Thursday, November 18, 2010

Borders to close Santa Barbara store

National book retailer Borders is closing its downtown Santa Barbara store amid a nationwide wave of store closings.

Jason Roy, the general manager of the 900 State St. location, told the Business Times on Nov. 16 that the store would be closing in January.

“It’s sad that this Borders is leaving State Street,” said Roy, who’s been with the company for nine years, the past three months at the Santa Barbara location.

The store has about 35 employees, he said.

Although he wasn’t sure of the reasons behind the store’s closing, Roy said it is likely connected to an overall slowdown in the retail sector.

“In general if you walk State Street all the businesses are slow,” he said. “Walking it last night it was dead. I think it has to do with the economic times.”

The second-largest bookstore chain in the country behind Barnes & Noble, Borders has seen declining sales and profit margins for the past several years. The book retailer widened its losses to $46.7 million in the second quarter of the year as its second-quarter revenues dropped 6.8 percent.

The Michigan-based company has cut its store count by almost half in the past three years as it shutters underperforming U.S. locations and sells off international operations, Bloomberg News reported.

The building housing Borders’ Santa Barbara location was purchased in April by an affiliate of Santa Barbara-based real estate investment firm SIMA Corp. for $10 million, at the time the largest commercial real estate deal in downtown Santa Barbara in more than two years.

Borders has a long-term lease on the 38,000-square-foot, three-story building, but has notified the landlord that it has found another tenant to take the lease over, SIMA President Kevin Burnes told the Business Times on Nov. 16.

“We’re still very comfortable with our investment,” he said.

He would not say who the new tenant is. Roy said he doesn’t know who’s moving in to replace the bookstore, and Borders’ corporate media office did not immediately return a call seeking comment.

American Eagle Silver Uncirculated Coin

Production of United States Mint American Eagle Silver Uncirculated Coins continues to be temporarily suspended because of unprecedented demand for American Eagle Silver Bullion Coins. Until recently, all available silver bullion blanks were being allocated to the American Eagle Silver Bullion Coin Program, as the United States Mint is required by Public Law 99-61 to produce these coins “in quantities sufficient to meet public demand . . . .”

Although the demand for precious metal coins remains high, the increase in supply of planchets—coupled with a lower demand for bullion orders in August and September—allowed the United States Mint to meet public demand and shift some capacity to produce numismatic versions of the American Eagle One Ounce Silver Proof Coin.

However, because of the continued demand for American Eagle Silver Bullion Coins, 2010-dated American Eagle Silver Uncirculated Coins will not be produced.

The United States Mint will resume production of American Eagle Silver Uncirculated Coins once sufficient inventories of silver bullion blanks can be acquired to meet market demand for all three American Eagle Silver Coin products.

« TARP Watchdog November Report »

Kaufman delivers at the 1:20 mark. Start watching there.

Video: New TARP COP Sen. Ted Kaufman

Not quite the same as Elizabeth Warren delivering the monthly update...


Check out the TARP COP website

Examining the Consequences of Mortgage Irregularities for Financial Stability and Foreclosure Mitigation

Full report pdf is here...

The Congressional Oversight Panel's November oversight report, "Examining the Consequences of Mortgage Irregularities for Financial Stability and Foreclosure Mitigation," reviews allegations that companies servicing $6.4 trillion in American mortgages may in some cases have bypassed legally required steps to foreclose on a home. The implications of these irregularities remain unclear, but it is possible that "robo-signing" may have concealed deeper problems in the mortgage market that could potentially threaten financial stability and undermine foreclosure prevention efforts.

In the best-case scenario, concerns about mortgage documentation irregularities may prove overblown. In this view, which has been embraced by the financial industry, a handful of employees failed to follow procedures in signing foreclosure-related affidavits, but the facts underlying the affidavits are demonstrably accurate. Foreclosures could proceed as soon as the invalid affidavits are replaced with properly executed paperwork.

The worst-case scenario is considerably grimmer. In this view, which has been articulated by academics and homeowner advocates, the "robo-signing" of affidavits served to cover up the fact that loan servicers cannot demonstrate the facts required to conduct a lawful foreclosure. The risk stems from the possibility that the rapid growth of mortgage securitization in recent years may have outpaced the ability of the legal and financial system to track mortgage loan ownership. In essence, banks may be unable to prove that they own the mortgage loans they claim to own.

San Francisco Downgraded, Including Emergency Earthquake Bonds

Moody's has in one day downgraded the city of brotherly love and the city of same sex love, putting a kabosh on the Beatles theory that "all you need is love".

Moody's Investors Service has downgraded to Aa2 from Aa1 the rating on the City and County of San Francisco's General Obligation Bonds and assigned an Aa2 rating to the city's General Obligation Bonds (Earthquake Safety and Emergency Response Bonds, 2010) Series 2010.

Moody's also downgraded by one notch our ratings on the city's various general fund obligations, including its abatement leases and settlement obligation bonds.

Moody's said:
The downgrade primarily reflects the city's very narrow financial position and the minimal prospect of material improvement in the near term. The city ended fiscal 2009 with a balance sheet that was weaker than at any time in the prior ten years and extremely weak by comparison with other similarly rated local governments. Its fiscal 2010 and 2011 budgets both relied heavily on one-time solutions, including draws on reserves, to close sizable projected budget gaps, suggesting that final audited results will show little balance sheet improvement. The lackluster economy cannot be expected to provide substantial relief in the near term. Recent reports from the state confirm that its fiscal challenges continue to loom large, which in turn injects revenue risk into the city's current and next year budgets. The defeat in the election earlier this month of a local pension and health care cost control measure suggests that little near-term fiscal improvement is likely to result from external political pressure...The city's ratings continue to reflect its position as a large, world renowned city with a diverse economy and strong resident wealth levels. Its moderate debt burden, which is conservatively structured, is also incorporated into the ratings.

Bernanke's `Cheap Money' Stimulus Spurs Corporate Investment Outside U.S.

Southern Copper Corp., a Phoenix- based mining company that boasts some of the industry’s largest copper reserves, plans to invest $800 million this year in projects such as a new smelter and a more efficient natural-gas furnace.

Such spending sounds like just what the Federal Reserve had in mind in 2008 when it cut interest rates to near zero and started buying $1.7 trillion in securities to spur job growth. Yet Southern Copper, which raised $1.5 billion in an April debt offering, will use that money at its mines in Mexico and Peru, not the U.S., said Juan Rebolledo, spokesman for parent Grupo Mexico SAB de CV of Mexico City.

