Money Matters: The Dollar, Amero, Euro & the Oil 2 Options

[ABLAT Staff]

May 1 strike plans include truckers
By Jill Dunn

Independent owner-operator Armando Gonzales was among the truckers who shut down
in 2004 to protest fuel price increases. On May 1, he and other truckers plan to
shut down their trucks again, as part of a larger effort to protest a federal
immigration bill.

The resident of Rancho Cucamonga, Calif., is among those calling for a general
nationwide “Day Without An Immigrant� strike, across all industries, to
protest HR 4437, which the U.S. House approved in December. The bill would make
being in the country illegally, or assisting an illegal immigrant, a felony. A
softer version of the bill stalled in the U.S. Senate earlier this month.

“The pulse of the population is right for this,� Gonzales said. “It’s a
really hot time. HR 4437 is an attack against Hispanics in general.�

A group of truckers calling itself the Los Angeles Troquero Collective
(“troquero� is Spanish for trucker) advocates the strike in hopes of
bringing about immigrant amnesty, the right of all truckers to unionize and a 25
percent salary increase.

The collective has distributed fliers asking truckers to shut down and gather at
ports, rail facilities and truck stops May 1. A large trucker protest, for
example, is scheduled for May 1 in Banning Park in Wilmington, Calif., near the
Port of Los Angeles.

Most of the truckers planning to participate in the May 1 shutdown are Hispanic
owner-operators, said Gonzalez, a line-haul trucker who said he was among those
arrested in 2004 for blocking a California freeway with parked trucks. He plans
to join other truckers May 1 at the Citadel outlet mall in Commerce, Calif.

Ernesto Nevarez, a Wilmington, Calif., tax preparer whose clients include many
truckers, said it's important that all drivers have a sense of solidarity
“rather than having truck drivers split along racial lines." Nevarez said he
has supported years of trucker shutdowns

http://www.etrucker.com/apps/news/article.asp?id=52952

[ABLAT Staff]

Bush Administration Proposes Sweeping Overhaul of Financial Regulation
Saturday , March 29, 2008
AP

WASHINGTON —
The Bush administration is trying to confront the credit crisis that has rattled nerves from Wall Street to Main Street by proposing wholesale changes in how Washington oversees the financial system.

A plan set for release Monday would give new powers to the Federal Reserve so that the central bank serves as the system's overarching protector of stability.

The proposal would abolish agencies such as the Office of Thrift Supervision and the Commodity Futures Trading Commission, shifting their responsibilities to other federal institutions.

When Treasury Secretary Henry Paulson outlines the ideas in a speech, the changes will represent the most sweeping overhaul of financial regulation since the Great Depression of the 1930s.

The Associated Press obtained a 22-page executive summary of the proposal. It seeks to make sense of the mishmash of overlapping oversight in which an alphabet-soup roster of agencies regulates banks, thrifts and credit unions.

Under the current hodgepodge, institutions that take deposits and are federally insured face multiple regulatory bodies. By contrast, hedge funds, private equity firms and investment banks endure substantially less regulation.

The credit crisis that has rocked Wall Street and made credit hard to get on Main Street has highlighted that discrepancy in regulation.

Many financial institutions have declared billions of dollars in losses stemming from soaring mortgage defaults caused by prolonged housing troubles.

In an unprecedented move designed to get credit flowing again, the Fed is allowing investment banks to borrow directly from the Fed, something only commercial banks had the power to do before.

That decision came as part of a rescue effort for Bear Stearns Cos., the nation's fifth largest investment bank. It nearly failed earlier this month before the Fed rushed in with a $30 billion line of credit to facilitate the sale of Bear Stearns to JP Morgan Chase & Co.

The Fed's moves have put public money potentially at risk and increased calls for greater regulation of investment banks and other institutions.

The Paulson plan is expected to generate intense debate in Congress, which would have to approve the changes.

Some top Democrats, including Rep. Barney Frank, the chairman of the House Financial Services Committee, are pushing competing ideas that would streamline oversight but also impose new controls beyond those in Paulson's plan.

Sen. Charles Schumer, a leading voice in the debate, said he did not think Paulson had gone far enough in dealing with some of the new complex types of investments heavily featured in the current financial crisis.

"Very complex financial instruments have evolved in recent years," said Schumer, D-N.Y. "The Treasury Department should address these issues as well."

David Nason, Treasury's assistant secretary for domestic finance, said the administration's primary goal is to get through the current credit crisis with officials understanding that the debate over an overhaul plan this far-reaching could last for years.

"These are very complex issues that require a serious amount of debate," he said in an AP interview Saturday. "It is going to take time to play out."

Business groups on Saturday generally voiced support for Paulson's approach and said there would be significant debate over the details.

"The current crisis just shows in a very stark way that ... you need a regulatory structure that is simple, nimble and modern and ours does not meet that test," said David Hirschmann, president of the U.S. Chamber of Commerce's Center for Capital Markets Competitiveness.

Tim Ryan, president of the Securities Industry and Financial Markets Association, a big lobbying group for Wall Street, said there was "universal agreement that it is time to modernize and revitalize the current system."

The Paulson plan would:

—designate the Fed as the primary regulator for market stability, greatly expanding its ability to examine any financial institution deemed to pose a risk to the stability of the system.

—shift the functions of the Office of Thrift Supervision to the Office of the Comptroller of the Currency, although ultimately the plan envisions just one banking regulator.

—merge the Securities and Exchange Commission with the Commodity Futures Trading Commission.

—create a national regulator for insurance companies, which now are largely regulated by the states.

—establish a commission to address the abuses exposed in the current tidal wave of mortgage defaults.

http://www.foxnews.com/printer_friendly_st...,343061,00.html

[ABLAT Staff]

Fed Offers $100 Billion More to Banks
Friday, March 28, 2008 2:00 PM

WASHINGTON -- The Federal Reserve announced Friday it will auction another $100 billion in April to cash-strapped banks as it continues to combat the effects of a credit crisis.

The central bank said it would make $50 billion available at each of two auctions, on April 7 and April 21.

Through the end of March, the Fed has provided $260 billion in short-term loans to commercial banks through the innovative auction process. It also has employed Depression-era provisions to provide money to investment banks.

All the moves have been designed to cope with a serious financial crisis that has roiled U.S. and global markets and caused the near-collapse of Bear Stearns Cos., the nation's fifth largest investment bank.

The Fed has been holding auctions every two seeks since December to provide short-term loans to commercial banks. It started with auctions of $20 billion, then pushed the level to $30 billion, and in early March raised the auction amount to $50 billion as the credit shortage grew more severe.

In announcing the move to $50 billion last month, the Fed said it would continue the auctions for at least the next six months, unless credit conditions show they are no longer needed.

The auctions are just one of a series of unorthodox steps the Fed has taken to battle the current crisis. The biggest of those moves was an announcement that it was allowing investment banks to borrow directly from the Fed. Previously, only commercial banks, which face tighter regulations, had that privilege.

The Fed also said it would make available $30 billion in financing to support the sale of troubled Bear Stearns to JP Morgan Chase & Co., hoping to prevent a bankruptcy that could have rocked Wall Street.

The Fed's auctions have drawn criticism from some that the central bank, and ultimately U.S. taxpayers, could be financing a bailout for big Wall Street firms that had engaged in risky lending practices.

Fed Chairman Ben Bernanke will fact questions about the Fed's recent moves when he testifies on Wednesday before the congressional Joint Economic Committee.

http://www.newsmax.com/newsfront/fed_credi...3/28/83815.html

[ABLAT Staff]

Putting the Fox in charge of the Hen House- Bush Proposes Giving Major New Financial Regulation Powers to Federal Reserve - AP

Bush Seeks Financial Regulation Overhaul
Mar 29, 11:00 AM (ET)
By MARTIN CRUTSINGER

WASHINGTON (AP) - The Bush administration is proposing a sweeping overhaul of the way the government regulates the nation's financial services industry from banks and securities firms to mortgage brokers and insurance companies.

The plan would give major new powers to the Federal Reserve, according to a 22-page executive summary obtained by The Associated Press.

The Fed would be given broad authority to oversee financial market stability. That would include new powers to examine the books of any institution deemed to represent a potential threat to the proper functioning of the overall financial system.

The proposal, which will be outlined Monday in a speech by Treasury Secretary Henry Paulson, is certain to set off heated debates within different sectors of the financial services industry and in Congress, where some Democrats are likely to complain that the proposal does not go far enough to crack down on abuses.

The administration divided its recommendations into short-term goals that could be adopted quickly, intermediate recommendations and an "optimal" regulatory framework, which contains a radical restructuring of how the government supervises banks and other financial institutions.

The recommendations are the product of a yearlong review that was begun in an effort to modernize the government's regulatory structure so that the country's financial services industries could better compete in a fast-changing global economy.

The plan also seeks to address problems that have been brought to light in recent months since a severe credit crisis began roiling financial markets last August.

That crisis has already claimed as its biggest victim Bear Stearns, the nation's fifth-largest investment bank, which came to the brink of collapse before a government-arranged purchase by JP Morgan Chase & Co.

"I am not suggesting that more regulation is the answer, or even that more effective regulation can prevent the periods of financial market stress that seem to occur every five to 10 years," Paulson will say in the remarks he will deliver on Monday.

But the plan does seek to address problems highlighted by the current crisis in which the Fed in an unprecedented move has begun making direct loans to securities firms in an effort to shore up a system badly shaken by billions of dollars of losses stemming from sour mortgage loans.

The proposal would allow the Fed, in its new role as "market stability regulator," to dispatch examiners to check the books not just of commercial banks but of all segments of the financial services industry.

The administration proposal would also consolidate the current scheme of bank regulation by shutting down the Office of Thrift Supervision and transferring its functions to the Office of the Comptroller of the Currency, which regulates nationally chartered banks.

The plan recommends that the Securities and Exchange Commission, which regulates stock trading, be merged with the Commodity Futures Trading Commission, which regulates futures trades for oil, grains and various other commodities.

The plan would create a national regulator for the insurance industry, which is now largely governed by the states, and would create a Mortgage Origination Commission to try to address the abuses exposed in the current tidal wave of mortgage defaults.

The role Federal Reserve Chairman Ben Bernanke and his colleagues have been playing to shore up the financial system would be formalized in the administration plan by giving Fed officials greater power to detect where threats might be lurking in the system.

The proposal is certain to generate intense scrutiny in Congress and within the financial services industry, where past efforts to change how regulation is handled have met with fierce resistance.

Many Democrats in Congress are already pushing tougher proposals that would impose much stricter regulation in an effort to crack down on abuses exposed by the current credit crisis.

Sen. Charles Schumer, D-N.Y., said he believed Paulson's plan offered some valid suggestions.

"In broad outlines, we agree with large parts of Secretary Paulson's plan," Schumer, chairman of the Joint Economic Committee, said in a statement. "He is on the money when he calls for a more unified regulatory structure, although we would prefer a single regulator to the three he proposes."

Under Paulson's approach, the long-term goal would be to designate the Fed as market stability regulator and to have a financial regulator who would focus on financial institutions that operate with government guarantees such as providing deposit insurance.

The administration plan, which was first reported by The New York Times on its Web site Friday night, also proposes a business conduct regulator who would be in charge of overseeing consumer protection issues.

The initial reaction from the securities industry was also positive.

"Treasury has delivered a thoughtful and sweeping plan which should provoke intense discussion, debate and potential legislative changes," said Tim Ryan, president of the Securities Industry and Financial Markets Association.

"Our present regulatory framework was born of Depression-era events and is not well suited for today's environment where billions of dollars race across the globe with the click of a mouse," Ryan said in a statement.

http://apnews.myway.com/article/20080329/D8VN5KD80.html

[ABLAT Staff]

$600 billion could be lost in financial market crisis
Report warns meltdown could spread to hedge funds, insurance companies, pension funds
--Reuters

German watchdog eyes $600 bln global bank losses: report
Saturday March 29, 10:18 am ET

FRANKFURT (Reuters) - The financial market crisis could cause losses of up to $600 billion at banks and other financial institutions worldwide, a German magazine reported on Saturday, citing an internal report by German financial watchdog BaFin.

The $600 billion figure represents a worst-case scenario for losses linked to the financial turmoil sparked by the meltdown in the U.S. subprime mortgage market, Der Spiegel magazine said in a story released in advance of publication on Monday.

"Based on current knowledge and the market situation, we believe $430 billion is more likely," the magazine quoted what it said was a 16-page report by BaFin as saying.

BaFin calculated that banks had already acknowledged about $295 billion in losses, of which Germany accounted for around 10 percent, the magazine said.

Extrapolating from this percentage, German banks could suffer $60 billion in losses in the worst case and $43 billion in the more favorable scenario, the magazine added.

However, the magazine also said BaFin cited the risk that the financial crisis could spread beyond the banking sector to affect hedge funds, insurance companies, pension funds and even some non-financial companies.

A BaFin spokeswoman declined to comment on the Spiegel report but said the watchdog had prepared a discussion paper ahead of a two-day meeting of financial regulators and central bankers in Rome that ended on Saturday.

A figure of around $300 billion for losses reported to date came from publicly available sources, she said.

German mass-circulation Bild newspaper reported on Friday that German banks could face as much as 70 billion euros ($110 billion) in writedowns on their investments as a result of the credit crisis, citing "speculation by banking insiders" for the report.

