The SEC has stated that it will not enforce part of the Dodd-Frank Act that requires asset-back security issuers to post credit ratings on their marketing collateral, at least for the time being.
""Given the current state of uncertainty in the asset- backed securities market and the benefits to investor protection resulting from Securities Act registration, the Division is extending the relief,” the SEC said."
Under Dodd-Frank, ratings firms could be held liable for their ratings. Is it really that unrealistic to expect that firms, which create ratings that billions (if not trillions) of investment dollars hinge upon, have some culpability when it comes to the ratings they produce? I would fully expect a sea change in the way the ratings agencies operate, but this regulation isn't exactly a surprise. c'mon moodys!
"The Dodd-Frank law, signed by President Barack Obama in July, subjects ratings companies to so-called expert liability, meaning they would face the same legal risks as accountants and other parties that participate in bond sales."
http://www.bloomberg.com/news/2010-11-23/sec-allows-asset-backed-issuers-to-omit-ratings-required-by-dodd-frank-act.html
Tuesday, November 30, 2010
In the End, Everyone Has To Eat
Whether it takes the form of donations to food banks, or higher taxes to support unemployment benefits, the net-net is that everyone in the US needs to eat. And with the specter of the end of extended unemployment insurance looming large, food banks are getting ready to absorb the crush of people looking for sustenance. A crush of people that could amount to a 33% increase in the number of people heading to Feeding America's food banks.
"WASHINGTON -- Food banks across the country are watching for the end of federally-funded extended unemployment insurance.... Feeding America's 200 member food banks across the country feed nearly six million people every week. According to the Labor Department, two million long-term unemployed will be dropped from the programs by the end of December if Congress does not act."
http://www.huffingtonpost.com/2010/11/29/food-banks-bracing-for-en_n_789198.html
"WASHINGTON -- Food banks across the country are watching for the end of federally-funded extended unemployment insurance.... Feeding America's 200 member food banks across the country feed nearly six million people every week. According to the Labor Department, two million long-term unemployed will be dropped from the programs by the end of December if Congress does not act."
http://www.huffingtonpost.com/2010/11/29/food-banks-bracing-for-en_n_789198.html
A 'Countrywide' Problem
The question becomes: which is worse - a security backed by property that is declining in value and often defaulted on, or a security backed by.. nothing?
"This is in keeping with the judge’s recap, and also underscores the notion that it was Countrywide’s practice to not convey the notes. We have been told separately that a senior industry executive also said that no one in the industry transferred the notes. If true, this has very serious implications. As we’ve indicated, it means that residential mortgage backed securities are not secured by real estate, or as Adam Levitin put it, they are “non mortgage backed securities. Bloomberg provides further comments along those lines:
http://www.nakedcapitalism.com/2010/11/more-on-bofa-employee-damaging-admissions-re-failure-to-convey-mortgage-notes.html
"This is in keeping with the judge’s recap, and also underscores the notion that it was Countrywide’s practice to not convey the notes. We have been told separately that a senior industry executive also said that no one in the industry transferred the notes. If true, this has very serious implications. As we’ve indicated, it means that residential mortgage backed securities are not secured by real estate, or as Adam Levitin put it, they are “non mortgage backed securities. Bloomberg provides further comments along those lines:
“It may mean investors who think they bought mortgage- backed securities bought securities that aren’t backed by anything,” said Kurt Eggert, a professor at Chapman University School of Law in Orange, California."
http://www.nakedcapitalism.com/2010/11/more-on-bofa-employee-damaging-admissions-re-failure-to-convey-mortgage-notes.html
$5.3B Buys Quite a Few Discounted Microderm Abrasion Treatments
It appears as though Google is prepared to pay in the neighborhood of $5.3B for Groupon.
A quick summary of what public companies Google could buy with $5.3B, assuming they'd pay a 30% premium over market cap (rough valuation.. market cap listed next to company name below) :
http://venturebeat.com/2010/11/29/new-groupon-deal-reports-allthingsd-5-3b/
A quick summary of what public companies Google could buy with $5.3B, assuming they'd pay a 30% premium over market cap (rough valuation.. market cap listed next to company name below) :
- AOL - $2.6B
- Interactive Corp 0 $2.8B
- AMD (almost) - $4.9B
- Garmin (almost) - $5.6B
- Concur Technologies - $2.7B
- Blackboard - $1.4B
http://venturebeat.com/2010/11/29/new-groupon-deal-reports-allthingsd-5-3b/
Hmm..
My mom always told me to be careful about road rage, saying "You never know who has a gun!"
I don't think she envisioned this - drivers carrying nukes!
1,000 warheads are being transported from Washington to Texas and back via Kenworths driven by drunkards.
"Eight of the Navy’s 14 ballistic-missile submarines are based at Bangor, so about 900 to 1,000 warheads would be transported from and returned to Kitsap County in special unmarked tractor trailers."
Let us hope they decide to lay off the booze...
I don't think she envisioned this - drivers carrying nukes!
1,000 warheads are being transported from Washington to Texas and back via Kenworths driven by drunkards.
"Eight of the Navy’s 14 ballistic-missile submarines are based at Bangor, so about 900 to 1,000 warheads would be transported from and returned to Kitsap County in special unmarked tractor trailers."
Let us hope they decide to lay off the booze...
