News What is wrong with the US economy? Part 2

[Astronuc]

Pay should be related to performance

Exactly.

15 Companies That Might Not Survive 2009
http://finance.yahoo.com/news/15-Companies-That-Might-Not-usnews-14279875.html

So let's see where these companies are in Dec '09.


How Wall Street Continues To Doom Itself
http://www.usnews.com/blogs/flowchart/2009/1/30/how-wall-continues-to-doom-itself.html

"Wall Street talent" is an oxymoron - Let the Wall St. "Talent" Walk
http://www.usnews.com/blogs/flowchart/2009/1/28/let-the-wall-st-talent-walk.html

 

[The Dagda]

Obama has put a cap on bonus payments of $500,000 but our MPs don't want to be so direct as it might send the talent out of the business, to be frank if our current mess is an indication of "the talent" it might do with some fresh ideas. That said some banks are still paying out 6,7 and even 8 figure bonuses to top execs, which I personally think is sameless, and shameful. I don't mind seeing the person in the high street bank getting a bonus (it is after all nothing to do with them and if they have done well then it should be rewarded) but given the people responsible for this mess were under these peoples control, it just seems wrong to me.

Thanks for the articles, they raised a wry smile.

I have to say and it's not something I ever thought I would say, but I'm with the libertarian right on this one.

 

[mgb_phys]

I don't see why not. But I buy and sell my shares over the internet.

So how is buying/selling shares in banks different from buying loans?

I thought "sub-prime" meant that people were being given mortgage interest rates at below the prime lending rate,

I hadn't heard of the baloon payment. but if sub-prime is lending at more than your best rate it applies to almost everybody. You have many different rates depending on the customer, the amount of deposit, the value of the loan etc. You will have a VERY good rate for your best customers, eg those with more than a couple of $M in deposit. Everybody else pays more than this - so presumably they are all sub-prime.

From my interpretation of everything I've read, it was short selling that made Mr. Soros a billion dollars in less than a week.

He bet that the value of a currency would go down, other people were happy to take his money and bet that the currency would go up.
He was right - they were wrong. they both saw the same market data, they both employed the same legions of economists, analysts, quants and dealing experts.

The black wednesday when Britain left the ERM was different. The UK decided that the pound was worth 2.95 Deutschmarks - purely on the basis of national pride and fixed the exchange rate at that level. The market disagreed and would only give you say, 2.5DM for your pound. But the government had guaranteed the ERM rate, so you could buy a £ on the markets for 2.5DM, the government would exchange it for 2.95 DM and you could take that 2.95DM back to the markets and buy £1.18 - repeat!

Perhaps everyone in the world should have shorted England that year, and then we'd all be billionaires! If only we'd had his credit rating.

You can short without having to borrow the shares. It was fairly obvious that nothing had suddenly happened to make the £ worth so much (they hadn't discovered oil) so you simply change you £ savings to $, open a US$ account at your bank and wait for the rate to swap back. The tricky bit is that the reason the £ was so high was that UK interest rates were among the highest in the world (beaten only by Iceland!) so by keeping your money in £ you could earn 6% while in $ you could earn 2%.

 

[Astronuc]

I heard an interesting interview with Richard Goldberg who is author of "The Battle for Wall Street". He indicates that Wall Street represents a historical struggle/conflict between sellers (financial institutions) and buyers (investors, e.g. private equity firms, hedge funds, the public, . . .). Previously, the sellers had the advantage of control of technology, i.e. information. Now the access to information is also in the hands of the buyers - well some of them.

I think he argues that the game has changed, and what happened recently, is that the banks/financial institutions got caught with too much leverage, as well as bad ('toxic') assets, and perhaps some got caught selling bogus investments (CDS's, MBS's, . . . ).


The Battle for Wall Street: Behind the Lines in the Struggle that Pushed an Industry into Turmoil
https://www.amazon.com/dp/0470222794/?tag=pfamazon01-20

From the Inside Flap


A conflict of epic financial proportions has begun on Wall Street and will continue to rage on in the coming years. The opposing forces are the sellers: an army of commercial and investment bankers; and the buyers: an army of hedge fund managers and private equity groups. It is a battle about power—and about winning the hearts, minds, and wallets of the investment community. In The Battle for Wall Street, twenty-five-year Wall Street veteran Richard Goldberg analyzes the struggle for power between traditional sell-side financial institutions—who have seen their dominance upended during the 2008 financial crisis—and buy-side newcomers, and tells what it means for you and your financial future.

Goldberg explains how, for over 100 years, the sellers held all the power. They made markets, controlled information about markets, and largely managed markets, while buyers were participants with limited power or influence, or none at all. He shows how, with the revolution in information technology, buyers gained access to the same data as the sellers and quickly became an equally powerful force in the marketplace—just as the numerous new pools of liquidity made money more readily available. The author examines the various drivers of large-scale trading technology, the "agents of change" that include private equity, hedge funds, endowments, sovereign wealth funds, and the major exchanges that are fast becoming global financial supermarkets.

With an insider's eye, he looks at the various strategies and initiatives currently under way as a wide range of powerful firms fight to manipulate this new generation of financial technology to their advantage. Throughout the book, he draws on the experiences of many of the sell- and buy-side "generals" in the battle.

With prominent sell-side players either out of business or humbled into restructuring as commercial banks, Goldberg offers dire predictions for some and success for others. And as Goldberg reveals the factors that will create future winners, those who stay ahead of these changes will profit in their careers and their investments. This book will be your guide.

Seems worth a read.

 

[OmCheeto]

So how is buying/selling shares in banks different from buying loans?

Because if you buy a share, you first look at the company's prospectus and watch the news and read the paper and decide if it is a company that you think will grow and profit. This can be done by just about anyone. I do it for $100 a month. Though I've found my broker is charging me $4 each time so the market would have to go up 4% each month for me to break even, so I do not think this is a good idea for me as I do not make much money and 4% growth per month is a bit high. I may switch to annual investments. Though it is fun to say you are in the market because the only people I know of who are in the market are rich and I like to pretend I'm rich.

Loans are different in that I don't think people like myself could afford to buy a loan. I might be able to afford a share of a loan that has been bundled, but I would not have access to the details of the original loan once it has been traded and rebundled with other loans. I think it would take an army of accountants to see if my $100 was being invested wisely. I think this loan packaging has been pointed to as one of the causes of the current economic downturn.

Here's a little blurb that speaks of the confusion I'm trying to convey:

Sep 25, 2008 -- http://clarkhoward.com/liveweb/shownotes/2008/09/25/14103/"
A New York Times reporter has traced the sale of just one of the weirdo investments that blew up on Wall Street and helped cause the mess we're in right now.

Here's the scoop: Bear Stearns came up with an investment package called "Bear Stearns Alt A Trust 2006-7" that was valued at $1.3 billion. Basically, they went out and bought more than 2,000 Alt A (liar's loan) mortgages with the average price tag being $450,000. More than half of the loans were made in the bubble states!

Then Bear Stearns took the trust and divided it into 37 different bonds that they split off for sale to investors. So what you had was a situation in which nobody knew how many loans failed; how many were going to fail going forward; and nobody knew how to value these investments. That's why there's so much confusion in the economy.

