Friday November 7 Housing and Economic stories

TOP STORIES:

New Terrain for Panel on Bailout - (www.nytimes.com) There was a rare moment of levity at the Treasury Department on Friday as the children of government workers scampered from office to office in Halloween costumes. A few minutes later, the children were gone and the hallways were retaken by grim-faced grown-ups — handing out tricks and treats of a different sort. The Treasury building is ground zero for the Bush administration’s $700 billion rescue of the financial system — an ambitious, increasingly embattled program that passed an early milestone last week when the government wired the first $125 billion to the nine largest banks in the United States. Having been handed vast authority and almost no restrictions in the bailout law that Congress passed a month ago, a committee of five little-known government officials, aided by a bare-bones staff of 40, is picking winners and losers among thousands of banks, savings and loans, insurers and other institutions.

All Is Well in Stepfordville: More on the Pre-election Chicanery of the Plunge Protection Team - (www.opednews.com) The swindle of American taxpayers is proceeding more or less in broad daylight, as the unwitting voters are preoccupied with the national election. Treasury Secretary Hank Paulson agreed to invest $125 billion in the nine largest banks, including $10 billion for Goldman Sachs, his old firm. But, if you look more closely at Paulson’s transaction, the taxpayers were taken for a ride – a very expensive ride. They paid $125 billion for bank stock that a private investor could purchase for $62.5 billion. That means half of the public’s money was a straight-out gift to Wall Street, for which taxpayers got nothing in return.

Another Example of Rewarding Corruption and Stupidity: Head of NY Fed Likely to Be Treasury Sec - (www.cnbc.com) It can be argued that New York Federal Reserve President Timothy Geithner presided over the most corrupt Wall Street in history and has stated multiple times in speeches over the past 5 years that the economy is strong and didn’t predict the current crisis. How will we reward him? As the new Treasury Secretary. The citizens of this country should be discussing how to try this idiot and bring him justice.

Rescue Cash Lures Thousands of Banks – (online.wsj.com) Treasury and banking regulators say as many as 1,800 publicly held institutions could apply for government investments in coming weeks, out of concern that failing to do so could make them losers in a banking sector reshaped by the Treasury's $700 billion rescue plan. Depending upon conditions still being crafted by Treasury, thousands more private banks could apply for government capital as well, a Treasury spokeswoman said Sunday. Only days ago, many healthy banks were saying they didn't need taxpayer money under the Troubled Asset Relief Program.

Private Equity Draws the Cold Shoulder - (online.wsj.com) Large institutional investors that provided much of the capital that put some of America's best-known companies into private hands are starting to cool on the investment strategy, suggesting that the lifeline for private equity is eroding. Public pension funds and endowments are turning down invitations to make private-equity investments. The nation's largest public pension fund, the California Public Employees' Retirement System, or Calpers, is asking private-equity firms to ease off on requests for additional capital it had previously committed to deliver. Calpers has $189.6 billion of assets under management. Harvard University, with an endowment of $36.9 billion under Jane Mendillo, is seeking to offload about $1.5 billion in investments with private-equity firms such as Bain Capital LLC, according to people familiar with the situation. If the Harvard portfolio trades, the transaction would be one of the largest-ever sales of a private-equity stake. Bids are due this week. Meanwhile, private-equity firms, some of which earned hundreds of millions of dollars for their founders less than two years ago by taking their firms public, continue to struggle amid the financial crisis. Kohlberg Kravis Roberts & Co., which has been trying to go public since July 2007, on Monday said that it would further delay its initial public offering until 2009. It also substantially reduced the valuations on several of its largest holdings in the third quarter, including the large Texas utility Energy Future Holdings Corp., formerly TXU Corp., by 28% and Dutch semiconductor company NXP BV by about 45%.

Goldman fund loses $990m after 10 months - (www.ft.com) One of Goldman Sachs‘s flagship hedge funds, run by two of the Wall Street bank’s most talented traders, has lost close to $1bn since its launch in January in further evidence of the crisis facing the industry. Goldman Sachs Investment Partners, which was hailed in January as one of the biggest hedge fund launches, raising more than $6bn, has told investors that it had lost $989m by September. It said the fund was down about 13 per cent in the third quarter. Year-to-date performance fell about 15.5 per cent in the year to September. The managers said: “We are disappointed with our performance.” But they added: “GSIP is not alone in producing disappointing returns this quarter and this year.

