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Brazil
raises rate for fifth time in a row - (www.ft.com) Brazil’s central bank raised its benchmark
interest rate for the fifth time in a row on Wednesday night, bringing it close
to double digits and raising questions about how much longer the tightening
cycle has left to run. The bank increased the Selic rate by 50 basis points to
9.5 per cent amid debate about whether it plans to continue the cycle at the
next meeting in six weeks’ time, which would bring the rates to the politically
sensitive 10 per cent level. The monetary policy committee “evaluates that this
decision will contribute to set inflation into decline and ensure that this
trend persists in the upcoming year”, it said, repeating the brief statement
issued at its last meeting in August. The bank has been keen to underline the
credibility of its inflation-targeting regime after perceptions of political
interference earlier in the year.
IMF
Sees Business-Loan Losses of EU250 Billion in EU Banks - (www.bloomberg.com) Banks in Spain, Italy and Portugal face
about 250 billion euros ($338 billion) in potential losses on their business
loans over the next two years, the International Monetary Fund said. About
one-fifth of combined corporate loans is at risk of default in the three
economies, which are forecast to contract this year, according to the fund’s
Global Financial Stability Report released today. The Spanish banking system is
the only one with enough reserves to cover the losses, it said. The study is
“an illustration of the potential magnitude of corporate risks for banking
systems,” the fund said in the report. “Some banks in the stressed economies
might need to further increase provisioning to address the potential
deterioration of asset quality on their corporate loan books, which could
absorb a large portion of future bank profits.”
Icelanders
Run Out of Cash to Repay Foreign Debts: Nordic Credit - (www.bloomberg.com) The nation faces a “repayment risk of foreign
debt by private entities in the economy, who don’t have access to foreign
financial markets,” Sigridur Benediktsdottir, head of financial stability at
the Reykjavik-based central bank, said yesterday in an interview. “We view this
as being exacerbated or made worse by the fact that our current account is
actually declining.” Prime Minister Sigmundur David Gunnlaugsson has said
Iceland’s foreign exchange shortfall is “a matter of huge concern” as he tries
to scale back currency controls in place since 2008. The government’s biggest
challenge is to allow capital to flow freely without triggering a krona
sell-off that would cause Iceland’s foreign debt to spike and undermine the
nation’s economic recovery.
So
This is A Recovery: Housing Welfare Queens Oppose Rollback of Crisis Loan
Limits - (www.mortgagenewsdaily.com) Pressure appears to be building on the
Federal Housing Finance Agency's (FHFA) acting director to back down or at
least delay an intended reduction in conforming loan limits for Fannie Mae and
Freddie Mac (the GSEs). In August Edward J. DeMarco announced plans to scale
back existing limits on the size of conventional loans that can be purchased by
the GSEs. The current limit is $417,000 with exceptions for counties
deemed to have high cost housing where the limit is as high as $625,000.
DeMarco proposed a gradual reduction as one mechanism to
encourage the return of private money to the mortgage market and to reduce the
government's housing finance footprint. Industry groups began almost
immediately to question both the wisdom of a reduction and the authority of
DeMarco to take the action without congressional authority. It now
appears they have unified to press their demands and have picked up some
congressional support. On Tuesday, 15 industry groups including the National
Associations of Home Builders (NAHB), Realtors (NAR),Credit Union Associations,
and the Land Title Association, Credit Union National Association, and the Mortgage
Bankers Association sent a letter to DeMarco stating that "a
reduction of the conventional conforming loan limit to $400,000 would have
impacted nearly 154,000 borrowers in 2012, many of whom were in markets still
in recovery." The group said that many of these borrowers could not
have qualified for loans under the tighter private market standards.
"These conditions leave the American dream out of reach for many families.
Lowering the loan limits further restricts liquidity and makes mortgages more
expensive for households nationwide."
