The Independent

On October 22nd 2009, Sen. Judd Gregg (R-N.H.), ranking Republican on the Senate Budget Committee , says that the U.S. economy faces a future as a “banana republic” if current federal fiscal policies continue. " Congress works for the next election, not for the next generation." In April 2009, Missouri Republican US Senator Kit Bond likened Barack Obama 's administration to a banana republic if they proceed to hold public trials on the issue of torture, giving the term banana republic a bimodal definition in the context of the ongoing US torture investigations. [23] In May 2009, Paul Krugman, columnist for the New York Times , referred to the state government of California as a banana republic. He was commenting on the state's tax system, in which taxes cannot be raised even in an emergency without a two-thirds majority. The state constitution requires that the budget be balanced, denying it the ability to borrow, while gerrymandering has turned many dist...

Watch your thoughts, for they become words. Choose your words, for they become actions. Understand your actions, for they become habits. Study your habits, for they become your character. Develop your character, for it becomes your destiny. Tryon Edwards

by CalculatedRisk on 11/26/2009 05:55:00 PM From Jon Lansner at the O.C. Register: How banks may lose $430 billion more Banks are projected to lose $430 billion on commercial real estate loans in the next two to three years [said] Stan Mullin, an associate with California Real Estate Receiverships in Newport Beach ... Highlight’s of Mullin’s talk: •$1.4 trillion in commercial loans are coming due in the next five years. •That’s equal to the same amount that came due in the last 15 years. •Lenders could take massive losses on their real estate portfolios from 2010-2013. This is similar to the recent presentation by Dr. Randall Zisler, CEO of Zisler Capital Partners: A crisis of unprecedented proportions is approaching. Of the $3 trillion of outstanding mortgage debt, $1.4 trillion is scheduled to mature in four years. We estimate another $500 billion to $750 billion of unscheduled maturities (i.e., defaults). And from the WSJ in October: Comme...

November 25th, 2009, 5:00 am · Post a Comment · posted by Teri Sforza, Register staff writer There were 2,386 reports of adult abuse in Orange County in 1994. There were nearly triple that many - 6,380 - in Orange County last year. And 2009 is on track to break records, with 21 new reports every day, or some 7,500 this year. The vast majority of these involve seniors being taken advantage of in their own homes, by friends or family members who are supposed to be protecting them. “Often, the people being abused and neglected don’t want their family member to get in trouble, so they’re hesitant to report anything,” said Carol Mitchell, program manager for Orange County Adult Protective Services. “That’s the biggest threat people get - ‘If you call them to complain, they’re going to put you in a nursing home.‘ But that can’t happen. We don’t have the authority to do that. Our goal is to maintain people in their homes.” Abuse investigations fall into Mitchell’s lap when people live in pr...

UPDATE: US House Panel Approves Broader Auditing Of Fed (Updates with vote count, details on the amendment, comments by Rep. Frank) By Fawn Johnson and Sarah N. Lynch Of DOW JONES NEWSWIRES WASHINGTON -(Dow Jones)- A key House panel on Thursday attached to a broad financial overhaul bill language that would give federal watchdogs massive new authority to audit the Federal Reserve. The House Financial Services Committee's 43-26 vote on the Fed auditing amendment, introduced by Rep. Ron Paul (R, Texas), concluded weeks of debate on a bill to create a new council of regulators to wind down large institutions that pose a risk to the economy. The committee has postponed a final vote on the bill until after the Thanksgiving holiday. For more than 20 years, Paul has championed significantly neutering the Fed. His amendment removes restrictions on the Government Accountability Office's auditing authority, giving it access to every item on the Fed's balance sheet. Paul...

The MBA reports a record 14.4 percent of mortgage loans were either one payment delinquent or in the foreclosure process in Q3 2009. This is an increase from 13.2% in Q2 2009.