This scenario was played out over and over again. One person takes a mortgage; it morphs, moves in pieces and slices to investors around the world; and is structured, divided and repackaged. By the time the investments were sold and re-sold and re-sold again -- and then the foreclosures start -- you have a mess that nobody can define or figure how to put a price tag on.

Since economics is a social science, I don't think it's a good idea to have confusion, or a mess, or something no one can figure out.

People will then not know what to do. Then they'll sit on their money. And then the economies of the world will get sluggish, and then we will be where we are today.

I'd answer your other questions, but I'm late for work.

Yes, I still have a job. Knock on wood.

 

[mgb_phys]

Loans are different in that I don't think people like myself could afford to buy a loan. I might be able to afford a share of a loan that has been bundled, but I would not have access to the details of the original loan once it has been traded and rebundled with other loans.

When you buy into a pension fund or a GIC/ISA you don't necessarily know which companies shares are being bought. If it is a market tracker you are buying shares in all the stocks in a particular exchange. The only guarantee you have is that the market will set a fair price for them.
If you buy an individual stock you are placing more trust in the company - you don't go and inspect their books or check their plants or count goods in their warehouse, you rely on the auditors to mean that their annual accounts are good.
If like Enron, the accounts are bad because the auditors had an ulterior motive to agree them - you are screwed.
The loans are just the same, you and any other large and small investors can't inspect each house with a mortgage - you rely on S+P and other ratings agencies. If they are signing off on bad loans because they will get more business/commision you are screwed.
But it's not the fact that you are buying loans that matters.

Basically, they went out and bought more than 2,000 Alt A (liar's loan) mortgages with the average price tag being $450,000.

If the ratings were honest then you could model what your profit/loss would be if 10%,20%,50% defaulted and if this would matter if the house price went up 5%,10%,20% a year.
The real problem is that it isn't in anybodies interest (except the short sellers) to cry foul - so everybody pretends they believe the most optimistic estimates.

More short sellers would have been good for the market. If a large number of people were betting that the price of these loans would drop by 50% then a lot of investors might have been more careful about buying them.

 

[Astronuc]

Well - we'll just have to see if this dire prediction holds true over the next 24 months.

More than 1,000 banks may fail, analyst estimates
RBC's Cassidy sharply raises gloomy view, urges avoiding banking stocks

SAN FRANCISCO (MarketWatch) -- More than 1,000 banks may fail during the next three to five years as the recession intensifies and loan losses climb, an analyst at RBC Capital Markets estimated on Monday.

In 2008, analyst Gerard Cassidy forecast 200 to 300 bank failures, but now he says the environment has deteriorated since then. See 2008 story on bank failures.

"Residential mortgage delinquencies remain at record levels, home-equity loan defaults are steadily rising and residential construction and land loan non-performing assets are skyrocketing for lenders with excess exposure to the weakest housing markets in the U.S.," Cassidy wrote in a note to clients.

"In conjunction with the slowdown in the economy, credit deterioration has accelerated in the commercial and industrial and commercial real estate loan areas," he said.

Since the mortgage-fueled credit crunch erupted in 2007, 34 banks have failed in the U.S. While Washington Mutual became the biggest bank failure in history last year, Cassidy expects most of the banks that collapse will be relatively small, with less than $2 billion in assets.

How much will that drain FDIC (Uncle Sam).

 

[turbo]

Well - we'll just have to see if this dire prediction holds true over the next 24 months.

More than 1,000 banks may fail, analyst estimates
RBC's Cassidy sharply raises gloomy view, urges avoiding banking stocks

How much will that drain FDIC (Uncle Sam).

Not a happy thought. If banks can refinance and forestall foreclosures for borrowers, they might be able to ride out the lean times. I see a problem with the greed of their managers, though. Rather than take the high road and pitch in, they may opt to keep credit really tight and rattle their tin cups to get more public money, which they may elect to keep, as they appear to have done during the initial bail-out.

 

[jreelawg]

One of the first things wrong with the economy in my opinion is our health care system. Imagine the amount of money that we pay the health insurance industry. We're talking a very, very large amount of money that people spend on "Health care", that doesn't go to health care. Imagine the bang for the buck we could get if our monthly bills all went to actual healthcare.

The underlying problem, I think, is 1: The level of corruption sponsored by greedy corporations, and 2: The dumbing down of our population to the point that regular folks will actually side with the greedy corporations.

 

[The Dagda]

One of the first things wrong with the economy in my opinion is our health care system. Imagine the amount of money that we pay the health insurance industry. We're talking a very, very large amount of money that people spend on "Health care", that doesn't go to health care. Imagine the bang for the buck we could get if our monthly bills all went to actual healthcare.

The underlying problem, I think, is 1: The level of corruption sponsored by greedy corporations, and 2: The dumbing down of our population to the point that regular folks will actually side with the greedy corporations.

Imagine indeed. It seems to me that the arguments against are pretty much redundant considering the sheer amount of cash wasted on a bloated and inefficient bureaucracy. Still it's a bit OT. What you'll find is one half is being fobbed off with the idea it's some sort of alien institution associated with communism. The selfish wealthy at least as usual seem to hate paying for anything that doesn't go directly to them as they see it, and of course many have an interest in businesses that are involved in the medical industry. Despite the fact that they could opt out under most nationalised systems and private companies can survive under nationalisation, they seem to think that it will be the end of the world. Never underestimate the power of ignorance.

 

[OmCheeto]

He bet that the value of a currency would go down, other people were happy to take his money and bet that the currency would go up.

I would like to know who those formerly happy people were. Or were they just banks doing their job?

The black wednesday when Britain left the ERM was different. The UK decided that the pound was worth 2.95 Deutschmarks - purely on the basis of national pride and fixed the exchange rate at that level. The market disagreed and would only give you say, 2.5DM for your pound. But the government had guaranteed the ERM rate, so you could buy a £ on the markets for 2.5DM, the government would exchange it for 2.95 DM and you could take that 2.95DM back to the markets and buy £1.18 - repeat!

Was the chunnel running at full capacity that day? I would imagine if everyone had known about that, the whole of London would be racing to France and back. - repeat.

One of my bosses quite a few years ago came back from a meeting and said something which I thought was very smart. Which surprised me because he never stuck me as being very smart. Anyways, he said; "If something goes wrong, it's usually no one's fault. It's almost always a problem with the system. We should therefore fix the system, daily."

I notice that the Black Wednesday brought out a lot of finger pointing, which usually indicates that someone thinks someone is to blame. I even see an odd little blurb that implies that the government was stupid and should have shorted itself to make a profit.

the main loss to taxpayers arose because the devaluation could have made them a profit. The papers show that if the government had maintained $24bn foreign currency reserves and the pound had fallen by the same amount, the UK would have made a £2.4bn profit on sterling's devaluation.

I'm not quite sure what to make of Mr. Soros sometimes. I've read that he was against financial regulations, and that he also thinks the market cannot be left to itself. But I guess he can say whatever he wants, now that his bank balance is fatter than a christmas hog.

But I do like the fact that he says we should learn from our mistakes.

And I do like his following idea, although I think it would be quite problematic to institute such a device.

http://online.wsj.com/article/SB121400427331093457.html?mod=hps_us_at_glance_markets"
JUNE 21, 2008

Mr. Soros's predictions in his books have fallen far short of his track record as a hedge-fund operator. In 1987 he wrote that the world had to ditch the dollar in favor of a new international currency system or risk "financial turmoil, beggar-thy-neighbor policies leading to world-wide depression and perhaps even war." His 1998 book said, "The global capitalist system ... is coming apart at the seams."

