The Weekend Economist July 25-27th

A compendium of articles focussing on the roiling American and global economies--a weekend supplement to the weekdays' Stock Market Watch.

Feel free to post your gleanings on business, finance and related topics below!

http://www.alternet.org/story/92426/

This post is part of a larger document that was prepared for the Convening on Community Values in May 2008.



..."Free trade" policies and the loan sharks that have run the World Bank and the International Monetary Fund have destroyed national economies. Millions of people have been forced into poverty, and entire communities have been displaced from the countryside. Multinationals and northern industrial nations siphon wealth from the developing countries. Those that migrate from their homelands to make a living in the north are greeted with walls, bullets and racism. In the United States, millions are homeless, unemployed, in prison, or one paycheck away from bankruptcy. The social wage has been beaten down to unsustainable levels -- real wages are lower now than they were 30 years ago. Yet the costs of fuel and raw materials have skyrocketed, causing worldwide food shortages. We have wiped out public budgets by eliminating taxes on those who profit most. Vital public infrastructure and services cannot meet basic needs like maintaining the levees in New Orleans and reconstructing the Gulf Coast, or controlling the devastating blazes in Southern California. Yet the majority of our federal budget sponsors the wars and occupation in the Middle East, the warehousing of generations of the poor and people of color, the witch hunt of immigrant refugees of U.S. foreign and trade policy, and the growing national debt.

Capitalism unchecked has given us Big Oil, Blood Diamonds, Enron and Halliburton. They have given us Afghanistan, Iraq, Guantanamo and the Wall of Death on the U.S.-Mexico border.... the current crisis marks the end of an era of credit expansion based on the dollar as the international reserve currency. The periodic crises were part of a larger boom-bust process. The current crisis is the culmination of a super-boom that has lasted for more than 60 years.

Soros argues that with the deregulation of the financial industry, many of the mechanisms put in place to withstand a significant bust cycle have been eliminated. The Federal Reserve and the government may no longer have the tools to stave off a recession.

Today, the United States is the leader in a number of shameful statistics: the highest percentage and total numbers of its population in prison, the highest consumption of the world's natural resources, the only industrialized nation without universal health care, the biggest military budget. It seems that the greatest product that the United States is capable of producing today is war, and this makes us a very dangerous country. Our primary role in the global community is as a mercenary army in the interests of big business....


A Cultural Shift: Reintroducing Community Values

It's clear that a profound change in the U.S. political direction is necessary. A fundamental shift in the political and economic direction of the country will require a cultural shift and a redefinition of social and political relationships. We need to challenge the values of individualism and competition and the culture of consumerism and reintroduce key values in defining our economic and social relationships -- values such as reciprocity, community, cooperation and solidarity. We need to affirm that as a society we share collective and community responsibilities. We must confront the underlying premises that have sustained the neoliberal/neoconservative agenda -- namely that taxes, unions and government are all bad. As Donald Cohen has outlined, we need to assert that taxes, organized labor, regulations and government are in fact necessary to keep the greedy in check and to achieve a just and democratic society....Shifting our values will allow us to make bold policy changes that are absolutely necessary.

More at link....

http://www.prospect.org/csnc/blogs/beat_the_press_archive?month=07&year=2008&base_name=yes_virginia_henry_paulson_is

Since comments here and elsewhere suggest confusion about Treasury's role in the Fannie/Freddie bailout, let me try to quickly clarify matters.

The Treasury is telling the markets that it is prepared to buy shares if the stock of Freddie and Fannie fall below a certain level. Without this commitment, short sellers would see these two bankrupt giants sitting there with positive valuations and push their price very close to zero.

This is as much a bailout as if Treasury just sent a multi-billion dollar check to be divided among the shareholders. This is exactly the sort of nonsense that Treasury invents so that it can do a bailout without owning up to it. Reporters are supposed to catch this sort of deception and inform the public of what is really going on. Paulson is betting that the U.S. press corps is sufficiently incompetent that the public will not realize that they are being taxed to reduce the losses of Fannie and Freddie shareholders.

Thanks for sharing these postings by Dean Baker, and thanks for the weekend thread!



:applause:

I was having withdrawal symptoms with my new work schedule....

For what is the crime of burglarizing a bank, compared with the crime of building one? --Bertolt Brecht


EDITOR'S NOTE: Additional reporting for this piece was provided by Lauren Citrome, Samuel W. duPont, Ben Silk, Jessica Bidgood, Sonia Tan and Renee Birenbaum as part of the Tufts University-Institute for Global Leadership Investigative Economics Program.


For decades, the world's largest banks have been helping wealthy Americans steal billions in unpaid taxes. What are we going to do about it?

The Hearing: Last week in Washington we got a rare look inside the global private banking industry, whose high purpose it is to gather up the assets of the world's wealthiest people and many of its worst villains, and shelter them from tax collectors, prosecutors, creditors, disgruntled business associates, family members and each other.

Thursday's standing-room-only hearing on tax haven banks and tax compliance was held by the US Senate's Permanent Subcommittee on Investigations, chaired by Michigan Senator Carl Levin, a regular critic of tax havens--except when it comes to offshore leasing companies owned by US auto companies. He presented the results of his Committee's six-month investigation of two of Europe's most venerable financial institutions--LGT Group, the largest bank in Liechtenstein and the personal fiefdom of Crown Prince Hans-Adam II and the royal family, with more than $200 billion in client assets; and UBS, Switzerland's largest bank and the world's largest private wealth manager, with $1.9 trillion in client assets and nearly 84,000 employees in fifty countries, including 32,000 in the United States.

The theatrics included videotaped testimony by Heinrich Kieber, a Liechtenstein computer expert in a witness protection program with a $7 million bounty on his head, for supplying a list of at least 1, 400 LGT clients--some say more than 4,500--to tax authorities in Europe and the United States; two former American clients of LGT, who took the Fifth Amendment; Martin Liechti, head of UBS international private banking for North and South America, who'd been detained in Miami since April, and who also took the Fifth; Douglas H. Shulman, our sixth IRS commissioner in eight years, who conceded that offshore tax evasion must be a "serious, growing" problem even though the IRS has no idea how large it is; and Mark Branson, CFO of UBS's Global Wealth Management group, who apologized profusely, pledged to cooperate with the IRS (within the limits of Swiss secrecy) and surprised the Committee by announcing that UBS has decided (for the third time since 2002) to "exit" the shady business of providing new secret Swiss accounts to wealthy Americans.

There were also several other potential witnesses whose importance was underscored by their absence. Peter S. Lowy, of Beverly Hills, another former LGT client who'd been subpoenaed, is a key member of the Westfield Group, the world's largest shopping mall dynasty, which operates fifty-five US malls and 118 others around the world, is worth more than $12.4 billion, holds the lease on the World Trade Center, has many other properties in Australia and Israel, and was recently awarded a $3 billion project for the UK's largest shopping mall, in time for the 2012 Olympics. His lawyer, the renowned Washington fixer Robert S. Bennett, reported that Lowy was "out of the country" and would appear later, probably also just to take the Fifth. Perhaps he traveled to Australia, where his family is also reportedly facing an LGT-related tax audit. (Bennett's law partner, David Zornow, the head of Skadden, Arps' White Collar Crime practice, represents UBS's Liechti.) Steven Greenfield, a leading New York City toy vendor whose business had been personally recruited by the Crown Prince's brother, went AWOL and did not bother to send a lawyer. LGT Group declined to follow UBS's contrite example and also failed to appear.

Also missing from the roster were two prominent UBS executives: Robert Wolf, CEO of UBS Americas, who has bundled more than $370,850 for Barack Obama so far this year, making UBS his fifth-largest corporate donor; and former Texas Senator Phil Gramm, vice chairman of UBS Securities LLC, a leading lobbyist for UBS until March and, until recently, John McCain's senior economics adviser. While they were on the subject of offshore abuses, the Senate might also have wanted to depose former top McCain fundraiser James Courter, who also resigned last week, after it was disclosed that his telecom firm, IDT, had been fined $1.3 million by the FCC for using a haven company in the Turks and Caicos to pay bribes to former Haitian President Jean-Bertrand Aristide.

While neither of these UBS executives have been directly implicated in the tax scandal, both might reasonably be questioned about precisely what the rest of UBS in the States knew about the Swiss program, what it implies for US tax policy, and whether those who complain about UBS's knowing facilitation of tax fraud are just whining.

---------------------------------------------------------------------------------------
The Cases: This crowded docket, combined with the UBS mea culpa, almost distracted us from the sordid details of the Levin Committee's actual findings.

UBS: UBS opened its first American branch in 1939, and for all we know, has likely been facilitating tax fraud ever since, but the Senate investigation focused only on 2000 to 2007. During this period, even as UBS was sharply expanding its onshore US operations by acquiring Paine Webber, expanding in investment and retail banking, it also mounted a top-secret effort to recruit wealthy Americans, spirit their money to Switzerland and other havens and conceal their assets from the IRS.

This program, aimed at people with a net worth of $40 million to $50 million each, was staffed by fifty to eighty senior calling officers and 1,000 client advisors. Based in Zurich, Geneva, and Lugano, each officer made two to ten surreptitious trips per year to the United States, calling on thirty to forty existing clients per visit and trying to recruit new ones by attending HNW (high net worth) watering holes like Miami's Art Basel and the UBS Regatta in Newport. By 2007, this program had garnered 20,000 American clients, with offshore assets at UBS alone worth $20 billion.

To achieve these results, UBS established an elaborate formal training program, which coached bankers on how to avoid surveillance by US customs and law enforcement, falsify visas, encrypt communications, secretly move money in and out of the country and market security products even without broker/dealer licenses.

Meanwhile, back in 2001, UBS had signed a formal "qualified intermediary" agreement with the US Treasury. Under this program, it agreed either to withhold taxes against American clients who had Swiss accounts and owned US stocks, or disclose their identities. However, when UBS's American clients refused to go along with these arrangements, the bank just caved in and lied to the US government. Eventually, it concealed 19,000 such clients, partly by helping to form hundreds of offshore companies. This cost the US Treasury an estimated $200 million per year in lost taxes.

In early July 2008, a US court approved a "John Doe" subpoena for UBS, demanding the identities of these 19,000 undisclosed clients. However, as of last week's Senate hearing, UBS has refused to disclose them. While it maintains that it is no longer accepting new Swiss accounts from Americans, it is also insisting on the distinction between "tax fraud" and "tax evasion," reserving full disclosure only for cases involving criminal tax fraud, which is much harder to prove under Swiss law. This means it may be difficult to ever know whether it has kept its commitments.

Ultimately UBS got caught, not by virtue of diligent law enforcement, much less the Senate's investigation, but by sheer accident. In late June, Bradley Birkenfeld, a senior private banker who'd worked with UBS from 2001 until late 2005 out of Switzerland, and then continued to service the same clients from Miami, pleaded guilty to helping dozens of wealthy American clients launder money. His name surfaced when his largest client, Igor Olenicoff, a Russian émigré property developer from Southern California, was accidentally discovered by the IRS to be reporting much less income tax than he needed to justify his $1.6 billion measurement on the Forbes 400 list of billionaires.

