Large U.S. bank collapse seen ahead The worst of the global financial crisis is yet to come and a large U.S. bank will fail in the next few months as the world's biggest economy hits further troubles, former IMF chief economist Kenneth Rogoff said on Tuesday. "The U.S. is not out of the woods. I think the financial crisis is at the halfway point, perhaps. I would even go further to say 'the worst is to come'," he told a financial conference. "We're not just going to see mid-sized banks go under in the next few months, we're going to see a whopper, we're going to see a big one, one of the big investment banks or big banks," said Rogoff, who is an economics professor at Harvard University and was the International Monetary Fund's chief economist from 2001 to 2004. "We have to see more consolidation in the financial sector before this is over," he said, when asked for early signs of an end to the crisis.
Fannie's Perilous Pursuit of Subprime Loans As It Tried to Increase Its Business, Company Gave Risks Short Shrift, Documents Show In January 2007, as years of loose mortgage lending were about to send the nation's housing market into devastating decline, Fannie Mae chief executive Daniel H. Mudd wrote a confidential memo to his board. Discussing the company's successes, Mudd said one of Fannie Mae's achievements in 2006 was expanding its involvement in the market for subprime and other nontraditional mortgages. He called it a step "toward optimizing our business." A month later, Fannie Mae outlined plans to further expand its activities in the subprime market. The company recognized the already weak performance of subprime loans but predicted that they would get better in 2007, according to another Fannie Mae document. Internal documents show that even late in the housing bubble, Fannie Mae was drawn to risky loans by a variety of temptations, including the desire to increase its market share and fulfill government quotas for the support of low-income borrowers.
Large U.S. Banks May Fail Amid Recession, Rogoff Says Credit market turmoil has driven the U.S. into a recession and may topple some of the nation's biggest banks, said Kenneth Rogoff, former chief economist at the International Monetary Fund. "The worst is yet to come in the U.S.," Rogoff said in an interview in Singapore today. "The financial sector needs to shrink; I don't think simply having a couple of medium-sized banks and a couple of small banks going under is going to do the job." The U.S. housing slump has triggered more than $500 billion of credit market losses for banks globally and led to the collapse and sale of Bear Stearns Cos., the fifth-largest U.S. securities firm. Rogoff said the government should nationalize Fannie Mae and Freddie Mac, the nation's biggest mortgage-finance companies, which have lost more than 80 percent of market value this year.
Gold rebounds as investors go bargain buying Gold prices rebounded Monday, pushing back above $800 an ounce as investors went bargain buying after the metal's massive sell-off last week. Silver also rose. In other commodities, crude oil fell below $113 a barrel as Tropical Storm Fay headed for Florida but stayed away from major oil installations in the Gulf of Mexico. After plunging below $800 on Friday for the first time since late last year, gold had a modest recovery as new buyers sought steep discounts from the metal's all-time highs above $1,000 an ounce reached earlier this year.
Time to Be Bullish on Gold? The chairman of Cumberland Advisors predicts more bank failures, while Louise Yamada tells investors why now is the time to be bullish on gold. More Bank Failures Due. “I think the financial problem is halfway through the cycle, or something like that. There’s another shoe to drop ahead of us, and it could be more severe. The reason is that this time around, as financial firms need to raise capital, they’re going to have to pay a higher and higher price to get it -- some of them are not going to be able to get it. And so I don’t think we’ve seen the last of the bank failures…”
Wholesale prices rising at fastest pace since 1981 Wholesale inflation surged by 1.2 percent in July, more than double what had been expected Wholesale inflation surged in July, leaving prices for the past year rising at the fastest pace in 27 years, according to government data released Tuesday. The Labor Department reported that wholesale prices shot up 1.2 percent in July, pushed higher by rising costs for energy, motor vehicles and other products. The increase was more than twice the 0.5 percent gain that economists expected. Core prices, which exclude food and energy, rose 0.7 percent. That increase was the biggest since November 2006 and more than triple the 0.2 percent rise in core prices that had been expected.
Financial Crisis Could Get Much Worse, Experts Say The year-old financial crisis is not only far from over but could actually get much worse, bringing more big shocks to the US economy and stock market, a host of experts said Monday. Among the predictions: the failure of some of the country's biggest financial institutions, the collapse of 1,000 banks and a possible government bailout of mortgage giants Fannie Mae and Freddie Mac. "I think the financial problem is halfway through the cycle," David Kotok, chairman and chief investment officer from Cumberland Advisors, told CNBC. "There's another shoe to drop ahead of us and it could be more severe.
