Wednesday December 10 Housing and Economic stories

TOP STORIES:

Chrysler’s Friends in High Places - (www.nytimes.com) In early November, as America’s automakers grasped for a lifeline from Washington, the Treasury secretary, Henry M. Paulson Jr., placed a call to his predecessor, John W. Snow. The topic: Chrysler L.L.C. Skip to next paragraph Chrysler is the smallest of the Big Three automakers, but it stands apart from its peers in another crucial respect. While General Motors and the Ford Motor Company are public corporations, Chrysler is controlled by one of the world’s richest and most secretive private investment companies. That investment company is Mr. Snow’s employer, Cerberus Capital Management, which has used its wealth and deep connections in Washington to shape the debate over the foundering automakers to its advantage. In recent weeks, Mr. Snow has personally lobbied Mr. Paulson and others for a federal rescue that would salvage Cerberus’s investments in Detroit. Cerberus has also deployed a corps of lobbyists and former government officials to secure a bailout and protect its interests.

AP IMPACT: How Freddie Mac halted regulatory drive - (news.yahoo.com/s/ap) When the Washington Nationals played their first-ever baseball game in the nation's capital in April 2005, two congressmen who oversaw mortgage giant Freddie Mac had choice seats — courtesy of the very company they were supposed to be keeping an eye on. Efforts to tighten government regulation were gaining support on Capitol Hill, and Freddie Mac was fighting back. The baseball tickets for home opener were means of influence. According to confidential company documents obtained by The Associated Press, Reps. Bob Ney, R-Ohio, and Paul Kanjorski, D-Pa., spent the evening in hard-to-obtain seats near the Nationals dugout with Freddie Mac executive Hollis McLoughlin and four of Freddie Mac's in-house lobbyists. Kanjorski declined comment through a spokeswoman. Ney ultimately served a federal prison term after pleading guilty to trading political favors for a golf trip to Scotland, other gifts and campaign donations in the Jack Abramoff lobbying scandal. The Nationals tickets were bargains for Freddie Mac, part of a well-orchestrated, multimillion-dollar campaign to preserve its largely regulatory-free environment, with particular pressure exerted on Republicans who controlled Congress at the time. Internal Freddie Mac budget records show $11.7 million was paid to 52 outside lobbyists and consultants in 2006.

Debt Watchdogs: Tamed or Caught Napping? - (www.nytimes.com) "Moody's was like a good watchdog that had regarded the financial markets as its turf and barked and growled when anybody it didn't know came near it," said Thomas J. McGuire, a former director of corporate development at the company who left in 1996. "But in the '90s, that watchdog got muzzled and gelded. It was told to turn into a lapdog." …. Edmund Vogelius, a Moody's vice president, explained the company's business model in a 1957 article in The Christian Science Monitor. "We obviously cannot ask payment for rating a bond," he wrote. "To do so would attach a price to the process, and we could not escape the charge, which would undoubtedly come, that our ratings are for sale." … But for Mr. McGuire, the former director of corporate development at Moody's, there were also dangers in relying on ratings as a form of regulation because the agencies would be able to sell ratings even if they failed investors. "Rating agencies are staffed by ordinary people with families to support and bills to meet and mortgages to pay," he said in a speech to the S.E.C. in 1995. "Government regulators are inadvertently subjecting those people to improper pressure, and share accountability for any scandals which may result."

AIG Lobbied for India Nuke Deal (Really!) - (from Mish and fsi.standford.edu) As AIG was on the brink of bankruptcy and facing a government takeover, the insurance giant made sure Congress knew where it stood—on U.S.-India nuclear relations, that is. AIG deployed its lobbyists to Washington last month to influence a bill that allows U.S. companies to sell nuclear technology to India. Signed by President Bush earlier this month, the bill overturns a 30-year-old ban on such sales imposed after India first developed a nuclear bomb. (Critics complain that the U.S.-India deal undermines non-proliferation efforts.) Why would AIG care about a U.S.-India nuclear pact at a time when its own existence was uncertain? “We were looking at this to see if there’s a potential business aspect” for AIG, company spokesman Nick Ashooh said. “We do a lot of business in India.” Ashooh said he was “not sure” if that business included insuring contracts between U.S. military technology companies and their Indian counterparts. Leading up to and following the government’s bailout of AIG last month, the company’s lobbyists kept busy. (AIG “suspended” its lobbying this week after coming under fire from senators.) Between July and September, the company spent more than $2 million to lobby Congress, the Treasury Department, the Federal Reserve and the White House, records show. (Between April and June, it spent more than $3 million). Apart from its own in-house lobbyists, AIG employed five lobbying firms and 20 lobbyists to influence 20 bills and several other policy matters.

