[QUOTE=Fusion_power;139771]I happen to disagree with your position cheesehead. I would tend to believe that ANY discontinuity in the debt market would have a catastrophic effect on the US economy. Let me be specific in stating that the effects we see from the mortgage market crisis would be amplified many times over should the international market suddenly shun US debt vehicles.[/QUOTE]
Exactly - the FCBs [foreign central banks] don't even need to dump their existing holdings of IOUSAs, they just need to not show up at the next debt auction - and those auctions happen regularly and with distressingly large bond volumes these days.

There's an analogous problem already occurring with the numerous troubled banks and brokerages who desperately need to raise cash - the more it becomes clear just how troubled their financial state is, the more difficult it becomes for them to raise cash, and the cost of doing so [typically by issuing high-dividend-yielding preferred shares] saddles them with massive dividend payment obligations which only makes their cash-flow situation worse. Minyanville has an excellent [url=http://www.minyanville.com/articles/wmu-KEY-zion-RF-ncc-gm/index/a/18647]two[/url] [url=http://www.minyanville.com/articles/fnm-fre-mbhi-sov-ftbk-jpm/index/a/18650]part[/url] series this week describing just how dire the straits are in which the various financial institutions which made big markets [and for a time, big money] in the real estate bubble:
[quote]We’ve seen some $505 billion in bank write-offs so far in this credit crisis. It’s serious naiveté to assume that this will be the extent of it. Most of the write-offs have been mortgage-related.

We haven’t yet seen the write-offs that will come as consumers start defaulting on credit cards, auto loans and other consumer debt. Nor have we seen the losses that will come from commercial real estate or corporate loans as the recession progresses.

You can’t write off something until it goes bad, although you can increase your loan loss provisions. This of course hits earnings and your stock price and thus your ability to raise new equity. It presents a very difficult dilemma for bank managers and investors deciding whether to invest or go away.

Sober-minded analysis from the IMF suggests that the total write-offs by all banks may be $1 trillion. Dr. Nouriel Roubini is much more alarmed; he puts potential losses at closer to $2 trillion.

That means that banks are going to have to increase their loan loss provisions, hitting both earnings and capital. And that means they’ll have to raise more investment capital and equity at a time when their stock prices are low.

It’s a vicious spiral. Banks have less capital, so less able to lend to the very businesses that need the money; without said money, businesses will be less able to pay their current loans, which means that banks have less capital. Rinse and repeat.

Ultimately, banks are going to have to raise a lot more capital than anyone who's buying financial stocks today imagines. And it's largely going to be expensive capital. Professor Bennet Sedacca wrote about this last week, in [url=http://www.minyanville.com/articles/MER-AXP-C-jpm-LEH-fre/index/a/18553]No Credit for Financials[/url]:

[i]Financial entities like banks, broker/dealers, regional banks, finance companies and insurance companies need credit at reasonable rates in order to finance themselves. I`ve been concerned for many years that the door to raise new capital in debt markets would finally shut on banks, brokers and others.

For many regional banks like KeyCorp (KEY), Zions (ZION), Regions (RF) and National City (NCC), the door is already shut; if they wanted to raise capital in the debt market at the levels at which their outstanding issues regularly trade, they would have to pay 12 to 15% - hardly economic levels. GM bonds trade near 27% yields. Washington Mutual (WMU) trades north of 15%.

Then there are the "good banks"; like JPMorgan (JPM) and Wells Fargo (WFC). JPMorgan recently sold $600 million of preferred stock at 8.75%; Wells Fargo sold $1.3 billion at 8 5/8%, plus underwriting fees.

