Friday, September 26, 2008

Economic Crisis Update: Moratorium Now! Holds Demonstration to Oppose Wall Street Bailout; Bush Pushes Taxpayer Cash Infusion to Banks; Real Estate Prices Fall

Group Pushing for Moratorium on Foreclosures

Thursday, 25 Sep 2008, 6:23 PM EDT

Members of the "Moratorium Now Coalition" marched in protest

By FOX 2 Web Team

DETROIT -- A group delivers a strong message concerning our nation's financial crisis near the landmark "Spirit of Detroit" statue.

Members of the "Moratorium Now Coalition" marched in protest Thursday at Woodward and Jefferson. They're demanding a statewide moratorium on foreclosures.

They also want Mayor Ken Cockrel, Jr. to declare a state of emergency in Detroit. The city has been hit hard by the nation's foreclosure epidemic.

The group has an online petition you can sign to push for a moratorium on foreclosures. You'll find the petition at .

Bush calls on Congress to approve rescue plan

By Daniel Dombey in Washington
September 26 2008 15:54

President George W Bush made an urgent call on Friday for Congress to approve a mammoth financial rescue package, a day after an unprecedented meeting in the White House with both presidential candidates failed to reach an agreement on the administration’s $700bn proposal.

Equity markets remained in the red even after President Bush insisted: “We are going to get a package passed.”

By mid-morning in New York the S&P 500 was 1.1 per cent lower at 1,195.52. The Dow Jones Industrial Average was 0.4 per cent lower at 10,980.81 while the Nasdaq Composite Index fell 1.4 per cent at 2,155.81.

Speaking as his administration continued its efforts to win over sceptics among its own Republican ranks, Mr Bush expressed his hope that both US parties would support a deal.

”There is no disagreement that something substantial must be done,” he said. ”We will rise to the occasion. Republicans and Democrats will come together and pass a substantial rescue plan.”

But, concerned by the size of the proposed intervention and amid mounting popular resistance to the plan, Republicans in the House of Representatives have deepened their opposition to the administration proposal, favouring instead an alternative that would not involve government funds.

On Friday, John McCain, the Republican presidential candidate, who has said he is suspending his campaign until a package is agreed, was meeting with House and Senate Republicans. Dick Cheney, US Vice President, also cancelled a trip to New Mexico and Wyoming to win Republicans over to the administration proposal.

Although Republican Senators have indicated they are willing to accepts a compromise based on the administration proposal, the Democrats, who hold the majority in Congress, are looking for Republican support in both Houses of Congress to split the political cost for supporting such a potentially unpopular measure.

”This is hard work,” said Mr Bush. ”Our proposal is a big proposal and the reason it’s big and substantial is because we got a big problem. We also need to move quickly.”

Mr McCain’s campaign said that since there had been no agreement on the financial package, it still did not know whether the candidate would attend the first presidential debate, scheduled for Friday. Barack Obama, the Democratic nominee has said that in any case he will travel to the event in Oxford, Mississippi.

Additional reporting by Alistair Gray

Copyright The Financial Times Limited 2008

WaMu seized and sold to JP Morgan

By Henny Sender, Francesco Guerrera, Julie MacIntosh, Joanna Chung and Saskia Scholtes in New York
September 26 2008 15:02

JPMorgan Chase has acquired the banking operations of Washington Mutual which was seized by US regulators on Thursday night in the biggest bank failure in US history.

On Friday morning JPMorgan said it had sold $10bn in common stock to finance its acquisition - 25 per cent more than had been expected. Shares in JPMorgan were off about 3.4 per cent at $41.98 in the first half hour of New York trade; WaMu shares had lost nearly all their value.

Under the deal, which was brokered by government, JPMorgan will pay $1.9bn to the banking regulator, and acquire all insured and uninsured deposits, assets and some of the liabilities of WaMu’s banking operations, including its troubled mortgage portfolio.

JPMorgan will not acquire claims by equity, subordinated and senior debt holders, said the Federal Deposit Insurance Corporation, which facilitated the transaction.

The intervention by regulators follows months of intensifying pressure on WaMu, the latest to be brought down by the mortgage crisis.

