An unfortunate case(153)

Coming home to roost:

BOSTON/NEW YORK, March 31 (Reuters) - A judge froze the assets of disgraced Wall Street legend Bernard Madoff's two sons and five executives who ran hedge fund portfolios that funneled money into his Ponzi scheme.

The order by Connecticut Superior Court Judge Arthur Hiller, issued Monday and made public Tuesday, prohibits them from selling homes or moving money, and marks the first time their assets have been frozen.

"This is an important step," said David Golub, a lawyer representing the town of Fairfield, Connecticut, in a lawsuit against Madoff and the so-called feeder funds run by Tremont Group Holdings, Maxam Capital Management and Fairfield Greenwich Group.

The town's pension funds charged in a lawsuit that the funds "knew -- or willfully refused to know -- that Madoff's investment returns were not actually produced by his purported split-strike conversion strategy."

Separately, a judge in New York denied an appeal by Madoff's brother, Peter, to lift a freeze on his assets in a civil lawsuit. Peter Madoff had reached an agreement with U.S. authorities in December on an asset freeze, according to court papers.

Lawyers for Madoff could not be reached immediately for comment.

http://www.reuters.com/article/marketsNews/idUSN3150656820090331

An unfortunate case(152)

…in a little-noticed move, the House Financial Services Committee, led by chairman Barney Frank, has approved a measure that would, in some key ways, go beyond the most draconian features of the original AIG bill. The new legislation, the "Pay for Performance Act of 2009," would impose government controls on the pay of all employees -- not just top executives -- of companies that have received a capital investment from the U.S. government. It would, like the tax measure, be retroactive, changing the terms of compensation agreements already in place. And it would give Treasury Secretary Timothy Geithner extraordinary power to determine the pay of thousands of employees of American companies.

The purpose of the legislation is to "prohibit unreasonable and excessive compensation and compensation not based on performance standards," according to the bill's language. That includes regular pay, bonuses -- everything -- paid to employees of companies in whom the government has a capital stake, including those that have received funds through the Troubled Assets Relief Program, or TARP, as well as Fannie Mae and Freddie Mac.

The measure is not limited just to those firms that received the largest sums of money, or just to the top 25 or 50 executives of those companies. It applies to all employees of all companies involved, for as long as the government is invested. And it would not only apply going forward, but also retroactively to existing contracts and pay arrangements of institutions that have already received funds.

http://www.washingtonexaminer.com/politics/Beyond-AIG-A-Bill-to-let-Big-Government-Set-Your-Salary-42158597.html

We had a management class that wrecked the financial system. We are simply substituting a new one, the congress and the treasury.

An unfortunate case(151)

I’ve never met this guy, but I have corresponded with people who know him. If you want to manage money for him, he is one of the toughest interviewers; I gather that you go back multiple times for many hours so he can test you on your mettle and endurance.

When he talks, I listen.

He said: "The G20 meeting is make or break because unless they do something for developing world there will be serious collapse in that part of the world.

"I'm using phrase depression because unless we take the right measures we're liable to end up there.

If countries start doing it [engineering a new financial world order] bilaterally instead of multilaterally, the system will fall apart and we'll end up in depression."

He also said the rebuilding meant the previous economic system had to be scrapped.

"I don't think we'll ever be back to where we came from. It should be recognised that the last 25 years were an aberration and we cannot go back there. We have to reconstruct the financial system from its foundations up."

Mr Soros said regulators and the financial sector shared the blame for the meltdown, as they "participated in this crazy boom built on false premises on the belief that markets are self-regulating and should be left alone".

Mr Soros also warned the UK economy was in a deep recession "which is going to be a lasting one".

He added: "The International financial system has collapsed and cannot be restored in its current form. It will have to be restructured because it was flawed and collapsed under its own weight."

A lot of people find him demonic. I find him brilliant, but I don’t think I'd want to be around him. He is much tougher than I am.

http://news.bbc.co.uk/1/hi/business/7970199.stm

But it is make or break. Sunday's chart shows it.

An unfortunate case(150)

The fix is "fixin" to be in:

March 30 (Bloomberg) -- Four days after U.S. lawmakers berated Financial Accounting Standards Board Chairman Robert Herz and threatened to take rulemaking out of his hands, FASB proposed an overhaul of fair-value accounting that may improve profits at banks such as Citigroup Inc. by more than 20 percent.

The changes proposed on March 16 to fair-value, also known as mark-to-market accounting, would allow companies to use “significant judgment” in valuing assets and reduce the amount of writedowns they must take on so-called impaired investments, including mortgage-backed securities. A final vote on the resolutions, which would apply to first-quarter financial statements, is scheduled for April 2.

http://www.bloomberg.com/apps/news?pid=20601091&sid=awSxPMGzDW38&refer=india

An unfortunate case(149)

Things have been ugly for quite a time. What I have above is a derivative of volatility. I’m not going to say what it is, it belongs to me. If you can figure it out, fine. Then it belongs to you.

The Red Line is now. The Black Line is what the derivative was in 1929 to 1932. The extension of the Black Line is to the future, predicated on the movement of the years following 1929. As you can see, it is worse now than in 1929. While the volatility derivative has backed off from the panic moments of the ‘08 Fall, we are in no way acknowledging anything halcyon in the US markets as measured from the Dow.

I don’t know what to say at this point. The time series tells me to sit on the comfort of my hands.

An unfortunate case(148)

Japan is key. This is quite ugly.

March 30 (Bloomberg) -- Japanese makers of cars and electronics slashed production a fifth month in February, the longest losing streak since 2001, adding to evidence that the recession is deepening.

Factory output fell 9.4 percent from January, when it plummeted a record 10.2 percent, the Trade Ministry said today in Tokyo. The median estimate of 26 economists surveyed by Bloomberg News was for a 9.1 percent drop.

An unprecedented drop in exports is putting pressure on the government to unveil measures that will prevent the slump from spreading to households. Prime Minister Taro Aso is preparing fresh spending in his third stimulus package since October.

“The longer this stretches out, the harder the domestic economy is going to be hit,” said Martin Schulz, senior economist at Fujitsu Research Institute in Tokyo. “The government really needs to come out with another package.”

Japan’s export declines have set new records every month since November as U.S. and European consumers retrenched. The collapse in U.S. sales forced Toyota Motor Corp. to announce plans to cut thousands of jobs and slash domestic production by half this quarter. The automaker may not increase output until after September, the Asahi newspaper reported last week, citing an executive at a parts supplier.

Governments around the world are spending billions of dollars in order to spur domestic demand as global trade dries up. Economists say a Japanese recovery hinges on whether a combined $1.4 trillion of spending in the U.S. and China, the country’s two biggest markets, is enough to revive demand for its cars and electronics in the second half of the year.
http://www.bloomberg.com/apps/news?pid=20601087&sid=acyJENYk4Q2U&refer=home

An unfortunate case(147)

Front running the plan:

I said they'd do a form of this a couple of days ago. I guess they are already doing it. Sounds like in size, although that is unclear.

http://www.nypost.com/seven/03252009/business/double_dippers_161157.htm

This is the first I've seen of this. Then the interview of the writer today is at the link below.

A "funny" thing is happening just as Treasury Secretary Tim Geithner seems to have finally found a scheme to deal with banks' toxic debt: Some big banks are aggressively bidding for toxic debt in the open market.

Specifically "Citigroup and Bank of America have been aggressively scooping up those same securities in the secondary market," Mark DeCambre of The NY Post reported earlier this week.

http://finance.yahoo.com/tech-ticker/article/220758/Geithner


Not sure the article has the right spin, not sure I have the spin either. Just have to watch.

Much of economics is modeling. I’ve never found modeling to be of much value because I’ve never known all the variables, much less the coefficients to assign to them. Modeling for me is a good way to go broke.

As to variables and coefficients, where I do know them, in an arbitrage trade, where one side truly equals another, I use them. But I see very few equalities of the nature of a delivery of T-bonds against the board of trade contract.

So to present this economic crisis, I have used the idea of an unfortunate case which has very disparate elements, but has threads.

One of the threads here is fraud.

The whole mortgage industry was engaged in a massive fraud. After an entire year we are still trying to cover it up. Pages past deal with some of this, to wit, the accounting changes in the works, the failure to shut down the right entities, all the while we are proposing a new regulatory scheme that will do so.

The page below is just another piece of this fraud:

An unfortunate case(146)

March 27 (Bloomberg) -- In early 2008, Cheryl Ann Montero, a California mortgage broker, held a series of free seminars in the clubhouse of the Lone Tree Golf Course in Contra Costa County, a suburban area near San Francisco. The attendees, homeowners facing foreclosure, were desperate for a rescue from their woes. Using a PowerPoint presentation, Montero delivered one.

She said her firm, Freedom Financial Solutions, could pressure lenders to stop foreclosures by challenging the legality of loan agreements, according to court records. Her fee: $2,500 upfront and a $2,000 monthly payment to cover legal costs. Promoting her services on the Web site Craigslist, Montero, a blond-haired, blue-eyed woman who looked like a soccer mom, became known as a foreclosure escape artist.

“All the real estate agents knew about her classes,” says Kay Trail, a realtor in Antioch. “She was one shrewd sister.”

She was also ripping people off, says Ken McCormick, a prosecutor in the Contra Costa County District Attorney’s office. A player in a new confidence game exploiting soaring defaults, Montero didn’t have a team of attorneys to confront lenders. Instead, her firm took a small ownership stake in some of her clients’ houses and filed for bankruptcy, temporarily suspending foreclosure proceedings on those homes, according to an investigative report filed in court by prosecutors.

