Wall Street Breakfast: Must-Know News

**Due to a technical glitch, an archived edition of Wall St. Breakfast was resent to some subscribers Sunday morning. We apologize for the error and any confusion it may have caused.**

• Auto aid shake-up. The White House auto task force rejected the turnaround plans of both General Motors (GM) and Chrysler, and warned both could be put through bankruptcy.
  ~On the request of Steve Rattner, head of the auto task force, Rick Wagoner will step down from his role as CEO of General Motors immediately and will be replaced by COO Fritz Henderson. Wagoner had said as recently as March 19 that he doesn't plan to resign. Instead of granting GM's request for up to $30B in loans, the company will reportedly get enough federal aid to restructure over the next 60 days, though officials maintain the company can bounce back if it initiates necessary changes. Premarket: GM -13% (7:00 ET).
  ~Sources say Chrysler CEO Bob Nardelli has not been asked to resign, but that Chrysler has been told it must complete a deal with Italian automaker Fiat. The company will have 30 days to complete the transaction and, if a deal is reached, could receive as much as $6B from the government. If talks fail, the company would be allowed to collapse. (Read the memos on GM's viability (.pdf) and Chrysler's viability (.pdf), and the auto restructuring fact sheet (.pdf))
• Fannie/Freddie may get new role. The Federal Housing Finance Agency said it's looking at ways that Fannie Mae (FNM) and Freddie Mac (FRE) could help revive the market for 'warehouse loans,' or loans made to mortgage banks. Low interest rates have created a surge in mortgage applications but mortgage banks are having a hard time keeping pace with demand because of tight credit. Regulators have asked representatives from mortgage banks to come up with a detailed plan of how Fannie and Freddie could ease credit access. This is the latest sign that the two mortgage giants are increasingly viewed as tools to implement government policy rather than corporations focused on shareholders.
• Renewed BHP-Rio merger? The Sunday Telegraph reported BHP Billiton (BHP) may revive its failed bid for Rio Tinto (RTP). Major investors in BHP have given the 'green light' to explore a new Rio bid, including the possibility of partnerships or asset sales in addition to the potential for a full merger. If BHP moves ahead with a new merger proposal, it will require the support of Rio's board since BHP is barred from launching a hostile takeover after walking away from its Rio bid last year. When BHP abandoned its $66B bid, it cited declining commodity markets, the global downturn and Rio's high debt levels. Management from the two companies have had 'informal dialogue.' Spokesmen for the firms refused to comment. Premarket: BHP -5.5%, RTP -4.9% (7:00 ET).
• HSBC goes on trial. HSBC Finance Corp., the U.S. home-lending unit of HSBC (HBC), goes on trial this week over claims that a corporate predecessor hid predatory lending from shareholders. Plaintiffs claim the suit could be worth $1B, while some analysts call it 'a real gamble' for HSBC to go to trial rather than settle out of court. Jury selection is set for today in a federal court in Chicago.
• More writedowns en route for UBS? Swiss newspaper Sonntag reported UBS (UBS) will likely announce additional writedowns and job cuts over the next few days. According to reports, UBS will write down another $2B on illiquid assets, and slash an additional 8,000 jobs. The bank has already written down over $49B since mid-2007 and cut 7,000 jobs. Shares -5.7% premarket (7:00 ET).
• Fifth Third sells stake in unit. Fifth Third Bancorp (FITB) is expected to announce today that it has agreed to sell a 51% stake in its payment-processing unit to private equity firm Advent International Corp. for $561M. The deal further shores up the bank's capital position after a $3.45B injection from the government. The profitable unit will be spun off into a separate company called Fifth Third Processing Solutions LLC. Fifth Third will provide $1.25B in loans to fund the new company.
• TARP leftovers. The Treasury estimates it has around $134.5B of TARP funds left, with 81% of the $700B in funds already committed. The money still remaining means Obama may not have to ask Congress for additional funds at all, or at least until well into the year. Geithner said the projection represents "a very conservative judgment about how much money is likely to come back from banks that are strong enough not to need this capital now to get through a recession."
• Ramping up for the G-20 meeting. The G-20 will meet this week and are expected to produce a new set of rules for offshore tax havens that will address oversight, transparency and conduct. Another focus will be the coordination of financial regulation, especially for large hedge funds. U.S. officials are easing off on earlier calls to set stimulus spending targets. Meanwhile, tens of thousands of people marched in capital cities in Europe, urging world leaders to act on poverty, jobs and climate change at the April 2 summit.
• Skype wants its apple a day. Skype (EBAY) plans to release a version of its internet phone software for the iPhone (AAPL). The move, which will be announced tomorrow, brings Skype more directly into competition with AT&T (T) and Verizon Wireless (VZ). The software is free and allows iPhone users to call Skype users for free if they are in a Wi-Fi hot spot. Alternately, the user can call a landline for a small fee, usually 2.1 cents per minute. Skype COO Scott Durchslag said the move is part of a strategic push into the cellphone market.
• Investment firms respond to transparency request. Earlier this month, the SEC asked Blackstone Group (BX), the world's largest private equity firm, and Fortress Investment Group (FIG) to publicly disclose the performance of their buyout and hedge funds. Fortress acquiesced, including the data in its annual report. Blackstone refused, responding that the disclosure of detailed performance data wasn’t required under current regulations and wasn’t a meaningful measurement of operating results. Blackstone's private equity funds had a net depreciation of 32% last year, compared to a net appreciation of 16% in 2007.
• OECD jobless forecast rises. According to OECD Secretary General Angel Gurria, unemployment in the U.S. and EU will reach 10% this year, and expected contraction will reach 4.2-4.3% vs. November's forecast of a 0.3% contraction. "This is unprecedented; we have not seen this in many decades," said Gurria. The official forecast will be released tomorrow.

