Weekend Economists' Patriots' Day Edition April 17-19, 2009

[Demeter]

Yes! It's Patriots' Day! This is a holiday in Massachusetts, where I once resided, honoring the brave colonials who went out to Lexington Green and the Old North Bridge in Concord in 1775 to slow down the British on their way to the arms depot. This is when Paul Revere rode out, shouting: "The British are Coming!" I regret that I never did get to see a reenactment, but not enough to plan to return. That's what imagination is for.

To further celebrate, the Boston Marathon will be run on Monday.

April 19h, 1995 was also the day designated for mass destruction by Timothy McVeigh and associates, a home-grown act of terrorism that has never been properly investigated for fear of finding out which public officials gave these guys the wherewithal to blow up the Alfred P. Murrah Federal Building, an office complex in downtown Oklahoma City, Oklahoma, including the day care center located therein for the convenience of parents employed there.

How can Americans remember their history, when so much of it is covered up, buried, moved on and passed over?

In certain old cities in this country, history is an industry, and it's hard to be completely ignorant. But for the vast wasteland that is suburbia, where one subdivision abuts another and only the road names may be changing from town to town, it's always Morning in America, and every day is a fresh new one.

Or so they'd like to believe. When faced with an economy sure to blight three generations at least, the days will run into years, and people will grow old and die, waiting for a new FDR to straighten out our banksters and robber barons and ex-pat crooks and Congress and the Supreme Court, and put us back on the road we were following until deregulation fever gripped the economically unfit.

There's a line from the end of "Fiddler on the Roof":

"Rabbi, we've been waiting for the Messiah all our lives. Wouldn't this be a good time for Him to come?"

"We'll have to wait somewhere else. Meanwhile, let's start packing."


So, I'm proclaiming this "Fiddler on the Roof" weekend. We all came from somewhere else--even the designated Native Americans--looking for a home of our own. We're still looking.

Here in our 3000 mile wide village, you might say each of us is a fiddler on the roof, trying to scratch out a simple, pleasant tune without breaking his or her neck. It isn't easy.

Of course, if we were able to remove the forces of Oppression, it would be a lot easier. But no bombs, please!


To further the Revolution that is America, we post information, speculation, and advice (and humor to break up the unbearable pain) that is the US economy....post them if you've got them. Drop in often, we update until midnight Sunday.

[Demeter]

1. There Is a Bank Failure Tonight

On Friday, April 17, 2009, American Sterling Bank, Sugar Creek, MO was closed by The Office of Thrift Supervision (OTS) and the Federal Deposit Insurance Corporation (FDIC) was named Receiver. No advance notice is given to the public when a financial institution is closed.


The FDIC has issued a press release (PR-054-2009) about the institution's closure.


Metcalf Bank, Lee's Summit, Missouri, Assumes All of the Deposits of American Sterling Bank, Sugar Creek, Missouri

FOR IMMEDIATE RELEASE
April 17, 2009
Media Contact:
LaJuan Williams-Dickerson
[phone]
E-mail: [email protected]

American Sterling Bank, Sugar Creek, Missouri, was closed today by the Office of Thrift Supervision, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Metcalf Bank, Lee's Summit, Missouri, to assume all of the deposits of American Sterling Bank.

The Missouri offices of American Sterling will reopen on Saturday, and the offices in California and Arizona will reopen on Monday as branches of Metcalf Bank. Depositors of American Sterling Bank will automatically become depositors of Metcalf Bank. Deposits will continue to be insured by the FDIC, so there is no need for customers to change their banking relationship to retain their deposit insurance coverage. Customers of both banks should continue to use their existing branches until Metcalf Bank can fully integrate the deposit records of American Sterling Bank.

Over the weekend, depositors of American Sterling Bank can access their money by writing checks or using ATM or debit cards. Checks drawn on the bank will continue to be processed. Loan customers should continue to make their payments as usual.

As of March 20, 2009, American Sterling Bank had total assets of approximately $181 million and total deposits of $171.9 million. In addition to assuming the failed bank's deposits, Metcalf also agreed to purchase approximately $173.6 million in assets. The FDIC will retain the remaining assets for later disposition.

The FDIC and Metcalf Bank entered into a loss-share transaction on approximately $100 million of American Sterling's assets. Metcalf Bank will share with the FDIC in the losses on the assets covered under the agreement. The loss-sharing arrangement is projected to maximize returns on the assets covered by keeping them in the private sector. The agreement also is expected to minimize disruptions for loan customers.

Customers who have questions about today's transaction can call the FDIC toll-free at 1-866-954-9528. The phone number will be operational this evening until 9:00 p.m., CDT; on Saturday from 9:00 a.m. to 6:00 p.m., CDT; on Sunday from noon to 6:00 p.m., CDT; and thereafter from 8:00 a.m. to 8:00 p.m., CDT. Interested parties can also visit the FDIC's Web site at http://www.fdic.gov/bank/individual/failed/amsterling.html.

The FDIC estimates that the cost to the Deposit Insurance Fund will be $42 million. Metcalf Bank's acquisition of all the deposits was the "least costly" resolution for the FDIC's Deposit Insurance Fund compared to alternatives. American Sterling Bank is the twenty-fourth FDIC-insured institution to fail in the nation this year. The last FDIC-insured institution to be closed in Missouri was Hume Bank, Hume, on March 7, 2008.

# # #

Congress created the Federal Deposit Insurance Corporation in 1933 to restore public confidence in the nation's banking system. The FDIC insures deposits at the nation's 8,305 banks and savings associations and it promotes the safety and soundness of these institutions by identifying, monitoring and addressing risks to which they are exposed. The FDIC receives no federal tax dollars – insured financial institutions fund its operations.

FDIC press releases and other information are available on the Internet at www.fdic.gov, by subscription electronically (go to www.fdic.gov/about/subscriptions/index.html) and may also be obtained through the FDIC's Public Information Center (877-275-3342 or 703-562-2200).

[DemReadingDU]

18. and another

Nevada State Bank, Las Vegas, Nevada, Assumes All of the Deposits of Great Basin Bank of Nevada, Elko, Nevada

FOR IMMEDIATE RELEASE
April 17, 2009
Media Contact:
LaJuan Williams
[phone]
E-mail: [email protected]

Great Basin Bank of Nevada, Elko, Nevada, was closed today by the Nevada Financial Institutions Division, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Nevada State Bank, Las Vegas, Nevada, to assume all of the deposits of Great Basin Bank of Nevada.

The five offices of Great Basin Bank of Nevada will reopen on Monday as branches of Nevada State Bank. Depositors of Great Basin Bank of Nevada will automatically become depositors of Nevada State Bank. Deposits will continue to be insured by the FDIC, so there is no need for customers to change their banking relationship to retain their deposit insurance coverage. Customers of both banks should continue to use their existing branches until Nevada State Bank can fully integrate the deposit records of Great Basin Bank of Nevada.

Over the weekend, depositors of Great Basin Bank of Nevada can access their money by writing checks or using ATM or debit cards. Checks drawn on the bank will continue to be processed. Loan customers should continue to make their payments as usual.

As of December 31, 2008, Great Basin Bank of Nevada had total assets of $270.9 million and total deposits of $221.4 million. In addition to assuming all of the deposits of the failed bank, Nevada State Bank agreed to purchase approximately $252.3 million of assets. The FDIC will retain the remaining assets for later disposition.

The FDIC and Nevada State Bank entered into a loss-share transaction on approximately $143.4 million of Great Basin Bank's assets. Nevada State Bank will share in the losses on the asset pools covered under the loss-share agreement. The loss-sharing arrangement is projected to maximize returns on the assets covered by keeping them in the private sector. The agreement also is expected to minimize disruptions for loan customers.

Customers who have questions about today's transaction can call the FDIC toll-free at 1-866-782-1969. The phone number will be operational this evening until 9:00 p.m., PDT; on Saturday from 9:00 a.m. to 6:00 p.m., PDT; on Sunday from noon to 6:00 p.m., PDT; and thereafter from 8:00 a.m. to 8:00 p.m., PDT. Interested parties can also visit the FDIC's Web site at http://www.fdic.gov/bank/individual/failed/greatbasin.html.

The FDIC estimates that the cost to the Deposit Insurance Fund will be $42 million. Nevada State Bank's acquisition of all the deposits was the "least costly" resolution for the FDIC's Deposit Insurance Fund compared to alternatives. Great Basin Bank of Nevada is the twenty-fifth FDIC-insured institution to fail in the nation this year, and the second in Nevada. The last FDIC-insured institution to be closed in the state was Security Savings Bank, Henderson, on February 27, 2009.

# # #

Congress created the Federal Deposit Insurance Corporation in 1933 to restore public confidence in the nation's banking system. The FDIC insures deposits at the nation's 8,305 banks and savings associations and it promotes the safety and soundness of these institutions by identifying, monitoring and addressing risks to which they are exposed. The FDIC receives no federal tax dollars – insured financial institutions fund its operations.

FDIC press releases and other information are available on the Internet at www.fdic.gov, by subscription electronically (go to www.fdic.gov/about/subscriptions/index.html) and may also be obtained through the FDIC's Public Information Center (877-275-3342 or 703-562-2200). PR-55-2009
http://www.fdic.gov/news/news/press/2009/pr09055.html

[tclambert]

19. A second failure occurred also. Great Basin Bank of Nevada, Elko, NV

That brings the total to 25 so far this year. There were 25 all of last year. 15 of the 2008 closings happened in the last four months of 2008. Most years there are 4 or 5 closings. In 2002 there were 11, none in 2005 or 2006. 77 total failed in the 2000s. (Source: http://www.fdic.gov/bank/individual/failed/banklist.html)

During the Great Depression, 9,000 banks failed during the 1930s. 744 failed in the first 10 months of 1930 alone. (http://www.livinghistoryfarm.org/farminginthe30s/money_08.html) It is hard to compare because banks are larger today than in the 1930s. Many of those old failures were one office operations. Still, 744 is almost 15 times the 50 that have failed since this recession began.

Back then, too, deposits were not insured. When banks failed, depositors often lost their life savings. Today, the FDIC insures accounts up to $250,000.

Bottom line: Who cares? It's just not that significant. It's a symptom of the recession, sure, but it's not a sign of impending apocalypse.

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28. The FDIC Must Release The News By Local Time Zones

Can't figure out why else it should be the way it is.

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2. Fannie Mae chief tapped to head U.S. bank rescue(Revolving Door Musical Chairs)

http://news.yahoo.com/s/nm/20090417/bs_nm/us_financial_tarp_director_4

WASHINGTON (Reuters) – Herb Allison, who has been chief executive of Fannie Mae since it was seized by the government last September, has been tapped to oversee the $700 billion financial rescue fund conceived to restore rattled markets, the White House said on Friday.

Allison must be confirmed by the Senate before he can succeed Neel Kashkari and become Treasury assistant secretary for financial stability. In that role, Allison will be charged with overseeing several federal programs meant to improve the availability of credit, aid major automakers and boost the housing market.

Allison was named CEO of mortgage finance company Fannie Mae in September as the housing market soured and pushed the company and its sibling agency, Freddie Mac, to the brink of collapse.

He had spent more than 25 years with Merrill Lynch before becoming chairman and chief executive officer of pension fund giant TIAA-CREF.

After six years as the head of TIAA-CREF, Allison retired in 2008 and was asked by former Treasury Secretary Henry Paulson to become conservator of Fannie Mae, the nation's largest source of housing finance.

In early April, Allison defended Fannie Mae's bonus payments to several thousand employees as lawmakers on Capitol Hill were scrutinizing payments made to executives at failed insurance giant American International Group Inc; both companies received billions of dollars in government bailout funds.

Allison has told Fannie Mae colleagues that his long experience and personal wealth have given him valuable independence when it comes to managing the nation's largest source of mortgage finance.

THIS MIGHT BE THE PETER PRINCIPLE AT WORK--THE MAN HAS NOT MADE AN OUTSTANDING SUCCESS OF HIS CURENT ASSIGNMENT, SURELY. IF HE HAS, THEY'RE KEEPING IT AWFULLY QUIET.

[Demeter]

3. Repeat Post From SMW Friday--Elizabeth Warren on Daily Show

Elizabeth Warren on Daily Show--Educating America One Show at a Time

http://www.thedailyshow.com/video/index.jhtml?videoId=224261&title=elizabeth-warren-pt.-1

http://www.thedailyshow.com/video/index.jhtml?videoId=224262&title=elizabeth-warren-pt.-2



Because she doesn't have the power to STOP this madness.

[antigop]

25. Thanks for posting these....I appreciate it. n/t

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4. Eurozone shows few signs of recovery

http://www.ft.com/cms/s/0/b1a166a4-2a6f-11de-8415-00144feabdc0.html


The rapid pace of the eurozone’s economic contraction shows few signs of slowing, with industrial production down almost 20 per cent year-on-year in February and inflation dissipating, official data showed on Thursday.

The 18.4 per cent fall in output in the 16-country region – the largest since records began in 1990 – highlighted the severity of the global slowdown. Monthly comparisons offered little sign of stabilisation, with the 2.3 per cent drop in February compared with January only slightly lower than the 2.4 per cent fall reported the month earlier...

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5. French finance house reveals first loss

http://www.ft.com/cms/s/0/76444548-2ab7-11de-8415-00144feabdc0.html

Caisse des Dépôts et Consignations, France’s state-owned finance house, on Thursday unveiled its first loss since it was established in 1816, demonstrating the perils of rescuing French companies in danger of collapse or foreign takeover.

CDC, which was set up in the wake of the Napoleonic wars to restore France’s public finances, recorded a net loss of €1.47bn ($1.94bn, £1.3bn) in 2008 after making provisions of €3bn on its assets.

Although theoretically independent from the government, the finance house is often encouraged by the state to protect French companies from foreign takeover by acting as a long-term core shareholder...

...CDC, arguably the world’s oldest sovereign wealth fund although it has no stream of oil or foreign exchange revenue, manages about €220bn of assets for France’s savings banks, and runs its own portfolio of investments, including stakes in many of the CAC40 top companies.

CDC has been an important tool for tackling the financial crisis and recession, providing €40bn in loans for small businesses, bank credit guarantees and public infrastructure projects.

It also manages and half-owns the Strategic Investment Fund, which Nicolas Sarkozy, French president, set up last year to protect French companies from foreign “predators”.

