"Our Children and Grandchildren are not merely statistics towards which we can be indifferent" JFK

Thursday, September 30, 2010

Securities and Exchange Commission might have Flash Crash Report completed Friday

Almost 5 months after the Flash Crash,
the Securities and Exchange Commission
is ready to release a 100 page multiple choice formatted report
on the causes of the flash crash.

By Jessica Holzer, Jacob Bunge and Sarah Lynch
The Wall Street Journal 

WASHINGTON—Regulators are close to releasing a report on the causes of the May 6 "flash crash."

The Securities and Exchange Commission staff is expected to circulate final copies of the report to all five SEC commissioners soon, a person familiar with the matter said, making it possible the report could be released by Friday.

Two of the agency's five commissioners, Elisse Walter and Kathleen Casey, are out of the country, a possible complication in securing release of the report. A majority of the five SEC commissioners must sign off on its release. Sources familiar with the issue said the long-awaited "flash crash" report, expected to run about 100 pages, isn't likely to point to a smoking gun or any novel explanation for the dive in the U.S. stock market that day.

Rather, it will present a detailed account of the events that day, showing that a confluence of factors led to the plunge that wiped out roughly $862 billion in equity-market value in less than 20 minutes.

Markets that day were already down heavily on fears around European debt problems when a number of large trades in derivatives markets fueled heavy selling in stocks. Some exchange systems became bogged down with the flow of market data, which prompted several major trading firms to cease trading activity, reducing the pool of available liquidity.

The report was prepared jointly by staff of the SEC and the Commodity Futures Trading Commission, which have in recent days been in discussions over precise wording in the text, fueling speculation the report's release would slip into next week.

All five SEC commissioners are expected to authorize the report's release.

The document aims to give a definitive account of the events that day, including second-by-second descriptions of parts of the day when rattled traders fled the markets, people familiar with the report said.

A draft of the report circulated to SEC commissioners over the weekend didn't proscribe any policy changes, nor did it attempt to nudge regulators to pursue certain reforms, according to a person who has seen it.

While no major revelations are expected in the report, market participants and regulators have voiced hope that a thorough accounting of the multiple factors playing into the market swings of May 6 will help boost investors' confidence in the market.

Stock trading activity in the third quarter of 2010 has dropped about 27% from second-quarter levels, according to figures from Barclays Capital, while trading in options and futures is off 21% and 15%, respectively.

Securities and Exchange Commission Crack Investigative  Research Team

Federal Reserve selectively releases data to a chosen few...the already RICH!

How is it that the already rich keep getting richer? Well, if you are one of the chosen few, you are privy to market moving data before we serfs. Yes, our grandchildren continue to be placed in financial harms way while Larry Meyer, Bill Gross and their elite group of chosen insiders stomp on our face. ROME IS BURNING!

Zero Hedge
Reuters has just released a stunning special report detailing how the Fed leaks all important, non-public, and ever so material, information to private parties. From the report:

On August 19, just nine days after the U.S. central bank surprised financial markets by deciding to buy more bonds to support a flagging economy, former Fed governor Larry Meyer sent a note to clients of his consulting firm with a breakdown of the policy-setting meeting.

The minutes from that same gathering of the powerful Federal Open Market Committee, or FOMC, are made available to the public -- but only after a three-week lag. So Meyer's clients were provided with a glimpse into what the Fed was thinking well ahead of other investors.

His note cited the views of "most members" and "many members" as he detailed increasingly sharp divisions among the officials who determine the nation's monetary policy.

The inside scoop, which explained how rising mortgage prepayments had prompted renewed central bank action, was simply too detailed to have come from anywhere but the Fed.

A respected economist, Meyer charges clients around $75,000 for his product, which includes a popular forecasting service. He frequently shares his research with reporters, though he kept this note out of the public eye. Reuters obtained a copy from a market source. Meyer declined to comment for this story, as did the Federal Reserve.

By necessity, the Fed spends a considerable amount of time talking to investment managers, bank economists and market strategists. Doing so helps it gather intelligence about the market and the economy that is invaluable in informing the bank's decisions on borrowing costs and lending programs.

But a Reuters investigation has found that the information flow sometimes goes both ways as Fed officials let their guard down with former colleagues and other close private sector contacts.

Frankly, we stopped right there, very much disgusted that we have been proven correct yet again when we asked rhetorically if "Bill Gross just confirmed on live TV that he has an "advance look" at non-public fed data?". Now we know how it is that Bill Gross knew all too well that the Fed would lower its GDP expectations to 2% three weeks ahead of the minutes release. It also explains why PIMCO is ever so precise in going on margin in purchasing either bonds or MBS.

Expletive it!

This is beyond disgusting, but that is to what this bullshit country has devolved: leaking the most important decisions made on "behalf of the middle class" so that a few multi-billionaires can make a few extra soon to be worthless dollars.

We will indicate if and when Pimco goes on margin next when the Total Return Fund posts its holding distribution next in mid October, telegraphing what the Fed has told it about the November FOMC meeting, but frankly at this point it is irrelevant. It is now obvious that the Fed now realizes all is lost and just feeding its wealthy clients (that's right, these people are the Fed's CLIENTS) the last remaining scraps before it pulls the hyperinflation switch.

By Kristina Cooke, Pedro da Costa and Emily Flitter
To the outside world, the Federal Reserve is an impenetrable fortress. But former employees and big investors are privy to some of its secrets -- and that access can be lucrative.

...No one is accusing Meyer and his firm, Macroeconomic Advisers -- or any other purveyors of Fed insights for that matter -- of wrongdoing. They are not prohibited from sharing such information with their hedge fund and money manager clients. WHY...WHY...WHY!!! This is transparency???

But critics question whether it is proper for Fed officials to parcel out details that have the potential to move markets around the world, especially with the government's involvement in the economy being so pronounced.

