Tuesday December 2 Housing and Economic stories

TOP STORIES:

Bailout costs more than Marshall Plan, Louisiana Purchase, moonshot, SL bailout, Korean War, New Deal, Iraq war, Vietnam war, and NASA's lifetime budget -- combined! - (www.boingboing.net) In doing the research for the "Bailout Nation" book, I needed a way to put the dollar amounts into proper historical perspective. If we add in the Citi bailout, the total cost now exceeds $4.6165 trillion dollars. People have a hard time conceptualizing very large numbers, so let’s give this some context. The current Credit Crisis bailout is now the largest outlay In American history. Crunching the inflation adjusted numbers, we find the bailout has cost more than all of these big budget government expenditures – combined:
• Marshall Plan: Cost: $12.7 billion, Inflation Adjusted Cost: $115.3 billion
• Louisiana Purchase: Cost: $15 million, Inflation Adjusted Cost: $217 billion
• Race to the Moon: Cost: $36.4 billion, Inflation Adjusted Cost: $237 billion
• S&L Crisis: Cost: $153 billion, Inflation Adjusted Cost: $256 billion
• Korean War: Cost: $54 billion, Inflation Adjusted Cost: $454 billion
• The New Deal: Cost: $32 billion (Est), Inflation Adjusted Cost: $500 billion (Est)
• Invasion of Iraq: Cost: $551b, Inflation Adjusted Cost: $597 billion
• Vietnam War: Cost: $111 billion, Inflation Adjusted Cost: $698 billion
• NASA: Cost: $416.7 billion, Inflation Adjusted Cost: $851.2 billion
TOTAL: $3.92 trillion

Board Director Robert Rubin To Blame For Current Citigroup Crisis - (www.nypost.com) RUBIN & CO. ORCHESTRATED THE FALL OF THIS BEHEMOTH. THE Citi Never Sleeps - but, ap parently, its directors do. Washington was forced over the weekend to come to the res cue of Citigroup - a once- great bank brought near to ruin by a grossly negligent board of directors. The cost? A mere $351 billion - that is, only $1,000 for every man, woman and child in America. Blame abounds, but most of it must accrue to the Citigroup directors - the men and women paid well to make corporate policy, and to oversee its proper execution. What were they thinking? Were they thinking? Some of them are already gone. If those who remain had any sense of decency, they'd simply quit. Who's still there? C. Michael Armstrong, who made a total of $242,022 in cash, stock and other compensation in 2007; Alain J.P. Belda ($170,181); Kenneth Derr ($241,667); John M. Deutch ($260,000) and Andrew Liveris ($163,474). Also, Anne Mulcahy ($240,000); Richard Parsons ($200,594); Roberto Hernandez, ($2,610,000); Robert L. Ryan ($43,750); Judith Rodin ($170,181); and Franklin Thomas, ($231,250). At best, they snoozed through the company's massive build-up of bad debt and rancid security instruments. Again, they need to go.

Video: Protests in Iceland - (optionarmageddon.ml-implode.com) For all of you asking: “Why all these bailouts?” The video at the attached link is why. The Iceland economy is at a standstill after the implosion of its banking system. What caused the implosion? A ridiculously overleveraged banking system, not unlike our own. The bailouts are our government’s attempt to avert the kind of banking collapse that would reduce accumulated wealth to near zero (via a sudden nationwide bank run). My fear is that the banks are going to blow up anyway, and that if the Fed goes down with the ship, government will be powerless to help us out of this mess.

Fed Has Giant, and Opaque, Role in Financial Crisis Aid - (www.washingtonpost.com) Wall Street analysts, congressional overseers and the media have parsed every detail of the Treasury Department's financial rescue program -- $250 billion and counting. Largely outside public view, however, the Federal Reserve is lending far more than that amount -- $893 billion, roughly the equivalent of the annual economic output of Mexico -- to help a wide range of institutions weather the economic storm. As of last week, the Fed's loans included $507 billion to banks, $50 billion to investment firms, $70 billion for money market mutual funds, and $266 billion to companies that use a form of short-term debt called commercial paper. It is considering a new program that would make billions more available to prop up consumer lending: auto loans, credit cards and the like. In lending these vast sums, the Fed is essentially substituting its own unlimited ability to supply cash for that of private markets, which are not functioning normally. The central bank is even fulfilling some of the original goals of the Treasury Department's $700 billion rescue program by allowing financial institutions to use securities that are difficult to sell as collateral for loans. "The existing system of lending is broken," said David Shulman, a senior economist at the UCLA Anderson Forecast, which analyzes economic trends. "The Fed is coming in to do that lending. That's why they call it the lender of last resort." But unlike the Treasury's rescue package, which has elaborate disclosure requirements and oversight mechanisms, the Fed lending is occurring quietly and at the discretion of its five governors, as well as top officials of the 12 regional Fed banks. Timothy F. Geithner, president of the Federal Reserve Bank of New York and the Obama administration's expected nominee for Treasury secretary, has been a leading architect of the new lending programs.

