Daily Digest

Daily Digest 10/15 - Bank Of America On Foreclosuregate, Middle Classes Hit With Tax Raid, Nobel Award In Darwin Economics

Friday, October 15, 2010, 9:43 AM
  • PressTV 1 News Analysis (with Max Keiser)
  • Nobel Award in Darwin Economics
  • Bank Of America On Foreclosuregate: "Heightened Risk Of More Dismal Scenario"
  • Middle classes hit again with tax raid on pensions
  • Moscow and London start to thaw relations
  • Dollar a smidgen away from U.S. parity
  • Can the Dollar Drop Fast Enough to Keep the Markets Up?
  • The Second Leg Down of America’s Death Spiral

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PressTV 1 News Analysis (with Max Keiser) (TomAdkins)

Insight from Max Keiser.

Nobel Award in Darwin Economics (pinecarr)

Named in honor of Charles Darwin, the Darwin Awards commemorate those who improve our gene pool by accidentally removing themselves from it. I therefore propose the ‘Nobel Award in Darwin Economics’. The recipient of the award would graciously be asked to remove (just) their ‘economic genes’ from our economic gene pool. If they teach economics, they’d be asked to cease and desist, if they were the Secretary of the Treasury, the Chairman of the Federal Reserve, or the President of the United States they’d be asked to resign.

Bank Of America On Foreclosuregate: "Heightened Risk Of More Dismal Scenario" (pinecarr)

The average delinquency at foreclosure for Florida is 678 days, while for New York, it is, get ready, 792 days! That's right, a house is delinquent on its payments, which usually means not paying anything, for over two years in New York before it is foreclosed upon. Which also means that only now are those who stopped paying their mortgage around the days when Lehman filed being foreclosed upon. And guess what happened to the economy, and the stock market in the 6 months immediately after.

In other words, there is such a huge cliff of accrued foreclosures that is supposed to be hitting right about...now, that the double whammy of foreclosure gate and the accrued foreclosures will blow right through the balance sheets of banks like JPM. And with that out of the way, here is why BofA believes that there is a "heightened risk of a more dismal scenario. If negative momentum in the housing market kicks in, and feeds into the banking system and broader economy, it will be hard to fight." Alas, Michelle, it already has.”

Middle classes hit again with tax raid on pensions (pinecarr)

Middle-class professionals and savers are facing a tax raid on their pensions under measures to be unveiled by the Coalition.

Moscow and London start to thaw relations (pinecarr)

Brian Cattell, secretary of the Bow Group Conservative think-tank in London, says the UK needs international partners and Russia is an important world player. “William Hague has recognized that Britain in its foreign policy needs to embrace a whole host of countries. Its foreign policy cannot just be based on strong relations with one or two countries,” Cattell said.

He added that “Britain needs to look to emerging markets all around the world and Russia is certainly one very important market of that kind. And there are opportunities for British business.”

Dollar a smidgen away from U.S. parity (pinecarr)

The Australian dollar is a mere smidgen from parity with the US dollar as the euro drags it higher against a weak American currency.

The local currency was trading close to one US dollar this afternoon after reaching its highest level since it floated in December 1983. The renewed rise came as traders awaited a second round of quantitative easing by US Federal Reserve - buying bonds from banks - to inject funds into the financial system to help the beleaguered American economy.

Can the Dollar Drop Fast Enough to Keep the Markets Up? (Ilene)

As you can see from Pharmboy’s excellent chart, our market "rally" is ALL about the declining dollar. We are not used to inflation in this country - it hasn’t been much of an issue for the past generation but that’s what we’re seeing here as we are experiencing lower wages, lower demand and flat prices - THAT IS INFLATION or, as we used to say in the 70s - STAGFLATION.

The Second Leg Down of America’s Death Spiral (tomadkins)

In the crazed frenzy to get as many mortgages securitized during the Oughts, banks took shortcuts with the paperwork necessary for the Mortgage Backed Securities. The reason was because everyone in the chain of this securitization mania got a little piece of the action—a little slice of the MBS pie in the shape of commissions.