Beggar-thy-neighbor.

Ha! I think I'll start using that phrase.

 

[mgb_phys]

I even see an odd little blurb that implies that the government was stupid and should have shorted itself to make a profit.

A lot of the problems come from the assumptions that the market operates logically.
It doesn't - there is no such thing as the market or the government - only people.

The aim of the government isn't to make a profit - the aim of politicians is to cling to power. So the UK went into the ERM at a crazy level because that particular party had a lot of anti-europe voters and they believed the way to make them happy was to claim that the UK was bigger and richer than Germany and so that the pound was worth 2.95DM.
It's the same in the stock markets, in theory a market acts to find the best price, in practice individual traders act to cover up their mistakes and in bad times to hide in the herd. That explains a lot of the movements like the recovery of the US$, if everybody else in your office is buying $, do you want to be the one investing in something else if they are looking to make layoffs?

Market regualtion is tricky. anything you do to chnage the way the market works (by banning shorting or limiting bonuses) will either be worked around or they will simply trade in some other countries market. You do need market regulation to ensure that people can trust the market, if you need to send some guys from New Jersey around to the floor of NYSE with tire irons to collect on a debt - it becomes difficult to do business.

 

[Astronuc]

Woosshhh!

1:38pm ET: 7,939.61 -331.26 (-4.01%)

Concerns about the next Bailout measure, which could be anywhere from $1 trillion to 1.5 trillion!

And even then, some bank failures are expected.

So it appears that the economy is unable to provide the incomes (revenue) to sevice the current debt load. So intervention should have been initiated 2+ years ago, before this problem became a crisis.

Update: 2:35PM ET: 7,893.02 -377.85 (-4.55%)

 

[jreelawg]

The way the problem was ignored, as it was warned time an again where we were heading in the past, it almost feels as if it was intentional.

 

[Astronuc]

Dow closed down - 4:03pm ET: 7,888.88 -381.99 (-4.62%)

Investors are not impressed by the actions in Washington. One criticism is that the next bailout plan is short on specifics.

Stocks tumble after gov't unveils financial plan
http://news.yahoo.com/s/ap/20090210/ap_on_bi_st_ma_re/wall_street

 

[turbo]

The way the problem was ignored, as it was warned time an again where we were heading in the past, it almost feels as if it was intentional.

My wife and I saw this coming several years ago. We bought a small house that can be easily heated 100% by wood, with a garden spot so we could raise most of our own vegetables. When we sold our old place (much larger than we needed) we put all the money in the bank and hunkered down. We're watching her 401K and my roll-over IRA losing value steadily, and the Fed's constant downward pressure on interest rates means our money market and savings accounts are earning far less interest than is necessary to keep up with inflation. We'll ride this out, but I'm glad we acted when we did.

Several people on this forum had read the signs well enough to know that a recession was inevitable (and already in progress), only to get pooh-poohed and insulted by other posters for saying so in threads like this one. That's OK. My wife and I voted with our pocketbooks and acted early before real estate and stocks tanked. A few months after he sold our house for us, a close friend and his wife bought a modest little house not far from here with a nice garden spot, a large chicken-coop and a large shelter to raise pigs in. He left real-estate before the big exodus and started operating heavy equipment for a local town. If common people can see trouble looming, why were the "experts" in finance and government blind-sided?

 

[Astronuc]

Charlotte in same predicament as Wall Street
http://news.yahoo.com/s/ap/20090214/ap_on_bi_ge/charlotte_banks

CHARLOTTE, N.C. – The financial collapse has hit the city known as Wall Street South.

For years, Bank of America Corp. and Wachovia Corp. helped turn Charlotte into a financial powerhouse. Now, the big banks have thrust it into the same predicament as the real Wall Street — the city is losing thousands of jobs and an unquantifiable amount of prestige. Residents who invested heavily in the banks have seen their wealth dissipate and lifestyles change radically.
. . .

The loss of so many bank jobs is causing upheaval in other industries. Consumers who have been laid off or fear being out of work are curtailing their spending, forcing restaurants and retailers to close — among them Morton's, a high-end steakhouse, and a 15-month-old Home Depot Design Center. Even some of the Charlotte's lively night clubs have shuttered their doors.
. . . .

GM considering Chapter 11 Bankruptcy - and becoming a 'new' company
http://news.yahoo.com/s/nm/20090214/ts_nm/us_gm_plan

GM has been in talks with bondholders and the United Auto Workers union to get an agreement on a restructuring that would wipe out about $28 billion in debt for the auto maker, sources have told Reuters. However, it appears unlikely a deal could be reached by the Tuesday deadline, they said.
. . . .

Ain't capitalism wonderful! The management goes off and starts a new company, and the shareholders, bondholders, employees and taxpayers get screwed.

 

[mgb_phys]

Ain't capitalism wonderful! The management goes off and starts a new company, and the shareholders, bondholders, employees and taxpayers get screwed.

And if you happen to kill a few people you can leave all the fines and liability behind
http://www.cnn.com/2009/US/02/13/peanuts.bankrupt/index.html?

 

[turbo]

And if you happen to kill a few people you can leave all the fines and liability behind
http://www.cnn.com/2009/US/02/13/peanuts.bankrupt/index.html?

That only makes is more necessary for the owner, the plant manager, and anybody in the company who knew of the positive salmonella tests be prosecuted, and go to jail for a very long time. Real prison, not country-club prison. Part of the solution to our country's economic problems is prosecution of people who violate laws for personal gain.

 

[mheslep]

Charlotte in same predicament as Wall Street
http://news.yahoo.com/s/ap/20090214/ap_on_bi_ge/charlotte_banks

GM considering Chapter 11 Bankruptcy - and becoming a 'new' company
http://news.yahoo.com/s/nm/20090214/ts_nm/us_gm_plan
Ain't capitalism wonderful! The management goes off and starts a new company, and the shareholders, bondholders, employees and taxpayers get screwed.

Yes, now we see the violence inherent in the system.

https://www.youtube.com/watch?v=http://www.youtube.com/watch?v=o76WQzVJ434
Instead of capitalism, perhaps we should go with the autonomous collective.

 

[Astronuc]

Yes, now we see the violence inherent in the system.

Instead of capitalism, perhaps we should go with the autonomous collective.

No, we see the effects of corruption and unethical practices. We should clean up capitalism (and in parallel, clean up the political system) and regulate effectively and fairly.

The way capitalism has been practiced of late in the US and much of the world has failed, as the current global financial crisis has revealed.

There's a reason bank robbery and stealing are illegal. It should also be illegal to sell bogus derivatives like some of the CLO's, CDO's, CDS's, ABS's, MBS's, . . . . They were done to spread risk, but because of the increased default rates due to over-leveraging created by unscrupulous lenders and borrowers, it went beyond risk (or chance) to a certainty that someone was going to get his with losses. Rather than transfer risk, the banks effectively transferred losses to unsuspecting investors, which include mutual funds (as in 401Ks).

