STOCK MARKET WATCH, Thursday May 14

[ozymandius]

Source: du

STOCK MARKET WATCH, Thursday May 14, 2009

Bush Administration Officials Under Indictment = 2
Financial Sector Officials Under Indictment = 0
Financial Sector Officials In Prison = 2

AT THE CLOSING BELL ON May 13, 2009

Dow... 8,284.89 -184.22 (-2.18%)
Nasdaq... 1,664.19 -51.73 (-3.01%)
S&P 500... 883.92 -24.43 (-2.69%)
Gold future... 925.90 +2.00 (+0.22%)
30-Year Bond 4.10 -0.06 (-1.47%)
10-Yr Bond... 3.12 -0.05 (-1.70%)

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

Market Conditions During Trading Hours

GOLD, EURO, YEN, Loonie and Silver

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---

Read more: du

[ozymandius]

1. Market Observation

Recipe: Bear Market Bottom
by RYAN J. PUPLAVA

.....
Stimulus

We have a loose monetary and fiscal policy today. It is on an unprecedented level unlike any loose policy program we’ve ever seen. The combined monetary policy of the Federal Reserve Bank and the fiscal policy of the government is estimated at 29.9% of GDP. The highest amount as a percentage of GDP before that was in the early 30s at 8.3% as seen from the table below.

.....

The Consumer

The next ingredient to the recipe is reviving consumer expectations. Part of the consumer confidence index is consumer expectations. Consumer expectations have improved since the market found a bottom in March. The confidence index itself remains below 40, a low level that had not previously been violated since the index was started in 1969. The index did, however, jump in April’s report after its small gain in March. The difference between those who found “jobs are plentiful” and the number who found “jobs are hard to get” improved in the April’s report. However, consumers are still very concerned over their job security, volatility in the market, stretched household finances, credit availability, and declining housing values. Despite the recent small recovery in consumer expectations, I do not consider them fully reviving yet but we seem close. The consumer needs more financial conditions to improve before the index returns to economically positive readings.

.....

Industrial Production

Capacity utilization has dropped below 70% to 69.3%, the first time since the data series began in 1966. Industrial production fell 1.5% in March as companies work off high inventory levels in Q1. Excluding car manufacturing, output declined 1.9%. Industrial production declined 20% annualized in the first quarter. Industrial production clearly isn’t bottoming out yet, but we’ll hear more on March 15th when the data for April comes out. Of special interest to me will be industrial production in the 2nd and 3rd quarter. During the earnings season many companies, such as Texas Instruments, highlighted that they had finished working down inventories in the first quarter and were ramping up production in the second quarter. This is encouraging to hear.

http://www.financialsense.com/Market/wrapup.htm

[ozymandius]

2. Today's Reports

08:30 Core PPI Apr
Briefing.com 0.0%
Consensus 0.1%
Prior 0.0%

08:30 Initial Claims 05/09
Briefing.com 580k
Consensus 610K
Prior 601K

08:30 PPI Apr
Briefing.com 0.2%
Consensus 0.2%
Prior -1.2%

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

[Hugin]

50. STOCKS NEWS US-Jobless claims rise on auto layoffs (Reuters)

"The number of U.S. workers filing new claims for jobless benefits rose more than expected last week, government data showed on Thursday, pushed up by auto plant shutdowns related to Chrysler's bankruptcy. Initial claims for state unemployment insurance benefits increased 32,000 to a seasonally adjusted 637,000 in the week ended May 9. Analysts polled by Reuters had forecast new claims rising to 610,000."

Entire report above... For other reports see: http://uk.reuters.com/article/UK_SMALLCAPSRPT/idUKN1447219620090514

[Hugin]

52. Jobless claims surge (CNN)

"Government says 637,000 people filed for first-time unemployment benefits last week. Continuing claims at all-time high for 15th week in a row."

By Ben Rooney, CNNMoney.com staff writer
Last Updated: May 14, 2009: 9:12 AM ET


NEW YORK (CNNMoney.com) -- The number of people filing initial claims for unemployment benefits rose more than expected last week, while the number of people filing claims on an ongoing basis rose to a record high for the 15th straight week, according to a government report released Thursday.

A total of 637,000 people filed new claims for jobless benefits in the week ended May 9, the Labor Department said. That's an increase of 32,000 from an upwardly revised 605,000 in the previous week.

More... http://money.cnn.com/2009/05/14/news/economy/jobless_claims/

________________________________________________________

Note the upward 'revision' of last week's 'better-than-expected' number of initial claims well into the 600k range.

[Pale Blue Dot]

54. Does this mean that the recession's not over?

Color me shocked.

[Hugin]

56. I guess not...

The widely touted "U" shaped recovery is looking more like an "< or >" shaped recovery... or at best a "L" shaped recovery.

Hmm... I'd say it's more of an ">" shaped recovery... I'm thinking that because the lower "/" bar implies the negative revisions and backward thinking we've witnessed lately.

But, that's as far as my technical analysis goes.

Watch for a 'joygasm' in the Markets today... Bad news for the Middle-class always translates into a surge of speculation.

[Ghost Dog]

53. ... And PPI food prices rise ...

...

In another report, the Labor Department said prices received by U.S. producers rose at a brisk pace in April, driven by a surge in food costs.

The Producer Price Index climbed 0.3 percent after declining 1.2 percent in March. Food prices rose 1.5 percent in April, the biggest increase since January 2008. Food costs rose on a record jump in egg prices, along with soaring prices for vegetables and meat.

Excluding food, the headline PPI would have increased 0.1 percent. However, compared to the same period last year, prices received by producers tumbled 3.7 percent, the biggest decline since January 1950, keeping the risk of deflation alive.

Core producer prices, excluding food and energy costs, rose 0.1 percent in April. The core PPI was unchanged in March.

Compared to the same period a year ago, core producer prices were up 3.4 percent.

Energy prices fell 0.1 percent in April versus a 5.5 percent decline in March. Gasoline prices edged up 2.6 percent in April and residential natural gas fell 6.2 percent.

/... http://news.yahoo.com/s/nm/20090514/bs_nm/us_usa_economy;_ylt=Ap8EKkcWOWJCTioVpDe3.qm573QA

[ozymandius]

3. Oil falls to near $57 as US recovery hopes wane

SINGAPORE – Oil prices fell to near $57 a barrel Thursday in Asia as weak U.S. retail sales and housing figures dampened investor optimism about a fledgling economic turnaround.

Benchmark crude for June delivery was down 88 cents to $57.16 a barrel by late afternoon in Singapore, in electronic trading on the New York Mercantile Exchange. On Wednesday, the contract fell 83 cents to settle at $58.02.

Prices have jumped from near $50 a barrel earlier this month — and rose above $60 earlier this week — on hopes that the worst of the recession is over the U.S. economy, the world's biggest oil consumer.

....

Crude inventories fell for the first time in about three months, down 4.7 million barrels in the week ended May 8, the Energy Department's Energy Information Administration said Wednesday. Analysts had expected a build of 1.4 million barrels, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.

....

In other Nymex trading, gasoline for June delivery fell 0.65 cent to $1.68 a gallon and heating oil slid 0.50 cent to $1.49 a gallon. Natural gas for June delivery dropped 7.3 cents to $4.26 per 1,000 cubic feet.

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

[ozymandius]

4. U.S. seeks crackdown on loosely regulated derivatives

WASHINGTON (Reuters) – The Obama administration moved on Wednesday to exert more control over the shadowy over-the-counter derivatives market, now closely linked to the global credit crisis.

Federal regulators proposed subjecting all over-the-counter derivatives dealers -- whose trades are not made through an exchange, making them hard to monitor -- to "a robust regime of prudential supervision and regulation," including conservative capital, reporting and margin requirements.

The plan, sketched out by Treasury Secretary Timothy Geithner and top regulators at a news conference, marks a big step in the administration's push to rewrite rules for banks and financial markets in response to a credit crisis that has sent economies around the globe reeling.

....

Trading of OTC derivatives, instruments that derive their value from other assets, exploded in size in recent years, with many large firms -- such as mega-insurer American International Group (AIG.N) -- charging into the burgeoning market.

The global market is pegged at about $450 trillion.

http://news.yahoo.com/s/nm/20090514/bs_nm/us_financial_derivatives

[Dr.Phool]

36. And I suppose they'll get the same 21 Dem Senators to vote for this.

The same ones that voted down Durbin's credit card reform bill yesterday.

This country is toast.

[ozymandius]

5. Reports: GM to export China-built cars to US

SHANGHAI – General Motors Corp. plans to begin exports of vehicles made in China to the United States within two years, ramping up sales to more than 50,000 by 2014, reports said Wednesday.

A spokeswoman for GM in China did not immediately respond to a request for comment on the reports, which were said to be based on a company recovery plan given to U.S. lawmakers.

GM intends to sell 17,335 made-in-China passenger cars in the U.S. market by 2011, the Shanghai Securities News and other reports said. By 2014 exports would triple to more than 51,000, it said.

....

If true, GM could end up becoming the first automaker to begin exporting to the U.S. from China: previously announced plans by Chinese manufacturers to crack the U.S. market have so far fizzled.

Most Chinese automakers have been daunted by the challenge of meeting stringent U.S. safety standards. They also face the uphill battle of winning consumer confidence for their unfamiliar brand names.

http://news.yahoo.com/s/ap/20090513/ap_on_bi_ge/as_china_gm

[janedum]

40. Great! More cheap junk from China and no jobs!

America is going down the tubes FAST!

[Demeter]

42. Senator Russ Feingold 'Appalled' Federal Auto Bailout Not Saving U.S. Jobs

http://onthehillblog.blogspot.com/2009/05/feingold-appalled-auto-bailout-not.html

Sen. Russ Feingold (D-Wis.) says he supported federal help for struggling U.S. automakers to help preserve jobs in his home state and elsewhere, but now is "appalled" that those corporations are now planning to ship jobs overseas to save money.

"We need an American auto industry, but it can’t be 'American' in name only -– American jobs must be protected," Feingold says in a speech yesterday from the Senate floor. "Unfortunately, the auto restructuring plans that have been put forward contain proposals to ship jobs overseas. That is not acceptable to me or to my constituents. The taxpayer dollars that are propping up the industry should be used to preserve family-supporting jobs in Wisconsin and around the country."...Wisconsin, Feingold notes, is home to two major auto plants -– a General Motors plant in my hometown of Janesville and a Chrysler engine plant in Kenosha.

Feingold says he supported handing some of the so-called bailout funds to help U.S. automakers because "unlike the money heading to Wall Street firms, the money provided to the automakers actually had a chance of preserving essential jobs in the United States."

"But that doesn’t mean we should give auto companies a blank check, which is why I said that any federal assistance provided to the automakers should come with requirements that the industry reform itself, including producing more fuel efficient cars that Americans are now demanding," the lawmaker says. "When Congress failed to take pass legislation to provide federal funds to the auto industry, I applauded then-President Bush for stepping in and using some of the Wall Street bailout money to help the auto industry while also requiring that the companies submit restructuring plans.