So in the name of “improved efficiencies” (and how many horror stories are we finding out, carried out in the name of “improved efficiencies”), banks digitized the mortgage notes—they didn’t physically endorse them, like they were supposed to by the various state and Federal laws.

Article suggestions for the Daily Digest can be sent to [email protected]. 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."


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Bernanke Sees Case for `Further Action' With Too-Low Inflation


"Inflation is running at rates that are too low" Bernanke warned. "The risk of deflation is higher than desirable."



"The dollar index hit the year's low Thursday on expectations the Federal Reserve will again print money next month, also known as quantitative easing (QE). Art Cashin, director of floor operations at UBS Financial Services, shared his insights.

“[The markets are] so currency dominated,” Cashin told CNBC.

“If today’s initial [jobless] claims number came out about 4 weeks ago, the S&P 500 would be down 8 points, but because of the way currencies are dominating everything, they’re keeping stuff up.” "

"Oct. 14 (Bloomberg) -- U.S. companies have almost $1.1 trillion of leveraged loans coming due from 2012 through 2014 after pushing out debt maturities past next year, according to a Fitch Ratings report.

Borrowers have paid back or extended about $175 billion of loans during the first three quarters of the year, creating a higher volume of debt that will need to be addressed several years from now, according to the report published yesterday."


"BEIJING (Dow Jones)--China's sovereign credit rating faces risks from high government debt and a potential fall in banks' asset quality from bad loans after the fiscal stimulus measures launched in late 2008, Fitch Ratings analysts said Friday.

Local government investment companies in China have large amounts of debt that may put general government debt between 32% and 47% of gross domestic product, and a big portion of the local debt may have repayment-risk issues, said Vincent Ho, an associate director on Fitch Ratings' Asia sovereign ratings desk, during a teleconference.

"If this part of the debt really goes sour eventually, it will affect the (non-performing loan) ratio to go up by about 4%-5% of total loans," he said.

Outstanding loans to local-government financing platforms totaled CNY7.66 trillion (US$1.15 trillion) as of June 30, and 26% of those loans are highly likely to go bad because they aren't backed by sufficient guarantees or cash flow, the state-run China Securities Journal reported this week, citing unnamed sources."

"The Obama administration is set to report Friday that the federal budget deficit exceeded $1 trillion for the second straight year, providing critics of government spending with fresh ammunition ahead of the midterm congressional elections."

"The Obama administration is projecting that the deficit for the 2011 budget year, which began on Oct. 1, will climb to $1.4 trillion. Over the next decade, it will total $8.47 trillion. Deficits of that size will constrain the administration's agenda over the next two years and will certainly be an issue in the 2012 presidential race.

Top economists with the National Association for Business Economics forecast this week that the 2011 deficit will total $1.2 trillion, only slightly better than the administration's estimate. These analysts pinpointed excessive federal debt as their single greatest concern, even more so than high unemployment."

"Paying for the state pension system, stung by heavy stock market losses during the recession, could soon force taxpayers to shoulder an additional $900 million a year, a scenario that had one gubernatorial candidate warning Thursday of a looming “train wreck.”

Although top Patrick administration officials warned a year ago about the potential spike, little has happened since to forestall the increase. Many fiscal analysts and lawmakers now believe that the most politically feasible course to avoid the increase is to push part of it onto future generations of taxpayers, a move that others warned comes with its own peril."

"TAMPA - Tampa's pension costs are rising at an alarming rate, city officials say, even as the city has shed hundreds of jobs and cut spending to meet its payroll obligations.

Four years ago, city taxpayers contributed about $1.5 million to Tampa's police and fire pension fund. Next year, city officials project that figure to surpass $19.5 million.

Overall, the city's contributions to its public safety and general employee pensions have doubled in the past two years, from $20 million to a projected $40.6 million next year."

""Our projection is that by 2013, the city's contribution will be $60 million," Anderson said."

"Nationwide, the cost of many government-run pension plans has become unsustainable, says Eli Lehrer, a senior fellow at The Heartland Institute, a Chicago-based think tank.

"Unless there's a particularly strong economic recovery, more local governments will run into serious problems," he said. "Without widespread reform, it's quite likely that we'll see a fair number of cities and counties file for bankruptcy protection over the next decade.""

