Thursday, May 16, 2013

April housing starts plummet from almost 5-year high

WASHINGTON (Reuters) - Ground-breaking for new U.S. homes plummeted more than expected in April from an almost five-year high, but applications to build new homes shows the housing sector could still contribute to the strengthening economic recovery.
The Commerce Department said on Thursday that starts at building sites for homes fell 16.5 percent last month to a 853,000-unit annual rate. That was below analysts' expectations of a 945,000-unit rate.
The housing recovery, driven by growing demand and record-low mortgage rates, has started to boost other sectors of the economy in the first part of the year.

[Click here to check home loan rates in your area.]
Builders appear to be ramping up for more construction projects. Newly issued building permits, a gauge of future construction, rose 14.3 percent from a month earlier to an annual rate of 1.017 million, the highest level since June 2008.
Permits for single-family homes, which comprise about two thirds of the total, rose 3 percent to a 617,000-unit rate, the highest since May 2008.
(Refiles to correct spelling of 'comprise' in last paragraph)
(Reporting By Margaret Chadbourn; Editing by Neil Stempleman)

Wal-Mart profit misses Street as U.S. sales weak

(Reuters) - Wal-Mart Stores Inc's (WMT.N) quarterly profit just missed Wall Street expectations on Thursday, with sales down 1.4 percent at its Walmart U.S. stores open at least a year.
The world's largest retailer said U.S. sales suffered from a delay in income tax refund checks, cool weather, less grocery inflation than expected, and the payroll tax increase.
Shares of Wal-Mart fell 2.3 percent in premarket trading to $78. The stock had hit a new high of $79.96 on Wednesday.
Wal-Mart earned $3.78 billion, or $1.14 per share, in the first quarter ended on April 30, up from $3.74 billion, or $1.09 per share, a year earlier.
The analysts' average forecast was $1.15 per share, according to Thomson Reuters I/B/E/S. In February, Wal-Mart had forecast a profit of $1.11 to $1.16 per share.
First-quarter revenue rose 1 percent to $114.19 billion.
Same-store sales at Walmart U.S. fell 1.4 percent, while the company had earlier expected such sales to be about flat. Visits to Walmart U.S. stores open at least a year fell 1.8 percent, while the average amount spent per visit rose 0.4 percent.
Wal-Mart forecast earnings of $1.22 to $1.27 per share for the current second quarter, up from $1.18 a year earlier.
The company said it expected second-quarter same-store sales, excluding those of fuel, to be flat to up 2 percent at Walmart U.S. and up 1 percent to 3 percent at its Sam's Club warehouse store chain.
(Reporting by Jessica Wohl in Chicago; Editing by Lisa Von Ahn)

Wal-Mart Misses, Weekly Jobless Claims, Google Getting More Gargantuan

Where Has All the Money Gone?