Today's Markets

Overseas markets tumbled and U.S. stock futures are under pressure after the Obama task force rejected carmakers' restructuring plans, reawakening bankruptcy concerns.

• Asia: Nikkei -4.53% to 8,236. Hang Seng -4.7% to 13,456. Shanghai -0.69% to 2,358. BSE -4.78% to 9,568.
• Europe at midday: London -2%. Paris -2.6%. Frankfurt -3.3%.
• Futures: Dow -2.2% to 7588. S&P -2.4% to 796. Nasdaq -2.1%. Crude -3.4% to $50.62. Gold -1.2% to $912. 30-year Tsy +0.63%. 10-year +0.46%.

Monday's Economic Calendar

• 3:00 PM Farm Prices
• Notable earnings on Monday: none.

Seeking Alpha editor Eli Hoffmann contributed to this post.

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Comments

[eddie6442:]

GM: Ask Ross Perot to dust off his notes of 20 years ago and he can give an intelligent and workable restrucuring plan......... Why isn't Ross on the government committee as a consultant?????????

CHRYLER: Is owned by a private equity firm with $BB of dollars, but refuses to invest further in C......... Why Chrysler is even involved with government "taxpayer" bailkout boggles the mind!!!!!!!!! The rich never spend their own money when the gullible taxpayer can be fleeced by "paid for" Congress!!!!!!!!!

IMHO

Mar 30 09:14 AM

[long_on_oil:]

Any company that accepts government money has a board that is a failure. It is clear the GM board is a major failure. GM is failing for a multiplicity of problems with the two biggest being legacy costs and sales. They have to cut costs and increase sales to get out of this mess. You can't cut costs when you have to deal with a Union that will not let you cut pension benefits like health care for retirees.
GM MUST get use to selling fewer cars and their business plan should be geared to that.
The entire management and board needs to be replaced by the stockholders not the government. Ford is dealing with the same problems and they have not accepted government bail out money.
The government should pick a slate of successful businessmen to replace the current board if the stockholders are not up to the task. Then let the stockholders vote on the new board. The board should not be forced down the stockholders throats.
This is a historic day that will change American business forever. We can not let the government take over management of American corporations.

Mar 30 09:18 AM

[normthefedup:]

...and out of the frying pan and into the fire. What makes our auto czar think that replacing the old guard with more old guard will actually change or improve anything? And wages and benefits have to be rolled back to emulate what the Japanese are paying in order to at least partially level the playing field. Doesn't the "rank and file" realize that they're going to lose EVERYTHING ANYWAY if GM files? Just bite the bullet the way all the creditors and stockholders have and move forward for crying out loud. Of course, GM will have to build cars that everyone wants to buy....all tall orders to be completed in 60 days........

Mar 30 09:39 AM

[BlueOkie:]

Most boards are a joke. They are paid big bucks and only work a day or two a month. Check out any major corporation and see what they pay their board members. Many board members have full time jobs and it ain't being a member of the board. The only thing crazier than the board is the compensation committee. "You vote to pay me more and I'll vote to pay you more". The real problem is the major stock holders - funds. Most fund managers don't have the time or even care how the CEO's run things. Does the replacement of the GM CEO by the government have to have the "advice and consent" of the Senate?(G)

Mar 30 09:52 AM

[Landbuyer:]

Damn it, it's time for us (meaning U.S.) to change out the miscreants in Congress. Term limits=4 years.


