Walking away without, er, walking away

May 21, 2010 16:29 UTC

LPS

Who says you can’t get something for nothing?

James Hagerty quotes interesting data from LPS Applied Analytics that shows banks struggling to handle the backlog of mortgage delinquencies are allowing non-paying borrowers to stay in their homes longer.

One in six are living rent-free for at least two years. One in two are doing so for more than a year, but less than two.

This lunch isn’t totally free, of course. The borrower’s credit report takes a hit. Meanwhile the bank’s stockholders absorb the losses.

As walking away gains cachet, expect more underwater borrowers with nerves of steel to play chicken with their banks.

Lunchtime Links 5-21

May 21, 2010 15:01 UTC

Euro’s slide may give U.S. more rope to hang itself (Crane/Swann, Reuters) Great piece from my Breakingviews colleagues Agnes and Chris. Flight to the dollar helps keep U.S. borrowing costs low, but that’s a curse because it discourages us from dealing with our own debt problem.

Vix-ated (Alloway, Alphaville) Neat table. For those that didn’t notice, the volatility index for the S&P 500 shot up over 20% near day’s end yesterday, closing at 45.79. For those tempted to write that off as paltry compared to levels over 80 reached post Lehman’s collapse, Tracy shows the fear index is flashing a deeper shade of red than it did during many previous black swans…

Senate passes financial reform legislation (Herszenhorn, NYT) It includes the tough Lincoln amendment that would force banks to get out of derivatives trading. But that is expected to die when the Senate bill is reconciled with the House bill.

Spitzer’s name arises as CNN tries to fill a seat (Stelter, NYT) Blodget resurrected himself via the media, his former nemesis may also.

The Hot Box from Hell (Reilly, ESPN) The Sauna world championship…

Auto journalist’s son crashes $180k Porsche (Cheney, Globe&Mail) Oops.

Brooklyn blogger lands Prokhorov interview (Koblin/Alexander, Observer) Not every day you get to sit down with a Russian billionaire in a Brooklyn bar. Given that no restrictions were put on the interview, I would have taken the opportunity to talk about Russia. What’s Putin really worth? $40 billion? There’s one interesting question about Prokhorov’s dealings in Zimbabwe, which the billionaire said is just a couple guys doing “stock market research.” Yeah, right. Zim doesn’t have functioning markets of any kind…

16 items they only sell at Chinese Walmarts (Buzzfeed) Last one is hilarious.

Lunchtime Links 5-20

May 20, 2010 16:53 UTC

FDIC says things look great! (Wutkowski, Reuters) FDIC’s quarterly profile of the banking sector was full of good news. Loss estimates for failed banks are down; bidders are paying more for failed banks; the deposit insurance fund has plenty of cash and the problem bank list only grew a bit. In other words, there’s light at the end of the tunnel. Trouble is, that light could be a freight train in the form of higher rates or reduced government support for housing. As support is removed, to the extent it flows through to mortgage rates, we’ll see house prices head back down, giving the banking system more seizures…

Breaking down major U.S. financial reform proposals (Drawbaugh, Reuters) Very useful summary…

Class of ’10 ready to flood U.S. labor markets as ’09 grads wait tables (Dorning, Bloomberg)

Teachers facing weakest market in years (Hu, NYT)

HD pic of oil spill from NASA (imgur) You can see the oil getting picked up by a current. Could bring it back around to the east coast.

A smoking gun in BP’s Deep Horizon mess (Thom Hartman, ht Felix) BTW, if this reads like Greek to you, watch both parts of 60 Minutes’ EXCELLENT interview with Mike Williams, one of the rig’s survivors. Not only is there lots of great detail about what happened, Williams story is astounding.

Gold at $800, say some analysts (Cendrowski, CNNMoney.com) The bear case for gold is a good one. The Greek debacle reminds us that debt deflation still looks like the most likely outcome for the world economy. As the price level falls, so will gold, depending on how central banks handle deflation of course. Therein lies the bull case, which is that gold remains a must-have insurance policy to protect portfolios from the risk that indebted countries suddenly lose their ability to borrow. That could prompt monetary authorities to monetize huge quantities of debt…

Font directory (Google) Cool tool

Great Depression II (Hume, Alphaville)

Landis admits doping, accuses others including Armstrong (WSJ) Kudos to Floyd for owning up.

