WCI Communities files for bankruptcy
August 4, 2008 - 11:43am ADRIAN SAINZ AP
Business Writer MIAMI (AP) - Carl Icahn's WCI Communities became the latest casualty of the housing market crisis Monday, filing for Chapter 11 bankruptcy protection after the home builder failed to get additional financing in the face of massive losses. Icahn, chairman of WCI's board, said the filing was necessary because the Bonita Springs, Fla.-based developer's entire $1.8 billion debt may soon be in default. Icahn said this was confirmed when some holders of $125 million convertible notes insisted on being paid in cash in full on Tuesday. WCI also dismissed Chief Executive Jerry L. Starkey and replaced him on an interim basis with David L. Fry. "We need to restructure our debt and bring our capital structure in line with today's marketplace realities. We believe Chapter 11 provides the most efficient and timely process for accomplishing this," Fry said. Day-to-day operations, including selling, building and delivering homes, will continue, and employees will still come to work be paid, the company said. WCI and about 130 of its subsidiaries filed petitions to restructure their debt and capital. Companies that file for protection under Chapter 11 of the U.S. Bankruptcy Code seek a court order to prevent creditors from immediately seizing the company's assets. WCI Communities builds retirement homes and "lifestyle communities" in Florida, mostly for retirees and wealthy vacationers from the New York and the Washington, D.C. areas. WCI already had received multiple loan extensions from two banks _ Bank of America Corp. and KeyCorp's Keybank _ as it sought flexibility to pay the interest on its debt. The banks agreed in January to new terms on WCI loans and credit that were set to expire next June. Icahn was named chairman last September after he attempted to take over the board and force the sale of the company. He said he viewed WCI as "a unique vehicle to take advantage of the current market disarray." The company said Monday it agreed with its principal lenders on terms for access to over $50 million of cash to continue operating on an interim basis. A motion for approval has been filed with the bankruptcy court, the company said. Also, WCI is negotiating a lender proposal for another $100 million in cash. Shares of WCI fell 60 cents, or 48 percent, to 66 cents in morning trading.
http://wtop.com/?nid=111&sid=1453438
HSBC reports 1H fall in profit
August 4, 2008 - 7:24am By EMILY FLYNN VENCAT AP Business Writer LONDON (AP) - HSBC Holdings PLC, Europe's largest bank by market value, reported Monday its steepest fall in profit since 2001 as costs for bad U.S. mortgage loans mounted. Net profit for the first half of the year plunged 29 percent to $7.7 billion from $10.9 billion in profit in the January to June period of last year. "The first half of 2008 saw the most difficult financial markets for several decades, marked by significant declines in profitability throughout much of our industry," said HSBC Chairman Stephen Green. "HSBC was not immune from the turmoil." The biggest losses came from the North American market, which HSBC depends on for a quarter of its revenue. Operations there posted a first-half loss of $2.9 billion, compared with profit of $2.4 billion a year ago. Part of the blame lies with Illinois-based Household International Inc., a lender HSBC purchased in 2003 that elevated the British bank to the unenviable position of biggest U.S. subprime mortgage lender. Still, HSBC has weathered the global financial storm with better than some others. In May, the bank reported that first-quarter 2008 profit was actually better than the same period last year, despite a $3.2 billion write-down on subprime mortgage assets in the United States. Today's half-year results compare favorably with what other British banks are expected to report later this week in their own half-year earnings results. On Friday, analysts are expecting the Royal Bank of Scotland to report the largest loss in British banking history _ of between 1 and 1.5 billion pounds ($2 billion to $3 billion). HSBC owes its relatively good performance to two things: its ample capital base, which means the cost of funding operations hasn't shot up in the midst of the credit crunch as it has at other British banks such as Alliance & Leicester PLC; and its strong and growing position in the quickly growing emerging markets of Asia, where HSBC rakes in over 50 percent of its pretax profit. Operations in the Asia-Pacific region, excluding Hong Kong, reported a pretax profit of $3.6 billion, up 8 percent on the $3.3 billion the company made in the first half of 2007. One of the positive signs in the earnings report was "the continuing strength in the retail businesses in the developing markets," HSBC's finance director, Douglas