Weekend Economists: The Day After Tomorrow January 21-23, 2011

[Demeter]

Don't know about you all, but my state of mind is frozen solid. It's cold, it's getting colder, and I'm hoping that we aren't going into a situation like that Dennis Quaid faced in the 2004 blockbuster, which is this weekend's featured film, since nobody came up with something warmer....





Plot

Jack Hall (Dennis Quaid) is a paleoclimatologist who is on an expedition in Antarctica with two colleagues, Frank (Jay O. Sanders) and Jason (Dash Mihok), drilling for ice core samples on the Larsen Ice Shelf for the NOAA when the ice shelf breaks off from the rest of the continent, and Jack almost falls to his death. Jack presents his findings on global warming at a United Nations conference in New Delhi, where diplomats and Vice President of the United States Raymond Becker (Kenneth Welsh) are unconvinced by Jack's theory.

However, Jack's concerns resonate with Professor Terry Rapson (Ian Holm) of the Hedland Climate Research Centre in Scotland. Two buoys in the North Atlantic simultaneously show a massive drop in the ocean temperature, and Rapson concludes that melting of the polar ice has begun disrupting the North Atlantic current. He contacts Jack, whose paleoclimatological weather model holds reconstructional data of the climate change that caused the first Ice Age, to predict what will happen. Jack believed that the events would not happen for a hundred or a thousand years, but he, Frank, Jason, and NASA's meteorologist Janet Tokada (Tamlyn Tomita) build a forecast model with his, Rapson's, and Tokada's data.

Across the world, violent weather causes mass destruction, including a snowstorm greatly impacting New Delhi, a large hailstorm ultimately destroying Tokyo, Japan, and a large outbreak of tornadoes wrecking Los Angeles. President Blake (Perry King), authorizes the FAA to suspend air traffic over the United States due to severe turbulence. At the International Space Station(ISS), three astronauts saw a huge storm system across the northern hemisphere, which has delayed their returning to Earth. The situation worsens when three massive hurricane-like blizzard superstorms begin to form, with their eyes pulling down super-cooled air that causes anything in contact with it to instantly freeze, thus heralding the predicted ice age in seven to ten days.

Meanwhile, Jack's son, Sam, (Jake Gyllenhaal) is in New York City for an academic competition with his friends Brian and Laura (Arjay Smith and Emmy Rossum), where they also befriend a student named J.D. (Austin Nichols). On the flight over, there is severe turbelence, and Sam grabs Laura's hand in fright. During the competition, birds suddenly cover the sky flying southwards. Then the weather becomes massively violent with intense winds and flooding rains. Sam calls his father, making a promise to be on the next train home. Unfortunately, the storm worsens, forcing subways and Grand Central Terminal to close. As the storm worsens in Manhattan, a tidal wave of overwhelming size (reaching up to the neck of the Statue of Liberty) impacts the island, causing major flooding. Sam and his friends seek refuge in the New York Public Library.

While the survivors in the northern United States are forced to stay inside due to the storm, the President orders the evacuation of the southern half of the country. Jack sets off for Manhattan to find his son, accompanied by Frank and Jason. Their truck crashes into a snow-covered tractor-trailer just past Philadelphia, so the group continues on snowshoes. During the journey, Frank falls through the glass roof of a snowbound shopping mall. As Jason and Jack try to pull Frank up, the glass under them continues to crack. Frank sacrifices himself by cutting the rope causing him to fall into the mall. In another incident, Raymond Becker gets word that President Blake's motorcade was caught in the superstorm before he can make it to Mexico causing Raymond to be sworn in as the new President.

In the library, Sam warns everyone to stay indoors, but few listen. The small group that remains burns books to stay alive and breaks the vending machine for food. Laura is afflicted with blood poisoning after she cut her leg on a taxi cab helping some people back when the tsunami hit. So Sam, Brian, and J.D. must search for penicillin in a Russian cargo ship that drifted inland, and are attacked by escaped wolves from the New York Zoo. The eye of the superstorm begins to pass over the city with its −150 °F (−101 °C) temperatures, and the entire New York City skyline begins to freeze. The three return to the library with medicine, food, and supplies, making it to safety.

During the deep freeze, Jack and Jason take shelter in an abandoned Wendy's restaurant, then resume their journey after the storm dissipates, finally arriving in New York City. They find the library buried in snow, but find Sam's group alive and are rescued by Chinook helicopters. President Becker orders search and rescue teams to look for other survivors, having been given hope by the survival of Sam's group as he does his first address to the nation. The movie concludes with the astronauts looking down at Earth from the Space Station, showing most of the northern hemisphere covered in ice, and a major reduction in pollution...

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

I have seen the Apocalypse, and it is COLD!

Warm us all up with some hot spicy economic chili dogs! Just don't barf in the thread.

[Demeter]

1. 3 BANKS DOWN AT 6:30 PM EST

Enterprise Banking Company, McDonough, Georgia, was closed today by the Georgia Department of Banking and Finance, which appointed Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC created the Deposit Insurance National Bank of McDonough (DINB), which will remain open until January 28, 2011, to allow depositors access to their insured deposits and time to open accounts at other insured institutions.

At the time of closing, the receiver immediately transferred to the DINB all insured deposits of Enterprise Banking Company, except for brokered deposits, certificates of deposit (CDs) and individual retirement accounts (IRAs). The receiver also transferred to the DINB all secured deposits of public entities.

The FDIC will mail checks directly to customers with CDs and IRAs. For the brokered deposit customers, the FDIC will pay the brokers directly for the amount of their insured funds. Customers with brokered deposits should contact their brokers directly for information concerning their money.

The main office and all branches of Enterprise Banking Company will re-open on Monday, January 24, 2011, and will provide limited services. The DINB will maintain limited business hours for Enterprise Banking Company. All government direct deposits, including Social Security checks, have been redirected to United Community Bank, Blairsville, Georgia, which will process them at the same time as in the past. Banking activities, such as writing checks, ATM and debit card withdrawals, can continue normally for former customers of Enterprise Banking Company until January 26, 2011. Official checks of Enterprise Banking Company will continue to clear and will be issued to customers who will be closing their accounts.

All insured depositors of Enterprise Banking Company are encouraged to transfer their insured funds to other banks during this transitional period. They may do so by asking their new bank to electronically transfer their deposits from the DINB or by writing checks for the amount in their accounts. For depositors who have not closed or transferred their accounts on or before January 28, 2011, the FDIC will mail checks to the address of record for the amount of the insured funds.

Under the FDI Act, the FDIC may create a deposit insurance national bank to ensure that depositors have continued access to their insured funds where no other bank has agreed to assume the insured deposits. This arrangement allows for uninterrupted direct deposits and automated payments from customers' accounts and allows them time to find another institution with which to do business.

As of September 30, 2010, Enterprise Banking Company had $100.9 million in total assets and $95.5 million in total deposits. At the time of closing, the amount of deposits exceeding the insurance limits was undetermined. Uninsured deposits were not transferred to the DINB. The amount of uninsured deposits will be determined once the FDIC obtains additional information from those customers.

Customers with accounts in excess of $250,000 should contact the FDIC toll-free at 1-800-405-8251 to set up an appointment to discuss their deposits....

The FDIC as receiver will retain all the assets from Enterprise Banking Company for later disposition. Loan customers should continue to make their payments as usual.

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $39.6 million. Enterprise Banking Company is the fourth FDIC-insured institution to fail in the nation this year, and the second in Georgia. The last FDIC-insured institution closed in the state was Oglethorpe Bank, Brunswick, on January 14, 2011.

CommunitySouth Bank and Trust, Easley, South Carolina, was closed today by the South Carolina State Board of Financial Institutions, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with CertusBank, National Association, Easley, South Carolina, a newly-chartered bank subsidiary of Blue Ridge Holdings, Inc., Charlotte, North Carolina, to assume all of the deposits of CommunitySouth Bank and Trust.

The six branches of CommunitySouth Bank and Trust will reopen on Saturday as branches of CertusBank, N.A. Depositors of CommunitySouth Bank and Trust will automatically become depositors of CertusBank, N.A. Deposits will continue to be insured by the FDIC, so there is no need for customers to change their banking relationship in order to retain their deposit insurance coverage up to applicable limits. Customers of CommunitySouth Bank and Trust should continue to use their existing branch until they receive notice from CertusBank, N.A. that it has completed systems changes to allow other CertusBank, N.A. branches to process their accounts as well.

This evening and over the weekend, depositors of CommunitySouth Bank and Trust can access their money by writing checks or using ATM or debit cards. Checks drawn on the bank will continue to be processed. Loan customers should continue to make their payments as usual.

As of September 30, 2010, CommunitySouth Bank and Trust had approximately $440.6 million in total assets and $402.4 million in total deposits. CertusBank, N.A. did not pay the FDIC a premium for the deposits of CommunitySouth Bank and Trust. In addition to assuming all of the deposits of the failed bank, CertusBank, N.A. agreed to purchase essentially all of the assets.

The FDIC and CertusBank, N.A. entered into a loss-share transaction on $211.3 million of CommunitySouth Bank and Trust's assets...The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $46.3 million. Compared to other alternatives, CertusBank, N.A.'s acquisition was the least costly resolution for the FDIC's DIF. CommunitySouth Bank and Trust is the fifth FDIC-insured institution to fail in the nation this year, and the first in South Carolina. The last FDIC-insured institution closed in the state was Williamsburg First National Bank, Kingstree, on July 23, 2010.

The Bank of Asheville, Asheville, North Carolina, was closed today by the North Carolina Office of Commissioner of Banks, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with First Bank, Troy, North Carolina, to assume all of the deposits of The Bank of Asheville.

The five branches of The Bank of Asheville will reopen on Monday as branches of First Bank. Depositors of The Bank of Asheville will automatically become depositors of First Bank. Deposits will continue to be insured by the FDIC, so there is no need for customers to change their banking relationship in order to retain their deposit insurance coverage up to applicable limits. Customers of The Bank of Asheville should continue to use their existing branch until they receive notice from First Bank that it has completed systems changes to allow other First Bank branches to process their accounts as well...

As of September 30, 2010, The Bank of Asheville had approximately $195.1 million in total assets and $188.3 million in total deposits. First Bank did not pay the FDIC a premium for the deposits of The Bank of Asheville. In addition to assuming all of the deposits of the failed bank, First Bank agreed to purchase essentially all of the assets.

The FDIC and First Bank entered into a loss-share transaction on $166.3 million of The Bank of Asheville's assets...The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $56.2 million. Compared to other alternatives, First Bank's acquisition was the least costly resolution for the FDIC's DIF. The Bank of Asheville is the sixth FDIC-insured institution to fail in the nation this year, and the first in North Carolina. The last FDIC-insured institution closed in the state was Cooperative Bank, Wilmington, on June 19, 2009.

[Demeter]

2. So, Two Real Stinkers So Far Tonight

One had to be dissolved, another sanitized in a separate subsidiary. Not what I'd call signs of recovery.

