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States cut money sent to cities, counties - (www.reuters.com) To balance their budgets, states are cutting funds they send to local governments, worrying many in the $2.9 trillion municipal bond market, from cities to rating agencies. Fitch Ratings said in a report on Friday that school districts and counties will face their greatest funding reductions from states. It said cuts in aid can result in "intergovernmental downloading," where the financial burden for a service is shifted from a higher level of government to a lower level. "Even if a funding source is identified, it may prove insufficient to cover the service that needs to be provided or may not grow at the rate needed to keep pace with expenditure growth," Fitch said. It added that local governments may not be able to cut programs states stop funding "because of the essential nature or legal requirements of some services." Counties provide most of these services and are more susceptible to "downloading" than cities. States give heavy financial support to schools -- roughly half of the money school systems use -- and cuts in education funding can be painful because "districts themselves have little if any control over revenue raising," Fitch said.
Chris Christie on Sick Pay Payouts: "Only in Government" - (www.youtube.com) Partial Transcript: Right now, the total accumulated sick leave liability for governments across New Jersey is $825 million. That is how much we will have to pay out in sick-leave payouts, currently. If I were to sign a bill that allowed for a $7500 cap, do you know what the bill would be? The bill would be $3.25 billion. Now, I don't call that reform. It's not reform when you are going to take the tab you are running up, from $825 million to $3.25 billion. And how did the number $7500 happen? Just plucked out of the air. So here is the choice the legislature has to make: Are they with you, or are they with special interests? There is no way to justify paying people cash for not having been sick. Only in government would we do something like this!
Goldman Credit Swaps Rise to Highest Level Since December on Senate Probe - (www.bloomberg.com) The cost to protect debt issued by Goldman Sachs Group Inc. (GS) climbed to the highest level in almost five months. Credit-default swaps on New York-based Goldman Sachs increased 6.7 basis points to 141.9 basis points, according to data provider CMA. The contracts have risen 30.6 basis points since a U.S. Senate Permanent Subcommittee on Investigations’s report last month said the firm misled clients about its bets on mortgage-related investments. The panel’s findings were referred to theDepartment of Justice and the Securities and Exchange Commission. The contracts, which are are at the highest since Dec. 1., pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. A basis point equals $1,000 annually on a swap protecting $10 million of debt.
Greece worries markets on reform plan - (www.ft.com) The eurozone crisis deepened on Friday as Greek economic reform plans were delayed, sparking tension in the financial markets over the country’s ability to rein back its mounting public debt. The euro dropped against the dollar, Greek bond yields rose to euro-era highs and fears of contagion to Spain, the key economy, increased amid worries that Athens’ determination to implement its recovery plan was waning. Fitch, the rating agency, also hit Greece with a multi-notch credit downgrade, warning that the country faced big challenges in turning round its reversing economy. Harvinder Sian, euro rates strategist at RBC, said: “The Greek crisis has ratcheted up this week because policymakers and central bankers cannot decide the way forward.” Gary Jenkins, head of fixed income at Evolution Securities, added: “It is a mess. Division among the politicians and central bankers is not helping.
Goldman Plunges, As Market Cap Shrinks By $8.3 Billion Just Since The Matt Taibbi Takedown - (www.businessinsider.com) If you haven't been paying attention, Goldman Sachs shares have been in freefall. They lost over 3% Friday amid a slew of headlines about imminent subpoenas related to Blankfein, the firm's activities during the crisis, and just generally for being the much-reviled Goldman Sachs. The stock has lost over 10% in just the last week since Matt Taibbi wrote his latest takedown, costing the firm over $8 billion in market cap. From its 52-week high made earlier this year, the stock is off 24%. At $134, it's only barely above its $129 book value, meaning that either A) people don't believe that the company's book value is real, or b) the value of the Goldman Sachs franchise has been reduced to $5/share, or just over $2.5 billion, based on 517 million shares outstanding. The stock is only barely above where it was at its depths last summer, before it settled civil fraud charges from the SEC.
OTHER STORIES:
Italy Outlook Revised to Negative by Standard & Poor’s; Ratings Affirmed - (www.bloomberg.com)
IMF Says Ireland’s Ability to Sell Bonds Remains ‘Elusive’ - (www.bloomberg.com)
Twenty SAC Capital Trades Examined by Senator Grassley, WSJ Says - (www.bloomberg.com)
BRICs Divisions Contrast With European Unity in Quest for Control of IMF - (www.bloomberg.com)
California unemployment edges below 12% - (www.latimes.com)
U.S. closes banks in Georgia and Washington state - (www.reuters.com)
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