Times calls Foul in "Fair Game"

Fair Game

It’s Time for Swaps to Lose Their Swagger

By GRETCHEN MORGENSON

New York Times Published: February 27, 2010

 

“USING these instruments in a way that intentionally destabilizes a company or a country is — is counterproductive, and I’m sure the S.E.C. will be looking into that.”

 

That’s what Ben S. Bernanke, chairman of the Federal Reserve, said last week when lawmakers asked him about credit default swaps during his Congressional testimony. Concerns are growing about such swaps — securities that offer insurance-like protection and helped tip over the American International Group in 2008 when it couldn’t pay mounting claims on the contracts.

Now, there are fears that the use of these swaps may also help propel entire countries — think Greece — to the precipice.

Read more of the latest, Here:


http://www.nytimes.com/2010/02/28/business/economy/28gret.html

We Own It... How About a Real Bail Out... An Annual Airwave Auction.

Economic View

The Buried Treasure in Your TV Dial

By RICHARD H. THALER
New York Times Published: February 27, 2010

HERE’S a list of national domestic priorities, in no particular order: Stimulate the economy, improve health care, offer fast Internet connections to all of our schools, foster development of advanced technology. Oh, and let’s not forget, we’d better do something about the budget deficit...

http://www.nytimes.com/2010/02/28/business/economy/28view.html?ref=business

Taibbi Unleashed

Wall Street's Naked Swindle

A scheme to flood the market with counterfeit stocks helped kill Bear Stearns and Lehman Brothers — and the feds have yet to bust the culprits

MATT TAIBBIPosted Oct 14, 2009 9:30 AM

 

Watch Matt Taibbi break down short-selling vs. naked short-selling on his blog, Taibblog.

On Tuesday, March 11th, 2008, somebody — nobody knows who — made one of the craziest bets Wall Street has ever seen. The mystery figure spent $1.7 million on a series of options, gambling that shares in the venerable investment bank Bear Stearns would lose more than half their value in nine days or less. It was madness — "like buying 1.7 million lottery tickets," according to one financial analyst.

But what's even crazier is that the bet paid.

http://www.rollingstone.com/politics/story/30481512/wall_streets_naked_swindle/print

Rolling Stone: The Dirty Dozen

Rollingstone.com

The Dirty Dozen

Meet the bankers and brokers responsible for the financial crisis - and the officials who let them get away with it

Posted Mar 25, 2009 8:40 AM


http://www.rollingstone.com/politics/story/26868968/the_dirty_dozen/print

The Economic Collapse - Hard Facts or the Sky is Falling?

It Is Now Mathematically Impossible To Pay Off The U.S. National Debt

A lot of people are very upset about the rapidly increasing U.S. national debt these days and they are demanding a solution. What they don't realize is that there simply is not a solution under the current U.S. financial system. It is now mathematically impossible for the U.S. government to pay off the U.S. national debt. You see, the truth is that the U.S. government now owes more dollars than actually exist. If the U.S. government went out today and took every single penny from every single American bank, business and taxpayer, they still would not be able to pay off the national debt. And if they did that, obviously American society would stop functioning because nobody would have any money to buy or sell anything. Read More:

http://theeconomiccollapseblog.com/archives/it-is-now-mathematically-impossible-to-pay-off-the-u-s-national-debt

Money, it's a gas Grab that cash with both hands And make a stash

from 30 Bizarre Examples of Defacing Money from the aptly named site, MONEY MUMBO JUMBO:
Sparta!


iPod

4. Iraq Dollar – American

Source
Alice in Wonderland

Moth Eaten:

Kiss

Source: Money Mumbo Jumbo

Unemployment, Consumer Confidence and Spending

February 23, 2010

Underemployed Report Spending 36% Less Than Employed

Gallup's new daily metric estimates that 30 million U.S. workers were underemployed in January

by Jenny Marlar

WASHINGTON, D.C. -- Gallup's daily measure of U.S. employment reveals that 19.9% of the U.S. workforce was underemployed during the month of January, translating to close to 30 million Americans who are working less than their desired capacity. Those who were underemployed reported spending 36% less than those who were employed, $48 per day versus $75 per day.

