G.O.O.D

Source: Bloomberg.com

The decline in U.S. manufacturing deepened in December as demand for such products as cars, appliances and furniture reached the lowest level since at least 1948, signaling further cutbacks in factory jobs and production this year.

The Institute for Supply Management’s factory index fell to 32.4, below economists’ forecasts and the lowest level since 1980, from 36.2 the prior month. Readings less than 50 signal contraction. The group’s new-orders measure reached the lowest level on record and prices slid the most since 1949.

“Every component suggests that the weakness is going to carry over into 2009,” Mark Vitner, a senior economist at Wachovia Corp. in Charlotte, North Carolina, said in a Bloomberg Television interview. “There’s just not a whole lot of new business coming in,” and companies will have a “painful adjustment” as consumers shun spending.

Today’s figures underscore that, with private demand collapsing, manufacturers’ best hope for new business this year may be President-elect Barack Obama’s plans for an unprecedented stimulus package. Obama has pledged an investment program in roads, schools and the U.S. energy network akin to the 1950s- era interstate highway construction boom.

Stocks advanced on the first day of trading in 2009, following the biggest annual drop for the Standard & Poor’s 500 Index in 71 years, on expectations government stimulus efforts will curtail the recession. The S&P index rose 1.4 percent to 916.16 at 11:08 a.m. in New York. Benchmark 10-year Treasury yields rose to 2.25 percent from 2.22 percent late Dec. 31.

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Technorati Tags: Manufacturing

Source: globalresearch.ca

It pains me deeply to announce that, despite the massive government rescue, yesterday’s collapse of Citigroup could ultimately lead to a shutdown of the global banking system.

For many years, I hoped this would never happen, and I thought we might be able to avoid it.

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More recently, in the wake of the biggest financial failures in history — Bear Stearns, Lehman Brothers, Washington Mutual, Wachovia and others — rather than liquidate the failed firms’ bad assets, the authorities have been engineering shotgun mergers. The end result is that they have been sweeping most of the bad assets under the carpet of larger banks like Bank of America, Citigroup, and JPMorgan Chase, each of which already had abundant bad assets of its own. Adding insult to injury, Treasury Secretary Paulson’s decision this month — not to buy up the bad assets from many of these banks — has only heightened this concern. Rather than dispose of the toxic waste, the regulators have been rolling up the garbage to the larger banks.

And now, here we are, nearing the end of the road with the largest banks of all endangered and with no larger bank that can swallow them up. It’s a day of reckoning that leaves me no choice but to issue this three-part warning:

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Despite the U.S. government’s massive Citigroup bailout, it is going to be difficult for the global banking system to survive the shock to confidence for very long.

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Even if insured depositors do not pull out their funds, uninsured institutional investors are likely to run with their money, threatening to bring the system down.

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And alas, even if you have your money in a safe bank with full FDIC coverage, you could be adversely impacted.

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Technorati Tags: Citigroup

Source: tradingmarkets.com

Wachovia Corp. lost $5 billion in deposits on Sept. 26 in a “silent run” on the Charlotte bank, leading regulators to tell Wachovia that it would be shut down within days if it were not acquired, according to court filings made by Citigroup on Friday.

The bank run began the day after the stunning failure of Washington Mutual. Around 5 a.m. that morning, Wachovia chief executive Bob Steel called Citigroup CEO Vikram Pandit to talk about a possible deal. During the day, Wachovia’s stock would plunge 27 percent, adding urgency to the situation.

During intense negotiations that weekend, Wachovia agreed to sell most of its operations to Citi under the direction of the Federal Deposit Insurance Corp. Four days later, however, Wells Fargo & Co. swooped in with a rival bid, which Wachovia accepted. That spurred a legal fight and negotiations to possibly carve up Wachovia among Citi and Wells. On Thursday, Citi backed down, allowing Wells to move forward with its purchase of Wachovia, although Citi is still seeking damages in court.

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Source: Charlotte Observer

On Friday, with its stock plunging 27 percent, Wachovia experienced a “silent run” on deposits, but the bigger worry for regulators was that other banks wouldn’t provide the Charlotte bank with necessary short-term funding when it opened for business Monday, sources familiar with the situation told the Observer.
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The FDIC, for the first time, used legislative authority created in 1991 to help it deal with a “very large complex bank failure” on short notice. It requires approval from heavy hitters – two-thirds of FDIC board members, two-thirds of Federal Reserve board members as well as the Treasury secretary, who must consult with the president.

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The new details show the precarious situation Wachovia faced over the weekend as it rushed to find a suitor, even as Congress debated a possible bailout plan. Intense negotiations in New York included a decision by Wells Fargo to pass on a deal Sunday and frequent consultations with the Office of the Comptroller of the Currency, the bank’s primary regulator, and the FDIC, sources said. In the end, the FDIC, which insures customer deposits, forged the deal because it has “the pocketbook,” a source said.

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Inside Wachovia, executives started noticing customers withdrawing money on Friday morning, following the failure of Washington Mutual on Thursday. “The so-called silent run on the bank – it’s real,” Carlos Evans, Wachovia’s wholesale banking executive, said in an interview. “When Congress failed to pass the ($700 billion bailout) proposal, when WaMu collapsed, you could see the money flowing. My computer screen was lighting up.”

Starting Friday morning, Evans said, businesses and institutions with large accounts started withdrawing money to lower their balances to below the federally insured $100,000 limit. They weren’t closing accounts, he said, adding “they were very apologetic in saying they love the service they get from Wachovia and they weren’t leaving Wachovia. They were just moving their money until things settled down.”

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The FDIC and the OCC declined to comment on whether the bank experienced a run on deposits. However, FDIC spokesman David Barr said it wouldn’t be surprising. “When a bank in the news is rumored to be in trouble that does prompt a lot of depositors to take a second look at their deposits,” he said.
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The FDIC became more heavily involved as the weekend progressed because of its role in protecting consumer deposits. For the first time, the agency triggered a “systemic risk exception” under the 1991 law that allows it to ignore a requirement to choose the “least costly” method for resolving a failing bank.

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Rest assured, Wachovia did NOT fail…ok.

Source: AFP

Citigroup agreed to buy troubled Wachovia’s banking operations in a deal Monday that gives the US government a stake in another sector shakeup amid the worst financial crisis since the Great Depression.

The government-engineered rescue marked further consolidation of the struggling US banking sector saddled with heavy losses from the bursting of the real estate bubble and a related credit crunch.

It came as Wachovia, the fourth-largest US bank by assets, faced a near collapse of its share price and weakening confidence because of its exposure to the subprime mortgage crisis.

The Wachovia takeover was unveiled just hours before the US House of Representatives rejected a massive 700-billion-dollar bailout of financial firms, roiling markets.

The tentative Wall Street bailout agreement was struck Sunday after intense negotiations between President George W. Bush’s administration and Republican and Democratic Congressional leaders.

The Bush administration insisted the rescue of financial firms exposed to toxic mortgage investments was crucial to avert a wider economic collapse.

The Federal Deposit Insurance Corp. (FDIC), which insures and regulates banks, said in announcing the Citigroup takeover that Wachovia “did not fail.”

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