Friday December 19 Housing and Economic stories

TOP STORIES:

Ecuador defaults, says to fight "monster" creditors - (www.reuters.com) President Rafael Correa declared a default on Ecuador's foreign sovereign bonds on Friday, vowing to fight "monster" debt-holders in court in one of most aggressive moves against investors in the region for years. Ecuador's dollar-denominated debt prices plunged on news of its second default in a decade and the first in Latin America since Argentina in 2002, although the decision was not expected to lead to similar moves around the region. Correa, a U.S.-trained economist and ally of Venezuela's anti-U.S. President Hugo Chavez, refused to make a $31 million interest payment due on Monday on 2012 global bonds, saying the debt was contracted illegally by a previous administration. "I gave the order not to pay the interest and to go into default," Correa said. "We know very well who we are up against -- real monsters."

Citadel Halts Withdrawals From Two Hedge Funds After 50% Drop - (www.bloomberg.com) Citadel Investment Group LLC, enduring its biggest losses since starting in 1990, halted year- end withdrawals from its two biggest funds after investors sought to take out $1.2 billion, or 12 percent of assets. Withdrawals may resume as early as March 31 for the Kensington and Wellington funds, the Chicago-based firm said in a letter yesterday to clients. The funds, which together manage about $10 billion, have lost 49.5 percent of their value this year through Dec. 5. “We have not made this decision lightly,” Citadel founder Kenneth Griffin, 40, wrote. “We recognize how a suspension impacts our investors, especially those with current financial obligations of their own to meet.”

Anger Grips Auto Workers - (www.washingtonpost.com) As the workers and residents of this small town that launched the Saturn automobile see it, there are several villains in the collapse of the automakers' rescue plan. But what stuns many in this place defined by the General Motors auto plant and its 4,200 workers is that no person played a larger role in the demise of autoworker hopes than their own Sen. Bob Corker (R), who is now regarded by some here with the kind of disdain reserved for traitors. Corker emerged as one of the leading critics of the rescue plan passed by the House. He lashed into the carmaker chief executives when they came to Washington looking for help. And it was Corker's alternative proposal, which was a plan that would have been tougher on union workers, that ultimately failed. In a dozen interviews with workers here, many suspected that he only feigned interest in rescuing Detroit's Big Three. Instead, they say, he wants to crush GM and its union to benefit foreign automakers, such Nissan and Volkswagen, who have opened or are opening nonunionized plants in the state.

Mitch McConnell's Finest Hour - (online.wsj.com) The same can't be said for President Bush on the auto bailout. In the Senate's Thursday night automobile showdown, the United Auto Workers said "No thanks" to a bailout with strings attached. Most Senate Republicans took them at their word and voted to block the bill. But within hours, President Bush blinked and Treasury is now scrambling to use money from the Troubled Asset Relief Program, or TARP. Who'd have thought Mr. Bush would want to join the long line of Detroit executives in caving to the UAW? Senate Republicans had more gumption. Led by Tennessee Senator Bob Corker, they asked the auto workers to show they were serious about making Detroit competitive again. In exchange for a lifeline from Washington, Mr. Corker wanted the union to set a "date certain" in 2009 for lowering the Detroit Three's hourly labor costs to the average of foreign-owned auto makers in the U.S. He also wanted creditors to bring down Detroit's total debt by two-thirds through an equity swap, making sure debtholders share the cost of restructuring. The union's counteroffer was that it would bring down labor costs in 2011, when its current contracts run out. Maybe we missed something, but we thought GM and Chrysler were facing bankruptcy now, not in three years. As Minority Leader Mitch McConnell said on the Senate floor, that sounds like "taxpayer money today for reforms that may or may not come tomorrow."

Americans' net worth in steep decline - (www.latimes.com) The latest Fed report, with data as of Sept. 30, was published Thursday. It showed that the value of U.S. households’ net worth -- the amount by which their assets exceeded debts -- tumbled $2.81 trillion in the quarter, or 4.7%, to $56.5 trillion. That’s still a big number, of course. But it now has fallen 11.1% from a record high of $63.63 trillion in September 2007. That is the largest year-over-year drop since record-keeping began in 1952, according to Bloomberg News.


