Stock Market Crash Expected In 2008 To Be Worse Than 1929

[Shammu]

And believe it or not we now have Idiotic Mainstream Media cheerleading the death of capitalism.

[Shammu]

Chrysler, GM discuss merger, acquisition


By TOM KRISHER, AP Auto Writer Sat Oct 11, 5:45 PM ET

DETROIT - For General Motors Corp. to acquire Chrysler LLC and all of its warts, GM would have to get desperately needed cash. Lots of it, according to industry analysts.
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With both automakers struggling to survive amid slumping sales, a slowing global economy and an unprecedented credit crunch, it's unclear whether Chrysler's majority owner, Cerberus Capital Management LP, would be willing to pay up, or whether the federal government might even get involved to save one or both struggling automakers.

"There's got to be more in it for GM than just Chrysler," said Erich Merkle, an auto industry analyst with Crowe Horwath LLP, an accounting and consulting firm. "If you put two auto companies together, both that are losing money, both that are losing market share, you've just got an auto company that's losing market share faster and losing more money."

GM and Cerberus, which owns 80.1 percent of Chrysler, have held preliminary talks about an acquisition or other combination of the two automakers, according to a person familiar with the discussions who did not want to be identified because the talks have not been made public.

A tie-up between the automotive giants would be historic for the industry and solidify GM's position as the global sales leader, which it has been in danger of losing to Toyota Motor Corp. GM and Toyota finished 2007 essentially even in vehicles sold worldwide.

GM and Chrysler already have a joint venture with BMW AG making a hybrid gas-electric powertrain. While melding the companies could save money by combining management, engineering, manufacturing and administrative staffs, analysts say consolidation would bring more costs, and the rewards probably wouldn't come for several years.

That might be too late for both automakers.

Auburn Hills-based Chrysler, a privately held company, doesn't have to open its books, but it lost at least $510 million in the first quarter and $1.6 billion last year. Its sales are down 25 percent so far this year, the worst drop of any major automaker.

Detroit-based GM is burning up more than $1 billion in cash per month, with several analysts predicting it will reach its minimum operating cash level of $14 billion sometime next year. Sales are down 18 percent, and the company has lost $57.5 billion in the past 18 months, largely because of tax accounting changes.

All of this comes as U.S. sales have slowed to their lowest point in 15 years, making bankruptcy possible for all of the cash-strapped Detroit Three if things don't turn around soon enough.

Not exactly the prime scenario for a GM-Chrysler combination, said analyst Kevin Tynan of New York-based Argus Research Corp.

"Even though you're getting the rationalization of folding the two businesses together, it doesn't make sense at this time," he said. "There's got to be some sort of outside motivation for them to do that sort of deal, especially in this market."

That outside motive, analysts speculated, could be the federal government, which would inherit massive pension liabilities if either company went under.

In exchange for taking on Chrysler, analysts envisioned that GM could be given access to low-rate emergency borrowing from the Federal Reserve's discount window, used in normal times by banks.

GM, though, said it is not going to the Fed at present.

"We're not actively pursuing anything at this time," said Greg Martin, GM's Washington spokesman.

The Wall Street Journal reported late Friday that Cerberus might trade Chrysler for GM's 49 percent stake in GMAC Financial Services. Cerberus bought 51 percent of GM's former financial arm for $14 billion in 2006, but since then GMAC has suffered because of bad mortgage loans.

GMAC could look good to Cerberus now, Merkle said, because its insurance and auto businesses are profitable, and the federal government may take on its bad mortgages through the $700 billion financial bailout plan approved earlier this month.

If a merger were to go through, GM could move quickly to cut costs and save billions, said Van Conway, a mergers and acquisitions expert and partner with Birmingham, Mich.-based Conway & MacKenzie. The company would have to calculate whether it has enough cash to stay alive and fund the deal, he said.

If the numbers work, a lean, merged automaker would be in a strong position to make money once the U.S. market recovers and people start buying vehicles again, Conway said.

"You want to be the last man standing here because the car market is going to come back," he said.

Tynan estimated GM could save more than $5 billion a year by running the two companies as one, but said it could take years to realize the savings.

"Over the short term there's very little in the way of consolidation that could occur," said Michael Robinet, vice president of global forecast services for CSM Worldwide, an auto industry consulting company based in Northville, Mich.

Renault and Nissan are still completing their consolidation, even though the companies joined in 1999, he said.

A combined GM-Chrysler would have too much factory capacity, too many brands and too many dealers, the analysts said.

"Adding three more brands (Chrysler, Dodge and Jeep) to their mix and another company that's very heavy in the area of truck production and sales, I don't know how that can be a good thing," Merkle said.

Neither GM nor Chrysler would confirm that they've talked, but each said discussions between automakers are routine. There also were reports Saturday that Chrysler was in talks with Nissan-Renault, and The New York Times reported that GM had approached Ford Motor Co. about a merger earlier in the year, but Ford wanted to stay independent.

Merger talk among the Detroit Three is not new. GM talked with DaimlerChrysler AG in 2007 about acquiring Chrysler before Cerberus bought its stake in a $7.4 billion deal. The talks fell through when GM decided it should concentrate on cost savings and efficiencies by globalizing its own operations.

Cerberus and Daimler confirmed last month that they are in talks for the private equity firm to acquire Daimler's remaining 19.9 percent Chrysler stake.

The Journal said the talks between GM and Chrysler are on hold for now due to recent turmoil in the financial markets.