Southern Copper’s plans illustrate why the Fed’s second round of bond buying may not reduce unemployment, which has stalled near a 26-year high. Chairman Ben S. Bernanke and his colleagues appear to be fueling a foreign-investment surge, underscoring the difficulty of stimulating the economy through monetary policy with interest rates already near record lows.

“You’re seeing leakage from quantitative easing,” said Stephen Wood, chief market strategist for Russell Investments in New York, which has $140 billion under management. “That leakage is going into emerging markets, commodity-based economies, commodities themselves and non-U.S. opportunities.”

U.S. corporations have issued more than $1.07 trillion in debt so far this year, according to data compiled by Bloomberg. Foreign companies also are tapping U.S. markets for cheap cash, selling $605.9 billion in debt through Nov. 15 compared with $371.8 billion for all of 2007, before the Fed cut the overnight bank-lending rate to a range of zero to 0.25 percent.

Korea, Chinese Companies

Sinochem Group, the Beijing-based petroleum, fertilizer and chemicals producer, sold $2 billion of 10- and 30-year bonds on Nov. 4. Two days earlier, state-owned Korea National Oil Corp., based south of Seoul in Gyeonggi, sold $700 million of five-year senior unsecured notes, according to data compiled by Bloomberg.

Corporate cash sloshing across U.S. borders is an unavoidable consequence of the Fed’s low-rate strategy, Wood said. Export Development Canada, the government agency that provides financing help for Canadian exporters, last month tapped the U.S. market for $1 billion in 1.25 percent notes. Those funds also will be available to support companies’ domestic activities, following a two-year expansion of the agency’s mission in 2009 to help businesses navigate the credit crunch.

“I have begun to wonder if the monetary accommodation we have already engineered might even be working in the wrong places,” Richard Fisher, president of the Federal Reserve Bank of Dallas, said in an Oct. 19 speech.

Falling Yields

Average yields on corporate bonds in the U.S. fell to 4.4 percent on Nov. 4, the lowest on record, from 10.6 percent two years ago, according to Bank of America Merrill Lynch index data.

Fisher said “far too many” large corporations told him that “the most effective way to deploy cheap money raised in the current bond markets or in the form of loans from banks, beyond buying in stock or expanding dividends, is to invest it abroad.” He didn’t name the companies.

Cliffs Natural Resources Inc., North America’s largest iron-ore producer, said in March that it would use part of a $400 million offering to repay debt associated with a Brazilian mining project. The Cleveland-based company owns 30 percent of the Amapa iron-ore mine in northern Brazil.

Finance Merger

PepsiCo Inc., the world’s largest snack-food maker, raised $4.25 billion in a four-part January debt offering to finance a merger with its two largest bottlers. The Purchase, N.Y.,-based multinational acquired the outstanding stock it didn’t already own in Pepsi Bottling Group Inc., which has operations in the U.S. and six other countries, and PepsiAmericas Inc., which in 2009 had more than 30 percent of its assets in Eastern Europe.

The deals were “primarily about strengthening our beverage business in North America rather than overseas expansion,” said Jeff Dahncke, a Pepsico spokesman. Even so, the company plans to invest some of this year’s anticipated $125 million to $150 million pretax savings from the transactions in “high-growth emerging markets,” according to a March 1 press release.

U.S. corporations’ overseas investment in the first half of 2010 exceeded the amount that foreign firms spent in the U.S. on factories and acquisitions at an annual rate of almost $220 billion, according to the Commerce Department. In the first half of 2006, the last year before the financial crisis, the net flow favored the U.S. at an annual rate of about $30 billion.

Outbound Investment

More than half of outbound investment this year landed in Europe, Commerce data show. In April, Valmont Industries Inc., which manufactures light poles and communication towers, issued $300 million in 10-year notes. The Omaha-based company said it would use the proceeds to help fund its $439 million acquisition of Delta PLC, a London-based maker of similar products.

The acquisition would add “highly complementary businesses to our existing businesses and significantly expand our footprint outside the United States, in fast-growing Asian markets and Australia’s strong, resource-driven economy,” Valmont said in a regulatory filing.

Such capital flows may help the U.S. economy over time by weakening the dollar and boosting exports, according to Richard DeKaser, an economist with the Parthenon Group, a Boston-based consulting firm.

“This is not unusual,” he said. “It’s not weird. It’s an integral part of monetary policy.”

Matthew Slaughter, a management professor at Dartmouth University’s Tuck School of Business in Hanover, N.H., agrees that overseas investment may contribute to growth.

‘Support or Complement’

“When U.S. companies expand abroad, that tends to support or complement what they do in the U.S.,” said Slaughter, who served on the White House Council of Economic Advisers from 2005 until 2007.

“Our focus is on domestic policy,” Eric Rosengren, president of the Boston Fed, said in a Nov. 16 interview. “Maybe on the margins, some companies are going to borrow in the United States and decide to invest elsewhere, but I’m not sure that would be my primary concern.”

There’s no mystery behind corporations’ interest in foreign markets. As the U.S. struggles to recover from the deepest recession since World War II, business prospects in other countries are brighter. The International Monetary Fund predicts the U.S. economy will grow at an annual rate of 2.3 percent next year, compared with 9.6 percent in China, 8.4 percent in India and 6 percent in Chile.

‘We’re Excited’

Dell Inc., the world’s third-largest maker of personal computers, said in August that second-quarter revenue from the four so-called BRIC countries -- Brazil, China, India and Russia -- rose 52 percent, compared with a 22 percent overall increase. The company anticipates spending more than $100 billion in China during the next decade, and “we’re excited about our strategic investments” there, Chief Executive Officer Michael Dell said Sept. 16.

Plans include building a manufacturing and customer-support center in Chengdu, China, and expanding Dell’s existing operation in Xiamen, the company said. The Chengdu site, scheduled to open in 2011, could grow to 3,000 workers, and as many as 500 jobs may be added in the Xiamen office.

Nine days before announcing the Chinese expansion, Dell sold $1.5 billion in 3-, 5- and 30-year notes. In regulatory filings, the Round Rock, Texas-based company said it planned to use the proceeds for “capital expenditures, advancements to or investments in our subsidiaries, and acquisitions of companies and assets.”

Company spokesman David Frink said none of the proceeds would be spent on the new Chinese facility.

“We don’t have plans to use the cash outside the U.S.,” he said.

