"Deck Us All With Bankers' Folly" WEE Christmas Weekend December 25-27, 2009

[Demeter]

WEE have met the enemy, and it's not us, for once. In this season of peace on earth, goodwill towards all, there is one group for which WEE will make an exception: white collar criminals in public or private enterprises.

There is no excuse for it. White collar crime: theft, extortion, fraud and the like, do not form part of a healthy society or a healthy group. "Predators and Prey" is not a game for our time, or any time, and those who insist upon playing it need to be shown the error of their ways, repeatedly and forcefully, if necessary. That is the very definition of a GREAT SOCIETY that vision LBJ conceptualized and nearly brought to life.

So in this season when we turn to the Light of the World, and the days grow longer and warmer and more life-sustaining, I bid you all: Be of Good Cheer! What cannot continue, will not continue; and we aren't going to help it, either. We will resist, actively and passively. We will fight their tyranny, just as another great man proclaimed:

4 June 1940--Winston Churchill

http://www.youtube.com/watch?v=6llT2ZYg-4E

"I have, myself, full confidence that if all do their duty, if nothing is neglected, and if the best arrangements are made, as they are being made, we shall prove ourselves once again able to defend our Island home, to ride out the storm of war, and to outlive the menace of tyranny, if necessary for years, if necessary alone.

At any rate, that is what we are going to try to do. That is the resolve of His Majesty's Government-every man of them. That is the will of Parliament and the nation.

The British Empire and the French Republic, linked together in their cause and in their need, will defend to the death their native soil, aiding each other like good comrades to the utmost of their strength.

Even though large tracts of Europe and many old and famous States have fallen or may fall into the grip of the Gestapo and all the odious apparatus of Nazi rule, we shall not flag or fail.

We shall go on to the end, we shall fight in France,
we shall fight on the seas and oceans,
we shall fight with growing confidence and growing strength in the air, we shall defend our Island, whatever the cost may be,
we shall fight on the beaches,
we shall fight on the landing grounds,
we shall fight in the fields and in the streets,
we shall fight in the hills;

we shall never surrender, and even if, which I do not for a moment believe, this Island or a large part of it were subjugated and starving, then our Empire beyond the seas, armed and guarded by the British Fleet, would carry on the struggle, until, in God's good time, the New World, with all its power and might, steps forth to the rescue and the liberation of the old."

Make no mistake--this is war, and we are under attack. See John Perkins' books, if you need convincing.

Bring on the intelligence, and let's crack those secret codes!

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1. While It Is Barely 3:30 PM, I Doubt that the FDIC will Be Working This Weekend

But I will check later for failed banks. Stay tuned!

[Demeter]

52. Alll's Clear--No Banks Closing This Weekend

how sentimental of Sheila Bair. Bah, Humbug!

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2. I've Been Saving This Gem: FT Person of the Year: Lloyd Blankfein

PLEASE READ THIS ON AN EMPTY STOMACH--NOT RESPONSIBLE FOR ACID REFLUX OR REGURGITATION.


http://www.ft.com/cms/s/0/479ac4ba-eb32-11de-bc99-00144feab49a.html

Master of risk who did God’s work for Goldman Sachs but won it little love

By John Gapper

Under other circumstances, this would have been a year to savour in the long, rapid ascent of Lloyd Blankfein. Goldman Sachs, the investment bank he has led for three years, not only navigated the 2008 global financial crisis better than others on Wall Street but is set to make record profits, and pay up to $23bn (€16bn, £14bn) in bonuses to its 31,700 staff.

For Mr Blankfein, a scholarship boy from the Bronx whose first financial job at Goldman was selling gold coins in its commodities trading arm, has prospered to an extent that was implausible even 10 years ago, when it became a public company. Its influence has spread throughout the world, from New York and London to Shanghai and São Paulo.

A good slice of its success is attributable to Mr Blankfein, a tough, bright, funny (everyone remarks upon his unpretentious, wisecracking manner) financier who reoriented Goldman. Under his leadership, trading and risk-taking have pushed to the fore, reducing the influence of its investment banking advisers.

In 2009, however, Wall Street faced a wave of public anger at how banks that survived only with the assistance of taxpayers seemed unchanged and unrepentant. Goldman’s profitability, and suspicions that its deep links with governments around the world give it unfair advantages, made it a symbol of Wall Street greed and excess. It was described by the Rolling Stone writer Matt Taibbi as “a great vampire squid wrapped around the face of humanity”.

Mr Blankfein has struggled to rebut the criticism effectively, shifting from insisting that it would probably have survived the crisis without help from the US Treasury, to apologising for its conduct, and finally (in a typically jaunty line at the end of an interview with the Sunday Times) asserting that it was “doing God’s work”.

Yet he has also steered Goldman adeptly through the crisis, betting correctly that the global investment banks would survive the turmoil (with government help) and not be dismantled by regulators. Instead, his bank has stuck to its strengths, unashamedly taken advantage of the low interest rates and diminished competition resulting from the crisis to make big trading profits.

For all of these reasons, both positive and negative, the Financial Times has chosen Lloyd Blankfein as its Person of the Year. His job and his personality have made him the public face of Wall Street during its most testing period since the 1930s.

This is not an unalloyed endorsement of either Mr Blankfein or Goldman, which the FT has sometimes criticised in the past year. Instead, it is a recognition that Mr Blankfein and his bank have taken the leading place in the world of finance, while others have fallen by the wayside.

Mr Blankfein, who declined to be interviewed for this article, is the antithesis of the boring banker. He prides himself on repartee and colleagues say the easiest way to pique him is to tell him someone else is the funniest person at Goldman.

“Lloyd is smart, really engaged, high-energy, funny and quick – very quick,” says John Mack, chairman of Morgan Stanley, Goldman’s closest rival. “He is highly analytical and he can make a decision.”

Mr Blankfein’s most valuable trait is his adaptability, which enabled him to rise rapidly within the bank. It also helped Goldman before the crisis, when it spotted that subprime securities were souring and cut its positions, while others told themselves that markets were wrong.

“Lloyd is an extremely rapid learner and exceptionally adaptable. He pretty much sees the world as it is, rather than as he’d like it to be,” says Stephen Schwarzman, chief executive of Blackstone, the private equity group. “That comes from his personal background, I think.”

Mr Blankfein was born in 1954 to Seymour Blankfein,(A MORE-THAN-IMMACULATE CONCEPTION--NOTE THE COMPLETE ABSENCE OF A MOTHER!) a postal clerk in the Bronx. The Blankfein family had emigrated to the US from eastern Europe during the 1880s and had at first prospered in the New York garment industry, but then suffered during the Great Depression.

His parents moved to East New York, now a bleak and run-down area of Brooklyn, and lived in the Linden Houses, a public housing project. Mr Blankfein attended schools including the Thomas Jefferson High School, where he gained entry to – and financial aid from – Harvard.

One formative experience was his discovery that, when his father retired from the US Postal Service to Florida, his place was taken by a sorting machine. Mr Blankfein was afterwards haunted by the image of his father working hard at a job that had already become redundant.

His background was not wholly unusual at Goldman. It was founded by Marcus Goldman in 1869 as a commercial paper dealer, and Charles Ellis records in The Partnership, a history of Goldman, that Sidney Weinberg, its most influential early partner, rode the New York subway and used to say proudly: “I’m just a Brooklyn boy from 13.”

After attending Harvard and Harvard Law School, Mr Blankfein got his first job at Donovan, Leisure, Newton & Irvine, a law firm founded by an Anglophile who instituted a tradition of serving tea and biscuits every afternoon. After a four-year spell there (including two years in Los Angeles advising Hollywood companies on tax) he grew interested in finance.

Goldman and Morgan Stanley turned him down when he applied to become an investment banker but he found a way in through the back door when he was instead recruited by J. Aron, a commodities trading firm. By the time he joined in 1982, Goldman had acquired J. Aron.

Mr Blankfein ascended the trading side of Goldman as it contributed an ever greater share of revenues, becoming chief executive in 2006, when Hank Paulson was appointed Treasury secretary. By then, Mr Blankfein was arguing for Goldman blurring the boundaries between its investing, advising and trading sides.

The bank went in the direction that he wanted and profited hugely from it: by 2007, Goldman’s net revenues had reached $46bn, of which $31bn came from trading and investing its own capital, and Mr Blankfein’s compensation was $54m. Becoming a Goldman “partner” – one of its 400 senior managing directors – had become the most reliable route to great wealth on Wall Street.

Mr Blankfein is not known for obvious extravagance. Most of his wealth is tied up in Goldman shares – his holding is currently worth about $615m – although he lives in a $26m apartment in 15 Central Park West, an apartment building favoured by Wall Street figures. He also owns a house in Sagaponack in the Hamptons, which he bought in 1995.

He has few outside interests, but he reads a lot – he majored in history at Harvard and remains a history buff – and is a keen judge for the Financial Times and Goldman Sachs Business Book of the Year Award. He swims and runs to keep in shape, although his weight fluctuates.

He devotes some time to philanthropy, including chairing a taskforce at Harvard on financial aid. “He has been an insightful voice on what financial aid means. His education was significant in his life,” says Drew Gilpin Faust, Harvard’s president.

Most of Mr Blankfein’s energy and intellect, however, are poured into his job. “He feels, as anyone would, a huge responsibility as the steward of Goldman,” says Mr Mack.

Even before the crisis, Goldman’s emphasis on trading had started to cause disquiet. Gary Cohn, now Goldman’s sole president, also worked at J. Aron, so the balance between banking and trading – exemplified by Stephen Friedman and Robert Rubin leading Goldman together in the early 1990s – has been diminished.

The crisis – particularly Mr Paulson’s decision to settle billions in credit default swaps held by Goldman and others with AIG, the insurer, without imposing any losses – fanned those doubts into public outrage. The fact that many Goldman partners, including Mr Paulson and Mr Rubin, have entered government after leaving the bank exacerbated suspicions that it has crony-like links with politicians.

Mr Blankfein seems to retain the support of his senior cadre. Its record profits this year have helped, although the results were tilted: in the first nine months, it gained $23.8bn in net revenues from trading and principal investments and only $3.2bn from investment banking.

Roy Smith, a former Goldman partner who is now a professor at New York University, says Mr Blankfein gained the trust of many former partners by reacting calmly to the financial crisis. He recalls Mr Blankfein’s remarks at a meeting with a group in New York a year ago.

“He said it had been a horrendous period but the firm still had a lot of smart, dedicated people and all the capital it needed. It might have to adapt in various ways, but it had done so before. That met with a lot of approval from the institution’s old ghosts,” says Prof Smith.

The question is where he takes Goldman from here. In 2009, he expressed contrition for the past – in a speech in November, he said: “We participated in things that were clearly wrong and have reason to regret. We apologise.” He responded to outrage over pay by changing the bonus structure for Goldman’s senior executives so they are awarded in shares that cannot be sold for five years.

So far, however, he shows little sign of altering Goldman’s essential strategy (or wanting to pay its employees less). Regulatory changes in Congress – and from international bank regulators in Basel – could impose higher capital standards on those banks judged “too big to fail” and make that tougher. “Goldman might have to do some classic adapting and split some things off rather than keeping everything under one restricted balance sheet,” says Prof Smith.

Mr Blankfein knows about adapting to altered circumstance better than anyone. His father’s former job was taken by a machine; his old high school in East New York was shut for poor performance in 2007; his former Manhattan law firm, unable to compete with rivals, dissolved in 1998. Nothing endures that cannot change, not even Goldman Sachs.

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3. To Wash That Out of Our Mouths: Some Roast Oliphant and friends

Dilbert Shows His Christmas Spirit

http://dilbert.com/dyn_file/str_strip/77354/gif/strip.print/



and Mark Fiore Spreads the Xmas Gospel

http://www.markfiore.com/political-cartoons/watch-christmas-animation-cartoon-shopping-consumerism

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4. Governmental Good Cheer: Treasury to provide as much capital as Fannie, Freddie need

http://www.marketwatch.com/story/treasury-lifts-cap-on-aid-to-fannie-freddie-wsj-2009-12-25?siteid=YAHOOB

The U.S. Treasury agreed to provide Fannie Mae and Freddie Mac with as much capital as they need over the next three years, in an effort to reassure the investors who bought the giant mortgage companies' debt, The Wall Street Journal reported.

Late on Thursday, the Treasury also said that it would stop buying the companies' mortgage-backed securities and end a short-term-liquidity facility set up for both companies and for the Federal Home Loan Banks. That facility was never drawn upon, the Journal reported.

And the Treasury Department said that Fannie Mae /quotes/comstock/13*!fnm/quotes/nls/fnm (FNM 1.05, 0.00, 0.00%) and Freddie Mac /quotes/comstock/13*!fre/quotes/nls/fre (FRE 1.27, +0.01, +0.79%) could reduce their giant mortgage-securities portfolios more slowly than its previous requirement of 10% a year.

The Treasury moved when it did because its authority to change the terms of its agreements with the two companies without Congress's approval expires Dec. 31, the Journal reported.

In September 2008, the Treasury seized the two companies, which had been heading for collapse under the weight of mounting mortgage defaults. The Treasury said then that it would inject as much as $100 billion of capital into each company in exchange for preferred stock paying a 10% dividend.

It has since put $60 billion into Fannie Mae and $51 billion into Freddie Mac, the Journal reported.

The new terms enable the Treasury to increase its support for the companies by the amount of the two companies' net losses over the three years beginning Jan. 1.

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6. Financial reform is flawed, says CBOE chief

http://www.ft.com/cms/s/0/e610848a-ef2a-11de-86c4-00144feab49a.html

US lawmakers are putting “undue political pressure” on regulators to tighten oversight of trading practices that had little to do with the financial crisis, while the bigger issues of systemic risk are not being adequately addressed, the head of the US’s biggest options exchange has warned.

