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Category: Finance
As Strange as this Sounds, This Makes Me Feel Good
So, we have two stories from Wall Street where it appears that the principals are just plain crooks.
It makes me feel good, because, unlike what people are saying about the rest of that lot, willful blindness in pursuit of an obscene payday is not grounds for some sort of criminal investigation, this is clearly criminal, and the people involved are likely to go to jail.
In a real way, it reflects far more poorly on me than it does on them.
First we have Bernard L. Madoff arrested for operating a Ponzi scheme that appears to exceed $50 billion dollars.
This guy is a big name, as he is, “a past chairman of the board of directors of the Nasdaq Stock Market as well as a member of the board of governors of the National Association of Securities Dealers,” which makes him a member of what could be described as the nobility of the financial system.
And then we have Mark Dryer, a high flying Wall Street lawyer accused of cheating his clients by selling false promissory notes, also arrested.
Some additional Schadenfreude comes from the fact that Henry Blodget, the smarmiest of the snake oil salesmen during the dotcom boom, got a haircut on this too.
If it’s Friday, It Must Be Bank Closing (x2)
It always happens after I shut down on Friday.
Haven Trust Bank, Duluth, Georgia, and Sanderson State Bank, Sanderson, TX.
Auto Industry Update
GM is planning to GM to cut production by 250,000 by closing about 1/3 of its plants, and most of its assembly plants at some point in the firs quarter.
One wonders what this will do to the supply chain.
Also, it looks like GMAC is perilously close to defaulting. They are still trying to become a bank holding company, and if they fail, it is likely that thousands of dealerships will have no access to credit.
AIG Again
Well, it looks as if the largest welfare sponge, AIG is now dawdling on its asset sales to return to viability:
The CEO of U.S. insurer American Insurance Group, which is looking to shed assets around the globe as part of a $152 billion U.S. government rescue package, said that difficult markets may delay the sale plans, though certain units have attracted heavy interest.
The translation here is: as long as we can rely on our sugar daddy at the US treasury, we won’t sell until prices go up, and if we run short on cash, we’ll hit up the taxpayer for some more.
And they will need more taxpayer money, because they are selling insurance at rates that are clearly below cost, so as to rebuild their market share.
They don’t care that they lose money on each sale, Uncle Sugar will bail them out…Again…and Again…and Again…and Again…
Economics Update
Woah, new claims for jobless benefits just jumped by 58,000, to 573,000, a 26 year high.
Continuing claims, which is a far less noisy metric, also jumped to a 26 year high, 4.43 million, up from 4.09 million.
In real estate, the average rate for a 30-year fixed mortgage hit 5.47%, a 4½ year low, and forclosures fell in November, but this appears to be as a result of new state laws requiring more time for the process and/or temporary moratoriums, so there will likely be a significant spike in the next few months.
In the more general economy, we have a first, or at least a first since the Federal Reserve began collecting the data in 1951, the level of consumer debt held in the US has fallen, by 0.8%.
Of course, consumer net worth fell by 4.7%, so it’s a net loss.
In international finance, the Swiss Central Bank cut its interest rate by 50 basis point, and China’s exports fell 2.2% year over year, the steepest drop in nearly a decade.
In currency, the dollar weakened significantly, by about 4¢.
My guess is that it was some combination of extremely low interest rates in the US, or the demonstration of batsh%$ insanity by the Republican senators on the auto bailout vote.
In energy, oil is back above $45/bbl on strong calls by OPEC for production cuts, and retail gasoline prices continued their slide.
Scary Stock Market Picture
Courtesy of Devilstower on Daily Kos.
Note that with the SEC, CFTC, etc., we are still almost off the bell curve.
I normally don’t do stock market numbers, too much noise and mass hysteria there, but this does appear to be a Black Swan moment.
KB Toys Files Chapter 11 (+2)
This is the third time since 2004, they, as both KB and FAO Schwartz, did a twofer in 2004.
Filing for bankruptcy as a tow store less than 3 weeks before Christmas?
Looks like liquidation this time.
Here is the obligatory scare quote:
Sales were little changed from Feb. 3 until Oct. 4, KB Toys said. Since then, sales have dropped almost 20 percent, the company said.
Sales fell as the Xmas season buying frenzy ramped up….Not good.
6 Pounds of Sh%$ in a 5 Pound Bag
Howard Husock, the vice president for policy research at the Manhattan Institute, says that the credit crunch is all the fault of the n*gg*rs.
All you need to know is that CRA loans are performing better than their non-CRA counterparts.
Once again, the Manhattan Institute, shows why they have always been the right wing’s go to think tank for racism and bigotry.
Where is My Revolver!
Yes, it’s AIG again, when we discover that their management just lost the firm, and the taxpayers, $10 billion for bad trades, and that managers, you the guys who created these bad trades, will get bonuses (sorry retention payments) as high as $4 Million each.
Un-Dirty-Word-Believable.
Could Auto Bailout Trigger CDS Apocalypse?
Because it appears that many of the credit default swaps (CDS) were written so that this might be the case
It’s this appointment of a government administrator to oversee automakers’ large expenditures and asset sales that has raised the possibility of a bankruptcy event for credit-default swaps, said Banc of America Securities analyst Glen Taksler.
He noted that the International Swaps and Derivatives Association, the trade group that acts as a standard-setter for credit-derivatives trading, says one trigger for a bankruptcy credit event is the appointment of an administrator, trustee or similar official to oversee all or most of an entity’s assets.
Once again, we see how financial “innovation” has created phony money at the cost of the real economy.