Growth Opportunities

Stanley Black & Decker Inc., the biggest U.S. toolmaker, also is emphasizing growth opportunities overseas. In August, the company raised $400 million in 30-year bonds and said it would use the proceeds to reduce debt and for general corporate purposes. Stanley declined to elaborate, spokesman Tim Perra said.

Chief Financial Officer Donald Allan told an investor conference Aug. 31 the New Britain, Connecticut-based company would build its security business through mergers and acquisitions in Europe and Asia and saw a “great geographic expansion opportunity” in Latin America.

Issuers aren’t required to disclose where they plan to spend the proceeds from such sales. Wal-Mart Stores Inc., the world’s largest retailer, raised $5 billion last month and said it would use the money to pay off existing short-term debt and for general corporate purposes. A spokesman for the Bentonville, Arkansas-based company didn’t respond to an e-mailed question about planned investment locations.

Refinancing, Reinvesting

Tim Hoyle, vice president for research at Haverford Investments in Radnor, Pa., which manages $6 billion, said Wal- Mart is among several corporations he follows that are refinancing existing debt and reinvesting the proceeds.

“In Wal-Mart’s case, all of the reinvestment is happening in overseas markets,” he said.

That phenomenon illustrates the challenge confronting Bernanke.

“All the Fed can do is create liquidity,” Hoyle said. “What Fisher is saying is correct: The Fed has no control over how that liquidity is used.”

To contact the reporter on this story: David J. Lynch in Washington at

« Robert Rubin Sounds The ALARM On U.S. Debt Crisis: "We're In Terribly Dangerous Territory, Bond Market Could Implode" »

Hot off the presses...

Just a quick thought for Bob. Perhaps if you, Greenspan and Larry Summers hadn't done everything in your power to derail and destroy Brooksley Born in the late 90's when she warned on derivatives and attempted to regulate them at the CFTC, then we wouldn't be in this extend-and-pretend, fed-ponzi, economic-collapse, national-debt nightmare.

So, thanks for your hard work in that regard. Taxpayers appreciate it!


From Aaron Task at Clusterstock

Warning of the risk of an "implosion" in the bond market, former Treasury Secretary Robert Rubin says the soaring federal budget deficit and the Fed's quantitative easing are putting the U.S. in "terribly dangerous territory."

Speaking at an event at The Pierre Hotel in New York City honoring Sen. Kent Conrad (D-N.D.), Rubin joined the growing number of current and former officials (foreign and domestic) to criticize QE2. The Fed's plan to buy $600 billion of Treasuries "has a lot of risk," he said, calling the international reaction "horrendous."

Rubin, who issued a similar warning about the bond market at The FT's "Future of Finance" conference in October, said Congress' vote on raising the deficit ceiling next spring could be the "trigger" for a rout in the Treasury market. Several Republican and Tea Party candidates vowed to not increase the government's debt ceiling unless Democrats agree to sharp cuts in spending that may not be politically tenable.

A Congressional standoff on the debt ceiling could spook international investors, Rubin said, alluding to a market event similar to the Dow's 778-point plunge on Sept. 29, 2008, when the House initially voted no on TARP.

While most pundits worry about the potential for China to dump its Treasury holdings, the former non-executive chairman of Citigroup said a financial version of the Cold War concept of Mutual Assured Destruction will likely prevent them from doing so. But he is worried about selling by the government's of Singapore, Hong Kong and Malaysia. "They could say ‘the Chinese are stuck but we're not,'" Rubin predicts.

Rubin's comments came during a panel discussion that also featured Sen. Conrad, chair of the Senate Budget Committee, former Nebraska Senator Bob Kerrey and former U.S. Comptroller General David Walker. The panel was moderated by former Commerce Secretary Pete Peterson, the senior chairman and co-founder of The Blackstone Group as well as founder of the Concord Coalition.


Video: Rubin speaks to students at Princeton...

What's interesting here is that this clip is from 2005. Just watch the first 2 minutes. An IMF bailout for the U.S?

« AWESOME - Watch A Protester Flip Out On JP Morgan Exec During Senate Banking Committee Hearings Yesterday »

Video: The protestor does not like foreclosure liars...

These are by far my favorite type of clips - random, live, televised episodes of public humiliation for the criminal bankster elite.

Watch an unknown protestor call JPMorgan Chase exec David Lowman a liar during yesterday's Senate Banking Committee hearings. Nice work.

The anger is growing...


House to Consider Override of Notary-Bill Veto

House lawmakers are scheduled to consider Wednesday a motion to override President Barack Obama's veto last month of a bill that critics claimed could make it harder for homeowners to stop flawed foreclosures.

The vetoed bill, sponsored by Rep. Robert Aderholt (R., Ala.), would require notarizations of mortgages and other documents, including those done electronically, that are done in one U.S. state to be accepted by courts in another state.

The House approved the bill in April by a voice vote, and the Senate passed it unanimously in late September. But Mr. Obama returned the bill to Congress without his signature last month as concerns mounted over the unintended impact the measure could have on consumer protections amid growing problems with foreclosure documentation.

Banks have halted thousands of foreclosures amid revelations that banks relied on so-called "robo-signers," or employees who falsely asserted that they had personally reviewed the details of foreclosure cases.

Critics have said the bill would make it easier for lenders to speed up the foreclosure process. Mr. Aderholt has rejected any link between document-handling problems and the bill, called the Interstate Recognition of Notarizations Act of 2010.

"The bill expressly requires lawful notarizations, and in no way invalidates improper notarizations," he said in a statement last month.

It isn't clear how much the foreclosure mess, which erupted in mid-September, could affect support for the measure among House lawmakers who voted for the bill last spring.

TSA Revolt: Naked screening lobby pushes for profit, not privacy?

Click this link ......

Foreclosure firms facing action from the Florida Bar

With Florida’s attorney general, defense lawyers, even members of Congress challenging the state’s “foreclosure mill” law firms, lenders’ attorneys have had little trouble from one group: The Florida Bar.

Out of the more than 200 lawyers the Bar suspended or stripped of licenses this year, none was punished for lying in a foreclosure trial or making fake documents for one, behavior that a cottage industry of critics works to document.

But that could change quickly.

This month, the Bar was investigating 43 reports of some type of foreclosure fraud involving 32 lawyers. One involves a Jacksonville judge’s ruling this year that lawyers from a South Florida firm committed “fraud on the court.” A new category solely for foreclosure fraud was added recently to the Bar’s system for tracking complaints.

To find new cases, the head of the Bar is asking judges around the state to report lawyers who break the rules — and pointing specifically to news coverage of claims about foreclosure suits.

