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Monday, March 9, 2009

Great Recession Roundup — March 9, 2009

Items of Interest:

ABC News:
AIG Warned of 'Crisis' if Government Didn't Help -- An AIG report to the Treasury Department last month warned that if the government didn't come to its rescue again, its collapse would trigger a "chain reaction of enormous proportion" that would "potentially bankrupt or bring down the entire system" and make it impossible for AIG to repay the billions it already owed the U.S. government...

A draft of the report, obtained by ABC News, was marked "strictly confidential." It said, "The failure of AIG would cause turmoil in the U.S. economy and global markets and have multiple and potentially catastrophic unforeseen consequences." ...

Barry Ritholtz / The Big Picture : AIG: Is the Risk Systemic?
The Stash: An Eye-Opener: Why the AIG Bailout Isn't Close to Over

Jim Puzzanghera / Los Angeles Times: Why AIG Still Gets Taxpayer Funds
Tom Brennan / CNBC:
Obama Plan Will Hurt U.S.-- Only nine stocks in the S&P 100 are up so far in 2009, Cramer pointed out during Monday’s Stop Trading!, and none of them have gained more than 5%. That, of course, means that 91% of the index is down...
Jim Cramer / TheStreet.com: Worst-Case Dow View
Jane Wells / CNBC:
US Recession Could Last Up to 36 Months: Roubini -- The man who predicted the current financial crisis said the US recession could drag on for years without drastic action.

Among his solutions: fix the housing market by breaking "every mortgage contract."

"We are in the 15th month of a recession," said Nouriel Roubini, a professor at New York University's Stern School of Business, told CNBC in a live interview. "Growth is going to be close to zero and unemployment rate well above 10 percent into next year."

Echoing a speech he made earlier in the day, Roubini said he sees "no hope for the recession ending in 2009 and will more than likely last into 2010."...
Justin Sullivan / Time:
The 10 Major Newspapers That Will Either Fold or Go Digital Next — A San Francisco Chronicle newspaper vendor — Over the past few weeks, the U.S. newspaper industry has entered a new period of decline. The parent of the papers in Philadelphia declared bankruptcy, as did the Journal Register chain...
Hugh Hewitt / Townhall.com: Not The Plain Dealer!
Kenneth D. Lewis / Wall Street Journal:
Some Myths About Banks — Nationalization would undermine confidence in the financial system. — The story of our economic crisis mirrors every great market bubble in history. Clearly, banks were key participants, but they were not alone. Mortgage lenders, borrowers, regulators …
House of Cards: A Tale of Hubris and Wretched Excess on Wall Street by William D. CohanNY Times:
The Tsunami That Buried a Wall Street Giant -- In March 2008 when the 85-year-old firm Bear Stearns — the nation’s fifth-largest investment bank, which had survived every crisis of the 20th century, from the Great Depression to the market dive of 1987 without a single losing quarter — crashed and burned in little over a week, it became a harbinger of the credit crisis that snowballed later in the year and led to the current global financial meltdown. As William D. Cohan makes clear in his engrossing new book, “House of Cards,” Bear Stearns is also a kind of microcosm of what went wrong on Wall Street — from bad business decisions to a lack of oversight to greedy, arrogant C.E.O.’s — and a parable about how the second Gilded Age came slamming to a fast and furious end.

Mr. Cohan, a former investment banker and the author of “The Last Tycoons,” a 2007 book about Lazard Frères & Company, gives us in these pages a chilling, almost minute-by-minute account of the 10, vertigo-inducing days that one year ago revealed Bear Stearns to be a flimsy house of cards in a perfect storm...
Charlie Gasparino / The Daily Beast:
Fallen Wall Street Titan Speaks -- A year after the death of Bear Stearns, former CEO Jimmy Cayne—still playing bridge!—talks to Charlie Gasparino about why he went down with his ship, where to invest now (gold?), and why other CEOs did a worse job.