In an interview with the Financial Times, Bill Brodsky, chief executive of the Chicago Board Options Exchange, said the debate on Capitol Hill over reforming financial regulation had focused on the wrong issues.

(COLOR US NOT SURPRISED)

“There are micro-market structure issues – flash orders, short-selling, high-frequency trading – that are being wrapped up into financial regulatory reform in a way that has a lot of political overtones,” he said. “This is something regulators should be dealing with without undue political pressure from Congress.”

The Securities and Exchange Commission has proposed banning flash orders – when exchanges allow traders’ computers to glimpse share order flows a fraction of a second before the broader market. The biggest options exchanges have lobbied for an exemption, saying flash orders give customers better prices and save them from paying fees at rival venues.

Mr Brodsky said Mary Schapiro, SEC chairman, had only proposed the ban after receiving a “very vociferous letter” on the issue from Charles Schumer, a powerful Democratic senator and member of the Senate Finance Committee.

Mr Brodsky said focus on these smaller issues had come at the expense of what should be the main thrust of efforts to overhaul the US financial system. He said legislation passed by the House of Representatives this month failed to tackle the problems.

“The central question is: what has this bill done to address systemic risk?

“I’m sceptical that the right questions are even being asked. What’s happened is that a lot of the big banks have rounded up their end-users to say: ‘Everything’s fine and don’t change anything.’ If everything’s fine, why were we at the brink of a disaster 1½ years ago and what’s changed?”

Industrial companies have lobbied Congress hard for exemptions to posting margin requirements on over-the-counter derivatives, without which they say they would be hampered from creating jobs and contributing to the economic recovery in the US.

Mr Brodsky said such exemptions were problematic. “The end-users get their financing from the banks that provide the derivatives.

“So if you exempt the end-users, what are you doing about the capital of the banks, the margin they have to post?”

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21. US town halls find fresh angles to meet recession

http://www.ft.com/cms/s/0/4797276a-ef29-11de-86c4-00144feab49a.html

“Other duties as assigned,” reads the job description for municipal workers in Siloam Springs, Arkansas.

Like the rest of the US, this town of 14,000 in the north-west of the state near the Oklahoma border is grappling with the fallout from a national recession. In response to plummeting revenue, David Cameron, the city administrator, has redrawn the roles of many employees.

“Our sales taxes are down 11 per cent but we still need to pick up the trash,” Mr Cameron says. “I pay more money to less people and maximise their use with more tasks.”

The court clerk now does all the marketing and handles the website. Firefighters do ambulance work and workers at the water treatment plant are paid extra to stand in for truck drivers, if needed.

Mr Cameron hopes the strategy will help withstand any more shortfalls and an uncertain outlook for growth.

Across the country, the financial crisis is redefining local government as officials face the reality of having much less money to deliver services, from public safety and libraries to rubbish collection.

About two-thirds of the 2,214 cities and counties that participated in a survey, to be released shortly, believe the changes implemented to deal with the downturn represent a different way of doing business that will endure beyond the financial crisis, according to the International City/County Management Association, a group for local government officials.

“That the recession has changed the way governments operate at the local level is not surprising,” said Ron Carlee, ICMA’s director of domestic initiatives. “However, the widespread belief that coping strategies represent a new normal is a significant development, with big implications for local governance.”

In the US, local governments are responsible for many of the services that affect the everyday lives of the general public, including police, transport and schools as well as public parks and libraries.

Unlike the situation for companies, demand for public services rises as revenue falls. For example, library attendance has risen as the unemployed use the facilities to research, write and send CVs. But local officials are being forced to cut hours to save money, Mr Carlee said.

Americans will this year begin to feel the consequences as their cities and towns make deep and more permanent cuts.

“We took this rollercoaster ride down to the bottom, but no one believes that we are going to go right back up to where we were,” said Jon Johnson, a former budget official for Jefferson County in Colorado, who works with ICMA to help local governments budget. “A new level of government and spending needs to be established.”

Observers have begun to question at what point local cuts could restrain the national economic recovery. The upshot is that having less money is forcing local government to be more efficient and giving them the opportunity to re-examine antiquated programmes. In Jefferson County, Mr Johnson discovered that the county was still sponsoring a Fairgrounds, but had not had a county fair in almost 10 years.

Facing drops in sales and income tax receipts of 12-15 per cent, Patrick Urich, the manager in Peoria County, Illinois, sought advice from construction company Caterpillar, whose headquarters is across the street from the county seat.

Like Caterpillar, which cut its workforce by 20,000, the county knew it had to shrink. Advised by Caterpillar’s human resources department, the county crafted incentives for people to leave their jobs voluntarily, including financial buy-outs and offers to continue health insurance. As a result, it cut 7 per cent of the workforce – 70 people – without any forced redundancies.

Walnut Creek, California, which must close a $20m (€14m, £12.5m) deficit for the 2010 financial year, is polling citizens on what services they value most, so it can make targeted cuts. Lorie Tinfow, assistant city manager, also expects the expansion of volunteer programmes such as checking on the elderly at home.

“We are rethinking what services the city provides, what we are paying for them and what we are expecting as American taxpayers to get for that dollar,” Ms Tinfow said.

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25. Democrats: Private Medicare plans waste billions

http://www.reuters.com/article/idUSTRE5B83TG20091209?type=politicsNews

Private health insurance companies that offer alternative Medicare coverage funnel billions of dollars toward company profits and marketing efforts rather than to patient care, U.S. Democrats said in a report released on Wednesday.

A number of insurers, including Humana Inc and UnitedHealth Group Inc, offer such plans known as Medicare Advantage as an alternative to traditional fee-for-service Medicare coverage for the elderly and disabled.

"But as this report shows, Medicare Advantage insurers are squandering billions of dollars on overhead costs -- in fact, they spend 10 times the amount per beneficiary as traditional Medicare," said House Energy and Commerce Committee Chairman Henry Waxman.

The report comes as lawmakers push forward on legislation to overhaul the nation's healthcare system, including cuts to Medicare Advantage and other industry reforms. The House, which passed its version of the bill in early November, is awaiting a final plan from the Senate before a bill can be sent to the White House.

From 2005 to 2008, Medicare Advantage insurers reported $27 billion in expenses unrelated to care, according to the report released by committee, which looked at 34 such insurers.

It also pointed to millions spent on executive compensation and company retreats in Hawaii, Cancun, Mexico and other exotic locales.

Health insurers Aetna Inc, Cigna Corp, Coventry Health Care Inc and WellPoint Inc were among those surveyed by the committee.

The industry's lobbying group, America's Health Insurance Plans (AHIP), had no comment on the report but said that the plans offer seniors additional benefits that aim to coordinate care or boost wellness that are not available under traditional Medicare.

"Seniors in Medicare Advantage receive higher quality care compared to fee-for-service Medicare," said AHIP spokesman Robert Zirkelbach.

Under the House reform bill, health insurance companies could not spend less than 85 cents of every premium dollar on actual patient t care; if they do, surplus money would be returned to customers through rebates -- essentially capping insurer profits.

The Senate bill currently under debate also calls for similar rebates, but could require a 90 cent on the dollar threshold under a compromise deal unveiled late on Tuesday.

The two bills would have to be combined before a final measure could be passed into law.

Democrats posted the report on their website at www.energycommerce.house.gov.

DU Discussion thread: http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=102x4178046

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26. Twelve repatriated from Guantánamo

http://www.ft.com/cms/s/0/7c2668d6-edaf-11de-ba12-00144feab49a.html

The US said on Sunday it had sent 12 detainees from the Guantánamo Bay prison camp home to Afghanistan, Yemen and the Somaliland autonomous region, as part of the Obama administration’s plan to close down the detention facility.

Four Afghans, two Somalis and six Yemenis were sent to their respective home countries over the weekend, the Department of Justice said.

They had been released after officials examined a number of factors, “including potential threat, mitigation measures and the likelihood of success in habeas litigation”, the department said.

“These transfers were carried out under individual arrangements between the United States and relevant foreign authorities to ensure the transfers took place under appropriate security measures,” it added.

“Consultations with foreign authorities regarding these individuals will continue.”

Almost 560 detainees have been released from Guantánamo since the Bush administration opened it in 2002 as part of its “war on terror”, the vast majority of them since Barack Obama, US president, took office in January.

About half of the almost 200 still in the Cuban island camp are from Yemen but the US government is concerned about transferring them home owing to government instability and al-Qaeda activity in the country....

...The White House...ordered last week the purchase of the Thomson Correctional Centre, an underutilised 1,600-cell maximum security prison about 150 miles west of Chicago, to house as many as 100 of those detained at Guantánamo Bay. Some of those would face trial there.

The decision to move the detainees on to American soil is controversial but the administration said that it would help to prevent future attacks by removing a “deadly recruiting tool” from the hands of al-Qaeda...

thereby giving the GOP a "deadly recruiting tool"...

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5. Keeping an Eye on the IMF

The International Monetary Fund, or IMF, serves as the shock troops in global conquest by multinational banking pirates.

http://vimeo.com/2076330

http://www.johnperkins.org/

As such, the IMF is under particular scrutiny in the battle of People vs Corporations. And Wherever they go, so does the CIA.

Supporting and informative articles on IMF will go here every weekend.

[Demeter]

8. Turmoil ends with Bucharest anxious for aid

http://www.ft.com/cms/s/0/65e62caa-efd0-11de-833d-00144feab49a.html

Romania attempted to leave behind weeks of political turmoil on Wednesday when parliament approved a new centrist government that will seek quickly to restore much needed financial assistance from the International Monetary Fund.

Parliament voted 276 to 135 to endorse a 15-member cabinet led by Emil Boc, the prime minister, who spoke of the “need to return to reason and stability” after three months of political deadlock.

The leu, Romania’s currency, rose to a three-month high following news of the government’s confirmation.

Twenty years after a revolution toppled the communist dictatorship of Nicolae Ceausescu, the new government faces a challenging year as it seeks to restore economic growth and narrow the budget deficit, while hold together a fragile coalition.

Romania has been ruled by a caretaker government since October, when a previous administration led by Mr Boc collapsed, forcing the IMF to put a €20bn ($29bn, £18bn) aid package on hold. The prime minister is an ally of Traian Basescu, the president, who was re-elected in bitterly fought elections earlier this month.

The new government is composed of members of Mr Boc’s Liberal Democrat party (PDL), the ethnic Hungarian UDMR, as well as independents.

Its priority will be to pass a credible budget that will persuade the IMF to unlock payments to the recession-hit country as early as ­February.

“The fact that we have a government is good news,” said Ionut Dumitru, chief economist at Raiffeisen Bank Romania.

“They can now implement the measures needed to comply with the IMF requirements.”

The IMF is pressing Romania to narrow its budget deficit from 7.3 per cent to 5.9 per cent in 2010, forcing the new government to consider a range of austerity measures.

Although Mr Boc has promised to maintain the 16 per cent flat tax and 19 per cent sales tax, he is expected to cut about 100,000 public sector jobs and freeze public sector wages next year. The cabinet also plans to adopt a fiscal responsibility law and reform the creaking pensions system.

The economy is forecast to contract by at least 7 per cent this year, before returning to modest growth of 1.3 per cent next year.

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9. IMF turns down $2bn loan to Ukraine

http://www.ft.com/cms/s/0/bb7fa3ae-efca-11de-833d-00144feab49a.html

The International Monetary Fund has turned down recession-battered Ukraine’s plea for a $2bn emergency loan before the New Year, a senior Ukrainian official said on Wednesday, citing his country’s failure to adopt a fiscally prudent 2010 budget and muster political consensus ahead of a hotly contested presidential election.

But officials said the financially-stretched government had other last-minute options that could allow it receive the needed $2bn in coming months, enough to cover natural gas import bills to Russia’s Gazprom, as well as citizens’ pensions and wages.

Ihor Umansky, Kiev’s finance minister, said Ukraine could revive negotiations with the Fund early next year, but added: “It will be impossible before the end of the year” to receive a fresh IMF disbursement.

The IMF was not immediately available for comment. It has provided $11bn in aid this year to keep Kiev financially afloat amid a 15 per cent drop in gross domestic product, but froze assistance in November due to a lack of reforms and political infighting.

Kiev’s political leaders are bitterly divided, with President Viktor Yushchenko, Prime Minister Yulia Tymoshenko and ex-premier Viktor Yanukovich all campaigning for a January 17 presidential election. The political temperature is not expected to cool down until after a second round run-off is held in February.

Without fresh cash, Ukrainian officials have said they could struggle to cover Russian gas import bills in coming months. The scenario could spark a repeat of last January’s stand-off with Russia that disrupted European supplies.

Government officials have also recently warned that escalation of their country’s financial woes could “spill over” into other regions. European banks hold a 40 per cent market share in Ukraine.

Alexander Ginzburg, an advisor to Ms Tymoshenko, told the Financial Times on Wednesday that her government was in “a really tough situation”, but could still manoeuvre to meet financial obligations.

Mr Ginzburg said the IMF’s board could on Wednesday sanction Kiev’s central bank to transfer into government accounts billions of dollars from its reserves that were built up with IMF money this year. “The cash supply could come out of the central bank if the IMF agrees to lower the floor for its reserves,” Mr Ginzburg added.

With almost $27bn in central bank reserves, and Ukraine’s currency stabilised after a more than 40 per cent drop in late 2008, Mr Ginzburg said there was “enough to put the money on the table”. But “political rivalries at play” ahead of the presidential election could block this option.

