Articles from 03/09/08 to 03/15/08

In addition to Bear Stearns' “big” news today, the company also said it was moving up the date for release of its first quarter results by three days. Instead of reporting earnings next Thursday…Bear Stearns will educate Wall Street Monday about the financial state of affairs, after the market closes. The company says it wants to provide more information about its current condition. Does that mean results may be a pleasant surprise? Or does it mean more bad news that Bear wants to get out of the way?

Bear Stearns executives said they’re comfortable with the range of earning estimates that are out there…which forecast a profit of $135 million. Given that little disclosure, I’m going to speculate that Bear is hoping its first quarter numbers will give its stock (which has cratered) a much needed kick in the pin-striped pants.

Of course, if a white knight appears over the weekend….none of this will matter.

Larry Meyer is a thoughtful guy, one of the world's most insightful students of the U.S. economy. A former Fed Governor, a leading forecaster. So, I take it seriously when he says we are now in the worst financial crisis of the post-war period.

This is not how I wanted to start my weekend.

Consider the contenders for this gloomy title: the Asian Financial Crisis, the LTCM Meltdown and the S&L crisis.

The Asian financial crisis was, well, in Asia mostly. South Korea almost collapsed, but it's a smallish economy compared to ours. Brazil came close, but it didn't meltdown.

It’s clear that many people who took out loans in the real estate boom didn’t really understand them. Today, the Department of Housing and Urban Development proposed the use of a new standardized form to help people know what they’re buying when they're shopping for a home loan. HUD estimates this will save consumers on average about $700.

This is the second time HUD has proposed changes. Last time, opposition by the industry kept reforms from taking place. There’s certain to be opposition to this form too, but given the current situation in the housing market, regulators should be more determined to get it done.

You can review HUD's press release about the new "Good Faith Estimate" form here: HUD PROPOSES MORTGAGE REFORM TO HELP CONSUMERS BETTER UNDERSTAND THEIR LOAN, SHOP FOR LOWER COSTS.

Do you think this form will help people understand their mortgages?

When I began reporting on the ethanol industry a couple of years ago, many economists repeated the same warning: the U.S. is trading food for fuel. They feared corn-based ethanol would demand so much of the U.S. corn crop that there might not be enough of the grain to feed the world. That prediction, in part, may be coming true. It also seems to be coming true a lot sooner than anyone expected.

We haven't run short of food yet, but it is getting increasingly expensive. At $5.00 a bushel, corn is roughly double what it was a year ago. Since demand for corn is so strong, farmers have planted fewer acres of soybeans and wheat. Their prices are even higher than corn.

Susie Gharib did a great job tonight putting President Bush on record about the dollar, oil and housing. After the interview, the President was generous with his time, chatting with Susie and our crew about his plans for the future and his concerns about protectionist trends he sees in the nation.

Mr. Bush says past history has shown that isolationism, protectionism and nativism tend to move together. The President is concerned Americans are turning inward. He plans to spend time thinking and writing about this after he leaves the White House.

I was interested in the President's comments on the dollar. He was as emphatic about wanting a strong dollar as any president I have seen in twenty years. Don't think that was enough to move the greenback though.

If you watch the broadcast tonight, you'll see my in-depth interview with President George W. Bush. (If you miss the program, look for the video and transcript of the interview on the NBR website.) I thought I'd use this blog entry to share with you what I call my "Reporter's Notebook." The notebook contains my impressions of my conversation with the President.

The interview took place in the Map Room of the White House, where FDR studied military maps during WWII. As for the mood, President Bush was upbeat and confident about the outlook for the economy, despite the recent gloomy economic news. When I asked him about what he plans to do after he leaves the White House in January, he mentioned several projects. At the top of his list is a book which he plans to write without the help of a ghost writer.

I also asked President Bush if he thinks Senator Hillary Clinton or Senator Barack Obama will be the Democratic challenger to Senator John McCain in the general election. He said it's "too close to call."

It's a very exciting day in the NBR newsroom with lots of preparations underway to bring you Susie Gharib's interview with President George W. Bush. The President addressed the Hispanic Chamber of Commerce today, and urged Congress to take up work on a free trade agreement with Columbia as soon as lawmakers return from their Easter recess. After that speech, the President sat down with Susie at the White House. Their conversation covered a variety of topics including international trade, the dollar, the U.S. economy and soaring oil prices.

In other news...

There's no way around it: while the Fed is moving to ease the gridlock in credit markets, it is also taking on more credit risk.

Fed officials say they are going to offer up to $200 billion in securities through their new lending program. That lending will be offset by collateral including debt from mortgage giants Freddie Mac and Fannie Mae and private label Mortgage Backed Securities that are rated AAA and not on review for downgrade.

Well. We all know that AAA ain't what it used to be. Ratings are changed all the time as housing prices continue to fall.

No one's shedding any tears for the position the credit rating agencies, like Moody's, now find themselves in. After rating a lot of now highly-suspect mortgage securities as "AAA," Moody's along with S&P and Fitch are taking the lumps from market critics. Moody's CEO Ray McDaniel issued something of a mea culpa during the interview I did with him today. McDaniel noted that Moody's did some things wrong, but also said that it's not realistic to expect any rating system to be able to foresee the kind of contagion that's spread through the credit markets.

The method of rating complex derivative mortgage-backed securities, such as collateralized debt obligations, with a simplistic "AAA" rating has also come under fire.

You’ll likely pay more for airline tickets this summer. Higher oil prices have already added as much as $50.00 to a domestic round-trip ticket. While you might think the silver lining could be not having a middle seat, don’t count on it. Higher prices will certainly ground some passengers, but the weak dollar is driving demand from foreign tourists. The Federal Aviation Administration and local airport authorities are working to reduce delays, implementing “peak pricing” plans to encourage airlines to better stagger flight schedules. The FAA will also begin rolling out its upgrade of the air traffic control system, known as NextGen. But that new system isn’t scheduled to be complete until 2025. By that time, U.S. airlines are projected to be carrying 1.3 billion passengers a year, compared to an estimated 750 million people this year.

Chicago is the birthplace of futures trading. It all started 160 years ago at the Chicago Board of Trade. The merger last year of the Chicago Mercantile Exchange and the Chicago Board of Trade created the CME Group, now the world's largest futures exchange.

CME Group Chairman Terry Duffy traded live hogs for a decade-and-a-half before being tapped to head up the Merc six years ago, and CME Group last year. So, he knows a thing or two about life in the trading pits or, more appropriately now, life on the trading screen. While the CME saw its trading volume rise nearly 27% last year, Duffy knows his exchange can't rest on its laurels.

What a day on Wall Street with many focusing not on the lousy stock market, but instead on the unfolding prostitution scandal involving New York Governor Eliot Spitzer. Spitzer made his name serving as New York's Attorney General. In that role he was an anti-corruption crusader bent on forcing Wall Street to clean up its act. He played a key role in the ouster of Dick Grasso from the New York Stock Exchange. Today, he made no reference to the prostitution scandal, saying only it was a private matter and that he'd failed to live up to his own standards. The Governor gave no sign he had any intention of stepping down. The New York Times quotes a federal law enforcement official as saying Spitzer is "client number nine" captured on federal wiretap tapes arranging a meeting with a high priced call girl on a visit to Washington, D.C. last month.

In other news...