Teen Challenge board suckered into Petter's scam!

Comment: One of the first responsibilities of a board is to act in a fiduciary capacity. This board foolishly risked their non-profit's funds for 24% interest on a 90 day loan. Rule # 1: "If it's too good to be true ... it's true good to be true!" Boy they walked right into that didn't they!

Rich returns give way to panic and fear


One small Twin Cities nonprofit say it earned as much as 24 percent on 90-day loans that Petters Co. Inc. said were used to buy and resell electronics goods.

Then last week, federal authorities raided Petters' company, his home and several other locations. In court documents, the government describes a scheme that may have bilked investors out of as much as $2 billion. On Tuesday, the government charged one of the people identified as a participant in the scheme.

Two of the investors named in court papers, the Fidelis Foundation and Minnesota Teen Challenge, say they first noticed signs of trouble late last year, when Petters Co. asked to extend their loans to as long as six months. Now they are worried that they may not get any of their money back, a potentially devastating blow for the organizations.

Fidelis Foundation of Minneapolis holds $27.6 million in Petters Co. notes that may ultimately be worthless. Among them are five notes for $5.7 million to Teen Challenge, a nonprofit program that Petters personally supported.

"We are overwhelmed, shocked and saddened," said Joe Smith, president of Fidelis.

Fidelis is a public charity that also serves as an investment agent for other public charities and nonprofits, including Teen Challenge.

Minnesota Teen Challenge

Government bears a huge responsibility for the mess

Comment: Good editorial with perspective on how we got in this mess!

Commentary: Bankruptcy, not bailout, is the right answer

How we got here:

The current mess would never have occurred in the absence of ill-conceived federal policies. The federal government chartered Fannie Mae in 1938 and Freddie Mac in 1970; these two mortgage lending institutions are at the center of the crisis. The government implicitly promised these institutions that it would make good on their debts, so Fannie and Freddie took on huge amounts of excessive risk.

Worse, beginning in 1977 and even more in the 1990s and the early part of this century, Congress pushed mortgage lenders and Fannie/Freddie to expand subprime lending. The industry was happy to oblige, given the implicit promise of federal backing, and subprime lending soared.

This subprime lending was more than a minor relaxation of existing credit guidelines. This lending was a wholesale abandonment of reasonable lending practices in which borrowers with poor credit characteristics got mortgages they were ill-equipped to handle.

Once housing prices declined and economic conditions worsened, defaults and delinquencies soared, leaving the industry holding large amounts of severely depreciated mortgage assets.


The fact that government bears such a huge responsibility for the current mess means any response should eliminate the conditions that created this situation in the first place, not attempt to fix bad government with more government.

The obvious alternative to a bailout is letting troubled financial institutions declare bankruptcy. Bankruptcy means that shareholders typically get wiped out and the creditors own the company.

Bankruptcy does not mean the company disappears; it is just owned by someone new (as has occurred with several airlines). Bankruptcy punishes those who took excessive risks while preserving those aspects of a businesses that remain profitable.

In contrast, a bailout transfers enormous wealth from taxpayers to those who knowingly engaged in risky subprime lending. Thus, the bailout encourages companies to take large, imprudent risks and count on getting bailed out by government. This "moral hazard" generates enormous distortions in an economy's allocation of its financial resources.

So what should the government do? Eliminate those policies that generated the current mess. This means, at a general level, abandoning the goal of home ownership independent of ability to pay. This means, in particular, getting rid of Fannie Mae and Freddie Mac, along with policies like the Community Reinvestment Act that pressure banks into subprime lending.

The right view of the financial mess is that an enormous fraction of subprime lending should never have occurred in the first place. Someone has to pay for that. That someone should not be, and does not need to be, the U.S. taxpayer.


Hindsight is 20/20

Wachovia's `Great Success' Became $122 Billion Burden


On a May 2007 conference call, Wachovia Corp.'s then-Chief Executive Officer Ken Thompson trumpeted the $24 billion acquisition of Golden West Financial Corp., a California lender that specialized in payment-option adjustable-rate mortgages.

``I think that 12 months or so from now people are going to look at the acquisition of Golden West as one that produced great success for Wachovia,'' Thompson said.

Seventeen months later, Thompson is gone and so is Wachovia. After losing 82 percent of its market value since that conference call due to mounting losses on option ARMs, the bank was sold to Citigroup Inc. today in a deal brokered by the Federal Deposit Insurance Corp.

``Golden West was the beginning of the end'' for Wachovia, said Anat Bird, a former Wells Fargo & Co. executive who now runs SCB Forums Ltd., a Granite Bay, California, company that conducts peer group conferences for bankers. Golden West ``had lousy assets, lousy liabilities and they paid a fortune for it.''

Comment: Wachovia was great bank before Golden West. History of Wachovia is here.

Silver Lining in Banking Mess?

Christian Financial World Sees Silver Lining in Banking Mess


Dick Towner, director of Willow Creek Community Church's Good Sense financial ministry, hasn't sensed panic among investors. However, he detects concern among ministries — particularly those in the shadow of Wall Street — that year-end donations may sharply decline.

Yet he also sees a silver lining in the financial clouds.

"This is a time that can bring us back to the sensibility of what's important," Towner said. "We have for some time needed something that would grab our attention and say, 'Hey, this can't go on forever. We can't spend more than we're making.'"

Comment: Individuals, businesses, and ministries need to make the necessary adjustments during these times.

Citigroup to buy Wachovia!

Citigroup to buy Wachovia banking operations


Citigroup Inc. will acquire the banking operations of Wachovia Corp., one of the nation's largest banks, in a deal facilitated by the Federal Deposit Insurance Corp.

Citigroup will absorb up to $42 billion of losses in the deal, with the FDIC covering any remaining losses, the government agency said Monday. Citigroup also will grant the FDIC $12 billion in preferred stock and warrants.

WSJ: Wells Fargo preferred bidder for Wachovia

Wachovia in Talks With Wells Fargo


Wachovia Corp., which catapulted to the top of the U.S. banking industry with relentless acquisitions of weaker rivals, was in advanced discussions Sunday night to sell itself to Wells Fargo & Co., according to people familiar with the situation.

Wachovia was also holding talks with Citigroup Inc., but by late evening Wells Fargo appeared to be the preferred bidder. Details of the proposed transaction weren't immediately clear, and the discussions could fall apart at the last moment.

Comment: Interesting. Note phrase "discussions could fall apart at the last moment"


Who will acquire Wachovia?

Regulators press for Wachovia sale


Federal regulators are pressing Wachovia Corp. to sell itself, and Citigroup and Wells Fargo have emerged as the leading candidates to buy the Charlotte bank amid intensifying talks, according to reports late Sunday.

Even as Congress unveiled a bailout plan to help banks offload troubled assets, Federal Reserve and U.S. Treasury Department officials were pushing for a more dramatic solution for Wachovia, the New York Times reported. A sale would mean that an N.C. institution that became a nationwide banking giant by buying up other banks would itself be taken over. That would come as a blow to Charlotte's status as a banking center and pose the possibility of layoffs among the bank's 20,000 employees here.

The possibility of a takeover surfaced Friday as Wachovia's shares plunged 27 percent following the failure of Washington Mutual a day earlier. The Seattle-based savings and loan's demise raised concerns that Wachovia may face bigger losses in its troubled Pick-A-Payment loan portfolio, amid general worries about weaker players in the financial industry. Wachovia officials have stressed the bank has a large and stable deposit base and strong core businesses.

If Citi or Wells Fargo pair with Wachovia, it would create a third financial behemoth to join Charlotte's Bank of America and New York's JPMorgan Chase, which have been taking advantage of troubled financial times by buying weakened rivals. The Times said the bidders are unlikely to offer Wachovia investors more than a few dollars per share, below Friday's $10 closing price. It's possible that Wachovia might be carved up, with the company's large retail bank the main prize eyed by Citigroup and Wells Fargo, the Times said. Wachovia CEO Bob Steel and Wachovia's top dealmaking executive, David Carroll, were leading talks in New York this weekend, the Times reported.

Comment: Should be interesting to see how this unfolds this week!