The Guarantee That Banks May Fear to Invoke - (www.nytimes.com) The mortgage
orgy that banks entered into before the financial crisis has caused them — and
their borrowers — immense pain since then. I have lost track of all the
settlements and payments. Now The American Banker newspaper is reporting that
banks may be hiding losses from their shareholders: The nation’s four
largest banks are holding $57 billion of seriously delinquent loans that
they’ve been slow to move into foreclosure over concerns that the Federal
Housing Administration, the government mortgage insurer, will refuse to cover
the losses and hit them with damages, according to industry sources. The banks
— Bank of America (BAC), Citigroup (NYSE: C), JPMorgan Chase (JPM), and Wells
Fargo (WFC) — have assured investors in the footnotes of quarterly filings that
the loans are government-insured and therefore pose no threat to their bottom
lines, even if they end up in foreclosure. What’s more, the banks have used
these supposedly ironclad government guarantees as a pretext for continuing to
classify the loans as performing and for holding no reserves against them.
From sea turtles to light bulbs, World Bank’s crisis response may have run off course - (www.washingtonpost.com) A review of the bank’s crisis-driven lending spree in 2009 and 2010 shows why Kim may be concerned — and why development experts worry that an institution with billions at its fingertips is in danger of becoming an inconsequential footnote rather than a catalyst to help the world’s poor. Bank lending more than doubled in 2009 and 2010, topping $100 billion, as officials approved an unprecedented 700 projects in more than 100 countries. But the organization — which touts itself as the world’s premier development agency — has struggled to deliver results. As much as a third of the money from those two years remains unspent as the bank copes with project delays, cost overruns and criticism that its crisis response focused on countries that needed it least.
Unaffordable
Care Act for some - (www.sfgate.com) Many
middle class and affluent families are finding the new health plan will send
their premiums soaring. Saunders. As a candidate for president, Barack Obama
sold his signature universal health care plan with the promise that it would
"cut the cost of a typical family's premium by up to $2,500
a year." Now that the Affordable Care Act exchanges are open for
business, voters are finding that the biggest problem with Obamacare isn't that
some Web sites crashed last week but that the Obama promise of big savings for
the average family was too good to be true. Now that the exchanges are
open for business, people who already have individual coverage have something
new to not like: sticker shock. The Affordable Care Act isn't affordable
after all. Last week, I began hearing from readers whose individual policy
premiums are going up, not down. A local architect sent me a notice he received
from Kaiser informing him that his individual coverage will increase by $199.95
per month, or 78.9 percent. When he added his two sons, the percentage increase
was even greater.
Batista
Creditors Said to Weigh Seizures as Default Looms - (www.bloomberg.com) OSX Brasil SA (OSXB3) bank creditors are considering taking
possession of two vessels used as collateral on loans to Eike Batista’s shipbuilding company, according to six
people with direct knowledge of the matter. Banks are talking to advisers and
OSX officials to evaluate whether they should execute guarantees if the
oil-producing sister company goes into default, which would trigger
cross-default clauses on OSX debt, said the people, asking not to be named as
discussions are private. OSX borrowed $1.27 billion from 12 banks including
Banco Santander SA and DVBGroup Merchant Bank (Asia) Ltd. and is still negotiating to avoid filing
for bankruptcy protection, one of the people said. OSX already hired
Credit Suisse Group AG to help sell the OSX-1 and OSX-2 platforms that
guarantee the loans, the people said. Creditors would enter that process as
they seek to avert losses after OGX Petroleo & Gas Participacoes SA missed
a $45 million Oct. 1 bond payment that puts Batista on the brink of Latin
America’s biggest corporate default after oil deposits he valued at $1 trillion turned out to be
commercial failures.
