KeNo's Housing and Economic Portal: Tuesday January 20 Housing and Economic stories

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Nortel Files for Bankruptcy Amid Credit Squeeze - (www.bloomberg.com) Nortel Networks Corp., the phone equipment maker that was once Canada’s largest company by market value, filed for bankruptcy protection after losses mounted and financing dried up amid a deepening recession. The century-old company, North America’s biggest maker of phone gear and worth about $250 billion at its peak in 2000, fell victim to reduced spending by customers such as Verizon Communications Inc. and competition from Cisco Systems Inc. The company made the filing a day before a $107 million interest payment was due and was granted protection in Ontario Superior Court today.

Some States in a Pinch May Raise Gasoline Tax - (www.nytimes.com) Several states are considering the rare step of raising gasoline taxes to help fill growing budget gaps and potholed roads. Skip to next paragraphPoliticians in California, Massachusetts, New Hampshire, Illinois and Oregon, for example, are introducing bills that would raise gasoline taxes for road and bridge repair, as state legislatures around the country begin their new sessions. In Iowa, top legislators in both houses would support an increase. And in Ohio, a state task force last week recommended raising the gas tax by 13 cents a gallon. There are political risks in raising taxes of any kind, and legislators have been loath to raise their gas taxes, which are imposed in every state but Alaska. In many states, gas taxes have not been raised for more than a decade and they often are not indexed to inflation. “I’ve opposed virtually every revenue enhancer in terms of tax increases up to this point,” said John E. Bradley, an Illinois state representative who is chairman of the House Revenue Committee.

Is Bank of America The Next Citigroup? - (globaleconomicanalysis.blogspot.com) Charles Darwin's theory was survival of the fittest. The Fed's policy isSurvival Of The Weakest. Rather than let the weak go under, the Fed tries to prop them up, draining resources from the strong. We see the Fed's losing play in action once again as Bank of America May Need More U.S. Aid to Absorb Merrill Lynch. Bank of America Corp., the biggest U.S. bank by assets after this month’s purchase of Merrill Lynch & Co., may need more money from the federal government to absorb losses linked to the global credit crisis. The purchases of money-losing Merrill Lynch and Countrywide Financial Corp., the biggest U.S. home lender, will add to credit costs at Charlotte, North Carolina-based Bank of America, which has been setting aside too little reserves for its own loans, Graham Fisher & Co.’s Joshua Rosner said in a note to clients today. The Wall Street Journal reported talks on a federal infusion have been going on since mid-December. Propping up Bank of America for a second time would put an additional strain on the Treasury’s $700 billion rescue fund for banks. The combined company already received a $25 billion infusion. Citigroup Inc. has received $45 billion of government capital and a U.S. guarantee on $306 billion in troubled assets, and it’s divesting the Smith Barney brokerage.

Downturn makes taking a vacation a dilemma - (www.philly.com) The tanking economy is forcing many people to bag their plans for winter and spring vacations. Others are waiting longer to book tickets, staying away fewer nights, and checking into cheaper hotels. Still, there are some, like Roger Trombley, a driver for U.S. Foodservice Inc., who consider their vacations an absolute right. "We work hard. We deserve a vacation." Trombley is heading to the Adirondack Mountains for eight days in April to hike and canoe with his girlfriend. Yes, it is the “right” of Americans to spend money they don’t have because they “deserve” it. How will he pay for it. Most likely, he will pitch some plan to take from the so-called “rich”. These are the seeds of socialism and entitlement being sewn as we speak.

Investors hammered by Citi fund setback - (www.ft.com) Citigroup’s Corporate Special Opportunities hedge fund is returning only 3 cents on the dollar to investors, underscoring the depths of the difficulties at the alternative investment unit once headed by the bank’s current chief executive, Vikram Pandit. The amount being returned is less than had been expected when the company decided to wind up the fund last year and came as bruising news for investors who had been prevented from withdrawing their money since January 2008. Yes, I guess managing a unit that returns 3 cents on the dollar qualifies him to run Citigroup.

Congress continue to spend money they don’t have, large expansion of child insurance - (www.ft.com) Yes, it sounds like a worthy cause. I would love to give $100 to every homeless person in the world, but you have to have the money before you can give it away. Congressional members as usual are afraid to say “no” to any worthy cause and don’t have the guts to cut any other programs to pay for this. One day (quickly approaching), government will not be able to borrow money from China, Japan, or other countries to pay for this. Congress on Wednesday voted for a large expansion in healthcare coverage for children in what Democrats said would be the first step towards providing universal insurance to the 47m Americans who do not have it. The move, which would provide coverage to more than 4m children, taking the total to 11m, followed similar votes by Congress in 2007 that were twice vetoed by George W. Bush, president.EDITOR’S CHOICE

$150bn taken out of hedge funds - (www.ft.com) Investors pulled close to a net $150bn from hedge funds last month in spite of moves by dozens of funds to halt or suspend redemptions. The record December figure, equivalent to about 10 per cent of industry assets, extends the run of outflows to four consecutive months and has increased the total net outflow for 2008 to $200bn. The size of the once lucrative industry has almost halved in the past year, to $1,000bn under management, according to data from TrimTabs Investment Research and Barclay Hedge. Conrad Gann, chief operating officer of TrimTabs, said he foresaw more redemptions in the first quarter of 2009. “We expected December hedge fund redemptions to be significant, but the results are still surprising ... twice the peak equity mutual fund outflows in September at $72bn,” he said. The hedge fund industry was clearly “under duress”, Mr Gann said

Fed Wants New Effort to Cleanse Banks Hobbled by Toxic Assets - (www.bloomberg.com) The Federal Reserve’s top two officials urged a new effort to address the toxic assets held by financial companies, warning that they threaten to prevent banks from resuming lending to households and companies. Chairman Ben S. Bernanke and Vice Chairman Donald Kohn said in separate remarks yesterday that the illiquid investments raise questions about the “underlying value” of banks and may hinder “private investment and new lending.” They called for the government to remove or insure the assets. The goal is to prevent the type of economic stagnation that plagued Japan in the 1990s, when banks weighed down with bad loans were unable to lend. President-elect Barack Obama has a window of opportunity to oversee a comprehensive bank restructuring plan after taking office next week. “Banks are insolvent now,” said Paul Miller, a bank analyst at Friedman Billings Ramsey & Co. in Arlington, Virginia, who estimates that financial institutions need an additional $1 trillion to $1.2 trillion in new help. “Until you address this shortfall, banks will continue to be credit hoarders and destroyers as they shrink their balance sheets.”

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Tuesday January 20 Housing and Economic stories

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