Weekday NEWS to Comfort the Disturbed and Disturb the Comfortable.
Wed 02.03.2010
David Walker (1/25/10) Comeback America: Turning the Country Around and Restoring Fiscal Responsibility David Walker, President, CEO, Peter G. Peterson Foundation; Former Comptroller General of the U.S.; Author, Comeback America: Turning the Country Around and Restoring Fiscal Responsibility One of Americas foremost independent financial experts, former comptroller general of the U.S. and head of the U.S. Government Accountability Office from 1998-2008, Walker will discuss a range of compelling ideas, including how to control spending, save Social Security, dramatically alter our health-care system, reform our tax system and re-engineer the base of the federal government all taking into account the Obama administrations efforts to-date to do the same. He will address a range of policies and operational and political reforms needed to ensure that Americas future will be better than its past.
Our Q&A with David Walker The deficit and debt are rising as political issues. But what are we supposed to do about them? Points turned to David Walker, author of "Comeback America," for ideas. Walker, who spoke Friday in Dallas to the National Center for Policy Analysis, is in a position to have them. The former U.S. comptroller general now heads the Peter G. Peterson Foundation, which has held town halls to educate Americans about these issues.
TOO BIG TO FAIL? DON'T COUNT ON IT, SAYS DAVID WALKER The deficit and debt are rising as political issues. But what are we supposed to do about them? David Walker, author of "Comeback America," spoke Friday in Dallas to the National Center for Policy Analysis. The former U.S. comptroller general now heads the Peter G. Peterson Foundation, which has held town halls to educate Americans about these issues. Walker presents grim statistics in his book, including that by 2030, Americans could face higher tax rates than Europe because of our debt. That's not far away. What should we do?
According to Walker, we should separate the short-term deficit from the structural one.
Our current deficit is caused by the recession, various bailouts, two wars, several tax cuts and recent increases in federal spending.
It will remain high for a couple of years and may rise in order to stimulate the economy and create jobs.
The deficit we should worry about is our large and growing structural one, he says:
We need a fiscal commission that recommends budget controls, reforms in Social Security, Medicare and Medicaid, our tax system and various other changes.
But a presidential commission won't have as much power as a statutory once since Congress won't have to vote on its recommendations.
Terrorist attack 'certain' in months By Eli Lake Intelligence leaders warn Senate panel The five senior leaders of the U.S. intelligence community told a Senate panel Tuesday they are "certain" that terrorists will attempt another attack on the United States in the next three to six months. The warning came during the annual threat briefing to Congress in response to questions from Sen. Dianne Feinstein, California Democrat and chairman of the Senate Select Committee on Intelligence, who asked, "What is the likelihood of another terrorist-attempted attack on the U.S. homeland in the next three to six months? High or low?"
Obama Threatens China and Iran, Another U.S. War? By: Shamus_Cooke - Market Oracle The possibility of yet another U.S. war became more real last week, when the Obama administration sharply confronted both China and Iran. The first aggressive act was performed by Obama's Secretary of State, Hillary Clinton, who "warned" China that it must support serious economic sanctions against Iran (an act of war). Clinton said: "China will be under a lot of pressure to recognize the destabilizing effect that a nuclear-armed Iran would have, from which they receive a significant percentage of their oil supply." The implication here is that China will be cut off from a major energy source if they do not support U.S. foreign policy - this, too, would equal an act of war.
US 'holds the power' in ties with China Gordon Chang, who has written extensively on China and North Korea, and is the author of the book The Coming Collapse of China, explains why US-China relations have soured.
China warns US over Dalai Lama By Geoff Dyer, Edward Luce - FT Beijing vows to impose sanctions over Taiwan arms China warned the US on Tuesday that any meeting between President Barack Obama and the Dalai Lama would further damage relations, in the latest sign of the deteriorating political mood between Beijing and Washington. Speaking on the day Beijing restated its pledge to impose sanctions on US companies that sell arms to Taiwan, a senior Chinese official said that meeting the Dalai Lama was not in the interests of the US at a time when it was trying to recover from the financial crisis.
Moody's Warns on Deluge of Debt By MIKE SPECTOR - WSJ Moody's Investors Service warned of sizable refunding requirements for nearly 1,000 companies over the coming years, questioning whether they will be able to refinance more than $800 billion in debt taken on in the middle part of the last decade. The credit-rating firm's annual report on risks faced by weaker companies and their investors found that 995 of the 1,300 companies Moody's rates as "junk" have debts maturing in the next five years. The debts are largely tied to the last decade's leveraged-buyout boom.
