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Feb 25, 2010

ZDNET : Italy Has Really messed up

Garett Rogers: The internet is a series of tubes — tubes attached to very innovative people and companies that have made websites which have changed how people work, play and interact. Many of these websites and tools were created without fear of their creators being prosecuted due to the actions of their users. In Italy, three Google [...]

Wed Feb 24 17:54:17 PST 2010

New York Times Afternoon Edition Selected Articles,, February 25,2010

 The articles below has been selected, by the undersigned, from the complete Afternoon Update edition,  of the New York Times

Fernando Guzmán Cavero


Fed Reviewing Goldman’s Moves on Greek Debt
The Federal Reserve is examining the stratagems devised by Goldman Sachs other big banks to help Greece mask its burgeoning debt over the last decade. 


Former Madoff Aide Accused of Helping to Hide Fraud
Daniel Bonventre, 63, a former director of operations for Bernard L. Madoff, was arrested and scheduled to appear Thursday in Manhattan federal court.

Aircraft Orders Are Only Bright Spot in Durable Goods Report
Orders for durable goods increased in January, but only because of commercial aircraft. And first-time jobless claims jumped by 22,000 last week, partly because of the weather.

Shares Fall Sharply Amid Concerns of a Slowdown
A worrisome foursome weighed on the markets: Greece’s debt, disappointing jobless filings, U.S. durable goods results and worsening economic sentiment in Europe.

Bernanke Defends Fed’s Ability to Supervise Banks
The Fed chairman urged senators not to strip the Fed of its oversight authority and also expressed skepticism about the the so-called Volcker Rule.

Royal Bank of Scotland Increases Bonus Pool as Loss Narrows in 2009
The British bank, majority-owned by the government after a 2008 bailout, reported its loss for 2009 had declined more than analysts had expected. Its stock rose.

More Business News

Mining Interactive: Tumi Resources, February 25th,2010


Tumi Commences Exploration in Sweden Starting with Ground-based Induced Polarization (IP) Surveys on Three (3) of its Licences at Vitturn, Jonsmossen and Lövåsen

  • The objective of the survey at Jonsmossen and Lövåsen is to pinpoint the source depth of EM anomalies discovered by an airborne geophysical survey performed in 2008; and
  • at Vitturn a gradient-array ground IP program is planned to further investigate the area surveyed by the same technique completed within the Vitturn licences in May, 2008.
Dear Friends:
In this case, I suggest you read the full Tumi Press Release. Especially the 3rd Paragraph relating to the Vitturn project and its previously discovered IP anomaly exceeding 400m in length and located along strike from known resource-grade mineralization. Vitturn is drill read and a high priority target.
As always - - - Stay Tuned!!

Nick L. Nicolaas
Mining Interactive "Ahead of the Pack"

MiningInteractive Videos
Click Here
Stay tuned for the most recent updates on Tumi Resources and other leading junior exploration companies through the MiningInteractive Video Interviews.
Nick L. Nicolaas
(604) 657-4058

The Economist: This week's Highlights, February 25th,2010

The data deluge

This week our cover story focuses not on news but on a long-term trend. 
The amount of data the world is producing has gone up from 150 exabytes (billion gigabytes)
five years ago to 1,200 exabytes this year, according to one estimate, and will continue to i
ncrease at a massive rate. Managing the deluge is difficult, but companies and governments 
are beginning to do so, and thereby to transform business and public life.

Here are some other pieces from this week's issue you might also be interested in. You can 
click straight through to each one and read it at
The Economist online using the links below.

This week's highlights
Gordon Brown
His pitch for re-election
Read more
What really went wrong
Read more
Economic power
The shift from West to East
Read more
Genetically modified crops
How they're spreading
Read more
The right to eat cats and dogs
Under threat in China
Read more

The Economist : Politics this week, February 25th, 2010

Politics this week
Feb 25th 2010
From The Economist print edition

Barack Obama unveiled a document that he hopes will form the basis of the Democrats’ final health-care bill ahead of a televised bipartisan summit. It contains many of the proposals in the Senate version of the bill, but would cost more ($950 billion) and also set up a panel that could block steep increases in insurance premiums, such as the recently announced 39% rise to some insurance-plan payments in California. See article
A few green shoots of bipartisanship were spotted on Capitol Hill. Ron Wyden, a Democrat, and Judd Gregg, a Republican, introduced a bill that would reduce the top rate of corporate income tax to 24% and end some special tax breaks for companies. And the Senate passed a (much watered-down) jobs bill with the support of 13 Republicans. This came several days after Mr Obama appointed a bipartisan commission on the deficit, albeit with not many powers.
The Justice Department released documents from its lengthy inquiry into the ethics of advice given to the Bush administration regarding the interrogation of terrorism suspects. John Yoo and Jay Bybee, two former lawyers at the department who justified the use of waterboarding (simulated drowning), were cleared of professional misconduct, but were criticised for their legal reasoning.
A 25-year-old Afghan immigrant who used to work at Denver airport pleaded guilty, in a civilian court hearing, to plotting to bomb the New York subway last year.
In the latest skirmish between Turkey’s government, led by the mildly Islamist AK party, and its secular armed forces, dozens of officers were arrested on suspicion of plotting a coup. Around half of them, including several admirals and generals, were charged. See article
The coalition government in the Netherlands collapsed following a row over the deployment of Dutch troops in Afghanistan. An election was scheduled for June 9th.

