Daily Digest

Daily Digest - December 12

Saturday, December 12, 2009, 11:01 AM
  • House Approves Massive Overhaul Of Financial Regulations
  • Weakness In Reform Bill A Win For Wall Street
  • Highlights Of The Financial Overhaul Bill
  • Sovereign Debt Default Is Biggest Threat
  • Goldman Had Major Role In AIG's Riskiest Gambles
  • New Underground Economy Rapidly Rising
  • Why Do Ratings Agencies Wield Such Power?
  • Many See VAT Option As Inevitable
  • Federal Employees Raking In The Dough During Recession
  • One Million Fewer Fliers Expected Over The Holidays
  • Six Ways To Find Returns When Interest Rates Are Zero
  • New 'Robin Hood' Moves Homeless Into Posh Mansions
  • McDonald's Launches Recession- Proof Breakfast For A Buck 
  • 'Wealth In America' Report
  • Healthcare Loophole Would Allow Annual Coverage Limits 
  • Banking On The Swiss
  • Gun Laws Are Getting Looser Across US
  • More Older Workers Being Forced Into Retirement
  • Democrats Spending Now To Save Their Seats Later
  • Recession-Themed Holiday Cards Express Sharp Dose Of Sobriety
  • Will The Real 'Green Car Of The Year' Please Stand Up? 


House Approves Massive Overhaul Of Financial Regulations (M.W.)

The nearly 1,300-page bill also would make other major changes to federal oversight of the financial system. Those include outlawing many predatory and abusive loan practices, imposing new restrictions on the largely unregulated market of complex financial derivatives, giving shareholders the right to nonbinding "say-on-pay" votes and reining in the authority of the Federal Reserve.

Weakness In Reform Bill A Win For Wall Street (M.W.)

The first proposed package called for regulations of derivatives without any exceptions. But a potent lobbying coalition that included Boeing, Caterpillar, GE, Coca-Cola and other big companies persuaded lawmakers to dilute the restrictions. "It's a weakness in the bill and a win for Wall Street," said Barbara Roper, director of investor protection for the Consumer Federation of America. "Hedge funds and others that are not bona fide hedgers of commercial risk will slip through this language."

Highlights Of The Financial Overhaul Bill (M.W.)

Allows the government to wind down and dismantle large, failing financial firms. Prevents bank dealers and major traders from collectively owning more than a 20% controlling stake in swap clearinghouses or trading platforms Allows the government to require secured creditors to take a 10% loss if the government has to take over a failing financial firm.

Sovereign Debt Default Is Biggest Threat (M.W.)

The specter of sovereign default looms large for world economies in coming years, and the debt tsunami that has engulfed countries from the United States to Dubai poses a threat to recovery, top money managers at the Reuters Investment Summit said this week.

Goldman Had Major Role In AIG's Riskiest Gambles (M.W.)

Goldman played a bigger role than has been publicly disclosed in fueling the mortgage bets that nearly felled AIG. A WSJ analysis of AIG's trades, which were on pools of mortgage debt, shows that Goldman was a key player in many of them, even the ones involving other banks. In Goldman's biggest deal, it acted as a middleman between AIG and banks, taking on the risk of as much as $14 billion of mortgage-related investments. Then Goldman insured that risk with one trading partner—AIG.

New Underground Economy Rapidly Rising (M.W.)

The FDIC released a report last week concluding that 7.7 percent of U.S. households do not have bank accounts, and an estimated 21 million are underbanked. As an economy becomes richer and incomes rise, the normal expectation is that the proportion of the unbanked population falls and does not rise as is now happening in the US.

Why Do Ratings Agencies Wield Such Power? (M.W.)

By assigning a top-notch, triple-A rating to many of the products that emerged from the boom in "structured finance", the credit rating agencies played a pivotal role in fostering the mad dash into sub-prime mortgage lending which eventually triggered the worst banking crisis since the Great Depression. So who are the credit rating agencies, why are they are so powerful and, given their manifest failings, why does anyone still take them seriously?

Many See VAT Option As Inevitable (M.W.)