Flint, said in a conference call Monday morning. HSBC's aggressive expansion into emerging markets is ongoing: the bank has opened 63 new branches across Asia in the last six months. Right now, the company is primed to become a major player in the quickly emerging economy of South Korea through the purchase of a controlling 51 percent share of the country's sixth-largest bank, Korea Exchange Bank, from the U.S. private equity firm Lone Star Funds. Although the deal hit a substantial road bump last Thursday, when the deadline for its completion passed without gaining the necessary approval from South Korean regulators, the fact that it's been put on ice could prove to be a financial boon to HSBC. Asian financial stocks have fallen by 18 percent since September, when the $6 billion deal was first agreed upon, and so HSBC could use the deadline's end to renegotiate a lower price for the Korean bank, which would give HSBC more than 7.7 million customers and 345 branches in Asia's fourth-biggest economy. HSBC confirmed that negotiations with Lone Star were ongoing in a regulatory announcement released Sunday, which said the two companies were "discussing how this transaction may be taken forward." It said last week that it still believed in the long-term prospects for Korea and wished to play a major part in the country's further development. HSBC shares fell 1.9 percent to 821 pence ($16.16) on the London Stock Exchange in Monday morning trading. http://wtop.com/?nid=111&sid=1453313
Small Florida bank is 8th U.S. failure this year Friday
August 1, 9:51 pm ET WASHINGTON (Reuters) - Bank regulators closed a small Florida-based bank on Friday, the eighth U.S. bank to fail this year under pressure from a weak economy and a credit crisis precipitated by falling home prices. The Federal Deposit Insurance Corp said First Priority Bank had $259 million in assets and $227 million in deposits and its failure will cost the federal fund that insures deposits an estimated $72 million. SunTrust Banks Inc (NYSE:STI - News) has agreed to assume the insured deposits of First Priority, whose six branches will reopen Monday as branches of SunTrust Bank. Customers can access their money over the weekend by check, teller machine or debit card, the FDIC said. It is the first bank to fail in Florida since Guaranty National Bank of Tallahassee failed in March 2004, according to the FDIC, which blamed the failure on exposure to the real estate market, predominantly in the construction lending area. Florida is among several states whose housing markets have seen the sharpest declines. The biggest bank failure by far this year is IndyMac (Other OTC:IDMC.PK - News), seized on July 11 with $32 billion in assets and $19 billion in deposits as of March, and the third-largest bank insolvency in U.S. history. The FDIC oversees an industry-funded reserve used to insure up to $100,000 per account and $250,000 per individual retirement account at insured banks. The agency also has running tally of problem banks that its examiners closely monitor. At the end of first quarter, 90 institutions were on that list. The FDIC does not name the institutions on the list, which is expected to be updated this month for the second quarter. (Reporting by John Poirier; Editing by Tim Dobbyn) http://biz.yahoo.com/rb/080801/firstpriority_fdic.html?.v=3
Gun-control groups fear top activist was NRA spy
PHILADELPHIA — A gun-control activist who championed the cause for more than a decade and served on the boards of two anti-violence groups is suspected of working as a paid spy for the National Rifle Association, and now those organizations are expelling her and sweeping their offices for bugs.The suggestion that Mary Lou McFate was a double agent is contained in a deposition filed as part of a contract dispute involving a security firm. The muckraking magazine Mother Jones, in a story last week, was the first to report on McFate's alleged dual identity.
The NRA refused to comment to the magazine and did not respond to calls Tuesday from The Associated Press. Nor did McFate.
The 62-year-old former flight attendant and sex counselor from Sarasota, Fla., is not new to the world of informants.
She infiltrated an animal-rights group in the late 1980s at the request of U.S. Surgical, and befriended an activist who was later convicted in a pipe bomb attack against the medical-supply business, U.S. Surgical acknowledged in news reports at the time. U.S. Surgical had come under fire for using dogs for research and training.
McFate resurfaced in Pennsylvania and has since spent years as an unpaid board member of CeaseFirePA and an organization called States United to Prevent Gun Violence. She also twice pushed unsuccessfully to join the board of the nation's largest gun-control group, the Brady Campaign to Prevent Gun Violence.
