Friday, December 17, 2010

Chase Foreclosure Protest: 22 Arrested In LA

Associated Press

LOS ANGELES — Police arrested 22 demonstrators who blocked entry to a downtown Chase bank branch Thursday to protest what they said were unfair home foreclosures.

The demonstrators, which included homeowners facing foreclosure, community advocates and labor leaders, silently allowed officers to bind their wrists behind their backs with plastic restraints and guide them into a police van.

Dozens more demonstrators chanted and marched on a nearby sidewalk holding sighs that said "Stop Bank Greed, Save Our Neighborhoods" as the 12 men and 10 women were taken into custody.

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Young people: get ready to grab your ankles

Auckland, New Zealand

If you’re reading this and under 30, let me be absolutely clear about one indubitable point: your government is going to sacrifice your future in order to pay for its own mistakes from the past.

To give you an example, students in London came out to the streets in droves last Friday to protest the British parliament’s most recent austerity measures which tripled the cap on their university tuition to $15,000.

Sure, Britain is imposing all sorts of austerity measures on its citizens… and while I won’t get into a discussion about the absurdity of government controlled education, I will point out that students are having their benefits cut far more drastically than any other segment of the population.

Are pensioners seeing their costs triple? No. Are middle-aged workers seeing 50% tax hikes? No. Aside from the very small segment of high-income earners who will be forever robbed and pillaged of their wealth, the younger generation is next in line to receive the butt end of the crisis fallout.

Younger folks have comparatively lower incomes, benefits, job opportunities, and political clout than their seniors, yet they are increasingly expected to assume a disproportionately larger burden of the consequences of government folly.

It’s the younger generation that is called on to go fight and die in pointless wars in faraway lands; it’s the younger generation that is forced to assume the debts of their forefathers; and it’s the younger generation that gets relegated to the back rows of the political amphitheater and dismissed by the establishment.

Meanwhile, retirees aren’t seeing massive benefits cuts, and middle-aged wage earners income earners are being protected from above by politicians. In fact, let’s take a minute and look at the looming fate of the average young person today:

1) Your government-run university tuition is going to go through the roof, saddling you with unfathomable debt before you even enter the world as an adult;

2) Once you graduate, you’ll be the last in the hiring queue;

3) If you do get hired, you’ll be the lowest on the totem pole and the first to be let go when tough times befall your business;

4) Once the labor market eventually stabilizes, you’ll enter your prime earning years with some of the highest tax rates ever seen as your government continues to cannibalize your generation to pay off its largess and indebted entitlement programs that benefited older generations;

5) For your entire working life, you’ll pay into a pension system that is going to be bankrupt by the time you’re qualified to draw on it;

6) More than likely, you’ll never achieve the standard of living that your parents achieved;

7) Whatever wealth your parents accumulated won’t be left to you– the bulk of it will be confiscated by the state (unless your folks were smart enough to plant multiple flags) due to a host of death taxes.

If you’re in the millennial Facebook generation, this is going to be the standard storyline of your peers. The system that’s in place right now– the failed cycle of debt and consumption fed by continuous government intervention– has stuck you with the bill.

Fortunately, there’s a silver lining (as always). Younger people are generally less anchored and more mobile than their elders, hence it’s much easier to opt out of this perverse system.

If you’re angry that your government is saddling you with the responsibility to pay off generations of bad decisions, then get out of dodge. Stop playing by the same rules of the game that used to work in the past– the old playbook of “go to school, get a good job, work your way up the ladder” simply doesn’t apply anymore.

Don’t stick around a society that has completely forsaken you and is waiting with knife and fork in hand to carve up your earnings once you finally enter the labor market… get out of dodge now, while it’s easy to do and you have little to risk.

Go explore the world and get an education based on experience, not expensive academic theory. Seek opportunities in thriving, frontier markets overseas… places like Kurdistan, Mongolia, Botswana, Kazakhstan. Soak up the local intelligence and become the grease guy on the ground who can make things happen.

Find people whose lifestyles you want to emulate and make yourself indispensable to them as an apprentice… this will be the only time in your life that you can afford to work for nothing in exchange for a valuable, first-hand education.

Most of all, stop playing by everyone else’s rules. Refuse to be enslaved by the idea that it’s your civic and moral responsibility to pay off the debts of your government’s failures. Cast off the yoke of their control… and summon the courage to live a life by your own design.

The path to prosperity in the Age of Turmoil depends on this ability to reject the old system, declare your economic independence, and carve your own path.

Robo-Signing Is Child's Play Compared To This - Bank of America Allegedly LYING To State & Federal Courts About Fraudulent Foreclosures in Kentucky

Guest post from Yves Smith of Naked Capitalism. Legal docs included inside.


Scroll down for embedded legal document


If you were to believe the banks, the concern over foreclosure “improprieties” is way overdone. They claim that the robo signers really weren’t doing anything seriously wrong, the banks just need to redo some paperwork, and everything else about foreclosures is just fine.

Yet Bank of America, having made the implausible claim that it had reviewed 102,000 cases in a few weeks and nothing was amiss, was forced to retreat and acknowledge that it’s review hadn’t been comprehensive, and it was finding errors at a rate that could exceed 5%.

The bank position so far has been that problems so far are mere mistakes and “sloppiness”. But as we’ve described repeatedly, the problems with securitzations run much deeper than that. It appears that the parties to the deal often failed to take the time consuming steps necessary to convey the note (the borrower IOU) to the trust as stipulated in the contract governing the deal, the pooling and servicing agreement. The PSA required that each note in the deal had to be signed by multiple intermediary parties before it got to its supposed final resting place, a trust. And that had to take place by closing or at most 90 days thereafter.

Many foreclosures show this process was not observed on a widespread basis: the notes were assigned (as in transferred) to the trust right before closing, a violation of the PSA, the New York trust statutes that govern virtually all mortgage securitization trusts, and IRS rules for these trusts (REMIC). When foreclosure defense attorneys started contesting these assignments, suddenly a new ruse started to show up: allonges, which are sheets of paper that contained the needed endorsements, would magically appear out of nowhere. The problem is that an allonge is supposed to be used only when there is no space left on the note for endorsements, including margins and the reverse side, and when it is used, it is supposed to be so firmly attached to the original as to be inseparable. But these “ta da” allonges were always somehow discovered at the custodian, quite separate from the note.

Bank of America appears to have improved the state of the art in the creative foreclosure procedures department. I started hearing a few months ago about a sudden and suspicious increase in the number of foreclosures Bank of America was making in its own name. BofA was in effect saying that it owned these loans and had never securitized them. That seemed questionable, since the bulk of Bank of America’s mortgages had been originated by Countrywide, and Countrywide has said in its SEC filings that it securitized 96% of them. Why would the courts see such an explosion in foreclosures in the relatively small proportion of mortgage that BofA had kept on its books? Lawyers suspected that BofA was falsely claiming that it owned the loan to circumvent questions about standing (if the note had not been conveyed to the trust properly, then the trust might not be able to foreclose).

We now have some evidence that these suspicions are correct. A bankruptcy attorney in Kentucky has been working with clients who have lost their homes in foreclosures in the name of Bank of America. After taking the house, the bank has been filing deficiency judgments for the remaining mortgage balance. The attorney files a Chapter 13 bankruptcy. In the example we have here, Bank of America next files an objection to the bankruptcy plan. The attorney for Bank of America makes a response to the objection. Before the confirmation hearing, the same attorney files a second objection to the plan in the name of a Countrywide trust.

The attorney for the borrower, needless to say, raises all kinds of hell in the hearing, and wants an explanation of how two creditors, each representing the same debt obligation, can each object to the plan, when neither has yet filed a Proof of Claim.

Here is the juicy part. A Proof of Claim is filed later that day. It shows a series of assignments that were executed after the judgment (meaning after the house was taken by BofA) and after the borrower’s attorney filed the bankruptcy petition. The assignment is from MERS to Bank of America executed on September 29. The second assignment is from Bank of America to trust CWABS 2003-B6. This assignment has not been recorded in the land office as of November 10. And even more fun, the allonges look odd.

SEC filings show the loan as asset of CWABS 2003-BC6.

So we have:

1. Either Countrywide lied in its 2003 SEC filings or the loan was never on Bank of America’s books. Which would you believe?

