And here they are, ordered, and numbered for the year so far, and these are, of course, in addition to the rather unusual Thursday closing yesterday.
So, no closings last Friday, and only one this Friday.
Things may be slowing down.
So, here is the graph pr0n with trendline:
Thomas Joseph Petters was convicted of running a Ponzi scheme, and he was sentenced to 50 years in prison, which has him released when he is 102.
There should be more of this, because it would deter these guys in the future.
The idea of 3-5 in a minimum security prison, followed by a lifetime of leisure does not cut it.
Well, today is jobless Thursday, and the the new unemployment numbers disappointed big time, with initial claims rising to 460,000, as opposed to falling slightly to 435,000, with the 4-week moving average rising 2,250 to 450,250.
On the bright side, continuing claims fell by 131K to 4.55 M, though one wonders how much of that was because of Tom Coburn’s petulant filibuster against extended unemployment benefits, which likely has depressed the number, which (full disclosure) has effected me directly. (Will no one rid me of ……… Oh, never mind.)
Meanwhile in consumer spending, February consumer borrowing fell at a -5.6% annual rate, wiping out, and then some, the growth in consumer borrowing in January that had economists crowing, though the Institute for Supply Management’s service sector index grew faster than it has since July 2004 in March.
On the brighter side, delinquencies in consumer loans fell in the 4th quarter of 2009.
In the world of national finance and central banks, we have a few developments with the 3-year, 10 year, and 30 year treasury notes falling and their yields rising, which implies that investors expect interest rates to increase, at least a bit.
Meanwhile, in central bank land, the Bank of England has left its benchmark interest rate and its quantitative easing unchanged, and the Bank of Korea also left rates unchanged.
In real estate, it’s been a pretty busy few days with the 30 year fixed rate mortgage hitting an 8 month high, which, unsurprisingly has depressed mortgage applications.
In residential real estate, foreclosures are still rising, and distressed home sales hit a new high of 29% in January, though delinquencies on sub-prime mortgages fell for the first time since 2006.
I’m thinking that the sub-prime delinquency rate fell because we have finally run out of people who have those mortgages who haven’t yet been forced out of their homes.
In commercial real estate, mall vacancies have hit an at least 10 year high, there are no records prior to this, and office vacancies hit 17.4%, the highest since 1994.
Meanwhile, in energy and currency, the bad job numbers drove crude prices down, and new concerns about Greece have driven the dollar higher.
This is as about as succinct a statement as to what needs to be fixed as anything that I have thus far seen:
Our position was simple: products having no economic purpose except to achieve questionable accounting, tax or regulatory goals; or that raise serious concerns that customers will use them to issue materially misleading financial statements; or that meet any of the other bullet points in the 2006 statement’s list, should, at a minimum, be labeled presumptively prohibited.
—Susan P. Koniak, George M. Cohen, David A. Dana and Thomas Ross in a New York Times OP/Ed
Basically, any transaction that has as a significant part of its purpose to obscure the material health of the firm should be be used only with prior approval.
Of course, it’s much to sensible to be adopted, either in regulation by Geithner,* et al, or in law by Congress.
*But remember, the Cossacks work for the Czar.
Matt Taibbi, once again, this time on how the banks used complex products to rape Jefferson County, Alabama when they wanted to issue debt to upgrade their sewer system:
What happened here in Jefferson County would turn out to be the perfect metaphor for the peculiar alchemy of modern oligarchical capitalism: A mob of corrupt local officials and morally absent financiers got together to build a giant device that converted human sh%$ into billions of dollars of profit for Wall Street — and misery for people like Lisa Pack. [a county employee laid off when the debt exploded]
………And once the giant sh%$ machine was built and the note on all that fancy construction started to come due, Wall Street came back to the local politicians and doubled down on the scam. They showed up in droves to help the poor, broke citizens of Jefferson County cut their toilet finance charges using a blizzard of incomprehensible swaps and refinance schemes — schemes that only served to postpone the repayment date a year or two while sinking the county deeper into debt. In the end, every time Jefferson County so much as breathed near one of the banks, it got charged millions in fees. There was so much money to be made bilking these dizzy Southerners that banks like JP Morgan spent millions paying middlemen who bribed — yes, that’s right, bribed, criminally bribed — the county commissioners and their buddies just to keep their business. Hell, the money was so good, JP Morgan at one point even paid Goldman Sachs $3 million just to back the f%$# off, so they could have the rubes of Jefferson County to fleece all for themselves.
(%$# mine, emphasis original)
I believe that I have described him as this generation’s Hunter S. Thompson, but I was wrong.
He is this generation’s Upton Sinclair, though there is certainly a lot of Thompson in his prose.
