Alfred Woody's Kewl Blog [ 椼森 ]: 10/01/2009

Saturday, October 31, 2009

The $189B Recast Problem Targeted Directly at the California Housing Market Of $189 Billion in Securitized Option ARMs $109B in California

It is rather clear that the housing market is muddling through. However, nationwide there has been a spurt in activity directly related to the Federal Reserve holding mortgage rates artificially low and the very expensive tax credit. This is a nationwide issue. But what isn’t a nationwide issue is the option ARM problem. Option ARMs, those lovable furry toxic mortgages that you wouldn’t give to even your worst enemy are still lingering on the balance sheets of many banks. Unlike nationwide housing issues, option ARMs are largely a problem of four states; California, Florida, Nevada, and Arizona. 75 percent of option ARMs sit in these states and 58 percent of all option ARMS are here in sunny California. Option ARMs are a subset of the Alt-A universe. Alternative A-paper includes option ARMs but also includes 30 year stated income loans, interest only loans, and other questionable products that were below prime. Specifically in this article we will look at option ARMs, the amount of option ARM loans outstanding comes to $189 billion that is securitized:

Soruce: T2 Partners LLC

Now do some basic math here. If 58 percent of the face value of the active loans is here in California, we have at least $109 billion in option ARMs just in the state. Keep in mind this is the lower bound estimate since Fitch only looked at securitized option ARMs. If we look at the total universe of these loans, we will find nearly 900,000 loans – 92,000 currently in foreclosure and 139,000 that are seriously delinquent but that leaves the bulk out floating in mortgage purgatory:

Option ARMs are largely a California problem. What is troubling beyond the obvious fact that these mortgages are absolute junk is that many of these loans are part of that infamous shadow inventory that we discuss and I will highlight why there is a false sense of security right now. Currently, we are sitting in the eye of the hurricane:

What is interesting about the above, is that we have largely moved through the subprime debacle which is wave 1 on the chart above. This impacted most states since every state had some volume of subprime loans. Yet the option ARM is largely a bubble state phenomenon. And there is nothing on the current table that is helping this out. This is largely a silent ticking time bomb that will go off in starting in 2010. Where a subprime loan can go badly slowly because of the lack of income from their borrower base, we can expect that many of these option ARMs will implode with strategic defaults. Why? Many of these were made at the peak and a large number are now underwater:

Soruce: T2 Partners LLC

As of January of 2009, 73 percent of all active option ARMs are underwater. In other words, California has $109 billion in option ARMs that have no remedy in this current market aside from foreclosure which lenders are obviously balking at. I would argue that even more are underwater because many of these were made at the peak with low or no down payment. They started out with little to no equity and this was before the California housing market imploded.

So we have established that option ARMs are largely an isolated problem and the majority of these loans are here in California. Many of these loans are going to implode not because of rate resets which adjust to interest rates, but the actual recast volume. Many are entering this stage earlier because of negative amortization caps being hit. Over 90 percent elected to go with the negative amortization payment option and this has actually increased the balance of many of these loans. At least with many subprime loans the balance didn’t grow.

And most of these option ARMs will fail to even qualify for HAMP because they are severely underwater:

So even a 2 percent teaser rate and 40 year extension will do little to fix these problems. The vast majority were stated income so good luck trying to get someone permanently on the HAMP when they have to verify their actual income via W-2s. The shadow inventory in higher priced markets tells us that people are already unable to make their payments on these toxic mortgages and this is validated by some examples in mid tier markets like Culver City, where homes are in pre-foreclosure and simply don’t appear on the MLS or any public stats. But where do they appear? In distress data:

And the above data is actually optimistic. Data released by Fitch in September shows that 46 percent of option ARM loans are now 30+ days late! Compare the actual issues and deterioration even more carefully. About 16 percent of option ARM loans in September of 2008 were 90 days late. September of 2009? The rate has jumped to 37 percent and these are highly distressed properties. These loans have the default characteristic chart trends of subprime loans but with a balance that is much larger and more isolated to a specific state. The reason we are seeing the wave shift forward is because of negative amortization:

Soruce: T2 Partners LLC

It is hard to tell how many of these loans will implode. Most of the loans are here in Southern California, in Los Angeles County if you really want to get specific:

The issue here is that not much can be done about these loans. They certainly don’t qualify for HAMP. Homeowners in many of these areas are more likely going to be strategic. I’ve gotten numerous e-mails from people saying that they have an option ARM and know exactly when their payment will recast. At that time, they will stop paying their mortgage and build up a fund and find a rental before their credit score is hammered by the foreclosure. Rental prices are falling so not a bad time to be a renter either. They figure they can buy about a year of time before losing their home. Why would you even want to work this kind of loan out? The interesting aspect of the option ARM is that it calls the banks on the biggest bluff. You want me to stay and pay my loan? Lower my principal. Otherwise, I walk. The spiking distress data tells you everything you need to know.

Even take the HAMP for example. In many cases, even with a 2 percent teaser and 40 year loan, the payment will be much higher than the negative amortization payment via the option ARM. There is little motivation to move on these. Banks are just buying time on these loans. Their preferred method so far has been to ignore these problems until they come to full fruition. People think the second wave will never come. It is already here! We are already near a 50 percent distress rate for all option ARMs and we have yet to hit the peak recast points – and these are heavily aggregated in California. Yet this isn’t an implosion? These people are the folks that only believe in what they see one step in front. They deny the shadow inventory or claim the tax credit worked. The home buyer tax credit cost the U.S. taxpayer roughly $40,000 for each additional home purchase. Cash for clunkers? $24,000. Incredibly inefficient programs that paper over the real issues. What really has happened is the housing fixes are now more nationwide in appeal (i.e., tax credit, mortgage rates, etc) but certain egregious loans like option ARMs have been isolated to their respective corners. They are on their own to fend for themselves in the state that developed them, California. What more would you expect? 58% are here so why would the other 49 states bail us out on a loan that only greased the mortgage broker commission?

And for those looking at the Case-Shiller or other data showing a minor move up in price, remember that prices are still dropping but the way the data is calculated, it does show minor moves up because of the shift in market sales. Lower priced homes, that subprime and foreclosure wave, made up a bulk of sales for the past year. Now, we are seeing more expensive homes sell but for cheaper prices thus the mix is moving up. For example, a hypothetical home in Pasadena bought in 1998 sold for $200,000. At the peak in 2007 it would have sold for $800,000. The home currently sells for $500,000. The Case-Shiller will show a nice gain even though prices are technically off their peak by a significant number. You can adjust the prices but you get the point. Each additional sale adds to the overall data and the median is at $275,000 for Southern California so it tends to shift the price higher. The median is not a good indicator of future prices. When the bubble took off the housing industry kept pointing to this as proof of sustainable housing prices. We know how that turned out.

Option ARMs are a major California issue. $109 billion is not a tiny number given the loss severity of these loans and this is only on securitized loans – the number is even bigger if we look at loans that are on the bank balance sheets. These can go from current to non-paying in massive waves once those recasts hit. My belief is many will default because of the amount of being underwater:

So what will happen? Expect to see more REOs whether the banks want the home or not. I’ve heard of banks converting the place into a rental but I have seen very little movement thus far. If anyone has seen the rental vacancy rate what do you think this will do to commercial real estate in say, condo conversions that are now shifting to apartments? Unintended consequences galore. In fact, most of the option ARM holders in California are not home owners. They have no equity plus they are constrained to their current location. Are they really a home “owner” in the traditional sense with negative equity? I would argue that they are a homeowner in name only. Home ownership was a way to build wealth through a slow and long-term methodical process. Option ARMs were never meant to be held onto beyond a short period of time and were designed to give mortgage brokers a healthy yield for their corrupt work. The irony is that many of those mortgage brokers that made these loans are out of work and financially strained, while their handiwork is destined to wreck havoc for years to come.

