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SEC charges city of Miami with fraud - (www.cnbc.com) The Securities and Exchange Commission charged
the city of Miami and its former budget director with fraud on Friday, for
allegedly making misleading statements and omissions in bond documents in order
to mask general fund deficits. The regulatory agency said it was seeking
injunctive relief and financial penalties from the city as well as former
budget director Michael Boudreaux. Noting that the city was already under a
cease-and-desist order for similar misconduct in 2003, the regulators said in a
written statement that starting in 2008 Boudreaux had moved money among city
funds to disguise financial weaknesses from investors looking at three 2009
bond deals worth $153.5 million. "Miami actively marketed bonds to the
investing public, while hiding the true reason for interfund transfers to boost
the image of its primary operating fund," said George Canellos,
co-director of the SEC's Division of Enforcement.
Detroit bankruptcy a big threat to retirees - (www.cnbc.com) As tax revenues have shrunk, the city's
financial obligations have grown—mainly to an ever-expanding pool of 30,000
retirees, promised life-time pensions and health benefits by short-sighted
government officials over decades who consistently failed to fund those future
obligations. The city now owes more than $17 billion—roughly $25,000 for every
resident. Union officials, who have vowed to fight any effort to reduce
benefits to retirees and vested workers, claim the city has undermined the
pension fund by outsourcing city services to workers who don't pay into the
system. "As older people leave the workforce, the city has been
privatizing those jobs instead of bringing people back in to pay into the
fund," said Ed McNeil, special assistant to the president of Michigan
AFSCME Council 25, which represents city workers.
NYU
Under Scrutiny for Sweetheart Loans to Admins - (www.nypost.com) For
top brass at NYU, the eye-popping loans and lavish pay packages kept flowing
freely last year. A controversial loan to former NYU Law School Dean Richard
Revesz ballooned to $6.4 million in the fiscal year that ended Aug. 31, 2012,
according to tax filings this week reviewed by The Post. The staggering sum —
the most recent figure that’s publicly available from the school — is nearly
$900,000, or 16 percent, more than a year earlier, when Revesz was carrying an
unpaid tab of more than $5.5 million, the filings show. The makeup of the loan
isn’t broken down in the tax filings, but public property records show that it
is mostly for mortgages on a swanky West Village townhouse as well as a 65-acre
spread that Revesz and his wife share in northwestern Connecticut. “What are
the terms of this $6.4 million loan? Why did it grow by nearly $900,000?” Sen.
Chuck Grassley (R-IA) said yesterday in response to a query by The Post. “Does
it carry zero interest? Will NYU forgive it, in effect making it a gift?” An
NYU spokesman declined to comment yesterday on the status of the growing loan
to Revesz, who last October announced he was stepping down as the law school’s
dean this spring.
Treasury's
Nominee Jack Lew’s Head-Spinning Mortgage Transactions – (www.wallstreetonparade.com) Lew
will now have more embarrassing details to explain (or not, as has become
his custom). We’ve dug out the details of his head-spinning mortgage deals with
his two former employers, New York University and Citigroup. This comes on
the heels of the bombshell dropped
by Senator Orrin Hatch in the confirmation hearing regarding Lew’s cozy
employment agreement with Citigroup that paid him a bonus of $940,000 if he
could somehow manage to secure a “full time high level position with the United
States Government or a regulatory body.” The insolvent bank had just been
bailed out by the taxpayer, making the $940,000 bonus accepted by Lew in early
2009 a gift from the public purse. Yesterday, the uber conservative
editorial page of the Wall Street Journal clicked off the problems it has with
Lew: “Investor in Cayman Islands tax haven? Check. Recipient of a bonus and
corporate jet rides underwritten by taxpayers at a bailed-out bank? Check.
Executive at a university that accepted student-loan ‘kickbacks’ for steering
kids toward a favored bank? Check. Excessive compensation with minimal
disclosure? Check.” The kickbacks the editorial references were akin to
what Bernie Madoff was doing in the “legitimate” stock trading side of his
company. Madoff paid brokerage firms a penny or two a share to direct stock
traffic to his brokerage business to steal trades away from the New York Stock
Exchange. The practice was called “payment for order flow.”
