Saturday, March 6, 2010

March 6.10 commentary

Good morning to all:
Before going into the regular commentary, there were 4 bank failures last night:

Bank Name




Closing Date


Bank of Illinois Normal IL 9268 March 5, 2010
Centennial Bank Ogden UT 34430 March 5, 2010
Sun American Bank Boca Raton FL 27126 March 5, 2010
Waterfield Bank Germantown MD 34976 March 5, 2010
We will know details on Monday as to the loss to the FDIC.  As of Dec 31.09, the FDIC was in the hole to the tune of 20.9 billion dollars.
They also stated that over 710 banks were still in trouble.  It looks like the FDIC will bring down at least 4 banks per week except on
holiday weekends when they are spared the hatchet job.
Gold closed up by $2.20 to 1134.80.  Silver rose by 20 cents to 17.36.
Silver seems to be trading differently than gold.  This metal is trying to break itself from the iron chains  of the banker cartel.
First of all, the CFTC erred in giving its OI on Thursday.  The correct total was 10,000 less at 487651.  They incorrectly gave the totals
at 497651.
The OI announced Friday that the banker-cartel are resolute in their handling of the paper gold.  The OI rose again another 7202 contracts
and the new corrrected level stands at 494853
The silver OI rose by another780 contracts to 110,698.
The committment of traders released at 4 pm showed the difference between gold and silver with the bankers showing alarm and unwilling to supply
paper silver.  Not so in gold.
Here is the report:

The Silver Commitment of Traders report showed that as of last Tuesday…

*The large specs increased their longs by 1,226 contracts and decreased shorts by 2,016.

*The commercials reduced longs by 5,494 contracts and reduced shorts by 4,324.

*The small specs reduced longs by 1,416 contracts and increased shorts by 656.

In gold…

*The large specs increased longs by 6,659 contracts and reduced shorts by –91.

*The commercials increased longs by 4,164 contracts and beefed up their shorts by 17,657.

*The small specs increased longs by 47 contracts and reduced shorts by 6,696.






Note"  in silver we saw the long specs increase their positions by 1226 contracts and remove some of their shorts by 2000 contracts.

The commercials were basically balanced:  reducing their longs but also their shorts by almost equal amts.

The small specs have vacated the arena.


But look at gold.  The large specs fiercely attacked by increasing their longs by 6659 contracts. The large specs are not going short on

gold .Look what the commercials did:  they increased their short position by a mammoth 17657 contracts.  The small specs have vacated the short arena.


The large increase in gold short is JPMorgan and HSBC.


Over at the inventory pits:  another revealing day!!


Here is the inventory for both gold and silver:


COMEX Warehouse Stocks Mar 5, 2010


ZERO ozs withdrawn from the dealer's (registered) inventory 
252,852 ozs withdrawn from the customer (eligible) inventory 
Total dealer inventory 49.51 Mozs 
Total customer inventory 61.42 Mozs 
Combined Total 110.93 Mozs


ZERO ozs withdrawn from the dealers (registered) category 
965 ozs deposited in the customer (eligible) category 
Total dealer inventory 1.63 Mozs 
Total customer inventory 8.34 Mozs 
Combined Total 9.97 Mozs


Note 1:  The month of March is a delivery month for silver.  We have a huge amt of silver standing and it is quite alarming to see no silver leave the dealers inventory.

Note2:   It is even more alarming to see another 252852 oz leave the customer inventory.  They are certainly scared of something. The customer inventory is at an alltime low of 61.41 million oz

             The dealer inventory sits at 49.5 million oz.  However 22 million oz seeks the silvery metal.


OK lets see what happened with the silver deliveries:


There were 213 delivery notices issued in the MAR silver contract. The total delivery notices for the month in silver stand at 2,883 or 14.4 Mozs. JPM issued 129 and stopped 69, BNS issued 0 and stopped123, while Deutche Bank issued 0 and stopped 5.



