Sunday November 2 Housing and Economic stories

TOP STORIES:

THE SOCIALISM OF THE UNITED SOCIALISTIC STATES OF AMERICA (USSA) IS CONTINUING AT RECORD PACE:
· Government near home loan bailout - (money.cnn.com) The government is considering a plan that would help around 3 million homeowners avoid foreclosure, sources briefed on the matter said. A final deal had not been reached as of Wednesday afternoon and negotiations could still fall apart, but government agencies were contemplating using around $50 billion from the recently passed bailout of the financial industry to guarantee about $500 billion in mortgages.
· Groups seek credit card debt forgiveness - (money.cnn.com) An alliance of financial industry interests and consumer advocates on Wednesday asked federal regulators to allow lenders to reduce by as much as 40 percent the amount of credit card debt owed by deeply indebted consumers in a special program. As the economic crisis has deepened and consumers increasingly are defaulting on their credit card debts, write-offs on the loans have mounted for banks and other lenders. The unusual joint request from the Financial Services Roundtable and the Consumer Federation of America highlighted the urgency of the situation: consumers - even those with strong credit records - defaulting at high levels on their credit cards, while banks battered by the credit crisis bleed tens of billions in red ink from the losses.
· GMAC Wants to Become Bank After Getting Access to Fed Program - (www.bloomberg.com) GMAC LLC, the money-losing auto finance and home-loan lender, is seeking to become a bank holding company after gaining access to the Federal Reserve's new program designed to unlock short-term commercial credit markets. The Fed began buying commercial paper from companies this week to reduce interest rates and lure investors back to the market for short-term debt, which seized up last month following the bankruptcy of Lehman Brothers Holdings Inc. Detroit-based GMAC said yesterday it was approved to participate in that program. Becoming a bank holding company would make it easier for GMAC, the primary lender to customers of General Motors Corp., to participate in the Treasury Department's banking-industry rescue and quell doubts about the lender's survival. The firm could also get direct loans from the central bank and temporary debt guarantees from the Federal Deposit Insurance Corp.
· Governors Call for Rescue Package for States - (www.nytimes.com) Governors David A. Paterson of New York and Jon S. Corzine of New Jersey added their voices Wednesday to the growing support for a second federal economic stimulus package, saying state governments would face devastating cutbacks if they did not receive assistance soon. Appearing before separate congressional committees, they said that their states, like many others, had already moved to address budget deficits. Their actions alone would not be enough, they said. “We are cutting all we can,” Mr. Paterson told the House Ways and Means Committee. “Therefore, we feel that targeted, sensible actions by the federal government will provide relief for us now.” Speaking to the House Transportation and Infrastructure Committee, Mr. Corzine implored, “We need federal help to get through these tough times.” Their remarks increased the pressure on the federal government to include money for state governments in the next round of economic stimulus legislation, pointedly putting the requests of the executives of two of the nation’s most populous states on the record. SORRY NY AND NJ, YOUR STATES HAVE BEEN PROFITING HANDSOMELY AT THE EXPENSE OF MANY OTHER STATES. NOW IT IS TIME FOR YOU TO TAKE YOUR MEDICINE FOR YOUR RECKLESSNESS.
· Fed Creates Swaps With South Korea, Brazil, Mexico - (www.bloomberg.com) The Federal Reserve agreed to provide $30 billion each to the central banks of Brazil, Mexico, South Korea and Singapore, expanding its effort to unfreeze money markets to emerging nations for the first time. The Fed set up ``liquidity swap facilities with the central banks of these four large systemically important economies'' effective until April 30, the central bank said yesterday in a statement. The arrangements aim ``to mitigate the spread of difficulties in obtaining U.S. dollar funding.'' South Korea's benchmark stock index had its biggest gain since at least 1980, the won surged and the cost of protecting Asia-Pacific bonds from default tumbled on optimism the measures will prevent the global credit crisis from upending financial markets. The Fed and China cut interest rates yesterday, followed by Hong Kong and Taiwan today.
· Fannie plans to write down $20bn asset - (www.ft.com) Fannie Mae (NYSE:FNM) said it would write down "substantially all" of a $20bn tax-related asset that has been a key component of its capital. The writedown increases the likelihood the US Treasury may have to cough up more capital to keep Fannie and fellow mortgage financier Freddie Mac afloat. Fannie's $20.6bn of so-called "deferred tax assets" represented a substantial portion of the mortgage company's $47bn of regulatory capital and accounted for almost half the company's $41.2bn book value at the end of the second quarter.

