Citigroup Inc. executives are looking at ways to cut costs amid a worsening business environment, a process that could culminate in layoffs at the New York banking giant, the company said Monday.
"We are engaged in a planning process in anticipation of our new CEO, and our business heads are planning ways in which we can be more efficient and cost effective to position our businesses in line with economic realities," spokeswoman Christina Pretto said in a statement.
...
CNBC reported earlier Monday that Citigroup is planning as many as 45,000 layoffs in coming months, with cuts expected across the company, not just in its fixed-income business. Ms. Pretto said in the statement that "any reports on specific numbers (of layoffs) are not factual."
Layoffs in real estate. Check.
Layoffs in finance. Check
Layoffs in government sector. Coming to a jurisdiction near you in 2008.
Also remember that nothing is real in the financial world until it happens in Manhattan, but once it happens in Manhattan its over analyzed and over emphasized. So expect about 50 new analyst reports about how job losses in the financial sector will lead us into recession. (about 50 more than were issued about job losses in the construction industry leading us to recession.)
If I got stopped out of the stock because of some wild CNBC speculation
Dems the breaks; don't look for any sympathy among all the shorts who got blown out of their HOV and Bear Stearns positions by bogus Buffett rumors last summer.
Sorry for the long post, not sure if the link works for nonsubscribers..
From the WSJ:
Schumers Letter on FHLB Loans
November 26, 2007 2:10 p.m.
Sen. Charles Schumer, a New York Democrat, urged regulators to examine potential risks posed by a sharp increase in lending by the Federal Home Loan Bank of Atlanta to Countrywide Financial Corp., the nations biggest mortgage lender. The following is his letter to regulators.
November 26, 2007
Ronald A. Rosenfeld
Chairman
Federal Housing Finance Board
1625 Eye Street NW
Washington, DC 20006
Dear Chairman Rosenfeld:
I write to express my serious concern over the lending practices of the Federal Home Loan Bank of Atlanta, specifically in regard to the significant volume of advances made to Countrywide Bank. I am concerned that the loans being pledged by Countrywide to secure these advances may pose a risk to the safety and soundness of the FHLB system as a whole. I urge you to conduct a careful review of FHLB Atlantas collateral evaluation policies, as well as Countrywides pledged collateral, in an effort to determine the risk that Countrywides collateral poses to the FHLB system. During the current market crisis, it is important that the FHLB system perform its critical mission safely without imposing additional risks on an already strained market.
According to the most recent SEC filings, FHLB Atlanta had made $51.1 billion in advances to Countrywide Bank, representing 37 percent of the Banks total outstanding advances as of September 30, 2007 and far exceeding advances made to the next largest borrower. Countrywide had pledged $62.4 billion of mortgages as collateral for the FHLB advances, representing 78 percent of its total mortgage loans held for investment at the bank.
I find these numbers alarming as reports continue to emerge about how Countrywides reckless and predatory lending practices were a leading contributor to todays foreclosure crisis. Moreover, it is my understanding that Countrywides loans held for investment at the bank have been far from immune from the credit deterioration that has resulted from unsound lending.
Countrywide reportedly held $27 billion of pay option ARMs as of September 30, 2007, accounting for over one-third of the loans held for investment by the bank. Countrywides option ARMs were (and may still be) often underwritten with less than full documentation according to UBS Warburg data prepared for the Wall Street Journal, 91 percent of Countrywides option ARMs underwritten in 2006 were low doc. It has been reported that delinquencies on Countrywides pay option ARMS are skyrocketing, jumping nearly 75 percent in the last quarter.
Given this rapid deterioration in the credit quality of Countrywides option ARMs, I urge you to conduct a review of the loans that are being held as collateral for FHLB advances in an effort to determine if FHLB Atlanta has adequate collateral to secure these advances. I would also like
"Also remember that nothing is real in the financial world until it happens in Manhattan"
So if Manhattan real estate valuations were to drop ten percent, financial armageddon would then be declared?
(Never mind the poor devils who've been crawling through the wreckage out in the Central Valley, High Desert, Arizon Florida, and beyond for the past year....)
I would also like an explanation of how any second lien mortgages during a time of property price declines could be viewed as adequate collateral for large FHLB advances.
Furthermore, I believe that you should consider preventing any further or continuing overnight advances based on collateral that does not meet the joint financial regulators guidance on nontraditional and subprime mortgage products (e.g., Interagency Guidance on Nontraditional Mortgage Product Risks and joint Statement on Subprime Mortgage Lending). This quarter, Countrywide reported that 89 percent of their 2006 originations of pay option ARMs did not conform to the joint regulators guidance, which increases the likelihood that Countrywide is pledging loans deemed predatory by the regulators as collateral for FHLB advances. Importantly, Fannie Mae and Freddie Macs safety and soundness regulator has specifically prohibited any new direct or indirect investment in loans that do not meet this guidance. As the mortgage crisis threatens to get worse from here, it is critical that the FHFB do the same.
For the last year or two, folks in Manhattan have had the same "things are different" here attitude with regard to their housing that folks in places like San Diego ("the weather is unbeatable"), Las Vegas/Orlando ("we're growing so fast"), and Boston ("we're supply constrained") used to have regarding the invulnerability of their RE market. Fact is, Wall Street is a fickle beast, and has been the driver of much of Manhattan's boom.
"According to the FDIC's Web site, less than two-thirds (63.13%) of America's $8 trillion in deposits are insured. When NetBank, an online bank based in Alpharetta, Ga., failed in September, $109 million in 1,500 deposit accounts exceeded the FDIC's $100,000 insurance limit. According to ING Direct, the Wilmington, Del.-based online bank that took over NetBank's accounts, one elderly customer had more than $1 million in CDs."
Bob Dobbs said:
"So if Manhattan real estate valuations were to drop ten percent, financial Armageddon would then be declared?"
Yep. Let's just say that when Citibank's Stephen Kim's Manhattan apartment is worth less than it was when he bought it two years ago, he may suddenly get more down on the national housing market. And when his assistant gets laid off and needs to move back in with her parents, that's a recession.
OK, 45,000 at an average salary of 80k saves 3.6 billion. Toss in a few campus closures and we are at 4-4,5 billion. Will take them a year to get it done and see the effects to the financials. I guess they gotta do something but comparing the quarterly losses to their proposed savings.........
massive layoffs or not, manhattan RE is doomed. every county around it has 30% or more of subprime. don't know the proportion of alt-a, but guess significant as even for a studio or tiny 1 BR you used to need a jumbo loan during the last 2 years.
