GM Filed Chapter 11

6/1/2009

Another piece of history was made today, as General Motors filed for bankruptcy protection. Continue reading at our new home cartoosh.com...

Crysler Filed For Bankruptcy Protection

4/30/2009

The Dow Jones Industrial Index gave up an early gain and closed a bit lower than yesterday, after learning that Chrysler - the nation's third-largest car manufacturer - filed for Chapter 11 bankruptcy protection in New York. Continue reading at our new home Cartoosh.com...

Glimmers of Hope for U.S. Economy

4/14/2009

The recent rally in the stock market has been led by the very same financial sector that dragged down the market. Thanks to the modified mark-to-market accounting rules, several banks have seen much improved balance sheets and reported better than expected earnings for the first quarter of 2009.

What's the magic about "the modified market accounting rules"? Read more...

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Wall Street and Main Street

4/22/2009

Investors on Wall Street have observed a strong rebound starting in early March after the year-long bear market. The stock market has dismissed dismal economic data and ignored the fact that most Americans are still losing their jobs and struggling to make ends meet. Read more...

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The Mess of AIG Bonuses

3/18/2009

AIG CEO appeared in front of furious lawmakers on Capitol Hill yesterday to shed some light on over $165M bonus awarded to his employees - many of them in AIG's financial products unit. That's the very same department blamed for plunging AIG into the financial turmoil that eventually led the government to lend and invest about $170 billion in the company.

In defending his decision foregoing the bonus payments, CEO Liddy said that AIG needs these employees to continue working to unwind the company's exposure to about $1.6 trillion in derivatives.

"I know $165 million is a very large number," Liddy said. "In the context of $1.6 trillion and the money already invested in us, we thought that was a good trade."

I think we should invite CEO Liddy to explain such "a good trade" in a simple way that our children and grand children can understand. After all, we're counting on him to turn AIG around and hopefully pay the money back to them.

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Madoff Trade Penthouse For Tiny Jail Cell

3/12/2009

The disgraced financier, Bernard Madoff, pleaded guilty on Thursday to 11 charges, including fraud, perjury and money laundering. Judge Denny Chin ordered him jailed immediately. Madoff's plea came without an agreement, which means he faces a statutory maximum of 150 years in prison when he is sentenced June 16. Madoff's Park Avenue penthouse reported worth of $7 million is going to be up for sale.

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S&P at 1996 Level

3/3/2009

S&P 500 index dropped to the lowest level below 7000 since October 28, 1996. Although the drop on Tuesday was moderate, the Dow Jones industry average tumbled 300 points a day earlier that sent both the Dow and the S&P 500 index to their lowest level in more than a decade. Monday's slump in the stock market was primarily triggered by the bigger than expected loss of $62 billion for the fourth quarter announced by AIG -- the biggest in U.S. corporate history. The U.S. government injected to AIG another $30 billion. The government already owns nearly 80 percent of the insurer’s holding company as a result of the earlier interventions, which included a $60 billion loan, a $40 billion purchase of preferred shares and $50 billion to soak up the company’s toxic assets.

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Cartoosh's View: CA: Give Me Your Unwanted Stimulus Money

1/22/2009

Some GOP governors appear to have difficult time in deciding whether to accept any money from the $787 billion economy stimulus package provided by the federal government. Some even are doing their calculus in determining which portion of the stimulus aid would be accepted and which portion not. Their reasons: The stimulus package is a waste of the taxpayers' money and is not going to help much of the economy or create enough jobs.

Well... California Gov. Arnold Schwarzenegger is more than happy to offer an easier solution to those governors: "Give your unwanted money to California. I'll take it!" Gov. Schwarzenegger just signed a painful budget deal last week in his state with severe cuts in spending, tax hikes, and borrowing to fill a $41 billion budget gap.

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Cartoosh's View: Bank CEOs Grilled By Congress

2/11/2009

After Treasury Secretary Tim Geithner announced yesterday that the government, the Federal Reserve, and the private sectors would spend around $2 trillion to bailout the troubling financial institutions, US bank CEOs appeared in front of the House Financial Services Committee in an attempt to repair their tarnished reputation. The banks are accused of using the money to cushion their balance sheets or buy up rivals. They are also accused of rewarding themselves with exceptional amount of bonus and corporate retreats to swanky hotels in Las Vegas and other resorts.

