Hedge funds - the daredevils of Wall Street - are backing away from risk

September 9, 2008 --

Hedge funds - the daredevils of Wall Street - are backing away from risk, fearful of getting beaten up by the market's persistent turbulence.

JPMorgan Chase's Highbridge Capital and Phil Falcone's Harbinger Capital are among a growing number of big-name hedge funds that are hunkering down, moving into cash and reducing the use of borrowed money, or "leverage," to inflate returns, sources said. http://www.nypost.com/php/pfriendly/print.php?url=http://www.nypost.com/seven/09092008/business/hedge_hogs_hunker_128180.htm

Paulson Engineers U.S. Takeover of Fannie, Freddie

http://www.bloomberg.com/apps/news?pid=20601087&sid=aY5djDWqugYk&refer=home

Paulson Engineers U.S. Takeover of Fannie, Freddie (Update4)

By Rebecca Christie and Dawn Kopecki

Sept. 7 (Bloomberg) -- The U.S. government seized control of Fannie Mae and Freddie Mac after the biggest surge in mortgage defaults in at least three decades threatened to topple the companies making up almost half the U.S. home-loan market.

``Our economy and our markets will not recover until the bulk of this housing correction is behind us,'' Treasury Secretary Henry Paulson, who engineered the takeover along with Federal Housing Finance Agency Director James Lockhart, said in Washington today. ``Fannie Mae and Freddie Mac are critical to turning the corner.''

The FHFA will take over Fannie and Freddie under a so- called conservatorship, replacing their chief executives and eliminating their dividends. The Treasury can purchase up to $100 billion of a special class of stock in each company as needed to maintain a positive net worth. It will also provide secured short-term funding to Fannie, Freddie and 12 federal home-loan banks, and purchase mortgage-backed debt in the open market.

The takeovers bring Fannie, formed after the Great Depression and spun off in 1968, and Freddie, created in 1970, back under the government's fold. It's the biggest step yet in officials' efforts to grapple with a yearlong credit crisis that has caused more than $500 billion of losses and writedowns.

Treasury Gets Stock

Under the plan, the Treasury will receive $1 billion of senior preferred stock in coming days, with warrants representing ownership stakes of 79.9 percent of Fannie and Freddie. The government will receive annual interest of 10 percent on its stake.

As a condition for the assistance, Fannie and Freddie eventually will have to reduce their holdings of mortgages and securities backed by home loans.

The portfolios ``shall not exceed $850 billion as of Dec. 31, 2009, and shall decline by 10 percent per year until it reaches $250 billion,'' the Treasury said. Fannie's portfolio was $758 billion at the end of July, and Freddie's was $798 billion.

Officials are aiming ``to prevent the mortgage market from falling apart,'' said former Federal Reserve Bank of St. Louis President William Poole. The Treasury's funds ``will be flowing in for quite a long time,'' Poole, a Bloomberg contributor, said on Bloomberg Radio.

Herbert Allison, 65, former chief executive officer of TIAA-Cref, will take over as Fannie's new CEO. David Moffett, 56, who was vice chairman of US Bancorp, will head Freddie, Lockhart said. They will work with existing management, he added.

Mudd, Syron Exit

Fannie CEO Daniel Mudd, 50, and Freddie CEO Richard Syron, 64, will serve in a transition period as consultants.

``Americans should be confident that the actions taken today will strengthen our ability to weather the housing correction and are critical to returning the economy to stronger sustained growth,'' President George W. Bush said today in a statement released by the White House.

``The actions taken today are temporary,'' Bush said. As the administration considers the companies' future role, ``it is critical that they not pose similar risks to our economy and to our financial system again.''

While common stockholders of Fannie and Freddie won't be eliminated under the conservatorships, they will be last in line for any claims, Paulson said. Preferred shareholders will be second in absorbing losses, he said.