Mortgage giants decline over renewed bailout fears Shares of mortgage finance giants Fannie Mae and Freddie Mac tumbled Monday amid renewed fears that shareholders will wind up with nothing if the government intervenes to bail out the troubled companies. The Treasury Department late last month gained the authority to boost Fannie and Freddie through an investment or a loan should the companies need their finances propped up due to soaring losses from bad mortgages. The new government power, enacted by Congress after the companies' shares plunged to levels not seen since the early 1990s, for several weeks quieted worries that the companies could collapse.
Investors Can’t Shake Mortgage Worries Stocks fell sharply on an otherwise quiet Monday as jitters about the mortgage industry prevailed in low-volume trading, sending shares of Fannie Mae and Freddie Mac to 17-year lows. The Dow Jones industrial average fell 180 points and the broader Standard & Poor’s 500-stock index lost 1.5 percent, as shares of banks and financial services firms took a sharp hit. The biggest losers were Fannie Mae and Freddie Mac, the beleaguered mortgage giants, which have suffered from widespread concern over their ability to raise capital and continue to guarantee most of the nation’s mortgages. Mortgage giants decline over renewed bailout fears Shares of mortgage finance giants Fannie Mae and Freddie Mac tumbled Monday amid renewed fears that shareholders will wind up with nothing if the government intervenes to bail out the troubled companies. The Treasury Department late last month gained the authority to boost Fannie and Freddie through an investment or a loan should the companies need their finances propped up due to soaring losses from bad mortgages. The new government power, enacted by Congress after the companies' shares plunged to levels not seen since the early 1990s, for several weeks quieted worries that the companies could collapse.
Fannie Mae, Freddie Mac Are Pounded $$ Two Stocks Plunge On Growing Fears Of a U.S. Bailout Share prices of Fannie Mae and Freddie Mac plunged Monday amid growing fears that the two largest providers of funding for U.S. home mortgages won't be able to avoid a government bailout. In 4 p.m. trading on the New York Stock Exchange, Freddie shares were down 25% to $4.39. Fannie stock dropped 22% to $6.15. Both stocks are down more than 90% from a year ago. Many investors and analysts fear the two companies may not be able to raise more capital by selling shares, amid gloom over the huge losses they face on mortgage defaults. On Monday, some preferred shares previously issued by Fannie and Freddie were quoted at dividend yields of more than 16%, up from 14% Friday. With investors demanding such high yields, raising money through new preferred shares may be too expensive.
Freddie Mac plans $3bn debt issue Freddie Mac was on Monday marketing a $3bn benchmark five-year debt issue even as renewed concerns about the future of the US government-sponsored entities (GSEs) sent ripples through the financial markets. Shares of Fannie Mae and Freddie Mac hit their lowest levels in nearly two decades on fears of a federal bail-out that would eliminate the common stock, as well as significantly reduce the value of preferred shares and subordinated debt. This scenario is not a new one, but a weekend story in Barron’s magazine rekindled investor worries over the relative value of the various parts of the capital structure should the federal government nationalise the GSEs.
FDIC Presses Bank Regulators To Use Warier Eye $$ Flagging Woes Now Will Bolster Insurer; The 'Camels' Rating The deteriorating condition of commercial banks is intensifying a debate among government officials over how to respond, illustrating the likely difficulties facing regulators bracing for a wave of bank failures. In private meetings, Federal Deposit Insurance Corp. officials have pushed other agencies to more forcefully downgrade the confidential rating -- which is known only to regulators and bank management -- of troubled financial institutions, according to people familiar with the talks. If the FDIC gets its way, it could result in more public enforcement actions and could give the FDIC more muscle to either force the companies to improve their balance sheets or seek a sale. It could also make it more expensive for companies to raise capital, as scrutiny from investors would likely spike.
