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    Daily Digest 12/18 – Ghost Towns Haunt Spanish Banks, Debit Fee Cap = Higher Banking Costs?, Concerns of Oil on Gulf Floor

    by DailyDigest

    Saturday, December 18, 2010, 4:00 PM

  • Newly Built Ghost Towns Haunt Banks in Spain
  • European Central Bank Arms Itself for Spanish Crisis
  • John Williams Discusses The Reasons For The Upcoming Dollar Dump
  • In Thirty Years America Spent Enough Debt To LBO Itself, And Ended Up Bankrupt
  • U.S. Yield Curve Steepest Since February on Tax-Cut Extension
  • Debit Card Fee Cap Could Mean Higher Banking Costs
  • BP Oil on Gulf Floor Draws Concern

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Newly Built Ghost Towns Haunt Banks in Spain (solidswede)

Just how big a loss the banks are facing is unknown, at least publicly, and that has investors worried — the cost of financing Spain’s debt rose 18 percent in the last month alone. But the potential costs of failure go far beyond that. Spain’s economy, the fifth largest in Europe, is much bigger than Ireland’s or Greece’s, and a bailout of its banks could be far more costly, an event that could push the government into default and end up dooming the euro itself. The Bank of Spain says the banks have about $240 billion in “problematic exposure” out of $580 billion invested in real estate and construction, a situation, they say, the banks are capable of handling.

European Central Bank Arms Itself for Spanish Crisis (pinecarr)

The ECB’s move came as Spain braved the debt markets following a downgrade alert by Moody’s. Madrid paid the highest interest rates for a decade with yields on 10-year bonds rising to 5.45pc, compared with 4.63pc in November. Spain’s government and banks have to refinance almost €300bn of debt next year, leaving the country prey to a buyers’ strike. “The auction wasn’t a disaster but the markets are going to lose patience very quickly if the bond spreads widen further,” said Elizabeth Afseth from Evolution Securities.

John Williams Discusses The Reasons For The Upcoming Dollar Dump (pinecarr)

Lately, anywhere we look, there seems to be a pattern emerging: those economic thinkers who actually construct and run their own macro models (not the glorified powerpoint presenter variety) and actually do independent analysis and tracing of the money flow, instead of relying on Wall Street forecasts that have as much credibility as a Moody’s home price hockey stick from 2006, almost inevitably end up having a very dire outlook on the economy. One such person is and has pretty much always been Shadowstats’ John Williams, whose “shadow” economic recreation puts the BLS data fudging dilettantes to shame. That said any reader of Zero Hedge who has been with us for more than a few weeks, knows all too well our eagerness to ridicule the increasingly more incoherent lies coming out of the US department of truth, so no surprise there. Yet another aspect over which there is much agreement is that no matter how one slices the data, the outcome for the US currency is a very grim one.

In Thirty Years America Spent Enough Debt To LBO Itself, And Ended Up Bankrupt (pinecarr)

After recently debunking the economic “recovery’s” flagrantly misrepresented employment data, the OMB’s David Stockman makes a third appearance in as many months (previously here and here), this time on Dylan Ratigan. And as always, it is a must see: key soundbite: “We have had a Fed engineered serial bubble, that has created the appearance of wealth, that has caused people to consume beyond their means through borrowing, and that has flushed the income and wealth of our society up to the top, as a result of the Fed turning the financial markets into a casino. These are pure casinos, they are not capital markets, they are not adding to the productive capacity of our economy, they simply are a bunch of robots trading with each other by the millisecond as a result of the Fed giving them zero cost overnight money, and giving them all kinds of hand signals on what to front-run.”

U.S. Yield Curve Steepest Since February on Tax-Cut Extension

The benchmark 10-year yield rose this week to the highest level in seven months as retail sales advanced in November more than economists forecast and the Federal Reserve said the recovery is continuing. The U.S. economy grew at a faster pace in the third quarter, a report is forecast to show next week. “The market will be subject to selling,” said Brian Edmonds, head of interest rates in New York at Cantor Fitzgerald LP, one of the 18 primary dealers that trade directly with the Fed. “It’s hard to think of anything good for bonds coming out of the tax-cut extension. Something has got to give.”

Debit Card Fee Cap Could Mean Higher Banking Costs

At issue is who will ultimately benefit from the savings? The Federal Reserve’s proposal to cap these fees, officially known as interchange fees, at 12 cents per transaction would enable retailers to pass on annual savings of $10 billion to $13 billion to consumers. But banks and card networks maintain that retailers will pocket the savings. This would leave consumers to bear the brunt of the new law through higher costs for banking and reduced rewards programs. In releasing its proposal Thursday, Fed staff said they found the cost to banks for processing is between 7 cents and 12 cents per transaction. Yet every time a customer swipes a debit card, the average fee is 44 cents.


BP Oil on Gulf Floor Draws Concern

Heavy contamination from the oil spill is limited to a few locations in the Gulf relatively close to BP’s Macondo well, officials said. Chemical tests have confirmed that oil in some sediment there matches oil from the BP well, according to the report by scientists advising federal spill-response officials. There is no practical way to clean up the spilled oil that has settled deep in the Gulf, officials said, adding that microbes in the water could eventually eat it up.

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