"It raises some real concerns with the tactics of the NRA. If they've got one person, maybe they have more. If they've done this dirty trick, what else have they done?" said Paul Helmke, president of the Brady Campaign, which planned to search its offices for listening devices and computer spyware.
The Brady Campaign and other groups said they are also researching whether McFate's alleged spying constituted a crime.
"Under some circumstances, it could be trespass," said Laurie Levenson, a professor at Loyola Law School in Los Angeles and a former prosecutor. But "if they're open meetings, it may be underhanded and sneaky; it may not be illegal."
At States United, McFate served as federal legislation director, meeting with members of Congress on Capitol Hill and writing letters. Over the years, she also stuffed envelopes, attended rallies and took part in conference calls and strategy sessions.
In retrospect, Helmke said, he now realizes McFate stopped by the Washington office for meetings and conference calls that could have been handled by phone, and perhaps pushed too hard to join the board or lobby Congress.
But as for any secrets she might have been privy to, the gun-control groups said they have little to hide, since they put their message and information about their budgets on the Web.
The allegations against McFate stem from a lawsuit brought against officials with Beckett Brown International, a now-defunct security firm based in Maryland. A former beer distributor who bankrolled the firm accused them of defrauding him.
Boxes of documents filed in the dispute reveal that Sapone worked as a subcontractor for Beckett Brown and that the firm's clients included the NRA. And they show that McFate billed the firm for unspecified intelligence-gathering services, submitting among other things a request for a $4,500-a-month retainer in 1999.
The documents also reveal that McFate — that is her maiden name; her married name is Mary Lou Sapone — tried to get daughter-in-law Montgomery Sapone hired by Beckett Brown. Montgomery Sapone worked as an intern at Brady Campaign headquarters in 2003, the gun-control group said.
John Dodd III, the Maryland beer distributor who bankrolled Beckett Brown, told the AP that he did not condone the infiltration of activist groups.
Bryan Miller, executive director of Ceasefire NJ, said he feels betrayed by McFate. Miller's brother, an FBI agent, was shot to death in 1994.
"To have somebody that I consider a friend, have been with dozens of times, shared meals with, treated as a friend, to have her be an employee, a subcontracted spy for the NRA, is just mind-boggling. It's so venal," Miller said. "In the battle of ideas with the gun lobby, we're at a constant disadvantage because we're honest."
Timothy Ward, a former Beckett Brown principal who said in a sworn statement that McFate worked for the firm, declined comment Tuesday through a person who answered the phone at his new company, Chesapeake Strategies Group. The NRA now uses that firm for intelligence-gathering, another Chesapeake official said in a deposition.
The CeaseFirePA leadership plans a vote Friday on whether to expel McFate, a board member for seven years.
"I feel flattered that the NRA would feel that they would have to infiltrate Ceasefire of PA. Obviously, they're hearing our footsteps," said Phil Goldsmith, the group's president. "Frankly, I think it's a waste of their money. We don't deal in state secrets."
http://www.usatoday.com/news/nation/2008-08-05-guncontrolgroups_N.htm?csp=34
The way i see it is, they are given an inch and they take a mile. This country will fall because people are not assimilating into this society anymore. They are told to keep their own culture, and that is fine but when you take your culture and try to impose it on mine, that is where the problem comes in. Some one asked me when i showed them this article, "What is Labor Day anyway" So here is the Wikipedia definition
Labor Day is a United States federal holiday observed on the first Monday in September. The holiday originated in 1882 as the Central Labor Union (of New York City) sought to create "a day off for the working man".
Congress made Labor Day a federal holiday in 1894.[1] All fifty states have made Labor Day a state holiday.
Traditionally, Labor Day is celebrated by most Americans as the symbolic end of the summer.
Plant Drops Labor Day For Muslim Holiday
More Than Half Of Tyson Plant's Workforce Muslim
UPDATED: 3:06 am CDT August 2, 2008
SHELBYVILLE, Tenn. -- Some workers at a local plant will no longer to be able to take their Labor Day holiday because of religious reasons.
