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  • Sun, Nov 2 2008
  • 7:45 PM » Is Credit Card Relief Coming?
    Published Sun, Nov 02 2008 7:45 PM by feeds.feedburner.com
    Credit card defaults are soaring. And banks after having fought credit card reform for years are now in panic mode over losses. Newsday.Com asks Banks, which are losing billions because many card holders aren't paying anything, seek OK to forgive up to 40% of strapped consumers' debts. Big banks have formed an unusual alliance with consumer advocates to urge the government to allow huge portions of credit card debt to be forgiven, a turnabout from recent years when the banking industry lobbied strenuously to make it harder for consumers to erase their credit card debts in bankruptcy. The new pilot program, which the banks hope will become permanent, could involve as many as 50,000 people struggling with credit card debt. On an individual basis, the amount of debt to be forgiven would rise according to the severity of the borrower's financial situation, up to a maximum of 40 percent. "There's obviously a financial benefit to the financial institutions to step up to the plate right now," said Susan Keating, president and chief executive of the National Foundation for Credit Counseling. "We absolutely support the proposal." In an increasingly tough economic climate, banks and other mortgage lenders already have been agreeing to modify loans of distressed homeowners to help them avoid foreclosure. Now, banks making credit card loans have reached a point where they can lose less by forgiving part of the debt than seeing the consumer walk away entirely. Americans are lumbering under about $900 billion in credit card debt, according to the latest available Federal Reserve figures. The new proposal pitched to federal regulators by the Financial Services Roundtable, which represents more than 100 big banks and other financial companies, and the Consumer Federation of America, would allow lenders to reduce by as much as 40 percent the amount of credit card debt owed by deeply indebted consumers in a pilot program. Be Careful For What You Wish...
    Click Here to Read the Full Article

    Source: feeds.feedburner.com
  • 7:45 PM » We Simply Do Not Have a Financial System
    Published Sun, Nov 02 2008 7:45 PM by Seeking Alpha
    submits: Here's : Sooner or later, then, consumers were going to have to pull in their belts. But the timing of the new sobriety is deeply unfortunate. One is tempted to echo St. Augustine’s plea: “Grant me chastity and continence, but not yet.” For consumers are cutting back just as the U.S. economy has fallen into a liquidity trap — a situation in which the Federal Reserve has lost its grip on the economy.
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 7:45 PM » World's Most Efficient Solar Cells Created
    Published Sun, Nov 02 2008 7:45 PM by feeds.feedburner.com
    In the land down under, comes some positive news on the energy front: . The University of New South Wales’ ARC Photovoltaic Centre of Excellence has reported the first silicon solar cell to achieve the milestone of 25 per cent efficiency. The UNSW ARC Photovoltaic Centre of Excellence already held the world record of 24.7 per cent for silicon solar cell efficiency. Now a revision of the international standard by which solar cells are measured, has delivered the significant 25 per cent record to the team led by Professors Martin Green and Stuart Wenham and widened their lead on the rest of the world. Professor Green said the jump in performance leading to the milestone resulted from new knowledge about the composition of sunlight. “Since the weights of the colours in sunlight change during the day, solar cells are measured under a standard colour spectrum defined under typical operational meteorological conditions,” he said. “Improvements in understanding atmospheric effects upon the colour content of sunlight led to a revision of the standard spectrum in April. The new spectrum has a higher energy content both down the blue end of the spectrum and at the opposite red end with, dare I say it, relatively less green.” Dr Anita Ho-Baillie, who heads the Centre’s high efficiency cell research effort, said the UNSW technology benefited greatly from the new spectrum “because our cells push the boundaries of response into the extremities of the spectrum”. “Blue light is absorbed strongly, very close to the cell surface where we go to great pains to make sure it is not wasted. Just the opposite, the red light is only weakly absorbed and we have to use special design features to trap it into the cell,” she said. Professor Green said: “These light-trapping features make our cells act as if they were much thicker than they are. This already has had an important spin-off in allowing us to work with CSG Solar to develop commercial ‘thin-film’ silicon-on-glass solar cells that are...
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    Source: feeds.feedburner.com
  • 7:30 PM » Here's an update on the criminal investigation (still) underway of Angelo Mozilo and his gang of thieves at Countrywide Toxic Mortgage
    Published Sun, Nov 02 2008 7:30 PM by feeds.feedburner.com
    I think we'll have to wait for a new Attorney General and new SEC chief until we see the laws of the land being enforced again. Since under the Bush Administration, laws were meant to be broken, not enforced. But there's always hope that this day may come sooner rather than later. Picture the day HP'ers that Angelo Mozilo is frog-marched and put into an orange jumpsuit, along with his criminal "VIP" pals.
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    Source: feeds.feedburner.com
  • 7:30 PM » Reckless loans ruled Wa-Mu, ex-worker says
    Published Sun, Nov 02 2008 7:30 PM by ml-implode.com
    As a senior mortgage underwriter, Keysha Cooper was proud of her ability to spot fraud and other problems in a loan application. A decade of vetting mortgage documents had taught her plenty, she says. But as a senior mortgage underwriter at Washington Mutual during the late, great mortgage boom, Cooper says she found herself in a vise. Brokers squeezed her from one side, her superiors from the other, she says, and both pressured her to approve loans, no matter what
    Click Here to Read the Full Article