Darkness and Light at GE Capital - (www.nytimes.com) GENERAL ELECTRIC’S shareholders have taken quite a pummeling lately, largely because of uncertainty at the GE Capital Corporation, the enormous and often impenetrable financial services unit that has generated more than half the company’s profits in recent years. Skip to next paragraphInvestors looking for more transparency about financial stresses facing their companies are fearful of troubles lurking inside the “black box” that is GE Capital. Last Tuesday, General Electric responded to these concerns and tried to provide clarity on the capital unit’s operations. Among the headlines are these: Turmoil in the credit markets is expected to drag down the unit’s earnings to $5 billion in 2009, well below the $9 billion it expects to generate this year. The parent will also incur an after-tax restructuring charge of at least $1 billion this year; 70 percent of this comes from GE Capital.

Why Wait to Repeal Tax Cuts for the Rich? - (www.nytimes.com) Ah, the socialists at NY Times always too eager to confiscate others people’s money for the good of the country. Eliminating the Bush tax cuts right away would make it possible to generate a much larger immediate increase in total spending. Of course, the government’s first priority must be to stimulate spending as quickly as possible, deficits be damned. But it’s important to get the biggest possible stimulus for any given deficit. To that end, it would make sense for Mr. Obama to stick with his original timetable. Eliminating the Bush tax cuts right away would make it possible to generate a much larger immediate increase in total spending. Higher tax rates for top earners wouldn’t appreciably reduce their spending. A robust finding in behavioral research is that people are extremely reluctant to accept cutbacks in their standard of living.

More than 160 US, NATO vehicles burned in Pakistan – (news.yahoo.com/s/ap) Militants torched 160 vehicles, including dozens of Humvees destined for U.S. and allied forces fighting in Afghanistan, in the boldest attack so far on the critical military supply line through Pakistan. The American military said Sunday's raid on two transport terminals near the beleaguered Pakistani city of Peshawar would have "minimal" impact on anti-Taliban operations set to expand with the arrival of thousands more troops next year. However, the attack feeds concern that insurgents are trying to choke the route through the famed Khyber Pass, which carries up to 70 percent of the supplies for Western forces in landlocked Afghanistan, and drive up the cost of the war. It also dents faith in Pakistani authorities already under pressure from India and the U.S. to act on suspicion that the deadly terror attacks in Mumbai were orchestrated by Islamic extremists based in Pakistan

Why were Wall Street workers not asked for concessions? - (www.latimes.com) Autoworkers stepped up to the plate to save the car industry. White-collar workers, on the other hand, weren't expected to do the same when financial firms went to Congress with hat in hand. Say what you will about the role of the union in exacerbating Detroit's financial troubles, one thing stands out: Blue-collar workers are taking it in the shorts as part of their employers' efforts to secure some bailout bucks from Uncle Sam. I don't recall white-collar workers on Wall Street stepping up with similar concessions in return for their companies' receiving billions of dollars in taxpayer cash. "There is absolutely no excuse for a bailout without significant sacrifices by all stakeholders," said Robert Reich, who served as Labor secretary under President Clinton and is now a professor of public policy at UC Berkeley. "We should be making everyone on Wall Street jump through hoops, not just the automakers."



OTHER STORIES:

Obama: Big 3 can't fail - (www.marketwatch.com) President elect says bankruptcy is not an option in dealing with auto industry woes. Remarks follow Obama's announcement of largest infrastructure works since 1950s.
Senator calls for Chrysler merger, new CEO at GM – (news.yahoo.com/s/ap) Moron, Christopher Dodd, overstepping his bounds again. Someone please muzzle this clod.
Muni-bond funds' record losses - (www.marketwatch.com) Investors who think municipal bond funds are a safe bet may be in for a shock, as some muni funds tally losses of more than 30%.
Chinese tour groups go house-hunting in U.S. - (www.latimes.com) The cash-rich visitors are looking for bargains in the plunging market. The trips are part of a broader trend of individuals and businesses in China seeking greater investment opportunities abroad.
India Unveils 3 Trillion Rupee Spending Plan By March - (www.bloomberg.com)
Obama Plans Largest Building Program Since 1950s - (www.bloomberg.com)
Republicans Divided on Aid to Automakers - (www.nytimes.com)
When a Job Disappears, So Does the Health Care - (www.nytimes.com)

UBS to cut another 4,500 jobs: reports - (www.marketwatch.com) First Georgia Community becomes 23rd U.S. bank to fail in 2008 - (www.marketwatch.com)Australia's ANZ plans 800 lay-offs: report - (www.marketwatch.com) HSBC will lend to small businesses - (www.marketwatch.com)Tips for $1-a-year execs - (www.marketwatch.com)Payrolls take huge plunge - (www.marketwatch.com)

Obama: Collapse Is Not an Option - (online.wsj.com)
GM, Chrysler Focus on Loans, Not Merger - (online.wsj.com)
Detroit Bailout Nears a Reprieve - (online.wsj.com)
Toyota Plans Further Production Cuts - (online.wsj.com)
Auto Makers Appeal to Canada for Aid - (online.wsj.com)