FDIC Prepares as Bank Failures Loom - Wall Street Journal

FDIC to Add Staff as Bank Failures Loom
By Damian Paletta
Wall Street Journal


WASHINGTON -- The Federal Deposit Insurance Corp. is taking steps to brace for an increase in failed financial institutions as the nation's housing and credit markets continue to worsen.

The FDIC is looking to bring back 25 retirees from its division of resolutions and receiverships. Many of these agency veterans likely worked for the FDIC during the late 1980s and early 1990s, when more than 1,000 financial institutions failed amid the savings-and-loan crisis.

FDIC spokesman Andrew Gray said the agency was looking to bulk up "for preparedness purposes." The division now has 223 employees, mostly based in Dallas.

The agency, which insures accounts at more than 8,000 financial institutions, is also seeking to hire an outside firm that would help manage mortgages and other assets at insolvent banks, according to a newspaper advertisement.

FDIC Chairman Sheila Bair, Comptroller of the Currency John Dugan and Office of Thrift Supervision Director John Reich have warned of a pickup in bank failures. Last week, Mr. Reich reported that the thrift industry lost a record $5.2 billion in the fourth quarter.

"Regulators are bracing for well over 100 bank failures in the next 12 to 24 months, with concentrations in Rust Belt states like Michigan and Ohio, and the states that are suffering severe housing-market problems like California, Florida, and Georgia," said Jaret Seiberg, Washington policy analyst for financial-services firm Stanford Group.

The FDIC was created by Congress in the 1930s after a series of bank runs during the Great Depression. At the end of 2007, it had $52.4 billion in its fund that backstops the nation's insured deposits.

FDIC to Add Staff as Bank Failures Loom - WSJ

Revisiting Our Gold Forecast from May 2007

"We were staring into an abyss as the price
of gold rose in September,1999."
Sir Edward George, Bank of England

The forecast we put out for Continuous Contract Gold in May 4, 2007
projected we would hit a high of 1,050 per ounce and end the year
roughly at 1,000 per ounce.


Here is the detailed forecast as we put it out almost a year ago.

Here is how things have actually turned out.

We are working on a new forecast and
hope to put it out here sometime in early March.

Theme for 2008: Back to the Abyss

Visa IPO Will Make Some Market Waves

The words generational top come to mind.

Watch these jokers try to prop the markets until they can get this one out the door like they did with AT&T Wireless.


Visa's IPO Could Be Largest In U.S. History
Company Aims to Sell As Much as $17 Billion in Stock
By ANDREW EDWARDS
February 25, 2008 7:22 a.m.

Credit-card processing giant Visa Inc. released the proposed terms of its long-expected initial public offering Monday, saying it plans to sell as much as $17 billion in stock, which would make it the biggest IPO in U.S. history.

The industry leader proposed to sell 406 million shares between $37 and $42 each. At the proposed price range, the Visa offering would easily trump AT&T Wireless Group's $10.62 billion IPO in 2000. The IPO's underwriters will have the option of buying an additional 40.6 million shares...

In 2006, Visa recorded 44 billion transactions, compared with 23.4 billion for MasterCard Inc., its largest competitor. The offering represents just more than half of Visa's 808 million shares outstanding. Visa has said the rest will be held by the San Francisco firm's member banks.

Visa made its initial IPO filing in June with the SEC, beginning the process from a private, member-owned association for financial institutions to a publicly held firm following the path of smaller rival MasterCard. MasterCard has been a high-flyer since going public in 2006, with its shares quintupling since then. Both firms aren't as tethered to consumer spending as credit-card issuers like banks because as an electronic-transaction processor it still makes money as more purchases are made with plastic instead of cash or checks.

Visa involves the mergers of Visa Canada, Visa USA and Visa International. Visa Europe will remain a bank-owned membership association and licensee of Visa Inc. The company said it plans to trade on the New York Stock Exchange under the symbol "V." The company hasn't said when it plans to make the offering, but today's release implies it could come soon.

