TUSCALOOSA, Ala.—Former Birmingham Mayor Larry Langford was sentenced Friday to 15 years in federal prison for taking some $235,000 in bribes in return for lucrative bond work.
But investment banker Bill Blount pleaded guilty to making the payments, and lobbyist Al LaPierre admitted being the middleman. Mr. Blount, the former state Democratic Party chairman, last week was sentenced to more than four years in prison. Mr. LaPierre, the former executive director of the state Democratic Party, got four years. Mr. Blount also was ordered to pay $1 million to the government, and LaPierre $470,000.
Wait a second....
How come Blount and LaPierre only got four years?
And how much did these guys - and these banks - get?
Mr. Langford was accused of telling major Wall Street banks J.P. Morgan Chase & Co., Goldman Sachs Group Inc., Bank of America Corp. and the now-bankrupt Lehman Brothers to include Blount's investment banking firm if they wanted to handle the county's bond work.
They just got sued, right?
Yep.
Just a "cost of doing business"?
Kinda like Pfizer and the Federal Reserve Board of NY?
No wonder these banksters keep at this crap - we prosecute and lock up the people they screw around with, but the banks themselves, just like the big drug companies, get fined in tiny amounts that amount to one percent or less of their market cap.
Yeah, that's a deterrent against criminality.
... about fixing housing finance through a completely redesigned system instead of trying to "fix" Fannie and Freddie (I know, believing a politician is not lying is always dangerous) I offer up the following suggestions.
However, if we're going to leave FHA and VA loans in place (and we can do the issuance via Ginnie Mae, which already exists) we need to seriously restore underwriting standards. Specifically, the following are minimums I believe we must demand:
Task the DOJ with enforcement of all statements on mortgage loan applications and paperwork. You lie, you go to prison. Period. End of discussion. No more "fraud for housing" .vs. "fraud for profit" - fraud is fraud, you go meet Bubba and lose your house. Investors have to be able to fairly evaluate what they're buying and so does the government!
In the private market I would radically revamp the securitization system such that:
That would be a good start.
PS: As I write this the pumptastic CNBS crooners claim that Barney Frank has repudiated his statements. Even though he apparently made them originally in public.
Mr. Frank, did you truly wake up and decide to do the right thing or not? I think you owe everyone an answer.
March 5 (Bloomberg) -- Fannie Mae and Freddie Mac bondholders shouldn’t assume the government will make them whole on their investments as Congress retools the companies, House Financial Services Committee Chairman Barney Frank said.
Heh, who's the biggest individual bondholder?
Mr. Bernanke, the bond market is on line #1!
Frank continues:
A “whole range” of options is being considered for investors in the two government-seized companies, “from paying nothing to a haircut to whatever,” said Frank, whose committee oversees Fannie Mae and Freddie Mac.
Nothing? You mean zero, zilch, bupkis?
That would be rich. After Bernanke stepped in and bought some $200 billion of their debt, to have it "marked to zero" would be the ultimate slap in The Fed's face for buying that which I have argued is impermissible under the law.
What an elegant solution to a difficult problem - "oops - tear 'em up jackass - you should have known better than to buy something that you weren't allowed to and was patently worthless!"
The irony of that outcome would be delicious. Yes, I know I'm dreaming here - or am I?
“Please don’t think this is federally guaranteed, I don’t think it is, I don’t think it should be, I don’t feel any obligation to bail you out,” Frank said. Congress will “certainly not” extend any new protections to bond and mortgage-security investors beyond what exists, Frank said.
Oh. You mean that the face of those prospectuses mean what they say? You mean this is real?
Uh, the market is kinda ignoring that right now, isn't it?
Yes, I think it is.
How about this for a clear statement?
“We’re not remaking Fannie and Freddie,” Frank said. “We’re going to start from scratch and do housing finance.”
Go ahead folks, keep buying. This is spelled "opportunity", thank you very much. Now please excuse me while I go put a few chips on "red."
PS: Why are these stocks still listed again?
Now this is getting interesting; we appear to have a police department that has invited an 18 USC 1983 lawsuit:
The district even set up a secure Web site so the police could have access to pictures and other information, according to attorneys in the case.
"Quite honestly, the police knew about these devices," said Marc Neff, a lawyer representing Perbix. "They were not in the dark about the fact that these computers were being tracked."
Policemen don't have the authority to issue search warrants. Only judges have that authority.
Every person who, under color of any statute, ordinance, regulation, custom, or usage, of any State or Territory or the District of Columbia, subjects, or causes to be subjected, any citizen of the United States or other person within the jurisdiction thereof to the deprivation of any rights, privileges, or immunities secured by the Constitution and laws, shall be liable to the party injured in an action at law, suit in equity, or other proper proceeding for redress, except that in any action brought against a judicial officer for an act or omission taken in such officer’s judicial capacity, injunctive relief shall not be granted unless a declaratory decree was violated or declaratory relief was unavailable. For the purposes of this section, any Act of Congress applicable exclusively to the District of Columbia shall be considered to be a statute of the District of Columbia.
Good luck to the local police department - they may need it, along with the school district.
Active cooperation of the school and police department to violate 4th Amendment rights against searches without a warrant having issued is a potentially-huge problem.
It's bad enough when the school attempts to arrogate to itself the right to search your home.