Below, I offer up a few guesses as to what other issuers would have to pay to issue preferred stock.[/i]
[code]
* [b]Lehman Brothers:[/b]........11-13%
* [b]Merrill Lynch:[/b]..........11-12%
* [b]Morgan Stanley:[/b]..........9-10%
* [b]Citigroup:[/b]...............9.5-10.5%
* [b]CIT Group:[/b]..............12-15%
* [b]Fannie Mae/Freddie Mac:[/b].15%
* [b]Keycorp:[/b]................11-13%
* [b]National City:[/b]..........13-15%
* [b]Wachovia:[/b]...............10-12%
* [b]Zions:[/b]..................13-15%
* [b]GM/GMAC:[/b]................Not possible.
* [b]Washington Mutual: [/b].....Not possible.
* [b]Ford:[/b]...................Not possible.[/code][/quote]
The only reason the USgov has been able to get away with paying hugely sub-market rates for their debt is the "backed by the full faith and credit" clause. If the FCBs [possibly in conjunction with a downgrade of the U.S. government's credit rating by one or more of the major ratings agencies, which is unlikely at present but not to be ruled out] decides that the risk of default [or dollar devaluation, which has much the same effect on their holdings] is in fact much larger than justified by the below-market interest rate U.S. Treasuries fetch, they might very well become no-shows, and start to try quietly selling off their debt holdings. If enough selling-off occurs it becomes impossible to do quietly, and then there's a risk of a "rush for the exits" scenario like that Fusion_power alludes to.

Foreign governments selling Fannie/Freddie
 

I found this article linked from the internet version of the biggest national newspaper in norway: [url]http://e24.no/makro-og-politikk/article2618291.ece#VG[/url]
Mightily funny automatically translated version:[url]http://www.tranexp.com:2000/InterTran?url=http%3A%2F%2Fe24.no%2Fmakro-og-politikk%2Farticle2618291.ece%23VG&type=text&text=&from=nor&to=eng[/url]

I've seen some speculation on this thread concerning this matter. The main points of the above article is that the value of the bonds issued by fannie and freddie held by the sovereign wealth fund of the norwegian government (second largest in the world according to [url]http://en.wikipedia.org/wiki/Sovereign_wealth_fund#Largest_sovereign_wealth_funds[/url] )has decliend from about 127 billion NOK (23.5 billion USD) to 88 billion NOK (16.2 billion USD). The article doesn't say how much of the decline is from the bonds losing value and how much is from reduced holdings. An analyst is quoted as saying the investment is safe because the institutions are "too big to fail", and that the US government will prevent a bankruptcy.

IndyMac Losses Rise | Home Price Plunge Continues
 

[QUOTE=KriZp;139969]I found this article linked from the internet version of the biggest national newspaper in norway: [url]http://e24.no/makro-og-politikk/article2618291.ece#VG[/url]
Mightily funny automatically translated version:[url]http://www.tranexp.com:2000/InterTran?url=http%3A%2F%2Fe24.no%2Fmakro-og-politikk%2Farticle2618291.ece%23VG&type=text&text=&from=nor&to=eng[/url]

I've seen some speculation on this thread concerning this matter. The main points of the above article is that the value of the bonds issued by fannie and freddie held by the sovereign wealth fund of the norwegian government (second largest in the world according to [url]http://en.wikipedia.org/wiki/Sovereign_wealth_fund#Largest_sovereign_wealth_funds[/url] )has decliend from about 127 billion NOK (23.5 billion USD) to 88 billion NOK (16.2 billion USD). The article doesn't say how much of the decline is from the bonds losing value and how much is from reduced holdings. An analyst is quoted as saying the investment is safe because the institutions are "too big to fail", and that the US government will prevent a bankruptcy.[/QUOTE]

Yes, the bondholders are in much better shape than the common sharesholders would [or dare I say will] be. Nice Bloomberg article on some of the options the U.S. Treasury has here:

[url=http://www.bloomberg.com/apps/news?pid=20601103&sid=aD3ccv6_sz9E&refer=us]Paulson Might Weigh Whom to Hurt in Any Fannie Rescue[/url]

=========================

[url=http://www.nakedcapitalism.com/2008/08/buiter-provokes-wrath-at-jackson-hole.html]Ex-Bank of England official slams Fed[/url]
[quote]Former Bank of England policy maker Willem Buiter sparked the biggest debate at the Federal Reserve's annual mountainside symposium, saying the central bank pays too much heed to the concerns of financial institutions.