`Restoration Plans'

Banks and insurance companies have typically purchased the two companies' preferred shares. The Federal Reserve and three other bank regulators said that they will work to ``develop capital restoration plans'' with the ``limited number'' of smaller institutions that hold Fannie and Freddie stock as a significant portion of their capital.

By ensuring that Fannie and Freddie maintain positive net worth, the Treasury will provide ``additional security'' to the owners of Fannie and Freddie bonds and ``additional confidence'' for the holders of their mortgage-backed securities, it said. The Treasury noted that Fannie and Freddie securities are held by central banks and ``investors around the world.''

Lockhart added that interest and principal payments will continue to be made on the companies' subordinated debt.

The government is taking an increasing role in financial markets, after the Fed six months ago provided $29 billion of financing to prevent Bear Stearns & Cos.'s collapse. Chairman Ben S. Bernanke praised today's action in a statement.

`Inherent Conflict'

The plan doesn't answer all of investors' questions about the companies' long-term prospects. It also doesn't address the question of whether the companies will be nationalized, privatized, or kept as government-sponsored enterprises that are shareholder owned. Paulson said that ``only Congress'' can tackle the ``inherent conflict'' of serving shareholders and a public mission.

``Keeping them alive is the wrong approach,'' said Peter Wallison, a fellow at the American Enterprise Institute in Washington and a former Treasury general counsel. ``They need to be sustained, they're essential to financing housing right now. But it doesn't mean that they have to be maintained as GSEs.''

Wallison added that if Fannie and Freddie return to profitability, ``then what the shareholders have is worth something.''

Lobbying Ban

Congress has long avoided making major changes to the two companies, which have had extensive lobbying operations. Lockhart said today that those operations will cease.

``All political activities -- including all lobbying -- will be halted immediately,'' Lockhart said. ``We will review the charitable activity.''

Democratic presidential nominee Barack Obama said today that ``some'' intervention was necessary to prevent a ``larger and deeper crisis,'' while adding that the ultimate resolution of the firms' status will need to be addressed.

Free-marked advocates such as former Fed Chairman Alan Greenspan and Richmond Fed President Jeffrey Lacker have called for the two companies to be split up and sold off.

``Debt holders still face uncertainty, especially regarding what happens in 2010 and what is the business plan going forward,'' said Eric Johnson, president of Carmel, Indiana-based 40/86 Advisors Inc., which manages $25 billion in fixed-income assets.

$5 Billion Purchase

Starting with a $5 billion purchase this month, the Treasury will buy new mortgage-backed securities from the two companies, in an effort ``to broaden access to mortgage funding for current and prospective homeowners,'' according to the Treasury.

The Treasury will hire independent asset managers to purchase and run the portfolio of mortgage-backed securities it will buy. ``There is no reason to expect taxpayer losses from this program, and it could produce gains,'' the department said.

For Bill Gross, manager of the world's biggest bond fund at Newport Beach, California-based Pacific Investment Management Co., today's announcement was good news.

``We own lots of mortgage-backed bonds, and I would expect on Monday and in the ensuing weeks for them to do very well,'' Gross said in a Bloomberg Radio interview. ``So yes, I'm smiling at the moment.''

Inflated Capital

Paulson's decision, taken after consulting with Bernanke, followed a review that found Washington-based Fannie and McLean, Virginia-based Freddie used accounting methods that inflated their capital, according to people with knowledge of the decision.

Paulson, 62, hired Morgan Stanley a month ago to probe the companies' finances. The investment bank concluded that the accounting, while legal, enabled Freddie, and to a lesser extent Fannie, to overstate the value of their reserves, according to the people who declined to be identified because the findings were confidential.

Robert Scully, an adviser to Morgan Stanley CEO and Chairman John Mack, and Ruth Porat, head of global financial institutions, led a 39-person team at the investment bank that explored a range of alternatives for Fannie and Freddie.

