[QUOTE=Fusion_power;138876]Shoes are dropping left and right. Freddy earnings not at all a surprise, in the pits. Links are all over the news this morning. Oh what would we do without a government bailout?[/QUOTE]

Apparently the only people "surprised" by Freddie's horrific "earnings" report were - as always - Wall Street "analysts" [and I use the latter term extremely loosely]:

[url=http://www.bloomberg.com/apps/news?pid=20601103&sid=a6_Gdw_0bE.Y&refer=news]Freddie Mac to Slash Dividend After Bigger-Than-Expected Loss; Shares Fall[/url]: [i]Freddie Mac, the U.S. mortgage-finance company hobbled by record foreclosures, slashed its dividend at least 80 percent after posting a quarterly loss that was three times wider than analysts' estimates.[/i]


[url=http://www.nytimes.com/2008/08/05/business/worldbusiness/05yuan.html?ref=world]Booming China Suddenly Worries That a Slowdown Is Taking Hold[/url]
[quote]HONG KONG — Many Chinese have been expecting a post-Olympics economic slowdown, but it has already started and the Games have not even begun.

Chinese factories reported a plunge in new orders last month. Exports are barely growing. The real estate market is weakening, with apartment prices sinking in southeastern China, the region hardest hit by economic troubles.

The trends, which actually have little to do with the Olympics (the Games themselves, which open Friday, are small compared with the size of the economy), are being felt worldwide.

China’s slowing growth is one reason that gasoline prices have fallen in the United States, for example. Similarly, world prices for metals like copper, tin, zinc and aluminum have tumbled in the last several weeks, as voracious Chinese factories have closed, or cut back their consumption.

But while China’s difficulties may reduce inflationary pressures around the world, they threaten to slow further the already tenuous global economic growth.

“China has slowed down a lot already, but it’s going to slow down more,” said Hong Liang, the senior China economist at Goldman Sachs.

Economists expect growth to slip from its recent pace of 11 percent or more annually to as low as 9 or 9.5 percent over the coming year.

Most nations would envy that rate. But 9 percent growth will make it much harder to supply jobs to the millions of Chinese moving to cities from rural areas in search of work. And any slower growth could prove a shock to workers who have been receiving double-digit pay increases each year, as companies struggle to find enough labor to keep factories open.[/quote]


The [i]Financial Times[/i] is publishing a ten-part analysis of the mortgage and credit crisis. I'll post links to and snippets from the ten articles as they appear. Here are links to the first 2 installments:

[url=http://www.ft.com/cms/s/0/a09f751e-6187-11dd-af94-000077b07658,dwp_uuid=13e90304-4dc0-11dd-820e-000077b07658.html?nclick_check=1]The Big Freeze part 1: A year that shook faith in finance[/url]
[quote]Just over a year ago, Hiroshi Nakaso, a senior official at the Bank of Japan, started to fear that the global financial system was heading for a jolt. Back then, most American policymakers assumed that the western banking system was extraordinarily strong. Thus while US mortgage defaults were rising, western officials were convinced that such losses would be easily “contained”.

But as Mr Nakaso watched western markets in July 2007, he had a sense of déjà vu. “I see striking similarities in what I see today with the early stages of our own financial crisis [in Japan] more than a decade ago,” he privately warned international contacts shortly after IKB, a German lender, imploded as a result of subprime losses. “Probably we will have to be prepared for more events to come ... the crisis management skills of central banks and financial authorities will be truly tested.”

His fears proved well-founded.

...

What has made this upheaval so shocking is not simply its scale and duration but the fact that almost all western policymakers and bankers were caught unawares. “If you had said a year ago that America could suffer a banking crisis on the scale of Japan, people would have laughed,” one former senior US regulator admits...
The answer to this seeming mystery lies in the slippery concept of financial “faith”. Over the past decade, western banking has experienced an extraordinary burst of innovation, as financiers have discovered ways to slice and dice their loans – such as the now controversial subprime mortgages – and then turn these into securities that can be sold to investors all over the world.

...

The first of these was a belief that modern capital markets had become so much more advanced than their predecessors that banks would always be able to trade debt securities. This encouraged banks to keep lowering lending standards, since they assumed they could sell the risk on. “Abundant market liquidity led some firms to overestimate the market’s capacity to absorb risk,” says the Institute of International Finance, a Washington-based lobby group, in a recent report. “The same buoyant environment resulted in market pressure for high returns ... and high levels of competition among financial firms.”

Second, many investors assumed that the credit rating agencies offered an easy and cost-effective compass with which to navigate this ever more complex world. Thus many continued to purchase complex securities throughout the first half of 2007 – even though most investors barely understood these products.