More groups affected by Madoff Fraud:
Madoff Madness: "I knew he was cheating, That's why I used him" - (Mish at globaleconomicanalysis.blogspot.com) - So why did these smart and skeptical investors keep investing? They, like many Madoff investors, assumed Madoff was somehow illegally trading on information from his market-making business for their benefit. They didn't consider the possibility that he was clean on that score but running a good old-fashioned Ponzi scheme.
Madoff lawsuits in line - (www.marketwatch.com) Investors are expected to line up to sue brokerage founded and run by Bernard Madoff after his arrest on fraud charge. Fund fraud hits big names (WSJ.com) - (www.marketwatch.com) Santander has big exposure to Madoff - (www.marketwatch.com) Unicredit's Pioneer unit into Madoff - (www.marketwatch.com)
For Investors, Trust Lost, and Money Too - (www.nytimes.com) The zoning lawyer in Miami trusted him because his father had dealt profitably with him for decades. The officers of a little charity in Massachusetts respected him and relied on his advice.Skip to next paragraph Wealthy men like J. Ezra Merkin, the chairman of GMAC; Fred Wilpon, the principal owner of the New York Mets; and Norman Braman, who owned the Philadelphia Eagles, simply appreciated the steady returns he produced, regardless of market conditions. But these clients of Bernard L. Madoff had this in common: They chose him to oversee much of their personal wealth. And now, they fear, they have lost it. While Mr. Madoff is facing federal criminal charges, accused by federal prosecutors of operating a vast $50 billion Ponzi scheme, many of his clients are facing an abrupt reversal of fortune that is the stuff of nightmares. “There are people who were very, very well off a few days ago who are now virtually destitute,” said Brad Friedman, a lawyer with the Milberg firm in Manhattan. “They have nothing left but their apartments or homes — which they are going to have to sell to get money to live on.”



OTHER STORIES:

Update: Rescap Deadline Extended... Again - (www.ml-implode.com) - The previous extension only yielded an additional commitment of less than $1 billion...
Moscow Memories of 1997 - [2008-12-13] - They were desperate times, and you could see that there was a climactic crisis coming. It is easy to talk about this sort of th...
BLAMING “THE STUPIDS” FOR THE FINANCIAL DISASTER - (www.ml-implode.com) - A few weeks old, but a great read. Tom then lays out who was complicit in all this—with nary a mention of the media that spent...

Now Accused of Fraud, Wall St. Wizard Had His Skeptics - (www.nytimes.com)
Fed regulators shut 2 banks in Georgia, Texas - (biz.yahoo.com/ap)
'All Just One Big Lie' - (www.washingtonpost.com)

GM Moves Closer to Bailout as Wagoner Holds Talks With Bolten - (www.bloomberg.com)
White House Ready to Aid Auto Industry - (www.nytimes.com)
Global car crisis far from over, executives say - (www.reuters.com)

White House still working on Big 3 bailout - (money.cnn.com)
Busy last full week of trading in '08 awaits - (money.cnn.com)
December layoffs exceed 100k - (money.cnn.com)
Auto bailout: What went wrong? - (money.cnn.com)
8 really, really scary predictions - (money.cnn.com)
Fear of a worthless car warranty - (money.cnn.com)
A little sympathy for car dealers - (money.cnn.com)

Thursday December 18 Housing and Economic stories

TOP STORIES:

Ecuador Plans to Default on Bond Debt - (online.wsj.com) Ecuador's President Rafael Correa said his nation is defaulting on its foreign debt, in a hardball move prompted as much by leftist ideology as economic distress. President Rafael Correa said Ecuador would skip a $30.6 million payment to bondholders due on Monday, calling foreign creditors 'real monsters.' Mr. Correa said Ecuador will skip a $30.6 million payment to bondholders due Monday, asserting that there are irregularities in how the debt had been contracted by an earlier administration. Mr. Correa, an economist who is close to Venezuelan president Hugo Chávez, lashed out at foreign creditors as "real monsters." Oil-rich Ecuador's move marks the first sovereign default since the onset of the global financial crisis in September. While Ecuador had put markets on notice last month that it was threatening such action, the announcement still left some investors agape, as Ecuador has $2 billion in cash on hand to pay. "Correa is really, really convinced foreign debt is like the devil and he doesn't have to pay," says Alberto Bernal, head of emerging-market macroeconomic strategy at Bulltick Capital Markets in Miami. "There's a strong ideological component here."

Fed to Bloomberg: “F*** off” - (www.ml-implode.com) The Fed has refused to comply with Bloomberg’s request for information regarding its massive new lending programs. The Fed is worried such a disclosure would reveal all the big banks are effectively bankrupt, causing widespread panic and, I suppose, a possible run on the entire banking system.