A.I.G. Plan for $100 Million Bonus Payout Draws Fire By Mary Williams Walsh, Sewell Chan - NY Times The American International Group has agreed to cut employee bonuses by $20 million and will distribute about $100 million on Wednesday, according to people with knowledge of the negotiations. But the reductions may not be enough to appease the company’s critics, who do not accept the company’s argument that it has to honor contracts from before its government bailout. “A.I.G. has taxpayers over a barrel,” said Senator Charles E. Grassley, an Iowa Republican, in a statement on Tuesday night. “The Obama administration has been outmaneuvered. And the closed-door negotiations just add to the skepticism that the taxpayers will ever get the upper hand.”
No Aid or Rebound in Sight More Homeowners Just Walk Away By David Streitfeld - NYTimes In 2006, Benjamin Koellmann bought a condominium in Miami Beach. By his calculation, it will be about the year 2025 before he can sell his modest home for what he paid. Or maybe 2040. “People like me are beginning to feel like suckers,” Mr. Koellmann said. “Why not let it go in default and rent a better place for less?” After three years of plunging real estate values, after the bailouts of the bankers and the revival of their million-dollar bonuses, after the Obama administration’s loan modification plan raised the expectations of many but satisfied only a few, a large group of distressed homeowners is wondering the same thing.
Ten Geopolitical and Economic Predictions for 2010 By Minyanville Staff There's a widespread belief that the world has “ducked the strategic bullet” of global economic collapse, but this is merely the delusionary euphoria of the severely wounded patient. Severe structural damage has occurred to the key driver of global economic stability: the United States. Most major economies of Western Europe and Asia, although in plight, have been protected in their fall by a complex web of structures and the fact that they weren't, in many respects, as leveraged as the US. Britain and Japan, however, remain leveraged in their debt-to-asset ratio, to a death-defying degree.
Inside Story - Tensions rise over Taiwan arms deal Beijing has warned of "serious harm" to relations between the two powers, accusing Washington of "arrogance" over plans to sell arms to Taiwan. Does escalating the rhetoric in this dispute threaten to deepen rifts between the world's largest and third-largest economies? Are bilateral relations on the brink and the fates of other countries being held hostage?
'Current rise in dollar, equity fall to help gold, silver' NJ, USA (Commodity Online): The current rise in the U.S. dollar and decline in U.S. stocks might actually strengthen the fundamentals of gold and silver. It is now more likely that Bernanke will continue to hold interest rates at 0% for a longer than expected period of time. Therefore, a rise in the U.S. dollar today could be setting the stage for a crash in the U.S. dollar as soon as late-2010, followed by the onset of hyperinflation, according to National Inflation Association of USA.
Gold Continues Bounce as Risk Play By Matt Whittaker - WSJ NY - Gold futures continued their risk-fueled bounce as concerns about Greek sovereign debt eased and the U.S. dollar faltered. April gold rose $13, or 1.2%, to settle at $1,118 an ounce on the Comex division of the New York Mercantile Exchange. February gold rose $13.10 to $1,117.40.
Gold steady above $1,110/oz, eyes on US data TOKYO, Feb 3 (Reuters) - Gold prices were steady on Wednesday after hitting their highest level in almost two weeks the previous day, with investors cautiously awaiting U.S. jobs data later this week to gauge prospects for the U.S. economy and the dollar.
Gold: fundamentals remain strong, says World Gold Council The World Gold Council said that suggestions of a gold price ‘bubble’ do not take account of gold’s market fundamentals, which remain robust. The World Gold Council said that investor flows, specifically from western markets, have provided a key means of support during the course of the credit crisis as investors sought to diversify their exposures to other assets and protect their wealth against market shocks. It said that these western investor flows have remained resilient even as the global economy has shown signs of recovery. Furthermore it said, evidence suggests that even the more tactical elements active in the gold market are being firmly driven by positive sentiment toward gold’s fundamentals. Further price support was provided by a progressive recovery in jewellery demand after a pressured first quarter.
Gold Price and the Ongoing Inflation Threat Gold had a strong rally the first trading day of February. This rally was significant for two reasons. First, gold hit a significant support level last Friday and needed to bounce at that point if it is going to form a double bottom. Secondly, assets in bull markets should rally the first few trading days of the month. Despite a barrage of press coverage during the last several weeks, the threat of inflation hasn't diminished, nor are the world's governments likely to return to fiscal and monetary responsibility for many years into the future. Gold will continue its long-term rally until that happens.
