Archive for the ‘Financial Collapse’ Category

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GE, BofA sell $18B in FDIC debt

Monday, March 9th, 2009

Bloomberg Story

Just a day after the FDIC announced it may be insolvent this year – and with responsible smaller banks crying foul (We’re paying for the mistakes of the reckless banks), GE Capital (which was NOT a bank) has issued $8B in bonds guaranteed by the FDIC and BofA (which recently said it was a mistake to accept TARP funds) has issued $8.5B in FDIC backed loans because Credit Default Swaps on their own lending is getting too expensive (because people selling the swaps believe the chance of default is going up).

If CitiGroup is allowed to fail, there is really no doubt the FDIC goes with it.  All the cards are on the table now, and the United States is holding a pair of 3s and bluffing – and the other people at the table know the cards we are holding.

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Posted in Bankruptcy Watch, Currency Watch, Financial Collapse, Politics | No Comments »

Want to buy 36 radio stations for $1,000?

Friday, March 6th, 2009

That’s for all 36 stations, not for each one.  Details here

Davidson Media group had acquired these stations over time – they mostly low power stations in small markets in the Southeastern US – carrying Spanish language programs or gospel music.

Sanjay Sanghoee has stepped forward and agreed to pay $1,000 to buy the entire company – AND responsilbity for the $2 billion in debt that was used to acquire these stations.

Who is he?  Here is his description from the web site for his novel about corporate crime and corruption.

“Sanjay has an MBA from Columbia Business School and was an investment banker with Lazard Freres and Dresdner Kleinwort Wasserstein. He also worked from 1992-1995 with Strategic Intelligence Network, Inc., a spinoff from Kroll Associates. During his time with SINI, he was involved in all facets of corporate investigative work, including liaising with ex-law enforcement officers to conduct due diligence on business transactions.”

and his book was about:

“Set in the secretive world of multi-billion dollar mergers and ruthless plays for money and power, Merger takes readers behind the closed doors of Wall Street to witness the shocking dealings of corrupt CEOs and unethical bankers who violate the public trust for their personal gain – similar to the real-life incidents at Enron and WorldCom. ”

Feel free to connect any dots you see.

Posted in Bankruptcy Watch, Financial Collapse | No Comments »

GE Credit watch

Friday, March 6th, 2009

Bloomberg Story

Back when I was in college in the mid 1970s, I was taught that General Electric was a good substitute for the entire US Stock Market (this was long before SPDRs and index mutual funds).  GE had their hands in so many different businesses that it was as diversified as a single company could get.  One of the things GE owns is NBC Telemundo, which owns MSNBC, which Keith Obermann owns.

Another thing GE does (through GE Capital)  is invests money in commercial real estate, home mortgages and investments in Eastern Europe, which is falling apart faster than the United States.  One of the strategies GE Capital has to keep itself “cash flow positive” is to raise the rent rates on its empty shopping centers and vacant office space.

Back before it was apparent that Candidate Obama would become President, GE’s common stock was trading around $36 a share.  It’s now around $6 a share.  If GE goes under, the fat lady is truly singing.  Good job Mr Obermann.

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Posted in Bankruptcy Watch, Financial Collapse | No Comments »

FDIC to borrow its way to solvency

Friday, March 6th, 2009

The “solution” to the FDIC being insolvent is for the US Treasury to loan the FDIC $500 billion (It currently insures around $4 trillion sitting in bank accounts – probably more by now)

The problem with this?  The total revenue the FDIC raises by assessing a fee to banks on their insured deposit accounts is $2 billion a year.  It takes a long time to pay back $500 billion at $2 billion a year.

To dig the hole deeper, part of the mortgage cram-down bill’s language (probably to blackmail the American Banker’s Association into supporting it) is making the “temporary” insurance limit raise from $100k to $250k per account permanent.

The stupidity and unintended consequences continue.

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Posted in Financial Collapse, Politics | No Comments »

Don’t catch a falling knife

Thursday, March 5th, 2009

One of the “rules” of investing is don’t try to stop a falling market by trying to stand in its way.  It’s the fast path to poverty.

Yesterday, China decided to follow the prosperity through spending model of Obama/Geithner and announced a large spending program to boost its economy causing the world markets to go up around 3%

Apparently, they have realized the folly of their ways and said “no more”.  Today the free fall continues – down 3.5% before noon, and heading straight down.

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Bankruptcy Watch – Masonite

Wednesday, March 4th, 2009

Bloomberg Story

Not a huge surprise since they mostly make and sell counter tops for new houses.   With 19 million empty houses, unless there is a huge influx of new immigrants, demand for new houses will be very slow for at least a decade.

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Unintended or not?

Saturday, February 28th, 2009

First you demonize people who travel in private planes.  Then you suggest that the President doesn’t really need that new fleet of helicopters after all. 

Well, Textron makes Cessna airplanes, and Presidential helicopters (as a subcontractor to Lockheed/Martin Marietta).  Textron has already maxed out its $3 billion bank credit facility.

Friday, in the midst of all the other chaos, Textron announced it is selling off the portion of its company that makes control systems for military planes, tanks, helicopters, etc… in order to “maintain liqudity”.  They also laid off a significant portion of the Cessna work force that makes mostly private planes.

Do laid off airplane workers count as “jobs lost”, “jobs not yet saved” or “George Bush’s fault”?

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FDIC to raise insurance rates to banks

Friday, February 27th, 2009

Story here

At a time when banks have no place to earn even meager interest safely, the FDIC has announced it needs an “emergency” increase in the insurance rate charged to insure your deposits.

The one time assessment with be 20 basis points ($.20 for each $100 on deposit), expected to generate $15 billion

The ongoing fee will be raised from $.14 to $.16 per $100 on deposit.

This was a completely predictable outcome of the Congressional mandate to increase the FDIC limit to $250k to cover deposits in banks for which no premiums were being paid in the past.  It’s like allowing people to buy house insurance the day after their house burned down.

Thank you John McCain.

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It’s official – CitiGroup caves

Friday, February 27th, 2009

Story here

Citigroup Common stock immediately lost 41% of its value.

*** Update ***
Since the US Government is moving its claim of ownership to the end of the line, Citigroup Preferred stock is zooming up – up 70%….

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NBA offered a “bailout”

Friday, February 27th, 2009

AFP (the French news service) reports that the Sports Business Journal  reports that Bank of America and JP Morgan approached the NBA about lending them $175 million to help them get through the tough times.

Does this mean the $500k governemnt salary cap needs to apply to the NBA?

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Posted in Financial Collapse, Politics | No Comments »

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