What I don't understand is the Street's reaction to the layoff rumors -- C down another 5% today. I thought investors liked to see the blood flow from the severed heads.
Maybe they think they're being played again, like last spring? Or is it just that all news is now bad news for the "rudderless behemoth" (to quote the FT)?
Dems the breaks; don't look for any sympathy among all the shorts who got blown out of their HOV and Bear Stearns positions by bogus Buffett rumors last summer.
What comes around goes around ...
central_scrutinizer | 11.26.07 - 2:31 pm | #
I have a lot of respect for Buffett, so when I heard that rumor I started buying puts on HOV because I never believed them. Now, if only I had hung on to those puts a little longer than I did...
i had puts of HOV before that added a little more with the upward movement on buffet. it's great to take at least some profits though from time to time.
Not the Atlanta Fed, the Atlanta FHLB. Lending to mortgage lenders is the job of the home loan bank system. Doing so to a single troubled lender to the extent that 1/4 of the assets held by the Atlanta FHLB is CountryWide markers is pretty irresponsible.
By the way, I hear that some insiders are now talking about 55k layoffs. Could be that those insiders are scared. Could be that the number is still in flux because this is almost certain to eat into core operations. How much the until-recently biggest bank in the Western World wants to cut into core operations may be a hotly debated issue.
Citi shares just dipped below $30 for the first tims in 5 years (and a month).
Fed extends lifeline to struggling banks
Central bank says it will conduct special short-term loans to insure banks have enough cash available.
November 26 2007: 12:53 PM EST
"WASHINGTON (AP) -- To help alleviate any end-of-year cash crunch, the Federal Reserve announced Monday that it will conduct a series of special operations starting this week.
The Federal Reserve Bank of New York, in a brief statement, said it will make the first such operation on Wednesday, for about $8 billion. The operation essentially makes available short-term, six-week loans, maturing on Jan. 10, to financial institutions, and thus boosts cash available to them.
The Fed didn't say when its next operation would be conducted. "The timing and amounts of subsequent term operations spanning the year-end will be influenced by market and reserve developments," the Fed said in its statement.
..."
"What I don't understand is the Street's reaction to the layoff rumors -- C down another 5% today. I thought investors liked to see the blood flow from the severed heads."
Not when it's their own.
I'm sure they'll do whatever they can to keep this from affeting Manhattan, though even if prices there went down 10 or 20 percent, it'd still be insanely expensive, though all those new condos would get a bit harder to sell.
What I don't understand is the Street's reaction to the layoff rumors -- C down another 5% today. I thought investors liked to see the blood flow from the severed heads.
yeah, but not when the company could be going under.
K - I think a layoff of that magnitude will indeed cut into core operations. And you can bet some will be underwriters and processors...and others of similar ilk in the other areas of the company. True - something needs to be done, but in restructures like this, all to often, the end result is the staffers they should have kept/reassigned will be gone via the pick slip or disgust. It takes a long time to recover from that.
Running-
There will be layoffs in the non-federal government sector in 2008. Governments are being hit with the double whammy of lower sales and property taxes, plus some accounting rules I'm only vaguely familiar with which require recognition of unfunded pension liabilities.
So it will be time to hike taxes or layoff someone. And since raising taxes doesn't get you re-elected, I'll chose option 2 in 2008. (tax hikes will come later after all the politically palatable cuts have been made).
Running for the Hills/Anon 3:31 - School Districts show no reluctance to laying off teachers if they have to. I remember many teacher friends of my Mom's having to deal with that. Tenure ain't worth diddly. The only thing tenure is good for is preferential status when they're hiring again and selecting who is likely to get laid off first.
If you said that there would be a "blue ribbon panel" looking into government layoffs paid for on the public dime, I'd buy it. Even with state constitutions, they'll find ways to run unbalanced budgets.
The federal government slowdown in employment will come through retirements and decreased hiring of contractors. It is already starting to show due to the continuing esolution.
Oh, and if "No Child Left a Dime" wasn't screwed before, it definately will be one of the first things strapped school boards will scrap heap when they start to get really squeezed. Standards are a luxury when you're just trying to keep it all from falling apart.
I suspect we'll see a lot of pull back in gov't programs in general, not just schools. But I suspect that schools will be the canary in the coal mine as they tend to be locally funded and directly depend on property tax receipts. Politically, they are also (relatively) easier to cut, at least initially.
Teachers have always been least respected. Why do you think teaching positions were traditionally held by spinsters in the 19th century? Unmarried women are among the least valued cohort of society anyway, so they naturally would get the least respected jobs.
Running-
I agree that the first reaction of gov't is to deficit spend. But not only are there the constitutional limits, but I also see the credit crunch coming into play. Think AAA ratings will just be handed out like candy to a municipality with a falling tax base? Think AMBAC might charge a few extra bucks for bond insurance these days? Even deficit spending won't be easy. Some cuts will happen this year- the easy things like obscure regulatory agencies or some random department of a state univeristy.
Markets looking ugly. When they make the TV movie, this may be the day where Hank Paulson runs out onto the floor of the New York Stock exchange waving his checkbook and is overwhelmed by sell orders.
"When NetBank, an online bank based in Alpharetta, Ga., failed in September, $109 million in 1,500 deposit accounts exceeded the FDIC's $100,000 insurance limit."
I'm going to assume that all these accounts were under a single name. FDIC insurances back accounts up to $200K if the account is in two names. Not a bad deal for a husband/wife account.
I was also pleased to hear that ING Direct was the suitor in the aftermath that debacle. They're one of my banks.
A thought on the Citi news and Citi stock. As noted earlier, Citi seems intent on becoming a smaller bank. It claims to be "right-sizing" rather than cutting into staff to make numbers in the next couple of quarters, but if you don't believe that to be true, you think Citi is messing with its own future earnings stream in an effort to make numbers in the near term. Sell 'em.
There may be a broader issue in Citi planning to do less business. Citi, in planning to lay off great gobs of people, seems to be signaling that the volume of business in the sector is going to go down. Less volume means less money for everybody. Where do you go for leadership on the SIV super-fund? Where do you go for irresponsible lending in Latin America?