COMMENT

“As the price level falls, so will gold, depending on how central banks handle deflation of course. Therein lies the bull case, which is that gold remains a must-have insurance policy to protect portfolios from the risk that indebted countries suddenly lose their ability to borrow.”

Mish did an excellent job of explaining why gold performs better in real terms during deflation:
http://globaleconomicanalysis.blogspot.c om/2007/02/is-gold-inflation-hedge.html

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Lunchtime Links 5-19

May 19, 2010 14:56 UTC

Consumer prices unexpectedly fall (Mutikani, Reuters) The Fed will view this as support for its low rate policy. But while consumer prices are falling, asset prices have been on a tear, taking a breather only after the Greek crisis erupted. The re-inflation of asset prices is investors’ response to low rates: they’re chasing risk. That encourages more bubbly lending, sowing the seeds of more violent debt deflation later.

Italy suspends mark-to-market rules on banks’ government bond holdings (Cohen, Dow Jones) Dirty little secret folks: Basel capital rules allow banks to treat government bonds as “riskless,” meaning they are assets against which they needn’t hold any capital. Bottom line, banks have literally zero cushion to absorb losses on government securities. Italian banks’ exposure to Greek loans is small compared to France/Germany, but they could have significant holdings of bonds of peripheral European countries that may be at risk of default, a problem which their regulator appears willing to paper over…

CHART — Mortgage purchase applications “plummet” (Culp, Reuters) “Plummet” is the lobbyist’s word. Demand was pulled forward thanks to the homebuyers tax credit and is now crashing. You can see how a similar dynamic played out last fall, when it was believed the credit would be allowed to expire on schedule. This time around it will expire. It’s chief Senate proponent, Georgia’s Johnny Isakson, has said it’s not going to be re-upped.

Clients worried about Goldman’s dueling roles (Morgenson/Story, NYT) Great story. Yves has some good thoughts too.

Roubini says U.S. bond market may face “vigilantes” (Ryan, Bloomberg) Just give it time. Honestly, referring to sellers with pejoratives like “vigilante” and “wolfpack” gives pols the political capital to blame “speculators” rather than actually deal with their debts.

Fiduciary amendment attacked as loophole ridden (Kearney, Reuters)

A new clue to explain existence (Overbye, NYT)

No trespassing (reddit)

Lifelock CEO’s identity stolen 13 times (Zetter, Wired)

Kevin Costner wants to help clean up the oil spill (Youtube) Call it penitence for Water World.

COMMENT

While the BASEL based Risk based ratio does allow for a 0% weighting of gov’t debt, at least in the US the other ratios are based only on total assets, regardless of type.

Thus meaning that a bank can not lever up ad infinitum to buy more and more gov’t securities.

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Euro’s deep dive continues…

May 18, 2010 20:02 UTC

As of this writing, the euro is cliff-diving again. It’s now down near $1.22, a four-year low. The proximate cause of the sell-off is a German plan to ban naked short-selling in stocks and certain government bonds.

Some thoughts from currency strategist Win Thin of Brown Brothers Harriman:

Euro selling has accelerated, which we can attribute to two possible factors. First, the German ban seems to be a bit of “flailing.” Given the questions we raised in our earlier note, it appears to be half-baked and not really thought out, and plays into market doubts about European policy-making credibility. The second, and perhaps more important, factor is the fact that if the Europeans are in effect trying to take away legitimate investment vehicles, then investors that are negative on Greece and Portugal can only take recourse in limited ways, the biggest one being to simply short the euro.

emphasis mine

COMMENT

If only Milton Friedman were alive today.

He would be shouting from the rooftops that we need Friedmanite helicopter drops and tax cuts financed out of printed money.

Moving debt from one place to another just cannot work any longer. Sovereigns need to delever. The private sector needs to delever.

The only was for this to happen is for the monetary base to increase dramatically.

