Wednesday November 26 Housing and Economic stories

TOP STORIES:

OPEC in disarray as oil sinks to $50 - (www.ft.com) The oil price yesterday sank below $50 a barrel for the first time since 2005 as the first signs of fractures within the Opec oil cartel became apparent. Nigeria said it did not want to cut its production to try to stop the slide in prices because it needed high output to balance its budget, while Iran, Kuwait and others said they would support another production cut.

The Federal Home Loan Bank of Seattle delayed filing its third-quarter report while it completes an assessment of its investments - (www.prudentbear.com) The Federal Home Loan Bank of Seattle delayed filing its third-quarter report while it completes an assessment of its investments. The bank hasn't been able to complete its evaluation of other-than-temporary impairments of some investments, the FHLB system said... The bank said it had losses of $4.2 million related to the September bankruptcy of Lehman Brothers Holdings Inc

Berkshire's Credit Risk Soars on $37 Billion Bet - (www.bloomberg.com) The cost of protecting against default by Warren Buffett's AAA rated Berkshire Hathaway Inc. has almost tripled in two months, a sign of just how skittish investors have become amid the global financial crisis. The cost to protect against Berkshire being unable to meet its debt payments, based on credit-default swaps, is more than four times that of rival insurer Travelers Cos. At those levels, the swaps are typical of companies rated Baa3 by Moody's Investors Service, one level above junk. The price may have risen on concern that the billionaire's firm could lose a $37 billion bet on world stock market values more than a decade from now. ``That's just so stupid,'' said Mohnish Pabrai, head of Pabrai Investment Funds and a Berkshire shareholder. The swap buyers are projecting ``present circumstances into infinity'' and concluding Buffett's bet will cost the company $40 billion, Pabrai said. ``It will never happen,'' he said.

Markets wary of Irish debt as fresh rescue looms - (www.telegraph.co.uk) Ireland's bank rescue has begun to unravel despite a blanket debt guarantee for the country's top lenders, prompting concerns that Europe's credit crisis may be entering a second and more menacing phase. The Taoiseach, Brian Cowen, told the Irish parliament yesterday that he was exploring "all options" to shore up the banks after the collapse of their share prices over recent days. While talk of a fresh bail-out has helped revive the battered stocks of Anglo Irish, Bank of Ireland and other lenders, it appears merely to have shifted the risk to the Irish state itself. Michael Klawitter, a strategist at Dresdner Kleinwort, said the cost of insuring Irish sovereign debt through credit default swaps (CDS) has surged to 133 basis points. "The markets have begun to see a risk to the solvency of the Irish government. They are questioning whether it has the financial muscle to back up the guarantees," he said.

Volcker issues dire warning on slump - (www.telegraph.co.uk) Paul Volcker: Volcker issues dire warning on slump: Paul Volcker, the former chairman of the US Federal Reserve, has warned that the economic slump has begun to metastasise after a shocking collapse in output over the past two months, threatening to overwhelm the incoming Obama administration as it struggles to restore confidence. "What this crisis reveals is a broken financial system like no other in my lifetime," he told a conference at Lombard Street Research in London. "Normal monetary policy is not able to get money flowing. The trouble is that, even with all this [government] protection, the market is not moving again. The only other time we have seen the US economy drop as suddenly as this was when the Carter administration imposed credit controls, which was artificial."

Fed `Has Done About as Much as It Can,' Hoenig Says - (www.bloomberg.com) Federal Reserve Bank of Kansas City President Thomas Hoenig said the central bank has ``done about as much as it can do'' to revive the economy, which has worsened faster than he expected. ``Interest rates are extremely low,'' Hoenig said today in an interview with PBS's Nightly Business Report. ``The fact that we have the recession now is a little bit more than what I had anticipated,'' he said in a transcript of an interview provided by the show prior to a scheduled broadcast tonight. The Fed has tried to mitigate the worst credit crisis in seven decades by reducing the benchmark interest rate to 1 percent and channeling more than $1 trillion in loans to banks and other financial institutions. Some central bank credit has gone to non-banks, such as insurer American International Group Inc., and U.S. automakers are also seeking federal assistance. Policy makers should provide emergency lending programs only to financial institutions that create credit and handle payments, Hoenig said earlier today in a speech in New York.