2. Even though Countrywide appears to have intended to convey the loan to its CWABS 2003-BC6 trust, it appears never to have completed the steps. The assignments are legally void by virtue of being out of time and by being inconsistent with conveyance chain stipulated in the PSA (which would have been from Countrywide through at least one intermediary entity to the trust. So the trust does not now own the note either.

This means the odds are awfully high that Bank of America committed multiple frauds on the court, first on the state court in the foreclosures process, and now on the Federal bankruptcy court.

This sort of abuse is far more serious than robo signing. As much as the likely misconduct here and robo signing would both be considered frauds on the court, the robo signing is arguably cost cutting gone mad and riding roughshod over proper legal procedures. By contrast, this practice has all the appearances of multiple coverups of the fact that Countrywide trust did not have standing to foreclose on the house. The steps undertaken here look to be a deliberate, concerted effort for the bank to get its way, the law be damned. And this clearly took more parties and more thought than the robo signing abuses.

At a minimum, the attorneys at the law firm and the parties at the servicer had to be aware of this device. And if our reading of this document is correct, this is fraud, pure and simple. It’s high time we see some attorneys disbarred and some law firms go out of business as a result of foreclosure chicanery, as well as serious investigations of the people involved in foreclosure litigation at the servicers and the banks’ general counsel’s office.



Financial Analyst: This Is The First Recession Since the End of the FIRST World War Where Government Help Isn't Trickling Down to the American People

Banking expert Christopher Whalen (hailed by Nouriel Roubini as one of the leading independent analysts of the U.S. banking system) told the American Enterprise Institute that this is the first recession going back at least to the end of the first World War where government assistance has not trickled down to Main Street and ordinary Americans.


Because the banks are keeping the money and not loaning it back out:

Buy why aren't the banks loaning the money back out?

As I've repeatedly explained, the government has given the big banks many trillions in bailouts and subsidies.

However, as I wrote in October 2008:

Many people (including me) have been warning that the banks will keep hoarding cash no matter how much money the feds give them.

Now, even the banks themselves are admitting it.

As the New York Times writes in an article entitled "Banks Are Likely to Hold Tight to Bailout Money":

"Will lenders deploy their new-found capital quickly, as the Treasury hopes, and unlock the flow of credit through the economy? Or will they hoard the money to protect themselves?

John A. Thain, the chief executive of Merrill Lynch, said on Thursday that banks were unlikely to act swiftly. Executives at other banks privately expressed a similar view.

'We will have the opportunity to redeploy that,' Mr. Thain said of the new capital on a telephone call with analysts. 'But at least for the next quarter, it’s just going to be a cushion.'


Lenders have been pulling back on credit lines for businesses, mortgages, home equity loans and credit card offers, and analysts said that trend was unlikely to be reversed by the government’s money.

Roger Freeman, an analyst at Barclays Capital, which acquired parts of the now-bankrupt Lehman Brothers last month [said] 'My expectation is it’s quarters off, not months off, before you see that capital being put to work.' ”

And another Times article includes the following quote:

“It doesn’t matter how much Hank Paulson gives us,” said an influential senior official at a big bank that received money from the government, “no one is going to lend a nickel until the economy turns.” The official added: “Who are we going to lend money to?” before repeating an old saw about banking: “Only people who don’t need it.”

The banks are going to sit on the cash, not loan it out. So can everyone please stop saying that the bailouts were necessary to increase liquidity?

The banks are not "going to lend a nickel until the economy turns", and yet it is impossible for the economy to turn until the giant banks are broken up.

Moreover - as confirmed by the head of the Bank of England, the world's leading living monetary economist, economists Nouriel Roubini, James Galbraith, Robert Kuttner, financial analysts such as Chris Whalen and Marshall Auerbach, and many others - the big banks are insolvent, and have been insolvent since 2008 at the latest.

Remember, more and more "surprises" of fraudulent actions by the banks keep popping out. First it was falsely rating investments and financial instruments, then it was robosigning and fraudulent mortgage backed securities. Each time a new "surprise" pops out, the banks will incur many billions more in additional liabilities. The government refuses to prosecute any of the big fish for their biggest unlawful actions (see this and this), so the mess never gets cleaned out.

Instead, the big banks and the government know there is a lot more garbage coming down the pike (and so are terrified of leaks), and the banks hunker down and sock away any money the government gives to them to try to ride out future hurricanes which they know are coming. Why do they know they are coming? Because they know there are lots more skeletons in the closet, and that whistleblowers will eventually talk about them in deposition or through anonymous leaks.

So the big banks are hoarding all money they can beg from the government (or else crazily speculating with it trying to make their bonuses). But lending it to Main Street? No way, Jose (I know that borrowers are trying to repair their balance sheets and so demand for loans has declined. But that's only part of the story).

Moreover, as crazy as it sounds, the Federal Reserve is intentionally ensuring that the banks don't use the money we're giving them to lend to Main Street, under the guise of fighting inflation.

Of course, there has never been a recession before whether such a high percentage of the government's assistance went to foreign banks.

Finally, government policy is worsening the unemployment crisis.

So there is no mystery as to why assistance from the government isn't trickling down to Main Street.

Two videos about the Kosovo's mafia

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Snooty Europhiles should be forced to crawl in penitence

The 'blimpish Little Englanders’ who opposed monetary union were right all along, says Boris Johnson.

Snooty Europhiles should be forced to crawl in penitence; A horse and cart passes the Bank of Ireland in central Dublin, Ireland; AP
A horse and cart passes the Bank of Ireland in central Dublin, Ireland

I think we deserve an apology. By “we” I mean all the Euro-sceptics, Euro-pragmatists, Euro-realists and Euro-hysterics who were alarmed by some of the optimism that surrounded the birth of the single currency. Do you remember the disdain with which we were treated? We were told that we were boss-eyed Little Englanders. They used to say we were a bunch of xenophobic, garlic-hating defenders of the pint and the yard and the good old bread-filled British banger.

Whenever we protested about any detail of the plan for monetary union, we were told that we were in danger of stopping the great European train, boat, bus, bicycle or whatever it was. We were a blimpish embarrassment to our country, a bunch of idiot children who had to be shooshed while the grown-ups got on with their magnificent plans.

So it gives me a tingling pleasure to report that everywhere you look on the map of Europe we have been proved resoundingly and crushingly right.

In the late Eighties and early Nineties, I was writing for this paper from Brussels, and the big topic of the day was what was then known as the Delors Plan for Economic and Monetary Union. I had one major reservation about the proposals. The problem wasn’t so much that EMU involved scrapping time-hallowed currencies such as the franc, the Deutschmark and the lira. As far as I was concerned, we could all use the Rice Krispie, provided Europe could be turned into an optimal single-currency zone.

But Europe was nowhere near ready for the euro, the Rice Krispie or anything else. The continent was — and still is – a collection of different languages, diverging labour market traditions, and individual approaches to deficits and inflation. It was very risky, we warned, to try to impose a one-size-fits-all monetary policy over the whole lot. What was right for Germany might turn out to be wrong for, say, Italy or Ireland.

Countries might exploit the low interest rate to spend more than they should, in the knowledge that they could still keep inflation low and avoid any penalty from the markets. Their relative profligacy would be masked; they could trade on German thrift, and free-ride like egrets perched on the shoulder of a hippopotamus, until disaster struck; and that is exactly what happened.

There was a boom, and during the boom years the governments of the PIGS (Portugal, Ireland, Greece and Spain), and to some extent Italy, went on a spending spree. Public sector wages soared. Low interest rates simultaneously helped to inflate the speculative bubble, especially in property. When the Irish bubble burst, the government was obliged to step in to rescue the banks that had lent to the speculators — and then found itself in a dreadful position. Irish government debt is now more than 100 per cent of GDP, and the difference between this debt crisis and previous crises is stark.

The Irish are locked in to the euro, and cannot devalue, and so their government and people are facing a protracted humiliation at the hands of Brussels and, at one remove, at the hands of the German government. They have been forced to cut wages and benefits and to lay off public sector workers, so provoking serious social unrest — and still they may not have done enough. Their credit rating has just been downgraded by Fitch to BBB plus — the same as Libya. They simply may not be able to find enough takers on the bond markets to finance their debts. What then? Who will bail them out?

