U.S. Economy: Home Prices Fall Near Depression Pace

Dec. 23 (Bloomberg) -- Sales of single-family houses in the U.S. dropped in November by the most in two decades and resale prices collapsed at a pace reminiscent of the Great Depression, dashing speculation the market was close to a bottom.

Lets see what happens when the Alt-A mortgage holders try to refi.

When money goes global, fraud does too.

Madoff Scheme Kept Rippling Outward, Across Borders

Jim Rogers says most US Banks Bankrupt

Jim Rogers calls most big U.S. banks "bankrupt"
Reuters Thu Dec 11, 2008 1:53pm EST

"What is outrageous economically and is outrageous morally is that normally in times like this, people who are competent and who saw it coming and who kept their powder dry go and take over the assets from the incompetent," he said. "What's happening this time is that the government is taking the assets from the competent people and giving them to the incompetent people and saying, now you can compete with the competent people. It is horrible economics."

NY Times investigations/Editorials

The Reckoning
NY Times Articles in this series are exploring the causes of the financial crisis.

OP-ED COLUMNIST
Two C(J)heers for Rod Blagojevich

By FRANK RICH
Published: December 13, 2008
Need to be a free member of the NY Times to view this article.

Ex-Nasdaq chairman, investor charged with securities fraud, FBI says

Here we go again. The next round of bad news.

Madoff arrested in alleged Ponzi scheme
Ex-Nasdaq chairman, investor charged with securities fraud, FBI says

By Alistair Barr & Ronald D. Orol, MarketWatch
SAN FRANCISCO (MarketWatch) -- Bernard Madoff, former Nasdaq Stock Market chairman and founder of Bernard L. Madoff Investment Securities LLC, was arrested and charged with securities fraud Thursday in what federal prosecutors called a Ponzi scheme that could involve losses of more than $50 billion.
Madoff, 70, of New York, was charged with one count of securities fraud, according to a statement from the Acting U.S. Attorney for the Southern District of New York and the Federal Bureau of Investigation.
The Securities and Exchange Commission filed a complaint in federal court in Manhattan seeking an asset freeze and the appointment of a receiver for the firm run by Madoff.
"We are alleging a massive fraud, both in terms of scope and duration," said SEC Enforcement Bureau director Linda Thomsen in a statement. "We are moving quickly and decisively to stop the fraud and protect remaining assets for investors, and we are working closely with the criminal authorities to hold Mr. Madoff accountable."

Aus $ to rise vs US $

USD Per Australian Dollar Currency Exchange Forecast

Month Date Forecast
Value
0 Oct 2008 0.6870
1 Nov 2008 0.662
2 Dec 2008 0.662
3 Jan 2009 0.709
4 Feb 2009 0.735
5 Mar 2009 0.791
6 Apr 2009 0.819
7 May 2009 0.847
8 Jun 2009 0.823

£500bn worth of loans need refinancing

Guardian UK
High street meltdown
A Nightmare on the High Street as shops fall like dominoes
After the collapse of MFI and Woolworths, other retailers are sure to go under, but there will be some financiers who seize the opportunity to build an empire from the rubble, writes Nick Mathiason
The Bank for International Settlements, the central banks' central bank, said in its annual report last year that there were £500bn worth of loans taken out by private equity firms that need refinancing by 2010. As things stand, many of the private equity-owned retail businesses are struggling to make payments on what were generous bank terms negotiated in the good times.

Spitzer surfaces

We could really use Elliot Spitzer right now to wade into Wall street and send some people to jail.
Instead the man who might have run for president is now reduced to a political commentator.

Too Big Not To Fail
We need to stop using the bailouts to rebuild gigantic financial institutions.
By Eliot Spitzer
Posted Wednesday, Dec. 3, 2008, at 5:59 PM ET

...
In that case, vast sums now being spent on rescue packages might have been available to increase the intellectual capabilities of the next generation, or to support basic research and development that could give us true competitive advantage, or to restructure our bloated health care sector, or to build the type of physical infrastructure we need to be competitive.
It is time we permitted the market to work: This means true competition with winners and losers; companies that disappear; shareholders and CEOs who can lose as well as win; and government investment in the long-range competitiveness of our nation, not in a failed business model of financial concentration and failed risk management that holds nobody accountable.
This point will be all too well driven home when the remaining investment bankers in New York board a CACC jet to fly to Washington to negotiate the terms of a government bailout of yet another U.S. financial institution that was deemed too big to fail.

California's car crisis

From the BBC
California's car crisis
Page last updated at 00:30 GMT, Thursday, 4 December 2008
Cars are stacking up at California ports.
Car salesman say you should not buy a car if your house has just lost 60% of its value.

Buffett's 2003 warning about derivatives was not heeded

Apocalypse is nigh, Buffett tells Berkshire faithful

By Simon English in New York
Last Updated: 9:34PM GMT 03 Mar 2003
Warren Buffett is poised to issue his most doom-laden forecast for the state of the world economy yet, including a damning verdict on the derivatives industry he fears could cause a global financial crisis.
In the upcoming annual letter to shareholders of Berkshire Hathaway, Mr Buffett drops his usual folksy style to warn that banks do not understand the hidden risks lurking on their balance sheets.
He labels derivatives "time bombs, both for the parties that deal in them and the economic system" and "financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal".

