The great interest rate rip off part 1

Employees work on wind turbines at a Gamesa factory in Tianjin, China. Washington is challenging a government fund in China that awards grants to makers of wind power equipment.

Wall St. Computers Read the News, and Trade on It

By GRAHAM BOWLEY 28 minutes ago

Traders are using software to track news, blogs and even Twitter posts to identify shifts in market sentiment.

DealBook

Airgas Board Rejects Air Products' Bid

By JEFFREY CANE

The board says that the revised $70-a-share offer is "inadequate" and contends that Airgas is worth $78 a share "at this time."

DealBook: Parsing the Airgas Rejection

Media Decoder Blog

Time Inc. Installs New Senior Management in Shake-Up

By JEREMY W. PETERS 51 minutes ago

Time Inc.'s new chief executive, Jack Griffin, has appointed several new senior deputies and split two of the company's largest magazine segments into separate divisions.

Media Decoder Blog

Approval Talks Delay Comcast-NBC Deal

By BILL CARTER and BRIAN STELTER 17 minutes ago

The long-awaited completion of the takeover of NBC Universal by Comcast will have to wait until the new year.

U.S. Home Sales Rose in November but Missed Forecasts

By CHRISTINE HAUSER 12:56 PM ET

Sales of homes rose 5.6 percent in November to a seasonally adjusted annual rate of 4.68 million houses.

Wall Street Shares Are Little Changed

By THE ASSOCIATED PRESS 20 minutes ago

The soft trading came after a report showed that the United States economy grew slightly faster than first thought during the summer.

In a Sign of Foreclosure Flaws, Suits Claim Break-Ins by Banks

By ANDREW MARTIN

Critics said a tide of lawsuits accusing banks of wrongfully breaking into homes reinforced their claim that the foreclosure process is fundamentally flawed.

interestrateripoff · December 22, 2010

Fraud As A Business Model: Deutsche Bank

And an admission this time.

NEW YORK (AP) -- Deutsche Bank

admitted criminal wrongdoing

and agreed to pay more than $550 million in connection with its participation in tax shelters that enabled the rich to temporarily avoid paying hundreds of millions of dollars in U.S. taxes, authorities announced Tuesday.

Note that: ADMITTED CRIMINAL WRONGDOING.

Why there's an indictment, right? After all, that's a guilty plea (well, as good as one)

Nope.

In court papers, the Department of Justice agreed not to criminally prosecute Deutsche Bank for any crimes related to its participation in a broad conspiracy to defraud the Internal Revenue Service.

Very nice.

So if you're a big international bank you can commit crimes with impunity, admit to them, and not be prosecuted.

Just pay a fine. It's just a cost of doing business, after all... $550 million is approximately 1.5% of the firm's market capitalization of $32 billion. Of course if you commit 100 crimes and get caught once, well, that makes it a pretty good business decision to commit crimes, right? You only pay once - the other 99 times you get to keep the loot and so does everyone else who you help commit the crimes.

We get the same consideration as these banksters, and are allowed to "only pay fines" that amount to a tiny fraction of our net worth when we get caught committing crimes, right?

Oh wait - that doesn't happen for the people. No, instead we get jailed (effectively "broken up" if we were a corporation.)

Again: Explain to me why you, as a citizen, follow the law - any law - given what is documented as the government's behavior when it uncovers criminal acts - acts that, in this case, were admitted to - by these large institutions.

There's one law for the rich and another for the poor.

interestrateripoff · December 22, 2010

Fraud As A Business Model Endorsed by The Fed And OCC

Yep.... any screwing is a good screwing, so long as a bank does it and you, the consumer, are the screwee.

WASHINGTON -- Top policymakers at the Federal Reserve are fighting efforts to rein in widely reported bank abuses, sparking an inter-agency feud with the FDIC and the Treasury Department.

The Fed, along with the more bank-friendly Office of the Comptroller of the Currency, is resisting moves to craft rules cracking down on banks that charge illegal fees and carry out improper foreclosures

. The FDIC supports such rules, according to an FDIC official involved in the dispute.

Got that?

The Fed and OCC are resisting cracking down on ILLEGAL fees and IMPROPER foreclosures.

What part of "illegal" don't these guys care about?