It's even worse when they conspire with the local cop shop and "don't bother" to get a judge involved to sign a search warrant.
Never mind the school who tried to claim originally that this was "just a little IT thing" used for internal purposes to find stolen laptops. Now we discover that the cops had their own little backdoor into the spying system, courtesy of the school administration and IT department, all used without lawful search warrants.
Hint to the lawyers: Sometimes it's better to keep your mouths shut.
The mortgage firms are looking at every loan more than 90 days past due and “asking us basically to give them all the documentation to show that it was properly underwritten,” JPMorgan’s Scharf said. “We then go through a process with them that takes a period of time, and literally it’s every loan, loan-by-loan, and have the discussion on whether or not we actually should buy the loan back.”
That's exactly what I said would happen more than two years ago.
EVERY LOAN.
If there was appraisal fraud OR
If there was income fraud OR
If there was DTI fraud OR
If the automated underwriting was gamed OR
If there was asset fraud
THEN the bank gets rammed with a repurchase demand on the bad paper - paper that is 90 days+ and, in essentially every case, dramatically underwater.
The "dream" that this will result in "only" $7 billion in losses (30% of the repurchased amount) is a fantasy.
The most common include inflated appraisals or falsely stated incomes in the loan applications, said Larry Platt, a Washington-based partner at law firm K&L Gates LLP who specializes in mortgage-purchase agreements. The government agencies hire their own reviewers who go back and compare the appraisals with prices from historical home sales, he said.
Ding ding ding ding ding ding.
The truly ugly news isn't found in these mortgages. It is found in the second lines - HELOCs and "Silent Seconds" - that are behind these agency mortgages. Those are worth zero once the first defaults, and when the repurchase demand is perfected the auditors are going to force these loans to be recorded at their likely recovery value - which is zero.
There are literal hundreds of billions of dollars worth of that trash on all of the big banks balance sheets, and all of it is being carried under assumptions that nearly every one of those loans is "money good." 80% of the dollar value of these HELOCs and Seconds are in the bubble areas and of those virtually all are behind an underwater first.
The assumption that these loans are "money good" is blatantly and intentionally false. It is a fiction that our regulators, examiners and auditors have foisted upon the public, and if you rely on it, you will get burned.
Oh, JP Morgan's net income for all of 2009? $11.7 billion.
They recorded $1.6 billion last year for this "expense", and I'm willing to bet that it's double that or more for the coming year, not to mention the impairment or outright write-off of the seconds.
That would be roughly 20% of their net earnings - not exactly an immaterial amount of money.
PS: $21 billion is tiny compared to the tsunami headed these folks' direction. In the end every piece of this bad paper is going to head back to the securitizers and originators. All of it - and the seconds behind that paper are all going to wind up marked to zero, because they are subordinate to an underwater first. It is simply a matter of time before the people who hold these RMBS and the more complex securities structured on top of them decide to come after the banks and, to the extent that they can prove malfeasance or misfeasance, these banks will eat it.
Resentment of the U.S. government and suspicions over the 9/11 attacks have surfaced in writings by the Californian identified as the gunman who shot two Pentagon police officers before he was mortally wounded in a hail of return fire.
Oh, that's not a right-wing thing - that's a lefty paradise! Specifically:
Signs emerged that Bedell harbored ill feelings toward the government and the armed forces, and had questioned the circumstances behind the Sept. 11, 2001, terrorist attacks.
The user named JPatrickBedell wrote the Sabow case was "a step toward establishing the truth of events such as the September 11 demolitions."
Demolitions eh?
Ah, a 9/11 Troofer. Got it.
The mark of the hard left, who are convinced that Dick Cheney ordered the towers blown up with explosives as a way to goad the United States into invading Iraq - all for that evil Texas Tea, of course.
I wonder how long it will be before we see the bastions of the left in the mainstream media call this what it is - home-grown terrorism conducted under the banner of the "troofer" who are convinced that our government killed 3,000 of our own citizens on 9/11.
"What is never, Alex."
Such intellectual honesty you have, Mr. Media Man.
So now we have Senator Dodd saying:
"I can't write regulations, this is way beyond the competency of Congress"
Really Mr. Dodd?
How about "Bankruptcy Reform"?
How about the CARD act, which as you can see from my Ticker yesterday, was instantaneously circumvented by the banks. Instead of "jacking interest rates" they simply put a CALL feature into their account disclosures, which now means you get raped by having the entire balance on your card due and payable literally on demand. (As an aside, how hard would it have been to say "no adverse actions" as a consequence of universal default, instead of what was actually done? Oh, and did banking lobbying interests recommend the language you did adopt?)
"The business community needs certainty on this issue," he said. "We ought to leave it to them to make the recommendations."
Really? Like the business community "recommended" OptionARMs, automated underwriting, blacklisting appraisers that didn't participate in outright fraud on property valuations, bankruptcy "reform", Credit Default Swaps, Synthetic CDOs and more?
Who's on the other side of the table? What other voice is there on input into this process?
None.
Now let's look at results. I would have no quarrel with a wildly business-friendly environment if it produced prosperity.
But it did not.
It instead produced asset-stripping, fraud, scams of various dimension, a huge housing and credit bubble and threatened the nation, if Hank Paulson is to be believed, not just with economic depression but literal martial law.
