Another government bailout

[Paddy]

This time big business has its hand out. I wonder if the executives, THE DECISION MAKERS, at these companies are going to continue to draw their multimillion dollar salaries. 

Fed Takes Rare Path to Aid Bear Stearns
Friday March 14, 4:54 pm ET
By Martin Crutsinger, AP Economics Writer
Fed Endorses Rescue Effort for Bear Stearns and Pledges to Supply Cash to Financial System

WASHINGTON (AP) -- The Federal Reserve invoked a rarely used Depression-era procedure Friday to bolster troubled Bear Stearns Cos. and said it will provide even more help to combat a serious credit crisis.

The action won praise from the administration, with President Bush saying that Fed Chairman Ben Bernanke was "doing a good job under tough circumstances."

The Fed announcement came in a brief two-sentence statement that was issued as stocks were plunging on Wall Street over worries that a plan to ease a liquidity crisis at Bear Stearns Cos. might not work. Federal Reserve Chairman Ben Bernanke, delivering a speech later Friday, told a housing group he had had a "busy morning." He did not elaborate on the Fed's action regarding Bear Stearns.

"The Federal Reserve is monitoring market developments closely and will continue to provide liquidity as necessary to promote the orderly functioning of the financial system," the board said in its statement. It said members had voted unanimously to approve the arrangement, announced by JP Morgan Chase and Bear Stearns earlier.

Delivering a speech on the economy in New York, Bush voiced confidence in the Fed's actions to aggressively cut interest rates and the Fed announcement last week that it would supply up to $200 billion in loans to cash-strapped financial institutions.

"It was a strong action by the Fed and they did so because some financial institutions that borrowed money to buy securities in the housing industry must now repair their balance sheets before they can make further loans," Bush said. "Today's actions are fasting moving, but the chairman of the Federal Reserve and the secretary of the treasury are on top of them and will take the appropriate steps to promote stability in our markets."

The plan announced Friday will supply secured funding to Bear Stearns for an initial period of 28 days, seeking to provide short-term relief for Bear Stearns.

Senior Federal Reserve staffers said the arrangement allows JP Morgan Chase to borrow from the Fed's discount window and put up collateral from Bear Stearns to back up the loans. JP Morgan, a bank, has access to the discount window to obtain direct loans from the Fed, but Bear Stearns, an investment house, does not.

While JP Morgan is serving as a conduit for the loans, the Fed and not JP Morgan will bear the risk if the loans are not repaid, officials said.

This type of procedure, Fed officials said, dates back to the Great Depression of the 1930s but has rarely been used since that time.

In his speech, Bush said the administration had a plan to deal with the problems in credit and housing markets and said he opposed a number of measures pending in Congress to go further by allocating billions of dollars to purchase abandoned and foreclosed home and changing the bankruptcy code to allow judges to adjust mortgage terms.

However, Senate Banking Committee Chairman Christopher Dodd, D-Conn., said the problems at Bearn Stearns, one of the country's largest investment banks, highlighed the need for more aggressive efforts.

"Instead of cheerleading and reacting with tepid measures, the administration should act boldly and decisively to prevent the looming foreclosure crisis from having catastrophic consequences for our economy and our markets," Dodd said in a statement.

Treasury Secretary Henry Paulson praised the Fed's leadership and said that the country's financial system would be able to weather the problems.

"As we have been saying for some time, there are challenges in our financial markets and we continue to address them," Paulson said in a statement. "This is another challenge that market participants and regulators are addressing. We are working closely with the Federal Reserve" and the Securities and Exchange Commission.

Paulson said he appreciated the leadership of the Fed "in enhancing the stability and orderliness of our markets."

The action by the Fed board in Washington represented an endorsement of a rescue effort for Bear Stearns that had already been arranged by JPMorgan and the Federal Reserve's New York regional bank.

It was seen as a last-ditch effort to save the investment bank, which on Friday acknowledged its serious financial problems after a week of denials.