It won’t be inflationary because the debt overhang is gigantic all over the world.

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Lunchtime Links 5-18

May 18, 2010 13:38 UTC

Blackstone-led group drops bid for Fidelity National (Davies, Reuters) Probably smart. Even at $32 per share, the buyout shops would have paid nearly 9x this year’s anticipated EBITDA while deploying over 5x leverage. Doable, but not cheap. Yes, Fidelity National has stable cash flows to pay debt, but its business is not immune to business cycle hiccups. Meanwhile, FIS is going to lever up anyway to buy back shares.

Assisted homeowners as indebted as ever (Treasury) Take a look at the table on page 5. Back-end debt-to-income is up to 64% of pretax income. It was 61% last month. The few homeowners that are getting mortgage modifications are still carrying far more debt than they can handle.

Banks embrace “extend and pretend” as U.S. hotels await rebound (Brandt, Bloomberg) Another reason the Fed can’t raise rates: if it did, real estate prices will head back down and there’d be no more pretending these extended loans will recover.

Washington pushes for free credit scores (Sutton, CNNMoney.com)

CHART: U.S. Housing starts up on tax credit, but still way off peak (Culp, Reuters)

Effort to bring Fannie/Freddie on budget fails (Indiviglio, Atlantic)

Near misses fuel gambling addiction (ScienceBlogs, ht Kedrosky) Gambling game manufacturers know this, apparently, and design their machines to exploit it.

Teen mom Bristol Palin to earn $15-$30k per speech on lecture circuit discussing, er, the perils of teen pregnancy (WaPo)

United States of Funk (imgur) ?

Ultra-cool graffiti (reddit) Can you see the face?

Shock therapy

May 18, 2010 12:35 UTC

The “flash crash” in U.S. stock markets on May 6 shocked investors. As one response, it makes sense to coordinate circuit-breakers and other safety switches across trading venues. But the goal shouldn’t be to eliminate sudden drops. Markets are volatile, and smart traders build in a margin of safety. That’s a useful message that is reinforced by the odd surprise.

It’s still not clear what caused the near-thousand-point cliff-dive on the Dow Jones Industrial Average. The most likely explanation is a confluence of factors, including riots in Greece, a decline in the S&P 500 index below an important moving average, an indigestibly large trade in a popular futures contract, and — as the plunge gathered momentum — the disappearance of some high-frequency, high-volume traders from the market.

The bulk of the losses reversed almost as quickly as they materialized. So market forces did, eventually, equilibrate. But one flaw stands out. While market-wide circuit breakers — designed to force a breather in trading when prices move violently — weren’t activated, some other mechanisms covering only parts of the fragmented stock-trading markets did kick in.

On the New York Stock Exchange, for instance, so-called liquidity replenishment points were triggered, forcing trades onto other platforms that didn’t have similar brakes. This may have added to the volatility. Coordinating such tools might help damp irrational market swings in the future.

Other potential fixes offer little protection, however, and won’t come without costs. Deliberately widening bid-ask spreads might concentrate buyers around fewer price points, but would raise investors’ trading costs. Requiring high-frequency traders to stay in the market may have merit, but it won’t stop precipitous drops, the biggest of which happened in 1987, long before such traders existed.

In any case, volatility can be healthy. The “Great Moderation” in the years running up to 2007, notably the extreme predictability of U.S. monetary policy, led to complacency and, ultimately, the credit crunch. Unexpected drops remind investors to operate with healthy margins of safety. That’s a lesson of the recent crisis that no-one should try to regulate away.

Lunchtime Links 5-17

May 17, 2010 14:15 UTC

Must Read — The Great Consolidation (Douthat, NYT) A great column. Douthat is a solid addition to the NYT op-ed page. Given another hundred words, he might have also mentioned how Washington and other central governments are consolidating power by consolidating debt. As people/companies/pension plans/municipalities/states/countries face bankruptcy, more of their liabilities are being absorbed by national and supranational (IMF) balance sheets as opposed to being written off. But what happens when nations turn up insolvent? Sovereign default or printing money to buy debt are two very bad options.