If I in concert with others took actions that threatened the destruction of our government by force, and thus gave rise to an argument that martial law would have to be declared, I would (justifiably) be held on charges of seditious conspiracy. Can someone explain why firms and individuals, acting between themselves in a fashion that leads them to effectively demand a $700 billion bailout lest the tanks roll, fails to meet this definition under the law?
We keep talking about how the government "saved us" from the depths of Hell - literally - with their "extraordinary measures." Whether it is Congress, The Administration or The Fed, all are credited with keeping the nation (and perhaps the world) from going over the cliff and straight down into the land of brimstone and sulfur.
But are we actually standing on terra firma, or are we playing Wile-E-Coyote dangling in the air?
Let's look at the facts.
Now consider this: There is neither the capital or the political will to go through another bailout cycle. Not now, not any time in the foreseeable future.
IF a sovereign nation starts a chain-reaction default (e.g. Greece, Spain, etc), IF there is a massive fraud discovered at one of the big banks, IF there is a speculative attack on a currency, any of a thousand IFs.
We won't be able to stop it.
Not The Fed, not The Government, not anyone.
We have been given the ability - a gift really - to pull the fuse on this mess. To lock up the nuclear financial weapons away from the kids. To let the adults in the room.
So far, we've not only done none of the above, we've gone further to concentrate and increase systemic risk.
We cannot withstand another attack.
Everyone wants to talk about health care. Sorry folks, that's a misdirection. A scam. It is simply a way to try to get more tax revenue - right now - to stave off a possible federal funding crisis. Treasury knows it, Obama knows it, and Congress knows it.
They won't tell you, but they know the truth.
We cannot withstand another attack.
We must break up the large financial institutions that caused this mess. What sort of act is more anti-competitive than going to the government and threatening it with economic armageddon if it does not hand you billions of taxpayer dollars? Whether it's a loan or a handout makes no difference - the very issuance of such a threat is a declaration of trust behavior banned under The Sherman Act, among others. We need no new laws to deal with this situation - we simply can and must enforce the existing ones.
We cannot withstand another attack.
Stiglitz, in a remarkable display of truth, said today that The Federal Reserve System is corrupt. He's right, of course. What other explanation is there for an institution that literally sat back and watched more than $10 trillion in fraudulent credit creation take place - all so a bunch of banksters could make billion-dollar bonuses? This must change - here and now.
We cannot withstand another attack.
But we're gonna suffer one, and soon, if we don't pull the fuse.
The Credit Default Swap monster has to be caged. I know I sound like a broken record, but it has to happen. Now. Today. I don't give a damn if the banks like it or not. I don't care if bankrupts all of them. It has to happen now.
The off-balance-sheet crap has to be exposed and valued, along with everything else, at the market. Yes, I know it will cause major problems for the banks. I don't care. It has to be happen now.
We have to get control of federal spending. We cannot spend $1.3 trillion more a year than the government takes in via taxes. We just can't. We're getting away with it right now because everyone is scared that Greece is about to blow the Euro Zone to pieces. But once that either happens or the fear recedes, the speculators will point their weapons of financial destruction here. We have either fixed the problem before then, or we're next.
And finally, we must know what The Fed is holding, what they've bought, what they've monetized, who got paid off and what sort of trash is hidden in the black hole known as their balance sheet. This means full audits - now and evermore in the future. No exceptions.
If you remember back when Paulson's "bazooka" was first discussed I said that the market calls all bets.
It did.
Within days.
We're there again folks, about to witness the market calling our leaders' bet again, and we are enjoying a respite only because there are other hookers in the room of nations with a worse case of crotch rot than we have.
But that's not a sign of strength - it is a sign of danger, for our own particular financial STD has not been cured.
We're running out of time to take the penicillin.
And hereeeeeeeeeees..... CENSUS!
In February, employment in the federal government edged up. The hiring of 15,000 temporary workers for Census 2010 was partially offset by a decline in U.S. Postal Service employment.
Yep.
Headline number was -35,000 and the unemployment rate held at 9.7%, both headline. Everyone's fear of a huge weather impact was instantly dashed, as the BLS said they couldn't quantify any changes in their sampling "accuracy." Given their methodology the most-likely place for any real impact to show up is in the hours worked, not the actual employment rate, and that did tick down by a tenth.
The internals in the household survey, however, showed real improvement.
Unfortunately we're nowhere near the 200,000 or so net job adds that we need to find in order to cover new entrants to the workforce, but these tables are a marked improvement over the previous months:
Essentially flat-lined. That's good, actually, off the household numbers.
Ah, that's where it came from. Essentially all of the "improvement" in the monthly household data came from those formerly leaving the labor force coming back in.
That is, there was no net hiring of new entrants to the labor force, but the insane rate of "drops" reversed and some of those who were discouraged re-entered the workforce. And indeed, if you look at the U-6 number you'll see that not-seasonally-adjusted it fell from 18.0 to 17.9. Note that on a seasonal adjusted basis BLS claims that the U-6 rate increased by three tenths (to 16.8 from 16.5), which is curious and implies that the seasonal expectation is for a big rise in shift out of "not-in-labor force" and other "marginally attached" people - and they didn't get it.
Interestingly enough if you look at the previous years monthly numbers do show a significant spike in this month. Is the BLS overly pessimistic with their seasonal adjustments or are we seeing a real turn? No idea - yet - but seasonal adjustments won't account for Census temporary hiring, which will continue through the spring (and then result in firing come summer!)
