NightBlogger

General Motors Corp., the largest U.S. automaker, probably has weeks rather than months left before it runs out of cash without federal aid, said Jerome York, an adviser to billionaire Kirk Kerkorian and former GM board member. Chief Executive Officer Rick Wagoner “all but said” at congressional hearings in the past two days that GM can’t continue to operate until a new U.S. administration takes over in January, York said in a Bloomberg Television interview today. More

The headline says it all.

The CEOs of GM, Ford and Chrysler may have told Congress that they will likely go out of business without a bailout yet that has not stopped them from traveling in style, not even First Class is good enough. All three CEOs - Rick Wagoner of GM, Alan Mulally of Ford, and Robert Nardelli of Chrysler - exercised their perks Tuesday by flying in corporate jets to DC. Wagoner flew in GM’s $36 million luxury aircraft to tell members of Congress that the company is burning through cash, asking for $10-12 billion for GM alone. More

Dutch insurer Aegon said it may buy a small U.S. thrift company to qualify for potentially more than $1 billion in U.S. government support, sending its shares down more than 8 percent. Aegon’s plans are similar to those of Hartford, a life and property insurer that has been hit by investment losses, and peers Genworth Financial and Lincoln National, who are all planning to buy small savings and loans companies and apply for federal support. More

Herald Tribune
At least 110 banks have requested more than $170 billion from the Treasury Department’s rescue fund, and many more are expected to have submitted applications before Friday’s deadline. Another 48 banks have applied for about $6.5 billion, according to the Keefe, Bruyette & Woods report. Several banks that have filed applications said they haven’t yet decided whether to accept any funds. The tally doesn’t include requests from four life insurance companies that are seeking regulatory approval to purchase savings and loans in order to become eligible for government funds.

One of those companies, Hartford Financial Services Group Inc., said it would be eligible to receive between $1.1 billion and $3.4 billion if its purchase of Federal Trust Bank is approved. Generally, only banks and savings and loans are eligible for direct investment from the TARP. AIG is the only nonbank company to receive such funds so far. The total also doesn’t include American Express Co., which said Monday it has restructured as a bank holding company, reportedly to seek up to $3.4 billion in funding. More

Who’s being rescued? Are bailout funds being used as intended?
Dennis Kucinich: “Essentially what Secretary Paulson did the other day was to say we’re going to give the money to banks and maybe the banks will help millions of homeowners…Now you got money for bank consolidation, money for parties, money for bonuses….This is a dangerous moment for our country.”

Bush and Paulson don’t care about America’s cities, only Wall Street Banks, meanwhile China spends billions on rebuilding her infrastructure.

Bloomberg – Philadelphia, Atlanta and Phoenix are asking the U.S. Treasury Department for part of the $700 billion financial rescue package to help them finance construction projects and pay bills. They seek $50 billion on behalf of cities nationally to spend on infrastructure and loans lasting for as long as a year to aid cash flow. A copy of the letter was supplied by a spokeswoman for Atlanta Mayor Shirley Franklin. “The federal government is providing support for the financial industry,” said Luke Butler, a spokesman for Philadelphia Mayor Michael Nutter, who organized the effort. “Cities could use some support, too.” In Washington, Treasury Secretary Henry Paulson said on Nov. 12 such requests are beyond the scope of the bailout. More

CNBC debate regarding the consequences of allowing US Automakers to fail. CNBC’s Phil Lebeau and Steve Liesman are shameless mouthpieces for GM and all things government with an irritating flair for smug arrogance. I long ago dismissed the fact that either one of them were paid propaganda agents lying about the truth; no one can act that well. Both of them clearly believe the stupidity they spout. Rick Santini and sometimes Mark Haines (not included in this video) are the only members of the CNBC Muppets that see the truth. In this video, Peter Schiff stuns Phil Lebaue by telling him Americans are no longer buying cars. Lebaue incredulously replies, “Americans aren’t buy cars? Are you crazy?” Lebeau is clueless. In fact both Steve Liesman and Phil Lebeau could meet the description of Parsons, a character in George Orwell’s Novel, 1984:

“Parsons was Winston’s fellow employee at the Ministry of Truth. He was a fattish but active man of paralyzing stupidity, a mass of imbecile enthusiasms– one of those completely unquestioning, devoted drudges on whom, more even than on the thought police, the stability of the Party depended.”

“Taxpayers are ‘keeping the zombie alive,’ said Robert Eisenbeis, chief monetary economist at hedge fund Cumberland Advisors and former director of research at the Atlanta Fed. ‘We keep getting deeper and deeper into these holes.’”

China is watching. GM is next.

Revised AIG Terms Begin Treasury Transfusions to ‘Zombie’ Firms
(Bloomberg) — The revised bailout of American International Group Inc. marks a new phase in the government’s effort to shore up financial markets: It’s the first time cash from the rescue fund Congress created last month has been committed to a failing company. The Federal Reserve, which saved the insurer from collapse two months ago with an $85 billion loan, yesterday reduced that loan and offered lower rates, while the Treasury chipped in $40 billion from its bank-rescue fund to buy preferred shares. The new terms represent a departure for Secretary Henry Paulson, who until now has said he only wants to invest Treasury funds in “healthy” firms. More

Bloomberg — American Express Co. won Federal Reserve approval to convert to a commercial bank, gaining access to funds as credit losses build and sales of asset-backed bonds plummet. “That business has totally dried up,” said Frederic Dickson, who helps oversee about $20 billion as chief market strategist at D.A. Davidson & Co. in Lake Oswego, Oregon. More

Chinese Premier Wen Jiabao knows the US is no longer a credible risk, and that US consumers are broke. He made it clear China will find other buyers for their products in emerging economies. The US is now one gigantic step closer to Default and Hyperinflation.