Note No 3:  there were 213 notices issued in the march silver contract.  Notice that JPMorgan issued the majority with the Bank of Nova Scotia the receiver of those contracts along with JPMorgan.

                 The total no of notices issued now stand at 2883 or 2883 x 5000 oz per contract or 14.4 million oz of silver.


No 4:         The options exercised on the Feb silver remain at 4.6 million oz of silver.  These contracts get delivered upon in March as Feb is a non delivery month.


and lets see what remains to be served:


The open interest in the MAR gold contract INCREASED for a third straight day by 18 contracts to 273, in silver it also INCREASED to 650 which is a 16 contract increase from the prior session; someone wants physical metal immediately. 


Note:  5:     In silver the OI strangely increased back up to 650 contracts or 3.25 million oz of silver remain to be serviced upon.


Thus the total amount of silver standing for real metal in March (we do not know how much was settled for cash) is:


14.4 million plus 4.6 million plus 3.25 million which equals   22.25 million oz.


By golly, our missing 1 million oz of silver reappears.

There is no doubt that the cartel bankers are having their hands full with the silver delivery.


This is Adrian Douglas' comments on the lack of movement in the silver dealer inventory:


The open interest in the MAR gold contract INCREASED for a third straight day by 18 contracts to 273, in silver it also INCREASED to 650 which is a 16 contract increase from the prior session; someone wants physical metal immediately. 


As for gold, these are all options exercised for real metal.  So far  it looks like 42100 oz or 1.33 tonnes of physical gold are standing in a non delivery month of March. This is relatively high.





OK lets go to the economy:


Yesterday we saw the release of the  jobs number and it showed a drop of 36000 workers.  They claimed the weather for the loss of workers.

This figure also shows a net gain of 15000 censor workers who has since been let go.


The shadowgovernment stats by John Williams shows that U6 which is a measure of the employed plus underemployed rose from 16.5% to 16.8%.

These are real government figures.  In the 1990's the government used u6 as their measure of unemployed.  Now they use the U3 which eliminates temporary discouraged

unemployed or underemployed.

The shadowstats number for the permanent unemployed or underemployed rose to 21.6%.  Here is this report:


No. 284: February Employment and Unemployment "

- Payroll Drop of 36,000 was 51,000 Net of Census Hiring  
- Broader February Unemployment Measures Rose:  
U.6 at 16.8% (up 0.3%), SGS at 21.6% (up 0.4%)  
- Economy Remains Headed into Deepening Downturn

To all of you who desire to look at government stats, there is a look at their various levels of employment.
The latter is the U6:

Economic News Release 
Current Employment Statistics – CES (National)

Table A-15. Alternative measures of labor underutilization

Table A-15. Alternative measures of labor underutilization Percent


Not seasonally adjusted

Seasonally adjusted










U-1 Persons unemployed 15 weeks or longer, as a percent of the civilian labor force










U-2 Job losers and persons who completed temporary jobs, as a percent of the civilian labor force










U-3 Total unemployed, as a percent of the civilian labor force (official unemployment rate)










U-4 Total unemployed plus discouraged workers, as a percent of the civilian labor force plus discouraged workers










U-5 Total unemployed, plus discouraged workers, plus all other persons marginally attached to the labor force, as a percent of the civilian labor force plus all persons marginally attached to the labor force










U-6 Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force










NOTE: Persons marginally attached to the labor force are those who currently are neither working nor looking for work but indicate that they want and are available for a job and have looked for work sometime in the past 12 months. Discouraged workers, a subset of the marginally attached, have given a job-market related reason for not currently looking for work. Persons employed part time for economic reasons are those who want and are available for full-time work but have had to settle for a part-time schedule. Updated population controls are introduced annually with the release of January data.