The Conference Board Consumer Confidence Index® Declines Sharply

February 23, 2010

The Conference Board Consumer Confidence Index®, which had increased in January, declined sharply in February. The Index now stands at 46.0 (1985=100), down from 56.5 in January. The Present Situation Index decreased to 19.4 from 25.2. The Expectations Index declined to 63.8 from 77.3 last month.

Consumer confidence plummets

Index of consumer sentiment falls to an all-time low in February and signals more deterioration ahead.

NEW YORK (CNNMoney.com) -- A key measure of consumer sentiment fell more than expected in February, to the lowest level since its 1967 inception, as Americans remained wary of spending amid the weak economy and rising unemployment.

The Many Myths Of Warren Buffett

"...here we sit with an entire generation of investors fooled by the idea that value investing/buy and hold is the single greatest way to accumulate wealth.  With the poor results of the last ten years investors have finally started to challenge this thinking."

West End play award-winning morality tale starring Enron

Trailer from Enron: The Play

There was a warning. And its name was ENRON. One of the most infamous scandals in financial history becomes a unique theatrical event in Rupert Goolds brilliant production (Guardian). Mixing class...  

There was a warning. And its name was ENRON.

One of the most infamous scandals in financial history becomes a unique theatrical event in Rupert Goolds brilliant production (Guardian). Mixing classical tragedy with savage comedy, it reviews the tumultuous 1990s and casts new light on the current financial situation. In what promises to be an outstanding evening (ES), ENRON is the exhilarating answer to a $60bn question (Times).

Are you kidding me? Did we take advantage? Thats what we do, thats how the world works. When you ask, Did you take advantage?, I hear Do you make a living?, Do you breathe in and out?, Are you a man? Yes, we took advantage. And the only difference between me and the people judging me is they werent smart enough to do what we did.

Inspired by real-life events and using music, dance and video, ENRON is directed by Headlong Theatre's Artistic Director Rupert Goold whose recent credits include the award-winning Macbeth and Six Characters in Search of an Author, King Lear, No Man's Land and Oliver!

Category:  Entertainment

Tags: 

ENRON  THEATRE  ENTERTAINMENT  DR  WHO  FINANCE  NEWS  STOCK  MARKET 

http://www.enrontheplay.com/index-home.php

and be sure to check out the excellent Guardian Piece

Enron: how we made a drama out of a financial crisis

Andrew Dickson, Alex Healey and Michael Tait
guardian.co.uk,
Wednesday 24 February 2010

 

Lucy Prebble, Rupert Goold and Samuel West talk about their award-winning play Enron, now in the West End – and explain how a saga of corporate collapse became a morality tale for our times. Guardian Video Here:

http://www.guardian.co.uk/stage/video/2010/feb/22/theatre-enron-lucy-prebble 

Doomsday Clock - Bulletin of Atomic Scientists

Timeline

IT IS 6 MINUTES TO MIDNIGHT

2010: International cooperation rules the day. Talks between Washington and Moscow for a follow-on agreement to the Strategic Arms Reduction Treaty are nearly complete, and more negotiations for further reductions in the U.S. and Russian nuclear arsenal are already planned. Additionally, Barack Obama becomes the first U.S. president to publicly call for a nuclear-weapon-free world. The dangers posed by climate change are still great, but there are pockets of progress. Most notably: At Copenhagen, the developing and industrialized countries agree to take responsibility for carbon emissions and to limit global temperature rise to 2 degrees Celsius.