Heavily influenced by Ms Tymoshenko’s opponents, the central bank could refuse to assist the government. Such an outcome would be the most recent of many attempts this year to starve Ms Tymoshenko’s government of cash, thereby “sabotaging her presidential candidacy”.

Late on Wednesday, Mr Yushchenko pledged to continue blocking the transfer of central bank reserves, which Ms Tymoshenko’s government hoped to use for covering the widening budget deficit..

Borrowing from Russian banks is another option, but it could be more expensive and come with political strings attached. Moreover, it would not be “easy to borrow from Russian banks at this stage,” Mr Ginzburg said. “The timing is very tight with the holidays.”

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11. Greek parliament approves budget cuts

http://www.ft.com/cms/s/0/86b42d82-f07b-11de-839a-00144feab49a.html

The Greek parliament voted in the early hours on Thursday to give the government the green light to implement its 2010 budget, which seeks to reduce the deficit by four percentage points to 9.1 per cent of GDP

Speaking just before the voting began, George Papandreou, prime minister, said the 2010 budget was the most difficult and important since 1974 when democracy returned to Greece.

All 160 deputies of the ruling socialist Pasok party voted in favour of the budget while 139 deputies of the opposition parties voted against, with one deputy abstaining.

George Papaconstantinou, finance minister, has set an even lower target for the 2010 budget deficit to 8.7 per cent of GDP to convince the markets of the government’s intentions to put the public finances in order and arrest the growth in public debt, which is the second highest in the eurozone as a percentage of GDP.

Even so, it will not be easy since the credibility of the country has been hurt by its inability to deliver on its budget promises in the past. The government, which came to power after a landslide victory in early October elections, does not have much time either since Greece will have to borrow some €54bn ($78bn) next year to finance the budget deficit and roll-over its maturing debt.

Analysts believe Mr Papandreou will need to side with the reformists in his party, risking the alienation of the old guard which has a more populist economic agenda, while seeking the support of trade unions and other interest groups. This is likely to be a delicate balancing act.

“What counts is effectiveness in cutting expenditure and raising the projected revenues,” said Constantine Boukas, director of asset management at Beta Securities.

“There is some relief following Moody’s decision to downgrade Greece by one notch which gave the government a bit of time to implement its strategy, but this is just a respite.”

[Demeter]

17. Latvia issues warning to Swedish banks

http://www.ft.com/cms/s/0/bceac44a-ef3d-11de-86c4-00144feab49a.html

Latvia’s prime minister has warned Swedish banks they risk choking off recovery in the Baltic state’s crisis-hit economy unless they resume lending.

Banks such as Swedbank and SEB, which dominate the Latvian market, have reined in credit as they struggle to contain rising bad loans amid the deepest recession in the European Union.

“The ... abrupt stopping of credit is a very problematic issue,” said Valdis Dombrovskis, the prime minister. “We expect Swedish banks to start (lending) again.”

Mr Dombrovskis said the banks must share responsibility after they helped sow the seeds of crisis by lending “irresponsibly”. The economy has contracted by about 18 per cent this year after a long period of rapid growth was thrown into reverse by the global credit crunch.

“Of course you can say that Latvians were borrowing irresponsibly but to borrow irresponsibly you need someone to lend irresponsibly,” he said. “We had very easy credit in a very overheated economy. Now we have almost no credit in a very deep recession.”

Neighbouring Lithuania and Estonia have also been hit hard, inflicting big losses on the Nordic banks that expanded aggressively across the Baltic region.

Mr Dombrovskis warned that deep budget cuts agreed as part of a €7.5bn rescue package with the International Monetary Fund and the European Commission would increase economic pain in the short term. But he insisted the measures were crucial to fiscal stability.

He ruled out devaluation of the lat. While breaking the currency’s fixed exchange rate with the euro would help Latvia’s exporters, it would increase the burden of euro-denominated loans, which account for 85 per cent of lending, he said.

“We would not see much benefit from devaluation because we are a very small and open economy which means that any competitiveness gains we may get would be very short-lived,” he said. “We would redistribute wealth from pretty much all the population to a few exporters.”

His resistance to devaluation reflects a determination to keep alive hopes of joining the euro. Mr Dombrovskis said he was confident of reducing the budget deficit from 10 per cent this year to 3 per cent – the maximum allowed under euro entry rules – by 2012, paving the way for membership by 2014.

[Demeter]

7. Plant DNA leaves thieves tainted

http://www.ft.com/cms/s/0/684f7906-efb7-11de-833d-00144feab49a.html?ftcamp=rss

The police (IN THE UK, I EXPECT, ALTHOUGH IT IS NOT CLEAR) are using specially tailored plant DNA to catch thieves who steal money from cash delivery vans, in the latest crime-fighting development in genetic engineering.

When cash boxes in delivery vans are opened or moved illegally, dyes are released onto banknotes, but these can be removed using aggressive solvents, making stolen money hard to identify.

The adapted plant DNA, called SigNature, is added to the dye, so the cash, criminals and anything else the dye touches are coated in it. Long strands of plant DNA are very difficult to remove, so they persist after the dye has been removed, allowing suspects to be linked directly to the crime scene.

The first criminals to be successfully prosecuted on this type of evidence were convicted in late October. Two men who stole thousands of pounds by intercepting a cash delivery in London were found with SigNature DNA on their skin, clothing and mobile phones as well as on banknotes. They pleaded guilty and were sentenced to up to five years in prison.

Over 1,000 such robberies took place in the UK in 2009.

To make the tailored DNA, US-based biotech firm Applied DNA Sciences chops up plant DNA and rearranges it, creating unique and easily identifiable DNA “markers”.

The tailored DNA is then stabilised – it can survive unaltered for up to 350 years – and added to the dye. Police scan suspects’ clothing and any recovered money using handheld detectors. If DNA is seen, it is extracted and analysed to confirm it matches the marker in the dye.

Because the tailored plant DNA has been rearranged, each batch is unique. Different batches are used for each cash shipment, allowing police to trace stolen money to particular currency deliveries, and eliminating the chances of mistaken identity.

Loomis, a cash management company which handles about £150bn ($239bn) annually in the UK, is the first company to adopt SigNature DNA marked cash boxes.

[Demeter]

23. Stem cells help cure blindness (FU RIGHT WINGNUT RELIGIOUS WHACKOS!)

http://www.ft.com/cms/s/0/005ba1fa-ef15-11de-86c4-00144feab49a.html

A stem cell treatment developed in Newcastle has restored good vision to eight people who had lost sight in one eye.

“This has transformed my life,” said one of the patients, Russell Turnbull, whose right eye was burned and scarred in an ammonia attack after intervening in a fight on a Newcastle bus 15 years ago. “I’m working, I can go jet skiing and also ride horses.”

The new technique – developed at the North East England Stem Cell Institute – involves taking a small biopsy from the cornea of the patient’s good eye and multiplying its stem cells several hundredfold in the lab with a special culture system. When the cells are transplanted back into the damaged eye, they restore the damaged cornea.

“The operation has improved the sight in my right eye from 10 per cent to 90 per cent,” said Mr Russell, 38, “and best of all it has removed the constant pain and light sensitivity in the eye.”

The technique could help thousands of people who suffer severely impaired vision through a condition known as Limbal Stem Cell Deficiency. This is caused by damage to the surface of the cornea, caused by disease, chemical burning or physical injury.

Sajjad Ahmad, the scientist who developed the Newcastle method, said its success showed the scope for using the patient’s own stem cells to treat the eye. Details are published in the journal Stem Cells.

But the technique depends at present on having one healthy eye from which to extract stem cells. And, while it might be extended to treat other disorders of the cornea, it is not suitable for retinal problems such as blindness caused by macular degeneration. Scientists elsewhere are planning clinical trials of stem cells derived from early human embryos to treat retinal disease.

The Medical Research Council has given the Newcastle team a £1.5m grant to extend the trial to 25 more patients over the next three years, said Francisco Figueiredo, consultant eye surgeon at the city’s Royal Victoria Infirmary.

“We want to take this from a research-based technique to one that could be used in eye departments throughout the NHS,” said Dr Ahmad. “It would save a lot of money as well as preventing suffering, because patients with LSCD currently have to see an eye specialist every six weeks or so.”

[Demeter]

24. Here we have a man of Middle Eastern Descent REALLY Doing God's Work

Jesus Heals a Man Born Blind

As he went along, he saw a man blind from birth. His disciples asked him, “Rabbi, who sinned, this man or his parents, that he was born blind?”

“Neither this man nor his parents sinned,,” said Jesus, “but this happened in his life. As long as it is day, we must do the work of him who sent me. Night is coming, when no one can work. While I am in the world, I am the light of the world.”

Having said this, he spit on the ground, made some mud with the saliva, and put it on the man’s eyes. “Go,” he told him, “wash in the pool of Siloam” (this word means Sent). So the man went and washed, and came home seeing.

His neighbors and those who had formerly seen him begging asked, “Isn’t this the same man who used to sit and beg?” Some claimed that he was.

Others said, “No, he only looks like him.”

But he himself insisted, “I am the man.”

“How then were your eyes opened?” they demanded.

He replied, “The man they call Jesus made some mud and put it on my eyes. He told me to go to Siloam and wash. So I went and washed, and then I could see.”

“Where is this man?” they asked him.

“I don’t know,” he said. -- John 9:1-12

The Pharisees Investigate the Healing

They brought to the Pharisees the man who had been blind. Now the day on which Jesus had made the mud and opened the man’s eyes was a Sabbath. Therefore the Pharisees also asked him how he had received his sight. “He put mud on my eyes,” the man replied, “and I washed, and now I see.”

Some of the Pharisees said, “This man is not from God, for he does not keep the Sabbath.”

But others asked, “How can a sinner do such miraculous signs?” So they were divided.

Finally they turned again to the blind man. “What have you to say about him? It was your eyes he opened.”

The man replied, “He is a prophet.”

The Jews still did not believe that he had been blind and had received his sight until they sent for the man’s parents. “Is this your son?” they asked. “Is this the one you say was born blind? How is it that now he can see?”

“We know he is our son,” the parents answered, “and we know he was born blind. But how he can see now, or who opened his eyes, we don’t know. Ask him. He is of age; he will speak for himself.” His parents said this because they were afraid of the Jews, for already the Jews had decided that anyone who acknowledged that Jesus was the Christ would be put out of the synagogue. That is why his parents said, “He is of age; ask him.”

A second time they summoned the man who had been blind. “Give glory to God,” they said. “We know this man is a sinner.”

He replied, “Whether he is a sinner or not, I don’t know. One thing I do know. I was blind but now I see.”

Then they asked him, “What did he do to you? How did he open your eyes?”

He answered, “I have told you already and you did not listen. Why do you want to hear it again? Do you want to become his disciples, too?”

Then they hurled insults at him and said, “You are this fellow’s disciple! We are disciples of Moses! We know that God spoke to Moses, but as for this fellow, we don’t even know where he comes from.”

The man answered, “Now that is remarkable! You don’t know where he comes from, yet he opened my eyes. We know that God does not listen to sinners. He listens to the godly man who does his will. Nobody has ever heard of opening the eyes of a man born blind. If this man were not from God, he could do nothing.”

To this they replied, “You were steeped in sin at birth; how dare you lecture us!” And they threw him out. -- John 9:13-34

Spiritual Blindness

Jesus heard that they had thrown him out, and when he found him, he said, “Do you believe in the Son of Man?”

“Who is he, sir?” the man asked. “Tell me so that I may believe in him.”

Jesus said, “You have now seen him; in fact, he is the one speaking with you.”

Then the man said, “Lord, I believe,” and he worshipped him.

Jesus said, “For judgment I have come into this world, so that the blind will see and those who see will become blind.”

Some Pharisees who were with him heard him say this and asked, “What? Are we blind too?”

Jesus said, “If you were blind, you would not be guilty of sin; but now that you claim you can see, your guilt remains.” -- John 9:35-41


While I am as much a christian as I am pagan, I think Blankfein should fear his arrogance...

[Demeter]

10. Sales of new US homes plunge unexpectedly

http://www.ft.com/cms/s/0/cdad284a-efce-11de-833d-00144feab49a.html

Sales of new homes in the US plunged unexpectedly in November, official figures showed, as buyers favoured distressed and foreclosed properties.

Separately on Wednesday, personal incomes in the US recorded their biggest gains in six months in November as the labour market began to improve and consumer spending continued to thaw.

New home sales dropped by 11.3 per cent to an adjusted annual rate of 355,000, commerce department figures showed. That was the lowest level in seven months and defied expectations of a rise.

Compared with a year ago, sales of new homes are off by 9 per cent.

The disappointing housing data shows how sales of existing homes, which rose last month, have cannibalised new home sales. The figures also showed the impact of expectations that the first-time home buyer tax credit would expire in November. It was eventually extended into next year.

“It is important to understand that the earlier recovery was in part a product of the tax incentive, which is now slated to go away at the end of April,” said Joshua Shapiro, chief US economist at MFR. “It would appear that weaning housing from the government’s teat is going to be a difficult process.”

Home sales were hit the hardest in the south, where they fell by 21.1 per cent. They fell by 9.2 per cent in the west, 3.3 per cent in the northeast, but rose by 21.4 per cent in the midwest.

A bright note on Wednesday was that the median price of a new home in the US rose by 3.82 per cent to $217,400 from October to November. That was clouded, however, by a rise in housing inventory, which rose to a 9.5-months-supply at the current sales rate.

Meanwhile, incomes rose by 0.4 per cent to $49.7bn in November, silghtly behind economists’ expectations but stronger than the prior month, according to commerce department figures. Workers benefited from the slowing pace of lay-offs and employers who began to increase their hours.