Alcatel-Lucent
to Reduce 10,000 Jobs as Losses Mount - (www.bloomberg.com) Alcatel-Lucent SA (ALU) will eliminate 10,000 jobs as Chief
Executive Officer Michel
Combes
accelerates a 1 billion-euro ($1.4 billion) cost-cut plan to revive the
unprofitable French network-equipment maker. The cuts, due by 2015, represent
about 14 percent of the workforce worldwide, based on the 72,000 employees the
Paris-based company had as of December. About 4,100 jobs will be reduced in Europe, Middle East and Africa, 3,800 in Asia and 2,100 in the Americas, Alcatel-Lucent
said today. Sites in the French cities of Toulouse and Rennes will be
shuttered. Alcatel-Lucent is speeding up a turnaround bid after thousands of
earlier job cuts, restructuring and asset sales failed to stem losses.
Worsening
Debt Crisis Threatens Puerto Rico - (www.nytimes.com) Puerto
Rico has been effectively shut out of the bond market and is now financing its
operations with bank credit and other short-term measures that are
unsustainable in the long run. The biggest concern is that the territory, which
has bonds that are widely held by mutual funds,
will need some sort of federal lifeline, an action for which there is no
precedent. In a meeting with bond analysts in New York on Monday, the president
of the Puerto Rican Senate, Eduardo Bhatia, said officials in the United States
Treasury and White House had been analyzing the situation carefully, “wondering
how they can help Puerto Rico send a very strong signal of stability right
now.” “We are waiting for some sort of an announcement from the Treasury and
the White House,” he said without clarification. He also complained that
analysts and investors did not appreciate the tough austerity measures that
Puerto Rico pushed through in recent months. Puerto Rico, with 3.7 million
residents, has about $87 billion of debt, counting pensions, or $23,000 for
every man woman and child. That compares with about $18 billion of debt for
Detroit, with a little more than 700,000 people, or about $25,000 for every
person in the city. Detroit and Puerto Rico have been rapidly losing
population, leaving a smaller, and poorer, group behind to shoulder the burden.
Gold Befuddles Bernanke as Central Banks’
Losses at $545 Billion - (www.bloomberg.com) Ben
S. Bernanke, the world’s most-powerful central banker, says he doesn’t
understand gold prices. If his peers had paid attention, they might have
stopped expanding reserves that lost $545 billion in value since bullion peaked
in 2011. Bernanke, who holds economics degrees from Harvard College and the
Massachusetts Institute of Technology and led the Federal Reserve through the
biggest financial disaster since the Great Depression, told the Senate Banking
Committee in July that “nobody really understands gold prices and I don’t
pretend to really understand them either.” Central banks, which own 18 percent
of all the gold ever mined, will add as much as 350 tons valued at about $15
billion this year, the London-based World Gold Council estimates. They
purchased 535 tons in 2012, the most since 1964. Russia is the biggest buyer, expanding reserves
by 20 percent since prices reached a record $1,921.15 an ounce in September
2011. Gold slumped 31 percent since then.
Peter
Schiff Warns of Martial Law - (www.infowars.com) American
investment broker, businessman, author and financial commentator Peter Schiff
warns us that we are in worse shape now economically than we were just before
the 2008 financial crisis, which we still have yet to recover from. “I think
the U.S. has been in a depression or a recession for the entirety of the Obama
presidency,” Schiff said. “I think there’s going to be a depression, but I
don’t think it’s going to be global.” “When the dollar collapses and when the
rest of the world stops wasting their resources, propping up our economy,
buying our debt, selling us products that we can’t pay for, I think you’re
going to have a global economic boom outside of the United States.” “I just
hope that one day we’re smart enough to jump in on it by adopting free market
principles.” “I hope we can reclaim our former glory,” he continued. “But to do
that’s we’re going to have to reclaim the values that we have abandoned and
those are the ones that our Founding Fathers wrote into our Constitution, not
the ones that we’re following now.”
Lockheed
plans to furlough 3,000 employees next week - (www.washingtonpost.com) Bethesda-based Lockheed Martin said
Friday that it will furlough about 3,000 employees next week due to the
government shutdown and expects that number to grow if the budget standoff
doesn’t end soon. The figure represents a fraction of the company’s roughly
120,000 employees but reflects a growing concern among contractors about
Congress’s failure to reach an agreement to fund the government. Private
companies have had more flexibility in the early days of the shutdown, but
contracting executives have warned that the situation will soon worsen. In a
memo to employees, Marillyn A. Hewson, Lockheed’s chief executive, said
affected employees should use vacation time and floating holidays so they can
continue to be paid during the furlough. Those without enough vacation time
will be given an advance on up to 40 hours of their salary, she said.
