- China – Cash for Gas
- China lends Russia $25 billion to get 20 years of oil
- FSN News Hour Energy & New Future Progects At 52:00 The Minute Point
- Other Audio Formats FSN News Hour See Feb 21 First Hour
- Bernanke: Contradicting Soros, Roubini, Volcker, Reality
- Week # 9 Bank Closing # 15 regulators close banks in Nevada, Illinois
- BofA carries loans $44 billion above market value
- TOPWRAP 5-Banks cede control to govts; Japan, India falter
- Bank Failures Take Toll on Insurance Fund
- Citigroup bailout
- ‘We’re Not Paying For Your Crisis!’
- Russia’s Putin warns against economic protests
- Growing hate groups blame Obama, economy (Hat Tip Zombie210)
- Economy shrinks at fastest pace in 26 years
- Brutal February for Blue Chips
- $1T In Taxes Is Hell To Pay
- Dell Income Drops 48% as It Seeks to Cut Costs (Hat Tip Zombie210)
- More on the Simply Dreadful Performance of CDOs
- Emergent trouble for the dollar
- California unemployment rate reaches 10.1%
- California unemployment slide show
- Glenn Beck, Housing Crisis, (Hat Tip GregRoberts)
- Golden Chutes
- Stimulus Watch by State (Hat Tip Katherine)
- The Credit Card Debt Crisis: The Next Economic Domino (Hat Tip Zombiie210)
- Clean Coal Air Freshener (Hat Tip Fred)
- Lawmakers ask coal-fired plant near Capitol to switch to gas (Hat Tip Fred)
China has agreed to lend Russian oil companies $25 billion (17.5 billion pounds) in return for supplies from huge new East Siberian oilfields that will power its economy for the next two decades.
He says the recession will end this year.
The utter ridiculousness of such a statement in the face of rising global unemployment, massive monetary inflation, and collapsing banks is testimony to the fact that the self-delusional government and financial industry psychology that incubated and unleashed the present financial catastrophe is alive and well. As long as these arrogant economic narcissists man the helm of our common financial ship, any hope for real solutions and genuine reversal is dim at best.
Why even George Soros and Nouriel Roubini, two other economic media darlings offered direct contradiction to Bernanke’s blather.
WASHINGTON, Feb 27 (Reuters) – U.S. regulators closed Security Savings Bank in Henderson, Nevada, and Heritage Community Bank in Glenwood, Illinois, the Federal Deposit Insurance Corporation said on Friday.
Heritage, which had four offices, had total assets of $232.9 million and total deposits of $218.6 million as of Dec. 5, 2008. It will be acquired by MB Financial Bank.
Security Savings Bank, which had two offices, had total assets of approximately $238.3 million and total deposits of $175.2 million as of Dec. 31, 2008. It will be taken over by the Bank of Nevada.
The seizures bring to 16 the number of banks closed in the first two months of 2009. That would be up from 25 in 2008, and just three in 2007. (Reporting by Diane Bartz; Editing by Gary Hill)
NEW YORK (Reuters) – Bank of America Corp (BAC.N) is carrying loans on its balance sheet marked at more than $44 billion above their fair value, the company said in its annual report filed with U.S. regulators on Friday.
The bank said it ended 2008 with $886.2 billion in loans, but estimated the fair value — or market price — for these loans as $841.6 billion.
The federal insurance fund that protects most bank deposits is being drained by a sharp rise in bank failures and has dwindled to its lowest level since 1993, the Federal Deposit Insurance Corp. reported yesterday.
Depositors are not at risk because the fund is backed by the government, but taxpayers could be forced to reach into their wallets if the decline continues.
When a bank fails, the FDIC pays up to $250,000 to each account-holder to replace whatever money does not remain in the vaults. The fund is replenished by assessments on banks, but over the last year, much more money left than arrived. And the pace of bank failures continues to increase.
The fund held $52.4 billion at the beginning of 2008. One year and 25 bank failures later, the fund held $18.9 billion.
So far this year, 14 banks have failed, draining another $1.7 billion from the insurance fund.
Citigroup is a troubled financial institution that would be seized by the FDIC if it were a small institution or that would be forced into the hands of another company if it were a large institution. However, it is neither. Citigroup is a colossus that spans the globe with its tentacles in everything. Therefore, Citi receives special treatment.
Anger rises in Germany as the economy falls. Trade unions and globalization-critical protesters are planning demonstrations in Berlin and Frankfurt under the banner: "We’re not paying for your crisis." Alexis Passadakis, 31, an activist from the group Attac, tells SPIEGEL what’s wrong with the system.