Oh, that's simple. If it's illegal (say, by charging an illegal fee, foreclosing by committing perjury, doctoring wire information so that the fact that you're funding terrorism in the Middle East is obscured, or screwing municipalities with hinky derivative deals, or perhaps not even transferring mortgages into alleged mortgage-backed securities) according to The Fed and OCC it's perfectly ok if it screws the consumer - or anyone except a bank.

But as soon as you screw a bank, why that's really illegal and for that you should be prosecuted.

That we continue to allow this as citizens, when we, the people, have the final and in fact unalienable right to say no simply means that we get the government we deserve.

So when you get screwed (and you probably are if you're paying your mortgage right now, since nobody will tell you who actually owns it - therefore, you don't know if you're paying the right person), if you get charged an illegal fee (and then forced to pay it), if you're an investor and get screwed by a computer run by a big bank that "front runs" your trades and thus allows said bank to have an unbroken "winning" record (remember, for every winner in a trade there is a loser - guess who the loser is? Yep - it's you) or whatever other indignity you suffer, it's your responsibility - directly - through your continued silence and continued re-election and permission to occupy the Capital that you grant for the clownfaces in DC, including those at The Fed and the OCC, that this occurs.

It is one thing to have a set of documents called "The Declaration of Independence" (setting forth unalienable rights that you possess not from government, but simply as a consequence of existence) and "The Constitution" (which sets forth a very small number of enumerated powers for our Federal Government) but if you, the people, sit on your ass while that same government gives license to blatant and clear lawless behavior such as the charging of illegal fees and does not enforce the law, including by criminal indictment, then you in fact have nothing at all.

Enjoy your self-imposed serfdom America.

It only ends when you demand it.

To start demanding it (and note, this is only a start) go to http://stopservicerscams.com/

interestrateripoff · December 22, 2010

Mush: One Goldbug Cowering In Fear

The response from Shedlock to my previous missive on Kucinich's bill is amusing.

Denninger is not the only one who is stunned. I am stunned that anyone could support this preposterous idea, assuming they read it and are sober.

Neither sound money nor the free market comes from printing money into existence. Arguably the only thing worse than the Fed printing money out of thin air is Congress printing money out of thing for the purpose of full employment and/or any other absurd ideas Congress has.

As opposed to loaning it into existence at gunpoint (literally in the case of TARP, QE1 and QE2), as is done now?

The last thing we need, the very last thing we need is Congress lending money into existence to pay the bills or to do anything it wants for any reason. Those looking for hyperinflation can find the roots of it in that bill.

Might I remind Mish (or should I rename him as "Mush", as in "for brains") that the bill contains an explicit provision prohibiting that which he claims will happen?

(5) GOVERNING PRINCIPLE OF MONETARY POLICY.—

The Monetary Authority shall pursue a monetary policy based on the governing principle that the supply of money in circulation should not become inflationary nor deflationary in and of itself,

but will be sufficient to allow goods and services to move freely in trade in a balanced manner. The Monetary Authority shall maintain long run growth of the monetary and credit aggregates commensurate with the economy’s long run potential to increase production, so as to promote effectively the goals of maximum employment,

stable prices

, and moderate long term interest rates.

Gee, an actual zero inflation mandate! Funny how we finally define stable prices and Mush has a problem with it.

One should look at The Federal Reserve Act for reference - you'll find the same mandate less the definition of "stable prices."

Of course if you're an "asset manager" you have a hell of a reason to like "small inflation", because that is what creates the dynamic that forces people to spend or take risk instead of saving, as savings are under such an inflationary system a sinking fund.

I am 100% in favor of eliminating fractional reserve lending.

Ironically, Denninger once challenged me on that score, defending the practice. Please see

Fractional Reserve Lending Constitutes Fraud

for the debate.

Hopefully Denninger has changed his mind.

Bah.

Once again the nuts are loose rolling around on the floor and intentional distortions and in fact outright lies are again becoming the stock-in-trade of those who wish to claim a "debate."

I have repeatedly pointed out that the solution to the games played by the banking system can be found with a standard of
One Dollar of Capital. This standard prohibits unsecured lending that exceeds the excess capitalization (whether through bond sales, paid-in-capital or retained earnings) of the firm in question. And incidentally, Kucinich's bill effectively does exactly this and in fact goes further.

