Wall Street Breakfast: Must-Know News

• Lackluster response to Fed, Treasury programs. The Treasury delayed the deadline for investors to join its Public-Private Investment Program and loosened some of the program's guidelines. Officials said they're trying to make it easier for firms to participate in the legacy securities portion of the program, but others wonder if officials are giving themselves more time to find firms who want to participate at all. Separately, participation in the Federal Reserve's TALF program has remained lackluster. Wary of legislative interference and hiring curbs, only two issuers have put together about $1.4B of TALF-eligible bonds heading into the Fed's deadline today, even worse than last month's disappointing $4.7B in loans. (Read the Treasury's Updated Guidance on the PPIP)
• Fed's four-way swap. The Federal Reserve authorized new foreign currency liquidity 'swap lines' with the Bank of England, the European Central Bank, the Bank of Japan and the Swiss National Bank. The move will allow the Fed to receive euro, yen, sterling and Swiss francs should the need arise, and to provide currency liquidity to U.S. financial firms. The swap lines are authorized through Oct. 30, 2009. (Read the Fed's press release)
• SEC eyes short selling. The SEC will consider several proposals to restrict short selling. SEC Chairwoman Mary Schapiro told reporters "we are going to put forward about four different proposals, and one of them does include the original [uptick rule]. There are different modified versions because the markets have changed a lot, even since 2007." Other proposals under consideration include a so-called 'bid test' and a 'circuit breaker.' Schapiro didn't provide details on how the bid test or circuit breaker would work, and didn't elaborate on the fourth proposal.
• Anti-subprime bill en route. Rep. Barney Frank is working on a broad package of legislation to promote stability in the mortgage market by limiting future subprime lending. The legislation would also address executive compensation and limit systemic risk. Frank wants to have hearings on the bill by the end of April, and see the bill become law by the end of the year. "It is important that we say you can't securitize 100 percent of anything," said Frank, and "no institution anywhere in the financial system ought to be able to get so indebted that it threatens our financial stability."
• U.S., Swiss revise tax treaty. Officials from the U.S. and Switzerland will meet to revise a 1996 bilateral tax treaty amid a high-profile banking secrecy dispute between the two nations. Talks are set to begin April 28, and Geithner said he welcomes the moves by Switzerland to "implement international standards by agreeing to revise the U.S.-Switzerland tax treaty for the exchange of information for tax purposes with the U.S."
• MGM said to be in loan talks. MGM Mirage (MGM) is reportedly in talks with private equity firm Colony Capital to obtain up to a $750M secured loan in order to help the casino company refinance its debt. According to sources, Colony might invest in corporate debt secured by a lien on one or more MGM Mirage casinos. An investment in CityCenter is unlikely, which leaves MGM until April 13 to come up with a plan to fund the unfinished Las Vegas Strip project. Shares -2.0% premarket (7:00 ET).
• Higher gov't stake after failed RBS share offer. Royal Bank of Scotland (RBS) said only 0.7% of the shares it issued to raise £5.37B ($7.92B) were subscribed to as shareholders kept their distance from the bank. The government, which already owns 57.9% of RBS, will subscribe to the outstanding shares on offer, bringing its stake to 70.3%. The result was widely expected. RBS will use the offer's proceeds to redeem £5B in preference shares issued to the U.K. government as part of a £20B capital boost. Shares -8.2% premarket (7:00 ET).