Frankly, I am appalled that the automakers that received taxpayer assistance are not prioritizing the retention of American jobs, including jobs in Wisconsin," Feingold adds. "Over the past several months, I have heard concerns from the workers at the Chrysler Kenosha Engine Plant that work that Chrysler had promised to assign to the Kenosha plant might no longer actually be assigned to the Kenosha plant. At the same time, Kenosha’s workforce told me that the same work would likely continue as scheduled at a plant in Mexico."

Feingold says he has contacted Treasury Secretary Timothy Geithner and White House economic adviser Larry Summers, seeking their intervention in the matter. In his speech, Feingold called on the Obama administration to more forcefully protect U.S. jobs at the firms that received federal assistance.

"The first priority of any company receiving federal taxpayer assistance should be to preserve jobs within the United States so I call upon the administration, Chrysler, and GM to reexamine their restructuring plans to make the preservation of U.S. jobs the top priority of these plans," he says. "I will continue to do all I can to support Wisconsin’s workers and local communities in their efforts both to respond to these decisions and to ensure these auto companies prioritize saving auto manufacturing jobs in Wisconsin as the restructuring process moves forward in the coming days and weeks."

[janedum]

49. Kudos to Feingold!

While the rest of the do-nothing idiots in Congress allow our jobs to be shipped overseas.
America is going down the tubes!
I guess they expection 10 million people to live off welfare.
Disgusting!

[Dr.Phool]

55. I think Feingold and Kucinich are the only ones that actually "get it".

[AnneD]

68. They can import all they like.....

I won't spend a nickle on them :wtf: The management really has a death wish.

[Demeter]

6. Good Morning, Ozy! First Rec

http://imgsrv.gocomics.com/dim/?fh=d6595a4c33539fae6e86ee8b44c6df11

[ozymandius]

8. Good morning, Demeter

:donut: :donut: :donut:

It's nice to have some company.

[rfranklin]

12. Pass the donuts!

Good morning, Oz.

[ozymandius]

17. This cartoon compliments your sig line.

[Demeter]

20. That Is Truly Funny, the First Laugh All Week

The GOP is to be laughed out of existence.

[Dr.Phool]

57. Which GOP?

We've been under non-stop Republican rule since 1981, if you include 2 stealth Republican presidents in the mix.

[rfranklin]

22. That has been the truth all along...

They have been brilliant at convincing Joe Sixpack that he is one of them.

[ozymandius]

7. A.I.G. Says Revamping Could Take 3 to 5 Years

WASHINGTON — Edward M. Liddy, the chairman of the American International Group, said on Wednesday that the company would probably need three to five years to carry out its restructuring plan and fully repay the taxpayer bailout money.

A.I.G., once the nation’s biggest insurance conglomerate, has received more than $170 billion from the Federal Reserve and the Treasury since it nearly collapsed in September. The Treasury currently owns almost 80 percent of A.I.G.’s voting shares, and Fed officials recruited Mr. Liddy to unwind its exposure to subprime mortgages and salvage its comparatively healthy insurance businesses.

Testifying before the House Committee on Oversight and Government Reform, Mr. Liddy said the company has devised a long-range plan, named Project Destiny, to sell or spin off most of its insurance subsidiaries and other business units. It is already trying to sell its aircraft leasing business, International Lease Finance, and it recently struck a deal to sell its office building in Tokyo for $1 billion.

....

Lawmakers also pressed Mr. Liddy about his ties to Goldman Sachs, where he served as a director before moving to A.I.G., and about A.I.G.’s plan to pay $165 million in retention bonuses to executives in its financial products unit. The unit virtually bankrupted the conglomerate through its sale of financial instruments tied to subprime mortgages.

http://www.nytimes.com/2009/05/14/business/14aig.html

[DemReadingDU]

27. Marcy Kaptur explodes at AIG trustee

5/13/09 Marcy Kaptur explodes at AIG trustee

Rep. Marcy Kaptur (D-Ohio) grilled members of AIG’s board of trustees during a hearing of the House Committee on Oversight and Government Reform Wednesday – but the real fireworks started when the hearing ended.

Approached by AIG trustee Jill Considine after the hearing had been gaveled to a close, Kaptur unleashed a burst of anger, alleging that AIG is sending money to banks and other institutions that are exploiting her constituents.

Standing just a foot or two from Considine, Kaptur said, “You are defending the worst-behaving corporations that are too big and too irresponsible.”

“They hire outside people to come in and rape us,” Kaptur said, her voice rising. “It’s outrageous.”

Chastened, Considine did not respond, instead folding her hands until Kaptur left the room.

Earlier, the two women had another head to head battle over Considine’s role as chairwoman of a Bermuda-based company that provides administrative services to offshore hedge funds.

Considine is one of three trustees appointed by the Federal Reserve Bank of New York to control the roughly 77 percent of AIG stock purchased by the taxpayers. But she also chairs the board of a Bermuda-based company that administers offshore hedge funds, called Butterfield Fulcrum Group. Who, Kaptur wanted to know, are that firm’s clients?

“Mainly hedge funds,” responded Considine.

Which ones, asked Kaptur, pressing for names.

“Very small that wouldn’t be on your radar screen,” said Considine.

“Pick two,” said Kaptur.

“We are a private company and usually don’t come out with the names of our clients,” Considine said. “It’s not a U.S. company, it’s incorporated in Bermuda, its’ senior management is in the U.K.”

President Barack Obama has targeted offshore hedge funds as tax shelters
for the wealthy. Asked whether her company’s business practices are at odds with Obama’s rhetoric, Considine said her company is perfectly legitimate. “What we're talking about is a global company that was actually founded in Bermuda,” she said. “It’s not one of these companies that just went there.”

Throughout the hearing, members of Congress of both parties struggled to understand who the trustees are, and where their loyalties lie. At issue was whether they represent the interests of the American people as they say, or instead report to the Federal Reserve Board of New York, which is itself controlled by a board of directors heavily stocked with Wall Street banks. Many of the committee members seemed skeptical that the trustees were as independent of the Fed and the U.S. Treasury as they claimed to be.

Rep. Dennis Kucinich (D-Ohio) wanted to know whether the trustees release minutes of their weekly meetings.

Chester Feldberg, who served as a Federal Reserve Bank employee for 36 years and is now an AIG trustee, said the minutes of the trustees meetings are released to the New York Fed. But he said he was unsure whether he could send the minutes along to Congress.

“It is my understanding that the minutes belong to the Federal Reserve,” Feldberg said.

Rep. Darrell E. Issa (R-CA) pronounced himself a skeptic of the creation of the AIG Trust in the first place. “It is inappropriate for shadowy regulators and bureaucrats to use any legal sleight-of-hand to obscure their influence in running the U.S. financial sector,” he said.

After more than an hour of questioning the AIG trustees, Chairman Edolphus Towns (D-N.Y.) threw up his hands in confusion. “It’s not clear to me and the other members exactly what you do,” he said.

http://www.politico.com/news/stories/0509/22494.html

[DemReadingDU]

30. Cspan: Watch Kaptur question AIG Liddy

5/13/09
Kaptur begins at 1:43:30. She gets some facts on the record.

Then again watch Kaptur beginning at 2:22:35. Watch her smile right after Liddy goes on record with the statement about Maiden Lane being set up.

Kaptur: "Were you ordered to give them (Dresdner Kleinwort) the $2 Billion by the Federal Reserve?"

Liddy: "The Federal reserve, when we set up Maiden Lane Three, took responsibility for the settlement of all of those credit default swap contracts."

http://www.c-span.org/cspanFLVPop.aspx?src=project/economy/econ051309_aig.flv&s=6122.187&e=0&live=N&popup=Y


more from Karl Denninger
http://market-ticker.org/archives/1037-FLASH-Liddy-Lays-An-Egg-On-BERNANKE!.html

[Demeter]

31. Keep Digging, Congresspeople!

How nice that there are a few who take their oaths seriously. One could even call it quaint.

[DemReadingDU]

35. More from Zero Hedge

5/13/09 AIG CDS Unwind Goes From Waterfall To A Trickle

As Zero Hedge initially reported nearly two months ago, the main reason why the banks' fixed income trading desks generated phenomenal profitability in January and February had nothing to do with actual trading of fixed income and everything to do with AIG's hamheaded (and loss-generating) unwind of its CDS book, which by implication generated one-time, massive profits for counterparties to the trade (read: the banks, which are now doing all they can to issue shares in the open market day in and day out on the coattails of the phenomenal short squeeze that this unwind generated).

AIG CEO Ed Liddy provided some more fire for this hypothesis today during his testimony before the House Financial Services Subcommittee. In a very odd twist, Liddy, who in March had disclosed that AIG-FP had unwound over $1.1 trillion in CDS notional (from $2.7 trillion to $1.6 trillion - a ridiculously large amount), today noted that the financial black hole had succeeded in only unwinding an additional $0.1 trillion in the last 2 months, from $1.6 trillion to $1.5 trillion.

The obvious question that arises here is why did AIG slow down its CDS unwind process so much?

Some potential answers: i) the banks do not need any taxpayers gifts now as much as they did in January and February; ii) the financial blogosphere (and to a much smaller extent, the mainstream media) is now fully aware of the taxpayer thuggery that AIG committed when it unwound the $1.1 trillion in no time, and iii) Andrew Cuomo is monitoring every CDS transaction at AIG-FP under a microscope now, so wholesale dumping could be a "tad" more problematic.

The logical implication is that if banks need to break the taxpayer piggybank again, it will be next to impossible to abuse the taxpayer funded rainy day fund. Therefore banks better all raise equity stat or else the pain in Spain will soon be unbearable: ergo a wholesale, orchestrated short squeeze rally.

Links to transcripts from March and May provided.

http://zerohedge.blogspot.com/2009/05/aig-cds-unwind-goes-from-waterfall-to.html

[ozymandius]

9. SEC may charge Countrywide's Mozilo

NEW YORK (CNNMoney.com) -- Staffers at the Securities and Exchange Commission are recommending that the agency file civil fraud charges against Countrywide co-founder Angelo Mozilo, according to a published report.

The agency sent a notice to Mozilo telling him of the potential charges, which include violations of insider-trading laws and failing to disclose information to shareholders, according to the Wall Street Journal, which cited people familiar with the investigation. The agency may ultimately decide not to file charges.

http://money.cnn.com/2009/05/13/news/companies/SEC_Mozilo/index.htm

[Hugin]

58. Tanzillo Headed For The Pokey? (Denninger)

What I like even better though it this note:

Countrywide is also one of many mortgage companies under criminal investigation by federal prosecutors over possible violations during the boom. It isn't clear whether these probes will produce charges. Criminal investigations require a higher level of proof than civil suits.