For many investors, social ties to arrested NY advisor trumped concerns about transparency - (www.latimes.com) They had known him for years as a golf partner, a family friend. Some were neighbors or fellow members of country clubs on Long Island and in Florida. They had known him for years as a golf partner, a family friend. Some were neighbors or fellow members of country clubs on Long Island and in Florida. Many had begun investing with 70-year-old Bernard L. Madoff decades ago, often after being referred by a friend or relative who had known the Wall Street veteran even longer. There had been some warnings: Financial consultants had been suspicious for years about his astounding run of success. They couldn't figure out how he managed to produce steady returns, month after month, even when everyone else was losing money — and leave almost no footprint while moving billions of dollars in and out of the markets. "People would come to me with their statements and I couldn't make heads or tails of them," said Charles Gradante, co-founder of the Hennessee Group and advisor to hedge fund investors. "He only had five down months since 1996," Gradante said. "There's no strategy in the world that can generate that kind of performance. But when people would come to him and say, 'How did I make money this month?' he didn't like it. He would get upset with people who probed too much." Those investors were scrambling Friday to learn whether they had been wiped out by what prosecutors described as a multibillion-dollar Ponzi scheme. The assets of Madoff's investment company were frozen Friday in a deal with federal regulators and a receiver was appointed to manage the firm's financial affairs.

Wells Fargo to write down $40 billion in Q4: Bove - (www.reuters.com) Ladenburg Thalmann's Richard Bove cut his price target on Wells Fargo & Co (WFC.N: Quote, Profile, Research, Stock Buzz) and said the bank intends to write-off $40 billion in the fourth quarter related to the acquisition of Wachovia Corp (WB.N: Quote, Profile, Research, Stock Buzz). Shares of Wells Fargo were down 9 percent at $26.56 in afternoon trade on the New York Stock Exchange. Bove now expects Wells Fargo to incur a loss of $6.09 per share in 2008, compared with his prior view of $2.14 a share profit. The analyst said the bank's loan losses were rising because of weakness in the economy and margins were being stressed by the decline in asset yields.

US Bancorp Sees $1 Billion in Writedowns Ahead - (www.cnbc.com) U.S. Bancorp, one of the largest U.S. banks, said on Thursday it may incur $1 billion of credit costs and writedowns in the fourth quarter as the recession deepens and credit markets remain tight. The bank expects net charge-offs of $600 million to $650 million in the quarter, up from $498 million in the third quarter and $225 million a year earlier. It said it plans to add to loan loss reserves a sum equal to 90 percent to 110 percent of net charge-offs. Minneapolis-based U.S. Bancorp also expects $200 million to $300 million of writedowns because prices are falling on asset-backed commercial paper, structured investment vehicles and non-agency mortgage-backed securities.

BlackRock Cuts 500 Jobs, Struggles with Outflows - (www.cnbc.com) BlackRock, the largest publicly traded U.S. asset manager, has cut 500 jobs worldwide, its chief executive said on Thursday, as it grapples with a surge in outflows during the global credit crisis. Speaking at the Goldman Sachs Financial Services Conference in New York, BlackRock Chairman and Chief Executive Laurence Fink said the New York-based company has "downsized" by 500 people.
He said many of the 500 were part-time employees, according to a webcast of the presentation. BlackRock has 5,600 staff globally, according to the company's website.

UBS Freezes $6 Billion Property Fund - (www.cnbc.com) Swiss bank UBS said on Friday it had frozen a $6 billion real estate fund as it could not keep up with redemption requests from wealth management clients. The Jersey-based UBS Wealth Management Global Property Fund will be closed until the end of 2009. "Due to the strained liquidity situation in the market as a whole and the longer process for selling real estate, the fund can no longer handle all redemption requests without forcing remaining investors to suffer losses from emergency sales," a spokeswoman for UBS said, confirming a report in Swiss newspaper Neue Zuercher Zeitung. "In such a situation it is a fund manager's responsibility to temporarily suspend the fund in the best interest for all investors," she said.

Forget $200, Goldman Now Sees $45 Oil in '09 - (www.cnbc.com) Yes, these guys are supposed to be the smart guys. They have changed their 2009 forecast from $200/barrel to $45. Hmmm. How much are these clowns getting paid?