“We haven’t received many complaints about this misconduct from the judiciary. In fact, oftentimes we have learned of these matters only from the media,” Bar President Mayanne Downs wrote last month in a letter to the chief judges of Florida’s 20 judicial circuits. Downs asked judges to send in copies of any orders they write that mention misconduct, in foreclosures or anywhere else.

In principle, foreclosure fraud can end a lawyer’s career. Knowingly giving false documents to a court or lying to a judge can lead to disbarment. Just knowing another lawyer did that and not saying anything can be grounds for suspension.

But none of that happens unless the opposing side spots the deception and challenges it in court, said Circuit Judge Jean Johnson of Jacksonville, and that traditionally hasn’t been done.

“It hasn’t been argued before me frequently,” she said. “You can’t find there’s been a fraud unless someone brings it to your attention.”

Johnson threw out one case in February after ruling that lawyers representing JP Morgan Chase used bogus documentation to try to seize a Jacksonville house.

A bogus document

Johnson concluded that government lender Fannie Mae owned the mortgage, which two mortgage companies owned previously, and Chase was simply paid to process payments and handle other loan services. That meant, the judge continued, a document from the Fort Lauderdale law firm Shapiro & Fishman that showed the original lender selling the mortgage directly to Chase was bogus, as well as being dated 16 years after Fannie Mae bought the loan.

Johnson added the law firm should have known who owned the loan anyway, because Fannie Mae had hired the firm to foreclose on the same mortgage years ago, although it was dropped when the borrowers caught up on their payments.

A tiny stack of other fraud rulings have been filed around the state, such as a Pasco County judge’s decision in March that paperwork supposedly written in 2007 was “facially impossible” because it was notarized with a notary stamp that was issued in 2008.

Many judges have gotten used to incomplete or confusing paperwork, but documents that are obviously false can still get a case thrown out, said Chip Parker, a lawyer representing Jacksonville homeowners Hank and Marilyn Pocopanni in Johnson’s case.

“This case was just particularly egregious,” Parker said. “Shapiro & Fishman absolutely knew they were committing fraud. … They couldn’t talk their way out of it.”

Chase is appealing Johnson’s ruling with a different law firm, and spokesmen for Chase and Fannie Mae declined to talk about the case except to confirm Chase was acting on Fannie Mae’s behalf.

A lawyer hired to represent Shapiro & Fishman said he wasn’t sure why the false document was created but said the firm didn’t deserve the fraud ruling.

“From everything I’ve seen so far, they’re acting in good faith,” said Gerald Richman, who also represents the firm in a court fight over an investigation launched by Florida Attorney General Bill McCollum.

Attorney general’s cases

McCollum’s office also opened investigations of three other high-volume South Florida foreclosure firms: the Law Offices of Marshall C. Watson; the Law Offices of David J. Stern; and Florida Default Law Group. Accusations against those firms have filled blogs, made headlines and caught the attention of members of Congress, who persuaded Fannie Mae and Freddie Mac last month to stop sending lawsuits to Stern’s firm.

Richman said fraud arguments are still rare in foreclosures, but he is seeing more defense lawyers trying them. For some, the goal is just to delay a foreclosure, not to resolve the debt, he argued.

He said bad documentation isn’t evidence of fraud as much as a sign that law firms are trying to handle a lot of work fast and cheap.

“A lot of these issues about fraud on the court are totally unjustified. There are mistakes that have been made because of the tremendous volume” of lawsuits, he said.

That’s not an all-purpose excuse, said Johnson, who said every lawyer has a personal duty to make sure their work meets professional standards.

That also shouldn’t mean every lapse is treated as fraud, she said, because judges have to be able to sort out sloppiness from dishonesty.

“That can be a very difficult question to answer directly,” she said, but said the argument for fraud grows when “documents have actually been created to prove a fact that is not in existence.”

A judge for 17 years, Johnson said she believes attorneys in Northeast Florida follow high ethical standards and said the cases she considered questionable were filed by mill firms. She would not say whether she had reported her fraud ruling to the bar.

The City of Brotherly Love Gets No Love from Moody's

Moody's Investors Service has downgraded to A2 from A1 the rating on City of Philadelphia's $3.8 billion in general obligation bonds and unconditional General Fund debt obligations.

Moody's has also assigned an A2 rating to the city's $199 million General Obligation Bonds, Series 2010A and $69 million General Obligation Bonds, Series 2010B (Federally Taxable - Issuer Subsidy - Build America Bonds). Approximately $135.3 million of the Series A bonds will be used to refund portions of the city's Series 1998 and 2001 bonds for a net present value savings of 6.5% of refunded principal. The remaining $63.65 million and the Series B bonds will be used to finance the city's ongoing capital improvement plan.


The downgrade to A2 reflects continued weakness of the city's finances, which had improved from 2005 to 2007, but deteriorated in fiscal 2008 and 2009, and improved in 2010, but continue to face challenges in the coming few years. Although fiscal 2010 results are favorable, General Fund balance remains negative, both on a budgetary and GAAP basis, and we believe the city has little budgetary margin over its five-year plan which includes significant repayment of deferred pension contributions in 2013 and 2014. In response to the significant financial stresses that began in fiscal 2008, city officials created a fiscal recovery plan that included a temporary sales tax increase and the pension deferral in fiscal 2010 and 2011; the plan gained the required approval from the Commonwealth of Pennsylvania legislature at the end of September 2009, allowing for the sales tax increase to begin at the beginning of October. Additional revenue and expenditure reductions in fiscal 2010 resulted in surplus operations, although these were diminished from previous forecasts due to a late state aid payment of approximately $70 million; much of that revenue has since been received.

The fiscal 2011 budget, which includes a property tax increase and the full-year effect of the sales tax increase, projects an additional surplus in fiscal 2011 with the expectation that the city will return to a positive, albeit low, General Fund balance position. Throughout the plan, financial flexibility remains relatively weak, providing little cushion for contingencies. Moody's believes that growth in the local economy will remain weak, affecting wage tax collections and the potential for mid-year cuts in aid from the Commonwealth of Pennsylvania (G.O. rated Aa1 with a negative outlook).

The A2 rating also reflects the city's ongoing economic challenges, weak demographics and high unemployment, modest property value growth, and a heavy burden of tax-supported debt. Moody's believes the city's weak credit characteristics are mitigated by the fact that it is subject to a state oversight board, with well-established five-year planning and quarterly monitoring procedures in place.

