I haven’t been posting too much over the past several months as things in our country continue to deteriorate at the usual pace, fast and un challenged!
The economy is fragile and the ‘medicine’ that Ben Bernanke is giving the ‘system’ will soon become the poison–it is inevitable. This is not just me spouting off at the mouth but several very good economists with pretty darn good track records as well.
Take a look at this article, read it and weep for what once was and what is coming soon.
Major Bank, Economists Agree: Market Collapse Will Strike in 2013
Wednesday, 09 Jan 2013 10:22 AM
By Christian Hill
According to a major bank, a pair of noted economists, and one controversial billionaire, 2013 will be a “year of terrible reckoning” for the stock market.
JPMorgan just released its outlook for the first quarter. Surprisingly, this regularly bullish company has reversed course and revealed an ominous chart that every investor needs to be alerted to.
As you can clearly see, stocks have retraced the pattern from the last two big market rallies (averaging over 100%), and now face a massive decline in 2013 (of over 50%).
JPMorgan isn’t alone in its stark predictions.
Economist and NYU professor Nouriel Roubini has said in recent interviews that there is a chance that an economic “perfect storm” will devastate global markets in 2013. He points to a worsening eurozone crisis, a hard landing for the Chinese economy, and a war in the Middle East that could push oil prices above $200 a barrel.
Agreeing with Roubini’s worrisome outlook is billionaire Jim Rogers. In a recent interview with Yahoo Finance, Rogers says regarding 2013, “You should be very worried, and you should prepare yourself.”
Rogers referenced a little-known economic cycle that proves the United States experiences a slowdown every four to six years (and 2013 marks four years since our last slowdown).
Perhaps most alarming of all are the predictions made by economist Robert Wiedemer.
In a recent interview for his New York Times best-seller Aftershock, Wiedemer says, “The data is clear, 50% unemployment, a 90% stock market drop, and 100% annual inflation . . . starting in 2013.”
Editor’s Note: Watch the disturbing interview with Wiedemer. click here to view
Now before you dismiss Wiedemer’s claims as impossible or unrealistic, consider that he and his team of economists correctly foresaw the real estate collapse in 2006, the stock market crash of 2008, and the federal debt bubble plaguing America now.
And bear in mind, Sam Stovall of Standard & Poor’s has stated that Wiedemer “makes a compelling argument for a chilling conclusion,” and MarketWatch’s Paul Farrell called Wiedemer’s work “your bible.”
When the interview host questioned Wiedemer’s latest data, the author unapologetically displayed shocking charts backing up his allegations, and then ended his argument with, “You see, the medicine will become the poison.”
The interview has become a wake-up call for those unprepared (or unwilling) to acknowledge an ugly truth: The country’s financial “rescue” devised in Washington has failed miserably.
Wiedemer says blame lies squarely on those whose job it was to avoid the exact situation we find ourselves in, including current Federal Reserve Chairman Ben Bernanke and former Chairman Alan Greenspan, tasked with preventing financial meltdowns and keeping the nation’s economy strong through monetary and credit policies.
Shocking Footage: See the eerie chart that exposes the ‘unthinkable.’
At one point, Wiedemer even calls out Bernanke, saying that his “money from heaven will be the path to hell.”
But it’s not just the grim predictions that are causing the sensation; rather, it’s the comprehensive blueprint for economic survival that’s really commanding global attention.
Now viewed over 50 million times, the interview offers realistic, step-by-step solutions that the average hard-working American can easily follow.
The overwhelming amount of feedback to publicize the interview, initially screened for a private audience, came with consequences as various online networks repeatedly shut it down and affiliates refused to house the content.
Bernanke and Greenspan were not about to support Wiedemer publicly, nor were the mainstream media.
“People were sitting up and taking notice, and they begged us to make the interview public so they could easily share it,” said Newsmax Financial Publisher Aaron DeHoog, “but unfortunately, it kept getting pulled.”
“Our real concern,” DeHoog added, “is what if only half of Wiedemer’s predictions come true?
“That’s a scary thought for sure. But we want the average American to be prepared, and that is why we will continue to push this video to as many outlets as we can. We want the word to spread.”
I urge you to take the necessary precautions as things could get rather weird in the coming days and months ahead! No one knows the exact moment, but many will point back in time and pick some arbitrary event that ’caused it all’. Ben Bernanke will most likely avoid ridicule. Many have been, are and will be responsible for our economy and none will be made responsible.
With Greece wanting out of the EC and further economic woes hitting all the ‘PIGGS’, some are reporting that the Euro has collapsed, at least unofficially.
A bit of background: MSM has reported that there have been huge capital outflows from Greece, in the billions per day and now Spain. It isn’t like this is just falling from the sky unannounced. Remember Ireland, Italy and Portugal all have been in the news with bailouts of some sort over the past year or two. The press has played this well, sort of like the frog in water who slowly dies as the water begins to heat up and boil.
Now it appears we might have hit critical mass with the problems in the EC. The Bailouts will continue to happen as we see more and more capital outflows, they will continue to get larger and larger as the liquidity issues mount. Much like the U.S. the ‘quantative easing(printing money) will be to infinity.
Which brings me to the point of this piece, as more money is printed and less and less economic activity there to back it up we will begin to see inflation hit the goods and services that we use on a daily basis. Moreover, the typical assets like real estate will most likely not enjoy such price inflation as no one will have the buying power to afford such purchases and without buyers prices will not rise as will prices in basic commodities, such as food and gas.
The governments are trying to fill the financial hole created by the banks and their insane lending and ‘betting'(read derivative) practices which have still not come to full force. We have been given a small insight into the destructive power of these instruments in the recent JP Morgan debacle, losing 2 billion in one 3 month period. There are trillion upon trillions of these dangerous bets floating around the world. When the music stops, we will all pay!
How can you prepare for this catastrophe should it come to pass (again many are saying that it is coming to pass right now!)?
I for one own some gold and silver, probably not enough but some. Many survivalists disagree with this strategy saying you can’t eat or drink the metals. I agree there but also see them as a short term solution to the things that I might need but haven’t seen that need yet. I do own quite a bit of storable foods, all organic, non-GMO foods that are high in nutrition. I urge everyone to educate themselves on the value of nutrition versus calories. Both are necessary but good nutrition is critical. Water is another necessity and I am fortunate enough to live very close to a river and own a gravity filter system to clean it up.
I hope everyone is somewhat prepared, if not physically mentally for what appears to be coming over the horizon. Stay Strong!
As if TARP money wasn’t enough…7.7 trillion in loans to bail out the criminals that caused the problem? Really? Someone needs to go to Jail in my opinion! If you or I did such things it would be fraud or worse…
That these guys still can’t get it right, look at Europe and our Too Big To Fail Banks with tons of derivative risk guaranteeing all that debt prompting yet another round of free money!
Secret Fed Loans Gave Banks $13 Billion Undisclosed to Congress
The Federal Reserve and the big banks fought for more than two years to keep details of the largest bailout in U.S. history a secret. Now, the rest of the world can see what it was missing.