A spokesman for Germany's Finance Ministry on Friday also said worldwide losses so far were about $300 billion but said he was not aware of the 70 billion euro figure mentioned in Bild.

Germany's big listed banks such as Deutsche Bank (XETRA:DBKGN.DE - News), Commerzbank (XETRA:CBKG.DE - News) and Deutsche Postbank (XETRA:DPBGN.DE - News) have largely escaped the huge subprime-related writedowns seen at some international rivals.

However, the country's state-sector banks have been hit hard, with two of their number nearly collapsing after billions of euros in risky investments turned bad.

(Reporting by Jonathan Gould)

http://biz.yahoo.com/rb/080329/germany_ban...osses.html?.v=1

[ABLAT Staff]

Forget April Fools' Day: Next Week's Data is No Joke
Friday, Mar. 28 2008
Mark Lieberman, Senior Economist
FOXBusiness

Next Tuesday may be April Fools' Day, but the data due out during the week will be no joke--especially if it’s as bad as expected.

There will be two key points for the week: Wednesday’s Congressional testimony by Federal Reserve Chairman Ben Bernanke before the Joint Economic Committee and the first labor report of the month released Friday. Both events are highly predictable.

Bernanke’s testimony will likely echo the Fedspeak remarks we’ve heard in the two weeks since the Federal Open Market Committee’s March 18 meeting. This was the meeting at which the Fed further reduced the target Fed Funds rate (the interest rate banks charge each other for overnight loans used to maintain required reserves) to the lowest level since December 2004 -- when rates were on the way up.

The Federal Reserve hasn’t exactly been idling since then. It engineered the acquisition of threatened investment banking firm Bear Stearns by commercial banking giant JPMorgan Chase and then added new arrows to its quiver in its uphill struggle to contain damage in the financial services sector from the mortgage meltdown.

Bernanke’s testimony comes against the backdrop of a new survey by the Pew Research Center, which found Americans have grown steadily more negative about the national economy over the past three months. According to the survey, only 11% of the public views the economy as "excellent" or "good," compared with 17% in early February, and 26% in January. The survey's results show people's view of the economy is at lows it saw during the recession of the early 1990s. "In August 1993, 10% of Americans rated the economy as excellent or good in a Gallup survey,” the survey found.

However, Bernanke might be able to bask in anonymity. According to the survey, most Americans don't know who he is: 56% say they have not heard of him or do not know enough about him to offer an opinion. Those who are familiar enough with Bernanke to offer an opinion of him are divided: about a quarter (24%) hold a favorable, while 20% offer an unfavorable rating.

Bernanke did somewhat better with those who know about recent investment bank problems. Among those who know a lot about the situation, 37% rated him favorably and 40% did not offer an opinion.

If Bernanke slinks in under the radar, Friday’s employment report won’t. The headline numbers such as the unemployment rate and the change in payroll jobs will, by definition, draw the most attention -- but the report also contains nuggets suggesting the future direction of the economy.

Joel Naroff, chief economist at Commerce Bank, suggested one nugget could come from the diffusion index in the employment report. The index, Naroff said, shows how broadly-based the changes in jobs are and reflects the breadth of employment. The index--on the last page of the report --is a series of tables noting the percentage of industries that have increased their payrolls in the last month, three months, six months and the last twelve months. Looking at the percentage changes at different time frames provides insight about trends in layoffs and hiring generally and, since there are two sets of indexes-- manufacturing and all private sector payrolls--how widespread the changes are.

Another under-the-radar number, according to David Resler, chief economist at Nomura, is the labor force participation rate. Resler noted the unemployment rate improved in February even though job creation was negative for the second month in a row because the labor force--the sum of individuals employed and unemployed (only those actively looking for work are considered “unemployed”) -- declined.

Confused by this? Here's a simple example. Imagine there were only 11 people over the age of 16 (which is the age cut-off used by the Bureau of Labor Statistics in developing its employment report). Of the 11, two are unemployed and nine are employed, producing an unemployment rate of 18%, or two divided by 11. As the labor market weakens, one of the two who had been unemployed stops looking, reducing the labor force to 10. The unemployment rate would be cut to 10%, or one divided by ten.

The composition of the labor force too, Resler suggested, could offer glimpses into the future. He suggested the weakening labor market could push older workers into retirement, with the composition force changing.

We’ll see Friday.

http://www.foxbusiness.com/markets/economy...e_538848_3.html

[ABLAT Staff]

"Coming collapse of US economy"
Ellen Gonzalez

International experts foresee collapse of U.S. economy
Posted By Hielema, Bert

And you thought that I had a gloomy outlook on the economy. Now the bad news pops up everywhere.

Harry Koza in the Globe and Mail quotes Bernard Connelly, the global strategist at Banque AIG in London, who claims that the likelihood of a Great Depression is growing by the day.

Martin Wolf, celebrated columnist of the U.K.-based Financial Times, cites Dr. Nouriel Roubini of the New York University's Stern School of Business, who, in 12 steps, outlines how the losses of the American financial system will grow to more than $1 trillion - that's one million times $1 million. That amount is equal to all the assets of all American banks.

Every day now, thousands of people all over the U.S. and Great Britain are walking away from their homes - simply mailing their house keys to the banks - as housing bailout plans fail.

With unemployment growing, the next phase will hit commercial real estate making the financial institutions the unwilling owners not only of quickly depreciating houses, but also of empty strip malls and even larger shopping centres.

The next domino to fall will be credit card defaults, and after that... who knows? There are so many exotic funds out there, with trillions of dollars in paper - or rather computer-screen money - all carrying assorted acronyms, and all about to disintegrate into nothingness. Over the next couple of years, scores of banks that have thrived on these devices, based on quickly disappearing equities, will fail.

The most frightening forecast so far comes from the Global Europe Anticipation Bulletin (GEAB), available for 200 euros - about $300 - for 16 issues annually. Its prediction is quite specific.

Where my warnings never spelled out an exact date, this think tank has it pegged precisely. Here are its very words:

"The end of the third quarter of 2008 (thus late September, a mere seven months from now) will be marked by a new tipping point in the unfolding of the global systemic crisis.

"At that time indeed, the cumulated impact of the various sequences of the crisis will reach its maximum strength and affect decisively the very heart of the systems concerned, on the front line of which (is) the United States, epicentre of the current crisis.

"In the United States, this new tipping point will translate into - get this - a collapse of the real economy, (the) final socio-economic stage of the serial bursting of the housing and financial bubbles and of the pursuance of the U.S. dollar fall. The collapse of U.S. real economy means the virtual freeze of the American economic machinery: private and public bankruptcies in large numbers, companies and public services closing down."

The report goes on to say that we are entering a period for which there is no historic precedent. Any comparisons with previous situations in our modern economy are invalid.

We are not experiencing a "remake" of the 1929 crisis nor a repetition of the 1970s oil crises or 1987 stock market crisis.

What we will have, instead, is truly a global momentous threat - a true turning point affecting the entire planet and questioning the very foundations of the international system upon which the world was organized in the last decades.

The report emphasizes that it is, first and foremost, in the United States where this historic happening is taking an unprecedented shape (the authors call it "Very Great U.S. Depression").

It continues to predict that, although this crucial event is global, it will be the beginning of an economic 'decoupling' between the U.S. and the rest of the world. However, non 'decoupled' economies will be dragged down the U.S. negative spiral.

Concerning stock markets, the GEAB anticipates that international stocks would plummet by 40 to 80 per cent depending where in the world they are located, all affected in the course of the year 2008 by the collapse of the real economy in the U.S. by the end of summer.

The European authors of this report - it appears simultaneously in French, German and English - state that they simply and without prejudice try to describe in advance the consequences of the ominous trends at play in this 21st-century world, and to share these with their readers, so that they can take the proper means to protect themselves from the most negative effects.

So there you have it. Three reports from three different sources, all well regarded, and all pointing to a disastrous fall-out from our monetary moves.

This and earlier columns can be seen at hielema.ca. Comments to hielema@allstream.net.

http://www.fivedoves.com/letters/mar2008/elleng329.htm

[ABLAT Staff]

March 29, 2008
Trying to Get the Swiss to Talk
By CARTER DOUGHERTY

GENEVA — Like Paul Revere, Konrad Hummler sounded the alarm last week as he made his way by train and by plane to his bank’s branches across Switzerland. This country’s storied role as secret banker to the world’s wealthy is under threat like never before, Mr. Hummler warned.

Mr. Hummler, the jaunty, blunt-spoken managing partner of Wegelin & Company, a small private bank in St. Gallen, has watched a German tax-evasion scandal evolve into a debate about banking secrecy here. Worried that the treasured discretion of Swiss banks is under assault, Wegelin’s foreign clients have been inquiring about their money.

Mr. Hummler says that this time, Switzerland may not be able to stop the rest of the world from prying open Swiss banking.

“What is going on is a power play,” he said. “It may be unusual in today’s Europe, but it is here.”

This land of stunning Alpine vistas, which has chosen to remain outside the European Union, has always loomed large in the global imagination as the place where the wealthy stash their money beyond the tax man’s reach. The best estimates suggest that image is true, to the tune of $1 trillion to $2 trillion.

The scandal that threatens that lucrative business began when German authorities obtained secret financial data from Liechtenstein, Switzerland’s tiny neighbor with similar banking laws. The information in hand, investigators fanned out across Germany to seize documents thought to be related to tax evasion by hundreds of wealthy Germans. Cases are now being prepared based on the information, a process likely to take years. The fallout has claimed the job of one top executive, Klaus Zumwinkel, who had headed the German postal service, and has given the German left a political boost.

But Switzerland is the bigger prize. And its continuing refusal to help other countries catch tax cheats hiding their money there appears to have hardened Europe’s resolve to force change.

“If a car is stolen in Germany and taken to Switzerland, the Swiss help find it,” said Hans Eichel, a member of the German Parliament and a former finance minister. “But when it’s about tax evasion — and much larger sums — they do nothing. No one outside Switzerland understands that.”

To Thomas Borer, a former Swiss ambassador to Germany, few inside Switzerland understand the depth of foreign discontent.

“It is obvious,” said Mr. Borer, now a lobbyist, “the government and the banks, really, are heavily underestimating the impact of this scandal.”

“There may be an avalanche coming, and we are not ready,” he added.

Mr. Borer compares the coming storm to the debate Switzerland faced in the late 1990s over dormant bank accounts belonging to Holocaust victims and their families. When first faced with demands for restitution, Swiss banks dismissed the claims despite urgent warnings from some Swiss diplomats that the issue would not go away.

After an international blowup that sullied their reputation, the banks settled the matter by creating a $1.25 billion restitution fund.

Last month, Germany threatened to delay a new passport-free travel arrangement with Liechtenstein, the clearest sign that Germany is willing to hold other policies hostage to its goal of cracking banking secrecy laws.

Angela Merkel, the German chancellor, is due to visit Switzerland in late April and is expected to press demands for more investigative assistance from Swiss authorities in tracking down German tax dodgers — and less secrecy generally.

The official Swiss reaction has been self-conscious detachment, which they hope will deflate the issue.

No one expects Swiss banking secrecy to dissolve overnight. What European governments are aiming for is a middle ground between Switzerland’s being a banking black hole and the openness of other major countries.

One compromise might be for the Swiss to agree to provide greater assistance to foreign authorities investigating suspected crimes. But that kind of move could breach the discretion so many Swiss clients value.

Under current agreements with the 27-nation European Union, Switzerland imposes its own capital gains tax on people who invest here but live in European Union countries, and remit the money to the appropriate national authorities. Some countries, including Germany, believe the current system gives them less money than they are owed.

European officials believe they can seize this moment to rally public opinion against the Swiss, German officials said. France, which will take over the rotating presidency of the European Union in the second half of this year, has agreed to take up the issue.

Even American leaders are taking note. Senator Carl Levin, Democrat of Michigan, has announced his own inquiry into tax evasion by Americans in Liechtenstein, and both he and Senator Barack Obama are pushing legislation that would give the federal government new powers to track down money in Switzerland and elsewhere.

The concept of bank secrecy is deeply rooted in Switzerland, akin to the confidentiality rules governing doctors and lawyers in other countries, and a 1934 law makes it a crime for bankers to disclose client information. For foreigners, this combination is an effective shield against authorities at home.

Generally, treaties on mutual legal assistance between sovereign nations apply only to matters that would be deemed a crime in both countries.

Mr. Hummler is unusual only in that he openly admits Swiss banks manage lots of money that escapes taxation elsewhere. But he makes no apologies. Recently he wrote a widely read eight-page tract defending Europeans who put their money in Switzerland as engaging in “financial self-defense” against high taxes at home.

Most analysts say big Swiss banks like UBS and Credit Suisse, which make most of their money outside Switzerland, would do just fine without banking secrecy. But Mr. Hummler said such secrecy is vital for the small private banks, a stable business with fat margins even in bad times.

Polls consistently show that 80 percent of Swiss support the banking confidentiality law — but that number drops into the 40s when it is applied to foreigners, suggesting the Swiss care much less about the privacy of non-Swiss citizens.

Mr. Hummler experienced that reality first hand a few weeks ago. During a meeting of his Rotary Club in Zurich, his fellow members were appalled that Swiss bankers might be managing the money of foreign tax evaders. “We had no idea,” Mr. Hummler recalls them saying, “that you did things like that.”

