Wall Street Breakfast: Must-Know News

U.K. bulks up bank bailout. The U.K.'s initial £500B ($740B) rescue plan failed to prevent the economic downturn from worsening and bank stocks have continued to face heavy losses. So British Prime Minister Gordon Brown, refusing to 'sit idly by and let people and businesses go to the wall,' has expanded the bailout by insuring banks against loan defaults in exchange for them promising to lend more money and paying a fee. Called the Asset Protection Scheme, the government will commit an extra £100B ($142B) to the industry. Royal Bank of Scotland (RBS) is one of the bailout's primary beneficiaries (read more below).
RBS in royal trouble. The U.K. government will increase its holdings in Royal Bank of Scotland (RBS) to almost 70% from 58% after agreeing to swap its preference shares for ordinary ones, while RBS has promised to make £6B ($8.7B) in loans available to U.K. borrowers and will sign a binding agreement about how much it will lend and under what terms. The government's added intervention comes as the bank forecasts a 2008 loss of £22B-£28B ($31.8B-$40.5B), primarily from goodwill charges associated with its 'disastrous' acquisition of ABN Amro and from trading losses. RBS CEO Stephen Hester explained the losses (sort of) by saying 'we doubled up at the wrong time,' while PM Brown expressed anger at the bank for taking 'irresponsible risks.' Hester didn't rule out the possibility of complete nationalization, but said it's a move that both RBS and the government want to avoid. Shares -66.8% premarket.
Slim's fat profits on NYT. New York Times Co. (NYT) will pay a steep 14.1% for a much-needed $250M investment from Mexican billionaire Carlos Slim. Slim will receive warrants that can be converted into 15.9M common shares at a strike price of $6.36, a slight discount to where the shares closed on Friday, and the 14.1% notes are due in 2015. Considering NYT's pressing need for cash, its dwindling options for raising money and the deteriorating advertising market, $250M may not be enough to allow the company to survive as an independent firm. It's not clear whether Slim is interested in acquiring full control of the company but the Ochs-Sulzberger family, which holds about 19% of NYT's equity and controls the publisher through super-voting shares, said it's not interested in selling. If he exercises the warrants, Slim will control around 18% of the company.
Satyam's forged bank letters and inflated workforce. Sources close to the Satyam (SAY) investigation say the disgraced Indian outsourcer used forged documents from at least four major banks when it claimed to have a cash balance over $1B. Satyam had forged letters confirming its account balance at HSBC (HBC), Citigroup (C), HDFC Bank (HDB) and ICICI Bank (IBN). According to the Economic Times, Satyam also managed to siphon off money by reporting a staff headcount 15-20% higher than it actually was and paying the fictitious workers 'salary payments.' The investigation into Satyam's fraud has been expanded to include two firms connected to the company's jailed founder, and one of Satyam's biggest clients has canceled its contract. Other clients are likely to follow suit.
Treasury toughens TARP oversight. Under pressure to increase lending and to tighten oversight of the government's rescue program, the Treasury is demanding monthly reports from the banks that received the most capital under TARP. Kashkari sent letters to Citigroup (C), Bank of America (BAC) and 18 other banks asking for data on business and consumer loans, as well as details on purchases of mortgage-backed and asset-backed securities. The first reports, due at the end of January, will cover transactions from October-December, while subsequent reports will be monthly. The results will be made public. (The other 18 banks that received letters: JPM, WFC, GS, MS, PNC, USB, STI, COF, RF, FITB, BBT, BK, KEY, CIT, CMA, STT, MI and NTRS.)
Chrysler-Fiat deal. Fiat will take a 35% equity stake in Chrysler in a tentative agreement that needs U.S. Treasury approval. The no-cash deal will give Chrysler access to Fiat technology, helping Chrysler make vehicles with fewer harmful emissions. The move would provide both companies with greater economies of scale and geographical reach. Daimler, meanwhile, says it's still looking to sell its 19.9% stake in Chrysler.
More gloom and doom from Roubini. Nouriel Roubini sees financial losses in the U.S. from the credit crisis reaching as much as $3.6T, suggesting the banking system is 'effectively insolvent.' The system is 'bankrupt' in Europe too, says Roubini. He expects commodities to fall another 15%-20%.
French automakers get a lift. The French government plans to provide 'massive' aid to its automobile industry, in the amount of €5B-€6B ($6.6B-$7.9B). Prime Minister Francois Fillon said the industry is facing its worst crisis in decades and aid recipients will have to guarantee they will maintain their industrial operations in France.

Earnings: Tuesday Before Open

Logitech (LOGI): FQ3 EPS of $0.22 misses by $0.21. Revenue of $627.5M (-15.7%) vs. $699.3M. (PR)
Suncor Energy (SU): Q4 EPS of $0.46 beats by $0.14. "We've had a challenging 2008," said CEO Rick George, and the company is working at "achieving higher, more stable production rates in 2009 and beyond."(PR)

Today's Markets

Asia markets closed mostly down. Nikkei -2.3% to 8,066. Hang Seng -2.85% to 12,960. Shanghai +0.4% to 1,994. BSE -2.45% to 9,101.
In Europe at midday, London -0.5%. Paris -0.2%. Frankfurt -0.45%.
U.S. futures: Dow -1.0%. S&P -1.1%. Nasdaq -1.2%. Crude -6.8% to $34.01. Gold +1.6% to $853.20.