The auto industry has been hit hard in recent weeks by the effects of the credit crisis, prompting GM and Ford to issue statements Friday to dispel the notion that they might be headed for bankruptcy.

GM and Ford shares were battered with the rest of the stock market this week, falling to lows not seen in decades. GM shares lost about half of their already-depressed value during the week, closing at $4.89 on Friday. Ford shares fell similarly, ending the week at $1.99.

Chrysler, GM discuss merger, acquisition

[nChrist]

And believe it or not we now have Idiotic Mainstream Media cheerleading the death of capitalism.

Brother, I just have one sentence for our mainstream media:

Anyone who loves freedom of any kind will hate COMMUNISM!

[Soldier4Christ]

The government ship is sinking, mainly because members of government kept drilling BIG HOLES in the hull of the ship. Their MESS is HUGE and it might even be intentional.

It at least does look as though it was intentional. After all they want it to look like capitalism doesn't work so that they can more easily put socialism in it's place. Even if it is intentional I am reminded of the words of Jesus Christ on the cross, "they know not what they do" because in the long run they actually don't know what they are doing. All of this is playing into the hands of the devil just as God said that mankind would do.

Probably only GOD knows what's left to work with. We haven't deserved GOD'S Blessings, so we shouldn't dare try to blame GOD. I don't think that anyone knows yet how hard things are going to get, and I don't think our CORRUPT POLITICIANS can fix things. Regardless of how the coming election goes, I think they will simply preside over a sinking ship. We are now reaping what was sown, and I think that the same is true for the entire world. Let's just face the TRUTH:  THIS WORLD IS CORRUPT AND EVIL MORE BY THE DAY! It is getting RIPE for the HOLY AND RIGHTEOUS WRATH OF ALMIGHTY GOD. The time may not be now, but I think that the time is soon.

Brothers and Sisters, we should have already separated ourselves from this world anyway because it isn't our HOME. Biblical teaching tells us not to love this world or the things in it. Our HOPES are ETERNAL IN CHRIST and NOT subject to change or failure. Maybe the hard times will draw us closer to CHRIST. Further, we don't know how much longer Christians will be on this earth. Regardless, we should further separate ourselves from the EVIL of this world. I'm not hinting that we should stop or slow down the work we do for the LOST - just the opposite. NOW more than ever, we should yield ourselves to GOD for HIS Use. We need to do MORE for the LOST - not less. We should know that the time remaining to help the LOST is limited. Our FULLNESS OF JOY should be based and centered on JESUS CHRIST - not this world.[/b]

Amen, brother. I'm looking forward to the time in which He will fix all these problems and more.

[Soldier4Christ]

Brother, I just have one sentence for our mainstream media:

Anyone who loves freedom of any kind will hate COMMUNISM!

and many of those will be the same ones that are supporting it right now.

[Soldier4Christ]

Bailout push included threat of martial law
Congressman says several colleagues got message before vote

During deliberations over the $700 billion federal bailout of banks and financial institutions, several members of Congress were threatened with the prospect of martial law if they did not act quickly and decisively to approve the measure, according to Rep. Brad Sherman, D-Calif., an ardent opponent of the plan.

"Many of us were told in private conversations, that if we didn't pass this bill on Monday, the sky would fall, the market would drop two or three thousand points, another couple thousand the second day, and a few members were even told that there would be martial law in America if we voted no," he said on the House floor Oct. 2.

The statement by Sherman added to fears raised by the announcement that the Army's 1st Brigade Combat Team of the 3rd Infantry Division, after service in Iraq for 35 of the last 60 months, would, for the next 12 months, serve in the U.S. under the service wing of the Northern Command as part of an "on-call federal response force for natural or manmade emergencies and disasters, including terrorist attacks."

[Soldier4Christ]

Bush announces expanded bank bailout details
Will spend $250 billion to buy stock in banks, take other bold steps

President Bush said Tuesday his administration will spend $250 billion this year to purchase stock in banks and take a number of other bold steps in an effort to combat a global credit crisis that is threatening to push the U.S. into a deep recession.

In a speech from the White House lawn, Bush said the government's role will be limited and temporary and "these measures are not intended to take over the free market, but to preserve it."

"I know Americans are deeply concerned about the stress in our financial markets and the impact it's having on their retirement accounts and 401(k)s and college savings and other investments," Bush continued.

"I recognize that the action leaders are taking in Washington and European capitals can seem distant from those concerns but these efforts are designed to directly benefit the American people by stabilizing our overall financial system and helping our economy recover."

Bush announced the new initiatives early Tuesday after executives of the country's biggest banks were summoned to a remarkable meeting at the Treasury Department on Monday. Treasury Secretary Henry Paulson basically told the bank CEOs that they had to accept the government stock purchases for the good of the U.S. economy.

The administration plans to spend $250 billion of the $700 billion government rescue program passed by Congress on Oct. 3 to make stock purchases this year. The first purchases will be in nine large banks, officials said. The industry and government officials spoke on condition of anonymity because the details were yet to be formally released.

The decision represents a remarkable turnaround for the $700 billion rescue program, already the largest bailout in U.S. history. As the plan sped through Congress, the administration said the money was needed to purchase bad mortgage-related assets that are weighing on the books of financial institutions, never mentioning direct stock purchases.

However, as the financial crisis gained new intensity last week, sending U.S. stocks down by a record amount, the administration decided to shift focus and adopt a bolder program modeled more along the lines of bank rescue efforts being put together in Britain and other European countries.