Morgan Stanley, officials and regulators determined it was too risky for the companies to try to raise money themselves, because of the losses on many private capital injections in the past year, two people involved in the discussions said. They also deemed a Treasury capital infusion without a government takeover as too risky for taxpayers, the people said.

No End Date

The FHFA will aim to ``preserve and conserve'' the companies' assets and property and put them ``in a sound and solvent condition,'' according to a fact sheet distributed by the Treasury. There is ``no exact time frame'' for when the conservatorship will end, the statement said.

Fannie and Freddie own or guarantee almost half of the $12 trillion in U.S. home loans and the government had been leaning on the companies to help pull the economy out of the housing crisis.

Concern over the companies' capital pushed their borrowing costs to record levels over U.S. Treasuries, sent their common and preferred stocks tumbling and boosted mortgage rates. Fannie is down about 66 percent in New York Stock Exchange trading since the end of June. Freddie has fallen about 69 percent.

Paulson briefed Republican presidential candidate John McCain, Obama, and the Democratic and Republican leaders of the House and Senate. Senate Banking Committee Chairman Christopher Dodd and House Financial Services Committee Chairman Barney Frank and their Republican minority counterparts were also informed.

Congressional Reaction

``Paulson has threaded the needle just right by taking necessary action to stabilize U.S. financial markets while minimizing the liability for taxpayers,'' Democratic Senator Charles Schumer of New York, who heads the congressional Joint Economic Committee, said in a statement. ``This plan will be met with broad acceptance in Congress because it doesn't prejudge the ultimate fate of Fannie Mae and Freddie Mac.''

Other congressional statements indicated hearings are likely as soon as this week.

Fannie was created by the government in 1938 as part of President Franklin D. Roosevelt's New Deal. Freddie was chartered in 1970 to compete with Fannie.

As losses on the mortgages grew late last year, the companies recorded $14.9 billion in combined net losses, eating into their capital. Fannie raised $14.4 billion since November and Freddie sold $6 billion of preferred securities. Plans for a $5.5 billion sale were delayed as the company's fortunes sank.

Required By Regulator

Fannie had $47 billion of capital as of June 30, according to company filings. The company is required by its regulator to hold $37.5 billion. Freddie's capital stood at $37.1 billion, compared with a requirement of $34.5 billion, filings show.

Fannie's market capitalization is now $7.6 billion, down from $38.9 billion at the end of last year. Freddie's has fallen to $3.3 billion, from $22 billion over the same period.

Bernanke participated in the meetings because the central bank was given a consultative role in overseeing Fannie's and Freddie's capital under legislation approved in July.

The FHFA was scheduled to release its assessment of the companies' capital levels as early as last week as part of a quarterly appraisal of their finances.

To contact the reporter on this story: Rebecca Christie in Washington at Rchristie4@bloomberg.net; Dawn Kopecki in Washington at dkopecki@bloomberg.net

Last Updated: September 7, 2008 17:23 EDT

US Blackmailed By China on Fannie and Freddie Bailout

Bloomberg is reporting Fannie's Mudd Soothed Asian Investors as Bonds Rose .
Fannie Mae Chief Executive Officer Daniel Mudd was sitting down to a glass of wine with his wife at their Washington home around 10 p.m. on Saturday July 12 when Treasury Secretary Henry Paulson called.

 

Concerns about the financial health of the biggest U.S. mortgage finance company had driven Fannie Mae's borrowing costs to the highest since March the previous week and its shares had tumbled 45 percent on the New York Stock Exchange. Investors in Asia, the biggest foreign owners of Fannie Mae's $3 trillion of bonds, were asking the Treasury to bolster the government- sponsored company and its smaller competitor, Freddie Mac, said three people with knowledge of the talks.

Paulson told Mudd he had a plan to restore confidence in Fannie and Freddie, the core of the Bush administration's efforts to revive the U.S. housing market. ``At that point, the proposal began to take form,'' Mudd, 49, said in an interview. ``We're trying to solve a crisis of confidence. Would this do it?''