The Fed didn’t tell anyone which banks were in trouble so deep they required a combined $1.2 trillion on Dec. 5, 2008, their single neediest day. Bankers didn’t mention that they took tens of billions of dollars in emergency loans at the same time they were assuring investors their firms were healthy. And no one calculated until now that banks reaped an estimated $13 billion of income by taking advantage of the Fed’s below-market rates, Bloomberg Markets magazine reports in its January issue.
Saved by the bailout, bankers lobbied against government regulations, a job made easier by the Fed, which never disclosed the details of the rescue to lawmakers even as Congress doled out more money and debated new rules aimed at preventing the next collapse.
A fresh narrative of the financial crisis of 2007 to 2009 emerges from 29,000 pages of Fed documents obtained under the Freedom of Information Act and central bank records of more than 21,000 transactions. While Fed officials say that almost all of the loans were repaid and there have been no losses, details suggest taxpayers paid a price beyond dollars as the secret funding helped preserve a broken status quo and enabled the biggest banks to grow even bigger.
‘Change Their Votes’
“When you see the dollars the banks got, it’s hard to make the case these were successful institutions,” says Sherrod Brown, a Democratic Senator from Ohio who in 2010 introduced an unsuccessful bill to limit bank size. “This is an issue that can unite the Tea Party and Occupy Wall Street. There are lawmakers in both parties who would change their votes now.”
The size of the bailout came to light after Bloomberg LP, the parent of Bloomberg News, won a court case against the Fed and a group of the biggest U.S. banks called Clearing House Association LLC to force lending details into the open.
The Fed, headed by Chairman Ben S. Bernanke, argued that revealing borrower details would create a stigma — investors and counterparties would shun firms that used the central bank as lender of last resort — and that needy institutions would be reluctant to borrow in the next crisis. Clearing House Association fought Bloomberg’s lawsuit up to the U.S. Supreme Court, which declined to hear the banks’ appeal in March 2011.
The amount of money the central bank parceled out was surprising even to Gary H. Stern, president of the Federal Reserve Bank of Minneapolis from 1985 to 2009, who says he “wasn’t aware of the magnitude.” It dwarfed the Treasury Department’s better-known $700 billion Troubled Asset Relief Program, or TARP. Add up guarantees and lending limits, and the Fed had committed $7.77 trillion as of March 2009 to rescuing the financial system, more than half the value of everything produced in the U.S. that year.
“TARP at least had some strings attached,” says Brad Miller, a North Carolina Democrat on the House Financial Services Committee, referring to the program’s executive-pay ceiling. “With the Fed programs, there was nothing.”
Bankers didn’t disclose the extent of their borrowing. On Nov. 26, 2008, then-Bank of America (BAC) Corp. Chief Executive Officer Kenneth D. Lewis wrote to shareholders that he headed “one of the strongest and most stable major banks in the world.” He didn’t say that his Charlotte, North Carolina-based firm owed the central bank $86 billion that day.
JPMorgan Chase & Co. CEO Jamie Dimon told shareholders in a March 26, 2010, letter that his bank used the Fed’s Term Auction Facility “at the request of the Federal Reserve to help motivate others to use the system.” He didn’t say that the New York-based bank’s total TAF borrowings were almost twice its cash holdings or that its peak borrowing of $48 billion on Feb. 26, 2009, came more than a year after the program’s creation.
Howard Opinsky, a spokesman for JPMorgan (JPM), declined to comment about Dimon’s statement or the company’s Fed borrowings. Jerry Dubrowski, a spokesman for Bank of America, also declined to comment.
The Fed has been lending money to banks through its so- called discount window since just after its founding in 1913. Starting in August 2007, when confidence in banks began to wane, it created a variety of ways to bolster the financial system with cash or easily traded securities. By the end of 2008, the central bank had established or expanded 11 lending facilities catering to banks, securities firms and corporations that couldn’t get short-term loans from their usual sources.
“Supporting financial-market stability in times of extreme market stress is a core function of central banks,” says William B. English, director of the Fed’s Division of Monetary Affairs. “Our lending programs served to prevent a collapse of the financial system and to keep credit flowing to American families and businesses.”
The Fed has said that all loans were backed by appropriate collateral. That the central bank didn’t lose money should “lead to praise of the Fed, that they took this extraordinary step and they got it right,” says Phillip Swagel, a former assistant Treasury secretary under Henry M. Paulson and now a professor of international economic policy at the University of Maryland.
The Fed initially released lending data in aggregate form only. Information on which banks borrowed, when, how much and at what interest rate was kept from public view.
The secrecy extended even to members of President George W. Bush’s administration who managed TARP. Top aides to Paulson weren’t privy to Fed lending details during the creation of the program that provided crisis funding to more than 700 banks, say two former senior Treasury officials who requested anonymity because they weren’t authorized to speak.
The Treasury Department relied on the recommendations of the Fed to decide which banks were healthy enough to get TARP money and how much, the former officials say. The six biggest U.S. banks, which received $160 billion of TARP funds, borrowed as much as $460 billion from the Fed, measured by peak daily debt calculated by Bloomberg using data obtained from the central bank. Paulson didn’t respond to a request for comment.
The six — JPMorgan, Bank of America, Citigroup Inc. (C), Wells Fargo & Co. (WFC), Goldman Sachs Group Inc. (GS) and Morgan Stanley — accounted for 63 percent of the average daily debt to the Fed by all publicly traded U.S. banks, money managers and investment- services firms, the data show. By comparison, they had about half of the industry’s assets before the bailout, which lasted from August 2007 through April 2010. The daily debt figure excludes cash that banks passed along to money-market funds.
While the emergency response prevented financial collapse, the Fed shouldn’t have allowed conditions to get to that point, says Joshua Rosner, a banking analyst with Graham Fisher & Co. in New York who predicted problems from lax mortgage underwriting as far back as 2001. The Fed, the primary supervisor for large financial companies, should have been more vigilant as the housing bubble formed, and the scale of its lending shows the “supervision of the banks prior to the crisis was far worse than we had imagined,” Rosner says.
Bernanke in an April 2009 speech said that the Fed provided emergency loans only to “sound institutions,” even though its internal assessments described at least one of the biggest borrowers, Citigroup, as “marginal.”
On Jan. 14, 2009, six days before the company’s central bank loans peaked, the New York Fed gave CEO Vikram Pandit a report declaring Citigroup’s financial strength to be “superficial,” bolstered largely by its $45 billion of Treasury funds. The document was released in early 2011 by the Financial Crisis Inquiry Commission, a panel empowered by Congress to probe the causes of the crisis.
Andrea Priest, a spokeswoman for the New York Fed, declined to comment, as did Jon Diat, a spokesman for Citigroup.
“I believe that the Fed should have independence in conducting highly technical monetary policy, but when they are putting taxpayer resources at risk, we need transparency and accountability,” says Alabama Senator Richard Shelby, the top Republican on the Senate Banking Committee.