The new fund has so far made only a handful of investments and has vowed to act as a “discerning investor”. But it is coming under intense pressure from French politicians to bail out failing companies with unviable business models....

[Demeter]

6. Iran becomes biggest wheat importer

http://www.ft.com/cms/s/0/d04b8f04-2aaf-11de-8415-00144feabdc0.html


Iran has become the world’s largest importer of wheat, the country’s staple, in a blow to Tehran’s goal of achieving self-sufficiency in the crops it considers key to food security.

Iran has in months catapulted from being a minor player in the cereals market to the top buyer. It has even been forced to buy wheat from the US for the first time in 26 years.

The surge in cereal imports – due largely to drought – comes amid rising concern about food security among Middle East and North African countries that has led Saudi Arabia and other wealthy Gulf states to seek farmland overseas to grow crops....

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7. US housing starts fall 10.8% in March

http://www.ft.com/cms/s/0/faa22722-2a91-11de-8415-00144feabdc0.html

New US residential building slowed sharply in March after a surprise surge the month before, dimming hopes that the real estate slump may be nearing a bottom.

Housing starts fell for the eight time in nine months, dropping by 10.8 per cent to an adjusted annual rate of construction of 510,000, commerce department figures showed on Thursday. The decline was worse than analysts expected and was due to a big drop in construction of multi-family homes. Single-family starts were unchanged in the month....On the year housing starts are down by 48.4 per cent, as builders became wary of breaking new ground amid plunging real estate prices. Last month’s decline followed a jump in new construction in February, when housing starts rose by a revised 17.2 per cent. Construction remained above January’s low of 488,000, the worst month since 1959.

According to economists at Capital Economics, housing starts are 77 per cent below their peak and 60 per cent lower than their 50-year average. During the height of the home construction boom monthly housing starts peaked at 2.27m in January 2006

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8. GM seeks provision for its suppliers

http://www.ft.com/cms/s/0/76c7ca06-2ad2-11de-8415-00144feabdc0.html


General Motors is prepared to argue that hundreds of its suppliers are “critical vendors” who require timely payments if it seeks bankruptcy protection, setting the stage for what would be the most sweeping attempt ever to win special treatment for such contractors, people close to the matter say.

Companies often request special treatment for a limited number of suppliers as part of bankruptcy petitions.

Bankruptcy experts say GM would stand a good chance of winning protection for more suppliers than is usual because of the large number that provide “just-in-time” car parts to the company.

“On its face, the justification for critical trade appears very strong here, as strong if not stronger than in most other cases,” said James Sprayregen, a bankruptcy partner at Kirkland & Ellis. “It’s hard to see how it’s going to be in anybody’s interest to shut the supply chain down.”

In recent months, GM has raised questions about whether a bankruptcy filing would create more problems than it would solve.

It has argued that a slowdown in payments to its vendors could prompt them to withhold supplies or go bankrupt themselves, creating turmoil across the US industrial sector.

By seeking permission to pay hundreds of suppliers, GM could mitigate damage to the car parts industry.

People close to GM say the company would make the request regardless of where it filed its bankruptcy petition. Company insiders say the most likely venues would be Detroit, New York or Delaware.

“No matter what court they go into, they’ll get authority to pay whatever suppliers they need,” said one person close to GM. “In a GM bankruptcy, there won’t be very much fallout for suppliers except perhaps for suppliers of Saturn and Hummer.”

Those two brands will be shut if they are not sold. More suppliers could drop outside the key vendor pool if GM is pressed to cull its portfolio further, targeting brands such as Pontiac.

GM would have to demonstrate in court that its business would be better off, and could retain more value if it pays key bills.

A judge could also force GM to prove that individual suppliers would stop operating or shipping goods if they were not paid, rather than letting GM use the money as it sees fit.

The critical vendor legal doctrine can be “subject to abuse and unfairness”, one attorney said. Roughly two-thirds of GM’s suppliers also sell parts to Ford or Chrysler, and some may be able to absorb late or reduced payments.

“It’s a game of chicken,” one attorney said. “How do you figure out which suppliers really will stop supplying tomorrow and which won’t?”

[Demeter]

9. Rosetta Stone rises 40% in stock market debut

http://www.ft.com/cms/s/0/8b50b590-2aec-11de-8415-00144feabdc0.html


Rosetta Stone, the language software provider, staged a stellar stock market debut on Thursday, its shares rising almost 40 per cent to become the best performing initial public offering in a year.

Hopes have risen that the equity capital raising environment is showing signs of improving with Bridgepoint, the online college, also choosing to float this week. Shares in Bridgepoint rose on their debut, but less emphatically than Rosetta, ending their first day’s trading up 8.5 per cent.


Rosetta Stone’s shares started trading on the New York Stock Exchange at $25 on Thursday, well above its above its IPO price of $18.

The stock continued to rise through most of the day before ending at $25.12, up 39.6 per cent from its floatation price.

The expected offer range was $15 to $17, set by underwriters Morgan Stanley and William Blair & Co.

Its first day gain made Rosetta the best-performing US IPO since fertilizer company Intrepid Potash gained 58 per cent on its debut in April last year.

In another encouraging sign for companies considering access the public equity markets, Rosetta’s was also the first IPO to price above its expected range since May last year.

[CatholicEdHead]

40. Well, I am learning Manderian Chinese with their software

a way to try to get ahead in the worldwide market.

[Demeter]

10. YouTube to show full length movies

http://www.ft.com/cms/s/0/7f5feebc-2ae3-11de-8415-00144feabdc0.html


YouTube on Thursday said it would add a new area to its site displaying full-length TV shows and movies, the fruit of its latest efforts to win over the professional content producers it needs in order to boost the site’s commercial fortunes.

Speaking in an interview with the FT, Eric Schmidt, YouTube parent Google’s CEO, hailed the arrangement as part of a broader push to ally with movie and TV producers, and as a way to bring new “high-quality ads” to YouTube.

Yet the initial content alliances largely involve companies with which YouTube already had partnerships, suggesting that the initiative has yet to produce a fundamental change in its studio relations.

YouTube’s commercial growth has been held back by the lack of formal links with studios, since it only sells advertising against content covered by these types of arrangements.

“We’ve been looking for a business model where the content owner is happy and making money,” Mr Schmidt said. He compared the new area for full-length, professional content on YouTube to an agreement reached earlier this month with Universal Music to show that company’s music videos on a new site, with revenue split between the two companies.

While not disclosing the financial arrangements for the latest initiative, he said it followed a “similar model” to the Universal Music deal.

The largest studio involved in the partnership is Sony. But that deal is a modest one. Sony has its own web video site, Crackle, where it displays internet-specific content, television shows and about 60 movies. Only the web material had been available via YouTube.

Now Sony will offer movies - but only 15 of them, including such dated material as “St Elmo’s Fire” and “The Blue Lagoon.” In addition, the movies will play not at YouTube but at Crackle, and Sony will control the environment and play the ads, which will appear about every 10 minutes.

“They are sending users to us. It’s all about Crackle,” a Sony source said.

Another partner, Lionsgate, will display its content on the YouTube site. That includes one complete television series, an aged sitcom called “Alf” that also shows on Hulu, the studio-supported free site that has done surprisingly well with only premium content.

Lionsgate will also contribute such old movies as “American Virgin” and “Love and a .45,” said studio digital media president Curt Marvis. The studio will keep more than half of the ad revenue, Mr Marvis said.

Because of YouTube’s enormous user base, “we look at this as a real shot in the arm,” he said. “This is their first real effort to put a spotlight on long-form content.”

[DemReadingDU]

11. KPFA 'Guns and Butter' interviews Michael Hudson

4/15/09 Guns and Butter -
"The Financial Barbarians at the Gate" with financial economist and historian, Dr. Michael Hudson. Europe; worsening financial situation and indebtedness; the history of banking and the criminalization of the banking system; tax policy; real estate asset inflation; US imperialism via the monetary system; neoliberal/neofeudal economics; classical political economy; finance capital breaking away from industrial capital; the financial crisis leading to a political crisis; similarities with the Roman Republic; what measures labor should take.
http://kpfa.org/archive/id/50059


appx 1 hour

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29. Very Interesting and Scary

Michael Hudson sounds like he's reporting from the end of the world and halfway down the cliff freefall.

[Demeter]

12. Struggling Citi and GE post profits

http://www.ft.com/cms/s/0/bfb1f8da-2b41-11de-b806-00144feabdc0.html

Citigroup and General Electric, two of the biggest corporate victims of the economic crisis, on Friday won some respite by reporting better-than-expected profits in the first three months of the year.

However, the two corporate giants failed to dispel the market’s fears over their future at a time when the global economy and the US consumer sector remain under severe strains....

[Demeter]

13. GE results offer hope to investors

http://www.ft.com/cms/s/0/a8a64b44-2b43-11de-b806-00144feabdc0.html


General Electric reported a quarterly profit decline that was not as severe as Wall Street had feared, delivering confidence to investors disappointed by the conglomerate’s performance last year.

Operating profit fell 35 per cent to $2.8bn, or 26 cents a share, on lower results from the company’s financial services and media businesses. Revenue slipped 9 per cent to $38.4bn.

The results gave GE its first opportunity to rebuild credibility damaged by repeated earnings shortfalls, the loss of its triple-A credit ratings and a sharp cut to its stock dividend.

GE executives had sought to assure investors in recent months that its embattled finance arm, at the root of most of GE’s 2008 missteps, and a global economic downturn would not swamp the corporate parent with losses.

While GE’s per-share profit exceeded estimates, Friday’s results drew scrutiny from some analysts for the company’s reliance on one-off gains.

A $1.2bn tax benefit helped GE Capital, the finance arm, meet its goal for turning a profit in the first quarter.

Tax benefit or not, falling short of the GE Capital goal could have been a devastating blow to GE executives’ efforts to revive investor confidence.

GE had opted in December to stop sharing its targets for quarterly and annual profit, but maintained its prediction the finance arm would avoid losses even in a deepening credit crisis....

[Demeter]

34. Citi Losing Non-US Deposits

http://econompicdata.blogspot.com/2009/04/citi-losing-non-us-deposits.html

Back in October, Bloomberg reported:

The Federal Deposit Insurance Corp. will temporarily guarantee new senior unsecured debt and fully protect non-interest-bearing deposits at banks in a bid to restore confidence in the financial system.

"All of us are prepared to do whatever it takes, to fix whatever problems arise, and to work with Wall Street and Main Street to unclog the financial system,'' FDIC Chairman Sheila Bair said today during a Treasury news conference.

The program is the latest effort by the FDIC to shore up confidence in the U.S. banking system in the wake of 15 bank failures this year. The $700 billion U.S. financial industry rescue law raises FDIC coverage of bank deposits to $250,000 per customer from $100,000 through 2009.

Looking at the shift in Citi's deposit base over the last year, the added insurance looks very timely as non-interest bearing deposits spiked, helping to offset a portion of the rather large drop in deposits outside of the U.S. (though more than half of the decline outside of the U.S. was due to FX adjustments).





Change in Deposit Base





Cumulative Percent Change in Deposit Base by Type / Region

Source: Citigroup

[Demeter]

14. JPMorgan earns $2.1bn on record sales

http://www.ft.com/cms/s/0/3055ce46-2a6f-11de-8415-00144feabdc0.html

Jamie Dimon on Thursday expressed JPMorgan Chase’s desire to be free from government intervention, calling the US Treasury’s toxic assets plan “irrelevant” to his bank and saying the lender could immediately repay $25bn in federal aid without raising new capital.

The chief executive’s comments underscore the belief at healthier banks, such as JPMorgan and Goldman Sachs, that severing financial ties with the government would give them an edge on weaker rivals.

However, JPMorgan’s eagerness to repay the government and unwillingness to participate in the toxic asset plan could deepen investor fears of a polarisation of the US banking sector with some banks recovering and others, such as Citigroup and Bank of America, remaining mired in the crisis....

[Demeter]

15. GSK and Pfizer to merge HIV portfolios

http://www.ft.com/cms/s/0/5327ff12-2aaa-11de-8415-00144feabdc0.html

Two of the world’s largest pharmaceutical groups on Thursday said they would spin out their entire portfolios of HIV medicines into a jointly controlled company, heralding a radical new approach to the sale and development of drugs.

GlaxoSmithKline and Pfizer will contribute 11 marketed medicines and a further six that are currently being tested in patients into the new company with initial gross assets of £250m, annual sales of £1.6bn and operating profits of £870m, and a 19 per cent market share.

The move marks a way for the two companies to pool efforts in a therapeutic area with tough scientific challenges that has come under intense pricing pressure and in which they have been outstripped commercially by rivals led by Gilead, the US biotech company. Others such as Roche of Switzerland have pulled out of HIV research.

The new structure may pave the way for further similar actions by the companies and other large pharmaceutical groups - to create more innovative, tightly focused spin-offs in a range of therapeutic areas, allowing them to share the high risks and costs of drug development.

Andrew Witty, GSK’s chief executive, said: ”This reinvigorates GSK’s presence as one of the largest companies operating in the field ... This is a new and unique way of incentivising research success and deciding how to allocate research and development capital.”

Jeff Kindler, Pfizer’s chief executive, said: ”We are creating a new global leader in HIV and reaffirming our ongoing commitment to the treatment of the disease.”

In the complex deal, GSK will initially control 85 per cent and Pfizer the remaining 15 per cent of the equity, with GSK’s share rising as high as 91 per cent or falling to 69.5 per cent depending on the relative success of the two companies’ drugs in meeting mutually agreed ”milestones” for future development. Differential performance will also trigger payment of preferential dividends.

The new company - which has yet to be named and is expected to be formally launched later this year - will have the rights to license in promising earlier stage HIV research still being conducted by GSK and Pfizer, as well as from third parties.

It will allow cost savings by 2011 of £60m a year. GSK said the transaction would dilute earnings per share by 1-2 per cent in 2010, 1 per cent in 2011 and then reverse as the spin-off creates new sales. Pfizer said it would be neutral to earnings in 2009 and slightly accretive in 2010 and 2011.

Gbola Amusa, pharmaceuticals analyst with UBS, the investment bank, in London, said the move could herald a wave of collaborative transactions leading to company break ups and sales: ”We’ll look back in a few years and highlight this deal as being industry-shifting.”

[DemReadingDU]

16. Alex Smith 'Ecoshock' radio: interviews Ilargi

very good, appx 10 minutes
Ilargi has a very interesting voice!

