XIAM007 - Making Unique Observations in a Very Cluttered World: 02/26/10

Friday, 26 February 2010

Fannie Mae will seek $15.3 billion in aid from the U.S. Treasury after posting a 10th straight quarterly loss -

Reading - Fannie Mae will seek $15.3 billion in aid from the U.S. Treasury after posting a 10th straight quarterly loss -

Fannie Mae, the mortgage-finance company under federal conservatorship, said it will seek $15.3 billion in aid from the U.S. Treasury after posting a 10th straight quarterly loss.

A fourth-quarter net loss of $16.3 billion, or $2.87 a share, pushed the company to request its fifth draw on an unlimited lifeline from the government, Washington-based Fannie Mae said in a filing today with the Securities and Exchange Commission.

Fannie Mae, which posted $120.5 billion in losses over the previous nine quarters, has taken $59.9 billion in federal aid since April. Its shares, which peaked at $87.81 in December 2000, closed at 99 cents today in New York Stock Exchange composite trading. The Treasury owns 79.9 percent of Fannie Mae’s outstanding common shares.

Washington-based Fannie Mae, which owns or guarantees about 28 percent of the $11.8 trillion U.S. home-loan market, has been hobbled by a three-year housing slump that wiped 28 percent from home values nationwide and led to record foreclosures. Fannie Mae lost $74.4 billion for the 12 months ended Dec. 31, compared with $59.8 billion in 2008.

“Our financial results for 2009 reflected the continued adverse impact of the weak economy and housing market, which has resulted in record mortgage delinquencies and contributed to our recording significant credit-related expenses and net losses during each quarter of the year,” Fannie Mae said in the filing today.

Avoiding Receiver

Fannie Mae’s borrowings from Treasury will total $76.2 billion after the next payout, carrying with it an annual dividend cost of $7.6 billion, which the company said it will repay by borrowing more money from the Treasury. “This amount exceeds our reported annual net income for all but one of the last eight years, in most cases by a significant margin,” the company said.

The company said the ability to tap continuing cash infusions from the Treasury this year “is critical to keeping us solvent and avoiding the appointment of a receiver.”

The loss in the fourth quarter was driven in part by a $5 billion writedown on low-income housing tax credits that the Treasury Department barred the company from selling. Rival Freddie Mac took a $3.4 billion charge for the same reason.

Losses at Fannie Mae are likely to grow with rising unemployment and costs to implement President Barack Obama’s plans to reduce foreclosures, the company said.

Housing Slump

Fannie Mae and McLean, Virginia-based Freddie Mac survived last year on investments the government made in the companies after regulators put them in conservatorship in September 2008. The Treasury on Christmas Eve removed a $200 billion limit on each company, extending unlimited backing through 2012.

The two companies own or guarantee more than $5 trillion in U.S. residential debt, and were responsible for as much as 75 percent of the new mortgages made last year.

A record 3 million U.S. homes will be repossessed by lenders this year as unemployment and depressed home values leave borrowers unable to sell or make their house payments, according to a RealtyTrac Inc. forecast last month. Last year there were 2.82 million foreclosures, the most since the Irvine, California-based company began compiling data in 2005.

Fannie Mae and smaller rival Freddie Mac were chartered by the government primarily to lower the cost of homeownership by buying mortgages from lenders, freeing up cash at banks to make more loans. The companies make money by financing mortgage-asset purchases with lower-cost debt and by charging fees to guarantee securities they create out of home loans from lenders.

Treasury Borrowings

Fannie Mae’s net worth, or the difference between assets and liabilities, was negative $15.3 billion as of Dec. 31, compared with negative $15 billion on Sept. 30 and negative $10.6 billion on June 30, according to company statements.

For the fourth quarter, Fannie Mae decreased reserves for future credit losses to $64.9 billion last quarter from $65.9 billion in the previous quarter.

The amount of nonperforming loans that Fannie Mae guarantees for other investors rose to $174.6 billion from $163.9 billion in the third quarter, according to the filing. Fannie Mae also owned $41.9 billion in non-performing loans as of Dec. 31, up from $34.2 billion in the third quarter.

The fair value of Fannie Mae’s assets was negative $98.8 billion last quarter, compared with negative $90.4 billion at the end of September.

Future of Companies

The Obama administration will wait until next year to seek legislation that addresses the future of Fannie Mae and Freddie Mac, Treasury SecretaryTimothy F. Geithner told the House Budget Committee on Feb. 24.

“We are going to propose reforms to the Congress next year to try to make sure we bring about fundamental change in the housing market and get ourselves in a position where the government is playing a less risky, but more constructive role in supporting housing markets,” Geithner said. “That’s going to be a difficult set of reforms.”

