By Jonathan Burgos and Jim McDonald
July 11 (Bloomberg) -- CIT Group Inc. hired the law firm of Skadden, Arps, Slate, Meagher & Flom LLP as an adviser as it prepares for a possible bankruptcy filing after failing to win access to government guarantees for its borrowing, the Wall Street Journal reported, citing people familiar with the matter.
The hiring of the prominent bankruptcy law firm doesn’t mean a company will actually make a bankruptcy filing, the report said. “The government has not said absolutely no to anything,” the newspaper cited a person familiar with the matter as saying.
The Federal Deposit Insurance Corp., run by Chairman Sheila Bair, is in discussions with CIT about how the lender can strengthen its financial position to get approval, including by raising capital, a person familiar with the matter told Bloomberg News yesterday. CIT’s measures to improve its credit quality, such as transferring assets to its bank, have been insufficient, the person said.
“CIT continues to be in active dialogue with the government,” the company said yesterday in a statement distributed by Business Wire. “There can be no assurance that CIT’s application will be approved by the FDIC, nor as to the timing or terms of any such determination.”
The century-old New York-based lender to 950,000 businesses became a bank in December to qualify for a government bailout and received $2.33 billion in funds from the U.S. Treasury. CIT, which has reported more than $3 billion of losses in the last eight quarters, faces $10 billion of maturing debt through 2010 and hasn’t had access to the corporate bond market in more than a year, according to data compiled by Bloomberg.
CIT’s $500 million of floating-rate notes due in November 2010 fell 3.5 cents on the dollar to 70 cents, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The stock fell 33 cents, or 17.7 percent, to $1.53 in New York Stock Exchange composite trading, after earlier falling as low as $1.13, the lowest in seven years.
To contact the reporter for this story: Jonathan Burgos in Singapore atjburgos4@bloomberg.net.
Last Updated: July 11, 2009 01:29 EDTUS's Geithner seeks clampdown on derivatives dealers
* Says aims to prevent mark manipulation, other abuses
* Major dealers to be subject to supervision, regulation
* SEC, CFTC would impose recordkeeping, reporting rules
WASHINGTON, July 10 (Reuters) - U.S. Treasury Secretary Timothy Geithner on Friday proposed clamping down on dealers in freewheeling markets for little-understood derivatives that helped create a crisis in U.S. and world financial markets.
In testimony at a joint hearing by two congressional panels that will play a role in writing legislation on derivatives, Geithner set out proposals that would make big dealers like JPMorgan Chase
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CFTC to move quickly on position limits
WASHINGTON, July 10 (Reuters) - The Commodity Futures Trading Commission will move aggressively to rein in excessive speculation in the energy and metals markets by focusing largely on expanding their existing authority, and could have new regulations in place as early as late October.
"We're looking at a pretty fast time line," Bart Chilton, a CFTC Commissioner, said in an interview. "We're going to use our authority to the fullest extent possible. That doesn't mean we're going to be draconian or go too far."
In response to recent swings in oil prices, the CFTC announced this week it was considering clamping down on big market players by implementing position limits on all commodity futures contracts, focusing especially on energy and metals such as gold and silver.
Chilton said while he couldn't ultimately predict what the CFTC will do, he would like to put out proposed rules in September, open them up to public comment and implement them by late October or November.
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What stood out was the mention of GOLDMAN SACHS and JP MORGAN CHASE in the first article and the mention of "focusing especially on energy and metals such as gold and silver" in the second.
This is quite the development because of the concentrated positions of JP Morgan Chase in both the gold and silver markets. How can their concentrated short position be allowed to stand for the public to see in the banking reports if Geithner is actually telling the truth and does what he says he is going to do? Goldman Sachs is now a bank, so that goes for them too.
Could it be the Obama Administration is really going to do something meaningful when it comes to market manipulation? (Before I get a zillion emails decrying this notion, I am only saying there is a shot here.) That shot entails the Obama camp knowing the prices of gold and silver are WAY underpriced and undervalued due to the price suppression scheme. After all, the architects of the scheme include Geithner and key economic advisor, Lawrence Summers. But, the key is, if the GATA camp is correct, THEY know The Gold Cartel is going to hit the wall in the months and years ahead when it comes to available central bank gold and silver to meet annual supply/demand deficits. It just won’t be there, especially as other governments want to hold on to the gold they have left and other governments are accumulating gold.
At the same time, there could be a split in the Obama Administration … those who wish to continue the scheme and those who want it ended before it blows up. This might be the way the one camp opposed to the scheme gets their way.
On that score, The Gold Cartel has been effective with their mission. The specs are exiting.
The gold open interest fell 7134 to 366,909 and the silver open interest dropped 2082 contracts to 98,809. The gold open interest is only some 10,000 contracts off its recent low and a stunning 228,000 contracts off its highs when gold first reached $1,000 per ounce.
