Oh, So Allstate Wasn’t Just Sold Crap By ONE Bank?
by ilene - February 16th, 2011 4:37 pm
Courtesy of Karl Denninger, The Market Ticker
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Oh hoh, and there were…. all of them?
In its complaint, Allstate alleges the defendants "made numerous misrepresentations and omissions regarding the riskiness and credit quality" of the loans backing the securities sold as part of the transaction. JPMorgan Chase acquired Bear Stearns and Washington Mutual — along with the banks’ assets — back in 2008 when the housing meltdown hit. While both firms are technically defunct, each still has structured finance trading platforms unwinding.
Same basic allegations in the last lawsuit. Statistical sampling says "you intentionally hosed us."
In a land with an actual justice system by now there would be some people in "pound-me-in-the-ass" Federal Prison. Instead, we do the quaint lawsuit thing.
Incidentally, Matt’s at it again over at Rolling Stone.
"Everything’s ****ed up, and nobody goes to jail," he said. "That’s your whole story right there. Hell, you don’t even have to write the rest of it. Just write that."
I put down my notebook. "Just that?"
"That’s right," he said, signaling to the waitress for the check. "Everything’s ****ed up, and nobody goes to jail. You can end the piece right there."
And until we, the people, demand that this change and enforce that demand with an Egypt-like protest, it won’t change, and you, dear reader, will keep getting screwed.
Right up until the debt bubble pops…. which it will.
And soon.
Pic credit: Jr. Deputy Accountant
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DiggRon Paul slams Fed’s bond-buying program; Political Pressure on Fed Mounts
by ilene - February 9th, 2011 3:49 pm
Courtesy of Mish
MarketWatch reports Paul slams Fed’s bond-buying program
Outspoken Federal Reserve critic Rep. Ron Paul, R-Texas, slammed the central bank’s latest $600 billion bond-buying program on Wednesday, saying it and near-zero interest rates haven’t led to job creation in the United States.
“Over $4 trillion in bailout facilities and outright debt monetization, combined with interest rates near zero for over two years, have not and will not contribute to increased employment,” Paul said at a hearing of a House Financial Services subcommittee he heads.
“Debt monetization” is a reference by Paul and other Fed critics to the Fed’s latest bond-buying program — a characterization rejected by Fed Chairman Ben Bernanke.
In essence, Paul is charging that the central bank is enabling profligate spending by the government. The term “debt monetization” is a buzzword for how some poorer countries conducted policies in the post-World War II era.
Political Pressure on Fed Mounts
WSJ’s Sudeep Reddy reports on concerns the Federal Reserve could be facing political pressure from Congress, as Rep. Ron Paul holds the first hearing of a new Fed oversight committee. Separately, Fed Chairman Bernanke updates Congress on the economy.
If the above YouTube does not play here is a link: Rep. Ron Paul Ignites Fed Worry
A Bubble in Complacency
by ilene - January 30th, 2011 10:13 pm
Courtesy of John Mauldin, Thoughts From The Frontline
The Recent GDP Numbers – A Real Statistical Recovery
Consumer Spending Rose? Where Was the Income?
A Bubble in Complacency
Egypt
Rosie, Las Vegas, Phuket, and Bangkok
This week I had the privilege of being on the same panel with former Comptroller General David Walker and former Majority Leader (and presidential candidate) Richard Gephardt. A Democrat to the left of me and a self-declared nonpartisan to the right, stuck in the middle and not knowing where the unrehearsed conversation would take us. As it turned out, to a very interesting conclusion, which is the topic of this week’s letter. By way of introduction to those not familiar with them, David M. Walker (born 1951) served as United States Comptroller General from 1998 to 2008, and is now the Founder and CEO of the Comeback America Initiative. Gephardt served in Congress for 28 years, was House Majority Leader from 1989 to 1995 and Minority Leader from 1995 to 2003, running for president in 1988 and 2004.
Some housekeeping first. We have posted my recent conversation with George Friedman on the Conversations with John Mauldin web site. And on Saturday we will post the Conversation and transcript I just did with David Rosenberg and Lacy Hunt, which I think is one of the more interesting (and informative!) ones I have done. You can learn more about how to get your copy and the rest of the year’s Conversations (I have some really powerful ones lined up) by going to www.johnmauldin.com/conversations. Use the code “conv” to get a discount to $149 from the regular price of $199. (If you recently subscribed at $199 we will extend your subscription proportionately. Fair is fair.)
