Monday December 1 Housing and Economic stories

TOP STORIES:

Cost Of Bailout Hits $8.5 Trillion - (www.prisonplanet.com) - The total cost of funds committed to the bailout in its various guises has now hit $8.5 trillion dollars, up from $7.7 trillion in just two days after the federal government committed an additional $800 billion to two new loan programs on Tuesday. The total amount of funds now committed equals a figure that represents 60 per cent of the U.S. gross domestic product. Millions of Americans with savings accounts and pensions will ultimately pay the price because, as the San Francisco Chronicle admits today, “The Fed lends money from its own balance sheet or by essentially creating new money.” Just another reminder that the private, run for profit, Federal Reserve has the printing presses cranked on overdrive in order to bailout Wall Street and the big banks, while the homeowner and the middle class see their savings devalued out of existence. “If you print money all the time, the money becomes worth less,” warns Diane Lim Rogers, chief economist with the Concord Coalition, but its an empty threat to delirious traders and investors drunk on a record stock market rally after the government pumped more fake liquidity into the bloated bubble.

Rubin, Weil, Pandit, Prince: Many to Blame for Citi Debacle, None Owning Up - (finance.yahoo.com) – Good video. Let’s start by saying that Pandit has only been on the job for 1 year. It has to go back to crooked Sandy Weill, Robert Rubin, and Prince. Citigroup CEO Vikram Pandit appeared on The Charlie Rose Show last night, where he steadfastly declined to take responsibility for the firm's predicament. "As I got into this job about 11 months ago, I came in with a set of assets were which unduly concentrated against the U.S. residential market, and we have been working down steadily," Pandit said, effectively laying the blame at the feet of his predecessor Chuck Prince. Prince, who became CEO of Citigroup in 2003 and then chairman in 2006, certainly deserves a share of the blame for the company's use of leverage and other decisions that ultimately left the bank at the mercy of the U.S. government. But as with any debacle of this magnitude, there's plenty of blame to go around. What about Sandy Weil, the architect of Citi's "supermarket" strategy and the man who handpicked Prince to succeed him? Then there's board member and former Treasury Secretary Robert Rubin, who has received over $100 million in compensation from Citi in 10-plus years, according to the New York Post. "I don't feel responsible, in light of the facts as I knew them in my role," Rubin told the New York Times back in April. "In hindsight, there are a lot of things we'd do differently. But in the context of the facts as I knew them and my role, I'm inclined to think probably not."

LandAmerica Financial Group Files Ch.11 BK - (news.yahoo.com/s/nm) - Title insurer LandAmerica Financial Group Inc (LFG.N) said it has filed for bankruptcy protection and its bigger rival Fidelity National Financial Inc (FNF.N) will buy two of its underwriting units.

Massachusetts Turnpike Big Dig 'Swaps' Backfire - (online.wsj.com) The financial crisis is causing a big row in Massachusetts over tolls. The Massachusetts Turnpike Authority, already the object of local scorn for cost overruns incurred in the infamous Big Dig road project, faced further public wrath in recent weeks when it proposed a $100 million a year toll increase covering Boston's bridges and tunnels. At the tunnels outside Logan International Airport, cash tolls would double to $7. Looming large among the reasons the authority needs the cash are three "interest rate swap" contracts related to the Big Dig that were sealed with UBS AG, Lehman Brothers Holdings Inc. and J.P. Morgan Chase & Co. The deals have gone wrong for the state, adding to its interest burden and confronting it with up to $467 million in potential fees if the firms opt to pull the plug on the contracts. "Did anyone know what they were doing?" asks Alan LeBovidge, who walked into the mess a year ago when he became the Turnpike Authority's executive director. Maybe, he says, his predecessors "should have been nice and conservative. It's like going to Las Vegas."

Bell Canada Bombshell Hits Hedge Funds - (www.nytimes.com) Some event-driven hedge funds won’t have much to be thankful for tomorrow. Wednesday’s news that Bell Canada’s $50 billion leveraged buyout — the largest in history — is in jeopardy will likely hammer several big funds that were gaining confidence the deal would close on Dec. 11. Among the big names that owned Bell Canada shares are hedge funds Paulson & Company, D.E. Shaw and S.A.C. Capital. An arbitrage fund run by BNP Paribas also held about $129 million worth of Bell Canada stock at the end of September, according to public filings. Other funds that held a substantial amount of shares as of Sept. 30 included Chesapeake Partners, Mason Capital Management, York Capital Management and Highbridge Capital Management. Bell Canada shares were down as much as 40 percent in premarket trading after the telecom giant said Wednesday that a preliminary report by the auditor KPMG found that “given current market conditions,” it would not remain solvent once it took on the $33 billion in debt needed to take it private.