Conclusion

It is rather clear that the option ARM issue is largely targeted to California. Given all the bailouts and moratoriums it is surprising that California is still in horrible shape. But what it boils down to is the fact that these loans will not benefit from current government programs. And they shouldn’t. These will continue to fail because if you haven’t noticed, the underemployment rate of California is now up to 22 percent. So now we are seeing big spikes even in prime loans. Until the job market stabilizes there is little reason to believe a housing turnaround is in store. Option ARMs will fail even if the employment market picks up in California.

JP Morgan Chase now owns Washington Mutual that was an option ARM expert:

And many of these loans are just entering their recast period:

Driving in Southern California you will notice all WaMu locations are now Chase banks. Some ads say welcome to Chase WaMu customers. No, welcome to you JP Morgan and enjoy those options ARMs as they recast in your balance sheet starting in mass in 2010.

Congress: We Can't Help the American Public Because The Dog Ate Our Homework

Elizabeth Warren sums things up pretty succinctly:

The banking lobby is as powerful and deeply entrenched as ever, but it was powerful in the 1930s, too. Nonetheless, the New Dealers learned the Great Lesson: Powerful insiders cannot be permitted to write the rules, and prosperity and security depend on a playing field that supports a vibrant middle class. Today, we face a similar set of questions as we faced then. Will the institutions that created the crisis continue calling the shots and writing the rules, or will Washington take the side of families? Have we learned the Great Lesson?

To date, of course, the White House and Congress are siding with "the institutions that created the crisis" and not families.

As PhD economist Craig Pirrong makes clear, all of the talk of "reform" and "regulation" coming out of Washington is just for show (without any substance), to appease the populist anger:

Rather than a serious effort to address systemic risk, this [proposal on bank oversight] seems to be populist boob bait, a response to popular outrage against taxpayer banking bailouts, rather than a serious attempt to address TBTF. Not a surprise, and quite understandable, but not a major improvement of incentives.

Indeed, a 725-word story from Harper's proves (again) that Congress is trying to fool the American people:

Everyone rational knows that there is an enormous need to seriously reform the derivatives market, but [on October 7th, the House Financial Services] committee, headed by Congressman Barney Frank (D-Wall Street), invited a panel of eight guests who were distinguished by their uniformly pro-industry positions...

In response to complaints from Americans for Financial Reform, which represents hundreds of consumer groups and labor unions, the committee issued an invitation—the night before the hearing was held — to Rob Johnson of the Roosevelt Institute. For the committee, the last minute inclusion of Johnson — a former managing director at Bankers Trust Company and former economist at the Senate Banking Committee and Senate Budget Committee — apparently constituted sufficient balance.

Predictably, witnesses at the hearing trotted out positions urging caution in regard to the matter of reform. Derivatives and other exotic financial devices have reaped the finance industry vast profits, but for Hixson of Cargill the common man and woman would be the real losers if Congress were to act too severely. “We offer customized hedges to help bakeries manage price volatility of their flour so that their retail prices for baked goods can be as stable as possible for consumers and grocery stores,” he told the committee’s wagging heads. “We offer customized hedges to help a restaurant chain maintain stable prices on their chicken so that the company can offer consistent prices and value for their retail customers when selling chicken sandwiches.”

Johnson, who came last, offered the only serious critical viewpoint, saying that the American public had been “quite demoralized by…the bailouts that we experienced last fall.” After about five minutes of his testimony, Congresswoman Melissa Bean—another industry-funded committee member who chaired the hearing because Frank was absent—had heard enough. “I’m just going to ask you to wrap up because we’re running out of time,” she told Johnson.

Johnson gamely continued. “When I hear the testimony today that are largely financial institutions and end users, I believe that I represent a third group that comes to the table, which is the taxpayers, the working people of the United States,” he said.

“I do need a final comment,” Bean interjected seconds later.

That put an end to Johnson’s testimony. “I was just called to this hearing last night, so I will provide detailed comments on your bill and a statement for the record that will finish my comments,” he concluded.

About five days later Johnson submitted his full testimony to the committee, to be included on its website along with the statements of the other eight panelists. When it wasn’t posted, Johnson asked Lynn Parramore, editor of the Roosevelt Institute’s blog, to see what was up. Parramore emailed and spoke to staffers at the Financial Services Committee, and received a number of explanations for why Johnson’s testimony had not been posted: first she was told it hadn’t been received, then that it had to be submitted as a PDF, then that the committee was having IT problems. “I couldn’t decide whether it was incompetence or mischief, but I began to suspect the latter,” Parramore told me.

Finally, she was informed that the committee’s general counsel would not allow posting of the testimony because Johnson had not submitted it during the hearing. (Of course, since Johnson had been invited at the last minute it was impossible for him to fulfill this pointless requirement.) So you still can’t read Johnson’s prepared testimony at the committee website, but you can check it out on the Roosevelt Institute’s blog.

Meanwhile, Frank’s committee has put forth its “reform” bill. “Too tepid, too weak, too late,” Johnson says of the legislation. “Very industry influenced. We had a crisis and they are pandering to the perpetrators.”

Yves Smith summed it up well:

The House Financial Services Committee has refused to publish his testimony, offering “the dog ate my homework” level excuses.

Ron Paul: Let the dollar prove itself

Editor's note: Ron Paul is an 11-term Republican U.S. representative from Texas who made a bid for the GOP presidential nomination in 2008. His book, "End the Fed," was recently published by Grand Central Publishing.

Washington, D.C. (CNN) -- A growing number of Americans are becoming aware of the Federal Reserve System, what it is, how it has precipitated our financial crisis, and how it continues to pursue policies that delay economic recovery and weaken the dollar.

The Fed's actions, combined with the federal government's bailout bills and stimulus packages, have struck a nerve in the American people.

Recent polls have shown that more than 75 percent of Americans support efforts to audit the Fed, something which my bill, HR 1207, the Federal Reserve Transparency Act, aims to do. HR 1207 has the support of 304 members of Congress, and the Senate version of the bill, S. 604, is supported by 31 U.S. senators.

Fed Chairman Ben Bernanke has embarked on an ambitious program of monetary expansion, more than doubling the monetary base to almost $1.9 trillion and doubling the size of its balance sheet to over $2 trillion, placing the American economy in a precarious position.

If all this excess money begins to be loaned out, the Fed risks creating a hyperinflationary crisis similar to 1920s Germany. If the Fed contracts this money, it risks harming the banks it desperately wants to see bailed out.

It is imperative that the American people know what the Fed is up to, how much money it loans to banks and what types of agreements it enters into with foreign banks and governments. Just about all of this information is exempt from audit or oversight. The Fed's actions directly affect the value of the dollar, which is coming under increasing pressure from our foreign creditors. If we do not wish to see a complete collapse of the dollar, the Fed needs to be subject to a strict audit of its actions, if not an outright abolition of its charter.

While I would like nothing more than to see the Federal Reserve abolished, it is not absolutely necessary to do so with direct legislation.

The Fed's influence comes about because of its monopolization of the creation of money. If we could abolish the government monopoly on the creation of money, the Federal Reserve would be forced to clean up its act or go out of business. Economists know that monopolies lead to reduced output and higher prices, a suboptimal allocation of resources. This applies as well to the market for circulating currency as it does to markets for any other good.

In the previous Congress I introduced legislation that would eliminate the three major barriers to competition in currency and break the Fed's stranglehold on money.

The first barrier: Legal tender laws, which Congress does not have the Constitutional authority to enact. Historically, legal tender laws have been used by governments to force their citizens to accept debased and devalued currency.

Gresham's Law describes this phenomenon, which can be summed up in one phrase: Bad money drives out good money. In the absence of legal tender laws, Gresham's Law no longer holds. If people are free to reject debased currency, and instead demand sound money, sound money will gradually return to use in society.

The second barrier: laws that prohibit the operation of private mints. Certain sections of U.S. code classified as anti-counterfeiting statutes were in fact intended to shut down private mints that had been operating in California. There is no reason to ban private companies from minting gold and silver coins to compete with the dollar.

All currencies are based on trust, trust that the issuing authority will not debase the currency. If it becomes known that the issuer of a particular currency is minting underweight coins, people will stop accepting that currency and that company will go out of business. If someone else attempts to counterfeit that currency and pass those coins, there are sufficient counterfeiting laws on the books to prosecute those counterfeiters.