"It's certainly not what Fed officials should be doing," said Alice Rivlin, a former Fed governor and now a fellow at the Brookings Institute think tank. "The rules when I was there were you don't talk to anybody about anything that could be used for commercial purposes."

 Link to Reuters Report...you will not be happy!!

21st Sequential Weekly Outflow from U.S. Equity Funds

S and P 500 as of 9/29/10 close is up 96 points or 9.2% month to date while the billions of withdrawals from the U.S. Stock Market continue. $16 Billion reported withdrawn from week ending 9/1/10 through  9/22/10.

The stock market is not manipulated, it is just irrational. After all, you have Jim Cramer, Dennis Kneale, Fast Money, CNBC and the SEC covering your back!

Washington, DC, September 29, 2010 - Total estimated inflows to long-term mutual funds were $5.75 billion for the week ended Wednesday, September 22, the Investment Company Institute reported today. Flow estimates are derived from data collected covering more than 95 percent of industry assets and are adjusted to represent industry totals.

Equity funds had estimated outflows of $1.91 billion for the week, compared to estimated outflows of $3.02 billion in the previous week. Domestic equity funds had estimated outflows of $2.52 billion, while estimated inflows to foreign equity funds were $616 million.

Total Domestic Equity Flows/Week Ending
-$2.524 billion 9/22/10
-$3.599 billion 9/15/10
-$2.235 Billion 9/8/10
-$7.705 billion 9/1/10
-$15.598 Billion for the month of August 2010
-$11.142 Billion for the month of July 2010
-$7.519 Billion for the month of June 2010
-$19.066 Billion for the month of May 2010

Since April 30th, 2010, $69.388 BILLION has been withdrawn from Domestic Equity Funds (This is the 21st sequential weekly outflow from US stocks).

Safest cities for families with young children revealed-Underwriters Laboratories

NORTHBROOK, Ill., Sept. 29, 2010 - News stories about tragic accidents, many that could have been prevented, seem to dominate today's headlines. While accidents can happen anytime or anywhere, Underwriters Laboratories (UL), the global safety leader, commissioned a study with Sperling's Best Places to determine the cities that stand out in helping prevent needless accidents and improving the safety of their residents, especially families with young children.

The study, "Safest Cities for Families with Young Children," evaluated the 50 largest U.S. cities on specific criteria that contribute to home, community and overall personal safety. The results showed that 10 cities lead the way in helping reduce risk of fire deaths, pedestrian accidents and other mishaps that contribute to the estimated 14 million potentially disabling, unintentional injuries that children sustain each year.

The 2010 "Safest Cities for Families with Young Children" include:
  • Boston
  • Columbus, Ohio
  • Louisville, Ky.
  • Minneapolis, Minn.
  • New York
  • Portland, Ore.
  • San Francisco
  • Seattle
  • Tampa, Fla.
  • Virginia Beach, Va.

Each city was measured on 25 criteria encompassing child-focused, safety-oriented behaviors and regulatory best practices. As part of the methodology, the study filtered out cities with the highest crime rates and considered air quality, incidence of child pedestrian accidents, injuries and drowning. The study also focused on accessibility to hospitals; response time for fire and police personnel; and laws, codes and regulations that address smoking, home inspections, smoke and CO alarms, pool safety and bike helmets. The top 10 cities had the highest frequency or values in these categories.

"There is a unique set of safety considerations that goes into developing safe homes, communities and environments for raising young children, and the purpose of the study was to bring awareness to the best practices in those areas," said Gus Schaefer, UL's Public Safety Officer. "We hope that highlighting the importance of these safety practices will help keep more families protected." Complete Press Release

JPMorgan Chase suspends "certain" foreclosures...they too neglected to verify foreclosure documents

Huffington Post

Even as August saw more Americans lose their homes to foreclosure than in any other month on record, there are growing concerns over the legality of many of those proceedings.

JPMorgan Chase has suspended legal proceedings on "certain" foreclosures, due to concerns about the validity of the foreclosure documents, a spokesman for the bank told CNBC Wednesday (hat tip to Zero Hedge).

JPMorgan spokesman Tom Kelly confirmed to the AP Wednesday that "employees signed some affidavits about loan documents without personally verifying the files."

The decision is the latest signal of a potentially massive stall in the nation's foreclosure process. Last week, after GMAC Mortgage halted its foreclosures in 23 states, the Washington Post reported that one of GMAC's employees hadn't read the roughly 10,000 foreclosure documents he approved each month (and now Colorado wants to be added to that list of states). It then turned out that the "robo signer" might not have been alone.

This week, the controversy extended to JPMorgan Chase, as lawyers for a Florida homeowner challenged the person's JPMorgan foreclosure, citing a May statement from an executive for the bank who said she didn't properly review foreclosure documents before approving them.

Zero Hedge, for what it's worth, sees this as the beginning of a larger unraveling in the country's foreclosure process. Indeed, regardless of what JPMorgan determines during its review, the freeze will throw countless foreclosures into doubt.

As Bloomberg noted this week, delays in foreclosure proceedings would cripple the already wounded housing market.

Dylan Ratigan: Confessions of a Lobbyist, "Everybody's writing a check."

Huffington Post Recap
Corporations and interest groups have an unlimited ability to spend money on political causes, fostering an unethical and potentially illegal system of influence, a powerful Washington DC lobbyist acknowledged to MSNBC's Dylan Ratigan on Wednesday.

Appearing on the first installment of a series called "Follow the Money," the lobbyist, Jimmy Williams, a principal at Sonnenschein Nath and Rosenthal LLP, said corporations and interest groups often do not report to the IRS the large amounts of money they give to lawmakers and political action committees, choosing instead to pay a nominal fine. The money goes into a "black hole," Williams said, perpetuating a system he called "corrupt." In 2009, the congressional publication The Hill named Williams one of capital's top corporate lobbyists.

