Thursday December 18 Housing and Economic stories

TOP STORIES:

Ecuador Plans to Default on Bond Debt - (online.wsj.com) Ecuador's President Rafael Correa said his nation is defaulting on its foreign debt, in a hardball move prompted as much by leftist ideology as economic distress. President Rafael Correa said Ecuador would skip a $30.6 million payment to bondholders due on Monday, calling foreign creditors 'real monsters.' Mr. Correa said Ecuador will skip a $30.6 million payment to bondholders due Monday, asserting that there are irregularities in how the debt had been contracted by an earlier administration. Mr. Correa, an economist who is close to Venezuelan president Hugo Chávez, lashed out at foreign creditors as "real monsters." Oil-rich Ecuador's move marks the first sovereign default since the onset of the global financial crisis in September. While Ecuador had put markets on notice last month that it was threatening such action, the announcement still left some investors agape, as Ecuador has $2 billion in cash on hand to pay. "Correa is really, really convinced foreign debt is like the devil and he doesn't have to pay," says Alberto Bernal, head of emerging-market macroeconomic strategy at Bulltick Capital Markets in Miami. "There's a strong ideological component here."

Fed to Bloomberg: “F*** off” - (www.ml-implode.com) The Fed has refused to comply with Bloomberg’s request for information regarding its massive new lending programs. The Fed is worried such a disclosure would reveal all the big banks are effectively bankrupt, causing widespread panic and, I suppose, a possible run on the entire banking system.

For many investors, social ties to arrested NY advisor trumped concerns about transparency - (www.latimes.com) They had known him for years as a golf partner, a family friend. Some were neighbors or fellow members of country clubs on Long Island and in Florida. They had known him for years as a golf partner, a family friend. Some were neighbors or fellow members of country clubs on Long Island and in Florida. Many had begun investing with 70-year-old Bernard L. Madoff decades ago, often after being referred by a friend or relative who had known the Wall Street veteran even longer. There had been some warnings: Financial consultants had been suspicious for years about his astounding run of success. They couldn't figure out how he managed to produce steady returns, month after month, even when everyone else was losing money — and leave almost no footprint while moving billions of dollars in and out of the markets. "People would come to me with their statements and I couldn't make heads or tails of them," said Charles Gradante, co-founder of the Hennessee Group and advisor to hedge fund investors. "He only had five down months since 1996," Gradante said. "There's no strategy in the world that can generate that kind of performance. But when people would come to him and say, 'How did I make money this month?' he didn't like it. He would get upset with people who probed too much." Those investors were scrambling Friday to learn whether they had been wiped out by what prosecutors described as a multibillion-dollar Ponzi scheme. The assets of Madoff's investment company were frozen Friday in a deal with federal regulators and a receiver was appointed to manage the firm's financial affairs.

Wells Fargo to write down $40 billion in Q4: Bove - (www.reuters.com) Ladenburg Thalmann's Richard Bove cut his price target on Wells Fargo & Co (WFC.N: Quote, Profile, Research, Stock Buzz) and said the bank intends to write-off $40 billion in the fourth quarter related to the acquisition of Wachovia Corp (WB.N: Quote, Profile, Research, Stock Buzz). Shares of Wells Fargo were down 9 percent at $26.56 in afternoon trade on the New York Stock Exchange. Bove now expects Wells Fargo to incur a loss of $6.09 per share in 2008, compared with his prior view of $2.14 a share profit. The analyst said the bank's loan losses were rising because of weakness in the economy and margins were being stressed by the decline in asset yields.

US Bancorp Sees $1 Billion in Writedowns Ahead - (www.cnbc.com) U.S. Bancorp, one of the largest U.S. banks, said on Thursday it may incur $1 billion of credit costs and writedowns in the fourth quarter as the recession deepens and credit markets remain tight. The bank expects net charge-offs of $600 million to $650 million in the quarter, up from $498 million in the third quarter and $225 million a year earlier. It said it plans to add to loan loss reserves a sum equal to 90 percent to 110 percent of net charge-offs. Minneapolis-based U.S. Bancorp also expects $200 million to $300 million of writedowns because prices are falling on asset-backed commercial paper, structured investment vehicles and non-agency mortgage-backed securities.

BlackRock Cuts 500 Jobs, Struggles with Outflows - (www.cnbc.com) BlackRock, the largest publicly traded U.S. asset manager, has cut 500 jobs worldwide, its chief executive said on Thursday, as it grapples with a surge in outflows during the global credit crisis. Speaking at the Goldman Sachs Financial Services Conference in New York, BlackRock Chairman and Chief Executive Laurence Fink said the New York-based company has "downsized" by 500 people.
He said many of the 500 were part-time employees, according to a webcast of the presentation. BlackRock has 5,600 staff globally, according to the company's website.