Yes they do, and I pray every night that prosecutors are convinced they can get a conviction.

I have repeatedly commented way back when Countrywide was still an independent company that Tanzillo's gaudy suits needed to have much wider stripes.

Perhaps we'll finally get to see him wearing something more fitting of a man of his character soon.

More... http://market-ticker.org/archives/2009/05/14.html

[Demeter]

63. Oooh! Vicious!

[ozymandius]

10. HK Shares End Sharply Down;Market Seen In Consolidation Phase

HONG KONG (Dow Jones)--An unexpected drop in U.S. retail sales figures released overnight cast fresh doubt over the pace of recovery in the U.S. economy, sending Hong Kong's benchmark index sharply lower Thursday.

Property developers led declines after recent sharp gains. Analysts said economic concerns have ended the market's rally for now, and profit-taking pressure will be heavy in the near term.

The Hang Seng Index fell 517.93 points, or 3.1%, to 16,541.69, its lowest closing level since May 5, when it ended at 16,430.08.

http://online.wsj.com/article/BT-CO-20090514-705224.html

[Ghost Dog]

51. Global stocks extend losses

LONDON (Reuters) - World stocks fell for a fourth straight day on Thursday while the low-yielding dollar and yen advanced as weak U.S. retail sales data prompted investors to cut back on risky assets after their nine-week rally.

Oil prices also fell while government bonds rose as investors took a break from a risk buying frenzy after data showed on Wednesday sales at U.S. retailers fell for a second straight month in April, breaking a string of more upbeat reports that had suggested the economic slump was abating.

"Yesterday's retail sales were a blow to the green shoots theory because that theory had been predicated on the resilient U.S. consumer," said Lee Ferridge, vice president and senior macro strategist at State Street.

However, market indicators showed a recovery is still on track. The cost of borrowing medium-term dollars hit a record low in Asia, suggesting banks are more willing to lend, while shipping costs hit a 2009 high on Wednesday on the back of strong Chinese demand for commodities. MSCI world equity index (^MIWD00000PUS - News) fell 0.9 percent, extending a decline after hitting a six-month high on Monday. The index is on track for the first weekly loss in 10 weeks.

...

Emerging stocks (^MSCIEF - News) fell 2.4 percent.

"Historically equity markets start to price in the turn in the economic cycle about two quarters before the actual data starts to improve," Georgina Taylor, equity strategist at Legal & General Investment Management, said in a note. "However, for the market gains to be sustainable, economic growth needs to pick up as well as stabilize."

/... http://finance.yahoo.com/news/Global-stocks-extend-rb-15239709.html?.v=2

[ozymandius]

11. European Stocks, U.S. Index Futures Fluctuate; Barclays Gains

May 14 (Bloomberg) -- European stocks and U.S. futures fluctuated as a rebound by banks from the steepest drop in six weeks offset declines by energy companies after oil fell for a second day and SBM Offshore NV posted a lower-than-expected profit forecast.

Barclays Plc gained 6.2 percent after Morgan Stanley recommended the shares, leading a measure of bank stocks higher. SBM, the world’s largest supplier of floating oil production platforms, slumped 12 percent. Leighton Holdings Ltd. slid 7.5 percent as Australia’s biggest construction company reduced its full-year earnings forecast by 10 percent.

Europe’s Dow Jones Stoxx 600 Index was little changed at 200.62 as of 10:09 a.m. in London. The MSCI Asia Pacific Index sank 2.9 percent, while Standard & Poor’s 500 Index futures were almost unchanged.

....

‘Reality Check’

“The market is having a bit of a reality check, the green shoots of recovery have been frozen at last as we are still in a deep-seated recession,” said David Buik, a London-based market analyst at BGC Partners in London.

http://www.bloomberg.com/apps/news?pid=20601100&sid=aSV9fRx2pnFY&refer=germany

[Ghost Dog]

62. Europe stocks rise, snap three-day losing run

LONDON, May 14 (Reuters) - ... The pan-European FTSEurofirst 300 .FTEU3 index of top shares rose 0.5 percent to close at 835.71 points. The index is up 29.5 percent from the lifetime low it hit on March 9.

"The market doesn't want to give up a lot of ground," said Mike Lenhoff, chief strategist and head of research at Brewin Dolphin Securities, in London. "It may have got a bit ahead of itself, and may need a bit of cooling off. But it's here because it's taking the view that there's a recovery out there."

Several banks regained some of the ground lost in recent days. Barclays (BARC.L), Credit Suisse (CSGN.VX), HSBC (HSBA.L), and Royal Bank of Scotland (RBS.L) rose between 1.7 and 4.2 percent. UBS (UBSN.VX) rose 4 percent on reports the Swiss government is seeking a quick exit from its investment in the country's biggest bank.

...

But Natixis (CNAT.PA) tumbled 13.6 percent after reporting a first-quarter loss late on Wednesday.

Belgian bank KBC (KBC.BR) slumped 24.9 percent, as trading resumed following suspension on Wednesday. KBC, which has secured government guarantees to help it survive the financial crisis, posted a 3.6 billion euro ($4.9 billion) first-quarter loss, hit by 4.1 billion of writedowns on its investment portfolio

Energy stocks were the biggest losers as crude CLc1 lost more than 1 percent. BP (BP.L), ENI (ENI.MI), Royal Dutch Shell (RDSa.L), StatoilHydro (STL.OL) and Total (TOTF.PA) lost between 1.2 and 3.1 percent.

...

British telecoms carrier BT (BT.L) fell 6.4 percent after announcing 15,000 further job losses and saying it would cut its dividend after its pension costs almost doubled and a 1.58 billion pound ($2.4 billion) writedown tipped it into an annual loss.

"Companies are transferring their recession to the economy," said Lenhoff. "They're cutting jobs, to boost productivity and earnings."

...

Across Europe, the FTSE 100 .FTSE index closed 0.7 percent higher; Germany's DAX .GDAXI and France's CAC 40 .FCHI rose 0.2 and 0.1 percent respectively.

/... http://www.reuters.com/article/marketsNews/idCALE23051820090514?rpc=44&sp=true

[Demeter]

13. Another case of India link to credit card fraud in UK

Crosspost from OhioChick in LBN

http://economictimes.indiatimes.com/Another-case-of-Ind...

LONDON: In yet another case of international bank cards fraud, customers at a petrol pump in the city of Leicester last week found that their card details were used to withdraw money from various places across the world, including India.

The police had confirmed latest cases this week and launched an inquiry after receiving several reports victims whose details had been used to make cash withdrawals across the world.

Several people were contacted by banks over the weekend to be told that withdrawals had been made from their accounts in Australia, Canada, Ghana, India, Thailand, Malaysia and the United States.

The banks said that thousands more may have fallen victim.

Most of the victims used a Shell petrol pump on Uppingham Road in Leicester. A Shell spokesman said the company had launched an investigation into allegations of card fraud.

British security officials have been grappling with card-cloning, by which card details are surreptitiously recorded during transactions at petrol pumps and supermarkets and emailed across the globe for illegal withdrawals from ATM.

Last year, several such cases have come to light when British consumers found that money was withdrawn from their accounts from Mumbai, Chennai and other parts of India, besides other places around the world.

[Festivito]

14. Debt: 05/11/2009 11,260,454,652,131.26 (UP 1,760,856,674.16) (Debt down, mostly FICA.)

(Not much of a move near to the same as yesterday's.)

= Held by the Public + Intragovernmental(FICA)
= 6,955,188,380,355.05 + 4,305,266,271,776.21
DOWN 29,759,155.68 + UP 1,790,615,829.84

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

THINKING IN BILLIONS: Think 3 or 4 dollars per billion in a 306-Million person America.
If every American, man, woman and child puts in $3.26 each THAT'S 1B$.
A family of three: Mom, Dad, Child: $9.79, ABOUT TEN BUCKS for a 1B$ federal program.
I hope that is clear. However, I'd suggest using $3 per 1B$ to underestimate it.
Use $4 per 1B$ to overestimate the cost when thinking: Is the federal program worth it?
Aid to Dependant Children: 2B$/yr =$8/yr(a movie a year) Family of 3: $24/yr(an hour of bowling)

PERSONALIZED DEBT:
Every 14 seconds we net gain a another American, so at the end of the workday of this report, there should be 306,331,972 people in America.
http://www.census.gov/population/www/popclockus.html
Currently, each of these American's owe $36,758.99.
A family of three owes $110,276.98. (And that is IN ADDITION to their mortgage.)

ANALYSIS:
There were 21 reports in the last 30 to 31 days.
The average for the last 21 reports is 4,320,428,781.27.
The average for the last 30 days would be 3,024,300,146.89.
The average for the last 31 days would be 2,926,742,077.64.
There were 252 reports in 365 days of FY2007 averaging 1.99B$ per report, 1.37B$/day.
There were 253 reports in 366 days of FY2008 averaging 4.02B$ per report, 2.78B$/day.
There were 75 reports in 112 days of GWB's part of FY2009 averaging 8.03B$ per report, 5.38B$/day.
There were 77 reports in 111 days of Obama's part of FY2009 averaging 0.10B$ per report, 0.16B$/day so far.
There were 152 reports in 223 days of FY2009 averaging 8.13B$ per report, 5.54B$/day.

PROJECTION:
There are 1,350 days remaining in this Obama 1st term.
By that time the debt could be between 13.1 and 18.7T$.
It could be higher. It could be lower.

HISTORICAL:
President's term begins and ends on Jan 20.
(Guess who might want to hide the Reagan Bush years. Jan 20 data is missing before 1993.)
01/20/1993 _4,188,092,107,183.60 WJC Inaugural
01/22/2001 _5,728,195,796,181.57 WJC (UP 1,540,103,688,997.97)
01/20/2009 10,626,877,048,913.08 GWB (UP 4,898,681,252,731.43)
05/11/2009 11,260,454,652,131.26 BHO (UP 633,577,603,218.18 so far since Obama took office.)

Fiscal Year ends: Sep 30
Borrowed in FY1993: (Maybe later.)
Borrowed in FY1994: 281,261,026,873.94
Borrowed in FY1995: 281,232,990,696.07
Borrowed in FY1996: 250,828,038,426.34
Borrowed in FY1997: 188,335,072,261.61
Borrowed in FY1998: 113,046,997,500.28
Borrowed in FY1999: 130,077,892,735.81
Borrowed in FY2000: _17,907,308,253.43 Bill alone
Borrowed in FY2001: 133,285,202,313.20 Bill and George
Borrowed in FY2002: 420,772,553,397.10 All George
Borrowed in FY2003: 554,995,097,146.46
Borrowed in FY2004: 595,821,633,586.70
Borrowed in FY2005: 553,656,965,393.18
Borrowed in FY2006: 574,264,237,491.73
Borrowed in FY2007: 500,679,473,047.25
Borrowed in FY2008: 1,017,071,524,650.01
Borrowed in FY2009: 1,235,729,755,218.80 so far this fiscal year.

