Federal bailout, round two, for Citigroup

Wake up and good morning. Hardly a surprise after last week's drubbing in the stock market, Citigroup Inc. just got a mega-sized federal bailout, a deal to inject $20-billion into the troubled firm and to guarantee hundreds of billions of dollars in risky assets. It had to happen. Citigroup shares closed at a puny $3.77 on Friday and a market value of about $20-billion -- a value that has shriveled from more than $100-billion in a matter of a few weeks.

Hope this bailout works. We seem to have a habit of going back to the rescue trough over and over with these big financial firms. Witness insurance giant AIG, whose name has devolved to Always Insisting on Gimme's from the feds.

But here's the nasty underbelly: How can we gauge the depth of the broader problems when the stream of announcements of ever-growing rescues goes on and on? Drip. drip, drip. A little more and we're all under water. We gasped at the original size of the government bailout: $700-billion. Now the feds are committing (with the guarantees -- don't for get these) at least $300-billion just to Citigroup.

For those interested, here are the terms of the Citigroup bailout. And here's the now perfunctory statement of a big bank CEO, in this case Vikram Pandit of Citigroup, in announcing that it, too, is now owned in part by the U.S. taxpayer:

"This weekend, the U.S. government and Citi worked together in an unprecedented way to address market confidence and the recent decline in Citi's stock price," said Pandit. "We reached an agreement based on an innovative market solution to further strengthen our capital ratios, reduce risk, and increase liquidity. We appreciate the tremendous effort by the government to assure market stability. We are committed to streamlining our business and providing outstanding banking services to our clients around the world. We will continue to focus on opportunities and alternatives to further enhance the company's overall position and value."

Will it work? It better. Citigroup could not stem the bloodletting of its balance sheet on its own. There's a curve ball in all this, however. It's hard to instill fresh confidence in Citigroup when those running the federal bailout increasingly lack credibility. Citigroup may find itself tarred with the same doubts and, like AIG and Oliver Twist, be forced to go back cup in hand: "May I have so more, sir?"

A couple of early comments on the Citi deal here and here worth looking at, as well as this naked capitalism blog posting which points out the Citigroup bailout will lead soon to the GM bailout:

"I do not see how GM can be denied a rescue now (not that that outcome is really in doubt, merely how much pain will be inflicted on management and the UAW)."

Keep in mind. This is not the first but the second bailout infusion for Citigroup. This $20-billion cash injection by the Treasury Department will come from the $700-billion financial bailout package. The capital infusion follows an earlier one -- of $25-billion -- in Citigroup in which the government also received an ownership stake.

-- Robert Trigaux, Times Business Columnist

Will Citigroup become GM of banking?

Wake up and good morning. If the "Citi never sleeps" then how is it getting such a rude wake-up call? Perhaps the world's greatest icon of financial capitalism, New York's Citigroup Inc. is mulling the idea of putting itself up for sale. So says the Wall Street Journal this morning, which starts this way:

"Executives at Citigroup Inc., faced with a plunging stock price, began weighing the possibility of auctioning off pieces of the financial giant or even selling the company outright, according to people familiar with the matter."

Surely this is just talk, or maybe a "worst case scenario" that Citigroup's board is taking in the event of further stock swoons like Thursday's when already battered Citigroup shares drooped 26 percent. It was the worst one-day decline ever for the banking company. Worse, the fall occurred despite the announcement by Saudi Arabian investor Prince Alwaleed bin Talal bin Abdulaziz Al Saud that, in further support of the bank's management, he will increase his holdings in Citigroup Inc. to 5 percent.

Citigroup's shares sit at a puny $4.71 but this is still a company with a market value exceeding $25-billion. General Motors, for perspective, has dwindled to just $1.76-billion in market value. Says the New York Times this morning:

"Within the bank’s Manhattan offices, television screens have stopped displaying the company’s stock price. Traders have begun making jokes comparing Citigroup to the Titanic."

Are we really on the edge of such significant shifts in the American and even global economy? Sure, anyone paying attention is reconciled to the notion that GM, Ford and Chrysler will either disappear or be radically altered. But Citigroup? More than 3,000 people in the Tampa Bay area alone depend on Citigroup for a paycheck and a reason to go to work. But globally, this is one mega-sized company of more than 300,000 employees.

What's ahead? Here's what the Wall Street Journal says, boiled down to three points:

1. In addition to pondering a move to sell the entire company to another bank, executives are exploring the possibility of selling off parts of the firm, including the Smith Barney retail brokerage, the global credit-card division and the transaction-services unit, which is one of Citigroup's most lucrative and fast-growing businesses.

2.In Washington, Citigroup officials this week have been urging lawmakers and regulators to intervene by making it tougher for investors to place bets that the company's share price will fall, a strategy known as "short selling," according to people familiar with the matter. Banks are lobbying the Securities and Exchange Commission to reinstate the ban it temporarily imposed this autumn on short selling of financial stocks.

3. Citigroup's board of directors is scheduled to have a formal meeting Friday to discuss the options. CEO Vikram Pandit scheduled a conference call for 8 a.m. today to discuss the situation with senior managers.

Here's my take. The financial karma at Citigroup is atrocious these days. Whatever it touches lately turns to dung. Earlier this week, in yet another move to fix a rotting infrastructure, the company said it would buy $17.4-billion in assets from its structured investment vehicles, or SIVs. These are complex investment tools that first encountered trouble last year due to their mortgage-related holdings.

Remember, this is the very same corporation that cut a deal with the federal government earlier this fall to -- start the laugh track now -- "bail out" crumbling Wachovia Corp. (Wells Fargo eventually seized it from a wimpy Citigroup.) Imagine Citigroup's current plight -- and Florida's given Wachovia's No. 1 ranking in the state banking market -- had the Citi-Wachovia deal gone through.

How bad could it get? Ask Hugh Hendry, chief investment officer at hedge fund Eclectica Asset Management. As he told CNBC this morning: We're heading fast for a nationalized financial system  because the alternative is so much worse.

"All financials will be owned by the U.S. government in a year," Hendry said. "I bet you."

