By F. William Engdahl
8-4-8
Tuesday, 5 August 2008
Paulson Loses Control Over US Financial System
Hundreds of banks will fail, Roubini tells Barron's
NEW YORK, Aug 3 (Reuters) - The United States is in the second inning of a recession that will last for at least 18 months and help kill off hundreds of banks, influential economist and New York University Professor Nouriel Roubini told Barron's in Sunday's edition. Taxpayers will pay a big price for helping bail out the rest of the financial services industry as well, Roubini said -- at least $1 trillion and more likely $2 trillion. The banks will become insolvent because of mounting losses as a result of the housing bust and because they have only written down their subprime loans so far, he said. Still in front of them are their consumer-credit losses, for which they lack the reserves, Barron's reported. He also said there are hundreds of millions of dollars outstanding in home-equity loans that could be worth zero, too. U.S. consumers, meanwhile, are "shopped out" and saving less, while the Federal Reserve's performance in handling the crisis has been poor, Roubini said, because it failed to see that the problem extended beyond subprime mortgage debt. Now, Roubini told Barron's, the government is overregulating, bailing out troubled participants and intervening in every market. "The regulators should investigate themselves for bailing out Fannie Mae (FNM.N: Quote, Profile, Research, Stock Buzz) and Freddie Mac (FRE.N:Quote, Profile, Research, Stock Buzz), the creditors of Bear Stearns and the financial system with new lending facilities. They have swapped U.S. Treasury bonds for toxic securities," he told Barron's. "It is privatizing the gains and profits, and socializing the losses as usual. This is socialism for Wall Street and the rich." He said that sometimes it is necessary to use public money to rescue institutions, but in a way that does not bail out the people who made the mistakes. "In each one of these episodes, the government bailed out the shareholders, the bondholders, and to some degree, management," Roubini told Barron's. As for the banks that will go bankrupt, they will include community banks that finance homes, stores, downtown areas, commercial real estate and other mainstays of U.S. towns and cities, Roubini said. "Of three dozen or so medium-sized regional banks, a good third are in distress," he told Barron's, saying half of the group could go bankrupt. Some big banks could wind up insolvent, he added, but said they might be deemed too big to fail. Nouriel stressed that he is "quite bullish" about the state of the global economy and that he is positive about the medium and long term. (Reporting by Robert MacMillan, editing by Martin Golan) © Thomson Reuters 2008 All rights reserved
A second, far larger wave of U.S. mortgage defaults is building
NEW YORK: The first wave of Americans to default on their home mortgages appears to be cresting, but a second, far larger one is building with alarming speed. After two years of upward spiraling defaults, the problems with mortgages made to people with weak, or subprime, credit are showing the first, tentative signs of leveling off. But with the U.S. economy struggling, homeowners with better credit are now falling behind on their payments in growing numbers. The percentage of mortgages in arrears in the category of loans one rung above subprime, so-called alternative-A, or alt-A, mortgages, quadrupled to 12 percent in April from a year earlier. Delinquencies among prime loans, which account for most of the $12 trillion market, doubled to 2.7 percent in that time. While it is difficult to draw precise parallels among various segments of the mortgage market, the arc of the crisis in subprime loans suggests that the problems in the broader market may not peak for another year or two, analysts said. Defaults are likely to accelerate because many homeowners' monthly payments are rising rapidly. The higher bills come as home prices continue to decline and banks are tightening their lending standards, making it harder for people to refinance loans or sell their homes. Of particular concern are alt-A loans, many of which were made to people with good credit scores without proof of their income or assets. Much will depend on the course of the economy, particularly unemployment. A weaker job market would push more homeowners toward the financial brink. The U.S. Labor Department reported Friday that the unemployment rate climbed to a four-year high in July. Other downbeat reports last week documented another drop in home prices, slower economic growth than expected and a huge loss at General Motors. "Subprime was the tip of the iceberg," said Thomas Atteberry, president of First Pacific Advisors, a investment firm in Los Angeles that trades mortgage securities. "Prime will be far bigger in its impact." During a conference call with analysts last month, James Dimon, the chairman and chief executive of JPMorgan Chase, said he expected losses on prime loans at his bank to triple and described the outlook for them as "terrible." Delinquencies on mortgages tend to peak three to five years after loans are made, said Mark Fleming, the chief economist at First American CoreLogic, a research firm. Not surprisingly, subprime loans from 2005 appear closer to the end than those made in 2007, for which default rates continue to rise steeply. "We will hit those points in a few years and that will help in many ways," Fleming said, referring to the loans made later in the housing boom. "We just have to survive through this part of the cycle." Data on securities backed by subprime mortgages show that 8.41 percent of loans