Everyone (myself included) expected census hiring to be significnat, and it is. The release of the data caused an immediate spike upward of a few points in the futures, but it also hammered the ten year Treasury rate (upward.)
The key is sustainability, and unfortunately the census employment will skew this in a way that is going to be extremely difficult to back out until the summer months when it ends and those people are laid off. If that hiring and the pay disbursed as a consequence produces a significant upward swing in spending, there could be a salutary knock-on effect in the private sector. But that's a big if, as it requirs that those people employed by the Census spend the money instead of paying down debt and deleverage their personal balance sheets.
All-in the report is a definite positive but right in line with expectations, given government activity. My short-term concern is the offsets from announced job actions in various state and local governments as they attempt to avoid their own insolvency, balanced by the Census activity.
Krugman sharts once again with an amazing bit of partisan hackery:
But while the blockade is over, its lessons remain. Some of those lessons involve the spectacular dysfunctionality of the Senate. What I want to focus on right now, however, is the incredible gap that has opened up between the parties. Today, Democrats and Republicans live in different universes, both intellectually and morally.
Ah, here we go - an appeal to morals. Why did I know - right in the second paragraph (and why did you bury the leade, Paul?)
Take the question of helping the unemployed in the middle of a deep slump. What Democrats believe is what textbook economics says: that when the economy is deeply depressed, extending unemployment benefits not only helps those in need, it also reduces unemployment. That’s because the economy’s problem right now is lack of sufficient demand, and cash-strapped unemployed workers are likely to spend their benefits. In fact, the Congressional Budget Office says that aid to the unemployed is one of the most effective forms of economic stimulus, as measured by jobs created per dollar of outlay.
But this makes an assumption Paul, and one that you and the rest of the Democrats have refused to face (to their credit, the Republicans haven't faced it either!): This sort of "bridge" or "pump priming" only works if there is underlying final demand that can come back.
But here's the problem - the so-called "stimluls" didn't do much in the US. Why not? It stimulated China!
The Senators have singled out a particular wind project in Texas for criticism. China's Shenyang Power Group, the U.S. Renewable Energy Group and a Texas company called Cielo Wind Power are involved in a joint venture to build a 648MW wind farm. The Senators says the project is on the verge of receiving $450 million in grants, despite the fact it uses Chinese-made turbines, and that the lion's share of jobs it creates are in China.
Yeah.
In point of fact, that 1603 "green" recovery act stuff has, thus far, diverted eight out of ten dollars outside of the United States.
This belies the real issue that underlies all of this.
Take Chicago. It used to be home to the Zenith picture tube plant in Melrose Park which, as you might surmise, made television picture tubes. It had been there for a long time.
But in 1998 it was announced that the plant would close, as the company was losing $300 million annually trying to compete with offshored production by people working in near-literal slave conditions with no environmental laws to add cost to the product. Thousands of good-paying local jobs disappeared.
I used to drive by that plant on a regular basis, the proud sign of American manufacturing throwing its illumination on I-294. My parents owned a Zenith television when I was growing up.
That's a microcosm of what's happened. We've offshored our production, by and large, to places like China. What has replaced these jobs are positions in finance, which is a parasitic enterprise - that is, it obtains the money that is "earned" not from producing things, but from siphoning off cash flow from everything it touches.
Such a shift is inherently destabilizing. We made up for it by running our credit cards to the moon, both figuratively and literally. We blew a bubble first in Internet stocks and then in housing, which allowed people to then "access" (the true word, "extract", is so ugly isn't it) the faux value that we claimed it. We, on balance, did so and spent it.
The error in Krugman's analysis is that he believes that all this "pump priming" will do the job and the economy will recover, allowing us to pay back what he avers is an effective loan.
My question to Paul and all those like him: How?
We can't support a financial system that consumes 1/4 of every dollar that goes into the economy, siphoning it off. The margins are not there to permit that. They never were, but refusing to attend to this, as Paul and his cohorts have done (and to be fair, the Republicans are no better in this regard!) is how we wound up with a debt bubble.
So what's the solution?
As much as you don't want to hear it there are only two answers:
Both of these outcomes require that the financial system's "grift" shrink dramatically. It cannot be otherwise. But #2 means the end of the social program "backstop" that we currently have, because it cannot be sustained.
We cannot spend $1.3 trillion more than we take in via taxes for these "support programs" indefinitely. Krugman thinks we can, but he's wrong. Iceland thought this, Greece thought this, Argentina thought this.
You know what happened in the former and latter, right? The middle nation in that list might meet the same fate. Their so-called "austerity measures", from my back-of-the-envelope calculation, won't work. It's nowhere near enough!
Now let's look at what did happen to Greece. Their 10 year bond offering went off at 6% - double what Germany is paying to borrow for the same amount of time.
What happens if our bond carrying costs double?
We carry, today, $8,026 billion (that's $8.026 trillion) in publicly held debt in the United States. Ignoring the $4.482 trillion in "intergovernmental holdings" (that's fancy speak for Social Security and Medicare "current issue" promises that we won't keep, as those "promises" back 20x that in claimed benefits for the next 75 years!) if we were financing the debt at our current 10 year rate we'd pay $289 billion a year.