New York Commercial Property Sales Plunge 61% in Credit Freeze - (www.bloomberg.com) New York City commercial real estate transactions plunged 61 percent in 2008 through October as the global credit crisis roiled lending and sidelined buyers. The banks are not lending, and most of them are saying we're done for the year,'' said Scott Latham, executive vice president for New York investment sales at Cushman & Wakefield Inc., the largest closely held commercial brokerage. ``In all likelihood, you will see next to no transactions between now and the end of the year.'' The property recession that began in housing during 2006 is spreading to the commercial market. About 85 percent of domestic banks tightened lending standards on commercial and industrial loans to large and mid-size firms in the past three months, the highest since the Federal Reserve's Senior Loan Officer Survey began in 1991, the Fed said yesterday. Financial firms have recorded writedowns and losses of more than $680 billion. The office market will likely get worse in 2009 and may not improve for at least another year, said Andrew Simon, executive managing director for the New York City office of NAI Global, a worldwide network of 325 independent commercial property brokerages. The bankruptcy of Lehman Brothers Holdings Inc., the takeover of Merrill Lynch & Co. and the city comptroller's forecast that New York may lose as many as 165,000 jobs are also weighing on the market.

Blue Mountain freezes withdrawals - (www.ft.com) Blue Mountain Capital Management is suspending withdrawals from its $3.1bn Credit Alternatives Fund, becoming the latest hedge fund firm to do so. Unlike other hedge funds that have seen redemptions soar due to poor performance, Blue Mountain has done relatively well.

Concern over shipping derivatives losses - (www.ft.com) Fears are growing in the shipping industry over the potentially big losses that could emerge this week on derivatives triggered by the October collapse in rates to charter dry bulk ships. Since short-term dry bulk charter rates fell 71.9 per cent in October, traders and shipowners have worried that traders might be caught out by the speed and severity of the fall. Traders in forward freight agreements – derivatives based on short-term charter rates – could owe significant sums if they were betting on a rise in charter rates for ships carrying coal, iron ore and other commodities. The sector’s Baltic Dry Index of charter rates started the month at 3,025 points and closed on Friday at 851. The 80 per cent of trades made through clearing houses were being settled on Monday, while traders who bought cash-settled products through private transactions, known as over-the-counter trades, have until Friday to settle

SBA-Backed Loans Dry Up - (online.wsj.com) When entrepreneurs can't get conventional loans, they traditionally turn to loans backed by the Small Business Administration. But in recent months -- as many banks turned away businesses and slashed credit lines -- SBA lending also has dried up substantially. The retrenchment has become especially pronounced in the past couple of weeks. The big decline in SBA lending is fueling new criticism that the federal government isn't doing enough to help businesses when they are in most dire need of cash. "SBA volume is significantly down, and one might argue that [it's happening] at a time when small business needs access to capital more than ever," says Chris Reilly, president of CIT Small Business Lending Corp. of Livingston, N.J., which ranks among the top SBA lenders nationwide.

Convertible Bonds Cause Hedge Funds Serious Pain - (online.wsj.com) Pain in the market for convertible bonds is crippling big hedge funds and cutting off a key avenue of financing for many companies. This market, which has long welcomed businesses struggling to raise cash, is the latest to suffer from too much borrowing and faulty hedges, which came unwound in the recent turmoil. Overall, the $200 billion convertible-bond market has lost 36% so far this year, a bit more than the stock market, according to Merrill Lynch. But the average convertible-bond hedge fund has lost about 50% in that time, including a 35% plunge in October, according to Hedge Fund

Credit crisis sends businesses into junk bond limbo - (www.usatoday.com) The credit crisis is serving up a double-whammy to struggling companies that could make it even harder for some to recover. Not only are a rising number of companies facing the possibility of seeing their credit downgraded to junk, but they're falling from grace at a time when it's never been more expensive to have junk bonds. That means companies already hurting in a weak economy may suffer again in the credit markets if they need cash to get them through. "If these companies need to come to market … they are going to have a problem," says Dave Novosel, analyst at bond analysis firm Gimme Credit. This point of stress on companies is poised to be a real issue for a number of reasons such as the: •Surging number of "fallen angels." So far this year, 33 companies around the world with debt of $194.4 billion have had their credit ratings cut from investment grade to junk levels, says Diane Vazza of Standard & Poor's, based on the most recent data as of Oct. 14. The debt held by this year's fallen angels already is 44% greater than that held by all fallen angels in all of 2007.



