Wednesday December 3 Housing and Economic stories

TOP STORIES:

Trump Entertainment Forgoes Interest Payment to Conserve Cash - (www.bloomberg.com) Trump Entertainment Resorts Inc., the casino company founded by Donald Trump, said it will forgo a $53 million bond-interest payment due Dec. 1 as it negotiates with creditors on ways to restructure the company’s finances. Trump has a 30-day grace period during which it will hold talks with lenders. The company’s board formed a committee to oversee the discussions, Atlantic City, New Jersey-based Trump said today in a statement on Globe Newswire.

Hedge funds try to hold back redemption wave - (www.marketwatch.com) Hundreds of hedge funds will shut this year as an estimated wave of as much as $700 billion in investor redemptions crashes over the industry, but some managers are trying to hold back the tsunami. At least 75 hedge fund firms, including GLG Partners ( GLG 2.54, +0.06, +2.4%) , Deephaven Capital Management, RAB Capital (UK:RAB: news, chart, profile) and New Star Asset Management, have put up "gates," suspended redemptions or unveiled a restructuring this year. Preventing lots of investors withdrawing their money at once helps avoid selling assets at fire-sale prices and potentially relieves short-term market pressure. However, the trend is also raising tension between hedge fund investors, who may need cash quickly, and managers, who may be more interested in holding on to assets to protect their businesses.

Bets are off as lack of deals hits arbitrageurs - (www.ft.com) The sudden collapse of BHP’s efforts to buy Rio Tinto this week has highlighted the bleak environment for merger arbitrage – when traders bet on whether proposed corporate takeovers will make it to the finish line. Arbitrageurs try to profit from the risks surrounding a deal, usually by buying the target company’s shares while they are trading at a discount and shorting the shares of the acquirer. Some investors liken the practice to “picking up nickels in front of a bulldozer”. When markets are stable, spreads between the target’s share price and the value of its takeover bid tend to be just a few percentage points wide. Traders turn those “nickels” into quarters by adding leverage. Many arbitrage funds are now under pressure, however, to use less leverage and return capital to skittish investors.

Student Loan Aid Is Test for Treasury - (www.washingtonpost.com) Student advocacy groups are urging the Treasury Department to prevent a new $200 billion consumer-lending program from benefiting private student lenders, which they say are largely unregulated and prey on students with risky, high-interest loans. The program, announced this week and developed by the Treasury and Federal Reserve, is not aimed specifically at the student loan market. Its much broader goal is to encourage lending to consumers -- including car loans, credit card debt and student loans -- as well as help the financial system by increasing liquidity in the credit markets.

For jobless, long waits to file claims - (www.boston.com) A surge in layoffs at Massachusetts companies is straining the state's ability to process unemployment claims, leading to lengthy lines at local walk-in centers and long waits for those filing by phone - if they can get through at all. Claimants are waiting up to two hours at some unemployment walk-in centers, and an average of about 30 minutes on the state's toll-free phone line, according to the Division of Unemployment Assistance. About 85 percent of first-time claims are filed by phone, and call center workers answered nearly 30 percent more calls in October than they did in the same month a year ago. Those figures, however, don't count people who can't get through or give up in frustration before the call is answered. For example, Maribeth Boisvert, laid off by a real estate developer about two weeks ago, estimated she tried 40 times over the course of two days to get through to a service representative to process her claim.

JPMorgan Chase Will Trim 19,000 From WaMu This Weekend - (www.forbes.com) - "Up to 19,000 employees of Washington Mutual face being laid off this weekend... said it expects to retain the 22,000 employees who work at Washington Mutual branches and 2,000 workers in the mortgage and wealth management divisions in California..." Layoffs are never good news, but any time during the holiday season is the worst news of all. About 1,600 employees who work in the back-offices of the California branches have already been informed that their jobs will be cut by March. WaMu had about 43,000 employees as of June, according to a filing with the Securities and Exchange Commission. Combined, Chase and WaMu have about 5,400 branches. The company said it only plans to close about 10.0%. The bulk of the job cuts will be at the Washington Mutual headquarters in Seattle due to the overlap in operations with the current employees at JPMorgan. JPMorgan acquired the tired thrift from the Federal Deposit Insurance Corp. in late September for $1.9 billion. The deal excluded the assets and liabilities of the holding company and its nonbank subsidiaries. Federal regulators had seized the teetering savings and loan and then orchestrated the sale of the bulk of its assets to JPMorgan. The combined bank is the largest in the U.S. by deposits.

