WaMu has $3.33 bln loss, may be cut to “junk”

NEW YORK (Reuters) – Washington Mutual Inc, the largest U.S. savings and loan, posted a $3.33 billion second-quarter loss on Tuesday as souring mortgages forced it to set aside more money for loan losses.

The thrift’s deteriorating health prompted Moody’s Investors Service to say it may downgrade Washington Mutual to “junk” status. Shares of Washington Mutual fell in after-hours electronic trading.

Read moreWaMu has $3.33 bln loss, may be cut to “junk”

U.S. Foreclosures Double as House Prices Decline

July 25 (Bloomberg) — U.S. foreclosure filings more than doubled in the second quarter from a year earlier as falling home prices left borrowers owing more on mortgages than their properties were worth.

One in every 171 households was foreclosed on, received a default notice or was warned of a pending auction. That was an increase of 121 percent from a year earlier and 14 percent from the first quarter, RealtyTrac Inc. said today in a statement. Almost 740,000 properties were in some stage of foreclosure, the most since the Irvine, California-based data company began reporting in January 2005.

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Food stamp use soars in Mass

Fastest-Growing Program in Nation

Massachusetts, which earlier this decade had the lowest percentage of eligible residents using food stamps, now has the fastest-growing food-stamp program in the country, a dramatic turnaround that state officials attribute to soaring food prices and a simplified application process.

As food and fuel costs continue to rise, the officials say, people who would not normally use food stamps are turning to the federal program to make ends meet.

“I think low-income families are faced and will be faced this winter with the difficult choice of eating or heating a home,” said Patricia Baker, senior policy analyst for the Massachusetts Law Reform Institute, a nonprofit organization that advocates for the poor. “We’re seeing prices escalating, and anything that a family can access to help them buy basic food for their families is critical.”

More than 500,000 people statewide received food stamps in April, a 67-percent increase from 2003 and 11 percent more than last year, according to state records.

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The U.S. Enters into an Ever-Worsening Cycle

We are a year into the financial pain and virtually no systemic problem has been solved. Markets have entered into a new unsustainable cycle. The new dance is a two-step. Home prices slide, delinquencies rise, defaults rise. This puts additional pressure on housing going forward. Financial firms announce greater write-offs. Retailers slump and contagion goes global. Selling grips the markets, the good and the bad are sold off indiscriminately. Commodities rise, fear escalates and reaches a crescendo as at least one major institution nears or reaches insolvency. Forecasts of impossible return to the good old days are debated and rebound timetables are pushed back. In the depths of the swoon, the Fed opens the discount window to some new and previously barred set of institutions. Bail-outs are readied, Treasury checks are cut and we rebound off the lows. Bad news becomes good, commodities sell-off and financials soar.

Read moreThe U.S. Enters into an Ever-Worsening Cycle

Quotes from the Great Depression

September 1929
“There is no cause to worry. The high tide of prosperity will continue.” — Andrew W. Mellon, Secretary of the Treasury.

October 14, 1929
“Secretary Lamont and officials of the Commerce Department today denied rumors that a severe depression in business and industrial activity was impending, which had been based on a mistaken interpretation of a review of industrial and credit conditions issued earlier in the day by the Federal Reserve Board.” — New York Times

December 5, 1929
“The Government’s business is in sound condition.” — Andrew W. Mellon, Secretary of the Treasury

Read moreQuotes from the Great Depression

Ford Posts Loss of $8.7 Billion on Asset Woes

DETROIT – The Ford Motor Company, stunned by abysmal sales of its most profitable vehicles and a sudden shift in consumers’ tastes, said Thursday that it lost $8.7 billion in the quarter, its worst ever, and would overhaul its North American plants to focus on small cars.

The loss, equal to $3.88 a share, was mostly the result of $8 billion in write-downs because of falling demand for and resale values of gas-thirsty pickups and sport utility vehicles in the United States. Ford took charges of $5.3 billion charge related to lower asset values in North America and $2.1 billion on the lease portfolio at its financing arm, the Ford Motor Credit Company.

The news sent Ford shares tumbling nearly 10 percent in morning trading.