BBC
Will China bail out the West?
Yi Gang, vice-governor of the People’s Bank of China, made this point at a meeting of world financial leaders in Washington last week. “The World Bank should urge the developed countries to shoulder their due responsibilities in stabilising the global economy,” he said. Chinese Premier Wen Jiabao has added his comments to the debate. He said his country would do its bit to help stabilise world financial markets. But in a telephone conversation with Britain’s Prime Minister Gordon Brown, he also made it clear where China’s priority lay.

“The most important thing for China now is to handle its own affairs well,” China’s state-run Xinhua news agency reported him as saying. And for all its foreign exchange reserves, China is still a developing country with its own problems that will require lots of money to fix. Just a few days ago, the Chinese leadership promised to double incomes in rural areas - where most of its people live - over the next 12 years. The government will have to try to meet these promises despite what independent Chinese economist Andy Xie believes will be an economic slowdown in China. He said the country had largely escaped financial problems affecting others, but would have to look to other areas of the world to generate future growth. “China needs to play a bigger role in circulating money among emerging economies,” he said. More

Ian Bell
Sunday Herald
HOW WOULD YOU FEEL, RUNNING A MODEST business, if the money fairy came along and promised you would never, ever go bust? How much of a spring would it put in your step if the nice imp then said she had cast a spell guaranteeing all your lending, all your borrowing, and 98% of your customers’ cash? “Yes,” you might just say, clapping your sticky little hands, “I do believe in fairies!” This hard-to-swallow tale has more than one happy ending. While your godmother hopes you will become a good little banker one day, she doesn’t want to be too stern. It’s not her place. So if she sprinkles some of her magic dust and shrinks the cost of money, she won’t force you to share your good luck with anyone. She’ll “urge” you instead. But only a very naughty banker would ignore that, surely?

After all, you owe the good fairy something. In fact, you owe her billions of things. They are the reasons why you are still able to frolic as a happy little banker. They also explain why you are still looking forward to big Christmas presents and the chance, some time very soon, to tell fairy godmother where to stick her advice and all those tiresome homilies on the need to be nice to poor folk. Whatever Alistair Darling was waving at the bankers during a breakfast meeting on Friday morning, it was not a magic wand. He can urge to his heart’s content, but they intend to go on treating the Bank of England, its base rate and its monetary policy committee (MPC) as fictions only children would believe. Most may have buckled, belatedly, under an avalanche of bad publicity, but the chancellor doesn’t frighten them.

True, they told him to “get his finger out” and save them from themselves. True, it was they who demanded dollops of other people’s money or it would be the worse for the chancellor (and all those other people). True, they asked for public trust when the facts indicate that they do not trust one another to lend to one another, even though Darling has guaranteed all transactions. But they know that he knows that they know: once the chancellor was forced to promise the survival of every bank in every circumstance, happy days were here again.

They had him over a barrel. The first rule of the capitalist purist had been breached. An enterprise that believes it cannot fail cannot be governed, brought to heel or obliged to do anything it does not wish to do. The bonus culture can resume and the government can be sent packing as soon as the banks have screwed the public for the money to repay the government. More

Andrew Jeffery
A Second Stimulus Package?
California Democrat and Speaker of the House Nancy Pelosi is urging lawmakers to push through a second stimulus package in short order. Arguing economic conditions have deteriorated such that waiting until President-Elect Obama takes office in January would be unwise, Pelosi floated a $60 to $100 billion relief package to be passed by the end of the month. According to the Wall Street Journal, the Speaker believes tax cuts implemented by adjusting tax-withholding tables, rather than more rebates or reductions in capital-gains taxes, would immediately inject cash into the economy.

The proposal comes in conjunction with the convening of Obama’s 17-member economic advisory board, which includes such notables as Berkshire Hathaway CEO Warren Buffett, Google CEO Eric Schmidt, former Treasury Secretary Robert Rubin, former Federal Reserve Chairman Paul Volker and others. Pelosi is also busying herself with the troubled automakers, meeting with representatives from Ford, General Motors and Chrysler, over their request for federal money to stay afloat. More

The nonpartisan Committee for a Responsible Budget estimates all the government economic and rescue initiatives, starting with the $168 billion in stimulus checks issued earlier this year, total $2.6 trillion. Where is this money coming from? No where! Currently, the US fiscal deficit is being monetized by the Fed. That means they’re printing money or creating digital dollars out of thin air. The US will experience HYPERINFLATION Weimar Republic style sometime in 2009.

“If you think that the current economic crisis is something that has never happened in history before, you may be wrong! After the collapse of the agriculture sector in Zimbabwe in 2000, the inflation in that country skyrocketed to 231 million percent a year! Just think about it - 231 000 000%! Unemployment went up to 80% and a third of country’s population left it. Let`s now have a look at the photos that you may not be able to see anywhere else in the world.” More

SCOTT REYNOLDS NELSON
Chronicle.com
As a historian who works on the 19th century, I have been reading my newspaper with a considerable sense of dread. While many commentators on the recent mortgage and banking crisis have drawn parallels to the Great Depression of 1929, that comparison is not particularly apt. Two years ago, I began research on the Panic of 1873, an event of some interest to my colleagues in American business and labor history but probably unknown to everyone else. But as I turn the crank on the microfilm reader, I have been hearing weird echoes of recent events.