The Treasury and the companies’ regulator, the Federal Housing Finance Agency, blocked Freddie Mac and Fannie Mae from selling their low-income housing tax credits, which can only be recognized if the companies expect to be profitable.

The Treasury found that an agreement Fannie Mae had to sell about half of its credits would have cost taxpayers more than the company would gain from the deal, according to a November letter to that company.

Vice President Joe Biden, "It's easy being vice president — you don't have to do anything."

Watching - Vice President Joe Biden, "It's easy being vice president — you don't have to do anything."

Little Brownie Bakers have issued a Girl Scout cookie recall today for their Lemon Chalet Cremes -

Reading - Little Brownie Bakers have issued a Girl Scout cookie recall today for their Lemon Chalet Cremes -

Earlier today, the maker of the famous Girl Scout cookies announced a recall of some cookies. Little Brownie Bakers is recalling lemon chalete cremes cookies due to the fact that there is a taste and smell not typically associated with the product. According to the company, the cookies contain an oil that results in a strong odor and taste.

While the Girl Scout Cookie recall is in place, they are still considered safe to eat. The recall is in place because the cookies are not up to the standards of Little Brownie Bakers.

Full story: http://www.bbb.org/us/post/maker-of-girl-scout-cookies-announces-recall-1319

Embarrassing glitch for Facebook - began getting hundreds of personal messages that were not intended for them -

Reading - Embarrassing glitch for Facebook - began getting hundreds of personal messages that were not intended for them -

Late Thursday, in an embarrassing glitch for Facebook that raised questions about privacy on the site, some users of the social-networking service began getting hundreds of personal messages that were not intended for them.

A WSJ.com editor, Zach Seward, reported the apparent glitch after his Facebook inbox was flooded with messages ranging from the mundane to the truly private.

"I am sorry for letting my jealousy and worry get the best of me," read one of the e-mails.

Another, apparently talking about the application Love Farm, said, "just letting you know that if you would like me to plant seeds on your farm etc … I can only access it, if you steal/share one of my plants that are ready for harvest."

Even a copy of one couple's entire explicit chat session landed in Seward's account.

Some users noticed the glitch and either tried to resend the message or sent Seward notes such as "I'm sorry … I don't know why FB sent that last message to you, please disregard!"

The problem was the latest to cause concern about privacy on Facebook and other sites that allow people to share personal information over the web.

Along the way, the privacy policies of the sites came under fire, as have the sites' abilities to protect users' data. Facebook recently rolled out a new design of its inbox to make it more like Gmail's, but the most recent glitch could raise questions for users.

Seward, who received emails from about 100 people, said he was later temporarily unable to access his Facebook account.

Facebook removed all but two of the messages.

But like many Facebook users, Seward had these messages sent to his third-party email account, where they remain. He said he did not hear from Facebook regarding the glitch.

However a Facebook spokeswoman emailed the following response to Digits.

"During our regular code push yesterday evening, a bug caused some misrouting to a small number of users for a short period of time. Our engineers diagnosed the problem moments after it began and are working to get everything back in its rightful place. While they fix the issue, affected users will not be able to access the site."

The company said it was still investigating the problem and could not immediately respond to specific questions about the glitch.

It was unclear how many Facebook users were affected by the problem, but several Twitter users reported the glitch.

A user with the handle seantanu wrote, "Some bug: Facebook messages intended for others delivered to me today. 71 and counting," and colleen02127 wondered if her problem was a "facebook fail."

Silicon Alley Insider reported on the glitch Thursday and said it appeared to be affecting people who joined Facebook soon after the service started.

Seward, who joined as a Harvard freshman, was the 185th account on the site.

For more on this glitch, see the Wall Street Journal.

JP Morgan Chase, says investors should be more worried about the risk of default of California than of Greece -

Reading - JP Morgan Chase, says investors should be more worried about the risk of default of California than of Greece -

Mr Dimon told investors at the Wall Street bank's annual meeting that "there could be contagion" if a state the size of California, the biggest of the United States, had problems making debt repayments. "Greece itself would not be an issue for this company, nor would any other country," said Mr Dimon. "We don't really foresee the European Union coming apart." The senior banker said that JP Morgan Chase and other US rivals are largely immune from the European debt crisis, as the risks have largely been hedged.

California however poses more of a risk, given the state's $20bn (£13.1bn) budget deficit, which Governor Arnold Schwarzenegger is desperately trying to reduce.

Earlier this week, the state's legislature passed bills that will cut the deficit by $2.8bn through budget cuts and other measures. However the former Hollywood film star turned politician is looking for $8.9bn of cuts over the next 16 months, and is also hoping for as much as $7bn of handouts from the federal government.

