World The Economy of Fail - The Latest Financial Crisis News Thread

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Existing Home Sales Hit 12-Year-Low

Sales of existing homes took an unexpected plunge from December to January, falling to the lowest level in nearly 12 years as pessimism about the economy grew and buyers waited to see how the new government would help revive the U.S. housing market.

The National Association of Realtors said Wednesday that sales of existing homes fell 5.3 percent to an annual rate of 4.49 million last month, from 4.74 million in December. It was the weakest showing since July 1997.

Sales had been expected to rise to an annual pace of 4.79 million homes, according to Thomson Reuters.

The median sales price plunged to $170,300, down 14.8 percent from $199,800 a year earlier. That was the lowest price since March 2003 and the second-largest drop on record.

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GM posts massive loss, auditor may question viability

DETROIT (Reuters) - General Motors Corp posted a nearly $31 billion loss on Thursday for 2008 and said its auditors were likely to cast doubt on its ability its viability as it seeks an expanded federal bailout to stay afloat.

GM, which asked for up to $30 billion of U.S. government aid, posted losses in all of its major units during the fourth quarter and it burned through $6.2 billion of cash. Revenue plunged by more than a third.

The automaker also warned its pension plans for hourly and salaried workers were underfunded by about $12.4 billion as of the end of 2008, raising the risk of an even greater funding gap in the years ahead.

The release of the grim results came on the same day that GM Chief Executive Rick Wagoner and other senior executives were scheduled to meet with members of the task force headed by U.S. Treasury Secretary Timothy Geithner and White House economic adviser Larry Summers.

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AIG mulls further government stakes as auction deadline looms

HONG KONG/NEW YORK (Reuters) - Beleaguered U.S. insurance giant American International Group may allow the U.S. government to take control of certain assets should the sale of stakes in various units fail to produce attractive offers, according to a source close to the matter.

Another option under discussion is for Washington to convert $40 billion worth of preferred stock into common shares, said the source, who was not authorized to speak on the record.

AIG, facing the prospect of a third round of government aid and the largest quarterly loss in U.S. corporate history, is trying to sell off assets to stay afloat and help pay back part of the $150 billion it borrowed after being driven to the brink of collapse last year.

Deadlines for bids for the Asian assets, sales of which could raise tens of billions of dollars for AIG, are due on Friday, according to sources. AIG is also selling off stakes in U.S. subsidiaries.

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JPMorgan sees home equity losses and 12,000 WaMu cuts

NEW YORK (Reuters) - JPMorgan Chase & Co (JPM.N) said it expects losses of $1 billion to $1.4 billion in each quarter of 2009 tied to its "non-credit-impaired" home equity loan portfolio.

The second-largest U.S. bank also said on Thursday that falling home prices may result in more borrowers with home equity loans owing more than their residences are worth. It said this could affect 35 percent to 39 percent of home equity borrowers at the end of 2009 and 36 percent to 41 percent at the end of 2010, up from 27 percent at the end of 2008.

JPMorgan said it expects to open 120 new retail branches this year, even as it cuts a net $2 billion of costs tied to its September acquisition of the banking units of the failed lender Washington Mutual Inc (WAMUQ.PK). In connection with the merger integration, JPMorgan projects a total of 12,000 job cuts from the time the merger was announced.

The New York-based bank stood by its forecast for a 7 percent first-quarter net charge-off rate within its card services business.

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Obama forecasts $1.75 trillion deficit this year

WASHINGTON (Reuters) - President Barack Obama will forecast the biggest U.S. deficit since World War Two in a budget that urges a costly overhaul of the healthcare system and would spend billions to arrest the economy's freefall.

An eye-popping $1.75 trillion deficit for the 2009 fiscal year is projected in Obama's first budget, according to U.S. officials who briefed reporters on the numbers.

That is equal to 12.3 percent of U.S. gross domestic product -- the largest share since 1945 when the country ran a shortfall of 21.5 percent of GDP.

Obama will unveil the budget at 11 a.m. EST (1600 GMT). It provides the broad outlines of a more detailed document to be released in April.