Bailout Rumors Slam Fannie, Freddie Bailout rumors have Fannie and Freddie shareholders worried that those stocks are in a race to zero. On Monday, Fannie Mae and Freddie Mac plunged off a weekend report that posited that the government will indeed need to rescue the cash-starved firms and that equity holders will end up losing their shirts. Fannie fell 17.8%, or $1.41, to $6.50 and Freddie lost 16.6%, or 97 cents, to $4.88. Investors don't have much left to lose; both companies have lost more than 90.0% of their market value in the last year. Uncle Sam's paternal posturing in recent months had initially calmed investor anxieties. However, as the likelihood has lessened that the two will be able to raise enough capital to stay afloat on their own, Wall Street has begun to view the U.S. government as a dangerous rescuer instead of a benevolent savior.
Lehman May Put a Prized Unit on the Block Lehman Brothers, the troubled investment bank, is considering the sale of all or part of its prized money management division to private equity firms to raise billions of dollars of capital and ease the pressure caused by losses related to real estate. The move would be the latest by a Wall Street firm forced to sell off high-end assets, following the recent sale by Merrill Lynch of its stake in Bloomberg L.P.and the sale by Citigroup last month of its large German consumer banking franchise. Lehman sent letters last week to a number of financial companies, including private equity firms like Kohlberg, Kravis & Roberts, J. C. Flowers, the Blackstone Group, the Carlyle Group and Apollo Management, to test interest in its money management division, according to several people briefed on its contents.
'Liar loans' threaten to prolong mortgage crisis In the mortgage industry, they are called "liar loans" — mortgages approved without requiring proof of the borrower's income or assets. The worst of them earn the nickname "ninja loans," short for "no income, no job, and (no) assets." The nation's struggling housing market, already awash in subprime foreclosures, is now getting hit with a second wave of losses as homeowners with liar loans default in record numbers. In some parts of the country, the loans are threatening to drag out the mortgage crisis for another two years. "Those loans are going to perform very badly," said Thomas Lawler, a Virginia housing economist. "They're heavily concentrated in states where home prices are plummeting" such as California, Florida, Nevada and Arizona.
US Home Builder Sentiment Still at Record Low U.S. home builder sentiment was stuck at a record low in August, as stringent lending and a flood of foreclosed homes dragged on the real estate market, according to data from the National Association of Home Builders released Monday. The NAHB/Wells Fargo Housing Market index held at 16 in August for a second straight month, the group said in a statement. The August figure matched the median forecast among analysts surveyed by Reuters. Readings below 50 mean more builders view market conditions as poor than favorable.
As Oil Giants Lose Influence, Supply Drops Oil production has begun falling at all of the major Western oil companies, and they are finding it harder than ever to find new prospects even though they are awash in profits and eager to expand. Part of the reason is political. From the Caspian Sea to South America, Western oil companies are being squeezed out of resource-rich provinces. They are being forced to renegotiate contracts on less-favorable terms and are fighting losing battles with assertive state-owned oil companies. And much of their production is in mature regions that are declining, like the North Sea. The reality, experts say, is that the oil giants that once dominated the global market have lost much of their influence — and with it, their ability to increase supplies.
U.S. Stocks Retreat on Inflation Concern, Housing Data, Losses U.S. stocks tumbled for a second day after wholesale prices climbed twice as fast as economists projected, housing starts fell and concern grew that the nation's biggest financial firms will post more losses. American International Group Inc., the world's largest insurer, and Lehman Brothers Holdings Inc., the biggest mortgage- bond underwriter, retreated more than 3 percent after analysts warned of additional credit writedowns. D.R. Horton Inc. lost 1.1 percent as the government said builders broke ground on the fewest houses in 17 years last month. Staples Inc. retreated 7.4 percent after producer prices increased 1.2 percent in July and the retailer said profit decreased.
Car buyers' satisfaction with US brands stumbles U.S. car buyers are growing less satisfied with their purchases from domestic automakers while their Asian and European competitors continue to improve, according to a recent survey. Consumer satisfaction with U.S. auto brands slipped as Lexus and BMW tied for first place, followed by Toyota and Honda, according to the University of Michigan's American Customer Satisfaction Index released Tuesday. General Motors Corp.'s Buick and Cadillac brands, and Ford Motor Co.'s Lincoln and Mercury lines, fell from their No. 2 perch at a time when U.S. companies are struggling to outshine their competitors and reverse their shrinking sales and market share. That's an unsettling sign for domestic automakers, said Claes Fornell, the University of Michigan business professor who heads the annual survey. Traditionally, U.S. brands improve their customer satisfaction scores each year, just not as much as their overseas counterparts. Now, the domestic companies' ratings are declining while their competitors' scores continue to climb.