 

[Astronuc]

Empty Street
Commentary: As Washington wrestles with rescue packages, Wall St. stalls

By David Weidner, MarketWatch

NEW YORK (MarketWatch, Last update: 12:01 a.m. EST Feb. 12, 2009) --
. . . .

If the market's fall this (last) week wasn't enough of an indication, the statistics tell the story. Until something happens in Washington, ain't nuthin' happenin' on Wall Street except layoffs and losses.

Don't be fooled by the CEO testimony Wednesday before the House Financial Services Committee. Banks are not lending at a rate anywhere close to the pace they were a few years ago, or even back before credit standards got silly.

Syndicated lending -- the kind of big loans that corporations use for all types of expenditures -- has dropped, year-to-date, to just $93 billion, compared with $218 billion in 2008 (same period), according to Dealogic.

Remember, 2008 wasn't exactly a boom year for lending.

Not even existing loans are being renewed. Refinancing volume fell 78% to 32 deals worldwide, valued at a combined $7.5 billion year-to-date through Tuesday, according to Dealogic.

The bankers who testified said as much. Jamie Dimon, the chief executive of J.P. Morgan Chase & Co., said that if someone or some company is creditworthy, they're getting a loan. But in this environment, who is?

"We should not forget eroding standards by many market participants played a large role in creating the current economic malaise," he said.

In other words, banks are reluctant to make a bad situation worse by taking on more bad loans. This unwillingness to lend in the credit cycle's downdraft along with a stubborn inability to value collateralized assets remain the two biggest question marks hovering over the financial system. Until answers emerge, the Street remains in paralysis.

No-go IPOs

The initial-public-offerings market, which may be Wall Street's most profitable enterprise, remains close to a standstill.
. . . .

Debt doldrums

If banks aren't lending, you can bet that companies will be turning to the bond market. They are, but they're not exactly driving the market's 10% increase so far this year. Of the top 10 debt deals this year only one, a $10 billion offering by General Electric Co. (GE), was not issued by a bank, the government or a government-backed entity such as Fannie Mae (FNM).

It's good volume, but probably not enough to overcome the lost fees from the asset-backed and mortgage-backed securities markets. They are down 92% and 90%, respectively.

Again, 2008 wasn't exactly a boom year for ABS and MBS issuance.

There was a combined $446 billion, compared with $2.1 trillion in 2007 and $2.7 trillion in 2006, according to Dealogic.

. . . .

No advice

Finally, without the market for new debt and equity, few companies are willing to acquire rivals. Even those that do are having second thoughts, including Dow Chemical Co. (DOW), , which is looking to exit its $15 billion deal for Rohm & Haas (ROH), and Bank of America Corp. (BAC), which is taking a beating over its $19 billion acquisition of Merrill Lynch & Co.

Through January, mergers and acquisitions were down 37% globally. Wall Street made $20.9 billion for advising buyers and sellers in 2008, according to Dealogic. With a total value of $3.3 trillion, it still was the fourth-biggest year for M&A on record.

. . . Deal (M&A) volume dropped sharply, 36% in the fourth quarter, and a record 1,362 deals were scrapped, mostly near the end of 2008.

To sum up

You can see there are a lot of idle hands on Wall Street. There's no work. There's no income. No wonder Credit Suisse (CS), one of the few major global banks without significant exposure to toxic securities, posted a $2.75 billion loss for the fourth quarter. Credit Suisse has a big U.S. investment-banking arm. Not only was there no business, but the company couldn't trade its way out of the quarter, taking losses on hedging positions.

That's why as lacking as Geithner's plan is, it needs to be implemented -- and fast. For as much as the people on Main Street want to deny it, the business of Wall Street is essential to the American economy. . . .

Headlines on MarketWatch:

Illinois bank becomes 12th failure of the year
FDIC shutters four banks in one day
Riverside Bank of Cape Coral, Fla. fails

GM to say more aid or bankruptcy - WSJ

Trump Entertainment may face forced bankruptcy filing: Journal

On the upside:
2 Florida banks temporarily halting foreclosures
http://biz.yahoo.com/ap/090214/halting_foreclosures_florida.html

 

[DrClapeyron]

There's a reason bank robbery and stealing are illegal. It should also be illegal to sell bogus derivatives like some of the CLO's, CDO's, CDS's, ABS's, MBS's, . . . . They were done to spread risk, but because of the increased default rates due to over-leveraging created by unscrupulous lenders and borrowers, it went beyond risk (or chance) to a certainty that someone was going to get his with losses. Rather than transfer risk, the banks effectively transferred losses to unsuspecting investors, which include mutual funds (as in 401Ks).

I agree. Mortgages are necessary for two things; the purchase of a house and to finance overdrafts at the Federal Reserve.

This article was published shortly before the Iraq War in 2003.
http://news.bbc.co.uk/2/hi/business/2817995.stm

Buffett warns on investment 'time bomb'


The rapidly growing trade in derivatives poses a "mega-catastrophic risk" for the economy and most shares are still "too expensive", legendary investor Warren Buffett has warned.

The world's second-richest man made the comments in his famous and plain-spoken "annual letter to shareholders", excerpts of which have been published by Fortune magazine.

Economic growth in the 1990's came on the heel of a speculative bubble tied into rising stock value, now in the 2000's we have seen economic growth as a result from speculative MBS trades in the repo market to finance overdrafts at the Federal Reserve. Does anyone wish to predict what the new speculative-economic tool of the 2010's will be?

 

[Astronuc]

Let's add fiscal irresponsibility of state and local governments to the list.

From Slate's review of today's papers
So Long, Car Czar
By Daniel Politi

The New York Times leads with news that President Obama has decided to drop plans to name a single "car czar" who would oversee the restructuring of General Motors and Chrysler. Instead, Treasury Secretary Timothy Geithner and National Economic Council Director Lawrence Summers will oversee the Presidential Task Force on Autos, which will work with a number of government agencies on the issue. Ron Bloom, a restructuring expert, would also be named as a senior adviser to Treasury on the auto industry. USA Today leads with a look at how state and local governments have pretty much failed to set aside any money to pay for at least $1 trillion in medical benefits to retired civil servants. States have $445 billion in unfunded obligations to help retirees pay for health insurance, and local governments have obligations that surpass the $500 billion mark. Governments may now be forced to cut benefits or raise taxes in order to deal with the issue.

Benefits neglected for civil retirees
http://www.usatoday.com/news/washington/2009-02-15-retireehealth_N.htm

 

[mgb_phys]

There's a reason bank robbery and stealing are illegal. It should also be illegal to sell bogus derivatives like some of the CLO's, CDO's, CDS's, ABS's, MBS's, . .

Was it Engels that said "who is the greater criminal,he who robs a bank or he who owns one?"

 

[Astronuc]

Well - Bill doesn't get it.

Clinton Says Don't Blame Him for the Economic Crisis
http://news.yahoo.com/s/time/20090216/us_time/08599187977400

The magazine's story, which apportioned blame widely between such figures as Countrywide co-founder Angelo Mozilo, former Federal Reserve Chairman Alan Greenspan, Lehman Brothers CEO Dick Fuld and President George W. Bush, zeroed in on two specific economic policy decisions made during the Clinton administration. Clinton ushered out the Glass-Steagall Act, which for decades had separated commercial and investment banking, and signed the Commodity Futures Modernization Act - which exempted all derivatives, including the now-notorious credit-default swaps, from federal regulation. His administration also loosened housing rules, which added pressure on banks to lend in low-income neighborhoods.

