News&Notes: Tontine unwind, Fed Delays for Money Mkts, Bailout Problems & Goldman Slime

RCM Comment: We wrote a few days ago the next 'shoe to drop' would be the announcement of major hedge fund liquidation and closure. This story is just the beginning.
Jeffrey Gendell's hedge fund Tontine is winding down a majority of funds - CNBC
Tontine had been a $9 bln hedge fund at one time. One fund, Tontine Financial, is down 83.3% for the year. Tontine Capital is down 77.8% for the year. Says this will be an orderly liquidation.

Fed delays its big plan to shore up money funds - WSJ
WSJ reports the Federal Reserve said its big rescue plan for money-market funds will be delayed until later this month. The delay, announced Monday, presents a challenge for the $3.6 trillion money-market industry, which is struggling to sell short-term debt into tight credit markets. The Fed plans to finance purchases for as much as $540 billion of the money funds' short-term debt. Many had expected the buying program to be up and running last week, but now the Fed says it will start on or about Nov. 24. The funds need the money to meet investor redemptions. The reason for the delay appears to be the Fed's preoccupation with other bailouts and wrangling over how the money-fund program will be set up... The rescue facility was originally intended for money funds, but could be expanded to include securities lenders in coming weeks, according to people familiar with the matter.

Strains mount on bailout plans - WSJ
WSJ reports the U.S. government's financial-system rescue plans are coming under pressure as a growing array of distressed companies signal the need for assistance. On Monday, mortgage giant Fannie Mae said it is losing money so rapidly it may need a cash infusion from the Treasury Department by year's end. The funds would come from a special $100 billion pool Treasury set aside back in September to aid the company. Fannie Mae had a loss of $29 billion for the third quarter... Fannie Mae's $29 billion loss for the third quarter reflected $9.2 billion in credit-related expenses, including losses on foreclosures and provisions for future losses. Along with rival Freddie Mac, the company owns or guarantees nearly half of all U.S. mortgages. Freddie Mac hasn't set a date for releasing third-quarter results, a spokesman said. The biggest factor in Fannie's loss was a $21.4 billion charge to reflect the likelihood that the company won't be able to make use of tax credits listed on its balance sheet as assets. By writing off the credits, the company is acknowledging that the worst housing downturn in decades is showing no signs of letting up. Howard Shapiro, an analyst at Fox-Pitt Kelton Cochran Caronia Waller in New York, called the losses "a form of housecleaning" by Fannie's new chief executive, Herbert Allison.

GS Goldman Sachs urged bets against California bonds it helped sell - LA Times (71.21 ) LA Times reports the co urged some of its big clients to place investment bets against California bonds this year despite having collected millions of dollars in fees to help the state sell some of those same bonds. The giant investment co did not inform the office of California Treasurer Bill Lockyer that it was proposing a way for investment clients to profit from California's deepening financial misery. In Sacramento, officials said they were concerned that Goldman's strategy could raise the interest rate the state would have to pay to borrow money, thus harming taxpayers. Such worries would tend to drive down the price of California bonds. That, in turn, would drive up the interest rate the state and its municipalities pay to borrow money. An increase of a single percentage point on a $1-billion bond issue would cost taxpayers an additional $10 million a year in interest.