Thursday, July 31, 2008

Greenspan Talks and You Should Listen

In a wide ranging interview on CNBC with Maria Bartiromo, former Fed Chairman Alan Greenspan provided one of the best overall analyses of the current economic situation.

As we have pointed out in the past, Greenspan studies the details of economic data better than any other economist. The one weakness Greenspan has is that, amazingly, he doesn't have a business cycle theory. This weakness displays itself briefly in the interview, but for the most part it is top notch commentary by Greenspan.

Significantly, as we have pointed out also, Greenspan understands that the current crisis is housing and housing finance crisis, rather than a full-fledged recession.

But,Greenspan does not, and this is where his lack of a business cycle theory comes in, discuss the current slowdown in money supply that could throw the economy into a full-fledged recession.

From his data digging, he points out that currently there are some 12 million homeowners that have negative equity in their homes. Of course, homes with negative equity are homes very susceptible to foreclosures and walk aways. It is these kind of numbers that cause Greenspan to say that the US is “nowhere near the bottom” of the housing slump.

Greenspan also warned that "Fannie and Freddie are a major accident waiting to happen," and speculated that the two may eventually have to be nationalized.

He very perceptively warned that the plan Treasury Secretary Paulson is pushing to put the Federal Reserve in the role of regulator of the financial sector is foolhardy and such a role by the Fed would end in failure by the Fed as all factors are never known in advance and thus it is impossible to regulate them in advance. Hear, hear!

He also very perceptively pointed out that the financial crisis shall ultimately pass, but the real long-term problem will be inflation and stagflation.

In a moment of complete honesty, he pointed out that during his reign as Fed chairman productivity growth suffocated inflation problems, but that now the tide has turned and inflation is a much bigger problem than when he was Fed chairman.

Part 1 of the interview is here.

Part 2 of the interview is here.

Banks Borrow Record Amount From Fed

Banks borrowed a record amount of funds from the Federal Reserve in the latest week as the commercial paper market continued to contract.

Banks' primary credit borrowings averaged $17.45 billion per day in the latest week, the second straight week this had hit a record and up from $16.38 billion the previous week, Fed data showed on today.

It is difficult to attribute the reasons behind the increase in primary credit borrowings from the Fed. Some may be from banks having difficulty finding alternative funding, and others may be borrowing to take advantage of the low borrowing rate of 2.5%.

On the other hand, secondary credit extended by the Fed, which is usually taken out by banks in need of emergency cash, rose to $89 million in the latest week, from $34 million the week before. Although these numbers are very small compared with primary credit, it means that there's an increasing number of banks that the Fed is classifying as 'unsound' or inadequately capitalized.

The U.S. commercial paper market, fell $16.0 billion to $1.728 trillion, the lowest level outstanding in two years. Part of the overall decline was attributable to asset-backed commercial paper, a subsector that has been eroded by the slide of housing and mortgage-related securities. U.S. asset-backed commercial paper outstanding fell by $6.1 billion.

Secretary Paulson on The State of the Housing Market

Treasury Secretary Henry Paulson spoke today on the Markets and Economy at the Exchequer Club, in Washington D.C. As part of his remarks, he provided an overview of the current state of the housing market (our emphasis.)

It took years of excesses – lax underwriting standards, excessive home price appreciation and overbuilding – to sow the seeds of the housing correction.

That said, we need to recognize that there is not a national housing market, but a collection of regional markets. The severity of the current correction varies widely by state and region. Areas that had some of the most pronounced price appreciation are facing the most pronounced price declines and foreclosure increases. Of course, that does not mean the correction isn't being felt across the nation. Foreclosure starts as a share of total outstanding mortgages have risen from 0.4 percent to 1.0 percent since the beginning of 2006. However, OFHEO's home price data shows that home prices actually rose in about half of the states in the first quarter.

Due to overbuilding in prior years, home inventories are now far above normal levels. At the current sales rate, there is a ten month inventory of new single-family homes on the market, and an 11 month inventory of existing single-family homes. This compares with a historical average of about six to seven months. The key to stabilizing the housing and financial markets is to work through these home inventories as quickly as possible.

Inventories decrease in two ways – fewer homes are built, and more buyers come into the market. We are seeing the necessary sharp decline in homebuilding. Single-family housing starts are down 65 percent from their 2006 peak and look to remain weak through this year.

New home sales appear to have stabilized to a degree – sales of new single-family homes are down 62 percent from their peak; and sales have been flat, rather than declining, for three months now. The drastic slowing in new construction has helped reduce the number of new single-family homes on the market, which is down 26 percent since its 2006 peak. The number of existing homes on the market remains elevated, but there are also tentative signs that sales in this category have been stabilizing since early 2008.

We all recognize that foreclosure sales increase inventories and, as foreclosed homes are put on the market, they drive down prices. Foreclosures and short sales now make up about one-third of existing home sales....

Foreclosures and existing home inventories are likely to remain substantially elevated this year and next and home prices are likely to decline further on a national basis. The key question is, "When will the correction be largely behind us?" While home price adjustments will continue for some time, and certainly well beyond the end of the year, I believe we can move through the bulk of the correction in months rather than years.

Obama's Energy Plan: Hot Air....

...in your tires.

I'm glad this is on youtube, otherwise, it is hard to believe. Obama claims that if only we all just properly inflated our tires, we would save as much gasoline as "all the oil that they're talking about getting off drilling. "




Writes Power Line:

The stunned silence with which the crowd greets this howler suggests that most Americans have a more practical understanding of energy consumption than Obama.

Just for fun, I did the math. Properly inflating your tires can improve gas mileage by 3%. Of course, many people already keep their tires properly inflated, and many more are at least close to being properly inflated. Let's be generous and assume that one-half of the total possible savings would be realized if we all inflated our tires properly; that's a net gain of 1.5% fuel efficiency.

Americans drive approximately 2,880 billion miles per year. If we average 24 mpg, we use around 120 billion gallons of gasoline in our vehicles. If, through perfect tire inflation, we improved our collective fuel efficiency by 1.5%, that would be 1.8 billion gallons. A barrel of oil produces around 20 gallons of gasoline, so the total savings available through tire inflation is approximately 90,000,000 barrels of oil annually.

How does this stack up against "all the oil that they're talking about getting off drilling?"

ANWR: 10 billion barrels
Outer Continental Shelf: 18 billion barrels (estimated; the actual total is undoubtedly much higher, since exploration has been banned)
Oil shale: 1 trillion barrels

So, on the above assumptions, it would take only 11,308 years of proper tire inflation to equal "all the oil that they're talking about getting off drilling."

Q2 GDP Up 1.9%

GDP is not one of our favorite pieces of data. It's too much of an aggregation, with lots of points where the acquiring of data is subject to the potential for significant errors, that said, the Commerce Department reported today that GDP increased at an annual rate of 1.9 percent in the April-to-June period.

Do with this number what you will, but the number certainly doesn't indicate any recession in the economy.

"Housing" Bill Includes Funds For Obama Affiliated Left Wing Organization

The "Housing" Bill surprises just keep on popping up.

Earlier this month, we reported on a shadowy, powerful left wing organization that Barack Obama worked for, ACORN.

The housing bill signed Wednesday by GW will provide funds for various nonprofit groups that are involved in the housing market. One of the biggest likely beneficiaries, despite Republican objections, will be ACORN. ACORN in one of its poses is a housing advocacy group that also helps lead ambitious voter-registration efforts benefiting Democrats.

ACORN is made up of several legally distinct groups under that name. It's voter mobilization arm is co-managing a $15.9 million campaign with the group Project Vote to register 1.2 million low-income Hispanics and African-Americans, who are among those most likely to vote Democratic. "Technically" nonpartisan, the effort is one of the largest such voter-registration drives on record.

Obama was a member of ACORN and taught leadership conferences for the group while working for Miner, Barnhill & Galland, according to No Quarter. Obama actively sought and received the endorsement by ACORN for his local campaigns. He has now done the same in his bid for the USA presidency, says No Quarter.

In a Spring 2003 article for City Journal, titled, ACORN’s Nutty Regime for Cities, Sol Stern reported on the organization:

If you thought the New Left was dead in America, think again. Walk through just about any of the nation’s inner cities, and you’re likely to find an office of ACORN, bustling with young people working 12-hour days to “organize the poor” and bring about “social change.” The largest radical group in the country, ACORN has 120,000 dues-paying members, chapters in 700 poor neighborhoods in 50 cities, and 30 years’ experience...

[ACORN]promotes a 1960s-bred agenda of anti-capitalism, central planning, victimology, and government handouts to the poor....

ACORN’s bedrock assumption remains the ultra-Left’s familiar anti-capitalist redistributionism. “We are the majority, forged from all the minorities,” reads the group’s “People’s Platform,”...“We will continue our fight . . . until we have shared the wealth, until we have won our freedom . . .
. "

ACORN has perfected an in-your-face strategy that works effectively at capturing public attention and winning adherents in cities......there’s one....crucial respect in which ACORN departs from the old New Left’s playbook. Instead of trying to overturn “the system”—to blow it up...—ACORN burrows deep within the system, taking over its power and using its institutions for its own purposes...


According to WSJ:

The organization's main advocacy group lobbied hard for passage of the housing bill, which provides nearly $5 billion for affordable housing, financial counseling and mortgage restructuring for people and neighborhoods affected by the housing meltdown. A third Acorn arm, its housing corporation, does a large share of that work on the ground.

Acorn's multiple roles show how two fronts of activism -- housing for the poor and voter mobilization -- have converged closely in this election year. The fortunes of both parties will hinge in part on their plans for addressing the fall of the nation's housing market and the painful economic slowdown. Some of the places buffeted worst by mounting foreclosures are states whose voters could swing the election. Five battleground states where Acorn has registration drives were among the top 10 states for foreclosure rates as of June: Colorado, Florida, Nevada, Michigan and Ohio...