Plan B: Skip College (Steinberg, NYT) As a product of the University of Chicago core curriculum, I believe a liberal education that teaches kids how to think critically is a crucial ingredient to building a just, tolerant, productive society. But such educations were affordable once upon a time. Now vocational training is all that makes sense for many…

Lack of trust pummels Europe bank lending (Paulden/Harrington, Bloomberg) LIBOR is still on the rise. Again, it’s well below panic levels reached in fall ’08. Nevertheless, euro money markets are more than a bit stressed. Why? Tracy Alloway at Alphaville has interesting thoughts

CHART: Foreigners still plowing money into Treasuries (Culp, Reuters) For the moment…

“No democracy will immolate itself on the altar of monetary union for long” (Evans-Prtichard, Telegraph) Europeans should expect to use their bailout bazooka before long…

LeBron isn’t NBA’s marquee free agent (Soshnick, Bloomberg) Rumor is, LeBron and Kentucky coach John Calipari are trying to sell themselves as a package to interested teams like the Bulls. If LeBron wants to win, he needs a coach that knows how to build teams around superstars, not suck up to the superstar. Phil Jackson would be perfect. BTW, is it me, or did LeBron throw the last two games of the Celtics series? Gave him a convenient excuse to leave Cleveland…

Submerged Seconds: Zombie love and the failure of mortgage modification (Whalen, IRA)

Up to something naughty

Why are Americans fat? I give you the Cheesesteak pretzel (philly.com)

The 140 mph chase cars of the US Air Force (Jalopnik)

Bank failure Friday

May 14, 2010 21:34 UTC

Ameris Bank, the acquiring institution of the night’s first failure, has now gone to the well three times. The company’s share price hit a low of $5.05 on Thursday 11/5/06, the day before it made its second FDIC-assisted transaction. Since then, the stock has more than doubled to $10.89. This is good business, acquiring busted banks!

(Though Sheila Bair has said FDIC is getting better deals of late…)

#69

–Failed bank: Satilla Community Bank, Saint Marys GA
–Regulator: Georgia Department of Banking and Finance
–Acquiring bank: Ameris Bank, Moultrie GA
–Vitals: assets of $135.7 million, deposits of $134.0 million
–Transaction: Loss share on $101.0 million of assets
–Estimated DIF damage: $31.3 million

#70

–Failed bank: New Liberty Bank, Plymouth MI
–Regulator: Michigan Office of Financial and Insurance Regulation
–Acquiring bank: Bank of Ann Arbor, Ann Arbor MI
–Vitals: assets of $109.1 million, deposits of $101.8 million
–Transaction: Loss share on $95.2 million of assets
–Estimated DIF damage: $25.0 million

#71

–Failed bank: Southwest Community Bank, Springfield MO
–Regulator: Missouri Division of Finance
–Acquiring bank: Simmons First National Bank, Pine Bluff AR
–Vitals: assets of $96.6 million, deposits of $102.5 million
–Transaction: Loss share on $66.8 million of assets
–Estimated DIF damage: $29.0 million

#72

–Failed bank: Midwest Bank and Trust Company, Elmwood Park IL
–Regulator: Illinois Dept of Financial Professional Regulation
–Acquiring bank: Firstmerit Bank, National Association, Akron OH
–Vitals: assets of $3.17 billion, deposits of $2.42 billion
–Transaction: Loss share on $2.27 billion of assets
–Estimated DIF damage: $216.4 million

Lunchtime Links 5-14

May 14, 2010 17:44 UTC

Detroit shrinks itself, historic homes and all (Kellogg, WSJ) Right-sizing the city is exactly the right approach to deal with decline. Shrinking the city’s fixed cost base frees up resources that can be spent more productively in places where folks still live.

Bank failure watch: Midwest Bank — $3.2 billion of assets (Daniels, ChicagoBusiness.com) Crain’s says the bank is expected to be seized tonight.