LAST FIFTEEN REPORTS OF ADDITIONS TO PUBLIC DEBT(NOT FICA):
04/21/2009 -000,363,758,089.93 ---
04/22/2009 +000,051,738,680.14 ------------*******
04/23/2009 -012,857,484,009.95 -
04/24/2009 -000,133,239,400.23 ---
04/27/2009 +000,285,896,492.06 ------------******** Mon
04/28/2009 +000,154,949,620.57 ------------********
04/29/2009 -034,727,762,120.64 -
04/30/2009 +079,347,503,951.43 ------------**********
05/01/2009 -003,202,605,992.57 --
05/04/2009 +000,068,750,275.89 ------------******* Mon
05/05/2009 +000,122,936,524.80 ------------********
05/06/2009 -000,058,764,073.21 ----
05/07/2009 +027,679,213,817.18 ------------**********
05/08/2009 -000,216,334,016.92 ---
05/11/2009 -000,029,759,155.68 ---- Mon

56,121,282,502.94 Total of 15 above reports.

Heavy borrowing seems to start after 09/18/2008.
US borrowed $1,595,822,848,872.19 in last 235 days.
That's 1,596B$ in 235 days.
More than any year ever, including last year, and it's 157% of that highest year ever only in 235 days.
And it is over 100% of ANY dismal Bush, for any dismal Bush-year, ONLY IN 235 DAYS NOT 365.

For a prettier and more explanatory view of our nation's debt:
http://www.brillig.com/debt_clock

(Debt to the penny keeps changing. Stuff is missing. Best to keep our own history.) LAST REPORT:
http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=102&topic_id=3872456&mesg_id=3872511

[Festivito]

74. Debt: 05/13/2009 11,255,959,564,418.43 (DOWN 4,495,087,712.83) (Debt down, mostly FICA.)

(Small moves.)

= Held by the Public + Intragovernmental(FICA)
= 6,954,980,864,876.37 + 4,300,978,699,542.06
DOWN 207,515,478.68 + DOWN 4,287,572,234.15

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

THINKING IN BILLIONS: Think 3 or 4 dollars per billion in a 306-Million person America.
If every American, man, woman and child puts in $3.26 each THAT'S 1B$.
A family of three: Mom, Dad, Child: $9.79, ABOUT TEN BUCKS for a 1B$ federal program.
I hope that is clear. However, I'd suggest using $3 per 1B$ to underestimate it.
Use $4 per 1B$ to overestimate the cost when thinking: Is the federal program worth it?
Aid to Dependant Children: 2B$/yr =$8/yr(a movie a year) Family of 3: $24/yr(an hour of bowling)

PERSONALIZED DEBT:
Every 14 seconds we net gain a another American, so at the end of the workday of this report, there should be 306,344,315 people in America.
http://www.census.gov/population/www/popclockus.html
Currently, each of these American's owe $36,742.84.
A family of three owes $110,228.51. (And that is IN ADDITION to their mortgage.)

ANALYSIS:
There were 21 reports in the last 30 days.
The average for the last 21 reports is 4,094,333,776.33.
The average for the last 30 days would be 2,866,033,643.43.

There were 252 reports in 365 days of FY2007 averaging 1.99B$ per report, 1.37B$/day.
There were 253 reports in 366 days of FY2008 averaging 4.02B$ per report, 2.78B$/day.
There were 75 reports in 112 days of GWB's part of FY2009 averaging 8.03B$ per report, 5.38B$/day.
There were 78 reports in 113 days of Obama's part of FY2009 averaging 0.02B$ per report, 0.09B$/day so far.
There were 153 reports in 225 days of FY2009 averaging 8.05B$ per report, 5.47B$/day.

PROJECTION:
There are 1,348 days remaining in this Obama 1st term.
By that time the debt could be between 13.1 and 18.6T$.
It could be higher. It could be lower.

HISTORICAL:
President's term begins and ends on Jan 20.
(Guess who might want to hide the Reagan Bush years. Jan 20 data is missing before 1993.)
01/20/1993 _4,188,092,107,183.60 WJC Inaugural
01/22/2001 _5,728,195,796,181.57 WJC (UP 1,540,103,688,997.97)
01/20/2009 10,626,877,048,913.08 GWB (UP 4,898,681,252,731.43)
05/13/2009 11,255,959,564,418.43 BHO (UP 629,082,515,505.35 so far since Obama took office.)

Fiscal Year ends: Sep 30
Borrowed in FY1993: (Maybe later.)
Borrowed in FY1994: 281,261,026,873.94
Borrowed in FY1995: 281,232,990,696.07
Borrowed in FY1996: 250,828,038,426.34
Borrowed in FY1997: 188,335,072,261.61
Borrowed in FY1998: 113,046,997,500.28
Borrowed in FY1999: 130,077,892,735.81
Borrowed in FY2000: _17,907,308,253.43 Bill alone
Borrowed in FY2001: 133,285,202,313.20 Bill and George
Borrowed in FY2002: 420,772,553,397.10 All George
Borrowed in FY2003: 554,995,097,146.46
Borrowed in FY2004: 595,821,633,586.70
Borrowed in FY2005: 553,656,965,393.18
Borrowed in FY2006: 574,264,237,491.73
Borrowed in FY2007: 500,679,473,047.25
Borrowed in FY2008: 1,017,071,524,650.01
Borrowed in FY2009: 1,231,234,667,506.00 so far this fiscal year.

LAST FIFTEEN REPORTS OF ADDITIONS TO PUBLIC DEBT(NOT FICA):
04/22/2009 +000,051,738,680.14 ------------*******
04/23/2009 -012,857,484,009.95 -
04/24/2009 -000,133,239,400.23 ---
04/27/2009 +000,285,896,492.06 ------------******** Mon
04/28/2009 +000,154,949,620.57 ------------********
04/29/2009 -034,727,762,120.64 -
04/30/2009 +079,347,503,951.43 ------------**********
05/01/2009 -003,202,605,992.57 --
05/04/2009 +000,068,750,275.89 ------------******* Mon
05/05/2009 +000,122,936,524.80 ------------********
05/06/2009 -000,058,764,073.21 ----
05/07/2009 +027,679,213,817.18 ------------**********
05/08/2009 -000,216,334,016.92 ---
05/11/2009 -000,029,759,155.68 ---- Mon
05/13/2009 -000,207,515,478.68 ---

56,277,525,114.19 Total of 15 above reports.

Heavy borrowing seems to start after 09/18/2008.
US borrowed $1,591,327,761,159.36 in last 237 days.
That's 1,591B$ in 237 days.
More than any year ever, including last year, and it's 156% of that highest year ever only in 237 days.
And it is over 100% of ANY dismal Bush, for any dismal Bush-year, ONLY IN 237 DAYS NOT 365.

For a prettier and more explanatory view of our nation's debt:
http://www.brillig.com/debt_clock

(Debt to the penny keeps changing. Stuff is missing. Best to keep our own history.) LAST REPORT:
http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=102&topic_id=3876544&mesg_id=3876573

[Demeter]

15. "Why I'm Freaking Out"

http://www.nakedcapitalism.com/2009/05/guest-post-why-im-freaking-out.html

Yves Smith notes:
This post is from reader Gonzalo Lira. Although I beg to differ with him on a couple of his observations, it's certainly colorful and thought provoking. I give my quibbles at the end.


Insofar as this burgeoning Millennial Depression goes, I've noticed there are two sorts of people: Ones such as myself, obsessively following every blog and every chart and chasing after every little Bloomberg article like a starving hunter in an African veldt chasing down every little rodent with a spear, and others who vaguely know that there's a crisis going on but who are pretty much buying the stock markets' rise and the mainstream media's line that "Green shoots are sprouting, and everything will soon be back to normal."

Obsessives like me and presumably you who are reading this are more or less outraged that these pathetic cud-chewers are placidly eating up this "green shoots" nonsense. We see our charts, we read our Bloomberg, we see one and one thing only: THE END IS HERE!!! REPENT NOW YE SINNERS!!! IT'S A SHORT SQUEEZE, YOU IDIOTS!!! SAVE YOURSELVES FROM DAMNATION!!!

We obsessives are a high-strung bunch.

Now, the economy isn't like the weather: If the weatherman says it'll be sunny tomorrow, the weather don't grow cloudy to spite him. The weather don't care what the weatherman say. But in macroeconomics, if enough people say that things are going to suck canal water, well then, things will suck canal water—hell, they'll suck turpentine. Macroeconomics is the ultimate example of the Heisenberg Uncertainty Principle, only magnified: If some observers say it'll get better, it'll get a lot better. If enough observers say it's going to get worse, it'll get a LOT worse. A relatively small group of influential market participants—the MSM and some key people, not even necessarily powerful people—can literally create self-fulfilling prophecies.

So if we discard the old, clearly failed model of perfectly rational markets and economic actors, and instead think of macroeconomics in these more realistic terms—more-or-less rational models and charts and numbers, plus a really big slug of basic human psychology—a healthy bit of denial is actually not a bad thing. The very act of believing things will get better actually makes things get better. So when I torque down and try to coolly analyse what's going on, macroeconomically speaking, I am actually okay with all this talk about green shoots and light at the end of the tunnel. I figure, Happy talk leads to calm people, leads to happy markets, leads to renewed confidence, leads to . . . you get the picture.

But I'm still freaking out. Why?

It's because of what's behind the mask.

In every economic crisis or mushrooming recession, the MSM and the leadership classes always talk up how great things really are, and how great things are going to get in just a little while, putting on a brave face and putting out optimistic talk—and that's fine: That sort of mild deception is not only acceptable, it is in fact necessary. Putting on the happy mask is not the issue.

The issue is, what's behind the happy mask. In other words, what are the people in power actually doing, and do they have any sense that they know what they're doing, or where they're going? Or are they making it up as they go along? Are they on a path—even if it's the wrong path, or one I don't agree with—or are they lost in a wilderness and just going around in circles?

That's my problem. That's why I'm freaking out.

Sixteen months into this Millennial Depression, and less than a business quarter into Obama's administration, it is inescapably clear that Team Obama hasn't the slightest idea what it's doing. To pretend otherwise is self-deception. The louts and Constitutional traitors of the Bush administration didn't much know what they were doing either—but they were flat stupid. Team Obama doesn't have that excuse.

Let's do a quick recap—roll tape:

The banks: The stress test was so obviously so much window-dressing that it's rather questionable what utility the whole process actually served. I mean, c'mon: The banks negotiated the results of the test (!). This is a far cry from Roosevelt's bank holiday in March '33—a far cry? Hell, it's a whole other musical genre. But even if the stress tests had been on the up-and-up, it is clear that Team Obama will not do what has to be done—nationalise the banks, fire management, liquidate the stock-holders, write off the bad assets, get the bond holders to take haircuts (or quasi-decapitations, as the case
may be) and turn the banks around and send them on their way, FDIC-style. Why they won't do this is besides the point, through capture by Wall Street—akin to state capture of East European governments by the native oligarchy—seems to be the general consensus.