"None of it was an endorsement of permissive lending and risk-taking," the magazine concluded. "But if you believe deregulation is to blame for our troubles, then Clinton earned a share too."
. . . .

Oh, no. Nod, nod, wink, wink.

The criticism at the time was that commercial or depository banks would divert cash to finance risky deals. Well that's what they did because people wanted high yields. Banks borrowed cheaply thanks to the Fed's rate cutting, and then loaned out lots of cash to finance deals. The borrowers of that capital then overleveraged on risky investments, which lost big time when the default rates escalated.

Now about 10-16% of households are at risk of default and forclosure - unless the government helps.

This morning I saw an interview with a woman who mentioned they received a default notice and warning of foreclosure. She is hoping for government assistance in order to remain in her $800K house, which is now worth ~$600K.

 

[Astronuc]

U.S. agents enter Stanford Financial Houston office
http://finance.yahoo.com/news/US-agents-enter-Stanford-rb-14381229.html

. . . .
About 15 people, some wearing jackets identifying them as U.S. marshals, entered the lobby of Stanford's office in the Houston Galleria area, the eyewitness said.

Houston-based Stanford Financial Group, which says it oversees more than $50 billion of assets, is being investigated by U.S. regulators, according to a person familiar with the matter.

The New York Times reported that U.S. securities regulators had accused three top Stanford executives, including Robert Allen Stanford, of fraud.
. . . .

Another scandal like Madoff's ponzi scheme?

 

[turbo]

A little more detail, here. Stanford fabricated very favorable past-performance data and promised continued high rates on CDs. Sure looks like the Madoff business model.

http://news.yahoo.com/s/ap/20090217/ap_on_bi_ge/stanford_sec_charges;_ylt=AqXZq5tReM5iw.2TkCafJMms0NUE;_ylu=X3oDMTFlNW8zajRkBHBvcwM5MQRzZWMDYWNjb3JkaW9uX2J1c2luZXNzBHNsawNzZWNjaGFyZ2Vzc3Q-

 

[Astronuc]

Stanford's firms include Antigua-based Stanford International Bank, broker-dealer Stanford Group Co. and investment adviser Stanford Capital Management, which are both based in Houston.

Notice the off-shore bank. I don't think it's clear yet, or at least not clear to many, the role of transfer of captial off-shore, which has been going on for 2+ decades at least.

 

[DrClapeyron]

I pulled this info from Stanford's site here http://www.stanfordfinancial.com/sir_allen

Sir Allen earned a Bachelor of Arts in Finance from Baylor University in 1974. He resides in St. Croix, US Virgin Islands, and holds dual citizenship, having become a citizen of Antigua and Barbuda ten years ago

Not just any off-shore banking but off-shore banking by a native Texan with dual US/US-Virgin Islander citizenship who has been knighted by the queen mum, really? I couldn't make this stuff up.

 

[mheslep]

...Commodity Futures Modernization Act - which exempted all derivatives, including the now-notorious credit-default swaps, from federal regulation.

That unqualified statement from TIME on CFMA is false. CDS's were exempted from regulation as commodities by the Commodity Futures Trading Commission which made sense because they are not traded on an exchange (a requirement for commodities). They were still under the control of the Securities Exchange Commission, who should have done a better job.

TIME also goes on to pick a '25 People to Blame' list and manages to leave sitting power brokers Barney Frank and Chris Dodd off this list. How convenient.

 

[Astronuc]

Economy Strains Under Weight of Unsold Items
http://www.washingtonpost.com/wp-dyn/content/article/2009/02/16/AR2009021601391.html

The unsold cars and trucks piling up at dealerships and assembly lines as consumers cut back and auto companies scramble for federal aid are just one sign of a major problem hurting the economy and only likely to get worse.

The world is suddenly awash in almost everything: flat-panel televisions, bulldozers, Barbie dolls, strip malls, Burberry stores. Japan yesterday [Feb 15] said its economy shrank at an 12.7 percent annual pace in the last three months of 2008 as global demand evaporated for Japanese cars and electronics. Business everywhere are scrambling to bring supply in line with demand.

Downsizing can be tricky, though. No one knows how much worse the economy will get, and while everyone waits for the recession to peter out, businesses are grappling with how to cut costs and survive without sabotaging their ability to grow when the economy picks up.

And there is a lot to cut.

"There is over-capacity in everything," from "retail to manufacturing to housing," said Richard Yamarone, chief economist at Argus Research. "If capacity is too large, you don't need that many people employed, which is another reason we're seeing such high job losses."

As long as capacity far outstrips demand, businesses have little reason to expand, buy new equipment or hire workers. Even if the government funds bridge repairs and banks step up lending, many industries still have to go through massive restructuring before growth can resume. But executives say they have to tread carefully. If they put off critical investments in technology or research for too long, they could hobble their recovery and even the economy's.
. . . .

Now there is serious concern about deflation, although apparently inflation will affect some items, e.g. energy and perhaps food. So there could be potential significant social upheaval.

Apparently Paul Volcker made the comment that the global economy is deteriorating faster than previously thought or anticipated.

Meanwhile - EU leaders back sweeping financial regulations
http://www.washingtonpost.com/wp-dyn/content/article/2009/02/22/AR2009022200454.html

WP - UAE government throws Dubai financial lifeline
"Analysts have speculated for months that the federal government in oil-rich Abu Dhabi might need to help debt-ridden Dubai. "

 

[OmCheeto]

Economy Strains Under Weight of Unsold Items
http://www.washingtonpost.com/wp-dyn/content/article/2009/02/16/AR2009021601391.html
Now there is serious concern about deflation, although apparently inflation will affect some items, e.g. energy and perhaps food. So there could be potential significant social upheaval.

Apparently Paul Volcker made the comment that the global economy is deteriorating faster than previously thought or anticipated.

Meanwhile - EU leaders back sweeping financial regulations
http://www.washingtonpost.com/wp-dyn/content/article/2009/02/22/AR2009022200454.html

WP - UAE government throws Dubai financial lifeline
"Analysts have speculated for months that the federal government in oil-rich Abu Dhabi might need to help debt-ridden Dubai. "

My acquaintance and I were discussing how metal prices have dropped over the last year. I noticed that http://www.kitcometals.com/charts/aluminum_historical.html" were down 75% and aluminum stockpile was up 300%.

Might be a fabulous time to rebuild our electrical infrastructure.

How many times have I mentioned that the wind farms in the Northwest were putting out too much power? That could have been sold to those silly Californians? But instead they had to take them off line? WTF?!

Time to make lemonade out of lemons, methinks.

 

[Astronuc]

But some people don't want high voltage power lines obstructing their view of the landscape, or windmills for that matter.

 

[Gokul43201]

TIME also goes on to pick a '25 People to Blame' list and manages to leave sitting power brokers Barney Frank and Chris Dodd off this list. How convenient.

There was a similar CNN article (actually an internet poll asking people to rate the most blameworthy). If I recall correctly, they had Clinton and Frank on their list, but I think they didn't have Dodd (kinda foggy on it now).

 

[OmCheeto]

Uh oh. Competition might be the culprit.

