Thursday October 2 Housing and Economic stories

TOP STORIES:

SEC moves away from mark to market – (www.financialweek.com) Regulator tells banks they can rely on level 3 input; 'pick a number, any number' . U.S. securities regulators on Tuesday gave the financial industry a reprieve from marking hard-to-value assets down to fire sale prices, throwing a lifeline to an industry beset by strained credit markets and the latest round of bank failures. The U.S. stock market added to gains on the news, in hopes that regulators’ new interpretation of fair value, or mark-to-market, accounting rules, will slow or reverse the heavy flow of mortgage-related losses on banks’ balance sheets. In the new guidance, first reported by Reuters, the U.S. Securities and Exchange Commission reminded financial services firms that they don’t need to use fire sale prices when evaluating their hard to price assets.

FDIC and key politicians want to raise deposit insurance limit to $250,000 - (www.reuters.com) The chairman of the House Financial Services Committee has told lawmakers that a federal bank regulator will seek authority to increase the deposit insurance limit to a level above its current $100,000, said a source familiar with the chairman's thinking. Representative Barney Frank, a Massachusetts Democrat, has told lawmakers of his committee that Sheila Bair, chairman of the Federal Deposit Insurance Corporation, will soon request the authority to boost the level of insured deposits, the source said. Presidential nominees Barack Obama and John McCain both proposed an increase in federal deposit insurance to $250,000 from $100,000 as a way to broaden support for the bank asset bailout bill rejected on Monday by the U.S. House of Representatives.

Lehman Hedge-Fund Clients Left Cold as Assets Frozen - (www.bloomberg.com) Lehman Brothers Holdings Inc.'s bankruptcy probably means the end of hedge-fund manager Oak Group Inc. after 22 years in business. John James, who runs the Chicago-based firm with $25 million of assets, didn't buy Lehman stock or debt. Instead, his potentially fatal mistake was to rely on the bank's prime brokerage in London, a unit that provides loans, clears trades and handles administrative chores for hedge funds. He's one of dozens of investment managers whose Lehman prime-brokerage accounts were frozen when the company filed for protection from creditors on Sept. 15. ``We're probably going out of business and liquidate, game over,'' James, 59, said. ``We've lost 70 percent of our assets.''
The list of funds trapped in the Lehman morass keeps growing. London-based MKM Longboat Capital Advisors LLP said last week it will close its $1.5 billion Multi-Strategy fund in part because of assets stuck at Lehman, according to an investor letter. LibertyView Capital Management Inc. of Hoboken, New Jersey, owned by Lehman's Neuberger Berman unit, told investors on Sept. 26 it had suspended ``until further notice'' attempts to calculate the value of its funds. LibertyView was not included in the Sept. 29 sale of Neuberger to Bain Capital LLC and Hellman & Friedman LLC.

Pressure mounts in UK to guarantee savings - (www.ft.com) Gordon Brown, the UK prime minister, was facing growing pressure to extend the guarantees on British savers’ bank deposits after Ireland promised to underwrite the debts and savings accounts of its six largest lenders in a desperate bid to restore investor confidence in the ailing sector. The Irish government’s emergency move was agreed by ministers and bank executives at a late-night meeting on Monday amid concerns about a run on an Anglo-Irish bank and raised the stakes in the state intervention sweeping Europe’s banking sector. It enraged British and European officials and may fall foul of the European Commission’s rules on state aid by offering competitive advantages to some Irish banks. The guarantees make the six lenders more attractive to savers and investors. The European Commission said it was only contacted overnight about the scheme but was looking to see whether state aid was involved.

US credit crisis affects Fla.'s ability to borrow money; state can't issue bonds for schools - (www.chicagotribune.com) The nation's credit crunch has frozen Florida's ability to borrow money, but that isn't yet causing problems for the state, a top state money manager said Tuesday. Florida has been unable to borrow money for nearly three weeks, said Ben Watkins, director of the division of the state's Division of Bond Finance. As such, the state cannot issue bonds for schools, roads or programs to purchase environmentally sensitive land, Watkins said. Florida, which works on bonds months in advance, is not in a dire need for extra cash, he said. "It's not creating a problem for us currently," Watkins told Gov. Charlie Crist and members of the Florida Cabinet. "But if this goes on for an extended period of time we will be challenged to have access to the credit markets." Florida has more than $24 billion in debt. Each year, it borrows anywhere from $1 billion to $2 billion. Two-thirds of the money the state has borrowed has gone to pay for new buildings for schools, community colleges and universities. The money is paid back through various taxes like those on utility bills and money from selling items such as lottery tickets. The ongoing credit crisis could eventually affect other functions of state government.

