Daily Digest

Daily Digest - March 13

Sunday, March 14, 2010, 10:14 AM
  • States may hold onto tax refunds for months
  • ECONned: The Book
  • Harry Markopolos on The Daily Show with Jon Stewart
  • 'Cash for Keys' Deals Helping Homeowners Escape Debt
  • Ratigan And Spitzer Discuss Repo 105, Conclude "Civil Cases Will Be Brought"
  • It’s Déjà Voodoo Economics... All Over Again
  • Monsanto, Big Ag, Get Warning From Obama Administration

Economy

States may hold onto tax refunds for months (mhoop)

States from New York to Hawaii that have been hard-hit by the economic downturn say they have either delayed refunds or are considering doing so because of budget shortfalls.

ECONned: The Book (Davos)

Harry Markopolos on The Daily Show with Jon Stewart (Davos)

'Cash for Keys' Deals Helping Homeowners Escape Debt (joemanc)

Jon Daurio, chief executive officer of mortgage investor Kondaur Capital, recently offered a $4,000 check to Barry Culver for the deed to his Bryan, Ohio house. With the exchange, and a pay-off to a second-lien holder, Culver was freed of $120,000 in crushing mortgage debt on the house, said Daurio, who had bought the right to cut the deal when he purchased the mortgage months earlier. The house, after repairs, is now on the market for $47,500.

Ratigan And Spitzer Discuss Repo 105, Conclude "Civil Cases Will Be Brought" (Erik T.)

It’s Déjà Voodoo Economics... All Over Again (Erik T.)

The financial industry often prides itself on the hindsight principle. We may not predict the future with great accuracy, but when things fall apart we’re very quick to explain why and how it happened with authoritative aplomb. "Hindsight is 20/20", as they say. But is it really? Despite our seemingly thorough analysis of past failures, the financial industry seems to have an uncanny ability to make the same mistakes over and over again.

Environment

Monsanto, Big Ag, Get Warning From Obama Administration (mhoop)

[Monsanto], the Creve Coeur-based company, which has helped pioneer the use of genetic traits in seed to help farmers control weeds and ward off pests, has already acknowledged that it received a formal request for information from the Justice Department as part of an ongoing probe of the seed industry.

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18 Comments

idoctor's picture
idoctor
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Re: Daily Digest - March 13

"So, who are these people who would invest billions in the bonds of a state government with a $13 billion deficit, which includes $6 billion in unpaid bills?

"Well, there's a buyer for just about anything in this world," said Professor Woods Bowman, DePaul University.

Bowman is a former state house member and chairman of an appropriations committee. He says Wall Street investors love bonds issued from desperate locals, like like Illinois.

"Junk bonds are what people who buy the bonds call them. People who sell them call them high yield bonds which is the equivalent to higher interest rates," said Bowman. "

"The state, whose budget deficits have left it with the lowest credit rating among U.S. states, raised $2.5 billion, paying a top yield of 5.65 percent on 30-year bonds. The issue was increased by $500 million from the amount initially offered by California, which is facing a $20 billion deficit through June 2011, after individuals put in orders for $1.38 billion.

“Despite all these headlines of credit concerns in municipal markets, the truth is there’s a huge amount of demand for tax-exempts,” said Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia. “The issuers are doing the math.”"

"Almost one-third of Illinois’ 79,800 retired state government employees, most of whom pay no monthly premiums for health insurance, would have to fork out between $290 and $500 a month to keep their coverage as part of Gov. Pat Quinn’s fiscal 2011 budget proposal.

And retirees’ cost for insuring many of their 31,000 dependents would rise by $75 to $430 a month.

The potential changes in retiree health coverage, unveiled this week, are designed to save $255 million on benefits that cost the state $772 million a year."

"Paterson said the day he took over from prostitution-scarred Eliot Spitzer was when he began to learn about the fiscal house of cards holding up the state.

"Difficulty and disaster greeted me and have dictated most of the decision making through my term," Paterson said.

Now the state's looming $9 billion budget gap makes it worse. Assembly Speaker Sheldon Silver has said no new taxes and no new fees to nickel and dime people to death, so the only thing left to close the gap is cuts ... painful cuts."

"March 12 (Bloomberg) -- New Jersey’s revenue collections for the first eight months of this fiscal year were $471 million, or 2.8 percent, below estimates, the treasury department said. "

""Unemployment benefits are a big driver of the budget deficit," says Brian Bethune, chief financial economist at IHS Global Insight. Bethune points out that not only has the unemployment rate spiked from 7.2% in January 2009 to 9.7% in March 2010, but the time that people are spending unemployed has also increased significantly. "It's the combination of the [unemployment] rate going up and the average length people receive benefits that make it a bad news story," he said

Bethune said that from October 2009 through the end of February 2010, the government spent $114.9 billion on all unemployment benefits. During the same period in the previous fiscal year, the government spent $37.7 billion. "If we continue to spend at that rate, for the full year we would be close to $250 billion.""