Williams cited the Supreme Court ruling at the beginning of this year in the case Citizens United v. Federal Election Commission Link to PDF, in which corporations received protection for their First Amendment right to spend money on political causes. Essentially, Williams said, the decision gives corporations the same rights he, a registered lobbyist, has -- except the corporations don't have to register as lobbyists. "If the court is saying that a corporation is a person, then why shouldn't they have to play by the same exact rules that I have to play by?" he said.

The solution, Williams said, is to end the practice of lavish fundraisers, in which these corporations and interest groups write large checks to finance political campaigns, and to switch to a system of federally-financed elections. If each taxpayer paid just four dollars more, he said, every lawmaker and the president would have $1 million per election cycle to spend on publicity.

Williams said both major political parties are in the game and special interests are happy to play in the current system. "Everybody's writing a check."

Senator Al Franken does a Stuart Smalley Therapy on Ally Financial

"As part of this investigation, it is crucial that Ally and its employees are held fully accoutable for any criminal misconduct. "It is critical to confirm that no loans provided through the FHA or in conjunction with the HAMP program were associated with Ally's misconduct."

Oh, oh....wait until Al finds out that our government agencies
have been as negligent and inept as Ally!

Senator Al Franken at a Senate Judiciary Committee in June.
(Photo Credit: Melina Mara/The Washington Post)

By Washington Post staff  
Sen. Al Franken (D-Minn.) called on the departments of Justice and Treasury and other relevant U.S. agencies to investigate foreclosure actions by Ally Financial and to ensure that homeowners who were wronged receive "proper restitution and compensation."

Franken said the company's filing of false affidavits in support of foreclosures "may have resulted in numerous illegitimate foreclosures across the country." He said the probes should include looking into possible criminal misconduct by Ally and its employees.

In a letter sent Wednesday to Attorney General Eric Holder, Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke, among others, Franken also asked administration officials to explain what actions the federal government is taking in its oversight role. Al Franken Letter

Wednesday, September 29, 2010

FASB odds of mark-to-market...fat chance given election year

1,500 to 1 against mark-to-market (a.k.a. fair value) and FASB is discussing a compromise to fair value accounting! FASB board member would bet on a hybrid model as a compromise!! If there are no standards, then FASB is simply another FAB friend of the banks.

By Dena Aubin

(Reuters) - Strong opposition to a controversial proposal to expand fair value accounting could sway rulemakers to modify the plan, a member of the U.S. accounting rule-making board said on Tuesday.

The proposal by the Financial Accounting Standards Board calls for loans and other financial assets to be valued based on what they would fetch in the market, known as mark-to-market, or fair value. That change is intended to give investors a clearer picture of assets held on banks' books.

The banking industry has opposed the measure, saying it does not make sense to assign market prices to loans that will never be sold.

"Thus far, I think the count is up to about 1,500 or so comment letters," said Lawrence Smith, a board member of FASB, which sets U.S. accounting rules. "I think I've read one that supports what we propose."

Smith added that board members will probably be influenced by the opposition. "If I were a betting person, I would bet on some type of hybrid model being adopted," he said.

The proposal differs from an approach taken by the International Accounting Standards Board, which has said loans should be valued based on amortized costs.

FASB has been working with IASB to reach agreement on one set of global standards. Mark-to-market is a key area where the rule-makers remain far apart.

Based in London, IASB sets rules that are used in more than 110 countries.

FASB is taking written comments on its proposal until September 30 and will hold public round tables until mid-October.

It will meet with IASB in November, Smith said.

"We're hopeful we can still come to a converged solution, although the time frame is very tight," he said.

FASB and IASB are trying to achieve a convergence of their accounting rules by June 2011, a timeline being pushed by leaders of the G-20 group of nations.

The U.S. Securities and Exchange Commission is also pushing for FASB and IASB to finish, so it can decide by 2011 whether to move U.S. companies to the international standards.

Timmy Geithner's Treasury Selling Citigroup Shares...

Classic Government Speak
"Loss Sharing Agreement"

WASHINGTON (AP) -- The government said Wednesday it is starting to sell $2.2 billion in trust preferred shares that it holds in Citigroup, another move to recoup the costs incurred in the $700 billion financial bailout.

The Treasury Department said the pace of the sales would be determined by market conditions.

The $2.2 billion in trust preferred shares were received by the government as part of Treasury's agreement in January 2009 to share potential losses on a pool of $301 billion of assets held by Citigroup.

The loss-sharing arrangement also involved the Federal Deposit Insurance Co. and the Federal Reserve. Citigroup paid the Treasury and the FDIC a premium in the form of securities for their willingness to share potential losses over a five to 10-year period.

The loss sharing arrangement was terminated in December 2009 at the request of Citigroup. Treasury was never required to make any payments under the arrangement and has no further obligation to do so.

The sale of the trust preferred shares will be handled by a syndicate of Wall Street investment firms including BofA Merrill Lynch, J.P. Morgan, Morgan Stanley, UBS Investment Bank and Wells Fargo Securities. These firms will solicit bids for the securities and will sell off the securities based on the bids received.

The sale of the Citigroup trust preferred securities is being handled separately from the sale of $25 billion in Citigroup common stock that the government owns.

Citigroup received $45 billion in taxpayer support in one of the largest bank rescues by the government in addition to the insurance provided against losses on the pool of $301 billion in assets.

Of the $45 billion, $24 billion was converted to a government ownership stake which the government has been selling off last spring. The bank repaid the other $20 billion in December 2009.

