing aversion to interferi...
Option Armaggedon: What Price Financial Stability? - (www.ml-implode.com)
New Bailout Price Tag: $2.25 Trillion Dollars - (www.ml-implode.com)
The Banking Crisis is Over (?) Long Live the Economic Crisis - (www.ml-implode.com)
Home Loan Applications Rise for Second Straight Week - (www.ml-implode.com)
NY Fed: Manufacturing conditions "deteriorated significantly in October" - (www.ml-implode.com)

Must a Borrower Stop Paying in Order to Get Help? - (finance.yahoo.com)
Smaller Banks Resist Federal Cash Infusions - (washingtonpost.com)
Compelling Banks To Lend At Bazooka Point - (Mish)
Foreclosures May Blunt Treasury Aid - (bloomberg.com)
What Price Financial Stability? - (optionarmageddon.ml-implode.com)

The Fed is Destroying Your Money RIGHT NOW - (www.libertymaven.com)
Economy Faces Rolling Lay-Offs Which Could Hit Millions - (247wallst.com)
Mortgage crisis stops down-payment subsidy - (www.dispatchpolitics.com)

Yes, Chicken Little, the sky really is falling - (www.theglobeandmail.com)
The end of capitalism? No, just another burst bubble - (www.guardian.co.uk)
Obama McCain: A Man For This Season - (www.opednews.com)

Banks Brace for Slump as Economy Weakens - (www.nytimes.com)
Bernanke Weighs Limits on Bank Consolidation, Asset Bubbles - (www.bloomberg.com)
Democrats Mull $300 Billion Stimulus - (online.wsj.com)
Federal deficit hits record $455 billion - (www.latimes.com)
New York Manufacturing Index Drops to Record Low as Orders Fall - (www.bloomberg.com)
Next Victim of Turmoil: Your Salary - (www.nytimes.com)
Despite Big Rally, Grim Outlook on Profits and Jobs - (www.nytimes.com)
Fed Offers GE, Citigroup Commercial Paper Subsidies - (www.bloomberg.com)

New York May Lose 165,000 Jobs on Financial Woes, Official Says - (www.bloomberg.com)
JPMorgan Net Income Drops 84 Percent on Writedowns - (www.bloomberg.com)
Drama Behind a $250 Billion Banking Deal - (www.nytimes.com)
GMAC Has Limited Funding, May Scale Back Business Outside U.S. - (www.bloomberg.com)
Which banks live or die? Wielding $250 billion, U.S. may decide - (www.latimes.com)
Toyota says market worsening, U.S. outlook weak - (www.boston.com)
Lehman's Hedge Fund Clients Face Margin Calls on Frozen Assets - (www.bloomberg.com)
GE's Commercial Properties Turn Sour - (online.wsj.com)
IT Spending Seen Decelerating - (online.wsj.com)
Credit crisis' next victim: bankruptcies - (www.dallasnews.com)
What Went Wrong - (www.washingtonpost.com)
Why How Matters - (www.nytimes.com)

Stocks Fall in Europe, Asia on Economy Concern; Nokia, TNT Drop - (www.bloomberg.com)
Oil falls to 14-month low on bad US economic data - (www.ap.com)
Money-Market Rates in Euros Fall as Central Banks Inject Cash - (www.bloomberg.com)
Korean Won Falls Most Since 1997, Stocks Drop on S&P Warning - (www.bloomberg.com)
U.S. stock futures rise sharply after economic data - Market Watch from Dow Jones
CDOs Imperiled by Collapse of Iceland Banks, S&P Says - (www.bloomberg.com)
Emerging market currency volatility erupts - (www.ft.com)
Bank funding costs prompt debt concerns - (www.ft.com)

Latin America Economy Falters as Commodities, Investment Plunge - (www.bloomberg.com)
Global equity market sell off deepens - (www.ft.com)

UBS and Credit Suisse Get Urgent Bailout Funds - (www.nytimes.com)
Switzerland Gives UBS a Bailout; Credit Suisse Raises Funds - (www.bloomberg.com)
Asia looks to its own consumers to bolster region's economies - (www.iht.com)
Can China's banks survive the financial storm? - (www.reuters.com)