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Thursday, January 22, 2009

Great Recession Roundup — January 22, 2009

Items of Interest:

Housing Wire:
Housing Starts Plunge, Yet Again -- The construction of new homes continued its downward trend in December, falling more than 15 percent to a seasonally adjusted annual rate of 550,000 — 45 percent below last December’s rate — setting yet another record low, the Commerce Department reported Thursday.

“The financial market shockwave felt in the fall has clearly brought the housing industry to its knees,” wrote Stephen Stanley, chief economist for RBS Greenwich Capital, according to Market Watch. “Builders have essentially closed up shop for a while until the storm blows over.”

398,000 single-family homes were started in December, a 13.5 percent drop from November, while 145,000 housing structures with five-plus units were started...

Merrill Lynch’s CEO, John Thain spent $35,000 for a 'commode on legs' as his firm went down the toiletBargain: "Commode on Legs" for only $35,000

Charlie Gasparino / The Daily Beast:
John Thain's $87,000 Rug -- In a Daily Beast/CNBC exclusive, Charlie Gasparino reveals how Merrill Lynch’s CEO spent over $1 million to redecorate his office last year—even as the firm faced a financial crisis.

In early 2008, just as Merrill Lynch CEO John Thain was preparing to slash expenses, cut thousands of jobs and exit businesses to fix the ailing securities firm, he was also spending company money on himself, senior people at the firm say.

According to documents reviewed by The Daily Beast, Thain spent $1.22 million of company money to refurbish his office at Merrill Lynch headquarters in lower Manhattan. The biggest piece of the spending spree: $800,000 to hire famed celebrity designer Michael Smith, who is currently redesigning the White House for the Obama family for just $100,000...
John ThainGawker:
How an $87,000 Rug Could Take Down Merrill's Boss -- They called him "Superthain." John Thain, Merrill Lynch's Clark Kent-lookalike CEO, had the public image of a straight-shooting, clean-living superhero CEO. Billions of dollars in losses haven't stained that, but an $87,000 rug could.

Thain personally authorized a $1.2 million redecorating spree a year ago, Charlie Gasparino writes in the Daily Beast, even as Merrill prepared to slash jobs and expenses. Merrill's CEO was hailed as a hero for selling the company to Bank of America for $28 billion in September, as Wall Street collapsed around him. It was sold for a bargain price, but the firm met a far better fate than Bear Stearns or Lehman Brothers...

Wall Street Manna: John Thain and the $35,000 toilet

Financial Times:
Merrill delivered bonuses before BofA deal -- Merrill Lynch took the unusual step of accelerating bonus payments by a month last year, doling out billions of dollars to employees just three days before the closing of its sale to Bank of America.

The timing is notable because the money was paid as Merrill’s losses were mounting and Ken Lewis, BofA’s chief executive, was seeking additional funds from the government’s troubled asset recovery programme to help close the deal...

Thain, Lewis part ways -- John Thain’s out of the door as well. And one wonders if Ken Lewis could have saved himself a lot of heartache if only he had watched the action movie “Speed”...

French Louis Style XV Bombe Commode (with legs)
Wall Street Journal:
Builder Offers 3.99% Rate on Mortgage -- Looking to jolt paralyzed buyers into action, builder Toll Brothers is offering a 3.99% fixed mortgage rate for 30 years, one of the lowest available.

Toll, based in Horsham, Pa., said the deal is for loans of $417,000 or less and carries no points for the buyer.

"We think we're going to create some excitement in the marketplace," said Don Salmon, president and chief executive of TBI Mortgage Co., Toll's mortgage subsidiary.

Toll didn't reveal its funding source, but said the lenders support the rock-bottom rate, which requires a credit score of 720 or higher and a down payment of 20% without private mortgage insurance...
CNN: 30-year fixed rated climbs back above 5% -- Mortgage rates are on the rise for the first time since the Federal Reserve's decision to purchase mortgage backed securities in November...
The Higher Education Bubble

Soot & Ashes:
College Tuition Collapse? -- Now that the debt bubble and student loan ponzi scheme has imploded & the HELOC money is gone, will stupid debt-fueled college tuitions collapse too?

I'm not sure who's more evil - bankers or college administrators.

The bankers provided the ammunition, the college administrators provided the gun, and the students and parents pulled the trigger...

College Tuition Bubble----
Where to pour the gravy

Robert Reich's Blog:
The Stimulus: How to Create Jobs Without Them All Going to Skilled Professionals and White Male Construction Workers -- The stimulus plan will create jobs repairing and upgrading the nation’s roads, bridges, ports, levees, water and sewage system, public-transit systems, electricity grid, and schools. And it will kick-start alternative, non-fossil based sources of energy (wind, solar, geothermal, and so on); new health-care information systems; and universal broadband Internet access.

It’s a two-fer: lots of new jobs, and investments in the nation’s future productivity...
Michelle Malkin:
Robert Reich: Keep stimulus money away from skilled workers and “white male contractors” -- I missed Clintonite moldy oldie-turned-Obama economic adviser Robert Reich’s testimony a few weeks ago on how the government should spend federal stimulus money. The Berkeley professor engaged in academic fantasy land talk about getting all the cash out to workers as quickly as possible — a pipe dream debunked by the CBO report I mentioned in my column yesterday.

Even more noteworthy, however, were the comments Reich made about which workers deserve the stimulus bucks most. Reich’s proposal exposes the lie that the Obama administration is actually interested in revitalizing basic infrastructure for the good of the economy. No, what Team Obama really wants is to ensure that the least skilled, least qualified workers get jobs based on their chromosomes and pigment...

Madoff Ponzi

Madoff Clients May Recoup More Losses Through Taxes Than Suits -- Customers of Bernard Madoff, accused of bilking his clients in a $50 billion Ponzi scheme, may recover more of their investment losses through tax strategies than by suing Madoff or his bankrupt firm.

“If they invested a lot, then they could possibly recover 40 percent of everything” through U.S. and state tax laws, said Micah Bloomfield, a tax specialist at New York law firm Stroock & Stroock & Lavan LLP...

ABC News:
Madoff: One of Many Scammers? -- As the Economy Tanks, More and More Ponzi Schemes Come to Light

These aren't of the scale of the $50 billion that Bernard Madoff is alleged to have lost, but hundreds of millions of dollars have vanished. Officials point to the cases of Arthur G. Nadel in Florida, Joseph S. Forte in Philadelphia and James Ossie in Atlanta as among the most notable allegations.

Call them mini-Madoffs...
Will Bridge Banks Work?

NY Times:
Obama Has No Quick Fix for Banks -- In its recent report, the Congressional Budget Office estimated the $20 billion that the Treasury spent in November to guarantee $306 billion of toxic assets by Citigroup will cost taxpayers $5 billion — a 26 percent subsidy.

William Seidman, a former chairman of the Federal Deposit Insurance Corporation who was closely involved with the bailout of savings-and-loan institutions in the 1990s, said the government should simply take control of the banks it tries to rescue. “When we did things like this, we took the banks over,” Mr. Seidman. “This is a huge, undeserved gift to the present shareholders.” ...

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