Indonesia Said Container Volumes Likely to be Down 20-30% This Year

T H E G L O B A L E C O N O M Y

How Bad is it ? Normal cylcle recession Fear generated recession It is bad It is really bad and getting worse Stop worrying about it things will get better Everything is fine. Kudlow Mustard Seeds Everywhere Current Results

The Global Economy is slowing quickly

JAKARTA, Feb 14 (Reuters) – Indonesia’s trade minister said on Saturday export volumes for non-oil and gas are set to fall 20-30 percent this year from 2008 as global trade slows, dealing a blow to Southeast Asia’s biggest economy in an election year.

Earlier this month, Trade Minister Mari Pangestu said Indonesia’s non-oil and gas export growth target had been revised to below 4.3 percent for 2009. On Saturday she told reporters the outlook was worse.

“Based on container flow for January-February, exports volume this year may decline by between 20 to 30 percent. Non-oil and gas exports are expected to fall,” Pangestu said.

She added that exports of automotive products and electronics would be worst hit.

Car exports through the Jakarta International Container Terminal, the country’s largest shipping terminal, fell to 9,391 units in January, from 13,000 units in December 2008, Pangestu said, representing a decline of about 27 percent.

Earlier this week, Pangestu said that growth in total exports would slow to just 1-2.5 percent this year, from about 20 percent in 2008. The government had previously forecast total exports would grow 5 percent in 2009.

The government has proposed a 71.3 trillion rupiah ($6.1 billion) fiscal stimulus package to counter the effects of a global economic slowdown, and expects economic growth to slow to between 4 and 5 percent, from an estimated 6.2 percent in 2008.

While Indonesia’s economy is less dependent on exports than some other Asian countries, millions of Indonesians are employed in export-related sectors and the prospect of big job losses is a concern for the government ahead of the April 9 general election and July 8 presidential election.

Indonesian exports include palm oil, tin, coal, copper, and rubber, and prices for many of these commodities have slumped.

Earlier this month, Indonesia reported that exports fell 20.6 percent to $8.69 billion in December from a year ago, the biggest drop in seven years.

Economists expect the central bank, Bank Indonesia, to continue its monetary easing cycle this year to try to boost economic growth.

Indonesia’s central bank cut its key interest rate by 50 basis points to 8.25 percent in February, the third cut in three months, and indicated it may cut rates again to support growth. ($1=11,750 Rupiah) (Additional reporting by Karima Anjani; Writing by Sara Webb; editing by Elizabeth Piper)

Geithner
Does he have what it takes to succeed	Yes No He is part of the old group of people who failed to identify the problem He does not have enough experience Still too early to decide I’m not sure. Time will tell
	Current Results

Gaining Trust< /strong>

ROME (Reuters) – After disappointing markets with a sketchy bank rescue plan, Treasury Secretary Timothy Geithner came to the Rome this weekend needing to prove to Group of Seven colleagues that he was up to the job of fixing the U.S. financial system.

He largely succeeded in earning their good will and arguing that his plan was more than a skeleton of wishful thinking. But he has left them — and investors — still hungry for details and the confidence that his ideas will actually work.

“You can have the best plan in the world, it has to be executed,” Bank of Canada Governor Mark Carney told reporters during the meeting.

“This is a comprehensive plan, the will is there. We look forward to the execution and that will have an important bearing on global access to credit,” Carney said.

Geithner’s first trip to the meeting of finance ministers and central bank governors as Treasury Secretary came less than three weeks after he took office and just three days after he announced a “framework” for shoring up the U.S. financial system that was painfully short on details.

Investors hoping for a more comprehensive plan that gave clear and strong government action to remove toxic mortgage assets from bank balance sheets were sorely disappointed. Stocks fell sharply, with the S&P 500 marking a 4.8 percent fall for the week to test the bear market lows of last November.

London-based Lombard Street Research labeled Geithner a “weak link” and said his announcement was merely “starting a process to develop a plan.”