Wall Street's Bailout Hustle - Taibbi - Rolling Stone

Wall Street's Bailout Hustle 
Matt Taibbi
Rolling Stone

Goldman Sachs and other big banks aren't just pocketing the trillions we gave them to rescue the economy - they're re-creating the conditions for another crash

  Goldman wasn't alone. The nation's six largest banks — all committed to this balls-out, I drink your milkshake! strategy of flagrantly gorging themselves as America goes hungry — set aside a whopping $140 billion for executive compensation last year, a sum only slightly less than the $164 billion they paid themselves in the pre-crash year of 2007. In a gesture of self-sacrifice, Blankfein himself took a humiliatingly low bonus of $9 million, less than the 2009 pay of elephantine New York Knicks washout Eddy Curry. But in reality, not much had changed. "What is the state of our moral being when Lloyd Blankfein taking a $9 million bonus is viewed as this great act of contrition, when every penny of it was a direct transfer from the taxpayer?" asks Eliot Spitzer, who tried to hold Wall Street accountable during his own ill-fated stint as governor of New York.

http://www.zcommunications.org/wall-streets-bailout-hustle-by-matt-taibbi

Picking up some of the better commentary

New York Times
Op-Ed Columnist

Virtuous Bankers? Really!?!

By MAUREEN DOWD

Published: November 11, 2009

WASHINGTON

Fred R. Conrad/The New York Times

Maureen Dowd

The saying used to be, whatever happens, the lawyers win. But with bankers getting obscene bonuses again, now it’s whatever happens, the bankers win.

 http://www.nytimes.com/2009/11/11/opinion/11dowd.html

The Crisis of Credit Visualized - Part II

The Crisis of Credit Visualized - Part I

George Soros on the Euro

In Pursuit of "Greenspan's "Flaw" from the broadcast originally Aired: October 23, 2008

Greenspan Admits 'Flaw' to Congress, Predicts More Economic Problems
Former Fed Chair Alan Greenspan told Congress Thursday the economic crisis unveiled "a flaw" in his view of world markets. Economic analysts discuss his testimony and legacy.

ALAN GREENSPAN: Well, remember that what an ideology is, is a conceptual framework with the way people deal with reality. Everyone has one. You have to -- to exist, you need an ideology. The question is whether it is accurate or not.

And what I'm saying to you is, yes, I found a flaw. I don't know how significant or permanent it is, but I've been very distressed by that fact.

REP. HENRY WAXMAN: You found a flaw in the reality...

ALAN GREENSPAN: Flaw in the model that I perceived is the critical functioning structure that defines how the world works, so to speak.

REP. HENRY WAXMAN: In other words, you found that your view of the world, your ideology, was not right, it was not working?

Wall Street Bonuses

Wall Street bonuses top $20bn

• Huge payouts will be a 'bitter pill' for many
• Investment banks on track to make $55bn profit for 2009

Total Wall Street bonuses since 1985 (pdf)

The average taxable Wall Street bonus was $123,850, said New York's state comptroller, Thomas DiNapoli Photograph: Stan Honda/AFP/Getty Images

Despite calls for restraint in multi-million dollar pay packages, Wall Street bonuses jumped by 17% to $20.3bn (£13bn) for 2009 as America's financial services industry rebounded swiftly from the credit crunch to healthy profitability, according to New York's tax department.

The Big Takeover - Taibbi - Rolling Stone

The Big Takeover

Matt Taibbi

from The Rolling Stone

March 20th, 2009

It’s over — we’re officially, royally fucked. no empire can survive being rendered a permanent laughingstock, which is what happened as of a few weeks ago, when the buffoons who have been running things in this country finally went one step too far. It happened when Treasury Secretary Timothy Geithner was forced to admit that he was once again going to have to stuff billions of taxpayer dollars into a dying insurance giant called AIG, itself a profound symbol of our national decline — a corporation that got rich insuring the concrete and steel of American industry in the country’s heyday, only to destroy itself chasing phantom fortunes at the Wall Street card tables, like a dissolute nobleman gambling away the family estate in the waning days of the British Empire...

http://www.scribd.com/doc/13452965/The-Big-Takeover

Greed Never Retires... it just Evolves... and Money Never Sleeps... Stoned Again...

WALL STREET: MONEY NEVER SLEEPS: Teaser Trailer

Remember These? "Amateurs" compared to the New Breed...

 

Inside Job, Sound Familiar?