The Commerce Department reported Wednesday that Housing Starts dropped a whopping 10.6 percent in the one month period October 2009 versus September 2009, and fell 30.7 percennt below an already awful number last October 2008. This is in spite of the $8,000 first time home buyers credit the Central Planners decided was a key stimulus tactic. New Building Permits fell 24.3 percent from last year's lousy October number. Mortgage Applications fell 2.5 percent last week. Clearly the Central Planners' stimulus plan is not working. The reason is simple, they have targeted a small minority to get the trillions of dollars of government spending, and have failed miserably in conducting a strategy that would get cash into the hands of all American Households. If you have a clunker and are willing to buy a tiny car with a certain gas mileage performance, if you are buying a new home for the first time, or if you are one of the largest financial companies on earth, you get the money, and...

Nov. 16 (Bloomberg) -- The Federal Reserve Bank of New York “severely limited” its ability to save taxpayer money on American International Group Inc.’s rescue by refusing to compel banks to take concessions, said a Treasury Department watchdog. The Fed didn’t use its “considerable leverage” as regulator of several of AIG’s counterparties to force them to accept so-called haircuts on credit-default swaps, Neil Barofsky, special inspector for the Troubled Asset Relief Program, said today in a report. The regulator gave up efforts to negotiate discounts from the banks after two days and opted to pay them in full for $62.1 billion in swaps, Barofsky said. “These policy decisions came with a cost -- they led directly to a negotiating strategy with the counterparties that even then-New York Fed President Geithner acknowledged had little likelihood of success,” Barofsky said. Timothy Geithner, now Treasury secretary, was among officials who took over negotiations with the banks from AIG in N...

by CalculatedRisk on 11/11/2009 08:47:00 AM Matt Padilla at the O.C. Register writes: Foreclosure notices hit record 8,800 Graph from O.C. Register. ForeclosureRadar.com reports that outstanding foreclosure auction notices in Orange County rose to 8,895 at the end of September, the highest in this housing downturn and probably the highest ever. September’s total was up 5% from August and 90% from a year ago. Padilla provides a second graph (see his article) of 90 day delinquencies, foreclosures and REOs. He writes: [The second] chart shows that the ratio of borrowers having missed at least three monthly payments is at nearly 7% and has risen every month for more than three years. It’s incredible that while so many mortgages are delinquent, banks are only holding 0.26% of first mortgages as REOs. Loans in the trial modification period are still considered delinquent, so that might explain some of the increase in 90+ day delinquencies. But that doesn't explain the ...

Three banks failed on Friday, bringing the annual headcount to 123. Two in Florida and one in California will cost the FDIC roughly a billion dollars… money they haven’t had for months.

by CalculatedRisk on 11/15/2009 09:20:00 AM From Bloomberg: China’s Liu Says U.S. Rates Cause Dollar Speculation “The continuous depreciation in the dollar, and the U.S. government’s indication, that in order to resume growth and maintain public confidence, it basically won’t raise interest rates for the coming 12 to 18 months, has led to massive dollar arbitrage speculation,” [Liu Mingkang, chairman of the China Banking Regulatory Commission said] ... Liu said this has “seriously affected global asset prices, fuelled speculation in stock and property markets, and created new, real and insurmountable risks to the recovery of the global economy, especially emerging-market economies.” President Obama will be in China today, and there will probably be some dicussion of China's exchange rate policy.

by Charles Maley Although Gold might be a bit stretched in the short term, it is not hard to see where it could go a lot higher in the long run. I found some interesting charts on Agora Financial website that fall into the “a picture is worth a thousand words” category. First, let’s look at the expansion in the monetary base. The monetary base is not only in a vertical ascent, but also without precedence. We have never seen anything like this. The monetary base is essentially the Federal Reserve Bank’s currency and reserves. Now, with an expansion like this you would think inflation would be rearing its ugly head, but as hedge fund manager John Paulson points out “that’s because this base money has not yet been lent out and multiplied throughout the economy. Yet the monetary base and money supply are highly correlated, almost 1-to-1 between the two.” So what does this mean? I think it means that soon or a later the money supply will follow, and if money supply grows faster th...