The government bailout of banks, auto companies and insurance giant American International Group Inc. have drawn heavy criticism. Many charge the Wall Street firms that helped lead the country into recession are now reaping big profits while ordinary Americans are continuing to struggle with high unemployment, soaring home foreclosures and a weak economy.

Oh no...another TARP Bank (Bank of America) cutting Proprietary Trading Jobs

Sept. 29 (Bloomberg) -- Bank of America Corp., the largest U.S. bank, is eliminating between 20 and 30 proprietary trading jobs to comply with Volcker rule limits on banks trading their own capital, according to a person briefed on the decision.

The cuts, which represent fewer than one third of the bank’s proprietary trading jobs, follow a decision this week to stop trading some liquid instruments, said the person, who declined to be more specific. Some of the affected employees are being encouraged to seek jobs within the bank, the person said, speaking anonymously because the matter isn’t public. The positions are in New York and outside the U.S.

“We continue to explore the best possible ways to comply with the Volcker rule and this is one step in that direction,” said Jessica Oppenheim, a spokeswoman in New York for the Charlotte, North Carolina-based bank.

Bank of America follows competitors including Goldman Sachs Group Inc. and JPMorgan Chase & Co. in taking steps to comply with the Dodd-Frank financial overhaul legislation passed in July. The Volcker rule, named after former Federal Reserve Chairman Paul Volcker, who proposed it, bans bank holding companies that have federally insured deposits from trading for their own accounts.

Bank of America’s proprietary trading business is run globally by David Sobotka. He’s a former Merrill Lynch & Co. commodities trader who later headed Merrill Lynch’s fixed-income trading division before taking charge of proprietary trading in August 2008. That was less than two months before Merrill Lynch agreed to be acquired by Bank of America.

The group was created to consolidate teams that traded the firm’s own capital in products including stocks, bonds, currencies and commodities. Sobotka remains in his position, the person briefed on the matter said. The jobs that are being cut will be fully eliminated in the fourth quarter, the person said.

Ted Kaufman: "The Sytem is so awful"...and he is one of the few good guys!!

Ted Kaufman
"It is a perfect catch-22,"
"...I don't know what to say about the system.
The system is so awful."

Ryan Grim
Huffington Post

Appointed as a two-year caretaker to keep Joe Biden's seat warm for his son Beau Biden, Delaware's Ted Kaufman turned out to be one of the biggest surprises of the 111th Senate. His rousing speeches on the floor of the upper chamber rattled Wall Street and rallied opposition to banks that are protected as too big to fail.

His signature amendment to break up the banks, introduced with Ohio Democrat Sherrod Brown, was opposed by the White House and ultimately defeated, but the debate raised the profile of the issue and helped lead to reforms that forced banks to spin off some of their proprietary trading desks.

The effort, which Kaufman said would have succeeded with White House support, built him a strong following and led to pleas that he run for reelection; were he pitted today against Tea Party backed Christine O'Donnell, he'd no doubt be polling far ahead of her. (Beau decided not to run.)

But, Kaufman said in an interview with the Huffington Post, there's a paradox at work: If he'd been running for reelection, he wouldn't have those rabid backers, because he never would have waged his campaign against the banks - not because he would have worried it would hurt him politically, but simply because he would have had to spend more than half his time raising money and organizing his campaign.

"It is a perfect catch-22," said Kaufman, explaining that his campaign against the banks "wouldn't have existed, no, because I'm not on the banking committee. I would have stuck to my bidding on judiciary and foreign relations."

And without the campaign against the banks, he wouldn't have the supporters he now does. "I wouldn't have this rabid" following, he said. "That's the whole thing. It was a Catch-22. There's no way I could have -- my race, if I ran, would be totally, you know, standard, cookie-cutter campaign. I wouldn't have had anything to show. I never would have been able to do any of the things that would really be the major things in my campaign, because the whole stuff I'd done on financial reform--we never would have been part of the debate."

Kaufman said he would have watched the debate from afar. "I would have said, 'Jeez, you know, I'm really upset about this and that,' but I wouldn't have had the time. I would not have not done it because I didn't think it was politically" the smart move, he said.

Were he running in 2010, he added, he'd be facing a massively well-funded opponent, thanks to his opposition to Wall Street. "If I was a senator from a big state, New York, California, Illinois, the money--you couldn't win against the intensity of something like that. I would have been totally overwhelmed by the money. I guarantee," he said. "If I was in Illinois, whoever my opponent was would be the best-funded person."

Kaufman said that the only way out of the paradox he experienced is to create a system of public financing for campaigns, but the Supreme Court is making that increasingly less attainable. "If I'm czar, not president of the United States of America, I'd institute public financing of campaigns. But that cat's long out," he said. "So I don't know what the answer is. I don't know what to say about the system. The system is so awful."

Tuesday, September 28, 2010

American Trucking Association: For-Hire Truck Tonnage Index fell 2.7 percent in August, which was the largest month-to-month decrease since March 2009.

More exciting news regarding Summer Recovery
courtesy of the American Trucking Association.

ARLINGTON, VA — The American Trucking Associations’ advance seasonally adjusted (SA) For-Hire Truck Tonnage Index fell 2.7 percent in August, which was the largest month-to-month decrease since March 2009. The latest drop lowered the SA index from 110 (2000=100) in July to 106.9 in August.

The not seasonally adjusted index, which represents the change in tonnage actually hauled by the fleets before any seasonal adjustment, equaled 113.5 in August, up 3.2 percent from the previous month.

Compared with August 2009, SA tonnage climbed 2.9 percent, which was well below July’s 7.4 percent year-over-year gain. Year-to-date, tonnage is up 6.2 percent compared with the same period in 2009.

ATA Chief Economist Bob Costello said that August’s data highlights that the economy, while still growing, is slowing. “We fully anticipate sluggish economic growth for the remainder of this year and the latest tonnage numbers are reflecting that slowdown.” However, Costello believes that the trucking environment has changed dramatically. “While I’d much rather see better tonnage figures, motor carriers can now do better with small increases in demand since so much supply left the industry during the recession.”