Merchants and individuals are free to choose which currencies they accept, and in the absence of legal tender laws I believe that alternative currencies will gain more traction.

Stores today can accept whatever currency they like. In Washington, DC a few years ago, some stores began accepting euros from international tourists. Harrod's in London accepts pounds, euros, and dollars. There is no legal requirement in the United States for a store to accept dollars for non-debt transactions.

If you walk into a 7-11 to buy a soda, the clerk doesn't have to accept your dollars, he could demand euros, silver, or copper. But because legal tender laws backing the dollar have caused the dollar to drive other currencies out of circulation, it is easier for stores to accept dollars.

However, most stores also accept credit cards, personal checks, and debit cards, none of which are legal tender. Some stores are moving to credit card-only transactions to minimize costs, which they are allowed to do.

Under a system of competing currencies, it would be to the advantage of stores to accept as many currencies as they could, in order to attract a wide range of customers. Stores that only accepted one currency would see their customer base shrink. The use of credit cards could simplify things just as it does today when Americans travel to Europe. They pay in euros with their credit card, and their card company bills in dollars. The market will find a solution to any problems that might arise.

The final barrier to competing currencies: Laws that assess capital gains and sales taxes on gold and silver coins. Under federal law, coins are considered collectibles, and are liable for capital gains taxes. These taxes actually tax monetary debasement. The purchasing power of gold may remain relatively constant, but as the nominal dollar value increases because of a weak dollar, the federal government considers this an increase in wealth and assesses taxes.

Thus, the more the dollar is debased, the more capital gains taxes must be paid on holdings of gold and other precious metals. For individuals who may wish to use gold and silver in everyday transactions, this can quickly become a complicated and costly burden.

The long-term strength of the dollar will only be weakened by maintaining the Fed's monopoly on our monetary system. Our foreign creditors are already moving to dethrone the dollar as the world's currency.

The prospect of American citizens also turning away from the dollar toward alternate currencies should provide an impetus to the U.S. government to regain control of the dollar and halt its downward spiral. Restoring soundness to the dollar will remove the government's ability and incentive to inflate the currency, and provide stability to the financial system. With a sound currency, everyone is better off, not just those who control the monetary system.

The opinions expressed in this commentary are solely those of Rep. Ron Paul.

U.S. Home Vacancies Rise to 18.8 Million on Defaults

Oct. 29 (Bloomberg) — About 18.8 million homes stood empty in the U.S. during the third quarter as banks seized properties from delinquent borrowers and new home sales fell in September.

The number of vacant properties, including foreclosures, residences for sale and vacation homes, rose from 18.4 million a year earlier and 18.7 million in the second quarter, the U.S. Census Bureau said in a report today. The record high was in the first quarter, when 18.95 million homes were vacant. The homeownership rate, meaning households that own their own residence, stood at 67.6 percent.

The worst U.S. housing crash since the Great Depression has led to a record number of foreclosures and shaved almost a third off property values. The S&P/Case-Shiller Index of 20 cities in August was 29 percent below its 2006 high, after rising for four consecutive months.

“We are bumping along the bottom of the housing market,” said James Lockhart, vice chairman of WL Ross & Co. and the former director of the Federal Housing Finance Agency. “There is the potential for another swing down.”

Sales of new U.S. homes fell 3.6 percent in September to an annual pace of 402,000, the Commerce Department said yesterday. That was lower than the 440,000 median forecast of 75 economists surveyed by Bloomberg News.

Vacancy Rate

The percentage of all U.S. homes empty and for sale, known as the vacancy rate, rose to 2.6 percent from 2.5 percent in the second quarter. It hit an all-time high of 2.9 percent in the first and fourth quarters of 2008, the Census Bureau said.

There were 130.3 million homes in the U.S. in the third quarter, according to the report. In addition to the 2 million empty properties for sale, the report counted 4.6 million vacant homes for rent and 4.6 million seasonal properties that are only used for part of the year.

Foreclosures are included in a part of the Census Bureau that also includes vacation homes intended for year-round use and homes that are unoccupied because they are under renovation or tied up in legal proceedings. There were 7.7 million such properties empty in the first quarter, up from 7.5 million a year earlier, the report said.

Foreclosures could also be counted as vacant homes for sale or rent, or as owner-occupied properties if lenders have not yet evicted previous owners, the federal agency said.

Job Losses

Companies have shed more than 7 million jobs since the recession began in December 2007, cutting demand for homes and eroding the consumer spending that makes up about 70 percent of the world’s largest economy. In September, the unemployment rate rose to 9.8 percent, the highest in more than a quarter century.

U.S. foreclosure filings climbed to a record in the third quarter as lenders seized more properties from delinquent borrowers, according to RealtyTrac Inc. in Irvine, California. A total of 937,840 homes received a default or auction notice or were repossessed by banks, a 23 percent increase from a year earlier, the data company said.

U.S. banks in the second quarter held $34 billion of properties acquired through foreclosure, including repossessed homes and condominium projects gone bust, according to the Federal Deposit Insurance Corp. in Washington. That’s almost double the $18.9 billion of real estate a year earlier.

By Kathleen M. Howley

US Rich-Poor Income Gap World’s Most Extreme

Income inequality in the US is now the most extreme of all countries. The 2008 OECD report ‘Income Distribution and Poverty in OECD Countries’ concludes that the US is the country with the highest inequality and poverty rate across the OECD and that since 2000 nowhere has there been such a stark rise in income inequality as in the US. The OECD finds that in the US the distribution of wealth is even more unequal than the distribution of income.

The increase in US income inequality in the 21st century coincides with the offshoring of US jobs, which enriched executives with ‘performance bonuses’ while impoverishing the middle class, and with the rapid rise of unregulated OTC derivatives, which enriched Wall Street and the financial sector at the expense of everyone else. Millions of Americans have lost their homes and half of their retirement savings while being loaded up with government debt to bail out the banksters who created the derivative crisis. The financial insiders running the Treasury, White House, and Federal Reserve (Rubin , Greenspan etc.) shifted to taxpayers the cost of the catastrophe that they had created. Goldman Sachs, saved with the public’s money, recently announced that it was paying massive six and seven figure bonuses to every employee.

ABCD

According to the OECD report, Great Britain has the 7th most unequal income distribution in the world. After the Goldman Sachs bonuses, the British will move up in distinction, followed by Merkel’s Germany.

Source: Rense

U.S. economic growth claims are fabricated on more debt spending

(CounterThink) – While the White House is celebrating a 3.5% reported growth in GDP last quarter — the first economic growth in a year — they conveniently forget the simple fact that it’s easy to fake economic growth with debt spending.

This so-called “growth” was really just the result of the U.S. Treasury flooding the economy with more debt-ridden “stimulus dollars” that will drive the nation even deeper into irreversible debt. That’s not genuine economic growth, it’s just really bad economic planning.

For example, if a family is living on credit card debt to buy groceries, and they’re two years behind on credit card payments, and then they suddenly take out a huge cash advance against their credit cards so they can spend even more money, that’s not “economic growth.” That’s just more stupid spending.

The U.S. government has done precisely the same thing: It’s spending money it doesn’t have, then claiming “an end to the recession” because the nearly $1 trillion in stimulus dollars did, indeed, manage to spend a lot of money and create “economic activity.” But rather than being good news, it’s actually really bad news because it’s all borrowed money.

Speaking of stupid economic ideas, $3 billion of those stimulus dollars were used to buy new cars as part of the U.S. government’s “clunkers” program. An analysis of the program reveals that taxpayers ended up paying $24,000 for each additional car sold under the scheme (http://money.cnn.com/2009/10/28/aut…). In effect, the “cash for clunkers” program was a giant government handout to Japanese car manufacturers. Sure, it counts as economic activity (and adds to the nation’s GDP), but is it really an intelligent way to spend taxpayer dollars?