After the situation at Bear Stearns worsened late Wednesday, there were a series of conference calls throughout the day on Thursday with officials from the Fed, the New York Fed and the SEC to assess the potential impact on the broader economy, according to a Treasury official, who spoke on condition of anonymity because of the sensitive nature of the discussions.

This official said that Paulson had been keeping Bush updated on the proposed rescue effort.

JPMorgan Chase is providing an undisclosed amount of secured funding to Bear for 28 days, backstopped by the Federal Reserve Bank of New York.

The Securities and Exchange Commission issued a statement saying it has been "in close contact" with Treasury, the Federal Reserve and the Federal Reserve Bank of New York during discussions concerning an agreement by J.P. Morgan Chase & Co. to provide a secured loan facility to The Bear Stearns Companies.

"We will continue to work closely together in a way that contributes to orderly and liquid markets," the SEC said.

Last week, the Fed announced an industry-wide rescue package that would provide as much as $200 billion in loans to banks and investment houses and allow them to put up risky home-loan packages as collateral. It was the Fed's latest effort to stem a global credit crisis that began last August with rising loan defaults for subprime mortgages, loans provided to borrowers with weak credit histories.

Associated Press reporters Marcy Gordon, Jeannine Aversa, Terence Hunt, Stephen Bernard, Madlen Read and Joe Bel Bruno contributed to this report.

[christopher]

"It  is  not  the  function  of  our  Government  to  keep  the  citizen  from  falling  into  error;  it  is  the  function  of  the  citizen  to  keep  the  Government  from  falling  into  error".

U.S.  Supreme  Court,  in  American  Communication  Association  v.  Douds,  339  U.S.  382,  442



When the government fears the people, there is liberty. When the people fear the government, there is tyranny.

[The Rabbi]

"It  is  not  the  function  of  our  Government  to  keep  the  citizen  from  falling  into  error;  it  is  the  function  of  the  citizen  to  keep  the  Government  from  falling  into  error".

U.S.  Supreme  Court,  in  American  Communication  Association  v.  Douds,  339  U.S.  382,  442



When the government fears the people, there is liberty. When the people fear the government, there is tyranny.

Huh?

It is the function of the Fed to ensure orderly markets. The failure of Bear Stearns would have unleashed a whirlwind.
I'm not saying that ought to be gov't policy (it shouldnt).  But in general the gov't needs to keep hands off the whole mess.  In this case they might have acted OK.  Might.

[christopher]

Might, maybe, who knows. Get your mop & check book. The loan shark home mortgages are foreclosing faster than...so we'll dump 'em on Fanny Mae & let the tax-payer mop it up, sound familiar.
More scare tactics to rob the national treasury. But why not loot the government, because they never run out of money.

[longeyes]

The Fed is a guy with two buckets trying to bail out the Titanic.

[Paddy]

I'm shocked, Rabbi. Shocked and encouraged that you & I may somewhat agree on this. It is one function of government, IMO, to protect the average citizen from major predatory and negligent acts of big business. But only when not to do so would result in significant financial hardship, especially for large numbers of people.

That said, it is not a function of government to indemnify people against their own stupidity or against normal business cycles.  IOW, I'm opposed to the constant manipulation of the economy by the fed.   Let the market determine interest rates, and growth control the money supply.

I'm not familiar enough with all the ramifications of bailing/not bailing out Bear Stearns and how it affects the average citizen, however.  It is funny, though that a bunch of 'free market' capitalists are on the receiving end of government assistance. 

[roo_ster]

Two words:  Moral Hazard

Let them reap the whirlwind and be an example to others.

[Headless Thompson Gunner]

This isn't another bailout.  This is the first bailout.  To date, no other companies, lenders, or borrowers have been saved by government intervention in the mortgage mess.  And it isn't even strictly accurate to say that Bear Stearns was aided by the government.  It was Chase (a private institution) and the Fed (a cooperative public/private institution) that lent a hand.  It ain't like our tax dollars are propping up Bear Stearns.