 MONDAY, MARCH 15, 2010

The $2 Trillion Hole

"THE PROSPECTS ARE BLEAK for many state and local governments as a result of all this. According to a survey last month by the Pew Center on the States, a nonpartisan research group, eight states -- Connecticut, Illinois, Kansas, Kentucky, Massachusetts, Oklahoma, Rhode Island and West Virginia -- lack funding for more than a third of their pension liabilities. Thirteen others are less than 80% funded.

Governments could fill that gap by raising property, sales and income taxes, but most are wrestling with huge revenue shortfalls in trying to balance their budgets.

The more likely outcome is dramatic cuts in essential services, such as police and fire protection, health spending, education and infrastructure improvements, in order to cover ballooning pension payments. State and municipalities, after all, must do something: Most have a legal obligation to pay out earned pension benefits. And some don't even have the courage to switch new teachers, bureaucrats and police to a defined-contribution system, to prevent the funding problem from worsening as time rolls on.

THUS, MORE DEBT DEFAULTS and bankruptcy filings probably lie ahead, unsettling the $2.7 trillion municipal-bond market. The possibility of taxpayer revolts and likely insolvencies has shaken some investors' confidence in general-obligation bonds -- those backed by the "full faith and credit" of the states or localities. Once the gold standard for munis, GOs are under a cloud in financially troubled areas.

The size of the legacy-pension hole is a matter of debate. The Pew report puts it at $452 billion. But the survey captured only about 85% of the universe and relied mostly on midyear 2008 numbers, missing much of the impact of the vicious bear market of 2008 and early 2009. That lopped about $1 trillion from public pension-fund asset values, driving down their total holdings to around $2.7 trillion.

Other observers think the eventual bill due on state pension funds will be multiples of the Pew number. Hedge-fund manager Orin Kramer, who is also chairman of the badly underfunded New Jersey retirement system, insists the gap is at least $2 trillion, if assets were recorded at market value and other pension-accounting practices common in Corporate America were adopted.

Finance professors Robert Novy-Marx at the University of Chicago and Joshua Rauh of Northwestern University asserted in a recent paper that the funding gap for state pension plans alone might exceed $3 trillion, in part because state funds are using an unrealistic long-term annual investment return of 8% to compute the present value of future payments to retirees, as is permitted in government standards for pension-fund accounting."

"The euro zone has agreed a multi-billion euro bailout for heavily indebted Greece as part of a package to support the euro, the Guardian newspaper reported on Saturday. Skip related content

The 16 euro zone members have agreed on "coordinated bilateral contributions" in the form of loans or loan guarantees to Greece if Athens is unable to refinance its debts and asks the European Union for help, the Guardian quoted a senior European Commission official as saying.

The agreement was reached despite strong resistance by Germany, and Berlin has played the pivotal role in organising the deal, the paper quoted other sources as saying.

Euro zone finance ministers will finalise the package on Monday, the paper said."

"Park Avenue Bank's failure is expected to cost the FDIC's insurance fund $50.7 million. Old Southern Bank's failure will cost the fund $94.6 million, while Statewide Bank's failure will cost the fund $38.1 million."

  • Other news stories/headlines:

Soaring China home prices thwart ordinary buyers (Prices in Beijing and Shanghai doubled in three years)

LA council approves $2B sale of LAX bonds

Investors should avoid Spain bonds, says Merrill

Why New Jersey is Doomed (Blog...NJ pensions)

Hundreds of Teachers Face Uncertain Job Future (Las Vegas...up to 500 layoffs)

Past spending decisions haunt San Jose budget (Notice the part about pensions near the bottom of the page)

Burlington faces decision on audit ($17 million asset becomes a deficit)

Crisis exposes cracks in Hungary

 REOs and Short Sales Account for 50% of California Home Sales

 U.S. setting bad example on protectionism - Sarkozy

Goldman says it's never used repo 105 transactions

A dove for Bernanke

 

I don't expect to have the time to do this for Sunday, so my next news post will be Monday. Enjoy the weekend.

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Corporation runs for Congress!

Corporation runs for Congress!

After the Supreme Court declared that corporations have the same rights as individuals when it comes to funding political campaigns, the self-described progressive firm took what it considers the next logical step: declaring for office.

http://www.washingtonpost.com/wp-dyn/content/article/2010/03/12/AR2010031204127.html?g=0

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Re: Corporation runs for Congress!
jhart5 wrote:

Corporation runs for Congress!