Andrew,
Term repos over the end of the year are pretty standard for the Fed. What is odd about today's announcement is the announcement itself, for one thing. The Fed usually doesn't see the need to make a big fuss, but it did today. Timing is another oddity. This is early for over-the-turn term repos. The "lifeline" notion in the headline is more about what is going on in the market, I think, than the Fed's action. The Fed does this sort of thing every year.
Note, however, that this comes right along with rising Libor rates, the ECB announcing emergency facilities, Citi, HSBC, housing sector downgrades, just after a big credit hiccup in Asia last week. The Fed's decision to wave this action around may reflect concern that credit markets need certainty where they can get it.
somewhat OT--Has anyone already mentioned a post on Market Watch? Stephan Kim, the housing super bull from Citi, downgraded the home builders today, admitting that the bottom was not in sight. Great day to have lots of put positions in financials, builders and banks. I noticed that my put position on The Southern Financial Group (TSFG) (Feb 25) did not move today, even though the stock was down nearly a dollar. Investigating more carefully, I found that the bid ask is 6.50/11.30. I'll wait until closer to expiration when the spread will be tighter. I bought puts on this and a lot of other mid sized banks cheap this summer
Same advice one of my old math profs gave in an advanced class gave when some complained about the difficulty - "ah, don't worry about it I'm teaching the course again next term ".
"Countrywide is treating the Federal Home Loan Bank system like its personal ATM," Schumer said in the letter. "At a time when Countrywide's mortgage portfolio is deteriorating drastically, FHLB's exposure to Countrywide poses an unreasonable risk."
kharris, I agree with you on REPOs and end of year REPOs not being unusual. I suppose what I was commenting on was the number of news outlets I saw saying that the Fed was pledging to provide liquidity - The Financial Times also headlined this fact. The Fed is applying spin to public perception.
Coming on the heels of the ECB injection pledge, I found the timing interesting and am wondering what's behind it.
OT - w/r/t discussion of bond insurers a few days ago, Accrued Interest thinks an Ambac downgrade is likely absent capital improvement: Accrued Interest: AMBAC: This is not going to work
He also thinks they could probably survive the losses (pay all the claims). The links to his earlier discussions, and the comments, are very interesting and on point (at least from my perspective).
To the people who get laid off: Welcome to the party, pal! Same goes for the California grifters. California and Wall Street have earned the hard times coming in spades. They never once gave a crap about anyone else, now I say, same to ya!
Hmm. Saw someone posted a CR link in Curbed comments earlier today . . . please don't do that.
Curbed comments (I have a comment ID there, but most are anonymous) are often a sewer, and we don't need an army of ignorant turd-flinging chimps in here sullying the discourse.
hopeinsd saud: "Layoffs in real estate. Check.
Layoffs in finance. Check
Layoffs in government sector. Coming to a jurisdiction near you in 2008. "
Great post! I live in the DC area and all I hear about is how "immune" this area is to a housing downturn, a recession, a Wall Street meltdown. It is hillarious! The bloated government pig has been feeding at the tax-payer trough for so long- it's time for a correction!
As I posted a friendly bet a while ago, I'll simply repeat, CITIBANK IS BANKRUPT.
When marked to market, and when looking at the trend of asset valuation, CITI is asset-wise BK. If anyone can conclude otherwise, please explain the finer points of non-valuation, fantasy-valuation, pretend cross-collateralization (with ML,very likely...ha ha, or as a back up, with Bear Stearns...more ha ha.
When the SIV comes onto their balance sheet, their lendable funds will slam into yet another ditch.
Where are the strong minds who can look beyond this debacle and see how to transfer operations to another entity, like CITI HOLDING COMPANY, so the ordinary depositors can continue on with their lives???
In some areas very likely - property taxes into local and county governments may decrease.
Yeah real unlikely. That's like teachers tenure
If enough properties change hands at lower prices, the county property appraiser may have no choice but to value them based on the comps. Lower appraisals at the same millage rate will generate lower tax revenue.
My question is... various states have implemented per year caps on home valuation increases, do those caps apply in the downward direction ? IOW, could your existing home value (for tax calculations) only be allowed to fall by x% a year ?
Teacher's tenure? For some reason people seem to think tenure guarantees a job for life. Not at all. Teachers in school sign one, two, or three year contracts typically. Teachers, like anyone else, can be fired. The only difference is, there is a formal process to show 'due cause'. Like any larger private business, I might add.
Are teacher layoffs impossible? It is to laugh. Hah. Every downturn, even in the 2001, 'you call this a recession' downturn, teachers or assistants, or others were laid off by school districts. And gummint revenues DO decline in recessions.
Drops in revenue cause layoffs. Just like businesses. Because tax collections lag behind the business cycle by several months, gummints appear to be invulnerable until the revenue drop catches up with projected collections.
Then, we join the Citi worker bees in the bread line.
Federal employees... well, as long as you're willing to run deficits and monetize the debt.... that's another issue.
Under the traditional ad valorem system, valuation only distributes the property tax burden. The levy determines the amount of tax to be collected so if valuation goes down, mill rates will rise -- unless there is a conscious choice to collect less tax.
The interesting thing will be to watch the holy hell this will all unleash on Prop 13 and California public finance. If property values dip below acquisition value then market valuation is used to determine tax base. Interesting to see how property assessment is considered arbitrary and capricious in good times but the cornerstone of fairness in bad times. In any event, county assessors will have backlogs stretching for years, maybe even a decade, if past experience is any indication
Regards Prop 13; there is nothing arbitrary or capricious or unfair or any of that. Prop 13 sets assessments at 1% of purchase and allows a 2% increase per year. How simple is that? Care to have you sales tax computed based upon what the highest price anyone else is willing to pay? Even if that person is committing fraud and getting cash back in the transaction?
The problem with prop 13 is the ridiculous 2% per year increase. It would be more fair to cap it at, say, the inflation rate. It's fair to insulate people from the ups-and-downs of the market (well, really just the ups, right?), but 2% is just a gift for people who sit in a home for 20-30+ years.