Personal consumption expenditure also continued to climb, rising by 0.5 per cent, as holiday discounts succeeded in luring shoppers. Consumer spending has risen in six of the past seven months.

With spending and incomes tracking each other closely, the savings rate held steady at 4.7 per cent in November.

“There is no evidence that the consumer is seeking to ramp the savings rate higher and we attribute this to the recovery in equity prices and the stabilisation in home prices, which has restored a degree of wealth cushion to US households,” said John Ryding and Conrad DeQuadros, economists at RDQ Economics.

Consumer spending accounts for about 70 per cent of economic activity in the US. On Tuesday, revised government figures showed that the US economy had grown at an adjusted annual rate of 2.2 per cent in the latest quarter. Analysts forecast that gross domestic product could grow by more than 4 per cent if consumer spending keeps rising at this rate.

The commerce department’s core price index, a key measure of inflation, was flat in November, signalling that rising prices are not an imminent concern.

[Demeter]

12. MARLEY'S CHAINS: The Banksters' Sub Thread

Is it a bird? Then it's a vulture. A Plane? then it's a private jet.

It's the Fraudsters: Carlyle, Citi, BoA, etc. They all go here.

[Demeter]

13. Carlyle eyes cash bid for Shanks

http://www.ft.com/cms/s/0/3a92c85a-f067-11de-839a-00144feab49a.html

Carlyle Group, the US private equity investor, confirmed on Thursday that it was considering a cash bid for Shanks, the FTSE 250-listed waste management company.

However, the stock exchange announcement was thought to be a formality rather than a sign of any material change to the stand-off between the two companies...

[Demeter]

14. Glencore takes step closer to flotation

http://www.ft.com/cms/s/0/b4eef802-efbe-11de-833d-00144feab49a.html

Glencore, the world’s dominant commodity trader, has taken its first step towards becoming a public company by issuing up to $2.2bn in convertible bonds to strategic investors in the US, Singapore and China.

The issue, which values the publicity shy, Switzerland-based company at $35bn, has been taken up by First Reserve, the US-based private equity group which focuses on natural resources, GIC, Singapore’s sovereign wealth fund; US-based BlackRock; and Zijin Mining Group, the Chinese miner...

[Demeter]

15. GM picks Microsoft’s Liddell as finance chief

http://www.ft.com/cms/s/0/52053b3c-ee4e-11de-944c-00144feab49a.html

...Mr Liddell’s move from cash-rich Microsoft to the struggling carmaker will entail one of the biggest financial contrasts in American business. While at the software company, he has been closely associated with the company’s move to return more of its cash to shareholders, paying out more than $85bn in share buy-backs and dividends in his time at the company – a sharp contrast to loss-making GM.

However, Mr Liddell was also credited with bringing much greater financial discipline and cost control after joining Microsoft in May 2005, in what was also an unusual outside hire for that company. Spurred on by the maturing of its core operating system business and the recession, Mr Liddell pushed through the first company-wide job cuts in Microsoft’s 34-year history. Before joining the software company he was chief financial officer at International Paper, the world’s largest forest products company.

A phlegmatic New Zealander with a low-key style, Mr Liddell was nonetheless credited with forging a close partnership with the ebullient and expansive Steve Ballmer, Microsoft’s chief executive.

Mr Liddell, aged 51, “brings a depth and experience to this job that were unmatched in our search for a new financial leader,” said Ed Whitacre, GM’s chairman and interim chief executive said. Steve Rattner, former head of the US government’s auto industry task force, sharply criticised GM’s financial management in a recent piece for Fortune magazine.

Mr Liddell has an engineering degree from the University of Auckland, and later graduated from Oxford University. He is a former director of the New Zealand Rugby Union.

GM’s former CFO, Ray Young, has been reassigned to a senior position in the carmaker’s international operations....

[Demeter]

33. France stands by use of stolen bank data

http://www.ft.com/cms/s/0/810a6f94-ed89-11de-ba12-00144feab49a.html

France said on Sunday that it had committed no crime in using a stolen list of Swiss bank accounts to track French tax evaders as a dispute intensified between Bern and Paris over banking secrecy.

“France is committing no fraud, the tax evaders are,” said Eric Woerth, budget minister, in a television interview on Canal Plus. “What counts is that we obtained legally.”

Switzerland has threatened to suspend ratification of a new bilateral tax treaty agreed with France in September over the decision by French fiscal authorities to use a list stolen from HSBC in Geneva by a former employee. Hervé Falciani, an IT specialist, has admitted stealing the information and handing it to French tax authorities, though he denies receiving payment.

The Swiss government has demanded that the list of more than 100,000 international account holders, including thousands of French citizens, be returned before Christmas. HSBC on Sunday said the information in the list was “incomplete” and “inaccurate”.

The French government is not the first to use stolen information to crack down on tax fraud. Germany has opened hundreds of investigations into suspected tax evaders in Liechtenstein after acquiring information from a former bank employee. Paris officials have said the Swiss list and other sources show that roughly 3,000 accounts held by French citizens contain a total of €3bn ($4.3bn, £2.6bn).

Mr Woerth revealed the existence of the list in August and said anyone who came clean on undeclared accounts before the end of the year would not be fined. The budget minister has said about €500m has already been recovered.

Nonetheless, the manner in which the list was obtained has raised concerns, even within the ruling UMP party. In a bid to avert questions over the legality of using stolen information, tax authorities are limiting their inquiries to information passed on by judicial investigators who were subsequently given the list by Mr Falciani and are looking for evidence of money laundering.

Hans-Rudolf Merz, Swiss finance minister, is due next month to meet his French counterpart, Christine Lagarde, to discuss how France intends to handle stolen data in future.

[Demeter]

34. Sales of dollar junk bonds hit record

http://www.ft.com/cms/s/0/463f62be-edae-11de-ba12-00144feab49a.html

Sales of dollar junk bonds have hit all-time high levels in 2009, as issuers rush to tap strong global investor demand after a year in which the asset class has produced record returns.

Total issuance so far this year of high-yield bonds, commonly known as junk, last week topped $144bn (£89bn), passing the previous high of $143bn reached in 2006, according to Dealogic. This marks a big reversal from last year, when investors shunned this corner of the credit markets.

Returns on junk bonds this year are running at 56 per cent, according to a Merrill Lynch index, easily beating the previous record of a 39 per cent return in 1991.

The rally has taken many analysts and policymakers by surprise. Earlier in the year there was widespread concern that the sector would be ravaged by corporate defaults. Moody’s Investors Service, for example, forecast that defaults would peak at 16.4 per cent among global companies with high-yield ratings.

Since then, the default rate has risen, and in November it was running at 12.7 per cent, or 250 defaults.

However, Moody’s now thinks that this global default rate has peaked and will fall sharply next year to about 4 per cent. Other forecasters predict a similar path.

These projections, coupled with government support measures for the capital markets, have sparked a big rally in junk bond prices, with an associated fall in yields.

Nevertheless, some analysts question whether the rally is sustainable.

“The government backing of the banking sector helped open the new issue market and was a watershed moment for high yield,” said Steve Huber at T. Rowe Price.

“ companies are not out of the woods yet – the day of reckoning has just been extended.”

[Demeter]

46. Icap to pay $25 mln to settle SEC fraud charges

http://www.marketwatch.com/story/icap-pays-25-mln-to-settle-sec-charges-2009-12-20?siteid=YAHOOB

The U.S. subsidiary of the London inter-dealer broker Icap PLC settled fraud charges brought by the U.S. Securities and Exchange Commission by paying $25 million in penalties, the company and agency said.

Icap Securities USA matches buyers and sellers in the over-the-counter markets for securities like U.S. Treasury bonds and mortgage-backed securities via customer trading screens, the SEC said.

In a Friday statement, the SEC said that Icap brokers on its U.S. Treasury desks "displayed fictitious flash trades, also known as 'bird' trades, on Icap's screens and disseminated false trade information into the marketplace attract customer attention to its screens and encourage actual trading by these customers.

"Icap's customers believed the displayed fake trades to be real and relied on the phony information to make trading decisions."

Icap /quotes/comstock/11i!iaply (IAPL.Y 13.85, +0.40, +2.97%) /quotes/comstock/23s!e:iap (UK:IAP 423.60, +1.27, +0.30%) neither admitted nor denied the SEC's allegations. The company agreed to disgorge $1 million and to pay $24 million in penalties. And Icap agreed to retain a consultant to review its controls and compliance mechanisms and to assess its trading activities to ensure that such violations aren't occurring elsewhere within the company, the SEC said.

Icap said in a statement on Friday that the settlement concludes a four-year investigation by the SEC. The company said it has made " enhancements to the quality of its control environment" and "remains committed to maintaining the highest professional standards and to providing its customers with the highest quality service."

The company said it would report the $25 million penalty as a special item in its financial statements.

Seven current and former executives of Icap also were charged by the SEC and settled the allegations without admitting or denying wrongdoing.

[Demeter]

16. Missing jet engines spark crisis in Malaysia

http://www.ft.com/cms/s/0/ff6c46d2-eef6-11de-92d8-00144feab49a.html

The Malaysian government is facing a fresh corruption crisis after officials admitted that two US-made fighter jet engines had disappeared from an air force base after apparently being illicitly sold by military officers to a South American arms dealer.

Najib Razak, prime minister, said there would be a full investigation of the thefts, which happened in 2007 and 2008, when he was defence minister. However, opposition parties accused the government of covering up the incidents.

Lim Kit Siang, parliamentary leader of the opposition Democratic Action party, said the authorities had been “super slow” and claimed that the prime minister’s response had painted “a frightening picture of a government of thieves”.

Idris Ahmad, spokesman for the allied Parti Islam SeMalaysia, said “powerful people” had been involved. “We don’t want only the ikan bilis to be arrested while the sharks are allowed to swim freely,” he said.

The General Electric J85-21A engines, each worth about M$50m ($15m), were spares for the Royal Malaysian Air Force’s Northrop Grumman F-5E Tiger II fighters, which fly from the Butterworth air base near the country’s northern border with Thailand.

Ahmad Zahid Hamidi, defence minister, said the engines and associated equipment were “believed to have been sent to a South American country” after being moved to the Sungai Besi air force base in Kuala Lumpur for maintenance.

The defence ministry would not identify the company or the country involved or comment on claims in the Malaysian media that the engines may have ended up in the Middle East.

The F-5 went out of production in 1989 but is still flown as a trainer aircraft by US forces and is in frontline or reserve service with many foreign air forces, including that of Iran.

The defence ministry said several senior officers were being investigated. General Azizan Ariffin, chief of the armed forces, said the engine thefts might have been “the tip of the iceberg”, raising the possibility that other military equipment might also have disappeared.

The disclosure of the thefts is a serious blow to Mr Najib, who has promised a crackdown on corruption as part of efforts to recover support for his long-serving National Front government, which lost many of its seats in a general election last year.

The prime minister last week unveiled a three-year action plan amid concerns about declining investor interest and the impact of Malaysia’s fall to 56th in the 2009 Corruption Index published by Transparency International – down from 47th in 2008.

Mr Najib has flatly denied any personal corruption, including opposition claims of involvement in an allegedly corrupt submarine deal while he served as defence minister.

Corruption charges were brought this month against a senior port executive and two other officials linked to a controversial development near Kuala Lumpur known as the Port Klang Free Trade Zone.

The arrests followed a damning parliamentary report that found widespread corruption and cost overruns at the project, which has run up debts of more than $1bn.

[Demeter]

18. Russia welcomes end to gas dispute (Russia fights globalization alone)

http://www.ft.com/cms/s/0/eb38667c-ef1f-11de-86c4-00144feab49a.html

Gazprom, the Russian state energy company, signalled on Tuesday it would fight to retain influence over central Asian gas exports, settling an eight-month trade dispute with Turkmenistan and saying it would build new pipelines to bring Turkmen gas to Europe.

Alexander Medvedev, deputy chief executive of Gazprom, said Russia had agreed to buy up to 30bn cubic metres a year of gas from Turkmenistan starting next year.

Gazprom would also build a new pipeline to link untapped gas reserves in east Turkmenistan with a new pipeline running along the Caspian coast from central Asia to Russia, it said.

Dmitry Medvedev, Russia’s president, on his second visit to the Turkmen capital Ashkabad this year, welcomed the deal, saying after talks with Gurbanguly Berdymukhammedov, Turkmenistan’s leader, it would provide “a good basis for our energy co-operation in the immediate term”, the Interfax news agency reported.

The dispute erupted in April after a pipeline explosion halted Turkmenistan’s gas exports to Russia, choking off the country’s main source of foreign revenue. Turkmenistan accused Gazprom of causing the blast – a charge the Russian company denied.

Gazprom, facing a drop in Russian and European gas demand, ordered Turkmenistan to renegotiate a contract signed last year to supply Russia with 50bn cubic metres of gas in 2009.

Turkmenistan refused, turning instead to China and Iran with offers of extra gas supplies. It also stepped up talks with the European Union to join the planned Nabucco pipeline project to bring Caspian and central Asian gas to Europe via the Caucasus and Turkey.

China exploited the dispute, granting Turkmenistan a $3bn (€2.1bn, £1.9bn) loan to help develop the South Iolotan gas field in the east of the country that could help to supply a pipeline to China that opened this month.

Funded by China, the pipeline crosses Turkmenistan, Uzbekistan and Kazakhstan, breaking Russia’s stranglehold on central Asian gas export routes.

In a further move to diversify gas trade, Turkmenistan began building a second pipeline to Iran that will allow it to double exports to its southern neighbour from next year.