Bailout: a temporary euphoric reception?

Bailout won't put the brakes on downward slide


But, at best, all a government program can do is keep things from getting dramatically worse, economists say. In the worst case, a government bailout program won't keep financial conditions for households and businesses from deteriorating much further.

The public detests the idea of bailing out lenders and investors complicit in the stupid decisions to offer mortgages to home buyers who couldn't afford them. But almost all financial market pros and the great majority of economists stress that failure to help financial institutions with bad loans would be a recipe for a deep recession or worse.

"Something does need to be done in short order," said Aaron Edlin, a professor of economics and law at UC Berkeley and one of 122 economists who signed a letter to Congress critical of the Treasury Department's original bailout plan.


In the short term, the financial markets emergency is a classic crisis of confidence. The catastrophe that nearly befell markets last week was driven by overwhelming and, in many cases, unjustified fear. After Wall Street's Lehman Bros. went bankrupt two weeks ago and insurance giant AIG needed government intervention to keep from going under, every company became suspect, even highly creditworthy borrowers far-removed from the housing market.

Quick, forceful action from Washington is essential to restore confidence and loosen loan markets, financial professionals and political leaders say.

"The markets need a message from us," House Speaker Nancy Pelosi, D-San Francisco, said at a news conference Friday.

Indeed, it's possible a bailout package could get a euphoric reception from both the stock and credit markets. But any psychological effect would be temporary, experts caution. In the medium and long term, it's by no means certain a bailout will succeed.

"I'd give the government a 50 percent chance of stabilizing the markets," Edlin said. "The reason for optimism is that there will be an enormous amount of money. The reason for pessimism is that nobody knows how the money will be spent."

The idea behind the bailout is to buy bad loans from financial institutions, freeing them to turn on the credit spigot again. But if those institutions have to take big losses on the assets they sell to the government, they could still be too strapped to lend freely again. In addition, they are likely to remain wary of extending credit in the midst of a recession. On top of that, a movement is under way throughout the economy to cut back on debt, a phenomenon known as deleveraging.



Do I Hear 4%? On This Site, Banks Bid for Your Cash


IN some bazaars, vendors call out their prices, lowering them on the spot as they vie with one another for a shopper’s business.

That’s the kind of competitive selling — and possible good deals for shoppers — that one new Web site hopes to bring to those looking to invest a nest egg in a certificate of deposit or other savings account at an attractive rate.

The hawking will not be done by shouting vendors, but instead through a modern, electronic equivalent: automated auction software running on a Web site that gets its bidding orders from dozens of banks looking for business. When a customer comes to the site and asks for the terms of a C.D., the banks bid against one another via the software to win the deposit.

MoneyAisle (www.moneyaisle.com) has signed up 108 small and midsize banks across the country, many of them eager to build their customer bases, especially in a time when some investors are withdrawing money from shakier investments in search of a safer harbor. When people come to the site shopping for a C.D. or a high-yield savings account, the banks engage in a fast-moving auction. A hundred banks may bid in the first round, 80 in the second round, 50 in the third, until the bank with the highest offer wins the auction.

Comment: Looks promising! I gave it a try without committing. $ 2000 CD for 6 months. The rate was over 4%! Actual screen shot!

Dave Ramsey on the current conomic crisis

Q & A: Dave Ramsey

For individuals:

Have money in savings, get out of debt, live on a budget, live on less than you make, don't co-sign, and diversify your investments. These are things the Bible tells us to do with money. If you do these things, you're going to survive in bad times and prosper in good times.

Impact on churches:

We may have the lowest giving in the fourth quarter than we have had in a decade. Churches that are out of debt and have money set aside for emergency, biblically speaking, are going to survive. Churches that have no cash and are in debt are going to reflect some of these Wall Street companies. They have to adjust spending to be able to live on what's coming in and anticipate a drop right now.

Comment: Good advice


Burning Down The House: What Caused Our Economic Crisis?

My broker called and ...

For all of you with any money left, be aware of the next expected mergers so that you can get in on the ground floor and make some BIG bucks.

Watch for these consolidations in 2008:

  1. Hale Business Systems, Mary Kay Cosmetics, Fuller Brush, and W. R.Grace Co. will merge and become: Hale, Mary, Fuller, Grace.
  2. PolygramRecords, Warner Bros., and ZestaCrackers join forces and become: Poly, Warner Cracker.
  3. 3M will merge with Goodyear and become: MMMGood
  4. Zippo Manufacturing, AudiMotors, Dofasco, and Dakota Mining will merge
    and become: ZipAudiDoDa.
  5. FedEx is expected to join its competitor, UPS, and become: FedUP.
  6. Fairchild Electronics and Honeywell Computers will become: Fairwell Honeychild.
  7. Grey Poupon and Docker Pants are expected to become: PouponPants.
  8. Knotts Berry Farm and the National Organization of Women will become: Knott NOW!

Comment: Sent to me from my Brother. He had another one that was too risque for this forum: Victoria's Secret and Smith & Wesson ... will become ___________

Add your own suggestions in the comments.

Buffett's "time bomb" goes off

Buffett's "time bomb" goes off on Wall Street


When historians write about the current crisis, much of the blame will go to the slump in the housing and mortgage markets, which triggered the losses, layoffs and liquidations sweeping the financial industry.

But credit default swaps -- complex derivatives originally designed to protect banks from deadbeat borrowers -- are adding to the turmoil.

"This was supposedly a way to hedge risk," says Ellen Brown, the author of the book "Web of Debt."

"I'm sure their predictive models were right as far as the risk of the things they were insuring against. But what they didn't factor in was the risk that the sellers of this protection wouldn't pay ... That's what we're seeing now."

Brown is hardly alone in her criticism of the derivatives. Five years ago, billionaire investor Warren Buffett called them a "time bomb" and "financial weapons of mass destruction" and directed the insurance arm of his Berkshire Hathaway Inc (BRKa.N: Quote, Profile, Research, Stock Buzz) to exit the business.

Comment: Again the "Derivatives". Still don't understand them.

A 'flight-to-quality'

Merrill raises Wells Fargo rating, cuts BB&T


Merrill Lynch said Wells Fargo & Co (WFC.N: Quote, Profile, Research, Stock Buzz) is well-positioned to outrun credit deterioration through strong revenue growth and raised its rating on the bank to "neutral" from "underperform."

Merrill said the deepening credit crisis is creating revenue opportunities for those banks that have a strong capital base and are generally experiencing a 'flight-to-quality' revenue benefit.

"Wells is experiencing this benefit the most," analyst Edward Najarian wrote in a note to clients.

The brokerage expects net interest income growth to be exceptionally strong at Wells Fargo and raised earnings estimates for the bank through 2010.

Merrill raised 2008 profit estimates for Wells Fargo to $2.16 a share from $2.10, 2009 view to $2.50 a share from $2.10 and 2010 outlook to $3.20 a share from $2.75.

Comment: A 'flight-to-quality' is when someone says ... I think it is safer to have my money in a stronger institution.


The danger of a downward spiral of credit lockdown

Credit Enters a Lockdown


In many corporate offices, in company cafeterias and around dining room tables, however, the reality of tight credit already is limiting daily economic activity.

“Loans are basically frozen due to the credit crisis,” said Vicki Sanger, who is now leaning on personal credit cards bearing double-digit interest rates to finance the building of roads and sidewalks for her residential real estate development in Fruita, Colo. “The banks just are not lending.”

With the economy already suffering the strains of plunging housing prices, growing joblessness and the new-found austerity of debt-saturated consumers, many experts fear the fraying of the financial system could pin the nation in distress for years.

Without a mechanism to shed the bad loans on their books, financial institutions may continue to hoard their dollars and starve the economy of capital. Americans would be deprived of financing to buy houses, send children to college and start businesses. That would slow economic activity further, souring more loans, and making banks tighter still. In short, a downward spiral.

Fear of this outcome has become self-fulfilling, prompting a stampede toward safer investments. Investors continued to pile into Treasury bills on Thursday despite rates of interest near zero, making less capital available for businesses and consumers. Stock markets rallied exuberantly for much of Thursday as a bailout deal appeared in hand. Then the deal stalled, leaving the markets vulnerable to a pullback.