As a practical matter lending against secured value must (to be safe) have a significant margin built-in so as to prevent an unexpected "draw" against a bank's excess capital. That is, if you lend someone $100,000 to buy a house you suddenly become very concerned about down payments and such (and likely require 20% or more down) if such is a fully-secured loan, as without doing so the risk of an "unexpected" incursion into the bank's excess capital becomes very real - and should it happen you could literally be forced into liquidation with no notice at all. This risk prevents most of the abuses all on its own, but I can live with Kucinich's solution - he simply requires that if you want to lend against assets without having a dollar of capital for each dollar lent that the loan must come from the Federal Government.

Kucinich's bill also turns banks into fiduciary depositories for customers, ending the possibility of the FDIC - that is, the government - having to cover fraudulent lending. By designating a transaction account as having a bailment arrangement fiduciary responsibility and criminal sanction suddenly appears should the system be gamed. Gee, what's the problem with that? If you wish to loan money to a bank (in exchange for interest) you may, but such a loan must be designated as a loan (not claimed to be a "deposit") and further, there is no insurance or guarantee upon it.

You might suddenly become very interested in the safety, soundness and activity of such an institution before you lend it money, eh? Yeah.

The bill also includes two other provisions - an interest-rate cap (8%) and a limit on all fees, costs and interest that may not exceed the principal, with the exception of mortgages. This will cut off predatory lending at the knees - since the risk-free rate of return is about 3% ex-inflation, and the bill contains a zero-inflation mandate, this means that someone who's risk is a bit more than twice the "risk-free" rate will be denied credit. This provision stops the pyramiding of risk that by and large led to the housing bubble - the predatory lending that was at the core of the asset-price runup could not happen, nor could complex securitizations with embedded costs in the mid-several-percent range be completed and put together with such a cap. In short, if you're not a good credit risk you will be paying cash - that is, spending from economic surplus instead of pulling forward demand. This again is good, not bad.

Finally, the bill requires that the emission of currency to match economic growth (which, incidentally, is what we wind up with under the Kucinich bill) be allocated such that 25% of it be distributed to the states for infrastructure, education, health care and unfunded Federal mandates. That is, at least one quarter of the monetary balancing will have to go toward the States, rather than being dissipated in The Federal Government. While that's not perfect it sure beats what we have now, where state and local governments wind up engaging in hinky derivative deals with banks that end up screwing their citizens when they need a new sewer system.

To answer the question Mush asked up top of his post, yes, I did read the bill. In full. It is, after all, only 46 pages.

No, it's not perfect.

But it would be a monstrous improvement over what we have now, and I will remind Mush that in point of fact we had Colonial Script some rather long time ago, and further, there is nothing in The Constitution that prohibits the Federal Government from issuing and fixing the value of fiat currency. In fact, such is explicitly contemplated and expected by The Constitution.

interestrateripoff · December 22, 2010

3Q GDP Revision: Bad News

You wouldn't know it, of course - the market did nothing.

Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 2.6 percent in the third quarter of 2010, (that is, from the second quarter to the third quarter), according to the "third" estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 1.7 percent.

That looks like pretty much a flat report (former was up 2.5%)

But it's the inside scoop that's the problem.

The price index for gross domestic purchases, which measures prices paid by U.S. residents, increased 0.7 percent in the third quarter, 0.1 percentage point less than the second estimate; this index increased 0.1 percent in the second quarter. Excluding food and energy prices, the price index for gross domestic purchases increased 0.4 percent in the third quarter, compared with an increase of 0.8 percent in the second.

So "inflation" (price inflation) is either smack up the middle of Bernanke's "desired" band or moderately over it, depending on whether you include the things that everyone needs to buy or not. Since I do include those things, I call it "moderately over."

Profits from current production (corporate profits with inventory valuation and capital consumption adjustments) increased $26.0 billion in the third quarter, compared with an increase of $47.5 billion in the second quarter.
Current-production cash flow (net cash flow with inventory valuation adjustment) -- the internal funds available to corporations for investment -- decreased $68.4 billion in the third quarter
, in contrast to an increase of $61.1 billion in the second.

"Margin collapse" anyone?