Mayor Bloomberg Reneges, Says He'll Halt $400 Homeowner Rebate Checks - (www.bloomberg.com) New York Mayor Michael Bloomberg said his administration wouldn't send $400 property-tax rebate checks due this month to owners of apartments and houses because the slowing economy threatens to worsen a widening budget gap. Bloomberg first announced his intention to halt the checks, which have gone out since 2004, during a budget modification presentation earlier this month. City Council members objected to the plan, noting it would be unlawful unless they voted to approve it. ``We have no money. This isn't a legal issue; this is a fiscal issue,'' Bloomberg said at a Brooklyn news conference today. ``Obviously, we're not going to send out checks, and we'll have to find a way to balance the budget.''

Dear Mr. President: Our open letter to Barack Obama outlines eight steps he should take to restore order to financial markets and bolster the economy. - (www.barrons.com) Sea change as Barron’s becomes a socialistic magazine. Top 3 recommendations talk about bailouts for others including bailing out Ford and GM (why not Chrysler?). Take a look at #3: 3. Help Homeowners: The avalanche of foreclosures must be stemmed, pure and simple. The central problem for the economy is the housing crisis, and the central problem for housing is foreclosures. Most of the solutions proposed so far are half-measures, such as tinkering with interest rates or extending loan maturities. Barron's believes the government should kick in $100 billion to reduce the principal on mortgages in serious arrears as of Dec. 1, drawing on the $700 billion financial bailout approved by Congress. Participating banks, mortgage servicers and holders of mortgage securities should contribute another $50 billion. The program would reduce a borrower's mortgage to the level of the home's current value, which might amount to a cut of 20% to 30%. In return, the government would be entitled to an agreed-upon portion of any price appreciation realized when the home is sold. In other words, neither the homeowner nor the mortgage lender would get a free ride. Yet both would be better off than with foreclosure -- and so would the economy. Homeowners who have managed to keep up with their mortgage payments could well feel cheated by this plan. Our advice: Get over it. The state of the economy requires bold action, and everyone will be better off once the foreclosure problem is curbed.

Legislators seek solution for jobless benefits - (www.sfgate.com) As the state releases its latest unemployment report today, the fund that pays jobless benefits will soon run out of cash, and while federal loans will keep the checks coming, state lawmakers are debating a plan to restore the program to solvency. When the state Legislature meets Sunday to consider an emergency budget revision, among the proposals before them will be a program from Gov. Arnold Schwarzenegger to revive the fund requiring employers to pay between $56 and $417 more per employee, per year starting in 2010. Schwarzenegger has also proposed cutting weekly jobless benefits by between $1 and $44 per week for workers who had earned $15.15 to $24.95 per hour. That would also take effect in 2010. The fate of the plan is anyone's guess, but Schwarzenegger's office says that if the package is not adopted in the special session, he will resubmit a funding plan when the new Legislature takes office. Meanwhile, the state will ask for a federal loan on Dec. 1 to prevent any interruption of benefit checks while the issue is being debated.

Bankruptcy Is Option to GM Board - (online.wsj.com) Members of General Motors Corp.'s board of directors are willing to consider "all options" for the ailing auto maker, including an eventual filing for bankruptcy protection, a stance that puts them in rare disagreement with Chairman and Chief Executive Rick Wagoner, people familiar with the matter said. As part of his push to win a federal bailout for the company, Mr. Wagoner told Congress this week that GM management believes bankruptcy protection is not a viable option for the company. Instead, GM is focusing on persuading lawmakers to provide financial help, Mr. Wagoner said.

Citigroup, Under Siege, Holds Talks With U.S. - (www.nytimes.com) With the sharp stock-market decline for Citigroup rapidly becoming a full-blown crisis of confidence, the company’s executives on Friday entered into talks with federal officials about how to stabilize the struggling financial giant. In a series of tense meetings and telephone calls, the executives and officials weighed several options, including whether to replace Citigroup’s chief executive, Vikram S. Pandit, or sell all or part of the company. Other options discussed included a public endorsement from the government or a new financial lifeline, people involved in the talks said. The course of action, however, remained uncertain on Friday night, these people said, and other options may yet emerge. But after a year of gaping losses and an accelerating decline in share price, Citigroup, which has $2 trillion in assets and operations in scores of countries, is running out of time, analysts said. After a board meeting early Friday morning, Citigroup’s management and some board members held several calls with Henry M. Paulson Jr., the Treasury secretary, and with the president of the Federal Reserve Bank of New York, Timothy F. Geithner, who later emerged as President-elect Barack Obama’s choice to be Treasury secretary.