UBS Freezes $6 Billion Property Fund - (www.cnbc.com) Swiss bank UBS said on Friday it had frozen a $6 billion real estate fund as it could not keep up with redemption requests from wealth management clients. The Jersey-based UBS Wealth Management Global Property Fund will be closed until the end of 2009. "Due to the strained liquidity situation in the market as a whole and the longer process for selling real estate, the fund can no longer handle all redemption requests without forcing remaining investors to suffer losses from emergency sales," a spokeswoman for UBS said, confirming a report in Swiss newspaper Neue Zuercher Zeitung. "In such a situation it is a fund manager's responsibility to temporarily suspend the fund in the best interest for all investors," she said.

Forget $200, Goldman Now Sees $45 Oil in '09 - (www.cnbc.com) Yes, these guys are supposed to be the smart guys. They have changed their 2009 forecast from $200/barrel to $45. Hmmm. How much are these clowns getting paid?

AIG BAILS ON LOANS FROM FEDS - (www.nypost.com) - Uncle Sam may not get paid back as promised in its $150 billion bailout of American International Group, the giant insurer conceded. AIG had agreed as a condition of its recent government lifeline to escape bankruptcy that it would repay at least $60 billion by selling valuable assets. However, CEO Ed Liddy admitted yesterday that it may not be that easy to raise the cash. "These are challenging times to undertake divestiture," Liddy acknowledged at a Hong Kong luncheon speech, far from the ears of Washington, DC, lawmakers. "It's quite possible that the pace and order of our divestitures will change." AIG promised to sell life insurance, retirement services and an airplane-leasing unit to repay a $60 billion government loan in its overall $150 billion - and counting - rescue package, in exchange for Uncle Sam taking a 79.9 percent stake in AIG



OTHER STORIES:

We Need a Bailout Exit Strategy - (www.ml-implode.com) - For all of these reasons, it is incumbent upon federal policy makers to ensure that the extraordinary actions of the past months...
U.S. Treasury Ready to Prevent Failure of Automakers - (www.ml-implode.com) - Paulson implements the "if you do not like the answer Congress gives, go around them" philosophy.
Green Tree Sees Servicer Ratings Upgraded - (www.ml-implode.com) - "Fitch said it had upgraded servicing ratings for HLTV and subprime product from ‘RPS3+’ to ‘RPS2-,’ and upgraded the more gener...
Fannie's Change Won't Save Mortgage Modifications - (www.ml-implode.com) - "An interesting change this week in Fannie Mae’sloan modification process has me wondering about the motivation behind it"

German bank bail-out has failed, say MPs - (www.ft.com) Dramatic appeal adds to pressure on Merkel. Germany’s banking sector rescue has failed and should be modified urgently if lasting damage to the economy is to be avoided, the MPs who oversee the €500bn ($668bn, £449bn) of funds warned on Friday. In a letter to Peer Steinbrück, the finance minister, obtained by the Financial Times, the MPs said a €400bn fund set up by the government to guarantee bank debt had not led to a resumption of inter-bank lending and that German banks were not providing companies with sufficient credit.

Regulators close 2 banks in Georgia, Texas, bringing bank failures to 25 in year to date - (www.latimes.com) Regulators on Friday closed Haven Trust Bank in Georgia and Sanderson State Bank in Texas, bringing to 25 the number of U.S. bank failures this year.
Sandals resort chain lays off 650 workers in Bahamas, Jamaica, St. Lucia amid tourism drop - (www.latimes.com) Sandals Resorts International is laying off 650 Caribbean hotel workers in response to a decline in tourist bookings, the company said Friday.
Pensions Get a Reprieve in Congress - (www.nytimes.com) Companies whose pension funds suffered big losses this year will not have to replenish the money quickly under a relief measure that flew through the Senate Thursday and will next go to the president for his signature. Skip to next paragraphBecause of strong market performance, big contributions made in the past, and a two-year phase-in of tougher financing rules passed in 2006, many companies have not had to pump much money into their pension funds in the last few years. But they suddenly faced the prospect of having to come up with a lot of cash because of this year’s financial crisis.
Blagojevich and Union Go Way Back - (online.wsj.com)
Allegations that Blagojevich sought help from the nation's largest union in a pay-for-play scheme are the latest episode in his long relationship with the SEIU.
Filing Aims to Strip Blagojevich's Powers

GMAC Failure - (www.cnbc.com) Video provides a look at the impact of GMAC's withdrawal of its application to be a bank holding company, with Alex Taylor, Fortune; CNBC's Michelle Caruso-Cabrera & Phil Lebeau
GM Hired Advisers to Consider Bankruptcy - (www.cnbc.com)
Bush May Use TARP Fund To Rescue US Auto Makers - (www.cnbc.com) The Bush administration, worried about a further blow to the US economy, said it was ready to prevent the auto industry from collapsing, likely using the $700 billion Wall Street bailout fund.

Madoff's Alleged $50 Billion Fraud Hits Other Investors - (www.cnbc.com) Investors scrambled on Friday to assess potential losses from the $50 billion fraud allegedly perpetrated by Bernard Madoff, a day after the arrest of the prominent Wall Street trader.
Retail Sales, Inflation Drop; Sentiment Improves - (www.cnbc.com)
JPMorgan Chase Is Having A 'Terrible' Quarter: Dimon - (www.cnbc.com)