came to a standstill and demonstrators clashed with police during a 24-hour general strike over planned austerity measures to reduce the deficit. There were warnings of further downgrades to Greece’s sovereign debt.
Viktor Yanukovich was inaugurated as Ukraine’s president. He said he planned to visit Brussels shortly afterwards, a possible sign that his presidency will be more friendly towards the European Union, and maybe less so towards Moscow, than some had expected. See article
Less than three weeks after unionist and republican leaders in Northern Ireland reached a power-sharing deal, a large car-bomb exploded outside a courthouse in the town of Newry. No one was injured.
Flash floods on the Portuguese Atlantic island of Madeira killed at least 42 people.

Nigeria’s ailing president, Umaru Yar’Adua, flew back home after three months in a Saudi clinic. Only two weeks ago his vice-president, Goodluck Jonathan, had formally been given presidential powers, albeit temporarily. A power struggle may yet ensue. See article
Iran arrested Abdolmalek Rigi, the leader of Jundullah, a Sunni group that draws on Baluchi support in the south-east and which has been blamed for a string of terrorist attacks. The Iranians, who have accused the group of links both to al-Qaeda and to the West, say they have photographs proving that Mr Rigi was at an American base in Afghanistan.
Sudan’s government agreed to a ceasefire with one of the main rebel groups in Darfur, the Justice and Equality Movement, raising hope for a wider agreement to end seven years of conflict in Sudan’s western region. But several other rebel groups vowed to carry on the struggle.

Foreign diplomats in Afghanistan expressed concern at the reform of an electoral-complaints commission made by President Hamid Karzai, which gives him the power to appoint all its members. The commission thwarted Mr Karzai’s first-round election victory last August, by ruling that nearly 1m votes were fraudulent. See article
General Stanley McChrystal, the commander of NATO’s forces in Afghanistan, apologised on national television for an air strike in which as many as 27 civilians were killed on the northern edge of Uruzgan province, which borders Helmand. The government in Kabul described the attack as “unjustifiable”.
India and Pakistan held their first formal meeting since the terrorist onslaught on Mumbai in November 2008. On the eve of the talks in Delhi, the two countries traded allegations over shooting in the disputed territory of Kashmir. India said its border guards came under fire from Pakistan.
Bangladesh’s army was deployed in the Chittagong Hill Tracts in the south-east of the country after the worst violence in the area since a peace deal was signed in 1997. At least five people have been killed in clashes between Bengali settlers and local tribal people.

Meeting in the Mexican resort of Playa del Carmen, the leaders of 32 countries in Latin America and the Caribbean agreed to set up a new regional body. When it is created, either next year or in 2012, it will be a rival to the Organisation of American States, in which the United States and Canada, but not Cuba, take part. The leaders also expressed their support for Argentina’s claim to sovereignty over the Falkland (or Malvinas) Islands, which has been reignited by the arrival of an oil exploration rig in the islands. See article
In Cuba, Orlando Zapata, a political prisoner, died in hospital after a lengthy hunger strike in protest at poor prison conditions. Mr Zapata was arrested in 2003, during a crackdown against democracy activists on the island. Cuba’s president, Raúl Castro, said he regretted the death but denied that prisoners suffered torture.
Brazil’s governing Workers’ Party endorsed Dilma Rousseff as its candidate in October’s presidential election. Ms Rousseff is President Luiz Inácio Lula da Silva’s chief of staff and was hand-picked by him as his successor. She has pledged to continue Lula’s pragmatic economic policy, but at the party convention Lula said that she should not be afraid to extend the state’s remit in the economy. See article

MarketWatch: Personal Finance Daily, February 25, 2010

Personal Finance Daily
FEBRUARY 25, 2010

Thursday's Personal Finance stories

By MarketWatch

Don't miss these top stories:

Florida and Arizona have a host of competitors now when it comes to preferred retirement destinations. Sure, those two rather warm states remain popular spots to relocate but they no longer hold an exclusive on the senior set.