In response to questions regarding his previous plan to treat his bank to a new private jet, Citigroup CEO Vikram Pandit said: "We did not adjust quickly enough ... and I take personal responsibility for this mistake." He now pledged that he'll take a salary of one dollar a year with no bonus, until Citigroup is back in profit.

After the hearing, these US bank CEOs will be facing a much bigger "challenge" in terms of what would be "the best uses" of the $2 trillion bailout money for the financial institutions.

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Cartoosh's View: $3 Trillion To Save Our Economy

2/10/2009

How much would it take to turn around the sinking economy again?

The Obama administration has been considering for the government and private sectors to purchase so-called toxic assets from the struggling financial institutions. According to the new estimate, the amount of government and private funds combined will be "on an initial scale of up to $500 billion, with the potential to expand up to $1 trillion."

In addition, the Federal Reserve announced it would commit up to $1 trillion to purchase bonds or other assets backed by consumer loans. The Treasury will guarantee a portion of the Fed investment by putting up $100 billion, an increase from a $20 billion commitment that Bush administration had announced.

Adding all up along with the stimulus plans, the U.S. could throw as much as $3 trillion more in government and private funds into the fight against frozen credits and job losses. And, I think that's only a best guess at this point in time. What's your number?

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Cartoosh's View: Obama Administration Tries Its Best

2/9/2009

President Obama held a conference today to call on Republicans not to "play the usual politics games" and pressure the lawmakers to approve the massive economy stimulus plan.

"The plan is not perfect," the president said. "No plan is. I can't tell you for sure that everything in this plan will work exactly as we hope, but I can tell you with complete confidence that a failure to act will only deepen this crisis as well as the pain felt by millions of Americans."

President Obama said the country could well be in better shape by next year, as measured by increased hiring, lending, home values and other factors. "If we get things right, then, starting next year, we can start seeing significant improvement," Obama said.

Most of people seem to agree on President's call that the government has to take swift actions to bailout the troubling economy. Some experts concern that the stimulus plan lacks a clear strategy and is very much like a whole bunch of plans bundled together. Under the tremendous pressure in time, I guess we just has to throw all the mud on the wall and hope some would stick.

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Cartoosh's View: Digital TV Changeover Delayed for Four Months

1/26/2009

The Senate on Monday voted unanimously to postpone the upcoming transition from analog to digital television broadcasting by four months to June 12.

Monday's Senate vote is responding a growing concern that many Americans are not ready for such changeover. According to The Nielsen Co., more than 6.5 million U.S. households that rely on analog television sets to pick up over-the-air broadcast signals could see their TV sets go dark next month if the transition is not postponed. The changeover could add additional stress on particularly low-income and elderly viewers who have been overwhelmed by the economic downturn.

President Barack Obama has called for delay of the transition, after learning that the Commerce Department hit a $1.34 billion funding limit for government coupons that consumers may use to help pay for digital TV converter boxes. The boxes that translate digital signals back into analog ones for older TVs typically cost between $40 and $80 dollars.

Also see this editorial cartoon at CNN's iReport.com.

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Cartoosh's View: Are Banks Making Loans Again?

Most of the first half of the $700 billions bailout money has been handed out by the Treasury Department to the nation's banks. The idea was to inject enough money to the banks, so they would start making loans and lending money to businesses or consumers. In theory, that would thaw the frozen credit market and help jump-start the economy.

"Banks might normally be leveraged 10:1, so some of the logic is that if you invest a billion dollars in a bank in capital, then over a period of time that bank may create $10 billion in loans," explains Mike Menzies, CEO of Easton Bank and Trust.

But, it hasn't quite worked out that way. It turns out that most of the banks have been sitting on the bailout money instead of making new loans. There are signs indicating that the real balance sheets of the banks are much worse than what's already known by the public. So, the banks are holding the bailout money as their own safety net rather than taking new risks. Neither the Treasury Department nor the congress has any means for the banks to provide accounting records about their received bailout money. So far, the $350 billion bailout is as good as throwing a stone into the ocean.