Of course we don't do that - some of it is longer duration, some shorter. Last year it cost us about $180 billion in total, mostly because of the collapse in interest rates.
Now let's assume that we have a "Greecefire" here in the US and our Ten Year rate goes to 7%. Interest costs would go from $289 billion to $562 billion.
But that assumes we don't add to the debt, and we are. In fact, we added $1.4 trillion last year and will add $1.7 trillion this year. If we keep "pump priming" through the end of the decade (as the CBO says we will given their projections - and they are projecting GDP growth in the 4% range for the entire period!) we will go from the current $8.02 trillion to approximately $14 trillion in public debt by the end of the decade.
That figure, at 7%, would produce an interest cost of close to $1 trillion a year - or about half of all federal tax receipts.
So which is it Paul?
At some point we have to face the facts: We can't continue to spend more, as a nation or as individuals, than we make. We cannot make promises that are impossible to fund, instead putting it off with more borrowing. We must face the imbalances we have fostered in our economic system, along with the trade imbalances that we not only have fostered over the last 20 years but are feeding with so-called "stimulus" that instantaneously flows overseas instead of helping Americans.
There's plenty of blame to go around, but what is not helpful, and solves nothing, is ranting about how Jim Bunning's demand that these extensions in unemployment payments be offset with federal spending cuts somewhere else, or that they be taken from already-budgeted funds such as the TARP.
That, Mr. Krugman, was his objection. Not that the benefits were being extended, but rather that they were not paid for.
The liberals are always quick to pull out the national credit card. They've been doing so for the last 30 years. But this sort of spendthrift approach to everything that ails us has left us with a severely-imbalanced economic structure that no longer produces enough to carry its own weight.
The (credit) drunk needs a stint in detox Mr. Krugman, not another bottle of whiskey.
The rating company said GMAC commingled cash flows from multiple bonds in a single custodial account, Moody's said in a statement. This allowed GMAC to use cash from loans in one bond for principal and interest payments on another, it said.
By allowing the commingling, it "increases the likelihood that some RMBS deals may not be able to recover the amounts 'borrowed' by the servicer to fund advances or another RMBS deal if a servicer bankruptcy were to occur," Moody's said.
What?
Is that permitted? Legal?
When is a servicer not a fiduciary (effectively, a trustee) for the bondholder? It appears the answer, in this case, is whenever they feel like shuffling around funds and paying one bondholder with money that came in from a different deal.
Oh, we bailed them out too.
Several times.
So far.
Next question: Who else is doing this sort of thing? Or maybe the better question is "who's not doing this sort of thing?" The latter may be the shorter list.
How's this for "undisclosed risks"?
Gee, how do you like the rape job that the banks just served up on you?
(Click to enlarge)
Read that white part carefully, and then make sure you read the inverted part.
If you:
The bank can immediately close your account without notice AND DEMAND YOU PAY THE ENTIRE BALANCE ON THE ACCOUNT IMMEDIATELY.
Oh, and when you can't (because you thought you had time to pay) you are then in default again for not paying "on time" and they can sue and add attorneys fees and costs.
I thought this crap was going away?
This, by the way, is from Chase, I have the entire section of the statement (all pages), and is claimed to be effective on 22 February.
So much for the CARD act banning practices like this, eh?
This is effectively a "CALL" option on your credit card. This "feature" is why when I ran MCSNet I refused to ever accept a bank credit line for any purpose whatsoever for the company - they all had this sort of tricky crap in them somewhere. Every one. In each and every case such a clause gives the bank the right to force you into bankruptcy if you ever actually use the credit for anything other than as a cash-management tool (that is, as a means to pay for something over time), as they can declare the line in default any time they'd like and accelerate repayment, demanding the full balance. You either have it (in which case you didn't really need the credit, right?) or you're bankrupt - at their sole discretion.
TELL THE BANKSTERS TO SHOVE THIS CRAP UP THEIR BUTTS - WITHDRAW YOUR MONEY AND REMOVE YOUR BUSINESS FROM ANY LENDER WHO HAS SOMETHING LIKE THIS IN THEIR AGREEMENTS - ALL OF IT.
I warned people a year ago to get out of debt, especially revolving debt or any other sort of credit where the terms could be changed on you, in my "Ten Things" Ticker of June 8th of 2009.
This sort of trick is why.
Wall Street got bonuses, taxpayers paid the bill, America got a deep recession, and the world got the worst financial crisis in history. Financial holocaust deniers obstruct solutions that can help prevent the next crisis and would stick taxpayers with the bill again.
Yep.... listen to the shills try to deflect the voice of reason....
Disgusting, isn't it?
Tell their advertisers what you think. It's the only way to be sure....
Never mind the man behind the curtain, who won't utter the word:
The Labor Department reported Thursday that productivity jumped at an annual rate of 6.9 percent in the fourth quarter, even better than an initial estimate of a 6.2 percent growth rate. Unit labor costs fell at a rate of 5.9 percent, a bigger drop than the 4.4 percent decline initially estimated.
In the real world this means:
That's all.
And by the way, reduced pay per unit of work spells DEFLATION.
Now here's the problem: We have huge public-sector labor unions that are resisting this force. Yet this force is exactly what has to happen in order to bring the economy back into balance.