In the end, she didn’t deliver lower mortgages for the 10 homeowners who paid a total of $52,000 for her services, McCormick says. Montero did have mounting financial woes of her own: In September, she filed for personal bankruptcy, according to court records.


http://www.bloomberg.com/apps/news?pid=20601109&sid=aUL_Qh8cOzv8&refer=exclusive


Economics does not do justice to a situation in which fraud is so prevalent. Variables and coefficients are obscure enough. Throw fraud in...

Rescue scams are springing up across the U.S., says California Deputy Attorney General Angela Rosenau, exacerbating a housing crisis in its third year. The predators are persuading troubled borrowers they can intervene with their lenders and negotiate lower payments on their mortgages, law enforcement officials say. Instead, the players, often out-of-work real estate professionals who peddled subprime mortgages during the boom, pocket hundreds of thousands of dollars in advance fees and disappear or bleed their victims by charging monthly payments.

These folks are beating the state government to the punch,

The swindlers are thriving largely because the lenders and Wall Street banks that inflated the housing bubble by originating and securitizing subprime loans have been slow to help homeowners as those mortgages blow up. The State Foreclosure Prevention Working Group, a coalition of 37 attorneys general and banking supervisors, found in a study released in September that lenders were not providing mortgage relief for 8 out of 10 delinquent subprime borrowers last year.

and by immediate implication, the President.

President Barack Obama is trying to coax banks to rewrite mortgages with a $75 billion plan begun in March that could reach 4 million borrowers. The administration is encouraging lenders to slash interest rates so mortgage payments amount to 38 percent of a borrower’s monthly gross income. If the lender reduces payments further, to 31 percent of income, the government will pick up half of the losses.

Obama’s plan faces a major hurdle: Mortgage service companies often can’t reduce home loans because they’ve been packaged and sold to investors who expect a steady stream of income. Countrywide Financial Corp., acquired by Bank of America Corp. in 2008 as the housing market was collapsing, sold almost all of the loans it originated to investors and services them for fees, says Scott Kurzan, head of mortgage investor relations at the lender.

A fertile, fraudulent field.

An unfortunate case(145)

The president was set to take the temperature of the bank CEOs on Friday at the White House. The session will be the latest in a series of such meetings Obama has had with financial industry representatives and business executives since taking office amid the worst economic downturn since the Great Depression.

http://finance.yahoo.com/news/Obama-seeks-input-of-bank-apf-14762439.html

The choice of thermometer is irresistible.

An unfortunate case(144)

I have no love for these people, but hedge funds and private equity did not cause the crisis.

WASHINGTON (AP) -- The Obama administration's aggressive plan for strict scrutiny of hedge funds and other freewheeling investors, part of the biggest expansion of financial restraints since the Great Depression, is drawing instant opposition from Republican lawmakers and the rules' targets. And skeptics are questioning whether the new rulebook would work anyway.

We're not in this mess because we need new rules," said Bill Fleckenstein, a Seattle-based hedge fund manager who accurately predicted the housing bubble. "We need to enforce the rules we already have," he said. "What we had was a complete breakdown by all our regulators. They simply didn't do their jobs."

And Fleckenstein said he didn't think requiring big hedge funds to register with the government would prevent devastating frauds like Bernard Madoff's Ponzi scheme.
"You could register all 10,000 hedge funds, and it probably would just overwhelm the regulator," he said.

http://finance.yahoo.com/news/Tough-financial-rules-apf-14760256.html

So we assimilate hedge funds and private equity firms to being AIGs and regulate them. Then we keep funding AIG and the big banks that are at the heart of the crisis.

Makes sense in the political world.

An unfortunate case(143)

WASHINGTON (Reuters) - Treasury Secretary Timothy Geithner on Thursday called for broad reforms to curb risk taking on Wall Street, including a new regulator to oversee the entire financial system in a bid to restrain behavior that led to the worst credit crisis since the 1930s.

In testimony to Congress, Geithner said "comprehensive reform" was needed to guard against future crises. "Not modest repairs at the margin, but new rules of the game."

http://finance.yahoo.com/news/US-government-seeks-to-rb-14755159.html?sec=topStories&pos=main&asset=TBD&ccode=TBD

The systemic risk regulator would get powers to order prompt corrective action if capital levels decline -- similar to those that now are held by the Federal Deposit Insurance Corp, a U.S. bank regulator.

Who will the regulator be?

Many lawmakers have considered giving the Federal Reserve that role.

You'd think that the Fed would have to get out of the market before this happens. It's the biggest player in the markets now. How would it regulate itself?

An unfortunate case(142)

You have to look at the difficulty which the S&P 500 shows the policy makers face. Above is the downward slide in annual earnings per S&P share, recorded as fact through 12/31/08, forecast from there per Silverblatt through 9/30/09. Financials cannot take any more losses without the slide going below zero.

The chart runs from '89 to the present.

If you could just get back some of the previous losses through write-ups…

That is what we are talking about. Changing the rules to do just that.

An unfortunate case(141)

Looking at the overall debt problems, you wonder who is going to join Sec.Geithner’s public/private partnerships to take down some of these toxic assets. With leverage of 6 to 1 you need $166 billion to do any good here. Who has this kind of money other than sovereign funds? Private equity and hedge funds are shrinking from losses and redemptions.

The players of distressed debt are not exactly flush these days.

But there is no question the assets have to be repriced in the banks favor, or taken off the books for free, for us to have a significant recovery. The earnings contraction, while industry-wide, has been disastrous for the financial industry. All this has been in Mr.Silverblatt’s comment.

As a component of the S&P 500, it is what has driven the index to negative quarterly earnings for the first time in history. Reverse this problem and you have a miraculous recovery.

You have your V bottom with a violent snap-back.

You can have this recovery with the stroke of a pen. You can change the rules. You can change mark to market requirements. You will have to. You know this. So you send the head of FASB, after some harangue, back to his headquarters to change the rules.

He will. His rules produced Enron, remember. Remember all that off balance sheet stuff. It is still around.

If somehow the rule change is not perfect for you, then you can put some partnerships together, small ones, which will bid at Fed supervised auctions. Remember there probably is not the private capital for large ones. These small entities only need to bid on a few of these assets for you to reprice whole sectors of instruments.

You can control the bidding with your supervision, and the banks that own these assets can put some of these small partnerships together to bid on them. They will have every incentive to bid up a small number of these securities.

With the liquidity of an old, obscure slow-bid market, where the pit on the floor is nearly empty, except for an occasional hand wave, you can do this.

You need to be clever, but you can do this. You can get FASB to help you with the off balance sheet stuff, too.

March 25 (Bloomberg) -- The U.S. government wants to clear as much as $1 trillion in soured loans and securities from bank balance sheets with its latest bailout plan.

That might prove a short-term respite. No sooner might the Treasury Department mop up those assets than $1 trillion or more in new ones spring up to take their place.

That is due to the potential return of assets held in so- called off-balance-sheet vehicles that banks may soon have to put back onto their books. The end result may be that banks are in no better shape to increase lending even after the government bailout.

Mr. O’ Reilly, who wrote the commentary above is quite right. He also is right in saying that:

Accounting rulemakers now want banks to bring some of those assets back onto their books.

They are trying to crack down on transactions that banks used to sidestep rules inspired by the off-balance-sheet antics that led to Enron Corp.’s collapse. Of course, there is a danger that the rulemakers will backtrack, especially given recent congressional efforts to twist rules that will let banks polish their books.

http://www.bloomberg.com/apps/news?pid=20601039&sid=akv_p6LBNIdw&refer=columnist_reilly

He noticed also.

When you do all this clever business, you need to take the attention off of yourself. So you do this also:

March 25 (Bloomberg) -- The Obama administration plans to unveil new rules to protect consumers and investors against financial fraud, aiming to stamp out practices that helped cause the mortgage-market crisis.

The administration will also release this week proposed legislation to give powers to the Treasury and Federal Deposit Insurance Corp. to take over failing financial institutions and wind them down.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aAL.o9Nh9djw&refer=home

An unfortunate case(140)

He's behind his Chi Bro,

CHICAGO -(Dow Jones)- The chairman of Madison Dearborn Partners LLC said the White House's plan for rescuing faltering mortgage assets is potentially lucrative for private investors, but added the Chicago private equity firm will not participate.

But he ain't doin' no deal.

"Our investors pay us to buy businesses," he said after a speech to the Executives Club of Chicago. "The plan announced is a good plan. If it's structured correctly, it could be a very attractive investment for private investors."

http://money.cnn.com/news/newsfeeds/articles/djf500/200903241256DOWJONESDJONLINE000477_FORTUNE5.htm

Yeah, but what does this mean?

If it's structured correctly...

How do you correctly structure a sham to get people to price assets that are unpriceable?

How do you convince them that once the sham is in place, the sham price was the real price all along?

Call on FASB, my Bros.

"What do you want it to be, Coach?"

"Let's run a 24 Cross."

An unfortunate case(139)

Seizure of these companies is all right.

The Obama administration will ask Congress to give the Treasury secretary unprecedented powers to initiate the seizure of non-bank financial companies, such as large insurers, investment firms and hedge funds, whose collapse would damage the broader economy, White House spokesman Robert Gibbs said this morning.

Treasury Secretary Timothy F. Geithner is set to argue for the new powers at a hearing today on Capitol Hill that was scheduled to address the furor over bonuses paid to executives at American International Group, which the government has propped up with about $180 billion in federal aid. Administration officials say the proposed authority would have allowed them to seize AIG last fall and wind down its operations at less cost to taxpayers.

http://www.washingtonpost.com/wp-dyn/content/article/2009/03/24/AR2009032400847.html?hpid=topnews

An unfortunate case(138)

Not a good day for these guys with the markets exploding to the upside.