Hi Fi version
http://www.ecoshock.org/downloads/ecoshock/ES_Automatic_Earth.mp3

Lo Fi version
http://www.ecoshock.org/downloads/ecoshock/ES_Automatic_Earth_LoFi.mp3

Here the entire show, appx 1 hour
Will big American banks tumble? Better sooner than later? Interview with news producer & mediachannel.org blogger Danny Schechter. Government revolutionary/mom Elizabeth Warren on other ways to go. Meredeth Whitney says don't count on your credit card/line - it may disappear. Bear Ian Gordon sees Dow at 1200. Interview finance blogger "Ilargi" of The Automatic Earth. Be your own bank.
http://www.ecoshock.net/eshock09/ES_090417_Show_LoFi.mp3

Summary of the show...
http://www.ecoshock.org/transcripts/ES_090417_Script.htm

[Demeter]

55. There's Got to Be a Silver Lining Around Here Somewhere....

(frantically digs through closet). Thanks for the post. The problem is much bigger than any individual. Our problem is we couldn't vote for someone who was willing to do what needed to be done, and now we've got a great President willing to feed the banksters until they blow up, taking the world with them.

There's got to be a point of leverage, a way to save the world...

Get out the FRSP! That worked for France! What other options have the PTB left us?

[DemReadingDU]

17. Simon Johnson & Joseph Stiglitz to testify April 21

HEARING ANNOUNCEMENT: Too Big to Fail or Too Big to Save? Examining the Systemic Threats of Large Financial Institutions

April 10, 2009

JEC HEARING: “TOO BIG TO FAIL OR TOO BIG TO SAVE? EXAMINING THE SYSTEMIC THREATS OF LARGE FINANCIAL INSTITUTIONS”

Notable Economists Joseph Stiglitz, Simon Johnson Discuss How Best to Handle Failures of Large Financial Institutions

Washington, D.C. - The Joint Economic Committee (JEC), chaired by Congresswoman Carolyn B. Maloney, will hold a hearing on Tuesday, April 21, 2009 at 10:00 a.m. in Cannon House Office Building Room 210. At the hearing, entitled “Too Big to Fail or Too Big to Save? Examining the Systemic Threats of Large Financial Institutions,” economists including Joseph Stiglitz and Simon Johnson will focus on new policy responses to failures at large financial institutions. The hearing will examine what criteria policymakers and regulators should use to determine when institutions pose systemic risk – at what point financial firms become ‘too big to fail’ – and how regulators should deal with them when they are insolvent.

WHAT: JEC hearing: “Too Big to Fail or Too Big to Save? Examining the Systemic Threats of Large Financial Institutions”

WHO: Joseph Stiglitz, Nobel Prize recipient, 2001; University Professor, Columbia University; former chairman, Council of Economic Advisers
Simon Johnson, Ronald A. Kurtz Professor of Entrepreneurship, MIT's Sloan School of Management; Senior Fellow, Peterson Institute; former Economic Counselor, International Monetary Fund
Thomas M. Hoenig, President, Federal Reserve Bank of Kansas City

WHEN: Tuesday, April 21, 2009 at 10:00 a.m.

WHERE: Cannon House Office Building, Room 210

http://jec.senate.gov/index.cfm?FuseAction=Hearings.HearingsCalendar&ContentRecord_id=90aa4fb4-5056-8059-763a-a45c5849b73b

[Demeter]

47. Could Reality Actually Penetrate the Beltway?

I wait with bated breath.

[DemReadingDU]

20. The Close : April 7, 2009 : BEAR ATTACK: PART 1 [04-07-09 3:30PM]

BNN speaks to Nouriel Roubini, professor of economics, New York University's Stern School of Business and Eric Sprott, chairman and CEO, Sprott Asset Management.

http://watch.bnn.ca/the-close/april-2009/the-close-april-7-2009/#clip158793

[DemReadingDU]

21. The Close : April 7, 2009 : BEAR ATTACK: PART 2 [04-07-09 4:00PM]

BNN interviews Meredith Whitney, founder, Meredith Whitney Advisory Group LLC; and Ian Gordon, author, "The Long Wave Group".

http://watch.bnn.ca/the-close/april-2009/the-close-april-7-2009/#clip158804

[Hawkowl]

43. Excellent Analysis!

The panel of speakers they had on were just outstanding. Especially the American woman bank analyst. She is very technical but gives a very cogent analysis of the unwinding of the economy vis-a-vis the credit collapse. The other main point I took away was the Canadian (Pratt?) who was arguing that unemployment should now be considered a leading, not lagging, indicator of the economy because more foreclosures and loan defaults are the inevitable result of losing your job (which feeds right back into the banks tightening credit and shoring up cash reserves). The others too, were very good. O.K. the "Long Wave" analyst is a little out there and very grim, but I took his view as the absolute worse case scenario. So worst case, we're only in a depression till 2020!

[DemReadingDU]

22. The Close : April 7, 2009 : BEAR ATTACK: PART 3 [04-07-09 4:30PM]

BNN's phone lines opened for viewer comments.

http://watch.bnn.ca/the-close/april-2009/the-close-april-7-2009/#clip158840

[DemReadingDU]

23. Hugh Hendry: Citywire Interview

4/11/09 Hugh Hendry: Citywire Interview

Hugh Hendry, the outspoken CIO and co-founder of Eclectica, one of the UK’s most successful hedge funds during the last 4 years, and in particular the last 2 years, appears in a full length interview, speaking on a variety of issues, including his thoughts on contrarianism, quantitative easing, deflation vs. inflation, his outlook for the market, and future of the hedge fund industry.

As usual, Hendry is both enlightening, and controversial, and his remarkable accuracy about the nature of the market and course during the last year make him worth listening to.

Part 1: The Eclectica co-founder explains why he is sticking to his guns despite having ‘my tail between my legs’ after the recent banking sector rally, and why the dollar could approach parity with the euro.

Part 2 : The outspoken hedge fund manager argues that the majority of his peers ‘have no future’, and explains his fear that tighter financial regulation will mean two decades of deflation in the second of a two part series.

click link for 2 videos and the transcript...
http://greenlightadvisor.com/glablog/2009/04/11/hugh-hendry-citywire-interview/

[Dr.Phool]

24. A real patriot, and a good friend,

John confuses the teabaggers.

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=385x298687

But, the prick beat me on the golf course last week!

[DemReadingDU]

26. good message

If I lived in Florida, I'd vote for him!


Plenty of videos and audios on this weekend thread. Good morning everyone!

[DemReadingDU]

27. Chris Martenson audio via Financial Sense Newshour

4/18/09

Select an Audio Format
http://www.financialsense.com/Experts/2009/Martenson.html


direct mp3 link
http://www.netcastdaily.com/broadcast/fsn2009-0418-2.mp3

[DemReadingDU]

53. Martenson Report: The Great Baby Boomer Asset Bubble

In the excellent audio interview in previous post, Martenson mentions his February report: The Great Baby Boomer Asset Bubble

Look thru the charts and graphs of this report and read the conclusion.
http://www.chrismartenson.com/blog/great-babu-boomer-asset-bubble/16648


BTW, you could download the mp3 version of the audio interview to your Ipod and listen to the interview as you go about doing your daily activities. It's appx 1 hour, and very good!

[Demeter]

30. How Goldman Sachs Turns Real Conflict of Interest into Fake Conspiracy as the Rumpelstiltskin of Wal

http://www.buzzflash.com/articles/analysis/718

by Meg White



All this time I thought it was the Illuminati or Exxon Mobil running the world. Turns out it's really just Goldman Sachs.

Financial publications and blogs are rife with derisive references to those crazy "Goldman Sachs conspiracy theorists" these days. Usually, Jon Stewart uses his post at The Daily Show desk to mock the paranoid sector of society. Not this time, to the dismay of financial journalists. Watch his take on the tangle of Goldman Sachs and the government:

http://www.thedailyshow.com/video/index.jhtml?videoId=224259&title=clusterfu#@k-to-the-poor-house

If you're interested in a more detailed look at the Goldman Sachs web, Portfolio magazine manages to point out nearly every conflict of interest, while at the same time calling anyone a nutcase who might see the chain as linked.

Many point to Goldman's impeccable pedigree as the reason so many of its board members and CEOs go onto government work from that high perch. David Viniar, Goldman's CFO, sniffled in a New York Times article yesterday that he felt those who write articles about "Government Sachs" should be ashamed, and that he thought public service should be encouraged, not berated.

Government work should be praised, indeed. But so too should conflicts of interest be pointed out, and not dismissed as the ravings of the jealous and mad.

Way back in October 2008, one editor at The New York Times was laughing his head off at the idea that Goldman Sachs was "pulling strings in the market meltdown and bailout. And afterward, we can all have Kool-Aid!"

This week, that same paper of record published an op-ed by William D. Cohan, a contributing editor at Fortune and author of House of Cards: A Tale of Hubris and Wretched Excess on Wall Street. Cohan basically affirmed what the paper wouldn't even entertain as an idea last year. At the same time, of course, he still managed to poke fun at those crazy conspiracy theorists (emphasis mine):

How can one ignore, the conspiracy-minded say, the crucial role that Henry Paulson, who followed Mr. Rubin to the top at both Goldman and Treasury, played in the decisions to shutter Bear Stearns, to force Lehman Brothers to file for bankruptcy and to insist that Bank of America buy Merrill Lynch at an inflated price? David Viniar, Goldman's chief financial officer, acknowledged in a conference call yesterday the important role the changed competitive landscape had on Goldman's unexpected first-quarter profit of $1.8 billion: "Many of our traditional competitors have retreated from the marketplace, either due to financial distress, mergers or shift in strategic priorities."

But he was largely mum on American International Group, which, Goldman's critics insist, is the canvas upon which the bank and its alumni have painted their great masterpiece of self-interest. A few days after Mr. Paulson refused to save Lehman Brothers last September -- at a cost of a mere $45 billion or so -- he came to AIG's rescue, to the tune of $170 billion and rising. Then he decided to install Edward Liddy -- a former Goldman Sachs board member -- as AIG's chief executive. Goldman has since received some $13 billion in cash, collateral and other payouts from AIG -- that is, from taxpayers.

Why kill Lehman and save AIG? The theory, we now know, was that the government felt it needed to save the firms, including Goldman Sachs, that had insured many of their risky ventures through the insurer. Indeed, had Mr. Paulson decided not to save AIG, its counterparties would have suffered serious losses. Lehman's creditors will be lucky to get back pennies on the dollar.

Cohan concludes that "the real reason Goldman has cleaned up this year the huge misfortunes of its major competitors."

Cohan is not the only reputable writer tracing the edges of this story. London's Independent details how Goldman has insinuated itself into just about every country in the world. Bloomberg called Goldman out as one of the main beneficiaries of the bailout plan way back in September 2008. Howard Rodman quips at Huffington Post that "when the dust clears from WWIII, the only things left standing will be Keith Richards, cockroaches and the investment bank of Goldman Sachs."

Goldman officials just shrug their shoulders and say "Who, me? Why, that's just crazy!" and the mainstream media just nods. But it seems the mega-bank is flustered by at least one online "conspiracy theorist."

Goldman's reaction to a financial consultant's observations on the company's connections is revealing. Instead of dismissing Mike Morgan's Web site, GoldmanSachs666.com as laughable conspiracy, the bank sent him a cease and desist letter within a week of his first posting.

The Telegraph reports that Goldman hired a lawyer to pursue Morgan on the grounds that the site violates intellectual property rights and could be construed to be associated with the bank. Goldman makes that argument in spite of the fact that each page on GoldmanSachs666.com contains this disclaimer in the header:

This website has NOT been approved by Goldman Sachs, nor does this website have any affiliation with Goldman Sachs. This website was designed to provide information about Goldman Sachs direct from the public, and NOT from Goldman Sachs's marketing and public relations departments. You may find the official Goldman Sachs website at http://www.goldmansachs.com.

Morgan filed a lawsuit against Goldman to protect his site, a redesign of which he says will be launched by the end of next week.

"We haven't heard a peep from Goldman Sachs since we filed our case. They won't respond," Morgan said in response to a question posed by BuzzFlash via conference call. "But that's Goldman Sachs."

Yet the snickering from mainstream financial journalists continues to the present moment, with writers rolling their eyes over "theories about Goldman Sachs running a shadow government."

I wouldn't be surprised if someone left a similar comment on this story. But the truth is, there is no dramatic conspiracy here, because it's all out in the open.

Due to the nature of the corporatist society we live in today, it was a given that some private entity (and probably a bank) would profit from the financial crisis. Why not Goldman Sachs? That's just the vagaries of modern capitalism.

The New York Times revealed yesterday that the AIG "CEO" newly installed by former Treasury Secretary Henry Paulson has something in his back pocket to make up for his $1 a year salary. That's right, Edward Liddy has a $3 million stake in Goldman Sachs.

One financial blogger said the news "will delight and pique the Goldman Sachs conspiracy theorists out there, for better or worse." This was just after the writer noted the huge conflict of interest caused by Liddy's Goldman investments.

Still, are we surprised at this? Liddy "earned" these investments fair and square when he was on the board at Goldman. Aren't conspiracy theories supposed to be shocking and hard to believe?

The bottom line is as long as these facts are relegated to the conspiracy bin, teabaggers and other malcontents will be free to rail against imaginary socialism, foreclosure prevention plans, and other clearly demarcated social pariahs as the bane of their collective existence.

[Demeter]

31. This Sunday Is Also Earth Day

NPR's Living on earth Ecology program had a report on how birth defects in Indiana track with the application of pesticides in the farmlands during conception, and how some of these defects are permanent changes to the genome, transmissible down the generations for ever after.

And here we have the EPA worrying about carbon dioxide, the primary component of soda water.

My head hurts.
........................................

I want to propose a new political movement and party. It is one that will hold damn near everyone in the nation except for the pathologically and criminally insane.

It would be called the Real Wealth Party.

Right off the bat this attracts the fiscally conservative--taking the seed money out of the GOP.

It appeals to the Greens and the Socialists, because Real Wealth is environment, labor, health, and happiness. Food, clothing, shelter, education, health care, arts. Legal laws and their enforcement.

The Progressives will have a place of honor, as they are focussed on creating and spreading
Real Wealth among the population of the nation and the world. Workers of the World, unite!