Major stock markets around the world surged higher Monday as traders began to hear of new actions being taken in Europe, where governments put $2.3 trillion on the line Monday in guarantees and other emergency measures to save banks there.

On Wall Street, the Dow Jones industrial average soared by a one-day record of 936 points. But all the stock gains came after staggering losses in the previous week and economists said more rough days can be expected until there are clearer signs that the credit crisis is lessening.

While the administration refused to provide details in advance of Bush's appearance, industry and government officials who were briefed on the proposals said the stock purchase was aimed at bolstering depleted capital reserves as a way of getting the institutions to resume more normal lending patterns.

After the purchase of preferred stock in nine large banks, the program is expected to be expanded to many others. Among the initial banks participating will be all of the country's largest institutions, including Citigroup Inc., Wells Fargo & Co., JPMorgan Chase & Co., Bank of America Corp. and Morgan Stanley, said one official, with each institution expected to receive billions of dollars in return for the sale to the government of preferred shares.

The advantage to the taxpayer is that if the rescue plan works, then the shares can be sold for more than the government initially paid, providing a profit on the transaction.

Bush will certify Tuesday that another $100 billion is needed from the $700 billion rescue program. That would leave the final $350 billion to be spent, probably by the next president.

In addition to the stock purchases, the Federal Deposit Insurance Corp. will temporarily provide insurance for loans between banks, charging the banks a premium for doing so, the officials who were briefed on the program's details said.

This FDIC program would take the form of providing insurance for new "senior preferred" debt that one bank would lend to another. This debt would be insured by the FDIC for three years, helping to unlock bank-to-bank lending, which has fallen dramatically because of fears about repayment in the face of billions of dollars of bank losses because of bad loans, primarily in mortgages.

The officials said the FDIC would remove for a period the current $250,000 limit on FDIC insurance on bank deposits for non-interest-bearing accounts. This primarily would benefit businesses who use non-interest-bearing accounts to run their companies. That money now would be insured, removing the need for companies to juggle funds among multiple bank accounts to stay under the $250,000 limit.

Congress, as part of the bailout bill, temporarily boosted the deposit insurance cap from $100,000 to $250,000, an action that will not be affected by the new program.

The $700 billion rescue program will continue to feature the purchase by the government of banks' bad assets, but the administration decided to place greater emphasis on the stock purchase program after doubts were raised about how long it might take to get the asset purchase program up and running.

Democrats in Congress, while supportive of Paulson's desire to expand the program, complained Monday that not enough strings were being attached, such as restricting excessive compensation for Wall Street executives who raked in millions of dollars in bonuses by pursuing risky investment strategies that now have helped push the U.S. financial system to the brink.

The government should purchase only stock in financial firms that agree to cut dividends paid to shareholders, adhere to strict limits on executive compensation and curb their use of exotic investment strategies, Sen. Charles Schumer of New York, chairman of the Joint Economic Committee, argued.

Worried about the slumping U.S. economy only three weeks from the elections, House Republicans and Democrats on Monday pushed for fresh action to prevent a serious downturn. Democrats scheduled hearings to consider a postelection stimulus package that could cost as much as $150 billion. Republicans called for more tax cuts and energy exploration.

In a campaign speech in Ohio, Democratic presidential nominee Barack Obama proposed a 90-day moratorium on home foreclosures at some banks and a two-year tax break for businesses that create new jobs. His Republican opponent, John McCain, promised a change in direction from the Bush administration's economic policies.

The administration on Monday announced a series of steps to get the rescue program under way, including selecting a team of interim managers, picking an outside firm to help run the program and choosing a prominent New York law firm to draw up guidelines for how the stock purchase program will work.

[Soldier4Christ]

Chicago mayor to shut down government for 6 days
Consolidation of departments will cut 240 jobs, save city $5 million a year

Facing a huge hole in Chicago's current and upcoming budgets, Mayor Richard Daley announced on Tuesday a plan to partially shut down city government for six days.

Along with several other measures, the mayor's plan was aimed at saving $62 million for the city's corporate or operating fund, which currently faces a $469 million shortfall.

Under the plan, city employees, with the exception of mostly public safety workers, would not work and would not be paid for the day after Thanksgiving or for Christmas Eve and New Year's Eve this year and in 2009.

Daley also said the fiscal 2009 budget he will unveil on Wednesday will eliminate 1,346 currently vacant positions and will include various cost-cutting or revenue-raising measures.

"I know that no one will be completely satisfied with our recommendations," the mayor said in a statement. "But, if we work together and responsibly cut spending this year, we'll be taking an important step toward addressing the financial challenges we'll still face in the years ahead."

On Friday, the mayor announced the consolidation of several city departments in a move that will cut almost 240 jobs and save Chicago about $5 million a year.

The city expects to collect $2.52 billion early next year from a long-term lease of Midway Airport to a private operator, but most of that money would be earmarked to pay off airport debt, as well as for infrastructure improvements and pension funding.

Daley has rejected using all of the remaining $100 million to tackle the budget shortfall.

[HisDaughter]

The Next Banking Bomb?

cbsnews.com

“This bill will, in my judgment, raise the likelihood of future massive taxpayer bailouts. …if you want to gamble, go to Las Vegas. If you want to trade in derivatives, God bless you.”

That was North Dakota Senator Byron Dorgan’s statement on the floor of the Senate - not this week or last, or even during the last six months as Wall Street collapsed - but back in 1999.