But third, and perhaps most crucially, there was a widespread assumption that the process of “slicing and dicing” debt had made the financial system more stable. Policymakers thought that because the pain of any potential credit defaults was spread among millions of investors, rather than concentrated in particular banks, it would be much easier for the system to absorb shocks than in the past. “People had looked at what had happened to the Japanese banks and said, ‘this simply cannot happen here’, because the banks were no longer holding all the credit risk,” one senior European policymaker recalls.[/quote]


[url=http://www.ft.com/cms/s/0/cc160f46-624f-11dd-9ff9-000077b07658,dwp_uuid=13e90304-4dc0-11dd-820e-000077b07658.html]Cost of a wrong turn: The Big Freeze part 2 – the future of banking[/url]
[quote]On Friday August 3 last year, as US financial markets were approaching the summer doldrums and bankers began to head off for holidays on Long Island or Cape Cod, Bear Stearns held a conference call for investors.

Shares in the investment bank, the fifth largest in the world, had fallen as investors worried about the collapse of two hedge funds that it managed and its exposure to the troubled housing market. But few were prepared for the candour of Sam Molinaro, its chief financial officer. Instead of reassuring them about Bear Stearns’ financial condition, he scared them even more: “I’ve been at this for 22 years. It’s about as bad as I have seen it in the fixed income market during that period . . . [what] we have been seeing over the last eight weeks has been pretty extreme.”

Later that afternoon, Jim Cramer, the former hedge fund manager, whose show, Mad Money, on the CNBC financial cable channel had become a cult among US retail investors, took to the air to sound his own alarm. Mr Cramer chided Bear Stearns for admitting publicly that it was struggling to cope but then launched into an angry tirade. He lambasted Ben Bernanke, chairman of the Federal Reserve, for not cutting interest rates aggressively, and said bank executives were calling him in distress. “We have Armageddon. In the fixed income markets, we have Armageddon,” he shouted, as Erin Burnett, his co-host, tried to calm him down.

If all of this sounded bizarrely alarmist at the time, a year later it reads like a fair assessment of the havoc that was breaking out in financial markets as the liquidity that had washed through the US economy and the rest of the world abruptly froze.

As Americans defaulted on subprime mortgages in increasing numbers, bond markets became chaotic. Most of these mortgages had been securitised by banks and sold to investors in complex collateralised debt obligations, which were rated by credit agencies led by Moody’s and Standard & Poor’s. Investors knew that the lower-rated tranches would be at risk in any downturn, but few predicted the damage to investment grade securities (see below).

The chaos in the US housing market and structured finance rippled into the wholesale markets in which banks raise short-term finance. Trust evaporated as financial institutions hoarded cash and withdrew credit from others. The London interbank offered rate, the main measure of interbank lending rates, rose sharply.

The effect was devastating. Six weeks later, Northern Rock, the mortgage lender that relied on interbank funding, was rescued by the UK government after other institutions re­fused to lend to it. Seven months after Mr Molinaro’s warning, Bear Stearns itself succumbed to the market crisis. It was given emergency funding by the Federal Reserve and forced to sell itself to JPMorgan Chase for $2.1bn (€1.3bn, £1.1bn), paying the ultimate price for the market’s loss of confidence.[/quote]

8 States in Deep Fiscal Trouble | AIG Misses B.I.G
 

[url=http://globaleconomicanalysis.blogspot.com/2008/08/eight-states-in-deep-fiscal-trouble.html]Eight U.S. States in Deep Fiscal Trouble - More to Come[/url]
[quote]The worst states as a percentage of budget gaps vs. general funds are in order: California (21.3%), Arizona (17.8%), Nevada (13.5%), Rhode Island (12.6%), Florida (11.0%), New York (9.1%), New Jersey (7.6-10.6%), and Alabama (9.2%).[/quote]
Some prime bankruptcy candidates there. Here in CA, the governor, in addition to ordering the temporary slashing of state payrolls and salaries until a budget is passed, has also done something anathematic to the Republican "talk smaller government, do the opposite, talk about balancing the budget, but instaed lower taxes, spend like there`s no tomorrow and leave future generations to clean up the mess" playbook, namely opened the door to a "temporary" 1% sales tax hike. That would surely help close the budget hole *if* consumer spending magically stopped plummeting - which is unlikely to happen, and raising the sales tax to close to 10% [once the local component thereof is factored in] would likely push consumers to spend even less on non-food items [food is not taxed], which would negate a significant chunk of the intended revenue-boosting effect. Typically, still no serious talk about addressing the real root of the problem, namely out-of-control state spending which needs to be *permanently* slashed. It`s like listening to the Republicans in Washington prattle about "increasing domestic oil production" as some alleged panacea for high oil prices, and not putting consumption reduction front and center as the #1 way to reduce the impact of high oil prices. Pandering, posturing buffoons, the lot of them. If the CA slaes tax hike is approved, expect it to quickly become "permanent" as the state bureaucracy quickly becomes dependent on the added revenue stream, which will simply serve as an excuse to not address the real problem.