Judd Gregg, a former New Hampshire senator who was a lead Republican negotiator on TARP, and Barney Frank, a Massachusetts Democrat who chaired the House Financial Services Committee, both say they were kept in the dark.
“We didn’t know the specifics,” says Gregg, who’s now an adviser to Goldman Sachs.
“We were aware emergency efforts were going on,” Frank says. “We didn’t know the specifics.”
Frank co-sponsored the Dodd-Frank Wall Street Reform and Consumer Protection Act, billed as a fix for financial-industry excesses. Congress debated that legislation in 2010 without a full understanding of how deeply the banks had depended on the Fed for survival.
It would have been “totally appropriate” to disclose the lending data by mid-2009, says David Jones, a former economist at the Federal Reserve Bank of New York who has written four books about the central bank.
“The Fed is the second-most-important appointed body in the U.S., next to the Supreme Court, and we’re dealing with a democracy,” Jones says. “Our representatives in Congress deserve to have this kind of information so they can oversee the Fed.”
The Dodd-Frank law required the Fed to release details of some emergency-lending programs in December 2010. It also mandated disclosure of discount-window borrowers after a two- year lag.
TARP and the Fed lending programs went “hand in hand,” says Sherrill Shaffer, a banking professor at the University of Wyoming in Laramie and a former chief economist at the New York Fed. While the TARP money helped insulate the central bank from losses, the Fed’s willingness to supply seemingly unlimited financing to the banks assured they wouldn’t collapse, protecting the Treasury’s TARP investments, he says.
“Even though the Treasury was in the headlines, the Fed was really behind the scenes engineering it,” Shaffer says.
Congress, at the urging of Bernanke and Paulson, created TARP in October 2008 after the bankruptcy of Lehman Brothers Holdings Inc. made it difficult for financial institutions to get loans. Bank of America and New York-based Citigroup each received $45 billion from TARP. At the time, both were tapping the Fed. Citigroup hit its peak borrowing of $99.5 billion in January 2009, while Bank of America topped out in February 2009 at $91.4 billion.
Lawmakers knew none of this.
They had no clue that one bank, New York-based Morgan Stanley (MS), took $107 billion in Fed loans in September 2008, enough to pay off one-tenth of the country’s delinquent mortgages. The firm’s peak borrowing occurred the same day Congress rejected the proposed TARP bill, triggering the biggest point drop ever in the Dow Jones Industrial Average. (INDU) The bill later passed, and Morgan Stanley got $10 billion of TARP funds, though Paulson said only “healthy institutions” were eligible.
Mark Lake, a spokesman for Morgan Stanley, declined to comment, as did spokesmen for Citigroup and Goldman Sachs.
Had lawmakers known, it “could have changed the whole approach to reform legislation,” says Ted Kaufman, a former Democratic Senator from Delaware who, with Brown, introduced the bill to limit bank size.
Kaufman says some banks are so big that their failure could trigger a chain reaction in the financial system. The cost of borrowing for so-called too-big-to-fail banks is lower than that of smaller firms because lenders believe the government won’t let them go under. The perceived safety net creates what economists call moral hazard — the belief that bankers will take greater risks because they’ll enjoy any profits while shifting losses to taxpayers.
If Congress had been aware of the extent of the Fed rescue, Kaufman says, he would have been able to line up more support for breaking up the biggest banks.
Byron L. Dorgan, a former Democratic senator from North Dakota, says the knowledge might have helped pass legislation to reinstate the Glass-Steagall Act, which for most of the last century separated customer deposits from the riskier practices of investment banking.
“Had people known about the hundreds of billions in loans to the biggest financial institutions, they would have demanded Congress take much more courageous actions to stop the practices that caused this near financial collapse,” says Dorgan, who retired in January.
Instead, the Fed and its secret financing helped America’s biggest financial firms get bigger and go on to pay employees as much as they did at the height of the housing bubble.
Total assets held by the six biggest U.S. banks increased 39 percent to $9.5 trillion on Sept. 30, 2011, from $6.8 trillion on the same day in 2006, according to Fed data.
For so few banks to hold so many assets is “un-American,” says Richard W. Fisher, president of the Federal Reserve Bank of Dallas. “All of these gargantuan institutions are too big to regulate. I’m in favor of breaking them up and slimming them down.”
Employees at the six biggest banks made twice the average for all U.S. workers in 2010, based on Bureau of Labor Statistics hourly compensation cost data. The banks spent $146.3 billion on compensation in 2010, or an average of $126,342 per worker, according to data compiled by Bloomberg. That’s up almost 20 percent from five years earlier compared with less than 15 percent for the average worker. Average pay at the banks in 2010 was about the same as in 2007, before the bailouts.
‘Wanted to Pretend’
“The pay levels came back so fast at some of these firms that it appeared they really wanted to pretend they hadn’t been bailed out,” says Anil Kashyap, a former Fed economist who’s now a professor of economics at the University of Chicago Booth School of Business. “They shouldn’t be surprised that a lot of people find some of the stuff that happened totally outrageous.”
Bank of America took over Merrill Lynch & Co. at the urging of then-Treasury Secretary Paulson after buying the biggest U.S. home lender, Countrywide Financial Corp. When the Merrill Lynch purchase was announced on Sept. 15, 2008, Bank of America had $14.4 billion in emergency Fed loans and Merrill Lynch had $8.1 billion. By the end of the month, Bank of America’s loans had reached $25 billion and Merrill Lynch’s had exceeded $60 billion, helping both firms keep the deal on track.
Wells Fargo bought Wachovia Corp., the fourth-largest U.S. bank by deposits before the 2008 acquisition. Because depositors were pulling their money from Wachovia, the Fed channeled $50 billion in secret loans to the Charlotte, North Carolina-based bank through two emergency-financing programs to prevent collapse before Wells Fargo could complete the purchase.
“These programs proved to be very successful at providing financial markets the additional liquidity and confidence they needed at a time of unprecedented uncertainty,” says Ancel Martinez, a spokesman for Wells Fargo.
JPMorgan absorbed the country’s largest savings and loan, Seattle-based Washington Mutual Inc., and investment bank Bear Stearns Cos. The New York Fed, then headed by Timothy F. Geithner, who’s now Treasury secretary, helped JPMorgan complete the Bear Stearns deal by providing $29 billion of financing, which was disclosed at the time. The Fed also supplied Bear Stearns with $30 billion of secret loans to keep the company from failing before the acquisition closed, central bank data show. The loans were made through a program set up to provide emergency funding to brokerage firms.
“Some might claim that the Fed was picking winners and losers, but what the Fed was doing was exercising its professional regulatory discretion,” says John Dearie, a former speechwriter at the New York Fed who’s now executive vice president for policy at the Financial Services Forum, a Washington-based group consisting of the CEOs of 20 of the world’s biggest financial firms. “The Fed clearly felt it had what it needed within the requirements of the law to continue to lend to Bear and Wachovia.”
The bill introduced by Brown and Kaufman in April 2010 would have mandated shrinking the six largest firms.
