STOCK MARKET WATCH, Wednesday March 24

[ozymandius]

Source: du

STOCK MARKET WATCH, Wednesday March 24, 2010

AT THE CLOSING BELL ON March 23, 2010

Dow... 10,888.83 +102.94 (+0.95%)
Nasdaq... 2,415.24 +19.84 (+0.83%)
S&P 500... 1,174.17 +8.36 (+0.72%)
Gold future... 1,106 +6.30 (+0.57%)
10-Yr Bond... 3.68 +0.03 (+0.77%)
30-Year Bond 4.61 +0.04 (+0.90%)

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Market Conditions During Trading Hours

Euro, Yen, Loonie, Silver and Gold

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Bush Administration Officials Convicted = 2
Names: David Safavian, James Fondren

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

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

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

Read more: du

[ozymandius]

1. Today's Reports

08:30 Durable Orders Feb
Briefing.com -1.0%
Consensus 0.6%
Prior 2.6%

08:30 Durable Orders ex Auto Feb
Briefing.com 0.6%
Consensus 0.6%
Prior -1.0%

10:00 New Home Sales Feb
Briefing.com 300K
Consensus 315K
Prior 309K

10:30 Crude Inventories 03/20
Briefing.com NA
Consensus NA
Prior 1.01M

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

[ozymandius]

2. Oil falls to near $81 on US crude supplies jump

SINGAPORE – Oil prices fell to near $81 a barrel Wednesday in Asia after a report showed a larger-than-expected jump in U.S. crude inventories last week. ...

Oil supplies in the U.S. have risen sharply in recent weeks, belying a slow but steady overall economic recovery and suggesting consumer demand remains weak.

Crude inventories jumped last week by 7.5 million barrels, the American Petroleum Institute said late Tuesday. Analysts had expected an increase of 1.7 million barrels, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.

Inventories of gasoline and distillates fell, the API said.

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

[ozymandius]

3. Fed rate policy to shift amid slow growth: report

SAN FRANCISCO (Reuters) – The Federal Reserve will start moving away from its zero interest rate policy later this year as the U.S. economy improves modestly and job growth resumes, the UCLA Anderson Forecast unit said on Wednesday. ....

As rates rise, employers uncertain about costs that may arise from new policies in Washington, including federal healthcare legislation signed on Tuesday by President Barack Obama, will cautiously rebuild payrolls, keeping unemployment above 9 percent through next year, the unit predicted.

"We forecast that the unemployment rate will be 9.6 percent at the end of 2010, just a tad lower than where it is today and 9.1 percent at the end of 2011," the report said.

Job growth will struggle to stay barely ahead of work force growth. "Furthermore, with the modest employment growth we are forecasting, payroll employment will still be 2 million jobs below its peak in 2007 by the end of 2012," the report said.

http://news.yahoo.com/s/nm/20100324/bs_nm/us_usa_economy_uclaforecast

[ozymandius]

4. Home sales dip, credit-related surge eyed

WASHINGTON (Reuters) – Sales of previously owned homes fell for a third straight month in February and the supply of unsold houses on the market surged, showing the housing market was struggling to find its feet.

Existing home sales dipped 0.6 percent month-over-month to an annual rate of 5.02 million units, the National Association of Realtors said on Tuesday. The drop last month was a touch less than market expectations for a fall to 5.0 million units.

The data showed weakness at a crucial time for the housing market with the Federal Reserve due to wind up its program to buy mortgage-related securities. The program pushed home loan rates to record lows and helped the market slowly recover from a three-year slump.

Analysts were disturbed by the first rise in inventories in seven months and the jump in the months' worth of supply to its highest level since August. .....

U.S. stocks ignored the rise in inventories, surging on relief that the drop in sales was less than forecast. Both the Dow Jones industrial average (.DJI) and the Standard & Poor's 500 Index (.SPX) jumped to 18-month closing highs.

http://news.yahoo.com/s/nm/20100323/bs_nm/us_usa_economy_housing

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U.S. stocks ignored the rise in inventories - Thus further demonstrating the irrationality of markets.

[ozymandius]

5. Stocks point to lower start

NEW YORK (CNNMoney.com) -- U.S. stocks were set for a slightly lower start Wednesday as investors await more information about the housing market. ....

Economy: Due out shortly after the start of trade are February new home sales data from the Census Bureau. Economists surveyed by Briefing.com expect a jump to a 315,000 annualized unit rate from a 305,000 annualized unit rate in January.

Before the market opens, the Commerce Department will report durable goods orders for February. Economists expect a rise of 0.5%, after a 2.6% increase the previous month. Durable goods excluding autos are expected to have risen 0.3% after falling 1% in January.

http://money.cnn.com/2010/03/24/markets/premarkets/

[Festivito]

6. Debt: 03/22/2010 12,663,372,436,835.10 (UP 2,332,709,328.45) (Mon)

(Up a little. Good day all.)

(Debt under Obama seems to jump up big then drop slowly maybe up a little and down a little for days--repeat.)
= Held by the Public + Intragovernmental(FICA)
= 8,175,095,386,996.26 + 4,488,277,049,838.84
UP 662,784,714.13 + UP 1,669,924,614.32

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

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

PERSONALIZED DEBT:
Every 10 seconds we net gain another American, so at the end of the workday of the report, there should be 309,048,798 people in America.
http://www.census.gov/population/www/popclockus.html ON 11/07/2009 08:19 -> 307,879,272
Currently, each of these Americans owe $40,975.32.
A family of three owes $122,925.95. (And that is IN ADDITION to their mortgage.)

ANALYSIS:
There were 21 reports in the last 30 to 28 days.
The average for the last 21 reports is 12,397,393,199.04.
The average for the last 30 days would be 8,678,175,239.33.
The average for the last 28 days would be 9,298,044,899.28.
There were 252 reports in 365 days of FY2007 averaging 1.99B$ per report, 1.37B$/day.
There were 253 reports in 366 days of FY2008 averaging 4.02B$ per report, 2.78B$/day.
There were 75 reports in 112 days of GWB's part of FY2009 averaging 8.03B$ per report, 5.38B$/day.
There were 174 reports in 253 days of Obama's part of FY2009 averaging 7.33B$ per report, 5.07B$/day so far.
There were 249 reports in 365 days of FY2009 averaging 7.57B$ per report, 5.16B$/day.
There were 117 reports in 173 days of FY2010 averaging 6.44B$ per report, 4.36B$/day.
Above line should be okay

PROJECTION:
There are 1,035 days remaining in this Obama 1st term.
By that time the debt could be between 14.1 and 22.3T$.
It could be higher. It could be lower.

HISTORICAL:
President's term begins and ends on Jan 20.
(Guess who might want to hide the Reagan Bush years. Jan 20 data is missing before 1993.)
01/20/1993 _4,188,092,107,183.60 WJC Inaugural
01/22/2001 _5,728,195,796,181.57 WJC (UP 1,540,103,688,997.97)
01/20/2009 10,626,877,048,913.08 GWB (UP 4,898,681,252,731.43)
03/22/2010 12,663,372,436,835.10 BHO (UP 2,036,495,387,922.02 so far since Obama took office.)

FISCAL YEAR DEBT CHANGE, Sep 30 prior year to Sep 30 named year:
(One "* " for each 40B$ reached)
FY1994 +0,281,261,026,873.94 ------------* * * * * * * WJC
FY1995 +0,281,232,990,696.07 ------------* * * * * * * WJC
FY1996 +0,250,828,038,426.34 ------------* * * * * * WJC
FY1997 +0,188,335,072,261.61 ------------* * * * WJC
FY1998 +0,113,046,997,500.28 ------------* * WJC
FY1999 +0,130,077,892,735.81 ------------* * * WJC
FY2000 +0,017,907,308,253.43 ------------WJC
FY2001 +0,133,285,202,313.20 ------------* * * C&B
01-WJC +0,053,598,528,417.78 ------------* WJC 31% of FY, 40% of FY-Debt
01-GWB +0,079,686,673,895.42 ------------* GWB 69% of FY, 60% of FY-Debt
FY2002 +0,420,772,553,397.10 ------------* * * * * * * * * * GWB
FY2003 +0,554,995,097,146.46 ------------* * * * * * * * * * * * * GWB
FY2004 +0,595,821,633,586.70 ------------* * * * * * * * * * * * * * GWB
FY2005 +0,553,656,965,393.18 ------------* * * * * * * * * * * * * GWB
FY2006 +0,574,264,237,491.73 ------------* * * * * * * * * * * * * * GWB
FY2007 +0,500,679,473,047.25 ------------* * * * * * * * * * * * GWB
FY2008 +1,017,071,524,649.92 ------------* * * * * * * * * * * * * * * * * * * * * * * * * GWB
FY2009 +1,885,104,106,599.30 ------------* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * B&O
09GWB +0,602,152,152,000.60 ------------* * * * * * * * * * * * * * * GWB 31% of FY, 32% of FY-Debt
09-BHO +1,282,951,954,598.70 ------------* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * BHO 69% of FY, 68% of FY-Debt
FY2010 +0,753,543,433,323.40 ------------* * * * * * * * * * * * * * * * * * BHO
Endof10 +1,589,845,972,040.70 ------------* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * Linear Projection

LAST FIFTEEN REPORTS OF ADDITIONS TO PUBLIC DEBT(NOT FICA):
03/02/2010 +000,051,419,206.42 ------------*******
03/03/2010 +001,678,102,940.09 ------------*********
03/04/2010 +034,416,128,156.63 ------------**********
03/05/2010 -000,074,542,156.87 ----
03/08/2010 +000,260,238,586.47 ------------******** Mon
03/09/2010 +000,542,827,835.74 ------------********
03/10/2010 +000,295,703,179.30 ------------********
03/11/2010 +029,692,666,288.30 ------------**********
03/12/2010 +000,363,901,611.09 ------------********
03/15/2010 +060,487,338,970.60 ------------********** Mon
03/16/2010 +000,241,513,784.66 ------------********
03/17/2010 +000,318,864,879.69 ------------********
03/18/2010 +020,986,560,998.86 ------------**********
03/19/2010 +000,244,805,712.35 ------------********
03/22/2010 +000,662,784,714.13 ------------******** Mon

150,168,314,707.46 Total of 15 above reports.

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

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

(Debt to the penny keeps changing. Stuff is missing. Best to keep our own history.) LAST REPORT:
http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=102&topic_id=4316432&mesg_id=4316606

[Festivito]

50. Debt: 03/23/2010 12,670,895,780,689.20 (UP 7,523,343,854.10) (Tue)

(Up a little. Good day all.)

(Debt under Obama seems to jump up big then drop slowly maybe up a little and down a little for days--repeat.)
= Held by the Public + Intragovernmental(FICA)
= 8,175,891,420,076.37 + 4,495,004,360,612.83
UP 796,033,080.11 + UP 6,727,310,773.99

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

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

PERSONALIZED DEBT:
Every 10 seconds we net gain another American, so at the end of the workday of the report, there should be 309,057,438 people in America.
http://www.census.gov/population/www/popclockus.html ON 11/07/2009 08:19 -> 307,879,272
Currently, each of these Americans owe $40,998.51.
A family of three owes $122,995.54. (And that is IN ADDITION to their mortgage.)