Now the cynic in me says that markets are being grossly manipulated by bears, day traders and short sellers who are driving worthy blue chip stocks down for big profits.

Like most folks, I have a theory, and like Hendry's prediction, it is just conjecture. The federal bailout plan essentially required the country's biggest banks -- Citigroup, Bank of America and JPMorgan Chase among others -- to accept billions in taxpayer dollars as emergency infusions to their capital. But it comes with some terrible and unintended consequences. It told investors worldwide that these banks can't cut the current crisis on their own. Maybe it sent a bigger message that a financial system awash with SIVs, GSEs and CDOs and too many other acronyms we apparently don't understand (and never did) is flawed.

And the leadership of the federal financial rescue plan -- including Treasury Secretary Hank Paulson, Federal Reserve Chairman Ben Bernanke and, increasingly scary, a waffling Congress? Well let's just say all these emperors wear no clothes.

-- Robert Trigaux, Times Business Columnist

Come on, throw your name in Treasury hat!

Pssst... Want to be the next U.S. Treasury Secretary? Apparently there may be some room for a dark horse candidate. At a Wall Street Journal "CEO Council" gathering Tuesday, top executives in the audience were asked: Who should be the next Secretary of the Treasury?

Using electronic devices at their chairs, 93 CEOs responded (anonymously) to the question, according to a blog posting by the Journal from the event. Tim Geithner, president of the Federal Reserve Bank of New York, won a plurality of the vote with 37 percent of the CEOs. And the rest?

* 18 percent to Geithner's former boss, ex-Treasury Secretary Lawrence Summers.

* 10 percent to former Federal Reserve Chairman Paul Volcker, who frankly can do more good helping the Obama Administration think through its strategy than stand in front of a podium defending it.

Here's the clincher. "None of the above" came just one vote shy of Geithner, the Journal blog says, drawing more than 35 percent of the vote.

Okay readers: Any ideas for a stronger candidate to head Bailouts 'R Us?

-- Robert Trigaux, Times Business Columnist

Banking's overhaul gathers momentum

Wake up and good morning. Since it's Columbus Day -- a salute to an explorer who left Spain well capitalized in search of new riches in a new world -- it seems only fitting to start with news of a Spanish bank looking to expand its turf in the United States. Spain's Banco Santander SA said today it's in advanced talks to acquire full control of Sovereign Bancorp Inc., a Pennsylvania institution hobbled by souring loans. Santander, you may recall, eyeballed Wachovia (check out the details on Wachovia's "silent run") closely before the bank eventually fell into the hands of Wells Fargo (a deal blessed Sunday by the Federal Reserve, that should close be the end of this year). Watch the AP news video and read the hometown Charlotte paper's take on Wells Fargo's challenges. Banco Santander has been seeking a bigger foothold in fast-growing Hispanic American markets like Florida, Texas and Arizona.

We care about this because the turmoil in the banking industry is only going to get more intense for awhile as regulators push banks to merge and continue to shut down others. Some area banks are also under pressure, as this Sarasota report suggests. The  government is switching gears and, rather than focus on buying bad mortgage assets, now wants to invest directly in certain banks to shore them up. Is this a national bailout or a nationalized bailout? Or does it matter any more? Here's my latest print column in the St. Petersburg Times asking that question and more. What do you think?

All of this instability is not helping consumer nerves. Americans' confidence in their own financial security has tumbled alongside dizzying declines in stock prices and home values, according to a new Washington Post-ABC News poll. Less than half now believe they will have enough money to last through retirement, and two-thirds fear for their family's economic situation.

Finally, cheers to the Tampa Bay Rays dramatic comeback in Game 2 of the American League Championship Series. Rays owner Stu Sternberg is profiled anew in the New York Times this past weekend basking in the payoff in his long-shot investment in the Tampa Bay baseball franchise. Sternberg's still a season ticketholder for the New York Mets, we learn, but as Rays' owner he's also enjoying his one-thirtieth take of Major League Baseball’s Internet and television cash cows. Yet he still questions the viability of staying at Tropicana Field. And a new Forbes ranking lists the Rays as one of the "Top Ten" franchises most likely to move. As a business, a strong season like this one for the Rays will only enhance  Sternberg's leverage for a new stadium -- somewhere. And if there's anything we've learned in this Wall Street crisis, leverage is a powerful tool.

-- Robert Trigaux, Times Business Columnist

Write your own federal rescue press release

Wake up and good morning. If these morning blog postings have a familiar ring, they do. Call it the calamity du jour. Let's make it easier. You can choose whichever underlined words make best sense to you in this first report. And yes, this is a spoof, folks -- it's Friday:

WASHINGTON -- The U.S. Treasury, acknowledging its (inability) (ham handedness) thus far to take control of the downward-spiraling economy, agreed Friday to (guarantee) (once again stick the taxpayer with) the (bad assets) (CEO golden parachutes) of every (U.S. corporation) (U.S. bank)) (oh heck, everybody everywhere) in an attempt to stabilize the (global stock markets) (presidential polls). "I am taking this action because our (demanding financial times) (sagging resume) (place in history) is under attack," said Treasury Secretary Henry Paulson. Added Federal Reserve Chairman Ben Bernanke: "It is time to bring some (sobriety) (Bud Lite) to our American party built on (debt binges) (predatory lending) (comatose regulators). It is the consensus of this Administration that guaranteeing our (free market system) (nationalized economy) is necessary to prevent further loss of (this financial crisis) (my job)."

Back to Oct. 10 reality now (I think). "U.S. officials are discussing temporarily backing all U.S. bank deposits if economic conditions continue to worsen, a move that would mark another unprecedented step as the government struggles to stem the sprawling  financial crisis." That's the front page story from today's Wall Street Journal. I have only one question. Who's going to guarantee the U.S. government? It's not a knee-jerk idea. Check out this analysis in the Washington Post today headlined "The End of American Capitalism?" We are, the analysis suggests, becoming the global example of comeuppance for national excess. Here's one view cited:

"Derivatives and hedge funds are like casino gambling," said South Korean Finance Minister Kang Man-soo. "A lot of Koreans are asking, how can the United States be so weak?"