By David Vine, TomDispatch
This piece first appeared at TomDispatch. Read Tom Engelhardt’s introduction here.
Outside the United States, the Pentagon controls a collection of military bases unprecedented in history. With U.S. troops gone from Iraq and the withdrawal from Afghanistan underway, it’s easy to forget that we probably still have about 1,000 military bases in other peoples’ lands. This giant collection of bases receives remarkably little media attention, costs a fortune, and even when cost cutting is the subject du jour, it still seems to get a free ride.
With so much money pouring into the Pentagon’s base world, the question is: Who’s benefiting?
Some of the money clearly pays for things like salaries, health care, and other benefits for around one million military and Defense Department personnel and their families overseas. But after an extensive examination of government spending data and contracts, I estimate that the Pentagon has dispersed around $385 billion to private companies for work done outside the U.S. since late 2001, mainly in that baseworld. That’s nearly double the entire State Department budget over the same period, and because Pentagon and government accounting practices are so poor, the true total may be significantly higher.
Not surprisingly, when it comes to such contracts and given our recent wars, the top two countries into which taxpayer dollars flowed were Afghanistan and Iraq (around $160 billion). Next comes Kuwait ($37.2 billion), where the military has had a significant presence since the first Gulf War of 1990-1991, followed by Germany ($27.8 billion), South Korea ($18.2 billion), Japan ($15.2 billion), and Britain ($14.7 billion). While some of these costs are for weapons procurement, rather than for bases and troop support, the hundreds of thousands of contracts believed to be omitted from these tallies thanks to government accounting errors make the numbers a reasonable reflection of the everyday moneys flowing to private contractors for the world of bases the United States has maintained since World War II.
Beyond the sheer volume of dollars heading overseas, an analysis of Pentagon spending reveals a troubling pattern: the majority of benefits have gone to a relatively small group of private contractors. In total, almost a third of the $385 billion has flowed into the coffers of just 10 top contractors, including scandal-prone companies like KBR, the former subsidiary of Halliburton, and oil giant BP.
In addition, Pentagon spending on its baseworld has been marked by spiraling expenditures, the growing use of uncompetitive contracts and contracts lacking incentives to control costs, outright fraud, and the repeated awarding of non-competitive sweetheart contracts to companies with histories of fraud and abuse. There’s been so much cost gouging that any attempt to catalog it across bases globally would be a mammoth effort. The $31-$60 billion in contracting fraud in the Afghanistan and Iraq wars alone, as calculated by the Commission on Wartime Contracting, which Congress established to investigate waste and abuse, suggests the global total could be astronomical.
Since 2001, U.S. taxpayers have effectively shipped hundreds of billions of dollars out of the country to build and maintain an enormous military presence abroad, while major Pentagon contractors and a select group of politicians, lobbyists, and other friends have benefited mightily.
Peeling the Potatoes and Bringing Home the Bacon
While a handful of overseas bases, like Guantánamo Bay, date to the turn of the twentieth century, most have existed since the construction of thousands of bases during World War II. Although the number of installations and troops ebbed and flowed in the Cold War years and shrank by about 60% once it was over, a significant infrastructure of bases remains. Scattered from Aruba and Belgium to the United Arab Emirates and Singapore, the Pentagon’s global landholdings are bigger than all of North Korea and represent by far the largest collection of foreign bases in history.
Once upon a time, however, the military, not contractors, built the barracks, cleaned the clothes, and peeled the potatoes at these bases. This started to change during the Vietnam War, when Brown & Root, better known to critics as “Burn & Loot” (later KBR), began building major military installations in South Vietnam as part of a contractor consortium.
The use of contractors accelerated following the Cold War’s end, part of a larger trend toward the privatization of formerly public services.  By the first Gulf War, one in 100 deployed personnel was a contractor. Later in the 1990s, during U.S. military operations in Somalia, Rwanda, Haiti, Saudi Arabia, Kuwait, Italy, and especially the Balkans, Brown & Root received more than $2 billion in base-support and logistics contracts for base construction and maintenance, food services, waste removal, water production, transportation services, and much more.
By the second Gulf War, contractors represented roughly one in two deployed personnel in Iraq, with the company now known as KBR employing more than 50,000 people, or enough to staff 100 army battalions.  Burger Kings, Starbucks, and car dealerships, as well as air conditioning, steak, and ice cream became regular features of often city-sized bases. However, this wasn’t a phenomenon restricted to war zones. U.S. bases worldwide look much the same, which helps explain the staggering taxpayer dollars they consume.
Calculating Costs in a “Dysfunctional” System
The problem is, it’s remarkably difficult to figure out who’s been benefiting from all the taxpayer money. The government doesn’t bother to compile such information. This meant I had to pick through hundreds of thousands of contracts and research scores of companies in countries worldwide.
I began with publicly available government contract data and followed a methodology for tracking funds used by the Commission on Wartime Contracting. This allowed me to compile a list of every Pentagon contract with a “place of performance”—that is, the country where most of a contract’s work is performed—outside the United States since the start of the Afghan war (fiscal year 2002).
There were 1.7 million of them.
Scrolling through 1.7 million spreadsheet rows, one for each contract, offered a dizzying feel for the immensity of the Pentagon’s activities and the money spent globally. Generally, the companies winning the largest contracts have been doing one (or more) of four things: building bases, running bases, providing security for bases, and delivering fuel to bases. Among those 1.7 million contracts, there was one for $43 for sand in South Korea and another for a $1.7 million fitness center in Honduras.  There was the $23,000 for sports drinks in Kuwait, $53 million in base support services in Afghanistan, and everything from $73 in pens to $301 million for U.S. Army industrial supplies in Iraq.