Higher Highs Coming In Gold! By: Peter Degraaf - Gold Seek The recent peak in gold on December 2nd was interrupted by a pullback that most likely ended with a double bottom on Jan 28th. To help us determine if this pull-back is ready to give way to the next big rally we take a look at all of the pullbacks of 10% or more since the Gold Bull started its run in 2001. There have been 9 such pull-backs, including the one just ending. But first we draw your attention to a very bullish chart. It is the chart that highlights the inverted head and shoulders formation that came to life when gold broke out above the important $1,000.00 level. This breakout portends a target of $1,350.00 minimum, and some would conclude at target at $1,500.00
Silver Is Poised to Rise in The Long Run, But The Short-term Situation Is Complicated By: Przemyslaw Radomski - SilverSeek.com Perhaps you may have heard mentions recently of the Austrian School of Economics versus the Keynesian branch. Maybe you saw televised interviews with Congressman Ron Paul (R-Texas.) He is the Congressman who has been trying for decades to pass a bill that would give Congress the power to audit the Federal Reserve Bank. What was once a ridiculed, marginal proposal recently passed the House and will soon be considered by the Senate. Congressman Paul blames the country’s economic woes on a long-dead economist by the name of John Maynard Keynes, whose present-day adherents, he says, are the ones bringing the country’s economy to the cliff’s edge.
What’s next for the Dollar? by Axel Merk - Financial Sense The Federal Reserve’s Open Market Committee (FOMC) is sticking to its course for phasing out the additional purchases of Mortgage Backed Securities (MBS). Notably however, in its statement released January 27th, reference to an improving housing market was omitted after recent bad news about the sector. The Fed rarely puts much weight on a month’s worth of data, be they good or bad; few have ever accused the Fed of being “ahead of the curve”. Indeed, there was one dissenting vote, Kansas City Fed President Thomas Hoenig, who argued the Fed should no longer commit to “exceptionally low levels of the federal funds rate for an extended period”.
20 reasons Global Debt Time Bomb explodes soon By Paul B. Farrell, MarketWatch Which trigger will ignite the Great Depression II? Retire? You can fugget about it if the new Global Debt Time Bomb is detonated by any one of 20 made-in-America trigger mechanisms. Yes, 20. And yes, any one can destroy your retirement because all 20 are inexorably linked, a house-of-cards, a circular firing squad destined to self-destruct, triggering the third great Wall Street meltdown of the 21st century, igniting the Great Depression II that George W. Bush, Ben Bernanke, Henry Paulson and now President Obama have simply delayed with their endless knee-jerk, debt-laden wars, stimulus bonanzas and bailouts.
U.S. Deepening Debt Crisis By: Michael_Hudson - Market Oracle Be Afraid of Bernanke Reappointment If the economy deteriorates in the L-shaped "hockey-stick" rut that many economists forecast, what political price will President Obama and the Democrats pay for having returned the financial keys to the Bush Republican appointees who gave away the store in the first place? Reappointing Federal Reserve Chairman Ben Bernanke may end up injuring not only the economy but also the Democratic Party for years to come. Recognizing this, Republicans made populist points by opposing his reappointment during the Senate confirmation hearings last Thursday, January 27 - the day after Mr. Obama's State of the Union address.
Volcker Looms Larger as Support for Bernanke Strengthens Ties By Rich Miller Feb. 2 (Bloomberg) -- Paul Volcker is enjoying increased influence with the Federal Reserve as well as the Obama administration, central bank records show. Volcker, who headed the Fed from 1979 to 1987, met current chairman Ben S. Bernanke six times in the year through November, the latest month that the Fed has made its records available. In the prior year, the two men only got together once. "Volcker has had very strong views on regulation going way back," said Lyle Gramley, who served as a Fed governor under Volcker and is now a senior economic adviser to New York-based Potomac Research Group. "It would be logical for Bernanke to talk to him about financial reforms" as policy makers wrestled over how to prevent another crisis.
The Bernanke Disaster By Michael Hudson If the economy deteriorates in the L-shaped “hockey-stick” rut that many economists forecast, what political price will President Obama and the Democrats pay for having returned the financial keys to the Bush Republican appointees who gave away the store in the first place? Reappointing Federal Reserve Chairman Ben Bernanke may end up injuring not only the economy but also the Democratic Party for years to come. Recognizing this, Republicans made populist points by opposing his reappointment during the Senate confirmation hearings last Thursday, January 27 – the day after Obama’s State of the Union address.
Banks shouldn't be hedge funds, Volcker tells Senate By Rex Nutting, MarketWatch Federal safety net shouldn't cover speculators, Obama adviser says The federal safety net for commercial banks should protect depositors, not speculators, former Federal Reserve Chairman Paul Volcker told senators on Tuesday, urging them to pass the so-called Volcker Rule that would ban banks from trading for profit and that would restrict the size of the biggest banks. Volcker, now an adviser to President Barack Obama, told the Senate Banking Committee that the banking system must be restructured to prevent a repeat of the bailouts of 2008.
