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    Daily Digest 1/21 – States Look for Ways to Declare Bankruptcy, Irish Government Collapses, Mortgage Losses

    by DailyDigest

    Friday, January 21, 2011, 4:00 PM

  • NYT Reports States Looking For Ways To File Bankruptcy
  • Irish Government Collapses, Six Cabinet Members Resign, Election March 11
  • The Meredith Whitney Effect In One Big, Beautiful Chart
  • Plans Being Drawn Up To Let States Declare Bankruptcy
  • Bank Of America Posts Billion-Dollar Loss Tied To Mortgages
  • Schlumberger 4Q Profit Rises 31% On Stronger Demand
  • U.S. Firms Seek To Pick Up Pace In China

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Economy

NYT Reports States Looking For Ways To File Bankruptcy (pinecarr)



A few days ago we reported that Newt Gingrich was pushing for legislation to allow states to file for bankruptcy, “allowing Them To Renege On Pension And Benefit Obligations.” As we speculated back then “obviously what this means for equity investors in assorted muni investments is that a complete wipe out is becoming a possibility, as Meredith Whitney’s prediction, which everyone was quick to mock and ridicule, is about to come back with a vengeance.” Sure enough, this most recent development in the states’ path to insolvency was quickly ignored as it was not a dipping mushroom cloud that could be bought. Until tonight: the NYT has just rehashed the post in an article that would not only validate the Whitney thesis if true, but make a Cramer-Bove out of everyone who has been caught on tape in the past two weeks kicking and screaming that there is no chance in hell the carnage predicted by the scourge of Citigroup (and yes, back in 2007 everyone said that Citi could never fail either).

Irish Government Collapses, Six Cabinet Members Resign, Election March 11 (pinecarr)



The election was precipitated during a day of turmoil after the small Green party, which has kept Fianna Fail in power, called for a contest in March. Four Fianna Fail ministers, plus a long-time supporter, then announced their resignations. In what is viewed in Dublin as an extraordinary move, Mr Cowen then redistributed their portfolios with some of his remaining ministers taking on extra responsibilities. Mary Hanafin, for example, has become Minister for Trade, Enterprise, Innovation, Tourism, Culture and Sport.

The Meredith Whitney Effect In One Big, Beautiful Chart (pinecarr)



Want to see the Meredith Whitney effect? This chart of muni bond outflows says it all.

Plans Being Drawn Up To Let States Declare Bankruptcy (jeff)



Unlike cities, the states are barred from seeking protection in federal bankruptcy court. Any effort to change that status would have to clear high constitutional hurdles because the states are considered sovereign. But proponents say some states are so burdened that the only feasible way out may be bankruptcy, giving Illinois, for example, the opportunity to do what General Motors did with the federal government’s aid.

Bank Of America Posts Billion-Dollar Loss Tied To Mortgages



The loss was driven by a previously announced writedown of $2 billion related to mortgage business. Excluding the charge, the bank earned 4 cents per diluted share or $756 million. Analysts expected the bank to earn 14 cents per share and bring in $25 billion in revenue. In the fourth quarter of 2009, the bank lost $5.2 billion, or 60 cents per share.

Schlumberger 4Q Profit Rises 31% On Stronger Demand



The company’s performance has been boosted by its $11 billion acquisition of Smith International Inc. in August as well as a rush for North American shale oil and gas. Strength in those areas has been offsetting softness in its international and deep-water businesses. Still, major oil companies’ increased focus on deep-water projects and exploration may benefit Schlumberger, whose operations are more focused internationally than many of its rivals. Schlumberger reported a profit of $1.04 billion, or 76 cents a share, up from $795 million, or 65 cents a share, a year earlier. Excluding restructuring and merger-related expenses, earnings from continuing operations rose to 85 cents from 67 cents. Revenue soared 58% to $9.07 billion, after dropping 17% a year earlier.

U.S. Firms Seek To Pick Up Pace In China



Hu travels to Chicago on Thursday and returns to China on Friday, following a speech Thursday to U.S. business and political leaders. He met President Barack Obama for a one-on-one meeting as well as a formal state dinner Wednesday. Read story about Hu’s speech. Interviewed after Hu’s Thursday speech, members of the U.S. business community said they were pleased by the deepening economic engagement between the two countries but said obstacles remain.

Article suggestions for the Daily Digest can be sent to [email protected]. All suggestions are filtered by the Daily Digest team and preference is given to those that are in alignment with the message of the Crash Course and the “3 Es.”

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