From Volume 7, Issue 33 of EIR Online, Published August 12, 2008

U.S. Economic/Financial News

Morgan Stanley Freezes Withdrawals from Home Equity Lines

Aug. 6 (EIRNS)—Morgan Stanley, the second-largest securities firm in the U.S., has notified thousands of its clients that they won't be allowed to withdraw money on their home-equity credit line, since most of their properties have lost value. "Morgan Stanley periodically reassesses client property values and risk profiles," said Christine Pollak, a Morgan Stanley spokeswoman. "A segment of clients was recently notified of a change in the status of their home-equity line of credit, or HELOC, due to a change in the value of their property and/or their credit profile."

Lyndon LaRouche commented: "What is this? Another Northern Rock?" referring to the British bank which went belly-up in February 2008.

Bloomberg reports that JP Morgan Chase has notified 150,000 customers about modifications in their home-equity lines of credit, in some cases reducing the credit lines and in some cases suspending them. Bank of America and Washington Mutual, among others, have also frozen home-equity credit lines this year.

Transatlantic Business Losses, Fire Sales, Flea Markets

Aug. 5 (EIRNS)—This Summer's announcements of second-quarter profits, is, instead, a deluge of announcements of losses, bankruptcies, and attempted fire sales, as shown in the list below of selected Transatlantic examples from retail, construction, restaurants, and, of course, banking. Overall, in the United States, the U.S. commercial loan market is at its lowest level in two years—presently $1.728 trillion, and on the way down. The U.S. ACBP market—Asset Backed Commercial Paper—once at a $1.3 trillion level, now stands at $743.9 billion and falling.

* WCI Communities, the U.S. luxury home builder chaired by Carl Icahn, filed Chapter 11 bankruptcy yesterday after failing to get financing. The next in line for bankruptcy may be another biggie, Beazer Homes USA. WCI operated in the Virginia and Florida, formerly "prime" residential markets.

* Merrill Lynch CEO John Thain said the reason he recently sold Merrill's mortgage investments at fire sale prices, was to bolster employee morale! A week ago, he sold billions of toxic mortgages for pennies on the dollar, explaining he needed to take decisive action: "We have over 60,000 people working every day. All the efforts of these people are overwhelmed by the write-downs in the mortgage-related assets." Also, Thain said he sold because, "the buyer might have gone away."

* U.S. retail and restaurant commerce is tanking. On Aug. 4, the Baltimore-based Boscov's Inc., a department store chain, declared Chapter 11 bankruptcy. On July 29, a division of the Metromedia conglomerate owned by billionaire John Kluge, Bennigan's Pubs, of S&A Restaurant Group, announced intent to declare Chapter 7 bankruptcy for its 170-outlets. For 2008 overall, U.S. restaurant sales will decline, for the first time since 1990.

* European retail sales (in the 15-nation eurozone) in June fell by 3.1% from a year earlier, and the most since 1995. Sales of food products dropped 4.4% from June 2007; sales of non-food goods dropped 2.2%. Unilever, the Anglo-Dutch cartel company, second-biggest in the world for consumer products, announced a net income drop of 20% for the first half of this year.

* Northern Rock, the British home lender, nationalized in February, reported a £585 million (nearly $1 billion) loss for the first half of this year, way up from the loss level of £199 million for all of 2007. The number of those defaulting on their loans is increasing rapidly.

* HSBC Holdings, the biggest European Bank, reported a 29% profit drop for the first six months of '08, with net profit dropping from $10.9 billion in 2007 to $7.7 billion in 2008.

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