We have "advanced" promises made to these people - $200,000+ pensions and other similar obscenities - even though doing so is a ponzi scheme that is impossible to maintain. We have continually cow-towed and pandered to these unions, including educators, police and fire and all other manner of public sector employees with wage increases that exceed growth in aggregate output per-person when one counts both salary and benefits.
This, of course, cannot continue. It is yet another example of the expanding gap that opens up between two exponential functions - for those who have forgotten my favorite pair chart (two exponential curves, one with a slightly-higher exponent than the other), here it is again:
I understand that everyone wants to avoid taking the pain. I understand that everyone claims that "its not fair!"
None of this changes the facts. You cannot continually offshore your better-paying labor to China for the purpose of being able to have a $30 DVD player, destroying the $40/hour skilled job base and replacing it with $7/hour burger flippers and espresso-shot-pullers, and maintain the ability to commit compound annual growth rates of 5, 6, 7% or more to public-sector employees. Doing so inevitably destroys the tax base necessary to meet those commitments, and once the destruction has occurred it cannot be un-done.
You cannot falsely-report "growth" that is in fact no such thing, but rather is simply the addition of more debt, thereby creating false demand that never existed on an organic basis, and continue this process forever.
The person who loses their job can continue to spend as if they have not - for a while. They can run up the credit cards - for a while.
They can do so until the credit card company discerns that the ex-employee has no money, and thus will never pay them. Once that happens the credit card is cut off.
States, municipalities and nations are no different than people in this regard. We have played this game for 30 years. We have promised people they could have unlimited health care, unlimited prescription drugs and unlimited, compound increases in salaries and benefits. At the same time we have permitted our corporations to send their labor base overseas, destroying the income base to purchase these products and the tax base required to pay those benefits. All of this has been "facilitated" by a financial system that grew from about 7% of the marketplace to well north of 20% (in 2007) before it all fell apart.
Instead of allowing it to fall apart and return to a 5-7% of the market, which would be sustainable, politicians instead created false final demand of about 9% of GDP (~ $1.2 trillion annual increases in deficits on a $14t GDP) and then added $13 trillion of "guarantees" in the form of funny money to the financial system to prevent it from imploding (roughly equal to the entire financial debt in the system, which currently stands around $16 trillion.) This "prevented" the immediate recognition that the derivatives written by these firms were nothing more or less than a gigantic fraud, as there was no ability to pay - not at origination, not at maturity, not ever.
But none of this game-playing changes the mathematical fact that:
The actual private sector production worker is now being forced to recognize this. He's being told to work harder and longer for less money (per hour) or lose his job. That's what the statistics say. This sort of movement in the private labor force is unprecedented - it in fact exceeds that which formerly was accomplished with computerization in the 1980s and 1990s - and this time it's actual labor, not the introduction of new technology.
The first step to solving problems is admitting to what they truly are.
The recent pronouncements and announcements out of both the new governor of New Jersey but also California, where they have attempted to play "extend, pretend and charge-it-up" more and worse than anywhere else in the nation make clear that the credit line has run out and we either face the facts - like it or not - or we get the clue-by-four upside the face.
As usual, the politicians thought they could extend, pretend and lie until after the election. As in 2008, they're wrong, and if they don't cut it out we'll get a repeat of the 2008 disaster but this time around it will be much worse.
Welcome to 2010.
Greece is now whining that their "austerity" should bring gifts - from Germany:
“We have fulfilled to the utmost all that we must from our side; now it’s Europe’s turn,” Papandreou told his ministers, according to an e-mailed transcript. “It is a historic moment for the European Union.”
No it's not.
Honest accounting is its own reward. So is fiscal prudence.
You're owed nothing Greece.
More importantly, there's no money. Not just there - here too. Witness the layoff/hirebacks in California and New Jersey's new governor - the latter who told the truth for the first time by a state politician in 30 years.
You wouldn't know it from the pumper brigade on Tout TV, of course. They claim it's all getting better.
Really?
Borrowing and spending 9% of GDP by the government to falsely inflate final demand is "getting better"?
No, it's hiding the truth, and while it can continue for a while, just as you can do the same thing if you lose your job, continuing to run up your plastic until your credit card company figures out that you lose your job and will never pay them back, so can governments.
Unfortunately instead of solving the problems in our economy and financial system - which would have resulted in the bankruptcy of some very powerful people and firms - we decided to lie.
Just like Greece, just like Italy, just like the rest of the world.
Politicians are very good liars. Indeed, it's pretty much all they do.
But irrespective of how much you want to lie, or how much you do lie, at the end of the day when there is no money left what your "balance sheet" says you have is immaterial.
Only cash pays the light bill my friends, and the cash is insufficient to cover the demands of those who want to suck on that government tit.
This is math - not politics.
If you remember just a short while ago I reported on what certainly appears to be a very clumsy scam pulled by the BLS in their so-called "inflation" reading published on the 19th of February - where the numbers they presented simply didn't add up, and as a consequence put forward a false CPI, or inflation number.
Curiously, we haven't heard anything from the BLS on this "error".
This, of course, is only an "error" in that it is not the actual means by which the BLS is "supposed" to report "inflation."
But the BLS has twice in the last 30 years revised their methodology, both times with the intent of understating "inflation."
Why? Well, a big part of the reason is that the law says that various benefit programs are supposed to be indexed to inflation. By intentionally understating inflation Senior Citizens and others on various fixed-income entitlement programs funded by government get intentionally screwed.