"The Fed listens to Wall Street and believes what it hears," Buiter said yesterday in a paper presented to the Fed`s conference in Jackson Hole, Wyoming. "This distortion into a partial and often highly distorted perception of reality is unhealthy and dangerous."[/quote]


[url=http://money.cnn.com/2008/08/26/news/economy/fdic_banks/index.htm]FDIC Problem bank list keeps growing[/url]: [i]FDIC says list of troubled banks in 2nd quarter grows to 117 with $78 billion in assets - up from 90 banks, $26 billion in assets in 1st quarter.[/i]
[quote]Banks included on the problem list are considered the most likely institutions to fail, although few institutions actually reach that point - just 13% of banks on the FDIC's problem list have failed on average.

The FDIC, one of the regulators of the nation's banking system, doesn't reveal the names of the banks on the list, but it does give the total assets of these institutions.

That number was $72 billion during the quarter, up sharply from $26.3 billion the previous quarter. The lion's share of that figure included the Pasadena, Calif.-based mortgage lender IndyMac, which boasted assets of $32 billion before it collapsed in mid-July.

Including IndyMac, nine banks have failed so far this year.[/quote]
Of course IndyMac WASN'T ON THE "PROBLEM" LIST until right before it went into receivership, so it seems the relative changes in number of banks and total holdings matter more than the "just 13% have failed" bullcrap. And on the "FDIC has adequate reserves" [paraphrasing FDIC head Sheila Bair] front:

[url=http://www.reuters.com/article/americasMergersNews/idUSN2637860820080826]IndyMac Loss Estimate Doubles[/url]
[quote] WASHINGTON, Aug 26 (Reuters) - A U.S. banking regulator said the failure of mortgage lender IndyMac Bancorp Inc (IDMC.PK: Quote, Profile, Research, Stock Buzz) will deliver a bigger blow to its insured deposit fund than originally expected.

The Federal Deposit Insurance Corp said on Tuesday it now expects IndyMac's failure in July to cost its insurance fund $8.9 billion, compared with the previous expected range of $4 billion to $8 billion.[/quote]


[url=http://money.cnn.com/2008/08/26/real_estate/Case_Shiller_home_price_report/index.htm]Home Prices Plummet a Record 15.4%[/url]: [i]National prices fell 15.4% in past 12 months. Las Vegas was the worst-hit city, while Denver and Boston saw the biggest price increases.[/i]
[quote]NEW YORK (CNNMoney.com) -- National U.S. home prices fell a record 15.4% in the second quarter compared with last year, according to a report released Tuesday.

The latest S&P/Case-Shiller national home price index is down 18.2% from its peak in the second quarter of 2006, and there are no signs that the pace of home-price declines is easing. The second-quarter loss was even larger than the record 14.2% drop posted in the first three months of 2008.

Both the Case-Shiller 10-city index (down 17%) and 20-city index (down 15.9%) also posted record year-over-year losses in the second quarter.

A small piece of good news: In June the pace of monthly declines slowed ever so slightly compared with May. Prices for the 10-city index declined 16.9% year-over-year and the 20-city index was down 15.8%.
Too much inventory


...with mortgage loans difficult for many home buyers to obtain and foreclosure rates still rising, inventories of homes for sale continue to expand, depressing home prices. There is now an 11.2 month supply of existing homes on the market.

"The inventory problem has not been solved," said Larson.

Peter Schiff, president and chief global strategist at Euro Pacific Capital, said the market is only about halfway to its bottom. In 2005, he predicted the then-coming bust would cut 30% off national home prices.

Losses will continue because there has been no fundamental change in markets, he said. Despite abundant foreclosure sales, inventories are still growing and lending availability is still shrinking.

And, people are not inclined to buy in a falling market. They wait for it to hit bottom. "If prices fall another 20%, that's the time to buy," said Schiff.[/quote]

German Recession Fear| Bill Miller Bets on GSEs
 

[url=http://www.fxstreet.com/news/forex-news/article.aspx?StoryId=86196f5c-3fbf-495b-bef6-9b6d558ef262]Plunging German Confidence Fans Recession Fear[/url]
[quote]FRANKFURT (Dow Jones)--Plunging German business and consumer sentiment this month have reinforced expectations that the euro-zone's biggest economy has stalled and might already be in a recession.