Earlier this week, John Chiang, the state's controller, said that if a workable plan to reduce the deficit and increase cash levels is not reached soon, he will have to return to issuing IOU's, forcing state workers to take additional unpaid leave and potentially freezing spending.

Last summer, California issued $3bn of IOU's to creditors including residents owed tax refunds as a way of staving off a cash crisis.

"I can't write checks without money; that's against the law. My main goal is to keep the state afloat, but I won't be able to do it without the help of new legislation," said Mr Chiang.

Flight canceled after two female attendants "got into a fistfight on the plane" -

Reading - Flight canceled after two female attendants "got into a fistfight on the plane" -

A Delta Connection flight from Rochester, N.Y., to Atlanta was canceled after an altercation between two flight attendants.

The flight was operated by Memphis-based Pinnacle Airlines.

A Pinnacle Airlines spokesman, Joe Williams, told the Associated Press the spat erupted just as Delta Connection Flight 887 returned to the gate Thursday morning after a passenger became ill.

YNN Rochester, a cable news Web site, quoted a passenger, Steve Mazur, who said the two female attendants "got into a fistfight on the plane. The pilot decided to kick everyone off the plane.”

“They told us we had to get off the plane because stewardesses were fighting,” another passenger, Corey Minton, told YNN.

But Williams told the AP there was no physical contact and he didn't know the reason for what he termed a "verbal disagreement."

Williams said the flight attendants will be kept off the job until an internal investigation is completed.

“The acts described are not acceptable,” he said.

Williams said Delta found alternate travel plans for passengers on the canceled flights.

British politicians fall victim to Twitter scam - Hijackers take over accounts, send out sexually explicit messages -

Reading - British politicians fall victim to Twitter scam - Hijackers take over accounts, send out sexually explicit messages -

British politicians were among those caught up Friday in the latest Twitter-based scam which hijacks users' accounts to send out sexually explicit messages to friends and followers.

The micro-blogging website has been hit by a wave of so-called “phishing scams,” which lure users to a bogus Web site where they're enticed to part with their passwords. The compromised accounts are then used to distribute rogue messages to other users.

Those tracking the Twitter account of Ed Miliband, the British energy minister, were surprised by a message carrying an unusually direct reference to the politician's sex life.

“Oh dear it seems like I've fallen victim to twitter's latest 'phishing' scam,” Miliband said in a message posted shortly afterward.

He wasn't alone.

On Thursday, House of Commons leader Harriet Harman told lawmakers her account had sent a bogus message to opposition lawmaker Alan Duncan.

She didn't say exactly what the content of the message was, but she left British lawmakers wondering when she told them: “I wouldn't ever send a tweet like that.”

Other prominent politicians and journalists were among those who received the rogue messages.

Even tech-savvy Twitter users have been hit.

Intel UK, the British arm of the chip maker, apologized to its followers Thursday after saying its account had been hacked.

So too was the account of prominent tech blogger Cory Doctorow, who blamed the small screen on his phone for falling victim to the scam.

Head of IMF proposes new global reserve currency that would serve as an alternative to the U.S. dollar -

Reading - Head of IMF proposes new global reserve currency that would serve as an alternative to the U.S. dollar -

Dominique Strauss-Kahn, the head of the International Monetary Fund, suggested Friday the organization might one day be called on to provide countries with a global reserve currency that would serve as an alternative to the U.S. dollar.

"That day has not yet come, but I think it is intellectually healthy to explore these kinds of ideas now," he said in a speech on the future mandate of the 186-nation Washington-based lending organization.

Strauss-Kahn said such an asset could be similar to but distinctly different from the IMF's special drawing rights, or SDRs, the accounting unit that countries use to hold funds within the IMF. It is based on a basket of major currencies.

He said having other alternatives to the dollar "would limit the extent to which the international monetary system as a whole depends on the policies and conditions of a single, albeit dominant, country."

Strauss-Kahn, a former finance minister of France, said that during the recent global financial crisis, the dollar "played its role as a safe haven" asset, and the current international monetary system demonstrated resilience.

"The challenge ahead is to find ways to limit the tension arising from the high demand for precautionary reserves on the one hand and the narrow supply of reserves on the other," he said.

Several countries, including China and Russia, have called for an alternative to the dollar as a reserve currency and have suggested using the IMF's internal accounting unit.

Strauss-Kahn said the IMF also needs to do a better job of tracing how risk percolates through the global economy.

"Here it will be essential to improve our ability to monitor several dozen large complex financial institutions that make up the `plumbing' through which global capital flows," he said, while leaving national regulators the job of monitoring the solvency of individual institutions.