Steve Quayle News Alerts

August 26, 2003
Posted By: economica

[COMMENT: IS ANOTHER A-BOMB ABOUT TO BLOW OFF THE HEDGE FUNDS...... AND WILL FANNIE MAE DOWNGRADE COME NEXT??... SHOULD WE ANTICIPATE A SUDDEN STRIKE OF INFLATION?...SOME SAY THAT LOW RATES CANNOT LAST, THAT THE FED IS TRICKING US INTO BELIEVING THAT ITS MONETARY POLICY WONT CHANGE... ]

WALL ST. RUMORS SPARKED AFTER EXECS LEAVE GIANT HEDGE FUND
By JENNY ANDERSON
(NY POST)
August 26, 2003 -- Two high-profile executive exits from one of the world's largest hedge funds have sparked massive investor speculation about what's going on inside the $10.3 billion Clinton Group. Weeks ago, Bill Feingold, who at one point ran the $595 million Clinton Riverside convertible portfolio, left because he was stripped of many of his responsibilities, say people familiar with the situation. Soon after Feingold's exit, Seth Fischoff, the former point man for investors on the huge $2.2 billion Clinton Multi-Strategy Master Fund, departed unexpectedly for personal reasons.

Both Feingold and Fischoff declined to comment.
The departures have inspired widespread rumors, ranging from the money managers' physical condition to whether the Clinton Group was preparing to sell itself....... The abrupt exit of Fischoff, a 10-year firm veteran, sparked widespread concern because of his high profile on Wall Street. At 31, he was known to be a protÎgÎ of Clinton Group founder and president George Hall....

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(RETAILERS TOOK THEIR CHANCES... BUT TOO BAD, ESTIMATES ARE ALWAYS WRONG WITH FIAT MONEY)
Retailers Getting Out of Credit Card Business
By Dina ElBoghdady
Washington Post Tuesday, August 26, 2003
For at least two decades, retailers used the lure of easy store credit to drive sales, even if it meant extending the option to consumers with low income, poor payment records or no credit history at all. As long as the economy was good and the credit card holders were employed, retailers took their chances on risky borrowers and charged hefty interest rates and fees to make up for it. But in a shaky economy, the formula has failed -- prompting at least seven retailers this year to turn over the administration of their credit card operations to third parties, according to industry analysts.

Circuit City Stores Inc., one of the nation's largest consumer electronics chains, became the most recent example this month when the Richmond-based company put up for sale the money-losing portion of its credit card operation. The retailer said the unit's high default rates and sinking profits were drains on its finances and a distraction from its retail business. The announcement came about a month after Sears, Roebuck and Co., a pioneer in the credit card business, said it would sell its troubled credit card division to Citigroup Inc. for about $3 billion, probably later this year. "We've entered into a new era in the finance world," said Robert McKinley, chief executive of CardWeb.com, a Frederick , Md. firm that tracks the industry. "Around 2001, when people started losing their jobs, one of the first things they would stop paying on was their credit cards. Ever since, it's been a real learning experience for the industry. It got out of control for these retailers."........ Consumers who took advantage of those perks had high default rates, Sears belatedly discovered. The company needed to raise its bad-debt reserve by $189 million late last year in part to deal with the bad credit, the company said...... The portfolio that Circuit City is trying to unload -- which includes Visa and MasterCard -- lost $29 million in the first quarter and suffered default rates in the mid-teens, said Bill Cimino, a Circuit City spokesman. First North American National Bank, Circuit City's wholly owned subsidiary since 1991, amassed the portfolio through direct-mail -- as opposed to in-store -- solicitations..........

And Sears sales clerks will continue pitching the cards because Citigroup agreed to pay Sears at least $200 million annually for 10 years for the new accounts and sales on credit that Sears employees are expected to generate. Why would Citigroup, or any other credit card issuer, want to take on an unstable portfolio? Because buying one comes cheap at this point, said David Robertson, publisher of the Nilson Report. And as the credit card market continues to consolidate, the largest issuers are ever more dependent on scale of operations for profitability, Robertson said..........
<http://www.washingtonpost.com/wp-dyn/articles/A44770-2003Aug25.html>http://www.washingtonpost.com/wp-dyn/articles/A44770-2003Aug25.html

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HOUSING CRASH LATEST UPDATE: <http://www.moneyfiles.org/housingcrash6.html>http://www.moneyfiles.org/housingcrash6.html

Freddie's Board the Latest to Drop Ball
By Matthew Goldstein - THE STREET - Senior Writer 08/26/2003
Once again, a corporate board has fumbled its response to a major scandal. This time it's Freddie Mac's directors who are wiping egg from their faces, after regulators forced the mortgage finance firm to oust newly appointed Chief Executive Gregory Parseghian and longtime general counsel Maud Mater. Freddie's board misjudged the reaction of regulators and some investors to its decision in June to promote Parseghian, who had been the company's chief investment officer. The board promoted Parseghian even though sources say it knew an internal investigation would reveal he had a hand in orchestrating some of Freddie's accounting games..........

Freddie Mac Credit Ratings Cut
(Reuters) 8/25/03
Some of Freddie Mac's debt was downgraded by one ratings agency on Monday while another said it may cut the company's financial strength rating as markets digested the departure of the company's second chief executive in three months in an accounting scandal. Fitch Ratings downgraded Freddie Mac's (FRE.N) subordinated debt and preferred stock ratings and Moody's Investors Service said it may cut the company's financial strength rating. Standard & Poor's said its ratings on Freddie Mac were unaffected by the latest management change. Freddie Mac CEO Greg Parseghian -- who took over in June after the company replaced its top three executives over accounting irregularities -- was pushed out on Friday after the company's regulator determined Parseghian may have been too close to controversial transactions aimed at smoothing earnings........

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