The Senate yesterday rejected a $250 one-time check to Seniors and others who have been so-screwed for the last two decades:
President Barack Obama has called for Congress to approve the payments to make up for their benefits not increasing this year, but the Senate defeated it 50 to 47.
....
Social Security payments for the elderly and disabled will stay flat this year for the first time since 1975 because they are tied to consumer prices, which decreased amid the worst economic recession in 70 years.
Of course the real problem doesn't lie here. As is usually the case the media won't talk about the fact that the current inflation rate, if measured under the "old" methodology, never went anywhere near zero.
How much does this "count"? Tremendously so. Over a ten year time frame understating inflation by 7% results in your Social Security payments being half of what they would otherwise be. If the understatement is by just 3% you get a 35% underpayment at the end of a ten year period.
Of course what the media reports is the "one time" payment was rejected, but what they don't report is that seniors have been screwed for three decades by intentional book-cooking in the government.
And by the way - no, there is no possibility of the government "fixing this" and paying what the law says they should. The money doesn't exist.
But this scam, along with dozens of others, is how our fabulous government managed to run its Ponzi Scheme for as long as it has - a Ponzi that is now collapsing, irrespective of what you're being told by the vacuous bobbing heads on national television.
If you're a senior and been paying "membership dues" to AARP, you might want to ask them why their much-vaunted "lobbying" and "public education" campaigns haven't focused on this for the previous 20 years - and why they sold you down the river.
Hope you like your kids (and they like you) Seniors, because the government tit is rapidly running dry.
In a nice rant intended to be an attack on AG Cuomo (who would like a "better job", natch) Dickie once again leads me to ask: "Did you pay extra at God's brain handout desk for the vacuum between your ears?"
Dick, let me ask a few "pertinent" questions....
If the "primary business" in a given state was selling crack, would you propose that doing so should be ok because, well, it's the primary business?
What if it was ripping off little old ladies?
What if it was selling swampland as "pristine real estate"?
What if it was marketing drugs that were laced with cyanide?
Or faulty cars (exploding Pintos anyone?)
If the company doing any of those things was the dominant employer in a given state, then the AG should give them a pass, right?
Oh I know, that's not what you meant.
It is, however, what you said.
If you want to go after Cuomo's record with regard to HUD, that's a valid area to explore, and Bove started there. But Fannie and Freddie's mess is not, in the main, due to subprime mortgages, nor did HUD have anything to do with OptionARMs and all the other tricky crap. Indeed the primary problem is the garbage securitizations - most of which had nothing to do with the GSEs, along with synthetics and other dubious piles of dog refuse dreamed up by Wall Street.
But arguing that an Attorney General, who's charge is to enforce the law no matter who is committing the crimes - that is, bring suits and criminal charges against people who do bad things as the laws of a given state proscribes, should exempt certain big and powerful corporations and/or individuals from those laws because they employ lots of people and/or bring in lots of tax revenue is, in effect, to demand that a State's AG partner with the Mafia!
Some of us - hopefully the dear readers of The Ticker - are too smart for that sort of rank endorsement of outrageous (and perhaps criminal) conduct and instead believe (and demand) that the correct thing for Wall Street to do is behave both ethically and lawfully.
If they do that - behave ethically and lawfully - they have nothing to fear from Mr. Cuomo - or anyone else.
BRUSSELS, March 3 (Reuters) - Spain wants the European Union to use a planned public prosecutor's office for the region to protect the euro currency against speculators, Spanish attorney general Candido Conde-Pumpido said on Wednesday.
Do the prosecutors have a mandate to go after all the nations - perhaps including Spain - that cooked their books?
Why do I already know the answer to that question....
"Doubtless if there were a public prosecutor and there was a combined attack against the single currency, the prosecutor could coordinate the legal response vis-a-vis that attack."
Doubtless: Up yours. Stop lying and the problem won't present itself.
Oh wait - that would mean you'd have to close a bunch of your big banks, right? Care to return the AIG pass-through payments?
That's crickets I hear, crickets....
Today most hacked PCs run Microsoft's Windows operating system, and the company has invested millions in trying to fight the problem.
That's because the operating system was designed for backward compatibility with Windows 95 and 98 first (and 3.1 before it) which had no concept of permissions or privileges. It was (until Windows 7) thus inherently insecure and even Vista (and Win7) can be told to be insecure to deal with all those "legacy issues."
In short, these machines are infested (not infected, infested) because their operating system has historically been full of security holes (this has improved, especially in Windows 7, to be fair.)
So what does Microsoft propose?
So who would foot the bill? "Maybe markets will make it work," Charney said. But an Internet usage tax might be the way to go. "You could say it's a public safety issue and do it with general taxation," he said.
That's nice.
Sell an insecure operating system and then get someone else to pay a tax because they bought an arguably-defective product you sold?
How about this instead Microsoft?
For each computer infested, the publisher of the operating system sold to that user is assessed a fine of US $100,000 by the Department of Justice.
I bet that would get you to improve security quite a bit - or bankrupt your ass.
PS: Total number of viruses and other malware found on my rather-high-profile Freebsd servers in the last ten years? ZERO. Put that in your pipe and smoke it sir.