March 24 (Bloomberg) -- BlackRock Inc.’s global macro fund, the world’s second-best performer over two years among hedge funds that invest based on economic trends, is betting against this month’s equities rally and buying bonds as a recovery from the worst credit crisis since the Great Depression falters.

BlackRock’s A$216 million ($152 million) Asset Allocation Alpha Fund returned 41 percent in 2008, when hedge funds around the world lost a record 19 percent on average. The fund is short U.S. and Australian equities, expecting them to decline, and long U.S., German, Australian, Canadian, and U.K. bonds, said its manager David Hudson.

“The risk is that the economic recovery disappoints in the second half and that equity markets need to revisit their lows in the next few months and maybe go through them,” Sydney-based Hudson said in an interview March 20.

The MSCI World Index, which tumbled 42 percent last year, has rallied 21 percent since March 9, boosted in part by the U.S. Federal Reserve’s decision to pump money into the economy to get credit flowing. Hudson profited from the declines last year by betting against equities.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=agWBAC38f9f0

Hudson could be right.

The problem is that that Hudson will be fighting the big banks, which need a few positive prints on some assets so they can pronounce the manure in their accounts sweet smelling. Alas, for Hudson, the big banks have won the government's will.

Geithner has put a program together to get Pimco and other fixed income asset players to do this for them with 85% non-recourse debt that the taxpayer will guarantee. They will do this by overpaying for certain big bank assets, as Krugman suggested in his post on the arithmetic of the plan today.

http://krugman.blogs.nytimes.com/2009/03/23/geithner-plan-arithmetic/

Other assets the banks will not have to mark to market because Congress will have forced FASB to rescind the 'm-to-m' rule.

This will help the financial sector to begin restating earnings. Stock prices of banks will waft still higher. The S&P will move higher as the financial components within it do the same.

Note here that this rally will have begun on a fiction and will stay on the course of that fiction as long as powers can keep it going.

Do people like a fiction? They loved it today.

The hedge fund will get a pop on its bonds, but the equity markets will rally more. For now, the fund needs to cover its short.

We'll just have to see how the rest of the administration agenda is furthered by this. The big banks will owe it and congress a mother lode.

An unfortunate case(137)

Krugman has some analysis of the non-recourse leverage in the plan.

See today's post on the arithmetic of the plan.

http://krugman.blogs.nytimes.com/


On 3/21/09 he wrote this:

If you think it’s just a panic, then the government can pull a magic trick: by stepping in to buy the assets banks are selling, it can make banks look solvent again, and end the run. Yippee! And sometimes that really does work.

But if you think that the banks really, really have made lousy investments, this won’t work at all; it will simply be a waste of taxpayer money. To keep the banks operating, you need to provide a real backstop — you need to guarantee their debts, and seize ownership of those banks that don’t have enough assets to cover their debts; that’s the Swedish solution, it’s what we eventually did with our own S&Ls.

Now, early on in this crisis, it was possible to argue that it was mainly a panic. But at this point, that’s an indefensible position. Banks and other highly leveraged institutions collectively made a huge bet that the normal rules for house prices and sustainable levels of consumer debt no longer applied; they were wrong. Time for a Swedish solution.

He's finally coming around to Seidman's idea; maybe he's had it for a while. It does not matter. It's the one that beckons at this time.

It's the only one that will work, but it will do away with the big banks. If we don't do it now, we'll be doing it later and in a still more costly manner.

He ends with this:

Because I’m afraid that this will be the administration’s only shot — that if the first bank plan is an abject failure, it won’t have the political capital for a second. So it’s just horrifying that Obama — and yes, the buck stops there — has decided to base his financial plan on the fantasy that a bit of financial hocus-pocus will turn the clock back to 2006.

http://krugman.blogs.nytimes.com/2009/03/21/more-on-the-bank-plan/#more-1689

I once was part of taking what turned out to be a bunch of bad assets of one firm and transferring them to a second. The second was willing to take them at cost. It had its reasons.

The US government simply has to take these assets at cost, put them in an RTC, take the big banks over, fire the present management, employ some fresh MBAs and get the system running again.

The old shareholders need to lose everything, along with the debt holders. And everybody who was involved in this scheme needs to be sued or worse. That is what we did some twenty years ago.

The Nobel winner is moving in Seidman's direction. It's good to see.

An unfortunate case(136)

The plan of The Man with the Plan:

http://www.bloomberg.com/apps/news?pid=20601068&sid=agS2OsKxeJFA&refer=economies

The Public-Private Investment Program will use $75 billion to $100 billion from the $700 billion Troubled Asset Relief Program enacted last year, giving the government “purchasing power” of $500 billion, the Treasury said today in a statement in Washington. The program may double “over time,” it said.

Treasury Secretary Timothy Geithner is deploying an array of tactics to remove the devalued loans and securities from banks’ balance sheets so they can start lending again and help resuscitate the economy. Because the program depends on private investors stepping up, it may be weeks or months before it’s clear whether the approach will work.

What the treasury has done is multiply entities beyond necessity, violating Ockham's razor.

Beyond that, how the loans and securities will be priced will determine participation.

The FDIC, which has extensive experience disposing of devalued loans from taking over failed banks, will hold auctions for the pools of loans, which will be controlled and managed by the private investors with oversight by the FDIC.

Then the financing:

The Treasury, Federal Reserve and Federal Deposit Insurance Corp. will provide capital and financing for private investors to buy illiquid loans and securities held by banks, according to today’s statement.

Leverage of 6 to 1:

The FDIC will then guarantee financing for the investors, up to a maximum of six times the capital, or equity, provided.

An unfortunate case(135)

A resurrection in Italy:

March 20 (Bloomberg) -- Father Vincenzo Federico usually offers prayers when times are tough. As Italy lurches deeper into an economic crisis, the Roman Catholic priest is turning into a financial, rather than spiritual, adviser
.
After he guaranteed a loan of 10,000 euros ($12,700) to a family of four earlier this year, his mornings are back-to-back appointments with churchgoers seeking similar aid.

“These days I feel like a banker,” Federico, 40, said by telephone from his parish in the medieval village of Padula in southern Italy. “In 15 years of priesthood, I never thought that this is what I would wind up doing.”

As Europe’s most indebted country faces its worst recession since 1975, the church is stepping in to help cash-strapped Italians, who receive the lowest unemployment benefits in the 30-member Organization for Economic Cooperation and Development.

The smallest of Italy’s 325 dioceses have earmarked a minimum of 15,000 euros to support bank loans for parishioners. The archdiocese of Milan, the country’s second-largest city, has created a fund now totaling 3.2 million euros to which people may contribute over the Internet.

Church officials will meet in Rome March 23-26 at the Italian Bishops Conference to commit more cash, according to Andrea La Regina, head of social projects at Caritas, a Catholic charity based in the capital.

http://www.bloomberg.com/apps/news?pid=20601109&sid=a04PjQ71PNnk&refer=exclusive

An unfortunate case(134)

From the first article posted on the Agonist Housing Market page:

Still, the prospect of a housing slowdown appears less frightening than it did a few months ago, according to those who track the industry. There seems to be little concern that a much-touted housing bubble will lead to a collapse in sales and prices.

New Federal Reserve Chairman Ben Bernanke said last month housing would enter a moderate slowdown but not a crash.

William Mack, a housing analyst for Standard & Poor's, predicted "a soft landing. The overall market is just taking a step back."

3/6/06

http://agonist.org/forum/housing_market

No prescience then. Why prescience now?

An unfortunate case(133)

When things come unglued:

March 19 (Bloomberg) -- The biggest bankruptcy in history might have been avoided if Wall Street had been prevented from practicing one of its darkest arts.

As Lehman Brothers Holdings Inc. struggled to survive last year, as many as 32.8 million shares in the company were sold and not delivered to buyers on time as of Sept. 11, according to data compiled by the Securities and Exchange Commission and Bloomberg. That was a more than 57-fold increase over the prior year’s peak of 567,518 failed trades on July 30.

The SEC has linked such so-called fails-to-deliver to naked short selling, a strategy that can be used to manipulate markets. A fail-to-deliver is a trade that doesn’t settle within three days.

“We had another word for this in Brooklyn,” said Harvey Pitt, a former SEC chairman. “The word was ‘fraud.’”

http://www.bloomberg.com/apps/news?pid=20601109&sid=aB1jlqmFOTCA&refer=exclusive

The regulators have been failing to monitor this for years. Especially for small companies, naked shorting has been going on without much enforcement action.

Then this to follow:

March 21 (Bloomberg) -- Lehman Brothers Holdings Inc. has negotiated the return of thousands of Lehman-logoed knickknacks that were mistakenly transferred to Barclays Plc through the sale of the bankrupt securities firm’s brokerage unit.

Tote bags, umbrellas, stress balls, Tiffany paperweights and other items now stored in closets and warehouses from New York to Chicago will be returned to Lehman and sold to pay creditors, according to a court filing on March 19. Lehman filed the largest bankruptcy in U.S. history in September and has about $200 billion in unsecured liabilities left to pay, Chief Executive Officer Bryan Marsal said Jan. 28.

http://www.bloomberg.com/apps/news?pid=20601109&refer=exclusive&sid=aqjUaiC4.BJQ

The items in question:

Items in storage include: 1,630 green canvas duffle bags with Lehman ribbon, 353 green compact golf umbrellas, 75 Waterford Marquis Treviso crystal clocks, 682 white Lehman coffee mugs, 130 Swiss Army pens, an English beechwood-lined sterling silver box from 1902, 200 Lehman conference pens, 12 pairs of Links of London cufflinks, 24 Screwpull wine openers inscribed “LB,’ 24 Titleist PRO VI golf balls inscribed “LB,” 30 girl Teddy Bears, 18 large, ivory womens’ F&G stretch snap shirts and one Tiffany shooting star.