ANALYSIS:
There were 21 reports in the last 30 to 28 days.
The average for the last 21 reports is 12,453,385,753.68.
The average for the last 30 days would be 8,717,370,027.57.
The average for the last 28 days would be 9,340,039,315.26.
There were 252 reports in 365 days of FY2007 averaging 1.99B$ per report, 1.37B$/day.
There were 253 reports in 366 days of FY2008 averaging 4.02B$ per report, 2.78B$/day.
There were 75 reports in 112 days of GWB's part of FY2009 averaging 8.03B$ per report, 5.38B$/day.
There were 174 reports in 253 days of Obama's part of FY2009 averaging 7.33B$ per report, 5.07B$/day so far.
There were 249 reports in 365 days of FY2009 averaging 7.57B$ per report, 5.16B$/day.
There were 118 reports in 174 days of FY2010 averaging 6.45B$ per report, 4.37B$/day.
Above line should be okay

PROJECTION:
There are 1,034 days remaining in this Obama 1st term.
By that time the debt could be between 14.1 and 22.3T$.
It could be higher. It could be lower.

HISTORICAL:
President's term begins and ends on Jan 20.
(Guess who might want to hide the Reagan Bush years. Jan 20 data is missing before 1993.)
01/20/1993 _4,188,092,107,183.60 WJC Inaugural
01/22/2001 _5,728,195,796,181.57 WJC (UP 1,540,103,688,997.97)
01/20/2009 10,626,877,048,913.08 GWB (UP 4,898,681,252,731.43)
03/23/2010 12,670,895,780,689.20 BHO (UP 2,044,018,731,776.12 so far since Obama took office.)

FISCAL YEAR DEBT CHANGE, Sep 30 prior year to Sep 30 named year:
(One "* " for each 40B$ reached)
FY1994 +0,281,261,026,873.94 ------------* * * * * * * WJC
FY1995 +0,281,232,990,696.07 ------------* * * * * * * WJC
FY1996 +0,250,828,038,426.34 ------------* * * * * * WJC
FY1997 +0,188,335,072,261.61 ------------* * * * WJC
FY1998 +0,113,046,997,500.28 ------------* * WJC
FY1999 +0,130,077,892,735.81 ------------* * * WJC
FY2000 +0,017,907,308,253.43 ------------WJC
FY2001 +0,133,285,202,313.20 ------------* * * C&B
01-WJC +0,053,598,528,417.78 ------------* WJC 31% of FY, 40% of FY-Debt
01-GWB +0,079,686,673,895.42 ------------* GWB 69% of FY, 60% of FY-Debt
FY2002 +0,420,772,553,397.10 ------------* * * * * * * * * * GWB
FY2003 +0,554,995,097,146.46 ------------* * * * * * * * * * * * * GWB
FY2004 +0,595,821,633,586.70 ------------* * * * * * * * * * * * * * GWB
FY2005 +0,553,656,965,393.18 ------------* * * * * * * * * * * * * GWB
FY2006 +0,574,264,237,491.73 ------------* * * * * * * * * * * * * * GWB
FY2007 +0,500,679,473,047.25 ------------* * * * * * * * * * * * GWB
FY2008 +1,017,071,524,649.92 ------------* * * * * * * * * * * * * * * * * * * * * * * * * GWB
FY2009 +1,885,104,106,599.30 ------------* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * B&O
09GWB +0,602,152,152,000.60 ------------* * * * * * * * * * * * * * * GWB 31% of FY, 32% of FY-Debt
09-BHO +1,282,951,954,598.70 ------------* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * BHO 69% of FY, 68% of FY-Debt
FY2010 +0,761,066,777,177.50 ------------* * * * * * * * * * * * * * * * * * * BHO
Endof10 +1,596,490,653,274.64 ------------* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * Linear Projection

LAST FIFTEEN REPORTS OF ADDITIONS TO PUBLIC DEBT(NOT FICA):
03/03/2010 +001,678,102,940.09 ------------*********
03/04/2010 +034,416,128,156.63 ------------**********
03/05/2010 -000,074,542,156.87 ----
03/08/2010 +000,260,238,586.47 ------------******** Mon
03/09/2010 +000,542,827,835.74 ------------********
03/10/2010 +000,295,703,179.30 ------------********
03/11/2010 +029,692,666,288.30 ------------**********
03/12/2010 +000,363,901,611.09 ------------********
03/15/2010 +060,487,338,970.60 ------------********** Mon
03/16/2010 +000,241,513,784.66 ------------********
03/17/2010 +000,318,864,879.69 ------------********
03/18/2010 +020,986,560,998.86 ------------**********
03/19/2010 +000,244,805,712.35 ------------********
03/22/2010 +000,662,784,714.13 ------------******** Mon
03/23/2010 +000,796,033,080.11 ------------********

150,912,928,581.15 Total of 15 above reports.

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

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

(Debt to the penny keeps changing. Stuff is missing. Best to keep our own history.) LAST REPORT:
http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=102&topic_id=4317781&mesg_id=4317792

[ozymandius]

7. Feinberg Caps Pay at AIG, Others

U.S. pay czar Kenneth Feinberg said Tuesday his $500,000 restriction on cash salaries will cover 82% of the 119 top executives at the five companies he oversees. Five executives at American International Group Inc., one of the five firms, will receive more than that.

He made the announcement as part of his review of 2010 pay packages for the "top 25" executives at the companies, including senior executives and the next 20 most highly compensated employees. Some of those employees have since left the firms, which in addition to AIG include General Motors Co., Chrysler Financial, Chrysler Group LLC and GMAC Inc. .....

Several AIG executives did appear to see increases in annual cash salary above what Mr. Feinberg set for them late last year, according to an analysis of two reports issued by Mr. Feinberg—in October and on Tuesday—that identify the top earners by employee ID numbers. .....

In addition, AIG went from having one person in the group Mr. Feinberg reviewed earning cash salary of more than $500,000—Chief Executive Robert Benmosche—to five. Three of those people are making $700,000 a year and one is making $1.5 million. Mr. Benmosche earns $3 million in cash a year.

http://online.wsj.com/article/SB10001424052748704896104575139900930843786.html?mod=WSJ_hpp_MIDDLTopStories

[Demeter]

17. About Time!

Think it will go to the Supremes?

[ozymandius]

8. Wall Street Despised in Poll Showing Majority Want Regulation

March 24 (Bloomberg) -- Americans are leery about creating a new federal agency to make consumer-protection rules for mortgages and credit cards and would prefer to enhance the existing powers of banking regulators.

Most people interviewed in the Bloomberg National Poll say they don’t like Wall Street, banks or insurance companies and favor letting the government punish bankers who helped cause the worst financial crisis since the Great Depression.

Almost seven out of 10 people surveyed support using current bank regulators for consumer protection, backing positions held by the financial industry and Republicans over President Barack Obama’s proposal to establish an independent agency. .....

The poll’s findings come as the White House and congressional Democrats pivot to focus more election-year attention on an unpopular political target -- banks and Wall Street -- following this week’s victory on health-care legislation. ....

The majority of poll participants -- 56 percent -- say big financial companies are more interested in enriching themselves at the expense of ordinary people, while 40 percent say such firms play a vital role in enabling the economy to grow.

http://www.bloomberg.com/apps/news?pid=20601087&sid=a4nQoiYaj2ag&pos=2

[ozymandius]

9. States Sue Over Overhaul That Will Bust State Budgets

March 23 (Bloomberg) -- President Barack Obama faces a fight over the health-care overhaul from states that sued today because the legislation’s expansion of Medicaid imposes a fiscal strain on their cash-strapped budgets.

Florida, Texas and Pennsylvania are among 14 states that filed suit after the president signed the bill over the constitutionality of the burden imposed by the legislation. The health-care overhaul will make as many as 15 million more Americans eligible for Medicaid nationwide starting in 2014 and will cost the states billions to administer.

States faced with unprecedented declines in tax collections are cutting benefits and payments to hospitals and doctors in Medicaid, the health program for the poor paid jointly by state and U.S. governments. The costs to hire staff and plan for the average 25 percent increase in Medicaid rolls may swamp budgets, said Toby Douglas, who manages the Medicaid program for California, which hasn’t joined the lawsuits. .....

The federal government mandates that states provide health coverage under Medicaid to children, pregnant women, and the elderly and disabled poor. States set the rules on eligibility and decide which benefits to provide, making for a complex hodge-podge of coverage standards across the nation. The health- care overhaul simplifies the system by setting a minimum national floor and requires that all states cover childless adults, who will make up almost all of the expansion enrollees.

http://www.bloomberg.com/apps/news?pid=20601010&sid=ajwSWE6H1kHM

[ozymandius]

10. Pressure grows to overhaul Fannie Mae, Freddie Mac

It is the forgotten bailout: $125.9 billion spent by taxpayers so far to rescue housing giants Fannie Mae and Freddie Mac -- nearly twice what's been pumped into American International Group Inc. -- and with no end in sight. ....

But with a full legislative agenda and concerns about a struggling housing recovery, the Obama administration is not eager to get started on the difficult and complex task of remaking, or replacing, Fannie and Freddie. The companies, seized by the government during the credit crisis in 2008, hold or guarantee a total of about $5 trillion in mortgages.

Administration officials had promised last year they would offer a plan in February. Now Geithner has said that a detailed plan won't come until next year. Lawmakers from both parties do not want to wait. ....

In December, the Treasury Department announced there would be no cap until the end of 2012 on what could be spent to keep Fannie Mae and Freddie Mac out of bankruptcy, a move it said was designed to add stability to the housing market and safety for buyers of new mortgage-backed securities and those holding $1.6 trillion in old debts. ....

But Fannie Mae and Freddie Mac still are playing a large role in housing finance because banks remain hesitant to lend, so there are strong economic and political reasons Congress and the Obama administration need to move slowly, said Jaret Seiberg, a financial policy analyst at Concept Capital's Washington Research Group.

http://www.latimes.com/business/la-fi-fannie-freddie23-2010mar23,0,1593634.story

[ozymandius]

11. Anticipating Eurozone collapse

The Germans are pressing a hard line on all fronts of the sovereign debt crisis in Europe – not only with austerity measures for Greece but for a planned European Monetary Fund (EMF) as well. The most critical part of the German negotiating stance, however, is now Eurozone exclusion, something that started when Finance Minister Wolfgang Schäuble publicized plans for the EMF. ....

An article just released in today’s German weekly WirtschaftsWoche (Business Week) puts together the salient points quite well. My translation is below.

The Chancellor stands firm and refuses to help the Greeks. She wants new rules for the euro.

The Greeks are creating pressure. When European leaders meet in Brussels on Thursday and Friday, Prime Minister Jorgo Papandreou expects to finally have a concrete pledge for the ailing Mediterranean state. "It is important to make a decision at the summit," said the Greek. "We have to put the loaded gun on the table to ensure that the markets react properly." Previously, a senior Greek official had announced that Greece would apply to the International Monetary Fund no later than the Easter weekend in order to extricate itself from its financial plight. Papandreou denied the request to the IMF. But the message itself weakened the euro and made it clear to the political leadership in Europe, that it can not remain idle.