Back in the early Nineties we warned that a single currency zone must mean large fiscal transfers between the poor and the rich areas, between the productive and the less productive regions. That involves what we then called a sense of “political union”, a feeling of shared purpose and common destiny between the peoples of Europe. That feeling, we suggested, does not exist — and certainly not in the way that it exists in a long-standing unitary state like Britain.

London contributes massively in net tax revenues to the rest of the UK, and by and large Londoners accept that this is part of belonging to a single political entity. But Germany, which already contributes significantly to EU budgets, shows no sign of wanting endlessly to bail out the poorer and more fiscally reckless parts of the currency zone. The Germans have already stumped up for rescue packages for Greece and Ireland, and Angela Merkel is plainly facing significant unrest from a growing constituency who see no reason why they should pay ever more in their taxes to finance a load of bludgers on the periphery of Europe.

So what next? All the options now look bad. If the Irish do the unthinkable, ditch the euro and reclaim the punt, they will certainly achieve a competitive advantage currently denied them. Since this would logically involve a default, there would be huge collateral damage to banks in the UK and Germany that are exposed to Irish debt, and the Irish would find it hard to raise money on the markets for a long time to come.

Any break-up of the euro would also be viewed as a tragedy for the European “project”, and though that assumption bears closer examination, it is a fair bet that the EU’s political classes will stop at virtually nothing to keep the single currency alive and intact. Most sensible people seem to think that they will succeed, and that the contagion will not overwhelm Spain as well — but then huge numbers of apparently sensible people managed to shut their eyes to the glaring flaws in the euro.

Politics made the euro, and politics can destroy it, especially if electorates start to feel it is a machine for German domination and the destruction of benefits and wages; or if the German electorate feels that it is a machine for fleecing Germany.

In the meantime, all those snooty Europhile politicians and journalists who sneered at us for our doubts should be forced to crawl in penitence to Dublin Castle, scourging themselves with copies of the Maastricht Treaty. We have been vindicated, and the least they can do is admit it. They know who they are.

Greece general strike: protesters throw petrol bombs at police in Athens

A police officer's leg is engulfed in flames as a petrol bomb explodes during a protest in Athens

A police officer's leg is engulfed in flames as a petrol bomb explodes during a protest in Athens

Picture: AFP/GETTY

Jubilee 2012 Report #6: Ownership, Rights and Silver Vigilantes

EU in Flames of Uprising: Athens, Rome, London - Who's Next?

Peter Schiff on CNBC 12/15/10

Click this link .....

« US will lose AAA credit rating by 2013: bond manager »

Video - Jim Leaviss, head of retail fixed interest at M&G, the fund management arm of the Prudential, said France remains "the AAA economy closest to a downgrade" and that the US "will lose its AAA rating – but not in 2011" as the two countries grapple with debt.

  • "Central banks and governments are throwing everything they have in their monetary and fiscal policy weaponry to generate a self-sustaining economic recovery."

China’s U.S. Treasury Holdings Reach $907 billion; Chingquin Rural IPO in HK

China region key stock indexes drop on inflation concerns. China’s U.S. Treasury holding increased 2.6% to a record $906.8 billion in November. Chingqing Rural Commercial Bank gains 4.6% on its first day of trading in Hong Kong.

5:00 PM Hong Kong, China – China region key stock indexes drop on inflation concerns. China’s U.S. Treasury holding increased 2.6% to a record $906.8 billion in November. Chingqing Rural Commercial Bank gains 4.6% on its first day of trading in Hong Kong.

China stocks dropped for the second day led by banks and metal producers after the governmental efforts to contain inflation by slowing lending stoked investor concern.

The Shanghai Composite Index lost 0.46% or 13.28 to close at 2,898.14. The CSI 300 Index dropped 0.52% or 16.98 to close at 3,230.67.

The Hang Seng Index in Hong Kong fell 1.23% or 282.31 to close at 22,691.04.

Chingqing Rural Commercial Bank Co, the first Chinese bank since Agricultural Bank of China Ltd to go public in Hong Kong, climbed on its debut after raising HK$11.5 billion in the city’s fifth-largest IPO this year.

The shares gained as much as 4.6% in early trading from the initial price of HK$5.25.

The Consumer Price Satisfaction Index in China fell to 13.8 in the latest quarter, the lowest since data was first released in the fourth quarter of 1999, the People’s Bank of China said on its Web site on Wednesday

The survey of 50,000 people in 50 cities across China found that 74% of households said the prices were too high, up 15.6% from the previous quarter.

SAIC Motor Corp, China’s largest auto group, said on Wednesday it has raised 10 billion yuan through a private placement for development of new-energy cars in China.

Shanghai Automotive Industry Corp, the parent of the company, agreed to invest about 1 billion yuan for 10% of the additional 7.21 billion shares priced at 13.87 yuan per share. The other investors include Baosteel Group and the garment maker Youngor Group, the company said in its filing to the Shanghai Stock Exchange.

China’s direct investment in non-financial sectors in 122 countries reached $47.56 billion in the first 11 months of the year, according to data from the Ministry of Commerce released on Wednesday.

The investment covered some 2,786 overseas enterprises mostly in Hong Kong, Australia, the United States and Russia.

China increased its holding of U.S. Treasuries for the fourth month in a row to reach the highest level in 11 months.

The U.S. Treasury Department said on Wednesday that China’s holdings of Treasury debt rose 2.6% in November to $906.8 billion from a month earlier. Japan was the second-largest holder of Treasury debt with $877.4 billion, up 1.5% from October.

The government signed new contracts with bid-winning home appliance manufacturers, paving the way for extending subsidies to rural buyers of home appliances next year.

According to the contracts, 15,290 models of televisions, refrigerators, washing machines, mobile phones, electromagnetic cookers, microwave ovens, air-conditioners, computers and water heaters can enjoy government subsidies for sales in rural areas.

A governmental research report issued on Wednesday predicted that the country’s economy would expand at 10% in 2010 from a year ago period with the gross domestic product reaching 37 trillion yuan.

In its Blue Book of China’s Society, the Chinese Academy of Social Sciences noted that in 2010 the country had made great efforts to keep its macro-economic policies “consistent” and that its economy had begin to recover.

Stock Movers

China Banking Regulatory Commission’s Shanghai branch ordered halts on lending to companies for fixed asset purchases until the end of this year, the Oriental Morning Post reported led to a decline in bank shares.

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Silver: Debunking The Myths

Silver is back in the spotlight, roiled once more by allegations of impropriety by financial institutions as a regulatory investigation in the U.S. continues to dig deep. But whatever the eventual findings of the U.S. Commodity Futures Trading Commission, what’s clear is that the conspiracy theorists and bank-haters are having a field day.

The silver market has long been plagued with scandals, most notably during the 1970s and 1980s, when Bunker and Herbert Hunt accumulated millions of troy ounces of the metal and whisked a large portion of it away on planes to vaults in Switzerland for safe keeping. Their actions caused a market shortage and saw prices rise from just $1.50/oz to a massive $50/oz over the course of six years, eventually forcing U.S. exchange Comex to suspend trading in new contracts.

If you listen to reports and videos popping up on a number of websites these days, the same thing is happening again. Only this time, silver could reach $500/oz from $29/oz currently, some of the reports suggest, because of the trading activities of a handful of banks that have been craftily cornering the market.

One of the videos portrays Jamie Dimon, the chief executive and chairman of J.P. Morgan, as Nazi leader Adolf Hitler hankering down in an underground bunker with his troops, railing against the rising price of silver as the market turns against the firm. The site has been set up by film-maker and former trader Max Keiser, who says J.P. Morgan’s activities in silver make it the “biggest financial terrorist on Wall Street,” and is as part of his ‘Crash J.P. Morgan, Buy Silver’ campaign that has the goal of bankrupting the bank.

Keiser is not without his own critics–nicknamed “Mad Max,” he has called for bankers to be “decapitated” for receiving bonuses–but his focus on J.P. Morgan is stepping up the heat on an institution that is generally widely respected for its commodity trading activities.

The broader financial media is now joining in, with the latest report Monday by U.K. newspaper The Financial Times.

Singling out U.S. bank J.P. Morgan, the story cited an unnamed source as saying the institution had cut a short silver futures position on Comex in an attempt to deflect criticism of its dealings in the precious metal. The report also said that a group of small precious metals investors has alleged that large silver futures positions held by several banks, including J.P. Morgan, are keeping prices low. It didn’t name the other banks, nor provide information of price levels at which trades were concluded.

