Worldwide Financial Collapse -- US Will Nationalize Largest Banks

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240,000 Jobs Lost in October = 1.2 Million So Far in 2008

THE EMPLOYMENT SITUATION: OCTOBER 2008


Nonfarm payroll employment fell by 240,000 in October, and the unemployment rate
rose from 6.1 to 6.5 percent, the Bureau of Labor Statistics of the U.S. Department
of Labor reported today. October's drop in payroll employment followed declines of
127,000 in August and 284,000 in September, as revised. Employment has fallen by
1.2 million in the first 10 months of 2008; over half of the decrease has occurred
in the past 3 months. In October, job losses continued in manufacturing, construc-
tion, and several service-providing industries. Health care and mining continued
to add jobs.

Unemployment (Household Survey Data)

The unemployment rate rose by 0.4 percentage point to 6.5 percent in October,
and the number of unemployed persons increased by 603,000 to 10.1 million. Over
the past 12 months, the number of unemployed persons has increased by 2.8 mil-
lion, and the unemployment rate has risen by 1.7 percentage points. (See
table A-1.)

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AIG's Bailout Increased to $150 Billion!

Remember that $85 billion bailout that was increased a month later to $123 billion? Well, it has just been increased to $150 billion and the interest rate has been lowered on the first loan. AIG just posted a $24.5 billion loss for the third quarter. Here. Speaking of huge losses, Fannie Mae just posted a $29 billion loss for Q3. That's $13.00 a share. First Call consensus estimate called for a loss of only $1.60 a share. That's probably because the books were cooked before (which we all knew) and now they're trying to unravel things.

Meanwhile, both Ford and GM are in danger of failing within a matter of months. In the case of GM, they can't operate beyond December without immediate government aid. Ford has lost $24 billion since the beginning of 2006 and GM has lost $50 billion in the last three years.

That $25 billion we just gave them is intended to help them retool for new fuel-efficient models. They need another $50 billion immediately just to keep the factory doors open. Otherwise we will lose a total of about 2.5 million jobs and states like Michigan and Ohio will need federal bailouts of their own.

GM has not turned a profit on its U.S. assembly divisions in ages. They used to make money on GMAC but that was before they sold half of GMAC and before GMAC got caught up in the subprime mortgage debacle. Don't forget, GMAC owns DiTech. The main reason GMAC made money was because every time someone bought a new car or truck at 0.9% APR or 1.9% APR (or whatever), that division (Chevrolet, Buick, etc.) had to pay GMAC the difference between the below market rate and fair market retail rates.

GM was just moving money from one pocket to the other. And they were losing their asses on all of those low payment leases because the reason the payments were so low was because they set the residuals way too high. At the end of the lease the residual was thousands of dollars higher than the market value of the vehicle (especially on SUVs), so people just let GMAC and FMC, etc., have the vehicle. GMAC (and the other captives) were offering $5,000 or more in incentives to get the customer to keep the vehicle. In other words, they would offer to refinance the residual for another five years and price it several thousands of dollars lower than it was originally.

The U.S. auto manufacturers have been selling cars and trucks below cost for years just to hold onto market share. The only models they made a profit on were the gigantic SUVs and full-size pickup trucks and now those are ice cold.

All of this is going to require immediate government action to avoid allowing the U.S. economy to plunge into a real Depression. It's going to require the sort of government intervention that may not even pass in the current House of Representatives. Remember how difficult it was to pass the $700 billion bailout bill? We're going to need at least another $700 billion in government assistance just to keep our economy from going into the tank. Most of those government loans will be paid back eventually. But hey, remember, the "fundamentals of our economy are strong." Just ask WALNUTS!

P.S. -- Shares of General Motors (GM 3.27 -1.09) have fallen to a fresh multi-decade low. Deutsche Bank downgraded GM to Sell from Hold and cut its price target to $0 from $4, noting without government intervention, GM may not be able to fund its U.S. operations beyond December. Here.

In corporate news this morning, Circuit City (CC 0.11, -0.14) filed for Chapter 11 bankruptcy protection due to stiff competition and financial market disruptions that limited the retailer's access to credit.

Beginning January 30, 2009, DHL U.S. Express will only focus on international offerings and will discontinue domestic-only air and ground services. The shipping company, owned by Germany-based Deutsche Post World Net, will cut 9,500 U.S. jobs, on top of the 5,400 jobs it has already eliminated. DHL U.S. Express will retain 3,000 to 4,000 employees. World-wide DHL has some 300,000 employees.

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Fed Refusing to Disclose Details of $2 Trillion in New Loans

Fed Defies Transparency Aim in Refusal to Disclose

Nov. 10 (Bloomberg) -- The Federal Reserve is refusing to identify the recipients of almost $2 trillion of emergency loans from American taxpayers or the troubled assets the central bank is accepting as collateral.

Fed Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson said in September they would comply with congressional demands for transparency in a $700 billion bailout of the banking system. Two months later, as the Fed lends far more than that in separate rescue programs that didn't require approval by Congress, Americans have no idea where their money is going or what securities the banks are pledging in return.

``The collateral is not being adequately disclosed, and that's a big problem,'' said Dan Fuss, vice chairman of Boston- based Loomis Sayles & Co., where he co-manages $17 billion in bonds. ``In a liquid market, this wouldn't matter, but we're not. The market is very nervous and very thin.''

Bloomberg News has requested details of the Fed lending under the U.S. Freedom of Information Act and filed a federal lawsuit Nov. 7 seeking to force disclosure.

The Fed made the loans under terms of 11 programs, eight of them created in the past 15 months, in the midst of the biggest financial crisis since the Great Depression.

Here.

Haha! Michael Bloomberg is suing the Federal Reserve to force disclosure. Is he still an Independent? I've lost track. He was a Democrat before he became a Republican and a Republican before he became an Independent.