The Greek pressure generated counter-pressure. Chancellor Angela Merkel, who so far has steadfastly refused to support the Greeks lightly, wants to avoid future dilemmas like the current one. Her conclusion from the Greek crisis: she wants new rules for the euro.

So, you have Greek politicians threatening to go cap in hand to the IMF, involving the Americans and humiliating the EU, if the EU doesn’t bail the Greeks out. Then you have the Greek Prime Minister denying this and telling the other Europeans they must put the loaded gun on the table this week or the debt markets will implode. Meanwhile, the response from the Germans is ‘Nein.’ In fact, Angela Merkel wants to retroactively change the eurozone criteria so that the Greeks can be excluded from the eurozone if they continue to deficit spend. This doesn’t sound like a lovefest of Friede, Freude Eierkuchen to me. More likely, we have the makings of a more severe crisis.

http://www.creditwritedowns.com/2010/03/anticipating-eurozone-collapse.html

[Ghost Dog]

49. No way. (LEAP/E2020: global geopolitical dislocation phase)

When Mrs Lagarde denounces Germany's export oriented economy or when Mrs Merkel expresses the idea that in the future it should be possible to exclude a country from the Eurozone, they both show they essentially do not understand anything about the way the EU is operating.

...

Another thing is certain though: both women underline true problems but which both have nothing to do with solving the Greek case, but rather everything to do with the after-Greece Eurozone's perspectives. In itself, it shows that Eurozone leaders are already pushing their pawn for “the day after”.

For instance, it is absolutely ridiculous to imagine an exclusion of the Eurozone beyond pure psychological pressure's aims. A country faced with such a situation will see its currency and financial situation fall into pieces while it will generate a major political mess throughout the EU.

Meanwhile the global crisis is putting an end to what used to be the 'norm', such as Germany using its Eurozone partners as mere exports markets; or Eurozone leaders pretending that they still can act as if the Euro did not exist.

So in both cases, both women would have been better inspired to set up the perspectives for the coming three to five years required changes in the Eurozone governance, rather than appearing to argue about the short term crisis reasons.

Both could also have usefully highlighted one of its key components : the fact that a global monetary war has started, with Washington and London trying to defend their currencies against the new kids on the block such as the Euro and the Yuan.

And that, in such a currency war, the 'situation room' cannot accommodate adversaries, questioning therefore the future role of any European institution involving non-Eurozone countries when it comes to Eurozone decisions. The UK position is particularly at stake as it is obvious to all that the interest of the British pound is almost adverse to the interest of the Euro.

Last but not least, they could have also explained why in the coming years the Eurozone needs to create a kind of 'Rapid Financial Deployment Force', such as a European Monetary Fund, dedicated to the sole Eurozone interests. One reason being that the Eurozone can no longer trust the IMF (in Washington's hands) to respect its own interests rather than those of the Dollar.

Of course, these questions are typically the kind of issues which should be discussed within a Eurozone Economic Governance body, not when a crisis erupts, but rather on a regular basis; not with British or American medias, but rather within the Eurozone public sphere and with Eurozone citizens democratic approval.

At least we can hope that the current situation reminds our leaders that 'Gouverner, c'est prévoir'. Something they obviously forgot.

/... http://www.newropeans-magazine.org/content/view/11132/1/


The five steps of the global geopolitical dislocation phase

- Public announcement GEAB N°43 (March 16th, 2010) -

At the end of this first quarter of 2010, with increasing signs of confrontation at international level on monetary, financial, commercial and strategic fronts, and as the severity of the social impact of the crisis is evident at the heart of major countries and regions, LEAP/E2020 is able to provide a first anticipation of the ensuing roll-out of this phase of global geopolitical dislocation.

A reminder that this phase can only be a precursor to a sustained reorganisation of the international system if, between now and the middle of this decade, the consequences of the collapse of the world order inherited from the second world war and the fall of the Iron Curtain fully come home to roost. In particular, this development requires a complete recasting of the international monetary system based on an international currency, replacing the current system founded on the US Dollar, the value of which would be based on a basket of the major world currencies weighted according to the respective size of their economies.

...

The failure of the 2009 Copenhagen summit, which brought almost two decades of international cooperation and influence on the subject matter, due to increasing US and Chinese conflict and western lack of agreement on the actual topics (2) is, therefore, a relevant sign confirming our researchers’ anticipations. Due to increasing tensions (zones and subject matters) international relationships become worse, whilst the ability of the United States to play their role as manager (3), or just only as « boss » of those under their umbrella, fades away a little more with each passing month (4). At the end of 2010’s first quarter we can highlight:

. constant worsening of Sino-US relations (Taiwan, Tibet, Iran, Dollar-Yuan parity (5), declining purchases of US Treasury Bonds, numerous commercial disputes,…)

. increasing transatlantic dissent (Afghanistan (6), NATO (7), contracts for US Air Force in-flight refueling tankers (8), climate control, the Greek crisis,…)

. Washington’s decision-making (9) paralysis

. Middle Eastern (10) instability without respite and the intensification of potential Israeli-Palestinian and Israeli-Iranian crises

. increasingly good reasons for having regional blocs (Asia, Latin America (11), and Europe in particular)

. increased monetary (12) and financial (13) volatility in the world

. increasing sovereign risk worries

. the growing criticism of the role of US banks linked to regulation targeting a regionalisation of financial markets (14)…

At the same time, without any economic recovery in sight (15), social conflict is increasing in Europe, whilst in the United States the social fabric is, purely and simply, coming apart at the seams (16). If the first event is more visible than the second it is, however, the second which is the more important. Control of the tools of the international media by the United States enables the social consequences of this destruction of US public and social services on the back of the increasing poverty of the country’s middle classes (17) to be covered up. This concealment is made even easier compared to Europe, that the US social fabric has been vaporised (18): weak trade unions, unions very limited by sector, and without general social claims social claims being historically identified as an « anti-American (19) » attitude,… Still, on both sides of the Atlantic (and in Japan) public (public transport, police, the fire service) and social (health, education, retirement) services are in the process of being dismantled, when they are not purely and simply closed; demonstrations (20), sometimes violent, are increasing in Europe, whilst acts of domestic terrorism or political extremism (21) are on the increase in the United States,… In China, growing control over the Internet and the media is, above all, a reliable indicator of increased nervousness of Chinese leaders over the state of their popularity. Demonstrations over unemployment and poverty are on the increase, contradicting the optimistic speeches of the Chinese leaders on the state of the economy. In Africa, the frequency of coups d’état has increased since last year. In Latin America, notwithstanding somewhat positive macro-economic numbers, social discontent feeds the risks of radical political change, just as Chile saw.

All these trends are in the course of rapidly creating an « explosive socio-political cocktail » which leads directly to strife between component parts of the same geopolitical entity (conflict between federal states/the United States itself, tensions between European Union and member states, Russian republics and the Federation, Chinese provinces and central government), between ethnic groups (an almost universal increase in anti-immigrant sentiment) and a falling back on nationalism, both national and regional (23), to channel these destructive tensions. All this takes place on the back of middle class poverty in the United States, Japan and in Europe (in the United Kingdom, and in European and Asiatic (24) countries in particular, where households and local authorities are the most heavily in debt).

/... http://www.leap2020.eu/GEAB-N-43-is-available!-The-five-steps-of-the-global-geopolitical-dislocation-phase_a4420.html

[Demeter]

52. I Expect USA's Biggest Enemies Are Congress and Treasury and Fed Reserve

all staffed by Goldman goldbricks. The corporate-based corruption is what is destroying us, with the ignorant public baffled and bewildered by the corrupted media coverage.

I wonder if Europe will begin to pull together. Angela never struck me as particularly pan-European nor particularly farseeing. But she is the power of the moment, by default and because she IS a strong person who knows how to use power.

That was a really helpful post--thanks!

[Festivito]

12. Good morning Ozy. Great to have an oil chart back.

And that toon hits its mark.

A note on the five world currency images, when centered, they insist on being one horizontal item rather than shifting down separately based on window size. I have an old small screen and it spills off to the right.

Congratulation on finding that oil chart!

Thanks again for all you do.
--Fes

[ozymandius]

13. Good morning.

:donut: :donut: :donut:
I am glad you enjoy the new addition. I had some rare spare time yesterday evening. Updating the code for this page seemed to be the thing to do.

About the screen spillage with the currency charts: I have a Mac with a 16-to-9 ratio screen. I tried resizing the browser window narrow to wide and the images respond accordingly - side-by-side when extended and stacking when narrowed. Though I did wonder how this would reflect on machines with different monitor settings. Have you tried taking your screen off the 'maximize' setting and adjusting the size manually?

Thanks again.
ozy :hi:

[Festivito]

16. Mine stick together regardless of window size.

Could be this ancient XP with IE6. I looked at the html sources of yesterday's and today's and today's has an html div align=center that yesterday's did not, so I figured you might have been making it look prettier. Interesting: the difference between the IBM and MAC.

My tea is cold. Time to hit the shower. :9 thanks for the donuts.

[ozymandius]

47. Sorry about that.

I will rework the "div align" tags when I get home. Perhaps going with a different format tag will help.

[ozymandius]

56. Here is the OP with new formatting tags.

STOCK MARKET WATCH, Wednesday March 24, 2010

AT THE CLOSING BELL ON March 23, 2010

Dow... 10,888.83 +102.94 (+0.95%)
Nasdaq... 2,415.24 +19.84 (+0.83%)
S&P 500... 1,174.17 +8.36 (+0.72%)
Gold future... 1,106 +6.30 (+0.57%)
10-Yr Bond... 3.68 +0.03 (+0.77%)
30-Year Bond 4.61 +0.04 (+0.90%)

---

Market Conditions During Trading Hours

Euro, Yen, Loonie, Silver and Gold

---

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

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

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

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

Bush Administration Officials Convicted = 2
Names: David Safavian, James Fondren

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

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

---

---

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

[Festivito]

58. Source shows tag: center. Still stuck on one line.

Oh well.

[Demeter]

18. Looks Great, Ozy!

More modern and easier on the eyes.

[Roland99]

39. yeah, that's a nice chart. Thanks!

[ozymandius]

14. Spitzer/Rosner: “Lehman Scandal: Where’s the Follow Up?”

It doesn’t take a rocket scientist — and certainly not an accountant — to deduce one thing from the Lehman scandal. The misleading of regulators, investors and the public did not happen in isolation. Like Enron, WorldCom, Tyco, Wachovia, Washington Mutual, Fannie/Freddie, CDOs, Bear, AIG, bond insurers, GM, Chrysler, CIT, California, Greece and the countless others wrapped up in this crisis, Lehman is symptomatic of a banking system bent on finding ways to hide risk from the investing public and regulatory community. Every time the truth was uncovered, investors fled and new investors demanded returns that compensated them for the new understanding of the known risks and for those that might remain hidden. In some cases, the cost of that new capital broke the firms. ....