[Demeter]

7. ANOTHER BANK FALLS

United Western Bank, Denver, Colorado, was closed today by the Office of Thrift Supervision, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with First-Citizens Bank & Trust Company, Raleigh, North Carolina, to assume all of the deposits of United Western Bank.

The eight branches of United Western Bank will reopen on Monday as branches of First-Citizens Bank & Trust Company...As of September 30, 2010, United Western Bank had approximately $2.05 billion in total assets and $1.65 billion in total deposits. First-Citizens Bank & Trust Company did not pay the FDIC a premium for the deposits of United Western Bank. In addition to assuming all of the deposits of the failed bank, First-Citizens Bank & Trust Company agreed to purchase essentially all of the assets.

The FDIC and First-Citizens Bank & Trust Company entered into a loss-share transaction on $1.11 billion of United Western Bank's assets...The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $312.8 million. Compared to other alternatives, First-Citizens Bank & Trust Company's acquisition was the least costly resolution for the FDIC's DIF. United Western Bank is the seventh FDIC-insured institution to fail in the nation this year, and the first in Colorado. The last FDIC-insured institution closed in the state was Southern Colorado National Bank, Pueblo, on October 2, 2009.

THEY HAD TO GO TO NORTH CAROLINA TO FOB OFF A COLORADO BANK?

[Demeter]

23. TOTAL LOSS FOR THE WEEKEND: $454.9M

"Happy Days Are Here Again"

[Demeter]

3. General Electric's man in the White House

http://www.salon.com/technology/how_the_world_works/2011/01/21/jeffrey_immelt/index.html

President Obama has chosen GE CEO Jeffrey Immelt to replace Paul Volcker as the head of his Economic Recovery Advisory Board, now reframed as a "Jobs and Competitiveness Council." According to Fox News talking head Noelle Nikpour, the appointment is yet another example of "Chicago-style politics payback." The new position is a reward, so her analysis goes, for NBC's "rooting" for Obama over the last two years...

THING IS, FOX IS PROBABLY RIGHT.

[Demeter]

52. Immelt, GE Capital, and the Financialization of Manufacturing.

http://www.democraticunderground.com/discuss/duboard.php?az=post&forum=103&topic_id=583726&mesg_id=583732

...Before anything else, the idea that we have 15 million unemployed because of our “competitiveness” is just wrong, lacking any real substantial evidence. But the idea that GE can, as Joe Klein puts it, point a way forward from a financialized economy is also wrong. Two points.

1. As Raj Date cleverly put it, to understand the bailouts, you need to understand “the Killer G’s”: Goldman Sachs, GMAC, and GE Capital.

GE Capital, the major subsidiary of GE, is a major shadow bank. It used GE’s high-quality credit rating to become a major player in the capital markets, much in the same way AIG FP used the boring insurance high credit rating. GE Capital was the single largest issuer of commercial paper going into the financial crisis.

GE Capital received major bailouts during the crisis, including having the FDIC guarantee more than $50 billion dollars of unsecured debt that was issued. To put that in perspective, only about $24 billion of GE Capital’s funding comes through deposits, allowing a shadow bank with massive unsecured debt obligations and only a small depository base to be carried through the financial panic...

MORE AT LINK AND GRAPHIC PORN

[Demeter]

53. JESSE'S CAFE: GE's Jeff Immelt To Replace Paul Volcker

http://jessescrossroadscafe.blogspot.com/2011/01/ges-jeff-immelt-to-replace-paul-volcker.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+JessesCafeAmericain+%28Jesse%27s+Caf%C3%A9+Am%C3%A9ricain%29

...It should be noted that GE was the number one corporation in lobbying, spending $40 million on the purchase of political influence last year.

Obama is looking more like Herbert Hoover every day, but without the Great Engineer's accomplishments.

As someone said, it could have been worse, Obama could have chosen Lloyd Blankfein as his advisor. But that would have been a demotion for Lloyd, and a probable lessening of his existing impact on public policy...

"The liberty of a democracy is not safe if the people tolerate the growth of private power to a point where it comes stronger than their democratic state itself. That, in its essence, is fascism - ownership of government by an individual, by a group."

Franklin D. Roosevelt

[Demeter]

54. ...To Run New Jobs-Focused Panel As GE Sends Jobs Overseas, Pays Little In Taxes

Obama Picks Jeffrey Immelt, GE CEO, To Run New Jobs-Focused Panel As GE Sends Jobs Overseas, Pays Little In Taxes

http://www.huffingtonpost.com/2011/01/21/obama-picks-jeffrey-immel-ge-jobs-overseas_n_812502.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+HP%2FBusiness+%28Business+on+The+Huffington+Post%29

...Immelt's firm stands as Exhibit A of a successful and profitable corporate America standing at the forefront of the recovery. It also represents the archetypal company that's hoarding cash, sending jobs overseas, relying on taxpayer bailouts and paying less taxes than envisioned.

The move is the latest salvo in the White House's continued aggressive and very public outreach to corporate America. Earlier this month, Obama appointed a top executive at JPMorgan Chase as his chief of staff, and this week he granted a longtime wish of business interests by promising to review federal regulations perceived as onerous.

Immelt's appointment raises fresh questions about Obama's courtship and future policy proposals. Firms like GE say good jobs will come from lower taxes and less regulation. Immelt told analysts Friday that he'll focus on tax policy and regulation, among other topics.

"A clear problem in the recovery is that it's been a much stronger recovery for business in terms of their profit and earnings than for those folks who work and earn a living in the U.S.," said Gary Burtless, a former Labor Department economist and now a fellow at the Brookings Institution, a research and policy organization in Washington...

[Demeter]

4. And for a Theme Song:

http://www.youtube.com/watch?v=bcLazPauA1c

[Tansy_Gold]

5. I knew that one without even clicking.

And first rec!!!

[Demeter]

6. Thanks Ben…You Have Destroyed the Social Fabric of the World

http://www.zerohedge.com/article/mike-krieger-deconstructs-commodity-inflation-you-aint-seen-nothing-yet?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+zerohedge%2Ffeed+%28zero+hedge+-+on+a+long+enough+timeline%2C+the+survival+rate+for+everyon

History is littered with the carcasses of men that in their exaggerated hubris attempted to stop the forces of nature and the markets only to fall flat on their faces. We tell the stories of these men in history books and myths from prehistory, but it never stops men of successive generations from trying it all over again. What the current political class the world over (at the behest of Wall Street financial terrorists and other big corporate interests) are doing falls into the same exact formula of prior historical failures. Some of the historical figures that attempted to beat back nature were great warriors or kings that just reached too far. Some of them were evil megalomaniacs whose desire was nothing short of absolute power in their hands over any of the unfortunate human beings that happened to be in the way. Ben Bernanke is neither of these. He is a just a little dweeb with an electronic printing press. Tragically, because of modern technology and the way the monetary system works today he has the ability to cause more damage than any other one person in the history of mankind and he is doing it. I shudder to contemplate the ultimate effects of the inflationary holocaust he has unleashed on the six billion mesmerized and helpless souls present on earth at this time. The signs are starting to show up again just like in early 2008. Food is becoming scare at a “reasonable” price in many parts of the globe and the symptoms of this are starting to bubble up to the surface. For example in recent days we have witnessed food riots in Algeria and Tunisia where at least 14 people are reported to have died in each country.

These types of events were easily predictable and have been predicted by people like me and many other whose views will never be seen in the mainstream media. Fortunately, the alternative media is taking over (which is why the Obama administration is certain to increase its crackdown on the internet) and people are becoming very informed and linked all over the world. The divide and conquer strategy that has worked so well for millennia will be much harder to pull off this time around.

[bread_and_roses]

29. This paragraph....

...

The consensus view of the market remains that if inflation gets truly out of control, the Fed will raise rates and then treasuries will get bid as everything else craters. I completely disagree. Ben Bernanke is no Paul Volcker, and I doubt even Paul Volcker would have the nerve to raise rates like he did with the U.S. government just having levered its balance sheet so extraordinarily. Thus, counter intuitively what do I think Banana Ben will do when prices start soaring? He will print more money. He will justify this by saying we need to get more “money in the hands of the people” so they can buy food and energy. Barrack "I am incapable of telling the truth about anything” Obama will also lead the propaganda charge on this front. They will demonize speculators. They will take no blame. They will be in a corner. They just saved the richest 0.1% of America from taking any losses on their investments and ensuring that Wall Street firms that are nothing but wards of the fascist state can make record payouts. They will have to print to “help the people” who’s future they just completely decimated. Let’s never forget who did this…

("b" added - ain't that the truth)

You know, I don't really understand any of this in terms of "the market" - nor do I care to - there are sources I trust to explain what it all means in "the big picture." But I sure do understand that when people can't buy food they get angry, they riot ... it's already happening. How far away is it here? I really wonder. I can afford food, but I am still feeling "sticker shock" these days at the grocery. And I have a family member who is genuinely poor, who has a child, both have weight problem and simply can't afford to eat healthy and often would not eat at all if I were not there to help....

With cost of gas predicted to go to near $4 in spring, with energy costs this winter, with no jobs on the horizon ... what the hell is going to happen?

Meanwhile, reading the "can't tell the truth about anything" line I was reminded of how crazed I have been lately by the current mantra repeated endlessly that Barrack has reformed his formerly "anti-business" ways :rofl: and is now going to make nice with our wonderful "private enterprise system" (like he's ever done anything else?) - I am speechless.

10th Rec

[mbperrin]

45. Two years ago, we got worried about food and availability.

For one thing, corn is nearly the only food in this country.

Cattle eat corn. Meat and milk from cows. Pigs eat corn. Meat from pigs. Chickens eat corn. Meat and eggs from chicken. Farm fish eat corn. Meat and oils from fish. Even vegetables, sauces, pastries, just about anything at all is made with High Fructose Corn Syrup. So corn is the ubiquitous ingredient and basis for the American diet. We truly are corn-fed. This creates tremendous demand for corn.

Then we started burning corn as ethanol in cars. This jumps demand even more. In addition, some farmers are planting less corn and more soybeans, relying on government info that soybean prices are trending up faster than corn. This removes corn from the market, making prices go up faster.

So we had a storage cellar made and stocked 15,000 cans of food there, using guidelines and menu suggestions from the extension service on what will last better than others. I felt exactly like those atomic bomb shelter builders when we did it, but food riots elsewhere have made me feel a little more prepared and a little less like a raving paranoid.

I really do feel food riots in some areas of this country could occur before Christmas this year. I surely hope not.

[DemReadingDU]

8. Keith Olbermann's show is gone

Read more in GD

[Demeter]

9. Those who live on the edge are always ground down

He'll be back, somehow, somewhere.

[Fuddnik]

10. Comcast strikes again.

[DemReadingDU]

12. Welcome to our weekend thread

:hi:


I'm not sure if KO resigned or was forced out or was fired. Guess the truth will surface soon enough. I would like to think he will re-appear on a different network, but I doubt it would be Fox.