Similarly, the tiny surge in home sales was spurred by yet another government handout: The $8,000 tax credit for first-time home buyers. Although such a stimulus appears to create economic activity, it really just throws more debt money at a nation that’s already buried under so much debt that foreign investors are increasingly selling the dollar and buying other currencies.

Real economic growth requires more people having real jobs that produce real goods or services. And that’s simply not happening in America. According to Labor Department statistics, 530,000 Americans file for unemployment claims last week alone. Tens of millions are out of work, and there’s been no growth whatsoever in terms of new job openings.

The White House can cheer its fabricated 3.5% growth in GDP, but real economists know the difference between genuine economic growth and a debt spending blip. Gee, if spending more debt money is the way to prosperity, then why not just throw $100 trillion and boost the GDP by 350%?

The answer is because debt costs you money, which means this 3.5% growth in GDP is going to cost the nation probably 4% in economic punishment somewhere down the road. When it comes to economics, there’s no such thing as a free lunch, and the laws of compounding interest eventually cause every debt spending spree to come to a crashing close.

The United States of America is not immune to the laws of economics any more than you or I.

Source: Counter Think

Turkey to drop dollar in trade with Iran, China

" Turkey is switching to national currencies in trade with Iran and China, ending dependence on the U.S. dollar and the euro for about 20 percent of its commodity turnover, local media reported on Wednesday."

Continue reading »

Carl Icahn lends CIT a hand

The embattled small business lender gets a $1 billion credit line from a onetime foe as it tries to push through a restructuring plan.

NEW YORK (CNNMoney.com) -- Small business lender CIT Group got a hand Friday from a most unlikely source: a billionaire activist investor who has spent the past month trying to foil the company's restructuring plans.

New York-based CIT (CIT, Fortune 500) said Friday it reached an agreement under which Carl Icahn will support the firm's restructuring. Icahn's hedge fund firm, Icahn Capital LP, will also provide CIT with a $1 billion credit line.

The credit line can be used as debtor-in-possession financing if CIT ends up filing for Chapter 11 bankruptcy protection -- as the company has threatened to do should bondholders fail to support its restructuring plan.

CIT wants to restructure its debt to slash its borrowings by $5.7 billion. Bondholders who sign off on the plan would get a smaller amount of new bonds and equity in the revamped firm, without forcing CIT to go through the bankruptcy courts.

This week, Icahn offered to buy some CIT debt from retail investors who he said had been "disadvantaged" by the terms CIT was offering.

Bondholders had to submit their final say on CIT's plans by Thursday evening. On Friday, the company had no details on whether bondholders had accepted the offer.

However, Reuters reported late Friday that holders of about 90% of its unsecured bonds have approved the prepackaged bankruptcy, citing two sources familiar with the matter. The company needed two-thirds approval.

But CIT is still counting ballots to see if half of the voting bondholders have approved the deal, a necessary condition, according to a person familiar with the matter cited by Reuters

The company said it had received more than 150,000 ballots and that once the final tally had been reached, the company's board of directors would make a decision about its fate.

CIT shares, which have dropped 80% this year as the company struggles to raise new money, were off 18% in midday trading to about 80 cents.

Separately, the company said in a filing with the Securities and Exchange Commission Friday that it had struck an agreement with Goldman Sachs (GS, Fortune 500) to change the terms of a loan it had originally sought from the Wall Street firm in June.

In reducing the size of the loan to $2.125 billion from $3 billion, CIT Group will pay Goldman a termination fee of $285 million and will post $250 million in collateral.

In return, Goldman agreed not to terminate the credit facility if CIT files for bankruptcy.

Prior to Friday's announcement, Goldman Sachs was poised to collect $1 billion if CIT were to file for bankruptcy, according to reports.

Fortune's Colin Barr contributed to this report.

新疆騷亂19人判監‧刑期3年至終身監

（中國‧北京）中國以危害國家安全罪名，判處新疆19人3年至終身監禁刑期，其中一些被告與新疆“7．5”騷亂有關。

據中新社10月23日的報導，被告皆為維吾爾人，被控危害國家安全。

報導說，集團首腦被判終生監禁，罪名包括成立一個組織，煽動人們違抗政府法規及倡議發動“聖戰”。

他也被指計劃在“7．5”騷亂後在伊犁組織非法抗議，但後來因當地保安森嚴而放棄計劃。

另10人被判3至15年刑期，罪名為進行分離主義活動及意圖傷害，一些與烏魯木齊騷亂有關。

另外，新疆高級人民法院駁回烏魯木齊騷亂上訴案，在21名被告，9人維持判死，3人判死緩。

21名被告涉及故意殺人、放火、搶劫等罪名，18人提出上訴，全被駁回，其中9人被判死刑，3人被判死刑，緩刑2年，其餘人士分別被判無期徒刑及有期徒刑。

中國‧享年98歲‧航天之父錢學森逝世

（中國‧北京）中國科學巨星錢學森於今日（週六，10月31日）早上在北京逝世，享年98歲。

錢學森是中國航天科技事業的先驅和傑出代表，被譽為“中國航天之父”和“火箭之王”。

中國導彈之父錢學森周六在北京逝世，享年98歲；錢學森曾主持完成中國火箭技術建立規劃，參與兩彈一星研制

曾在美“軟禁”5年

他也是中國近代力學和系統工程理論與應用研究的奠基人和倡導人，曾主持完成中國火箭技術建立規劃，參與兩彈一星研制。

錢學森於1911年12月11日出生，浙江杭州人。他於1935年赴美國深造，分別在麻省理工學院航空工程系及加州理工學院學習，獲博士學位。他曾在加州理工學院航空系、麻省理工學院航空系及加州理工學院噴氣推進中心任職教授。

錢學森與他人合作完成的《遠端火箭的評論與初步分析》，奠定了地對地導彈和探空火箭的理論基礎；與他人一起提出的高超音速流動理論，為空氣動力學的發展奠定了基礎。

領導“兩彈結合”試驗

在美期間，美國政府指控錢學森竊取機密企圖運回中國和隱瞞共產黨員身份，取消他的工作證。他要求返回中國，但被美國“軟禁”5年，終在1955年獲准離開美國。

1956年初，中國國務院、中央軍委根據他的建議，成立了導彈、航空科學研究的領導機構——航空工業委員會，並被任命為委員。

1956年，錢學森受命組建中國第一個火箭、導彈研究所——國防部第5研究院並擔任首任院長。他主持完成了“噴氣和火箭技術的建立”規劃，參與了近程導彈、中近程導彈和中國第一顆人造地球衛星的研制。

錢學森直接領導了用中近程導彈運載原子彈“兩彈結合”試驗，參與制定了中國第一個星際航空的發展規劃，發展建立了工程控制論和系統學等。

今年9月，錢學森被評為“100位新中國成立以來感動中國人物“。

錢學森生平
被譽為“中國導彈之父”

錢學森1911年12月11日出生，浙江杭州人，被譽為“中國導彈之父”，“中國火箭之父”，“導彈之王”，2007年被評為感動中國年度人物。

錢學森1934年畢業於交通大學機械工程系，1934年赴美留學，先後在麻省理工學院和加利福尼亞理工大學學習，考取博士學位。

錢學森隨後留在美國任講師、副教授、教授以及超音速實驗室主任和古根罕噴氣推進研究中心主任，並從事火箭研究。

1950年開始爭取回歸祖國，當時美國海軍次長金布爾說：“錢學森無論走到哪裡，都抵得上5個師的兵力，我寧可把他擊斃在美國也不能讓他離開。”因此錢學森受到美國政府迫害，失去自由，歷經5年於1955年才回到祖國。

衝破阻力回祖國

1955年10月，經過周恩來總理外交上的不斷努力，錢學森衝破種種\阻力回國，1959年加入中國共產黨。曾任中國科學院力學研究所所長，第7機械工業部副部長，國防科工委副主任等職，現任中國科技協會名譽主席等職。