    Source: ml-implode.com
  • Fri, Oct 31 2008
  • 11:16 AM » Economic Report: Biggest drop in consumer spending in 4 years in Sept.
    Published Fri, Oct 31 2008 11:16 AM by Market Watch
    WASHINGTON (MarketWatch) -- Reluctance on the part of consumers to shop for big-ticket items like cars led U.S. consumer spending to its biggest drop in over four years, the Commerce Department reported Friday.
  • 11:02 AM » Some Banks May Tell U.S. to Keep Bailout Cash
    Published Fri, Oct 31 2008 11:02 AM by CNBC
  • 11:01 AM » Economic Report: Consumer sentiment drops in October
    Published Fri, Oct 31 2008 11:01 AM by Market Watch
    As the financial crisis takes its toll, U.S. consumer sentiment drops in October from the prior month, reaching a record monthly decline, according to the University of Michigan/Reuters index released Friday.
  • 11:01 AM » Consumer Spending Falls 0.3 Percent in September
    Published Fri, Oct 31 2008 11:01 AM by Washington Post
    Consumers shied away from big-ticket items in September, as wages remained basically stagnant and people began to tuck more money into savings -- further evidence of a pullback by American households.
    Click Here to Read the Full Article

    Source: Washington Post
  • 11:01 AM » Money Markets
    Published Fri, Oct 31 2008 11:01 AM by acrossthecurve.com
    My money market correspondent reports that the short term money markets are awash in a mountainous sea of liquidity. The target funds rate seems “symbolic” as the central banks push to flood the system with dollar liquidity has forced the funds rate down to 25 basis points. He notes that there are solid names finding overnight commercial paper funding as cheaply as 10 basis points. Traditionally, with a one percent target overnights would range between 90 basis points and 1.10 percent. He opines that the CPFF facility is taking supply out of the market and at some point will compel large institutional investors to move out on the money market yield curve. Those clients have been inactive quite some time but the punishing overnight rate will force them to do credit homework and buy some longer dated paper. He notes that the Irish banks trade Libor plus 10 basis points to 15 basis points and with the government guarantee are sovereign debt. Separately, money funds are still phobic about another credit event and another round of redemptions. That tends to keep them short and liquid.
    Click Here to Read the Full Article

    Source: acrossthecurve.com
  • 10:41 AM » AIG Arbitrages the Fed Via Its New Commercial Paper Program
    Published Fri, Oct 31 2008 10:41 AM by Google News
    Let's see, AIG had to ask to be included in the Fed's new commercial paper program. AIG was reported to have said it needed a wee bit more money, but no more than $10 billion. No reasons were given in any news stories. Now we find out the intended use. From (hat tip reader Steve A): American International Group Inc (AIG.N: Quote, Profile, Research, Stock Buzz) reduced the amount it owes under a U.S. Federal Reserve credit line by $6.8 billion, but only by borrowing from a different government lending program. AIG currently owes $83.5 billion under two emergency facilities from the Fed, which were necessary to prevent the company from filing for bankruptcy. That figure was $90.3 billion a week ago. An AIG spokesman said neither the company nor the Fed plan to disclose the exact amount the Fed was repaid. The company was able to repay part of the amount already borrowed by voluntarily participating in a program that the Fed started on Monday to buy short-term debt known as commercial paper from companies. Surprisingly, a on the same snookering gamesmanship was entirely approving and indicates the amount borrowed through the CP program to repay the other credit lines was even larger: American International Group Inc., the insurer bailed out by the U.S., reduced its debt under two credit lines to $83.5 billion by using cash from the Federal Reserve's commercial paper program. The insurer got as much as $20.9 billion from the program, which swaps commercial paper for cash, AIG spokesman Nicholas Ashooh said yesterday in an interview. The terms of the commercial paper funding are better than the U.S. loan made last month to save New York-based AIG from collapse, he said. ``They're paying off a Fed loan with another kind of government subsidy -- it's like using one credit card to pay off another credit card,'' said Robert Haines, an analyst at CreditSights Inc. ``If they make progress paying off debts over time, I don't think it'll be viewed...
  • 10:40 AM » Public Pensions Place Undue Burden on Staggering Economy
    Published Fri, Oct 31 2008 10:40 AM by www.minyanville.com
    The ticking time bomb of overpromised underfunded public pension plans has finally exploded. Here are a few articles to consider: Pension fund of San Diego may have lost as much as $1 billion of its $5 billion in assets Through mid-October Colorado’s PERA fund lost $10 billion in market value Illinois taxpayers may soon be forced to bail out IMRF the best-funded public pension plan in the state after it incurred $3.6 billion in losses A pension crisis is on the horizon in Canada. Taxpayers may have to spend $1 billion to prop up Los Angeles County’s public pensions. Fresno ...
    Click Here to Read the Full Article