Workers at the Tyson Foods poultry processing plant in Shelbyville will no longer have a paid day off on Labor Day but will instead be granted the Muslim holiday Eid al-Fitr.
According to a news release from the Retail, Wholesale and Department Store Union, a new five-year contract at the plant included the change to accommodate Muslim workers at the plant.
Tyson's director of media relations Gary Mickelson said the contract includes eight paid holidays -- the same number as the old contract.
Eid al-Fitr -- which falls on Oct. 1 this year -- marks the end of Ramadan, the Muslim holy month of fasting.
Union leaders said implementing the holiday was important for the nearly 700 Muslims, many of them Somalis, who work at the plant that employs a total of 1,200 people.
Nineteen-year plant veteran William Pentecost doesn’t agree with the decision.
"I don’t think it's right. I really don't think it's right," he said.
Tyson company spokeswoman Libby Lawson said by phone that, "This isn't a religious accommodation, this is a contractual agreement. The majority asked for it."
The change didn’t bother some workers.
"I think it's fine. I don’t have any problem with it. There's a whole bunch of them here, so they've got to do something for them," said worker John Smith.
"It shouldn't happen. I mean, I think, we're in America, you're in America, I think that they should go with our holidays," Pentecost said.
Channel 4's Cynthia Williams could not reach any of the plant’s Muslim workers, because Channel 4 News' crew was not permitted on the property.
Former employee and Shelbyville resident Anthony Proctor said he thinks what's happening is wrong.
He said he helped build a special Muslim prayer room that's located inside the plant and that no other Tyson facility has been that accommodating for any other religion.
"If we want to go pray, we don’t have one for Christians," he said.
Tyson is headquartered in Arkansas.
Lawson said they consider religious accommodations on a case-by-case basis. She said that so far, no one has asked for any other type of religious prayer room.
No one at the Retail, Wholesale and Department Store Union’s regional office answered phone calls placed by Williams on Friday.
A representative in New York said that no one there knew specifics about the new contract with the workers, but a person in research told Williams that holidays aren't usually replaced and are more likely to be added on.
The decision will only apply to workers at the plant who are union members. All other employees at the plant will still have their normal Labor Day holiday.
http://www.wsmv.com/news/17063986/detail.html
They will try to pass a law to keep this from happening, but it will do no good. They can say they (congress) can protect you from all types of hardships. When they pass the law it takes away more of your rights. It makes this Country more Socialistic, more equal All men are created equal does not mean that you have to make all men equal.
They Know What's in Your Medicine Cabinet
How insurance companies dig up applicants' prescriptions—and use them to deny coverage by Chad TerhuneEM>
That prescription you just picked up at the drugstore could hurt your chances of getting health insurance.
An untold number of people have been rejected for medical coverage for a reason they never could have guessed: Insurance companies are using huge, commercially available prescription databases to screen out applicants based on their drug purchases.
Privacy and consumer advocates warn that the information can easily be misinterpreted or knowingly misused. At a minimum, the practice is adding another layer of anxiety to a marketplace that many consumers already find baffling. "It's making it harder to find insurance for people," says Jay Horowitz, an independent insurance agent in Overland Park, Kan.
The obstacle primarily confronts people seeking individual health insurance, not those covered under an employer's plan. Walter and Paula Shelton of Gilbert, La., applied to Humana in February. They were rejected by the large Louisville insurer after a company representative pulled their drug profiles and questioned them over the telephone about prescriptions from Wal-Mart Stores and Randalls, part of the Safeway grocery chain, for blood-pressure and anti-depressant medications.
Mental Health Is a Red Flag
Walter Shelton, a 57-year-old safety consultant in the oil and gas industry, says he tried to explain that the medications weren't for serious ailments. The blood-pressure prescription related to a minor problem his wife, Paula, had with swelling of her ankles. The antidepressant was prescribed to help her sleep—a common "off-label" treatment doctors advise for some menopausal women. But drugs for depression and other mental health conditions are often red flags to insurers.
Despite his efforts to reassure Humana, the phone interview with the company representative "just went south," Walter recounts. He and his wife remain uninsured.