Republicans critical of Acorn's roles say any money that it gets for housing makes it easier for the group to put money into voter drives. "These are taxpayer funds, in an indirect method, being used to subsidize political activism," says Rep. Jeb Hensarling, Texas Republican and chairman of the conservative House Republican Study Committee. "I'm sure they're not going out and registering any Republicans."..

Acorn worker Stephanie Willis was scouting for new voters in a seedy neighborhood of Aurora, Colo., a Denver suburb. Spotting a woman seated on a park bench, Mrs. Willis hustled over and thrust a clipboard and pen at her. Within minutes, Brenda Hernandez was a new registered voter. Mrs. Willis then handed Mrs. Hernandez a flier listing Acorn's housing and other services, and signed her up to be an Acorn member
.
"Obama!" Mrs. Hernandez yelled, attempting to fist-bump Mrs. Willis, who already was scanning for other people to register.

Exxon Profit Soars Again

Exxon Mobil reported a 14% increase in second-quarter net income.

Net income rose 14 percent to $11.7 billion, or $2.22 a share, from $10.3 billion, or $1.83, a year earlier. It is highest profit ever for a U.S. company without one-time gains.

However, Production tumbled 7.8 percent after assets were seized in Venezuela, Nigerian workers went on strike.

Morgan Stanley Goes On Hiring Binge

Morgan Stanley apparently believes in taking advantage of crisis.

It plans to use up to $1bn saved from cutting 4,800 jobs this year to hire top-level executives and bolster its presence in areas such as derivatives, risk management and proprietary trading.

The aggressive hiring campaign is driven by Morgan Stanley’s desire to take advantage of the lay-offs among firms hit by the credit crunch to add expertise in fast-growing businesses and regions such as the Middle East and Asia.

John Mack, chairman and chief executive, has told associates that the turbulence, which has caused 75,000 job losses in the US financial sector, is a historic opportunity to recruit bankers, traders and risk managers.

Wednesday, July 30, 2008

A Real Estate Tip from Richard Nixon

“A town house in Manhattan is like oceanfront property. It never loses its value.”

-From a fascinatng story at NYT on how Nixon finally ended up with a townhouse in Manhattan. Pat Nixon as the worried wife. And, check out the low, low prices tossed around for Manhattan real estate, in the story. The full story is here.

Alert: FOMC Meets Next Week

The Federal Open Market Committee will meet Tuesday Aug. 5 for its regularly scheduled meeting. All indications suggest that they will hold the Fed Funds rate at 2%.

Tax "Credit" In Housing Bill Is Really Just A Loan

More details are pouring out of the 600 page Housing "Rescue" Bill. The latest: The $ 7,500 credit for new homeowners is not really a credit. It's a loan. Those who qualify to receive this "credit" will receive 10% of the purchase price of their home -- up to $7,500, in the first year. Then they will repay the loan over a 15-year period, starting in the second year after the taxable year in which the house is purchased.

Those who haven't owned a principal residence for three years before buying the new home qualify for the "credit".. If you've owned a vacation home or timeshare, you will still qualify.

The Housing "Rescue" Bill Actually Has Incentive For Some To Sell Their Homes

Only from Congress.

Stuck with a second home you can't get rid of? Now, you are really screwed.

The massive 600 page tax bill, supposedly created to help get the housing market back on its feet, has a clause that will create huge incentive for some to sell second homes and thus put added pressure on the housing market.

Taxpayers have played hopscotch, moving from home to vacation home to the next home, etc. and avoiding income taxes on the sale of each one, according to Eva Rosenberg, founder of TaxMama.com . That free ride is at an end.

The personal resident exclusion is still good on your personal home. However, you'll be paying taxes on the sale of your vacation home, or rental property converted to a home or any "unqualified" home. As with anything coming out of Congress, the calculations of the taxes owed will be complicated to determine.

The tax will be based on the amount of days the house was not a qualified personal residence divided by the total number of days you owned it. This ratio is multiplied by the amount of gain realized on the sale of the property.

The new law defines unqualified use as:

any period after the last date the property is used as the principal residence of the taxpayer or spouse (regardless of use during that period), and

any period (not to exceed two years) that the taxpayer is temporarily absent by reason of a change in place of employment, health, or, to the extent provided in regulations, unforeseen circumstances, are not taken into account.

This law becomes effective January 1, 2009. Thus, this creates huge incentive for those who are considering selling their vacation or other second homes to sell them before the first of the year, creating even more supply in this weak housing market.

Scheer: This Is a Time to Condemn the Bankers, Not to Embrace Them.

Robert Scheer writes:

This is a time to condemn the bankers, not to embrace them. They are the scoundrels who got us into the biggest economic mess since the Great Depression, lining their own pockets while destroying the life savings of those who trusted them. Yet both of our leading presidential candidates are scrambling to enlist not only the big-dollar contributions but, more frighteningly, the "expertise" of the very folks who advocated the financial industry deregulations at the heart of this meltdown....Not good at a time when we need a presidential candidate who sticks it to the bankers instead of sucking up to them.

Obama Links McCain to 'Reckless' GOP Economics

Barack Obama is correct in calling current GOP economics reckless and calling for change.

"We can either choose a new direction for our economy or we can keep doing what we've been doing. My opponent, John McCain, thinks we're on the right track," Obama said on a campaign swing through Missouri.

Change is needed but it is change that needs to follow the line of thinking of Adam Smith, Milton Friedman, Murray Rothbard and Ludiwg von Mises, not Obama economics, which could very well be socialism.

Samuelson: The Seeds of the Next Housing Crisis Are Being Planted Today

Robert Samuelson at WaPo details the many ways the government fueled the out-of-control housing market and how they are planting the seeds for the next crisis. Samuelson fails to point out the Federal Reserve's role by printing money and keeping interest rates dangerously low, but, otherwise, Samuelson nails it:

The real lessons of the housing crisis have gotten lost. It's routinely portrayed as the financial system run amok; the housing market became a casino. The remedy, we're told, is to enact rules that prevent a repetition. All this is partly true. But it ignores a larger truth: Our infatuation with homeownership, embedded in dozens of government policies, has turned housing -- once a justifiable symbol of the American dream -- into something of a national nightmare...

We think everyone should become a homeowner, when many families can't or shouldn't. The result is to encourage lending to weak borrowers who are likely to default...

Congress's response to the present crisis is, not surprisingly, more of the same. The legislation enacted last week adds new subsidies to the old. It creates more tax breaks; most first-time home buyers could receive a $7,500 tax credit. It expands the lending authority of Fannie Mae and Freddie Mac. Previously, the permanent ceiling on their mortgages was $417,000; now it would be as much as $625,500. And the FHA would be authorized to support, at much lower monthly payments, the refinancing of mortgages of an estimated 400,000 homeowners who are in danger of default.

More subsidies may -- or may not -- stabilize the housing market in the short run. But there are long-term hazards...

... the government's pro-housing policies contributed in two crucial ways [to the current crisis].

First, they raised demand for now suspect "subprime" mortgages. The Department of Housing and Urban Development sets "affordable" housing goals for Fannie Mae and Freddie Mac to dedicate a given amount of credit to poorer homeowners. One way Fannie and Freddie fulfilled these goals was to buy subprime mortgage securities -- many of which have now gone bad. Second, government's housing bias created a permissive climate for lax lending. Both the Clinton and present Bush administrations bragged about boosting homeownership. Regulators who resisted the agenda risked being "roundly criticized," notes Zandi.

... When tomorrow's housing crisis occurs, we will probably find its seeds in the "solution" to today's.

Zimbabwe Drops Tweleve Zeros From ts Currency

Zimbabwe will drop 10 zeros from its hyper-inflated currency _ turning 10 billion dollars into one _ the country's reserve bank said Wednesday. President Robert Mugabe threatened a state of emergency if businesses profiteer from the country's economic and political unraveling.

Note to Mugabe: Business "profiteers" aren't printing the money causing the inflation. The inflation is caused by the central bank printing money to pay for expenses of the Mugabe government.

Aggravating the problem are price controls which are resulting in shop shelves that are empty and there are chronic shortages of everything including medication, food, fuel, power and water. Eighty percent of the work force is unemployed and many who do have jobs don't earn enough to pay for bus fare.

Wednesday's announcement by central bank governor Gideon Gono that he was dropping 10 zeros from the currency, effective Friday, comes a week after he introduced a 100 billion-dollar note which was not enough to buy a loaf of bread.

Mugabe went on television immediately after Gono's announcement to warn against illegal money dealings and profiteering.

"Entrepreneurs across the board: Don't drive us further," he warned. "If you drive us even more we will impose emergency measures."

Gono said new money would be launched Friday with 500-dollar bills. He also said he was reintroducing coins, which have been obsolete for years. Bills will be back in the millions in record time if the central bank continues to print currency.

Gono said the high rate of inflation was hampering the country's computer systems. Inflation is officially running at 2.2 million percent in Zimbabwe but independent economists say it's closer to 12.5 million percent.

Computers, electronic calculators and automated teller machines at Zimbabwe's banks cannot handle basic transactions in billions and trillions of dollars.

You Can Easily Spot The Socialist Tendencies Of Barack Obama, If You Try

Investor's Business Daily has a very important piece on the extreme socialist tendencies of Barack Obama. It can be read here.

Fed Introduces Longer-Term Credit to Help Unfreeze Markets

The Federal Reserve announced several steps,today, including longer-term credit, in its efforts to provide cash to unfreeze financial markets. The Fed said it will now offer 84-day credits in addition to 28-day loans. The central bank also announced that it has extended its loans to broker-dealers, who are also primary dealers of Treasury debt, to the end of January from mid-September. The Fed will also auction options for primary dealers to borrow Treasury securities. These options are designed to help firms navigate periods of elevated stress in markets, such as quarter-ends. The Fed said the European Central Bank and the Swiss National Bank were also adding lengthier maturities. The Fed will increase its swap line with the ECB to $55 billion to help this shift to lengthier maturities.

