ING, the Dutch financial giant, announced the departure today of its chief executive and 7,000 job losses as it posted a fourth-quarter deficit of €3.3 billion (£3.1 billion)
It also said that it had reached an agreement with the Dutch Government over €22 billion of state loan guarantees for its troubled mortgage loan portfolio.
President Obama is considering another massive injection of cash into America’s stricken banking system, a move that will be deeply unpopular with the public but is being forced upon him by the speed at which the US economy is unravelling.
With the collapse on Saturday of the third US bank this month – the First Centennial Bank of California – Mr Obama is under pressure to spend hundreds of billions more to rescue the financial system. It would come on top of last year’s $700 billion (£515 billion) Wall Street rescue package that was opposed by a most of Americans. They viewed the plan as a bailout of the bankers that they blame for the financial crisis.
Any additional move to ease the crisis afflicting America’s banks will be separate from Mr Obama’s $825 billion economic stimulus package that senior aides spent the weekend trying to sell to a growing number of Republican sceptics and the US public.
Does anyone remember that California needs money soon before it goes under? The problems are happening faster than they can handle them.
A recent cold weather snap and low fuel prices might be the reason why some area retailers had to travel to Syracuse for home heating oil recently.
Some began commuting to Syracuse and other locations last week after they were told by regional distributors that more home heating oil would not be available here through the Buckeye Terminal pipeline until Wednesday.
Some consumers who use heating oil to warm their homes might have seen a short-term rise in costs as retailers tried to offset their traveling costs.
The article goes on to explain the errors of forecasting and greed (some people held off buying until it was too late because they thought that prices were going to fall even further) that led to these problems.
But I think they may be missing something. I know of a certain hospital in upstate New York that has what they call interruptable gas supplies. What this means is that they are charged a lower price for their natural gas in exchange for guaranteeing that they have enough oil on hand to switch over to fuel oil at a moments notice.
Well, it just so happen that they had a problem with a pumping station on one of the natural gas pipelines that serves the upstate area in late December. This necessitated shutting down the pipeline for an extended period of time (it just recently got back on line). So this hospital and every one else who had interruptable gas supplies were told they had to switch to fuel oil as fast as they could be required to by contract. And the hospital was told that if it was at all possible for them to switch faster they should pretty please do so. This was done so that the natural gas suppliers could insure that there would be enough gas for those with uninterruptable gas contracts.
What this meant is that the hospital suddenly started burning thousands of gallons of fuel oil a day during the coldest part of the year. Naturally the hospital had enough fuel oil on hand that this was no problem. But they did not want their stock of fuel oil to shrink because nobody knows what is going to happen in the future. Thus, tractor trailer loads of fuel oil were being delivered to this hospital every couple of days.
Multiply this by all the other places that had interruptable gas contracts and you had a huge hit to local oil supplies at the same time a cold snap hit the area.
Tonight there are new claims that Gordon Brown is starting to show signs of panic after the announcement that the UK is officially in recession. The opposition parties appear to have sensed a draining of confidence from the UK Treasury and the Prime Minister after literally billions and billions of pounds appear to have been wasted on a number of rescue packages. The situation with the UK economy has taken a serious downward lurch over the last few days amid signs that the government is running out of ideas.
When I first came across this (via a link on a Belmont Club post) I thought it was overstating its case. I have long thought that the U.K was in big trouble. But I had not seen signs that Gordon Brown was panicking. But then I saw this from the Telegraph….
If you hadn’t seen, Mr Rogers has been urging investors to join in the pound’s slide and “sell any sterling you might have.”
“The City of London is finished,” according to the American now living in Singapore. He believes Britain’s former glories – its North Sea oil supply and the major financial centre in the City of London – have gone to pot and are no longer able to support sterling.
The comments have ruffled a few feathers, including it would seem, the Prime Minister’s. “If you think we are going to build our policy around the comments of a few speculators who want to make money out of Britain then you are very, very wrong indeed,” he told the Today Programme on BBC Radio 4 this morning.
Mr. Rogers is only a millionaire. For Gordan Brown to treat his comments seriously is a sign that he is indeed worried. In normal times Rogers would have been laughed off.
To estimate the scale of such a failure, report co-author John Kappenmann of the Metatech Corporation looked at the great geomagnetic storm of May 1921, which produced ground currents as much as ten times stronger than the 1989 Quebec storm, and modeled its effect on the modern power grid. He found more than 350 transformers at risk of permanent damage and 130 million people without power. The loss of electricity would ripple across the social infrastructure with “water distribution affected within several hours; perishable foods and medications lost in 12-24 hours; loss of heating/air conditioning, sewage disposal, phone service, fuel re-supply and so on.”
We have posted on this already, but this story comes with a cool map showing the percentage of transformers affected by the modeled storm in each state.
Across the whole of the UK, 49% of the economy will consist of state spending, while in Wales, the figure will be 71.6% – up from 59% in 2004-5. Nowhere in mainland Britain, however, comes close to Northern Ireland, where the state is responsible for 77.6% of spending, despite the supposed resurgence of the economy after the end of the Troubles.