Shares in WaMu, which specialised in providing home mortgages, credit cards and other retail lending products, have lost nearly all their value in recent months.

An outflow of deposits began on September 15 2008, totalling $16.7bn, making WaMu “unsafe and unsound” to transact business, according to the Office of Thrift Supervision, WaMu’s main regulator, which closed the bank on Thursday night.

Sheila Bair, chairman of the FDIC, said: ”For all depositors and other customers of Washington Mutual Bank, this is simply a combination of two banks.”

”For bank customers, it will be a seamless transition. There will be no interruption in services and bank customers should expect business as usual come Friday morning.”

The FDIC’s deposit insurance fund, which has been under growing strain amid the increasing number of bank failures this year, will not suffer any losses as a result of the transaction, the regulator said.

The FDIC held the bidding process on Wednesday that resulted in the acquisition by JPMorgan Chase, which has long coveted WaMu’s branch network on the West Coast and the south-east US.

WaMu had assets of $307bn and total deposits of $188bn and its failure far surpasses that of $40bn Continental Illinois National Bank & Trust Company, which closed in 1984 during the savings and loan crisis.

The acquisition by JPMorgan creates the largest US depository institution, with over $900bn of customer deposits.

But the deal is a rare setback for TPG, the private equity firm that led a group that bought a minority stake in WaMu in April, with a $7bn capital infusion.

WaMu’s share price on Thursday fell 57 cents to $1.69. At Thursday’s price, WaMu’s market value had fallen to about $2.9bn – or about 15 per cent of its tangible book equity of $18.8bn – as of the second quarter of 2008.

The WaMu sale comes at a time when Congress is deciding the fate of the Treasury’s proposed $700bn rescue plan for the financial sector.

JPMorgan said it would take a $31bn writedown in line with the bank’s estimate of remaining credit losses related to the impaired loans.

It said it would acquire $31bn of net assets from WaMu that will cover that write down, but JPMorgan also plans to raise $8bn of common equity capital on Friday in what the bank called an ”offensive capital raise.”

”This deal makes excellent strategic sense for our company and our shareholders,” said Jamie Dimon, chief executive of JPMorgan, during a conference call.

”Increasing our regional banking presence not only strengthens our retail business, but also benefits other business lines across our firm, including our commercial banking, business banking, credit card, and asset management groups.”

”We had about 75 people at JPMorgan involved in looking at the data and in conversations with the company,” said Mr Dimon. ”This was probably one of the most thorough things we have ever done.”

Copyright The Financial Times Limited 2008

Wall Street's Woes Hit Highest End

Some Luxury Properties See Slowdown as Jittery Buyers Head for Exits

Wall Street Journal

For months, as housing values were falling for midsize ranch houses in Stockton, Calif., and Las Vegas high-rises, sales of high-end properties in financial centers like London, New York and San Francisco continued to percolate along.

But that was before last week, when turmoil in the credit markets brought down Lehman Brothers Holdings and imperiled thousands of high-paying jobs. While those rare properties priced at $20 million or more are still holding up, there are signs that the crisis is exacerbating a downturn that was already plaguing properties in the $2 million to $10 million range, a market often sought by Wall Street workers.

Since last Thursday, there have been 200 price cuts on properties listed at less than $10 million on Manhattan's Upper East Side or Upper West Side -- a 17% jump from the week before. Deanna Kory, a broker with New York-based Corcoran Group who's handling nearly two-dozen properties priced between $2 million and $10 million, says her showings are down by about 40% in the last two weeks compared to the same time last year. A slew of new buildings set to open in the next year will only increase supply.

New York's Park Avenue: Listed on Tuesday, this $20 million, 10-room penthouse duplex once owned by Broadway playwright and director Moss Hart and actress Kitty Carlisle has already attracted interested buyers.

The impact is reaching beyond Manhattan. On Massachusetts's North Shore, where the average sale price of luxury homes is about $3 million, Lanse L. Robb says he's lost more than $15 million in listings and transactions in the last week.