Former Treasury Secretary Rubin: Bond Market Could Implode; Vote to Increase Deficit Could be the Trigger

Former Treasury Secretary Robert Rubin is laying it on the line. At a confrence today at the Pierre Hotel in NYC he said, according to Arron Tusk, that the soaring federal budget deficit and the Fed's quantitative easing are putting the U.S. in "terribly dangerous territory" and warned of a bond market "implosion."

Get this. He said Congress' vote on raising the deficit ceiling next spring could be the "trigger" for a rout in the Treasury market.

He also said the Fed's plan to buy $600 billion of Treasuries "has a lot of risk," calling the international reaction "horrendous."

The jaws of debt are about to devour America.

The Trumpet

Is the Deficit Commission on to Something?

By Robert Morley
Think antelope-type intensity! The lion has roared. His breath is hot, his teeth like razors—and if you don’t move, you are dead. Run! Now!
You have all seen a lion in chase, and how the adrenaline-pumping antelope bursts into flight. It runs like its life depends on it—because it does. This is the type of intensity you need now to get your financial house in order and prepare for the looming economic collapse. And you need to move now, before you get crushed by the herd.

Collapse is coming—and like a roaring lion—it is going to devour a lot of people. You don’t have to be one of them.
Last week, President Obama’s bipartisan deficit commission released a draft report on fixing America’s budget problems. The Examiner called it “shock therapy” for America. cnn said it was a “call for action.
Either way it was a wake-up call to just how precarious of a position America is in.

The good news is the authors think America can be saved. The bad news is that if all the spending cuts, asset sales, and tax increases are implemented, America’s formerly plush landscape will resemble barren wasteland, possibly for years to come.

America’s problem is that 40 cents out of every budget dollar spent is borrowed. The government will add $1.3 trillion to the national debt this year alone.
Read that again. Forty percent of America’s current federal expenditures is borrowed. How long can you borrow 40 percent of your yearly salary on credit cards and personal loans before the interest payments leach the life out of you and you start defaulting?

At present, Social Security, Medicare and Medicaid take up all of federal revenue, reported the authors. “The rest of the federal government, including fighting two wars, homeland security, education, art, culture, you name it, veterans—the whole rest of the discretionary budget is being financed by China and other countries,” said Alan Simpson of Wyoming.

What has America become when entitlement programs take up 100 percent of tax revenue?

This cannot go on for long. Therefore it won’t. This is why you need to get out of debt, ramp up your savings and investments, and change your way of life before it is too late. “We can’t grow our way out of this,” former White House Chief of Staff Erskine Bowles said. “We could have decades of double-digit growth and not grow our way out of this enormous debt problem.”

That is how bad it is. Decades of double-digit growth and America still wouldn’t be able to escape its debt problem! America’s national debt is already close to 90 percent of gross domestic product. By this time next year it could be approaching 100 percent, which is pretty close to European crisis levels.

Of the problems facing America, one of the biggest is Social Security—or lack thereof. Last year, Social Security went negative. More benefits were paid out to retirees than was collected in taxes. The recession has wrecked the financial models. Planners apparently never considered that America could ever suffer a moderate recession. Now the plan is in the red and is expected to be in the red again next year.

By 2037, Social Security will have no money, reports the commission. Millions of workers who paid into the system will have nothing. And that is the best-case scenario. If the economy doesn’t get back to 3 to 4 percent growth, and quickly, the fund will be out of money much sooner.

The situation is actually even more dire—because politicians have stolen the Social Security trust fund money. There is no Social Security trust fund. The money has been spent. In its place are $2.5 trillion worth of government ious (in the form of treasury bonds).

Now that Social Security is in the red, instead of the government being able to pilfer the money for general spending, it has to pay it back. It is a double whammy to the budget.

Worse yet, all those ious could disappear overnight. What if the U.S. dollar were ever to collapse? All those government treasuries would be worthless.
It is sad because there is no need for Social Security to be broke. Just keep your hands off what is not yours.

Think of what $2.5 trillion could have bought American taxpayers. It would have been the largest sovereign wealth fund in the world. Instead of government ious, the fund could have been owners, or minority owners, of the best companies in the world—and all those corporate profits would be flowing toward Americans. After all, that is exactly what the Arabs, Russians and Chinese do. They take their surpluses and buy strategic assets.

$2.5 trillion would buy a 49.9 percent interest in Exxon Mobil, PetroChina, Apple, PetroBrazil, Industrial & Commercial Bank of China, Microsoft, China Mobile, Hong Kong Mobile, Berkshire Hathaway, China Construction Bank, bhp Billiton, Wal-Mart Stores, Royal Dutch Shell, Nestle, hsbc, General Electric, Johnson & Johnson, Procter & Gamble, ibm, AT&T, Chevron, Vale, Novartis, JP Morgan Chase, Pfizer, Coca-Cola, Oracle, Rio Tinto and Bank of America.

In case you are wondering, those are the 28 biggest companies in the world, according to the Financial Times. In fact, the trust could have owned many more companies too, since the funds would have been invested years ago when these companies were worth just fractions of their current value.
Nevertheless, the deficit reduction commission says Social Security can be saved. Politicians simply need to slash payouts, raise the retirement age and jack up contributions by employees and employers. Easy. And oh, hope that the dollar stops plummeting.

Actually, the commission seems to present a thorough picture of what could be done to balance the national budget. There are lots of options, none of them fun. Different scenarios include: a trillion dollars’ worth of new taxes; eliminating the mortgage interest deduction; selling off 64,000 government buildings; plus major Medicare reductions. Other options include slashing government employment by hundreds of thousands, eviscerating the military budget, reducing foreign aid and jacking up gasoline taxes.

The next question is what will politicians choose to do with the report.
They know the danger facing the country. Will they be able to put aside differences and for once—just once—act for the welfare and benefit of the nation?

Don’t count on it. The recommendations are dead on arrival, pronounced former Speaker of the House Nancy Pelosi. They are “simply unacceptable.” And as far as Republicans are concerned, some of them are already backing away from campaign promises to eliminate earmarks. Wasn’t the election just a few weeks ago?

“If Republicans are going to commit to what they ran on, that means making some awful hard decisions that aren’t very popular politically,” says Chris Lehane, a Democratic political strategist. “At the end of the day, if they’re really serious about putting government on a diet, what they’re talking about is a liquid diet. Are they going to cut back on Social Security and Medicare? They could look at other places, but those are tiny amounts of money.”