Hans-Rudolf Merz, the Swiss finance minister, has brushed aside notions that Switzerland will water down banking confidentiality, a cornerstone of the financial system. Jean-Michel Treyvaud, a spokesman for Mr. Merz, called the debate “a media phenomenon” and declined an interview request.

But bankers here said Swiss authorities’ worries actually run deeper. The quandary they face is that even discussing the issue could unnerve foreign clients.

Mr. Hummler said clients were already unnerved, since the dangers facing secrecy are obvious.

“You don’t want to say Swiss banking secrecy is in danger because of marketing issues,” he said. “But when it is so obvious, as it is now, it does not do much for marketing.”

http://www.nytimes.com/2008/03/29/business...qBVXwgpgyT0iayg

[ABLAT Staff]

Sunday, March 30, 2008
Banks teeter as credit crisis deepens
Orange County could see first traditional lenders fail since early '90s, experts say.
By MATHEW PADILLA
The Orange County Register

A real estate slump that has claimed hundreds of mortgage companies and recently mega investment bank Bear Stearns as victims now is heading straight for traditional banks and thrifts, some experts say.

Bank failures would force the Federal Deposit Insurance Corp.to step in and ensure consumers get their deposits back, possibly with taxpayer funds. Last year Orange County saw subprime lenders collapse, including New Century Financial of Irvine and ResMae Mortgage of Brea, but they lacked deposits.

Widespread bank and thrift failures were last seen in the late '80s and early '90s during the savings-and-loan crisis and recession. Orange County's last bank failure was more than a dozen years ago.

Richard Hollowell, partner in charge of the real estate services group of Newport Beach-based Squar, Milner, Peterson, Miranda & Williamson, said as many as 50 banks and thrifts likely will fail nationally over the next two years. The FDIC said on average six banks fail per year.

Continuing weakness in the housing market as well as growing weakness in commercial real estate will add to bank woes, said Hollowell. During the S&L crisis he headed a company that managed 1,400 delinquent loans and bank-owned properties.

"Banking institutions will need to merge, raise more capital or potentially be put of business by their regulators," said Hollowell, who helps struggling developers of all stripeswork out deals with their lenders

"We see the depth of the problem," Hollowell said. "We see first hand how deep the losses are."

Orange County-based lenders that take deposits and are struggling include Brea's Fremont General, parent of Fremont Investment & Loan, and Newport Beach's Downey Financial, parent of Downey Savings. Others who have operations here and recently reported losses or profit declines include Pasadena-based Indymac Bancorp and Seattle-based Washington Mutual.

Experts interviewed for this story declined to predict whether any of those companies will fail. And not all experts agree that banking problems are dire.
Gary Findley, who tracks FDIC-insured lenders and heads Anaheim-based The Findley Reports, said he expects just a few institutions to fail, perhaps just three or four in all of California.

"The general health of the banking industry is OK. It's not fabulous, but it's OK," Findley said.
However, if real estate values drop much further, including on commercial projects, then more banks will stumble, he said.

But it's already crunch time for some institutions, such as Fremont. Fremont, once a Top 10 lender to borrowers with spotty credit, is running low on cash.
And last week the FDIC ordered the company to raise more capital or sell its bank unit within two months. That follows previous signs of company woes.

On March 18, it said it would delay a $6.6 million interest payment on some senior notes as it attempts to renegotiate payment. This follows a previous announcement it received default notices from two buyers of its subprime loans. Fremont has said it is considering selling itself.
The company's fortunes have fallen with the housing market. It has yet to state its entire earnings for 2007, but it reported a loss of $202 million for 2006.

Loans it made in 2006 led delinquencies among large subprime lenders as home prices stalled, according to a report that year by financial giant UBS. Then in 2007, the FDIC shut down Fremont's subprime operation, saying, among other things, that Fremont marketed adjustable-rate subprime loans to consumers in a way that increased the probability of default.
The regulator also criticized Fremont's commercial loan operation, which the company later sold.

In November 2007, Fremont announced it hired Stephen Gordon as chief executive, replacing Louis Rampino who resigned. Gordon, who declined to be interviewed for this story, has a strong track record. He co-founded Irvine-based Commercial Capital Bancorp and served as CEO when it was acquired by Washington Mutual in October 2006 for nearly $1 billion.
Gordon has arranged at least one deal that should help Fremont's balance sheet. The company recently said investment fund Carrington Capital Management is buying rights to service $1.9 billion in loans, or roughly 13 percent of the principal balance of loans serviced by Fremont.

Fremont did not disclose what Carrington is paying. The deal is set to close Tuesday.
At the end of 2007, Fremont told the FDIC it had more than $7 billion in deposits, including an estimated $1.4 billion in uninsured deposits. It sells certificates of deposit, or CDs.

Downey's rising NPAs
Downey Financial has been a good company making 'prime' and near prime loans, but an increase in its troubled loans and foreclosed homes – dubbed nonperforming assets, or NPAs, – is getting serious, said Amit Chokshi, who leads hedge fund manager Kinnaras Capital Management in Norwalk, Conn. Chokshi previously bet against Downey's stock.
Downey's nonperforming assets totaled 9 percent of its total $13.6 billion in assets at the end of January, up from less than 1 percent a year earlier. It reported a $56.6 million loss for 2007.
Although it lends to folks with good credit scores, Downey made too many option ARM, stated-income loans at the peak of the housing boom, Chokshi said. Option adjustable-rate mortgages allow borrowers to select a payment, including one that defers principal and interest to the future. Under stated-income programs, borrowers say what they earn and skip the documents that prove it.
Chokshi said Downey has run out of "cushion" in case things get worse in the housing market.
"They are typically a good, solid, simple bank," Chokshi said, "but because of that they are stuck holding all this garbage on their balance sheet." Unlike pure mortgage banks, Downey doesn't sell many loans to Wall Street.
Downey, whose chief executive did not return a call seeking comment, has attempted to get ahead of the delinquency curve. The company has said it is seeking out borrowers who might not be able to afford a jump in payments on their option ARM loans and is offering to refinance them into more stable mortgages.
Its auditor KPMG insisted such refinanced mortgages be classified as non-performing assets, since Downey did not fully re-underwrite them. Excluding such refinances, its non-performing assets in January would have dropped from 9.14 percent to 5.55 percent.

FDIC gearing up for failures

The FDIC plans to add 140 workers, bringing total staff to 360 workers in the division that handles bank failures, said John Bovenzi, the agency's chief operating officer.
"We want to make sure that we're prepared," Bovenzi said, adding that most of the hires will be temporary and based in Dallas.
FDIC officials said last month that they planned to bring back about 25 retirees to the agency and noted those workers will train new hires. Over the next five years, about 50 percent of employees with experience in bank failures, especially those who were at the agency during the savings and loan crisis, will be eligible for retirement, officials added.
The last time the FDIC was hit hard with failures was during the 1990-1991 recession, when 502 banks failed in three years. About 40 institutions failed in California.
There are 76 banks on the FDIC's "problem institutions" list – which would equate to about 10 expected bank failures this year, though FDIC officials declined to make projections.
While depositors typically have quick access to their bank accounts on the next business day after a bank closure, winding down a failed bank's operations can take years to finish. That process can include selling off real estate, investments and dealing with lawsuits.
FDIC-tracker Findley said if the agency takes over a troubled bank that doesn't necessarily mean taxpayers will foot the bill for consumer deposits.
Usually the FDIC finds a buyer for the bank's deposits, he said. Deposits have value and some companies will pay a premium for them, he said.
The losers generally are the bank's shareholders, Findley said.

However, if a troubled bank raised the interest it offered consumers to attract deposits, such as high yields on CDs, then bidders will offer less money for the deposits, since they are more costly to hold, Findley said. He cautioned that just because a lender offers high interest rates on deposits that doesn't necessarily mean the lender is in trouble. (The FDIC last week ordered Fremont to limit interest it pays on deposits to market rates.)
And even consultant Hollowell, who has a more severe view of banks nationally, especially banks with $5 billion or less in assets, said Orange County residents shouldn't lose any sleep over an industry shake up.
"There is no reason for anyone to believe they will lose their principal in their savings account because of a bank failure," Hollowell said.

Copyright 2008 Orange County Register Communications

http://www.ocregister.com/articles/bank-fr...-deposits-loans

[ABLAT Staff]

Gas prices strike all-time high
Average price of regular unleaded rises to record $3.287 a gallon, according to AAA survey.
Last Updated: March 31, 2008: 9:24 AM EDT

NEW YORK (CNNMoney.com) -- Average gasoline prices have hit another all-time high, according to a survey conducted for motorist organization AAA.

The average price of regular rose to $3.287 a gallon, up from $3.286 the previous day, according to the AAA Web site.

The price averaged $3.165 a month ago. A year ago, American drivers were paying $2.673, according to AAA.

Motorists in Hawaii paid the most for gas, averaging $3.647 a gallon. New Jersey drivers paid the least, with a statewide average of $3.045 a gallon, according to the survey.

Analysts say surging crude prices are largely to blame for pricey gas. Crude topped $100 a barrel in early 2008, and has traded above $100 for most of the year.

While gasoline prices have hit record highs well before the start of the summer driving season, most analysts expect prices to peak relatively early - somewhere between $3.30 and $3.80 a gallon - and then decline during the second half of the spring as a slowing economy crimps demand.

The AAA survey, updated daily, tracks prices at roughly 80,000 service stations across the country. It is conducted for the group by Oil Price Information Service. To top of page
First Published: March 31, 2008: 4:11 AM EDT

http://money.cnn.com/2008/03/31/news/econo...dex.htm?cnn=yes

[ABLAT Staff]

Scope for dollar selling, investors still overweight
Fri Mar 28, 2008 9:13am EDT

By Simon Falush - Analysis

LONDON (Reuters) - The dollar has dropped sharply this year but many investors still hold overweight positions and could force the greenback to new depths against the euro as they scramble to sell.

The dollar has tumbled 15 percent over the last 12 months to an all-time low of 1.59 per euro on March 17, and investors expect it to continue its slide.

The U.S. economy has been battered by a collapse in the housing market and a banking sector severely wounded by the credit crunch, prompting fears of a full-blown recession.

This has caused the Federal Reserve to pump liquidity into the market and slash rates by 300 basis points since September, undermining the yield appeal of the greenback and prompting heavy selling.

But many institutional investors have been left behind and still hold relatively long positions in dollars. Speculative investors like hedge funds have been quicker to adopt short positions but there is still scope for them to cut further.

This could herald fresh dollar lows against the European currency -- analysts say it could plumb the mid-1.60s level -- and prompt more calls from European politicians, concerned about the soaring costs of their exports, for intervention.

Based on a survey of asset managers who hold around $14 trillion in assets, State Street Global Markets estimates that institutional investors are now more heavily weighted in the dollar than they have been 69 percent of the time in the past.

"Institutional investors are still long the dollar and this is likely due to broad based capital repatriation as funds unwound hedges and bought back dollars," said Michael Metcalfe, senior strategist at SSGM.

"They are now actively unwinding these positions, a move that could take three to five weeks ... This could see new highs for euro/dollar."

MORE SPECULATIVE BETS POSSIBLE

While speculative investors are ahead of their institutional counterparts in terms of adopting short dollar positions, there is still plenty of scope for them to make more extreme bets against the ailing U.S. currency.

Speculators increased bets against the U.S. dollar to $22.4 billion in the week to March 18, up slightly from the $19.63 billion the previous week according to data from the Commodity Futures Trading Commission.

"There are not excessive short positions in the dollar; there's nothing to stop it going further," said Martin McMahon, FX strategist at Credit Suisse in Zurich.

While short dollar positions have crept higher for speculative investors over the last two weeks, they are short dollars by far less than they were in previous periods when the greenback fell sharply, data from International Money Markets indicates.

"The IMM data shows that there is roughly $5 billion worth of dollar shorts versus the euro outstanding," said Peter Frank, currency strategist at Societe Generale.

"It was about four times higher than that last year between February and May, over which time the euro rose nearly 10 cents, so you could see the euro move to $1.65 if people start to move more heavily into dollar short positions."

With investors taking a bearish stance on the U.S. economic outlook, speculative investors are likely to hold onto short dollar positions for the foreseeable future, analysts said.

"I can't see the net aggregate position being long any time soon," said Dustin Reid, senior FX strategist at ABN Amro in Chicago. He said the lingering short stance of many investors would contribute to further volatility in the market.

The dollar is expected to do better against its other major counterpart, the Japanese yen, at least partially because options contracts are heavily skewed to yen calls.

A Reuters poll earlier this month sees the yen gradually firming to around 104 to the dollar, from 99.77 at present, through June.

(Editing by Michael Winfrey)

http://www.reuters.com/article/reutersEdge...0080328?sp=true

[ABLAT Staff]

It may well be more likely just a case of a "very bad economy", which is very alarming all the same- Steph
-----------------
Wal-Mart Cancels 45 Superstore Projects
Posted March 30, 2008

"Cannibalization Factor" Eating The Company's Future

According to a list released this week, Wal-Mart Stores has abandoned a record-shattering 45 proposed projects over the past 10 months -- often leaving local officials dejected and confused. Another 19 Wal-Mart projects have been killed by local citizen's groups. In total, the world's largest retailer has suffered an historic loss of 64 projects.