The End of Credit Card Consumerism A new frugality could remake the U.S. economy—and American life When it comes to longevity, few royals can top America's King Consumer. For more than four decades, our shopaholic nation has shown an insatiable desire to spend until our credit cards melt. And throughout this era, consumer spending has, well, consumed a greater and greater share of our total economy. Only twice since 1965, despite half a dozen recessions, have Americans spent less in a year than the previous one. Indeed, it often seems that we have defined ourselves by our ability to buy supersized everything, from McMansions to tricked-out SUVs to 60-inch flat-screen televisions—all enabled by decades of cheap credit.
Wake Up America - You're Sinking America is in decline. Our standard of living is descending to reconnect with our means and more resemble Western Europe’s. We’ve been living on a borrowed standard of living ever since we started replacing organic growth with financial engineering, some 40 years ago.
Credit con game Debt settlement outfit falsely promised relief as clients' woes grew; regulator acts For thousands of people far behind on their credit card payments and other bills, Robert Lovinger's "Debt Meltdown Program" sounded awfully alluring. He offered to help them reduce the amount of their bills by as much as 60% and, in some instances, to free them of debt altogether within 30 months. About 2,000 people joined, and they often ended up paying thousands of dollars for the Long Island-based service—which was marketed under several names, including The Debt Elimination Center and Edge Solutions. What many customers got, in fact, was little or nothing. In some cases, Mr. Lovinger and his staff failed to contact creditors to settle customers' delinquent bills; in others, they drove people deeper into debt by refusing to accept settlement offers from lenders, even after clients asked them to do so.
How the Housing Law Affects Reverse Mortgages Most seniors should be cautious The housing bill signed by President Bush on July 30 raises the amount seniors can borrow using federally backed reverse mortgages and lowers the cost of getting the cash. But aging experts say you should still be cautious before spending down your home equity. Here's how the new law affects reverse mortgages and what you still need to be wary of. Instant cash—with strings. A reverse mortgage is a loan against your home if you're generally age 62 and over that doesn't have to be paid back as long as you live in that house. Tapping home equity to finance your golden years is growing in popularity, with 107,367 reverse-mortgage loans made in fiscal year 2007, up from 6,600 loans in 2000, but they still account for only about 1 percent of older households, according to the AARP. After you pay a variety of fees on the loan, you can get a lump sum, monthly payments, a credit line, or a combination of these options based on the value of your house. If the home is sold, the loan must be repaid with the proceeds, and any equity that remains after that is distributed to the borrower.
Debate rages over free wireless spectrum The debate over new unlicensed spectrum the Federal Communications Commission is considering opening up is heating up as Google ups the ante with a new lobbying Web site. Google on Monday launched the new site called FreetheAirWaves.com to provide consumers with a voice, the company's policy guru said during a press conference call. Google and other technology companies such as Intel, Microsoft and Motorola have been lobbying the FCC for months to open up what's known as "white space" spectrum for unlicensed use after the digital TV transition early next year. These slivers of spectrum that sit between TV channels as buffers to ensure that TV channels don't interfere with each could be used to provide broadband wireless services.
Renewable Power's Growth in Colorado Presages National Debate When Colorado voters were deciding whether to require that 10 percent of the state's electricity come from renewable fuels, the state's largest utility fought the proposal, warning that any shift from coal and natural gas would be costly, uncertain and unwise. Then a funny thing happened. The ballot initiative passed, and Xcel Energy met the requirement eight years ahead of schedule. And at the government's urging, its executives quickly agreed to double the target, to 20 percent. In Colorado -- a state historically known for natural gas and fights over drilling -- wind and solar power are fast becoming prominent parts of the energy mix. Wind capacity has quadrupled in the past 18 months, according to Gov. Bill Ritter (D), and Xcel has become the largest provider of wind power in the nation. Experts say U.S. is losing its ability to patrol Arctic waters A growing array of American military leaders, Arctic experts and lawmakers say the United States is losing its ability to patrol and safeguard Arctic waters even as climate change and high energy prices have triggered a burst of shipping and oil and gas exploration. In the meantime, a resurgent Russia has been busy expanding its fleet of large oceangoing icebreakers to about 14. It launched a large conventional icebreaker in May and, last year, the world's largest icebreaker, named 50 Years of Victory, the newest of its seven nuclear-powered, pole-hardy ships. The U.S. National Academy of Sciences, the Coast Guard and others have warned over the last several years that the United States' two 30-year-old heavy icebreakers, the Polar Sea and Polar Star, and one smaller ice-breaking ship devoted mainly to science, the Healy, are grossly inadequate. Also, the Polar Star is out of service.
