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AIG plans bonuses to financial-products employees.
Payments go to staff at unit that sent insurer to brink of collapse.
AIG has received 4 bailouts thus far totalling 85 Billion
The company took the original bailout money and went off on a $440,000 dollar spa spending spree for the executives
Received $20 billion in fresh US government aid and $118 billion worth of guarantees against bad assets
The emergency funding will absorb the losses it incurred when it bought Merrill Lynch.
The bailout was engineered after days of denials by Bear executives that the firm was facing a liquidity crisis and lacked sufficient funds to continue operating.

Chrysler on track to run out of cash before the end of 2009 if a merger or major government intervention doesn’t occur, analysts tell the Wall Street Journal. With credit markets choked and rapidly diminishing reserves, experts say bankruptcy, which would carry massive consequences for the industry and economy as a whole, could be unavoidable.

Chrysler would fight filing for bankruptcy because it would undermine consumer confidence in their products, with car buyers afraid their vehicles might not have manufacturer support down the road. It would also have a disastrous effect on local car dealers and other automakers that depend on their parts.


Circuit City Shutting 150 Stores to Avoid Bankruptcy

It's made it through some tough times in the past, but it looks like Circuit City is now really up against the wall, and it's apparently considering some rather drastic measures to avoid becoming the largest retailer to enter bankruptcy protection in recent years.


Citigroup Not Only Bank in Sports Game Receiving Bailout Money

Citigroup, Inc. (NYSE: C) has been the target of public criticism over their record $400 million naming rights deal for the new Mets stadium set to open this year, but they’re not the only banking institution receiving federal bailout money in the sports sponsorship game.

While Citi’s deal is by far the largest deal (20-years at $20 million annually), several other U.S. banking intuitions are taking in Troubled Asset Relief Program, or TARP monies while investing heavily in the stadium sponsorship game such as: Bank of America, Chase, PNC Financial Services Group Inc., and Comerica.


Ex-Leaders of Countrywide Profit From Bad Loans

Fairly or not, Countrywide Financial and its top executives would be on most lists of those who share blame for the nation's economic crisis. After all, the banking behemoth made risky loans to tens of thousands of Americans, helping set off a chain of events that has the economy staggering. So it may come as a surprise that a dozen former top Countrywide executives now stand to make millions from the home mortgage mess.


Fannie Mae seeks $15.2B in US aid after 4Q loss

WASHINGTON (AP) -- Fannie Mae lost $25.2 billion in the fourth quarter and is asking the government for $15.2 billion in aid as the U.S. housing market worsens. The mortgage finance company, seized by federal regulators in September, posted a quarterly loss of $4.47 per share. That compares with a loss of $3.6 billion, or $3.80 a share, in the year-ago period.

The fourth-quarter loss was driven by $12 billion in credit losses due to declining housing market conditions, $12.3 billion in losses on derivatives and $4.6 billion in write downs of the value of its mortgage-backed securities.

The request for $15.2 billion in federal aid, which matches Fannie's negative net worth for the quarter, is the first time the company has asked for government money.


GE indicated that the problems in the financial markets were the big reason behind the weakness. The company's two financial services units - Commercial Finance and GE Money - both reported steep declines in operating profits. What's more, GE said that operating profits in both units could post double-digit declines in earnings for all of 2008, helping to push lower GE's own forecast for overall profits for the coming year. Unfortunately, GE's bad news extends far beyond the credit crunch and is a troubling sign for the entire economy and market.


GM shares plunge on bankruptcy fears

General Motors (GM, news, msgs) shares slumped below $10 today -- a level not seen since September 1954 -- after an analyst suggested that slumping sales may force the automaker to seek bankruptcy protection. The plunge is an astonishing moment in the history of the nation's largest automaker -- once so powerful that many people believed that, as the late GM president Charles Wilson was incorrectly quoted as saying in 1953: "What's good for General Motors is good for the country."


As part of a financial rescue strategy in the wake of the nation's credit crisis, Goldman Sachs was one of eight leading banks in the nation that signed up for a government plan that would invest up to $250 billion in ailing financial institutions. Sources familiar with the bailout plan said in mid-October that Goldman Sachs stood to receive $10 billion of that money to help stabilize the former stand-alone investment bank.


The Death of IndyMac

The credit crisis might go down in two distinct chapters: A rise in foreclosures that wrestles homeowners into submission, as we've seen in the past year and a half, and a second phase that up until now hasn't received as much attention: Bank failures. California-based IndyMac (NYSE: IMB) was seized by the FDIC, the government organization that insures bank deposits, in what could go down as one of the costliest bank failures ever. Once the smoke clears, the FDIC could be on the hook for between $4 billion and $8 billion. That's a seriously scary chunk of the $53 billion it has set aside for such episodes.


Krispy Kreme Doughnuts Inc. said higher ingredient and gas costs contributed to its losses in the third quarter. The Winston-Salem-based company said it recorded a loss of $5.9 million, or 9 cents per share, in the quarter ended Nov. 2. That compares with a loss of $798,000, or a penny per share, in the same quarter last year.


Merrill Lynch, which has already written down approximately $24.5 billion on its sub prime securities investments, is anticipated to write down additional investments in the first quarter of 2008. Noted stock research firm, Sanford C. Bernstein & Co., estimates that Merrill Lynch will write down an additional $4.5 billion on collateralized debt obligations (“CDOs”). Merrill Lynch reported that it held approximately $30.4 billion in CDOs at the end of 2007 and the values of CDOs have fallen sharply since that time.