Runaway federal deficits have thrust a politically unsavory savior into the spotlight: a nationwide tax on goods and services. Economists across the political spectrum say a consumption tax may be inevitable The favored route of economists is known as a value-added tax, which is a tax on goods and services that is collected at every step along the production chain, from raw material to a consumer’s shopping bag.

Federal Employees Raking In The Dough During Recession (M.W.)

The number of federal workers earning six-figure salaries has exploded during the recession. Federal employees with salaries of $100,000 or more jumped from 14% to 19% of civil servants during the recession's first 18 months — and that's before overtime pay and bonuses. Federal workers are enjoying an extraordinary boom time — in pay and hiring — during a recession that has cost 7.3 million jobs in the private sector.

One Million Fewer Fliers Expected Over The Holidays (M.W.)

On top of slightly higher holiday airfares this year, many airlines have imposed surcharges of $10 to $20 each way for travel on peak days during the holiday season.

Six Ways To Find Returns When Interest Rates Are Zero (M.W.)

The Fed is still transfusing money into a weak economy, and the patient shows signs of a very slow recovery at best. Despite huge budget deficits, interest rates could remain near zero, making 2010 a challenging year to find low-risk returns on your money. Here are factors to consider as you think about how to employ your investment funds next year.

New 'Robin Hood' Moves Homeless Into Posh Mansions (M.W.)

The champion of London's homeless is becoming nearly as famous as his celebrity neighbors, including Margaret Thatcher and Sean Connery. Tthe self-appointed leader of a group of squatters, is grabbing headlines again after taking up residence in yet another mansion in Belgravia, London's most upscale district.

McDonald's Launches Recession- Proof Breakfast For A Buck (M.W.)

The hamburger group is extending its Dollar Value menu to include five new breakfast items - each costing $1 The items include a sausage mcmuffin, a sausage burrito and a hash brown. Mc Donald's is hoping the move will bring cash-strapped Americans back through its famous Golden Arches.

'Wealth In America' Report (M.W.)

A new CNBC "Wealth in America Report" finds that Americans plan to increase their spending an average 10.5 % this holiday compared to last year. But the gains are entirely driven by plans of the wealthy to spend more. Middle and low-income Americans plan to reduce their spending dramatically. There were a few glimmers of hope in the survey.

Healthcare Loophole Would Allow Annual Coverage Limits (M.W.)

A loophole in the Senate health care bill would let insurers place annual dollar limits on medical care for people struggling with costly illnesses such as cancer, prompting a rebuke from patient advocates. Adding to the confusion, the language is tucked away in a clause of the bill captioned "No lifetime or annual limits."

Banking On The Swiss (M.W.)

British financiers are threatening to flee London to Switzerland after a new tax on their bonuses takes effect. Don't bet on it.

Gun Laws Are Getting Looser Across US (M.W.)

A nationwide review by The AP found that over the last two years, 24 states have passed 47 new laws loosening gun restrictions. Among other things, legislatures have allowed firearms to be carried in cars, made it illegal to ask job candidates whether they own a gun, and expanded agreements that make permits to carry handguns in one state valid in another.

More Older Workers Being Forced Into Retirement (M.W.)

Conditions for older workers continue to deteriorate. The number of unemployed workers ages 55 to 64 has nearly tripled since the recession began, to about 1.6 million of the nation's 15.4 million unemployed as of November. By comparison, the number of jobless workers of all ages has roughly doubled.

Democrats Spending Now To Save Their Seats Later (M.W.)

The problem for Obama is that the spending has to start paying sizable dividends for the economy and employment by next fall, or else it will be too easy for Dems to be painted as bankrupting their children's future. Congress is raising the debt ceiling now by a whopping $1.8 trillion to avoid having to raise it again just before the elections.

Recession-Themed Holiday Cards Express Sharp Dose Of Sobriety (M.W.)

Greeting-card giant Hallmark has rolled out 25 new recession-themed cards this year — up from just five last year. "We can say it: This wasn't the year that any of us had hoped for," reads one gold-inked card. Another shows a small Christmas tree with three wrapped presents underneath: "We don't have to have a lot to have everything." It's a sharp dose of sobriety for the card company known for purveying sunny good cheer.

