All Blog Posts from Econwatch

After seizing control of more than 150 failed banks in the last two years, the U.S. government reluctantly finds itself in the real estate business.

According to a Wall Street Journal report Tuesday, the Federal Deposit Insurance Corp. now owns more than 5,000 foreclosed properties taken from small banks that collapsed as the housing market went into the tank.

The entire catalog of properties, ranging from an $18,700 home in Birmingham, Ala., to a $1.7 million lodge tucked in the mountains of Steamboat Springs, Colo., carries an appraised value of $1.8 billion.

As the Journal's Michael M. Phillips writes: "The financial crisis started with Americans buying homes they couldn't afford. It is ending with the government struggling to sell buildings it never wanted."

Phillips charts the FDIC's efforts to sell troubled Dresden Heights – an unfinished housing development in Atlanta that counts an interstate highway and a pest control company as neighbors.

Among the many challenges facing the FDIC – a decaying constructions site, looters and the fact that potential buyers would technically have to trespass to get to their homes (the original developer took out loans from two different banks to buy the land and then build on it).

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A year after a Wal-Mart worker was trampled to death by a massive crowd of bargain-hunting shoppers, the retail giant is implementing new crowd control measures to handle the crush that typically accompanies the day after Thanksgiving – Black Friday.

According to a New York Times report Wednesday, Wal-Mart is taking a page from experts who have managed crowds at the Super Bowl and Olympics. The revamped effort stems from the death of Jdimytai Damour, a temporary store worker crushed by throngs of customers in Valley Stream, N.Y.

Among the measures:

• Most Wal-Mart stores will stay open from Thanksgiving night into Black Friday. In the past, the store closed Thanksgiving and opened its doors in the early morning hours Friday, leading to a huge crowd buildup outside its doors. The store hopes the extra hours will ease the crowd flow.

• To avoid the mad dash toward popular items, the store will have customers line up at product displays and treat them on a first come, first serve basis.

• Since Wal-Mart stores only have one entrance, making crowd control more difficult, workers will be stationed at the front of the store directing customers to the appropriate places.

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The economy may be growing again, but that's little comfort to Americans struggling to find jobs.

But as the unemployment rate inches steadily toward 10 percent, CBS MoneyWatch editor-at-large Jill Schlesinger says there are still sectors hiring.

The health care industry has added 560,000 jobs and remains a huge part of the U.S. economy. And the government claims to have created or saved 380,000 jobs in education through stimulus efforts.

The government itself is hiring, though some of those jobs – like census workers – are temporary.

And the technology sector is experiencing "very good growth," Schlesinger told "Early Show" co-anchor Harry Smith Thursday.

Industries hardest hit by job losses come as no surprise – construction, manufacturing, restaurants and retail continue to struggle.

As far as geography, Schlesinger says heartland states like Nebraska, North Dakota and South Dakota have been largely spared the full force of the recession, boasting unemployment rates under 5 percent.

Worst areas for job seekers? Michigan, Nevada, Rhode Island and big housing boom states like California.

A prominent executive in the technology industry has been implicated in the alleged $20 million insider trading case unraveled by investigators earlier this month, according to a Wall Street Journal report ($) Wednesday.

Hector Ruiz, then-chairman and former chief executive of chipmaker Advanced Micro Devices, was the unnamed AMD executive that fed inside information to Danielle Chiesi, one of the six arrested in the case, according to a person familiar with the matter. Chiesi worked at hedge fund Newcastle Partners during the alleged insider trading.

Court filings indicate an unnamed executive at AMD told Chiesi about confidential plans to reorganize AMD in 2008. Chiesi then shared that information with Raj Rajaratnam, the billionaire co-founder of Galleon Group also charged with insider trading. New Castle and Galleon bought up shares of AMD just prior to the transaction, but their potential profits were hurt by the general downturn in the market last fall.

Ruiz, a highly respected executive in the technology sector, is not charged in the case and the complaint doesn't say that he personally profited from passing along the information.

The six arrested deny the charges.

Meanwhile, Galleon Group is close to completing its wind down in light of the allegations, liquidating more than 90 percent of its $3.7 billion hedge fund holdings.

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Call it AIG: Part Deux?

Maurice "Hank" Greenberg, the man who built the AIG empire that barely stayed afloat during the financial crisis, is piecing together an insurance giant that could compete with his brainchild, according to a New York Times report Tuesday.

Greenberg, 84, spent nearly four decades at AIG's helm before his 2005 ouster amid an insurance scandal. He has insisted he bears no responsibility for the risky behavior of AIG's financial products division that prompted the largest government rescue package in U.S. history last year.

Now Greenberg is using the $4.3 billion retirement package from AIG (which AIG alleged he stole, though a court disagreed) to start C.V. Starr & Company, a network of insurance companies that bears at least some resemblance to AIG's complex structure (minus the financial product services unit). He's even luring top AIG executives away to help launch the venture.