Cheek by jowl, I found the most basic services, the most banal purchases, and the most ominous acquisitions, including concrete sidewalks, a traffic light system, diesel fuel, insect fogger, shower heads, black toner, a 59” desk, unskilled laborers, chaplain supplies, linen for “distinguished visitor” rooms, easy chairs, gym equipment, flamenco dancers, the rental of six sedans, phone cards, a 50” plasma screen, billiards cues, X-Box 360 games and accessories, Slushie machine parts, a hot dog roller, scallops, shrimp, strawberries, asparagus, and toaster pastries, as well as hazardous waste services, a burn pit, ammo and clips, bomb disposal services, blackout goggles for detainees, and confinement buildings.
The $385 billion total is at best a rough estimate; the real totals are surely higher.  The Federal Procurement Data System that’s supposed to keep track of government contracts “often contains inaccurate data,” according to the Government Accountability Office. Harvard University economist Linda Bilmes calls the system “dysfunctional.” For example, hundreds of thousands of contracts have no “place of performance” listed at all. There are 116,527 contracts that list the place of performance as Switzerland, even though the vast majority are for delivering food to troops in Afghanistan and at bases worldwide.
The unreliable and opaque nature of the data becomes clearer when you consider that the top recipient of Pentagon contracts isn’t a company at all, but a category labeled “miscellaneous foreign contractors”; that is, almost 250,000 contracts totaling nearly $50 billion, or 12% of the total, have gone to recipients we can’t identify. As the Commission on Wartime Contracting explains, “miscellaneous foreign contractors” is a catch-all “often used for the purpose of obscuring the identification of the actual contractor[s].”
The reliability of the data only worsens when we consider the Pentagon’s inability to track its own money or pass an audit. Identifying the value of contracts given to specific companies is made more difficult by a general lack of corporate transparency, as well as complicated subcontracting arrangements, the use of foreign subsidiaries, and frequent corporate name changes.
Still, examining the top contractors is illuminating.  Let’s start with the top three whose names we know:
1. KBR: Among the companies bringing home billions, the name Kellogg, Brown & Root dominates. It has almost five times the contracts of the next company on the list and is emblematic of broader problems in the contracting system.
KBR is the latest incarnation of Brown & Root, the company that started paving roads in Texas in 1919 and grew into the largest engineering and construction firm in the United States. In 1962, Halliburton, an international oil services company, bought Brown & Root. In 1995, Dick Cheney became Halliburton’s president and CEO after helping jump-start the Pentagon’s ever-greater reliance on private contractors when he was President George H.W. Bush’s secretary of defense.
Later, while Cheney was vice president, Halliburton and its KBR subsidiary (formed after acquiring Kellogg Industries) won by far the largest wartime contracts in Iraq and Afghanistan. It’s difficult to overstate KBR’s role in the two conflicts. Without its work, there might have been no wars.  In a 2005 interview, Paul Cerjan, a former Halliburton vice president, explained that KBR was supporting more than 200,000 coalition forces in Iraq, providing “anything they need to conduct the war.” That meant “base support services, which includes all the billeting, the feeding, water supplies, sewage—anything it would take to run a city.” It also meant Army “logistics functions, which include transportation, movement of POL [petroleum, oil, and lubricants] supplies, gas… spare parts, ammunition.”
Most of KBR’s contracts to support bases and troops overseas have come under the multi-billion dollar Logistics Civilian Augmentation Program (LOGCAP). In 2001, KBR won a one-year LOGCAP contract to provide an undefined quantity and an undefined value of “selected services in wartime.” The company subsequently enjoyed nearly eight years of work without facing a competitor’s bid, thanks to a series of one-year contract extensions. By July 2011, KBR had received more than $37 billion in LOGCAP funds.  Its experience reflected the near tripling of Pentagon contracts issued without competitive bidding between 2001 and 2010. “It’s like a gigantic monopoly,” a representative from Taxpayers for Common Sense said of LOGCAP.
The work KBR performed under LOGCAP also reflected the Pentagon’s frequent use of “cost-plus” contracts. These reimburse a company for its expenses and then add a fee that’s usually fixed contractually or determined by a performance evaluation board. The Congressional Research Service explained that because “increased costs mean increased fees to the contractor,” there is “no incentive for the contractor to limit the government’s costs.” As one Halliburton official told a congressional committee bluntly, the company’s unofficial mantra in Iraq became “Don’t worry about price. It’s ‘cost-plus.’”
Not surprisingly, in 2009, the Pentagon’s top auditor testified that KBR accounted for “the vast majority” of wartime fraud. The company has also faced accusations of overcharging for everything from delivering food and fuel and supplying housing for troops to providing base security services.
After years of bad publicity, in 2007, Halliburton spun KBR off as an independent company and moved its headquarters from Houston to Dubai. Despite KBR’s track record and a 2009 guilty plea for bribing Nigerian government officials to win gas contracts (for which its former CEO received prison time), the company has continued to receive massive government contracts. Its latest LOGCAP contract, awarded in 2008, could be worth up to $50 billion through 2018.
2. Supreme Group: Next on the list is the company that’s been described as the KBR for the Afghan War. Supreme Group has won more than $9 billion in contracts for transporting and serving meals to troops in Afghanistan and at other bases worldwide. Its growth perfectly symbolizes the soldiers-to-contractors shift in who peels the potatoes.
Supreme was founded in 1957 by an Army veteran who saw an opportunity to provide food for the hundreds of U.S. bases in Germany. After expanding over several decades into the Middle East, Africa, and the Balkans, the company won multi-billion-dollar “sole source contracts” that gave it a virtual monopoly over wartime food services in Afghanistan.
Today, in a prime example of the revolving door between the Pentagon and its contractors, Supreme’s chief commercial officer is former Lieutenant General Robert Dail. From August 2006 to November 2008, Dail headed the Pentagon’s Defense Logistics Agency (DLA), which awards food contracts. In 2007, Dail presented Supreme with DLA’s “New Contractor of the Year Award.” Four months after leaving the Pentagon, he became the president of Supreme Group USA.