[Tansy_Gold]

13. updates & speculations

Anderson cooper will have info

NYT reporting KO prohibited from going to another network.

reports are KO was fired, did not quit.

maddow will be on maher, questions are pouring.

[Fuddnik]

11. Is that a picture of Detroit?

Or NYC the week before last?

[Demeter]

14. No Lady Liberty In Detroit Waters

Just the Ambassador Bridge:



The Ambassador Bridge is a suspension bridge that connects Detroit, Michigan, in the United States, with Windsor, Ontario, in Canada.<1> The bridge is owned by the Detroit International Bridge Co., which is controlled by Grosse Pointe businessman Manuel "Matty" Moroun.<2> The Detroit–Windsor Tunnel also connects the two cities. A 2004 Border Transportation Partnership study showed that 150,000 jobs in the region and US$13 billion in annual production depend on the Windsor–Detroit international border crossing.<3> It is the busiest international border crossing in North America in terms of trade volume: more than 25 percent of all merchandise trade between the United States and Canada crosses the bridge.

The bridge, over the Detroit River, had the longest suspended central span in the world when it was completed in 1929—564 m (1850 feet), a title it would hold until the opening of the George Washington Bridge in 1931. It can be seen from Ford Field and the total bridge length is 2,286 m (7,500 feet). Construction began in 1927 and was completed in 1929. The architect was the McClintic-Marshall Company of Pittsburgh, Pennsylvania.

The bridge is styled in a mixture of Art Deco and Streamline Moderne architectural designs, with some Gothic architecture blended in. It is made primarily out of steel; however, the two main towers on each side of the river are made of a steel-silicon alloy which rise up from concrete piers. The towers rise 118 m (386 feet) above the river, and plunge 35 m (115 feet) below the surface of the Detroit River. The bridge is made up of 19,000 tonnes (21,000 short tons) of steel, and the roadway rises as high as 46 m (152 feet) above the Detroit River. Only the main span over the river is supported by suspension cables; the approaches to the main pillars are held up by steel in a cantilever truss structure.

The only bridge sidewalk on the south side used to allow pedestrians and bicycles, but security concerns after the September 11 attacks had it closed.<4> When the painting is being done on the south side of the bridge span, the sidewalk helps accommodate equipment and decrease the length of the lane that is cordoned off for painting.

The four-lane bridge carries more than 10,000 commercial vehicles on a typical weekday. A major redesign of the U.S. plaza completed in July 2009 provides direct access to Interstate 96 and Interstate 75 on the American side and Highway 3 (and indirectly with Highway 401) on the Canadian side. Currently, traffic coming off the Ambassador Bridge on the Canadian side must travel through heavily populated residential and business areas on Highway 3 before accessing Highway 401. The Ambassador Bridge enhancement project calls for a twin span to be built across the Detroit River.<6>

Granite blocks, originally used on the U.S. side, were given to the Windsor Parks & Recreation Department, and now grace many of the pathways in Windsor parks...Wikipedia

In addition, the State and the Feds and other Powers that be have been trying for decades to get the bridge out of private hands. There is a move afoot to build a second bridge to cut out the first one. There's something about a well-run, privately owned resource that sticks in the craw...

[Demeter]

15. Ambassador Bridge President Jailed January 10, 2011

http://www.joc.com/government-regulation/ambassador-bridge-president-jailed

Contempt citation demands plan to rebuild Gateway Project bridge approaches

Dan Stamper, president of the company that owns the Ambassador Bridge, was jailed Monday on contempt charges by a Wayne County (Detroit) judge.

The court action comes at the end of a year-long legal dispute between the Detroit International Bridge Co. and the Michigan Department of Transportation over contract terms for the Gateway Project, a new approach to the bridge from Interstate 75 in southwestern Detroit.

Circuit Judge Prentis Edwards on Monday cited the company for contempt and levied a $7,500 fine plus court costs. On Feb. 1, 2010, Edwards issued an order that the company rebuild approaches to the bridge, as set out in the terms of its contract with MDOT. DIBC appealed the decision all the way to the state supreme court.

Ambassador Bridge news from JOC:
U.S. Coast Guard Halts Ambassador Bridge Project.

The MDOT contract called for an above street-level approach between I-75 and the bridge. DIBC cited alleged flexibility in the contract that allowed it to divert bridge traffic through a ground-level toll plaza and fuel facility before approaching the bridge.

The toll plaza and fuel pumps were built on land that DIBC had illegally taken from the city of Detroit. There is a separate court order to demolish them.

According to the court order, Stamper will remain at the Wayne County Jail until DIBC pays the fine and drafts a timetable for the demolition of the structures within one year, and reconstruction of the Gateway Project bridge approaches.

DIBC is owned by billionaire Manuel “Matty” Moroun, who also owns CenTra, the parent of several LTL and truckload carriers, plus related logistics firms.

Moroun has been at the center of a battle to build a public bridge across the Detroit River. The Detroit River International Crossing would be two miles downriver from the Ambassador site, where Muroun proposes a privately-owned twin span to the 80-year-old Ambassador Bridge.

DRIC has strong support within the state and Canada, but the project has not been approved by the Republican-controlled state senate. Moroun and his family have allegedly spent millions in campaign contributions to block a vote in the senate.

[Demeter]

16. Ambassador Bridge traffic down for decade

http://detnews.com/article/20110113/METRO/101130373/Ambassador-Bridge-tr

January 13, 2011

...The number of vehicles entering and exiting the United States via the Ambassador Bridge in 2010 rose 12 percent from the previous year, but traffic remained significantly lower than 10 years ago...Bridge officials attribute the increase to economic conditions in the region improving slightly from 2009 — a year in which plant closings and downsizing hit the auto industry and Metro Detroit particularly hard.

Despite the increase, the 2010 numbers are still down 2 percent from those posted in 2008, according to the bridge company. That year, more than 7.3 million cars and trucks used the Ambassador Bridge. The three lowest totals of the decade came in the last three years.(THANK YOU, HOMELAND SECURITY AND BANKSTERS) In 2000, more than 12 million cars and trucks used the bridge. The bridge company says 2010's traffic was down 41 percent from 2000...

The latest numbers are likely to become ammunition for both the Ambassador Bridge Co., owned by Detroit area billionaire Manuel "Matty" Moroun, and the state of Michigan in their separate attempts to build a new span across the Detroit River.

"We're still continuing with our interest in building a replacement span — it's still a high priority for us," said Phil Frame, a company spokesman.

"We still plan to do it. But it's not because we feel we need more lanes to accommodate the traffic. It's because we want to have a more modern bridge in place that is less expensive to maintain."

[Demeter]

17. A Billionaire and His Bridge: The Fight Over Detroit's Ambassador Bridge

http://www.dailyfinance.com/story/billionaire-moroun-detroit-ambassador-bridge/19545089/

A little more than 30 years ago, Manuel "Matty" Moroun bought the vast Ambassador Bridge that connects Detroit and Windsor, Ontario. By doing so, Moroun, who is now 83 years old, not only claims the honor of being the only person to privately own a border crossing in the United States but he also enjoys a monopoly over one of the nation's busiest international trade routes. But now, as the Ambassador is starting to show its 81 years, Moroun has found himself in a heated battle with the cities on either end of his bridge, defending his claim to the lucrative trade business that takes place across the Detroit River each year.

While all of the parties agree that the Ambassador, which 9,000 cars a day cross, is past its prime, they are fighting bitterly on how to fix the problem. Two months ago, Canadian officials took matters into their own hands and offered to loan Michigan $550 million to start construction on a new bridge a couple of miles downriver from the Ambassador to be called the Detroit River International Crossing (or DRIC). Such a plan did not sit well with Moroun who argues that a new bridge would unfairly compete with the Ambassador and could potentially burden taxpayers.

Instead, Moroun proposes to put up between $400 million and $500 million to build a new six-lane bridge adjacent to the Ambassador. The old span would run as a back-up if needed, according to CNN Money. However, officials in Michigan and Canada contend that Moroun's plan is not enough and fails to meet security requirements. They argue that the region needs a new bridge -- regardless if Moroun's plan comes to fruition or not.

"One bridge is not enough to handle the truck traffic at the biggest border crossing in North America," says Bill Shreck, a spokesman for the Michigan Department of Transportation, which is bidding to be part of a public-private partnership to help build the DRIC.

A By-the-Numbers Battle

Moroun, a trucking tycoon who is estimated to be worth $1.8 billion by Forbes, is lobbying the Michigan legislature to stop a bill to approve the DRIC, which is expected to be voted on this summer. He argues that the state has inflated the traffic needs in the area in order to push its plan through and that taxpayers will inevitably end up footing the bill for the DRIC should tolls not meet these optimistic projections.

The Michigan Department of Transportation says that the DRIC could generate $70.4 million in tolls in its first year -- a revenue stream that is desperately needed by Detroit's ailing economy -- and could grow to almost $240 million by 2040. It also claims that toll payers, not taxpayers, will be paying for the bridge.

The MDOT has also claimed that both the DRIC and the Ambassador Bridge would make money if the new span is built. But Moroun estimates that the state's bridge could take up to 75% of his commercial traffic, the biggest money maker for any bridge. The Ambassador is currently estimated to generate about $60 million a year in toll revenue, according to Crain's Detroit...

[Demeter]

18. Detroit International Bridge Co. spokesman resigns Jan. 21, 2011

http://www.detnews.com/article/20110121/METRO01/101210443/1361/Detroit-International-Bridge-Co.-spokesman-resigns

Phil Frame, spokesman for Ambassador Bridge owner Manuel "Matty" Moroun, has resigned, saying he will devote more time to his own consulting firm...Frame said his leaving had nothing to do Gov. Rick Snyder's endorsement this week of the Detroit River International Crossing, a new span bitterly opposed by the bridge company...

[Demeter]

19. And Like Anything Else, there is a Website for the Bridge

http://www.ambassadorbridge.com/

I've crossed this bridge to Canada a number of times, but now, with the requirement of a passport or a double-the-cost driver's license, I haven't been since 2001...It's like prison, or an amputation, not being able to freely travel to Windsor....

[Fuddnik]

26. I went over to Windsor a couple of times in 2001-2002.

Customs was a big enough pain in the butt. And that was before DHS, TSA, passports, instant background checks, etc.

Maybe I'll start going to Cuba instead. I've heard it's a lot less hassle going through Mexico.

[Demeter]

28. Not to mention, Warmer!

[Po_d Mainiac]

61. There are day trips out of Cancun

As long as you stay less than 24hs...Cuban officials Will Not stamp your passport.

[Demeter]

20. And Historic Film on Youtube!

http://www.youtube.com/watch?v=clcQk76-N2k

http://www.youtube.com/watch?v=TNpt0BUe0Q4&feature=related

http://www.youtube.com/watch?v=S2FGggZ_MYM&feature=related

[Demeter]

21. A Path Is Sought for States to Escape Their Debt Burdens

http://www.nytimes.com/2011/01/21/business/economy/21bankruptcy.html?_r=1&hp

Policymakers are working behind the scenes to come up with a way to let states declare bankruptcy and get out from under crushing debts, including the pensions they have promised to retired public workers.

