Is the Bank Watch List Incomplete?

CNNMoney.com posted an interesting article after we did our Thursday post yesterday. The story is one that we've continue to spotlight: Worries over possible bank failures. It is worth going back and reading.

Here's why you care: We highlighted the government watch list for angst ridden banks in a prior posting. What CNNMoney.com is saying is that the list may be incomplete. That's a big deal for two reasons: 1) an unexpected left hook like the IndyMac failure would really jolt a fragile Wall Street and 2) what's going on at the government level that the list is incomplete?

We're hoping for more from CNNMoney.com and others. This is an important story.

Next Week's News Today (Politics and Economics Collide at the Repulican Convention)

Why You Care is back with our weekly installment of what to look for next week. (Yes, we noticed today's the new numbers on the economy, if you want perspective CNN has a great write).

But first, a word about what to expect tonight: Senator Barack Obama's acceptance speech is going to be about the economy. Did anyone notice that Michele Obama's speech in essence was about economics? Consider one of her most applauded lines: "America should be a place where you can make it if you try". We think you'll hear much more of that tonight. Which bring us to next week.

Both Sen. John McCain and the national media will rightly be focused on the economy next week. If you compare the speakers list at next week's Republican convention with the scheduled economic reports due, along with earnings, like we have below you will see something interesting: The day Sen. McCain accepts the nomination is the same day that initial unemployment claims are due out.

Here's why you care: That will make for interesting coverage on TV the night of his acceptance, and equally interesting copy in Friday morning's papers. Hopefully it will give the type of news peg for smart thoughtful analysis like last week's New York Times Magazine examination of Sen. Obama's economic positions.

Also, you can certainly expect Gov. Mitt Romney on Wednesday to focus on the economy. We'll be watching and reading, and will bring you the best stories that combine both politics and money because we know you care.

MONDAY 9/1 - Holiday

Republican Convention Speakers (all convention speakers courtesy of www.gopconvention2008.com):
U.S. Sen. Joseph Lieberman (Conn.)
Gov. Arnold Schwarzenegger (Calif.)
Vice President Richard B. Cheney
First Lady Laura Bush
President George W. Bush


TUESDAY 9/2
Earnings: NCI Building Systems, Inc

Economic Reports: Auto Sales, Truck Sales, Construction Spending

Republican Convention Speakers:
Former New York City Mayor Rudolph W. Giuliani
Former Gov. Mike Huckabee (Ark.)
Former Gov. Tom Ridge (Pa.)


WEDNESDAY 9/3
Earnings: H & R Block, Staples

Economic Reports: Factory Orders, Crude Inventories

Republican Convention Speakers:
Carly Fiorina, Victory ‘08 Chairman for the Republican National Committee and former Chairman and CEO of Hewlett-Packard Co.
Former Gov. Mitt Romney (Mass.)
Mrs. Cindy McCain
Gov. Bobby Jindal (La.)
Republican Party’s Vice Presidential Nominee

THURSDAY 9/4
Earnings: Jackson Hewitt, Smith & Wesson, Quicksilver

Economic Reports: Initial Claims (for unemployment)

Republican Convention Speakers:
Gov. Tim Pawlenty (Minn.)
Gov. Charlie Crist (Fla.)
U.S. Sen. Sam Brownback (Kan.)
U.S. Sen. Mel Martinez (Fla.)
John McCain


FRIDAY 9/5
Earnings: National Semiconductor Corp

Economic Reports: Average Work Week, Hourly Earnings, Unemployment Rate

Do More Bank Failures Mean a Call to the Treasury to Back Up Your Checking Account?

The Wall Street Journal reports today that the government agency which insures your private checking and saving accounts up to $100,000 may need to borrow cash from the Treasury to protect YOUR deposited money due to an "expected wave of bank failures". Meanwhile, the New York Times reports the same story by saying the agency (the Federal Deposit Insurance Corporation, aka the FDIC) simply expects the banking "crisis to worsen".

Here's why you care: As we noted in a prior posting, 100 banks were reportedly on the FDIC watch list, and if the folks that are insuring your checking account are concerned enough now to raise the issue of borrowing from the Treasury, shouldn't you be concerned? With that in mind, we suggest the Wall Street Journal and New York Times articles.

