This is just embarrassing.
Harry Reid has no spine at all, and Obama is not coming out well in this either.
We are now seeing reports that they are trying to cut a deal to let him take his seat as a Senator, and now we have reports that the Obama team is pressuring Senate leadership to seat Burris and end this rather bizarre bit of theater.
This is just stupid.
Umm….Holy excrement?
The payroll firm ADP Employer Services just released its report as to job losses in December, 693,000 jobs lost…..In one month…..The ironically named Challenger, Gray & Christmas is also saying that layoffs reached a 5 year high in 2008.
The BLS will release its numbers on Friday, but I rather expect them to hew pretty closely to ADP’s numbers, particularly since ADP has been working to make its survey match the government numbers.
It’s no wonder that late loan payments are higher than at any point since 1980, there are a lot of people out of work.
In retail, we saw U.S. retail sales fell 0.8% YOY in the week following Christmas, and mall vacancies are at a 10 year high, rising from 6.6% to 7.1%, the highest quarterly jump ever recorded, and the highest vacancy rate ever recorded.
We are also seeing mortgage applications down for the first time in 4 weeks, though that could people waiting for the Federal Reserve’s purchase of mortgage backed securities to drive rates lower.
We are seeing similarly grim economic data in Europe too.
About the only bright news is that GM is saying that it does not expect to need more in the way of loans…After $13.4 billion in tax dollars to GM and $6 Billion to GMAC, I would certainly hope so.
The jobs number drove the dollar down, and traders are starting to go long on the Canadian dollar, which implies that they expect commodities, oil and timber come to mind for Canada, to start going up again.
That being said, expectations were not met today, with oil falling by 12% on reports of large inventories…..They are literally running out of tanks to store the stuff.
Retail gasoline, however has risen for the 9th straight day, and is now higher than it was a month ago…..My thinking here is that there was an overshoot on the way down, and (assuming that oil stays around $50/bbl) we will be looking at $2/gal gas.
It appears that a bill to allow bankruptcy judges to modify mortgages will be introduced in the House some time this week.
Two snaps up.
Neither Franken nor Burris were sworn in today.
Burris was turned away because Harry Reid is taking a stand on principle, which he will shortly fold on, and Franken was not seated because the Republicans are using Reid’s brief flirtation with principle as a fig leaf for politics.
And I just heard on Countdown that the head of the Senate Rules Committee, Diane Feinstein,* has said that in fact Burris’s paperwork is in order.
This is FUBAR.
*Full disclosure, my great grandfather, Harry Goldman, and her grandfather, Sam Goldman were brothers.
Madoff, that is.
The prosecution wants his bail revoked. It appears that he has been transferring a significant amount of valuables to 3rd parties.
It appears that he has mailed in excess of $1million in items to friends and relatives:
The decision by Bernard Madoff and his wife to ship jewelry and others valuables to family and friends may land him behind bars sooner rather than later.
Assistant U.S. Attorney Marc Litt of the Southern District of New York told a magistrate judge Monday that Madoff and his wife Ruth mailed in excess of $1 million in valuables late last month despite a court order in a related civil case requiring the accused mastermind of a multi-billion dollar Ponzi scheme not to dissipate assets.
Most of the material has since been returned and handed over to federal authorities, but Litt said the transfer amounted to changed conditions that warrant Madoff detention as he awaits trial or a guilty plea on one of the largest frauds in history.
Defense attorney Ira Sorkin of Dickstein Shapiro said the mailing of the valuables, which included watches, a pair of cuff links and even a $200 pair of mittens, had nothing to do with allowing Madoff to remain free on bail.
$200 mittens?
Silvio Berlusconi dis something that George W. Bush could only dream of, he partially privatized the Italian social security system.
Well, the “beneficiaries”, of the policy, the roughly 1.2 million people who made the switch to privately managed accounts, are now screaming like defrauded Italians, (which they are) because their accounts have gone south with the markets, and the management fees have taken most of what is left, and now they want their bailout.
How many times does this have to happen until people realize that taking a safety net, and making it a revenue stream for a broker is a bad thing?
Just so you know, the whole auto industry is in a tailspin.
All the auto manufacturers are seeing sales fall by more than 30%, with Chrysler falling by a whopping 53%, year-over-year.
My guess as to Chrysler is that the American public realizes on some unconscious level that Cerberus is a pump and dump operation that cannot be trusted.
In real estate, construction spending was down by 0.6% from October to November, which was better than the consensus estimate of 1.4%, which to my mind is a serious WTF number. 1.4% a month is Sta-Puft Marshmallow man time.
In central-bank land, we have reports that the Federal Reserve and the ECB are working together to avoid deflation, which indicates that central bankers on the both sides of the pond are scared.
The ECB’s only charter is to control inflation, but now they are trying to figure out how to get inflation back into their economies.
No surprise that we are still seeing a flight to safety that is driving the dollar up against both the Euro and Yen.
In energy, oil is up again, largely on concerns about the Middle East, and retail gasoline was up 1.4¢/gal, the 6th straight day in a row, which seems to indicate that gas prices will be rising in the near future.
