Daily Digest

Daily Digest 10/31 - Bill Black Occupies Wall Street, How The Big Players Fare During The Crisis, How 10 Billion Will Live

Monday, October 31, 2011, 10:49 AM
  • Cheat Sheet: What’s Happened to the Big Players in the Financial Crisis
  • Keep Wall Street Occupied
  • Bill Black Goes To Occupy Wall Street
  • Europhoria
  • Berlusconi Defiant as EU’s Focus Shifts to Italy
  • USA Export land model analysis for food energy production and consumption
  • The Disappearing Island
  • How 10 Billion Will Live

Our 'What Should I Do?' guide has steps to cook, see & stay warm in times of power outage

Economy

Cheat Sheet: What’s Happened to the Big Players in the Financial Crisis (jdargis)

Mortgage lenders contributed to the financial crisis by issuing or underwriting loans to people who would have a difficult time paying them back, inflating a housing bubble that was bound to pop. Lax regulation allowed banks to stretch their mortgage lending standards and use aggressive tactics to rope borrowers into complex mortgages that were more expensive than they first appeared. Evidence has also surfaced that lenders were filing fraudulent documents to push some of these mortgages through, and, in some cases, had been doing so as early as the 1990s. A 2005 Los Angeles Times investigation of Ameriquest – then the nation’s largest subprime lender – found that “they forged documents, hyped customers' creditworthiness and ‘juiced’ mortgages with hidden rates and fees.” This behavior was reportedly typical for the subprime mortgage industry. A similar culture existed at Washington Mutual, which went under in 2008 in the biggest bank collapse in U.S. history.

Keep Wall Street Occupied (June C.)

Everyone can do this. I get at least 10 credit card solicitations per week. This is going to be fun.

http://www.youtube.com/watch?feature=player_embedded&v=2JlxbKtBkGM

Bill Black Goes To Occupy Wall Street (June C.)

Let me guess.... he's a Marxist?

Europhoria (Ilene)

One obvious problem is the political and financial fallout from the “voluntary” 50% haircuts being agreed to by Greek bondholders. Now that Greek bondholders have been shorn, what will keep Italy, Spain and Portugal from asking for the same deal to help them out of their debt obligations? German Chancellor Merkel is already warning against this. She declared, “In Europe, it must be prevented that others come seeking a haircut.” It is possible that the finance ministers of the eurozone have accomplished nothing more than to prevent fiscal contagion by exchanging it for a pandemic of debt forgiveness, as nation after nation lines up to ask their creditors to similarly accept 50% haircuts or perhaps even more.

Berlusconi Defiant as EU’s Focus Shifts to Italy (jdargis)

The European Union’s latest package of measures failed to staunch a rise in Italian borrowing costs, with an Oct. 28 bond sale sending yields to a euro-era record and damping the euphoria unleashed after the summit that ended the day before. Luxembourg Prime Minister Jean-Claude Juncker insisted that Italy should deliver “substantial structural reform.”

Energy

USA Export land model analysis for food energy production and consumption: Part 1

The relative contribution from soyabean and soyabean oil to total production has risen from 9 to 19 percent of total net food energy production, while the relative contribution from maize(corn) has risen from 38 to 45 percent. In other words just soyabean and corn production accounted for 64% of total net food energy production in the USA. Add in wheat and you are at 74%. Just amazing.

This nicely illustrates the consequence of America's industrial food complex: great efficiency in production (i.e., a 2.4 times increase in net production from 1961 to 2007) at the cost of high dependency on just three food types: corn, soyabean, and wheat for almost three-quarters of production.

Environment

The Disappearing Island (jdargis)

Tangier Island lies in the middle of the Chesapeake Bay and is 92 miles (148km) southeast of Washington, DC. This small piece of land is barely above sea level and its 500 residents are fighting for its survival.

How 10 Billion Will Live (jdargis)

At present, the prospects are not bright. While most of the world’s capital, managerial experience, and engineering expertise is concentrated in the high-income and emerging economies of Europe, China, North America, Japan, and the Asian Tigers, none of those countries will be significant contributors to future population growth. Even China, which we think of as a population juggernaut, is now reaping the results of its one-child policy and is projected to suffer a decline in population of 400 million by 2100.

Article suggestions for the Daily Digest can be sent to dd@PeakProsperity.com. All suggestions are filtered by the Daily Digest team and preference is given to those that are in alignment with the message of the Crash Course and the "3 Es."

