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Thursday, November 13, 2008

Credit Crunch Roundup — November 13, 2008

Items of Interest:

David Herszenhorn / NY Times:
Dodd Says Auto Bailout Lacks Votes in Senate -- Senator Christopher J. Dodd raised doubts about efforts to aid automobile manufacturers during a lame-duck session...

Dan Calabrese / RealClearMarkets:
Good for GM, Bad for America - Michigan’s self-destructive economic practices have sent ripples of fiscal poison all across the nation in the form of supplier contracts, dealership agreements and financing agreements by, for and with General Motors, Ford and Chrysler....

The Missed Issue in GM Bailout Versus Bankruptcy Debate

Micheline Maynard / NY Times:
G.M.’s Troubles Stir Question of Bankruptcy vs. a Bailout

Felix Salmon / Portfolio.com:
Reasons to Bail Out GM

Business News:
Dems Muster Votes For Big Three Bailout — Congressional Democrats are marshaling support for a rescue package to pump $25 billion in emergency loans to U.S. automakers in exchange for a government ownership stake in Detroit's car companies.

Democrats hunt for support for auto industry bailout — Congressional Democrats pushed forward Thursday with a rescue package to pump $25 billion in new emergency loans into U.S. automakers, ...

Business News:
Senators, Bankers Clash Over Bailout Fund — While the Bush administration shifts course on its $700 billion rescue plan, Congress is examining whether even bigger changes should be made in the program in light of the deteriorating economy and soaring mortgage foreclosures.

U.S. senator says bailout of automakers lacks votes in Senate — Senator Christopher Dodd raised doubts about efforts to aid U.S. automobile manufacturers during a lame-duck session.

Auto CEOs called to testify before Senate next week — WASHINGTON -- Senate Banking Committee Chairman Chris Dodd said Thursday he plans to call Detroit's Big Three CEOs to testify next week on a proposal to immediately grant automakers $25 billion in emergency financing to fund operations...
The Economist:
How AIG Got Uncle Sam Over a Barrel - JUST how concerned should American taxpayers be about American International Group (AIG), the insurance company brought to its knees by its escapades in the credit-derivatives market? On November 10th a revised rescue package was announced, comprising $153 billion of capital injections and loans. That is the largest bail-out for any firm, anywhere, during the crisis. Is the government being, as AIG’s new chairman says, “very, very smart”, or has it been taken for one of the most expensive rides in corporate history?

Even on September 16th, when the state first intervened, AIG was a controversial candidate for assistance. Its insurance businesses are ring-fenced by local regulators and individually capitalised, precisely so they can survive a collapse of the holding company. A bankruptcy was avoided only because of the size of the holding company’s book of toxic credit derivatives, which senior executives barely understood. These left AIG so intertwined with other financial firms that its failure was judged by the Federal Reserve and Treasury to endanger the financial system...
John Berry / Bloomberg:
AIG Rescue Avoids Repeat of Lehman Debacle
Reuters / Yahoo! News:
GSE chief says mortgage aid plan should be model -- U.S. mortgage finance companies should soon adopt a foreclosure prevention plan developed by Fannie Mae (FNM.P) and Freddie Mac (FRE.P) to ease loan terms for troubled borrowers, the companies' overseer said on Thursday.

"I have talked to servicers in the last couple of days. They are telling me that it is important that this standard was set because it gives them a lot more cover and they are going to be more aggressive in modifying loans," said James Lockhart, director of the Federal Housing Finance Agency.

On Tuesday, Lockhart said Fannie Mae and Freddie Mac will cut monthly payments for delinquent borrowers to a point where their payments do not exceed 38 percent of their income....
Bypass the Depression and Head Straight for 1907 --
“On Oct. 17, 1907, panic began to spread on Wall Street after two men tried to corner the copper market. In the months preceding the panic, the stock market was shaky at best; banks and securities firms were contending with major liquidity problems. By mid-October, Wall Street was paralyzed; for days, there were runs on several large banks. Millions of dollars were withdrawn, and banks closed their doors."
Sound familiar? The above passage is from an article on the NPRs website titled "Lesson's From Wall Street's Panic of 1907." 101 years later, the US economy finds itself in an eerily similar situation...

10 worst years for the Dow Jones Industrial Average [DJIA]

Calculated Risk

MishTalk - Mike Shedlock

Paul Krugman - NY Times

The Big Picture - Barry Ritholtz

naked capitalism - Yves Smith

Pragmatic Capitalism

Washington's Blog

Safe Haven

Paper Economy

The Daily Reckoning - Australia