U.S. Role in Mortgage Market Reaches 96.5% Of All Home Loans

Posted By on April 30, 2010

The U.S. government’s massive share of the nation’s mortgage market grew even larger during the first quarter.

Government-related entities backed 96.5% of all home loans during the first quarter, up from 90% in 2009, according to Inside Mortgage Finance. The increase was driven by a jump in the share of loans backed by Fannie Mae and Freddie Mac, the government-owned housing-finance giants.

By providing a steady source of liquidity to the mortgage market, the government has helped housing markets to stabilize. However, “Fannie and Freddie have to get smaller and less relevant in order to revamp them, and instead, every day they’re getting bigger and bigger and bigger,” said Paul Bossidy, chief executive of Clayton Holdings LLC, a mortgage analytics firm.

The collapse of the mortgage market in 2007 steered more business to the Federal Housing Administration, which insures loans, and Fannie and Freddie, which were taken over by the government in 2008 as rising losses wiped out thin capital reserves. Congress also increased the limits on the size of loans that Fannie, Freddie and the FHA can guarantee, raising the ceiling to as high as $729,750 in high-cost housing markets such as New York and California.

Over the past year, rates on those “conforming-jumbo” loans have improved, and more banks have stepped up their offerings, helping to boost the government’s already hefty share of the mortgage market, said Guy Cecala, publisher of Inside Mortgage Finance. By the end of 2009, the share of jumbo loans that were sold or backed by government entities exceeded the non-government jumbo share of the market.

Read the entire article at http://online.wsj.com/article/SB10001424052748704093204575216530213580458.html?mod=WSJ_hps_LEFTWhatsNews

John Williams Of “Shadowstatistics” Is A Specialist In Government Economic Reporting….He Says We’re Going To See An Intensified Downturn In The Near Future!

Posted By on April 30, 2010

Everyone should take the time to read this, which is part of a broader interview done on April 30 .  This will also effect interest rates.
 

ShadowStats’ John Williams has done his math and believes his numbers tell the truth. He explains why the U.S. is headed for or in a depression and why a “Hyper-Inflationary Great Depression” is now unavoidable. John also shares why he selects gold as a metal for asset conversion.    John Williams is not a doom and gloomer.  His statistics are reviewed by the government with a keen interest.  If He is wrong and things continue better, then everybody will prosper.  If he is right in his negative accessment, then only those willing to listen and prepare for an unknown future will prosper.  It’s a very unusual circumstance that we have now.
 
Put yourself in Mr. Bernanke’s situation the had to prevent a collapse of the banking system. He was afraid of a severe deflation as was seen in the Great Depression, when a lot of banks went out of business. The depositors lost funds and the money supply just collapsed. He wanted to prevent a collapse of the money supply and keep the depository institutions afloat. Generally, that has happened. The FDIC expanded its coverage and everything that had to be done to keep the system from imploding was done. The effects eventually will be inflationary.
 
In the process, what Mr. Bernanke did was to expand the monetary base extraordinarily, more than doubling it over a period of a year. The monetary base is money currently in circulation plus bank reserves. If you go back to before September 2008, the bank reserves were in the $50 to $60 billion range. Where the currency was maybe $800 billion, we’ve gone over $2 trillion in total reserves. Most of that is in excess reserves and not required reserves that banks have to keep to support their deposits. Normally banks would take their excess reserves and lend them out into the regular stream of commerce, and in doing so, that would create money supply. Instead they’re leaving the excess reserves on deposit with the Fed. Money supply and credit are now generally contracting. We’re going to see an intensified downturn in the near future. I specialize in looking at leading indicators that have very successful track records in terms of predicting economic or financial turns. One such indicator is the broad money supply.
 
Whenever the broad money supply adjusted for inflation has turned negative year over year, the economy has gone into recession, or if it already was in a recession, the downturn intensified. It’s happened four times before now, in modern reporting. You saw it in the terrible downturn of ’73 to ’75, the early ’80s and again in the early ’90s. In December of 2009, annual growth in real M3 turned negative. It’s now at a record low in terms of decline, down more than 6% year over year.  What that suggests is that in the immediate future you’re going to see renewed downturn in economic activity

 
 In all the prior instances that I mentioned, this event led recessions, except for ’73 to ’75. That’s when you had the oil spike and a recession that came from that. When the money supply turned down in that recession, the economy accelerated in its decline. We’re going to see something along those lines, now, with about a six-month lead time. You’re going to have negative economic growth this year. The implications for that are extraordinary, because the projections on the federal budget deficit, a number of the state deficits, and the solvency and stress tests for the banking system all were structured assuming positive economic growth in the 2% to 3% range for 2010. Instead it’s going to be negative. Many states are going to be in greater difficulty than they thought. Most likely, you’re going to have federal bailouts there. The banks are going to have more troubles. All this means more government support, more government spending, greater deficits and greater funding needs for the U.S. Treasury. We have a global market that already is increasingly reluctant to hold the dollars and U.S. Treasuries.
 
I don’t like the euro. I don’t think that’s going to hold together, and I’ve thought so for some time. If it should break up and you have a new German currency, a new mark or something like that might be a strong one option. At the moment I like the Canadian dollar, the Australian dollar and the Swiss franc. For anyone living in the United States, rather than looking at the short-term volatility in the markets and trying to make money off of that, this is the time to batten down the hatches and to look to preserve your wealth and assets.

In terms of preserving the purchasing power of your assets, the best thing I can think of is physical gold. That’s worked over the millennia. I’m not per se a gold bug. It just happens to be a circumstance in which it’s the cleanest asset around for that. You don’t need to put all your assets into gold, but hold some. Hold some silver. I’d look to get some assets out of the U.S. dollar and look to get some assets out of the U.S. When I say outside of the U.S. dollar, again, I look at the Canadian dollar, Australian dollar, Swiss franc in particular. I think they will tend to do particularly well, whereas the U.S. dollar is going to become effectively worthless.

As the dollar breaks down, you’ll also likely see disruptions in supply chains.   No currency system in the U.S. is going to work unless the fiscal conditions that drove it into oblivion are also addressed.

On a global basis, where the dollar is the world’s reserve currency, 80% of currency transactions involve the U.S. dollar. There’s going to have to be an overhaul of the global currency system. To gain credibility with the public, the powers that be likely will design a system that has some kind of a tie to gold, but that’s purely speculative.

Walter J. “John” Williams was born in 1949. He received an A.B. in Economics, cum laude, from Dartmouth College in 1971, and was awarded a M.B.A. from Dartmouth’s Amos Tuck School of Business Administration in 1972, where he was named an Edward Tuck Scholar. During his career as a consulting economist, John has worked with individuals as well as Fortune 500 companies. For more than 25 years he has been a private consulting economist and a specialist in government economic reporting. His analysis and commentary have been featured widely in the popular media both in the U.S. and globally. Mr. Williams provides insight and analysis on his website, www.shadowstats.com.

 

Gordon T. Long Reviews Interest Rate Swap Deals That Have Become Problematic…..How About The $437 Trillion In Interest Rate Swaps Outstanding

Posted By on April 30, 2010

PRIMA FACIA – WHERE IS UNCLE SAM?

I have written extensively about the unregulated, non-exchange traded, offshore, off balance sheet (OTC) $605 Trillion derivatives market and specifically about the $437 Trillion Interest rate swap market. In Sultans of Swap: the Getaway I laid out some of the court actions taking place throughout Europe and the US at all levels of government. Below is a summary of those findings along with governments where the use of Interest rate Swaps is publicly documented.

 -Interest_Rate_Swaps--Legal_Proceedings-2

 This list includes only those Interest Rate Swap deals that have become problematic or which I have written about. The Service Employees Union (SEIU) has additionally documented an extensive list that was published by the Wall Street Journal: This study by the Service Employees International Union, was commissioned to demonstrate the broad based seriousness of the problem.

http://home.comcast.net/~lcmgroupe/2010/Article-Extend_Pretend-Uncle_Sam_You_Sly_Devil.htm

This Explains Where The U.S. Stands In The “Misery” Index

Posted By on April 30, 2010

Misery_Index

http://home.comcast.net/~lcmgroupe/2010/Article-Extend_Pretend-Uncle_Sam_You_Sly_Devil.htm

Here In Lies The Potential Problem

Posted By on April 30, 2010

THIS IS CRITICAL…………….THE BALANCING ACT

Balancing_Act

 

Treasury Holdings

http://home.comcast.net/~lcmgroupe/2010/Article-Extend_Pretend-Uncle_Sam_You_Sly_Devil.htm

Ravitch: New York Deficit Could Swell To $15 Billion Next Year

Posted By on April 30, 2010

The next crisis in the U.S. will likely be state and municiple debt problems.    33 states of the USA are headed for bankruptcy.
 
By Bob Hennelly

NEW YORK, NY April 29, 2010 New York’s $9.2 billion budget deficit is expected to balloon to $15 billion next year, according to Lt. Gov. Richard Ravitch.

Speaking to a midtown audience of real estate developers, Ravitch said he does not expect the state to reach a budget deal any time soon, despite the state’s desperate fiscal situation. The budget is nearly one month late and Ravitch says there are no external triggers forcing lawmakers and the governor to act.

More at:http://www.wnyc.org/news/articles/154198

Greek Bailout Cost To The U.S.

Posted By on April 30, 2010

Thought For The Day

The cost for a Greek bailout to the citizens of the US via the IMF will be $100 billion.  Now there is a nice addition to the Federal Budget Deficit.

www.jsmineset.com

Oil Disaster…..Navy And Other Defense Department Resources Investigating

Posted By on April 29, 2010

The Oil slick disaster, besides being a detriment to intended drilling projects, remains a mystery with respect to ‘cause’. Of course the dispatch of Navy and other Defense Department resources will be seen in the proper light of being helpful; while we ponder whether they’re investigating just in case something else happened; given the rig as well as blowout preventer failures. In the modern world, having both surface and subsurface equipment catastrophic failure is uncommon, and definitely requires more than cursory investigation of triggering.

Map Of Oil Disaster

www.ingerletter.com

Secret Meetings…..So What’s On The Agenda?

Posted By on April 29, 2010

Information is circulating of a secret meeting between U.S. and Egyptian as well as Israeli defense officials, as well as even the Palestinians asking the Chinese to back-off working with Iran; because of growing concern that Iran now seeks triggering a false reason for conflict, perhaps within the next three-four months or so. Egypt in particular is focusing on a diversion by Hezbollah (in Lebanon) aided by the Syrians (who are intractable), which provides such complexity that it subverts the forthcoming U.S. (and later UN) efforts to invoke sanctions to deflect Iran’s intent to start a major regional war (never assume that fanatics can be easily reasoned with of course). And by the way, one report has the U.S. (we mentioned the start of this a couple months back) accelerating facilities in Diego Garcia in the Indian Ocean, with a report that President Obama is signaling an intent to take out Iran if they don’t start to cooperate (that may or may not be bluster or rumor, but it is a circulating story). In any event everybody acknowledges an Iranian (triple pass some say off the record) jet overflew the USS Eisenhower, the only carrier we have in the Persian Gulf now, in the early part of the week. While this is not especially unique, they are probing us one more time. ‘Rumor’ has it that two additional carriers will move to the region ‘soon’.

www.ingerletter.com

Shell Puts Oil Sands Expansion Plans On Hold

Posted By on April 29, 2010

Nathan VanderKlippe and David Ebner

Thursday, Apr. 29, 2010

Costs to build in the oil sands have grown so high that one of the world’s largest energy companies plans to wait at least five years – perhaps much longer – to expand its presence there.

The oil sands have become one of the most costly places on earth to pursue oil projects, said Marvin Odum, the Americas head for Shell As a result, the company will delay any decisions on expanding its Athabasca Oil Sands Project (AOSP) until at least the second half of this decade, and will focus instead on wringing more production out of its existing facilities.

That process could increase its production, which will hit 255,000 barrels a day later this year, by a further 30,000 to 80,000 barrels per day, Mr. Odum said.

“We certainly have seen the cost environment in Alberta go up considerably,” he said in an interview with The Globe and Mail editorial board on Wednesday. “We see the ability for lower investment levels to bring more production online over the next four, five, six years.”

It is Shell’s most definitive declaration that it is retreating from one of the grandest growth schemes in the business. In 2007, as its current 100,000-barrel-a-day expansion began, Shell talked about eventually mining almost 800,000 barrels of bitumen a day. Now, the oil sands are very much a next-decade resource, as Shell instead chases offshore oil in Alaska, the Gulf of Mexico and Brazil.

The company’s expansion, which will enter production this year, has been far more costly. Shell was one of the few companies to continue oil sands construction – both through the height of the boom and the subsequent crash – and saw expansion costs climb from $9.4- to $12-billion in 2006 to $14.3-billion earlier this year.

The expansion will now require an oil price of $70 to $75 to turn a profit, making it “some of the most expensive production that we have,” Mr. Odum said.