錢學森自1958年4月起，長期擔任火箭導彈和航天器研製的技術領導職務，對中國火箭導彈和航天事業的發展作出了重大貢獻，曾參與兩彈一生研制。

1991年10月，國務院，中央軍委授予錢學森“國家傑出貢獻科學家”榮譽稱號和一級英雄模範獎章。

做人堅持4大原則

錢學森一生做人有四項原則，就是不題詞、不為人寫序、不出席應景活動、不接受傳媒採訪。

錢學森愛好廣泛，平日常去參觀書畫展，對國畫藝術有自己的見解。他還對書法、詩詞、音樂認識頗深，除貝多芬和莫札特的交響樂外，也喜歡中國佛教儀式和宮廷禮儀等古典音樂，引用詩詞更是信手拈來。

敬重錢學森貢獻
中國領導人多次探望

中國國家領導人胡錦濤、溫家寶十分關心為中國科技事業作出傑出貢獻的錢學森，曾多次登門看望。

2008年1月19日，在新春佳節即將到來之際，胡錦濤來到錢學森家中，親切看望這位老先生，代表黨中央向他表示衷心的祝福。

對這位“國家傑出貢獻科學家”，溫家寶始終心存敬意。從上1980年代中後期，溫家寶經常和時任中國科協主席的錢學森一起研究工作，並多次書信往來。溫家寶每次登門看望錢老，兩人都親切交談。

溫家寶近年來曾四次看望錢學森。今年8月6日，在新中國成立60週年之際，溫家寶冒著細雨，專程登門看望為中國科技事業作出突出貢獻的錢學森，向他致以親切的問候和良好的祝願。

當時的錢老精神不錯，並與坐在床邊的溫家寶親切談話。當天，錢老還對溫家寶笑說“我活到100歲”，並在回憶自己留學歸國經歷後表示，“在中國，比在國外更有發展和成就。”

“時速1萬公里有可能”
火箭理論譽滿全球

錢學森留美10年後成為當時一流火箭專家。由於發表了“時速為1萬公里的火箭已成為可能”的驚人火箭理論而譽滿全球。

錢學森跟其導師馮卡門參與了當時美國絕密的“曼哈頓工程”導彈核武器的研製開發工作，在美國是一個屈指可數的稀世之才。

1950年，美國對共產黨人實行全面追查。錢學森因被懷疑為共產黨人和拒絕揭發朋友，而被美國政府取消他參加機密研究的資格，美國移民並於10月對他下達放逐令。

錢學森這時立即決定以探親為名回國，準備一去不返。然而，美國海軍部次長惡狠狠地說：“他知道所有美國導彈工程的核心機密，一個錢學森抵得上5個海軍陸戰師，我寧可把這個傢伙鎗斃了，也不能放他回紅色中國去！”

遭美國政治迫害

從此，美國對他的政治迫害接踵而至。移民局抄了他的家，在特米那島上將他拘留，兩週後雖經同事保釋出來，但繼續受到移民局的限制和聯邦調查局特務的監視，被滯留5年之久。

1955年6月的一天，錢學森夫婦擺脫特務監視，在一封寫在一張小香煙紙上寄給在比利時親戚的家書中，夾帶了給陳叔通先生的信，請求祖國幫助他早日回國。

當年8月1日，中美大使級會談在日內瓦開始，王炳南大使以錢學森這封信為依據，迫使美國政府不得不允許錢學森離美回國。

1955年8月4日，錢學森收到了美國移民局允許他回國的通知，並在10月輾轉回到了中國。

主持火箭技術規劃
參與兩彈一星研制

錢學森曾主持完成中國火箭技術建立規劃，參與兩彈一星研制。

1958年5月29日，錢學森同聶榮臻元帥和黃克誠一起部署了中國第一枚近程導彈的製造工作。1960年11月15日，中國製造的第一枚近程導彈進行了飛行試驗。

1964年6月29日，中國自行設計的中近程導彈進行飛行試驗獲得成功。

1965年1月，錢學森向國家提出報告，建議早日製造中國人造衛星的研究計劃，這項建議隨後以代號“651工程”列入國家任務。

在651工程中，錢學森擔負大總體，即星─箭─地面系統三大方面總的技術協調和組織實施工作。

成功製造首顆人造衛星

在運載火箭方面，錢學森提出了一個更為快捷的實施方案。他不主張專為發射人造衛星設計研製運載火箭。他建議充份利用已有導彈和探空火箭的技術基礎，將二者結合起來，組成發射衛星的運載火箭。

他認為，走這個路子可以大大縮短研製時間和人力物力。後來的事實證明，他的這個研製思路是完全正確的。

但由於“文革”的干擾，一些領導幹部和老專家被打倒，甚至派性鬥爭也滲入到技術工作之中，常常使研製工作無法進行。

不過，在重重壓力下，錢學森還是完成了製造中國第一顆人造衛星的艱鉅工作。

1970年4月24日，重173年公斤的中國首顆衛星在酒泉衛星發射場成功升空，這顆衛星向全世界播送的“東方紅”樂曲，宣告新中國迎來了航天時代的黎明。

堂姪錢永健獲諾獎

錢家是個大家族，在江南有大量族人，在海外也有2008年諾貝爾化學獎得主錢永健這樣的親屬。

當時，在家休養的錢學森，獲悉堂姪錢永健榮獲諾貝爾獎後，很是高興，並表示祝賀。

中國‧從財政部“空降”昆明‧靚女成最年輕副市長

（中國‧昆明）雲南昆明市人大常委會週五（10月30日）通過任命兩名由中央部委調來的新副市長，其中一人是來自財政部、年僅32歲的李茜（圖），她是目前全國省會級城市最年輕的副市長（正局級）。

雲南網報導，兩名到昆明掛職2年擔任副市長的人選，分別是來自國家發改委的周小棋（46歲）及來自財政部的李茜。

留著一頭長髮，樣貌清秀的李茜是山東菏澤人，畢業於山東財政學院財政系，曾任財政部國際司國際金融組織二處副處長，現任財政部機關團委書記（正處級），她也曾掛職任山東費縣副縣長，並曾獲第8屆“中央國家機關十大傑出青年”。

當時評委對李茜的評價：曾8次作為主力承擔西方8國集團與中國財長對話的工作；在國家主席胡錦濤及總理溫家寶出席全球性重大活動的工作中，多次受到領導肯定。2006年首次中美戰略經濟對話任中方辦公室文件組組長，圓滿完成任務。

中國‧兩股冷空氣入襲‧東北部出現寒潮

（中國‧北京）中國北部、中部及東部地區，受到兩股冷空氣影響，出現入冬以來首個寒流，北京及部份地區的氣溫驟降攝氏10度以上，跌穿零度。

北部海域吹起10級陣風，有船隻沉沒，當局調派直升機拯救遇險船員。

發佈橙色警報

中央氣象台已發佈今秋首個寒潮橙色警報。

一股從蒙古進入內地冷空氣，首先影響東北地區，令原本天氣相對和暖的北京、蘭州及寧夏等地，在短短72小時內，氣溫急降10度以上，北京的氣溫更加下跌到零度以下，更吹起6至7級強風。

而黑龍江、新疆、吉林及遼寧，氣溫亦急速下降，部份地區更開始下雪。氣象部門表示，另一股冷空氣已經進入新疆，並且會在今日（週六，10月31日）與蒙古高原的冷空氣匯合後，華北、四川以至中國南部局部地區的氣溫亦會下降10度以上。

北京最低溫零下2℃

其中北京在週日（11月1日）的最低氣溫將低至零下2℃，由於全市統一供暖仍未開始，市民唯有自行取暖。而廣東省在下週二（11月3日）的氣溫也可能跌破10度，粵北地區更只有3度。

寒流令廣泛地區受到大霧籠罩，瀋陽、天津、湖南及安徽等地的交通近日受大霧影響，部份高速公路大塞車，為應付冷空氣造成的大霧天氣，南方部份高速公路進行防霧演練，以減少天氣對交通造成的影響。

氣象部門預測，冷空氣的影響有望在下週一（11月2日）開始逐漸減弱，氣溫將會稍為回升。

中國‧十大流行語居首‧學生最愛說“暈”

