Paging George Bailey, You Have A Call

Most of us have never witnessed an actual run on a bank, where nervous depositors crash a teller's window demanding their money. Our closest view comes from the classic film, "It's a Wonderful Life", and the scene when customers swarm the Bailey Building & Loan. George Bailey, played by Jimmy Stewart, steps up to calm everyone down.
In the coming weeks, we'll need that type of Bailey-like resolve as the country sorts through the worse U.S. banking crisis since the Great Depression.
That's not an overstatement. Just consider what's going on.
The feds have taken over insolvent Pasadena, California-based IndyMac bank, where this week depositors flocked to check on their accounts. On Wall Street, we're witnessing an investor run on the bank, as fund managers and others flee well-known national and regional bank stocks. Talk of insolvency and FDIC takeovers abounds.
Some of the biggest names in banking--Citibank and JP Morgan Chase--are getting ready to announce quarterly earnings and it's going to be butt ugly. Meanwhile, small banks are cobbled by loan problems and may implode. Throughout the country, web sites, newspapers and business tabloids have been running stories about the "Texas ratio" of smaller banks.
The higher the percentage ratio, the greater the risk the bank tanks, unless it gets a cash transfusion.
And as anyone with a set of ears knows, housing loans are a huge problem--which is why the Bush Administration is stepping in to stabilize mortgage giants Fannie Mae and Freddie Mac.
There's more bad news to come.
Every banker worth their salt is scrambling for fresh capital (as is the U.S. auto makers and airlines.) but there's only so much money out there. After all, Warren Buffett can't buy everything.
As a wee reporter, I spent a few years covering the banking industry including the mammoth savings and loan crisis and subsequent taxpayer-backed industry bailout that cost about $200 billion. Throughout, I was constantly amazed at how many everyday folks were so blase' about the financial meltdown going on around them.
This time it's different.
Trouble has hit home--literally. People are noticing and have every right to be concerned.
We're not at a full-blown depositor panic and let's hope we don't get there. But there's little doubt that a growing number of the nation's banks, big and small, are on the brink.
Where's George Bailey when you need him?

Hang On! Economy Hasn't Hit Bottom Yet

Summertime and the cost of living ain't that easy. Not this year, at least.
We're at 2008's halfway mark and indications are the economy is tumbling with no sign of hitting a bottom. Some economic optimists say we'll start to bounce back in the third or fourth quarter. Don't count on it.
Perhaps 2009. Perhaps.
We all know the problems.
Home values are declining and foreclosures are rising, business and mortgage credit is tightening (although the credit card companies keep sending out those "You've been pre-approved" credit card applications to consumers), and household debt is piling up. Did I fail to mention the escalating price of gas and food?
What's more, greater unemployment is just around the corner. Recently, the Business Roundtable's CEO Outlook panel predicted a 6.5 percent unemployment rate by mid-2009. Right now, we're at 5.5 percent--so that's a significant increase at the unemployment line.
While everyday working people are scared, Wall Street types are in a near panic.
Trading floors have always been rumor mills, but lately they've really been buzzing with recurring tales of insolvencies, recapitalisation and bargain-basement buyouts of major investment houses.
This week, all eyes are on Lehman Brothers, which is rumored to be on the selling block and running out of money--something the firm denies. Keep in mind,however, that Bear Stearns said pretty much the same thing before it was swallowed whole by JP Morgan Chase (with an assist from the Federal Reserve).
We'll see.
Frankly, I don't mind if some greedy and crafty Wall Street players get their comeuppance. But Wall Street's missteps always have a way of tripping up Main Street and injuring innocent bystanders, so expect some major fallout if an investment firm bites the dust.
On CNBC, many so-called economic experts debate whether we're really in a recession.
Technically, it may not be a recession.
But you know what? It sure feels like one.


Clay Felker: An Editor With Style. More years back than I care to remember, I had my one and only dinner with famed editor Clay Felker. Throughout the meal, Felker told a string of fascinating stories about the New York media scene in the 1960s and 70s--his heyday for editing some of the world's best magazines.
We dined at the Mansion on Turtle Creek in Dallas. Felker, who was then running Adweek magazine, was talking to me about a position in its Chicago bureau. After eating, we took a stroll around the swanky neighborhood with Felker puffing on a cigar and ruminating on the state of journalism, politics and anything else he wanted.
A week or so later, I had a follow-up phone conversation with him and expressed some reservations about the job. Felker screamed at me and slammed down the phone. (I later learned that he was notorious for such fast and furious responses).
So, I never worked for him. But wish I had.
My wife, however, did work for Felker and, upon hearing of his death, remembered him as an editor with an unmatched sense of journalistic style. As usual, she's right.


Banking on Buffett. One fellow who is prospering in these uncertain times is ultra-wealthy investor Warren Buffett.
This blog has occasionally chronicled Buffett's shrewd investments and his ample marketplace clout.
To learn more about Buffett, pick up the latest issue of Bloomberg Markets and read it's excellent cover story, "Why Buffett is Buying."


Happy Fourth of July! Check out a fireworks display, unfurl the flag, go to a parade or rent a copy of "Yankee Doodle Dandy" with the late, great James Cagney as George M. Cohan.
Whatever you end up doing, put aside your concerns for a moment to ponder what a great country this is and how we can make it even better.
Have a terrific Fourth.
Cheers!



(Economy graphic courtesy of Stone Soup Station via Google Images)

Crafty Murdoch Tees Up Dow Jones Sale

Media titan Rupert Murdoch just put Dow Jones & Co. up for sale. And he doesn't even own it.
But he did the next best thing today by offering $5 billion to acquire the owner of the Wall Street Journal, Barron's and other business publications and related Internet sites.
In making the unsoliciated offer, that's nearly a 67 percent premium over Dow Jones current share price, Murdoch is forcing that company's owners into a corner. They can take his offer or seek other buyers. But, saying no is not a viable option, unless the company's board wants to get its pants sued off by unhappy Dow Jones investors.
And when it comes to a bidding battle, never rule out Murdoch. He comes to play and pay. His $5 billion bid is about $60 per share--a height that Dow Jones stock hasn't reached in many years.
But other suitors may surface. Among the names being thrashed about: Time Warner, New York Times Co., Washington Post Co. and, my personal favorite, business news provider Bloomberg LP ---which is financially healthier and shrewder than those first three companies put together.
Marketwatch is speculating that GE, which owns NBC Universal and cable TV business network CNBC, may bid. (My opinion: Not likely.)
Hey, if we're tossing out names why not Google or Yahoo? Content is still king and Dow Jones churns out alot of it. Maybe Microsoft? Or just Bill Gates?(wouldn't it be clever to put WSJ in his charitable trust?)
Also, don't forget those private equity players or super-rich individual investors (hello, Warren Buffett) who could cut a deal with the Bancroft family--which is a controlling shareholder in Dow Jones and said it's not interested in Murdoch's offer. From there, they take Dow Jones private.
(Must be nice to turn down a huge slice of $5 billion. I have to try that sometime.)
We've already seen a similar buyout dance in Chicago, where the Tribune Co. went through an auction process only to be swooped up by investor Sam Zell (with the help of an Employee Stock Ownership Plan).
Dow Jones' case is different because Murdoch is willing to pay real money to acquire it. He sees a bargain for terrific content that could factor into his stated plans to start a new cable TV financial news network and beyond.
One thing is certain: This business news story is just beginning.