That's why you see more towns in North Carolina, South Carolina, Tennessee -- even Delaware and Maine -- popping up in Top Places to Retire lists. Those spots may not be as toasty as the Sunshine State but they are relatively mild and usually boast much lower costs of living than you're likely to find in other retirement paradises -- a key consideration in these days of depleted nest eggs.

The vast majority of retirees don't worry about relocating once they wrap up their primary careers, though, because they stay put. It's called aging in place, but what it really is is a desire to remain close to friends, family, institutions and activities that are familiar.

A lot of those folks may click wistfully on Web pages of more exotic locales as they research their retirements and they may be intrigued -- but they won't be moved.

-- Steve Kerch, assistant managing editor


The top 10 places to retire

Where do you want to live in retirement? Most folks age in place. But there are those who spend their golden years in dreamy locales. Where are those places?
See Robert Powell.


Bond ETF buyers, beware

Investors seeking safety have been pouring cash into bond funds -- but when it comes to exchange-traded funds they run the risk of limiting gains or magnifying losses.
See Fund Watch.

Bracing for higher interest rates

Higher interest rates are coming. And that has significant implications for investors, since markets anticipate events. Assuming we are in the very early stages of a credit-tightening cycle, investors need a whole new strategy for a world of rising interest rates. Here are some of the implications investors need to address now and over the next several months:
See Smart Money.

Emerging markets hit speed bump

Financial troubles in Southern Europe and unrest in Turkey threaten investors in developing markets, says David Riedel, president of emerging-market analysts Riedel Research. Jonathan Burton reports.
 Watch Video Report.


Builders bracing for long, slow recovery in housing

The abysmal new-home sales numbers released Wednesday are a grim reminder that the housing recovery will likely be choppy, and some home-builder chiefs are voicing concerns about what will happen to demand when stimulus measures expire soon.
See Real Estate.

30-year fixed-rate mortgages now above 5%

For the first time in three weeks, rates on 30-year fixed-rate mortgages rose to above 5%, according to Freddie Mac's weekly survey of conforming mortgage rates.
See Mortgages.


Protecting consumers central to bank-reform bill: Dodd

New bank regulations must protect consumers from unsafe financial products, the chairman of the Senate Banking Committee said Wednesday in pushing for sweeping bipartisan reform legislation.
See Capitol Report.


Unfortunate? Definitely. Necessary? Not so fast

Unfortunate but necessary. That's how executives from health insurance giant WellPoint and its subsidiary Anthem Blue Cross of California summed up their justification for Anthem's planned premium rate hikes of up to 39% for individual policyholders in hearings before lawmakers in California and Washington D.C. this week. The rate increases are side effects, they say, of rising medical costs, higher utilization of services and a troubled economy that has more young, healthy people choosing not to buy coverage when they lose their jobs. But the companies' version of events may be suffering from "truthiness," as satirist Stephen Colbert so delicately put it.
See Health Matters Blog.

Lines drawn, health-care summit opens

President Barack Obama and congressional Republicans opened the White House's health-care summit on Thursday with a clash over how best to reform the system, with Obama calling for common ground but Republicans urging a return to the drawing board on the huge bill.
See Capitol Report.

Obama's opening statement at health-care summit

President Barack Obama said in a statement opening his bipartisan summit on health-care that he hoped the two parties would genuinely try to solve problems with the system and avoid turning the event into political theater.
 Watch Video Report.


How to choose the right college fund

It's not easy. Did you know there are some 85 different college savings funds, known as 529 programs, offered through states and big financial institutions?
See Jennifer Openshaw.

Personal Finance Minute: Get your credit report

New laws that mandate consumers be given free credit reports come into effect later this year. Personal Finance Editor Andrea Coombes gives you the tips you need to save money and guard against ID theft.
 Watch Video Report.


Temp workers no longer on a path to permanent jobs

More workplace woes: Temp workers may no longer land permanent jobs, as MarketWatch's Charlie Turner reports.
 Listen to Radio Report.


Two seats as a first-class alternative

Middle Seat columnist Scott McCartney joins the News Hub to discuss a new trend in flying -- getting a second seat.
 Watch Video Report.