AIG BAILS ON LOANS FROM FEDS - (www.nypost.com) - Uncle Sam may not get paid back as promised in its $150 billion bailout of American International Group, the giant insurer conceded. AIG had agreed as a condition of its recent government lifeline to escape bankruptcy that it would repay at least $60 billion by selling valuable assets. However, CEO Ed Liddy admitted yesterday that it may not be that easy to raise the cash. "These are challenging times to undertake divestiture," Liddy acknowledged at a Hong Kong luncheon speech, far from the ears of Washington, DC, lawmakers. "It's quite possible that the pace and order of our divestitures will change." AIG promised to sell life insurance, retirement services and an airplane-leasing unit to repay a $60 billion government loan in its overall $150 billion - and counting - rescue package, in exchange for Uncle Sam taking a 79.9 percent stake in AIG



OTHER STORIES:

We Need a Bailout Exit Strategy - (www.ml-implode.com) - For all of these reasons, it is incumbent upon federal policy makers to ensure that the extraordinary actions of the past months...
U.S. Treasury Ready to Prevent Failure of Automakers - (www.ml-implode.com) - Paulson implements the "if you do not like the answer Congress gives, go around them" philosophy.
Green Tree Sees Servicer Ratings Upgraded - (www.ml-implode.com) - "Fitch said it had upgraded servicing ratings for HLTV and subprime product from ‘RPS3+’ to ‘RPS2-,’ and upgraded the more gener...
Fannie's Change Won't Save Mortgage Modifications - (www.ml-implode.com) - "An interesting change this week in Fannie Mae’sloan modification process has me wondering about the motivation behind it"

German bank bail-out has failed, say MPs - (www.ft.com) Dramatic appeal adds to pressure on Merkel. Germany’s banking sector rescue has failed and should be modified urgently if lasting damage to the economy is to be avoided, the MPs who oversee the €500bn ($668bn, £449bn) of funds warned on Friday. In a letter to Peer Steinbrück, the finance minister, obtained by the Financial Times, the MPs said a €400bn fund set up by the government to guarantee bank debt had not led to a resumption of inter-bank lending and that German banks were not providing companies with sufficient credit.

Regulators close 2 banks in Georgia, Texas, bringing bank failures to 25 in year to date - (www.latimes.com) Regulators on Friday closed Haven Trust Bank in Georgia and Sanderson State Bank in Texas, bringing to 25 the number of U.S. bank failures this year.
Sandals resort chain lays off 650 workers in Bahamas, Jamaica, St. Lucia amid tourism drop - (www.latimes.com) Sandals Resorts International is laying off 650 Caribbean hotel workers in response to a decline in tourist bookings, the company said Friday.
Pensions Get a Reprieve in Congress - (www.nytimes.com) Companies whose pension funds suffered big losses this year will not have to replenish the money quickly under a relief measure that flew through the Senate Thursday and will next go to the president for his signature. Skip to next paragraphBecause of strong market performance, big contributions made in the past, and a two-year phase-in of tougher financing rules passed in 2006, many companies have not had to pump much money into their pension funds in the last few years. But they suddenly faced the prospect of having to come up with a lot of cash because of this year’s financial crisis.
Blagojevich and Union Go Way Back - (online.wsj.com)
Allegations that Blagojevich sought help from the nation's largest union in a pay-for-play scheme are the latest episode in his long relationship with the SEIU.
Filing Aims to Strip Blagojevich's Powers

GMAC Failure - (www.cnbc.com) Video provides a look at the impact of GMAC's withdrawal of its application to be a bank holding company, with Alex Taylor, Fortune; CNBC's Michelle Caruso-Cabrera & Phil Lebeau
GM Hired Advisers to Consider Bankruptcy - (www.cnbc.com)
Bush May Use TARP Fund To Rescue US Auto Makers - (www.cnbc.com) The Bush administration, worried about a further blow to the US economy, said it was ready to prevent the auto industry from collapsing, likely using the $700 billion Wall Street bailout fund.

Madoff's Alleged $50 Billion Fraud Hits Other Investors - (www.cnbc.com) Investors scrambled on Friday to assess potential losses from the $50 billion fraud allegedly perpetrated by Bernard Madoff, a day after the arrest of the prominent Wall Street trader.
Retail Sales, Inflation Drop; Sentiment Improves - (www.cnbc.com)
JPMorgan Chase Is Having A 'Terrible' Quarter: Dimon - (www.cnbc.com)