Boesky and Milken, Sound Familiar?

 

Smarter than U.S.

  

?

FDIC Bank Failure Update

 

 

 

Prediction is for a higher failure rate in 2010 than 2009 with the somewhat bittersweet caveat that it won't surpass the 1999 peak. However, if one also considers a previous post regarding ARM Resets... the slopes in 2010 mimic 2009 but with higher elevations... cause and effect?

Where the Jobs Will BE - Interactive Map

http://www.mint.com/blog/trends/mint-map-where-the-jobs-will-be/?display=wide

A Visual Guide to the Financial Crisis from mint.com's blog via Atomic Napalm

http://www.mint.com/blog/finance-core/a-visual-guide-to-the-financial-crisis/

A Unique Application of the Undo Shortcut

There's definitely a market for these... Particularly in the Financial Sector and Congress and... too bad it isn't as easy as ctrl+z...

And you can buy one of these bad boys from Etsy here.

The Latest on Unemployment

New York Times February 22, 2010 The New Poor

Millions of Unemployed Face Years Without Jobs

"Every downturn pushes some people out of the middle class before the economy resumes expanding. Most recover. Many prosper. But some economists worry that this time could be different. An unusual constellation of forces — some embedded in the modern-day economy, others unique to this wrenching recession — might make it especially difficult for those out of work to find their way back to their middle-class lives."


"Labor experts say the economy needs 100,000 new jobs a month just to absorb entrants to the labor force. With more than 15 million people officially jobless, even a vigorous recovery is likely to leave an enormous number out of work for years."

Long-Term Unemployment

 

So Who's in Charge?

Newsweek proposes "Spheres of Influence"

"When it comes to money, the buck has to stop somewhere. But in today's mess, which buck stops with whom? As leaders struggle to pull together an unprecedented redistribution of power in the financial world, a dizzying number of acronyms abound. To make sense of it all, explore how responsibility for the country's financial health has been divvied up--and how the massive $700 billion bailout could transform that power structure overnight."

and provides a nice interactive graphic here:

http://www.newsweek.com/id/161094

http://ndn2.newsweek.com/media/62/regulators4.swf?dataXML=/media/56/data.xml&section=Inside%20Business&commercialNode=techbiz/biz/insidebiz&url=161094

Rolling Stone Financial Beat Gunslinger Matt Taibbi Slinging

Inside The Great American Bubble Machine

Matt Taibbi on how Goldman Sachs has engineered every major market manipulation since the Great Depression

MATT TAIBBIPosted Jul 02, 2009 8:38 AM

 

"The first thing you need to know about Goldman Sachs is that it's everywhere. The world's most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money. In fact, the history of the recent financial crisis, which doubles as a history of the rapid decline and fall of the suddenly swindled dry American empire, reads like a Who's Who of Goldman Sachs graduates."

The Man Who Crashed The World... AIG in Vanity Fair

Investigation
The Man Who Crashed the World

By Michael Lewis August 2009

"Almost a year after A.I.G.’s collapse, despite a tidal wave of outrage, there still has been no clear explanation of what toppled the insurance giant. The author decides to ask the people involved—the silent, shell-shocked traders of the A.I.G. Financial Products unit—and finds that the story may have a villain, whose reign of terror over 400 employees brought the company, the U.S. economy, and the global financial system to their knees."

http://www.vanityfair.com/politics/features/2009/08/aig200908?printable=true&currentPage=all

AIG Update from the Columbia Journalism Review

Economic Crisis, The Audit — January 27, 2010 02:08 PM

Advancing the AIG Story

By Ryan Chittum

"The immediate reason why AIG needed bailing out in the fall of 2008 was the collateral called in by the likes of Goldman Sachs due to both the deterioration of AIG’s credit rating and of toxic assets they’d bought insurance on from AIG. Could the government have stopped the collateral calls without directly giving Wall Street tens of billions of dollars?"

Read the whole story HERE.