The next afternoon, before financial markets opened Monday in Asia, Paulson announced the rescue plan, saying he would seek authority to buy unlimited equity stakes in the companies and their bonds if needed, while the Federal Reserve would lend directly to Fannie and Freddie. Congress included the proposals in a broader housing bill that President George W. Bush signed into law last week.

Asian investors were among the most important groups to soothe because central banks, financial institutions and funds in the region own $800 billion of Fannie Mae and Freddie Mac's $5.2 trillion in debt, according to data compiled by the Treasury. U.S. officials were concerned that sales from the region would push lending rates higher, said the people, who declined to be named because the discussions were confidential.

Paulson, the 62-year-old former CEO of Goldman Sachs Group Inc., "knows the markets; he's seen parts of this movie before," Mudd said. The decision to allow Fannie and Freddie to borrow from the Fed's so-called discount window was meant to "send a message to the markets that it wasn't just a someday aspiration, but those confidence building measures are in place right now before Tokyo opens on Sunday night," he said. Karl Denninger wrote a scathing attack of Paulson's maneuver in Now We Know - There WAS A Threat . My thoughts on the so-called "confidence building measures" of this scheme follow.

Confidence Building?

• How can anyone have confidence in the markets when the Fed, the SEC, or the Treasury Department has to intervene on a weekly basis?
  
• How can anyone have any confidence in earnings statements when level 3, market to fantasy assets rise every quarter?
  
• How can anyone have confidence in banks when Citigroup Holds $1.1 Trillion in Mysterious Off Balance Sheet Assets ?
  
• How can anyone have any confidence when the FASB Postpones Off-Balance-Sheet Rules for a Year, at Citigroup's request, because "It's not practical" to implement the rules now. (Please see Not Practical To Tell The Truth for more on this story).
  
• How can anyone gave confidence in financial institutions when Deleveraging Risk Is High And Growing At Lehman and other broker dealers?
  
• How can anyone have any confidence in banks when there are 25 Rock Solid Reasons To Believe The Banking System Is Unsound .
  
• How can taxpayers have any confidence when Congress acts in the best interest of Fannie Mae executives, investors like Bill Gross who bet on a taxpayer funded bailout, and China, rather than the best interests of taxpayers and innocent citizens that had nothing to do with this housing mess?
  
• How can anyone have confidence in the system if there is even the remotest possibility that the US financial system was held hostage by China?
  

Fannie Mae Chief Executive Officer Daniel Mudd called Paulson's move a "confidence building measure". Mudd cannot possibly be further from the truth.

By Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Click Here To Scroll Thru My Recent Post List

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management . Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.

Visit Sitka Pacific's Account Management Page to learn more about wealth management and capital preservation strategies of Sitka Pacific.

I do weekly podcasts every Thursday on HoweStreet and a brief 7 minute segment on Saturday on CKNW AM 980 in Vancouver.

When not writing about stocks or the economy I spends a great deal of time on photography and in the garden. I have over 80 magazine and book cover credits. Some of my Wisconsin and gardening images can be seen at MichaelShedlock.com .

© 2008 Mike Shedlock, All Rights Reserved

Freddie and Fannie get nationalized by Feddie?

I've been reading The Black Swan, which talks about the impact of highly improbable events and how often they actually happen. Two years ago, if you had asked Wall Street insiders what the probability was of a bankruptcy of Fannie Mae (FNM) and Freddie Mac (FRE), they'd have most certainly said less than 1%. And yet that is basically what we've just witnessed. It's not technically a bankruptcy, but the equity has been wiped out and the company has been taken over by the only entity that can guaranty the debt - the US govt/taxpayers. http://seekingalpha.com/article/94191-bad-news-friday-nights

http://news.google.com/news/url?sa=t&ct=us/0-3&fp=48c2a097ee0030a3&ei=GdPCSIvpKqT2ygSHurjYAw&url=http%3A//www.digitaljournal.com/article/259495&cid=1241810220&usg=AFQjCNEITbykqvBVNfQMbQWVyyqsLZuXKA

http://www.nolanchart.com/article4736.html     "Will the foreign dollar holders, the ones who hold most of the U.S. debt in the world, also applaud the move?" If they do, the Fed will probably get away with this power grab, at the expense of the taxpayers.