This is exactly what the Fed is supposed to do.  It's one of the reasons we created the Fed.  They're supposed to be a lender of last resort, which is exactly what Bear Sterns needed right now.  Y'all may not like the fact that "the government" intervened here, but I assure you that you would have liked the alternative a whole lot less. 

Note also that Bear Sterns is far from "saved".  It'll probably get vultured up by another big financial institution before too long.  All those execs and investors who ran Bear Sterns are about to lose their company and their very considerable investments.  Trust me, they are suffering the consequences of their bad decisions.

Y'all should do yourselves a favor and take the time to learn about the Fed, about the nation's financial systems, and about the current situation unfolding right now.  Stop ranting and learn.  Think.  I'll bet you dollars to doughnuts that you come away with an entirely different perspective on current events.

[christopher]

"I'm not familiar enough with all the ramifications of bailing/not bailing out Bear Stearns and how it affects the average citizen, however"

Bear Stearns is senior underwriter for a refunding of $1 billion of state Department of Water Resources power revenue bonds in a sale closing on March 19, and for a sale of $302 million in state Public Works Board lease revenue bonds closing on March 26.

California expects $1.3 billion after the sales close, said Tom Dresslar, a spokesman for California Treasurer Bill Lockyer.

"Given their financial difficulties, we have been in touch with the head of their underwriting desk telling them we want a written assurance from a senior Bear Stearns official that we're going to get our money on time," Dresslar said.


Other states, including New Jersey and Wisconsin, said they also now will analyze whether to keep Bear Stearns as an underwriter for upcoming bond sales.

Bear Stearns was a prominent underwriter of tobacco bonds, which are backed by payments from cigarette-makers to states.

Wisconsin, for example, had chosen Bear Stearns to underwrite $1.5 billion of tobacco bonds that have yet to be sold and the bank's problems could open the door for a rival.

The Fed will provide financing to Bear through JPMorgan, which said it is working closely with Bear "on securing permanent financing or other alternatives." The Fed approved the arrangement in an emergency meeting Friday morning.

companies: Bear Stearns (BSC.N: Quote, Profile, Research)

-- 2007 Net Income: $233 million

-- Assets: $395.362 billion

-- Employees: 14,153

-- Market Capitalization: $3.50 billion

[Standing Wolf]

Well, heck. I'm about ready to get bailed out myself. I could use a few hundred million in free money.

[Finch]

The action won praise from the administration, with President Bush saying that Fed Chairman Ben Bernanke was "doing a good job under tough circumstances."

Well, an endorsement from Bush is all I needed to see...

[longeyes]

Sure, Bernanke's doing a fantastic job--of trading good debt for bad.

And this is just the beginning.

[christopher]

NEW YORK (Fortune) -- The government is showing considerable ingenuity in devising new tactics to fight the credit crunch. But some observers fear that the innovations risk making matters worse - by fueling inflation and insulating executives who made reckless bets from the full wrath of the market.

The Federal Reserve set off a ferocious stock market rally Tuesday with its plan to lend banks as much as $200 billion over 28 days later this month. The plan sent shares of hard-hit lenders such as Fannie Mae (FNM), Freddie Mac (FRE, Fortune 500) and Washington Mutual (WM, Fortune 500) soaring, because the Fed will allow borrowers to use privately issued mortgage-backed securities as collateral. Investors have fled those securities because they see a rising risk that mortgage bonds will become impaired as housing prices slide and defaults tick higher.

Tuesday's plan, dubbed the Term Securities Lending Facility, wasn't the first Fed move aimed at loosening up the debt markets. Late last year the Fed rolled out a similar plan called the Term Auction Facility that briefly succeeded in bringing down the interest rates banks charge one another for overnight loans.

"Think of Ben Bernanke as action hero," Felix Salmon wrote this week at Portfolio.com. "Every time the credit markets seize up and threaten to bring down the U.S. financial system, he pulls out a new weapon."