Domestic profits of nonfinancial corporations increased $0.3 billion in the third quarter, compared with an increase of $48.2 billion in the second.
In the third quarter, real gross value added of nonfinancial corporations decreased
. Profits per unit of real value added were unchanged; an increase in unit prices was offset by increases in both the unit labor costs and the unit nonlabor costs corporations incurred.

Yep. Now quit with the QE crap and stop manipulating the bond market and corporate leverage. We're getting negative outcomes from these games - and if we don't cut this crap out that negative outcome may become extremely serious.

I'm suspicious of some of the internal reported data, as I have been before. But what's clear is that PCE (personal expenditures) was revised down, disposable personal income is not increasing much at all (in fact the torrid 5.5% rate of the second quarter has cooled to +1.7% annualized) and inventories are rising.

None of this is particularly positive and when added to the trade imbalance (imports/exports) and cost-push pressures along with non-financial corporation margin collapse that is increasingly showing up in the data is now essentially baked into the cake and will inevitably show up either on the shelf or in profit margins - neither of which is good for the economy as a whole.

On balance the report showed no real change, and the differences from the second issue of this report were all negative - even if only modestly so.

Luckily it's all contained.

interestrateripoff · December 23, 2010

http://www.telegraph.co.uk/finance/economics/8220167/Demand-for-ECB-loans-raises-bank-funding-fears.html

Fears that financial institutions are still facing problems securing market funding have been raised after the European Central Bank (ECB) saw stronger than expected demand for three-month loans.

Banks across the eurozone on Wednesday borrowed €149.5bn (£127.2bn) during the ECB's 98-day liquidity operation, far higher than analysts' expectations of €105bn. The interest rate attached to the loans is indexed to the central bank's main refinancing rate, which currently stands at 1pc.

The ECB said 270 banks bid for funds in the tender, where banks are guaranteed to get all the money they request. Each institution is required to settle its loans on March 31.

The funds were issued ahead of Thursday's deadline for €97bn-worth of 12-month loans. Banks will also be given a chance to take a 13-day loan from the ECB to smooth over the year-end period.

Banking analysts said the 98-day loan figure indicated "ructions in eurozone peripheral markets", but added the picture would not complete before 13-day tender results were announced on Thursday.

Elia Lattuga, analyst at Unicredit said: "This would suggest there has been some reduction in demand from core countries and a small increase from peripheral countries. Tensions remain, but to understand fully the situation in peripheral banks, we need to see [Wednesdy's] numbers."

So on March 31 do they settle the loans by taking out new loans with the ECB?

Although if the market is wanting a higher rate than the ECB from a business point of view your going to borrow from the ECB.

interestrateripoff · December 23, 2010

http://www.nytimes.com/2010/12/23/business/23prichard.html?_r=1&ref=business

This struggling small city on the outskirts of Mobile was warned for years that if it did nothing, its pension fund would run out of money by 2009. Right on schedule, its fund ran dry.

Then Prichard did something that pension experts say they have never seen before: it stopped sending monthly pension checks to its 150 retired workers, breaking a state law requiring it to pay its promised retirement benefits in full.

Since then, Nettie Banks, 68, a retired Prichard police and fire dispatcher, has filed for bankruptcy. Alfred Arnold, a 66-year-old retired fire captain, has gone back to work as a shopping mall security guard to try to keep his house. Eddie Ragland, 59, a retired police captain, accepted help from colleagues, bake sales and collection jars after he was shot by a robber, leaving him badly wounded and unable to get to his new job as a police officer at the regional airport.

Far worse was the retired fire marshal who died in June. Like many of the others, he was too young to collect Social Security. “When they found him, he had no electricity and no running water in his house,” said David Anders, 58, a retired district fire chief. “He was a proud enough man that he wouldn’t accept help.”

The situation in Prichard is extremely unusual — the city has sought bankruptcy protection twice — but it proves that the unthinkable can, in fact, sometimes happen. And it stands as a warning to cities like Philadelphia and states like Illinois, whose pension funds are under great strain: if nothing changes, the money eventually does run out, and when that happens, misery and turmoil follow.

It is not just the pensioners who suffer when a pension fund runs dry. If a city tried to follow the law and pay its pensioners with money from its annual operating budget, it would probably have to adopt large tax increases, or make huge service cuts, to come up with the money.