    Source: www.minyanville.com
  • 10:39 AM » Levitt: Derivatives Necessary, Should Be Regulated
    Published Fri, Oct 31 2008 10:39 AM by The Big Picture
    Former U.S. Securities and Exchange Commission Chairman Arthur Levitt talks about the importance of credit derivatives to the financial markets and the need for regulation and transparency, and the outlook for executive compensation at financial firms. Levitt is a senior adviser to the Carlyle Group and a board member of Bloomberg LP, the parent company of Bloomberg News. click for Video: http://www.bloomberg.com/avp/avp.htm?N=av&T=Levitt%20Says%20Derivatives%20Necessary%2C%20Should%20Be%20Regulated&clipSRC=mms://media2.bloomberg.com/cache/vhbslNoBG_nI.asf 00:00 Credit derivatives' importance, transparency 01:26 Growth of derivatives market, new regulation 02:11 "Some moderation" in executive compensation Running time 03:48 Source: Bloomberg, Last Updated: October 29, 2008 09:23 EDT http://www.bloomberg.com/apps/news?pid=newsarchive&sid=azMrpQyorJFs
    Click Here to Read the Full Article

    Source: The Big Picture
  • 10:38 AM » Could Junk Bond Defaults Reach 20%?
    Published Fri, Oct 31 2008 10:38 AM by Google News
    As the economy weakens, a predictable result is an increase in corporate defaults. In the early 1990s, the default rate on high-yield bonds peaked at 12+% (note some define the universe differently and come up with somewhat lower figures) The most recent Standard & Poor's forecast, while noting a marked deterioration in the economy and revising up its expected level of defaults accordingly, still forecasts that defaults over the next year will be considerably lower than the worst periods in the early 1990s recession and the dot-bomb era. However, in part that is because they are forecasting only as far out as full year 2009. From : Standard & Poor’s expects the rate of default in the U.S. speculative-grade segment to increase materially in the next 12 months, reaching 7.6% by September 2009, the highest level in nearly six years. Under a “pessimistic scenario,” the rate could go as high as 9.6%.... The pessimistic scenario yields a mean default rate of 9.6%, more than double the long-term average of 4.4% but still below the peaks of 10.8% in the 2001-2002 recession and 12.5% in the 1991-1992 recession. The optimistic scenario yields an average default rate of 6.1%. In the next 12 months. But Accrued Interest, in "" argues that Motown defauls could swamp forecasts: On Monday the yield on the Merrill Lynch High Yield Master index reached a shocking 19.6%..... In short, if we're getting 20% yield, could we wind up suffering 20% losses in defaults? According to Moody's, the largest default rate in history was 15% in 1933. In the post Depression era, there have been three years which produced double-digit default rates: 1990 (10.1%), 1991 (10.4%) and 2001 (10.6%). The average recovery rate (i.e., the amount the bond is worth immediately after default) is 32% for the three peak default years. So if a portfolio suffers 10% in defaults with 30% in recovery, it has actually suffered 7% in total credit losses. That history would seem to favor high...
  • 10:37 AM » New Mortgage Recue Proposal to Kick Can Down the Road a Few Years
    Published Fri, Oct 31 2008 10:37 AM by Google News
    Before we debate the merits (more accurately, the lack thereof) of the latest trial balloon of a plan being floated to rescue overextended mortgage borrowers, we need to consider a few not sufficiently discussed facts: 1. The problem is that banks are not making loan modifications as they did in the past. That is turn is due to securitization In the old days, including in the nasty (in the Southwest and Texas) housing bear market of the early 1990s, it was standard practice for banks to modify mortgages. That was not charity on the part of the bank but a cold-blooded economic calculation, that in the majority of cases, it would take a lower loss by changing mortgage terms than by foreclosing. 80% of mortgages are now securitized, however, and the servicers do not do mods in the vast majority of cases, despite over a year of tough talk, pressure, and various half-baked programs (Hope Now Alliance as the poster child).Why? Our belief is the big reason is the most obvious: servicers get pretty well compensated for foreclosing, but cannot charge (much if any) for the work of doing a mod. Servicers are also set up like factories, with highly standardized procedures. They are not set up to do anything on a one-to-one basis, lack knowledge of the borrower (no doc and low doc mortgages mean the initial files are skimpy, and I am told they are often a mess) and have no experience in assessing borrower ability to pay (ie, they never were in the credit-extension business). To top that off, many servicers have lousy relationships with their borrowers, and so borrowers would probably not be as forthcoming as they would need to be to work out a fair and viable deal (the borrower would assume anything could and would be used against them). 2. A foreclosure lowers the value of all other homes in the neighborhood. Readers have said that recent studies have found 5% is a typical level; anyone with better data or links is encouraged to speak up. 3. I am amazed that the banking industry...
  • 10:37 AM » Some Additional Observations on the 2008Q3 Advance GDP Release
    Published Fri, Oct 31 2008 10:37 AM by www.econbrowser.com
    If you went no further than noticing that the q/q annualized growth rate of -0.3% was faster than the -0.5 in the Bloomberg consensus, you might have taken this as good news. I'm not going to say it wasn't good news (relatively speaking), although negative growth makes the case for recession pretty good according to (who is on the ); see also . However, there are some pretty interesting things that merit additional discussion. I think that most observers will concur with assertion that the -3.1% decline in consumption q/q annualized was the most important aspect, as highlighted in . To place the consumption drop in perspective, consider the q/q changes in GDP and consumption over the last forty years. The last time consumption growth went negative was in the 1990-91 recession. Figure 1 show the growth rates (not contributions to GDP). Figure 1: Quarter-on-quarter annualized growth rates of real GDP (blue) and consumption (red), calculated as log-differences. NBER defined recession dates shaded gray. Source: BEA, NIPA release of 30 October 2008, , and author's calculations. What is the composition of this consumption decline? Figure 2 shows the contribution of each consumption aggregate to GDP growth. It's apparent that the consumption decline is widespread, spanning all categories. Durables I expected to decline, given the procyclicality of consumer durable expenditures. The decline in services and nondurables, however, signals either more binding credit constraints, a downward revision in permanent income, or both. Figure 2: Consumption contribution to GDP growth (tan bars), durables contribution (red), non-durables contribution (green) and services contribution (teal), in percentage points. NBER defined recession dates shaded gray. Source: BEA, NIPA release of 30 October 2008 and . Returning to overall growth, I have two observations that pertain to growth prospects. The first is that exports are accounting for a smaller proportion of overall growth...
    Click Here to Read the Full Article