Shell internally forecasts future oil prices between $50 and $90 – a range that potentially excludes the oil sands, and makes other global projects more attractive unless the company can find a way to beat back costs.

Shell will only commit “to watch the market and see when is the next time to commit to the next major expansion of the oil sands,” Mr. Odum said.

Full article at:http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/shell-puts-oil-sands-expansion-plans-on-hold/article1550160/

The Set-Up For Higher Food Prices

Posted By on April 29, 2010

No bats and no bees means an increase in food prices, plain and simple!

Honeybee-Colony Losses Widened Last Winter, USDA Says 

Dwindling phosphorus supply, and important component of fertilizers, and decline bee populations suggest higher food prices.

Managed colonies lost to all causes reached 33.8 of the total, compared with 29 percent a year earlier and 35.8 percent during the winter of 2007-2008, the U.S. Department of Agriculture said today. About 28 percent of surveyed beekeepers reported losing hives without any evidence of dead bees, a sign of Colony Collapse Disorder, compared with 26 percent the previous year and 32 percent the year before that.

“It’s unsustainable, said Dennis vanEngelsdorp, a past president of the Apiary Inspectors of America, which helped conduct the USDA survey. It’s a pretty big loss for beekeepers to absorb, and they can’t keep doing that.

Bees are essential for the health of pollinator-dependent crops such as almonds and blueberries.

More at:http://www.bloomberg.com/apps/news?pid=20601087&sid=a.Z9vV4nA5j4&pos=9

Bond Rally Teeters As Yield Spreads Blow Out, Interest Rates Set To Rise

Posted By on April 29, 2010

By Bryan Keogh and Sonja Cheung

April 29 (Bloomberg) — The record rally in corporate bonds is showing signs of cracking, with yields rising the most in 13 months relative to government debt and new sales falling to the least this year.

The extra interest investors demand to own company debentures rather than government debt widened 6 basis points this week to 149 basis points, according to Bank of America Merrill Lynch’s Global Broad Market Corporate Index. The last time spreads rose in a week was in the period ended Feb. 12. Global corporate bond issuance tumbled 56 percent to $19.6 billion, data compiled by Bloomberg show.

Investors retreated from credit markets on concern that worsening government finances may undermine the global economic recovery, curbing revenue and providing less of a cushion for borrowers to meet debt payments. Before this week, investors drove corporate bond spreads to a 2 ½-year low, generating total returns of about 22 percent including reinvested interest since the market bottomed in March 2009.

“Corporate bonds could only defy gravity for so long,” said Eric Cherpion, deputy head of syndicate at Societe Generale SA in London. “The volatility from Greece is pushing spreads out, which have remained tight despite the credit risks in the market.”

http://www.bloomberg.com/apps/news?pid=20601087&sid=ajWp9v9lwh38&pos=2

Wall Street Faces Capital Shortfalls Of As Much As $250 Billion From Banking Bill

Posted By on April 29, 2010

By Dawn Kopecki

April 29 (Bloomberg) — JPMorgan Chase & Co. and Goldman Sachs Group Inc. are among U.S. investment banks that may be forced to raise an additional $250 billion in capital, cut executive pay and divest some of their most lucrative assets under a bill on the U.S. Senate floor today, analysts say.

A two-page provision tucked inside the 1,558-page bill on April 21 would change the structure of about 40 of the largest U.S. investment banks by forcing them to spin off their derivatives businesses. Another measure added this month would require derivatives dealers to maintain a “fiduciary duty” to municipal, pension and retirement plan investors, which some analysts say would wipe out that market altogether.

“The bill has moved so far left so hard, that it’s caught everybody by surprise,” said FBR Capital Markets analyst Paul Miller, a former examiner for the Federal Reserve Bank of Philadelphia. He said the bill was a “big, big hot button issue with voters.” “The Street now is just realizing that all of this stuff is getting in the bill.”

The spin-off provision would result in a capital deficit of $85 billion at eight of the largest global investment banks, analysts led by Kian Abouhossein at JPMorgan Securities in London estimated in a research note today. It prohibits swaps dealers from taking any federal assistance, including access to the Federal Reserve discount window or deposit insurance from the Federal Deposit Insurance Corp.

At a minimum, the measure would require banks to spin out their derivatives business into a separately capitalized affiliate, analysts say. It was actually designed to force about 40 of the largest U.S. swaps dealers that also have federally insured banks to divest all swaps activities, said Courtney Rowe, a spokeswoman for bill sponsor Senator Blanche Lincoln, who sponsored the bill.

“This would be a sweeping change to our financial system and it was introduced 11 days ago without a hearing, without a study on its impact,” said Luke Zubrod of Pennsylvania-based Chatham Financial Corp., which advises more than 1,000 firms on derivatives.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aAH7Zq6wWQPQ&pos=4

Three Points of View: The United States, Pakistan and India

Posted By on April 28, 2010

April 28, 2010 

The Jihadist Strategic Dilemma

 By Peter Zeihan

In recent weeks, STRATFOR has explored how the U.S. government has been seeing its interests in the Middle East and South Asia shift. When it comes down to it, the United States is interested in stability at the highest level — a sort of cold equilibrium among the region’s major players that prevents any one of them, or a coalition of them — from overpowering the others and projecting power outward.

One of al Qaeda’s goals when it attacked the United States in 2001 was bringing about exactly what the United States most wants to avoid. The group hoped to provoke Washington into blundering into the region, enraging populations living under what al Qaeda saw as Western puppet regimes to the extent that they would rise up and unite into a single, continent-spanning Islamic power. The United States so blundered, but the people did not so rise. A transcontinental Islamic caliphate simply was never realistic, no matter how bad the U.S. provocation.

Subsequent military campaigns have since gutted al Qaeda’s ability to plot extraregional attacks. Al Qaeda’s franchises remain dangerous, but the core group is not particularly threatening beyond its hideouts in the Afghan-Pakistani border region.

As for the region, nine years of war have left it much disrupted. When the United States launched its military at the region, there were three balances of power that kept the place stable (or at least self-contained) from the American point of view. All these balances are now faltering. We have already addressed the Iran-Iraq balance of power, which was completely destroyed following the American invasion in 2003. We will address the Israeli-Arab balance of power in the future. This week, we shall dive into the region’s third balance, one that closely borders what will soon be the single largest contingent of U.S. military forces overseas: the Indo-Pakistani balance of power.

Pakistan and the Evolution of U.S. Strategy in Afghanistan

U.S. strategy in Afghanistan has changed dramatically since 2001. The war began in the early morning hours — Pakistan time — after the Sept. 11 attacks. Then-U.S. Secretary of State Colin Powell called up then-Pakistani President Gen. Pervez Musharraf to inform him that he would be assisting the United States against al Qaeda, and if necessary, the Taliban. The key word there is “inform.” The White House had already spoken with — and obtained buy-in from — the leaders of Russia, the United Kingdom, France, China, Israel and, most notably, India. Musharraf was not given a choice in the matter. It was made clear that if he refused assistance, the Americans would consider Pakistan part of the problem rather than part of the solution — all with the blessings of the international community.


Three Points of View: The United States, Pakistan and India

(click here to enlarge image)

Islamabad was terrified — and with good reason; comply or refuse, the demise of Pakistan was an all-too-real potential outcome. The geography of Pakistan is extremely hostile. It is a desert country. What rain the country benefits from falls in the northern Indo-Pakistani border region, where the Himalayas wring moisture out of the monsoons. Those rains form the five rivers of the Greater Indus Valley, and irrigation works from those rivers turn dry areas green.

Accordingly, Pakistan is geographically and geopolitically doomed to perpetual struggle with poverty, instability and authoritarianism. This is because irrigated agriculture is far more expensive and labor-intensive than rain-fed agriculture. Irrigation drains the Indus’ tributaries such that the river is not navigable above Hyderabad, near the coast — drastically raising transport costs and inhibiting economic development. Reasonably well-watered mountains in the northwest guarantee an ethnically distinct population in those regions (the Pashtun), a resilient people prone to resisting the political power of the Punjabis in the Indus Basin. This, combined with the overpowering Indian military, results in a country with remarkably few options for generating capital even as it has remarkably high capital demands.

Islamabad’s one means of acquiring breathing room has involved co-opting the Pashtun population living in the mountainous northwestern periphery of the country. Governments before Musharraf had used Islamism to forge a common identity for these people, which not only included them as part of the Pakistani state (and so reduced their likelihood of rebellion) but also employed many of them as tools of foreign and military policy. Indeed, managing relationships with these disparate and peripheral ethnic populations allowed Pakistan to stabilize its own peripheral territory and to become the dominant outside power in Afghanistan as the Taliban (trained and equipped by Pakistan) took power after the Soviet withdrawal.

Thus, the Americans were ordering the Pakistanis on Sept. 12, 2001, to throw out the one strategy that allowed Pakistan to function. Pakistan complied not just out of fears of the Americans, but also out of fears of a potentially devastating U.S.-Indian alignment against Pakistan over the issue of Islamist terrorism in the wake of the Kashmiri militant attacks on the Indian parliament that almost led India and Pakistan to war in mid-2002. The Musharraf government hence complied, but only as much as it dared, given its own delicate position.

From the Pakistani point of view, things went downhill from there. Musharraf faced mounting opposition to his relationship with the Americans from the Pakistani public at large, from the army and intelligence staff who had forged relations with the militants and, of course, from the militants themselves. Pakistan’s halfhearted assistance to the Americans meant militants of all stripes — Afghan, Pakistani, Arab and others — were able to seek succor on the Pakistani side of the border, and then launch attacks against U.S. forces on the Afghan side of the border. The result was even more intense American political pressure on Pakistan to police its own militants and foreign militants seeking shelter there. Meanwhile, what assistance Pakistan did provide to the Americans led to the rise of a new batch of homegrown militants — the Pakistani Taliban — who sought to wreck the U.S.-Pakistani relationship by bringing down the government in Islamabad.

The Indian Perspective

The period between the Soviet collapse and the rise of the Taliban — the 1990s — saw India at a historical ebb in the power balance with Pakistan. The American reaction to the Sept. 11, 2001, attacks changed all that. The U.S. military had eliminated Pakistan’s proxy government in Afghanistan, and ongoing American pressure was buckling the support structures that allowed Pakistan to function. So long as matters continued on this trajectory, New Delhi saw itself on track for a historically unprecedented dominance of the subcontinent.

But the American commitment to Afghanistan is not without its limits, and American pressure was not sustainable. At its heart, Afghanistan is a landlocked knot of arid mountains without the sort of sheltered, arable geography that is likely to give rise to a stable — much less economically viable — state. Any military reality that the Americans imposed would last only so long as U.S. forces remained in the country.

The alternative now being pursued is the current effort at Vietnamization of the conflict as a means of facilitating a full U.S. withdrawal. In order to keep the country from returning to the sort of anarchy that gave rise to al Qaeda, the United States needed a local power to oversee matters in Afghanistan. The only viable alternative — though the Americans had been berating it for years — was Pakistan.

If U.S. and Pakistan interests could be aligned, matters could fall into place rather quickly — and so they did once Islamabad realized the breadth and dangerous implications of its domestic insurgency. The five-year, $7.5 billion U.S. aid package to Pakistan approved in 2009 not only helped secure the arrangement, it likely reflects it. An unprecedented counterinsurgency and counterterrorism campaign conducted by the Pakistani military continues in the country’s tribal belt. While it has not focused on all the individuals and entities Washington might like, it has created real pressure on the Pakistani side of the border that has facilitated efforts on the Afghan side. For example, Islamabad has found a dramatic increase in American unmanned aerial vehicle strikes tolerable because at least some of those strikes are hitting Pakistani Taliban targets, as opposed to Afghan Taliban targets. The message is that certain rules cannot be broken without consequences.

Ultimately, with long experience bleeding the Soviets in Afghanistan, the United States was inherently wary of becoming involved in Afghanistan. In recent years, it has become all too clear how distant the prospect of a stable Afghanistan is. A tribal-ethnic balance of power overseen by Pakistan is another matter entirely, however. The great irony is that such a success could make the region look remarkably like it did on Sept. 10, 2001.

This would represent a reversal of India’s recent fortunes. In 10 years, India has gone from a historic low in the power balance with Pakistan to a historic high, watching U.S. support for Pakistan shift to pressure on Islamabad to do the kinds of things (if not the precise actions) India had long clamored for.