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Dell Income Drops 48% as It Seeks to Cut Costs

MOUNTAIN VIEW, Calif. — During past downturns in technology spending, Dell tended to boast about its ability to weather the conditions better than competitors bogged down by higher-priced goods and cumbersome business models.

In 2009, no such gloating has been heard.

Like its peers, Dell has watched as businesses and consumers have sharply curtailed technology purchases. The decline in sales has proved so severe that Dell’s earnings have fallen to the lowest level since 2002.

On Thursday, Dell reported that net income for the fourth quarter, ended Jan. 30, fell 48 percent, to $351 million from $679 million reported in the fourth quarter of the prior year. Revenue tumbled 16 percent, to $13.4 billion from $16 billion.

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Worst job losses in 60 years expected

WASHINGTON (MarketWatch) -- The recession tightened its grip on U.S. businesses and consumers in February, according to economists, who are predicting the largest one-month job loss in almost 60 years.

"Pink slips continue to fly," said Meny Grauman, an economist for CIBC World Markets.

With output still falling at a dizzying rate, most companies are shedding unneeded workers and cutting back the hours of those remaining. Strapped by debt and seeing their paper wealth evaporating, many consumers are spending as little as they can.

"The economic patient is still in critical condition, with little medication to relieve the pain," wrote economists Brian Bethune and Nigel Gault of IHS Global Insight. "We will have to bite the bullet."

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AIG enters record books with $61.7 billion loss

NEW YORK (Reuters) - American International Group Inc posted a $61.7 billion fourth-quarter loss -- the biggest quarterly loss in corporate history -- after reaching a revised rescue deal with the U.S. government that wards off for now the prospect of crippling credit rating downgrades.

The massive quarterly loss, equal to $22.95 a share, was AIG's fifth in a row, bringing the total loss over that period to more than $100 billion.

The U.S. Treasury and Federal Reserve said AIG had posed a systemic risk requiring government action to prevent its problems from damaging the entire financial system.

AIG, the recipient of $150 billion in taxpayer aid last year, will get access to an additional $30 billion under the government's revised plan announced on Monday.

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Stocks resume slide on lack of positive news - falls 200 points

NEW YORK – Investors are having another change of heart and are selling stocks once again after a one-day burst of optimism fizzled.

The major market indicators extended their slide to levels not seen in more than a decade Thursday, as investors contended with more disheartening economic data, fresh concerns about the stability of General Motors Corp., and ongoing uncertainty about the financial system.

The market is also extremely anxious ahead of Friday's February jobs report that is likely to show the loss of hundreds of thousands of jobs. Even some positive news, including some better-than-expected retail sales and factory orders, was not enough to stoke investor confidence.

These reports failed to show a significant improvement and so the market gave back its big gain from Wednesday, said Doreen Mogavero, president of brokerage Mogavero, Lee & Co.

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GM auditors raise doubt on viability

DETROIT (Reuters) - General Motors Corp on Thursday said its auditors had raised "substantial doubt" about its ability to survive outside bankruptcy if it fails to stem its losses and stop burning cash.

The "going concern" warning from the struggling U.S. automaker had been expected, but underscored the stakes for GM as it seeks up to $30 billion in U.S. government aid to restructure outside a court-supervised bankruptcy process.

GM's shares dropped 15 percent to $1.87 in early trading on the New York Stock Exchange as investors reacted to the news.

GM said its creditors had agreed to waive a requirement that could have allowed them to force the automaker to repay more than $6 billion in loans because of the warning in order to allow GM to press its case for government aid.

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Retailers report weak U.S. sales, but Wal-Mart shines

NEW YORK (Reuters) - Top U.S. retailers saw anemic same-store sales in February as shoppers kept a tight hold on spending, but Wal-Mart Stores Inc again beat expectations and said lower gasoline prices had relaxed some household budgets.

Apparel retailers and department stores posted some of the steepest sales declines, according to results released on Thursday, but better weather and new merchandise helped chains like Gap Inc and American Eagle Outfitters top dismal forecasts.

