FedUpUSA

Archive for July 12th, 2011

This is some sort of joke, right?

Nevertheless, a number of participants judged the risks to the outlook for inflation as tilted to the upside. Moreover, a few participants saw a continuation of the current stance of monetary policy as posing some upside risk to inflation expectations and actual inflation over time.

coupled with

Participants also discussed the medium-term outlook for monetary policy. Some participants noted that if economic growth remained too slow to make satisfactory progress toward reducing the unemployment rate and if inflation returned to relatively low levels after the effects of recent transitory shocks dissipated, it would be appropriate to provide additional monetary policy accommodation. Others, however, saw the recent configuration of slower growth and higher inflation as suggesting that there might be less slack in labor and product markets than had been thought. Several participants observed that the necessity of reallocating labor across sectors as the recovery proceeds, as well as the loss of skills caused by high levels of long-term unemployment and permanent separations, may have temporarily reduced the economy’s level of potential output. In that case, the withdrawal of monetary accommodation may need to begin sooner than currently anticipated in financial markets. A few participants expressed uncertainty about the efficacy of monetary policy in current circumstances but disagreed on the implications for future policy.

Let’s just be up-front: Their alleged plans have not worked out, now three years into their “accommodations” and “policies”, and they do not have the first clue as to why.

Either that or they know full well that the real problem is excessive debt and there’s only one way to clear it: detonate their patron banks.

Pick one.

Gee, this is an old movie from the Bush era, isn’t it?

“I cannot guarantee that those checks go out on August 3rd if we haven’t resolved this issue. Because there may simply not be the money in the coffers to do it,” Mr. Obama said in an interview with CBS Evening News anchor Scott Pelley, according to excerpts released by CBS News.

The disgusting part of this “interview” is that there’s no follow-up with the obvious question: Why is it that you blew all the Social Security and Medicare tax revenue you took in, and thus are unable to pay the Social Security checks?

What you have is a President who has admitted to kiting checks and then borrowing to cover up the theft that previously occurred in the Treasury Department.

Oh, it’s legal kiting, since the government is doing it, but it is, in fact, check kiting.

The culpable party if you don’t get your check?  He’s sitting in the chair in the below video.

The Market-Ticker

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JP Morgan agreed to pay $211 million last week to settle allegations that it cheated local governments in 31 states by rigging the bidding process for dozens of muni bond deals.

With all the coverage on the grim jobs numbers and the stirring launch of Atlantis, you might have missed the news about JP Morgan’s settlement. Or maybe you thought it was groundhog day.

Friday’s settlement was just the latest in a series for the banking giant.

• In June, JPMorgan paid the SEC $154 million to settle charges it failed to disclose that hedge fund Magnetar not only helped choose the assets in a CDO transaction called “Squared,” but also bet against much of the deal.
• In April, JPMorgan Chase paid $75 million in fines and forfeited $647 million in fees to settle federal charges that it made unlawful payments to win municipal bond business in Jefferson County, Ala.
• In March 2010, JPM settled for $6 billion with the estate of Washington Mutual, which JPM bought from the FDIC in late 2008 for $1.9 billion. The estate claimed JPMorgan conspired to lower WaMu’s sale price by leaking false information about WaMu’s finances to federal regulators and potential rival bidders.

Meanwhile, Chris Whalen of Institutional Risk Analytics estimates JPMorgan may face up to $50 billion in additional claims stemming from lawsuits related to its crisis-era purchases of Bear Stearns and Washington Mutual. The firm is also exposed to separate settlements with state and federal regulators over illegal foreclosure and servicing practices.

“It has been our view, for some time, that banks are similar to tobacco and asbestos companies in that they are being sued by plaintiffs for a wide variety of problems,” writes Rochdale Securities analyst Dick Bove. “This means that each year for the next five to seven, there will be agreements, some wins and some losses, that will cost these companies billions of dollars. JPMorgan Chase, the nation’s second largest bank, is likely to pay a large amount of this money.”