Four years later in a letter to shareholders, billionaire investor Warren Buffett followed with his own warning, calling derivatives “weapons of financial mass destruction” controlled by “madmen.”

While financial experts were concerned with the housing bubble and mortgage-backed securities, Dorgan and Buffett were focused on what many now believe may be the next big shoe to drop - the credit derivatives market, better known as credit default swaps.

What worries financial insiders most is the $54.6 trillion of risky credit derivatives concentrated among the few banks left standing.

Credit default swaps (CDS) are the cornerstone of the credit derivatives market accounting for more than 98 percent of all credit derivatives. They are difficult to understand, ignored by regulators and poorly reported on balance sheets. In simplest terms, CDS are insurance policies on things like bonds, loans and corporate debt. But there are two big differences: the seller of a CDS doesn’t need to have the money to cover losses if the security defaults, and the buyer doesn’t need to own the asset it wants to protect.

It’s as if hundreds of people could buy insurance policies on houses they didn’t own yet still collect the full value if it burns down.

The danger comes when the company defaults and the seller - because he’s not required to - doesn’t have the money to pay out on the default.

Investment firms that traded various derivatives, such as CDS, collected an average of $2 billion in fees each quarter over the past two years. And traders who spoke to CBS News said these transactions were the largest cash cows on Wall Street, even more profitable than mortgages. The newfangled transactions were seen as easy money and many traders had the attitude that when it blows up, it’s someone else’s problem.

Today, the same commercial banking heavyweights thought to be the most safe, JPMorgan, Citigroup Inc. and Bank of America, hold 92 percent of all the disclosed credit derivative contracts, according to the Office of the Comptroller of the Currency.

But that number is merely an estimate because the overwhelming majority of these contracts are unregulated - private, mostly undisclosed and difficult to measure.

“There is no question we are at the edge of the cliff and someone is going to fall off,” said Weil, Gotshal & Manges Senior Partner Harvey Miller who is currently overseeing the Lehman Brothers bankruptcy.

Back in 1999 when the legislation was being debated Senator Dorgan opposed the consolidation of commercial and investment banks. In fact, he sponsored two amendments to prohibit these new mega-banks from …investing in derivatives.

Today, Dorgan apparently feels the same way. He was one of 25 senators who voted no on the recent $700 billion bailout.

“No one knows where the credit derivatives are, whose balance sheets they may threaten, or how much additional risk they pose to financial firms. Yet, I was told this plan could not require regulation and transparency of these financial markets because there was opposition in Congress and the White House,” Dorgan said in a statement explaining why he didn’t vote for the bailout.

With banks already suffering losses from the subprime fiasco, many now believe they face chain reaction failures from the credit derivatives market.

“If the market keeps going in the direction it’s been going, you’re going to have lots of defaults which are dangerous things,” said Miller.

Some economic analysts predict even more panic over next few months. As more corporations default and banks find out they can’t make good on their contracts, a new round of losses for funds and financial firms could result and make the recent losses in mortgage-backed securities seem miniscule by comparison.

[Soldier4Christ]

Social Security benefits going up by 5.8 percent

Social Security benefits for 50 million people will go up 5.8 percent next year, the largest increase in more than a quarter century.

The increase, which will start in January, was announced today by the Social Security Administration. It will mean an additional $63 per month for the average retiree.

It's the largest increase since a 7.4 percent jump in 1982 and is more than double the 2.3 percent rise that retirees got in their monthly checks starting in January of this year.

The typical retiree's monthly check will go from $1,090 currently to $1,153.

But the fatter Social Security check may still seem puny to millions of retirees battered this year by huge increases in energy and food costs who have also watched helplessly as their retirement savings have been assaulted by the biggest upheavals on Wall Street in seven decades.

"Right now many senior citizens are feeling depressed because things seem out of control. They feel like they are in a boat being whipped around by rough seas," said Sung Won Sohn, an economics professor at the Smith School of Business at California State University. "Their purchasing power has been going down because of higher prices for food and energy and a lot of other things while their savings have taken a hit because of what is happening in the markets."

The market turbulence has continued this week with the Dow Jones industrial average plunging by 733 points on Wednesday, the second largest point drop on record. Earlier this month, the Congressional Budget Office estimated that Americans' retirement plans have last as much as $2 trillion over the last 15 months - more than 20 percent of their value - because of all the market upheaval.

With all the gloomy news, retirees may take little comfort in the new cost of living adjustment. The benefit change is based on the amount the Consumer Price Index increases from July through September from one year to the next.

The increase would have been even higher, but after racing ahead earlier in the year, energy costs fell in both August and September, helping to moderate the overall price gain.

The 5.8 percent rise in the cost of living adjustment is a sharp departure from recent years. The COLA increases have been below 3 percent for all but three of the past 15 years as the Federal Reserve waged a successful campaign to keep inflation under control.

Even with the big increase, the COLA is well below the gains of the late 1970s and early 1980s when the country was in the grips of a decade-long bout of high inflation. The biggest cost of living benefit on record was a 14.3 percent increase in 1980. Social Security benefits have been adjusted every year since 1975.

In one break for most retirees, the cost of living increase will not be eaten up by higher monthly premiums for the part of Medicare that pays for physician services. Because of gains in the Medicare Part B trust fund, that premium will hold steady at $96.40 a month, although higher-income people including couples making more than $170,000 annually will see their premiums increase.

Next year's cost of living increase will go to more than 55 million Americans. More than 50 million receive Social Security benefits while the rest get Supplemental Security Income payments for the poor.