Monday, November 29, 2010
I See a Pattern
While sovereign debt crises are the flavor of the month, and geopolitical shenanigans keep us amused, there is something just over the horizon that may mean potential retirees in the near future face 'forced austerity':
- Universities: http://pensionpulse.blogspot.com/2010/11/universities-sinking-in-pension-abyss.html
- Chicago (on a per capita basis): http://www.kellogg.northwestern.edu/news/rauh_chart.htm
- And from the same source... all municipalities:
- http://www.kellogg.northwestern.edu/News_Articles/2010/municipal-pension-systems.aspx#
- "Six major cities have current pension assets that can only pay for promised benefits through 2020: Philadelphia, Boston, Chicago, Cincinnati, Jacksonville and St. Paul. An additional 18 cities and counties, including New York City, Detroit, Cook County in Illinois and Orange County in California would be solvent through 2020 but not past 2025."
- Corporations too?
- http://www.businessinsider.com/scary-facts-about-the-coming-pension-crisis-2010-8#americas-100-largest-corporate-pension-plans-were-underfunded-by-217-billion-at-the-end-of-2008-1
- "America's 100 largest corporate pension plans were underfunded by $217 billion at the end of 2008"
- "..under the Pension Reform Act of 2006, corporations were given a grace period until fiscal 2011 to fully fund their pensions--a time that is rapidly approaching...As the discount rate falls, the estimated present value of a fund's liabilities rises, along with any portion that is assumed to be unfunded. The way the math works, a one percentage point decline in the discount rate a fund applies is equal to a roughly 15% decline in stock prices. As of today, the median discount (settlement) rate for corporate pension plans is 5.9%. That compares to a 3.7% discount rate applied to annuities, according to MetLife. That's a huge difference and one that must be recognized in the coming fiscal year, if rates stay low.
Its all relative..
Some great insight into what may be driving a lot of the reluctance of the rich to accept higher tax rates from two different articles... somewhat obvious..
"Many families with income of $250,000 and more do spend everything they earn, and, of course, would have to cut back. As psychologists have long known, individuals typically find belt-tightening painful. But recent psychological research suggests that if all in that group spent less in unison, their perceptions of their standard of living would remain essentially unchanged….
With less after-tax income, top earners also wouldn’t be able to spend as much on cars or their children’s weddings and coming-of-age parties. But why did they feel compelled to spend so much in the first place? In most cases, they simply wanted a car that felt spirited, or a celebration that seemed special. But concepts like “spirited” and “special” are inescapably relative: when others in your circle spend a lot, you must spend accordingly or else live with the disappointment that results from unmet expectations."
http://www.nakedcapitalism.com/2010/11/tax-hikes-status-competitiveness-and-social-stratification-2.html
"Many families with income of $250,000 and more do spend everything they earn, and, of course, would have to cut back. As psychologists have long known, individuals typically find belt-tightening painful. But recent psychological research suggests that if all in that group spent less in unison, their perceptions of their standard of living would remain essentially unchanged….
With less after-tax income, top earners also wouldn’t be able to spend as much on cars or their children’s weddings and coming-of-age parties. But why did they feel compelled to spend so much in the first place? In most cases, they simply wanted a car that felt spirited, or a celebration that seemed special. But concepts like “spirited” and “special” are inescapably relative: when others in your circle spend a lot, you must spend accordingly or else live with the disappointment that results from unmet expectations."
http://www.nakedcapitalism.com/2010/11/tax-hikes-status-competitiveness-and-social-stratification-2.html
The Continued Delusion
While some parts of the article come from a fairly extreme viewpoint, assuming this data is correct, there is something to be learned from the section in bold below. The talking points from the past few years are that consumers are tightening their belts and paying off debt. But, if credit card debt has only decreased due to financial institutions writing off a portion of that as 'bad debt', then the reality is somewhat different (although the authors of the piece below do not indicate how much debt would normally be written off in a give quarter).
"The MSM declares that the reduction in overall consumer debt from its peak of $2.56 trillion in 2008 to $2.41 trillion today proves that consumers have been cutting back and paying off debt. This is another media lie. Non-revolving debt, which includes car loans, education loans, mobile home loans and boat loans sits at $1.6 trillion, an all-time high matched in 2008. Credit card debt has “plunged” from $957 billion to $814 billion, not because consumers paid down their balances. The mega Wall Street banks have written off $20 billion per quarter since early 2009, accounting for ALL of the reduction in credit card debt. Clueless consumers continue to charge at the same rate as the peak in 2008."
http://www.nakedcapitalism.com/2010/11/jim-quinn-lies-across-america.html
"The MSM declares that the reduction in overall consumer debt from its peak of $2.56 trillion in 2008 to $2.41 trillion today proves that consumers have been cutting back and paying off debt. This is another media lie. Non-revolving debt, which includes car loans, education loans, mobile home loans and boat loans sits at $1.6 trillion, an all-time high matched in 2008. Credit card debt has “plunged” from $957 billion to $814 billion, not because consumers paid down their balances. The mega Wall Street banks have written off $20 billion per quarter since early 2009, accounting for ALL of the reduction in credit card debt. Clueless consumers continue to charge at the same rate as the peak in 2008."
http://www.nakedcapitalism.com/2010/11/jim-quinn-lies-across-america.html
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