The latest business survey released Tuesday by the Ifo economic research group reflected the gloomiest corporate outlook in three years. An August survey of consumer confidence from the German market research group GfK showed consumer confidence at a five-year low.[/quote]


[url=http://money.cnn.com/2008/08/27/news/economy/bankruptcy/index.htm]Bankruptcy filings up nearly 30%[/url]
[quote]Bankruptcy filings surged 29% in the 12 months that ended June 30, according to government figures released Wednesday.

Total filings rose to 967,831 from 751,056 a year earlier.

Business filings jumped more than 41% to 33,822 from 23,889 in the year-ago period. Personal filings totaled 934,009, up 28% from last year.[/quote]


[url=http://dailybriefing.blogs.fortune.cnn.com/2008/08/27/bill-miller-on-the-mend]Fannie, Freddie shares surge as bailout fears ease[/url]
[quote]Fannie Mae (FNM) and Freddie Mac (FRE) rallied for the third straight day Wednesday, clawing back a bit from their recent free fall. Merrill Lynch became the latest firm to say talk of a government takeover of the mortgage lenders is premature, with analyst Kenneth Bruce writing Wednesday that any action by Treasury may first involve buying the companies’ debt, rather than making an equity investment that would wipe out shareholders. By doing so, Treasury Secretary Henry Paulson would seek to ease the strain on the housing market caused by rising mortgage rates, while leaving the companies’ shareholder-owned structure intact for the purpose of raising private capital down the road.

Holman Jenkins makes a similar point in The Wall Street Journal and then goes Bruce one better, saying that once the bailout hysteria has passed Legg Mason fund manager Bill Miller will prove to have been “prescient when he doubled down on Freddie’s shares.” Freddie’s 80% rise, to about $4, off Friday’s low certainly helps in that regard, though it may yet be a while before the shares return to the levels where Miller was buying, which reach well into the $20s and above. But then, Miller’s continued buying of Freddie shares suggests that he’s determined to see his against-the-grain bets prove out, no matter how long it takes.[/quote]

Durable Goods,GDP Numbers: Altius, Fortius, Bogius
 

[url=http://money.cnn.com/2008/08/27/news/economy/durable_goods.ap/index.htm]Durable-goods orders surge 1.3%[/url]: [i]Jump in demand for commercial aircraft helps boost orders of manufactured goods beyond expectations.[/i]

[url=http://www.bloomberg.com/apps/news?pid=20601103&sid=aebPB1ZZyvqA&refer=news]U.S. Economy Grew Faster Than Estimated in Second Quarter on Export Gains[/url]: [i]The U.S. economy expanded faster than previously estimated in the second quarter, helped by a surge in exports that will probably wane as Europe and Japan head toward recessions.[/i]

A little perspective - the kind the delusional Wall Street permabulls routinely ignore, because it`s "not on the page A1, leftmost column of the Wall Street Journal" - on the "better than expected" durable goods numbers and 2Q GDP revisions:

[url=http://bigpicture.typepad.com/comments/2008/08/durable-goods-d.html]Goldman Sachs’ Jan Hatzius: Durable Goods Orders: Don’t Be Fooled by Inflation[/url]
[quote]Durable goods orders beat expectations with a 1.3% month-on-month increase in July. But the apparent strength is due to higher prices, not stronger activity. In fact, deflating orders by the producer price index for durable manufactured goods shows a 9.4% year-on-year drop in real orders, the worst since early 2002.

Even if we adjust for the unfavorable year-on-year comparisons that partly explain this plunge, the recent data look surprisingly similar to those seen in the runup to the 2001 recession.[/quote]


[url=http://www.bloomberg.com/apps/news?pid=20601109&sid=azae4HCCn2z4&refer=news]Spain May Suffer From ECB Lending Curbs on Collateral as Expansion Falters[/url]: [i]Spain's economy, brought to the brink of a recession by surging global credit costs, may find money even harder to come by when the European Central Bank tightens its lending practices.[/i]
[quote]Spain's banks have stored up 89 billion euros of their own asset-backed securities, more than any euro-region country, because the ECB accepts them as collateral in auctions, according to UniCredit SpA. Now the central bank wants to change the rules, ECB council member Yves Mersch said in an interview on Aug. 23, a move that may leave Spain holding the bag.