------------------------------------------------------------------------------------------

--the fact (is) there are serious conflicts of interest among developed and developing countries. The fact is that the United States, the UK and other developed countries not only lose tax revenue to haven banking; they also profit from it, because their own banks are so deeply engaged in it, especially when it involves developing countries.
------------------------------------------------------------------------------------
Back in April 1986, this author broke the story that Citibank was actually taking far more capital out of Latin America and other developing countries than it was lending to them, despite its reputation as the largest Third World lender. Indeed, the business of helping Third World elites decapitalize their own countries had become so large and lucrative that Citi's private banking group was the bank's single most profitable division.

To achieve that feat, Citigroup resorted to skullduggery and the flouting of local laws all over the planet. This included repeatedly sending teams of private bankers undercover to countries like Brazil, Argentina, and Venezuela; helping to set up thousands of shell companies and bank accounts in offshore havens and secretly transferring funds to them; teaching its clients money-laundering tricks like mis-invoicing and back-to-back loans; designing ways to communicate with clients that kept their financial secrets safe; and overall, concealing vast sums of flight capital from Third World tax authorities (and their competitors), while lobbying Congress to insure that any foreign capital that arrived in the United States enjoyed near-zero taxes and near-Swiss secrecy. For a time the resulting tax breaks and lax banking rules that applied to "nonresident aliens" from other countries made the United States, in effect, one of the world's largest tax havens.

In short, from the 1970s to the 1990s, banks like Citigroup, BankAmerica and JP Morgan Chase (and UBS, Credit Suisse, RBS, Paribas and Barclays etc.) were behaving throughout the Third World just as badly as UBS has recently been behaving here. And their very success laid the foundations for the global private-haven banking industry with which the IRS is now struggling.

In the last thirty years, fueled by the globalization of financial services, lousy lending, capital flight and mind-boggling corruption, a relatively small number of major banks, law firms, accounting firms, asset managers, insurance companies and hedge funds have come to launder and conceal at least $10 trillion to $15 trillion of private untaxed anonymous cross-border wealth.

Rich people the world over, including tens of thousands of wealthy Americans, are now free to opt in to this sophisticated, secretive, utterly unprincipled global private banking industry. They can become, in effect, residents of nowhere for tax purposes, citizens of a brave new virtual country, which offers its inhabitants unprecedented freedom from the taxes, regulations and moral restraints that the rest of us take for granted. They wield enormous political influence even without paying taxes, merely by making contributions, threatening to withhold them--or better yet, threatening to abscond with their capital unless certain conditions are met. In a sense, this is the ultimate libertarian pipe dream: representation without taxation. But it is a nightmare for the rest of us, and we must design and organize our way around it.

MUCH MORE AT LINK! http://www.thenation.com/doc/20080804/henry/print

http://www.opednews.com/articles/The-Real-News-is-in-the-Fi-by-Mike-Folkerth-080724-873.html






Good Morning Middle America, your King of Simple News is on the air.



Yesterday I made my future prediction for residential housing. In those predictions I stated that government would pull out all of the stops to save the non-sustainable housing industry.



I talked about Fannie Mae and Freddie Mac in my book. Today, as I suggested, they are broke. Our government however believes that these mortgage giants are too big to fail, yet failure was obvious to me from the outset. What will be the eventual cost for bailing out Fannie and Freddie? Some believe as much as $300 Billion, while others don’t think that is enough.



Yesterday President Bush dropped his objections to the bailout plan that was poised to aid the failing mortgage giants by allowing Freddie and Fannie access to $25 Billion of government loans. The vote passed the House and is expected to move quickly through the Senate.



The Congressional Budget Office says that the two big lending agencies may not need any of the money and worse case losses would be less than $100 Billion. I doubt it.



Please remember that Fannie Mae and Freddie Mac are publicly traded stocks that receive special government treatment…such treatment as not allowing them to go broke with the help of your tax dollar. I bet the Enron folks wish that they had gotten the same treatment.



The question that begs to be asked is where would our government ever get the money to bail out the beleaguered lenders? The answer is of course that they would borrow it from foreign nations and promise those nations that the U.S. taxpayers were good for it.



What didn’t make the main stream news was a little ditty at the end of the bailout legislation. News that is so staggering that it should have been headlined all across America. Remember my question as to where our government would get the money? This nifty piece of legislation also contains a provision to raise the National Debt ceiling by $800 BILLION, to a new record of $10.6 TRILLION!!



This is the hardest working Congress in history toiling away here. This is the Democrats who will save America by borrowing our way to success with the help of kindly nations such as Communist China, who is more than glad to give us another handout as they drive another nail in Middle America’s coffin.



The Republicans on the other side of the aisle are nothing short of horrible. When will we ever learn that neither of the main stream parties have the slightest interest in Middle America’s welfare? We simply allow the lost to take turns leading.



Wake up Middle America, this isn’t a drill, it’s the real thing.





Authors Website: www.kingofsimple.com

Authors Bio: Mike Folkerth is the author of "The Biggest Lie Ever Believed" and is not your run-of-the-mill author of finance and economics. The former real estate broker, developer, private real estate fund manager, auctioneer, Alaskan bush pilot, restaurateur, U.S. Navy veteran, heavy equipment operator, taxi cab driver, fishing guide, horse packer and few jobs too embarrassing to mention, writes from experience and plain common sense. Mike’s humorous systems of “Mikeronomics” and “Mikemathics” drastically simplify the economic and mathematic formulas commonly used by very smart, but terribly sheltered individuals.

http://www.opednews.com/articles/Minimum-wage-raise-too-lit-by-Holly-Sklar-080724-403.html




Minimum wage workers have been stuck in a losing game of "Mother May I" with the federal government. Workers step forward when the government says yes to raising the minimum wage. Workers step backward when the cost of living increases, but the minimum wage doesn't.

Until 1968, minimum wage workers took frequent and big enough steps forward to make overall progress. Since 1968, when the minimum wage reached its peak buying power, workers have taken many steps backward for every step forward.

The July 24 minimum wage raise is so little, so late that workers will still make less than they did in 1997, adjusting for the increased cost of living, and way less than in 1968.

The decade between the federal minimum wage increase to $5.15 an hour on Sept. 1, 1997, and the July 24, 2007 increase to $5.85 was the longest period in history without a raise.

Gas prices rose from $1.23 to $2.97 a gallon in the same period. Now it's over $4.

The new $6.55 minimum wage is lower than the 1997 minimum wage, which is worth $6.88 in 2008 dollars, and way lower than the inflation-adjusted $9.86 minimum wage of 1968. For full-time workers that translates into $20,509 a year at the 1968 rate, compared with just $13,624 at the hourly rate of $6.55.

The minimum wage does not provide a minimally adequate living standard -- and it still won't when the last scheduled raise to $7.25 takes place next July.

Workers are constantly choosing what to go without -- "heat or eat," child care or health care.

Health care aides can't afford to take sick days. Retail clerks and child care workers depend on food banks. Security guards sleep at homeless shelters.

It wasn't always this way. Workers used to share in the gains of rising worker productivity.

Between 1947 and 1973, worker productivity rose 104 percent and the minimum wage rose 101 percent, adjusting for inflation. The middle class grew.

Between 1973 and 2007, productivity rose 83 percent and the minimum wage fell 22 percent, adjusting for inflation. Average worker wages fell 10 percent while domestic corporate profits rose 219 percent, and profits in the disproportionately low-wage retail industry jumped 346 percent. More jobs paid poverty wages.

Higher education does not protect you from falling wages. The inflation-adjusted wages of recent college graduates were lower in 2007 than they were in 2001.

There's been a massive shift of income from the bottom and middle to the top. The richest 1 percent of Americans has increased their share of the nation's income to a higher level than any year since 1928, the eve of the Great Depression.

Our modern robber baron age features people like Countrywide Financial CEO Angelo Mozilo. He pocketed $103 million last year as the subprime mortgage ponzi scheme morphed into the worst financial crisis since the Depression.

Minimum wage workers don't put raises into predatory lending, commodity speculation or offshore tax havens. They recycle their needed raises back into local businesses and the economy through increased spending.

Eight of the "SurePayroll Top Ten States for Small Businesses" in 2008 have had state minimum wages above the federal level. They include Washington, California and Oregon, three of the four states with the highest minimums.

Minimum wage raises are stimulus for an economy tanking from a housing bubble gone bust, sharply higher oil prices, extreme inequality, unsustainable debt, and fraud and speculation crowding out productive investment.

Higher wages benefit business by increasing consumer purchasing power, reducing costly employee turnover, raising productivity, and improving product quality and company reputation. They reinforce long-term success.

Let Justice Roll, a national faith, community, labor and business coalition, which I advise, is calling for a minimum wage of $10 in 2010.

$10 in 2010 will bring the minimum wage closer to the value it had in 1968, a year when the unemployment rate was a low 3.6 percent.

It will bring the minimum wage closer to the "minimum standard of living necessary for health, efficiency and general well-being of workers" promised by the Fair Labor Standards Act establishing the minimum wage 70 years ago.

It will strengthen the foundation under our unsound economy.




Authors Website: www.letjusticeroll.org

Authors Bio:

Holly Sklar is a widely published op-ed columnist whose books include "Raise the Floor: Wages and Policies That Work for All of Us" and "Streets of Hope: The Fall and Rise of an Urban Neighborhood," the widely taught story of how the Dudley Street Neighborhood Initiative is rebuilding a long impoverished Boston community.

http://www.ilcaonline.org/ht/display/ArticleDetails/i/70866


WITNESSES: BUSH LABOR DEPT. WAGE & HOUR ENFORCEMENT DROPS, WORKERS CHEATED
By Mark Gruenberg
PAI Staff Writer

WASHINGTON (PAI)--Enforcement of wage-and-hour laws, to ensure workers get at least the minimum wage and the overtime pay they deserve, has dropped drastically under the GOP Bush government, impartial investigators and a low-income workers’ advocate told Congress. As a result, low-wage workers are routinely cheated.

In a contentious July 15 House Education and Labor Committee hearing, probers for the non-partisan Government Accountability Office revealed how the regime’s DOL Wage and Hour Division routinely didn’t count complaints, sent workers with legitimate gripes to private lawyers, and closed almost half of all complaints with perfunctory phone calls to employers to try to settle cases. The workers lost out, and lost money.

And Kim Bobo, executive director of the Chicago-based Interfaith Worker Justice
--which goes to bat in counseling centers for low-income workers nationwide--added that the wage and hour agency is so understaffed that does fewer probes than the year it was founded, 1941. “And wages are stolen,” she added.

The only witness who disagreed with the evidence was Alexander Passantino, acting administrator of Bush’s Labor Department Wage and Hour Division. He went so far as to call the GAO probe “wrong…wrong…wrong….wrong” on every point it raised.

But even Passantino admitted his agency doesn’t handle all the complaints it gets. He also said he repeatedly asked for “more resources”--more money to hire more inspectors--but was turned down. He didn’t say by whom, or how much more he sought. No lawmakers asked and he ducked out before reporters could quiz him.