“When a few banks have advantages, the little guys get squeezed,” Brown says. “That, to me, is not what capitalism should be.”
Kaufman says he’s passionate about curbing too-big-to-fail banks because he fears another crisis.
‘Can We Survive?’
“The amount of pain that people, through no fault of their own, had to endure — and the prospect of putting them through it again — is appalling,” Kaufman says. “The public has no more appetite for bailouts. What would happen tomorrow if one of these big banks got in trouble? Can we survive that?”
Lobbying expenditures by the six banks that would have been affected by the legislation rose to $29.4 million in 2010 compared with $22.1 million in 2006, the last full year before credit markets seized up — a gain of 33 percent, according to OpenSecrets.org, a research group that tracks money in U.S. politics. Lobbying by the American Bankers Association, a trade organization, increased at about the same rate, OpenSecrets.org reported.
Lobbyists argued the virtues of bigger banks. They’re more stable, better able to serve large companies and more competitive internationally, and breaking them up would cost jobs and cause “long-term damage to the U.S. economy,” according to a Nov. 13, 2009, letter to members of Congress from the FSF.
The group’s website cites Nobel Prize-winning economist Oliver E. Williamson, a professor emeritus at the University of California, Berkeley, for demonstrating the greater efficiency of large companies.
In an interview, Williamson says that the organization took his research out of context and that efficiency is only one factor in deciding whether to preserve too-big-to-fail banks.
“The banks that were too big got even bigger, and the problems that we had to begin with are magnified in the process,” Williamson says. “The big banks have incentives to take risks they wouldn’t take if they didn’t have government support. It’s a serious burden on the rest of the economy.”
Dearie says his group didn’t mean to imply that Williamson endorsed big banks.
Top officials in President Barack Obama’s administration sided with the FSF in arguing against legislative curbs on the size of banks.
On May 4, 2010, Geithner visited Kaufman in his Capitol Hill office. As president of the New York Fed in 2007 and 2008, Geithner helped design and run the central bank’s lending programs. The New York Fed supervised four of the six biggest U.S. banks and, during the credit crunch, put together a daily confidential report on Wall Street’s financial condition. Geithner was copied on these reports, based on a sampling of e- mails released by the Financial Crisis Inquiry Commission.
At the meeting with Kaufman, Geithner argued that the issue of limiting bank size was too complex for Congress and that people who know the markets should handle these decisions, Kaufman says. According to Kaufman, Geithner said he preferred that bank supervisors from around the world, meeting in Basel, Switzerland, make rules increasing the amount of money banks need to hold in reserve. Passing laws in the U.S. would undercut his efforts in Basel, Geithner said, according to Kaufman.
Anthony Coley, a spokesman for Geithner, declined to comment.
Lobbyists for the big banks made the winning case that forcing them to break up was “punishing success,” Brown says. Now that they can see how much the banks were borrowing from the Fed, senators might think differently, he says.
The Fed supported curbing too-big-to-fail banks, including giving regulators the power to close large financial firms and implementing tougher supervision for big banks, says Fed General Counsel Scott G. Alvarez. The Fed didn’t take a position on whether large banks should be dismantled before they get into trouble.
Dodd-Frank does provide a mechanism for regulators to break up the biggest banks. It established the Financial Stability Oversight Council that could order teetering banks to shut down in an orderly way. The council is headed by Geithner.
“Dodd-Frank does not solve the problem of too big to fail,” says Shelby, the Alabama Republican. “Moral hazard and taxpayer exposure still very much exist.”
Dean Baker, co-director of the Center for Economic and Policy Research in Washington, says banks “were either in bad shape or taking advantage of the Fed giving them a good deal. The former contradicts their public statements. The latter — getting loans at below-market rates during a financial crisis — is quite a gift.”
The Fed says it typically makes emergency loans more expensive than those available in the marketplace to discourage banks from abusing the privilege. During the crisis, Fed loans were among the cheapest around, with funding available for as low as 0.01 percent in December 2008, according to data from the central bank and money-market rates tracked by Bloomberg.
The Fed funds also benefited firms by allowing them to avoid selling assets to pay investors and depositors who pulled their money. So the assets stayed on the banks’ books, earning interest.
Banks report the difference between what they earn on loans and investments and their borrowing expenses. The figure, known as net interest margin, provides a clue to how much profit the firms turned on their Fed loans, the costs of which were included in those expenses. To calculate how much banks stood to make, Bloomberg multiplied their tax-adjusted net interest margins by their average Fed debt during reporting periods in which they took emergency loans.
The 190 firms for which data were available would have produced income of $13 billion, assuming all of the bailout funds were invested at the margins reported, the data show.
The six biggest U.S. banks’ share of the estimated subsidy was $4.8 billion, or 23 percent of their combined net income during the time they were borrowing from the Fed. Citigroup would have taken in the most, with $1.8 billion.
“The net interest margin is an effective way of getting at the benefits that these large banks received from the Fed,” says Gerald A. Hanweck, a former Fed economist who’s now a finance professor at George Mason University in Fairfax, Virginia.
While the method isn’t perfect, it’s impossible to state the banks’ exact profits or savings from their Fed loans because the numbers aren’t disclosed and there isn’t enough publicly available data to figure it out.
Opinsky, the JPMorgan spokesman, says he doesn’t think the calculation is fair because “in all likelihood, such funds were likely invested in very short-term investments,” which typically bring lower returns.
Even without tapping the Fed, the banks get a subsidy by having standing access to the central bank’s money, says Viral Acharya, a New York University economics professor who has worked as an academic adviser to the New York Fed.
“Banks don’t give lines of credit to corporations for free,” he says. “Why should all these government guarantees and liquidity facilities be for free?”
In the September 2008 meeting at which Paulson and Bernanke briefed lawmakers on the need for TARP, Bernanke said that if nothing was done, “unemployment would rise — to 8 or 9 percent from the prevailing 6.1 percent,” Paulson wrote in “On the Brink” (Business Plus, 2010).
Occupy Wall Street
The U.S. jobless rate hasn’t dipped below 8.8 percent since March 2009, 3.6 million homes have been foreclosed since August 2007, according to data provider RealtyTrac Inc., and police have clashed with Occupy Wall Street protesters, who say government policies favor the wealthiest citizens, in New York, Boston, Seattle and Oakland, California.
The Tea Party, which supports a more limited role for government, has its roots in anger over the Wall Street bailouts, says Neil M. Barofsky, former TARP special inspector general and a Bloomberg Television contributing editor.
“The lack of transparency is not just frustrating; it really blocked accountability,” Barofsky says. “When people don’t know the details, they fill in the blanks. They believe in conspiracies.”
In the end, Geithner had his way. The Brown-Kaufman proposal to limit the size of banks was defeated, 60 to 31. Bank supervisors meeting in Switzerland did mandate minimum reserves that institutions will have to hold, with higher levels for the world’s largest banks, including the six biggest in the U.S. Those rules can be changed by individual countries.