“Without trust and confidence, business can’t go on, and we can easily fall into a deeper recession and eventually a depression,” said Andrew Lo, a finance professor at M.I.T.’s Sloan School of Management. “It would be disastrous to have no plan.”

Comment: One may think that they are immune .... but you probably are not. If you have a 401K plan, are an investor, have a credit card, have a student loan, work for a company, etc. ... it impacts us all!

Update: The credit crunch: Loans out of reach

At larger institutions, such as the San Francisco-based Bank of the West, which has approximately 700 branches mostly west of the Mississippi River, consumers need a better credit score than they did before the credit crunch hit.

"We have seen a change in the landscape and responded to it," said Bruce Heysse, an executive vice president for Bank of the West's consumer lending business.

Consumers whose credit rating teeters between 'good' and 'not so great' are the ones getting squeezed the most, added Carole Merchant, a fellow Bank of the West executive vice president in the company's indirect lending business.

"Will loans be available for people who have some sort of credit blemish? That will probably remain more difficult," said Merchant.

Given the current state of the economy, banks such as the San Antonio, Texas-based Cullen/Frost (CFR), have been forced to withdraw lines of credit from some customers.

Still, the lending spigot hasn't been completely shut off. Instead, Dick Evans, chairman and CEO of Cullen/Frost, said that his bank is charging customers higher rates for loans than they did before.

"We have tightened from the standpoint that we get paid for the risk," said Evans, whose bank focuses primarily on business lending and had more than $13 billion in assets as of the end of last year.

Comment: The above seems like a good thing!

Another view of the Bailout

Issue Is Payback, Not Bailout


Yet in just a few days’ time, members of Congress have to figure out how to improve the bare-bones $700 billion plan submitted by Henry Paulson, the Treasury secretary, and ultimately whether to vote for it.

Their best shot at success depends on keeping the debate tightly focused on the questions that matter most. There are really only two: What steps are most likely to solve the immediate crisis? And how can the long-term cost to taxpayers be minimized?

The first thing to understand is that a bailout plan doesn’t have to cost anywhere close to $700 billion, so long as it’s designed well. The $700 billion number that you see everywhere is an estimate of how much the government would spend to buy deteriorating assets now held by banks. Eventually, the government will turn around and sell these assets, for a price almost certain to be greater than zero. So this $700 billion is very different from $700 billion spent on a war or on Medicare.

“Much of the discussion of the cost of the bailouts is getting it wrong,” David Colander, an economist at Middlebury College, says. “What matters is what price they buy the assets for and the price they sell them for. That’s where the real action is.”

Figuring out how much to pay for the assets is the first problem. The drop in house prices and rise in foreclosures have made it clear that these securities are worth considerably less than banks expected. But there is enormous uncertainty about how much less.

Comment: Much I do not understand!

The end of WaMu

JPMorgan Chase buys WaMu assets after FDIC seizure


The deal will cost JPMorgan Chase $1.9 billion, and the bank said in a statement it planned to write down WaMu's loan portfolio by approximately $31 billion. JPMorgan Chase, which acquired Bear Stearns Cos. last March, also said it would sell $8 billion in common stock to raise its capital position.

The FDIC, which insures bank deposits, said it would not have to dip into the insurance fund as a result of the seizure. There had been concerns that the fund, which took a big hit after the seizure of IndyMac Bank, could be depleted by a WaMu seizure.

Comment: Its history ... goes back more than 100 years!

Thursday miscellanea

Kathee and I attended a company breakfast this morning where our company President spoke. Because it was a United Way / Community Support event, the economy was not his topic. But he did briefly touch on the state of the economy. He said that the current national financial situation was the worst in our lifetimes.

I sat next to a financial guy during breakfast and he tried to explain Financial Derivatives. I can't say I understand them even after his explanation.

We have a three day weekend and I am really ready for this.

My head is still spinning about economic events. I do not clearly understand all that is going on. It concerns me that we are bailing out company after company. It strikes me me as corporate socialism. I fear that our future is for a dramatically declining dollar, increasing oil prices, and inflation.

Buffett: `Economic Pearl Harbor'




Comment: I generally vote "yes" on school referendums because well funded public schools are good for property values. I will again this year. The referendum failed last November.

Catholic pro-life ad

HT: hotair.com

Comment: I'm not a Catholic, but I commend them for the ad


Biden - "no" to coal!

Biden: 'No coal plants here in America'


"No coal plants here in America," he said. "Build them, if they're going to build them, over there. Make them clean."

"We’re not supporting clean coal," he said of himself and Obama. They do, on paper, support clean coal.

The answer seems to play into John McCain's case that Obama has been saying "no" to new sources of energy.

In the primary, Biden opposed Obama's push for clean coal, which is seen as a way of maintaining or expanding America's coal-burning power plants -- many of which are in rust belt swing states.

Comment: "No" to the energy source most plentiful in the U.S.! Madness!

Wouldn't this be exciting!

269 tie: An electoral college 'doomsday'?


On Nov. 5, the presidential election winds up in a electoral-college tie, 269-269, the Democrat-controlled House picks Sen. Barack Obama as president, but the Senate, with former Democrat Joe Lieberman voting with Republicans, deadlocks at 50-50, so Vice President Dick Cheney steps in to break the tie to make Republican Sarah Palin his successor.

"Wow," said longtime presidential historian Stephen Hess. "Wow, that would be amazing, wouldn't it?"

"If this scenario ever happened, it would be like a scene from the movie 'Scream' for Democrats," said Democratic strategist Mary Anne Marsh. "The only thing worse for the Democrats than losing the White House, again, when it had the best chance to win in a generation, but to do so at the hands of Cheney and Lieberman. That would be cruel."

Sound impossible? It's not. There are at least a half-dozen plausible ways the election can end in a tie, and at least one very plausible possibility - giving each candidate the states in which they now lead in the polls, only New Hampshire - which went Republican in 2000 and Democratic in 2004, each time by just 1.5 percent - needs to swap to the Republican column to wind up with a 269-269 tie.

There are currently 10 tossup states, according to RealClearPol-itics.com, which keeps a running average of all state polls. If Republican presidential nominee Sen. John McCain wins Ohio, Virginia, New Hampshire and Indiana - not at all far-fetched - and Mr. Obama takes reliably Democratic states Pennsylvania and Michigan, and flips Colorado (in which he holds a slight poll lead), with the two splitting New Mexico and Nevada, the electoral vote would be tied at 269.

Comment: Graphic from the Washington Times


The Dolphins’ Formation: How They Did It

The Dolphins’ Formation: How They Did It

The Dolphins wanted to try the “Wildcat” offense during the pre-season, but running back Ronnie Brown’s sprained right thumb delayed those plans.

Sunday in New England, the timing was perfect for a trick formation, and the result was a stunning 38-13 victory.

The idea was reborn eight days ago, as the Dolphins flew home from a discouraging loss at Arizona. Coach Tony Sparano called quarterbacks coach David Lee to the front of the plane to discuss ways to beat a team that had won 21 consecutive regular-season games.

Lee ran the exotic formation last year when he was offensive coordinator at the University of Arkansas. In Fayetteville he called it the “Wild Hog” and used running back Darren McFadden to create havoc by lining up as a quarterback in the shotgun.

Sunday, it was Brown who lined up six times at quarterback and came away with three touchdown runs and one scoring pass. Brown also ran for a touchdown from a conventional set.

They tried it for the first time on second-and-goal from the 2, late in the first quarter. Brown waltzed into the end zone past a confused Patriots defense.

Lighting Up N.F.L. Scoreboards

the most stunning offensive performance was by the Miami Dolphins in their 38-13 victory over the Patriots. The back-to-earth performance of Patriots quarterback Matt Cassel was to be expected (and predicted by Porter, who backed up his pregame trash talk with three sacks). Opponents now have film of Cassel and what they see is an offense that has lost all semblance of the wide-open, down-the-field attack that made the Patriots virtually unstoppable with Tom Brady. The short screen passes on which the Patriots would like to rely are less effective.

