STOCK MARKET WATCH, Wednesday February 24

[ozymandius]

Source: du

STOCK MARKET WATCH, Wednesday February 24, 2010

Bush Administration Officials Convicted = 2
Name(s): David Safavian, James Fondren

Bush Administration Officials Charged = 1
Name(s): Richard Lopez Razo

Financial Sector Officials Convicted since 1/20/09 = 11

AT THE CLOSING BELL ON February 23, 2010

Dow... 10,282.41 -100.97 (-0.97%)
Nasdaq... 2,213.44 -28.59 (-1.28%)
S&P 500... 1,094.60 -13.41 (-1.21%)
Gold future... 1,103 -10.10 (-0.91%)
10-Yr Bond... 3.68 -0.11 (-3.00%)
30-Year Bond 4.63 -0.10 (-2.03%)

---

U.S. FUTURES & MARKETS INDICATORS
NASDAQ FUTURES..............................................S&P FUTURES

Market Conditions During Trading Hours

GOLD, EURO, YEN, Loonie, Silver and US$

---

Handy Links - Market Data and News:
Economic Calendar    Marketwatch Data    Bloomberg Economic News    Yahoo! Finance
    Google Finance    Bank Tracker    Credit Union Tracker    Daily Job Cuts

Handy Links - Economic Blogs:
The Big Picture    Financial Sense    Calculated Risk    Naked Capitalism    Credit Writedowns
    Brad DeLong    Bonddad    Atrios    goldmansachs666    The Stand-Up Economist

Handy Links - Government Issues:
LegitGov    Open Government    Earmark Database    USA spending.gov

Handy Links - Videos:
The Coming Collapse of the Middle Class    Charlie Rose talks with Roubini    Charlie Rose talks with Krugman    William Black: This Economic Disaster    Bill Moyers with Kevin Drum and David Corn

---

This thread contains opinions and observations. Individuals may post their experiences, inferences and opinions on this thread. However, it should not be construed as advice. It is unethical (and probably illegal) for financial recommendations to be given here.

Read more: du

[ozymandius]

1. Today's Reports

10:00 New Home Sales Jan
Briefing.com 325K
Consensus 354K
Prior 342K

10:30 Crude Inventories 2/19
Briefing.com NA
Consensus NA
Prior 3.08M

http://www.briefing.com/Investor/Public/Calendars/EconomicCalendar.htm

[UpInArms]

44. U.S. Jan. new-home sales down 6.1% in past year - U.S. Jan. new-home sales drop 11%

10:00a U.S. Jan. new-home sales down 6.1% in past year

10:00a U.S. Jan. median new home price down 2.4% in year

10:00a U.S. Jan. new-homes month supply rises to 9.1

10:00a U.S. Jan. new-home inventory rises 0.4% to 234,000

10:00a U.S. Jan. new-home sales fall to record-low rate

10:00a U.S. Jan. new-home sales drop 11% to 309,000 rate

[Roland99]

47. New home sales hit record low in January

http://news.yahoo.com/s/ap/20100224/ap_on_bi_go_ec_fi/us_economy

The Commerce Department reported Wednesday that new home sales dropped 11.2 percent last month to a seasonally adjusted annual sales pace of 309,000 units, the lowest level on records going back nearly a half century. The big drop was a surprise to economists who had expected sales would rise about 5 percent over December's pace.

...

January's weakness was evident in all regions except the Midwest, where sales posted a 2.1 percent increase. Sales were down 35 percent in the Northeast, 12 percent in the West and almost 10 percent in the South.

The drop in sales pushed the median sales price down to $203.500. That was down 5.6 percent from December's median sales price of $215,600, and off 2.4 percent from year-ago prices.

New home sales for all of 2009 had fallen by almost 23 percent to 374,000, the worst year on record. The National Association of Home Builders is forecasting that sales will rise to more than 500,000 sales this year, an improvement from 2009 but still far below the boom years of 2003 through 2006 when builders clocked more than 1 million new home sales per year.

[ozymandius]

2. Oil hovers below $79 after US crude supply drop

SINGAPORE – Oil prices hovered below $79 a barrel Wednesday in Asia after a report showed U.S. crude inventories unexpectedly fell last week, suggesting demand may be improving. ...

Crude inventories fell 3.1 million barrels last week, the American Petroleum Institute said late Tuesday. Analysts had expected an increase of 2 million barrels, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.

Supplies of distillates, which include heating oil and diesel fuel, also fell while gasoline supplies grew, the API said. ...

In other Nymex trading in March contracts, heating oil gained 0.64 cent to $2.0389 a gallon, and gasoline rose 0.23 cent to $2.0679 a gallon. Natural gas was steady at $4.779 per 1,000 cubic feet.

http://news.yahoo.com/s/ap/oil_prices

[ozymandius]

3. Banks report small profit but 'problem' list jumps

WASHINGTON – The number of U.S. banks considered troubled jumped to more than 700 last quarter even as the industry squeezed out a small profit in a recovering economy. ...

The snapshot for October-December 2009 issued Tuesday by the Federal Deposit Insurance Corp. offered a tale of two banking sectors. On the one hand, big banks have been gradually recovering, many of them with help from federal bailout money. On the other, small and mid-sized institutions continue to suffer distress that will likely persist in the coming years.

Loan losses and bank failures are likely to continue to haunt the industry as regional banks succumb to soured commercial real estate loans. ...

Such defaults could escalate the wave of bank failures that numbered 45 in the fourth quarter and totaled 140 last year. That was the highest annual total since 1992, at the peak of the savings-and-loan crisis. So far this year, 20 banks have failed. FDIC Chairman Sheila Bair said that pace likely will pick up this year.

http://news.yahoo.com/s/ap/20100224/ap_on_bi_ge/us_banks_earnings

[ozymandius]

4. Reid seeks extension of jobless aid

WASHINGTON – Senate Majority Leader Harry Reid is pressing to extend unemployment benefits and health insurance subsidies for the jobless through December as he and Republicans try to clear leftover Senate business.

Reid also hopes to keep helping cash-strapped states with their Medicaid budgets, he said Tuesday on the Senate floor. Taken together, these proposals would cost in the range of $100 billion. ...

Facing a Feb. 28 deadline, Reid hopes to pass two measures, one as soon as possible. The first includes a 30-day extension of several of soon-to-expire provisions such as jobless aid, parts of the Patriot Act and prevention of cuts in Medicare payments to doctors.

Reid and McConnell were discussing the parameters of the second — a broader, longer-term measure — in a private conversation on the Senate floor. A top Reid aide could be overheard suggesting a full-year extension of unemployment insurance and a 65 percent health insurance subsidy for the unemployed through the federal COBRA program.

http://news.yahoo.com/s/ap/20100224/ap_on_bi_ge/us_congress_unemployed

[ozymandius]

13. Horrid Job Number Coming

...The Labor Department employment report to be released on March 5 will say that it is for February, but the fine print will say it is for a particular week. Both the household survey (which produces the unemployment rate) and the employer survey (which produces the job count) ask about workers in the week during which the 12th of the month fell.

For February, that was the week of the 7th to the 13th. There were blizzards on the East Coast the previous weekend, and again during the week.

That means that a lot of people who had jobs may report they did not work during the week, and companies may say they had fewer people on the payroll than they would have cited a week earlier or later. If so, we may get a truly horrid job number. ...

http://norris.blogs.nytimes.com/2010/02/22/horrid-job-number-coming/?pagemode=print

[Robbien]

42. Daily Job Cuts

Just found this site
http://www.dailyjobcuts.com/

The site owner scans the news for notices of organizations announcing layoffs (and bankruptcies and closings). Sad to see so many schools on the list for today. Chicago is also in a big battle right now about closing down schools.

February 24 , 2010

Fort Mill School SC - 30 Possible Job Cuts

The town of Oro Valley AZ - 2 Building Inspectors

Santa Ana Unified trustees - Voted 126 Layoffs Next School Year

Update: Bakersfield City School District Ca - Approves 120 by Next School Year

Temecula Valley Unified school District - 150

Stockton Unified School District - 200 Layoff Notices by March 15

Belleayre Mountain Ski Center - 59

Lake Norman Regional Medical Center - < 50 Temporary Laid off

Update: Visalia Unified School District - 26

Merced City School District - 19 Layoff Notices

Lenovo - 32

The Dryden Central School District - 17 Possible

Ford Motor Credit Business Center in Mauldin SC - 100

Muni May Transit - 170

Jackson Memorial Hospital - Cut up to 1,000 Jobs

NYC Transit Agency - 1,000

Update: ABC News - 300 to 400

[Juneboarder]

57. OMG... that is just horrible!

And we're creating more jobs? I think not...

[Loge23]

77. Sears closing 20+ stores

Another 1,000 jobs will be lost.

http://www.nj.com/business/index.ssf/2010/02/sears_closing_2_nj_stores_as_p.html

[ozymandius]

5. Flagging confidence intensifies economic fears

NEW YORK – Americans' confidence in the economy has suffered a sudden relapse, dimming hopes that they will start spending — and spurring job growth — any time soon.

The Consumer Confidence Index figures released Tuesday were much worse than analysts had expected and showed that Americans are morose about the job market and their economic prospects. That bodes ill for the sort of uptick in consumer spending that normally powers economic recovery, and could raise pressure on the Obama administration and Congress to create jobs themselves.

The index fell almost 11 points to 46 in February, down from a revised 56.5 in January and the lowest level since a 40.8 reading in April 2009. It erased three consecutive months of improvement, according to the Conference Board, the research group that releases the monthly index. ....

Confidence has been recovering fitfully since hitting a historic low of 25.3 in February 2009. Many economists believe it will remain well below healthy levels for at least another year or two. A reading above 90 indicates an economy is on solid footing. Above 100 signals strong growth.

http://news.yahoo.com/s/ap/20100223/ap_on_bi_go_ec_fi/us_economy

---

The index hasn't been this low since December 1974.

[mbperrin]

24. December 74 was the end of the semester before I graduated from college.

Remember it well (no matter how much you'd like to forget).

Finally got a commission job selling truck tires. 2% of sales against a $150/week draw. Definitely made me wonder why I had just finished a BA.

[stevebreeze]

28. 74 was the first time I got laid off.

[DemReadingDU]

69. 74 was the year of my 1st child, and pregnant with 2nd

Thankful just being at home.

[skoalyman]

82. 74 was the year I was born

January 23

[ozymandius]

6. Facing pressure, Bernanke to address lawmakers

...Now, lawmakers want to know what he can, or will, do to ease the jobs crisis and make sure the economic recovery lasts. Many will be looking, too, for any clues about when the Fed might start to tighten credit.

Bernanke, who will deliver his twice-a-year economic report to Congress, will be under more pressure than usual. It's an election year for lawmakers, whose constituents face near-double-digit unemployment, record-high home foreclosures and tough-to-get credit, especially for small businesses. ...

Bernanke will probably have to reverse course and start tightening credit for millions of Americans even when unemployment is still high. The timing of that move will be the next big challenge for the Fed. Boosting rates too soon could derail the recovery. But waiting too long could trigger inflation and feed a speculative asset bubble. That, too, could threaten the economy, along with Americans' pocketbooks and nest eggs. ...

http://news.yahoo.com/s/ap/20100224/ap_on_bi_ge/us_bernanke

[ozymandius]

7. Bernanke Likely to Face Questions on Jobless Recovery

...Unemployment “will be a big topic” when the Fed chief faces the Senate Banking Committee, Senator Bob Menendez, a New Jersey Democrat and a panel member, said in an interview. “How do we help small- and mid-sized businesses, because they’re the ones who are going to create the jobs? What is he going to do and the Federal Reserve going to do to help grow this economy?”

Democratic leaders are pushing legislation to stimulate the job market amid concerns that unemployment will translate into losses in November elections. The Senate is scheduled to vote today on a $15 billion bill that provides a payroll tax holiday for hiring workers who have been jobless for at least 60 days. ...

Fed Bank Presidents Janet Yellen of San Francisco and Dennis Lockhart of Atlanta said this month that economic growth probably won’t rapidly bring down the unemployment rate. More than 8 million jobs have been lost in the recession that started in December 2007. ...

Central bankers last month restated their intention to cease buying $1.25 trillion of mortgage-backed securities at the end of March, and maintained their commitment to keep rates near zero for an “extended period.”

http://www.businessweek.com/news/2010-02-24/bernanke-likely-to-face-questions-on-jobless-recovery-update1-.html

---

Edited to add: "Jobless recoveries" do not exist. The economy might look like it is growing on paper but it is essentially meaningless per meaningful sustainable development. It's a bit like me, on paper, being named Xultar: Ruler of the Known Universe. It simply does not make me so.

[Demeter]

8. People Are Starting to Pay Attention to The Economic Realities

But it may be too late. they got us boxed, sealed, and ready to dump into their evil plot to not just take over but completely destroy the world.

I don't get it. Where did this desire to destroy, to override every social impulse inculcated through centuries of community, come from?

[ozymandius]

11. Good morning, Demeter and all.

Consider the checklist:

• Own members of the public policy institutions;
• Cultivate a "revolving door" political patronage system;
• Block access of "little people" to the courts to redress grievances;
• Break labor unions to scatter and demoralize those opposed to company policy;
• Cannibalize institutions to enrich self...

The list could get quite long.

I do not know how and why the basest of impulses spread their contagion. It feels like a heightened state of desperation has taken hold. People who have resources in sufficient quantity want more because an insatiable desire for want resides within them. People who have little to nothing want what some describe as basic human needs.

[boomerbust]

15. One event that comes to mind

Was the day Trickle Down Ronnie fired all the union air traffic controllers. It's been all down hill from there.

[Tansy_Gold]

19. The desire to destroy

I firmly and honestly believe that it is all rooted in a calvinistic, patriarchal, anti-woman jealousy religion that demands "If I don't have the power to CREATE then I'll sure as fucking hell have the power to DESTROY and show you, ha ha ha."

I keep telling the BF to back away from this whole stupid "personal responsibility" bullshit and begin looking at the cultural motivations underpinning many/most of our institutions. I keep telling him that the U.S. did not develop organically the way many other cultures did, but was created, like some megamega-version on the Sun City planned community model, as a theocratic state. And that if the eventual development of those tiny colonies over the next four centuries didn't retain all the characteristics of that grace-is-bestowed-and-cannot-be-earned ideology, they were poured into the foundations like the blood of martyrs.

But then, that is the sociologist and feminist in me.

Tansy Gold

[Demeter]

31. Chilling. I'm Shivering As I Read Your Post

Of course, the fact that it's a blizzard outside today might have something to do with it...It looks like Ann Arbor has its own, little, personal cloud over it, emptying its guts on the land.

This is the snowiest its been all winter--

[Tansy_Gold]

33. Sunday -- and think about it

I once asked the BF, when we were in one of these discussions, why Sunday is so special. Why do we not have liquor sales in some places on Sunday? Or why can't we sell liquor after midnight on Saturday until after noon on Sunday? Why can we have college classes on Saturday but not Sunday? Why do we pay time and a half overtime for Saturday, double time for Sunday?

I said there is no explanation other than Sunday has been sanctified by religion of a particular type to such an extent that it persists to this day. It's not Saturday or Friday or Wednesday, but SUNDAY, the traditional Christian "day of rest."

And these are the cultural markers that alert me to the underlying foundations of the various institutions. Do they look anti-woman, anti-life? If so, what are the potential/possible origins?

I could be wrong.

I'm only human.