"Pennsylvania cities will begin to topple like dominoes in five to 10 years unless the state Legislature drastically reforms state law controlling employee pensions and other public finances, Allentown Mayor Ed Pawlowski told a municipal association meeting Thursday.

But Reading Mayor Tom McMahon said Pawlowski is too optimistic: The cities only have two or three years."

"Pawlowski said Allentown's annual payments to the pension fund were $6.5 million when he took office five years ago. Now they are $15 million and 20 percent of the city budget, and by 2012 will be 25 percent.

"This is crazy," he said.

Trying to run cities under state law, he said, "is like trying to hang wallpaper with both hands tied behind your back, and blindfolded.""

"Oct. 14 (Bloomberg) -- President Barack Obama said “all options” are on the table to keep the Social Security system solvent, including raising the cap on payroll taxes."

"CHUCK REED is the Democratic mayor of San Jose, California. You might expect him to be an ally of public-sector workers, a powerful lobby in the Golden State. But last month, at a hearing on pension reform held by the Little Hoover Commission, which monitors the state’s government, Mr Reed lamented his crippling public-pensions bill. “City payments for retirement benefits have tripled over the last ten years even though our workforce has declined dramatically, and we have billions of dollars in unfunded liabilities that the taxpayers must pay,” he said.

Mr Reed estimated that the average cost to his city of employing a police officer or firefighter was $180,000 a year. Not only can such workers retire at 50, but some enjoy annual pension payments greater than their salaries. They are also entitled to cost-of-living increases of 3% a year, health and dental insurance for life and lump-sum payments for unused sick leave that could reach hundreds of thousands of dollars.

Plenty of similar bills are looming in America’s public sector: in municipalities, in the federal government, and especially at state level."

"Mr Rauh calculates that seven states will have exhausted their pension assets by 2020—even if they make a return of 8%, a common assumption that looks wildly optimistic."


"BOSTON (MarketWatch) -- Federal Reserve Board Chairman Ben Bernanke on Friday said he thought the current high unemployment and low inflation environment would linger into 2011 and as a result there is a "case for further action" on the monetary policy front. Bernanke did not provide many details on the nonconventional policies that the Fed might take beyond saying the Fed might expand its holdings of longer-term securities. He backed a cautious approach, saying that the Fed has little experience in judging the economic effects of more asset purchases. Bernanke said another step the Fed might consider is to strengthen its pledge to keep rates low for an extended period. The Fed may stress that it expects to keep rates "low for longer than markets expect," Bernanke said."

..................10A) Bernanke: Fed wrestles with size of aid program (Notice the inflation comments near the bottom)

...................10B) Bernanke outlines case for easing (Financial Times)

"The Federal Reserve has taken a large step towards a formal inflation target after chairman Ben Bernanke said that most of its officials think the rate of price rises should be “2 per cent or a bit below”.

Noting that current measures of core inflation are around 1 per cent, Mr Bernanke said that “inflation is running at rates that are too low” relative to what the Fed judges is most compatible with its mandate.

Mr Bernanke’s speech sends a clear signal that the Fed intends to anchor a new round of quantitative easing – the policy of expanding its balance sheet through asset purchases – on driving inflation up to its target level.

This is the first time that Mr Bernanke has explicitly linked the long-term inflation forecasts of members of the Fed’s Open Market Committee – which have been published for some time – with the central bank’s inflation objective.

That makes “2 per cent or a bit below” tantamount to an inflation target"

"AUSTIN -- A top lawmaker predicted Thursday that the state's projected budget shortfall will likely be significantly higher than $21.5 billion and warned that the Legislature may be forced to take a "meat cleaver" approach when it meets next year to write a new spending blueprint for the next two years.

Rep. Rene Oliveira, D-Brownsville, chairman of the House Ways and Means Committee, issued the bleak assessment at a two-day meeting of the Texas Taxpayers and Research Association.

Projections of the shortfall -- the result of a steep decline in state sales tax revenue because of the economic downturn -- were originally pegged at $11 billion and have worsened the past several months."

"Next year's state budget deficit could worsen by hundreds of millions of dollars if state social services officials are correct that Connecticut's Medicaid costs will skyrocket by nearly $1 billion starting in July.

