Mish – of Mish’s Global Economic Trend Analysis – had a different breakdown of the stimulus plan, take a look:

Math To Date

Funds paid out so far = $83.8 billion + $52.1 billion + $71.4 billion = $207.3 billion
$207,300,000,000 / 640,329 = $323,739.83 per job created

Plan Goals Math

Now let’s assume this stimulus package will eventually create (or save) 3.5 million jobs and all the money (but no more) will be spent.

Here’s the math again.

$787,000,000,000 / 3,500,000 = $224,857.14 per job created

I wonder how Jared Bernstein, chief economist and senior economic advisor to the vice president, feels about these numbers?  If the estimate of $160K/job was “calculator abuse” yesterday what does $224K (or $323K) constitute in his book?

Remember that there is no accurate way to validate the governments claims of “saved or created”. Furthermore the claim roughly 400,000 education and construction jobs, with an average salary of $92K, is flat out unbelievable.

There are a number of developments to point out this evening so let us get right into it, shall we?

FDIC Friday!

9 Banks closed were shuttered by the FDIC on Friday with a total asset base of $19.1B in total – and I thought the 7 from last week were bad .  The banks in question are:

• California National Bank, CA
• Bank USA, NA, AZ
• San Diego National Bank. CA
• Pacific National Bank, CA
• Park National Bank, IL
• Community Bank of Lemont, IL
• North Houston Bank, TX
• Madisonville State Bank, TX
• Citizens National Bank, TX

How much will the 9 closings cost the FDIC DIF fund? A nice little sum of $2.5B.  Nice, huh?

Stimulus has saved, created 650,000 – Bullsh*t

The magic of being a politician is that one can say just about anything without providing much detail about your statement or claim and very few people will have the ability to debunk your claim.  Then, if someone does attempted to make sense of your statement, you can simply attack them without using facts and claim the person questioning you is unfit or unqualified to be asking such a question.

In 2008 Mr. Obama stated he would “save or create 3.5 million jobs by 2011” including “600,000 “created or saved” this year.  There are so many problems with this claim it is laughable.

There is virtually no way to hold him accountable to this number as there is no realistic way to count a “saved” job.  So, to hear the administration claim a total of 650,000 jobs were saved due to $159B in stimulus spending is highly questionable.

If you break it down one could imply there were 650,000 new/saved jobs that pay $160,000 per year? God forbid one actually questions the administration on such a thing:

Jared Bernstein, chief economist and senior economic advisor to the vice president, called that “calculator abuse.”

He said the cost per job was actually $92,000 — but acknowledged that estimate is for the whole stimulus package as of the end of 2010.

Stay classy Bernstein.

Two areas that allegedly benefited where construction (80K) and education (325K).  You mean to have the public believe roughly 400,000 construction and teaching jobs were created AND pay 92K a year?

Really?

Look at the base average of those two groups and tell me there is any truth there.

We already know the official unemployment number reported is severely under reported, and the method of collecting data for this survey is faulty, how can anyone believe this claim?

It’s politics, pure and simple.

The coming (Commercial) Real Estate Crash

Capmark was the big signal last week that CRE lenders are really feeling the economic pinch.  While people have been warning of the CRE implosion for almost a year now, the press is beginning to really take notice of the situation.

Wilbur Ross Jr, the leveraged buyout specialist, is warning of the impending doom:

“All of the components of real estate value are going in the wrong direction simultaneously,” said Ross, one of nine money managers participating in a government program to remove toxic assets from bank balance sheets. “Occupancy rates are going down. Rent rates are going down and the capitalization rate — the return that investors are demanding to buy a property — are going up.”

Let’s put this into terms most people can relate to.

You have a mall and each vendor needs to make rent; however, you have a bad holiday season.  As a result, quarter of the vendors can no longer make their monthly payments.  Stores close, occupancy goes down. Unfortunately the property owner must have a certain occupancy rate to meet the demands of their loan.  No longer being at this threshold the property owner defaults and banks now have a “toxic” loan on their hands.

