Daily Digest

Daily Digest - December 18

Friday, December 18, 2009, 10:48 AM
  • As Good As Gold
  • Taxation Without Representation
  • McCain Introduces Legislation To Reinstate Glass-Steagall
  • Second Bill Introduced In Congress To Restore Glass-Steagall
  • Four Big Mortgage Backers Swim In Ocean Of Debt
  • The Health Bill Is Frightening
  • Sickening Bonuses: Hospital Execs Cleaning Up
  • No Mistake: Bank Credit Card's New Interest Rate Is 79.9%
  • Citigroup Does The Impossible: It Screws Taxpayers Again
  • Treasury Blames Fed
  • US Begins Handing Out Broadband Stimulus Funds
  • Congress Ramps Up Taxpayer-Financed Journeys
  • SEC Requires Surprise Exams In Response To Madoff Ponzi Scheme
  • SEC To Require Broader Disclosure On Executive Pay
  • $4.8 Trillion Dollars Interest On US Debt
  • Investing: 6 People Who Helped Shape A Tumultuous Decade
  • Top 5 Most Bizarre Legal Tax Deductions
  • The15 Biggest PR Disasters Of The Decade
  • That Tap Water Is Legal, But May Be Unhealthy


As Good As Gold (Claire H., pinecarr)

As the price of gold pulls back from its recent high, many investors are pondering what exactly drives the movement of this important metal.

Taxation Without Representation (Claire H.)

The EU is now appointing people without going through the typical election process. This interview is a glimpse into what America's future may soon look like if our government continues to follow the EU mold.

McCain Introduces Legislation To Reinstate Glass-Steagall (M.W.)

Senators John McCain and Maria Cantwell (D) teamed up to introduce legislation that would restore the Glass-Steagall Act, which would force giant banking institutions to choose between operating as a commercial bank or an investment bank. Give McCain and Cantwell a big round of applause. Because in Washington, it is the sort of idea that would bring real pain to the banking industry, who'd much rather we quickly forget about the collapse of the economy and return to business as usual.

Second Bill Introduced In Congress To Restore Glass-Steagall (M.W.)

Financial giants such as Goldman could be broken up under two bills introduced in Congress Wednesday, one with the backing of John McCain. A similar measure was offered by seven Democrats in the House. Neither the House reform bill, nor its companion legislation being debated now in the Senate Banking Committee, would reinstate Glass-Steagall. Citigroup, JPMorgan Chase, Morgan Stanley, Goldman Sachs, and Wells Fargo declined to comment.

Four Big Mortgage Backers Swim In Ocean Of Debt (M.W.)

AIG, Fannie, Freddie, and GMAC are not only unable to repay the government, they are in need of continuing infusions that make them look increasingly like long-term wards of the state. And the total risk they pose to the taxpayer far exceeds that of the big banks. Fannie and Freddie, in the final days of the year, are even said to be negotiating with Treasury about greatly expanding the money available to them.

The Health Bill Is Frightening (M.W.)

I recently suggested that seniors will die sooner if Congress actually implements the Medicare cuts in the health-care bill put forward by Senate Majority Leader Harry Reid. My colleagues who defend the bill—none of whom have practiced medicine—predictably dismissed my concern as a scare tactic. They are wrong. Every American, not just seniors, should know that the rationing provisions in the Reid bill will not only reduce their quality of life, but their life spans as well.

Sickening Bonuses: Hospital Execs Cleaning Up (M.W.)

Wall Streeters aren't the only ones raking it in. Hospital presidents and CEOs also collect fat bonuses and "incentive payments," even as health-care systems cry poverty, claiming they struggle to break even against government cutbacks, tightwad insurers and skyrocketing costs. While warning of layoffs and slashed patient services, hospitals shower their execs with bonuses and perks including chauffeurs, first-class air travel, tuition for their kids and country-club memberships.

No Mistake: Bank Credit Card's New Interest Rate Is 79.9% (M.W.)

It's no mistake. This credit card's interest rate is 79.9%. The bloated APR is how First Premier Bank, a subprime credit card issuer, is skirting new regulations intended to curb abusive practices in the industry. It's a strategy other subprime card issuers could start adopting to get around the new rules.

Citigroup Does The Impossible: It Screws Taxpayers Again (M.W.)

The taxpayers' $7.7 billion share stake in Citi has been diluted from about 33% of the company to about 26% without a single dollar being raised for Treasury. Value has been permanently lost because the dilution is permanent. Here's how banking analyst Chris Kotowski of Oppenheimer describes what just happened to us:

Treasury Blames Fed (M.W.)