Excluding the write-downs and other charges, the company lost $1 billion from continuing operations, down from a profit of $483 million a year ago. It lost $1.3 billion in North America, where $4-a-gallon gasoline has caused consumers to clamor for more fuel-efficient vehicles.

Read moreFord Posts Loss of $8.7 Billion on Asset Woes

Governor plans to slash state workers’ pay to the federal minimum

Gov. Arnold Schwarzenegger plans next week to slash the pay of more than 200,000 state workers to the federal minimum of $6.55 per hour to help ease the state’s budget crisis, according to a draft executive order obtained by The Chronicle on Wednesday.

The governor also will order an end to overtime pay for all but critical services, a freeze on state hiring and the immediate layoff of nearly 22,000 temporary, seasonal and student workers.

“As a result of the late state budget, there is a real and substantial risk that the state will have insufficient cash to pay for state expenditures,” the executive order states.

Read moreGovernor plans to slash state workers’ pay to the federal minimum

Merrill Cuts 2009 U.S. GDP Forecast: Chart of the Day

July 22 (Bloomberg) — Merrill Lynch & Co. economists clipped their forecasts for U.S. growth, making revisions that they described as “adjusting to the new reality.”

“Just like consumers, who are insulating their windows and making fewer trips to the malls, we are adjusting our economic forecasts to the new high-oil-price reality, not to mention the latest round of trauma in the mortgage markets,” New York-based economists Sheryl King and Drew Matus wrote in a report.

The chart of the day shows the quarterly change in U.S. gross domestic product in green, with the annualized figure in red. Merrill now expects the economy to contract by 0.5 percent in 2009, after previously forecasting growth of 0.5 percent.

``We expect GDP to plummet 2.5 percent in the fourth quarter, and see a similar decline in the first quarter” of 2009, wrote King and Matus. “With the consumer likely to remain under duress into 2009 and inflation fears likely to abate, we continue to expect the Federal Reserve to cut interest rates early next year.”

Read moreMerrill Cuts 2009 U.S. GDP Forecast: Chart of the Day

Google In Final Negotiations To Acquire Digg For “Around $200 Million”

Google’s on and off negotiations with Digg have been back on in a big way for the last six weeks, we’ve heard from multiple sources inside of Google, and the two companies are close to a deal that will bring Digg under the Google News property. The acquisition price is in the $200 million range, says one source.

We first wrote about the Google-Digg negotiations in March. Despite a vigorous denial by Digg CEO Jay Adelson the negotiations continued, although Google’s Marissa Mayer reportedly cooled on the company for a period of time.

The companies are now in final negotiations according to our sources, although it could be a couple of weeks before it closes. And while the major deal points have been agreed on, the acquisition could still fall apart. Microsoft, which was previously interested in the company, may be willing to step back in at a much lower price.

Most of Digg’s revenue comes from a three year ad deal with Microsoft, which will be terminated on a sale to Google. Digg has raised $11.3 million in venture capital.

Meanwhile, Google’s fascination with the Digg voting concept continues.

Read moreGoogle In Final Negotiations To Acquire Digg For “Around $200 Million”

Wachovia Has Record $8.9 Billion Loss, Cuts Dividend

If Wachovia fails, then you can probably forget about the FDIC.

And remember that there are no more bailouts left:
Fed: No more bailouts, except Fannie Mae and Freddie Mac.

July 22 (Bloomberg) — Wachovia Corp., the U.S. bank that hired Treasury Undersecretary Robert Steel as chief executive officer two weeks ago, reported a record quarterly loss of $8.9 billion, slashed the dividend and announced 6,350 job cuts. The stock slumped as much as 10 percent in New York trading.

The second-quarter loss of $4.20 a share compared with net income of $2.3 billion, or $1.23, a year earlier, the Charlotte, North Carolina-based company said today in a statement. The loss included a $6.1 billion charge tied to declining asset values.

The writedown, job cuts and second dividend reduction in three months reflect Steel’s response to the worst housing market since the Great Depression, which cost former CEO Kennedy Thompson his job after eight years. Wachovia has dropped more than 75 percent since it spent $24 billion two years ago to buy Golden West Financial Corp. just as home prices were peaking.

Read moreWachovia Has Record $8.9 Billion Loss, Cuts Dividend