[url=http://biz.yahoo.com/rb/080806/aig_results.html?.v=1]Reuters | Insurer AIG posts 2nd-quarter loss on write-downs[/url]
[quote]NEW YORK (Reuters) - American International Group Inc (NYSE:AIG - News), the world's largest insurer, posted its third consecutive quarterly net loss, hurt again by the write-down of derivatives linked to bad mortgage investments.

AIG said on Wednesday its second-quarter net loss was $5.36 billion, a loss of $2.06 a share, compared with net income of $4.28 billion, or $1.64 a share, in the year-earlier quarter.

AIG said it recorded $5.57 billion in second quarter unrealized market valuation losses on credit default swaps.[/quote]
Seeing as we are once again in delusional-bull "bad news is good news" market mode, the Dow will probably be up 300 points tomorrow, perhaps 500 if Fannie Mae reports a gargantuan loss, and oil plunges another massive FIFTY CENTS PER BARREL! After all, gasoline dropping from $4 per gallon to $3.90 will instantly cure this whole "housing and credit crisis" silliness, the housing price bubble will quickly reflate, and the above states will magically have their budget deficits turn into surpluses.

But this is exactly as I predicted - plunging oil demand due to a deepening [and soon to be global] recession leading to a price drop, which the "rational, forward-looking, all-facts-discounting" Wall Streeters would misinterpret as a bullish indicator. If oil drops to the $100 level, we might see the Dow back above 12,000, if no major banks blow up or other fiscal crisis hits in the next month or two. But the big bank blowup is a matter of "when and how many", not if, at this point. Even if the government keeps bailing furiously, they can only delay, not prevent, the ensuing asset-price destruction.

[i]EDIT: The AIG earnings were apparently another *huge* surprise to the financial "analysts" - according to [url=http://www.bloomberg.com/apps/news?pid=20601103&sid=aiHLxxFku1HU&refer=news]Bloomberg[/url]:
[quote]Ten analysts recommend investors accumulate shares of AIG, eight have ``hold'' ratings, and none say ``sell,'' according to Bloomberg data through yesterday.[/quote]
You can bet that tomorrow, if AIG shares gap down big at open, multiple analysts will issue as-ever-timely post facto sell ratings.[/i]

Paulson taps Morgan Stanley for GSE "advice"
 

[url=http://money.cnn.com/2008/08/05/news/economy/paulson/index.htm]Paulson taps Morgan Stanley for Freddie, Fannie advice[/url]
[quote]Morgan will provide advise on capital markets, capital structure, strategy and mortgage-related matters through January 17. It will not be paid for the work, beyond accepting $95,000 for expenses.[/quote]
Gosh, how very magnanimous of Morgan to "not be paid for the work ... beyond expenses." [Whatever that means - is that like an auto repair shop charging you only for parts, but not labor, when you buy an oil filter and install it yourself? Anyway, in this game, a hundred thousand bucks is peanuts, so let's move on.]

I`ll cede the rest of the acerbic commentary on this one to [url=http://market-ticker.denninger.net/archives/532-And-So-It-Begins-The-NEXT-Implosion.html]Karl Denninger[/url]:
[quote][i]...in the "bullshit update" department, we have Morgan Stanley being "hired" by Treasury to analyze what proper capitalization of Fannie and Freddie might be (and whether they meet that.)

Only one problem:
[b]
"A Treasury spokeswoman said Morgan Stanley would not have access to Fannie's and Freddie's internal books in conducting its analyses."
[/b]
They're going to render an opinion without looking at the books.

Astounding.

PS: They don't need to do any actual work. The GSE's "regulatory capital requirements" permit them to buy and hold mortgage securities with less than fifty basis points of capital behind them. That's right - less than 1/2 of 1%, or a leverage ratio of more than 200:1. What more do you need to know?[/i][/quote]
Ah, so now we see why Morgan Stanley Auto Body and Dent Removal isn`t charging for labor - since they won`t actually be looking at the books [the only thing that really matters], they won`t be doing any labor. Basically, they'll have a nice lunch at a Five Star restaurant with the Fannie and Freddie execs [probably old frat buddies], begin with a nice aperitif of soothing lies about "adequate capitalization", move on to an appetizer of gazpacho and stuffed portobello mushrooms eaten to the lilting strains of "housing will recover in 2009", then finish with a raspberry creme brulee warmed with flaming cognac and topped with "we`ll take your word for it", and exit with a nice "check, please" for the 95 thou.