A top Treasury official blamed the Federal Reserve on Thursday for Citigroup's botched attempt to raise funds to pay back its federal bailout. The finger-pointing comes a day after the market rejected the government and the Fed's assertions about the health of Citigroup, turning back the bank's effort to raise $17 billion by selling common stock.

US Begins Handing Out Broadband Stimulus Funds (M.W.)

VP Joe Biden announced $183 million in investment in 18 broadband projects in 17 states. The spending is the first of $2 billion in grants and loans to be made available for broadband projects over the next 75 days. The Obama administration designated a total of $7.2 billion in the Recovery Act for expanding broadband access in underserved communities.

Congress Ramps Up Taxpayer-Financed Journeys (M.W.)

Lawmakers take scores of overseas trips each year to visit military bases, meet foreign officials, attend conferences and see how U.S. funds are spent. Ever since a corruption scandal in 2005 led to restrictions on privately funded travel, legislators have been taking more trips paid for by the government. The cost they reported for such travel abroad was $13 million in 2008, a 70% jump from 2005.

SEC Requires Surprise Exams In Response To Madoff Ponzi Scheme (M.W.)

U.S. regulators will require that investment advisers who have control over clients’ cash and securities get surprise inspections. Securities and Exchange Commission members voted to require exams for firms that don’t park customer assets with banks or brokerages.

SEC To Require Broader Disclosure On Executive Pay (M.W.)

Federal regulators voted Wednesday to require companies to reveal more information about how they pay their executives amid a public outcry over compensation. The SEC also changed a formula that allowed companies to understate how much their senior executives are paid. At issue is how public companies report stock options and stock awards in regulatory filings. Such awards often make up most of top executives' pay.

$4.8 Trillion Dollars Interest On US Debt (M.W.)

More than half of the $9 trillion in debt that Uncle Sam is expected to build up over the next decade will be interest. Accumulating any more interest on what the US owes at this point is like extreme sports: dangerous. All the more so because when interest rates rise, the country's interest payments could jack up very fast.

Investing: 6 People Who Helped Shape A Tumultuous Decade (M.W.)

Financial markets are all about herd behavior. In a decade marked by repeated bouts of collective euphoria and collective panic, it's difficult to find individuals who stood out. Yet some key figures did make their mark. Bloomberg BusinessWeek wanted to identify the handful of people who most affected individual investors over the past 10 years.

Top 5 Most Bizarre Legal Tax Deductions (M.W.)

The quest to outwit the government has produced tax deductions, loopholes, and write-offs that boggle the mind, defy common sense and sometimes seem too outrageous to be true – and yet they are. But be that as they may, there are other deductions, from around the world that might be even more unusual.

The15 Biggest PR Disasters Of The Decade (M.W.)

Oprah-induced chicken riots, racist board games, wardrobe malfunctions... The past decade had several memorable corporate PR disasters.

That Tap Water Is Legal, But May Be Unhealthy (M.W.)

Only 91 contaminants are regulated by the Safe Drinking Water Act, yet more than 60,000 chemicals are used in the US. Scientists have scrutinized thousands of those chemicals in recent decades, and identified hundreds associated with a risk of cancer and other diseases at small concentrations in drinking water. But not one chemical has been added to the list of those regulated by the Safe Drinking Water Act since 2000.


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Re: Daily Digest - December 18

"Dec. 17 (Bloomberg) -- The number of homes that may be in the pipeline for a sale because of foreclosure and delinquency climbed about 55 percent to 1.7 million at the end of September, according to estimates by First American CoreLogic. "

"Dec. 18 (Bloomberg) -- Hong Kong’s former central bank chief Joseph Yam said that the yuan can become the “third pillar” of the global monetary system as deteriorating public finances erode confidence in the dollar and the euro.

“Large budget deficits and public debt, and structural problems in the financial system, mean that the two pillars are not resting on sound foundations,” he said at a financial conference today in Beijing. “There is a need for a third currency to serve as a third pillar, which would also give an opportunity for the two weak pillars to heal.” "

"The unfunded pension liability of cities and counties in California is a fiscal time bomb, and Petaluma may be one of the first to explode given its increasingly precarious financial plight.

Over the six-year period from 2002 to 2008, the city’s unfunded pension obligation to its retired employees more than tripled, ballooning from $9 million to $28.5 million."

"The big test for home prices will come next spring when the U.S. starts to withdraw from the market

The U.S. housing market has been on government life support for much of 2009. Thanks to the feds' bounty of tax credits, purchases of mortgage securities, interest-rate cuts, and home loan programs, new and existing home sales are up. The median home price rose, to $177,900. What happens in 2010 depends on whether the market can stand on its own. "

"Previous Fixes Fall Victim to Sagging Revenue, Political Fights and Court Rulings; Ohio Finds Itself $851 Million Short

The patches used by states on their ailing budgets just months ago are now failing.