At the midpoint of the proposed range, Visa sees raising nearly $15.6 billion, or $17.1 billion if the underwriters exercise their option to purchase all additional shares made available. The company said $3 billion of the proceeds would be put into an escrow account to pay legal settlement, with another $10.3 billion used to redeem stock held by its member banks. The rest would be for general corporate purposes.

The Principal Shareholders

J. P. Morgan Chase (JPM) 23.3%
Bank of America (BAC) 11.5%
National City (NCC) 8.0%
Citigroup (C) 5.5%
US Bancorp (USB) 5.1%
Wells Fargo (WFC) 5.1%
VISA Europe Ltd. 19.6%


The Underwriters

Class A Common Stock

J.P. Morgan Securities Inc.
Goldman, Sachs & Co.
Banc of America Securities LLC
Citigroup Global Markets Inc.
HSBC Securities (USA) Inc.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
UBS Securities LLC
Wachovia Capital Markets, LLC


The VISA Prospectus filed with the SEC

The VISA Prospectus from EDGAR Online

Shoppers Warned Bigger Food Bills on the Way

Shoppers Warned Bigger Bills on Way
By Javier Blas

Published: February 24 2008 22:02

When William Lapp, of US-based consultancy Advanced Economic Solutions, took the podium at the annual US Department of Agriculture conference, the sentiment was already bullish for agricultural commodities boosted by demand from the biofuels industry and emerging countries.

He added a twist – that rising agricultural raw material prices would translate this year into sharply higher food inflation.

“I hope you enjoy your meal,” Mr Lapp told delegates during a luncheon. “It is the cheapest one you are going to have at this forum for a while.”

His warning that a strong wave of food inflation is heading towards the world economy was met by nods from agriculture traders, food industry executives and western’s government officials at the USDA’s annual Agricultural Outlook Forum.

Larry Pope, chief executive of Smithfield Foods, the largest US pork processor, warned delegates of a wave of “real food inflation” just at the time central banks were under pressure to cut interest rates.

“I think we need to tell the American consumer that [prices] are going up,” he said. “We’re seeing cost increases that we’ve never seen in our business.”

The comments highlighted one of the conference’s main concerns – that rising agricultural prices have reached a stage at which the impact will be felt not only on fresh food but will also filter through the supply chain and raise the cost of processed food.

Tom Knutzen, chief executive of Danisco, one of the world’s largest ingredients companies, said rising vegetable oil costs made it more expensive to produce preservatives, colourings and flavourings.

“Our products are based on vegetable oil. “Our input cost has gone up so we are increasing prices,” he said in an interview in Brussels. He added that preservatives, colourings and flavourings made up only 1-2 per cent of the cost of food but there would be a ripple effect as they were present in almost all the food sold worldwide.

US agriculture officials forecast that food inflation will rise this year at an annual rate of 3-4 per cent, warning that the risks were skewed to the upside. Last year, food inflation rose 4 per cent, the highest annual rate since 1990.

Joseph Glauber, the USDA’s chief economist, said in an interview that until now some companies had absorbed the rise in commodities prices, but that trend was about to change.

He said that wheat prices had previously moved from $3 to $5 a bushel without significant pain for consumers. “But now the wheat price has jumped to nearly $20 a bushel. These large increases will show up [in consumer prices].”

Some people hope a slowdown in the US or global economy would push down agricultural commodities prices. But Mr Glauber said that would have a limited impact on agriculture commodities prices. “I am more concerned about higher prices than lower prices.”

However, Simon Johnson, chief economist at the International Monetary Fund, said in an interview that for most agricultural commodities and metal markets the global slowdown would push prices down.

“The commodities market believes in the decoupling of developing countries’ growth,” Mr Johnson said. “The IMF does not believe in decoupling to that extent.”

But even if commodities prices do slow down, other forces could still push consumer prices higher, food industry executives said.

Companies until now have moderated consumer price increases thanks to large inventories and financial hedges in the commodities market futures. But during the course of this year those mitigating factors would vanish, executives said.

“The final result will be higher prices,” Mr Lapp said. The global economy is “at the beginning of a period in which consumer will face higher food prices”.

Additional reporting by Andy Bounds in Brussels

Shoppers Warned of Bigger Food Bills - Financial Times