It should be clear to all that a deeper examination of the relationship between all the audit firms and their clients on the issue of risk-obfuscation is needed. Limiting any inquiry to Lehman alone is inadequate. To start, here are a few simple questions:

1. To the Fed: Where were you? Did you know what Repo 105 was? You claim that you were not the regulator but acknowledge that you were on site for 6 months before Lehman’s failure to make sure you would be repaid on your exposures, so wouldn’t deceptive accounting have reduced your faith in your ability to collect on your exposures?

2. To the SEC: What are you doing to ensure that other banks and investment banks are not using similar techniques to manipulate their books?

3. To federal investigators: Where are the subpoenas?

more at Naked Capitalism

[ozymandius]

15. Top Analyst Says “Developed Market Governments Are Insolvent By Any Reasonable Definition”

More from Naked Capitalism:

Dylan Grice, a top analyst for European financial giant Société Générale, writes:

Developed market governments are insolvent by any reasonable definition.

Who could have known?

Everyone, actually.

As I wrote in December 2008, “The “Central Banks’ Central Bank” says Bailouts Putting Nations at Risk, as Confirmed By Higher Credit Default Swap Spreads“:

The Bank for International Settlements (BIS) is often called the “central banks’ central bank”, as it coordinates transactions between central banks.

BIS points out in a new report that the bank rescue packages have transferred significant risks onto government balance sheets, which is reflected in the corresponding widening of sovereign credit default swaps:

The scope and magnitude of the bank rescue packages also meant that significant risks had been transferred onto government balance sheets. This was particularly apparent in the market for CDS referencing sovereigns involved either in large individual bank rescues or in broad-based support packages for the financial sector, including the United States. While such CDS were thinly traded prior to the announced rescue packages, spreads widened suddenly on increased demand for credit protection, while corresponding financial sector spreads tightened.

In other words, by assuming huge portions of the risk from banks trading in toxic derivatives, and by spending trillions that they don’t have, central banks have put their countries at risk from default.

ozy here: The transfer of toxic assets onto government balance sheets brings to mind again the story of how Geithner's FRBNY appears to have accepted toxic waste as collateral for infusions of cash to support major banks' gambling habits. This informed perspective presented here goes even further to bolster these assertions (as one reads further) and expounds upon the potentially criminal affronts to our financial system.

[Tansy_Gold]

26. "transfer of toxic assets"?

Would this "transfer" more correctly be called a "purchase" and/or "sale"?

"Transfer" seems to imply they were merely moved, but wasn't there an exchange of something to get them where they are now?

In fact, didn't the Fed BUY these "assets," and give "infusions" of cold hard cash to the banks from which they "bought" them? You get it, Ozy. I think this Dylan Grice gets it. Chomsky and Lakoff would probably get it, too.

WORDS HAVE MEANING, and those meanings shape the way we think and act.

I lost several hours of productive time yesterday evening to anger over being lectured on "professionalism" by a woman who sent out an "official" document with my and two other addressees' names grossly misspelled in the body of the document. The subject line of her document had another gross typographical error -- "Sorubg" had been typed; she meant "Spring." And she had misspelled seven or eight times -- thus debunking any excuse that it was just "a typo" -- the nature of the business in which she was demanding professional standards.

I am rapidly coming to the conclusion that no one gives a shit -- outside the limited sphere of the SMW and WEE membership, that is -- and it's very discouraging, demoralizing, and depressing.


Pansy, er, Tansy Gold

[DemReadingDU]

42. Hardly anybody cares nor pays attention

Except in the few financial blogs that I read..that's why I read them. I have yet to find anybody that I personally know that sees things as we do here. Heck, I can't even talk to spouse about it, because he says, there's nothing he can do about any of it.

[Demeter]

19. Where Are the Subpeonas, Indeed

Eric Halter, call your office!

Probably looking forward, again.

[Demeter]

28. FROM SEPTEMBER: Lehman leads the way in ‘lottery ticket’ rally

http://www.ft.com/cms/s/0/4da6c6d0-9b0d-11de-a3a1-00144feabdc0,dwp_uuid=563f9cc0-993e-11de-ab8c-00144feabdc0.html



Almost a year after it filed for bankruptcy, the value of Lehman Brothers shares has soared amid a surge in trading activity.

Other bankrupt companies – where the value of shares is usually close to zero because equity investors are compensated only after all creditors have been repaid – have also seen a frenzy of trading in the last few days.

“People lost so much money last year and they are so desperate to recoup their losses, that they are willing to invest in anything,” said Brad Golding, portfolio manager of CRC Financials Opportunity hedge fund in the Cayman Islands. “Everyone wants a lottery ticket.”

After Lehman collapsed last September, Barclays Bank and Nomura bought substantial parts of its business. That left a holding company largely containing toxic mortgage assets and derivatives potentially amounting to billions of dollars that are still being unwound.

Lehman shares peaked last week at 32 cents, having spent much of the year at less than 5 cents. When the rally in Lehman began in late August, trading volume soared above 100m shares on one day, compared with virtually no activity earlier in the year. Lehman shares closed last week at 14 cents with trading volumes on Friday reaching just over 11m shares.

Shares in Washington Mutual and IndyMac, two other bankrupt financial institutions, have also risen sharply in recent days.

Traders say Lehman and WaMu have more debt than cash, meaning they have no equity value and that buying their shares is a forlorn cause.

“It is tulip mania,” said Mr Golding. “People have decided a stock is worth something based on nothing. The facts are quite the contrary.”

Trading in the delisted stocks of companies that have filed for bankruptcy takes place in private, over-the-counter deals, rather than on a registered exchange. More often that not, a sharp rise in the stock price of a bankrupt company reflects speculation about the recovery value prospects.

The rally in Lehman shares has followed explosive rises in the share price of Fannie Mae and Freddie Mac, the two mortgage companies taken over by the US government last year. Shares in AIG and to a lesser extent Citi, two companies with significant US government ownership, have also risen sharply in recent weeks.
HAS ANYTHING CHANGED SINCE SEPTEMBER?

[Demeter]

36. ALSO SEPTEMBER: Dick Fuld of collapsed bank Lehman Brothers says 'his mother loves him'

http://www.telegraph.co.uk/finance/financetopics/financialcrisis/6158452/Dick-Fuld-of-collapsed-bank-Lehman-Brothers-says-his-mother-loves-him.html

Dick Fuld, the former Lehman Brothers chairman who has spent much of the last 12 months shouldering the blame for the dramatic collapse of the investment bank, has spoken for the first time since the bank's demise.

In an interview with Reuters, the veteran banker said that he felt "pummelled" by the negative coverage against him, but said that he can handle the continuing onslaught ahead of the anniversary of the bank's collapse on September 15.

Mr Fuld, speaking to a reporter who tracked him down to his riverside country house outside the small town of Ketchum, Idaho, he said that he is not a defeatist and that "good guys do win" in the end.

His comments were made during a series of exchanges with Reuters over the course of three days at his house, at an airport and on a flight to Salt Lake City.

Mr Fuld – whose was known as the Gorilla of Wall Street during his 14 years in charge at Lehman due to his combative and masculine approach to business – told the reporter she reminded him of his daughters, referring to her as "sweetie" in one exchange.

But it was at his country hideaway – dressed in grey shorts, a black fleece and sandals - that he appeared most relaxed, joking with her: "You don't have a gun; that's good."

"You know what, people are saying all sorts of crap and it's a shame that they don't know the truth, but they're not going to get it from me," he said. Although he wouldn't say why he wouldn't put across his side of the story – something which last September he said would be to painful too discuss – he did admit that he had promised himself he wouldn't comment ahead of the anniversary.

However, he said he had taken notice of what has been said: "I've been pummelled, I've been dumped on, and it's all going to happen again. I can handle it. You know what, let them line up."

"I want to get through the 15th and I want to get all that crap out of the way - when all the news comes out, all the books come out," he continued.

Asked about his feelings on Federal chairman Ben Bernanke and former Treasury Secretary Hank Paulson – who failed to save Lehman – Mr Fuld's said, firmly: "I'm sorry. I'm not going to do it. I'm just not going to do it."

Despite the obvious pressure of the last 12 months, however, Mr Fuld, who is believed to be in the process of setting up a consulting firm, is keeping his head above water.

"You know what, my mother loves me. And you know what, my family loves me and I've got a few close friends who understand what happened and that's all I need."

[DoBotherMe]

40. Denial ain't just a river in Egypt

This guy makes me barf with his deflections and rationalizations. Typical immature defense mechanisms. Ugh. Dana ; )

[AnneD]

46. Per Harry Truman...

If you want a friend in Washington DC, get a dog.

Dr Phool-can we train a Manchurian Candidate? :evilgrin:

[Demeter]

20. German 'gang of retirees' sentenced in kidnapping

http://news.yahoo.com/s/ap/20100323/ap_on_re_eu/eu_germany_gang_of_retirees

BERLIN – Three German retirees who lost $1.4 million in the financial crisis and kidnapped their American investment adviser in an attempt to recoup the money were convicted Tuesday, with their 74-year-old ringleader sentenced to six years in prison.

Two couples, aged between 61 and 80, had invested their savings with James A., a financial adviser who worked out of offices in the U.S. and Germany, the Traunstein regional court said.

They received 12 percent annual interest for four years, according to the court.

The German weekly Spiegel said on its Web site that James A., 57, had made investments in real estate projects in Florida since the 1990s. In 2005, Amburn's group of companies was shaken by the U.S. crisis, and he could not come up with the promised interest anymore, Spiegel said.

The court said the four retirees teamed up with Wilhelm D., a former employee of James A.'s who said the financial adviser owed him $690,000.

Four of the five defendants pleaded guilty to charges including kidnapping and aggravated assault for abducting James A. from his home in the southern German city of Speyer in June. They held him in a house and forcing him to send an order to transfer more than euro2 million ($2.7 million) to their accounts from his bank in Zurich, Switzerland, not knowing that there was no money left, officials said.

After four days captivity, James A. wrote a plea for help in a crude code — "Sell 100 Call Pol.ICE" — on the fax to his bank and was freed by police within hours.

The court sentenced the group's leader, 74-year-old Roland K., to six years in jail and his wife Sieglinde, 79, to a suspended 18-month sentence. Defendant Gerhard F., 67, is ill and has not been tried. His wife Iris received a 21-month suspended sentence.

Wilhelm D., 60, was sent to prison for four years.

Judge Karl Niedermeier said the group had taken justice into their own hands "spectacularly," and called the crime insidious and deceitful.

[AnneD]

35. Morning Marketeers.....

:donut: and lurkers. A sign of things to come I think. I think these German investors might have found a more sympathetic judge here in the US. I think when some of these folks in the US get wind of how underfunded their pensions are-they will be in the in the streets with tar and pitch forks. Texas Teachers Retirement fund is in better shape than most but the teachers here are very active and have done what they could to blunt Perry's appointments. We have lots of friends in the legislator and the teachers single handedly got rid of some odious legislators this last election and believe me when I say it was a shot heard all the way to the halls in Austin. We may have lost the governorship-but he doesn't have much power-it is the legislator and the House Speaker that has the keys to the kingdom and they have a renewed respect for teachers, despite the national trend.
Well, gotta run.