I'm only



Tansy Gold

[Demeter]

35. I've Always Seen the Invisible Hand of Christianity in Govt.

But I always found Corporations singularly deaf to religious mores and customs. If it weren't for federal laws, I'm sure Corporations would ignore holidays entirely--as Scrooge would have preferred.

So why did Corporations go in for misogyny, etc? Once the rules were rewritten that women could not be exploited at 59 cents on the dollar, which the Govt. had permitted all along...until it didn't anymore.

It's rather like the Workers, having won a few minor battles, needed to be totally crushed before they took over. Workers of the World, Unite!

[Tansy_Gold]

40. It's all co-optation

The patriarchal powers co-opted this new religion because it was getting too many lower class followers, so the teachings of the executed traitor Jesus had to be mixed in with the traditional hierarchical, anti-woman, anti-life beliefs. Apparently it was harder to silence the unwritten whispers of the xtian message than it was to burn or otherwise destroy the books with the written message, which is why the scrolls were hidden at Q'umran. Books are tangible and can be destroyed before their words become beliefs, and that makes it easier to control the masses. Just don't let them have the books and they will have nothing to think about. :sarcasm:

The thread about the cult that starved the child for not saying amen is illustrative, I think, of how the successful the co-optation has been. The thread, that is, not the actual event.


Tansy Gold, still slogging

[Festivito]

9. Debt: 02/22/2010 12,403,027,179,655.21 (UP 972,344,066.53) (Mon)

(Tiny mixed moves. Debt seems to jump up big then drop slowly maybe up a little and down a little for days--repeat. Good day all.)

= Held by the Public + Intragovernmental(FICA)
= 7,893,549,784,639.46 + 4,509,477,395,015.75
DOWN 206,249,204.22 + UP 1,178,593,270.75

Source: Debt to the penny:
http://www.treasurydirect.gov/NP/BPDLogin?application=np

THINKING IN BILLIONS: Think 3 or 4 dollars per billion in a 309-Million person America.
If every American, man, woman and child puts in $3.24 each THAT'S 1B$.
A family of three: Mom, Dad, Child: $9.71, ABOUT TEN BUCKS for a 1B$ federal program.
I hope that is clear. However, I'd suggest using $3 per 1B$ to underestimate it.
Use $4 per 1B$ to overestimate the cost when thinking: Is the federal program worth it?
Aid to Dependant Children: 2B$/yr =$8/yr(a movie a year) Family of 3: $24/yr(an hour of bowling)

PERSONALIZED DEBT:
Every 10 seconds we net gain another American, so at the end of the workday of the report, there should be 308,806,878 people in America.
http://www.census.gov/population/www/popclockus.html ON 11/07/2009 08:19 -> 307,879,272
Currently, each of these Americans owe $40,164.35.
A family of three owes $120,493.05. (And that is IN ADDITION to their mortgage.)

ANALYSIS:
There were 21 reports in the last 30 to 31 days.
The average for the last 21 reports is 4,788,651,987.52.
The average for the last 30 days would be 3,352,056,391.26.
The average for the last 31 days would be 3,243,925,539.93.
There were 252 reports in 365 days of FY2007 averaging 1.99B$ per report, 1.37B$/day.
There were 253 reports in 366 days of FY2008 averaging 4.02B$ per report, 2.78B$/day.
There were 75 reports in 112 days of GWB's part of FY2009 averaging 8.03B$ per report, 5.38B$/day.
There were 174 reports in 253 days of Obama's part of FY2009 averaging 7.33B$ per report, 5.07B$/day so far.
There were 249 reports in 365 days of FY2009 averaging 7.57B$ per report, 5.16B$/day.
There were 97 reports in 145 days of FY2010 averaging 5.08B$ per report, 3.40B$/day.
Above line should be okay

PROJECTION:
There are 1,063 days remaining in this Obama 1st term.
By that time the debt could be between 13.9 and 17.9T$.
It could be higher. It could be lower.

HISTORICAL:
President's term begins and ends on Jan 20.
(Guess who might want to hide the Reagan Bush years. Jan 20 data is missing before 1993.)
01/20/1993 _4,188,092,107,183.60 WJC Inaugural
01/22/2001 _5,728,195,796,181.57 WJC (UP 1,540,103,688,997.97)
01/20/2009 10,626,877,048,913.08 GWB (UP 4,898,681,252,731.43)
02/22/2010 12,403,027,179,655.21 BHO (UP 1,776,150,130,742.13 so far since Obama took office.)

FISCAL YEAR DEBT CHANGE, Sep 30 prior year to Sep 30 named year:
(One "* " for each 40B$ reached)
FY1994 +0,281,261,026,873.94 ------------* * * * * * * WJC
FY1995 +0,281,232,990,696.07 ------------* * * * * * * WJC
FY1996 +0,250,828,038,426.34 ------------* * * * * * WJC
FY1997 +0,188,335,072,261.61 ------------* * * * WJC
FY1998 +0,113,046,997,500.28 ------------* * WJC
FY1999 +0,130,077,892,735.81 ------------* * * WJC
FY2000 +0,017,907,308,253.43 ------------WJC
FY2001 +0,133,285,202,313.20 ------------* * * C&B
01-WJC +0,053,598,528,417.78 ------------* WJC 31% of FY, 40% of FY-Debt
01-GWB +0,079,686,673,895.42 ------------* GWB 69% of FY, 60% of FY-Debt
FY2002 +0,420,772,553,397.10 ------------* * * * * * * * * * GWB
FY2003 +0,554,995,097,146.46 ------------* * * * * * * * * * * * * GWB
FY2004 +0,595,821,633,586.70 ------------* * * * * * * * * * * * * * GWB
FY2005 +0,553,656,965,393.18 ------------* * * * * * * * * * * * * GWB
FY2006 +0,574,264,237,491.73 ------------* * * * * * * * * * * * * * GWB
FY2007 +0,500,679,473,047.25 ------------* * * * * * * * * * * * GWB
FY2008 +1,017,071,524,649.92 ------------* * * * * * * * * * * * * * * * * * * * * * * * * GWB
FY2009 +1,885,104,106,599.30 ------------* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * B&O
09GWB +0,602,152,152,000.60 ------------* * * * * * * * * * * * * * * GWB 31% of FY, 32% of FY-Debt
09-BHO +1,282,951,954,598.70 ------------* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * BHO 69% of FY, 68% of FY-Debt
FY2010 +0,493,198,176,143.50 ------------* * * * * * * * * * * * BHO
Endof10 +1,241,498,857,188.81 ------------* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * Linear Projection

LAST FIFTEEN REPORTS OF ADDITIONS TO PUBLIC DEBT(NOT FICA):
02/01/2010 +090,319,223,365.33 ------------********** Mon
02/02/2010 -000,066,012,400.47 ----
02/03/2010 +000,334,538,130.44 ------------********
02/04/2010 -009,677,289,403.68 --
02/05/2010 -000,081,816,346.60 ----
02/08/2010 +000,119,837,978.11 ------------******** Mon
02/09/2010 +000,368,016,270.35 ------------********
02/10/2010 -000,056,577,287.25 ----
02/11/2010 +007,265,093,186.33 ------------*********
02/12/2010 -000,104,736,856.82 ---
02/16/2010 +030,097,605,306.92 ------------********** Tue
02/17/2010 +000,408,694,886.67 ------------********
02/18/2010 +015,224,901,067.79 ------------**********
02/19/2010 +000,114,262,910.59 ------------********
02/22/2010 -000,206,249,204.22 --- Mon

134,059,491,603.49 Total of 15 above reports.

Heavy borrowing seems to start after 09/18/2008 while Bush was in power JUST BEFORE fiscal year end.
Bush admin borrowed $962,245,245,654.01 in those last 124 days in office crossing two fiscal years.
$360,093,093,653.42 in last 12 days of FY2008, and $602,152,152,000.59 in subsequent 112 days before leaving office.

For a prettier and more explanatory view of our nation's debt:
http://www.brillig.com/debt_clock
http://www.usdebtclock.org/
DUer primer on National debt

(Debt to the penny keeps changing. Stuff is missing. Best to keep our own history.) LAST REPORT:
http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=102&topic_id=4279641&mesg_id=4279650

[Festivito]

65. Debt: 02/23/2010 12,409,374,679,862.09 (UP 6,347,500,206.88) (Tue)

(Up a bit. Debt seems to jump up big then drop slowly maybe up a little and down a little for days--repeat. Good day all.)

= Held by the Public + Intragovernmental(FICA)
= 7,893,954,003,115.85 + 4,515,420,676,746.24
UP 404,218,476.39 + UP 5,943,281,730.49

Source: Debt to the penny:
http://www.treasurydirect.gov/NP/BPDLogin?application=np

THINKING IN BILLIONS: Think 3 or 4 dollars per billion in a 309-Million person America.
If every American, man, woman and child puts in $3.24 each THAT'S 1B$.
A family of three: Mom, Dad, Child: $9.71, ABOUT TEN BUCKS for a 1B$ federal program.
I hope that is clear. However, I'd suggest using $3 per 1B$ to underestimate it.
Use $4 per 1B$ to overestimate the cost when thinking: Is the federal program worth it?
Aid to Dependant Children: 2B$/yr =$8/yr(a movie a year) Family of 3: $24/yr(an hour of bowling)

PERSONALIZED DEBT:
Every 10 seconds we net gain another American, so at the end of the workday of the report, there should be 308,815,518 people in America.
http://www.census.gov/population/www/popclockus.html ON 11/07/2009 08:19 -> 307,879,272
Currently, each of these Americans owe $40,183.78.
A family of three owes $120,551.34. (And that is IN ADDITION to their mortgage.)

ANALYSIS:
There were 22 reports in the last 30 to 32 days.
The average for the last 22 reports is 4,859,508,724.76.
The average for the last 30 days would be 3,563,639,731.49.
The average for the last 32 days would be 3,340,912,248.27.
There were 252 reports in 365 days of FY2007 averaging 1.99B$ per report, 1.37B$/day.
There were 253 reports in 366 days of FY2008 averaging 4.02B$ per report, 2.78B$/day.
There were 75 reports in 112 days of GWB's part of FY2009 averaging 8.03B$ per report, 5.38B$/day.
There were 174 reports in 253 days of Obama's part of FY2009 averaging 7.33B$ per report, 5.07B$/day so far.
There were 249 reports in 365 days of FY2009 averaging 7.57B$ per report, 5.16B$/day.
There were 98 reports in 146 days of FY2010 averaging 5.10B$ per report, 3.42B$/day.
Above line should be okay

PROJECTION:
There are 1,062 days remaining in this Obama 1st term.
By that time the debt could be between 13.9 and 17.9T$.
It could be higher. It could be lower.

HISTORICAL:
President's term begins and ends on Jan 20.
(Guess who might want to hide the Reagan Bush years. Jan 20 data is missing before 1993.)
01/20/1993 _4,188,092,107,183.60 WJC Inaugural
01/22/2001 _5,728,195,796,181.57 WJC (UP 1,540,103,688,997.97)
01/20/2009 10,626,877,048,913.08 GWB (UP 4,898,681,252,731.43)
02/23/2010 12,409,374,679,862.09 BHO (UP 1,782,497,630,949.01 so far since Obama took office.)

FISCAL YEAR DEBT CHANGE, Sep 30 prior year to Sep 30 named year:
(One "* " for each 40B$ reached)
FY1994 +0,281,261,026,873.94 ------------* * * * * * * WJC
FY1995 +0,281,232,990,696.07 ------------* * * * * * * WJC
FY1996 +0,250,828,038,426.34 ------------* * * * * * WJC
FY1997 +0,188,335,072,261.61 ------------* * * * WJC
FY1998 +0,113,046,997,500.28 ------------* * WJC
FY1999 +0,130,077,892,735.81 ------------* * * WJC
FY2000 +0,017,907,308,253.43 ------------WJC
FY2001 +0,133,285,202,313.20 ------------* * * C&B
01-WJC +0,053,598,528,417.78 ------------* WJC 31% of FY, 40% of FY-Debt
01-GWB +0,079,686,673,895.42 ------------* GWB 69% of FY, 60% of FY-Debt
FY2002 +0,420,772,553,397.10 ------------* * * * * * * * * * GWB
FY2003 +0,554,995,097,146.46 ------------* * * * * * * * * * * * * GWB
FY2004 +0,595,821,633,586.70 ------------* * * * * * * * * * * * * * GWB
FY2005 +0,553,656,965,393.18 ------------* * * * * * * * * * * * * GWB
FY2006 +0,574,264,237,491.73 ------------* * * * * * * * * * * * * * GWB
FY2007 +0,500,679,473,047.25 ------------* * * * * * * * * * * * GWB
FY2008 +1,017,071,524,649.92 ------------* * * * * * * * * * * * * * * * * * * * * * * * * GWB
FY2009 +1,885,104,106,599.30 ------------* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * B&O
09GWB +0,602,152,152,000.60 ------------* * * * * * * * * * * * * * * GWB 31% of FY, 32% of FY-Debt
09-BHO +1,282,951,954,598.70 ------------* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * BHO 69% of FY, 68% of FY-Debt
FY2010 +0,499,545,676,350.30 ------------* * * * * * * * * * * * BHO
Endof10 +1,248,864,190,875.75 ------------* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * Linear Projection

LAST FIFTEEN REPORTS OF ADDITIONS TO PUBLIC DEBT(NOT FICA):
02/02/2010 -000,066,012,400.47 ----
02/03/2010 +000,334,538,130.44 ------------********
02/04/2010 -009,677,289,403.68 --
02/05/2010 -000,081,816,346.60 ----
02/08/2010 +000,119,837,978.11 ------------******** Mon
02/09/2010 +000,368,016,270.35 ------------********
02/10/2010 -000,056,577,287.25 ----
02/11/2010 +007,265,093,186.33 ------------*********
02/12/2010 -000,104,736,856.82 ---
02/16/2010 +030,097,605,306.92 ------------********** Tue
02/17/2010 +000,408,694,886.67 ------------********
02/18/2010 +015,224,901,067.79 ------------**********
02/19/2010 +000,114,262,910.59 ------------********
02/22/2010 -000,206,249,204.22 --- Mon
02/23/2010 +000,404,218,476.39 ------------********

44,144,486,714.55 Total of 15 above reports.

Heavy borrowing seems to start after 09/18/2008 while Bush was in power JUST BEFORE fiscal year end.
Bush admin borrowed $962,245,245,654.01 in those last 124 days in office crossing two fiscal years.
$360,093,093,653.42 in last 12 days of FY2008, and $602,152,152,000.59 in subsequent 112 days before leaving office.

For a prettier and more explanatory view of our nation's debt:
http://www.brillig.com/debt_clock
http://www.usdebtclock.org/
DUer primer on National debt

(Debt to the penny keeps changing. Stuff is missing. Best to keep our own history.) LAST REPORT:
http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=102&topic_id=4281371&mesg_id=4281397

[ozymandius]

10. Geithner May Give Regulators Leeway in Applying Volcker Rule

Feb. 24 (Bloomberg) -- The U.S. Treasury Department wants to give regulators discretion to define proprietary trading as the White House tries to revive its plan to bar banks from making risky bets that could cause another financial crisis.

One month after President Barack Obama said firms “will no longer be allowed” to trade for their own accounts, officials say they need flexibility to avoid impairing the $7.2 trillion Treasury securities market. ...

The proposed ban on proprietary trading has met opposition in Congress, hampered by criticism that the administration waited too long and offered too few details. ...