"I want to know what's in there if there's a black mark against us," Walter says. Paula, 51, adds: "We can't get health insurance because we're taking medications that were prescribed by our doctors. I don't think that's right."
A spokesman for Humana says the company uses "data regarding pharmacy history as part of our assessment process." But he adds that the insurer has a policy of not commenting on particular cases, such as the Sheltons' failed application.
FTC Investigation
Traditionally, applicants have been asked to provide insurers with a description of past illnesses. About 30% are deemed uninsurable because of their histories, according to industry veterans. Prescription profiles could add another hurdle, making it especially difficult for the 47 million Americans who lack insurance to acquire coverage. Some 18 million people are now covered by individual policies.
Most consumers and even many insurance agents are unaware that Humana, UnitedHealth Group, Aetna ,Blue Cross plans, and other insurance giants have ready access to applicants' prescription histories. These online reports, available in seconds from a pair of little-known intermediary companies at a cost of only about $15 per search, typically include voluminous information going back five years on dosage, refills, and possible medical conditions. The reports also provide a numerical score predicting what a person may cost an insurer in the future.
An investigation last year by the Federal Trade Commission found that the two companies supplying these pharmacy profiles—MedPoint and IntelliScript—violated federal law for years by keeping the system hidden from consumers. But the FTC has merely required disclosure if prescription information causes denial of coverage or some other adverse action; the agency imposed no penalties. MedPoint and IntelliScript say they are now fully complying with the FTC's order.
Two-thirds of all health insurers are using prescription data—not only to deny coverage to individuals and families but also to charge some customers higher premiums or exclude certain medical conditions from policies, according to agents and others in the industry. Some carriers are also using the data to charge small employers higher group rates. Separately, some 20% of life insurance companies are relying on prescription histories when reviewing applications, according to experts in that business.
Designed for Emergency Use
"The fundamental breakthrough is that this is the first time ever we have had near-instantaneous access to objective, third-party information," says Tia Goss Sawhney, an actuary and consultant to the health insurance industry. She says she tested the prescription profiles last year while designing a new insurance policy for American Community Mutual Insurance in Livonia, Mich.
IntelliScript says it sells prescription data to more than 75 health, life, and long-term-care insurance companies. Milliman, a large Seattle consulting firm, acquired the company in 2005. A rival service, MedPoint, has been offered by UnitedHealth's Ingenix data-mining unit since 2002. MedPoint says it has access to more than 5 billion pharmacy claims.
The data were originally sought to help inform doctors treating patients, especially in emergencies. But that use hasn't widely caught on, and today the information is primarily employed by insurance companies.
MedPoint and IntelliScript buy the data they disseminate mostly from another group of middleman companies known as pharmacy-benefit managers (PBMs). Large PBMs, such as Medco Health Solutions, provide services to insurers and employers. In playing that role, the PBMs gain broad access to prescription information from drugstores. Some retail chains operate their own PBMs. No privacy laws or other regulations prevent the gathering of this data, according to the FTC.
Fodder for Denials
In its marketing to the insurance industry, MedPoint says prescription histories help "identify high-risk individuals, reduce costs, lower loss ratios, and increase revenue." Despite that pitch, John Stenson, an Ingenix executive who helps oversee MedPoint, says he doubts that his company's information causes insurers systematically to reject more people for coverage. "This is about insurance companies getting at the information quickly and clearly," he says.
BlueCross BlueShield of Tennessee, the state's biggest insurer, has used MedPoint since April 2007, ordering prescription profiles for about 75% of individual applicants. Since February, when the federal disclosure requirement went into effect, BlueCross says it has notified 1.5% of applicants that their prescription reports have resulted in denial or other negative action. But the company acknowledges that it doesn't alert consumers if the profiles lead to requests for more medical information that result in subsequent denial. "This doesn't make it any harder for consumers," Kevin Ashpole, director of individual products at Tennessee BCBS, maintains. "It ensures the right decision is made."
But skeptics worry that more people inevitably will be turned down for coverage as a result of growing reliance on prescription histories. Most consumers would be shocked to learn that information about their past prescriptions is being bought and sold—and could come back to haunt them, says Gary Claxton, director of the Health Care Marketplace Project, a research organization run by the Kaiser Family Foundation in Washington, D.C. Rejection by one insurer commonly becomes grounds for denial by others, and the industry has ready access to who has been turned down through a separate database.