The following groups will be outcast and alarmed:

Parasites--the bloodsuckers who create nothing but paperwork, misery, and divisiveness. Insurance companies, larger banks, stock brokers. Most politicians of the old school, who sell influence. War mongers. For profit prisons. High society and gated communities and anyone whose self-worth is dependent on feeling superior to someone else on the basis of "stuff". Barbara Bush, big time.

Basically, every public policy decision, every tax-generated cent spent, will be evaluated on the basis: Does this create Real Wealth for all to benefit? Or does it reduce real wealth, or lavish it on only selected individuals?

If you can't show a common good, then your proposal fails. No amount of corporate lobbying, which is absolutely forbidden, can sway the decision process. Corporations themselves, unless employee owned and operated, will be illegal and must dissolve to the shop floor level. Executives will be much lower down, and have to do useful things, too. Big Pharma, Big Auto, Big Power, Big Anything, will get much smaller, more local, more responsive, cleaner, more responsible to workers and communities, and Globalism will die. Co-operative ventures will co-operate, not exploit.

It would be a revolutionary reordering of the economy and the government and society in general. It wouldn't happen overnight, but it would be the touchstone that evidently our Constitution no longer is, our guiding principle on what it means to be a principled nation.

[Demeter]

32. Mark Fiore Responds to the Right Wingnuts

http://www.markfiore.com/political/newly-frugal-guy

[Hugin]

33. *Grand Opening* The SMW Economic Index is here! *New*

:fireworks: :hiredclowns: :balloons:

First some background, a little over a week ago, Ozy and I were discussing the failings of using the Stock Market Indexes (Dow, S&P, NASDAQ, etc.) as indicators of the economic health of these United States. (Especially, since a former chairman of one of those indexes has recently been charged with running a colossal Ponzi Scheme. Details here)

So, we decided to rummage through the gumbo (non-shrimp) of numbers and stew up a custom Index for the SMW.

Since that phrigingdumbass guy with the way-cool poll tracking posts during the elections didn't seem to be about... I was called upon to put something together. ( Details here )

Using my newly found dictatorial powers, I set forth.

Early on in the process, I decided there would be a few important areas for coverage by the Index and ground rules to follow;

1. The SMWEI will attempt to reflect the Economy from the point-of-view of the average resident on the Demand Side of the U.S. Economy... A 'Retail' Index, if you will. Yet another index for Supply-siders to point at to justify the Bankrupt Voodoo Trickle-down foolishness of the past 30 years is not needed. (I'm sorry Ghost Dog, although I agree that in this highly interconnected and complex Global Economy we need something covering everything. Given the data available to me I can't manage that at this time. I will continue searching for a way to do it, however.)

2. The SMWEI will include both objective measures and reasonable subjective assessments of the Economy.

3. All objective data included in the SMWEI will be drawn from the SMW and to a lesser degree the WEE.

4. The SMWEI is a number between -10 and +10. It will be posted starting in the WEE and then on Mondays (or the first Business Day of the week) in the SMW.

5. I encourage anyone interested in submitting their assessment (a number between -10.0/+10.0) to be included in the Index to either post it in the SMW or if you'd rather keep your entry private, PM me with an appropriate subject line. A little statement about why you think the entry is good and helps in understanding your reasoning, but, is not necessary.

That said... The value of this week's SMWEI is....

(Drum roll please.)

-----------> (-5.6)(minus five-point-six) <---------

A couple of comments... The Index seems to be currently trending neutral. It may be due to the stimulus or possibly we've entered the lower bar of this 'L' shaped recovery which has been discussed... or maybe everyone has been laid off.

Some groups of North-American Natives believe that in order to fight something, it must first be defined and named. The SMWEI is an attempt at accomplishing this.

Thank you...

:freekosherhotdogs: :cottoncandy: :syrupysoftdrinks:

:antacids:

Edit: I went back to spell phrig properly and add free balloons to the offerings.

[Demeter]

35. I Miss P-Man. Where Is He, By the Way?

Still waiting for the Franken-Coleman contest to be settled?

Your index seems high, but that's because I'm in the deepest hole, here in Michigan. Good job, Prag!

So, we're halfway to 1929, and it's only April. I'd better stock up on wine.

[Hugin]

41. I entered the numbers you provided for MI on Thursday...

and Well, I think you're better off not knowing. :scared:


Oh, and incidentally... Y'know how 'Prag', 'Teabagging', and 'Dromedary Digits' have obtained different meanings in this Brave New World? Uh, Ah... 'Deer in headlights' seems to be shifting too. So, I'm hoping everyone is set to "Google Moderate Safe-search" on my link above.

:hi:

I haven't seen the P-man for quite some time now.

Edit: I fight a never ending battle with punctuation.

[Demeter]

42. Your Sig Line Made Me Giggle!

In New England, passing is verboten. There simply is no place with one lane each way where one can legally pass.

In Michigan we've killed off the idiots, so passing is a regular feature...

I won't call you Prag any more. I have no idea why this is, what the old or the new meanings are, but since you do, so be it. I'm culturally deprived, self-sheltered, so to speak.

[Hugin]

45. Fiddler on the roof - If I were a rich man (with subtitles)

So no need for lyrics! :D

http://www.youtube.com/watch?v=RBHZFYpQ6nc

Sadly, I know little about FOTR.

[Demeter]

48. wikipedia

I would sing the entire show for you--including the multipart choruses, if you were within ear range, and as much of the dialog as I can remember....

[Demeter]

49. Basically, the story of a small village when the Czar's pogrom forces them out of their lives

Set in Ukraine, before the Bolshevik revolution, a milkman and his 7 daughters (reduced to 5 for the movie) and wife end up seeing centuries of life patterns destroyed and remade.

Zero Mostel on Broadway--stunning. I have only his recording, and it is unsurpassed. The film version Tevye was not as good, but he gets better as the story progresses.

It is a tragedy with comic moments and lots of love.

[Demeter]

59. I See You've Updated your Journal Page, Finally!

[Hugin]

81. I had changed it.

Back when I adopted my new moniker... Somehow, it must've reverted.

I was doing some blogroll spring cleaning and link verifying. I dropped one because I don't know their new name! I'll have to look it up.

BUT! It'll have to wait! After six months of begging, pleading, and supplication...

SOMEBODY FINALLY MADE ME A.... Real! Fresh! (all organic ingredient ;) )

BANANA CREAM PIE! (BCP) :9

:woohoo:

(It only cost me my fillings and from what I understand, I can get by with only one kidney and half-a-liver... Is that correct?)

: ohboy : Who cares! :yum:

[Dr.Phool]

94. They were obviously talking about US 19 in Florida

[Ghost Dog]

64. Good grief, I see what you mean...

Don't worry about internationalising: what we're interested in is the real for real people US economy.

For the rest, we can always just throw the I Ching. :)

I believe you. -5.6, huh? Heavy. With more to come on the next downwave.

So, let me offer a quote lifted from this uplifting other thread from this evening: "Let's leave pessimism for better times."

[antigop]

44. How about free pony rides? n/t

[Hugin]

46. Good idea.

:think:

[ozymandius]

105. Finally!

I've been waiting for this with baited breath (Irish whiskey (Clontarf) flavored) to see what the final index numbers give. Which Please post this index tomorrow! If you really feel like it - please post the metrics you are measuring.

:yourock:

[Demeter]

36. Dying Midwestern Cities Are The New Bohemian Enclaves

http://www.businessinsider.com/dying-midwestern-cities-are-the-new-bohemian-enclaves-2009-4

You know those artists, always looking for some abandoned industrial space on the cheap. When they got priced out of Manhattan they moved to Brooklyn. And now that they've gotten priced out of Brooklyn, they're moving to... Cleveland.

Yep, artist types are snapping up those homes in Cleveland that are so unwanted the city's big challenge is coming up with the money to raze them, the Wall Street Journal reports. They're even buying those homes in Detroit that they sell for $1.

This is America. Former industrial centers are now only fit for Bohemians. But it's not all bad. The neighborhoods to which artists migrate usually end up being pretty nice and livable, with coffee shops, nice grocery stores, design firms, startups, you name it.

[Demeter]

37. Interesting Website on Mortgage Fraud--Check it out!

http://ml-implode.com/

[AnneD]

38. Hi-de-ho weekenders......

Just popped in to vote and say hello. It is busy this weekend and Thor is really pounding his anvil here so I'm leary around electronics.

I want to thank you, tclambert for your gallant defense of this Texan. Now mind you, most native Teas women are pretty handy at sticking up for themselves-but we always appreciate the courtly gestures. :loveya: my hero.

[Demeter]

39. Japan plans emergency share purchases

http://www.ft.com/cms/s/0/fbea8ad4-2b09-11de-8415-00144feabdc0.html

By Michiyo Nakamoto in Tokyo

Published: April 17 2009 05:41 | Last updated: April 17 2009 18:12

Japan’s ruling Liberal Democratic Party on Friday unveiled details of its proposed Y50,000bn scheme to allow the government to buy shares from the market if share prices fall to an extent that is seen as an economic emergency.

[Demeter]

50. Deflation Has Gone Global

http://globaleconomicanalysis.blogspot.com/2009/04/deflation-has-gone-global.html

Deflation properly defined is a net decrease in the money supply and credit, with credit being marked to market. Deflation by that measure went global long ago.

This post however, is in reference to sustained price drops widely (and incorrectly) referred to as deflation.

Japan wholesale prices log fastest drop since 2002

Japanese wholesale prices fell at their fastest annual pace in nearly seven years last month, official data showed Monday, adding to worries about the renewed threat of deflation.

Corporate goods prices fell by 2.2 percent in March from a year earlier, down for a third straight month, the Bank of Japan reported. It was the steepest year-on-year drop since May 2002 and followed declines of 1.6 percent in February and 0.7 percent in January.

"Companies are in tough competition to cut prices due to weak consumer sentiment," said Hideyuki Araki, economist at the Resona Research Institute. "Consumers are now worried about their jobs or pay cuts. It's natural that they want cheaper goods," he said.

In Germany wholesale prices see record decline in 22 years.

Wholesale prices in Germany dropped 8.0 percent in March compared with the same month last year, the biggest year-on-year decline since January 1987, the German Federal Statistical Office said Wednesday.

Compared to February, however, wholesale prices declined 0.9 percent, said the Wiesbaden-based statistics office.

Crude oil prices have retreated 66 percent from a record 147 U.S. dollars per barrel in July 2008. As a result, solid fuels and petroleum products were 21.4 percent cheaper in March than a year earlier, the statistical office said.

Prices of grain, seeds and feed declined 42.6 percent in the past 12 months.

Statistics show that Germany's inflation has fallen to its lowest level in almost 10 years, as the global financial crisis has dragged the European Union's biggest economy into its worst recession since World War II.

European Central Bank (ECB) council member Athanasios Orphanides told local media a day earlier that the risk of deflation may push further monetary easing.

Chinese CPI, PPI Negative

Please consider the following chart of Chinese Inflation.

http://1.bp.blogspot.com/_nSTO-vZpSgc/SebfaQjzcEI/AAAAAAAAF8A/hy5jzoRhMck/s1600/chinese+inflation.png

US CPI In First Year-Over-Year Decline Since 1955

In the US the CPI is in First 12-Month Decline Since 1955.

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2 percent in March, before seasonal adjustment, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. The index has decreased 0.4 percent over the last year, the first 12 month decline since August 1955.

On a seasonally adjusted basis, the CPI-U decreased 0.1 percent in March after rising 0.4 percent in February. The decrease was due to a downturn in the energy index, which declined 3.0 percent in March after rising 3.3 percent the previous month. All the energy indexes decreased, particularly the indexes for fuel oil,
natural gas, and motor fuel. The food index declined 0.1 percent for the second straight month to virtually the same level as October 2008. The food at home index declined 0.4 percent, the second straight such decrease, as the index for dairy and related products continued to decline.

MUCH MORE AT LINK

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

[Demeter]

51. Film "In Debt We Trust"

http://indebtwetrust.com/synopsis.php

[DemReadingDU]

52. Danny Schechter mentioned his film in the Ecoshock interview

Thanks for the link!

[Pale Blue Dot]

54. I watched this a few months ago.

It's spot on, and accurately predicted the mortgage implosion 3 years before it happened.

[Demeter]

56. Are the good times really over?

http://rodrik.typepad.com/dani_rodriks_weblog/2009/04/are-the-good-times-really-over.html

Globalization is responsible for the vast increase in economic growth that we experienced in recent times, right?

Well, yes and no. It all depends on what you mean by globalization and when you think it began. As the following chart illustrates, clearly something fundamental happened in the early years of the postwar period (the data are from Angus Maddison). Starting around 1950, the world economy became able to support levels of economic growth that were a multiple of (three to four times higher than) levels observed at any time before then. You may call this the miracle of globalization, but it would be more accurate to call it the success of the Bretton Woods regime.

SEE LINK FOR GRAPH

Note by contrast that the period of gung-ho globalization, which we may date from the early 1990s on, presented no improvement over the preceding post-war arrangements. In fact average growth in the world as a whole lagged behind the rates experienced in the immediate post-war period. And the Chinese growth miracle is slightly less distinguished than the Japanese miracle of the earlier era (at least according to Maddison's numbers).

The lesson? While it is important to ensure that deglobalization doesn't go too far, we should not lose sleep over the possibility that we might not restore openness in trade and financial policies to the levels that prevailed in the last couple of decades. The world economy can do very well indeed, thank you very much, with Bretton-Woods levels of openness.

A second lesson has to do with the post-1950 growth champions identified in the chart above: Japan, South Korea, and China. What was common in the policies of these countries is that they were all "productivist." They prioritized productive structural change--the movement of resources from traditional to modern activities--above all else. They employed not only "orthodox" instruments (such as investment in infrastructure and human capital) but also subsidization of new industries, undervaluation of currencies to promote tradables, and repression of finance whenever it stood in the way.

So the good times need not be over (at least for developing nations) even with some deglobalization as a result of the present crisis. Less finance may even do them some good.

[Demeter]

57. This Is Your Economy on Credit Crack - and Heading for a Crack-Up

http://jessescrossroadscafe.blogspot.com/2009/04/this-is-your-economy-on-credit-crack.html


Here is a clear and simple explanation of why we may have already passed the point at which the Fed and Treasury will have no choice but to substantially devalue the bonds and reissue a 'new US dollar' as part of a managed default on our sovereign debt.


