NightBlogger

Michael Swanson
We are at a critical point in the economic history of the United States. I know of no other way to put it. The events of last week were of a character that we’ve never seen before. On Friday mortgage lender IndyMac Bancorp became the second largest federally insured financial company to fail after it got hit by a bank run. The Federal Deposit Insurance Corporation took it over. That news may be a big story, but is totally overshadowed right now by the teetering collapse of Fannie Mae and Freddie Mac. Both are in danger of going under and the Bush administration, Federal Reserve, and Treasury Department are now meeting on a daily basis to figure out what to do.

There is no news that would be worse than the collapse of these two institutions and such an event if it happens will have ramifications for the economy and stock market for years to come. Fannie and Freddie buy mortgages and then package them into bonds, which they guarantee. They then sell the bonds to investors, including mutual funds, hedge funds, pensions, annuities - just about any institutional investor you can think of. Odds are that if you own a mutual fund or annuity that you indirectly own a security backed by one of these two institutions. The two of them combined own half of America’s twelve trillion in outstanding mortgages and their failure would be the implosion of the entire financial system. More

TENS of thousands of French workers demonstrated against government plans to reform pensions and the 35-hour work week today, but the biggest labour union conceded turnout was lower than it had hoped. The relatively low participation, by French standards, could encourage President Nicolas Sarkozy to press on with his reforms despite several months of protests over a range of issues. “I’m here to make Sarkozy cave in,” said Alex Boulet, a railway worker waving a union flag in Paris, where police said 18,000 people marched.

Union figures were not yet available. The CGT and CFDT unions had called for protests in more than 120 towns and cities against plans to extend the number of years employees must work to get a full pension to 41 from 40, and to give companies more scope to bypass the 35-hour week. CGT, which had set a target of over a million demonstrators nationwide, said it estimated turnout was 500,000. Bernard Thibault, the head of CGT, vowed to resume the fight when workers returned refreshed from their summer breaks. More

Photo victoria
By David Cho
Accounting tactics conceal a crisis for public workers

The funds that pay pension and health benefits to police officers, teachers and millions of other public employees across the country are facing a shortfall that could soon run into trillions of dollars. But the accounting techniques used by state and local governments to balance their pension books disguise the extent of the crisis facing these retirees and the taxpayers who may ultimately be called on to pay the freight, according to a growing number of leading financial analysts. Read more