Is there any good news? Yes, seems like FDIC Sheila Bair has been consistent in warnings, and with developing a plan. BUT, regardless as to whether your local bank is on the list or not, it does mean one thing: If you need a loan, it is a tough time to get one.

Obama's Economic Positions Explained: Obamanomics

Perhaps the most important thing you can read leading up to the Democratic conventions next week is the the New York Times Magazine's lengthy examination of Democratic Presidential Candidate, Sen. Barack Obama's economic game plan. The New York Times has it up on their website as an early release before Sunday.

Here's why you care: Dave Leonhardt's reporting sums it up best when he says Sen. Obama has "more-detailed proposals but a less obvious ideology". Quick, in one sentence describe Sen. Obama's economic ideology?

That's what we thought. Why You Care found itself with a run on sentence when we tried ourselves. That's why this article is important. You should read the whole thing, but if you have to cut to the chase as to what Sen. Obama wants to do then go to section five of the article. We're pretty sure you'll care.

Next Week's News Today (Politics and Economics Collide)

Why You Care is posting the third installment of Next Week's News Today.

We have broken it down by day below but the headline for you is this: The start of the week will use home sale numbers below to punch out headlines regarding housing woes. In addition, the Federal Reserve Open Markets Committee minutes on monetary policy will be cause for media scrutiny of the economy - BUT even more important than that, if the speakers at next week's Democratic convention are reading these pieces then they'll pepper their speeches with the latest economic worries.

Here's why you care: Next week is likely to see what Why You Care has been predicting: Political slogans offered as economic solutions. Solid reporting will cut through this, and we'll highlight the excellent pieces. Get ready.

MONDAY - 8/25/08
Economic News: Existing Home Sales for July

Political: DNC Convention begins; Expected DNC convention prime time speaker - Michelle Obama.

TUESDAY - 8/26/08
Economic News: New Homes Sales; Consumer Confidence; FOMC Minutes (Federal Open Markets Committee [think Federal Reserve]).

Earnings: Border Group Inc; J Crew; LTX Corp; Sanderson Farms; Smithfield Foods;

Political: Expected DNC convention prime time speaker - Sen. Hillary Clinton.

WEDNESDAY - 8/27/08
Economic News: Durable Orders; Crude Inventories

Earnings: American Eagle; Men's Warehouse; Talbots

Political: Expected DNC convention prime time speaker - TBD Democratic Vice Presidential Nominee (*Bill Clinton also speaks).

THURSDAY - 8/28/08
Economic News: Initial Claims

Earnings: Costco; Del Monte; Dell; Fred's; Kirklands; Micros Systems; Tiffany & Co.

Political: Expected DNC convention prime time speaker - Sen. Barack Obama (*Al Gore also speaks).

FRIDAY - 8/29/08
Earnings: Personal Income; Personal Spending

Looking Past the Headlines and Through the Political Conventions for an Economic Antibiotic

Why You Care notes that CNNMoney.com has two stories posted today that are really the same story. The first headline is Mortgage Applications Hit a Six Year Low, while the second one promises Falling Home Prices: The Silver Lining. What's going on here is simple supply and demand. In fact as bad news as that might be for the person who is trying to hang on to their property because their mortgage has reset, it is equally good news for those that saved their pennies and waited for the market to cool off before jumping in. We've said repeatedly whether you want land or stocks of those who are involved in land/lending, the real estate after Christmas sale continues.

That is likely intuitive to you. Thus, we suggest instead spending your time today with the New York Times editorial which is interesting on a number of levels.

Here's why you care: The Times editorial raises the caution that we raised yesterday by linking to a Wall Street Journal story regarding 100 banks on a government watch list due to their financial health. In other words, there's more to come. The Times also raises the issue we raised Monday which is that economic solutions are easily paved over in election year rhetoric. What the Times does that we didn't do is call for immediate action by Congress to begin work on another stimulus package. That is indeed interesting. What should be in it? Should the government wait? Should other options be explored instead or at least simultaneously? That is fertile ground for debate.

It would be terrific if the next few weeks of political convention coverage became an incubator for ideas. Whether you agree with the Times' suggestions or not, reading this will help you understand the campaign slogans over the next few weeks.