They take full effect in 2019.
Meanwhile, Kaufman says, “we’re absolutely, totally, 100 percent not prepared for another financial crisis.”
To contact the reporters on this story: Bob Ivry in New York at firstname.lastname@example.org; Bradley Keoun in New York at email@example.com; Phil Kuntz in New York at firstname.lastname@example.org.
This is very serious business folks and your ability to Survive and Thrive are on the line now!
In a sad statement of our times, when 1/5 of our adults are taking psychiatric drugs with numerous side effects, it should make us question what the American Dream has become; a nightmare for many. Interestingly enough the same percentage of the working population is unemployed. The truth is, however, that despite the socioeconomic challenges we are facing nowadays, a cleaner healthier diet, growing your own veggies at home and taking enough B vitamins as well as sleep enhancing and nervous system relaxing herbs, can go a long way to keeping people off psychiatric drugs.
This video gives some insight into the gravity of this issue;
In my opinion, France will soon become the next victim of the sovereign debt fall out amongst the EU countries. Let’s fact it, there is a HUGE crisis of confidence and trust in the financial system worldwide. While the leaders are focused on the numbers, mostly from the worst possible perspective-at least in my opinion, the people are seething.
How can anyone in their right mind think that these illustrious leaders are going to get it right this time after multiple failures starting with the Lehman debacle to the recent MF Global catastrophe and, last but certainly not least, the European Sovereign debt debacle? Of course, to be fair it all really started with very loose regulations coming from decades of official deregulation of financial industries and the advice given to our leaders by none other than the people most responsible for creating this mess!!!!
Realize that the sovereign debt is just the tip of the iceberg, and it is melting down pretty quickly at this point. No matter the words you hear, because the news is tightly controlled and ‘they’ don’t want you to hear the truth of it, this entire financial system is in meltdown.
The most immediate problem, not the only one by a long shot, is that all the holders of this toxic sovereign debt which would include just about every large and medium sized bank in the world have to write down a ton of this debt. With that write down the banks have less capital and to maintain the required capital to loan ration they must either raise more capital-hardly likely right now given the economic/political disarray in the U.S. and Europe-sell assets and reduce their loan exposure and/or borrow from the Central Banksters.
As I see it, they are borrowing from the Central Bank, which just creates money out of thin air, to shore up their capital which is in itself not a long term strategy but only a very quick and short term fix and selling assets to raise liquidity while at the same time reducing their loans portfolios-which of course will put the respective economies into a recession…Does all this sound familiar?
We have been replaying this scenario from coast to coast and continent to continent for the past 3 years, over and over again with much the same results-slowing economies, rising unemployment, more real estate woes as foreclosures rise and values fall which leads to further deterioration of existing loan portfolios (did anyone catch that Fannie Mae and Freddie Mac require more billions to cover losses last quarter?) and the need to raise even more capital.
Of course as the economies slow down companies-large and small- have a harder time servicing their debts and have to layoff more people in the face of declining sales. You get the idea of how vicious this cycle is? I think we will continue to see this scenario play out except now we have entire governments/countries falling under the sheer weight of debts they cannot possibly repay!
I have very little faith, as do most people now, that our illustrious leaders can pull yet another rabbit out of the hat! We are seeing the beginnings of a ‘bank run’ on the European banks as the larger money market funds pull out of the larger European banks (Deutche Bank lost over 6 billion in one single day last week from this reaction by just one money fund). In my opinion it is just a matter of time before the people start to ask for their cash!
Once the people lose faith then to see what might happen rewind to the Argentinian crisis of the last decade! Perhaps a look at the first Great Depression from a historical perspective would be in order as well!
I hope I am wrong about the outcome here as it will make things so difficult that we cannot imagine. Not only that but very few have the grit and determination to weather such a storm! Chaos could ensue and that folks is not a pretty thing.
The good news, from the ashes comes the Phoenix…the people will get another chance at this and I hope that they will be much better informed of the possibilities than most are now!
Well the article from the UK below spells it out, the weak are going to get kicked out of the EC or kinda kicked out and the strong will survive…this is the death of the whole system as they know it.
Without all the players who is left? Germany and maybe France, although their bond yields are skyrocketing today as well as the ‘contagion’ spreads’. This is a very serious situation for all of us-worldwide. The only way I see out, or actually further into economic catastrophe, is to print more money and then we will eventually see inflation. We should see some devaluation almost immediately.
The worst is yet to come in my opinion…stay tuned. No one, not even the ‘leaders’ of the EU know what the heck to do. A lot of grabbing at straws and talk to keep the markets from totally imploding.
GERMANY AND FRANCE’S SECRET PLAN FOR A ‘NEW FEDERAL EUROPE’
Angela Merkel and Nicolas Sarkozy with Berlusconi discuss the eurozone crisis
Thursday November 10,2011
By Emily Fox for express.co.uk
Have your say(36)
THE leaders of Germany and France are secretly planning for a new federal-style Europe in a last-ditch bid to save the euro.
German chancellor Angela Merkel insisted there was now a need for ‘more Europe’ in order to rescue the economic and political crisis gripping the eurozone.
She said Europe’s plight was now so ‘unpleasant’ that deep structural reforms were needed quickly, warning the rest of the world would not wait.
“That will mean more Europe, not less Europe,” she told a conference in Berlin.
Her comments followed reports that France and Germany are secretly preparing to force weak countries out of the euro with Merkel warning nations not pulling their weight that they could be booted out.
The German chancellor also called for changes in the main EU treaties after French President Nicolas Sarkozy advocated a ‘two-speed Europe’ in which eurozone countries accelerate and deepen integration while an expanding group outside the currency bloc stays more loosely connected – a further signal that some members may have to quit the euro.
We need more Europe, not less Europe
German Chancellor Angela Merkel speaking at a conference in Berlin.
“It is time for a breakthrough to a new Europe,” Merkel said.
“A community that says, regardless of what happens in the rest of the world, that it can never again change its ground rules, that community simply can’t survive.”
With European leaders still struggling to find a credible response to the crisis, the prospect of one or more countries leaving – and effectively defaulting on their sovereign debt as they do so – is rising by the day.
The news came as Jose Manuel Barroso claimed that membership of the EU and belonging to the single currency should be one and the same thing.
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“In principle all member states of the European Union [including Britain] should be members of the euro. It’s an obligation of the treaties,” Mr Barroso said in Brussels.
Downing Street declined to discuss reports – denied in both Paris and Berlin – that France and Germany were discussing an overhaul of the single currency that would lead to a more closely integrated eurozone with fewer member-states.
Mr Cameron said: “If the leaders of the eurozone want to save their currency, they and the eurozone institutions must act now together, because the longer they delay, the greater the danger.
“It is not in our interests for the eurozone to break up – for countries to leave the eurozone.
“We have to keep the British economy safe, to take the British economy through this storm. That means preparing for all eventualities.”
Warnings that Britain could face a second recession due to the developments in the eurozone were prevalent as Business Secretary Vince Cable revealed contingency plans if the euro should fall.
