Daily Digest

Daily Digest 12/29 - Poverty & Homelessness Increase, Tax Hikes Looming, Rare Earth in China

Wednesday, December 29, 2010, 11:00 AM
  • Sovereign Debt Levels 'Unsustainable', Double Dip A Possibility
  • Pleas For Food Jump As Poverty Increases (Arizona)
  • Number Of Homeless Students In State Climbs To 21,000 (Washington)
  • Illinois Default Insurance Cost at Five-Month High: Muni Credit
  • Treasurys Sink After Poor 5-Year Auction
  • Oil Industry's Spending to Rise in Hunt for Energy
  • Ambulance Fees Increasing Across USA
  • Minnesota Tax Hikes Looming
  • Three-Quarters Of U.S. Uninsured Employed
  • US `Very Concerned' About China Rare-Earth Quotas -USTR Spokeswoman
  • China To Establish Rare Earth Group

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Sovereign Debt Levels 'Unsustainable', Double Dip A Possibility

Too many countries have levels of debt they will not be able to finance, which could cause further economic turmoil in 2011, Gulf economic expert Eckart Woertz has said.
Speaking to Arabian Business, Woertz, who is a visiting Fellow at Princeton university in America, said GCC economies would not be insulated from another downturn on international markets.
He said: “Debt levels are still at historic and unsustainable peaks compared to GDPs. There was only a certain shift from private to public sector debt issuance and the latter has faced increasing problems in 2010, be it in California or Greece. 
“People who uncritically hail the growth potential of China and other emerging markets may think twice: their growth model has relied on exports and deficit spending in the US and other OECD countries - if the latter crumbles, they will face problems as well.”

Pleas For Food Jump As Poverty Increases (Arizona)

Arizona’s sharply rising poverty rate has spurred a run on food banks statewide, including Rim Country where food banks continue to push a food drive through the holiday season.
Arizona now suffers the second highest poverty rate in the nation and food banks this year reported a 27 percent jump in demand, according to a just-released survey by Arizona State University’s Morrison Institute for Public Policy.
The long lines at many food banks mirror a 33 percent increase in applications for Supplemental Nutritional Assistance Program — formerly called food stamps. 
Nearly 1 million Arizonans now need extra food, including one out of four children, according to the survey.

Number Of Homeless Students In State Climbs To 21,000 (Washington)

OLYMPIA — They sleep in cars. In parks. In shelters. On the sofas of generous relatives or friends. 
They are the more than 1.3 million homeless children nationwide. 
Of that total, more than 21,000 live in Washington state, according to numbers submitted to the federal government this past week. 
According to the Office of Superintendent of Public Instruction, the numbers show that during the 2009-10, the state reported 21,826 homeless students, up 5.0 percent from the previous year and up 56.5 percent from 2005-06. 

Illinois Default Insurance Cost at Five-Month High: Muni Credit

The cost of insuring Illinois's bonds against default rose to the highest level in five months as the state headed for the new year without a plan to finance a $3.7 billion pension-fund contribution.....Bill Gross, who runs the world's biggest bond fund at Pacific Investment Management Co. in Newport Beach, California, said Illinois's budget may be only 55 percent-funded."That means the other 45 percent they can't pay or have to borrow," Gross said today in an interview on CNBC. "How a state like that can get in that type of position, I'm not quite sure."He said he would avoid buying any Illinois debt.

Treasurys Sink After Poor 5-Year Auction

Treasury prices sank Tuesday after lukewarm demand on a $35 billion sale in five-year notes. 
The bond market extended its losses after the auction, pushing prices to fresh session lows, as the result raised concern about the outlook for Wednesday's scheduled sale of seven-year notes. 
Higher yields failed to lure enough buyers to underwrite the auction, a sharp contrast to the two-year notes sale Monday. 
The Treasury Department sold the five-year notes at a yield of 2.149%, much higher than 2.103% traded right before the auction. Higher yields suggested bidding prices were weaker than many dealers had anticipated. 
The auction was 2.61 oversubscribed, down from the average of 2.82 from the past four auctions.