Note on the impact of trucking company failures on the index: Each month, ATA asks its membership the amount of tonnage each carrier hauled, including all types of freight. The indexes are calculated based on those responses. The sample includes an array of trucking companies, ranging from small fleets to multi-billion dollar carriers. When a company in the sample fails, we include its final month of operation and zero it out for the following month, with the assumption that the remaining carriers pick up that freight. As a result, it is close to a net wash and does not end up in a false increase. Nevertheless, some carriers are picking up freight from failures, and it may have boosted the index. Due to our correction mentioned above, however, it should be limited.

Trucking serves as a barometer of the U.S. economy, representing 68 percent of tonnage carried by all modes of domestic freight transportation, including manufactured and retail goods.

Trucks hauled 8.8 billion tons of freight in 2009. Motor carriers collected $544.4 billion, or 81.9 percent of total revenue earned by all transport modes.

ATA calculates the tonnage index based on surveys from its membership and has been doing so since the 1970s. This is a preliminary figure and subject to change in the final report issued around the 10th day of the month. The report includes month-to-month and year-over-year results, relevant economic comparisons, and key financial indicators.

The American Trucking Associations (www.truckline.com) is the largest national trade association for the trucking industry. Through a federation of other trucking groups, industry-related conferences, and its 50 affiliated state trucking associations, ATA represents more than 37,000 members covering every type of motor carrier in the United States. Follow ATA on Twitter @TruckingMatters (www.twitter.com/truckingmatters), or become a fan on Facebook (http://tinyurl.com/y4qwp6h).

Meredith Whitney: financial challenges states face could be the next systemic risk

Meredith Whitney:
  1. Financial challenges states face could be the next systemic risk
  2.  80,000 financial services jobs will be lost this year
  3. "We think October, after the banks report, you'll see a really ugly Case-Shiller number, which means the fourth quarter is going to be very tough for banks."

Crippling Debts and Deficits
Crippling debts and deficits are about to make individual states the next casualty of the credit crisis, analyst Meredith Whitney told CNBC.

Speaking as her firm, Meredith Whitney Advisory Group, just released a lengthy report on the state of the states, the noted financial analyst compared the looming explosion to the collapse of the financial system in 2008 and 2009.

"The similarities between the states and the banks are extreme to the extent that states have been spending dramatically and are leveraged dramatically," she said. "Municipal debt has doubled since 2000, spending has grown way faster than revenues."

Only the Algorithmic Machines are Trading
Whitney also offered another warning about banks, saying a sharp dropoff in trading revenue and a double-dip in housing would hammer at fourth-quarter earnings.

But she reserved her harshest words for the states. She said the paper released Tuesday was the culmination of two years' work by her firm and was made even more difficult by the lack of reliable data on state spending and debt.

"It reminded me so much of the banks pre-crisis that we just kept working at it," she said. "We couldn't find anything that gave us a clear story, we couldn't find any information that was transparent. So we did it ourselves."

There were some bright spots: Texas, Virginia and Nebraska were among states that have done a good job of controlling their finances over the years and aren't threatened as much.

But other states, such as California and Michigan, will burden the entire country should the federal government decide to step in with a bailout. States are required to balance their budgets, but massive debt-service payments could prevent that from happening in many states and necessitate the federal government to step in.

"You have to look at the states and the risk that the states pose, because the crisis with the states will result in an attempt at least for the third near-trillion-dollar bailout," Whitney said. "That has consequences on the dollar, that has consequences on just about everything. It certainly has consequences on the US recovery."

"Imagine you're conservative, fiscally sound Nebraska and you have to bail out California, or you're fiscally conservative Texas and now you have to bail out Michigan," she added.

So You Want to Work on Wall Street
On the banks, Whitney reiterated her call that some 80,000 financial services jobs will be lost this year, based on an expected 25 percent sequential decline in equity trading and "low single-digit" returns on equity.

On top of that, she said housing numbers will begin to worsen. The monthly Standard and Poor's/Case-Shiller housing report earlier in the day signaled that home prices were flattening but stabilizing; Whitney said that reading is going to get progressively worse.

"This quarter is going to be unique for the banks because this will be the last quarter when they can dodge the credit bullet," she said. "We think October, after the banks report, you'll see a really ugly Case-Shiller number, which means the fourth quarter is going to be very tough for banks."

Larry Summers: economy will eventually improve and "people aren't going to live with their parents forever"

Larry Summers: economy will eventually improve and
 "people aren't going to live with their parents forever"
....as Larry heads back to Harvard...living on campus??

Arthur Delaney
Huffington Post

One of President Obama's top economic advisers said Tuesday that the economy will eventually improve and that "people aren't going to live with their parents forever."

Speaking at the National Journal's Workforce of the Future conference, Larry Summers touted Democratic legislation to spur the economy and Obama's proposal to reauthorize expiring tax cuts for the middle class. He also said he took comfort in the "inherent cyclicality to economies.

"On average, the economy forms about 1.5 million family units each year," Summers said. "Housing starts are running at four or five hundred thousand. That's a natural economic response to the kind of inventory that exists. That's a reflection of the fact that family formation slows in more difficult times. But people aren't going to live with their parents forever. Family formation will come back to normal and indeed will catch up to reflect the delays that have taken place."

The Census Bureau reported this month that the number of families doubling up rose 11.6 percent from 2008 to 2010. An April study sponsored by the Mortgage Bankers Association found that "normal rates of household formation will not return until unemployment levels return to close to normal rates."

So how long will people live with their parents? Most forecasts have unemployment stubbornly high for the foreseeable future. Obama adviser Austan Goolsbee, for instance, said this month that unemployment is "going to stay high."