Real Clear Politics: Top 5 Stories on RealClearPolitics, Thursday 25, 2010

Top 5 Stories on RealClearPolitics
A Foundation for Agreement - Sebelius & DeParle, Washington Post
Over the past year, we've had a vigorous national conversation about how to bring down health-care costs for families, hold insurance companies accoun...
Health Care, The Chicago Way? - John Kass, Chicago Tribune
President Barack Obama will star in his very own televised entertainment spectacular on Thursday "” let's call it Federal Health Care Kabuk...
Return of ObamaCare: The Political Context - Jay Cost, RealClearPolitics
In the last essay, I argued that the legislative process is going to complicate the passage of Obama's health care reform proposal. Just how complica...
Why This Summit Matters - Jonathan Cohn, The New Republic
On one end of Pennsylvania Avenue yesterday, administration staffers were busy making preparations for an event that will likely determine whether com...
Why Dems' Health Care Bill is Stalled - George Will, NH Union Leader
Today's health policy "summit" comes at a moment when, as happens with metronomic regularity, Washington is reverberating with lamentations about go...
More Opinion and Analysis
Obama's Nanny Care Insults the American Spirit - Michael Barone
You are victims. You are helpless against the wiles of big corporations and insurance companies, and you need protection. You need the government to t...
Americans Can Speak for Themselves on Health Care - Froma Harrop
Have you voted on any of the Democratic health care reform plans? Me neither. No such vote was ever taken. But with coordination that the Rockettes w...
Obama Embraces Nixonomics - Steve Chapman
Barack Obama has often modeled his policies on Franklin Roosevelt. Lately, though, he's been coming across more as Richard Nixon Lite. In 1971, fed u...

Forbes . com : Intelligent Investing, February 25, 2010

Intelligent Investing with Steve Forbes


Smart Money
How To Ride Seth Klarman's Coattails
In investing, imitation is the sincerest form of flattery. Set your sights on Seth Klarman's Baupost Group.
With Mebane Faber
Intelligent Investing Panel
Don't Bet On A Retail Recovery
Consumers are spending more, but mostly it's a dead cat bounce.
With Alexandra Zendrian

Video: Intelligent Investing With Steve Forbes

Intelligent Investing With Steve Forbes
Stiglitz Lambasts Out Of Control Risk
Nobel Prize winning economist Joseph Stiglitz chronicles how risk-taking got out of hand.