Regardless, the banks are zombies—and they will remain zombies indefinitely. Zombie banks can undercut solvent competitive banks, strangling financial competition and ironically curtailing market liquidity, because the zombies know they will always be propped up by Uncle Sam (sorry for the mixed metaphors, but you get the idea). This is exactly what happened—and is still happening—in Japan. Zombie banks will take the government's largesse, lend out no money, squeeze out their non-zombie competition, and wind up turning the entire financial industry zombie—and Team Obama has no idea how to stop this, aside from shoveling even more liquidity in their direction. Or maybe they DO know what has to be done—put an FDIC receivership bullet in the brains of these zombies—but lack the political courage to do so. Either way, the result is the same: Zombies everywhere, killing everything, ironically curtailing liquidity even as they are propped up in the name of improving liquidity.

The charitable conclusion here is, this shows Team Obama doesn't have the foresight to envision the obvious traps of allowing zombie banks to exist. Hence they don't have an overall plan for the banking sector—if they did, they'd realize the perniciousness of zombie banks and therefore put a stop to them by setting up a real stress test and putting the banks that failed it—no matter their size—into receivership. The uncharitable conclusion is that Team Obama are captured lackeys of Wall Street.

Industry: Team Obama's capitulation to entrenched interests in the automobile industry—that is, the United Auto Workers Union—is a very, very bad sign. The government's involvement, instead of being good for Chrysler and GM in their respective bankruptcy processes and shielding upstream suppliers from the harm of a drawn-out bankruptcy, will actually mean that the business decisions of these two companies will effectively be beholden to political considerations from here on out. After all, the reason these companies were nationalised was in order to save the UAW's bacon. (BTW, to compare what's going on at GM and Chrysler today to Chrysler in 1980 is apples and Agent Orange: In 1980, the US government guaranteed Chrysler's bonds. In 2009, the US government is guaranteeing CHRYSLER—and GM too.)

Moreover, Team Obama hasn't presented any rationale for the de facto nationalization of Chrysler and GM—so what's to stop any other industry (or union) from asking to be nationalised? I'm not one of these fools who says that any state-run enterprise is "Communist" or "Socialist"—I would prefer bankruptcy for an insolvent business, but on principle I have no problem with a government takeover of a business or industry, so long as there is a clear, compelling, non-trivial, non-political reason, and so long as there is a clear horizon for the exit of the government, if the interference was for exigent or unique reasons. But
the arbitrary de facto nationalization of Chrysler and GM through this sham (and probably illegal) pre-pack bankruptcy has no rationale, no raison d'etre, aside from propping up some union (which is receiving a shockingly sweet and possibly illegal deal in the Chrysler case, a deal presumably to be repeated in the imminent GM bankruptcy)—the way it's being done makes no rational business sense, but makes terrific POLITICAL sense. These are the twin problems with Team Obama and their auto industry meddling: It's not that they are meddling in the private sector, it's that they're giving priority to political considerations over financial or macroeconomic considerations, and they're meddling without a clear and compelling rationale, opening the door for every private business to seek state subsidy so long as they have the political muscle to get the sweet taxpayer-financed deal out of Team Obama.

This shows Team Obama's lack of an overall plan, coupled with a lack of faith in capitalism and bankruptcy, a lack of faith that the laws and system in place will actually do what they're supposed to do. When an administration doesn't have faith in the law, it starts to break it. If you don't believe me, ask the Bushies.

The military: No one is noticing this, and I know I'm odd man out on this subject, but weapons procurements and excessively large military expenditures—above and beyond the two wars being fought—are continuing apace, and no one is saying a thing. This is a disaster. Military weapons are, by definition, expenses—they're a waste of money, at best a very inefficient redistribution of income from taxpayers to workers on the factory floors of the weapons' manufacturers. Now, I'm no pinko-Commie-Hippie-Vegan freak—I have a gun, I ate raw baby seal with some Inuit friends in Alaska one time (delicious), and I sure as hell don't go around wearing that stupid little semaphore sign which is really just the footprint of the American chicken. However, the exorbitant military spending going on is a tremendous drain on the economy. It doesn't seem so because the economy has been so used to it, and because in the good times it wasn't such a pressing issue.

Keep in mind, the Millennial Depression is the first truly serious economic downturn since the end of the Cold War. But even during the Cold War, when the Soviet Union presented an obvious and equal military challenge, there were cutbacks in '81 and after '73, as well as in the Fifties, when the economy got rocky. Now—with no serious or imminent enemy except low-tech terrorists—we have a massive military industry, above and beyond the endless, pointless occupations in Afghanistan and Iraq. The military would be the obvious place to start cutting—is Team Obama cutting? . . .

Team Obama's failure to cut non-occupation military expenditures shows a lack of political will, even though from a rational point of view, cutting weapons procurements and the excessive military in order to redirect those monies to more productive, more clearly stimulative programs is obvious and indeed necessary, if the rationale for the recently passed stimulus package is to be believed. Yet Team Obama does not have the will to do so.

The deficit: Here we come to the big kahuna, the ultimate issue. Team Obama delivered on its promise to stimulate—boy did they deliver! What a doozy of a stimulus package! And the financing of that stimulus? Deficit. The Constitutional traitor Dick Cheney declared that "deficits don't matter", and Team Obama is drinking from the same Kool Aid. The budget deficit is being financed by the emission of Treasury bills, notes and bonds. This year, I believe $2.3 trillion worth of Treasury paper will be sold.

Question: What happens when there are no buyers for those Treasuries? Don't tell me it can't happen—that's what they told me last year about Lehman going under, and then they said the same about AIG. In the Millennial Depression, anything can happen. Simple math makes it obvious that those Treasuries won't find foreign buyers like before—not when the petro-states are selling less oil and at cheaper prices than a year ago, not when China and Japan are exporting a fraction of what they did before. The Fed is willing and able to buy those Treasuries, effectively printing money—and Team Obama is a-okay with that. No budget cuts, just print money. Is anyone else realizing that the dollar will eventually crash if this isn't stopped? Or am I whistling Dixie in a hurricane?

This shows that Team Obama is either willfully irresponsible in its cavalier attitude towards the currency, or else hasn't seriously thought through what a crash of Treasuries and a run on the dollar could actually mean for the United States. I can tell you what will happen: In a nutshell, it would mean out-and-out chaos: Fighting in the streets over food. It's happened before, elsewhere and in the U.S. immediately after the Civil War. No reason to believe it can't happen in America today.

This is a quick recap, light on detail, maybe a bit on the hyperbolic side, yes—but you who are reading this, an obsessive like me, know all the details already. You can fill in those blanks, and the picture they paint is unmistakably clear: Team Obama is lost, with no guiding principles or overall plan, making it up as they go along.

I didn't even go into abortions like the P-PIP or the collapsing balance sheets of the state and local governments (which the Federal Government is doing nothing to alleviate) or the looming pension fund blow-up, not to mention credit-card asset blow-ups (happening even now as I rant), CMBS blow ups (which are about to hit like Katrina), and on and on and on. I don't have to mention any of this: All these details only add to the picture—Team Obama gives a great speech with a huge happy mask firmly in place.

But behind the mask, there is nothing. No plan, no vision for the endgame or the way out of this Millennial Depression, no idea what to do except put out every little fire that pops up in front of them while the general conflagration goes on all around. Team Obama doesn't even believe that they should do nothing, on the assumption that time alone will heal the banks and the economy—if they really believed that time itself would be the cure for our current ills, they wouldn't have passed such an aggressive stimulus package, or be playing with legal fire in the Chrysler and GM bankruptcies, or playing with financial Armageddon with the shockingly massive Treasury paper sale.

Team Obama does not have a clue what it is doing. Behind the happy mask of green shoots and hope we can believe in, there is nothing: Just a plastic, reassuring, empty smile.

That's why I'm freaking out. Am I the only one?

SEE LINK FOR HER RESPONSE

[Hugin]

23. "squeeze out their non-zombie competition"

Isn't that the truth.

[Demeter]

24. And unfortunately, it isn't just banking that's up against crony capitalism

damn near EVERY industry--manufacturing or service--is controlled by favored corporations. There is no way to compete against the likes of Coca Cola, or IBM, or MacDonalds.

[Ghost Dog]

61. "Out-and-out chaos: Fighting in the streets over food."

Would a dollar crash really have these consequences?

[Demeter]

64. I Hope to Heaven We Never Find Out

but given recent luck and current events....

[ozymandius]

16. Paulson Told Bankers to Take U.S. Taxpayer Aid or Be ‘Exposed’

May 14 (Bloomberg) -- Former Treasury Secretary Henry Paulson, saying nine U.S. banks were “central to any solution” of the credit crisis, told their leaders to take government aid or be forced to by regulators, according to a memo prepared for an October meeting.

“If a capital infusion is not appealing, you should be aware that your regulator will require it in any circumstance,” Paulson’s one-page list of talking points for the session with the banks’ chief executives said. “We don’t believe it is tenable to opt out because doing so would leave you vulnerable and exposed.”

.....

The CEOs who attended included Kenneth Lewis of Bank of America Corp., Vikram Pandit of Citigroup Inc., Lloyd Blankfein of Goldman Sachs Group Inc., Jamie Dimon of JPMorgan Chase & Co., John Thain of Merrill Lynch & Co., now part of Bank of America; Robert Kelly of Bank of New York Mellon Corp., Ronald Logue of State Street Corp., John Mack of Morgan Stanley and Richard Kovacevich of Wells Fargo & Co.

Accompanying Paulson were Federal Reserve Chairman Ben Bernanke, Federal Deposit Insurance Corp. Chairman Sheila Bair and New York Federal Reserve Bank President Timothy Geithner, who succeeded Paulson as Treasury secretary.

http://www.bloomberg.com/apps/news?pid=20601087&sid=auLCYdFyUm5Y&refer=home

[Demeter]

18. One Fig Leaf Does Not Prevent Exposure in a High Wind

Brrr!

and unless the taxpayer wants to spring for a whole new bank wardrobe, why not put the banks out of our misery?

If taxpayers wanted a whole new banking system, they could start from scratch and do it properly for a whole lot less. But then the Masters of the Universe would be pounding the pavements and collecting unemployment.

[ozymandius]

19. Have a nice day.

The day away from home begins. Funny - this school year has evaporated like rain. Just two more weeks are left.

:hi:

[Demeter]

21. Good Luck, Ozy!

thanks for the daily thread!

[tclambert]

25. Quick note on the safety net cartoon.

The social safety net used to be for poor people, you know, senior citizens and the unemployed. Now it's for bankers.

