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Tuesday, January 20, 2009

Great Recession Roundup — January 20, 2009

Items of Interest:

Intrade.com:
Chance of a Depression (-10% or worse U.S. GDP over four consecutive quarters)

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Jack Healy / New York Times:
Fresh Bank Worries Batter Stocks; Dow Falls Below 8,000 -- President Obama took office Tuesday urging Americans to choose hope over fear, but on Wall Street, fear was making a comeback.

Stock markets had one of their worst Inauguration Day losses in more than a century, skidding more than 4 percent. Financial companies plunged more than 15 percent, their biggest one-day drop in nearly two decades, as investors worried that the troubles facing the country’s biggest banks might be larger and deeper than anyone had thought.

Even after record corporate write-downs and a $700 billion bailout to shore up the financial system, banks are still reporting huge losses, lining up for new government lifelines and cutting their profit outlooks...
Discussion:
Robert Stein / Connecting.the.Dots: Wall Street Gets Obama's Message
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John Berry / Bloomberg:
Bernanke Tells It Like It Is, Some Don't Listen -- This may be as close as we’re going to get to a Fed chairman labeling some in Congress as irresponsible.

Sure, Federal Reserve Chairman Ben S. Bernanke was typically careful with his wording in a Jan. 13 speech in London. “The public in many countries” is “understandably concerned” that government is spending money to rescue the financial industry, “when other industries receive little or no assistance,” Bernanke said.

After explaining how the world economy “is critically dependent on the free flow of credit,” Bernanke issued his challenge: “Responsible policy makers must therefore do what they can to communicate to their constituencies why financial stabilization is essential for economic recovery and is therefore in the broader public interest.” ...
Discussion:
Arnold Kling / EconLog: The Best Policy Regarding Banks
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Madoff Ponzi

Reuters:
Madoff exposure went beyond the ultra-rich -- While wealthy investors are the principal victims of Bernard Madoff's alleged $50 billion fraud, less affluent investors were also hit via products with lower minimum-investment thresholds, asset managers said...

WSJ:
Madoff's Point Man Is Cast in Same Role for Prosecutors -- As a key lieutenant to money manager Bernard Madoff for more than 30 years, Frank DiPascali Jr. said he headed stock-options trading and was the point man for investment-advisory clients who were told he executed their trades.

Now, he is a potential point man in the investigation of a Ponzi scheme that Mr. Madoff has told prosecutors he carried out over decades, according to a criminal complaint and people familiar with the matter...

Boston Globe:
Broker with ties to Madoff will miss 2d state hearing -- Boston broker Robert Jaffe is not expected to appear at his rescheduled hearing Wednesday in the state’s investigation of the Bernard L. Madoff case, Massachusetts Secretary of State William F. Galvin’s office said today...

NY Times:
’92 Ponzi Case Missed Signals About Madoff -- Seventeen years ago, federal investigators questioned for the first time whether Bernard L. Madoff was connected to a Ponzi scheme. Their inquiry centered on Frank Avellino, an accountant who had been funneling investors to Mr. Madoff since the 1960s...
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Minyanville:
Ghost Towns, Ghost Malls -- This is an epic event - the end of a 20-year secular credit expansion that went absolutely parabolic from 2001-2007. Before the US economy can truly begin to expand again, the savings rate must rise to pre-bubble levels of 8%, that the US housing stocks must fall to below 8 months' supply, and that the household interest coverage ratio must fall from 14% to 10.5%. It's important to note what sort of surgery that is going to require.

We will probably have to eliminate $2 trillion of household debt to get there, this will happen either through debt being written off, as major financial institutions continue to do, or for consumers themselves to shrink their own balance sheets...
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The Briefing Room - The Blog / WhiteHouse.gov:
Change has come to WhiteHouse.gov -- Welcome to the new WhiteHouse.gov. I'm Macon Phillips, the Director of New Media for the White House and one of the people who will be contributing to the blog.

A short time ago, Barack Obama was sworn in as the 44th president of the United States and his new administration officially came to life. One of the first changes is the White House's new website, which will serve as a place for the President and his administration to connect with the rest of the nation and the world...
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The Bush Years: All Circus, No Bread----
Jeremy Lott / Guardian:
We are all Bush-haters now — As George Bush leaves office today, the loathing of him once confined to liberal elites is nearly universal — When George Bush takes off from Andrews Air
Force Base today, he will be departing over a country that holds him in contempt...
Discussion:
Sister Toldjah: The definition of elite BDS -- That type of BDS is on display prominently in this worthless Jeremy Lott piece, in which he tries to explain why Bush hatred isn’t just confined to the left...

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