Here is the complete story on the BLS on the jobs picture as reported by them:

08:30 Feb average hourly earnings 0.1% vs. consensus 0.2%; average weekly hours 33.8vs. consensus 33.7
Jan average hourly earnings unrevised from 0.2%; average weekly hours unrevised from 33.9 
* * * * *

08:38 Follow-up: February nonfarm payrolls (36K)
Some notable trends in the numbers:

•Average hours worked fell one tenth to 33.8 hours, which may have been impacted by the 1M people that the BLS said missed some work due to weather (vs 290K on average in February).
•Manufacturing payrolls rose 1K, the second straight increase.
•Construction payrolls continued to fall, falling 64K after a 77K decline in January, though weather may well have been a factor.
•Service payrolls rose 42K, led once again by temp help, which rose 48K. The temp category has been the strongest in recent months, averaging a 57K monthly gain over the past five months of increases.
•In the notoriously volatile household survey, the labor force rose 342K and employment rose 308K, leaving the unemployment rate unchanged at 9.7%. 
* * * * *

Feb payrolls fall 36,000, weather impact unclear

WASHINGTON (Reuters) - U.S. employers cut a smaller than expected 36,000 jobs in February, leaving the unemployment rate unchanged at 9.7 percent, according to a government report on Friday which said it was unclear how severe weather had impacted payrolls.

The Labor Department said job losses for December and January had been revised to show 35,000 fewer jobs lost than previously reported.

Analysts polled by Reuters had expected non-farm payrolls to drop 50,000 last month and the unemployment rate to edge up to 9.8 percent. The median forecast from the 20 most accurate forecasters also saw payrolls falling by 50,000, while the 10 most accurate economists predicted a 70,000 decline.

Analysts had feared that the heavy snowstorms that hit large areas of the United States during the survey week for the employment report would cause a huge drop in payrolls.

However, the Labor Department said while the winter storms might have affected payrolls, it was difficult to quantify the net impact on employment.

"Nor do we know how new hiring or separations were affected by the weather. For those reasons, we cannot say how much February's payroll employment was affected by the severe weather," said Bureau of Labor Statistics Commissioner Keith Hall.

Unemployment is one of the toughest challenges facing President Barack Obama, whose approval ratings have dropped.

Obama and fellow Democrats worry voters could punish them in November congressional elections if no progress is made in putting Americans back to work as the economy emerges from its worst downturn since the 1930s. Since the start of the recession, 8.36 million jobs have been lost.

The labor market is gradually improving and the pace of layoffs has slowed markedly from early last year when the economy was losing 750,000 jobs on average a month.

Manufacturing added 1,000 jobs in February, but construction payrolls fell 64,000 jobs. Temporary hiring added 48,000.

The average workweek for all employees slipped to 33.8 hours from 33.9 hours in January.


U.S. staffing execs: Don't bet on fast recovery

* Temp jobs up 48,000 in February 
* Staffing execs: bigger temp job gains likely ahead 
* Employers still cautious about recovery 
* Shares of staffing companies rise

NEW YORK, March 5 (Reuters) - The temporary help sector continued to add jobs in February, a potential sign of an imminent recovery in hiring, but the pace of growth is not yet strong enough to eliminate the possibility of a double-dip recession.

Staffing industry executives say demand for temporary workers is broadening and they expect temp hiring to accelerate in coming months. But they caution that headline job numbers may not show growth until the second half of the year, and even then hiring is likely to be up gradually.

Last month, fewer jobs than expected were lost outside the farm sector, down 36,000, and the unemployment rate held steady at 9.7 percent. The temporary help services sector added 48,000 jobs in February, after adding 50,000 jobs in both January and December…




OK lets go to other important economic stories.


I have received quite a few comments on the March 25.10 hearing at the CFTC on gold and silver. The format for the hearing is rather unusual.  We were asked to issue letters in a formal complaint form

and the letter should not be longer than 5 minutes.  These complaints are to be part of the public record and read to the commission and then be answered.  They would then make decisions based on their findings.

We are asking that position limits be placed on the precious metals on both the long end and the short end.  If JPMorgan could no longer supply paper because they do not have any gold or silver backing their paper shorts, the game would rapidly come to an end and gold and silver will rocket northbound.