Not quite a fan club
Not everyone is a fan of Action Ben, however. David Rosenberg, chief North American economist at Merrill Lynch (MER, Fortune 500), wrote Wednesday that this week's Fed action will do little to counter the impression that Bernanke & Co. is struggling with problems that the Fed ultimately has little control over.

"This latest experiment, as with the others undertaken thus far, does not address underlying credit problems, does not materially improve the solvency of the institutions exposed to assets under stress, does nothing to put a floor under home prices," Rosenberg wrote in a note to clients. "We see no reason based on this for anyone to change their economic or earnings outlook despite the stock market's initial reaction to this latest initiative."

Rosenberg, who has been predicting for some time that the economy will slip into recession this year, expects the Fed to cut its fed funds rate to as low as 1% later in 2008, down from 3% now and 5.25% back in August. Observers expect the rate cuts to continue next week, with a cut as deep as 75 basis points at the Fed's regularly scheduled meeting. But there's little optimism that the cuts will do anything to stimulate demand for houses, which remain pricey by historical measures, or even bring down mortgage rates, which have been rising since the Fed's slashed rate by more than a percentage point over eight days at the end of January.

The fear is that by expanding its emergency lending programs and sharply cutting rates, the Fed will turbocharge already healthy parts of the economy - at the cost of reduced purchasing power by dollar holders. Meanwhile, the big problem - bad loans tied to houses whose value is now declining - continues to fester.

"We're in the helicopter phase now," says Howard Simons, a strategist at Bianco Research in Chicago. He references the nickname Helicopter Ben, which Bernanke got tagged with after a 2002 speech on how central banks can steer away from deflation by dropping money into the economy.

Simons says he appreciates the Fed's need to make sure the economy has sufficient liquidity. But with gasoline prices approaching an all-time inflation-adjusted high and the price of milk having jumped 12% last year, inflation "is a very real concern," Simons says.

Betting on inflation
He points to the action in Treasury Inflation Protected Securities - bonds whose principal amount is adjusted upward when the consumer price index shows inflation and drops when it shows deflation. The yield on five-year TIPS recently turned negative - meaning that investors buying the securities now are accepting a lower interest rater than they would get on comparable Treasury notes, in the expectation of making up the difference in coming years via the inflation adjustment. In essence, they are betting that buying TIPS will shield them from the loss of purchasing power they would suffer over time by holding nominal Treasurys.

David Merkel, chief economist at broker-dealer Finacorp Securities, agrees that inflation is worrisome but adds that the makeup of the current board of governors ensures the Fed will "err on the side of inflation." Along with Bernanke, Fed Vice Chairman Donald Kohn and governor Frederic Mishkin "are students of the Great Depression," Merkel says. "So you're going to see more loosening" of monetary policy when the economy runs into trouble.

Inflation isn't the only worry on the minds of Fed critics. Dean Baker, co-director of the Center for Economic and Policy Research in Washington, says the Term Securities Lending Facility and moves like it amount to a government bailout of corporate executives who made reckless bets - and who should be made to pay the tab with their jobs.

"The Fed's actions are keeping banks from having to write down large losses and quite likely go into bankruptcy," he writes on his blog at the American Prospect. "The result is that the bank executives, whose inept management pushed them into bankruptcy, get to keep their jobs and their salaries, which run into the tens of millions a year." Meanwhile, homeowners facing foreclosure - not to mention ordinary savers who are watching inflation erode the value of their nest eggs - remain quite unbailed-out.

Simons says the whole mess points up the limitations of the Fed. "They're not crisis managers," he says. "There's no playbook for this."

[Fly320s]

That said, it is not a function of government to indemnify people against their own stupidity or against normal business cycles.  IOW, I'm opposed to the constant manipulation of the economy by the fed.   Let the market determine interest rates, and growth control the money supply.

My sentiments exactly.

[Manedwolf]

IMO, if we keep trying to avoid a recession with slap-on patches, we're going to be "just on the edge of a recession" for years, which will lead to stagflation.

Better to just have the damn recession and get it over with. It's like having a tooth pulled!