NOVO-OGARYOVA, Russia, Feb 27 (Reuters) – Russian Prime Minister Vladimir Putin warned opposition critics on Friday not to use the economic crisis as an excuse to challenge his government and told them to abide by the law.
Unrest across Russia over economic upheaval has been muted, with the biggest protests so far taking place in the Far East port of Vladivostok where hundreds were arrested in January demonstrations over car tax.
Don Black said he despises Barack Obama. And he said he believes illegal aliens undermine the economic fabric of the United States.
The blue-chip benchmark ended down 937.93 points, or 11.72% on the month — the worst percentage drop for February since 1933, when it fell 15.62%. The Dow industrials have fallen six months in a row and are now more than 50% off their record highs hit in October of 2007.
WASHINGTON (AP) — The economy contracted at a staggering 6.2 percent pace at the end of 2008, the worst showing in a quarter-century, as consumers and businesses ratcheted back spending, plunging the country deeper into recession.
The Commerce Department report released Friday showed the economy sinking much faster than the 3.8 percent annualized drop for the October-December quarter first estimated last month. It also was considerably weaker than the 5.4 percent annualized decline economists expected.
WASHINGTON – Big government is back – and so are big taxes.
President Obama unveiled a mammoth, $3.6 trillion budget yesterday that would dramatically boost federal spending almost across the board – and pay for it with tax hikes of $1 trillion on individuals and businesses over the next decade.
MOUNTAIN VIEW, Calif. – During past downturns in technology spending, Dell tended to boast about its ability to weather the conditions better than competitors bogged down by higher-priced goods and cumbersome business models.
The Financial Times has been keeping tabs on the results, or perhaps more accurately, the lack thereof, of collateralized debt obligations. A couple of weeks ago, it highlighted research by Morgan Stanley and Wachovia that concluded that nearly half the CDOs made from asset backed securities.
Today, Gillian Tett of the FT discusses research on CDOs by JP Morgan and Wachovia. I’m assuming that JP Morgan released an additional study (as opposed to the first article having mistakenly mentioned Morgan Stanley, as opposed to JP Morgan). Tett mentions not only the impressive level of failures, but also the horrid recovery rate.
From the Financial Times:
Just how much should a debt vehicle backed by subprime mortgage bonds be worth these days? Two years ago, most banks and insurance companies assumed the answer was close to 100 per cent of face value – or more…
But as the zeroes relating to writedowns multiply, a peculiar – and bitter – irony continues to hang over these numbers. Notwithstanding the fact that bankers used to promote CDOs as a tool to create more "complete" capital markets, very few of those instruments ever traded in a real market sense before the crisis – and fewer still have changed hands since then.
Thus, the "prices falls" that have blasted such terrible holes in the balance sheets of the banks have not been based on any real market numbers, but on models extrapolated from other measures such as the ABX, an index of mortgage derivatives…
But now, at long last, one shard of reality has just emerged to piece this gloom. In recent weeks, bankers at places such as JPMorgan Chase and Wachovia have been quietly sifting data ….
From late 2005 to the middle of 2007, around $450bn of CDO of ABS were issued, of which about one third were created from risky mortgage-backed bonds (known as mezzanine CDO of ABS) and much of the rest from safer tranches (high grade CDO of ABS.)
Out of that pile, around $305bn of the CDOs are now in a formal state of default, with the CDOs underwritten by Merrill Lynch accounting for the biggest pile of defaulted assets, followed by UBS and Citi.
The real shocker, though, is what has happened after those defaults. JPMorgan estimates that $102bn of CDOs has already been liquidated. The average recovery rate for super-senior tranches of debt – or the stuff that was supposed to be so ultra safe that it always carried a triple A tag – has been 32 per cent for the high grade CDOs. With mezzanine CDO’s, though, recovery rates on those AAA assets have been a mere 5 per cent.
I dare say this might be an extreme case. The subprime loans extended in 2006 and 2007 have suffered particularly high default rates and the CDOs that have already been liquidated are presumably the very worst of the pack.
Even so, I would hazard a guess that this is easily the worst outcome for any assets that have ever carried a "triple A" stamp. No wonder so many investors are now so utterly cynical about anything that bankers or rating agencies might say these days.
After all, when the ABX started taking a dramatically bearish tone 18 months ago, many banks claimed that it was ridiculous that they were writing their mortgage assets down to prices extrapolated from the ABX, since it was popularly claimed that the ABX overstated likely future loss. Even the Bank of England appeared to share that view.