Volcker plea over Wall St shake-up By Tom Braithwaite, Francesco Guerrera - FT Paul Volcker, former Federal Reserve chairman, made a direct pitch to Congress to prevent his proposed ban on banks’ proprietary trading from being diluted or scrapped by skeptical lawmakers. No member of the Senate banking committee voiced outright opposition to the plan – announced by Barack Obama, the president, last month – but there was plenty of criticism from Democrats and Republicans at the manner and lack of detail of the announcement.
Obama banking plan complicates regulatory bill By Jim Kuhnhenn - AP The Obama administration's stepped up demand for tougher restrictions and new taxes on big banks is complicating Senate efforts to write a bipartisan financial regulation overhaul, even drawing a sharp rebuke from a top presidential ally in the Senate. In an unusual reprimand, Senate Banking Committee Chairman Christopher Dodd, D-Conn., chided administration representatives at the end of a hearing Tuesday for injecting ideas late in his negotiations for a sweeping bill.
More new taxes, more new spending By Washington Times Can someone explain how this is change? Over the next decade, President Obama plans on increasing taxes by $1.4 trillion, offset by his planned $300 billion in tax cuts. But his spending splurge will increase so much that Mr. Obama will add $5.1 trillion to the national debt over the next five years and $8.5 trillion over 10 years. This will be on top of the $1.4 trillion deficit we ran last year. At the end of these 10 years, the publicly held national debt will nearly double to $18 trillion. Even Mr. Obama's own estimates put all the other tax-and-spend liberals to shame. And Mr. Obama hasn't even gotten his massive, costly takeover of the health care system and his even more costly cap-and-tax proposal. It is not as if Americans couldn't survive with a smaller amount of government spending - eight years ago, the budget was about half as big as Mr. Obama's proposal.
Dodd Calls Obama Plan Too Grand By Sewell Chan - NYTimes The chairman of the Senate Banking Committee warned on Tuesday that the Obama administration’s new proposals to rein in Wall Street firms ran the risk of derailing months of delicate negotiations over overhauling financial regulations. “It’s not a movable feast,” the chairman, Christopher J. Dodd, told Paul A. Volcker, the former Federal Reserve chairman, who has become an influential outside adviser to President Obama. “It’s adding to the problems of trying to get a bill done,” he said at the end of a hearing on the proposals, after all the other committee members had already left.
Geithner fights budget hawks By Tom Braithwaite, Anna Fifield - FT The Obama administration on Tuesday defended its $3,800bn budget amid fierce criticism from fiscal hawks, with Tim Geithner, the Treasury secretary, saying extra spending was needed to avoid “eroding” the US lead in the world economy. This came as Barack Obama, president, detailed his plan for a new $33bn (£20.6bn. €23.6bn) pot of money for small banks to lend, which he said would help small businesses once again become “the engine of job growth in America”.
The Myth of the Fed's Exit Strategy The Mad Hedge Fund Trader - Silver Bear Cafe The "Exit Strategy" the Fed's Bernanke is contemplating is nothing less than a total, unadulterated myth. This is the fairy tale you read to your young children at night where the government cuts back its spending and the Fed shrinks its lending. The private economy then picks up the slack, and the rest of us live happily ever after. Unfortunately, this time there will be no Prince Charming riding in on a white horse. In 2009, the US ran an unprecedented $1.5 trillion budget deficit, financing the shortfall by issuing Treasury bonds. The Fed happily obliged by soaking up this tsunami of paper, either directly, or indirectly through mortgage purchases.
Senators cool to 'Volcker rule' By Jennifer Liberto (CNNMoney.com) -- The fate of President Obama's latest proposal to rein in banks was thrown into doubt on Tuesday after it got a chilly reception from key lawmakers. The Senate Banking Committee grilled Obama adviser Paul Volcker who has, for months, been championing a proposal to curtail so-called proprietary trading. The aim is to stop big banks from making trades on their own accounts, especially since commercial banks have access to funds back-stopped by the government.
Obama's Budget Has One Small, Missing Piece.... For $6.3 Trillion Dollars by Tyler Durden - Zero Hedge Today, to much fanfare, the administration released its ridiculous $3+ trillion budget (we say + because at that size the one thing certain is that the budget will certainly never hit the target and while we wish it would be lower, we are certain it will end up materially higher), which consists of a "short" 192-page summary section and a 1420 page appendix. We are confident that not one politician will read the whole thing from cover to cover. We won't either. Not because we don't care about what's in it, but because we are much more concerned with what is not included, namely $2.8 Trillion and $1.9 Trillion of MBS guaranteed portfolios at Fannie and Freddie, and an additional $782 billion and $809 billion in company debt outstanding for the two GSEs, respectively. This amounts to a total of $6.3 trillion in liabilities which should be counted toward the budget.