Happy hunting and watch out for the bears.

[Po_d Mainiac]

21. Measure Aimed at Saving Maine Logging Jobs Moves Forward

The rivalry between Maine loggers and their Canadian counterparts for jobs in the North Woods dates back at least 40 years. And during that time governors, lawmakers, labor officials and loggers themselves have tried to solve the problem.

Under the federal bonded labor program, American companies that are unable to find American workers to cut wood are allowed to bring in Canadian workers to do the job. But Maine loggers say the program is being exploited and they're going without work. And they've been letting their representatives in Augusta hear about it.

snip

"And what goes on in my area is basically the landowners hire foreign contractors and the contractors hire their own friends, relatives and whatever through the bonding process under federal law," said Rep. John Martin of Eagle Lake.
Martin says of the 40 or so companies that have applied for bonded labor in the woods, most are Canadian firms that hire between 160 to 180 Canadian woods workers a year. Under his bill, a landowner violating hiring practices would be removed from the tree growth program for one year and required to pay five years of back taxes plus interest.

http://www.mpbn.net/News/MPBNNews/tabid/1159/ctl/ViewItem/mid/3762/ItemId/11501/Default.aspx

..................
This is an interesting use of a subsidy clawback if an owner uses bonded labor.

The Tree Growth" tax break is substantial, and the penalties would have some major pain associated. Northern Maine has not experienced the recent economic downturn...They were in a depressed state well before the 08' crash.

The sliding dollar vs the Loonie will also impact the appeal to work on this side of the border.

[Demeter]

22. Guest Post: More Evidence that Banks Create Credit Out of Thin Air → Washington’s Blog.

http://www.nakedcapitalism.com/2010/03/guest-post-more-evidence-that-banks-create-credit-out-of-thin-air.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+NakedCapitalism+%28naked+capitalism%29

I recently provided evidence that banks create credit out of thin air.

I’ve just found two more pieces of evidence:

(1) William C. Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York, said in a speech last July:

Based on how monetary policy has been conducted for several decades, banks have always had the ability to expand credit whenever they like. They don’t need a pile of “dry tinder” in the form of excess reserves to do so. That is because the Federal Reserve has committed itself to supply sufficient reserves to keep the fed funds rate at its target. If banks want to expand credit and that drives up the demand for reserves, the Fed automatically meets that demand in its conduct of monetary policy. In terms of the ability to expand credit rapidly, it makes no difference

(2) On February 10th, Ben Bernanke proposed the elimination of all reserve requirements:

The Federal Reserve believes it is possible that, ultimately, its operating framework will allow the elimination of minimum reserve requirements, which impose costs and distortions on the banking system.

Of course, Bernanke’s proposal is the exact opposite of the 100% reserve system proposed by Nobel prize winning economist Milton Friedman and Laurence Kotlikoff, former Senior Economist for the President’s Council of Economic Advisers.

More importantly, if banks don’t make loans based on available reserves, but can enter into loan agreements first and then borrow any reserves needed, that means:

(1) This was never a liquidity crisis, but rather a solvency crisis, as I and many others have repeatedly tried to explain. In other words, it was not a lack of available liquid funds which got the banks in trouble, it was the fact that they speculated and committed fraud,so that their liabilities far exceeded their assets. If you don’t understand what I’m saying, please read this

http://www.washingtonsblog.com/2008/10/problem-was-never-liquidity-but.html

and

(2) The giant banks are not needed, as the federal, state or local governments or small local banks or credit unions can create the credit instead, if the near-monopoly power the too big to fails are enjoying is taken away, and others are allowed to fill the vacuum.

[Demeter]

23. Social Immobility: Climbing The Economic Ladder Is Harder In The U.S. Than In Most European Countrie

http://www.huffingtonpost.com/2010/03/17/social-immobility-climbin_n_501788.html

Is America the "land of opportunity"? Not so much.

A new report from the Organization for Economic Co-Operation and Development (OECD) finds that social mobility between generations is dramatically lower in the U.S. than in many other developed countries.

So if you want your children to climb the socioeconomic ladder higher than you did, move to Canada.

The report finds the U.S. ranking well below Denmark, Australia, Norway, Finland, Canada, Sweden, Germany and Spain in terms of how freely citizens move up or down the social ladder. Only in Italy and Great Britain is the intensity of the relationship between individual and parental earnings even greater.

For instance, according to the OECD, 47 percent of the economic advantage that high-earning fathers in the United States have over low-earning fathers is transmitted to their sons, compare to, say, 17 percent in Australia and 19 percent in Canada.

Recent economic events may be increasing social mobility in the U.S. -- but only of the downward variety. Harvard Professor Elizabeth Warren, for example, argues that America's middle class had been eroding for 30 years even before the massive blows caused by the financial crisis. And with unemployment currently at astronomical levels, if there are no jobs for young people leaving school, the result could be long-term underemployment and, effectively, a lost generation.

According to the OECD report, the main cause of social immobility is educational opportunity. It turns out that America's public school system, rather than lifting children up, is instead holding them down.

One particularly effective way governments can help children from disadvantaged backgrounds improve their prospects, according to the report, is to increase the social mix within schools. Doing so "appears to boost performance of disadvantaged students without any apparent negative effects on overall performance." Early childhood education also helps a lot.

Another big factor in social mobility is inequality, the report finds. The greater a nation's inequality, the harder it is for its children to improve their lot.

That confirms findings by other researchers. "The way I usually put this is that when the rungs of the ladder are far apart, it becomes more difficult to climb the ladder," Brookings Institution economist Isabel Sawhill tells HuffPost. "Given that we have more inequality in the U.S. right now than at any time since the 1920s, we should be concerned that this may become a vicious cycle. Inequality in one generation may mean less opportunity for the next generation to get ahead and thus still more inequality in the future."

There are things governments can do to reduce inequality, the OECD points out. Progressive tax systems and social programs help reduce income inequalities between parents "so that their descendants' income would converge more quickly."

Perhaps more realistically for this country, given the current political climate, higher short-term unemployment benefits can reduce the effect of socioeconomic background on student achievement, the reports says.

Gary Orfield, co-director of the Civil Rights Project/Proyecto Derechos Civiles at UCLA writes in an e-mail to HuffPost: "I think that researchers know about the poor mobility and millions of people are experiencing it -- but it is little discussed in a society in which both parties purport to represent the 'middle class' and no one is talking about the locked-in poor or the risk of downward mobility in public life."

As for the report's conclusions about the value of social mixing in schools, Orfield, a long time foe of school segregation, notes: "There has been such a relentless conservative attack on desegregation strategies, even those focusing on class,... that I think there has been very little discussion of peer group effects (except in college) for a long time. During that void, however, the research evidence has become much more powerful.

"People need to understand that schools are basically students and teachers interacting together and that if you have classmates who know very little, you won't learn from them, you may be distracted by them. And teachers teaching entire classes and schools with students who are not ready to learn at their grade level and require all kinds of individual tutoring will often leave as soon they can so these schools get the least experienced and qualified teachers, which perpetuates the inequality."

Just last month, Orfield's center issued a report urging President Obama, a supporter of charter schools, to take into account the extreme segregation of black students in those schools and to devise policies that encourage diversity.

All in all, the OECD report is an ugly reality check for a country that has historically seen itself as uniquely rewarding of talent; as a place free of the sorts of rigid social structures that led so many generations of immigrants to leave Old Europe.

And the goal of reducing barriers to social mobility isn't just a moral imperative, it's an economic necessity, the OECD notes. "First, less mobile societies are more likely to waste or misallocate human skills and talents. Second, lack of equal opportunity may affect the motivation, effort and, ultimately, the productivity of citizens, with adverse effects on the overall efficiency and the growth potential of the economy."

[Demeter]

24. What would Goldman Lobbyists Hate About the Financial Reform Bill?

http://rortybomb.wordpress.com/2010/03/17/what-would-goldman-lobbyists-hate-about-the-financial-reform-bill/

Ok, so a crowd-sourcing request. There’s a lot of coverage on the new Chris Dodd financial reform bill, and most of it is trying to find good things to say about the bill. Trying very hard in fact, with varying degrees of success.

I want to approach it from a different angle: What would an investment bank hate about this bill, and lobby hard to change? I actually read this bill as if I was a Goldman Sachs lobbyist, looking for all the sections that I hated and made a list of what items I needed to lobby hard on to kill or modify.

My final verdict, by the time I got to the end? If I was a Goldman lobbyist, I’d probably shrug and go “eh, pass it.”

What’s there to object to? More practically, what’s this bill really going to do? I really couldn’t find anything outside of two items that nobody expects to be effective anyway, and one I’m doubting will get passed. I’d love all of your help to think of ways in which the current system of financial “rip our clients’ face off and drink the real economy’s milkshake” capitalism would be worried that this would disrupt the new post-bailout status quo, but I can’t find it.

Let’s go through some specifics, from the point of view of a Goldman lobbyist:

No Problem

1) The Federal Reserve is now your regulator, regardless of what kind of charter you have as long as you remain a big company. The bill has a lot of regulations that look like the following (page 95, my bold):

(2) LIMITATION ON CREDIT EXPOSURE.—The regulations prescribed by the Board of Governors under paragraph (1) shall prohibit each nonbank financial company supervised by the Board of Governors and bank holding company described in subsection (a) from having credit exposure to any unaffiliated company that exceeds 25 percent of the capital stock and surplus (or such lower amount as the Board of Governors may determine by regulation to be necessary to mitigate risks to the financial stability of the United States) of the company.

25% of the capital stock&surplus to one company is not a huge requirement and would probably do little to make firms less interconnected. But at a lower level, it would be, and from the bold above, the smart technocrats at the Federal Reserve could make it lower if needed. So the Federal Reserve can make firms less interconnected. Or it could choose not to. And I’m sure there’s a way to not even do the 25% if they didn’t want to that I didn’t catch or that they could make up on the spot. The Federal Reserve – it’s a place where regulators can hang out, and do like, whatever.

There’s a lot of that kind of language in the bill.

At MMBM, Richard Carnell gave a presentation about how it is in the nature of recent financial crisis for regulators who failed in the last one to ask to be given more powers, that are even more vague, so that they can tackle the next crisis. And sure enough, the Federal Reserve is asking for a bunch of vague powers so they can tackle the next crisis. And the Dodd Bill is going to give it to them.

If you are Goldman, the issue here is that the Federal Reserve is on your ass even if you remove your commercial charter. Would they be worse than the SEC? What’s your take?

2) The most important thing for preserving the shadow banking system as unregulated is keeping the regulatory arbitrage going – where investment banks functioning as commercial banks can take on more leverage under riskier low liquidity terms than commercial banks. Page 40 has some stuff: “the Council may make recommendations …. that …. are more stringent than those applicable to other nonbank financial companies and bank holding companies that do not present similar risks to the financial stability of the United States.” But I’m not holding my breath on the Federal Reserve cracking this whip.

There’s a bunch of stuff about liquidity stress tests, but given that the NY Fed juked those statistics with a known troubled firm, I have a hard time thinking that they’ll do well with an unknown troubled firm. So no objections here.

