Posted tagged ‘Financial Crisis’

Police Find Freddie Mac CFO Dead

April 22, 2009

David Kellermann, the acting chief financial officer of money-losing mortgage giant Freddie Mac was found dead at his home this morning in an apparent suicide.

From the Associated Press:

Mary Ann Jennings, director of public information for the Fairfax County, Va., Police Department, said Kellermann was found dead in his suburban Virginia home. The police would not say if a suicide note was found.

Kellermann, 41, lived in Hunter Mill Estates, a well-off neighborhood of large single-family homes with manicured lawns. County records show Kellermann’s home is worth about $900,000.

He worked for Freddie Mac for the past 16 years and was named acting chief financial officer last September when the government seized control of the company to keep it from failing. Freddie Mac lost more than $50 billion last year, and the government has pumped in $45 billion to keep the company afloat.

Freddie Mac, which owns or guarantees about 13 million mortgages, has been criticized for financing risky mortgage loans that fueled the real estate bubble.

News of Kellermann’s death came as a shock to employees of the McLean, Va.-based company, with those who knew Kellermann tearing up on Wednesday morning and a quiet mood prevailing.

Early Wednesday, Sharon McHale, a Freddie Mac spokeswoman, said senior executives at the company heard the news on local radio before going to work. “It’s just so awful,” she said.

President Obama ‘Stunned’ by AIG Bonuses

March 20, 2009

Hey…so was I!

President Barack Obama said last night on “The Tonight Show” that he was stunned to hear about the $165 million in bonuses that were paid to employees of troubled insurer AIG over the weekend.

He has promised to do everything he could to get these bonuses back.

From NBC News:

“These financial industries are holding us hostage,” Obama said in an interview on NBC’s “Tonight Show With Jay Leno,” which NBC said was the first time a sitting president had been a guest on a late-night talk show.

Obama said the AIG payments raised moral and ethical problems, but he stressed that the bigger problem was the culture that allowed traders to claim them.

“We need to get back to a place where people know enough is enough,” he said. “If we can get back to those values that built America, then we’ll be OK.”

Obama used the visit as an opportunity to defend Treasury Secretary Timothy Geithner, who has been sharply criticized for his handling of the AIG controversy. Sen. Johnny Isakson, R-Ga., called for Geithner to resign Thursday afternoon.

But Obama said Geithner was doing an “outstanding job,” handling a full plate with grace and good humor.

“He is a smart guy. He is a calm and steady guy,” Obama said. “I don’t think people fully appreciate the plate that was handed him.”

Listing the recession, the banking crisis and the need to coordinate with other countries, Obama acknowledged that Geithner was “on the hot seat.” But he said too many in Washington were trying to figure out whom to blame when they should be focused on fixing the problems.

“Look, I’m the president. Ultimately, it’s my responsibility,” Obama said. “If I’m not giving [Geithner] the tools he needs, it’s on me.”

AIG To Pay $165 Million in Executive Bonuses

March 14, 2009

American International Group is giving its executives tens of millions of dollars in new bonuses even though it received a taxpayer bailout of more than $170 billion dollars.

Great to see MY tax dollars will help pay for these executives to get their bonuses!

From the Associated Press:

AIG is paying out the executive bonuses to meet a Sunday deadline, but the troubled insurance giant has agreed to administration requests to restrain future payments.

The Treasury Department determined that the government did not have the legal authority to block the current payments by the company. AIG declared earlier this month that it had suffered a loss of $61.7 billion for the fourth quarter of last year, the largest corporate loss in history.

Treasury Secretary Timothy Geithner has asked that the company scale back future bonus payments where legally possible, an administration official said Saturday.

This official, who spoke on condition of anonymity because of the sensitivity of the issue, said that Geithner had called AIG Chairman Edward Liddy on Wednesday to demand that Liddy renegotiate AIG’s current bonus structure.

Geithner termed the current bonus structure unacceptable in view of the billions of dollars of taxpayer support the company is receiving, this official said.

Dow Plunges To 12-Year Low

February 23, 2009

Investors unable to extinguish their worries about a recession that has no end in sight lowered stocks again today.

The Dow  tumbled 251 points to its lowest close since Oct. 28, 1997.

From the Associated Press:

All the major indexes slid more than 3 percent. The Dow is just over 100 points from 7,000.

“People left and right are throwing in the towel,” said Keith Springer, president of Capital Financial Advisory Services.

Investors pounded most financial stocks even as government agencies led by the Treasury Department said they would launch a revamped bank rescue program this week. The plan includes the option of increasing government ownership in financial institutions without having to pour more taxpayer money into them.

Although the government has said it doesn’t want to nationalize banks, many investors are clearly still concerned that this could be a possibility as banks continue to suffer severe losses because of the recession. They’re also worried that banks’ losses will keep escalating as the recession sends more borrowers into default.