The Collapse of Sovereign Government Bonds The Next Financial Crisis Contagion By: Martin_D_Weiss - Market Oracle The next contagion is beginning to spread around the globe. It is unexpected on Wall Street, misunderstood in Washington - and very dangerous. It could sabotage the plans of the U.S. Treasury, the Federal Reserve, and many of their counterparts overseas. It is … The Collapse of Sovereign Government Bonds This is certainly not the first financial contagion of recent memory: Back in 1997, we witnessed a currency contagion - hatched in Thailand, spreading quickly to the rest of Southeast Asia … smacking Russia in the gut … and sinking a major player in the U.S. derivatives market. Then, 10 years later, came the debt contagion - incubated in a subsector of America's mortgage market … soon infecting nearly all credit instruments … striking Wall Street like a sledgehammer … and mortally wounding the global financial system. Those contagions were bad enough. Now, however, the contagion is beginning at a much higher level, in the most important financial instruments on Earth - long-term bonds issued by sovereign governments. The Saga Begins in Greece
Dangerous Recession Economic Recovery Lessons of 1937 Jonathan M. Finegold Catalan writes: Many economists have already compared the years 1929-1932 to those of 2007-2009, and the current period of recovery to the time period 1933-1939. It was only a matter of time before they began to look for a comparison between the recession of 1937 and a potential "double dip" today.
Secret Banking Cabal Emerges From AIG Shadows by David Reilly (Bloomberg) -- The idea of secret banking cabals that control the country and global economy are a given among conspiracy theorists who stockpile ammo, bottled water and peanut butter. After this week's congressional hearing into the bailout of American International Group Inc., you have to wonder if those folks are crazy after all. Wednesday's hearing described a secretive group deploying billions of dollars to favored banks, operating with little oversight by the public or elected officials. We're talking about the Federal Reserve Bank of New York, whose role as the most influential part of the federal-reserve system -- apart from the matter of AIG's bailout -- deserves further congressional scrutiny.
Tedbits 2010 Outlook by Ty Andros - Financial Sense When Hope Turns to Fear, Part II Currencies, Bombs… er, Bonds and Banks are ALL Rotten to their Core. This is the epicenter of the unfolding financial crisis and inflationary/deflationary depression. The developed world is BANKRUPT and the policies of INSOLVENCY are entrenched in its leaders and citizens in such a way as to make the final destination of financial system destruction UNAVOIDABLE. The “something for nothings” in the developed world are firmly in control of the electoral process and their constituencies continue to grow as the global financial crisis crushes their incomes and future prospects. Taxes are headed far higher, thus transferring capital from the private economies (where jobs and incomes are created and where production exceeds consumption) to the public sector which has no idea what cost-benefit analysis is and consumes much more than it produces.
A Mortally Wounded Private Sector by Michael Pento - Financial Sense President’s 2011 budget proposal was so outrageously egregious that Obama had to hold a special conference on Monday just to spin the news. The scope of the proposed budget for fiscal 2011 is $3.8 trillion. The difference between revenue and expenditures for this fiscal year will leave us with a deficit of $1.6 trillion and, amazingly enough, that shortfall will equal 10.6% of GDP—the highest since WWll and $200 billion more than 2009! Next year’s deficit is slated to post just a $300 billion reduction to $1.3 trillion.
Cloudy Future for Fannie and Freddie By: Charles Duhigg - The New York Times The Great Bailout is mostly over for the banks. But for those troubled behemoths of the nation’s housing bust, Fannie Mae and Freddie Mac, the lifeline from Washington just keeps getting longer. Fifteen months after Fannie and Freddie were effectively nationalized, neither the Obama administration nor Congressional leaders see a quick solution to one of the thorniest problems in American finance: how to fix the twin mortgage giants without choking the flow of credit to homeowners and dealing a blow to a still-fragile housing market.
America's New Housing Crisis Capitals by Francesca Levy - Forbes Real-time listing prices in these areas are dropping, and experts expect them to fall further this year. During the housing bust, while the effects of foreclosures and a crushing recession tore through real estate markets in states like Florida, California and Nevada, the Denver metro seemed insulated from economic harm. It has consistently performed relatively well among the 20 major metropolitan housing markets tracked in the S&P/Case-Shiller Home Price Index, which measures sale prices, and is published with a two-month lag. In its January report, covering the year ending in November, Denver topped those markets with a 0.5% home price increase.
Largest-ever federal payroll to hit 2.15 million By Stephen Dinan - Washington Times The era of big government has returned with a vengeance, in the form of the largest federal work force in modern history. The Obama administration says the government will grow to 2.15 million employees this year, topping 2 million for the first time since President Clinton declared that "the era of big government is over" and joined forces with a Republican-led Congress in the 1990s to pare back the federal work force.