The same Denninger article also has a nice (especially if you`re a fan of really gory horrorshow cinema) discussion of the Pay-Option ARM time bomb. Tick, tick, tick...

[url]http://news.yahoo.com/s/ap/20080807/ap_on_bi_ge/pending_home_sales[/url]

So which is more important, the fact that the pending sales index is 12% lower than it was in June 2007? or that the June reading is 5.3% higher than the May reading? Anybody think this is kind of like a dead cat bounce? Whatever you do, don't be taken by the 'spin' of the story.

DarJones

Pending Home Sales Up 5%, but...|Retail Sales Grim
 

[QUOTE=xilman;138844]It warms my heart to know that both socialism and hypocrisy are alive and well in the USA.[/QUOTE]

True, but I prefer the nifty summary descriptor of America now having becoming a "[url=http://freedominourtime.blogspot.com/2008/07/big-bailout-america-as-full-spectrum.html]full-service kleptocracy[/url]". [Still chuckling about that blogger`s imagery regarding the prospects of Obama "the chosen one" saving us from disaster].

DarJones, your questioning of the "fabulous 5% explosion" in pending home sales announced by the NAR propagandists is well-founded - more on that below.

[b]Dead Fred Walking:[/b]

Mish Shedlock puts a little perspective on the "badder than expected" numbers from Freddie Mac yesterday, and quickly shows that it`s gonna get much, much worse:

[url=http://globaleconomicanalysis.blogspot.com/2008/08/fannie-freddie-reality-check-big.html]Fannie, Freddie Reality Check: The Big Bailout Is Coming[/url]
[quote]Freddie, in the second quarter, wrote down the value of its subprime and Alt-A portfolio by $1 billion. Freddie is claiming that they can hold these securities to maturity and not have to take a loss, because over time, the dire predictions of defaults on these loans just won’t come to pass. Freddie’s subprime and Alt-A portfolio is about $130 billion. Think of that. Just $1 billion in writedowns.

Anyone following Alt-A mortgages knows that Freddie's claim is simply preposterous.[/quote]


[url=http://www.forbes.com/2008/08/07/briefing-opener-walmart-markets-equity-cx_ra_0807markets21.html?partner=yahootix]Forbes.com | Wal-Mart Whoas Hit Wall Street[/url]
[quote]The problem with artificial stimulus is that it's artificial. As soon as the benefit of the U.S. government's $600-per-person spending bribes began to wear off, American consumers cut back on their shopping, sending a chill through Wall Street on Thursday as the major retailer store chains announced their July sales numbers.

Wal-Mart wasn’t alone. Other retailers also reported sagging sales – bad news since the back-to-school shopping season is just around the corner. Meanwhile, Limited Brands and Gap, along with higher-end retailers like Saks, which operates Saks Fifth Avenue, also reported sales declines.

Consumer spending accounts for more than two-thirds of U.S. economic activity.

Meanwhile, the U.S. Labor Department reported that the number of American workers filing new jobless claims increased by a seasonally adjusted 7,000, to 455,000 last week, the highest level since late March 2002, and significantly higher than Wall Street’s expectations of around 430,000.

The combination of the increasing number of new claims for unemployment benefits mixed with the decline in consumer spending signals that the outlook for the U.S. economy going forward looks grim.[/quote]


[url=http://money.cnn.com/news/newsfeeds/articles/apwire/17603df9f44646ab1427e32bcab36694.htm]Toyota reports 28 percent plunge in fiscal first-quarter profit on US sales slip, strong yen[/url]
[quote]NEW YORK (Associated Press) - Toyota's fiscal first-quarter profit plunged 28 percent from the previous year as slipping North American sales, a strong yen and rising material costs dented the earnings of the Japanese automaker.

Toyota Motor Corp. has so far avoided the kinds of deep losses racked up by U.S. automakers such as General Motors Corp. and Ford Motor Co. But even Toyota, Japan's top automaker, is seeing the momentous pace of its sales growth slow amid a U.S. downturn and soaring gas prices.[/quote]
Note that even though Toyota makes lots of high-gas-mileage vehicles [including the Prius, which they can`t manufacture fast enough to keep up with demand], they also have a large chunk of the SUV market in the U.S., and the collapse of that is probably the key factor behind the aforementioned "slipping North American sales". They are still in far better shape than their American-based rivals.


