News Bytes - Greenspan, BRKA

Greenspan Speaks (Schaeffer Research - 15 Feb)
Former U.S. Federal Reserve Chairman Alan Greenspan was addressing energy execs at a CERA conference in Houston, saying the U.S. economy was on the verge of recession, warning that conditions would "continue to erode until housing prices stabilized," MarketWatch reported. In conclusion, Greenspan noted that the housing-market woes were still far from a bottom.

Warren Buffett Portfolio Changes (Schaeffer Research - 15 Feb)
Berkshire Hathaway (BRKA) disclosed it was accumulating shares of Kraft Foods (KFT) , gathering an 8.6% stake by the end of 2007. The billionaire also revealed a 1.5-million-share stake in drug maker GlaxoSmithKline (GSK) , amongst others, while reducing stakes in Iron Mountain (IRM) and Ameriprise Financial (AMP).

Bernanke Speaks (www.thestreet.com 14 Feb)
Federal Reserve Chairman Ben Bernanke on Thursday offered a bleak economic outlook for the near term and signaled the central bank's willingness to continue to cut its target rate.

Bernanke expects a period of sluggish growth, followed by a "somewhat stronger pace of growth starting later this year" as the tax rebates and interest rate cuts begin to impact the economy, the Fed chief told the Senate's Committee on Banking, Housing and Urban Affairs. He noted the Federal Open Market Committee's aggressive rate cuts to battle tight interbank lending market that have resulted in a 225 basis point drop to the federal funds rate since September to its present 3%.

Bernanke said further cuts in homebuilding and related activities are likely, as is more-expensive and less-available credit straining the economy. Additional subprime writedowns also appear likely in the short term. And while the chairman doesn't expect a "rip-roaring labor market," the Fed will be looking to see if it stabilized at current levels.

"It is important to recognize that downside risks to growth remain, including the possibilities that the housing market or the labor market may deteriorate to an extent beyond that currently anticipated, or that credit conditions may tighten substantially further," said Bernanke.

Bond Insurers Getting the Heat (www.wsj.com 15 Feb)
The clock is running out for bond insurers to save their triple-A credit ratings.
In congressional testimony yesterday, New York Gov. Eliot Spitzer gave a three-to-five-day time frame for the bond insurers to raise much-needed capital or find other ways to resolve their problems.

Bond insurers -- relatively obscure companies that insure the principal and interest payments in the event of default -- have emerged as the linchpins of large swaths of the financial markets, ranging from municipal bonds to short-term securities backed by student loans. With investors worried that potential downgrades will lead to massive write-downs in their holdings of securities guaranteed by the insurers, regulators have been trying to rally banks to help rescue the insurers.

FGIC Corp., the third-biggest bond insurer by amount of insured debt outstanding after MBIA Inc. and Ambac Financial Group Inc., has already lost its top-notch triple-A rating from all three major ratings firms, indicating that the banks so far have failed to devise a way to raise enough capital to save its status. Moody's Investors Service cut FGIC's triple-A financial-strength rating by six notches to A3, with a warning that it could be cut to the lowest investment grade level of Baa if FGIC's strategic and capital plans had "an unfavorable outcome."

FGIC is closely held by mortgage-insurer PMI Group Inc., which owns a 42% stake, and private-equity firms Blackstone Group Inc. and Cypress Group, each with 23%.

The forays of FGIC, Ambac and MBIA into the risky business of insuring complex mortgage-related securities have put them on the hook for potentially billions of dollars of claims as the housing market stumbles.

The Moody's downgrade -- which could prompt money-fund managers to unload their FGIC-insured holdings -- is more severe than the downgrades of FGIC to double-A in January by Fitch Ratings and Standard & Poor's.

- PersianCat (Millionaire-in-progress)