Deutsche Bank Securities chief economist Joseph LaVorgna said: “It’s not big enough. There are few details. The administration is trying to buy time and they don’t get the fact that we need to get something yesterday.”

PUBLIC PRIVATE

At the heart of the plan announced on Tuesday is Geithner’s idea for a public-private investment fund that would put government capital alongside private capital to buy up illiquid assets from banks, clearing up questions about the size of their losses and freeing their balance sheets for more lending.

But previous efforts for both private-sector and public- sector solutions to the crisis have failed. Geithner’s predecessor, Henry Paulson, in 2007 proposed a bank-funded vehicle to buy up assets only to find little interest.

Paulson initially intended last year’s $700 billion bank bailout fund to buy assets through a reverse auction process, but dropped the idea in favor of direct capital injections when it became apparent that the process would be too complicated and struggle to halt the slump in market confidence.

Participants said Geithner still looked uncomfortable under the media glare at a news conference on Saturday, but he spoke passionately about the plan and the challenges facing the administration after an edgy display in Congress last week.

He is determined not to make the same mistakes that Paulson made and he told G7 ministers that he wants to “get it right” before launching the program so that he would not have to shift strategy midstream. He also wanted their thoughts on it.

The initial design process for the plan brought in ideas from the Federal Reserve and the Federal Deposit Insurance Corp, and others were floated, such as relaxing asset accounting standards and more comprehensive government funded “bad bank” programs. Continued…

Auto Companies and Auto Suppliers
Should we bailout these industries ?	Yes No Let them Reorganize under Bankruptcy
	Current Results

“Breakdown Go Ahead and Give it to Me”

DETROIT (Reuters) – Talks between the United Auto Workers and General Motors Corp central to a turnaround plan for the struggling automaker have broken down over the issue of retiree healthcare costs, a person briefed on the talks said on Saturday.

A parallel set of talks between Chrysler LLC and the UAW over similar concessions were continuing over the weekend but little progress had been made, a person briefed on those negotiations said.

The breakdown of talks at GM and the stalled negotiations at Chrysler come with just three days remaining until both automakers must submit new restructuring plans to the U.S. government as a condition of the $17.4 billion in federal aid that has kept them both operating since the start of the year.

“It doesn’t seem like the stakeholders are really prepared to give a whole lot,” said independent auto industry analyst Erich Merkle. “It’s a high-stakes game of poker right now.”

If GM cannot win agreement from the UAW and creditors to reduce its debt, analysts say the Obama administration will face a politically tough choice: either pump billions of dollars more into the struggling automaker or steer it toward bankruptcy as some critics of the bailout have urged.

UAW negotiators walked away from talks being held near GM’s Detroit headquarters on Friday night because of differences over how to pay the health care costs of retirees, the person familiar with the talks said.

Under Chief Executive Rick Wagoner, GM has resisted suggestions that it would be better able to restructure under a court-supervised bankruptcy.

Wagoner and other executives have argued that consumers would shun GM cars and trucks if it were in bankruptcy, sending already weak sales into an irreversible tailspin.

But in recent weeks, senior executives at the automaker have become more open to the prospect of a bankruptcy filing, a person involved in the talks said.

GM declined to comment directly on the state of negotiations with the union. “We are committed to meeting the terms of the bridge loan and executing our restructuring plan,” GM spokeswoman Renee Rashid-Merem said.

Chrysler said it was also committed to meeting the terms of the federal bailout, which requires both automakers to reduce labor costs and the amount owed to a UAW-affiliated fund.

“We continue to engage all of our stakeholder groups as we work through this process,” Chrysler said in a statement.

UAW representatives were not immediately available.

HEALTH CARE COSTS KEY

The UAW is owed some $20 billion by GM, money pledged to a healthcare trust for retirees. The union faces demands that it surrender its claim to half of that amount in exchange for stock in a recapitalized GM under the terms of the federal bailout for the automaker.

GM and the UAW agreed to create the retiree health-care fund as part of a 2007 labor agreement the automaker hailed at the time as a way for it to shift a crippling liability from its balance sheet.