    Source: www.econbrowser.com
  • 10:37 AM » Trump - a (late-20th century) American icon
    Published Fri, Oct 31 2008 10:37 AM by themessthatgreenspanmade.blogspot.com
    Donald Trump will go kicking and screaming into the new American "culture of austerity" that was thrust upon us all last month. Throughout the two-decade long credit bubble, the New York real estate developer has been a symbol of American success and excess, rebounding from near-bankruptcy during the 1990s housing bust, then returning bigger and better than ever with a reality TV show that has since become something of a bad parody of itself. Apparently exhausting viewers with the original format of The Apprentice, the show has resorted to celebrity editions, apparently a necessary prerequisite for NBC signing on for another season that begins in January. The "new frugality" sweeping the nation runs counter to everything the Trump name stands for - borrow big, build big, spend big, and make a lot of noise in the process. Can the Trump brand survive during an era when "layaway" payment plans are making a comeback (seriously, I heard an ad for this morning where they touted layaway plans as an exciting new payment option). Anyway, it looks like the Donald may be in for a rough patch according to this WSJ : Donald Trump's tallest construction project ever is facing some tall challenges. Many real-estate developers are under pressure these days as lenders and investors rush to cut their exposure to the market. But Mr. Trump's 92-story Trump International Hotel & Tower in Chicago, which will be the tallest building constructed in the U.S. since the Sears Tower opened in 1973, may be especially vulnerable because it's getting hit by a triple whammy of colliding forces: the credit crunch, the reversal in the housing market and weak retail sales. The shiny glass skyscraper is one of the few that the brash Mr. Trump developed without partners. The situation also puts pressure on one of the project's major lenders, Fortress Investment Group LLC. So far, Mr. Trump has lined up buyers for a bit less than $600 million of condo units...
    Click Here to Read the Full Article

    Source: themessthatgreenspanmade.blogspot.com
  • Thu, Oct 30 2008
  • 9:26 AM » Here Comes Da Zirp!
    Published Thu, Oct 30 2008 9:26 AM by The Big Picture
    How likely are we to see a zero percent interest policy? Pretty likely: "Federal Reserve Chairman Ben S. Bernanke signaled he's ready to cut interest rates to the lowest level on record should the central bank's actions fail to stem the deepening economic slump. Policy makers said yesterday that ``downside risks to growth remain'' even after their half-point reduction in the main rate to 1 percent. The Fed dropped a reference in its statement to threats from inflation, projecting "levels consistent with price stability'' in coming quarters... Bernanke is drawing on an academic career studying the failed efforts to prevent the Great Depression, and yesterday's shift indicates he's prepared to revisit his 2003 commitment as a governor to lower rates to zero percent if necessary. Should lending fail to revive by December, the central bank will probably cut by another half point, said former Fed Governor Lyle Gramley... Reflecting a crisis that has reverberated throughout the global economy, the Fed's Open Market Committee yesterday said that international rate cuts should contribute by loosening credit markets. The FOMC also said slowing economies abroad will threaten the record boom in American exports, which have kept the U.S. from a deeper slump... In a new step to increase the availability of dollars in emerging markets, the Fed yesterday agreed to provide $120 billion to four counterparts. Brazil, Mexico, South Korea and Singapore get $30 billion each by signing the so-called currency swap lines. The U.S. already has unlimited agreements with the European Central Bank and Bank of England." Inflation from 2002-07, Deflation from 2008-09, hyper inflation from 2010-??? I could see Gold going to $3,000, by way of $300 first. > * With apologies to Source: Scott Lanman and Craig Torres Bloomberg, Oct. 30 2008 http://www.bloomberg.com/apps/news?pid=20601087&sid=adtjOhAF5mEk&
    Click Here to Read the Full Article