After the Supreme Court declared that corporations have the same rights as individuals when it comes to funding political campaigns, the self-described progressive firm took what it considers the next logical step: declaring for office.

http://www.washingtonpost.com/wp-dyn/content/article/2010/03/12/AR2010031204127.html?g=0

Link

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Re: Daily Digest - March 13

Interesting picture:

 

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Re: Daily Digest - March 13

I really love Eric King's interview style, but I sorely wish he would take the long overdue step of firing his webmaster. As per normal, I'm unable to access any of these interviews due to persistent technical problems with the KWN website, and they don't publish on iTunes. In a private e-mail exchange, the webmaster admitted to me that they intentionally don't do iTunes because he couldn't figure it out. Sigh...

Erik

 

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Re: Daily Digest - March 13

Must have been due to me tying up the site downloading the mp3 files!  I add them to my iTunes library to listen to later at a convenient time.  If you can receive a 12 to 16 MB file at once I can email them to you Erik.

Tom

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Re: Daily Digest - March 13

 

ErikTownsend wrote:

I really love Eric King's interview style,....

+1 Erik. I think it's because he lets his subject actually talk instead of like most interveiwers who like to hear their own voice.

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Re: Daily Digest - March 13

I wish I knew how to contact Eric King directly. I'd like to respectfully suggest to him that the technical embarrassment of his present website doesn't do justice to the image he deserves as a world class interviewer, and that he's leaving a huge amount of audience "share" on the table by accepting his webmaster's policy of not publishing thru iTunes because it was too hard for [the webmaster] to figure out. But sadly the contact links on the site all go to the webmaster, whom I doubt would forward the message to Mr. King once he saw what it said...

Erik

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Re: Daily Digest - March 13

As the Lehman story continues to unfold, ZH has another outstanding piece. Don't miss this one: http://www.zerohedge.com/article/how-lehman-feds-complicity-created-anot...

Erik

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Re: Daily Digest - March 13
ErikTownsend wrote:

As the Lehman story continues to unfold, ZH has another outstanding piece. Don't miss this one: http://www.zerohedge.com/article/how-lehman-feds-complicity-created-anot...

Erik

Crap Erik. I wish I had read that last night. I hate starting a day POd.

Erik T.'s picture
Erik T.
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Re: Daily Digest - March 13

Don't worry, Tycer, it's OK...

You are feeling that this is such an eggregious outrage that the world will stop, the markets will correct, and life will never be the same after the big scandal that's been revealed.

But sleep soundly, my son. Tomorrow will come, nobody will have noticed, and the system will march on unaffected by this overwhelming evidence of Watergate-scale government corruption. Think of it as dumbed down, post-American Idol USA. Comfort can be found in the fact that nothing that has been revealed will be taken seriously or even noticed by the MSM. All is well. As Britney Spears said, "Why doesn't everybody just trust the President?"

Erik who is 6,597 miles from the nearest U.S. coastline, but who's counting...

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Dick Fuld lies to congress

Despite having been plainly exposed for lying to congress by Bloomberg here: http://www.bloomberg.com/avp/avp.htm?N=video&T=Dick%20Fuld%20Own%20Words..., I predict Fuld will never have a charge levied against him, and that nobody in SEC or Treasury will be fired or even reprimanded.

But don't forget to report your staurday night poker winnings as income, else the IRS will hunt you down and nail your ass!

Erik

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Re: Dick Fuld lies to congress
ErikTownsend wrote:

Despite having been plainly exposed for lying to congress by Bloomberg here: http://www.bloomberg.com/avp/avp.htm?N=video&T=Dick%20Fuld%20Own%20Words..., I predict Fuld will never have a charge levied against him, and that nobody in SEC or Treasury will be fired or even reprimanded.

But don't forget to report your staurday night poker winnings as income, else the IRS will hunt you down and nail your ass!

Erik

+1 !!! That read you linked to at 0 Hedge said it all. It also poignantly the absurdity of the Fed's ability to one day sell assets worth 0. We have been robbed blind by the elite. 

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JAG
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Re: Daily Digest - March 13
ErikTownsend wrote:

As the Lehman story continues to unfold, ZH has another outstanding piece. Don't miss this one: http://www.zerohedge.com/article/how-lehman-feds-complicity-created-anot...

Erik

I grow tired of being the banker's bidet.

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V
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Re: Dick Fuld lies to congress

Dick Fuld lies to Congress, FRBNY,SEC,Chris Cox, Timmy Geithner, screwing the taxpayers? This sounds like a conspiracy theory to me and should be relegated to the basement.

On top of which this is old news. What inquiring minds want to know is what do they have in store for us now?

V

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Tycer
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Re: Daily Digest - March 13

Hee Hee.

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Nacci
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Re: Daily Digest - March 13

Here is a particularly well done piece by Dylan Ratigan of MSNBC laying this whole mess out: http://www.informationclearinghouse.info/article24980.htm

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