The list of store cancellations was compiled by Sprawl-Busters, which has maintained a database on Wal-Mart battles for more than a decade. Since June, 2007, the Arkansas-based retailer has delayed or killed its own stores in the following communities:

Aledo, IL; Arlington, WA; Belfast, ME; Bonita Springs, FL; Brooksville, FL; Chico, CA; Concord, CA; Crowley, TX; Derry, NH; Elyria, OH; Fircrest, WA; Garden Grove, CA; Gilbert, AZ; Glen Carbon, IL; Hadley, MA; Hemet, CA; Hilo, HI; Isle of Wight, VA; Knightdale, NC; Lake County, FL; Lakeland, FL; Lawrence, NJ; Lewiston, ME; Liberty, OH; Pennfield, MI; Hillsborough, NH; Kilbuck, PA; La Puenta, CA; Marietta, GA; Marysville, WA; Memphis, TN; Morganton, NC; Neptune Beach, FL; Oakley, CA; Oxford, NC; Portland, OR; Raleigh, NC; Ravalli County, MT; Rutland Charter, MI; Spooner, WI; St. Peters, MO; Sioux Falls, SD; Stoughton, WI; Sunrise, FL; Waukesha, WI.

These store withdrawals usually come with little advance notice, and even less explanation. In September, 2007, for example, when Wal-Mart suddenly folded its tent in Lancaster, Massachusetts -- 3 miles from the construction site of another Wal-Mart superstore -- the company issued a terse, four paragraph press release which stated, "The decision is related to Wal-Mart's recently announced plans to moderate growth of U.S. supercenters as part of leveraging capital resources through a strategy designed to improve returns and sales within U.S. stores." Such dense statements left local officials scratching their heads in disbelief -- sometimes following months, even years, of lobbying by the retailer to get a project approved.

Up until 10 months ago, Wal-Mart was planning to open a new store in America every 26.5 hours. But all of that changed on the morning of June 1, 2007. On that Friday morning, Wal-Mart stunned 18,000 stockholders assembled in the Bud Walton Arena on the campus of the University of Arkansas in Fayetteville. The retailer announced its growth plan for 2008 -- in what the New York Times described the next day as a "turning point" for the company.

In their laps, stockholders held Wal-Mart's 2007 Annual report, which said, under the heading "Future Expansion," that the company's "planned expenditures will include the construction of...265 to 270 new supercenters..." But in the weeks between sending their Annual Report to the printer, and their stockholder's meeting -- Wal-Mart popped its own growth bubble.

For several years, Wall Street's reaction to the retailer's overly-aggressive U.S. construction forecast had been less than encouraging. In 2005, for example, Bernstein Research Call issued a 13-page report warning stockholders of the downside of Wal-Mart's superstore plans. The analysts noted that Wal-Mart's growth "is under siege in several regions of the country from growing opposition by local communities...Local opposition has successfully squashed numerous plans among big box players in different parts of the country." Bernstein noted that "heightened resistance could negatively impact these retailers by slowing their square footage growth rates." Even modestly slower long-term square footage growth could have both an earnings per share and valuation impact, researchers said.

Because of grassroots anti-Wal-Mart groups, Bernstein warned, "it is clear that (discount retailers) will need to pursue a substantially larger number of permits going forward to hit their internal square footage targets given the likelihood of many opportunities failing."

Not only had Wal-Mart suddenly slammed on the brakes for 2008, but the company said it would open "only" 170 superstores per year for the next three years, and 80 supercenter would be deferred into 2009. In its 2007 Annual Report, the company explained, "We are focused on prioritizing capital spending to the projects that produce the highest returns. We want to improve our Company's return on investment, or ROI, improve our comparable store sales and improve our working capital productivity. The outcome is a focus on the most capital efficient opportunities."

In part due to the company's pale 1.9% growth in same store sales in 2007, John Menzer, Wal-Mart's Chief Administrative Officer, admitted, "We also have been focused this year on reducing cannibalization of existing stores via our more strategic selection of U.S. real estate projects." Same store sales indicates the performance of existing stores by measuring the growth in sales for such stores during a particular period, over the corresponding period in the prior year. Wal-Mart's same store sales have been dropping for 20 years, but this past year was the worst. The 1.9% growth rate in 2007 compares to 5% in 1997, and 13% in 1987.

Every store site that Wal-Mart proposes is reviewed by its executive-level Real Estate Committee, which looks at a number of benchmarks to see if each unit meets the retailer's Growth Model: the state of the economy, the local trade area, competition in the area, local demographics, real estate and construction costs, and: "potential impacts on neighboring Wal-Mart stores." This last metric -- the cannibalization factor -- has had a major impact on the deep-sixing of many superstore projects this year.

"As we continue to add new stores in the United States," the company told shareholders, "we do so with an understanding that additional stores may take sales away from existing units. We estimate that comparable store sales in fiscal 2007, 2006 and 2005 were negatively impacted by the opening of new stores by approximately 1% in fiscal years 2007, 2006 and 2005. We expect that this effect of opening new stores on comparable store sales will continue during fiscal 2008 at a similar rate."

To measure Wal-Mart's retrenchment another way, the corporation added 42,000,000 square feet of store space in 2007, compared to 39,000,000 square feet in 2006. It's current growth plan cuts new square footage to 20,000,000 for 2008. As projects get cancelled, square footage growth drops, sales growth slows, all of which can impact earnings and company valuation. The last thing Wal-Mart wants is for investors to see the company for what it really is: a middle-aged corporation choking on its own domestic appetite for growth. If it weren't for China and India, Wal-Mart's growth prospects would be problematic. Yet Wal-Mart's future as a colonial retail empire is far from certain, if places like Indonesia, Germany and Japan are the yardstick.

Sam Walton explained that his growth strategy was "to saturate a market area by spreading out, then filling in...We became our own competition." He once boasted that Springfield, Missouri, for example, had 40 Wal-Marts within 100 miles. But Wal-Mart has paid a price for competing with itself. Today, the saturation card has been overplayed, and the retailer has been forced to go on a superstore crash diet. While hundreds of sling-shot coalitions have been hurling rocks at this retail Goliath for years, ironically, it is now the giant itself which is reeling from its own self-inflicted excesses.

This has created a wonderful 10 months for anti-Wal-Mart groups in 21 states, who have woken up in their small towns to read that another proposed Wal-Mart superstore has dissolved, as suddenly as the morning mist.

Al Norman is the founder of Sprawl-Busters. Forbes Magazine has called him "Wal-Mart's #1 Enemy."

http://www.huffingtonpost.com/al-norman/wa...er_b_94112.html

[ABLAT Staff]

Paulson: Change rules for Wall Street
Treasury chief wants to overhaul how financial firms are regulated. Among the ideas: Widening Fed's reach and creating a U.S. regulator for mortgage industry.

By David Ellis, CNNMoney.com staff writer
Last Updated: March 31, 2008: 3:07 PM EDT

NEW YORK (CNNMoney.com) -- Treasury Secretary Henry Paulson proposed a set of sweeping changes on Monday aimed at modernizing the nation's financial system in what could herald the biggest regulatory overhaul of Wall Street since the Great Depression.

The plan, which would broadly expand the Federal Reserve's powers, comes as concerns about the housing crisis and its fallout in the financial system continues to fuel calls for change in Washington. The Paulson changes, if enacted, would be largely invisible to consumers but would drastically alter how the financial services industry is regulated.

"Government has a responsibility to make sure our financial system is regulated effectively," Paulson said. "And in this area, we can do a better job."

But the Treasury chief was cautious to warn that changes could take "many years to complete."

Democrats, on the whole, slammed the Bush administration proposal. Senate Banking Committee Chairman Christopher Dodd of Connecticut called it a "failure of leadership" and argued that regulators are not taking advantage of the powers already at their disposal.

Among the plan's proposals is one that would grant additional powers to the Federal Reserve, essentially transforming it into a regulator that would stabilize financial markets.

The Fed, along with the Treasury Department, has attempted to shepherd the nation through the housing crisis and the recent turmoil in financial markets. Earlier this month, the Fed orchestrated a marriage between JPMorgan Chase (JPM, Fortune 500) and Bear Stearns (BSC, Fortune 500), which was on the verge of a collapse that threatened to send shockwaves through the broader financial system.

Under the Paulson plan, the Fed would essentially serve as a financial markets moderator, stepping in if the nation's markets were again threatened by an episode like the near collapse of Bear Stearns.

The plan would also give the central bank greater oversight of investment banks and previously unregulated entities like hedge funds and private equity firms that have wielded growing influence in financial markets in recent years.

Up to now, the Fed has played a important but much smaller role in the nation's financial system - setting the country's monetary policy and acting as one of the handful of regulators responsible for overseeing banks.

Streamlining agencies

The Treasury began examining the American financial system's ability to compete with maturing foreign markets about a year ago.

Since the last major overhaul in the 1930s, much of the change in the nation's financial system has been reactionary, with new regulatory agencies created in response to previous market crises.

Paulson, the former CEO and chairman of Wall Street powerhouse Goldman Sachs, said that as a result, regulators now find themselves duplicating each other's efforts, while other key regulatory issues slip through the cracks - a glitch the Treasury plan would hope to correct.

One suggestion involves combining the Securities and Exchange Commission, which ensures the functioning of financial markets and is responsible for protecting investors, with the Commodity Futures and Trading Commission, which regulates the trading of futures contracts of such key commodities as oil, gold and wheat.

The Treasury plan would also fold the Office of Thrift Supervision - the overseer of federally-chartered institutions that function much like banks - into the Office of the Comptroller of the Currency. The comptroller is responsible for overseeing national banks.

On the housing front, the plan would allow for the creation of a federal regulator for the mortgage industry, dubbed the Mortgage Origination Commission. The commission would aim to rein in the questionable practices of both lenders and brokers, who are now required to abide by a patchwork of state regulations.

In addition, the insurance industry could experience dramatic changes, under the plan. Insurance companies would now have the option to be regulated at the federal level, instead of the current state-run model, which has been in effect for more than 130 years.

"I am not suggesting that more regulation is the answer," Paulson said Monday. "I am suggesting that we should and can have a structure that is designed for the world we live in, one that is more flexible, one that can better adapt to change."

Act cautiously

Putting any part of the plan into effect, however, would require legislation, which could face a headwind with the nation in an election year and some congressional Democrats already showing hesitancy over the plan.

House Speaker Nancy Pelosi, D-Calif. said the proposal was "a step in the right direction" but urged more action.

Massachusetts Rep. Barney Frank, who chairs the House Financial Services Committee and recently proposed his own set of regulatory changes, said Paulson's proposal provided "an important service" but said he disagreed with some of its specifics.

"The plan goes too far in diminishing the role of the states, and not far enough in conferring needed new powers on the Federal Reserve over non-bank financial institutions for which they now have greater responsibility," Frank said.

Industry groups, which spoke in favor and against the plan over the weekend as its details became widespread, are likely to weigh in as well as the debate moves forward.

The Securities Industry and Financial Markets Association, which represents more than 650 financial services firms, called Paulson's plan "thoughtful" and "sweeping."

The Independent Insurance Agents & Brokers of America, which represents more than 300,000 independent insurance agents, brokers and their employees questioned the insurance component of the proposal, arguing that there are better ways to overhaul of the insurance industry without creating a "new federal bureaucracy."

In his speech, however, Paulson urged restraint, saying that enacting major changes could burden a market already under strain.

"These long-term ideas require thoughtful discussion and will not be resolved this month or even this year," he said.
First Published: March 31, 2008: 9:26 AM EDT

http://money.cnn.com/2008/03/31/news/econo...dex.htm?cnn=yes

[ABLAT Staff]

Housing Secretary Alphonso Jackson Resigns Amid Mortgage Crisis, Federal Probe
Monday , March 31, 2008
AP

WASHINGTON —
HUD Secretary Alphonso Jackson, his tenure tarnished by allegations of political favoritism and a criminal investigation, announced his resignation Monday amid the wreckage of the national housing crisis.

He leaves behind a trail of unanswered questions about whether he tilted the Department of Housing and Urban Development toward Republican contractors and cronies.

The move comes at a shaky time for the economy, with soaring mortgage foreclosures imperiling the nation's credit markets.

In announcing that his last day at HUD will be April 18, Jackson said only, "There comes a time when one must attend more diligently to personal and family matters."

Some Congressional Democrats had pushed for him to leave.

Democratic presidential candidate Hillary Rodham Clinton said that while Jackson's resignation is "appropriate, it does nothing to address the Bush administration's wait-and-don't-see posture to our nation's housing crisis."

House Speaker Nancy Pelosi, D-Calif., said HUD will be called on to work with Congress on assisting refinancing for borrowers faced with imminent foreclosure.

The ethical allegations against Jackson "meant that the Bush administration's ineffective housing policies were being burdened by an even more ineffective HUD Secretary," Sen. Patty Murray, D-Wash., said after Jackson's announcement.

President Bush called Jackson "a strong leader and a good man." Ties between the two men go back to the 1980s when they lived in the same Dallas neighborhood. It was Jackson's personal ties to Bush that brought him to Washington, where he displayed a forceful personal style at HUD for seven years, first as the agency's No. 2 official and since 2004 in the top slot.

Despite a strong commitment to housing for those in need, Jackson was capable of ill-advised public comments.