Perhaps C is chopping so that their pig is more presentable when they bring its parts to market. Putting a little lipstick on its parts.
barely | 11.26.07 - 5:19 pm | #
Regards Prop 13; there is nothing arbitrary or capricious or unfair or any of that. Prop 13 sets assessments at 1% of purchase and allows a 2% increase per year. How simple is that? Care to have you sales tax computed based upon what the highest price anyone else is willing to pay? Even if that person is committing fraud and getting cash back in the transaction?
Exactly. However, one thing I will say is that the housing bubble would have been much less popular if CA residents had been forced to deal with 20+% per year tax increases.
The problem with prop 13 is the ridiculous 2% per year increase. It would be more fair to cap it at, say, the inflation rate. It's fair to insulate people from the ups-and-downs of the market (well, really just the ups, right?), but 2% is just a gift for people who sit in a home for 20-30+ years.
Its not fair that those of us who have been paying taxes for 25 plus years pay for the newbee's extra need for schools, roads and infastructures.
If Citi is the trustee for mortgage pools, how will firing worker bees help dotting all the i's and crossing all the t's necessary to get all their assignments and other ducks in row before they start foreclosures?
Should we start a pool for when (i.e., guess a date) a judge does a Deutsche Bank on them for not having all their paperwork in order?
Do you think some happy worker bees might toss some critical paperwork as they head out the door? Will they accidentally on purpose misfile some documents?
My point is that Prop 13 got wheels because many people believe 3rd party assessment of market value is not fair (arbitrary and capricious) Yet when values fall, suddenly market value assessment is "fair" and acquisition value is tossed overboard.
There are so many things wrong with Prop 13 from the standpoint of public finance and tax policy principles, this logical inconsistency is relatively minor.
Sorry if this has already been suggested. WSJ for monday says Citi is being pressured to modify loans. Cutting staff gives them an excuse for going slow on the modifications.
Also, I'm fascinated by the comment about capping California property taxes at the inflation rate rather than at 2%. How do you then define the inflation rate? Via the government definition...what's that...something that excludes everything? LOL! That's hilarious.
Remember the good old days when stock prices would actually rise on the rumors of massive layoffs? Back then, layoffs were referred to as "right-sizing". It was believed that productivity would rise as employees, fearful of losing their jobs, would be motivated to work long hours with no hope of overtime pay, bonuses, or even merit pay increases. The privilege of keeping one's job was considered a sufficient reward for an 80 hour work week. In fact, they would be so grateful for the privilege of keeping their jobs they would actually get teary eyed. Tear eyed, I tell you! Back then, layoffs were one of the most important weapons in the arsenal of the fiscally prudent CEO. That's the way it was way back then, and you know what? We liked it, dammit!
does anybody know how many layoffs in manhattan? could it be enough to affect the local RE mkt?
well, it's a good thing it's different here in New York. I was worried or a second.
"for"
Interesting.
CNBC says it "could" be 45,000 people.
Citi didn't say.
Where did CNBC get that number?
It doesn't say.
If I got stopped out of the stock because of some wild CNBC speculation......
Average Joe, Here is the WSJ take:
Citigroup Inc. executives are looking at ways to cut costs amid a worsening business environment, a process that could culminate in layoffs at the New York banking giant, the company said Monday.
"We are engaged in a planning process in anticipation of our new CEO, and our business heads are planning ways in which we can be more efficient and cost effective to position our businesses in line with economic realities," spokeswoman Christina Pretto said in a statement.
...
CNBC reported earlier Monday that Citigroup is planning as many as 45,000 layoffs in coming months, with cuts expected across the company, not just in its fixed-income business. Ms. Pretto said in the statement that "any reports on specific numbers (of layoffs) are not factual."
Best Wishes.
Been there, done that in Houston.
Layoffs in real estate. Check.
Layoffs in finance. Check
Layoffs in government sector. Coming to a jurisdiction near you in 2008.
Also remember that nothing is real in the financial world until it happens in Manhattan, but once it happens in Manhattan its over analyzed and over emphasized. So expect about 50 new analyst reports about how job losses in the financial sector will lead us into recession. (about 50 more than were issued about job losses in the construction industry leading us to recession.)
If I got stopped out of the stock because of some wild CNBC speculation
Dems the breaks; don't look for any sympathy among all the shorts who got blown out of their HOV and Bear Stearns positions by bogus Buffett rumors last summer.
What comes around goes around ...
Sorry for the long post, not sure if the link works for nonsubscribers..
From the WSJ:
Schumers Letter on FHLB Loans
November 26, 2007 2:10 p.m.
Sen. Charles Schumer, a New York Democrat, urged regulators to examine potential risks posed by a sharp increase in lending by the Federal Home Loan Bank of Atlanta to Countrywide Financial Corp., the nations biggest mortgage lender. The following is his letter to regulators.
November 26, 2007
Ronald A. Rosenfeld
Chairman
Federal Housing Finance Board
1625 Eye Street NW
Washington, DC 20006
Dear Chairman Rosenfeld:
I write to express my serious concern over the lending practices of the Federal Home Loan Bank of Atlanta, specifically in regard to the significant volume of advances made to Countrywide Bank. I am concerned that the loans being pledged by Countrywide to secure these advances may pose a risk to the safety and soundness of the FHLB system as a whole. I urge you to conduct a careful review of FHLB Atlantas collateral evaluation policies, as well as Countrywides pledged collateral, in an effort to determine the risk that Countrywides collateral poses to the FHLB system. During the current market crisis, it is important that the FHLB system perform its critical mission safely without imposing additional risks on an already strained market.
According to the most recent SEC filings, FHLB Atlanta had made $51.1 billion in advances to Countrywide Bank, representing 37 percent of the Banks total outstanding advances as of September 30, 2007 and far exceeding advances made to the next largest borrower. Countrywide had pledged $62.4 billion of mortgages as collateral for the FHLB advances, representing 78 percent of its total mortgage loans held for investment at the bank.
I find these numbers alarming as reports continue to emerge about how Countrywides reckless and predatory lending practices were a leading contributor to todays foreclosure crisis. Moreover, it is my understanding that Countrywides loans held for investment at the bank have been far from immune from the credit deterioration that has resulted from unsound lending.
Countrywide reportedly held $27 billion of pay option ARMs as of September 30, 2007, accounting for over one-third of the loans held for investment by the bank. Countrywides option ARMs were (and may still be) often underwritten with less than full documentation according to UBS Warburg data prepared for the Wall Street Journal, 91 percent of Countrywides option ARMs underwritten in 2006 were low doc. It has been reported that delinquencies on Countrywides pay option ARMS are skyrocketing, jumping nearly 75 percent in the last quarter.