Recently, Supreme has faced growing scrutiny over the way it’s won competition-free contracts, with service fees as high as 75% of costs and reportedly for more than three-quarters of a billion dollars in overbilling. Last month, Supreme had the chutzpah to sue the Pentagon for awarding a new $10 billion Afghanistan food contract to a competitor that underbid Supreme’s offer by $1.4 billion.
3. Agility Logistics: Next on the list is Agility Logistics, a Kuwaiti company. It won multi-billion-dollar contracts to transport food to troops in Iraq. When the Pentagon decided against awarding similar contracts in Afghanistan to a single firm, Agility partnered with Supreme in exchange for a 3.5% fee on revenues. In 2009 and 2010, grand juries indicted Agility for massive contracting fraud, and the Pentagon suspended the company and 125 related companies from receiving new contracts. In 2012, a judge issued a default judgment against Agility in a whistleblower suit seeking more than $1 billion for overcharging the government.
The Rest of the Top 10: A Pattern of Misconduct
Things don’t get much better farther down the list. Next come DynCorp International and Fluor Intercontinental, which along with KBR won the latest LOGCAP contracts. Awarding that contract to three companies rather than one was intended to increase competition. In practice, according to the Commission on Wartime Contracting, each corporation has enjoyed a “mini-monopoly” over logistics services in Afghanistan and other locations. DynCorp, which has also won large wartime private security contracts, has a history littered with charges of overbilling, shoddy construction, smuggling laborers onto bases, sexual harassment, and sex trafficking.
Although a Fluor employee pled guilty in 2012 to conspiring to steal and sell military equipment in Iraq, it’s the only defense firm in the world to receive an “A” on Transparency International’s anti-corruption index that rates companies’ efforts to fight corruption. On the other hand, number seven on the list, ITT (now Exelis), received a “C” (along with KBR and DynCorp).
The last three in the top ten are BP (which tops the Project on Government Oversight’s federal contractor misconduct list) and the petroleum companies of Bahrain and the United Arab Emirates. After all, the U.S. military runs on oil.  It consumed five billion gallons in fiscal year 2011 alone, or more than all of Sweden. In total, 10 of the top 25 firms are oil companies, with contracts for delivering oil overseas totaling around $40 billion.
Spreading the Love
Contractors are hardly alone in raking in the dollars from the Pentagon’s baseworld. Pentagon officials, military personnel, members of Congress, and lobbyists, among others, have all benefited—financially, politically, and professionally—from the giant overseas presence. In particular, contractors have spread the love by making millions in campaign contributions to members of Congress. According to the Center for Responsive Politics, military contractors and their employees gave more than $27 million in election donations in 2012 alone, and have donated almost $200 million since 1990.
Most of these have gone to members of the armed services and appropriations committees in the Senate and House of Representatives. These, of course, have primary authority over awarding military dollars. For the 2012 elections, for example, DynCorp International’s political action committee donated $10,000 to both the chair and ranking member of the House Armed Services Committee, and made additional donations to 33 other members of the House and Senate armed services committees and 16 members of the two appropriations committees.
Most contractors also pay lobbyists hundreds of thousands of dollars to sway military budgeteers and policymakers their way. KBR and Halliburton spent nearly $5.5 million on lobbying between 2002 and 2012, including $420,000 in 2008 when KBR won the latest LOGCAP contract and $620,000 the following year when it protested being barred from bidding on contracts in Kuwait. Supreme spent $660,000 on lobbying in 2012 alone. Agility spent $200,000 in 2011, after its second indictment on fraud charges, and Fluor racked up nearly $9.5 million in lobbying fees from 2002 to 2012.
Shrinking the Baseworld
Today, there are some signs of baseworld shrinkage. The hundreds of bases built in Iraq are long gone, and many of the hundreds built in Afghanistan are now being shut down as U.S. combat troops prepare to withdraw. The military is downsizing an old base in the Portuguese Azores and studying further base and troop reductions in Europe. While many in Congress are resisting an Obama administration request to reduce “excess capacity” among thousands of domestic bases through two new rounds of the Base Realignment and Closure process, at least some current and former members of Congress are calling for a parallel effort to close bases abroad.
At the same time, however, the military is building (or exploring the possibility of building) new bases from Asia and Africa to the Persian Gulf and Latin America.  Small drone bases are on the rise from Niger to Saudi Arabia.  Even in Europe, the Pentagon is still building bases while closing others.
Much work remains to be done to figure out who’s been benefiting from the Pentagon’s baseworld. The billions in contracts that sustain our bases, however, are a good reminder that there are immediate savings available by reducing troop deployments and Cold War bases abroad. They are also a reminder of where we should look when we’re told there isn’t enough money for Head Start or hospitals or housing.
For decades, tens of billions of dollars in overseas spending have ended up in the coffers of a select few, with many billions leaking out of the U.S. economy entirely. Stemming those leaks by cutting overseas spending and redirecting precious resources toward long-neglected non-military needs is an important way to help revive an economy that has long benefited the few rather than the many.
Top 25 Recipients of Pentagon Contracts Abroad
Miscellaneous Foreign Contractors
KBR, Inc.
Supreme Group
Agility Logistics (PWC)
DynCorp International
Fluor Intercontinental
ITT/Exelis, Inc.
BP, P.L.C.
Bahrain Petroleum Company
Abu Dhabi Petroleum Company
SK Corporation
Red Star Enterprises (Mina Corporation)
World Fuel Services Corporation
Motor Oil (Hellas), Corinth Refineries   S.A.
Combat Support Associates Ltd.
Refinery Associates Texas, Inc.
Lockheed Martin Corporation
Raytheon Company
S-Oil Corporation (Ssangyong)
International Oil Trading Co./Trigeant   Ltd.
FedEx Corporation
Contrack International, Inc.
GS/LG-Caltex (Chevron Corporation)
Washington Group/URS Corporation
Tutor Perini Corporation (Perini)