The Obama administration is working with the Senate on legislation to forbid banks that take government-insured deposits from trading exclusively for their own profit or investing in hedge funds or private-equity operations. At the same time, proprietary trading will need to be defined in a way that doesn’t prevent banks from keeping their own trading accounts that may be used to offset customer bets or to ensure that securities are easily traded. ...

This week, Republicans continued to question whether additional legislation was needed for regulators to crack down on risky activity. Senator Richard Shelby, the top Republican on the banking panel, said it will be difficult to define proprietary trading in the legislation.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aieZ19R8J5HI&pos=1

---

Oh the stupidity of it all! Let somebody else define "proprietary trading" with detailed language. That angle has worked for the banks and against everyone else's interest since hair-splitting legislation gave the banks whatever they want with specified loopholes. Use simple language and broad terms to define the parameters of "proprietary trading" and close the loopholes.

All the banks need is detailed language to enable their prostitutes in the Senate to change the wording very subtly to render the bill-come-law ineffective in its aims.

[ozymandius]

16. Volcker Rule Being Deep Sixed

Yves Smith argues that the Volcker Rule was inadequate, to start, and is being rendered utterly meaningless through the Bankster sycophants in the Senate:

Separate proprietary trading operations are a relatively recent development, and plenty of speculation occurs on market-making desks. Gillian Tett pointed out that the so-called “trading books” were regularly abused in the run-up to the crisis (for instance, the large CDO positions, which were tantamount to proprietary positions, were held on customer dealing desks). Thus even with the Volcker rule, bad practices that played a direct role in the meltdown would continue to be backstopped.

The second flaw is that Volcker appeares to have an outdated view of the financial system. He viewed backstops as limited to banks, meaning depositaries. Yet in the crisis, emergency lifelines were throws to a host of non-banks: AIG, Goldman, Morgan Stanley, plus Bear and Merrill (via subsidized mergers). Bloomberg contended that Goldman and Morgan Stanley could continue to be bank holding companies, but would have to give up their banking subsidiaries, which would have a very limited impact on their business (for instance, a source who understood the operations of one major Wall Street firm estimated the rule would affect less than 1% of their activities). Reader MichaelC disagreed, arguing that Goldman booked its credit default swaps on the books of its bank subsidiary, so it would be troublesome and costly for them to escape; I checked with other sources, and they said it was too early to tell what the rule might really look like to tell.

All these debates appear to be moot. The Volcker rule is following the tried and true path of all Obama “reforms”, meaning an idea announced with great fanfare is being whittled back to meaninglessness. ....

Yet while Treasury appears to be, um, clairfying the Volcker rule, the White House maintains its steadfast support:

Asked if the Obama administration is softening its insistence on the Volcker rule, White House Press Secretary Robert Gibbs yesterday said, “absolutely not.”

“We’re not walking away from, and we’re not watering down that proposal one bit,” Gibbs said.

Yves here. But in reality….

In negotiations with Congress, administration officials have focused on giving regulators the power to set limits and to design the program in a way that avoids market disruptions.

http://www.nakedcapitalism.com/2010/02/volcker-rule-being-deep-sixed.html

---

Ozy here: Now we would not want to do anything that would "disrupt" anything that makes the Banksters happy, would we?

[Tansy_Gold]

17. Am I too cynical?

Was Volcker rolled out only to placate the masses? Then as soon as the masses started putting away the torches and pitchforks, Volcker was tucked back into his cubbyhole and it all returned to business as usual?



Tansy Gold, more and more cynical by the day

[Dr.Phool]

18. It's sure starting to look like it.

Couple that with Timmeh's alleged "charm offensive". I just hope it all holds together for a little while longer. My Dad finally got a contract on his house in SC, yesterday. And he didn't take a major beating. He sold it for what he paid for it 6 years ago. Now, I can get him down here to this nice little retirement community in Clearwater.

[Tansy_Gold]

21. Congrats for your dad and for you

My mother has been trying for three years to sell her condo in Chicago, with no luck whatsoever. If things turn around enough for her to do so, I have to hope she decides to stay up there and not come down here. She's arriving for a four-day visit next week, and I am truly afraid that after too many years in the gloom of midwest winters, after my dad's passing two years ago, and all the attendant loneliness and depression, etc. after all that that she will spend four days here and decide she wants to move here. I have space for her, but not for her and me both, if that makes sense.

And now I need to get back to work on the fallout from the nightmare software conversion that will not go away. . . .



Tansy Gold, missing you all very much

[DemReadingDU]

22. My son in Ohio just got a contract on their house yesterday

I think they will break even, so that's good. His wife wants to move closer to her mom, but then they would both have to travel 50-60 minutes to their jobs (compared to 20 minutes now). How nuts is that??? And gas is getting more expensive again. So I suggested that they find a place to rent for awhile. They might not like paying hundreds dollars more in gas. Plus, I suggested that while they are renting, houses will be coming down in price, and they can get a really good deal by waiting to buy. But whose kids take a parents advice?

Edit: both have good jobs and really don't want to switch and start over at lower salaries.

[Demeter]

25. All my fingers crossed for you, Doc

also toes, legs, arms...

Once your father is comfortable, we get to work on MINE (with full environmental armor, and butterfly nets).

[Ghost Dog]

23. You're not (it's what I thought at the time). Meanwhile: TOBIN TAX moves:

EU should 'coordinate' Tobin tax ideas: Commission
23 February 2010, 23:43 CET

(BRUSSELS) - European nations should use a tax on financial transactions to boost their income, European Commission policymakers argue in a report on economic strategy for the next decade.

"New tax bases, eg financial transactions, should be explored, in a coordinated way, as potential sources of government revenues," according to the European Commission's "2020" vision, seen by AFP and due to be published on March 3.

/... http://www.eubusiness.com/news-eu/finance-economy.2u6

Economists and MEPs call for Tobin Tax
Tuesday, 16 February 2010 08:42

A letter from 350 leading economists including Joseph Stiglitz calls on the G20 countries to tax international financial transactions as a way of both reducing harmful currency speculation and to generate funds to help poorer countries.

This adds further weight to calls from some 850 international parliamentarians led by a group of Members of the European Parliament.

Civil society organisations in the UK have also launched a high-profile campaign to support what they are calling the "Robin Hood Tax"


Read more at http://www.independent.co.uk/news/business/news/hundreds-of-economists-call-for-tax-on-currency-speculation-1899534.html
and http://tobintaxcall.free.fr/documents%20t%E9l%E9charg%E9s/Brochure%20Tobin%20FPM%202003.pdf
www.robinhoodtax.org

You may also enjoy the viral at http://www.youtube.com/watch?v=qYtNwmXKIvM

/... http://www.globalhealtheurope.org/index.php?option=com_content&view=article&id=265:economists-and-meps-call-for-tobin-tax&catid=37:current&Itemid=103

Tax on Financial Transactions
February 15, 2010

Given the recent publicity about the ”Robin Hood” tax, it’s perhaps not surprising that it was given an honourable mention at the plenary session of the European Parliament in Strasbourg last week. An amendment to a resolution on the Conference on Climate Change held in Copenhagen in December suggested a tax on financial transactions, the Tobin tax named after the economist James Tobin who first mooted the idea, to support international climate action.

Although the amendment was defeated due to lack of support from the centre-right and right wing groupings in the European Parliament, I was pleased that many, though sadly not a majority, of MEPs joined with those campaigning to make the Tobin tax a reality.

We know that Prime Minister Gordon Brown, Nicolas Sarkozy, President of France, and the German Chancellor Angela Merkel have all been strong advocates of what is becoming known as the “Robin Hood” tax. You couldn’t find a much better line up than that. Gordon Brown, in fact, started to lobby for support for the Tobin tax in the City of London in the autumn of last year and I understand the International Monetary Fund is looking at such a plan, despite opposition from the United States.

It is, of course, the international nature of the Tobin tax which it such an ideal tool for raising money for matters which require action in more than one country. The recently launched campaign in Britain by comedy writer Richard Curtis and popular actor Bill Nighy for such a a ”Robin Hood” tax to be levied on banks is rare indeed in that it is popular for its own sake and targeted at an unpopular group – the banks. Richard Curtis’s proposal to impose a 0.5% tax on international bankers’ transactions could raise up to £250 billion per year, a huge sum half of which would be retained by the country where the deal took place and the other half split between tackling climate change and reducing global poverty. The plan targets institutions not ordinary people and is set at a level which should not hurt the banks.

/... http://thehoneyballbuzz.com/2010/02/15/tax-on-financial-transactions/

"Tobin Tax" and UN Global Taxman Making A Comeback
Monday, 08 February 2010 12:00

For decades, the "Tobin Tax" — a proposed global tax on currency transactions — has remained far from economic mainstream thought, being primarily the hobby horse of left-wing academics and advocates of world government, such as the World Federalists, or communist dictators, such as Fidel Castro. The past few years, however, have seen a host of Tobin-type proposals coming from more establishment sources.

In the past few months, it has been boosted by liberal-left economists Paul Krugman and Robert Kuttner, as well as French President Nicolas Sarkozy, French Foreign Minister Bernard Kouchner, British Prime Minister Gordon Brown, European Commission President Jose Manuel Barroso, the European Council, Greek Prime Minister George Papandreou (who is also president of the Socialist International) and the U.K.'s Financial Services Authority chairman Lord Adair Turner.

Advocates of the Tobin tax, named for the late Yale economics professor and Nobel laureate James Tobin, suggest a tax on foreign currency transactions would engender international currency stability by discouraging speculation. Some politicians, like Gordon Brown and Venezuela's Hugo Chavez, have pushed for Tobin taxes at the national level. However, as the British journal The Economist noted, "Unless a Tobin tax were implemented worldwide, trading would move out of any country that enforced it."

Tobin proponents differ greatly on the optimum rate that should be charged, which is to be expected, since the line between speculating and investing is largely subjective. Some Tobin tax advocates propose "simplifying" things by levying a tax not only on foreign currency conversions, but all securities transactions. With tens of trillions of dollars in transactions taking place, that raises the possibility of raising hundreds of billions of dollars annually in new tax revenues. Voila! Suddenly the Tobin tax is transformed from a "stabilizing" tool into an almost inexhaustible global source of revenue. This, of course, raises immediate questions as to who will collect and administer these funds and to what ends they will be put.

Cuban dictator (sic) Fidel Castro, addressing the UN's World Conference Against Racism, Racial Discrimination, Xenophobia and Related Intolerance, in Durban, South Africa, in September, 2001, proposed a Tobin tax that would provide the UN with a trillion dollars annually. Fidel said:

May the tax suggested by Nobel Prize Laureate James Tobin be imposed in a reasonable and effective way on the current speculative operations accounting for trillions of US dollars every 24 hours, then the United Nations, which cannot go on depending on meager, inadequate, and belated donations and charities, will have one trillion US dollars annually to save and develop the world. Given the seriousness and urgency of the existing problems, which have become a real hazard for the very survival of our species on the planet, that is what would actually be needed before it is too late.

Cuba's erstwhile "Maximum Leader" would find few to disagree with him over at the Tobin Tax Campaign and Policy Network, which includes dozens of groups of the far Left, such as the National Lawyers Guild, the Institute for Policy Studies, Friends of the Earth, World Federalists Association, Rainforest Action Network, Oxfam, the World Council of Churches, the Commission on Global Governance, and the AFL-CIO.

The AFL-CIO, however, apparently realizes that a Tobin tax is more politically feasible if the revenues generated from it are promised to spending on domestic programs, rather than the UN, though it is not averse to funding UN projects as well.

Most news stories paint the Obama administration as being firmly against any type of Tobin tax, with much being made of Treasury Secretary Timothy Geithner's reported opposition to Gordon Brown's Tobin proposal at last November's G20 summit. Geithner's anti-Tobin comments may or may not reflect genuine opposition by the administration to the transaction tax; there is ample reason for suspecting that the announced opposition is mere posturing and maneuvering, and that Team Obama may be planning a strategic flip-flop on the issue. After all, that is what Gordon Brown did; before becoming a top Tobin advocate, he was a leading opponent. Ditto for billionaire speculator George Soros, who flipped for the Tobin tax back in 2001 (see here, and here).

/... http://www.thenewamerican.com/index.php/usnews/politics/2901-qtobin-taxq-and-un-global-taxman-making-a-comeback

(Just for example...)

[Dr.Phool]

62. Too many questions.

I don't think you're too cynical. But, Volcker is looking more and more like a dog and pony show.

[Roland99]

37. Obama = The Geraldo Rivera Administration

Al Capone's vault was empty.

[ozymandius]

12. Headline of the Day: “Lending Falls at Epic Pace”

From Ritholtz:

How can you not love that hedder?

It sums up everything in the article in a tidy little package, and delivers it with style and grace. (Plus, its the second time today I have gotten to use the word epic!)

Here is the Journal’s version (pub date FEB 24, 2010):

“U.S. banks posted their sharpest decline in lending since 1942 at the end of last year, suggesting that the industry’s continued slide is making it harder for the economy to recover.

While top-tier banks are recovering at a faster clip, the rest of the industry is still suffering, according to a quarterly report from the Federal Deposit Insurance Corp. Banks fighting for survival, especially those plagued by losses on commercial real estate, are less willing to extend loans, siphoning credit from businesses and consumers.

Besides registering their biggest full-year decline in total loans outstanding in 67 years, U.S. banks set a number of grim milestones. According to the FDIC, the number of U.S. banks at risk of failing hit a 16-year high at 702. More than 5% of all loans were at least three months past due, the highest level recorded in the 26 years the data have been collected. And the problems are expected to last through 2010.”

That is epic!

More at The Big Picture

[ozymandius]

14. Redux from Tuesday: Goldman Sachs Minted Most Toxic CDOs

This story may destroy your appetite.

...
A potentially more important development slipped by with less notice, Bloomberg Markets reports in its April issue. Representative Darrell Issa, the ranking Republican on the House Committee on Oversight and Government Reform, placed into the hearing record a five-page document itemizing the mortgage securities on which banks such as Goldman Sachs Group Inc. and Societe Generale SA had bought $62.1 billion in credit-default swaps from AIG.

These were the deals that pushed the insurer to the brink of insolvency -- and were eventually paid in full at taxpayer expense. The New York Fed, which secretly engineered the bailout, prevented the full publication of the document for more than a year, even when AIG wanted it released.

That lack of disclosure shows how the government has obstructed a proper accounting of what went wrong in the financial crisis, author and former investment banker William Cohan says. “This secrecy is one more example of how the whole bailout has been done in such a slithering manner,” says Cohan, who wrote “House of Cards” (Doubleday, 2009), about the unraveling of Bear Stearns Cos. “There’s been no accountability.” ...

The identification of securities in the document, known as Schedule A, and data compiled by Bloomberg show that Goldman Sachs underwrote $17.2 billion of the $62.1 billion in CDOs that AIG insured -- more than any other investment bank. Merrill Lynch & Co., now part of Bank of America Corp., created $13.2 billion of the CDOs, and Deutsche Bank AG underwrote $9.5 billion. ...

Schedule A also makes possible a more complete examination of why AIG collapsed. Joseph Cassano, the former president of the AIG Financial Products unit that sold the swaps, said on a December 2007 conference call that his firm pulled back from selling swaps on U.S. subprime residential CDOs in late 2005. The list shows that the $21.2 billion in CDOs minted after 2005, mostly based on prime and commercial mortgages, performed as badly as or worse than the earlier subprime vintages.

http://www.bloomberg.com/apps/news?pid=20601109&sid=ax3yON_uNe7I&

[Demeter]

26. If Europe Can Take Down Goldman

They will have repaid us for all of WWII.