The Recent GDP Numbers – A Real Statistical Recovery
Now, before we get into our panel discussion (and the meeting afterward), let me comment on the GDP number that came in yesterday. This is what Moody’s Analytics told us:
“Real GDP grew 3.2% at an annualized pace in the fourth quarter of 2010. This was below the consensus estimate for 3.6% growth and was an improvement from the 2.6% pace in the third quarter. Private inventories were an enormous drag on growth, subtracting 3.7 percentage points; this bodes very well for the near-term outlook and means that current demand is very strong. Consumer spending, investment and…
Stock World Weekly
by ilene - January 30th, 2011 8:23 am
Here’s this week’s Stock World Weekly. Enjoy! Comments welcome.
Ping-Pong Seasonal Madness In Weekly Jobs Claims; How to Predict Whether the 4-Week Moving Average Will Rise or Fall
by ilene - January 29th, 2011 3:17 pm
Courtesy of Mish
Weekly unemployment claims have been all over the map recently. Here are the seasonally-adjusted Weekly Unemployment Claims totals for the last 5 weeks.
Jan 27, 454,000
Jan 20, 403,000
Jan 13, 447,000
Jan 06, 411,000
Dec 30, 388,000
The first three numbers above are from the current report. I calculated the January 6, number. The December 30 number is from the archives.
The reported seasonally-adjusted number on January 6 reporting was 409,000. It was revised up but no one saw that revision.
The reason no one can easily spot revisions is the weekly report only gives the latest 3 weeks. I calculated January 6th number from the 4-week moving average, now reported as 428,750.
A similar calculation looking at the January 20 Weekly Claims Report shows that December 30, was revised up from 388,000 to 391,000. These are small revisions but even large ones would be hard to spot if you do did not do the math or go to the archives.
Computing the Missing Number and Hidden Revisions
The 4-week moving average is constructed from the current 4 weeks. However the report only shows 3 weeks. To compute the week not shown, take the 4-week moving average (SA) and multiply by 4. Subtract the last three weeks shown on the report. What remains is the hidden 4th week used to compute the 4-week moving average.
Moreover, the difference between that number and was was originally reported for that number is a hidden revision.
Gaming the 4-Week Moving Average
If you want to pace a bet on whether the 4-week moving average will rise or fall, you need to know the number to beat and how to calculate it.
The number to beat is the missing number (as described above), about to roll off. In this case, 411,000.
Assuming no revisions, a number higher than 411,000 will cause next week’s 4-week moving average to rise. A number below 411,000 will cause next week’s 4-week moving average to drop.
My guess is the 4-week moving average will rise next week and fall the following week when the January 13 of 447,000 rolls off the report.
Clearly, if you are attempting to predict such numbers, it is critical to look at the number about to roll off.
What’s With The Ping-Pong?
Revisions and hidden numbers aside, inquiring minds are asking about the ping-pong.…
Mubarak’s Acts of Cowardice; Obama Calls Mubarak for 30-Minutes; Cell Service, Internet Total Shutdown; Anarchy in Cairo; How Long can Mubarak Last?
by ilene - January 29th, 2011 3:04 pm
Courtesy of Mish
The situation in Egypt has gone from bad to worse. Cairo is in a state of near-anarchy and Egyptian President Hosni Mubarak’s cowardly disruptions to the internet and cell phones have made things worse.
Egyptian citizens unable to get news on the internet or cell phones have only one place to get it now, the street.
President Obama called Mubarak in a 30-minute phone call. Obama’s message was "Ultimately, the future of Egypt will be determined by the Egyptian people."
If that was a hint, Mubarak did not get it. Instead, Cairo is in flames as protesters have turned more defiant.
Mubarak Orders Crackdown, With Revolt Sweeping Egypt
The New York Times reports Mubarak Orders Crackdown, With Revolt Sweeping Egypt
With police stations and the governing party’s headquarters in flames, and much of this crucial Middle Eastern nation in open revolt, President Hosni Mubarak of Egypt deployed the nation’s military and imposed a near-total blackout on communications to save his authoritarian government of nearly 30 years.