Analysts were expecting retailers to post an overall decline of 1.2 percent in February, although wide variations in performance were expected from discounters to apparel chains, according to Thomson Reuters. Excluding Wal-Mart, the drop was expected to be 4.8 percent.

Wal-Mart, the world's largest retailer, posted a better-than-expected 5.1 percent increase in sales at stores open at least one year, sending its shares up 3 percent in premarket trading.

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Stocks shoot higher on Citigroup profit news

Wall Street soars after Citi says it operated at a profit during January and February

NEW YORK (AP) -- Wall Street got some good news from Citigroup, and responded with a huge rally.

Led by financial stocks, the market made its first big move upward in weeks Tuesday after Citigroup Inc. said it had operated at a profit during the first two months of the year. All the major indexes soared more than 3 percent, and the Dow Jones industrials shot up 250 points.

In a letter sent to employees Monday, Citi Chief Executive Vikram Pandit said the bank had an operating profit of $8.3 billion before taxes and special items through February -- its best performance since the third quarter of 2007.

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AT&T to invest $17 billion in capital spending, add jobs

NEW YORK (Reuters) - AT&T Inc (T.N) on Tuesday said it plans to invest $17 billion to $18 billion on capital spending in 2009, with about two-thirds to be used to improve its wireless and wired broadband networks.

The company, which had said in December that it was eliminating 12,000 jobs, also promised that it would add nearly 3,000 jobs in growth areas this year while cutting jobs in its traditional wired phone business.

The new jobs would be added in its wireless, video and broadband business segments, it said.

Chief Executive Randall Stephenson said in a statement that data traffic on its network was growing at an annual rate of about 50 percent a year.

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China February Auto Sales Rise 25% After Tax Cuts

March 10 (Bloomberg) -- China vehicle sales surged 25 percent in February, the first gain in four months, after the government cut taxes on some models, helping the country extend its lead as the world’s largest auto market this year.

Sales of passenger cars, buses and trucks climbed to 827,600, the China Association of Automobile Manufacturers said today in Beijing. The tally in the first two months rose 2.7 percent to 1.56 million, compared with a 39 percent decline to 1.35 million in the U.S.

China has halved retail taxes on small cars and drawn up plans to give out vehicle subsidies in rural areas to revive demand after auto sales rose at the slowest pace in a decade last year. Combined with the country’s wider 4 trillion yuan ($585 billion) economic stimulus package, the policies have caused General Motors Corp. to roughly double its forecast for China’s nationwide auto market growth this year.

“Consumers are regaining confidence because of the government’s stimulus policies,” said Ricon Xia, an analyst at Daiwa Research Institute in Shanghai. “Still, vehicle sales may fluctuate in the coming months.”

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Freddie Mac to Tap $30.8 Billion in Aid as Losses Deepen

March 11 (Bloomberg) -- Freddie Mac, the mortgage-finance company thrust into a leading role in President Barack Obama’s homeowner rescue plans, said it will tap an additional $30.8 billion in federal aid after loan holdings and other assets deteriorated.

More capital may be needed, and the $200 billion in total financing pledged by the U.S. Treasury may not be enough, the McLean, Virginia-based company said today in a Securities and Exchange Commission filing. Freddie, which owns or guarantees more than 20 percent of U.S. home loans, posted a wider fourth- quarter net loss of $23.9 billion, or $7.37 a share.

“These numbers are so mind-boggling,” said Paul Miller, an analyst at FBR Capital Markets in Arlington, Virginia. “You can’t even begin to analyze it.”

Freddie and larger competitor Fannie Mae, which together account for about $5.2 trillion of the $12 trillion U.S. residential mortgage market, are part of Obama’s plan to help 9 million Americans avoid foreclosure amid the worst housing slump since the Great Depression.

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Budget deficit reaches $765B in 5 months

WASHINGTON (AP) - Lower tax revenue and massive government spending on the bank bailout pushed the federal deficit to $765 billion in the first five months of the budget year, well on its way to hitting the Obama administration's projection of a record annual imbalance of $1.75 trillion.