Of course, they won't call it nationalization. They won't even call it a bailout. They'll use high-sounding phrases like the ones that Fox News and the Times are using, because those are the words the banking interests gave to the major news organizations in the first place.

Indeed, the U.S. financial debacle is now so ingrained - and a so-called "Super Crash" so likely - that most Americans alive today won't be around by the time the last of this credit-market mess is finally cleared away - if it ever is, Rogers said.... http://www.moneymorning.com/2008/09/06/jim-rogers-book/

http://money.cnn.com/2008/01/03/news/newsmakers/gross_pimco/?postversion=2008010311Gross avoided exposure to subprime securities and also anticipated the effect that the decline in home prices would have on the broader economy and corporate bonds, Morningstar said.

http://www.howestreet.com/articles/index.php?article_id=7395 The Treasury Department is close to finalizing a plan to help shore up mortgage giants Fannie Mae and Freddie Mac, according to people familiar with the matter. Precise details of Treasury's plan couldn't be learned. The plan is expected to involve a creative use of Treasury's new authority to make a capital injection into the beleaguered giants.

The plan includes changes to senior management at both companies, according to a person familiar with the plans. An announcement could come as early as this weekend.

On Friday, a series of high-level meetings were planned between Federal Reserve Chairman Ben Bernanke, Treasury Secretary Henry Paulson, the chief executives of Fannie Mae and Freddie Mac and the companies' new regulator, the Federal Housing Finance Agency.

Treasury has been working with bankers at Morgan Stanley to use its newfound authority, granted by Congress in July, to devise a way to prop up the mortgage giants, which have been pummeled by investors in recent weeks.

 

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Ruble falls Russian bonds face potential default

http://www.bloomberg.com/apps/news?pid=20601087&sid=a2Vnuf1g659I&refer=home Sept. 5 (Bloomberg) -- Russian stocks plunged and the cost to protect government bonds from default jumped to the highest in almost four years as the central bank shored up its currency pummeled by the conflict in Georgia and tumbling commodity prices.

The central bank said it intervened after the ruble fell to the lowest level in almost a year against the dollar yesterday. Russia's RTS Index dropped the most among 88 stock indexes tracked by Bloomberg today, capping its worst week since May 2006, and credit-default swaps on the government's debt rose 13 basis points to 165, the highest since November 2004, according to CMA Datavision prices.

Palin drives down markets

http://www.clusterstock.com/2008/9/sarah-palin-pick-blamed-for-clobbering-stock-market Alongside last Friday's announcement that Alaska Governor Sarah Palin would be John McCain's running mate, the Dow Jones Industrial Average fell 170 points. Stocks have shown weakness ever since.

Elite E Services FX Systems (EESFX) Trading Group Chat in Skype Public Chat

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• Direction of FX markets
  
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World's Largest Gold Refiner Runs Out of Krugerrands

Aug. 28 (Bloomberg) -- Rand Refinery Ltd., the world's largest gold refinery, ran out of South African Krugerrands after an ``unusually large'' order from a buyer in Switzerland.

The order was for 5,000 ounces and it will take until Sept. 3 for inventories to be replenished, said Johan Botha, a spokesman for Rand Refinery in Germiston, east of Johannesburg. He declined to identify the buyer.