Russia Tosses Life Preserver to One of Its Richest Men - (online.wsj.com) The Kremlin is stepping in to bail out one of the country's richest men, in what could be the first move in a shakeout among the powerful businessmen known as oligarchs, whose holdings are spread throughout the Russian and world economies. People close to the situation said that on Tuesday Russia allowed Alfa Group, a conglomerate controlled by businessman Mikhail Fridman, to tap its $50 billion rescue fund to pay back a $2 billion loan to a group of banks led by Deutsche Bank AG. The funding allowed Mr. Fridman to avoid having to give up his 44% stake in ...

Hedge fund Greenlight down more as VW surges - (www.reuters.com) Hedge fund manager David Einhorn's Greenlight Capital suffered heavy losses in his portfolio when German carmaker Volkswagen's shares spiked 82 percent on Tuesday, people familiar with his portfolio said. The German carmaker briefly zoomed past Exxon Mobil to become the world's biggest company by market value as hedge funds who bet Volkswagen's price would drop further were forced to cover their positions. Carmaker Porsche Automobil Holding SE (PSHG_p.DE: Quote, Profile, Research, Stock Buzz) surprised the market by announcing it had effectively gained control of 74 percent of Volkswagen's voting shares. Einhorn's Greenlight Capital L.P. had already lost 16.4 percent in the first nine months of the year, Einhorn told investors in a letter on October 1. He said Porsche was one of nine losers in the portfolio that each cost more than one percent of capital in the quarter. Losses will be even bigger now and make October another difficult month, two people familiar with Einhorn's positions, who declined to be identified because they are not authorized to speak about the hedge fund publicly said.

Hedge funds scramble to assess damage - (www.ft.com) Hedge funds are scrambling to assess the damage done to portfolios after bets on Volkswagen’s shares have turned sour. Estimates of the losses suffered by funds that went short – borrowed shares and sold them in the expectation they could buy them back more cheaply – run into several billions of euros. After Porsche declared it held sway, directly or indirectly, over more than 74 per cent of VW’s shares this week, fund managers have been struggling to buy back shares to cover their short positions, pushing the carmaker’s share price ever higher. There is widespread speculation that the losses nursed by some hedge funds may be enough to force them under. One hedge fund manager said: “Being long of VW preference shares and short of the ordinary shares was a very common trade and there may have been more than 100 managers doing it”. Funds including Greenlight Capital, headed by David Einhorn, and Odey Asset Management have recently told clients that they had big short positions in VW. Other managers, including Highbridge Capital Management, have sought to refute reports of big losses in VW. Marshall Wace said its losses on VW trades “were immaterial”. Citadel Investments, one of world’s biggest funds cited to have lost money on VW, said: “We have suffered no losses of substance on Volkswagen whatsoever.” The losses have been exaggerated, argues Andrew Baker, deputy chief executive of the Alternative Investment Management Association.