I sure hope somebody does, and soon.


Maybe Goldman taking down Europe was a pre-emptive strike?

[UpInArms]

20. dollar watch

http://quotes.ino.com/chart/?acs=NYBOT_DX&v=i

Last trade 80.761 Change -0.089 (-0.11%)

US Dollar Declines Against Major Currencies Ahead of Bernanke Testimony

http://www.dailyfx.com/forex/fundamental/daily_briefing/session_briefing/euro_open/2010-02-24-0546-US_Dollar_Declines_Against_Major.html

The US Dollar traded lower against the spectrum of major currencies ahead of tomorrow’s congressional testimony by Fed Chairman Ben Bernanke, where the US central bank chief will likely downplay the prospects for interest rate hikes in the near term.

Key Overnight Developments

• Japanese Exports Rise Most in 24 Years on Global Stimulus
• US Dollar Down Despite Stock Drop Ahead of Bernanke Testimony



The Euro and the British Pound advanced, adding about 0.2 percent apiece against the US Dollar as the greenback traded lower against the spectrum of its major counterparts ahead of tomorrow’s congressional testimony by Federal Reserve Chairman Bernanke, with the US central bank chief expected to play down last week’s discount rate increase as “normalization” that is not intended to signal the US central bank is speeding up the march to tighten monetary policy. We remain short EURUSD at 1.4881 and GBPUSD at 1.5765.



Japan’s Merchandise Trade Balance showed a surplus of 85.2 billion yen in January as exports grew at an annual pace of 40.9 percent, the fastest in at least 24 years, on the back of close to $2 trillion in global fiscal stimulus that has boosted demand for Japanese cars and electronics. Shipments to Asia led the increase, rising 68.1 percent. Also of note, cross-border sales to the US added 24.2 percent, marking the first increase in the annual growth rate in over two years. Exports have been the primary engine of growth for the world’s second-largest economy as a crippled labor market continues to bear down on private consumption. Most worryingly, this does not seem to be the recipe for sustainable growth considering the flow of stimulus cash will invariably dry up, an outcome that is likely to materialize sooner rather than later considering the widespread worries about public deficits that have taken root over recent months.

...more...

Opening Comment 02.24

http://www.dailyfx.com/forex/fundamental/daily_briefing/daily_pieces/opening_comment/2010-02-24-0530-Opening_Comment_02_24.html

The Euro and currencies in general, have managed to recover marginally ahead of the European open, after getting hit hard in Tuesday trade.

Comments from Fed Bullard, who downplays the latest discount rate hike and suggests that the Fed may hold off moving on its key policy rate until 2011, have helped to inspire some USD profit taking. In Japan, the trade surplus came out better than expected, while corporate services prices remained sluggish. BoJ Yamaguchi was also out saying that the central bank would do its utmost to pull Japan out of deflation.

Meanwhile, Australian data was mixed, with wage growth coming in on the weaker side, and construction showing firmer. The latest Chinese news that CBRC has told lenders to restrict new lending, has weighed on sentiment, but traders seem to be taking the news with a grain of salt given the central bank’s commitment to maintain an overall accommodative policy. Finally, Kiwi has received a bit of a boost on the back of some positive news out from the country’s largest company, after profit forecasts were lifted.

...more...

[Demeter]

27. That Plaza Accord and the Louvre Accord that Was Supposed to Fix It

those were some really stupid accords. Think the nations gave up on globalism at that point? So the Corporations decided to do it all themselves?

[UpInArms]

55. then there was Basel I and II

and they really went beyond the pale to destroy any semblance of sanity

http://en.wikipedia.org/wiki/Basel_Accord

now, we approach March and we need for the Japanese yen to look good since it is their "year end" reporting month - too bad that Toyota seems to have really botched their profit outlook - and then in april the G-whatever number will meet and yammer about what great gods they are and how the mere peons don't need to eat too much ....

:hi:

[Demeter]

29. Are Derivatives the Real Problem?

http://www.informationarbitrage.com/2010/02/are-derivatives-the-real-problem.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+InformationArbitrage+%28Information+Arbitrage%29

Regulators, Congress, and the media generally focus on the crisis at hand. The Enron scandal gave us Sarbox. The market crash has created a PR flurry against “sponsored access” and proprietary trading. AIG generated a firestorm surrounding the use of credit derivatives. The common thread is that policy-makers are reactive and missing the big picture, leading to short-termism and a host of poorly constructed rules and policies. And invariably the word “derivatives” is used as a lightning rod for why new regulations should be promulgated. The problem, however, isn’t exclusive to derivatives; it’s the underlying “business purpose” of transactions. Hedging has a legitimate business purpose. Making markets, speculation, and financing projects have solid business foundations as well. But entering into transactions that serve to hide or obfuscate economic reality work against this principle. And this lack of business purpose is not confined to the derivatives markets, but frequently takes place in the cash markets as well.

Consider leasing, a transaction that has been popular for over 50 years. As the industry has evolved, transactions such as sale/leasebacks and “asset defeasance” have been used to synthetically borrow money without the obligation being reflected as debt on the balance sheet. The form of the transaction: a lease. The substance of the transaction: a borrowing. The multi-trillion dollar securitization industry has the same motivation: moving assets (and liabilities) off the balance sheet, while economic recourse still exists should asset values and/or debt ratings drop. This is what the market discovered when Citigroup’s multi-billion structured investment vehicles (SIVs) began to fail and the assets and liabilities came back onto its financial statements. What is the proper characterization of a contractually obligated stream of payments? Debt. How should a portfolio of assets and associated liabilities be treated if the risks and rewards of ownership haven’t been completely transferred? As never having left the balance sheet. Yet the accounting profession, with the SEC’s support, has enabled this charade to continue.

Derivatives have also been used to achieve similar ends. Structured transactions have been designed to generate upfront cash without a corresponding obligation being recorded on the financial statements. The recent discovery of Greece’s use of these instruments has shined a light on the dangers of hidden borrowings. Municipalities have mortgaged their futures by selling strips of participations in cash flow generating assets (roads, bridges, airports, etc.) in order to generate liquidity today (at a steep cost to financial solvency tomorrow). The virtually unbounded rise of the credit derivatives industry is partly due to the mismatch between the notional value of derivatives being written and the actual value of underlying instruments. This mismatch can be 5x or more of the bonds being “hedged,” leading to market failures when physical delivery is demanded from counterparties lacking actual ownership (or the ability to borrow the position). Neither of these examples embody true business purpose.

Both cash-market and derivative instruments should be put to the “business purpose” test. Accounting rule-makers, with support of the SEC, should move towards a “principles-based” system where common sense, and not black-and-white rules around which myriad loopholes can be found, should become the new paradigm. But let’s be clear. The issue isn’t derivatives; it’s all financial transactions whose objective is to deceive or to weaken financial transparency.

[Demeter]

30. Judge approves BofA settlement with SEC

http://www.ft.com/cms/s/0/53e1c380-1fcc-11df-8deb-00144feab49a.html

A US federal judge on Monday approved a $150m settlement between Bank of America and the Securities and Exchange Commission over disclosure issues related to the acquisition of Merrill Lynch , bringing closure to a matter that had turned into a a public embarassment for the regulator .

In his ruling, US District Judge Jed Rakoff tempered his approval of the deal with criticism of the SEC, writing of the settlement: “While better than nothing, this is half-baked justice at best.”

The judge’s approval means the SEC will no longer have to go to trial next week to prove its allegation that BofA misled shareholders about bonus payments that had been approved for Merrill Lynch.

“We’re very pleased the judge has approved the settlement,” BofA said.

The ruling ends BofA’s regulatory exposure over questions about whether it should have provided its shareholders with more disclosure prior to a December 2008 vote that approved the acquisition of Merrill Lynch.

But two executives at the centre of the disclosure debate still face civil charges of fraud brought by the office of Andrew Cuomo, New York attorney-general.

Mr Cuomo has alleged that Ken Lewis, BofA’s former chief executive, and Joe Price, who was chief financial officer and now heads retail operations at the bank, conspired to hide the magnitude of losses at Merrill Lynch from shareholders before turning round and exaggerating those losses, in an effort to win financial support for the deal from federal regulators.

Lawyers for Mr Lewis and Mr Price have denounced those charges as baseless and plan to fight them in court.

The SEC, which has been investigating the same matters as Mr Cuomo, first reached a settlement with BofA in August, agreeing to let the bank pay a $33m fine to settle charges that it misled shareholders as to the nature and scope of bonus payments that had been approved at Merrill Lynch.

BofA told investors that no huge bonus payments would be given to Merrill executives without prior approval from BofA, but failed to inform shareholders that $5.8bn in bonus payments had already been approved as part of the merger agreement.

Judge Rakoff refused to accept that proposed settlement, and rebuked the SEC for alleging that shareholders had been misled without identifying any executives or lawyers who purportedly did the misleading. In accepting the new settlement, the judge reiterated his overall concern, but said he found the SEC’s reasoning “not to be irrational”.

The $150m settlement incorporates the allegations from the original deal, concerning bonus payments at Merrill, with the larger question of whether BofA should have disclosed Merrill’s mounting losses to its shareholders.

In his ruling last year, Judge Rakoff asked the SEC how it came up with the initial figure of $33m for the fine and questioned the fairness behind allowing executives accused of wrongdoing agree to a settlement in which shareholders would pay a fine for the executives’ alleged misbehaviour.

In agreeing to the settlement on Monday, BofA neither admits nor denies any of the underlying allegations.

[Demeter]

32. Greece threatens more than the euro By Gideon Rachman

http://www.ft.com/cms/s/0/c5aadd7e-1fe7-11df-8deb-00144feab49a.html

As Greece’s financial crisis rumbles onwards, it has become commonplace to argue that the roots of the problem stretch all the way back to the design of Europe’s single currency. Actually, it is worse than that. The Greek crisis is about the very basis on which European unity has been built for the last 60 years. It threatens not just the euro but the entire edifice of the European Union.

The risk for Europe now is that if the EU does not move forward politically in response to the Greek crisis, it will move backwards – and the long process of European integration could start to unravel.

The EU has always proceeded by creating economic “facts on the ground”, which were intended to trigger political effects. Ever since the 1950s this has worked admirably, as a modest coal and steel community turned into a common market and finally into a Union of 27 nations, with its own parliament, supreme court and foreign policy. MAYBE WE SHOULD TRY THIS IN THE US

Jacques Delors, the European Commission president who presided over the creation of a single market in the 1980s, said frankly: “We’re not here just to make a single market – that doesn’t interest me – but to make a political union.” The creation of the single market involved a huge expansion of European law and therefore deep erosions of national sovereignty.

The same political thinking lay behind the design of the single European currency in the 1990s. As Tommaso Padoa-Schioppa, a former member of the board of the European Central Bank, recently wrote in these pages: “The founding fathers wanted the euro primarily as a step towards political union.”

This drive for political union was intensified by the end of the cold war. France feared that a reunited Germany might once again dominate Europe. The French answer was to bind Germany into the European construction through the creation of a single currency. The German government willingly accepted this in return for the promise of a major advance towards political union in Europe, which was a longstanding national goal. (As for the German people, they were never consulted directly – an oversight that may come back to haunt the euro now.)

Gerhard Schröder, the German chancellor at the time that euro notes first emerged from Europe’s cash machines, believed that monetary union required “decisive advances towards political union”. Some, like Romano Prodi, Mr Delors’ successor as Commission president, even looked forward to an eventual crisis in the eurozone as the event that would trigger these “decisive advances”.

Now the crisis has happened – and it clearly invites the big political steps that the founding fathers anticipated. A logical political response to Greek insolvency – and the threat of similar crises in Spain, Portugal and eventually Italy – might be to create common European taxes and a mechanism for big fiscal transfers between EU states. These are features that helped smooth a currency union in the US, but that do not yet exist in Europe.

But there is no sign of any such move. Europe is stuck. So what has gone wrong? The problem is that the “economics first, politics later” method is almost Marxist in its assumption that economics will inevitably dictate a particular political response. But democratic politics involves choice.

The traditional EU method could only work when the political changes prompted by earlier economic decisions did not seem deeply controversial or unfair to ordinary voters. But the kind of political integration required by the euro affects ordinary citizens at a very basic level – since it involves big choices about taxation and spending.

As a result, it exposes a truth that ardent pro-Europeans are very reluctant to acknowledge. Most citizens of the EU still feel far more attached to their own nation than to the Union. “Europeans” are much less willing to bail each other out than they are to bail out their own fellow countrymen. West Germany spent billions to turn around East Germany. But there is little sign that the Germans are willing to spend further billions to turn around Greece – with the spectre of similar crises to come in Spain and Italy. The Germans may feel very “European” in principle. But when they are asked to start writing large cheques to support a bankrupt Greek state, they start to feel strangely German again.

As for the Greeks, they too have counted among the most ardently pro-European people in the Union. But the price of any EU bail-out of Greece is likely to be savage austerity measures, overseen by officials sent in from Brussels. That is likely to feel more like colonisation than a voluntary “political union”.

So what happens now? It is possible that Greece may yet muddle through this crisis. But, in a world of rapidly rising sovereign debt, the next euro-crisis might only be months away. At that point, the members of the European single currency will once again be asked how much they are willing to do (and to pay) to help each other out. If the answer is still, “not very much”, the euro-area might begin to shed some of its weaker members.

But the consequences could go well beyond the single currency. The EU would have a crisis of confidence and the likely result would be that other powers it has acquired, on everything from immigration to social policy, would come into question. There is more than money at stake in the Greek crisis.

[Demeter]

34. Wells Fargo, You Never Knew What Hit You.

Could It Be That the Best Chance to Save a Young Family From Foreclosure is a 28-Year-Old Pakistani American Playright-slash-Attorney who Learned Bankruptcy Law on the Internet?

Wells Fargo, You Never Knew What Hit You.
BY WAJAHAT ALI

- - - -

From time to time we'll be posting full articles from the San Francisco Panorama. Wajahat Ali, the author of the following example, hoped that this article could reach readers all over the web—especially those who might not have found the story through our usual channels—so we're presenting the entire article in both PDF and text-only form. This story, which is hilarious and reads like a thriller, concerns Ali's efforts (as a self-taught, foreclosure attorney) to save a family from foreclosure. It's a must-read, for anyone interested in how banks work—and don't work.

- - - -

Click here to view/download this as a PDF:

http://mcsweeneys.net/PDFS/AliFINAL.pdf

- - - -
THE REST OF THIS SITE LOOKS INTERESTING, TOO.

http://www.mcsweeneys.net/

[Demeter]

36. The Drive to Eliminate Social Security Accelerates By Shamus Cooke

http://www.informationclearinghouse.info/article24837.htm

In Washington each new day brings a fresh call to “reform entitlement programs” — Social Security, Medicare, etc., (in Congress, the word “reform” now means to eliminate, or drastically reduce). Tackling Social Security has been on the to-do list of the corporate elite for years, and they’re not waiting any longer. After years of promoting this cause, conservative think tanks have now garnered solid support from the political establishment as a whole, which includes the Republican and Democratic parties.

The newest liberal recruit to the destruction of Social Security is Thomas Friedman, the influential columnist for The New York Times, who wrote recently:

“The president needs to persuade the country to invest in the future and pay for the past... We have to pay for more new schools and infrastructure than ever, while accepting more entitlement cuts than ever when public trust in government is lower than ever.” (February 20, 2010).