Ben's Un-shrinkable Balance Sheet
Delta Global Advisors
April 14, 2009

As he stated again clearly today, the Chairman of the Federal Reserve has deluded himself into thinking that when the time comes, he will be able to shrink the size of the Fed's balance sheet and reduce the monetary base with both ease and impunity. He also has deluded himself into thinking inflation will be easily contained.

It is very important that he does not fool you as well.

The Fed believes low interest rates should not be the result of a high savings rate, but instead can exist by decree, a conviction which has directly led consumers to believe their spending can outstrip disposable income.

The result of such thinking has been a rise in household debt from 47% of GDP in 1980 to 97% of total output in Q4 2008. As a result of this ever increasing burden, the Fed has been forced into a series of lower lows and lower highs on its benchmark lending rate. Keeping rates low is an attempt to make debt service levels manageable and keep the consumer afloat. Problem is, this endless pursuit of unnaturally low rates has so altered the Fed's balance sheet that Mr. Bernanke will be hard-pressed to substantially raise rates to combat inflation once consumer and wholesale prices begin to significantly increase.

Banana Ben Bernanke has grown the monetary base from just $842 billion in August 2008 to a record high of $1,723 billion as of April 2009. But it's not only the size of the balance sheet that is so daunting; it's the makeup that's becoming truly scary.

Historically speaking, the composition of the Fed's balance sheet has been mostly Treasuries. And the Federal Open Market Committee would typically raise rates by selling Treasuries from its balance sheet into the market to soak up excess liquidity. However, because of the Fed's decision to purchase up to $1 trillion in Mortgage Backed Securities (and other unorthodox holdings), it will not be selling highly-liquid US debt to drain reserves from banks. Rather, it will be unwinding highly distressed MBS and packaged loans to AIG. Not to mention the fact the Fed would have to break its promise of being a "hold-to-maturity investor" of such assets.

Moreover, not only are the new assets on the Fed's balance sheet less liquid but the durations of the loans are being extended. According to Bloomberg, the Fed is contemplating extending TALF loans to buy mortgaged backed securities to five years from three after pressure it received from lobbyists and a failed second monthly round of auctions. That means when it finally decides it's time to fight inflation, the Fed will find it much more difficult to reverse course.

But because of the extraordinary and unprecedented (some would say illegal) measures Mr. Bernanke has implemented, only $505 billion of the $2 trillion balance sheet is composed of U.S. Treasury debt. Today, most Fed assets are derived from the alphabet soup of lending programs including $250 billion in commercial paper, $312 billion of Central Bank liquidity swaps and $236 billion in mortgage-backed securities.

Thus, our economy has become more addicted than ever to low interest rates. But because bank assets will now be collecting income at record low rates, when and if the Fed tries to raise rates it will only be able to do so on the margin. If Bernanke raises rates substantially to fight inflation, banks will be paying out more on deposits than they collect on their income streams. Couple that with their already distressed balances sheets and look out!

Additionally, not only do the consumers need low rates to keep their Financial Obligation Ratio low, but the Federal government also needs low rates to ensure interest rates on the skyrocketing national debt can be serviced. Our projected $1.8 trillion annual deficit stems from the belief that the government must expand its balance sheet as the consumer begins to deleverage. In fact, both the consumer and government need to deleverage for total debt relief to occur, else we're just shuffling debts around and avoiding a healthy deleveraging entirely.

In order to have viable and sustainable growth total debt levels must decrease, savings must increase and interest rates must rise. But that would require an extended period of negative GDP growth-a completely untenable position for politicians of all stripes. Ben Bernanke would like you to believe inflation will be quiescent and he can vanquish it if it ever becomes a problem. Just make sure you don't invest as though you believe him.

[Demeter]

58. Big Profits, Big Questions (Goldman Sachs)

YOU'VE SEEN SNIPPETS OF THIS ARTICLE--I HIGHLY RECOMMEND READING THE WHOLE THING! hERE:

http://www.nytimes.com/2009/04/15/opinion/15cohan.html?emc=eta1

[Demeter]

62. The Goldman Sachs Three Card Monte Act

http://www.economicpolicyjournal.com/2009/04/goldman-sachs-three-card-monte-act.html

These guys never stop. Bob Murphy has pointed out to me a letter to the editor of WSJ written by Goldman Sachs managing director Lucas van Praag:


Prof. Amar Bhidé does his readers a disservice when he asserts that Goldman Sachs miscalculated the creditworthiness of AIG and was “made whole” by a government bailout of the company (”You Can’t Rush a Recovery,” op-ed, April 9).

These are the facts: Goldman Sachs is in the business of acting as an intermediary for numerous clients and often assumes risk on their behalf. Our normal protocols require that we protect our shareholders from loss associated with our incurring these positions through rigorous risk management. This includes buying credit insurance which, in the matter at hand, we did from AIG, then one of the world’s largest insurance companies. The terms of this insurance included a requirement that AIG give us enough cash collateral to protect us against possible future loss.

We have consistently said that we had no direct economic exposure to AIG. We marked to market the risk we had insured with AIG, and AIG was contractually required to give us collateral to cover any diminution in value. Because there were periods when AIG didn’t provide enough collateral, we hedged ourselves against the then seemingly unlikely event that AIG might default. The cost of this hedging was over $100 million. If AIG had failed, we would have had both the collateral and the proceeds from the credit default swaps and therefore would not have incurred any economic loss.

In order to collect under a credit default swap, there has to be an event of default. No event of default means no payout. By supporting AIG, the government prevented the company from defaulting. Some have questioned whether, if AIG had defaulted, we would have received the money owed to us under the credit default swap arrangements. Because these swaps were written by large financial institutions which mark to market their obligations to each other and net their positions at the close of business every day, we exchanged collateral with the CDS providers on a daily basis. This protected us from the risk of any knock-on defaults.

Finally, others have asked why Goldman Sachs didn’t take a “haircut,” in other words, less money than we were owed. We had taken great care and incurred considerable expense to protect our shareholders. Why would it have been appropriate for them to have suffered a loss when they didn’t need to?

Far from miscalculating the creditworthiness of AIG, we acted in a way which most people would think of as a good example of responsible risk management.

Lucas van Praag
Managing Director
Goldman Sachs & Co.
New York

Bottom line, van Praag is saying, look we had insurance if AIG went bankrupt, but because the government propped up AIG, we couldn't exercise our credit default swaps (i.e. insurance), so that's why the government gave us money because they prevented the bankruptcy which we hedged against.

Was Goldman fully protected on their own? Maybe, maybe not, depending on how much insurance Goldman actually bought. But, what van Praag is doing is, like an expert three card monte shark, keeping you focused on the wrong card. While everyone is focused on the card van Praag is playing with, the real action is the card left over on the other side. That card is the wholesale liquidation of AIG portfolios at fire sale prices that Goldman and money center banks were able to flip for billions in profits at the expense of the taxpayer.

Unless those trades are analyzed, no one will really know what went down to make Goldman profitable in Q1. Further, I suspect Goldman, and others are gearing up for more of these wholesale liquidations. After the stress test results are released the government will force the sale of Private Eqiuty positions held by banks.

It is a three card monte act, but instead of ripping off NYC tourists on Broadway and Fifth Avenue for $20, it is ripping off taxpayers for billions without the taxpayers even getting to look at any of the cards. Only Timothy Geithner gets a peek.

[Ghost Dog]

65. Goldman Sachs & Co., look: not the same as Goldman Sachs Group Inc.

nor any of the other shadowy enterprises in that black box, (depending on context, or, whatever they choose to say at any given point in time...)

(Ref: http://journals.democraticunderground.com/Ghost%20Dog/201 )

[Demeter]

63. "Don’t set Goldman free, Mr Geithner"

http://www.nakedcapitalism.com/2009/04/john-gapper.html


John Gapper makes a fundamentally important point in his Financial Times comment today, that Goldman should not be permitted to wriggle free of TARP strictures by repaying the emergency backing of last November, at least not until Treasury has imposed structural reforms. Why? Whether Goldman formally has government funding or not, it has been designated as one of the "too big to fail" banks. Thus it can operate as if it has government backing and play closer to the line than it otherwise would.

Since Glass Steagall, the Depression era regulation mandating the separation of commercial and investment banking was passed in 1933, brokerage firms enjoyed higher profits than their government guaranteed brethren and were permitted to fail. But then the line got blurred, and finally erased, as banks pressed to get into more lucrative businesses. And as the brokerage firms became more bank-like (as in bigger users of capital and more active traders) in response to the bank incursion, they became bank-like risks to the system too.

Goldman has been very clever at having its cake and eating it too, and that has to come to an end.

However, despite the logic of Gapper's argument, I doubt any serious structural reform is in the offing for the financial services industry unless conditions decay to the point where Treasury's hand is forced. Geithner and Summers are clearly true believers in the what-ought-to-be-discredited model of finance-driven capitalism. They have been consistent enablers of the industry, taking tough stands only in the face of public outcry, and then on token issues (and the industry has dutifully played its part in this Kabuki drama, howling at how simply dreadful those requirements are).

From the Financial Times:

Should Tim Geithner let Lloyd Blankfein escape?

Mr Blankfein, the chairman and chief executive of Goldman Sachs, is eager for his institution to become the first big bank to shake off the stifling embrace of the US government. Mr Geithner, the US Treasury secretary, must decide whether to let him.

Mr Blankfein’s argument is seductive: it is Goldman’s “duty” to pay back the $10bn in taxpayer money it took last autumn when its future – and that of the global financial system – looked dicey. Goldman seems to be doing fine now: this week, it reported unexpectedly robust first-quarter earnings of $1.8bn.

It has spent recent weeks attempting to turn its repayment into a fait accompli. First, Mr Blankfein made a contrite speech assuring investors – to the irritation of its rivals – that Goldman was sadder and wiser and would buckle down to pay reform. Then he raised $5bn in capital from those investors to wave in front of the Treasury secretary.

But Mr Geithner should take his time. Not only is the future of Goldman and other taxpayer-backed banks unclear, given the unstable US economy, but Goldman wants to escape the burdens of political control while retaining the benefits of public backing. That does not seem like a good deal for the taxpayer.

There are obvious political risks in letting Goldman roam free while other banks remain bound by the troubled asset relief programme (Tarp). It would exacerbate suspicions that Goldman, with its long history of producing Treasury secretaries, gets special treatment. These were not soothed by the decision to pay off all Goldman’s credit default swaps with American International Group, now controlled by the state.

The bigger danger is the long-term precedent it would set. Goldman wants to bolt before Congress or Mr Geithner, who still operates as a one-man band while the nomination process for his senior staff meanders along, has the chance to change fundamentally how it operates.


Yves here. This is not a given. Regulatory measures could still be imposed on Goldman, TARP or not. Goldman is an integrated firm. Many of its businesses are regulated, and there is no reason to think rules devised for broker dealers, large credit market players, or "too big to fail firms" would exclude Goldman, whether or not it is on the dole. Back to the article:

So far, it has faced mildly irritating limits on how much it can pay staff but nothing on the scale of the 1933 Glass-Steagall Act, which imposed structural reforms on Wall Street after the excesses of the Jazz Age. It would never acknowledge it, but its political campaign is going just fine...

Mr Blankfein criticised Wall Street’s past pay practices as “self-serving and greedy” but Goldman is still putting aside 50 per cent of revenues – $4.7bn in the first quarter – for the bonus pool. Inside, it may feel “humbled”, as Mr Blankfein said, but it looks like the same old bank.

The same, that is, except for one thing – Goldman is now backed by the US government... Once it has repaid the $10bn, Goldman hopes to go back to paying employees what it wants, buying and selling more or less what it fancies and operating as before.

He is peddling an illusion. Even if Goldman repays the equity, the world has changed irrevocably because it is a government-backed enterprise.

That will formally be true for a year at least. As well as the preferred shares it took from the Tarp, it has raised another $28bn in bonds backed by the Federal Deposit Insurance Corporation and intends to carry on using the FDIC’s balance sheet.

More fundamentally, we now know unambiguously that Goldman is a “systemically important financial firm”. In other words, Goldman is too big to fail and would be bailed out by the US government if its balance sheet failed. That privilege should come with weighty conditions.

Note that Goldman’s status is a choice, not a tag it has unwillingly been given. It could avoid this by shrinking itself into an institution like a private equity group or a merchant bank, which can take all the risks it desires because its partners lose everything if it fails.

Goldman does not want to do that because it likes having the engine of its capital markets division and equities operations alongside its advisory and fund management arms. It calculates, probably correctly, that the pay-obsessed Congress is not sufficiently serious to put a new Glass-Steagall Act in its way.

But there is no clarity yet that Goldman or other Wall Street banks will be forced to pay an appropriate levy for government backing. Unless it is high, they have no incentive to be truly independent.

There is no need to look back far to observe how pernicious a combination of private ownership, implicit public backing and inadequate regulation can be. This produced the Fannie Mae and Freddie Mac fiascos.

If Mr Geithner cannot think of a sound structural reform to limit the size of Wall Street banks, he must at least make regulatory restrictions bite. He has talked of capping their leverage and their latitude to indulge in proprietary trading but not defined what this means in practice.

He ought to keep Goldman on the leash until he has set out the price it must pay for its newfound privileges. If he lets Mr Blankfein dash straight back to business as usual, Goldman will have won again.

[Demeter]

60. Fed first to blame for financial crisis: Kaufman

http://www.reuters.com/article/ousiv/idUSTRE53G4M420090417?sp=true

By John Parry

NEW YORK (Reuters) - The Federal Reserve allowed the global credit crisis to happen and must be redrawn as a tough regulator to stop big financial institutions from taking excessive risks, prominent Wall Street economist Henry Kaufman said on Friday.

The world is "now in the midst of the worst financial crisis since the Second World War," Kaufman said in a speech titled "Who is Primarily Responsible for the Credit Crisis?" he gave to a conference in New York.

"I am convinced that the misbehavior of some would have been much rarer -- and far less damaging to our economy -- if the Federal Reserve and, to a lesser extent, other supervisory authorities, had measured up to their responsibilities," Kaufman said.

Kaufman became known for correctly forecasting higher inflation and interest rates when he was chief economist with Salomon Brothers in the 1970s and 1980s. During that time, he acquired the moniker "Doctor Doom" among financial market watchers and is well known as an expert on monetary policy and how financial markets work.