“The biggest thing I see here is the incredible pessimism,” Springer said. “The government is doing a lousy job of alleviating fears.”

The Treasury and other agencies issued a statement after The Wall Street Journal reported that Citigroup is in talks for the government to boost its stake in the bank to as much as 40 percent. Analysts said the market, which initially rose on the statement, wanted more details of the government’s plans.

“It’s only a very partial picture of what we may get,” said Quincy Krosby, chief investment strategist at The Hartford. “This proverbial lack of clarity is damaging market psychology.”

Meanwhile, technology stocks fell after The Journal reported that Yahoo Inc.’s new chief executive plans to reorganize the company. But the selling came across the market as pessimism about the recession and its toll on companies deepened.

“There’s no where to hide anymore,” said Jim Herrick, director of equity trading at Baird & Co.

Citibank Hardship Reaches the Consumer (Me)

November 25, 2008

How surprised was I last Friday to get a notice in the mail from my credit card company, Citibank, who was raising my APR to 15.99%. I have been a Citibank customer for ten years and just a few months ago, finally got my APR down to 9.99%.

I contacted Citibank to see about this change and was hoping to keep my APR at 9.99%.

Here is the response that I got:

The change proposed to your purchase APR was due to a reexamination of our policies was needed given the severe changes in the financial markets. Our costs in borrowing the money we use to lend have gone up significantly.

In addition we are seeing dramatically higher loan losses and delinquencies for many of our customers. We must manage to the dramatic changes we are seeing by changing some of our rates and fees in order to continue to provide you with products, benefits and services we have today.

More information on the proposed changes can be found online at http://www.federalreserve.gov.

Thank you for using our website.

Well thank you Citibank for explaining that YOUR financial problems are the reason that MY APR is going up. I’m so glad to be doing business with you.

For now, I will NO LONGER be using my credit card for any purchases, and as soon as I can transfer my balance to another company, you will lose a customer of ten years.

AIG Throws Another $86,000 Executive Party

October 17, 2008

AIG is back in the news yet again today for spending thousands of dollars on its executives, even as the New York-based insurer asked for an additional $37.8 billion loan from the Federal Reserve. This time instead of a spa treatment, a number of top executives attended an English hunting trip.

From the Associated Press:

The news comes as New York Attorney General Andrew Cuomo on Wednesday told the insurance giant to do away with golden parachutes for executives, golf outings and parties while taking government money to stay afloat.

Cuomo said he has the power under state business law to review and possibly rescind any inappropriate AIG spending as long as the Federal Reserve is propping up the huge insurer with almost $123 billion in loans announced since Sept. 16.

“This was an annual event for customers of the AIG property casualty insurance companies in the U.K. and Europe, and planned months before the Federal Reserve Bank of New York’s loan to AIG,” company spokesman Peter Tulupman said Wednesday morning.

In a prepared statement later in the day, the company said, “We will continue to take all measures necessary to ensure that these activities cease immediately. AIG’s priority is to continue focusing on actions necessary to repay the Federal Reserve loan and emerge as a vital, ongoing business.”

AIG officials declined to say which AIG executives attended the trip, which reports have said racked up an $86,000 tab. News of the hunting trip surfaced just days after AIG received an additional $37.8 billion loan from the Federal Reserve, on top of a previous $85 billion emergency loan granted last month.

The company said last week it would stop “all non-essential conferences, meetings and activities that do not clearly maximize value and service given the current conditions.”

Last month, and just days after the U.S. government stepped in to save AIG with a $85 billion taxpayer-funded loan, the company picked up a $440,000 tab for a week-long retreat at a posh California resort for top-performing insurance agents.

Lawmakers investigating AIG’s meltdown said they were enraged that executives of AIG’s main U.S. life insurance subsidiary spent a lavish amount on the retreat, complete with spa treatments, banquets and golf outings. Last week, White House Press Secretary Dana Perino called the event “despicable.”

Asian Markets Plunge Early Friday Morning

October 10, 2008

A sell-off on Wall Street and escalating fears of a global recession have sent Asian stocks plunging this morning, with Japan‘s benchmark index falling more than 10 percent.

From the Associated Press:

“Selling is unstoppable in New York and Tokyo,” said Yutaka Miura, senior strategist at Shinko Securities Co. Ltd. in Tokyo. “Investors were gripped by fear.”

Markets in Hong Kong, Australia, South Korea, Thailand and the Philippines were all down more than 7 percent. Shanghai’s index was down 3.8 percent.

Indonesian authorities suspended trading indefinitely on the Jakarta Stock Exchange after they had halted trading Wednesday when the index plunged more than 21 percent over three days earlier this week.

In Tokyo, the gut-wrenching drama left individual investors shellshocked.

Kenji Akasaka, 69, president of a local printing company, said he had never seen it this bad in the 40 years he has traded stocks. He said he invests mainly in blue-chips including Toyota Motor Corp. and Nintendo Co.