Last year, after the subprime mortgage crisis erupted, many policymakers underlined the disproportionate impact of the high-risk, high-cost mortgages on minorities and the elderly, who often are targets of predatory lending practices that lure people into loans they are incapable of repaying.

Asked about the problems with subprime mortgages last June, Jackson insisted that many such borrowers were not unsophisticated, low-income people but what he called "Yuppies, Buppies and Guppies" — well-educated, young, black and gay upwardly mobile achievers — with expensive cars who bought $400,000 homes with little or no money down.

In announcing his departure, Jackson said that in his time at HUD, "We have helped families keep their homes. We have transformed public housing. We have reduced chronic homelessness. And we have preserved affordable housing and increased minority homeownership."

Bush has been cool to the idea of a big federal housing rescue. "The temptation of Washington is to say that anything short of a massive government intervention in the housing market amounts to inaction," the president said recently. "I strongly disagree with that sentiment."

In October, the National Journal first reported on the criminal investigation of Jackson. The FBI has been examining the ties between Jackson and a friend who was paid $392,000 by Jackson's department as a construction manager in New Orleans. Jackson's friend got the job after Jackson asked a staff member to pass along his name to the Housing Authority of New Orleans.

In another instance of alleged favoritism that came to light in February, the Philadelphia housing authority alleges that Jackson retaliated against the agency because it refused to award a vacant lot worth $2 million to soul-music producer-turned-community developer Kenny Gamble for redevelopment of a public housing complex.

Jackson's problems began in 2006, when he told a group of commercial real estate executives that he had revoked a contract because the applicant who thanked him said he did not like President Bush. Jackson later told investigators "I lied" when he made the remark about taking back the contract.

The probe of Jackson's comment by the HUD inspector general ended with no action taken against him, but the investigators brought to light friction between the HUD secretary and some contractors who have long done business with the agency, a number of them donors to Democrats. On Monday, the IG's office said it had seen Jackson's remarks and "there is nothing more that we can add."

In the IG probe, some of Jackson's own aides contradicted his account of one incident in which investigators found the HUD secretary had blocked a contract for several months to one heavily Democratic donor. Jackson blamed his aides for the delay in the award.

Jackson was the first black leader of the housing authority in Dallas, where his integration efforts caused clashes with some local homeowners in predominantly white neighborhoods.

http://www.foxnews.com/printer_friendly_st...,343470,00.html

[ABLAT Staff]

Chaos on Wall Street
Published on Monday, March 31, 2008.
Source: CNN Money

The big banks' fear of big losses is threatening to bring down the entire system, with dire consequences for all of us. Here's what's going on, and what we can do about it.
By Allan Sloan, senior editor at large

(Fortune Magazine) -- What in the world is going on here? Why is Washington spending billions to bail out Wall Street titans while leaving struggling homeowners to fend for themselves? Why are the Federal Reserve and the Treasury acting as if they're afraid the world may come to an end, while the stock market seems much less concerned? And finally, what does all this mean to those of us who aren't financial professionals?
Okay, take a few breaths, pour yourself a beverage of your choice, and I'll tell you what's happening - and what I think is going to happen. Although I expect these problems will resolve themselves without a catastrophic meltdown, I'll also tell you why I'm more nervous about the world financial system now than I've ever been in my 40 years of covering business and markets.

Finally, I'll tell you why I fear that the Wall Street enablers of the biggest financial mess of my lifetime will escape with relatively light damage, leaving the rest of us - and our children and grandchildren - to pay for their misdeeds.

We're suffering the aftereffects of the collapse of a Tinker Bell financial market, one that depended heavily on borrowed money that has now vanished like pixie dust. Like Tink, the famous fairy from Peter Pan, this market could exist only as long as everyone agreed to believe in it.

So because it was convenient - and oh, so profitable! - players embraced fantasies like U.S. house prices never falling and cheap short-term money always being available. They created, bought, and sold, for huge profits, securities that almost no one understood. And they goosed their returns by borrowing vast amounts of money.
The first shoe

The fantasies began to fade last June when Bear Stearns (BSC, Fortune 500) let two of its hedge funds collapse because of mortgage-backed-securities problems. Debt market - both here and abroad - went sour big-time. That, in turn, became a huge drag on the U.S. economy, bringing on the current economic slowdown.

And before you ask: It's irrelevant whether or not we're in a recession, which National Bureau of Economic Research experts define as "a significant decline in economic activity spread across the economy, lasting more than a few months." What matters is that we're in a dangerous and messy situation that has produced an economic slowdown unlike those we're used to seeing.

How is this slowdown different from other slowdowns? Normally the economy goes bad first, creating financial problems. In this slowdown the markets are dragging down the economy - a crucial distinction, because markets are harder to fix than the economy.

A leading political economist, Allan Meltzer of Carnegie Mellon, calls it "an unusual situation, but not unprecedented." When was the last time it happened in the U.S.? "In 1929," he says. And it touched off the Great Depression.

No, Meltzer isn't saying that a Great Depression - 25% unemployment, social unrest, mass hunger, millions of people's savings wiped out in bank collapses - is upon us. Nor, for that matter, am I. But the precedent is unsettling, to say the least. You can only imagine how unsettling it is to Federal Reserve chairman Ben Bernanke, a former economics professor who made his academic bones writing about the Great Depression.

Academics now feel that the 1929 slowdown morphed into a Great Depression in large part because the Fed tightened credit rather than loosening it. With that precedent in mind, you can see why Bernanke's Fed is cutting rates rapidly and throwing everything but the kitchen sink at today's problems. (Bernanke will probably throw that in too, if the Fed's plumbers can unbolt it.) None of this Alan Greenspan (remember him?) quarter-point-at-a-time stuff for him.
Fear is the culprit

So why hasn't the cure worked? The problem is that vital markets that most people never see - the constant borrowing and lending and trading among huge institutions - have been paralyzed by losses, fear, and uncertainty. And you can't get rid of losses, fear, and uncertainty by cutting rates.

Giant institutions are, to use the technical term, scared to death. They've had to come back time after time and report additional losses on their securities holdings after telling the market that they had cleaned everything up. It's whack-a-mole finance - the problems keep appearing in unexpected places. Since the Tink market began tanking, so many shoes have dropped that it looks like Imelda Marcos's closet.

We've had problems with mortgage-backed securities, collateralized debt obligations, collateralized loan obligations, financial insurers, structured investment vehicles, asset-backed commercial paper, auction rate securities, liquidity puts. By the time you read this, something else - my bet's on credit default swaps - may have become the disaster du jour.

To paraphrase what a top Fednik told me in a moment of candor last fall: You realize that you don't know what's in your own portfolio, so how can you know what's in the portfolio of people who want to borrow from you?

Combine that with the fact that big firms are short of capital because of their losses (some of which have to do with accounting rules I won't inflict on you today) and that they're afraid of not being able to borrow enough short-term money to fund their obligations, and you can see why credit has dried up.

The fear - a justifiable one - is that if one big financial firm fails, it will lead to cascading failures throughout the world. Big firms are so interlinked with one another and with other market players that the failure of one large counterparty, as they're called, can drag down counterparties all over the globe. And if the counterparties fail, it could drag down the counterparties' counterparties, and so on. Meltdown City.
The long-term view

In 1998 the Fed orchestrated a bailout of the Long-Term Capital Management hedge fund because it had $1.25 trillion in transactions with other institutions. These days that's almost small beer, because Wall Street has created a parallel banking system in which hedge funds, investment banks, and other essentially unregulated entities took over much of what regulated commercial banks used to do.

But there's a vital difference. Conventional banks have reason to take something of a long-term view: Mess up and you have no reputation, no bank, no job, no one talking to you at the country club.

In the parallel system a different ethos prevails. If you take big, even reckless, bets and win, you have a great year and you get a great bonus - or in the case of hedge funds, 20% of the profits. If you lose money the following year, you lose your investors' money rather than your own - and you don't have to give back last year's bonus. Heads, you win; tails, you lose someone else's money.

Bernanke and his point man on Wall Street, New York Fed president Tim Geithner, know everything I've said, of course. As does Treasury Secretary Hank Paulson, former head of Goldman Sachs (GS, Fortune 500).

They know a lot more too - such as which specific institutions are running out of the ability to borrow and have huge obligations they need to refinance day in and day out. Walk by Fed facilities in New York City or Washington, and you can feel the fear emanating from the building.
Because these aren't normal times, the Fed has tried to reassure the markets by inventing three new ways to inundate the financial system with staggering amounts of short-term money. This is in addition to the Fed's existing mechanisms, which are vast.

http://money.cnn.com/2008/03/28/news/econo..._sloan.fortune/

[ABLAT Staff]

The Trillion Dollar Meltdown
Published on Monday, March 31, 2008.
Source: Bloomberg

Be it ever so devalued, $1 trillion is a lot of dough.

That's roughly on a par with the Russian economy. More than double the market value of Exxon Mobil Corp. About nine times the combined wealth of Warren Buffett and Bill Gates.

Yet $1 trillion is the amount of defaults and writedowns Americans will likely witness before they emerge at the far side of the bursting credit bubble, estimates Charles R. Morris in his shrewd primer, ``The Trillion Dollar Meltdown.'' That calculation assumes an orderly unwinding, which he doesn't expect.

``The sad truth,'' he writes, ``is that subprime is just the first big boulder in an avalanche of asset writedowns that will rattle on through much of 2008.''

Expect the landslide to cascade through high-yield bonds, commercial mortgages, leveraged loans, credit cards and -- the big unknown -- credit-default swaps, Morris says. The notional value for those swaps, which are meant to insure bondholders against default, covered about $45 trillion in portfolios as of mid-2007, up from some $1 trillion in 2001, he writes.

Morris can't be dismissed as a crank. A lawyer, former banker and author of 10 other books, he knows a thing or two about the complex instruments that have spread toxic debt throughout the credit system. He once ran a company that made software for creating and analyzing securitized asset pools. Yet he writes with tight clarity and blistering pace.

The financial innovations of the past 25 years have done some good, Morris notes. Collateralized mortgage obligations, invented in 1983, saved homeowners $17 billion a year by the mid-1990s, according to one study.

Slicing and Dicing

CMOs transformed the business by slicing pools of mortgages into different bonds for different risk appetites. Top-tier bonds had the first claim on all cash flows and paid commensurately low yields. The bottom tier was the first to absorb all the losses; it paid yields resembling those on junk bonds.

What began as a good thing, though, soon spawned a bewildering array of new asset classes that spread throughout the financial system, marbling balance sheets with what Morris calls inflated valuations, hidden debt and ``phony triple-A ratings.'' The more the quants fine-tuned the upper tranches of CMOs and other collateralized debt obligations, the more dangerous the bottom slices grew. Bankers began calling it ``toxic waste.''

Guess where the toxins wound up? That's right: Credit hedge funds are now the weakest link in the chain, Morris says. Their equity stands at some $750 billion and is so massively leveraged that ``most funds could not survive even a 1 percent to 2 percent payoff demand on their default swap guarantees,'' he writes.

`Utter Thrombosis'

Morris sketches a scenario in which hedge fund counterparty defaults would ripple through default swap markets, triggering writedowns of insured portfolios, demands for collateral, and a rush to grab cash from defaulting guarantors. The credit system would suffer ``an utter thrombosis,'' he says, making the subprime crisis``look like a walk in the park.''

As bankers and regulators try to prop up the ``Yertle the Turtle-like unstable tower of debt,'' Morris points to two previous episodes of lost market confidence.

The first was the 1970s inflationary trauma that prompted investors to suck money out of the stocks and bonds that finance business. Confidence returned only after Fed chief Paul Volcker slew runaway inflation by ratcheting up interest rates.

The other precedent is the popped 1980s Japanese asset bubble. In that case, politicians and finance executives tried to paper over their troubles. Two decades later, Japan still hasn't recovered, Morris writes.

We should be as bold as Volcker, he suggests: Face the scale of the mess, take a $1 trillion writedown and shore up regulatory measures. His recommendations include forcing loan originators to retain the first losses; requiring prime brokers to stop lending to hedge funds that don't disclose their balance sheets; and bringing the trading of credit derivatives onto exchanges.

What he fears is that the U.S. will instead follow the Japanese precedent, seeking to ``downplay and to conceal. Continuing on that course will be a path to disaster.''

``The Trillion Dollar Meltdown: Easy Money, High Rollers and the Great Credit Crash'' is from PublicAffairs (194 pages, $22.95).

(James Pressley writes for Bloomberg News. The opinions expressed are his own.)

To contact the writer of this review: James Pressley in Brussels at jpressley@bloomberg.net.

http://www.bloomberg.com/apps/news?pid=new...id=aHCnscodO1s0

[ABLAT Staff]

Oil execs to take heat from lawmakers Tuesday
Monday March 31, 3:35 pm ET
By Chris Baltimore

WASHINGTON (Reuters) - Five U.S. oil company executives set to testify on Capitol Hill on Tuesday about soaring gasoline prices and record industry profits will likely offer a common defense: It's not our fault.

U.S. average pump prices have risen steadily since the beginning of 2008 and recently hit a record above $3.20 a gallon, heaping yet more pressure on a U.S. economy beleaguered by an imploding housing market and recession fears.

Rep. Ed Markey of Massachusetts, a long-time oil industry critic and chairman of the House Select Committee on Energy Independence and Global Warming, will chair the hearing called "Drilling for Answers: Oil Company Profits, Runaway Prices and the Pursuit of Alternatives."

