Did Goldman and Other Dealers Squeeze Mortgage CDS Shorts So They Could Sell Toxic CDOs? –As reported in the Financial Times, Senator Carl Levin of the Senate permanent investigations released damaging e-mails in which Goldman traders discuss “killing” some mortgage-related CDS shorts in May 2007. Levin understood the implications, that damaging the shorts would allow Goldman to buy CDS even more cheaply, but did not tease out the logical conclusion. This move was a likely a major step that allowed Goldman (and fellow dealers not under investigation who likely pursued parallel strategies) to package its remaining mortgage dreck into CDOs, which were launched as the reported squeeze evidently took place, and unload as much toxic inventory as possible before the wheels came hopelessly off the subprime bandwagon. Goldman gives the usual pious denials, arguing that the market tanked, but the market action in later March to June 2007 belies their claims. And Levin may have unwittingly given Goldman an out by pegging the time of the short squeeze a bit late. It’s a bit hard to see on the scale of this chart, but CDS spreads on subordinated bonds widened markedly in February and continued into March of 2007. And even though that move looks tame compared to what later came to pass, it was enough to create havoc in the subprime market.
Jobless Recovery?: 25 Unemployment Statistics That Are Almost Too Depressing To Read – Guess what? Unemployment is up again! That’s right – even though Wall Street is swimming in cash and the Obama administration is declaring that "the recession is over", the U.S. unemployment rate has gone even higher. So are you enjoying the jobless recovery? The truth is that there should not be any talk of a "recovery" as long as the "official" unemployment rate remains at around 10 percent and the "real" unemployment continues to hover around 17 percent. There are millions and millions of American families that are living every day in deep pain because of the lack of jobs. Meanwhile, there are all of these economic pundits that are declaring that we are just going to have to realize that chronic unemployment is the "new normal" and that if other nations can handle high rates of unemployment then so can we. …If you have never been unemployed, it can be hard to describe how soul-crushing it can be. As the bills pile up and the financial obligations mount, the pressure can be debilitating. Being unemployed for an extended period of time can easily plunge you into depression and grind your self-worth away to almost nothing. After getting rejected dozens of times (or even hundreds of times), many Americans simply give up. There are countless marriages and countless families that are being ripped to shreds by financial pressure even as you read this. When the money is gone and there is no job in sight it can be a really, really empty feeling.
On Christmas Shopping Lists, No Credit Slips – The lowest percentage of shoppers in the 27-year-history of a national survey said they used credit cards over the Thanksgiving weekend, while the use of general credit cards like Visa and MasterCard fell 11 percent in the third quarter from a year earlier, according to the credit bureau TransUnion. Britt Beemer, chief executive of America’s Research Group, a survey firm, said “The consumer really feels a lot of pressure from previous debts, and they just aren’t going to dig themselves into that kind of hole,” he said. After the Thanksgiving shopping weekend, the group found that just about 17 percent were paying with credit — just over half of last year’s level and the lowest rate in the 27 years it has conducted a survey. Some people are shunning credit cards for budgeting reasons, while others do not have a choice. More than 15 million Americans lost their cards because of strict credit-card regulations that were passed last year, or when issuers cut back on credit during the recession, said David Robertson, publisher of The Nilson Report, a credit card industry newsletter.
Orszag named vice chairman of global banking (Reuters) – Citigroup Inc named U.S. President Barack Obama’s former budget director as a senior global banking adviser on Thursday, strengthening its ties to high-profile former officials the same week the bailed-out bank finished shrugging off U.S. government ownership. Peter Orszag, currently a senior fellow at the Council on Foreign Relations, is Citigroup’s second hire of a former senior government official this month. Last week the bank hired Carlos Gutierrez, former Commerce Secretary under President George W. Bush, as a vice chairman for its institutional clients group.Orszag, who had worked as director of the Office of Management and Budget under President Obama, left the White House in July. He was one of the president’s most prominent advisers and remains well-connected in U.S. political circles.He follows in the footsteps of another prominent Democratic government official — former Treasury secretary Robert Rubin, who became a senior counselor to Citigroup and helped shape the bank’s strategy during the years leading up to the financial crisis.
America’s Message To The Rest Of The World: You Send Us Oil And Cheap Plastic Gadgets And We’ll Send You Our Wealth And Prosperity – In order to maintain our standard of living, the U.S. government has been going to the countries we have been sending our wealth to and has been begging them to loan us massive amounts of their dollars. At this point the U.S. government literally owes trillions of dollars to the rest of the world. Scoffers say that it is just a bunch of "paper money" that we are sending them, but the truth is that it is hundreds of billions of dollars of "paper money" that is not in the hands of average Americans. We have sent massive amounts of our wealth and prosperity overseas and it isn’t coming back unless we borrow it. Today there are dozens and dozens of U.S. cities such as Detroit, Michigan and Camden, New Jersey that are turning into post-industrial hellholes while thousands of gleaming new modern factories are going up all over China. 42.9 million Americans are now on food stamps (a 16 percent increase in just one year) while the oil sheiks of the Middle East build opulent palaces that are extravagant beyond belief. Most Americans do not realize how serious the U.S. addiction to foreign oil really is. We are constantly being drained of our wealth by the oil powers of the Middle East.
Ted Turner urges global one-child policy to save planet – The compromise tax bill will extend the ethanol subsidy for one year at 45 cents per gallon while also retaining the 54-cent tariff on imports of the biofuel. The legislation also will revive the $1-a-gallon subsidy for biodiesel that expired at the end of 2009 retroactively back to January 1. Climate change and population control can make for a politically explosive mix, as media mogul Ted Turner demonstrated Sunday when he urged world leaders to institute a global one-child policy to save the Earth’s environment. Mr. Turner spoke at a luncheon where economist Brian O’Neill from the U.S.’s National Center for Atmospheric Research unveiled his study on the impact of demographic trends on future greenhouse gas emission, a little-discussed subject given its political sensitivity.
Fury over bid to cut pension payments by 25pc – Pension changes that could lead to millions of private sector workers losing up to a quarter of their retirement income have been strongly criticised. Ministers have been studying plans to allow funds to water down their own rules promising members minimum annual increases in pension payments. About six in 10 private-sector pension schemes have clear rules dictating that members’ pension payments should increase every year in line with the retail prices index (RPI) measure of inflation. Steve Webb, the pensions minister, will publish today a consultation on changes that could allow schemes to override their rules and increase payments according to the consumer price index (CPI) instead, which is generally significantly lower.
European Central Bank Plays Cat and Mouse Over the Euro – It is the battle that could well determine the fate of the euro. On one side is the European Central Bank, which is spending billions to prop up Europe’s weak-kneed bond markets and safeguard the common currency. On the other side are hedge funds and big financial institutions that are betting against those same bonds and, by extension, against the central bank, that mighty symbol of Europe’s monetary union. The war keeps escalating as traders position themselves for what some believe is inevitable: a default by Greece, Ireland or perhaps even Portugal. The strains grew Tuesday, when European finance ministers made no pledge to increase the emergency fund that the European Union has put in place to help protect the euro. The head of the International Monetary Fund, meantime, urged Europe to take broader action to fend off speculators.