Goldman joins race to save ShoreBank (McKinnon/Williamson, WSJ) Article mentions that this bank has good connections, but doesn’t note a key one: Eugene Ludwig. Ludwig, the former Comptroller of the Currency and lately of Promontory Point, is coordinating the capital raising for ShoreBank as Reuters’ Karey Wutkowski reported. Besides Goldman, BofA, Citi and JPMorgan have signed up to help out. The bank is said to be involved in lending in poor communities and for green projects. BTW, they donated to Obama’s campaign…

Paper: The curious case of leveraged ETFs (Alphaville) Be sure to click on the full PDF in the post. Many are getting burned investing in leveraged ETFs. NOT RECOMMENDED for retail investors…

Morgan Stanley CDOs were doomed even at low default rates (Sheen/Moore, Bloomberg) Unfortunately there’s not a deeper discussion of the “feature” that guaranteed the collapse of the CDO in question.

Sarkozy threatened to back out of the Euro (Guardian) Meanwhile….

Euro goes into power dive (Bloomberg) It’s now below $1.24.

Plenty of useful commodities have outperformed gold this year (Kedrosky)

9-year-old borrows mom’s camera, she finds this image (reddit)

Drama queen (YouTube)

nonreg

COMMENT

Sorry you got confused by the Grameen reference — I was talking about their international stature, not their lending methodology. My point was simply that ShoreBank has an international stature, like Grameen’s, such that it requires no “political influence” hypothesis to explain why folks like Goldman would step up when ShoreBank got in trouble. ShoreBank’s management can get their calls returned by all the Masters of the Universe. The pols may have picked up the phone to encourage support, but it wouldn’t be required.

Yes, Grameen is (IMHO overly) dependent on free donor funds. However, you are mistaken about ShoreBank, which is a different kettle of fish entirely. First, it is not a “charity”. It operates essentially as a for-profit, although it is not a profit maximizer for its shareholders. The necessity to make a profit is in effect a “constraint” on their business model. They manage their business to generate enough earnings to generate a reliable return on their borrowed funds and have enough equity to meet FDIC insurance requirements. It’s that model — a community bank that can efficiently deliver services to a poorer sector of a community but meet the regulatory requirements for commercial banks — that has been so intriguing for banking regulators in other countries who want to expand both lending and savings services to the less affluent who currently have little or no access to financial services.

The problem ShoreBank is facing now is the concentration of their business, geographically and socio-economic, that’s taken an unusually large beating in the Great Recession. In that, they’re certainly not alone. It’s a problem being faced by other community banks that aren’t geographically diversified and operate in badly hit areas, even if those banks didn’t focus on the poorer members of their community. And btw, a “green” focus doesn’t necessarily imply NPLs. Frex, there’s an increasingly good business in local, low-tech efficiency conversions, and programs like Cash for Caulkers will create more demand for local small businesses to meet. AFIK, that’s the sort of “green” that ShoreBank finances. It’s not like ShoreBank is a “green tech” VC.

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Evening Links 5-13

May 13, 2010 22:03 UTC

Snippets from Goldman Sachs the Musical (New Yorker) Very clever. The lyricist has a strong grasp of what happened.

Paul Volcker just saved the bankers…and now he owns them (Scheiber, New Republic) Interesting thought. Volcker killed Blanche Lincoln’s bill to get commercial banks out of the derivatives business entirely. Bankers are happy for that, but not to see the “Volcker rule” itself go into effect.

Abu Dhabi hotel installs gold vending machine (AFP) This blog remains a bull on gold over the long-run. At the very least, it makes sense to hold a bit of it to hedge the risk that central banks overstimulate to the point of destroying fiat currencies. That said, this sure looks like the sign of a bubble!

Companies using transfer pricing to avoid billions in taxes (Drucker, Bloomberg)

Wall Street probe widens (WSJ) Everyone was manufacturing CDOs. Here misery loves company. If everyone’s under investigation, there will probably be an omnibus resolution not unlike the settlement reached after the .com bubble exposed Wall Street analysts as shills for their investment banker colleagues…

Senate acts on credit rating agencies (Herszenhorn, NYT) Credit rating agencies deserve all the bad press they get for the role they played during the credit bubble. That said, I don’t think moves like this will really change anything. So long as the Fed is holding rates at 0%, investors will chase yield…

Ten easy lessons for cooking the books (Alphaville) One of my favorite financial writers, Howard Schillit, was spotted at CFA Institute’s annual conference in Boston.