Oil Industry's Spending to Rise in Hunt for Energy

The global oil industry—far from chastened by the catastrophic U.S. Gulf of Mexico spill—is planning record spending next year, including a large amount for deep-water development. From giants Saudi Aramco and Exxon Mobil Corp. to five-person wildcat outfits, the industry plans to spend nearly a half-trillion dollars next year to find and extract oil and natural gas, according to a new survey by investment bank Barclays Capital.

Ambulance Fees Increasing Across USA

When a Gig Harbor, Wash., Fire & Medic One ambulance speeds toward a hospital, medics are focused on saving lives, not money, says Medical Division Chief Paul Berlin. 
But the service — and thousands like it across the USA — can't ignore the bottom line — not when the fire district is projecting a $1.5 million drop in property tax revenue next year.So on Sept. 1, the tax-funded district raised its ambulance fees, hiking its basic service from $375 to $550.....Ambulance providers nationwide are coping with rising costs, decreased support from local government, low Medicare reimbursement rates and a jump in the number of uninsured Americans, says Stephen Williamson, president of the American Ambulance Association.
A 2007 report by the Government Accountability Office showed providers were paid a Medicare reimbursement rate 6% below cost, and the gap widened to 17% in remote areas. Williamson says the disparity has grown since then.

Minnesota Tax Hikes Looming

The Minnesota legislature is facing a six-billion dollar deficit. It could mean higher taxes.
The budget's of most small Minnesota cities rely heavily on Local Government Aid payments from the state. If the Legislature cuts those payments, local leaders say it could mean a cut in services and more taxes.
For instance: A complete loss of L.G.A. payments to the City of Crookston would require a 300-percent increase in property taxes to make up the difference.
Dave Genereux, Crookston Mayor: "We really don't have a lot of choices. We'd raise taxes a little… some. But, we'll have to cut services, raise fees on things to try to make up for it."

Three-Quarters Of U.S. Uninsured Employed

Seventy-five percent of the some 50 million of the U.S. population with no health insurance come from working families, researchers say. 
The report by the Kaiser Family Foundation says 57 percent of people in the U.S. under age 65 receive health insurance coverage as an employer benefit. Medicare covers virtually all those who are age 65 years and older, but the non-elderly who do not have access to or cannot afford private insurance now go without health coverage unless they qualify for insurance through the Medicaid program, Children's Health Insurance Program or a state-subsidized program. 
The report says the recession has resulted in many losing their health insurance because they have become unemployed, but it has become increasingly difficult for many of the employed to afford coverage.


US `Very Concerned' About China Rare-Earth Quotas -USTR Spokeswoman

The U.S. sharply criticized China's decision Tuesday to cut its rare-earth export quotas, raising the stakes for potential retaliation over the sensitive trade issue.
"We are very concerned about China's export restraints on rare-earth materials," said a spokeswoman from the U.S. Trade Representative's office.
"We have raised our concerns with China and we are continuing to work closely on the issue with stakeholders," the spokeswoman said.
China's decision to cut first-half 2011 export quotas by about 35% from the year-earlier period is stoking tense bilateral trade tensions less than a month before President Hu Jintao arrives for a visit with President Barack Obama.

China To Establish Rare Earth Group

China, which supplies more than 90 percent of the world’s rare earth minerals, is close to establishing an association that will, under government oversight, work to “guide” the domestic industry. The China Association for Rare Earth will be organized under the authority of the Chinese Ministry of Industry and Information Technology and include the 93 largest domestic producers, Wang Caifeng (王彩鳳), a member of the committee overseeing the group’s formation, told reporters at a press conference in Beijing yesterday.....The US said last week it may file a WTO complaint against China over restraints on supplies of rare earths....(Page 2)-China will also raise export taxes for some rare earth elements to 25 percent next year, the Ministry of Finance said this month. The move is an increase from the 15 percent temporary export tax on neodymium, used in batteries for hybrid cars, including Toyota Motor Corp’s Prius.