Written Testimony of Ron Bloom, Senior Advisor to the Secretary of the Treasury

Bloom and Millstein before the Congressional Oversight Panel
February 25, 2010
Written Testimony of Ron Bloom, Senior Advisor
to the Secretary of the Treasury
and Jim Millstein, Chief Restructuring Officer,
U.S. Department of the Treasury
Before the Congressional Oversight Panel
Good morning.
Chair Warren, and members of the Congressional Oversight Panel, thank you for the opportunity to testify before you today.  We are here to report on the state of the capital markets for financing the purchases of cars and light trucks by dealers and consumers, and in particular the relationship between one of the nation's largest sources of such financing – GMAC[1] – and the Treasury's investments in General Motors and Chrysler.
Background on Auto Industry Investments
Over the past year, the Obama Administration has been working to manage an historic crisis in the American automobile industry.  President Obama inherited a situation in which the industry had lost 50% of its sales volume and over 400,000 jobs in the year before he took office.  GM and Chrysler had received substantial loans from the prior Administration and were requesting additional assistance.  Without such assistance, both companies faced almost certain liquidations, which would have caused an enormous disruption to the entire American automotive industry and posed a significant risk to the overall economy.  GM and Chrysler's outright failure would have resulted in the loss of hundreds of thousands of jobs across multiple industries and further damage to the financial system, as auto financing accounts for a material portion of overall financial activity.
Working with their stakeholders and the President's Auto Task Force, both GM and Chrysler underwent fair and open bankruptcies and have emerged as stronger global companies.  This process required deep and painful sacrifices from all stakeholders – including workers, retirees, suppliers, dealers, creditors, and the countless communities that rely on a vibrant American auto industry.  Anytime a company as large and interconnected as GM or Chrysler becomes insolvent, the collateral damage is enormous.  However, the steps that the President took not only avoided a potentially catastrophic collapse and brought needed stability to the entire auto industry, they also kept hundreds of thousands of Americans working and gave GM and Chrysler a chance to become viable, competitive American businesses.
Background on Auto Finance Market
A viable auto industry requires financing for both dealers and consumers.  The vast majority of automobile purchases in the U.S. are financed, including an estimated 80%-90% of consumer purchases and substantially all dealer inventory purchases.  
Both this Administration and the prior Administration have recognized that preventing a collapse of the auto industry required stabilizing the auto finance industry as well.  Therefore, from the early days of this Administration, Treasury identified addressing the problems in this market as a priority of our financial stability plan. 
For the last 80 years, the auto industry has largely relied upon dedicated financing providers.  Most dealer inventories have historically been financed by the captive finance companies (e.g., Ford Motor Credit financed 77% of their U.S. dealer inventories in 2008).[2]  Captives have also been the largest source of financing for consumers, financing approximately 47% of consumer units between 2006 and 2008 (30% through loans and 17% through leases).  Banks, third-party finance companies, and credit unions financed an additional 30%-40% of consumer purchases.[3]  Since at least the 1970s, these financing options supported consumer demand by helping to dramatically lower the total cost of owning a car, from an average monthly payment of 9.1% of household income in the 1970s to 5.7% recently.[4]  The improvement in the affordability of owning an automobile coincided with an increase in cars per driver from 0.93 in the 1970s to 1.16 in the 2000s, and likewise supported increases in the size and quality of cars purchased.[5]
Specialized automotive finance companies have unique resources, infrastructure, and long term experience underwriting automotive credit, and for the foreseeable future they will continue to be the largest sources of credit for both consumers and dealers. 
Founded as GM's captive finance subsidiary in 1919, GMAC has been the primary source of financing for GM's dealers and consumers for over 90 years.  At the time of Treasury's initial investment in GMAC, in December 2008, GMAC provided: wholesale financing for 75% of GM's dealers representing 85% of total dealer inventories; "in-transit" [6] financing for 95% of the GM dealers financed by GMAC; and consumer financing for 25% of GM's retail sales.  In turn, GM represented 96% of GMAC's wholesale financing volumes and 84% of new vehicle retail financing volumes in 2008.
Distress in Credit Markets.  As a result of the financial crisis, particularly the events of September 2008 including the collapse of Lehman Brothers, credit availability to auto dealers and consumers became severely impaired.  The impact of the contraction of credit was dramatic: loan approval rates dropped, interest rates increased, and financing terms tightened.  This was especially true for GM and Chrysler, as uncertainty about the future of the companies impaired the ability of GMAC and Chrysler Financial to access the capital markets.  Consumers were immediately impacted: loan approval rates to prime borrowers dropped from the mid-80% to approximately 60%, loan-to-value ratios dropped from 95% to 85%, and interest rates increased from approximately 5.0% to over 8.0%.[7]  In addition, GMAC and Chrysler Financial cancelled their vehicle leasing programs and reduced lending to lower income borrowers considerably.  Some estimates suggest that the contraction in the auto finance market reduced auto sales by 1.5 – 2.5 million cars per year. [8]
Impact on GMAC and Auto Industry. By late 2008, one of GMAC's primary sources of funding, the securitization market, was in severe distress.  This abrupt contraction in funding forced GMAC to dramatically restrict its lending activities to auto consumers in order to preserve capital necessary to support dealers.  The asset-backed securitization (ABS) market's fear about the risks of funding GMAC's ongoing operations was magnified by the simultaneous crisis overwhelming the automakers, including the threat of both GM and Chrysler bankruptcies.  ABS investors were skittish and required significant credit enhancement, and GMAC was not able to access alternative sources of funding, such as the unsecured bond market.  Without government assistance, GMAC would have been forced to suspend financing lines to creditworthy dealerships, leaving them unable to purchase automobile inventory for their lots.  Without orders for cars, GM would have been forced to slow or shut down its factories indefinitely to match the drop in demand. Given its significant overhead, a slow-down or stoppage in production of this magnitude would have toppled GM.