The average couple, both getting Social Security benefits, will see their monthly check go up by $103 a month to $1,876.

The standard Supplemental Security Income payment for a couple will go from $956 per month to $1,011. The SSI payment for an individual will go from $637 per month to $674 per month.

The average monthly check for a disabled worker will go from $1,006 to $1,064.

Sens. Barack Obama and John McCain have sparred over Social Security during the presidential campaign, although neither has provided much insight into how they would fix the government's largest entitlement program, which is facing severe strains with the upcoming retirement of 78 million baby boomers.

If no changes are made, the Social Security trust fund is projected to deplete its reserves in 2041 and will begin paying out more than it collects in benefits even sooner, starting in 2017.

In addition to the cost of living adjustment, the government announced Thursday that the maximum amount of earnings subject to the Social Security tax will increase next year to $106,800, up from $102,000 this year.

Of the 164 million workers who will pay Social Security taxes in 2009, about 11 million will pay higher taxes as a result of this increase.

[Shammu]

Spreading the wealth? US already does it
By CHARLES BABINGTON, Associated Press Writer Charles Babington, Associated Press Writer Tue Oct 21, 5:53 pm ET

WASHINGTON – John McCain is pouncing on Barack Obama's call for shifting more wealth from richer Americans to poorer ones, likening it to socialism. His remarks win applause at campaign events. But they ignore the nation's long tradition of redistributing huge amounts of wealth through tax-and-spending policies.

Placing a heavier burden on the wealthy has been a cornerstone of the federal income tax since its inception in 1913. Under its "progressive" formula, in which the wealthy pay higher tax rates, the richest 5 percent of Americans now pay well over half of all federal income taxes.

Forty percent of Americans pay no federal income tax at all, although it is the government's largest revenue source. Meanwhile, they benefit from various social programs aimed at low-income households, another feature of a system that redistributes money.

Conservatives, citing such statistics, say the country needs no more top-to-bottom shifts of wealth.

McCain, the Republican presidential nominee, has hammered the issue since Obama, talking to an Ohio plumber, said he would raise taxes on the wealthy and cut them for lower-wage workers, adding: "I think when you spread the wealth around, it's good for everybody."

Many Americans think that sounds "a lot like socialism," McCain said in a radio address Saturday. "Barack Obama's tax plan would convert the IRS into a giant welfare agency," he said, "redistributing massive amounts of wealth at the direction of politicians in Washington."

McCain accused Obama of "class warfare." But McCain is the perpetrator, argue Democrats, who contend he is trying to fuel middle-class resentment toward poorer people with inflammatory words like "socialism" and phrases reminiscent of Ronald Reagan's attacks on "welfare queens."

In fact, Obama supporters note, the gap between rich and poor Americans has grown markedly in recent years as middle-class wages remained largely stagnant while corporate profits and high-earners' salaries soared. The nation's income inequality now ranks among the world's largest, reports show. The richest 10 percent earn an average of $93,000 a year; the poorest 10 percent make $5,800 on average.

Various economic and regulatory factors have fed that gap. But tax policies play a role, too, because some major revenue sources are far less favorable to low-income people than the income tax is.

For most Americans, the biggest tax burden is the payroll tax that funds Social Security and Medicare. The tax rates are the same for everyone, and the Social Security levy does not apply to incomes above $102,000, a boon to the wealthy.

Moreover, Social Security benefits go to rich and poor retirees alike. That means low-income workers' payroll taxes are partly shifted to wealthier people, a reverse of the income tax's topdown construct.

Federal excise taxes on products including gasoline and cigarettes are more regressive still, as are sales taxes levied by many states.

Despite the nation's income disparity, McCain sees Obama's exchange with "Joe the Plumber" as a means to appeal to anyone who resents paying taxes to subsidize less wealthy people. His running mate, Alaska Gov. Sarah Palin, criticized "Barack the wealth-spreader" in a campaign speech Tuesday in Reno, Nev.

Obama responded while campaigning in Florida. He said McCain, like President Bush, wants to "give more and more to those with the most, and hope prosperity trickles down to everyone else." He said McCain has accused him of being "more concerned with who gets your piece of the pie than with growing the pie."

After eight years of "Bush-McCain economics," Obama said, "the pie is now shrinking."

Obama has proposed higher taxes on the wealthy, and tax cuts for most other households. He would end the Bush administration's tax cuts for people making more than $250,000 a year, he says. He also would impose a new Social Security payroll tax on incomes above $250,000 a year. Currently, all annual income up to $102,000 is taxed at 12.4 percent for Social Security, with employers and workers splitting the cost evenly.

As for the claim that Obama might turn the Internal Revenue Service into a "giant welfare agency," liberal groups note that the number of Americans on welfare fell by more than 60 percent after a 1996 overhaul of the program approved by President Clinton.

For several years, a strong economy and social safety net programs helped many families avoid poverty. However, the liberal Center for Budget and Policy Priorities says the recent economic downturn "has coincided with a sharp increase in food prices, which has exacerbated hardship for many low-income families who also face high gas prices (and will face high home heating bills this fall and winter)."

The group's chief economist, Chad Stone, says the degree to which U.S. tax policies favor the poor over the wealthy "should not be a concern to people."

"We still have too much poverty," he said. "And if it were not for the progressive nature of our tax system, it would be much worse."