"It is true the economy is not fulfilling the promise many of us saw in the spring," Summers said. "I think that is a reflection of three factors. It's a reflection of the shocked confidence that came out of what was happening in Europe that raised risk premia, depressed markets, created uncertainty, and that proved to be much more virulent than most people expected. It's a reflection of the end of the inventory cycle, which had been a substantial source of tailwind leading to increased employment, increased hiring as inventories were replenished... And it's a reflection of the difficulty that firms have had in getting over the threshold and making a decision to expand their hiring, which led to lower levels of income which in turn led to lower levels of hiring."

Speaking about the looming game of chicken over the expiring Bush era tax cuts in Congress, Summers said, "Look at what middle class families have been through and it's hard to believe this is the right time to be raising gridlock concerns about whether we're going to substantially increase middle class families' taxes in the midst of a recession."

Rep. Dennis Cardoza introducing a bill to return to "fogging the mirror" mortgage era

Rep. Dennis Cardoza is introducing a bill in which he believes would help as many as 30 million homeowners. The homeowner with a Fannie or Freddie mortgage would be able to refinance their mortgage at record low interest rates regardless of their income, credit history or loan-to-value ratio.  Welcome to the return to the "fogging the mirror" mortgage era.

$145 Billion of Fannie and Freddie already on the backs of our grandkids
and Cardoza could give a rip about additional financial burdens dumped 
on our children and grandchildren!!

By Jason Philyaw

A new bill before the House of Representatives aims to allow up to 30 million homeowners with mortgages held or backed by Fannie Mae and Freddie Mac to refinance with rates locked in at the current historical lows.

Rep. Dennis Cardoza, D-Calif., who introduce the bill, said it will "help stabilize the housing market by decreasing the inventory of foreclosed homes and reducing declines in property values from issues surrounding blight and abandonment." He also expects the refinancings to afford those with mortgages backed by Fannie and Freddie "additional disposable income, providing a direct economic stimulus."

Eligible mortgagees will be able to refinance almost without penalty regardless of income levels, credit history or loan-to-value ratio, Cardoza told Reuters earlier Tuesday.

Fannie and Freddie would issue new mortgage-backed securities to fund the refinanced mortgages, using proceeds to pay off existing mortgages. Cardoza said the GSEs would "receive the same cash flow to cover default risk that they do now, passing along the reductions in financing costs to borrower."

"None of the administration’s current housing programs have been far-reaching enough to make a dent in the worst foreclosure crisis in U.S. history," Cardoza said. "Until we see a program that cuts to the heart of the recession, we will continue to see little growth in our economy, families losing their homes and lifetime investments with lost equity."

Cardoza initially introduced the Housing Opportunity and Mortgage Equity Act in January 2009. Today's bill has been modified to reflect changes made after the congressman met with the House Financial Services Committee and leading economists, including Christopher Mayer, senior vice dean of the Columbia Business School and Mark Zandi, chief economist for Moody’s Analytics.

"With mortgage rates near record lows, the quickest and most effective way policymakers can help the economy is to facilitate more mortgage refinancings," Zandi said.

Monday, September 27, 2010

General Electric backed regulations that just killed U.S. Jobs

But one worker, who went out of his way to talk to me,
said the regulations are just a "scapegoat."
GE wanted to send their jobs to Mexico,
and the regulations provide political cover.

By: Timothy P. Carney
Senior Examiner Columnist
Washington Examiner.com
September 24, 2010

WINCHESTER, VA.-- On Thursday night -- sometime around 8 o'clock -- 130 years after Thomas Edison commercialized the incandescent light bulb, Dwayne Madigan helped make the last such bulb Edison's company, General Electric, would make in the United States.

Madigan spent the rest of his shift at the Winchester Lamp Plant emptying chemicals out of machines and helping clean up the shop. By Friday, Madigan and all 200 plant employees were out of work. Those who would talk to a reporter on Thursday all had someone to blame.

Dave Rusk, retiring against his will, told me his job disappeared thanks to "a push from Congress." The 2007 energy bill included minimum efficiency standards for light bulbs - standards that the bulbs made in Winchester can't meet.

For now, compact fluorescents - the double-helix shaped bulbs that sell for $2 for a 100-watt equivalent - are the stand-in. GE Lighting spokeswoman Janice Fraser says light-emitting diode bulbs will be the true long-term replacement: most of GE Lighting's research and development goes into LEDs.

"When you see the enormous savings that can be achieved by more efficient lighting ... it's huge," said Fraser. But if the energy savings are big enough, and if the lifespan of the high-tech bulbs is as long as they say, then why should it take regulation to get people to buy them?

GE supported the regulations. Many Winchester workers, noting that the CFLs are made in China by lower-wage workers, say GE wanted to force the higher profit-margin bulbs on consumers, and Winchester is collateral damage.

Rusk holds this against GE and "the Democratic Congress" that passed the bill. "To me, it's actually another freedom taken away from Americans," he told me from his pickup truck as he left his final full shift Thursday. "Actually outlawing this lamp by 2014. ... You're losing a choice there. I think that bothers me more than anything. I should be able to buy whatever I want."

Everybody has different explanations of GE's lobbying on the rules. Fraser told me that GE had opposed early regulations that would have totally banned incandescent technology, but supported the efficiency standards as less bad. "As long as you know that the legislation is coming one way or another," she said, "you want to influence it in a way that makes sense for your customers and your business."

Teresa Golightly, after working her last shift Thursday, said GE CEO Jeff Immelt supported the rules to cozy up with politicians: "He got on Obama's economic team. I feel like we were sold out."

Like Rusk and Golightly, GE management in a press release last year blamed the factory's closing on "a variety of energy regulations that establish lighting efficiency standards" that will "make the familiar lighting products produced at the Winchester Plant obsolete."