But now, U.S. and Pakistani interests not only appear aligned again, the two countries appear to be laying groundwork for the incorporation of elements of the Taliban into the Afghan state. The Indians are concerned that with American underwriting, the Pakistanis not only may be about to re-emerge as a major check on Indian ambitions, but in a form eerily familiar to the sort of state-militant partnership that so effectively limited Indian power in the past. They are right. The Indians also are concerned that Pakistani promises to the Americans about what sort of behavior militants in Afghanistan will be allowed to engage in will not sufficiently limit the militants’ activities — and in any event will do little to nothing to address the Kashmiri militant issue. Here, too, the Indians are probably right. The Americans want to leave — and if the price of departure is leaving behind an emboldened Pakistan supporting a militant structure that can target India, the Americans seem fine with making India pay that price

Reprinting or republication of this report on websites is authorized by prominently displaying the following sentence at the beginning or end of the report, including the hyperlink to STRATFOR:

“This report is republished with permission of STRATFOR

Banks Bet Against U.S. Cities And States With Derivatives Using Credit Default Swaps

Posted By on April 27, 2010

Banks Bet Against U.S. Cities, States

First Posted: 04-27-10

Amidst growing pessimism about the financial condition of U.S. cities and states, investors are increasingly buying financial instruments that essentially allow them to short sell  or bet against cities and states, says a Wall Street Journal report.

Offered by banks like JP Morgan, Bank of America, and Citigroup, the so-called municipal credit default swaps can be used by investors to bet that insurance contracts protecting holders of municipal bonds will default.

Some states say the derivatives not only scare away potential buyers of municipal bonds by creating a perception of risk, but ultimately drive up states’ borrowing costs. Others contend that the instruments are traded too thinly to affect municipal bond markets or a state’s credit rating.

The California treasurer is just one of a number of state treasurers that have launched a probe into the sale of these derivatives and the sale of municipal bonds by big Wall Street firms that might reveal “speculative abuse of CDS in the muni market” says one regulator.

http://www.huffingtonpost.com/2010/04/27/banks-bet-against-us-citi_n_553891.html

A Sign Of The Times….Hundreds Camp Out For Job Opportunities In Queens

Posted By on April 27, 2010

Some Arrived As Early As Friday Armed With Blankets Hoping To Get 1 Of 750 Applications For Elevator Industry Job

 Apr 27, 2010

By KATHRYN BROWN, CBS 2 HD News
NEW YORK (CBS) ―

An application to work for the Joint Apprentice & Training Committee of the Elevator Industry was handed out to hundreds of people seeking jobs who camped out for days in the rain in Queens on April 26, 2010.

 

Desperate times call for desperate measures – even if it means camping out in the rain for a chance at a job application.

Hundreds of job-seekers did just that in Queens in the hopes of landing a coveted union job.

Construction workers, engineers, electricians — hundreds spent the weekend right here. Many left with a job application, while many others walked away empty-handed.

“The sky’s the limit after this!” said Aaron Johnson of Mount Vernon.

Johnson is living month-to-month, struggling to pay the bills, with a 4-year-old daughter to support — and he was one of the lucky ones.

After three days of sleeping on the street, he left with one of just 750 job applications handed out for a position as an elevator technician apprentice — a secure job with pension and benefits and an earning potential up to $40 an hour.

“You don’t wanna keep working these dead-end jobs, check to check to check to check. I don’t want to do that anymore,” Johnson said.

More than 1,000 eager applicants began lining up as early as Friday morning armed with a variety of skills — and warm blankets.

Though many near the end of the line knew they probably wouldn’t even get an application, desperation to land a job fueled their determination to stand on line anyway — and hope for the best.

http://wcbstv.com/local/jobs.employment.queens.2.1657008.html

Unchartered Waters In Sovereign Debt Issuance, And Who’s That At The Front Of The Parade?

Posted By on April 27, 2010

 

Unchartered Waters

 

http://www.leap2020.eu/GEAB-N-43-is-available-Global-systemic-crisis-USA-UK-The-explosive-duo-of-the-second-half-of-2010-Summer-2010-The-Bank_a4531.html

The Federal Deficit

Posted By on April 27, 2010

 

Federal Deficit

Deficit-Percent GDP

http://market-ticker.org/

Pension Pains: States Cut Benefits

Posted By on April 27, 2010

Pension Pains: States Cut Benefits to Skirt Massive Funding Shortfall
Illinois Teachers Complain; California Latest State to Push for Pension Reform

 
By DALIA FAHMY
Apr. 26, 2010

Dan Montgomery doesn’t have many kind words for his elected officials. The high school English teacher from Skokie says Illinois politicians spent years neglecting their obligations to the state’s public pension funds and now want workers to foot the bill.

“It’s terrible,” said Montgomery, who has been teaching for 17 years.

Illinois recently cut benefits and raised retirement ages for public employees in order to cover a $78 billion shortfall in its public pension fund.

“We really fought it, but in the end they did it anyway,” Montgomery said.

States around the country are beginning to face the necessity of reforming their public pension systems, after the financial crisis took a bite out of already inadequate savings and put a seemingly insurmountable gap between assets and the benefits that governments had promised their workers.

Illinois is one of the most recent states to tackle its shortfalls, with a reform that the government says is expected to save taxpayers more than $200 billion over 35 years.

http://abcnews.go.com/Business/Retirement/public-pension-reform-states-cut-benefits-massive-funding/story?id=10448854

From John Mauldins “Outside The Box”…… Eric Sprott…Weakness Begets Weakness: From Banks To Sovereigns To Banks

Posted By on April 26, 2010

By: Eric Sprott & David Franklin

Sprott Asset Management

The Greek debt situation has been an interesting case study for students of the sovereign bond markets. If there’s a lesson to be learned from Greece’s experience thus far it’s that sovereign bailouts are far more complicated than bank bailouts. They require more sophisticated negotiations and proposals and involve an extra layer of diplomacy that makes them especially difficult to accomplish. As we write this, the European Union has recently announced new lending terms to support the Greek government, with great efforts made to assure the markets that these new terms do not constitute a ‘bailout’. The problem with the Greek situation is that an actual bailout would involve an almost impossible coordination among all the major powers within the EU. It would require the unanimous pre-approval of all the EU heads of state. It would involve the European Commission, the European Central Bank and the International Monetary Fund (IMF) all visiting Greece to perform financial assessments. And finally, it would involve at least seven EU countries affirming support through parliamentary votes – all of this before a single euro is spent.

A true bailout involves an almost impossible number of hurdles that essentially guarantee nothing will happen until all other avenues of rescue are exhausted. However, judging by the recent increase in yields on 10-year Greek bonds, Greece may soon need more than a loan package proposal to solve its fiscal problems.

One aspect of the Greek situation that has been obscured by all the recent political wrangling is the crisis’ impact on the Greek banks. Although the banks were supposed to be rock solid after all the government-injected capital they received (not to mention zero-percent interest rates and generous lending terms from the European Central Bank), data shows that Greek bank deposits have fallen 8.4 billion euros, or 3.6 percent, in two months since December 2009. With no restraints on capital flows within the European Union, Greek savers are free to transfer their assets elsewhere. Given that bank deposit guarantees in Greece are the responsibility of the national government rather than the European Central Bank, we suspect Greek citizens are pulling money out of their banks because they question their government’s ability to honour its domestic deposit guarantees. We envision Greek depositors asking themselves how a government that can’t raise enough money to stay solvent can then turn around and guarantee their bank deposits? It’s a fair question to ask.

The Greek bank stocks have been thoroughly punished throughout the crisis. Chart A plots an index consisting of the four largest Greek bank stocks and shows an average decline of 47% since November 2009. The deposit withdrawals from these banks have been so damaging to their respective balance sheets (remember bank leverage?) that the Greek banks have asked to borrow 17 billion euros left over from a 28 billion euro support program launched in 2008.3 You see the connection here? Greece experienced a financial crisis, followed by a sovereign crisis, followed by another financial crisis. There is no doubt that the Greek crisis has helped drive the gold spot price to its recent all time high in euros. Gold is a prudent asset to own in times of crisis, and it’s possible that a portion of the Greek deposit withdrawals were reinvested into the precious metal. The fact remains, however, that if the Greek government cannot stem the outflows of deposits soon, the EU will have no other choice but to undertake a real sovereign bailout with all its bells, whistles and arduous protocols.

It’s a vicious spiral from financial crisis to sovereign debt crisis to banking crisis, and there is no reason it can’t spread to other European countries suffering from similar fiscal imbalances. With Spain and Portugal next in line with their own sovereign debt issues, we can expect depositors in these countries to make similar runs to the bank for their cash. “Guaranteed by Government” is truly beginning to lose its potency in this environment. The International Monetary Fund (IMF) seems to be preparing for such a scenario with its recent announcement of a tenfold increase in its emergency lending facility. The IMF’s New Arrangements to Borrow (NAB) facility is designed to prevent the “impairment of the international monetary system or to deal with an exceptional situation that poses a threat to the stability of that system.” The NAB facility has grown from US$50 billion to US$550 billion with the mere stroke of a pen. Does the IMF know something that the market doesn’t? Is this a pre-emptive measure to repel an attack by bond vigilantes’ on Europe’s fiscally-weakened countries?

jmotb042610image001

Sovereign Debt

In our examination of the Greek situation this past month, we kept coming across various sovereign credit ratings. In an effort to better understand the Greek situation, we decided to look at how the ratings agencies generate their actual rankings and built our own model to determine a country’s credit risk.5 We used common metrics such as GDP per Capita, Government Budget Deficits, Gross Government and Contingent Liabilities, the inflation rate and incorporated a simple debt sustainability metric in order to generate our own sovereign ratings. What we discovered in the process was quite puzzling.

It should first be noted that the rating agencies are in the business of offering their ‘opinions’ about the creditworthiness of bonds that have been issued by various kinds of entities: corporations, governments, and (most recently) the packagers of mortgages and other debt obligations. These opinions come in the form of ‘ratings’ which are expressed in a letter grade. The best-known scale is that used by Standard & Poor’s (“S&P”) which uses AAA for the highest rated debt, and AA, A, BBB, BB, for debt of descending credit quality.

In our opinion, as they relate to sovereign debt, the ratings provided by the agencies are highly suspect. While these agencies claim to provide ratings that consider the business credit cycle, there appears to be very little forward-looking information actually factored into their credit models. In some cases, the agency ratings end up looking absurdly optimistic. This of course should come as no surprise – we all remember the subprime mortgages that were rated AAA that are now worth pennies on the dollar.

While there were some similarities in our rankings (for example, our model ascribed AAA ratings to the local currency debt of Australia, Canada, Finland, Sweden, New Zealand which matched the ratings given by S&P), we found some glaring inconsistencies in the rating results for less fiscally prudent countries that left us scratching our heads. A good example is South Africa. The agencies currently rate South Africa an A+ entity, while our model calculated a ‘BBB-‘ rating for its debt using our estimates. ‘BBB-‘ is the lowest ‘investment grade’ rating for local currency sovereign debt – one level above junk. We arrived at this rating without having factored in South Africa’s resource endowment. A significant contributor to South African GDP is derived from mining, particularly gold mining. While South Africa has been the largest producer of gold until very recently, their below-ground reserves have not been revised since 2001 when the country held 36,000 tonnes of gold (or about 40% of the global total). Recent stats from the United States Geological Survey (USGS) estimate that South Africa now has only 6,000 tonnes worth of economic gold reserves remaining. Further review by Chris Hartnady, a former associate professor at the University of Cape Town, using similar techniques to those of M. King Hubbert (the Peak Oil theorist), suggests that South Africa could have only half of the gold reserves estimated by the USGS.7 If these new estimates are correct, South Africa could have 90% less gold than claimed – and it’s not even factored into our BBB- rating! So what’s South African debt really worth? An ‘A+’ from the ratings agencies seems far too generous based on our cursory review of the country’s fundamentals.

The rating agencies’ ranking of the United States is even more disconnected from reality. To believe that the US sets the benchmark for sovereign debt credit ratings is preposterous. While we have written ad nauseam about the excessive debt issuance by the United States, we found a recent update written by United States Government Accountability Office (GAO) to be particularly instructive. The update noted the US’s budget deficit equivalent to 9.9% of GDP in 2009 – the largest 10 since 1945 – and stated that without significant policy changes the US government would soon face an “unsustainable growth in debt”.

This was not news to us. It goes on to state, however, that using reasonable assumptions, “roughly 93 cents of every dollar of federal revenue will be spent on the major entitlement programs and net interest costs by 2020.” This is news! In less than ten years, using reasonable assumptions, there will essentially be no money left to run the US government – 93% of all tax revenues the US government collects will go to pay social security, Medicare, Medicaid and the interest costs on their national debt. This implies no money left over for defense, homeland security, welfare, unemployment benefits, education or anything else we associate with the normal business of government. And the US government is rated AAA!?

The historian Niall Ferguson recently wrote that, “US government debt is a safe haven the way Pearl Harbor was a safe haven in 1941.” It’s hard not to agree given the foregoing statements by the GAO. The risk inherent to investors, of course, is what happens when the bond market begins to realize and react to this new level of risk. In a speech earlier this month, J�rgen Stark, who is a member of the board of the European Central Bank, stated, “We may already have entered into the next phase of the crisis: a sovereign debt crisis following on the financial and economic crisis.”