When commentators invoke 1929, I am dubious. According to most historians and economists, that depression had more to do with overlarge factory inventories, a stock-market crash, and Germany’s inability to pay back war debts, which then led to continuing strain on British gold reserves. None of those factors is really an issue now. Contemporary industries have very sensitive controls for trimming production as consumption declines; our current stock-market dip followed bank problems that emerged more than a year ago; and there are no serious international problems with gold reserves, simply because banks no longer peg their lending to them.

In fact, the current economic woes look a lot like what my 96-year-old grandmother still calls “the real Great Depression.” She pinched pennies in the 1930s, but she says that times were not nearly so bad as the depression her grandparents went through. That crash came in 1873 and lasted more than four years. It looks much more like our current crisis.

The problems had emerged around 1870, starting in Europe. In the Austro-Hungarian Empire, formed in 1867, in the states unified by Prussia into the German empire, and in France, the emperors supported a flowering of new lending institutions that issued mortgages for municipal and residential construction, especially in the capitals of Vienna, Berlin, and Paris. Mortgages were easier to obtain than before, and a building boom commenced. Land values seemed to climb and climb; borrowers ravenously assumed more and more credit, using unbuilt or half-built houses as collateral. The most marvelous spots for sightseers in the three cities today are the magisterial buildings erected in the so-called founder period.

But the economic fundamentals were shaky. Wheat exporters from Russia and Central Europe faced a new international competitor who drastically undersold them. The 19th-century version of containers manufactured in China and bound for Wal-Mart consisted of produce from farmers in the American Midwest. They used grain elevators, conveyer belts, and massive steam ships to export trainloads of wheat to abroad. Britain, the biggest importer of wheat, shifted to the cheap stuff quite suddenly around 1871. By 1872 kerosene and manufactured food were rocketing out of America’s heartland, undermining rapeseed, flour, and beef prices. The crash came in Central Europe in May 1873, as it became clear that the region’s assumptions about continual economic growth were too optimistic. Europeans faced what they came to call the American Commercial Invasion. A new industrial superpower had arrived, one whose low costs threatened European trade and a European way of life.

As continental banks tumbled, British banks held back their capital, unsure of which institutions were most involved in the mortgage crisis. The cost to borrow money from another bank — the interbank lending rate — reached impossibly high rates. This banking crisis hit the United States in the fall of 1873. Railroad companies tumbled first. They had crafted complex financial instruments that promised a fixed return, though few understood the underlying object that was guaranteed to investors in case of default. (Answer: nothing). The bonds had sold well at first, but they had tumbled after 1871 as investors began to doubt their value, prices weakened, and many railroads took on short-term bank loans to continue laying track. Then, as short-term lending rates skyrocketed across the Atlantic in 1873, the railroads were in trouble. When the railroad financier Jay Cooke proved unable to pay off his debts, the stock market crashed in September, closing hundreds of banks over the next three years. The panic continued for more than four years in the United States and for nearly six years in Europe.

The long-term effects of the Panic of 1873 were perverse. For the largest manufacturing companies in the United States — those with guaranteed contracts and the ability to make rebate deals with the railroads — the Panic years were golden. Andrew Carnegie, Cyrus McCormick, and John D. Rockefeller had enough capital reserves to finance their own continuing growth. For smaller industrial firms that relied on seasonal demand and outside capital, the situation was dire. As capital reserves dried up, so did their industries. Carnegie and Rockefeller bought out their competitors at fire-sale prices. The Gilded Age in the United States, as far as industrial concentration was concerned, had begun.

As the panic deepened, ordinary Americans suffered terribly. A cigar maker named Samuel Gompers who was young in 1873 later recalled that with the panic, “economic organization crumbled with some primeval upheaval.” Between 1873 and 1877, as many smaller factories and workshops shuttered their doors, tens of thousands of workers — many former Civil War soldiers — became transients. The terms “tramp” and “bum,” both indirect references to former soldiers, became commonplace American terms. Relief rolls exploded in major cities, with 25-percent unemployment (100,000 workers) in New York City alone. Unemployed workers demonstrated in Boston, Chicago, and New York in the winter of 1873-74 demanding public work. In New York’s Tompkins Square in 1874, police entered the crowd with clubs and beat up thousands of men and women. The most violent strikes in American history followed the panic, including by the secret labor group known as the Molly Maguires in Pennsylvania’s coal fields in 1875, when masked workmen exchanged gunfire with the “Coal and Iron Police,” a private force commissioned by the state. A nationwide railroad strike followed in 1877, in which mobs destroyed railway hubs in Pittsburgh, Chicago, and Cumberland, Md.

In Central and Eastern Europe, times were even harder. Many political analysts blamed the crisis on a combination of foreign banks and Jews. Nationalistic political leaders (or agents of the Russian czar) embraced a new, sophisticated brand of anti-Semitism that proved appealing to thousands who had lost their livelihoods in the panic. Anti-Jewish pogroms followed in the 1880s, particularly in Russia and Ukraine. Heartland communities large and small had found a scapegoat: aliens in their own midst.

