Lunchtime Links 8-5
MUST READ—The debt-inflation myth, debunked by UBS (Alphaville, ht Yves) Tracy Alloway has a GREAT piece today debunking the idea that we can “inflate our way out of debt.” As I’ve argued previously, this assumes debt doesn’t have to be rolled over. But of course is does, especially when you’re operating with deficits as high as our own. The consequence of higher inflation, then, is that lenders demand higher interest rates on new debt. As legacy debt is inflated away, new debt issuance is MUCH more expensive.
Taylor Bean suspended from making FHA loans (WSJ) Funny business going on at the nation’s third-largest FHA lender. Taylor Bean was one of the two targets of the Neil Barofsky’s raids earlier this week. The other was big bank Colonial. Taylor is dependent on Colonial for its warehouse line of credit. With Colonial is on the ropes, Taylor investors put together a quick $300m to keep them afloat, and make them eligible to receive government money. This is just another way lenders are scamming taxpayers and the government to get bailout funding to support home loans. Dirty business. Read the last three paragraphs of this article.
New York seeks millions of back taxes from Lehman (NYT) This article has some good detail regarding the bankruptcy process, but the actual news is old. My colleague Matt Goldstein reported it June 29th.
Post office considers closings, consolidations (AP) The headline number is 1,000 POs may be on the chopping block. Seems big, but consider that there are nearly 33,000. The post office has been struggling for years due to e-mail and, lately, onlinebillpay. The PO wants to make adjustments to its pension plan and reduce mail delivery to five days per week.
Clunker-nomics (David Kotok) It’s all been said, but Kotok says it rather articulately.
SEC memo says Guaranty Bank to be seized, not sold (GoingConcern, ht AK) Teri Buhl has an OTS source that claims Guaranty will cost the deposit insurance fund “at least” $5.3 billion and, even more stunning, that it’s too late to find a buyer, that FDIC will be forced to wind them down. I wonder if that’s actually going to happen, as a reader commented to me: “I can’t believe they can’t even find someone to take the branches and deposits. Sure, they can wind down stupid Frontier Bank of Greely, Co with all of what, 3 branches or whatever, GFG is a much different story. It’d have to be the largest wind down since the S/L problem. It’d look terrible in the press, too. I’d still guess they’ll strong arm someone into taking over the branches/non brokered deposits, even if the acquirer pays basically nothing.” Still, it’s a great story from Teri. Lots to chew on for future bank failure Fridays…
Alumna sues college b/c she can’t land a job (CNN) She wants a refund on $72,000 in tuition.
Obama’s birthday cake delivery (BBC) Sociologist Max Weber might have much to say about Obama’s charisma. Me? I’d prefer a guy who wasn’t afraid to say no once in awhile. As in, no we can’t deliver more free lunches financed by government borrowing.
Finally the spleen gets some respect (NYT) Scientists have finally discovered why we have a spleen: “The parallel in military terms is a standing army….You don’t want to have to recruit an entire fighting force from the ground up every time you need it.”
One person’s first experience with a store-bought pizza…aka “Pizza Fail”