But the steep slide in U.S. auto sales in late 2008 overwhelmed GM’s attempts to cut costs and raise cash on its own, leaving it unable to survive without federal loans and unable to fund its commitment to the union trust fund.

For his part, UAW President Ron Gettelfinger has balked at saddling retired workers with additional risk by taking devalued GM stock instead of cash.

GM’s bondholders, who are being asked to write off some $18 billion in debt in exchange for GM stock, have also held out for better terms, people briefed on the talks have said.

GM has received $9.4 billion from the U.S. government and has been pledged another $4 billion if it can show it can be viable at a time when U.S. auto sales are near 30-year lows.

The Wall Street Journal reported on Saturday that one scenario being considered by GM would put its viable assets, including international operations, into a single company. Other assets would be sold under the protection of a bankruptcy court, the newspaper said.

A bankruptcy filing would allow GM to rework its contracts with creditors, the UAW, dealers and its suppliers.

But it would also mean even steeper job losses. GM, Chrysler and Ford Motor Co have cut 250,000 jobs since the start of the decade and are looking to cut more.

A bankruptcy by one of the U.S. automakers could also trigger a wave of failures among parts suppliers. That industry is seeking $18.5 billion in federal aid and has warned that 1 million jobs could be lost if the industry collapses.

Chrysler has been given $4 billion in emergency funding from the U.S. Treasury and is seeking another $3 billion.

Chrysler has said it will present two restructuring plans. One will show its prospects as a stand-alone company now owned by private equity firm Cerberus Capital Management.

A second scenario will show Chrysler’s prospects under a tie-up with Italy’s Fiat SpA. Fiat has agreed to take a 35 percent stake in Chrysler in exchange for access to its small-car technology and development efforts if the U.S. automaker can be made viable.

Japan vs. The United States
Will we have a lost decade like Japan ?	Yes No Too early too tell It will be worse since we have no savings and considerable debt We will escape this scenario in less than 5 years We will escape this scenario in less than 3 years Get ready for a new bull market cycle We have created a chain reaction leading to the abolishment of society as we know it
	Current Results

What can we learn from Japan ?

The Obama administration is committing huge sums of money to rescuing banks, but the veterans of Japan’s banking crisis have three words for the Americans: more money, faster.

The Japanese have been here before. They endured a “lost decade” of economic stagnation in the 1990s as their banks labored under crippling debt, and successive governments wasted trillions of yen on half-measures.

Only in 2003 did the government finally take the actions that helped lead to a recovery: forcing major banks to submit to merciless audits and declare bad debts; spending two trillion yen to effectively nationalize a major bank, wiping out its shareholders; and allowing weaker banks to fail.

By then, Tokyo’s main Nikkei stock index had lost almost three-quarters of its value. The country’s public debt had grown to exceed its gross domestic product, and deflation stalked the land. In the end, real estate prices fell for 15 consecutive years.

More alarming? Some students of the Japanese debacle say they see a similar train wreck heading for the United States.

“I thought America had studied Japan’s failures,” said Hirofumi Gomi, a top official at Japan’s Financial Services Agency during the crisis. “Why is it making the same mistakes?”

Many American critics of the plan unveiled Tuesday by Treasury Secretary Timothy F. Geithner said the plan lacked details. Experts on Japan found it timid — especially given the size of the banking crisis the administration faces.

“I think they know how big it is, but they don’t want to say how big it is. It’s so big they can’t acknowledge it,” said John H. Makin, an economist at the American Enterprise Institute, referring to administration officials. “The lesson from Japan in the 1990s was that they should have stepped up and nationalized the banks.”

Instead, the Japanese first tried many of the same remedies that the Bush administration tried and the Obama administration is trying — ultra-low interest rates, fiscal stimulus and ineffective cash infusions, among other things. The Japanese even tried to tap private capital to buy some of the bad assets from banks, as Mr. Geithner proposed.

One reason Japan’s leaders were so ineffectual for so long was their fear of stoking public outrage. With each act of the bailout, anger grew, making politicians more reluctant to force real reform, which only delayed the day of reckoning and increased the ultimate price tag. Japanese taxpayers are estimated to have recouped less than half what it cost the government to bail out the banks.