When the prior Administration decided to provide assistance to GMAC in December 2008, GMAC managed approximately $26.5 billion of wholesale auto loans, $23.3 billion of which supported GM dealers.  Had Treasury allowed GMAC to fail, no single competitor or group of competitors could have stepped in to absorb GMAC's entire loan portfolio.  Dealer floor plan financing is a unique and labor-intensive segment of the loan market that has been dominated by captive lenders who are not easily replaced.  For example, in December 2008, 75% of GM dealers received their financing from GMAC while the next five lenders made up only 8%.  The remaining dealers were serviced by 200 banks, most of which provided financing for only a single dealer.  It is also important to remember that when the initial investment decision was being made, many large national banks faced significant threats to their own financial health (e.g., deteriorating legacy asset values, diminished access to capital, mounting losses).  Finally, most banks lack the capacity to aggressively grow their auto lending portfolios, given internal and regulatory limits on borrower and industry concentrations.  In addition to size and capital constraints, providing new dealers with financing is complex and requires time that was not available.  GM estimates that it would have taken a new provider up to six months to create the infrastructure, systems, and human capital necessary to replace GMAC.
Actions Taken. Given this difficult environment, in December 2008, GMAC (which already owned an industrial loan company) applied for and received approval from the Federal Reserve to become a bank holding company (BHC).  Shortly thereafter, the prior Administration invested $5.0 billion in GMAC, and GMAC was able to raise an additional $2.0 billion from its existing owners, $884 million of which came from a loan provided by Treasury to GM.[9]
After the Obama Administration took office, Secretary Geithner announced the Financial Stability Plan, a key component of which was the "stress test."  The Treasury worked with federal banking supervisors to develop the Supervisory Capital Assessment Program (SCAP) to determine whether the nation's largest BHCs had a capital buffer sufficient to withstand losses and sustain lending in a significantly more adverse economic environment.  The supervisors conducted forward-looking assessments to provide the transparency necessary for individuals and markets to judge the strength of the banking system.  All domestic BHCs with year-end 2008 assets exceeding $100 billion were required to participate in the SCAP.  These 19 firms collectively held two-thirds of the assets and more than one-half of the loans in the U.S. banking system.  GMAC, with $173 billion in assets as of year-end 2008, was one of these 19 institutions. 
As part of the SCAP, Treasury committed to make capital available for firms that did not meet their SCAP buffer requirement via third party sources. 
On May 7, 2009, the Federal Reserve released the initial results of the stress test, which required GMAC to raise $13.1 billion of new capital.  The SCAP analysis included loss assumptions for certain discrete events, the most significant of which were the then-pending GM and Chrysler restructurings.  SCAP participants were given until November 9 to meet their capital requirements.  Aside from GMAC, 18 of the 19 participants were shown to have no additional capital need, or were able to raise the necessary capital in the private market.  In consultation with the banking supervisors, Treasury agreed to help meet GMAC's SCAP requirement by investing additional capital in two stages. The first investment of $7.5 billion was made on May 21 to address GMAC's immediate capital needs.  Days before the November 9 deadline, GMAC's Board of Directors informed Treasury that it would replace the company's CEO with one of its Board members, Michael Carpenter.  With the banking supervisors' consent, GMAC and Treasury agreed to delay the second investment to allow GMAC's new management to review the company plans.  In December, Mr. Carpenter presented to Treasury a proposed recapitalization plan to bring GMAC into compliance with its SCAP requirements by year-end.  Treasury ultimately invested an additional $3.8 billion on December 30.  This amount was $1.8 billion less than the initially projected $5.6 billion in May due to variety of factors, including less disruption than anticipated from the GM and Chrysler bankruptcies.  Completion of the SCAP process by year-end was an integral part of preparing GMAC to re-enter the public debt markets, and thereby, protecting the taxpayers' existing investment in GMAC. [10]
Concurrent with the May transaction, GMAC received regulatory approvals that enabled it to enhance its liquidity.  The FDIC approved GMAC's application to issue guaranteed debt under the Temporary Liquidity Guarantee Program and also increased the amount of brokered deposits that GMAC's bank subsidiary (Ally Bank) could raise.  In addition, the Federal Reserve Board granted a waiver of Section 23A of the Federal Reserve Act, expanding Ally Bank's ability to fund consumer and dealer finance loans for GM and Chrysler with deposits.
Chrysler Financial
Like GMAC, Chrysler Financial also faced a severe liquidity crisis last year, as credit market deterioration and the threat of a Chrysler bankruptcy constrained its access to funding throughout the first half of 2009.
Necessary for Successful Restructuring of Chrysler. As the conditions in the auto industry continued to worsen throughout the spring of 2009, it became clear that a Chrysler bankruptcy could well be required to effectuate a restructuring of the company.  Chrysler Financial, Chrysler's affiliated finance arm providing retail and wholesale loans to Chrysler customers and dealers,[11]  had approximately $20.4 billion of conduit financing that was slated to expire by July 30, 2009, some of it immediately upon the occurrence of a Chrysler bankruptcy.  The loss of these conduits would have had an immediate and acute impact on Chrysler's dealers: Chrysler Financial would have been forced to discontinue financing any new inventory for Chrysler dealers, the dealers would have been unlikely to find alternative financing, and the purchase of new vehicles from Chrysler by dealers through Chrysler Financial would have ceased entirely.  Since Chrysler Financial financed approximately 60% of dealer purchases from Chrysler, this would have resulted in a near-total collapse of Chrysler revenues.  The portion of the conduits backing its dealer financing would have terminated immediately upon a bankruptcy of Chrysler, and those providing Chrysler Financial its retail and lease financing facilities would have foreclosed on the underlying collateral, starving Chrysler and its retail customers and dealers of needed capital.  Given the state of the credit markets and the threat of a Chrysler bankruptcy, Chrysler Financial looked for but found no refinancing alternative.
As it became clear that a Chrysler bankruptcy was imminent, the situation rapidly became more acute, and we were forced to act.  Without a viable financing source for its customers and dealers, a successful restructuring of Chrysler would not have been possible. Fiat, who played a critical role in the restructuring, insisted as a condition to its alliance that such a viable funding alternative be in place before it agreed to any deal.
Actions Taken. Given the lack of funding options for Chrysler Financial and the ramifications its failure would have had on Chrysler, several options were reviewed.  Chrysler Financial solicited bids for its platform from potential third-party non-captive finance providers, but was unable to successfully complete a sale.
