Clem’s Chronicles: Stocks Swoon/GM bankruptcy ahead?/Fixing Health Care

Clem Lane here. Another crummy day on Wall Street. Tomorrow, the dreaded February Jobs report is issued at 8:30am ET and is expected to be U-G-L-Y.

STOCK MARKET-You know that recurring gag in the PEANUTS comic strip, the one where Lucy offers to hold the football for Charlie Brown so that he can kick it but pulls it away at the last second, causing Brown to fall flat on his keister? That’s how I feel as an investor-every time I think there’s a bottom to this market and now is the time to jump back in, it goes down even further. So let’s say bye-bye to yesterday’s nearly 150 point gain and hello new low. The Dow Jones closed at its lowest level in 12 years, falling 281.40 points (a 4% drop) to end the day at 6594.44. Why does this market keep going down when it seems to be so vastly over-sold already? Betsy Stark told us on WORLD NEWS that "Wall Street is, as one analyst I spoke to today, ‘underwhelmed’ by what’s going on in Washington." But isn’t the Obama Administration throwing everything but the kitchen sink at the problem? Stark tells us it’s not enough for investors-"they see trillions being spent on rescuing the banks and still worry the banks have so many toxic assets on their books that they haven’t really been stabilized." And then there’s the dreaded Jobs report-Stark tells us "all week long the specter of tomorrow’s job report has been hanging over the market. We’ll get the number tomorrow morning (8:30am ET) but it’s expected to be in the neighborhood of 600 to 700 thousand jobs lost in a single month."

BANKS/SOME OF US ARE DOING JUST FINE THANKS-We saw the price of Citicorp fall to below $1 a share today. $1!!! Betsy Stark also noted that "JP Morgan, Bank of America and Wells Fargo all took a beating (in the stock market) today." Certainly it can’t be all doom and gloom in the banking sector. Before you shout "Pollyanna" let me introduce you to my friend Chris Bury, who filed for WORLD NEWS and told us that "far from the carnage on wall street, thousands of smaller banks are still going strong." Case in point-The Union Bank & Trust of Evansville, Indiana. Evansville is no different from many other communities who are feeling the effects of the economic downturn. But Bury tells us "small banks (like Union), deeply rooted in their communities are lowering interest rates and extending loan terms, foreclosing on fewer properties than bigger banks." Union’s president Chris Eager doesn’t much care for being tarred with the same brush as his colleagues on Wall Street, telling Bury "They are giving us all a bad name. They are making too much money. They are taking too much risk." That risk is something "these old-fashioned bankers avoided to earn record profits last year. Now they don’t want or need that federal bailout money. Here on Main Street, they believe a bank that’s ‘too big to fail’ is simply too big."

GENERAL MOTORS-Certainly not helping matters today was yet another grim assessment of General Motors continued viability. This didn’t come from some cable pundit or politician with an agenda to go with their opinion. This came from the company’s own auditors Deloitte & Touche. Eric Horng, who filed for WORLD NEWS, picks up the story: "auditors looked at GM’s dismal sales…its crushing debt…and sky-high costs and said current factors ‘raise substantial concern about (GM’s) ability to continue as a going concern." Having already gone through more than $13 billion in government loans, the automaker is seeking another $17 billion to stay afloat but Horng tells us "today’s report says even that may not be enough…unless the unions give up more and consumers buy more." While the company continues to talk "restructuring", there’s no avoiding the alternate  possibility that the company might have to declare bankruptcy.

GM/BANKRUPTCY-So what’s the deal with a possible GM bankruptcy? All I keep hearing is how bad it would be for the company, the economy. Haven’t plenty of other companies come out the other side of a filing? John Berman, in his WORLD NEWS spot, tried to explain the pros and cons for the company-
First the good news (for the company)-Berman says "it would allow GM to cut new deals with its’ unions and suppliers. A bankruptcy court would almost certainly allow GM to reduce the $98 billion in pension costs, and $43 billion in health care it owes to its workers and retirees." Berman adds that "in bankruptcy GM would get a new line of credit" likely funded by the government that would have to be repaid much faster than the rules governing their monetary handouts so far.
The bad news? Berman: "GM execs don’t like it, maybe because they would almost certainly lose their jobs in a court-ordered restructuring. There would be job cuts for GM’s 240 thousand employees and benefit cuts for those who remain."
Go ahead and weigh the plusses and minuses if you want but Berman says that bankruptcy "might be the only way to keep (GM) an existing company."