Saw this on the front page of the Sunday paper this morning at the market:

http://www.oregonlive.com/special/index.ssf/2009/02/solar_story.html"

"Soon, we'll be able to sell to our customers for just $1 per watt," says Sha, crossing the floor in towering heels. Little does Sha know her sky-high ambitions threaten to cast a shadow as far as Oregon.

At a buck-a-watt, solar — the world's most expensive energy — would beat today's cheapest power, coal-fired electricity. That would pave the industry's way to the rooftops of the masses, giving it a surefire edge in the world's race for affordable clean energy.

Ummm... A buck a watt? That's 1/4 the best going current rate. That cuts ROI time to a very reasonable level.(*1)

Gads. That means my thousand dollars worth of panels, which now generate 200 watts, will generate a thousand watts with my next thousand dollar investment. (*2)

Does anyone know how to say "I love you" in Mandarin and Cantonese?(*3)

I wonder if they waited on purpose for W to leave before they announced this. I'm sure he'd have found a reason to nuke them. "Damn Chinese gots weapons 'o mass destruction! We's got to woop them thar arses befores they comes and gets us!"(*4)

ps. I think I'll add copper and aluminum to my investments next month. (*5)

pps. Yes. I know. I've posted out of assigned topics. Can someone from admin please cut and paste my above comments to the appropriate threads. Who has time for all this posting:(*6)

*1: https://www.physicsforums.com/showthread.php?p=1920549#post1920549"
*2: https://www.physicsforums.com/showthread.php?p=2070516#post2070516"
*3: https://www.physicsforums.com/showthread.php?p=2066006#post2066006"
*4: https://www.physicsforums.com/showthread.php?p=2079335#post2079335"
*5: https://www.physicsforums.com/showthread.php?p=1986641#post1986641"
*6: https://www.physicsforums.com/showthread.php?p=1859991#post1859991" please don't ban me, please don't ban me...

 

[OmCheeto]

But some people don't want high voltage power lines obstructing their view of the landscape, or windmills for that matter.

Makes me wonder what the Dutch think about such an absurdity. Look at something spinning in the wind, or drown and starve? There's your choice.

People are so adverse to foopin' change and stuck on the "not in my backyard" nowadays, I just want to barf.

I've been a fan of http://en.wikipedia.org/wiki/Columbia_River_Gorge" for quite some time.
Home building is banned in the corridor.
I would personally love to see the thing lined with windmills.
It's big. It's windy. It could probably supply half this damn countries energy all by itself.(I might be off by a factor of 10 or 100, it just seems that windy most of the time)

And on top of that, I don't think my goldfish would even have noticed...

 

[Astronuc]

SEC probed Stanford companies; red flags abounded
http://news.yahoo.com/s/ap/20090223/ap_on_bi_ge/stanford_sec_warning_signs

WASHINGTON – For years, there were red flags — so many they could have massed into a crimson blanket.

As with the Bernard Madoff case, the scandal surrounding billionaire R. Allen Stanford now seems clear and obvious in hindsight. Yet Stanford managed to run his alleged scheme even while the Securities and Exchange Commission and other regulators had him on their radar screens and investigated his businesses. Stanford wasn't charged until last week.

From his tiny accounting firm's office near a North London fish-and-chips shop to certificates of deposit promising outsized returns sold by a bank in Antigua, ample warning signs over the years suggested Stanford's business wasn't what it seemed.

Among them: . . . .

Last week, the SEC accused Stanford in a civil lawsuit of a "massive" fraud. It said he peddled sham promises and funneled investors' money into real estate and other assets not easily turned into cash. FBI agents in Houston are running a parallel investigation.

Stanford, who was served legal papers by FBI agents last week, hasn't been charged with any crime.

The SEC began investigating Stanford's businesses in October 2006 but was asked by another, unidentified federal agency to suspend its inquiry, an SEC official in Texas told news organizations last week.
. . . .

So did Stanford have friends in the Bush administration?

 

[OmCheeto]

SEC probed Stanford companies; red flags abounded
http://news.yahoo.com/s/ap/20090223/ap_on_bi_ge/stanford_sec_warning_signs

So did Stanford have friends in the Bush administration?

I just had a weird vision run through my head. Somehow, it didn't seem right. I think I now understand the Serb-Milošević and Post WWII German-Hitler mindset.

It's very difficult to imagine the leader of your country in shackles.

Though I think I could get used to it in this case.

We should take a poll in Iraq and determine if anyone suffered any distress because of Saddam being hung.

 

[Astronuc]

Forecasters see higher unemployment in 2009
http://news.yahoo.com/s/ap/20090223/ap_on_bi_ge/troubled_economy

WASHINGTON – Brace yourself: The recession is projected to worsen this year.

The country stands to lose a sizable chunk of economic activity in 2009 as consumers at home and abroad retrench in the face of persistent economic troubles. And the U.S. unemployment rate — now at 7.6 percent, the highest in more than 16 years — is expected hit a peak of 9 percent this year.

That gloomy outlook came from leading forecasters in the latest survey by the National Association for Business Economics to be released Monday. The new estimates are roughly in line with other recent projections, including those released last week by the Federal Reserve.

"The steady drumbeat of weak economic and financial market data have made business economists decidedly more pessimistic on the economic outlook for the next several quarters," said NABE president Chris Varvares, head of Macroeconomic Advisers.

All told, Varvares and his fellow forecasters now expect the economy to shrink by 1.9 percent this year, a much deeper contraction than the 0.2 percent dip projected in the fall.

If the new forecast is correct, it would mark the first time since 1991 the economy actually contracted over a full year and would be the worst showing since 1982, when the country had suffered through a severe recession.

Vanishing jobs, shrinking nest eggs, rising foreclosures and tanking home values have forced American consumers to cut back, which in turn has caused businesses to lay off workers and slash costs in other ways, feeding a vicious downward cycle for the economy.

The current recession, which started in December 2007, is posing a major challenge to Washington policymakers, including President Barack Obama and Fed Chairman Ben Bernanke. That's because its root causes — a housing collapse, credit crunch and financial turmoil — are the worst since the 1930s and don't lend themselves to easy or quick fixes.

"As the news on the economy has darkened, so too, have the forecasts," said Ken Mayland, president of ClearView Economics. "We are suffering a period of maximum stress on the economy."
. . . .

Perhaps people are thinking positively enough. Bill Clinton was recently recommending that Obama talk more positively about the economy and the state of the world. But then we just finished with an administration in which the president confidently declared that the fundamentals of the economy were strong, or the economy was fundamentally strong.

Meanwhile - Asian, European stocks advance on Citigroup report
http://biz.yahoo.com/ap/090223/world_markets.html

HONG KONG (AP) -- Asian and European stock markets advanced Monday, as investors digested reports the U.S. government might expand its stake in troubled banking giant Citigroup to ease the financial crisis.

Worries that major Western banks like Citigroup Inc. and Bank of America Corp might have to be nationalized because of mounting bad debts sent global markets sharply lower last week.

But investors seemed relieved, at least for now, to have some clarity about the fate of Citigroup after the Wall Street Journal said late Sunday the company is negotiating with authorities to increase the U.S. government's stake in the teetering lender to as much as 40 percent.

Executives would prefer to keep the government's stake closer to 25 percent, according to the Journal, which cited people familiar with the situation. The talks arose after Citigroup made the proposal to regulators.