Coins and bars of precious metals are attracting investors as a haven against a sliding dollar and conflict between Russia and its neighbor Georgia. The U.S. Mint suspended sales of one- ounce ``American Eagle'' gold coins, Johnson Matthey Plc stopped taking orders for 100-ounce silver bars at its Salt Lake City refinery and Heraeus Holding GmbH has a delivery waiting list of as long as two weeks for orders of gold bars in Europe.

``A lot of people are worried about the dollar, they're worried about inflation and now we have geopolitical risk with what's happening in Russia,'' said Mark O'Byrne, managing director of brokerage Gold and Silver Investments Ltd. in Dublin. O'Byrne said his company's sales are up fourfold this year, heading for a record since its founding in 2003.

Gold rose to a record in March and is 25 percent higher than this time last year, while the dollar dropped 7.4 percent against the euro. Silver is up 15 percent in the period.

http://www.bloomberg.com/apps/news?pid=20601012&sid=acH4WhPh1WJ0&refer=commodities

Iran calls for production cuts

http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article4663676.ece
The price of crude oil tumbled yesterday in the futures markets as the destructive force of Hurricane Gustav dwindled.

Traders are focused again on the weakening global economy and panicky behaviour is being detected within Opec, suggesting that some cartel members fear that the oil price could crash. The gloom in the commodities markets pushed the price of US light crude as low as $105.46 per barrel yesterday, a $10 fall. Iran, the most hawkish member of the oil cartel, called for agreement next week on a cut of 1.5 million barrels per day in output.

Oil price of $100 a barrel on horizon...

ABU DHABI GOES TO THE MOVIES; $1B INVESTMENT IN FILM PRODUCTION...

Gustav Strikes! See local news feeds

http://www.maroonspoon.com/wx/gustav.html

Crude, Gasoline advances as forecast by EES

http://www.bloomberg.com/apps/news?pid=20601087&sid=aZQgpZMcLmfM&refer=home

Crude Oil, Gasoline Advance as Gustav Cuts Production, Refining

By Gavin Evans and Margot Habiby

Sept. 1 (Bloomberg) -- Crude oil and gasoline futures rose as Hurricane Gustav approached the U.S. Gulf coast, halting most regional oil and gas output and shutting local refineries.

Gustav, about 215 miles (350 kilometers) south-southeast of the Mississippi River mouth, will make landfall along the Louisiana coast later today as a ``major'' hurricane, according to the U.S. National Hurricane Center. Wind and sea conditions have reduced the chances of ``significant intensification,'' the center said.

``There are still some production rigs in the way'' of a major storm, said Gerard Burg, energy and minerals economist at National Australia Bank Ltd. in Melbourne. ``We're just going to have to wait and see what kind of impact it's going to have.''

Crude oil for October delivery rose $1.52, or 1.3 percent, to $116.98 a barrel in after-hours electronic trading on the New York Mercantile Exchange at 9:45 a.m. in Sydney. Prices, which dropped 7 percent in August, are up 22 percent this year.

Gulf Coast refineries have cut at least 1.56 million barrels a day of production, about 9.8 percent of the U.S. total. Eight refineries have announced shutdowns, while another five have reduced capacity.

Personnel from more than 70 percent of the platforms and rigs in the Gulf have been evacuated as the storm approaches, the U.S. Minerals Management Service said in a statement on its Web site yesterday. About 1.25 million barrels a day of oil, and 6.09 billion cubic feet of gas have been shut, or more than 96 percent of offshore oil output and 82 percent of gas production.

http://www.theoildrum.com/node/4472

PRODUCTION/INFRASTRUCTURE MAPS AND REFINERY INFORMATION

Here's a link to a really good map of oil refining/SPR storage facilities in respect to the path of Katrina (NB: OLD TRACK MAP!) and here is a listing of production and refining capability for the state of LA.