There is also the issue of silver.  JPMorgan, by far the most massive short in the silver arena with a supporting role by HSBC sold 25% of worldly production in 2008. This short was caught in the Banking Participation Report.  The BIS, or the Bank of International Settlements, uses this report to ascertain risks to the banking community of failure to deliver or default.  They never look at private parties, only risks to their banker friends.  The BIS is really the central banker to all central banks.

Thus, if the BIS reports on the risk to the bankers on silver, there is no corresponding long anywhere as they measure risk on a global scale on all major banks.

This is why the argument that JPMorgan could have a hedge or ownership of a huge amount of silver over in England. It is so foolhardy for the CFTC to suggest to me and others that these guys may have an

offsetting long position in other jurisdictions.  The data just does not hold any water.  Besides, the regulators can just ask  the banks for proof that they are the beneficials owners of a hedge across the pond.

They refuse to ask them these pertinent questions.

These will be the questions that will be asked on March 25.10.  It is also interesting to see that Obama is asking for the Volcker rule or that bankers that take deposits from customers to stop trading for their own accounts.  If the Volcker rule would be implemented, JPMorgan would default and go into bankruptcy along with Citibank and Wells Fargo.


Here is Bill Murphy of on the hearing on the 25th of March:


The CFTC is supposed to have position limit hearings on March 25. The drill is to send them a letter, around five minutes in length, and with a request to read the letter to those on the CFTC panel … after which they will respond with questions. The letter will be a matter of public record no matter what. Whether the CFTC will allow me, and hopefully Adrian Douglas, to make a presentation is up to them. Regardless, CafĂ© members, and everyone else we can get the letter in front of, will know what was presented to CFTC chairman, Gary Gensler.


I found this commentary from the Gartman Letter very intriguing from the standpoint of gold:


This morning The Gartman Letter reported a gold-friendly story from a source: oil producer in [the Middle East] is converting about 200,000 BPD of oil sales into gold bullion - this offtake would equal about 6% of annual gold production

Generally, the TGL stance is that capital, quite likely official, is moving from Euros and the Dollar, with some of it going into gold. It is a perception which has served TGL well.


This man is very well informed by the banking cartel et al. You must take this news as serious.  Private Arab holders of oil are wishing to take oil money and put it into gold and take 6% of world production or

144 tonnes of gold.


Looks like we have 4 major players seeking gold:

1.  the Arab oil sheiks

2. the Chinese

3. the Russians

4. Eric Sprott


As always, I give you a little news on individual states in the usa and see how they are faring in this economy: (from

Idaho, NC and Florida budget headlines:

Idaho tax revenue is $41M behind estimates

North Carolina tax collections down $35M as consumers cut spending

Florida's budget gap could be as high as $3.2 billion



Note:  the huge budget gap in Florida at 3.2 billion dollars




Nobel Prize winner Joseph Sitglitz blasted the Fed as being corrupt yesterday.

from the Huffington post:


Stiglitz, Nobel Prize Winning Economist Says "The Fed is Corrupt" of the world's leading economists said Wednesday that the very structure of the Federal Reserve system is so fraught with conflicts that it's "corrupt."

Nobel laureate Joseph Stiglitz, a former chief economist at the World Bank, said that if a country had applied for World Bank aid during his tenure, with a financial regulatory system similar to the Federal Reserve's -- in which regional Feds are partly governed by the very banks they're supposed to police -- it would have raised alarms.

"If we had seen a governance structure that corresponds to our Federal Reserve system, we would have been yelling and screaming and saying that country does not deserve any assistance, this is a corrupt governing structure," Stiglitz said during a conference on financial reform in New York. "It's time for us to reflect on our own structure today, and to say there are parts that can be improved."

Stiglitz made the remarks at a conference held by the Roosevelt Institute. He and other speakers, including Harvard Law Professor and federal bailout watchdog Elizabeth Warren and legendary investor George Soros, had bold ideas about reforming the nation's financial system.