It’s a fairly long read, and the twists and turns of the deal, where Morgan Stanley paid a middleman to bribe people, and now will be getting off Scott free, and I really can’t do justice with a summary, so just read the whole thing, and at the end, you will agree with him when he says, “This isn’t capitalism. It’s nomadic thievery.”
I wish that I could write like him.
No bank closings Friday, probably because of the Good Friday holiday, so here is a graph update with a slightly bent curve
The Supreme Court just handed down a decision in Jones v. Harris, where investors sued brokers for excessive fees.
CNN has an article titled, “Mutual fund investors win Supreme Court victory,” and Reuters has an article titled, “Supreme Court hands victory to mutual fund industry.”
It appears that the court rejected the lower court ruling that, “That the competition that has developed among mutual funds in recent years is sufficient protection for mutual fund investors,” which would be construed as a win for investors, but retained the standard of, “fees are excessive only when they are so high they could not be the result of arm’s-length bargaining and bear no reasonable relationship to the services provided.“
It sounds to me like they split the baby, which seems to be the SCOTUSblog’s take on this too, which would imply to me that we will see this back before the court in the next decade or so.
And here they are, ordered, and numbered for the year so far, and these are, of course, in addition to the rather unusual Thursday closing yesterday.
So, here is the graph pr0n with trendline:
And once again, it’s a swing and a miss, because once again, it’s an attempt to use the carrot on banks, a rather generous payout for principal reductions, along with giving banks an incentive to shovel their most toxic mortgages to the FHA, as opposed to a stick, in the hope that house prices somehow recover.
They won’t ever that is what “post bubble” means.
But once again, Larry Summers* and His Evil Minions™bailing out the banks, not the homeowners. The goal is to keep the toxic nature of the mortgages off of the banks’ books.
Little things, like banning prepayment penalties, which lock people into bad mortgages, and allowing mortgages to be modified in bankruptcy (cram down), would give lenders the incentive to deal fairly.
But that’s not gonna happen.
*But remember, the Cossacks work for the Czar.
Well, it looks like the issue with a possible default by Greece has been resolved, for a while at least, by a joint action of the EU and the IMF.
I think that this puts to rest the idea that Greece will leave the Euro, for a while at least, but the real problem is that the Germans have structured the Euro with the goal of furthering their mercantilist export driven goals, much as the Chinese have with the Yuan, and the solution here is not to kick the Greeks out of the Euros, but to kick the Germans out of the Euro.
Simply put, the German desire for new export markets has made them push aggressively for countries to join the monetary union before it is prudent, and to encourage them to do so by providing economic aid and by overvaluing the sovereign currency.
Unfortunately, this creates asymmetries that are creating the problems that we have now, and it will be a tough thing to avoid something like the downfall of European Exchange Rate Mechanism that occurred when George Soros, “Broke the Bank of England.”
The problem is that, absent the labor mobility that exists in the United States, where one need neither a work permit nor to learn a new language, these asymmetries will persist.
This has been further reinforced by the efforts of Europhiles to jump-start the mechanisms of European integration through direct and indirect subsidies to entice new members to join prematurely.
Damn ………… I gotta make this a longer form, and submit it to Marketplace as a guest editorial.
It’s jobless Thursday, and initial jobless claims fell by 14K to 442,000, though it should be noted that a change to seasonal adjustments accounted for 11K of that 14 K.
The less noisy 4 week moving average fell by 11K to 453,750, and continuing claims fell by 54K to 4.65 million, the lowest number in 1¼ years.
All in all, good news, but we are still not at a number where we would see real job growth.
In the intersection of real estate and finance, we have 13.6% of US mortgages being delinquent in the 4th quarter of 2009, up by 0.9% from the 3rd quarter.
In a blast from the past, we have a development in the slow motion immolation of the monoliner insurers with the largest of the bond insurers, Ambac, had the Wisconsin Office of the Commissioner of Insurance take control of roughly $35 billion of insurance contracts on residential mortgages.
They have direct the troubled insurance company to segregate these contracts into separate accounts.
You arrogant ass. You’ve killed us!Just so you know, it appears that the financial weapon of mass destruction, the Credit Default Swap is rearing its ugly head once again, as the segregation of accounts may constitute a “default” under the terms of the credit default swap contracts on these assets.
Seriously, this sh%$ is going to destroy us if we don’t get a handle on it. (Cue captain Tupolev)
Finally, in currency the Euro has rebounded slightly off its low on reports of an imminent solution for the Greek crisis, though these concerns were still enough to push oil prices down.
According to polls, the American public thinks that Wall Street and the big banks are evil and they want them flayed and staked to anthills:
Most people interviewed in the Bloomberg National Poll say they don’t like Wall Street, banks or insurance companies and favor letting the government punish bankers who helped cause the worst financial crisis since the Great Depression.
OK, so maybe I exaggerate a bit, but it has the ring of truthiness, and they did not ask about flaying or anthills in the poll.