Time to check in on the future of Wachovia. Watch for an official word sometime this morning that Wachovia  will, indeed, be purchased by Wells Fargo. That's the good news. Citigroup, which tried to buy some of Wachovia with FDIC backing, now seems willing to walk away, lick its wounds and demand damages (pay us, says Citi) in court. If this is an accurate if messy scenario, it will ultimately mean good things for Florida with the arrival of a new competitor in California-based Wells (a reasonably healthy one so far, one of the few) to the Sunshine State.

Some very good lessons for Florida in this USA Today story about the debate over Gulf Coast (Mississippi) communities rebuilding over and over in the wake of repeated strikes by hurricanes. Does it make sense? From the story:

"Locals and officials throughout the Gulf Coast continue to press for more stringent building requirements and stronger levees and floodwalls to prevent floods. But some coastal analysts argue that coastal erosion is growing too fast and some Gulf Coast towns need to depopulate and move to higher ground.The debate could be repeated in coastal communities in Florida, Louisiana, Alabama, Mississippi and elsewhere throughout the USA, said Robert Young, professor of coastal geology at Western Carolina University.

"It's hard to see how the federal government can continue pumping billions of dollars in protecting coastal communities. At some point within the next two decades, some of these vulnerable communities may need to relocate."

An early warning for tourism? "The plunging stock market, big bank failures, falling home values and other scary economic news could signal trouble for travel," says this USA Today report. I'm not convinced Florida's tourism industry is in too much trouble. Gas prices are starting to drop under $3 at some gas stations, which will ease some of the pressures on driving. And some tourist destinations are discounting heavily. Example: Cypress Gardens offers a special promotion for today, Oct. 10, and next Friday, and Oct. 17.  The first 10,000 visitors will receive admission into the park for just $10. Hey, it beats throwing $10 into the stock market these days.

-- Robert Trigaux, Times Business Columnist

*

Hello? Get on with better Wells-Wachovia deal

Wake up and good morning. Amid the drumbeat of "who's in financial trouble now" how could we forget the fate of Wachovia, the North Carolina banking company that's got a No. 1 market share in Florida? Because the three players determining Wachovia's future -- Citigroup, Wells Fargo and, yes, the federal government -- are still thumb-wrestling over who gets what. Kind of like an early scene of carving up a Thanksgiving turkey. If you can recall through the fog of financial chaos, Citigroup agreed to buy Wachovia's banking assets (but not Wachovia Securities) with the generous backing of the FDIC. Days  later, Wells Fargo stepped up with a dramatically better offer: Buy all of Wachovia -- without FDIC backup. Citi protested and sued for $60-billion -- an absurd sum suggesting Citi's thinking with its ego, not its brain. Now the banks' lawyers are fighting and there may be resolution when the truce ends Friday morning.

“There are negotiations between Wells Fargo and Citigroup about a possible grand solution that would preserve the shareholder value for Wachovia as represented by the Wells Fargo deal,” Wachovia lawyer David Boies said during a teleconference. Such a deal “would involve not a single choice between Citigroup and Wells Fargo,” Boies said, without providing details.

Say what? Boies, you may recall is the lawyer who represented Al Gore in the controversial 2000 election recount in Bush vs. Gore before the U.S. Supreme Court. Hopefully, Boies will have better luck this time.

One thing is for sure. The pundits and analysts do not like Citigroup's approach to the Wachovia deal. This MarketWatch column slams Citigroup's recent history of "whatever it touches turns mediocre" and warns Wachovia would be next for the reverse-Midas touch. A Wall Street Journal opinion piece this week suggests Citigroup is smarter to call off its legal battle over Wachovia to prepare for bigger warfare ahead, including the possibility of a global banking recession, or worse. I agree. Besides, the FDIC (which is ultimately backed by the U.S. taxpayer) has an obligation to step away from guaranteeing Wachovia's bad assets when Wells says it will acquire them with no federal strings attached. Hello, FDIC, anybody home?

Here's another tale of a medical test apparently hitting the market before it's ready. The Food and Drug Administration warned clinical test giant Laboratory Corp. of America Holdings that it was marketing an ovarian cancer test in violation of the law, vindicating skeptics worried the $220 test wasn't ready yet. Here's the Wall Street Journal story about OvaSure -- and the concerns of Tampa's Rebecca Sutphen, a spokeswoman for the National Ovarian Cancer Coalition and director of genetic counseling and testing services at H. Lee Moffitt Cancer Center and Research Institute.

"When you make a test available, then people are likely to make decisions based on the test," Sutphen said. "Obviously, everyone is on the same page in terms of wanting such a test. But women may be using this information prematurely to make decisions, and the decisions may not be in their best interests."

On the financial bailout front, here what's one of Tampa's small business owners -- Maryann Ferenc owns and operates the fine dining restaurant Mise en Place and a catering event business -- thinks of the fed's giant rescue package, as reported by Business Week magazine. (I paraphrase). Suck it up, Wall Street, downscale your excessive lifestyle and toughen up. Not bad advice since we Floridians all have to do this at times! Here's what Ferenc actually says:

"As an independent business person for the past 23 years, there have been times when I had to close my businesses because of financial necessity," she says. "No one helped me, and I don't think they should. I had to change my lifestyle when I made decisions that were less than fabulous. But I learned a lot and came out on the other side a better business person. It's a good lesson for Corporate America to go through. People need to pay for their mistakes. We need to hold people responsible for the decisions they make. I am a Democrat and a strong one, but I do not like to see us bailed out."

--Robert Trigaux, Times Business Columnist

*

Buddy, can you spare a 401(k) contribution?

Wake up and good morning. Be sure to get to your job on time today ... because you need to hold on to that paycheck longer than you think. The financial meltdown has demolished Americans' retirement savings, wiping out $2-trillion — or about 20 percent of its value — in the past 15 months. For those brave enough to have looked at their 401(k) statements lately, that may not be so surprising. The sharp drop in savings has led Americans to postpone contributing and, in some cases, delay retirement. A new study by the AARP found that one in five workers 45 and older have stopped putting money into a 401(k), IRA or other retirement savings account during the past year. Think that's scary? Try this: 13 percent of Americans 45 and older are tapping into their retirement accounts, or other investments, to cover day-to-day expenses. Here's the entire study.