• Buyers bid for AIG unit. Around a half-dozen buyers have submitted bids for AIG's (AIG) asset management unit, according to people familiar with the situation. The sale of the $100B portfolio has been complicated by client withdrawals and a fall in asset prices; buyers have submitted offers between $400M and $800M, well below the typical price for asset-management businesses. Among the companies that are said to be interested are private-equity firms Ashmore Investment Management, Hellman & Friedman LLC, Rhone Group LLC and TA Associates, as well as mutual-fund manager Franklin Templeton Investments and asset manager Southgate Alternative Investments. Shares -3.6% premarket (7:00 ET).
• GM preps for possible bankruptcy. Even as company executives work to cut costs and avoid bankruptcy, General Motors (GM) is reportedly speeding up preparations for a possible Chapter 11 filing. Sources say GM would focus on forming a new company from its best assets if court protection is needed as part of a so-called 363 sale. In the meantime, executives are trying to set new cost-cutting goals and are looking at how to go beyond proposals to cut debt by 46% and shed 47,000 jobs in 2009. Despite all the work on bankruptcy prevention and bankruptcy preparation, GM still found the time and money to partner with Segway Inc. on a two-seat, two-wheel, electric prototype vehicle which it will unveil today in advance of the New York auto show.
• Ford completes debt swap. Ford (F) said its investors agreed to exchange $9.9B in debt for cash and stock, slightly below the $10.4B in debt Ford said it could have retired but still enough to lower its annual interest expense by $500M. The debt swap reduces Ford's overall debt by 28%. Even so, S&P lowered its corporate credit and other ratings on Ford to 'selective default' and downgraded certain Ford issue ratings to "D." S&P said the debt swap is "tantamount to defaults under our criteria," but added it would re-assess the firm by mid-April.
• Merkin charged in Madoff fraud. New York Attorney General Andrew Cuomo charged financier Ezra Merkin with civil fraud, alleging he "betrayed hundreds of investors" by steering $2.4B to Madoff and repeatedly lying about how the money was invested. Merkin raised billions for his three hedge funds and told clients he managed the money himself; instead, Merkin collected hundreds of millions of dollars in fees while channeling investors' money into Madoff's Ponzi scheme.
• $1T deficit in H1. According to estimates from the Congressional Budget Office, the U.S. budget deficit reached nearly $1T during the first half of the fiscal year which began in October. The CBO said the deficit likely hit $953B, including $290B for TARP. During the same half-year period, receipts dropped around $160B, or 14% vs. the same period in 2008. Nearly half the drop was from a fall in corporate income tax receipts, the largest such fall in more than three decades.
• BoJ widens collateral for loans. Bank of Japan kept its key interest rate unchanged at 0.1%, as expected, and broadened the range of collateral it accepts to encourage more lending. Officials said the economy will "continue deteriorating for the time being," keeping its monthly assessment unchanged. To give the country a boost, Prime Minister Taro Aso ordered more than ¥10T ($99.73B) of fresh stimulus spending.
• Aussie rate cut. Australia's central bank cut its benchmark interest rate by a quarter-point to 3.0%, a 49-year low. The country faces its first recession since 1991.
• Employment index falls. The Conference Board Employment Trends Index fell again in March, decreasing 2.3% from the previous month and down 22.1% from the previous year. "The decline was not as strong as in the previous four months, suggesting that the most intense stage of job losses may be behind us," said Conference Board senior economist Gad Levanon. "However, the drops in each of the eight components of the ETI in March signal that many more jobs will disappear over the next several months."