The Obama administration has not indicated whether it would back the plan, the Journal said. Just last week, Obama officials voiced support for keeping the banking system private as widespread talk about nationalization led investors to unload shares in Citigroup and Bank of America.

The news was unlikely to give stocks extended support, analysts said. Should the U.S. end up taking greater ownership, however, the move could help restore long-term confidence in the hard hit financial sector, raising prospects of a faster recovery in the world economy.

"People are taking it as a positive sign," said Francis Lun, general manager of Fulbright Securities Ltd. in Hong Kong. "It shows the government will not allow a major bank to fail again. They've learned their lesson with Lehman Brothers that the ramifications are so great, sometimes no amount of money can rebuild confidence."

. . . .

So the world markets expect the US government to intervene more than it has.

 

[Astronuc]

Vegas, Midwest seek the $8 billion for fast trains
http://news.yahoo.com/s/ap/high_speed_spending

WASHINGTON – The Republicans attacking President Barack Obama's economic stimulus package point to a project they dub the "Sin Express" — a high speed rail link between Anaheim, Calif., site of Disneyland, and Las Vegas.

Not so fast.

In fact, competition for the $8 billion in mass transit construction is just beginning. Backers of numerous other planned high-speed rail corridors around the country are making their case for the money.

They notably include a Midwest initiative long supported by someone with even more clout than Sen. Harry Reid, D-Nev., who strongly supports the Anaheim-Las Vegas line. That would be former Illinois Sen. Obama.

It was Obama's White House that, in the final hours of negotiations over the $787 billion stimulus bill, sought and won the big sum for high-speed rail projects, far above what either the House or Senate had passed. Reid was happy to agree but there's no guarantee the Anaheim-Las Vegas line will win dollars, to be determined by the Transportation Department.

Also in the running are proposed high-speed corridors in the Northeast, the Northwest, Florida and the South.

Howard Learner, president of the Chicago-based Environmental Law and Policy Center, a group promoting a Midwest high-speed rail network, said his area is in excellent position to capture a good chunk of that money. The Federal Railroad Administration, he said, has recognized the Midwest initiative connecting Chicago and 11 metropolitan areas within 400 miles as the system most ready to go.

He and others brushed aside claims that the $8 billion was set aside for Reid's favorite. Obama, who expressed strong interest in high-speed rail investment during the campaign, and his chief of staff Rahm Emanuel, are both from Chicago. Obama's transportation secretary, Ray Lahood, also is from Illinois. So is the Senate's no. 2 Democrat, Richard Durbin.

Quentin Kopp, chairman of the California High-Speed Rail Authority, said he was "delighted to see that the momentum has shifted in favor of high-speed train transportation." He outlined $2 billion in state projects that could be initiated before the Sept. 30, 2012, deadline for committing the $8 billion. Those include electrification of the line from San Jose to San Francisco, home to House Speaker Nancy Pelosi.

But Reid's involvement in crafting the bill still made him and the Las Vegas line a target.

"Billions of dollars for a sin express train from Los Angeles to Las Vegas. Necessary? I don't think so," said Rep. Mike Simpson, R-Idaho.

"Tell me how spending $8 billion in this bill to have a high-speed rail line between Los Angeles and Las Vegas is going to help the construction worker in my district," said House Republican leader John Boehner, whose district is just north of Cincinnati.

Actually, some of the money might ride his way. One offshoot of the Midwest network would connect the Ohio cities of Cleveland, Columbus and Cincinnati.

It certainly looks suspicious that HSR projects are under consideration for districts served by Pelosi and Reid. I'm not sure why the economy would benefit from a high speed rail project from LA to Las Vegas, in which the primary economic activity is entertainment and gambling. It would seem more appropriate to link LA with Phoenix, Tuscon, AZ with extension to Albuquerque, NM and perhaps Dallas, TX.

Advocates of the Anaheim-Las Vegas line envision using the futuristic magnetic levitation or maglev technology, where trains zoom on an air cushion created by powerful magnets instead of wheels. Obama recently cited the maglev system in Shanghai, China, as an example next-generation transit.

"Our prospects are certainly good," said Neil Cummings, president of American Magline Group, a private partnership that is promoting the Maglev train that will carry passengers the 268 miles between the two cities at speeds of up to 310 miles per hour. Last year Congress approved $45 million for environmental and other studies.

. . . .

Well if it's so great, then let the private partnership put up the money. And to use the electrification will require someone to build additional electrical generating capacity and transmission lines to supply the electrical current.

 

[OmCheeto]

Forecasters see higher unemployment in 2009
http://news.yahoo.com/s/ap/20090223/ap_on_bi_ge/troubled_economy

All told, Varvares and his fellow forecasters now expect the economy to shrink by 1.9 percent this year, a much deeper contraction than the 0.2 percent dip projected in the fall.

Perhaps people are thinking positively enough. Bill Clinton was recently recommending that Obama talk more positively about the economy and the state of the world. But then we just finished with an administration in which the president confidently declared that the fundamentals of the economy were strong, or the economy was fundamentally strong.

I think this "1.9 %" figure might be where everyone is coming from.
Even though the markets may have plunged anywhere from 50 to 80%, the economy seems not to have been affected anywhere near as much. I get the feeling that people equate the markets with the economy. Although interconnected, and dependent on each other, they are quite different things. I think it might actually help both if Obama starts flashing that figure around as an indicator that the American economy is not in as bad shape as the markets makes it out to be.

Meanwhile - Asian, European stocks advance on Citigroup report
http://biz.yahoo.com/ap/090223/world_markets.html
So the world markets expect the US government to intervene more than it has.

Why not? The economy's not in that bad shape.

And as for a Vegas-Anaheim rail line? It might turn out to be the newest version of "the bridge to nowhere" joke if they decide to build it:

http://www.lasvegassun.com/news/2009/feb/16/forbes-las-vegas-americas-emptiest-city/"
By Cara McCoy
Mon, Feb 16, 2009 (4:55 p.m.)

Empty and barren are words typically used to describe the desert that surrounds Las Vegas; however, they are now fitting adjectives for the city itself, according to a Forbes Magazine report.

The magazine ranked Las Vegas the No. 1 "emptiest" city in America. Using numbers from the Census Bureau released earlier this month, Forbes compiled data on homeowner and rental vacancy rates for 75 of the largest metropolitan areas in the country. It's the fallout from the housing boom and bust, Forbes said, that has garnered Las Vegas the undesirable title of "most abandoned."

An acquaintance of mine once called gambling "stupid tax".
Which I believe is an ellipsis, as I'm sure he implied that it is a "stupid person's tax".
(We have state run gambling here in Oregon which provides around 3% of the budget, which is good for the smart people because they get a 3% tax break because of all the stupid people.)

If there are enough stupid people in LA that would justify the expense of the line, then maybe...

 

[mgb_phys]

An acquaintance of mine once called gambling "stupid tax".

The bit I don't understand - there is a rollover in this weeks lottery - $50M (or something) and ticket sales have doubled.
So people don't bother buying a ticket for a mere $10M, but if it's $50M then it's worth a gamble!

If there are enough stupid people in LA that would justify the expense of the line, then maybe...

Trouble is it's the intersection of the set of LA people who are stupid enough to gamble and the ones who are careful enough to save money by taking the train and book in advance!