An unfortunate case(132)

March 20 (Bloomberg) -- The Inter-American Development Bank failed to rein in managers who made losing bets in the U.S. mortgage market, including investments in securities issued by Countrywide Financial Corp., according to an outside consultant’s findings reviewed by the IDB board today.

The Washington-based bank, the biggest lender for infrastructure projects in Latin America, took a nearly $1 billion loss last year after plowing as much as 60 percent of its cash reserves into mortgage-backed securities, an unusually aggressive investment strategy that went “largely undetected” by agency officials, according to the review by Oliver Wyman, the consulting unit of Marsh & McLennan Cos.

The findings, coming as the IDB prepares for its 50th annual meeting next week in Medellin, Colombia, may undermine the bank’s case for obtaining more funds from the U.S. Congress to meet surging loan demand from the region’s poor, credit- starved countries.

http://www.bloomberg.com/apps/news?pid=20601087&sid=atcK6110sOWY&refer=home

“Portfolios of official lenders have to be very conservative.”

What were these guys thinking?

An unfortunate case(131)

In a comment, 11/12/08, on an article by Ritholtz on the growing bailouts, I wrote in response to his question

“Unregulated, Free market capitalism, anyone?”

the following:

”There is none here, clearly, but what is not adumbrated is: what happens if the new administration decides to run the banking system in perpetuity? It will have a controlling interest in quite a bit of it(who knows how much?) if it ponies up the numbers Ritholtz suggests are possible.

"And so it may be in other industries that are lining up at the trough. If the US left is Marxist, when it comes to power this January, we could witness the beginning of a revolution that leaves no private capital and takes its victims willingly and bloodlessly.

"The devil is clearly in the details here, not clear to anyone at the moment and to be fashioned to suit the next in power.”

The US left is a new stripe of Marxist, I have no doubt of that, for I was one. I know when I see one.

On the other hand, what they are going to do I don’t know. It’s too early to tell, but while all this populism against bonuses breeds dissent against capital, a kind of policy is getting leverage, in which debt may no longer have the covenant aspect that it once had. If it does not, at least in certain markets, what does it do to the pricing of other debt markets?

As the Fed balloons its balance sheet to carry one credit market after another, one has to wonder if certain of these markets won’t come back in prior form. The auction municipal market is gone. Others are teetering:

March 17 (Bloomberg) -- Coca-Cola Co. is fleeing commercial paper for the safety of long-term bonds.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=atxKQSJUp6RE

As the Fed balance sheet once again balloons, with the theory that it can unwind as soon as credit markets stabilize, what happens if the landscape is very different? It will likely be one in which certain debts do not have to be repaid, certain subprime mortgages for example. It may be one in which municipalities default with Fed backing. Cities will be hard hit as tax revenues deplete. Some may have to settle their debts for fractions on the dollar. Then what happens to US debt? Does it become a kind of BBB rated security, or worse?

It depends on how strong populism gets, as to how much will change in the hands of the new folks at the helm.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aj6hzf32OcEk

One can undo quite a bit of the system of property we have, if the situation worsens in certain directions.

An unfortunate case(130)

This guy has some folks put out with him, but he may be making a smart move:

March 20 (Bloomberg) -- Philip Falcone, who runs the $7 billion Harbinger Capital Partners LLC, is starting a hedge fund that draws on his background in distressed securities, even as investors are locked into his biggest fund.

The Credit Distressed Blue Line Fund will buy troubled loans and bonds, and bet against higher-rated debt, the New York-based firm said in a March 16 letter to investors. The firm’s flagship $5 billion Harbinger Capital Partners Fund I limited withdrawals to 65 percent of its assets last year because of private-equity investments, which are harder to sell than publicly traded stocks.

“We hired Falcone because he was the best distressed investor on the planet, and then he morphed into an equity manager who took big bets with an activist bent,” said Brad Alford, head of Alpha Capital Management LLC in Atlanta and an investor in Harbinger Capital Partners. “Now, he decides to launch a credit fund while 35 percent of our capital is stuck in private equity.”

Harbinger’s assets have fallen about 73 percent from a peak of $26 billion in mid-2008 because of investment losses and client withdrawals. Capital Partners I declined 28 percent last year, exceeding the 19 percent average loss for all hedge funds, according to Chicago-based Hedge Fund Research Inc.

Charles Zehren, a spokesman for the fund, declined to comment on the new fund and the letter, a copy of which was obtained by Bloomberg News.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aCgUvUYwBys0&refer=home


It is certainly smart not to lever in this envronment.

It will purchase devalued high-yield bonds, bank loans and trade claims, which are debts that a bankrupt company owes to its suppliers. The fund won’t borrow money to make purchases, nor will it buy stocks.

You can see from the article that the private equity deals he made in the first fund are of little value at this point and have to be endured for quite a time.

As to the rest of the article, the hirings, the new alignments, etc., indicate the cross currents in the hedge fund and private equity markets.

An unfortunate case(129)

This is a good example of what happens in an old-style FDIC deal:

LOS ANGELES (AP) -- Federal Deposit Insurance Corp. said late Thursday it completed the sale of IndyMac Federal Bank, one of the largest casualties of the housing bust, to OneWest Bank.

Pasadena, Calif.-based OneWest, a federal savings bank formed by an investor group that includes billionaire George Soros and Dell Inc. founder Michael Dell, agreed last December to purchase the failed California lender for $13.9 billion.

OneWest will assume all deposits of IndyMac's 33 branches, which will reopen as branches of OneWest on Friday, with deposits continuing to be insured by the FDIC.

As of Jan. 31, IndyMac had total assets of $23.5 billion and total deposits of $6.4 billion, about half the company's total at the time of its failure. OneWest has agreed to purchase all deposits and about $20.7 billion in assets at a discount of $4.7 billion.

The FDIC will retain the remaining assets for later sale.

http://biz.yahoo.com/ap/090319/fdic_indymac_sale.html

This is the way it should work with the bigger banks.

The FDIC will retain the remaining assets for later sale.

No mark to market here.

A side deal:

Under terms of the sale, the new investors will shoulder the first 20 percent of the bank's loan losses, with the FDIC agreeing to take on the majority of any losses thereafter. In return, OneWest will continue a closely watched home-loan modification program launched by FDIC Chairman Sheila Bair last August.

You don't need to do this one, but if you do, well..., it's a deal nonetheless.

An unfortunate case(128)

A comment on the Fed move:

“This is a very powerful and aggressive move,” Hoey, chief economist at Bank of New York Mellon Corp., said in an interview with Bloomberg Television. “One of the reasons I’ve been arguing we won’t have a depression is we’ve got a Fed chairman who understands the problem and is going to come with the right diagnosis and the right medicine.”

http://www.bloomberg.com/apps/news?pid=20601087&sid=aT.QUD5kdxQc&refer=home

Another comment:

The Fed is “naive” if officials think the move will lower borrowing costs, said Doug Dachille, chief executive officer of New York-based First Principles Capital Management. The “historic precedent” of when the Treasury Department was buying back debt amid the budget surpluses of the Clinton administration show it may fail to do so, he said.

This is an interesting case. It appears that they would be better served to narrow spreads between yields of other assets and the 10 year treasury yield. At the very least, the spread is way too wide at the corporate level. Triple B corporate yields are 600 basis points or so over treasuries. Consumer credit rates, auto rates, etc., are too high.

Looking at the situation as a trader, they should be selling the 10 year and buying the other assets. Then those yields will come down relative to treasuries and they will get a more normal, functioning credit market. Besides, that lets the market, not the Treasury, determine the level of rates.

Instead they are buying the 10 year treasuries, relying on the notion that the other yields will follow the 10 year yield down. This is less likely to happen than if they did the spread trade.

In addition, they are buying securities(treasuries) that they have to sell for regular government funding. So, ultimately, they are in a vicious circle.

They just need to take over the assets from the bad banks and put them in an RTC-like structure and not price them for a while. That will shrink the supply of mortgage and other assets in the market. It will create clean banks with capital to buy new assets and the problem will be on its way to a gradual resolution.

For whatever reason, they do not want to do this.

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Since private equity is, in essence, broke, why is this a surprise?

WASHINGTON (Reuters) - The U.S. government might have to front five times as much money as private investors under the Obama administration's plan to buy up toxic bank assets, a senior Republican lawmaker said on Wednesday.

With markets still awaiting details of the plan and some signs that they may be further delayed, Representative Spencer Bachus told Reuters Financial Television that the government would be providing the lion's share of funding in the venture.

"We're hearing that probably you're talking about a five to one ratio -- five public to one private," he said when asked how much public and private capital would be involved.

Bachus, of Alabama, is the top Republican on the House of Representatives Financial Services Committee. "What you're going to see out of this administration is ... the government supplying the majority of funds," he said.

Spooked by ferocious criticism this week of bailed-out insurer American International Group Inc (AIG.N), hedge funds and private equity firms may be hesitating about participating in the public-private purchase plan, lobbyists said.

"They thought they were going to be able to just go in there and get paid, and now they're thinking they're going to have all these restrictions," said a financial services sector lobbyist who asked not to be identified.

The plan was first proposed last month in only very broad terms by U.S. Treasury Secretary Timothy Geithner.

This past Saturday, a senior Treasury official said the department would offer more details this week on the venture, but a Treasury official said on Wednesday that details might not be released until early next week.


http://www.reuters.com/article/gc06/idUSTRE52I0D720090319


Blame it on their pocketbooks, not AIG.