NSA
Protests Reach Doorstep of Pelosi's Wealthy Donors - (www.commondreams.org) Civil
Liberties picket is a rare show of dissent from a Democratic party that has
rallied behind Obama's warrantless spying. Protests against NSA spying have
reached all the way to the home of House Democratic Leader Nancy Pelosi's big
campaign fundraiser. And this time, the protests are coming from a group that
includes professed Democrats—a notable departure from the silence and inaction
of the Democratic machine as the Obama Administration's NSA spying scandal
ripples across the globe. Over 70 people picketed Saturday afternoon outside of
the Belvedere, California home where congressman Jared Huffman was throwing a
big fundraising bash for Pelosi. The fundraiser took place just weeks after
Pelosi forcefully defended the NSA's warrantless spying programs and denounced NSA
whistleblower Edward Snowden as a 'criminal' at a NetRoots Nation conference in
San Jose, California. Her statement at the conference was met with loud boos
and heckles from the crowd.
Misfit
Borrowers Attracting Lenders as Housing Revives - (www.bloomberg.com) SOUND
FAMILIAR?? Raj Date helped write new
rules for U.S. mortgage underwriting as deputy director of the Consumer
Financial Protection Bureau. Now he’s building a company that will offer loans
to borrowers blocked by the agency’s standards. Date, 42, left the CFPB in
January to found Washington-based Fenway Summer LLC, which plans to provide
loans, including interest-only financing, to borrowers he considers low risk
even though they might carry debt that exceeds the agency’s threshold. He estimates
that nonqualified mortgages make up as much as $1.5 trillion of the $10 trillion home-loan
market. “There are plenty of borrowers who are eminently responsible people but
fall outside of the bright-line boundaries,” Date said in a telephone
interview. “And there’s a meaningful-sized business that can be quite good for
borrowers and for lenders and investors to be able to satisfy that need.” Fenway
joins a growing group of companies offering financing to consumers with
irregular incomes, damaged credit or past foreclosures as the housing market
recovers and rising interest rates drive
down demand for refinancing,
the industry’s biggest source of business since the 2008 credit crisis. That’s
slowly bringing mortgage availability back to Americans shut out of homebuying
after a real estate crash triggered by loose lending to subprime borrowers.
Crude
Reaches 15-Month High as Jobless Claims Decline - (www.bloomberg.com) West
Texas Intermediate rose to the highest level in almost 16 months as U.S.
jobless claims declined and equities advanced. WTI’s discount to Brent narrowed
to less than $1 for the first time since 2010. Prices climbed 1.5 percent after
the Labor Department said jobless claims dropped
last week to the fewest since early May. The Standard & Poor’s 500 Index (SPX) reached a record intraday high on
better-than-forecast earnings. The Brent-WTI spread contracted to 93 cents as
inventories decreased at Cushing, Oklahoma, a major U.S. hub. “The economy looks good,”
said Jeff Grossman, president of New York-based BRG Brokerage and a New York Mercantile Exchange floor trader. “Crude is working its way
higher in sympathy with the stock market. Everyone is buying and they can’t
hold it back.” WTI for August delivery gained $1.56 to $108.04 a barrel on the New York Mercantile Exchange, the highest
settlement level since March 19, 2012.
Analysis:
Bank of America's interest-rate exposure may be worse than rivals' - (www.reuters.com) Bank
of America Corp's balance sheet suffered from rising bond yields in the second
quarter, suggesting that the second-largest U.S. bank may be more exposed to
interest-rate risk than some of its major rivals. The bank posted a profit for
shareholders of $3.57 billion in the second quarter, but on its balance sheet
the picture was not as good - its net worth fell by $6.26 billion as a result
of investment losses. Rivals JPMorgan Chase & Co and Citigroup Inc.
both managed to increase their net worth as measured by their book value.
Intel
cuts 2013 revenue forecast as PC industry sags - (www.reuters.com) Intel Corp
cut its full-year revenue forecast and said it is scaling back capital spending
as it adjusts to a painful contraction of personal computer sales and economic
weakness in China, one of its biggest markets.
The forecast and cut in capital spending were announced on Wednesday in the
company's quarterly earnings report,
the first under new Chief Executive Brian Krzanich. The soft-spoken
manufacturing guru, who took over as CEO in May and faces falling PC sales and
a hyper-competitive mobile market, was quick to acknowledge Intel's past
errors. He said the top chipmaker would aggressively speed up the rollout of
new Atom mobile chips.