Bibles seized from Americans' luggage Christian group was set to distribute 300 Chinese customs officials confiscated more than 300 Bibles on Sunday from four American Christians who arrived in a southwestern city with plans to distribute them, the group's leader said. Chinese customs officials confiscated more than 300 Bibles on Sunday from four American Christians who arrived in a southwestern city with plans to distribute them, the group's leader said. The group, based in Sheridan, Wyo., distributes Bibles and Christian teaching materials around the world to "strengthen the persecuted church," according to its Web site.
Washington's hypocrisy The U.S. administration is trying to stick the label of "bad guy" on Russia for exceeding the peacekeeping mandate and using "disproportionate force" in the peace-enforcement operation in Georgia. Maybe our American friends have gone blind and deaf at the same time. Mikheil Saakashvili, the president of Georgia, is known as a tough nationalist who didn't hide his intentions of forcing Ossetians and Abkhazians to live in his country. We were hoping that the U.S. administration, which had displayed so much kindness and touching care for the Georgian leader, would be able to save him from the maniacal desire to deal with the small and disobedient peoples of the Caucasus.
Musharraf departure heightens uncertainty Pakistan’s president Pervez Musharraf stepped down on Monday after nine years in power, dodging his opponents’ attempts to impeach him but deepening confusion over who will control the nuclear-armed state. Announcing on national television that he had decided to resign “in the interest of Pakistan”, Mr Musharraf said that, if he had decided to stay on, a political struggle could have dragged in the military. In an emotional broadcast just hours before parliament was due to consider formal impeachment proceedings, he said: “Even if a move to impeach me is defeated, the government’s relations with the president’s office will be ridden with friction.”
Iranian Satellite Launch ‘Quantum Leap in Capability,’ Israeli Expert Says Iran’s weekend test launch of a rocket that is meant to carry a research satellite into orbit represents a “quantum-leap” in Iranian technological capabilities and shows that the U.S. is justified in its desire to put a defensive missile shield in Europe, an expert said here on Monday. Iranian television reported on Saturday that Iran had successfully test launched a rocket that it wants to use to carry a research satellite into orbit. Images of the nighttime launch of the two-stage Safir or Ambassador rocket were broadcast on Iranian state television. Experts agreed that the test-launch was not of itself threatening but signaled that Iran was making headway in technical advances in its missile program. Tehran offers to help Muslim nations launch satellites Iran is prepared to help Muslim countries launch satellites, an Iranian official said Monday, a day after Tehran declared that it had test-fired a new rocket capable of carrying a satellite into orbit. "I am announcing now that Iran is ready to launch satellites of friendly Islamic countries into space," Reza Taghipour, head of Iran's Aerospace Organization, said on state television. On Sunday, Iranian television showed images of a nighttime rocket launch and said a satellite had been sent into orbit. Iranian officials later said that only the rocket had been fired. Iran has made several recent claims of test-firing missiles that Western military analysts have said were inflated.
The Iran Scenarios These days you can read as many different scenarios regarding the likelihood that Israel will attack Iran’s nuclear facilities as there are experts putting them forth. History, past and present, may have already written the script. In a recent interview with Der Spiegel; Israeli Prime Minister, Ehud Olmert asked, “Why do you need to enrich uranium if you don’t have the facilities that can make use of this uranium for civilian purposes?” Iran does have such plants, but both have been in various stages of construction and delay since 1992 and neither has ever produced a watt of electricity. The August edition of Energy Tribune takes on the question of an Israeli military action against Iranian facilities refining fissionable materials for the development of nuclear weapons. John Bolton, the former U.S. ambassador to the United Nations, is quoted saying that Israel has “a window” in which to conduct the strike. It would be between “the day after the November 4 U.S. election and closes with the swearing-in of George W. Bush’s successor on January 20, 2009.”
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