But one worker, who went out of his way to talk to me, said the regulations are just a "scapegoat." GE wanted to send their jobs to Mexico, and the regulations provide political cover.

Indeed, the regulations allow GE to manufacture light bulbs for sale in the United States until 2014 for lower wattages (2012 for 100-watt bulbs). Then there are the growing markets in India and China, where more people have electricity every day, and where no such regulations exist. So GE is still making traditional incandescents -- but in Monterrey, Mexico, instead of Winchester. "We look at our business as a global business," Fraser explained. "We make things where it is more efficient."

For Cecil Affleck, who also retired against his will Friday, this is the problem. Affleck watched a recent economic presentation in which Immelt touted exports as the key to U.S. economic recovery. "He said that his answer to economic recovery was exporting products. The only thing he's exporting is jobs -- and they're going to Mexico."

So free trade is another culprit: making bulbs in China and Mexico is cheaper. It makes economic sense for GE, but it leaves the workers -- whose wages were nearly $30 an hour -- in a bad spot. "I'm an uneducated middle-class guy," Affleck told me. "It's gonna be hard."

Madigan, Rusk, Affleck, and Golightly feel like politicians and businessmen have abused them. They and their colleagues are a reminder that politics has human costs

Morgan Stanley implements a hiring freeze...Profit drought on Wall Street

Charlie Gaspario reports that Morgan Stanley has implmented a hiring freeze. Profit Drought on Wall Street is cited as the reason. The poor bailed banks are simply not raking in the cash due to anemic stock market trading volumes. Does the hiring freeze lead to layoffs?

What goes around comes around!!

Insiders dumping shares (Zero Hedge)

From the fine folks at Zero Hedge
For all those who thought last week's "dramatic" improvement in the ratio of insider selling to buying from 650:1 to "just" 290:1 was a sign things are turning and insiders may soon be selling only 100 or so times more stock per week than buying, we have some bad news.

According to Bloomberg, the latest ratio of insider selling to buying was 1,411 to 1. Let us repeat: 1,411 to 1. Needless to say, corporate insiders are totally buying the Fed reflation story, and the economic recovery. Like, totally.

United States trying to make it easier to wiretap the internet

The New York Times
Published: September 27, 2010

WASHINGTON — Federal law enforcement and national security officials are preparing to seek sweeping new regulations for the Internet, arguing that their ability to wiretap criminal and terrorism suspects is “going dark” as people increasingly communicate online instead of by telephone.

Essentially, officials want Congress to require all services that enable communications — including encrypted e-mail transmitters like BlackBerry, social networking Web sites like Facebook and software that allows direct “peer to peer” messaging like Skype — to be technically capable of complying if served with a wiretap order. The mandate would include being able to intercept and unscramble encrypted messages.

The bill, which the Obama administration plans to submit to lawmakers next year, raises fresh questions about how to balance security needs with protecting privacy and fostering innovation. And because security services around the world face the same problem, it could set an example that is copied globally.

James X. Dempsey, vice president of the Center for Democracy and Technology, an Internet policy group, said the proposal had “huge implications” and challenged “fundamental elements of the Internet revolution” — including its decentralized design.

“They are really asking for the authority to redesign services that take advantage of the unique, and now pervasive, architecture of the Internet,” he said. “They basically want to turn back the clock and make Internet services function the way that the telephone system used to function.”

But law enforcement officials contend that imposing such a mandate is reasonable and necessary to prevent the erosion of their investigative powers.

“We’re talking about lawfully authorized intercepts,” said Valerie E. Caproni, general counsel for the Federal Bureau of Investigation. “We’re not talking expanding authority. We’re talking about preserving our ability to execute our existing authority in order to protect the public safety and national security.”

Investigators have been concerned for years that changing communications technology could damage their ability to conduct surveillance. In recent months, officials from the F.B.I., the Justice Department, the National Security Agency, the White House and other agencies have been meeting to develop a proposed solution.

There is not yet agreement on important elements, like how to word statutory language defining who counts as a communications service provider, according to several officials familiar with the deliberations.

But they want it to apply broadly, including to companies that operate from servers abroad, like Research in Motion, the Canadian maker of BlackBerry devices. In recent months, that company has come into conflict with the governments of Dubai and India over their inability to conduct surveillance of messages sent via its encrypted service.

In the United States, phone and broadband networks are already required to have interception capabilities, under a 1994 law called the Communications Assistance to Law Enforcement Act. It aimed to ensure that government surveillance abilities would remain intact during the evolution from a copper-wire phone system to digital networks and cellphones.

Often, investigators can intercept communications at a switch operated by the network company. But sometimes — like when the target uses a service that encrypts messages between his computer and its servers — they must instead serve the order on a service provider to get unscrambled versions.

Like phone companies, communication service providers are subject to wiretap orders. But the 1994 law does not apply to them. While some maintain interception capacities, others wait until they are served with orders to try to develop them.  Link to complete article

Sunday, September 26, 2010

Sunday Comics

Christine O' Donnell
"Evolution is a myth...why aren't monkeys still evolving into humans?"

Oh come on Ms. O'Donnell, it wasn't lust...
I was faking it!

GMAC Mortgage Document Review Division

GMAC Robo Document Signer

Bank of America's Collection Agency Sensitivity Training
Compliance Officer

Republican Pledge To America

John Kerry blames out-of-touch voters for Democrats' midterm image troubles

Kerry blames out-of-touch voters
for Democrats' midterm image troubles

 Massachusetts Sen. John Kerry is docking his family's
new $7 million yacht in neighboring Rhode Island,
allowing him to avoid paying roughly $500,000
 in taxes to the cash-strapped Bay State.

