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Subprime moment looms for ‘risk-free’ sovereign debt - (www.ft.com) When future financial historians look back at the early 21st century, they may wonder why anybody ever thought it was a good idea to repackage subprime securities into triple A bonds. So, too, in relation to assumptions about the “risk-free” status of western sovereign debt. After all, during most of the past few decades, it has been taken as a key axiom of investing that most western sovereign debt was in effect risk-free, and thus expected to trade at relatively undifferentiated tight spreads. Now, of course, that assumption is being exposed as a fallacy. Just look at those Greek haircuts, or the scale of future losses now being implied in the credit derivatives markets for Portugal, Ireland and Italy. As the turmoil in the euro zone spreads, forcing a paradigm shift for investors, the intriguing question now is whether we are on the verge of a paradigm shift in the regulatory and central bank world, too. After all, it is not just investors who have tended to assume that mainstream sovereign bonds are risk-free; this assumption has also acted as a pillar of the entire regulatory structure, and many central bank operations.
Why Not Give Greeks Their Say? - (www.nytimes.com) The fundamental nature of European governance is about to change. Either a large part of the Continent will move much closer to a federal government, with common fiscal policies and a substantial loss of sovereignty for many nations, or it will spin apart, with possibly severe economic and financial consequences. That has been clear for months, and markets have alternately soared and plunged as it appeared Europe was closer to or farther from reaching the first alternative. This week, it appeared that the prospect that scared European leaders the most was the specter of democracy. When the Greek prime minister, George A. Papandreou, proposed a referendum on whether Greece would go along with the agreement reached at the European summit meeting last week — one that calls for more austerity and that polls say is unpopular with most Greeks — much of Europe reacted with shock and alarm. How dare he do that?
MF Global Masked Debt Risks - (online.wsj.com) MF Global Holdings Ltd may have disguised its debt levels to investors by temporarily slashing the debt it was carrying before publicly reporting its finances each quarter, according to an analysis by the Wall Street Journal. The activity is referred to in the financial industry as "window dressing." "Over the last two years, MF Global's ending balance on short-term borrowings were 6 percent less than the quarterly average," MF Global spokeswoman Diana DeSocio told Reuters. A company spokeswoman separately told the Journal that the firm did not lower its reported borrowings deliberately. In MF Global's view the firm's quarter-end numbers conveyed an accurate picture to investors of its level of risk and leverage, she told the newspaper.
Debt-reduction supercommittee talks appear to be at an impasse - (www.washingtonpost.com) Washington’s latest exercise in debt reduction appeared to be at an impasse Thursday, as members of a special congressional committee barreled toward a Thanksgiving deadline with no movement on the fundamental question of whether to raise taxes. Talks continued between congressional leaders and members of the supercommittee, but the panel had no further meetings scheduled and no path to compromise on a plan to slice at least $1.2 trillion from projected borrowing over the next decade. Aides in both parties said the prospects for a bigger deal were fading rapidly, and that the panel committee could be left struggling just to meet its minimum target. “In a word, it’s stolid. Not stalled, but stolid,” said super-committee member Max Baucus (D-Mont.), chairman of the Senate Finance Committee, suggesting that talks had slowed to a crawl.
ANOTHER FIASCO: $1 Error Leads Bank Of America To Foreclose On A House That Was Already Sold - (www.businessinsider.com) Yesterday, we reported that a Texas resident was threatened with foreclosure after Bank of America incorrectly placed an insurance policy and increased mortgage payments on a house that didn't exist. It looks like the major financial institution has screwed up again. According to Connect2Utah (via The Consumerist), a Utah family received a foreclosure notice from Bank of America on a home they sold months earlier. What's worse, the homeowner's credit score was destroyed by a negative report claiming the family had missed months of mortgage payments. Apparently, the mix-up was attributed to a $1 coding error, which BofA quickly noted.
Euro zone private sector decline signals recession: PMI - (www.reuters.com)
Italy Faces Monitoring by IMF Amid G-20 Concern on Economy - (www.bloomberg.com)
Australia Central Bank Cuts Growth, Inflation Forecasts Amid Euro Turmoil - (www.bloomberg.com)
U.S. Payrolls Rose in October; Jobless Rate 9%- (www.bloomberg.com)
G-20 Failed to Agree on Use of IMF Resources in Debt Crises, Merkel Says - (www.bloomberg.com)
G-20, under Greece’s shadow, struggles with growth - (www.bloomberg.com)
Corzine Resigns From MF Global After Bankruptcy - (www.bloomberg.com)
MF Global’s Repo Transactions Drew Scrutiny by U.S. Regulators in March - (www.bloomberg.com)
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