The real threat here is that the idea of resolution authority is so credible here, so daunting to the company, that the cost of funding goes up. Heh. What do you think?

3) Prompt Corrective Action has been replaced with “Early Remediation Requirements” (page 101) – which strikes me as PCA with the ability to drag in liquidity requirements. Here the language is creating “requirements in the initial stages of financial decline…” which strikes me as too late. What the hell can you do with a company in “financial distress” besides sell it or stick cash into it or bankrupt it? Ideally you start PCA with a company that still has positive net worth. The threat from PCA is that regulators will have triggers before your company has actually failed. Again, I have no idea what the Fed will mean by “financial distress”, but I’d advise Goldman not to lose any sleep over this.

4) CFPA at the Federal Reserve doesn’t matter for Goldman. It does for JP Morgan, and I’ll cover it in another entry.

Potential Problems

5) The derivatives language isn’t out yet. I’m going to go ahead and assume that Goldman will be classified as an end-user, and that exchanges can be defined with a lack of price transparency, and is thus exempted from the majority of all regulation here. Lobbyists should work here, but really I doubt they’ll need to work very hard to kill this. It got mutilated in the Frank Bill, and that is going to be considered to be the stronger bill by the time this is done.

6) What’s going on with the Volcker Rule here? It’s under study, and can be implemented at a later date. Financial Times and Huffington Post both think that the financial sector isn’t worried. Goldman has a little bit extra to lose if the Volcker Rule goes into play, so they may want to lobby this one harder than I’d recommend. I honestly am not expecting much – Geithner and Bernanke are good bellweathers for how the Federal Reserve will approach regulation, and I know Geithner at least doesn’t like it, and Bernanke doesn’t care.

7) The only actual threat from any of this is the language surrounding “proxy access.” I don’t have a handle on this yet, but I can tell that this might be a problem. I’d kick you over to the WSJ for now. Fighting the good fight, the CFA Institute supports the initiative. The Chamber of Commerce is gunning to kill this, hard.

Can You Find Anything?

So I think I’d recommend that they just send the lobbyists home and tell them to pass the bill. This is why I don’t work on the Street mind you, because I don’t have that go-getter spirit. I’m sure by the time all the banking lobbyists are done the Senate bill will become one of the key primary sources for students 100 years from now on how broken the Senate of the early 21st Century was. But in terms of lobbying there seems to be nothing that needs to move. Which should worry us all.

If I was advising you, as a taxpayer, I’d point out that since we don’t want to shrink the biggest banks, we are going to be putting a lot of stress on unproven and uncertain powers and institutions, particularly the Federal Reserve’s ability to discipline the largest financial firms, and resolution authority’s ability to take on firms whose business model is, in part, to warehouse gigantic derivatives portfolios.

The four big items for detection in Rob Johnson’s MMBM report are off balance sheet reform (none), derivatives reform (gamed), extensive real time examination, and international exposure information. There are living wills, but I imagine in practice they’ll function more like “organ donor cards” – less a map on what to do while the building is burning, and more a bunch of stuff you can harvest if you move fast enough. And, though I may be wrong, I doubt they’ll be credible enough in real-time and on an international basis. So if you think of resolution authority as a process of deterrence -> detection -> resolution, like in Rob’s report and where each step strengthens each other, we are putting a lot on the resolution bucket.

But maybe I’m missing something – what did you catch?

[Demeter]

25. Rep. Bachus demands hearing on Lehman report, says Fed, SEC may have 'turned a blind eye' on fraud

http://www.nydailynews.com/money/2010/03/17/2010-03-17_rep_bachus_demands_hearing_on_lehman_report_says_fed_sec_may_have_turned_a_blind.html

A Republican lawmaker requested a congressional hearing on a bankruptcy examiner's report on Lehman Brothers Holdings Inc (LEHMQ.PK), saying the findings cast doubts on the Federal Reserve's supervisory role.

Representative Spencer Bachus, the top Republican on the House of Representatives Financial Services Committee, said the report highlighted regulators' failure to act on evidence of accounting gimmicks used to hide Lehman's insolvency.

"Either the SEC and the New York Federal Reserve failed to discover the ongoing accounting fraud at Lehman, or they turned a blind eye to the ongoing fraud," Bachus said in a letter to the committee's chairman, Barney Frank, requesting a hearing.

He said the hearing would be especially important given legislative proposals to expand the Fed's regulatory powers.

Under legislative packages in the House and Senate that represent the most extensive rewriting of financial market rules since the 1930s, the Fed would gain greater ability to supervise the largest and most complex financial firms.

Later on Wednesday, the House Financial Services Committee was to hold a hearing to examine the link between the Fed's banking supervision responsibilities and its monetary policy function.

The 2,200-page Lehman report, from a court-appointed examiner, found that the investment banking firm used a gimmick, known as "Repo 105," for the sole purpose of manipulating its books, contributing to its demise.

The report also found that Lehman had been insolvent for weeks before it filed for bankruptcy in September 2008.

Bachus, who does not have authority to convene a hearing himself, said lawmakers should examine the adequacy of the monitoring of Lehman by the New York Fed and the U.S. Securities and Exchange Commission after the collapse of Bear Stearns in March 2008.

He said the hearing should include testimony from Treasury Secretary Timothy Geithner, former SEC Chairman Christopher Cox, and former Lehman Chief Executive Dick Fuld.

Read more: http://www.nydailynews.com/money/2010/03/17/2010-03-17_rep_bachus_demands_hearing_on_lehman_report_says_fed_sec_may_have_turned_a_blind.html#ixzz0j5wMqtMi

[Demeter]

27. Credit Rating Agencies Took "Bribes" for Higher Ratings

http://www.washingtonsblog.com/2009/09/credit-rating-agencies-took-bribes-for.html

...Prolific financial journalist, Brookings Institution scholar, and the author of more than 30 books on financial market issues Martin Mayer: One of the untold scandals of this country is that our museums are stuffed with fake old masters because the people who authenticated paintings for the Mellons and Morgans of this world were paid a percentage of the price for the authentication. If they said it was no good, they got a few hundred bucks. If they said it was great, they got $100,000. Same story in the credit-rating organizations....

You may have heard how the big ratings agencies - Moody's, S&P and Fitch - "sold their soul" by rating toxic assets and mismanaged companies much more highly than they should have been rated.

But as the following discussion shows, the ratings agencies effectively took bribes for higher ratings, just like people who knowingly authenticate forged art so that they will earn a higher fee:

Finance professor Ed Kane: One has to remember that these are profit-making institutions. Issuers will would pay more money for a good rating than a bad one, and issuers are very clear what kind of ratings they want. This is a straight-forward way to pay bribes without ever violating the law, it appears, and the credit rating organizations do not take formal responsibility for their incompetence or negligence...

...Former Federal Reserve attorney and economist Walke] Todd: Right. They also drop the ball. I've been around failing banks and financial crises since 1974, and the rating agencies have dropped the ball almost every time. They were always at best late to the party.

Mayer: John Heimann, former comptroller of the currency, used to say that the function of the ratings agency is to go on the battlefield after the battle is over and shoot the wounded.

[kickysnana]

38. It is worse than that.

My brother was doing a start up a database management and security start up at the end of the dot.com era and he had five different "rating" agencies asking $25,000 for a favorable report. At least one of them was a major player.

He had signed three major clients but never got another after declining to pay the extortion. He went back to doing this for small firms.

[Demeter]

29. China's Fat Banking Years Are Fading, And Risks Are Rising FROM SEPTEMBER

http://www.chinastakes.com/2009/9/chinas-fat-banking-years-are-fading-and-risks-are-rising.html

Since the stock-holding reform, China's banking sector has seen some years of fat profits, but now for the first time it is experiencing a real test of the economic cycle. There has already been a substantial decline in profits, and accumulating non-performing loans (NPLs) and credit risk are likely to become apparent with the withdrawal of the government's stimulus policies.

The oceanic lending spree in the first half of 2009 has put enormous capital pressure on the banks. The China Banking Regulatory Commission (CBRC), seriously concerned that bad debts will rise while the quality of capital declines, is studying how to deduct subordinated debt capital instruments held by banks from subordinate capital.

CBRC has recently issued a "Notice on Improving the Capital Supplement Mechanism for Commercial Banks (draft)," requiring commercial banks to deduct subordinated debt cross-held between banks from the subordinate capital in calculating their capital adequacy ratios.

The deduction will decrease banks' capital adequacy, putting constraints on lending and limiting the supply of funds in demand by the real economy during the fragile recovery. Brokerages and institutions have reported that this provision, if implemented, will drop total capital adequacy levels by nearly one percentage point and cut new lending by about 600-700 billion yuan.

CBRC says this policy will help optimize the structure of investors of subordinated debt capital instruments, and will not reduce the circulation of subordinated debt by commercial banks.

The new regulation has triggered dissatisfaction among banks. Frank Newman, chairman of Shenzhen Development Bank, hopes that the new regulation will be applied to future issuance rather than that already issued, and a gradual approach will be adopted during this change.

Guo Shuqing, chairman of China Construction Bank, says his bank has not reached a consensus on this issue so far. An increase in the capital adequacy ratio is only a part of risk control, and does not necessarily mean the higher, the better

CBRC says some share-holding commercial banks have taken on potential risks, and the increased lending has led to capital adequacy nearing 8%, the minimum regulatory standard. CBRC chairman Liu Mingkang has consistently adhered to a cautionary approach and warned banks when the new lending took off in the first half.

CBRC has suspended the approval of new business for banks with capital adequacy lower than 9%, including Shanghai Pudong Development Bank, China Minsheng Bank, and China Merchants Bank, among others.

The interest rate differential (IRD) has been the main source of profit for banks. In 2008, though, the central bank cut interest rates five times, and removed controls over the size of loans, leading to lower loan prices and IRD narrowing. In accordance with established practice, the loan re-pricing began at the beginning of 2009, so it had limited impact on the performance of banks last year but its impact on banking sector profits this year is showing.

The first half of 2009 saw 7.37 trillion yuan hit the economy, 2.3 times that in the same period in 2008, and the total capital of the five biggest banks, ICBC, Agricultural Bank, Bank of China, Construction Bank, Bank of Communications, increased by 27.7%, year-on-year. It appears that the increasing base meant greater profits. However, the vast credit growth has not offset the narrowing of IRD and decreasing loan yields, and banking sector profits this year have declined substantially from last year's.

The huge lending has also masked NPLs. If things go wrong with new loans, it usually takes two years for the effect to show. The abundant liquidity has partially revived many weak companies, so the realization of NPLs is delayed. Credit risk is still the major problem. For firms in a difficult operating environment, liquidity will play only a temporary role in easing pressures, and once they mount up NPLs will proliferate.

Most new lending has gone mainly to infrastructure projects and the government financing platform. Regulator's statistics show that in less than a year and a half, the debt of the government financing platform has increased by 3.5 trillion yuan, of which nearly 85% comes from bank loans. Analysts worry that banks' credit risks are supported by the state, and many projects relying on their own cash flow are unable to repay without that state support.