（中國‧重慶）現代校園最流行甚麼？學生最愛說的口頭禪又是甚麼？調查發現，中國中小學生最常掛在嘴邊的一個字是“暈”，調查也指越來越多的學生承認自己有心理問題。

重慶《課堂內外》雜誌社早前公佈了2009年中國青少年成長調查報告。這次調查用問卷訪問了全國十多萬中小學生，內容涉及青少年的學習負擔、心理健康、興趣愛好、網絡遊戲、假日消費等許多熱門問題。

學生最愛說的口頭禪是調查最有趣的地方。在“酷”、“雷”、“囧”、“暈”、“氣死我了”、“沒勁”、“OK”、“隨便”、“有沒有搞錯”……這些潮語中，40.64%的小學生選擇“暈”，44.22%的中學生和47.53%的高中生也選擇“暈”。“暈”無論在中小學生的十大流行語中，都排在第一位，“囧”、“雷”等網上潮語也在十大之列。

《課堂內外》總編輯、調查報告總撰稿人徐永恒認為，像“暈”、“囧”、“雷”等都是最初在網上流行的網語，從網上流傳到現實生活中，說明青少年學生受網絡的影響越來越大。

新加坡‧多1天公假損失逾16億‧公假僅11天

（新加坡）新加坡每年的公共假期只有11天，比其他國家少，但你可知道，放一天假，新加坡就會損失超過7億元（16億8000萬令吉）的收入。

早前有媒體報導，在195個國家中，新加坡的公共假期天數，比各國平均來得少。

金融中心香港有18天、中國有22天，而排行榜首的伊朗則有30天。

公假多影響競爭力

新加坡人力資源學院主席何玉珠說︰“增加1天的公共假期，可能會嚴重地影響我們的競爭力，並促使成本增加，使得我們的商業受創。”

一名經濟學者說，將新加坡的國內生產總值除以354天（一年有365天，扣除掉原本11天的公共假期，就剩下354天）。

根據新加坡統計局網上最新的數據，新加坡2008年的國內生產總值為2574億1850萬，根據以上方法計算，每天的生產總值約為7億2717萬元。

換言之，如果增加多1天的公共假期，國家將損失超過7億元的收入。

每33年享多一天公假

另外，一些宗教假期如︰大寶森節、復活節和回教先知誕辰，在多年前就不列為宗教假期，這是為了改善商業競爭力。

新加坡人希望能有多1天公共假期的願望，每隔32年或33年會實現一次。

國大數學系副教授赫爾姆指出，每隔32年或33年，開齋節在一年內會有2天，因此，新加坡在1968年和2000年都享有12天的公共假期。

新加坡‧網絡電視為吸引點擊率‧主持人半裸坐冰塊

（新加坡）網絡電視又玩火！主持人半裸坐冰塊30分鐘，輸的被淋胡椒水。

為吸引點擊率，網絡電視“Clicknetwork.tv”越玩越過火，兩名男主持竟脫剩底褲，坐在冰塊上，輸的人還得被淋胡椒水。

除此，另兩名男女主持人凱凱和保羅，也挑戰打電話給父母說髒話，這段影片吸引不少網民點擊。

公眾投訴教壞小孩

不少公眾投訴，這些網絡電視為達到點擊率，經常製造意識不良的短片，教壞小孩。

據瞭解，兩名挑戰寒冷的男主持人在短片中裸著身子，只穿一件單薄的方形底褲，雙雙在攝氏零下4度的餐廳Eski Bar裡，分別坐在冰塊上，看誰最快投降，最不能耐冷，就被對方自制的胡椒水淋臉。

10分鐘之後，網絡電視主辦單位還陸續拿來了小冰塊、冰水等，讓兩人互相淋在對方的身上，之後還要兩人的雙腳浸在冷水中。

過了半小時左右，兩名主持人開始冷得臉部僵硬、口齒不清、四肢遲鈍，而且全身不停地顫抖。

最後，海之因為又冷又餓，宣佈投降，他果真被另一名主持人麥克，淋上滿臉的胡椒水。

打電話給父母說髒話

另一段令人匪夷所思的短片，由男女主持人凱凱和保羅“演出”。

他們這次挑戰的是打電話給父母，並用10個無厘頭的字眼和髒話，穿插在談話當中，只要成功把所列的字眼說完，就算贏了比賽。

保羅致電母親，言談中說了一堆無厘頭的內容，並穿插了10個字眼，他的母親聽後大怒︰“你到底在說甚麼？你是喝醉了嗎？”

兩人過後感覺很尷尬，似乎為了捉弄父母感覺內疚，不過最後則以大笑收場，讓人不解這段長達7分鐘影片的目的何在。

新加坡‧動物園老虎咬死工人案‧驗屍庭裁決死者自殺

（新加坡）動物園白老虎咬死清潔工人事件經過2天研訊後，驗屍庭裁決諾丁死於自殺。

驗屍官楊啟英週五（10月30日）下判時說，雖然警方的調查無法確定諾丁（Nordin BinMontong）尋死的動機，但種種跡象顯示諾丁是故意尋死的。

指死者有機會卻不逃

首先，諾丁越過圍欄，闖入白虎展區，雙手高舉，涉水到雄白虎烏瑪（Omar）面前挺起胸膛，被虎掌擊倒。其次，他聽到圍觀遊客高喊叫他逃跑時，雖未受重傷，有機會和時間逃脫，但他沒這麼做，也沒有極力掙扎。

驗屍官說，動物園首席管理員兼合法持鎗人塞爾文從武器庫取出雙管散彈鎗趕抵白虎展區時，3隻白虎已被關進虎穴。但即使他更早抵達，由於周圍有遊客及其他管理員，他還必須考慮到他們的安全，不能向白虎開鎗，頂多只是向空中發出警告式的一鎗。

法醫剖屍後，發現諾丁身上有不少過90個傷痕，包括頭部、臉部、背部、手腳及肺部。剖屍報告顯示，諾丁死因是被動物咬導致身體多處受傷。

驗屍官也強調，警方的調查顯示，新加坡動物園的安全措施符合國際動物園與水族館協會（Association of Zoos and Aquariums）設下的國際標準。

Fed to Banks With Major Commercial Real Estate Loan Exposure: Bang You Are Dead

The Fed has just released a statement on commercial loan workouts. There can be more than one interpretation to what the Fed is up to here, but the confusion will spook markets even more so than they are now. Here's the full statement:

For immediate release

The Federal Reserve on Friday adopted a policy statement supporting prudent commercial real estate (CRE) loan workouts. This policy statement, adopted by each of the financial regulators,1 provides guidance for examiners, and for financial institutions that are working with CRE borrowers who are experiencing diminished operating cash flows, depreciated collateral values, or prolonged delays in selling or renting commercial properties. The financial regulators recognize that prudent loan workouts are often in the best interest of both financial institutions and borrowers, particularly during difficult economic conditions. This policy statement details risk-management practices for loan workouts that support prudent and pragmatic credit and business decision making within the framework of financial accuracy, transparency, and timely loss recognition.

Financial institutions that implement prudent loan workout arrangements after performing comprehensive reviews of borrowers' financial conditions will not be subject to criticism for engaging in these efforts, even if the restructured loans have weaknesses that result in adverse credit classifications. In addition, performing loans, including those renewed or restructured on reasonable modified terms, made to creditworthy borrowers, will not be subject to adverse classification solely because the value of the underlying collateral declined.

The policy statement includes examples of CRE loan workouts. The examples, provided for illustrative purposes only, reflect examiners' analytical processes for credit classifications and assessments of institutions' accounting and reporting treatments for restructured loans. The policy statement reiterates existing guidance that examiners are expected to take a balanced approach in assessing institutions’ risk-management practices for loan workout activities.

