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From WSJ:

A frantic, last-ditch attempt to forge an emergency-relief package for the Big Three auto makers collapsed in the U.S. Senate, amid a sharp partisan dispute over the wages paid to workers at the troubled manufacturing giants.

I warned my readers last week that a bankruptcy filing is likely, and very expensive. GM will shake the country much more than Lehman would, in my opinion.

Top Broker Accused of Fraud

Bernard L. Madoff, a force in Wall Street trading for nearly 50 years, was arrested by federal agents, a day after allegedly telling two senior employees that his investment advisory business was "a giant Ponzi scheme."

This initially failed to catch my eye until I realized that they are accusing him or defrauding for $50 billion dollars. That's more than Enron, Worldcom/MCI. That's 1/3rd of the AIG bailout, and about 10% of what the Fed has spent this year on the TARP program. In other words, this ain't chump change.

Blagojevich Thrived by Capitalizing on Ties

The complaint against the Illinois governor cites financial troubles, including more than $500,000 in legal bills, and alleges the Senate appointment was a way out of his troubles.

Senate seats for sale now? They probably always were, but this guys was blatant and out in the open about it!

Executive Accused of Mortgage-Securities Scheme

A financial executive was charged with fraud for allegedly inflating the value of thousands of mortgages that were sold as securities to investors.

This should come as no surprise.

BofA to Cut 35,000 Jobs

Bank of America expects to eliminate about 35,000 positions over the next three years as it absorbs Merrill Lynch.

If you're firing that many people, I don't know if "absorbing" is the most accurate term. Take this in perspective, combined with the loss of 1.9 million jobs so far this year, almost half of which occurred in the last two months, and the slump in bank financing since the credit crisis intensified, the figures darken an already gloomy outlook for consumer spending.

Debt Shows First Drop as Slump Squeezes Consumers

The U.S. economy is deteriorating more rapidly than expected, indicating the recession will be deeper and longer than feared. Economists in a WSJ survey expect the decline in GDP to continue into next year.

I was actually expecting this and worse. It is amazing how unrealistically optimistic investors and pundits are being. Open your eyes. I am watching bankruptcy candidates on my short lists rally in price during these trader controlled bear market sucker rallies.

U.S. household wealth fell in the third quarter by the most on record as property values and stock prices tumbled, highlighting the tattered state of consumer finances even before the most recent slump in lending.

From Bloomberg: Household Net Worth in U.S. Drops Most on Record as Stocks, Homes Tumble

Net worth for households and non-profit groups decreased by $2.81 trillion, the most since records began in 1952, according to the Federal Reserve’s Flow of Funds report issued today in Washington. Real-estate-related assets declined by $646.9 billion, three times the prior quarter’s drop.

U.S. Initial Unemployment Claims Soar to 26-Year High as Recession Deepens

The number of Americans filing first- time claims for unemployment benefits surged more than forecast last week to a 26-year high, a sign companies are stepping up firings as the recession deepens.

Initial jobless claims increased 58,000 to 573,000 in the week ended Dec. 6, the highest level since November 1982, from a revised 515,000 the previous week, the Labor Department said today in Washington. The number of workers staying on benefit rolls reached 4.429 million, also the most since 1982.

Employers are slashing payrolls as consumers retrench and credit stays frozen. Mounting job losses and falling home prices increase the likelihood that the U.S. recession will extend well into 2009, adding impetus to President-elect Barack Obama’s call for an economic stimulus package of unprecedented size.

Russians Buy Jewels, Hoard Dollars as Ruble Plunge Evokes 1998 Devaluation

Moscow resident Tima Kulikov banked on the full faith and credit of the U.S. government, not the Kremlin, when he sold his biggest asset for cash.

The 31-year-old director of a social networking Web site initially agreed to sell his apartment for rubles, then cringed at the thought of the currency weakening as it sat in a lockbox pending settlement of the contract. It wasn’t until the buyer showed up with $250,000 stacked in old mobile-phone boxes and stuffed in his pockets that Kulikov closed the deal.

“The exchange rate we agreed on wasn’t great, but I did it because the money’s going to lie there for a month,” Kulikov said. “Put it this way, the ruble’s more likely to have problems than the dollar.”

Russians are shifting their cash into foreign currencies and buying things they don’t need as the economy stalls and the central bank weakens its defense of the ruble, signaling a larger devaluation may be on the way. The currency has fallen 16 percent against the dollar since August, when Russia’s invasion of neighboring Georgia helped spur investors to pull almost $200 billion out of the country, according to BNP Paribas SA.

The central bank today expanded the ruble’s trading band against a basket of dollars and euros, allowing it to drop 0.8 percent, said a spokesman who declined to be identified on bank policy.

With the specter of the 1998 debt default and devaluation in mind, Russians withdrew 355 billion rubles ($13 billion), or 6 percent of all savings, from their accounts in October, the most since the central bank started posting the data two years ago. Foreign-currency deposits rose 11 percent.

This set of stories is the kicker, though. AIG, the world's largest insurer is basically just a big hedge fund, apparently does more speculative trading than I do. Since falling on hard times, they have been exposed to unprecedented scrutiny - Lo and behold, the truth shines through.

AIG Is Said to Pay $18.7 Billion to Goldman, SocGen for Swaps - American International Group Inc., the insurer rescued by the U.S. government, made $18.7 billion in payments tied to credit-default swaps to banks including Goldman Sachs Group Inc. and Societe Generale SA, according to a person briefed on the situation.

The insurer sent the money to the banks in the three weeks after AIG’s Sept. 16 bailout, said the person, who declined to be named because the information is confidential. The banks bought the swaps from AIG as protection on mortgage securities that plunged in value.

“The AIG bailout wasn’t meant to help the American taxpayer,” said Janet Tavakoli, president of Chicago-based Tavakoli Structured Finance. “What this has ended up doing is helping the investment banks who had AIG as counterparty.”

You've got that right, sis! I want all subscribers to pay close attention to the Actionable Intelligence Note in the next article. Some should email Janet, and send her a copy.