On Mar 30 08:25 AM long_on_oil wrote:

> The Government is going to do a bank up job running GM and if you
> believe that you will believe the market will hit 14000 by Friday.
> This administration makes me sick. The answer to all the problems
> seems to be just give money to bad businesses and hope they recover.
>
> The businesses have to change their ways they just can't keep doing
> business the same old way and expect different results. The stockholders
> and boards must replace management, not the government. Just look
> at Obama's selections for his cabinet and you will see what I mean;
> nothing but tax cheats and misfits. These guys are throw offs from
> the Clinton administration and we expect them to fix the problems,
> get real.
> Most life time government employees couldn't even run a hot dog stand
> at a profit, let alone GM.
> Damn it, it is time for the boards and stockholders of these companies
> to stand up and be heard. Stop caving in to these losers from Washington.
>

Mar 30 09:54 AM

[winindthedust:]

Not to mention, it was government run Fannie & Freddie, that got us into this mess in the first place. Do you think they will do any better with the Auto industry?

All the former employees, consultants, CEO's, etc. of Fannie & Freddie that now are in the Obama administration should give back the money and bonuses they earned in Fannie & Freddie. How is this glossed over in the media? Whether intentional or not, Fannie & Freddie turned out to be a scheme to enslave it's citizens and defraud it's taxpayers.

Mar 30 10:13 AM

[MikeT:]

Term limits need to be implemented to get the employees out. Put them on Social security and give them a 401k and watch the decisions change. Some Congressman from Michigan criticized the dumping of Wagoner. Do you think he really thought Wagoner was doing a good job or was the problem that he was not going to be on Wagoner's payroll any more? If Congressmen in MI really cared about their constituents they would have been kicking the doors down at GM, Ford and Chrysler years ago.
But it is the politicians that need to go and they won't do it voluntarily. Life is too good for them and they don't want to give up the power and perks. Two terms and out!

Mar 30 10:18 AM

[winindthedust:]

Jeremiah 10:23

On Mar 30 09:54 AM Landbuyer wrote:

> Damn it, it's time for us (meaning U.S.) to change out the miscreants
> in Congress. Term limits=4 years.

Mar 30 10:22 AM

[winindthedust:]

Apple looks like a very cheap and sound buy.

Software like Skype will continue to drive Apple hardware sales.

This is very exiting, we will be traveling oversees, soon, and to have Skype on my iPhone will save the day for international business calling.

Apple is one company, who's fundamentals are actually improving despite the economy... Apple as a long play is a no brainer.

Mar 30 10:27 AM

[Repsonsible...:]

Long Story Short , America is BROKE , and digging deeper everyday. GM s Toast along with hundreds of other major American Businesses. Theres 10 Milllion Americans now living in Shanty towns and tent cities and By Next year it will be 20 Million . And were suppose to believe things are going to get better next year Wake up people !! . As Obama said very clearly at his very First Washington press conference "THE PARTYS OVER " Apparently that went "Over" everyones head !

Mar 30 10:48 AM

[aarc:]

The panic sell-off today is not entirely surprising.

I have been arguing in previous posts that the next catalyst or "stimulus" for a sustained market meltdown is going to be big companies (out of financials) going bankcrupt with GM as the most obvious candidate sitting right into the middle of the cross-hairs.

Non-financial companies going bankcrupt will exacerbate the unemployment problem since they hire more employees per unit income as compared to the bank, brokers and insurance companies.

Companies other than financials are burning though their cash reserves at unprecedented rate with no alternatives available for shoring up their resources in this equally unprecedented economic crisis with the market downpour now entering the 19th month of unrelenting sell-off. They are also demoralized at the current stage with the massive public outcry over government bail-outs of the financial firms. Their chances for possible gov't assistance is in great jeopardy if and when they start reaching insolvency stage caused by sustained consumer spending crunch of which the economy is 70% dependent.

This is not the start of a sustained market meltdown.

The Obama administration has found a "palatable" way to provide assistance to GM for the next immediate future by asking Wagoner to step down.

This is not the solution to prevent big companies outside the financials from going down the drain.

The government has to either provide a Comprehensive Economic Recovery and Stabilization Plan or they do it peacemeal starting with an Economic Re-investment Program.

The Comprehensive Economic Recovery and Stabilization Plan is going to take considerable time to outline and be able to establish specific courses of actions.