Will The Real 'Green Car Of The Year' Please Stand Up? (M.W.)

Carmakers are justifiably proud of winning the annual "Green Car of the Year" award at the LA Auto Show. This year's recipient is described as setting the "bar for highway fuel efficiency in the luxury car segment. Its 50-state certified clean diesel engine is quiet, responsive, and achieves its mission without the need for exotic technologies. Plus, it's sporty and just plain fun to drive."


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Re: Daily Digest - December 12

"HARRISBURG, Pa. — The Pennsylvania Public School Employees' Retirement System says it's going to need more than $4 billion annually in additional taxpayer money in the coming years.

The pension system said Friday that its projected needs will rise from $617 million this year to $1.1 billion in July, and then hit nearly $4.2 billion in July 2012.

Those figures are despite a gain of nearly 9.2 percent on the system's investments for the quarter that ended Sept. 30."

"WASHINGTON — An unexpected surge in college enrollment has created an $18 billion shortfall in the Pell Grant program, the biggest in its history.

An administration official told The Associated Press the program will cost $18 billion more than Congress and the White House had anticipated over the next three years. The official, who was not authorized to speak publicly about the budget, spoke on condition of anonymity."

"The U.S. Treasury may need to increase its lifeline to Fannie Mae beyond the total of up to $200 billion already made available if the economy deteriorates further next year, analysts at Barclays Capital said in a report Friday."

"In a letter to Harvard on Thursday, university President Drew Gilpin Faust said that the shaky state of the global economy —including the huge hits taken by Harvard's endowment—necessitated the pause."

"California has picked a broker to sell $2 billion worth of real estate that the troubled state hopes will plug some of its financial holes.

CB Richard Ellis Group will sell 17 state office buildings in Los Angeles, Oakland, Sacramento, San Francisco and Santa Rosa. After paying off bond obligations on the buildings, the state hopes to net $660 million that will go directly into the general fund to help offset the $20.7 billion deficit projected through June 2011. "

"Approval Index rating of -16. That’s the lowest Approval Index rating yet recorded for this President"

(Note: not meant as a political statement)

"The worst of the past year's financial upheaval might be over, but the fund that provides retirement benefits to Texas teachers will feel the effects for many years, actuaries said Friday.

"There is virtually no way that this state can give ... a permanent increase to your retirees in the foreseeable future," said Michael Carter, an outside actuary for the Teacher Retirement System of Texas.

"The depth of what the markets have done in this decade will be felt for probably at least 20 years, and it will impact what this system will be able to do," Carter said, referring to the most recent market decline and the losses that followed the technology industry bust in 2001-02.

Over the past 10 years, the fund's average earnings were 3.3 percent, compared with an expected return of 8 percent.

It was sobering news for the board of the $94 billion pension fund and its 1.3 million retired and active members."

Now here's Nathan's Economic Edge looking at the info in the report:

"Rarely do I get to see such an honest account of small business conditions. This report is startling, never in our life times have conditions been so hostile to small business.

I took the liberty of breaking a few of the charts out of this report for you. Let’s start with Sales, Expected versus Actual. Here you will find that expected sales jumped tremendously since the beginning of the year, almost like you would guess they are by listening to CNBS, but just look at how different reality turned out. Now look over at the left scale at that reality figure! That’s right, it says down almost 40%. My critique here is that we don’t get to see the raw data and so we don’t know what the baseline is. Still, there have obviously been many months in a row of decline without a like recovery:"

"The number of federal workers earning six-figure salaries has exploded during the recession, according to a USA TODAY analysis of federal salary data.

Federal employees making salaries of $100,000 or more jumped from 14% to 19% of civil servants during the recession's first 18 months — and that's before overtime pay and bonuses are counted.

Federal workers are enjoying an extraordinary boom time — in pay and hiring — during a recession that has cost 7.3 million jobs in the private sector.

Defense Department civilian employees earning $150,000 or more increased from 1,868 in December 2007 to 10,100 in June 2009, the most recent figure available.

When the recession started, the Transportation Department had only one person earning a salary of $170,000 or more. Eighteen months later, 1,690 employees had salaries above $170,000."