Many Republicans looked upon the recent elections as a turning point for the country. Not likely. At a time when decisive, dramatic action is needed to put the nation’s financial house on track, the polarized nature of politics in America means the country will instead be gripped by paralysis.

Paralysis can be deadly. When the lion roars, an antelope had better already be in motion. If not, he will soon be dead.

If you are weighed down with debt, you need to shed some pounds to make your getaway. Work the overtime, or get that second job now while it is still available. If you continue to rely on debt to finance your standard of living, you will be ruined. Hard times are coming to America. The fat years are over. The prophesied lean years have arrived.

But even as the United States continues down the path to bankruptcy and collapse, the staff at the Trumpet remain optimistic about America’s long-term future prospects. Once all the greed and corruption is wiped out, a foundation for a new, prosperous and equitable economic system can be built. But until that time, there is a way you can prosper, even in a depression. Read “Storm-Proof Your Financial House.” And for a picture of the bright future awaiting America, read The Wonderful World Tomorrow—What It Will Be Like, by Herbert W. Armstrong.

« Mortgaging Your Children's Future »

Not a bad cartoon...

Gerald Celente on US Political System - 'Bribes & Payoff's'

Click this link ......

First Serious Sign of Trouble in Muni Bond Market; Orange County California Issue Pulled

The Orange County Sanitation District in Southern California has postponed the sale of $160m in Build America bonds. “The bond market has been pretty volatile and flooded with new issues,” said Mike White, the controller.

Translation: They can't get the deal done at a reasonable price, if at all.

Expect further problems, on Tuesday, the yields on triple A 10-year muni-bonds rose 18 bps to 2.93 per cent, the largest one-day rise since October of 2008, according the MMD index.

« What If The Bankers Gorged On A Record $144 Billion In Bonuses And No One Noticed »

Video: Those crazy Taiwanese animators are back!...

Trust me, this is a brilliant clip. This is how the rest of the world sees the Wall Street bailout.

Don't forget what Bill Black has been making very clear the past few weeks - The payouts are based on fictional FASB accounting, leading to fictional profits, and billions in bonuses for bank executives running the scam.

Covering up the losses had three real (carefully unstated) purposes: (1) permitting evasions of the PCA [Prompt Corrective Action law], (2) allowing the banks to remove themselves from the strictures of the TARP program even if they are, in reality, insolvent, and (3) allowing insolvent and impaired banks to pay their senior executives huge bonuses on the basis of the (fictional) income that results when a bank does not recognize its losses.

Bill Black's Latest: The Banks Are Still Insolvent, And Obama Is Not Only Covering It Up, He's Taking Credit!

Wall Street bonus payouts will be $144 billion for 2010 - NYT


Video: Gerald Celente on bonus madness...

Don't skip. I don't normally post Celente, but this one was way too good to pass up.

Text from youtube - While millions of Americans are unemployed and the national debt is soaring, it seems top financial executives are far from feeling the pinch. A recent Wall Street Journal survey estimates they'll receive a staggering $144 billion dollars in compensation and benefits this year.

  • This amount is equal to the U.S. stimulus package approved by Congress in 2008.

Trend forecaster Gerald Celente says Americans are failing to react to the payouts, because the financiers' fanbase in the mainstream media is distracting public opinion.

Just When You Thought You Knew Something About Mortgage Securitizations

Dan Edstrom is a guy who is in the right place at the right time.

His profession? He performs securitization audits (Reverse Engineering and Failure Analysis) for a company called DTC-Systems.

The typical audit includes numerous diagrams including the following:

Transaction Parties and Flow (similar to the chart below, but much easier to understand)

Note exchanged for a bond Foreclosure parties

Priority of Payments from the Security Instrument (Mortgage, Deed of Trust, Security Deed or Mortgage Deed)

Priority of Payments from the Pooling and Servicing Agreement

This diagram shows that they are not following the borrowers instructions in the security instrument

Source of Payments for Distributions--This diagram is extremely complex and shows that the miscellaneous proceeds specified in the security instrument (and in the SEC Filings) should be applied to the sums secured by the obligation upon the event of a loss in value of the property, whether or not then due, with the remainder, if any, returned to the borrower. This document combines UCC 3-602(a), UCC 9-315, UCC 9-336, UCC 2-609, and UCC 3-501 together with NY Code Section 4545 and the SEC Filings to show that the miscellaneous proceeds can be applied to the borrowers obligation.

The following flow chart reverse engineers the mortgage on the Ekstrom family residence. It took Dan over one year to take it this far and it clearly demonstrates what happens when there are too many lawyers being manufactured.

Take a look at this chart and then decide how long you think it will take for Barney Frank and Eric Holder to sort everything out. There is a link to an expandable version at the end of this post.


Dan will be lecturing on this subject on December 11, 2010 if you are interested in learning more about who is the holder of your mortgage note. Here is the link to the Seminar:

Securitization Seminar

and here is a link to a LARGE VERSION of the Chart:


Is Europe Coming Apart Faster Than Anticipated?

The sky is black with PIIGS coming home to roost: I was going to write my customary long and boring think piece—but the simmering crisis in the Eurozone just got the heat turned up: Things are boiling over there!

“Euro Dead” by Ryca.
So let’s take a break from our regularly scheduled programming, and give you a run-down of this late-breaking news:

The bond markets have no faith in Ireland—Greece has been shown up as having lied again about its atrocious fiscal situation—and now Portugal is teetering—

—in other words, the PIIGS are screwed. I would venture to guess that we are about to see this slow-boiling European crisis bubble over into a full blown meltdown over the next few days—and it’s going to get messy.

So to keep everything straight, let’s recap:

The spreads on Irish sovereign debt widened, and the Germans are pressing them to accept a bailout—despite the fact that the Irish government is fully funded until the middle of 2011. But it’s not the Irish fiscal situation that the bond markets or the Germans are worried about—it’s the Irish banking sector that is freaking everyone out.

After all, the Irish government fully—and very foolishly—backed the insolvent Irish banks back in 2008. And for unexplained reasons, the Irish government is committed to honoring Irish bank bonds fully—which the country simply cannot afford. However, German banks are heavily exposed to Irish banks, which explains why Berlin is so eager to have Ireland accept a bailout.

Right now, European Union, International Monetary Fund and European Central Bank officials are meeting with Irish representatives, putting together a bail-out package. The reason the Irish are so leery, of course, is that any bail-out would be accompanied by very severe austerity measures: In other words, the Irish people would suffer the consequences of shoring up the Irish banks—which is the same as saying the Irish people would suffer austerity measures in order to keep German banks from suffering losses. Also, the EU/IMF/ECB bail-out would probably also cost the Irish their precious 12.5% corporate tax rate—a key magnet for bringing capital to the Emerald Isle.