The nonchalance which Friedman calls for cutting Social Security is indicative of the climate in Washington, where the last remnants of liberalism have been suffocated under the heavy demands of profit-hungry corporations, especially financial institutions and big banks. For political hacks like Friedman — and there are thousands of them — the ONLY solution to curing the U.S. deficit is cutting social services in general, while specifically targeting Social Security and Medicare.

But President Obama revealed these assertions to be lies, when he recently announced, “fixing Social Security would be simple.” The Associated Press explains:

“The system is funded with a tax on earnings, up to $109,000 a year. Obama says lifting that cap to tax a larger share of income would be one way to extend the system of monthly payments for retirees. It also would be unpopular with some.” (February 19, 2010).

This idea is indeed very unpopular with the very rich, who enjoy the privilege of paying no Social Security tax after the $109,000 threshold. Obama let an unpopular truth out of the bag when he brought up this fact; but conveniently for him, many mainstream news outlets decided not to amplify the President’s voice.

Obama, however, is unlikely to promote this “radical” idea much further, since he’s already decided on a method to undermine Social Security. Obama’s National Commission on Fiscal Responsibility and Reform is a bi-partisan group that is set to attack Social Security in a way where, in the end, both political parties will be blamed, so that neither party is overburdened with guilt. The Republicans — having made their contempt for Obama more than known — are salivating at the chance to cooperate.

The Washington Post recently announced that Republican leaders have agreed to Obama’s commission, while making no secret about the motive behind the grouping:

“…Obama's commission may lack the power to force the parties to reach consensus on a plan that is almost certain to require deep cuts to the popular entitlement programs — Social Security, Medicare and Medicaid — as well as significant tax increases…Building bipartisan consensus for such a plan would be particularly difficult in the run-up to the fall elections…” (February 19, 2010).

Since the foregone conclusions of Obama’s panel will be so unpopular, the Washington Post explains that they will be announced after the fall elections, in December 2010.

There will be little room in Obama’s commission for his above-mentioned tax increase on the rich. The Republicans have already announced that they will be solidly focusing on reducing services for the working class, not taxing the wealthy.

What will the “reformed” Social Security look like? Again, the Conservative think tanks have an idea waiting in the wings: personal savings accounts. In the same way that 401(k)s killed the pension, Social Security is set to be privatized for the mighty benefit of Wall Street.

Just last week, Republican Rep. Paul Ryan of Wisconsin announced a privatization plan that just happened to coincide with the creation of Obama’s commission. Michael Hiltzik of The Los Angles Times called Ryan’s plan “a roadmap for killing Social Security.” He writes:

“His privatization scheme would allow workers under 55 to place more than one-third of their current Social Security taxes into personal retirement accounts, with the ultimate goal of shifting most of that money into the stock market." (February 17, 2010).

By creating individual accounts, Wall Street is bolstered while the public nature of Social Security is undermined, since Social Security is a “pay as you go” program: if workers under 55 decide to invest in Wall Street, and not to pay into the Social Security fund, older workers don’t receive benefits. Social Security is thus dismantled.

Only workers who have money to save — and are gullible enough to trust their money to Wall Street — will put money in their new Social Security accounts.

The killing of Social Security and Medicare cannot be a one-act drama. If both programs were instantly destroyed, the public outrage would be uncontrollable. Obama’s deficit commission, then, will likely work to undermine the program in a variety of ways so that a future Congress can finish the job.

Therefore, Obama’s commission may recommend a variety of tactics to strip the program: instituting benefit cuts, increasing the age in which benefits are received, and introducing a limited option for personal accounts. Also possible is the implementation of a tiny, ineffectual tax on the rich to give the illusion that everybody is making “sacrifices.”

Whatever methods are used to attack Social Security, they will surely erode the last vestiges of credibility from the two-party system. Most Republicans are aware that their cooperation on the elimination of Social Security and Medicare will destroy what’s left of their party, which is why they are in the midst of creating a new, more radically right-wing party — now a mere tea party.

But the above scenarios are not inevitable, as the corporate establishment would have you think. The only reason Social Security and Medicare were not attacked earlier was the fear of working class reaction. That fear must be reintroduced.

A coalition of unions, pensioners, AARP members, and other retiree organizations must unite to oppose any cuts in Social Security, Medicare, Medicaid, and social services. To begin, these groups could include their demands in a "jobs for all" march on Washington, which many unions have been calling on the labor movement to organize.

Other community and student groups would be drawn into such a struggle, as could the general public. In place of cuts to essential services, a tax on the wealthy and corporations must be demanded, alongside of an end to foreign wars, bank bailouts, and other forms of corporate welfare. If such a coalition fails to materialize, the banks and corporations will continue to loot workers in this country unchallenged. The sooner the cut backs are organized against and smashed, the better.

Shamus Cooke is a social service worker, trade unionist, and writer for Workers Action (www.workerscompass.org). He can be reached at [email protected]

[Demeter]

38. How JP Morgan treats its clients: scandalously and in bad faith

http://blogs.reuters.com/felix-salmon/2010/02/18/how-jp-morgan-treats-its-clients-scandalously-and-in-bad-faith/

Judge Jed Rakoff’s January 29 ruling in the case of Empresas Cablevisión vs JP Morgan Chase Bank has barely been reported, which is a shame, because it sheds some much-needed light on how banks like JP Morgan really operate — and, for that matter, on the kinds of methods by which Carlos Slim has made his multi-billion-dollar fortune.

I’ve put a copy of the ruling here — http://www.scribd.com/doc/27054742/Show- Temp-pl

But the gist is that JP Morgan took one of its longest-standing clients in Mexico — Grupo Televisa — and tried to hand all of its secrets over to its biggest rival, Carlos Slim. And the way it tried to do that was by selling Slim a loan larded up with covenants which would essentially force Televisa to reveal any and all information to the holder of the debt.

I was faxed the ruling in the case by Alfonso de Angoitia, a director and very senior executive within Grupo Televisa, who told me the story behind the lawsuit. I also called JP Morgan for comment, but they said nothing. And it wasn’t one of those 45-minute off-the-record phone conversations where they ultimately say that they decline to comment on the record: this was more like a 10-second conversation where no sooner did I make it clear which case I was calling about than they said “no comment” and the phone call was over. So for JP Morgan’s side of the story, all I have to go on is their 40-page memorandum of law in the case, which is quite narrowly legalistic, which was roundly rejected by Rakoff, and which obviously can’t respond to Rakoff’s ruling since it was filed before Rakoff made his ruling.

In any case, the facts of the case are pretty clear. The relationship between JP Morgan and Televisa goes back decades, and so JP Morgan was the natural choice for Televisa to turn to when it decided to buy a fiber-optic cable company called Bestel for $325 million, $225 million of which was to come from Televisa subsidiary Cablevisión.

JP Morgan intended to syndicate the loan, but the timing was bad: the deal closed in 2008, when credit markets were all but closed, and as a result JP Morgan ended up owning all of it. After an attempt by Televisa to help JP Morgan syndicate the loan fell through, JP Morgan then turned to Inbursa, Carlos Slim’s bank.

This was not an obvious choice from the point of view of serving one’s client. Slim and Cablevisión compete fiercely in the telecommunications space, where Slim is the dominant monopolist and Cablevisión is selling telephony and internet access in competition with him. And the rivalry is all the tougher due to the history between the two groups: Slim used to be a major shareholder in Televisa, and to this day Inbursa owns a 22% stake in Cablevisión.

Now there were two ways of selling this loan: JP Morgan could either assign it to Inbursa, which would require Cablevisión’s permission, or else it could participate it to Inbursa, which would not. At first, JPM tried to assign the loan, but unsurprisingly Cablevisión refused to grant their permission for that deal to happen. It’s worth quoting Judge Rakoff’s ruling here:

On June 3, Guadalupe Phillips of Televisa called Carlos Ruiz de Gamboa of JP Morgan to report that Cablevisión would not consent to the proposed assignment. Gamboa allegedly reacted by threatening to give Inbursa the 90% interest in the form of a “participation.” Later that day, Phillips sent JP Morgan an email with an attached letter from counsel formalizing Cablevisión’s decision. That letter expressed Cablevisión’s belief “that it would be inappropriate, and could cause serious harm to our business and our competitive position, if one of our major competitors is allowed to gain access to confidential and competitively sensitive information about us, or to exert any control over our business affairs and hinder the development of our business.” The letter also noted that a “participation” of 90% of the loan to Inbursa would be similarly unacceptable and would violate JP Morgan’s “duty of good faith” under the Credit Agreement. Nonetheless, JP Morgan began negotiations to transfer 90% of the loan to Inbursa in the form of a Participation, and these discussions continued throughout June and July until a formal agreement between Inbursa and JP Morgan was executed on July 15, 2009.

This is all pretty amazing stuff. Televisa is a client in long standing of JP Morgan, and makes its views on JP Morgan selling the loan to its most formidable competitor very clearly known. What’s more, Televisa even offered to buy back the loan from JP Morgan at exactly the same discount as Inbursa was offering, and JP Morgan’s Sjoerd Leenart gave Televisa every indication that the loan would not be participated to Inbursa. Even as JP Morgan was doing exactly that.

For a bank which claims to pride itself first and foremost on its client focus, this is seriously torrid. It’s pretty clear why Inbursa wanted the debt — we’ll come to that in a minute. But why was JP Morgan so desperate to alienate Televisa by selling it to Inbursa? Is Carlos Slim so scary that if he wants 90% of a $225 million loan, JP Morgan will give up an entire client relationship to sell that to him? Why else would JP Morgan go ahead with a course of action which looks for all the world as though it was designed to anger Televisa as much as possible?

It turns out — that is, it was revealed to Televisa after it finally brought suit against JP Morgan — that this was no ordinary participation agreement, either. It had all manner of extra bells and whistles in it, all of which were designed to (a) make it look very much like an assignment rather than a participation; and (b) extract information from Cablevisión and hand it over to Inbursa. As Rakoff says, “the agreement permits Inbursa to request and receive nearly unlimited information from Cablevisión”. And what’s more, if Cablevisión for any reason refuses to hand over such information, Inbursa can declare Cablevisión in default, and automatically convert the participation to a fully-fledged assignment.

Rakoff concludes:

JP Morgan, acting in bad faith, used the guise of a purported “participation” to effectuate what is in substance a forbidden assignment, with unusual provisions demanded by Inbursa that are calculated to give Inbursa exactly what the assignment veto in the Credit Agreement was designed to prevent. JP Morgan thereby violated, at a minimum, the covenant of good faith and fair dealing automatically implied by law in the Credit Agreement…

The Court concludes that plaintiff has shown a likelihood of success on the merits of its claim that JP Morgan breached its implied covenant of good faith and fair dealing under the Credit Agreement. Further the Court finds that Cablevisión has shown a likelihood of irreparable harm if preliminary injunctive relief is not granted…

there is as a factual matter a strong likelihood of irreparable harm arising from Inbursa’s ability to seek and obtain Cablevisión’s confidential business information under the Credit Agreement and then use it to Cablevisión’s detriment.

With that, Rakoff tells JP Morgan that it cannot proceed with the participation, or in any way treat it as valid or enforceable, or in any other way try to give ownership of the loan to Inbursa.

The ball is now in JP Morgan’s court to work out how to comply with Rakoff’s injunction — one way would be to go back to Televisa, say sorry, and offer to sell them the loan instead, at the same price. But they haven’t done that: according to Angoitia, they haven’t been in touch with anybody at Televisa at all. All they’ve visibly done since the ruling came down was go once to the court to ask for a two-week extension, which was granted.

I think at this point that a public apology from JP Morgan to Televisa is the bare minimum that is in order — along with an explanation of what exactly went wrong, and how it was that the bank ended up acting in such spectacularly bad faith. Or maybe they genuinely think that they didn’t do anything wrong. Nobody knows: JPM has gone silent. Which I don’t think is necessarily the best way of redeeming its reputation in this case.

----commments---

Felix, I’m sure that you already know, but it is worth emphasizing that this is (only) a preliminary injunction. The full suit, if it goes ahead, is yet to come.

I am not even close to being a lawyer, but presumably JP Morgan’s legal team is now discussing the likelihood of their winning if it does go to trial. There would appear to be a variety of options open to JPM at this stage, and the possibility of negative press will be only one of their concerns.

[Demeter]

39. Does Judge Rakoff Smackdown of Heinous JP Morgan Conduct Mark Beginning of a Sea Change?

http://www.nakedcapitalism.com/2010/02/does-judge-rakoff-smackdown-of-heinous-jp-morgan-heinous-conduct-mark-a-beginning-of-an-end-to-tolerance-of-sharp-practices.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+NakedCapitalism+%28naked+capitalism%29

Tonight provides yet another example of a blogger who brought an important stories to light not being credited by the MSM, in this case, a harsh preliminary ruling against JP Morgan in a dispute involving its client Televisa.

I... post on Felix Salmon’s story, which discussed some extraordinarily dishonest conduct by JP Morgan, for two reasons: first, to remind readers that the obsession with Goldman chicanery is providing a nice smokescreen for the rest of the industry, and second, for its larger legal implications. And now we have a third reason, the MSM not giving Felix the credit it would provide to a conventional reporter. Felix pointed out two days ago that the decision was made last month, yet the story was peculiarly ignored by the MSM; suddenly, the story graces the front page of the Wall Street Journal.

JP Morgan in particular is being treated with a degree of respect that it does not deserve. For instance, banking industry expert Chris Whalen derides the notion that JP Morgan was in better shape than the broker-dealers that teetered on the verge of failure in 2008. He describes JP Morgan as a $76 trillion (notional) derivatives exchange with a $1.3 trillion bank attached, and that serious turbulence in the derivatives markets would have been fatal to JPM. And let us not forget that while Goldman has become the bank that everyone loves to hate, there is no reason to think its behavior was materially worse than that of its peers (its brazenness and tone-deafness, however, are a completely different matter).

The second reason was the reasoning behind the smackdown by Judge Jed Rakoff against JP Morgan for its conduct involving a loan to a long-standing Mexican client, Televisa.

And now there is a third wrinkle, the Wall Street Journal’s belated interest in the piece and how the WSJ version leaves out some key details presented by Felix, and the omissions are all of items that make JP Morgan look even worse. Although I’ll give a recap and discuss some of the additional issues this case raises, I encourage readers to look at both pieces in their entirety. I think you’ll agree that Felix’s version is, hands down, a better job of reporting....

The Journal failed to say that the participation agreement was unusual, which could leave the reader with the impression that the information demands were typical. Without this key tidbit plus the Televisa offer to buy the loan back, it simply looks like Televisa is balking at JP Morgan, which wants to get out of the loan, having Inbursa as its only exit. Thus a reader might conclude that the information provided was reasonable, and JP Morgan was guilty of putting its interest ahead of its client’s only by having gone to Inbursa. The article completely leaves out the most duplicitous, destructive action: that JP Morgan rejected what on paper was a BETTER out, selling the entire loan back to Televisa, and instead conspired with Televisa’s biggest competitor in a scheme to suck competitively sensitive information out of Televisa....