An unfortunate case(126)

The Fed makes its intent clear:

WASHINGTON (AP) -- With the country sinking deeper into recession, the Federal Reserve launched a bold $1.2 trillion effort Wednesday to lower rates on mortgages and other consumer debt, spur spending and revive the economy. To do so, the Fed will spend up to $300 billion to buy long-term government bonds and an additional $750 billion in mortgage-backed securities guaranteed by Fannie Mae and Freddie Mac.

http://biz.yahoo.com/ap/090318/fed_interest_rates.html?sec=topStories&pos=main&asset=TBD&ccode=TBD

So Wall Street goes up 1.2 % and the dollar drops over 3%:

http://www.bloomberg.com/apps/news?pid=20601083&sid=aCsmmEbrDLM4&refer=currency

An unfortunate case(125)


March 17 (Bloomberg) -- Chairman Ben S. Bernanke and Federal Reserve policy makers may have to ramp up their purchases of mortgage securities and other assets after the economy and job market deteriorated further since they last met.

It is very significant that the Fed's balance sheet has shrunk and that it is worried about it:

The Federal Open Market Committee, gathering today and tomorrow in Washington, needs to redouble its efforts after the central bank’s balance sheet shrank 17 percent from a $2.3 trillion December peak, Fed watchers said. The retreat came even as Bernanke acknowledged the chance that the unemployment rate will exceed 10 percent for the first time in a quarter century.

“It takes massive balance-sheet expansion to generate significant easing in financial conditions,” said Andrew Tilton, an economist at Goldman Sachs Group Inc. in New York who used to work at the Treasury. “More needs to be done.”

The article goes on:

The Bloomberg U.S. Financial Conditions Index is still about five standard deviations below the average of the 1992 to 2008 period. Standard deviation measures how much a value varies from the mean.

Investors demand an average of 6 percentage points more than corresponding U.S. Treasuries to buy investment-grade U.S. corporate bonds, according to data compiled by Merrill Lynch & Co. That’s up from 5.40 percentage points when the FOMC met Jan. 28.

http://www.bloomberg.com/apps/news?pid=20601087&sid=awl.LOiyL.3I&refer=home

BBB rates 6% over T. You cannot run an economy very well under those conditions.

An unfortunate case(124):

This gal is a force:

March 16 (Bloomberg) -- Forget Nicolas Sarkozy. Ignore Gordon Brown. Angela Merkel, taking advantage of Germany’s economic heft, is now the European Union’s dominant figure. And leaders from Warsaw to Washington had best not forget it.

Just as the German chancellor vetoed a bailout for eastern Europe on March 1, she is now leading European opposition to U.S. President Barack Obama’s call for a global pump-priming package. She’ll determine the fate of a 5 billion-euro ($6.4 billion) infrastructure proposal at an EU summit in Brussels later this week.

“It’s Merkel who holds the key to the cashbox, and she doesn’t want to give it up,” says Jean-Dominique Giuliani, chairman of the Robert Schuman Foundation, a research center in Paris.

Merkel’s rejection of more stimulus touched off the first trans-Atlantic clash of the Obama administration and led critics to say she risks deepening the global recession. Even as finance ministers from the Group of 20 nations were meeting in southern England March 14, seeking to paper over differences with a pledge to deliver a “sustained effort” to boost growth, Merkel was 42 miles (67 kilometers) away in London, defending her opposition to further spending.

“Germany really has contributed its share,” said Merkel, 54, as she stood alongside Brown, the U.K. prime minister.

http://www.bloomberg.com/apps/news?pid=20601109&sid=aL4VMcMofiI8&refer=exclusive

Love a strong woman. Someone you could run a ranch with and not buy a farm. Especially when the rest of these guys cojones have shrunk to English Peas.

An unfortunate case(123)

Thundarr the Barbarian was set in a future post-apocalyptic wasteland divided into kingdoms or territories—the majority of which are ruled by wizards—and whose ruins typically featured recognizable geographical features from the United States, such as Las Vegas, Los Angeles, Mount Rushmore, New York City, San Francisco or Washington, D.C. Other episodes with recognizable settings are located in Central America, while one is in London. Another notable feature of this future Earth is that the Moon was broken in two pieces, but the gravity of the pieces drew them back together, orbiting at roughly the same height as the intact Moon once did. The shattered moon and the ruins of the former human civilization were supposedly caused by the passage of a runaway planet between the Earth and the Moon in 1994, which, from scenes shown in the opening sequence, caused radical changes in the Earth's climate, geography and tidal effects. However, by the time period in which the series is set (2,000 years later), the Earth and Moon seem to have settled into a new balance.
http://en.wikipedia.org/wiki/Thundarr_the_Barbarian

He's governor of your(that is, Dash's) state, I thought.


(In our case we had runaway mouths and money)

An unfortunate case(122)

This rule change, if it goes through, will mark a spot in this saga where government begins to control earnings in the financial sector. Using the principle of “significant judgment”, policy changes on lending and packaging of loans will be able to be brought about such that cash flows from new instruments can be defined a new way.

This will enable a politicization of lending that we have not seen before. Remember it was Congress which ordered the rule change from FASB. A result could be that banks are told to whom to lend and how to value their loans.

Soon the view may be that the financial crisis was simply a result of inappropriate reporting requirements. Steve Forbes, on the right wing, thinks that, as Floyd Norris noted in the article referenced a few posts ago.

Ironically, this view might do wonders for the non-Forbeseans in power.

An unfortunate case(121)

March 16 (Bloomberg) -- The Financial Accounting Standards Board, pressured by lawmakers to change the fair-value rule blamed for worsening the financial crisis, proposed permitting companies to use “significant judgment” in valuing assets.

Companies would be able to apply the revised rule to their first-quarter financial statements, FASB Chairman Robert Herz said today during a meeting at the U.S. accounting rulemaker’s Norwalk, Connecticut, headquarters. The board is set to vote on the proposal April 2, after a 15-day public comment period.

This will change first quarter earnings.

Fair-value, also known as mark-to-market accounting, requires companies to set values on most securities every quarter based on market prices. Wells Fargo & Co. and other companies argue the rule doesn’t make sense when trading has dried up because it forces banks to write down assets to fire- sale prices.

“Mark-to-market is fundamentally not about a quote on a screen,” Wells Fargo Chairman Richard Kovacevich said March 13 in a speech at Stanford University in California. “It should always be about expected cash flows.”

If you believe your own bushwa, it's about the present value of expected cash flows. If it takes your "significant judgment" to determine this rather than a market, then the following paragraph says it all:

Investor groups and the accounting industry say the rule forces companies to reveal their true financial health to shareholders.

http://www.bloomberg.com/apps/news?pid=20601087&sid=ar8GMXGDnlws&refer=home

An unfortunate case(120)

The credit situation does not want to go away quietly:

This is so bizarre.

Off the run treasuries at 44 basis points over current benchmark issues:

March 16 (Bloomberg) -- Even in the world’s safest debt market, investors are paying triple the average premium for the easiest-to-sell securities as the 19-month credit-market freeze shows few signs of ending.

Buyers requiring only the newest, most-traded 10-year Treasuries are giving up about 0.4 percentage point of yield compared with older debt of similar maturity, according to Barclays Capital Inc., one of 16 primary dealers required to bid at government debt sales. Before the subprime mortgage crisis began in August 2007, the gap was about 0.13 percentage point.

Treasuries already lost 2.85 percent this year, according to Merrill Lynch & Co. index data, as the government accelerated bond sales to finance a federal budget deficit that President Barack Obama’s administration forecasts may expand to $1.75 trillion. Sacrificing returns for so-called benchmark bonds shows how skittish investors remain as financial markets deteriorate in the worst crisis since the Great Depression.

“It’s a pretty telling sign that things are not back to normal,” said Wan-Chong Kung, who helps manage $76 billion in fixed income at FAF Advisors in Minneapolis, the asset-management arm of U.S. Bancorp.

For investors who don’t need benchmark Treasuries, the older off-the-run securities, as they’re known to traders, are bargains, according to Kung.

http://www.bloomberg.com/apps/news?pid=20601103&sid=apbLlIU80p.k&refer=news

In the old days there were names for certain bonds.

The 7's of 07, now matured, were called "James Bonds".

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March 13 (Bloomberg) -- Investment funds that purchased a majority of the lowest-rated loans during the credit boom have stopped buying, threatening to undermine President Obama’s plan to pull the economy out of the worst recession since 1982.

The funds, known on Wall Street as collateralized loan obligations, provided cash to movie-rental chain Blockbuster Inc., which is now exploring a bankruptcy filing, according to a person familiar with the situation. They also helped finance the $33 billion buyout of Nashville, Tennessee-based hospital operator HCA Inc.

Now, as an economic slowdown drags into the 16th month, borrowers unable to pay their debts are causing record losses for CLOs. Moody’s Investors Service put 760 of the funds, holding about $440 billion of assets, on review for downgrades on March 4. Unless policymakers decide to earmark some of the $11.6 trillion of government programs created to combat the seizure in credit markets to support high-yield loans, defaults may soar through 2012, according to investors.

“The game is over,” said Ross Heller, managing director at New York-based NewOak Capital LLC, an investment and advisory firm. “There isn’t going to be money available for refinancing. Companies will have to be put into bankruptcy and the debt restructured.”

As credit losses have climbed, issuance of so-called leveraged loans in the U.S. plummeted to $11.7 billion in January and February from $66.3 billion in the first two months of 2008 and $158.7 billion for the same period in 2007, according to data compiled by Bloomberg.

http://www.bloomberg.com/apps/news?pid=20601109&sid=akXjReT2YryA&refer=exclusive

This is another area of credit not well understood by the equity markets, which have been rallying over the last week. So much in the credit markets is collapsing, you wonder how a mere change in accounting rules, spoken of recently, will cure the credit crisis.