[Demeter]

26. Munger on Phony Accounting, Cultural Decay, and Derivatives

http://www.nakedcapitalism.com/2009/05/munger-on-phony-accounting-cultural.html

Stanford Law Review has a great interview with Warren Buffett's longstanding partner, Charlie Munger. Munger offers much less corn pone and more direct opinion than Buffett does.

The entire piece is very much worth reading, but I wanted to hone in on some key topics. One is the neglect of the role of what amounts to accounting fraud in this mess. Much of this is technically not fraud under the current regime but would be if the standards of 20 years ago were still in place. We now live in a world where everyone knows that the authorities simply will not take down any of the Big Four. Four is now deemed to be the minimum number of big accounting firms permissible. So we de facto have accounting firms "too big to fail", which means "too big to be asked to eat much liability, not matter how indefensible their conduct." So if they do something bad, they might have to fire a few partners and pay a moderate fine.

So effectively, we live in a world that echoes the Nixon Presidency. If the Big Four does it, it must be legal.

From the Stanford Law Review (hat tip reader Hubert):

As we look at the current situation, how much of the responsibility would you lay at the feet of the accounting profession?

I would argue that a majority of the horrors we face would not have happened if the accounting profession developed and enforced better accounting. They are way too liberal in providing the kind of accounting the financial promoters want. They've sold out, and they do not even realize that they've sold out.

Would you give an example of a particular accounting practice you find problematic?

Take derivative trading with mark-to-market accounting, which degenerates into mark-to-model. Two firms make a big derivative trade and the accountants on both sides show a large profit from the same trade.

And they can't both be right. But both of them are following the rules.

Yes, and nobody is even bothered by the folly. It violates the most elemental principles of common sense. And the reasons they do it are: (1) there's a demand for it from the financial promoters, (2) fixing the system is hard work, and (3) they are afraid that a sensible fix might create new responsibilities that cause new litigation risks for accountants....

Very few people realize how much we've screwed up. Even in leading law schools and business schools very few people realize that the mess at Enron never could have happened if accounting customs hadn't been changed. What we have now is a bigger, more widespread Enron...

[Demeter]

28. AIG CDS Unwind Goes From Waterfall To A Trickle

http://www.nakedcapitalism.com/2009/05/guest-post-aig-cds-unwind-goes-from.html

Submitted By Tyler Durden of Zero Hedge

As we initially reported nearly two months ago, the main reason why the banks' fixed income trading desks generated phenomenal profitability in January and February had nothing to do with actual trading of fixed income and everything to do with AIG's hamheaded (and loss-generating) unwind of its CDS book, which by implication generated one-time, massive profits for counterparties to the trade (read: the banks, which are now doing all they can to issue shares in the open market day in and day out on the coattails of the phenomenal short squeeze that this unwind generated).

AIG CEO Ed Liddy provided some more fire for this hypothesis today during his testimony before the House Financial Services Subcommittee. In a very odd twist, Liddy, who in March had disclosed that AIG-FP had unwound over $1.1 trillion in CDS notional (from $2.7 trillion to $1.6 trillion - a ridiculously large amount), today noted that the financial black hole had succeeded in only unwinding an additional $0.1 trillion in the last 2 months, from $1.6 trillion to $1.5 trillion.

The obvious question that arises here is why did AIG slow down its CDS unwind process so much?

Some potential answers: i) the banks do not need any taxpayers gifts now as much as they did in January and February; ii) the financial blogosphere (and to a much smaller extent, the mainstream media) is now fully aware of the taxpayer thuggery that AIG committed when it unwound the $1.1 trillion in no time, and iii) Andrew Cuomo is monitoring every CDS transaction at AIG-FP under a microscope now, so wholesale dumping could be a "tad" more problematic.

The logical implication is that if banks need to break the taxpayer piggybank again, it will be next to impossible to abuse the taxpayer funded rainy day fund. Therefore banks better all raise equity stat or else the pain in Spain will soon be unbearable: ergo a wholesale, orchestrated short squeeze rally.

[Demeter]

29. FLASH: Liddy Lays An Egg On BERNANKE!

http://market-ticker.org/archives/1037-FLASH-Liddy-Lays-An-Egg-On-BERNANKE!.html

Ok, now this gets interesting.

In a hearing not covered by the so-called "mainstream media" but covered on Cspan, Liddy, AIG's CEO, in response to a question by Rep Kaptur said:

"When The Fed set up Maiden Lane they took on responsibility for settlement of all of the CDS."

WHOAH!

Ok, now we're getting into interesting territory.

Specifically, I quote: "The Federal Reserve decided we should pay 100 cents on the dollar", but Mr. Issa nailed the truth on this in a followup - they could have purchased those contracts for far less in the open market at the time.

The bottom line is that the testimony was that The Fed decided to settle the contracts in a non-economic manner that resulted in screwing the taxpayer by transferring more than $100 billion dollars of taxpayer money out to these banks when the cash value at the time was FAR LESS.

(Mr. Issa, by the way, is one of the Congressfolk who actually does understand securities - and it shows. He refused to let this go until he hammered it into the ground and got the answer in plain, irrefutable English.)

Bluntly - we got raped.

Is it any surprise that CNBC is refusing to cover this?

Is it any wonder how the banks managed to "report decent profits"?

The allegation just made by Liddy is that Bernanke and The Fed literally stole $100 billion dollars from you and I by intentionally and wantonly overpaying on the settlement of these contracts!

I want to see indictments; nothing less is sufficient any more.

NOTHING WE DIDN'T KNOW IN OUR HEARTS AND GUTS ALREADY, BUT IT'S NICE TO GET IT IN WRITING.

[UpInArms]

32. dollar watch

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

Last trade 82.702 Change +0.136 (+0.17%)

US Dollar Strength Will Outlast Risk Aversion as Economy Recovers

http://www.dailyfx.com/story/bio1/US_Dollar_Strength_Will_Outlast1242268355894.html

The US Dollar has fallen sharply over recent weeks as a rebound in risky assets weighed on the safety-linked currency. Looking ahead, however, evidence continues to suggest that the sell-off is a correction in the context of a larger uptrend rather than a sustainable change in Dollar’s overall trajectory, whether or not it is driven by risk sentiment.

The US Dollar Has Been Driven by Trends in Risk Sentiment

Recent months have seen the US Dollar exhibit a very strong inverse correlation with trends in risk appetite. Indeed, the US Dollar Index’s link with MSCI World Stock Index (a composite metric tracking global stock performance) was as strong as -95.9% in mid-December and now stands at a formidable -85.4%. As global demand weakened, expectations of dour earnings weighed on stock markets and pushed traders to pull capital from equities and other risky assets to seek safe haven in the greenback: the US continues to have the deepest, most developed capital markets and the most stable geopolitical profile, making dollar-based assets the venue of choice for risk-averse investors. Since March 10th, this relationship has worked against the Dollar as equities rebounded, sending the greenback 7.95% lower against its top counterparts.

...more...

Are the Early Signs of Recovery Strongest With the US and Dollar?

http://www.dailyfx.com/story/topheadline/Are_the_Early_Signs_of_1242249723515.html



The Economy and The Credit Market



Optimism surrounding an eventual economic recovery is growing; but all those making positive forecasts do so with a disclaimer for timing and barring any unforeseen events. These stipulations are perhaps as important as the general concept of a recovery itself; and therein lays the source of the market’s next dominant fundamental theme. Will the US economy recovery before its G10 counterparts? Is there a next shoe to drop? And, if that is the case, will the dollar take the role of safe haven or growth candidate? These are the questions that all fundamental market participants will be asking themselves; but that the greenback traders in particular will be attempting to discount. Over the past week, the outlook for the US (compared to the rest of the globe) improved modestly on a smaller than expected drop in May payrolls and the in ‘tolerable’ shortfalls of those 10 American banks that failed the Federal Reserve’s stress test. However, it is important to realize that the recovery in risk appetite is fully derived from speculation of future growth, earnings and returns. Things could fall apart quickly…

...more...

[DU GrovelBot]

33. ## PLEASE DONATE TO DEMOCRATIC UNDERGROUND! ##

This week is our second quarter 2009 fund drive.
Donate and you'll be automatically entered into our daily contest.
New prizes daily!



No purchase or donation necessary. Void where prohibited. Click here for more information.

[Demeter]

34. CCB share deals soar after BofA stake sale

http://www.ft.com/cms/s/0/598106ee-3fe8-11de-9ced-00144feabdc0.html

The volume of share dealing in China Construction Bank soared on Wednesday, fuelling speculation that some buyers of Bank of America’s $7.3bn sell-down had flipped their holdings to pocket huge gains.

The troubled US bank, which is trying to raise $34bn to meet regulators’ capital requirements, on Tuesday sold 13.5bn shares in the mainland lender to a group of predominantly mainland investors via a private placement at HK$4.20 each, a discount of more than 14 per cent to Monday night’s closing price.(WITH A GOLDMAN SACHS CONNECTION!)

The $7.3bn trade propelled the daily turnover of CCB’s Hong Kong-listed shares to 18.2bn. Excluding the BofA sell-down, trading volume was about 11 times higher than normal.

Market participants said that the extent of trading, after a large sell-down, was unprecedented and suggested some of those investors offloading CCB shares had held them for less than 24 hours.

“Given the absence of official confirmations, the market is attributing today’s heightened trading activity to those who wanted a quick flip,” said a veteran Hong Kong banker.

If somebody who bought shares on Tuesday sold them on Wednesday, they could have easily earned at least a 10 per cent profit.

UBS arranged a block sale of 758m CCB shares at HK$4.88, which represents a 2 per cent discount, in a deal worth $460m, while CICC, the mainland’s leading broker, arranged a $120m private placement at HK$4.82.

The names of the sellers were undisclosed.

CCB’s shares, which climbed on Tuesday when news of the sell-down emerged, fell 4 per cent to HK$4.79 on Wednesday.

The prices fetched by stock sales will heighten scrutiny of the terms of BofA’s sell-down. The discount handed to the buyers exceeded that of the bank’s previous divestment of CCB stock this year.

It is also double the discount given by Royal Bank of Scotland when it sold its $2.3bn stake in Bank of China in January.

In addition, BofA took the highly unusual step of not engaging investment banks to help underwrite and arrange this week’s share sale, a move that market participants said was embarrassing to Merrill Lynch, its subsidiary, which it controversially acquired this year.

BofA defended the discount and said it had been agreed after talks with the buying consortium but has yet to comment on the share sale.

The bank confirmed it had sold the shares to a consortium led by Hopu Investment Management, a mainland investment firm; a subsidiary of China Life; Bank of China International and Singapore’s Temasek, none of which are believed to have sold on their stakes. Hopu Investment Management is an investment firm founded in 2007 by Fang Fenglei, a former full-time head of Goldman Sachs’s mainland securities joint venture. However, many other unnamed funds are believed to be among the buying consortium.