It’s hard to believe that a year ago this week, one of the largest investment banks in the world, Bear Stearns, imploded. Its finances were so stretched by investments in soured real estate that the federal government arranged an emergency loan to prop up the company before it forced Bear’s shotgun sale to megabank JP Morgan a couple of days later...
Councilman Tony Brancatelli/Cleveland grapple with at least 10,000 abandoned homesAlex Kotlowitz / NY Times:
All Boarded Up -- TONY BRANCATELLI, A CLEVELAND CITY COUNCILMAN, yearns for signs that something like normal life still exists in his ward...

Prayer and sheer persistence are pretty much all Brancatelli has to go on these days. Cleveland is reeling from the foreclosure crisis. There have been roughly 10,000 foreclosures in two years. For all of 2007, before it was overtaken by sky-high foreclosure rates in parts of California, Nevada and Florida, Cleveland’s rate was among the highest in the country. (It’s now 24th among metropolitan areas.) Vacant houses are not a new phenomenon to the city. Ravaged by the closing of American steel mills, Cleveland has long been in decline. With fewer manufacturing jobs to attract workers, it has lost half its population since 1960. Its poverty rate is one of the highest in the nation. But in all those years, nothing has approached the current scale of ruin...
V. Dion Haynes / The Washington Post:
Recession Sends Lawyers Home -- Firms Trade Brick-and-Mortar Prestige for a Better Business Model

Across the country, the recession is putting increasing pressure on law firms to slash spending and discount their services. Client demand for lower prices is prompting firms to outsource some of their document work to India, hire more temp or contract lawyers, shift from billable hours to fixed fees and eliminate staff.

Geoff Willard, a Northern Virginia lawyer who largely represents newly launched companies, illustrates how the Wal-Mart effect of discounting is playing out in the Washington region's legal community...
Wall Street Journal:
Economic Tumult Besets Trump Property Projects -- With the economy bearing down, Donald Trump's real-estate business has hit new snags that imperil several big projects that bear his name.

The latest troubles -- following a bankruptcy filing by the casino company he founded and a dispute with lenders at a Chicago condo project -- come in Las Vegas. Three-fourths of the buyers of condo-hotel rooms at the Trump International Hotel & Tower Las Vegas have failed to close contracts, according to public records and people familiar with the project...
New York Times:
Geithner, With Few Aides, Is Scrambling – Rarely have so few people had so little time to prop up so many pillars of the economy as those in the Treasury Department under Timothy F. Geithner.

In the six weeks since Mr. Geithner took over as Treasury secretary, he and a skeleton crew of unofficial senior advisers have been racing to make decisions that will shape the future of the banking, insurance, housing and automobile industries...
Kimberly Wolfe / Fullerton Community Examiner:
Over 15,000 descend on Fullerton to protest higher taxes -- Shouting “Off with their heads!” and “Heads on a stick!” over 15,000 people from all over California descended on downtown Fullerton for the Revolt, Recall, Repeal rally to protest over $50 billion in tax increases in the state of California and to begin a recall effort against the governor and many state legislators. Freeway off ramps heading into Fullerton had to be shut down because so many people were heading to the event and police services were stretched thin, according to a sergeant handling traffic duty at the event...
Kevin Kelly / The Technium:
Collapsitarians -- Doom and collapse are in the air. We could think of the Long Doom as the opposite of the Long Boom. The stock market has been falling steadily for a year and not even the usual optimists are claiming it has bottomed out. Like a vicious circle bad news breeds more bad news, and so at the moment the prospect for the near future is for more of the same bad news.

How low could it go?

That's the question on everyone's mind. Once you start thinking about it, you can imagine it going very low: unemployment, massive layoffs, huge migrations, class warfare, classic war, and without much effort, you soon arrive at the collapse of civilization itself...

The only thing left to believe in is collapse.

That's not boring! The end of civilization would be terribly exciting, and unlike any future we could imagine, probably more likely. Dystopias are a favorite science fiction destination now. We all are collapsitarians these days...

Calculated Risk

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