Daily Digest

Daily Digest - February 17

Wednesday, February 17, 2010, 10:45 AM
  • Hoenig Says Fed’s Objectives Threatened by U.S. Debt
  • Fannie Mae Mortgage-Bond Yield Spreads Fall to Lowest on Record
  • Companies Pull Most Bond Sales Since ‘07 Crisis: Credit Markets
  • Foreigners Cut Treasury Stakes; Rates Could Rise
  • Paterson Proposes Delay In Paying Tax Refunds
  • Expect Delay For Tax Refund
  • Foreclosures Seen Still Hitting Prices
  • Mortgage Delinquencies Tick Higher In Fourth Quarter
  • Shadow Inventory of Homes to Take Nearly 3 Years to Clear: S&P
  • State Auditors Report Pension Debt
  • Lodi School Board To Discuss Hundreds Of Layoffs
  • Nummi Suppliers Face Steep Job Losses
  • Suburban Homeless: Rising Tide Of Women, Families
  • Bank of Japan Pressed To Fix ‘Sick Dog’
  • European Bank Shares Dumped By Funds
  • Stimulus Spending: $32 Billion Per Month


(Federal Reserve Bank of Kansas City President) Hoenig Says Fed’s Objectives Threatened by U.S. Debt

“It is a fact that the current outlook for fiscal policy poses a threat to the Federal Reserve’s ability to achieve its dual objectives of price stability and maximum sustainable long- term growth, and therefore is a threat to its independence as well,” Hoenig said today in a speech in Washington. The Obama administration estimates budget deficits will total $4.3 trillion during the next five years and hit a record $1.6 trillion in the year ending Sept. 30. The U.S. must be “willing to disappoint a host of special interests” and tackle the debt, or it risks “its own next crisis,” Hoenig said.

Fannie Mae Mortgage-Bond Yield Spreads Fall to Lowest on Record

The gap on so-called agency mortgage bonds has been driven too tight by the Federal Reserve’s purchases of the securities to invest in the debt, said Frank Koster, chief investment officer at Dwight Asset Management Co. in Burlington, Vermont, where he helps oversee $70 billion of assets. The end of the U.S. central bank’s program “will have a negative effect ultimately on valuations,” he said today in a telephone interview. “The only question is the timing,” with spreads being unlikely to widen much until the second half of this year, he said.

Companies Pull Most Bond Sales Since ‘07 Crisis: Credit Markets

Companies are pulling bond sales at the fastest pace since the credit markets seized up 2 1/2 years ago on concern that the inability of European governments to trim their budget deficits will threaten a global recovery. At least 17 borrowers including Montreal-based airplane maker Bombardier Inc. and Italian betting company Snai SpA have postponed or withdrawn $7.7 billion of debt sales over the past month, according to data compiled by Bloomberg. That’s the most since more than 50 were canceled in the months after financial markets began to freeze in July 2007

Foreigners Cut Treasury Stakes; Rates Could Rise

A record drop in foreign holdings of U.S. Treasury bills in December sent a reminder that the government might have to pay higher interest rates on its debt to continue to attract investors..... Alan Meltzer, an economics professor at Carnegie Mellon University, said China's shift should be a wake-up call for Washington. "The Chinese are worried that we have unsustainable debt levels, and we do not have a policy for dealing with it," Meltzer said. He said the Chinese worry that confidence in the U.S. government's ability to repay its debt could erode. That would cause the value of Treasurys and the dollar to fall -- and lead to losses on Beijing's' U.S. debt holdings.

Paterson Proposes Delay In Paying Tax Refunds (NY)

Some New Yorkers could see a delay in the arrival of their state income tax refund checks if Gov. David Paterson decides it's the best way to make sure the state has enough cash. The state currently limits the amount of tax refunds it pays in the first three months of the year to $1.75 billion. Paterson is considering lowering that threshold to $1.25 billion because the state must roll $1.4 billion into next year's budget to close a current year budget gap.

Expect Delay For Tax Refund (North Carolina)

Many North Carolina taxpayers will soon experience a delay in the return of their income tax refunds, as the state holds on to the money a little longer during the tight budget times. Ken Lay, the revenue secretary, said the move is necessary to make sure the state has enough cash on hand to pay its bills between now and the end of the June 30 fiscal year. "We are managing the cash flow very carefully," Lay said Monday. "We are managing the distribution of refund checks as well."