Catastrophic Consequences of a U.S. Default
Explained - (finance.yahoo.com) As
we close out the first week of the government shutdown, a bigger and even more
toxic disaster is creeping into the fray that could make the contentious budget
battle look like a slap fight. The Treasury Department said Uncle Sam will be
broke by October 17th unless something is done. Treasury secretary Jack Lew hammered
home that point Thursday by releasing an unusually ominous statement that warned of catastrophic risks to the economy. House Speaker John
Boehner has said he won't let the government default on its debt, but until steps are taken to
raise the nation's debt ceiling, the possibility of default is still
theoretically alive. "If they seriously default on the debt, what we're
really talking about is a depression," says veteran financial sector
analyst Richard Bove, VP of research at Rafferty Capital Markets. In the
attached video he explains how the fallout would be a lot worse than the
recession suffered in 2008 and the aftershocks would be felt for at least a
decade. "The first thing you have to do is look at who holds the
debt," Bove says of the $16.7 trillion of bonds the U.S. currently has
outstanding. "The first, biggest owner (of U.S. debt) is the social
security fund, so you'd have all of these people who are receiving social
security payments who now have to question whether they'll get their
payments."
Caviar
Off Indian Officials’ Menu as Junk Rating Looms - (www.bloomberg.com) Tough life!! J For
Arvind Mayaram, India’s
push to avoid having its credit
rating cut
to junk means he’ll have to forgo caviar and a two-meter-long flat bed in first
class on his flight from New Delhi to Washington D.C. this week. Mayaram,
India’s Economic Affairs Secretary, will fly business class instead to the
annual World Bank and International Monetary Fund meetings, saving taxpayers at
least $3,000. The change is part of moves to narrow a budget deficit that
reached almost 75 percent of the 5.4 trillion-rupee ($88 billion) target in the
first five months of the fiscal year, imperiling efforts to limit the widest
shortfall in major emerging nations. Prime Minister Manmohan
Singh faces
a slump in economic expansion that’s hurting tax revenues as rupee weakness
raises the cost of oil imports and fuel subsidies. He’ll likely scale back
spending on areas such as research and development while maintaining energy,
food and fertilizer aid to court support before elections due by May, Religare
Capital Markets Ltd. said.
Fed's Bernanke questioning whether bond-buying
works - (www.reuters.com) The Federal Reserve's powerful chairman
and architect of the U.S. central bank's massive bond-buying program is serious
about questioning its effectiveness, a Fed policymaker known for his opposition
to the program said on Thursday. "The difference I have with my colleagues
is the question of efficacy," Richard Fisher, president of the Dallas
Federal Reserve Bank, told a group of CEOs in Little Rock, Arkansas. "To
his great credit, Chairman Bernanke has made this the driving point of every
discussion: Is this working or is it not working?" Fisher, repeating
comments he made just hours earlier in his hometown of Dallas, said he believes
it is not.
Realtor
sells them a house then loots it while they are away, cops say - (www.nypost.com) A real-estate agent sold an Upper West Side
town house to the owner of an art gallery — then allegedly looted the home of
more than $500,000 in high-end goods when the victim and her family were away
in the Hamptons, The Post has learned. David Kim, 42, last employed by the
Corcoran Group, was involved in the sale of the $7.6 million West 81st Street
property to Tina Kim — who runs the Tina Kim Gallery in Chelsea — and her
husband, Jae Chung, in December 2012, police sources said. The sale was not
handled by Corcoran. Tina Kim’s family, which employs a maid, nanny and
personal driver, never changed the locks on the doors, allowing the agent
allegedly to slip inside the home and steal their pricey possessions, including
rare statues and portraits. “He decorated his apartment by framing the artwork
on his walls,” said one police source about David Kim, who was arrested last
week on a slew of felony charges. The source added, “The guy stole almost
everything from their home, even humidifiers, cigar boxes and all of the
woman’s purses. “One was worth $90,000. He has a drug and gambling problem.”
