Profiles in Panic: The World of the Rich Collapses

With Wall Street hemorrhaging jobs and assets, even many of the wealthiest players are retrenching. Others, like the Lehman Brothers bankers who borrowed against their millions in stock, have lost everything. Hedge-fund managers try to sell their luxury homes, while trophy wives are hocking their jewelry. The pain is being felt on St. Barth’s and at Sotheby’s, on benefit-gala committees and at the East Hampton Airport, as the world of the Big Rich collapses, its culture in shock and its values in question.


Illustrations by Barry Blitt.

A snapshot: East Hampton, late summer, a lawn party at a house on the ocean overlooking the dunes. The host is a prince of private equity known for dressing well. One of his guests is Steven Cohen, the publicity-shy billionaire whose SAC Capital, with $16 billion under management, is perhaps the most revered of the 10,000 or so hedge funds spawned by this giddily rich time. Nearby is Daniel Loeb, of Third Point, one of the better-known “activist” hedge funds, who hopes to move soon into a 10,700-square-foot, $45 million penthouse at l5 Central Park West, a Manhattan monument to the new gilded age. Gliding easily between them is art dealer Larry Gagosian, so successful at selling Bacons and Serras to Wall Street’s new titans-including to Cohen-that he now travels in his own private jet and has his own helicopter to take him to it.

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JPMorgan Chase to cut 9,200 jobs at Washington Mutual

Reporting from New York — JPMorgan Chase & Co. said Monday that it would cut 9,200 jobs at Washington Mutual Bank, which it acquired Sept. 25 after WaMu became the nation’s largest bank to fail amid the continuing credit crisis.

The most cuts will come at Washington Mutual’s Seattle headquarters, where 3,400 pink slips are going out, and at the bank’s San Francisco center, where 1,600 jobs are being eliminated, JPMorgan spokesmen said.

The other 4,200 firings will be spread throughout the United States, with fewer than 300 in Southern California, they said.

No branch closures are planned in California as JPMorgan integrates Washington Mutual, so retail customers in the state will continue to see the same faces as always, the spokesmen said.

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1.5 Million Job Cuts So Far This Year, Factory Slump Probably Worsened: U.S. Economy Preview

Nov. 30 (Bloomberg) — The recession engulfing the U.S. economy deepened this month as employers slashed more jobs and manufacturing contracted at the fastest pace in a quarter century, economists said before reports this week.

Payrolls shrank by 320,000 workers in November, the biggest one-month drop since the 2001 terrorist attacks, according to the median estimate of economists surveyed by Bloomberg News before the Labor Department’s Dec. 5 report. The jobless rate may have jumped to 6.8 percent, the highest level since 1993.

Employment may keep deteriorating as the credit crunch continues to bite, with Goldman Sachs Group Inc. analysts forecasting a 9 percent unemployment rate by late 2009. The worsening outlook prompted President-elect Barack Obama to craft a plan to save or create 2.5 million jobs in two years to stave off what he called a “crisis of historic proportions.”

“All signals point to a very weak labor market and further weakening,” said Dean Maki, co-head of U.S. economic research at Barclays Capital Inc. in New York. “We should expect a large stimulus program shortly after Obama takes office.”

The 11th consecutive drop in payrolls would follow a 240,000 decline in October and bring the total number of jobs eliminated so far this year to 1.5 million. Factories probably reduced staff by 80,000 workers, according to the survey median.

The jobless rate was 6.5 percent in October.

Read more1.5 Million Job Cuts So Far This Year, Factory Slump Probably Worsened: U.S. Economy Preview

U.S. Unveils New Programs to Ease Credit

Related article: Fed Pledges Top $7.4 Trillion to Ease Frozen Credit


Treasury Secretary Henry M. Paulson Jr. spoke at a news conference at the Treasury Department on Tuesday in Washington.

The federal government unveiled $800 billion in new loans and debt purchases on Tuesday, hoping another infusion of cash can help unfreeze troubled credit markets and make borrowing easier for homebuyers, small businesses and students.

The Federal Reserve said that it would buy up to $600 billion in mortgage-backed assets from the government-sponsored mortgage finance giants Fannie Mae and Freddie Mac. The agency would also buy up to $100 billion in debt directly from the companies and up to $500 billion in mortgage-backed securities.