Foreclosures Seen Still Hitting Prices

The John Burns study estimates that five million houses and condominiums on which mortgages are now delinquent will go through foreclosure or related procedures that put them on the market over the next few years. That would represent the bulk of the estimated 7.7 million households behind on their mortgage payments

Mortgage Delinquencies Tick Higher In Fourth Quarter

The percentage of homeowners late with mortgage payments hit another record during the last three months of 2009, and the pace at which they fell behind took a turn for the worse, a new report says. For the fourth quarter, 6.89 percent of mortgage payments were 60 or more days past due, according to credit reporting agency TransUnion. That's up from 4.58 percent in the final three months of 2008. The previous record delinquency rate was 6.25 percent in the third quarter of 2009.

Shadow Inventory of Homes to Take Nearly 3 Years to Clear: S&P

The “shadow inventory” of bank-repossessed properties, as well as distressed mortgages facing foreclosure, will take nearly three years to clear at the current sales rate, according to a report from the credit rating agency Standard & Poor’s (S&P). The analysts add that during this period many servicers will likely shift their emphasis from mortgage modification to loan liquidation.

State Auditors Report Pension Debt (Illinois)

The state's five pension systems are collectively under funded by more than $62 billion, according to a new financial report released Tuesday by state auditors. That liability was $8 billion more than the previous year, an increase of 14.7 percent.

Lodi School Board To Discuss Hundreds Of Layoffs

When the Lodi Unified School District board meets Tuesday night in north Stockton, the board is expected to recommend layoffs of nearly 300 employees. The district is expecting budget deficits of about $30 million for the 2010-2011 budget year. "With budget reductions from the state almost annually, they're gutting education," said board president Richard Jones.

Nummi Suppliers Face Steep Job Losses

They are among roughly 1,000 companies statewide that supply parts to Nummi, which, since 1984, had been owned by General Motors Corp. and Toyota. But now the mammoth plant visible from Interstate 880 is scheduled to close, as its distressed former parents pare back their own operations. The number of workers at supplier firms has been estimated from 20,000 to as high as 50,000, a precise count being difficult because so many small shops are involved.

Suburban Homeless: Rising Tide Of Women, Families

Homelessness in rural and suburban America is straining shelters this winter as the economy founders and joblessness hovers near double digits — a "perfect storm of foreclosures, unemployment and a shortage of affordable housing," in one official's eyes. "We are seeing many families that never before sought government help," said Greg Blass, commissioner of Social Services in Suffolk County on eastern Long Island.

Bank of Japan Pressed To Fix ‘Sick Dog’

Bank of Japan officials have a metaphor to explain why they do not want to buy more government bonds in spite of deepening deflation: Japan’s economy is like a chronically sick dog. The bank’s regular policy board meeting begins on Wednesday and many in Japan’s government and the markets would like it at the meeting’s end on Thursday to announce aggressive quantitative easing in the form of the purchase of long-term debt as the US Federal Reserve and the Bank of England have done. But the BoJ is reluctant, fearing tthat bond buying will not cure the dog but kill it.

European Bank Shares Dumped By Funds

European fund managers sold bank shares aggressively last month as investor sentiment on the sector worsened due to sovereign debt contagion fears. According to the latest survey conducted by Bank of America Merrill Lynch, the popularity rating of European banks dropped from 16 per cent in January to minus 53 per cent in February, the biggest monthly fall in the survey's nine-year history.

Stimulus Spending: $32 Billion Per Month

The pace of stimulus spending should pick up in coming months, according to administration officials. The federal government expects to distribute $32 billion in Recovery Act funds per month, up from an average $27 billion a month over the past year, according to Vice President Joe Biden, who will release his annual stimulus progress report on Wednesday.

Please send article submissions to: [email protected]


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Re: Daily Digest - February 17

"The country's state debt is expected to grow by 184 trillion won over the next five years, according to a state-run economic think tank. Two thirds of the state debt will have to be shouldered by taxpayers.

According to the Korea Institute of Public Finance, state debt will reach 493.4 trillion won in 2013, up 184.4 trillion won from 2008. The estimation is based on the Ministry of Strategy and Finance's state debt management plan."

"Palo Alto's annual budget deficit will more than triple over the next decade if the city doesn't slash its services or find significant new revenue sources, a new financial forecast shows.