But Brady didn’t play defense, and that’s where the Patriots’ real troubles lie now. New England was shredded by an exotic formation — the Dolphins called it “Wildcat” — in which running back Ronnie Brown produced an astonishing four touchdowns from six direct snaps (three runs, one pass to Anthony Fasano). Brown also scored a touchdown out of a — ho-hum — conventional set. New England safety Rodney Harrison admitted the Patriots had no idea that formation was coming — shocking enough for a team known for its meticulous preparation — but after Brown had run for two touchdowns and thrown for another, the Patriots were still unable to adjust, allowing one more 62-yard Brown touchdown run.

“Wildcat” didn’t just expose a hole in the Patriots’ game plan, it exposed just how much the brilliance of Brady covered up. Without him, the onus falls on the defense to keep games close and it’s hard to imagine that the rebuilding Dolphins are the toughest offense the Patriots will face this season. The defense tried to figure out what the Dolphins were doing on the sideline — Belichick could be seen talking with defensive coordinator Dean Pees after one of Brown’s direct snaps — but to no avail.

Comment: The most surprising game of the week - the Dolphins upset New England!


Mortgages: Past and Future

The Mortgages of the Future



During the housing crisis of 1933, for example, Congress created the Home Owners’ Loan Corporation to force some fundamental shifts in mortgage institutions. The HOLC swapped its own debt, which was guaranteed by the government, for mortgages of defaulting homeowners, and it reissued mortgages with some important new features. The new loans had a 15-year term and were self-amortizing — that is, the homeowner made the same fixed payment each month until there was nothing more to pay.

This was a huge change. Until 1933, home mortgages in the United States generally had terms of three to five years, and homeowners had to go back regularly to refinance them. If a mortgage could not be refinanced — because the homeowner was unemployed or because the price of the home had fallen too much relative to the loan amount — a homeowner had to pay back all principal, typically a huge payment, or lose the house.


Mortgages could be structured differently, so that adjustments in payments would be made as a matter of routine — systematically, automatically and continuously — starting even before any distress is perceived by borrower or lender. By avoiding thousands and even millions of individual family crises, we might also make institutional crises, like the collapse of Lehman Brothers and Bear Stearns, less likely.

We need to innovate, with the creation of “continuous-workout mortgages.” Such mortgage contracts, when originally signed, would specify a program for steady adjustment of the balance and payment schedule over the life of the mortgage, enabling most homeowners to continue to afford to make payments and maintain some home equity, even in harsh economic circumstances. These contracts might become the standard, with automatic adjustments based on shifts in national housing-cost indexes and futures markets (I’ve been involved in creating both), as well as economic indexes like the unemployment rate.

Continuous-workout mortgages would be privately offered. They would not be bailouts; the cost of workouts would be priced into the original mortgage rate. This transparency has a great advantage: when the actual risk to the investor is explicit from the beginning, mortgages are less likely to be initially overvalued in the market, and so the kind of financial crisis we are experiencing now would be less likely. It is, after all, the rapid decline in value of subprime mortgages, and of derivative financial instruments based on them, that has wreaked such havoc in the global financial system.

Comment: In my own view it's been the ARM, no-down payment or low-down payment loans, independent mortgage brokers, and "liar loans", that have brought us to the current crisis.

Mortgage Advice: “stay put” for 7 years or rent

Mortgagees: Considering the Seven-Year Plan


Some suggest not moving, unless you expect to stay in the new home for at least seven years. That is the advice of Thomas Vanderwell, a frequent writer about real estate issues on the Internet who is a mortgage officer at Fifth Third Bank, which is based in Cincinnati but offers home loans in many states including New York.

Given current real estate trends, it will come as little surprise to learn that most buyers who move from existing homes will lose money if they move again in the short term.


People who are renting, Mr. Vanderwell said, and who find a good deal on a home, should take into consideration the length of time that they plan on staying in the home because they will still need to recoup the fees they pay when they eventually sell it. But there are other factors to consider, like the difference between rental payments and mortgage costs, tax deductions for mortgage interest and, up to a point, mortgage insurance premiums.

Comment: Good read


Bailout bill: $700,000,000,000

Text of Draft Proposal for Bailout Plan


The Secretary is authorized to take such actions as the Secretary deems necessary to carry out the authorities in this Act, including, without limitation:


The Secretary’s authority to purchase mortgage-related assets under this Act shall be limited to $700,000,000,000 outstanding at any one time.

Increase in Statutory Limit on the Public Debt.

Subsection (b) of section 3101 of title 31, United States Code, is amended by striking out the dollar limitation contained in such subsection and inserting in lieu thereof $11,315,000,000,000.

Comment: Our politicians really don't care. They will pass this bill and then go home to their districts to campaign. My children's children's children will pay for this!

Will racism cost Obama the Presidency?

Comment: I post this because it is of interest to me regarding the 2008 Presidential election. I personally decry the views of some whites who are racially biased against blacks. I will vote against Barak Obama NOT because he is black but because of his political positions!

Poll: Racial misgivings of whites an Obama issue


Deep-seated racial misgivings could cost Barack Obama the White House if the election is close, according to an AP-Yahoo News poll that found one-third of white Democrats harbor negative views toward blacks—many calling them "lazy," "violent" or responsible for their own troubles.

The poll, conducted with Stanford University, suggests that the percentage of voters who may turn away from Obama because of his race could easily be larger than the final difference between the candidates in 2004—about 2.5 percentage points.

Certainly, Republican John McCain has his own obstacles: He's an ally of an unpopular president and would be the nation's oldest first-term president. But Obama faces this: 40 percent of all white Americans hold at least a partly negative view toward blacks, and that includes many Democrats and independents.

More than a third of all white Democrats and independents—voters Obama can't win the White House without—agreed with at least one negative adjective about blacks, according to the survey, and they are significantly less likely to vote for Obama than those who don't have such views.

Such numbers are a harsh dose of reality in a campaign for the history books. Obama, the first black candidate with a serious shot at the presidency, accepted the Democratic nomination on the 45th anniversary of Martin Luther King Jr.'s "I Have a Dream" speech, a seminal moment for a nation that enshrined slavery in its Constitution.

"There are a lot fewer bigots than there were 50 years ago, but that doesn't mean there's only a few bigots," said Stanford political scientist Paul Sniderman who helped analyze the exhaustive survey.

The pollsters set out to determine why Obama is locked in a close race with McCain even as the political landscape seems to favor Democrats. President Bush's unpopularity, the Iraq war and a national sense of economic hard times cut against GOP candidates, as does that fact that Democratic voters outnumber Republicans.

The findings suggest that Obama's problem is close to home—among his fellow Democrats, particularly non-Hispanic white voters. Just seven in 10 people who call themselves Democrats support Obama, compared to the 85 percent of self-identified Republicans who back McCain.

The survey also focused on the racial attitudes of independent voters because they are likely to decide the election.

Lots of Republicans harbor prejudices, too, but the survey found they weren't voting against Obama because of his race. Most Republicans wouldn't vote for any Democrat for president—white, black or brown.


Rangel insults Palin

Rep. Rangel Calls Palin 'Disabled'


In a CBS 2 HD exclusive interview Rep. Rangel called Republican vice presidential candidate Sarah Palin "disabled."

The question was simple. Why are the Democrats so afraid of Palin and her popularity.

The answer was astonishing.

"You got to be kind to the disabled," Rangel said.

That's right. The charman of the powerful House Ways & Means Committee called Palin disabled -- even when CBS 2 HD called him on it.

CBS 2 HD: "You got to be kind to the disabled?

Rangel: "Yes."

CBS 2 HD: "She's disabled?"

Rangel: "There's no question about it politically. It's a nightmare to think that a person's foreign policy is based on their ability to look at Russia from where they live.

Comment: I hope that this creates a backlash against the Dems and that more of the Hillary voters come on over!


Chocoholics sour on new Hershey’s formula: Former fans kissed off about replacement of cocoa butter with vegetable oil


Products such as Whatchamacallit, Milk Duds, Mr. Goodbar and Krackel no longer have milk chocolate coatings, and Hershey’s Kissables are now labeled “chocolate candy” instead of “milk chocolate.”