Also, see this editorial cartoon on CNN's iReport.com.

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Cartoosh's View: U.S. National Debt Over $10.6 Trillion

Due to the recent economy stimulus plans, the U.S. national debt has rapidly reached to a new high - over 10.6 trillion as of 1/13/2009. And, the increasing rate is not expected to slow down, until the economy turns around the corner. By any standards, a corporation with a red ink of this kind in its book would have filed for bankruptcy long ago. Luckily, the nation is run by Uncle Sam who can keep borrowing money from foreign countries without worrying who has to pay for it. Just don't tell your kids about it.

Also, read this post on Squidoo and HubPages.

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Cartoosh's View: Obama Asks For Remaining Financial Bailout Money

1/12/2009

President-elect Barack Obama has asked President Bush to request the 2nd half of the $700 billion financial bailout money. While Congress considers Obama's request, they are concerned how the first half of the bailout money was spent. The treasury department has failed to provide enough insights regarding how the $350 billion was distributed.

"Many of us have been disappointed with the absence of clarity, the lack of transparency, the failure to track how the money's been spent and the failure to take bold action with respect to areas like housing," Obama said.

Apparently, none of the $350 billion bailout money was provided to home owners who are facing foreclosure. Many experts have considered aid to foreclosures a key to stabilize the housing market turmoil. They say the deteriorating housing market is leading the downward spiral of our economy and must be stabilized, before the economy can turn around.

"My commitment is that we are going to fundamentally change some of the practices in using this next phase of the program. We're going to focus on housing foreclosures, we're going to focus on small businesses, we're going to focus on what's required to make sure that credit is flowing to consumers and businesses," Obama promised.

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Cartoosh's View: The Greenspan Era of Bubbles

The biggest bubble in the modern U.S. history has started to pop. The average U.S. housing market has tumbled for more than 20% since its peak in 2006. In some areas, the declines in prices have exceeded 50%. The housing bubble has sink not only the financial industry, but the entire economy. In fact, the whole global economy is shattered.

Many has attributed the housing bubble to the long-time federal reserve chairman, Alan Greenspan, who had kept the interest rates so low for so long. The low interest rates had inflated paper wealth - everything from houses, stocks, credits, and etc.

Wonder how to explain this to your kids? Read my post "How to Tell Your Kids about Financial Crisis."

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Cartoosh's View: Government a Solution Not a Problem

1/9/2009

Two months after winning the election, Mr. Obama warned that if Congress resisted or delayed approving a stimulus package designed to counter the worst effects of the recession, “a bad situation could become dramatically worse”.

He said in his speech: “At this particular moment, only government can provide the short-term boost necessary to lift us from a recession this deep and severe. Only government can break the vicious cycles that are crippling our economy where a lack of spending leads to lost jobs which leads to even less spending, where an inability to lend and borrow stops growth and leads to even less credit.”

Words in Mr. Obama's speech seemed to imply that government as a solution, rather than a problem. Continue to read the full story.

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Cartoosh's View: 2009 Budget Deficit Estimated $1.2 Trillion

1/3/2009

According to the Congressional Budget Office, our federal budget deficit will nearly triple to an unprecedented $1.2 trillion for the 2009 budget year, figures. The 2008 deficit was $455 billion.

The eye-popping includes about $400 billion spent to bail out the financial industry and take over Fannie Mae and Freddie Mac. The $700 billion bailout for the financial industry is expected to actually cost taxpayers $189 billion over this year and next.

Obama and his transition team are pressing an economy stimulus plan, which will blend up to $300 billion in tax cuts with big new spending programs and could cost up to $775 billion over the next few years.

Where would the government get all the money? The simple answer is: "Just Print It, Baby!"

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Cartoosh's View: Another Look at The 2008 Stock Market

You may have heard enough of bad news and don't even want to look at the stock indexes again. The Dow Jones Industry Index lost 33.8% in 2008 alone. The two other years in which the Dow did worse than that were 1907, when the index lost 37.7%, and 1931, when the Dow lost 52.7%. OK, I'll stop right here. But, wait. Let me show you one more stock index chart...

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