The new document, which the City Council's Finance Committee discussed Tuesday night, projects that the deficit in Palo Alto's general fund will balloon from $6.4 million in fiscal year 2011 to $19.6 million in 2020 if the city doesn't reduce costs or find new revenue sources."

"Santa Rosa’s city leaders are primed to ask their 1,300-member work force to take pay cuts in the face of a projected $8 million budget deficit that has ballooned to almost $17 million.

“Pay cuts and other employee concessions may be the new norm for the next few years,” Mayor Susan Gorin said."

"Supervisors drop rate from 27% to 18% as of July for emergency room doctors and on-call specialists at private hospitals who treat uninsured patients."

"The rate cut could lead private hospitals to close emergency rooms and send more patients to crowded county hospitals, officials said."

""The [county] health department has a $200-million deficit. The state's not going to give us anything to fix it. There is no one to backfill," Meyer said.

The county had expected to pay doctors with $9 million from the state's Emergency Medical Services Appropriation. But state lawmakers eliminated the fund, and as the number of uninsured grows, private doctors are expected to file more claims than ever with the county this year, Meyer said.

Meyer estimates that Tuesday's action will affect roughly 150,000 patients. Those patients are predominantly childless men between the ages of 18 and 50, who are not disabled and do not qualify for Medi-Cal.

"There's no new source of funding to fill that gap," Meyer said."

"The study showed the average household debt climbed to $96,100, creating a debt-to-income ratio of 145 per cent in 2009, the highest ever.

"Under this scenario, about 1.3 million households could have a vulnerable or dangerously high debt service load by 2011," the report stated."

"KANSAS CITY, Mo. -- Parents sounded off Tuesday night on a controversial plan to close 30 schools in the Kansas City School District.

It's a drastic move to save money and consolidate resources.

Families at a public forum at Northeast Elementary were told that the district is teetering on bankruptcy."

"Feb. 17 (Bloomberg) -- Sovereign-debt risks in Greece and other European nations may push up Japanese bond yields and increase the cost of insuring the debt against default, according to Mizuho Securities Co."

"“If investors shift their attention to Japan’s worsening finances, that may lead to higher yields,” Noji said in an interview yesterday. As long as the market stays focused on sovereign-debt risks, Japan’s bonds may face speculation that the nation will be “next Greece,” he said."

"State payments totaling about $90 million a month to five insurance plans providing health coverage for low-income residents will be delayed in May and June, and possibly April, says state Human Services Director Lillian Koller.

The delays come on top of deferrals in December and January payments because the federal share of funds could not be accessed.

Delayed payments over several months could force suspension of services or even closure of some health centers, which serve a disproportionate share of Medicaid beneficiaries, said Beth Giesting, executive director of the Hawaii Primary Care Association, which represents community health centers."

"AUSTIN – State agencies offered up potential budget cuts of 5 percent Tuesday, fulfilling a request from state leaders as Texas grapples with a shortfall that could reach $15 billion or more.

But their trims amount to a relatively small, initial pebble in a large pool.

Lawmakers and state leaders face a daunting task to close the budget gap, and few have offered substantive ideas for dealing with the state's structural deficit."

"A venture led by developer GlenStar Properties LLC has defaulted on a $34.3-million mortgage on International Tower, an 11-story office building near O’Hare International Airport whose value has plunged to about $22 million because of rising vacancy. "

"Insurance giant Humana Inc. will cut 2,500 jobs nationwide this year while adding about 1,100 jobs in areas where officials expects to grow, the company announced Wednesday.

The net reduction in employment will be about 1,400 positions, according to a news release."

"Deficits, Political Gridlock, Unemployment: the States Facing the Most Frightening Fiscal Crises "

"California Reaming

With a fiscal year 2010 budget gap of nearly $52 billion, or 56 percent of its total general budget, California is hands down the poster child of fiscally imperiled states. It also enjoys the dubious distinction of having the single worst credit rating (A-) of any of the 50 states, as measured by Standard & Poor's.