(USA Today article Mish refers to)

"As many exotic adjustable rate mortgages (ARMs) are set to recast in 2010, the Consumer Mortgage Audit Center (CMAC) is projecting a mortgage crisis in 2010 as large as the subprime.

“We’ve spoken to Florida attorneys who sit at the forefront of the U.S. foreclosure crisis and have learned that 53 percent expect recasting ARMs to present a mortgage crisis as large as subprime and 61 percent expect to work on more loan modifications in 2010 than they did in 2009,” said Sylvia Alayon, VP of operations for CMAC “The New Year is going to hold very rude awakenings for some homeowners, but there are things you can do to analyze your situation and get help if you need it.”

Option ARMs enable borrowers to make monthly payments that are interest and principal, interest only, or just part of the interest due. After months and years of paying less than their full monthly payment of both interest and principal, many homeowners accumulate negative amortization. This means the amount of interest due on a loan becomes higher than the amount of the actual loan itself. As the majority of ARMs begin to recast in early 2010, housing bills will inflate, and many homeowners will be forced to repay the negative amortized balances."

"A new Internal Revenue Service unit set up to catch rich tax cheats hiding their wealth in complex business entities is rapidly taking shape with the hiring of hundreds of employees."

"The U.S. House of Representatives on Thursday approved a $387 million boost for the IRS for the fiscal year that started October 1, in part to fund the high-wealth unit. The Senate is expected to vote on the measure on Sunday.


The IRS is also opening new criminal offices in Beijing, Panama City and Sydney to focus on funds flowing out of Europe and into Asia, in part because of a heightened focus on international enforcement in Europe."


..................Gotta get the money from all of those "rich people"

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Re: Daily Digest - December 12

Food Stamps Go to a Record 37.2 Million, USDA Says

By Alan Bjerga

Dec. 8 (Bloomberg) -- A record 37.2 million people, or about one out of every eight Americans, received food stamps in September, as the recession drove a surging jobless rate, according to a government report.

Recipients of the subsidy for retail-food purchases climbed 18 percent from a year earlier, according to a statement posted today on the U.S. Department of Agriculture’s Web site. Participation has set records for 10 straight months.

The government boosted food aid as unemployment soared, heading to a 26-year high of 10.2 percent in October. The jobless rate cooled to 10 percent last month, the Labor Department said on Dec. 4.

“We’ve been working to get that money out the door” to families that need assistance, Deputy Agriculture Secretary Kathleen Merrigan said last week in an interview.

Nevada had the biggest increase in food-stamp participation rates from a year earlier, surging 54 percent, followed by a 46.5 percent jump in Utah, according to the USDA. Texas had the most recipients at 3.1 million, followed by California with 2.9 million and New York with 2.6 million.

Recipients increased in every state and the District of Columbia, except Louisiana. Because of a sharp rise after Hurricanes Ike and Gustav in 2008, the number of people in Louisiana getting food stamps fell 65 percent in September from a year earlier. Gains of more than 30 percent from 2008 were reported in 18 states.

35 Million Budgeted

About 35 million people are expected to receive food stamps each month through the Supplemental Nutrition Assistance Program in the fiscal year that began Oct. 1, according to the budget that President Barack Obama sent to Congress in May.

“In this economic time, SNAP has been essential,” Merrigan said. The participation rate of state residents who are eligible for food stamps varies widely, the USDA said last month in a report based on 2007 data.

In Missouri, about 100 percent who were eligible that year took advantage of the program, the highest rate in the nation, followed by residents of Maine and Michigan, at 91 percent and 89 percent, respectively, the USDA said. Wyoming’s participation rate of 47 percent was the lowest in fiscal 2007, followed by California and Idaho at 48 percent and 50 percent, according to the study.

Nationwide, participation in the food-stamp program was 66 percent of those eligible for the aid in 2007, the USDA said. The department has budgeted for a rate of 68 percent in the current 2010 fiscal year.

“We know of a lot of people who are SNAP-eligible who are not participating in the program,” Merrigan said. “We are working with states to improve participation.”

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Re: Daily Digest - December 12

I ran into this pdf document about peak oil.  Maybe it has been placed here before.  If no?



