While the US was panicking over a double zero jobs report, things in Europe just fell off a cliff. As both the WSJ and Reuters report, it seems that the second Greek bailout, following repeated and consistent disappointments by Greece which has resolutely refused to comply with the terms of its fiscal austerity program, has just collapsed.And with the US closed on Monday: long a counterbalance to European risk pessimism, this week (especially with the news fro the latest FHFA onslaught against global banks) may just be the one that "it" all comes to a head. But back to Europe, and more specifically Greece, which it now appears is doomed. From the WSJ: "I expect a hard default definitely before March, maybe this year, and it could come with this program review," said a senior IMF economist who is keeping close tabs on the situation. "The chances for a second program are slim." It is not only Greece - Italy also thought it would sneak by with getting quid pro no and continue leeching off of Europe, or specifically Germany, indefinitely, at least until the ECB said that absent Berlusconi taking austerity seriously that implicit ECB support for Italian bonds would be yanked, sending the second most indebted country in the world into a toxic debt tailspin. And so it comes that after 2 years of waffling, Europe finally realizes that the piper always eventually gets paid. Alas, it is now far too late.
Where does one start with this one. The WaPo reports that Jon Lovett, an Obama speechwriter and the reigning champion of official Washington’s stand-up comedy circuit, is quitting his job as the teleprompter's telepronpter. "In mid-September, Lovett, 29, plans to leave the administration to write for television out West. “It’s always been a dream of mine to write comedy and be creative,” said Lovett, who insisted that the current West Wing woes had nothing to do with his timing. “I would like to be able to write in my own voice.” Uhm, Lovett may not have noticed, but his work over the past 2 years has directly created some of the most profoundly hilarious comedy in the history of the "free world."
Although I am not as convinced as Stefan that the US government has brought about all our economic ills through deceit, I give it ample credence; but also give a good share of the blame to a citizenry at large vested with waste and greed. On my drive back, ruminating on that blame placed on the government as the mastermind and source of deceit I thought of my friend back in Portland. Was he really the victim of deceit, or did he really invite deceit by his own self-deceit? By entering into a romantic relationship two years before with a woman less than half his age with a compromising polyamorous background, one which was not much different from that which she is exhibiting, and blamed for, today!? Is it really economic, political or romantic deceit we are sometimes victims of, or is it more often than not a case of unfulfilled wishful thinking, of self-deceit?
Whille the past week was full of economic news, most of them decidedly negative, it is next week that the house of cards could finally come unhinged. In what will be the event of the week, Germany's Constitutional Court is set to rule on the legality of the seemingly endless bailout pledges made by Merkel. If they rule against the bailouts, that would be Europe's version of a Lehman moment. Next on the docket you have Italy which has recently been softening its austerity program. Berlusconi needs to show increased leadership by solidifying his pledge towards consummate austerity in an effort to improve his country's finances. Financial markets have recently taken notice of these negative developments. Investors knew that the jobs report wouldn't be pretty, however, yesterday's large selloff was actually due to renewed euro zone jitters. If the Eurozone does blowup, all bets are off.
To sum up today's mass bank lawsuit news: first the taxpayers were asked to save Freddie and Fannie, then they were asked to save the banks, now when it is politically expedient to do so, the first entity which is still being saved ($200B of taxpayer funded capital injections later) is suing the second saved entity. In the interim, on a day when job growth in this country was essentially ZERO, we are going to lose another 30,000 private sector jobs. Finally, it is worth mentioning that these lawsuits are suggesting that Fannie Mae and Freddie Mac were semi-clueless when it came to the mortgage securitization process. Something that may be a tad difficult to prove given that they were major players in the mortgage markets. If readers are confused, they are not alone.
Because this time is never different...
We end this busy day of economic buffoonery with Goldman's scorecard for August ("the US economy has not fallen off a cliff", which we translate as a B+, and "far better than expected"), which in turn explains why Goldman, and everyone else, now assumes QE3 (yes, Op Twist is QE3; get over it) is not only a given, but why in Goldman's esteemed opinion, the Fed has at least 3 rationales for pushing for more QEasing. Incidentally, these are as follows: "First, unemployment is far above the Fed’s long-term forecast in the low 5% range; the longer high unemployment persists, the greater the risk that an erosion of skills and labor force attachment will result in permanent supply-side damage. Second, economic growth has been woeful this year and there is no convincing sign of the second-half pickup in growth that the majority of Fed officials seem to expect. The payroll report in particular will weigh heavily in the minds of many Federal Open Market Committee members. Third, there is limited prospect for near-term fiscal stimulus from a gridlocked Washington." The only thing Goldman is avoiding, of course, is the wipe out in stocks that will make QE3 a virtual certainty, as we have been predicting ever since March. Goldman is also avoiding to mention that the only outcome of more QE will be another record year of Wall Street bonuses, all at the expense of more joblessness, higher gas prices, a 120% debt/GDP ratio, and overall sovereign insolvency. Oh well - in the meantime we continue, as we have for the past 2.5 years, to buy gold... or spam for the Econ PhDs out there.