[url=http://www.cnbc.com/id/26073744/site/14081545?__source=yahoo%7Cheadline%7Cquote%7Ctext%7C&par=yahoo]Pending Home Sales Good, But Here's Reality Of It All[/url]
[quote]Another housing indicator today, and for a change the number was actually in the positive. Pending home sales, which is an index from the National Association of Realtors that measures the number of contracts signed each month (as opposed to closings, which is their Existing Home Sales monthly number) [url=http://www.cnbc.com/id/26072378/site/14081545/?site=14081545]rose 5.3 percent in June after falling nearly 5 percent in May[/url].

This would indicate that existing home sales may be improving. Okay, good news. But here comes the realism. It doesn't exactly mean housing has bottomed because there are a whole lot of ingredients in the soup that housing is in right now, and the bulk of them are still pretty bitter.

Prices for homes are still falling; in fact the CEO of Freddie Mac said we are only [url=http://www.cnbc.com/id/15840232/site/14081545/?video=815192571&play=1]halfway through the price correction[/url]. Foreclosures are still rising, and Realtors even admit that [b]foreclosed homes could account for 40 percent of existing home sales[/b]. And then there's credit. Mortgage rates are rising and Fannie Mae is now increasing fees on loans in markets where values are falling the most.[/quote]


[URL=http://biz.yahoo.com/rb/080807/citigroup_auctionrate.html?.v=10]Citigroup settles with NY, agrees to buy back $7 billion auction-rate securities[/url]

The eventual amount of ARs Citi will end up buying back could go as high as $20 Billion, according to some estimates I`ve seen. Other big-finance players will likely have to take these now-illiquid, nearly worthless "assets" back onto their balance sheets as well, or face similar lawsuits. Even better, I expect many will have to tap the Fed`s emergency discount window [a.k.a. "Your tax dollars work"] in order to allow them to fund the buybacks. Predictably, on the [i]Yahoo Finance[/i] message board for Citi, we once agin see numerous posts to the effect that "[url=http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks_C/threadview?m=te&bn=2895&tid=289501&mid=289501&tof=8&frt=2#289501]Citi has finally come clean[/url]" and "[url=http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks_C/threadview?m=te&bn=2895&tid=289482&mid=289482&tof=9&frt=2#289482]worst is now behind them[/url]". Uh-huh - anyone truly believing that is free to load up on the stock. Of course thanks to the SEC`s unprecedented gerrymandering of the rules of the "free market", folks who disbelieve the "bottom is in" claims are no longer free to short Citi and the other institutions on the magical "Friends of Hank Paulson" list. This poker game is highly rigged for now, but a bad hand is still a bad hand - it`s just more expensive now to call the bad-handers bluff.


Amusing historical analogy with Paulson`s recent proposal to repackage mortgage-back CrapSecurities as "covered bonds" and thus somehow make them magically less toxic:

[url=http://www.bloomberg.com/apps/news?pid=20601109&sid=amy5j45Oa9Ag&refer=news]Hank the Great? Paulson Takes a Page From Frederick With Covered-Bond Plan[/url]: [i]In 1769, short of funds to rebuild Prussia after attacks by Russia, Sweden and Austria, Frederick the Great let aristocrats, churches and monasteries raise money by pledging their estates as security to investors.[/i]
[quote]Covered bonds get higher ratings than notes sold by banks and pay less in interest because they augment the issuer's repayment pledge with assets that can be sold in a default.[/quote]
Gee, I wonder where banks are going to get those backing assets, given the nightmarish state of most of their balance sheets. Lemme guess - something involving "temporary loan of U.S. Treasuries" or similar way of putting the taxpayer on the hook.
[quote]Paulson's blueprint, unveiled last month, allows banks to sell bonds backed by mortgages made to homeowners who provide down payments of 20 percent and are current on their loans.[/quote]
Those kinds of mortgages are the diametric opposite of the kinds of subprime and liar-loan mortgages banks are most desperate to fob off at any kind of nonzero valuation. This sounds like an attempt to solve a problem that doesn`t exist. A nonstarter ... Alas, Hammerin` Hank is no Frederick the Great [not for lack of trying, mind you], and his [i]Pfandbriefe[/i] amount to "same rotting meat in new sausage skins". But Hank, while falling short of Friedrich-der-Grosse-like, uh, "Grossness", may still be aspiring to be the next Alexander Hamilton - as one of the readers of Russ Winter`s [i]Wall Street Examiner[/i] blog [url=http://wallstreetexaminer.com/blogs/winter/?p=1828]suggests[/url]:
[quote]As Russ has been saying, the GSE debt is now fully backstopped by the Treasury (JULS[sup]*[/sup]) and now the FOH rats can create new corporations funded by FCB’s and various favored pigmen which will issue covered bonds against the very best assets on the books to allegedly “rescue” FNM/FRE. And when this rescue fails (which it inevitably must) then the covered bond holders take all the great assets for pennies on the dollar and viola!, instant bank recapitalization.[/quote]
Now *that* would be a scheme even the esteemed Mr. Hamilton would be proud of.