10 Comments

saxplayer00o1's picture
saxplayer00o1
Status: Diamond Member (Online)
Joined: Jul 30 2009
Posts: 2679
rhare's picture
rhare
Status: Diamond Member (Offline)
Joined: Mar 30 2009
Posts: 1271
As usual - only looking at 1/2 the problem....

June C wrote:

Let me guess.... he's a Marxist?

Not a Marxist, but only looking at 1/2 the equation.  In the video he talks a lot about all the fraud and greed of the bankers and the fraudulent loans and lack of regulation.  But he completely ignores the other half of the equation and the dramatic impact it had on causing the housing bubble.

In order for banks to push loans to consumers, they had to have someone to buy them.  Banks don't hold onto the mortgages, they sell them to investors.  The whole MBS side of things.  For an investor to be willing to buy a mortgage and hold it they will demand a certain interest rate based on the riskiness of holding the loan.  The more risky the loan, the higher the rate of interest.  The higher the rate of interest the less people can afford and the less people qualify.  So there was a manipulation of interest rates to keep them low (the Fed) and a big effort to reduce risk so that investors would buy MBS and regular mortgages.  That distortion came in the form of guarantees by the federal government via the GSEs (Fannie, Freddie, Ginnie, Sally) via FHA, VA, HUD.

Yes, we need to prosecute those that committed fraud on the issuing side of loans, but we also need to deal with the massive corruption and fraud committed on the guarantee side of the loans.  We also need to address the problem that guarantees of loans by the Federal government simply move the risk from corporations and investors to the taxpayer.  However, right now over 90% of all mortgages being issued are still being guaranteed by the Federal government.

So, while Bill Black see's all kinds of lack of regulation as the cause of the problem, I look at it as the Federal government via loan guarantees and the Fed via manipulation to create artificially low rates were the root cause of the problem.   Without that manipulation the fraud by the banks and mortgage lenders could not have occurred.

Bill Black wrote:

If you want to fix the problems you have to fix the regulators.

How about we stop the manipulation that leads to distortions, then we might not need the regulators!

saxplayer00o1's picture
saxplayer00o1
Status: Diamond Member (Online)
Joined: Jul 30 2009
Posts: 2679
U.S. plans to borrow $305 bln Oct. through Dec.

"The U.S. Treasury expects to borrow $305 billion this quarter and $541 billion in the next three-month period as the government struggles to bring down future budget deficits despite a weak economy.

Treasury on Monday said its new estimate on debt issuance for October through December is higher than an earlier estimate of $285 billion. The increase in borrowing was related to lower government revenues and higher spending.

In January through March, Treasury expects to issue $541 billion in debt, the second-highest borrowing figure for a quarter. It borrowed $286 billion in July through September. "
 

Berlusconi urged to quit as bond yields climb

Greece to Hold Referendum on New Debt Deal

osb272646's picture
osb272646
Status: Silver Member (Offline)
Joined: Mar 14 2010
Posts: 120
Keep Wall Street Occupied

Sending back junk mail in a postage paid envelope is fun and gratifying.  I include a note asking that they take my name off their mailing lists.

My opinion is that receiving multiple solicitations daily or even weekly is not something that should be ignored.  There are issues of privacy and ID theft, and possible havoc with one's credit rating of a bad guy worms his way into your financial life.  Plus, it's a waste of resources.  Better to put a stop to these solicitations.

Interestingly,  I have had people tell me that there are folks who depend on sending out junk mail for their livlihood. If everyone stops receiving junk mail, what would those people do?  That's a can of worms I won't open here.

You can stop these credit card solicitations from coming if you call Credit Card Opt-out at 888-5optout.  Or do it on the web www.optoutsprescreen.com.  I did this several years ago.  Once in awhile one still gets through, but it's down to less than one a month.  Those are the ones I send back all loaded up with their junk mail along with my request to get me off their mailing list.

You can get rid of your other junk mail by going to the website of the Direct Marketing Association and registering your address with them.  Junk mail will decline in a couple of months.  It will not disappear altogether, but whatever junk mail you still receive, simply contact the sender and tell them to get your address off their list.  Most of the time you can do this on the internet, quickly and easily.

Years ago, I had a month long trip for which I had the Post Office put my mail on hold.  When I returned, I was shocked to find two bushel baskets of mail, most of it unsolicited junk mail.  I started a process of stopping as much as I possibly could.  In two months, there was a 90% decline in junk mail.  It took me almost another year go get rid of the remaining 10%, but I was successful.  Now, a month's  worth of mail would fit into a shoebox. 

earthwise's picture
earthwise
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Posts: 829
  Bill Black Goes To

Bill Black Goes To Occupy Wall Street (June C.)