What’s going on here? On Friday, TODAY consumer correspondent Janice Lieberman reported that Hershey’s has switched to less expensive ingredients in several of its products. In particular, cocoa butter — the ingredient famous for giving chocolate its creamy, melt-in-your-mouth texture — has been replaced with vegetable oil.

The removal of cocoa butter violates the U.S. Food and Drug Administration’s definition of milk chocolate, so subtle changes have appeared on the labels of the Hershey’s products with altered recipes. Products once labeled “milk chocolate” now say “chocolate candy,” “made with chocolate” or “chocolatey.”

Some say the label changes are too difficult to spot.

“A lot of people don’t notice it. The package looks exactly the same,” said Cybele May, who has chronicled the changes in detail on her Candy Blog. “I feel betrayed by Hershey’s. They’re giving me an inferior product and they’re not even telling me …

“I call it mockolate, which is basically a fake chocolate product.”

Comment: As long as they do not mess with M&M's!

The Catholic vote

Joe Biden loses Barack Obama the Catholic vote


Remember, you read it here first: on September 11 this blog reported a mounting backlash from Catholic bishops against Biden, Barack Obama's "Catholic" pro-abortion running mate. At that time I estimated eight bishops had come out to denounce Biden; the total is now 55. Beyond that, Biden is being trashed across every state of the Union by Catholic newspapers, TV and radio stations, and blogs. It is a tsunami of rejection.

There are 47 million Catholic voters in the United States. One quarter of all registered voters are Catholics. At every presidential election in the past 30 years the Catholic vote has gone to the winning candidate, except for Al Gore in 2000. This year 41 per cent of Catholics are independents - up from 30 per cent in 2004. Psephologists claim practising Catholics were the decisive factor in the crucial swing states in 2004: in Ohio 65 per cent of Catholics voted for Bush, in Florida 66 per cent. They were drifting away in disillusionment from the Republicans and split 50-50, until Joe Biden worked his magic. This is electoral suicide by the Democrats.

Comment: My own take is that American Catholics are soft on anti-abortion. American Catholics pick and choose their social views. For example, I have many Catholic friends and relatives that reject the Pope's view on birth control.

The Fed's rescue of MM's - too fast? mistake?

Rescue Plan for Funds Will Come at a Cost


But the guarantee plan also drew immediate attack from the American Bankers Association, whose members compete with the money fund industry. The A.B.A.’s leaders warned that the plan could encourage investors to withdraw money from an already stressed banking system to seek higher yields in money funds while the guarantee is in place.

Another important element of the plan was the Federal Reserve’s decision to expand an emergency lending program so that commercial banks could buy asset-backed securities from money funds. That step immediately began to ease industry fears that money funds would not be able to find buyers if they needed to sell assets to meet withdrawals.

“If the markets are operating as they should, it would be my hope and expectation that the temporary guarantee plan would never be needed,” Mr. Stevens added.

Charles Schwab, founder of that giant fund family, called the government’s steps “the right medicine at the right time.” The intervention was essential, he added, to “give the financial system time to re-establish its equilibrium.”

Money market funds are essentially mutual funds that invest in short-term government securities, certificates of deposit, asset-backed commercial paper and other highly liquid securities.

Since their inception, the funds have typically maintained a price of a dollar a share, providing investors with a way to earn interest on their savings without risking the loss of their principal.

That unofficial dollar floor, while not guaranteed by any prospectus or regulation, had become an article of faith among money fund investors, big and small, who all assumed that each dollar invested in a money fund would always retain its full value.

Institutional investors began to question that premise on Tuesday, after the Reserve Fund, the company whose founder invented the money fund concept in the early 1970s, announced that several of its funds had broken the buck.

The decline — only the second time a money fund had ever broken the buck — came after the funds wrote down the value of their stake in various securities issued by Lehman Brothers, which filed for bankruptcy on Monday.

Industry figures released Thursday afternoon showed that those professional investors had pulled more than $173 billion out of money funds in the previous week.

By then, it was clear that more money funds would break the buck unless withdrawals could be reduced and the market for short-term securities could be stabilized. That led to the plan announced by the Treasury and the Fed on Friday.

Taken together, the steps represent the most sweeping intervention of banking regulators into the mutual fund industry since its inception in the 1930s.

“I’ve never seen anything like it in my 57 years in the industry,” said John C. Bogle, founder of the Vanguard fund family.

The Treasury’s intention was to create an entity like the Federal Deposit Insurance Corporation, which charges banks premiums to participate in a fund that insures their customers’ deposits.

Like many steps the government has taken in this turbulent week, the guarantee plan smudges the lines along traditional regulatory borders, giving banking industry regulators an expanded and uncertain role in the mutual fund industry, which has been the purview of the Securities and Exchange Commission for more than 60 years.

One price of rescue, therefore, may be that money funds face new restrictions on the kinds of assets they can buy if they participate in the program, said Jay G. Baris, a fund industry lawyer with Kramer Levin Naftalis & Frankel in New York. That could reduce their yields at the same time that the plan’s premiums increase their operating expenses.

And dealing with an expanded universe of regulators will also be more expensive and less predictable for mutual funds, noted Geoffrey Bobroff, a fund industry consultant.

But the primary concern, Mr. Bogle said, was the risk that a federal safety net would encourage money funds to take greater risks than they should so that they can offer consumers higher yields than their rivals.

Comment: Seems like a lot of these decisions are being made very fast with little public scrutiny.

MM funds to receive guarantees

Treasury to Guarantee Money Market Funds


The Treasury Department said Friday morning that it would guarantee, at least temporarily, money market funds up to an amount of $50 billion in order to ensure their solvency.

“For the next year, the U.S. Treasury will insure the holdings of any publicly offered eligible money market mutual fund — both retail and institutional — that pays a fee to participate in the program,” the Treasury said in a statement .

“Money market funds play an important role as a savings and investment vehicle for many Americans,” the Treasury said in statement.

Concerns about the value of money market funds falling below $1 have exacerbated global financial market turmoil and caused severe liquidity strains.

Comment: See yesterday's posting about this - "break the buck"


Herminone on tall ladder

Comment: My sister is having new fans installed on her ceilings. Herminone (who is a little, little kitty) climbed the top of the shorter of the 2 ladders.

MM fund "broke the buck"

Money Market Funds Enter a World of Risk


On Tuesday, the Reserve Primary Fund, a giant money market fund whose parent helped invent that investment, said its customers would lose money. Instead of each share being worth a dollar for every dollar invested, it said its customers’ shares were worth only 97 cents. In Wall Street parlance, it “broke the buck,” a rare occurrence.

So far, it appears that no other money market funds have fallen below a dollar a share. And other money market managers have hastened to reassure investors that their money is safe. But the Primary Fund’s announcement did raise this question: What, in today’s world, is truly safe?

Comment: Remember when these were considered super safe?

Resolution Trust redux

New bailout planned


The federal government, in what could prove to be its most comprehensive effort yet to contain the financial crisis, is poised to establish a program to let banks get rid of the mortgage-related assets that have been hard to value and harder to trade.

Leaders from both the House and the Senate were briefed on Thursday evening by Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke.


There's precedent for the federal government taking on troubled assets from the private sector. In the 1930s, the Home Owners Loan Corp. was set up to issue bonds to refinance borrowers. Then during the S&L crisis Congress set up the Resolution Trust Corp. to sell assets of failed banks.

Comment: Read about it here: Savings and loan crisis and Resolution Trust Corporation

Harry Reid: "no one knows what to do"

Democratic Congress May Adjourn, Leave Crisis to Fed, Treasury


The Democratic-controlled Congress, acknowledging that it isn't equipped to lead the way to a solution for the financial crisis and can't agree on a path to follow, is likely to just get out of the way.

Lawmakers say they are unlikely to take action before, or to delay, their planned adjournments -- Sept. 26 for the House of Representatives, a week later for the Senate. While they haven't ruled out returning after the Nov. 4 elections, they would rather wait until next year unless Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke, who are leading efforts to contain the crisis, call for help.