[longeyes]

TIPS buyers need to ask themselves if they believe that the Government's official CPI numbers aren't just cotton-candy confections designed to keep COLAs in check and reduce the panic of those living on fixed incomes.  Whats the value of a cost-of-living number that excludes some of the most important components of our lives?

And will anyone ask Bernanke why the Fed stopped publishing the M3 money supply numbers?  Maybe because they getting, well, too embarrassing?

[Manedwolf]

There's another effect I'm wondering at, the runaway prices of stuff like WHEAT. Talk to anyone involved in producing baked goods. A bushel of wheat spiked up from $3-$7 to over $24.

The whole ethanol thing isn't helping, either.

[Gewehr98]

Yeah, I know. 

I eat a buttload of field corn every day.   

[Manedwolf]

Yeah, I know. 

I eat a buttload of field corn every day.   

No. Federal incentives to grow corn for ethanol = less of other crops = higher prices of other crops. The poor harvest in Asia and Europe is most of what caused the price spike, but the ethanol incentives aren't helping.

That's what the analysts are saying, not me.

[Gewehr98]

I trust none of them. Well, maybe one:

http://www.e85fuel.com

My family's selling field corn to local distilleries, on land that the Feds paid them not to plant previously.  (Look up PIK for what that's all about...)  The acreage is EXTRA corn that's over and above what's planted to maintain cattle feed and other consumer levels. 

They're also not having any troubles making their grain sales to buyers of cattle feed, never mind the fact that the distilleries are selling the distiller's dry grain (left over after the fermentation process) as high-quality cattle feed by itself.  IOW, cows aren't starving, Mexicans may bitch, but they still use white corn for their tortillas, and I want to watch somebody tuck into an ear of field corn and say with a straight face that they'd prefer that over the sweet corn that's frozen in that bag of Green Giant Niblets at the supermarket.   

The spin would also be funny, if it weren't so sad, considering how it's either George W. Bush's fault, or ethanol's fault, that we're in the petroleum quandry that we're in come 2008.  And of course, there's much weeping and gnashing of teeth when word gets out that there are subsidies in the alternative energy industry. Well, duh.

Hello?  McFly?  How the hell else do they think we're going to get out from under Big Oil, which is the de-facto energy economy and coincidentally nicely amortized over the last 100 years or so?   Nobody in their right mind is going to go full-steam with an alternative energy plan without somebody investing significantly, be it Bill Gates, Sir Richard Branson, or in ethanol's case - the FedGov.  It would be madness to even think about it without some sort of cash injection.  Speaking of cash injection, I filled up today for $2.49/gallon of E-85.  Regular unleaded gasoline was $3.29 the next pump over.  I noted that I still paid 40 cents/gallon in taxes on my E-85.  There's a cash injection if ever there was.  I haven't run gasoline in over two years and about 20K miles, so somebody with a big H2 Hummer in Hollywood needs to thank me for leaving them their share.

Gasoline will hit or exceed $4.00 a gallon, I wager well before July 4th.  People will bitch, as they did when I watched the Arab Oil Embargo happen in 1973.  I remember the lines at gas stations, and I vividly remember Detroit scrambling to downsize their land yachts and build fuel-efficient automobiles.  Everything old is new again, and NOBODY's learned the lesson.  At some point, people's comfort level will be exceeded, and we'll wisen up, but only after the Suburban/Texas Cadillac assembly line shuts down and people lose their jobs as a result.   

In the meantime, I'm helping my uncles plant more liquid gold this spring, and I'm glad to at least be thinking outside of the box while others bitch about how unfair gas prices have become, along with the ripple-effect of consumer goods based on a petroleum economy. Efforts will be made to once again legislate drilling the ANWR, and again, it will meet with limited success.  Efforts to capitalize on our huge coal reserves will bump headlong into the Sierra Club, as is already happening in Wisconsin with our coal-fired electrical plants.  Wind farms sound nice, but once again, they're stymied by realtors concerned about dropping property values from such "eyesores" and folks who don't want birdies to get chowdered in the big blades. So we look at alternatives, whether it's ethanol from corn or eventually sawgrass/biomass, solar, oil shale, algae, Virent's biomass hydrogen extraction via aqueous phase reforming, you name it - they all require research and investment to get out in front of the entrenched system built around the fossilized plant remains we're competing for worldwide.  To think that they'd happen for free is ludicrous at best. 