Unlike cities, the states are barred from seeking protection in federal bankruptcy court. Any effort to change that status would have to clear high constitutional hurdles because the states are considered sovereign.

But proponents say some states are so burdened that the only feasible way out may be bankruptcy, giving Illinois, for example, the opportunity to do what General Motors did with the federal government’s aid.

Beyond their short-term budget gaps, some states have deep structural problems, like insolvent pension funds, that are diverting money from essential public services like education and health care. Some members of Congress fear that it is just a matter of time before a state seeks a bailout, say bankruptcy lawyers who have been consulted by Congressional aides...

[mbperrin]

46. Texas is #50 in state government expenditures per citizen. Yet the

morans who now have a supermajority in the Lege are proposing axing 10,000 state employees, 100,000 education employees, shutting 4 junior colleges and reducing everything else by a quarter to a third.

Real problem of course, is that business pays nearly nothing at all in terms of state taxes, but these pod-legislators seem hell-bent to wreck the state completely.

[Demeter]

22. SEC Adopts Disclosure, Review Rules for Asset-Backed Securities

http://online.wsj.com/article/SB10001424052748704881304576093914001455874.html?mod=dist_smartbrief

The Securities and Exchange Commission adopted a number of disclosure and review requirements for securities issuers Thursday as part of its ongoing work to implement the Dodd-Frank financial law.

The rules are designed to protect investors by giving them more information about asset-backed securities, which have been blamed for playing a role in the 2008 financial crisis.

One rule would require issuers to review or have a third party review the assets underlying each security, checking to ensure the underlying loans match the loans that are being described to investors. The results and conclusions of the review would have to be made public.

The commission voted 3-2 in favor of the rule, with SEC Chairman Mary Schapiro and commissioners Elisse Walter and Luis A. Aguilar supporting and Commissioners Kathleen L. Casey and Troy Paredes opposing...


GUESS WHICH COMMISSIONERS WERE APPOINTED BY W....

ALL EXCEPT MARY SHAPIRO.

[Demeter]

24. EU monetizing debt, too? Euro zone mulls bond buy-backs in crisis

http://www.reuters.com/article/idUSLDE70J1DW20110120

The euro zone is considering allowing the European Financial Stability Facility to buy back the bonds of member states in trouble as part of a broader response to the sovereign debt crisis, a euro zone source said.

The EFSF is a special purpose vehicle that can borrow money against government guarantees and lend it to a euro zone country cut off from market financing, in exchange for a tough programme of fiscal consolidation and structural reform.

The 17 countries that share the euro are in discussions about raising the EFSF's effective lending capacity, from around 250 billion euros closer to its 440 billion euro ceiling, while also broadening how the funds can be used.

The changes are part of a package of new measures that the euro zone is expected to announce by mid-March as it tries to draw a line under the sovereign debt crisis, which has forced Greece and Ireland to seek EU and IMF financial help...

[Demeter]

25. China Bank Moves to Buy U.S. Branches

http://online.wsj.com/article/SB10001424052748704754304576096002767228880.html?mod=WSJ_myyahoo_module

ICBC Signs a Deal for Bank of East Asia's Retail Outlets

China's biggest bank signed an agreement that would make it the first Beijing-controlled financial institution to acquire retail bank branches in the U.S., though regulators could still block the deal.

Under the deal, Industrial & Commercial Bank of China Ltd., by some measures the world's largest bank, agreed to acquire a majority stake in Bank of East Asia Ltd.'s U.S. subsidiary. The price tag was not disclosed but people familiar with the matter said it was about $100 million. Bank of East Asia, which is privately held and based in Hong Kong, has a total of 13 branches in New York and California. ICBC and Bank of East Asia have talked to U.S. regulators about the deal, these people said.

The move represents what could be the start of big expansions by Chinese financial institutions in the U.S.

Inked in Chicago on the last day of Chinese President Hu Jintao's state visit to the U.S., the move, comes as both Beijing and Washington are calling for greater commercial ties between the two countries...


SO, NOW WE KNOW WHAT HU WAS DOING IN CHICAGO--

IS ANYONE ELSE CREEPED OUT BY THE COINCIDENCE THAT ICBC OS JUST BCCI REARRANGED?

[Demeter]

27. THE ULTIMATE SOLUTION FOR FASCISTS

[Demeter]

30. California Declares Fiscal Emergency

http://www.cnbc.com/id/41189521

Jerry Brown, California’s governor, declared a state of fiscal emergency on Thursday for the government of the most populous US state to press lawmakers to tackle its $25.4 billion budget gap. Democrat Brown’s declaration follows a similar one made last month by his predecessor Arnold Schwarzenegger, the former Republican governor.

Democrats who control the legislature declined to act on Schwarzenegger’s declaration, saying they would instead wait to work on budget matters with Brown, who served two terms as California’s governor in the 1970s and 1980s.

Brown was sworn in to his third term early this month and has presented lawmakers with a plan to balance the state’s books with $12.5 billion in spending cuts and revenue from tax extensions that voters must first approve.

Brown has said he wants lawmakers to act on his plan by March...The 72-year-old governor also wants the legislature to back a ballot measure for a special election in June that would ask voters to extend tax increases expiring this year to help fill the state budget’s shortfall.

Brown needs a handful of Republican votes to put the measure to voters.

Republican leaders in the legislature have said they doubt those votes will come...

[Demeter]

31. Home Buyers Are at Risk in Bad-Foreclosure Case at Massachusetts Top Court

http://www.bloomberg.com/news/2011-01-21/faulty-foreclosure-case-in-massachusetts-high-court-may-hurt-home-buyers.html

Massachusetts’ highest court will consider whether a home buyer can rightfully own a property if the bank that sold it to him didn’t have the right to foreclose on the original owner.

The state’s Supreme Judicial Court, which agreed last month to take the appeal, already ruled Jan. 7 that banks can’t foreclose on a house if they don’t own the mortgage. The lower- court decision now under review said the buyer of residential property in Haverhill, Massachusetts, never really owned it because U.S. Bancorp foreclosed before it got the mortgage.

“It appears to be the next step in the conversation,” Paul R. Collier III, who represented the borrower in the earlier case, U.S. Bank v. Ibanez, said in a phone interview...

LOTS OF DETAIL AT LINK

[Demeter]

32. LPS: 6.87 Million Mortgages Delinquent or in Foreclosure

http://www.dsnews.com/articles/lps-687-million-mortgages-delinquent-or-in-foreclosure-2011-01-20


FUNNY--THAT WORKS OUT TO ONE MORTGAGE FOR EVERY TWO UNEMPLOYED AMERICANS...

[Demeter]

33. Bank of America posts $1.2 billion loss for fourth quarter of 2010

http://www.washingtonpost.com/wp-dyn/content/article/2011/01/21/AR2011012102029.html?hpid=moreheadlines

...The bank said it lost $1.2 billion in the fourth quarter of last year, more than six times its loss from the same period in 2009. Perhaps more troubling were the bank's warnings about what might be coming: The company could be forced to pay out as much as $10 billion to resolve some disputes over the toxic mortgages it sold to investors around the globe.

"We would expect resolution of these matters to be a protracted process which could take years to conclude," Chief Financial Officer Charles Noski said in a conference call with analysts and investors.

The company struck a different tone from just two months ago, when chief executive Brian T. Moynihan said the bank was meeting those disputes with "hand-to-hand combat." On Friday, such language was absent. Instead, the bank explained that it was setting far more money aside for the troubles it could be facing ahead.

The bank's earnings included some signs that Bank of America is recovering along with the nation's economy. The soured loans it had issued to businesses and homeowners, for instance, declined by 5 percent from the fall and 9 percent from a year earlier. ...

[Demeter]

34. Obama Asks GE's Immelt to Head Economic Advisory Panel, Replacing Volcker

http://www.bloomberg.com/news/2011-01-21/obama-taps-ge-s-immelt-for-economy-panel-replace-volcker.html

...In announcing Immelt’s appointment to take the helm of the newly renamed President’s Council on Jobs and Competitiveness, Obama said the economy is “in a different place” from where it was during the financial crisis when Volcker was brought on, and new ideas are needed to keep the momentum going.

“The past two years was about moving our economy back from the brink,” Obama said alongside Immelt during an event in Schenectady, New York, home to the birthplace of GE’s energy business. “Our job now is putting our economy into overdrive.”

He said Immelt “understands what it takes for America to compete in the global economy.”


DON'T KNOW ABOUT YOU, BUT I FEEL SICK.

DOES THE FACT THAT GE WAS UNDER "THE TARP" MEAN NOTHING? WHAT POSSIBLE CREDIBLE REASON IS THERE FOR THIS APPOINTMENT?


In Schenectady, Immelt said while more than half of GE’s revenue comes from outside the U.S., he wants to ensure that “this is the most competitive country in the world.”

GE had 304,000 employees at the end of 2009, down from 310,000 at the end of 2001. About 134,000 were based in the U.S....

MORE DETAIL, NONE OF IT INFORMATIVE NOR REASSURING

[Demeter]

35. IMF says interest rate on Irish loan to fall

http://www.reuters.com/article/idUSN2016638620110120

The interest rate that Ireland is paying on its International Monetary Fund loan is set to fall as part of changes being made to member countries' voting shares, the IMF said on Thursday.

IMF spokesman David Hawley told a regular news briefing that Ireland's IMF quota, which determines among other things how much a country contributes and can borrow from the IMF, was set to increase following governance reforms approved in 2008.

"Ireland is one of those countries whose quota stands to increase under this agreement," Hawley said. "As a consequence, the amount of its loan relative to its quota will fall, and that will have a bearing on the interest rate paid on its borrowing from the IMF."

Hawley said the rate currently stands at 3.1 percent.

He said the IMF was in the process of calculating the adjustments for each member country, but could not offer exact figures. The quota changes would probably affect several other borrowers, he said, but could not elaborate.

Interest rates paid on IMF loans are tied to the IMF's Special Drawing Rights, the fund's internal unit of account, and are market determined...

THE PLOT THICKENS--ANYTHING BUT TRANSPARENT

[DemReadingDU]

65. 1/23/11 Ireland Government Crumbles As Green Party Pulls Out Of Ruling Coalition

1/23/11 Ireland Government Crumbles As Green Party Pulls Out Of Ruling Coalition

It has been a while since we had one of those "before Asia opens" kind of Sundays. Today just may be one. BBC has just reported that the Irish Green party has pulled out of the ruling coalition with Fianna Fail which is "expected to bring forward the general election from 11 March." In other words suddenly the entire Irish "rescue", taken for granted for over a month, will have to be reexamined, once the new ruling party, which will certainly be from the current opposition reevaluates the terms. Elections are now expected to come some time in mid-February. Look for peripheral bond spreads to go whooosh tomorrow.

more...
http://www.zerohedge.com/article/ireland-government-crumbles-green-party-pulls-out-ruling-coalition


Looks like there could be some Sunday evening/Monday morning market excitement

[Demeter]

36. Banks must be allowed to fail, says Paul Tucker

http://www.bbc.co.uk/news/business-12214849

Capitalism cannot work unless banks are allowed to go bust, Bank of England deputy governor Paul Tucker has said.