One reason, Senate Majority Leader Harry Reid said yesterday, is that ``no one knows what to do'' at the moment.

``When you rush to judgment, you usually make mistakes,'' said Sherwood Boehlert, a former Republican congressman from New York. ``This is something you can't go on forever without addressing, but Congress in a short span of time is best served by going home.''

Comment: To quote Jon Lovitz, "Yeahhh! That's the ticket!"


Dick Kovacevich: "I feel like a kid in a candy store"

Wells Fargo Chairman eyes possible acquisitions


BEVERLY HILLS, Calif., Sept 17 (Reuters) - The chairman of the No. 2 U.S. mortgage bank said on Wednesday that his company was "buying with both hands" and, given the distressed state of financial assets, he felt "like a kid in a candy store."

Wells Fargo (WFC.N: Quote, Profile, Research, Stock Buzz) Chairman Richard Kovacevich declined to comment to Reuters at a conference in Beverly Hills, California, on whether the company is interested in buying Washington Mutual Inc (WM.N: Quote, Profile, Research, Stock Buzz) or Wachovia Corp (WB.N: Quote, Profile, Research, Stock Buzz) but indicated he was interested in buying other banks in distress.

"Wells Fargo often buys fixer uppers," companies that have had some hard knocks and can be rehabilitated in two or three years, he said in a speech at the Association of Corporate Growth 2008 conference. "Given the financial conditions today I feel like a kid in a candy store. There is a lot out there today."

Comment: My brush with Dick Kovacevich. He was in Minneapolis and was walking across the street to the Federal Reserve (the older building). I used to park on the street across from the Fed. He stepped in front of my car as I was parking and put out his hand and touched my hood as if to signal "stop". (I'll probably get fired for this!)

IngDirect advice

Comment: Email to customers today

The consequences of the mortgage meltdown on financial institutions and individuals continue to erode many Americans' dreams. We will continue to stress the right way to achieve home ownership – buying only as much house as you can afford and paying off your mortgage as fast as possible. In return for good credit and prioritizing home investment, ING DIRECT mortgage Customers are rewarded with exceptional rates and a transparent, direct administration process. Rather than selling your mortgage to another bank or investor the minute you get it, we keep your mortgage and service it here. Doing so gives us flexibility to find innovative solutions to help Customers keep their homes during unexpected financial downturns.

While we don’t have an Orange crystal ball, we do expect the economy to remain fragile through 2009. The best course of action for our Customers is to be disciplined: avoid splurging; identify and cut out unnecessary expenses and save for what's essential; and hedge against those tough times. We can all benefit by developing good spending habits: confront - and cut up - credit cards; use your home as a savings vehicle - not as an ATM; and establish and contribute regularly to an IRA or 401(k).

Comment: Good advice.

Where will WaMu find shelter?

Washington Mutual on the auction block


Merrill Lynch (NYSE: MER) analyst Kenneth Bruce issued a report Wednesday saying that WaMu is coming under increasing pressure to “seek shelter from the storm through a merger.

“The decision of another rating agency to downgrade (WaMu’s) debt to non-investment grade, and the market disruptions in the wake of the Lehman bankruptcy, are likely to further undermine (WaMu’s) fundamentals,” Bruce said in a note to clients.

The New York Post reported Wednesday that federal regulators have approached healthier banks about their interest in WaMu, including Wells Fargo, HSBC and Chase. None of the institutions have engaged in formal discussions with WaMu, the newspaper said.

Comment: Interesting!

More banking news: FDIC & merger rumors

Federal bank insurance fund dwindling


Banks are not the only ones struggling in the growing financial crisis. The fund established to insure their deposits is also feeling the pinch, and the taxpayer may be the lender of last resort.

The Federal Deposit Insurance Corp., whose insurance fund has slipped below the minimum target level set by Congress, could be forced to tap tax dollars through a Treasury Department loan if Washington Mutual Inc., the nation's largest thrift, or another struggling rival fails, economists and industry analysts said Tuesday.

Treasury has already come to the rescue of several corporate victims of the housing and credit crunches. The government took over mortgage finance companies Fannie Mae and Freddie Mac, and helped finance the sale of investment bank Bear Stearns to J.P. Morgan Chase & Co.

Eleven federally insured banks and thrifts have failed this year, including Pasadena, Calif.-based IndyMac Bank, by far the largest shut down by regulators.

Additional failures of large banks or savings and loans companies seem likely, and that could overwhelm the FDIC's insurance fund, said Brian Bethune, U.S. economist at consulting firm Global Insight.

Wachovia merger speculation heats up


Wachovia, with its dominant Eastern franchise is seen as a promising merger partner for a company with big banking ambitions.


Wells Fargo & Co. (NYSE:WFC) has long been viewed as a potential merger partner, given the San Francisco bank’s dominance in the West.

WaMu may seek merger as pressure mounts


Washington Mutual's stock has lost almost 94 percent of its value from its 52-week high of $39.25 on September 19, 2007, to its close on Tuesday of $2.36, as investors worry about continued losses related to risky real-estate loans.

The company's woes has led to speculation that it is primed for a takeover.

On Wednesday the New York Post reported, citing sources, U.S. federal regulators recently called a number of banks asking if they would consider buying Washington Mutual should it eventually falter.

In recent days federal banking regulators contacted Wells Fargo & Co (NYSE:WFC - News), JPMorgan Chase & Co (NYSE:JPM - News), HSBC (LSE:HSBA.L - News) and several other financial institutions to gauge their interest in a possible acquisition of the largest U.S. savings and loan institution, the paper said.

Comment: A Wells Fargo - Wachovia merger would be a merger of equals (equal in size, not in quality!). Wells / Wachovia would a National franchise à la Bank of America. A Wells Fargo / WaMu deal would be in Wells existing "footprint" - BIG FISH swallowing small fish.


The 'Experience' Canard

Palin and the 'Experience' Canard


When Coolidge was named to Warren Harding's ticket in 1920, he had been governor of Massachusetts for less than two years. Aside from a largely powerless stint as lieutenant governor and other smaller legislative posts, his chief previous government experience was as mayor of Northampton, to which he was first elected in 1910 by a Wasilla-like margin of 1,597 to 1,409.

Another year-and-a-half governor to be nominated for the vice presidency: Teddy Roosevelt. It's true that TR, as a former assistant secretary of the Navy, had more foreign policy experience than Mrs. Palin, though one wonders what today we would make of a candidate whose proud boast was that he had killed an enemy soldier "like a jackrabbit."

Then there is Harry Truman, to whom Mrs. Palin compared herself at the Republican convention. "He had only to open his mouth and his origins were plain," wrote David McCullough in his biography of the 33rd president, in lines that might also have been written about Mrs. Palin. "It wasn't just that he came from a particular part of the country, geographically, but from a specific part of the American experience, an authentic pioneer background, and a specific place in the American imagination."

The Truman comparison seems especially to rankle Mrs. Palin's critics, perhaps because in many respects it rings true. Take vetting. John McCain may have met Mrs. Palin only once before he offered her the job, but Franklin Roosevelt admitted "I hardly know Truman" in July 1944, the same month the "Senator from Pendergast" was put on the Democratic ticket.

Or take foreign policy experience. It's fair to say that Mrs. Palin has none, and the McCain campaign should drop the transparent pretense that Alaska's proximity to Russia, or her nominal responsibility for the state's National Guard, gives her some.

Then again, what did Truman know? "Truman had no experience in relations with Britain or Russia, no firsthand knowledge of Churchill or Stalin," writes Mr. McCullough. "He didn't know his own Secretary of State, more than to say hello. . . . Roosevelt, Truman would tell [daughter] Margaret privately, 'never did talk to me confidentially about the war, or about foreign affairs or what he had in mind for peace after the war.' He was unprepared, bewildered."

Truman, it's true, had served bravely as an army captain in World War I; he knew the nature of war. But his chief recommendation as a U.S. senator was as a good-government type who bucked his home state's machine politics (though not so frontally as Mrs. Palin bucked hers) and fought waste, fraud and corruption in military spending.

