Wall Street being the lifeblood of the city and all that, the state of financial jobs is, one notices, a topic of concern. This being so, here comes the bad joss from the Independent Budget Office of New York:
Wall Street securities firms will emerge from the current recession in a down-sized mode, with few of the jobs cut replaced by 2013, even as the industry returns to profitability next year, a New York City fiscal monitor said in a gloomy report released on Wednesday.
The city faces a decline in tax revenues of $2.5 billion in the current fiscal year, and a further $2.2 billion decline in the 2010 fiscal year, due to the Wall Street job cuts, a drooping real estate market and lower business taxes, the city’s Independent Budget Office said in the report.
The projected decline for the current fiscal year ending on June 30 represents a 6.6 percent decline in tax revenues, according to the watchdog’s report.
“This back-to-back decline — which follows a year, 2008, of essentially no tax revenue growth — would mark the first time in at least three decades that the city experienced consecutive years of falling tax revenues,” the Independent Budget Office said in the report.
Of course, we already know that the collapse of revenue is both a federal and state problem at this point and after we are done bailing out California it is easy to suspect there may be nothing left in the royal purse. Then what?
Wall Street Seen Replacing Few Of Jobs Cut By 2013 [The New York Times]
Looking to get a bit longer on the bailout than your status of a taxpayer has you already? Never fear, qualified purchaser. Despair not, accredited investor. We have got the deal for you. You heard it was coming. Now it is almost here!
The U.S. government plans to invite wealthy investors to invest in the bailout of the crippled financial system, The Washington Post reported on Friday.
The investors would be invited to buy up recently issued, highly rated securities that finance consumer lending — without the risk of massive losses, the report said.
Now is definitely the time to buy. Just look at how cheap QGRI has gotten.
U.S. to invite wealthy to invest in bailout: report [Reuters]
As we mentioned in the Opening Bell, GM is staring default and potentially bankruptcy in the face (“we actually need about $30 billion”). A lot of light and noise has been emanating from GM’s general direction for several weeks now, but it looks like this is the main event. Of course, this isn’t a surprise. GM warned last month that Deloitte & Touche might excommunicate the company from its close circle of friends, and that, certainly, sounds like the beginning of the end.
GM has until the end of March to close deals with the UAW and debt holders to qualify for government assistance (again). One wonder’s if they are likely to make it that far.
GM said its creditors had agreed to waive a requirement that could have allowed them to force the automaker to repay more than $6 billion in loans because of the warning in order to allow GM to press its case for government aid.
In fact, GM has been begging for, and mostly getting, lots of waivers for call and acceleration provisions- at least until the Treasury fails to give the automaker the Goodhousekeeping Seal of Bailout Approval. And why not? The bond holders are really buying an option by laying off of GM here. That government cheese might be the lion’s share of what they see. It would be interesting to know what power creditors waived with respect to forcing liquidation owing to the government involvement.
Separately, GM said in its SEC filing that its lenders had waived “call” provisions that could have forced early payment of its $4.5 billion secured revolving credit facility, a $1.5 billion term loan and a $125-million inventory financing facility.
The new waivers allow GM’s lenders to call those loans if the U.S. Treasury rejects GM’s restructuring plan and request for additional aid and forces it to repay the $13.4 billion it has already borrowed from the U.S. government.
Gotta love priorities.
GM warns it may be forced into bankruptcy [Reuters]
And now the real fun begins:
Negotiators for Congress and the White House have agreed on a $789 billion economic stimulus bill, lawmakers announced. The compromise measure could get final approval by Friday.
The situation is fluid.
Pact on Economic Stimulus Is Reached In Congress [CNBC]
Just in case you weren’t sure, General Motors is in trouble. Big trouble. On top of all the other trouble you’ve no doubt heard about they are now planning to cut 10,000 jobs. Yesterday’s rumors are fact this morning as the flagging former giant begins to face the music.
General Motors Corp., the largest U.S. automaker, plans to eliminate 10,000 salaried jobs globally, people familiar with the situation said.
The situation is fluid (except for the cuts, which are solid as can be).
General Motors Is Said to Plan to Eliminate 10,000 Jobs [Bloomberg]
Reuters is reporting that that whole preferred shares idea with respect to bank bailouts might not really be so preferred. We’ve argued for some time now that if the government really wanted to influence policy and have some control over the day-to-day operations of the targets of its largess, it should do so like everyone else, with common stock. Someone obviously thinks this plain.
We aren’t sure that we buy those early and oft repeated arguments for preferred stock, that using that particular vehicle would get the taxpayers funds back quicker and with more certainty. To us the selection of preferred stock looked like a weak emulation of Warren Buffett’s investment in Goldman Sachs, and a not-so-subtle message to the banks that the government would still be as “hands-off” as a non-voting shareholder during a proxy fight.
Perhaps now the gloves are coming off?
U.S. officials are examining ways to convert government stakes in banks into ordinary shares as banks accumulate losses, the Financial Times said, citing people close to the discussions.
Policymakers are considering an idea that the government change its existing holdings in the banks, which have taken the form of preferred shares — non-voting stock that carries a fixed dividend — into convertible preferred shares that could be converted into common stock, the paper said.
Under this proposal, the shares would automatically convert into common equity if there was a decline in the bank’s health, as measured by its tangible equity ratio, for example, the paper reported.
The government may also make future capital injections in the form of such convertible preferred shares, the paper said.
It bears mentioning that this passage sounds a bit ominous: “Policymakers are considering an idea that the government change its existing holdings in the banks.”
One wonders if this will be with or without the consent of the banks in question.
U.S. explores converting stakes in banks: reports [Reuters]
…down to “in the neighborhood of $800 billion.”
Senators working to craft a massive U.S. economic stimulus package said on Thursday they had agreed it should be close to the $800 billion wanted by President Barack Obama, and Senate leader Harry Reid said he believed he had the votes to pass it.
Senate nears vote on huge stimulus [Reuters]