Coming to everyone soon?

interestrateripoff · December 23, 2010

http://www.guardian.co.uk/business/2010/dec/23/insolvencies-experian-north-south-divide

Further evidence of a north/south divide in business confidence has emerged as data confirmed company failures in the north of England are running at significantly higher rates than in the rest of the United Kingdom.

In its latest report credit reference group Experian said that business insolvencies fell to 0.07% in November 2010 – down from 0.09% in same month last year. However, it noted that businesses in southern England appear to be faring better than their northern counterparts.

The report published today backs up the most recent figures from the Insolvency Service which suggest companies are enjoying better trading conditions than a year ago, albeit with a wide regional variations.

Experian reports that business in the southeast, south west, Greater London and eastern England were the four regions that recorded the lowest failure rates of 0.06%.

Companies in Yorkshire, the north-east and the north-west have been failing at a much higher rates – of between 0.09% and 0.1%. Scotland is the only area where more businesses have failed this year, than in 2009.

The recovery continues.

interestrateripoff · December 23, 2010

Breaking news

Homeowners warned of return to 5% interest rates

Bank of England official says people must be aware that rates will gradually rise to 'normalised position' of 5%
143 comments
- Poll: Will rates rise tip UK back into recession?
[*] Mortgage approvals hit 20-month low

Mortgage approvals in November show a 32% year-on-year drop, while net lending slumps by 56%, latest BBA figures show

10 comments

[*] Santander sends 35,000 bank statements to wrong addresses

Bank recently voted worst for customer services faces large FSA fine, but denies error could facilitate identity theft

16 comments

[*] Rio Tinto offers £2.5bn for Riversdale

Mining group's A$16-a-share bid is expected to spark takeover battle for coal miner, with Indian joint venture already showing interest

[*] Tarmac closure plan puts 550 jobs at risk

Company informs staff days before Christmas that it plans to shut its precast concrete and flooring business

5 comments

[*] Pound falls against dollar after GDP growth is cut

Office for National Statistics trims 0.1 percentage points off GDP, raising pessimism about UK recovery

Festive fun

Christmas cards by Kipper Williams

Print or tweet one of seven Christmas cards illustrated by Guardian cartoonist Kipper Williams
The business Christmas special

Flattering pants, supersized suits and cheesey handouts ...
Our bumper five-part Christmas quiz

Graeme Wearden tests your knowledge of the business year – the people, the resignations and the crises
Rate of insolvencies highest in north

Credit reference group Experian says business insolvencies fell to 0.07% in November 2010 – down from 0.09% in same month last year
Mystery trader sends copper price soaring

Buyer acquires up to 90% of copper on London Metal Exchange as demand from China and others sends value to record high
More business news
Has Lord Browne got his eye on BP?
Bank minutes show rising inflation fear
46 comments
Former HP boss fights to keep Jodie Fisher letter private

interestrateripoff · December 23, 2010

Last-minute buyers gear up for busiest shopping day of the year

James Thompson: After days in which their shop fronts have been bound with snow, retailers are hoping for a shower of last-minute present-buyers today.

James Moore: The failure's the same on the trains, the buses and the planes

Outlook Another day another report of transport misery brought about by the snow. And, amid a rising tide of criticism British Airways and BAA, the airports operator, are indulging in the time honoured tactic of blaming each other.

Nick Bolton: Perpetual motion for OMG chief

Heading up this Oxford-based technology group, he has seen its reach extend beyond films and games

interestrateripoff · December 23, 2010

Energy stocks lead FTSE higher, breaks 6,000 level

LONDON (Reuters) - The leading share index closed just shy of the 6,000 level on Thursday as energy gains outpaced slight weakness in miners and banks in wafer thin trade.

Irish government swoops on Allied Irish

DUBLIN (Reuters) - Ireland effectively nationalised Allied Irish Banks on Thursday with a 3.7 billion euro (£3.1 billion) capital injection that cemented state control over most of the country's banking sector.