Mortgage Applications at Slowest Pace Since 2000

Applications for U.S. home mortgages dropped to their slowest pace since December 2000, according to the Mortgage Bankers Association. Hgher loan rates hovering near one-year highs compounded the housing market's woes,

Fixed 30-year mortgage rates averaged 6.46 percent in the week.

Private Sector Added 9,000 Jobs During July, ADP Says

No recession, yet. Just a very severe housing/finance crisis.

U.S. private employers added 9,000 jobs in July, according to a report by ADP Employer Services. Many economists expected the number to be negatve.

Bush Signs "Housing" Bill

It's law.

President Bush signed the bill without any fanfare or signing ceremony, in the Oval Office in the early morning hours. He was surrounded by top administration officials, including Treasury Secretary Henry Paulson and Housing Secretary Steve Preston.

The bill contains provisions to fingerprint mortgage brokers, requires that all credit card transactions be forwarded to the IRS, and it raised the national debt ceiling by $800 billion.

Pickens Bails, Says Yang Is A Yahoo

Boone Pickens excoriated Yahoo's management for failing to reach an agreement to sell all or part of the Web portal to Microsoft Corp.

Pickens, who bought 10 million Yahoo shares in May in hopes that an acquisition was imminent, said Monday that he got tired of waiting for a deal and sold his entire holdings at a loss.

"I think that Yahoo management was pathetic," Pickens told The San Francisco Chronicle's editorial board.

Pickens declined to say how much money he lost on his Yahoo investment. A little calculation, though, can result in a rough determination. He bought his shares in early May, likely paying between $25 and $27. Yahoo! is now trading five dollars lower, in the $20 to $22 range. That puts Pickens' loss at around $50 million

The Theatre of the Absurd: SEC Extends Short-Selling Emergency Order

SEC Chairman Chris Cox is on record as saying that none of the 19 stocks contained on the list of stocks singled out for protection against naked short-selling, through an emergency order of the SEC, were actually the victim of naked short sellers. Further, regs against naked short-selling, before the new Chris Cox order, were already on the books.

So what to do with this new order that is redundant and applies to stocks that are not impacted by naked short-sellers? Why extend the absurd order, of course.

The Securities and Exchange Commission voted to extend the temporary rules it put in place to restrict the naked short-selling, that doesn't exist, on the 19 stocks.

The SEC commissioners didn't take additional steps to expand the number of stocks affected by the rules or make them permanent, which some have called for.

The temporary rules were set to expire Tuesday, and the SEC extended the order until Aug. 12.

Tuesday, July 29, 2008

The Obama-Bernanke Meeting

Barack Obama met with Fed Chairman Ben Bernanke, today at the Federal Reserve.

The meeting lasted for 40 minutes.

According to Obama's Senate spokesman Michael Ortiz, "Senator Obama had an informative meeting with Chairman Bernanke at the Federal Reserve about the health of the U.S. economy and the risks of further economic deterioration."

"Senator Obama made clear his respect for the independence of the Federal Reserve System and the special importance of its role during periods of economic uncertainty," Ortiz continued.

Bennigan's, Steak & Ale Close, File for Bankruptcy Protection

National restaurant chains Bennigan's and Steak & Ale have closed their doors and filed for Chapter 7 bankruptcy protection, shuttering more than 300 locations and letting go of thousands of employees.

It is one of the country's largest restaurant bankruptcies and eliminates two sit-down chains that have been part of the casual-dining landscape for decades. The chains will liquidate and aren't likely to re-open.

I Felt It

I am on the West Coast this week, and in Los Angeles, today.

As most of you must know by now, a 5.4 earthquake hit the area just before noon. I was on an outdoor escalator near the Citibank Building in downtown Los Angeles. I was headed across the street via a pedestrian overpass toward the hotel I'm staying at, the Westin Bonaventure.

On the escalator the quake felt like a strong jolt, and the escalator snaked a bit, but it was very brief, perhaps three seconds. I didn't know for sure it was a quake until a minute or two later when I was back at the Bonaventure. In the lobby the televisions were on and remarkably the networks had already broken into regular programming to report the quake.

Guests now in the lobby, who were in their rooms at the time of the quake, said there was considerable swaying of the hotel. For my next meeting, I had to walk through the World Trade Center building, which is next to the Bonaventure. There was more a look of concern on those at the WTC. There were small bits of debris which clearly fell from the ceiling of the WTC. I then headed further up the hill and over to where many of the larger office buildings in LA are, office tenants were out of their buildings. These are 40 and 50 story buildings and the look on the faces of secretaries suggested it was more than a jolt on the top floors. They were clearly in a mild state of shock. One passerby was telling his friend that he was sitting in his chair on the 49th floor and he said the swaying and shaking was so bad that he was sure that if he would have tried to stand up he would have been knocked to the floor.

I overheard one girl tell her friend that she had to walk down the stairs from her 47th floor office. It took her about 7 minutes, she said. And she had to take her high heels off, carry them and walk barefoot. She said her calves were sore.

The most disconcerting part of the entire experience was the public address systems in the buildings. While, I was in the lobby of the Bonaventure, instructions were given, but the poor acoustics made it impossible to understand what the instructions were. The same thing occurred when I left the WTC building and entered the Bank of America building, instructions were being given out at the BofA building, but they were impossible to make out.

If there ever was an emergency where people had to be instructed quickly with emergency instructions, these PA systems would never be able to deliver the message to those in the lobbies.

News reports say the potential for a stronger quake to hit exists for a period of 24 hours after the first one. And, of course, there will be aftershocks--kind of like the mortgage crisis.

Berkshire Hathaway Stock Down 25%

Warren Buffett's Berkshire Hathaway class A shares closed exactly 25 percent below the all-time high set last December.

Today's closing price of $111,900 per share is the lowest for the stock since August 15.

Berkshire is down 21.0 percent in 2008, underperforming the benchmark S&P 500 stock index, which has dropped 15.9 percent this year.

Sen. Stevens of Alaska Faces Criminal Charges

Sen. Ted Stevens from Alaska, the longest serving U.S. Republican senator ever, was indicted today on seven counts of making false statements, according to a federal grand jury indictment.

The U.S. Justice Department has scheduled a news conference for 1:20 p.m.E.T. to make an announcement "regarding a significant criminal matter."

A federal law enforcement official said the news conference would discuss the criminal charges against Stevens.

UPDATE: Stevens was charged on Tuesday with concealing more than $250,000 of gifts, including home renovations, from an Alaska oil services company, the Justice Department said.

The indictment also charged that he received a new vehicle in exchange for an older one worth far less, and household goods such as furniture and a new gas range, the Justice Department said.

S&P: Home Prices Drop By Record 12-Month Decline of 15.8% Through May

Home prices fell by the steepest rate ever in May, according to The Standard & Poor's/Case-Shiller 20-city index.

No city in the Case-Shiller 20-city index saw price gains in May, the second straight month that's happened. The monthly indices have not recorded an overall home price increase in any month since August 2006.

Nine metropolitan cities — Las Vegas, Miami, Phoenix, Los Angeles, San Diego, San Francisco, Seattle, Wash., Portland, Ore., and Washington, D.C. — posted record lows in May.

Las Vegas recorded the worst drop, with prices plunging 28.4 percent over the last 12 months ending May 2008. Miami came in a close second, with prices down 28.3 percent over the last 12 months.

Charlotte, N.C., posted the smallest drop of 0.2 percent ovrr the last 12 months enging in May 2008. Until April, the North Carolina city had been the last metro still showing price gains.

"The Sunbelt led by Miami, Tampa, Phoenix, Las Vegas, San Diego and Los Angeles saw the biggest booms and now see the largest declines. The Northeast, including Boston and New York,is cyclical but less volatile while the Midwest, paced by Detroit and Cleveland face difficult local economies” said David M. Blitzer, Chairman of the Index Committee at Standard & Poor's.

Note: Be careful of the AP numbers being put out which are using a headline that reports a decline in May of 15.8%, without reporting this is for the 12-month period--not a decline of 15.8% for just the month of May.

Obama Meeting With Bernanke, Today

Drudge is reporting thta Barack Obama will be meetng with Fed Chairman Ben Bernanke, today at the Fed.

Monday, July 28, 2008

Financial Bloodbath--Even SEC Protected Stocks

Financial stocks that investors fear may be undercapitalzed took a pounding in trading today.

Wachovia (WB) fell 5.38% to $13.73, Lehman Brothers Holdings (LEH) was down 10% at $15.35, Goldman Sachs (GS) fell 3% to $172.90, Morgan Stanley (MS) was off 4.5% at $35.09, Merill Lynch was off 11.6% at $24.33, JP Morgan Chase (JPM) was off 4.71% at $37.66, Bank of America (BAC) fell 5.14% to $28.06, and Citigroup (C) was off 7.6% at $17.43.

Note: Lehman, Goldman, JP Morgan, Bank of America, Citigroup are all stocks that were on SEC's new anti-naked short selling regs, whch Charmain Cox now admits were not impacted by naked short-selling in the first place. Says Cox,

The SEC’s emergency order is not a response to unbridled naked short selling,which so far has not occurred,[in these 19 stocks], rather it is intended as a preventative step to help restore market confidence at a time when that is sorely needed.

You get it, don't you? It was a preemptive strike, sort of like GW's strike on Iraq to end Saddam's non-existent WMD program.

Obviously, the one thing this financial meltdown is teaching us is that if you want protection, you should go to the Mafia, not Chris Cox.