Footnotes

1.The financial regulators consist of the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the National Credit Union Administration, the Office of the Comptroller of the Currency, the Office of Thrift Supervision, and the FFIEC State Liaison Committee. Return to text

2009 Banking and Consumer Regulatory PolicySo what is going on here?

1. The Fed clearly anticipates serious problems in the Commercial Real Estate market.

2. Problems so big that they are going to be changing policy.

3. They are encouraging banks to workout the loans and there won't be negative feedback from the Fed.

But here's what could be real major spooky to the markets. The Fed is probably also signalling that it is not going to do wholesale bailouts of the commercial real estate loan market, the way it did to parts of the mortgage securitized sector.

This is a total reversal of the attempt to prop up the residential market. The Fed wants the commercial market down and fast.

BOTTOM LINE: This means major, major hits ahead for bank earnings and not all banks will survive.

Do Direct Stimulus Jobs Really Cost $533,000 a Piece?!

On Thursday, the government released a flood of data [1] about the stimulus, showing how 9,000 federal contractors spent their stimulus dollars — including the value of the contract, each project’s status, and how much each of the contractor’s five highest-paid officers were paid.

But when it came to presenting that data, Recovery.gov [2], the government’s official site for stimulus information, highlighted one number in particular, posting it on the site’s main page [2] in large font: “JOBS CREATED/SAVED AS REPORTED BY FEDERAL CONTRACT RECIPIENTS: 30,383.” To make extra certain of getting viewers’ attention, the number itself appears in bright green.

As the economy continues to shed jobs [3], it’s easy to see why the administration is keen to highlight the number of jobs created by the stimulus. When the numbers were released, Jared Bernstein, the administration’s chief economist, said [4] the job count “exceeds our projections,” adding that it supported the conclusion “that the Recovery Act did indeed create or save about 1 million jobs in its first seven months.”

But do the 30,000 jobs represent a good return? And since the federal contracts for which data was reported this week represent just a sliver of the overall stimulus package, what do they really say about the impact of the stimulus as a whole?

Let’s start with the 30,000 jobs themselves. The federal contracts in question represented $16 billion in stimulus spending. Assuming the number of created or saved jobs reported by each contract recipient was accurate—which, as we’ve reported before [5], is still an open question—that breaks down to $533,000 for each job. That’s more than five times the projection of the president’s own Council of Economic Advisers [6], which estimated [7] in May that every $92,136 in government spending would create one job for one year.

Five hundred thousand dollars per job might sound like a lot of money, but wait: The data released this week covers only the jobs directly created by federal stimulus money so far. It doesn’t cover indirect jobs — the people who make the materials that contractors need to complete their project, or make the sandwich when a construction worker buys lunch from the proverbial roadside diner.

So, if the $16 billion in federal stimulus contracts generated 30,383 direct jobs, how many indirect jobs were created or saved? We asked the White House, which told us they believe that for each direct job created or saved, there is one indirect job. Assuming that’s right, that $16 billion created or saved some 60,000 jobs — which still clocks in at $267,000 per person.

What about the second question — the relationship between the 30,000 direct jobs reportedly created or saved by that $16 billion, and the job impact of the stimulus as a whole? We asked the White House for the logic behind Bernstein’s statement that this week’s numbers “point to the conclusion that the Recovery Act did indeed create or save about 1 million jobs in its first seven months.”

Their response: Because the $16 billion in federal contracts represents about 5 percent of the $339 billion spent so far, they multiplied the 30,000 jobs by 20. The result is 600,000 direct jobs; and, relying again on the assumption that each direct job produces one indirect job, the White House doubled that number to 1.2 million.

Of course, that assumes that for every part of the stimulus will have roughly the same job-creating impact as federal contracts. That’s contradicted by the Council of Economic Advisers’ own report [7], which said that while every $92,136 in government spending creates one job for one year, it takes $145,351 in tax cuts to achieve the same result. As much as 28 percent of the stimulus is going to tax cuts; if the Council’s estimates are right, then the White House’s assertion — that every part of the stimulus will produce the same job impact as federal contracts — starts to look a little less certain.

The bottom line, it seems, is that knowing for certain how many jobs the stimulus is producing remains, for now, as tricky as ever [8].

Ron Paul Geithner Fed Res As Lender Last Resort Contributes to Moral Hazard

Check this link ....... http://bit.ly/JECzF

Censored 9-11 Police Radio Transmissions Urban Moving Vans

Check this link ...... http://bit.ly/3lhOJk

Robert Kennedy on the Vaccine Autism Coverup

Check this link ...... http://bit.ly/4xgLMS

Mercury is good for you! - US Mainstream Media Report

Check this link ....... http://bit.ly/4EStGs

Friday, October 30, 2009

Consumer confidence slips unexpectedly

Americans still worried about jobs; home prices rise for third month

CHICAGO - Americans' confidence about the U.S. economy fell unexpectedly in October as job prospects remained bleak, a private research group said Tuesday, fueling speculation that an already gloomy holiday shopping forecast could worsen.

The Consumer Confidence Index, released by The Conference Board, sank unexpectedly to 47.7 in October — its second-lowest reading since May.

Forecasters predicted a higher reading of 53.1.

A reading above 90 means the economy is on solid footing. Above 100 signals strong growth.

The index has seesawed since reaching a historic low of 25.3 in February and climbed to 53.4 in September.

Economists watch consumer confidence because spending on goods and services by Americans accounts for about 70 percent of U.S. economic activity by federal measures. While the reading doesn't always predict short-term spending, it's a helpful barometer of spending levels over time, especially for expensive, big-ticket items.

Recent economic data, from housing to manufacturing, has offered mixed signals but some evidence that an economic recovery might be slow.

But on Tuesday, the figures showed that shoppers have a grim outlook for the future, The Conference Board said, expecting a worsening business climate, fewer jobs and lower salaries. That's particularly bad news for retailers who depend on the holiday shopping season for a hefty share of their annual revenue.

"Consumers also remain quite pessimistic about their future earnings, a sentiment that will likely constrain spending during the holidays," said Lynn Franco, director of The Conference Board's Consumer Research Center.

Economists expect holiday sales to be at best flat from a year ago, which saw the biggest declines since at least 1967 when the Commerce Department started collecting the data.

The Consumer Confidence Index survey, which was sent to 5,000 households, had a cutoff date of Oct. 21.

The news came on the heels of rosier data about the nation's housing market.

The Standard & Poor's/Case-Shiller home price index, which studies real estate transactions in 20 major cities, showed home prices rose in August, the third straight monthly increase and a sign that a housing recovery might be taking hold.

The measure showed the home price index climbed 1 percent from July to a seasonally adjusted reading of 144.5. While prices are down 11.4 percent from August a year ago, the annual declines have slowed since February.

Prices are at levels not seen since August 2003 and have fallen almost 30 percent from the peak in May 2006.

The latest index shows a widespread turnaround with prices rising month-over-month in 15 metro areas since June.

The Dow Jones industrials wavered on the dueling reports, but the index was up 65 points to 9,933 in midmorning trading.

New jobless claims climb more than expected

WASHINGTON - The number of newly laid-off workers filing claims for jobless benefits rose more than expected last week, after falling in five of the past six weeks, as employers remain reluctant to hire even with the economy showing signs of recovery.

The Labor Department said Thursday that new jobless claims rose to a seasonally adjusted 531,000 last week, from an upwardly revised 520,000 the previous week. Wall Street economists had expected only a slight increase, according to Thomson Reuters.

Economists closely watch initial claims, which are considered a gauge of layoffs and an indication of companies' willingness to hire new workers.

The four-week average of claims, which smooths out fluctuations, fell slightly to 532,250, the lowest since mid-January and about 125,000 below the peak for the recession, reached this spring. But claims remain well above the 325,000 that economists say is consistent with a healthy economy.

The number of people continuing to claim benefits did drop for the fifth straight week to 5.9 million, from just over 6 million. The figures on continuing claims lag initial claims by a week.

Many recipients are moving onto extended benefit programs approved by Congress in response to the recession, which began in December 2007 and is the worst since the 1930s. Those extensions add up to 53 weeks of benefits on top of the 26 typically provided by the states.

When those programs are included, the total number of recipients dropped to 8.8 million in the week ending Oct. 3, the latest data available, down about 50,000 from the previous week. That decline is likely due to recipients running out of benefits, rather than finding jobs, economists say.