The Wage and Hour Division’s role is important. It is supposed to enforce the 70-year-old Fair Labor Standards Act, the law that established the minimum wage and the right to overtime after 40-hour weeks. But low-wage workers are often victims of the lack of enforcement, GAO probers Anne Marie Lasowski and Greg Kutz testified.

And there’s another way that workers are cheated besides missed calls or referrals to lawyers whom they can’t afford, the GAO probers said. The agency is so understaffed with attorneys to follow up cases that many times the employer wins, and the worker gets nothing, because the statute of limitations runs out before DOL can file a complaint.....

MORE AT LINK

http://www.bharatbook.com/productdetail.asp?id=79569


Key Findings

Ukraine is one of the fastest growing countries in Eastern Europe by assets, loans, deposits and profitability of the banking sector.

The bank deposits in the Ukrainian banking sector are projected to grow at a CAGR of about 45.8% (in terms of national currency) during 2008-2012.

The bank loans in the Ukrainian banking sector are forecasted to grow at a CAGR of about 66% (in terms of national currency) during 2008-2012.

Economic entities accounts for majority of bank loans in Ukraine.

It is forecasted that total number of payment cards will reach over 95 Million by the end of 2010 at a CAGR of 31%.

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=114&topic_id=41360&mesg_id=41360


Thanks Finnfan!

http://www.newsweek.com/id/146772


With the failure last week of California bank IndyMac, deposit insurance is suddenly a matter of significant concern. On Wednesday, NEWSWEEK columnist Daniel Gross sat down in Chicago with Sheila Bair, chairwoman of the Federal Deposit Insurance Corporation (FDIC), where she was on the first stop of a four-city roadshow to commemorate the agency's 75th anniversary and promote confidence in the ailing banking sector. NEWSWEEK asked Bair how many more banks might fall in the wake of the subprime mortgage mess, whether or not the FDIC really has enough cash to insure depositors and what keeps regulators like her up at night. Excerpts:

NEWSWEEK: How worried should people be about the banking system and about their deposits?
Sheila Bair: Insured depositors should not be worried at all. Banks overwhelmingly are safe and sound. There are a handful that have some challenges, but the chances that your bank will close is remote. Even if it does, your insured deposits are absolutely safe. We took over IndyMac as a conservator last Friday, and insured depositors had access to their insured deposits over the weekend through their ATM and debit cards. By Monday morning, we opened business as usual, and they had full access to insured deposits.

Current law says that depositors are insured for $100,000 in a particular account. Do the levels need to be adjusted higher?
The deposit insurance limits are set by statute. Starting in 2011, we can adjust the limits for inflation, and we will do so. It's also important for people to realize that you can get much more than $100,000 in deposits insured. Basic insurance is $100,000 for an individual account and $250,000 for a retirement account. But that means you can insure $100,000 in an account in your name, and then $100,000 in a joint account with your spouse and that your spouse can do the same. So you can get a lot of insurance coverage at your bank. And if you've exhausted the totals, you can go to another bank.

BLAH BLAH BLAH

7/24/08 Why wasn't IndyMac on FDIC problem list?

<snippet>

Christopher Whalen, managing director of Institutional Risk Analytics, says "everyone expects regulators to be ahead of the curve, but they never are. It's hard for regulators to be proactive. If the FDIC was beating the hell out of IndyMac a year ago, the congressmen that represent IndyMac would have been all over them."

Whalen says the problem list understates the number of troubled banks. Of about 9,000 institutions, "we have identified about 10 percent that are in significant distress and another 10 to 15 percent headed in that direction," he says.

Whalen says the problem list should be closer to 900 companies instead of 90.

more about Why wasn't IndyMac on FDIC problem list? ...
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/07/23/BU9A11TUKC.DTL

There is a drop-down box for a list of the most recent failed banks for people to inquire about their accounts.
http://www4.fdic.gov/dip/index.asp



edit to add link for FDIC Failed Bank List
http://www.fdic.gov/bank/individual/failed/banklist.html

I've read in previous articles that when a bank fails, the first effort of the Government is to sell it... Who buys these banks? Is there anyone around with enough money/credit to buy something as large as say, IndyMac?
:hi:

But so far, I don't think there has been a buyer for Indymac. It's been renamed IndyMac Federal Bank.


IndyMac Federal Bank, FSB (Federal Savings Bank) is a bridge bank created to manage assets and liabilities of IndyMac Bank until they can be disposed of.
http://en.wikipedia.org/wiki/IndyMac_Bank

Disposed of???
What does this mean?

But, what happens to the liabilities?

I guess that's what they're talking about when they say 'Writedowns'... Maybe.

http://www.prospect.org/csnc/blogs/beat_the_press_archive?month=07&year=2008&base_name=why_is_the_government_guarante

Is there some reason why reporters are not asking this question? There is a clear rationale for making good on Fannie and Freddie's bonds. If the government allowed these bonds to default, not honoring the implicit guarantee, then investors would recognize that these bonds are far more risky than they had believed. This would raise mortgage interest rates for many years to come. It is understandable that we would not want to see this happen, especially in the middle of the housing meltdown.

But what interest does the public have in protecting the share prices of Fannie and Freddie stock? Don't stockholders understand they take a risk when they buy stock? In this case, the stockholders made a bad investment. They are supposed to lose their money (possibly all of it), right?

I have yet to hear any explanation from anyone as to why the government is supporting the share price. (In an NPR interview this morning, Senator Chris Dodd gave an incoherent answer that implied that supporting the share price was somehow tied to backing up the bonds. It isn't.)

In a country that can't fight a few billion dollars to provide funding for child care or children's health care, this multi-billion dollar affirmative action plan for dumb stockholders deserves a little questioning.

(NPR's "Power Breakfast" did an unbelievably awful segment in which it commented that some conservatives oppose bailing out shareholders as "socialism." What? Huh? Is this Planet Earth? Socialism is about giving tax dollars to shareholders? In which volume of Das Kapital does this appear? Conservatives may oppose the bailout for whatever reason, but handing tax dollars to shareholders does not correspond to any definition of socialism I've ever seen.)

--Dean Baker

http://www.mortgagecalculator.org/helpful-advice/worst-real-estate-investments.php

Notorious Property Deals and Why They Failed
Bad real estate investments are a given. Even pros make errors and encounter unforeseen circumstances. Here are 8 of some of the most public, bizarre and plain raw real estate investment deals:

1. Bad Investment Decision Combined with Market Slump Bodes the End for High Profile Developer

In the late 1980s Olympia and York was arguably one of the most powerful private real estate developers in the world. The company was divided in its trophy properties: half in North America, half in London. The London half of the company’s holdings was in the developing Canary Wharf district, a high profile and costly public-private renovation project.

Canary Wharf was originally one of the most vital ports in Europe and key to early Canary Islands trade, thus the name of the wharf. Prior to the 20 th century ships were smaller, more nimble and had no problem negotiating the Canary Wharf. The port became completely unsuitable for modern ships.


During the mid 20 th century, Canary Wharf became a maritime ghost town, left to ruin, a huge bust for the London economy and business landscape.


London docklands intended boom:

In the late 80s a partnership between London government and private investors signaled a plan to revitalize the London Docklands, or Canary Wharf. The goal: remake it into one of the most powerful business districts in the world. Enter Olympia and York: the company would be a key mover and shaker in the district, and help attract and net other powerful developers with notoriety and cash to invest.

What in theory was a great real estate investment for Olympia and York, as well as hundreds of others, was undone by a one-two industry punch: the slump in the U.S. real estate market followed by a hard slump in the London market.

First the U.S. real estate market slumped, when that happened Olympia and York was reportedly immediately crunched for cash between its New York and Canadian holdings and the unnerving costs for construction on its Canary Wharf project.
In a strategic and hush-hush move the company unloaded a surprising number of its New York and Canadian properties in the early 90s. Why? The company needed to put all its assets into the Canary Wharf project in order to survive the market gyrations. The deal was not a wise one: by 1992 Olympia and York had collapsed and ultimately declared bankruptcy.
What went wrong for Olympia and York?

In hindsight Olympia and York placed huge bets on multiple high dollar real estate investments in two rapidly falling markets without imagining the fall-out from such sudden dives.

2. The One Great Worst Las Vegas Real Estate Deal
Las Vegas is symbolic of one of the most innovative land uses in history: a plot of desert in the middle of hot and arid Nevada devoted exclusively to high stakes gambling and no-expenses-spared resort casinos. Who could lose in that game? From our perspective now it’s obvious that Las Vegas property on any scale was an absolute great investment. Even small time homeowners own a real estate gem. But for one particular high profile Las Vegas investor, a real estate deal turned deadly:



As a thug, Bugsy Siegel excelled. He was one of the Mafia’s most notorious and violent gangsters; very effective at his job. As a real estate developer he failed miserably due to a variety of factors:

Bugsy Siegel assumed development on a floundering hotel construction in the new Las Vegas territory during the 1940s.
He sunk millions of dollars into the project, much of it borrowed directly from the Mob.
One of his biggest mistakes was his assumption that he was capable of managing a construction development project, protecting the assets. According to his records he never would have ended up in the hole for nearly the amount of money had he the skills needed of a good developer.
At that time the hotel, named the Flamingo, was such a design departure from the other hotels in the area. Consequently his mob partners doubted the venture’s success from the start.
The Flamingo’s eagerly anticipated grand opening failed to net the return on investment needed to repay Siegel’s Mob debts.
Ultimately his bad business dealings cost him his life not long after the Flamingo had debuted.
The real irony in the Bugsy Siegel real estate investment saga: Siegel was right on with his high-end, no-expenses-spared Havana-inspired casino resort concept. His general concept is that upon which all of Las Vegas’s success is based today.

3. The Bizarre Oak Island Money Pit – Negative Cash Flow Over and Over
The famous Oak Island real estate deal is cloaked in pirate tales and buried treasure, big incentives for rich investors with wild imaginations and money to burn, but not very practical. Truth is many a real estate investment in history has been struck over the shear possibility of riches, be it treasure, lost mines, or mineral deposits.



For over 200 years the legendary acreage known as Oak Island off the coast of Nova Scotia has been bought and sold and bought and sold many times over. The alleged treasure continues to sit far under the earth in a purported maze of traps and shafts that apparently are so ingenious even the most savvy and wealthy of investors is stumped. 3 Each sale symbolizes bankruptcy and failure and each purchase portends of financial riches.

What makes Oak Island one of the worst investments?

So far any investor who’s put cash into Oak Island has lost a fortune. The property has been the reverse of most ideal real estate investments: a loser, a negative cash flow from the very first shovel-full of dirt. Most successful real estate investors look for holdings with a predictable cash flow upward.

Should Oak Island ever surrender its reported riches the investor holding this stake will make a killing. In the meantime this property deal remains one of the most infamous and bizarre real estate losers in history.

4. Rockefeller Center: Trojan Horse Deal
In the late 80s most of the investment holdings in Rockefeller Center in New York were sold to Mitsubishi Estate Company. The sale was recorded at $1.4 billion, twice what a competing Japanese bidder was willing to pay. The price was paid only because the bid was for the world renowned Rockefeller Center.