The activities of the IMF would confirm this statement. The question we must now ask ourselves is whether “backed by government” actually means anything anymore. In the depths of the 2008 crisis it was the governments that stepped in to provide a guarantee on financial assets. It was the governments that backed our savings accounts, money market funds, day-to-day business banking accounts, as well as debt issued by US banks. But what happens when confidence in the government guarantee begins to erode? We’ve seen what happened to Greece. Leverage inherent in the banking system elevated a bank run, equivalent to a mere 3.6 percent of deposits, into another full blown banking crisis. In our view it’s time for investors to acknowledge sovereign risk. The ratings agencies can opine all they want, but it seems clear to us that the only true AAA asset to protect your wealth is gold.

April 2010 AGEMENT LP

If you would like to reproduce any of John Mauldin’s E-Letters or commentary, you must include the source of your quote and the following email address: JohnMauldin@InvestorsInsight.com.

Opinions expressed in these reports may change without prior notice. John Mauldin and/or the staffs at Millennium Wave Advisors, LLC and InvestorsInsight Publishing, Inc. (“InvestorsInsight”) may or may not have investments in any funds cited above.

A Flaming Greece

Posted By on April 26, 2010

Greec Flame Out

Cost of Insuring Greek Debt Soars To A New Record….Hmm, And They Said The Greek Save Was A Slam Dunk. We Ask This Question Again…..Why Would Anyone Ever Believe These Guys!

Posted By on April 26, 2010

BY KATIE MARTIN AND MICHAEL WILSON

LONDON—Hopes that Greece’s formal request for international financial aid might help stabilize the financial markets are proving short-lived Monday, with the cost of insuring Greek debt against default soared to a new record.

The euro also took a dive, after briefly rebounding from a 12-month low of $1.32 against the dollar Friday after Greece officially requested the financial aid promised last month by euro-zone finance ministers and the International Monetary Fund.

As Monday trading got off in earnest, though, concerns over the lack of detail on how this aid will be implemented shoved the euro below $1.33 against the dollar.   

http://online.wsj.com/article/SB10001424052748703465204575207662667002760.html?mod=WSJ_hpp_MIDDLETopStories

Germany Throws A Wrench Into The Works………..

Posted By on April 26, 2010

Germany refuses to help Greece unless it agrees to tougher terms
Germany’s finance minister Wolfgang Schauble has raised fresh obstacles to the €40bn (£35bn) aid package for Greece, warning that Berlin will not transfer funds until Athens agrees to tougher terms.

 By Ambrose Evans-Pritchard and Edmund Conway

 Published: 10:47PM BST 25 Apr 2010

Mr Schauble said no decision had yet been taken by Berlin or the European Union and that the outcome may yet be “negative”. “It depends entirely on whether Greece goes through with the strict austerity in coming years,” he told Bild Zeitung.

George Papaconstantinou, Greece’s finance minister, insisted in Washington that the Germans were “completely on board” and that other EU states and the International Monetary Fund would provide a bridging loan if necessary. He said funds “will lose their shirts” if they have taken short bets on Greek debt. “I want to categorically state that any restructuring is off the table.”

Mr Papaconstantinou also warned that other EMU states with big debts could fall foul of the markets. “What we are talking about is not merely a Greek problem. There are broader issues around the eurozone.”

Dominique Strauss-Kahn, head of the IMF, said everybody involved “recognises the need for speed. We are all aware of the seriousness of the situation and the courageous efforts being made by the Greek people.”

Mr Schauble will meet Bundestag leaders today (Monday) amid rising doubts among Free Democrats (FDP) and Bavaria’s Social Christians (CSU) over the wisdom of open-ended help.

http://www.telegraph.co.uk/finance/financetopics/financialcrisis/7632538/Germany-refuses-to-help-Greece-unless-it-agrees-to-tougher-terms.html

Dollar, Euro, Pound Are All ‘Ugly Sisters,’ HSBC’s King Says

Posted By on April 26, 2010

 April 26, 2010, 10:46 AM EDT

By Jennifer Ryan

April 26 (Bloomberg) — The dollar, euro and pound are all unappealing investments, either because of policies of “benign neglect” or concerns on the euro region’s stability, said Stephen King, chief economist at HSBC Holdings Plc.

“It is a competition between ugly sisters, they are none of them particularly attractive” he said in an interview today in London. In the U.S. and U.K., “there will be a policy of a desire not so much to drive the currency low, but a policy of benign neglect. If the dollar weakens and sterling weakens, the authorities in those countries will be more than happy.”

The European Central Bank won’t want to see a weaker euro because that would imply a loss of investor confidence in the single currency, King said. The euro has dropped against the dollar and sterling on concern that Greece won’t get a rescue package to help it meet its debt payments.

“If the euro weakens, it’s more a worry about the stability of the euro zone and that’s more of a concern to the ECB,” he said. “You’ve got on the one hand the benign neglect approach from the States and the U.K., on the other you have the worries about the structural integrity of the euro, which is obviously weakening the euro.”

King’s book, “Losing Control: The Emerging Threats to Western Prosperity,” will be published next month.

The euro is down about 1.5 percent against the dollar this month and traded at $1.3331 as of 2:39 p.m. in London. The currency has dropped 3.3 percent against the pound in the same period to 86.13 pence.

http://www.businessweek.com/news/2010-04-26/dollar-euro-pound-are-all-ugly-sisters-hsbc-s-king-says.html

Hmm….Economists: The Stimulus Didn’t Help! Are They Kidding? Nope

Posted By on April 26, 2010

Economists: The stimulus didn’t help
By Hibah Yousuf, staff reporter
April 26, 2010: 3:56 AM ET

NEW YORK (CNNMoney.com) — The recovery is picking up steam as employers boost payrolls, but economists think the government’s stimulus package and jobs bill had little to do with the rebound, according to a survey released Monday.

In latest quarterly survey by the National Association for Business Economics, the index that measures employment showed job growth for the first time in two years — but a majority of respondents felt the fiscal stimulus had no impact.

NABE conducted the study by polling 68 of its members who work in economic roles at private-sector firms. About 73% of those surveyed said employment at their company is neither higher nor lower as a result of the $787 billion Recovery Act, which the White House’s Council of Economic Advisers says is on track to create or save 3.5 million jobs by the end of the year.

That sentiment is shared for the recently passed $17.7 billion jobs bill that calls for tax breaks for businesses that hire and additional infrastructure spending. More than two-thirds of those polled believe the measure won’t affect payrolls, while 30% expect it to boost hiring “moderately.”

But the economists see conditions improving. More than half of respondents — 57% — say industrial demand is rising, while just 6% see it declining. A growing number also said their firms are increasing spending and profit margins are widening.

http://money.cnn.com/2010/04/26/news/economy/NABE_survey/

Peter Schiff: New Financial Regulations Will Likely Increase Severity Of The Next Crisis

Posted By on April 25, 2010

By Peter Schiff

April 25

The following is an opinion piece written by Peter Schiff, president of Euro Pacific Capital and author of Crash Proof 2.0: How to Profit from the Economic Collapse. Mr. Schiff, a Republican, is also running for the U.S. Senate seat currently held by Banking Committee chair Christopher Dodd.

In a speech to Wall Street today, President Obama talked of a “failure of responsibility” in Washington and on Wall Street. But the financial sector is the most regulated part of the economy, so surely responsibility lies mostly with Washington. It was the federal government that created deposit insurance, which removed risk (and therefore caution) from bank deposits. It was also the feds that created “too big to fail,” our new system of private profits and socialized losses. Most importantly, it was federal taxes and regulations that undermined our productive capacity, rendering us weak in the face of financial shocks.

In this speech castigating private greed, no mention was made of Fannie, Freddie, or the FHA’s role in encouraging sub-prime loans, nor of the Fed’s ultra-low interest rates which made the mortgage “teaser rate” possible. The maligned “unregulated derivatives” market was largely based on exposure to these government-backed loans.

Obama claims he wants “common sense rules” to be put in place. Yet, his reform proposal defies common sense.

The new “resolution authority” is an attempt to replace the traditional bankruptcy court system with a bailout bureaucracy that subordinates the rule of law to political expediency. The result of this reform will be to increase uncertainty for any honest market participants – and create a protected sandbox for firms connected to the executive branch.

The “Volcker Rule” to split up large firms runs directly counter to this, and the past, Administration’s encouragement of dominant banks to buy their weaker competitors. Ironically, the additional regulations put in place by the bill will create tremendous barriers to entry for new firms, and strongly advantage those firms that can create the largest economies of scale (number of productive employees per compliance officer).

So long as the Fed continues to hold interest rates artificially low and the government continues to guarantee mortgages, real estate prices will remain distorted, credit will be misallocated, moral hazards will increase, and the underlying fundamentals of our economy will continue to deteriorate. Contrary to the President’s assertion, government bailouts and stimulus have weakened the underpinnings of our economy, not saved it. As a result, the next economic crisis, likely to hit within a few short years, will be that much worse. Not only will this new regulation do nothing to prevent the second phase of the crisis, it will more than likely increase its severity.

http://www.investmentnews.com/article/20100422/FREE/100429949

USA Launches Unmanned Space Aircraft

Posted By on April 25, 2010

Interesting comments and photos of a new U.S. space shuttle…….from Russia’s Prauda.    

 

The weapon station of space. This is what some critics are calling the recent launch by the United States Air Force (USAF) of an unmanned space shuttle called X-37B.

 

http://english.pravda.ru/photo/report/shuttle-5342

Just A Reminder…. We Either Are, Or Will Be At New Highs Very Soon On These Derivatives Charts

Posted By on April 23, 2010

Over-The-Counter Derivatives

Barry Ritholtz Reviews The Case Against Goldman Sachs

Posted By on April 23, 2010

The Daily Reckoning Presents
 
 
10 Things You Don’t Know (or were misinformed about) The Goldman Sachs Case

I have been watching with a mixture of awe and dismay some of the really bad analysis, sloppy reporting, and just unsupported commentary about the GS case.I put together this list based on what I know as a lawyer, a market observer, a quant and someone with contacts within the SEC. (Note: This represents my opinions, and no one elses).

1. This is a Weak Case: Actually, no – it’s a very strong case. Based upon what is in the SEC complaint, parts of the case are a slam dunk. The claim Paulson & Co. were long $200 million dollars when they were actually short is a material misrepresentation – that’s Rule 10b-5, and it’s no brainer. The rest is gravy.

2. Robert Khuzami is a bad ass, no-nonsense, thorough, award winning Prosecutor: This guy is the real deal – he busted terrorist rings, broke up the mob, took down security frauds. He is now the director of SEC enforcement. He is fearless, and was awarded the Attorney General’s Exceptional Service Award (1996), for “extraordinary courage and voluntary risk of life in performing an act resulting in direct benefits to the Department of Justice or the nation.”When you prosecute mass murderers who use guns and bombs and threaten your life, and you kick their asses anyway, you ain’t afraid of a group of billionaire bankers and their spreadsheets. He is the shit. My advice to anyone on Wall Street in his crosshairs: If you are indicted in a case by Khuzami, do yourself a big favor: Settle.

3. Goldman lost $90 million dollars, hence, they are innocent: This is a civil, not a criminal case. Hence, any mens rea – guilty mind – does not matter. Did they or did they not violate the letter of the law? That is all that matters, regardless of what they were thinking – or their P&L.

4. ACA is a victim in this case: Not exactly, they were an active participant in ratings gaming. Look at the back and forth between Paulson’s selection and ACAs management. 55 items in the synthetic CDO were added and removed. Why?

What ACA was doing was gaming the ratings agencies for their investment grade, Triple AAA ratings approval. Their expertise (if you can call it that) was knowing exactly how much junk they could include in the CDO to raise yield, yet still get investment grade from Moody’s or S&P. They are hardly an innocent party in this.

5. This was only one incident: The Market sure as hell doesn’t think so – it whacked 15% off of Goldman’s Market cap. The aggressive SEC posture, the huge reaction from Goldie, and the short term market verdict all suggest there is more coming.

If it were only this one case, and there was nothing else worrisome behind it, GS would have written a check and quietly settled this. Their reaction (some say over-reaction) belies that theory. I suspect this is a tip of the iceberg, with lots more problematic synthetics behind it.

And not just at GS. I suspect the kids over at Deutsche bank, Merrill and Morgan are working furiously to review their various CDOs deals.

6. The Timing of this case is suspect. More coincidental, really. The Wells notice (notification from the SEC they intend to recommend enforcement) was over 8 months ago. The White House is not involved in the timing of the suit itself; it is a lower level staff decision.

7. This is a Complex Case: Again, no. Parts of it are a little more sophisticated than others, but this is a simple case of fraud/misrepresentation. The most difficult part of this case is likely to turn on what is a “material omission.” Paulson’s role in selecting mortgages may or may not be material – that is an issue of fact for a jury to determine. But complex? Not even close.