Executives from the three biggest U.S.-based oil companies -- Exxon Mobil Corp (NYSE:XOM - News), Chevron Corp (NYSE:CVX - News), and ConocoPhillips (NYSE:COP - News) -- will attend, as well as U.S. representatives of BP Plc (LSE:BP.L - News) and Royal Dutch Shell (LSE:RDSA.L - News).

With heated questions expected from Markey and other Democrats on the panel, oil executives are likely to point to U.S. crude oil prices, which have skyrocketed from below $20 in early 2002 to a record $111.80 a barrel earlier this month.

"Gasoline and diesel prices are being set in what we consider to be a crude-driven market," said Red Cavaney, president of the American Petroleum Institute, which lobbies on behalf of big U.S. oil companies.

In other words, there is no shortage of refined products like gasoline, heating oil and jet fuel, and U.S. companies have little control over a world market dominated by geopolitical events like supply disruptions in Venezuela, Nigeria and Iraq.

"This is a well-supplied market," said API chief economist John Felmy, pointing to plentiful U.S. stockpiles of crude oil and gasoline.

According to the U.S. Energy Information Administration, about 70 percent of the February 2008 average pump price of $3.03 a gallon was crude oil, with 17 percent from refining and marketing costs and 13 percent from taxes.

Markey has pointed out that even though Exxon earned a record $40.6 billion in 2007, oil companies have opposed a push by congressional Democrats to strip about $18 billion in tax breaks from big oil companies and put them toward planet-friendly energy alternatives like wind and solar.

The API's Cavaney said oil company profits actually come in lower than other sectors like pharmaceuticals, and that private U.S. companies rely on their giant scale to compete with state-owned oil companies like Saudi Aramco.

"We continue to hear this idea about we make these massive amounts of dollars of profit," Cavaney said. "But again, the dollars are large because the companies' competition is the huge national oil companies," which control the lion's share of global supply.

The image of oil executives raising their right hands and swearing to tell the truth about their influence over pump prices is a perennial event in Washington.

The last time U.S. lawmakers called such an expansive oil company hearing was in March 2006, in the upshot of the 2005 Gulf Coast hurricanes.

Industry witnesses at Tuesday's hearing are: Stephen Simon, senior vice president of Exxon Mobil; Peter Robertson, vice chairman of Chevron; John Lowe, executive vice president of ConocoPhillips; John Hofmeister, president of Shell's U.S. subsidiary, and Robert Malone, chairman of BP's U.S. subsidiary.

(Reporting by Chris Baltimore, editing by Matthew Lewis)

http://biz.yahoo.com/rb/080331/usa_oil_congress.html?.v=2

[ABLAT Staff]

Truckers to Strike Over Record Diesel Prices, Some Paying Up to $1,200 to Fill-Up
Tuesday , April 01, 2008
FC1

MEDFORD, Ore. —
Independent U.S. truckers are planning to stop hauling freight Tuesday in protest of record-high diesel prices that drivers say they can no longer afford.

Independent truckers, who constitute 90 percent of the nation's trucking fleet, are being hit especially hard by soaring diesel prices and compensation lags far behind rising costs, according to the American Trucking Association.

"Diesel used to be 30 to 40 cents cheaper than regular gasoline; now it's 30 to 40 cents more," said independent truck driver Gordon Gravely, of Helena, Mont., who stopped at the Phoenix Petro Truck Stop on his way to Roseburg, Ore.

Many truckers are spreading word of a strike through Internet blogs and over their CB radios, encouraging everyone to put their trucks in park in order to send the message to U.S. oil companies and the federal government.

"Make a stand, we're going to unite. It’s something we've needed to do," said truck driver Carla Skipworth.

Diesel this week was at an average of more than $4 a gallon in Oregon and Washington and nearly $4.12 in California, according to the American Trucking Association. If a trucker is filling up a 300-gallon semi, that bill could top $1,200.

The Owner-Operator Independent Drivers Association says it has not called for strikes and gave no estimate of how many of its members might participate. "We do not tell our members what to do. They inform us of what they are doing and we support their decisions either way," said Norita Taylor, a spokeswoman for the group.

"It worries the hell out of me," said 10-year truck driver Stan Hall, of Salt Lake City. "It just seems like a nightmare. In my wildest dreams, I wouldn't have guessed it would get this bad."

Hall said his company restricts drivers to certain fuel stations, where it has negotiated discount diesel rates.

"They tell us not to buy fuel in California," Hall said. "We are supposed to buy only as much as we need to get out of there."

Web sites such as TruckDriversUnited.com, are asking truck drivers to band together in a nationwide strike this first week of April, and some drivers already are planning to stop their trucks for a few hours early Tuesday.

"We keep getting e-mail every day from more and more who say they will shut down," Dan Little, owner of Little & Little Trucking of Carrollton, Mo. told the Indianapolis Star, "It's not only the truckers that are getting involved in this. We're getting e-mails from others, too. They tell me they plan to stay home on April 1."

Mike Card, president of Combined Transport in Medford, has 388 tractor-trailers in the company. He says the company is spending $2 million a month on fuel.

To help offset the costs Combined Transport has discount agreements with some fuel stops and installs tires, aerodynamic body parts and anti-idling devices that make the trucks more fuel-efficient. The company also reduced the maximum speed for its trucks to save on fuel.

More than 100 truckers and others rallied on the steps of the Pennsylvania Capitol in Harrisburg Monday, asking lawmakers to cut state taxes on their fuel.

Some truckers drove around the Capitol, blasting their horns in protest, but the state argues it needs the tax revenue to repair roads and bridges.

"There is a disproportionate burden placed on small business owners who are truck drivers because they depend upon diesel to run their businesses," said Norita Taylor, a spokeswoman for the Owner-Operator Independent Drivers Association.

George Vincent, 44, a driver from Monroe, Mich., said he doesn't support the trucker strike because he fears it will "throw the economy into a spiral."

Vincent said he copes by spending more time on the road. "I don't know how some people are making it. I have to work more to earn less."

Prices for diesel fuel have been lifted in the last few months by a wave of higher crude oil prices. Although oil has dropped from its March 13 closing high of $109.17, it is still trading above $100 per barrel and keeping gasoline and diesel prices at or near record levels.

The U.S. retail price for gasoline set a new high of $3.29 a gallon after rising 3.1 cents over the last week, the federal Energy Information Administration said on Monday.

The national price for regular, self-service gasoline is up 58 cents from a year ago as expensive crude oil continued to be passed on to consumers at the pump, the Energy Department's analytical arm said in its weekly survey of service stations.

In the EIA's latest weekly survey, gasoline was the most expensive on the West Coast at $3.52 a gallon, up 0.6 cent. San Francisco had the highest city price at $3.65, down a penny.

The Gulf Coast states had the cheapest regional price at $3.21 a gallon, up 4 cents. Boston had the lowest city price, up 0.7 cent to $3.11.

The Associated Press, Reuters News Agency and Indianapolis Star contributed to this report.

http://www.foxnews.com/printer_friendly_st...,344170,00.html

[ABLAT Staff]

UBS to Write Down Another $19 Billion
BY DAVID JOLLY

PARIS — UBS, the largest Swiss bank, said Tuesday that it would write down another $19 billion related to the American real estate market and said that its chairman, Marcel Ospel, would step down.

UBS said the write-down would result in a first-quarter loss of about 12 billion Swiss francs, or $12 billion, and that it would seek new capital of about $15 billion, the second time it has announced plans to raise money since the credit markets began to contract.

The UBS board proposed that Peter Kurer, the bank’s general counsel, take over as chairman, pending shareholders’ approval at a meeting April 23.

The news came as the biggest German lender, Deutsche Bank, warned Tuesday that market conditions “have become significantly more challenging during the last few weeks,” and said it expected to write about 2.5 billion euros, or $3.9 billion, on real estate loans and assets from the United States.

Global banks have now written down more than $200 billion of soured loans since last summer when the subprime mortgage market began to implode.

UBS has written off $37.1 billion in losses related to the American housing market, including the $18.1 billion it wrote off in the third and fourth quarters of 2007, a bank spokesman, Dominik von Arx, said in Zurich.

UBS said the $15 billion rights issue was underwritten by a syndicate of banks led by JPMorgan Chase, Morgan Stanley, BNP Paribas and Goldman Sachs. In February, UBS raised 13 billion francs in new capital from the Government of Singapore Investment Corporation and an unidentified Middle Eastern investor. That led some shareholders to call for a board shake-up and for Mr. Ospel to step down.

In an e-mailed statement on Tuesday, a representative of the Singapore fund, which bought 11 billion francs of UBS shares in the previous rights issue, said fund executives would “examine the terms of the rights issue and obtain other necessary information before we decide” whether to participate in the new capital increase.

A banking analyst at Dresdner Kleinwort in London, Folkert Jan Van der Veer, said, “Based on what we’ve heard for the last few months, it’s no surprise that a bank like UBS, with significant market exposure, is coming out with sizeable write-downs.”

“If the markets remain difficult,” he said, “you can’t rule out that further write-downs will follow.”

Mr. Van der Veer said the fact that the rights issue was fully subscribed meant that UBS’s “capitalization remains relatively strong.” UBS said its tier-1 capital ratio, a measure of financial strength, would stand at about 10.6 percent after the new capital infusion.

In a statement, the UBS chief executive, Marcel Rohner, said “the environment remains difficult, and while we are committed to further substantially reducing our exposures we do not want to undertake sales of positions at severely distressed levels.”

UBS is segregating its assets related to the American residential real estate market into “a portfolio work-out unit, separating these positions from its other, profitable businesses,” it said, and it left open the possibility that the unit would eventually be divested.

UBS had a 12.5 billion franc loss in the fourth quarter of 2007.

Its shares, which are down about 58 percent over the last year, rose 8.5 percent in Zurich afternoon trading. Shares of Deutsche Bank, down about 26 percent over the last year, were up 3.3 percent in Frankfurt. Other European bank shares rallied, including Credit Suisse which rose 6.2 percent, and Société Générale rose 6.2 percent. HSBC Holdings rose 1.8 percent.

A senior banking analyst at ING Financial Markets in Madrid, Carlos Garcia, said banking sector shares rose because “People were expecting further write-downs and now there’s a little more certainty about the situation, so in the short term there is some relief.”

Nonetheless, Mr. Garcia said he remains concerned about “those banks that have not been more aggressive about marking down their securities portfolios and which had low capital ratios.” Many European banks, he said, “are still in denial” about the bad loans on their books.

UBS said it has remaining exposure to the subprime market of about $15 billion, down from $27.6 billion on Dec. 31, while its exposure to so-called Alt-A positions declined to $16 billion from $26.6 billion. Alt-A loans are given to customers with little credit history or minor credit problems.

But it said its exposure to auction-rate certificates, another part of the market that has been hurt of late, rose to $11 billion from $5.9 billion. Mr. Von Arx said that was because the bank had participated in unsuccessful auctions for the securities in January.

Deutsche Bank said in a statement that its write-downs related to “leveraged loans and loan commitments, commercial real estate, and residential mortgage-backed securities,” particularly Alt-A securities. It said it would have tier-1 capital ratio at the end of the first quarter of 8 percent to 9 percent, consistent with its published targets.

Deutsche Bank said in February that its fourth-quarter 2007 profit fell 48 percent from a year earlier, to 953 million euros, but it announced no subprime write-downs for the period. In the third quarter of last year, the bank wrote off 2.2 billion euros in subprime lending. The company will report its first-quarter results on April 29.

http://www.nytimes.com/2008/04/02/business...amp;oref=slogin

[ABLAT Staff]

Brit paper declares: 'Great Depression'
Says record 28 million Americans relying on food stamps to survive
--The Independent

USA 2008: The Great Depression

Food stamps are the symbol of poverty in the US. In the era of the credit crunch, a record 28 million Americans are now relying on them to survive – a sure sign the world's richest country faces economic crisis

By David Usborne in New York
Tuesday, 1 April 2008

We knew things were bad on Wall Street, but on Main Street it may be worse. Startling official statistics show that as a new economic recession stalks the United States, a record number of Americans will shortly be depending on food stamps just to feed themselves and their families.

Dismal projections by the Congressional Budget Office in Washington suggest that in the fiscal year starting in October, 28 million people in the US will be using government food stamps to buy essential groceries, the highest level since the food assistance programme was introduced in the 1960s.

The increase – from 26.5 million in 2007 – is due partly to recent efforts to increase public awareness of the programme and also a switch from paper coupons to electronic debit cards. But above all it is the pressures being exerted on ordinary Americans by an economy that is suddenly beset by troubles. Housing foreclosures, accelerating jobs losses and fast-rising prices all add to the squeeze.

Emblematic of the downturn until now has been the parades of houses seized in foreclosure all across the country, and myriad families separated from their homes. But now the crisis is starting to hit the country in its gut. Getting food on the table is a challenge many Americans are finding harder to meet. As a barometer of the country's economic health, food stamp usage may not be perfect, but can certainly tell a story.

Michigan has been in its own mini-recession for years as its collapsing industrial base, particularly in the car industry, has cast more and more out of work. Now, one in eight residents of the state is on food stamps, double the level in 2000. "We have seen a dramatic increase in recent years, but we have also seen it climbing more in recent months," Maureen Sorbet, a spokeswoman for Michigan's programme, said. "It's been increasing steadily. Without the programme, some families and kids would be going without."