[Demeter]

30. Oil boom fuels mystery of the missing island in the Mexican Gulf

http://www.timesonline.co.uk/tol/news/world/us_and_americas/article6823281.ece

The mystery has come to haunt Mexico as unrelentingly as one of its beloved soap operas: where is Bermeja, an island off the Yucatan coast that appears to have vanished without trace?

The disappearance of Bermeja is no laughing matter – it would allow Mexico to extend its maritime border some 55 miles further north, helping it to fight off what it sees as American encroachment on its claims to potentially vast oil reserves in the Mexican Gulf.

Hunger for news of the missing island has intensified – along with bizarre speculation about what could have happened to it – as Mexico and America ponder a new drilling agreement.

Mexico’s hunt for Bermeja has been given urgency by BP’s announcement last week of a big find in the Gulf, the latest in a series of discoveries that has turned the area into one of the oil world’s most promising exploration regions.

Some have scented skulduggery on an epic scale and conspiratorially minded Mexican nationalists have seized on the mystery as an opportunity to bludgeon America, a standard reflex when things go wrong south of the Rio Grande.

They accuse the great behemoth in the north of destroying the island – described in some accounts as a sand bar or coral clump and in others as a volcanic rock rising out of the sea – to undermine Mexico’s oil claims. Others argue that natural causes, from rising sea levels to earthquakes, may have brought about the demise of Bermeja, which means bright red in Spanish.

It appears on maps as early as the 1500s and as late as 1941. Mexican Islands, a book published in 1946 by the country’s Institute of Geography, lists Bermeja’s coordinates; so do publications by the distinguished Mexican Society of Geography and Statistics. The longitude and latitude of Bermeja are given on Google Earth and in a CIA atlas. However, Mexican expeditions sent to the island in the past decade have been forced to return home without a glimpse of it.

Doubts about Bermeja’s existence surfaced more than a decade ago but were kept quiet so as not to cause panic. The Alacranes islets much further south were the point of reference for a 1997 treaty on maritime limits between Mexico and America and a 2001 “doughnut hole” accord – a reference to one of the gaps between American and Mexican territorial waters.

Mexican legislators fighting a rearguard action in favour of the island’s existence have been dealt a blow after a land and air search of the region: a report to the Mexican Congress by the National Autonomous University of Mexico concluded that “the island does not exist”.

Elias Cardenas, chairman of the parliament’s maritime committee, said there were four more possible sites where the island might lie. He called for more studies before Mexico and America formalise the next drilling agreement. “Right now, the big fight is for oil,” he said. He did not believe the United States had bombed the island, as some have suggested.

Others took a different view. “There is no doubt the gringos are behind this,” wrote Marco on a nationalist website. “Let’s not forget that they stole California.”

[Demeter]

31. Fantasy Island… Bermeja

http://mexfiles.net/2009/03/21/fantasy-island-bermeja/

....The United States Navy reported NOT finding the islet in 1997, although it is mentioned in a 1998 Mexican document. Satellite photos indicate the seabed is 40 m. deep at that point. Global warming may have raised sea levels, but 31 sq. Kilometers don’t just disappear under 40 meters of water without someone noticing.

The “mystery of the deep” gets murkier. In 2000, Mexico and the United States signed an agreement to hold off new oil prospecting and drilling in oil reserves in their respective economic zones until 2011. With Bermeja missing, Mexico’s economic zone — and control of the Hoyos de Dona reserve – is gone. And the documents relating to Bermeja have — like Bermejaitself — disappeared.

Mexican legislators — especially on the left — are starting to take an interest. There has been next to nothing in the foreign press, although AFP had a brief article about the Bermeja mystery in February:
bermeja1

Where'd it go?

“There are two stories about how it disappeared: one is that global warming raised the sea level and it is under water,” said Mexican lawmaker Elias Cardenas, of the Convergence Party.

“The other is that … it was blown up by the CIA so that the United States would get the upper hand in Hoyos de Dona” — the oil reserves area.
Even better for conspiracy theorists, when the treaty defining oil rights in the gulf was being considered, A PAN Senator, the Chairman of the Mexican Senate Foreign Relations Committee, José Angel Conchello Dávila, was dismissed as something of a crank when he became incensed over foreign explorations in what was then acknowledged as Mexican territory, and began raising objections to the proposed moritorium on drilling. Then was killed in an unexplained auto accident.

And Bermeja disappeared. As have documents about both the treaty negotiations, like the islet itself, have sank out of sight. Although official archives appear to have been destroyed, Bejame has been described on nautical charts as early as 1570. The Biblioteca del Instituto de Geografía at UNAM, the Sociedad Mexicana de Geografía y Estadística and the Secretaría de Gobernación have historical maps that show Bermeja in Mexican waters. The Secretarías of Gobernacion, Marina and Comerico all include Bermeja on official maps. Travel Journals Net (based on 1994 CIA data) lists Bermeja as lying in the State of Yucatan.

With an estimated 22.5 billion (thousand million) barrels of oil potentially at stake, Bermeja is more than just a intriguing mystery of the sea. It’s a multi-trillion dollar buried treasure.

[Demeter]

32. Mexico’s missing island

http://www.lonelyplanet.com/mexico/travel-tips-and-articles/42/39875

Includes pictures--not identified as Bermeja, however.

[Demeter]

33. Have you seen this Island? If so, please call Mexico at 01-800-BERMEJA

http://jacqui.instablogs.com/entry/have-you-seen-this-island-if-so-please-call-mexico-at-01-800-bermeja/

http://www.instablogsimages.com/images/2009/02/27/nnn_AS6pO_18311.bmp

Attention all international readers, Mexico needs your help. Have you seen this island? Bermeja is about 80 kilometers in size and was last seen frolicking in the Gulf of Mexico outside of Yucatan. She is at least 350 years old and was last seen wearing 22 billion barrels of sea bed oil reserves. If seen, please call Mexico at 01-800-Bermeja.

There has been much commotion and even greater conspiracy theories involving the disappearance of our little Bermeja Island. Where’d she go? Who is she with? Is she frightened and alone, waiting for us to rescue her or did she meet a handsome peninsula and just take off? Did her provocative attire prove too much to resist? The questions are unlimited.

The mysterious remote islet is said have been roughly 100 kilometers North of the state of Yucatan. Her history is a bit surreal, like many things in Mexico. She first appeared in cartography in the 1600’s where she remained and was rewritten into a 1946 cartography book edited by the Mexican government. The islands cartography can be followed with visual testimonial proof until 1977 and actualized Mexican cartography until 1998.

Bermeja island in the Gulf of Mexico — a strategic marker defining US and Mexican maritime and subsea rights — has disappeared along with documents backing up a bilateral treaty on major oil reserves in the area, fueling rumors of a CIA plot.

Low-lying Bermeja, a smallish 80 km2 (31 sq miles), until 30 years ago was the official land point from which Mexico set its 200 nautical-mile economic zone.

The Alacranes islands now are being used as the marker, sharply reducing Mexico’s economic zone. -AP

Have you seen this Island? If so, please call Mexico at 01-800-BERMEJA

The interesting issue of her disappearance is the the strategic value she holds for her rightful owner. The mystery of Bermeja is not within her geographics, but in politics and economics.

Under the administrations of Ernesto Zedillo and William Clinton, an agreement was signed setting the boundaries and rights of the two nations. The donut holes are zones in the ocean lying in international waters outside of any national territory and require treaties for their exploitation.

The Zedillo-Clinton treaty awards 60% of the Gulf sea bed in the Western Donut Hole (an eastern one exists as well) to Mexico, and the 40% remaining, which have a greater possibility of oilfields, to the United States.

In June 2000, Mexico and the United States signed a treaty putting a 10-year moratorium on their prospecting and pumping activities in the area. It is set to expire in 2011. -AP

Miguel Angel Gonzalez Felix, a foreign ministry legal adviser when the treaty was negotiated, told senators the island was some 40 to 50 meters (120 to 150 feet) under water, thus before the treaty was even signed Bermeja had been removed from treaty negotiations. With the removal of the M.I.A. Bermeja island the ocean was divided without it as part of Mexican territory. Thus, Mexican territory was deemed to begin much farther south, which meant the elimination of Mexican territory in the Western Donut Hole and reducing its oil potential in favor of the United States, which already has three highly productive oil wells in exploitation.

This is where it gets good. I know you’ve got to be thinking “WTF, how the hell does and island just get lost?” According to Mexican lawmaker, Elias Cardenas, there are only two possibilities:

“There are two stories about how it disappeared: one is that global warming raised the sea level and it is under water,”

“The other is that ... it was blown up by the CIA so that the United States would get the upper hand in Hoyos de Dona” — the oil reserves area.-Elias Cardenas, Mexican senator

Wow! Senator Elias Cardenas strikes fast and furious. So, who’s the culprit? Did Mother Nature swallow our little Miss Bermeja whole or did the greedy, deceitful and corrupting American government send in special operational island vanishing forces to do away with her?

“A force of nature (able to sink an island) does not take place without anyone noticing, and much less so when it is sitting in an area with more than 22 billion barrels of oil reserves.”
-Mexican senators

Have you seen this Island? If so, please call Mexico at 01-800-BERMEJA

They’ve probably got a point there. You would think, in this day and age, where everything and everyone is monitored by sometype of Big Brother system or satellite 31 square miles of land vanishing would not just go unnoticed. If by some freak of nature it did happen, why were all surrounding islets and islands left unscathed; coincidence or was someone hungry for donuts?

At the same time, bombing 31 sqaure miles of land off the face of the earth would not go unnoticed either. I am more inclined to believe rising sea levels, or sinking sea floor, or a combination of both. Maybe Navy Seals, aliens, or robot dolphins dismantled it a shovel at a time. Even that is more probable than a bomb.

Now, there are some very interesting details surrounding Bermeja’s disappearance. We know Bermeja appears in a 1998 book of Mexican islands by the Interior Ministry, but in 1997 a pretreaty Navy expedition sent by President Zedillo, reported it could not locate the island. We also know the treaty was signed, we know it regulates and dictates both U.S. and Mexican pumping and prospecting activities. We know it will become null in 2011, but we don’t know the specifics of how the treaty, and under what conditions, the treaty was signed.

“We do not have information about how this accord was signed”
-Elias Cardenas

The documents establishing territorial ocean borders with the United States have disappeared, documents that should have been kept in the power of the Senate, are nowhere to be found.

When the treaties were discussed, the primary negotiations were only opposed by one Mexican Senator, José Angel Conchillo, who denounced this new dispossession to everyone including the four winds. Oddly enough, Conchillo, died in a strange road accident that was never investigated in 1998.

Standard Congressional rule dictate all discussions on the treaty should have and were in fact recorded, yet these recordings, along with the list of participating legislators seem to have disappeared along with the island.

Have you seen this Island? If so, please call Mexico at 01-800-BERMEJA

There you have it. We had an island, the island was charted, and now she’s gone; we lost her. Where? Nobody really knows, but let me leave you with a question to ponder:

Wouldn’t you think an island such as Bermeja, with billions of barrels of oil in awaiting would be kept track of? We’re talking about national security, our nation’s economic livelihood. I’ll admit, I lose things all the time: my keys, wallet, cellphone; hell I’ve even lost track of my kids in the past, but I have never lost something and not looked for it.