There's a lot of sloganeering around the Treasury's $700-billion financial rescue package, the Federal Reserve's $900-billion-plus lending authority, plus whatever else happens in the days ahead. Taxpayers need some clarification, so they don't hate the rescue any more than is, well, reasonable. says Bloomberg News columnist Jane Bryant Quinn, who tries to offer a sharper explanation in this column of what's happening. For example: Is the U.S. taxpayer losing $700-billion? The ultimate cost to the taxpayer depends on when the bleeding in home values stops and these assets rise in price. Peter Orszag, director of the Congressional Budget Office, expects the cost to be "substantially less than $700-billion but more likely than not to be greater than zero." Well, glad the experts have narrowed that down.

NEWS! Maybe this will help.The Federal Reserve this morning just cut a key interest rate by half a percentage point to steady an economy teetering on the kind of financial collapse that the United States suffered in 1929. Read more here.

In Tampa, it's almost the one-year anniversary of the October raid on WellCare Health Plans by federal agents. After operating under that shadow ever since, is there light at the end of the tunnel? This week, a plea agreement by former WellCare employee and 50-year-old Tampa resident Gregory West -- here are the charges against him -- gave shares of the Medicaid managed-care company a modest lift as investors apparently saw the development as a reassuring sign about the federal probe of the company. According to the Dow Jones newswire, the plea agreement "supports our view that the scope of the investigation appears limited to Florida Medicaid behavioral health and that a settlement could fall at the lower end of the potential outcomes," said Goldman Sachs analyst Daryn Miller. West's guilty plea came two months after the government raid and was under seal until Monday night. Added Miller: "The announcement moves WellCare one step closer to settling this issue." As for West, he faces up to 10 years in prison and a $250,000 fine.

What's this? The Rock of Gibraltar -- Progress Energy, a big regulated utility -- feeling the economic squeeze? "We're not recession-proof, and we're not immune to these financial ills," says Progress Energy CEO Bill Johnson in the North Carolina company's hometown newspaper, Raleigh's News & Observer. To quote from the story:

"Progress Energy has virtually stopped growing in Florida and is cutting 300 positions in that state amid a backlog of vacant homes that are unsold or in foreclosure. The company could begin to see the same effects in this state as North Carolina's economy continues to slow. The company will provide a financial update when it releases earnings Oct. 31."

Before the credit crisis, Progress Energy took out short-term loans about once a week to cover its expenses. But as financial institutions grew more cautious, Progress Energy has been forced to borrow on a daily basis to make payroll and cover other expenses. The good news? The story says Progress Energy officials are relieved the economic crisis didn't erupt after the company had begun construction on multibillion-dollar nuclear plants -- including the one just north of the Tampa Bay area in Levy County.

Hmmm. Rough times everywhere. I'm sure there's some other good business news lurking out there. Give me a moment. I'll find some.

-- Robert Trigaux, Times Business Columnist

*

Bailout just the start of long, pricey rescue

Wake up and good morning. Is this bailout a "good" one? That's the $64 (really the $700-billion-plus) question. An interesting NPR segment explored that question and the answer is ... yes, even though a majority of economists queried prefer an alternative approach. And another segment is a great "you're not alone" tale of people trying to survive in the economy -- including this Tampa Bay story. As the Boston Globe reports, economists predict people are expected to cut back further after the tumultuous events of the past month. And the fourth quarter in the stock markets? Watch out for more turbulence ahead. Still, this is nothing like the Great Depression, say those old enough to remember those days.

At least not yet. Federal Reserve Chairman Ben S. Bernanke may find little time before the next trauma: a potential spread of the crisis to corporate America and state and local governments. Companies from Goodyear Tire & Rubber Co. to Duke Energy Corp. are being forced to tap emergency credit lines or pay more to borrow as investors flee even firms with few links to the subprime-mortgage debacle. California Gov. Arnold Schwarzenegger says his and other states, including Massachusetts, may need emergency federal loans as funding dries up. Florida government leaders already have said deals around the state to build infrastructure have been put off. Without funding, states "can't operate the health-care system, schools, roads and other services they provide,'' said Ben Watkins, who heads Florida bond sales.

We know automakers have their hands full with high gas prices and a down economy. But auto dealerships are right there with them. My Sunday column in the St. Petersburg Times quotes AutoNation CEO Mike Jackson and president Mike Maroone explaining how tough things are out there.

I've never been a fan of the King Solomon method of bank regulation, but this smacks of one. Citigroup Inc. and Wells Fargo & Co., prodded by U.S. regulators, may divide up Wachovia Corp. to end a takeover battle that's disrupting a federal rescue of the ailing North Carolina bank, the Wall Street Journal reports. Wachovia insists it is pressing ahead with its deal to sell itself to Wells Fargo. Wachovia responded to a judge's order Saturday temporarily blocking the sale of the bank to Wells Fargo, saying it does not believe the order "has any effect on the validity of the Wells Fargo agreement with Wachovia." Here's the latest update on the legal wrangling, but the net effect (for the moment) is Wachovia remains determined to cut a deal with Wells Fargo, while Citigroup refuses to be pushed aside. All this has prompted prompted a self-assessment in the Charlotte Observer and the good think piece in the New York Times on Sunday: Is Charlotte's economy too bank dependent? (Gee, ya think?)

Before we jump into a hectic week, take a  lighter moment with this Saturday Night Live skit on the financial bailout. Especially amusing is the segment featuring the spoof on California billionaires Herb and Marion Sandler, who sold their Golden West Financial and its subsidiary, World Savings (prominent in the Tampa Bay area), to Wachovia for $25-billion. It was that sale that largely lead to Wachovia's demise and the condemnation of the Sandlers. Now Herb Sandler, in an AP interview, says he has been "listening to this crap for two years" and says he and wife Marion have been "unfairly tarred." What do you think?