A preliminary budget request from the Department of Social Services particularly tosses a fiscal wrench into Republican gubernatorial nominee Tom Foley's plans to balance the budget without tax hikes. The Greenwich businessman has said he could save more than $500 million by reducing state health care costs by at least 10 percent."

"Farm loan delinquencies have hit a 17-year high, and 2.3 percent of all agricultural production loans made by commercial banks were past due, up from 1.3 percent a year ago, according to the Federal Deposit Insurance Corp.

The number of Minnesota farmers defaulting on agricultural loans has swelled dramatically since 2008, reaching levels not seen since the 1980s farm crisis permanently altered the state’s rural economy, reported the Minneapolis Star Tribune October 4.

Lenders have sent farmers more than 3,670 default notices in the past 12 months, according to the University of Minnesota’s Farmer-Lender Mediation Program. That’s up 83 percent in just two years."

"The 13 percent decline in the Dollar Index since June has led some OPEC members to call for oil to rise to $100 a barrel.

The U.S. currency’s weakness means the “real price” of oil is about $20 less than current levels, Venezuelan Energy and Oil Minister Rafael Ramirez said after yesterday’s meeting of the Organization of Petroleum Exporting Countries in Vienna. The group, which accounts for 40 percent of global crude output, left targets unchanged and called for greater adherence to quotas, which are being exceeded by a supertanker load a day.

“OPEC is not interested in compliance right now,” Nordine Ait-Laoussine, the former Algerian oil minister who now runs Geneva-based consultant Nalcosa SA, said in an interview in Vienna. “They’re concerned about the dollar because as the dollar weakens, prices go up. They’re not paying any attention to production discipline.”"

  • Other news, headlines and opinion:

Russia worried about reserve currency volatility

Gold May Advance on Demand for Currency Alternative, According to Survey


Inflation Unexpectedly Quickens to 8.62%, Adding to Interest Rate Pressure (India)

America's Currency Crisis is Now Underway (Inflation.us)

Yuan Rises to Record as US Pressure for Appreciation Mounts

Portugal's Former Monopolies Safer Than Sovereign: Euro Credit

Bank of America Downgraded by Bonds on Loans: Credit Markets

Iceland Pension Funds to Block $2 Billion Debt Relief Proposal

Bank Of Japan Vows More Action If Needed

Ruling Party Lawmaker Group Seeks to Curb Independence of Central Bank (Japan)

UN official: US is $1.2 billion in arrears at UN

Dubai debt seen at $115 bln, asset sales likely

Kansas budget deficit could top $300 million

Buffalo Schools Could Layoff Over 900 Employees

Default-Swap Dealers May Create Futures Contracts as US Regulation Looms

Las Vegas retail vacancy rate climbs to 10.5 percent 

Financial crunch worrying seniors

Mayor Daley's Schools Pay Price for Illinois Fiscal Problems: Muni Credit

Moody's: Sept. CMBS delinquency rate hit 8.24 pct

AIG $2 Billion Treasury Backstop Shows Rating Firms' Influence 

Jobs of 500 Camden municipal employees on chopping block

Newark Council Approves Plan to Sell 17 Buildings to Plug Gap

State pension head warns of dire future for Pittsburgh ("bankrupt in 10 years")

Teachers Picket as One of Michigan's Wealthiest School Districts Faces Big Deficit

Raiding funds, debt leaves Wisconsin worse off (Opinion)

Bobb wants state to wipe out DPS debt (Detroit public schools)...."Otherwise, more school closings, classroom sizes of 62 pupils could result, district says"

Greece's state firms lost 1.7bln euros last year- Top loss-makers' combined debt is 12 billion euros

State Considers Selling Prisons (Louisiana)

Minister downplays suspension of payments to private pension funds (Hungary)

Fort Worth's pension plan may become insolvent by 2023, study says and The First 10 City Pensions That Will Run Out Of Money

States Should Cut Pension Costs, Not Default on Debt, Deutsche's DWS Says

New Jersey government pension costs rise dramatically (Graph from October 12 news story)

U.K. Government Bonds Decline Amid Stock Gains, Concern Over Debt Supply

Italy's True Unemployment Rate Exceeds 11 Percent, Bank of Italy Reports

U.S., Europe at Risk of Contacting `Japanese Disease,' Stephen Roach Says

Crisis Freezes Foreclosures as REO Inventories Rise

Congressional Panel Sees Conflicts of Interest from TARP Contractors

Pa. pension guru warns Pittsburgh of takeover

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Re: Daily Digest 10/15 - Bank Of America On ...