“Growth has stalled in Europe, and there is a risk of a new recession,” said Economic and Monetary Affairs Commissioner Olli Rehn.
“While jobs are increasing in some member states, no real improvement is forecast in the unemployment situation in the EU as a whole.”
He said the key to reviving growth and job creation was “restoring confidence in fiscal sustainability and in the financial system and speeding up reforms to enhance Europe’s growth potential”.
The commissioner added: “There is a broad consensus on the necessary policy action. What we need now is unwavering implementation. On my part, I will start using the new rules of economic governance from day one.”
Today’s Autumn economic forecast for next year says confidence has “sharply deteriorated” and is affecting investment and consumption.
The European Central Bank’s hardline chief economist told eurzone governments not to expect the bank to rescue them with unlimited funds, despite its efforts to stabilise runaway bond markets.
“We are not the lender of last resort and I do not advise European governments to ask the ECB to become lender of last resort,” Juergen Stark, who will quit his post in protest at continued bond-buying told a conference in Frankfurt.
“This will mean that the ECB immediately will lose its independence.”
Again folks this is some serious business that will affect everyone here in this country as well. Just as our 2008 debacle affected people worldwide, their current debacle is sure to return the favor…and with a banking system already weak, this could the the timber that breaks it all apart!
In the great race to the finish line to see who loses the most value first, it is a very close race now between the U.S. dollar and the Euro. Today more weakness in the Euro due to the continuing debt issues in Greece, Ireland, Portugal and Spain is driving that currency even lower!
This fall is driving worldwide stock markets lower and some commodities withe Gold up and Silver down, a very mixed bag. I am looking for the opportunity to purchase more silver somewhere in here, it might be a good time who knows now?
Stocks Tumble, Euro Weakens on Debt Concern
Global stocks sank the most in two months, while the euro slid to a record low versus the Swiss franc and commodities plunged, amid signs Europe’s government- debt crisis is worsening and the economic recovery is slowing. Costs to protect Greek debt from default surged to a record.
The MSCI All-Country World Index sank 1.9 percent at 12:33 p.m. in New York, its worst loss since March 15 on a closing basis, after the Shanghai Composite Index plunged the most since January. The Standard & Poor’s 500 Index retreated 1.2 percent. Italy’s FTSE MIB Index slid 3.3 percent as bonds tumbled in Ireland, Portugal, Greece, Spain and Italy, while U.S. Treasuries increased to near their highest levels of the year. The euro dipped below $1.40 for the first time since March 18. Oil and copper declined at least 2.2 percent.
U.S. equities followed European shares lower after Italy’s credit-rating outlook was cut by S&P on May 20 and Spanish Prime Minister Jose Luis Rodriguez Zapatero’s Socialist party suffered losses in local elections amid a backlash over austerity measures. A Federal Reserve Bank of Chicago economic gauge unexpectedly dropped below zero, European services and manufacturing growth slowed more than forecast and a report showed China’s manufacturing may expand at a slower pace.
“There’s bad news out there,” said Paul Zemsky, the New York-based head of asset allocation for ING Investment Management, which oversees $550 billion. “We’ve got doubts about European fiscal austerity and weaker economic data across the board. The thing that has driven the market higher — earnings season — just came to an end. People will be pulling money out of riskier assets.”
The S&P 500 extended losses after dropping for three straight weeks, its longest slump since August. Industrial companies and commodity producers led declines among the index’s 10 main industry groups, all of which fell. Caterpillar Inc., Alcoa Inc. and DuPont Co. fell at least 2.5 percent to lead declines all 30 stocks in the Dow Jones Industrial Average.
The Chicago Fed national index, which draws on 85 economic indicators, was minus 0.45 in April versus 0.32 in March. A reading below zero indicates below-trend-growth in the national economy and a sign of easing pressures on future inflation.
The S&P 500 climbed to an almost three-year high on the final trading day of April. It has slumped 3.6 percent since as economic data trailed forecasts and investors prepared for the Federal Reserve to complete its $600 billion bond-purchase program at the end of June.
Citigroup Inc.’s U.S. Economic Surprise Index, which gauges the rate at which data is exceeding or missing estimates and reached a record in March, turned negative in May and is at its lowest level since August. It has risen only one day this month.
The S&P 500 is still up about 4.5 percent in 2011 amid better-than-estimated profits. Per-share earnings topped analysts’ projections at 72 percent of the 455 companies in the index that released results since April 11, data compiled by Bloomberg show.
The yield on the 10-year U.S. Treasury declined five basis points to 3.10 percent today, while the two-year note yield slipped one basis point to 0.507 percent after touching 0.4950, the lowest this year.
The Dollar Index, which tracks the U.S. currency against those of six trading partners, climbed 1.2 percent, the most since May 5. The U.S. currency strengthened versus all 16 major peers. The yen appreciated against all 16 of its most-traded counterparts except the dollar, strengthening 1.1 percent versus the euro. The Norwegian krone, Swedish krona and Australian dollar weakened against most of their peers.
The Stoxx Europe 600 Index slid 1.7 percent, the most since March 15 on a closing basis, as all 19 industry groups declined. Ryanair Holding Plc tumbled 5.3 percent after Europe’s biggest discount airline said it will cut capacity for the first time in its history amid higher fuel costs. International Consolidated Airlines Group, the parent of British Airways, sank 5.1 percent and Air France-KLM (AF) Group slid 4.5 percent as Iceland’s weather office said ash from a volcanic eruption may reach the U.K. this week, threatening trans-Atlantic traffic.
Italy’s 10-year bond yield climbed three basis points to 4.81 percent, sending the spread with benchmark German bunds eight points wider to 179 basis points, the most since January. The Spanish-bund spread increased seven basis points to 250. The yield on the 10-year Greek security climbed 46 basis points to 17.03 percent, with the Irish yield rising to as high as euro- era record of 10.88 percent.
The Markit iTraxx SovX Western Europe Index of swaps on 15 governments rose by 13 basis points to a midprice of 202.5 and the euro depreciated as much as 0.8 percent to a record 1.23235 Swiss francs. Credit-default swaps on Greece soared 124.2 basis points to a record 1,470.8, according to data provider CMA. Ireland jumped 28.8 to 669.3, Portugal gained 34.7 to 674.2, while Italy increased 7.1 to 167.9 and Spain climbed 6.3 to 268.2, CMA data show.
European Central Bank Governing Council member Ewald Nowotny said the bank will accept Greek government bonds as collateral in its refinancing operations as long as the country maintains its consolidation program. ECB Council member Jens Weidmann said May 20 that the central bank may no longer be able to accept Greek bonds as collateral for refinancing operations.
More than a year after European policy makers approved a 750 billion-euro ($1.1 trillion) bailout blueprint to stem the sovereign crisis, bond yields in debt-laden peripheral countries are at record highs and officials are floating plans to extend Greek repayments. Hours before the May 20 S&P warning about Italy, Fitch Ratings cut Greece three levels and said it would consider an extension of maturities as a default.