3:29pm GMT

Riversdale agrees $3.9 billion Rio bid; rivals circle

SYDNEY (Reuters) - Anglo-Australian miner Rio Tinto offered $3.9 billion (£2.5 billion) to buy African-focussed coal miner Riversdale in an agreed deal that is likely to be challenged by rivals seeking to secure coking coal reserves. | Video

4:35pm GMT

EU's Rehn says markets too pessimistic on Portugal, Spain

HELSINKI (Reuters) - Financial markets are underestimating Portugal's and Spain's ability to cope with their public debt and stimulate economic growth, the European Union's top economic officials was quoted as saying on Thursday.

8:21am GMT

Fitch cuts Portugal rating one notch to A-plus

NEW YORK/LISBON (Reuters) - Fitch Ratings on Thursday downgraded Portugal, citing burgeoning debt levels and a tough financing environment, in a move which analysts said had been largely expected by markets.

6:51pm GMT

China says willing to help eurozone return to health

BEIJING (Reuters) - China is willing to help countries in the euro zone return to economic health and will support the International Monetary Fund element of a bailout package for the bloc, a Chinese Foreign Ministry spokeswoman said on Thursday.

9:30am GMT

Aston Martin and Daimler in talks over Maybach - report

FRANKFURT (Reuters) - Aston Martin is in talks with Daimler over a deal that would see the luxury carmaker design and build the German company's upmarket Maybach brand, the Financial Times reported.

10:25am GMT

Mortgage approvals hit 20-month low

LONDON (Reuters) - Mortgage approvals fell to a 20-month low in November and net mortgage lending dropped to its lowest in more than a decade, figures from the British Bankers' Association showed on Thursday, signalling further weakness in the housing market.

2:02pm GMT

Prospects rising for reinsurers mergers - EU watchdog

FRANKFURT (Reuters) - Merger activity among reinsurers looks set to rise due to the combination of low interest rates and low prices for reinsurance products, the European Union's insurance watchdog said on Thursday.

11:46am GMT

Bats to create top European exchange with Chi-X

LONDON (Reuters) - Bats Europe's bid for rival Chi-X Europe marks a period of consolidation among the new breed of exchanges, weakened by a fight over market share with traditional bourses.

interestrateripoff · December 23, 2010

23 December 2010 Last updated at 17:50

Santander admits statement glitch

Banking giant Santander admits that up to 35,000 people have received other customers' details on bank statements.

Airlines 'ignoring travel rights'

Some airlines' behaviour towards passengers during the snow-disrupted Christmas getaway was 'unacceptable', a watchdog says.

Christmas jobs pain for thousands

Thousands of public sector workers begin receiving grim news about their jobs in the run up to Christmas as councils serve legal notice of cuts.
US consumer spending rises again

US consumer spending rises for the fifth consecutive month, reinforcing the view of a solid if pedestrian recovery, figures show.
Standard Life China talks finish

Edinburgh-based insurer Standard Life's talks with Bank of China over a joint venture insurance business have broken down.
'Record' shopping day predicted
Hungary credit rating downgraded
Heinz workers set to strike again
Mortgage lending at 20-month low
Fresh bail-out knocks AIB shares
Skype slowly recovers from outage
Rio offers $3.9bn for Riversdale
Paddy Power to buy out Sportsbet
Boxing Day Tube strike goes ahead
Train firm's franchise extended
'No evidence' for Power Balance
Russia 'accepts' image problems

Political car crash

Will the chancellor regret creating the Banking Commission?
Cable: Unanswered questions

Memory Lane

But is it back to the 1930s or the 1970s?
Global imbalances

interestrateripoff · December 23, 2010

[/url]

FTSE 100 hits 6,000 in last gasp Santa rally

A last-gasp Santa rally pushed the FTSE 100 through the symbolic 6,000 mark for the first time in 30 months, as City experts caught the festive mood and forecast the blue-chip index hitting record highs in 2011.

Homeowners should prepare for rates of 5pc

Homeowners should start preparing for interest rate rises ahead of a return to “normalised” levels of around 5pc, warns Paul Fisher, the Bank of England's head of markets.

Economy could contract in 2011, warns BoE's Fisher

Paul Fisher interview - the full transcript

Top 10 economics stories of 2010

AIB 'under state control' after €3.7bn bail-out

Allied Irish Banks has received a €3.7bn (£3.14bn) injection from the Irish government, effectively placing it under state control.

John Lewis Christmas sales defy bad weather

John Lewis reported near-record sales in the last week, apparently untouched by the snow and cold, as rival retailers hope for a last-minute rush today to save their Christmas season.