On that note, Floyd Norris has a readable article:

http://finance.yahoo.com/banking-budgeting/article/106746/Bankers-Say-Rules-Are-the-Problem

An unfortunate case(118)

Ghost Towns Dot Finland as Forestry Collapse Threatens Growth

Finland’s forest industry -- once a pillar of the Nordic nation’s economy -- may be collapsing as the global recession stifles demand and exacerbates years of plunging prices for commodities and products.

The forest industry’s share of Finland’s economy has halved in three decades to 3.8 percent as exports fell to 15 percent of total shipments from 42 percent. In January, production slumped 35 percent from the same month a year earlier, the most on record, Finland’s statistics agency said March 10.

Pine forests cover two thirds of Finland, whose $235 billion annual gross domestic product and population of 5.3 million make it economically and demographically the size of Minnesota.

http://www.bloomberg.com/apps/news?pid=20601109&sid=akSi61xkAdT8&refer=home

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The quarterly difference in household and non financial business borrowing turned negative in the fourth quarter. This is despite massive federal stabilization of markets with government borrowing. The data come from the 4th quarter flow of funds statement from the Fed.

An unfortunate case(116)

The Deutsche version:

March 14 (Bloomberg) -- German Chancellor Angela Merkel’s government is considering a plan to take over toxic bank assets until they mature, enabling lenders to avoid massive write-offs while dodging adding to bailout funds, three people familiar with the proposal said.

The recommendation by a government panel co-chaired by Deputy Finance Minister Joerg Asmussen and Deputy Economics Minister Walther Otremba aims to circumvent pricing the assets, according to the people, who spoke anonymously because details have yet to be provided to lawmakers. Lenders would “park” the holdings in a state-controlled “bad bank” until maturity, betting a market recovery will minimize losses, the people said.

The measures draw on the lessons of a $73 billion aid program for the banking system inherited from East Germany in 1990 after re-unification. They’d mark a tack untried in the U.S. and the U.K., where officials are also struggling to relieve banks of junk assets that have frozen lending.

http://www.bloomberg.com/apps/news?pid=20601085&sid=aRTzrKvoD13U&refer=europe

Achtung, Herr Geithner. Ring fences are cowboy ideas.

http://www.investopedia.com/terms/r/ringfence.asp

http://ftalphaville.ft.com/blog/2008/04/03/12025/wall-st-banks-to-ring-fence-bad-assets/

http://www.buzzle.com/articles/251727.html

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It is beginning to look as though a rationale is developing politically for, in essence, cooking the books of these underwater institutions. If it does, there will likely be write-ups rather than write-downs on some financial companies. S&P 500 earnings will begin to reverse downward course with a simple accounting change. Where we go after that I don’t know, but a strong rally could develop near term from this.

The character below is betting on it and he is a pretty good talker. Also listen to the rationale as it exudes from his smile.

http://finance.yahoo.com/tech-ticker/article/207236/Bulls-Betting-on-the-Demise-of-Mark-to-Market-Revival-of-the-Uptick-Rule?tickers=XLF,MS,WFC,JPM,FAS,SKF,%5EDJI

I guess Silverblatt will smile as well.

An unfortunate case(114)

The crisis will go away with an accounting change:

The rally got an extra dose of adrenaline Thursday after an accounting board told Congress it may recommend an easing in financial reporting rules of tough-to-sell assets -- a change that banks say would help their bottom lines. Upheaval in the banking industry has been dogging the market since 2007, and hope that banks might finally get relief in how they value their bad assets spurred a flurry of buying on Wall Street.

"We might find that the banks are not as bad, or not bad at all, if these assets are marked differently," said Doreen Mogavero, president of the New York floor brokerage Mogavero, Lee & Co.

http://agonist.org/forum/u_s_economy#comment-183039

Not bad at all.

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March 12 (Bloomberg) -- Bernard Madoff was jailed after admitting he masterminded the largest Ponzi scheme in history, an epic swindle that may have reached $65 billion and made him the symbol of investor distrust in a global recession.

http://www.bloomberg.com/apps/news?pid=20601103&sid=aDrMyMCgzqYw&refer=us

Here is another symbol of investor distrust:

WASHINGTON (AP) -- A House panel wrung a pledge Thursday from the head of an accounting board to try to issue guidelines in three weeks that will ease rules that force banks to value assets at current prices.

The commitment by the chairman of the independent Financial Accounting Standards Board came amid a muscular display of congressional power at a hearing on the so-called mark-to-market accounting rules. The head of the House panel, Rep. Paul Kanjorski, D-Pa., had held out the threat of legislation to pressure the standard-setting board and the Securities and Exchange Commission to take steps that would give relief to battered banks.

FASB had planned to put out the new guidelines for the mark-to-market accounting rules in the April-June quarter. The rule has forced banks to take steep write-downs on some financial assets -- especially securities linked to mortgages -- even as the industry has been reeling from the housing market decline.

As the financial crisis has ground on and banks large and small have foundered and failed, the banking industry has been pushing for the accounting relief.

FASB Chairman Robert Herz told the lawmakers on the House Financial Services subcommittee on capital markets that the board "could have the guidance in three weeks."

http://biz.yahoo.com/ap/090312/meltdown_accounting_rule.html

Congress and FASB will cook the books like Bernie.

From Marlowe and the Folger library:

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Base Fortune, now I see, that in thy wheel

There is a point, to which when men aspire,

They tumble headlong down: that point I touched,

And, seeing there was no place to mount up higher,

Why should I grieve at my declining fall?(5.6.59-63)

One of my "all-time" favorite quotes, from Marlowe's Edward II

http://www.bloomberg.com/apps/news?pid=20601109&refer=exclusive&sid=apUN4GkGPA.I


http://internetshakespeare.uvic.ca/Library/SLT/drama/medievaltragedy.html


When you went to the Ultimate Shithouse in the Middle Ages it was significant.

An unfortunate case(111)

Still in the credit woods.

Short-term borrowing costs are increasing as banks hoard cash and governments struggle to thaw credit markets after finance companies reported almost $1.2 trillion of writedowns and losses since the start of 2007. Banco Popolare SC yesterday became Italy’s first lender to seek state aid. Lloyds Banking Group Plc, the U.K.’s largest mortgage provider, ceded control to the government March 7. U.S. regulators seized 17 failing banks so far this year.

“The market is beginning to think that the solution is either not politically possible, or we can’t afford it, or maybe there isn’t a solution,” said Bob Baur, chief global economist at Des Moines, Iowa-based Principal Global Investors, which manages $198 billion of assets. Libor’s rise “is just another indication of that concern,” he said.







http://www.bloomberg.com/apps/news?pid=20601109&sid=a0JxdKUPIyk4&refer=exclusive

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There was a nice rally yesterday in equities. There are some extremes that have been reached in the downward pricing of the indexes. So a rally like this could have some legs. I don't make short term forecasts, so I won't make one here.

As to whether there is a recovery in process, I think a central indicator will be Japan. Its pricing is relatively transparent. I'm much more comfortable with numbers coming out of there than those from China.

Here is Japan's latest headline:

Japan’s Wholesale Price Declines Accelerate as Slump Deepens

http://www.bloomberg.com/apps/news?pid=20601080&sid=aK6G6x9oPtng&refer=asia

That these people are still digging a deeper hole bodes ill for us all.

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I don't care for the guy's style, but he's from New Yawp; he has an excuse. He is, however, dead right on the bailout.

http://finance.yahoo.com/tech-ticker/article/204909/Get-Long-Torches-&-Pitchforks-Bailouts-%22Absolutely-Asinine%22-Ritholtz-Says?tickers=C,AIG,BAC,XLF,SKF,%5EGSPC,%5EDJI

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I began 11/11/08 with this remark on the dialogue form:

I have an additional number of thoughts on the form, but the current situation in the US has dampened my ability to write. I am seeing configurations in my time series research which have not been seen since prior to WW2. I am quite concerned about the future of the economy.

To the extent that I work at all, I work from the market time series itself. Heavy mathematics is useless. You look at what is in front of you.

These eco-dudes are finally coming around to doing the same. Not that I'm as smart. Sometimes a look beats an analysis.

March 9 (Bloomberg) -- The U.S. economy’s vital signs may not confirm a diagnosis of depression. The symptoms increasingly point to one.

As in the Great Depression, world trade is collapsing, wealth is evaporating and the banking system is broken. Deflation is a growing threat as companies slash production, pay and prices. And leaders worldwide are having difficulty making headway in halting the self-perpetuating decline.

“We are tracking 1929-1930,” says Barry Eichengreen, a professor of economics and political science at the University of California, Berkeley.

(true)

The result: This contraction may leave a lasting imprint on the economy and society, just as the Depression did. In the wake of the devastation of the 1930s, Americans swore off stocks, husbanded their own resources and looked to the government for help. Now, another generation might draw some of the same lessons from the deepest economic collapse of their lifetime.

“This is going to scar the collective psyche,” says Mark Zandi, chief economist at Moody’s Economy.com in West Chester, Pennsylvania. “People will become much more conservative in borrowing, lending and investing.”

http://www.bloomberg.com/apps/news?pid=20601109&sid=aNlx.TpHF5W4&refer=exclusive

An unfortunate case(107)

The fear in early 2008 in the linked report has abated:

http://www.iags.org/new_economic_order0208.pdf

The New World Order cited there is now in question.