Ohio lawmakers were expected late Thursday to vote on a compromise reached with Gov. Ted Strickland to avoid cutting education budgets an average of 10% on Jan. 1. In Arizona, lawmakers met in a special session Thursday -- their fourth on the budget this year -- to grapple with a new deficit. And in New York, Democratic Gov. David Paterson said Sunday he would postpone paying $750 million of state bills to avert a cash crunch."

............5A) Weekly wrap: Governors offering dire spending plans

(Click the link and scroll down to see details on a few of the states)

"One by one, America’s governors are beginning to prepare their constituents for a dark year ahead, even as the economic recovery gets under way.

With many legislatures convening in a few weeks, governors are offering bleak budgets for the next fiscal year calling for deeper spending cuts and, in some cases, tax increases.

Their despair is plain. They say they already have cut spending to the bone and do not want to have to increase taxes on people still suffering from the effects of the recession. But tax revenues are still in free fall in many states, and the federal economic stimulus money is running out. "

"To date, more than 759,000 trial loan modifications have been started, but just 31,382 have been converted to permanent new loans. That's averages out to 4 percent, far below the 75 percent conversion rate President Barack Obama has said he seeks."

"Some other states are also wrestling with retirement costs. But California is the only one that allows nearly all public safety workers to retire at age 50 with 90 percent of their salaries."

"In the ten years since the pension increase was adopted, payouts by the California Public Employees' Retirement System have more than doubled, to $10.8 billion, while resources fell from an actuarial surplus of $32.8 billion to an actuarial unfunded liability of $35 billion in 2008.

CalPERS prefers a different number for its unfunded liability – $30.3 billion – a calculation that includes the market value of its assets. The state Legislative Analyst has criticized CalPers for using conflicting figures – obscuring the true cost of the pensions.

Former legislators say they were assured by CalPERS in 1999 that the state's share of the liberalized pensions would reach $300 million at most. According to CalPERS most recent numbers, the pensions are now costing the state $3 billion a year.

Municipalities are not doing much better."

"The swaps, which assumed that interest rates would rise, proved so toxic that the 373-year-old institution agreed to pay banks a total of almost $1 billion to terminate them. Most of the wrong-way bets were made in 2004, when Lawrence Summers, now President Barack Obama’s economic adviser, led the university. Cranes were recently removed from the construction site of a $1 billion science center that was to be the expansion’s centerpiece, a reminder of Summers’s ambition. The school suspended work on the building last week."

"Problems in China continue to mount. Money supply is growing rampantly out of control, property prices are in a bubble, exports are weak, commodity speculation is pervasive, and GDP growth is more of a mirage than real."

""Once the clock strikes midnight and EBT cards are charged, you can see our results start to tick up," says Tom Schoewe, Wal-Mart Stores Inc's chief financial officer.

As food stamps become an increasingly common currency in a struggling U.S. economy, they are dictating changes in how even the biggest retailers do business.

From Costco to Wal-Mart, store chains are rethinking years of strategy as they watch prized customers lose jobs and turn to this benefit, the stigma of which is disappearing not just in society, but in corporate America."

(Here's their graph for the number of people on food stamps)

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Re: Daily Digest - December 18

On the case of Iran and it stopping to price oil in dollars, I read an article an hour ago that Iranian forces have taken up position on Iraqi soil, apparantly over some oilwell close to the border that both countries claim. Specificly, they've gone in, with armored vehicles, cut down the Iraqi flag, and replaced it with their own.

Trouble brewing in oil-land??? uh-ohh. Sounds like something that could drive up oilprices, just what the US economy needs........(mind the sarcasm....)

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Re: Daily Digest - December 18

Woodman's picture
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Re: Daily Digest - December 18

The NY Times article on unhealthy drinking water has a lot of misleading or false statements that I can easily detect based on my many years as an engineer and scientist in the industry but unfortunately most people would not be able to.  The one part they got right is the person they quoted noting there is a lot of uncertainty in the science.   I can see  how misinformation can be easily spread, and makes me wary to trust only my own conclusions when I read economic articles. 

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Seven more banks fail in 2009

Seven more banks fail in 2009.


Tic, tock; tic, tock; tic tock...

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Re: Seven more banks fail in 2009
horstfam wrote:

Seven more banks fail in 2009.


Tic, tock; tic, tock; tic tock...

550 on the troubled list, an insolvent looted FDIC and I myself estimate no less than 2,000 banks that will likely tank. Sad, one closure this week left folks with high net worths a phone number and no guarantees. Don't think they will have faith in Bernake's paper Monday after they call.

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Re: Daily Digest - December 18

Here comes the 2010 food crisis...

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