WSF Headline Roundup - 1/2/09 - Jeremy Grantham among those getting it right; City National TARP probed; FDIC: "loss sharing"; India rate cuts; $BRK-B Berkshire in 3 decade worst drop; Keep your $ out of Alpharetta, Ga banks?;GM/Chrysler sales@ 16 yr low

• The Doomsayers Who Got It Right
• Decision to award bailout money to City National Bank probed
• FDIC Employs Tool Used for S&L Crisis
• India Cuts Key Rates for a Fourth Time Since October
• Berkshire Has ‘Nowhere to Hide’ in Worst Drop in Three Decades
• Bank-Failure Central? Try Alpharetta, Georgia
• Steel Industry, in Slump, Looks to U.S. Stimulus
• GMAC, GM to Amend Financing Agreement
• GM, Chrysler May Lead Sales Slide to Cap 16-Year Low
• Merrill Lynch To Pay $1.6 Million To Settle Job-Bias Suit
• Russian gas row may cost UK customers
• Sharp fall in hybrid vehicles sales as US tightens belt

The Doomsayers Who Got It Right - Wall Street Journal

For years, they were the party poopers: financial prognosticators who, amid the ebullient stock prices and effervescent home values that defined the early 21st century, warned of trouble. In hindsight, they're the ones who got it right -- or, at least, some of it.

Often mocked for predictions that seemed outlandish at the time -- big banks will fail, Fannie Mae will go bankrupt -- a few of these outliers, including money manager Jeremy Grantham, mutual-fund manager Bob Rodriguez and brokerage-house owner Peter Schiff, were among the first to describe key parts of the U.S. financial meltdown.

Still, they say the worst may be ahead.....

Decision to award bailout money to City National Bank probed - Los Angeles Times

Can a $400-million injection of federal bailout money to the "bank to the stars" in Beverly Hills really help revive the troubled U.S. economy?

That's one of the questions the Treasury Department's inspector general is asking in a review of the decision to award bailout funds to City National Bank, The Times has learned.

The inspector general's examination of the funding for City National reflects growing concern in Washington about whether the banking bailout is working. In a private meeting Dec. 10, top financial regulators, including Treasury Secretary Henry M. Paulson, acknowledged the difficulty of keeping track of the massive funding and measuring its effects on the economy, according to documents released Wednesday.

The inquiry is not based on any suspected wrongdoing by City National. Instead, investigators see the review as a case study into how the Treasury Department is implementing its controversial program to infuse $250 billion into the nation's banking system and why certain institutions were selected to participate.....

FDIC Employs Tool Used for S&L Crisis - Wall Street Journal

Federal regulators are dusting off a tool used during the savings-and-loan crisis to help deal with an expected wave of bank failures in 2009.

The mechanism, known as "loss sharing," gives healthy banks an incentive to take on troubled assets of a failed institution, with the government agreeing to assume the majority of future losses. In most other cases, the buyer takes the failed bank's deposits, leaving most of the assets to be managed and sold by the Federal Deposit Insurance Corp.

The FDIC used versions of the loss-sharing model several times last year, including during the initial attempt to rescue Wachovia Corp., as part of federal aid to Citigroup Inc. and during the fire sale of two failed California institutions......

India Cuts Key Rates for a Fourth Time Since October - Bloomberg

India’s central bank cut interest rates for the fourth time in less than three months, extending the steepest set of reductions since 2000, as inflation cooled. 

The Reserve Bank of India cut the repurchase rate to 5.5 percent from 6.5 percent and the reverse-repurchase rate to 4 percent from 5 percent, it said in a statement in Mumbai. The monetary authority also cut the so-called cash reserve ratio, or the proportion of deposits banks must hold in reserve, to 5 percent from 5.5 percent, releasing 200 billion rupees ($4.1 billion) into the banking system. 

India is also preparing to announce its second stimulus package in a month today to counter the impact of a global recession on Asia’s third-largest economy. The government will unveil measures later today in New Delhi, spokesman Umakant Mishra said, without providing details. India announced excise duty cuts and a 200 billion-rupee ($4 billion) spending plan last month.....

Berkshire Has ‘Nowhere to Hide’ in Worst Drop in Three Decades - Bloomberg

Billionaire Warren Buffett’s Berkshire Hathaway Inc. slumped 32 percent last year, the worst performance in more than three decades, as the U.S. recession forced down the value of the firm’s equity holdings and derivative bets. 

Most of the stock decline happened in the last three months as Berkshire posted a fourth straight profit drop amid sagging insurance results. The company still beat the 38 percent tumble of the Standard & Poor’s 500 Index, the 14th year in 20 that Buffett outperformed the benchmark. Just six of 1,591 U.S. stock mutual funds with at least $250 million in assets made money for investors last year, according to data compiled by Bloomberg. 

“In 2008, there was nowhere to hide,” said Guy Spier, chief investment officer at Aquamarine Capital Management, which holds shares in the Omaha, Nebraska-based company. “Berkshire can’t escape the general fate of American businesses. What Buffett tries to do is ensure that Berkshire Hathaway does less badly than other companies.”....