"At a minimum, the Fed's sensitivity to financial excesses must be improved," Kaufman said.

SAYS GREENSPAN FAILED TO WARN ABOUT RISKS

Kaufman directly criticized former Federal Reserve Chairman Alan Greenspan for not using his position to dissuade big banks and others from taking big risks.

"Alan Greenspan spoke about irrational exuberance only as a theoretical concept, not as a warning to the market to curb excessive behavior," Kaufman said. "It is difficult to believe that recourse to moral suasion by a Fed chairman would be ineffective."

Partly because the Fed did not strongly oppose the repeal in 1999 of the Depression-era Glass-Steagall Act, more large financial conglomerates that were "too big to fail" have formed, Kaufman said, citing a factor that has made the global credit crisis especially acute.

"Financial conglomerates have become more and more opaque, especially about their massive off-balance-sheet activities," he said. "The Fed failed to rein in the problem."

Banks' exposure via hedge funds and structured investment vehicles, known as SIVs, to assets that turned bad have burdened them with trillions of dollars of write-downs and losses since the credit crisis erupted in mid-2007.

The U.S. central bank is largely to blame for the banking system's ballooning exposure to such risks, Kaufman said.

"Much of the recent extreme financial behavior is rooted in faulty monetary policies," he said. "Poor policies encourage excessive risk taking."

Now the Fed should act as a regulator to strictly oversee big financial institutions and impose "constraints on their assets and profit growth," he said.

However, Kaufman praised the central bank's many emergency measures to combat the global financial crisis by supporting securities markets to get credit flowing again.

For the central bank's "resourcefulness and innovativeness in working to revive the credit market ... the Fed deserves to be commended," Kaufman said. "Even so, these actions came after the crisis had gained considerable momentum."

[Demeter]

61. You've Heard the Economy Is Bad. How Bad Is It?

Congress is looking into this Bernard Madoff scandal. So, the guy that made $50 billion disappear is being investigated by the people who made $750 billion disappear!

The economy is so bad:

CEO's are now playing miniature golf.

Even people who have nothing to do with the Obama administration aren't paying their taxes.

Hotwheels and Matchbox stocks are trading higher than GM.

Obama met with small businesses to discuss the Sti mulus Package: GE, Pfeizer and Citigroup.

PETA serves chicken wings at their meetings.

McDonalds is selling the 1/4 ouncer.

People in Beverly Hills fired their nannies and learned their children's names.

A truck of Americans got caught sneaking into Mexico.

The most highly-paid job is now jury duty.

Dick Cheney took his stockbroker hunting.

People in Africa are donating money to Americans.

Mothers in Ethiopia are telling their kids, "finish your plate, do you know how many kids are starving in the US?"

Motel Six wont leave the light on.

The Mafia is laying off judges.


---courtesy of Sis, still in DC trying to stay sane while keeping Dad alive

[Ghost Dog]

66. "The Mafia is laying off judges."

Now, that's serious downsizing.

(Meanwhile, in recently earthquake-damaged central Italy, guess who's getting in on the rebuilding business? - mentioned just by way of a warning to all...)

[antigop]

67. In State Pension Inquiry, a Scandal Snowballs (be sure to see graphic)

http://www.nytimes.com/2009/04/18/nyregion/18pension.html

The inquiry into corruption at the New York State pension fund started simply enough. Alan G. Hevesi, the former comptroller, was accused of using state workers as chauffeurs for his ailing wife.

But by the time Mr. Hevesi resigned his office in late 2006, investigators for the Albany County district attorney’s office were examining a more troubling problem: allegations that Mr. Hevesi’s associates had sold access to the state’s $122 billion pension fund, using one of the world’s largest pools of assets to reward friends, pay back political favors and reap millions of dollars in cash rewards for themselves.

“We knew this was not going to be a case we could handle ourselves in Albany County,” recalled P. David Soares, the Albany County district attorney.

In 2007, Attorney General Andrew M. Cuomo’s office and then the Securities and Exchange Commission took over the inquiry, which has ballooned into a sprawling investigation involving some of the most prominent players in New York’s political and financial worlds.

Hundreds of investment firms have been subpoenaed. Three people have been criminally charged and another has pleaded guilty to a felony. And the scandal has grabbed the attention of Wall Street, as members of the investment establishment’s top tier now face scrutiny.

The Carlyle Group, the politically connected private equity firm, is among the companies whose transactions are being examined. Steven Rattner, just appointed to serve as the Obama administration’s point man in the bailout of the auto industry, has emerged as a significant figure.

Graphic:
http://www.nytimes.com/imagepages/2009/04/18/nyregion/0418graphic-pension.html

[Demeter]

69. If the Carlyle Group Goes Down, and Cerberus, That's MY Silver Lining

star light, star bright, first star I see tonight...

[antigop]

70. Can they ever really go down? Won't they just surface somewhere else?

This is what is so aggravating about this whole economic mess. Is anyone going to go to prison? Is anyone going to be prosecuted for fraud?

If no one is ever held accountable for actions and we don't put the appropriate regulations in place, we'll just keep repeating this nonsense over and over.

I hope more info comes out on this pension scandal. The graphic shows quite a web of transactions.

[Demeter]

71. Lehman's Went Down, and Fuld may yet end up in prison

the investment banks no longer exist. If we are very single-minded, like the Nazi hunters, and rest not until the last criminal is dead....

[antigop]

72. True, but the whole damn system is corrupt, including most of Congress that went along with them.

Is Phil Gramm ever going to be held accountable? Larry Summers? Robert Rubin? Every Congress member that voted for the repeal of Glass-Steagall and every other piece of legislation that allowed these guys to get by with this shit?

I'm not expecting this in my lifetime. The MSM has people so brainwashed.

[Demeter]

73. We Just Have to Persist, and Take What Fortune Gives Us

And fight beyond the point of insanity. Embrace your inner Polack: too stupid to die.

[antigop]

74. "Fight beyond the point of insanity." --HA! I think the country reached that point a long time ago

Don't know about you, but I'm getting too old for this shit. I'm worn out.

[Demeter]

75. Teach Your Children Well

besides, that's what unemployment/retirement is for.

[antigop]

77. The Effects of Sleep Deprivation on Brain and Behavior

http://serendip.brynmawr.edu/exchange/node/1690

It's gonna take its toll sooner or later.

Gotta go. Thanks for the thread.

[Demeter]

79. I Could Write a Book on Sleep Deprivation

if only I could be sure spell check would catch all the typos...

[Tansy_Gold]

83. For those who HAVE retirement and/or can survive unemployment

One of the byproducts of the post-war prosperity was a new thing call "leisure." The 8-hour day amd 40-hour week that paid enough for a family to live on, the whole retirement before frailty, with a pension and social security and savings, all that was what gave "the masses" some economic clout and the time to do more than be slaves.

Oh the horror that the working poor, the serfs, the peons, the peasants, the slaves should have leisure time. Time to learn, time to live. They become uppity. They want their fair share of the pie.

Can't have that, oh no. The idle rich can't have anyone encroaching on their domain. Gotta have clear distinction between the haves and the have nots, between the astors and the georges. it's a different set of values, dontcha know.

So we'll go back to the old ways, the conservative ways, the "traditional" ways. Ah, yes, tradition. where people work until they die, but they die younger that way and don't suffer as long. Tradition, where we marry our own kind and expel anyone who doesn't follow "the rules" regardless how stupid and irrational and unjustifiable those rules may be.

I was engaged in a conversation with a friend yesterday who had spent several years living and working in Vienna in the 80s and 90s. He loved the country, but found it to be the single most anti-semitic culture he'd ever encountered anywhere in the non-Muslim "west." The Austrians, he said, as a culture (not necessarily as individuals) hate Jews and don't want them around. BUT they are a marvelous culture for the preservation of their tradition. The historic buildings, the art, the traditional costumes, all that sort of thing. To the extent that they become obsessive about it.

And I said but doesn't that illustrate exactly what Altemeyer said in The Authoritarians? Hatred/fear of change, hatred/fear of equality, longing for the immutable past and fear of the volatile future? And wouldn't a culture like that inherently expel or isolate or otherwise neutralize anyone or anything that challenged the precious status quo? And he shrugged in reply because he had to agree.

We have a similar culture at work in the US right now, attempting to install that kind of "traditional values" as the basis for government, a tradition that includes institutionalized racism (to the point of reinstituting slavery), sexism, homophobia, ageism, even looksism. People who have no idle time, no leisure time, no time to learn and to think and to question, are not going to be able to overthrow tradition.

And as long as we base our "quality of life" on the things that we have rather than the things that we do, we will never escape.

Never.


Tansy Gold, in one of her less optimistic moods

[tclambert]

86. The Illuminati declaring bankruptcy?

Cool. Secret societies selling off their secrets. That would be fun. The CIA publishing tell-all books because they need money for more exploding cigars. Area 51 opened to tourists. Dick Cheney sells his diary to buy pacemaker batteries. (No, way too many fantasies about Condoleezza in there.)

[Demeter]

68. This Has It All: Larry Summers, Harvard, GoldmanSachs, AIG, and Fraud

Who Else Is Paying For Those Fat Wall Street Profits?
By Moe Tkacik - April 15, 2009, 6:21PM

There's another big reason -- besides AIG -- that Wall Street trading desks have been booking such fat profits lately: fees they're collecting closing out interest rate swaps that have been exploding in the faces of cities, states, towns and public utilities over the past year.

Put another way: they're not just booking those billions soaking the government, they're booking them soaking...the government. Along with hospitals, utilities, park authorities, pretty much every other realm of the public or nonprofit sector...

Including Harvard! In December the university raised $2.5 billion dollars in a bond offering partially designed to give them the capital to buy out of $570 million in underwater interest rate swaps it had invested in back in 2005. The swaps were expressly endorsed by then-president Larry Summers, now head of the National Economic Council.

Harvard sold the bonds with the underwriting and advisory services of JP Morgan, Morgan Stanley and Goldman Sachs -- the same group of banks, according to Bloomberg, that endorsed the "Summers swap." Another recommendation: that Harvard offer an interest rate as much as 1.41 percentage points higher than an identically rated corporation would pay to borrow the money to sweeten the deal for investors.

(That, if you were wondering, is an example of the unequal credit system perpetuated by the rating agencies differing standards for corporate and public debt that so rankles House Financial Services Chairman -- and Harvard alum -- Barney Frank.)

At those terms, money came flowing in to Harvard:

"It was a riot," said John Flahive, a senior vice president at BNY Mellon Wealth Management, of demand for the Dec. 10 bonds. His $1 million buy "was only 20 percent or 25 percent of what I wanted."

And much of it came right back into the coffers of the banks with whom it had entered into its 19 swap contracts -- including Goldman, Morgan Stanley and JP Morgan.

The value of Harvard's swaps dropped as the fixed rates sought by banks in exchange for floating rates on new swaps fell below what the university was paying. By Oct. 30, its swaps were worth a negative $570 million, meaning that's how much Harvard needed to pay to get out of them, S&P said.
...
Some proceeds from the $1.5 billion bond sale paid termination fees for the forward-rate swaps, the S&P report said. Harvard declined to say how much it spent to get out of the agreements. As much as $99.3 million of the $1 billion sale paid off swaps related to existing debt, Harvard's official statement on those bonds said.

It's hard to explain exactly how swaps sent so many public sector institutions into such fiscal peril so quickly, except to say that the contracts all hinged on the financial health of a few bond insurers that all went bust in tandem with AIG, and relatively liquid markets that started to collapse with Bear Stearns. But critics have long suspected the swaps were engineered primarily to ensure a steady stream of fees to the banks that arranged the deals -- and last year Ben Bernanke wrote a letter to Congressman Jim Moran suggesting public sector entities might consider banning derivatives in the future.

As for Harvard, we're pretty sure their business model is safe. Good thing they got rid of that Summers guy though, huh.

http://tpmmuckraker.talkingpointsmemo.com/2009/04/where_goldman_made_its_massive_profits_hint_its_no.php#more

[Demeter]

76. AIG accused of 'dirty tricks' campaign

http://www.independent.co.uk/news/business/news/aig-accused-of-dirty-tricks-campaign-1669376.html

By Stephen Foley in New York

AIG, the insurance giant kept alive on a drip of US taxpayer funds, has been diverting some of its bailout money into a dirty tricks campaign against its former boss, politicians allege.

The titanic feud between AIG and Hank Greenberg, who was pushed out in an accounting scandal in 2005, has mushroomed into a major political row, with Democrats demanding to know how much the insurer is spending on public relations firms – and how much time they are spending briefing against Mr Greenberg.

The issue comes on the heels of the bonus row at AIG, when revelations that executives at the disastrous derivatives trading division had been paid $165m (£110m) in bonuses ignited public fury. "I would be extremely disappointed to learn that any of the billions of taxpayer dollars invested to support AIG may have been diverted to finance a public relations campaign against critics of the AIG bailout," Ed Towns, the chairman of the House oversight committee, wrote in a letter to AIG's chief executive, Edward Liddy.

Mr Greenberg has been a persistent critic of the way the government has run AIG since taking an 80 per cent stake to stop it collapsing last September, and has even hinted he will try to take over the company. AIG, meanwhile, is suing him to get him to return 290 million shares in the company.

The insurer now employs four of New York's top PR firms, compared with one before the bailout. Two WPP-owned firms, Burson-Marsteller, which handles firefighting on controversial issues, and Hill & Knowlton, which fields inquiries from Capitol Hill, are the subject of Mr Towns' inquiry.

[Demeter]

78. HOPE IS A GOOD BREAKFAST BUT A BAD SUPPER

==cryptogram says...

[Demeter]

89. AIG in spotlight over derivatives

http://www.ft.com/cms/s/0/cb2ddafc-278c-11de-9b77-00144feabdc0.html

The unit that all but destroyed AIG has failed to sign up for the overhaul of the global derivatives market which was given added impetus by the troubles at the US insurance group.

AIG confirmed that its financial products unit, whose soured bets on credit default swaps forced the company into government hands last year, did not adopt the “Big Bang” protocol that has been signed by more than 2,000 market participants.

The protocol, created under the auspices of International Swaps & Derivatives Association, is intended to make it easier for investors in the opaque market for credit derivatives to know what will happen to their contracts if debt defaults occur. It came into force on Wednesday.

AIG Financial Products opted to eschew the protocol and make bilateral agreements with counterparties on more than 200 outstanding derivatives trades.

