Monday, September 08, 2008

Bailouts for everyone!

Stock Markets rallied around the globe on news of the largest bailout in history... Hurray!


Hell, F&F got bailed out, why not the Big-3 next -- they only need $ 50 Billion...

Big Three auto makers prepare to lobby for as much as $50 billion in loans

DETROIT -- Ford Motor Co. Chief Executive Officer Alan Mulally said that more legislators are "in our corner" as the three U.S. auto makers prepare to lobby the government for as much as $50 billion in low-cost loans.

"I think last year was a real turning point," Mr. Mulally said following a speech in Dearborn, Mich., on Monday. "I think a lot of people [in Washington] believe in the industry."

Ford, along with General Motors Corp. and Chrysler LLC, are hoping to persuade the U.S. government to provide as much as $50 billion in low-cost loans as slumping sales in the U.S. market eat into profitability. A bill signed into law last year authorized loans of as much as $25 billion to help car makers and suppliers retool plants to produce new, highly fuel-efficient vehicles.

"I absolutely don't think it's a bailout," Mr. Mulally said. "I think it will be a loan at lower interest rates with the caveat to pay it back. It is written for $25 billion but there are a lot of people who believe that more would help speed the transition," he said.


Once the Big-3 are taken care of, Paulson might want to start taking a look at the FDIC, because once WaMu goes kaput, they too will need a fresh cash infusion

WaMu replaces CEO, signs agreement with regulator

Washington Mutual Inc. replaced its chief executive on Monday as the nation's largest thrift tries to find a new leader to guide it through the housing crisis.

The lender also said it signed an agreement with its main regulator, the Office of Thrift Supervision, which requires it to provide an updated business plan and forecasts for results, asset quality, capital and the performance of business segments.

Kerry Killinger, who was CEO of WaMu from 1990, will be replaced by Alan Fishman, the company said.

"Like everyone else in the business, WaMu is facing very significant pressures," Fishman said during a conference call Monday.

WaMu shares have slumped on its exposure to the housing market and risky mortgages, and questions have arisen about its capitalization and further losses. It has cut thousands of workers and slashed its dividend. Through Friday's close, WaMu shares were down about 88% over the previous year.

Credit quality may deteriorate and that could mean WaMu needs to raise more capital, the analysts said. The company could probably raise $1 billion to $3 billion of capital from TPG, the private-equity firm that already owns a big stake. It could also raise that amount by selling some bank branches, they explained.

"If it needs more than that, it could have a tougher time finding it," they warned. "In that case, we could not rule out a regulatory intervention."

The memorandum of understanding WaMu signed with the OTS may be the first intrusion into its affairs by regulators. If the company's condition worsens, the OTS can restrict WaMu's business operations, as it did with another thrift, Downey Financial on Friday, the analysts said.


While you have the checkbook open, may as well write a check for the PBGC too, as they will soon need it

PBGC Panned for Risky Investment Plan

America's pensions could be in safer hands. The Pension Benefit Guaranty Corp., the government agency that backs the retirement benefits for more than 40 million Americans, is about to take a step to make overly risky investments, according to the Government Accountability Office. And it suggests that the PBGC move may be a dangerous path to easing its own debts.

The congressional watchdog says that the PBGC has $68 billion in assets, but that its $14 billion deficit places it on the GAO's "high-risk" list of federal programs. The pension insurer used to limit its investments in equities to a range of 15 to 25 percent of its holdings, but announced plans to lift that rule in 2008.

The agency's investment targets now include 40 percent fixed-income, 39 percent equities, 10 percent real estate and private equity, 6 percent alternative equities, and 5 percent alternative fixed-income. The PBGC has about $55 billion to invest under the new investment policy.

"While the new investment policy aims to reduce PBGC's $14 billion deficit by investing in assets with a greater expected return, we found that the new allocation will likely also carry more risk than acknowledged by PBGC's analysis," according to the GAO.


Additionally, the state of California is not looking too good - could you spare some chump change (~ $15B) ?

States pay price for binge in spending

State and local government spending has been rising three times as fast as revenue amid warnings from governors that their finances are nearing crisis stage.

As many Americans face stagnant wages, high gas prices and job uncertainty, new government figures show that state and local governments boosted spending 7.8% in the second quarter compared with 2007 while revenue rose 2.5%. Government is on a hiring binge, too, even as private-sector jobs disappear.