Bank-Failure Central? Try Alpharetta, Georgia - Wall Street Journal

Fourteen miles north of Atlanta is a suburb of wide boulevards, sleepy cul-de-sacs and bustling red-brick shopping centers. It also is the bank-failure capital of the U.S.

In just 13 months, three banks based within a few miles of each other went bust. Three more in other Atlanta suburbs were seized by regulators in 2008, as the region was haunted by overabundant home building, years of risky lending and one of the most relaxed regulatory environments in the U.S. for starting new banks, according to some experts.

The sprawling Atlanta area was home to five of the 25 banks that failed last year across the country. As many as 20 of the 122 banks still headquartered in or near Atlanta could go under before the credit crisis and recession are over, local bankers and analysts predict.....

Steel Industry, in Slump, Looks to U.S. Stimulus - NY Times

The steel industry, having entered the recession in the best of health, is emerging as a leading indicator of what lies ahead. As steel production goes — and it is now in collapse — so will go the national economy.

That maxim once applied to Detroit’s Big Three car companies, when they dominated American manufacturing. Now they are losing ground in good times and bad, and steel has replaced autos as the industry to watch for an early sign that a severe recession is beginning to lift.

The industry itself is turning to government for orders that, until the September collapse, had come from manufacturers and builders. Its executives are waiting anxiously for details of President-elect Barack Obama’s stimulus plan, and adding their voices to pleas for a huge public investment program — up to $1 trillion over two years — intended to lift demand for steel to build highways, bridges, electric power grids, schools, hospitals, water treatment plants and rapid transit....

GMAC, GM to Amend Financing Agreement - Wall Street Journal

GMAC LLC said Friday that it agreed to amend its financing-services agreement with General Motors Corp., allowing GM the option to offer auto financing incentives through a third-party financing source for two years under some circumstances.

Under the original 2006 agreement, whenever GM offers financing incentives such as lower interest rates than market rates, it was obliged to do so through GMAC. GM received an annual fee from GMAC for granting the exclusive right to provide that financing, which was effective through November 2016. GM and GMAC agreed to finalize the amendment by March 29.

In a filing with the Securities and Exchange Commission, GMAC said that after the two-year period, GM can offer any such incentive programs on a graduated basis through third parties on a non-exclusive, side-by-side basis with GMAC.....

GM, Chrysler May Lead Sales Slide to Cap 16-Year Low - Bloomberg

General Motors Corp. and Chrysler LLC, bailed out by $13.4 billion in federal loans last month, probably led a decline in December U.S. auto sales that capped the industry’s worst year since 1992. 

Sales dropped 48 percent from a year earlier at Chrysler, 41 percent at GM and 33 percent at Ford Motor Co., based on the average estimates of six analysts surveyed by Bloomberg. Toyota Motor Corp. may report a 40 percent slide and Honda Motor Co. may say its total was down 36 percent, Brian Johnson, a Barclays Capital analyst in New York, said in a Dec. 31 note to investors. 

Auto sales tumbled more than 25 percent each month since September as the credit crunch reduced access to loans and consumer confidence fell amid a weakening economy. With demand for large pickup trucks and sport-utility vehicles damped earlier this year by record fuel prices, analysts expect an annual total of slightly more than 13 million autos, the fewest in 16 years.....

Merrill Lynch To Pay $1.6 Million To Settle Job-Bias Suit - Dow Jones via CNNMoney

Merrill Lynch & Co. (MER) has agreed to pay $1.6 million to settle a discrimination lawsuit that alleged an employee was let go from the company because he is Muslim and Iranian, the U.S. Equal Employment Opportunity Commission said Wednesday.

The lawsuit filed by the EEOC alleged that the investment bank failed to promote Majid Borumand, a quantitative analyst in its Model Development Group, in August 2005 and ultimately terminated him because of his national origin and religion.

Merrill instead promoted a less qualified individual, the EEOC asserted in the lawsuit filed in a Manhattan federal court.....

Russian gas row may cost UK customers - The Guardian

Hopes of deep cuts in heating bills for British homes before the winter is out were evaporating yesterday after Russia turned off the gas supply to neighbouring Ukraine over alleged payment arrears, raising concern about the security of supplies throughout Europe.

Pipelines that cross Ukraine carry about a fifth of the European Union's gas needs and politicians across the continent yesterday urged the two sides to resolve their dispute as quickly as possible.

"We urge both parties to treat this as a commercial matter and seek agreement through negotiation," said Britain's Department of Energy. "All existing commitments to supply and transit must be honoured," said the Czech deputy prime minister, Alexandr Vondra, hours after the republic took over the EU presidency.....

Sharp fall in hybrid vehicles sales as US tightens belt - Financial Times

Americans’ appetite for hybrid cars is evaporating as tumbling fuel prices and tighter household budgets trump environmental concerns.

The sudden reversal in what was, until a few months ago, one of the hottest segments of the world’s biggest car market creates a new area of uncertainty for carmakers, such as Toyota, General Motors, Ford Motor and Honda, that are investing heavily in hybrids and other fuel-efficient technologies.

Industry executives, including Alan Mulally, Ford’s chief executive, have joined environmentalists in urging US politicians to consider the hitherto taboo idea of raising petrol taxes as a way of encouraging fuel conservation.....