Monday, July 30, 2012

Tuesday July 31 Housing and Economic stories



TOP STORIES:

Every Money Professional Knew Libor Was A Scam – (www.businessinsider.com) They've known it for 30 years.  The only thing interesting about this story is that it’s 30++ years old.People have been sandbagging Libor quotes since the concept of Libor was originated.  I don’t believe that there is a money pro on either the buy or sell side over the past thirty years who didn’t understand that the Libor Fixing was “fixed”. If they claim to be “shocked” today, they are either lying or stupid. The same goes for every central banker and treasury official that knows the way to the bathroom.  As far as any consumers who took out a Libor based loan are concerned; they have no claim at all. If Libor hadn’t been “fixed” all these years they would have paid substantially more on those loans. Libor has always been jimmied down, not up. The world has been looking for an excuse to hang some bankers (and a few regulators). Liborgate looks like it could be the opportunity for the bloodletting. I’m convinced that this is the wrong issue to bring out the nooses.

Social Security Hole Overwhelms Taxes, Cuts - (www.bloomberg.com)
Now that health care is off the front burner, it’s time to fix Social Security. Social Security’s trustees say the system needs only “modest changes.” In fact, the system is desperately broke. The proof is buried deep in the trustees’ own 2012 report in a complex table, numbered IV.B6. The system’s actuaries prepare the report’s tables. But what the trustees make of them is up to the trustees. Clearly this year, as in others, the trustees ignored table IV.B6. How else could they have come up with their blase statement that Congress should address Social Security’s finances “in a timely way”? Table IV.B6 is a long-run balance sheet for Social Security. It shows that the system’s $88.9 trillion in liabilities exceed its $68.4 trillion in assets by $20.5 trillion. The liabilities are the present value of the system’s projected benefit payments, whereas the assets are the system’s $2.7 trillion trust fund plus $65.7 trillion in projected taxes, also valued in the present. The $20.5 trillion fiscal gap separating Social Security’s liabilities and assets -- its unfunded liability -- is enormous; it is 1.4 times U.S. gross domestic product and 34 times annual Social Security taxes.

The Worst Banking Scandal Yet? - (www.bloomberg.com) The scandal over the manipulation of Libor has the potential to become one of the most costly and consequential in the history of banking. If the financial institutions involved want to prevent it from overwhelming their businesses and damaging the broader economy, they’ll have to act fast. Investigators in the U.S., CanadaEurope and Asia are piecing together a breathtaking portrait of avarice and deceit. To hide their institutions’ problems during the financial crisis, or often to boost their traders’ profits, bankers knowingly submitted false data for the calculation of the London Interbank Offered Rate, a benchmark interest rate that influences the value of hundreds of trillions of dollars in financial contracts around the world, including floating-rate mortgages, corporate loans and interest-rate swaps. The roughly $450 million in fines paid by Barclays Plc, the first bank to fess up, is only the beginning. Regulators can and should hit more banks with large fines to prevent a repeat. More important, criminal charges for the first time could threaten a significant number of bankers and traders with jail terms for their actions during the financial crisis -- a much needed comeuppance that could help reset the industry’s moral compass.

Insight: The curious case of Iowa broker's Romanian property empire - (www.reuters.com) Russell Wasendorf Sr., the founder of failed Iowa brokerage PFGBest, had risky investments a long way from the Midwest markets where he built his name. More than a decade before he allegedly began hiding more than $200 million of misappropriated client money in a scheme that unraveled this week, Wasendorf joined three other Chicago traders as founding investors in one of Romania's largest real estate development groups, Avrig 35 Group, which was valued at more than $1 billion at its height in 2007. But since 2007 the paper value of his holdings has crashed from around $150 million to less than $45 million, as Avrig has written down investments. As Avrig's complex web of dozens of firms struggles to trade its way out of difficulties, Alexander Hergan, Wasendorf's Romanian-born business partner and a former options trader and founding member of the Chicago Board of Options Exchange (CBOE), hopes the drama in Iowa doesn't upset the firm's recovery.

Spain Threatens Deficit-Troubled Regions, Offers Help - (www.bloomberg.com) Spain’s government threatened to take control of budgets in regions that fail to meet austerity targets, while offering financing to help them avoid default as the nation battles to restore investor confidence. Regions projected to miss deficit goals this year were given a week to take action or risk intervention, Budget Minister Cristobal Montoro said in Madrid late yesterday after meeting regional finance chiefs. Local officials, including some from the ruling People’s Party, resisted his demands. “This proposal has more show than go,” said Michael Derks, chief strategist at FxPro Group Ltd. in London. “Spain isn’t in any position to take on more obligations and this isn’t going to repair the credibility of regional governments that have been shut out of markets for a considerable time.”







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