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Re: Daily Digest 10/15 - Bank Of America On ...


DrHolden wrote:

Re: Daily Digest 10/15 - Bank Of America On ...



Too funny DrH!

I always suspected a double-life...

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bond selloff

This is the sixth day of a sell off in the 20 year treasury.  Three days ago it moved through the 50 day moving average and it has gone down ever since then.  Today even when the market was down, TLT was down hard, and it only recovered marginally by the close.  I think this is something interesting, because its a relatively new effect.

Might our overseas creditors be tired of floating us money at low rates, only to have us print more, and then have the underlying currency drop?  At the very least, perhaps they are moving money from the long end of the yield curve to the short end.

I think this trend is worthy of note.

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Re: Daily Digest 10/15 - Bank Of America On ...

Western economies remain in “grave danger of financial collapse”




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Re: Daily Digest 10/15 - Bank Of America On ...

The Impact of Error From Securitization to Foreclosure -  Barry Ritholtz -  There are quite a few misunderstandings, denials, and exaggerations floating around as to what the final outcome might be of “Fraudclosure.” At the current stage, we really do not know how extensive the problems are. We could make wild and unsubstantiated conclusions, but we prefer reason and logic. So let’s break this down as to the primary concerns. As I see this, what facts are revealed and how these errors get resolved will determine the resolution of the current fiasco, as well as the costs

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Re: Daily Digest 10/15 - Bank Of America On ...

U.S. is Currency War's "Tomb Maker": China Economist

By Simon Rabinovitch

October 15, 2010 --- (Reuters) - The United States fired the first shot in the currency war and the rest of the world must be on guard for its deliberate strategy to devalue the dollar, a Chinese economist said in an official newspaper on Thursday.

In a front-page commentary in the overseas edition of the People's Daily, Li Xiangyang described the United States as the conflict's "first maker of tomb figures," a Chinese idiom that means someone who creates a bad precedent.

Li, head of the Asia department at the Chinese Academy of Social Sciences, a top government think tank, said continued intervention in currency markets by developed economies would deal a blow to global economic recovery.

Chinese leaders have warned before that loose monetary policies in the United States pose a serious challenge for emerging markets, but rarely in such strident language, a window onto the rising anger in Beijing.

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Re: Daily Digest 10/15 - Bank Of America On ...


Published on Friday, October 15, 2010 by Reuters

French Strikers Cut Fuel Pipeline to Paris


Refinery workers cut off a fuel pipeline to Paris today as protesters piled on pressure to derail French president Nicolas Sarkozy's unpopular pension reform.

Police broke up blockades at fuel depots in southern France but protesters blocked a terminal at Paris's Orly airport and truckers were set to join the fray as momentum built for a day of street rallies tomorrow.

A nationwide strike is planned on Tuesday, a day before the Senate is due to vote on a bill to make people work longer for their pensions.

The protests have become the biggest challenge facing the centre-right president, who is struggling with rock-bottom popularity ratings as he tries to appease financial markets by stemming a ballooning pension shortfall.

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Re: bond selloff

heard in one of the articles how to hedge for both deflation and inflation. People hedge for inflation with gold/hard assets and hedge for deflation with high dividend paying stocks. bonds down is an attempt to move into dividend stocks or commodities?.

But I can't help but wonder if this is just options expiration and perhaps end of year fund manager window dressing. (some fund EOY is

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Re: Daily Digest 10/15 - Bank Of America On ...

I like Max Keiser, but I have no idea what he's talking about in that interview when he goes on a rant about big money managers dropping the dollar and going into gold. He needs to stick with the facts, instead of unsubstantiated claims by unnamed sources about total destruction of the dollar in the next few days.

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