Asked why the bank did not use Merrill Lynch, BofA said: “We did it as a party to party transaction.”

Temasek already owned 6 per cent of CCB and is typically a long-term investor. It holds any stock it acquires for at least the medium term. Both Hopu and Temasek declined to comment.

[Demeter]

37. American Express sells $3bn of debt (SECURITIZED CREDIT CARDS)

http://www.ft.com/cms/s/0/12f30270-4012-11de-9ced-00144feabdc0.html

By Saskia Scholtes in New York

Published: May 14 2009 00:22 | Last updated: May 14 2009 00:22

American Express sold $3bn of debt on Wednesday without a federal guarantee to help the credit card issuer repay government bailout funds.

AmEx joined a string of banks, including JPMorgan and Goldman Sachs, that have issued such debt in recent days after government stress tests found they did not need additional equity capital. US regulators have said banks that want to repay federal bail-out funds must be able to issue debt without government insurance...

AmEx said that subject to regulatory approval, it would use the proceeds of the debt sale for the “partial funding of the repurchase of $3.4bn of preferred shares issued to the US Treasury as part of the capital purchase programme.”

The credit card issuer sold the debt in two parts: $1.25bn of five year notes with a coupon of 7.25 per cent and $1.75bn of 10-year bonds with a coupon of 8.125 per cent.

[Hugin]

46. I should go back and find the post where I posed the question...

of "If the FICO nonsense was being gamed in the manner of the Bond Ratings?"

Because, quite obviously they were/are.

In order to sell these things, "Credit Card Tranches" to the widest possible group of investors suckers. I'm sure they were rated and I suppose just by coincidence the 'FICO' scores are ratings. How convenient!

AND... Who wants to bet the riskiest tranches have loads of CDSs and Derivatives built up on them... About $450 Trillion worth?

Once again, I must ask... Why are the Banksters so loath to solve the Auto/Mortgage/Consumer Credit Crises? It's simple... Because they stand to make much more if we fail. (Which is a false hope. If we fail enmass... There's nobody left to pay them their blood money.)

Where's antigop? I'm sure this was yet another way to get their hands on those Pension Funds just laying there and not in the Greedy SOBs' pockets. antigop is the expert on these continuing issues.

[Dr.Phool]

38. Good morning fellow travelers.

I started out this morning, just turning 57. I'm starting to age quicker as I read the news. I figure I'll be 80 by the end of the day, but, I'll probably be too drunk to realize it.

They're killing health-care reform. They killed credit card reform yesterday. GM must have a new board made up of ex-Wal Mart execs. A well sourced friend told me last night, that his neighbor's Army son was wounded in combat in Mexico, and his buddy was killed. Just what we need, another fucking war.

Sorry to spread all this cheer this morning. I'm headed off to the dog park with the Fudd. And maybe after I return, and start on the bloody mary's, I'll be in a better mood.

:party: :toast: :party: :beer: :beer: :beer: :beer: :beer: :beer: :beer:

[Demeter]

65. Happy Birthday, Doc!

Remember, living well is the best revenge, and he who laughs last, laughs best.
I'm going to live long enough to see all these bastards dead or in jail. It is my life goal.

[Dr.Phool]

72. Thank you!

In between cocktails, I'm working on a fax that will burn Bill Nelson's ears off. I'll wait until tomorrow morning to edit it, and make sure it makes sense. He doesn't like me much anymore, anyway. In 2006, I told him that if he didn't vote to filibuster Alito, I was going to file to run against him. I did. I guess I disrupted his fundraising a little bit, because Karen Thurman (FDP Chair) ordered me to get off the ballot. She doesn't like me much anymore either. I told her to go perform an unnatural act on herself. Ain't politics fun?

In the mean time, I just got off the phone with John Russell. I ran his congressional campaign. We're going to set up a Web-TV channel in his house, and really go after these bastards. Mark Adams is on board. We'll all probably wind up getting shot! But, the vodka will relieve the pain, and besides, I'll be a star!

[ozymandius]

75. Congratulations Dr. Phool!

I toast your latest acquisition of another year. :toast: Many happy returns on this momentous occasion.

[Dr.Phool]

76. The bad thing is, my mind says I'm still 35.

My body say's "No you're not!"

[Demeter]

39. "American home prices just suffered their worst quarter in recorded history"

http://www.agorafinancial.com/5min/

[Demeter]

41. Stop the “Entitlement Crisis” Fear-Mongering

http://www.ourfuture.org/blog-entry/2009052012/stop-entitlement-crisis-fear-mongering

By Bernie Horn

Today, the trustees of the Social Security and Medicare systems issued their annual reports and, as expected, the occasion has prompted the usual suspects to reiterate their fear-mongering misrepresentations about an “entitlement crisis.”

Let us be clear (and truthful): Social Security is not broken, and Medicare can only be fixed by comprehensive health care reform.

The Trustees project that Social Security’s trust fund reserves will be exhausted in 2037. If absolutely nothing is done over the next 28 years, the program would then pay about 75 percent of scheduled benefits, rather than full benefits. There is no crisis requiring immediate action. Medicare, on the other hand, will exhaust its trust fund for hospital expenses by 2019 unless we work to get skyrocketing health care costs under control.

To understand the fear-mongering, let's review the way these programs are funded.

Both programs are financed by workers and employers, each paying a flat tax of 6.2 percent of an employee’s salary for Social Security and 1.45 percent apiece for Medicare. The Social Security tax applies only to the first $106,800 a worker receives (a ceiling that floats up with inflation every year) while the Medicare tax has no ceiling. Because the payroll tax receipts far exceed the program’s expenses, the excess has been invested in U.S. Treasury securities—more than $2.5 trillion so far. U.S. Treasury securities are widely considered the safest investment in the world, which is why China and Japan have invested nearly $1.4 trillion in such securities.

According to the Trustees’ reports, Social Security payroll tax income will continue to exceed expenses until 2017. At that point, when the Trust Fund is projected to have $3.6 trillion in assets, the government will have to start redeeming investments in Treasury securities in order to pay retirees. Drawing down these assets will keep the program running with full benefits for nearly three decades. The cost of Medicare will exceed tax revenues this year and that Trust Fund will be depleted by 2019.

So Medicare is a problem, but only because health care costs have far exceeded inflation for years. It’s a problem not only for Medicare, but for all public and private health insurance. Rising health care costs cannot be controlled in a vacuum. The only solution is comprehensive, national health care reform. In other words, the Trustees’ Report for Medicare is a loud and clear warning that our nation has no choice but to enact a universal health care plan as soon as possible.

But why are the Chicken Littles (congressional Republicans, the Peterson Foundation, the Washington Post, et. al.) crying that the sky is falling on Social Security? Because, starting in 2017, the federal government will have to find the revenues to pay back Social Security’s investments—and they don’t want it to be an occasion to tax the rich!

But that’s the only fair thing to do. American workers have paid this regressive payroll tax throughout their lives based on the promise that they’d get the money back in retirement. The payroll tax was increased on all workers in 1983 with the understanding that a surplus would be built up and then paid down. A deal is a deal. It would be grossly unethical for the nation to break its contract with workers by increasing the payroll tax on average Americans or cutting their Social Security benefits. Besides, the wealthiest Americans have gotten a tax break all along because (1) they paid no payroll tax for income earned over the ceiling, and more important (2) they paid no Social Security tax at all on investment income.

During his campaign for President, Barack Obama suggested that the Social Security payroll tax should be expanded to apply to earnings above $250,000 per year, which would affect only the wealthiest three percent of Americans. That’s one possible course of action. Another course is suggested by Nobel Prize-winner Paul Krugman—don’t do anything to Social Security. As he points out:

Social Security, with its own dedicated tax, has been run responsibly; the rest of the government has not. So why are we talking about a Social Security crisis?

It should be obvious that every American deserves a secure retirement. Retirement security is an essential part of the American Dream. Today, less than half of workers participate in a retirement plan, and only a fraction of them have access to a traditional kind of pension that guarantees income in retirement. So in the absence of some other national retirement system, it would be morally wrong to raise the tax on middle-income workers or cut Social Security benefits.

Yet, that is exactly what many Republicans and Democrats want to do. The SAFE Commission Act (H.R. 3654 by by Reps. Jim Cooper, D-Tenn., and Frank Wolf, R-Va.; and S. 304 by Sens. George Voinovich, R-Ohio, and Joe Lieberman, I-Conn.) would create a commission that would recommend tax increases and benefit cuts for Medicare, Medicaid and Social Security, and require Congress to bring the commission’s recommendation to an up-or-down vote without opportunity for amendments. House Majority Leader Steny Hoyer has endorsed the concept of this undemocratic commission. (Speaker Nancy Pelosi has said she opposes such a commission.)

The Economic Policy Institute reminds us that Social Security is the very cornerstone of retirement in America. More than 49 million Americans receive Social Security benefits, including more than 90 percent of the elderly. Social Security provides 73 percent of the typical retiree’s income, compared to 17 percent from pensions and 10 percent from savings and other sources. AARP points out that without Social Security, more than 35 percent of Americans aged 65 and older would be living in poverty.

A nation’s greatness is defined, not by its military might, but by how it treats its most vulnerable citizens. Let’s aspire to greatness.

The writer is a Senior Fellow at Campaign for America’s Future and author of the book, "Framing the Future: How Progressive Values Can Win Elections and Influence People."



Status of the Social Security and Medicare Programs
A SUMMARY OF THE 2009 ANNUAL REPORTS
Social Security and Medicare Boards of Trustees

http://www.ssa.gov/OACT/TRSUM/index.html

[DemReadingDU]

43. Maybe I will get S.S. after all!

Interesting quote from your link...
"But why are the Chicken Littles (congressional Republicans, the Peterson Foundation, the Washington Post, et. al.) crying that the sky is falling on Social Security? Because, starting in 2017, the federal government will have to find the revenues to pay back Social Security’s investments—and they don’t want it to be an occasion to tax the rich!"

[Demeter]

44. Stressing Fannie and Freddie - What Does It Mean?

http://brucekrasting.blogspot.com/2009/05/stressing-fannie-and-freddie-what-does.html

The stress test process disrupted the markets for several weeks. In the end, the government’s effort has delivered some benefits. As a result of the mandated capital increases our banks will be stronger. The idea that all 19 are now ‘sound’ is not correct. However, they certainly will be ‘more sound’. Provided that the broad economy does not resume a significant downward slide in the next eighteen months our major banks and financial institutions will make it through this period.

The Fed and Treasury put the Financials through the wringer on this one. There is no precedent for this. The group of 19 were given one choice in this matter; either they consent to the process and agree to the conclusions or they go out of business. The circumstances justified the heavy hand of the government. There was a very troubling question in depositors minds, “Is my bank safe?” Even more significant was the question in investors minds, “Should I risk my capital in theses entities?” As of Friday both of these questions appear to have been answered in a positive manner.