J.P. Morgan declined to confirm whether it has significantly reduced its shorts in the silver market, noting that it doesn’t comment on its trading position–and who would?

But the bank went as far as to say:

“It is absolutely incorrect to say or imply that the New York Mercantile Exchange, Commodity Futures Trading Commission or any other exchange or regulator has instructed or asked us to reduce our position.”

If blaming the big bad banker has become all too easy in a post-Lehman Brothers world, backing up accusations appears to be a whole lot harder. The data used in the Financial Times was the U.S. Bank Participation Report, which shows that U.S. banks held 19.1% of the total number of outstanding short futures contracts at the start of December.

Big deal.

According to the CFTC’s bank participant report, the figure has remained steady in recent months, with U.S. banks holding 19.4% in November and 19.5% in October. While the figure is down from 30.2% in January, the overall short futures positions held by U.S. banks by April was already as low as 25.8%. If a bank has been stealthily cutting its short silver futures position, it didn’t do it recently. And if not U.S. banks, which players hold the remaining 80%-plus?

The figure for U.S. banks holding outstanding short futures in other commodity products is actually higher, with palladium at 21% and gold at 22.5%. A handful of currencies and energy products are not far off. But that’s still hardly a dominant position or cartel.

This isn’t the first time silver has attracted the attention of the regulator: there have been investigations in the past, all of which concluded the market was orderly. Most recently, in September 2008 the CFTC confirmed that its division of enforcement had been investigating complaints of misconduct in the silver market. It didn’t name any of the participants under investigation and hasn’t commented since.

The situation isn’t likely to go away in a hurry. The price of silver isn’t helping–it’s up at 30-year highs, a gain of 49% in the last three months alone. This is a greater rise over the same period than its sister metal gold, which is up 13%, as well as the London Metal Exchange’s flagship three-month copper contract, which is up 21%. Silver has also risen some 160% since the start of 2009, after the global financial crisis hit investor sentiment and subsequently the world’s metal markets.

So if U.S. banks have been attempting to keep silver prices lower, then it clearly isn’t working.

There are other bank critics, such as former trader Andrew Maguire. He alleged market manipulation of silver and gold by J.P. Morgan and HSBC earlier this year, after which unconfirmed reports of CFTC and Department of Justice investigations abounded. J.P. Morgan batted back, saying there was no criminal or civil investigation into its silver trading activities.

But what the reports lack in sourcing and detail, they make up for in drama, and only add to the negativity surrounding commodities. The watchful eye of the regulator is now firmly fixed on the asset class at a time of booming investor interest and improving fundamental demand, with 2011 likely to bring changes to the sector that may not be entirely welcome.

In Praise of Junk Silver

It's doomsday plus a few weeks. Say you need to bribe the border guards at the state line but they seem to have all the wristwatches and free range eggs they can use. Hah! There's nothing like a few good ol' silver coins to become their number one tourist, let this man through. Or your gas station's not accepting Visa and the ATMs have gone dark from sea to shining sea and you've got a hard to get reservation at a fallout-free retreat. Hah! Dazzle 'em with the sheen of silver my friend, fill 'er up and happy motoring to you.

Or you gotta do some emergency shopping but hackers insist your bank records have gone missing and your bank agrees and meanwhile Bernanke Bucks are sinking faster than a head-shot carp. Hah! With junk silver just step over to the VIP express aisle and take what you need, take two while you're at it and here, let me help you with that. Or you're down to your last few rounds and you've gotta hit the freedom trail like now, and there are a dozen shooting galleries between you and your little blue heaven but your ammo vendor ain't taking paper. Hah! With silver you can top off from his private stock, the nickel plated ones that chamber slick as butter, and y'all come back now.

All this is by way of saying silver is the common man's hedge against the consequences of well informed, highly educated stupidity. This time it's likely to manifest itself as a general repudiation of paper promises, including currency. Let's get to the plain facts. Junk silver means silver coins with no collector premium for rarity. They're culls, valued only for their silver content, called melt value, not that anybody actually melts them. [Updated values here, second table down] Just as a guide, with silver at $29 to $30 per troy ounce, a silver dime goes for a bit over two bucks, so for any junk silver coin you can figure face value times twenty, plus a cup of cappuccino. For the moment.

Annoying data: there are 14.58 troy ounces per avoir pound, that would be the regular kitchen-type pound, a troy ounce being 480 grains, the avoir ounce being 437.5 grains. The grain is identical in both systems. Rule of thumb: the troy ounce is about 10% heavier than the avoir ounce, but the troy pound is only 12 troy ounces and therefore lighter than the avoir pound, which is 16 avoir ounces. Coin silver is 90% silver, 10% copper. Finally, Indiana Jones is .812 Roy Chapman Andrews.

Dimes and halves are favored. For every ten ounces current wisdom says do five ounces in halves, five in dimes. You'll have more dimes than halves, five-to-one, natch. Quarters are somewhat less favored. Not for any actual, sensible, defensible reason. It's just the way it is. Could be the tyranny of even numbers. The silver dollar's place seems to have been taken by the one ounce silver eagle. It's too bad, the silver dollar is the embodiment of the ancient and original definition of a dollar, namely "three hundred and seventy-one grains and four sixteenths parts of a grain" of fine silver alloyed with copper to the tenth part. It's genuine Constitutional money. Get one and treasure it. And while you're doing so, reflect on today's paper dollar being equal to 1/29th of an ounce of silver, and how did that happen.

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Bank of America to pay $137 million in state fraud cases

These executives head some of the nation's largest and most closely watched financial institutions.

Bank of America will pay $137.3 million to settle allegations that it defrauded schools, hospitals and dozens of other state and local government organizations, federal officials said Tuesday. The settlement stems from a long-running investigation into misconduct in the municipal bond business that raises money for localities to pay for public services.

Bank of America is accused of depriving local organizations of millions of dollars by engaging in illegal behavior when investing the proceeds of municipal bond sales.

The bank is paying $107.8 million to these organizations in restitution, $25 million to the Internal Revenue Service for abuses related to the tax-free status of municipal bonds and $4.5 million to state attorneys general for costs related to their investigations.

The government showed Bank of America leniency in the settlement because the bank first disclosed the illegal conduct that launched the investigation. As a result, the bank must pay restitution but does not have to pay an additional financial penalty.

A number of bankers and other professionals from a variety of financial firms have pleaded guilty in the probe, which centered on companies conspiring to win municipal securities business in violation of statutes requiring fair competition. The investigation was conducted by the Justice Department and the Securities and Exchange Commission, among other agencies.

"Bank of America's disclosure of wrongdoing and cooperation has led to an aggressive, ongoing investigation by the Department of Justice into anticompetitive activity in the municipal bond derivatives industry," said Christine Varney, the department's antitrust chief. "The Division's investigation of this matter continues, and the prosecution of anticompetitive conduct in the financial markets remains our highest priority."

In a statement, Bank of America said it was pleased to put the matter behind it. "Bank of America is one of a number of financial institutions that are under investigation, but Bank of America was the first and only company to self-report, and it was our company that the Justice Department has cited as being particularly helpful in its investigation."

The banking giant is accused of taking part in a conspiracy in which it and other banks paid kickbacks to win the business of municipalities seeking to invest the proceeds of bond sales before the money is ready to be spent.

The municipalities hired companies to help them find attractive investments. Under federal rules, these companies are required to use a bidding process allowing banks and investment firms to offer competing proposals for how to invest the municipalities' money.

The companies are accused of directing the business to particular banks that paid them kickbacks. Bank of America was one such bank, according to federal officials.

"This ongoing investigation has helped to expose widespread corruption in the municipal reinvestment industry," said SEC enforcement director Robert Khuzami. "The conduct was egregious: In return for business, the company repeatedly paid undisclosed gratuitous payments and kickbacks and affirmatively misrepresented that the bidding process was proper."

The alleged misconduct dated from the late 1990s to the early 2000s. It affected municipal bond sales related to health-care facilities in Minnesota and utilities in Guam to universities in California.

Disagreement over EU debt crisis stalks summit

Gabriele Steinhauser
Associated Press

BRUSSELS — European leaders disagreed over how to fight the region's crippling debt crisis as they headed into a two-day summit in Brussels on Thursday and uncertainty spooked financial markets once again.