Detroit defaults on $600 million of unsecured
bonds - (www.washingtonpost.com) Detroit
on Tuesday defaulted on more than $600 million of general obligation bonds
deemed unsecured by the city’s emergency manager, a city spokesman said. The
move marked the second bond default by the cash-strapped city after Kevyn Orr,
the former corporate bankruptcy attorney who has been running Detroit since
March, announced on June 14 a moratorium on unsecured debt payments. Spokesman
Bill Nowling confirmed the city did not make debt service payments due Tuesday
on the unsecured GO bonds, including $411 million of voter-approved unlimited
tax debt. However, payments were made on about $349 million of GO bonds deemed
secured debt by the city, he added. “Unsecured debts will be satisfied in the
course of a plan of adjustment or by mutual agreement of the parties, and
approval of the judge,” Nowling said, referring to Detroit’s bankruptcy filing.
Rising
foreclosures hurt Long Island as nation recovers - (www.newsday.com) New
foreclosure cases on Long Island are spiking, even as the mortgage crisis fades
in the rest of the United States. Despite rising home values that suggest a
housing rebound on the Island, lenders filed 12,271 initial foreclosure cases
here in the first eight months of this year, a nearly 53 percent surge compared
with the same period in 2012, according to data from real estate information
firm LI Profiles, based in Brightwaters. Nationwide the number of initial
filings dropped 34 percent during the same period, national data provider RealtyTrac reported. "We're definitely seeing the Long Island
area buck the national trend when it comes to foreclosure activity," said
Daren Blomquist, vice president of RealtyTrac, based in Irvine, Calif.
The 'Smart Money' In The Stock Market Has Been
Headed For The Exits Since May - (www.businessinsider.com) The
"Smart Money Flow Index" has been headed lower since May, even though
the stock market has continued to make new all-time highs since then. What is
the SMFI? A description of the indicator from Bloomberg: The Smart Money Flow
Index is calculated by taking the action of the Dow in two time periods: the
first 20 minutes and the close. The first 30 minutes represent emotional
buying, driven by greed and fear of the crowd based on good and bad news. There
is also a lot of buying on market orders and short covering at the opening.
Smart money waits until the end and they very often test the market before by
shorting heavily just to see how the market reacts. Then they move in the big
way. These heavy hitters also have the best possible information available to
them and they do have the edge on all the other market participants. To
replicate this index, just start at any given day, subtract the price of the
Dow at 10 AM from the previous day's close and add today's closing price.
Whenever the Dow makes a high which is not confirmed by the SMFI there is
trouble ahead.
Uncle
Sam Is Reluctant Landlord Of Foreclosed Homes - (www.nbcnews.com) For sale or rent by distressed owner: 248,000
homes. That’s how many residential properties the U.S. government now has in
its possession, the result of record numbers of people defaulting on
government-backed mortgages. Washington is sitting on nearly a third of the
nation’s 800,000 repossessed houses, making the U.S. taxpayer the largest owner
of foreclosed properties. With even more homes moving toward default, Fannie
Mae, Freddie Mac and the Federal Housing Administration are looking for a way
to unload them without swamping the already depressed real estate market. Trouble
is, they haven’t figured out how to do that. The government admitted as much in
August, when Fannie, Freddie and FHA issued a joint plea to the public for
ideas about how to solve the problem. (Give it your best shot: You have until
Sept. 15 to email ideas to reo.rfi@fhfa.gov.) “They’re stuck,” says Karen Shaw
Petrou, managing partner of Federal Financial Analytics, a Washington-based
consultant that advises banks and other clients on government policy. “They
don’t know what to do.”