Spreading the wealth? US already does it

[Shammu]

Dow Plunges 486 Points
November 05, 2008
Matt Egan

Election-Day euphoria vanished in a cloud of negativity on Wednesday as the Dow plummeted almost 500 points, its worst post-election plunge on record. The losses narrowly surpassed the Dow’s 4.51% decline the day after Franklin Roosevelt’s win in 1932 during the Great Depression.

Today's Market

The Dow Jones Industrial Average lost 486.01 points, or 5.05%, to 9139.27, the broader S&P 500 dropped 52.98 points, or 5.27%, to 952.77 and the Nasdaq Composite slid 98.48 points, or 5.53%, to 1681.64. The consumer-friendly FOX 50 fell 42.13 points, 5.49%, to 724.71.

“I think it’s primarily a realization that some of the bullishness we’ve seen in the last week needs to be tempered a bit. There still are potential potholes ahead and the market had gotten significantly overbought short-term," said Michael James, senior equities trader at Wedbush Morgan Securities.

Wednesday's losses, which were led by plunging financial giants like Citigroup (C: 12.63, -2.05, -13.96%), come a day after Barack Obama and the Democrats swept the elections by promising change amid the worst financial crisis since the Great Depression.

“I think everybody was anticipating Obama was going to win. Now that he has, we have turned our views back to the economy to say, ‘Geez, look at the mess we’re still in,’” said Paul Nolte, director of investments at Hinsdale Associates. “The fact that Obama is now the president-elect doesn’t change the economy for good or bad. He won’t be able to implement anything until March or April.”

The selloff erases all of the Dow's 305-point rally from Tuesday, which was the largest on a presidential Election Day in modern history.

"Nothing has changed from yesterday to today. Personally, I thought yesterday’s rally was ridiculous. There was very little reason for the market to be up," said James.

All 30 components of the Dow lost at least 1% on Wednesday, led by steep losses from Boeing (BA: 49.55, -3.67, -6.89%) and Citigroup. Drug maker Merck (MRK: 28.72, -2.41, -7.74%) and Bank of America (BAC: 21.75, -2.78, -11.33%) also fell sharply. 3M (MMM: 64.52, -1.09, -1.66%) was the best performing stock on the index but still lost nearly 2%.

The Nasdaq Composite ended in the red for the first time in more than a week, ending its longest win streak since December 2007. Big-name tech stocks like Google (GOOG: 342.24, -24.70, -6.73%) and Apple (AAPL: 103.30, -7.69, -6.92%) posted steep losses.

It's worth noting the New York Stock Exchange saw slim volume of barely 1.3 billion shares.

Economy Back in Focus

Obama’s election was widely expected on Wall Street and elsewhere, so Wednesday’s losses likely weren't a knee-jerk reaction to his victory.

"The election of Obama does not change anything from an economic, credit or housing point of view. Nothing has changed other than the fact that people will now stop focusing on the election and start to focus on the economy," said Kenneth Polcari, managing director at ICAP Equities.

There was no shortage of economic news on Wednesday for Wall Street to focus on. Unfortunately, none of it was positive.

The ADP Employment survey released Wednesday showed the U.S. lost a higher-than-expected 157,000 private-sector jobs last month. However, the ADP report has had limited success recently in predicting the government’s more closely-watched report.

Another key economic report showed the nation's service sector contracted further in October, giving yet more evidence of a U.S. recession. The Institute for Supply Management, a private research firm, said its non-manufacturing index fell to 44.4 last month, down from 50.2 in September.

Looming in the not-too-distant future is Friday's all-important monthly jobs report, which is expected to show the U.S. lost 175,000 jobs in October on top of the 160,000 lost the month before.

“Given everything else we’ve seen so far, it wouldn’t surprise me to see something in the 200,000 to 225,000 range. For this particular part of an economic cycle, that isn’t a surprise," said Nolte. “It reinforces the fact that we’re in a recession and numbers are going to be bad in a recession.”

Financials, Earnings Weigh on Stocks

Despite new signs of thawing credit markets, financial stocks were the biggest drags on Wall Street on Wednesday, falling more than 8% as a group. Citigroup was at the forefront of those losses, diving double-digit percentages despite a lack of major news. Citi wasn't alone as Goldman Sachs (GS: 87.43, -7.57, -7.96%), Morgan Stanley (MS: 17.06, -1.84, -9.73%) and Merrill Lynch (MER: 17.62, -2.37, -11.85%) all suffered steep losses.

The government intervention appears to have helped unlock the lending markets as the three-month Libor rate, a closely-watched barometer of banks’ willingness to lend to each other, dropped to 2.5% -- the lowest level of the year.

There were few positive earnings reports on Wednesday as bond insurers MBIA (MBI: 8.16, -2.30, -21.98%) and Ambac Financial (ABK: 2.01, -1.39, -40.88%) posted huge quarterly losses and Time Warner (TWX: 10.15, -0.68, -6.27%) lowered its 2008 outlook.

Crude Sinks Below $70

Meanwhile, crude oil prices gave back nearly all of Tuesday's huge gains, falling sharply after the government reported weekly gasoline inventories surprisingly jumped by 1.1 million barrels last week. Analysts had forecasted a decline of 600,000 barrels in gasoline stockpiles.

The price of a barrel of crude closed down $5.23 to $65.30. The declines come after crude saw its biggest one-day jump in six weeks on Tuesday, soaring on the plunging dollar and news of a production cut from Saudi Arabia.