Top 10 retail stories of 2010

Good tidings or bad? Retailers will know today

How the other retailers are doing: in numbers

Services sector activity falls as austerity measures bite

US consumer confidence prompts QE questions

Rival bidders circle as Rio offers £2.5bn for Riversdale

JJB in £30m cash call as chairman John Clare also goes

Fines for any repeat of Heathrow snow chaos

Mortgage lending slumps to lowest level since 1999

interestrateripoff · December 23, 2010

New Interest in Turning Gas to Diesel

By MATTHEW L. WALD 12:06 PM ET

With natural gas getting cheaper, a bit of alchemy may be the cheapest way to create a gallon of diesel fuel.

E.P.A. to Proceed on Rules for Greenhouse Gases 2:13 PM ET

Stephane De Sakutin/Agence France-Presse — Getty Images

Sasol’s headquarters in Johannesburg. Sasol is buying into a Canadian shale gas field so it can explore turning natural gas into diesel and other liquids.

Ireland Puts Another $4.8 Billion Into Allied Irish Banks

By LIZ ALDERMAN 1 minute ago

The latest injection of money means that the government is on course to own nearly 93 percent of the bank.

Media Decoder Blog

F.C.C. Head Expected to Approve Comcast-NBC Deal

By BRIAN STELTER 25 minutes ago

The Federal Communications Commission chairman signaled his tentative approval to Comcast's acquisition of NBC Universal, though with conditions.

DealBook

Leonard Green Offers $1.6 Billion for Jo-Ann Stores

By DEALBOOK 49 minutes ago

Private equity firm Leonard Green & Partners offered $61 a share for Jo-Ann Stores — a 34 percent premium to the closing price on Wednesday.

Wall Street Steady Ahead of the Holiday

By THE ASSOCIATED PRESS 12:52 PM ET

Stocks have shown little momentum because of the holidays and the fact that many major indexes have returned to levels last seen in September 2008.

Jobless Filings Steady; Consumer Spending Rises

Alabama Town’s Failed Pension Is a Warning

By MICHAEL COOPER and MARY WILLIAMS WALSH

As cities and states struggle to pay for pensions, Prichard, Ala., is a worst case. Some retirees have become destitute.

Photographs: Where the Pension Checks Stopped

Home-Stretch Buying Lifts Merchants’ Spirits

By STEPHANIE CLIFFORD

In-store sales are up 5.5 percent on the final weekend before Christmas compared with last year.

DealBook

HCA Files for $4.6 Billion I.P.O.

By CHRIS V. NICHOLSON

After a reorganization last month, the hospital operator bought by Bain Capital and Kohlberg Kravis Roberts in 2006 files a new plan to go public.

DealBook

Rio Tinto Offers $3.9 Billion for Riversdale Mining

By CHRIS V. NICHOLSON 11:10 AM ET

The board of Riversdale Mining, the Australian coal mining company with operations in southeastern Africa, said that it backed Rio Tinto’s all-cash offer of $16 a share, some 6 percent higher than Rio’s previous proposal.

interestrateripoff · December 23, 2010

The Fed Is Capitulating On Housing

It seriously does appear so....

As gauged by an aggregate of housing indexes dating to 1890, real home prices rose 85 percent to their highest level in August 2006. They have since declined 33 percent, falling short of most predictions for a cumulative correction of at least 40 percent.[

1
] In fact, home prices still must fall 23 percent if they are to revert to their long-term mean (

Chart 1

). The Federal Reserve’s purchases of Fannie Mae and Freddie Mac government-sponsored-entity bonds, which eased mortgage rates, supported home prices. Other measures included mortgage modification plans, which deferred foreclosures, and tax credits, which boosted entry-level home sales.

This, of course, was The Fed's intent - prevent reversion to the mean. But did they "prevent" it or is the other 23% decline - 40% of the total, roughly - still to come no matter whether they like it or not?

The fact that many mortgage holders have negative equity in their homes stymies modification efforts. In the case of HAMP, the cost of carrying a house must be reduced to 31 percent of the owner’s pretax income. Even if permanent modification is achieved, adding other debt payments to arrive at a total debt-to-income ratio boosts the average participant’s debt burden to 63.4 percent of income. In many cases, the financial innovations of the credit boom era, enabling owners to monetize home equity, encouraged high aggregate debt.