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

[sup]*[/sup]([i]JULS = "Joe Ultralight Sixpack", a Winterian euphemism:for "the average American consumerBot")[/i].

Arnie to hold breath until CA budget passed
 

[b]Schwarzenegger: Oh Lords of COBOL, hear my plea[/b]

No, it`s not the title of an episode of [i]Battlestar Galactica[/i] ... but in BG lingo, California`s finances are definitely fracked on multiple fronts:

[url=http://www.sacbee.com/111/story/1132588.html]California state computers can't handle pay cut, controller says[/url]
[quote]If Gov. Arnold Schwarzenegger wants to issue minimum-wage checks to 200,000 state workers in less than a month, he may want to rehire any semi-retired computer programmers he terminated last week.

The massive pay cut would exhaust the state's antiquated payroll system, which is built on a Vietnam-era computer language so outdated that many college students don't even bother to learn it anymore.

Democratic state Controller John Chiang said Monday it would take at least six months to reconfigure the state's payroll system to issue blanket checks at the federal minimum wage of $6.55 per hour, though Schwarzenegger insists such a change should occur this month.

...

The state payroll system is based on the COBOL, or Common Business Oriented Language, programming language – a code first introduced in 1959 and popularized in the 1960s and 1970s.

"COBOL programmers are hard to come by these days," said Fred Forrer, the Sacramento-based CEO of MGT of America, a public-sector consulting firm. "It's certainly not a language that is taught. Oftentimes, you have to rely on retired annuitants to come back and help maintain the system until you're able to find a replacement."

Retired state employees who have returned to work part-time for the state were among thousands of workers laid off last week.

Forrer said the system has tens of thousands of lines of code, so it is time-consuming to find and replace salaries for each job classification on an individual basis.
[b]
California has tried to modernize its payroll system throughout the past decade, dating back to former Controller Kathleen Connell. It has faced numerous delays as state legislators have avoided investing the $177 million it now will cost.[/b][/quote]
Typical ... and the worst of it is, I`ll bet a handful of talented coders working in a Silicon-Valley-startup fashion could do it for 1% of that estimated cost, and do it much faster and probably better than whichever [i]Big Expensive Computer Consultancy Corp[/i] outfit the state will eventually "hire based on a highly competitive bidding process" to do the work. Oooh, scary - "tens of thousands of lines of code" ... and probably ten new lines required to make the needed change.

And speaking of CA`s budget woes:

[url=http://www.bloomberg.com/apps/news?pid=20601109&sid=aAjM9j4K4v4U&refer=news]Not Even 2% Fed Funds Help Munis Amid Record Rates[/url]
[quote]Aug. 7 (Bloomberg) -- The Oakland, California, agency that runs toll bridges across the San Francisco Bay is proving that the era of cheap money for municipal borrowers is over.

This week the Bay Area Toll Authority sold more than $700 million of bonds at rates as high as 5.34 percent to refinance debt that cost 4 percent last year. That leaves less money to finance projects, such as bridge improvements.

``The cost of money just went way up,'' said Brian Mayhew, the agency's chief financial officer. ``You may have projects on the cusp that are going to be difficult to do.''

Almost a year after the Federal Reserve began to cut its target rate for overnight loans between banks to 2 percent from 5.25 percent, borrowing costs for states, cities, hospitals and municipal authorities are going in the opposite direction.

The $2.66 trillion municipal debt market is reeling from a series of jolts springing from a decline in the creditworthiness of insurers that once backed half of all securities sold at the same time the economy teeters on the edge of a recession, eroding tax revenue. Bond prices have fallen an annualized 4.75 percent so far this year, the most since tumbling 11.3 percent in 1999, Merrill Lynch & Co.'s Municipal Master Index shows.

``The world is falling apart'' for borrowers, said Robert Doty, the president of American Governmental Financial Services, an advisory firm in Sacramento.

...

That's not what Fed Chairman Ben S. Bernanke had in mind when he starting slashing the Fed's target rate in September as the credit market seized up. Instead, the economy continued to worsen, eroding tax revenue.[/quote]
Of course that`s not what Bernankruptcy Ben had in mind - he had in mind bailing out the Wall Street banks and brokerages. Getting back to the particular case of my home state, due to endless dithering on the state budget, CA may have to start borrowing billions of dollars as early as next week - wonder what kind of interest rate they`ll be paying on that?