8. The case looks thin: What we see in the complaint is the bare minimum the prosecutor has to reveal to make their case. What you don’t see are all the emails, depositions, interrogations, phone taps, etc. that the prosecutors know about and GS does not. During the litigation discovery process, this material slowly gets turned over (some is held back if there are other pending investigations into GS).

Going back to who the prosecutor in this case is: His legal reputation shows he is a very thorough, very precise, meticulous litigator. If he decided to recommend bringing a case against the biggest baddest investment house on Wall Street, I assure you he has a major arsenal of additional evidence you don’t know about. Yet.

Typically, at a certain point the lawyers will tell their client that the evidence is overwhelming and advise settling. That is around 6-12 months after the suit has begun.

9. This case is Political: I keep hearing that phrase, due to the SEC party vote. It is incorrect. What that means is the case is not political, it means it has been politicized as a defense tactic. There is a huge difference between the two.

10. I’m not a lawyer, but . . . Then you should not be ignorantly commenting on securities litigation. Why don’t you pour yourself a tall glass of “Keep Your Mouth Shut” and go sit quietly in the corner.

Bonus: CNBC’s Steve Liesman has taken over the role Charlie Gasparino used to occupy – he appears to be the official designated spokesperson/leakee for Goldman. I find this sort of access Journalism contemptible, but that’s just me. It also says some negative things about Charlie’s career move – Fox Biz may not garner enough ratings to waste a leak there.

I have $1,000 against any and all comers that GS does not win – they settle or lose in court. Any takers? My money is already in escrow – waiting for yours to join it. Winnings go to the charity of the winner’s choice.

Barry Ritholtz
for The Daily Reckoning

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Mortgage Math

Posted By on April 23, 2010

$10 Billion a Month Freed up Each Month from People not paying their Mortgage. $1.9 Billion of That is in California so People can continue Leasing their SUV Mercedes and Getting Tans. Thanks Bailouts!

Posted: Thu, 22 Apr 2010 16:31:29 +0000

Living in California, the central hub of housing bubble mania, I have come to realize that many people that overpaid for homes are now quickly shifting their mindset to one of non-payment revolt.  With the 24 hours news cycle and instant viral financial information, many are now realizing that strategically defaulting isn’t such a bad option anymore.  In fact, this is now a significant strategy for many.  The corrupt bankers and Wall Street have set the example so people figure why shouldn’t they follow the same path?  But the problem with that is someone still ends up paying.  And that is the prudent middle class.  Look at it this way.  We have 51 million homes with a mortgage.  Over 44 million Americans are paying their mortgage diligently.  Yet our economy is screwed because we are bailing out the bankers and Wall Street but also giving incentives to many others to walk away from their home or game the current bailout structure.

Let us look at the current U.S. mortgage market first:

Source:  Census, MBA

The latest data tells us that over 14 percent of all U.S. mortgages are either 30+ days late or in some stage of foreclosure.  In other words, 7.2 million people are not paying their mortgages.  Yet banks are turning out record profits even though they are bleeding in their real estate cash-flow.  Now let us run a hypothetical here.  The median mortgage payment of those 51 million mortgages is $1,514.  This is actual stimulus for people if you don’t pay that each month.  If you aren’t paying your mortgage you just relieved yourself of your biggest monthly commitment.  So let us run a rough number:

$1,514 x 7.2 million         =             $ 10,931,916,697

So this frees up some $10 billion each month (this is a rough number).  This seems close to what Mark Zandi has calculated:

“(Zero Hedge) No, not crazy. With some 6 million homeowners not making mortgage payments (some loans are in trial mod programs and paying something but still in delinquency or default status), this is probably freeing up roughly $8 billion in cash each month. Assuming this cash is spent (not too bad an assumption), it amounts to nearly one percent of consumer spending. The saving rate is also much lower as a result. The impact on spending growth is less significant as that is a function of the change in the number of homeowners not making payments.

I’m not sure I would say this is juicing up spending, but resulting in more spending than would be the case otherwise.”

Part of the jump in recent spending has come from people flat out not paying on their mortgage.  I can tell you of a case of someone that bought a home here in California.  They paid $700,000 for a home that is now worth $500,000 (if they are lucky).  That is typical.  What is also typical is that they took on an exotic mortgage for the full $700,000 amount.  Last year, they realized that they wouldn’t be able to sell the home and wouldn’t be able to make their new modified home payment.  So once it modified late last year, they stopped paying.  Yet they had the money to pay.  They explained that the bank wouldn’t deal with them until they missed a few payments.  Now, the bank is throwing itself like an obsessed lover to help them “modify” their loan.  The terms now seem nice but they want to negotiate for more.  You have the banking criminals using taxpayer money to negotiate with people that drive around in a leased Mercedes SUV and BMW.  Does this sound like the poor grandma being kicked out of her humble home?  Apparently I’m not the only one hearing and seeing this:

“(WSJ) Some borrowers are being helped by the Obama administration’s foreclosure-prevention program and other modification efforts. Irma Bravo, the owner of a cleaning service in San Diego, recently received a loan workout that lowers the monthly payment on her $522,000 mortgage to $1,736 from nearly $5,000.

“It’s a big, big relief,” Ms. Bravo says.”

Did you get that?  A $5,000 mortgage payment was pushed down to $1,736.  Now wouldn’t you, one of the 44 million prudent Americans want to have this kind of sweetheart deal?  If you want this deal you have to imitate your local crony banker and give them the middle finger and stop paying.  Suddenly, they’ll do handstands and back flips to lower your payment.  The Wall Street system has perverted the foundation of our economy.  Do I begrudge the people doing this?  Not really.  But what I do resent is the fact that banks are using the trillions of dollars in taxpayer money to make these deals work.  If they wanted to use their own money, so be it.  But that is not the case.  And we have many people that fall in this category:

Source:  Calculated Risk

I also wanted to get this data specifically for California:

So today you have roughly 798,000 California mortgage holders not paying their mortgage for a variety of reasons.  Clearly the main reason is the economy is horrible.  But a large number are taking advantage of the situation.  The median home payment in the state is $2,384.  Let us do the math:

$2,384 x 798,832               =             $1,904,414,716

So of the $10 billion in non-payer stimulus, California receives roughly 20 percent of the cut.  And what are people doing with this money?

“(CNBC) The person had an $1,880.00 monthly mortgage payment on which they’d defaulted, but said person’s monthly bank statement showed payments to a tanning salon, nail spa, liquor stores, DirecTV bill with premium charges, and $1,700.00 in retail purchases from The Gap, Old Navy, Home Depot, Sears, etc.”

Well I’m glad some people have their priorities straight.  The fact of the matter is the bulk of Americans, the middle class, are being screwed by the banks, Wall Street, and also the current bailout structure.  The median home price in the U.S. hovers around $170,000.  Why not cap any bailout help to mortgages at that level or less?  Do you feel good that the folks I talked about (who make over $100,000 a year by the way) in California who have a Mercedes and BMW and continue to live in a nice home rent free are able to do so because of your taxpayer money?  This is exactly what is happening.  No wonder why many Americans must feel like fools.

The name of the game is simple.  Get into massive debt, so much so that when you fail, you will then be able to negotiate lower terms because the government enjoys rewarding horrible behavior.  Things like this won’t last long because eventually, the public that is being ramrod into bailouts wakes up and revolts.  Yet this could be a few years or much longer before any of it happens.  Things have gotten so absurd that people are now calling up credit card companies and blackmailing corrupt banks saying they won’t pay on $50,000 on debt unless something changes.  In many cases, credit card companies are changing terms if you sound convincing enough.  Otherwise, if you are one of the majority who honor their debt be prepared to pay higher fees for the smaller group that are milking the system.  This is an absolute war on the middle class.  And why save when banks offer close to zero percent because of the Federal Reserve cartel?

$10 billion a month freed up from not paying mortgages.  No wonder why retail spending has jumped up recently.

http://www.mybudget360.com/

Greece Says We Need Money And We Need It Now Or We’re Going Bankrupt!

Posted By on April 23, 2010

Well, just curious, who would trust these guys……………..The Greek government pushed the button on an emergency financial bailout package Friday, formally acknowledging that it needs loans from its European neighbors and the International Monetary Fund to avoid a humiliating bankruptcy.  The move came after weeks of insistence by Athens that it would not have to resort to such loans, which it characterized as more of an insurance policy to soothe skittish investors.

Moody’s And S&P Influenced By Wall Street For Ratings

Posted By on April 22, 2010

By Jesse Westbrook

April 22 (Bloomberg) — Moody’s Investors Service and Standard & Poor’s were influenced by Wall Street, had insufficient resources and used outdated models to grade mortgage securities that blew up when the U.S. housing market collapsed in 2007, according to Senate investigators.

The Senate Permanent Subcommittee on Investigations concluded after an 18-month probe that the credit-rating firms had conflicts of interest and ignored signs that fraud and lax lending had infected the housing market. The findings may undermine lobbying efforts aimed at defeating legislation that would make it easier for investors to sue the companies.

“Credit-rating agencies allowed Wall Street to impact their analysis, their independence and their reputation for reliability,” Senator Carl Levin, the Michigan Democrat who leads the investigative panel, told reporters in Washington today. “They did it for the big fees that they got.”

E-mails released by the committee show Moody’s and S&P deferring to investment banks that were paying them to assign ratings to securities composed of pooled mortgages.

S&P’s residential mortgage-backed securities group had “become so beholden to their top issuers for revenue they have all developed Stockholm syndrome which they mistakenly tag as customer value creation,” an unidentified S&P employee wrote in an August 2006 e-mail. Stockholm syndrome describes hostages who’ve developed positive feelings for their captors.

More…..http://www.bloomberg.com/apps/news?pid=20601110&sid=a7HeXCIFSsFQ

Dirty Bombs Revisited: Combating The Hype

Posted By on April 22, 2010

April 22, 2010 

By Scott Stewart

As STRATFOR has noted for several years now, media coverage of the threat posed by dirty bombs runs in a perceptible cycle with distinct spikes and lulls. We are currently in one of the periods of heightened awareness and media coverage. A number of factors appear to have sparked the current interest, including the recently concluded Nuclear Security Summit hosted by U.S. President Barack Obama. Other factors include the resurfacing rumors that al Qaeda militant Adnan El Shukrijumah may have returned to the United States and is planning to conduct an attack, as well as recent statements by members of the Obama administration regarding the threat of jihadist militants using weapons of mass destruction (WMD). A recent incident in India in which a number of people were sickened by radioactive metal at a scrap yard in a New Delhi slum also has received a great deal of media coverage.

In spite of the fact that dirty bombs have been discussed widely in the press for many years now — especially since the highly publicized arrest of Jose Padilla in May 2002 — much misinformation and disinformation continues to circulate regarding dirty bombs. The misinformation stems from long-held misconceptions and ignorance, while the disinformation comes from scaremongers hyping the threat for financial or political reasons. Frankly, many people have made a lot of money by promoting fear since 9/11.

Just last week, we read a newspaper article in which a purported expert interviewed by the reporter discussed how a dirty bomb would “immediately cause hundreds or even thousands of deaths.” This is simply not true. A number of radiological accidents have demonstrated that a dirty bomb will not cause this type of death toll. Indeed, the panic generated by a dirty bomb attack could very well result in more immediate deaths than the detonation of the device itself. Unfortunately, media stories hyping the threat of these devices may foster such panic, thus increasing the death toll. To counter this irrational fear, we feel it is time once again to discuss dirty bombs in detail and provide our readers with a realistic assessment of the threat they pose.

Dirty Bombs Defined

A dirty bomb is a type of radiological dispersal device (RDD), and RDDs are, as the name implies, devices that disperse a radiological isotope. Depending on the motives of those planning the attack, an RDD could be a low-key weapon that surreptitiously releases aerosolized radioactive material, dumps out a finely powdered radioactive material or dissolves a radioactive material in water. Such surreptitious dispersal methods would be intended to slowly expose as many people as possible to the radiation and to prolong their exposure. Unless large amounts of a very strong radioactive material are used, however, the effects of such an exposure will be limited. People are commonly exposed to heightened levels of radiation during activities such as air travel and mountain climbing. To cause adverse effects, radiation exposure must occur either in a very high dose over a short period or in smaller doses sustained over a longer period. This is not to say that radiation is not dangerous, but rather the idea that the slightest amount of exposure to radiation causes measurable harm is not accurate.

By its very nature, the RDD is contradictory. Maximizing the harmful effects of radiation involves maximizing the exposure of the victims to the highest possible concentration of a radioisotope. When dispersing the radioisotope, by definition and design the RDD dilutes the concentration of the radiation source, spreading smaller amounts of radiation over a larger area. Additionally, the use of an explosion to disperse the radioisotope alerts the intended victims, who can then evacuate the affected area and be decontaminated. These factors make it very difficult for an attacker to administer a deadly dose of radiation via a dirty bomb.