A study found that in a best-case outcome, 20 to 25 percent of modifications will become permanent.[

5
] In 2008, one in three homeowners devoted at least a third of household income to housing; one in eight was burdened with housing costs of 50 percent or more.[

6
] Failed modifications suggest that, without strong income growth, the bounds of affordability can be stretched only so far.

Ah, recognition! The problem isn't just mortgages. It's all debt, and unfortunately, the merchants didn't confine their infestation to homes. In point of fact this is the key item in the analysis - debt service requirements are simply too high, and debt has not been written off or defaulted to any material degree.

Until it is, we cannot recover. This has been my thesis since the outset of this mess and slowly, recognition is showing up at The Fed.

With nearly half of total bank assets backed by residential real estate, both homeowners on the cusp of negative equity and the banking system as a whole remain concerned amid the resumption of home price declines.[

8
] This unease highlights the housing market’s fragility and suggests there may be no pain-free path to the eventual righting of the market. No perfect solution to the housing crisis exists.

The latest price declines will undoubtedly cause more economic dislocation

. As the crisis enters its fifth year, uncertainty is as prevalent as ever and continues to hinder a more robust economic recovery.

Given that time has not proven beneficial in rendering pricing clarity, allowing the market to clear may be the path of least distress

.

I'll be damned.

I actually read something intelligent from a regional Fed publication.

Ps: The entirety of the stock market's bubble behavior over the last 18 months, particularly that in the financials, depends on this not happening. Ever. Consider yourself warned that The Fed is waking up to the inevitability of their chosen path's failure, and that eventually we have to "eat" these embedded - and hidden - losses.

interestrateripoff · December 23, 2010

Jobless Claims: Meh

Once again we were treated to the idiot patrol in the mainstream media making claims that are of dubious worth on this number release. Let's look at the report and suss out what's up.

In the week ending Dec. 18, the advance figure for seasonally adjusted

initial claims

was 420,000, a decrease of 3,000 from the previous week's revised figure of 423,000. The 4-week moving average was 426,000, an increase of 2,500 from the previous week's revised average of 423,500.

Ok, we still have a "4" as the first number. Wake me up when the first number is a "3" and the second one is no higher than "5". That's consistent with some level of private payroll growth.

There's your seasonal hiring. It's not very strong, but it's present. That's good, and about half of the total is almost-certainly seasonal hiring as opposed to EUC and Extended benefits (which could be roll-offs, and probably are.)

The bad news is that last week three times as many people got added to the rolls.

Now what we don't know, of course, is how this translates into the employment report.

We'll get that in another couple of weeks. What I don't like is that the trend here supports only very light hiring coming into the season - perhaps enough to move the needle by a tenth on the unemployment rate. In a word: Yuck.

There are anecdotal state-level reports that tend to confirm this, as we've seen state-level unemployment levels ticking up in a number of important states, including Georgia. The national report for December will be interesting, and I'll get to either validate or refute what appears to be a clear trend - that is, that we're rolling over again - for employment in general.

Coming into the holidays that should not be happening if in fact there is any sort of building strength in the labor market.

It is a jobless recovery. If the workers have no money they can't buy the goods.

interestrateripoff · December 23, 2010

http://www.foxbusiness.com/markets/2010/12/23/economist-chinas-growth-model-unsustainable/

China's robust growth over the last few decades is unsustainable, a former member of the People's Bank of China's policy committee wrote Thursday in the state-run
China Daily, warning that government control, excessive real estate investment and a lack of innovation threaten future performance.
Yu Yongding, who currently serves as president of the China Society of World Economics, echoed Premier Wen Jiabao's concern that the nation's growth is "unstable, unbalanced, uncoordinated and ultimately unsustainable."

He said the two main potential growth laggards were the "government's influence in a large proportion of investment decisions," and excessive resources directed to real estate development, which accounts for nearly a quarter of total investment.

"Some local governments are literally digging holes and then filling them in to ratchet up GDP," Yu said in his opinion piece.

[url=http://www.foxbusiness.com/markets/2010/12/23/economist-chinas-growth-model-unsustainable/#ixzz18y1hLdpR][/url]

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