Olivant suffers Lehman blow - (www.ft.com) Luqman Arnold's investment company, Olivant, has been hit by the collapse of Lehman Brothers (NYSE:LEH) as it emerged that its entire shareholding in UBS (NYSE:UBS) was held in accounts managed by the failed Wall Street bank. The investment company has been trying to recover its 2.78 per cent stake in UBS - worth about SFr1.4bn (£700m) at Tuesday's prices - since Lehman filed for bankruptcy last month.
However, in spite of intensive discussions with Lehman and PwC, the administrators for Lehman Brothers International (Europe), it has been unable to locate the shares.

Bush Approves Loans for Auto Makers - (online.wsj.com) Yes, the monkey from Texas is doing anything and everything to try and preserve some sort of legacy and goodwill around his name. President Bush on Tuesday signed into law a low-interest loan package to aid U.S. auto makers, but those struggling companies will still have to wait months to find out how and when they can tap the $25 billion designated to smooth their transition to building more fuel-efficient vehicles.The loan package was approved last year as a way to help auto makers and their suppliers meet fuel-economy standards set by the federal government. But the funding for the package wasn't passed by Congress until this year. One estimate put the total cost to auto makers at $100 billion to meet stricter efficiency standards that require vehicles to reach 35 miles per gallon by 2020.

Rep. Brad Sherman On Bailing Out Foreign Investors - (Mish’s globaleconomicanalysis.blogspot.com) It's very clear. The Bank of Shanghai can transfer all of its toxic assets to the Bank of Shanghai of Los Angeles which can then sell them the next day to the Treasury. I had a provision to say if it wasn't owned by an American entity even a subsidiary, but at least an entity in the US, the Treasury can't buy it. It was rejected. The bill is very clear. Assets now held in China and London can be sold to US entities on Monday and then sold to the Treasury on Tuesday. Paulson has made it clear he will recommend a veto of any bill that contained a clear provision that said if Americans did not own the asset on September 20th that it can't be sold to the Treasury.

Idiocracy - Presidental Speech - (www.youtube.com) Any parallels with the current congress? J
This is the movie scene where the president is making a speech and unvailing Joe A.K.A not sure to the world. He promisis that joe will fix all the world's problem and if he dosn't he will throw his ass back in Jail....

Bankruptcy, not bailout, is the right answer - (www.cnn.com) The obvious alternative to a bailout is letting troubled financial institutions declare bankruptcy. Bankruptcy means that shareholders typically get wiped out and the creditors own the company. Bankruptcy does not mean the company disappears; it is just owned by someone new (as has occurred with several airlines). Bankruptcy punishes those who took excessive risks while preserving those aspects of a businesses that remain profitable

Congressional Most Endangered List - (Mish’s globaleconomicanalysis.blogspot.com) Two-thirds of Congress' most vulnerable members — Republicans and Democrats alike — chose to protect their seats on Election Day rather than follow their party leaders and vote for an unpopular economic bailout plan. Their votes helped doom the plan President Bush, congressional leaders and top economic officials said was critical. "We're all worried about losing our jobs," Rep. Paul Ryan, R-Wis., said, endorsing the bill and voting for it after leading a rebellion against an earlier version last week. "Most of us say, 'I want this thing to pass, but I want you to vote for it, not me,'" he said, speaking for colleagues who have tougher re-election fights than his own. The three vulnerable Republicans who voted "yes" were Reps. Christopher Shays of Connecticut, Mark Kirk of Illinois and Jon Porter of Nevada. The three vulnerable Democrats voting "yes" were Tim Mahoney of Florida, Paul E. Kanjorski of Pennsylvania and Jerry McNerney of California.