Update on the Sitdown Strike
It appears that the owner may have been planning to shut down the plant and skip town for some time. It appears that, “company managed by the wife of Republic Windows and Doors owner Richard Gillman recently purchased an Iowa plant that manufactures similar products.”
Echo Windows and Doors was created two weeks ago and lists Sharon Gillman as its manager, according copies of records obtained by the Daily News from the Iowa Secretary of the State. According to Cook County property tax records, Sharon Gillman is Richard Gillman’s wife.
The couple purchased a $2.6 million Oak Street condo together in 2007, according to property records.
The Gillimans could not be reached for comment today. But this afternoon, Richard Gillman released a statement confirming the creation of the new company.
Also, Amy Zimmerman, who has served as Republic’s marketing director, is now listed as the contact on the newly registered echowindows.com domain name. She refused comment today.
As much as it pains me to say this, it may very well be that Bank of America is blameless in all this. The Gillimans may have set up a second company to find cheap non-union plant in Iowa, and then screwed up their credit line with BoA on purpose, so they could get out from under things like COBRA, owed vacation time, and other benefits.
In the mean time it appears that Chase, which had a 40% stake in Republic, is actually doing the right thing: it has pledged $400,000 to the employees there.
Still, this is getting weird, and if this is a scam by the Gillimans, and it looks increasingly so, there may very well be a criminal fraud case against them.
Economics Update
Well, now we have a report from MasterCard saying that gasoline consumption rose year over year for the first time since April, which I guess gives us an indication of just how quickly American consumers go back to their old ways when fuel prices fall.
In the meantime, Calculated Risk’s Credit Crisis Indicators have shown a bit of improvement, though with people taking negative interest to be in US treasuries, I’m not sure how reassuring that it.
In any case, it’s now clear that last week’s surge in mortgage applications was from people scrambling to lock in rates and this week, we have the application rate plunge, because this week’s applicants rushed to apply last week.
Meanwhile, consumer spending looks to post the biggest drop since just after Pearl Harbor, which is really pretty scary when you think of it.
And there won’t be much help on the export markets, with both China and Europe showing more signs of slowing themselves.
Which leads one to wonder when they will stop lending to us, because the U.S. budget deficit was $164.4 billion in November, up from $98.2 billion in November 2007.
Finally, we have oil rising on a Saudi supply cut, retail gasoline dropping for the 84th straight day, and the Dollar was mixed again today.
Funniest State Bond Issue Addendum Evah!!!
Yeah, I know, small data set, but still, this is just too good not to share:
According to the source (at link), this is not a joke.
In Blatantly Obvious News
The Congressional oversight committee for TARP discovers that Hank Paulson and His Evil Minions™ could not find their ass with both hands.
Their findings:
- No comprehensive plan for stabilizing markets.
- It’s unclear whether the equity for the money has been at fair value.
- Lacks transparency
- No followup on how the money is being used
And this is news because????
Bitch Slap Fight!!!
It appears that the Presidents of the various Federal Reserve banks across the nation are upset with the degree that Brenanke has been acting unilaterally.
They feel that he is undermining their authority and marginalizing their positions.
If I were in their positions, I’d be glad that my fingerprints were not on this.
Because the Banks are More Important than People
Ben Bernanke has said that he will not use the fed lending facility, already bailing out banks to the tune of trillions of dollars to provide liquidity to the auto makers.
It’s true that Obama can’t get rid of him until the end of his term, but how about asking him to resign?
It’s Because They Don’t Like You That Way
It appears that the Obama transition team is not interested in attempts by Bush and His Evil Minions™ to work together on the bailout, and this is of concern to members of the Bush economic team:
But tension is growing: Treasury officials believe Obama aides are being short-sighted in their refusal to offer more policy and lobbying assistance, while the transition team sees an administration looking to be rescued from its own miscues.
Obama and the people around him most likely think that George W. Bush and Hank Paulson and their people are incompetent and corrupt, and they believe to the degree that these folks do not take action, it is a positive development.
Any attempt to work with Paulson or Bush will imply buy ins of their policy, and that it like buying into the ice concession on the RMS Titanic.
Economics Update
We already knew that Japan was in a recession, but the updated data is worse than the initial data. The preliminary number was 0.1%, the prediction was 0.2%, and it came in at 0.5%.
Barry Ritholtz notes that the 4 Week T-Bill was paying 0%, down from 0.4%, and notes that the only reason to do this is if you expect that the next 4 week T-Bill will have a negative interest rate, i.e. that you pay the government money for the honor of lending them your money.
Turns out that he was a a little bit premature, because the 3 month T-Bills actually traded at negative interest rates, “If you invested $1 million in three-month bills at today’s negative discount rate of 0.01 percent, for a price of 100.002556, at maturity you would receive the par value for a loss of $25.56.”
If you want to feel concerned note that this is the Lowest Rate Since 1929…1929….That year sounds familiar.
In the meantime, the Bank of Canada cut its key rate by 75 basis points to a 50-year low, because they are in recession too.
In real estate, the Pending Home Sales index fell, though not by much, and listing prices for homes have continued to fall.
Calculated Risk has a summary of the commercial real estate market, and it ain’t pretty.
In energy, oil is down a bit, likely spooked by the complications on a bailout deal.
The dollar was mixed today, up a bit vs the Pound and Euro, and down a bit vs. the Yen.
How Very White of Them
So, Merrill Lynch’s John Thain and Mogan Stanley’s John Mack have decided to forgo bonuses this year, after the Andrew Cuomo basically read the riot act to their respective firms.
Asking for millions in bonuses when your company is losing money….Failing upwards….Welcome to George W. Bush’s America.