Stimulus: Secret sequel in the budget By Tami Luhby CNNMoney.com) -- They're not calling it Stimulus 2, but the Obama administration wants to extend the life of several Recovery Act provisions by building them into the federal budget. The president's $3.8 trillion budget for fiscal 2011, unveiled Monday, calls for giving states more money for Medicaid and infrastructure projects, as well as renewing tax breaks for workers, small businesses and municipalities issuing bonds. It also requests additional funding for Obama's educational reform initiative, Race to the Top.
Obama: $30B to aid small businesses By Kara Rowland - Washington Times Continuing his focus on jobs, President Obama on Tuesday will introduce a plan to take $30 billion from the Wall Street bailout fund to create a new program encouraging community banks to lend to cash-strapped small businesses. The proposal, which Mr. Obama is set to unveil at a town hall event in Nashua, N.H., is the latest in a series of policies aiming to spur job growth by easing the burden of the recession on start-ups and smaller firms. It is sure to draw fire from Republicans on Capitol Hill, who have argued that any leftover money from the Troubled Asset Relief Program should be used to pay down the deficit.
Oversold by Neil Charnoc - Financial Sense A piece of news I expected is now out – an Obama plan to spend more money on stimulus. I have stated this would happen in the past weeks. Will it get passed or not is the question? There will be a battle and the proposals may get changed around however there is one thing for certain the Government will spend. I discussed this with a colleague a few weeks back and we agreed there was no way any government in an election mode would withdraw stimulus. The USA will not be the last as governments struggle to increase employment, growth and popularity during the course of this year.
Home-Ownership Level Falls to 67.3% By Sara Murray, Jeff Bater - WSJ The percentage of Americans who owned their homes fell at the end of 2009 to the lowest point in nearly a decade, a reflection of continuing troubles in the housing market even as the sector showed signs of stabilizing. In one upbeat sign, an index of pending sales of previously owned homes increased 1.0% to 96.6 in December, the National Association of Realtors said Tuesday, suggesting the housing market is steadying after sharp swings caused by the uncertain fate of a government tax credit.
Rising FHA default rate foreshadows a crush of foreclosures By Dina ElBoghdady, Dan Keating - Washington Post The share of borrowers who are falling seriously behind on loans backed by the Federal Housing Administration jumped by more than a third in the past year, foreshadowing a crush of foreclosures that could further buffet an agency vital to the housing market's recovery. About 9.1 percent of FHA borrowers had missed at least three payments as of December, up from 6.5 percent a year ago, the agency's figures show.
Swiss Banks Achilles Heel Is Workers Selling Data By Warren Giles (Bloomberg) -- Swiss banks are discovering that the biggest threat to client privacy is their own workers. German Chancellor Angela Merkel said yesterday her government may buy stolen data on Swiss bank accounts as French authorities comb information acquired from an employee of HSBC Holdings Plc's private bank in Geneva. The cases come two years after Germany paid 5 million euros ($7 million) for details filched from LGT Group in neighboring Liechtenstein.
Senate panel mulls campaign-finance rules By Jim Abrams - AP Legislation aims to address fallout from court decision Lawmakers said Tuesday they might counter the recent Supreme Court ruling on campaign money, along with the blizzard of special-interest spending that could result, by making corporations and unions come clean about which campaign ads they are sponsoring and how much they are shelling out.
Next in line for a bailout: Social Security By Allan Sloan NY (Fortune) -- Don't look now. But even as the bank bailout is winding down, another huge bailout is starting, this time for the Social Security system. A report from the Congressional Budget Office shows that for the first time in 25 years, Social Security is taking in less in taxes than it is spending on benefits. Instead of helping to finance the rest of the government, as it has done for decades, our nation's biggest social program needs help from the Treasury to keep benefit checks from bouncing -- in other words, a taxpayer bailout.
Colorado Springs cuts into services considered basic by many Michael Booth - Denver Post COLORADO SPRINGS - This tax-averse city is about to learn what it looks and feels like when budget cuts slash services most Americans consider part of the urban fabric. More than a third of the street lights in Colorado Springs will go dark Monday. The police helicopters are for sale on the Internet. The city is dumping fire fighting jobs, a vice team, burglary investigators, beat cops - dozens of police and fire positions will go unfilled. The parks department removed trash cans last week, replacing them with signs urging users to pack out their own litter.
Cut all librarians before any cop? by E. J. Montini - The Arizona Republic If these were better days and we were better people, the murder of a police officer in Gilbert wouldn't have anything to do with the job status of librarians in Phoenix. But times are tough. And we are who we are. To deal with a $242 million budget deficit, Phoenix is planning a series of cuts to all types of city services. Transportation. Senior centers. Libraries. As well as police and firefighters. Already the police are fighting back. The Phoenix Law Enforcement Association has sponsored a television spot showing a frightened woman in a darkened house calling 911.