Today's Markets

Asia markets were mixed Tuesday while Europe is trading lower, this after a weak start to the week in the U.S. on Monday.

• Asia: Nikkei -0.28% to 8,833. Hang Seng -0.46% to 14,929. Shanghai +0.8% to 2,439 (was closed Monday). BSE closed.
• Europe at midday: London -1.65%. Paris -1.5%. Frankfurt -1.1%.
• Futures: Dow -1.4% to 7805. S&P -1.6% to 818. Nasdaq -1.4%. Crude -1.7% to $50.20. Gold +1% to $881.50. 30-year Tsy +0.56%. 10-year +0.41%. Euro -1.1% vs. dollar.

Tuesday's Economic Calendar

• 7:45 ICSC Retail Store Sales
  8:55 Redbook
  3:00 PM Consumer Credit
  5:00 PM ABC Consumer Confidence Index
• Notable earnings before Tuesday's open: none.
• Notable earnings after Tuesday's close: AA, BBBY, MOS

Seeking Alpha editor Eli Hoffmann contributed to this post.

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Comments

[long_on_oil:]

This administration is doing what Bin Laden couldn't, they are taking America down without firing a shot. The people have elected the smartest communist the world will ever see and they didn't even know it. My God people, wake up and smell the signs of a take over.
#1 Try to buy ammunition other than shotgun shells, if you can find it you will pay 3X what you should.
#2 Government take over of the banks and big businesses via the power of the purse and congress. Throw out the constitution when it gets in the way of your goals.
#3 Redistribution of wealth; use the tax code to steal from the rich and give to the poor. Put the nation in debt and debase the currency.
#4 Renew relationship with communist Cuba and any other country ran by a dictator.
#5 Pass any law that will take away the power of the individual and give all power to the people and do it under the guise of global warming.
The list goes on and on, and we just sit back and twiddle our thumbs and talk about how great our first black president is going to be.
WAKE UP AMERICA...our brave veterans did not die for the government we are headed for.

Apr 07 08:26 AM

[eddie6442:]

SEC changes to Mark-to-Market & Shorting is kinda like the Government setting fire to a barn filled with 100 horses locked in stalls. Gradually, as the fire spreads, with the government watching and citizens screaming, over 90 horses are killed....... Then the fire department is called and the remaining section with 10 horses is saved by unlocking the barn door.............. And the goverment acts as if it has accomplishing some admirable act................
INCREDIBLE!!!!!!!!!!

Apr 07 08:36 AM

[Bull in Chi...:]

Barney (the banking queen) Frank wants to take the risk out of everything and have the Fed. Govt control all. You gotta be kidding me! He should fix the Postal Service and Soc. Sec. and a few other govt controlled entities before he starts on more! God bless America -- we need it.

Apr 07 08:41 AM

[Mourning Ca...:]

I thought subprime loans were Frank's idea to begin with. Wasn't he one of the ones behind the push for homes for all Americans, regardless of credit risk? How do people like that keep getting elected?

Apr 07 09:10 AM

[doubleguns:]

US and Swiss talk tax treaty? Maybe the demicans and republicrates have hit on a partial solution to the tax problem, nominate tax cheats to office and find the ones hidding in the tax havens. Unfortunately there isn't much left in these accounts either.

Apr 07 09:19 AM

[BlueOkie:]

You didn't forget about the President going to Europe and dissing on his country - USA, did you?


On Apr 07 08:26 AM long_on_oil wrote:

> This administration is doing what Bin Laden couldn't, they are taking
> America down without firing a shot. The people have elected the
> smartest communist the world will ever see and they didn't even know
> it. My God people, wake up and smell the signs of a take over.
>
> #1 Try to buy ammunition other than shotgun shells, if you can find
> it you will pay 3X what you should.
> #2 Government take over of the banks and big businesses via the power
> of the purse and congress. Throw out the constitution when it gets
> in the way of your goals.
> #3 Redistribution of wealth; use the tax code to steal from the rich
> and give to the poor. Put the nation in debt and debase the currency.
>
> #4 Renew relationship with communist Cuba and any other country ran
> by a dictator.
> #5 Pass any law that will take away the power of the individual and
> give all power to the people and do it under the guise of global
> warming.
> The list goes on and on, and we just sit back and twiddle our thumbs
> and talk about how great our first black president is going to be.
>
> WAKE UP AMERICA...our brave veterans did not die for the government
> we are headed for.

Apr 07 09:37 AM

[AndrewBaker:]

Now we're beginning to see the spin more clearly. This government is simply playing around with our money and trying to influence the natural course of markets. They have no idea about finance other than shifting tax dollars to bad homes and stopping investment dollars from doing what is sensible. The sooner politicians get out of business and especially financial markets, the sooner we can repair the damage that's been done.

Apr 07 10:08 AM

[axelrod608:]

This administration is just following down the same path its predecessor started, both, all, deluded by "economists" and "financial experts" clinging to theories that don't apply to current circumstances.