Greenspan knew 30+ years ago we should own gold

Gold and Economic Freedom
Alan Greenspan

by Alan Greenspan
1967
From Capitalism: The Unknown Ideal

Perth Mint suspends orders amid rush to buy bullion

Mint suspends orders amid rush to buy bullion
Font Size:DecreaseIncreasePrint Page:Print
Sarah-Jane Tasker | November 22, 2008

Article from: The Australian
FEARS of the unknown long-term effects from the global financial crisis have sparked a new gold rush.

With retail and wholesale clients around the world stocking up on the precious metal, the Perth Mint has been forced to suspend orders.

As the World Gold Council reported that the dollar demand for gold reached a quarterly record of $US32 billion ($50.73 billion) in the third quarter, industry insiders said the race to secure physical gold had reached an intensity that had never been witnessed before.

APEC summit's free trade faith is questioned, protectionism looms

As global crisis worsens, APEC summit's free trade faith is questioned, protectionism looms
By FRANK BAJAK, Associated Press Writer
9:40 AM PST, November 25, 2008
LIMA, Peru (AP) _ Leaders of 21 nations that represent half the global economy fear a raft of new protectionist barriers will strangle commerce as the world slides into a frightening recession.

There are growing signs that developing countries will erect protectionist barriers to weather the crisis, partly because they have seen that time after time, "free trade" agreements have focused chiefly on beating rivals to market.

The rise of consumer credit

Reuters
THE RISE OF CONSUMER CREDIT
U.S. households took on an additional $8 trillion in debt over the past decade as the housing boom drove increased mortgage borrowing. Flush with newfound housing wealth, consumers saw less need for other forms of savings.

http://static.reuters.com/resources/media/editorial/20081117/Consumer-debt.gif

Thomas Jefferson on allowing private banks control of the money supply

“I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.”

Thomas Jefferson, Letter to the Secretary of the Treasury Albert Gallatin (1802), 3rd president of US (1743 - 1826)

The insanity continues...$7.7 Trillion bailout

U.S. Pledges Top $7.7 Trillion to Ease Frozen Credit (Update2)

By Mark Pittman and Bob Ivry
Enlarge Image/Details

Nov. 24 (Bloomberg) -- The U.S. government is prepared to provide more than $7.76 trillion on behalf of American taxpayers after guaranteeing $306 billion of Citigroup Inc. debt yesterday. The pledges, amounting to half the value of everything produced in the nation last year, are intended to rescue the financial system after the credit markets seized up 15 months ago.

VC confidence index down in Q4

The Silicon Valley Venture Capitalist Confidence Index
(Bloomberg ticker: USFSVVCI)

Third Quarter – 2008
(Release date: October 15, 2008)

Mark V. Cannice, Ph.D.
University of San Francisco

The US govt has unlimited funds to bail out the economy

WSJ NOVEMBER 24, 2008
U.S. Agrees to Rescue Struggling Citigroup
Plan Injects $20 Billion in Fresh Capital, Guarantees $306 Billion in Toxic Assets

[TEWS comment] Foreign governments are increasingly unlikely to fund the trillions
required to finance the endless bailout.

Times of London Dooms Day Scenario

From The Times
November 22, 2008
Britain is in no position to laugh at Iceland’s problems
Patrick Hosking Business commentary
Is Britain simply a bigger version of Iceland?

...

Like Iceland, we boast a huge banking industry out of all proportion to the overall economy. Like Iceland, we have an unfunded depositor lifeboat scheme totally unequipped to grapple with failing banks. Like Iceland, our national output is dwarfed by the vast liabilities of our banks. Like Iceland, our banks for years scoffed at relying on domestic depositors to fund their activities and developed a dangerous addiction to wholesale money. Like Iceland, our Government is poised to go on a borrowing spree to try to soften the pain. Like Iceland, our currency is on the skids as foreign investors pull out.

...

The scale of our problems has still not been understood. In essence the domestic banks are largely bust. The Government’s £500 billion bailout plan is primarily designed not to keep banks lending to small firms and to homebuyers but to prevent an unimaginable financial calamity.

Banks provide the very foundations and plumbing of the entire economy. A failure of confidence in them could still bring the entire capitalist edifice tumbling down.

...

At the risk of hyperbole, we should not be worrying about whether this is going to be a thin Christmas for retailers (it is), but whether Britain and the West are about to plunge into a years-long economic Dark Age – complete with mass unemployment and social unrest.