The Treasury Department also said Wednesday that the February deficit reached $192.8 billion. That's a record for the month and up 10 percent from a year ago, but below analysts' expectations of $205.7 billion.

With seven months left in the current budget year, which ends Sept. 30, the deficit already has shattered last year's record annual gap of $454.8 billion.

The huge deterioration in the government's finances is due to the recession, which has cut into tax revenues, and the large amounts of money being spent from the $700 billion financial rescue plan that Congress passed in October.

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Foreclosures up 30 percent in February

WASHINGTON (AP) - Despite halts on new foreclosures by several major lenders, the number of households threatened with losing their homes rose 30 percent in February from last year's levels, RealtyTrac reported Thursday.

Nationwide, nearly 291,000 homes received at least one foreclosure-related notice last month, up 6 percent from January, according to the Irvine, Calif-based company. While foreclosures are highly concentrated in the Western states and Florida, the problem is spreading to states like Idaho, Illinois and Oregon as the U.S. economy worsens.

"It doesn't bode well," for the embattled U.S. housing market, said Rick Sharga, vice president for marketing at RealtyTrac, a foreclosure listing firm. "At least for the foreseeable future, it's going to continue to be pretty ugly."

The rise in foreclosure filings came despite temporary halts to foreclosures by Fannie Mae (FNM) (FNM) and Freddie Mac (FRE) (FRE), and major banks JPMorgan Chase, Morgan Stanley (MS), Citigroup and Bank of America. Those companies pledged to do so in advance of President Barack Obama's plan to stem the foreclosure crisis, which was launched last week.

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U.S. retail sales drop not as bad as feared

Sales at the nation's retailers fell slightly less than expected in February, suggesting that the economic deceleration may at least be slowing, according to a government report on Thursday.

The Commerce Department said retail sales declined 0.1 percent from January, better than the 0.5 percent drop that economists had expected, but nonetheless returning to negative territory after a surprise 1.8 percent gain in January.

Not including automobiles, which dragged down the overall number, sales ticked up 0.7 percent after a 1.6 percent gain in January.

Retailing analysts and economists said that sales in February were helped by a decline in gasoline prices that provided consumers with more disposable income. Sales at discount chains were up, but so were sales at furniture stores, which is surprising given the miserable state of the housing market.

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Wall Street set to extend gains for 4th session

NEW YORK (AP) - Stock futures pointed higher early Friday as investors, following the lead of overseas traders, prepared to extend Wall Street's advance into a fourth straight session.

Markets in Asia and Europe rose on hopes for new economic stimulus measures in China and Japan. Chinese Premier Wen Jiabao said the government is ready to roll out even more measures, while Japan's prime minister is calling for a new stimulus package.

Encouraging comments from Bank of America Corp. (BAC)'s chief executive Ken Lewis added to the optimistic tone in Friday's trading. Lewis said his bank was profitable in January and February. On Tuesday, news that Citigroup Inc. (C) was having its best quarter since 2007 started the rally has lifted the Dow Jones industrials nearly 10 percent in three days.

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Illinois income tax rate may rise by 50%

TRIBUNE UPDATE: Gov. Pat Quinn today acknowledged he plans to raise income taxes in the wake of a Chicago Tribune story that he is considering a 50 percent increase on individuals. He declined to confirm details in the Tribune report, which said he is looking at raising the personal income tax from 3 percent to 4.5 percent as well as increasing personal exemptions.

"There will be some that will have a higher tax burden," Quinn told reporters today during an impromptu news conference at the James R. Thompson Center, adding it would be based on the ability to pay. Quinn said an increase would be part of a "fundamental reform" of the income tax system that would provide tax relief for many Illinoisans. He said that would come from more generous tax exemptions for working families who are suffering amid the nation's economic decline.

SPRINGFIELD — Gov. Pat Quinn is considering raising the Illinois income tax by 50 percent in a politically risky bid to address one of the biggest budget dilemmas in state history, sources said Thursday.

An increase to 4.5 percent from the current 3 percent tax rate on individuals would include a corresponding hike in the corporate income tax on businesses, according to sources familiar with the new governor's preparations for his first budget address Wednesday.

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