EVERY financial crisis of the past 100 years was caused by too much debt. Yet our "leaders" are doing everything they can to bring back the credit markets to increase the debt. Duh, as my kids would say.

Total debt in the US is now around $60 Trillion supported by a GDP of $12 - $14 Trillion (chose a number based on who you think is lying the least). It is the definition of UNSUSTAINABLE.

Richard Russell said the other day the only way to fix this mess is to let the free market sort it out and let the bankruptcy courts handle the "troubled" corporations. Russell probably knows more about all this than any other person alive today.

No person, company, or government ever spent its way tp prosperity. The US won't either. It' not the way reality works. We can't jut close our eyes and click our heels and pretend "we're not in Kansas" anymore.

Apr 07 10:13 AM

[Spike7878:]

They want the Country to collapse. They are waiting for people to be a little hungry, no jobs and have massive protest's, then they will Introduce you to a new way of life and you will all go for it.

Apr 07 11:03 AM

[bbowen7:]

I see from today's NYT headline that public opinion about the country's financial shape has been improvinag since Obama's innauguration. So, as the natural economic cycle rolls on, the next several months will be consumed showing how money that hasn't yet been spent, and policies that haven't yet been enacted caused the turnaround.
With the stakes so high, one hopes that here will be a lot of critical analysis about the budget/stimulus packages, the new regulatory regime, and the ongoing intrusion of the government into private enterprise, without accepting the premise that the messiah led us there. (I am reminded of his comment that the seas stopped rising when he got the nominatioin.)

Apr 07 11:04 AM

[PainfullyAware:]

This all just seems like an "Alice In Wonderland" market.

Strange, Twisted, and Whack.

We have come so far in "Governmental Take Over" that I fear that we will be enslaved by the Corprotocracy before this is all over.

The Writing Is On The Wall. The Course OF Events Is Moving Us To Dark Places.

Safety Is A Function Of Awareness.

Apr 07 12:23 PM

[eieinli:]

WAKE UP AMERICA! TAKE YOUR COUNTRY BACK BEFORE IT'S TOO LATE!!!
The problem is there's really one Party in America with two divisions:
Republicans and Democrats! What a choice; some choice. With very few exceptions they are all corrupt. Do we really have democracy when we really have no choice? Think about it!!!!

Apr 07 01:19 PM

[Joseph Sherman:]

GM and Segway - something new for GM, at least it is a change in a fresh direction.

Apr 07 01:29 PM

[The Capital...:]

The Banking queen keeps getting elected by the over-diversifed, east coast elitests and their sub-servient seculars who are the state of Massachusettes. A prime example of the moral decadence and economic class warfare that the entire country is headed for under the corrupt idealogues that are the Dumocratic party and their following of entitlement hungry sheep.




On Apr 07 09:10 AM Mourning Capitalist wrote:

> I thought subprime loans were Frank's idea to begin with. Wasn't
> he one of the ones behind the push for homes for all Americans, regardless
> of credit risk? How do people like that keep getting elected?

Apr 07 02:53 PM

[I am not a ...:]

A quiet Note on the Aussie dollar and Reserve bank Chief Glenn Stephens.
Prior to the last election the bank rate rose 12 times forcing worry into the home owners realm ,many wondering if they would be able to keep paying the $2000 + per month mortgage repayments.
The present government made much of these home loan interest rises during the election campaign and was one of the reasions they were elected.
Although the country was going through a major comodities selling boom and home owners were perfectly capable of supporting the mortgages ( to a certain extent) those rate rises were mostly happening unnoticed by the commentators in Australia.
I believe the lack of proper questioning was deliberate and was done to destabilize the Howard government,afterall the banks were doing rather handsomely out this recording billion dollar profits each quarter..!! .
With the Election of the present government,Suddenly the reserve bank drops it's base rate and now it's at the lowest rate in 49 years.
Stephens was asked before a senate committee what his motives were as would appear that the was no need to raise the rate,and suddenly almost without warning the rate drops after an election.
Stephens demeaner before the Senate could only be described in the words of the bard.." Methinks thou doest protest too much..."