Unfortunately, the two largest financial institutions in the United States were able to avoid the rigors of the stress test. Fannie Mae and Freddie Mac should be put under the same microscope as the commercial banks. This is very much a case of, ‘What is good for the goose is also good for the gander’.

Putting Fannie and Freddie to the stress test is relatively easy. Unlike the commercial banks they do not have a diversity of assets. The Agencies only risks are in residential mortgages. The two Agencies have the same business model. They both have a large book of funded mortgages and a significant off balance sheet guarantee business.

The following chart sets out the Feds parameters for evaluating mortgage assets.(SEE LINK)


On a combined basis the Agencies have approximately $1.4 Trillion of Sub Prime and Alt-A exposure. Based on the Fed’s criteria this would require at least $200 billion of new equity just from this category of the Agencies balance sheet. An average rate to evaluate the Agencies total book of business would have been in the 6-8% range if the Fed had used the same standards to evaluate the Agencies as they did when evaluating Wells Fargo Bank. For the basis of this discussion a modest 7% will be used to stress test Fannie and Freddie.

This chart shows the current amounts outstanding in the Agencies funded and guarantee books. (SEE LINK)


Multiplying the total risk book by the 7% haircut produces an addition capital requirement of $700,000,000,000. This amount is approximately 10 times the total amount of capital required for the 19 public financial institutions that were subject to the Fed’s stress test. The average Baseline haircut of 4% suggested by the Fed produces a capital shortfall of $400 billion. Applying the Federal Reserve Board's rules to the Agencies demonstrates just how large our problem is.

The cost to the taxpayer for cleaning up the Agencies will take many years to calculate. It may take a decade to stabilize these important institutions. The guidelines established in the Fed stress test do provide some insight as to the magnitude of the losses we may face. Those losses will certainly exceed the Baseline Case of $400 billion. It is quite likely the losses will approach three quarters of a trillion dollars.

It is difficult to put these very big numbers into perspective. By way of comparison, the losses at the Agencies will probably be larger then all of the costs that will be incurred in the Iraq war.

[Demeter]

45. POSTED FOR THE LAUGH: Geithner says financial system healing

http://www.ft.com/cms/s/0/eac791ea-3fc5-11de-9ced-00144feabdc0.html

By Sarah O’Connor in Washington

Published: May 13 2009 15:07 | Last updated: May 13 2009 15:07

Tim Geithner, US Treasury secretary, said on Wednesday that “the financial system is starting to heal” as he pledged to recycle returned bank bail-out funds into small community banks.

Citing improving lending conditions, easing concerns about systemic risk and lower leverage at banks, Mr Geithner said “a substantial part of the adjustment process” for the financial sector was now over.

As some larger banks become confident enough to repay funds from the government’s Troubled Asset Relief Programme, the Treasury will recycle that money into smaller banks with under $500m in assets, Mr Geithner said. They will have six more months to apply for funds, and the Treasury will also increase the amount of money they can access from 3 per cent of risk-weighted assets to 5 per cent.

“As in any financial crisis, the damage has been unfair and indiscriminate,” said Mr Geithner in a speech to community bankers. “Ordinary Americans, small business owners, and community banks who did the right thing and played by the rules are suffering from the actions of those who took on too much risk.”

More than 90 per cent of America’s 8,300 banks are small or mid-sized. The US government has already invested capital in the form of preferred stock in 300 small banks, although the vast majority of Tarp money has gone to the country’s largest financial institutions.

A number of those large banks have said they intend to pay back Tarp funds, including Goldman Sachs, JP Morgan and Capital One Financial.

Mr Geithner pointed to a drop in spreads for corporate bonds, lower risk premiums in inter-bank markets and cheaper default insurance on the biggest banks as evidence that fear in the financial system was abating. “These are all welcome signs, but the process of financial recovery and repair is going to take time,” he said.

Mr Geithner also said he would soon propose legislation to create a systemic risk fund to support financial institutions in times of crisis, backed by large financial institutions. It would be an “extraordinary mechanism for extraordinary situations,” he said, and would be kept separate from the Federal Deposit Insurance Corporation, which insures bank deposits.

“With this authority, the financial costs of intervention would no longer fall to those institutions that played by the rules and made conservative and prudent choices,” he said.

[Hugin]

47. Eventually, even an unset broken bone heals...

Only to necessitate re-breaking it and setting it properly.

Hey, if Timmeh is going to use Medical comparisons... So am I!







(An aside... I wonder if "Sarah O’Connor" ever gets tired of the "Terminator" movie jokes?)

[DemReadingDU]

48. Does Geithner believe the system is healing?

Does he believe the people will believe the system is healing?

Do the people believe the system is healing?

Is the system healing?


:crazy:

[Tansy_Gold]

59. Well, the banks have all our money. They may not be healed,

but they sure as hell oughtn't to be hurtin' none.



Tansy Gold

[Demeter]

66. No, No, NO! and .......HELL NO!

[TheMachineWins]

60. Watched Kudlow for a few minutes, how pathetic

He kept saying he doesn't want big government, like a chant over and over again. He can't accept reality, that government owns the banks now and the government is the only thing holding his failed system up. So, the other TVbots on the yapping panel just humored him for a while until the segment ended with Kudlow saying how much he loved "this" and he let out some evil laugh. TV land cut to another TV whore who said how much she loved and agreed with Kudlow and how attractive he was today.

It's like a cheap, poorly acted soap opera, purposely dumbed down and horribly performed just to play to what few viewers they have left.

[DemReadingDU]

67. FDIC to Open a Temporary East Coast Satellite Office

5/8/09 FDIC to Open a Temporary East Coast Satellite Office
The Jacksonville Office will Assist with Asset Sales and Bank Closings

The Federal Deposit Insurance Corporation (FDIC) today announced it will open a temporary satellite office in Jacksonville, Florida, to manage receiverships and to liquidate assets from failed financial institutions primarily located in the eastern states.

After conducting a competitive leasing acquisition process, the FDIC entered into a short-term agreement to lease space at 7777 Baymeadows Way in Jacksonville. The decision was based on mission needs and workload.

The new office will provide facilities for up to 500 nonpermanent staff and contractors. Staffing will be based on the workload needs of this office, based on the number of closings in the eastern states, the resulting number of receiverships, and the post-closing workload.

Throughout its history, the FDIC has used these offices to keep temporary asset resolution staff closer to the concentration of failed bank assets they oversee. As the work diminishes, the temporary satellite offices are closed.

The FDIC expects to gradually move into the space starting in mid-September 2009.

http://www.fdic.gov/news/news/press/2009/pr09068.html



edit: From November 2008

11/19/08 FDIC Announces Location of Temporary West Coast Satellite Office

The Federal Deposit Insurance Corporation (FDIC) today announced it will open a temporary office in Irvine, California, to manage receiverships and to liquidate assets from failed financial institutions primarily located in the western states.

This office will act as a temporary satellite of the FDIC's resolutions and receivership operations. Through out its history, the FDIC has used these offices to keep our temporary asset resolution staff closer to the concentration of failed bank assets they oversee.

After conducting a thorough search and competitive bidding process in the southern California market, the FDIC entered into a lease for 200,000 square feet of space located at 40 Pacifica Place, in Irvine. The location and lease were determined to be the best value for the FDIC, considering mission, price and other qualitative criteria listed in our solicitation. The term of the lease is for three years, with two one-year options.

The FDIC will hire non-permanent employees and contractors to meet the workload needs of this office based on the number of closings that occur west of the Rockies, the number of receiverships and the post closing workload.

Grubb and Ellis advised the FDIC on the search. The FDIC expects to gradually move into the space starting at the end of December.

http://7thspace.com/headlines/298108/fdic_announces_location_of_temporary_west_coast_satellite_office.html

[Robbien]

69. Banks Sue MBIA Over Restructuring Plan (Banks want to be paid for their swaps)

A group of 18 American and foreign banks sued MBIA in New York state court on Wednesday, arguing that the bond insurer’s plan to split itself into two entities was fraudulent.

Among the plaintiffs in the case are virtually every major money-center bank, including Citigroup, Bank of America, JPMorgan Chase, Royal Bank of Scotland and UBS.

It is the latest lawsuit against MBIA, which announced its restructuring plan in February after consulting with New York’s insurance regulator. The plan spun off MBIA’s core municipal insurance business into a new business, National Public Finance Guarantee Corporation, leaving behind its toxic business of insuring structured financial products under the MBIA name.

These assets included collections of mortgages known as collateralized debt obligations, the instruments that lay at the heart of the financial crisis.

The lawsuit by the banks charges MBIA with unlawfully transferring $5 billion in capital from that unit into its new municipal-insurance entity, rendering the structure-finance insurance business insolvent and unable to pay out claims. Many of these banks have met with Eric Dinallo, the New York State insurance superintendent, to complain about the plan.

“Our lawsuit simply seeks to ensure that policy holders receive what they have paid premiums for: contractually guaranteed insurance protection,” Vince DiBlasi, a lawyer from Sullivan & Cromwell representing the banks, said in a statement.

http://dealbook.blogs.nytimes.com/2009/05/13/banks-sue-mbia-over-restructuring-plan/

MBIA should bring out that "wink and a nod letter" letter.

[cosmicdot]

70. Jeff Walser, FDIC Economist, Charged With Attempted Bank Robbery

you just can't make this stuff up
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Jeff Walser, FDIC Economist, Charged With Attempted Bank Robbery

KANSAS CITY, Mo. — An economist on leave from the federal agency that insures bank deposits has been charged with the April 11 attempted robbery of a Kansas City-area bank.

Jeff Walser said he had a bomb in his briefcase and demanded money at the Bank of America branch in Independence, but did not take $41,000 brought to him by an employee, according to an indictment filed Tuesday.

Walser, 51, surrendered to police and was being held in federal custody, the U.S. attorney's office said.

Walser told police that he has health problems and was "alone, discouraged and tired of working" and that his plan was to be arrested and not tell police he required thrice-weekly dialysis treatments to survive.

"I wanted to be arrested and I wanted to die," he is quoted as saying. "But after my arrest, I did not have the will to kill myself."

Walser worked for the Federal Deposit Insurance Corp.'s Kansas City office and was on leave at the time of the robbery, agency spokesman Andrew Gray said.

Messages left Thursday for Walser's public defender were not immediately returned.

http://www.huffingtonpost.com/2009/05/14/jeff-walser-fdic-economis_n_203620.html

edited to fix subject

[Demeter]

71. Wow. Poor Man

Dialysis is a hard way to live.

[Dr.Phool]

73. This sounds like it's straight out of The Onion!

It reminds me of an interview I read years ago with Tom Wolff. He was trying to make up events that were totally outrageous, for Bonfire of the Vanities, and no matter what he wrote, within days, something even crazier was happening in New York.