US hospitals may have to buy back $8bn in debt - (www.ft.com) US hospitals may be forced to buy back more than $8bn (£5bn, €2bn) of debt as a result of turmoil in the credit markets, adding to their burdens just as a weakening economy is draining resources. The problem for the hospitals involves so-called variable rate demand notes and other securities that they have agreed to buy back in some cases. The interest rates on VRDNs reset periodically and investors have the right to reject the new terms and sell the paper back to the issuer or a bank. An estimated $400bn in VRDNs have been issued in the US and most require banks – rather than the issuer – to buy back the debt. However, Moody’s Investors Service, the ratings agency, said 24 not-for-profit hospitals in the US have issued $8.4bn of debt requiring them to buy back the paper. Lisa Martin, senior vice-president at Moody’s, said three hospitals – NorthShore University HealthSystem in Illinois, North Mississippi Health System and Virginia’s Riverside Health System – have had to repurchase such debts. Although they all have sufficient cash to meet their obligations, the repurchases were described as highly unusual by Moody’s. In the past, hospitals could usually count on their bankers to find new buyers for such debts. “Three out of 24 might not sound very bad, but it is unprecedented,” Ms Martin said. “There has rarely been a situation where a hospital has not been able to find a new buyer.”

States' Credit Threatened by Slowdown, Moody's Says - (www.bloomberg.com) U.S. states' credit ratings are threatened as turmoil in credit markets pinches finances and an economic slowdown crimps revenue, Moody's Investors Service said. Moody's has a negative outlook on six states -- Florida, Kentucky, Nevada, Ohio, Rhode Island and Wisconsin -- while its outlook on state credit overall also has been negative since April, according to a report released today. Sales-tax revenue, which generates about a third of general fund revenue for states, is expected to fall as consumers cut spending, according to Moody's. Income-tax revenue also will likely decline because of ``sagging personal income,'' the unit of New York-based Moody's Corp. said.


OTHER STORIES:

GM calls bottom of downturn - (www.ft.com) And we know GM has been right about so many things in the past 25 years, like oil prices, building hybrids, etc. (sarcasm intended)!!! General Motors on Wednesday said it had continued to feel the impact of the financial crisis in its third quarter sales but that the US had reached the bottom of its economic downturn. The US carmaker sold 2.1m vehicles in the most recent quarter, a drop of 11.4 per cent from the same quarter last year, bringing its year-to-date sales to 6.7m, down 5.8 per cent on a year ago.Michael DiGiovanni, GM’s head of global marketing and industry analysis, said the industry had felt the “tremendous snowballing effect around the world from financial turmoil” in the third quarter.

Treasury, FDIC Said to Develop Program to Avert Foreclosures - (www.bloomberg.com)
World According to TARP No Laughing Matter for U.S. - (www.bloomberg.com)
Securities-Lending Sector Squeezed - (online.wsj.com)
Pension fund gap hits $100bn - (www.ft.com)
Beware the unwinding of the yen carry trade - (www.ft.com)

More companies may end 401(k) match - (www.usatoday.com)
Weak industrial output weighs on Japanese economy - Boston Globe
Recession Fears Settle In as Outlook Dims in Japan - (online.wsj.com)

Sony profit plunges 72 percent on strong yen - (biz.yahoo.com/ap)
A $25 Billion Rescue for Hungary - (www.nytimes.com)
U.K. September Mortgage Approvals Stayed Close to Record Low - (www.bloomberg.com)

Fed Cuts Rate to 1% to Avert Prolonged Recession - (www.bloomberg.com)
Government Said to Be Discussing Plan to Aid Homeowners - (www.nytimes.com)

September U.S. Durable Orders Ex-Transport Fall 1.1% - (www.bloomberg.com)
US weighs mortgage guarantee plan - (www.ft.com)

Week-to-week mortgage applications down 16.8% - (www.marketwatch.com)
Fed May Cut Rate to 1%, Signal Steps to Save Economy - (www.bloomberg.com)
New York governor urges state spending cut - (www.ft.com)
Home prices still falling amid gloomy forecast - (www.sfgate.com)
Visa warns of tough three years ahead - (www.ft.com)

Outlook Is Cut for U.S. Drug Sales - (online.wsj.com)
Sony's second quarter profits plunge 72 percent - (www.latimes.com)

Global car sales fall 6% in third quarter - (www.ft.com)
OfficeMax delays earnings to sort out effects of Lehman failure - (www.chicagotribune.com)
Hollywood may not be recession-proof this time - (www.latimes.com)
Broader Financial Turmoil Threatens Biotech’s Innovation and Cash - (www.nytimes.com)