The Inimitable Khan explains Credit Default Swaps

What is a Credit Default Swap?

http://en.wikipedia.org/wiki/Credit_default_swap

Bear Stearns, AIG or what happens if you're left without a chair when the music stops

http://www.pbs.org/wgbh/pages/frontline/meltdown/

"AIG is a collection of well-regulated insurance companies that are still making money today, and the holding company at the top that took the profits generated by the insurance company and speculated in the most irresponsible, unregulated way."

Barney Frank Chair, House Financial Services Committee (D-Mass.)

"All of a sudden AIG woke up and saw they had insurance liabilities that they had no idea they had. And all of a sudden the people said: "OK, I bought a credit default swap. The thing went bust, and pay me." That's what their problem was. It had nothing to do with Lehman. Nothing. AIG was in trouble months before Lehman went under."

Alan "Ace" Greenberg Former CEO, Bear Stearns

Andrew Ross Sorkin with Charlie Rose - The Financial Crisis + CDO's with Khan

& Khan explains CDO's or Collateralized Debt Obligations:

Year's best business books to make sense of financial crisis

http://www.usatoday.com/money/books/2009-12-20-years-best-business-books_N.htm

"The panic and the U.S. reaction spawned a wave of books. Money Bookshelf editor Gary H. Rawlins picks some of the better ones. The selection includes books that point the finger at Wall Street firms and their CEOs, that blast the government for excessive bailouts, that assail the U.S. economic policy triumvirate for letting the inflation genie out of the bottle, and that explain arcane financial derivatives and how they acted as viral agents spreading the crisis to the global economy."    from USA Today

Latest Opinion Polls - Congress & Obama

U.S. 2011 Obama's Budget | New York Times & UK Guardian

New York Times Published: February 1, 2010

Obama’s 2011 Budget Proposal: How It’s Spent 

http://www.nytimes.com/interactive/2010/02/01/us/budget.html 

Guardian UK Published: February 2, 2010

 Obama's 2011 budget: US public spending by department since 1962

Barack Obama's second budget is already controversial. Find out what it means for each department, how it compares to George Bush's last one - and how it's changed since 1962

 

 

Things We Should Consider Part II -- A TED Classic

Things We Should Consider Part I -- The Story of Stuff

Europe Takes Lead on Regulating Over the Counter Derivatives following Fiasco in Greece

Draft report on OTC derivatives market reforms

London, February 2010

Werner Langen MEP has published a draft report on over-the-counter derivatives reforms to be considered by the European Parliament’s Economic and Monetary Affairs Committee in its decision on how the European derivatives markets should be regulated going forward. On 11 February 2010, Member of the European Parliament (MEP) Werner Langen published a draft report on the over-the-counter ( OTC) derivative market reforms in the European Union.  The Langen Report (the Report) is due to be discussed by the European Parliament’s Economic and Monetary Affairs Committee on 22 February 2010.

The Report generally supports the mandatory clearing of standardised derivatives through independent clearing between financial institutions.  It further endorses the need for greater risk management, transparency and the use of independent central counterparty (CCP) clearing.

Over the Counter Derivatives | The Warning | Khan Explains the Nuances

A 26 Trillion Dollar Black Hole

The Warning sees the light a decade later PBS Frontline October 2009...

"We didn't truly know the dangers of the market, because it was a dark market," says Brooksley Born, the head of an obscure federal regulatory agency -- the Commodity Futures Trading Commission [CFTC] -- who not only warned of the potential for economic meltdown in the late 1990s, but also tried to convince the country's key economic powerbrokers to take actions that could have helped avert the crisis. "They were totally opposed to it," Born says. "That puzzled me. What was it that was in this market that had to be hidden?" (more »)

http://www.pbs.org/wgbh/pages/frontline/warning/

From Wikipedia:

