Miscellaneous Financial News
by Sinclair Noe
DOW + 61 = 13,390
SPX + 3 = 1461
NAS + 61 = 13,390
10 YR YLD -.02 = 1.85%
OIL +.01 = 93.16
GOLD – 2.80 = 1659.00
SILV – .05 = 30.46
AIG, the insurance company won’t join ex-CEO Maurice “Hank” Greenberg’s lawsuit against the US government over the insurance giant’s financial crisis bailout. Greenberg has filed a $25 billion lawsuit accusing the government of violating shareholders’ rights by bailing out AIG, because the terms of the bailout weren’t as cushy as Greenberg wanted. Thank you, AIG.
Earlier this week I told you about an $8.5 billion settlement announced between the Federal Reserve and the Office of the Comptroller of the Currency with 10 big mortgage services, including Citigroup, JPMorgan and Wells Fargo over botched foreclosure claims. Now, Goldman Sachs and Morgan Stanley and other banks are expected to agree to a $1.5 billion settlement with the regulators sometime this week. The other banks haven’t been officially identified but best guess is that the group includes HSBC, Ally, EverBank, and OneWest Bank.
Goldman got into the mortgage servicing business by purchased Litton Loan Servicing and Morgan Stanley bought Saxon Capital. The Fed has ordered both firms to conduct case by case reviews of foreclosures after widespread mistakes were discovered in how the firms processed home seizures.
Meanwhile, Morgan Stanley plans to cut about 1,600 jobs, nearly 3 percent of its workforce. The cuts will focus on senior ranks at the bank. About half of the cuts will be in the U.S. Morgan Stanley’s investment banking unit has been asked to cut about 6 percent of its staff.
Remember when the government offered an amnesty program for people who were evading taxes by holding funds in Swiss bank accounts; admit it, pay the tax plus penalties and all will be forgiven. Well, there was a hitch; taxpayers whose identities become known to the IRS before the clients come forward voluntarily are generally not eligible for the reduced fines and penalties.
UBS, the Swiss banking giant came under criminal investigation for its work selling tax-evasion services to wealthy Americans. Three years ago, UBS entered into a deferred prosecution agreement, agreed to pay a $780 million fine and later turned over more than 4,000 client names. More than four dozen American clients of Swiss and Swiss-style banks have been charged or indicted in recent years; today a 79 year old Florida woman pleaded guilty to criminal charges of tax evasion through accounts at UBS. She faces six years in prison, but probably won’t face that much. She actually tried to enter a voluntary disclosure program with the Internal Revenue Service that would have allowed her to pay reduced fines and penalties, but the IRS already had her name.
The government will stop sending out Social Security checks as on March 1st. No more paper checks. Instead, the Treasury Department will distribute funds electronically, either via direct deposit or on a prepaid “Direct Express” card. Most Social Security benefit recipients already receive their payments electronically, but 5 million checks are mailed each month. Over the next ten years, the move away from paper checks is expected to save about $1 billion.
As you have likely heard, President Obama plans to put Tim Geithner out of his misery tomorrow by nominating Jack Lew for Treasury Secretary. Lew is known for being Obama’s White House Chief of Staff and also for a truly bizarre signature. And, should he be confirmed and subsequently have his name printed on a bunch of dollar bills, Lew will likely be forced to come up with something that actually looks like it spells a name and not a Jackson Pollack painting.
US oil production topped seven million barrels per day for the first time since March, 1993 and is nearly 20 percent above the amount produced at this time last year. The latest weekly data from the Energy Information Administration shows that imports fell as domestic production continues to increase. The government now predicts the US industry could pump 14 percent more oil this year alone. The use of non conventional drilling techniques in places like North Dakota and Texas has created an explosion in US production to the point where the US is expected to pass Saudi Arabia in crude production by 2020.
At the same time, the industry is developing more pipeline capacity to carry crude from storage in Cushing, Okla. to the Gulf Coast refining areas. That should continue to drive the trend, create more refined product for the US and export markets, and the EIA says that should bring down oil prices over the next several years.