Amid the political deadlock, the crisis' effects rang out across the continent. Spain saw its borrowing costs jump in a bond sale a day after rating agency Moody's warned it might downgrade its debt. A bailout of Spain would dwarf those of Ireland and Greece and test the EU's financial limits.

Violent protests shook Athens on Wednesday and strikes continued throughout Greece.

Still, the two-day EU summit was not expected to result in any new shock-and-awe decisions to contain the smoldering debt crisis. Instead it will focus on a small change to EU treaties to set up a new crisis mechanism agreed almost two months ago.

German Chancellor Angela Merkel insisted that in itself was a milestone.

"It is a very big step of solidarity among the euro states," she said in a meeting of Christian Democrat leaders ahead of the summit.

She sought to play down days of rumors and reports about quarrels among the member states on how to fix the currency crisis that has become a major threat to EU plans of further integration.

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Governments high on taxation

The taxman wants to make sure he scores off Adrienne Baker-Hick’s pot purchases.

The Warkworth woman didn’t expect to get hit for nearly $100 of HST monthly when buying her usual $750 shipments of medical marijuana.

But the taxman has been digging into her pocket ever since the HST came into effect in July.

“It’s ridiculous,” said Baker-Hicks, 52, who became licensed to purchase marijuana last year.

“I am charged $97.50 per shipment. The pills I have to take from my doctors, I don’t have to pay HST on them,” she added. “Here, the doctor signs it. That’s how they fill out the cards — they have to put how many grams you get for the month. It’s the same thing as a prescription.”

In the case of prescription drugs, a patient pays only a dispensing fee.

“I’m able to afford (the HST), but there are some people who can’t,” she said.

Her allotment of 150 grams of pot each month helps Baker-Hicks deal with the 27 chronic diseases.

It helps with the pain of her degenerated bone spurs that damage her spinal cord, a blood condition and a disorder which causes seizures.

“It helps you deal with your day,” she said.

The former biomedical researcher has been on long-term disability for 10 years and stays mainly at home with her husband in their home near Peterborough.

“Health Canada charges me and I’ve spoken to them and I’m still waiting for callbacks from them from March,” she said.

According to Health Canada, which regulates medicinal marijuana, pot is subject to HST in applicable jurisdictions – including Ontario.

“Dried marijuana is not an approved therapeutic drug (i.e. prescription drug under the Food and Drug Act,” said Health Canada spokesman Stephane Shank.

The Canadian Revenue Agency could not provide a comment on why HST was being charged on the plant.

“Individuals who obtain a Health Canada supply of marijuana for medical purposes may claim the costs of their marijuana as a medical expense for tax purposes, provided that they have kept their Government of Canada receipts,” Shank added.

It’s little comfort for Baker-Hicks, who accused the government of weeding out those who smoke pot to help cope with their illnesses.

“With each shipment I get the paperwork from Ottawa telling me the government doesn’t recommend the use of medical marijuana and that it’s addictive,” she said “That tells you what the government thinks about us using marijuana.”

« Bank of America in Settlement Talks Over Mortgages »

At issue are mortgage putbacks...


Source - WSJ

Bank of America Corp., after vowing to fight requests that it repurchase certain loans, has begun potential settlement discussions with some of its largest mortgage investors.

The 17-member group now in talks with the nation's largest bank as measured by assets includes the Federal Reserve Bank of New York, government-owned mortgage company Freddie Mac, BlackRock Inc., and Allianz SE's Pacific Investment Management Co., or Pimco.

The bank's approach with this group appears to signal a change in tone for Chief Executive Brian Moynihan, who in November pledged to engage in "day-to-day, hand-to-hand combat" on investor requests to repurchase flawed mortgages made before the U.S. housing collapse.

The investors, some of whom are acting on behalf of clients, sent a letter in October alleging that a Bank of America unit didn't properly service 115 bond deals comprised of residential mortgages. It gave the bank 60 days to respond.

The disclosure of the letter sent Bank of America's stock tumbling 4.4% on Oct. 19, as investors grappled with concerns that the bank could be overwhelmed with such investor requests. The group has since expanded and now includes 17 investors and 167 bond deals.

"Our clients are obviously very pleased that we've been able to open this dialogue and we hope to move it forward in a constructive direction," said Kathy Patrick, an attorney for the bondholders. Ms. Patrick said that the initial extension in the time period for negotiations will be through Jan. 30, "but it can obviously be extended if the discussions are productive."

No U.S. bank is more vulnerable to an array of political and financial threats posed by home-lending woes. Bank of America has more repurchase requests than any of its rivals. It services one of every five U.S. mortgages, many of them from Bank of America's acquisition of lender Countrywide Financial Corp. in 2008.

Total new mortgage repurchase claims amounted to $12.8 billion at the end of the third quarter, up from $7.5 billion in the year-ago quarter. The bank has set aside $4.4 billion in reserves for these put back attempts.

Continue reading at the WSJ...


« Treasury Says GM Buys Back Preferred Shares »

WASHINGTON—The U.S. Treasury said Wednesday that General Motors Co. had completed the repurchase of preferred stock issued to the government as part of the car maker's U.S. bailout last year.

In late October, the Obama administration announced that GM would buy back $2.1 billion in preferred stock held by the Treasury.

Continue reading at the WSJ...

Here's the real story on GM's bailout...

Steve Rattner: "GM Had No Idea On Any Given Day How Much Cash They Had"

GM's annoying new TV commercial ruined my Thanksgiving and Evel Knievel Memories

LIKE A CROCK - How The Hell Did GM Pay Back Its Loans "In Full And Ahead of Schedule?" Well, It Didn't

F#@K YOU GEITHNER - Treasury Announces Plan To Sell Taxpayers' GM Stake With 'No Concern For Profit'


« Elizabeth Warren & Ted Kaufman Deliver TARP Oversight Reports For August Thru December 2010 »

Video - TARP COP Ted Kaufman delivers the December report

A Review of Treasury's Foreclosure Prevention Programs

We covered it in more detail here earlier today:


November report...

Video - Chairman Ted Kaufman of the TARP Congressional Oversight Panel introduces the COP November report, "Examining the Consequences of Mortgage Irregularities for Financial Stability and Foreclosure Mitigation."


October report...

Video - Chairman Ted Kaufman of the TARP Congressional Oversight Panel introduces the COP October report, "Examining Treasury's Use of Financial Crisis Contracting Authority."


No video for September as the chairmanship was changing from Elizabeth Warren to Ted Kaufman, but a report was produced: "Assessing the TARP on the eve of its expiration."


Finally, Elizabeth Warren with the August report...

Video - Chair Elizabeth Warren of the TARP Congressional Oversight Panel introduces the COP August report, "The Global Context and International Effects of the TARP."


Retail Watch: A&P Files Ch. 11; TJX Consolidating AJ Wright Division

Also This Week: Dollar General Ahead of Count in New Stores; Looks To Up it More; Realty Income Acquires 135 SuperAmerica Stations; Pantry Acquires 47 Presto Convenience Stores; Retail Outlook for CMBS is Cautiously Optimistic; CVS Rolling Up 77 New Store Loans; Macy's Chooses West Virginia for New Fulfillment Center; Tanger Ups, Extends its Lines of Credit; O'Charley's Closes 16 Restaurants; and DJM Realty Hired To Dispose of Lack's Stores, Warehouses

The Great Atlantic & Pacific Tea Company Inc. (A&P) filed a voluntary petition under Chapter 11 of the U.S. Bankruptcy Code with the U.S. Bankruptcy Court for the Southern District of New York.

A&P said it plans to continue to conduct business and serve customers at its 395 stores while proceeds through the Chapter 11 process. The company said the financial and operational restructuring was necessary in order to shed debt and restore it to long-term financial health.

However, as part of its bankruptcy filing, A&P is looking to cancel leases on 73 "dark" stores in 12 states, where the company has already ceased ongoing operations and has been unable to sublease, assign or terminate the relevant leases.

The filing could have a significant impact on retail centers in certain markets, said Suzanne Mulvee, a real estate strategist with CoStar Group's Property & Portfolio Research.

"It may be surprising that A&P has stumbled, given a geographic footprint in arguably more supply-constrained metros," Mulvee said. "But what is happening to A&P is an example of a bigger trend. The wholesale and discount stores have amassed a large stake in the grocery market - Wal-Mart, Sam's Club, Costco, and Target together make up 35% of U.S. food sales - and are pushing traditional discount grocers out of business. These nontraditional retailers continue to add more inventory to the market, stifling expansion by their traditional counterparts and making it likely that A&P will not be the last victim."