...

Spain's banks have relied on cheap money from the ECB to help provide credit to consumers and companies even as the economy is buffeted by a real-estate downturn. Without the ECB, the country would be more dependent on foreign investors, who are demanding higher returns before committing funds.

ECB officials have agreed to adjust collateral rules in response to some banks' attempts at ``gaming the system,'' Mersch told Bloomberg News at the Federal Reserve's annual retreat in Jackson Hole, Wyoming. Axel Weber, another council member, said in an interview published yesterday in Frankfurt that the ECB must ensure its rules are ``not abused.''

[b]Fitch Warning[/b]

The share of asset-backed bonds in the collateral deposited with the ECB jumped by a third last year. What's more, the quality of the assets underlying those bonds has deteriorated, Fitch Ratings said in a report in May. Spanish banks are pooling ``higher risk'' mortgages and consumer loans to back the bonds, Fitch said.[/quote]


[b]Karachi Journal: The REAL Way to Deal With a Bear Market[/b]

On a humorous note, saw this on a financial blog today - I just *know* Chris Cox of the SEC is studying it closely as we speak:
[quote]"Worried about falling stock prices? Do what the Pakistanis did: decree that prices cannot fall. In response to a 36 percent decline in the Karachi Stock Exchange this year, the board of directors of that Exchange announced that shares would not be allowed to trade below their closing level as of Wednesday."[/quote]

[quote=ewmayer;140212][B]Karachi Journal: The REAL Way to Deal With a Bear Market[/B]

On a humorous note, saw this on a financial blog today - I just *know* Chris Cox of the SEC is studying it closely as we speak:[/quote]I thought that by "humorous note", you meant that the "board of directors of that Exchange announced that shares would not be allowed to trade below their closing level as of Wednesday" part was fictitious -- but it's not.

From Reuters at [URL]http://in.reuters.com/article/asiaCompanyAndMarkets/idINISL9244120080828[/URL]:

[quote=Aftab Borka]
KARACHI, Aug 28 (Reuters) - Pakistan's main share index ended slightly higher on Thursday after exchange and government authorities set a floor for the index following heavy losses in recent days.

The Karachi Stock Exchange index opened more than 1 percent up but later slipped back to end 0.64 percent, or 58.85 points, higher at 9,203.78.

Some dealers saw the floor-freezing move as bolstering the confidence of investors, at least in the short-term.[/quote]Those who've read the Tom Clancy book I mentioned earlier may notice a [I]distant[/I] resemblance (distant enough not to be a spoiler, I think) to something in the novel.

[QUOTE=cheesehead;140244]I thought that by "humorous note", you meant that the "board of directors of that Exchange announced that shares would not be allowed to trade below their closing level as of Wednesday" part was fictitious -- but it's not.[/QUOTE]

Perhaps I should have been clearer - the joke was not the story itself [which is genuine], but rather the idea that the U.S. SEC might actually seriously consider a similar action. But you know, given the flagrant way the SEC has manipulated the rules for the options markets and given certain Wall Street big finance firms "special" status insofar as enforcement of the rule against naked shorting is concerned, I wouldn`t put anything past the financial cabal which the Fed, the Treasury and the SEC have become, now that they are fully and unabashedly in league with the longstanding mafia that is Wall Street.

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

[url=http://money.cnn.com/2008/08/29/news/economy/consumer_spending/index.htm]Personal income in largest drop in 3 years[/url]: [i]Consumers are spending more even though they have less cash in their pockets as the stimulus wave passes, according to a government report.[/i]


[url=http://money.cnn.com/2008/08/28/news/companies/news.lehman.fortune/index.htm]Lehman to Lay Off 1,500[/url]: [i]The troubled investment bank's plans to shed up to 6% of its workforce amid a slumping stock price, concerns about its future.[/i]


[url=http://money.cnn.com/2008/08/29/real_estate/sellers_concessions_in_buyers_market/index.htm]Homebuyers turn screws on desperate sellers[/url]: [i]It's a buyer's market, and many are trying to take full advantage of it by demanding major home repairs, warranties on home appliances, and even tax rebates.[/i]
[quote]NEW YORK (CNNMoney.com) -- A rock-bottom price just isn't enough for buyers these days - it's a starting point. If the furnace is out of date, they'll demand a new one. Cracked driveways have to be repaved, and dirty carpeting torn out and replaced. All at the seller's expense.