A call to ban the burqa in Australia has been countered with a call to ban speedos (Australian Times)

COMMENT

Gold….I just don’t see it. If things get so bad that all currencies are worthless what the hell good will gold be? Gold would have no value in a world where there was no money. If we actually ever found ourselves in a Mad Max type world barter would be far more important than gold. You can’t eat gold and I doubt any farmer in apocolyptic times would have any desire for it either.

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American bank failures pump up deal flow

May 13, 2010 13:37 UTC

Vulture investors like Wilbur Ross and small-town community bankers aren’t alone in cashing in on America’s steady flow of bank failures. While the mergers and acquisitions business remains largely in the doldrums, a coterie of investment bankers and advisers outside the bulge bracket is minting fees from the banking crash.

The biggest winners are acquirers, of course. As banks are seized by the Federal Deposit Insurance Corp at an accelerating pace — 68 through the first week of May — healthy institutions have scooped up good assets at deep discounts, mainly strong deposit franchises that would be expensive to build from scratch.

But the investment bankers and advisers involved in these FDIC deals have also managed to skim off a fair bit of cream. According to SNL Financial, banks have advised on the transfer of $90 billion of deposits in the five quarters through March. Bankers are cagey about what they make on such deals, but it’s likely in the ballpark of 10-15 basis points of transferred deposits, implying fees between $90 and $130 million.

While big banks like Credit Suisse, Deutsche Bank and JPMorgan worked on the biggest deals, smaller folks are the busiest. Keefe Bruyette & Woods, Hovde Financial, Sandler O’Neill Partners and Howe Barnes Hoefer & Arnett lead the way in terms of number of deals advised on, collecting a healthy share of fees. A small Arkansan consultancy — DD&F Consulting — also pops up regularly.

The complexities of FDIC-assisted transactions mean advisers work for their fees. To avoid runs, troubled institutions are put up for auction just weeks before they’re seized by the FDIC. And bankers that have worked on multiple transactions can help would-be acquirers navigate the vicissitudes of FDIC’s auctions. Indeed, the regulator just recently revamped its standard loss-share agreement.

With U.S. bank failures still expected to peak this year, Friday evenings — when FDIC chairman Sheila Bair sends her troops into battle — will continue to be the most lucrative day of the week for at least a portion of the investment banking community.

COMMENT

why can’t I make comments?

Posted by STORYBURNcom2 | Report as abusive

American bank failures pump up deal flow

May 12, 2010 22:27 UTC

Vulture investors like Wilbur Ross and small-town community bankers aren’t alone in cashing in on America’s steady flow of bank failures. While the mergers and acquisitions business remains largely in the doldrums, a coterie of investment bankers and advisers outside the bulge bracket is minting fees from the banking crash.

The biggest winners are acquirers, of course. As banks are seized by the Federal Deposit Insurance Corp at an accelerating pace — 68 through the first week of May — healthy institutions have scooped up good assets at deep discounts, mainly strong deposit franchises that would be expensive to build from scratch.

But the investment bankers and advisers involved in these FDIC deals have also managed to skim off a fair bit of cream. According to SNL Financial, banks have advised on the transfer of $90 billion of deposits in the five quarters through March. Bankers are cagey about what they make on such deals, but it’s likely in the ballpark of 10-15 basis points of transferred deposits, implying fees between $90 and $130 million.

While big banks like Credit Suisse , Deutsche Bank and JPMorgan Chase worked on the biggest deals, that’s a lot of money for the collection of smaller folks that are the busiest. Keefe Bruyette & Woods, Hovde Financial, Sandler O’Neill Partners and Howe Barnes Hoefer & Arnett lead the way in terms of number of deals advised on. A small Arkansan consultancy — DD&F Consulting — also pops up regularly.