A further lesson from Japan is that the bank rescue will determine the fate of the wider economy. While President Obama has prioritized his stimulus plan, no stimulus is likely to succeed unless the banking sector is repaired.

The Japanese crisis of the 1990s and early 2000s had roots similar to the American crisis: a real estate bubble that collapsed, leaving banks holding trillions of yen in loans that were virtually worthless.

Initially, Japan’s leaders underestimated how badly the real estate collapse would hurt the country’s banks. As in the United States, a policy of easy money had fueled both stock and real estate speculation, as well as reckless lending by banks.

Many in Japan thought that low interest rates and economic stimulus measures would help banks recover on their own. In late 1997, however, a string of bank failures set off a crippling credit crisis.

Prodded into action, the government injected 1.8 trillion yen into Japan’s main banks. But the injections — too small, poorly planned and based on little understanding of the extent of the banking sector’s woes — failed to stem the growing crisis.

Fearing more bad news if banks were forced to disclose their real losses, Japan’s leaders allowed banks to keep loans to “zombie” companies on their balance sheets.

Japan, instead, experimented with a series of funds, in part privately financed, to relieve banks of their bad assets.

The funds brought limited results at best, says Takeo Hoshi, economics professor at the University of California, San Diego. For one thing, the funds were too small to make an impact. The depository for bad loans had no orderly way to sell them off. And the purchases that did take place failed to recapitalize banks because the bad assets were priced so low.

So far, the Obama administration’s plan avoids the hardest decisions, like nationalizing banks, wiping out shareholders or allowing banks to collapse under the weight of their own bad debts. In the end, Japan had to do all those things.

Economists say these blunders meant Japan’s financial system did not start to recover until late 2002, six years after the crisis broke. That year, the government of the reformist leader Junichiro Koizumi ordered a tough audit of the country’s top banks.

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Called the Takenaka Plan after Heizo Takenaka, who headed the government’s financial reform efforts, the move finally brought the full extent of bad loans to light. Initially, banks lashed out at Mr. Takenaka. “The government can’t order bank management to do this and that,” Yoshifumi Nishikawa, president of the Sumitomo Mitsui Financial Group, complained to the press in October 2002. “It’s absolutely absurd.”

But Mr. Takenaka stood firm. His rallying cry, he said in an interview on Wednesday, was, “Don’t cover up. Don’t distort principles. Follow the rules.”

“I told the banks clearly, ‘I am in a position to supervise you,’ ” Mr. Takenaka said. “I told them I am not open to negotiation.”

It took three more years to finally get the majority of bad loans off the banks’ books. Resona Bank, which was found to have insufficient capital, was effectively nationalized.

From 1992 to 2005, Japanese banks wrote off about 96 trillion yen, or about 19 percent of the country’s annual G.D.P. But Mr. Takenaka’s toughness restored faith in the banks.

“That was a turning point in the banking crisis,” said Mr. Gomi of the Financial Services Agency, who worked with Mr. Takenaka on the audits.

By then, other factors had fallen into place that aided economic recovery, including a boom in exports to the United States and China.

(Those very share holdings would come back to haunt banks, as the recent market sell-off batters their balance sheets. And as the economy worsens, bad loans are again on the rise, the Financial Services Agency said Tuesday.)

The United States will probably not be able to count on growing demand for its products, since the global economy is worsening.

“The way things are going right now,” said Mr. Hoshi, “the U.S. taxpayers’ burden will keep going up and up.”

Bankruptcy
Does this matter concern you ?	Yes No I believe we will sove the problem Man is flawed and we will have trouble fixing this issue Rob Peter to pay Paul or Mary
	Current Results

Obligations now total $65.5 trillion and climbing

As the Obama administration pushes through Congress its $800 billion deficit-spending economic stimulus plan, the American public is largely unaware that the true deficit of the federal government already is measured in trillions of dollars, and in fact its $65.5 trillion in total obligations exceeds the gross domestic product of the world.