A&P "has an estimated 16 million square feet of store space in 400 locations, most of these stores are in the New York metropolitan area (which includes Bergen and Passaic counties in New Jersey)," Mulvee said. "There, A&P accounts for as much as 25% of the grocery store space, excluding ground floor retail in Manhattan. The grocer is also heavily concentrated on Long Island and in Northern New Jersey, where it comprises 22% and 17% of the local stock of traditional and nontraditional grocery retailers."

"It is in these markets where a failure to emerge from bankruptcy may cause the most disruption," Mulvee said. "However, under bankruptcy protection, locations in Baltimore and Hartford are more likely to be scrutinized for closure, as the grocer is less likely to have developed sufficient economies of scale there. These markets are also more saturated with grocery space."

The bankruptcy court has approved A&P's access to $800 million in debtor in possession (DIP) financing, which will enable it to continue paying local suppliers, vendors, employees and others in the normal course of business. The company has entered into an $800 million DIP facility with JPMorgan Chase & Co.

"We have taken this difficult but necessary step to enable A&P to fully implement our comprehensive financial and operational restructuring," said A&P president and CEO, Sam Martin. "While we have made substantial progress on the operational and merchandising aspects of our turnaround plan, we concluded that we could not complete our turnaround without availing ourselves of Chapter 11. It will allow us to restructure our debt, reduce our structural costs, and address our legacy issues."

A&P announced that Frederic F. (Jake) Brace, who was named chief administrative officer in August, will lead the company's restructuring effort. Brace will take the additional title of chief restructuring officer to reflect his expanded role.
For a list of the 73 store lease cancellations download tthe Watch List Newsletter,, a weekly pdf that includes leads of distressed properties and loans and other news items not found on the CoStar Group web news pages.

T.J. Maxx To Close 71 A.J. Wright Stores, Layoff 4,400

TJX Companies Inc., an off-price retailer of apparel and home fashions in the U.S. and worldwide, plans to consolidate its A.J. Wright division by converting 91 A.J. Wright stores into T.J. Maxx, Marshalls or HomeGoods stores and by closing the remaining 71 stores, along with A.J. Wright's two distribution centers and home office.

"A critical factor in this decision is that, over the past two years, we have learned how to serve the A.J. Wright customer with our T.J. Maxx and Marshalls banners and have seen very strong performance from these stores in demographic markets similar to those in which we have A.J. Wright stores," said Carol Meyrowitz, president and CEO of The TJX Cos. "We believe these markets represent an incremental growth opportunity for our Marmaxx division, and that this business now has the potential for 2,300-2,400 stores, 300-400 more than we had previously estimated."

"While this action will reduce our square footage growth in the near-term, due to the 71 store closures, we expect the square footage growth of our continuing operations to remain in the 5% to 6% range thereafter," Meyrowitz added. "In addition, with this growth, we would expect to continue to create thousands of jobs annually on a worldwide basis."

In total, across the United States, the company estimates that 4,400 positions will be eliminated as a result of this action, almost half of which are part-time positions. The company will also be closing its two A.J. Wright distribution centers, one in South Bend, IN, and the other in Fall River, MA, as well as the A.J. Wright headquarters in Framingham, MA and certain regional offices.

The company anticipates that all 162 A.J. Wright stores will close between late January and the middle of February 2011. For the 91 stores that will be converting to other banners, the company estimates this conversion process will generally take eight weeks, during which time the stores will remain closed.

Th company plans to permanently close the following A.J. Wright stores:
  • California: Bakersfield, San Bernadino/Colton, El Monte, Inglewood and La Puente;

  • Connecticut: Bridgeport, Hamden, West Haven and Wethersfield;

  • Florida: Jacksonville (St. John's Square);

  • Georgia: Decatur and Stone Mountain;

  • Illinois: Calumet Park, Chicago (Six Corners), Chicago (Bricktown Square), Cicero (Cicero Marketplace), Forest Park, Chicago (Washington Square), River Grove, Evanston, Markham, Loves Park and Matteson;

  • Indiana: Highland;

  • Massachusetts: Fitchburg, Malden, Medford, Methuen, New Bedford, Quincy, Somerville, Springfield (Lowe's Plaza), Waltham and Worcester (Perkins Farms Plaza);

  • Maryland: Baltimore (Meadows Park Shopping Center);

  • Michigan: Grand Rapids, Oak Park, Redford and Southgate;

  • New Hampshire: Nashua;

  • New Jersey: North Brunswick and North Bergen;

  • New York: Albany, Amherst, Buffalo (Delaware Consumer Square), West Seneca, Cheektowaga, Irondequoit, Long Island City, Newburgh, Schenectady, Syracuse (Shop City Plaza), Syracuse (Western Lights Plaza) and Utica;

  • Ohio: Willoughby Hills, Columbus (Great Western Shopping Center), Columbus (Great Southern Shopping Center) and Columbus (Town & Country Plaza);

  • Pennsylvania: Pittsburgh (Edgewood Towne Center), Pittsburgh (Crafton-Ingram Shopping Center), Philadelphia (Park West Shopping Center) and Wyncote;

  • Rhode Island: East Providence;

  • Tennessee: Memphis (Raleigh Springs Marketplace) and Memphis (South Plaza);

  • Virginia: Chesapeake, Hampton, Richmond (Merchants Walk), Virginia Beach and Woodbridge; and

  • Wisconsin: Milwaukee (709 East Capitol Drive).

Dollar General Ahead of Count in New Stores; Looks to Up Total Even More

Dollar General Corp. in Goodlettsville, TN, has pumped nearly $260 million into new property and equipment so far this year.

The capital expenditures include $95 million relating to new leased stores and store purchases, $85 million for improvements and upgrades to existing stores, $44 million for remodels and relocations of existing stores, $18 million for distribution and transportation improvements and $17 million for systems-related capital projects.

Year-to-date, the discount retailer has opened 491 new stores and relocated or remodeled 458 stores.

Dollar General said it plans to open 600 new stores and to remodel or relocate a total of 500 stores in 2010. Total capital expenditures for the fiscal year are currently expected to be $410 to $430 million.

The company's previous guidance was for capital expenditures of $350 million.

The upward revised estimate includes the anticipated purchase of certain of the company's store real estate locations and initial costs relating to the construction of a new distribution center in the Southeast.

In 2011, the company plans to open 625 new stores, including expansion into Connecticut, New Hampshire and Nevada. In addition, the company plans to remodel or relocate 550 stores. Selling square footage is expected to increase 7% in 2011.

Realty Income Acquires 135 SuperAmerica Stations

Realty Income Corp. completed the acquisition of 135 SuperAmerica convenience stores and one support facility for $248 million under long-term, triple-net lease agreements.

These, and certain other assets, were sold by Marathon Oil and will be leased to newly formed companies owned and operated by Northern Tier Energy, a portfolio company of ACON Investments and TPG Capital.

Realty Income acquired the 136 SuperAmerica properties under 15-year, triple-net lease agreements.

The stores are in Minnesota and Wisconsin, and average 3,500 leasable square feet on 1.14 acres.

In addition, the individual locations have, on average, 6.5 multi-pump gasoline dispensers, and are seasoned stores with long term operating histories. The stores are operationally strong with gallons sold and merchandise sales well above national averages, and strong cash-flow coverage of rent at the store levels.

With this acquisition, the company anticipates that the convenience store industry will now generate 20% of Realty Income's revenue going forward.

Including the SuperAmerica transaction, and other properties to be acquired in the fourth quarter, we now anticipate that acquisition activity should exceed $700 million for 2010," said Tom A. Lewis, CEO of Realty Income. "These acquisitions should contribute to the continued stable stream of lease revenue from which we pay monthly dividends."

Pantry Acquires 47 Presto Convenience Stores

The Pantry Inc., owner and operator of Kangaroo gas and convenience stores, acquired 47 convenience stores from Presto Convenience Stores LLC. The stores operate under the Presto trade name and are in Kansas with three stores in Missouri.

The 47 acquired stores generated revenues of $194 million for the 12 months ended May 2010.

The acquisition is expected to be accretive to the company's earnings per share in fiscal 2011 and was funded with cash on hand. The acquisition includes the real estate underlying 36 of the stores. Terms were not disclosed.

