Thursday, November 13, 2008

CRASH TALK NOV 13

Barney Frank is writing a bill that would give the auto industry $25 billion in loans but would include an equity position for the federal government, something missing from the other proposals. He might want to add a provision that the auto industry must provide the EPA with a complete list and details of every patent it has bought over the decades and not used. Buried in these may be some amazing ideas for running more efficient cars that the big three didn't want out in public.

Amit R. Paley, Washington Post -
No formal action has been taken to fill the independent oversight posts established by Congress when it approved the bailout to prevent corruption and government waste. Nor has the first monitoring report required by lawmakers been completed, though the initial deadline has passed.

"It's a mess," said Eric M. Thorson, the Treasury Department's inspector general, who has been working to oversee the bailout program until the newly created position of special inspector general is filled. "I don't think anyone understands right now how we're going to do proper oversight of this thing."

In approving the rescue package, lawmakers trumpeted provisions in the legislation that established layers of independent scrutiny, including a special inspector general to be nominated by the White House and a congressional oversight panel to be named by lawmakers themselves. . .

CNN - Another 84,868 homes were lost to foreclosure in October. . . a total of 936,439 homes have been lost to foreclosure since the housing crisis hit in August, 2007. Foreclosures hit a record high in August when 304,000 homes were in default and 91,000 families lost their houses. Since then, a number of states have adopted legislation to freeze foreclosures and give homeowners a chance to modify their mortgages. These laws have helped slowed the rate of foreclosures.
"The really sobering reality for us is that despite these various state programs that are artificially keeping the numbers down, we are still up 25% from a year ago," said Rick Sharga, senior vice president of RealtyTrac.

Robert Reich -
Why, exactly, is the Treasury substituting government bailouts for chapter 11? Even if you assume Wall Street's major banks and insurance giant AIG are so important to the national and global economy that they can't be allowed to fail, that doesn't mean they have to be bailed out. They could be reorganized under bankruptcy protection. True, their creditors, shareholders, and executives would take bigger hits than they're taking now that taxpayers are bailing them out. But they're the ones who took the risk. We didn't.

The Treasury seems to have lost sight of its real client. It's client is not the creditors, shareholders, or executives of any of these firms. Its sole client is the American people.

It would be different if Main Street was getting something out of all this. But credit still isn't flowing to small businesses or distressed homeowners, and unemployment is skyrocketing.

There's more at stake for Main Street when it comes to General Motors and other automakers now teetering on the edge of bankruptcy, because two and a half million households depend directly or indirectly on them for their paychecks. But the best way to protect all these people is not to pay off the automakers' creditors, shareholders, and executives, with no strings attached. Recall that when the government bailed out Chrysler in the early 1980s, a third of its employees lost their jobs.

In exchange for government aid, the Big Three's creditors, shareholders, and executives should be required to accept losses as large as they'd endure under chapter 11, and the UAW should agree to some across-the-board wage and benefit cuts. The resulting savings, combined with the bailout, should be enough to allow the Big Three to shift production to more fuel efficient cars while keeping almost all its current workforce employed. Ideally, major parts suppliers would adhere to the same conditions. . .

It's not the big guys who need rescuing. It's the small. Right now, the government has its priorities upside down.

Ashley Powers, Los Angeles Times, Wells, NV
- The women at Donna's Ranch are crowded around the kitchen table on a warm summer night, dining on stir fry, tugging at thigh-high dresses, griping about depleted bank accounts. At this northeastern Nevada bordello, which marks a gravel road's end, they woo grizzled truckers and weary travelers for a single reason: money.

Amy, 58, once bought a $32,000 Toyota Tacoma in cash; now her $1,200 mortgage saps her dwindling pay. Some weeks, she could make more flipping burgers than flirting under a made-up name. Marisol's daughters think she works at a resort; she struggles to keep up the ruse. It now takes months, not weeks, to bring $5,000 back to Southern California. "Marisol," one of her regulars tells her, "it costs me in gas what it takes for me to spend a half-hour with you."

Signs of the economic free fall have cropped up in many of Nevada's 25 or so legal brothels. The Mustang Ranch, for example, has a steady stream of customers, but the number of women vying for work has soared. Even a 74-year-old applied. This summer, the Shady Lady gave $50 gas cards to those who spent $300. The Moonlite Bunny Ranch offered extras to customers paying with their economic stimulus checks.

At least we'll look better - CROX late Wednesday reported a third-quarter loss of $148 million, or $1.79 a share, battered by inventory write downs on its colorful sandals and restructuring charges to rejuvenate its once high-flying business. Sales fell 32% to $174 million. In the year-earlier period, Crocs earned $57 million, or 66 cents a share. Crocs warned more losses are coming as it downsizes. It expects to lose between 50 cents and 65 cents in the fourth quarter on sale of up to $120 million. Shares of Crocs closed ahead of the report at $1.90. - Market Watch


Boston Globe -
A bruised and battered economy is threatening the livelihood of local lobstermen. . . The men and women who trap the shellfish for a living say the price drop is catastrophic for their business. "We are hoping that the processors come back and start buying product again, which is really the reason the price is so low," Massachusetts Lobstermen's Association President Bernie Feeney said. "It's adding up, and this is the time of year we make money to make up for the spring work. We came down and worked on gear all day, and we didn't make anything.". . . "Go right on down to your local harbor and knock on the back of a boat and say, 'I'd like to buy some lobsters.' This is the time to buy them. A 1 pound lobster off the back of a vessel is cheaper than an ice cream cone," Feeney said.

Forbes -
According to Credit Sights, a research firm in New York and London, the U.S. government has put itself on the hook for some $5 trillion, so far, in an attempt to arrest a collapse of the financial system. The estimate includes many of the various solutions cooked up by Paulson and his counterparts Ben Bernanke at the Federal Reserve and Sheila Bair at the Federal Deposit Insurance Corp., as the credit crisis continues to plague banks and the broader markets.

The Fed has taken on much of that total, including lending a cumulative $1 trillion in overnight or short-term loans since March to primary dealers through its emergency discount window and making a cumulative $1.8 trillion available through its term auction facility, a series of short-term transactions it began making available twice a month in January. It should be noted that a portion of the funds lent in these programs has been repaid and that the totals represent what has been made available.

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