[Manedwolf]

I don't have any problem with Big Oil. In fact, I think they need to tell the greenies to get bent, and go ahead and build refineries. LOTS of refineries. And start using coal again, LOTS of coal. We have 500 years of coal. At this point, it's a matter of national security. If the greenies don't like it, they can protest, or they can do something stupid and vacation at Gitmo. I don't care. We have it, we need to use it.

Sorry, I just don't see ethanol as anything other than a program pushed by the same people who got Columbia destroyed by switching to "green" foam. I don't like the power loss engines experience with E-85, I don't want to buy a new car. That, and there's even suggestion that it might pollute more than gasoline.

I like gasoline. I like oil. And I want the US petroleum industry to have its hobbles removed so we can develop what we have here. They're talking a possible 65 BILLION barrels from the deepwater wells in the Gulf. Go for it! Refine it here! Tell OPEC to get lost!

But keep it as oil. I like oil. Supplement it with nuclear plants, too. Lots of nuclear plants. Oil and coal for plastic and cars, nuclear and coal for electricity.

Also, I don't even think it's "plant remains". What they're finding is too deep and too big. Way too deep. I'm suspecting that the scientists who think it was created by a geological process instead are correct. Titan is covered with hydrocarbons, and there were no plants there. It's not inconceivable that there are deeper reserves of hydrocarbons in the deep crust, more than we can even imagine.

[Gewehr98]

Power loss? Are you kidding? 

105 octane in my FlexFuel S-10 is actually giving me a boost as the Fuel Composition Sensor adjusts the ignition and fuel injector timing to the E-85. I can tell the minute I have to add 87 octane to the tank when I'm caught between E-85 stations on really long trips.

105 octane in my purpose-build E-85 383 stroker '53 Chevy PU is giving me even more of a boost. Power loss?

I'm working on converting my Shovelhead to the stuff, again, using the right compression for the job at hand.  I'm getting an education in tube bending of stainless fuel lines, but other than that, no big deal.

I've been watching Volvo do exciting work with the S60/C30 cars and their E-85 engines, and I'll go on the record and state they're not exactly losing power - quite the opposite.

You don't see high-performance engines running low-octane, at least, not when I was doing my trips down the 1/4 mile in my blown 580 CID Pro Stock dragster, or running 100LL AvGas in the Cessnas I rent... 

As a footnote, I don't begrudge folks wanting their petroleum, btw.  But I will give a sideways glance when they bitch and moan about prices climbing and availability shrinking - the free ride will be over.  We 'Merkins ain't the only ones sucking on that teat, and just watch when China and India get seriously thirsty for more...

[johnster999]

I'm working on converting my Shovelhead to the stuff, again, using the right compression for the job at hand.  I'm getting an education in tube bending of stainless fuel lines, but other than that, no big deal.

Interesting. I'd like to read about it when you get it done.

[Paddy]

As a footnote, I don't begrudge folks wanting their petroleum, btw.  But I will give a sideways glance when they bitch and moan about prices climbing and availability shrinking - the free ride will be over.  We 'Merkins ain't the only ones sucking on that teat, and just watch when China and India get seriously thirsty for more...

It ain't all 'supply and demand'.  Most of it is the declining dollar, and the abject failure of the U.S. to develop any kind of energy policy. And, FWIW, it's already $4 here in CA.   And if you think that's funny (which you probably do) just wait a short while.   It will cost you to fill up those Suburbans.

[Sergeant Bob]

Well, there is such a thing as corn tortillas, which many of the Mexicans I know do indeed use.