The echoes of the past in the current problems with residential mortgages trouble me. Loans after about 2001 were issued to first-time homebuyers who signed up for adjustablerate mortgages they could likely never pay off, even in the best of times. Real-estate speculators, hoping to flip properties, overextended themselves, assuming that home prices would keep climbing. Those debts were wrapped in complex securities that mortgage companies and other entrepreneurial banks then sold to other banks; concerned about the stability of those securities, banks then bought a kind of insurance policy called a credit-derivative swap, which risk managers imagined would protect their investments. More than two million foreclosure filings — default notices, auction-sale notices, and bank repossessions — were reported in 2007. By then trillions of dollars were already invested in this credit-derivative market. Were those new financial instruments resilient enough to cover all the risk? (Answer: no.) As in 1873, a complex financial pyramid rested on a pinhead. Banks are hoarding cash. Banks that hoard cash do not make short-term loans. Businesses large and small now face a potential dearth of short-term credit to buy raw materials, ship their products, and keep goods on shelves.

If there are lessons from 1873, they are different from those of 1929. Most important, when banks fall on Wall Street, they stop all the traffic on Main Street — for a very long time. The protracted reconstruction of banks in the United States and Europe created widespread unemployment. Unions (previously illegal in much of the world) flourished but were then destroyed by corporate institutions that learned to operate on the edge of the law. In Europe, politicians found their scapegoats in Jews, on the fringes of the economy. (Americans, on the other hand, mostly blamed themselves; many began to embrace what would later be called fundamentalist religion.)

The post-panic winners, even after the bailout, might be those firms — financial and otherwise — that have substantial cash reserves. A widespread consolidation of industries may be on the horizon, along with a nationalistic response of high tariff barriers, a decline in international trade, and scapegoating of immigrant competitors for scarce jobs. The failure in July of the World Trade Organization talks begun in Doha seven years ago suggests a new wave of protectionism may be on the way.

In the end, the Panic of 1873 demonstrated that the center of gravity for the world’s credit had shifted west — from Central Europe toward the United States. The current panic suggests a further shift — from the United States to China and India. Beyond that I would not hazard a guess. I still have microfilm to read.
____________________________________________________________________________________
Scott Reynolds Nelson is a professor of history at the College of William and Mary. Among his books is Steel Drivin’ Man: John Henry, the Untold Story of an American legend (Oxford University Press, 2006).

Bob Chapman
International Forecaster
…All of our government’s statistics are bogus. The bailout was for the most part for money center banks, the big financial conglomerates and transnational corporations. Those funds went to the insiders, not to smaller institutions. They were for the crime syndicate, the corrupt Illuminist mafia. The next step after the election is the monetization of money and credit and horrible hyperinflation. Soon the dollar short covering will be history. Libor has already fallen and is back in its normal place. Credit derivatives and credit default swaps has produced a demand for dollars for settlement payouts. That will soon end as well. Fifteen months ago these derivatives began to fail and that systemic failure is ongoing. It will end in the complete collapse of the dollar.

This is the same barbaric horde that just sent the commodity market down almost 60%. They are now waiting to take it back up again to plunder the public once more. They bashed commodities and gold and silver because the rush for real assets had to be destroyed even though it was temporary. As a result there was a rush into physical gold and silver products, a resultant shortage developed. The elitists saw that and not wanting more physical gold in the publics’ hands the mints in Johannesburg, Canada, the US and Mexico shut down. Do you really think that was coincidence? They do not want gold and silver attractive because they are going to hyper inflate. At least for the next two to three years inflation is going to rage. Money and credit are still expanding at 12-1/2% and inflation is 12-1/2%. What deflationists do not seem to grasp is that the elitists will keep the system running because they do not want a crash until they can get a major war underway, as a distraction; another way of adding wealth, and for getting a tighter grasp on power and to further exercise population control. The question is when will the viability of America debt be questioned?

Will the failure to deliver US treasuries break the market and not nonparticipation? We do not know but it is surely possible. This is why we have not for some time recommended US Treasuries, but instead Swiss franc Treasuries for those who prefer a partial cash position. It is very simple. The more debt the US government creates and the more money and credit the Fed creates the more the value of the dollar depreciates. Worse yet, the collateral being presented for the exchange of Treasuries is essentially worthless. We also believe Treasuries are being created and not being reported in order to satisfy the perceived flight to quality. Remember, these people do not tell the truth about anything and they believe as the Illuminated ones that they can do anything they please. That is why we continue to tell you to be out of US government and debt paper as well as the stock market. The only exceptions are gold, silver and oil and gas stocks. Cash out your retirement plans if you can and move them into gold and silver related assets.

We can promise you two things, hyperinflation and eventual Treasury default. Why do you think on 11/15 major nations are meeting to form a new monetary unit? It will take several months. But it is about to happen. The dollar as a reserve currency and as a store of value is finished and many other currencies will follow. Remember 64.5% of world central bank reserves are in US dollars. No country is going to survive this unscathed. There will be a trigger as there always is. It probably will be an economic event or a string of events that begins the dollar collapse. There are things going on we know nothing about, but which we will soon find out about.

We have another couple of bubbles coming. There is a pension bomb that is in process and the credit card bubble-bomb. Lenders wrote off about $21 billion in bad credit card loans in the first half of 2008, and they haven’t even scratched the surface yet. Companies are laying off millions of workers and it is currently conservatively estimated that by the end of 2009 they’ll lose another $55 billion. Currently losses are 5.5% of debt outstanding and probably will easily exceed 8%.

As lenders rethink their lending rules our credit-hooked nation is rethinking their credit habits. It is about time lenders smartened up and stopped being greedy and it is about time Americans started paying for gas, food and other items with cash. You should only be using credit cards for emergencies and you should pay off your debit every month. In 2005 mortgage extractions were $595 billion, in 2007 they fell to $470 billion and the second quarter of 2008 saw $9.5 billion. At that rate we’ll see a 90% drop from 2005.