100 Banks on Government Watch List? Time for Tough Love?

Inside the Wall Street Journal today is an important story about the health of banks around the country. The Journal reports that 100 banks around the country are on a government watch list due to their financial well being. Furthermore, the the Journal says two government arms are at odds over whether there needs to be pressure put on them to get their balance sheets in order.

The first arm argues tough love now will mean less cost later in cleaning things up. The second arm apparently advocates a less "dire analysis" according to the Journal.

Here's why you care: The first arm is the Federal Deposit Insurance Corporation (FDIC) which was created in the wake of the depression and insures your checking account or savings account to the tune of $100,000 (ie, if the bank goes bust, the government will pay you up to $100,000). The second arm oversees savings-and-loans around the country (the Office of Thrift Supervision). If the folks that are insuring your checking account are concerned enough to advocate more pressure on banks to get their financial house in order, shouldn't you be concerned too?

That's why amidst all of the stories today about building starts being down, the Producer Price Index pointing to inflation and earning reports (which Why You Care outlined for you last Thursday), you should instead be reading this article.

McCain, Obama and the Wall Street Primary

Why You Care guesses you were away at the beach this weekend and likely were not pouring over the Sunday business pages. That's okay, we were. What you missed was a terrific look at how both Senators Barack Obama and John McCain are vying for both economic bonafides in the eyes of voters and Wall Street dollars.

Here's why you care: Nelson Schwartz and Steve Lohr's piece rightly points out that Wall Street Democrats and Republicans largely lined up behind then presidential candidates Hillary Clinton and Mitt Romney respectively. Senators Obama and McCain are now making up that ground for very different reasons. That will impact how they play to Wall Street and to the voter. If you think the offshore oil drilling debate was interesting, try fiscal policy that will make the difference as to when you are able to retire, buy a house, or put a child through college.

Reading this piece will give you a sense of what's going on leading up to the party conventions in the next few weeks.

Washington, DC Plays Mortgage Scandal Poker

Washington loves a good game of scandal poker: I see your scandal and raise you. Why You Care is not surprised to see the Wall Street Journal's headline that a Nevada bank caught up in the mortgage mess in fact had Sen. John McCain's son on its board.

This comes on the heels of House Republican lawmakers pushing for an inquiry into a Portfolio magazine article that links Countrywide loans to Democratic lawmakers, and... even journalists.

Here's why you care: As we keep noting the political conventions are upon us, it is an election year, and thus you are going to hear a lot of slogans and platitudes about how to make America's financial spine stronger. These two articles show how close those that write the slogans, speak the slogans, and legislate the slogans are to the actual mess.

It is a matter of perspective. Reading these two articles will help you broaden yours.

Next Week's News Today

Lots of news today to compete for your time. Inflation is at a 17 year high (New York Times has a great write). Foreclosures are up from last month, with the "wow" number being 183% up from last year (CNNMoney.com has the best write on that). However, Why You Care notes that as horrible as that number is, as you read the story you again see that it is market to market.

So what's next week going to look like? We've got a window and it looks like more stories about inflation as it relates to retail and a report on the number of new homes built will be a reason to revisit the foreclosure numbers.

Here's Why You Care: As we noted last week when we posted Next Week's News Today, business like politics is often a game of expectations. With the bad news on inflation and foreclosures today, the stories next week will either be a) the sequel to that; or b) if there's any hint of good news then it will be treated as something of a rebuttal.

What's going to happen next week falls perfectly into that framework. Lots of retail oriented companies are due to report their earnings. Plus, the Producer Price Index, the PPI, (which tracks how much those who make things get paid for them) is set to report on Tuesday. It makes sense then that those will be threads of stories.

And the double whammy? Housing starts will be out on Tuesday. In other words, data on new construction of homes. You are probably thinking, well, that's got to be incredibly low. That makes sense, but then we've both just set an expectation right?

Here's Next Week's News Today:

Monday August 18
Earnings: Perry Ellis and Lowe's
Tuesday August 19
Economic Reports: Housing Starts/Building Permits and the Producer Price Index (PPI)

Earnings: Home Depot, Saks and Target

Wednesday August 20
Economic Reports: Crude Inventories

Earnings: Longs, Limited, Ross Stores, BJ's Wholesale and Phillips-Van Heusen

Thursday August 21
Earnings: Dick's Sporting Goods, Barnes and Noble, Foot Locker, bebe stores, Burger King, Cost Plus and Pacific Sunwear

Friday August 22
Earnings: AnnTaylor

The Politics of Your Money

What is the best way to spend tax dollars to bolster the economy? Should they be spent at all? If your life depended on it could you answer the following question: Did the last stimulus package work? The Washington Post has a provocative editorial today (Why You Care is not necessarily agreeing/disagreeing with their argument) due to the issues they bring up on what Congress is thinking about doing next when it comes to the economy.