Alexander Medvedev said Gazprom was interested in co-operating with Turkmenistan to build a pipeline from South Iolotan to link into a new pipeline from central Asia to Europe.

But Professor Jonathan Stern, director of gas research at the Oxford Institute for Energy Studies, said although Russia could compete with China by offering higher prices for Turkmen gas, it would not need extra gas from Turkmenistan for several years. “The whole Turkmenistan gas fever is cooling off,” amid the global recession.

[Demeter]

32. Serbia to submit bid to join the EU

http://www.ft.com/cms/s/0/c7bc1936-ed8b-11de-ba12-00144feab49a.html

Serbia will apply to join the European Union on Tuesday, hoping that improving relations with the bloc will open a fast track for its candidacy by the end of 2010.

The Balkan country of around 8m people – still weighed down by the legacy of the 1990s wars – seeks EU candidate status despite lingering questions about its co-operation with the United Nations tribunal for the former Yugoslavia.

But a largely positive report from UN prosecutors earlier this month has brought greater flexibility, even from the most sceptical EU members.

“We see new momentum and would like this to continue,” said Bozidar Djelic, Serbia’s deputy prime minister. “By making our application now, we will unequivocally demonstrate the central strategic goal of Serbia is to join the EU and nothing else.”

Economic stabilisation and the successful busting of Balkan drug-trafficking networks have also boosted Belgrade’s credibility nearly a decade after the overthrow of wartime leader Slobodan Milosevic.

Boris Tadic, president and main pro-EU party leader, said: “No one can doubt the road that Serbia has taken. Serbia is going towards European integration.”

[Demeter]

19. Seeing as we now have a quorum, I'm turning over to you

I've got to put the ham in and make some potato salad...you are all welcome at the table, by the way! Ann Arbor, Michigan--head north from Toledo.

[Demeter]

20. New Zealand GDP growth disappoints

http://www.ft.com/cms/s/0/d3da18e6-ef6e-11de-86c4-00144feab49a.html

New Zealand recorded unexpectedly sluggish growth in the third quarter, underlining fears that the country’s emergence from its worst recession in decades will be slower than predicted.

Gross domestic product rose 0.2 per cent in the three months ended September compared with the previous quarter, about half economists’ forecasts. For the year to September, the economy contracted 2.2 per cent compared with the year to September 2008.

Economists noted that there had been a particularly sharp fall in residential building in the latest quarter and that business investment and manufacturing had also been weak.

The New Zealand dollar responded by falling to its lowest level since September after it dipped below US$0.70 on speculation that the country’s central bank would delay raising interest rates until the middle of 2010.

Bill English, finance minister, said more work was needed to ensure the country’s sustainable recovery.

”While growth is still weak, today’s figures are positive news. New Zealanders can go into the Christmas break feeling a bit more confident about the economy and the year ahead,” he said. “Two quarters of growth – following five quarters of contraction – reflects a stabilisation in the global economy and the government’s sound economic management.”

However, he warned the country’s recovery was fragile and any further problems in the global economy could weaken growth prospects.

“It is critical we improve the competitiveness of our exporters and address structural imbalances in our economy,” he said.

Rachael Milicich, national account manager at Statistics New Zealand, the government agency, said the picture across industry was mixed during the third quarter.

“On the production side of the economy, mining and business services showed the largest increases,” she said.

[Demeter]

22. Opec indicates $70-$80 oil price target

http://www.ft.com/cms/s/0/9f7eadc0-eee5-11de-92d8-00144feab49a.html

The Opec oil cartel on Tuesday gave the strongest indication yet it aims to keep oil prices at $70-$80 a barrel next year as it tries to support the economic recovery.

Ali Naimi, Saudi Arabia oil minister and the group’s de facto leader, said the current oil price was “excellent” and added he would like to “keep it that way” in 2010. “Everyone needs this price: this is the future,” the minister said.

As a first step, the cartel, which controls more than 40 per cent of the world’s oil output, agreed to leave leave its production levels unchanged at least until March.

The decision in Luanda, Angola’s capital, comes after Opec’s campaign to reduce supply doubled prices from a year-low of $32.70 in late January to $73.30 on Tuesday.

The cartel’s president and Angola’s oil minister, Jose Botelho de Vasconcelos, said: “I think that for 2010 price levels will be identical to what we have today.”

But in a sign that Opec does not believe the recovery is yet firm, it called for better adherence to its official output levels, after compliance slipped in recent months. Opec members subject to quotas – Iraq is excluded – pumped 26.6m barrels a day last month, the highest level this year and well above its ceiling of 24.85m b/d.

The cheating concerns Opec because it keeps inventories above normal levels, making a drop in prices likely if the economy does not rebound as fast as expected.

In its communiqué, the cartel said that although “asset market prices have rebounded and economic growth has resumed in some parts of the world, it is not yet clear how strong or durable the recovery might be”. “The world economy remains confronted with the deepest, most wide-spread contraction since the 1940s,” it added.

Against this backdrop, Opec believes an oil price of $70-$80 is in everyone’s interest, allowing producers to invest and consumers to recover. However, Michael Wittner, oil analyst at Société Générale, said Opec’s acceptance of the range was more a tactic to support recovery in 2010 than a permanent shift. “If a fragile global economy can handle current prices, surely a robustly growing one can handle higher prices,” he said.

The International Monetary Fund expects the global economy to grow 3.1 per cent in 2010, after contracting 1.1 per cent in 2009....

AND HERE WE HAVE IT--THE WEAK SPOT, OR ONE OF THEM, IN GLOBALISM AND THE IMF ET AL. THEY BELIEVE THEY CAN CREATE THEIR OWN REALITY, EVEN THOUGH IT WAS A "MISERABLE FAILURE" IN A CERTAIN WESTERN POWER JUST RECENTLY...

YES, THEY CAN ASSASSINATE AND CORRUPT LEADERS, BUT CAN THEY GOOSE A REAL GROWTH OUT OF THE DESTRUCTION THEY HAVE WROUGHT? I DON'T THINK SO...

[Demeter]

35. Tullow eyes block on Heritage asset sale

http://www.ft.com/cms/s/0/087c170e-ed83-11de-ba12-00144feab49a.html

Tullow Oil is likely to scupper Heritage Oil’s proposed $1.5bn (£930m) sale of its Ugandan assets to Eni, the Italian energy group, by exercising a right to pre-empt the deal, a senior Tullow executive has said.

Tullow has until January 17 to decide how to respond, but Brian Glover, head of its Uganda operations, said: “All things being equal, it’s highly likely we would pre-empt.”

Uganda is preparing to become Africa’s newest oil producer in the next two to three years. Tullow estimates the land-locked country has 2bn barrels of recoverable crude, which would put it in the same league as Equatorial Guinea and Chad.

Eni’s proposed entry into Uganda, announced at the end of November, signalled the country’s impending transformation from a playground for intrepid oil explorers to a destination for big oil companies and their billion dollar rivalries.

The Ugandan government would have to approve any deal but a minister said it did not have a preference for Tullow or Eni and was only interested in securing the best outcome for the country.

Heritage has agreed to sell out of the country entirely by giving its 50 per cent stakes in oil blocks 1 and 3a to Eni for $1.35bn in cash plus a deferred payment of $150m either in cash or as a stake in another producing field.

Tullow owns the other 50 per cent of both blocks and a partnership agreement between the two wildcat explorers gives it the right to pre-empt the deal within 30 days of seeing the sale agreement, which it received last Friday.

Mr Glover stressed that Tullow had not made a firm decision and that its response would depend on the details of the agreement. “What we want to ensure is that due process is followed,” he said.

Peter Lokeris, Uganda’s minister of state for mineral development, said the government had told the companies to resolve the issue between themselves and then present a final proposal.

“All these things, we don’t have a preference,” he said. “We want just to find good deals. You don’t say you prefer one. What you prefer are good negotiations and what is good for the country.”

In order to commercialise production, Uganda needs one or more large oil companies to help build a refinery, pipeline and new transport links that could cost over $10bn. Neither Tullow nor Heritage have the money or expertise to do so.

Both Eni and Heritage declined to comment.

Heritage’s surprise move has soured its relations with Tullow.

When it was announced, Tullow was already looking for a larger partner to buy half of its own stakes in blocks 1 and 3a and half of its 100 per cent stake in block 2.

Tullow’s data room for potential buyers closed in London on Friday and bids are expected in January, Mr Glover said.

But the Heritage move has injected uncertainty into the process.

[Demeter]

27. DUBAI DUBAI DOO: The Land that Reality Forgot, or rather, Fogot Reality

Two items this week so far:

Bank creditors hold Dubai World talks

http://www.ft.com/cms/s/0/147a5880-edb1-11de-ba12-00144feab49a.html

Representatives of more than 90 Dubai World bank creditors on Monday attended the first face-to-face meeting between the company and its banks since it told them to prepare for the restructuring of the $22bn in debts needed to keep it out of the insolvency courts.

Creditors were meeting a six-strong co-ordinating committee, including HSBC and RBS, to hear Dubai World sketch out plans for its restructuring, now that troubled developer Nakheel’s $4.1bn obligation on December’s sukuk will be paid off thanks to a $10bn bail-out loan from Abu Dhabi.

To meet the government’s terms for further support on the remaining $5.9bn bail-out, Dubai World was expected to ask creditors to freeze debt repayments until May next year.

That coincides with maturity on a tranche of its largest single debt, a $5.5bn bilateral loan. But a formal standstill request might not be made at Monday’s meeting.

Aidan Birkett, Dubai World’s chief restructuring officer, was expected to lead discussions, but people close to Dubai World said it was too early to expect it to yet have anything substantial to tell the banks.

Most creditors have welcomed the calming effect of settling Nakheel’s sukuk, but some believe doing so might mean bank creditors wait longer to be repaid.

It is understood the government may help pay back the $1.7bn in Nakheel bonds maturing in 2010 and 2011, but one person involved in the restructuring said the company could still exchange them for new, longer-term securities.

Another banker said: “Some banks aren’t happy about the bond being repaid but then when you say, ‘Would you rather Dubai World go into bankruptcy?’ their response is no.”

Banks will hope for pledges that Dubai World will continue to pay interest so they can avoid booking exposure as non-performing loans, which would have a significant impact especially on local lenders.

Creditors say they expect some indication of how much money the government can pump into the holding company and its subsidiaries, as well as an indication on expected asset sales, if the banks are to take the longer-term view and roll over loans.

The introduction of a specialised bankruptcy law for Dubai World is a reminder to creditors that the end-game is a court-driven insolvency process, but the new laws give bank creditors some leverage.

If two-thirds of the banks agree to a plan, they could apparently use the court to implement it over the objections of subordinated creditors. Some assets, such as Inchcape Shipping Services, are expected to make a quicker sale than the group’s global real estate assets, many of which are laden with too much debt to recover any equity value until markets recover.

Abu Dhabi, which is expected to keep a tighter rein on the bail-out cash, should get first refusal on any asset sales as part of the bargain behind the $25bn of aid extended to Dubai from various institutions in the capital.

Austrian developer bets on Dubai turnround

http://www.ft.com/cms/s/0/f9d3fc64-ee70-11de-944c-00144feab49a.html

Josef Kleindienst is a rare breed of investor in Dubai. Rather than trying to recover money from an emirate groaning under a debt mountain, he is trying to lure buyers to its battered property sector.

As bank creditors met on Monday to kick off the restructuring of indebted holding company Dubai World, the Austrian developer launched a resort on one of Dubai’s more outlandish offshore developments, hoping to prove that The World has not come to an end – even if Nakheel, the master developer of its 300 man-made islands, is at the heart of the debt crisis....Property prices have collapsed 50 per cent from their peak last year and a surfeit of hotels are under construction threatening occupancy levels, but Mr Kleindienst remained bullish enough on Monday to unveil a three-year plan to build The Heart of Europe resort – a six-island development .

Mr Kleindienst, who has worked in Dubai property since the freehold boom in 2003, liquidated his Dh1.1bn ($300m, €210m, £180m) property portfolio before the bubble burst last autumn. He has since ploughed Dh300m into the six-island project and plans to begin construction in the new year, in what could be the first commercial development on The World.

But in the current climate, the straight-talking former Austrian policeman faces a big challenge in persuading buyers to stump up between Dh4m-Dh15m for the villas he is building in “Germany”, the first phase of the project.

“We understand appetite of our customers very well and we are very confident we can sell these villas very soon,” he said.

But Mr Kleindienst is taking a calculated risk that not only will the Dubai property market recover but that interest from Europe will also be strong.

Roy Cherry, a property analyst with investment bank Shuaa Capital, says Dubai’s empty buildings and the overhang of more than 30,000 soon-to-be-completed properties undermine the economic fundamentals of the project.

“It’s hard to see the viability of such a project right now. Anyone launching right now is betting on a change in market conditions, but it carries significant risks,” said Mr Cherry. “It will be hard to get people in this market to pay a premium for what could be a construction site for the next five to 10 years.”

Three of the 20 villas projected for the first phase have been sold to two Germans and a Swede, Mr Kleindienst says. The buyers then pay for the construction of their own three-to six-bed villa.

By injecting 30 per cent of the project’s Dh3.1bn costs up front, Mr Kleindienst hopes he can delay tapping investors or banks until 2012, admitting that relying on loans in the current environment would be too expensive.

Even if the restructuring of Dubai World sees Nakheel split up in insolvency proceedings, the Kleindienst Group has secured ownership of the Germany island, allowing him to pass on title deeds to customers.

He plans to complete payments on two further islands next year.

The debt crisis may have blown a hole in Dubai’s reputation but that has not damped Mr Kleindienst’s enthusiasm for features that could have been plucked from the emirate’s boom time.