Rinse. Repeat.

This story is going on all over the United States in both retail on office. Unfortunately for CRE lenders the Federal Reserve is saying “Hey, good luck with that!”

Financial institutions that implement prudent loan workout arrangements after performing comprehensive reviews of borrowers’ financial conditions will not be subject to criticism for engaging in these efforts, even if the restructured loans have weaknesses that result in adverse credit classifications. In addition, performing loans, including those renewed or restructured on reasonable modified terms, made to creditworthy borrowers, will not be subject to adverse classification solely because the value of the underlying collateral declined.

Just a matter of time until the banks get hammered.

At this point not much else to say that hasn’t been said - from the Wall Street Journal

The company plans to file for bankruptcy in New York as soon as Sunday night or early Monday, said people familiar with the matter. CIT is poised to enter bankruptcy with enough creditor support to approve its reorganization plan and shorten its stay in Chapter 11, these people said.

Several questions (some that I highlighted last evening):

1. Will CIT Bank be taken over by the FDIC late this evening? If so, at what cost to the fund?
2. How will the credit markets respond, will they lock up?
3. Will small business be impacted?
4. What long term economic impact will this have? *
5. While I do not support bailouts of such firms, one has to ask why the Government decided CIT is too small to save and why are they remaining silent?
6. Who will truly profit from a CIT Bankruptcy?

Keep your eyes open.

*You know there are government economists running numbers/projections on such a situation.

I had previously stated that CIT was going to do everything in their power to keep Carl Icahn out of their restructuring plan.  Based on their public “calling out” of his statements it appeared things were going to get out of control.  Today; however, the story took a very strange twist.

CIT has received a $1B loan from Icahn – AND – he has agreed to support the CIT restructuring plan.

This is a very odd twist.  Actually, it is one that makes someone ask “What is in it for Carl?”  As he stated there is more money to be made with his plan I suspect he CIT has provided him with an offer he could not refuse.  How he Icahn makes out in this situation will be made clear in coming days, I’m sure.

Also, in the coming days, I’m still expecting the bankruptcy.

With the CIT debt exchange only 30 minutes away from closing, more news agencies are getting in the act of calling a CIT bankruptcy – this time we have Reuters.

Sources familiar with the matter have told Reuters that the voluntary debt exchange is unlikely to happen, and bankruptcy is much more likely.

Analysts have argued that the debt exchange was doomed from the start, because it required too many different kinds of investors with too many competing interests to comply.

When Lehman collapsed last fall the government was there to step in; however, officials have stated a number of times CIT is not “too big to fail.” I would argue no institution is too big to fail, but it makes one wonder why CIT is not getting the attention of the government when their role in small business economics is obvious.

Trade and Retail groups fear such an event will impact supply chains, and small business owners believe their ability to expand will be stopped, the future remains unclear. A large number of people believe a CIT bankruptcy may provide a devastating blow to the economy  but the reality is that remains to be seen.

Frankly, I cannot see how such an event would be a “good thing” for the economy, nor can I see the credit market reacting in a positive manner.

What I find interesting is that you do NOT hear about CIT Bank – their Utah based retail operations - in any of the reports.  As the FDIC has already stated CIT Bank must raise additional funding, would it be that much of a surprise we saw a press release tomorrow evening talking about the bank going under? Would it also surprise anyone to find out the government is standing by to sell CIT to another bank (a la Wachovia)?

I personally believe such an event is item number 3 over the past 10 days that would stress the economy.  CIT very well may be the ripple that creates the Tsunami.

The bottom line is this: CIT is to small business credit and financing what Lehman was to derivatives.

Goldman Sachs, Morgan Stanley and the like were throwing around their GDP estimates yesterday afternoon.  While the market consensus was 3.2%, the numbers were really all over the board.  At one point, Goldman actually revised their estimate down to 2.7%; however, it looks like everyone was off:

The U.S. economy grew at a 3.5 percent pace in the third quarter, the best showing in two years, fueled by government-supported spending on cars and homes. It’s the strongest signal yet that the economy has entered a new, though fragile, phase of recovery and that the worst recession since the 1930s has ended.