[ozymandius]

55. I spied somewhere it on the side of a milk carton.

:hide:

[Demeter]

57. Sneaking Back After Hours, Eh?

Well, now you know.

[InkAddict]

37. Wow, a second island goes missing...

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=102&topic_id=4317856&mesg_id=4317929

though this one seems to have legitmately sunk below sea level.

Paging John Locke...

[zogofzorkon]

44. If there ever was a clear cut case of

alien island abduction this is it.

[Demeter]

53. Yes, but These Aliens Are Probably Gringos

not ET

[Po_d Mainiac]

41. dupe delete

[Demeter]

34. Guest Blog: Financial Crisis and Reform Déjà Vu By Simon van Norden

http://www.econbrowser.com/archives/2009/09/guest_blog_fina_1.html

"Once you've seen one financial market crisis...you've seen one financial market crisis."

-- Attributed to Federal Reserve Board Governor Kevin Warsh by former US Treasury Assistant Secretary for Economic Policy Phillip Swagel in The Financial Crisis: an Inside View, March 2009, p. 4.

The financial crisis has set a lot of records so far; it's certainly the worst US banking crisis of my lifetime. Some, as suggested by the above quote, see such crises as unique events; each one is singular and there's not much to be learned about how to handle one from looking at past crises. For example, there's no precedent that I know of for a banking crisis involves the failure of the biggest counterparties for credit default swaps.

I think a much smaller number of people see the crisis differently; they think of it as another potato, a big one. No two potatoes are exactly alike in size and shape, but they all taste pretty much the same and you can use the same recipe for most of them. For that reason, it's interesting to see to what extent the current crisis behaves like other crises, even if it has some unique features.

I think there's some interesting parallels between the current crisis, the Savings and Loan (S&L) crisis of the 80s and 90s, and the Long-Term Capital Management (LTCM) Crisis of 1998. But before I talk about that, let me talk about what a "typical" banking crisis looks like.

The Basel View of "Typical" Banking Crises

If we set the way-back machine to 2004, a time long before terms like ARM, CDS, and AIG entered common conversation, we can see what people thought a typical bank crisis looked like. That's the year the guys in Basel who worry about such things published "Bank Failures in Mature Economies." They looked at the main banking crises in developed countries from 1980 to 2000 and asked themselves what they saw. To be sure, they saw some differences, but they also saw some patterns. Here's part of their main conclusions (note that "credit risk" is Banker for "bad loans").

Most of the widespread failures required some amount of public support, sometimes in very large amounts. All of the episodes that involved large amounts of public support were caused by credit risk problems. ...The widespread banking crises that involved credit risk were remarkably similar. A period of financial deregulation resulted in rapid growth in lending, particularly in real estate related lending. Rapidly rising real estate prices encouraged more lending, abetted by lax regulatory systems in many cases. When economic recessions occurred, inflated real estate prices collapsed, leading directly to the failures. (BIS, 2004, p.66)

That sounds a lot like what the US (and some other countries) experienced immediately afterwards. There had been some financial deregulation, which was followed by a period of very rapid growth in real-estate-related lending. Rapidly rising real estate values encouraged more lending. The biggest difference seems to be the last point; the recession did not cause real estate prices to collapse; they had peaked by 2006 and fell before the recession started. We could probably also argue about whether it was financial deregulation or "financial innovation that avoided regulations" that helped fuel the increase in real-estate lending. However, in this view the boom and bust cycle in real estate, the subsequent fallout for the banking sector, and the need for a major publicly-funded bailout is not remarkable; we've seen this kind of story before. In fact, Reinhart and Rogoff have gone so far as to tabulate what happens to government debt in the aftermath of a banking crisis. They find that real government debt increases by an average of 86% in the three years after the start of a crisis. So regardless of how you feel about the US government's spending during the crisis, it seems less remarkable when compared to what typically happens in a banking crisis.



Figure from Reinhart, Carmen M., and Kenneth S. Rogoff. 2009. "The Aftermath of Financial Crises." American Economic Review, 99(2): 466-72.

Three American Financial Market Crises

More support for the view that banking crises follow similar patterns can be found by comparing the last three US banking crises; the S&L crisis of the late 80s and early 90s, the collapse of LTCM and the most recent crisis. The S&L crisis closely followed the pattern described by the BIS report quoted above; financial deregulation, followed by a rapid growth in real estate lending, creation of local speculative bubbles in real estate prices, and the failure of institutions as bubbles burst (For descriptions of the S&L crisis, see BIS (2004) or the GAO 1996 report). The General Accounting Office put the cost of the S&L bailout to US taxpayers at $132.1 billion, or a bit under 2% of GDP (United States General Accounting Office (1996) "Financial Audit: Resolution Trust Corporation's 1994 and 1995 Financial Statements," Table 3 and author's calculations). That may seem small compared to the size of TARP or this year's projected federal deficit, but it was shocking at the time.

At first glance, the LTCM crisis appears quite different; no bank failed (LTCM was a hedge fund), its failure was unrelated to real estate investment or credit risk, and the crisis was resolved at no cost to the taxpayer. However, the LTCM crisis showed that, as a result of deregulation, a systemic crisis could start outside the regulated banking system. Another GAO study noted:

The LTCM case illustrated that market discipline can break down and showed that potential systemic risk can be posed not only by a cascade of major firm failures, but also by leveraged trading positions. LTCM was able to establish leveraged trading positions of a size that posed potential systemic risk primarily because the banks and securities and futures firms that were its creditors and counterparties failed to enforce their own risk management standards. (US GAO (1999) p. 29)

The same report noted:

* Gaps in regulatory authority limits their ability to identify and mitigate systemic risk (US GAO (1999) p. 24)
* Regulators did not identify weaknesses in firms' risk management practices until after the crisis (US GAO (1999) p. 16)
* Monitoring did not reveal the potential systemic threat posed by LTCM (US GAO (1999) p. 17)

and provided a variety of proposals (some of which are mentioned below) to reform the financial system by reducing systemic risks.

The success of those reforms can be judged by role of similar factors in the most recent US banking crisis. An important factor in the latter has been the role of trading in derivative securities, primarily mortgage-based securities and credit default swaps (CDS). Again, government oversight of this market was limited due to faith in the market's ability to manage its exposure to risk, and was further weakened by divided responsibilities between multiple agencies. Regulators and private lenders alike were again unaware of major firms' exposure to losses on derivative securities; this time even the heads of major financial institutions were not aware of the extent of their own exposures. Again, this was in part due to the lack of transparency, lack of clearing and high leverage afforded by trade in Over-the-Counter (OTC) derivatives (particularly those traded at Bear Stearns.) Again, weaknesses in firms' risk management practices became apparent only in hindsight. Again, major financial firms that were not regulated as traditional deposit-taking banks took on highly-leveraged positions and posed major systemic threats to the banking system. These included several investment banks (such as Bear Stearns, Goldman Sachs, Lehman Brothers, and CitiGroup) and the insurance company AIG.

Conclusion

Looking at recent events from this perspective, I still see the size of the losses as breathtaking, but the causes and dynamics seem much more familiar. What bothers me is that some of the suggested solutions sound pretty familiar too; make derivative trading more transparent, improve coordination among the regulators, give regulators more power to control systemic risk in new places, and so on. Despite that, not only was there another crisis, but it was much larger than the two previous crises combined.

[DemReadingDU]

43. Paul Craig Roberts: Good-Bye

3/24/10 Good-Bye
Truth Has Fallen and Taken Liberty With It
Paul Craig Roberts

There was a time when the pen was mightier than the sword. That was a time when people believed in truth and regarded truth as an independent power and not as an auxiliary for government, class, race, ideological, personal, or financial interest.

Today Americans are ruled by propaganda. Americans have little regard for truth, little access to it, and little ability to recognize it.

Truth is an unwelcome entity. It is disturbing. It is off limits. Those who speak it run the risk of being branded “anti-American,” “anti-semite” or “conspiracy theorist.”

Truth is an inconvenience for government and for the interest groups whose campaign contributions control government.

Truth is an inconvenience for prosecutors who want convictions, not the discovery of innocence or guilt.

Truth is inconvenient for ideologues.

Today many whose goal once was the discovery of truth are now paid handsomely to hide it. “Free market economists” are paid to sell offshoring to the American people. High-productivity, high value-added American jobs are denigrated as dirty, old industrial jobs. Relicts from long ago, we are best shed of them. Their place has been taken by “the New Economy,” a mythical economy that allegedly consists of high-tech white collar jobs in which Americans innovate and finance activities that occur offshore. All Americans need in order to participate in this “new economy” are finance degrees from Ivy League universities, and then they will work on Wall Street at million dollar jobs.

Economists who were once respectable took money to contribute to this myth of “the New Economy.”

And not only economists sell their souls for filthy lucre. Recently we have had reports of medical doctors who, for money, have published in peer-reviewed journals concocted “studies” that hype this or that new medicine produced by pharmaceutical companies that paid for the “studies.”

The Council of Europe is investigating the drug companies’ role in hyping a false swine flu pandemic in order to gain billions of dollars in sales of the vaccine.

The media helped the US military hype its recent Marja offensive in Afghanistan, describing Marja as a city of 80,000 under Taliban control. It turns out that Marja is not urban but a collection of village farms.

And there is the global warming scandal, in which NGOs. the UN, and the nuclear industry colluded in concocting a doomsday scenario in order to create profit in pollution.

Wherever one looks, truth has fallen to money.

Wherever money is insufficient to bury the truth, ignorance, propaganda, and short memories finish the job.
.
.
As the pen is censored and its might extinguished, I am signing off.

more...
http://www.counterpunch.org/roberts03242010.html



So how are we supposed to find the truth, if people like PCR stop writing?

[Tansy_Gold]

45. does anyone remember a novel by Irving Wallace (I think)

titled "The Word"?

That's what came to mind as I read this piece.

I may have to see if I can find a copy of the book around here somewhere.



TG

[kickysnana]

51. I read Ayn Rand as a young teen...

At the time I thought that they were warning tales, mind exercises. I never, ever thought that anyone would build an economic system based on her "horror" stories. I should probably reread again as an adult with an eye to what the heck others saw.

I read The Word. It was the first modern novel I had read about religious beliefs and it actually cured me of the guilt for my doubts since evidently thinking people really do question their church and even their faith, sometimes a very good thing.

[ozymandius]

48. 5 yr note auction not good, is sea change upon us?

With the backdrop of a 5 yr note yield at the highest level since mid Jan, the 5 yr auction was not good and the higher yield was still not tempting enough. ..... however modest but something has changed in the US Treasury market and the benchmark 10 yr rate is just within 1-2 bps of breaking out.

http://www.ritholtz.com/blog/2010/03/5-yr-note-auction-not-good-is-sea-change-upon-us/

Anybody have an idea about what's happening here?

[Demeter]

54. The Lunatics Are Running The Asylum, Ozy

There are no adults in office or in charge any more, and no bone fide experts have the ear of power any longer. We are Freaking Doomed, as the Mugambo Guru says, if not necessarily for the reasons he chooses to bemoan.