Instead the article below would indicate that the swinging of the pendulum has brought its own destruction and fears:

March 9 (Bloomberg) -- The value of global financial assets including stocks, bonds and currencies probably fell by more than $50 trillion in 2008, equivalent to a year of world gross domestic product, according to an Asian Development Bank report.

Asia excluding Japan probably lost about $9.6 trillion, while the Latin American region saw the value of financial assets drop by about $2.1 trillion, said Claudio Loser, a former International Monetary Fund director and the author of the report that was commissioned by the ADB. The report didn’t give a breakdown of asset declines in other regions.

“The loss of financial wealth is enormous, and the consequences for the economies of the world will unfortunately commensurate,” said Loser, now the Latin American president of strategic advisory firm Centennial Group Inc.. “There are serious economic and political stumbling blocks that may well cause the recovery to be costly and slow to consolidate.”

Some of the world’s biggest financial companies including Lehman Brothers Holdings Inc. and Merrill Lynch & Co. have collapsed as banks and other financial institutions reported almost $1.2 trillion of losses and writedowns since the start of 2007. Global stock markets lost about $28.7 trillion in 2008, and another $6.6 trillion has been wiped from the value of world equities in 2009.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aZ1kcJ7y3LDM&refer=worldwide

Ironically the author's name is Mr. Loser.

Mr. Market meet Mr. Loser.

Mr. Loser makes no attempt to value OPEC assets.

Valuing oil in the ground is not an easy business. But if world assets are off 50%, certainly OPEC's are off at least that. To have valued them at 92 T in the first place, as was done in the first report, is speculative. Who knows what they are worth, the dollar having rallied, the nature of decline curves, the future price, the future cost of production...

The elements of valuation are hard to predict.

Let's just say everybody's down a bunch.

An unfortunate case(106)

They have to know what is on their books, but are they telling the truth about it?

March 9 (Bloomberg) -- American International Group Inc. appealed for its fourth U.S. rescue by telling regulators the company’s collapse could cripple money-market funds, force European banks to raise capital, cause competing life insurers to fail and wipe out the taxpayers’ stake in the firm.

http://www.bloomberg.com/apps/news?pid=20601087&sid=av8IskE9DZ4A&refer=home

Trading at 36 cents.

An unfortunate case(105)

NEW YORK (AP) -- The World Bank predicts the global economy will shrink this year for the first time since World War II, and sees trade at its lowest point in 80 years.

The World Bank also said Sunday the growing global financial crisis will create a multibillion-dollar financing shortfall for poor and developing nations.

A group of 129 countries face a shortfall of $270 to $700 billion this year, the World Bank says. It warns international financial institutions will not be able to cover even the low end of that estimate.

The bank said only one-quarter of the vulnerable countries will be able to ease the impact of the economic downturn through job creation or "safety net" programs.

http://biz.yahoo.com/ap/090308/world_bank_economy0171.html

What else would you expect in a financial collapse?

The report said that 94 out of 116 developing countries have been hit by economic slowdowns. Net private capital flows to emerging markets are plunging, set to fall to $165 billion this year -- or 17 percent of their 2007 levels. Falling demand in the West is sparking the sharpest drop in world trade in 80 years, sending sales of the products and commodities of poorer nations spiraling down, the report said.

http://www.washingtonpost.com/wp-dyn/content/article/2009/03/08/AR2009030801216.html

There are "no jobs anywhere."

That decline is touching off a wave of job losses. Cambodia has lost 30,000 jobs in the garment industry. In India, more than half a million jobs vanished in the last three months of 2008, including cuts in the gems, jewelry, auto and textile industries, according to the World Bank.

There is no private money. We've already seen that private equity is essentially broke.

So it is government lending or government sponsored lending in one form or other that will take place. Multilateral hand ringing, along with it.

Without drawing any political conclusions, right or left, one can say that a political class will take over banking for a while.

To help them, multilateral lenders will need to dig deep. The World Bank remains well financed and is positioned to almost triple spending to $35 billion this year. But it warned the scope of the need in the developing world will exceed the combined ability of major multilateral lenders, and it called on governments in major nations and the private sector to pitch in more.

For instance, its sister organization, the International Monetary Fund, recently received $100 billion more from Japan, but is still asking more affluent nations to come up with an additional $150 billion to replenish its rapidly diminishing funds. While the World Bank aims to reduce global poverty largely through long-term projects in the developing world, the IMF is charged with offering bigger, more immediate bailouts to countries on the verge of economic collapse. The list of countries fitting that description has soared in recent months.

In November alone, the IMF parceled out $50 billion to nations in crisis -- the most the institution has ever spent in a single month. With more nations, particularly in Eastern Europe and Central Asia, facing serious trouble, the IMF is preparing to hand out tens of billions more. It is hoping to raise more funds from Western nations and other cash-rich countries such as China and those in the Middle East.

The concern now, however, is that the scope of the crisis may be so vast that even an extra $150 billion may not enough. Some fear that nations in Western Europe such as Austria, Ireland and Spain -- believed to have graduated from IMF lifelines decades ago -- may soon require bailouts, taking funds that would have been spent on poorer nations. It could also prove difficult to raise more money from hard-hit countries including the United States and Britain, where politicians and citizens may decide that charity begins at home.

(All from the Post link)

Are we looking backward, or forward? I mean by that: are the IMF and World Bank and others going to have to remedy things that have already happened and won't happen to get much worse from here?

A look at the Indian market above suggests that the situation is not getting any worse. It has stayed flat for the last quarter or so.

But we could be on the brink of going lower. We have recently been making incrementally new market lows.

An unfortunate case(104)

If you read that Silverblatt note, you see that it is the non-financial firms that are still making money. But they cannot borrow at good rates. BBB rates are high. Corporate borrowing is expensive. Paradoxically, it is the financial firms who are getting the cheap money and they keep spiraling lower.

This cannot continue for much longer without the non-financial firms sinking as well.

An unfortunate case(103)

Mr. Silverblatt's current note from 3/2/09

AIGs record setting Q4,'08 As Reported loss of $-61.7B; -$22.95 per AIG share, $-7.10 index impact (first negative quarter for index ever)

28%, 138 of the 486 As Reported EPS are negative

19 issues with mega-$billon losses

AIG Operating loss of $-44.6B (record); $-16.59 per AIG share, $-5.13 index impact (first negative quarter for index ever)

19%, 94 of 486 Operating EPS are negative

18 issues with mega-$billon losses

$-5.2B loss for the quarter, with $-101.3B from the Financials; Non-Financials therefore positive
Sales are down -9.13%; 41% higher Y/Y (avg +6.86%), 59% lower (avg -17.93%)

Massive charges warp P/Es (field H33), forward numbers more important - but many investors have a lack of trust in the estimates

Cash flow now high priority, dividend cuts to 'preserve cash', ride out the storm->companies are worried (so am I)

No major shift in estimates yet as stimulus/TARP/housing/budget details come out

Howard Silverblatt, S&P Senior Index Analyst

http://www2.standardandpoors.com/spf/xls/index/SP500EPSEST.XLS

This has not been reported on CNBC, so far as I have seen. It is certainly not a theme, if it has been.

An unfortunate case(102)

When governments start looking for money, they look for it everywhere. Speculation on the UBS tax case is here:

http://seekingalpha.com/article/123470-the-ubs-mess-with-the-irs?source=yahoo

An unfortunate case(101)

NEW YORK (AP) -- Foreclosures are spreading by epidemic proportions, expanding beyond a handful of problem states and now affecting almost 1 in every 8 American homeowners.
It's an economic role-reversal: The economy, driven down by the collapse of the housing bubble, is causing the housing crisis to spread.

Figures released Thursday show that nearly 12 percent of all Americans with a mortgage -- a record 5.4 million homeowners -- were at least one month late or in foreclosure at the end of last year.

That's up from 10 percent at the end of the third quarter, and up from 8 percent at the end of 2007. In addition, the numbers now include many once-qualified borrowers who took out fixed-rate loans.

Data from the Mortgage Bankers Association also showed that a stunning 48 percent of homeowners who have subprime, adjustable-rate mortgages are behind on their payments or in foreclosure.

The reckless lending and borrowing practices in states like Florida, California and Nevada that were the epicenter of the problem are no longer driving up the nation's delinquency rate.

Instead, foreclosures are being fueled by a spike in defaults in places such as Louisiana, New York, Georgia and Texas, where the economy is rapidly deteriorating and unemployment is climbing.

"It's jobs. People are losing their jobs left and right," said Houston real estate agent Michael Weaster.

http://biz.yahoo.com/ap/090305/states_foreclosures.html

Getting uglier still. The oil patch is declining rapidly here in Texas. Guys have lost jobs that were making them $80,000/ yr. The hotel bookings along the interstate in Midland/Odessa have to be thinning out.

An unfortunate case(100)

...The FDIC last week approved a one-time “emergency” fee and other assessment increases on the industry to rebuild a fund to repay customers for deposits of as much as $250,000 when a bank fails. The fees, opposed by the industry, may generate $27 billion this year after the fund fell to $18.9 billion in the fourth quarter from $34.6 billion in the previous period, the FDIC said.

The fund, which lost $33.5 billion in 2008, was drained by 25 bank failures last year. Sixteen banks have failed so far this year, further straining the fund.

Smaller banks are outraged over the one-time fee, which could wipe out 50 percent to 100 percent of a bank’s 2009 earnings, Camden Fine, president of the Independent Community Bankers of America, said yesterday in a telephone interview.

“I’ve never seen emotions like this,” said Fine, adding that he’s received more than 1,000 e-mails and telephone messages from angry bankers.