A couple other things which use corn and most of which aren't from sweet corn (it doesn't grind up very well):

Products that use Corn
Adhesives (glues, pastes, mucilages, gums, etc.)
Aluminum
Antibiotics (penicillin)
Asbestos insulation
Aspirin
Automobiles (everything on wheels)
xxx- cylinder heads
xxx- ethanol - fuel & windshield washer fluid
xxx- spark plugs
xxx- synthetic rubber finishes
xxx- tires
Baby food
Batteries, dry cell
Beer
Breakfast cereals
Candies
Canned vegetables
Carbonated beverages
Cheese spreads
Chewing gum
Chocolate products
Coatings on wood, paper & metal
Colour carrier in paper & textile, printing
Corn chips
Corn meal
Cosmetics
C.M.A. (calcium magnesium acetate)
Crayon and chalk
Degradable plastics
Dessert powders
Dextrose (intravenous solutions, icing sugar)
Disposable diapers
Dyes
Edible oil
Ethyl and butyl alcohol
Explosives - firecrackers
Finished leather
Flour & grits
   

Frozen foods
Fructose
Fuel ethanol
Gypsum wallboard
Ink for stamping prices in stores
Insecticides
Instant coffee & tea
Insulation, fibreglass
James, jellies and preserves
Ketchup
Latex paint
Leather tanning
Licorice
Livestock feed
Malted products
Margarine
Mayonnaise
Mustard, prepared
Paper board, (corrugating, laminating, cardboard)
Paper manufacturing
Paper plates & Cups
Peanut butter
Pharmaceuticals - The Life Line of The Hospital
Potato chips
Rugs, carpets
Salad dressings
Shaving cream & lotions
Shoe polish
Soaps and cleaners
Soft drinks
Starch & glucose (over 40 types)
Syrup
Tacos, tortillas
Textiles
Toothpaste
Wallpaper
Wheat bread
Whiskey
Yogurts

Question:    Of 10,000 items in a typical grocery store, how many would you guess would contain corn in one form or another?
Answer:    At least 2,500 items use corn in some form during the production or processing.

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How Corn is Used in Some of these Products
Beer    

Beer manufacturing is a process of treating malt to convert and extract the barley starch to fermentable sugars using the amyloytic enzymes present in malt followed by yeast fermentation. However, demand for lighter, less filling beer, especially in the U.S., has permitted use of more refined carbohydrate sources of two types:

a) dry adjuncts, primarily dry milled corn grits, broken rice, refined corn starch, and more recently, dextrose.

b) liquid adjuncts, namely corn syrups
Cake Mixes    Cake mixes use a pregelatinized corn starch that will form a paste in cold or warm water. In baked goods that use yeast for rising, dextrose is used as a yeast nutrient.
Candies    Corn syrup is used in hard candies to provide a body giving them chewiness and a desirable mouthfeel without excessive sweetness. Candies that are coated use a pyrodextrin corn starch for the coating.
Carbonated Beverages - Coke    High fructose corn syrup (HFCS) blended with sucrose in a 50/50 blend is sweeter than the same concentration of sucrose. The use of HFCS in carbonated beverages is common throughout Canada and the U.S.
Cookies    Corn starch, corn flour or dextrose may be found in cookies.
Corn Flakes    The flaking grits are cooked to a rubbery consistency with syrup, malt, salt and flavouring added. After tempering, the cooked grits are flattened between large steel rolls, followed by toasting in travelling ovens to a golden brown colour.
Corn Starch    Corn starch is derived from the wet milling process and is an important manufactured product. Some uses depend on the properties in the dry state, but most applications relate to its properties as a cooked, hydrated paste.
Corn Meal    Corn meal is a popular dry corn product because of its long shelf life. It is used to produce an assortment of chemically leavened bread and fried products like corn bread and muffins.
Cosmetics    Corncobs, when finely ground, are relatively dust free and very absorbent. This absorbency makes corncobs useful carriers for pesticides, fertilizers, vitamins, hand soaps, cosmetics and animal litters.
Granola Dips/Granola Bars    Some types of Granola Dips use dextrose as a sweetener.
Gypsum Wallboard    Starch-containing corn flour is gelatinized during the manufacturing process; It functions by controlling the rate of water loss during drying of the board. Soluble carbohydrates migrate to the surface and control the rate of crystallization of the gypsum, providing a strong bond between the gypsum and the liner.
Instant Coffee & Tea    Maltodextrins are derived from the wet milling process. They are a dextrose equivalent product of complete solubility but little or no sweetness. Maltodextrins are sprayed on instant tea and coffee to keep the granules free flowing. This solution is also used in instant soup mixes or other packages where the contents must be be kept free flowing.
Mars Bar & Twix Bar    Many candy bars contain corn syrup.
Paint and Varnish    Tetrahydrofurfuryl alcohol is a resin developed from processing corncobs. These resins are useful in the paint and varnish industry as solvents for dyes, resins, and lacquers.
Paper Products    Paper products use raw starch in the manufacturing process. The properties of high paste viscosity and strong gels are useful in specially coated papers. Pyrodextrins are also used for paper manufacturing for the adhesive property on remoistenable gums for postage stamps and packaging tape.
Pharmaceuticals    