Details of the raw Rockefeller Center deal:

The sale was in reality a way for the Rockefeller family to save their family namesake from the real estate dumper. Manhattan office space was in a hard real estate slump and more money was going out than coming in.
Mitsubishi Estate Company believed its investment to be a rock solid international buy, a cash flow property, a key holding that would expand the company’s growing global trophy properties.
In reality, Mitsubishi, traded well over a billion dollars for a complex of historically intriguing properties, yes, but with dwindling renters, and devastating financial debt trailing along in the dust.
Other big losers in the Rockefeller deal were the investors from large to small that actually bought into the REIT in the mid-80s, another Rockefeller ploy to shore up a loser real estate investment and keep the family in the black.
The nitty gritty of the Rockefeller Center investment from day one to the present: despite the historic and architectural significance of this property, Rockefeller Center has produced unremarkable profit. 6 Its saving grace has been its family name and New York City fame.

Ironically Tishman Speyer Properties bought Rockefeller Center outright for $1.85 billion in 2001 7 and went on to be a key player in some of the best real estate investment deals to date.

5. Rich Silicon Valley, Poor Silicon Valley

Silicon Valley in California had a Jekyll and Hyde personality, from boom to bust. The tech bubble was perhaps the number one road sign indicating that even a tough tech economy could be brought to its knees when faced with a frenzy of unwise business investments. At the same time the Dot Com companies were establishing tech and online real estate most also bought up tracts of rich Valley territory on which to build their imagined corporate empires.

Real estate-speaking the burst in the Valley could just as well have been an atomic bomb blast.Buildings sat vacant for years, office rents plummeted and companies lost fortunes that had only existed on paper. For dozens of companies the real estate investment online and offline was ruinous.

Physical real estate deals had happened for the worst, and in one of the most disastrous “bubbles” of modern time.
Only recently has Silicon Valley begun to experience re-growth. Even new business is checked and without impulse.
6. Extraterrestrial Real Estate For Sale: Affordable Acreage

Of the more bizarre real estate investment bad choices: buying acreage on the moon--the moon up in the sky at night, yes. In 1980 Lunar Embassy hung its shingle and has since then marketed astral acreage. Buy moon property for an affordable $37 per acre. Lunar Embassy boasts a few million buyers and over 300 million acres sold. The legitimacy of the property ownership remains hotly contested, but the company not only offers it for novelty but “potential prudent investment.”

Lunar real estate facts:

Lunar Embassy is not the only extraterrestrial real estate agency in the business to make a killing on people’s bad investment decisions.
Worried about acreage running out? The surface of the moon is covered with 9 billion acres of rock and lunar dust.
The Outer Space Treaty signed in 1967 was designed to establish a system of regulations and laws pertaining to the use of extraterrestrial land. The treaty explicitly forbids any sovereign nation from private property ownership.
Novelty or frenzy, $37 is hard, cold cash and any real estate investment for extraterrestrial property is impractical at best. Even if the sales were legitimate, who exactly is policing the pell-mell sale of acreage located on a rock 384,000 km away? When can our ancestors move in?

Save your money.

7. For Sale: Toxic Dump Acreage
Donald Trump in late 2007 advertised his partnership with a golf course development company. Their project: to refurbish acres of land fill in New Jersey and create mixed use property, specifically pristine golf courses and residential neighborhoods.



Why this deal became a stinker:

The deal set aside money for site cleanup, or brownfield site development.
EnCap, the cleanup developer that ultimately won the project bid, proved itself completely inept and totally bungled a rather high-profile job. The company literally worsened the filth of the area, if that’s possible, and when slapped with millions of dollars in fines for its errors, ended up in a financial sink-hole.
So much local and environmental flap has ensued that the project took a predictable nose-dive.
Who wants to play golf or live on land that sits above toxic garbage? Would any other investor even bother considering the deal? Bad deal, by one of the most storied real estate developers/entrepreneurs of all time.

8. From Boom to Bust: Real Estate Between 2005 and 2008

Remember back in 2005, when everyone even tangentially associated with real estate and investments was on a cash-flow high? Optimism skyrocketed. Interest-only loans, no money down and other quickly cobbled financial fabrications put millions of Americans into home deals in which they had no real business being involved and unwittingly in cahoots with a great many lenders that had become too-big-for-their-britches. “The Trillion-Dollar Bet,” is what the New York Times called it in June 2005.

During 2005 over 26% of all home loans were interest-only and an additional 15%+ were option-ARMS 12, a fancy way of saying, “You can pay us what you can manage each month--until we need exponentially more, of course.” That brings impractical loans made in 2005 to over 40%, close enough to half to be frightening, particularly in hindsight.
Rapid expansion in structured investment vehicles (SIV: a tricky, off-the-balance-sheet investment tool) played a critical role in the ensuing credit market crunch. In mid-2007 when the actual value (or lack of value) of subprime mortgages was revealed, the losses literally brought a number of national and international investment banks to their knees. The instability led to credit line shut-downs and an asset-backed commercial paper (CP) crisis of a global magnitude.
During 2007 foreclosures increased to record levels—1.3 million for the year 13 alone –and hit a breakneck pace during the final quarter. A breathtaking 20%+ home price free-fall dominated the news for the last two months of 2007, as well.
It’s mid-2008: Despite the global financial repercussions of the industry meltdown, and the millions of Americans for whom the dreams of homeownership led them to the single worst financial investments of their lives, the RE investment bottom has not even been realized.
What can we learn from high-profile investment mistakes? Even the savviest of industry soothsayers can lose, particularly when the stakes are high.

on the Moon. :blush:

It was a gift, tho. :D

Someday! Someday! I'll get to put my shack up there!

It suits you!

I've been getting google new alerts on "layoffs" for the past several weeks, and I can report that there's been a sudden uptick in the number of layoffs announced in China. Today: 80,000 jobs. From a petroleum company.



If the Chinese economy sinks, they're going to want their money.

http://www.nytimes.com/2008/06/06/business/06mortgage.html?_r=2&oref=slogin&oref=slogin


About 1 in 11 American mortgages were past due or in foreclosure at the end of March, according to a report released (in June), a figure that is rising fast as home prices fall and the job market weakens. The first three months of 2008 marked the worst quarter for American homeowners in nearly three decades, according to the report, issued by the Mortgage Bankers Association. The rate of new foreclosures and past-due payments surged to their highest level since 1979, when the group first started collecting the data.

All told, about 8.8 percent of home loans were past due or in foreclosure, or about 4.8 million loans. That is up from 7.9 percent at the end of December. (About a third of American homeowners do not have mortgages.)

Delinquency and foreclosure rates started rising from historically low levels in late 2006 and have picked up speed in nearly every quarter since. Analysts say at first past due mortgages represented mostly high-risk loans made to borrowers with blemished, or subprime, credit. Now, as the economy has weakened and home prices have fallen in many parts of the country, homeowners with better loans are also falling behind.

Economists worry that a big loss of jobs in the coming months could drive default rates much higher. The Labor Department will release its report on the job market for May on Friday.

“It’s not going to help the housing market out at all if you have a loss of jobs,” said John Lonski, chief economist at Moody’s Investors Service. “When employment’s contracting, that makes it all the more difficult to sell your home at an attractive price.”

Though defaults are rising in many places, it is worst in areas where home prices soared in recent years or where the local economy is now struggling.

California and Florida, for instance, accounted for nearly a third of all mortgages that were in foreclosure or 90 days delinquent. Home prices, construction and mortgage lending were particularly ebullient in those states earlier this decade. The housing industry accounted for a bigger portion of their economies during the boom...Midwestern states like Michigan and Ohio, where home prices did not soar, are suffering mostly from the loss of manufacturing jobs and high-risk loans. Default rates in those states appear to have leveled off in the last few months, which may be an early hopeful sign. About 9.7 percent of loans in five Midwestern states were past due or in foreclosure in the first quarter, down from 10.5 in the fourth quarter.





This article has been revised to reflect the following correction:

Correction: June 30, 2008
A chart on June 6 with an article about the rising rate of foreclosures and overdue mortgage payments had incorrect rates for some states in some editions. Seven states — Arizona, California, Georgia, Illinois, Louisiana, Mississippi and Rhode Island — had delinquency rates of 4 to 5 percent, not 5 to 6 percent. Two states, Indiana and Ohio, had delinquency rates of 5 to 6 percent, not over 6 percent. A corrected version can be found at nytimes.com/business.

http://calculatedrisk.blogspot.com/2008/07/foreclosure-crisis-and-exploitation-of.html


This is an extremely distressing story: a woman faxes a suicide note to her mortgage servicer on the day the foreclosure sale is scheduled, and is dead by the time the police arrive.

Distressing for anyone with what I take to be a normal sense of human decency, that is. To the local and now national media, it seems to be catnip. Carlene Balderrama's personal tragedy is in danger of becoming an indelible urban legend of the Great Predatory Foreclosure Crisis, uncomfortable facts be damned. The tenor of the reporting, of course, makes anyone who expresses any skepticism about the media's line on this sad event sound inhuman. I have been telling myself since I first saw this story that only a fool would try to steer a course through the rock of credulousness or the hard place of callousness. But I guess it's my job to be a fool today.

***************

The Boston Globe got the thing underway on Thursday:

TAUNTON - The housing crunch has caused anguish and anxiety for millions of Americans. For Carlene Balderrama, a 53-year-old wife and mother, the pressure was apparently too much.

Police say that Balderrama fatally shot herself Tuesday afternoon, 90 minutes before her foreclosed home was scheduled to be sold at auction. Chief Raymond O'Berg said that Balderrama faxed a letter to her mortgage company at 2:30 p.m., saying that "by the time they foreclosed on the house today she'd be dead."

The mortgage company notified police, who found her body at 3:30 p.m. The auction had been scheduled to start at 5 p.m., when bidders showed up at the house and found it surrounded by police cruisers.

But, unbeknownst to buyers and to Balderrama, the auction had been postponed by the time she grabbed her husband's high-powered rifle, O'Berg said.

Balderrama left a note for her family, saying they should "take the insurance money and pay for the house," O'Berg said. The chief said he did not know, however, if the family would be able to collect on the policy in the event of a suicide.


Those appear to be facts. Then we get this:
Joe Whitney, who works with Balderrama's husband, said that she handled the bills in the household and that the husband was unaware of the foreclosure.

"John didn't even know about it; that's the surprise," Whitney said outside the home, where he had come to comfort the family. "It's just one of those awful, awful, tragic events."

John Balderrama did, however, file for Chapter 13 bankruptcy three times from 2004 to 2006, but the courts dismissed the petitions. Debtors who declare bankruptcy under Chapter 13 generally can keep their homes while paying off their debts under a court-approved reorganization plan.
Something doesn't add up here. Nonetheless, the reporter is undeterred:

As Congress rushed yesterday to help 400,000 strapped homeowners avoid foreclosure and prevent Fannie Mae and Freddie Mac from collapsing, the suicide underscored the potentially devastating toll of the housing crunch.

Bruce Marks, chief executive of the Neighborhood Assistance Corporation of America, said it is not uncommon for homeowners to contemplate suicide when they cannot keep up their mortgage payments. Marks's group counsels homeowners in crisis and responds to such crises by immediately notifying the police, he said.

