Monday, January 30, 2012

January, Monday 30, 2012

DOW – 6 = 12653
SPX – 3 = 1313
NAS – 4 = 2811
10 YR YLD - .06 = 1.84%
OIL - .61 = 98.94
GOLD - 7.00 = 1731.30
SILV - .49 = 33.60
PLAT – 10.00 = 1616.00

The stock market moved lower this morning; the justification was that Greece had not resolved its debt crisis. The 27 nations of the European Union held their 17th Summit in the past 2 years. The Greeks have been trying put together a deal with private bondholders to restructure about 200 billion euros of debt. But they couldn't come up with completed deal. You're shocked; I know; I'm shocked.

And so the EU leaders can't do anything until a deal gets done in Greece. To push things forwar, the Germans proposed a European Commissar take control of Greek public finances to ensure it meets its fiscal targets. Greek Finance Minister Evangelos Venizelos said that to make his country choose between national dignity and financial assistance ignored the lessons of history. The German call won cautious backing from the Dutch and Swedish prime ministers. Apparently everyone forgot that the EU has already installed an unelected technocrat to run the country, Prime Minister Lucas Papademos.

Then the Europeans talked about increasing the bailout funds to make at least a trillion dollar fire-ring around the economies of Portugal and Ireland and Greece, in hopes that the default problem doesn't jump to Spain and Italy and get out of control.Treasury Secretary Tim Geithner went to the World Economic Forum in Davos, Switzerland on Friday he said he wants the Europeans to come up with a bigger, more credible firewall.

Yep, shocking, absolutely shocking. And as the day dragged on, the stock market realized it was all just Europe being Europe. And equities recovered.

Geithner talked about more than a bigger, more credible firewall. He also discussed the “critical risks” facing the American economy this year. Geithner's conclusions: the European sovereign debt crisis and the rise in tensions with Iran that might result in a jump in oil prices. Those are certainly risks, however, he forgot about jobs and wages here at home. America now produces more than it did when the recession began. But it does so with 6 million fewer workers. For all of 2011, incomes fell .1 percent. Consumer spending picked up slightly in the fourth quarter mainly because consumers drew down their savings; that sounds a bit risky to me. It's easy to forget what's really important, especially when you're in Davos.
A week before MF Global Holdings Ltd. collapsed, its chief financial officer told Standard & Poor's in an e-mail that the futures broker had "never been stronger."
S&P provided the House Financial Services Subcommittee on Oversight and Investigations with an excerpt of the e-mail from MF Global CFO Henri Steenkamp. S&P also informed the panel that Jon Corzine, then MF Global's chief executive officer, met with its analysts on Oct. 20 to reassure them that his $6.3 billion bet on European sovereign debt was no threat to the firm.
U.S. lawmakers will turn their attention to the role of the ratings companies in the failure of MF Global at a Feb. 2 hearing. The bankruptcy trustee of MF Global’s U.S. brokerage unit has returned about 72% of the money in customer’s U.S. accounts when the New York firm filed for bankruptcy at the end of October. By contrast, all the money of U.S. customers invested on foreign exchanges remains frozen.

Officials hunting for an estimated $1.2 billion in missing customer money increasingly believe that much of it might never be recovered. The findings so far suggest that a "significant amount" of the money could have "vaporized" as a result of chaotic trading at MF Global during the week before the company's Oct. 31 bankruptcy filing.

This is actually a very interesting concept, that money can vaporize. Some people question this, they think that vaporizing money is just a euphemism for stealing money. But think about it; if the Federal Reserve can create money out of thin air, then it makes sense, ashes to ashes; dust to dust; thin air to vaporization. This is the problem when money isn't real in the first place – poof, it disappears. It happens to all of us. For example. A couple of months ago, I bought a tank of gasoline for $50, this week it cost me $55 for the same amount of gas. What happened? My $5 vaporized.

Money managers raised combined bullish positions across 18 U.S. futures and options by 13 percent to 742,902 contracts in the week ended Jan. 24, Commodity Futures Trading Commission data show. The so-called net-long position in copper jumped 53 percent to the highest since August and in silver by 22 percent to the most since September. Speculators also expanded bullish bets in sugar, soybeans, cotton, gold, gasoline and crude oil.

State and federal officials are close to a settlement with the largest U.S. banks over mortgage abuses, with states facing an end-of-the-week deadline to decide whether they will sign on. The final value of any settlement will depend on which states it includes, and could drop sharply if states like California don't join.
In another sign the deal is close, negotiators have overcome a sticking point and agreed on Joseph Smith, North Carolina's banking commissioner, as a monitor to ensure the banks comply with the terms of the settlement. The banks in the talks are Bank of America, Wells Fargo, JPMorgan Chase, Citigroup and Ally Financial.
The proposed settlement releases the banks only from civil claims of errors in servicing and originating the loans. In exchange for up to $25 billion, much in the form of cutting mortgage debt for distressed homeowners, the banks will resolve civil state and federal lawsuits about servicing misconduct and faulty foreclosures, and state lawsuits about how they made some of the loans. President Barack Obama said in his State of the Union speech last week that he directed his attorney general to create the new working group to "help turn the page on an era of recklessness." The idea being that there might still be investigations into misconduct that fueled the financial crisis.

If this settlement goes forward (and I expect it will), then there will be more modification and foreclosure activity in coming months.

This is just one of several policy changes in the works including the automated HARP refinance program (starts in March) and a possible GSE REO to rental program. Plus the Federal Reserve is "contemplating issuing guidance to banking organizations and examiners" to allow banks to also rent more residential REO.
What shall we make of this surprise pronouncement in President Obama’s State of the Union address? A belated investigation has been launched into the role of fraud in the financial crisis.
This much is clear: Despite rampant illegalities, bank fraud and countless cases of perjury, the response to date — at the federal level and from most, but not all, states — has been underwhelming, cowardly even. A few principled holdouts — the attorneys general of Delaware, New York, Nevada and California — refuse to rubber-stamp a pre-investigation settlement with banks, but that’s all. Despite chances to bring crooks to justice, there has been little action.
So, here we are, four years after the great financial collapse, three years after the recovery began and in the last year of Obama’s term — and the president has finally decided to investigate the role of fraud in the great global financial crisis. Hence, this new task force — the unit of Mortgage Origination and Securitization Abuses — begins behind the curve. The statute of limitations is, in many cases, close to elapsing.
Even so, do not dismiss the investigation out of hand because of the timing: History informs us that a serious investigation can begin four years after the fact. Recall that Ferdinand Pecora was the fourth chief counsel for the Senate committee that investigated the Wall Street crash of 1929 and subsequent Depression. He was appointed in 1932 and received broad investigatory powers in 1933. His report ran thousands of pages. Thanks in large part to Pecora’s findings, Congress passed the Glass-Steagall Banking Act, which separated commercial and investment banking; the Securities Act of 1933, which established penalties for filing false information about stock offerings; and the Securities Exchange Act, which created the Securities and Exchange Commission to regulate the stock exchanges. Nearly 50 years of financial stability followed.
Maybe we really need a Fraud Unit running around with windbreakers with the bold letters: FU; rushing in to arrest the banksters, only to realize the statute of limitations has expired; maybe they could just reinstate Glass-Steagall.

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