Even less shocking is the response of the banks to the news of these attitudes, a brand new PR campaign:
One of Wall Street’s main lobbying groups is starting an image-improvement campaign aimed at showing the financial industry as trustworthy and a positive force after more than a year of being chastised in Washington.
You know, if you stopped making your goal f%$#ing the ordinary American, people might like you more.
The Federal Home Loan Bank (FHLB) is suing banks that made dodgy mortgage loans and then misrepresented them:
Last week, the Federal Home Loan Bank of San Francisco sued a throng of Wall Street companies that sold the agency $5.4 billion in residential mortgage-backed securities during the height of the mortgage melee. The suit, filed March 15 in state court in California, seeks the return of the $5.4 billion as well as broader financial damages.
Not also that the quasi-governmental GSEs, Fannie Mae and Freddie Mac, are suing too:
Fannie Mae and Freddie Mac may force lenders including Bank of America Corp., JPMorgan Chase & Co., Wells Fargo & Co. and Citigroup Inc. to buy back $21 billion of home loans this year as part of a crackdown on faulty mortgages.
Interesting times.
Full FHLB statement below fold:
Statement Regarding PLRMBS Litigation
March 15, 2010Today the Federal Home Loan Bank of San Francisco (Bank) filed complaints in the Superior Court of California, County of San Francisco, against nine securities dealers in relation to certain of the Bank’s investments in private-label residential mortgage-backed securities (PLRMBS). The Bank is seeking to rescind its purchases of 134 securities in 113 securitization trusts, for which the Bank originally paid more than $19.1 billion. The Bank’s complaints allege that the dealers made untrue or misleading statements about the characteristics of the mortgage loans underlying the securities.
All of the PLRMBS in the Bank’s mortgage portfolio, including those identified in the complaints filed today, were rated AAA when purchased, based on the information provided by the securities dealers. The Bank employs conservative criteria and guidelines for all its MBS investments. The Bank invests in high-quality financial instruments to facilitate its role as a cost-effective provider of credit and liquidity to its member financial institutions. These investments support the Bank’s mission of promoting housing, homeownership, and community development by providing the Bank with greater financial flexibility in helping members meet the credit needs of their communities during all economic times and in funding the Bank’s Affordable Housing Program and other programs that create affordable housing and promote community economic development.
In filing these complaints, the Bank seeks to continue supporting its mission and to protect the interests of its member shareholders, which include over 400 community banks, credit unions, and savings institutions headquartered in Arizona, California, and Nevada that serve millions of consumers.
H/t Barry Ritholtz
He wonders about what caused stock market capitalization to grow so much relative to GDP starting in the late 1980s.
I think that the answer is simple: The US government started to subsidize stock purchases, specifically the IRA and the 401(K), and it drew more money in to the markets, and that money bid up asset prices.
Of course, I like simple answers, and I am not a stock broker or an economist, so I would appreciate hearing alternate theories.
It turns out that when Pay Czar Ken Feinberg cut the pay of executives at bailed out firms, there was no rush for the exits:
For months, Wall Street banks and the troubled automakers feverishly protested that their top executives would flee if they were not lavishly rewarded for their talents. New data, however, suggests the departures were more of a trickle than a flood.
Of the 104 senior executives whose pay was set by the federal pay regulator in the last two years, 88 executives, or nearly 85 percent, are still with the companies even though their pay was drastically cut back, according to people briefed on the government data.
There are a number of reasons, including the fact that these”super geniuses” are really pretty toxic, and for the most part, really not much special.
Additionally, if you are getting “only” $2 million a year, you can still live pretty well on that, even in Manhattan, and it’s a pain looking for a job ………… Trust me on this one, it’s a real pain looking for a job.
And 15% turnover in 2 years, that might actually be less than normal.
H/t Calculated Risk
The news in in real estate so far this week, with U.S. commercial real e3state prices rising for the 3rd straight month, though, as the Graph pr0n clearly shows, if you own commercial property, and you need to roll over your 5 year mortgage, you are still in a world of hurt, as you are at least 30% under water.
In residential real estate though, it was just plain grim, with existing home sales falling, though the snopocalypse might have something to do with that, and the number of homes for sale jumped by nearly 10%.
In more general economic news, the Chicago Bank of the Federal Reserve’s national activity index fells last month, which might also be snow related.
Meanwhile, on the other side of the pond, prices fell in the UK for the first time on 6 months, indicating that the pressures toward deflation continue apace.
In currency, we have the problems with Greece pushing the Euro lower, while in energy, oil rose slightly, to $81.91/bbl, and the price of retail gasoline continues to climb, to $2.81/gallon, up about 80¢ from a year ago.