Add to the Irish worry, Greece is once again wearing a bright red conical dunce cap: They’ve been shown up to have lied again about their fiscal situation. Three guesses what they lied about: If you guessed Greek deficit, you win—yesterday, the Greek government officially revised its deficit figures: 15.4% for 2009, and 9.4% for 2010 (as opposed to an original 7.8% projection). Odds are good that these figures will be revised—for the worse—soon enough: Nobody believes anything other than Greece is insolvent.

That’s what’s going on this morning—and as a reaction, the dollar (if you can believe it) is roaring back alive: As I write (noon EST), the Euro is at $1.3511, the Pound at $1.5870, gold down to $1,333 an ounce, silver $25.05 an ounce; the dollar is up ¥83.45.

There was no specific reason why things took a turn for the worse today—but this downturn of sentiment has been having a cascading/contagion effect through the rest of Europe:

As a result of the Irish not taking the EU bail-out, Portugal’s debt started to tumble—which has everyone worried. Portugal is looking an awful lot like Greece did five-six months ago: It’s debt spread over the German benchmark is 6.5%, and climbing. Even France’s debt yield spread widened against the German bund—it costs more to insure French debt than it costs to insure Chilean debt (I guess a good “Viva Chile!” would be in order?).

The reason the entire slate of Euro bonds are tumbling is because of Ireland—but the real worry is Spain.

If Ireland and then Portugal go down the tubes, then it would only be a matter of time before Spain is next—and Spain is far larger than Greece, Ireland and Portugal combined.

If Spain goes, then it’s curtains for the whole Eurozone, perhaps even for the European Union as a political entity.

So Germany, the EU, the IMF and the ECB all want to save Ireland as a firewall, against further bond market deterioration.

The problem is, the Irish don’t want to be saved.

Ireland isn’t the only country that doesn’t want the EU/IMF/ECB bail-out of the Irish to happen. Several other EU countries also do not want any more bail-outs, be it of Ireland or Greece or Portugal or anyone else:

Austria has just announced that it is withholding bailout funds to Greece, according to Reuters. The reason, as articulated by Austria’s Finance Minister, Josef Proell, is that they are sick and tired of Greece’s bullshit. He was much more polite, of course, but essentially this is what he said. So Athens won’t be getting any of Austria’s money until there has been “extensive debate”.

Now, the Greek bailout is to the tune of €30 billion—Austria’s end is a measely €190 million: Six tenths of 1% of the total package. But for the political impact of the Austrian government’s decision, their contribution to the bailout fund could be twenty or thirty times as large. More than one government, and more than one political party, is working on slogans along the lines of, “If the Austrians can do it, why can’t we?”

Finland is another country openly unwilling to play ball vis-à-vis bailouts: The Finns have made it clear today that they are unwilling to put pressure on Ireland to accept an EU bailout. Again according to Reuters, the Finns are opposed to bailing out Ireland because of an upcoming election, and popular opposition to more bail-outs. This makes sense, especially if you consider that Finland has been helping to bail out Iceland, and the Baltic countries, especially Latvia.

Now, of course, the bitching and moaning by small-fry Euro-nations in and of itself means nothing—except for two things:

One, the European Financial Stability Fund (EFSF) needs a unanimous vote to be activated to save Ireland, or anyone else. If (and that’s a big if) the Irish finally tap this funding source, undoubtedly the EFSF would pay up—but in order to get that unanimity, a lot of political favors would have to be doled out to recalcitrant members.

And two, Austria and Finland’s objections to an Irish bailout is the visible articulation of differences that are raging privately in Berlin and Paris, and every other capital of Eurozone countries. The debate is between bail-outs, and letting the chips fall where they may.

Which brings us to a key point: There is clearly political exhaustion setting in. All these efforts to save all these small countries—Greece, Ireland, Portugal, the Baltics, Iceland—is leaving the European political leadership exhausted, not to mention leaving them out of bullets, as it were.

That’s because all these bail-outs have come at tremendous political costs, among the constituents of the nations doing the bailing out. The Finnish example—where clear and present political danger keeps the politicians from helping in a bail out—is a harbinger of things to come for the rest of Europe’s political leadership.

But even without this political exhaustion, one has to stop and consider an obvious truth: Some countries are simply too large to bail out.

What happens when Spain finally gets into serious trouble? It’s not an if question anymore—not when Spain is running practically 20% unemployment, and a projected fiscal deficit this year of 9.3%, according to Bloomberg. Just like Greece, Ireland and Portugal, eventually, the bond markets will turn on Spanish debt—it’s only a matter of time.

What will the EU and the ECB do then? Bail out Spain? Good luck with that—that’ll be like trying to hoist an elephant out of a septic tank with nothing but a smile: It simply cannot be done. Spain’s simply too big.

I think that these measures the European leadership is trying to carry out are simply postponing the inevitable. And what’s inevitable is a crash of the peripheral members of the Eurozone—the PIIGS plus Belgium. Because even if the Irish are bailed out in the next day or two, in a few months time, we’ll have another round of panic, this time over Portugal. And by next summer, it is going to be Spain—inevitably.

If Ireland is not sorted out—which at this point is in fact highly likely—then the Euro-bond market might well crash in the near-term, bring down not just Irish debt, but Portuguese, Spanish and Italian debt as well. Maybe even French debt. And that would be curtains for the Eurozone—maybe even the European Union.

In my post just last week, The Tidal Forces Ripping Europe Apart, I argued that the stress of over-indebtedness coupled with an unwillingness to take haircuts and restructure the sovereign debt would rip the European Union apart.

I argued this would happen—I just didn’t think it would happen so soon . . .

The horrible truth starts to dawn on Europe's leaders

A newspaper seller in Dublin on Monday

Survival crisis? A newspaper seller in Dublin on Monday

The entire European Project is now at risk of disintegration, with strategic and economic consequences that are very hard to predict.

In a speech this morning, EU President Herman Van Rompuy (poet, and writer of Japanese and Latin verse) warned that if Europe’s leaders mishandle the current crisis and allow the eurozone to break up, they will destroy the European Union itself.

“We’re in a survival crisis. We all have to work together in order to survive with the euro zone, because if we don’t survive with the euro zone we will not survive with the European Union,” he said.