Here's why you care: If your tax dollars are going to be used, don't you want to know that the "how" and "when" is executed without politics and with the greatest hope of success? We hope the Washington Post keeps these questions hot on their editorial page and that you reward them with a few minutes of your time. Why You Care thinks the political conventions are upon us, and the details outlined in the editorial may get painted over in the broad brush strokes of political speeches.

Why You Care When Good Borrowers Go Bad

Once again CNNMoney.com has the must read article of the day. It hammers away at something we've spotlighted, and what Jaime Dimon the JP Morgan Chase CEO called in his portfolio "terrible." Namely prime borrowers - or those with good credit - defaulting. Why You Care was going to link to our prior post with his quote, but then realized CNNMoney's Les Christie dutifully included the Dimon quote. So just go read his good work.

Here why you care: If good borrowers are defaulting, it just means that much longer before we stabilize the housing market, and the financial sector on Wall Street that is pulling down the value of your 401k.

What's behind the Russian-Georgian Conflict

U.S. Vice President Dick Cheney is quoted in this article posted on CNNMoney.com a stating, "Russian aggression must not go unanswered." That is not surprising given that Georgia is a U.S. ally, and given that the U.S. has an interest in stability and humanitarian issues. But, keep in mind as you watch the terrible pictures from the region that both Russia and the U.S. have another interest in the region.

Here's why you care: CNN gets it right with this headline: "Oil jumps on Russia-Georgia conflict." That's right oil distribution will be disrupted because of the conflict. It is why Russia cares. It is why the stock market cares. Read this article and then observe the statements from all parties through the lens of not just diplomacy but economics.

Debating Keeping Businesses in the U.S. While Sweeping Up the Mess

We're guessing when you read the words "Sarbanes-Oxley" (unless your job is to care about it) means you skip to the next article. You shouldn't do that with this one. Even though Floyd Norris' terrific column today may be in the business section for people who already have a financial background, it is just as well written for those who don't. Forget about Sarbanes-Oxley for a moment, this article is important to you because it shows that regulation doesn't necessarily mean companies will flee the U.S.

Here's why you care: There's a big debate going on right now as to how much the U.S. government will regulate the banks and Wall Street. Yes, legislation already passed. But, passing legislation in the nation's capitol and implementing and enforcing it are two different matters. Some fear too much tightening will cause financial institutions to essentially hop the pond and increase their office space in London. Other's think if we don't enforce we'll send the market further down the drain. Both have good points. The report Mr. Norris highlights shows that just because you institute a regulatory measure doesn't mean everyone leaves. Think about that in the context of credit crisis and the mortgage mess.

Here's another reason why you care: The political conventions are around the corner. Why You Care bets that the mortgage mess and solutions to the economy will be a big part of it. You're going to hear lots of speeches about regulation - from all sides. This article will help you be smart when you hear Senators Obama and McCain. Too bad Mr. Norris was on the business page today and not the A Section.

Next Week's News Today

Truth be known, Why You Care wanted to make Next Week's News Today a regular Wednesday feature and post this yesterday. But, when we saw the article yesterday about the bank in San Diego buying up properties, we felt compelled to post that along Fairfax County, Virginia making a similar move. It was just too interesting and informative.

So, we were not really that surprised when we woke up this morning to find both the Wall Street Journal and New York Times running stories about retail sales.

Here's why you care: Business like politics is often a game of expectations. Retailers are interested in setting the tone regarding their July sales BECAUSE NEXT WEEK many of them are due to report earnings.

Here's why you care again: Those earnings are often times looked at by Wall Street as not static figures but rather subjective ones. For instance, if you establish you are going to post a loss, but post less of a loss than was expected - BINGO you're a winner. The thing about retailers that impacts you personally is that if they don't do well that means part time jobs start to dry up. That means less spending power. And if they really don't do well, that means malls start losing their stores. A few small ones, not the end of the world (except for that small business owner). But, you lose an anchor store (i.e. the goliath store at the mall that all the other ones center around) then the rest of the stores may fall like dominos.