Factor in an above-the-national-average unemployment rate of 12.4 percent, severe political dysfunction – a two-thirds majority is required to pass a budget, making any semblance of shared political sacrifice practically a nonstarter – as well as the fact that California consumes three times more energy than it produces, and it becomes painfully clear that the Golden State is hurtling toward a very dark place. "

  • 13) Some headlines

Oakland City Council approves layoffs, property sales to help close deficit (Selling convention center)

Cal State East Bay announces layoffs (140 layoffs)

750 will get LBUSD layoff notices (Long Beach Unified School District)

Moses Taylor staff cut by 61; layoffs facility's first in 17 years (PA)

Layoffs Loom for Los Angeles Trial Courts (300 layoffs, $79 - $130 million deficit for LA Superior Court)

San Joaquin General braces for possible layoffs, sale 

SJ considers new taxes to avoid fiscal emergency

Villaraigosa says he's looking at up to 2000 more job cuts (Los Angeles)

Hawaii teacher furloughs remain as school year starts running out (deficit could cause 2,500 layoffs)

House panel to vote on unemployment tax hike (Indiana....Jobless benefits fund "bankrupt")

School Districts Push For Teacher Pay Cuts During Contract Talks (San Diego pushing for 8% pay cut)

Vallejo studies disbanding cops

School Bus Fees, Pay Cuts Highlight School Board Meeting (Douglas County...Colorado)

State budget cuts to force loss of 300 employees of DeSoto schools (Tennessee)

Santa Rosa set to push for employee pay cuts

County pressures labor unions for pay concessions (Santa Cruz)

Facing budget gap, Boston ponders closing up to 10 library branches

LA Unified to seek $100 parcel tax hike

Miami-Dade job, service cuts set to begin (up to 1,000 layoffs)

Casino MonteLago Closes Doors (Las Vegas...180 layoffs)

Voros: Auto history, 5000 jobs fading away in Fremont

Closings loom for NY state parks, historic sites

Revenue shortfall jolts Half Moon Bay "unprecedented declines" in revenue

148 teachers in Oxnard may be given pink slips

"February 17, 2010 – On Tuesday, the General Aviation Manufacturers Association (GAMA) announced that 2009 worldwide shipments and billings of general aviation airplanes were down in all categories. Speaking at GAMA’s Annual Industry Review and Market Outlook Briefing, GAMA Chairman, Rob Wilson, president of Honeywell Business and General Aviation, reported that the global economic downturn led to one of the toughest years ever for general aviation manufacturers. "

"Industry billings dipped to $19.5 billion, a 21.4 percent decrease from the 2008 record high of $24.8 billion, but the third highest year ever. 2009 worldwide shipments of general aviation airplanes declined for a second year in a row with a total of 2,276 units delivered, a 42.6 percent decrease over the previous year’s total of 3,967 airplanes."

"Muni is facing a budget gap of $16.9 million in the current fiscal year and a projected $53 million deficit next year.

The concessions asked drivers to make a one-time contribution to their pension fund. They also were expected to cut overtime expenses. "

"A key indicator from last week’s ABC News/Washington Post poll underscores these persistent

negative feelings. Eighty-eight percent think that the economy, despite what economists say to

the contrary, is still in a recession. And on a more personal note, 53 percent say that based on

their experience the economy has not begun to recover.

CURRENT INDEX – The CCI is based on Americans’ ratings of the national economy, their

personal finances and the buying climate. Current views of the economy are the worst of the

three measures; only 8 percent rate it positively, 30 points below the long-term average and in

single digits for 12 weeks straight."

""To me it is like if you have a good car, it's had a few difficulties, but rather than having those repairs made you trade in this midsize car for a Yugo," Judd said.

Sen. Dan Liljenquist, R-Bountiful, said if fixes aren't made to the retirement machinery right now — midsize car or compact — it will implode beyond repairs."

"Foreclosure filings on California properties rose daily in January compared with December, according to ForeclosureRadar, which tracks foreclosure activity in the state.

The daily average of Notices of Default filings rose by 9.5%, while Notice of Trustee Sale filings rose by 10.3%.

“With delinquent payments rising, foreclosures slowing, and foreclosure alternatives failing, it appears the foreclosure crisis will be with us for many years to come,” said ForeclosureRadar.com founder and CEO Sean O’Toole. "

"WASHINGTON (Reuters) - Growing international pressure makes it likely that Beijing will allow its currency to begin rising in value again this year, two U.S. private sector China specialists said on Wednesday."

rhare's picture
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Re: Daily Digest - February 17 - Humor

Perhaps this will be how things get resolved.  :-)

The Onion - US realizes money is an illusion


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Re: Daily Digest - February 17 - Humor
rhare wrote:

Perhaps this will be how things get resolved.  :-)

The Onion - US realizes money is an illusion


Sanest thing I've seen this year,.  If only!  Smile

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Re: Daily Digest - February 17

US Mineral production declines 20% in 2009:


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Re: Daily Digest - February 17

Published: February 16, 2010

It took more than a month for the container ship Ebba Maersk to steam from Germany to Guangdong, China, where it unloaded cargo on a recent Friday — a week longer than it did two years ago.

