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STORIES:
Detroit
Beyond Repair; Next Stop: Cannibal Anarchy - (www.seattlepi.com) The first report by Detroit's emergency manager
declares that the city is broke and at risk of running completely out of money
— a financial meltdown that could mean employees don't get paid, retirees lose
their pensions and residents endure even deeper cuts in
municipal services. If Detroit cannot avert disaster by reducing its debt
payments, the only remaining option appears to be bankruptcy, a threat that
looms large over Kevyn Orr's urgent efforts to make deals
with creditors and debt holders. Orr says he will have to seek concessions from
those groups to keep the Motor City afloat. "On a cash-flow basis, we
don't have it. We're broke," Orr said Monday at a news conference. He said
the city can make payroll through the rest of the year, but that some other
bills and obligations are not being paid or are being deferred.
Spanish banks face fresh hit from bad loans - (www.ft.com) Spanish banks are bracing themselves for a fresh financial hit, amid rising pressure from the Bank of Spain on lenders to write down the value of their €200bn portfolio of restructured loans to the country’s troubled companies and struggling households. The move is likely to trigger a further rise in bad loan ratios across the system and reduce earnings at a time when most Spanish banks are already suffering from low profitability. Analysts believe the crackdown could also shine a harsh new light on the capital position of some of the weaker banks, forcing them to sell assets to avoid the need to raise fresh capital. The move reflects concern among Spanish regulators that banks are still shying away from admitting the full extent of the damage inflicted on their loan books by Spain’s long-running economic crisis. There is a particular worry that Spanish banks have sought to avoid losses by agreeing to refinance loans to struggling companies, even in cases where borrowers are unlikely to repay their debt – a practice known in banking circles as “extend and pretend” or “delay and pray”.
The
coming political battle over Bitcoin - (www.washingtonpost.com) Given that Bitcoin first
broke into mainstream attention when Gawker explained how to use it to buy drugs,
perhaps the surprise is that it took federal regulators this long to take
action against it. In the wake of the Gawker story two years ago, Sen. Chuck
Schumer (D-N.Y.) describedBitcoin as an “online form of
money laundering” and called for the authorities to shutter the Bitcoin-based
drug market Silk Road. Yet until recently, the feds have taken a relatively
hands-off posture. Agencies have issued guidelines and signaled that they are monitoring the
situation, but none have taken active steps to force Bitcoin intermediaries to
comply with federal regulations. That hands-off stance may have started to
change this week when the feds took action against Mt. Gox, the world’s
leading Bitcoin exchange. Many people use Dwolla, a PayPal-like payment
network, to send dollars to their Mt. Gox accounts. They then use those dollars
to buy Bitcoins. On Tuesday, Dwolla announced that it had frozen Mt. Gox’s
account at the request of federal investigators. It’s the first federal action
against the currency. CNet has confirmed that the asset seizure was
initiated by Homeland Security Investigations, a division of Immigration and
Customs Enforcement. Among other things, that agency has the power to enforce
laws against money laundering and drug smuggling.
Lehman
Reaches Beyond Grave to Grab Millions From Nonprofits - (www.bloomberg.com) Almost five years after Lehman Brothers Holding Inc (LEHMQ). filed
for bankruptcy and set off the global financial crisis, managers of the bank’s
estate are demanding millions of dollars from retirement homes, colleges and
hospitals. After selling most of its assets, Lehman now says it was
shortchanged by scores of nonprofits that were forced to pay to exit
derivatives that were unwound after the firm filed for Chapter 11 protection. The Buck Institute for Research on Aging in
Novato, California, gave Lehman $2 million in
October 2008 to cancel a swap contract used to manage fluctuating interest
rates. Lehman says it wants $12.1 million more and has assessed at
least an additional $4.7 million in interest, the research center said in itsmost recent financial
statement. The amount Lehman is seeking is more than half of what
Buck spent last year researching Alzheimer’s, Parkinson’s and other diseases.
Stern
Advice-Retiring on 0.25 percent a year - (www.reuters.com)
It isn't like Federal Reserve
Board Chairman Ben Bernanke and his colleagues have it in for old people - I'm
sure they are all very respectful of their elders. (The policy-setting reserve
bank presidents typically have to retire when they are 65. Bernanke is 59.) But
their policy of holding interest rates as low as they need to be to keep the economy in modest growth mode is also
hitting Grandma and Grandpa particularly hard: At ages when most people try to
keep their money "safe" in bank certificates of deposit and bonds, retirees are having to contend with
returns that would be considered laughably bad if they didn't have to cover
groceries and Medicare co-pays. The national average interest rate on a
one-year CD is 0.25 percent, according to Bankrate.com. Ten-year Treasury notes
are yielding less than 2 percent. Fed watchers expect the Fed to keep buying bonds and holding rates low for at
least another year and possibly longer. New research from the Employee Benefit
Research Institute shows that if those low rates were to continue permanently,
more than a quarter of baby boomers and generation Xers would not be able to
meet their retirement budgets.