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From Floyd Norris This year, a subcommittee of the House Financial Services Committee held a hearing at which legislators sought no facts but instead threatened dire action if the chairman of the financial accounting board did not promptly make it easier for banks to ignore market values of the toxic securities they owned. The board caved in, which may be one reason why banks are reporting fewer losses these days. But the board’s retreat was not enough to satisfy the banks. The American Bankers Association is now pushing Congress to give a new systemic risk regulator — either the Federal Reserve or some panel of regulators — the power to override accounting standards. The view of the bankers is that the financial crisis did not stem from the fact that the banks made lots of bad loans and invested in dubious securities; it was caused by accounting rules that required disclosure when the losses began to mount. The superciliousness continues.

Health care reform squeaked through the House Saturday by a 220-215 vote as the threat of working during the Christmas holiday got the House version moving. The plan passed with virtually no discussion as speaker Pelosi squashed any attempts at questioning the bill or virtually any portion of the bill. Democrats must now be especially motivated to get this passed after viewing the results in Virginia and New Jersey, which could be a precursor to the 2010 elections. A loss of even a handful of seats next year could mean this type of bill won’t get passed in the next session. It was interesting to note that one Republican voted for the bill while 29 Democrats voted against it.

First time unemployment topped 10% for the first time since 1983 (see chart below courtesy chartoftheday.com), well above the Administration’s peak estimate of 8.5% they projected in February. Temporary employment, typically a leading indicator of hiring, rose for the third straight month, increasing 33.7K in October. Without that increase the employment picture would have been significantly weaker. Unofficial estimates of the “underemployed”, i.e. those wishing to be employed full time but unable to obtain employment, rose 1% to 17.5%. The second chart below, courtesy of Barry Ritholtz, shows the number of unemployed longer than 27 weeks, dating back to 1948. Even if the economy stabilizes and hiring moves back into a 150K-200K per month range, it could take 3-5 years to achieve prior levels of employment.

"Now the Fed wants to be the systemic risk regulator. But the Fed is the systemic risk. Giving the Fed more power is like giving the neighborhood kid who broke your window playing baseball in the street a bigger bat and thinking that will fix the problem. I am not going to go along with that and will use all my powers as a Senator to stop any new powers going to the Fed. Instead, we should give them less to do so they can do it right, either by taking away their monetary policy responsibility or by requiring them to focus only on inflation." —Senator Jim Bunning questioning Ben Bernanke

As most working taxpayers will soon realize, beginning November 1st, the state increased withholding by 10%. Officials are saying that this is not a tax increase because at tax time you will owe no more that before the increase. Wrong! It is a tax increase because all withholding is borrowing money from taxpayers without paying interest, and an increase in withholding is borrowing more money without paying interest. The result is more money for government and less for taxpayers, which to reasonable people is a tax increase. Many taxpayers declare fewer dependents than the number to which they are legally entitled to assure that their tax liability is fully covered. If you are in that category, you have the ability to counter this grab for more of your money by changing the number of dependents you declare. However, it is always a good idea to consult with your tax preparer first, before making a change. To change the number of dependents you declare, you will need to fill out a DE-4 fo...

Thank you for writing to Governor Schwarzenegger in opposition to Assembly Bill 1288. Due to a technical error, you may have inadvertently received an outdated response from the Governor's Office, and I apologize for any confusion this may have caused. Our office is pleased to inform you that the Governor vetoed AB 1288 after extensive consideration of arguments from both supporters and opponents of the issue. To read the Governor's veto message for the bill, please visit the Official California Legislative Information website at "http://www.leginfo.ca.gov". Again, thank you for taking the time to write. The Governor values your suggestions on how government can better serve the people of our state. Sincerely, Lauren Thurston Office of Constituent Affairs

16 Oct 2009 09:21 AM PDT From MarketWatch: Summers: 'Time has come' for deep change for banks White House senior economic adviser Lawrence Summers challenged U.S. financial institutions Friday to think about what they can do for their country by stepping up and accepting the regulations imposed upon them in the wake of the largest financial crisis since the Great Depression. "Financial institutions that have benefited from government support can, should and must use this moment to think about what they can do for their country -- by accepting the necessary regulation to protect the American people," Summers said in remarks prepared for delivery at the Economist's Buttonwood Gathering in New York. "There is no financial institution that exists today that is not the direct or indirect beneficiary of trillions of dollars of taxpayer support for the financial system." ... "The time has come for fundamental change in the financial sector of our economy...