    Source: The Big Picture
  • 9:25 AM » Fed Expands Swap-O-Rama to Brazil, Mexico, South Korea, Singapore
    Published Thu, Oct 30 2008 9:25 AM by feeds.feedburner.com
    In an effort to unfreeze money markets the . The Federal Reserve agreed to provide $30 billion each to the central banks of Brazil, Mexico, South Korea and Singapore, expanding its effort to unfreeze money markets to emerging nations for the first time. The Fed set up "liquidity swap facilities with the central banks of these four large systemically important economies" effective until April 30, the central bank said yesterday in a statement. The arrangements aim "to mitigate the spread of difficulties in obtaining U.S. dollar funding." "The swap lines will help unclog the liquidity pipeline and that action is boosting markets even more than" the Fed's rate cut, said Venkatraman Anantha-Nageswaran, head of research at Bank Julius Baer & Co. in Singapore. "It's a step in the right direction and prevents things from getting worse." Step Towards The Cliff The idea that currency swaps are a step in the right direction is complete silliness. The Fed's swap-o-rama meet does not unclog anything. It just seem s like it. The illusion will vanish as soon as the Fed stops the swap meet. Note the similarity between the Fed's actions and a drug dealer and his client. A shot of heroin will relieve the withdrawal symptoms, but only if the next dose is stronger. Korean Stock Market Surges On Fed Supplied Drugs For now the market is happy as . South Korea's stock index rose by a record and the won surged after the central bank signed a $30 billion currency swap with the Federal Reserve and President Lee Myung Bak said he's ready to take more steps to aid the economy. The swap line is part of the Federal Reserve's efforts to alleviate a credit freeze in emerging nations, with the U.S. also providing dollars to Singapore, Brazil and Mexico. Korean lawmakers today approved the government's $100 billion guarantee of bank debts to help lenders struggling to access foreign funds. Korea's currency jumped 14 percent...
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    Source: feeds.feedburner.com
  • 9:24 AM » I think this is the bottom
    Published Thu, Oct 30 2008 9:24 AM by themessthatgreenspanmade.blogspot.com
    From Tom Toles at the :
    Click Here to Read the Full Article