-- Robert Trigaux, Times Business Columnist

*

Credit crunch: Not just a breakfast cereal

Wake up and good morning. "Credit crunch" may sound like a breakfast treat at this hour of the morning, but it's a hot topic in the news as the financial dysfunction on Wall Street, a still pending bailout and the weak economy continue to dry up lending. And Florida is right in the middle of the credit desert. Stories about local lending challenges appear in AP reports and dot the state newspapers from the Fort Myers News-Press and Sarasota Herald-Tribune to the St. Petersburg Times (including an explainer on how spikes in LIBOR, the London InterBank Offering Rate, are messing up short-term credit). All this lends credence to the probability that the Federal Reserve will cut interest rates before policymakers are next scheduled to meet.

There's even talk that many of the sports stadiums and arenas adorned with the names of certain companies -- marketing deals paid for at great price -- may see a big turnover as the businesses fall prey to tough credit and rough times. The Wachovia Center arena in Philadelphia and WaMu theater at Madison Square Garden and in Seattle are among the venues whose names face an uncertain future. Let's not forget the  lucky players on England's storied Manchester United soccer team (controlled by the Tampa Bay Bucs' Glazer family) wear the AIG name on their jerseys, advertising a company that fell so deep into financial trouble that the U.S. government took control of it. Check out this photo of the shirts.

On the housing front, we keep getting occasional whiffs of fresher air that things in Florida may slowly be improving. I said slowly. But a new analysis from PMI Mortgage Insurance Co. sucks all the oxygen out of the room again. The Fall 2008 U.S. Market Risk Index, which shows increases in foreclosures and unemployment have significantly heightened the risk of future home price declines, ranks the nation's 50 largest metropolitan statistical areas according to the likelihood that home prices will be lower in two years.

So where do we stand? Florida's still taking it in the chops. The highest risk of future price declines remains in Fort Lauderdale-Pompano Beach-Deerfield Beach (99.5 percent), Riverside-San Bernardino-Ontario, Calif. (99.5 percent), Orlando-Kissimmee (99.4 percent), Miami-Miami Beach-Kendall (99.3 percent) and ... drum roll, please ... Tampa-St. Petersburg-Clearwater (99 percent). Are we making strides? Absolutely. Are we near our real estate bottom? Apparently not.

-- Robert Trigaux, Times Business Columnist

*

Trust eroding fast in bailout leadership

Wake up and good morning. At this early hour of the day, let's not get too political here. But we're talking about -- what else? -- the massive federal Wall Street/mortgage industry bailout that went down in flames Monday when House Republicans and more than a few Democrats defied congressional and White House leadership and voted against the $700-billion rescue that had supposedly been so earnestly crafted over the past weekend. Let's talk about this leadership thing because getting a rescue package approved is one thing. Overseeing it, managing it well, fixing its hopefully minor problems on the fly -- that's another thing, one that will be inherited presumably by either President John McCain or President Barack Obama. Lucky guys. There's rapidly growing doubt the folks in charge (some lame ducks, some apparently just lame) are doing their jobs to the country's satisfaction. Consider the Washington Post headline ("For Many Americans, Fear and Distrust Run High") on this story about the public backlash to the rescue. Or this New York Times analysis titled "In Bailout Vote, a Leadership Breakdown." Or the Wall Street Journal piece: "Dysfunction in Washington Exacts a Heavy Price."

The hyped image of Treasury Secretary Henry Paulson going down on one knee in mock begging for congressional support a few days ago was cute at the time. Maybe he should have been more sincere. And Treasury's "Let them eat cake" style of remark in this Forbes.com article is now mainstream fodder for ridicule on TV and radio talk shows. Asked how the government came up with $700-billion, this was the response: "It's not based on any particular data point," a Treasury spokeswoman told Forbes.com. "We just wanted to choose a really large number."

Yeah? Well what if that number isn't big enough? How will Washington sell Bailout 2 - The Sequel to America? It's all laughable if we weren't so close to a major financial meltdown. The profound lack of "get 'er done" credibility helped topple the Dow 777 points Monday and is mangling the stock values of corporations, and especially other banks, across Tampa Bay and the country. Regions Bank down more than 40 percent in one day? Steady SunTrust losing 20 percent? Bank stocks can only limbo so low before they get caught in the fear that helped sink Wachovia and forced it into a government assisted sale to Citigroup. It's hardly a leap to say Creative Loafing Media, whose alternative newspapers help make Tampa Bay and other metro areas more interesting places to live, would not have gone Chapter 11 Monday if the credit faucet from banks had not been turned off. Here's hoping Tuesday brings more sober actions in Washington and Wall Street.

On to more upbeat news. Tampa Bay rises to the top once again among business travelers, finds Conde Nast Traveler's eleventh annual Business Poll. Portland International Airport is the favorite among business fliers, according to the results published in the magazine’s October issue. Portland's airport barely squeezed ahead of Tampa International Airport as top dog. Following TIA came Washington, D.C. (Reagan), Milwaukee and Orlando airports. Portland had high marks for its location and the ease of making connections. Tampa also did well when it comes to snagging connecting flights, edging out Portland in this category.

-- Robert Trigaux, Times Business Columnist

*

Bailout fighting growing public economic fears

Wake up and good morning. Lots of news and views to start what may once again be a very rocky week for Wall Street and one of fundamental change, including the possible departure of still more companies once thought to be the pillars of our U.S. economy. Let's get started.

First, to set the overall scene: Disturbing survey findings on America's confidence. In a sign that anxiety is growing, 33 percent of 1,011 adults surveyed over the weekend said the economy already is in a depression. (Don't read over the "D" word. That's "depression -- not "recession.") Just 12 percent said that 10 months ago. This reveals how critical it is to get the $700-billion bailout package right the first time. Separately, a new USA Today/Gallup poll indicates 78 percent of Americans say Congress should approve a historic bailout of the nation's financial markets, but most want lawmakers to significantly modify the Bush administration's $700-billion plan.