Just to give you a rough idea of where things are, the map above is a probability swath for Katrina (OLD TRACK MAP!) with the Thunder Horse platform as the red dot, and the other purple dot represents the Mad Dog development (100,000 bd); the Holstein development that produces at peak, around 100,000 bd of oil; and the Atlantis field that may have ramped up to around 200,000 bd in all. Put together these projects have the potential of around 650,000 bd, but as can be seen, they were sitting in an uncomfortable spot relative to the track of the Katrina.The white dot is where Port Fourchon is.  This is where the Louisiana Offshore Oil Port, or LOOP, is located. Rigzone pointed out that this is where the foreign tankers offload, Google and Terraserve maps you can see that the area is very low-lying.  One of the big concerns is that there will be sub-sea landslides or other ground movement that might affect the LOOP.  Were this to be disrupted, then foreign tankers would need to be diverted elsewhere, with the likely port being Houston.

Here is a really good link/map (from "Rod and Reel" no less) of the LA southern coastline showing all of the Submersible and Floater Gulf rigs.

We have accumulated resources from previous hurricans below, but we'd like to find updated materials if you know of them. Recent refinery maps, recent rig maps in the gulf, recent gas fields, SPR facilities, the Intercoastal Canal, pipeline stations and transfer points, etc., etc. Leave links in the comments please.

Also, here's the EIA's Alabama, Louisiana, Mississippi, and Texas Resources pages. They will also likely come in handy. Also, here's a link to the national page.

Here's another good resource for infrastructure maps and such. (scroll down a bit)

Here's a map from CNN with large and small refineries laid out. (though it is an old storm track)

Very detailed piece by RIGZONE on rigs and other infrastructure in the area. (thanks mw)

Here's a flash graphic of the oil refineries and rig maps from Hurricane Rita, it emphasizes Beaumont and Galveston's importance. Click on oil production in the tab. Note the many rigs on the east side of the storm that will get the brunt of the damage from the NE quad of the storm...hence the high long-term GOMEX oil production damage estimates below.

Here's a link to Rigzone's coverage of Gustav.

You want a detailed map? Well here's the probably the best MMS map I could find. Very detailed and lots of interesting stuff. (VERY big .pdf warning)

Also, Scott Wilmoth at Simmons & Co was kind enough to send us this map. The map below captures only deepwater infrastructure. For a complete list of deepwater development systems (includes operator, depth, location): http://www.gomr.mms.gov/homepg/offshore/deepwatr/dpstruct.html

(Please deposit new relevant links, graphs, and comments in this new thread...we have updated the resources part of this post with new maps and some more old maps and articles from Katrina on the LOOP and Port Fourchon--important parts of the infrastructure, as we learned about three years ago. Please leave personal anecdotes and themes unrelated to hurricane for the other upcoming 'bigger picture' posts, as yesterdays information was difficult to upload for those on dial-up)

Russia may cut off oil flow to the West

http://www.telegraph.co.uk/money/main.jhtml?view=DETAILS&grid=&xml=/money/2008/08/29/cnrussia129.xml

Fears are mounting that Russia may restrict oil deliveries to Western Europe over coming days, in response to the threat of EU sanctions and Nato naval actions in the Black Sea.

Any such move would be a dramatic escalation of the Georgia crisis and play havoc with the oil markets.

Reports have begun to circulate in Moscow that Russian oil companies are under orders from the Kremlin to prepare for a supply cut to Germany and Poland through the Druzhba (Friendship) pipeline. It is believed that executives from lead-producer LUKoil have been put on weekend alert.

"They have been told to be ready to cut off supplies as soon as Monday," claimed a high-level business source, speaking to The Daily Telegraph. Any move would be timed to coincide with an emergency EU summit in Brussels, where possible sanctions against Russia are on the agenda.