HOW INCREDIBLY---NON-SPIN. OF COURSE, THAT'S IN ENGLAND.

DON'T SEE HOW FAILURE TIES INTO CAPITALISM "WORKING"...

[Demeter]

37. Brazil May Ask WTO About Possible Action on Weak Currencies, Official Says

DOES HE MEAN THE YUAN, THE DOLLAR, OR MAYBE, BOTH?

http://www.bloomberg.com/news/2011-01-18/brazil-may-ask-wto-about-possible-action-on-weak-currencies-official-says.html

Brazil, which saw imports from China surge 61 percent last year, may ask the World Trade Organization to look into what action can be taken against countries that weaken their currencies, a Finance Ministry official said.

Carlos Marcio Cozendey, the ministry’s international affairs secretary, said the government hasn’t decided whether to consult the Geneva-based WTO and that it’s too early to say if global trade rules apply to currency policies. He said he wasn’t referring to any specific country or currency.

“If the currency is out of place or there are factors inadequately influencing the currency, it can work as a kind of subsidy to exports,” Cozendey said in an interview yesterday in Brasilia. “It’s a real problem. It affects trade.”

President Dilma Rousseff’s administration is voicing more concern about the yuan’s peg to the U.S. dollar than her predecessor’s government at the same time policy makers are stepping up measures to curb a 38 percent rally of the real against the dollar since 2008. The gains outpace all 25 emerging market currencies tracked by Bloomberg and compares with a 3.7 percent gain by the yuan in the same period....

[Demeter]

38. U.S. Factories Buck Decline Sector Creating More Jobs Than It's Cutting

http://online.wsj.com/article/SB10001424052748704029704576088412618821224.html?mod=dist_smartbrief

U.S. manufacturing, viewed as a lost cause by many Americans, has begun creating more jobs than it eliminates for the first time in more than a decade.

As the economy recovered and big companies began upgrading old factories or building new ones, the number of manufacturing jobs in the U.S. last year grew 1.2%, or 136,000, the first increase since 1997, government data show. That total will grow again this year, according to economists at IHS Global Insight and Moody's Analytics.

Among others, major auto makers—both domestic and transplants—are hiring. Ford Motor Co. announced last week it planned to add 7,000 workers over the next two years.

The economists' projections for this year—calling for a gain of about 2.5%, or 330,000 manufacturing jobs—won't come close to making up for the nearly six million lost since 1997...

NS,S

[Demeter]

39. What Eileen Rominger's appointment means for fund biz

http://www.investmentnews.com/article/20110119/FREE/110119912

The Securities and Exchange Commission's appointment of Eileen Rominger, an 11-year veteran of Goldman Sachs Asset Management, as its new director of investment management, marks the first time in decades — if ever — that the agency has named an industry executive with no legal background to the position.

And fund executives and observers are optimistic that her appointment could mean that the agency will take into account the practical needs of the industry when enacting reforms, particularly relating to 12(b)-1 and money market funds...

Ms. Rominger's appointment demonstrates that Chairman Mary Schapiro is responding to outside criticism that the agency has been “too insular,” said Barry Barbash, former director of the SEC's Division of Investment Management and now a partner at Willkie Farr & Gallagher LLP.

“Chairman Schapiro was looking for a non-lawyer because she recognized that so many of the rules that need to be done by the division will have significant implications for the industry, and some business expertise will be crucial,” Mr. Barbash said.

THE REST IS RATHER WONKY..

[Demeter]

40. BP: Renewable energy will outpace oil growth in 2030

http://content.usatoday.com/communities/greenhouse/post/2011/01/bprenewable-energy-outpace-oil-2030/1

AND TO THINK, WITHOUT BP AND OTHER MEGA-CONGLOMERATES AND GOOD OLE ST. RONNIE, WE COULD HAVE BEEN THERE 30 YEARS AGO...

Renewable power sources will outpace oil as global energy demand surges nearly 40% in the next 20 years, according to an industry forecast released Wednesday by energy giant BP.

Most of the expected increased in energy demand will come from emerging economies such as China, India, Russia and Brazil, according to "BP Energy Outlook 2030." Such non-OECD countries (Organization of Economic Co-operation and Development), which will account for 93% of the demand growth, will boost their share of demand from just over half currently to two-thirds.

At the same time, energy efficiency and diversification will increase. From 2010 to 2030, the report says, renewable energy sources (solar, wind, geothermal and biofuels) will increase their contribution to energy growth from 5% to 18%. In contrast, coal and oil are likely to lose market share and natural gas is projected to be the fastest growing fossil fuel.

The analysis is the first that BP, criticized for its key role in the massive Gulf of Mexico oil spill last year, has published, although the company says it has produced 60 years of historical data in its own BP Statistical Review of World Energy...

[Demeter]

41. Energy intensity is converging across the world

http://www.economist.com/blogs/dailychart/2011/01/energy_use

THE energy required to produce a unit of GDP is falling in most countries around the world. As countries industrialise, energy-intensive businesses make up a bigger share of the economy. Peaks generally correlate to the high point of heavy industry, before lighter industry and higher value-added businesses (such as services) begin to replace old-fashioned smokestack manufacturers. This often coincides with gains in energy efficiency, too. According to BP’s "Energy Outlook 2030", published on January 19th, globalisation will lead to a similar level of "energy intensity" across the globe by 2030, despite wild divergence in the past, as energy is traded freely and consumption trends and technologies spread.

[Demeter]

42. Banks, tech send Wall Street to worst drop in 2 months WEDNESDAY

http://www.reuters.com/article/idUSTRE70G3AB20110119?feedType=nl&feedName=usdai

The S&P 500 suffered its biggest decline in nearly two months on Wednesday as disappointing results from Goldman Sachs and Wells Fargo put a damper on the rally.

The Nasdaq fell more than 1 percent, its biggest daily percentage loss since November 16, as more disappointment in earnings came from chipmaker Cree Inc (CREE.O). Its stock tumbled 14.5 percent to $53.63.

After the close, F5 Networks Inc (FFIV.O) shares plummeted 20.7 percent to $110.08 after the network equipment maker posted a weaker-than-expected quarterly revenue and forecast second-quarter revenue below Wall Street's estimates. The stock has been one of the big momentum plays during the past year and could serve to extend the sell-off on Thursday.

Financial and technology stocks have been driving the surge that has pushed the benchmark index up nearly 10 percent since the start of December, which some investors believe has stocks primed for a pullback...

[Demeter]

43. For Greece, Buyback of Bonds Is Floated

http://www.nytimes.com/2011/01/20/business/global/20euro.html?_r=1&ref=business

Analysts said on Wednesday that having Greece buy back its own devalued bonds could be an important step toward solving Europe’s sovereign debt crisis.

A German government spokesman denied reports that such a plan was in the works. But if Greece bought back the bonds with help from other euro zone countries, the country would not have to repay the full amount of the debt when the bonds reached maturity.

“It’s the first time we’ve got an indication Europe is starting to think outside of the box,” said Jacques Cailloux, chief European economist at Royal Bank of Scotland. “Ultimately, it’s the return to some kind of stable debt path that will provide the biggest turnaround in confidence,” he said.

Talk of a restructuring has been taboo among European leaders, who fear that a default by a euro country could permanently undermine the credibility of the common currency....

[Demeter]

44. France Seeks More Open Commodity Markets Among G-20

http://www.nytimes.com/2011/01/20/business/global/20commod.html?ref=business

Rising prices for basic commodities could derail the fragile economic recovery by pushing up inflation in developed countries and stoking social tensions in developing ones. But could the recent escalation in energy and food prices actually be a boon to the world economy by leading to greater security of supply, better regulation and more transparent pricing?


WHAT DO YOU THINK? READ THE LINK AND REPLY

[bread_and_roses]

47. Socialism for Wall Street

http://www.commondreams.org/view/2011/01/21-11

Financial Socialism by and for Wall Street Elites?

by Les Leopold

As bonus season arrives, the gap between the American people and Wall Street couldn't be wider. And where is Washington in this great divide? Don't ask.

At a moment when Americans desperately want jobs on Main Street and expect Wall Street to pay its fair share, Washington officials are hard at work -- seeking jobs for themselves on Wall Street. (Congratulations, Peter Orszag, on parlaying your position as Obama's OMB director into a top job at CitiGroup, the bank that received hundreds of billions in taxpayer bailouts and guarantees on your watch!)

Most Americans rightly sense that our mixed free-enterprise economy, which once built a broad middle class, has devolved into a system of financial socialism by and for elites. The public wants and deserves answers to these basic questions ...

Nothing new here to the WE crew ... also, I don't believe that Wall Street has "paid back" anything like the real cost of the bail-out? However, posting because the writer does at least raise the "where does all their "wealth/profit" come from question.

[Demeter]

48. Further Venezuela Currency Devaluation Seen Soon

http://laht.com/article.asp?ArticleId=384266&CategoryId=10717

The January 1 devaluation was the second in 12 months and eliminated the strongest exchange rate at 2.6 bolivars per dollar of a complex, multitiered foreign exchange system. That left two official rates: 4.3 and the central bank's SITME rate of around 5.3. The most likely option is for the government to weaken the SITME rate in what some economists are saying would be a "stealth devaluation" -- as the rate has never been officially declared.

Venezuela is likely to devalue its currency again soon after President Hugo Chavez scrapped a plan to increase the country's sales tax as analysts said the impact of a New Year devaluation had been limited.

Wall Street experts had welcomed the socialist president's plan to hike the recession-hit economy's sales tax and maybe put in place a new bank tax and other moves to generate income.

Then last week, Chavez said none of that would happen because high oil prices meant the OPEC member had enough funds to cover its needs, including post-flood reconstruction costs that he estimated at $10 billion (6 billion pounds).

The tax U-turn -- made with an eye on the next presidential election in December 2012 -- means the currency remains overvalued and the South American nation will have to take further steps to improve its balance sheet, experts say.

MORE AT LINK---IT'S HARD TO SORT TRUTH FROM PROPAGANDA, WHEN IT COMES TO VENEZUELA. THE CORPORATIONS REALLY HATE CHAVEZ.

[Demeter]

49. HOT: Fed Hides Major Accounting Change

http://www.economicpolicyjournal.com/2011/01/hot-fed-hides-major-accounting-change.html

Reuters has a very hot story out tonight on an accounting change the Fed snuck into a regular weekly report. It will move off its balance sheet any bad debt the Fed may have purchased from Goldman Sachs, or anybody else for that matter. Here's Reuters via CNBC (My emphasis):

Concerns that the Federal Reserve could suffer losses on its massive bond holdings may have driven the central bank to adopt a little-noticed accounting change with huge implications: it makes insolvency much less likely.