Finally, here is a pretty picture:
It’s a measure of the ISM Manufacturing index (I mentioned this last week). The graph is courtesy of The Bonddad Blog, and he accurately describes this as “cliff diving”.
Well, it looks like cram-downs, the ability of bankruptcy judges to rewrite the terms and the principal in mortgages for primary residences is back on the table. (A copy of the article that does not require registration is here)
They can already do this for rental properties, and for the vacation homes of rich folks, but for your home, it has been prohibited by law since (IIRC), the late 1970s, because it was argued that the mortgage industry was heavily regulated, so cram-downs were unecessary….Yeah…I know.
The problem now is that many of the worst mortgages cannot be modified because they are held by dozens, if not hundreds, of people, any of whom could sue if they did not like the terms of a voluntary readjustment of a mortgage.
Additionally, this gives lenders a real incentive to negotiate in good faith, and allows the bankruptcy judges to move against the insane fees that are charged by some mortgage management companies.
It’s the last day of the year, and we are finally getting a picture of how retail did during the holiday season, and it is not pretty.
ShopperTrak is revising its original holiday sales figures downward, from a sales increase of 0.1% and a traffic drop of 9.9%. which was already pretty grim, to a sales decrease of 2.3% with a 16% drop in traffic.
The estimates now are that 2009 is not going to be good either and that over ¼ of all retailers are at significant risk for bankruptcy (see graph pr0n above), which will hose suppliers too.
The unemployment claims numbers from last week were better than recent reports, 492,000 new applications, down 94,000 from the last week’s 586,000, and the 4 week moving average fell by about 1%.
I would note, however, that there are two things that make this news less good than it sounds, first, we are talking about the week of Christmas which means that everything was shut down on last Thursday, and, perhaps more significantly, continuing jobless claims continued to rise, hitting a 26 year high of 4.5 million.
Real estate still appears grim, with Manhattan office rents down about 25% (h/t Calculated Risk), though mortgage application activity remains at a 5 year high.
My real question though would be as to the number of mortgages granted, not the number of applications, which are likely multiple refi applications driven by even lower mortgage rates.
Additionally, the Federal reserve is to start buying mortgage backed securities, so they are going even deeper into the sh&%pile.
In currency, the dollar is up, and infact it’s up against the Euro this year, the first time 2005 that this has happened.
I guess that investors still think of the US Dollar as a safe haven, though the same cannot be said about the Ruble, which is down again.
In the stock market the VIX, the Chicago Board Options Exchange Volatility Index, fell below 40 for the first time since October 2, to 39.9, which indicates that traders are a bit less twitchy.
But that’s only a bit, because before the Lehman collapse, it was around 25, and a year and a half ago, it hung around 10-15.
In energy, oil rose about 5½ bucks/bbl, to settle at $44.60/bbl.
This is good news for GM, as much of the auto sales decline is due to problems getting auto loans, so the ability of the auto finance company to access both TARP funds and the dozen or so the new Federal Reserve lending programs.
One of the things that must happen now is that Cerberus and GM must both reduce their stakes in GMAC to conform with banking regulations.
We are now starting to see the breakdown of customs in the financial community that would have been unthinkable only a year ago.
Case in point, Deutsche Bank refusing to execute a call option on €1 of subordinated debt, which has the Bank of China ready to cut off all contact with them.
Here is the short version of what just happened:
The thing is that while Deutsche is under no legal obligation to call in the bonds, this sort of rollover has been a routine way of doing business for a very long time.
In some ways these conventions are at least as important in international finance as the actual laws and regulations under which these institutions operate, and we are seeing them break down in significant ways.
You have to love this:
If you go back about 20 years, you come across a bank regulator known as Darrel W. Dochow who overrode the recommendation of bank examiners in the matter of Lincoln Savings and Loan, of Keating 5 fame, that the institution be seized because it was insolvent.
Of course, a little while after that, it collapsed, at far greater cost to the taxpayers than had they acted earlier.
So, where is Mr. Dochow now? He’s the western regional director for the Office of Thrift Supervision (OTS), and he figures prominently in the failure of IndyMax.
It seems that he signed off on a back-dated transfer of money to the now failed thrift:
The Office of Thrift Supervision’s western regional director, Darrel W. Dochow, allowed IndyMac Bank to receive $18 million from its parent company on May 9 but to book the money as having arrived on March 31, according to the Treasury Department’s inspector general, Eric M. Thorson. The backdated capital infusion allowed IndyMac to plug a hole that its auditors had belatedly found in the bank’s financial results for the first quarter. If IndyMac had not been able to plug that hole retroactively, its reserves would have slipped below the minimum level that regulators require for classifying banks as well capitalized.
Though the $18 million transaction was minuscule in comparison to IndyMac’s $32 billion in assets, it had tremendous significance. If IndyMac had lost its well-capitalized status it would not have been allowed to accept “brokered deposits” from other financial institutions. Brokered deposits are typically high-yielding certificates of deposit arranged by brokers and sold to savings and loans. IndyMac relied heavily on brokered deposits, which amounted to $6.8 billion or 37 percent of its total deposits last spring.