Given this rapid deterioration in the credit quality of Countrywides option ARMs, I urge you to conduct a review of the loans that are being held as collateral for FHLB advances in an effort to determine if FHLB Atlanta has adequate collateral to secure these advances. I would also like
"Also remember that nothing is real in the financial world until it happens in Manhattan"
So if Manhattan real estate valuations were to drop ten percent, financial armageddon would then be declared?
(Never mind the poor devils who've been crawling through the wreckage out in the Central Valley, High Desert, Arizon Florida, and beyond for the past year....)
(cont)
I would also like an explanation of how any second lien mortgages during a time of property price declines could be viewed as adequate collateral for large FHLB advances.
Furthermore, I believe that you should consider preventing any further or continuing overnight advances based on collateral that does not meet the joint financial regulators guidance on nontraditional and subprime mortgage products (e.g., Interagency Guidance on Nontraditional Mortgage Product Risks and joint Statement on Subprime Mortgage Lending). This quarter, Countrywide reported that 89 percent of their 2006 originations of pay option ARMs did not conform to the joint regulators guidance, which increases the likelihood that Countrywide is pledging loans deemed predatory by the regulators as collateral for FHLB advances. Importantly, Fannie Mae and Freddie Macs safety and soundness regulator has specifically prohibited any new direct or indirect investment in loans that do not meet this guidance. As the mortgage crisis threatens to get worse from here, it is critical that the FHFB do the same.
For the last year or two, folks in Manhattan have had the same "things are different" here attitude with regard to their housing that folks in places like San Diego ("the weather is unbeatable"), Las Vegas/Orlando ("we're growing so fast"), and Boston ("we're supply constrained") used to have regarding the invulnerability of their RE market. Fact is, Wall Street is a fickle beast, and has been the driver of much of Manhattan's boom.
"any reports on specific numbers (of layoffs) are not factual."
Translation: "If we find the b@stard who leaked the news we'll add their name to the top of the list."
N.B. Were the actual number of layoffs to be 44,999 or 45,001 then the above quote would be legally true."
Wal-Mart is hiring but competition could be stiff...6,000 apply for 300 Wal-Mart jobs.
Clarion Ledger
Turn to banks when stocks fail
"According to the FDIC's Web site, less than two-thirds (63.13%) of America's $8 trillion in deposits are insured. When NetBank, an online bank based in Alpharetta, Ga., failed in September, $109 million in 1,500 deposit accounts exceeded the FDIC's $100,000 insurance limit. According to ING Direct, the Wilmington, Del.-based online bank that took over NetBank's accounts, one elderly customer had more than $1 million in CDs."
clarionledger.com | Jackson, MS | The Clarion-Ledger
Atlanta Fed bailing out Countrywide? Interesting...
Bob Dobbs said:
"So if Manhattan real estate valuations were to drop ten percent, financial Armageddon would then be declared?"
Yep. Let's just say that when Citibank's Stephen Kim's Manhattan apartment is worth less than it was when he bought it two years ago, he may suddenly get more down on the national housing market. And when his assistant gets laid off and needs to move back in with her parents, that's a recession.
OK, 45,000 at an average salary of 80k saves 3.6 billion. Toss in a few campus closures and we are at 4-4,5 billion. Will take them a year to get it done and see the effects to the financials. I guess they gotta do something but comparing the quarterly losses to their proposed savings.........
10-year treasury yield is now just 3.90 %! I guess my big financial crash is finally coming.
lol, suddenly stephen is suffering from diarrhea.
massive layoffs or not, manhattan RE is doomed. every county around it has 30% or more of subprime. don't know the proportion of alt-a, but guess significant as even for a studio or tiny 1 BR you used to need a jumbo loan during the last 2 years.
What I don't understand is the Street's reaction to the layoff rumors -- C down another 5% today. I thought investors liked to see the blood flow from the severed heads.
Maybe they think they're being played again, like last spring? Or is it just that all news is now bad news for the "rudderless behemoth" (to quote the FT)?
247 Visitors Online
what don't you people have jobs . . .
wait no.
Dems the breaks; don't look for any sympathy among all the shorts who got blown out of their HOV and Bear Stearns positions by bogus Buffett rumors last summer.
What comes around goes around ...
central_scrutinizer | 11.26.07 - 2:31 pm | #
I have a lot of respect for Buffett, so when I heard that rumor I started buying puts on HOV because I never believed them. Now, if only I had hung on to those puts a little longer than I did...
If that 45k number is correct, percentage wise, we're talking over 15% of their remaining workforce, gone.
5 days before the CFA exam and me finally on the hunt for a true finance job, they flood the labor market with unemployed analysts.
son of zinger,
i had puts of HOV before that added a little more with the upward movement on buffet. it's great to take at least some profits though from time to time.
45k is a big number. that's the size of many mid fortune 500 companies.
Billy,
Not the Atlanta Fed, the Atlanta FHLB. Lending to mortgage lenders is the job of the home loan bank system. Doing so to a single troubled lender to the extent that 1/4 of the assets held by the Atlanta FHLB is CountryWide markers is pretty irresponsible.
By the way, I hear that some insiders are now talking about 55k layoffs. Could be that those insiders are scared. Could be that the number is still in flux because this is almost certain to eat into core operations. How much the until-recently biggest bank in the Western World wants to cut into core operations may be a hotly debated issue.
Citi shares just dipped below $30 for the first tims in 5 years (and a month).
Ambac Needs Capital Infusion to Keep Its AAA Rating:
Ambac Needs Capital Infusion to Keep Its AAA Rating -- Seeking Alpha
CR,
Thanks a lot for the effort. Very well explained.
Didn't see anyone post on this yet. Sorry if it is a repeat.
Business, financial, personal finance news - CNNMoney.com
Fed extends lifeline to struggling banks
Central bank says it will conduct special short-term loans to insure banks have enough cash available.
November 26 2007: 12:53 PM EST
"WASHINGTON (AP) -- To help alleviate any end-of-year cash crunch, the Federal Reserve announced Monday that it will conduct a series of special operations starting this week.