Is Disclosure Enough?
When applying for insurance, individuals routinely sign paperwork allowing providers to review their medical history. To comply with the privacy provisions of the federal Health Insurance Portability & Accountability Act, most insurers have now added a reference to prescription history in the lengthy fine print consumers are instructed to read.
The FTC forced the industry to begin disclosing the use of prescription information under a different federal statute, the Fair Credit Reporting Act. Insurers now are required to tell applicants the address of the company that assembled the data. Copies of prescription reports are supposed to be available to consumers at no charge under federal law.
"As soon as we were alerted by the FTC, we cooperated fully, and we began sending out notices to [insurance industry] clients of their obligations" under federal law, says Mark Franzen, managing director of IntelliScript. "This wasn't the result of a consumer complaint or privacy being violated." The FTC confirms that its investigation didn't stem from consumer concern but won't say what did spark the inquiry.
Insurance companies say that they use prescription data responsibly and that it isn't the sole basis of decisions to deny coverage. A spokesman for UnitedHealth
U.S. Farmland Values Reach Record on High Crop Prices (Update2)
By Alan Bjerga
Aug. 4 (Bloomberg) -- U.S. farmland values are at a record high even as the rest of the country suffers the worst housing crisis since the Great Depression, with the highest crop prices ever pushing up agricultural real estate.
The value of all land and buildings on farms averaged $2,350 an acre at the start of this year, up 8.8 percent from a year earlier, the U.S. Department of Agriculture said today in an annual report. Surging corn, wheat and soybean prices boosted values in the Northern Plains, which includes Kansas, Nebraska, North Dakota and South Dakota, by 15.5 percent, the biggest increase in the country, according to the report. (the rest of the story is at)http://www.bloomberg.com/apps/news?pid=20601087&sid=a2FmZilSagA0&refer=worldwide
Panicking Fed Scrambles to Hide Credit Crisis Truth Stock-Markets / Credit Crisis 2008 Aug 01, 2008 - 04:44 PM By: Mike_Shedlock
The Fed, now in continual panic mode, Extends Emergency Borrowing Program . The Federal Reserve said Wednesday that it was extending its emergency borrowing program to Wall Street firms and was taking other steps to ease a tight credit market that has hobbled the national economy.
The Fed said the program, in which investment houses can tap the central bank for a quick source of cash, will be available through Jan. 30. Originally the program, started on March 17, was supposed to last until mid-September. Another program, in which investment firms can temporarily swap more risky investments for safer Treasury securities, also will continue through Jan. 30, the Fed said. It also will let commercial banks, in a separate program, bid on cash loans that last longer — for 84 days — besides the 28-day loans now available.
FASB Postpones Off-Balance-Sheet Rule for a Year On July 30th, FASB Postpones Off-Balance-Sheet Rule for a Year . The Financial Accounting Standards Board postponed a measure, opposed by Citigroup Inc. and the securities industry, forcing banks to bring off-balance-sheet assets such as mortgages and credit-card receivables back onto their books. FASB, the Norwalk, Connecticut-based panel that sets U.S. accounting standards, voted 5-0 today to delay the rule change until fiscal years starting after Nov. 15, 2009. The board needs to give financial institutions more time to prepare for the switch, FASB member Thomas Linsmeier said at a board meeting. "We need to get a new standard into effect," Linsmeier said, though " it's not practical " to begin requiring companies to put assets underlying securitizations onto their books this year.
Citigroup's Mysterious Shadow Assets Of that $11 trillion in total bank off balance sheet entities, Citigroup has $1.1 trillion of it. Enquiring minds may wish to consider Citigroup's $1.1 Trillion in Mysterious Shadow Assets . If Citigroup is looking for an award, it can take the blue ribbon for greed, arrogance, and stupidity in the off balance sheet category. There are plenty of other categories and more blue ribbons will be awarded. Nominations are being taken now. Did Citigroup Know In Advance? On July 23, the Citigroup CEO said Citi Off-Books Risks `Well in Hand' . Citigroup Inc. Chief Financial Officer Gary Crittenden said earnings will probably be strong enough to absorb any losses created when new accounting rules force it to move off-balance-sheet securities onto its books. "There's likely to be a fair amount of time between now and when that event actually takes place, and that's a time period in which we intend to generate a very significant amount of capital," Crittenden said today on a conference call with investors. "We think we have it well in hand."