6.875%: LIBOR Tags All Time High - (bigpicture.typepad.com) - This will be bad for ARMs. The money markets have completely broken down, with no trading taking place at all. There is no market any more. Central banks are the only providers of cash to the market, no-one else is lending.'' -Christoph Rieger, a fixed- income strategist, Dresdner Kleinwort. The London interbank offered rate reached an all time high yesterday on the failure of the bailout plan, and the market sell off. For those of you new to the site, this interest rate is frequently used by banks to lend money to each other. When this spikes, it means that credit is very tight.

'We are approached by hedge funds considering fund liquidations on a weekly basis' - (business.timesonline.co.uk) Every week at least one British hedge fund is considering winding up its funds as catastrophic investment performance puts the sector under unprecedented pressure, an industry expert said yesterday. Andrew Shrimpton, the former head of hedge fund regulation at the Financial Services Authority who now runs Kinetic, a consultancy, said: “The credit crisis is definitely kicking in for the hedge fund industry now. We are being approached by hedge funds considering voluntary fund liquidations on a weekly basis.” His remarks came as CQS, one of London's best-known hedge funds, wrote to its investors to say that its flagship $4.25billion CQS Fund had fallen 9.42 per cent for the year to date. Michael Hintze, its chief executive and senior investment officer, told investors that senior management at CQS were meeting as often as three times a day to monitor the fund and take action over its exposures where necessary. The fund, which specialises in convertible arbitrage - or small price differentials between bonds and underlying equities - is down more than 11 per cent for the year.




OTHER STORIES:

Foreclosure Help Isn’t Helping - (www.ml-implode.com) - "Servicers appear to have reached the ‘low hanging fruit’ of subprime loans facing interest rate resets, while not developing ef...
Overnight-Lending Markets Still Flashing Red - (www.ml-implode.com) - If you only watch the stock market, where the Dow was recently up more than 250 points, you might get the mistaken impression ...
Congressional Neroes - Republicans and Democrats fiddle as the economy burns - (www.ml-implode.com) - Hey, WaPo -- The Washington Times called; they want their Wall Street-cowtowing editorial back- IF THE UNITED States does exp...
Uncle Sam Realty and Loans Inc. - (www.ml-implode.com) - "Sadly, recent events in Washington suggest that this optimism of some kind of meaningful rescue plan for Main Street may have b...
Stocks stage partial rebound after steep sell-off - (www.ml-implode.com)
They Just Don't Get It- - (www.ml-implode.com)
Case Shiller Index Falls 17.5% in July - (www.ml-implode.com)
The $55 trillion question - (www.ml-implode.com)
Private Mortgage Insurance Volume Continues Slide 3 - (www.ml-implode.com)
Main Street turns against Wall Street - (www.ml-implode.com)
Let Risk-Taking Financial Institutions Fail - (www.ml-implode.com)
Erratum to``Calculation of a capsizing rate of a ship in stochastic beam seas'' - (www.ml-implode.com)
Congressman Who Backed Bailout Aghast At Failure - (www.ml-implode.com)

Throw these 205 bailout bastards out of Congress - (patrick.net)
How Voter Fury Stopped The Bailout - (Mish at globaleconomicanalysis.blogspot.com)
Nebraska dairy farmer flies to Washington to oppose bailout plan - (www.omaha.com)
Bailout Itself Causes More Risk Than No Bailout - (tpmcafe.talkingpointsmemo.com)
What Can You Do To Help Solve The Credit Crisis? - (www.erica.biz)
Mainstream Media Censors Bailout Protests on Wall Street - (www.hubpages.com)
Treasury Accidentally Admits Bailout CEO Pay Restrictions Were Farce - (www.dailykos.com)
Asia stocks fall after US bailout halted - (news.bbc.co.uk)
Mortgage lending plunged by 95% in August In England - (www.news.sky.com)
McDonald's More Credit-Worthy than U.S. Government - (www.watchingamerica.com)
Goldman, Morgan Stanley Shares Drop as Bailout Fails - (www.bloomberg.com)
Wachovia's "Great Success" Became $122 Billion Burden - (www.bloomberg.com)
Citigroup to Acquire Banking Operations of Wachovia - (www.fdic.gov)
Crumbling Financial Giants Gave Generously To Sen. Dodd - (www.courant.com)
Investors ready to snap up distressed assets - (www.dallasnews.com)
Oil drops more than $10 as bailout plan fails - (www.marketwatch.com)
Lessons to be learned from American meltdown - (www.nzherald.co.nz)
Bush the arrogant - (www.latimes.com)
Falling Into Fall - (jameshowardkunstler.typepad.com)