Buyers are in the driver's seat and they know it. They're using that leverage to pry more concessions out of desperate sellers than they ever dreamed of during the bubble.

"'Now it's my turn,' is the attitude," said Mike Byrd, a real estate agent with SLO Home Store in San Luis Obispo, Calif. "Some buyers are really putting the screws on."

In New England, buyers are demanding that sellers pay to fill up a home's heating oil tank. In California, sellers are forking over closing costs. Nearly everywhere, buyers are insisting that sellers purchase a home service contract providing a one year warranty on all of a home's appliances.

New central air-conditioning systems, a year of condo association fees and even two weeks in Hawaii are just a few of the incentives that sellers are having to employ these days, according to Byrd.

And buyers are getting it all in writing.

"[During the boom] buyers usually accepted the property as-is, and we even occasionally offered to pay the seller's state and county transfer taxes," said Washington D.C. based agent John Sullivan, who is also president elect of the National Association of Exclusive Buyer's Agents. "No more."
[/quote]
My comment: Ain`t karma a bitch?


[url=http://money.cnn.com/2008/08/28/news/companies/fdic_banks/index.htm]What the problem bank list isn't telling us[/url]: [i]More banks are in trouble nowadays, but some experts wonder just how accurate a picture the FDIC's list paints of the industry.[/i]
[quote]NEW YORK (CNNMoney.com) -- The government's latest assessment of the nation's financial system showed that many more small banks are in trouble. But what the report didn't say may speak volumes.

On Tuesday, the Federal Deposit Insurance Corp. revealed that the number of institutions on its so-called "problem bank" list jumped to 117 during the second quarter, up from 90 just three months earlier.

That list has gained greater attention lately as many banks continue to suffer losses stemming from the deteriorating housing market and slowdown in the broader economy. Nine banks have failed so far this year, including IndyMac, a California-based mortgage lender with assets of $32 billion at the time of its collapse.

But experts contend that the list is a lagging indicator and, as a result, may not provide an accurate picture of the current health of U.S. banking industry.

Typically, the list is published some 8 weeks after all of the nation's banks have reported their latest quarterly results.

What's more, notes Mark J. Flannery, a professor of finance at the University of Florida's Warrington College of Business Administration, [b]regulators base their decision on what banks tell them.

And since current accounting standards give banks some discretion about when they recognize bad news, they may want to put it off as long as possible.[/b]

Exactly how bank regulators determine which institution is worthy for the "problem list" remains a process shrouded in secrecy.

But what is known is that the health of a bank tends to be based on several factors including the amount of capital an institution has on hand to protect against losses, the quality of its assets, its management, and its earnings, liquidity and sensitivity to market risk.

Bank regulators - which in addition to the FDIC include the Office of the Comptroller of the Currency (OCC) and Office of Thrift Supervision (OTS) - then give the banks a report card, assigning a composite rating based on the bank's performance in each category. Those that receive a rating of 4 or 5 are put on the list.

[b]A selective list?[/b]

Since the failure of IndyMac in mid-July, however, speculation has emerged that regulators may have exercised some discretion about which institutions they put on the confidential list.

The FDIC's first-quarter problem list, released at the end of May, clearly did not have IndyMac on it. That's because the FDIC reported that the 90 banks on the list had a combined $26.3 billion in assets - less than the size of IndyMac. That suggested that the only problem banks at the time were smaller community banks.

Experts say that if IndyMac had been on the list, the total asset size of troubled banks would have been much higher. That might have prompted a witch hunt of sorts, with the market looking for which bank was in trouble and possibly causing a run on that institution.