Bad for you pocket book, bad for anyone you know that needs a part time job, bad for you community. We think you care.

And if you are a land owner near by, really bad for you property value.

So, next week expect lots of stories that fall into the framework laid out above because take a look at who is reporting earnings next week that relate to retail:

Macy's (Wednesday 8/13/08)
Wal-Mart (Thursday 8/14/08)
Estee Lauder (Thursday 8/14/08)
JC Penny (Thursday 8/14/08)
Kohl's (Thursday 8/14/08)
Nordstrom (Thursday 8/14/08)
Abercrombie (Friday 8/15/08)

You're Next Week's News Today bonus: Consumer Price Index (CPI) numbers should be out on Thursday, August 14. What's CPI? CPI, although criticized by some economists and market watchers, is used to more or less gage inflation. That's because it is supposed to measure the average price of goods you as the consumer are out purchasing. When tracked over time, some point to it as inflation thermometer - but again, talk to three economists on this, and they'll are likely get wound up. You'll also see stories about inflation next week because 1) the Federal Reserve is concerned about it; and 2) the CPI numbers are out on Thursday.

The Real Estate After Christmas Sale Continues

There are two groups who benefit when a bubble bursts: Those that saved their pennies, and those who are lucky enough to have deep pockets. That's why we've said repeatedly right now is like an after Christmas sale for the financial and real estate inclined.

That doesn't lessen the hurt for others, or does it?

Here's why you care: Amidst the further gloom and doom headlines today is a great story in the Wall Street Journal about how a bank in San Diego is buying up houses banking on the market turning around in five years. Even though you likely don't live in San Diego, and each real estate market is just that - a market unto itself - this matters to you. Why you care is because even if you can't take advantage of the sale, and are worried about your house price, it is another sign that those who are financially enabled are convinced of a turn around (albeit down the line). That should help some of the sleepless nights.

Here's another reason why you care: Just like this San Diego bank, the Washington Post has previously reported that Fairfax County Virginia has stepped in as a local government actor to buy properties in foreclosure. They are acting in defense, but down the line, that just might look like a terrific offense. (Many thanks to the alert Why You Care fan that sent us this link).

Gives you a sense that there a lot more deals going on out there than you are aware of, huh?

While the Fed Debates Rates, Get Smart on Oil's Impact

While the Federal Reserve Board meets today to discuss rates, a wounded real estate market, flaccid economy, and concerns about inflation we thought it would be a good time to give you two excellent pieces that should be read together. They are, of course, about oil. But, they are really about where you live and how.

Here's why you care: FORTUNE has a well researched article called "Falling Oil Prices: The Downside". Their point, oil is coming down because there's less demand. There's less demand because our economy is in the tank. That's interesting to consider that pump pain relief comes at a different cost - i.e. an acknowledgement the economy is sick.

BUT, if you take the FORTUNE article then read Sunday's New York Times' "Shipping Costs Start to Crimp Globalization" you'll get an even different take. Their point, pump pain means higher fuel costs for shipping goods. Thus, made in Akron, Ohio starts looking better than made in India to the Wal-Marts of the world.

So while you are pumping your next tank and watching the numbers roll over like a slot machine trying to calculate the national deficit, consider which pain you're willing to bear.

Here's another reason why you care: We're going to pay either way, so what's the best path? We think reading these two articles today will leave you better informed as the campaign cycle heats up and the legions of political advisers look at data to shape presidential campaigns. They'll do that believing they know why you care. These two articles will help you make up your own mind.

The Solution, Or Trading One Drug for Another?

Today's New York Times' lead - shouting that banks expect borrowers with decent credit to start defaulting - has enough angst in it to cause a run on Zantac at your local drugstore. One would think that would be enough to say that's why you care, and this is your one must read article today.

You'd be wrong. What you REALLY want to do is read their lead today, then go read their lead editorial from yesterday regarding banks and private equity (aka deep pocket investors).