People close to the situation said the highly complex nature of many of AIG FP’s trades, particularly the credit default swaps on mortgage-backed securities, made it easier to negotiate with individual counterparties rather than adopt a catch-all protocol.

“We fully intend to adhere to the protocol but for technical reasons have decided to do so through bilateral agreements with our counterparties,” AIG said. Company officials added that for simpler transactions, such as CDSs written on individual corporate bonds, AIG FP would adopt a contract similar to the protocol.

AIG FP’s move raised eyebrows, with worries that because AIG is not a signatory to the new credit derivatives regime, it could choose not to abide by a credit event ruling.

Senior bankers and AIG downplay AIG FP’s absence from the protocol as the unit unwinds its legacy positions, runs down its portfolio and is no longer an active participant in the market.

[ozymandius]

106. Fvcking robbery!

And much of it came right back into the coffers of the banks with whom it had entered into its 19 swap contracts -- including Goldman, Morgan Stanley and JP Morgan.

And we are supposed to believe that the robbery these banks perpetrated against individuals and institutions will abate under this crook's supervision? Fuck that noise.

[Demeter]

80. Lehman Sits on Bomb of Uranium Cake as Prices Slump (Update1)

http://www.bloomberg.com/apps/news?pid=20601109&sid=aNJJYNBs1rQA&refer=home

DO YOU THINK CHENEY KNEW? HOW ABOUT THE CIA?

By Linda Sandler, Yuriy Humber and Christopher Scinta

April 14 (Bloomberg) -- Lehman Brothers Holdings Inc. is sitting on enough uranium cake to make a nuclear bomb as it waits for prices of the commodity to rebound, according to traders and nuclear experts.

The bankrupt bank, in the throes of paying off creditors, acquired uranium cake “under a matured commodities contract” and plans to sell it when the market improves “to realize the best prices,” Chief Executive Officer Bryan Marsal said.

Lehman, once the fourth-largest investment bank, has an estimated $200 billion in unsecured liabilities left to pay. The uranium, which may be as much as 500,000 pounds, might fetch $20 million at today’s prices of about $40.50 per pound, said traders who asked not to be named because of the confidential nature of the data. Marsal said the traders’ estimate of Lehman’s uranium holding is “reasonable,” while declining to be more specific.

Uranium has dropped for five straight months from $55 a pound on Dec. 1 on concerns that countries including China and India would delay nuclear power projects because of the global economic crisis, and because Lehman might dump its radioactive material on the market, the traders said.

More than 43 million pounds of uranium-oxide concentrate, or yellowcake equivalent sold on the spot market last year, more than doubling the 2007 trading volume, according to Roswell, Georgia-based Ux Consulting Co.

Illiquid Market

The oversupply in an illiquid market pushed prices down about 30 percent between September and November, spurring sales by speculative investors, such as hedge funds, said John Wong, a fund manager in London at CQS UK LLP, which has $6 billion under management including shares of funds that own uranium.

“What people found out is that this is not like playing copper where it’s a liquid and deep market,” Wong said. “A lot of the funds playing this market have blown up.”

Uranium typically trades through broker-dealers, including MF Global Ltd. and Tullett Prebon Plc, or in direct sales between mining companies and nuclear utilities. Utilities buy processed ore known as yellowcake, which is later converted, enriched and fabricated into fuel rods. The New York Stock Exchange also supports trading in futures contracts, which are not linked to physical delivery.

One Bomb

The market is regulated by governments, who control transport of radioactive material and limit the number of buyers and sellers by requiring them to obtain licenses. Utilities and producers are key buyers and sellers. Lehman got its license just a month before its bankruptcy, one of the traders said.

A supply of 500,000 pounds of yellowcake is just “slightly” less than the amount needed to make one bomb, or fuel one nuclear power reactor for a year, if the latest enrichment technologies are used, said Gennady Pshakin, an Obninsk, Russia-based nonproliferation expert.

Lehman, before filing for bankruptcy protection in September, actively traded commodities in the broker-dealer market and on exchanges such as the London Metal Exchange and the New York Mercantile Exchange. After filing, it began unloading holdings of everything, including greenhouse-gas credits, traders said. Uncertainty about the bank’s plans for its uranium is helping to depress prices, Wong said.

“Everyone knows there’s still an overhang,” he said. If Lehman sold its remaining stockpile, “there’d be a tightness in the market immediately.”

Testing the Market

Lehman “tested” the uranium market after its bankruptcy filing in an effort to raise cash, pulling back after it did because “everyone was low balling,” Marsal said. With $10 billion in the till today from other asset sales, Lehman isn’t in a hurry any longer to sell uranium, he said.

“We plan on gradually selling this material over the next two years,” he said. “We are not dumping this on the market and have no fire-sale mentality.”

Lehman’s bankruptcy forced it to liquidate assets to pay creditors. Some $400 billion out of $639 billion in assets were offset by matching liabilities, Marsal said.

The bank raised a quick $1.75 billion in September by selling its North American brokerage and real estate to Barclays Plc. It later got the London-based bank to return thousands of Lehman-logoed knickknacks that also will be sold to pay creditors, the bank said. They include tote bags, umbrellas, stress balls, Tiffany paperweights and other items now stored in closets and warehouses from New York to Chicago.

Canadian Storage

Lehman’s radioactive material is partly stored in Canada, Marsal said. One trader, who declined to specify a date, said he was offered 450,000 pounds of Lehman uranium stored in facilities owned by Canada’s Cameco Corp. and France’s Areva SA.

“When Lehman first approached the market to sell the material, they had a flawed market strategy,” said Kevin Smith, head of uranium trading and marketing at commodities brokerage Traxys SA. “They were trying to sell it all as a block and part of it was at a less desirable location. It was a take-it-or- leave-it offer, so everyone left it.”

The bankruptcy case is In re Lehman Brothers Holdings Inc., 08-13555, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

To contact the reporters on this story: Linda Sandler in New York at [email protected]; Yuriy Humber in Moscow at [email protected]; Christopher Scinta in New York bankruptcy court at [email protected].

[Hugin]

82. Next thing you know they'll be complaining there's too much Govt regulation on Yellowcake.

Mark my words... These people never learn.

[tclambert]

88. The Second Amendment!

The right to keep and bear arms shall not be infringed. (The highest authority, the NRA, has ruled the other wording in the official text of the Second Amendment is just meaningless gobbledygook.)

No exceptions listed for automatic weapons, RPGs, tanks, MOABs, nor nuclear weapons. The founding fathers were Revolutionaries! (Maybe even terrorists.) They wanted private citizens to own military grade weapons so they could overthrow the government. And making money by selling military weaponry? Well, that's just about the only industry where we still have a trade surplus.

Surely you wouldn't want the government to intrude into private commerce by preventing Lehman from selling uranium to the highest bidder.

[tclambert]

87. Well, now, you know, the guv'mint contracts out its nuclear weapons manufacturing.

Babcock and Wilcox Pantex makes 'em. Sandia National Laboratories, a subsidiary of Lockheed Martin, designs 'em. The military just buys 'em.

Don't worry, though! It's not like the businessmen in charge might be tempted to sell nukes for profit, or anything. They're too scared of Jack Bauer.

[Demeter]

84. UBS seeking to drop accounts for undeclared EU cash: report

http://news.yahoo.com/s/nm/20090419/bs_nm/us_ubs_accounts_1

ZURICH (Reuters) – Swiss bank UBS (UBSN.VX) (UBS.N), under pressure from an international campaign against tax evasion, wants to drop accounts for undeclared cash from Europe Union clients, Sonntagszeitung newspaper reported on Sunday.

Scaling back on the controversial accounts would be the most radical step so far by the bank in moves to curb its offshore business.

UBS, the world's largest wealth manager in terms of assets, is already exiting the offshore business for U.S. clients.

The paper, citing a high-ranked UBS manager, said the bank would separate out untaxed assets and try to get rid of them.

"UBS exits the lucrative business of undeclared money," ran the headline on the paper's story...The offshore business with EU clients is much bigger than with U.S. clients, although the bank does not disclose details on offshore accounts.

Sonntagszeitung said UBS clients from Germany, France, Britain and other EU countries would be moved to special units. They would no longer receive visits nor advice via telephone or email. Only a minimal service in Switzerland would be kept.

Swiss banks, especially UBS, have come under pressure as countries like the United States and Germany step up the fight against tax evasion. Switzerland has recently relaxed its banking secrecy and agreed to cooperate more in cases of tax evasion...

Last week, UBS said it saw outflows of 23 billion Swiss francs ($19.91 billion) in its wealth management and Swiss banking business in the first quarter, mainly after the hand-over of the client data.

(Reporting by Sven Egenter; Additional reporting by Lisa Jucca: Editing by David Cowell)

[Demeter]

85. Geithner sees no new banking crisis: report

HERE IT IS, FOLKS--THE LINE IN THE SAND; THE PRETEXT TO RID US OF THAT STODGE!

http://news.yahoo.com/s/nm/20090419/bs_nm/us_financial_geithner_banking_3

TOKYO (Reuters) – U.S. Treasury Secretary Timothy Geithner does not see a second wave of banking collapses and the government is ready to support capital-raising when needed, a Japanese newspaper said on Sunday.

In an interview with the Asahi Shimbun newspaper, Geithner was quoted as saying U.S. authorities were making sure there was steady funding and that banks were able to meet commitments.

"So in some ways what we're saying is we're going to backstop the amount of capital-raising that's necessary," he was quoted as saying in an English text of the interview.

"And again, a lot of that will come from the market, ultimately. But where it doesn't we'll make sure we provide it."

In an attempt to assess banks' capital needs, the U.S. government is testing how they would fare under more adverse economic conditions than are expected. The results are due at the end of April.

Once the "stress tests" are finalized and the capital needs are determined, banks will have six months to raise capital in the private market or could take an infusion of government funds.

Geithner was also quoted as saying the Group of Seven of rich nations and the Group of 20, which also includes emerging economies such as China and India, were "very complementary forums."

Geithner will host both a G7 finance ministers meeting and a G20 ministerial session on April 24 in Washington.

He told the Asahi that China had played a role in stabilizing the global financial crisis, and added that Beijing was committed to a more flexible currency regime over time.

"China's exchange rate appreciated quite substantially in real terms," he was quoted as saying.

"China's accumulation of foreign reserves has slowed and they are putting in place economic policies that will encourage domestic demand and growth."

(Reporting by Chisa Fujioka; editing by Jeremy Laurence)

[CatholicEdHead]

90. Pearls Before Swine says it all today

[Demeter]

91. Real Interesting Blog chain Letter at AngryBear

http://angrybear.blogspot.com/2009/04/i-agree-with-hank-paulson-not-paul.html

[Hugin]

92. I was just over in...

GD:P watching Naomi Klein get eviscerated in a very similar manner to the treatment Krugman received over there not so long ago.

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=132&topic_id=8354143&mesg_id=8354143

[Dr.Phool]

93. I've been over there in this thread.

I need some lye soap and a fire hose. These Obamaphiles are insane.

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x5483721

The stoopid in this place is amazing anymore.

[Tansy_Gold]

95. Oooh, that was ugly, ugly, UG-ly.

some of the rationalizations make my hair hurt.

Ick


:hi:


TG

[Hugin]

96. They better watch out...

About the only thing Klein and Krugman have in common other than being clobbered in the GD:P is that they are both Jewish.

One more evisceration in a row and I'm thinking it becomes Antisemitism

Heck, I'm not even Jewish and I can see it.

[DemReadingDU]

97. That was bad

ugh, and I still live in this state

[Hugin]

98. I must agree with your point over there.

The last thing needed in an economic crisis such as we're in currently is an incentive to incarcerate people to provide a steady supply of cheap (slave) labor. It's what the Red Chinese would do.

Hey, didn't they just catch a couple of Judges in PA doing exactly that? Oh, no... Wait... They were keeping the juvenile jails full to get larger kickbacks from the privatized prison special-interests.

[Demeter]

99. sounds like a lot of heavy drinkers deep in their cups

[Demeter]

100. Obama: No taxpayer money for bank 'black hole'

IF OBAMA WANTS TO LIE, HE'S GONNA HAVE TO DEVELOP SOME BETTER TALKING POINTS AND TECHNIQUES.

http://www.marketwatch.com/news/story/obama-vows-not-pour-money/story.aspx?guid={3B77F964-BFB3-4028-B132-5B24B2E91116}&siteid=yahoomy


SAN FRANCISCO (MarketWatch) -- President Obama said Sunday that he'll require "accountability" from U.S. banks that require additional bailout funds, and vowed he would not put taxpayer money into a "black hole," according to media reports.

Obama spoke at news conference at the conclusion of the Summit of the Americas in Port-of-Spain, Trinidad.

"If taxpayer money is involved, I've got a responsibility to ensure some transparency and accountability in the operations of those businesses," Obama was quoted as saying.

The U.S. government is now carrying out stress tests on lenders to determine whether each bank has sufficient capital reserves to cover loan losses over the next couple of years based on a series of economic projections for that period. Read more on bank stress tests.

Based on each stress test, Treasury and bank regulators will decide if the government needs to provide additional capital to the banks. Results are expected to be released May 4.

"We try to use as light a touch as we can. But I am not going to simply put taxpayer money into a black hole, where you are not going to see results," Obama said, according to Reuters.

Despite signs of recovery in the banking sector, Obama reportedly said the economy is "not out of the woods," and that credit is still contracted.
Also on Sunday, Obama's economic adviser Larry Summers said the president planned near-term steps on protecting consumers from exorbitant credit-card fees.

The president is "going to be very focused, in a very near term, on a whole set of issues having to do with credit card abuses, having to do with the way people have been deceived into paying extraordinarily high rates that they wouldn't have paid if they knew what they were getting themselves into," Summers said on NBC's "Meet the Press," according to media reports.
End of Story
Lisa Twaronite reports for MarketWatch from San Francisco.

[Demeter]

101. Is TARP Investigator on Collision Course With Treasury on Bank Assets?

http://www.nakedcapitalism.com/2009/04/is-tarp-investigator-on-collision.html

This could get interesting. The Financial Times tells us that Neil Barofsky, the special investigator general for the TARP, is looking at whether banks cooked their books by overvaluing assets to qualify for TARP funding. Remember, bank had to fall into this funny construct of being sick enough to need help, but not so sick as to be terminal.