Ailing London Hedgie Panicked - (www.nypost.com) Troubled London hedge fund manager RAB Capital is gearing up to pull the plug on several of its portfolios that invest in hedge funds, known as funds of hedge funds, The Post has learned. The move highlights the trouble encroaching on the funds of hedge funds industry. Among the funds RAB Capital is liquidating in the coming months is the RAB Multi Strategy Fund, a fund of hedge funds that invests solely in RAB Capital's proprietary funds - some of which have proven to be the worst performing in the industry this year. The RAB Multi Strategy, together with its more levered version known as the RAB Multi Strategy Enhanced, manages about $200 million in assets, down from at least $400 million earlier this year. It's down roughly 28.8 percent this year, according to a letter the fund distributed yesterday to its investors.

Economic woes hit Ireland hard - (www.latimes.com) That growth was most visible on the Dublin riverfront, where a new breed of developers transformed this city of cozy pubs with a slew of new luxury condos, wine bars and grade-A office space. Fueled by low interest rates on euro loans and a flood of Eastern European immigrants who came to work in the sprouting restaurants and factories of Dublin, Cork and Shannon, house prices in some areas of Ireland jumped as much as 500% in a decade. "The problem, you see, is that things got out of hand," said developer Mike Wallace. "The money was too cheap and incentives to build too great. The effect was the opposite of European integration. We became more like America and less like Europe. That has got to change." Today, Wallace has three prime parcels of land that he'd like to build on. Despite a national housing glut, the properties are in highly coveted areas, but most banks are refusing to lend. Banks that are willing to do so are charging interest rates -- once so low as to promote overbuilding -- that are too high to make any building project worthwhile. "We can't seem to get it just right," he said. Part of the problem is that European monetary policy, which once worked in favor of fast growth in Ireland, is now working against it. Over the last decade, analysts say, European Central Bank interest rates were probably too low for the likes of Ireland, contributing to a massive credit bubble here that has all but collapsed in recent months.

Extreme Makeover at Morgan Stanley - (www.nytimes.com) Two months ago, Morgan Stanley, one of the grandest names on Wall Street, transformed itself into an old-fashioned bank holding company in a desperate bid to survive the financial crisis. But now this new Morgan Stanley faces an even bigger challenge: figuring out where to go from here. Goldman Sachs, its perennial rival, is in the midst of a similar metamorphosis, and both firms face a somewhat uncertain future. Drawing up the roadmap at Morgan Stanley are Walid A. Chammah and James P. Gorman, who are not only co-presidents but also potential rivals to succeed John J. Mack as chief executive.
Mr. Chammah is trying to re-engineer Morgan Stanley’s vaunted investment banking operation for leaner times, which means cutting jobs — lots of them. Since July the firm has announced plans to eliminate 16 percent of its work force.


OTHER STORIES:

Solvency Issues May Jeopardize Bell Canada Deal - (www.nytimes.com)
Dividends Cut Fastest Since 1950s as Citigroup Conserves Cash - (www.bloomberg.com)
BCE Takeover in Doubt - (online.wsj.com)
Home prices keep plunging; L.A. sees some of the sharpest declines - (www.latimes.com)

Fed Aid Sets Off a Rush to Refinance - (online.wsj.com)
U.S. Mortgage Rates Drop Most in Seven Years on Fed Debt Plan - (www.bloomberg.com)
Beyond the Ivied Halls, Endowments Suffer - (www.nytimes.com)
U.S. Mortgage Rates Drop Most in Seven Years on Fed Debt Plan - (www.bloomberg.com)

EU Proposes 200 Billion-Euro Stimulus Against Crisis - (www.bloomberg.com)
China Slashes Lending Rate to Support Slowing Economy - (www.bloomberg.com)
Japan engulfed - (www.ft.com)
Brazil's housing boom shows cracks - (www.latimes.com)
U.K. Consumer Spending Declines as Economy Shrinks - (www.bloomberg.com)
A Global Downturn Puts the Brakes on China’s Industry - (www.nytimes.com)
U.S. Initial Jobless Claims Fell to 529,000 Last Week - (www.bloomberg.com)
Consumer Spending in U.S. Falls 1%, Most in 7 Years - (www.bloomberg.com)
U.S. Durable Orders Fall Twice as Much as Forecast - (www.bloomberg.com)
Food Prices Expected to Keep Going Up - (www.nytimes.com)
U.S. Moves to Revive Consumer Lending - (www.washingtonpost.com)
Fed Risks ‘Spitting in the Wind’ With New $800 Billion Pledge - (www.bloomberg.com)
Americans' Food Stamp Use Nears All-Time High - (www.washingtonpost.com)
Americans' Gloom Reverberates - (online.wsj.com)
Home prices keep plunging; L.A. sees some of the sharpest declines - (www.latimes.com)
Seattle home prices fall nearly 10% in third quarter - (seattletimes.nwsource.com)
Tiffany lowers outlook as profit tumbles - (www.marketwatch.com)
Porsche sees sales declining sharply in 4 months through November as crisis bites - (www.chicagotribune.com)
Tiffany posts lower profit; economy hits US sales - (www.reuters.com)
AIG receives $40 billion from government program - (biz.yahoo.com/ap)
Holiday travel will be down this year as economic slump continues - (www.chicagotribune.com)
Toyota Suffers First Credit Rating Cut in 10 Years Amid Slump - (www.bloomberg.com)