NightBlogger

Hotels in Tucson, Ariz., and Hilton Head, S.C., also are about to default on their mortgages. That pace is expected to quicken. The number of late payments and defaults will double, if not triple, by the end of next year, according to analysts from Fitch Ratings Ltd., which evaluates companies’ credit. “We’re probably in the first inning of the commercial mortgage problem,” said Scott Tross, a real estate lawyer with Herrick Feinstein in New Jersey. That’s bad news for more than just property owners. When businesses go dark, employees lose jobs. Towns lose tax revenue. School budgets and social services feel the pinch.

Companies have survived plenty of downturns, but economists see this one playing out like never before. In the past, when businesses hit rough patches, owners negotiated with banks or refinanced their loans. But many banks no longer hold the loans they made. Over the past decade, banks have increasingly bundled mortgages and sold them to investors. Pension funds, insurance companies, and hedge funds bought the seemingly safe securities and are now bracing for losses that could ripple through the financial system. More

The U.S. government is prepared to lend more than $7.4 trillion on behalf of American taxpayers, or half the value of everything produced in the nation last year, to rescue the financial system since the credit markets seized up 15 months ago. The unprecedented pledge of funds includes $2.8 trillion already tapped by financial institutions in the biggest response to an economic emergency since the New Deal of the 1930s, according to data compiled by Bloomberg. The commitment dwarfs the only plan approved by lawmakers, the Treasury Department’s $700 billion Troubled Asset Relief Program. Federal Reserve lending last week was 1,900 times the weekly average for the three years before the crisis. More

Richard Benson
It’s important to realize that this bailout plan adds nothing to economic growth and was necessary to prevent a worldwide global collapse of the financial system. The proposal will shift hundreds of billions of taxpayer dollars to purchase rotten financial assets from Wall Street institutions and banks for more than they are worth. This is all happening as our economy has been weakened by higher unemployment and non-financial corporate failures, and we’re bracing for a worldwide recession that is unfolding in never-ending newspaper headlines. Even now, before America has a newly-elected President and a fresh Congress in office, legislators in Congress have already started discussions to launch another stimulus package. My bet is that the stimulus needed will total at least $500 billion. Trillion dollar federal deficits for the next few years are now inevitable and as this truth sinks in, the consequences will be enormous. More

optionarmageddon
Last week there was a run on money market funds: According to AP: “investors pulled $224 billion…in the seven-day period ended Thursday. On Wednesday alone, about $89 billion was taken out, and another $56 billion was withdrawn on Thursday…” The industry has a total asset base of $3 trillion according to that AP article. Money market assets are constantly rolled over in the commercial paper market, providing the short-term working capital AAA credits like GE and IBM need to make payroll.

The Journal:

Without [money market] funds’ participation, the $1.7 trillion commercial-paper market, which finances automakers’ lending arms or banks credit-card units, faced higher costs. The commercial-paper market shrank by $52.1 billion in the week ended Wednesday, according to data from the Federal Reserve, the largest weekly decline since December.

Without commercial paper, “factories would have to shut down, people would lose their jobs and there would be an effect on the real economy,” says Paul Schott Stevens, president of the Investment Company Institute mutual-fund trade group.

It seems this may have scared the Feds more than anything to date. Instantly, Paulson offered deposit insurance on money market assets in order to prevent further flight. This may have been a big reason why Paulson explained to lawmakers “that we’re literally maybe days away from a complete meltdown of our financial system, with all the implications here at home and globally.” More

Captain Hook
Subterfuge, illusion, and misdirection - this is what the bureaucracy perpetuates on the public every day. Please look over here at the giveaways and presents we have for you while we continue to defraud your children out of a future - all for the greater good you know. Not surprisingly then, the net result of all this is an increasingly debased society, which accounts for our willingness to allow the same for the currency. Quite literally, one couldn’t make this stuff up if you tried, such supposedly wealthy and educated people willing to give up their liberties so easily, but at the same time this has all happened before (think Rome - Bread And Circuses), just not on this scale. And nobody wants to touch the subject matter because it’s just that ugly, a dark reflection on what we have become. A society of gamblers and drug addicts who need a variety of fix every day just to get by.