Corporate Movers

Google (GOOG: 342.24, -24.70, -6.73%) announced it is abandoning its search advertising deal with Yahoo! (YHOO: 13.92, +0.57, +4.26%) to avoid a potential lengthy legal battle with anti-trust regulators.

Time Warner (TWX: 10.15, -0.68, -6.27%), owner of CNN and Time, beat the Street with a third-quarter adjusted-profit of 31 cents per share on $11.71 billion in revenue. However, the media giant cut its 2008 forecast below Wall Street's view.

MBIA (MBI: 8.16, -2.30, -21.98%) disclosed a quarterly loss of $3.48 per share, well off its profit of 30 cents per share a year ago.

Ambac Financial (ABK: 2.01, -1.39, -40.88%) posted a much worse-than-expected quarterly adjusted-loss of $8.11 a share. The bond insurer, which took $2.71 billion in writedowns, was expected to disclose a more modest loss of 50 cents per share.

Transocean (RIG: 80.35, -4.17, -4.93%) fell sharply after the world's largest offshore oil and gas driller said it earned $3.39 per share on an adjusted basis in the third quarter, widely missing estimates for $3.54 per share.

Duke Energy (DUK: 15.62, -1.30, -7.68%) missed estimates with third-quarter adjusted-earnings of 33 cents per share on $3.51 billion in revenue.

Sara Lee (SLE: 10.20, -1.66, -13.99%) plunged double-digit percentages after the baking company slashed its fiscal 2009 outlook. The company earned 32 cents per share in the fiscal first-quarter, compared to 28 cents a year ago.

Global Markets

Overseas, Asian investors responded positively to Obama's victory. Japan's Nikkei 225 Index gained 406.64, or 4.46%, to 9521.24. In Hong Kong, the Hang Seng Index gained 455.82 points, or 3.17%, to 14840.16.

European reaction was more tepid as London's FTSE 100 closed down 2.4% and Germany's Dax lost 2.1%.