Well, well. This theme is all too familiar to readers of The Daily Telegraph, but it comes as something of a shock to hear such a confession after all these years from Europe’s president.

He is admitting that the gamble of launching a premature and dysfunctional currency without a central treasury, or debt union, or economic government, to back it up – and before the economies, legal systems, wage bargaining practices, productivity growth, and interest rate sensitivity, of North and South Europe had come anywhere near sustainable convergence – may now backfire horribly.

Jacques Delors and fellow fathers of EMU were told by Commission economists in the early 1990s that this reckless adventure could not work as constructed, and would lead to a traumatic crisis. They shrugged off the warnings.

They were told too that currency unions do not eliminate risk: they merely switch it from currency risk to default risk. For that reason it was all the more important to have a workable mechanism for sovereign defaults and bondholder haircuts in place from the beginning, with clear rules to establish the proper pricing of that risk.

But no, the EU masters would hear none of it. There could be no defaults, and no preparations were made or even permitted for such an entirely predictable outcome. Political faith alone was enough. Investors who should have known better walked straight into the trap, buying Greek, Portuguese, and Irish debt at 25-35 basis points over Bunds. At the top of boom funds were buying Spanish bonds at a spread of 4 basis points. Now we are seeing what happens when you build such moral hazard into the system, and shut down the warning thermostat.

Mr Delors told colleagues that any crisis would be a “beneficial crisis”, allowing the EU to break down resistance to fiscal federalism, and to accumulate fresh power. The purpose of EMU was political, not economic, so the objections of economists could happily be disregarded. Once the currency was in existence, EU states would have give up national sovereignty to make it work over time. It would lead ineluctably to the Monnet dream of a fully-fledged EU state. Bring the crisis on.

Behind this gamble, of course, was the assumption that any crisis could be contained at a tolerable cost once the imbalances of EMU’s one-size-fits-none monetary system had already reached catastrophic levels, and once the credit bubbles of Club Med and Ireland had collapsed. It assumed too that Germany, The Netherlands, and Finland would ultimately – under much protest – agree to foot the bill for a ‘Transferunion’.

We may soon find out whether either assumption is correct. Far from binding Europe together, monetary union is leading to acrimony and mutual recriminations. We had the first eruption earlier this year when Greece’s deputy premier accused the Germans of stealing Greek gold from the vaults of the central bank and killing 300,000 people during the Nazi occupation.

Greece is now under an EU protectorate, or the “Memorandum” as they call it. This has prompted pin-prick terrorist attacks against anybody associated with EU rule. Ireland and Portugal are further behind on this road to serfdom, but they are already facing policy dictates from Brussels, but will soon be under formal protectorates as well in any case. Spain has more or less been forced to cut public wages by 5pc to comply with EU demands made in May. All are having to knuckle down to Europe’s agenda of austerity, without the offsetting relief of devaluation and looser monetary policy.

As this continues into next year, with unemployment stuck at depression levels or even creeping higher, it starts to matter who has political “ownership” over these policies. Is there full democratic consent, or is this suffering being imposed by foreign over-lords with an ideological aim? It does not take much imagination to see what this is going to do to concord in Europe.

My own view is that the EU became illegitimate when it refused to accept the rejection of the European Constitution by French and Dutch voters in 2005. There can be no justification for reviving the text as the Lisbon Treaty and ramming it through by parliamentary procedure without referenda, in what amounted to an authoritarian Putsch. (Yes, the national parliaments were themselves elected – so don’t write indignant comments pointing this out – but what was their motive for denying their own peoples a vote in this specific instance? Elected leaders can violate democracy as well. There was a corporal from Austria … but let’s not get into that).

Ireland was the one country forced to hold a vote by its constitutional court. When this lonely electorate also voted no, the EU again disregarded the result and intimidated Ireland into voting a second time to get it “right”.

This is the behaviour of a proto-Fascist organization, so if Ireland now – by historic irony, and in condign retribution – sets off the chain-reaction that destroys the eurozone and the European Union, it will be hard to resist the temptation of opening a bottle of Connemara whisky and enjoying the moment. But resist one must. The cataclysm will not be pretty.

My one thought for all those old friends still working for the EU institutions is what will happen to their euro pensions if Mr Van Rompuy is right?

« Banking Scandal Lurking For Obama In 2011? Broadway Bank, Alexi Giannoulias & Friends In High Places »

Video: Darrell Issa

The Ulsterman Report - Banking Scandal Lurking for Obama in 2011?

Congressman Issa discuss his investigation of the timing of the FDIC's takeover of Illinois' troubled (and politically connected) Broadway Bank. Did the FDIC delay its takeover to help Obama friend, Democrat Senate candidate and bank owner Alexi Giannoulias?


Issa: Why so late with the Broadway Bank takeover? - Washington Examiner

As his family’s Broadway Bank was failing, Illinois Democratic Senate candidate Alexi Giannoulias was meeting with White House officials, complains Rep. Darrell Issa, R-Calif., the ranking Republican on the House Oversight Committee. Issa now wonders whether Broadway might have received special treatment due to politics, and he has written FDIC Chairwoman Sheila Bair asking why Broadway Bank wasn’t taken over sooner.

He writes

  • The $394.3 million cost of taking over Broadway represents a loss of approximately 36 percent of Broadway's assets to the FDIC. The amount of the Broadway loss, both in dollars and as a percentage of total deposits, is significantly higher than those figures for the other six Illinois banks closed on April 23, 2010. These figures suggest that the FDIC may have waited longer than it should have to act to prevent foreseeable losses in the case of Broadway Bank.


Issa: Did FDIC help Broadway Bank? - Politico

“The high losses in the case of Broadway Bank suggest there may be a bias in the way the FDIC evaluates when to take action on a distressed bank,” Issa writes to Bair. “Was Mr. Giannoulias’ candidacy for the United States Senate considered when the FDIC was deliberating about whether to take action on Broadway Bank?”

Issa also wants to know if the White House knew anything about the bank closure. The FDIC in late January warned Broadway Bank that it needed to raise more capital. On March 9, Giannoulias met with White House Senior Adviser David Axelrod, Issa says.

“The fact that senior White House officials such as David Axelrod are meeting with Mr. Giannoulias at the time the FDIC is covering hundreds of millions in losses at Broadway Bank raised a flag,” Issa said.

Issa, who is extremely aggressive in his investigations, is demanding answers to why the FDIC waited until April to close the bank and he wants to know what the costs would have been if the feds took the bank when it was “critically undercapitalized.”