News Cut: October 6, 2008 Archive

We're melting!

Posted at 9:50 AM on October 6, 2008 by Bob Collins (6 Comments)
Filed under: Economy

Any notion that the big bailout bill would bring confidence to the markets and stabilize the financial meltdown in the U.S. disappeared today in early trading on Wall Street. The market is down about 5.6% (at 9:51 a.m. CT), dropping to a five-year low.

I'll be posting updates and links here during the day.

9:57 a.m. Zachary Karabell, says the U.S. is losing its status as the center of the global economic system. "I doubt it's a secret anymore," he says. He writes in the Wall St. Journal...

What is happening to finance today is similar to what happened to manufacturing beginning in the 1970s. Until then, U.S. manufacturing accounted for as much as half of all global output. By the 1970s, Germany and Japan began to exert themselves as manufacturing titans. So did Taiwan, Singapore, Korea and others that had benefited from American aid. The globalization of manufacturing continued, and was accelerated by the information technology revolution of the 1990s. While the U.S. today continues to produce a decent share of global manufactured goods, it is one among many and employs only 13 million people (10% of the workforce) in a sector that in the middle of the 20th century accounted for a third of all jobs. The same thing is now happening with finance.

He says there's been a massive shift of wealth to Asia. Is this the sun setting on the "U.S. Century?" (Please comment below)

10:07 a.m. - CNBC analyst points out that the government now has powers under the bailout bill it hasn't used yet. "They're still reading the thing," he says. Will the bailout work? The Economist tackles the question.

The pain is reaching municipalities and states. Alabama's Jefferson County is on the verge of bankruptcy. California's governor, Arnold Schwarzenegger, has reportedly given warning, in a letter to the Treasury, that his state is running out of cash to fund day-to-day operations and may need an emergency loan of $7 billion from the federal government.

Do you get the feeling that next month's Minnesota financial projection is going to be a disaster?

10:09 a.m. -- It seemed like only yesterday we were worried about inflation (Wait! It was yesterday). Now, we're hearing that the threat of deflation is returning. Ten years ago -- 10 years! -- MPR tackled what happens with deflation and why it's not necessarily a great thing. Here's a trip down memory lane. Or a glimpse into the future. Or both.

10:11 a.m. - Bloomberg reports that the legal wrangling between Wells Fargo and Citi may end with Wachovia being split between the two. Those are banks. You know, where we used to keep our money.

10:26 a.m. What are the darkest days in the history of the stock market? Here's a historical look:

Greatest Net Losers
Rank	Date	Change
1	9/29/2008	-777.68
2	9/17/2001	-684.81
3	4/14/2000	-554.26
4	10/27/1997	-512.61
5	8/31/1998	-512.61
6	10/19/1987	-508
7	9/15/2008	-504.48
8	9/18/2008	-449.36
9	3/12/2001	-436.37
10	2/27/2007	-416.02
Greatest percentage losers
1	12/12/1914	-24.39
2	10/19/1987	-22.61
3	10/28/1929	-12.82
4	10/29/1929	-11.73
5	11/6/1929	-9.92
6	12/18/1899	-8.72
7	8/12/1932	-8.40
8	3/14/1907	-8.29
9	10/26/1987	-8.04
10	7/21/1933	-7.84
Source: Dow Jones

10:51 a.m. - The Dow is down 4.69% with a loss of 483. That puts it in 8th place and knocks (at least for now) 2/27/2007 off the top 10. Three of the top ten losing days have come in the last month.

11:01 a.m. - The head of Lehman Brothers dropped what once would be considered a bombshell on Congress today, saying federal regulators knew exactly what the situation with the onetime financial giant was. "Once would be considered ?" How much confidence do you have in the government these days? Is this sort of revelation really much of a surprise?

11:39 a.m. - How bad are things? CNBC went to a 10-person box to fit all the talking heads in today. It's the first time they've gone to the 10-person display. The previous record was 8, two weeks ago.

11:42 a.m. - Richard Fuld, CEO of Lehman Brothers is now testifying before Congress. There have been some protests in the room. Times change. Two years ago, protests broke out in hearings about a war. Now, they're focused on the House Committee on Oversight and Reform for a banking hearing.

12:26 p.m. - Weep not for the Lehman execs. According to Henry Waxman, Lehman was steering millions to departing execs while asking for a bailout.

12:27 p.m. What's an investor to do. Don't "do nothing" is one piece of advice.

2:11 p.m. - Dow is down 611.58 or 5.97%. That bumps it up to third place in the all-time-points-lost list. I've just finished writing up a piece on the effect on nonprofit organizations and will post that shortly.

2:13 p.m. - According to Floyd Norris at the New York Times, the market has lost 13% over the last three sessions. The crash of 1987 was the only other time that has happened since World War II. Prior to that, the last time it happened was 1940, when France was conquered by Germany.