And since we are widely reading reports of banks carrying lots of mortgage paper at higher than 80 cents on the dollar (we've even seen reports of over 90 cents on the dollar being common) it would appear that Barofsky's suspicions are well founded.

So play this out: we have the public private partnerships designed to hoover up assets at well above market levels. These programs are voluntary, so the banks most decidedly will not sell assets unless they get a price that is above the current carrying value on their books. And recent research suggests that, contrary to the Treasury's claims otherwise, the current market values are likely to reflect accurately what this dreck is worth. So taxpayers are being asked to overpay substantially for junk in an opaque and unnecessarily costly subsidy (the need to bring in the private asset managers as a fig leaf only adds costs, since they need to somehow see decent odds of a positive return). And doing it this way, by making an indirect subsidy to the banks, excludes the overpayment from what the government calculates as its subsidy to each bank. The more the taxpayers perceive they have given to a Citi or a BofA, the more they are entitled to demand control, or at least more restraints (particularly on risk taking. Why should these banks be gambling with taxpayer funds to enrich shareholders?). So muffing the equation helps the plutocracy.

But now Barofsky is likely to find the banks overvalued their assets to make themselves look less sick. That's tantamount to saying they defrauded the government, and that the PPIP is overpaying for assets by an even larger margin than previously thought.

Let's hope he does not get muzzled.

From the Financial Times:

Neil Barofsky, special inspector-general for the troubled asset relief programme, told the Financial Times he was seeking evidence of wrongdoing on the part of banks receiving help from the fund, which was designed to ease credit conditions and support distressed industries.....

Large banks from Citigroup to Goldman Sachs and hundreds of regional banks have taken billions from Tarp to rebuild balance sheets weakened by the financial crisis.

But institutions applying for Tarp money had to show they were fundamentally sound, potentially prompting them to mis-state their assets and liabilities.

Mr Barofsky also said the Treasury’s expanded term asset-backed securities loan facility (Talf) was ripe for fraud.

The former New York prosecutor said the decision to expand the Talf to encourage investors to buy distressed, or “legacy”, assets from banks could put public money behind investments that were backed by fraudulent mortgages.

“One of our strongest recommendations of the last report was do not expand the Talf to buying legacy assets. If its structure is not changed considerably it’s very, very dangerous,” he said.

“We know the triple A rating was a sham. We could be buying securities that are backed with assets that we know were likely riddled with fraud.”

Mr Barofsky revealed at a Congressional hearing earlier this month that he was involved with “probably more than a dozen” investigations into possible wrongdoing and fraud. He told the FT that potential fraudsters would pay attention when his team began seeking indictments. “Indictments can serve as great deterrents,” he said....

With scant reporting requirements when the bail-outs began at the end of last year, banks had a fairly free rein on what to do with Tarp money. Concerned about a lack of transparency, Mr Barofsky has written to all of them to ask how the funds were spent.

“We haven’t served a single subpoena,” he says. The preliminary audit will be published in the next few weeks, after analysis of the “pretty detailed descriptions with what banks say they’ve done with the money”.

That fulfils part of his office’s transparency remit and is not necessarily a trawl for fraud. But big banks are potential targets...

“One of our main areas of focus is to see if there was a significant communications breakdown as to how that policy decision was made,” says Mr Barofsky.

[Demeter]

102. John Dizard: Geithner's and Citi's Days Numbered

http://www.nakedcapitalism.com/2009/04/john-dizard-geithner-and-citis-days.html

Now I will admit my headline overstates John Dizard's current column in the Financial Times a hair, but only a hair. Dizard has a somewhat baroque way of presenting his messages, and the color can take the edge off his communiques. Nevertheless, he has cultivated contacts among central bankers as well as at the major financial firms, so he typically has good intelligence.

The big messages are that Washington simply cannot make all the bank bondholders good, despite its pretenses it can. Citi is going to become a test case sooner than most realize. Dizard also says that the charade that the banks have a liquidity problem not a solvency problem, is wearing thin even on those who have good reason to play along (and as far as I can tell, there is absolutely no Plan B when the world wakes up and realizes what a crock Plan A was).

Dizard's certainty that Geithner and Citi are goners comes through loud and clear even through his elaborate prose.

From the Financial Times:

“That piece of shit up there, I never liked him. I never trusted him... But that’s history, I’m here, he ain’t.” Tony Montana (Al Pacino), watching a colleague hanged from a helicopter.

Scarface (1981)

It’s nearly time for some Washington careers to get the helicopter-noose treatment, particularly among the crowd of unvetted advisers and the tiny group of confirmed appointees at the Treasury Department. Politicos and policy hustlers have a style that differs slightly from Tony’s, but they’re about as sentimental. Secretary Timothy Geithner, not a bad or dishonest person, just a mediocrity who picked the wrong friends and trusted them for too long, can probably hear the rotor blades in the distance. Sadly, the prospective compensation packages for his next career are more modest than they would have been even a year ago…

For the rest of us, the question is who can be the next to take the lead on the national workout. That is probably Sheila Bair, chairman of the Federal Deposit Insurance Corp. But the FDIC needs serious reinforcement of its talent, and a different capital structure, for this to work.

You can pick out the likely geographical spot where the present bail-out wave will recede: 399 Park Avenue, the Citigroup HQ. Already, the Federal Deposit Insurance Corp’s resolution planners are circling the holding company’s shareholders, bondholders, and – at last! – top management.

Even other Tarp financed Wall Streeters are getting tired of the pretence that the Treasury and its advisers are brilliant or that their schemes make sense. Vishwanath Tirupattur, a Morgan Stanley credit strategist, said on a conference call last week that “The policymakers think lack of liquidity and leverage is the main problem…they think prices are depressed more for technical than underlying reasons. There are clearly several asset classes where current prices are better explained by collateral performance.”

“Collateral performance” means that the banking system’s real losses, not temporary mark to market losses, are overwhelming the capital injections finance-able by Federal bail-out appropriations. Congress won’t vote for any more, because they want to safely return home to their districts and maybe get re-elected.

So who’s left? The receivers at the FDIC. They’re sort of like the Internal Revenue Service, though without the Service’s easygoing institutional nature and its agents’ good sense of humour.

When there is a seizure, or “resolution”, of a bank, they take over as owner, guarantee deposits, and fight to take control of any assets. They are not customer-centric, relationship lenders. The FDIC is a corporation owned by the US government, but its costs are paid through levies on member banks.

Before Sheila Bair puts up government buildings colour swatches on the wall of Mr Geithner’s office, though, she will want to decide whether it might make more sense to stay in her current position. Senate confirmation would not be a challenge for her. Maybe, though, having some other punching bag at the Treasury would be better, especially since the FDIC faces staff shortages. Managing that, as well as a leadership transition and a raft of resolutions, would be difficult.

Also, while the Wall Streeters in Mr Geithner’s corner are demoralised enough to be brushed aside, and the big bank shareholders are either playing some derivative arb or totally out of it, the bondholders of the banks aren’t going to run away crying like little girls. Their basic implied threat is to withhold any further capital investment in big banks, which example would be followed by foreigners. That is less scary than it was before Hank Paulson’s crash.


Yves here. That is a standard threat, "Stiff the bondholders, and you'll never raise cash again," and it is utter rubbish. Bond investors LOVE investing in nice cleaned up companies exiting bankruptcy. Happens all the time. And note Dizard's claim that Geithners' Wall Street defenders are losing faith. Back to the article:

Chris Whalen of Institutional Risk Analytics, which, among other activities, profiles bank credit quality, says “The administration has said that all the senior debt of the banks is money good, but they don’t have the money to back that u.p,,,,Before the end of the second quarter, we have to come to a decision on Citibank. Government cannot write a cheque for $200bn, $300bn or $400bn to bail out the bondholders.”...

Citi might buy some time with writeups on assets formerly marked to market. And even with bank bondholders sliced up and turned into mere stockholders, and with the FDIC backed with a $500bn (£341bn, €377bn) (or bigger) line of credit with the Treasury, a systemic workout will eventually need new law.


Yves here. Geithner has given lip service before Congress to being able to put big banks in receivership, but I have seen nada in the way of concrete steps to make that happen. Back to the article:

The key problem is this: if the cash the FDIC uses for big bank resolutions really is a loan from the Treasury, then it will have to be repaid with a usurious assessment on the rest of the insured banks. That would not leave sufficient operating cash flow, or capital accumulation, for the banks to finance recovery. So the loan must turn into an equity capital contribution from the taxpayers.

However, since the FDIC is owned by the same taxpayers, and insures their deposits, that will be an easier sell than any more capital “investments” in the banks or dealers. Also, FDIC managers have modest houses in the suburbs, and drive minivans rather than limos. Better optics.

[Demeter]

103. Obama Stakes His Fortunes on Failed Banksters: Jonathan Weil

http://www.bloomberg.com/apps/news?pid=20601039&refer=columnist_weil&sid=aNMQDysdnKRc


April 9 (Bloomberg) -- Now that we have a rough idea how President Barack Obama and his lieutenants plan to prop up insolvent financial institutions using taxpayers’ money, we’re left with a more difficult question: Why?

Why doesn’t the Obama administration force insolvent banks and insurance companies to come clean about their losses first? It’s the “why” that’s so vexing. The who, what, when, and how are mere details, by comparison.

More than anyone else’s, it should be in Obama’s political self-interest to accelerate the worst of the financial crisis and get as much of the inevitable pain behind us as quickly as possible. Every day he waits is one less day he will have between the time we hit rock bottom and the next election. And yet, Obama and his minions are doing all they can to delay the reckoning, which only will make it worse.

When publicly owned companies change management, often the smartest thing a new chief executive officer can do is clear the decks and take a “big bath” charge to earnings. In other words, the company writes off all its worthless assets and reports huge losses, pushing every conceivable drop of red ink into the past. The new CEO gets to blame his predecessor’s dumb mistakes. The company gets a fresh start with the investing public.

Obama could have taken the same approach with the banks the moment he took office, while he still had standing to blame the financial crisis on George W. Bush’s administration, stupid regulators, and corrupt lawmakers -- that is, everyone but himself.

Executive Order

He could have ordered all U.S. financial institutions to immediately confess whatever losses they hadn’t yet recognized. And he could have backed that up by vowing to prosecute every officer, director and auditor the Justice Department could find who had approved numbers they knew to be wrong.

Obama didn’t do that. And now, six months into the government’s Troubled Asset Relief Program, his administration’s approach to the financial crisis is largely indistinguishable from its predecessor’s. The only objective, it seems, is to buy time, in hopes that an economic recovery somehow will materialize and lift the financial system back to health.

The Obama administration’s “strategy,” for lack of a better word, is to keep plying broken financial institutions with as much taxpayer money as the government can print. And so the government will keep subsidizing failed mega-banks indefinitely, rather than placing any into receivership or liquidating them.

Taxpayers at Risk

The latest iteration of this policy is the Treasury Department’s Public-Private Investment Program. In short, struggling financial institutions will be encouraged to swap their most toxic mortgage-related assets with one another at inflated prices. The purchases will be financed by big government loans, so that taxpayers are at risk for the bulk of any losses.

If the government wanted transparency, it would force financial institutions to write down their bad assets now, and figure out afterward which companies deserve taxpayer support. Instead, the Treasury plans to recapitalize them first, keep their current financial condition hidden, and let their failed managers stay in their jobs.

The key assumption underlying this plan is that the declines in the values of these companies’ toxic assets are the result of private investors’ temporary reluctance to buy them, and that prices will rebound if Treasury can revive the markets where these assets trade.

Proper Values

The Treasury hasn’t explained why it believes the assets’ proper values are their original book values, rather than the prices unsubsidized investors are willing to pay for them. (This is one of the points made in an April 7 report by the U.S. bailout program’s Congressional Oversight Panel.) If Treasury’s hunch proves wrong, the government will need to rely on something other than a rising economy to restore the banks to solvency.

So why don’t Obama, Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke force the banks to write down their troubled assets first, as a condition of government assistance? We can only speculate, because their explanations so far have made no sense.

Perhaps they’re scared the markets would panic if large, insolvent financial institutions started telling investors just how undercapitalized they are. There’s the distinct chance some of Obama’s advisers are beholden to failed banksters, because they used to work for them and may want to do so again someday.

Manpower Shortage

There also could be a manpower problem. The government might not have enough employees to seize all those sickly banks and supervise the process of winding them down. Probably, it’s some combination of those and other factors.

Why else would the Treasury tell the 19 biggest U.S. banks to undergo “stress tests” of their financial health, and then put the banks in charge of performing the tests on themselves? Those reasons also might help explain why regulators pressured the board that sets U.S. accounting standards to weaken the rules on mark-to-market accounting, so the banks could hide their losses and show more capital.

Whatever the case, as long as the government refuses to remove the cancer of zombie banks from our financial system, there’s little hope the U.S. will return to robust economic growth anytime soon. And the longer our wounded banks are allowed to stagger along with no end-game in sight, the greater the risk for Obama that voters will conclude he’s as responsible for blowing the cleanup as others were for causing the crisis.

He’d better act soon. Time may not be our side any longer.

(Jonathan Weil is a Bloomberg News columnist. The opinions expressed are his own.)

To contact the writer of this column: Jonathan Weil in New York at [email protected]

[Demeter]

104. And Now Back to That Fiddler (on the Roof) the Drinking Song

Tevye the milkman goes to the tavern to negotiate his daughter's marriage to the butcher, and they drink on the deal. Since it's an "integrated" establishment, the Christians join in, and they all dance until a major brawl breaks out....



To life! To life! L'chai-im!
L'chai-im, l'chai-im, to life!
If you've been lucky, then Monday was No worse than Sunday
was,
Drink l'chai-im, to life.

To life, l'chai-im!
L'chai-im, l'chai-im, to life!
One day it's honey and raisin cake,
Next day a stomach ache,
Drink L'chai-im, to life!

Our great men have written words of
Wisdom to be used
When hardship must be faced;
Life obliges us with hardship
So the words of wisdom
shouldn't go to waste.

To us and our good fortune
Be happy be healthy, long life!
And if our good fortune never comes
Here's to whatever comes,
Drink l'chaim, to life!

http://www.allmusicals.com/lyrics/fiddlerontheroof/tolife.htm

MUCH MORE AT LINK

I'M STOPPING HERE WITH A TOAST TO US. HAVE A GOOD WEEK, ALL!