The acquisition expands Pantry's geographic footprint and creates new fill-in opportunities for future growth.

Retail Outlook for CMBS is Cautiously Optimistic

While this holiday season is expected to see a slight gain in same store sales over last year, increases are expected to be in the low single digits, according to Fitch Ratings, which anticipates the retail sector will see similar growth rates in 2011.

Despite continuing high unemployment, consumers have begun to cautiously increase spending. Retailers that are expected to fare better into 2011 are value-oriented, needs-based centers. Malls, especially those secondary in their markets, will continue to struggle to keep sales and occupancy.

Recovery is expected to come at a relatively slow pace as many landlords have yet to re-lease vacant big box spaces. Absorption is slowly trending upward as the strategy of some retailers to expand into untapped markets (while the rent remains low) has more than counterbalanced additional store closures in underperforming locations.

By dollar balance, retail loans represent 30% of the current outstanding balance of U.S. CMBS transactions. Current delinquencies (6.25%) and cumulative default rates (9.21%) for retail are slightly lagging the overall CMBS universe at 7.78% and 10.60%, respectively.

Recent lending for retail has been fairly strong compared to other property types, as evidenced by the large percentage in 2010 CMBS conduit deals, ranging from 33% to 71%.

CVS Rolling Up 77 New Store Loans

CVS/Caremark Corp. plans to securitize more than $338 million in loans backing 77 new drugstores in 28 states.

Based on information received through Dec. 1, 2010, Moody's Investors Service has assigned a provisional (P) Baa2 rating to $338.1 million of CVS Lease-Backed Pass-Through Certificates, Series 2010-B, to be issued by a trust that will acquire 77 first-priority lien commercial mortgage, credit-tenant lease loans.

The loans will be secured by mostly newly constructed drug stores and related realty that will be triple-net leased to subsidiaries of CVS/Caremark. Each of the leases will be bondable and guaranteed by CVS, and bankruptcy-remote, special purpose borrowers will own each of the fee or ground-leased properties.

The loans mature in January 2033. Fixed net rent under the leases will be sufficient to pay in full all interest and principal of the loans.

Macy's Chooses West Virginia for New Fulfillment Center

Macy's Inc. plans to build a major new fulfillment center near Martinsburg in Berkeley County, WV, to support the continued growth of its online business. The site is located strategically along I-81, about 80 miles northwest of Washington, D.C.

Construction on the 1.3 million-square-foot facility is expected to begin in spring 2011, with operations beginning in April 2012 and order shipments beginning in summer 2012.

Two sites in Berkeley County are under consideration for the final location. When fully operational, the Martinsburg fulfillment center is expected to employ approximately 1,200 full- and part-time associates year-round. In addition, another approximately 700 temporary seasonal associates are expected to be hired each year to handle a significantly higher level of online orders from customers during the holiday shopping season.

"Our internet sales continue to grow rapidly as part of the omnichannel strategy at Macy's and Bloomingdale's - allowing customers to shop seamlessly in stores, online and via mobile devices in a manner that meets their needs and preferences. In the first 10 months of fiscal 2010, our online sales were up by about 29% compared with the same period last year. This is on top of growth of about 20% in 2009," said Terry J. Lundgren, chairman, president and CEO of Macy's. "The new Martinsburg fulfillment center will represent a significant expansion of our online capacity, and will be used in particular to prepare and ship orders to customers in Northeast and Middle Atlantic states."

Online orders from currently are handled primarily by Macy's Inc. fulfillment centers located in Portland, TN, and Goodyear, AZ. orders are handled primarily from a fulfillment center in Cheshire, CT. As previously announced, the Portland facility, with 600,000 square feet of space, currently is being expanded by 374,000 square feet in a project expected to be completed in fall 2011.

Tanger Ups, Extends its Lines of Credit

Tanger Factory Outlet Centers entered into a $385 million unsecured revolving credit bank facility.

In addition to this syndicated facility, Tanger simultaneously entered into a $15 million stand-alone liquidity revolving credit facility with Bank of America providing total revolving line capacity of $400 million. The liquidity facility's terms are substantially the same as the syndicated facility, including maturity date.

"This new syndicated facility has provided us the opportunity to reinforce our relationships with our long-term banking partners and to initiate a number of new banking relationships," said Steven B. Tanger, president and CEO. "With the additional stand-alone revolving credit facility, Tanger now has $400 million in line of credit capacity through late 2013. Coupled with the free cash flow generated by our operations, we believe that we are well positioned for future growth."

The syndicated facility replaces Tanger's previous $325 million in bilateral lines of credit that were scheduled to mature between June and August 2011, and, together with the stand-alone facility, represents an increase in line capacity of more than 20%.

Through an accordion feature, the maximum borrowing capacity on the syndicated facility may be increased to up to $500 million in certain circumstances. The maturity date of the new facility is Nov. 29, 2013, and the company has an option to extend the facility for one year.

At closing, the facilities bear interest at a spread over LIBOR of 190 basis points, based on the operating partnership's current long-term debt rating.

Merrill Lynch, Pierce, Fenner & Smith, successor by merger to Banc of America Securities, and Wells Fargo Securities were Joint bookrunners and joint lead arrangers. Participating banks are as follows: Bank of America, Wells Fargo Bank, Branch Banking and Trust Co., SunTrust Bank, US Bank, PNC Bank, Regions Bank, Royal Bank of Canada and Scotiabanc.

O'Charley's Closes 16 Restaurants

O'Charley's Inc. closed 11 underperforming O'Charley's restaurants and five underperforming Ninety Nine restaurants.

The decision to close the restaurants was the result of an extensive review of the company's restaurant portfolio that examined each restaurant's recent and historical financial and operating performance, its position in the marketplace, and other operating considerations.

"These closings permit us to focus our energy and efforts on improving the performance of our remaining 339 company-operated restaurants in 25 states," said David Head, president and CEO of Nashville-based O'Charley's. "We continue to strongly believe in the potential of our three concepts which enjoy high brand loyalty and guest appeal."

Eight of the 16 closed restaurants will be treated as discontinued operations in the company's financial statements. Not including the discontinued operations, the company estimates that total pretax charges relating to these closings will be approximately $5 million.

DJM Realty Hired To Dispose of Lack's Stores, Warehouses

Retail home furnishings chain operating Lack's Stores Inc. and Lack Properties Inc. have hired DJM Realty, a Gordon Brothers Group Co., to manage the disposition of all leased and owned retail and warehouse facilities throughout Texas.

Lack's Stores specializes in quality home furnishings including furniture, bedding, major appliances and home electronics through retail outlets throughout Texas. Lack's Stores is the lessor of 35 retail locations, and Lack Properties, a wholly-owned subsidiary, is the owner of the real property and improvements associated with 14 store and warehouse locations that are leased to Lack's.

DJM Realty will be marketing 35 retail locations which range from 16,000 to 70,000 square in: Abilene, Alice, Austin, Bay City, Beeville, Clute, College Station, Corpus Christi, Del Rio, El Campo, Killeen, Leon Valley, Longview, Lubbock, Lufkin, Midland, New Braunfels, Odessa, Port Lavaca, Portland, San Angelo, San Antonio, Temple, Tyler, Uvalde, Victoria and Waco.

In addition, it will be marketing four warehouse facilities, including a 380,000-square-foot state of the art distribution center in Schertz, TX.

Lack's Stores recently filed for Chapter 11 and is currently liquidating its inventory through their stores until closing sales are complete. The retention of DJM is subject to the approval of the United States Bankruptcy Court.

Download this story and other national news in the Watch List Newsletter,, a weekly pdf that includes leads of distressed properties and loans and other news items not found on the CoStar Group web news pages. Sign up for the Watch List E-Mail Alert. It's the quickest way to link directly to the news and leads you want. Just e-mail your name, title, company, company business, city, state, and e-mail address to Mark Heschmeyer

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« Chris Whalen: Devaluation And Default Will Be Dominant Banking Themes Of 2011 »

More detail on this clip is here...


Guest post submitted by banking analyst Christopher Whalen

Will Devaluation and Default be the Themes for 2011?