    Source: themessthatgreenspanmade.blogspot.com
  • 9:23 AM » Cuomo Prepares to Embarrass Banks Over Top Level Pay
    Published Thu, Oct 30 2008 9:23 AM by Google News
    Banks have proven to be remarkably immune to condemnation over senior level pay. CEOs and top level producers seem to have an undimmed sense of entitlement, even though the nine banks receiving the first Treasury handouts equity purchases earned a collective $305 billion from 2004 to mid 2007, followed by $323 billion in writedowns. But the powers that be are keeping up scrutiny and pressure. The latest salvo comes from New York attorney general Andrew Cuomo. At this stage, Cuomo appears merely to have made a request to the nine recipients of Federal largess to cough up fairly extensive information about bonuses. If the firms fail to respond, he may try to force them to comply. The New York AG would then resort to a legal theory that is a bit of a stretch. Even if Cuomo is unlikely to win a case based on this theory, it may have enough substance to survive a motion for summary judgment from the opponents. If it does, Cuomo can then proceed to discovery, which means he can gather a great deal of potentially embarrassing information. From the : Under pressure from members of Congress to curtail compensation, banks now face a new threat from Andrew M. Cuomo, the New York attorney general, who sent a letter on Wednesday to nine big financial institutions receiving government aid. Mr. Cuomo gave the companies a week to provide a “detailed accounting regarding your expected payments to top management in the upcoming bonus season.” That could prove difficult for the banks, which typically do not complete bonus pools until later this month at the earliest. Mr. Cuomo’s letter also warned that payments worth more than the services provided by executives might violate New York law. The letter follows one sent earlier this week to the same banks by Henry A. Waxman, the California Democrat who is chairman of the House Committee on Oversight and Government Reform, urging them not to use any government money for bonuses or other payments and asking for data on pay going back to 2006...
  • 9:22 AM » "Fears mount in Japan over complex yen products"
    Published Thu, Oct 30 2008 9:22 AM by Google News
    This Times Online story is frustratingly vague about the exact nature of these complicated and risky foreign exchange products sold to Japanese retail investors. While the size of the problem ($90 billion) may seem not all that bad in comparison, say, to subprime exposures, recall that these trades are likely to be unwound in a compressed period of time when currency markets are already volatile, thus increasing the potential for havoc. The irony is that Japanese regulators were once hugely protective of retail investors and placed tough restrictions on what products could be sold to them. That attitude clearly went out the window. From the : Traders in Tokyo have given warning that about $90 billion (£55billion) of complex foreign exchange products, sold mainly to Japanese households and institutions, are on the brink of falling “like a house of cards”. A rescue effort by the product issuers - large Japanese, European and American investment banks - is expected to involve extensive hedging measures that will throw global currency markets into even deeper turmoil. The products, which are known as power reverse dual currency notes (PRDC), were sold to Japanese households as simple products offering higher yields than regular savings but the bonds were in reality hugely complex structures “with 15 moving parts and multiple points of pain”, derivatives experts at RBS in Tokyo said. The products combine exposure to foreign exchange, interest rate differentials and domestic inflation and have formed a small but potent part of the so-called yen carry trade - the borrowing of yen to invest in currencies offering higher interest rates - a gambit thought to have financed huge amounts of global risk-taking in recent years. RELATED LINKS Japanese giants lose £777m as demand slows Japan's regional banks to receive public funds The PRDC's complexity disguised from the buyers the fact that they were taking on the same big foreign exchange risks as the regular carry trade but...
  • 9:21 AM » JP Morgan Under Criminal Investigation for Jefferson County, Other Swaps
    Published Thu, Oct 30 2008 9:21 AM by Google News
    The agonies of Jefferson County, Alabama, which got itself into a too-clever-by-half funding arrangement that put the county on the verge of bankruptcy, have faded from the public eye. However, the type of transaction that caused so much woe, a swaption to supposedly lower financing costs, has been the subject of SEC and Justice Department investigations for some time. The focus has moved to JP Morgan based on its role n the ill-fated Jefferson County deal and other municipal transactions. The Bloomberg story provides some detail on the swaption itself, and if the reporting is accurate, this looks like an a deal almost certain to have turned out badly for the county. This is not at all uncommon for OTC derivatives, where even if the transaction in theory has merit, the fees charged are so high as to make the deal uneconomical to the client. But clients almost universally lack the skills to properly model the deal to figure this out. Most deals don't blow up as spectacularly as this one did, so most clients never figure out they were had. From : The U.S. Justice Department is investigating a derivative trade between the state of Alabama and JPMorgan Chase & Co. as part of a nationwide criminal probe. The Justice Department subpoenaed documents about a so- called swaption, or an option on an interest-rate swap, between JPMorgan and the state's school construction authority, according to a federal lawsuit filed by the state, which is trying to void the 2002 deal. The agency is investigating whether banks and advisers conspired to overcharge governments on the contracts. ``Although the authority does not seek by this action to avoid payment of any legitimate obligation, the pendency of at least two separate governmental inquiries implicating the validity of the transaction heightens the necessity for a judicial determination of the parties' rights,'' the complaint, filed yesterday in federal court in Montgomery, Alabama, said. U.S. prosecutors and...
  • 9:20 AM » House Oversight Committee Requests Bonus Info of Major Banks
    Published Thu, Oct 30 2008 9:20 AM by feeds.feedburner.com
    Henry A. Waxman, Committee Chairman on Oversight and Government Reform, . In letters to nine major banks that will receive $125 billion of taxpayer funds, Chairman Waxman requested information on their compensation and bonus plans in 2008. List of Banks (121 KB) (122 KB) (123 KB) (122 KB) (121 KB) (121 KB) (124 KB) (121 KB) (123 KB) The letters are all essentially the same. Congress is upset at the level of bonuses being handed out and is asking for compensation data for 2006-2008 for all personnel broken down by salaries, bonuses (cash and equity), and benefits. It is asking for additional information of the highest paid employees. The banks have until November 10th to comply. A huge public backlash is likely over this bailout and one can not blame them. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management. Visit http://www.sitkapacific.com to learn more about wealth management for investors seeking strong performance with low volatility.
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    Source: feeds.feedburner.com
  • 9:20 AM » My house has still got to be worth...
    Published Thu, Oct 30 2008 9:20 AM by themessthatgreenspanmade.blogspot.com
    There's a new up at the Zillow blog where homeowners all across the U.S. were asked what they think happened to the value of their home over the last year and what the year ahead might bring. As expected, many homeowners remain blissfully unaware of the carnage that has recently occurred in the nation's housing market and are far too optimistic about what the future holds. But, some of this is quite understandable - after all, we don't all obsess over this stuff. If you've been in a place for years with no plans to move, haven't had the need to "tap" your home equity only to find less of it there, and don't see the need to keep track of what nearby houses sell for, you're probably not really qualified to offer an opinion on this anyway. It's like asking someone who doesn't know or care about the S&P500 where stocks have come and where they're going. Despite what the National Association of Realtors might tell you, housing hasn't always been viewed as an investment by everybody - many people still look at their house as an asset that depreciates in real terms when upkeep, taxes, and insurance are factored in. For those who do view their home as an investment, it's easier than ever to get some kind of an idea what real estate is worth with the rise of websites like Zillow. I became painfully aware of Zestimates after we sold our Southern California house a few years back, only to watch the Zestimate rise to $805,000 during the 2006 peak - it's now at $535,000. Anyway, the survey data for how homeowners think home prices have moved over the last year is interesting, but, in my view, not all that surprisingly. Here are the results by region: And, a short excerpt: There’s no doubt we’ve been deluged with depressing economic and housing news over the past few months. Every day is a new headline, every channel has a new pundit and the recession debate has shifted from “if” to “how long.” Given this, when fielding...
    Click Here to Read the Full Article