Friday’s protests were the largest and most diverse yet, including young and old, women with Louis Vuitton bags and men in galabeyas, factory workers and film stars. All came surging out of mosques after midday prayers headed for Tahrir Square, and their clashes with the police left clouds of tear gas wafting through empty streets.
By nightfall, the protesters had burned down the ruling party’s headquarters in Cairo, and looters marched away with computers, briefcases and other equipment emblazoned with the party’s logo. Other groups assaulted the Interior Ministry and the state television headquarters, until after dark when the military occupied both buildings and regained control. At one point, the American Embassy came under attack.
Six Cairo police stations and several police cars were in flames, and stations in Suez and other cities were burning as well. Office equipment and police vehicles burned, and the police seemed to have retreated from Cairo’s main streets. Brigades of riot police officers deployed at mosques, bridges and intersections, and they battered the protesters with tear gas, water, rubber-coated bullets and, by day’s end, live ammunition.
Cairo in Near-Anarchy
The Washington Post reports Cairo in near-anarchy as protesters push to oust president
The Egyptian capital descended into near anarchy Friday night, as the government sent riot police, and then the army, to quell protests by tens of thousands of demonstrators determined to
…
“If These Allegations Are Correct, It Appears To Have Been A Direct Transfer Of Wealth From The United States Treasury To Goldman Sachs Shareholders”: Josh Rosner
by ilene - January 28th, 2011 12:41 am
Courtesy of The Daily Bail
Our favorite quotes so far from today’s FCIC report and reaction from analysts…
- "Less than a 3 percent drop in asset values could wipe out a firm." – FCIC Report
- "The AIG counterparty bailout, which was spun as necessary to protect the public, seems to have protected the institution at the expense of the public." – Josh Rosner
- "The total was for proprietary trades," the report asserts. "Unlike the $14 billion received from AIG on trades in which Goldman owed the money to its own counterparties, this $2.9 billion was retained by Goldman."
- "At the time, the idea was the sucker could go down because there wasn’t enough liquidity in the system, money wasn’t moving, and you could see a domino effect," said Ann Rutledge, a principal at R&R Consulting in New York, which specializes in structured finance. In reality, she contends, those fears were overblown: There was ample money in the financial system. Rather, individual institutions did not have enough cash on hand to survive their losses, she asserts. But the fear of a broader liquidity crisis was used as justification for what now appears to have been a backdoor means of bailing out Goldman, said Rutledge.
- The details in the commission’s report leave Goldman "naked," she added. "It doesn’t have the fig leaf of a systemic risk argument. Normally what happens when you have a sophisticated institution that’s doing stupid credit stuff is you let them eat it, but that didn’t happen in the bailout."
- "If these allegations are correct, it appears to have been a direct transfer of wealth from the Treasury to Goldman’s shareholders." – Josh Rosner
Buried One Mile Deep In Economic News: Rand Paul Proposes Elimination of HUD; Churches “Walk Away”; China Hard Landing; Repeal of Davis-Bacon
by ilene - January 27th, 2011 3:01 pm
Courtesy of MIsh
Many stories of significance have come my way on housing issues, state debt issues, federal debt issues, pension issues, and other economic items of note. I feel as if I am buried a mile deep news. Here are a few stories that caught my eye.
Senator Rand Paul Proposes Elimination of HUD
I am pleased to report a tremendous deficit cutting idea by senator Rand Paul: Eliminate Energy, HUD and most of Education department
In his first major legislative proposal, U.S. Sen. Rand Paul has proposed cutting government spending by $500 billion in a year, including eliminating the Departments of Energy and Housing and Urban Development and most of the Department of Education.
That is the single best piece of fiscal legislation proposed in years.
Nevada Governor Brian Sandoval Addresses Underfunded Public Pension Plans
While Illinois has jumped off the deep end with tax hikes, Nevada’s Governor says Tax increases last thing Nevada businesses need
Tax increases are the last thing Nevada businesses need now, Gov. Brian Sandoval told a receptive audience Wednesday during a speech to the Las Vegas Chamber of Commerce. "My understanding is that PERS is an $8 (billion) or $9 billion unfunded liability that Nevada can’t afford," he said. Sandoval said benefits reforms must starts with the new employees hired by the state.