Judge Rakoff, the same judge who rejected the initial settlement that the SEC and Bank of America had negotiated over the Charlotte bank’s failure to disclose Merrill’s deteriorating to shareholders pre the vote on the acquisition, was again unafraid to deliver a sharp rebuke:

JP Morgan, acting in bad faith, used the guise of a purported “participation” to effectuate what is in substance a forbidden assignment, with unusual provisions demanded by Inbursa that are calculated to give Inbursa exactly what the assignment veto in the Credit Agreement was designed to prevent. JP Morgan thereby violated, at a minimum, the covenant of good faith and fair dealing automatically implied by law in the Credit Agreement…

Yves here. I’m actually a bit gobsmacked to see this as the basis for a ruling, and hope it stands. I welcome input from corporate litgators, but this is my non-expert reading on what happened.

The normal basis for litigation under a contract are violations of the terms of the agreement (although counter suits can bring in issues outside the agreement. For instance, a colleague hired a decorator who proceeded to draft grandiose plans and refused to come up with anything within the budget stipulated at the outset. When he fired her, she submitted an outrageous final bill, what the entire project had he completed it with her should have cost. His attorney looked her drawings, which were blueprints and called for plumbing and walls to be moved. They sued her for practicing architecture without a license. She suddenly became much more willing to negotiate).

Now notice what happened here. Televisa had told JP Morgan in writing that it regarded going ahead as a breach of good faith and fair dealing. JP Morgan went ahead anyhow, because it clearly regarded this as a weak line of attack, one it thought would not fly in court. And my understanding is that good faith and fair dealing arguments are not common outside employment law.

A “bad faith” argument does not claim that the other side violated a particular contractual provision, but rather operated in a way that might be permissible on a narrow, technical reading. but flies in the face of the logic of the larger objectives of the agreement. Good faith and fair dealing is an assumption that undergrids all contracts. And before the “sanctity of contracts” crowd starts hooting and hollering, a general premise that parties will behave reasonably and perform in accordance with the objectives presupposed by the contracts is necessary for any system based on agreements to work. It is simply impossible for contractual system to function if both parties can easily resort to narrow, legalistic readings of the deal to screw the other side. As much as contracts often contemplate various scenarios, it would far too costly, both in negotiation and drafting costs, to devise contracts detailed enough to address all the ways sneaky people might welch on a deal.

This is merely a preliminary injunction, and Judge Rakoff has scheduled further hearings, but certainly looks like he is not buying what JP Morgan was selling.

This is a very encouraging sign, because the financial services industry has made an art form of sneaky practices and if good faith and fair dealings arguments become more successful as a tactic (possible given how badly the industry has overplayed its hand) that would be a badly needed counterbalance. Unfortunately, it is far too early to tell. This is only the first skirmish in this suit: JP Morgan might settle. But even if the case goes to trial, JP Morgan may believe that it can get the ruling overturned on appeal. I would not regard pursuing this suit as a wise move; Televisa could demand that JP Morgan and Inbursa produce their documents and e-mails about the the proposed “participation”, particularly those unusual terms that would have required Televisa to cough up sensitive information to its biggest competitor. Given that Televisa offered to match Inbursa’s purchase price, it isn’t hard to imagine that JP Morgan was willing to sacrifice (literally in this case) its client for either some fees or a promise of future business.

Even if JP Morgan might get a verdict against it overturned on appeal, the damage to its reputation of exposing the gory details of its double-dealing would outweigh any financial winnings. Bankers Trust made that error of judgment in a suit brought by Proctor & Gamble, and it never recovered from the repercussions of the public getting a full view of its predatory conduct.

[Joe Chi Minh]

70. That would be something.

[DemReadingDU]

41. Bullish a Year Ago, Robert Prechter Now Sees "the Biggest Bubble in History"

Click link for video

2/24/10 Bullish a Year Ago, Robert Prechter Now Sees "the Biggest Bubble in History"

In February 2009, Robert Prechter of Elliott Wave International predicted a market rally that would be "sharp and scary for anyone who is short."

In recent months, Prechter returned to more familiar territory, declaring here in November the market was in a "topping area."

A few weeks ago, the veteran market watcher told the Society of Technical Analysts in London that a "grand, super-cycle top" is at hand, The WSJ reported.

"What has happened is a complete change in psychology from extreme negativity to extreme optimism" heading into the market's recent top in January, Prechter says.

Among the many sentiment indicators he watched, Prechter cited the very low levels of cash at mutual funds, which is approaching levels seen near major tops in 1973, 2000 and 2007.

"Nobody should be taking risk right now. This is a time to be safe," he says.

But considering U.S. equity funds suffered about $46 billion of outflows from August to December 2009 while bond funds took in about $198 billion, according to ICI, aren't investors already playing it safe -- a bullish contrarian signal?

"The individual investor has been more or less abandoning stocks" and buying bond funds, Prechter concedes. "I think that is going from the frying pan into the fire. The bond market is the biggest bubble in the history of the world. "

Corporate debt, municipal debt, mortgages and consumer loans will all suffer in the great deflation Prechter believes is already underway, as detailed in his book Conquer the Crash.

So is there any way for investors to protect themselves from the carnage? Check the accompanying video for Prechter's recommendations.

http://finance.yahoo.com/tech-ticker/bullish-a-year-ago-robert-prechter-now-sees-%22the-biggest-bubble-in-history%22-429931.html?tickers=^DJI,^GSPC,TBT,UUP,SHY,JNK,TLT&sec=topStories&pos=9&asset=&ccode=

[Tansy_Gold]

43. Uncle Sam, er Uncle Ben and Cousin Timmeh have been protecting

"investors" from the carnage all along.

No one is asking "Who's protecting the taxpayers frm the rape?" because the answer is "no one. . .. . "



TG

[DemReadingDU]

63. Deflation Is Coming and There's Nothing Bernanke Can Do About It, Says Robert Prechter

click link for video

2/24/10 Deflation Is Coming and There's Nothing Bernanke Can Do About It, Says Robert Prechter

Contrary to popular belief, noted technical analyst Robert Prechter says the extraordinary action taken by the Federal Reserve to bail out the economy will not lead to runaway inflation.

"Deflation is gaining the upper hand very, very slowly, but it's happening," Prechter the founder of Elliott Wave International tells Tech Ticker. Of course, as anyone familiar with his work knows, he's been saying this for years.

Why should we believe him now?

For the first time since 1982 core inflation fell in January as measured by the consumer price index. Prechter says it's even more noteworthy that it's happening "in the face of this tremendous amount of stimulus...from the government and a real attempt at stimulus from the central bank."

Prechter describes the forces of deflation as a "socio-nomic" shift in social mood that will prevent Federal Reserve Chairman from printing too much money. "At some point, the voters - as you can already see from the Tea Parties - are going to start saying we've had enough" with government spending and bailouts.

How should you invest in a deflationary environment? We'll get to that in a forthcoming clip.

click link for video

http://finance.yahoo.com/tech-ticker/deflation-is-coming-and-there%27s-nothing-bernanke-can-do-about-it-says-robert-prechter-430193.html?tickers=TIP,GLD,TBT,TLT,UUP,^DJI,^GSPC&sec=topStories&pos=8&asset=&ccode=

[DemReadingDU]

64. Bear Market Armageddon: Why Prechter Might Be Right This Time

click link for video

2/24/10 Bear Market Armageddon: Why Prechter Might Be Right This Time

In late February last year, Robert Prechter of Elliott Wave International said "cover your shorts" and predicted a sharp rally that would take the S&P into the 1000 to 1100 range. That prediction came to pass. Prechter then urged investors to "step aside" from long positions, and speculators should "start looking at the short side."

With Prechter firmly back in familiar bearish territory, he joined Aaron and Henry again, armed with scary charts that forecast an imminent "grand, super cycle top" and collapse, mirroring the decline after the 1929 crash. A firm believer in deflation on the horizon, Prechter sees commodity prices falling this year into next.

Prechter admits he hasn't always been right. "The disinflationary period lasted longer than I thought," he confesses. But, this time it's different, he promises.

click link for video

http://finance.yahoo.com/tech-ticker/bear-market-armageddon-why-prechter-might-be-right-this-time-430357.html?tickers=dia,spy,^dji,^gspc,gld,tlt,tbt&sec=topStories&pos=9&asset=&ccode=

[Demeter]

84. Deflation: Caused By Money PilingUp in Hoards Instead of Circulating

[Demeter]

45. A Prisoner’s Dilemma: AIG and Goldman Sachs Game Each Other And PwC

http://retheauditors.com/2010/02/18/a-prisoners-dilemma-aig-and-goldman-sachs-game-each-other-and-pwc/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+ReTheAuditors+%28re:+The+Auditors%29

Jimmy Dell: I think you’ll find that if what you’ve done for them is as valuable as you say it is, if they are indebted to you morally but not legally, my experience is they will give you nothing, and they will begin to act cruelly toward you.
Joe Ross: Why?
Jimmy Dell: To suppress their guilt.

The Spanish Prisoner, Written and Directed by David Mamet, 1997

From Wikipedia:

“The prisoner’s dilemma is a fundamental problem in game theory that demonstrates why two people might not cooperate even if it is in both their best interests to do so….If we assume that each player cares only about minimizing his or her own time in jail, then the prisoner’s dilemma forms a non-zero-sum game in which two players may each cooperate with or defect from (betray) the other player. In this game, as in most game theory, the only concern of each individual player (prisoner) is maximizing his or her own payoff, without any concern for the other player’s payoff.”

Gretchen Morgenson and Louise Story of the New York Times told us on February 6, 2010 that Goldman Sachs aggressively pushed AIG to the edge of liquidity by repeatedly demanding cash. A longstanding dispute over the value of securities that were covered by credit default insurance sold by AIG to Goldman Sachs had reached a crucial climax:

“Billions of dollars were at stake when 21 executives of Goldman Sachs and the American International Group convened a conference call on Jan. 28, 2008, to try to resolve a rancorous dispute that had been escalating for months.

A.I.G. had long insured complex mortgage securities owned by Goldman and other firms against possible defaults. With the housing crisis deepening, A.I.G., once the world’s biggest insurer, had already paid Goldman $2 billion to cover losses the bank said it might suffer.

A.I.G. executives wanted some of its money back, insisting that Goldman — like a homeowner overestimating the damages in a storm to get a bigger insurance payment — had inflated the potential losses. Goldman countered that it was owed even more, while also resisting consulting with third parties to help estimate a value for the securities.

After more than an hour of debate, the two sides on the call signed off with nothing settled…”

Finally, on September 15, 2008, AIG cried uncle and capitulated, admitting they could not meet all collateral demands. The federal government bailed out AIG and taxpayer assistance to the company currently totals $180 billion. Some have already disputed several assertions in the Morgenson/Story piece on the basis, primarily, that Goldman Sachs was proved right in the end. Lucas van Praag, Goldman Sachs’ spokesperson, refuted most of it in a piece published in the Huffington Post.

Morgenson/Story do a great job of documenting that the dispute between AIG and Goldman Sachs had been going on for a while. Their neato graphic says that AIG first sold Goldman Sachs insurance on the securities in 2003 and that Goldman Sachs first started asking for more collateral in July of 2007 to respond to what they saw as declines in the value of the underlying securities.

I told you in my previous post that AIG had been struggling with issues over valuations for a while.

“AIG Crisis One litigation is still very much alive. After PwC’s material weakness determination in early 2008, for the 2007 financials, there was an attempt to amend the ongoing suits to include a CDO/CDS cause of action. Research to support this request showed that PwC had been dealing with closely related accounting issues at AIG as far back as 2002, centered mostly around EITF 02-3 valuation issues. The research revealed deep, longstanding internal controls issues that were now becoming painfully apparent…”

When the Audit Committee of the Board of Directors of AIG met on January 15, 2008, about two weeks prior to the conference call the New York Times cites in the story above, minutes from the meeting say all the big names showed up:

Present: Messrs. Michael H. Sutton, Chairman, George L. Miles, Jr., Morris W. Offit, Robert Willumstad, ex-oficio. Also present were Director Frank G.Zarb,a non-voting member of the Committee, Messrs. Tim Ryan, Dennis Nally, Henry Daubeney and Michael McColgan from PricewaterhouseCoopers LLP (‘PwC’), Mr. James Cole of Bryan Cave LLp, Mr. James Gamble of Simpson Thacher & Bartlett, LLP, President and Chief Executive Officer Martin J. Sullivan, Executive Vice President and Chief Financial Officer Steven J. Bensinger, Executive Vice President and General Counsel Anastasia D. Kelly, Senior Vice President and Comptroller David Herzog, Senior Vice President and Chief Risk Officer Robert E. Lewis, Senior Vice President and Director of lntemal Audit Michael E. Roemer, Senior Vice President Secretary and Deputy General Counsel Kathleen E. Shannon, Vice President-Corporate Governance Eric N. Litzky, Paulette Mullings-Bradnock of lnternal Audit, and, for portions of the meeting, Edward diPaolo, John French, Joseph Nocera and Alfred Panasci of lnternal Audit.


For the benefit of those playing at home, the PwC attendees’ roles and responsibilities were/are:

* Tim Ryan (Global Relationship Partner for AIG and PwC’s Financial Services Industry Group Head at the time.)
* Michael McColgan (Engagement Partner for AIG)
* Dennis Nally (Chairman and Senior Partner of PwC LLP, the PwC US member firm at the time and now Global Chairman of PwC)
* Henry Daubeney (Partner in PwC’s Banking and Capital Markets Practice, London)

Based on my reading of the Audit Committee minutes, I believe that PwC was aware of weaknesses in internal controls over the AIGFP super senior credit default portfolio throughout 2007 and prior. Why were they pussy footing around still on January 15, 2008 as to whether these control weaknesses were a significant deficiency (which would not have to have been disclosed) or a material weakness (which eventually was)? In fact, at this meeting, PwC was still more concerned about what it saw as an almost inevitable material weakness in controls over AIG’s financial close process instead. And for those of you who thought AIG’s only significant issue was with Goldman Sachs, I have to tell you, regrettably, this is not so. AIG had a hornet’s nest of nagging issues that clearly required high level attention.

Mr. Ryan commented that the significant deficiency in controls over the financial close process is the most significant deficiency and recapped that at the end of the second quarter there were concerns that without additional management procedures and a reduction in late adjustments and new errors, the financial close significant deficiency could rise to the level of material weakness. He indicated that the company had responded in the third quarter financial close and sustaining the fourth quarter close efforts will be important in the year end analysis.

Mr. Bensinger then indicated that he, Mr. Sullivan and Messrs. Ryan and Nally had been meeting regularly to discuss the control matters and he had asked Mr. Ryan to update the Committee on those discussions. Mr. Ryan then provided the Committee with background on the issues, much of which had been discussed with the Committee in December and in follow-up sessions thereafter with Mr. Sutton. Mr. Ryan commented that following the third quarter close, the PwC team debriefed and assessed a number of issues that had occurred…

PwC then goes on to second guess both the 2nd Q disclosures and 3rd Q 2007 disclosures as a result of the financial close control weaknesses and other major problems mentioned that had not been disclosed to Executive Management, according to PwC, until it was too late.

“…the collateral issues could have been escalated to the AIG level earlier in the process.”

And, in contrast to what the NYT article stated, AIG seems to have been trying to defend their position on valuations in all AIG business units with subprime exposures. AIG hired KPMG and Deloitte to conduct an independent review of their Enterprise Risk Management and AIG operations with subprime exposure and to make recommendations on improving the risk function and on ways to obtain more information on pricing and valuation. But PwC would only respond that, “…further consideration of the super senior credit derivative valuation process is required.” I did not receive any response to my requests to KPMG and Deloitte spokespersons for information about this review and its results.
By February 7th, the next Audit Committee meeting, PwC had come to the conclusion that a material weakness was going to be cited for the internal controls over the valuation process and not the weaknesses in the financial close process. Senior management was already preparing the ratings agencies, in particular, for a material weakness disclosure. There was grave concern that a ratings downgrade once this disclosure was made would cause additional, perhaps untenable, liquidity stress.