The complexities of FDIC-assisted transactions mean advisers work for their fees. To avoid runs, troubled institutions are put up for auction just weeks before they’re seized by the FDIC. And while bankers that have worked on multiple transactions can help would-be acquirers navigate the FDIC’s processes, these are changing regularly. Indeed, the regulator just recently revamped its standard loss-share agreement.

With U.S. bank failures still expected to peak this year, Friday evenings — when FDIC chairman Sheila Bair sends her troops into battle — will continue to be the most lucrative day of the week for at least a portion of the investment banking community.

Lunchtime Links 5-12

May 12, 2010 17:38 UTC

New college loan rules put taxpayers at risk (Bennett, Forbes) New rules will make it easier for students to default on debt. It’s good to give them a way to escape debt slavery, but this is the wrong way to do it. Better to stop providing so much aid in the first place. It only serves to inflate a tuition bubble anyway.

U.S. investigating Morgan Stanley on CDOs (WSJ) It’s a criminal investigation, but it would be tough to bring criminal charges, since prosecutors need to prove guilt beyond a reasonable doubt, as opposed to civil cases where they need only demonstrate a preponderance of the evidence against the defendant…

Thomson Reuters interested in buying Newsweek (DealBook)

Quick, run for the Goldschläger (Kaminska, Alphaville) The Germans and Swiss appear to be driving gold demand. Small wonder since the ECB is now going to monetize eurozone government debt by printing money to buy their bonds. Increased demand for gold coins and bars is a vote of no confidence in the euro. [It's at a new record of $1243 at this writing.]

In Greek debt crisis, some see parallels to the U.S. (Leonhardt, NYT) “Both [Greece and the U.S.] have a bigger government than they’re paying for. And politicians, spendthrift as some may be, are not the main source of the problem. We, the people, are.” Amen.

Rig disaster threatens drilling (Coy/Reed, Bloomberg)

Chart: U.S. trade gap hits 15 month high (Culp, Reuters) Exports were up, but imports were up more…

Coolest guy ever? (reddit, ht daytonamike) Motorcycle? Check. Headphones? Check. Cigar? Check. Parrot? Oh yeah.

We bustin’ out of this joint (imgur)

Heroic skydiving instructor saves life, is paralyzed (Hartman, CBS)

COMMENT

““Both [Greece and the U.S.] have a bigger government than they’re paying for. And politicians, spendthrift as some may be, are not the main source of the problem. We, the people, are.” Amen.”

Amen squared. Our politicians are not imposed upon us by Martians. Somewhere along the line we got a political party that believed in borrowing to finance government programs. This was counter balanced by a political party that believed in reducing or not raising taxes. The vaulted “people” looked at the policy of something for nothing and said “I like it.”
Of course, we have a bunch of economists who justify making money out of thin air – which works…until it doesn’t.

Posted by fresnodan | Report as abusive

$13 trillion….

May 12, 2010 13:18 UTC

Don’t look now, but total U.S. public debt outstanding is approaching $13 trillion.

Each incremental trillion is going by so quickly, it’s hardly news anymore…

$6 trillion: February 28, 2002
$7 trillion: January 15, 2004 (22.5 months)
$8 trillion: October 20, 2005 (21 months)
$9 trillion: August 31, 2007 (22 months)
$10 trillion: September 30, 2008 (13 months)
$11 trillion: March 16, 2009 (5.5 months)
$12 trillion: November 16, 2009 (8 months)
$13 trillion: May-June 2010 (6-7 months)

COMMENT

For me, looking back to the last few years gives a different perspective on “too big to fail”. The solution seems to be to pass the buck (or rather the promise to pay back the buck) up to the next higher level. Once the gov’t is reached there is no higher level and failure, as Rick Wagoner so memorably said, “is not an option”. We all know there is no gold or anything else that supports this hat trick. It all comes down to trust. You say what a dollar is worth and, if I agree, then that’s what it’s worth. But we are all simply holding pieces of paper with famous faces on them. Right now, if we all can only wish wish wish hard enough that there is real value then perhaps there is daylight at the end of the tunnel…until next time.

Found in a paper recycling bin the other day – Surviving the Great Depression of 1990 by one Dr. Ravi Batra. I wonder if he has a new printing for the latest depression.

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