The Economic Re-investment Program can be initiated immediately. It requires establishment of an FDIC sponsored and guaranteed Private-Public Bank that will provide immediate capital infusion to distressed companies both financial and non-financial if and when those companies start needing fresh capital support and to provide fresh capital to new businesses.

This approach should be able to arrest the mounting unemployment and create new jobs needed for an economic recovery and stabilization for the immediate future.

The Private-Public Bank will be co-owners of distressed companies and are entitled to future profits and dividends if and when those companies become profitable again.

Likewise, the Private-Public Bank will be exempt of all taxes and fees regarding all profits, capital gains, interest gains and other potential future rewards as a part of of the deal to encourage private investors as well as individuals to participate in Saving America from a potential major economic dislocation that can threaten capitalism, the government, and Democracy itself.

It is hightime that both the government and the private sectors stop and reverse this economic downturn that is going on for more than 18 months - and prevent potential civil unrest that can lead to rebellion as the government got entangled with using the taxpayers' money as a means of stop-gap measure for helping the finance sector.

Mar 30 11:04 AM

[rcomment:]

Yes, the boards should stand up- BUT it is the board and their CEO that put them where they are today. The auto - oil problems have been staring at us for some time. They (big auto, big oil) are going to ride this profit pony until he drops. Why not when the public is willing to buy the Ceo's with their money they can live anywhere in the world they wish.


On Mar 30 08:25 AM long_on_oil wrote:

> The Government is going to do a bank up job running GM and if you
> believe that you will believe the market will hit 14000 by Friday.
> This administration makes me sick. The answer to all the problems
> seems to be just give money to bad businesses and hope they recover.
>
> The businesses have to change their ways they just can't keep doing
> business the same old way and expect different results. The stockholders
> and boards must replace management, not the government. Just look
> at Obama's selections for his cabinet and you will see what I mean;
> nothing but tax cheats and misfits. These guys are throw offs from
> the Clinton administration and we expect them to fix the problems,
> get real.
> Most life time government employees couldn't even run a hot dog stand
> at a profit, let alone GM.
> Damn it, it is time for the boards and stockholders of these companies
> to stand up and be heard. Stop caving in to these losers from Washington.
>

Mar 30 11:51 AM

[woodsey:]

Brother Barak, listen while I tell you the facts of life. We auto workers helped you a lot. We gave a lot and are still giving. Now you have turned into a union buster. That earns you a vote of no confidence at least. As for me, Louis Ricker, when you try to screw my brothers and sisters you just f'd yourself. I'm through with you and your pals.

Mar 30 01:45 PM

[AndrewBaker:]

Well, what other double dealings is this administration going to get up to this week? Elsewhere you can read about the ramping of bank stocks done through the AIG bail-out money, and now we have the G20 comedy show returning. When I commented a while back about there being stock ramping by some means or other, I was voted down: now proof is out, I hope the doubters now relent. Whatever we hear this week, there will be a fix in somewhere.

Mar 30 02:05 PM

[Repsonsible...:]

Somebody who edits this board must Love AIRHEAD Burnett on CNBC !

Mar 30 03:03 PM

[Joseph Sherman:]

Skype wants its apple a day - great way to enter the market

Mar 30 04:35 PM

[Repsonsible...:]

Dylan Ratigan was FIRED by CNBC excs last week after saying on air that the AIG Bailout money was basically given over to Goldman Sacs to payoff there CDSs at 100% on The Dollar !
So for speaking truth to Power he was fired and looks like Banished from the World of Broadcasting . I Wish Him Well he was the REAL DEAL !

Mar 30 05:18 PM

[Lin:]

RE

The US goverment Does not want the facts out at all ! Look how hard they try to " dumb down " the masses ! A comment I made Sunday PM with 3 + checks in 1-2 hours was edited out by this am ! I agree with Andrew Baker + Responsible Citizen . Like I said yesterday + will repeat " if you worked hard in the US + acted responsibly , you will get Nothing from this government ! This IS the 3rd Reich + we Will have Weimer Germany soon . I will not be dumbed down !

Mar 30 11:20 PM

[Lin:]

Re

Responsible citizen . Really America has always been broke . The past 20 years has been an illusion resulting from derivatives , HUGE amounts of credit + leverage . Now ALL the bubbles have simutaneously burst . There is NO positive , practical solution to this Global derivative meltdown . None ! The US is truly finished now as the rest of the world will not continue to ' finance ' our madness !

Mar 30 11:34 PM

[Truyen:]

I think the G-20 summit should not cover too many problems the world economy is facing now, just beef up the stimulus package as well as the protectionism.

Mar 31 07:47 AM