“This action is being taken to reduce the cost and increase the availability of credit for the purchase of houses, which in turn should support housing markets and foster improved conditions in financial markets more generally,” the Federal Reserve said in a statement.

Separately, the Fed and Treasury Department announced a $200 billion program to ease commercial lending on debts like student loans, car loans or business loans. The Fed would lend up to $200 billion to holders of asset-backed securities supported by car loans, credit card loans, student loans, and business loans guaranteed by the Small Business Administration.

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Fed Pledges Top $7.4 Trillion to Ease Frozen Credit

We will see hyperinflation, the dollar will fail and then the US will fail.
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Henry Paulson, U.S. treasury secretary, left, and Ben S. Bernanke, chairman of the U.S. Federal Reserve, look through their notes before a hearing of the House Financial Services Committee in Washington, Nov. 18, 2008. Photographer: Jim Lo Scalzo/Bloomberg News

Nov. 24 (Bloomberg) — The U.S. government is prepared to lend more than $7.4 trillion on behalf of American taxpayers, or half the value of everything produced in the nation last year, to rescue the financial system since the credit markets seized up 15 months ago.

The unprecedented pledge of funds includes $2.8 trillion already tapped by financial institutions in the biggest response to an economic emergency since the New Deal of the 1930s, according to data compiled by Bloomberg. The commitment dwarfs the only plan approved by lawmakers, the Treasury Department’s $700 billion Troubled Asset Relief Program. Federal Reserve lending last week was 1,900 times the weekly average for the three years before the crisis.

When Congress approved the TARP on Oct. 3, Fed Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson acknowledged the need for transparency and oversight. Now, as regulators commit far more money while refusing to disclose loan recipients or reveal the collateral they are taking in return, some Congress members are calling for the Fed to be reined in.

“Whether it’s lending or spending, it’s tax dollars that are going out the window and we end up holding collateral we don’t know anything about,” said Congressman Scott Garrett, a New Jersey Republican who serves on the House Financial Services Committee. “The time has come that we consider what sort of limitations we should be placing on the Fed so that authority returns to elected officials as opposed to appointed ones.”

Read moreFed Pledges Top $7.4 Trillion to Ease Frozen Credit

Downey Seized, Sold to U.S. Bancorp as Mortgage Fallout Spreads

Nov. 22 (Bloomberg) — Seizure and sale of Downey Financial Corp. and two smaller lenders may cost the FDIC more than $2 billion as foreclosures rise and home prices extend declines in the worst housing slump since the Great Depression.

U.S. Bancorp acquired Downey and smaller PFF Bank & Trust, California thrifts crippled by bad mortgages, yesterday in a deal brokered by the Federal Deposit Insurance Corp. Community Bank of Loganville, Georgia, was also closed and its $611.4 million of deposits taken over by Bank of Essex in Tappahannock, Virginia.

Regulators this year have closed the most banks since 1993 as mortgage defaults and tightening credit froze markets. The collapse of IndyMac Bancorp Inc. was among the biggest in history, costing the FDIC $8.9 billion. The agency expects Downey’s demise to deplete its Deposit Insurance Fund by $1.4 billion, with PFF costing $700 million and Community $240 million.

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The global economy is being sucked into a black hole

This Is Not A Normal Recession

Moving on to Plan B

“The Winter of 2008-2009 will prove to be the winter of global economic discontent that marks the rejection of the flawed ideology that unregulated global financial markets promote financial innovation, market efficiency, unhampered growth and endless prosperity while mitigating risk by spreading it system wide.” Economists Paul Davidson and Henry C.K. Liu “Open Letter to World Leaders attending the November 15 White House Summit on Financial Markets and the World Economy”

The global economy is being sucked into a black hole and most Americans have no idea why. The whole problem can be narrowed down to two words; “structured finance”.