LATE ANNOUCEMENT: Merrill to Issue $8.5 Billion in New Stock

Merrill Lynch said late today that it plans to issue $8.5 billion in new common stock. Note: Most of the new common stock will be issued for various obligations and thus will show very little in terms of positive cash flow for Merrill. Singapore's state-run Temasek Holdings Pte Ltd TEM.UL,has agreed to buy $3.4 billion of the new shares, Merrill added.

However, in satisfaction of Merrill Lynch’s obligations under the reset provisions contained in the investment agreement with Temasek, Merrill Lynch has agreed to pay Temasek $2.5 billion, 100% of which Temasek has contractually agreed to invest in the offering and is part of the $3.4 billion Temasek investment.

The firm is also forcing conversion of its convertible preferred stock.

$5.4 billion of the $6.6 billion of outstanding mandatory convertible preferred holders have agreed to exchange their outstanding preferred stock for approximately 195 million shares of common stock, plus accrued dividends payable in cash or stock at the option of the holder. A holder of $1.2 billion of outstanding mandatory convertible preferred has agreed to exchange their securities for new mandatory convertible preferred securities with a reference price of $33.00. The reset feature for all securities exchanged has been eliminated.

The firm also said it sold a big chunk of its U.S. super senior asset-backed security collateralized debt obligations, cutting its exposure in this area by $11.1 billion compared to the end of June. Merrill Lynch agreed to sell $30.6 billion gross notional amount of U.S. super senior ABS CDOs to an affiliate of Lone Star Funds for a purchase price of $6.7 billion. At the end of the second quarter of 2008, these CDOs were carried at $11.1 billion, and in connection with this sale Merrill Lynch will record a write-down of $4.4 billion pre-tax in the third quarter of 2008.

Merrill shares fell 5.7% to $22.94 during after-hours trading on Monday.

Add Two More Names to Obama's Economic Mini-Summit

Earlier today, I reported on Barack Obama's economic mini-summit. In addtion to those mentioned in the earlier post, you can add Bush administration veterans former Treasury Secretary Paul O'Neill and former Securities and Exchange Commissioner William Donaldson to the list of attendees.

For my take on O'Neill, read my review of Ron Suskind's biography of O'Neill, The Price of Loyalty, here.

Merrill Lynch Plunges

In late trading, Merrill Lynch stock is down 10.32% to 24.69.

It doesn't appear that there is any obvious news that is behind the drop.

UPDATE: Merrill plans to raise $8.5 billion. Details here.

Columnist Robert Novak Has A Brain Tumor

Columnist Robert Novak said today he has been diagnosed with a brain tumor but says that, “God willing,” he plans to be back at work soon.

Novak said he was diagnosed Sunday with a tumor and will soon begin treatment at Brigham and Women’s Hospital in Boston.

He issued the following statement:

“On Sunday, July 27, I was diagnosed with a brain tumor. I have been admitted to Brigham and Women’s Hospital in Boston, where doctors will soon begin appropriate treatment. “I will be suspending my journalistic work for an indefinite but, God wlling, not too lengthy period."

Paulson: GSE's Now Funding 70% of Residential Mortgages

At a news conference held today to promote "covered bonds" as a method to increase mortgage financing and improve underwriting standards, Treasury Secretary Paulson pointed out that:

The housing government-sponsored enterprises, Fannie Mae, Freddie Mac and the Federal Home Loan Banks, and the Federal Housing Administration are funding more than 70 percent of residential mortgages during these months of market stress.


Covered bonds are debt securities backed by cash flows from mortgages or public sector loans. They are similar in many ways to asset-backed securities created in securitization, but covered bond assets remain on the issuer’s consolidated balance sheet.

Because the assets of covered bonds remain on the balance sheet of the issuer, the issuer has incentive to make sure the assets issued are quality assets, unlike under asset-backed securities where issuers have no further obligation with respect to assets securitized.

Alert: Treasury Secretary Paulson To Hold 2:30 ET Press Conference

Details:

Monday, July 28, 2008, 2:30 p.m. EDT
Secretary Henry M. Paulson, Jr.
Mortgage Finance Press Conference
Treasury Department
Media Room (4121)
1500 Pennsylvania Avenue, NW
Washington, D.C.

Crashng Prices On Chicago Condos Undercuts Trump

ChicagoBusiness reports:

Investors no longer have to pay Trump prices for a piece of Donald Trump's downtown condominium and hotel tower.

At least 34 hotel suites sold by the developer in the past six months are back on the market, some priced at a steep discount to comparable unsold hotel units in the yet-to-be-completed project. They are owned by investors who signed purchase contracts before construction began on the 92-story skyscraper, aiming to flip the units for a profit after closing.

It's a potential problem for Trump International Hotel and Tower, which is having a hard time regaining early sales momentum in a downtown condo market suffering from surging supply and declining demand. Mr. Trump, who relied on early sales contracts with investors to get $770 million in construction loans, now must compete with many of them for buyers: That's tough when prices on some of the resale units are more than 30% below the developer's.

"My clients want to get out, and the only way they can get out is by undercutting the developer," says broker Andrew Glatz, who has listings for 18 hotel units in the building at 401 N. Wabash Ave.

Mr. Glatz has listed a one-bedroom hotel suite on the 25th floor for $1 million, well below the $1.5 million a buyer would pay Trump for a comparable unit.

He's also trying to sell a two-bedroom suite on the 23rd floor for $2.6 million, vs. $3.2 million for a Trump unit.

The 339-unit hotel opened in January, the same time buyers started closing. Unlike a traditional hotel, where one large investor owns the entire building, the Trump project is a condo-hotel, where suites are sold individually to investors. The investors can occupy their condos and have them rented out when they're away.

Bush Administration Official: 2008 Will Set Record Budget Deficit

Andrew Taylor at AP reports:

A senior Bush administration official says the budget deficit for this year will set a record in dollar terms, approaching $490 billion.

The official said Monday the deficit was being driven to record levels by the sagging economy and the stimulus payments being made to 130 million households in an effort to keep the country from falling into a deep recession. A deficit approaching $490 billion would easily surpass the current record deficit of $413 billion set in 2004.

The official spoke on condition of anonymity because the new deficit estimate had not been formally released. Bush administration officials were scheduled to do that at a news conference later Monday.

So Much For Google's New Competitor, Cuil

MyWay reports:

Anna Patterson's last Internet search engine was so impressive that industry leader Google Inc. (GOOG) (GOOG) bought the technology in 2004 to upgrade its own system.

She believes her latest invention is even more valuable - only this time it's not for sale.

Patterson instead intends to upstage Google, which she quit in 2006 to develop a more comprehensive and efficient way to scour the Internet.

The end result is Cuil, pronounced "cool." Backed by $33 million in venture capital, the search engine plans to begin processing requests for the first time Monday...

For starters, Cuil's search index spans 120 billion Web pages.

Patterson believes that's at least three times the size of Google's index, although there is no way to know for certain. Google stopped publicly quantifying its index's breadth nearly three years ago when the catalog spanned 8.2 billion Web pages.


This morning I searched both services for "Economic Policy Journal". At Google, EconomicPolicyJournal.com showed up on the first page. At Cuil, economcpolicyjournal.com was not on the first page, when I clicked for page 2, it took forever to load at least two minutes. Still no economicpolicyjournal.com.

I then searched for the phrase "ron paul credit card transactions", which is currently driving a lot of traffic to our site. Google has 135,000 results, with all on the first page appearing relevant.

This was the Cuil result:

We didn’t find any results for “ron paul credit card transactions”


I would test even more, but now the first page of a search is slow loading, and I just don't have the time.

It appears that what Cuil is really good at is hype. As they would say in Texas, "All hat, and no cattle."

McCain Tests Out Total Economic Stupidity

Economists have pointed out that John McCain's proposed gasoline tax cut would result in a benefit to oil companies as opposed to consumers, since the gasoline price is set by supply and demand, and in the short-term supply is pretty much fixed. Any change in taxes would not change the supply and demand factors, thus not changing the price, but simply result on oil companies keepng a larger percent of gasoline revenues.

In an interview on ABC yesterday, John McCain said he stood by his earlier call for a so-called “gas tax holiday”. Asked how he would prevent oil and gas companies from absorbing the tax break themselves, McCain said Americans would not “let” the companies do do.

Obama's Economic Brain Trust?

Barack Obama plans to meet a panel of advisers today to examine his campaign’s ?economic policies. The gathering will include Warren Buffett, the billionaire ?investor, Eric Schmidt, Google’s chairman, Paul ?Volcker, the former Federal Reserve chairman, and ?both Lawrence Summers and Robert Rubin, the former Treasury secretaries.

Obama told NBC on Sunday that the team would discuss a second potential stimulus package, ways to shore up the housing market, and energy and infrastructure initiatives.

Let's see what comes out if this group. You have Goldman Sachs represented through Robert Rubin. You have the great investor Warren Buffett who turns into an economic idiot whenever he talks about economic policy.

KKR To Go Public

Kohlberg Kravis Roberts is going public through a complicated transaction in which it will merge with KKR Private Equity – its listed unit in Amsterdam – and then take its combined entity to a listing in New York.

The deal, which will raise no new capital, values the buy-out group at a discount to rival Blackstone and far below the $26 billion that KKR had estimated in securities filings last year after it first revealed plans to go public

KKR is now hoping the New York listing will value the company at $15 billon-$19 billion.

Sunday, July 27, 2008

Mortgage Crisis Resulting In Spreading Credit Crisis

Peter Goodman at NYT explains:

Banks struggling to recover from multibillion-dollar losses on real estate are curtailing loans to American businesses, depriving even healthy companies of money for expansion and hiring.

Two vital forms of credit used by companies — commercial and industrial loans from banks, and short-term “commercial paper” not backed by collateral — collectively dropped almost 3 percent over the last year, to $3.27 trillion from $3.36 trillion, according to Federal Reserve data. That is the largest annual decline since the credit tightening that began with the last recession, in 2001.