The mystery of how so many useless new houses came to be built in a remote part of Ireland might have the usual explanation: that rash speculation had been unwisely left to go its own way by the state. Such an impression of previous government passivity would certainly be helpful to the Fianna Fáil party, which has governed Ireland since 1997 and which on September 30 announced it would spend up to €18 billion on a further state bailout of Irish banks-otherwise, in the words of Brian Lenihan, the finance minister, their insolvency would "bring down" the Irish state itself, in ways he didn't go on to describe. Lenihan put the blame squarely on the banks for their "pattern of reckless lending," but as Fintan O'Toole demonstrates time and again in this book, the government was far from being a helpless spectator. Its policies and behavior were crucial to the property boom that, when it inevitably turned to bust, wrecked the Irish economy so spectacularly. O'Toole has written much about the theater, including brilliant studies of Shakespeare and Sheridan, and he sees tragedy, absurdity, and of course hubris among the human ruins left standing on the national stage. What he shows most memorably, however, is how Ireland's political leaders were complicit in the boom's every aspect: land acquisition, planning permission, funding.

Ian Jack
"Ireland: The Rise & the Crash"
The New York Review of Books
November 11, 2010


First we wish a safe holiday and happy, healthy and prosperous New Year to all. The IRA will be quiet until just before New Years, when we will review last year's predictions publish our prognostications about 2011.

Also, this week in The IRA Advisory Service, we discuss how the proposal by the FDIC to impose punitive insurance premiums on large banks that use all types of brokered deposits could have a decidedly adverse impact on the entire U.S. banking industry. To our friends at the FDIC we recall the old saying: Be careful what you wish for. You may get it.

We start this comment with an excerpt from Ian Jack's review of Fintan O'Toole's new book, Ship of Fools: How Stupidity and Corruption Sank the Celtic Tiger. Both are must reading for students of the crisis around the world. And conveniently enough, you have but to change the words of either of these works to include American politicians and states to show that the stories on both sides of the pond were remarkably similar.

Speculative booms are the result of free people doing greedy, short-sighted and stupid things to benefit themselves at the expense of everyone else. We invite you to examine the new book by our friend Alex Pollock at American Enterprise Institute, Boom and Bust: Financial Cycles and Human Prosperity, wherein he writes:

"Despite their historical frequency, the busts at the end of the bubbles take people by surprise. Then they ask the same questions. How did it happen? How did prices get out of control? How did so many risky loans get made? Who is guilty. What can we do so it never happens again?"

Well, sad to say that the whole point of being a free society is that booms and busts will happen again. The Irish and their American cousins share this terrible but also wonderful attribute. When the desire for individual freedom and opportunity runs into the reality of a zero sum world, there is fraud and larceny. Sad to say, when Americans arrive at the point of perfectly managed regulatory perfection we shall all being living in a Euro-style corporate dictatorship. The reason that the Danes have such an orderly mortgage market is because like much of Europe, their people have only the freedoms allowed by the state. And fraud and corruption in Europe are largely the province of politicians and their clients among the largest banks and corporations. Indeed, America is well along in the journey down that road to serfdom, in part because we still are unwilling to punish the outliers and thereby restore balance between individual aspirations for a better life, call it the American dream, and the public good.

Last week, we received an invitation from some good citizens to sign onto a letter calling for criminal prosecutions of fraud as a necessary condition for national recovery. At first this idea liked us well, but then we reconsidered. If you are calling for criminal prosecutions, does this not demand a certain degree of specificity? Thus we demurred in the letter writing effort, preferring instead to conduct our own investigation. We are already on the record regarding our view of the need for prosecution of delinquents such as former Citigroup director Robert Rubin. Read the past issues of The IRA ( 'Country Risk: The World According to Robert Rubin (Updated)', June 29, 2010 ). Former Treasury Secretary Hank Paulson and Bank of America CEO Ken Lewis also come to mind.

Our friend Yves Smith over at Naked Capitalism has been sorting out the foreclosure documentation mess for some months and her work suggests some additional culprits. In a December 2, 2010 post, Smith skewers American Securitization Forum executive director Tom Deutsch for giving "one of the most outrageously dishonest presentations I can recall ever seeing." Click here to read "American Securitization Forum Tells Monstrous Whoppers in Senate Testimony on Mortgage Mess."

Now, just to be clear, we are not suggesting that all of the members of the ASF should be transported free of charge to Guantanamo. But if you follow the excellent work done by Smith and others in the blogosphere, the only conclusion to be reached is that there are potentially thousands of individuals associated with originating, selling and/or servicing mortgage loans who could or should be prosecuted for deliberate acts of fraud. And the lawyers too. Yet Washington refuses to do the will of the American people.

The view on all of this expressed by the banking and loan servicing community is that the imperfections in the documentation of a lien or the transfer of a note are significant, but that at the end of the day the imperfections will be cured and the note holder will prevail. We agree. More to the point, when the dead weight of all of the defaulted loans which are just now starting to move from foreclosure to involuntary sale falls upon lenders, the courts, and communities, the legal and technical problems that Smith and others very accurately accurately describe will become political and they will be fixed -- and not always to the benefit of the note holder. The whole point of our federalist system is that such issues must first be adjudicated by the lower courts, then the appeals courts and Congress will take a systemic view and move toward a consistent means of resolution.

One of the things about a free society is that when a problem grows to a certain size, the political force behind the good of the many becomes irresistible and the good of the few or the one can often overlooked. As new political tendencies join governments in Ireland and the U.S. in January 2011, we look for macro economic and financial factors to start driving events in some ways that will be very unpleasant for creditors and consumers like. More on this in a couple of weeks. Just remember that sovereign states like Ireland, California and New York don't file bankruptcy, they merely default a la Iceland and Argentina. Or to quote the headline in The Daily Bail: "Secret GOP Plan: Avoid A Massive Bailout By Pushing States To Declare Bankruptcy, Smashing Unions"


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« Chairman Ron Paul: "We Must Audit The Fed In 2011" (Video & Transcript) »

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Give Us Fed Transparency Or Give Us Death (WSJ Op-Ed By Ron Paul & Jim Demint)


A Full and Complete Audit of the Fed in 2011

By Chairman Ron Paul

Since the announcement last week that I will chair the congressional subcommittee that oversees the Federal Reserve, the media response has been overwhelming. The groundswell of opposition to Fed actions among ordinary citizens is reflected not only in the rhetoric coming out of Capitol Hill, but also in the tremendous interest shown by the financial press. The demand for transparency is growing, whether the political and financial establishment likes it or not. The Fed is losing its vaunted status as an institution that somehow is above politics and public scrutiny. Fed transparency will be the cornerstone of my efforts as subcommittee chairman.

Thanks to public pressure earlier this year, Congress did pass legislation that requires the Fed to disclose some information about its bailout of select industries and companies following the 2008 financial crisis. So two weeks ago the Fed released data concerning more than $3 trillion of assistance it offered to banks through its bailout facilities. After reviewing this data, however, we are left with many more questions about the Fed's "lending".

In the "Term Securities Lending Facility", the Fed was supposed to have loaned against AAA-rated securities-- yet over half of the collateral put up by banks to obtain loans had no listed credit rating. Should we assume that the Fed accepted absolute junk rated securities as collateral for loans? Presumably these securities were so bad that they wouldn’t even publicize their credit rating. So why should our central bank, backed up by your taxes, accept such collateral?

On another note, of the $1.25 trillion purchased under the Fed’s "Mortgage-Backed Securities Purchase Program," only $877 billion in purchases have been publicized. What happened to the remaining $400 billion?

These kinds of limited disclosures by the Fed only underscore the need for a full and complete audit of the Fed’s financial books. This audit should be done by an independent third party, in the same manner that public companies are audited. The Fed should make public its balance sheet, income statement, and perhaps most importantly its cash flow statement. It also should publicize the notes explaining those financial statements.

We seem to forget sometimes that Congress created the Fed-- it is a government-created banking monopoly, and its top decision-makers are appointed by the President and confirmed by the Senate. If the Fed does not perform satisfactorily in the eyes of these politicians and their constituents, the Chairman and Governors may not be re-nominated.

In theory, Congress could even repeal the Federal Reserve Act altogether since it has the authority to do so. Obviously Congress is within its authority to audit an organization it created by statute, and it is time to assume that responsibility.

With 320 Members of Congress cosponsoring my legislation to fully audit the Fed in the 111th Congress, my hope is that we can build on our broad bipartisan coalition in 2011 and continue the push for greater Fed transparency going forward.