beware the Aussie Dollar .
\

Apr 07 05:52 PM

[dcb:]

I agree having found if I don't read things just get better. I'm off to fantasy Island for my easter vacation this week


On Apr 07 10:43 AM Cetin Hakimoglu wrote:

> I would not try to get bogged down with the news reports

Apr 07 07:36 PM

[dcb:]

I hate to tell you, but the problems going on aren't about party. We aren't going to get anywhere with a fixed ideology. As for talking to our enemies. Bush looked into the eyes of putin and saw someone he could trust and Nixon opened to china which will turn out to be our big threat. We avoided democratic india in favor of our corporate interests in Pakistan now they have nukes and are in a state of anarchy. We supported the Shah and look what that got us. if it wasn't for our oil money the saudi's would not have been able to export terror all over the world and reagan gutted our attempts to become energy independent.

I am not saying I am a big obama fan. in fact I continue to write the republican party and urge congressional action and oversight against what is going on. At the same time the ranting of this post shows some major brain washing.

For god's sake dude, do some reading and learn. america's policy has been for a long time if it is a dictator and we can make money great. If it is dictator and we can't make money they are evil. the world isn't so simple and you should listen to things your hear with a bit more of an open mind. There is a very good reason a lot of people hate us. How about the fact that we turned cuba into a small mafia run state. Does that count for anything.



On Apr 07 08:26 AM long_on_oil wrote:

> This administration is doing what Bin Laden couldn't, they are taking
> America down without firing a shot. The people have elected the
> smartest communist the world will ever see and they didn't even know
> it. My God people, wake up and smell the signs of a take over.
>
> #1 Try to buy ammunition other than shotgun shells, if you can find
> it you will pay 3X what you should.
> #2 Government take over of the banks and big businesses via the power
> of the purse and congress. Throw out the constitution when it gets
> in the way of your goals.
> #3 Redistribution of wealth; use the tax code to steal from the rich
> and give to the poor. Put the nation in debt and debase the currency.
>
> #4 Renew relationship with communist Cuba and any other country ran
> by a dictator.
> #5 Pass any law that will take away the power of the individual and
> give all power to the people and do it under the guise of global
> warming.
> The list goes on and on, and we just sit back and twiddle our thumbs
> and talk about how great our first black president is going to be.
>
> WAKE UP AMERICA...our brave veterans did not die for the government
> we are headed for.

Apr 07 07:53 PM

[Boldhawk:]

Limbaugh and Obama are both a distraction generated by the people who have already taken over. They want you to believe there are opposition parties, but the progress of event show that there is extreme right dressed Bush style, and the new Reagan right in the persona of Obama.

We must not rationalize our leaders’ behavior by generously labeling it stupidity, which is the immediate reactions of people who honest themselves, can’t imagine that there would be those who do exactly as they intend to get the result they wanted.
Things have taken place according to plan, and have come out nearly as well as expected: The financial community dictates to and owns the government, and they will NOT under general circumstances accede to the demands of people, except to the extent necessary to retain their power.
TARP was urged onto the people by a member the financial community club, Paulson. The entire Obama administration is filled with club members, friends of Reagan’s trickle down economics. Both TARP and ARRA are typical examples of trickling down the recovery, all trickling down by being funneled through the financial community, who simply doesn’t do what the Fed and the government says they expect it to do. They mount and run impenetrable walls of legal interference just to obviate the application of the public’s intention. AIG bonuses are on their way to be paid, and after a few months of legal legerdemain when people will have forgotten, they will have the right set of public relation statements that people will doubt, but will have no choice but to accept.
Let me end with one of Will Rogers brilliant statements from his book, The Illiterate Digest: Be thankful we're not getting all the government we're paying for.

Apr 08 01:53 PM