Medivation, if you've been under a rock this morning, announced bad results for an Alzheimer's drug (which Pfizer was involved with as well) and was destroyed this morning to the tune of 70%:
A quick check of option transactions yesterday shows that a lot of people were placing bets. Zerohedge put forward the premise (as did Livevol) that there was massive insider trading.
Maybe.
But it was Livevol's time & sales report that caught my attention. Specifically:
This sure smells bad. But that it was a spread does not necessarily mean that the trade was taken on inside information. Indeed, it might mean the opposite.
Consider that if both positions were sold then the trader got $14 + $17.50 = $31.50 per contract, assuming a 1x1. It actually looks like, however, a 1x2 (2x PUTs) with about 8,000 calls and twice as many PUTs.
So how does the trader win or lose?
Let's plot it out, assuming these contracts were sold:
This actually looks like a fairly reasonable trade going into a binary event like this. It loses under $13 or over $79, roughly, and makes the maximum profit at $40, with a couple of weeks to go. Yes, it has the potential to make $30 million smackers, which sure isn't shabby!
As of right now, with the stock trading $13.21 (as I wrote this), the trade is profitable - barely.
Insider trading or smart trading? Heh, that's a pretty good range! Even if the drug had hit, would it really have spiked up over $78 - and on a miss under $13?
Well, the trader probably thought not. So far he's right.
But a quick analysis of this trade doesn't appear to show a clear directional bias, which would have, given the money involved, been pretty clear evidence of inside information. Indeed, the "centroid" of the spread was right near the closing price yesterday.
This looks like a probability trade to me, which is exactly what you want to do when there's a news event and you think the options are rich at their implied volatility given what you think is going to happen. Indeed, I remember the Dendreon (DNDN) AC decision a couple of years ago during which I was doing spread trades like a madman, and made some nice coin doing it. I no more knew anything about the outcome of the AC than did the man in the moon but I saw an opportunity with a complex option spread and put it on. As the trade I put on had a defined risk I figured out how much I was willing to lose and stuffed size on as the decision approached - it sure looked big, but the net exposure, when it was all said and done, was reasonable.
I'm the first one to jump on an insider-trading scam if I see one, but this time, without more information to make me suspicious, I don't.
Disclosure: No, that trade wasn't mine - no position.
Disclosure #2: Nice analysis software eh? ThinkOrSwim folks. Really. And no, they don't pay me to say that :)
The latest non-manufacturing ISM is out, and schizoid is the best word I can use to describe it. Here's the table, appropriately highlighted:
Activity and production slowed its rate of acceleration slightly. New orders, however, accelerated a bit from their former "above replacement" rate.
The amusing part is that inventories are being drawn down, which is congruent with this. So all is right with the world, right?
Well, no. Inventory sentiment is that there's still too much inventory in the system.
So non-manufacturing (services) businesses are advancing order and production activity, while at the same time they think they have too much in inventory.
Uh......
In addition on the manufacturing side the current month showed deterioration both in production and new orders, and a SLOWING rate of change in inventory draw (instead of a quickening one.)
Uh, yeah.
Schizoid we be, trying to figure out whether we're actually going to see real final demand show up or if, as I have maintained for the last year, this is all a chimera of government borrow-and-spend - a chimera that is soon to come to an end and stick producers with huge amounts of unmarketable inventory.
CNBS' Kudlow and the rest of the "financial media" are desperate to get you to believe it's not the second. That "demand" - organic demand - is improving. This despite the raw mathematical fact that between Fiscal 2009 and Fiscal 2010 we're going to spend $3.1 trillion more than the government takes in, which incidentally is about $2.7 trillion more than was being "overspent" before the collapse. Put another way, that is about 10% of GDP which is not actual final demand but instead is comprised of the government borrowing money and showering it on the economy.
Ben Bernanke's helicopter? Nope - try Nancy Pelosi, Harry Reid and President Obama, and let's not forget that there is a sizable percentage of the population that not only believes that "President Obama is gonna pay my mortgage!" now, but that he'll continue to do so - and that he can continue to do so - forevermore.
Uh huh.
On that point, incidentally, don't talk to people in government contracting. I am hearing repeated reports of major shifts coming after the end of the quarter - that is, March 31st.
The Tinfoil brigage is out in force on this, claiming that we're about to have a "catastrophic" forced dollar devaluation. If that happens I'll eat my Wall Street Journal (part of a page anyway) on webcam for you all.
No, what's coming folks is major cutbacks in government budgeting, and it's not voluntary. Folks are putting in commitments on the current fiscal year to spend NOW rather than into the 3rd and 4th fiscal quarters.
This is normal coming into September 30th because of how the government does things. If you don't spend all of your budget, that which you "didn't need" will be stolen back for the next fiscal year. Thus there is always a mad rush to commit funds before the end of the Federal Fiscal year - always.
For this to happen now, with an end-of-second-quarter deadline, means that the government foresees either a major realignment of budgetary spending (and everyone is thus protecting claimed budgets by spending them NOW lest they be clawed back for other purposes) or worse, they foresee a problem with the bond market.
This also feeds into the manic desire to pass "health care reform" now, even though there will be no benefits to you, even as claimed by government, until 2013 - but the tax increases will start right now. The truth is that the "benefits" will come never and this entire "plan" is simply a scam to try to scare up more revenue that the federal government desperately needs, as the tax receipt numbers have absolutely gone through the floor.
You hope we don't get a bond-market blowup folks.
Really.