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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Re: Daily Digest 12/29 - Poverty & Homelessness Increase, ...

"Italy on Wednesday raised 12 billion euros (15.7 billion dollars) in a treasury bond auction that drew strong demand but at interest rates sharply higher than at a previous operation.

Italy, with a public debt approaching 120 percent of gross domestic product, has lately prompted investor unease amid a wider eurozone finance crisis affecting Spain, Portugal, Ireland and Greece.

The Bank of Italy said the treasury had placed six-month bonds worth 8.5 billion euros and two-year bonds worth 3.5 billion euros.

The offer was heavily oversubscribed, with six-month bonds attracting 13.198 billion euros and two-year bonds 4.139 billion euros.

But the yield, or interest rate demanded by investors, rose sharply compared with a similar operation November 25.

The rate on the six-month bond went to 1.698 percent from 1.483 percent while that on the two-year bond rose to 2.937 percent from 2.307 percent.

The treasury on Thursday is to issue medium- and long-term bonds, its last operation of the year."

"Officials at Connecticut's public colleges and universities are bracing for another tough budget year as the legislature and new governor grapple with next year's $3.67 billion deficit.

"Public universities are definitely on the firing line," said Higher Education Commissioner Michael Meotti. "The next several years are going to be the toughest budget years higher education has faced in the last 50 or 60 years.""

"While combined spending by the state's three higher education systems-the University of Connecticut, Connecticut State University and the Connecticut Community Colleges-grew by nearly 230 percent over two decades, to $1.94 billion in fiscal 2009, the General Fund contribution increased by less than 83 percent, to $556 million, according to the Office of Legislative Research.

Meanwhile, in-state tuition and fees increased by 239 percent at the community colleges, 284 percent at UConn and nearly 353 percent at CSU."

"Canastota, NY -- When Todd Rouse became mayor of Canastota in 2001, the village paid $14,203 into the state retirement fund for all of its employees. This year, the bill is $131,000. It’s projected to rise to about $184,000 in 2012 — more than 10 percent of the village’s current tax levy.

“The system is broken,” Rouse said. “What has to happen is that, just like the private sector, the number of retirees in the system are going to have to realize that it’s just not feasible to keep doing this.”"

"DALLAS (AP) -- Passengers whose travel plans were wrecked this week when thousands of flights were canceled might not want to hear it, but airfares are going up again.

Several airlines confirmed Tuesday that they are raising prices on many domestic routes by $10 one way and $20 per round trip, even as snowbound passengers remained stranded at New York City-area airports.

United, Continental and Delta said they're raising prices effective immediately. Travel website FareCompare.com said American was too, but the airline didn't respond to a request for comment.

Southwest did not immediately go along with the higher prices, which raised the possibility that the other airlines might back down, FareCompare suggested.

The airlines posted strong profits in the third quarter, and traffic has been running higher than a year ago as travel demand slowly recovers from the recession. They didn't offer a reason for the fare hikes.

But FareCompare noted that they are facing rising fuel costs. Oil prices have climbed this year and analysts predict they will rise again in 2011 due to strong demand from developing countries such as China and India."

"Three dozen of the University of California's highest-paid executives are threatening to sue unless UC agrees to spend tens of millions of dollars to dramatically increase retirement benefits for employees earning more than $245,000.

"We believe it is the University's legal, moral and ethical obligation" to increase the benefits, the executives wrote the Board of Regents in a Dec. 9 letter and position paper obtained by The Chronicle.

"Failure to do so will likely result in a costly and unsuccessful legal confrontation," they wrote, using capital letters to emphasize that they were writing "URGENTLY."

Their demand comes as UC is trying to eliminate a vast, $21.6 billion unfunded pension obligation by reducing benefits for future employees, raising the retirement age, requiring employees to pay more into UC's pension fund and boosting tuition.