By extension then, this tendency is seen within investing habits as well, where once conservative markets have literally turned into casinos, with all caution thrown to the wind. And it’s important for you to recognize this, that present trading mechanisms are not ‘markets’ anymore, but instead ‘betting parlors’, which accounts for the unbridled growth of derivatives and toxic paper contracts designed to swindle your money in being heavily in favor of the house. Certainly the most flagrant example of this is found in the rise and fall of various toxic securitized real estate debt schemes perpetuated by ‘the establishment’ that helped blow that bubble up far greater than ever should have been allowed. Having worked through the initial effects of subprime in the markets for the most part at present, which has finally set our corrupt financial community on the road to ruin where it belongs, process continues to unfold in this regard.

Oh yes, and corrupt they are, our present day financial community, and more. They are bold and reckless as well. Exactly how bold and reckless are they, and why should this matter to you? If I may, I would like to borrow from one of Jim Sinclair’s recent dispatches that sums the situation up nicely in my opinion, as follows:

“The banks think that they have established the principle that if they over borrow enough, if they are reckless enough, if they expand enough, they become “too big to fail” and their losses will be borne by the taxpayers and all holders of the currency, while they keep their personal profits and bonuses.”

So you see, the reason one should care about this is in adding insult to injury, an equally corrupt bureaucracy expects the public to pay for the financial community’s excesses on the premise to do otherwise would level the system. Talk about holding a gun to your head, no? And of course this is in fact the situation, while at the same time banks and the bureaucracy also conspire to suppress precious metals to remove alternatives for those who contemplate exiting the system. In a nutshell then, the markets and financial system are a function of the government sponsored Ponzi Scheme (the largest ever — known as the Fed) being perpetuated by the banks, now intensifying as an implosion approaches. More

You have heard that Fannie and Freddie, their gentle names notwithstanding, may cripple the financial system without a large infusion of taxpayer money. You have gleaned that jobs are disappearing, housing prices are plummeting, and paychecks are effectively shrinking as food and energy prices soar. You have noted the disturbing talk of crisis hovering over Wall Street. Something has clearly gone wrong with the economy. But how bad are things, really? And how bad might they get before better days return? Even to many economists who recently thought the gloom was overblown, the situation looks grim. The economy is in the midst of a very rough patch. The worst is probably still ahead. Job losses will probably accelerate through this year and into 2009, and the job market will probably stay weak even longer. Home prices will probably keep falling, shrinking household wealth and eroding spending power. “The open question is whether we’re in for a bad couple of years, or a bad decade,” said Kenneth S. Rogoff, a former chief economist at the International Monetary Fund, now a professor at Harvard. More

Michael Hunter
London equities fell further Wednesday after initial support for the troubled financial sector proved unsustainable. The FTSE 100 gave up modest early gains to stand 70 points lower at 5,101.0 in afternoon trade, a loss of 1.4 per cent after closing at its lowest level since October 2005 in the previous session. Stubborn worries about the health of the wider financial system delivered more punishment for the banks, leading the wider market lower. Royal Bank of Scotland fell 9 per cent to 152.3p amid dealing room speculation, discussed on FT Alphaville’s Markets Live, about the potential consequences of its exposure to the US subprime mortgage sector. HBOS also lost 4.6 cent, to 248p, ahead of Friday’s deadline for its 275p rights issue and Barclays was 2.4 per cent lower at 254p. The decline in Barclays was prompted in part by a report that the Chinese government had barred China Development Bank from further investment in the bank, but people close to Barclays said the report was incorrect and CDB would go ahead with its investment as planned. More

Richard Daughty
There is only one way to “protect the financial system”, and that is to stop the damned Federal Reserve from creating all the excess money and credit that finances the inflated crap that ends up endangering “the financial system” because so many people have lied to so many people to have them invest so much money into so many over-valued things, and now losses are inevitable, and on a scale that dwarfs the economies of the world.

I tried to leap to my feet to shout, “No! No! No! The Fed is supposed to protect the value of the dollar, which it has completely failed to do, and now it has created so much money and so much inflation in asset prices that they created the ‘unacceptable systemic risk’ you are talking about, you moron! In fact, the Federal Reserve is so incompetent and stupid that the dollar has lost almost 98% of its buying power since 1913 when the Fed was authorized by a few corrupt Congressional politicians on Christmas Eve, 1913 when everybody else was away! And now you want to give the Fed more powers? You’re a freaking imbecile or insane! Or both!”, but I found that was frozen in outrage! I could not move!

Hell, the recent downdraft in the S&P500 index to just over 1300 means that anybody who bought shares in this index since October 2006 has lost money! And now, because so many people are getting ready to lose so much money, here is the Secretary of the Treasury wanting permission to take over the finances of every company in America! Hahaha! Un-freaking-believable! We’re freaking doomed! Ugh. More