Goldman's Dan "Shitty Deal" Sparks Sued For Selling “Junk,” “Dogs,” “Big old lemons,” and “Monstrosities”Submitted by Tyler Durden on 09/02/2011 - 17:50
While the FHFA has targeted lawsuits at a whole bunch of employees of the 17 banks previously disclosed, nothing gives us as much amusement and frankly pleasure, as the fact that Goldman's definition of smugness - one Dan Sparks of "shitty deal" fame, is among the accused. Perhaps, even in uber crony communist America, what goes around eventually comes around. Now, if only someone can figure out how Warren Buffett's Wells Fargo, with its several hundred billion worth of Wachovia toxic biohazard, is not on the list of defendants...
Two weeks ago we had a "bear market" open thread in which we lamented the arrival of the recession, or the resumption of the depression, depending on one's proclivity for dramatic flair. It took the rest of the world about two weeks to catch up to what our commentators already knew. Today, in turn, we want to celebrate a peaceful, calm, (lack of) labor day holiday following which we are positive the markets will reopen calmly, in an orderly manner, with modest volume, declining 3M USD Libor, a collapse in the Libor OIS and with no invocation of Rule 48 whatsoever, by opening it up to our readers' very cool, calm, collected and politically correct stream of consciousness.
FHFA goes hog wild and potentially full retard in suing everyone, or specifically 17 global banks, up to an including such dead men walking as Barclays, RBS and SocGen. Oddly such crony capitalist favorites as Wells Fargo are suspiciously absent: we wonder what the cost of that particular Eureka moment was to the interested party. Either way, come Monday, this will get interesting when already scarce liquidity goes... poof. Full statement is below, while the link to all the individual law suits is here.
Remember when one month ago the US, to much pomp and circumstance, not to mention one downgrade, announced a grand bargain raising the debt ceiling from $14.294 trillion to something much higher, with a stop gap intermediate ceiling of $14.694 trillion, or $400 billion more. Well, as of today, or less than a month since the expansion, total US debt is at $14.697 trillion. Yep - the total debt is again over the ceiling, which means the US debt increased by $400 billion in one month. Score one for fiscal prudence. And while the total debt subject to the limit is still slightly less, at $14.652, one week of Treasury auctions and will be time for Moody's to justify again why the US is a quadruple A credit.
And so it begins:
- FHFA Sues Barclays over mortgage securities over losses for $4.9 billion: RTRS
- FHFA Sues Merrill Lynch Bank of Americal over mortgage securities over losses for $30.85 billion: RTRS
Put a fork in Bank of Countrywide Lynch.
Trust Bloomberg's Jonathan Weil to put two and two together, and to remember that everything new is just well forgotten old. In this case Bank of America. And we are not talking comparisons to Lehman (or even SocGen) - those are boring. No, it is much more fun to compare the insolvent bank to another world con, in this case WorldCom. As Weil reminds us, the news that Moynihan's last stand was considering a tracking stock reported earlier by the WSJ, as a means to demonstrate to the Fed its "viability", is nothing short of the comparison of WorldCom's last ditch in kind method, which none other than a WorldCom director likened to, well, horseshit.
In America, in the midst of economic crisis and government driven moral hazard, millions of people are scrambling for “solutions”. The term is used rather haphazardly and often without proper context. There are, indeed, very evil men out there in the dark precipices of global infrastructure, and, these men often instigate very bad events. However, “doing away with them” is NOT a solution. It is NOT a plan. It is merely a goal. A solution requires more than an end result; it also involves the steps necessary to achieve said result. The Liberty Movement, as it is commonly called, tends to run into so much frustration and angst, I believe, because it consistently attempts to skip to the end of the story without traveling the rest of the very necessary journey. End the Fed! Sue the Fed! March on Washington! Vote the bums out! Take up arms! These are not actions, but reactions triggered by the confusion of the moment. Not only are they single minded responses that lack the strategy and logistics inherent in a successful counter-offensive, but such cries ignore the other devious culprit responsible for our national heartache; ourselves. Yes, the world must change, and soon, if our principles are to survive. But, for this to happen, we must change first. Instead of looking up, down, and all around us for some magical all encompassing answer, we have to question our very assumptions and world views.