But with the ABX now suggesting that triple A subprime mortgage assets are worth around 40 cents on the dollar (depending on the precise vintage), the message from that might almost be too optimistic in relation to some CDOs. So where does that leave the banks? In reality we will not know whether that horrific 95 per cent loss is unusual until the rest of the CDO of ABS are liquidated too. But for my part, I suspect that the saga strengthens the case for financiers now biting the bullet – and conducting some open auctions of this stuff, to get a bit of market price discovery….
After all, if an open auction ends up pricing mortgage-linked CDOs near zero, at least the capital hit to the banks and insurance companies will be clear; and if it is higher than zero, it might even cheer investors up.
the ongoing shocking collapse of japan got another datapoint yesterday as new data showed the country, just a few months ago one of the world’s preeminent export powers, returning to a current account deficit for the first time in 25 years. japan was only recently the largest buyer of dollar-denominated debt in the world; today, it has no need of any. japan is about to experience what is likely the most savage depression of any first-world country since the 1930s.
Japan’s exports plunged 45.7 percent in January from a year earlier, resulting in a record trade deficit, as recessions in the U.S. and Europe smothered demand for the country’s cars and electronics.
The shortfall widened to 952.6 billion yen ($9.9 billion), the biggest since 1980, the earliest year for which there is comparable data, the Finance Ministry said today in Tokyo. The drop in shipments abroad eclipsed a record 35 percent decline set the previous month.
Exports to the U.S. tumbled an unprecedented 52.9 percent from a year earlier, and shipments to Asia and Europe also posted the largest-ever declines as the global recession deepened. The collapse is likely to force Japanese companies to keep firing workers and closing factories, worsening an economy that shrank the most in 34 years last quarter.
China is unfortunately likely to follow. the latest piece of evidence via yves smith and bloomberg that china is experiencing a consumer-driven deflationary collapse is a bit of goldman sachs research on tax collections within the middle kingdom. official pronouncements of fiscal and financial health from the chinese leadership look more and more bogus with every passing week.
as such, we are witnessing the end of vendor finance. and that has severe ramifications for the united states.
spending plans for the united states are exuberant as the nation turns to neo-keynesianism in its hour of need, reinforced earlier today in a deutsche bank call on american GDP.
Deutsche Bank sees current quarter GDP at -6.5 percent and makes assertion that while it is not likely one can make a case for -10 percent.
A (-10%) decline in GDP is only possible when some really bad economic data is hitting the wire — and it is. united states january durable goods orders came out this morning (-23.3%).
the obama administration budget proposal just released for 2009 considers a fiscal shortfall of nearly $1.8tn for this year alone. treasury is already auctioning unprecedented amounts of debt weekly, creating new maturities and reopening old issues. it will have to step up in size from even these auctions.
the reasonable paramount question is, now more than ever, "who is going to buy all this debt?"
japan is suddenly out of the picture. petrostates are dealing with the collapse in global demand for and price of oil by shutting down petrodollar reinvestment flows and, in some cases, actually shedding reserves. china is faced with shortly following japan. and, as cited in the financial times, bank of new york mellon runs the sums and notes that even 8% american domestic savings rate by the end of 2010 — which would correspond to a depression-level contraction in spending — would raise just $830bn in potential domestic finance for treasury against something on the order of $4tn in deficit spending plans. brad setser’s notion that rising domestic savings will offset contracting vendor finance would in this scenario be found severely wanting.
it is quite possible that some of the approximately $3tn that needs to be found in 2009 and 2010 could be vomited out of other capital markets — corporate bonds, stocks and the like.
to the extent that it is not, however, the federal reserve bank is very likely to be compelled to monetize treasury debt in terrific size — true quantitative easing and in earnest, no later than the second half of this year.
but the fallout may be harder to predict than simply "inflation". the united states will not be alone — indeed, in a world of competitive devaluation, the dollar might even appreciate vis-a-vis its forex crosses. furthermore, the inflation of quantitative easing may well fail to stave off declining prices (particularly in leverageable assets) simply because, even at a full $3tn of monetization, it isn’t enough to offset the vaporization of moneylike credit which is ongoing. if prices are to rise, chances are much better that it would be in the realm of physical raw inputs and unfinished goods, with the depressed conditions of falling income and credit scarcity continuing to crush leverage and margins.
the conclusion? mellon suggests storing wealth in precious metals, which they see as outperforming.
UPDATE: john jansen speculates:
The indirect bidding category, which folklore holds is a proxy for central bank interest, won nearly 39 percent of the auction.