For instance, Sweden, one of the planned islands, will host a 1.6km boulevard boasting technology that can provide ambient air through the summer’s scorching heat and humidity, allowing visitors to enjoy a café lifestyle and artificial rain derived from the byproduct of the air conditioning.

Mr Kleindienst insists the properties will appeal to European buyers. “I have customers for these villas. I would be insane not to do it,” he said.

[Demeter]

28. Car Talk--With Apologies to Tom and Ray!

So sue me! I'm from Detroit, after all, and the Motor city made 20th century America (with some assist from the airplane guys and a couple of wars...).

And if we are to be a modern nation again, we are going to have to take back our manufacturing, so here goes the latest!

[Demeter]

29. Spyker in new offer for carmaker Saab

http://www.ft.com/cms/s/0/5626842e-ed8a-11de-ba12-00144feab49a.html

There was another twist in the saga of Saab Automobile on Sunday when Spyker Cars made a fresh offer to buy the company two days after General Motors said it planned to wind down its ailing Swedish unit.

Spyker, the Dutch boutique sports car maker, said the new offer would remove all the obstacles that caused its previous bid to collapse and gave GM until the end of Monday to consider it.

GM declined to comment specifically on the renewed Spyker bid but said it had received inquiries from several parties since announcing its plan to close Saab and would evaluate each one...

[Demeter]

30. Ford closes in on sale of Volvo brand

http://www.ft.com/cms/s/0/224d2efc-ee5a-11de-944c-00144feab49a.html

...to China’s Zhejiang Geely Holding Group...

[Tansy_Gold]

54. You gotta wonder, don't you? what the Swedes think of all this.

I mean, why did they sell both Saab and Volvo to American car giants (money, I know) and now look what's happened?

Sheesh.


TG

[Demeter]

55. Call Me Paranoid, But Maybe the IMF?

Or maybe to shed their union workers?

I'm sure it wasn't for a GOOD reason, in any event.

I do remember how the Big Three were so intent on buying stuff---just before they went bankrupt!

I notice the Swedes are making no noises of buying them back, either. Although once the US businessman has mucked about with it, would anyone else want it back?

And to think, I owned and drove a Volvo for 15 years and 350,000 miles.

[Tansy_Gold]

56. I have no idea why they were bought, or why they were sold, but

I've heard other stories about the remarkable longevity of Volvos and maybe GM didn't want the word to get around? Maybe they were intent on trashing it, making it a clone, in terms of quality, of the Corvair?

It might be interesting -- though I'm sure some enterprising investigative journalist has already done so -- to look at the history of the growth of these now lumbering behemoths like GM, to determine at what point and for what reasons everything started to go wrong. Rather than merely throwing more and more and more of our children's and grand-children's money down the various ratholes.

Good threads, Demeter. Far too much for me to read everything on a "working" holiday week-end -- not paid work, but the mega-chore of CLEANING MY HOUSE (you know what that's like!) and trying to organize some of my collected shit -- but I grab an article or essay or two whenever I need to take a break from the dusting and mopping.

Hope you had a happy holly day and aren't getting too much bad weather!


Tansy Gold, in sunny (as soon as the sun gets up) but cool (frost when the dogs went out the first time at 5:15) Arizona

[Demeter]

31. GM stalwart takes on his toughest role

http://www.ft.com/cms/s/0/a4be43fa-ee53-11de-944c-00144feab49a.html

It is Nick Reilly’s 60th birthday. But it’s yet another tightly-scheduled working day for the new head of Opel and Vauxhall, General Motors’ European operations.

“I’m trying to forget it’s my birthday because it is a big one,” says the jovial Welshman, who was jetting off to the Philippines for Christmas after the interview.

The short break will be welcome, as after weeks of hopping around Europe’s capitals, GM’s Detroit headquarters and Shanghai, home of his previous office, Mr Reilly faces a daunting year.

The GM stalwart, brought in as head of Opel last month, will have to restructure a carmaker that racked up billions of euros in losses in the past few years, lost market share on its home turf, was forced to delay investments amid uncertainty over its future and will face further falling sales in 2010.

GM had pushed Opel into a strategic vacuum earlier this year with plans to shed the brand. When GM reversed course last month and scrapped the sale, it left unanswered questions: why did GM make a U-turn and, most importantly, does GM have a strategy for Opel that goes beyond mere cost-cutting?

Several of Mr Reilly’s predecessors have tried to turn around Opel and failed. But the GM veteran of 35 years seems to possess many of the qualities needed to bring success back to the operations. He knows them well from his time both as chairman of the UK business, Vauxhall, and at the headquarters of GM Europe, now disbanded. His pedigree as a keen restructuring expert was demonstrated by the turnaround of Daewoo.

Mr Reilly is frank that GM kept Opel because having a European arm would make the carmaker more attractive when it comes for the Obama administration to sell its stake. He also concedes that the year of uncertainty over Opel’s ownership has hurt sales to big fleets as well as in Germany. “This is where the image has the biggest impact,” he says.

But Mr Reilly thinks that the delay by GM may have inadvertently helped its strategy. He denies that the plan – which will see 8,500 job losses and parts of several factories closed – is all about cost reduction.

“We have a terrific launch of new products, such that about 80 per cent  . . . will be new within three years,” he says.

The new products will be desperately needed as Mr Reilly himself admits 2010 will be a “difficult year”.

He adds that “we wouldn’t choose” the timing, and he forecast a sales drop in the western European car market of 1m cars, to 13.5m, next year.

But the targets beyond that are ambitious: “2011 we think we should get to about break-even, and then 2012, as the market really recovers, we can start earning some decent money,” Mr Reilly says.

His goal is to achieve an operating margin of “at least 4-5 per cent” by 2013, a level few volume carmakers have ever reached in Europe.

Analysts say this is highly ambitious. “But without such a task, the restructuring would be meaningless because Opel would still burn cash,” says Arndt Ellinghorst, head of automotive research at Credit Suisse.

What Opel does need to achieve in 2010 is €3.3bn ($4.7bn) in funding. He expects governments to provide the bulk of the loan to help with restructuring, 2010’s losses and investing in products.

Mr Reilly is optimistic in spite of public comments from Germany’s new economics minister that he wouldn’t support state aid.

“There are positive signals from many governments around Europe . . . Even Germany has said they would be willing to look at an application,” Mr Reilly adds.

Similarly, he believes negotiations with workers – who favoured a sale to Magna, the Canadian car parts maker – are improving. “It has gone quite well, especially in the last two weeks. We have taken the temperature down,” he says. In return for savings of about €280m, workers will get a stake in Opel of 5-10 per cent.

For all his reputation as a restructurer, Mr Reilly denies suggestions by a company insider that his key test will be how brutal he will be.

“No. I don’t know what he meant but I don’t think you have to be a brutal restructurer. You have to take the right decisions and some of those decisions are very tough and will affect people. On the other hand, there are ways of doing it where we can make the impact less.”

[Demeter]

36. The Daily Reckoning Archives--A Lot of Graphic Porn!

Bill Bonner and co. are entertaining, opinionated, and sometimes informative beyond the usual news articles. their contributions go here.

http://dailyreckoning.com/archives/



















Higher mortgage rates sure won't do much for the high end of the residential real estate market. Homeowners with mortgages of $1 million or more are now defaulting at nearly double the national average.

That 12% figure compares with less than 5% a year ago. Ouch.

In large part, that's a function of the fact that Fannie Mae and Freddie Mac can't buy "jumbo" loans of more than $729,750. In other words, once you reach the high six figures, you don't have Fannie and Freddie propping up the market with artificially low interest rates. So prices can fall more quickly to a more natural level...and high-end homeowners can find themselves way underwater...


...A new law will take effect in February. Like every new law, it disrupts the old laws by which people organized their lives. This one decrees that credit card companies shall henceforth cease the practice known as "universal default."

If a fellow defaults on one credit card, the other credit card companies rightly figure he's likely to do the same to them. So they take precautions, cutting him off from future credit.

But the authorities want people to spend - apparently, even people who can't pay their bills. So, they are outlawing the practice of "universal default."

The term "unintended consequences" was invented for these occasions. As usual, the law produces the exact opposite results from those the politicians wanted. The credit card companies are tightening up on all their accounts, realizing that after the new law goes into effect in February, they will be less able to identify the bad accounts quickly and less able to control their losses.

According to Bloomberg, this threatens $9 billion in holiday season sales...

[Demeter]

38. Bill Bonner ... from London, England 12/14/2009

It's open season on bankers. But the hunters are shooting blanks!

First, Britain said it would impose a 50% super-tax on their bonuses. Then, Sarkozy said he would do the same thing. Angela Merkel merely said that she found the idea 'charming.'

As for the US, the argument goes on. Goldman has tried to head it off with various gestures. Its top man said the firm wasn't just trying to make money; it was doing "God's work." No kidding. We couldn't make this stuff up.

How Mr. Blankfein knows what God wants him to do, we can't tell you. But it was certainly a bold public relations move to suggest it.

More recently, top executives agreed not to take cash bonuses.

The Financial Times calls it a "war on greed." But it's a bogus war. What is really going on is that both sides are conspiring to share money that doesn't belong to them. The Wall Street Journal, for example, revealed more of the real dealings between AIG and Goldman. AIG had guaranteed billions worth of Goldman's dodgy mortgage deals. If AIG went down, Goldman would lose a lot of money. So, when the feds stepped in to "save western civilization as we know it," they were really saving Goldman. Western civilization would have been better off if they had all taken their losses and gone to wherever willing investors and lenders sent them. Instead, the feds put up the taxpayers' money...and the bankers got their bonuses.

The show must go on. And now, the government pretends to punish the bankers, the bankers pretend to suffer.

In the first place, a 50% tax is not that extraordinary. The top marginal rate is nearly 50% in many places already - including the US. Add the local tax to the federal levy and you barely have half left.

In the second place, if the bankers don't take big cash bonuses they'll take their compensation in some other manner.

According to The Financial Times, rough handling by English tax collectors is causing many bankers to leave the country. But there's more to it than just the taxes. Bankers are leaving the UK because the opportunities for them are better elsewhere.

Here we come to one of the world's big trends - one that will have profound consequences for the entire world. There may be a depression in the US and Britain...but it hasn't slowed the movement of money and power from the mature, developed economies - notably the aforementioned Britain and America - in the direction of the emerging markets. The emerging markets are growing faster; everybody knows that. According to a Goldman study, nearly half the world's economic growth is now occurring in just four countries. And neither the US nor Britain is on the list. Nor is any other developed country. The four are the BRICs...Brazil, Russia, India and China. They were given a big boost by the Fed...which has kept the price of credit in the US artificially low for almost an entire generation. This increased consumer demand in the US for foreign products, indirectly transferring a substantial part of the US GDP to the emerging market exporters.

This year, nearly twice as many IPOs were completed in Hong Kong as in either New York or London. Why? Because there is more new economic activity in Asia than in the mature Anglo-Saxon markets. And because there is more money available in those emerging markets than there is in the West.

This trend could come to an end at any time. But it is unlikely. The industrial revolution favored the West. The next phase of global development seems to favor the new, emerging markets. They don't have the legacy costs and corruptions of mature industrial societies. No giant military establishments. Minimal social security and public health care systems. Smaller welfare, education and health bureaucracies. Fewer lobbyists and entrenched special interests. Fewer retirees. In short, fewer parasites.(SO THE BANKERS DON'T HAVE ANY COMPETITION--DEMETER)

Emerging markets are now playing catch up. Sometime in the future, some of them may take the lead - surpassing the US and Europe in military power, national income, growth, even quality of life and income per capita. Then, they too can begin ruining themselves. But that is still far, far in the future. We'll have many a laugh between now and then...

Growth requires finance. Capital needs to be raised and allocated. Then, earnings must be distributed and invested. And, of course, consumers want credit too.

One sector that is growing particularly fast in the emerging markets is...you guessed it...finance. You could say that the thing that emerging markets most lack is a sophisticated financial industry. Until they get that, they'll have to continue to earn their livings with honest work. When people in Argentina buy houses, for example, they typically have to come up with a lot of cash...sometimes 100% cash. This means that they tend to have a lot in savings. It also means that there is a huge business waiting to be developed - helping the consumer get deeper into debt.

[Demeter]

40. The crisis is over, say the feds

The crisis is over, say the feds. Now, they can begin turning off the taps.

"Fed takes first step in exit strategy," is the headline in The Financial Times. A more accurate headline would have been...

"Fed dodges and weaves...fakes exit."

The only way to exit is by the door the Fed came in. It barged into the market buying up toxic assets and Treasury notes and bonds. In order to get back out the door, it has to get rid of all the debt it gobbled up. How? It has to sell them back to the people it bought them from - or to someone else.

Instead, the Fed has come up with a subterfuge: the reverse repo.

"In a reverse repo," The Financial Times explains, "the Fed sells assets, such as Treasury securities, to dealers for cash, with an agreement to buy them back later at a slightly higher price..."

No kidding. That's what it says. Now, let us put the question to you, dear reader. Having thus reverse repo-ed a boatload of debt, has the Fed:

a) unloaded its unwanted debt and drained liquidity from the system,
b) not unloaded any debt at all...but merely lent out the credits at negative interest rates
c) postponed the problem until later?

If you answered "all of the above" you are not paying attention to the choices we've given you. It's not on the list. Still, it's probably the right answer...

The Fed says it's going to try out this reverse repo trick and see how it works. We can tell them now. Save them some trouble. Either the Fed is the bagman of bad US debt, or it is not. It is either in or out. Long or short. Either Fannie Mae, AIG, GM are backed by the government or they're not. If they're not, the market will sort them out in its own good time. If they are the bagmen...well, then, the feds will squirm and dissemble...get themselves in deeper and deeper...until, finally, the bags drag them beneath the surface.