After the conference, Stiglitz said that his remarks on the Fed were "maybe a little hyperbole," but then again made the case that if another country had presented a plan to reform its financial system, and included a regulatory regime that copied the makeup of the Federal Reserve system, "it would have been a big signal that something is wrong."

To Stiglitz, the core issue is that regional Fed banks, such as the New York Fed, have clear conflicts of interest -- a result of the banks being partly governed by a board of directors that includes officers of the very banks they're supposed to be overseeing.The New York Fed, which was led by current Treasury Secretary Timothy Geithner during the time leading Wall Street firms like Citigroup, JPMorgan Chase, AIG, and Goldman Sachs were given hundreds of billions of dollars in taxpayer bailouts, presently has on its board of directors Jamie Dimon, the head of JPMorgan Chase. He's been there for three years. He replaced former Citigroup chairman Sanford "Sandy" Weill."So, these are the guys who appointed the guy who bailed them out," Stiglitz said. "Is that a conflict of interest?" he asked rhetorically."They would say, 'no conflict of interest, we were just doing our job,'" he answered. "But you have to look at the conflicts of interest."

A message left for a New York Fed spokeswoman after regular business hours was not returned.

"The reason you talk about governance is because in a democracy you want people to have confidence," Stiglitz said. "This is a structure that will undermine confidence in a democracy."




Fannie Mae and Freddie Mac are getting into the picture yesterday.  First these two entities are demanding a return of 21 billion of faulty mortgages back to JPMorgan, Citibank and Wells Fargo.

The Europeans are demanding that the Government put the liabilities of Fannie and Freddie are their balance sheet, a move that they do not wish to do as this would add 6 trillion dollars to their debt limit

and this would bring them debt/GDP limit as 125%.  Here are two stories on this issue:


First from Bill Holter:


Barney Frank/Fannie Mae

To all; Uh oh, Barney Frank just opened his mouth regarding Fannie Mae and Freddie Mac! He previously said back in Jan. that his committee would recommend abolishing Fannie Mae but today he says that Fannie and Freddie have "explicit" government guarantees. What happened to change his mind? Did somebody actually have the nerve to question the financial position of these 2 government agencies? Something is obviously happening behind the scenes otherwise Mr. Frank would have no need to "re"state or confirm what is already known to be policy.

I wrote late in 2008 that the Treasury would have to have $5-6 trillion added to the balance sheet. It never has been. But if there is a global pissing match going on behind the scenes I would imagine some sovereign nation may have just brought up this little detail and asked why we don't show these liabilities on the balance! If I am correct in this assumption then you could say "Houston, we have a problem"! The addition of $6 trillion to the Treasury's balance sheet will bring the debt/GDP ratio close to 125% which people will howl about. This is meaningless because in reality there is at least another $50-60 trillion that needs to be added onto the books. It looks to me like someone somewhere is stirring up the pot!

This is BAD because the U.S. surely doesn't want anybody looking under the hood for fear what they might find. I obviously don't know for sure but this certainly has the potential to point the hedge fund and speculative canons in the direction of the Dollar. We must monitor closely now because if the questions begin to grow we could have a 1 to 2 week event that changes EVERYTHING we know and have learned. Call me paranoid but Barney Frank did not speak about Fannie and Freddie to hear himself talk, something is happening. Have a nice weekend and stay alert! Regards, Bill H.


and then this story on the faulty 21 billion mortgages:( from Bloomberg)


Fannie, Freddie Ask Banks to Eat Soured Mortgages (Update1) 
By Bradley Keoun

March 5 (Bloomberg) — Fannie Mae and Freddie Mac may force lenders including Bank of America Corp., JPMorgan Chase & Co., Wells Fargo & Co.and Citigroup Inc. to buy back $21 billion of home loans this year as part of a crackdown on faulty mortgages.

That's the estimate of Oppenheimer & Co. analyst Chris Kotowski, who says U.S. banks could suffer losses of $7 billion this year when those loans are returned and get marked down to their true value. Fannie Mae and Freddie Mac, both controlled by the U.S. government, stuck the four biggest U.S. banks with losses of about $5 billion on buybacks in 2009, according to company filings made in the past two weeks.