But the trend is not restricted to the rust-belt regions. Forty states are reporting increases in applications for the stamps, actually electronic cards that are filled automatically once a month by the government and are swiped by shoppers at the till, in the 12 months from December 2006. At least six states, including Florida, Arizona and Maryland, have had a 10 per cent increase in the past year.

In Rhode Island, the segment of the population on food stamps has risen by 18 per cent in two years. The food programme started 40 years ago when hunger was still a daily fact of life for many Americans. The recent switch from paper coupons to the plastic card system has helped remove some of the stigma associated with the food stamp programme. The card can be swiped as easily as a bank debit card. To qualify for the cards, Americans do not have to be exactly on the breadline. The programme is available to people whose earnings are just above the official poverty line. For Hubert Liepnieks, the card is a lifeline he could never afford to lose. Just out of prison, he sleeps in overnight shelters in Manhattan and uses the card at a Morgan Williams supermarket on East 23rd Street. Yesterday, he and his fiancée, Christine Schultz, who is in a wheelchair, shared one banana and a cup of coffee bought with the 82 cents left on it.

"They should be refilling it in the next three or four days," Liepnieks says. At times, he admits, he and friends bargain with owners of the smaller grocery shops to trade the value of their cards for cash, although it is illegal. "It can be done. I get $7 back on $10."

Richard Enright, the manager at this Morgan Williams, says the numbers of customers on food stamps has been steady but he expects that to rise soon. "In this location, it's still mostly old people and people who have retired from city jobs on stamps," he says. Food stamp money was designed to supplement what people could buy rather than covering all the costs of a family's groceries. But the problem now, Mr Enright says, is that soaring prices are squeezing the value of the benefits.

"Last St Patrick's Day, we were selling Irish soda bread for $1.99. This year it was $2.99. Prices are just spiralling up, because of the cost of gas trucking the food into the city and because of commodity prices. People complain, but I tell them it's not my fault everything is more expensive."

The US Department of Agriculture says the cost of feeding a low-income family of four has risen 6 per cent in 12 months. "The amount of food stamps per household hasn't gone up with the food costs," says Dayna Ballantyne, who runs a food bank in Des Moines, Iowa. "Our clients are finding they aren't able to purchase food like they used to."

And the next monthly job numbers, to be released this Friday, are likely to show 50,000 more jobs were lost nationwide in March, and the unemployment rate is up to perhaps 5 per cent.

http://www.independent.co.uk/news/world/am...ion-803095.html

[ABLAT Staff]

Hud Chief Resigns Amid Criminal Probe
Mar 31 04:50 PM US/Eastern
By PETE YOST
Associated Press Writer

WASHINGTON (AP) - HUD Secretary Alphonso Jackson, his tenure tarnished by allegations of political favoritism and a criminal investigation, announced his resignation Monday amid the wreckage of the national housing crisis.

He leaves behind a trail of unanswered questions about whether he tilted the Department of Housing and Urban Development toward Republican contractors and cronies.

The move comes at a shaky time for the economy, with soaring mortgage foreclosures imperiling the nation's credit markets.

In announcing that his last day at HUD will be April 18, Jackson said only, "There comes a time when one must attend more diligently to personal and family matters."

Some Congressional Democrats had pushed for him to leave.

Democratic presidential candidate Hillary Rodham Clinton said that while Jackson's resignation is "appropriate, it does nothing to address the Bush administration's wait-and-don't-see posture to our nation's housing crisis."

House Speaker Nancy Pelosi, D-Calif., said HUD will be called on to work with Congress on assisting refinancing for borrowers faced with imminent foreclosure.

The ethical allegations against Jackson "meant that the Bush administration's ineffective housing policies were being burdened by an even more ineffective HUD Secretary," Sen. Patty Murray, D-Wash., said after Jackson's announcement.

President Bush called Jackson "a strong leader and a good man." Ties between the two men go back to the 1980s when they lived in the same Dallas neighborhood. It was Jackson's personal ties to Bush that brought him to Washington, where he displayed a forceful personal style at HUD for seven years, first as the agency's No. 2 official and since 2004 in the top slot.

Despite a strong commitment to housing for those in need, Jackson was capable of ill-advised public comments.

Last year, after the subprime mortgage crisis erupted, many policymakers underlined the disproportionate impact of the high-risk, high-cost mortgages on minorities and the elderly, who often are targets of predatory lending practices that lure people into loans they are incapable of repaying.

Asked about the problems with subprime mortgages last June, Jackson insisted that many such borrowers were not unsophisticated, low-income people but what he called "Yuppies, Buppies and Guppies"—well- educated, young, black and gay upwardly mobile achievers—with expensive cars who bought $400,000 homes with little or no money down.

In announcing his departure, Jackson said that in his time at HUD, "We have helped families keep their homes. We have transformed public housing. We have reduced chronic homelessness. And we have preserved affordable housing and increased minority homeownership."

Bush has been cool to the idea of a big federal housing rescue. "The temptation of Washington is to say that anything short of a massive government intervention in the housing market amounts to inaction," the president said recently. "I strongly disagree with that sentiment."

On Monday on his way out of the country for a trip built around a NATO summit, Bush said he wants Congress to modernize HUD's Federal Housing Administration, allowing more struggling homeowners to refinance their mortgages.

In October, the National Journal first reported on the criminal investigation of Jackson. The FBI has been examining the ties between Jackson and a friend who was paid $392,000 by Jackson's department as a construction manager in New Orleans. Jackson's friend got the job after Jackson asked a staff member to pass along his name to the Housing Authority of New Orleans.

In another instance of alleged favoritism that came to light in February, the Philadelphia housing authority alleges that Jackson retaliated against the agency because it refused to award a vacant lot worth $2 million to soul-music producer-turned-community developer Kenny Gamble for redevelopment of a public housing complex.

Jackson's problems began in 2006, when he told a group of commercial real estate executives that he had revoked a contract because the applicant who thanked him said he did not like President Bush. Jackson later told investigators "I lied" when he made the remark about taking back the contract.

The probe of Jackson's comment by the HUD inspector general ended with no action taken against him, but the investigators brought to light friction between the HUD secretary and some contractors who have long done business with the agency, a number of them donors to Democrats. On Monday, the IG's office said it had seen Jackson's latest remarks and "there is nothing more that we can add."

In the IG probe, some of Jackson's own aides contradicted his account of one incident in which investigators found the HUD secretary had blocked a contract for several months to one heavily Democratic donor. Jackson blamed his aides for the delay in the award.

Jackson was the first black leader of the housing authority in Dallas, where his integration efforts caused clashes with some local homeowners in predominantly white neighborhoods.

___

Associated Press writers Marcy Gordon, Ben Feller, Hope Yen and Devlin Barrett contributed to this report

http://www.breitbart.com/article.php?id=D8...;show_article=1

[ABLAT Staff]

Bear market rallies only delay day of reckoning
By Ambrose Evans-Pritchard, International Business Editor
Last Updated: 2:06am BST 01/04/2008

Every slump is punctuated by exuberant bursts of optimism, known to traders as "bear market rallies". Japan had four false dawns during its long slide into the abyss. Each lifted Tokyo's Nikkei index by an average of 53pc. Such bounces can be intoxicating.

Teun Draaisma, Morgan Stanley's stock guru, expects the current rally to boost Europe's MSCI 600 index by 21pc from its trough in late January, with similar moves on the S&P 500. The battered shares do best: builders and banks this time.

There have been nine bear rallies since 1970. The average length is four months. The surge misleads investors into believing that sunlit uplands lie ahead. Then the sucker punch hits.

"The Federal Reserve's actions have averted financial Armageddon, but they cannot avert an earnings recession. We don't expect a new bull market until early 2009," he said.

Morgan Stanley says earnings will fall 16pc this year as debt leverage kicks into reverse.

Investor psychology is "asymmetric". The market discounts trouble in advance. Share prices start falling a year before earnings peak. In a downturn investors keep selling until earnings hit bottom.

"Bear markets are terrible for the human psyche. You get one profit warning after another. People see their hopes dashed so many times that they stop believing," said Mr Draaisma.

"You have got to be very disciplined and not buy shares too early just because they look cheap. Things can go down further than you ever dare believe," he said. He is not predicting a bloodbath along the lines of 1929-1933 (-88pc) or 2001-2003 (-49pc): just a long slog, with failed rallies.

For now, the markets are flashing a tactical buy signal. Mr Draaisma's "capitulation indicator" has crashed to the lowest level since the 1998 LTCM crisis: the share "valuation indicator" is near an all-time low.

UBS is also gearing for a big rebound, convinced that the Fed's move to shoulder $30bn of Bear Stearns liabilities has changed the game.

In its latest report -"Ready for a Rally" - it said financial shares rose 448pc in the 12 months after the Swedish rescue in 1992, 88pc after Japan's Revitalisation Law in 1998; and 82pc after Roosevelt's Emergency Banking Act in 1933.

The pessimists at Société Générale remain sceptical, even though the Fed has gone nuclear. "We expect global equity prices to fall by up to 75pc from their peaks as a deep global economic downturn unfolds over the next few years," said Albert Edwards, their global strategist. He fears a 50pc collapse in earnings, compounded by an "Ice Age derating of equities".

It may echo the Lost Decade in Japan, where stocks fell 80pc. The yields on state bonds kept falling as debt deflation engulfed the banks, thwarting efforts to nurse lenders back to health by the usual device: "steepening yield curve". The authorities were left chasing their own tails. Having lived through this, Japan's chief regulator Yoshimi Watanabe has advised Washington to go for a quick taxpayer rescue, rather than trying "to fix the hole in the bathtub".

Whatever happens, there will always be tactical rallies. Mr Edwards cites four Wall Street bounces above 25pc in the 2001-2003 bust. The buying cue is when investor gloom nears black despair. The put/call ratio on options is now at a bearish extreme of 0.90.

"That would historically suggest that a joyous 25pc spring rally is close at hand," he said. Yet Mr Edwards remains wary as long as analysts cling to their belief that earnings will rise 11pc in 2008. This is not the sort of "washout" level of gloom required to clear the air.

Still, the oldest adage on Wall Street is "never fight the Fed". In short order, Ben Bernanke has slashed interest rates by 300 basis points to 2.25pc, and invoked the emergency clauses of Article 13 (3) of the Federal Reserve Act for the first time since the Great Depression to take on direct credit risk.

The Bush administration has told the housing agencies Fannie Mae and Freddie Mac to absorb $200bn of extra mortgage debt. It has implicitly nationalised them in the process. The network of Federal Home Loan Banks has mopped up $900bn of mortgage securities. Congress has rushed through a $170bn fiscal blitz.

This is not to be sniffed at. It is worth a good spring rally, until the inexorable logic of a 25pc house price crash prevails once again.

Bernard Connolly at Banque AIG, who foresaw this crisis with uncanny accuracy, believes central banks will resort to full-throttle reflation, setting off a fresh boom in shares and gold. But this will occur only after the economic slump has spread to Europe and beyond.

The authorities will wait too long to act, believing their own decoupling myth. Unemployment will ratchet up. Civil unrest may rock Latin Europe.

In the end, the whole industrial world will stoke a fresh credit bubble to put off the day of reckoning, for another cycle.

The capitalist system is now so deformed by debt that it requires ever lower interest rates to keep going. It survives on perma-bubbles. Monetary rigour at this late stage would endanger democracy.

How did we ever let matters reach this pass?

http://www.telegraph.co.uk/money/main.jhtm...1/ccview131.xml

[ABLAT Staff]

Weak economy slows cargo, idles railcars
By SUSAN GALLAGHER
CRAIG, Mont.

BNSF Railway Co., the nation's top hauler of container rail freight, is parking miles of railcars in Montana and elsewhere because there isn't enough freight to keep them rolling.

Cars that often carry 40-foot containers of goods shipped from Asia stand like an iron fence between the Missouri River and this Montana burg known for world-class fly fishing. They stretch as far as Sandee Cardinal can see when she stands outside her home on the river's west bank between Helena and Great Falls.

"What is that but a symbol of how America is down in the dumps right now?" Cardinal asked as she gazed at the cars that haven't moved for about three months.

The cars parked are the type that haul cargo from ships on the coast to points inland, mainly imported goods -- an area that's starting to slow down due to the weak economy. Analysts say transportation usually is among the first sectors to show signs of a downturn in the economy and with Americans feeling pinched -- employers eliminated 63,000 jobs last month amid declining consumer confidence -- it could be a while before the idle cars move.

"If you take a look at transportation, both trucking and rail, you will see that things started softening last summer," said Arnold Maltz, associate professor of supply-chain management at Arizona State University. "The reason you are seeing all those cars parked is that the consumer economy translates into slower imports."

Texas-based BNSF Railway, a division of Burlington Northern Santa Fe Corp., has parked upward of 1,000 cars in Montana alone, spokesman Gus Melonas said. More are parked in other parts of the company's 32,000-mile system, which operates in 28 states and two Canadian provinces.

"There's been a downturn in international business and therefore this equipment is not necessary at this point," Melonas said.

The cars standing between Helena and Great Falls constitute 5 percent of the BNSF fleet, Melonas said. He declined to say what percentage of the fleet is parked elsewhere, citing confidentiality issues.

Seasonal car storage is common, he said, but the number of cars now idle is exceptional.