"What gets us so angry is that people blame themselves," Marks said. "They can't see past their sense of responsibility to see the responsibility and the predatory nature of these lenders. The fact of the matter is, unless something dramatic happens, there's going to be more and more people like her taking their lives."

Police believe that when the Balderramas bought the house in a stronger market, the family chose an adjustable rate mortgage, confident they would be able to keep up the payments. But as the housing market plummeted and the rates rose, the family fell behind, O'Berg said.

We have Bruce Marks, who should be ashamed of himself, labelling Balderrama's mortgage lender a predator. We have a cop making claims about the terms of the mortgage loan and the sequence of events leading to the default--claims that the reporter could have verified by searching the public records. (Note: I have not examined the Balderrama's recorded mortgage documents, because the North Bristol MA Registry of Deeds requires creation of an account with an account fee and a $1.00 per page charge for the documents. I am not inclined to spend $15 to see a copy of their mortgage, but I'm inclined to wonder why the Boston Globe isn't so inclined.) But we get even more from the co-worker and the cop:

Whitney said he did not believe that Carlene Balderrama had a history of mental illness.

"It looked like a happy couple," Whitney said. "That's why John was so blown away. Nothing medically ever came up, and I've known them for 20 years."

O'Berg said he was troubled that the pressures of foreclosure had triggered suicide on a street that he described as solidly middle-class.

"That's the real sad part: This is a middle-class family, a husband working, the son is working," O'Berg said. But the housing crunch, he said, "is inflicting real pain on middle-class Americans.

"Put yourself in her shoes," he added. "You handle the finances, and you're hiding everything from family. It's a lot of pressure."

Why are two people who are neither psychologists nor economists so eager to convince us that the primary cause of this suicide was "the foreclosure crisis"? Since when do the local cops become your go-to sociologists?

The Boston Herald on the same day provided some facts that rather confound this narrative:
John Balderrama bought the three-bedroom house at 103 Duffy Drive in October 2002, using a $220,255 mortgage to cover most of the $232,000 purchase price, public records show.

But less than eight months later, PHH initiated foreclosure proceedings - usually a sign that a borrower is at least 90 days delinquent.

The Herald does not confirm that the mortgage loan in question was an ARM, but it certainly casts doubt on the idea that rising interest rates and plummeting house prices had anything to do with the Balderramas' difficulties with their mortgage.

According to the Herald, John Balderrama filed Chapter 13 bankruptcy petitions in 2004, 2005, and 2006. I did spend some time looking at these bankruptcy filings, which are available to anyone with a PACER account and the willingness to spend 8 cents a page. In all three filings, the only debts listed for Balderrama were a single mortgage on the house and a car loan. There are no unsecured debts and no undischargeable or "priority" debts. There are no catastrophic (or even modest) medical expenses or debts. In fact, in all three filings, the only debt to be paid through the Chapter 13 plan is the arrearage on the mortgage, which seems to have been around $27,000 in the first filing and around $44,000 by the last one (in April 2006). Otherwise, each plan indicated that Balderrama would pay his approximately $1700 house payment (that figure includes taxes and insurance) and $289 car loan directly to the creditors during the BK. Each plan indicated that there were no assets above exempt amounts.

The only real difference among the three filings is that Balderrama's income kept increasing substantially, meaning that in each filing the required payment to the trustee kept increasing. In the first filing, he claimed gross monthly income of $6,202, which resulted in a monthly repayment plan requirement of $527 (in addition to the regular monthly car and house payment). (The Herald story reports his net (after tax) income instead of gross.) By the third filing, the gross monthly income was $10,461 and the plan payment was $1066. As far as I can tell, Balderrama never made more than one plan payment during any of these BKs. It's hard to tell whether the mortgage payment was made post-petition, but in at least two of the BKs the post-petition car payment didn't get made. All the bankruptcies were dismissed due to either failure to make payments to the trustee or failure to attend hearings or creditors' meetings.

I have to say that these were a very strange set of BK filings. Carlene Balderrama never appears as a debtor, or even as a spousal signatory. (Did Carlene even know about the BK filings? It makes more sense that she would be in the dark about the BKs than that her husband was in the dark about the mortgage arrearage.) Although the household income keeps rising, there are no increases in bank accounts or other debts or assets that can account for where the money goes every month. In the first BK, filed just over a year and half after the purchase of the home and a year after the first foreclosure attempt, Balderrama's debt-to-income ratio as a mortgage lender would calculate it was 41%, including the Chapter 13 payment. By the last BK, the DTI was 29%. There is no indication that Balderrama's mortgage payment increased; in fact if the debtor's filing is correct it decreased (from $1740 in the first filing to $1703 in the last).

It seems quite obvious that these filings were intended solely to stay foreclosure rather than to deal with crippling debt payments and reduced income. Yet Balderrama never cooperated with the court or made an effort to make payments, resulting in serial dismissals. Even on the assumption that the household budget in a Chapter 13 is often unrealistically tight, I just can't see from the paperwork why the Balderramas couldn't pay their house and car payment and the arrearage installments.

Are these folks debt-bingers? Apparently not. They've had exactly two debts in the last six years: a house payment and a car payment. Did they buy an overpriced home with a mortgage that instantly went upside down? It doesn't look like it. If Zillow is to be believed, the mortgage has never been upside down and was probably quite close to break-even when the foreclosure was completed (including arrearages in the loan amount). Victims of job loss or serious illness? Doesn't look like it. Victims of a predatory lender squeezing them with an exploding ARM in a falling RE market? The BK paperwork suggests that that claim is ridiculous.

Nonetheless, by this morning ABC news got ahold of the story. A new detail:
But for one reason or another, it appeared that Carlene Balderrama decided to deal with the family's flagging finances on her own. O'Berg said that according to Balderrama's husband, John, Carlene handled all of the family's financial matters.

"I had no clue," John Balderrama told The Associated Press on Wednesday, adding that Carlene had hidden from him the fact that she hadn't paid the mortgage in 42 months.
Mr. Balderrama filed two bankruptcies during the last 42 months. But he had no idea his mortgage payments were in arrears? Are we supposed to believe that Carlene Balderrama forged her husband's signature on the BK filings and suborned the perjury of at least one attorney? How else do we square this claim of ignorance with the BK records?

Little details like that, however, don't stop the ABC reporter or his psychologist quote-bots:
"Suicide is certainly a response to hard economic times," noted Dr. Harold Koenig, professor of psychiatry and behavioral sciences at Duke University Medical Center in Durham, N.C. "Consider what happened when the stock market fell in 1929. There was a rash of suicides."
Well, John Kenneth Galbraith labelled that "rash of suicides" a "myth" in 1955, and if anyone has more recent hard data that says otherwise, I'd like to see it. Before we construct another myth about the Great RE Crash of 2008 with the same kind of "data."

I do not doubt for a moment that Carlene Balderrama was under severe psychological stress. Whatever kept her going through six years of an inability to make her mortgage payments, clearly the reality of the day of foreclosure sale was too much to bear. What I do object to is the transformation of this story into an urban legend about "predatory lenders" and the effects of an RE downturn based on no evidence whatsoever. I object to these reporters' unwillingness to deal with the facts available to them that surely complicate this currently popular narrative. I object to cops running off at the mouth with unsubstantiated claims and a husband and his co-worker heaping blame for the family's financial woes on a dead woman who can no longer defend herself, and I surely object to it when it gets used to slander a mortgage servicer who was, apparently, the only party involved who ever took this woman seriously enough to call 911.

If anybody can explain to me how this series of reports on Carlene Balderrama's suicide are anything other than exploitation of her tragedy in order to support an overwrought rhetoric that sees every foreclosure that has occurred in the last year or so as "predatory" and "unnecessary," then please do so in the comments. I am not seeing it.

THIS SOUNDS LIKE AN EPISODE OF COLUMBO: WAS THIS A MURDER FOR INSURANCE?

http://www.prospect.org/csnc/blogs/beat_the_press_archive?month=07&year=2008&base_name=if_a_bailed_out_homeowner_gets

This is not a grand philosophical question. Rather, it is a concrete question about how the media should talk about the housing bill.

It is standard practice to report that the bill will aid 400,000 homeowners facing foreclosure, based on the Congressional Budget Office's (CBO) estimate. However, CBO estimates that 140,000 of these homeowners will face foreclosure a second time and lose their home. So, should we say that a person who struggles with high mortgage payment for 2 to 3 years (likely much higher than the rent on a comparable unit) and then ends up getting foreclosed, with zero equity, has been helped?

If we only count the people who CBO expects to actually avoid being foreclosed a second time, then the bill helps 260,000 homeowners.

--Dean Baker

http://www.bloomberg.com/apps/news?pid=20601087&sid=aPSvhHzsqaxo&refer=home

July 25 (Bloomberg) -- Bank of America Corp. and Wells Fargo & Co., the top mortgage lenders, told Congress they have accelerated the pace of loan modifications to avoid foreclosures amid criticism they are slow to help keep people in their homes.

Both banks added staff and contacted more homeowners to reduce loan rates or to arrange repayment plans to cut monthly payments, executives said today at a House Financial Services Committee hearing in Washington. Bank of America doubled its modifications in the first half of this year from the second half of 2007, and Wells Fargo increased staffing fivefold.

``Bank of America remains committed to helping our customers avoid foreclosure whenever they have a desire to remain in the property and a reasonable source of income,'' said Michael Gross, the Charlotte, North Carolina-based lender's managing director for loss mitigation, mortgage, home-equity and insurance services.

U.S. bank regulators, including Federal Reserve Chairman Ben S. Bernanke, and lawmakers are prodding mortgage servicers to help more borrowers who are falling behind on their payments. Foreclosure filings rose 121 percent in the second quarter from a year earlier, RealtyTrac Inc. of Irvine, California, reported.

Wells Fargo, which services one in eight U.S. mortgages, expanded its staff to more than 1,000, from 200 in 2005, to help borrowers, said Mary Coffin, executive vice president of Wells Fargo Home Mortgage. The San Francisco-based company contacted 94 percent of customers who are delinquent and helped 60 percent who agreed to work with the bank to avoid foreclosure, she said.

`Last Resort'

``Foreclosures are a measure of absolute last resort,'' Coffin said.

Bank of America helped more than 117,000 homeowners avoid foreclosure from January through June, almost double the pace in the second half of 2007, Gross said. The bank will modify at least $40 billion in troubled mortgages by the end of 2009 to help more than 250,000 borrowers keep their homes, Gross said.

http://www.nytimes.com/2008/07/26/nyregion/26pay.html?_r=1&adxnnl=1&oref=login&ref=business&adxnnlx=1217041818-YTCxvoxPbCMya6zHF73JIQ



--------------------------------------------------------------------------------

July 26, 2008

Government officials in New York are preparing for what could be the biggest single-year decline in pay on Wall Street in history and with it a vexing shortfall in city and state revenues...A review of the latest statements from the largest financial companies based in the city shows that they intend to hand out about $18 billion less in pay and benefits in 2008 than in 2007. The cutting of payrolls is well under way, but the full effect will not be felt until the year’s end, when bonuses for employees based in New York could shrink by $10 billion or more, according to city officials and compensation experts.