BoA subpoenaed | Consumers hit credit cards hard
 

[QUOTE=ewmayer;138936]The eventual amount of ARs Citi will end up buying back could go as high as $20 Billion, according to some estimates I`ve seen. Other big-finance players will likely have to take these now-illiquid, nearly worthless "assets" back onto their balance sheets as well, or face similar lawsuits.[/QUOTE]
at the risk of repeating myself [see previous posts about IndyMac's insolvency], "that didn't take long":

[url=http://biz.yahoo.com/rb/080807/bankofamerica_subpoenas.html?.v=1]Reuters | Bank of America gets subpoenas, reports SEC probe[/url]
[quote][i]Thursday August 7, 4:35 pm ET
[/i]
NEW YORK (Reuters) - Bank of America Corp (NYSE:BAC - News), the largest U.S. retail bank, said on Thursday that it has received subpoenas and requests for information from federal and state government agencies over auction-rate securities.

The Charlotte, North Carolina-based bank also said it has received subpoenas, interrogatories or civil investigative demands from a number of state attorneys general regarding municipal derivatives transactions from 1992 to the present.

Bank of America said it is cooperating on both matters.

Separately, the bank said Countrywide Financial Corp, the mortgage lending giant it acquired last month, has responded to subpoenas from the U.S. Securities and Exchange Commission, and that the agency is conducting a formal investigation.[/quote]


[url=http://www.bloomberg.com/apps/news?pid=20601103&sid=agPKcrc4TVgg&refer=news]U.S. Consumer Credit Climbs $14.3 Billion, More Than Economists Forecast[/url]
[quote]Aug. 7 (Bloomberg) -- U.S. consumers borrowed more than twice as much as economists forecast in June as a decline in home equity forced Americans to fund purchases with credit cards and other loans.

Consumer credit rose by $14.3 billion, the most since November, to $2.59 trillion, the Federal Reserve said today in Washington. In May, credit rose by $8.1 billion, previously reported as an increase of $7.8 billion. The Fed's report doesn't cover borrowing secured by real estate.

Consumers are using credit cards and loans to cover expenses as falling home values cause banks to restrict access to home- equity lines. The Bush administration sent out tax rebate checks in the past three months to help support spending, which accounts for more than two-thirds of the economy.
[b]
``This is definitely showing some level of spending activity on the part of the consumer following the fiscal stimulus bounce,'' said Maxwell Clarke, chief U.S. economist at IDEAGlobal Inc. in New York. ``The impact of the stimulus has put our problems off for tomorrow.''[/b][/quote]
I`ve no clue what point Mr. Clarke is trying to make here. "Some level of spending activity" - WTF is that supposed to imply? Well, yes, consumers did spend *some* money even after they used their government bribe-checks to fill up the gas tank of their SUV - is that somehow surprising? And what these data show is that despite falling spending on non-absolute-essentials, consumers are still getting themselves into rapidly deeper hock on the credit-of-last-resort front. Expect massive defaults on that front in the coming year.
[quote]Economists forecast an increase of $6.3 billion in consumer credit, according to the median of 32 estimates in a survey conducted by Bloomberg News. Estimates ranged from gains of $3 billion to $8 billion. [/quote]
So even the "highball" estimate [pun fully intended] was way, way short of the mark. As usual, "professional economists" show their utter cluelessness. Scary thing is, these are the kinds of idiots and their idiotic worse-than-random-guessing computer models running the Federal Reserve and other key departments of the Ministry of Truth. The same folks who still don`t think the U.S. is in a recession, because their bogus computer models and fudged statistical data haven`t "indicated one" yet.

Well the other show has dropped. If Freddy Mac was hung out to dry, how do you describe Fannie Mae's $2.3 billion loss? and they raised/are raising $7 billion in "additional funding". What does that tell you they think of the current market condition?

DarJones

Look at the Dow soar 200 points and you'll be able to answer that question. The one-word answer starts with an 'm'.

[QUOTE=garo;139006]Look at the Dow soar 200 points and you'll be able to answer that question. The one-word answer starts with an 'm'.[/QUOTE]

The equivalent five-word answer [at least if you pay U.S. taxes] is, "Your tax dollars at work." After all, the U.S. Treasury now has essentially unlimited power to buy shares of FNM and FRE at whim, in order to prop up the price. Quite a [url=http://ichart.finance.yahoo.com/b?s=FNM]smart recovery made by FNM[/url] after the post-earnings-announcement selloff. Not that that in itself is unusual - quite often simply a result of the would-be bottom feeders moving in. But with Paulson & co. now able to engage in unlimited price manipulation behind the scenes, one can simple no longer assume that the price of the GSEs is being set by the "free market". OTOH, Paulson is surely a sharp trader, so there`s actually an opportunity for him to make some serious money here. If he and the Treasury Boyz [hypothetically speaking] bought a couple tens of millions of shares at the opening gap-down price and then managed [by way of continued buying "at market price " on lower volume] to run the price up a buck or so, then slowly sold off [using limit orders] at the higher prices, they could have booked a fat profit. I wonder if there was any transparency built into the housing bailout bill, so the public would have some of finding out what kind of trading the Treasury is doing of the GSEs. If anyone has time and motivation to dig into this and find out, please post your findings and relevant links.