The total U.S. obligations, including Social Security and Medicare benefits to be paid in the future, effectively have placed the U.S. government in bankruptcy, even before new continuing social welfare obligation embedded in the massive spending plan are taken into account.

The real 2008 federal budget deficit was $5.1 trillion, not the $455 billion previously reported by the Congressional Budget Office, according to the “2008 Financial Report of the United States Government” as released by the U.S. Department of Treasury.

The difference between the $455 billion “official” budget deficit numbers and the $5.1 trillion budget deficit cited by “2008 Financial Report of the United States Government” is that the official budget deficit is calculated on a cash basis, where all tax receipts, including Social Security tax receipts, are used to pay government liabilities as they occur.

But the numbers in the 2008 report are calculated on a GAAP basis (“Generally Accepted Accounting Practices”) that include year-for-year changes in the net present value of unfunded liabilities in social insurance programs such as Social Security and Medicare.

Under cash accounting, the government makes no provision for future Social Security and Medicare benefits in the year in which those benefits accrue.

“As bad as 2008 was, the $455 billion budget deficit on a cash basis and the $5.1 trillion federal budget deficit on a GAAP accounting basis does not reflect any significant money [from] the financial bailout or Troubled Asset Relief Program, or TARP, which was approved after the close of the fiscal year,” economist John Williams, who publishes the Internet website Shadow Government Statistics, told WND.

Find out what’s behind the chaos at the White House, in the No. 1 best-seller “Obama Nation”

“The Congressional Budget Office estimated the fiscal year 2009 budget deficit as being $1.2 trillion on a cash basis and that was before taking into consideration the full costs of the war in Iraq and Afghanistan, before the cost of the Obama nearly $800 billion economic stimulus plan, or the cost of the second $350 billion in TARP funds, as well as all current bailouts being contemplated by the U.S. Treasury and Federal Reserve,” he said.

“The federal government’s deficit is hemorrhaging at a pace which threatens the viability of the financial system,” Williams added. “The popularly reported 2009 [deficit] will clearly exceed $2 trillion on a cash basis and that full amount has to be funded by Treasury borrowing.

“It’s not likely this will happen without the Federal Reserve acting as lender of last resort for the Treasury by buying Treasury debt and monetizing the debt,” he said.

“Monetizing the debt” is a term used to signify that the Federal Reserve will be required simply to print cash to meet the Treasury debt obligations, acting in this capacity only because the Treasury cannot sell the huge of amount debt elsewhere.

The Treasury has been largely dependent upon foreign buyers, principally China and Japan and other major holders of U.S. dollar foreign exchange reserves, including OPEC buyers purchasing U.S. debt through London.

“The appetite of foreign buyers to purchase continued trillions of U.S. debt has become more questionable as the world has witnessed the rapid deterioration of the U.S. fiscal condition in the current financial crisis,” Williams noted.

“Truthfully,” Williams pointed out, “there is no Social Security ‘lock-box.’ There are no funds held in reserve today for Social Security and Medicare obligations that are earned each year. It’s only a matter of time until the public realizes that the government is truly bankrupt and no taxes are being held in reserve to pay in the future the Social Security and Medicare benefits taxpayers are earning today.”

Calculations from the “2008 Financial Report of the United States Government” also show that the GAAP negative net worth of the federal government has increased to $59.3 trillion while the total federal obligations under GAAP accounting now total $65.5 trillion.

The $65.5 trillion total federal obligations under GAAP accounting not only now exceed four times the U.S. gross domestic product, or GDP, the $65.5 trillion deficit exceeds total world GDP.

“In the seven years of GAAP reporting, we have seen an annual average deficit in excess of $4 trillion, which could not be possibly covered by any form of taxation,” Williams argued.

“Shy of the government severely slashing social welfare programs, federal deficits of this magnitude are beyond any hope of containment, government or otherwise,” he said.

“Put simply, there is no way the government can possibly pay for the level of social welfare benefits the federal government has promised unless the government simply prints cash and debases the currency, which the government will increasingly be doing this year,” Williams said, explaining in more detail why he feels the government is now in the process of monetizing the federal debt.