FDIC's list of 'problem' banks swells to 171 - (news.yahoo.com) The Federal Deposit Insurance Corp. said Tuesday the list of banks it considers to be in trouble shot up nearly 50 percent to 171 during the third quarter — yet another sign of escalating problems among the institutions controlling Americans' deposits. The 171 banks on the FDIC's "problem list" encompass only about 2 percent of the nearly 8,500 FDIC-insured institutions. Still, the increase from 117 in the second quarter is sharp, and the current tally is the highest since late 1995. "We've had profound problems in our financial markets that are taking a rising toll on the real economy," said FDIC Chairman Sheila Bair in a statement, adding that Tuesday's report "reflects these challenges."

Citgroup Blasted By New Yorkers - (www.reuters.com) - The bailout of Citigroup has made people in New York angrier than they were about any of the other government rescues of financial institutions this year. In a random sample of people inside the Port Authority, the world's busiest bus terminal, only one man backed the government decision to prop up the New York-based bank, even though it is a huge employer in the region.
All the rest are angry -- even on the day before Thanksgiving . "They were bailed out before, this is the second bailout, so what's going on? Are they going to ask for another bailout soon?" asked Cheril Nichols, a 50-year-old nurse from New Jersey.

Malls, hotels next victims in new mortgage crisis - (biz.yahoo.com/ap) The full scope of the housing meltdown isn't clear and already there are ominous signs of a new crisis -- one that could turn out the lights on malls, hotels and storefronts nationwide. Even as the holiday shopping season begins in full swing, the same events poisoning the housing market are now at work on commercial properties, and the bad news is trickling in. Malls from Michigan to Georgia are entering foreclosure. Hotels in Tucson, Ariz., and Hilton Head, S.C., also are about to default on their mortgages.

Hedge funds seek to keep a grip on data - (www.ft.com) Hedge funds have always had a reputation for secrecy but the recent crisis engulfing the industry is prompting some to become private to the point of paranoia. SRM’s decision to sue the Wall Street Journal for printing the poor performance of its Monaco-based SRM Global hedge fund, which lost its original investors 85 per cent in a little over two years, is at the extreme of industry reaction. However, plenty of other funds are cutting back the information they share with investors, as intense interest in which hedge funds are in trouble has led to widespread leaks of performance data. The rising secrecy flies in the face of efforts by regulators and parts of the industry to increase transparency, with the G20 calling earlier this month for a unified code of practice for hedge funds.


OTHER STORIES:

AIG Plans to Pay Retention Bonuses to Executives - (www.ml-implode.com) - Listen to this article. Powered by Odiogo.com How can you give cash compensation to an executive, yet claim it is not a salary or bonus? You call it a "retention bonus," No, I am not making this up. Note that AIG chose to make this disclosure the day before Thanksgiving, clearly choosing a time when it would attract the least notice. Not that it really matters. The talk about restricting executive compensation to bailout recipients has been just that, talk.
House prices post record decline in Case-Shiller survey - (biz.yahoo.com)
A Look at Case-Shiller Numbers by Metro Area - (blogs.wsj.com)
House prices keep plunging; L.A. sees some of the sharpest declines - (www.latimes.com)
Housing Is Bad Enough, but Wait - It'll Get Worse - (www.truthout.org)
Anonymous Banker Weighs In On The Coming Credit Card Debacle - (www.nytimes.com)
Shameless housebuilders push for a bailout - (www.bloggingstocks.com)
Fed sets plan to help keep housing prices too high - (www.marketwatch.com)
Massive new Fed programs aimed at making everything more expensive - (news.yahoo.com)
Citigroup collapses! Banking Shutdown Possible - (www.moneyandmarkets.com)

Outlook Grows More Dire for Housing Market - (www.nytimes.com)
FDIC Graphs Show the Extent of Financial Crisis - (yourmortgageoryourlife.wordpress.com)
Russian analyst predicts decline and breakup of USA - (humor, I think) - (www.drudgereport.com)
Pension Agency Sounds Alarm - (online.wsj.com)
CDS Report: governments under pressure - (www.ft.com)
Satellite Halts Hedge Fund Withdrawals, Fires 30 After Losses - (www.bloomberg.com)

BlueBay closes emerging markets fund after heavy losses - (www.ft.com)
Japan’s Recession Deepens as Output Falls, Consumers Spend Less - (www.bloomberg.com)
China downturn deepens - (www.reuters.com)
Top Chinese official warns on downturn - (www.ft.com)
Attacks directed at India's commercial heart - (www.ft.com)
British retail angst reflects broader economic downturn - (www.iht.com)
European November Confidence Drops More Than Forecast - (www.bloomberg.com)
Government Funds in Gulf Face 15% Loss - (online.wsj.com)
China’s Currency Reserves May Rise to $2 Trillion - (www.bloomberg.com)
China says impact of global crisis deepening - (news.yahoo.com/s/afp)
European Stocks Advance for Fourth Day; Asian Shares Gain - (www.bloomberg.com)
Zimbabwe labor leaders call for run on banks - (biz.yahoo.com/ap)