To be fair, oil is down sharply today, dollar up, and the "oh so forward looking" and egregiously misnamed "smart money" types who watch CNBC [a.k.a. Bubblevision] seem to be taking those as bullish signs, even though both are quite the opposite. Oil is falling to to dropping demand rather than increasing supply, and the dollar is not strengthening so much as e.g. the Euro is weakening on signs that the recession is starting to bite hard there, as well.

On to today`s news ... given all the "temporary" government interventions into the "free" markets of the past several months, I thought this quote quite appropriate: A former CA governor - who was himself a great fan of running up huge deficits once he attained the highest office in the land - put it nicely:

[b]"There is nothing more permanent than a temporary government program" - Ronald Reagan[/b]

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

Here's a link to today`s Bloomberg piece on Fannie Mae`s quarterly results and outlook - similarly dismal to Freddie`s, and both companies have huge lt-a loan exposure which they haven`t yet begun to mark-to-market in any significant way [to say nothing of the core prime-loan portfolio, which is also deteriorating in value, even if the default risk remains "relatively" low]::

[url=http://www.bloomberg.com/apps/news?pid=20601103&sid=a1Q.uMr71kSY&refer=news]Fannie Mae Slashes Dividend to 5 Cents a Share After Fourth Straight Loss[/url]: [i]Fannie Mae, the largest U.S. mortgage- finance company, cut its dividend 86 percent after posting a loss that was more than three times analysts' estimates and said the worst housing slump since the Great Depression is deepening.[/i]


Another Bloomberg headline from today which at first glance looks positive ["worker productivity up!"] but is really a recessionary indicator, because it translates to "employers slashing payrolls and squeezing remaining workers to do more":

[url=http://www.bloomberg.com/apps/news?pid=20601103&sid=aQlzSZTWikZE&refer=news]Worker Productivity in U.S. Rises 2.2% Amid Job Cuts; Labor Costs Moderate[/url]: [i]Worker productivity in the U.S. grew in the second quarter as employers trimmed payrolls to weather the economic slump.[/i]
[quote]``Historically, productivity growth has tended to suffer during periods of energy-price shocks,'' David Greenlaw, chief U.S. fixed-income economist at Morgan Stanley in New York, said in a note to clients. ``The current year-over-year growth rate of just a shade under 3 percent demonstrates an impressive degree of resilience.''[/quote]
...or maybe workers are so worried about their jobs that they are working longer and harder in an effort to keep them. In any event, the productivity numbers are from the BLS, a.k.a. the Ministry of Truth, so need to be taken with a very large proverbial grain of salt, i.e. in the "sign is probably correct, magnitude and import highly uncertain" sense.

Other major news today ... bond insurer MBIA posted [url=http://www.bloomberg.com/apps/news?pid=20601103&sid=aGmj4X8WAxDw&refer=news]better than expected[/url] fake earnings [read the article to see why I say "fake" - hint, the key phrase is "declining value of liabilities", a nifty accounting trick being used by many financial firms these days to put lipstick on the metaphorical pig] ... UBS, a.k.a. "Wir sind nicht ein Crook!" followed its brethren-in-nicht-crookedness Citigroup and Merrilll and quickly [url=http://www.bloomberg.com/apps/news?pid=20601103&sid=a7K5TOB799HI&refer=news]agreed to settle[/url] an auction-rate-securities probe buy buying back nearly $20 Billion in AR securities at face value. The speed at which these folks are settling these cases tells me they either [a] Know they have no legal leg to stand on and that they would likely lose in court and actually have the perpetrators-in-chief face jail time, or more benignly [b] They figure no good can come from the adverse publicity surrounding litigation, especially as all are desperately trying to raise capital, a key part of which is convincing the herd of Greater Fools that [i]"all is well ... no more nasty surprises to come this time around ... no, really! The last sixteen times we were lying, but this time around we`re not!"[/i]

[QUOTE=ewmayer;139010]...with Paulson & co. now able to engage in unlimited price manipulation behind the scenes, one can simple no longer assume that the price of the GSEs is being set by the "free market".[/QUOTE]

Again circumstantial evidence, but if you look how conspicuously flat FNM and FRE's share price was for the last 3/4 of today's trading [figures below], especially compared to their usual daily charts and today's action in other major financial shares, that certainly smacks of price control by someone operating behind the great "Free Market" Proscenium.