And on the bailout front: Proposed legislation (here's the actual legislative proposal) is scheduled for a vote today in the House. It would authorize Treasury Secretary Hank Paulson to kick start what may become the biggest government bailout in U.S. history, allowing him to spend up to $700-billion to relieve faltering banks and other firms of bad assets backed by home mortgages, which are falling into foreclosure at record rates. The plan also would give Paulson broad latitude to purchase any assets from any firms at any price and to assemble a team of individuals and institutions to manage them. Focus on the House Republicans. Are they in or out on this deal?

One promising piece of this package: CEOs of firms seeking the bailout would have their pay packages capped. The proposal seeks to rein in compensation at participating companies by limiting their tax deduction on executive salaries exceeding $500,000. (Not exactly a bulletproof way to limit clever designers of compensation packages but still a deterrent.) Tell us what you think. Take the poll on CEO pay on this Web site.

If fixing WaMu (Washington Mutual) was last week's practical task, now we are looking at Wachovia Corp. The North Carolina banking giant was in advanced discussions over the weekend to sell itself to Wells Fargo & Co., the Wall Street Journal reports today. Wachovia also held talks with Citigroup, but by late Sunday Wells Fargo appeared to be the preferred bidder, the newspaper reported. Details of the proposed deal weren't clear and the talks could still fall apart, the report added. Spain's Banco Santander had also expressed an interest in Wachovia, but that deal now seems less likely.

UPDATE*** With FDIC aid, Citigroup will acquire tha banking operations of Wachovia. Here are the basics. More to come this morning!

A loss of Wachovia is rattling Charlotte. The North Carolina banking city that has for years delighted in saying it boasts more banking assets than New York City. That claim will disappear if Wachovia is acquired. A Wall Street Journal story today reminds us all of how temporary corporate tradition and clout are these days. "The name Wachovia used to evoke a very special feeling among customers and competitors and investors and the people who worked at the bank," said L.M. "Bud" Baker Jr., chief executive of the former Wachovia when it agreed in 2001 to a takeover by First Union Corp. The merged company kept the Wachovia name. "They used to belong to something that was truly special in the lineup of American corporations," says the story. I interviewed Bud Baker at Wachovia in Winston-Salem long before he was CEO of that bank and long before Wachovia erred -- my opinion -- in merging with troubled First Union. Rarely have I ever seen someone (or a hometown) as intensely loyal and proud of an institution. That's become a rare commodity.

-- Robert Trigaux, Times Business Columnist

*

Another domino down, WaMu is acquired

Wake up and good morning. We knew it was coming eventually, but it's never easy to see the Biggest Banking Collapse in U.S. History plastered across the front page of today's Wall Street Journal. This just isn't the financial industry's heyday as Washington Mutual, or WaMu, a Washington State savings institution with more than 40 branches in the Tampa Bay area and over 250 statewide to rank No. 5 in size in Florida, was pushed late Thursday by federal regulators into the arms of JPMorgan Chase. Here's how the Federal Deposit Insurance Corp. explains it. For depositors, this is a win win because WaMu was not "failed" first by the FDIC so all deposits -- regardless of size -- are protected in this transaction. "For all depositors and other customers of Washington Mutual Bank, this is simply a combination of two banks," said FDIC Chairman Sheila C. Bair. "For bank customers, it will be a seamless transition. There will be no interruption in services and bank customers should expect business as usual come Friday morning."

The deal is important because WaMu is one of the few big financial problem institutions waiting to be resolved amid, so far, stalemated efforts in the nation's capital to get a $700-billion Wall Street/mortgage industry bailout under way. WaMu was a distraction. But no longer. It's kind of funny. In the late 1980s and early 1990s, Chase Bank (what is now JPMorgan Chase) tried to push into the Tampa Bay area with retail branches by buying failed local banks. And the company has taken plenty of subsidies from the state to create jobs here, not always with a good conclusion. Now the bank is back -- whether this was its intention or not!

Will the Wall Street megabailout, once it kicks in, actually help people stay in their homes or let smaller banks get rid of some of their bad loans? That's a hot topic. A Wall Street Journal article today notes that executives at some small banks like Bradenton's Freedom Bank are optimistic that they would be able to sell assets to the government as well. Freedom has been trying to raise up to $25-million in capital to cover expected losses. "Any amount of help is better than nothing," said Freedom Bank CEO David Zeurn, Pennsylvania's former secretary of banking. "It doesn't have to be every loan we have." (Freedom, not to be confused with another bank called Freedom Bank in St. Petersburg, has a "zero star" ranking in health, making it among the weakest in the state.) As the Journal story explains, it's unclear whether the rescue plan would provide a mechanism for banks like Freedom to participate. Much of the focus has been on mortgage-backed securities, not on the so-called whole loans that reside on the books of smaller lenders.

Finally, for those of you wondering if the smackdown between Spain and Tampa's Odyssey Marine Exploration treasure hunters is making headway, the simple answer is: Nope. This week Odyssey denied Spanish government claims that it "secretly" scoured the ocean floor to find a wreck containing a $500-million haul of colonial-era coins. "Odyssey in this case followed all the appropriate archaeological and legal protocols," said Odyssey CEO Greg Stemm, calling allegations to the contrary false and "inflammatory."

-- Robert Trigaux, Times Business Columnist

*

Bailout plan drawing more critics

Wake up and good morning. A forlorn-looking President Bush, clearly wishing he was talking about just about anything but a financial crisis in his last few months in office, urged Congress to make speedy work of the bailout package and push it through pretty much intact -- as the Bush administration wants it. Watch the video of his remarks.

The good news, this being a democracy and all, is other opinions are rising fast to the surface. Take those of John Allison, CEO of North Carolina's BB&T, a not-too-big, not-too-little $136-billion banking company that's prominent in the Tampa Bay area after it bought Republic Bank here years ago. For Greek-philosophy-quoting Allison, the high-risk rollers on Wall Street are getting too much of the ear of Congress and having too much say in resolving the financial nightmare that they created, the Winston-Salem Journal reports. That's why he submitted a 14-point letter (PDF) Tuesday to all 535 members of Congress with a simple message on the proposed $700-billion bailout. "There is no panic on Main Street and in sound financial institutions," he wrote. "The problems are in high-risk financial institutions and on Wall Street."