It is important to note that a dirty bomb is not a nuclear device, and no nuclear reaction occurs. A dirty bomb will not produce an effect like the nuclear devices dropped on Hiroshima or Nagasaki. A dirty bomb is quite simply an RDD that uses explosives as the means to disperse a radioactive isotope, and the only blast effect will be from the explosives used to disperse the radioisotope. In a dirty bomb attack, radioactive material not only is dispersed, but the dispersal is accomplished in an obvious manner, and the explosion immediately alerts the victims and authorities that an attack has taken place. The attackers hope that notice of their attack will cause mass panic — in other words, the RDD is a weapon of fear and terror.

The radioisotopes that can be used to construct an RDD are fairly common. Even those materials considered by many to be the most likely to be used in an RDD, such as cobalt-60 and cesium-137, have legitimate medical, commercial and industrial uses. Organizations such as the International Atomic Energy Agency warn that such radioisotopes are readily available to virtually any country in the world, and they are almost certainly not beyond the reach of even moderately capable non-state actors. Indeed, given the ease of obtaining radiological isotopes and the ease with which a dirty bomb can be constructed, we are surprised that we have not seen one successfully used in a terror attack. We continue to believe that it is only a matter of time before a dirty bomb is effectively employed somewhere. Because of this, let’s examine what effectively employing a dirty bomb means.

Dirty Bomb Effectiveness

Like a nonexplosive RDD, unless a dirty bomb contains a large amount of very strong radioactive material, the effects of the device are not likely to be immediate and dramatic. In fact, the explosive effect of the RDD is likely to kill more people than the device’s radiological effect. This need for a large quantity of a radioisotope not only creates the challenge of obtaining that much radioactive material, it also means that such a device would be large and unwieldy — and therefore difficult to smuggle into a target such as a subway or stadium.

In practical terms, a dirty bomb can produce a wide range of effects depending on the size of the improvised explosive device (IED) and the amount and type of radioactive material involved. (Powdered radioisotopes are easier to disperse than materials in solid form.) Environmental factors such as terrain, weather conditions and population density would also play an important role in determining the effects of such a device.

Significantly, while the radiological effects of a dirty bomb may not be instantly lethal, the radiological impact of an RDD will in all likelihood affect an area larger than the killing radius of the IED itself, and will persist for far longer. The explosion from a conventional IED is over in an instant, but radiation released by a RDD can persist for decades unless the area is decontaminated. While the radiation level may not be strong enough to affect people exposed briefly in the initial explosion, the radiation will persist in the contaminated area, and the cumulative effects of such radiation could prove very hazardous. (Here again, the area contaminated and the ease of decontamination will depend on the type and quantity of the radioactive material used. Materials in a fine powdered form are easier to disperse and harder to clean up than solid blocks of material.) In either case, it will be necessary to evacuate people from the contaminated area, and people will need to stay out of the area until it can be decontaminated, a process that could prove lengthy and expensive.

Therefore, while a dirty bomb is not truly a WMD like a nuclear device, we frequently refer to them as “weapons of mass disruption” or “weapons of mass dislocation” because they may temporarily render contaminated areas uninhabitable. The expense of decontaminating a large, densely populated area, such as a section of London or Washington, is potentially quite high. This cost would also make a dirty bomb a type of economic weapon.

Historical Precedents

The world has not yet witnessed a successful dirty bomb attack by a terrorist or militant group. That does not necessarily mean that militant groups have not been interested in radiological weapons, however. Chechen militants have perhaps been the most active in the realm of radioactive materials. In November 1995, Chechen militants under the command of Shamil Basayev placed a small quantity of cesium-137 in Moscow’s Izmailovsky Park. Rather than disperse the material, however, the Chechens used the material as a psychological weapon by directing a TV news crew to the location and thus creating a media storm and fostering public fear. The material in this incident was thought to have been obtained from a nuclear waste or isotope storage facility in the Chechen capital of Grozny.

In December 1998, the pro-Russian Chechen Security Service announced it had found a dirty bomb consisting of a land mine combined with radioactive materials next to a railway line frequently used to transport Russian troops. It is believed that Chechen militants planted the device. In September 1999, two Chechen militants who attempted to steal highly radioactive materials from a chemical plant in Grozny were incapacitated after carrying the container for only a few minutes each; one reportedly died. This highlights another difficulty with producing a really effective dirty bomb: The strongest radioactive material is dangerous to handle, and even a suicide operative might not be able to move and employ it before being overtaken by its effects.

Still, none of these Chechen incidents really provided a very good example of what a dirty bomb detonation would actually look like. To do this, we need to look at incidents where radiological isotopes were dispersed by accident. In 1987, in Goiania, Brazil, a tiny radiotherapy capsule of cesium chloride salt was accidentally broken open after being salvaged from a radiation therapy machine left at an abandoned health care facility. Over the course of 15 days, the capsule containing the radioisotope was handled by a number of people who were fascinated by the faint blue glow it gave off. Some victims reportedly even smeared the substance on their bodies. The radiation was then dispersed by these people to various parts of the surrounding neighborhood, and some of it was even taken to nearby towns. In all, more than 1,000 people were contaminated during the incident and some 244 were found to have significant radioactive material in or on their bodies. Still, only four people died from the incident, and most of those who died had sustained exposure to the contamination. In addition to the human toll, the cleanup operation in Goiania cost more than $100 million, as many houses had to be razed and substantial quantities of contaminated soil had to be removed from the area.

In a more recent case involving a scrap dealer, this time in a slum outside New Delhi, India, eight people were admitted to the hospital because of radiation exposure after a scrap dealer dismantled an object containing cobalt-60. The material apparently arrived at a scrap shop March 12, and the owner of the shop was admitted to the hospital April 4 suffering from radiation-poisoning symptoms (again another case involving prolonged exposure to a radiation source). The radiation source was found at the scrap yard April 5 and identified as cobalt-60. Indian authorities hauled away eight piles of contaminated scrap. The cleanup operation was easier in the Indian incident, since the radioactive material was in metallic form and found in larger pieces rather than in powdered form seen in the cesium in Goiania. Intriguingly, a nearby scrap shop also was found to be contaminated April 16, but it appears from initial reports that the second site was contaminated by a second radioactive source that contained a weaker form of cobalt-60. Though we are watching for additional details on this case, so far, despite the long-term exposure to a potent radioactive source, no deaths have been reported.

At the other end of the spectrum from the Goiania and New Delhi accidents is the 1986 Chernobyl nuclear disaster in northern Ukraine, when a 1-gigawatt power reactor exploded. It is estimated that more than one hundred times the radiation of the Hiroshima bomb was released during the accident — the equivalent of 50 million to 250 million grams of radium. More than 40 different radioisotopes were released, and there was a measurable rise in cesium-137 levels across the entire European continent. No RDD could ever aspire to anything close to such an effect.

Chernobyl wrought untold suffering, and estimates suggest that it may ultimately contribute to the deaths of 9,000 people. But many of those affected by the radiation are still alive more than 20 years after the accident. While STRATFOR by no means seeks to downplay the tragic human or environmental consequences of this disaster, the incident is instructive when contemplating the potential effects of a dirty bomb attack. In spite of the incredible amounts of radioactive material released at Chernobyl, only 31 people died in the explosion and immediate aftermath. Today, 5.5 million people live in the contaminated zone — many within or near the specified EU dosage limits for people living near operational nuclear power plants.

It is this type of historical example that causes us to be so skeptical regarding claims that a small dirty bomb will cause hundreds or even thousands of deaths. Instead, the most strategic consequences of this sort of destruction are economic. By some estimates, the Chernobyl disaster will ultimately cost well in excess of $100 billion. Again, in our opinion, a dirty bomb should be considered a weapon of disruption — one that will cause economic loss, but would not cause mass casualties or any real mass destruction.

Fighting Panic

Analytically, based upon the ease of manufacture and the historical interest by militants in dirty bombs — which ironically may in part be due to the way the RDD threat has been hyped — it is only a matter of time before militants successfully employ one. Since the contamination created by such a device can be long-lasting, more rational international actors probably would prefer to detonate such a device against a target outside their own country. In other words, they would lean toward attacking a target within the United States or United Kingdom rather than the U.S. or British embassies in their home country.

And since it is not likely to produce mass casualties, a dirty bomb attack would likely be directed against a highly symbolic target — such as one representing the economy or government — and designed to cause the maximum amount of disruption at the target site. Therefore, it is not out of the question to imagine such an attack aimed at a target such as Wall Street or the Pentagon. The device would not destroy these sites, but would limit access to them for as long as it took to decontaminate them.

As noted above, we believe it is possible that the panic caused by a dirty bomb attack could well kill more people than the device itself. People who understand the capabilities and limitations of dirty bombs are less likely to panic than those who do not, which is the reason for this analysis. Another important way to help avoid panic is to carefully think about such an incident in advance and to put in place a carefully crafted contingency plan for your family and business. Contingency plans are especially important for those who work in proximity to a potential dirty bomb target. But they are useful in any disaster, whether natural or man-made, and something that should be practiced by all families and businesses. Such knowledge and planning provide people with the ability to conduct an orderly and methodical evacuation of the affected area. This allows them to minimize their exposure to radioactivity while also minimizing their risk of injury or death due to mass hysteria. For while a dirty bomb attack could well be messy and disruptive, it does not have to be deadly.

Reprinting or republication of this report on websites is authorized by prominently displaying the following sentence at the beginning or end of the report, including the hyperlink to STRATFOR:

“This report is republished with permission of STRATFOR

Oh Oh….Wasn’t This Problem Solved? Nope

Posted By on April 21, 2010

Greec Flame Out

www.ingerletter.com

The Future of U.S. Housing……. An In Depth Report From MyBudget360

Posted By on April 21, 2010

The Future of U.S. Housing – Projections of Household Formation, Loan Modification Data, 500,000 Option ARMs Still Active, and a Decade of Stagnation.

Tue, 21 Apr 2010

Take what you knew about projecting housing for the last fifty years and throw it out the window.  The big problem with using models post-World War II is that they base growth on a baby boomer population that was the largest affluent middle class cohort known to the world.  That model is now disappearing.  Some point back to the Great Depression but forget to mention that life expectancies in the first half of the 1900s weren’t that fantastic.  So you had a population that was constantly churning and emptying out homes that many had paid down.  Yet after World War II the Levittown model of housing took hold with suburban life being the driving force of future home building.  When linked up to cheap oil and 30 year fixed mortgages this seemed to be a good balance for entry into the middle class.  Those days are seemingly no longer here.

This isn’t to say that our best days are behind us.  But if you base excellence on massive consumption, you will be hard pressed to adapt in the new world.  For example, today our birth rate is near replacement levels:

One of the biggest pushes to buy a home was based on the “household formation” stages.  But many Americans are now delaying this stage.  Part of it has to do with shifting values but another cause is more practical.  People don’t want to start a family in a horrible economy:

“(WaPo) That same survey found that women with low incomes were particularly likely to report postponing having a child. Nine percent of those earning less than $25,000 annually postponed having a child, while only 2 percent of those earning more than $75,000 did so.

“Certainly younger folks have the ‘luxury’ of delaying their childbearing in an attempt to hold out for better economic conditions, while older people may feel the press of the biological clock prevents too much of a delay,” said Gretchen Livingston, a senior researcher at Pew.”

This is understandable.  But another more hidden reason has to do with the near religious idea that housing is always a great investment.  You have an entirely new generation of Americans who will never believe the hollow mantra that real estate only goes up.  There have even been articles talking about the new American Dream revolving around renting.  Times and motivations change.

Is There Such a Thing as Too Much Homeownership?

We found out that owning a home should be based on economic fundamentals.  For so long have we lived in this Wall Street bubble machine that people have forgotten what sound lending involved.  People fret about “high interest rates” shattering the housing market but back in the early 1980s people were still buying homes with double-digit mortgage rates.  Why?  Because prices still made sense and people came in with a down payment.  Today, we still have a market artificially being pumped up by the Federal Reserve.  Wall Street would like you to believe that things are so complex that only a Ph.D. can understand what is going on and therefore we warrant complex securities.  Nonsense.  We had over 150,000,000 Americans in 1950 and somehow boring banking and lending seemed to work.  And we certainly didn’t have a financial crisis like the one we just had that was the worst since the Great Depression.  We reached the apex of homeownership in this bubble and are quickly reversing course:

Source:  The Urban Land Institute

69 percent was the absolute upper-bound range.  And keep in mind what it took to get there.  This involved using every toxic mortgage product imaginable and actually creating rampant accepted fraud where people didn’t even verify incomes.  In fact, we had a period where you could structure a housing deal where you received money (i.e., cash back deals, 125% LTV products).  Wall Street knew this was the case and fueled the fire over and over so they could structure deals to keep the casino card game going.  Why?  Every person that wanted a home with good credit and income had one.  The next group was basically anyone that wanted a home irrespective of income and credit.  The birth of subprime, Alt-A, and other junk.  And these toxic products still linger on bank balance sheets even while they announce record profits:

Source:  OCC/OTS

Just look at the amount of active loans.  Nearly 20 percent of active loans fall in the Alt-A and subprime category.  The “other” category also has questionable loans.  So total that up and you have roughly 10 million active mortgages that fall in this risky category.  We have yet to work through this.  Banks keep announcing solid profits and putting on a smile for the public but behind closed doors they are keeping their money tight and are churning profits internally for their corporatocracy.  The last thing they are doing is placing a bet on the American people even though they have taken $13 trillion in bailouts and handouts.