"It is kind of the issue of the snake swallowing the watermelon," said Bert Ely, an Alexandria, Va.-based banking industry consultant of Ely & Co. "I can assure you if IndyMac had been on the list in late May, there would have been an immediate hunt."

Others pointed out that bank failures, as a rule, don't happen to be overnight phenomena.

Tim Yeager, a professor of finance at the University of Arkansas' Walton College of Business who previously worked for the Federal Reserve Bank of St. Louis, said regulators probably knew about the state of IndyMac for some time even though it wasn't on the first-quarter problem list.

"It is telling that IndyMac was not on the problem list the quarter before," said Yeager. "Usually bank failures like that are pretty slow events - it is unlikely [federal regulators] were surprised by that."

The OTS, IndyMac's primary regulator, has maintained that it was aware of the company's problems, but was in the midst of an examination of the lender that did not wrap up until after the first quarter was over. At that point, IndyMac was placed on the list.[/quote]


In related news, FDIC chair Sheila Bair has made repeated assurances that FDIC is adequately capitalized [even though IndyMac looks like it`s going to eat up upward of 20% of their regulatory capital] - so why are they looking to open a credit line with the U.S. Treasury?


[url=http://globaleconomicanalysis.blogspot.com/2008/08/cash-strapped-fdic-considers-tapping.html]Cash-Strapped FDIC Considers Tapping Treasury[/url]
[quote]Federal Deposit Insurance Corp. Chairman Sheila Bair said Tuesday her agency might have to borrow money from the Treasury Department to see it through an expected wave of bank failures.

Ms. Bair said the borrowing could be needed to cover short-term cash-flow pressures caused by reimbursing depositors immediately after the failure of a bank. The borrowed money would be repaid once the assets of that failed bank are sold.

The last time the FDIC borrowed funds from Treasury came at the tail end of the savings-and-loan crisis in the early 1990s after thousands of banks were shuttered. That the agency is considering the option again, after the collapse of just nine banks this year, illustrates the concern among Washington regulators about the weakness of the U.S. banking system in the wake of the credit crisis.[/quote]

Unemployment Spikes to 5-year high
 

[url=http://money.cnn.com/2008/09/05/news/economy/jobs_august/index.htm]Jobless rate soars to 6.1%[/url]: [i]Unemployment surges to 5-year high as employers cut workers for eighth straight month. 2008 job losses on track to hit 1,000,000[/i]

Interestingly, the two consistent "bright spots" this year in the jobs numbers have been the government-jobs and the service sector [though even the latter contracted in this latest report]. Mish Shedlock [url=http://globaleconomicanalysis.blogspot.com/2008/09/jobs-decline-8th-consecutive-month.html]puts it nicely in perspective[/url]:
[quote]A total of 57,000 goods producing jobs were lost (higher paying jobs), and for the second time this year service sector jobs were lost. Government, the last pace one wants to see jobs, added 17,000 jobs or the service sector would have contracted more.
...
This was a very weak jobs report. And once again the [i][Bureau of Labor Statistics'][/i] Birth/Death Model assumptions are absurd. Last month the birth/death adjustments were back in orbit somewhere near Mars. This month they returned to deep outer space where they have been every month this year except for January and July. ... There is simply no way in a real estate crash that net new construction businesses are added. Nor are there net new professional and business services when mortgage and financial activity is collapsing. A quick check on the [url=http://ml-implode.com/]Mortgage Lender Implode-O-Meter[/url] shows that 280 Major US lending operations have imploded.
...
If you start counting all the people that want a job but gave up, all the people with part-time jobs that want a full-time job, etc., you get a closer picture of what the unemployment rate is. The official government number jumped to 6.1%, and U-6 (the most inclusive number) rose .4 to 10.7%. To the average Joe on the street unemployment feels more like 10.7% (if not 15%) than 6.1. Both numbers are poised to rise further. As noted earlier, my 6% target by the end of the year for the official number has been reached[/quote]

[url=http://money.cnn.com/2008/09/05/real_estate/foreclosures_rise_again/index.htm]Record 1.2 million U.S. homes hit by foreclosure[/url]: [i]Loans in foreclosure have doubled over the past year, while delinquency rates continue to soar[/i]