They are peeling the onion slowly

IMF economist says worst of crisis to come: paper
ZURICH (Reuters)
The financial crisis that has engulfed many top banks is spiraling into a broader economic crisis that has yet to peak, International Monetary Fund's top economist Olivier Blanchard told a Swiss newspaper on Saturday.
Blanchard said the crisis would continue for another year and called on governments to promote fiscal expansion and on central banks to cut rates toward zero.
"The worst is yet to come," he was quoted as saying in Finanz und Wirtschaft as he noted how the banking sector's woes had started to spill over into the real economy by hitting the carmaking industry.
"This is only the beginning," he added. "The risk exists that the data will get worse and worse, which would then lead to more pessimistic expectations and accelerate a fall in demand."

possibility of US Treasuries being issued in yen

Japan economists call for 'Obama bonds'
By Kosuke Takahashi

TOKYO - Japanese economists, increasingly concerned that the United States might seek to pay its enormous and growing debt obligations in a weakened US dollar, are looking to the possibility of US Treasuries being issued in yen.

Obama may not fix Wall Street

Rubin Failure on Swaps Dims Odds Obama Will Rein In Wall Street
By Heidi Przybyla
Nov. 19 (Bloomberg)

SOS from Automaker CEO's

Automakers Press High-Stakes Plea for Aid
Senators Greet CEOs' Request With Skepticism
By Lori Montgomery
Washington Post Staff Writer
Wednesday, November 19, 2008
GM chief executive G. Richard Wagoner Jr., right, listens while Chrysler CEO Robert Nardelli speaks during a Senate Banking Committee hearing on the state of the auto industry. GM and Chrysler have said that without a bailout, the firms could run out of cash next year. (By Linda Davidson -- The Washington Post)

Lawmakers Blast Handling of Bailout

Lawmakers Blast Handling of Bailout
In House Hearing, Paulson Defends Response to Fast-Moving Crisis
Paulson: Preserve Flexibility in Bailout
Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke waged a stout defense on Capitol Hill Tuesday of their management of a $700 billion financial bailout.
» LAUNCH VIDEO PLAYER
By Neil Irwin
Washington Post Staff Writer
Wednesday, November 19, 2008; Page A01
Lawmakers accused Treasury Secretary Henry M. Paulson Jr. yesterday of haphazardly managing the $700 billion financial rescue, as fault lines widened over what the government should try next to contain the fallout of the financial crisis.

AIG execs to receive $500 million in bonuses

AIG to Pay Millions To Top Workers
Move Comes on Heels Of Revised Bailout
By Carol D. Leonnig
Washington Post Staff Writer
Friday, November 14, 2008; D01

American International Group plans to pay out $503 million in deferred compensation to some of its top employees, saying it must tap the funds to keep valuable workers from exiting the troubled insurance giant.

News of the payments to top AIG talent comes as the federal government has just put more money into saving the company from bankruptcy, beefing up the total public commitment to $152 billion. Meanwhile, members of Congress are questioning the company's expenditures -- including lavish business trips to resorts -- during a time when taxpayers are on the hook for the bailout.

AIG's troubles stem from bad bets it made guaranteeing and buying risky mortgage investments. On Monday, the U.S. government announced that it would have to expand its rescue of the company to nearly double the $85 billion loan it first provided in September when AIG was unable to pay billions of dollars in claims.

Treasury officials said earlier this week that they had imposed some of the most stringent limits ever on AIG executives' bonuses and compensation in exchange for the broader bailout.

AIG's plans to crack open its deferred compensation bank for payments early next year is conveyed in a two-sentence paragraph buried inside a quarterly financial report filed with the Securities and Exchange Commission on Monday. But some compensation experts and AIG stakeholders yesterday said they considered the exodus of $503 million in AIG money dubious at a time when the company is drenched in red ink. The company reported losses this week that brought total losses to $37.63 billion for the first nine months of the year.

AIG spokesman Nicholas Ashooh said yesterday that the company is desperately trying to keep top talent from leaving, and that giving them deferred compensation works as a carrot to keep them on board. He

The origin of the problem

Life After Salomon Brothers By WILLIAM GLABERSON NY Times
Published: October 11, 1987
LEAD: ONE day this summer, Lewis S. Ranieri had one of the best jobs on Wall Street. The next, at the instigation of Salomon Brothers' chairman John H. Gutfreund, Mr. Ranieri was out; out as vice-chairman of the powerful company and out of Salomon Brothers altogether. The 40-year-old Mr. Ranieri went home with millions of dollars and a reputation as a brilliant competitor that he earned in 21 years as Salomon's rising star.

Instant Karma: Ranieri's bank melts down

Ranieri Becomes Victim of Crisis as Franklin Seized (Update1)
By Ari Levy Nov. 8 (Bloomberg)
The

The end of Wall Street

The end of Wall Street By Shawn Tully, editor at large Fortune Magazine
As Lehman's demise and Merrill's acquisition make clear, a business model built on ramping up risk and leverage simply doesn't work.

LAST UPDATED: SEPTEMBER 21, 2008: 3:11 PM EDT

The End

The End by Michael Lewis Nov 11 2008
The era that defined Wall Street is finally, officially over. Michael Lewis, who chronicled its excess in Liar’s Poker, returns to his old haunt to figure out what went wrong.