For all the hype regarding loan modifications most are failing only after a few months:

After 9 months nearly half of modified loans re-default.  And this is what you would expect when 17 percent of the population is underemployed.  How are they going to pay their mortgage?  The problem of course stems from the inability to pay at nearly any cost.  That is why we have lost over 1 million households since the recession started.  People are moving in with friends, families, and consolidating households.  This too is another reason why new home formation will be lagging in the next few years.

All you need to do is look at those who have their ear to the ground, home builders:

That minor bump is merely the reflective reaction of cheap money trying to do something.  Yet you can see for yourself above that homebuilders are not optimistic about building to meet new demand.  And why should they?  A large part of the current sales are occurring with existing home sale inventory.  We have plenty of that to last us for years.

The massive concentration of all this debt is put into the hands of a few big banks:

Source:  SIGTARP

The top six banks in the U.S. control 60 percent of all banking wealth.  This in a market where 8,000 banks exist.  But that number is dwindling but only because those banks that are able to fail are doing so:

And this year is quickly outpacing 2009.  So banks are failing yet the too big to fail are turning giant profits even as we have shown, still have the bulk of toxic loans on their books.  At a certain point this has to break and as we saw with the case against Goldman Sachs, even the mere mention of shedding light on banking balance sheets is enough to cause a market tremble.  Why?  Everyone still understands that toxic debt is still alive and well.

What About Short Sales and Option ARMS?

There is this hype regarding short sales and how they’ll be a big factor in today’s market.  I highly doubt that.  Will we see more?  Of course.  But not enough to shift the dynamic of the housing correction.  All this will do is push more inventory out:

37,000 completed short sales in the last reported quarter.  Measure that with 128,000 actual completed foreclosures.  Foreclosures still dominate the market.  Until that foreclosure number settles down, the housing market will be in a complete state of flux.

The broccoli of the housing dinner plate, option ARMs is still alive and well.  It is still sitting there, waiting to be eaten after the steak is devoured.  Most of the over 536,000 option ARMs are in housing battered states like California and Florida.  Maybe this is why national attention has fallen by the wayside for this topic but these states should care because it is another shoe to drop.  And the data on these loans gets worse and worse:

34 percent of option ARMs are non-performing.  This is astronomical given that most won’t hit their recast periods until 2010 and 2012.  The data gets worse as time goes along.  There is little reason to believe that these will turn out to be good deals.  You’ll notice above how the number has quickly fallen.  Part of this is because of foreclosures but another reason involves banks shifting these loans into “other” categories like interest only loans but that doesn’t make them any better.  It buys more time.

Where Next?

Mortgages rates will rise and this seems to be an obvious reality that few even factor in:

Current rates are absurdly low because of the Federal Reserve monetizing debt.  They recently completed buying up $1.25 trillion in mortgage backed securities.  Why did they have to buy? Because no one else would buy this debt at this artificially low rate.  Even as early as 2000 the 30 year mortgage rate was close to 8.5 percent.  With current rates near 5 percent, people fail to understand how big a move back to 8.5 percent would be (the 40 year historical average is 9 percent).

How big is this difference?  For a $300,000 mortgage it works out like this:

@ 5% PI          =          $1,610

@8.5% PI        =          $2,306 (a 43 percent increase)

With household budgets running tight, this is a massive jump.  Current rates are unsustainable and by definition something that is unsustainable will change.

Next, you have many baby boomers remaining put because they have now had to reevaluate retirement options.  This was thought to be a new boom for vacation resort areas where many new condos went up.  Yet that vision isn’t coming to pass.  Right now, the market seems to be pushing sales by one person losing their home and another one picking that home up for a price that was unthinkable just a few years ago.  Yet all that does is churn current inventory.  No new home building and move up buying is stagnant.

The trend is rather clear.  Housing is in for a long and hard struggle.  Things are being held together with a thin string right now.  With so many balls in the air, it is hard to envision what breaks the current back of the system.  Wall Street hasn’t had any serious reform so there is no reason to believe that things are now somehow better.  In fact, the too big to fail have now gotten even bigger.  They are earning profits from merely stock market voodoo.  The real economy is still languishing and current home data tells us that story in vivid color.

For more: http://www.mybudget360.com/

Value-Added Tax May Be On The Table

Posted By on April 21, 2010

WASHINGTON – President Barack Obama suggested Wednesday that a new value-added tax on Americans is still on the table, seeming to show more openness to the idea than his aides have expressed in recent days.

Before deciding what revenue options are best for dealing with the deficit and the economy, Obama said in an interview with CNBC, “I want to get a better picture of what our options are.”

After Obama adviser Paul Volcker recently raised the prospect of a value-added tax, or VAT, the Senate voted 85-13 last week for a nonbinding “sense of the Senate” resolution that calls the such a tax “a massive tax increase that will cripple families on fixed income and only further push back America’s economic recovery.”

http://news.yahoo.com/s/ap/20100421/ap_on_bi_ge/us_obama_tax

From Stratfor……Baghdad Politics and the U.S.-Iranian Balance

Posted By on April 20, 2010

April 20, 2010 

Baghdad Politics and the U.S.-Iranian Balance

By George Friedman

The status of Iraq has always framed the strategic challenge of Iran. Until 2003, regional stability — such as it was — was based on the Iran-Iraq balance of power. The United States invaded Iraq on the assumption that it could quickly defeat and dismantle the Iraqi government and armed forces and replace them with a cohesive and effective pro-American government and armed forces, thereby restoring the balance of power. When that expectation proved faulty, the United States was forced into two missions. The first was stabilizing Iraq. The second was providing the force for countering Iran.

The United States and Iran both wanted to destroy Saddam Hussein’s Baathist regime, and they collaborated to some extent during the invasion. But from there, their goals diverged. The Iranians hoped to establish a Shiite regime in Baghdad that would be under Tehran’s influence. The United States wanted to establish a regime that would block the Iranians.

The U.S. Challenge in Iraq

In retrospect, U.S. strategy in Iraq was incoherent at base. On one hand, the American debaathification program drove the Sunni community into opposition and insurgency. Convinced that they faced catastrophe from the Americans on the one side and the pro-Iranian government forming in Baghdad on the other, the Iraqi Sunni Baathists united in resistance with foreign jihadists. At the same time the Americans were signaling hostility toward the Sunnis, they also moved to prevent the formation of a pro-Iranian government. This created a war between three factions (the Americans, the Shia and the Sunnis) that plunged Iraq into chaos, shattered the balance of power with Iran and made the United States the only counterweight to the Iranians.

All of this turned what was intended to be a short-term operation into an extended war from which the United States could not extract itself. The United States could not leave because it had created a situation in which the Iranian military was the most powerful force in the Persian Gulf region. Absent the United States, the Iranians would dominate Iraq. They would not actually have to invade (Iran’s military has a limited ability to project force far from its borders in any case) to extract massive political and economic concessions from both Iraq and the Arabian Peninsula.

An unchecked Iran, quite apart from its not-yet-extant nuclear capability, represents a profound strategic threat to the balance of power in the Persian Gulf. Assuming the nuclear issue was settled tomorrow either diplomatically or through attacks, the strategic problem would remain unchanged, as the central problem is conventional, not nuclear.

The United States is set to complete the withdrawal of its combat forces from Iraq this summer, leaving behind a residual force of about 50,000 support personnel. This drawdown is according to a plan former U.S. President George W. Bush laid down in 2008, and that U.S. President Barack Obama has sped up only by a few months. Therefore, this is not a political issue but one on which there has been consensus. The reason for the withdrawal is that U.S. forces are needed in Afghanistan. Even more important, the United States has no strategic reserve for its ground forces. It has fought a two-theater, multidivisional war for seven years. The Army is stretched to the limit, and should another crisis develop elsewhere in the world, the United States would lack the land power to respond decisively.

Avoiding this potential situation requires drawing down U.S. forces from Iraq. But simply abandoning the Persian Gulf to Iranian military and political power also represents a dangerous situation for the Americans. Therefore, the United States must balance two unacceptable realities.

The only hope the United States has of attaining this balance would be to achieve some semblance of its expectations of 2003. This would mean creating a cohesive Iraqi government with sufficient military and security capabilities to enforce its will internally and to deter an attack by an Iranian force. At the very least, the Iraqis would have to be able to hold off an Iranian attack long enough to allow the United States to rush forces back into Iraq and to suppress insurgent elements from all Iraqi communities, both Sunni and Shiite. If Iraq could do the former, the Iranians likely would refrain from an attack. Iranian rhetoric may be extreme, but the Iranians are risk-averse in their actions. If Iraq could do the latter, then they eliminate Iran’s preferred mode of operations, which is covert subversion through proxies.

The issue therefore boils down to how the United States answers this question: Can the Iraqis form a coherent government in Baghdad capable of making decisions and a force capable of achieving the goals laid out above? Both the government and the force have to exist; if either one is lacking, the other is meaningless. But alongside this question are others. Does Iraq have any strategic consensus whatsoever? If so, does it parallel American strategic interests? Assuming the Iraqis create a government and build a significant force, will they act as the Americans want them to?

State vs. Faction

The United States is a country that believes in training. It has devoted enormous efforts to building an Iraqi military and police force able to control Iraq. The Americans have tried to imbue Iraq’s security forces with “professionalism,” which in the U.S. context means a force fully capable of carrying out its mission and prepared to do so if its civilian masters issue the orders. As professionals, they are the technicians of warfare and policing.

But perhaps the fundamental question of any military force, one that comes before training, is loyalty. In some militaries, the primary loyalty is to oneself. In such militaries, one joins to make a living, steal what one can and simply survive. In other militaries, the primary loyalty is not to the state, but some faction of the country, be it religious, ethnic or geographical. No one is going to give his life defending a state to which he is indifferent or even hostile, no matter how carefully trained in handling his weapon or how well-lectured he is on the question of professional responsibility. Neither of these conditions allows for a successful military in the end. A man in it for himself is not going to go into harm’s way if he can help it. A man in the military to protect his clan is not going to die to protect those to whom he has no loyalty.

The U.S. Army has trained tens of thousands of Iraqis. And Americans are great trainers. But the problem isn’t training, it is loyalty. Professionalism doesn’t imbue anyone with self-sacrifice to something alien to him.

And this is the challenge the United States faces in the Iraqi government, which like most governments, consists of many factions with diverging interests. In viable states, however, fundamental values shared by the overwhelming majority lie beneath the competing interests, be they a myth of country or of the moral principles of a constitution. It is simply not apparent that Iraqi factions have a core understanding of what Iraq should be, however, nor is it clear whether they owe their primary loyalty to the state or to some faction of Iraq.

Saddam Hussein held the state together by a complex of benefits and terror. He became the center of Iraq, and in a sense became Iraq. Once he was destroyed, Iraq’s factions went to war with each other and with the United States, pursuing goals inimical to a united Iraq. Therefore Iraq’s reconstituted military and security forces, however intermixed or homogenized they may be, still owe their individual loyalties to their factions, which will call on them to serve their people, a subset of Iraq.

The United States plans to withdraw its combat forces by the summer. Leaving aside how well-protected the remaining 50,000 noncombat troops will be, the question persists on who will hold the country together. The Iranians certainly are not eager to see the Iraqi situation resolved in favor of a government that can block Iran’s ambitions. The Iranians have longstanding relations with any number of Iraqi Shiite groups, and even with some Kurdish and Sunni groups. Iran would have every reason to do what it can to destabilize Iraq above and beyond any indigenous destabilization of Iraq in order to help shape a government it can dominate. In our view, Tehran has the tools to do this effectively.

The American leadership is certainly aware of this. It may hope or even believe that a stable Iraqi government will emerge, and it will certainly not say anything publicly that would decrease confidence in the process. But at the same time, the American leadership must privately know that the probability of a cohesive Iraqi government commanding a capable and loyal security force is far from a slam dunk.

In Search of a Plan B

Therefore, logic tells us that the United States must have a Plan B. This could be a plan to halt withdrawals. The problem with that plan is that there is no assurance that in three months or a year the core divisions of Iraq could be solved. The United States could be left without forces for a strategic reserve without any guarantee that time would solve the problem. A strategy of delay calls for some clear idea of what delay would bring.