Let me guess.... he's a Marxist?

Bill Black a Marxist?  Hmmmmmmm...............    I thought he looked familiar!

plato1965's picture
plato1965
Status: Platinum Member (Offline)
Joined: Feb 18 2009
Posts: 615
peak stuff ?

Apparently the UK hit "peak stuff" in 2001 ...

http://www.guardian.co.uk/environment/2011/oct/31/consumption-of-goods-falling

quite interesting if true.

so since then it's been.. never mind the width.. feel the quality ? 

saxplayer00o1's picture
saxplayer00o1
Status: Diamond Member (Online)
Joined: Jul 30 2009
Posts: 2679
Selling More Insurance on Europe Debt Raises Risk for U.S. Banks

"U.S. banks increased sales of insurance against credit losses to holders of Greek, Portuguese, Irish, Spanish and Italian debt in the first half of 2011, boosting the risk of payouts in the event of defaults.

Guarantees provided by U.S. lenders on government, bank and corporate debt in those countries rose by $80.7 billion to $518 billion, according to the Bank for International Settlements. Almost all of those are credit-default swaps, said two people familiar with the numbers, accounting for two-thirds of the total related to the five nations, BIS data show.

The payout risks are higher than what JPMorgan Chase & Co., Morgan Stanley and Goldman Sachs Group Inc., the leading CDS underwriters in the U.S., report. The banks say their net positions are smaller because they purchase swaps to offset ones they're selling to other companies. With banks on both sides of the Atlantic using derivatives to hedge, potential losses aren't being reduced, said Frederick Cannon, director of research at New York-based investment bank Keefe, Bruyette & Woods Inc.

“Risk isn't going to evaporate through these trades,” Cannon said. “The big problem with all these gross exposures is counterparty risk. When the CDS is triggered due to default, will those counterparties be standing? If everybody is buying from each other, who's ultimately going to pay for the losses?”"
 

"Federal regulators have discovered that hundreds of millions of dollars in customer money has gone missing from MF Global in recent days, prompting an investigation into the brokerage firm, which is run by Jon S. Corzine, the former New Jersey governor, several people briefed on the matter said on Monday.

The recognition that money was missing scuttled at the 11th hour an agreement to sell a major part of MF Global to a rival brokerage firm. MF Global had staked its survival on completing the deal. Instead, the New York-based firm filed for bankruptcy on Monday.

Regulators are examining whether MF Global diverted some customer funds to support its own trades as the firm teetered on the brink of collapse."

"Compton's finances are in such disarray that the city amassed $369,000 in late fees over the last year because it could not pay its policing contract with the Los Angeles County Sheriff's Department on time.

The city has already laid off about 15% of its workforce, and city leaders warn that more cuts may be on the way. City Hall has slashed spending, even canceling the city's popular gospel concert.

But most disconcerting is the city's looming deficit of $39 million, a sum that represents about 80% of its annual general fund budget. Standard & Poor this summer lowered the rating of some of Compton's bonds to just above junk status. City officials said they're hoping for a short-term loan or line of credit to get through the year and vowed not to file for bankruptcy.

As city leaders work frantically to turn the city's finances around, many residents are questioning how things got so bad so fast."

 

sk0204's picture
sk0204
Status: Member (Offline)
Joined: Jul 19 2011
Posts: 1
Opt out website

One correction, the website is at https://www.optoutprescreen.com 

MarkM's picture
MarkM
Status: Platinum Member (Offline)
Joined: Jul 22 2008
Posts: 755
Denninger on MF Global

"The "mainstream media" outlets this morning are talking about this being a "risk management" issue.  Nonsense.  This is a trust issue and Corzine is a former Goldman guy and the former governor of New Jersey."

-and-

"You cannot trust ANY balance sheet given to you today -- in point of fact the government itself demanded that FASB allow lies as a business practice when it comes to the alleged value of securities.  It's that simple.

This is not the mark of a representative republic, it is not the mark of a free and fair market, and it is not "crony capitalism."

It is a mark of a feudal system where outright looting is not only permitted it is encouraged."

http://market-ticker.org/akcs-www?post=196876

MarkM's picture
MarkM
Status: Platinum Member (Offline)
Joined: Jul 22 2008
Posts: 755
Mish has a nice write-up on Corzine

'Today I Congratulate Jon Corzine, CEO of MF Global, for an unheard of combination of rare "achievements".'

Read the entire article. The whole corrupt mess just becomes more amazing each day.

 

http://globaleconomicanalysis.blogspot.com/2011/11/regulators-investigate-mf-global-for.html

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