Comment: New word (for me): "panjandrum"

If nothing else, the media meltdown over Sarah Palin's candidacy for the vice presidency has exposed the not-unsuspected truth that, when it comes to historical ignorance and political amnesia, our cultural panjandrums are in a class by themselves.

Who will buy WaMu?

Chase seen as a likely suitor for Washington Mutual


J.P. Morgan Chase & Co. is seen as a likely suitor for Washington Mutual, which is staggering under huge mortgage losses.

Earlier this year, Chase made overtures to WaMu that were rebuffed. The New York bank reportedly offered a stock-swap buyout valued at $8 per share, although other reports put the buyout price at slightly more than $4 per share based on conditions such as contingent payments made based on the performance of WaMu loan portfolio performance. Instead, WaMu went with a $7 billion financing led by TPG Capital, formerly Texas Pacific Group, that valued WaMu at $8.75 per share. TPG structured the deal for its 13 percent stake in WaMu so that it’s made whole if the bank sells for less than it paid within 18 months of the April investment.

WaMu’s shares (NYSE: WM) closed Monday at $2 per share, down 26 percent. Last week, Chase was reportedly in advance talks with WaMu again about a potential deal.

Also fueling speculation on a WaMu sale is the board’s decision this month to oust long-time CEO Kerry Killinger, who resisted selling the thrift. He was replaced by Alan Fishman.

“Killinger was fighting to shrink the balance sheet and keep the bank independent,” Dick Bove, analyst at Ladenburg Thalmann, told the New York Post this week. “By adding Fishman, who’s known as a guy who can get a bank ready for sale, they removed an important obstacle.”

Other banks that have been cited as potential suitors for WaMu include Wells Fargo (NYSE: WFC) and HSBC.

Chase (NYSE: JPM) could be attracted to Washington Mutual’s large branch network in areas where Chase has none. Specifically, key growth markets such as California and Florida. San Francisco bankers have long said it’s only a matter of time before Chase operates branches in the Bay Area.

A sale is looking increasingly likely for Washington Mutual, possibly in a government-assisted transaction.

Comment: I told Kathee on the way into work today ... someone will be buying WaMu.


WaMu credit rating downgraded to junk

WaMu Rating Lowered to Junk by S&P on Mortgage Losses


Washington Mutual Inc., the biggest U.S. savings and loan, had its credit rating cut to junk by Standard & Poor's because of the deteriorating housing market.

S&P reduced its rating on Seattle-based WaMu to BB- from BBB-, leaving it three levels below investment grade, the ratings firm said today in a statement.

``Increasing market turmoil and the related impact from managing its concentrated mortgage franchise in this troubled housing and credit cycle led to the downgrade,'' S&P wrote. S&P cut its rating on the subsidiary bank to BBB- from BBB.

S&P followed similar announcements last week from Moody's Investors Service and Fitch Ratings. WaMu, which has reported $6.3 billion of losses in the last three quarters because of soured mortgages, said on Sept. 11 that it expects a third- quarter loan loss provision of $4.5 billion.

WaMu tumbled 73 cents, or 27 percent, to $2 at 4 p.m. on the New York Stock Exchange. The shares dropped another 20 cents, or 10 percent, to $1.80 in extended trading. They've lost 94 percent of their value in the past year.

``On a more positive note, we recognize that WaMu's holding company liquidity position is currently solidly positioned to meet all of its fixed obligations through 2010,'' S&P said. ``The bank is operating with adequate capital positions from a regulatory perspective and has demonstrated funding resilience as the deposit franchise has remained stable.''

WaMu slid 36 percent last week alone, a record decline. The lender ousted its chief executive officer and disclosed that its main regulator has told it to boost risk management and compliance. The bank on Sept. 11 said in a statement that retail balances at the end of August, of $143 billion, were ``essentially unchanged'' from the end of 2007.

WaMu's $1 billion of 5.125 percent notes due in 2015 fell 11 cents to 34 cents on the dollar today, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The debt yields about 27.9 percent, or 24.5 percentage points more than similar-maturity Treasuries, Trace data show.

Comment: I think Wells Fargo should buy WaMu! Same footprint!

Bank Shock!

Comment: I doubt anyone under the age of 75 has every seen something like this!

WFC, USB, and BBT are doing OK. But look at WB and LEH


Mortgage crisis "a corrosive force"

US in 'once-in-a-century' financial crisis : Greenspan


The United States is mired in a "once-in-a century" financial crisis which is now more than likely to spark a recession, former Federal Reserve chief Alan Greenspan said Sunday.

The talismanic ex-central banker said that the crisis was the worst he had seen in his career, still had a long way to go and would continue to effect home prices in the United States.

"First of all, let's recognize that this is a once-in-a-half-century, probably once-in-a-century type of event," Greenspan said on ABC's "This Week."

Asked whether the crisis, which has seen the US government step in to bail out mortgage giants Freddie Mac and Fannie Mae, was the worst of his career, Greenspan replied "Oh, by far."

"There's no question that this is in the process of outstripping anything I've seen, and it still is not resolved and it still has a way to go," Greenspan said.

"And indeed, it will continue to be a corrosive force until the price of homes in the United States stabilizes.

"That will induce a series of events around the globe which will stabilize the system."

Greenspan was also asked whether the United States had a greater-than 50 percent chance of escaping a recession.

"No, I think it's less than 50 percent.

"I can't believe we could have a once-in-a-century type of financial crisis without a significant impact on the real economy globally, and I think that indeed is what is in the process of occurring."

The former Federal Reserve chairman also predicted that the financial crisis would see the failure of more major financial institutions, even as embattled Wall Street investment giant Lehman Brothers scrambled to find a buyer.

"In and of itself that does not need to be a problem.

Comments: When Greenspan speaks, he speaks authoritatively! It's been interesting following news on Lehman Brothers this weekend. It may be gone by tomorrow.


CIO Values: Avid Modjtabai, Executive VP And CIO Of Wells Fargo


On The Job
IT budget (approximate): $2 billion

Size of IT team: About 6,000

Top three initiatives:

  • We set aggressive goals to provide better availability by radically reducing outages in the mainframe, network, and open systems infrastructure.
  • Streamlining our internal processes to manage costs and expedite time to market.
  • Fostering a great culture for team members and focusing on employee engagement.

How I measure IT effectiveness: We have the standard financial and technical measures, but also try to manage perception. We instituted an internal partner survey to get feedback, which is critical to help us drive alignment with the businesses we support.

Comment: I'm in her organization.

"I can see Russia from my house"

HT: Did Tina Fey out-Palin Palin on 'Saturday Night Live'?

Comment: Note: SNL humor. I struggled to stay away to watch the first minutes of SNL. This was very funny!


A bureaucratic government solution

Democrats Propose Gas Stamps


As the U.S. economy teeters on the brink of recession, Democratic leaders are revisiting an idea born of the Great Depression: gas stamps to help Americans cope with high fuel prices.

The proposal to subsidize fuel costs for lower-income families and individuals would almost certainly be popular with white, working-class voters and could boost Barack Obama’s appeal with that critical voting bloc in this year’s presidential election.

Democratic lawmakers and their leaders say they are serious about including it in a second economic stimulus package expected to move this month. Meanwhile, Republicans ridicule the idea as a return to welfare-state politics, which they say characterized the Democratic Party before Bill Clinton.

“It’s certainly under consideration,” House Majority Leader Steny Hoyer (D-Md.) told The Hill on Thursday afternoon. “It would be like food stamps for those people who need help.”

Gas stamps would work like traditional food stamps, which some Americans have collected since the 1930s. They would be used, however, to pay for regular unleaded instead of meat and potatoes.

Under one version of the proposal, a person earning up to $31,200 or a family of four earning up to $63,600 could receive government payments totaling $500 for gas.

HT: The Truth About Cars

Trying to turn back time

Mom allegedly uses daughter's ID to be cheerleader


A 33-year-old woman stole her daughter's identity to attend high school and join the cheerleading squad, according to a criminal complaint filed against the woman.