RBV8 RBOB Buy for weekend hurricane info

http://quote.barchart.com/quote.asp?sym=RBV8&code=BSTK

http://news.google.com/news/url?sa=t&ct=us/0-0&fp=48b898e3464678dc&ei=5ky4SLTdN5nI8ATLotDYAw&url=http%3A//www.bloomberg.com/apps/news%3Fpid%3D20601087%26sid%3DagFHDeJtXOEc%26refer%3Dhome&cid=1240704120&usg=AFQjCNGrJyjdzu6YDtYW8e3IizxMHXjHLA
29 (Bloomberg) -- Tropical Storm Gustav pounded Jamaica with rain, flooding streets with water and mud, as Louisiana prepared for the system to strengthen

* Strong dollar pressures oil, balancing Gustav support
guardian.co.uk, UK - 1 hour ago
NEW YORK, Aug 29 (Reuters) - Oil prices were nearly unchanged by midday Friday as a stronger dollar balanced concerns that Tropical Storm Gustav will impact

Bernanke, Aiming to Curtail Market Risks, Met NYSE, CME Chiefs

Bernanke, Aiming to Curtail Market Risks, Met NYSE, CME Chiefs

By Scott Lanman

Aug. 28 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke, aiming to curb risks in derivatives markets, met in June with NYSE Euronext Chief Executive Officer Duncan Niederauer and CME Group Inc. Chairman Terrence Duffy.

The Fed chief met on June 17 with Niederauer and on June 27 with Duffy, according to Bernanke's schedule for the month, released to Bloomberg News after a Freedom of Information Act request. CME is the No. 1 futures exchange in the U.S., and NYSE Euronext is the world's biggest owner of stock exchanges.

Bernanke and Duffy ``discussed a number of economic issues, including the credit markets and over-the-counter derivatives,'' CME spokesman Allan Schoenberg said in an e-mail message.

The central bank is trying to improve processing of trades in the $454 trillion over-the-counter derivatives markets, an effort Bernanke said last month would help the financial system ``withstand future shocks.''

The New York Fed and 17 securities dealers including Goldman Sachs Group Inc. and JPMorgan Chase & Co. agreed in July to form a central counterparty for the credit-default swap market that could absorb the failure of one of the major dealers.

Fed officials began urging banks in 2005 to improve processing of credit-default swaps as a backlog of unsigned trades ballooned to the equivalent of more than 17 days of trading volume.

CME and NYSE are seeking to expand into the $62 trillion market for credit default swaps, which let investors bet on the likelihood that companies will fail to repay debt. NYSE spokesman Richard Adamonis declined to comment.

Derivatives are financial instruments derived from stocks, bonds, loans, currencies and other assets, or linked to specific events like changes in the weather or interest rates.

At Risk

The amount U.S. commercial banks have at risk in derivatives markets jumped 50 percent in the first quarter as the credit crisis triggered an increase in the value of the contracts, the Office of the Comptroller of the Currency said last month.

Bernanke in June also continued weekly breakfasts with Treasury Secretary Henry Paulson. The Fed chief met twice with Securities and Exchange Commission Chairman Christopher Cox as they worked out an agreement on sharing information about the capital and risk-management systems of securities firms.

Bernanke had lunch at the White House with President George W. Bush on June 3. Earlier that day, the chairman had given a speech voicing concern about the declining value of the dollar.

The Fed chief delivered private remarks on June 6 to the Bilderberg Group, a gathering of North American and European government and business leaders, at a hotel in the Washington suburb of Chantilly, Virginia.

U.K. Leaders

Bernanke also met with a number of British officials. He met in his office on June 5 with Howard Davies, director of the London School of Economics, who formerly served as chairman of the U.K. Financial Services Authority and deputy governor of the country's central bank.

The daybook shows Bernanke also met for about 30 minutes on June 6 with George Osborne, Treasury spokesman for the U.K.'s opposition Conservative Party.

The British Embassy in Washington hosted a dinner on June 24 for the Federal Open Market Committee while policy makers were in town for a two-day meeting on interest rates.

To contact the reporter on this story: Scott Lanman in Washington at slanman@bloomberg.net

Last Updated: August 28, 2008 11:30 EDT