File This Under Interesting, Very Interesting

Chuck Hagel (R-Nebraska) accompanied Barack Obama on his “fact-finding” trip overseas. Interesting choice. Prior to his election to the U.S. Senate, Hagel worked in the private sector as the President of McCarthy and Company, an investment banking firm based in Omaha, Nebraska and served as Chairman of the Board of American Information Systems, the voting machine company .

American Information System received a major capital infusion from brothers William and Robert Ahmanson. (Prior to the capital infusion, the company was known as Data Mark). California newspapers have long documented the Ahmanson family’s ties to right-wing evangelical Christian and Republican circles.

According to Group Watch, in the 1980s Howard F. Ahmanson, Jr., uncle of Robert and William, was a member of the highly secretive far-Right Council for National Policy, an organization that included Lieutenant Colonel Oliver North, Major General John K. Singlaub and other Iran-Contra scandal notables.

In 1997, American Information Systems, after the purchase of Business Records Corp. (BRC), changed its name again to become ES&S.

The electronic voting industry is dominated by only a few corporations. Diebold and ES&S combined count an estimated 80% of U.S. black box electronic votes. At one point, Bob Urosevich was president of Diebold. His brother Todd was vice president of ES&S.

According to author Bev Harris in her book, Black Box Voting, " . . . one of the founders of the original ES&S (software) system, Bob Urosevich, also oversaw development of the original software now used by Diebold Election Systems."

In 1996, Chuck Hagel ran for the US Senate against Ben Nelson, who was the sitting governor of Nebraska. Although many people believed he had no chance of winning, he won a "stunning upset" in the election, receiving 56% of the vote. In 2002, Hagel overwhelmingly won re-election with over 83% of the vote, the largest margin of victory in any statewide race in Nebraska history

In both the 1996 and 2002 elections, Hagel's ES&S counted an estimated 80% of Hagel's winning votes.

The UK's Times reports:

Senior [Obama] advisers confirmed that Hagel, a highly decorated Vietnam war veteran and one of McCain’s closest friends in the Senate, was considered an ideal candidate for defence secretary[in an Obama Administration].

Obama's First Legislative Move: Taking Money From One Pocket And Putting It In Another

GW type hocus pocus could be Barack Obama's first move if he becomes president.

Depending on actions the current administration and Congress take, Obama told AP a new economic stimulus package may be his first legislative request from lawmakers if he takes office as the 44th president in January.

So here's the biggie question, Barack, if you think a "stimulus package" is such a no cost way to "get the economy going", why don't you give everyone a million dollars?

Answer: A "stimulus package" is not cost free for every dollar paid out, a dollar has to be taxed or borrowed from some other part of the economy. It's hocu pocus stimulus

McCain Calls Wall Street `The Villain'

"Wall Street is the villain in the things that happened in the subprime lending crisis and other areas where investigations and possible prosecution is going on," McCain said during a taped appearance on ABC's This Week program.

Hey John, Have you ever heard of the Federal Reserve? No Fed money pumping, no real estate boom-bust cycle. Wall Street isn't innocent, but compared to the evil that the Federal Reserve deals in, Wall Street looks like Mother Teresa.

Analyst: More Downside Pain for Bank Stocks

Mark Hanson, a mortgage consultant with the Field Check Group, who is used by top hedge-fund clients, is negative on a slew of financial stocks.

Stocks he has recently suggested betting against are Lehman Brothers, Wells Fargo, Wachovia, US Bank, PNC Bank, H&R Block and Assured Guaranty, according to NyPo.

The Current Economy In Perspective

From a very informative column by Robert Samuelson:

As yet, the present economic slowdown does not even approach the harshest post-World War II slump. The back-to-back recessions of 1980 and 1981-82 (as dated by the National Bureau of Economic Research) constituted, for most people, one prolonged downturn. Unemployment peaked at 10.8 percent in late 1982. In 1981 and 1982, housing starts were down almost 50 percent from their 1978 peak. From 1979 to 1982, the economy stagnated; output lurched down, then up and then down. There had been nothing like that since the 1930s...

The paradoxical thing about today's economy is its strength. No kidding. Consider all the hand grenades lobbed at it. Higher oil prices. The housing implosion. Large layoffs in affected industries: autos, airlines, construction, mortgage banking. The "credit squeeze" triggered by losses on "subprime" mortgages. Despite all that, the economy hasn't collapsed. It's merely weakened. Output in the first quarter of 2008 was actually 2.5 percent higher than a year earlier.


As we have written many times, the current downturn is a downturn in the mortgage industry and supporting industries, such as finance. We are not in a full-fledged recession. However, if the Fed continues to implement a near zero growth money supply policy, a recession or even worse, a depression, may be around the corner.

The Soup Stained Symbol of Capitalism

Writes Omid Memarian:

For Ahmadinejad and other Iranian officials, a tie is a symbol of capitalism.

Propoganda From The Bureau of Labor Statistics

LaTi gets to follow around a price checker that helps put together the Consumer Price index. Of course, the manipulation of the CPI Index is not done at the grunt level, it is done higher up the calculation chain. Sometimes, way up the chain. Richard Nixon was responsible for the wacky "Core Inflation" that removes food and energy from the CPI.

The propaganda in the article reaches its peak when it quotes government apologist and former Council of Economic Advisors member, Michael Boskin. LaTi reports:
...economist Michael Boskin said the CPI historically has overstated inflation...

Saturday, July 26, 2008

John McCain's Son Resigns From Board of Nevada Bank

Silver State Bancorp, a Henderson, Nevada-based holding company for the similarly named bank, reported that Andrew McCain, son of Republican presidential candidate John McCain, resigned today from the boards of directors of the bank and bank holding company.

The company cited “personal reasons” for McCain’s resignation, and a Silver State spokesman declined further comment.

Prominent libertarian writer, Douglas E. French, formerly Executive Vice President of Commercial Real Estate Lending at Silver State Bancorp, resigned from the bank for "personal reasons" in May.

Apparently, the personal reasons virus bug has hit Silver State Bancorp big time. Keep an eye out for more news from Silver State to better explain just why this virus is hitting now. From a high of $26 in January 2007, the stock has traded down to a Friday closing of $1.28.

The resignation of French has been controversial. Over at Google Finance one poster writes:

Having noted Mr. French’s “resignation” for “personal reasons” following his sale of Silver State Bancorp shares valued between approximately $15 and $10 in the November, 2007 to February, 2008 period, one has to wonder (as the stock now sits at $2.50): “Wasn’t that unconscionable insider trading?”

Does the company have anything to say on the topic?


Two other posters counter:

Doug French over the past 10 years has made more money for Silver State Bank than the rest of the lending staff combined. Just over 2 years ago this bank was producing an ROE of over 30%. Corey Johnson, the CEO, has been in charge just over 2 years and along with COO Micheal Treet they have totally ruined this bank. Check the RJ records and you can find Johnson smugly telling the RJ two years ago that he
was going to turn Silver State Bank into a "multi-state regional bank holding company" blah blah blah. Soon after Johnson expanded into Arizona, got himself and his minions (with the exception of French) covered under Million dollar golden parachutes, moved the company's executive offices to plush new space at "the District", came out with a botched stock offering, then came out with a botched "stock repurchase", then somewhow managed to be 90 days late reporting the
bank's real estate loan problems when compared to the other banks in the SAME market, and now he's asking the"bagholders" to cough up more money. With a track record like this I can't imagine not giving these guys a big raise!! Oh wait, they also got big raises back in December along with their big bonuses. Guess they had to throw French under the bus, but hey, Johnson and Treet are still knocking back their big salaries for a job well done! Wish I could get a job like that.


and

SOUnds like your familar with this group. Not only did they throw Frenchy under the bus, they backed up to make sure they got him. It's actually insulting to anyone who has been privy to the inner workings goign on at Silver State Bank when the press release states that French resigned. Make no mistake, he was fired !!!!


French received total compensation of $ 652,364 in 2007 and $ 604,287 in 2006. Compensation was a combination of salary, bonuses and incentives.

Filings with the SEC show French initially owned 289,900 shares of Silver State stock. According to the most recent filings, French has sold all but 121,700 of the shares he held for net proceeds in excess of $1,700,000.

Lew Rockwell On Supposed "Bankrupt Banks"

Lew Rockwell, on his blog, provides some odd advice, today. Rockwell under the headline "Bankrupt Banks" writes:

The whole system is shaky because of fractional reserves, of course, but if you have more than $100,000 in Wachovia, WaMu, or Downey, GET IT OUT.


But, why single out these banks, and try to play bank analyst? The prudent thing to do, since FDIC coverage is good for only $100,000 per bank, is to never have more than $100,000 at any one bank.

How "EOM" Makes Your Email More Efficient

Details here.

Senate Approves Sneaky Housing Bill

The Senate voted overwhelmingly this morning for final approval of the huge "housing" bill, that is some 600 pages long. It includes provisions to fingerprint mortgage brokers, requires all credit card transactions of consumers be reported to the IRS, raises the debt ceiling by $800 billion, and who knows what other evil has been snuck into the voluminous legislation?

The President is expected to sign the legislation this coming week.

FDIC Reports Two More Bank Failures

As of June 30, 2008, First National of Nevada, Reno, NV had total assets of $3.4 billion and total deposits of $3.0 billion. First Heritage Bank, Newport Beach, CA had total assets of $254 million and total deposits of $233 million. Both have been taken over by the FDIC

The cost of the transactions to the FDIC is estimated to be $862 million.

Money Supply Watch

Has Bernanke crashed his helicopter? Money supply growth is virtually non-existent. The three month M2NSA money supply measure is showing an annualized growth rate of only 1.2% through the end of June.

We don't expect this slow money growth to continue, but, if it does, we are headed for a Depression.