 All Other Contractors:
David Vine, a Tom Dispatch regular, is assistant professor of anthropology at American University, in Washington, DC. He is the author of Island of Shame: The Secret History of the U.S. Military Base on Diego Garcia. He has written for the New York Times, the Washington Post, the Guardian, and Mother Jones, among other places. He is currently completing a book about the effects of U.S. military bases located outside the United States. For more of his writing, visit
Follow TomDispatch on Twitter and join us on Facebook or Tumblr. Check out the newest Dispatch book, Nick Turse’s The Changing Face of Empire: Special Ops, Drones, Proxy Fighters, Secret Bases, and Cyberwarfare.
Copyright 2013 David Vine

The U.S. Army (CC BY 2.0)

This article originally appeared on : TruthDig

The Reason for the Soaring: The Stock Market is a Turbo-Fraud System

The exchanges rush from an all-time high to the next. The reason for this development: With the high-speed trading is a Ponzi scheme is out of control. The end might be like in the 1920s: trillion in real money from unsuspecting citizens will be destroyed.
The founder and investor Mark Cuban in 2004 a remarkable blog post written. In it, he describes what is really happening in the stock markets.
In reading one of the cold shiver runs down your spine.
Cuban has two companies – and Micro Solutions – founded and made great. After selling Micro Solutions, he brought to the stock market.The share price rose a dollar on the first trading above 60 dollars at the end of the day.
Cuban explains how this has expired: the stock market, he writes, is nothing more than a gigantic Ponzi scheme, the value of shares is not determined by the actual value of the company, but is a marketing number. Folks who sell want to look for people who want to buy. To this end, the sellers tell buyers the most beautiful fairy. It is crucial that as many tear to one share….
You have to watch the animated graphic to the end! The colored curves show the timeline the activities of the robot on the stock exchanges. 2007 was trading normally, at the end you see fireworks. (Graphic: Nanex)


RUSSIA Now Fully Commited With Rest of BRICS To DESTROY Reserve Currency Status Of DOLLAR

The status of the US dollar as the world reserve currency gives the US a number of advantages over other countries. The world’s most important commodities are priced and traded in dollars, even if most of these commodities are not produced in the US. The fact that the world’s financial system is based on the dollar allows the Federal Reserve to export inflation to other countries, while the Federal Government runs a huge deficit with impunity.
So far, only China has been active in challenging the dollar supremacy. .. Now, it seems that Beijing has found an ally in the Kremlin. And there appears to be a consensus between the BRICS countries: the urgent necessity to dismantle the dollar system.
A week before the recent BRICS summit in Durban, the Kremlin administration has silently produced a document which describes the Russian strategy in the context of BRICS cooperation. The document makes for a fascinating read for anyone brave enough to plow through the dense Russian legalese. The strategy has been designed in the “inner circle” of Vladimir Putin’s team, so it is safe to assume that it represents the official view on the BRICS future.
In Russia, politics are Byzantine; the fact that the Kremlin decided not to hide the document or leak it to a chosen few journalists, but publish it outright is a very strong signal, a very vocal angry signal directed at the US. A signal that the Western media chose to ignore…
The goals are clear. In the section titled “Strategic goals,” the first point on the BRICS’ agenda is the reform of the world financial system in order to make it “fairer, more stable, and more efficient.” In the later chapters, it is spelled clearly that this “reform” is actually a dismantling of the dollar system.

It is worth noting that the place of this issue in the list of the BRICS’ priorities speaks volumes about its importanceJudging by the order of priorities, depriving the dollar of its status as the world reserve currency is more important than “preventing breaches of sovereignty” (a.k.a. the “Syrian problem”) or “expanding economic cooperation.”
Read more:

BRICS should turn into 21st century global forum
Russian experts believe political cooperation between the BRICS will continue to grow with the countries gradually drifting towards the development of a mechanism of coordination primarily in politics.
‘The world is in a state of financial war’ – Russian presidential advisor

Stocks Disconnect From Reality… and Every Other Asset Class

by Phoenix Capital Research

The stock market is completely and totally out of control.

Eight of the last ten closes have been new record highs. It’s now been six months since we had a 5% correction. Traders got us to 1,650 on the S&P 500.

At this point, no long term investor in their right mind should be buying. This is especially true given that the S&P 500 is now not only totally disconnected from economic reality, but is disconnected from every other asset class.

Check out the divergence between stocks, Gold, Copper, and Oil. Do you think the latter three are more or less sensitive to the Fed slowing QE?