Here's Why You Care: The argument (which the Times editorialized against yesterday) is that, it has all gone to hell and the only way out is for the private deep pockets to invest in the banks so they can start lending again. If that happens, then the machinery that allows everyone to borrow money and make money can start moving again. The catch? The catch is that the private investors want to be free of the rules that essentially say if you buy enough of a bank, then you get regulated like one.

Here's another reason Why You Care: The Times makes some very good points regarding a lack of regulation and fancy math being the twin sirens that have grounded our collective financial ship. But, when you wake up Monday and read today's headline, you start to get the picture of just the type of pressure regulators will be under from private investors who say, "hey, we've got away out" all the while each day's headline points to further meltdown. In other words, does this end up being part of the solution, or would this really be like trading one drug habit for another?

The Sunday editorial did a good job of showing the behind the scenes debate. To best understand it and whether regulators will bend is to read both pieces together. Then you'll really understand why you care.

Book Review: "Deception and Abuse at the Fed"

By Tom Kaufman and Christian Hudson

Originally Published in the Santa Cruz Sentinel: 07/27/2008

Foreclosures in record numbers, inflation worries, a stagnant stock market ... Ask yourself: Have you seen a newscast in the past week that doesn't mention the Federal Reserve Board?

That's because the Fed is very much the 800-pound gorilla when it comes to righting our country's financial ship. But we're willing to bet you really don't know much about the Fed, and that's because historically it likes it that way.

That's why Dr. Robert Auerbach's new book, "Deception and Abuse at the Fed," has perfect timing. Auerbach served for more than a decade as an economist on the House of Representatives' Banking Committee [now Financial Services Committee] under then Chairman Henry B. Gonzalez. [Full disclosure, Auerbach has been a long-time friend, source and adviser in the ways of both Washington and economics for one of the column's authors.]

It is former Fed Chairman Alan Greenspan who takes center stage in Auerbach's critical look at the Fed's actions over the years. Perceptions ebb and flow in waves and the sea may be leaving Greenspan's reputation on somewhat rockier shoals of history. In part, this may be due to Auerbach's detailed account of skirmishes between then-chairman Greenspan and then-chairman Gonzalez.

The skirmishes pitted an ever-aggressive populist with little patience for the perceived imperial Fed in Gonzalez versus Greenspan's protection of the Fed's cherished independence.

The depiction is certain to dim the luster of the Greenspan years and bring into question the role of the Fed. More importantly for Greenspan, the book questions his political role in the Bush tax cuts and not preventing some of the abuses that have led to bubbles and the recent economic distress first arising out of the subprime market.


The book makes the case that for 17 years, the Fed insisted there were no records of the meetings of the famous "Federal Open Market Committee," which sets Federal Reserve strategy. Dogged determination by Gonzales forced the Fed to admit that there were actual transcripts going back to 1976 and they were eventually released. In other words, journalists and market watchers should send Auerbach a thank-you note pushing them into the light.

Greenspan was an unparalleled master of the media, and Auerbach asserts that as the "Master of Garblements" he manipulated congressional hearings and the press to achieve his desired results. Auerbach also argues that the Fed has brilliantly insulated itself from criticism by gobbling up able-minded economists out of academia with plum contracts.

Knowing the world would dissect his every word, Greenspan became a zen master at vague descriptions that left open an incredibly wide range of interpretations. At one session, four eminent newspapers had four different headlines on the same answers given by Greenspan: "Greenspan Sees Chance of Recession," "Recession is Unlikely, Greenspan Concludes," "Recession Risk Up, Greenspan Concludes," and "Fed Chairman Doesn't See Recession on the Horizon."

But this book highlights more than just Greenspan and his legacy. It sets forth the challenges that Congress faces in dealing with the Fed. The Fed needs to remain independent, but it is Gonzalez's premise, and apparently Auerbach's too, that it is unacceptable for an unelected body having vital control over the U.S. economy to be able to operate in secrecy without disclosing to the public its entire decision-making process. Auerbach's book, while focused on Gonzalez's victories with the Fed, is invaluable to anyone who cares about the economy and the at-times guerilla warfare between Congress and the Fed as they both grapple with what's best for the American economy.


Tom Kaufman is the Capital Markets Committee Chairman for the American College of Real Estate Lawyers.

Christian Hudson, a former Santa Cruz resident, now practices law at Hunton and Williams LLP in Washington.