Dennis Kozlowski, former Tyco CEO has filed a lawsuit against his former company for millions of dollars in retirement benefits:
Ex-Tyco International Ltd. Chief Executive Officer L. Dennis Kozlowski, jailed for stealing millions of dollars, wants a U.S. court to order the company to pay him tens of millions from his retirement account.
Lawyers for Kozlowski filed court papers in which they claim that Tyco breached its retirement agreement by refusing to pay him the lump sum he has demanded. As of October 2008, the value of Kozlowski’s retirement account was $75.9 million, according to the court papers, which are part of a 2002 lawsuit between Tyco and Kozlowski.
Kozlowski, 63, and former Chief Financial Officer Mark Swartz were convicted in 2005 of securities fraud, grand larceny and falsifying business records. The jury in New York State Supreme Court found they stole about $137 million from Tyco through unauthorized bonuses and the abuse of company loans.
Because, you see, in the world of the big players, going to jail from stealing from your company doesn’t mean you don’t get your golden parachute.
Seriously, can the just have the bailiff beat the snot out of him in open court?
Tyco’s defense, that, “A ‘faithless servant’ is not entitled to any compensation,” would sound fairly convincing to me, but I am an engineer, not a lawyer, dammit!*
*I LOVE IT when I get to go all Doctor McCoy!!!
Dodd’s weak tea financial reform passes the Senate Banking Committee.
Here’s hoping that the Barny Frank – slightly less weak tea – bill prevails in conference committee, though if the Dems were smart, they would use finance reform as a way to get the Republicans to vote for the fat cat Wall Street bankers, and then use those votes as a cudgel in November.
But that would require that Democrats find their spines, which I think is unlikely.
They do not realize that having a backbone is something that voters place a huge value on, perhaps even more than philosophy and policy.
That’s why the leading candidate in the Republican primary in Alan Grayson’s district is Alan Grayson, because voters vote for politicians with guts.
We have a couple new developments, first was that Merrill Lynch told both the SEC and the Federal Reserve Bank of New York that Lehman was cooking the books:
Securities and Exchange Commission and Federal Reserve officials were warned by a leading Wall Street rival that Lehman Brothers was incorrectly calculating a key measure of its financial health months before its collapse in 2008, people familiar with the matter say.
Former Merrill Lynch officials said they contacted regulators about the way Lehman measured its liquidity position for competitive reasons.
…
he findings raise questions over what federal regulators knew about Lehman’s accounting and when they knew it. In the account given by the Merrill officials, the SEC, the lead regulator, and the New York Federal Reserve were given warnings about Lehman’s balance sheet calculations as far back as March 2008.
Former and current Fed officials say even in the competitive world of Wall Street, it is unusual for rival bankers to relay such concerns to the Fed.
It takes an awful lot to get one investment bank to rat out another, the first rule of Wall Street is never tell the regulators, and and the Federal Reserve Bank of New York, president Timothy “Eddie Haskell” Geithner, as well as the SEC, which was largely deferring to the NY Fed, decided to ignore it.
Actually, it’s more. Not only did Geithner’s Bank ignore the reports, it bought junk grade debt from Lehman in violation of the law:
As Lehman Brothers careened toward bankruptcy in 2008, the New York Federal Reserve Bank came to its rescue, sopping up junk loans that the investment bank couldn’t sell in the market, according to a report from court-appointed examiner Anton R. Valukas.
The New York Fed, under the direction of now-Treasury Secretary Tim Geithner, knowingly allowed itself to be used as a “warehouse” for junk loans, the report says, even though Fed guidelines say it can only accept investment grade bonds.
Meanwhile, the Fed and Geithner both strongly oppose a congressional measure to authorize an independent audit of the central bank and its lending facilities. The provision passed the House but is under attack in the Senate, where Banking Committee Chairman Chris Dodd (D-Conn.) says he hopes to stop it.
Without an audit, the Fed is able to conceal the specifics of what it holds on its balance sheet. If the Lehman deal is any indication, the Fed is hiding billions of dollars in toxic loans on its books.
“The Fed legally is forbidden from taking such assets. There’s a legal requirement that the Fed’s assets be investment grade,” Rep. Alan Grayson (D-Fla.) told HuffPost. Grayson, who is the cosponsor of the Grayson-Paul Audit the Fed measure that passed the House, said the Lehman scandal shows precisely why such an audit is needed.
Seriously, he cheated on his taxes, he’s aided and abetted the pervasive accounting fraud at Lehman, and he’s still in the bank’s pocket.
I understand that his successor will face a filibuster, but please, fire him, and go with a recess appointment.
It doesn’t matter that he knows where the bodies are buried if he’s a part of the gang what murdered the economy, and he’s still working flashing gang symbols to Dimon and Blankfien.
Weekly, last 3 years
Total yearly, last 66 years
Courtesy of Calculated Risk.
And yes, it looks rather grim.