To rap this up, when I met with CFTC Commissioner Bart Chilton, and in subsequent conversations, he told me that results were what was important … not just concern and inaction. Bart C is well aware the problem in the gold and silver markets is with the concentrated SHORTS, not the long positions. The silver investigation goes on and on, with nothing of substance coming out of it. With the US Government as a price suppression scheme culprit, this is not an easy one to resolve by the players doing the resolving. GATA start some place.
IF what we are hearing is true, it just might be The Gold Cartel is playing its Swan Song for us, right now. Time will tell, but at least there is a glimpse of promise at the moment.
*The large specs reduced longs by 3,619 contracts and also reduced shorts by 3,577 contracts.
*The commercials increased longs by 4,761 contracts and reduced shorts by 1,750 contracts.
*The small specs decreased longs by 6,350 contracts and increased shorts by 119 contracts.
Interesting, the commercials began to cover before the big drop of the last few days and the little guys got out of their long positions. No doubt, the commercials have covered a great deal more on the latest drop ... which makes a recovery and the BIG MOVE we keep waiting for all the more likely.
end.
Here are some economic numbers from yesterday:
The yield on the 10 yr T note fell to 3.29%, a far cry from 4%.
The dollar rose .36 to 80.25.
The euro fell .0062 to 1.3948. The pound fell to 1.6205, while the yen rose .77 to 92.30, which continues to trade opposite to the euro.
Crude oil lost ground again, giving up another 52 cents per barrel to $59.89.
The CRB fell 1.08 to 233.45, which means it has corrected about 50% from its recovery high.
end.
On the trade front, the trade deficit narrowed to 26 billion dollars. Imports dropped off badly as nobody is importing anything. The economy is quite stagnant.
Gold exports are still extremely high. It looks like the usa sold about 3 billion dollars worth of gold. This physical gold is going to refiners and then into the markets. The game is over when this gold is no longer available.
U.S. May trade gap narrows to lowest since 1999
WASHINGTON, July 10 (Reuters) - The U.S. trade gap narrowed unexpectedly to $26 billion in May to the lowest reading since November 1999 as exports rose despite weak global demand and imports shrank, government data on Friday showed.
The Commerce Department said exports increased 1.6 percent to $123.3 billion, while imports declined by 0.6 percent to $149.3 billion.
Analysts polled by Reuters had expected the trade deficit to widen to $30.2 billion in May. The trade gap in April was revised to $28.8 billion from a previously reported $29.2 billion deficit.
May's import level was the lowest since July 2004 and the 10th straight monthly decline, providing further evidence that the recession-mired United States has diminished as a source of demand for the rest of the world.
The auto sector has been hard hit in the economic slowdown and May imports of automotive vehicles and parts slipped to $10.2 billion, the lowest level since March 1996, while auto exports were the lowest since July 1998.
The monthly deficit on goods trade with China grew to $17.5 billion from $16.8 billion in April and was the largest with any single country.
But the U.S. trade deficit with other big trading partners declined, falling to $2.8 billion with the European Union in May, for the lowest reading since March 1999, and retreating to $1.9 billion with Japan, which was the lowest since February 1984.
Imported oil cost $51.21 a barrel in May, up from $46.60 in April. The value of crude oil imports in May declined only slightly to $13.4 billion, despite a sharper decline in the quantity of oil actually imported, to 262 million barrels from 293 million in April, the Commerce Department said.
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US consumer sentiment fell badly again in June. This is not good for the dollars' value:
US consumers' mood sours in early July - survey
NEW YORK, July 10 (Reuters) - U.S. consumer sentiment soured in early July, slipping to its weakest since March, when confidence in the financial sector and economy were at a low ebb, the Reuters/University of Michigan Surveys of Consumers showed on Friday.
Consumers' escalating concerns about an extended economic downturn, job security and erosion of wealth were the main factors depressing sentiment, the survey said.
Its preliminary index of confidence for July fell to a reading of 64.6 from the final reading for June of 70.8.
July's preliminary reading was well below economists' median forecast for 70.5.
The index of consumer expectations fell to 60.9 from June's final reading of 69.2.
The index of current economic conditions slipped to 70.4
from June's final reading of 73.2.
"Consumers concluded that the economic downturn would last longer and their personal finances would not recover as quickly as they had previously expected," the Reuters/University of Michigan Surveys of Consumers said in a statement.
Recent income gains were reported by the fewest consumers in the more than fifty-year history of the survey, the statement said.
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This next story is another bombshell that is going to hit the markets and it concerns public pensions and they are plummeting in value. Here is a story on New Jersey's pension plan.