Living in a Powder Keg and Giving Off Sparks FOFOA - Silver Bear Cafe Well, we had quite a week! Obama's State of the Arrogant speech confirmed that we will continue on with more of the same. More big projects, cool new bullet trains, and more big, expensive government. Helicopter Ben was confirmed for another four-year term, sure to be chock full of QE, both overt and covert. And Congress cleared the way for another $1.9tn in deficit spending. Quite a week indeed! It almost seems like there is nothing at all that could stop these guys in Washington. With all the green lights, rainbows and good news, what could possibly go wrong? It is this question that is most important to us savers and investors. What could go wrong? Sometimes history repeats. The rest of the time it just rhymes.
Housing Red Flags Ignored by Elizabeth MacDonald g Red Flags Ignored One of the nation’s biggest mortgage industry players repeatedly warned the Federal Reserve, the Federal Deposit Insurance Corp. and other bank regulators during the housing bubble that the U.S. faced an imminent housing crash. The trade group also mapped out the 15 states which faced "sudden increases in foreclosures" and "a downward spiral," including California, Florida and Nevada. But bank regulators not only ignored the group's warnings, top Fed officials also went on the airwaves to say the economy was "building on a sturdy foundation" and a housing crash was "unlikely."
Urban unemployment grows By Blake Ellis NY (CNNMoney.com) -- The number of U.S. metropolitan areas with jobless rates above 15% increased in December, according to government figures released Tuesday. The Labor Department said 19 of 372 metropolitan areas surveyed posted unemployment rates of at least 15% last month, up from 17 metro areas in November. The metro area figures were not seasonally adjusted.
Toyota's Troubles Deepen Transportation Chief Says Probe Isn't Over; Car Maker Could Face Civil Penalty By Kate Linebaugh, Josh Mitchell, Norihiko Shirouzu - WSJ Toyota Motor Corp.'s quality crisis deepened Tuesday, as U.S. regulators accused the company of dragging its feet on fixing defective gas pedals and threatened civil penalties and further reviews of Toyota products. The move means that Toyota's efforts to address its biggest-ever safety and public-relations mess are far from over. Last week, the administration indicated it had no issues with how Toyota had responded to the sudden-acceleration reports, which led the company to recall about six million vehicles and have been linked to at least five fatalities.
Obama officials present a strategic redefining of Homeland Security's mission By Spencer S. Hsu - Washington Post The Obama administration Monday delivered to Congress the nation's first Quadrennial Homeland Security Review, defining homeland security for the first time as including hazards beyond terrorism, in a strategic document intended to drive long-term budget decisions. Congress mandated the high-level strategic review in 2007, two years after Hurricane Katrina exposed failings in the government's response and four years after the creation of the Department of Homeland Security. The initiative was modeled after the Quadrennial Defense Review, another congressionally mandated effort that directed the Defense Department to reset its strategies and budgets against evolving threats every four years.
Feds claim authority to regulate in-state commerce By Bob Unruh - WND Government cites Constitution in demanding dismissal of gun challenge The federal government is claiming in court documents demanding the dismissal of a gun-law challenge in Montana the authority to regulate in-state commerce under the Constitution's Commerce clause. But the plaintiff in the case says the court needs to review that provision in its amended form – since the 10th Amendment, adopted after the Commerce Clause, can be viewed as modifying the Constitution's provisions regarding the regulation of commerce, specifically granting additional authority to states.
Obama Surrendering Internet to Foreign Powers By: Bradley A. Blakeman - NewsMax Without the ingenuity of America’s brightest minds and the investment of U.S. taxpayer dollars, there would be no Internet, as we now know it today. Now, the Obama administration has moved quietly to cede control of the Web from the United States to foreign powers. Some background: The Internet came into being because of the genius work of Americans Dr.Robert E. Kahn and Dr. Vinton G. Cerf. These men, while working for the Department of Defense in the Defense Advanced Research Projects Agency in the early 1970s, conceived, designed, and implemented the idea of "open-architecture networking."
Prepare to Dodge Risks From Greece, Iran By James Anderson - Minyanville Nassim Nicholas Taleb wrote a book called The Black Swan to explain the existence and occurrence of high-impact, hard-to-predict, and rare events that are beyond normal expectations. My book review can be summed up in two words: Manure happens. I'm not just referring to dairy barns. This was one of those boring Winter weekends -- no football, and too early for important college basketball games. I was reduced to scanning the blog world. I came up with two potential Black Swans, just enough to ruin any happy thoughts you have for February.