The Federal Reserve Bank of New York, in a brief statement, said it will make the first such operation on Wednesday, for about $8 billion. The operation essentially makes available short-term, six-week loans, maturing on Jan. 10, to financial institutions, and thus boosts cash available to them.
The Fed didn't say when its next operation would be conducted. "The timing and amounts of subsequent term operations spanning the year-end will be influenced by market and reserve developments," the Fed said in its statement.
..."
"What I don't understand is the Street's reaction to the layoff rumors -- C down another 5% today. I thought investors liked to see the blood flow from the severed heads."
Not when it's their own.
I'm sure they'll do whatever they can to keep this from affeting Manhattan, though even if prices there went down 10 or 20 percent, it'd still be insanely expensive, though all those new condos would get a bit harder to sell.
What I don't understand is the Street's reaction to the layoff rumors -- C down another 5% today. I thought investors liked to see the blood flow from the severed heads.
yeah, but not when the company could be going under.
It's getting bloody out there. Indices diving starting around 3:00 . . . a half hour early today?
Capitualation approaches.
10-year note yield 3.85% and falling.
FFDIC, Thanks for the Ambac link.
Insurer downgrades = chain reaction in the bond market.
K - I think a layoff of that magnitude will indeed cut into core operations. And you can bet some will be underwriters and processors...and others of similar ilk in the other areas of the company. True - something needs to be done, but in restructures like this, all to often, the end result is the staffers they should have kept/reassigned will be gone via the pick slip or disgust. It takes a long time to recover from that.
"It's getting bloody out there. Indices diving starting around 3:00 . . . a half hour early today?"
Turkey leftovers starting to spoil - giving PPT a bellyache? Can't be the economy - consumers marched en masse to the malls starting on Friday.
/sarc
" Layoffs in real estate. Check.
Layoffs in finance. Check
Layoffs in government sector. Coming to a jurisdiction near you in 2008."
hopeinsd
hopeinsd,
Layoffs in government sector. Coming to a jurisdiction near you in 2008.
ROFLMAO!!! NOT LIKELY!
New York Fed to Offer Longer Loan Terms Starting Wednesday:
Sorry. Page not found.
"ROFLMAO!!! NOT LIKELY!"
In some areas very likely - property taxes into local and county governments may decrease.
In some areas very likely - property taxes into local and county governments may decrease.
4822 | 11.26.07 - 3:28 pm | #
Youthful idealism. It's refreshing.
"ROFLMAO!!! NOT LIKELY!"
In some areas very likely - property taxes into local and county governments may decrease.
Yeah real unlikely. That's like teachers tenure
Bloomberg article on the Fed's $8B Repo/liquidity injection event and term mods.
Fed Plans to Ease Funding Pressures by Adding Cash (Update4) - Bloomberg.com
10-year note now yields 3.85%. I'd call that a bad sign.
Andrew --
Business, financial, personal finance news - CNNMoney.com
"The move was designed to reassure the markets."
Well, thank goodness.
RE: Gov't employees...I think it's def. possibility some places. More likely are hiring freezes and longer-term wage stagnation for Gov't workers.
Yeah, the worm is definitely turning.
Running-
There will be layoffs in the non-federal government sector in 2008. Governments are being hit with the double whammy of lower sales and property taxes, plus some accounting rules I'm only vaguely familiar with which require recognition of unfunded pension liabilities.
So it will be time to hike taxes or layoff someone. And since raising taxes doesn't get you re-elected, I'll chose option 2 in 2008. (tax hikes will come later after all the politically palatable cuts have been made).
Running for the Hills/Anon 3:31 - School Districts show no reluctance to laying off teachers if they have to. I remember many teacher friends of my Mom's having to deal with that. Tenure ain't worth diddly. The only thing tenure is good for is preferential status when they're hiring again and selecting who is likely to get laid off first.
If you said that there would be a "blue ribbon panel" looking into government layoffs paid for on the public dime, I'd buy it. Even with state constitutions, they'll find ways to run unbalanced budgets.
GMAC to buy Citigroup
Google to Buy Citi Manhattan tower
does this help
useless
The federal government slowdown in employment will come through retirements and decreased hiring of contractors. It is already starting to show due to the continuing esolution.
Yup...teachers get RIFed all the time during downturns. IMO, they are the least respected profession in this society.
Cannot wait for the NYTimes to stop publishing articles like "What can you get for $10 million dollars". Is that of public interest?
Oh, and if "No Child Left a Dime" wasn't screwed before, it definately will be one of the first things strapped school boards will scrap heap when they start to get really squeezed. Standards are a luxury when you're just trying to keep it all from falling apart.
I suspect we'll see a lot of pull back in gov't programs in general, not just schools. But I suspect that schools will be the canary in the coal mine as they tend to be locally funded and directly depend on property tax receipts. Politically, they are also (relatively) easier to cut, at least initially.
5 days before the CFA exam
It's good. You should just skip the exam, and head straight to a job with the fed in forensic accounting..
22k to start, full bene's
CFA=Certified f**** A***oles
Teachers have always been least respected. Why do you think teaching positions were traditionally held by spinsters in the 19th century? Unmarried women are among the least valued cohort of society anyway, so they naturally would get the least respected jobs.
"Youthful idealism. It's refreshing."
In California there are Prop 13 taxation limits.
Cannot wait for the NYTimes to stop publishing articles like "What can you get for $10 million dollars".
That's nothing, the WaPo is running a story on how DC's hoi polloi now enjoy slumming at Costco (shhh! don't tell their friends!)
That said, I hate the NY Times and wish it would die.
Running-
I agree that the first reaction of gov't is to deficit spend. But not only are there the constitutional limits, but I also see the credit crunch coming into play. Think AAA ratings will just be handed out like candy to a municipality with a falling tax base? Think AMBAC might charge a few extra bucks for bond insurance these days? Even deficit spending won't be easy. Some cuts will happen this year- the easy things like obscure regulatory agencies or some random department of a state univeristy.
"We are engaged in a planning process in anticipation of our new CEO..."
Geez, sounds like they're cleaning out a spare room in anticipation of a new baby. I wonder when the stork will arrive with their new CEO.
? Unmarried women are among the least valued cohort of society anyway, so they naturally would get the least respected jobs.
mal
When Tanaa reads this nonsense of yours, she's going to rip you a new one.
Why? It's true.
I'm an unmarried woman so I should know.