But for the owner, the Danish shipping giant Maersk, that counts as progress.

In a global culture dominated by speed, from overnight package delivery to bullet trains to fast-cash withdrawals, the company has seized on a sales pitch
that may startle some hard-driving corporate customers: Slow is better.

By halving its top cruising speed over the last two years, Maersk cut fuel consumption on major routes by as much as 30 percent, greatly reducing costs. But the company also achieved an equal cut in the ships’ emissions of greenhouse gases.

“The previous focus has been on ‘What will it cost?’ and ‘Get it to me as fast as possible,’ ” said Soren Stig Nielsen, Maersk’s director of environmental sustainability, who noted that the practice began in 2008, when oil <http://www.nytimes.com/info/oil/?inline=nyt-classifier> prices jumped to $145 a barrel.

“But now there is a third dimension,” he said. “What’s the CO2 footprint?”

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Damnthematrix's picture
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Re: Daily Digest - February 17

Latest Oil Finds Amount To Spit In The Bucket

The oil industry was on a hot streak in 2009, making more than 200 discoveries
on five continents.

On its face, that certainly seems like good news.

For example, a new field found in Uganda last year is anticipated to yield two
billion barrels of oil.

It was referred to as "unquestionably the largest onshore discovery made in
sub-Saharan Africa in at least 20 years.”

And the Jubilee oil field, discovered off the coast of Ghana, is estimated to
hold between 650 million and 2 billion barrels of recoverable oil. The find was
viewed as so important that Exxon put up $4 billion for a stake in the field,
the oil giant's biggest investment in a decade.

And last September, oil was discovered in the deep waters off the coast of West
African nation of Sierra Leone. It is believed that more oil fields are yet to
be discovered and developed of the West African coast, perhaps yielding as much
as one billion barrels.

Advances in drilling technologies and exploration strategies are allowing for
the discovery and extraction of deep water oil that would have previously been
unrecoverable. Twenty-five years ago, oil companies struggled to operate in seas
deeper than 600 feet. Now technological innovations mean they can pump crude in
waters 6,000 feet deep.

But, as difficult as it is to get to oil as these depths, the rising price of
oil and diminishing onshore oil fields have made it worthwhile and
cost-effective to go after deep-water oil. That said, these oil fields are still
extremely expensive to develop.

But the most striking elements of these finds — cumulatively totaling five
billion barrels of oil — is this: the U.S. alone uses 21 million barrels of oil
every day. That amounts to 7.7 billion barrels annually. And U.S. oil
consumption has been rising at about two percent annually.

And, as a whole, the world uses 85 million barrels of oil daily.

The point is, despite the seemingly good news, the latest finds amount to spit
in the bucket. In no way will they make an appreciable difference in the
supply/demand ratio.

Recent oil discoveries have been far too small to offset the world's growing
population and rising demand for oil.

Just this week, Dubai excitedly announced the discovery of a new offshore oil
field, though its size was not revealed. The UAE sits on the world’s fifth
largest proven oil reserves, amounting to 97.8 billion barrels of crude oil.
But, according to the UAE government website, Dubai’s oil reserves, mostly
offshore, are expected to be exhausted within 20 years.

Dalton Garis, of the Abu Dhabi-based Petroleum Institute, warned of the
possibility that "prices would have to go above 80 or 90 dollars a barrel for
[the newly discovered field] to be commercially viable."

And last month, a new pool of oil was discovered in southern Egypt that is
proving to be more productive than the currently producing zones. The new
discovery has a natural flow to surface rate of 220 barrels of oil per day; with
artificial lifting, the maximum rate is 1300 barrels per day. That's all, and
it's more productive than currently producing zones. You get the picture.

One of the ironic outcomes of the Great Recession is this: U.S. oil consumption
dropped by 9 percent over the last two years. That may be the only good news
resulting from our economic malaise, but it is something we'd be hard pressed to
continue hoping for.

sjmvideo's picture
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Re: Daily Digest - February 17 - Humor

Very good parody. Laughing I sure hope that it actually helps wake up a few people to what is going on.

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