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Jobless ranks hit 10 million, most in 25 years; unemployment hits 14-year high


Sunny Yang, left, a masters degree student from Shanghai and employed banker in New York City, speaks with World Bank representative Roberto Amorosino about opportunities for unemployed friends of his during a career fair at Columbia Univeristy Friday, Nov. 7, 2008 in New York. The U.S. unemployment rate bolted to a 14-year high of 6.5 percent in October as another 240,000 jobs were cut, far worse than economists expected and stark proof the economy is deteriorating at an alarmingly rapid pace. (AP Photo/Julie Jacobson)

WASHINGTON (AP) — The nation’s jobless ranks zoomed past 10 million last month, the most in a quarter-century, as piles of pink slips shut factory gates and office doors to 240,000 more Americans with the holidays nearing. Politicians and economists agreed on a painful bottom line: It’s only going to get worse.

The unemployment rate soared to a 14-year high of 6.5 percent, the government said Friday, up from 6.1 percent just a month earlier. And there was more grim news from U.S. automakers: Ford Motor Co. and General Motors Corp., American giants struggling to survive, each reported big losses and figured to be announcing even more job cuts before long.

Regulators, meanwhile, shut down Houston-based Franklin Bank and Security Pacific Bank in Los Angeles on Friday, bringing the number of failures of federally insured banks this year to 19.

The Federal Deposit Insurance Corp. was appointed receiver of Franklin Bank, which had $5.1 billion in assets and $3.7 billion in deposits as of Sept. 30, and of Security Pacific Bank, with $561.1 million in assets and $450.1 million in deposits as of Oct. 17.

Read moreJobless ranks hit 10 million, most in 25 years; unemployment hits 14-year high

UK: Perilous state of economy revealed by MPC’s shock move

The perilous state of the UK economy was exposed as the Bank of England’s Monetary Policy Committee made an unprecedented 1.5 percentage point cut in interest rates.


Winston Churchill meets the Queen in 1955. Photo: PA

The shock vote brought interest rates down to 3pc for the first time since January 1955, when Winston Churchill was prime minister. Economists forecast that the cut could pave the way for further reductions – with some claiming that rates could hit a historic low of 1pc.

Thursday’s move was interpreted as a desperate attempt to protect the UK economy from a severe recession.

“There has been a very marked deterioration in the outlook for economic activity at home and abroad,” said the MPC in an explanatory statement, adding that the threat of inflation was now receding.

It warned that after the most serious crisis in the global banking sector for almost a century, households and businesses were likely to find it difficult to obtain credit “for some time.” The MPC counted falling share prices, a sharp reduction in UK output, and a squeeze on household budgets among a nasty cocktail of circumstances that have combined to hit both businesses and consumers hard.

The MPC’s decision came amid a raft of gloomy news and data emerged. Figures from Halifax, the UK’s biggest mortgage lender, showed that house prices have fallen by 15pc over the past 12 months.

It was the sharpest drop since the survey began in 1983 and brought the average house price down to £168,176 in October, compared with almost £200,000 in the same month last year.

Read moreUK: Perilous state of economy revealed by MPC’s shock move

Jobs lost in 2008: 1.2 million

Payrolls shrink by 240,000 in October, 10th straight month of cuts. Unemployment soars to 6.5%

chart_job_losses2.03.jpg

NEW YORK (CNNMoney.com) — The government reported more grim news about the economy Friday, saying employers cut 240,000 jobs in October – bringing the year’s total job losses to nearly 1.2 million.

According to the Labor Department’s monthly jobs report, the unemployment rate rose to 6.5% from 6.1% in September and higher than economists’ forecast of 6.3%. It was the highest unemployment rate since March 1994.

“There is so much bad in this report that it is hard to find any silver lining,” said Morgan Keegan analyst Kevin Giddis.

Economists surveyed by Briefing.com had forecast a loss of 200,000 jobs in the month. October’s monthly job loss total was less than September’s revised loss of 284,000. Payroll cuts in August were revised up to 127,000, which means more than half of this year’s job losses have occurred in the last three months.

September had the largest monthly job loss total since November 2001, the last month of the previous recession and just two months after the Sept. 11 terrorist attacks.

With 1,179,000 cuts, the economy has lost more than a million jobs in a year for the first time since 2001 – the last time the economy was in a recession. With most economic indicators signaling even more difficult times ahead, job losses will likely deepen and continue through at least the first half of 2009.

Read moreJobs lost in 2008: 1.2 million