Markets looking ugly. When they make the TV movie, this may be the day where Hank Paulson runs out onto the floor of the New York Stock exchange waving his checkbook and is overwhelmed by sell orders.
grim, thanks for the Sen. Schumer post.
First time that I could ever agree with an action of his, I think.
Go get 'em, Chuck!
At least my savings account didn't go down today!
From your viewpoint, it's an objective fact.
from my viewpoint it's a subjective fact
"When NetBank, an online bank based in Alpharetta, Ga., failed in September, $109 million in 1,500 deposit accounts exceeded the FDIC's $100,000 insurance limit."
I'm going to assume that all these accounts were under a single name. FDIC insurances back accounts up to $200K if the account is in two names. Not a bad deal for a husband/wife account.
I was also pleased to hear that ING Direct was the suitor in the aftermath that debacle. They're one of my banks.
A thought on the Citi news and Citi stock. As noted earlier, Citi seems intent on becoming a smaller bank. It claims to be "right-sizing" rather than cutting into staff to make numbers in the next couple of quarters, but if you don't believe that to be true, you think Citi is messing with its own future earnings stream in an effort to make numbers in the near term. Sell 'em.
There may be a broader issue in Citi planning to do less business. Citi, in planning to lay off great gobs of people, seems to be signaling that the volume of business in the sector is going to go down. Less volume means less money for everybody. Where do you go for leadership on the SIV super-fund? Where do you go for irresponsible lending in Latin America?
Andrew,
Term repos over the end of the year are pretty standard for the Fed. What is odd about today's announcement is the announcement itself, for one thing. The Fed usually doesn't see the need to make a big fuss, but it did today. Timing is another oddity. This is early for over-the-turn term repos. The "lifeline" notion in the headline is more about what is going on in the market, I think, than the Fed's action. The Fed does this sort of thing every year.
Note, however, that this comes right along with rising Libor rates, the ECB announcing emergency facilities, Citi, HSBC, housing sector downgrades, just after a big credit hiccup in Asia last week. The Fed's decision to wave this action around may reflect concern that credit markets need certainty where they can get it.
Weeeeeeeeeeeeee
Are we there yet (rhymes with stravinsky)?
somewhat OT--Has anyone already mentioned a post on Market Watch? Stephan Kim, the housing super bull from Citi, downgraded the home builders today, admitting that the bottom was not in sight. Great day to have lots of put positions in financials, builders and banks. I noticed that my put position on The Southern Financial Group (TSFG) (Feb 25) did not move today, even though the stock was down nearly a dollar. Investigating more carefully, I found that the bid ask is 6.50/11.30. I'll wait until closer to expiration when the spread will be tighter. I bought puts on this and a lot of other mid sized banks cheap this summer
"grim, thanks for the Sen. Schumer post. First time that I could ever agree with an action of his, I think."
Me too, and It felt so weird!!!
O wherefore art thou JOE ?
k harris,
I thought 6 week terms were unusual for repos.
I predict that the next two years of government employment reports will still have financials growing.
Yes, the birth-death model will need to account for all the small mom and pop banks that are starting up and flourishing over the next two years.
" 5 days before the CFA exam "
Don't worry about it, they'll offer it again.
Same advice one of my old math profs gave in an advanced class gave when some complained about the difficulty - "ah, don't worry about it I'm teaching the course again next term ".
CITI Run..
breaking up creates value,wuuuu-huuuuu
this whole thing is scary if you ask me
UPDATE 1-U.S. Sen. Schumer questions Countrywide borrowing
| Reuters
US Sen. Schumer questions Countrywide borrowing
"Countrywide is treating the Federal Home Loan Bank system like its personal ATM," Schumer said in the letter. "At a time when Countrywide's mortgage portfolio is deteriorating drastically, FHLB's exposure to Countrywide poses an unreasonable risk."
kharris, I agree with you on REPOs and end of year REPOs not being unusual. I suppose what I was commenting on was the number of news outlets I saw saying that the Fed was pledging to provide liquidity - The Financial Times also headlined this fact. The Fed is applying spin to public perception.
Coming on the heels of the ECB injection pledge, I found the timing interesting and am wondering what's behind it.
I'll be contained by Christmas...if only in my dreams
OT - w/r/t discussion of bond insurers a few days ago, Accrued Interest thinks an Ambac downgrade is likely absent capital improvement:
Accrued Interest: AMBAC: This is not going to work
He also thinks they could probably survive the losses (pay all the claims). The links to his earlier discussions, and the comments, are very interesting and on point (at least from my perspective).
The earlier discussion was in the ACA Capital thread at
Calculated Risk: ACA Capital.
US Sen. Schumer questions Countrywide borrowing
CFC must be close to going BK and the political gang is allready covering their ass.
To the people who get laid off: Welcome to the party, pal! Same goes for the California grifters. California and Wall Street have earned the hard times coming in spades. They never once gave a crap about anyone else, now I say, same to ya!
Products and Services Overview
another Markit cliff dive!
A dirty dozen new lows!!!
Fed Cut before the 7th of December!!!
gold to $1000
Oil to $125.
Happy Xmas.
Someday this war's gonna end...probably Jan 20, 2009.
Hmm. Saw someone posted a CR link in Curbed comments earlier today . . . please don't do that.
Curbed comments (I have a comment ID there, but most are anonymous) are often a sewer, and we don't need an army of ignorant turd-flinging chimps in here sullying the discourse.
hopeinsd saud: "Layoffs in real estate. Check.
Layoffs in finance. Check
Layoffs in government sector. Coming to a jurisdiction near you in 2008. "
Great post! I live in the DC area and all I hear about is how "immune" this area is to a housing downturn, a recession, a Wall Street meltdown. It is hillarious! The bloated government pig has been feeding at the tax-payer trough for so long- it's time for a correction!
another Markit cliff dive!
of course. it's remittance day. and surprisingly, things didn't improve.
What in the world will Citi do with those 45,000 used staplers?
"any reports on specific numbers (of layoffs) are not factual."
So... when has any report from Citi in the last year been "factual" anyway?
As I posted a friendly bet a while ago, I'll simply repeat, CITIBANK IS BANKRUPT.
When marked to market, and when looking at the trend of asset valuation, CITI is asset-wise BK. If anyone can conclude otherwise, please explain the finer points of non-valuation, fantasy-valuation, pretend cross-collateralization (with ML,very likely...ha ha, or as a back up, with Bear Stearns...more ha ha.