I feel the most important part of the story is burried toward the end:

A top concern is whether the recovery can continue after government supports are gone. Many economists predict economic activity won’t grow as much in the months ahead as the bracing impact of Obama’s $787 billion package of increased government spending and tax cuts fades.

This makes me ask how much of the GDP number was propped up because of Cash for Clunkers and the 1st time home buyers tax credit.

So, Bloomberg is noting CIT will declare bankruptcy today, only after the debt exchange finishes:

“We believe they will file for bankruptcy within the week, provided nothing unexpected occurs,” Adam Steer, an analyst with CreditSights Inc. in New York, said in a telephone interview.

Once CIT sails away into the fog and mist out on the east cost, we should take a look at the potential impacts to the group they provide services do. Will the Utah based CIT bank this fall under the weight of the parent company, and if so, will The FDIC’s Bair need to calm people down because “We will never run out of money…Afterall, we are the government”

Look for an almost instant credit contraction if this takes place – small business may soon find themselves unable to diversify, buy new hardware or grow the office. Consumers may be unable to buy their new laptops. Students may not be able to obtain their loans.

But even more scary is that goods and services (Rail way and airline leasing) my come to a standstill. Just think about what kind of impact that would make to the industry.

Over the last two weeks I have been watching a number of situations line up. I expect to more things to fall into place within the next two week that would begin a rather uncomfortable period in world economics.

Let’ hope they do not.

This is huge: CIT secures $4.5 bln credit facility:

Struggling commercial lender CIT Group Inc (CIT.N) said on Wednesday it obtained $4.5 billion more of financing from its creditors, just as it seeks to complete a debt exchange.

The new financing, which adds to a $3 billion loan arranged in July, is being provided by a group of lenders including some of CIT’s bondholders, the company said in a statement.

As it seems lenders involved in the debt exchange also provided funding, it looks like CIT may still be able to finish the exchange by 11/5.   Remember… on option in the debt exchange is a pre-packaged bankruptcy.

Now this is getting exciting.

Looks like Ford may have finally found a buyer for Volvo.  Surprise, surprise!  It’s a company out of China.

Ford Motor Co. narrowed talks on the sale of its Volvo Car unit to one bidder, a consortium led by China’s Zhejiang Geely Holding Group Co.

Ford will be holding more “detailed and focused negotiations with Geely,” having chosen the Chinese company as the “preferred bidder,” the U.S. carmaker said in a statement today.

Ford is asking $2B for the brand, roughly 1/3 of what they paid for it.  With the Volvo platform totally integrated into Ford’s product line, it will be very interesting to see how such a sale would play out.  Also, would there be any anti-trust issues facing the deal.

Chinese companies are really picking up assets during this fire sale, aren’t they?

I cannot believe the… self-indulging sense of importance Rocco Landesman and member of Obama’s administration have.  Truly, I cannot.  However, I guess the follow isn’t too far fetched from a group that asked artists to shill for the administration.

During his 2009 Grantmakers in the Arts Conference Keynote, Landesman – the chairman of the National Endowment for the Arts – made the following statement:

This is the first president that actually writes his own books since Teddy Roosevelt and arguably the first to write them really well since Lincoln. If you accept the premise, and I do, that the United States is the most powerful country in the world, then Barack Obama is the most powerful writer since Julius Caesar. That has to be good for American artists.

Really?

What about, I don’t know, say…

• Leo Tolstoy
• Mark Twain
• William Shakespeare
• F. Scott Fitzgerald

Now, assuming that Landesman meant that Obama happened to be a writer, not the best, per se, that commanded the most power due to his political position, what bout:

• Winston Churchill
• Adolf Hitler
• Vladimir Lenin

I think the case could be easily made showing other writers as more powerful in terms of both ability AND political position.  From where I sit, I’m not sure that is a good comparison to make right now.