Many analysts expect the economy grew as much as 3 percent in the July-September quarter, but employers are reluctant to hire as they wait to see if such growth can be maintained.

The unemployment rate rose to 9.8 percent in September from 9.7 percent, the department said earlier this month, as employers cut 263,000 jobs. The recession has eliminated a net total of 7.2 million jobs.

More job cuts were announced this week. Sun Microsystems Inc. said it plans to eliminate up to 3,000 jobs, or 10 percent of its worldwide work force, as it awaits a takeover by Oracle Corp., a deal being held up by antitrust regulators in Europe.

Among the states, Florida had the largest increase in claims, with 9,976, which it attributed to layoffs in the construction, service, manufacturing and agriculture industries. New York, Wisconsin, Indiana, and Arkansas had the next largest increases. The state data lag initial claims by one week.

California reported the largest drop in claims, down 7,062, which it attributed to fewer layoffs in the construction, service, and manufacturing industries. Tennessee, Maine and Nebraska also reported decreases.

New home sales take surprise tumble

Effect of the soon-to-expire, first-time buyer tax credit begins to fade

WASHINGTON - Sales of new homes dropped unexpectedly last month as the effects of a temporary tax credit for first-time owners started to wane.

The Commerce Department said Wednesday that sales fell 3.6 percent to a seasonally adjusted annual rate of 402,000 from a downwardly revised 417,000 in August. Economists surveyed by Thomson Reuters had expected a pace of 440,000.

It was the first decline since March. Sales in September were off 7.8 percent from a year ago. Despite the surprising decline, the market is up 22 percent from the bottom in January, though down more than 70 percent from the peak in July 2005.

The median sales price of $204,800 was off 9.1 percent from $225,200 a year earlier, but up 2.5 percent from August's $199,900.

The drop in sales was driven by a nearly 11 percent decline in the West and a 10 percent drop in the South. Sales rose 35 percent in the Midwest and were unchanged in the Northeast.

The report reflects contracts to buy homes, not completed sales. It has been taking longer to close a transaction this year because it's taking longer to get approved for a mortgage and to have a property appraised.

Those time lags could make buyers nervous they won't be able to complete the deal before the Nov. 30 deadline to take advantage of a tax credit of up to $8,000 for first-time buyers.

The report "demonstrates the power of the first-time homebuyers tax credit," said Bernard Markstein, senior economist with the National Association of Home Builders, which has been lobbying Congress to extend and expand the tax incentive. "We just haven't gotten the economy back to the point where we can step back and say the housing market doesn't need any more support."

Congress is considering extending the tax credit through March 31 and gradually phasing it out over the rest of next year. "If they don't extend it, then I think the pullback could be quite significant," said Brad Hunter, chief economist with Metrostudy, a real estate research firm.

Critics, however, say many buyers would have entered the market anyway and call the credit an unnecessary subsidy for people who don't need it.

Low mortgage rates, the tax credit and more affordably priced homes have provided a big lift to the housing market this year. Sales of previously occupied homes, for example, jumped more than 9 percent in September. That report measures completed sales rather than sales agreements.

There were 251,000 new homes for sale at the end of September, down almost 4 percent from August and the lowest inventory in nearly 27 years. At the current sales pace, that represents 7.5 months of supply.

No jobs= No recovery

Check this link ..... http://bit.ly/60p8B

Turkey to use national currencies in trade with Iran, China

ANKARA, October 28 (RIA Novosti) - Turkey is switching to national currencies in trade with Iran and China, ending dependence on the U.S. dollar and the euro for about 20% of its commodity turnover, local media reported on Wednesday.

Turkey has already switched to settlements in national currencies with Russia amid weakening confidence in the greenback as the world's major reserve currency. The move was initiated by Turkish President Abdullah Gul during his visit to Moscow in February.

Turkey's decision to make settlements with Iran and China in national currencies was announced during a visit to Iran by Turkish Prime Minister Recep Tayyip Erdogan. The Turkish premier told a Turkish-Iranian business forum on Tuesday that the countries had prepared a legal framework for transition to settlements in national currencies.

"We have adopted a necessary legislative act and are prepared for the transition," the Turkish newspaper Milliyet quoted Erdogan as saying.

According to the paper, Turkey's trade with Russia, Iran and China exceeds $65 billion a year. Russia is Turkey's largest trade partner, with $37.8 billion commodity turnover registered last year.

Russian Prime Minister Vladimir Putin said on October 14 that Russia was ready to consider using the Russian and Chinese national currencies instead of the dollar in bilateral oil and gas dealings.

"We are ready to examine the possibility of selling energy resources for rubles, but our Chinese partners need rubles for that. We are also ready to sell for yuans," Putin said.

Britain's Independent newspaper reported in early October that Russian officials had held "secret meetings" with Arab states, China and France on ending the use of the U.S. dollar in international oil trade.

The countries are reportedly seeking to switch from the dollar to a basket of currencies including the euro, Japanese yen, Chinese yuan, gold, and a new unified currency of leading Arab oil producing countries.

The Independent said the meetings have been confirmed by Chinese and Arab banking sources, although Russian officials said they had no knowledge of the talks.

"Money Multipliers Have Collapsed Everywhere...Confidence Is Missing. I Don't See Any Way To Stabilise M3 In Such Circumstances"

Former officials are often more honest than current ones, since they aren't under pressure to spread happy talk.

Former European Central Bank chief economist Otmar Issing recently said what current officials aren't addressing:

Nobody can be sure that we have a self-sustaining recovery. The challenges facing the ECB are tremendous. "Money multipliers have collapsed everywhere. What M3 is telling us is that confidence is missing. I don't see any way to stabilise M3 in such circumstances.

As Ambrose Evans-Pritchard notes:

Data from the European Central Bank shows that the M3 broad money supply has contracted over the last six months, confounding expectations that ultra-low interest rates would soon boost monetary growth. Loans to the private sector fell 0.3pc from a year earlier, the first such decline since the data started in 1983.
The M3 figures include a wide range of bank accounts...

The picture is even starker in America where M3 has shrunk at an annual rate of 6.5pc over the last three months, a pace of contraction not seen since the 1930s. US bank loans have plummeted since May.

(While the Fed stopped reporting M3 in 2006, people are still tracking it).

How can M3 have collapsed when governments world-wide are printing money faster than IHOP can cook pancakes?

Well, professor Tim Congdon from International Monetary Research says:

A key reason for credit contraction is pressure on banks to raise their capital ratios... "The current drive to make banks less leveraged and safer is having the perverse consequence of destroying money balances," he said. "It strengthens the deflationary forces in the world economy. That increases the risks of a double-dip recession in 2010."

But isn't it good that governments are requiring banks to raise their capital rations?

Sure, but unless they force the banks to write off their bad debts, they will remain giant black holes, and will never be adequately capitalized. If they are never adequately capitalized, they will never release money out into the economy through loans and other economic activity which increases M3.

As just one example, remember that the nominative amount of outsanding derivatives dwarfs the size of the global economy. As another example, remember that several of the too big to fails have close to a trillion dollars each in toxic assets in off-book SIVs.

IMF chief Dominique Strauss-Kahn says that the history of financial crises shows that "speedy recovery" depends on "cleansing banks' balance sheets of toxic assets". "The message of all financial crises is that policy-makers' priority must be to stop the quantity of money falling and, ideally, to get it rising again," he said.

As many people have repeatedly written (including me), the world's governments must restore sound economic fundamentals - which includes forcing banks to write down their bad assets - instead of cranking up the printing presses and trying to paper over all of the problems.

Moreover, as Mish, Michael Rivero, and many others have pointed out, governments can create all the credit they want, but if people do not have jobs, they will not borrow that money.

In addition, the amount of credit and wealth destroyed exceeds the amount of money pumped into the system.

When will the politicians listen? Will they wait until after the next huge market crash? When there are tent cities everywhere? After their governments default and they essentially lose sovereignty under "austerity measures" imposed by the IMF, World Bank or other agency?