Dow Plunges 486 Points
~~~~~~~~~~~

The market went up when they thought McCain was coming up in the polls and that the polls went down when they thought Obama was going to win. Socialism does not lend itself to capitalism.

[Soldier4Christ]

Employers slashed 240,000 jobs in October
Nation's unemployment rate jumps to a 14-year high of 6.5%

The nation's unemployment rate bolted to a 14-year high of 6.5 percent in October as another 240,000 jobs were cut, stark proof the economy is almost certainly in a recession.

The new snapshot, released Friday by the Labor Department, showed the crucial jobs market deteriorating at an alarmingly rapid pace.

The jobless rate zoomed to 6.5 percent in October from 6.1 percent in September, matching the rate in March 1994.
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Unemployment has now surpassed the high seen after the last recession in 2001. The jobless rate peaked at 6.3 percent in June 2003.

October's decline marked the 10th straight month of payroll reductions, and government revisions showed that job losses in August and September turned out to be much deeper. Employers cut 127,000 positions in August, compared with 73,000 previously reported. A whopping 284,000 jobs were axed in September, compared with the 159,000 jobs first reported.

So far this year, a staggering 1.2 million jobs have disappeared. Over half of the decrease occurred in the past three months alone.

Although the unemployment report was worse than expected, and Ford Motor Co. reported dismal third-quarter results and announced plans to cut more than 2,000 additional white-collar jobs, investors seemed attracted by stock prices beaten down the past two sessions. The Dow Jones industrial average was up about 50 points in morning trading and broader market indexes also are higher.

About 10.1 million people were unemployed in October, an increase of 2.8 million over the past year. A year ago, the unemployment rate stood at 4.8 percent.

The employment market is much weaker than economists expected. They were forecasting the unemployment rate to climb to 6.3 percent in October and for payrolls to fall by around 200,000.

Job losses were widespread, reflecting the mounting carnage from a trio of crises — housing, credit and financial.

Factories cut 90,000 jobs, the most since July 2003. Construction companies got rid of 49,000 jobs with heavy losses in home building. Retailers cut payrolls by 38,000. Professional and business services reduced employment by 45,000. Financial activities cut 24,000 jobs, with heavy losses in mortgage banking and at securities firms. Leisure and hospitality axed 16,000 positions.

All those losses more than swamped some gains elsewhere, including in the government, as well as in education and health care.

Racing to assemble his new Democratic Cabinet, President-elect Barack Obama will huddle with economic advisers later on Friday. His team has been in close contact with the Bush administration to pave the way for a smooth hand-off of power.

All the economy's woes — a housing collapse, mounting foreclosures, hard-to-get credit and financial market upheaval — will confront Obama when he assumes office early next year. And, the employment situation is likely to get worse.

Many expect the jobless rate to climb to 8 percent, possibly higher, next year. In the 1980-1982 recession, the unemployment rate rose as high as 10.8 percent before inching down.

To provide fresh relief, House Speaker Nancy Pelosi said Democrats, in a lame-duck session later this month, are pushing to enact another round of economic stimulus of around $100 billion.

Average hourly earnings rose to $18.21 in October, a 0.2 percent increase from the previous month, according to the Labor Department report. Over the past year, wages have grown 3.5 percent, but paychecks aren't stretching that far because high food, energy and other prices has propelled overall inflation at a faster pace.

To prevent the country from sinking into a deep and painful recession, the Federal Reserve last week ratcheted down interest rates to 1 percent and left the door open to further reductions.

The economy has lost its footing in just a few months. It contracted at a 0.3 percent pace in the July-September quarter, signaling the onset of a likely recession. It was the worst showing since 2001 recession, and reflected a massive pullback by consumers.

As U.S. consumers watch jobs disappear, they'll probably retrench even further, spelling more trouble for the sinking economy.

That's why analysts predict the economy is still shrinking in the current October-December quarter and will contract further in the first quarter of next year. All that more than fulfills a classic definition of a recession: two straight quarters of contracting economic activity.

[HisDaughter]

Financial crisis shifts power to Asia, experts say 

jpost.com--------------------------------------------------------------------------------

British Prime Minister Gordon Brown's whirlwind fundraising tour this week in the Gulf States demonstrates the increasing power of sovereign wealth funds and the shift of economic power to Asia, experts said Wednesday.

However they warned that it will take much more than a fund-raising trip to the oil-rich Gulf States to help countries like Britain and America cope with the worst global financial crisis since the Great Depression.

Brown said he was in search of "hundreds of billions of dollars" to alleviate the crisis that has hit his country, along with America, particularly hard.

"I think there will be more and more reliance and more of a shift of power toward Asian countries, not only for the oil rich countries, for the Gulf States, it's also true for Singapore, China, Kazakhstan and other countries," said Dan Galai, Professor of Finance at Hebrew University in Jerusalem. "Many countries in Asia will continue to accumulate money in sovereign funds and they will buy ownership in financial institutions that are located in England, Germany, France and the United States."

Sovereign wealth funds are state-owned investment funds. They have become increasingly important to troubled financial institutions in the United States and Western Europe, where some banks have lost up to 80 percent or more of their value due to the financial crisis.

While these financial institutions will continue to operate in Europe or in the United States, their ownership will increasingly be in the hands of sovereign funds in Asia, Galai said.

While the Gulf States are "awash with cash" earned from high oil prices and have reserves that Western countries can draw on, the solution to the crisis does not lie with any one region and will require a fundamental reform of the financial system, said Robin Shepherd, senior fellow and head of the Europe Programme at the London-based Chatham House. For example, the newly elected US President, Barack Obama, and other leaders will have to examine the regulatory environment surrounding the banking system, the way central banks and finance ministries keep track of developments in the financial sector, and reckless lending policies that have contributed to the crisis.

"The essential point is that the United States, Britain and Europe are in a dreadful financial mess at the moment; they will look anywhere they can to seek respite, whether in the Gulf States or elsewhere," said Shepherd. "In a globalized economy, all of the players become relevant."

[Soldier4Christ]

2 more banks go belly-up
Franklin of Houston, Security Pacific of Los Angeles bring 2008 tally to 19

The tally of failed banks in 2008 rose to 19 as the government announced that a Texas and a California bank had been shuttered Friday night.

Franklin Bank, a Houston, Texas-based bank and Security Pacific Bank, a Los Angeles, Calif.-based bank were shut down by state regulators Friday, marking the 18th and 19th bank failures this year.

Franklin Bank (FBTX) had total assets of $5.1 billion and total deposits of $3.7 billion as of Sept. 30, 2008, according to a statement on the Federal Deposit Insurance Corp.'s Web site.

Ironically, Lewis Ranieri, the 61-year-old co-founder and chairman of parent Franklin Bank Corp., is credited with inventing mortgage-backed securities two decades ago, the AP reported, back when he worked at Salomon Brothers, where he is a former vice chairman.

Franklin Bank Corp. just Sunday said it had received proposals for transactions to strengthen Franklin Bank's capital position and was keeping regulators informed of the talks' progress, according to the Associated Press.

Security Pacific Bank had total assets of $561.1 million and total deposits of $450.1 million as of October 17, 2008, according to the FDIC.

Prosperity Bank (PRSP), based in El Campo, Texas, will assume all of the deposits of the failed Texas bank, including those that exceed the insurance limit and brokered accounts. Depositors of the failed bank will automatically become depositors of Prosperity.

In addition to taking over the deposits of the failed Franklin Bank, Prosperity will purchase $850 million of assets. The FDIC will retain the remaining assets to dispose of later.

Pacific Western Bank of Los Angeles will assume all of the deposits of Security Pacific Bank and will purchase approximately $51.8 million of the assets. The FDIC will hold on to the remaining assets to dispose of later.

The failed Houston bank's 46 offices will open as branches of Prosperity under normal hours, including Saturday hours. The deal will give Prosperity more than 170 banking locations in Texas.

Security Pacific's four branches will reopen on Monday as branches of Pacific Western.

Customers of both banks should continue to use their existing branches, according to separate press releases on the FDIC's website. Dan Rollins, president of Prosperity Bank, in a statement said records will be fully integrated during the first quarter of 2009.

"The customers will be able to go about their business as usual; they will be able to access their money and use their ATM/debit card, Internet banking, bill pay service or other electronic banking services beginning Saturday morning," said Rollins.

Security Pacific customers can continue to access their funds via ATM, checks or debit cards, according to the FDIC.

In Friday's announcement about Franklin Bank, the FDIC said that the cost of its failure to the Deposit Insurance Fund will be between $1.4 billion and $1.6 billion.

Meanwhile, Security Pacific's failure, the third in California this year, will cost the FDIC $210 million. The FDIC said that for both banks, acquisition of their deposits was the least costly resolution.

Smaller regional banks have been under pressure as the financial crisis continues to take its toll.

Prosperity Chief Executive David Zalman said in a statement that his bank was "committed to taking care of their existing and new customers during this volatile time in the financial industry."