Total loans from commercial banks grew by $89 billion yoy to December. Of that $61 billion was credit card debt. That means banks only lent $28 billion to business or to individuals. These numbers show you how stressed consumers are, amid accelerating job loss, low wages and high inflation, home price deflation, the effects of illegal immigration and the losses in equity in stocks, never mind having their retirement accounts clobbered. Credit card debt is up – it has risen more in the recent 10 weeks than it has in the previous 10 months. The increase is annualized at 48.3%. American Express delinquencies on credit payments rose to 4.1% in the third quarter, up from 2.5% yoy, their pool of uncollectible loans to a high of 6.7%. If it weren’t so sad the following would be laughable. The second largest credit card merchant vendor is McDonalds. This is a sign of very serious distress. This level of credit card usage is unsustainable.

All this comes as stock market losses worldwide reduced global wealth by $16 trillion. A good part of which was in retirement accounts. This coming year government will admit to unemployment of more than 9%. That puts U6 at 14% and long-term at 17% using government figures. The duration of current unemployment is nine months or 38 weeks. That will be at least 14 months at the end of 2009. Unless unemployment benefits are expended an additional six months they’ll be lots of people in serious financial trouble. That means less consumption, which will feed recession. Incidentally, that will widen the budget deficit. Unemployed don’t pay taxes and that means less revenue.

We see a 2009 budget deficit of $1.2 trillion plus, as the recession deepens. The only thing keeping the end of 2009 out of depression will be massive injections of money and credit and that will cause the dollar to fall and inflation, gold and silver to rise. With all this in the mix we see would-be newsletter writers, economists and analysts predicting already slow recovery by the end of 2009. In order to be politically acceptable they didn’t recognize recession until a few months ago, a year and one-half behind the curve. This in spite of massive welfare during the year. More

American news publications are mouthpieces and apologists for the BIG 3 and neglect to mention anything but the loss of American jobs and satellite businesses. Why should American tax payers subside US auto makers’ expansion into foreign countries.

This from the Guardian:

“…the three companies have announced plans to close 35 plants, mostly in the area around Detroit, with the total loss of 100,000 jobs. GM and Ford are looking to expand operations in lower-cost places, such as Mexico, China and Africa.”

“The crisis gripping the big three and the alarm growing among Europe’s car makers will, in effect, only hasten the inevitable: the shift of production to countries where costs are lower, primarily India, China, Russia and Thailand.”

“Newton says: ‘The question is whether the big three can cut jobs and close factories, particularly in the US, quickly enough to offset their losses. Their current restructuring plan is based on last year’s industry forecasts. However, the outlook is far worse now. It’s touch and go.’ He also doubts whether the rumoured merger of GM and Chrysler would do more than delay the inevitability of further plant closures and job losses by a couple of months.”

Lost your house? Out of work? How much of this have you seen? $600 bucks?

SFGate
$900 billion in gov’t borrowing seen through March
The government, raising cash to pay for the array of financial rescue packages, said Monday it plans to borrow $550 billion in the last three months of this year — and that’s just a down payment. Treasury Department officials also projected the government would need to borrow $368 billion more in the first three months of 2009, meaning the next president will confront an ocean of red ink. The nonpartisan Committee for a Responsible Budget estimates all the government economic and rescue initiatives, starting with the $168 billion in stimulus checks issued earlier this year, total even more — an eye-popping $2.6 trillion. More

Pink Slip for Congress
Get Out of Our House!
Evict the politicians from the U.S. House of Representatives
Elections for representatives are held in every even-numbered year, on the first Tuesday after the first Monday in November.
Members of the House Who Voted Yes

Washington Post
Banks to Continue Paying Dividends
U.S. banks getting more than $163 billion from the Treasury Department for new lending are on pace to pay more than half of that sum to their shareholders, with government permission, over the next three years. The government said it was giving banks more money so they could make more loans. Dollars paid to shareholders don’t serve that purpose, but Treasury officials say that suspending quarterly dividend payments would have deterred banks from participating in the voluntary program. Critics, including economists and members of Congress, question why banks should get government money if they already have enough money to pay dividends — or conversely, why banks that need government money are still spending so much on dividends. “The whole purpose of the program is to increase lending and inject capital into Main Street. If the money is used for dividends, it defeats the purpose of the program,” said Sen. Charles E. Schumer (D-N.Y.), who has called for the government to require a suspension of dividend payments. More

CNBC’s Michelle Caruso-Cabrera talks with billionaire Carlos Slim. He is the second richest man in the world with a net worth of around U.S. $60 billion. On March 5, 2008, Forbes magazine ranked Slim as the world’s second-richest person, behind Warren Buffett and ahead of former world’s richest man Bill Gates. He refers to the current economic problems as “the worst I have seen in my life. It’s a financial [pandemic] that is effecting all the world, and I am very worried about the economic consequences — the real economy, because [currently] … we have a problem in the financial economy.”

John Chan
Source: WSWS
A wave of protests by laid-off workers is a sign of what is to come as the global recession hits China. Like their counterparts in North America, Europe and elsewhere in the world, workers in China are being hit hard by accelerating plant closures, especially in the major export industries.

The latest example is Smart Union, one of the largest toy manufacturers in Dongguan city in the southern province of Guangdong. Around 7,000 people lost their jobs after the company, which manufactured items for US toy giants like Mattel and Disney, went bankrupt on October 17.