First, prospective buyers for a $4 million waterfront home canceled their showing. Then two clients spooked by the financial meltdown held off listing their houses or looking for new ones.

One buyer who was poised to put an offer on a $15.7 million. 10-acre oceanfront estate in Manchester-by-the-Sea suddenly stopped returning Mr. Robb's calls. "I still haven't heard back," says Mr. Robb, of Christie's Great Estates affiliate LandVest. "It's total silence."

In San Francisco, a buyer in the market for an $8 million to $10 million property told Mark Allan Levinson last week to hold off on the search because his stock portfolio had just taken a big hit. "People are still buying, but they're not quite as bullish," says Mr. Levinson, of Sotheby's International Realty in San Francisco.


New York City's Chelsea: This $4.7 million three-bedroom condo is typical of the midrange luxury apartments often purchased by Wall Street workers. Brokers say they expect prices in this part of the market to soften.

Last Wednesday, a New York City buyer haggling over the purchase of a $1.9 million apartment used last week's turbulence to win an additional $100,000 discount. Arguing the situation had dramatically changed, the buyer contended that the market was headed for a steep decline. "He had lowballed the price to start with," says Anne Snee, a broker at Corcoran. "But given what's going on, I'm not sure that [the sellers] didn't make the right decision."

So far, the strongest part of the high-end market are the few "trophy" properties -- penthouses and other apartments with one-of-a-kind features that rarely come up for sale. "There are always people with money. Somebody's always on the other side of these crises," says David Ogilvy, a broker in Greenwich, Conn., who this year sold a $30 million house -- the second-most-expensive house ever sold in the area.

In New York on Tuesday, 50 people perused a 5,500-square-foot duplex penthouse on an in-demand Park Avenue block. Put on the market that very day, the 10-room cooperative apartment once owned by Broadway playwright and director Moss Hart and actress Kitty Carlisle boasts high ceilings, stunning city views and a $20 million pricetag.

According to Katherine Marshall, the broker whose family owns the unit, five prospective buyers have already returned to check out the apartment a second time.

Leighton Candler, a broker with Corcoran, says she has seen solid buyer interest in her top-shelf listings, which include a $46 million penthouse at 778 Park Ave. Previously owned by Manhattan socialite Brooke Astor, the apartment features 14 rooms, six terraces, five wood-burning fireplaces and city views.

Ms. Candler is also selling a $46.5 million penthouse at 1020 Fifth Ave., with a 40-foot grand salon and views of Central Park and the Metropolitan Museum of Art. It has been owned by the same family since it was built in 1925.

Just a few weeks ago, San Francisco saw one of its priciest listings ever, a 20,000-square-foot penthouse topping the St. Regis Residences. Encompassing two floors and featuring four terraces as well as a two-story waterfall, the still-unfinished unit has an asking price of $70 million.

So far, places like New York and San Francisco are still faring better than many other areas of the U.S., particularly areas of Southern California and Florida. "I think everyone is taking a hit," says Suzanne Perkins of Sotheby's in Santa Barbara, Calif., where prices have fallen 20% in the last year. "I still have buyers in the $20 million range, but they're looking for deals and they're looking for sellers who will negotiate."

In the run-up to the real-estate boom, brokers sometimes slapped headline-grabbing asking prices on highly desirable homes just to drum up interest and create buzz. Now, many of the tricks brokers are using to sell properties at the high-end are the same ones used with their more modest counterparts. The first and foremost: persuading the seller to list the home at an attractive price.

In Miami, Nelson Gonzalez of Esslingler Wooten Maxwell Realtors says he recently had to tell a client who wants to put his house on the market for $25 million to $30 million that it's really worth about half that amount. "I'm not willing to just put it on the market at the seller's pricing. I'm putting things on the market that are priced so they will sell," says Mr. Gonzalez.

Amid the financial crisis, agents say many buyers are also more reluctant to buy splashy properties for reasons other than the cost. "I don't think anybody is going to be bidding for at least the next several weeks," says Kirk Henckels of Stribling Private Brokerage. "You'd feel pretty silly walking into a cocktail party today and saying you bought an apartment today."

Write to Sara Lin at

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