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A Saudi family feud is being felt by banks around the world, from New York to the Cayman Islands.

It also offers a glimpse into the clannish nature of business in a region dominated by oil markets.

According to a Wall Street Journal report ($) Thursday, the Gosaibi clan – one of the richest in Saudi Arabia – is beset by multibillion-dollar debt that has sent its businesses into default and caused deep familial rifts.

The problems, Gosaibi family members say, stem from Ma'an al Sanea, a former fighter pilot from Kuwait who married into the family and eventually ran the financial arm of the clan's expansive business empire - Ahmad Hamad al Gosaibi & Bros., or Ahab.

Aside from his involvement in Ahab, Sanea also formed his own company, Saad Group. The two entities have borrowed $15 billion from 110 local and global banks over the last several years. Some of those banks have already written off hundreds of millions in bad loans while others, including Deutsche Bank AG, are suing Ahab subsidiaries and Saad group in New York, London, Dubai and the Cayman Islands, according to the report.

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Executives at bailed out U.S. firms have to "understand you can't party on like it's 2007" when it comes to compensation, TARP's congressional watchdog said Thursday.

Elizabeth Warren, who chairs the congressional oversight panel for the Troubled Asset Relief Program, told CBS' "The Early Show" that executive compensation has become a "problem in American industry" that must be fixed.

The White House's executive pay czar, Kenneth Feinberg, is expected to announce executive pay cuts at seven of the largest companies receiving significant federal bailout money – cuts that would slash top salaries by 90 percent, reports CBS News correspondent Bill Plante.

Lavish corporate pay packages, even after the taxpayer funded bailouts, have stoked anger and resentment in Washington D.C. and around the country.

"You know, you really begin to wonder what it's going to take to get the attention of the people in charge of these very large corporations," Warren told "Early Show" co-anchor Harry Smith. "They have taken taxpayer money, unemployment is now running at almost 10 percent. … And yet the executives want to say 'I take your money when I make mistakes and I still want to compensate myself richly because I'm the one when's in charge of this big company.'"

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Galleon Group, whose co-founder is allegedly at the center of an insider trading ring, is winding down its hedge funds, according to a Wall Street Journal report ($) Wednesday.

Billionaire money manager Raj Rajaratnam, who was arrested last week along with five others on charges of insider trading, informed employees and investors by letter of plans to close out the firm's hedge funds.

"I have decided that it is now in the best interest of our investors and employees to conduct an orderly wind down of Galleon's funds while we explore various alternatives for our business," the Journal quotes Rajaratnam as writing.

According to the report, one possibility is selling Galleon to another company.

The firm has reportedly started selling off some of its positions to raise cash in preparation for a spate of investors redemptions. No cash can be withdrawn, however, before Jan. 1, 2010 according to Galleon's redemption rules.

In the letter, Rajaratnam again denied the insider trading charges.

Galleon's hedge funds have enjoyed double-digit returns this year. An orderly wind down would likely prevent major disruptions to stocks and markets, the report notes.

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It would be "unrealistic" for Americans to expect the government to recoup all of the $700 billion spent in the last year to prop up a teetering financial system, the bailout's inspector general said Wednesday.

Neil Barofsky, who oversees the federal Troubled Asset Relief Program, said that while TARP funds helped pull the economy back from the brink of collapse, there is "no expectation at all that that money will come back."

Barofsky released a report Wednesday detailing the program's mixed results. During an appearance on CBS' "The Early Show", he graded the bailout effort as "incomplete"

"There's been some successes in as far as pulling us back from the brink of a financial collapse. But as far as restoring lending, helping homeowners, helping small businesses, that hasn't materialized yet. We'll have to wait and see," he told "Early Show" co-anchor Harry Smith.

One aspect of the program that's appeared to raise the ire of the public and Congress is the lavish bonuses paid out by Wall Street firms aided by taxpayer money. Barofsky called the bonuses a "significant issue" but noted "there's nothing in the legislation to stop them from doing so."

Raj Rajaratnam, the alleged billionaire ringleader of a massive insider trading scheme, was a hard-driving boss who was insisted his traders and analysts always have an edge over the competition, according to recently published reports.

According to Bloomberg, Rajaratnam gathered Galleon Group's 70 analysts, portfolio managers and traders every morning and peppered them with questions, expecting them to have better information than their competitors. As the report notes, that quest for a money-making edges is what has landed Rajaratnam in jail.

Rajaratnam was among six arrested Friday on insider trading charges. Prosecutors allege the group, which included executives at IBM, Intel, McKinsey & Co. and Bear Stearns traded insider information with Rajaratnam, who alone faces 13 charges of fraud and conspiracy.

A Wall Street Journal report depicts Galleon Group as a high-pressure environment in which investors and analysts were berated if they failed to get enough information, though the pressure was usually directly applied by executives other than Rajaratnam.

"Get an edge or you're gone," a former trader told the Journal. "Galleon is looking for that little bit of extra edge. That's what the firm is about."

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