Wendy Brown, of Green Bay, faces a felony identity theft charge after enrolling in Ashwaubenon High School as her 15-year-old daughter, who lives in Nevada with Brown's mother.

According to the complaint, Brown wanted to get her high school degree and become a cheerleader because she didn't have a childhood and wanted to regain a part of her life that she'd missed.

Brown allegedly attended cheerleading practices before school started, received a cheerleader's locker and went to a pool party at the cheerleading coach's house.

Comment: Don't we all sometimes want to "regain a part of life missed? News of the weird from the land of cheese-heads.


Electoral vote snapshot (53 days out)


Comment: First time that McCain polls ahead. Will it hold?

Dems criticize McCain's computer illiteracy

The real story:

McCain can't use a keyboard!

Yep. The day after 9/11, as part of its "get tough" makeover, the Obama campaign is mocking John McCain for not using a computer, without caring why he doesn't use a computer. From the AP story about the computer illiterate ad:

"Our economy wouldn't survive without the Internet, and cyber-security continues to represent one our most serious national security threats," [Obama spokesman Dan] Pfeiffer said. "It's extraordinary that someone who wants to be our president and our commander in chief doesn't know how to send an e-mail."

Well, I guess it depends on what you mean by "extraordinary." The reason he doesn't send email is that he can't use a keyboard because of the relentless beatings he received from the Viet Cong in service to our country. From the Boston Globe (March 4, 2000):

McCain gets emotional at the mention of military families needing food stamps or veterans lacking health care. The outrage comes from inside: McCain's severe war injuries prevent him from combing his hair, typing on a keyboard, or tying his shoes. Friends marvel at McCain's encyclopedic knowledge of sports. He's an avid fan - Ted Williams is his hero - but he can't raise his arm above his shoulder to throw a baseball.

In a similar vein I guess it's an outrage that the blind governor of New York David Patterson doesn't know how to drive a car. After all, transportation issues are pretty important. How dare he serve as governor while being ignorant of what it's like to navigate New York's highways.

Comment: Shamelsss criticism of McCain!

Angry Al

Comment: I approve this message.

1973 video of McCain POW release

Film shows McCain's release from Vietnamese prison

Joe Biden: "a human verbal wrecking crew"

Biden living up to his gaffe-prone reputation


Earlier in the week, in Columbia, Missouri, Biden urged a paraplegic state official to stand up to be recognized.

"Chuck, stand up, let the people see you," Biden shouted to State Senator Chuck Graham, before realizing, to his horror, that Graham uses a wheelchair. "Oh, God love ya," Biden said. "What am I talking about?"

Comment: Frankly I've had my own share of verbal gaffs. One summer I was ministerial intern at a church (think ripe young age of 22!). Seeing a woman with a plump belly, I asked her when her baby was due. Well you guessed it, she was not with child!


Sen. McCain’s Statements on the 7th Anniversary of 9/11

Here are Sen. McCain’s remarks from his speech in Shanksville, Pennsylvania:

“No American living then should ever forget the heroism that occurred in the skies above this field on September 11, 2001. It is believed that the terrorists on United Flight 93 may have intended to crash the airplane into the United States Capitol. Hundreds if not thousands of people would have been at work in that building when that fateful moment occurred, and been destroyed along with a beautiful symbol of our freedom. They and, very possibly I, owe our lives to the passengers who summoned the courage and love necessary to deny our depraved and hateful enemies their terrible triumph.

“I have witnessed great courage and sacrifice for America’s sake, but none greater than the sacrifice of those good people who grasped the gravity of the moment, understood the threat, and decided to fight back at the cost of their lives.

“I spoke at the memorial service for one of them, Mark Bingham. I acknowledged that few of us could say we loved our country as well as he and all the heroes of September 11 had. The only means we possess to thank them is to try to be as good an American as they were. We might fall well short of their standard, but there is honor in the effort.

“In the Gospel of John it is written, ‘Greater love hath no man than this: that a man lay down his life for his friends.’ Such was their love; a love so sublime that only God’s love surpasses it. I am in awe of it as much as I am in debt to it. May God bless their souls.”

HT: Race2008.com

Patience & Wisdom

One of the greatest secrets of life is having patience & wisdom ..

Comment: Sent to me by my Sister-in-Law, Carole


Free PC Screen Cleaner

PC Screen Cleaner

Comment: Works with CRT's, LCD's, Laptops, Desktops, Macs, Linux, and Windows. For some reason it is a little buggy on Vista!

After you try it, please leave a comment!

If you don't like it ....

Full sized image here

Full collection here

HT: Team Pyro

In case you wondered

This Is The Sarah Palin Bikini Shot You Are Looking For And, No, It's Not Real.

Comment: The pic of Sarah Palin in a flag-themed bikini with a rifle ... it's a photoshop. I am not posting the photos ... only the link with details.


Cream of Nothing

Saturday miscellanea

The house work (from hail damage on 5/31) commenced yesterday. Having done: new roof, 11 windows, siding on 2 sides, gutters and downspouts.

It took me almost three months to get all the insurance details finalized.

Kathee and I had a very hectic week. I virtually never get headaches but yesterday I had a raging one at the end of the day.

We came home and there were still roofers pounding away. The cats were in an absolute frenzy (imagine being home all day to this!!). The pounding went on until 8 p.m. It was not a relaxing evening.

K and I slept in until almost 8. Roofers arrived shortly thereafter and the banging commenced.

I gave blood by apheresis again today. This is an every 16 week thing. There are 2 times when I feel a little scared ... when they poke my finger for the initial blood test and when they put the needle in my arm.

Roof work looks to be finished. There is a big dumpster in the driveway still.

K is going shopping at 2:30 and I am going to take a drive in the country.

Roger and Kate are coming for dinner.

Worship tomorrow at 4th.


Being read your death sentence

Robert Novak: My Brain Tumor


A biopsy was performed, which showed a large, grade IV tumor. In answer to my question, the oncologist estimated that I had six months to a year to live. Being read your death sentence is like being a character in one of the old Bette Davis movies.

I believe I was able to withstand this shock because of my Catholic faith, to which I converted in 1998.

Comment: One of my favorite columnists!

Chief Dem taxman doesn't understand own taxes!

Rangel Failed to Report $75,000 in Income


Mr. Rangel, chairman of the House Ways and Means Committee, which writes the federal tax code, bought the beachfront villa at the Punta Cana Yacht Club and has received twice-yearly payments from the resort, which rents the property for $500 or more per night.


the congressman did not realize he had to declare the money as income, and was unaware of the semiannual payments from the resort because his wife, Alma, handled the family finances and conferred with their accountant, John Viardi, on tax matters.

The money was never sent to the Rangels directly, according to Mr. Davis and resort records, but was used to defray the mortgage the company gave them when they bought the villa and $23,000 in subsequent construction costs in 2003.

The confusion was magnified, Mr. Davis said, by the fact that the statements from the resort were sent only intermittently. The congressman declined to be interviewed, but issued a brief written statement.

“I have asked my accountant to review all the data recently made available to me by the Punta Cana Hotel in the Dominican Republic concerning my investment 20 or so years ago in purchasing a unit in that hotel for occasional use over the years,” the statement said. “Once my accountant obtains and verifies the facts, I will follow his recommendations.”

Mr. Davis said that Mr. Rangel had paid scant attention to the villa’s finances until Sunday, when The New York Post reported that the congressman had failed to declare the rental income for 2006 and 2007 on his Congressional financial disclosure forms. “This is all news to him,” Mr. Davis said. A review by The New York Times of the records dating back to 1996 showed that the congressman also did not report the income in 1996 through 2000. Mr. Davis said on Thursday that Mr. Rangel would most likely file amendments to the disclosure forms as well.

The disclosure is a sworn statement, and intentionally filing a false report is a felony that carries a possible five-year prison sentence, but in most cases the House ethics committee does not punish members for errors or omissions.

Comment: Here's the operative phrase - "the congressman did not realize he had to declare the money as income" Maybe if we had a flat tax or at least a simplified tax code, the Dem's chief tax bean-counter could figure it out. The average tax-paying American schmoe doesn't have the luxury of tax accountants and attorneys, but we have to figure it out!