Greece
May Need Billions More in Emergency EU Aid - (www.spiegel.de) The
Greek recovery may be facing yet another hurdle. According to a report by
German daily Süddeutsche Zeitung, the beleaguered country needs
another massive influx of money if it is to avoid insolvency. The paper cites
an unnamed official at the European Commission as saying that the
"financial gap" could be as large as €10 billion. The news comes at a
difficult time for Greece and its relations with Germany. German Finance
Minister Wolfgang Schäuble is set to visit Athens this Thursday for
consultations with his Greek counterpart Yannis Stournaras and with Prime
Minister Antonis Samaras. Schäuble is highly unpopular in Greece for his
consistent insistence on austerity. And with German elections looming in
September, it seems unlikely that additional aid money for Athens will be
forthcoming anytime soon.
Analysis:
Top fund managers were blindsided by U.S. bond market carnage - (www.reuters.com) The
plunge in the U.S. Treasuries market in the past couple of months may well have
been one of the most well-telegraphed reversals in financial market history. Top
money managers and investment strategists had warned the U.S. Federal Reserve
was likely to soon begin paring back its bond-buying stimulus if U.S. economic
data remained robust. Bill Gross, who is known on Wall Street as "the Bond
King," said on May 10 he believed "the 30-yr secular bull market in bonds"
had likely ended at the end of April. Other leading Wall Street figures told
the New York Fed they were concerned about the exposure of mom-and-pop
investors in the event of a bonds slump. And yet, when the market saw its
swiftest rise in rates in a decade, many of those managers got caught napping,
suffering big losses that hurt many institutions and individuals banking on
steady returns from the bond market.
[
Das] Japan’s ‘kamikaze’ economics risk Asia debt crisis - (www.marketwatch.com) Abenomics,”
the efforts of Japanese Prime Minister Shinzo Abe to revive Japan’s moribund
economy, has important implications outside of Japan. Japan’s recovery would
assist the global economy and generate demand for imports to Japan. The world’s
third-largest economy would also continue to be a source of capital to the rest
of the world. Failure would be equally significant. If economic growth does not
pick up, then a combination of budget and trade deficits that require financing
would affect the global economy. Japan’s overall current account may move into
deficit as soon as 2015. Japan would gradually run down its overseas
investments, selling foreign assets and repatriating the capital. The selling
pressure would affect prices and rates for a wide range of assets, transmitting
financial market volatility.
ECB's
Asmussen rejects call for troika to be abolished - (www.reuters.com) European
Central Bank policymaker Joerg Asmussen rejected on Wednesday a call from the
EU justice commissioner for the "troika" of the European Commission,
ECB and International Monetary Fund to be dissolved. Commissioner Viviane
Reding, said on Tuesday "the time of the troika is over", arguing
that in future Europe must resolve its problems without the IMF. But Asmussen,
a member of the ECB's Executive Board, said there was no other immediate
option. "There is, in the short-term, no functional alternative to the
Troika," he told newspaper Rheinische Post's online edition. "The
Troika also works very well together, as one sees on the ground in Athens, for
example," he said. "There is no reason, in the middle of the crisis,
to change this proven structure."
Investing
in Expensive Renovations for Rental Apartments (finance.yahoo.com) Her clients spent about $1 million on the
upgrade. But when their lease is up, they will be leaving most of these
improvements behind. In competitive real-estate markets, some luxury renters
are making a surprising decision: putting tens or even hundreds of thousands of
dollars into upgrades on their temporary lodgings. They are investing in redos
at a time when rental vacancies nationwide are at their lowest since
2001—currently at 4.3%, according to real-estate research firm Reis. Meanwhile,
rents have been rising rapidly, up 3.8% over the past year. The result: More
renters are deciding to stay put and put their money into improving their
current homes. "People don't want to live in something that's not up
to their standards. They're willing to make big changes even if they'll only be
there a couple of years," says Noble Black, a broker with Corcoran inNew
York, where the vacancy rate was just 1.9% in the first quarter of 2013, down
from 2.1% a year earlier.
Michigan
Needs To Ban Adverse Possession Squatting Like Florida - (www.mfi-miami.com) You
may remember this story from last year of Heidi Peterson, who came home
from an overseas to find squatter, Missionary Tracey Elaine Blair living in her
home. Blair had stripped radiators, stained glass windows and
anything else of value and sold them for cash. Peterson unable to afford
lengthy litigation to evict Blair was forced to live with Blair in the house
for 90 days before all the unwanted media attention forced her out. The
squatter is gone but the damage she did to the house remains as Heidi and her
20 month old daughter struggle to pick up the pieces and clean up the mess of
lead paint, holes in the walls and ceiling, jimmy-rigged plumbing and other
home improvement projects that make it appear Tracey Blair thought she was
Scotty the Engineer from Star Trek. Heidi Peterson is not the only victim
of Missionary Tracey Elaine Blair, a former Write-In Candidate for
President of the United States, MFI-Miami has found other homes where Blair has
filed bogus mechanic liens and other bogus documents in the historic
neighborhood of Boston Edison, where people like Mitt Romney, Barry Gordy,
Henry Ford and other prominent Detroiters once lived.