 

[Vanadium 50]

So people don't bother buying a ticket for a mere $10M, but if it's $50M then it's worth a gamble!

It could be rational. If they cut the price by a factor of five and kept the jackpot the same, would they also see sales double?

Of course, if you don't even buy a ticket your odds of winner are, to six decimal places, the same as if you do.

 

[mgb_phys]

Of course, if you don't even buy a ticket your odds of winner are, to six decimal places, the same as if you do.

Or you could buy last weeks ticket. Half price and your odds of winning are only 1 in a million less!

 

[Astronuc]

New U.S. stake in Citigroup may not calm doubts
http://news.yahoo.com/s/nm/20090223/ts_nm/us_citigroup

NEW YORK (Reuters) – Even if the government took a large common equity stake in Citigroup Inc, worries would likely persist about the bank's ability to absorb soaring losses in a deepening recession.

The third-largest U.S. bank by assets is in talks with federal regulators on a plan for the government to increase its stake, a person familiar with the matter said. Converting $45 billion of preferred stock, which the government obtained last fall, to common stock is one of many options, the person said.

An agreement could be announced Monday or Tuesday, CNBC television said.

Citigroup shares rose on Monday after the White House repeated that President Barack Obama believes keeping banks in private hands is "the best way to go.

U.S. bank regulators, meanwhile, said they stood ready to provide more capital to the sector and keep "systemically important financial institutions" viable.

But investors remained worried that losses from credit cards, emerging markets, trading and toxic assets could overwhelm Citigroup Chief Executive Vikram Pandit's efforts to restore the bank's fiscal footing. Analysts do not expect the New York-based bank to be profitable in 2009 or 2010.
. . . .
Washington got the Citigroup preferred shares, which equate to a 7.8 percent stake, when it bailed out the bank last fall and agreed to share in losses on $301 billion of toxic assets.
. . . .

And yet there are still more losses.

Losses are still being written off at other large national and international banks.

 

[Astronuc]

Freddie Mac investigates self over lobby campaign
http://news.yahoo.com/s/ap/20090223/ap_on_go_ot/freddie_mac

WASHINGTON – Lawyers hired by mortgage finance giant Freddie Mac are quietly investigating the firm's own $2 million lobbying campaign, The Associated Press has learned. The lobbying effort helped quash proposed new regulations on the company before the housing market collapsed.

It was not immediately clear how much Freddie Mac is spending to investigate its own conduct or whether it is spending any federal bailout money on the internal probe. The firm was placed under U.S. government control due to its massive investment losses.

The inquiry inside Freddie Mac follows stories by the AP about the company secretly hiring Republican consulting firm DCI Group of Washington to stop a proposal in the Senate in 2005 sponsored by Sen. Chuck Hagel, R-Neb. The legislation would have forced Freddie Mac and Fannie Mae to sell hundreds of billions of dollars worth of assets from their portfolios of mortgages and mortgage-backed securities. At the time, the portfolios were highly lucrative but their value plunged when the housing market collapsed.

The DCI Group did not file lobbying reports describing the work it was performing. . . .


One of Washington's leading law firms, Covington & Burling LLP, has spent more than a month interviewing current and former Freddie Mac employees and executives, according to three people familiar with the matter. These people spoke on condition of anonymity The people familiar with the internal inquiry told the AP that Anthony has interviewed current and former Freddie Mac employees about three issues raised by the AP stories:

_An accounting of the work done for the $2 million in payments to the DCI Group. It targeted 17 Republican senators in 13 states working to defeat Hagel's regulatory legislation by convincing prominent constituents and financial contributors the bill would hurt the housing boom. The measure was never brought to a vote and died.

_An accounting of six-figure payments to 52 outside lobbying firms and political consultants in 2006, including details about what work, if any, the consultants performed for the money paid to their firms. The consultants included former House Speaker Newt Gingrich and ex-Sen. Alfonse D'Amato. The payments to the 52 consultants amounted to $11.7 million. D'Amato's firm, which was paid $240,000, declined to comment. Gingrich's firm was paid $300,000 for strategic advice on a number of issues.

_An accounting of personal use by Freddie Mac executives of company-paid tickets and a company-leased skybox at the Verizon Center.

. . . .

I wonder how much the lawyers are going to make out of this one?

 

[Astronuc]

American International Group, the insurance giant bailed out by the United States government last year, has received a preliminary offer of $11 billion from MetLife for its American Life Insurance Company subsidiary, The New York Times said, citing people with knowledge of the discussions.

But the offer might slip to about $8 billion, as more becomes known about how the global downturn is affecting the unit, called Alico, which has operations in more than 55 countries.

Moreover, A.I.G.'s need for capital appears to be growing so quickly that $8 billion, or even $11 billion, would not come close to filling the hole. A.I.G. is expected to report fourth-quarter losses of perhaps $60 billion early next week, and losses on that scale could initiate a domino effect like the one that flattened the company last September.

The situation appears to leave A.I.G. with two distasteful options, The Times said: selling prized assets to competitors or handing over a big part of its business to the federal government.
. . . .

A.I.G. Unit Gets Bids as Survival Options Shrink
http://dealbook.blogs.nytimes.com/2009/02/25/as-aigs-losses-grow-its-survival-options-shrink/

The American International Group faced two distasteful options on Tuesday: selling prized assets to competitors or handing over a big part of its business to the federal government.

Grappling with huge losses, A.I.G. appears to have few choices as the government focuses on trying to keep the giant insurer from toppling and perhaps injuring other institutions, The New York Times’s Mary Williams Walsh and Michael J. de la Merced write.

The insurer has received a preliminary offer of $11 billion from MetLife for its American Life Insurance Company subsidiary, called Alico, The Times said, citing people with knowledge of the discussions.

But they said MetLife’s offer might slip to about $8 billion, as more became known about how the global downturn is affecting Alico, which has operations in more than 55 countries. The same sources said A.I.G. had received an offer from AXA, for all of Alico except its operations in Japan. The price was not disclosed.

But A.I.G.’s need for capital appears to be growing so quickly that $8 billion, or even $11 billion, would not come close to filling the hole. A.I.G. is expected to report fourth-quarter losses of perhaps $60 billion early next week, and losses on that scale could initiate a domino effect like the one that flattened the company last September. First would come a credit downgrade, then calls from trading partners to post the billions of dollars in collateral that their contracts stipulate after a downgrade.

If A.I.G. failed to produce the required amounts, the financial institutions holding its contracts would have to recognize losses of their own. That would erode their capital, leaving them at risk of downgrades as well.

 

[turbo]

Check the 2/25 story on the Grand View Coffee shop. The owner was running out of options, so he opened a coffee shop staffed with topless wait-staff. There are actually a few guys on the crew, though most are women. He had over 150 applicants for 10 positions in unpaid, tips-only jobs.

http://morningsentinel.mainetoday.com/news/local/5989595.html

 

[mheslep]

Check the 2/25 story on the Grand View Coffee shop. The owner was running out of options, so he opened a coffee shop staffed with topless wait-staff. There are actually a few guys on the crew, though most are women. He had over 150 applicants for 10 positions in unpaid, tips-only jobs.

http://morningsentinel.mainetoday.com/news/local/5989595.html

You paid a visit yet? Where does it say the owner was running out of options?