The significant shift was tucked quietly into the Fed's weekly report on its balance sheet and phrased in such technical terms that it was not even reported by financial media when originally announced on Jan. 6.

But the new rules have slowly begun to catch the attention of market analysts. Many are at once surprised that the Fed can set its own guidelines, and also relieved that the remote but dangerous possibility that the world's most powerful central bank might need to ask the U.S. Treasury or its member banks for money is now more likely to be averted.

But they are averting asking the Treasury for money in the future by an accounting gimmick that will simply dump the debt off its own balance sheet and onto that of the Treasury. More from Reuters:

(According to) Raymond Stone, managing director at Stone & McCarthy in Princeton, New Jersey, "An accounting methodology change at the central bank will allow the Fed to incur losses, even substantial losses, without eroding its capital."

The change essentially allows the Fed to denote losses by the various regional reserve banks that make up the Fed system as a liability to the Treasury rather than a hit to its capital. It would then simply direct future profits from Fed operations toward that liability...

"Any future losses the Fed may incur will now show up as a negative liability as opposed to a reduction in Fed capital, thereby making a negative capital situation technically impossible," said Brian Smedley, a rates strategist at Bank of America-Merrill Lynch and a former New York Fed staffer.


"The timing of the change is not coincidental, as politicians and market participants alike have expressed concerns since the announcement (of a second round of asset buys) about the possibility of Fed 'insolvency' in a scenario where interest rates rise significantly," Smedley and his colleague Priya Misra wrote in a research note.

Bottom line: We all knew the Fed was going to have to do some kind of monkey business to deal with all the junk securities it purchased, here it is: Negative liabilities. Yes, only at your local Fed.
Note: I hasten to add this does not appear to resolve the problem of the Fed going cash flow negative as a result of having to raise interest rates on excess reserve to a point where they are higher than most of the income earning debt they hold. Expect future monkey business on this front.


SUPPORTING LINK:http://www.cnbc.com/id/41198789

Accounting Tweak Could Save Fed From Losses

[Demeter]

50. A “Secret Weapon” To Stop Second Mortgage And Credit Card Collections In Their Tracks

http://mattweidnerlaw.com/blog/2011/01/a-secret-weapon-to-stop-second-mortgage-and-credit-card-collections-in-their-tracks/?utm_source=rss&utm_medium=rss&utm_campaign=a-secret-weapon-to-stop-second-mortgage-and-credit-card-collections-in-their-tracks

Increasingly, the banks and mortgage companies, particularly on second mortgages, are not filing foreclosures but are instead just filing breach of contract claims in courts across the country to collect those debts. They don’t want the property back, but they will file suit to get a judgment against you.

Problem is the banks have written a major problem into many of their own contracts that causes them MAJOR problems. If you read these contracts carefully, you will note they have a forum selection clause that mandates all disputes will be resolved through the American Arbitration Association. Problem for our bankster friends is the AAA no longer has this program running anymore, thus the banksters and the credit card companies cannot fulfill the terms of the contract they wrote.

Knowing how to use this to your advantage in any credit card or debt collection case is a great way to stop them dead in their tracks!

[Demeter]

51. MERS CEO to Leave Company

http://online.wsj.com/article/SB10001424052748704115404576096462866136394.html?mod=googlenews_wsj

The chief executive of the privately-held Mortgage Electronic Registration Systems, or MERS, is planning to leave the company and an announcement of his departure could come within days, according to people familiar with the matter.

The company has been under fire by Congress and state officials for its role in the mortgage-document crisis. The firm's board has met in recent days to address the fate of the company and its chief executive, R.K. Arnold, people said...Mr. Arnold, a former U.S. Army Ranger, has served as the CEO and president of Merscorp Inc., the parent company of MERS, since 1998 and has been with the company since its inception 15 years ago, according to a corporate biography.

MERS was built by Fannie Mae, Freddie Mac, and several large U.S. banks in 1996 as an electronic registry of land records. That created a parallel database to facilitate the packaging of loans into securities that could be sold and re-sold without being recorded in local county courthouses, reducing costs for banks. The company's name is listed as the agent for mortgage lenders on more than 65 million home loans.

But the company's practices have begun to receive heavy scrutiny from state prosecutors and federal regulators, particularly in light of foreclosure-document problems that surfaced last fall. State and federal lawmakers have begun to consider bills that would make it harder for banks to use or foreclose on properties through MERS.

MERS's legal standing also has been challenged by legal experts because it doesn't own the underlying debt. Previously, the mortgage and the promissory note weren't split between different parties....

[Demeter]

55. Surprise: Banks Ease Card Fees

http://online.wsj.com/article/SB10001424052748703951704576092342255305526.html?mod=WSJ_hp_LEFTWhatsNewsCollection

Lenders are betting that bad publicity from imposing fees could hurt more than higher fees help...Some prominent credit-card issuers, eager to keep customers happy, are beginning to pull back on fees.

Over the past year, giants Bank of America Corp. and Wells Fargo & Co., along with smaller lenders such as Huntington Bank, have stopped levying "penalty-interest rates" on borrowers who are late with their credit-card payments. For card customers with balances of $100 or less, BofA has entirely eliminated the fees. And in the past two months American Express Co. and Citigroup Inc.'s Citibank unit announced that they are killing foreign-transaction fees on some of their cards. American Express plans to launch its cards by March.

After the passage of the Credit Card Responsibility and Disclosure Act of 2009, which placed tough new restrictions on some of the fees that card companies can charge customers, consumer advocates complained that some issuers were circumventing or ignoring key strictures of the law to make up for lost fee income...According to R.K. Hammer Investment Bankers, an adviser to card issuers, the Card Act alone is expected to reduce banks' fee income by $11 billion this year. On top of that, the Senate late last year authorized the Federal Reserve to limit lucrative "swipe fees" on debit cards, costing banks an additional $13 billion a year in revenue, according to CardHub.com, a consumer-information website...Now, while banks are charging higher interest rates overall—an average 14.71% this month, down from 11.82% at the start of 2008, according to consumer-information site Creditcards.com—some lenders are stepping back from steep fees and penalty rates.

"We are seeing a move toward eliminating certain fees across cards," says Bill Hardekopf, chief executive of LowCards.com, a consumer-information site.

Why the change? Bank of America waived late fees on accounts with balances of $100 or less after it learned that many arose from simple payment oversights, says Chip Rossi, who heads the credit-card products division: "We didn't think it made sense to assess fees in these situations." ...Wells Fargo spokeswoman Lisa Westermann says the bank changed its penalty-pricing practices on certain accounts as part of an effort to "provide credit to as many credit-worthy customers as possible and to help our customers succeed financially." ...American Express says it nixed foreign transaction fees on certain cards to build loyalty among their cardholders, many of whom are frequent business travelers. "We want to offer the best card for the affluent traveler," says Desiree Fish, a company spokeswoman. ...Citi spokesman Sean Kevelighan says: "Waiving foreign currency fees was particularly meaningful to a select group of existing and prospective customers.

[Demeter]

56. Low Interest Rates and Optimism About the Economy Did Not Lure Homebuyers in December

http://www.cepr.net/index.php/blogs/beat-the-press/low-interest-rates-and-optimism-about-the-economy-did-not-lure-homebuyers-in-december?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+beat_the_press+%28Beat+the+Press%29

The Post reported on the better than expected numbers on existing home sales reported for December. It told readers that:

"Low interest rates, relatively affordable prices and tentative optimism about the economy helped lure buyers in December."

Actually, the data on existing home sales reports on closed sales in December. It generally takes 6-8 weeks between when a house contract is signed and when the sales are closed. This means that the December data reflect attitudes in October and early November, not December.

[Demeter]

57. BofA Says $10 Billion Is Top of Forecast for More Mortgage-Buyback Costs

http://www.bloomberg.com/news/2011-01-21/bofa-mortgage-buyback-provision-surges-as-bond-insurers-press-for-refunds.html

Bank of America Corp., which set aside $4.1 billion in the fourth quarter to resolve disputes over faulty mortgages, said it could cost as much as $7 billion to $10 billion more to resolve outstanding claims.

The forecast represents the “upper range” of future losses tied to bond insurers and private investors, the Charlotte, North Carolina-based bank said today in a slide presentation. The actual cost may depend on “legal and procedural hurdles” facing firms who want the bank to repurchase home loans it originated, Chief Financial Officer Charles Noski told analysts in a conference call.

Bank of America, the biggest U.S. bank by assets, has been battling accusations that mortgage investors were duped into buying loans issued with overstated property values and inflated borrowers’ incomes. Noski said the size of the provision was appropriate after Betsy Graseck, an analyst at Morgan Stanley, asked why the company didn’t set aside more for reserves, given the forecast range.

“This is a possible range, not a probable range,” Noski said. The future loss “could be as low as zero, theoretically, up to a high end of the range that we think could be $7 billion to $10 billion, based upon an array of different assumptions.”

The $4.1 billion provision drove a fourth-quarter loss and exceeded the $3 billion that the lender said on Jan. 3 would be needed for the period to settle disputes with U.S.-owned mortgage finance companies Fannie Mae and Freddie Mac. Resolving private-market demands, which include claims from mortgage investors and from bond insurers that issued coverage tied to the bank’s loans, will probably be “a protracted process which could take years to conclude,” Noski said.

[Demeter]

58. Connecting the Dots Between China’s Falling Consumption Level and Its Banking Crisis

http://www.nakedcapitalism.com/2011/01/connecting-the-dots-between-chinas-falling-consumption-level-and-its-banking-crisis.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+NakedCapitalism+%28naked+capitalism%29

One of the striking features of China’s continuing growth as an economic power is its extreme (as in unprecedented in the modern era) dependence on exports and investments as drivers of growth. Even more troubling is that as expansion continues, consumption keeps falling as a percentage of GDP.

As countries become more affluent, consumption tends to rise in relationship to GDP. And the ample evidence of colossally unproductive infrastructure projects in China (grossly underoccupied malls, office and residential buildings, even cities) raises further doubts about the sustainability of the Chinese economic model.

The post crisis loan growth in China, in tandem with visible signs that a meaningful proportion of it has little future economic value, has stoked worries that Chinese banks will soon be struggling with non-performing loans. China bulls scoff at this view, contending that China’s 2002-2004 episode of non-performing loans was cleaned up with little fuss (I never bought that story and recall how Ernst and Young was basically bullied by the Chinese government into withdrawing a 2006 report that NPLs at Chinese banks were a stunning 46% of total assets of its four largest banks. Note estimates of the NPLs as a percent of total loans from that crisis vary widely, even excluding Ernst, from 20% to 40%)...

MUCH MORE AT LINK--MUST READ!