Over-the-counter (OTC) derivatives are contracts that are traded (and privately negotiated) directly between two parties, without going through an exchange or other intermediary. Products such as swaps, forward rate agreements, and exotic options are almost always traded in this way. The OTC derivative market is the largest market for derivatives, and is largely unregulated with respect to disclosure of information between the parties, since the OTC market is made up of banks and other highly sophisticated parties, such as hedge funds. Reporting of OTC amounts are difficult because trades can occur in private, without activity being visible on any exchange. According to the Bank for International Settlements, the total outstanding notional amount is $684 trillion (as of June 2008).^[4] Of this total notional amount, 67% are interest rate contracts, 8% are credit default swaps (CDS), 9% are foreign exchange contracts, 2% are commodity contracts, 1% are equity contracts, and 12% are other. Because OTC derivatives are not traded on an exchange, there is no central counterparty. Therefore, they are subject to counterparty risk, like an ordinary contract, since each counterparty relies on the other to perform.

And Khan Spells it:

EU hangs struggling nations out to dry... and Rightfully so + Credit Default Swaps ala Khan

Greece Must Solve its own Problems, says EU

Competition commissioner Joaquín Almunia says EU will support Greece, but that its problems 'can't be tackled from outside'

(Ed. Looks like Greece, Spain, Portugal et al. are on their own, look for markets to fall Monday...?)

From Guardian UK:

The credit default swap market (where protection against sovereign default is traded) is at present an over-the-counter marketplace, with no public information about who is trading which products, and in which amounts.

(editor - perhaps a little too much subterfuge - see Goldman Sachs posts preceding)

"There's too much volatility [in the CDS market] that's not justified by the fundamentals of those economies," Almunia said.

And Khan Explains (Just substitute countries for corporations):

The Euro Dive vs. The US Dollar

The Euro's Greek Tragedy

Great time to plan a trip to Europe, but troubling in the big picture of global economic recovery... excellent article from Fortune magazine... predicting a fall to 1.28 by years end...

The Euro Dive, Goldman Complicit? Profiteering? Threatens Global Market Confidence & Recovery

 An excerpt from Faster Times, Jule Treneer's consolidation of the picture in Europe

Click on link for full article

Goldman, Greece — It’s All One Big Conspiracy, Man

February 20, 2010 Jule Treneer

 

"...Enter the conspiracy theory: on Wednesday, Jean Quatremer, who reports on the Brussels beat for the French daily Liberation, broke the story that Goldman Sachs and the hedge fund run by John Paulson are behind the attacks against Greece and the euro…

The most shocking aspect of this affair is without doubt the role played by Goldman Sachs, which, while at the same time advising the Greek government, has also taken secret positions against Greece and the euro.

And this coming in the same week that it was reported in Der Spiegel and the New York Times that, back in 2002, Goldman helped the Greek government conceal some of its debts from the European Union through a series of complex derivative transactions.  The sole purpose of these transactions would appear to be to sidestep EU reporting requirements and paint a misleading picture of Greek finances. That news drew a lot of ire. Even the normally circumspect German Chancellor Angela Merkel lashed out, saying, “It’s a scandal if it turned out that the same banks that brought us to the brink of the abyss helped fake the [Greek] statistics.”

But potentially more damning is the assertion made by Mr. Quatremer, that Goldman Sachs has been taking advantage of its advisory role, and profiting at the expense of Greece.

… on 25th of January, Greece managed to place 8 billion euros in 5-year paper, even though the original intention had been to issue only 3 billion: demand had reached 25 billion euros! Goldman Sachs was certainly among the syndicate that placed this Greek paper. Up to that point, nothing out of the ordinary… After this spectacular success, everyone thought that the markets had calmed down… But then starting Wednesday [Jan. 27th] another storm hit. An article from the Financial Times… had just confirmed news to the effect that China had refused to buy 23 billion euros of Greek debt, a “private placement” engineered by . . . Goldman Sachs. What was this about? When a government fears that it won’t be able to place its debt, it asks a bank directly to place it on its behalf with one or several investors. It’s a sign of panic. And the fact that Beijing was said to have declined the offer was downright disturbing. In short, two reasons for the markets to flee Greece. [Athens] denied this, but the markets nevertheless increased the risk premium they assigned Greece, boosting [Goldman's] profits.