Aspirin - an oxidized starch paste, which dries to a clear, adherent, continuous film, is spread in a thin layer over the aspirin.Intravenous - some IVs consist of dextrose and water solutions.

Antibiotics - preferred carbohydrate sources are corn syrup, dextrose, corn starch, lactose and sucrose. Cornsteep liquor was early found to provide a ready source of soluble nitrogenous nutrients plus unknown growth factors that stimulate antibiotic production.

Over 85 different types of antibiotics are produced using corn.
Snack Foods - Corn Chips & Doritos    These snack foods are generally made from whole corn (cornmeal). The high starch content of cornmeal and flour is important in giving a high puff in preparation of extruded (pressed) snack products in which a delicate corn flavour is desired.
Spark Plugs    Starch is used in the production of the porcelain part of spark plugs.
Tire, Rubber    In the production of tires, corn starch is sprinkled on the molds before pouring the rubber, to prevent the rubber from sticking to the molds.
Toothpaste    Sorbitol, which is produced from the corn sugar dextrose, is used in toothpaste as a low-calorie, water-soluble, bulking agent.
Whiskey    The major carbohydrate in the production of whiskey is corn.A typical Canadian whiskey is made from a mixture of about 90% corn, 5% rye, and 5% barley malt.
Yogurt    Some of the different brands of yogurt use corn syrup as a sweetener.
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Even President Bush thinks corn ethanol production is driving up the prices of corn and corn based food products.


NY Times
Bush Urges Action on Corn Price Rises Fueled by Ethanol

   
         

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By MATTHEW L. WALD
Published: March 5, 2008

WASHINGTON  President Bush said Wednesday that the national drive toward ethanol production was also driving up the cost of corn and other foods, a problem he said needed to be addressed.

The boom in alternative fuels, he said, was beginning to affect the price of food. And so we got to do something about it.

Mr. Bush has previously pointed out that the price of corn has been pushed up by competition from ethanol manufacturers and that this had raised costs for companies that raise beef and hogs on corn. But addressing a conference on renewable energy on Wednesday morning, Mr. Bush said that this was also affecting the price that consumers pay for food.

But, he said, the solution was not to back away from ethanol, but to develop ways to make ethanol from agricultural wastes, wood chips or similar materials. The Energy Department has spent nearly $1 billion trying to incubate a cellulosic ethanol industry, he said.

Mr. Bush said it was amazing to think how far our country has come in ethanol production, which reached 6.4 billion gallons last year, he said up from 1.6 billion gallons in 2007. Under the presidents goal of reducing gasoline consumption by 20 percent between 2007 and 2017, ethanol production would rise to about 35 billion gallons a year, far more than could be made from corn kernels.

Corn now sells for over $5 a bushel, up from under $2 in 2006. The price is so high that it has even scared off some potential builders of ethanol factories.