[Demeter]

59. Matt Stoller: The Real China Problem Runs Through JPM and Goldman

http://www.nakedcapitalism.com/2011/01/matt-stoller-the-real-china-problem-runs-through-jpm-and-goldman.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+NakedCapitalism+%28naked+capitalism%29

The Federal Open Market Committee releases its transcripts on a five year time lag. Last week, we learned what they were saying in 2005. Dylan Ratigan blogged an interesting catch: Dallas Fed President Richard Fisher expressed his frustration about Chinese imports. Not, of course, that there were too many imports, but that our ports weren’t big enough to allow all the outsourcing American CEOs wanted.

Fisher is just the latest Fed official to applaud this trend. Here’s the backstory. In the 1970s, there was a lot of inflation. The oligarchs of the time didn’t like this, because it made their portfolios worth less money. So they decided they would clamp down on inflation by no longer allowing wage increases. To get the goods they needed without a high wage work force, they would ship in everything they needed from East Asia and Mexico. The strategy worked. Inflation collapsed. Wages stopped going up. There were no more strikes. Unemployment jumped.

There were all sorts of excuses for why this was a good idea – we would do the ‘high value add’ work in America, like research and development, while the ‘low quality work’ like manufacturing went abroad. And everyone would benefit – sure you wouldn’t get a raise, but you’d get low prices at Walmart (Walmart shows up all the time in FOMC meeting transcripts). But basically this was a way of ensuring that banks and creditors could make a lot of money that would instead go to workers. It was known as ‘the great moderation’, a term coined by Bernanke, and was considered a great success.

As late as 2005, Richard Fisher was celebrating this trend. In that same meeting where he complained about too few Chinese goods coming into the US, he bragged about the weakness of one of the most significant employers in the United States: “My most delicious irony is the fact that similarly dated Vietnamese debt now trades on a price basis richer, and on a yield basis lower, than that of Ford Motor Company. ”

The Fed’s strategy is not without cost to the elites, and the bill will come due. The problem is that if you want to consume stuff from abroad, someone has to make it. And if it’s not going to be American workers, it’s going to be foreigners. But whoever it is, they wind up taking dollars when they sell it to the US. So pretty soon, these foreigners had a lot of dollars that they got in return for all the crap we were buying at Walmart and our rich were buying to fuel their private jets. For instance, China is believed to hold about 60% of its foreign exchange reserves, or well over a trillion dollars, in US currency (and oil producers have even more). There aren’t very many places you can put a trillion dollars, so rather than keep it in cash, China simply lent that money back to us. And that enormous flow of money recycled back into the US (through the big banks) helped create our massive debt pile-up. This process is known in econo-speak as ‘recycling global trade imbalances.’

As Jane D’Arista and Korkut Erturk, point out in a penetrating analysis of the financial crisis, this had a lot to do with causing financial instability. To fill our Walmarts and private jets with stuff, we had to borrow money from the Chinese and Arabs to buy it from the Chinese and Arabs. As D’Arista and Erturk said, “US households came to absorb an ever larger part of these global surpluses over time and thus became the epicentre of debt build up.“ And household debt, in this case mortgage and credit card debt, is the least productive kind of debt. It’s not as if the US was borrowing to invest in its future; the US was borrowing to create an illusion of prosperity while it was actually hollowing out of its economy...

MORE AT LINK--ANOTHER MUST READ

[Demeter]

60. The Kid Has Cabin Fever

She's tired of watching "Northern Exposure" TV series--wants to go out and experience the real thing...since it's up to all of 14F (and windchill is up to 5F!), I am being dragged from the nice warm screen to face the joys of Burger King, Blockbuster, library, etc....

Thanks AnneD for putting us onto Northern Exposure...

If I make it back, here's only 160 more emails...roughly

[Demeter]

62. State bankruptcy bill imminent, Gingrich says

http://news.yahoo.com/s/nm/us_usa_states_bankruptcy

Legislation that would allow U.S. states to file for bankruptcy will likely be introduced in Congress within the next month, Newt Gingrich, the former speaker of the House of Representatives and a powerful Republican party figure, told Reuters on Friday...Although Gingrich, considered responsible for the "Republican Revolution" of the 1990's, is no longer in office, he has deep ties to Congress and is frequently named as a potential presidential contender in 2012. For months he has championed letting states file for bankruptcy in order to handle their long-term budget problems despite resistance from states and investors in the $2.8 trillion municipal bond market.

"We're faced with the danger that the states are going to try to show up and say to Washington: You have to give us money," Gingrich said. "And I think we have to have an alternative that allows us to say no." FU, GINGRICH!

But the legislation will likely face an uphill battle with Democrats still in control of the Senate and the White House. YEAH, FOR 5 MINUTES, PERHAPS, AND THEN THE SELLOUT WILL BE COMPLETE.

Because states are sovereign, they cannot declare bankruptcy as cities can, and most have provisions in their constitutions that make defaulting on debt next to impossible...

California, the eighth largest economy in the world, would not benefit from the legislation, Treasurer Bill Lockyer said. "States didn't ask for it. We don't want it. We don't need it," Lockyer said. "Bankruptcy would devastate states' ability to recover from the recession and make the infrastructure investments that create good jobs."..."Just the availability of a bankruptcy option and the potential bond default could severely damage state credit ratings and destroy the trust of bondholders," said New York State Comptroller Thomas P. DiNapoli.

Last week, the municipal bond market suffered a sharp sell-off on fears of defaults by cities and other issuers...

But along with the recession states are faced with permanent budget problems, including pension obligations they cannot cover estimated to total at least $700 billion. Filing for bankruptcy would allow them to renege on their pension promises and other obligations to state employees. LEGALIZED THEFT, THE GOP'S ONLY STRATEGY.

MORE FILTH AT LINK

[Demeter]

63. Sugar High or Growth from Sustainable Economic Policy? By Edward Harrison

http://www.nakedcapitalism.com/2011/01/sugar-high-or-growth-from-sustainable-economic-policy.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+NakedCapitalism+%28naked+capitalism%29

What are the unifying themes about the America of Today?

1. The Financial Services sector is too large relative to the size of the economy. This is a de facto admission that the US economy is unbalanced, favouring a financial elite at the expense of the rest of American society.

2. Government is a large part of the problem. In fact, it is the government’s desire to counteract cyclical downturns which not only has allowed debt to accumulate but has also taught industry to insinuate itself into Washington to benefit from these actions. Industries implicated are Big Oil, Big Bank, the military industrial complex, Big Pharma, and the Insurance Lobby.

3. Deregulation as practiced now favours incumbent organizations at the expense of entrants, large companies at the expense of smaller companies and corporations at the expense of individuals.

4. The Federal Reserve is part of the problem or even the main trouble maker through its asymmetric easy money policy geared to goosing aggregate demand after financial bubbles.

5. US Economic policy is short-sighted and has no discernible longer-term objectives that can boost long-term economic growth.

[bread_and_roses]

64. Not just freezing growth - melting it

In light of our frozen theme (btw, we are in deep-freeze mode here in upstate NY as well) I thought this article on "de-growth" relevant. After noting that the earth is on the verge of a catastrophic ecological collapse (my summation, not the words of the article), the author (John Bellamy Foster) goes on to discuss "de-growth."

http://www.monthlyreview.org/110101foster.php

Hence, almost four decades after the Club of Rome raised the issue of “the limits to growth,” the economic growth idol of modern society is once again facing a formidable challenge.3 What is known as “degrowth economics,” associated with the work of Serge Latouche in particular, emerged as a major European intellectual movement in 2008 with the historic conference in Paris on “Economic De-Growth for Ecological Sustainability and Social Equity,” and has since inspired a revival of radical Green thought, as epitomized by the 2010 “Degrowth Declaration” in Barcelona.

It's all interesting, but one sentence in particular struck me:

...John Stuart Mill’s famous discussion of the “stationary state” in his Principles of Political Economy, which argued that if economic expansion was to level off (as the classical economists expected), the economic goal of society could then shift to the qualitative aspects of existence, rather than mere quantitative expansion.

(my emphasis added)

Qualitative. Now there's a word, as applied to our lives - where do we hear it? When do we think about it? What does it mean?

I have long been convinced that all most of us really want is to be part of a community of some sort, to have some sort of worthwhile work but to not be slave-driven and exhausted by it, to have time for relationships, creativity, fun. To raise healthy children, whether our own or our communities. To have good food regularly and the occasional feast-day. To rest when we are tired.

And none of that do we have unless by some combination of skill and luck we've clawed it out for ourselves - and then have to live in guilt, if we are thinking people, at all those who "failed" to get there.

Eh. I ramble on. To no end. But the article is interesting, unless one has some knee-jerk opposition to Socialist thought, which I would not expect of those here, even those who are not socialists.

[Demeter]

66. More Evidence of Undercapitalization/Insolvency of Major Banks

http://www.nakedcapitalism.com/2011/01/more-evidence-of-undercapitalizationinsolvency-of-major-banks.html

Even as we and other commentators have noted the underlying weakness of major bank balance sheets, which have been propped up by asset-price-flattering super low interest rates and regulatory forbearance, we still witness the unseemly spectacle of major banks keen to leverage up again. The current ruse is raising dividends to shareholders, a move the Fed seems likely to approve. Anat Admati reminded us in the Financial Times on Wednesday that we are about to repeat the mistakes of the crisis:

Paying dividends helps banks maintain excessive leverage. A typical bank funds over 95 per cent of its investments with debt and less than 5 per cent with equity. A small drop in asset values can lead to distress and possible insolvency. We have seen that furious “deleveraging” by any highly leveraged and interconnected bank can start a crisis…

The Basel III reforms agreed last year set minimum bank equity between 4.5 per cent and 7 per cent of “risk-weighted assets”, which are significantly smaller than total assets for most banks. Triple A-rated assets require little or no equity capital. The system of risk weights established by Basel II, which distorts banks’ investments towards favourably treated assets, was mostly maintained. Under Basel III, the ratio of equity to total assets can be as low as 3 per cent.

These equity requirements are dangerously low. Significantly increasing banks’ equity funding would provide many benefits to the economy, at little social cost.

Our Richard Smith has provided a series of posts analyzing the many shortcomings of Basel III (see here, here, here and here); below is his drive-by shooting:

Here are my main gripes:

Valuation: the capital ratios mean nothing if the assets are overvalued. Waldman is always going on about this. It ends up as quite a radical critique: capital ratios without valuation reform = cart before horse.

Accounting: there is still no harmonization of accounting practices on all the shadow banking apparatus: for instance, special purpose vehicles, derivative netting and repos. Actually, of course, when you come across things like Repo 105, or BoA’s quarter end balance sheet manipulations, there don’t seem to be any relevant reputable accounting practices at all; even if you think Lehman’s liquidity pool probably is an outlier, some of this stuff really, really needs fixing. And do we think that under Basel III there will be more accounting dodges that will cross the line from ‘asset sweating’ to ‘accounting manipulation’? Not Basel III’s fault, but I rather think we do expect exactly that.

Regulatory risk weightings are still a mess, with the ratings agencies still ensconced as the arbiters of credit quality.