The surge shows lenders are still paying the price for lax standards three years after mortgage markets collapsed under record defaults. Fannie Mae and Freddie Mac are looking for more faulty loans to return after suffering $202 billion of losses since 2007, and banks may have to go along, since the two U.S.- owned firms now buy at least 70 percent of new mortgages.

"If you want to originate mortgages and keep that pipeline running, you have to deal with the push-backs," said Paul Miller, an analyst at FBR Capital Markets in Arlington, Virginia, and former examiner for the Federal Reserve. "It doesn't matter how much you hate Fannie and Freddie."

Freddie Mac forced lenders to buy back $4.1 billion of mortgages last year, almost triple the amount in 2008, according to a Feb. 26 filing. As of Dec. 31, Freddie Mac had another $4 billion outstanding loan-purchase demands that lenders had not met, according to the filing. Fannie Mae didn't disclose the amount of its loan-repurchase demands. Both firms were seized by the government in 2008 to stave off their collapse.


Jim Sinclair comments on the above:

Jim Sinclair's Commentary

Note the comments in this article regarding bank losses when given TRUE value. That implies Freddie and Fanny are not giving a market value to these loans that either failed or are improperly written.

How about this story on the FHA underscoring risks:

if FASB blesses lies concerning the inventory of banks and financial institutions why should the FHA tells the truth?

FHA understates risk exposure. 
The Federal Housing Administration has understated how much risk it has taken on, according to a group of economists from the New York Federal Reserve and New York University. The FHA is overlooking factors that could signal higher losses, said the group, making it more likely that the agency will have to ask for taxpayer funds. As many as 40% of FHA-insured mortgages are worth more than the homes that secure them, and as many as 14% of the mortgages may be for more than 115% of the home's value. The FHA's calculations put the latter figure at 6%.

On the international front, here are 4 stories that kind of give the flavour of the day:
First Moody's lowers the credit rating on Abu Dhabi bonds:

Moody's Cuts Ratings On Seven Abu Dhabi Companies. Moody's Investors Service Inc. Thursday downgraded the ratings of seven Abu Dhabi-based companies by a notch or more saying there's "no explicit formal" government guarantee to support them, after being prompted to put them on review in December because of restructuring at Dubai World. In an emailed statement, Moody's said it lowered Mubadala , or Taqa; Emirates Telecommunications Co., or Etisalat; Dolphin Energy; and Aldar Properties. The rating on Aldar, Abu Dhabi's largest developer, moved from investment grade to speculative grade, or junk.

Abu Dhabi stands by state firms. The government of Abu Dhabi yesterday said it would continue to support government-owned business entities despite a downgrading by credit rating agency Moody's. Moody's yesterday said it has downgraded seven Abu Dhabi government-owned issuers. "We obviously disagree with the reasoning involved in a number of Moody's decisions, especially those concerning TDIC [Tourism Development and Investment Company], Mubadala, and Ipic [International Petroleum Investment Company]," Hamad Al Hurr Al Suwaidi, Undersecretary of Abu Dhabi's Department of Finance, said in a statement last evening. He asserted that there has been absolutely no change in any aspect of government support for those three companies. He also reiterated that the government continues to support Taqa. "The three companies — TDIC, Mubadala, and Ipic — are 100 per cent government-owned and play a crucial role in the government's strategy for diversifying the economy. They are irreplaceable," he said.

The second story comes from Argentina where a judge blocked the President from using foreign bonds to shore up the country's finances: (the bonds collapsed yesterday, with a new yield of 14.31%.
Argentina will collapse with yields this high!!

Argentine Bonds Drop as Judge Blocks Fernandez's Reserves Bid. Argentine bonds fell for the first time in seven days after a federal judge blocked President Cristina Fernandez de Kirchner's decree authorizing the use of foreign reserves to pay debt. The yield on the South American country's 7 percent dollar bonds due in 2015 climbed 64 basis points, or 0.64 percentage point, to 14.31 percent at 4:46 p.m. New York time, according to JPMorgan Chase & Co. The bond's price slid 1.95 cents to 75.6 cents on the dollar.