This reverse repo is just a scam to disguise the situation...so the Fed can pretend to exit without actually going out the door.

[Demeter]

41. More Graphic Porn from Daily Reckoning.com

[Demeter]

42. The Federal Reserve Becomes the ‘Buyer of Last Resort’

http://dailyreckoning.com/the-federal-reserve-becomes-the-buyer-of-last-resort/

By James Turk


12/15/09 The Federal Reserve is pursuing a pernicious policy that is insidiously debasing the dollar. This policy has generally been met with indifference, if it has even been noticed at all.

The Federal Reserve is debasing the dollar by purchasing inferior assets of poor quality. These assets are mortgage-backed securities issued by federal agencies like the insolvent, and for all practical purposes bankrupt, Fannie Mae.

These are assets neither the banks nor private investors want. If there was a legitimate, real-world demand for these assets, the Federal Reserve would not need to buy them. But it is. Thus, instead of acting in its historical role as the “lender of last resort,” the Federal Reserve has on its own expanded its mandate to become the “buyer of last resort.”

By purchasing mortgage-backed securities, the Federal Reserve is debasing the dollar. Just how pervasive – and therefore serious – this debasement has become is apparent from the following chart prepared by BusinessInsider:



The Wall Street Bailout Continues

According to its latest report, the Federal Reserve now owns over $1 trillion of mortgage-backed securities, which is 45.6% of all assets on its balance sheet. One year ago mortgage-backed securities were only 0.6% of the Federal Reserve’s total assets!

The Federal Reserve is very highly leveraged, much more than most banks. It is carrying $2.15 trillion of debt on $52.8 billion of capital, giving it a leverage of 40.8-times more debt than capital. The Federal Reserve’s mortgage-backed securities alone, represent 19-times its capital, meaning that if the true value of these assets is 5.3% less than their book value, the Federal Reserve’s capital is wiped out, effectively making it another insolvent institution.

Given that Fannie Mae is itself insolvent and most other mortgage generating federal agencies are not far from perilously sliding down to that same dire financial condition, it is reasonable to assume that the true value of these mortgage-backed securities is less than 94.7% of their book values. Therefore, on a strict accounting basis, the Federal Reserve is probably insolvent.

That said, the Fed could always remedy its “insolvency” by creating more dollar bills for itself. And, in fact, the Fed is already in the process of doing this exact thing. How else could its assets have mushroomed from $800 billion last year to more than $2 trillion currently?

We call this “inflation.”

[Demeter]

43. The Markets Ignore Bernanke By Chuck Butler

http://dailyreckoning.com/the-markets-ignore-bernanke/

12/15/09 St. Louis, Missouri – The daily noise has the bias to buy going toward the dollar this morning… For some unknown reason – and I emphasize this here – the markets are not listening to Big Ben Bernanke, when he says that current near-zero interest rates will remain for “some time”… You see, the markets are under the impression that he’s giving us a head fake, and will raise rates aggressively very soon, for the data that has printed recently is of the “need to raise interest rates before inflation takes the economy hostage” kind of stuff…

So… Somehow, the markets don’t believe the Fed Chairman… Now, I can’t imagine why they wouldn’t believe him, can you? HAHAHA! Of course I can, and so can you! He’s made a mockery of central banking! But shoot, like the old Hank Williams, Jr. song goes… It’s a family tradition! The previous Fed Chairman, Big Al Greenspan, was just as bad, if not worse! He primed the pump, and Bernanke is doing the pumping!

OK, I digress… Somehow, I see this all ending this week, at least for a while… You see, tomorrow, the FOMC will meet, and I think Big Ben will take that opportunity to stress that not only has the Fed kept rates unchanged, but that they will continue to do so… I just don’t see Big Ben validating the markets’ belief that rates will be going up aggressively very soon…

Now… Here’s the tale of two cities… First, I personally think that interest rates should never have gone to near zero… I made this case a couple of years ago, so for you new readers, don’ think I’m doing this in hindsight… I would have hiked rates long before now… But that’s just me.

On the other side of the coin, I personally hold to the thought that the US economy will do a double dip, and I think Big Ben sees that chance too… So he’s not going to raise rates now, only to look more like a fool when he has to cut them again.

OK… So… What’s the damage to this whole “interest rate hike thought process” by the markets this morning? Well, the euro (EUR) has fallen back to the 1.45 handle, and wasn’t given any room to breathe this morning, after German Investor Confidence slipped back to a 50.4 figure from the previous month’s 51.1 figure. The report actually was better than forecast (50), but… The slippage, helped euro investors decide to go ahead and take profits.

The other thing weighing on the single unit this morning (aside from Austria’s takeover of Hypo Bank) is the never-ending stream of “Armageddon” reports regarding Greece’s debt position… I had a conversation with one of my fave economists last night regarding this situation… And again, just like the Dubai thing, I keep coming back to California, New York, Illinois, and other states here in the US that have debt problems that are just as bad or worse than Greece… Or Spain… Or Ireland… Therefore, if the media outlets were doing their jobs correctly when reporting the Greek problems, they would say something like, “but here in the US the world’s 8th largest GDP resides in the state of California, and in California, the debt problems are far worse, which makes this a more dire situation, given the size of California!”

But I’m just dreaming there… So… I go on…

In Australia last night… The markets got shaken (not stirred) a bit with the release of the Reserve Bank of Australia’s (RBA) last meeting minutes, which showed that “they could consider a pause at the following meeting.”

So… Now we have the tale of two central banks… The RBA’s minutes were taken as dovish… What will the Fed say following their meeting tomorrow? If the Fed’s statements are more upbeat than the RBA’s, the Aussie dollar (AUD) could suffer… I personally don’t see that happening, but… You never know!

The Japanese yen (JPY) is weaker overnight too, which is opposite from what has happened any time the dollar has rallied in the past year… I think that all the talk of the Fed moving to aggressive rate hiking has squelched the dollar carry trades, and probably pushed them to the Japanese yen, where there hasn’t been any sign to raise rates since… Well, come to think of it, my youngest son is 14, and the Japanese have not raise rates in his lifetime!

So… Do you remember the carry trade? Well, it was a risk trade that involved selling a low yielding currency to buy a high yielding asset. The currency that was sold was the “funding currency”… This was huge before the financial meltdown of August 2008. Earlier this year, the dollar replaced the yen as the funding currency, for the dollar was losing ground fast, and yen was gaining ground. If the funding currency is losing value, then it makes the trade even more profitable, as the person that sold the currency short can buy it back to unwind the trade at a cheaper level!

But, all this talk of the Fed moving on rates soon, has scared the bejeebers out of the dollar carry trade folks, and… They have, it appears to me, unwound them in favor of yen carry trades once again… That means, the dollar gets bought to unwind the trades, and yen gets sold.

This is what it looks like to me, folks… I could very well be way off base here, but I’ve got my eye on the pitcher, and don’t think I’ll get picked off here!

Hey! Have you noticed the financial institutions lining up to repay the TARP money they took from the government? Citicorp and Wells Fargo so far, and there will be more… These financial institutions have gone “cold turkey” on the cocaine of TARP! The government was akin to the drug dealer, holding out the cash for these institutions at very low rates of interest, and once they institution took the “cocaine” they found out that it came with strings attached… Drug dealer/government intervention is how their institution would run!

So… These institutions are going “cold turkey” and giving up the “cocaine”…

And.. The fact that they can do that is what makes me so darn angry! If the government hadn’t just held out the drug for them in the first place, maybe these institutions would have figured out how to survive without the drug! But nooooooooo! The government made it too easy for them to take the drug, and make it all better, without the pain!

OK… I’m not going to carry on with this… Just thought it was interesting… And I just love the fact that Treasury Secretary Geithner says now that the $700 billion financial bailout will end up costing taxpayers “no more than $140 billion.” HEY TIMMY! IF IT COST TAXPAYERS $1 IT WAS TOO MUCH, YOU DOLT!

Besides… That $700 billion bailout package was suppose to keep unemployment at 8.5%… Hmmm… So, taxpayers paid $140 billion for nothing! Unemployment, if calculated correctly, is around 17%!

OH! And speaking of wasted days and wasted nights, along with wasted money… I read a story on the Bloomie this morning that says that Fannie and Freddie’s federal regulator is renegotiating the companies’ financing plan with the US Treasury Department and may seek an increase to their $400 billion federal lifeline before the end of the year.

So… Here’s another thing that just gets me all ticked off… The government took over Fannie and Freddie… And they’ve already run through a good portion of their $400 billion “back up” money… So, it’s just another example of how “well” the government runs things…

And that brings me to this… This past Sunday, the US Senate voted to pass a government funding bill that pumps $1.1 trillion into the government… Now… Haven’t I screamed and yelled enough about our national debt? Are these guys trying to see if they can make my heart explode? And get this… There will be all kinds of pork added to this bill before it gets the final stamp of approval.

So… Why is it that American people aren’t storming the streets with their pitchforks and rakes, and chasing their Senators down the streets? This is nothing more than more deficit spending that just increases the chances of this country going belly-up in the future… Is that what you want for your grandkids?

I shake my head in disgust… I really do…

So, in the end, folks, it goes like this… There may be dollar rallies, there may be times when everything is coming up roses for the dollar… But in the end, when the music stops, there won’t be a chair for the dollar to sit on… So don’t let this “noise” cause you to lose your focus on the horizon, and the long-term slippery slide the dollar will be on some day…

Last week I spoke at the Plan B Conference here in St. Louis. I was talking about gold and heard a quote by my old friend, Jon Nadler, that I just had to relay… It was that if you’re buying gold for the right reason, then there’s no wrong time to buy it. I explained it like this… If you’re buying gold because your neighbor down the street said he bought it and made a 20% profit in a week, then that’s the wrong reason… But, if you’re buying it as a diversification tool for your investment portfolio to provide insurance against dollar depreciation, inflation, deflation, and uncertainty in the world… That’s the right reason!

To recap… The dollar is stronger this morning on thoughts that the Fed will go on an aggressive rate hike campaign shortly, due to recent economic data. Bernanke could throw cold water on those thoughts at the FOMC tomorrow. The euro has a number of things weighing heavily on it this morning, but has shown resiliency in dealing with these items, and it looks like the carry trade is getting shifted from a dollar carry trade to a yen carry trade once again.

[Demeter]

44. The Yellowstone Syndrome By Chris Mayer

http://dailyreckoning.com/the-yellowstone-syndrome/

12/14/09 Gaithersburg, Maryland – Most people in finance operate under a giant self-deception: they think future economic trends are much more knowable than they actually are.

The economy is like a complex ecosystem. You cannot alter one piece of it without causing effects elsewhere in the system. Investors who understand this reality can also understand (and avoid) the hazards of over-confident investing.

Our discussion begins in Yellowstone National Park. In the late 1800s, Yellowstone’s game population – its elk, bison, antelope and deer – began to disappear. So in 1886, the US Cavalry took over management of the park. And its first order of business was to help bring back the game population.

After a few years of protection and special feeding, the game population started to come back strong. But what the government didn’t understand was that it was dealing with a complex ecosystem. You can’t just change one thing and think that it won’t also lead to cascading changes elsewhere.

The surging elk and deer populations ate a lot more. This caused the plant life to diminish. Aspen trees, for instance, started to disappear, eaten by the numerous elks. This hurt the beaver population, which depended on the aspen tree. The beavers built fewer dams. The beaver dams were important in helping prevent soil erosion by slowing the flow of water from the spring melt. Now the trout population took a hit, because it didn’t spawn in the increasingly silted water. And so on and so on…

The entire ecosystem started to break down because of man’s desire to boost the elk population. It got worse. In the winter of 1919-1920, more than half of the elk population died – with most of them starving to death. But the National Park Service chalked it up to predators. So it began killing wolves, mountain lions and coyotes – all of which only made the problems worse.

This anecdote from Yellowstone’s past comes from Michael Mauboussin’s book, Think Twice. He writes: “The population of the game animals began to experience erratic booms and busts. This only encouraged the managers to redouble their efforts, triggering morbid feedback loops.”

By the mid-1900s, the Park Service managed to kill off nearly all of the predators. In 1926, it shot the last wolf.

This experience in Yellowstone sounds a lot like what’s happening in our economy today. Congress and the Federal Reserve are so busy “rescuing” specific pieces of the economy that they fail to realize how these efforts are threatening other pieces of the economy.

Our government has propped up the auto manufacturers. It’s propped up numerous banks, mortgage lenders and the world’s biggest insurer, AIG. But the rest of the economy is still swooning.

In fact, portions of the government’s rescue efforts are contributing to the economy’s difficulties. Because the Fed is supplying so much credit at such low rates of interest to the big finance companies, these finance companies can make a lot of money by simply buying Treasuries, rather then lending to businesses. The result is that most small and mid-sized companies cannot get loans. If the Fed’s did not supply credit so inexpensively, the banks would be forced to loan to businesses.

Unintended effects like this one produce unintended effects elsewhere, and before you know it, cause and effect are hard to discern…or to explain accurately. “Yet our minds are not beyond making up a cause to relieve the itch of an unexplained effect,” Mauboussin writes. “When a mind seeking links between cause and effect meets a system that conceals them, accidents will happen.”

That’s why so many so-called experts are so often dead wrong. They think that know what’s causing what. But they don’t.

For instance, there is no shortage of financial experts who will tell their clients to put 15% of their portfolio here and 10% there or whatever. And these experts will have definite opinions on each of their recommended mutual funds. This one is better than that one. They’ll give numbers. It will seem very concrete and real and “expert.”