China warns Obama not to meet Dalai Lama China has warned that ties with the US would be undermined if US President Barack Obama met the Dalai Lama. There is speculation that Mr Obama will meet the Tibetan spiritual leader in Washington later this month, but no date has been confirmed. Communist Party official Zhu Weiqun said such a meeting would "threaten trust and co-operation" between Beijing and Washington. The dispute is the latest of several strains on the countries' relations.
Brussels backs Greek plan to tackle deficit By Kerin Hope, Ralph Atkins, Tony Barber - FT Barroso says proposal is ‘subject to risks’ Greece has won European support for its plan to pull back from the brink of financial disaster after its prime minister unveiled moves to boost tax revenue and cut public spending. The European Commission said on Tuesday it would endorse Athens’ plan to bring back under control the public sector deficit, which last year reached almost 13 per cent of gross domestic product.
Greece rattled by 'hidden debt' controversy By Ambrose Evans-Pritchard - Telegraph Greek debt markets have come under fresh assault from hot money funds after a commission of experts in Athens told the country's parliament that it had uncovered €40bn (£35bn) of "hidden debts" during an investigation into past manipulation by the financial authorities. Premier George Papandreou said the spike in Greek borrowing costs was "completely unjustified" and lashed out at the rating agencies, which precipitated this crisis by downgrading Greek bonds. "Greece is at the centre of an unprecedented speculative attack: we cannot be at the mercy of creditors. Despite our tragic mistakes, our fate is today defined by rating agencies that bear responsibility for the 'bubble' that led to the global crisis in the first place," he said.
German Companies Pull Out of Iran, Slowly By Judy Dempsey - NY Times BERLIN — German companies, long Iran’s biggest trading partners in Europe, are finding it increasingly difficult to do business there as the United States, Israel and others campaign for tougher U.N. sanctions in response to the country’s nuclear program. Yet even those companies that say they are pulling out — most notably Siemens last week — are likely to take years to wind down operations and wrap up outstanding contracts. Others are simply lowering their profile or finding third countries to do business through, fearing they will lose a lucrative market forever if they abandon it now.
Ahmadinejad backs deal to remove bulk of enriched uranium from Iran By Thomas Erdbrink, Glenn Kessler - Washington Post TEHRAN -- A long-dormant proposal to remove the bulk of Iran's enriched uranium from the Islamic republic appeared to be revived Tuesday as President Mahmoud Ahmadinejad said Iran had "no problem" with a deal initially brokered by the International Atomic Energy Agency. The deal, which Iran formally rejected weeks ago, would swap low-enriched uranium for fuel for a research reactor that produces medical isotopes. "If we allow them to take it, there is no problem," Ahmadinejad said on state TV. "We sign a contract to give 3.5 percent enriched uranium and receive 20 percent enriched ones after four or five months."
Iran dismisses US missile shield as 'puppet show' Matthew Weaver - guardian.co.uk Details emerge of unsuccessful US missile test designed to simulate Iranian attack amid increasingly tense standoff Iran today dismissed the US buildup of a missile shield in the Gulf as a "puppet show" as details emerged of an unsuccessful US missile test designed to simulate an Iranian attack amid a tense standoff between the two countries. The US has sent ships and missiles to the region in what officials said was an attempt to deter an attack by Iran on US allies. Iranian officials criticised the US deployment as unnecessary and unworkable.
US defense envisions multiple conflicts By Matthew Berger - Asia Times A report and budget request from the United States Department of Defense reveal both new and old priorities for President Barack Obama's Pentagon. Strategically, the military recognizes new, non-traditional threats ranging from failed states to cyber-warfare to climate change, but there is little change in the military spending habits of the Obama Pentagon versus that of his predecessor.
Taliban take on the US's surge By Syed Saleem Shahzad - Asia Times ISLAMABAD - At the major international conference on Afghanistan in London last Thursday, Afghan President Hamid Karzai called on the Taliban to take part in a loya jirga (assembly of elders) - as a start to peace talks. The Taliban are widely reported as having responded that first they want all of the more than 110,000 foreign troops in Afghanistan to leave the country by 2011. Asia Times Online, however, has learned from well-connected sources in Afghanistan who have been directly involved in backchannel negotiations with the Taliban that there is an important nuance to the Taliban demand. That is, the United States must put an immediate halt to its plans to send a further 30,000 troops to Afghanistan before withdrawal begins in 2011.
Inside Story - Saving the World in Davos? It has not been a good weekend for bankers as the World Economic Forum in Davos comes to an end. They are now facing the prospect of new, stricter bank regulations. Davos marked its 40th anniversary with the theme "Rethink, Redesign and Rebuild". But exactly how will policy-makers rebuild capitalism? Will the meeting lead to new regulations, and can another global financial crisis be prevented?
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