TOP
STORIES:
Cities
are considering a housing solution that makes investors furious - (www.businessinsider.com) In the foreclosure-battered inland stretches of
California, local government officials desperate for change are weighing a
controversial but inventive way to fix troubled mortgages: Condemn them. Officials
from San Bernardino County and two of its cities have formed a local agency to
consider the plan. But investors who stand to lose money on their mortgage
investments have been quick to register their displeasure. Discussion of the
idea is taking place in one of the epicenters of the housing crisis, a working-class
region east of Los Angeles where housing prices have plummeted. Last week
brought another sharp reminder of the crisis when the 210,000-strong city of
San Bernardino, struggling after shrunken home prices walloped local tax
revenues, announced it would seek bankruptcy protection.
Analysis: Banks behave badly redux: Is it killing confidence?
- (www.reuters.com) It wasn't supposed to be like
this. After the worst financial crisis since the Great Depression almost took
the global economy over a cliff, tough new regulations and stronger internal
controls at the world's major banks were meant to help restore confidence in
the financial system. But recent headlines have some top investors and
strategists questioning whether there has been any progress at all. The horror
stories include the deepening scandal that big banks rigged Libor, the
benchmark international lending rate; JPMorgan Chase's (JPM.N) mounting losses from disastrous
credit bets and a possible cover-up attempt; and the disappearance of customer
funds from Iowa futures
broker PFGBest, discovered after its founder tried to commit suicide and left a
note outlining a 20-year fraud.
JPMorgan Blaming Marks On Traders Baffles Ex-Employees - (www.bloomberg.com) JPMorgan Chase & Co. (JPM)’s assertion
that traders at its London chief investment office may have intentionally
mismarked trades, masking losses that total at least $5.8 billion, makes little
sense, according to former executives with direct knowledge of the unit’s
operation. The bank restated first-quarter results, paring profit by $459
million, in part because an internal review revealed that U.K. traders had
priced their books “aggressively,” Mike Cavanagh, head of Treasury &
Securities Services, said in a July 13 meeting with analysts. The mispricing
made losses on a portfolio of credit derivatives look smaller than they were,
and executives concluded that traders may have sought to hide the “full amount
of losses,” JPMorgan said in a presentation. JPMorgan
requires traders to mark their positions daily so the firm can track their
profits, losses and risk. An internal
control group double-checks the marks against market prices monthly and at the
end of each quarter, said three former executives from the CIO and a senior
executive in market risk. The firm uses the control group’s prices, not what
individual traders submit, to calculate earnings, making it difficult for one
trader or trading desk to rig prices, the people said.
Worst-in-Generation Drought Dims U.S. Farm Economy Hopes -
(www.bloomberg.com) A worst-in-a-generation drought
from Indiana to Arkansas to California is damaging crops, rural economies, and
threatening to drive food prices to record levels. Agriculture, though a small
part of the $15.5 trillion U.S. economy, had been one of the most resilient
industries in the past three years as the country struggled to recover from the
recession. “It might be a $50 billion event for the economy as it blends into
everything over the next four quarters,” said Michael
Swanson, agricultural economist at Wells Fargo & Co. (WFC) in Minneapolis,
the largest commercial agriculture lender. “Instead of retreating from record
highs, food prices will
advance.” The U.S. Department of Agriculture declared July
11 that more than 1,000 counties in 26 states are natural-disaster areas, the
biggest such declaration ever. The designation makes farmers and ranchers in
affected counties -- about a third of those in the entire country -- eligible
for low-interest loans to help manage the drought, wildfires or other disasters.
German Court Won’t Rule on Bailout for 8 Weeks in Delay for
Fund - (www.bloomberg.com) Germany’s
top court will take more than eight weeks to decide whether to suspend the
euro-area’s permanent bailout fund, leaving Europe’s
anti-crisis coffer less than half full to respond to the debt crisis. The Federal Constitutional Court in
Karlsruhe will issue a ruling on bids to halt Germany’s participation in the
European Stability Mechanism and the fiscal pact on Sept. 12, it said today in
an e-mailed statement. That’s more than two months after it held a hearing on
the measures. “The court has held a
comprehensive hearing on the issue and will now take the time it needs to reach
a decision,” German government spokesman Steffen Seibert told reporters in
Berlin today. Finance Minister Wolfgang
Schaeuble warned the hearing last week that a delay in
activating the ESM “could lead to a significant worsening” of the crisis.