Malls, hotels next victims in new mortgage crisis - (biz.yahoo.com/ap) - "We're probably in the first inning of the commercial mortgage problem," said Scott Tross, a real estate lawyer with Herrick Feinstein in New Jersey. . Refinancing formerly was an option, but many properties are worth less than when they were purchased. And since investors no longer want to buy commercial mortgages, banks are reluctant to write new loans to refinance those facing foreclosure. ... One hope was that the U.S. would use some of the $700 billion financial bailout to buy shaky investments from banks and insurance companies. That was the original plan. But Treasury Secretary Henry Paulson has issued a stunning turnabout, saying the U.S. no longer planned to buy troubled securities. For those watching the wave of commercial defaults about to crest, the announcement was poorly received. "He's created havoc in the marketplace by changing the rules," Rosen said. "It was the stupidest statement on Earth." It's hard to feel too sorry for those who rallied for the TARP because they thought it would save them from their natural fate. Throw your lot in with the government in order to feed at the public trough, and you just might find yourself empty-handed, crowded out by larger (and better-connected) pigs.

The Investors Who Can’t Come in From the Cold - (www.nytimes.com) Auction-rate securities, you may recall, are preferred shares or debt instruments with rates that reset regularly, usually every week, in auctions overseen by the brokerage firms that originally sold them. They have long-term maturities or, in the case of the preferred shares, no maturity dates at all. The securities are issued by municipalities, student-loan companies, closed-end funds and tax-exempt institutions like hospitals and museums. Officials in Massachusetts, New York and other states came to the rescue earlier this year, striking settlements with some of the bigger brokerage firms in the arena. But while some of the larger firms agreed to redeem the securities, not everyone is covered by those agreements. A group of people, size unknown, has fallen through the cracks in the settlements, and for several quirky reasons. They remain frozen in the securities and understandably upset. Irene Scharf, a professor of immigration law at the Southern New England School of Law, in North Dartmouth, Mass., is one of them. Back in 2005, she invested $75,000 in several auction-rate securities backed by municipalities. The money was earmarked to pay college tuition bills for her two sons.


OTHER STORIES:

The Real Truth behind the Citigroup Bank Nationalization - (www.engdahl.oilgeopoliticsnet) - That reality is the real reason Paulson was forced to abandon his original ‘crony bailout’ TARP plan and opt to use some of hi...
After General Bernanke Destroys The Deflationary Threat - (www.ml-implode.com) - The recapitalization efforts to date are, in fact, necessary if you conclude that financial institutions are so connected that a...
Can the US Do An IMF On Itself? - (www.ml-implode.com) - ... the US cannot perform a similar IMF bailout on itself, as it is currently attempting to do. The United States IS the IMF. As...
Former Regulator: Clear Fraud in Financial Crisis -- Why Isn't Anyone in Jail? - (www.ml-implode.com)

Americans Have Lost Their Appetite for Spending - (www.nytimes.com)
Fed Commercial Paper Holdings Rise to $295.1 Billion - (www.bloomberg.com)
A Bailout For Small Business? - (www.washingtonpost.com)
Frugal families learn how to cope with soaring food costs - (www.usatoday.com)

A Plague on All Their Houses - (www.forbes.com)
Plan C - (www.economist.com)
Singing the blues - (www.economist.com)

Meltdown far from over, new mortgage crisis looms - (biz.yahoo.com/ap)
Europe Inflation Rate Drops Most in Almost 2 Decades - (www.bloomberg.com)
Economic crisis sweeps deeper into Asia - (news.yahoo.com/s/afp)
U.K. Consumer Confidence Stays Near Three-Decade Low, GfK Says - (www.bloomberg.com)
Ruble Falls on Speculation Central Bank Scaling Back Defense - (www.bloomberg.com)

Holiday Sales Kick Off With Discounts to Lure U.S. Customers - (www.bloomberg.com)
U.S. ‘Black Friday’ Sales Rise 3%, ShopperTrak Says - (www.bloomberg.com)
When the Downturn Sailed Into Savannah - (www.nytimes.com)
Latest Chrysler Buyout Offer Lures Quarter of Salaried Staff - (www.nytimes.com)
Local Pillars, Auto Dealerships Teeter as Big Three Decline - (www.nytimes.com)
Will GM's cuts be enough as Congress reconsiders aid? - (www.freep.com)
Rubin, Under Fire, Defends His Role at Citi - (online.wsj.com)
Bankruptcy Could Offer GM More Flexibility - (www.washingtonpost.com)
Lehman’s Neuberger Division Sale May Be Scuttled By S&P Drop - (www.bloomberg.com)
The crisis that touches everyone - (www.iht.com)