Rising wages will burst China’s bubble- Who has survived the global credit crisis in the best shape?. The snap verdict that China is the big winner and the US and rest of the old Group of Seven big losers is already looking questionable. True, China has continued to register turbo-charged growth while many of the debt-laden economies of the west have struggled. No surprise, then, that a tsunami of financial capital has surged eastwards, or that European politicians are scrabbling for trade deals, despite China’s extraordinarily aggressive posture over the Nobel peace prize and other diplomatic issues. The financial markets, however, have taken a rather different view. The Shanghai market is at less than half its all-time high, significantly underperforming the other three members of the Bric group. The message is clear. The China story that has been sold so skilfully all over the world is simply another version of the “new era” thinking that has characterised every investment mania from the South Sea bubble to the dotcom frenzy.
Italy ‘Unfairly Punished’ as EU Debt Crisis Proxy – Italy, whose 10-year bond yields are near their highest in two years, may be a safer investment than its peers as the nation’s banks dodge the woes plaguing lenders in the euro region’s most indebted nations. "Italian bonds are unfairly punished," . "It doesn’t have the same structural problems that other peripheral countries have, and yet they are sold off because they are seen as a proxy to those bonds. From that perspective, their yields are attractive." Italy, which has the euro region’s second-largest debt burden, has fared better than its neighbors since Greece’s near- default last year drove up borrowing costs. Unlike Spain and Ireland, Italy’s economic growth wasn’t fueled by a housing and borrowing boom, and its banks haven’t had government bailouts. The country’s 10-year bonds yield 4.8 percent, after jumping by a percentage point in the past three months. Investors lost 0.7 percent, including reinvested interest, on Italian debt last year. That beat Greek securities, which lost 20 percent, as well as the bonds of Portugal, Ireland and Spain.
$2.6 Billion to Cover Bad Loans: It’s a Start – Bank investors cheered the announcement last week that Bank of America would pay $2.6 billion to buy back mortgages it had improperly sold during the housing bubble to Fannie Mae and Freddie Mac, the beleaguered mortgage finance giants. It seemed a sweet deal for the bank, whose Countrywide Home Loans unit had peddled tens of billions of dollars in risky loans to the taxpayer-owned companies. While it is unfortunate that the Bank of America deal won’t recoup much for taxpayers, the resolution could have one important benefit. It might just open the door to a much-needed reckoning of the liabilities created by questionable mortgage practices at the nation’s largest banks. These institutions have not yet made a full and realistic accounting of their liabilities. It seems clear, after all, that Bank of America will not be the only institution forced to buy back billions of dollars’ worth of loans because it did not meet the lending standards promised to buyers. Costs associated with foreclosure improprieties that have come to light in courts across the country — robosigners, forged legal documents — are also likely to be substantial.
The ‘Ponzi scheme’ of ‘artificial prosperity’ – The Obama administration’s $78 billion cut to US defense spending is a mere "pin-prick" to a behemoth military-industrial complex that must drastically shrink for the good of the republic, a former Reagan administration budget director recently told Raw Story. "It amounts to a failed opportunity to recognize that we are now at a historical inflection point at which the time has arrived for a classic post-war demobilization of the entire military establishment," David Stockman said in an exclusive interview. "The Cold War is long over," he continued. "The wars of occupation are almost over and were complete failures — Afghanistan and Iraq. The American empire is done. There are no real seriously armed enemies left in the world that can possibly justify an $800 billion national defense and security establishment, including Homeland Security." Short of that, he suggested, the United States has "reached the point of no return" with its artificial creation of wealth, and will eventually face a sharp economic decline. Stockman last fall criticized the extension of the Bush tax cuts while the federal government continued to borrow money abroad to pay for its public welfare and warfare programs. His solution to deficit spending — a huge across-the-board tax increase — is contrary to the current anti-tax ideology shared among tea party activists as well as fiscal conservatives in the Republican Party.
Why It Could Be Very Hard for Banks to Avoid Ibanez Mortgage Catastrophes – Although it’s only been a couple of days since the Massachusetts Supreme Court handed down its ruling in the "Ibanez" case, analysts are already announcing that it won’t be as big of a deal as it might seem. I don’t share their confidence.
Recall that in a decision released Friday, the highest court in Massachusetts declared that Wells Fargo and US Bancorp wrongfully foreclosed on two properties whose mortgages were unarguably in default. The court held that Well Fargo and US Bancorp had failed to show that the mortgages had been assigned to them at the time of the foreclosure. In the Ibanez case—actually, it was two mortgage cases decided at once—the banks could not show that they were entitled to foreclose because in the case of each of the mortgages, there were holes in the chain of title that the banks could not—or did not—close. Basically, if your bank is foreclosing on your home in Massachusetts, you should be contacting a lawyer and planning to contest the bank’s right to foreclose right now. The effect of this case is unlikely to be limited to Massachusetts. Other states will apply their own laws, of course. But the Massachusetts Supreme Court is regarded as one of the the best courts in the US, which means that this decision will be taken as what lawyers call "persuasive precedent" in other states.
Implications of the Ibanez Case Ruling – The Too Big To Fail banks have been waiting with trepidation for a ruling from the Supreme Judicial Court of the State of Massachusetts on the case titled US Bank National Association (as trustee) vs. Antonio Ibanez. They were right to be fearful. The state supreme court has ruled against the banks and upheld a lower court order that nullified foreclosures by US Bancorp and Wells Fargo, on the grounds that neither bank had the legal right under Massachusetts law to foreclose. Today’s ruling has far-reaching consequences for the banks and the housing market in general, as it throws into serious question the legal soundness of millions of mortgages in the US if, as expected, courts in other states come to similar conclusions as the Supreme Judicial Court of Massachusetts. The Ibanez case tied together two separate but similar foreclosure actions in Massachusetts. Both foreclosures took place on the same day, the banks having previously published their intention to foreclose in a local newspaper as required by law. The banks then purchased the properties at prices described by the court as significantly below market value.
Christopher Whalen: Massachusetts Mortgage Decision Could Kill Top Banks – The bank stress tests are back and you’ll sure be hearing the phrase "Too Big To Fail" uttered over and over again. The purpose of this test is to allow the 19 big banks to raise their dividends or repurchase stock. In order to get the approval they must submit their new capital plans to the Federal Reserve by this Friday. It will be a big banking week with concerns about Portugal and on Friday, JP Morgan is set to report is earnings. I decided to speak with Christopher Whalen, Senior Vice President and Managing Director of Institutional Risk Analytics.
LL: Stress tests will be back on the big 19 banks before they can return capital back to shareholders. Which ones do you think will be the first ones to be able to do this?
CW: Depends on degree of regulatory capture. None of the top eight bank holding companies should be able to change dividends this year if we have regulators worthy of the description. Bank of America, Wells Fargo, JPMorgan, US Bancorp still have issues to address with mortgage servicing/securitization mess.
LL: Any concerns of banks failing this test?
CW: No. These tests are not meant to be failed