“Mr. Sullivan asked Mr. Bensinger to update the Committee on the discussions with the ratings agencies in connection with AIG’s proposed filing of a Current Report on Form 8-K regarding AIG’s disclosures in connection with the valuation of the AIGFP super senior credit default swap portfolio and PwC’s views that there was a material weakness in financial control over the valuation process. Mr. Bensinger reported that he and Ms. Watson and Messrs. Dooley and Habayeb had telephone conferences with each of the ratings agencies… Standard & Poors in particular, having a good understanding of these credit markets, put the disclosure in proper perspective, with their head analyst indicating the belief that other companies would also have to deal with a material weaknesses.”

However, I do not recall any other company, and certainly no other PwC client such as JP Morgan, Bank of America, or Goldman Sachs, admitting that their valuation process had been, and still was, weak. Why did PwC decide to point the finger at AIG? Neither AIG nor Goldman Sachs had been willing to defect or betray each other thus far, per the prisoner’s dilemma, even to save them both. The dispute had been going on for more than a month, more than a quarter, more than a year. It may have been excusable for PwC to allow a mismatch in valuation on the same assets in two of their clients for a month or a quarter due to timing differences in access to information. But a serious, contentious mismatch for more than a year, through several 10Q’s, and now going on two 10K’s?

So why the push now?

What came next is telling:

“Mr. Bensinger said that pricing inputs had been a spirited discussion topic, with PwC holding the view that AIGFP’s assessment does not include enough consideration of market participants’ views on pricing.”

Market participants’ views on pricing = Goldman Sachs views, in my opinion.

“Mr. Bensinger described the differences of opinion with Goldman Sachs on the pricing of the underlying collateral, noting Goldman’s acknowledged desire to obtain as much cash as possible from their collateral calls. He pointed out that Goldman was unwilling or unable to provide any sources of their determinations of market prices.”

Mr. Bensinger made this statement in front of PwC - Messrs. Daubeney, Robert Sullivan, the Global Banking and Capital Markets Leader and Bob Moritz, the US Assurance Leader and Managing Partner of the NY Metro Region and now US Chairman and Senior Partner. Plus or minus Dennis Nally and the Goldman Sachs specific Global Relationship and Engagement partners, how much you want to bet these were some of the same guys sitting in on every Goldman Sachs Audit Committee meeting and hearing the other side of this “difference of opinion” during most of 2007 and all of 2008?

In fact, PwC discouraged AIG from digging too deep into the pricing issue. They wanted AIG to simply adopt the “market participants’ view”:

“Mr. Bensinger emphasized that Management’s objective is to obtain the best estimate of valuation, not necessarily the highest estimate. Mr. Sullivan agreed, noting that AIG had been working diligently to find observability for the spread differential which everyone believes exists. He added that extensive efforts, which he believed were appropriate to meet management’s fiduciary responsibility to shareholders, were not necessarily seen as a positive by PwC, but when it became clear that PwC did not consider the evidence AIG gathered to be adequate from a market observability standpoint, Management decided that the December 31 losses would not include an adjustment for the spread differential.”

In fact, Andrew Ross Sorkin told us in his book, Too Big To Fail, Goldman Sachs was still not satisfied in June of 2008 that PwC was pushing AIG hard enough to consider “market participants’ views” on pricing on a timely or suffiicient basis so Goldman could “obtain as much cash as possible from their collateral calls”:

…Sorkin describes a Goldman Sachs June 2008 board meeting where the issue of their collateral dispute with AIG boils over.

“In a videoconference presentation from New York, a PwC executive (PwC is Goldman Sach’s auditor, too) updates the board on its dispute with AIG over how it was valuing or in Wall Street parlance, “marking-to-market,” its portfolio. Goldman executives considered AIG was “marking to make-believe” as Blankfein told the board…the afternoon session proceeded with upbraiding PricewaterhouseCoopers:

“How does it work inside PwC if you as a firm represent two institutions where you’re looking at exactly the same collatteral and there’s a clear dispute in terms of valuation?”

How does it work, indeed. Jon Winkelreid, Goldman’s co-president, may or may not have received an answer that day. Sorkin does not report one. I have never heard one.

I still have not heard a specific explanation for how PwC could preside over a long running dispute between two of its most important global clients, a dispute that was material to at least one of them, obviously, that had the attention of its highest level partners, and not force a resolution based on consistent application of accounting standards sooner.

I mean… We are talking about valuation of the same assets!

I’ve been writing almost as long as I’ve been writing here that PwC should resign as AIG’s auditor. Was it not enough that PwC had been sued by AIG shareholders more than once for its role in accounting errors and restatements? Was it not enough that AIG never got corporate governance right and PwC let them get away with it forever? Is it not enough that now PwC has its own partners testifying against their client on behalf of plaintiffs they settled with in order to extricate themselves from ongoing expensive litigation?

Is it not enough that PwC was clearly torn between two clients (and maybe more who would have been impacted) who held enormous financial sway and lost its independence and objectivity? I think PwC finally succumbed to Goldman Sachs, selling out AIG while still tippy-toeing around the necessity to finally say which one was closest to complying with standards. Actually taking a consistent stand would potentially implicate other clients such as JP Morgan and Bank of America as well as Freddie Mac in a mark-to-model or rather “mark to make it happen” scandal?

Will someone eventually come forward and tell us that Goldman Sachs sat PwC down in the summer of 2008 and told them, “Listen you dweebs, tell those AIG SOBs to cough up! You do whatever you have to do to make them fold! You hear me you milquetoast, muckety-muck, risk averse wienies?”

And what of the possible collusion amongst the various parties to prop up market prices in the meantime by roundtripping some assets at month- and quarter-end in order to avoid writedowns as long as possible and, therefore, collect those hefty commissions and incentive bonuses?

Stay tuned…

IT MAKES MY HEAD HURT

[Demeter]

46. A Bit of Irony for Breakfast

"But here in the United States, schizophrenic home to both the largest number of elite universities in the world and the broadest-based strain of anti-intellectualism known to Western democracy, the aggressive debating style of lobbing witty insults at your opponent only plays well on reruns of Monty Python. If you doubt me, just look at the inarticulate clods we elect to public office. Most of these morons cannot even deliver a coherent speech, much less bandy about gerunds and subjunctive clauses in the midst of a heated argument. Most Americans would probably try to impeach them if they did. This is just not a country where you can use words like "egregious," "febrile," and "chimera" in public without running the risk of being lynched for general asshattery.

Why do you think this blog is pseudonymous?"

http://epicureandealmaker.blogspot.com/2010/02/mouth-of-sauron.html

He/She also takes on GS corporate psychology and culture....


"I fear the traders running the place do not understand that, while they are the biggest and baddest players in the global financial markets, who have to apologize or explain themselves to no-one, they don't control the game. Politicians and regulators do. (And they answer, at least indirectly, to the general public.) These are the people they have to appease. Or at least not piss off. These are the people who pay attention to Goldman's public communications strategy.

The Japanese have a saying: the nail that sticks up gets hammered down. Right now, Goldman Sachs is the biggest fucking nail on the board. And Lucas van Praag is the miniature douchebag standing on top of the nail yelling, "Nyah, nyah! Go ahead, hit me! I dare ya!"

Okay."

[Demeter]

48. Auerback/Wray: Memo to Greece: Make War, Not Love, With Goldman Sachs

http://www.nakedcapitalism.com/2010/02/auerbackwray-memo-to-greece-make-war-not-love-with-goldman-sachs.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+NakedCapitalism+%28naked+capitalism%29

In recent weeks there has been much discussion about what to do about Greece. These questions become all the more relevant as the country attempts to float a multibillion-euro bond issue later this week. The Financial Times has called this fund-raising a critical test of Greece’s credibility in financial markets as it battles with a spiraling debt crisis and strikes.

(http://www.ft.com/cms/s/0/463b205e-1d93-11df-a893-00144feab49a.html )

The “credibility” of the financial markets is an important consideration in a country which has functionally ceded its sovereign ability to create currency, and thus remains dependent on the vagaries of the very banking institutions which helped create the mess in the first place.

Maybe Greece should secede from the European Union and default on its euro debt? Or go hat-in-hand to the International Monetary Fund (IMF) to beg for loans while promising to clean up its act? Or to the stronger Euro nations, hoping for charitable acts of forgiveness? Unfortunately, all of these options are going to mean a lot of pain and suffering for an economy that is already sinking rapidly.

And it is questionable whether any of them provide long term viable answers. Polls show that given the perception of fiscal excesses of Greece and the other countries on the periphery, the public in Germany opposes a bailout of these countries at its expense by a significant margin. Periphery countries such as Ireland that have already undertaken harsh austerity measures also oppose the notion of a bailout, despite—nay, because of–the tremendous pain already inflicted on their own respective economies (in Ireland’s case, the banks are probably insolvent as well). The IMF route is also problematic, given that Greece probably doesn’t qualify under normal IMF standards, and many euro zone nations would find this unpalatable from an ideological standpoint, as it would mean ceding control of EU macro policy to an external international institution with strong US influence.

The Wall Street Journal recently highlighted an article by Simon Johnson and Peter Boone, lamenting that the demands being foisted on Greece and other struggling Euronations would “massively curtail demand, lower wages and reduce the public sector workforce. The last time we saw this kind of precipitate fiscal austerity—when nations were tied to the gold standard—it contributed to the onset of the Great Depression in the 1930s”

(http://online.wsj.com/article/SB10001424052748703525704575061172926967984.html ).

Where we disagree with Johnson and Boone is the suggestion that the IMF be brought in to craft a solution. Any help from this organization will come with tight strings attached—indeed, with a noose around Greece’s neck. Germany and France would be crazy to commit their scarce euros to a bail-out of Greece since they face both internal threats from their own taxpayers and external threats from financial vampires who are looking for yet another nation to attack.

Here’s a more appropriate action: declare war on Goldman Sachs and other global financial firms that created this mess. Send the troops, the planes, the tanks, and the ships. Attack every outpost of the saboteurs on European soil. Blockade the airports and ports. Make Wall Street traders and CEOs fear for their lives, or at least for their freedom to travel. Build some Guantanamo-like facility to hold these enemy financial combatants until they can be tried, convicted, and properly punished.

Ok, if a literal armed attack on Goldman is too far-fetched, then go after the firm using the full force of the regulatory and legal systems. Close the offices and go through the files with a fine-tooth comb. Issue subpoenas to all non-clerical staff for court appearances. Make the internal emails public. Post the names of all managers and traders on Interpol. Arrest anyone who tries to board a plane, train, or boat; confiscate their passports; revoke their visas and work permits; and put a hold on their bank accounts until culpability can be assessed. Make life at least as miserable for them as it now is for Europe’s tens of millions of unemployed workers.

We know that the Obama administration will not go after the banksters that created this global financial calamity. It has been thoroughly co-opted by Wall Street’s fifth column—who hold most of the important posts in the administration. Europe has even more at stake and has shown somewhat more willingness to take action. Perhaps our only hope for retribution lies there.

Some might believe the term “banksters” is too mean. Surely Wall Street was just doing its job—providing the financial services wanted by the world. Yes, it all turned out a tad unfortunate but no one could have foreseen that so many of the financial innovations would turn into black swans. And hasn’t Wall Street learned its lesson and changed its practices? Fat chance. We know from internal emails that everyone on Wall Street saw this coming—indeed, they sold trash assets and placed bets that they would crater. The crisis was not a mistake—it was the foregone conclusion. The FBI warned of an epidemic of fraud back in 2004—with 80% of the fraud on the part of lenders. As Bill Black has been warning since the days of the Saving and Loan crisis, the most devastating kind of fraud is the “control fraud”, perpetrated by the financial institution’s management. Wall Street is, and was, run by control frauds. Not only were they busy defrauding the borrowers, like Greece, but they were simultaneously defrauding the owners of the firms they ran. Now add to that list the taxpayers that bailed out the firms. And Goldman is front and center when it comes to bad apples.

Lest anyone believe that Goldman’s executives were somehow unaware of bad deals done by rogue traders, William Cohan

(http://opinionator.blogs.nytimes.com/2010/02/18/the-great-goldman-sachs-fire-sale -of-2008)

reports that top management unloaded their Goldman stocks in March 2008 when Bear crashed, and again when Lehman collapsed in September 2008. Why? Quite simple: they knew the firm was full of toxic waste that it would not be able to continue to unload on suckers—and the only protection it had came from AIG, which it knew to be a bad counterparty. Hence on March 19, Jack Levy (co-chair of M&As) sold over $5 million of Goldman’s stock and bet against 60,000 more shares; Gerald Corrigan (former head of the NY Fed who was rewarded for that tenure with a position as managing director of Goldman) sold 15,000 shares in March; Jon Winkelried (Goldman’s co-president) sold 20,000 shares. After the Lehman fiasco, Levy sold over $6 million of Goldman shares and Masanori Mochida (head of Goldman in Japan) sold $56 million worth. The bloodletting by top management only stopped when Goldman got Geithner’s NYFed to produce a bail-out for AIG, which of course turned around and funneled government money to Goldman. With the government rescue, the control frauds decided it was safe to stop betting against their firm. So much for the “savvy businessmen” that President Obama believes to be in charge of Wall Street firms like Goldman....

MORE AT LINK

[Demeter]

49. The doomsday cycle Peter Boone Simon Johnson

http://www.voxeu.org/index.php?q=node/4659

Over the last 30 years, the US financial system has grown to proportions threatening the global economic order. This column suggests a ‘doomsday cycle’ has infiltrated the economic system and could lead to disaster after the next financial crisis. It says the best route to creating a safer system is to have very large and robust capital requirements, which are legislated and difficult to circumvent or revise.

Over the last three decades, the US financial system has tripled in size, as measured by total credit relative to GDP (see Figure 1). Each time the system runs into problems, the Federal Reserve quickly lowers interest rates to revive it. These crises appear to be getting worse and worse – and their impact is increasingly global. Not only are interest rates near zero around the world, but many countries are on fiscal trajectories that require major changes to avoid eventual financial collapse....

GRAPHIC PORN AND MORE FOLLOWS...

[Demeter]

50. Wealth Disparities in U.S. Approaching 1920s Levels

http://seekingalpha.com/article/189649-wealth-disparities-in-u-s-approaching-1920s-levels?source=feed




Folks, there is no way we can have economic prosperity in this country when the top 1% has all of the money. The middle class is basically being destroyed right in front of our very eyes. Consumption economies die when the consumers have no money to consume!

I see growing signs of desperation and anger as the wealth of this nation continues to get transferred to the elite of this nation.

People are starting to "lose" it as a result. This past week's airplane event in Austin was a disturbing development. I must admit that I really am not surprised. The government shouldn't be either.

Things are only going to get worse in the violence department as the taxpayers continue to get violated and more desperate as a result of this economic cataststrophe. The news media tried to downplay the actions in Austin.

I think Washington was both surprised and concerned about what took place in Texas.

I have to ask: Should the government really be surpised that an American flew a plane into an IRS building in a fit of rage as we all get repeatedly fleeced by the political and social elites of this country?

Let me preface all of this by saying violence is not the answer here. However, why shouldn't every American be infuriated by what has ocurred since this crisis began?