Ben Bernanke's Hush Money

A must read essay on the current state of the banking system and the economy, by Gary North is here.

Friday, July 25, 2008

Barack, Say What?

From Investor's Business Daily:

Consider [Barack Obama's] claim during a news conference Wednesday in Israel that "just this past week, we passed out of the U.S. Senate Banking Committee, which is my committee, a bill to call for divestment from Iran."

His committee? Obama isn't even a member of the Banking Committee, let alone its chairman. So was it a self-promoting lie or a misstep? Only he knows.

Obama, A Long Time Calculating Politician

From London's The Sun:

Barack attended [his former brother in-law]Ian’s 1996 wedding...and famously ran out of a pub in Wokingham, Berks, during Ian’s stag bash when a raunchy dancer took to the stage.

Businessman Ian said: “We were having a few drinks, then a stripper dressed as a St Trinian’s schoolgirl appeared.

“She was no Miss World and it was the last thing I wanted. As soon as Barack saw what was about to happen he made a hasty retreat.

“He was in politics already and left the pub immediately.”

In 1996, Obama was elected for the first time to public office, when he was elected to the Illinois Senate.

Murphy Explains The Oil Price Spike

For a thorough well reasoned analysis of the current state of the oil market and what caused the oil price spike, check out the prepared remarks of Dr. Robert P. Murphy, made this week in testimony before Congress.

Murphy is an economist at the Institute for Energy Research.

His opening statement to Congress can be read here.

Arnold May Slash Wages of Californa State Employees

Governor Arnold Schwarzenegger just announced that he will sign an Executive Order on Monday slashing the wages of over 200,000 state employees to the bare minimum until legislators send him a budget he can sign.

Reportedly not to California's minimum wage of $8 per hour, but to the federal minimum wage of $6.55.

The plan would allow the state to defer paying about $1 billion a month. Workers would be repaid their lost earnings once a budget was in place.

The deadline for passing a 2008-09 budget was July 1, and without one soon, California may be unable to borrow billions of dollars needed to keep the state solvent.

How Mainstream Media Will Kill A Story

The National Enquirer a couple of nights back caught former-Senator John Edwards, who is reportedly on Barack Obama's short list as a vice-presidential candidate, entering the Beverly Hilton Hotel room of a woman that isn't his wife.

His wife, suffering from cancer, was presumably back at home in North Carolina. The Enquirer story has the definite sound of legitimacy. Check for yourself, here.

So what does the L.A. Times do, they put out an email to their bloggers telling them not to discuss the story.

Slate.com takes over the story from here:

LAT Gags Blogs: In a move that has apparently stirred up some internal discontent, the Los Angeles Times has banned its bloggers , including political bloggers, from mentioning the Edwards/Rielle Hunter story. Even bloggers who want to mention the story in order to make a skeptical we-don't-trust-the-Enquirer point are forbidden from doing so. Kausfiles has obtained a copy of the email Times bloggers received from editor Tony Pierce. [I've excised the recipient list and omitted Pierce's email address]:

From: "Pierce, Tony"

Date: July 24, 2008 10:54:41 AM PDT

To: [XXX]

Subject: john edwards

Hey bloggers,

There has been a little buzz surrounding John Edwards and his alleged affair. Because the only source has been the National Enquirer we have decided not to cover the rumors or salacious speculations. So I am asking you all not to blog about this topic until further notified.

If you have any questions or are ever in need of story ideas that would best fit your blog, please don't hesitate to ask

Keep rockin,

Tony

Alert: Treasury Secretary Paulson Speaks Next Week Thursday

Details:

Thursday, July 31, 2008, 1:00 p.m. EDT
Secretary Henry M. Paulson, Jr.
Remarks on Markets & the Economy
Exchequer Club of Washington
St. Regis Hotel
923 16th Street, NW
Washington, D.C.

McCain's VP Short List

John McCain may name his Vice Presidential running mate before the start of the Olympics, to gain maximum media coverage. This appears to be McCain's short list:

Former Massachusetts governor Mitt Romney

Minnesota Gov. Tim Pawlenty

Louisiana Gov. Bobby Jindal

Former U.S. budget director Rob Portman

Former Pennsylvania governor Tom Ridge.

WaMu Liquidity Increases

CNBC's David Faber has a solid report on the current WaMu situation, here.

Russian Market Falls 5% On Putin Comments

Late Thursday, Prime Minister Vladimir Putin launched a scathing attack on Mechel, the largest supplier of coal for steelmakers in Russia. Heavy trading in New York sent the stock down nearly 40 percent, wiping more than $5 billion off its value.

Putin criticized the company for charging much higher prices for raw materials domestically than it does for its exports. He called for an antitrust investigation into Mechel's activities.

The last time Putin issued such a scathing attack was on the former-Russian oil giant, Yukos. Yukos is no longer in existence, and its assets were swallowed up on the cheap by its Russian competitor and ultimately ended up in the hands of Gazprom. Yukos' chairman, Mikhail Khodorkovsky, is doing hard time in Siberia, on what appear to be trumped up charges.

Banks' Fed Borrowing Rises to Highest Level Ever

Who is in trouble, now?

A Fed report released Thursday said commercial banks averaged $16.4 billion in daily borrowing over the past week.

That was up from $13.9 billion in the previous week, and is at the highest level ever.

The identities of commercial banks and investment houses are not released.

Commercial banks and investment companies now pay 2.25 percent in interest for the loans.

Is The Fed About To Change The Rules For Randal Quarles?

As long time readers of EPJ know, Randal Quarles wants his Carlyle Group to be able to buy into banks stocks without additional supervision. Well, ladida, notice this news from Bloomberg. The Fed is considering changing the rules for private equity, i.e. Randal Quarles. Notice the Fed isn't considering changing the rules for everyone, just private equity.

So here's how the play remains. Henry Paulson continues to scare the s#@*t out of bank shareholders, a few bank lines thrown in for good measure, and Randal Quarles wants to buy into the bank stocks Big Time, just him and his private equity cronies. Get it? You aren't going to be able to play in his sandbox, it has gold in it.

Here's the latest from Bloomberg:

The Federal Reserve, looking to spur investment in lenders hit by credit-market losses, is weighing three measures to ease rules for private-equity funds that buy bank stakes, people with knowledge of the deliberations said.
Notice how the change in rules mentions private equity only.

One proposal would permit buyout firms to use ``silo'' funds walled off from their other investments to buy the stakes without subjecting the rest of their holdings to more federal oversight, said the people, who declined to be named because the talks aren't public. Under another scenario, the Fed would let private equity firms exercise more control of banks they invest in. A third plan would encourage firms to team up on bank deals.


So Henry Paulson is talking about giving the Federal Reserve greater authority so the financial industry can be regulated more intensly by the Fed, and simulataneously the Fed is meeting with Randal Quarles so that there is less regulation of private equity funds that buy into banks. Cute.

Buyout firms are ``hesitant to invest in banks because of the various levels of regulation that would apply to them,'' said Thomas Vartanian, a partner at Fried Frank Harris Shriver & Jacobson LLP in Washington who advises buyout funds and lenders. ``The banks need capital, and private equity has it. Necessity is often the mother of invention.''

So Thomas Vartanian is a new front man for Quarles and private equity. Everything he is quoted as saying, Quarles said privately at a luncheon months ago.

Treasury Secretary Henry Paulson has called on banks and brokerages to raise cash as their losses from the collapse of the mortgage market and the ensuing credit-contraction climb to more than $466 billion. Blackstone Group LP and Carlyle Group, the world's two biggest private-equity firms, discussed the topic when they met with Paulson this month, say people briefed on the talks.


They just started talking about this plan in the heat of the crisis this month? Who makes up these movie scripts? Read my report from the Quarles luncheon again and you will know this play has been in motion for months.

U.S. June Durable Goods Orders Up 0.8%

It continues to be a housing and banking crisis, not a full fledged recession.

Orders for U.S.-made durable goods surged in June, rising 0.8% on stronger demand for primary metals, machinery and electronics, the Commerce Department reported Friday. Excluding the 2.6% decrease in transportation goods, orders rose 2.0%, the sharpest gain since last December.

What happens from here will depend on Federal Reserve monetary policy. If the Fed adopts the stance of double digit money printing, as they did earlier this year, the economy will turn strong and inflation will soar. If the Fed continues on its no growth policy of the last two months, we are headed towards a depression.

Thursday, July 24, 2008

Speculation That Unsecured Creditors Were "Pulling Funds'' From WaMu

WaMu tumbled for a second day in New York trading after Gimme Credit LLC said unsecured creditors were ``pulling funds''.

Mixed reports are coming in from all directions on Washington Mutual.

Gimme Credit analyst Kathleen Shanley cited a decline in federal funds purchased and commercial paper to $75 million from $2 billion at year-end, which Washington Mutual reported this week in its second-quarter results. Securities sold under agreements to repurchase dropped to $214 million from $4.1 billion at the end of 2007, she wrote.

"We won't use the phrase `run on the bank,' but we would be remiss if we did not observe that many creditors have quietly been pulling funds," wrote Shanley. Their actions are ``presenting an increasing funding challenge," she wrote. Gimme Credit is an independent research firm serving corporate bond investors.

WaMu responded by email to Bloomberg, "As we stated publicly months ago, WaMu funds all of its business through its banking operations and does not rely on commercial paper." Note this email response doesn't exactly answer the question of the size of any withdrawals. Should this be filed n the non-denial, denial box?

Chief Executive Officer Kerry Killinger has said the $7 billion cash infusion led by TPG Inc., coupled with plans to save $1 billion annually by trimming the mortgage business, gives WaMu enough money to ride out the U.S. housing crsis.

Meanwhile, credit-default swap rates are soaring on WaMu debt. Credit-default swap sellers demanded 14 percentage points upfront and 5 percentage points a year to protect WaMu bonds from default for five years, up from 7.3 percentage points a year yesterday, according to CMA Datavision.

