U.S. Economic/Financial News
'Standard & Whores' Squeeze Play vs. General Motors
The rating agency Standard and Poor's has been caught, red-handed, playing the game of thieves, in this case, the thief being Kirk Kerkorian, the asset-stripper who has his sights set on the cadaver of General Motors. On Dec. 12, S&W downgraded GM bonds, once again, to far, far below junk grade. This came just days after the GM board, in the first sign of sanity in a long while, refused to allow a Kerkorian flunky to be placed on the GM board (Kerkorian has a 9.9% stake in GM), on the grounds that he would be privy to inside information that Kerkorian would be likely to use to profiteer from a GM collapse. Lyndon LaRouche asked the obvious question: Is "Standard & Whores" working on behalf of Kerkorian?
More of the behind-the-scenes manipulation by Standard & Poor's came out Dec. 13 in Bloomberg's London columnist's story, "GM, GMAC Derivatives Bet May Unravel." He points out that, with no buyer for GMAC on the horizonall those who came near fell outthe cost to GMAC to buy "insurance," i.e., purchase of credit-default derivatives to hedge against losses, at $200,000 in October, is now back up to $500,000. The rise in GM's "premium" payments occurred, in part, because there were no buyers for GMAC so traders stretched out the odds against loss or default.
The "premium" had been as high as $750,000 in May after S&P downgraded GM to junk-bond level. The fall from $750,000 to $200,000 is attributed to the move by S&P in October to separate its ratings of GM from GMAC, under the cover it hoped such a move would improve GMAC's marketability. Now, after the latest S&P cut of GM's corporate credit rating, S&P analyst Scott Sprinzen let the cat out of the bag: "We've been unequivocal about [GMAC's inability to close a deal], "all along. We would revert to our prior [non-separation rating scale] ratings," if there's no sale.
All this drives GM into the hands of hedge funds.
FEMA Ordered To Maintain Housing for Katrina Victims
A Federal court has ordered FEMA to maintain its "short-term" housing program for Katrina evacuees, now in hotels and motels. Federal Judge Stanwood Duval issued a temporary restraining order (TRO) Dec. 13 directing FEMA to continue to pay for the housing, finding the agency's actions "notoriously erratic and numbingly insensitive," as it has three times told these people it would terminate payments for their lodging. Judge Duval wrote, "It is unimaginable what anxiety and misery these erratic and bizarre vacillations by FEMA have caused these victims...."
Key to the court's consideration of issuance of a TRO, was whether FEMA, in attempting to end the Short-Term Lodging Program for the hurricane victims, has violated legal obligations to provide aid. Duval explicitly found that, "by law and mandate, the federal government is responsible," for providing this aid as detailed in the Stafford Act, which also prohibits discrimination on various grounds, including economic status. Duval found, "It is very evident ... the majority of the persons affected ... are the most disadvantaged of our citizens and/or the persons who lost virtually [everything] and in some cases family members.... The arbitrary January 7, 2006 termination of benefits is directly aimed at those who have virtually no resources, economic or otherwise." Based on this, he finds, "these actions by FEMA not only discriminate against victims based on ... economic status ... but also violate the intent of Congress in providing for disaster aid to assure ... means of assistance and alleviate the suffering...."
Duval's ruling requires FEMA to continue to pay the motel "rental" funds until Feb. 7, 2006, or such time as an applicant has been provided other housing assistance or been outright denied assistance. (The date could be extended upon further review as well.) As the Baltimore Sun put it, "The decision ... was a rebuff for federal officials whoafter being criticized for the high cost of hotel housingsought to force individuals and families to take over responsibility for their own housing."
Multitudes Still Homeless in Louisiana, Mississippi
Tens of thousands are still homeless in Louisiana and Mississippi, 105 days after Hurricane Katrina. U.S. Reps. Charlie Melancon (D-La) and Gene Taylor (R-Miss) told reporters Dec. 13 that upwards of 40,000 families in southern Louisiana and another 10-12,000 in south Mississippi are still living in tents or other makeshift shelter, because FEMA has failed to provide travel trailers and mobile homes for them. Taylor reported that during the last Congressional recess, he discovered a lot in Pass Christian, Miss., run by Bechtel, that contained 330 travel trailers that had been cannibalized for parts and rendered unusable. "It's time for the President, for FEMA, for Bechtel, to get off their duffs and help these people," Taylor said. He noted that, while the weather on the Gulf Coast is not nearly as cold as in the rest of the country, nighttime temperatures are forecast to go down into the 30s this week, making life miserable for those thousands in tents.
Millions of Americans Need Help To Pay Energy Bills
Six million Americans need assistance to pay winter energy bills, as available funds decline. Last year, the Congress allocated $2.2 billion to the Low Income Home Energy Assistance Program (LIHEAP), which funds states to help people pay their winter heating bills, according to USA Today Dec. 12. The Nonpartisan Center on Budget and Policy Priorities estimates that 6 million people will apply for help this winter, and that this requires $4.6 billion from Congress. In fact, the Republican Congressional leadership has attempted to cut LIHEAP funding, and 12 states are now taking steps to increase their supplement to the Federal dollars, by $280 million, to deal with the crisis.
The government Energy Information Administration estimates that home heating costs using natural gas will increase an average of 37.8%, to over $1,000, from $743; costs for heating with oil will increase 21.3%, to over $1,400, from $1,200; and electricity will be up 6.5%.
Housing for Full-Time Low-Wage Workers Is 'Out of Reach'
There is presently not a single county in the United States where a full-time worker, earning the Federal minimum wage, can afford a one-bedroom apartment, according to a report released Dec. 13 by the National Low Income Housing Coalition. "A full-time worker at minimum wage cannot afford a one-bedroom apartment anywhere in the country," concludes the NLIHC report, which is entitled, "Out of Reach 2005." It would take an average of $15.78 per hour, 40 hours per week, 52 weeks per year, to afford housing; this is three times the minimum wage. Moreover, "Nationally, a family with two full-time workers earning federal minimum wage would make just $21,424, significantly less than the $32,822 annually they would need to afford a modest two-bedroom apartment."