HOME FORECLOSURES/HOUSE ACTION-More bad news for homeowners-Charles Herman reports "Over 5 million homeowners or 11% are either in foreclosure or late making their payments according to the Mortgage Bankers Association at the end of last year.  This is the highest ever recorded in the mortgage group’s survey which started in 1972.
As of December 31, 2008:
7.88% of homeowners were at least 30 days late, a record.  This is an increase of 2% from just a year ago. 
3.30% of homeowners were in foreclosure, an increase of 1.3% from the end of September.  Also, a record
Homeowners with subprime adjustable rate mortgages continue to be a problem:  46% of them are at least 30-days late or in foreclosure.  In Florida, over 60% of subprime ARMs were at least one payment late."
In other mortgage news today,  the House has passed legislation to give debt-strapped homeowners a chance to win lower mortgage payments through bankruptcy courts. The vote was 234-191 to approve the measure  The bill gives bankruptcy judges new power to reduce the interest rate and principle on a home mortgage. It’s part of President Obama’s housing rescue plan. The bill faces a tough test next in getting through the Senate. Republicans and even some Democratic Senators are opposed to the idea.

HEALTH CARE SUMMIT-Health care. What to do for the millions who can’t get/can’t afford it? And even if you can get it, can you keep up with the price increases? Jake Tapper, filing for WORLD NEWS, tells us that "with health care costs rising at almost twice the rate of inflation, President Obama said the problem cannot be ignored any longer." Hence today’s health care summit-sorry no instant fixes were announced. Tapper tells us that "today was not about coming up with a concrete health care proposal, it was about getting every player in the room and signaling that together they all had to come up with a  solution, and everyone had to give something up." Dr. Tim Johnson was one of the summit’s participants today. He told Charles Gibson on WORLD NEWS that "absolutely every special interest group and every politician who has a stake in this process was there." Johnson added "I was blown away by President Obama’s grasp of the subject, how he connected the dots, answered the questions without any script." Gibson asked George Stephanopoulos about reports that the Obama Administration hopes to pay for health care reform by limiting itemized tax deductions. Stephanopoulos suggests you shouldn’t hold your breath. Steph: "It may not be dead on arrival but it is pretty close. In my reporting across Capitol Hill today, I couldn’t find any strong support for the plan." As for timing on when a health care plan could be crafted, Tapper says that "Congress should begin drafting legislation this summer."

NO OMNIBUS BILL VOTE FOR THE US SENATE TONIGHT-From Zach Wolf: " We were all set for an 8:15pm vote tonight on the pork-laden Omnibus appropriations bill for the fiscal year that is already half over. But there has been a late breakdown of some kind and there won’t be a vote tonight. Republicans want votes on more than ’10 or 12 more amendments,’ according to Reid. There have been votes this week on 12 already. All of them have been defeated. Any amendment would send this bill back to the House for another vote there – a delay Democrats want to avoid. Reid admitted at 8:41 that if there had been a cloture vote tonight, proponents of the bill would only have been able to muster 59 votes. The government runs out of money on Friday, so we expect the House and Senate to pass, probably by voice vote, a continuing resolution to fund the government through Tuesday. Reid suggested we’ll see a vote on Monday in the Senate on the amendments and perhaps on the omnibus bill. But he’s obviously having trouble counting votes. So who knows what’ll happen."

CRAIGSLIST/THE OLDEST PROFESSION 2.0-Cook County, Illinois’ sheriff filed a lawsuit today against Craigslist, saying the popular online classifieds site not only allows the solicitation of prostitution but has actively created "the largest source of prostitution in America." Thomas Dart, the Cook County sheriff told Barbara Pinto in her WORLD NEWS piece that “the majority of the prostitutes jailed by his department do business on Craigs List. Craigslist says it is fighting back. Pinto reports that “Craigslist emailed us measures they now take to prevent illegal activity-including the removal of inappropriate ads.” A fine sentiment but a wee bit hollow-Pinto says that “with only 28 employees and more than 30 million new classified ads every month, it’s nearly impossible to monitor.”

OTHER STUFF-
–TOP TREASURY PICK WITHDRAWS-George Stephanopoulos reports " Annette Nazareth, Treasury Secretary Tim Geithner’s expected pick to be his top deputy at the Treasury Department has withdrawn from consideration, administration sources confirm. The withdrawal of Nazareth, a former Securities and Exchange Commissioner, may further complicate Geithner’s effort to build his staff amidst the greatest economic crisis the nation has faced in decades. A Democratic source tells me that Nazareth faced resistance on Capitol Hill for being ‘too lax a regulator’ at the SEC.
–AFGHANISTAN CONFERENCE-Secretary of State Hillary Clinton said today in Brussels that an international conference on Afghanistan would be held later this month. What’s most interesting says Kirit Radia "is the expectation that Iran will be invited to take part. It shows the US taking the first step in a diplomatic dance between Washington and Tehran."