Sunday November 9 Housing and Economic stories

TOP STORIES:

Economy sinks as we save bankers - (Bill Fleckenstein at articles.moneycentral.msn.com) I could be wrong, of course, but I think we're probably in about the eighth inning of the crisis in financials. The government is not going to let any major financial entity (or almost any large entity) go bust at this juncture -- which means no one will lose access to green paper. Thus, while folks are worried about financial institutions, their real concern ought to be the economy. For several years now, as regular readers know, I have discussed my view regarding how weak the economic environment would be in my "next time down" scenario -- when real estate, stocks and the economy all feed on each other to the downside. I first proposed the idea before I saw the ultimate insanity that was our real-estate and credit bubble

Cerberus May Shift GMAC Stake to Investors to Get Bank Status - (www.bloomberg.com) Steven Feinberg is trying to pick-pocket the tax-payers and investors. Feinberg has already reamed many a good businesses by extracting money for himself and leveraging the company with inordinate amounts of debt. Cerberus Capital Management LP may forfeit control of GMAC LLC as part of a plan to convert the faltering auto-loan company into a bank with greater access to government funds, three people familiar with the matter said. Cerberus is weighing a plan to distribute its GMAC stake to investors in its private-equity funds, according to the people, who declined to be identified because the deliberations aren't public. The tactic, one of several options under discussion, may enable Detroit-based GMAC to become a bank and get funding from the U.S. Treasury and Federal Reserve without subjecting Cerberus to banking regulations. Led by former Drexel Burnham Lambert Inc. trader Stephen Feinberg, Cerberus is looking for ways to salvage its bet on the U.S. auto industry after automakers posted their lowest sales since 1991 in October and GMAC had a fifth straight quarterly loss. In related talks, the New York-based investment firm is pursuing a merger of Chrysler LLC, which it bought last year, with General Motors Corp.

Postal Service Looks To Cut 40,000 Jobs In First Layoff In History - (www.ksla.com) "We lost 2 billion dollars and like any other business we have to stay afloat." And to keep from sinking, the United States Postal Service is considering cutting thousands of jobs nationwide. Lavelle Pepper with the post office in Shreveport says they too are feeling the affects of the same disease hitting the country... a struggling economy. "We employ about 685,000 people. If we do layoffs it would include clerks, carriers, mail handlers across all crafts." Pepper says the postal service is looking to eliminate 40,000 jobs nationwide. There's not an exact number on how many of those could be from the Ark-La-Tex. Pepper says workers who are not part of union with six or less years of service would likely be the first on the chopping block. "We've identified 16 thousand people that are not covered under contract. We'll see what those numbers add up to." The postal service is also offering early retirement packages to workers over the age of 50 who have more than 20 years on the job. But according to pepper it may not be enough. "The preliminary numbers look like it's not going to be enough and we may have to do something else." But despite what may happen, Pepper says customers will not feel the pain they're going through. "The general public when it takes place won't se any decrease in service.. They largely won't know about it."

Goldman Sachs begins to notify some 3,200 employees of layoffs as financial crisis takes toll - (www.chicagotribune.com) Goldman Sachs Group Inc. has begun notifying about 3,200 employees globally that they have lost their jobs, as the world's biggest investment bank slashes expenses to ride out the financial crisis, a person familiar with the situation said Wednesday. The job cuts, which were first reported last month, are a reflection of the ongoing downturn in the credit and lending markets that triggered massive losses for banks around the world. Goldman Sachs had been considered the strongest investment bank on Wall Street, and earlier this year had expected its payrolls to expand. Positions will be cut across Goldman's offices globally and among various business lines, and will bring the company's staffing to 2006 and 2007 levels, the person said. He spoke on condition of anonymity because the company hasn't publicly disclosed details of the plan. According to CapitalIQ, Goldman has more than 37,000 employees across its operations

European Banks Cut Rates Sharply - (www.nytimes.com) The Bank of England cut its benchmark interest rate by 1.5 percentage points and the European Central Bank cut its benchmark interest rate by half a percentage point. The Bank of England unexpectedly reduced its benchmark rate by 1.5 percentage points, its biggest rate reduction in more than a decade, and the European Central Bank lowered its interest rate as expected by half a percentage point to 3.25 percent. The Bank of England cut was to 3 percent, the lowest level since 1954, surprising investors and economists who predicted a half percentage point cut. “Central banks don’t cut for free; they do so for very real economic risks,” said Philip Isherwood, a strategist at Dresdner Kleinwort in London. “We’re going back to the early 1980s when we also had coinciding recessions around the world.”

Blackstone Posts $502.5 Million Loss - (www.nytimes.com) The Blackstone Group said Thursday that it lost $502.5 million for its third quarter, a sharp reversal from last year as the private equity firm’s investments were buffeted by the market turmoil that swept the world. The loss, comprising 44 cents per unit, was atop $160.3 million in negative revenues. Blackstone saw negative revenue in nearly all its business lines, as the value of its various holdings dropped. The only bright spot was Blackstone’s advisory business, which includes a substantial restructuring operation. “We are operating in a challenging and volatile environment,” Stephen A. Schwarzman, Blackstone’s chairman and chief executive, said in a statement. “As evidenced in the third quarter, global equity and credit markets have declined substantially and we have lowered the carrying value of our fund investments.” Private equity firms have seen their once-golden reputation for profits tarnish during the financial crisis, as the drought of cheap financing withered the deal-making that is the lifeblood of the industry.