SEC may turn a blind eye to this If the SEC wants to investigate something, it should investigate how Citigroup might have been aware of an important rule change a week in advance. But contrary to what Crittenden says, Citigroup does not have things well in hand. Citigroup will be in worse shape two months from now and in even worse shape one year from now. The value of that $1.1 trillion in garbage that Citigroup is holding off the books is declining every day. Look at Merrill Lynch for an example of what some of Citigroup's assets might be worth. Merrill Lynch Sells CDOs at 5.5 cents on the dollar On July 29th it was reported that Merrill Lynch "raised capital" by selling CDOs. See Ratchet Provisions Soak Merrill Lynch, Will Sink WaMu . Merrill got an initially reported 22 cents on the dollar for this sale. Commentators went "gaga" on the news with another ridiculous round for "bottom calls" from nearly every corner. Well for starters 22 cents on the dollar is one hell of a writedown and nothing to cheer over. And the plain fact of the matter is that Merrill really only got 5.5 cents on the dollar as explained in Merrill Gives Up Gains, Is `On Hook' for CDO Losses . Nonsense Does Not Stop There Even as Merrill Lynch and Citigroup are in a mad scramble to raise capital, both continue to pay huge dividends. Please consider Merrill Lynch Declares Dividends on Common and Preferred Stocks . Paying dividends while raising capital is like trying to bail water from a sinking ship with a bucket that has huge holes in the bottom. One has to start questioning the competence of the new Merrill and Citigroup CEOs. OK For USA To Turn Japanese Barry Ritholtz on the Big picture is as disgusted with these delays as I am. Please consider FASB: OK For USA to Turn Japanese .
Just when you think there is a glimmer of hope that some of these ne'er do well, lying, cheating, sniveling, cowardly bank CEOs might finally be forced to step up to the confessional and tell all, this comes along: FASB Postpones Off-Balance-Sheet Rule for a Year. Question: How can anyone value a financial company if they cannot tell what are on their balance sheets? Answer: You cannot. If you buy a financial under these conditions, you are flying blind. Investment Thesis: Ritholtz Rule #1: Know What You Own. Whoever buys Financials under these circumstances loses the right to whine down the road about companies not being forthcoming. If you own them, don't complain when you get what you deserve. Not "Practical" To Tell The Truth It's NEVER "practical" for the Fed, the SEC, Banks, CEOs in general, the FDIC, Congress, the Treasury Department, or the President to tell the truth. This is what it all boils down to: Somehow it's never "practical" to stop a drunken credit-financed orgy, yet when the party ends, it's never "practical" to discuss the consequences. In this case, the credit orgy lasted so long, and there were so many players, that the most important truth right now that needs open, honest discussion is that the entire US Banking System Is Insolvent. I listed 25 reasons in You Know The Banking System Is Unsound When.... One of the few people always speaking on the practical side of matters is Minyanville's Mr. Practical. Inquiring minds will want to read what Mr. Practical has to say in The Bigger Picture . Here is a small snip:
We hear from apologists that banks selling stock will "heal" the system. But again that's not how it works. It only transfers wealth from one part of the system to another because wealth is not being created. There's no production, only transfer. It's a hallmark of deflation that companies sell stock. That is deflationary. People have to use cash to buy stock. So cash goes from investors who have less cash to buy things with, to banks who use it to write down debt. But the point is banks selling stocks to investors reduces liquidity, it does not increase it. The government's strategy is to buy time. It always is. Time allows it to slowly drain wealth from the poor/middle class and re-distribute it to the rich who own the financial system.
The Fed, the SEC, and the Treasury department are all jumping through hoops attempting to disguise this fact, but their collective panic to bail out the wealthy at the expense of the poor tells the truth, even as they find it "impractical" to do so.
By Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com/
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