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STORIES:
Do you
know who owns more than a 6% stake in the maker of .223 Bushmaster rifles, like
the one used last Friday to murder 20 first graders and seven adults in
Newtown, Connecticut? California public schoolteachers.
The
company in question is Freedom Group, a privately-held firearms conglomerate
formed by private equity and hedge fund group Cerberus Capital Management.
Cerberus created the platform in April 2006 via the acquisition of Bushmaster,
after which it added another 10 makers of firearms, ammunition and accessories
(including Remington, Marlin Arms and Barnes Bullets). The California State
Teachers' Retirement System (CalSTRS) committed to invest a whopping
$500 million into a $7.5 billion Cerberus fund that has helped bankroll Freedom
Group. That means that it effectively could own a 6.67% stake in the gun maker,
which filed to go public in late 2009 before pulling the offering in early
2011. In fact, the figure could be even higher since CalSTRS also committed
$100 million to a $1 billion predecessor fund, which likely made the original
investment.
New York State Budget Balanced With Gimmicks, Study Says -
(www.bloomberg.com) New York state relies on
gimmicks and nonrecurring revenue to pay for rising pension costs and the
most-generous Medicaid benefits in the U.S., said a group led by former Federal
Reserve Chairman Paul Volcker and former Lieutenant
Governor Richard Ravitch. Annual pension
contributions may increase 31 percent to $10.6 billion by 2015 from about $8.1
billion in 2013, and would probably need to rise by an additional $14.8 billion
if the state were to adopt a 5 percent assumed rate of return on invested
assets, instead of the current 7.5 percent, the State Budget Crisis Task Force said in
a report issued today. In 2009, New York spent $9,056 per enrollee in Medicaid,
the federal-state health program for the poor. That’s 69 percent higher than
the U.S. average, according to the report. Even with a cap instituted last
year, the state expects to pay $22.8 billion in fiscal 2014, an 8 percent
increase from last year, the group said.
Struggles Mount for Greeks as Economy Faces Winter - (online.wsj.com) Maria Katri sent her son to
live at a charitable home for poor boys after Greece's economy crashed. Now, as Greece slides deeper into depression, the
widowed mother is so poor that her teenage daughter, who stills lives at home,
is "jealous that her brother is having a better time than her in the
institution," Ms. Katri says. The spread of
economic hardship is fraying Greece's social fabric and straining its political
cohesion as the country enters the harshest winter of its three-year-old debt
crisis. Even the tightknit Greek family—an institution that has helped the
population to absorb a collapse in employment—is under pressure as household
incomes dwindle.
Spain Bad Loans Ratio Surges to 11.23% as Defaults Climb -
(www.bloomberg.com) Bad loans as a proportion of total
lending at Spanish banks climbed to a record 11.23 percent in October as the
country’s economic slump led more companies and homeowners to miss credit
payments. The proportion rose
from 10.71 percent in September as 7.4 billion euros ($9.8 billion) of loans
soured in the month to take the total of doubtful credit in the banking system
to 189.6 billion euros, the Bank of Spain said
on its website today. The mortgage default
rate jumped to 3.49 percent in the third quarter from 3.16 percent in the
second quarter, the Bank of Spain said. Spain’s economic slump, now in its
fifth year, continues to drive defaults to record highs as lenders report
rising impairments of corporate, home and consumer loans as well as those
linked to real estate. Doubts about the ability of Spain’s weaker lenders to
withstand mounting impairments of loans linked to real estate helped push the
country to seek a European bailout for its banking system in June.
Fannie
and Freddie Are Not Piggy Banks - (www.bloomberg.com)
What does a U.S. immigration
program have to do with the housing market? Nothing. Yet lawmakers are once
again attempting to tap mortgage-finance
giants Fannie Mae and Freddie Mac to fund unrelated legislation, this time to
cover the cost of increasing the number of green cards for foreign graduates
with advanced degrees. Fannie and Freddie, it seems, have become Washington’s
favorite piggy bank. Some may see this as a good thing. The U.S., after all,
spent $190 billion bailing out the companies, so why not siphon some of the
money back to pay for other priorities? The reality is that doing so raises
mortgage costs for borrowers regardless of their credit risk, threatens to
stall the housing market’s comeback and lowers the odds that Washington will
ever fix the two companies.
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