The BP of Banking

Clearly, JPMorgan is not alone in paying big fines. UBS and Bank of America both paid fines related to muni bond rigging while Goldman Sachs got tagged with a $550 million fine for the “Abacus? transaction that was very similar to JPMorgan’s Magentar deal.

Every Wall Street firm has paid significant fines during the past decade but JPMorgan is starting to look the BP of banking. BP, you’ll recall, was cited for safety violation with far greater frequency than its competitors in the years leading up to its 2010 disaster in the gulf.

I’m not saying JPMorgan is heading for the financial version of the Deepwater Horizon fiasco, but I’d like to take Jamie Dimon to task for creating a culture where bad behavior seems to be epidemic across the bank. Other than some low-level muni bond traders, no one at JPMorgan has been held accountable for these violations, which would suggest Dimon condones the bad behavior.

Any why not? The fines JPMorgan has paid to date are a drop in the bucket of the tens of billions of dollars of government bailouts and subsidies the firm has received — and continues to enjoy — going back to the take-under of Bear Stearns in March 2008. Plus, they’re a tax write-off!

(Editor’s note: The Daily Ticker has extended an invitation to Mr. Dimon to come on the program and respond to this story.)

The World’s Best Grifter

Dimon has taken advantage of Uncle Sam’s generosity — and competitors’ missteps — to turn JPMorgan into the nation’s most powerful bank; if the price of that growth is having to pay some fines that don’t even come with a playful slap on the wrist, he’d be a fool not to pursue this business model.

Dimon is often described as the world’s best banker but these days that’s like being the world’s best grifter — only the law is working for you rather than trying to stop you.

Which brings me to the watchdogs. I’d also like to take to task the SEC, Federal Reserve, Justice Department and other federal regulators to task for failing to seek criminal charges and for what The NY Times calls a “softer approach” in pursuing cases against white-collar criminals.

Aaron Task is the host of The Daily Ticker. You can follow him on Twitter at @atask or email him at altask@yahoo.com

Tech-Ticker

You awake at this hour of the night?

You should be.

The Euro is breaking down severely along with big declines in Asia.  Why?  Lies.

What’s the actual exposure at Unicredit to bad debt?  Everything – mortgages, sovereign, Greek, whatever?

Does the market know the truth?  No.

Does it know the truth about our banks?  No.  Bank of America just recently took a charge that was massively in excess of their alleged reserves for the same event.  Do you believe its over?  Why would you – it hasn’t been thus far.

This campaign of lies is now running out of gas.  The market is calling “Bull!” on everything that is being emitted from the so-called “authorities”, including in this case Junker.

There’s no fix for lies other than truth.  The problem with the truth is that the banks are insolvent.  Yes, ours.  Yes, theirs.  They did not take down their leverage.  They hid it.  There, here, everywhere, and it was done with the full complicity and active involvement of governments.  Specifically, swaps and derivatives were not forced onto an exchange where chained risk is eliminated and independent nightly margining by a third party who has to make good if they don’t do their job is enforced.

This is why Greece isn’t fixed and why there’s such a tizzy over defaults and “restructuring.”  It is why the ECB is so pissed about the possibility of a credit event, because they broke their own rules on collateral quality and are holding a bunch of this trash themselves.  Yeah, they’ll probably survive Greece if it blows.

Italy?  Not a prayer in Hell and the market is telling you it’s going to happen.

Our government, for its part, faked a “recovery” with more than 10% of GDP in borrowed and blown funds.  We spent it on things like giving free illegal guns to Mexican gangs through Gunwalker (yes, that was in the porkulus bill) which unfortunately turned into a subtraction to GDP when the guns were subsequently used to kill people that actually were productive.

Italy “restricted” short sales today.  This is yet another desperation move.  Were the shorts wrong in 2008?  No, they were right.  They were trading on knowledge that Lehman was factually bankrupt.  They knew this because Lehman tried to repo with them and their collateral was no good – and when challenged on it, they had nothing else to use.  Those were not “bets”, they were positions taken with knowledge of the facts.