    Source: themessthatgreenspanmade.blogspot.com
  • 9:20 AM » Nouriel Roubini blames the Fed
    Published Thu, Oct 30 2008 9:20 AM by themessthatgreenspanmade.blogspot.com
    Nouriel Roubini is everywhere! You have to wonder if he's starting to make odd requests for his media appearances like asking for . Last night, he was on the Nightly Business Report and was asked a very simple question, "Who or what is the major culprit of this financial crisis?" Here's his simple reply: First of all the Fed kept interest rates too low for too long and created the housing bubble. Secondly the Fed and the other regulators were asleep at the wheel and allowed all these toxic mortgages to be created without controlling it. Three, there was plenty of greed and excessive risk taking on Wall Street . And four, the rating agencies had major conflicts of interest because they were being paid by those that were supposed to be rating. So the blame is to be shared by many different culprits. It is quite clear there is plenty of blame to go around but, interestingly, the first two of the four culprits mentioned by the world's most in-demand economist were the Federal Reserve. The entire transcript is available . The New York University economics professor and founder of RGE Monitor (how does he find time to teach these days?) was also on Bloomberg video this morning predicting a very long and painful recession dead ahead. Click to play in a new window This simple on "Roubini" at Bloomberg shows the extent of Nouriel's omnipresence - a total of ten references in just the last few days.
    Click Here to Read the Full Article

    Source: themessthatgreenspanmade.blogspot.com
  • 7:53 AM » Credit Suisse aims to benefit from UBS weakness in U.S: report
    Published Thu, Oct 30 2008 7:53 AM by Reuters
    ZURICH (Reuters) - Credit Suisse Group AG aims to benefit from rival UBS AG's weakness in the United States, its chief executive said in an interview published on Thursday.
  • 7:52 AM » Where Did A.I.G.’s Cash Go?
    Published Thu, Oct 30 2008 7:52 AM by dealbook.blogs.nytimes.com
    The American International Group is rapidly running through $123 billion in emergency lending provided by the Federal Reserve, raising questions about how a company claiming to be solvent in September could have developed such a big hole by October, The New York Times’s Mary Williams Walsh says. Some analysts say at least part of the shortfall [...]
    Click Here to Read the Full Article

    Source: dealbook.blogs.nytimes.com
  • 7:51 AM » Japan unveils $275 billion stimulus package
    Published Thu, Oct 30 2008 7:51 AM by CNN
    Read full story for latest details.
  • 7:50 AM » Deutsche Bank posts profit as rule change limits write-downs
    Published Thu, Oct 30 2008 7:50 AM by Market Watch
    Deutsche Bank on Thursday reported an unexpected third quarter profit of 435 million euros ($575 million), helped by a tax gain and a change to accounting rules that allowed the bank to take fewer write-downs on its risky debt.
  • 7:50 AM » Investors Get Back Some Appetite for Risk
    Published Thu, Oct 30 2008 7:50 AM by CNBC
    Asian share markets rallied, European stocks were higher and the euro surged on Thursday on initial signs that investors are rediscovering an appetite for risk.
  • 7:50 AM » Ex-Fannie CEO Wishes he Said "No" More Often: Report
    Published Thu, Oct 30 2008 7:50 AM by CNBC
  • Wed, Oct 29 2008
  • 5:59 PM » Treasury, FDIC Considering Plan to Rework Millions of Mortgages
    Published Wed, Oct 29 2008 5:59 PM by Calculated Risk Blog
    From the WaPo: Treasury, FDIC Crafting Plan to Rework Millions of Mortgages Officials with the Treasury and the Federal Deposit Insurance Corp. are crafting a plan under which the government would guarantee the mortgages of as many as 3 million homeowners now struggling to avoid foreclosure ... Under the program being discussed, the lender would agree to reduce borrowers’ monthly payments, for
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 5:58 PM » Countrywide REOs Going Parabolic
    Published Wed, Oct 29 2008 5:58 PM by ml-implode.com
    ``19,618 Homes Offered For Sale on Countrywide Financial's Website.'' -- Click through to see the rather alarming chart.
    Click Here to Read the Full Article

    Source: ml-implode.com
  • 5:58 PM » NYAG Cuomo warns nine banks about bonus payments
    Published Wed, Oct 29 2008 5:58 PM by ml-implode.com
    ``New York Attorney General Andrew Cuomo, who negotiated executive payment clawbacks by American International Group Inc (NYSE:AIG - News) as it received a taxpayer bailout, warned nine banks receiving government money on Wednesday that using the funds for bonus payments may be illegal under state law.''
    Click Here to Read the Full Article