“Social Security and Medicare must be shown as liabilities on the federal balance sheet in the year they accrue according to GAAP accounting,” Williams argues. “To do otherwise is irresponsible, nothing more than an attempt to hide the painful truth from the American public. The public has a right to know just how bad off the federal government budget deficit situation really is, especially since the situation is rapidly spinning out of control.

“The federal government is bankrupt,” Williams told WND. “In a post-Enron world, if the federal government were a corporation such as General Motors, the president and senior Treasury officers would be in federal penitentiary.”

Everything must go !

WASHINGTON — When regulators took over the First National Bank of Nevada last year, they faced a showdown with the Terrible Herbst, the mustachioed cowboy who boasts of being the “best bad man in the West.”

This was no real gunslinger, but the name and logo of a chain of gas stations and convenience stores in Nevada that feature slot machines next to candy and beer.

The family-owned Herbst chain, auditors at the Federal Deposit Insurance Corporation concluded, did not generate enough sales at its Reno-area gas stations to support the repayment of a loan, leaving auditors with three bad choices: Move to take over those stations and put the government in the gambling business. Cut off any flow of additional loan money. Or sell the loan at a steep loss.

The F.D.I.C. faces tough choices like this every day as it struggles to manage $15 billion worth of loans and property left from failed banks. If still-to-be-sold assets from IndyMac Bancorp of California, whose demise last year was the fourth-largest bank failure, are included, the number jumps to $40 billion.

The F.D.I.C. inherited the collection of loans and property after the failure of 25 banks in 2008, compared to just three in 2007. Thirteen more have failed this year, including four on Friday night, and no one doubts that more are on the way. The F.D.I.C., which insures bank deposits and ultimately has responsibility for liquidating failed banks, is selling hundreds of millions of dollars worth of loans through eBay-like auction sites.

DebtX of Boston and First Financial Network of Oklahoma City, for instance, sell loans at auction to investors who typically pay 5 cents to 85 cents for each dollar of outstanding principal, according to Bliss A, Morris, First Financial’s president. It is unloading hundreds of houses across the country at bargain basement prices. In November, Lula Smith, 86, of Kansas City, Mo., bought a two-bedroom house across the street from her home for $4,000, one-tenth of its value two years ago.

“I am real satisfied with that price, yes sir,” she said, adding that after about $1,000 in additional costs to repair the house, and some new carpet, her son and daughter-in-law will move in. “It was a nice little deal, indeed.”

And — in the most closely watched tactic — the F.D.I.C. is negotiating a series of billion-dollar deals with private equity partners who will take over huge batches of loans in exchange for a chunk of the sale proceeds.

Even as the solutions to the financial crisis are debated in Congress and among economists, the F.D.I.C., one of the agencies that deals most closely with the nation’s banks, has already been transformed.

The rising tide of foreclosed real estate is so overwhelming that the agency, which had shrunk to a relatively tiny 4,800 employees from as many as 15,000 in the last period of bank meltdowns in the 1990s, is in the midst of a military-scale buildup as it undertakes one of the greatest fire sales of all time.

The agency is frantically calling in retirees and holding job fairs, looking to hire as many as 1,500 people. It has rented a high-rise office building in Irvine, Calif., the new headquarters for a West Coast branch of 450 employees who are wrestling with a real estate crisis in one of the hardest-hit regions. It is also budgeted to pay hundreds of millions of dollars for a small army of contractors to augment its staff. “We are trying to be ready for the inevitable,” said Mitchell L. Glassman, director of the F.D.I.C.’s division of resolutions and receiverships.

The budget for that division is increasing to $1 billion this year, from $75 million last year. Nearly $700 million of the increase is set to go to contractors like RSM McGladrey of Minneapolis, which provides temporary workers to help the agency close banks. These workers come at an hourly rate of $50 to $250. It is a high price, but the F.D.I.C contends the cost is much less than it would have to pay to hire permanent staff.