Taking into account the circumstances at that time, it was determined that the most effective method to provide financing to Chrysler's dealers and customers was to capitalize GMAC's existing auto origination platform to a level adequate for GMAC to assume these financing responsibilities.  GMAC had advantages that Chrysler Financial did not, such as the ability to use its bank deposits to fund its automotive finance originations and to apply for support under the FDIC's Temporary Liquidity Guarantee Program (TLGP).
As part of the stress test results in May 2009, the Federal Reserve determined that GMAC required $4.0 billion in addition to the SCAP buffer requirement in order to assume Chrysler's dealer and customer loan originations.  Today, the transition is nearly complete as GMAC has become the preferred financing source for Chrysler dealers and customers.  As of December, GMAC has completed its final underwriting and provides wholesale financing for 77% of Chrysler's U.S. dealership inventory, and is the top provider of consumer financing for Chrysler vehicles in the U.S.
Additional Auto Finance Programs
Another striking effect of the financial crisis has been the disintegration of the securitization markets.  These markets have historically been a critical component of lending in our financial system but were virtually shuttered during the worst period of the crisis.  These markets were especially important to the U.S. automotive financing marketplace with nearly $70 billion of securities backed by auto-related receivables issued in 2007.  Therefore, the Federal Reserve, with the support of Treasury, launched the Term Asset Backed Securities Loan Facility in November 2008 to jump-start the securitization markets by providing financing to investors to support their purchases of certain AAA-rated asset-backed securities (ABS). 
Retail Auto ABS. Through TALF, automotive finance companies have raised over $41.5 billion of securities to date backed by retail auto loans and leases since the program's launch in February 2009. Through the end of January, the Federal Reserve estimates that TALF has supported more than 2.6 million individual auto loans and leases. TALF has stimulated investor demand in asset-backed securities as spreads for ABS backed by retail auto loans and leases have narrowed to pre-crisis levels and liquidity has returned to the market. Today, retail auto loan and lease ABS are able to be successfully issued to investors without TALF assistance.
Dealer Floor Plan ABS. The financing environment has been and continues to remain challenging for ABS backed by dealer floor plan loans, where spreads remain wider than historical averages and investor demand remains limited. The securitization markets were historically the prominent source of funding for captive finance companies, including GMAC, who relied on both public and private securitizations to fund loan originations. As early as 2005, secured funding and whole loan sales represented 90% of GMAC's U.S. automotive term funding in comparison to 46% in 2004.[12] With access to this market effectively closed, finance companies were, and continue to be, severely restricted in their ability to originate loans for auto dealers to purchase inventory.
While dealer floor plan loans are TALF eligible, the rating agencies have been reluctant to rate floor plan securities AAA (a requirement under TALF), regardless of the credit enhancement offered, due to the distress in the auto industry.  In fact, issuance for auto dealer floor plan loans remained frozen from 2007 until World Omni's TALF-supported issuance in August 2009 of $225 million.[13] Since that issuance, dealer floor plan ABS spreads have narrowed, but continue to remain above historical levels. In total, only approximately $3.0 billion of auto floor plan ABS to date has been issued with TALF support since the program's launch in February 2009, which can be contrasted to the nearly $6.0 billion  issued solely within the first six months of 2007 without TALF support.  In the past three months, selected issuers like Ford, Hyundai, and Nissan have successfully completed issuances though investors remain attuned to the specific credit risk associated with each issuer, and the markets remain fragile.
While recognizing the need to avoid past excesses, a viable domestic auto industry cannot be sustained without improving the availability and affordability of credit to a more "normalized" level.  Having the capital markets recognize the stability in the value of domestic automobiles as collateral will be the most effective mechanism for improving the provision of credit to automotive dealers and consumers.  We believe that the auto industry offers strong credit opportunities: manufacturers have been revitalized and some have already returned to profitability; dealer networks have become healthier; the value of new and used vehicles produced by the domestic automakers is stabilizing; and we believe dealer floor plan loans will prove again to be safe assets.[14]
The Administration's investment in GMAC has been and continues to be a critical component of the effort to stabilize the U.S. auto industry.  Providing GM and Chrysler with a viable source of financing enabled Treasury to facilitate the successful restructuring of both of these companies.  GMAC was uniquely positioned to provide the personnel and infrastructure to originate and service auto loans and is now the largest provider of retail and wholesale financing to both GM and Chrysler's customers and dealers.
GMAC is now capitalized at levels well-above historical industry averages.  At the end of 2009, GMAC had $22.4 billion in Tier 1 Capital (14.1%) and $7.7 billion in Tier 1 Common Equity (4.8%).  GMAC is also now able to secure external funding for its ongoing operations, a critical step toward its independence.  As of year-end 2009, the company's deposit base at Ally Bank reached $31.0 billion, an important source of stable, low-cost funding.  With the support of TALF, GMAC has completed three securitizations in the past six months – two backed by retail loans to consumers and one backed by wholesale floor plan loans to dealers.  These represent GMAC's first ABS issuances in over three years.[15]  In addition, GMAC raised $2.0 billion of unsecured debt this month, priced at terms comparable to a recent financing completed by Ford Motor Credit.  This is the first time that GMAC has been able to raise unsecured debt since 2007, an important step towards financial stability.
As the owner of 56.3% of GMAC's common equity, Treasury has designated two members of GMAC's Board of Directors, and is in the process of selecting two additional members, which it expects to complete in April.  The government remains a reluctant shareholder in GMAC and other TARP recipients.  As we have noted previously, Treasury intends to dispose of its investments as soon as practicable, with the dual goals of achieving financial stability and protecting the interests of the taxpayers.  We have already begun to exit some of our auto-related investments.  In July 2009, we terminated the Warranty Commitment Program, and Chrysler Financial fully repaid its loan.  The Supplier Support Program will wind down in April this year.  GM has made an unconditional commitment to repay its loan by June and continues to work toward an initial public offering.  As with GM, Treasury will likely exit its investment in GMAC through a gradual sale of shares following a public offering.
In a better world, the choice to intervene in GMAC would not have had to be made.  But amid the worst economic crisis in three-quarters of a century, the Administration's decisions avoided devastating liquidations and provided both GMAC and the automakers with a new lease on life and with a real chance to succeed