A decline in bonuses of that magnitude would easily eclipse the drop of 2001, the year of the 9/11 terrorist attacks, when total bonuses declined by $6.5 billion, according to the state comptroller’s estimates. City and state officials said the coming plunge in pay would have wrenching effects on the local and regional economies...It would mean about $10 billion less in taxable income and several billion dollars less to be spent on apartments, furniture, cars, clothing and services. For many investment bankers and traders, year-end bonuses traditionally account for at least three-fourths of their income. But the downshifting of the Wall Street lifestyle has already begun.

“As long as I’ve been in the business, I think this is the worst,” said Vincent Nastri, whose Barclay-Rex tobacco shop down the street from the New York Stock Exchange sells cigars for as much as $35 apiece. “It’s been a little on the quiet side — a little shaky.”

All told, Wall Street firms, which employ about 178,000 people in the city, have announced thousands of layoffs in the last year. One of the seven largest financial companies in the city, Bear Stearns, nearly failed in March before it was acquired by JPMorgan Chase & Company. It is already clear that employees whose jobs survive the deep cutbacks will, as a group, take home much less money than they did last year or the year before. The latest financial statements from the remaining six of the seven largest firms show that their compensation costs declined by a total of $9.5 billion in the first half of this year, compared with the first half of 2007. Along with JPMorgan Chase, they are Citigroup Incorporated, Goldman Sachs, Morgan Stanley, Merrill Lynch and Lehman Brothers. Analysts familiar with those companies said the cuts so far implied an aggregate decline in pay and benefits, including bonuses, of more than $18 billion for the full year. About half of that amount would have gone to people employed in New York City, they said.

The impact on the state and city budgets is likely to be severe because the financial-services industry provides almost one-fourth of all income earned in the city. That pay accounts for about 10 percent of the city’s tax revenue and about 20 percent of the state’s, said Kenneth B. Bleiwas, deputy state comptroller for New York City.

“One of the things that highly compensated people do is they spend money,” Mr. Bleiwas said. “So when Wall Street suffers, the pain ripples through the rest of the economy.”

The impending decrease in the personal income of so many New York-area residents, Mr. Bleiwas said, “is a significant reduction which will affect not only state and city coffers but also have a direct impact on other sectors.” He said the jobs on Wall Street pay so well that on average, each one spawns two jobs in other fields in the city and a third in the surrounding region.

The state’s budget department estimated that the projected decline in bonuses would reduce state tax revenue by about $700 million this fiscal year, which ends March 31, said Jeffrey Gordon, a spokesman for the department....

http://robertreich.blogspot.com/2008/07/heart-of-economic-mess.html


The Federal Reserve Board's "beige book" for June and July offers a clear explanation for why the economy has slowed to a crawl. It shows American consumers cutting way back on their purchases of everything from food to cars to appliances to name-brand products. As they do so, employers inevitably are cutting back on the hours they need people to work for them, thereby contributing to a downward spiral.

The normal remedies for economic downturns are necessary. But even an adequate stimulus package will offer only temporary relief this time, because this isn’t a normal downturn. The problem lies deeper. Most Americans can no longer maintain their standard of living. The only lasting remedy is to improve their standard of living by widening the circle of prosperity.

The heart of the matter isn't the collapse in housing prices or even the frenetic rise in oil and food prices. These are contributing to the mess but they are not creating it directly. The basic reality is this: For most Americans, earnings have not kept up with the cost of living. This is not a new phenomenon but it has finally caught up with the pocketbooks of average people. If you look at the earnings of non-government workers, especially the hourly workers who comprise 80 percent of the workforce, you'll find they are barely higher than they were in the mid-1970s, adjusted for inflation. The income of a man in his 30s is now 12 percent below that of a man his age three decades ago. Per-person productivity has grown considerably since then, but most Americans have not reaped the benefits of those productivity gains. They've gone largely to the top.

Inequality on this scale is bad for many reasons but it is also bad for the economy. The wealthy devote a smaller percentage of their earnings to buying things than the rest of us because, after all, they’re rich. They already have most of what they want. Instead of buying, the very wealthy are more likely to invest their earnings wherever around the world they can get the highest return.

This underlying earnings problem has been masked for years as middle- and lower-income Americans found means to live beyond their paychecks. But they have now run out of such coping mechanisms. As I've noted elsewhere, the first coping mechanism was to send more women into paid work. Most women streamed into the work force in the 1970s less because new professional opportunities opened up to them than because they had to prop up family incomes. The percentage of American working mothers with school-age children has almost doubled since 1970 — to more than 70 percent. But there’s a limit to how many mothers can maintain paying jobs.

So Americans turned to a second way of spending beyond their hourly wages. They worked more hours. The typical American now works more each year than he or she did three decades ago. Americans became veritable workaholics, putting in 350 more hours a year than the average European, more even than the notoriously industrious Japanese.

But there’s also a limit to how many hours Americans can put into work, so Americans turned to a third coping mechanism. They began to borrow. With housing prices rising briskly through the 1990s and even faster from 2002 to 2006, they turned their homes into piggy banks by refinancing home mortgages and taking out home-equity loans. But this third strategy also had a built-in limit. And now, with the bursting of the housing bubble, the piggy banks are closing. Americans are reaching the end of their ability to borrow and lenders have reached the end of their capacity to lend. Credit-card debt, meanwhile, has reached dangerous proportions. Banks are now pulling back.

As a result, typical Americans have run out of coping mechanisms to keep up their standard of living. That means there's not enough purhasing power in the economy to buy all the goods and services it's producing. We’re finally reaping the whirlwind of widening inequality and ever more concentrated wealth.

The only way to keep the economy going over the long run is to increase the real earnings of middle and lower-middle class Americans. The answer is not to protect jobs through trade protection. That would only drive up the prices of everything purchased from abroad. Most routine jobs are being automated anyway. Nor is the answer to give tax breaks to the very wealthy and to giant corporations in the hope they will trickle down to everyone else. We've tried that and it hasn't worked. Nothing has trickled down.

Rather, the long-term answer is for us to invest in the productivity of our working people -- enabling families to afford health insurance and have access to good schools and higher education, while also rebuilding our infrastructure and investing in the clean energy technologies of the future. We must also adopt progressive taxes at the federal, state, and local levels. In other words, we must rebuild the American economy from the bottom up. It cannot be rebuilt from the top down.

INTERESTING COMMENTS FOLLOW--SEE LINK

http://www.theonion.com/content/news/recession_plagued_nation_demands


WASHINGTON—A panel of top business leaders testified before Congress about the worsening recession Monday, demanding the government provide Americans with a new irresponsible and largely illusory economic bubble in which to invest.

"What America needs right now is not more talk and long-term strategy, but a concrete way to create more imaginary wealth in the very immediate future," said Thomas Jenkins, CFO of the Boston-area Jenkins Financial Group, a bubble-based investment firm. "We are in a crisis, and that crisis demands an unviable short-term solution."

Enlarge Image
A prominent finance expert asks Congress to help Americans rebuild their ficticious dreams.
The current economic woes, brought on by the collapse of the so-called "housing bubble," are considered the worst to hit investors since the equally untenable dot-com bubble burst in 2001. According to investment experts, now that the option of making millions of dollars in a short time with imaginary profits from bad real-estate deals has disappeared, the need for another spontaneous make-believe source of wealth has never been more urgent.

"Perhaps the new bubble could have something to do with watching movies on cell phones," said investment banker Greg Carlisle of the New York firm Carlisle, Shaloe & Graves. "Or, say, medicine, or shipping. Or clouds. The manner of bubble isn't important—just as long as it creates a hugely overvalued market based on nothing more than whimsical fantasy and saddled with the potential for a long-term accrual of debts that will never be paid back, thereby unleashing a ripple effect that will take nearly a decade to correct."

Enlarge Image
"The U.S. economy cannot survive on sound investments alone," Carlisle added.

Congress is currently considering an emergency economic-stimulus measure, tentatively called the Bubble Act, which would order the Federal Reserve to† begin encouraging massive private investment in some fantastical financial scheme in order to get the nation's false economy back on track.

Current bubbles being considered include the handheld electronics bubble, the undersea-mining-rights bubble, and the decorative office-plant bubble. Additional options include speculative trading in fairy dust—which lobbyists point out has the advantage of being an entirely imaginary commodity to begin with—and a bubble based around a hypothetical, to-be-determined product called "widgets."

The most support thus far has gone toward the so-called paper bubble. In this appealing scenario, various privately issued pieces of paper, backed by government tax incentives but entirely worthless, would temporarily be given grossly inflated artificial values and sold to unsuspecting stockholders by greedy and unscrupulous entrepreneurs.

"Little pieces of paper are the next big thing," speculator Joanna Nadir, of Falls Church, VA said. "Just keep telling yourself that. If enough people can be talked into thinking it's legitimate, it will become temporarily true."

Demand for a new investment bubble began months ago, when the subprime mortgage bubble burst and left the business world without a suitable source of pretend income. But as more and more time has passed with no substitute bubble forthcoming, investors have begun to fear that the worst-case scenario—an outcome known among economists as "real-world repercussions"—may be inevitable.

"Every American family deserves a false sense of security," said Chris Reppto, a risk analyst for Citigroup in New York. "Once we have a bubble to provide a fragile foundation, we can begin building pyramid scheme on top of pyramid scheme, and before we know it, the financial situation will return to normal."

Despite the overwhelming support for a new bubble among investors, some in Washington are critical of the idea, calling continued reliance on bubble-based economics a mistake. Regardless of the outcome of this week's congressional hearings, however, one thing will remain certain: The calls for a new bubble are only going to get louder.

"America needs another bubble," said Chicago investor Bob Taiken. "At this point, bubbles are the only thing keeping us afloat."

http://bigpicture.typepad.com/comments/2008/07/dont-panic.html

"DON'T PANIC" - Words inscribed in large, friendly letters on front cover of The Hitchhiker's Guide to the Galaxy, the ultimate compendium of practical knowledge on practically any conceivable subject, and the most popular book in the known universe. This is partly because it is slightly cheaper than the Encyclopedia Galactica, but is mostly because it has the words Don't Panic inscribed in large friendly letters on it's cover."

Look who is telling us not to panic again: The WSJ Op Ed page!

"So there is no reason for stock market panic, nor for handwringing in the credit markets about an imminent default. Indeed, with the Senate finally -- after months of dithering -- passing legislation on Friday for a strong new Fannie and Freddie regulator, there is hope that the government will finally be able to rein in the excesses of these enterprises."
-There Is No Reason to Panic

Of course, the last time this self same page told us not to panic, it was Bear Stearn's David Malpass exhorting us not to Panic About the Credit Market:

"Equity markets have recently lost over $2 trillion in the U.S. and even more globally -- many times the likely amount of mortgage and corporate debt losses in the foreseeable future. This is in part a correction from the sharp global equity run-up through mid-July. Current prices still signal growth ahead."

How'd THAT work out?