If Bush looks unhappy, at least he'll be long gone from office when efforts to make the bailout actually work take place. But it raises a huge question. Is a bailout proposal pushed by Hank Paulson, a U.S. Treasury Secretary who is also scheduled to leave office in January with President Bush, going to get long-term support? Put another way, who will come in and fill Paulson's big shoes in a new administration? Here's an informed list, ranging from Democrats Tim Geithner (now president of the New York Federal Reserve) and Steve Rattner of the private-equity shop Quadrangle Group, to Republicans John Thain, who as recently arrived CEO of Merrill Lynch just sold the investment firm to Bank of America, New York City Mayor Michael Bloomberg (I strongly doubt this one), and the perennial Mitt Romney.

Here's another indirect casualty of the nation's financial pickle. Georgia-based, 2,700-employee Bill Heard Enterprises Inc., the biggest Chevrolet dealer in the country with a dealership in Plant City, said it is immediately closing its 13 remaining dealerships, unable to survive in a weak economy with high gas prices and an inventory heavy on trucks and SUVs. If that's not a partial indictment of the Chevrolet product line, then what is? But there's a lot more to this story.

Bill Heard Jr., in a rare interview in late July with his hometown Columbus Ledger-Enquirer, gave three reasons for his company's woes. It didn't react fast enough to the economic downturn. It is Chevrolet-exclusive. And banks tightened requirements to grant buyers loans. The company was squeezed again last month when financial company GMAC cut off the company's credit for new inventory. And Bill Heard has been fighting allegations of deceptive advertising going back years, according to a story in the Atlanta Journal-Constitution. Last year, Georgia's Consumer Affairs office filed a lawsuit accusing the company of engaging in a 16-year pattern of deceptive sales pitches. The allegations came after the company sent 10,000 Georgia car owners a flier with the words “Urgent Potential Recall Notice” that appeared to come from General Motors. The suit alleges the recall notice “was intended and designed to mislead recipients into believing that their automobiles were subject to an urgent recall, so that the recipients would call Bill Heard’s sales staff and be solicited for an automobile purchase or service contract.” It is the first suit the agency has filed against a car dealer in three decades. Company officials told the Journal-Constitution that they placed blame on an advertising firm.

-- Robert Trigaux, Times Business Columnist

*

Devil in details in mother of all bailouts

Wake up and good morning. Now that the initial shock of a MEGABAILOUT is wearing thin, the fight over the details begins. Take the supercritical matter of how to value vast amounts of mortgage-backed securities that no one wants to buy but the government has agreed to buy. Pay too much, and the government will look like "patsies of the securities industry," says a USA Today story. Pay too little, and the Treasury will drive some financial services companies out of business. Questions also are starting to emerge about unintended consequences and collateral damage. Even former President Jimmy Carter has concerns.

Now comes word FBI is investigating Fannie Mae, Freddie Mac, Lehman Brothers and insurer American International Group (AIG) and their senior executives for potential mortgage fraud. My only question is: Where was the FBI before all this? And what about all this rising grassroots disgust over executives of bailed-out institutions getting too much pay? There ought to be a law, and, well, that's another matter that will prove controversial. Speaking of pay, here's a look at what some of those top execs received:

Lehman Brothers CEO Richard Fuld Jr. made $34-million in 2007. Lehman filed for Chapter 11 bankruptcy protection earlier this month. AIG CEO Martin Sullivan was paid $14-million in 2007. The insurance giant gets an $85-billion federal bailout. Fannie Mae CEO Daniel Mudd received $11.6-million in 2007, while Freddie Mac CEO Richard Syron got $18-million. The federal government is taking over both mortgage backers.

Heads up, job-seeking veterans. There's a a free hiring event for job seekers who have military backgrounds in Tampa on Wednesday, Oct. 1, presented by the military-to-civilian recruiting firm RecruitMilitary. This career fair will take place from 11 a.m. until 3 p.m. at the Tampa Bay Performing Arts Center and here's how to get there. So who will be there? Among those now planning to participate: the Army National Guard, Brinks Home Security, Computer Sciences Corp., DeVry University, GlaxoSmithKline, Laird Plastics, MatchPoint Franchise Consulting Network, Miami-Dade County Public Schools, the Military Spouse Corporate Career Network, Northrop Grumman Technical Services, Plastipak Packaging, The Entrepreneur's Source, Troops to Teachers, the U.S. Secret Service, the Veterans Benefits Administration and Woodmen of the World.

Finally, never keep your eye off the long-simmering water war in Florida (and beyond). St. Petersburg Times reporter Craig Pittman notes that a controversial proposal to route water from one part of the state to another, scuttled after a huge uproar five years ago, may be revived as part of an Orlando gathering this week to plot the future of Florida's water supply. For those with a long memory, the state business group called the Florida Council of 100 recommended to then-Gov. Jeb Bush that water could be redirected from water-rich and slower-growing North Florida to thirsty, booming Central and South Florida. Here's the complete 2003 report with introductory letters from the task force chairmen and real estate developer Lee Arnold of Clearwater and then-CEO of WCI Communities (now in Chapter 11) Al Hoffman.

-- Robert Trigaux, Times Business Columnist

*

On economy outlook, we're glummer than glum

Here we are in full bailout debate mode, with Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke testifying before Congress ... while a new poll shows a whopping 82 percent of Americans say the national economy is getting worse and 68 percent say the national economy is in a recession. The results are based on 1,100 completed telephone interviews conducted by American Research Group among a nationwide random sample of adults 18 and older in mid September. Though another gloomy poll is not my first choice to post here on the Venture blog, these results are stunning.

In September, no (zero, zip, nada) Americans say that the national economy is getting better, 13 percent say it is staying the same, and 82 percent say it is getting worse. In August, 18 percent said the economy was getting better, 19 percent said it was staying the same and and 60 percent said it was getting worse. So, a dramatic decline in public confidence on the economy in one month's time.