Facts that our government and Federal Reserve intentionally concealed from the rest of us.  That is, they lied.

This evening we’re being treated to the same sort of instability in the futures markets that we saw in 2008, just a few weeks and months before it all blew up.  History in the markets rarely repeats, but it often rhymes, and I hear echoes of the crying by CNBS anchors as the DOW fell 700 points.

Folks, I hope you’ve enjoyed the ride upward in the market and the faux “recovery” that produced no jobs and in fact has a lower labor participation rate than it did in 2009.  That, of course is otherwise known as the “taxpayer rate”, or those who can pay taxes (it’s hard to pay taxes when you’re unemployed and on the dole.)

Yes, there will be more sticksave attempts.  I expect one this coming morning, in fact, as another day like today over in Europe is going to break some key technical levels and might set off a waterfall decline, both in their markets and ours. Then you’ll have to see Obama on the TeeVee once again telling us how exceptional America is.

He’s right – we are exceptional.

We’re exceptional liars, starting with him.

Get some rest folks – it’s going to be in short supply soon.

Tickercon 1

The Market-Ticker

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Europe is now openly burning once again (Italy-Bund spreads just hit a new record), the US is 9 days away from being bankrupt, and completing the trifecta is China, which just failed to sell half of the proposed 50 billion in CNY of local government debt at an auction, courtesy of the SHIBOR supernova which oddly only Zero Hedge has been covering. From Bloomberg: “China’s finance ministry failed to sell all of the three-year debt offered at an auction on behalf of local governments as a cash crunch curbed demand. The ministry sold 23.9 billion yuan ($3.7 billion) of bonds at a yield of 3.93 percent on behalf of 11 provinces and municipalities, falling short of its 25 billion yuan target, said a trader at a finance company required to bid at the auction. The Shanghai interbank offered rate, or Shibor, for three-month yuan loans, was fixed at 6.24 percent today, near a record high of 6.46 percent reached on June 28. “While the interbank borrowing cost is so high, investors won’t spend money on local government debt,” said Huang Yanhong, a bond analyst at Bank of Nanjing Co. in Nanjing. “Demand is low also because the debt’s secondary-market trading isn’t active. After you buy it, you can only hold it till maturity.” Who would have possibly thought that 7 week money costing 7% and more could have implications and stuff…

Not helping things is last week’s interest rate hike: “Demand for debt is also cooling after the central bank raised its benchmark one-year lending and deposit rates last week for the third time this year to help stem gains in consumer prices. Inflation accelerated to a three-year high of 6.4 percent in June, from 5.5 percent in May, the statistics bureau said on July 9. Last week, the finance ministry failed to sell all of the bonds offered at an auction of 182-day bills. The ministry also sold less debt than planned at a June 17 auction of one-year notes, and sales of 182-day bills and one-year bonds on May 13.” Bottom line: while you were sleeping, the financial crisis just went global.

More:

The central government will sell 200 billion yuan of bonds on behalf of local authorities this year. Today’s auction was the first involving this type of debt in 2011 and 25.4 billion yuan of five-year notes were sold at a yield of 3.84 percent.

The finance ministry in January published a list of 59 underwriters required to bid at its debt sales, including Industrial & Commercial Bank of China Ltd., Agricultural Bank of China Ltd., Bank of China Ltd., China Construction Bank Corp., China Citic Bank Corp., Postal Savings Bank of China, Industrial Bank Co., Guotai Junan Securities Co. and BOC International (China) Ltd.

Good luck with that “mandatory” issuance. Unlike in the US, China’s “Primary Dealer” equivalents apparently have no idea that their primary job is to keep the ponzi illusion going. Surely our 20 or so status quo perpetuators can teach their Chinese colleagues a thing or two about keeping your head stuck in the sand.

ZeroHedge