The third story from Venezuela who is seeking to raise the value of its plummeting bolivar:


Venezuela launches $50 mln bond to prop bolivar. Venezuela's Central Bank on Thursday launched a $50 million bond, the seventh such offering aimed at propping up the bolivar on a freely floated, semi-legal market since a currency devaluation in January. The zero coupon bond is priced at 112 percent and works as a foreign exchange instrument because it can be purchased at an official rate of 4.3 bolivars to the dollar but will be paid in dollars after 90 days. It can be traded on secondary markets within Venezuela.


Over in Greece, we are seeing massive protests on the threat of budget cutting by the Greek government:


Violent protests hit Greece as German backing sought 
Mar 5 10:03 AM US/Eastern

Greek police clashed with demonstrators protesting sweeping budget cuts Friday as the government sought support from Germany to help it avoid default, only to be told not to expect a single cent.

Police fired tear gas after a union leader was struck and hurt by youths, an AFP reporter on the scene said, during protests against sweeping new budget and spending cuts announced Wednesday.

The violence erupted as Greek Prime Minister George Papandreou was to meet German Chancellor Angela Merkel later Friday, with Germany critical to any eurozone effort to help Greece restore its market credibility and already signalling it was not prepared to offer financial assistance.

Parliament meanwhile approved the budget and spending cuts worth 4.8 billion euros (6.5 billion dollars) announced by Papandreou on Wednesday as he sought to secure EU backing.

Papandreou told Germany's Frankfurter Allgemeine newspaper he was "not asking for money" but other forms of support.






Looks like the Aloha state has some problems with the auction rate bonds that went sour last year.  The bankers have left this state in trouble:


Citigroup's Auction-Rate Bonds Freeze $1 Billion in Hawaii Cash 
By Christopher Palmeri

March 4 (Bloomberg) — Two years after the auction-rate bond market froze, Hawaii has lost about $250 million in market value on $1 billion in student-loan securities sold by a single Citigroup Inc. broker as a cash substitute that the state has had difficulty unloading.

Hawaii purchased half of the securities for its short-term treasury account from Honolulu broker Pete Thompson, 60, in the eight months before the market collapsed, according to Scott Kami, an administrator at the state finance department.

The transactions came while Citigroup was increasing brokerage commissions and traders were being told to "make sure all hands are on deck" and "do whatever is necessary" to dispose of auction-rate bonds as the $330 billion market began to fail, according to a 2008 U.S. Securities and Exchange Commission complaint against the New York-based bank in a separate case related to sales of the debt.

"I was shocked," state Representative Karl Rhoads said of his reaction when a constituent informed him last year that Hawaii was stuck with the auction-rate securities. "I didn't believe it. We're a small state, only 1.3 million people," Rhoads said in a telephone interview.

Hawaii's frozen-cash crunch complicates efforts by Governor Linda Lingle, 56, to close a $1.2 billion budget deficit as tourism revenue has fallen during the worst recession since the 1930s. She has proposed eliminating 800 state jobs, with teachers being told to stay home without pay for 17 days from November 2009 to May of this year.



Dan Norcini on thie Hawaiian problem with respect to the Citigroup auction rate mess:

"Hawaii last year rejected as "sorely lacking" an offer by Citigroup to buy the $1.1 billion in securities at an unspecified discount, according to Randall Nishiyama, Hawaii's deputy attorney general. The bank also offered to lend the state as much as $572 million at 3.85 percentage points above the federal funds rate, according to a loan term sheet obtained by Bloomberg News.,

Federal funds, which are the cost of overnight loans between banks, were quoted at 0.16 percent yesterday, less than a 10th of what the bonds Thompson sold are generating for the state in interest. Hawaii is earning 1.8 percent on the debt, which continues to pay interest despite the decline in market value, Kami said."