Better yet, take a look at the divergence between bonds and stocks. Ever since early May, stocks have gone straight up while bonds, a “smarter” asset class that is more sensitive to the threat of QE tapering, have fallen.

And again, the US Dollar is rallying (another indication QE is likely to taper). The currency markets are even larger and more sophisticated than bonds…

Investors, take note… stocks are always the last to “get it.” This bubble will end as all bubbles do: in disaster.

For more investment insights on how to prep for a market debacle, come visit us at

Best Regards,

Graham Summers

House panel set to OK cut in food stamp program

AP Photo
AP Photo/J. Scott Applewhite

WASHINGTON (AP) -- The House Agriculture Committee on Wednesday approved a sweeping farm bill that would trim the $80 billion-a-year food stamp program.
The panel rebuffed Democratic efforts to keep the food stamp program whole, as debate on the farm bill turned into a theological discourse on helping the poor.
The House bill would cut about $2.5 billion a year - or a little more than 3 percent - from the domestic food aid program, which is used by 1 in 7 Americans. The committee rejected a Democratic amendment to strike the cuts 27-17, keeping them in the bill.
The legislation would achieve the cuts partly by eliminating an eligibility category that mandates automatic food stamp benefits when people sign up for certain other programs. It would also save dollars by targeting states that give people who don't have heating bills very small amounts of heating assistance so they can automatically qualify for higher food stamp benefits.
Republicans argued that the cut is small relative to the size of the program, now known as the Supplemental Nutrition Assistance Program, or SNAP, and that people who qualify for the aid could still sign up for it, they just wouldn't be automatically enrolled. They defended the cuts after Rep. Juan Vargas, D-Calif., quoted the Book of Matthew in opposing them: "When I was hungry you gave me food. When I was thirsty, you gave me drink."
Several Republicans talked about their Christianity and said the Bible encourages people to help each other but doesn't dictate what the federal government should do. "We should be doing this as individuals, helping the poor," said Rep. Doug LaMalfa, R-Calif.
Rep. Jim McGovern, D-Mass., offered the amendment to do away with the cuts. He said taking the hunger assistance away from people will just make the poor "more vulnerable and more miserable."
"Christians, Jews, Muslims, whatever - we're failing our brothers and sisters here," McGovern said.
The cuts are part of massive legislation that costs almost $100 billion annually over five years and would set policy for farm subsidies, rural programs and the food aid. The Senate Agriculture Committee approved its version of the bill Tuesday, and the full Senate is expected to start work on the bill next week. House action is expected this summer. Current programs expire Sept. 30.
Last year more than 47 million people used the SNAP program with the cost more than doubling since 2008. The rolls rose rapidly because of the economic downturn, rising food prices and expanded eligibility under President Barack Obama's 2009 economic stimulus law.
Republicans criticized Obama in last year's presidential campaign for his expansion of the program, and many House conservatives have refused to consider a farm bill without cuts to food stamps, which make up about 80 percent of the bill's cost.
The Senate approved much smaller cuts to the program, about $400 million a year. House Agriculture Committee Chairman Frank Lucas, R-Okla., will have to appease all sides as he tries to push the farm bill through for the third year in a row, balancing calls from House conservatives to cut the program with Senate Democrats who are reluctant to touch it.
"I expect it to come from all directions," Lucas said last week of the food stamp debate.
The House bill would cut around $4 billion a year from food aid and farm spending, while the Senate bill would trim roughly $2.4 billion. Those reductions include more than $600 million in yearly savings from across-the-board cuts that took effect earlier this year.
Much of the savings in the House and Senate bills comes from eliminating annual direct payments, a subsidy frequently criticized because it isn't tied to production or crop prices. Part of those savings would go toward the deficit reduction, but the rest of the money would create new programs and raise subsidies for some crops while business is booming in the agricultural sector.
The Senate bill would eliminate direct payments immediately, while the House bill would phase out payments to cotton farmers, who rely on the program, over the next two years.
Like the Senate bill, the House measure also includes concessions to Southern rice and peanut growers who also depend on direct payments. The bills would lower the threshold for rice and peanut subsidies to kick in when prices drop.
There are protections for other crops as well. Both bills would boost federally subsidized crop insurance and create a new program that covers smaller losses on planted crops before crop insurance kicks in, favoring Midwestern corn and soybean farmers, who use crop insurance most often.
The committee made no changes to the subsidy programs in the bill Wednesday, and Lucas made no apologies for broadening some farm programs.
"Let's give certainty to an industry that has been a bright spot in an otherwise dismal economy," he said as he opened the committee meeting.
The farm bill passed the Senate last year but the House declined to take it up after conservatives in that chamber objected to the cost and insisted on higher cuts to food stamps. This year, Republican leaders have said the full House will consider the bill.
The House committee also:
- Voted to keep a new, voluntary risk management insurance program for dairy producers in the bill. Those who choose the new program would have to participate in a market stabilization program that could dictate production cuts when oversupply drives down prices. House Speaker John Boehner, R-Ohio, has called the program "Soviet-style."
- Voted to require the Agriculture Department to allow the organic industry to organize and promote itself as an industry, similar to familiar campaigns like "Got Milk?" and "Beef: It's What's For Dinner." Some supporters of traditional agriculture opposed the amendment.
- Voted to finance a public-private partnership to attract community investment in helping retailers stock healthier foods.
- Voted to bar California and other states from exporting cage standards and other restrictive laws to agricultural producers in other states. Amendment sponsor Steve King, R-Iowa, says California's law violates the clause in the Constitution that gives Congress the power to regulate commerce among the states.