2:15 p.m. -- Using the word "depression" in terms of the economy was, until recently, the stuff hyperbole was made of. Not anymore. CNN is out with a poll that says 60 percent of those surveyed say a depression is "likely."

2:21 p.m. - Sun Country files for bankruptcy. The economy had something to do with it. The arrest of Tom Petters had a lot to do with it.

3:22 p.m. - The market willed itself off its lows of 800 points. Closes down 369.88.

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When Main St. melts down: Nonprofits are worried

Posted at 2:20 PM on October 6, 2008 by Bob Collins (1 Comments)
Filed under: Economy

How likely are you to give money away that you don't have to give away other than to satisfy your philanthropic sensibilities?

Minnesota non-profit organizations are about to find out. The steady stream of bad economic news, coupled with the drop in home prices and retirement funds, may put a crimp in the services delivered by non-profits, including food shelves and charitable organizations. Even last week's arrest of Tom Petters reverberated through some nonprofit organizations.

"What we're hearing is approaching panic," said Kate Barr, the executive director of the Nonprofits Assistance Fund, which lends money to nonprofits. "The timing of this is never good but it's a unique time now because we're going into the fourth quarter, which is the best quarter for individual giving, and it's budget time for a lot of non-profits." She says it's difficult for nonprofits to predict when there's so much uncertainty.

Nonprofits are most worried about individual giving now because, Barr says, "it's what's felt most immediately" in an economic downturn. Foundations which have provided millions of dollars in support to Minnesota organizations have "hung in there" over the last few years, but are unlikely to give additional dollars, and it's unlikely an organization will be able to get new grants. But, she says, most grants are two-year grants so the impact of the financial meltdown isn't immediate.

But she expects a "rough" state budget in 2009, comparing the overall effect to that of the state budget crisis in 2002 and 2003.

Nonprofits built up financial reserves in the "good years" after 2003, but many of those "got hammered" in the stock market slowdown, according to Barr. Many organizations that have been planning capital campaigns are "revisiting their timing," she says.

"The ones that are having the hardest time are the ones that are seeing increased demand for services. It's hard for a food shelf to cut back when there's twice as many people at the door," according to Barr.

Bottom line? Expect cutbacks. Government has been "outsourcing" services to nonprofit groups. Those days may be over. "Nonprofits have made do with less. There might not be a lot of 'give' there," Barr says.

In which case, with ballooning budget deficits, governments may decide to simply stop paying for services, according to John Pratt with the Minnesota Council of Nonprofits. "People may want services and not be allowed to get it. The counties may just decide to have longer waiting lists and fewer clients."

There's a lot of worry, Pratt acknowledges. "For the Salvation Army, or Catholic Charities, this is a very important time. This is where it could hit very quickly," he says.

How quickly? He says the Center for Philanthropy at Indiana University has calculated that individual giving follows the S&P 500. As early as last summer it sounded a warning.

And this year the S&P 500 is down more than 30%, more than 7% today alone.

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Whatever happened to the flu pandemic?

Posted at 5:01 PM on October 6, 2008 by Bob Collins (8 Comments)
Filed under: Health

It wasn't that long ago -- within the last two years, actually -- that a flu pandemic was our biggest worry. Here at the world headquarters of News Cut, we even had a meeting or two about how we would function if we were all sick or half of us dead.

Those were the days.

A new report from Johns Hopkins Berman Institute of Bioethics, however, has reminded us -- in the event we weren't depressed enough already today -- that a pandemic is still a real possibility.

Says the report's outline:

This article provides ethics guidance for pandemic planning, response, and resource allocation--that is, what ethical considerations determine which public health responses are implemented, who will be restricted and who will be helped, what will be communicated to the public, and how will the public be included in decisions and responses?

In other words: Who's going to get first crack at vaccine and other treatment? Their suggestions are surprising. First responders? Sure. The sickest? Not so fast.

While some have suggested that scarce medical countermeasures be allocated primarily to first responders and then to the sickest, we suggest that an ethical public health response should set priorities based on essential functions. An ethical response also will engage the public, will coordinate interdependent sectors as a core preparedness priority, and will address how plans affect and can be understood by the least well off.

Public health "experts" and "government officials to whom the public will turn for information and direction" are on the priority list. So are utility workers, truck drivers, and people who work in grocery stores.

"Alongside healthcare workers and first responders, priority should be given to the people who provide the public with basic essentials for good health and well-being, ranging from grocery store employees and communications personnel to truck drivers and utility workers," said Nancy Kass, deputy director of public health at the Berman Institute.

Nothing about bloggers.

Minnesota, however, is way ahead of Johns Hopkins. In 2006, a task force outlined a strategy for who's the most important and who should be "saved" first.

It recommends young, healthy people get the vaccine first. The report also says that giving priority to health care workers won't work because there won't even be enough vaccine to go around.

And you? How critical do you think you would be during a pandemic?

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