[b]UK Housing Market Update:[/b]

[i]My Comment:[/i] It is surprising that the British pound remained so high against the dollar for so long, given that the UK's housing bubble and accompanying household debt explosion in the past 5 years are even worse than in the U.S. Buit [url=http://finance.yahoo.com/q/bc?s=FXB]no longer[/url], and the UK Exchequer's "policies" in the face of the looming fisccal disaster facing the UK have not helped:

[url=http://globaleconomicanalysis.blogspot.com/2008/09/chancellor-darlings-panic-stamp-tax.html]Chancellor Darling's Panic Move To Rescue Housing[/url]
[quote]In a surprise move to try to revive the housing market, the embattled Chancellor said that the £125,000 threshold at which buyers pay 1 per cent stamp duty will be raised from tomorrow and frozen at the new level for one year.

Announcing the freeze, Mr Darling said: "We are facing difficult times - we are in a situation where you are facing the combination of the credit crunch with high oil and food prices. We haven’t seen this since the 1930s."

Some economists are concerned that the £600 million measure, funding for which Mr Darling has said will come from "new money", could heap extra pressure on the public finances at an inopportune moment. The Government borrowed £19.1 billion between April and July - £10.7 billion more than in the same period last year, and debt could spiral further amid falling tax receipts.[/quote]

[b]Oil Price Update:[/b]

[url=http://money.cnn.com/2008/09/05/markets/oil/index.htm]Oil at 5-month low on shrinking demand[/url]: [i]Crude futures are more than $40 below the record high set nearly two months ago as global economic slowdown cuts into demand for energy.[/i]

The shoes are dropping fast now. Fannie and Freddie are on their collective fannies and Uncle Sam is stepping in to hoist them up.

[url]http://news.yahoo.com/s/ap/20080906/ap_on_bi_ge/mortgage_giants_crisis[/url]


DarJones

btw, anywhere you see dollar amounts this could cost taxpayers, please quadruple those amounts.

[QUOTE=Fusion_power;141132]anywhere you see dollar amounts this could cost taxpayers, please quadruple those amounts.[/QUOTE]

My prediction is that in 20 years time this takeover will end up costing taxpayers [B][I]trillions[/I][/B] - and yes I mean "tr" and yes I mean plural. It won't be long before the Demoncrats in Congress start with "It's not fair that hard-working low income people are losing their homes simply because they can't afford their mortgage payments" and "it's not fair that the evil wealthy (low-risk) people pay a lower interest rate than hard-working low and middle class (higher risk) workers. Look for laws giving low income earners "mortgage rebates" and laws forbidding higher interest rates for lower income levels. Perhaps you'll even see laws requiring lower interest rates for higher-risk mortgages. All subsidized by the U.S. taxpayer - but don't worry like social security these massive subsidies won't appear in the yearly budget deficit, they'll be disguised through accounting gimmicks. It will happen slowly until 20 years later you wonder how the hell we got this massive boondoggle - and no way to undo it.

But hey at least the foreclosure rate will go down. With the U.S. taxpayer footing part of the bill for millions of mortgages, fewer people won't be able to make their payments.

[QUOTE]It won't be long before the Demoncrats in Congress start with "It's not fair that hard-working low income people are losing their homes simply because they can't afford their mortgage payments" and "it's not fair that the evil wealthy (low-risk) people pay a lower interest rate than hard-working low and middle class (higher risk) workers. Look for laws giving low income earners "mortgage rebates" and laws forbidding higher interest rates for lower income levels.[/QUOTE]

Oh please! Gimme a break here. The administration proposing this bailout is a Repugnican one. Getting party political over this just doesn't make sense.

Follow the money my boy and you will see that both parties got plenty of dough from Fannie and Freddie.

And it isn't the Democrats who have mandated TAF and TSLF and PDCF which allow banks to get money on cheap for shitty collateral from the Fed - taxpayer money mind you - which they are not passing on as lower interest loans to people. This is so not an issue where you want to point a finger at Democrats.