“This is very significant in terms of whether IndyMac was over or under the O.T.S.’s thresholds for capital,” said Bert Ely, a veteran banking analysts in Alexandria, Va. “But what’s really troubling is that it seems to have been going on elsewhere.”
What is even more troubling is that this guy still had a job in bank regulations, and what’s more, he had a senior position.
Why this man was allowed to do anything that did not involve asking, “Do you want fries with that?” Is the real question here.
I don’t know if Darrel Dochow ever took a dime, or a dinner, or even something as inconsequential as a calendar or a pen, from anyone related to the industries that he regulated, but it’s clear that even if he broke no laws, he is corrupt, and he should be kept away from balance sheets and regulation for the rest of his natural life.
When a reporter asked the banks about what they were doing with their bailout funds, they refused to answer, except one bank with a vague, “reducing foreclosures,” which is, you know, like a lie, since foreclosures cost lots of money up front, and hit the balance sheet immediately.
One bank said, “No comment,” and then asked the reporter not to quote them on that.
Seriously, some people need to go to jail for a very long time.
So, I come across this story describing how Bush’s push for home ownership, aka the “Ownership Society,” was responsible in part for the housing crash.
I tend to agree with the Shrill One, when he says that Bush’s support of home ownership had the same role in the housing bubble as his support for marital fidelity did in the overall rate of adultery in the USA, and that his most significant contribution was in stripping away regulation that protected people from predatory lendors.
That being said, I cannot allow this quote go unanswered:
Then his Treasury secretary, Henry Paulson Jr., told him that to stave off disaster, he would have to sign off on the biggest government bailout in history. Bush, according to several people in the room, paused for a single, stunned moment to take it all in.
“How,” he wondered aloud, “did we get here?”
You just cannot read that and then not show a clip of the seminal music video from Talking Heads’ Once in a Lifetime.
Yes, it now appears that there is no segment of the finance industry too opaque to receive aid from the Federal Reserve.
This time, it’s hedge funds that are the recipient of Helicopter Ben’s largesse, being allowed access to the $200 billion Term Asset-backed Securities Loan Facility (TALF).
This is like lending Sweeney Todd money to open a combined barber – butcher school.
So now, the least watched channel in the history of cable has decided to follow Bloomberg’s lead and sue the Federal Reserve for more information on who is getting their bailout money.
Truth be told, I think that I published this just for the picture.
So Hank Paulson wants Congress to releasing the remaining $350 billion in TARP bailout funds for banks, but the White House is simultaneously saying that they may not formally request this until Bush is out of office.
I’m not sure what is going on, but until Hank Paulson and His Evil Minions™ are out of the office of the Secretary of the Treasury, Congress should not release another dollar.
A quick look at the proposal, and it looks to be remarkably non-punitive.
Politico has the bullet points:
Binding Terms and Conditions: The binding terms and conditions established by the Treasury will mirror those that were voted favorably by a majority of both Houses of Congress, including:
- Firms must provide warrants for non-voting stock.
- Firms must accept limits on executive compensation and eliminate perks such as corporate jets.
- Debt owed to the government would be senior to other debts, to the extent permitted by law.
- Firms must allow the government to examine their books and records.
- Firms must report and the government has the power to block any large transactions (> $100 M).
- Firms must comply with applicable Federal fuel efficiency and emissions requirements.
- Firms must not issue new dividends while they owe government debt.
Targets: The terms and conditions established by Treasury will include additional targets that were the subject of Congressional negotiations but did not come to a vote, including:
- Reduce debts by 2/3 via a debt for equity exchange.
- Make one-half of VEBA payments in the form of stock.
- Eliminate the jobs bank.
- Work rules that are competitive with transplant auto manufacturers by 12/31/09.
- Wages that are competitive with those of transplant auto manufacturers by 12/31/09.
- Note that wages here means all forms of current and past employee remuneration, or at least it does to Bush and His Evil Minions™,and so would have the effect of competing the Big 3 (Big 2½) with their large number of retirees against the transplants who have basically no retirees, which if strictly enforced, would mean not paying much more than minimum wage.
- Note also that these are “targets”, and not “binding terms and conditions”, and so will be subject to some level of sanity.
In any case, meeting the terms has a deadline of March 30 of next year, which kicks everything to Obama.
I think that this is why Obama has said very little here, because if he were engaged, it would give Bush the cover to do something much worse.
It appears that the Federal Reserve is using the same ratings agencies that rated the various subprime and Alt-A mortgage backed securities as AAA to evaluate the collateral offered by financial institutions as a part of the Federal Reserve’s sh%$pile for cash program.
So, Helicopter Ben is relying on the ratings agencies that called moldering corpses AAA….Nice…
So, the OTS and the Treasury Dept have formally approved new more consumer friendly rules. Unfortunately, we will have to wait until 2010, so expect for banks to bone you as much as possible in the interim.
