KeNo's Housing and Economic Portal: Wednesday September 7 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Cash crisis drives USPS towards insolvency - (www.ft.com) But almost 100 years after that description of the US Postal Service was inscribed, a cash crisis threatens to do just that. The USPS has said faster-than-expected sales declines could leave it technically insolvent by the end of September, and unable to pay its bills by mid-2012. If the USPS does not cut thousands of jobs, defer expenditures and reduce service, executives expect losses to accelerate, raising the prospect that the US taxpayer could be forced to bail out the second-largest civilian employer in the country. In truth, the USPS, like other national postal groups around the world, has been in decline for a number of years – squeezed by the inexorable substitution of physical mail by electronic equivalents and pummeled by the economic downturn. A 2006 law has exacerbated the problem, forcing the USPS to pre-fund its retiree health benefits with contributions totalling $59bn in 10 years – it has a crushing $5.5bn payment due in September – while restricting price rises to the rate of consumer inflation.

Morgan Stanley at Brink Got $107B From Fed - (www.bloomberg.com) As markets convulsed in September 2008, Morgan Stanley (MS)Treasurer David Wong briefed the Federal Reserve on a “dark” scenario in which the U.S. firm would need at least $10 billion of emergency loans from the central bank. It got 10 times darker by month’s end. Morgan Stanley borrowed $107.3 billion, the most of any bank, according to data compiled by Bloomberg News using information released in response to Freedom of Information Act requests, related court orders and an act of Congress. Morgan Stanley’s borrowing -- more than twice the amount all banks got from the Fed in the market squeeze that followed the Sept. 11 terrorist attacks -- peaked after hedge funds pulled $128.1 billion from the firm in two weeks, documents released by the Financial Crisis Inquiry Commission show. The first comprehensive examination of the Fed’s emergency lending reveals how close the New York-based bank came to running out of cash because of a run on its prime brokerage, the unit that finances hedge funds’ trades and holds their cash and securities. The Fed loans also show the degree to which Morgan Stanley and other banks depended on such brokerage accounts for funding, even though clients could close them on short notice.

UBS Plans to Cut About 3,500 Jobs to Save Costs - (www.bloomberg.com) UBS AG (UBSN), Switzerland’s biggest bank, will eliminate about 3,500 jobs, or 5.3 percent of its workforce, as stricter capital requirementsand a slowdown in client trading reduce earnings. About 45 percent of the reductions will come from the investment bank, 35 percent from the wealth management and Swiss bank division and 10 percent each from the asset management and wealth management Americas units, the Zurich-based bank said in a statement today. UBS had 65,707 employees at the end of June. Chief Executive Officer Oswald Gruebel aims to reduce annual costs by 2 billion Swiss francs ($2.5 billion) by the end of 2013 after scrapping the bank’s profit target. The 50 largest banks around the world announced almost 60,000 job reductions this year through the first week of August, the fastest rate since 2008, data compiled by Bloomberg show. Credit Suisse Group AG (CSGN) said last month it will cut about 2,000 jobs, or 4 percent of staff, to help save 1 billion francs in annual costs beginning next year.

Germany’s highest court to announce ruling on Greek, eurozone rescues Sept 7 - (www.washingtonpost.com) Germany’s highest court announced Tuesday that it will deliver its ruling on complaints against rescue packages for Greece and other eurozone countries next month. The Federal Constitutional Court said it will announce its verdict on Sept. 7. At a hearing last month, Finance Minister Wolfgang Schaeuble defended the rescue packages while opponents argued that the bailouts violated both German and European law. At issue in the case are the initial Greek rescue of May 2010 and the wider eurozone rescue fund agreed shortly after. Those plans foresee Germany — Europe’s biggest economy — guaranteeing loans up to €22.4 billion ($32.2 billion) for Greece and €147.6 billion for other countries. “I hope these complaints will be thrown out,” Peter Altmaier, a senior lawmaker with Chancellor Angela Merkel’s conservative party, told reporters. “We will look very closely at the reasoning for the verdict and then examine what consequences need to be drawn from it.”

German minister breaks rank on Greek collateral - (www.ft.com) A prominent member of Angela Merkel’s government has broken ranks with cabinet colleagues by calling on Germany to ask Greece to post billions in collateral in return for new emergency loans, following in the footsteps of Finland. Labour minister Ursula von der Leyen, who is also a deputy leader of Ms Merkel’s Christian Democratic Union (CDU), said forcing Greece to put up securities would “ensure that agreements [regulating a second bail-out] won’t be broken”. She made the suggestion in an interview with the Hannoversche Allgemeine, a German newspaper, and followed this with comments on public television in which she suggested Athens could post gold reserves or stakes in state-owned companies as collateral. Government officials were quick to distance the chancellor and her government from Ms von der Leyen’s demands, stressing that the emergency loans to Athens already came with many tough conditions to ensure timely repayment.