Hungary
Calls on IMF to Close its Budapest Office - (www.spiegel.de) Orbán's former economy minister and current
central bank governor, Gyorgy Matolcsy, wrote a letter to IMF Managing Director
Christine Lagarde on Monday calling on the fund to close its representative
office in Budapest as it was "not necessary to maintain" it any
longer. Hungary owes its economic survival to the IMF. When the country was
caught up in the global financial crisis in 2008, the fund and the EU came to
the rescue with a €20 billion ($26 billion) loan. At the time, Orbán's
predecessor was in office. Ever since Orbán became prime minister in 2010,
Hungary has had trouble with international institutions. His government pushed
through anew constitution and many laws that curtailed democracy,
the powers of the constitutional court, the justice system and press freedoms.
The EU responded by launching several proceedings against Hungary for breaching
EU treaties. In early July, the European Parliament passed a resolution calling
on Hungary to repeal the "anti-democratic changes." Orbán angrily
dismissed the demands as "Soviet-style" meddling.
Greece
Hit by General Strike to Protest Austerity - (www.nytimes.com) Thousands
of Greeks walked off the job Tuesday in a 24-hour general strike called by
unions opposing a new round of austerity measures that the government has vowed
to enact at the urging of the country’s foreign creditors. The sorest point is
a much-delayed overhaul of the Civil Service involving thousands of layoffs and
wage cuts, which is set for a vote in Parliament on Wednesday night. The
package must be passed if Athens is to secure the first installment of $9
billion in rescue loans approved last week by euro zone finance ministers. Despite
strong objections by the political opposition, and by some deputies in the
ruling coalition, the package is expected to squeak through the 300-seat
Parliament where the government has a slim majority of five. Implementation of
the contentious reforms will remain a tough challenge however in a volatile
political climate.
Portuguese
politics may spoil European austerity recipe - (www.reuters.com) Europe
hoped Portugal would
stick to the austerity prescribed in its financial rescue, graduating next year
and following Ireland in a successful recovery from economic
slump. Instead, a political crisis has knocked the program off track and Portugal is
starting to look more like Greece which
only scraped through the latest review of its bailout. Two senior Portuguese
ministers have resigned, creating political turmoil and spending cuts and tax
hikes have contributed to the worst economic slump since the 1970s and record
high unemployment of 18 percent. "The hope was that Portugal,
by being the second country to exit a program after Ireland,
would show that the cure works, that countries can recover," said Guntram
Wolff, director of Bruegel, an influential think tank in Brussels.
Analysis:
Citigroup has an emerging markets headache - (www.reuters.com) Emerging markets have
fueled two-thirds of Citigroup revenue growth for the last two years. The bank
operates in about 100 countries globally, far more than most of its U.S.
competitors, which means it can be hit by economic factors that shareholders
know little about. "If anything goes bump in the world, Citigroup may well
have some exposure," said Fred Cannon, an analyst at Keefe, Bruyette &
Woods. The slowdown in U.S. and European economies has made developing
countries as a whole look riskier. So far this year, emerging market stocks,
as measured by MSCI's index .MSCIEF, have declined about 12 percent, while the
U.S. benchmark Standard & Poor's 500 index .SPX has
gained about 15 percent.
Thousands
of borrowers to get mortgage payments reduced - (money.cnn.com) Starting
this week, hundreds of thousands of struggling borrowers could be in for a
pleasant surprise: a quick and easy way to get their mortgage payments back on
track -- and save considerable money. Through a new effort called the
Streamlined Modification Initiative, borrowers withmortgages backed by Fannie
Mae and Freddie Mac who are at least 90 days behind on payments will start
receiving offers from lenders to lower their mortgage payments. The Federal
Housing Finance Agency (FHFA), which oversees Fannie and Freddie, won't say how
many delinquent homeowners will receive the modifications, but the Mortgage
Bankers Association reported in May that about 1.1 million borrowers are behind
on their loans by three payments or more. Not all of those mortgage holders
have Fannie or Freddie loans, however.