“The week is starting in a decidedly fearful mode,” Kit Juckes, head of foreign-exchange strategy at Societe Generale SA in London, wrote in a report today. The change of outlook on Italy also “amplifies the risk for contagion,” he said.
The yield on the 10-year German bund, the euro-region’s benchmark government security, fell four basis points to 3.01 percent.
Fitch Ratings revised Belgium’s rating outlook to negative from stable and affirmed its long- term foreign and local currency user default ratings at AA+.
The MSCI BRIC Index of the four biggest emerging markets lost 2.3 percent, extending its retreat from this year’s high on April 8 to more than 10 percent, the threshold that some analysts identify as a correction.
The Shanghai Composite tumbled the most four months after a preliminary purchasing managers’ index compiled by HSBC Holdings Plc and Markit Economics dropped to 51.1 in May from a final reading of 51.8 in April. India’s Bombay Stock Exchange Sensitive Index slid 1.8 percent after Finance Minister Pranab Mukherjee signaled concern about inflation. The Micex Index fell 1.9 percent after OAO Gazprom, Russia’s gas-export monopoly, was cut to “underperform” by Credit Suisse Group AG.
Copper dropped 3.4 percent to $3.98 a pound in New York and crude oil declined 2.2 percent to $97.34 a barrel. The S&P GSCI index of 24 commodities retreated 1.7 percent, the biggest slump since May 11.
To contact the reporters on this story: Stephen Kirkland in London at email@example.com; Rita Nazareth in New York at firstname.lastname@example.org.
Stay tuned to more exciting economic news this week as the deficits worldwide soar.
Is anyone surprised that existing home sales declined? It appears that someone on the ‘street’ was by the tone of the article below. I don’t think we are in a recovery that means anything to the vast majority of Americans. Yes, Wall Street has done some recovering, just look at the bonuses that have been paid-a true sign of progress eh?
Main Street on the other hand is doing quite badly it appears. Small businesses are not hiring, although some claim that these businesses are hoarding cash, which makes sense when you look at the structural indicators like housing, overall employment, manufacturing and such which are all down in general.
Housing won’t be coming back anytime soon I am afraid!
Existing-Home Sales in U.S. Unexpectedly Fall
By Bob Willis – May 19, 2011 8:25 AM MT Bloomberg
Sales of existing U.S. homes unexpectedly declined in April, indicating the industry is struggling to gain traction as the economy expands.
Purchases of existing homes dropped 0.8 percent to a 5.05 million annual pace last month, the National Association of Realtors said today in Washington. A 5.2 million rate was the median projection in a Bloomberg News survey and the April figure was less than the most pessimistic forecast. The median sales price declined from a year earlier and 37 percent of transactions were of distressed dwellings.
Falling prices and the prospect of more foreclosures entering the market signal more Americans may be hesitant to purchase homes. With unemployment at 9 percent and wages stagnant, any sustained recovery in residential real estate may take years to unfold.
“The housing market continues to grind along the bottom,” said Richard DeKaser, an economist at Parthenon Group in Boston. “The bad news is there’s no market recovery unfolding. The good news is we’re not taking a double-dip in sales.”
Estimates for home sales ranged from 5.09 million to 5.40 million, according to the median of 75 forecasts in the Bloomberg survey. Purchases reached a record 7.08 million in 2005, and slumped to a 13-year low of 4.91 million last year.
Stocks trimmed gains after the housing figures and another release showing manufacturing may be cooling. The Standard & Poor’s 500 Index rose 0.3 percent to 1,343.98 at 10:11 a.m. in New York.
The Federal Reserve Bank of Philadelphia’s general economic index fell to 3.9 in May from 18.5 a month earlier. Readings greater than zero signal expansion in the area covering eastern Pennsylvania, southern New Jersey and Delaware. The median forecast of 59 economists surveyed by Bloomberg called for a gain to 20.
The Conference Board’s index of leading economic indicators fell in April after nine months of gains, depressed by a pickup in jobless claims that reflected temporary setbacks including auto-plant shutdowns. The gauge of the outlook for the next three to six months decreased 0.3 percent after a revised 0.7 percent gain in March, the New York-based group said today. Economists forecast a 0.1 percent increase, according to the median estimate in a Bloomberg survey.
Another report today from the Labor Department showed fewer Americans than forecast filed first-time claims for unemployment benefits last week. Applications declined by 29,000 to 409,000. Economists projected 420,000, according to the median forecast in a Bloomberg survey.
Of all purchases, cash transactions accounted for 31 percent after a record 35 percent in March, NAR chief economist Lawrence Yun said in a press conference as the figures were released. The Realtors group began tracking the monthly figure in August 2008, and the share on a yearly basis before that was around 10 percent, Yun has said.
Distressed sales, which comprise foreclosures and short sales, in which the lender agrees to a transaction for less than the balance of the mortgage, accounted for 37 percent of the total after 40 percent in March, Yun said.
“We still have a very large foreclosed, distressed inventory that needs to be worked through,” Yun said.
Existing-home sales decreased in three of four regions in April, led by a 7.5 percent drop in the Northeast. Purchases climbed in the Midwest.
The median sales price fell 5 percent last month from April 2010 to $163,700.
The number of previously owned homes on the market rose to 3.87 million in April from 3.52 million. At the current sales pace, it would take 9.2 months to sell those houses, the longest since November, compared with 8.3 months at the end of March. Supply in the eight months to nine months range is consistent with stable home prices, the group has said.
CoreLogic Inc. in March estimated about 1.8 million homes were delinquent or in foreclosure, a so-called “shadow inventory” set to add to the unsold supply of existing houses already on the market.
More than half of U.S. homeowners and renters say housing won’t recover until at least 2014, according to a survey released yesterday by Trulia Inc. and RealtyTrac Inc., collectors of real-estate data.
View of Market
The survey, taken in April, found that 54 percent of respondents don’t expect a recovery for at least three years, up from 34 percent in November. Those who see a turnaround by the end of next year fell to 15 percent.
Homebuilders are seeing no gain in demand as they are forced to compete with cheaper, foreclosed properties. Builders began work on 523,000 houses at an annual rate in April, down 11 percent from the prior month, the Commerce Department reported this week. Housing starts dropped to a record low of 478,000 in April 2009.
Douglas Yearley Jr., chief executive officer at Toll Brothers Inc. (TOL), the largest U.S. luxury-home builder, last week said the spring home-selling season has been “disappointing” and that “people are still scared.”
Demand for new houses will remain weak into next year, said Bill Wheat, chief financial officer of D.R. Horton Inc., who last week also projected a housing recovery will take time to develop. “We feel it could still be a struggle in 2012.”
To contact the reporter on this story: Bob Willis in Washington at email@example.com
I would really like to sell my house up here in Colorado, in the mountains, beautiful setting and everything and very close to the ski slopes. Unfortunately, the housing foreclosures have also dampened prices up here also. Any buyers out there?