Even in southern England, the government’s share of spending is growing relentlessly. In the southeast, it has gone up from 33% to 36% of the economy in four years.
The state now looms far larger in many parts of Britain than it did in former Soviet satellite states such as Hungary and Slovakia as they emerged from communism in the 1990s, when state spending accounted for about 60% of their economies.
Large-scale layoffs in the northeast will mean a rise in benefit payments. Newcastle-based Northern Rock was nationalised last year and has shed 1,500 jobs. Nissan announced three weeks ago that it was to cut its workforce in Sunderland by 1,200.
This explains a lot of the stories that come out of Great Britain. When the state has a Soviet size share of the GDP it will have Soviet type powers.
But such sniping aside, this shows how the economic health of Great Britain is dependent on the economic health of the government of Great Britain. Much of the money that sustained the government came from oil and gas revenues from the North Sea and the financial services industry in the city of London. Now that energy prices are falling around the world and the financial services industry is getting hammered, who is going to fund the government of Great Britain?
“The Chinese are probably one of the few people in the world who were sorry to see President Bush go, and are nervous about his successor,” said Kenneth G. Lieberthal, a visiting fellow at the Brookings Institution who worked on China policy for the Clinton administration.
You can’t use “few” to refer to the Chinese people. There are more then twice as many people in China as there are in Europe.
More to the point of the article, if Obama repairs relations with Europe, but America’s relations with China deteriorates, it will be a net loss for America. This is largely outside of Obama’s control regardless of what he says. So I am not trying to blame him.
But people who are celebrating the fact that America’s image is improving all around the world should take a good hard look at who is important and who is not. In the real world, some opinions matter more than others.
From a Freddie Mac 8-K Filing…..
Freddie Mac (formally known as the Federal Home Loan Mortgage Corporation) is in the process of preparing its financial statements for the fourth quarter of 2008 and the year ended December 31, 2008. Based on preliminary unaudited information concerning its results for these periods, management currently estimates that the Federal Housing Finance Agency, in its capacity as conservator of Freddie Mac (Conservator), will submit a request to the U.S. Department of the Treasury (Treasury) to draw an additional amount of approximately $30 billion to $35 billion under the $100 billion Senior Preferred Stock Purchase Agreement (Purchase Agreement) between Freddie Mac and Treasury. The actual amount of the draw may differ materially from this estimate as Freddie Mac goes through its internal and external process for preparing and finalizing its financial statements.
The Purchase Agreement requires Treasury, upon the request of the Conservator, to provide funds to the Company after any quarter in which the Company reports a negative net worth (that is, the Company’s total liabilities exceed its total assets, as reported in accordance with generally accepted accounting principles). The amount of the estimated additional draw described above reflects management’s current estimate of the impact of operating losses as well as other items that have a direct impact on the Company’s net worth in the fourth quarter. The Company previously drew $13.8 billion under the Purchase Agreement in November 2008, following its release of results for the third quarter of 2008. For further information, see “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Executive Summary — Conservatorship — Entry Into Conservatorship and Treasury Agreements — Overview of Treasury Agreements” and “— Legislative and Regulatory Matters — Conservatorship and Treasury Agreements — Agreement and Related Issuance of Senior Preferred Stock and Common Stock Warrant” in Freddie Mac’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2008, filed with the SEC on November 14, 2008.
They took $13.8 billion in the third quarter and they think they are going to need 30+ billion in the fourth quarter. That is a more then 100% increase. Even if the rate of increase slows down, I don’t think the original 100 billion is going to be enough.
Prices for food in U.S. grocery stores jumped 6.6% last year – the biggest spike since 1980 – underscoring yet again that inflation is a much bigger problem than government officials, or most economists, say it will be.
Of all food categories, prices for cereal and baked goods hit U.S. consumers the hardest, zooming 11.7% in 2008 over 2007. Prices for meats, poultry, fish and eggs gained 5.1%. Fruits and vegetable rose 3.4%, while dairy products advanced 2.7%.
It was the second straight year U.S. consumers were forced to pay a lot more for their groceries. In 2007, food prices at supermarkets rose 5.6%. Prices rose only 1.4% in 2006.
The article goes on to make the argument that inflation is still a problem and the government does not measure it properly.
The news that Merrill Lynch paid out $15 billion in bonuses is sure to ignite new questions about the wisdom of bailing out Wall Street. Merrill Lynch took $10 billion from the TARP, allegedly to fill holes in its balance sheet. But instead of using that to repair its financial health, it simply put the money into the pockets of its employees. There is no way to defend this disgusting payout.
The media made a big deal about Republicans attempts to make the tax system less progressive. But they have been largely silent about the fact that Democrats and Republicans have united to give taxpayer money to people who are filthy rich. Personally, I would have just preferred that we make the tax system less progressive.
I would prefer rich people who are taxed at the same rate as I am to rich people who are on welfare.