from 2005 were delinquent by 90 days or more or in foreclosure in June, up from 8.35 percent in May, according to CreditSights, a research firm with offices in New York and London. By contrast, 16.6 percent of 2007 loans were troubled in June, up from 15.8 percent. Some of that reflects basic math. Over the years, some loans will be paid off as homeowners sell or refinance, and some will be foreclosed and sold. That reduces the number of loans from those earlier years that could possibly default. Also, since the credit market seized up last year, lenders have become much more conservative and have stopped making most subprime loans and cut back on many other popular mortgages. The resetting of rates on adjustable mortgages, which was a big fear of many analysts in 2006 and 2007, has become less problematic because the short-term interest rates that many of those loans are tied to have fallen significantly as the Federal Reserve has lowered U.S. rates. The recent U.S. tax rebates and efforts to modify more loans have also helped somewhat, analysts say. What will sting borrowers more than rising interest rates, analysts say, is having to pay interest and principal every month after spending several years paying only interest or sometimes even less than that. Such loan terms were popular during the boom with alt-A and prime borrowers and made sense while home prices were rising and interest rates were low. But now, payments could jump 50 percent or more for some borrowers, and they may not be able to sell their properties for as much as they owe. Prime and alt-A borrowers typically had a five- or seven-year grace period before having to start making payments toward their principal. By contrast, subprime loans had a two- to three-year introductory period. That difference partly explains the lag in delinquencies between the two types of loans, said David Watts, an analyst with CreditSights.
A second, far larger wave of U.S. mortgage defaults is building
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Where Italy leads?
I don't think anyone is under any illusions – apart from the British media - as to why Berlusconi has put 3,000 armed troops on the streets of major Italian cities.
Tuesday, August 05, 2008
Ostensibly a measure to "help cut down crime", something claimed by both interior minister Roberto Maroni and his defence colleague Ignazio La Russo, this is nothing more than a fig-leaf, the Italians themselves being very well aware that most of the crime in Italy is Mafia-related, which will be untouched by this "crack-down".
If for "crime", however, you read "immigrants" – and in particular, the Roma – then the agenda becomes clearer, as does the timescale.
Coming on the back of the programme to fingerprint the inhabitants of the 700 or so immigrant encampments dotted around the major cities, the next move comes in October, when the "census" is finished, when the government plans to dismantle all remaining unauthorised settlements.
That the troops have been put on the streets now, with a deployment that is scheduled to last for an initial period of six months, is clearly – on the one hand - a pre-emptive strike, as unease grows at the scale of the "census", and – on the other - a preparation for the major upheaval that is to follow in a couple of months.
It is no coincidence, therefore, that in the main, the troops are being stationed mainly in or close to the camps and at the growing number of immigrant holding centres, all on the outskirts of the cities.
When the bulldozers move in during October – as indeed is planned – there is undoubtedly going to be trouble, as upwards of 160,000 gypsies are going to be targeted, even though up to three-quarters of them are Italian citizens.
That this "pogrom" will have the support of the bulk of Italian people is evidenced by a recent incident in Naples (pictured) when the bodies of two Roma girls who had drowned in the sea were left covered with towels while beachgoers continued to sunbathe.
Comparisons are now being made between this government's action and the census of Jews carried out by Benito Mussolin in 1938, the beginning of a process that put many of them in concentration camps. The Italian government, of course, denies any such connection, but its actions display a rooted determination to clear out what are clearly considered unwelcome "guests".
And all of this is going to present something of a problem for the "colleagues" in Brussels, who have been soft-peddling on their condemnation of the Rome government's action. When the troops go into action for real, however, even the EU is going to find it difficult to turn a blind eye. Unless it takes a firm line – where Italy leads, other member states will want to follow.
(NB: Blogger upload system for pics seems to be down - I'll try again later.)
COMMENT THREAD
Obama Showing Signs of Desperation
Foreign Reporting and Analysis Since April 2005China Confidential
Dateline USA....Barack Obama's new campaign ad branding his Republican opponent, John McCain, a tool of Big Oil, seems to signal desperation on the part of the ever-changing Candidate of Change. McCain is a strong advocate of domestic oil and gas development, which has not been championed in decades by multinational oil companies hooked on cheaper Middle Eastern supply agreements.
In fact, the Democrats, dating to the Carter administration, and the first big energy crisis, have been steadfast foes of domestic oil and gas (and coal and shale). The no-drill Democrats are anti-industry, in the grip of environmental extremists led by former Vice President Al Gore, whose global warming fear-mongering menaces the nation--and all of modern civilization.