Homeland Security seizes funds at main Bitcoin exchange

The US Government has taken its most serious action yet against the popular cyber-currency Bitcoin by shutting down transfers between payment provider Dwolla and a Japanese exchange where the currency is traded.
The U.S. government has reportedly shut down a prime source of liquidity for Bitcoin by seizing an account connecting a Japanese currency exchange, Mt. Gox, and payment services provider Dwolla.
The action by Homeland Security, reported by Betabeat, appears to be timed to send a clear message, coming during a week when Google Ventures and others announced major new investments in the popular cyber currency. The seizure itself is described in a screenshot posted by OKCupid cofounder Chris Coyne (see it below). It shows a message from Dwolla stating that Homeland Security has executed a “seizure warrant” against its account with Mt. Gox — the exchange where many people buy and sell Bitcoins.
GigaOM meet up BitCoin
What this means in practical terms is that Bitcoin traders are now shut off from one of the few ways to supply and receive funds from Mt. Gox. The Japanese exchange doesn’t work with mainstream banks — it only accepts funds via wire transfers and a handful of shadowy e-currencies.
Homeland Security typically executes seizure warrants in connection with criminal investigations, and Coyne’s screenshot refers to actions in the US District Court of Maryland. A search of court records, however, comes up empty — which could mean the records are under seal. The US government has yet to issue a statement.
Tuesday’s development is likely to provide a blow to the fledgling currency, which is mined by computers and is beyond the authority of any central bank. Last month’s Bitcoin crash, which saw its value fall from $266 to $105 in a single day, is believed to have been set off by liquidity problems at Mt. Gox. U.S.-based exchanges like Coinbase, which last week received a $5 million investment from Fred Wilson’s Union Square Ventures, provide a means to change dollars for Bitcoin, but only permits trades of up to $100.
Dwolla, which has raised more than $20 million in funding from investors including Andreessen Horowitz, Village Ventures, Thrive Capital and Union Square Ventures, offers a free web-based software platform that lets users send, receive and request funds from any other user. It says it now has 250,000 account holders.
The Homeland Security actions comes amid uncertainty about the US government’s regulatory powers over Bitcoin, which appears to be beyond the purview of the SEC.
If you want to learn more about the possibilities — and the perils — of Bitcoin, come join us at GigaOM’s free meet-up in San Jose on Thursday between 6 p.m and 9 p.m. We’ll be chatting with the CEOs of Expensify and Lemon, and engineers from Facebook and Google. There will be cocktails too, courtesy of our friends at Ribbit Capital.

Russia’s Plan For The BRICS To Dismantle The Dollar System

Via: Naked Capitalism (Added Commentary)