But guess what? Almost all the experts produced an identical 35% loss for their clients in 2008.

If an investor hopes to minimize or avoid losses of this magnitude, they must understand that economies are complex adaptive systems – replete with feedback loops and black swans and power laws. Investors must approach the future with humility. And that means fearing risk more than craving reward. A humble investor will also insist on a margin of safety in each investment.

I don’t write about this philosophy very much, because it is kind of wonky. But these ideas inform how I look at markets, and are one reason why I try to stay rooted in boots-on-the-ground-type thinking and present-day facts.

I’ve been influenced by a number of thinkers about the unpredictability of economies and markets. A couple of my favorites would be Nassim Taleb, author of Fooled by Randomness, and Benoit Mandelbrot, author of The (Mis)behavior of Markets. Another useful book on these ideas is Mauboussin’s More Than You Know. Mandelbrot writes a lot of highbrow stuff, but in this book he teamed up with Richard Hudson, a former Wall Street Journal editor, to reach a broader audience. Mandelbrot is a critically important thinker in finance. But he is not revered by academics.

As Paul Cootner, an MIT economist, put it: “If is right, almost all of our statistical tools are obsolete. Almost without exception, past econometric work is meaningless.” So there you go. Academics ignore him because if he’s right, academia is pretty much a farce. Academics won’t embrace Mandelbrot’s ideas because their salaries depend on them not embracing those ideas.

So if you think that academia might be promoting a farce – for the first time ever, of course – you might want to examine Mandelbrot’s ideas in more detail.

Regards,

Chris Mayer,
for The Daily Reckoning

[Demeter]

45. Financially Befuddled By Bill Bonner

http://dailyreckoning.com/financially-befuddled/


....In the West, no president or prime minister has been murdered for many years. In Italy, it has been 31 years since Aldo Moro was kidnapped and killed by Red Brigade terrorists. In America, Reagan was shot in the ’80s…but survived. The last US president to be gunned down in office was John Kennedy in the ’60s. And it’s been more than 200 years since France cut off the head of Louis XVI. Seems like much too long to wait for another one. After all, the best form of government is benign tyranny, as George Bernard Shaw reminded us, tempered by assassination.

Meanwhile, the financial world keeps working its way through this period of great confusion and uncertainty. Nobody knows what to think. Nobody knows what anything is worth. Nobody knows what to do.

It’s always this way…to some extent. But this time it’s worse. Financial authorities are to blame. Instead of letting the chips fall where they may…and where they could be picked up, weighed and re-organized…they caught the chips, wrapped them in gauze of cash, and tossed them back into the air.

Now we don’t know what they’re worth. We don’t know what anything is worth...
We look at the economy because it is the source of wealth for us all…it is the thing that gives value to our investment assets. If companies can’t make a profit, they are not worth owning – at any price. If, on the other hand, their earnings rise, so should their capital values.

So what’s happening in the economy? Well, the recession is said to be over. But what does that mean? Again, with so many phony indicators and so much fraudulent information around, nobody knows.

The malls are still moving the merchandise, but only by offering “deep discounts,” says the LA Times. A survey of shoppers shows that they intend to cut their buying by 15% this holiday season. Let’s see, 15% is about the limit of the profit margin for most retailers. Take away 15% of gross, and they may be losing money. And then take away 15% all the way up the chain from retail to wholesale to manufacturer. Not a situation that is likely to increase employment or stock prices.

This year will see a record number of corporate defaults worldwide – with most of them in the US. One in five college borrowers defaults. And New York governor Paterson says the state will end the year with negative cash for the first time ever.

Unemployment is increasing. Retail sales are decreasing (despite recent data that seem to show the contrary.) Thrift is coming back into style. It’s a depression, after all. It won’t stop being a depression until some major adjustments have been made; specifically, consumers have about twice as much debt as they can comfortably carry. That debt needs to be defaulted on, paid down, worked out, inflated away, or otherwise written off.

Don’t worry…it will happen. All in good time.

[bread_and_roses]

37. Joyous Festivus to you and to all, Demeter. Great title today!

I am exhausted from putting on a rather simple roast beef dinner - waning energy, I'm afraid, as I near 60. I'll just wish joys of the season - My own (copied from myself in another thread, lol) are the Solstice-Festivus-and-the-Jesus-story-tells-us-how-precious-is-each-child-born-however-"lowly"-and-animals-are-worthy-too holidays. Peace and joy to all, and to all a good night.

[Demeter]

39. Thank You! And Joyous Holidays to You and Yours!

As for the title, I was inspired today. It happens still, occasionally.

I've had a good Christmas. I got a lot of cleaning, cooking and singing in. I've found the lost, trashed the hopeless, and mended until my fingers bled (from chilblains, not from sewing). Sis ironed--she was getting frazzled by how much we weren't getting done. It was mostly quiet, and very productive, and rather non-commercial. The Kid hated that. But I've promised her After Christmas shopping, when I can afford both the time and the money. The Kid wants excitement. I guess I was never young That Way.

There's still electrical, plumbing and window treatment work galore, but I'm feeling more up to it than previously. And there's still half a house to clean-or really, only about a third. It is the hardest third, as it involves sorting, filing and compiling the paper piles and then cleaning all the undiscovered territory under and around them. At least half pertains to the condo association, which is having the annual meeting in roughly 3 weeks. As I am organizing a hostile takeover, I have to get my data organized...pray for me! I hate paper. I want everything on line! Half the rest pertains to the Kid, and the rest might be of interest to the IRS...

So, on with the show! 140 emails left to go this year...

[DemReadingDU]

47. Merry Christmas to all

Just returned from son's house. We go there now, that's where the little kids are, and so many presents. The 3-year old received 4 zhu-zhu pets! How much longer can this excessiveness go on? I have the feeling next Christmas is going to be a bit different.


Celine Dion-Oh Holy night
http://www.youtube.com/watch?v=7Jr-2eyRtV4

[Demeter]

49. And to all a Good Night!

so we can all fight the good fight.

[Demeter]

48. With Wind Energy, Opportunity for Corruption By DOREEN CARVAJAL

http://www.nytimes.com/2009/12/14/world/europe/14wind.html?_r=5&hpw=&pagewanted=print

The northern trade winds of the Canary Islands have long tempted daredevil windsurfers, but now the gusts rising up to 60 kilometers per hour are attracting giant wind turbines and the millions of euros behind them.

With their blades whirling, the 55 turbines that stand beyond the gray pebble beach of Pozo Izquierdo are stark, white symbols of a growing industry and the potential for abundant clean energy — and corruption.

The town of Santa Lucía Tirajana, host to the annual Grand Slam windsurfing championships, was struck this year with gale force. A yearlong investigation by the Guardia Civil — the Spanish gendarmerie — turned up irregularities in a plan to build a new wind park. Now the mayor, five town officials and two wind park developers are fighting criminal charges that include influence peddling, misuse of public office, misappropriation of land and bribery. The motivation? Up to €40 million in European Union subsidies.

This investigation and others taking place in Europe and the United States shed light on the sometimes freewheeling approach of the fast-evolving wind energy industry. Stoking the frenzy in Europe is the vast revenue available through a variety of subsidies, including the European Union’s farm subsidy system, which distributes more than €50 billion, or $73 billion, a year to farmers, corporate agribusiness and rural development projects.

In Europe, more than €6 billion in structural and agricultural subsidies have been allocated for renewable energy over a 13-year period ending in 2013. This is an attractive sum for a relatively new industry that experts say gets the benefit of the doubt because it has an eco-friendly image that seems above political reproach. And clean energy is at the forefront of the debate over climate change that is drawing global attention this week in Copenhagen.

The authorities say it is impossible to quantify the level of fraud in public spending on wind energy because investigations are scattered across different countries among the regional and fiscal police. But critics say the available riches and patchy controls are luring a rogue’s gallery of corrupt politicians and entrepreneurs trying to literally create money out of thin air.

“It’s the same mentality as a Texas oil strike,” said Jesus Bethencourt Rosillo, a Santa Lucía lawyer who represents a Canary Islands whistle-blower. “This is a gold rush, and everyone wants a wind park at whatever price.”
...............

Police investigators have been busy across the Continent in recent months. This year five Corsican nationalists were jailed and fined for skimming €1.54 million in European subsidies for wind farms. In Italy — where three investigations are unfolding — 15 people were arrested last month in a case the authorities code-named Gone With the Wind. They described it as a complicated Ponzi-style scheme to reap as much as €30 million in E.U. aid.

One of the suspects — who was briefly held under house arrest — was a former business partner of the founder of a Boston-based energy company called First Wind. The company’s records were subpoenaed last year by the New York attorney general’s office, which is investigating the state’s wind industry to determine whether promoters improperly sought land-use agreements from officials in return for special benefits.

In the United States, one of the top three wind energy producers along with Germany and Spain, the Energy Department is doling out aid covering 30 percent of project costs and has already announced more than $1 billion in grants — with individual grants near $100 million.

Wind farm development follows a common pattern in Europe and the United States. It is a complex chain in which, typically, small entrepreneurs strike deals for long-term land leases with farmers and seek local government approvals for wind parks. Then the entrepreneurs sell development packages through intermediaries to large multinational companies or utilities that actually build the wind parks.

Even the big companies have been burned in the process; Vestas Wind Systems, a Danish company that is the leading manufacturer of wind turbines in the world, revealed this year that it was the victim of a €12 million fraud scheme. The company asserts that three top Spanish employees, who are under investigation by the authorities in Barcelona, issued payments for nonexistent services to companies under their control, shifting the money in separate businesses to invest in wind turbines.

In New York, wind developers were prodded over the summer to sign an ethics code barring gifts to public officials, a standard developed by the office of the state attorney general, Andrew Cuomo, who also created a task force to monitor development of the industry.

“It’s a very new area of development with the promise of a lot of money that can be made, both for the developers of wind farms and landowners,” said John Milgrim, a spokesman for the New York attorney general’s office, who noted that the industry had been largely unregulated. “Anytime there’s financial dealings, new industry and large sums of money, there is potential for corruption.
.............

The lure is basic: a standard 2 megawatt turbine costs about €2.75 million to build and earns about €275,000 a year for the sale of electricity at the market rate. But that revenue can double to about €500,000 with special state-mandated incentives paid by utilities as a premium for renewable energies.

In many countries, wind producers are receiving feed-in tariffs — special premiums above the market rate as a bonus for renewable energy — or special rates for signing contracts over a period of 15 to 25 years.

Richard Robb, a New York investor in wind parks in France and Germany through his firm Christofferson, Robb & Co., said that even with lackluster winds there was a cushion of revenue for investors because of these tariffs.

In Germany, he said, his wind farm qualified for a feed-in tariff of about €83.6 a megawatt hour while the free market price ranged between €30 to €70 — helping to deliver as much as a 15 percent return. “None of this,” he said, “would have been possible without government subsidies.”

Last year Spanish incentives, or “premium” prices paid to wind producers above market rates, totaled almost €1.2 billion, a cost ultimately borne by consumers.

Lately in the land of Don Quixote, some local Spanish prosecutors have been tilting against some of the turbines scattered among the 737 wind parks that produce 16,740 megawatts of energy, mostly in northeastern Castile and León and Galicia. In Galicia, the former head of industry and energy is facing charges of influence trafficking for granting approvals for seven wind parks developed by his brother-in-law.

In the Canary Islands, where there are 44 parks, two investigations led to arrests of public officials and developers on charges of influence trafficking and bribery. The key to cracking those cases was thousands of wiretaps conducted by Guardia Civil investigators.

They were listening to conversations involving Santa Lucía wind developers and municipal officials accused of concocting a secret deal to swap private land near the beach of Pozo Izquierdo for municipal land — because subsidies were more likely to be granted for wind parks on public lands. At stake was up to €40 million from a fund that doles out E.U. aid to regions in Spain’s outer territories.

Silverio Matos, the mayor of Santa Lucía, who is accused of abuse of public office and insider dealing, has insisted he is the innocent victim of political persecution. Judicial proceedings are expecting to resume in January.

Similar investigations are taking place in Sicily, the birthplace of wind energy in Italy. In the Gone With the Wind operation, the authorities uncovered a complicated scheme to harvest E.U. aid, according to Col. Mario Imparato of the Guardia di Finanza. A banking official was part of the plot, he said, verifying documents for subsidies. The scheme involved an elaborate web of wind companies; one would successfully apply for E.U. funds, use a portion for construction and then send the rest to a company outside Italy, Colonel Imparato said. The foreign companies would then shift money to another company to help it qualify for a larger flow of E.U. subsidies.

A separate investigation, labeled Operation Aeolus, in western Sicily, resulted in the arrests of seven people this year who will face trial in January. In that case, prosecutors allege that organized crime had simply adapted old-fashioned techniques like kickbacks and bribery to make money from new energy, including giving one council member €75,000 and a Mercedes to vote in favor of a wind park.

“Cash is king,” said Anthony Campanelli, a forensics investigator for Deloitte Financial Advisory Services in New York. “In a down economy, individuals might be more inclined to need more cash. They might look at green energy as a mechanism to use ill-gotten funds.”

[Demeter]

50. Bill Moyers and Taibbi on Healthcare-- Dec. 18, 2009

http://www.pbs.org/moyers/journal/12182009/watch.html

Video and transcript

[Demeter]

51. Stopping for the Night

I really got behind on the emails--still have 133 to go.

This thread is getting lengthy, too. Expect it to go into a second thread Saturday morning, with more commentary rather than today's news and data.

[Demeter]

53. This WEE continues in new thread

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=103x505355

[Vidar]

57. K&R.