Minitruth
We haven't yet read Nudge, but as we blogged here, that idea sounds horribly like nanny in a new set of clothes. And Nudge's concept of "choice architecture" certainly sounds like extaordinarily good news for all those ad agencies who feast on taxpayers' wallets round at the COI. We're grinding our teeth again (HTP Spokey). PS Numpties or numties? Our original blog spelled it numties, which we lifted straight from a paper written by the Director of Kent Police College. But as commenters pointed out, that's totally wrong: the authorised BBC spelling isnumpties. Just goes to show you can't trust a Director of Kent Police College like an old time copper. Labels: propaganda
MONDAY, AUGUST 04, 2008
We learned over the weekend that the Home Office has outrageously spent £2m funding commercial TV series bigging themselves up:"Unlike normal documentaries, the programmes are commissioned by ministers with the purpose of showing their policies or activities in a sympathetic light.
The media watchdog Ofcom has disclosed that it had opened an investigation into one of the programmes, Beat: Life on the Street — about the Government’s controversial Police Community Support Officers, to see whether it breached its broadcasting code."
As BOM readers will know, Bonkett's Numpties* in Yellow Jackets are a problem (see this blog). They were introduced as a cost cutting measure to replace real coppers, and when last sighted there were 13,400 of them. But they have nevercommanded public confidence - eg that appalling case when they reportedly left a boy to drown in a flooded gravel pit.
So to address this yawning credibility gap, the commissars decided to take the law into their own hands. Stretching Ofcom rules about transparency and editorial control to the max, taxpayers' money was used to fund extended propaganda films disguised as fly-on-the-flourescent-yellow-jacket documentaries. An outrage Uncle Joe would have been proud of.
The dark deed was masterminded by the government's propaganda ministry, the Central Office of Information (COI). They're so detached from what we think that they're actually proud of what they've done: a spokesperson says:"Advertiser-funded programming has allowed the Government to successfully reach 22,804,675 people with important messages, such as those around tackling crime and disorder, or encouraging people to give blood.
COI aims to help government departments communicate their services for citizens, achieving maximum communication effectiveness and value for money."
Important messages around... maximum communication effectiveness... services for citizens - this is the modern language of state control (although HTF they can know they've reached 22,804,675 people - rather than say, 22,804,674 - is beyond me).
The COI was established on the second day of WW2 as the Ministry of Information. It was our MiniTruth, and its mission was wartime propaganda. Fair enough - there was a war on. The trouble is, despite the passage of 60 years, the COI remains in the business of wartime propaganda: streams of ads on TV, radio, newspapers, and increasingly the internet, all telling us that unless we jolly well pull our socks up, Jerry will win.
And it's not cheap. Last year, central government propaganda cost us £400m, including £168m spent on traditional advertising - making the governmentBritain's second biggest advertiser, behind only Procter and Gamble. Here's the summary from COI's Annual Report:
As we can see, although the spend on traditional ads has apparently stabilised, spend elsewhere is roaring away. In particular, the amount spent on digital media is exploding, up more than tenfold in four years to £35m pa.
And remember too, the COI's £400m only covers direct central government propaganda. As the TaxPayers' Alliance reported a few months back, local councils spend huge amounts on their own "publicity", currently running at £450m pa. Add in money spent by local NHS authorities, local police forces etc etc, and we're talking a figure around £1bn pa.
So that's another £1bn pa George could use to cut taxes. At a stroke.
Yeah.
If only.
The news from the Tory MPs' holiday reading list is that the number one required read is:"Nudge, the hit pop-psychology book by the Americans Richard Thaler and Cass Sunstein. The authors’ argue that sometimes voters need a light push to do the right thing, a sentiment that chimes with Mr Cameron’s policies on welfare and tax."
EU Brief.
UK Culture Secretary Issues Consultation Document on VOD Regulation
By itvtwp
The proposals are part of a comprehensive consultation on how the UK should implement the EU Audio Visual Media Services Directive, which includes various compulsory and optional elements, some of which are expected to result in new ...
itvt - http://blog.itvt.com
Times of Malta - Valletta,Malta
European Commission officials had said, however, that the recommendation to extend trapping for certain species beyond the end of the year could not be ...
By Achyut(Achyut)
In 2002 the European Union took its first step towards harmonizing its clinical trial regulations, throughout its Member States, by conceiving the European Directive on the approximation of the laws, regulations and administrative ...
The Three Amigos
The Three Amigos
Both Republican Party Presidential candidate John McCain and Democrat Party Presidential candidate Barack Obama recently spoke at the annual convention of the National Council of La Raza. I'm sure most readers understand that "La Raza" is Spanish for "The Race." That McCain and Obama would pander before an organization such as La Raza indicates just how deeply both the Republican and Democrat parties are committed to appeasing the pro-illegal immigration forces.........
http://www.newswithviews.com/baldwin/baldwin461.htm
by Chuck Baldwin
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