As some say the markets are front runners of trends, and I say this tongue in cheek since we have been trending to more and more economic trouble for years without any significant, sustained correction, we see several days of stock market sell off and Treasury prices rising with yields decreasing.
Now we have rising inflation, bond prices rising (strange since the value of the asset erodes with inflation), gold prices at highs as well as silver and a domestic and global economy mired in debt and no to slow growth.
What to do here? Stay focused and alert. Do what you think is best…my personal opinion is at the close of the article.
Dismal Data Boost Treasurys
By MIN ZENG
The steady drumbeat of dismal U.S. economic data continued Tuesday, driving investors into safe-haven Treasurys and pounding key yields down to five-month lows.
Disappointing U.S. housing and industrial-production figures are the latest underwhelming indicators in recent weeks as the market continues to focus on slowing growth. Inflation, the main threat to bond’s yields, remains the least of considerations.
Dimming growth prospects also undercut the appeal of riskier assets such as stocks and commodities, adding to the flight to safety.
“For now, the path of least resistance is lower yields,” said Mark MacQueen, partner and portfolio manager in Austin, Texas, at Sage Advisory Services Ltd., which oversees $9.5 billion in assets.
In late afternoon trading, the benchmark 10-year note was 9/32 higher to yield 3.118%. The yield earlier touched 3.096%, the lowest level since Dec. 7, when the yield last traded below 3%. Bond yields move inversely to their prices.
Chris Sullivan, who oversees $1.77 billion as chief investment officer in New York at the United Nations Federal Credit Union, said the 10-year note’s yield—which traded above 3.5% in early April—could test the 3% threshold in the short term. He said a break of that barrier could push the yield down to 2.92%.
Mr. MacQueen said 3% is possible in the near term, though he said the market is overbought and at risk of corrective selling. But, he added, a fall below 3% “will take an equity selloff, sovereign crisis or measurable deterioration of the economy.”
Many investors also have cut holdings in stocks and commodities in favor of Treasurys over fears that demand for risky assets could falter once the Federal Reserve completes its $600 billion Treasury bond buying program in June.
The Fed’s quantitative-easing measures to juice the economy, launched in November, have been a major driver pushing up prices of risk-based assets.
Investors now are worried about U.S. growth if monetary stimulus is pulled back at the same time fiscal stimulus is stymied by budget cutting in Washington D.C.
In addition, rallying Treasury prices on their own have created an updraft, as investors betting on price declines—or “shorting” the market—are forced to purchase securities, and increase demand, to unwind those bets.
Kevin Walter, head of Treasury trading at BNP Paribas, said Tuesday’s data forced some hedge funds to cover shorts, especially as the 10-year yield broke 3.14%, a level it has failed to close at in each of the past week’s sessions.
Brian Edmonds, head of interest rates at Cantor Fitzgerald LP in New York, said some investors were “caught off guard” by the continued decline in yields. He expects more unwinding of shorts as the 10-year yield moves closer to 3%.
Write to Min Zeng at firstname.lastname@example.org
I am planning on buying more silver sometime in the near future.
As we have been saying for sometime now, the home/equity/mortgage issues are not going away anytime soon and BoA is acknowledging this to it’s shareholders. With the proposed settlement of 5 billion for all the crooked mortgage docs etc. (which will probably be accepted to the chagrin of all the folks screwed) on top of falling prices as more homes are foreclosed on and sold at fire sale prices affecting all the other homes in the neighborhood and no end in sight, these banks are in a very precarious situation.
If it is bad enough to warn shareholders, you and I need to pay attention here as the ‘too big to fail’ banks continue to be at risk of failing! Another bailout would come, over the protests of the citizens, to ‘save’ the system. A system that is completely bankrupt, financially and morally!
We need to find solutions for our families and communities and these WILL NOT COME FROM GOVERNMENT! We have FEMA camps as the most likely government solution to upheaval…
I urge everyone reading this to consider these ideas. That this economy is in deep trouble should be clear to anyone with half a brain.
BofA CEO: Housing Faces ‘Enormous Challenges’
Bank of America Corp. (BAC) Chief Executive Officer Brian T. Moynihan told shareholders today the nation’s housing market faces “enormous challenges” and that the lender is still struggling to contain bad mortgages.
The bank, the biggest in the U.S. by assets, is putting “legacy” loans behind it and must resolve issues that arose after the acquisition of Countrywide Financial Corp., said Moynihan, 51, at the company’s annual shareholders meeting in Charlotte, North Carolina, where the bank is based.
Refunds and legal settlements tied to defective home loans dragged down first-quarter profit 36 percent to $2.05 billion, and the mortgage unit “still struggles mightily,” Moynihan said. Bank of America is the biggest servicer of U.S. mortgages, and is among firms negotiating with state attorneys general on potential penalties for faulty foreclosures.
Fourteen of the largest servicers including Bank of America signed a consent decree in April with the Federal Reserve and Office of the Comptroller of the Currency that compels them to pay back homeowners for losses on foreclosures that were mishandled, and to overhaul procedures for seizing homes.
Earnings are suffering from excess risk taken on when the firm acquired Countrywide in 2008, Moynihan said. While regulators at the time welcomed the bank’s rescue of Countrywide — which had been the biggest U.S. home lender — “attitudes have changed,” he said.
The bank has worked over the last year to rebuild a “fortress balance sheet” and capital cushion “to make sure we can handle anything that comes our way,” Moynihan said. Capital ratios are the strongest in a decade and the core franchise is strong, he said.
Moynihan told attendees today that the company needs to resolve concern about bad mortgages and lower the perceived volatility of the firm in the eyes of regulators before trying again to win approval of its capital plan, which would allow the company to raise its dividend. The plan will be resubmitted when management is sure regulators will accept it, he said.
Bank of America was left behind as competitors including JPMorgan Chase & Co. and Wells Fargo & Co. passed a Federal Reserve review of their capital plans and then increased their payouts. Moynihan had told investors in January and March that he believed the firm could raise its dividend this year. Bank of America had a 64-cent quarterly payout until 2008; it’s now a penny a share.
Promising a dividend before knowing you could deliver it was a “rookie mistake,” said Tony Plath, a professor of finance at the University of North Carolina in Charlotte who follows Bank of America. Moynihan became CEO in January, 2010.
“You can’t be a rookie CEO when you’re running a $2 trillion company,” Plath said in an interview before today’s annual meeting.
Investor Judith Koenick, who said her income was slashed when the dividend was cut, said Moynihan and other executives should forgo bonuses until they fully restore the payout.
“I would like you to explain how you’re entitled to all this money when you’re still sticking it to shareholders,” said Koenick of Chevy Chase, Maryland. “You should not be taking more than a dollar until you get the stock back up to where it was before you and your predecessors screwed it up.”
To contact the reporter on this story: Dawn Kopecki in Charlotte at email@example.com.
Continue to stock up on food and other supplies. I think we will get another great opportunity to purchase silver and gold in the next few days or weeks. Silver is now at around 35.50 as I write down from over $40.00 just a week ago.