Rolling Stone puts the Spotlight on Goldman Sachs

"Goldman Sachs and other big banks aren't just pocketing the trillions we gave them to rescue the economy - they're re-creating the conditions for another crash" 

 MATT TAIBBIPosted Feb 17, 2010 5:57 AM 

Wall Street's Bailout Hustle

Read it HERE.

Robin Hood Tax... ? Could just work here in the US as well...

Campaign video by Richard Curtis and Bill Nighy, about the Robin Hood Tax, a tiny tax on bank transactions that could raise hundreds of billions for public services and to tackle poverty and climate change at home and around the world. Add your own voice to the campaign at http://www.robinhoodtax.org.uk

Brand You... Counter Unemployment Tips that Resonate from:

Brand Yourself

By: Keith Ferrazzi 
October 17, 2006

You should be writing this column. Keith Ferrazi outlines five steps to get you here.

Few things can have greater impact on your personal brand and your organization's brand recognition than developing and sharing your expertise with the world. Whether you call it becoming a thought leader or a public expert, or, as marketing guru Steven Yoder's book espouses, Getting Slightly Famous...

http://www.fastcompany.com/resources/networking/ferrazzi/101706.html

and then today... What inflation? ...consumer prices actually fell by 0.1% in January...

...which should allow The Fed to keep Interests Rates Low, Low, Low a bit longer...

FEBRUARY 20, 2010

Flat Prices Bode Well for Economy

 Consumer prices in the U.S. are barely rising, a boon to shoppers for everything from computers to clothing and a big reason that the Federal Reserve is willing to keep interest rates exceptionally low a while longer... more HERE. 

 

Source WIKIPEDIA "Federal Funds Rate"

What About Inflation?

Commercial Real Estate Losses and the Risk to Financial Stability

The Congressional Oversight Panel’s February oversight report, “Commercial Real Estate Losses and the Risk to Financial Stability,” expresses concern that a wave of commercial real estate loan losses over the next four years could jeopardize the stability of many banks, particularly community banks. Commercial real estate loans made over the last decade – including retail properties, office space, industrial facilities, hotels and apartments – totaling $1.4 trillion will require refinancing in 2011 through 2014. Nearly half are at present “underwater,” meaning the borrower owes more on the loan than the underlying property is worth. While these problems have no single cause, the loans most likely to fail are those made at the height of the real estate bubble.

The Panel found that “a significant wave of commercial mortgage defaults would trigger economic damage that could touch the lives of nearly every American.” When commercial properties fail, it creates a downward spiral of economic contraction: job losses; deteriorating store fronts, office buildings and apartments; and the failure of the banks serving those communities. Because community banks play a critical role in financing the small businesses that could help the American economy create new jobs, their widespread failure could disrupt local communities, undermine the economic recovery and extend an already painful recession.

More Fuel for the Credit Crunch (Crisis) - 1.2T in Commercial Real Estate

Note: This article focuses on Washington, DC but the potential affects are Nationwide. See additional links below.

Who Will be Hit Hardest?
 
The foreclosure wave has ebbed and flowed over the last two years, but this next crest is expected to be ferocious. There are big names at-risk, like the Mayflower Hotel and the Boulevard at Capital Centre in Largo, but the smaller community banks are the entities who must really brace themselves. They are the lenders who issue a higher percentage of commercial loans, and many of them held onto their loans rather than sell them to different investors. The Committee’s report notes that the 3000 community banks with a high proportion of commercial real estate loans comprise nearly 40% of the banking industry.

Complete article HERE. 

 

And a thought provoking discussion from Zero Hedge under the psuedonym Tyler Durden HERE.

Khan offers a Possible Bailout Solution Part II

Khan offers a Possible Bailout Solution Part I

National Debt as a % of GDP US

And, a possible future (but Question the Source, as always... for any data, but particularly when it is politically charged and from a "think tank"):

 

Chart: The Heritage Foundation

Impacts and Implications of Debt vs. GDP

Ring of Fire

Discussion, Investment Outlook and Forecast HERE