Most of the parked cars are designed for intermodal transportation, when containers filled with imported goods are taken off vessels at U.S. ports and then transported by train, truck or both to distribution centers around the country.

For the first two months of 2008, the volume of intermodal rail freight in the United States was down 3.4 percent compared to the same period last year, according to the Association of American Railroads, an industry group based in Washington, D.C. Last year, intermodal traffic was flat as railroads began to feel the effects of slowing retail orders and the dollar's decline.

While shipments of store-ready consumer goods such as clothing have dipped, movement of coal, grain and ore have risen, according to the association. The latter are less sensitive to swings in the economy and help balance out the bottom line.

Excluding intermodal traffic, rail freight rose 1.7 percent for the first two months of 2008 compared to the same period a year earlier. Coal was out in front last month with 576,012 carloads, or an increase of 5.7 percent.

"The railroads have actually performed relatively well when you look at their entire portfolio," said transportation analyst Todd Fowler of KeyBanc Capital Markets in Cleveland.

For 2007, BNSF Railway's parent company, Burlington Northern Santa Fe Corp., reported about $15.4 billion in total freight revenues, compared to about $14.6 billion the previous year. That growth was carried largely by coal and agricultural segments.

The annual revenue generated from hauling domestic freight was down about 1 percent from 2006, while international traffic was up 2 percent. Meanwhile, coal and agricultural revenue each grew about 12 percent.

Union Pacific Railroad spokesman James Barnes said the Nebraska-based company's intermodal business is "just a little down, but that's not unusual for this time of year." The company's total commodity revenue was $15.5 billion in 2007, compared to about $14.9 billion in 2006. The agricultural segment posted an 8 percent increase over 2006.

Another major rail company, CSX Corp. in Florida, said its car storage is not out of the ordinary. The company's total revenue from surface transportation was up 5 percent, from about $9.6 billion to $10 billion in 2007.

One of the nation's leading trucking companies, Schneider National in Green Bay, Wis., says it believes a freight recession began about 20 months ago, well before signs of a downturn closed in on consumers.

"We have been in a freight recession longer than people have been expressing deep concern about the economy," said Bill Matheson, Schneider's president for intermodal transportation.

Trucking companies are in a unique position. They often compete with railroads for long haul contracts, while also carrying rail freight from the nearest railhead to its final destination.

Schneider is not parking trucks, but neither is it buying new ones to the usual extent, Matheson said.

In Long Beach, Calif., home of the nation's busiest port complex with Los Angeles, the movement of goods has been somewhat stagnant. About 7.3 million containers passed through the Port of Long Beach in 2007, the same as in 2006, port spokesman John Pope said.

"That was a big decline from the growth we'd seen in the past decade or so," Pope said. "Typically, there had been double-digit growth from year to year."

In January, Long Beach posted a decrease of about 12 percent in overall volume compared to January 2007. The situation was less extreme last month, with a 2 percent drop in overall volume compared to a year earlier.

While retailers have imported less goods to be hauled by rail or truck nationwide, exports leaving Long Beach rose as the weak dollar strengthened overseas purchases of U.S. goods, Pope said. Rising export volume -- including grain and wheat shipped by rail -- helped balance falling container imports for most of last year.

"It's a barometer of the economy," Pope said. "We're going to see the ebb and flow that mirrors what happens in the rest of the nation."

http://www.businessweek.com/ap/financialnews/D8VMUB380.htm

[ABLAT Staff]

Lords of Housing: Believing in the $22.5 Trillion Housing Market.

Many of you may be familiar with the show American Greed on CNBC. The show highlights examples of greed and corruption in rather dramatic case examples. This weekend, they had a couple of Southern California men from Compton, that decided to swindle church goers by convincing them that they could buy luxury cars such as Mercedes and BMW models for as low as $1,000.

One of the men, who had what appeared to be a case of inflated ego and an addiction to Pai Gow, claimed that his adopted father had left him millions in an estate which included these cars. At his father’s request and graciousness, he wanted only to sell the cars to people of faith. The two men recruited two women to be the front people of the scam which spanned the entire nation. The women portrayed themselves as good church goers usually winning over their victims with a subtle approach. As they would sell the story and an offer too good to be true, the cashiers’ checks started rolling in netting them $500,000 per month. When all was said and done, the scheme brought in $21 million. In the end, investigators were able to collect $12 million of this money while the other money was gone through gambling here in Southern California casinos or other vices.

As they interviewed the people in the story, many wanted to believe with their heart that this fantastic offer was true. After all, how can these people that seem so honest and appear so trustworthy be perpetuating an elaborate scam? Who doesn’t want a luxury car for $1,000? The show really gives us an example of consumer psychology and human nature. I would venture to guess that many people watching the show thought, “how can people be so naïve?” while they live in homes that they believe are worth inflated values that probably go beyond the $1,000 many had deposited for the cars sight unseen.

It is an astonishing fact that last year, the median home in California lost $3,000 per week and home prices are being slashed at record rates. Yet somehow, people still don’t look at the housing market as a risky speculative play. In many cases, current sellers are simply wishfully hoping that they get higher prices without having any basis in economic fundamentals. The reluctance for many to accept that real estate values were hyper inflated is still an issue that they wrestle with since it contradicts years of ingrained housing belief.

Even the actions of market participants shows a tinge of denial. For the large part, the number one suspect of all this mess was made out to be credit. The primary cause is bubble prices and the fact that credit is tighter is only a symptom of the disease, not the core issue. Yet the narrative going around the media is centered around sub-prime, credit crunch, and foreclosures. We don’t hear stories with the headlines, “today, we are facing more problems due to the overpriced housing market.” What we get is a dialogue that focuses on the disease and not the underlying cause.

This is highlighted by the lack of discussion regarding “lost” equity that simply has vanished into thin air over the past year. The Case-Shiller 20-City Index shows that home prices have declined 10.7 percent. This index is probably one of the best indicators of overall national home price increases and declines since it does a good job representing the nation looking at 20 metropolitan areas. Looking at data from the Census Bureau, we find that:

31.8% of all U.S. owner occupied homes do not have a mortgage

According to the Federal Reserve Flow of Funds Report, $10.5 trillion in mortgage debt is outstanding as of December of 2007

We also know that homeowner equity is at 47.9% at the end of the fourth quarter, an all time record low since the Fed started keeping track of data in 1945.

Given this information, we can estimate that the current total residential housing value is roughly $20.15 trillion. ($10.5 trillion in mortgage debt + $9.65 trillion in equity)

If we then extrapolate this information with the recent Case-Shiller Index decline, we realize that over $2.41 trillion of residential housing value has evaporated into thin air

($20.15/.893)=($22.5644) | $22.5644 - $20.15 = $2.41 trillion

Keep in mind that we are not using the peak price of the market. Estimates range from $23 to $24 trillion. It is becoming rather clear that when all is said and done, we may be seeing 20 to 30 percent nationwide declines in home prices. How much more equity will this destroy? Let us run the scenario further:
Drop Equity Lost
Current 10.7% drop $2.41 trillion
20% drop $4.28 trillion
30% drop $6.29 trillion

The problem of course is not necessarily with those with no mortgage, but many who bought at peak prices with very little equity. Those that went in with no money down, 5, 10, even 20 percent down stand to be underwater when the market reaches its bottom. Recent estimates place 8.8 million households underwater. Given that there are 51,234,170 households with mortgages in the U.S. that puts 17 percent of those with mortgages underwater. Nearly 1 in 5 people with mortgage debt now have zero equity in their home.

It was for the most part a large faith in housing that kept this bubble going for so long. The faith that home prices never fall. The belief that selling a home would always net a profit. The idea and trust that was put into Wall Street and those in the real estate industry. There is an excellent passage in Lords of Creation by Frederick Lewis Allen, written during the Great Depression in 1935 that highlights the current mob mentality:

“In part, the vast prestige of business was due to the vigorous pressure of majority opinion upon the heretical, a pressure most heavily felt in the small city or town. The orthodox thing to do was to boost the town, to follow the lead of the Rotary and the Chamber of Commerce, to accept without question the policies of the economic masters of the community; the heretic might retain his technical freedom of speech and of action, but there were a hundred ways in which he might be made uncomfortable. To question the soundness of a local real-estate development, to question the rates set by the local electric-light company, to believe in labor unions, was in many communities to be considered queer, or unreliable, or even “un-American,”-to have trouble, perhaps, in getting credit at the bank, or getting a job, or making sales; to meet opposition when one sought admission to clubs and other organizations; to be looked at askance at social gatherings; to be, in short, at a general disadvantage in the great race for success and prestige.

Yet even the flood of propaganda and the pressure of majority opinion could not have been effective unless most men and women had not wanted to believe that the business man was the heir to the ages, that independent business was the great American cornucopia of plenty. In part, the chorus of acclaim which we have been analyzing was quite spontaneous. As prosperity advanced, a natural market was created for the flattery of big business. The reason why The Man Nobody Knows, which described Christ as “a startling example of executive success,” was for two years the best-selling American book in the non-fiction class, was that ordinary men and women had become ready to listen to endorse such preposterous doctrine. The business propaganda of those days is not to be thought of as the dark device of a minority to convert or bamboozle a skeptical majority. It merely reflected and intensified the views of the crowd, merely added somewhat to the size and velocity of a snowball which was already rolling downhill.

For seven years the big business man enjoyed a golden age of power and public obeisance. For seven years the public distrust of Wall Street steadily diminished, until by 1928 and 1929 the big financiers, like the big industrialists, had become the object of a general veneration. Rich men predominated in the Cabinet at Washington; cartoons which depicted the millionaire as a portly gentlemen with a greedy face and a huge dollar-mark on his convex waistcoat became a rarity; the dissenting voices of the radicals and the skeptics were drowned in the hosannas of the faithful. It was the rulers of big business who held the golden keys to a golden American future.”

And so we are having the end of our seven fat years of housing. The mass psychology will slowly turn as it always does in major economic downturns. Sometimes things are too good to be true and housing going up as it did required a faith that propelled those in the dot com era to believe that companies with no earnings had a value of billions of dollars. The only time that equity was real is if you sold your home and after escrow closed, you left with a cashiers check and not one for a BMW in some Central American trust. Otherwise, you are waiting for a housing Ferrari to drive up in your driveway.

http://www.doctorhousingbubble.com/lords-o...housing-market/

[ABLAT Staff]

UBS doubles sub-prime writedowns
Swiss financial giant UBS has reported that its writedowns as a result of the sub-prime crisis have more than doubled to about $37bn (£18.5bn).

It is the largest writedown by any bank since the credit crunch began.

UBS also announced that its chairman and former chief executive Marcel Ospel would not be seeking re-appointment.

The bank has announced $19bn of fresh asset writedowns on top of the $18.4bn it wrote off in 2007, as the value of its assets has plummeted.

UBS added that it was seeking to raise 15bn Swiss francs ($15bn; £7.5bn) in capital by issuing new shares.

Its losses dwarf those declared by US banks such as Citigroup ($21.1bn) and Merrill Lynch ($22bn).

Widespread damage

The UBS announcements came as it said it expected to post a first-quarter net loss of $12.1bn.

The firm said that the next chapter of the firm's history would be one of "discipline and determination".

"There will be other chapters which will not be perfect but none will be like the ones we have just written".

The US sub-prime problems have hit the balance sheets of banks worldwide and have cost several leading bankers their jobs.

Mr Ospel had previously said that he wanted to stay at the company for another year.

"I have always stated that I ultimately take responsibility for the bank's situation," he said.

"We have worked very hard and have been able to address the firm's most pressing problems, thereby laying the foundation for the long-term success of the bank."

He will be replaced by Peter Kurer, a 58-year-old Swiss lawyer who has spent the last seven years as the bank's main legal adviser.

Mr Ospel said that his successor had considerable experience of the banking sector "and importantly of this bank".

Difficult year

UBS has also unveiled plans to create a new business that would handle US property assets which had become worthless.

It said that it was confident that this would "deal effectively with the firm's real estate exposures and allow the bank to focus on strengthening its core operations".

Mr Osler said that a decision would be made "within weeks" about how many jobs would go at the firm.

UBS management warned that it expected 2008 to be a difficult year for the firm and the industry as a whole.

In 2007 it reported its first annual loss since UBS was created from the merger of Union Bank of Switzerland and Swiss Bank Corporation in 1998.

Sub-prime loans were lent to US homebuyers with low incomes or with patchy credit ratings. These investments quickly soured as higher interest rates pushed up mortgage payments and triggered a wave of defaults.

As well as resulting in the collapse of Bear Stearns, it has also hit other big Western banks, including Wall Street giants Merrill Lynch, Citigroup and JP Morgan Chase, and BNP Paribas, France's biggest bank.

MAIN CREDIT CRUNCH LOSSES
UBS: $37.4bn
Merrill Lynch: $22bn
Citigroup: $21.1bn
HSBC: $17.2bn
Morgan Stanley: $9.4bn
Deutsche Bank: $7.1bn
Bank of America: $5.3bn
Bear Stearns: $3.2bn
JP Morgan Chase: $3.2bn
BayernLB $3.2bn
Barclays: $2.6bn
IKB: $2.6bn
Royal Bank of Scotland: $2.6bn
Credit Suisse:$2bn
Source: Company reports

http://news.bbc.co.uk/2/hi/business/7323809.stm