Then of course there is shadow banking, which Basel III largely dances around. One particularly glaring example is the whole custody/client money/asset segregation/rehypothecation/title mess in London. There’s not a peep, burble or whisper here in the UK about the sort of legal reforms (somewhat in the manner of the US’s 1934 Securities Act, perhaps, plus a UK version of SIPC) that would sort this out. Recent Lehman-related rulings on Client Money actually mess the situation up even more. Of course, our obligingly vague 17th century line on “who owns what” works very capital-efficiently for Prime Brokerages. Which is a big part of why Mayfair now houses a $4Trillion shadow banking system. Push from Basel III would have helped get more of a grip.

I have nothing to say about enforcement; it’s been such a long time since I’ve seen any that I’ve forgotten what it is.

London Banker takes an equally dim view (”More on the lunacy of the Basel Accords”), and in particular, scotches the asset risk weightings:

I was looking at the preferred asset classes under the Basel Accords…and realised that every single asset class that is given less than a 100 percent credit risk weighting is now tainted by widespread default, scandals or bailouts.

The credit risk weightings mean that instead of reserving the standard 8 percent of capital in respect of a debt, the bank can cut that by the weighting applied to the asset class. Effectively, the reduction in credit risk weighting operates as a powerful subsidy to the borrowers and equally powerful incentive to over-leveraging the lenders.

But we don’t need to wait for Basel III to come into effect to provide cover for continued bank undercapitialization, which is tantamount to undue risk-taking sure to be eventually eaten by taxpayers. We’ve pointed out that properly valuing second mortgage and commercial real estate exposures would put a serious dent in the reported equity of the four biggest banks. They have additional, yet to be determined liability as servicers and trustees of residential mortgage backed securities. The big European banks went into the crisis with even lower capital levels than their US peers and are widely considered to have done less to rebuild equity. And that is before factoring in their exposures to the evolving sovereign debt crisis.

Gillian Tett of the Financial Times today points to yet another time bomb which combined with the other factors listed above would wipe out the stated capital of major banks:

For one thing, this saga highlights something banks have long preferred to conceal: namely the wider level of under-collateralisation in the OTC derivatives market. Last year, Manmohan Singh, an economist at the International Monetary Fund, calculated, for example, that if market participants posted sufficient collateral to cover all OTC deals properly, they would need an extra $2,000bn (or about $100bn per big dealer). The TABB consultancy has reached similar conclusions*. And while banks dispute this data, these numbers are sobering; particularly since OTC business is now moving on to clearing houses – where collateral will be mandatory.

Those undercollateralized OTC derivatives are certain to consist largely, if not entirely, of credit default swaps, a product we have argued here and in ECONNED serves no legitimate social purpose and needs to be strangled over time (there are reasons that simply banning them and letting existing exposures run off would lead to dislocations). They are certain to continue to be undercapitalized at a clearinghouse, for adequate margining of CDS renders the product uneconomic. Thus moving them over to a clearinghouse is effectively another bailout, shifting risk from banks via creating another TBTF entity.

Einstein once said, “The definition of insanity is doing the same thing over and over again and expecting different results.” But the producers and top brass of the major financial firms found blowing up the global economy to be a hugely profitable exercise. 2009 bonuses were even richer than in 2007, and industry concentration increased, meaning their hold on power is even more secure than before. So for them, this conduct is completely predictable. I find it difficult to believe that regulators do not also see what is really at work, which means that one can only conclude that they are not insane but are either in denial or deeply corrupt.

[Demeter]

68. “Vast Majority Of Contraction Of Credit Availability To US Industry Has Been By Larger Banks"

http://www.nakedcapitalism.com/2011/01/guest-post-%E2%80%9Cthe-vast-majority-of-this-contraction-of-credit-availability-to-american-industry-has-been-by-the-larger-banks%E2%80%9D.html

Dennis Santiago – CEO and Managing Director of Institutional Risk Analytics (Chris Whalen’s company) – notes:

The really shocking numbers are in the unused line of credit commitments of banks to U.S. business. This is the canary number I like to look at because it is a direct expression of banking and finance confidence in Main Street industry. It’s gone from $92 billion in Dec -2007 to just $24 billion as of Sep-2010. More importantly, the vast majority of this contraction of credit availability to American industry has been by the larger banks, C&I LOC from $87B down to $18.8B by the institutions with assets over $10B. Poof!

This once again confirms what I have been saying for years: the giant banks are causing most of the credit contraction...Break up the big banks, so the smaller banks have room to grow and lend more.

[Demeter]

67. I'm Nominating the Kid for "Miss Cabin Fever 2011"

Both yesterday and today she insisted on going out to her favorite haunts...after this morning's ordeal in the 0F dark, even. When she was finally exhausted, I crashed...

There's a chance that it will get up to 20F and stay here, tomorrow, but no signs of hitting the freezing point in the next few days. I'm hoping today was the coldest day of the winter, because this was exactly like that winter I spent" in Finland, and I don't have the wardrobe for that anymore...

One advantage for such punishing weather--people with flu stay home.

Stay warm, stay healthy, have a good week. We'll try it again later. The emails aren't going anywhere.

[Demeter]

69. Bank Board Member Proposes Legislation in Virginia to Change UCC to Help Banks Escape Foreclosure Wo

http://www.nakedcapitalism.com/2011/01/bank-board-member-proposes-legislation-in-virginia-to-change-ucc-to-help-banks-escape-foreclosure-woes.html

Earlier this week, we discussed how several measures proposed in Virginia would have the effect of redressing the power imbalance between banks and borrowers in the foreclosure process. One would give borrowers more time to mount defensed (Virginia has one of the fastest track processes in the US); another would require judicial approval for a foreclosure to become final. But the farthest-reaching proposal would force banks to maintain accurate property records in local government offices, which would end the use of MERS in that state.

Not surprisingly, the industry is not about to let this go down without a fight. Rep. Donald Merricks, who is also a bank board member (apparently of Virginia Bank & Trust) proposed House Bill 1718. It was due to come up for “check vote” today, which is a preliminary tally of support, but it was “pulled” meaning the bill is still pending but the check vote has been deferred.

This is a serious undertaking. The bill proposed to change Virginia’s Uniform Commercial Code, which is a set of provisions not to be tampered with lightly. The irony here is that this is an outcome we have warned about in our earlier discussion of the Statute of Frauds of 1677, that basic practices to prevent abuses in contracts and in courts might be gutted to give the banks a free pass on their mortgage mess.

...I am told that these proposed changes would have the effect of authorizing transfers in blank in Virginia. That in turn would (in theory) allow banks to claim that an blank endorsement by the originator would allow the trust (who is usually the fourth party or later in a chain of transfers) to assert ownership, skipping over the problem that the intermediary transfers appear seldom to have happened. The banks clearly view endorsement in blank plus a claim that the PSA itself effected the transfer to the trust as a “get out of fuckup free” card; the American Securitization Forum has argued that position stridently (we’ve shredded it in numerous posts, see here and here for examples)...SEE LINK FOR SUPPORTING LINKS

Regardless of how the legislative jousting plays out in Virginia, it is clear that the Massachusetts Supreme Judicial Court Ibanez decision has focused the mind of the securitization industry. But it even though it is moving out of the denial stage, its efforts to evade responsibility and gut well settled law to shift liability on to others is deeply troubling.

[Demeter]

70. Fix Foreclosure Fraud With a Borrowers' Bill of Rights

http://www.huffingtonpost.com/rj-eskow/a-borrowers-bill-of-right_b_811414.html

People are debating the need for a "systemic fix"to address the foreclosure crisis. What we really need is a systemic redesign, from the ground up. Fortunately, the design was laid down centuries ago -- by 800 years of law, and by the idea that free people are entitled to limit the unwarranted power of others over their persons and property. These principles are a good foundation for structuring future negotiation, legislation, or regulation...What would those rules of the road, these borrower's rights, look like? Let's throw out a few to get the ball rolling:

2. State and local laws can't be overruled by private enterprise. MERS was created to bypass the law by naming itself as the "owner" of mortgages that it freely admitted it didn't own. It was a dummy corporation, but we were the dummies for letting it happen. MERS permitted banks to foreclose without proper documentation, without holding the deed to the property, and without giving the homeowner his or her day in court.

From the Magna Carta, 1215 C.E.: "No free man shall be seized or imprisoned, or stripped of his rights or possessions, or outlawed or exiled, or deprived of his standing in any other way, nor will we proceed with force against him, or send others to do so, except by the lawful judgment of his equals or by the law of the land."

3. Real-world assets (like homes) can't become digital gambling chips...

6. No more clauses allowing the banks to enter "abandoned" homes...

7. Auditors must be legally liable if they certify sketchy and/or fraudulent bank programs as financially sound...

8. We need ratings agencies that aren't inept, corrupt, compromised, or beholden to the companies they're rating...

9. If we rescue you, we call the shots...

10. Nobody gets rich by f*cking up. If you run your company into the ground, so that it will fail without massive taxpayer help, you're a failure in business. Period. If you pay yourselves massive bonuses after we rescue you, you're rewarding yourselves for being lousy at your jobs...

11. If you're collecting low (or zero) interest money at the Fed's "discount window," you better be lending it. Too many banks are collected those low-interest loans and investing it in non-productive areas, or flat-out speculating with it. Financial reform slowed that down a little, but didn't stop it. Lending is down, for both businesses and homeowners. So why is there such a long line at the discount window?
.....

13. Banks shouldn't make money writing bad deals.Banks make money on bad deals when they own the servicing companies that collect fees and penalties. Even the best underwriting will miss a few risky borrowers. But the book of business at any major bank is saturated with defaulting or struggling homeowners. That means the bank wrote a lot of loans it shouldn't have written. By owning the servicers, banks can make money from their own bad judgment. And it's an egregious conflict of interest.

Banks shouldn't own servicing companies, or profit from their own under-performance in any other way.

14. Underwater homeowners shouldn't be bailing out hugely profitable banks...

15. After you've wrecked everything, don't make me listen to your complaints about regulation...

...These aren't randomly selected ideas. Together they re-establish the rule of law, anchor the lending process back in physical reality, reduce the "moral hazard" that lets bankers avoid the consequences of their actions, and restore balance between banks, government, and their trading partners.

SEE COMPLETE LIST AT LINK


Richard (RJ) Eskow, a consultant and writer (and former insurance/finance executive), is a Senior Fellow with the Campaign for America's Future. This post was produced as part of the Curbing Wall Street project. Richard also blogs at A Night Light.

[Demeter]

71. Windchills from -15 to -25 F Tonight!

Until 11 am Monday!

As Keith Olberman would say above the Arctic Circle:


Hyvää yötä ja onnea!

[DemReadingDU]

72. That's cold!

I just checked weather.com, and we are -7 and feels like -22!

Brrrr, I'm getting under the electric blanket


Thanks for all the weekend articles!

[Demeter]

73. You're Welcome! Good Night, Sleep Tight!