Well, duh. If we had polled you last week -- in the worst week for Wall Street (and, financially, perhaps the country) in a generation -- how upbeat would your responses have been?

Here's a bit of a silver lining. A total of 42 percent of Americans say they believe the national economy will be better a year from now, 27 percent say it will be the same, 13 percent say it will be worse, and 18 percent are undecided.

--  Robert Trigaux, Times Business Columnist

Tom James: Wall Street got too leveraged

Wake up and good morning. After nearly 38 years at the helm of regional investment firm Raymond James Financial in St. Petersburg, CEO and chairman Tom James has some definite opinions on the massive and ongoing bailout package emerging to help major Wall Street firms weather the mortgage crisis. In an interview Monday, James especially lamented the loss of independence of Merrill Lynch, a firm he saw as an early role model for its focus on the consumer. He's also glad -- thank you, very much -- not to be dragged directly into the bailout mire (a theme reinforced in this Wall Street Journal story today), even though Raymond James took a 19-percent hit on its stock price on Monday alone.

Here's my column in the St. Petersburg Times today hitting some of the highlights of the interview. And more details of the Tom James chat appear below.

Meanwhile, the bailout debate predictably is turning into a long-winded debate between the Bush administration and congressional leaders over the historic $700-billion rescue package. As reported in the New York Times, lawmakers in both parties voiced anger over the steep cost and even skepticism about the plan’s chances of success. Even Florida's own Sen. Mel Martinez, a Republican and a member of the banking committee, said that he would strongly support limiting the pay of executives whose firms seek government aid. But he will oppose any effort to change the bankruptcy laws.

On one topic of interest to weaker banks in search of fresh capital, the Federal Reserve loosened longstanding rules that had limited the ability of buyout firms and private investors to take big stakes in banks. One report shows private-equity firms have looked at investing in distressed banks, but often pulled back. This summer, several private equity firms including MatlinPatterson Global Advisers LLC and Fortress Investment Group looked at investing in Florida's BankUnited Financial Corp., a struggling Coral Gables banking firm with offices in the Tampa Bay area. Those private equity firms never pulled the trigger to invest.

On another note, Verizon is taking a big step with its wireless phone business by ending mandatory one- and two-year commitments in favor of month-to-month contracts. Verizon and rival AT&T faced criticism from lawmakers and consumers who said fees for canceling contracts early are too high. But the new plan may not appeal to many customers because they will need to pay significantly more for new phones, which are often offered in various models at reduced prices to customers willing to sign up anew for one or two years. Still, it's a breakthrough for consumers to now have a monthly option.

-- Robert Trigaux, Times Business Columnist

Commercial banks win war with Wall Street

Wake up and good morning. Investment banks? We don't need no stinking investment banks. In a move that culturally would have once been as absurd as the Boston Red Sox suddenly donning Yankee uniforms and singing "I Love New York," the Federal Reserve took the extraordinary step on Sunday night of agreeing to convert investment banks Morgan Stanley and Goldman Sachs into traditional bank holding companies. Why? To try and prevent the crisis on Wall Street from infecting its two premier (and last) major institutions. And probably to also show the stock market before today's opening bell that the feds were doing something besides beginning the inevitable bickering between the Treasury Department and Congress on how to fashion the $700-billion bailout bill.

This Federal Reserve action does a couple of things. It buys more time for the government to get its act together with an overall strategy. It distracts the stock markets, forcing them to digest the structural change to Morgan and Goldman. It requires Morgan and Goldman to now act like bank holding companies, which means lowering their risk profiles and becoming subject to direct review of the Federal Reserve. It also means that a Morgan merger with Wachovia is "off the table," says CNBC.

Here's Morgan Stanley's take on it (through gritted teeth, I'm sure): Says John J. Mack, Morgan chairman and CEO: “This new bank holding structure will ensure that Morgan Stanley is in the strongest possible position – with the stability and flexibility to seize opportunities in the rapidly changing financial marketplace." And here's Goldman's spin (it becomes the  nation's fourth largest bank holding company): “We believe that Goldman Sachs, under Federal Reserve supervision, will be regarded as an even more secure institution with an exceptionally clean balance sheet and a greater diversity of funding sources,” said chairman and CEO Lloyd C. Blankfein. Oh my, oh my, what large portions of humble pie to start the week.

But not all is lost for top Wall Streeters. Top executives at Lehman Brothers' New York office, who were at the helm during history's largest corporate bankruptcy, have been guaranteed the lion's share of a $2.5-billion bonus pot. Lehman had "walled off" the fund, telling buyer Barclays Capital that it couldn't use the money for anything but severance payments or bonuses. And who was the "real" winner in the garage sale of Wall Street firms last week, Bank of America (which is buying Merrill Lynch in its entirety) or Barclay's (which is cherry-picking the best pieces of bankrupt Lehman)? "There's no question that Barclays gets the better deal," said Lutz-based Dick Bove, brokerage industry analyst at Ladenburg Thalmann.

Finally I was struck by two stories this weekend about two men who took very different paths while each had questionable business backgrounds and consummate salesman's skills. Susan Taylor Martin, writing in the St. Petersburg Times, profiled U.S. Rep. Vern Buchanan, a millionaire from Sarasota who's once again in a campaign for his seat against Sarasota former banker Christine Jennings. Wrote Martin about Buchanan: " 'The guy was an absolutely incredible marketer and salesman,' says Thomas Budzynski, a Detroit lawyer who handled one of the many lawsuits against Buchanan. 'Could he sell himself to the people and get elected? Of course he could.' "

And then there is the Orlando Sentinel story about the suicide of Winter Park developer Steve Walsh, a sales charmer and businessman who had twice gone bankrupt and twice fought his way back. And once again, note the reference to a charismatic personality. "Within a radius of about 10 to 12 feet, he was one of the most convincing people I'd ever met," said Charlotte, N.C., attorney Charles S. Daly. "If he could get within 12 feet of you, he could borrow money."

-- Robert Trigaux, Times Business Columnist

*