Or the United States could complete the withdrawal on the assumption that the Iranians would not dare attack Iraq directly while the residual U.S. force remained. The problem with this strategy is that it is built on an assumption. This assumption is not unreasonable, but it is still an assumption, not a certainty. Moreover, Iran could covertly destabilize Iraq, putting U.S. forces without sufficient combat capability in harm’s way from Iranian-supplied forces. Finally, Iran’s major audience consists of the oil powers of the Arabian Peninsula. Tehran wants to show the Gulf Arabs that the United States will withdraw from Iraq regardless of potential consequences to them, reducing their confidence in the United States and forcing them to contemplate an accommodation with Iran.

Halting the withdrawal therefore poses substantial challenges, and completing the withdrawal poses even more. This is particularly the case if the United States completes the withdrawal without reaching some accommodation with Iran. But negotiating with the Iranians from a position of weakness is not an attractive option. The Iranians’ price would be higher than the United States wants to pay. Therefore, the United States would have to make some show of power to the Iranians that will convince the Iranians that they are at risk. Bombing Iran’s nuclear facilities could fit the bill, but it has two drawbacks. First, the attacks might fail. Second, even if they succeeded, they would not have addressed the conventional problem.

Washington’s way forward depends upon what the American government believes the probabilities are at this point for a viable Iraqi government and security force able to suppress insurgencies, including those fomented by Iran. If the Americans believe a viable Iraqi government is a possibility, they should roll the dice and withdraw. But it is not clear from our point of view what Washington is seeing. If it believes the probability is low, the United States not only will have to halt the withdrawal, it will have to reverse it to convince the Iranians that the Americans are hypercommitted to Iraq. This might cause Tehran to recalculate, opening the door for discussion.

It is now April, meaning we are four months from the deadline for the completion of the withdrawal of U.S. combat forces from Iraq. In the balance is not only Iraq, but also the Iranian situation. What happens next all comes down to whether the mass of parties in Baghdad share a common foundation on which to build a nation — and whether the police and military would be loyal enough to this government to die for it. If not, then the entire edifice of U.S. policy in the region — going back to the surge — is not merely at risk, but untenable. If it is untenable, then the United States must craft a new strategy in the region, redefining relationships radically — beginning with Iran.

As with many things in life, it is not a matter of what the United States might want, or what it might think to be fair. Power is like money — you either have it or you don’t. And if you don’t, you can’t afford to indulge your appetites. If things in Baghdad work themselves out, all of this is moot. If things don’t work out, the Obama administration will be forced to make its first truly difficult foreign policy decisions.

Reprinting or republication of this report on websites is authorized by prominently displaying the following sentence at the beginning or end of the report, including the hyperlink to STRATFOR:

“This report is republished with permission of  STRATFOR

Jim Chanos Says Lehman Committed Financial Fraud

Posted By on April 20, 2010

Jim Chanos, hedge fund manager and president of Kynikos Associates, sat down with FOX Business Network’s Charlie Gasparino and Brian Sullivan to talk Lehman Brothers (LEHMQ) investigation, Goldman Sachs (GS) vs SEC, predicting financial scandals and China.

 

Apr 20, 2010 

Courtesy of Fox Business Network

On whether Lehman was a criminal fraud:

“I think it was. I think there were a number of criminal frauds that haven’t been prosecuted. I’m not going to name names, I just think anyone signing the financial statements who were CEOs and CFOs of these firms ought to be hiring criminal attorneys. Anybody who is lying to the public and their shareholders by saying one thing and doing clearly something else is committing fraud.

“We have had kid gloves in this cycle and in this crisis in going after people and I’m still puzzled as to why.

On Goldman Sachs:

“We do business with Goldman and we don’t short anybody we do business with.

On predicting future financial frauds and scandals:

“There is some big picture stuff that worries us. Congress is like the French General staff in the 20th century. What we need to do is look ahead. They are talking about staffing the same people that didn’t see it the last go round. I worry that we are going to get a false sense of confidence on that.

“What keeps me up at night clearly is the state of state and local finances. Municipal and State debt is going to be a big problem going forward. The numbers just don’t work. The demographic bulge is hitting that. You’ve got California, New York New Jersey. It’s going to be a tough issue. The fuse has been lit on the demographic time bombs for state and local governments.

On whether he shorts the United States Treasury Bond:

“Compared to what? That’s the problem. The problem is when you go short a government you have to, in effect, to do it another currency. I wouldn’t want to own thirty or ten year paper for my own account or my retirement account or any accounts I advise.

“Every time we seem to be on the brink of a deflationary event, it’s very clear that the Fed errs on the side of excess money creation.

On the Volcker rule:

“I think it’s going to make it.

On China:

“China is in the midst of a world class property boom. It is leading to the economic growth we are seeing. Almost half of their GDP is coming from that.

http://wallstreetpit.com/23957-jim-chanos-says-lehman-committed-financial-fraud

Stock Market Hustle – Three Ways Wall Street has Created a New American Serfdom And The Overly Expensive Mortgage Deduction

Posted By on April 19, 2010

Posted: Sun, 19 Apr 2010       www.thestatedtruth.com

Last week the S&P 500 almost reached an impressive 80 percent gain from the red abyss seen in March of 2009.  This puts this stock market rally up in the ranks of the strongest and fastest market turnarounds in history.  Yet on Friday news of Goldman Sachs betting on toxic mortgages sold to clients brought the market down as the SEC has finally decided to bring a civil suit forward.  Only took a full 27 months of the obvious.  The case against Goldman Sachs is a good representation of what our stock market has become especially when it comes to financial institutions and their gaming of the system.  Here you have a firm pushing toxic mortgage securities to their own clients yet at the same time, another division of the institutions is betting against the pool of securities because they know that it is junk.  This is the story of the current financial system.  What use is this really providing the market except enriching the most corrupt and elite financial institutions in the world?

It is fitting that on the same week of the 80 percent rally point, we find out that last month the U.S. saw the largest number of foreclosure filings on record.  We also had many states, including the largest with California announcing a new record unemployment rate of 12.6 percent.  Do we need more evidence that the stock market does not reflect the health of Main Street?  And people act shocked.  This is what happens when you inject $13 trillion into the financial sector on the backs of the American public.

Take a look at the power of this stock market rally:

Source:  Chart of the Day

The 1932 stock market rally came after an 89 percent stock market collapse during the bottom of the depression.  The 1942 rally came because Europe was bombed into oblivion during World War II and we were producing war goods like crazy.  Those models don’t seem to apply today.  The NASDAQ collapse is similar to the 1932 chart in that it fell approximately 80 percent from the peak.  Today, the stock market is only off by 24 percent from the massive bubble peak achieved in 2007.  Yet what has changed?  Not much actually in terms of the real economy.  Unemployment is still near the peak.  We have 40,000,000 Americans on food stamps.  Another 15 million are unemployed and another 9 million are working part-time but would like full-time work.  This is not a recovery but a clandestine embezzlement of wealth from the overall public, to a select few that are directly linked to Wall Street.

The above information only adds fuel to why 13 percent of the population thinks the economy is doing well:

Let us examine three ways the rich are enjoying the stock market rally while the overall economy is still mired in the pangs of recession.

Top 1 Percent Control 40 Percent of Financial Wealth

The first obvious reason for why the public is not feeling the enjoyment of the stock market rally is most Americans don’t derive most of their income from stocks:

Source:  William Domhoff

We have been bamboozled into believing that wealth is the person who has the most cars or the biggest homes.  But that is not necessarily true.  Many Americans bought homes that were too big with even bigger mortgages and many have lost those homes.  Many have been deceived that wealth is the person that drives the nicest car even if they live in a tiny 500 square foot apartment to pay that enormous lease.  True wealth is the actual power base of any economy and that comes from savings (i.e., capital stock, bonds, cash, etc).  And financial wealth is the absolute nucleus of power.  In the U.S. the top 1 percent control 42 percent of all financial wealth.  In other words, this 80 percent stock market rally only applies to the absolute tiniest segment of our population.

That is why even after a near 80 percent stock market rally, the vast majority of Americans have no faith in the economy.  Why should they?  Most of those profits were brought by firing workers or squeezing productivity of those currently working while wages remain stagnant.  Yet this is somehow a recovery?  It isn’t and the fact that only 13 percent think things are good is a reflection of this new darker economic reality.

This notion of wealth by getting into debt was followed by many:

So you might say that those that took on too much debt should get their comeuppance.  Many are through foreclosure and bankruptcy.  Yet that top 1 percent isn’t because they have political connections with the corporatocracy and have managed to swindle trillions of dollars from the public to backup their terrible bets.  You pay on both ends.  The top 1 percent gets away on both ends.

The reason this problem keeps on going unresolved is that Americans are sold the notion that you too can be the next Horatio Alger.  Just pull yourself up from your bootstraps.  Good companies strive and bad ones fail is the myth.  Yet we all know that isn’t true.  Most of the banks would be gone today because what they did was in fact financially stupid.  Yet we bailed them out.  It is a hypocritical version of capitalism.  Adam Smith would be turning in his grave if he saw what was going on today.

Housing Tax Breaks Benefit the Wealthy Disproportionately

Many don’t want to say this but we have subsidized housing enough.  Housing is the most heavily subsidized industry in this country:

Source:  CNN Money

We give more tax breaks with interest deductions on mortgage interest than any other item.  Now this sounds good because many people own homes.  Yet people fail to even examine the nuts and bolts of their taxes.  People forget that we have standard deductions and the actual housing deduction does not add much when all things are said and done.   Plus we have hidden costs that don’t show up immediately through higher taxes and horrible bailouts. Most Americans get a tiny benefit because most live with modest mortgages.  Yet the bulk of this benefit once again goes to the wealthiest in this country.  If you are paying $20,000 a month in interest on your mortgage do you think you can write more off than say someone who is writing off $800 a month?  Who do you think wins here?  Do the math.  If you think the rich pay just look at this list released by the California Franchise Tax Board of the 250 folks who have actually not paid their taxes.

Yet this is the way things get done by brainwashing the public with crumbs while the rich corrupt the system with gimmicks that are bankrupting our country.  It is actually irresponsible to continue giving maximum tax breaks while the country is massively in debt.  Why not cap the deduction to the median home price nationwide?  That would be fair.  Or even cap it at $300,000.  Either way, the current structure is merely a way of enriching the top 1 percent by allowing them to write-off giant mortgage interest from their income that many garner from gaming the Wall Street casino.

Going After Food Stamps and Unemployment Insurance

I’ve noticed this absurd trend that started in the last few weeks of going after food stamps and unemployment insurance.  This is blatantly absurd and frankly, a disgrace.  We spent $53 billion last year for food assistance to 40,000,000 American families.  This works out to $1,325 per family for an entire year.  We spent that much in one month with the Federal Reserve propping up the mortgage market.  Unemployment insurance is keeping this recession from becoming the next depression and leading to a full blown revolution.  Yet some people in the media have the gall behind their teleprompter and their comfy corporate media gig to try to eliminate these programs and talk them down.

They argue that food stamps and unemployment insurance keep people unmotivated from looking for work.  Do they even realize that we have 6 people for every 1 job opening out there?  The vast majority of Americans want to work but can’t find any work (i.e., look at Wall Street profits by slashing and burning American jobs).  Yet they talk and talk while their corporate advertisers keep them on the air so they can keep their makeup straight and help them enjoy monthly botox injections.  They really have no idea what is out there in the actual economy or the life that many average Americans are living.

Wall Street has polluted the current economy.  Most Americans don’t buy the propaganda because all they need to do is look at their monthly paycheck.  Or all they need to do is talk with their family and neighbors.  Or all they need to do is look at their own retirement plans.  We better wake up and do it fast because the wealth is being transferred quick and with no mercy.

http://feeds.feedburner.com/mybudget360/QePx

Where Did This Come From…..DRAMATIC COMMERCIAL BANK LENDING SPIKE

Posted By on April 18, 2010

DRAMATIC COMMERCIAL BANK LENDING SPIKE

There appears to be mysteries everywhere we look, just like the days of Enron, the US sub-prime housing bubble and with Greek debt accounting.

 

Below is the just released Federal Reserve report from FRED (Federal Reserve Economic Data) showing the weekly loans and leases of US Commercial Banks. The highlighted spike is $421.8 Billion dollars. It occurred in one week! We need to realize that these are annualized rate  numbers but it still compares in size to a monthly US Treasury Auction for example.

 

Bond 3

 

 The questions no one will answer are:

 

1- Who borrowed this amount of money?

2- What was it used for?

3- What Collateral was used to secure it?

 

http://home.comcast.net/~lcmgroupe/2010/Article-Extend_Pretend-Gaming_the_US_Tax_Payer.htm

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