Community Bank of Loganville, Georgia, Is Shuttered - (www.bloomberg.com) Community Bank of Loganville, Georgia, was closed by a state regulator today, the 20th U.S. bank seized this year as foreclosures rise and home prices extend declines in the worst housing slump since the Great Depression. Bank of Essex in Tappahannock, Virginia, will take over all of the $611.4 million of deposits from Community Bank, the Federal Deposit Insurance Corp. said today in an e-mailed statement. Community Bank’s four offices will open Nov. 24 as Bank of Essex branches. “Deposits will continue to be insured by the FDIC, so there is no need for customers to change their banking relationship to retain their deposit insurance coverage,” the FDIC said.

Obese have right to 2 airline seats --Canada court - (www.reuters.com) Obese people have the right to two seats for the price of one on flights within Canada, the Supreme Court of Canada ruled on Thursday. The high court declined to hear an appeal by Canadian airlines of a decision by the Canadian Transportation Agency that people who are "functionally disabled by obesity" deserve to have two seats for one fare. The airlines had lost an appeal at the Federal Court of Appeal in May and had sought to launch a fresh appeal at the Supreme Court. The court's decision not to hear a new appeal means the one-person-one-fare policy stands.



OTHER STORIES:

Budget deal would include steeper car fees - (www.latimes.com) Under the agreement, GOP lawmakers would vote to triple the vehicle tax in exchange for a ballot measure that would impose rigid limits on future state spending.
Utilities' surcharge proposal arrives at wrong time - (www.latimes.com) Southern California Gas, San Diego Gas & Electric and Pacific Gas & Electric want businesses to pay less and households to pay more to help low-income customers. >>
Surge in unemployment puts California's Inland Empire in tailspin - (www.latimes.com) Ripples from the real estate bust spread, contributing to the highest jobless rate among the nation's large metro areas. >>
Credit market freeze may claim local governments as victims - (www.latimes.com) States, cities and other entities that issued variable-rate municipal bonds are facing interest-rate shocks akin to those that hammered homeowners with adjustable-rate loans. >>
Wine buyers are sobered by Wall Street meltdown - (www.latimes.com) High-end bottles languish on shelves as shoppers opt for cheaper vintages. 'The state of the economy' is nothing to celebrate, a retailer says. >>
Delta Air Lines plans to reduce capacity amid slowing demand - (www.latimes.com) The carrier reveals the cutbacks in a regulatory filing nine days after announcing that it would introduce 15 new international routes next year. >>

Citigroup Talks But Nothing "Walks" To Stabilize Firm - (www.cnbc.com) As of Saturday afternoon, the general consensus between officials from Citi and government officials from the US Treasury department and US Federal Reserve is that the government will not takeover Citigroup in the way it took control of AIG.
Obama Warns On Economy: Works On Stimulus Plan - (www.cnbc.com)
U.S. President-elect Barack Obama said Saturday he was crafting an aggressive two-year stimulus plan to revive the economy, warning that swift action was needed to prevent a deep slump.
Soros: More Money Needed For U.S. Bailout - (www.cnbc.com)
With Washington Paralyzed, Wall Street Gets the Shakes - (www.cnbc.com)
Berkshire Hathaway Leaps 16% for Best Day in Years - (www.cnbc.com)
Layoffs, Once a Boon to Stock Prices, Now a Burden - (www.cnbc.com)

Job Losses Surge as U.S. Downturn Accelerates - (online.wsj.com)
Obama Said to Pick Geithner as Treasury Secretary - (www.bloomberg.com)
Financial Job Losses May Double to 350,000 by 2009 - (www.bloomberg.com)
Fields of Grain and Losses - (www.nytimes.com)
Goldman Slashes U.S. Growth Forecasts, Says Recession Deepens - (www.bloomberg.com)
Falling Prices Raise a New Fear: Deflation - (www.washingtonpost.com)
FDIC’s plan for home loans gains support - (www.ft.com)
As jobless funds fall, states look to raise taxes - (www.usatoday.com)

Citigroup eyes options including merger - (www.reuters.com)
Fannie, Freddie halt foreclosures for the holidays - (www.usatoday.com)
Honda to cut global production through March to deal with slowing demand - (www.chicagotribune.com)
Basel outlines stricter limits for banks’ capital - (www.ft.com)
`Unprecedented' Biotech Bankruptcies Erupt Amid Finance Crisis - (www.bloomberg.com)
Private labels part of grocers' strategies - (www.chicagotribune.com)
General Growth hires bankruptcy advisor Sidley Austin - (www.chicagotribune.com)
And You Thought 1931 Was Bad for the Market - (www.nytimes.com)