    Source: ml-implode.com
  • 5:58 PM » New York Attorney General asks banks for bonus information
    Published Wed, Oct 29 2008 5:58 PM by Market Watch
    New York Attorney General Andrew Cuomo asks nine of the largest U.S. banks for information about the bonuses they plan to pay.
  • 3:20 PM » Wall St Journal on the CA Housing Meltdown
    Published Wed, Oct 29 2008 3:20 PM by mrmortgage.ml-implode.com
    The Wall St Journal ran a very thorough yet backward looking story on the state of CA real estate. They focus on Los Banos, a small farming community about 80 miles South of Silicon valley, which is another ’subprime central’. One important thing they leave out is the fact this is beginning to happen everywhere not just Los Banos and the Subprime epicenters. In all areas Notices-of-Default, the first stage to foreclosure are surging. This will lead to similar foreclosure epidemics in higher priced areas. Values in the state have plummeted everywhere and you can use the ‘Subprime Implosion’ road map as a guide to what will happen to higher paper grades such as Pay Option ARMs, broader Alt-A, Jumbo Prime and finally Prime conventional sue to the negative equity effect and/or the exotic nature of said loans. Remember, what happened to Subprime borrowers with respect to payment adjustments is not unique to Subprime. Its just that Subprime ARM were mostly structured with 2-year teaser rate periods. The higher paper grades were structured longer such as 5-years. As a matter of fact the most popular Alt-A, Jumbo Prime and Prime loan program type in CA from 2003 through 2005 was the 5/1 interest only that allows an interest only period for 5-years then adjusts to a fully amortized loan in most cases according to LIBOR, CMT or 1-yr Treasury yield plus a margin. Do the math…2003 to 2005 + 5-years = heavy adjustments coming from 2008 - 2010. Even though the payments won’t double on these loans like on Subprime, any payment increase when the value of your home is down 50%, you are underwater 30% and paying 60% of your gross income on debt is rubbing salt on the wound and grounds for many to walk. Another very popular 5-year program was the now infamous Pay Option ARM, which has destroyed nearly every bank holding them. Below is their adjustment time. We can still get ahead of the major Pay Option implosion with proactive loan modifications but the banks just don’t want to play that...
    Click Here to Read the Full Article

    Source: mrmortgage.ml-implode.com
  • 3:20 PM » Fannie Mae Slammed for Setting Poor Industry Servicing Standard
    Published Wed, Oct 29 2008 3:20 PM by www.thetruthaboutmortgage.com
    Mortgage financier Fannie Mae “has become a major roadblock” in terms of helping at-risk borrowers find long-term solutions to their housing woes, according to the Neighborhood Assistance Corporation of America (NACA). The consumer help group, which planned a protest outside Fannie’s headquarters in Washington D.C. today, claims the mortgage giant is setting poor “Accepted Servicing Practices,” [...]
    Click Here to Read the Full Article

    Source: www.thetruthaboutmortgage.com
  • 11:54 AM » Deflation risk
    Published Wed, Oct 29 2008 11:54 AM by www.econbrowser.com
    There are plenty of things to worry about in the current economic situation. But deflation isn't one of them. Greg Mankiw had a last weekend in which he challenged the view that macroeconomists have learned enough to prevent a repeat of the Great Depression. Greg notes some disturbing similarities between our current difficulties and the problems of the 1930s: From 1930 to 1933, more than 9,000 banks were shuttered, imposing losses on depositors and shareholders of about $2.5 billion. As a share of the economy, that would be the equivalent of $340 billion today. The banking panics put downward pressure on economic activity in two ways. First, they put fear into the hearts of depositors. Many people concluded that cash in their mattresses was wiser than accounts at local banks. As they withdrew their funds, the banking system's normal lending and money creation went into reverse. The money supply collapsed, resulting in a 24 percent drop in the consumer price index from 1929 to 1933. This deflation pushed up the real burden of households' debts.... Deflation across the economy is not a problem (yet), but deflation in the housing market is the source of many of our present difficulties. With so many homeowners owing more on their mortgages than their houses are worth, default is an unfortunate but often rational choice. Widespread foreclosures, however, only perpetuate the downward spiral of housing prices, further defaults and additional losses at financial institutions. Greg is certainly correct that house price declines have a potential to cause similar problems today as we saw in the 1930s. But I believe it is more than an academic distinction whether we are talking about a relative price change (house prices go down but the dollar price of most other items goes up) or a true deflation (the dollar price of almost everything you buy goes down). The reason is that the latter problem is absolutely one that the Federal Reserve could fix, whereas the former...
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    Source: www.econbrowser.com
  • 11:54 AM » New Home Sales: Shift to FHA Financing
    Published Wed, Oct 29 2008 11:54 AM by Calculated Risk Blog
    According to the Census Bureau, 17% of new homes sold in Q3 2008 were financed with FHA loans. This is up from an average of 4% in the 2005 through 2007 period. This huge percentage increase in FHA loans was partially driven by Downpayment Assistance Programs (DAPs). These programs allowed the seller to provide the buyer with the downpayment by funneling the money through a charity. DAPs have
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
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