Here is another article showing the next victim for the vultures will be England:

Speculators Eye Next Prey 
How Safe Is Britain's Proud Pound? 
By Carsten Volkery in London

First the euro, now the pound. Britain's currency is coming under massive pressure as speculators bet that the UK's national debt will soon get out of hand. Like Athens, London has its share of problems — and the Brits don't have any euro zone partners to back them up.

Schadenfreude may be a German word, but it has never been a foreign concept in Great Britain — particularly in recent months as the British watch the trials and tribulations of the European common currency, the euro. The budgetary and debt problems facing Greece, Portugal, Italy, Ireland and Spain have merely reinforced their conviction that staying out of the euro zone was the right decision. Unlike Berlin, London is not under pressure to come to the aid of Athens.

But speculators have not just taken aim at the euro in recent days. The British pound, too, has become a favored target — showing Brits how vulnerable their own currency may actually be. At the beginning of the week, the pound slid to a 10-month low of just $1.4781. Since then, the pound has staged a mini-recovery, moving back above $1.50 on Wednesday. But market pressure on the British currency is not likely to disappear overnight.

Alarm on the Markets

The most immediate trigger for the recent currency swoon came in the form of political surveys which indicated that a Conservative victory in general elections (which will likely be held in early May) may not be a foregone conclusion. Markets were alarmed out of fear that a close election could make it difficult for parliament to pass a strict package of savings measures.


This peice of news came late in the day from Bloomberg:
Obama Spending Plan Underestimates Deficits, Budget Office Says

By Brian Faler

March 6 (Bloomberg) -- President Barack Obama's budget proposal would create bigger deficits than advertised every year of the next decade, with the shortfalls totaling $1.2 trillion more than the administration projected, according to theCongressional Budget Office.

The nonpartisan agency said yesterday the deficit will remain above 4 percent of the nation's gross domestic product for the foreseeable future while the publicly held debt will zoom to $20.3 trillion, amounting to 90 percent of GDP by 2020. By then, interest payments on the debt will have quadrupled to more than $900 billion annually, the report said.

Deficits between 2011 and 2020 would total $9.76 trillion, the CBO said.

Economists generally consider deficits topping 3 percent of GDP to be unsustainable because that means government debt is growing faster than the ability to pay back the money.

"The news today from CBO is clear: The president's budget will continue to lead our nation into a fiscal catastrophe -- an ever worse one than the president's own numbers suggest," Representative Paul Ryan of Wisconsin, the top Republican on the House Budget Committee, said yesterday.

White House Office of Management and Budget spokesman Kenneth Baer said the report "highlights how sensitive and uncertain budget projections are."

Baer also said, "What is certain is that the irresponsibility of the past put the country on an unsustainable fiscal trajectory."

Independent View

The CBO report is designed to give Congress an independent assessment of the administration's budget request. The difference between the two outlooks is largely attributable to varying economic assumptions that affect projections of how quickly tax revenues will pour into the Treasury.

Revenues will be about $2 trillion less than the administration projects, while spending will be lower by about $600 billion, according to the CBO report.

The administration projected last month the deficit would shrink to as low as 3.6 percent of GDP, with the 10-year shortfall totaling $8.5 trillion. It foresees the debt growing to 77 percent of GDP in 2020.

The deficit for the 2010 fiscal year has been projected to be $1.6 trillion, a record. Obama last month established an 18- member bipartisan panel to suggest to Congress steps that would reduce the shortfalls.

To contact the reporter on this story: Brian Faler in Washington

Last Updated: March 6, 2010 00:00 EST 
I wish everyone a grand weekend.  Before leaving, on a personal note, I wish to announce the safe arrival of our new granddaughter, Eden Lily, born to our children Dani and Aaron.
The baby came into the world at 7 lbs 5 oz yesterday morning.  Mother and Eden are doing just fine.  Father is still recouperating from all the excitement and the long arduous delivery process.
Enjoy your weekend

Search This Blog