Category Archives: Economics

A 60 Minutes Embarrassment

I think more than a few people were taken aback on Monday when, after posting a $2.5 billion dollar profit for the first quarter (NYT: Bank Profits Appear Out of Thin Air), Bank of America’s stock dropped by more than 25%.

I really hope no one was more shocked than Lelsie Stahl of 60 Minutes. As she read the news in the papers on Tuesday, wondering about  how it happened, I hope she also wondered whether her job is in jeopardy. Looking back at her 60 Minutes segment about Bank of America from October, it seems she produced one of the most un-investigative reports of all time.

Watch her journalist skills in action–after the collapse of Lehman and after the intial TARP bailout–as she cuddles up with the CEO of Bank of America Ken Lewis and looks on in admiration and appreciation when he says he “deeply believed” that it was his patriotic duty to take the money, infering he wouldn’t have done it otherwise, and how he believes bank executives make too much money.

Watch CBS Videos Online

This is the same Bank of America that has now run its tab with the U.S. government up to $163 billion, when including both preferred stock options and asset guarantees, but apparently still needs an extra $36.6 billion just to catch up to its other crippled peers.

And those bank executives that are making too much money? They are getting a 70% hike in their base salaries just to skirt the bonus restrictions imposed by the new administration.

Lewis smoothly sails along throughout  the whole puff piece (looking back puff piece might be an understatement), while Stahl remarks that “one of the reasons bank of America is doing so well is your decision not to get into sub prime mortgages,” and then rewards Lewis for his apparent prescience by declaring, “during this crisis people are taking money out of other banks and putting it in his.”

The entire segment is worth a watch, especially at the climax where both Stahl and Lewis share a laugh with each other as she states, “Well if you’re number one and the idea was to compete with New York or Wall Street, you won!”

Lewis then smirks, perhaps not quite understanding how he was getting away with this, and remarks, “Yes, we have won in that sense.”

Three hours away from the end of the world

The entire economic system almost suffered catastrophic failure on September 18th, according to Rep. Kanjorski (D-PA).

Partial transcript (via Ben Smith):

On Thursday at 11:00 a.m. the Federal Reserve noticed a tremendous draw-down of money market accounts in the U.S., to the tune of $550 billion was being drawn out in the matter of an hour or two. The Treasury opened up its window to help and pumped a $105 billion in the system and quickly realized that they could not stem the tide. We were having an electronic run on the banks. They decided to close the operation, close down the money accounts and announce a guarantee of $250,000 per account so there wouldn’t be further panic out there.
If they had not done that, their estimation is that by 2:00 p.m. that afternoon, $5.5 trillion would have been drawn out of the money market system of the U.S., would have collapsed the entire economy of the U.S., and within 24 hours the world economy would have collapsed. It would have been the end of our economic system and our political system as we know it.

Giving new meaning to the term "Bank of America"

bank-of-america-2

BANK OWNED BY AMERICA; FEDS BECOME LARGEST SHAREHOLDER...

NEW YORK (CNNMoney.com) — Bank of America has received another $20 billion from the federal government’s bailout fund, along with guarantees on $118 billion of assets at the bank, to absorb its recent purchase of the ailing Merrill Lynch.
Details of the deal were announced by the government in the early hours of Friday.
The new arrangement provides additional capital for Bank of America (BAC, Fortune 500) in exchange for preferred stock with an 8% dividend, according to a joint statement by the Treasury Department and the Federal Reserve.
The Treasury will extend $20 billion more to the bank under the $700 billion Troubled Asset Relief Program. The funding will come from the TARP Targeted Investment Program, not the subset $250 billion Capital Investment Program designed to prop up healthy banks’ balance sheets.
The bailout deal also provides a $118 billion backstop from the Fed in case of “unusually large losses” on assets backed by real-estate loans, most of which are being absorbed by Bank of America in its buyout of brokerage house Merrill Lynch. Bank of America will pay 3.7% of those assets as a fee for the backstop, and is responsible for the first $10 billion of losses and 10% of the remaining losses.

Looks like the internet is winning

These three stories broke this morning:

The McClatchy Co., burdened by debt and a steep slide in newspaper advertising, wants to sell one of its most prized properties, The Miami Herald, according to people briefed on the company’s plans.
McClatchy, the nation’s third-largest newspaper chain, has approached potential buyers for The Herald, said these people. But they said they knew of no serious offers for the paper, reflecting the evaporation of major investors’ interest in buying newspapers.

The company’s holdings include the Los Angeles Times, Chicago Tribune, Baltimore Sun, South Florida’s Sun Sentinel, Orlando Sentinel, Hartford Courant, 23 television stations, cable station WGN, and the Chicago Cubs.

The New York Times Company plans to borrow up to $225 million against its mid-Manhattan headquarters building, to ease a potential cash flow squeeze as the company grapples with tighter credit and shrinking profits.

————————–

And this one followed:

At Last: Pulitzer Prizes Expand to Internet Only Web News Outlets

NEW YORK For the first time, the Pulitzer Prizes will accept submissions from online-only news outlets, but require that they be “text-based” submissions from news organizations that are updated at least weekly and include original reporting.
Pulitzer Administrator Sig Gissler told E&P that “we are expanding the Pulitzers to include many text-based newspapers and news organizations that publish only on the Internet.” At the same time, they are “stressing” that all entered material should come from news outlets that publish material at least weekly, “are primarily dedicated to original news reporting, are dedicated to coverage of ongoing stories and that adhere to the highest journalistic principles.”

Coincidence?