“It was so painful downsizing after the last banking crisis,” James Wigand, deputy director of the F.D.I.C. receivership division, said, referring to the layoffs after the last cycle of bank failures. “We’re really trying to avoid going through that again.”

The blitz by the F.D.I.C. may offer lessons for the Treasury Department, which is separately struggling with an even more monumental challenge: how to help still-operating banks move giant loads of toxic debt off their balance sheets, in the hope that the banks will begin taking risks again and stimulate the economy.

Tuesday, for example, is the deadline for online bids for $108 million in loans left from the default of Freedom Bank of Bradenton, Fla., which DebtX is selling at auction.

Particularly instructive for Treasury may be the partnerships the F.D.I.C. has formed with private equity groups and other profit-seeking investors, who are being given a chance to earn a big return in exchange for their help in managing billions of dollars worth of troubled loans acquired from defunct banks.

Last month, the F.D.I.C formed a partnership with a company called Private National Mortgage Acceptance Company, based in Calabasas, Calif., which paid $43 million to take possession of $560 million in loans left from First National Bank of Nevada. Private National, a company set up last year to profit from the bad-debt market, paid the equivalent of 38 cents on the dollar for the 3,800 loans, which were left after another bank took over First National’s branches and deposits.

The company will try to collect payments from borrowers after renegotiating mortgages, or, if necessary, foreclose on loans and sell the property. Private National said it hoped to make an annual profit of more than 20 percent for its investors.

Despite the small upfront price Private National paid, F.D.I.C. officials said they considered it a good deal. The government will receive, at least initially, 80 percent of any money Private National can generate from the loans.

As a bank teeters, the F.D.I.C. swoops in virtually overnight and shifts as many good loans and deposits as possible to a healthy bank. The F.D.I.C. persuades the healthy bank to accept some of the bad loans by agreeing to take a share of certain future losses.

What is left is a miserable stew of failed real estate projects, vacant land, boarded-up houses and loans to defunct or bankrupt businesses, among other stories of misery from these recessionary times. About 4 percent of the assets from bank closures last year were bad, totaling some $15 billion in loans and property that once belonged to institutions like the Douglass National Bank of Kansas City, Mo., and Sanderson State Bank of Sanderson, Tex.

This is the stuff that no healthy bank wanted to buy, losing propositions, or in the diplomatically bureaucratic language of government, “assets in liquidation.”

The F.D.I.C.’s new workload is bringing back retirees like Gary Halloway, 58, of Spicewood, Tex., who has had assignments in seven states since he returned to work last year as the leader of regulatory SWAT team, moving from one failed bank to another.

“I wake up, I don’t know where I am, much less which time zone,” Mr. Halloway said in Jackson, Ga., last month, where he was working out of a former funeral home as he helped close First Georgia Community Bank.

Next stop: Houston, to work on the failure of Franklin Bank. “Sometimes I am driving on the highway and I see a sign and I even forget what state I am in,” he said.

For the F.D.I.C staff, the hardest part of taking control of failed banks may be deciding which outstanding loans to cut off, even in cases where perhaps a house development is only half built. Ending a loan almost certainly shuts down a project.

In the case of Terrible Herbst and its Reno-area gas stations, officials at the F.D.I.C. considered taking the highly unusual step of applying for a temporary casino license, allowing the agency to operate the gas stations and the electronic games after perhaps foreclosing on the nearly $10 million loan, one official involved in the effort said.

Another option, simply cutting off additional advances of cash from the loan, was ruled out because the business might close, making it nearly impossible to collect any of the outstanding principal.

The resolution of the case turned out to be a windfall for Terrible Herbst. The government put the loan on sale, and who should buy it directly from the government but the Herbst family, at a discount of more than 50 percent.

The government ate the loss, but at least it collected on some of the bad debt, the F.D.I.C. official involved in the deal said.

Executives at Terrible Herbst, who said they never formally refused to pay off the loan in full, were hardly disappointed.

“It worked out just fine,” said Sean Higgins, the company’s general counsel. “At least for Terrible Herbst.”