My Alerts

February 25, 2010 Compiled: 12:57 AM


Bets by some of the same banks that helped Greece shroud its mounting debts may actually now be pushing the nation closer to the brink of financial ruin.


The new restrictions would apply to any stock whose price has fallen at least 10 percent during a day’s session.


A deal to sell Hummer stalled as the companies awaited approval from the Chinese government.

GURUS BLOG :The risk-free rate and the "secret" in the valuation of companies

The article below has been trnaslated from Spanish into English from "Gurus Blog". The article in Spanish can be found  clicking on the next link:

Fernando Guzmán Cavero

The risk-free rate and the "secret" in the valuation of companies

tasa de riesgo y valoracion de empresas
Interesting blog post neoliberal thoughts which asked what the risk premium. If we put this post with McCoy on Wednesday, "The report that the market collapsed? Spain repaid with no debt. Ups, the uncertainty over what is the risk free rate may increase.
Let's start with the basics.
What is the risk free rate?
Rate of return is that you get when you invest in a financial asset that has no risk of breaking your payment.
Why is it important risk free rate?
The risk-free rate is a basic concept for the ratings because it depends on the discount rate (rate free + risk premium) to be applied to a future cash flows.
What is the risk free rate that is typically used?
This generally is the rate paid by bonds. But what state? If we value a Spanish company with its business in Spain the risk free rate of the bond would be the Spanish? Spanish bond is not at risk? According to McCoy's post it seems that some people think that does have risk, and it is true. But that risk is so high as to think that the Spanish State will not pay your debt? Well, maybe you have to evaluate this possibility.
One way to assess this possibility is to subtract the cost of the bond, the cost is you cover the "default risk" (that the market could be reflected in the price of CDS). Would logically a rate somewhat lower but maybe closer to reality.
Then, to obtain the required rate for discounting expected cash flows of the companies would have to calculate the risk premium, which is another very complicated issue.
What is the problem in this fee?
Depending on the rate that you use, the valuation will vary a lot. Hence we should always take great care and caution with the valuations of companies that do or do the analysts.
Anyway, as a reference on what companies can claim we have to make decisions, I think the more "conservative" or realistic, the better. But what is conservative or realistic? Another problem we have here :-) It is also true that being conservative (or what is commonly understood by conservatives) in this lose analyzing interesting investment opportunities but also lose opportunities to lose money.
What we must never lose in the valuation of companies is the common sense. Make a analysis simple and understandable way, Which does not mean it is a simple analysis and baseless, it is sometimes preferable to trying to draw thousands of complex formulas or many assumptions or scenarios to reach the important thing, that is if we invest or not a particular company.
In short, an analysis should be neither simple nor too complex. Must be nice and logical. How to get there? That is the "secret" best kept business valuation :-)