I just picked up two reports on California’s desperate situation. California, whose legislature and Governor have been hold up in around the clock negotiations, is now issuing IOU’s instead of cash. They have also been downgraded by Moody’s credit rating agency. The first story came from the well-known political site Monsters & Critics. And it demonstrates that California is on the verge of bankruptcy:

With the economy weakening significantly around the globe, the budgets of sovereign nations are coming under increased pressure. As a result S&P has put a number of countries under review for potential credit downgrades. However, now, the first actual cut is in: it is Greece.

Just months ago, Rio Tinto was a behemoth swaggering from the huge run up in commodity prices. This is a company that had revenue of nearly $30 billion and net income of nearly $8 billion in 2007. It was worth over $160 billion by May as the commodities boom took shape.

They were everywhere: building projects in Saudi Arabia, resisting a takeover by BHP Billiton and operating across the globe. Most of that is history now, except for the debt.

You have probably never heard of Glencore. Well you have heard of its founder Marc Rich, the man infamously pardoned by President Clinton before he left office. And I suspect that you will soon hear a lot more about the company as well.

Glencore is a metals production and trading company based in Switzerland. It is one of the largest privately-owned companies in the world and a very large employer in Switzerland. The problem is that commodities prices have been absolutely decimated. So, the secretive Swiss company’s credit default swaps are trading at huge premiums, something we alluded to last month.

The obvious question is: why is that? Unfortunately, the answer is: nobody knows. But rumors of financial problems are mounting.

In a shocking news story, the Wall Street Journal reports that the media company Tribune Company, which publishes the Chicago Tribune, is exploring bankruptcy.  While advertising revenue has contracted significantly, impacting all major media companies, it was not expected that this would lead to bankruptcy.  Below is a snippet of the Journal story.
Tribune Co. is [...]

The latest news in bailouts involves GE Capital. Apparently, the company has gone begging to the FDIC for a bailout. In fact, the FDIC has offered to back $139 billion in GE Capital debt. I have serious reservations about this move by Sheila Bair. In fact, I am outraged.

First, as I understand it, the FDIC has much less than $139 billion in capital on hand. And they have hundreds of banks to watch that are busy going broke. So, how is it possible that they can guarantee GE Capital’s debt? The answer is they cannot. American taxpayers are what is behind this move just as they were with Fannie and Freddie – not that we will get stuck with the bill as GE is not going under, but the FDIC certainly can’t pay.

In yet another move by ratings agencies likely to roil markets, HBOS has been cut by S&P. Given the fact that HBOS is the biggest loser to date in the European banking sector in the wake of Lehman’s collapse. This cannot be seen as good news.
Standard & Poor’s said Tuesday it is lowering [...]

The world of financial services in not looking terribly stable in the wake of the Frannie nationalization. In fact, things are as jumbled as they have ever been. The latest news has AIG down 30% and both WaMu and Lehman brothers on the auction block.
Given the pace of the news cycle these past [...]

Remember how the impartial accountancies lost their way during the tech bubble? The most egregious case was Arthur Andersen’s wrongdoings at Enron, which eventually bankrupted both Enron and Arthur Anderson.
Well in this particular crisis it looks like the rating agencies are getting ready to take it on the chin. The state of [...]

How many AAA companies do you know of that have seen 80% declines in their market value?
Two that I can think of:
Fannie Mae (FNM)
and Freddie Mac (FRE)

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