California's pension plan is also in disarray as is Colorado's. Here is the report:
I said more than 3 months ago that public pension plans would be the next massive area of bailout. Here's commentary on how much trouble New Jersey's plan is in:http://pensionpulse.blogspot.com/2009/07/jerseys-jitters-omen-for-public-plans.htmlIt's interesting that we never hear about California's public pension plan. If New Jersey's plan is in big trouble, California's must be in a terminal coma. I know Colorado's public fund was down 60% thru year end and was hopelessly underfunded at that point. AND they admitted that they had not yet "marked to market" all of the private equity and real estate investments.
The interior mechanisms of our whole system are melting down behind the veneer of Obama's highly polished, mass population hypnotising teleprompter speeches. It's almost become robotic in the spirit of Aldous Huxley's "Brave New World."
Barring a massive acceleration of the U.S. dollar printing presses and Bernanke sending out large air force transport planes instead of helicopters to drop the money in football field size bales, all signs are pointing to some kind of catastrophic economic (and maybe political collapse) before the end of the year.
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To receive the article on New Jersey press on the blue.
General Motors came out of bankruptcy protection after being in the can for only 40 days.
The problem is the continuing spiral downward in the markets. We may see General Motors go back into bankruptcy protection very shortly.
Obama is trying to get the Fed to be the overseer of derivatives and be a watchdog over the derivative mess.
It looks like there is mounting opposition to this:
Lawmakers Call for Probe of Fed Role in Bank of America Merger
July 10 (Bloomberg) -- House lawmakers are calling for an investigation of the Federal Reserve’s conduct in Bank of America Corp.’s takeover of Merrill Lynch & Co. before they consider granting more powers to the central bank.
In a letter to President Barack Obama, 14 Republicans and three Democrats said there is a "considerable amount" of evidence that calls into question Federal Reserve Chairman Ben S. Bernanke’s testimony last month that the Fed didn’t put undue pressure on executives to carry out the takeover last year…
http://www.bloomberg.com/apps/news?pid
=20601087&sid=aaHk9YEopsAg
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Here we go again. AIG is totally bust and they want to give retention bonuses to employees?
AIG Wants To Pay Financial Products Group $235 Million In Bonuses
Uh oh. Here we go again.
From The Associated Press:After its bonus payments ignited a firestorm of criticism earlier this year, American International Group is asking the federal government to weigh in on the insurer's plan to resume paying millions in promised retention incentives next week, according to media reportshttp://www.businessinsider.com/aig-wants-to-pay-financi
al-products-group-235-million-in-bonuses-2009-7
end.
Another bank failed last night, the Bank of Wyoming. It is small bank with assets of only 70 million.
There are only 13 billion dollar left in the FDIC and a bankruptcy of CIT will adsorb all of those dollars.
California still does not have a budget and the banks have stated that they will not honour the IOU's. The public are furious in that the Federal Government bailed out the banks and these same banks cannot help out a struggling state.
On that note, I leave you with Bill Holter's commentary on IOU's:
Bill H:
IOU World
To all; can you imagine living in IOU world? You go to work and at the end of the week your company gives you an IOU. You go shopping for food and give the smiling cashier an IOU and then stop at the gas station to fill 'er up and give some more IOU's. April 15th comes around and it's time to pay your taxes but you are a "little cash strapped" so you send Uncle Sam an IOU. If you are fortunate and have a refund coming back, the IRS (since they are REALLY cash strapped) sends you an IOU. Does any of this sound vaguely familiar?
The reality is this is the world we live in today. THIS is what the entire world has been subjected to since Aug. 1971. Dollars have been circulating throughout the world and have been used to "settle" international trade but in reality, none of this trade has ever been settled because these Dollars are nothing more than IOU's. Sure, the game of "hot potato" has gone on a long, long, time but if you hold onto your Dollars until the end of the game you won't even have a potato to show for your hard work and savings.
On the grandest of scales, this is what foreign nations are all coming to grips with now. The world led by Russia, China, India and Brazil are all cutting deals amongst themselves to conduct trade in their own currencies and thus reducing greatly the artificial demand for Dollars that has existed for years. Back in the early 70's John Connally the Sec. of Treasury at the time knew the Dollar had huge problems since it was being over printed and was no longer backed by Gold. He said "it's our Dollar but it's your problem" to the rest of the world. Then around 1973 Henry Kissinger cut a deal with the Saudis and OPEC that required all oil sales to be conducted in Dollars. This created $ billions in artificial demand that is now waning on a daily basis.
The Dollar is losing demand and as such will more and more have to stand on its own pathetic merits. Other than the "synthetic short" demand that requires debt to be paid back in Dollars, there are no more rabbits left in Uncle Sam's hat. One could say we are fortunate to be alive and witnessing such a major event in financial history but the only way to be "fortunate" is to not play on the railroad tracks and step as far away from the this failing system as possible. The movement away from Dollar settlement is gaining steam quite rapidly and fits neatly into an end of summer catastrophe. Keep the faith and do not let loose of even one ounce, we have come too far for too long to give anything away now. IOU world is very close to termination. Regards, Bill H.
end.
speak to you on Monday
Harvey.