SoCal office owner skips payment on $1.5 billion loan - (www.ocregister.com) A real estate investment trust run by KBS Realty of Newport Beach — owed $175 million by a Mexican company’s U.S. real estate operations — says the borrower is late on $105 million in principal due on the overall $1.5 billion loan package. The borrower, part of Cabi Properties, used the money last year to buy 33 office properties (including 2 in O.C.) throughout SoCal from General Electric’s Arden real estate arm. In Janaury, KBS Real Estate Investment Trust, with $3.2 billion in assets, bought $175 million in short-term “mezzanine loans” that were part of the $1.5 billion Cabi-Arden loan package. The KBS loans mature next August.

Wall Streeters want return to fantasyland - (www.marketwatch.com) Mark-to-market -- or fair-value -- accounting has one big problem: Some very powerful people are trying to change it. A movement spurred by bankers including Aubrey Patterson, chief executive of Bancorpsouth Inc. ( BXS 22.57, +0.15, +0.7%) , and Wall Street power brokers including Blackstone Group (BX 7.70, -0.90, -10.5%) Chief Stephen Schwarzman are arguing for at least a temporary suspension of Financial Accounting Standards Rule 157. Patterson and other supporters argued for the rule's suspension in a Securities and Exchange Commission roundtable Oct. 29. Other critics of FAS 157 included Damon Silvers, AFL-CIO general counsel, and Bradley Hunkler, an insurance executive from Western & Southern Life. Simply put, these guys want the government to stop requiring mark-to-market accounting so the financial industry can put blinders on to the deep trouble that lies on its balance sheets. Not surprisingly, the proponents of a suspension would also apparently benefit from it.

Feds May Be Considering Subsidy on Troubled Mortgages - (www.housingwire.com) When it comes to the idea that Treasury’s TARP funds may be used to manage a bailout of troubled mortgages, all options are still on the table, and the only thing that most of us really know is that the plans under consideration have been stuck in the negotiating room for some time. The Wall Street Journal suggested in coverage Monday that “disagreements over how to structure a federal foreclosure-prevention program are complicating and potentially delaying what is likely to be the Bush administration’s last attempt to forestall sliding home prices.” One plan that may be garnering some consideration is the idea of a federal subsidy for troubled borrowers, perhaps tied to an effort to modify loans. A source near Democratic senator Robert Casey’s office in Pennsylvania forwarded us a copy of a memo on Sunday evening, said to have sparked some of the ongoing negotiations now taking place, although HousingWire could not obtain further details. The memo outlines a proposed bailout that would use three-year subsidies for some troubled borrowers.

Man's shares plunge on hedge fund outflow fears - (www.iht.com) Shares in Man Group , the world's largest listed hedge fund group, fell more than 27 percent on Thursday on fears of further client redemptions, while other asset managers also reported gloomy results. Man said it had been moving most assets into cash in its Man Global Strategies (MGS) product, which fell 18.6 percent in the period, and this had caused the firm to bring forward a $107 million (67 million pounds) amortisation charge on sales commissions. The MGS product, which invests in hedge funds, had $8.6 billion in funds under management at the end of September. "We read management's decision to accelerate amortisation of upfront MGS sales commissions as an admission that outflows from MGS are expected to accelerate," analysts at Citi say.


OTHER STORIES:

Recession hits Europe as Club Med debt worries grow - (www.telegraph.co.uk)
Good comes from such asset price declines - (theaffordablemortgagedepression.com)
Fannie Mae spends $6,000 on golf outing - (www.contracostatimes.com)
Expectations lowered for new mortgage aid program - (biz.yahoo.com)

Is a bottom close? Is it silly to ask? - (latimesblogs.latimes.com)
5 Reasons Why California Still Has 3 Years Before Bottom - (www.mybudget360.com)
Houseowner expenses rise - (www.sfgate.com)
Another blogger's endorsement - (optionarmageddon.ml-implode.com)
Forrest Gump Explains Mortgage Backed Securities - (patrick.net)

U.S. Stocks Decline on Earnings; Cisco, News Corp. Shares Drop - (www.bloomberg.com)
S&P 500 Profit Estimates Slashed After Third-Quarter Misses - (www.bloomberg.com)
Wall Street’s Pay Is Expected to Plummet - (www.nytimes.com)
Bond Woes Choke Off Some Credit to Consumers - (online.wsj.com)
Schwarzenegger proposes 90-day freeze on pending home foreclosures - (www.latimes.com)
ECB cuts rates by 50 basis points, more action expected - (www.reuters.com)
UK interest rates slashed to 3% - (news.bbc.co.uk)
Swiss central bank cuts interest a half point - (biz.yahoo.com/ap)
U.K. October House Prices Drop Most in 25 Years - (www.bloomberg.com)
Europe's Outlook Grows Gloomier - (online.wsj.com)
New UK car sales plunge - (www.ft.com)

U.S. Initial Jobless Claims Fell 4,000 to 481,000 Last Week - (www.bloomberg.com)
U.S. Productivity Growth Slowed in Third Quarter - (www.bloomberg.com)
Downturn, deficit could hinder Obama's economic plan - (www.latimes.com)
Global credit crunch hits independent filmmakers - (www.latimes.com)
Toyota slashes outlook as global crisis bites - (www.ft.com)
At the Supermarket Checkout, Frugality Trumps Brand Loyalty - (online.wsj.com)

Citigroup, Goldman Said to Begin Eliminating Jobs - (www.bloomberg.com)
Toyota slashes outlook as global crisis bites - (www.ft.com)
ArcelorMittal Will Slash Steel Output At Least 35% - (online.wsj.com)
Decline in diners takes bite out of Morton Steakhouse earnings - (www.chicagotribune.com)
Top Priority Is Stabilizing the Patient - (www.nytimes.com)
For Obama, a Towering Economic To-Do List - (www.nytimes.com)