Shares of Morgan Stanley fell Tuesday amid broader concern about ongoing problems in the financial and housing markets and as analyst slashed his earnings estimates for the investment bank. Morgan Stanley shares fell $2.87, or 6.6 percent, to $40.40. Shares have traded between $29.60 and $69.87 during the past year.


Rite Aid Corp., the nation's third biggest drugstore chain, reported that it lost $960.4 million in its fourth quarter 2008, mostly the result of a non-cash income tax charge, as it worked to absorb more than 1,800 stores acquired last year. Rite Aid said it expects to lose money in fiscal 2009 for a third straight year and that sales would be below what analysts are predicting.


Sharper Image files for chapter 11 bankruptcy on February 20, 2008

NEW YORK (Reuters) - Retailer Sharper Image Corp has filed for Chapter 11 bankruptcy protection, citing declining sales, three straight years of losses and litigation involving its Ionic Breeze air purifiers. The San Francisco-based company filed for protection late Tuesday in U.S. bankruptcy court in Wilmington, Delaware. Sharper Image said it had $251.5 million in assets and $199 million in debt as of January 31, according to the filing. Cash on hand totaled about $700,000. Its shares plunged 92 cents, or 64 percent, to 52 cents on Nasdaq. "Sharper Image is in a severe liquidity crisis," Chief Financial Officer Rebecca Roedell said in a separate filing.


The ouster of G. Kennedy Thompson as chief executive of Wachovia, announced Monday morning, leaves the Charlotte, N.C.-based bank confronting an uncertain future. Some see Mr. Thompson’s hasty exit as a sign that the troubles at Wachovia - and indeed at many banks - will continue to deepen as credit problems spread.


Billions of dollars in tarnished debt sit festering on WaMu’s books. The stock is down 71 percent over the past year, thousands of employees have been laid off, and just last week WaMu effectively sold half of itself to an investor group at a bargain-basement price.
Shareholders are livid. CEO Killinger is doing his best damage control. The employees left are wondering if they’ll have a job in the next few months.

Hedge Funds: Signs of Life

Managers battle from their worst year in decades.
Bloomberg Markets, March 2009

Hedge fund managers on average lost 18 percent of their clients' money in 2008, for the worst performance since at least 1990, according to Hedge Fund Research Inc. Combine the losses with investor redemptions, and total hedge fund assets have been cut almost in half. TrimTabs Investment Research estimated hedge funds held $998 billion at the end of the year, down from $1.9 trillion a year earlier.

Investors withdrew an estimated $269 billion from hedge funds from September through December, according to TrimTabs in Sausalito, California. With investment losses, total hedge fund assets fell to their lowest level since 2004, the firm found.

Some managers prevented a bigger exodus only by imposing restrictions on redemptions, known as gates. Citadel Investment Group LLC's Ken Griffin, for example, suspended redemptions in the firm's Kensington Global Strategies and Wellington funds, according to a Dec. 12 letter he sent to investors.

Star managers forced by losses to shut funds include Dwight Anderson of Ospraie Management LLC and Jeffrey Gendell of Tontine Associates LLC.

Things changed as commissions and spreads on stock transactions shrank in the late 1990s, making equity trading cheaper -- and more profitable. When the technology stock bubble collapsed, pension fund money began to flood into hedge funds, and much of it was directed by consultants into equity strategies. These were easy to market compared with a macro fund, for which a manager might have to explain the outlook for the yield curve, say, or the Japanese yen.

As it turns out, the equity strategies were not particularly well hedged. That didn't matter much until the stock market plunged. While the long-short funds beat the Standard & Poor's 500 Index, they still lost 26 percent last year, and event-driven funds dropped 21 percent.
"On average, funds did not do what they represented they could do, which is to make money in up-and-down markets," says Sol Waksman, founder and president of Barclay Hedge Ltd., a Fairfield, Iowa- based firm that tracks and invests in hedge funds.

TGT Target:
Bill Ackman won't be forced to sell his stake in the company

New York Post

NY Post reports despite staggering losses in a fund dedicated to investing in TGT, hedge fund chief Bill Ackman won't be forced to sell his stake in the company, The Post has learned. Ackman, who runs hedge fund Pershing Square Capital Management, remains committed to the Target entity, known as Pershing Square IV, despite it having lost an eye-popping 93% since inception in 2007. There had been concern that a flood of redemption requests by unhappy investors could pressure him to sell the stock. That would have not only locked in losses by selling in a down market, but more important, hurt Ackman's chances of getting a seat on the retailer's board, which is how he expects to turn around both the company and the fund. The amount of money leaving the battered fund, which is scheduled to pay off redeeming investors this month, remains unclear. But several people close to the fund said the billionaire investor has cash on hand to pay them without sacrificing his investment. Sources tell The Post the fund has been saved by a combination of new investments - including $25 million from Ackman's own pocket - as well as "modest" redemption requests from existing investors, some of whom have very little to lose.

Connected Corruption (click to view larger)


Is the prospect that a party insulated from risk may behave differently from the way it would behave if it were fully exposed to the risk. Moral hazard arises because an individual or institution does not bear the full consequences of its actions, and therefore has a tendency to act less carefully than it otherwise would, leaving another party to bear some responsibility for the consequences of those actions.

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