Analysts at Piper Jaffray, Merrill Lynch and Friedman Billings Ramsey Group Inc. said after WaMu's earnings report that it may need to raise more cash. According to a clause in the TPG agreement, if WaMu raises more than $500 million in equity at less than $8.75 a share within 18 months, it must compensate TPG for the difference.

Standard & Poor's said WaMu has the liquidity to meet obligations without raising more funds through 2012. Analysts at Lehman Brothers Holdings Inc. and UBS AG also said the company should have enough capital.

CFTC Gets In The Act...

... with a "show trial," um, "show enforcement action". The CFTC has charged a Netherlands-based trading firm with manipulating the muti-billion dollar oil markets. These guys were so good at it that the CFTC says they actually made a million dollars.

Manipulating a billon dollar market and making just one million dollars, oh yeah.

Here are the details on this goofy charge:

CFTC has charged Optiver, a Netherlands-based global proprietary trading fund, two of its subsidiaries and three employees, with manipulation and attempted manipulation of crude oil, heating oil and gasoline futures contracts listed on the New York Mercantile Exchange in March 2007.

The regulator has filed the civil enforcement action in the U.S. District Court for the Southern District of New York against Optiver Holding BV and two subsidiaries -- Optiver US, LLC, a Chicago-based corporation, and Optiver VOF, a Dutch company.


The complaint also named defendants Christopher Dowson, head trader of Optiver; Randal Meijer, head of trading and supervisor of Optiver and Optiver VOF; and Bastiaan van Kempen, chief executive officer of Optiver.

The complaint charged all defendants with 19 separate instances of attempted manipulation involving the energy futures contracts on 11 days in March 2007.


In at least five of those 19 attempts, the defendants successfully manipulated certain energy futures contracts, causing artificial prices, CFTC alleged.

"Although this alleged energy trading scheme lasted only several days in March 2007, even short-term distortions of prices will not be tolerated by the Commission," said CFTC Acting Chairman Walt Lukken.

The defendants used a scheme known as "banging" or "marking" the close, which refers to the practice of acquiring a substantial position leading up to the closing period, followed by offsetting the position before the end of the close of trading in an attempt to manipulate prices, according to the CFTC complaint.

On March 19, 2007, van Kempen told an Optiver trader: "You should milk it for right now because you never know how long it's going to last," according to CFTC.

In a separate conversation, Dowson said that with 1,000 gasoline contracts, one could "really bully" the market. Meijer added that "you can bully around more with more."

The complaint also charged Optiver and van Kempen with concealing the scheme and making false statements in response to an inquiry from the Nymex.


Here's where it really gets good:

Acting Enforcement Director Stephen Jay Obie said at a news conference on Thursday that "these [Optiver's] manipulations had an impact on the market. At this point, we're not in a position to quantify the impact on the market."

"This is not a politically motivated case," Obie said. "What we're going after are manipulators of our markets. We pursue all manipulators."


Not sure of the impact? Let me put it this way, it had about as much impact as this CFTC enforcement action will have on the price of oil: None.

Not political? Obie held a press conference for this goofy charge!

If I had a dime for every trader who tried to close his stock, commodity, whatever, up on the day, I would be an American Oligarch before Randal Quarles.

Actually, van Kempen on tape pretty much says they are just taking advantage of a very strong market that won't last: "You should milk it for right now because you never know how long it's going to last."

No manipulation here. These dudes were just surfing the Federal Reserve money printing, inflation creating, Big Wave. Case dismissed!

From Barack Obama's Speech in Berlin

"As we speak, cars in Boston and factories in Beijing are melting the ice caps..."

"...America cannot turn inward...No one welcomes war. I recognize the enormous difficulties in Afghanistan. But my country and yours have a stake in seeing that NATO's first mission beyond Europe's borders is a success...My country must stand with yours and with Europe in sending a direct message to Iran..."

"This is the moment when we must build on the wealth that open markets have created, and share its benefits more equitably."

There you have it, words from a member in good standing of the Greenie-Industrial Complex,the War Party and the Egalitarians.

Actually, it sounds like the man is a two war president. Escalating in Afghanistan and taking on Iran. Oh, he'll get us out of Iraq alright.

Ron Paul: Housing Rescue Bill Has Provison That Will Require All Credit Card Transactions Be Reported To The IRS

Texas Congressman Ron Paul, in a 7 minute video message, has spilled the beans on the so called "Housing Rescue" bill just passed by the House, and soon to be passed by the Senate.

The bill is some 600 pages long. Sneaked into the bill is a provison that will require that all credit card transactions be reported to the IRS.

Further, the bill gives approval to increase the national debt ceiling by $800 billion. It also requires that those in the mortgage industry be fingerprinted.

With 600 pages, who knows what else was sneaked into this bill? With 600 pages of legalese, you can sneak in a lot. Once the report is in its final form, we are going to attempt to read it, and file a complete report. Check back.

Here's Ron Paul:

Home Sales Hit 10-Year Low, Almost A Year's Worth of Supply Now Exists

Sales of existing homes hit a new 10-year low in June.

The National Association of Realtors reported that sales dropped by 2.6 percent last month to a seasonally adjusted annual rate of 4.86 million units.

The decline left sales 15.5 percent below where they were a year ago.

The downward slide in sales depressed prices, too. The median price for a home sold in June dropped to $215,100, down by 6.1 percent from a year ago. That was the fifth largest year-over-year price drop on record.

The drop in sales pushed inventories of unsold single-family homes and condominiums to 4.49 million units, up by 0.2 percent.

That represented a 11.1 month supply at the June sales pace, the second highest level in the past 24 years.

Spitzer's Hooker Up To Her Old, Uh, Tricks?



Ex-Gov Eliot Spitzer may end up in the slammer, but what must be klling him right now is that he can't get any more of this action.

NyPo reports on Ashley "Kristen" Dupre so you can decide for yourself what she is up to, here.

Sheila Bair Is A Bit Concerned, So Am I

The San Francisco Times reports:

The federal agency insuring bank deposits learned that it can't afford to ignore the blogs following its seizure this month of IndyMac Bank, the largest bank failure since the 1980s.

"The blogs were a bit out of control," Sheila Bair, chairman of the Federal Deposit Insurance Corp., told the San Francisco Business Times after a speech in San Francisco this week.

That's putting it mildly. Following the FDIC's takeover of IndyMac on July 11, widely followed blogs were speculating on bank runs on some of California's largest banks based on nothing more than people waiting for their branch to open or large deposits moving between financial institutions.

The FDIC plans to pay closer attention to the blogosphere in the future.

"We're very mindful of the media coverage and blogs in controlling misinformation. All I can say is were going to continue to stay on top of it," Bair said. "The misinformation that came out over the weekend fed a lot of depositors' fears."


"Pay closer attenton," that doesn't sound promising. Sounds like they would like to regulate bloggers if they could.

My bit of concern is that government thinks it is God, is all knowing and gets everything right. Thus, as far as the government is concerned, they would lke to watch everything and control everything.

Of course, in truth, they are only human, obnoxious controlling humans, but just humans. They will bring us such debacles as the FDIC's embarrassing management of Superior Bank and the crème de la crème of bad forecasting, the New York Federal Reserve economists Jonathan McCarthy and Richard W. Peach 2004 analysis that we were then not in a housing bubble.

All government regulators do is regulate out options. It's their way or the highway. Thus when mistakes happen they are super jumo in size, because alternatives are regulated out of existence.

Half-Baked Baker

Dean Baker , whose shtick is bashing the media for poor economic analysis, over at his blog, Beat The Press, has apparently made a doozie of an error, himself.

Over two posts and an additional comment, Baker is either guilty of poor writing, or poor writing and not understanding what the Treasury is attempting to do in the Fannie Mae/ Freddie Mac rescue.

In a post yesterday, Baker wrote:


There is a clear rationale for making good on Fannie and Freddie's bonds... .

But what interest does the public have in protecting the share prices of Fannie and Freddie stock? Don't stockholders understand they take a risk when they buy stock? In this case, the stockholders made a bad investment. They are supposed to lose their money (possibly all of it), right?

I have yet to hear any explanation from anyone as to why the government is supporting the share price...

NPR's "Power Breakfast" did an unbelievably awful segment in which it commented that some conservatives oppose bailing out shareholders as "socialism." What? Huh? Is this Planet Earth? Socialism is about giving tax dollars to shareholders? In which volume of Das Kapital does this appear? Conservatives may oppose the bailout for whatever reason, but handing tax dollars to shareholders does not correspond to any definition of socialism I've ever seen.


I replied to this in the comment section:


I have not seen anywhere a government proposal to give money to shareholders. The Treasury has suggested it may have to buy newly issued stock of Fannie and Freddie to keep them alive, but that is far different than buying shareholder stock.

Paulson was clear on this, here.

Since, socialism refers to various economic and political concepts of government whereby ownership and administration of property and the means of production are controlled by the state, the Treasury buying shares (ownership) and influencing the operations (administration) of Frannie and Freddie, sounds to me like NPR nailed the socialism call..


Late yesterday, Baker posted again with more sloppy writing and confusion:

Yes, Virginia, Henry Paulson is Bailing Out Fannie and Freddie Shareholders


The Treasury is telling the markets that it is prepared to buy shares if the stock of Freddie and Fannie fall below a certain level. Without this commitment, short sellers would see these two bankrupt giants sitting there with positive valuations and push their price very close to zero.



This is as much a bailout as if Treasury just sent a multi-billion dollar check to be
divided among the shareholders. This is exactly the sort of nonsense that Treasury invents so that it can do a bailout without owning up to it. Reporters are supposed to catch this sort of deception and inform the public of what is really going on. Paulson is betting that the U.S. press corps is sufficiently incompetent that the public will not realize that they are being taxed to reduce the losses of Fannie and Freddie shareholders.