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Re: Daily Digest - December 12


BY ROGER EBERT / December 9, 2009

If this man is correct, then you may be reading the most important story in today's paper.

I have no way of assuring you that the bleak version of the future outlined by Michael Ruppert in Chris Smith's "Collapse" is accurate. I can only tell you I have a pretty good built-in B.S. detector, and its needle never bounced off zero while I watched this film. There is controversy over Ruppert, and he has many critics. But one simple fact at the center of his argument is obviously true, and it terrifies me.

That fact: We have passed the peak of global oil resources. There are only so many known oil reserves. We have used up more than half of them. Remaining reserves are growing smaller, and the demand is growing larger. It took about a century to use up the first half. That usage was much accelerated in the most recent 50 years. Now the oil demands of giant economies like India and China are exploding. They represent more than half the global population, and until recent decades had small energy consumption.

If the supply is finite, and usage is potentially doubling, you do the math. We will face a global oil crisis, not in the distant future, but within the lives of many now alive. They may well see a world without significant oil.

Oh, I grow so impatient with those who prattle about our untapped resources in Alaska, yada yada yada. There seems to be only enough oil in Alaska to power the United States for a matter of months. The world's great oil reserves have been discovered.

Saudi Arabia sits atop the largest oil reservoir ever found. For years, the Saudis have refused to disclose any figures at all about their reserves. If those reserves are vast and easy to tap by drilling straight down through the desert, then ask yourself this question: Why are the Saudis spending billions of dollars to develop offshore drilling platforms?


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Re: Daily Digest - December 12

if you could collapse civilization now,  with a goal of maybe 1/2 to 1/3rd the population surviving then you'd have enough oil and resources for a few hundred years.  

the tricky part, i imagine would be doing it without destroying so much that the remaining civilization is basically in the stone age. 

economic collapse might just do the trick....

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Re: Daily Digest - December 12

Leftist Latin American bloc to use virtual currency, not US dollar, for trade among members

"HAVANA (AP) — Members of a leftist bloc of nine Latin American nations said Saturday they plan to use a new currency dubbed the sucre for trade among themselves starting in January.

No sucres will be printed or coined, but the virtual currency will be used to manage debts between governments while reducing reliance on the U.S. dollar and on Washington in general.

Cuba already signed an agreement on Saturday to pay for a shipment of Venezuelan rice in sucres, according to Rogelio Sierra, the island's deputy foreign minister. He declined to say what the shipment was worth.

That agreement was made even as ever cash-strapped Cuba has fallen behind on its debt to nations and multinational corporations amid the global recession.

The Bolivarian Alternative for the Americas trade group is holding a two-day summit starting Sunday in the Cuban capital.

The group was formed by Venezuela's self-described socialist president, Hugo Chavez, as an alternative to U.S.-backed free-trade consortiums. Member nations are Venezuela, Cuba, Nicaragua, Honduras, Ecuador, Bolivia, Antigua and Barbuda, San Vincent and the Grenadines, and Dominica.

Honduras remains part of the bloc despite a June coup that toppled leftist President Manuel Zelaya. Zelaya's deposed foreign minister is attending the summit, but the acting government in Honduras will almost certainly not abide by any agreements made.

Chavez was greeted Friday as he arrived in Cuba by President Raul Castro. Cuba and Venezuela signed "agreements of cooperation" on 285 bilateral projects in 2010 totaling nearly US$3.2 billion, according to Venezuelan Energy Minister Rafael Ramirez. He provided no details on what those agreements entail, however.

Leftist presidents Daniel Ortega of Nicaragua and Evo Morales of Bolivia are expected to attend the summit."



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Re: Daily Digest - December 12
DailyDigest wrote:
  • House Approves Massive Overhaul Of Financial Regulations
  • Weakness In Reform Bill A Win For Wall Street
  • Highlights Of The Financial Overhaul Bill

Anyone knows of a good analysis about what that "most ambitious restructuring of federal financial regulations since the New Deal" might actually mean? It doesn't look to me like it has a lot of teeth, but currencies _and_ stock markets went all up all over the world on that news, while gold _and_ silver went down... what gives? Insanity, the sequel, or is there some sense in this? thanks


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