The fatter executive retirement benefits the employees are seeking would add $5.5 million a year to the pension liability, UC has estimated, plus $51 million more to make the changes retroactive to 2007, as the executives are demanding. "

  • Other news headlines:


Philippine 5-Year Bonds Fall as Debt Sales to Rise; Peso Gains

German Inflation Unexpectedly Quickened in December

Indonesia Raises Bank Foreign-Currency Reserve Ratios Amid Capital Inflows

SingleSpeak's picture
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Re: Daily Digest 12/29 - Poverty & Homelessness Increase, ...

"Three dozen of the University of California's highest-paid executives are threatening to sue unless UC agrees to spend tens of millions of dollars to dramatically increase retirement benefits for employees earning more than $245,000."

I've got a solution for this one. Let's reduce their base pay to about $100,000. They'll still be getting more than they are worth; the state will save a lot in salaries; and we can double the retirement benefits for anyone making more than 245k just like they want because there won't be any.


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Re: Daily Digest 12/29 - Poverty & Homelessness Increase, ...
Bank of America flag
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Bank of America threatened a Connecticut couple with foreclosure proceedings on their home — scheduled to begin on Christmas Eve — if they didn't agree to a forced sale. The kicker is this: The husband and wife had never missed a payment on their mortgage.

 Barry Ritholtz picks up the tale today on his blog, from a local website in Connecticut that first covered it.

Ritholtz cites the source article:

"The largest bank in the United States earlier this month notified Shock Baitch and his wife Lisa (Friedman) Baitch that foreclosure action will start today — Christmas eve — unless the couple agrees to put their home up for a forced sale."

"Why? Because another unit of Bank of America erroneously reported to credit agencies that the family was seeking a loan modification, ruining their credit rating and as the result (sic) putting their mortgage into default."

"All this is happening even though the bank – after admitting it erred and sent a letter of apology in September – handed this case to a special unit at Bank of America that is charged with dealing with severe customer issues. It promised to notify the credit reporting agencies that the couple were not deadbeats, but were good credit risks"

Of course, this comes on the heels of another case, first reported by Ritholtz, where Bank of America

[BAC  13.31    -0.03  (-0.22%)   ]

allegedly downgraded the credit rating of a customer whose only sin, according to reports, was to inquire about who owned his mortgage note.

Ritholtz concludes: "Post bailout, the giant banks have become too large to manage themselves. It is not just housing sh%$ holes like South Florida where the banks are paperwork disasters, but apparently states such as Connecticut, also."

Provocative stuff.

As I observed in my earlier article, about Bank of America allegedly cutting a credit score over a mortgage note inquiry: "A single case—no matter how compelling or potentially illustrative of a broader point—isn't yet a trend."

While that may be true, I'm certain my observation is cold comfort to anyone who's had a bank send them a notice of foreclosure in error.

Especially on Christmas Eve.

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Re: Daily Digest 12/29 - Poverty & Homelessness Increase, ...


Britain forms plan for Gulf evacuation in event of war with Iran

The British armed forces are drawing up contingency plans to evacuate hundreds of thousands of British residents and tourists from Dubai and other Gulf cities in the event of war with Iran.

By Richard Spencer, Dubai
28 Dec 2010

The Coalition government under David Cameron ordered an immediate review of British military planning in the Gulf after the election last May. The Daily Telegraph can reveal that new proposals are being drawn up to coordinate military activity in the region with local allies hostile to Iran, particularly the United Arab Emirates.

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Posts: 81
Re: Daily Digest 12/29 - B of A downgraded me

I asked B of A who holds my mortgage note. They sent me a nasty letter back informing me that they docked my credit. This is totally unjust. I will probably take the time to complain and get it off my report even though i have nearly perfect credit scores and am not looking for a loan. So, does two times make a trend? What do they get by doing this? I will sell this stupid house or just walk away from it (bought in 2006, duh) if they piss me off further. Btw, why was iDoc's post flagged?

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