By Mike Lillis - 09/25/10 06:06 PM ET
The Hill.com/Boston Herald.com
Sen. John Kerry (D-Mass.) this week said an uninformed public is largely to blame for the Democrats' problems heading into November's midterms, the Boston Herald reports.

“We have an electorate that doesn’t always pay that much attention to what’s going on so people are influenced by a simple slogan rather than the facts or the truth or what’s happening,” Kerry said Friday in Boston, according to the Herald.

"A lot of the anger today — while it’s appropriate because Washington is broken — is not directed at the right people."

The remark drew a quick response from William Jacobson, a conservative blogger and Cornell University law professor, who told the Herald that such an attitude is the reason the Democrats' are facing a tough election cycle to begin with.

“It just continues the Democrats’ theme that the reason people are upset is because they don’t understand — they're not smart enough," Jacobson told the Herald. "That sort of rhetoric just gets people even more upset."

Kerry waded into a similar spot in 2006 when he suggested that students who don't perform well in school will get "stuck in Iraq." Though Kerry is a decorated veteran of the Vietnam War, his comment drew howls from conservatives — including the George W. Bush White House — for implying that the military attracts less intelligent (or at least less motivated) recruits than other professions.

Financial Bailout Activites Continue...$30+ Billion to Credit Unions

National Credit Union Administration plans to issue
$30 billion to $35 billion in government-guaranteed bonds,
backed by the shaky mortgage-related assets.

Officials said the plan won't
cost taxpayers any money.

By Mark Maremont and Victoria McGrane
The Wall Street Journal
Two years after the peak of the financial crisis, the federal government swooped in to stabilize a crucial part of the credit-union sector battered by losses on subprime mortgages.

Regulators announced Friday a rescue and revamping of the nation's wholesale credit union system, underpinned by a federal guarantee valued at $30 billion or more. Wholesale credit unions don't deal with the general public but provide essential back-office services to thousands of other credit unions across the U.S. The majority of retail credit unions are sound, but they will have to shoulder the losses through special assessments over the next decade.

Friday's moves include the seizure of three wholesale credit unions, plus an unusual plan by government officials to manage $50 billion of troubled assets inherited from failed institutions. To help fund the rescue, the National Credit Union Administration plans to issue $30 billion to $35 billion in government-guaranteed bonds, backed by the shaky mortgage-related assets.

Officials said the plan won't cost taxpayers any money. Still, it marks the latest intervention by the U.S. government into a financial system weakened by the real-estate bust. Bad bets on mortgage-backed securities have now killed five of the nation's 27 wholesale credit unions since March 2009. The federal government, which now controls about 70% of the total assets at such credit unions, said the surviving institutions will be reined in so that they take fewer risks with their investments.

"Previously, we stabilized the system, and now we're resolving the problem and reforming the system," said Debbie Matz, chairman of the National Credit Union Administration, the U.S. agency overseeing credit unions.

Members United Corporate Federal Credit Union in Warrenville, Ill., Southwest Corporate Federal Credit Union of Plano, Texas, and Constitution Corporate Federal Credit Union, Wallingford, Conn., which had a total of $19.67 billion in assets as of July, were taken into conservatorship by federal regulators.

Wholesale credit unions, also known as corporate credit unions, invest money for retail credit unions and provide them with check clearing and other services. Since the start of 2008, 66 retail unions have failed, compared with more than 290 banks or savings institutions. Credit unions are member-owned cooperatives that act much like banks.

Under federal rules, wholesale credit unions were supposed to invest only in safe, liquid assets. But some chased higher returns by loading up on securities backed by subprime mortgages or other risky loans. Their portfolios were decimated by the mortgage meltdown.

Last year, regulators seized the two largest wholesale credit unions, U.S. Central Federal Credit Union, based in Lenexa, Kansas, and Western Corporate Federal Credit Union, San Dimas, Calif., after finding their losses were much larger than previously reported.

Losses on the mortgage-backed securities held by the five seized credit unions are expected by regulators to total about $15 billion. Wiping out the capital of the failed institutions will cover a chunk of those losses. But the remaining $7 billion to $9.2 billion eventually will be passed along to the nation's 7,445 federally insured credit unions in the form of future assessments.

The changes won't immediately affect customers of retail credit unions throughout the U.S. But it is possible that assessments on the industry could result in higher interest rates on loans and lower payouts on deposits, if credit unions can't otherwise cover their obligations.

Bert Ely, a financial-industry consultant in Alexandria, Va., said regulators share some of the blame for the resulting mess, because wholesale credit unions were allowed to pursue a strategy that was "viable only because of what clearly has turned out to be excessive risk-taking."

Ms. Matz, the nation's top credit-union regulator, said the investment losses reflect "unprecedented economic times" and "bad decisions" by regulators, credit-union managers and board members "by heavily over-concentrating in mortgage-backed securities."

New regulations issued by the NCUA on Friday will make oversight of wholesale credit unions much tougher, she said, and are meant to fix any regulatory shortcomings.

As part of the plan, regulators will eventually wind down the operations of the five failed credit unions.

Together they had about $50 billion in shaky mortgage-backed securities on their books, according to Larry Fazio, NCUA's deputy executive director.

Based on current market values, those securities are worth roughly half of their face value, representing a potential loss of $25 billion.

In an effort to minimize and spread out losses that must be absorbed by the credit-union industry, regulators said they will move all the battered securities into a good bank-bad bank structure. NCUA officials will manage the $50 billion portfolio, or "bad bank," of the failed wholesale institutions.

Federal regulators will allow the remaining "good bank" operations at the credit unions to continue for about two years while retail credit unions wind down their relationships with the failed institutions.

Friday's moves could deepen tensions between regulators and retail credit unions that withstood the financial crisis and resent having to bear financial costs caused by the mistakes of wholesale institutions.