OTHER STORIES:

Recession hits Europe as Club Med debt worries grow - (www.telegraph.co.uk)
German Bank Seeks $10.5 Billion in Bailout Aid - (www.nytimes.com)

NAR's Doublespeak on Support for Congressman Shays - (www.ml-implode.com) - This article has been contributed to ML-Implode by Teri Buhl of the New York Post The National Association of Realtors has a fri...
Ben Bernanke will make things a lot worse by repeating Alan Greenspan's mistakes - (www.ml-implode.com) - I take my life into my hands as I venture this – but are US base rates of 1pc really the answer? I would argue emphatically not....
Second Mortgage Notes For 1.1 Cents on the Dollar - (www.ml-implode.com) - ``A good friend who specializes in distressed real estate assets such as notes and REO just bought 27 second mortgages with a fa...
Chase Launches Loan Modification Program, Halts Foreclosures - (www.ml-implode.com) - "JP Morgan Chase announced Friday it was expanding its “already significant” loan modification program to include recently acqui...
U.S. ISM Manufacturing Index At 26-Year Low - (www.ml-implode.com) - "Manufacturing in the U.S. contracted in October at the fastest pace in 26 years as the credit crisis deepened and companies red...
Long Line Forms at Bailout Window - (calculatedrisk.blogspot.com) "Treasury and banking regulators say as many as 1,800 publicly held institutions could apply for government investments in coming weeks ... thousands more private banks could apply for government capital as well, a Treasury spokeswoman said Sunday."

Nearly One of Five Underwater on Mortgage - (www.ml-implode.com)
Mortgage Insurers See Borrower Defaults Jump - (www.ml-implode.com)
Fannie Mae, Freddie Mac fallout - (www.ml-implode.com)
Reckless loans ruled Wa-Mu, ex-worker says - (www.ml-implode.com)
Update on the criminal investigatio of Angelo Mozilo - (www.ml-implode.com)
25 Most Influential Real Estate Bloggers: 2008 - (www.ml-implode.com)
Deflation worries from coast to coast - (www.ml-implode.com)
"Joe The Hedge Fund Manager" - (www.ml-implode.com)
Is Credit Card Relief Coming? - (www.ml-implode.com)

U.S. Economy: Factory Index Declines to 26-Year Low - (www.bloomberg.com)
Treasury weighs purchasing stakes in more firms: report - (www.reuters.com)
U.S. Weighs Purchasing Stakes in More Firms - (online.wsj.com)
Homeowners Wait as Relief Plan Drags - (online.wsj.com)
JPMorgan Faces `Challenging' 2009, Rebound in 2010 - (www.bloomberg.com)
U.S. Auto Sales Fall 32% to Lowest Total in 17 Years - (www.bloomberg.com)
Automakers Report Grim October Sales - (www.nytimes.com)
Luxury Consumers Scrimp - (online.wsj.com)
BMW abandons full-year profit target - (www.ft.com)
Iron Miners Brace for Price Cuts - (online.wsj.com)
High Court Case Looms Large for Drugmakers - (www.washingtonpost.com)
Gold Rises in London as Dollar Drops; Crude Oil Prices Rebound - (www.bloomberg.com)
Three-Month Dollar Libor Falls to Lowest Since June 9, BBA Says - (www.bloomberg.com)

Developing Nation Debt Costs Drop Most Since '01 as Bonds Rally - (www.bloomberg.com)
Euro Rises as Stocks Advance, Bank Borrowing Costs Decline - (www.bloomberg.com)
Crude Oil Rebounds as Stocks Advance, Easing Growth Concerns - (www.bloomberg.com)
Financials lead European share advance - (www.ft.com)
Stock futures rise ahead of presidential election - (www.reuters.com)
Corporate leveraged loan market braced for further hardship - (www.ft.com)
Convertibles Put Squeeze on Some Funds - (online.wsj.com)

As China's Losses Mount, Confidence Turns to Fear - (www.washingtonpost.com)
Australia cuts rates, glimmers of hope from banks - (www.reuters.com)
German Bank Seeks $10.5 Billion in Bailout Aid - (www.nytimes.com)
New-Car Sales in Spain, Italy Plunge - (www.washingtonpost.com)
Overseas, More Nations Assemble Stimulus Plans - (www.nytimes.com)
Signs of Slowdown Abound in Hong Kong - (online.wsj.com)