The US Economy in Dire Straits: Vegas Not Immune
On Sunday, Treasury Secretary Henry Paulson said Americans should prepare themselves for months of economic troubles. According to him, there are "three big issues" the U.S. economy is facing right now: "First, the housing correction; secondly, turmoil of the capital markets; and thirdly, the high oil prices."
Paulson said the number of troubled banks will increase as they struggle to cope with big losses on bad mortgages. The government this month took over IndyMac after a run led it to become the largest regulated thrift to fail.
"Of course the list is going to grow longer given the stresses we have in the marketplace, given the housing correction. But again, it's a safe banking system, a sound banking system. Our regulators are on top of it. This is a very manageable situation," he said in broadcast interviews.
Paulson used appearances on the Sunday talk shows to tell people that deposits up to $100,000 are fully insured. He said no one has lost a single penny on an insured deposit in the 75 years that the Federal Deposit Insurance Corporation has operated.
"We're going through a challenging time with our economy. This is a tough time. The three big issues we're facing right now are, first, the housing correction which is at the heart of the slowdown; secondly, turmoil of the capital markets; and thirdly, the high oil prices, which are going to prolong the slowdown," he said.
"But remember, our economy has got very strong long-term fundamentals, solid fundamentals. And you know, your policy-makers here, regulators, we're being very vigilant."
41 percent of respondents in an AOL poll cited rising gas and energy prices as their number one financial concern. Only 8 percent said that owning or renting a home was hurting them economically.
Only 22 percent of gamblers at prediction market Intrade (50266 total people) believed that the US economy was going into a recession this year. Of the 68 who have already placed bets on the 2009 economy, they were less optimistic with 58 percent betting the US economy was heading into a recession.
While betting on bank closures was receiving somewhat lukewarm responses from the gambling public, the most volume was on FirstFed Financial going under before the year is out. The company has several bank branches as First Federal Bank of California, a banking institution that has been in business since 1929.
Both FirstFed and Downey topped the Ladenburg Thalmann analyst Richard Bove's list of "most vulnerable banks" based on an analysis of non-performing assets and seriously delinquent loans.
Both institutions bounced back on the stock exchange late last week.
The gambling sector - once considered "recession proof" - has also shown itself to be vulnerable.
Moody's Investors Service on Friday placed its credit ratings of Las Vegas Sands Corp. and one of its subsidiaries under review for a possible downgrade, due to slower-than-expected growth amid a softening Las Vegas gambling market, Associated Press reported.
The ratings of Venetian Macao were not affected by the ratings action. However, the company's shares fell 33 cents to 37.41 US dollars in morning trading. The stock has ranged from 30.56 US dollars to 148.76 US dollars in the last 52 weeks.
According to the report, the decline in the Las Vegas gaming market has been worse than Moody's expected, with the weaker economy meaning Vegas has had fewer visitors staying for shorter periods and spending less money.
Those factors could make it difficult for Las Vegas Sands LLC to maintain the acceptable level of profitability in relation to its debt that is required to retain its current rating, Moody's said.
Moody's said its review will focus on operating trends in the Las Vegas gaming market and their impact on Las Vegas Sands LLC's abilities to cut long-term borrowing while contributing to its parent company's global development, the report said.
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Christopher Costigan, Gambling911.com Publisher CCostigan@CostiganMedia.com
Originally published July 21, 2008 2:17 pm EST