In spite of that result and in spite of economic data this morning which borders on calamitous the bond market can not get out of its own way. Tomorrow brings month end and a substantial index extension and even with that the market sits within a basis point of cycle lows.
In that regard, I think that the markets have a serious auction and supply problem. David Ader, an analyst at Greenwich Capital, in a piece he wrote this morning talks about the rolling concession which the Treasury market requires to accommodate the issuance.
He notes that the concession building makes the charts look weak and that engenders more selling. …
I think that an era of unheard of concessions for Treasury issuance is possible too. The funding needs of the Treasury are prodigious and given the details of the budget released today it will only increase in the near term. The wholesale market ( primary dealers) has shrunk in size and the amount of balance sheet available to those in the market has contracted, too. I think that it is only a matter of time until demand slackens and the Treasury faces 10 basis point and 15 basis point tails on a regular basis (A tail is the number of basis points between the level at which the issue was trading in the brokers market and the level at which the auction stops.)
It has happened in other markets and it seems only logical to me that it should happen in this market also. If that pattern were to develop. I think it would force the hand of the Federal Reserve and would hasten their entry into the market as a buyer of Treasuries.
Reporting from Sacramento — More than 1 in 10 California workers were unemployed in January, the largest percentage in nearly 26 years, the state reported today.
The 10.1% jobless rate is the highest since June 1983 and not far below the 11% record set in November 1982 at the worst point of a severe recession, according to the governor’s office. Job losses escalated in January, with the state’s unemployment rate jumping by 1.4 percentage points from a revised 8.7% for December.
Glen Beck, Housing Crisis, (Hat Tip GregRoberts)
Credit card defaults are on the rise and are expected to hit 10 percent this year. This will obviously drive many banks closer to failing their stress tests — but it will have an even greater impact on the lives of people who find themselves sinking deeper and deeper into debt.
Clean Coal Air Freshener (Hat tip Fred)
WASHINGTON – Four days before a planned civil disobedience action at a coal-fired power plant near the U.S. Capitol, the leaders of the House of Representatives and the Senate asked Thursday for the plant to replace all its coal with natural gas.
Sen. Harry Reid, D-Nev., the Senate majority leader, and House Speaker Nancy Pelosi, D-Calif., sent a letter to Stephen Ayers, the acting architect of the Capitol, who’s in charge of maintaining the Capitol complex, telling him to reduce the amount of coal burned at the plant and to prepare for converting it to burn only natural gas by the end of the year.
The power plant, three blocks south of the Capitol, has been running every day since it went into service in 1910. It provides heating and cooling for the Capitol, the Library of Congress and about 20 other federal buildings on Capitol Hill, using both coal and natural gas.
The plant is the No. 1 source of air pollution and carbon pollution in the nation’s capital, the letter said.
For environmental activists it’s something more, however – a symbol of the nation’s reliance on coal, the most carbon-intensive fossil fuel. Scientists have identified heat-trapping carbon emissions from burning fossil fuels as the primary reason for the increase in Earth’s average temperature in recent decades.
Capitol Climate Action, a coalition of environmental and other advocacy groups, plans to hold a civil disobedience demonstration at the plant on Monday, capping PowerShift, a national conference of young environmentalists in Washington.
"I think it’s time we take a stand on global warming. We need to send a message to Congress and the president," NASA climate scientist James Hansen said in a video message to participants on YouTube. He plans to join the protest.
"What has become clear from the science is we cannot burn all the fossil fuels without creating a very different planet," Hansen said. "The only practical way to solve the problem is to phase out the biggest source of carbon and that is coal."
Nell Greenberg, a spokeswoman for Capitol Climate Action, said the demonstration would call for broader action to reduce greenhouse gas emissions.
Pelosi and Reid asked the Architect of the Capitol to provide information about what it would cost to retrofit the plant’s two boilers to operate entirely on natural gas. They said they want one of them converted as early as this summer and the other by year’s end.
The office of the Architect of the Capitol is committed to increasing energy efficiency and reducing the carbon footprint, and planning is under way "to make this a reality," said spokeswoman Eva Malecki.
The power plant was the last step, "right under the nose" of Congress and an example of a way to quickly move away from coal, said Bruce Nilles of the Sierra Club’s Beyond Coal Campaign.
Getting rid of the coal is important not just for global warming but also for health, Nilles said.
"The day before the inauguration was a Code Orange day" because of high pollution, he said. "It was a lousy way to welcome the first family, which has one asthmatic daughter."