That’s the good news. The bad news is that we’re still burning fossil fuels, and the climate is getting hotter, not just warmer – hotter. The average temperature in the continental US last year was 55.3 degrees; that’s a full degree higher than the previous record. Last year’s weather in the United States began with an unusually warm winter, with relatively little snow across much of the country, followed by a March that was so hot that trees burst into bloom. The soil dried out in the March heat, helping to set the stage for a drought that peaked during the warmest July on record. The drought covered more than 60% of the nation; comparable to a severe drought in the 50’s and almost as bad as the Dust Bowl days of the 1930’s. The drought killed corn and soybean crops, and forced ranchers to thin their herds. The Mississippi River’s levels dropped so much that barge traffic backed up and even came to a standstill; stretches of it are deserted like a ‘ghost town,’ and some of it could be closed altogether as it heads below 3 feet in depth.
Don’t forget the tornadoes, the Hurricanes (Isaac and Sandy), derechos, and of course, wildfires. Plain and simple, we need a cold winter with lots of snow, and then we’ll need lots of rain to counter the drought. If we don’t get it, then 2012 might seem mild. The drought of 2012 likely sliced one percent off the GDP. The nation was hit by 11 environmental catastrophes that cost at least $1 billion in losses. Climate is extremely complex. We may yet see some cold years. There is some thinking that the melting of ice at the poles could temporarily cool the oceans and reduce temperatures for a while. But the longer term trend is not only toward hotter, it is toward a kind of hotter that human beings may find it difficult to survive.
The Baseball Writers’ Association of America’s ballot for this year’s Hall of Fame class listed 37 players, including 24 new candidates, including Barry Bonds – the all time leader in home runs, and Roger Clements – a seven-time Cy Young Award winning pitcher. To be inducted, a player must receive a vote on at least 75 percent of the ballots returned. The Baseball Hall of Fame’s Class of 2013 will not have any new inductees from the ranks of the recently retired. It’s a dark day in Cooperstown and steroids are the reason.
The Consumer Electronics Show is wrapping up in Las Vegas. If you were waiting for a 110 inch, high definition flat screen TV, it made its debut this week. On the other end of the spectrum was a smart watch; it syncs up with your smartphone so you can get emails, and text and other messages on a 1-and-a-quarter-inch screen. There were cameras everywhere; on top of bicycle helmets, built into racing goggles. There were pouches to let you use your smartphone underwater. There were 3D printers. They’ve developed mind over matter devices, or at least you can use your mind to transmit signals to electronics that will then move themselves. All you Jedi warriors need to start your training. And then there was one booth selling antennas; yep, big old fashioned television antennas.
The Partnership for Civil Justice Fund obtained a Freedom of Information Act request that revealed the FBI coordinated at length with local law enforcement, private financial institutions, the Federal Reserve and other government agencies to monitor the Occupy Wall Street movement’s activities. One of the things I learned was that the Federal Reserve System has its own commissioned law enforcement arm, the Federal Reserve Police, which is allowed to operate in uniform or plainclothes. Apparently, the FBI treated the Occupy movement as a potential criminal and terrorist threat even though the agency acknowledges in documents that organizers explicitly called for peaceful protest and did “not condone the use of violence” at occupy protests. The idea was apparently to crackdown on the Occupy movement, and it seems to have worked. Meanwhile, how many of the banksters ended up in jail? And a funny thing happened while all those private and federal law enforcement types merged together to crush some protesters in the park…,
Someone here at the radio station today told me her Bank of America credit card was being replaced. She talked to the bank and they said there was a problem with hackers. I don’t know if there is a direct connection but at least nine financial institutions have been hit by hackers since September; more attacks are expected. And part of what makes them suspicious is that they seem calculated not to steal account data or money, but instead to disrupt the banking system. Government officials say Iran is behind the attacks. The distributed denial of service attacks, which seek to overload an online system’s ability to respond to requests, targeted Bank of America, Citigroup, Wells Fargo, U.S. Bancorp, PNC, Capital One, BB&T, HSBC, and Fifth Third Bank. You might want to make sure your credit cards are still working.