Workers immediately protested to demand their wages, severance pay and other benefits—2,000 gathered outside the local Zhangmutou district government office and another 100 workers outside the factory gate. Riot police with shields and clubs were deployed at the government building. The local government posted a sign at the factory gate warning that workers could be detained for 10-15 days for staging illegal protests, or ignoring orders from security officials. The confrontation only ended when the government promised to provide 24 million yuan ($3.5 million) to cover two months of unpaid wages.

A 42-year-old worker told Associated Press: “This financial crisis in America is going to kill us. It’s already taking food out of our months.” Most workers were migrants from rural areas. Song Xiaoguan, 25, told Agence France-Presse (AFP): “We thought about going to Shenzhen or even Shanghai. But then factories are also closing down in those places.” Another worker said he feared returning to Fujian province where economic conditions were worse than Dongguan. “I do not want to go back home a poorer man, in debt, and unable to feed my family,” he said.

Smart Union’s liquidation followed a loss of $US26 million caused by weak demand and rising costs—a situation facing most export industries. Earlier this month, Dongguan mayor Li Yuquan told foreign reporters that more than 400 factories in the city had closed down in the first half of this year, posing a serious unemployment problem. China’s customs agency announced last week that 52.7 percent of the country’s toy exporting companies—3,631 in all—had ceased operations in the first seven months of the year.

Dongguan is located in the Pearl River Delta—one of the country’s major manufacturing zones. The region turns out vast quantities of low-cost consumer goods such as toys, textiles, shoes, garments, home appliances and electronics for Western markets. Foreign investors from Hong Kong, Taiwan, Japan, US and Europe have flooded the region to set up factories since the 1980s.

In boom times, workers laboured in the atrocious conditions for long hours and low pay. Now millions of workers are losing their jobs. According to Chen Cheng-jen, chairman of the Federation of Hong Kong Industries, a quarter of small and medium Hong Kong-invested companies in the Pearl River Delta will be closed by next January, throwing 2.5 million workers out of work.

Since mid-October, workers from a series of closed factories across Guangdong province have held protests by blocking roads and highways. The demonstrations included: 1,000 workers from a Dongguan pet utility company, 700 workers from a Dongguan shoe factory, 500 workers from an electronic plant in Fushan and 500 workers from a Panyu textile firm. On October 13, 1,000 workers from a closed Taiwanese-owned factory in Dongguan’s Dongcheng district blocked a road, demanding three months in unpaid wages. Riot police were brought in to disperse the protest and arrested more than 20 people.

Shenzhen, a major manufacturing city in the Pearl River Delta, has also witnessed growing unrest. BEP, a home appliance manufacturer, recently declared bankruptcy, leaving 1,500 workers jobless. Workers staged demonstrations on October 20-21 and guarded the factory to prevent assets being looted by creditors and suppliers. The Shenzhen labour bureau offered each worker just 300 yuan ($US44) in compensation.

Following the collapse of watch manufacturer Peace Mark, more than 800 workers from its plant in the Baoan district of Shenzhen staged a protest on October 21, demanding 4 million yuan in severance pay. Another 600 workers from its factory in the Longhua district demonstrated in front of the township government. On October 20, more than 900 workers from the bankrupt electronics firm Gangsheng in Longgang district kidnapped a Hong Kong driver demanding the government cover unpaid wages.
Economic downturn

The labour unrest in Guangdong indicates why the Chinese regime has just announced an economic stimulus package in a desperate bid to keep growth above 8 percent. Either Beijing creates sufficient jobs to absorb the growing workforce or it faces a social explosion. The growth rate for the third quarter had already slowed to 9 percent—down from almost 12 percent last year.

China’s exports expanded more than 22 percent in the first three quarters—but the figure was down 4.8 percent from the same period last year. Stephen Green, China economist with Standard Chartered, forecast that exports could tumble to “zero or even negative growth” in 2009. JP Morgan Chase recently estimated that Chinese exports would fall 5.7 percent for every one percent shrinkage in global economic growth.

Guangdong’s exports rose just 14 percent in the first seven months of this year—down from 27 percent for the same period last year. Industrial profits were up just 4 percent in the first five months of the year—compared to 49 percent for the same period last year.

The slowdown in exports is reverberating throughout the whole economy, dragging down the prices of homes, especially in the once booming coastal cities. Yan Yu, a Beijing University academic, told USA Today on October 21 that the property bubble is starting to burst. Housing prices in Dongguan, for instance, have fallen by up to 50 percent this year, leaving many families owing more on their mortgage than their home is worth. The downturn in real estate, which is partly driven by a growing outflow of speculative capital from China, will weaken domestic demand and further slow the economy.

Zheng Zizhen, labour expert at the Guangdong Academy of Social Sciences, told the South China Morning Post on October 17 that the “big ships” of manufacturing were sinking because of the recession in the US and Europe. “And we do not know how long the others can stand. It all depends on how strong they are, so the government should be prepared for possible labour problems,” he warned.

The situation is no different in the region around Shanghai—another major manufacturing area. On October 7, Zhejiang River Dragon Textile Printing & Dyeing Co, one of the largest factories of its kind in China, shut down, leaving 4,000 workers in Shaoxing city jobless. Hundreds of workers joined protests, even as suppliers and creditors were busy looting assets from the complex. More than 10,000 textile companies throughout China went out of business in the first half of this year—that is, before the full impact of US financial crisis in September.

A program broadcast by state-run CCTV on September 13 focussed on the situation in Shengze, the “silk capital” in Jiangsu province, where 2,400 textile firms employed 250,000 workers. The reporter explained: “You can see a lot of small textile enterprises in Shengze. Most of them have only 30 or 40 machines and 10 or 20 workers. These companies are mostly working hard to just get by; some are closing down for a period and then starting up again. Although some are still in production, they are increasing inventory, like the company behind me here. According to locals, they haven’t been operating since Chinese New Year [in February]. For companies like this, no one is sure who will make it.”