How come every time a WSJ editorial tells us not to panic, we learn in subsequent hindsight, that Panicking is pretty much exactly what we should be doing?

By Panic, I mean pulling out all the stops to make sure any virally malignant, planet destroying financial cancer does not metastasize any further, mangling the good and the bad alike (or destroying a planet to make way for an interstellar bypass)?

Is there any reason to expect this chuckle-headed plea is going to turn out any different than the last chuckle-headed plea did?

http://www.timesonline.co.uk/tol/comment/columnists/william_rees_mogg/article4326794.ece


The experience of the 1930s makes me think that the present downturn will be relatively long and difficult

William Rees-Mogg

Today I am celebrating my 80th birthday, an age that seems less formidable when one has reached it than when one can see it only from afar.

I was born on July 14, 1928, about 15 months before the American boom of the 1920s came to its rather abrupt end. Like everyone else, I am naturally curious to see whether the global credit crunch is going to be a brief interruption in global prosperity, or the prelude to a longer and deeper depression.

I cannot claim to have clear memories of the 1929 Wall Street Crash, which occured when I was 1year old, or of Britain leaving the gold standard in 1931, when I was 3 years old.

I do however, remember newspaper articles about the later stages of the Depression. In the 1930s, my parents read The Times, the Financial Times and the Daily Mail.

I can remember the news stories of the Jarrow march of the unemployed. I also remember discussing with my mother a lead story which reported that farm workers' pay was to be raised 6d (2p) to what would now be £1.50 a week. The depression was a fact of existence in the North Somerset coalfield up to the outbreak of war in 1939.

Fortunately, there has only been one Great Depression in my lifetime, but there has also been a Great Inflation. In 2006 Pickering and Chatto, which I refounded in the 1980s, had the good timing to publish a three-volume History of Financial Disasters, under the general editorship of Mark Duckenfield.

His introduction to the 1929 crash on the New York Stock Exchange makes an important point: “Most of the stock market's loss in value took place in later years as the Depression deepened. Three years after its initial crash and shortly before the 1932 election, the Dow Jones Industrial Average had fallen to 34, a loss of more than 90 per cent in less than three years. The Dow did not return to its 1929 peak of 381 until a quarter of a century later at the end of 1954.”

On that basis, stock markets would get back to their 2007 levels in 2032.

...

The Great Depression can be regarded as lasting for ten years from 1929 to 1939; the Great Inflation ran for a similar period, from 1973 to 1982. Even these dates could be challenged, since both events were preceded by a build-up of debt and other warnings of trouble. Both were followed by aftershocks.

One can even argue about the correct date to take as the starting point of the present recession. It was certainly preceded by two great American bubbles, the dot-com bubble of the late 1990s and the US housing bubble of this century. On one view, the present recession began on August 7, 2007 - only a year ago - when the sub-prime mortgage crisis came to the surface. That date could also be used to mark the bursting of the US housing bubble, which is still having so damaging an impact on mortgage banking.

Alternatively, one could reasonably start the present recession from the bursting of the dot-com bubble itself, which was the beginning of a bear market on Wall Street. That happened in the early months of 2000, already eight years ago. If this is a depression, it is a matter of choice whether one regards it as one or eight years old.

A big inflation has many of the same consequences as a big depression. That is why many people made a dangerous mistake in the early 1970s. They saw that inflation was the immediate threat and assumed that it would raise the value of capital assets while liquidating debts. In fact, it raised interest rates on debt and actually reduced the value of many capital assets.

The inflation of the price of oil after 1973 was accompanied by a collapse of the British property market and the insolvency of the secondary banking sector in London. It is obvious that a big depression is bad for investors; a big inflation is bad for them as well.

The present recession has some characteristics which make me think that it will be a relatively long one. The recession is centred on banking and property. In an ordinary recession, one has to wait for consumers to regain their confidence, which, in turn restores the confidence of business. Now one has to wait for the bankers as well. At present, banks are too anxious even to lend to each other, let alone to expand consumer credit or business loans.

This recession has produced a succession of nasty surprises. Things are always proving to be worse than anyone had expected. Last week the crisis spread to the American mortgage giants Fannie Mae and Freddie Mac, created by President Roosevelt in 1938.

These are far bigger than the investment bank Bear Stearns and Northern Rock put together. They have brought the crisis from the level of billions of dollars, to the level of trillions. No doubt they will be saved because the US would be bust if they went down. But you cannot save six- trillion-dollar institutions without suffering on a large scale.

The debt crisis, the banking crisis, the property crisis, the oil crisis, the shift to Asia, the bear market in stocks, are huge global adjustments that have all come together at the same time.

If my birthday does not prove to be another Black Monday on Wall Street, I shall think myself rather lucky. There is now a momentum of negative events sweeping away financial flood defences; in the 1930s that force overturned democratic governments as easily as it overturned banks.

Before we get back to balance, we may see dramatic changes in politics, as well as in business and finance.

in the UK of the precipitate 1973 oil inflation with the severe depression that the British people will soon be facing - and post welfare-state, at that, with all the public services direly, and still increasingly, underfunded, including the now scant provision of rented housing for poorer folk by local councils.

An old Etonian, Rees-Mogg inhabits that monied UK Establishment, in which consideration of the economic welfare of the poor is at best irrelevant, and Robert Reich's advice concerning the need for a re-distribution of wealth via people's wage packets, would be an abolute non-starter.

Supply side fascist of the first magnitude.

Him and another guy put out a pricey investment newsletter that was ALWAYS wrong.

Silver State Bancorp, the Henderson-based holding company for the similarly named bank, reported that Andrew McCain, son of Republican presidential candidate John McCain, resigned today from the boards of directors of the bank and bank holding company.

The company cited “personal reasons” for McCain’s resignation, and a Silver State spokesman declined further comment.

http://www.lvrj.com/breaking_news/25941494.html

McCain's son resigning abruptly from a bank in Nevada? If anyone has more than $100,000 in this bank I would advise moving it right away.

This should go over like a lead brick.

Too hot to dump on a Friday, even!

My ego needs massaging....

What a great idea for a thread!

:hi:

Hope you get to Stock Market Watch on weekdays, too.

I've been reading the Stock Market Watch post whenever I can, usually after posting the Daily Widget since both are posted about the same time every morning.

Our Investment Board meets Monday with our portfolio managers for our annual review (I'm a non-profit exec). I expect they'll arrive wearing sackcloth and ashes, lol

I don't know how to get it posted (I read the WSJ article) but here goes....


Ellison's New Position: Cash Hoard
BY DIYA GULLAPALLI
Word Count: 678
David Ellison, one of the most respected financial-stock managers in the mutual-fund industry, has had it. While he is pleased with the run-up in financials in recent days, he still sees signs of Armageddon in the sector.

He recently pumped up the cash level in his two funds to as much as half his assets. His FBR Large Cap Financial fund stood at 50% cash at the end of June, up from 2% at the start of 2007, and his FBR Small Cap Financial is at 38% from 0%, according to Morningstar Inc. "I don't want to lose any more ...

http://online.wsj.com/article/SB121685817512279283.html?mod=todays_us_money_and_investing


So folks...cash is indeed a position. It is a good article is someone can figure how to post it in it's entirety.

These days, not many people are smiling when they see their 401(k) statements. But they¹d be downright outraged if they saw the fees that are automatically deducted from their returns.

The Labor Department is proposing a rule that would require employers to disclose to workers the fees and expenses charged by mutual funds and other investments in a chart or similar format. Following are some answers to common questions about 401(k) fees.

Q: How do I find out what type of fees I¹m paying?

A: Asset management fees vary depending on the mutual funds you select and most likely aren¹t listed on your statement.

The best place to see them is on your plan¹s Web site, perhaps under a heading called ³Fund Facts.² Fees are also usually outlined in your plan¹s annual report (take a look, if you haven¹t thrown it out).

http://www.chron.com/disp/story.mpl/business/5908618.html

Some of these fees can totally gobble up all your gains. There needs to be more transparency in this area for consumers because this will replace pensions for most of America.

Some of the country's biggest oil companies have a money problem. They've got too much of it.

No tears, of course, will be shed for Big Oil, which often is cast as the heartless profiteer, sneering in delight as we motorists wince with every squeeze of the pump handle.

But the oil companies, too, are in a squeeze. Awash in cash, they're having a hard time spending it.

More than three-fourths of the world's untapped reserves are controlled by countries that either ban or restrict access to their reserves. In other words, the best drilling prospects are taken.

Investment in emerging technology remains tentative because most alternative fuels don't yet offer the returns that big oil companies need to generate.

http://www.chron.com/disp/story.mpl/business/steffy/5906665.html

My man Steffy does it again. Remember, Houston is an oil town so he really steps out. It is also worth it to read the comments.

Taxes are the means to soak up loose cash in the economy to prevent inflation. Capitalists are going to have to accept the necessity.

to keep our eyes focused on this.

Thanks most especially for PAYING ATTENTION! So few people do, in this country, and that's our #1 porblem.

SunTrust, the bank which holds the secret formula for Coca-Cola in a vault in Atlanta, has been forced by the credit crunch to sell its $2bn stake in the soft drinks maker.

The Atlanta-based bank has held on to its Coca-Cola stake - regarded as its "family silver" - for almost 90 years, but decided to offload the 43.6m shares to bolster its capital position after mounting mortgage losses led to a 21% drop in second-quarter profits.

SunTrust said yesterday it had sold 10m Coke shares in June and donated 3.6m shares to its charitable trust. It has also set up a process to sell another 30m Coke shares over the next seven years.

Shares in Coke fell to a 52-week low on Monday and closed at $49.60 a share. After the announcement they climbed 3.5% to close at $51.35 yesterday.

By disposing of its stake, the large southeast regional bank will break some of its long-standing ties with the world's largest soft drink maker. Both companies are based in Atlanta.

http://www.guardian.co.uk/business/2008/jul/23/cocacola.useconomy?gusrc=rss

Isn't Atlanta having high foreclosure rates and why is this news being reported by the Guardian and not a US paper? That's a tad curious.

Cheneyism has infected the entire country. Secrecy is power, protection against embarrassment and threat, and ego-building for the chronically insecure. It is the only tool the Bushbots have--and it is specifically contraindicated for open, democratic government.

Secrecy keeps pedophiles, conmen, thieves and spies in business. There would be no crime without it.

The whole surveillence plot is to wrest people's little (or big) secrets from them, and use the information for coercion. It certainly isn't for fighting crime!

Few people would disagree that Wall Street lenders, hedge fund and investment banks got a little giddy during the credit boom, extending loans left and right and buying up risky securities linked to dodgy home mortgages.



The result was, in the now-famous words of U.S. President George W. Bush: “Wall Street got drunk. It got drunk–that’s one of the reasons I asked you to turn off the TV cameras–it got drunk and now it’s got a hangover,” Bush said Friday at a fund-raiser in Houston. “The question is how long will it sober up and not try to do all these fancy financial instruments.”

It is unclear why Bush felt discretion was required for this pronouncement. After all, the idea that Wall Street risk management got out of hand is conventional wisdom. In Saturday’s Wall Street Journal, James Grant asked why there isn’t more American outrage about what UBS called “the greatest failure of ratings and risk management ever.”