I commend Governor Brian Sandoval’s ideas and his starting point. States need to scrap defined benefit pension plans for new hires immediately.
100,000 People in Oakland Expected to Apply for 650 Subsidized Housing Openings
The San Francisco Chronicle reports Oakland opens waiting list for Section 8 vouchers
Oakland’s housing authority opened up its waiting list Tuesday for Section 8 housing vouchers, drawing thousands for a coveted spot in line.
The only way to sign up was over a computer, so across the city, hundreds jammed into city libraries to fill out the forms in the hope that they might eventually get a chance to live in subsidized housing.
In the first three hours, 6,000 people filled out applications. Over the five-day application period, the housing authority expects 100,000 people to apply for only 10,000 spots on the waiting list.
The housing authority uses a lottery to determine who gets on the list. And even then it’s no more than a foot in the door. It has taken nearly five years to clear the waiting list that was
…
Surprise, It Was Greenspan and Bernanke’s Fault
by ilene - January 27th, 2011 2:38 pm
Courtesy of Jr. Deputy Accountant
The Financial Crisis Inquiry Commission is about to tell us, in 576 pages, what many of us already know:
The majority report finds fault with two Fed chairmen: Alan Greenspan, who led the central bank as the housing bubble expanded, and his successor, Ben S. Bernanke, who did not foresee the crisis but played a crucial role in the response. It criticizes Mr. Greenspan for advocating deregulation and cites a “pivotal failure to stem the flow of toxic mortgages” under his leadership as a “prime example” of negligence.
Anyone else running out tomorrow to get a copy?
Like the 9/11 Commission, we could have saved a whole lot of money and time by simply verifying alternative media claims instead of starting from scratch as if no one knew anything all along.
Oh well.
What Most People Don’t Realize About The Fed’s Superpowers
by ilene - January 27th, 2011 2:33 pm
Bob Prechter’s Conquer The Crash reveals whether the Fed really can rescue the US economy
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By Elliott Wave International
Since its creation in 1913, the primary intended role of the U.S. Federal Reserve Bank has been that of protector. In theory, the central bank was bestowed with the power to shape monetary policy in a way that would keep both booms and busts in check. The two main tools at its disposal — interest rates and money creation — would provide a "ceiling of normalcy" above expansions AND a "net of safety" below contractions.
To this day, the financial mainstream holds great faith in the Fed’s ability to fulfill its save-the-day duties — as these recent news items make plain:
- "Why Raising Fed Funds Rate Is Positive For Equities." (Seeking Alpha)
- "Fed’s Moves Lift All Asset Classes." (Associated Press)
- "US Stocks Erasing Losses: The aggressive moves of the Fed have been an important driver for the stabilization of stock prices." (Bloomberg)
But of all the variables the Fed creators took into account, there’s one glaring factor they neglected to consider: Namely, it cannot force consumers to spend, creditors to lend, or businesses to borrow. The events of 2007-2009 "credit crunch" and the subsequent "Great Recession" made that obvious. Remember how the government was upset at banks for sitting on the bailout funds instead of lending them out to consumers? And consumers weren’t exactly lining up on the street to get a loan, either.
The Fed’s inability to change social mood is the central theme in Chapter 13 of EWI President Bob Prechter’s NY Times business bestseller book Conquer the Crash. There, Bob describes the Fed’s strategy of lowering the federal funds rate to stimulate spending to be as effective as "pushing on a string." Writes Bob:
"The primary basis for today’s belief in perpetual prosperity and inflation with an occasional recession is what I call the ‘Potent Directors Fallacy.’ It is nearly impossible to find a treatise on macroeconomics today that does not assert or assume that the Federal Reserve Board has learned to control both our money and our economy. Many believe that it also possesses the immense power to manipulate the stock market. The very idea that it can do these things is false."
And so begins one of the most groundbreaking studies into the very real INABILITY of the Fed to fell the great bears of economic declines, or…
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the Favorites backup site
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