Most migrant workers were staying put, hoping that things would get better. They depended on whatever shifts were available to get by. At Hengli Chemical Fibre, a large firm, the workforce had already been slashed by 1,500 jobs, due to increases in productivity. While the stronger companies may survive by hiring fewer workers, the small firms that employ the bulk of workers can only cut costs and wages or go bankrupt. “This has put many migrant workers in a very difficult situation,” CCTV explained.

With 90 percent of its economy dependent on silk-related textiles, Shengze is just one of many manufacturing cities in eastern China that specialise in a single product. There are “shoe” towns, “zipper” towns, “air conditioner” towns and “sock” towns—each with hundreds of thousands and even millions of workers dependent on the production of just one commodity. Once celebrated for their large numbers of successful new entrepreneurs, these towns and cities are now highly vulnerable to global recession.

As the full force of the economic tsunami hits China in coming months, many of these new industrial cities will rapidly be transformed from economic miracles to centres of political turmoil as sacked workers confront factory owners, police and government authorities.

TheStreet.com TV

Dylan Ratigan, CNBC’s Closing Bell Co-Anchor:
“If you go into history you will see that as a CEO of Goldman Sachs he [Pauslon] was one of the folks who testified and pushed and pushed the SEC to allow for more relaxed standards for the assumption of risk — self regulation, but even worse than that, he was one of the ones that said allow us the ability to go 40-1, allow us the ability to take more risks. We have to figure out a way to spread risk around the world such that it will not have negative repercussions — let us do it.

Now at the same time he and the other four banks that were involved: Merrill, Goldman, Lehman, Bear, — all those executives running those banks were then in effect allowed to take the entire bank and go nakedly long on the housing market. The risk of that naked long now pushed on to the tax payer. They were able to bonus themselves hundreds of millions of dollars by being nakedly long in the housing market. It doesn’t take a rocket scientist to get nakedly long or nakedly short anything. Particularly if it goes the other way, you don’t bear the risk.

The question is, is he the best qualified person to unwind this now because he is one of the individuals who advocated the system, or is it outrageous that somebody who was an advocate of the system is now given the authority to disassemble it, not to mention do it is secret? In other words, the Treasury meeting with the bank CEO’s has no transcript. There were no shareholders there. There’s no record of that.”

Ilargi
The Automatic Earth
Denmark joins the list of trouble with a desperate rate hike; Romania does the same. ING Groep loses another 20%, even though it got $14 billion last week. Sterling and the Euro keep plunging (which makes Europeans happy). The Yen is heading for the skies beyond infinity, which takes enormous additional amounts of credit out of the markets, a much bigger issue than you might think.

The IMF announces a plan to help developing nations, but even if we were to assume that they have noble intentions -which we don’t-, it is too little too late. The Fund is now talking to perhaps a dozen countries at the same time, and it can’t seem to conclude any deals. It doesn’t want to, it won’t, and it can’t. There’ll be token amounts handed out, but only to countries that agree to give up what can basically be labeled their sovereignty.

The Fed’s huge dollar swap injections included only the “richest economies” (it’s starting to get funny just to write that). For all the rest, it’s every man for himself. So now the poorer nations face steeply rising interest rates on their loans. Not good. East Asian stock exchanges lost $860 billion this week, and they come with an $80 billion rescue plan. Anybody got a calculator?

I don’t think the world markets have ever had a Black and Blue Sunday, but they could see a first. Investors have lost all confidence in Russia, and even though it has huge foreign reserves, there is a breaking point in every system. However, I still doubt that Russia will be exposed as the weakest link.

There is simply no way that all the holes around the planet can be plugged for much longer; it’s a matter of days now. Trillions of dollars ‘worth’ of global equity value have vanished today alone, regardless of Wall Street. We have started down the path towards the worst financial crisis in history, an unprecedented event. Don’t listen anymore to anyone anywhere saying there ‘might’ be a recession. This is a depression, and it will be much worse than the Great One.

How it will unfold is impossible to predict, but one thing is for sure: the rich will attempt to save themselves at the cost of the poor. And that should be a wake-up message for all of you. Politicians and bankers everywhere will keep insisting that their particular economy is in better shape than the others; they will continue to say this until it is no longer credible. I just see Canada’s central banker and Treasury secretary pull that very rabbit from the same old hat. No matter that personal debt in Canada is higher than in the US, I guess. Politics and economics are faith-based systems.

Politicians lie; it’s an integral part of their job description. It gets them votes. You vote for the guy and gal with a happy tale.

The problem with that is that it prevents their countries from preparing for what is the real, instead of the imaginary, future. And that in turn is a deadly threat for the poorer people within their societies, as well as the poor elsewhere in the world. The sense of entitlement of the middle classes, those who are not among the poor, is being maintained at unrealistic fantasy levels, and for an unrealistic length of time. The proof in the pudding: today’s report that US existing home sales numbers are up. You have to wonder what these folks are thinking. 98% are digging themselves into a hole for life.

Our societies, all of them, need to spread their remaining wealth, because if they don’t, they will fall apart. The poverty this crisis will unload upon our lands will make that inevitable. You either share, or you face street fighting men. Over 90% of the ‘money’ that makes the world go round is make believe, and it’s being renditioned and disappeared at lightning speed, to never be heard from again.