When the SIV comes onto their balance sheet, their lendable funds will slam into yet another ditch.
Where are the strong minds who can look beyond this debacle and see how to transfer operations to another entity, like CITI HOLDING COMPANY, so the ordinary depositors can continue on with their lives???
In some areas very likely - property taxes into local and county governments may decrease.
Yeah real unlikely. That's like teachers tenure
If enough properties change hands at lower prices, the county property appraiser may have no choice but to value them based on the comps. Lower appraisals at the same millage rate will generate lower tax revenue.
My question is... various states have implemented per year caps on home valuation increases, do those caps apply in the downward direction ? IOW, could your existing home value (for tax calculations) only be allowed to fall by x% a year ?
http://www.marketwatch.com/news/story/citigroup-must-broken-up-create/story.aspx?guid=%7B17949869%2D1D01%2D4EFD%2D98C0%2D0C94BCE4C5ED%7D
David Weidner calls for C break up.
Perhaps C is chopping so that their pig is more presentable when they bring its parts to market. Putting a little lipstick on its parts.
Teacher's tenure? For some reason people seem to think tenure guarantees a job for life. Not at all. Teachers in school sign one, two, or three year contracts typically. Teachers, like anyone else, can be fired. The only difference is, there is a formal process to show 'due cause'. Like any larger private business, I might add.
Are teacher layoffs impossible? It is to laugh. Hah. Every downturn, even in the 2001, 'you call this a recession' downturn, teachers or assistants, or others were laid off by school districts. And gummint revenues DO decline in recessions.
Drops in revenue cause layoffs. Just like businesses. Because tax collections lag behind the business cycle by several months, gummints appear to be invulnerable until the revenue drop catches up with projected collections.
Then, we join the Citi worker bees in the bread line.
Federal employees... well, as long as you're willing to run deficits and monetize the debt.... that's another issue.
Under the traditional ad valorem system, valuation only distributes the property tax burden. The levy determines the amount of tax to be collected so if valuation goes down, mill rates will rise -- unless there is a conscious choice to collect less tax.
The interesting thing will be to watch the holy hell this will all unleash on Prop 13 and California public finance. If property values dip below acquisition value then market valuation is used to determine tax base. Interesting to see how property assessment is considered arbitrary and capricious in good times but the cornerstone of fairness in bad times. In any event, county assessors will have backlogs stretching for years, maybe even a decade, if past experience is any indication
Regards Prop 13; there is nothing arbitrary or capricious or unfair or any of that. Prop 13 sets assessments at 1% of purchase and allows a 2% increase per year. How simple is that? Care to have you sales tax computed based upon what the highest price anyone else is willing to pay? Even if that person is committing fraud and getting cash back in the transaction?
The problem with prop 13 is the ridiculous 2% per year increase. It would be more fair to cap it at, say, the inflation rate. It's fair to insulate people from the ups-and-downs of the market (well, really just the ups, right?), but 2% is just a gift for people who sit in a home for 20-30+ years.
Perhaps C is chopping so that their pig is more presentable when they bring its parts to market. Putting a little lipstick on its parts.
barely | 11.26.07 - 5:19 pm | #
That's not lipstick. Its bbq sauce...
Regards Prop 13; there is nothing arbitrary or capricious or unfair or any of that. Prop 13 sets assessments at 1% of purchase and allows a 2% increase per year. How simple is that? Care to have you sales tax computed based upon what the highest price anyone else is willing to pay? Even if that person is committing fraud and getting cash back in the transaction?
Exactly. However, one thing I will say is that the housing bubble would have been much less popular if CA residents had been forced to deal with 20+% per year tax increases.
Cheers,
prat
Say goodbye to whatever was left of the US technology staff.
for more govtment revenues - speeding tickets.
Sure fire income producer.
Coming to a street near you.
The problem with prop 13 is the ridiculous 2% per year increase. It would be more fair to cap it at, say, the inflation rate. It's fair to insulate people from the ups-and-downs of the market (well, really just the ups, right?), but 2% is just a gift for people who sit in a home for 20-30+ years.
Its not fair that those of us who have been paying taxes for 25 plus years pay for the newbee's extra need for schools, roads and infastructures.
C gets a 7.5b investment from Abu Dhabi in return for a 4.9% stake of the company. Not sure what to make of this.
RPT-Citi to sell $7.5 bln equity units to Abu Dhabi group
| Reuters
If Citi is the trustee for mortgage pools, how will firing worker bees help dotting all the i's and crossing all the t's necessary to get all their assignments and other ducks in row before they start foreclosures?
Should we start a pool for when (i.e., guess a date) a judge does a Deutsche Bank on them for not having all their paperwork in order?
Do you think some happy worker bees might toss some critical paperwork as they head out the door? Will they accidentally on purpose misfile some documents?
You misunderstood my point
My point is that Prop 13 got wheels because many people believe 3rd party assessment of market value is not fair (arbitrary and capricious) Yet when values fall, suddenly market value assessment is "fair" and acquisition value is tossed overboard.
There are so many things wrong with Prop 13 from the standpoint of public finance and tax policy principles, this logical inconsistency is relatively minor.
Sorry if this has already been suggested. WSJ for monday says Citi is being pressured to modify loans. Cutting staff gives them an excuse for going slow on the modifications.
Love to hear everyone diss out NY and California. Cali and NY sneeze, the rest of the country catches a cold.
Also, I'm fascinated by the comment about capping California property taxes at the inflation rate rather than at 2%. How do you then define the inflation rate? Via the government definition...what's that...something that excludes everything? LOL! That's hilarious.
Remember the good old days when stock prices would actually rise on the rumors of massive layoffs? Back then, layoffs were referred to as "right-sizing". It was believed that productivity would rise as employees, fearful of losing their jobs, would be motivated to work long hours with no hope of overtime pay, bonuses, or even merit pay increases. The privilege of keeping one's job was considered a sufficient reward for an 80 hour work week. In fact, they would be so grateful for the privilege of keeping their jobs they would actually get teary eyed. Tear eyed, I tell you! Back then, layoffs were one of the most important weapons in the arsenal of the fiscally prudent CEO. That's the way it was way back then, and you know what? We liked it, dammit!