“The FDIC realizes that these assessments are a significant expense, particularly during a financial crisis and recession when bank earnings are under pressure,” Bair wrote. “We did not want to impose large assessments when the industry and economy are struggling. We searched for alternatives but found none better.”

The agency, which has released the change for 30 days of public comment, could modify the assessment to shift the burden to the large banks “that caused this train wreck,” Fine said. “Community bankers are feeling like they are paying for the incompetence and greed of Wall Street,” he said.

http://www.bloomberg.com/apps/news?pid=washingtonstory&sid=alsJZqIFuN3k


Congress can fund the FDIC to infinity. I don't see a reason for this except in the context of impoverishing banking capital nationwide. Which is exactly what I'd want if I wanted to nationalize banking permanently.

An unfortunate case(99)

I'll tell you what.

We'll do away with freedom if you'll do away with secrecy.

“The Swiss hold out bank secrecy as a national value, in the same way Americans prize freedom and democracy,” Levin said. “The Swiss claim bank secrecy is essential to protecting individual privacy and is more important than any law in the United States requiring the payment of taxes.”

http://www.bloomberg.com/apps/news?pid=20601087&sid=aWDQWshGiCig&refer=worldwide

This is going to be one conflagration of a case.

An unfortunate case(98)

A bear turns bullish:

Overdone.

Steve Leuthold, whose Grizzly Short Fund returned 74 percent last year betting against U.S. stocks, said now is the time to buy equities because investors are too fearful about the economy. The economy isn’t as bad as it was in 1974, when stocks began rebounding, said Minneapolis-based Leuthold. He predicted the S&P 500 will surge to at least 1,000 in 2009, representing a gain of 44 percent from yesterday’s 12-year low of 696.33.

‘Pretty Stupid’

“These comparisons people make with the Great Depression are totally out of touch with reality, and pretty stupid,” he told Bloomberg Television. “We’ve been in much worse, much more panicked and more scary situations in the U.S.”

http://www.bloomberg.com/apps/news?pid=20601103&sid=a1TJgwQe_pn0&refer=news

I submit that we have never been more panicked. I can produce numbers to show that.

That we are worse off than in the Depression is not true. He is right about that.

An unfortunate case(97)

This is Hank's work. So they say.

American International Group Inc. (AIG), responding to a lawsuit filed by former Chief Executive Maurice "Hank" Greenberg, said he was "directly responsible" for the creation of financial products that led to the company's near collapse.

The insurance giant called the suit, alleging securities fraud tied to misrepresentations of billion of dollars in losses on credit default swaps, " utterly without merit."

"It strains common sense to accept Greenberg's allegations that he was misled or did not appreciate the risks from the multisector CDS book written by AIG," the company said.
Greenberg, who led the insurance giant for almost 40 years, alleges that misrepresentations by the defendants - including former Chief Executive Martin Sullivan; former Chief Financial Officer Steven Bensinger; the former head of AIG's financial products division, Joseph Cassano; and four directors - led him to acquire stock in AIG at an artificially inflated price as part of his deferred compensation plan.

Responding to company's comments, Liz Bowyer, a spokeswoman for Greenberg, said, "These attacks on Mr. Greenberg are apparently designed to deflect attention from AIG's disastrous performance since Mr. Greenberg retired four years ago, and to distract attention from its wasteful use of shareholder and taxpayer funds since that time."

The company has received about $180 billion in federal government loans since September.
Bowyer said massive losses at AIG in 2007 and 2008 resulted from a shift in the way the financial products unit did business, reportedly writing as many CDSs on collateralized debt obligations in the nine months after Greenberg's departure as it had written in the previous seven years, with a majority of those exposed to subprime mortgages.

"Moreover, the risk controls that Mr. Greenberg and his team put in place reportedly were weakened or removed after his retirement, and the massive additional exposure in AIGFP was apparently not hedged," she added.

http://money.cnn.com/news/newsfeeds/articles/djf500/200903031947DOWJONESDJONLINE000786_FORTUNE5.htm

An unfortunate case(96)

March 3 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke said American International Group Inc. operated like a hedge fund and having to rescue the company made him “more angry” than any other episode during the financial crisis.

Bernanke made the comments in response to a question from Senator Ron Wyden, an Oregon Democrat, at the Senate Budget Committee hearing today in Washington.

“If there is a single episode in this entire 18 months that has made me more angry, I can’t think of one other than AIG,” Bernanke said. “AIG exploited a huge gap in the regulatory system, there was no oversight of the financial-products division, this was a hedge fund basically that was attached to a large and stable insurance company.”

http://www.bloomberg.com/apps/news?pid=20601087&refer=home&sid=aCrzJbsxzKdk

I guess Hank did not know anything about this.

An unfortunate case(95)

Let Hank live in a regular house, have a regular dog, a regular toilet and a regular BM. And a regular silence.

Maurice "Hank" Greenberg, 83, claimed in papers filed in federal court in Manhattan Monday that the company, once the world's largest insurer, has ruined his fortune by lying about its financial health.

AIG's stock fell to 42 cents Monday, as the government threw a stunning new $30 billion lifeline to the insurance giant, even as it confirmed it lost more than twice that much, $62 billion, last quarter. The source of trouble for AIG, which has 74 million customers worldwide and operations in more than 130 countries, is its business insuring mortgage-backed securities and other debt against default. That business imploded once the credit crisis struck with force.

The government has now made four separate efforts to save the company, totaling more than $170 billion.

Greenberg was forced out of AIG amidst a controversy in spring 2005 when the company restated its financial statements for the previous five years, acknowledging accounting improprieties, including "improper or inappropriate transactions."

New York regulators later accused AIG, Greenberg and the company's former chief financial officer of orchestrating an accounting scheme that made AIG's financial picture appear brighter than it was, misleading both investors and regulators.

http://biz.yahoo.com/ap/090302/aig_greenberg.html

An unfortunate case(94)

March 2 (Bloomberg) -- Ruth Madoff, the wife of accused fraudster Bernard Madoff, said she owns a Manhattan apartment, $45 million in bonds, and $17 million in cash that are “unrelated” to her husband’s alleged Ponzi scheme.

Already there is a conflict:

Ira Sorkin, the lawyer for Madoff and his wife, declined to comment.

This will be a song that never ends. I don't know if Lamb Chop is kosher or not.

http://www.youtube.com/watch?v=HNTxr2NJHa0

I never saw Lamb Chop get shorn out in our parts.

An unfortunate case(93)

March 3 (Bloomberg) -- Germany’s real estate companies are fighting for survival, with deadlines looming to refinance short-term debt that’s as much as 18 times their market capitalization while the recession erodes asset values.

Loans defined as short-term by the 10 largest publicly traded property companies total 4.2 billion euros ($5.3 billion), according to their most recent financial reports.

Patrizia Immobilien AG, Vivacon AG and IVG Immobilien AG alone owe 3.1 billion euros, part of which expires as early as next month. That’s more than five times the trio’s combined market value, which has shrunk 83 percent in the past year.

“I wouldn’t be surprised if banks pull the plug for some real estate companies in the very near future,” said

Matthias Schrade, an analyst at GSC Research in Dusseldorf, Germany.
Augsburg-based Patrizia and Hypo Real Estate Holding AG, the commercial property lender bailed out by Germany, are among stocks on Schrade’s “don’t touch” list. Since 2003, 11 of the 91 companies on that list have gone bankrupt and shares of 63 others slumped even as the equity market rose.

http://www.bloomberg.com/apps/news?pid=20601109&sid=a34Y6NVYrVyk&refer=exclusive

Looks a little like private equity which is also broke.

An unfortunate case(92)

The prior post introduced for levity has caused me to check my memory. There are now twenty million or so people in Australia and the sheep numbers are forecast below to move to one hundred million or so.

Makes for a ratio of 5 to 1.

There is a little politics behind some of this:

http://www.abc.net.au/news/stories/2008/05/14/2244204.htm

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

For a change:

Feb. 27 (Bloomberg) -- Australian sheep shearers, a steady- handed bunch typically, are getting jittery as a decision looms on their craft becoming recognized as a sport.

After more than a century of stripping wool in competition, shearers have applied for official sporting status that would open the way for state funding.

“I’d like to think 125 years puts us in pretty good stead,” Peter Artridge, chairman of governing body Sports Shear Australia Association Inc., said in an interview. “Shearing has as much right to be called a sport as any other national game.”

The country’s 6,000 or so shearers want to join tennis and dragon boat racing on Australia’s list of 81 official sports that shared grants of A$51.5 million ($33.4 million) last year.

Sports Shear said it expects a decision in March from the Australian Sports Commission, which will weigh criteria such as anti-doping programs and a development plan for the next three years, Artridge said.

Shearing, academics say, fits the commission definition of a sport as a “human activity capable of achieving a result requiring physical exertion and/or physical skill which, by its nature and organization, is competitive.”

http://www.bloomberg.com/apps/news?pid=20601109&sid=a8qEZg.uZCSU&refer=exclusive

Academics shed so much light on matters.

Sheep are a kind of moving target, no doubt. And you can cut them up a bit when they move under your hand. It takes a good 2 minutes to shear a sheep, our way, as I recall.

I have a hat from 1985 commemorating my timing some shearers in a contest.

Most of our shearers are good stout Mexicans. About 8 pounds wool comes off of a sheep in the spring in about 12o seconds. A lot of vegetable matter(grass) with it.

Real hombres.

But we don't separate lines(grades of wool) like the Australians. We pretty much put the sheep on a piece of plyboard in the pasture, shear it, and bag the whole fleece.

Of course, they have at least ten sheep for every person down there in Australia. So they take a great more pride in their outcome.

They need to.

So let 'em make a sport out of it.

What the hell?