“I pray before I go to bed that the Dow will recover,” said Akasaka, 69, as he scanned a monitor displaying the latest market levels. “I get sleepless, thinking about losses.”

Japan’s benchmark Nikkei 225 stock average plummeted 10.3 percent to 8,217.50 in early afternoon trading and appeared headed for its second biggest one-day loss ever. The Tokyo bourse and the Osaka Securities Exchange briefly suspended some futures and options trading during the morning.

Struggling Economy? Not for Gentleman’s Clubs

October 10, 2008

While the rest of the country is seeing sharp declines in sales and all other points of business, one industry is seeing quite the opposite. The New York Times is reporting that business in upscale Manhattan gentlemen’s clubs has actually jumped in recent weeks. Must be those businessmen who need relief from their days on Wall Street.

From the New York Times:

The implosion of the financial markets seems to mark the twilight of the second gilded age. History may look back with scorn at $30,000 couches, $600-an-hour therapists, $25,000 hot chocolates and super Sweet 16 parties.

The Wall Street folks, you’d think, seem to be saying goodbye to all that.

Except, apparently, in one area: strip clubs (or “gentlemen’s clubs,” as they like to brand themselves).

“Since the market has been going down, our business has been going up — it’s unbelievable,” said Sam Zherka, the owner of the V.I.P. Club in Chelsea, who estimates that about 80 percent of his clients are Wall Street types. (You’d think the lawsuits would have dampened that, but it seems fine as long as they’re not entertaining clients on their work-related expense accounts.)

Mr. Zherka added, “A lot of guys are losing their shirts in the market, and they are coming in droves.”

Business is up around 20 percent, he estimated, even though he does not advertise atop taxicabs.

“We’re an upscale gentleman’s club,” he said disdainfully.

In a moment of shrewd business, perhaps, Mr. Zherka and the club decided to introduce a premium product: the $1,000 lap dance package.

The package will buy a 20-minute lap dance, a bottle of Dom Pérignon and a private Champagne room. Not to mention, as Mr. Zherka did, they also “get to keep the girl’s G-strings.”

AIG Executives Go On Spa Outing (During Bailout)

October 9, 2008

Just days after the company received a federal bailout, American International Group Inc. spent approximately $440,000 on a California retreat for its executives, complete with spa treatments, banquets and golf outings. Don’t even get me started on this!!!

From the Associated Press:

AIG sent its executives to the coastal St. Regis resort south of Los Angeles even as the company tapped into an $85 billion loan from the government it needed to stave off bankruptcy. The resort tab included $23,380 worth of spa treatments for AIG employees, according to invoices the resort turned over to the House Oversight and Government Reform Committee.

“Average Americans are suffering economically. They’re losing their jobs, their homes and their health insurance,” the committee’s chairman, Rep. Henry Waxman of California, said as he scolded the company during a lengthy opening statement at a hearing Tuesday. “Yet less than one week after the taxpayers rescued AIG, company executives could be found wining and dining at one of the most exclusive resorts in the nation.”

Former AIG CEO Robert Willumstad, who after three months in the position lost his job a day after the Federal Reserve put up the $85 billion on Sept. 16, said he was not familiar with the conference and would not have gone along with it.

“It seems very inappropriate,” Willumstad said in response to questioning from Rep. Elijah Cummings, a Maryland Democrat.

“Those executives should be fired,” Democratic presidential candidate Sen. Barack Obama said at a debate with Sen. John McCain on Tuesday, referring to the retreat participants. Obama also said AIG should give the Treasury $440,000 to cover the costs of the retreat.

Stocks Drop Sharply as Dow Jones Drops Below 10,000

October 6, 2008

The selling on Wall Street began at the opening bell on Monday and only intensified as the morning went on. Shares moves sharply lower as the banking crisis tightened its grip on the global economy.

The Dow Jones industrial average fell below 10,000 for the first time since 2004 after losing more than 500 points in the first hour of trading. The index has lost more than 1,100 points in the past two weeks and no end seems to be in sight. It appears that whoever wins the election one month from now, Barack Obama or John McCain, will have to step up and find a way to end this crisis.

From the Associated Press:

The markets have come to the sobering realization that the Bush administration’s $700 billion rescue plan won’t work quickly to unfreeze the credit markets, and that many banks are still having difficulty gaining access to cash. That’s caused investors to exit stocks and move money into the relative safety of government debt.

Over the weekend, governments across Europe rushed to prop up failing banks. The German government and financial industry agreed on a $68 billion bailout for commercial-property lender Hypo Real Estate Holding AG, while France’s BNP Paribas agreed to acquire a 75 percent stake in Fortis’s Belgium bank after a government rescue failed.


Follow

Get every new post delivered to your Inbox.

Join 73 other followers