All the government has done is bail out Wall St. continuously since 2008. My guess is the disparity of wealth in this chart would look even worse if it included 2009. The rest of America has basically been ignored minus a few housing programs to help lower mortgage payments.

That's what's been so frustrating about this whole crisis and America is finally starting to get it. Just about ALL of the steps that have been taken by the government to help fix this crisis have involved throwing more and more money to the financial elites of this country. I mean, the examples are endless: TARP, AIG, Bank of America (BAC), Citi (C), Freddie (FRE), Fannie (FNM)....Need I say more?

The sheeple are finally realizing that the money is not trickling to them like Washington had promised when they threw billions to the banks. The people have only seen things get worse while Wall St. has prospered. They now want to know where their friggin' bailout is!

They are also realizing that the goverment's actions since this all started in 2007 have done nothing but drop the yields on their CD's to 0%. Gee thanks!

Let's not forget that the sheeple/middle class were also victimized by Wall St. as they were gamed into buying homes they couldn't afford. When this fantasy came crashing down they were again violated as they saw their 401k's get cut in half.

The people of this country can only take so much before they start going postal!


MORE AT LINK

[ozymandius]

80. Let's not forget about debt levels.

Personal debt levels in the 1920s are comparable to those today. Debt levels, then, were associated with personal consumption and speculative buying on the stock markets and (as you might have guessed).... land. In Florida. Some guy by the name of Charles Ponzi ripped off a bunch of middle and upper class land speculators when he sold shares in oceanside property that just happened to be sixty miles near the ocean.

Not much has changed in eighty years.

[Roland99]

51. 11:21am - YAFPD!!

Yet Another Free Pony Day

Dow 10,366 +84 +0.82%
Nasdaq 2,236 +22 +1.00%
S&P 500 1,103 +9 +0.80%
GlobalDow 1,887 +2 +0.12%
Gold 1,101 -2 -0.20%
Oil 80.06 +1.20 +1.52

[Demeter]

52. Uncle Ben Must Have Said the Magic Word

[Tansy_Gold]

53. And Timmeh waved his magic. . . . . .

eeeeeeiuw!!!!!!!!!!!!!

I don't even want that image in my brain. :rofl:

[Demeter]

54. I Truly Doubt He Has Anything to Wave--Be at Peace

[Hugin]

56. Yes, he said high unemployment and low inflation would mean low interest for a long long time...

:PUKE:

Thereby, sealing the casket on the Middle-class in the U.S.A... Forever.

They will use the "low inflation" argument to keep unemployment up and wages stagnant... Forever.

Ah, it was nice while it lasted... That democracy stuff. :sigh:


The Markets REJOICE!

:grr:

NEW YORK, Feb 24 (Reuters) - U.S. Treasuries prices erased early losses on Wednesday after Federal Reserve Chairman Ben Bernanke said a weak job market and low inflation would likely let the central bank keep interest rates low for a long time.

The testimony gave the bond market an added dose of relief after the Fed's surprise discount rate hike last week raised some fears an increase in the fed funds rate would happen sooner than first thought.

More on this here... http://www.reuters.com/article/idUSN2438778620100224

[burf]

58. One thing is for certain

We know who is gonna wind up cleaning up all that pony poop when this mess is finally over.

[tclambert]

66. We are working on genetically modified ponies that poop gold

here in the secret laboratories hidden deep in the remote mountains of Michigan. Thus far, we only have ponies that poop lead. But once we have ponies that poop gold, there will be no limit to what we can accomplish. We may even create ponies that poop fertilizer. Imagine the benefit to agriculture that would be.

[Demeter]

67. If I Mention that Michigan HAS NO Mountains, Are You Going to Kill Me?

Besides, all those nice abandoned copper mines would be a much better place to work....

[burf]

81. I thought there were some up in th UP

IIRC there is a town Iron Mountain up in that neck of the woods. Gold pooping ponies would really put the place on the map!

[Demeter]

83. Barely Foothills

We may not be prairie, but umpteen years of glaciers leveled the place.

[Robbien]

59. Short Sale Rule Passes After 3-2 Party-Line Vote, Shorting Anything To Be Illegal Shortly

http://www.zerohedge.com/article/short-sale-rule-passes-after-3-2-party-line-vote-shorting-anything-be-illegal-shortly

By the thinnest of margins, the SEC just voted 3-2 to institute the short-selling rule which will put curbs on shorting individual securities that fall over 10% in any one day. Dow Jones points out that even market decisions are now split according to party lines: "Republican Commissioners Kathleen Casey and Troy Paredes said Wednesday they would vote against the proposal. Democratic Commissioners Luis Aguilar and Elisse Walter signaled their support for it, along with SEC Chairman Mary Schapiro, who was appointed last year by President Barack Obama." Paredes was further quotes as saying that the rule is "rooted in conjecture and too speculative." Not surprisingly, Aguilar and Walter, both likely reading from the party lines said that this would "help bolster market confidence."

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That headline is over-hype.

The rule only disallows shorting for ONE DAY on a stock which has more than a ten percent drop.

see:

SEC Approves Rule to Limit Short-Sale Orders on Securities Which Fall 10%+ in 1 Trading Session
http://www.streetinsider.com/Corporate+News/SEC+Approves+Rule+to+Limit+Short-Sale+Orders+on+Securities+Which+Fall+10%25%2B+in+1+Trading+Session/5379298.html


The SEC has just approved (in a 3-2 vote) a so-called "alternative" short-sale rule which will limit short-selling on securities which fall at least 10% during one trading session. Further, the rule will allow short-selling only if the stocks price is above that the of "current national best bid". According to a summary put out by the SEC, the short-sell limitation will apply to orders in that security for the remainder of the day, as well as the following day.

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Just a brief breather before the vultures resume their attack.

[Robbien]

60. Hedge Fund, P.E.-Backed Bank Buys Another Failed Bank

A bank owned by a consortium of hedge and private equity funds has snapped up another failed bank.

OneWest Bank, itself the former failed lender IndyMac, has agreed to buy the deposits and most of the assets of La Jolla Bank, a California bank with $2.8 billion in deposits. It is the second failed bank bought by OneWest from the Office of Thrift Supervision and Federal Deposit Insurance Corp., following its deal for First Federal Bank in December.

As part of the agreement for La Jolla, the FDIC and OneWest will share losses of $3.31 billion on the failed bank. The FDIC’s Deposit Insurance Fund is expected to take an $882.3 million hit on the deal.

OneWest is owned by Paulson & Co., Soros Fund Management, JC Flowers & Co. and Dune Capital Management, among others.


http://www.finalternatives.com/node/11519


Hedge funds hiding behind a bank facade buying up banks after all the bad assets are offloaded to the FDIC. Well who could have guessed.

[Demeter]

68. That was just last Friday. Good Catch

It's like feeding the piranha at SeaWorld. What do you mean, they don't feed piranha at SeaWorld....

[Roland99]

61. Yet another reason to loathe the auto industry (Chrysler/Dodge in particular)

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x7785834

[citizen snips]

71. Dollar May Extend Fall on Prospects Fed Will Keep Rates Low

Feb. 25 (Bloomberg) -- The dollar may decline versus the euro for a second day on speculation the Federal Reserve will keep interest rates near zero to support an economic recovery.

The U.S. currency traded near a one-week low against the yen after Fed Chairman Ben S. Bernanke said a “nascent” recovery in the economy still requires low borrowing costs and before a report forecast to show U.S. companies expanded at a slower pace this month. The yen and dollar also may fall against higher-yielding counterparts as a U.S. share rally damps demand for the currencies as a refuge.

“If you get stocks up and risk is a bit better, it seems to remove a little bit of safe-haven demand for the U.S. dollar,” said Tony Morriss, a senior markets strategist in Sydney at Australia & New Zealand Banking Group Ltd. “It’s quite a nuanced message from the Fed at the moment. They are ready to start unwinding extraordinary measures, but clearly committed to keeping the Fed fund rate low.”

The dollar traded at $1.3543 per euro at 8:17 a.m. in Tokyo from $1.3538 in New York yesterday, when it fell 0.2 percent. The U.S. currency has risen 2.4 percent versus the euro this month, heading for a third monthly gain, its longest stretch since November 2008.

more...
http://www.businessweek.com/news/2010-02-24/dollar-may-extend-fall-on-prospects-fed-will-keep-rates-low.html

[citizen snips]

72. S.E.C. Restricts Short-Selling and Addresses a Global Accounting Shift

A sharply divided Securities and Exchange Commission voted on Wednesday to restrict selling stocks short when they are falling rapidly, with the majority voicing hopes the action would improve investor confidence and the dissenters saying there was no evidence that any action was needed.

The commission also said it hopes to approve the switch of American companies to international accounting standards by the end of 2011, but it set a series of conditions that made eventual adoption of the standards appear less than certain.

Short-selling — the practice of borrowing shares and selling them, intending to buy them back later after the price declines — has long aroused criticism, particularly when markets are volatile. In 2007, the S.E.C. repealed rules that barred short-selling unless the last move in the stock had been up.

But in 2008, when share prices of financial stocks fell rapidly, the commission hurriedly imposed some emergency measures to prevent short-selling in certain stocks, and it came under heavy political pressure to do something on a permanent basis.

The new rule on short sales would apply to any stock whose price has fallen at least 10 percent during a trading session. After that, short-selling would still be legal but only if the sale was at a price higher than the best bid price available at the time.

more...
http://www.nytimes.com/2010/02/25/business/25audit.html

[citizen snips]

73. The Plan on Fannie, Freddie to Come Next Year, Geithner Says

WASHINGTON—The Obama administration's plan for the future of Fannie Mae and Freddie Mac won't be unveiled until 2011, Treasury Secretary Timothy Geithner said Wednesday.

Mr. Geithner, appearing before the House Budget Committee, said the goal would be for the government to play a more productive, but less risky, role in the housing markets. He described the potential changes to the housing market as fundamental, and said the Treasury wants to reassure financial markets about the status of Fannie Mae and Freddie Mac.

"It's very important that we make it clear to investors around the world that we will make sure...that those two important government-sponsored enterprises can continue the role they need to play," Mr. Geithner said.

The Obama administration was originally expected to unveil its plan for the two mortgage finance firms, which have been under government control since September 2008, with the fiscal 2011 budget earlier this month. Officials have since backed off their expectations, and Mr. Geithner said the plan is now to operate under a multistep process that will run into next year.

more...
http://online.wsj.com/article/SB10001424052748704240004575085382423762288.html?mod=WSJ_hpp_LEFTWhatsNewsCollection

[Demeter]

85. Gods Help Us; They've Got a Plan

More foolishness, no doubt.

[citizen snips]

74. Blockbuster to Close 500 or More U.S. Stores, Restructure Debt

Feb. 24 (Bloomberg) -- Blockbuster Inc., the largest U.S. movie-rental chain, will close at least 500 U.S. stores and is exploring ways to restructure debt.

Blockbuster has been working with Rothschild Inc. since February 2009 on financing and strategy, the Dallas-based company said today in a statement. The company has total debt of $963.9 million, including leases, according to the statement.

The company closed 253 stores in January as more consumers turned to Coinstar Inc.’s Redbox movie vending machines and mail-order and online rental services such as Netflix Inc. Blockbuster, which licenses its name for rental kiosks owned by NCR Corp., said the partnership plans to add 7,000 additional such outlets this year.

“While we believe the future is bright, the next 12 to 18 months will remain challenging as we balance the secular decline of a single channel with the ascension of emerging channels; such as vending and digital,” said Jim Keyes, chairman and chief executive officer.

more...
http://www.businessweek.com/news/2010-02-24/blockbuster-to-close-500-or-more-u-s-stores-restructure-debt.html

[citizen snips]

75. Heating oil, gas up slightly as storms hit

Heating oil and natural gas prices inched higher Wednesday as another powerful winter storm barreled toward the energy hungry Northeast.

The pattern has been in place throughout one of the snowiest winters on record as a glut of supply is more than capable of meeting demand.

"Heating oil is not responding to the weather, natural gas has been lower all winter," said oil trader and analyst Stephen Schork.

Nearly 2 feet of snow has fallen over parts of eastern New York over the past day, while at least a foot has hit an area from Pennsylvania to New England. A foot or more is on the way for much of the region.

About 80 percent of all heating oil in the U.S. is consumed in the Northeast, yet prices have been remained fairly level over the winter despite the exceptional cold and snow. Huge stockpiles of natural gas, used to heat about half of the nation's homes, have been cut dramatically, but prices continue to stay low.

more...
http://finance.yahoo.com/news/Heating-oil-gas-up-slightly-apf-2488903928.html?x=0

[citizen snips]

76. Sector Snap: Newspaper shares rise on profits

NEW YORK (AP) -- Shares of newspaper companies rose Wednesday, helped by a series of positive quarterly results.

In the most recent round of financial reporting, publishers have generally shown that they can cut enough costs to deal with drastic declines in ad revenue. Many say they see things trending in the right direction despite an uncertain economy and online competition for ad dollars.

Washington Post Co. shares rose $9.60, or 2.3 percent, to $422.11 after the company said fourth-quarter earnings quadrupled. The company had sharply lower one-time costs than in the same quarter a year ago and also got a boost from revenue growth in its education and Cable TV divisions.

A.H. Belo Corp., which owns The Dallas Morning News and other newspapers, also posted a fourth-quarter profit Wednesday, reversing last year's loss. It earned $5.7 million despite a 15 percent decline in revenue. Shares rose 70 cents, or 11.7 percent, to $6.70 in afternoon trading.

more...
http://finance.yahoo.com/news/Sector-Snap-Newspaper-shares-apf-1349533692.html?x=0

[citizen snips]

78. Blockbuster posts 4Q loss of $435M as woes deepen

DALLAS (AP) -- Blockbuster Inc. suffered a fourth-quarter loss of $435 million as its video rental stores struggled to attract consumers who are increasingly getting their movies through the mail, vending machines and high-speed Internet connections.

The setback announced Wednesday reflected a dismal holiday season, usually one of Blockbuster's busiest times of the year.

The company, based in Dallas, boosted its ad spending in December in hopes of luring more customers into its stores, but the investment didn't pay off.

In a key measure of a retailer's health, sales in Blockbuster stores open in the U.S. for the past year plunged by 16 percent in the fourth quarter.

Blockbuster's woes contrasted with a sharp upturn in business for DVD-by-mail pioneer Netflix Inc., which added 1.16 million subscribers during the final three months of 2009 to generate a fourth-quarter profit of $31 million.

more...
http://finance.yahoo.com/news/Blockbuster-posts-4Q-loss-of-apf-3403544896.html?x=0

[citizen snips]

79. Treasurys surrender some gains after auction of 5-year notes

Bonds had been higher before the auction, with investors relieved after Federal Reserve Chairman Ben Bernanke said that interest rates are likely to remain low "for an extended period." Yields on 10-year notes had touched their lowest level in more than a week.

Yields on 2-year notes /quotes/comstock/31*!ust2yr (UST2YR 0.86, 0.00, 0.00%) declined 2 basis points to 0.86%. Short-term securities tend to be more sensitive to changes in monetary-policy expectations.

Yields move inversely to prices and a basis point is one one-hundredth of a percentage point.

Yields on 10-year notes /quotes/comstock/31*!ust10y (UST10Y 3.69, +0.01, +0.22%) were little changed at 3.69%, after having touched 3.65% earlier.

more...
http://www.marketwatch.com/story/bonds-edge-down-before-bernanke-5-year-auction-2010-02-24?siteid=yhoof