In a sense, that’s a very healthy development. Yet, the way we are approaching it to date will not end well for many of us. Forget the Wall Street “bloodbath”. Unless we change our ways real soon, we are talking real physical bloodbaths. More

Congress Betrayed America

Vote against supporters of the bailout bill (H.R. 1424). Go here to see who voted YES on the Emergency Economic Stabilization Act of 2008.

Source: Yahoo News
Bailout Nation: More Govt. Control of JPMorgan, Citi, BofA Coming
Rather than resolving the crisis, the government’s plan to inject capital into big banks is “merely the appetizer and soup course” in what will ultimate be a multi-course meal, says Christopher Whalen, managing director at Institutional Risk Analytics.

So what does Whalen see as the main course? Greater government control, if not outright ownership, of the nation’s biggest banks, including:

* Citigroup, which Whalen says is the “riskiest” of the group because of its exposure to consumer loans.

* Bank of America, which faces more Countrywide-related litigation and keeps more of its loans in house, meaning it has “whole loan” risk.

* JPMorgan, which is heavily exposed to potential defaults by businesses and is what Whalen calls an “over-the-counter derivatives exchange with a bank attached.”

Whalen, lauded for forecasting the banking crisis when most others were sanguine, believes the U.S. banking system is going to face $250 billion to $300 billion in additional loan losses in the coming 6 to 9 months. In anticipation of such heavy losses, banks are now diverting capital into loan loss reserves rather than seeking to make new loans. So when policymakers and politicians say the taxpayer monies injected into the banks is going to be used to make loans, “they are lying to us,” Whalen says, using the kind of candor others are afraid of or can’t afford.

Press TV
Independent presidential contender Ralph Nader criticizing the USD 700b bailout, demands a new tax against Wall Street financial institutions. “Make Wall Street pay for its own bailout, by implementing a securities speculation tax, starting with derivatives,” Nader told a crowd of several hundred in front of the New York Stock Exchange in lower Manhattan.

He said America’s high-flying financial wizards were guilty of “high economic crimes” which have led to the complete unraveling of the US financial system. A bailout tax, he said, “would have the additional benefit of deterring some of the worst excesses of casino-capitalism”. Nader, 74, who rose to fame in the 1960s as the guiding genius behind ‘Nader’s Raiders’ and the consumer protection movement the largely student volunteer group created to the chagrin of corporate America , also had harsh words for the two main White House contenders — Democratic hopeful Barack Obama and Republican rival John McCain.

“Senator Obama and Senator McCain, willingly or unwillingly, are puppets of corporate power,” Nader said. He also called for federal action to protect millions of cash-strapped Americans at risk of losing their homes to foreclosure, and faulted Obama and McCain for caring more about their own political fortunes than about Americans’ economic travails. The consumer rights activist, who has challenged the two major parties’ dominance of the US political scene, is making his fifth bid for the White House. He ran for the White House as a Green Party candidate in 1996 and 2000 and as an independent in 1992 and 2004.

Infowars.net
The total potential cost of the financial bailout to the U.S. taxpayer is already rapidly approaching $5 trillion, over seven times as much as the meaningless $700 billion bailout bill figure. Analysts have previously marked out the $5 trillion figure as the actual cost, now those predictions are becoming demonstratively accurate. Meanwhile, Hank Paulson has defended government intervention, stating “There’s no doubt that the way to get the maximum bang for the taxpayers here was to invest in banks.”

Based on this Reuters summary and the sources linked within the table, here is a breakdown of the bailout’s cost to taxpayers so far. More

“US buying into financial institutions…is absolute confirmation for me that this is an intentioned shut down of the economy. Each bank or financial institution that the Treasury buys into will give it (and Goldman Sachs) the power to shut each bank down and to decide when it shuts down. It couldn’t be more transparent. They’re going to turn out the lights in an orderly fashion and it’s obviously an attempt at a controlled fast crash. They’ve only got three months left in office. That would essentially make Barack Obama an economic janitor employed by the same firm.

GATA has been right all along and I have said so consistently for many years. The panicked sheep who have been “looking at” gold (late, but not too late) will hesitate and leave their money in stocks, blindly believing we have hit the bottom on Wall Street.

There is no bottom until there is CAPITULATION…Capitulation is when the market hits a bottom and just stays there…for days and weeks. When there are no signs of struggle or life. No heartbeat. No thrashing.” — More

“They are desperate to strengthen the US dollar to support the worldwide bailout, then once all the debt is transferred to the US they will let the dollar go into free fall. I don’t expect anyone to believe me, but the smart ones in the credit pits only get paid if they are right and by the LIBOR and TED spreads I see they don’t believe in it either.” — More

Marc Faber: US will go bankrupt

“Marc Faber was born in Zurich and schooled in Geneva, Switzerland. He studied Economics at the University of Zurich and, at the age of 24, obtained a Ph.D. in Economics magna cum laude. Faber resides in Thailand and is best known for the Gloom Boom Doom newsletter…Faber is famous for advising his clients to get out of the stock market one week before the October 1987 crash.”

Marc Faber said US long term treasury bonds should have “junk” ratings and US government will go bankrupt; it’s only a matter of time.

Out of control foreign debt; enriched bankers and big business made it easy to loot the country and turned a rich country into a poor one, wiping out its middle class in the process. Sound familiar? See what a real financial collapse looks like. This is America in 3 months. Thank the GOP and all the pompous-ass Barney Franks and Nancy Pelosis in Congress: Be afraid. Be very afraid. Watch this video. Watch all of i