Suddenly, a flurry of pressing money matters

Rounding up the news about Fannie Mae and Freddie Mac, Washington Mutual, the Boeing strike, and other issues related to your wallet.
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Bank notes from around the world, donated by visitors to the British Museum in London. (Wikipedia)

Rounding up the news about Fannie Mae and Freddie Mac, Washington Mutual, the Boeing strike, and other issues related to your wallet.

Lest we had any doubt, there were many reminders Monday, Sept.8, that money, indeed, speeds and slows the world, and even in our own neighborhood, as it goes around.

The feds rescue Fannie Mae and Freddie Mac

We awoke Monday morning to find that the federal government had seized Fannie Mae and Freddie Mac, the mortgage giants, and thus averted the collapse of one or both.

Both foreign and U.S. financial markets rallied Monday at news that the Fannie/Freddie executives and boards had been replaced and that Fannie and Freddie had been placed in government conservatorship. This was the worst possible alternative — except for all the others. Potential cost to taxpayers: $200 billion.

This will stabilize, at least for now, the mortgage industry and help stem the downward spiral of home prices which has taken place in most markets, although not here in metropolitan Seattle. Taxpayers and investors will take a hit. The final solution to the Fannie/Freddie problem will not unfold until 2009, when a new president and Congress pick things up from here. Sen. Barack Obama and Democrats generally have supported Fannie/Freddie and incremental steps to keep them viable. Sen. John McCain and Republicans have favored the long-term elimination of the agencies and the public obligations which accompany them. This is one place where November elections can make a real difference.

Killinger bites the dust

The long anticipated resignation of Washington Mutual CEO Kerry Killinger was demanded by the WaMu board last week. He was replaced immediately by Alan Fishman, a former CEO of Independence Community Bank in New York.

TPG came to WaMu's rescue with $7 billion in fresh capital this past April. But it was not enough to cover WaMu's ongoing obligations. Losses this year may approach $20 billion. WaMu common stock closed below $4 per share Monday.

Killinger got canned, just as Citigroup, Merrill Lynch, Wachovia, and Bear Stearns CEOs earlier exited. Fishman reportedly got a $10 million signing bonus to come aboard. The feds are not likely to ride to WaMu's rescue, having made such earlier major commitments. Fishman will earn his bonus if he brings WaMu out of 2009 alive.

A McCain-associated bank goes down

Less noticed locally, the Silver State Bank in Nevada was shut down by federal and state regulators last Friday, Sept. 5.

Andy McCain, John McCain's son, who is chief financial officer of Hensley & Co., the Phoenix beer distributorship headed by Cindy Hensley McCain, had resigned from the Silver State board in late July. He refused to respond to media queries about his Silver State knowledge or involvement. The Federal Deposit Insurance Corporation will take a $450 million to $550 million hit, it estimates. Some $20 million in deposits, involving 500 customer accounts, were uninsured by the FDIC. McCain was a member of the bank board's three-person audit committee.

Georgia on Russia's mind

A little noted dispatch from the Financial Times reported that the Russian central bank had intervened heavily to support the ruble at the end of last week. Some $21 billion in foreign capital, the FT estimated, had been pulled out of Russia after that country's intervention in Georgia.

The ruble had fallen to its weakest level since it had adopted a euro/dollar basket in February 2007. Russia's stock market had fallen about 4 percent on both last Wednesday and Thursday, Sept. 6 and 7. Russia has lots of capital with which to defend its currency. It has the third-largest foreign currency reserves in the world, about $580 billion. But the foreign withdrawals served notice on the Russian government that the West, after all, is not powerless to resist aggressive Russian policies toward neighboring countries.

Transportation funding still at center stage

The Seattle Times Monday ran a front-page article outlining the components and costs of Republican gubernatorial nominee Dino Rossi's proposals to expand and improve both regional and statewide surface transportation. His $15 billion proposal would shift state money from Sound Transit and the general fund. Overall, he says, new taxes would not need to be raised. Gov. Chris Gregoire will be challenged in her upcoming TV debate with Rossi to offer her own plan.

Meantime, John Erlick, chief civil judge of King County Superior Court, will conduct a hearing Wednesday, Sept. 10, on Will Knedlik's petition requesting revisions to this fall's Proposition 1 ballot title. His petition seeks explicit language stating that Sound Transit is not merely seeking $17.9 billion in the ballot measure, mainly to construct a regional light rail system, but also wants $107.5 billion in local-option tax authority over 45 years. Knedlik charges that Sound used "sleights-of-hand" to hide from voters the magnitude of Proposition 1's implications.

The $107.5 billion costs out to $60,400 per household for King, Pierce, and Snohomish county taxpayers — numbers which, if known by taxpayers, almost certainly would doom Proposition 1 in November.

Boeing and Machinist-union spokespersons have referred to the lost income and wages which would be incurred both by the company and strikers if the current strike continues. It is too soon to make firm estimates of actual losses, not only by the parties to the strike but also by hundreds of small businesses and subcontrators in the region who are dependent on Boeing and its workers. Stay tuned on this one.


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About the Authors & Contributors

Ted Van Dyk

Ted Van Dyk

Ted Van Dyk has been active in national policy and politics since 1961, serving in the White House and State Department and as policy director of several Democratic presidential campaigns. He is author of Heroes, Hacks and Fools and numerous essays in national publications. You can reach him in care of