Treasuries Plummet on Speculation Rescue Plan Will Be Salvaged - (www.bloomberg.com)
Sallie Mae Credit Swaps Jump to Record Amid Credit Turmoil - (www.bloomberg.com)
Gold, Silver Fall in N.Y. as Equities Rebound, Dollar Rallies - (www.bloomberg.com)
U.S. Stocks Surge on Speculation Bank-Rescue Plan Will Pass - (www.bloomberg.com)
Corporate Bonds Have Worst Month Since '80 as Lehman, WaMu Fail - (www.bloomberg.com)
FDIC to Ask for Authority to Raise Deposit-Insurance Limits - (www.bloomberg.com)
SEC, FASB Said to Issue Guidance on Fair-Value Accounting Rules - (www.bloomberg.com)
Libor Surges Most on Record After U.S. Congress Rejects Bailout - (www.bloomberg.com)
Municipal Bonds Headed for Worst Quarter in as Much as 14 Years - (www.bloomberg.com)
Hedge funds face worst year since 1990 - (www.ft.com)
What the death of the investment bank means for Wall Street - (www.economist.com)
The $55 trillion question - (www.fortune.com)
End of quarter has hedge funds bracing for redemptions - (www.financialweek.com)
Why the credit crunch is about more than Wall Street - (www.cnet.com)
Hedge Funds May See Key Employees Walk - (online.wsj.com)
Russian Stocks, Bonds Slump, Deepening Emerging Market Rout - (www.bloomberg.com)
With Wachovia Sale, the Banking Crisis Trickles Up - (www.nytimes.com)
Asian Borrowing Costs Rise as Bailout Failure Stalls Lending - (www.bloomberg.com)
Dexia to Get EU6.4 Billion Rescue; Miller, Richard Step Down - (www.bloomberg.com)
Crisis marks beginning of the end for Asia's export-fueled growth - (www.financialweek.com)
The financial crisis at break-neck speed - (www.telegraph.co.uk)
Japan faces fresh economic gloom - (news.yahoo.com/s/afp)
European Governments Rescue Another Failing Bank - (www.washingtonpost.com)
Australia Home-Lending Growth Slows to Weakest Pace in 22 Years - (www.bloomberg.com)
Senate Leaders Pledge Action to Revive Bailout Plan - (www.nytimes.com)
Home Prices in 20 U.S. Cities Declined 16.3% in July - (www.bloomberg.com)
Senate May Try to Revive Bank-Rescue Bill by Tomorrow - (www.bloomberg.com)
Lawmakers Grope for Resolution as They Attempt to Avoid Economic Calamity - (www.nytimes.com)
U.S. Heading for Deeper Economic Slump, With or Without Bailout - (www.bloomberg.com)
Consumer Confidence in U.S. Unexpectedly Increased - (www.bloomberg.com)
As risk grows, resources strained at Fed, FDIC - (www.latimes.com)
Loan costs soar as access tightens - (www.usatoday.com)
Gas shortage continues to plague Southeast - (www.ap.com)
Allied Capital slumps as Ciena Capital goes bust - (www.marketwatch.com)
Wachovia's Steel Ran Out of Time Amid Mortgage Losses - (www.bloomberg.com)
Congress decides it is worth risking depression - (www.ft.com)
Prudent Bear's David Tice Says Dow Average May Plunge to 5,000 - (www.bloomberg.com)
What Goes Before a Fall? On Wall Street, Reassurance - (www.nytimes.com)
Loose Money And the Roots Of the Crisis - (online.wsj.com)
The layman's finance crisis glossary - (news.bbc.co.uk)