--Dean Baker



I have not seen, anywhere where Paulson says he wants to bailout shareholders. In fact, Paulson will bailout debt holders, but if it comes to a rescue at the shareholder level where the Treasury comes in to buy newly issued Freddie or Fannie stock, current shareholders will be diluted down to pennies in value, for all practical purposes they will be wiped out. Baker just doesn't seem to get this. It really indicates an alarming lack of understanding of basic finance.

Further, this particular part of his post :


The Treasury is telling the markets that it is prepared to buy shares if the stock of Freddie and Fannie fall below a certain level
is just total nonsense. Treasury has never ever said they would step in to buy stock if the share price of Freddie or Fannie drop to a certain level.

At best, in the following ,we can possibly say that only the sloppy writing comes in, when Baker states the Treasury "...is prepared to buy shares if the stock of Freddie and Fannie fall below a certain level..." He does not state at all that the Treasury is only going to buy newly issued shares from the Treasury. I wonder if he really understands this? His writing can clearly lead to the impression that the Treasury may well go into the open market to buy stock, which is completely not the case.

Anyone reading Baker's posts, and buying Fannie or Freddie stock based on Baker analysis that the Treasury is bailing out shareholders could very well get baked big time.

Big Mother Out of Control

A proposal that would place at least a one-year moratorium on new fast-food restaurants in a broad swath of neighborhoods, mostly in South Los Angeles, won unanimous support from a Los Angeles City Council committee Tuesday.

If approved by the full council and signed by the mayor, the law would prevent fast-food chains from opening new restaurants in a 32-square-mile area.

The measure, proposed by Chief Southern LA Mama, Councilwoman Jan Perry, whose 9th District includes much of South Los Angeles, defines a fast-food restaurant as "any establishment which dispenses food for consumption on or off the premises, and which has the following characteristics: a limited menu, items prepared in advance or prepared or heated quickly, no table orders and food served in disposable wrapping or containers."

New York Times to Raise Newsstand Price to $1.50

The New York Times Co. will increase the Monday-Saturday newsstand cost of its paper by 25 cents to $1.50.

The move comes a week after The Wall Street Journal said it would boost its newsstand price by 50 cents to $2 starting July 28 to reflect both new content and higher costs.

Ford Posts $8.7 Billion Loss on Write-Downs

The Ford Motor Company reported today that it lost $8.7 billion in the second quarter as it wrote-off $8 billion in assets and as sales of its most profitable vehicles plunged.

The loss, equal to $3.88 a share, included write-downs of $5.3 billion on Ford’s North America assets and $2.1 billion on the lease portfolio of the Ford Motor Credit Company.

The company lost $1 billion from continuing operations, with $600 million of that amount attributable to North America.

“While we have no intention of giving up our longtime truck leadership, we are creating a new Ford in North America on a foundation of small, fuel-efficient cars and crossovers,” Mark Fields, the president of Ford’s Americas division, said in a statement.

Ford said it would retool a sport-utility vehicle factory in Michigan and begin making compact cars there in 2010. An S.U.V. plant in Kentucky will start building small cars in 2011. The company has already announced plans to build a new subcompact car, the Fiesta, at a former truck factory in Mexico.

A plant in St. Paul, Minn., that was scheduled to close next year will stay open through 2011 to continue building the Ford Ranger, a compact

Wednesday, July 23, 2008

Boston Private Announces $75 Million Investment by The Carlyle Group

Randal Quarles finds a financial services company he likes.

"In these challenging economic times, we have looked at many investment opportunities in the financial services sector and have seen few that we have found as attractive. We are attracted to Boston Private's strong history of growth and their diversified business structure that derives revenues not only from the private banking business but from strong fee-based businesses," said Quarles as part the announcement that Carlyle will invest $75 million in Boston Private Financial Holdings, Inc. (NASDAQ: BPFH).

Carlyle will purchase two series of non-voting preferred stock, one of which is mandatorily convertible into common stock and one of which is convertible only if Boston Private shareholders approve the conversion. The shares of mandatorily convertible preferred stock will, on an as-converted basis, represent 9.99% of the pro-forma outstanding common shares (including the shares issued in Boston Privates public offering and the shares issuable on conversion of the mandatorily convertible preferred stock). The mandatorily convertible preferred stock will convert automatically following a shareholders' meeting we expect to hold later this year at an initial conversion price of $5.52 per share. The conversion price was based on the average closing price of Boston Private common stock during the week of July 7, 2008.

The contingent convertible preferred stock will, on an as-converted basis, when combined with the mandatorily convertible preferred stock, represent approximately 19% of Boston Private's pro-forma common shares outstanding. The conversion price of the contingent preferred stock will also be $5.52 per share.

Both series of preferred stock initially will be entitled to receive dividends payable on Boston Private's common stock on an as-converted basis. If Boston Private does not hold a shareholders' meeting prior to the record date for Boston Private's 4th quarter dividend period, the mandatorily convertible preferred stock will carry a fixed dividend of 20% (accruing from September 30, 2008) until a meeting is held. If Boston Private shareholders do not approve the conversion of the contingent preferred stock prior to the record date for our 4th quarter dividend period, the contingent preferred stock will carry a fixed dividend initially of 14% (accruing from September 30, 2008), increasing to 15.5% and ultimately to 20% in the following two six-month periods if our shareholders do not approve the conversion at a subsequent meeting.

For every five shares of common stock issuable upon conversion of its preferred stock, Carlyle will receive warrants to purchase two shares of Boston Private's common stock during the next five years at a price of $6.62 per share (20% over Carlyle's initial common stock purchase price). As a result, Carlyle's economic interest in Boston Private, assuming conversion of all of its preferred stock and exercise of all of its warrants, would be 24.99%.

"The terms of Carlyle's investment with Boston Private closely aligns its interests with those of our current shareholders, without the various forms of special downside protection seen in many other private equity investments in this sector. Their willingness to partner with us and make this type of investment in Boston Private is a gratifying validation that our business model is positively differentiated from our competitors," said Timothy Vaill, Chairman and CEO of Boston Private.

So Much For Speculators Driving Up Oil Prices

SemGroup, the US physical oil trader, on Tuesday filed for bankruptcy as it acknowledged trading losses of more than $3.2bn in different energy markets after betting this year that crude oil prices would fall.

It took a $2.4 billion loss on July 16 after it transferred its New York Mercantile Exchange oil futures trading account to Barclays Plc, converting what they called "loss contingencies" into an actual loss. Included in the NYMEX loss was $290 million owed to SemGroup by a trading company owned by co-founder and former chief executive Thomas Kivisto, who was placed on administrative leave on July 17.

It also also took $850 million in losses on July 17 when its over-the-counter hedging program was marked to market. It listed liabilities of $7.53 billion in its bankruptcy filing, including $3.1 billion of total debt $2 billion of secured debt and $594 million in unsecured notes.

SemGroup was ranked the No. 12 private U.S. company by Forbes.com in a 2007 article.

Cubs Fan Steve Bartman Offered $25K If He Signs Just One Autograph

Steve Bartman, for those not familiar with Cubs history, is the fan who reached out for a foul ball during the eighth inning of Game 6 of the 2003 NLCS, a ball that could have been caught for an out by left fielder Moises Alou. Bartman, instead, deflected the ball by reaching out. The Cubs then choked and blew a 3-0 lead, lost the game and their chances at going to the World Series vanished with a Game 7 loss to the Florida Marlins.

To collect the cash, all Bartman has to do is show up at the Donald E. Stephens Convention Center in Rosemont, Ill., at 1 p.m. on July 31, prove his identity and sign a photograph of the infamous play. It will then be auctioned on the Web site with the proceeds going to a Chicago-based charity, according to a news release for the event.

"No one in sports memorabilia history has ever been paid $25,000 to sign one autograph — not Michael Jordan, Muhammad Ali, Joe DiMaggio, Babe Ruth, Lou Gehrig, or any other athlete,” said Mike Berkus, co-Executive Director of The National. "Steve Bartman has been a recluse for years, but we’re hopeful that he will accept our invitation and generous offer to appear ... We have personal security to provide to Steve at The National and to a destination of his choosing.”

Big League Stew writes:

It's an ingenious marketing plan, really, because I'm sure the organizers know they're dealing with probably the only man on Earth who wouldn't simply sign his name and then collect $25K. In the almost five years since his name became synonymous with the Billy Goat curse, Bartman has turned down every single interview request that has come his way and no doubt also said no to numerous book-TV-movie deals that were worth much, much more than what a bunch of baseball card dealers are offering here.

What's worth noting, though, is just how much attention just the mention of Bartman's name in a press release can draw.

Ed Yardeni Has Some Questions for the SEC

In his "Morning Briefing" economist Ed Yardeni had some questions for the Securities & Exchange Commission:

I have a few questions for the S.E.C. When you folks announced last Tuesday that naked short-selling would be banned under a 30-day emergency order, why was it limited to only 19 financial stocks? How did you pick those 19? What is so special about them? Why do they include 11 foreign-based companies? Isn’t it a bit ironic that you exempted market makers from the ban since many of the 19 are market makers and engage in short selling?

Housing Short-Seller Will Start To Buy Bank Stocks

Randal Quarles has competition.

John Paulson, the money manager whose short-sales against the U.S. housing market helped him earn an estimated $3.7 billion last year, is now seeking to profit from Wall Street's search for capital to offset mortgage writedowns, according to Bloomberg.

Paulson plans to open a hedge fund by December that will provide capital to the world's biggest banks and brokers, according to two people with knowledge of the matter. His firm has hired employees this year to research securities firms such as Citigroup Inc. for long-term investment positions.

The New York-based firm's credit funds rose as much as sixfold last year, in large part as a result of shorting subprime home loan securities.