And comparing Wall Street’s behavior to drunkenness isn’t an insult, it is an understatement. What is more, it probably isn’t even the best metaphor.

Now, we aren’t taking issue with Bush’s way of speaking here; his chatty, breezy demeanor is well known by now. We’re just wondering whether drunkenness is really the way to describe the situation, even though we have used a version of it ourselves in the past.

more.....


http://blogs.wsj.com/deals/2008/07/23/was-wall-street-drunk-stupid-or-evil/

Very good article. Wish I could paste the picture of the devil-looks like Ned Flanders. :spray:

Zimbabweans battle money shortages as collectors buy hundred billion dollar notes on eBay
23-07-2008 - 20:58

Amid Zimbabwe's mind-boggling hyper inflation, a new 100 billion dollar bank note has more value as a novelty item on eBay than on the streets of the capital.

The note, launched this week, is worth enough to buy a loaf of bread _ if you can find one on Zimbabwe's depleted store shelves. Meanwhile on eBay, the bill was on offer for nearly US$80.

Notes in the millions of dollars are useful only as toilet paper and it's cheaper to light a fire with low denomination bills than with newspaper.

In the political and economic turmoil since disputed March 29 elections, prices have risen almost daily. Factories and businesses have shut down amid empty order books and chronic shortages of gasoline, power, water and spare parts for equipment repairs.


more.....

http://www.aol.com.au/news/story/Zimbabweans-battle-money-shortages-as-collectors-buy-hundred-billion-dollar-notes-on-eBay/756291/index.html

May I humbly suggest that when we do start printing the Billion Dollar Bill-we use GW Bush image, after all, this would not have been possible without his 'hard work'.:eyes:

When McDonald's (NYSE: MCD) reports earnings, it may be an indication for how badly the spending habits of the working class and middle class in America have been hurt by the current economic downturn. According to The Wall Street Journal, "McDonald's has advantages over its rivals. The omnipresence of its restaurants means customers don't have to go far looking for them, making them a convenient trade-down option that doesn't eat up gas."

That is only an advantage if people can go out to eat at all. It is highly likely that the rising costs of food and fuel are hurting the people at the bottom levels of the income pool much worse than everyone else. It is hard to imagine most families with incomes under $25,000 being able to manage their daily living costs at all.

Even if a meal for four at McDonald's costs less than $20, it may be that a cheaper meal can be made at home.

McDonald's is not the preferred restaurant for the upper classes and it may be moving beyond the reach of the spending habits of those with very modest incomes .

www.bloggingstocks.com/2008/07/23/mcdonalds-mcd-a-bellwether-for-lower-class-and-middle-class/

Last time I went into a McDonald's, it was obvious that the kid's and men that I saw there were the family of workers there. Just an observation.

Last year I went in partners with a friend of mine on a carry-out pizza and Italian restaurant in Tampa. Back in March, I sold my interest out to my partner. The economy was tanking, and the price of supplies were going through the roof.

My old partner is going out of town for a few days this week, and asked if I would come in and take care of the place for him for a few days. No, problem, I said, and I went down Thursday to familiarize myself with the way things are running now.

He started closing on Mondays. No business. Cut down to Saturday evenings. No early business. Other days , slow except for Fridays, and they've slowed down a lot. He's cut back on staff, also.

Five restaurants in the immediate neighborhood have gone out of business in the last couple of months. More are on the brink.

The money that people would spend on a pizza or carryout on the week-ends is going into their gas tanks, or for groceries now.

Even though the price of a 50 lb bag of flour has increased over 300% in the last year, or cheese has doubled in price, and all the suppliers are adding a fuel surcharge on deliveries, he's kept the prices the same. But, business keeps sliding. One good thing was that neither of us had to depend on the business to make a living. But, our employees did.

And, I'm gonna work for him free of charge, just because we're friends.

We are now losing retail businesses. Tourism tanked on 9/11, and entertainment has been declining steadily. Housing peaked in 2001, and there's probably 15 years' of housing available right now, although a lot has been withdrawn from the active market in despair.

I never have a problem getting a table in good places anymore-esp if it is in the middle of the week. I patronize the locals over the fast food places (even the hamburger joints). I'd rather keep them in business than a corporation-and I know some all over Houston. Bless you for helping your friend out. I remember you talking about the price of materials going up. Small businessmen are really under pressure from all sides these days.

Ohio Lt. Gov. Lee Fisher and staffers from a half-dozen state agencies descended on Wilmington on Saturday, laying out what government services are available to thousands of people who could be hurt by DHL's plans to change the way it does business.

While the state is determined to save thousands of jobs at the Wilmington Air Park, Fisher said, it's also preparing for the worst, a crisis that could affect not only Clinton County, but also much of Southwest Ohio.

Saturday marked possibly the first time that state government sent in a crisis team of state workers to help prepare residents facing financial peril, Fisher said.

The state also set up a Web site to keep people informed about the Wilmington Air Park situation: airparkhelp.com.

http://www.cleveland.com/news/plaindealer/index.ssf?/base/news/1217147439282240.xml&coll=2

Friends from the area have said that Ohio is already in a Depression. :-(

DHL (previously Airborne Express) is Wilmington, Ohio. At least 6000 jobs will be lost directly from DHL, plus thousands more jobs surrounding the community. Coupled with the loss of thousands of GM jobs from the SUV factory in Moraine (near Dayton), SouthWest Ohio will become a ghosttown.

http://blog.cleveland.com/openers/2008/07/wilmin.html

But there is risk for Republican John McCain and Democrat Barack Obama if they are perceived as indifferent or merely offer sound bites. So far, they've offered help in their capacity as U.S. senators, although Ohioans Sherrod Brown and George Voinovich have that covered. The McCain campaign, saying it will do what it can but warning that the jobs might not be able to be saved, says its proposals can at least cushion the blow by keeping taxes low, reducing government regulations and reforming job-training programs.

______________________________________________

Yeah, John. You can look out the window and see what's trickling down to working families after all those tax cuts. And we can see full well how gutting regulations are helping the economy every day. Business, especially the airline industry, banking, and automobiles are thriving, thanks to lax regulations.

My biggest pet peeve is republican job training programs. Been there, done that. Or rather didn't do that. In 2001, when LTV Steel (my railroads parent company) went under, I qualified for all kinds of job retraining. Nothing that I wanted, but there were a few programs I could get into. In early 2002, I filed for benefits in March, the earliest possible date, and the fund was already depleted for that year. The following year, I re-applied in Florida, but they gave the money to Florida in the form of a block grant, and Jeb decided that he wasn't going to fund the program. He had better uses for that money, like tax cuts for his rich cronies.

Typical republican bait and switch.

The number of major employers planning cuts to their workforces has doubled in the last three months, suggesting the biggest shakeout in the jobs market may be yet to come.

Of more than 200 executives questioned, six out of ten said they were about to cut costs, and more than half – 53% – expected to reduce headcount, up from 29% in March.

So far, most layoffs have been confined to sectors fully exposed to the credit crunch, like financial services, but the survey suggests rising inflation is now unsettling the majority.

Nearly eight out of 10 said inflation would mean higher costs for their business, seven out of 10 said it would hurt their profits and 67% said their staff would cite it to justify higher pay.

http://www.contractoruk.com/news/003895.html

BEIJING — China's biggest oil producer, China National Petroleum Corp., will reduce its work force by 5 percent to control costs, the company said on its Web site Friday, amid a profit slump blamed on government price controls.

The cuts will take place over three years, according to a report on a speech by Jiang Jieming on the CNPC Web site.

It did not say how many jobs would be cut, but the official Xinhua News Agency says state-owned CNPC, parent of PetroChina, employs 1.6 million people. That could mean the elimination of up to 80,000 jobs.

Phone calls to CNPC's press office in Beijing were not answered and employees who answered the phone at the company's Hong Kong office said they did not know about Jiang's comments.

CNPC and China's other major state-owned oil company, China National Petroleum Corp., or Sinopec, say they are suffering heavy losses because of government controls that limit them from passing on crude prices to consumers.


more....

www.chron.com/disp/story.mpl/business/5908509.html

Very interesting....on so many levels.

WASHINGTON — Henry Paulson was supposed to bring a fresh dose of Wall Street to Washington. As it turns out, he's doing the very opposite.

As Treasury secretary, he's become the Bush administration's point man and chief spokesman on a series of government interventions in the economy — including the plan approved by Congress last week to put the full resources of the U.S. Treasury behind faltering home mortgage giants Fannie Mae and Freddie Mac.

But if Paulson's new role irritates conservatives and clashes with his long-standing faith in unfettered markets, the question going forward is how the former CEO of Goldman Sachs will react if the economy develops new or deeper problems — as it has repeatedly over the past year.

'In full defense mode'

From his earliest response to the subprime lending debacle to the Freddie-Fannie rescue operation, Paulson widely has been seen as a reluctant dragon. Critics say he has been slow to act and sometimes appears more concerned about shoring up financial markets than helping average citizens.
"He's a man who came in with one agenda and is having another one forced upon him by circumstances," said T.J. Marta of RBC Capital Markets in New York. "He's in full defense mode at this point."

more....

www.chron.com/disp/story.mpl/business/5908384.html

SOrry I can't give you guys some Ipecac for :puke: The only folks he seems to be protecting is WS CEO, mega investors, etc.

How many days did it take to have a 700 page "rescue" bill ready for a vote, with no debate? Less time than it took to come up with the massive "Patriot Act" after 9/11.

If that's not a dead giveaway that this was nothing more than a Wall Street lobbyist wish list, that was written by them, just sitting around waiting for the right time, I don't know what is.

I haven't read it yet, but it sets off my burglar alarm.

And BTW, did everyone catch Fritz Hollings on Moyers Friday night?

If not, I'd recommend going to www.pbs.org and watching. He knows what he's talking about.

watch your pockets.....

NEW YORK — Coming to a store near you: Even higher prices.

Most inflation this year has come from food and fuel, as retailers resisted passing along to strapped consumers the higher prices manufacturers charged them, but coming increases from companies such as Johnson & Johnson and Hasbro Inc. may leave them with no choice.

"While these increases have not for the most part been passed on at the retail level, it is inevitable that they will be at some point," said Dean Baker, co-director of the Center for Economic and Policy Research. "Car dealers and other retailers cannot continue to absorb rising costs at the wholesale level and not pass some of these increases on to consumers."

Sherwin Williams Co. on July 17 announced its third price increase in eight months. The company has been having "difficult discussions" with retailers, Chris Connor, chairman and CEO, said on its quarterly conference call.

The price increases are "well supported with facts in terms of why the company needs them," he said. "Our customers, to the best of their ability, are passing them on."

more....

www.chron.com/disp/story.mpl/ap/business/5910295.html

Boy, I didn't see this coming....:sarcasm:

I think there was a conscious effort by a lot of these large companies to try and hold off increases until after the election, but it's getting harder and harder to stay afloat.

We needed this.

You and Ozy are my heroes!

It's a compulsion, and I'm grateful for the tolerance I find here to indulge.