In a move to curb spending, California Gov. Arnold Schwarzenegger took sweeping action Thursday to pressure the Legislature to pass an overdue budget. He signed an order laying off up to 22,000 part-time and temporary state workers and cutting the pay of 200,000 others to the minimum wage of $6.55 per hour. The state is on track to spend $15 billion more than it will take in during the next year.


May want to keep a few blank taxpayer checks available for hedge funds too - if you haven't noticed already, they are having a tough time these days

Hedge funds deliver worst returns in decade

Hedge funds, which often promise to make money in all markets, are delivering their worst returns in a decade, according to new data released on Monday.

In the first eight months of the year, the average hedge fund lost 4.83 percent, according to data from Chicago-based hedge fund tracking firm Hedge Fund Research. In 1998, when hedge fund Long Term Capital Management collapsed, the average fund was off 5.5 percent, HFR said.

As fund managers find it ever more difficult to find a trend, more are posting heavy losses that are prompting clients to ask for their money back, several investors said.


Lastly, because it's getting close to dinner time, what about the CDS market - will you please bail them out too?

Fannie, Freddie Seizure Triggers Credit-Default Swaps

The government seizure of Fannie Mae and Freddie Mac triggered what may be the biggest settlement of credit-default swaps in the market's decade-long history.

The International Swaps and Derivatives Association will set rules by which parties to credit-default swap trades can demand payment on the net amount covered by the contracts, according to a statement today.

According to an ISDA memo yesterday obtained by Bloomberg News, 13 Wall Street firms agreed unanimously that the government takeover of the biggest U.S. mortgage-finance companies qualified as a so-called credit event on contracts covering more than $1.4 trillion in Fannie and Freddie debt.

``The market is not experienced at settling a credit event for a name of this size, so it is a bit of an unknown,'' said Sarah Percy-Dove, the head of credit research at Colonial First State Global Asset Management in Sydney.


Closing:

Will a line in the sand eventually be drawn, or will taxpayer bailouts be available for everyone?

Wife is calling - time for dinner

Best Regards

Randy

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6 Comments:

At 9/08/2008 6:25 PM, Anonymous Virgo said...

Randy,
So who exactly is supposed to pay out the 1.4 Trillion in credit default swaps? The government? I remember watching a video you had on credit default swaps and it was very scary indeed. But seriously, who is supposed to pay this? And how? This can't be good...

 
At 9/08/2008 7:00 PM, Blogger Randy said...

Good question Virgo - I don't have the answer, but here's a link to the video you mentioned:


Credit Default Swaps - video

Randy

 
At 9/09/2008 7:14 AM, Anonymous Anonymous said...

ALL of this stuff is PURE ENTERTAINMENT!

Watching FAT ASS, LAZY, Apathetic, good for NOTHING fellow Americans getting the well deserved SHAFT!

SHAFT THEM HARD! Politicians...... they 'love' it! and can't get enough of it!

Watch how many, they the American Garlic Eaters, Re- Elect for 'orifice' , this up-coming election cycle!

Re -electing Biden, Kennedy, LIEberman, Mc same, et. el.........

The very people that have been shafting them for YEARS!

SWEEEEEEET!

 
At 9/09/2008 3:37 PM, Anonymous Anonymous said...

Saying that taxpayers are going to pay for this is wishful thinking. The US already has a $10 trillion debt. Most middle class families are overburdened and cannot afford a tax increase. Neither will our children pay for this. People that are unemployed or employed in domestic services cannot bail out giant banks. China probably said "if you don't bail us out we'll stop paying for your wars." Or something like that. The US will do what Weimar Germany did to pay off its debts - print money, a lot of it, creating mass inflation.

 
At 9/10/2008 6:23 PM, Blogger FOFOA said...

PIMCO profiting $1.7b from the bailout reminds me of organized crime fixing a game they bet on.

 
At 9/10/2008 6:33 PM, Blogger FOFOA said...

And how fair is this? If you ran Fannie or Freddie into the ground, you get dismissed with a $15m severance.

But if you simply worked for Fannie or Freddie, guess what, your retirement account is full of common shares... now worth 74 cents and 66 cents respectively. A 100 fold shrinkage in one year.

 

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