Russia’s Plan For The BRICS To Dismantle The Dollar System
Yves here. Some financial markets commentators seem to be eagerly awaiting the dollar to collapse under the weight of the Fed’s monetary expansion. The wee problem with that view is that everyone knows that the party that trashes its currency gets a nice boost to its export sector, but it’s easy for this sort of behavior to devolve into “beggar thy neighbor” competitive devaluations (witness our recent finger-shaking at Japan). And since policy-makers in the major economies are deeply devoted to our current “free trade” system, the tacit assumption has been that we might see some jockeying within the current system, but no real breaks.
And the second major reason for the mainstream view that the dollar’s dominance is not at risk is that no other large economy wants the burden of serving as the reserve currency, which entails running trade deficits much of the time.
Nevertheless, a lot of countries resent the dollar hegemony. This post describes one effort to supplant it.
By Valentin Mândrăşescu, Editor of Reality Check @ The Voice of Russia. The article was edited by Wolf Richter and first published by Testosterone Pit.
The status of the US dollar as the world reserve currency gives the US a number of advantages over other countries. The world’s most important commodities are priced and traded in dollars, even if most of these commodities are not produced in the US. The fact that the world’s financial system is based on the dollar allows the Federal Reserve to export inflation to other countries, while the Federal Government runs a huge deficit with impunity.
So far, only China has been active in challenging the dollar supremacy. The internationalization of the yuan is an official priority of Chinese leaders. Currency swap agreements with major trade partners like Brazil, France, or Australia are small but important steps in the Chinese strategy. Changing the world financial system is not an easy task and certainly a very challenging undertaking for China. Now, it seems that Beijing has found an ally in the Kremlin. And there appears to be a consensus between the BRICS countries: the urgent necessity to dismantle the dollar system.
A week before the recent BRICS summit in Durban, the Kremlin administration has silently produced a document which describes the Russian strategy in the context of BRICS cooperation. The document makes for a fascinating read for anyone brave enough to plow through the dense Russian legalese. The strategy has been designed in the “inner circle” of Vladimir Putin’s team, so it is safe to assume that it represents the official view on the BRICS future.
In Russia, politics are Byzantine; the fact that the Kremlin decided not to hide the document or leak it to a chosen few journalists, but publish it outright is a very strong signal, a very vocal angry signal directed at the US. A signal that the Western media chose to ignore.
In the recitals section of the document, the authors point out that “there is a common desire of the BRICS partners to reform the outdated global financial and economic framework that doesn’t take into account the growing economic weight of the emerging markets.” Moreover, the Russian strategists view the BRICS as a tool to reform the way the world is being governed. Then the document hammers home its message:
Russia assumes that, given enough political will of the leadership of the BRICS countries to advance their cooperation, this alliance can become one of the key elements of a new system for global governance, primarily in the economic and financial domains.
Move aside New World Order! The BRICS are coming to change the world.
The goals are clear. In the section titled “Strategic goals,” the first point on the BRICS’ agenda is the reform of the world financial system in order to make it “fairer, more stable, and more efficient.” In the later chapters, it is spelled clearly that this “reform” is actually a dismantling of the dollar system.
It is worth noting that the place of this issue in the list of the BRICS’ priorities speaks volumes about its importance. Judging by the order of priorities, depriving the dollar of its status as the world reserve currency is more important than “preventing breaches of sovereignty” (a.k.a. the “Syrian problem”) or “expanding economic cooperation.”
The language used in this document indicates that it has been written or strongly influenced by Sergei Glaziev, the president’s economy advisor, who is known for masterminding the economic aspects of the Eurasian Union between Russia, Belarus, and Kazakhstan. Glaziev has repeatedly accused Fed Chairman Ben Bernanke of starting “a currency war” against the emerging markets. He also believes that Bernanke’s policy will ultimately lead to a military confrontation: “the conservation logic of the current financial and political system leads to a further escalation of military and political tensions, including the start of a major war” (read more).
A whole chapter of the strategy document is dedicated to step-by-step instructions on dismantling the existing global financial system. The list of measures includes:
  • Reformation of the world currency system in order to create a representative, stable and predictable system of world reserve currencies;
  • Reduction of the risks of destabilization of currency and equity markets linked to massive cross-border flows of capital;
  • Increasing the use of national currencies in the trade between BRICS countries;
  • Increasing the level of cooperation between BRICS countries in order to promote their interest in the domain of world trade;
  • Strengthening the BRICS Exchange Alliance;
  • Creating independent rating agencies.
Since the Durban Summit, at least one of those measures has been implemented: RT reported that “China’s Dagong Global Credit Rating agency is to set up the joint venture with US-based Egan-Jones Ratings Co (EJR) and Russia’s RusRating JSC to challenge the three major US ratings agencies.” As BRICS countries try to achieve the rest of their stated goals, it remains to be seen if the dollar system survives the joint onslaught of the biggest emerging economies. By Valentin Mândrăşescu, author of the pungent article on the inner machinations of Russia…. Cyprus: A Triumph For Russian Isolationists

The Austerity Allstars present Bugger The Bankers - The Official Video

Credit Rating Agencies Loosening Standards Again, In Same Dynamic That Preceded Financial Crisis

NEW YORK -- Huxley Sommerville, group managing director at Fitch Ratings, increasingly fears another massive financial crisis. Ask him why and he tells the story of a recent deal his credit rating agency failed to secure.
Last month, a group of Citigroup bankers contacted Fitch’s New York headquarters, hoping to convince its analysts to deliver their seal of approval for a bond issue. In essence, Citi needed Fitch to conclude that the landlord of an iconic Manhattan office tower should be considered as trustworthy as the government of the United States.
Citigroup had recently partnered with Deutsche Bank to lend $783 million to the owner of the Seagram Building, an architectural gem on Park Avenue in midtown Manhattan. Now, its bankers were in the process of turning that huge loan into multiple bonds, hoping to resell the debt to investors in pieces. They would turn one loan into commercial mortgage-backed securities.
But doing the deal required the rating agency's blessing: Fitch had to assign a slice of those bonds its coveted "AAA" rating, an action that would officially make the debt about as sound as a savings bond from Uncle Sam.
For Fitch, going along would have netted hundreds of thousands of dollars in fees. Still, its analysts balked. In making their pitch, the Citigroup bankers relied on a model that assumed rents for tenants in the building would increase by nearly 35 percent over the decade -- an optimistic scenario. If rents don't climb that much, the bonds would be riskier. The landlord may be unable to manage the shortfall, and the bondholders could get stiffed.
The analysts at Fitch were well aware of recent history and the popular perception that credit ratings played a not-insignificant role in turning reckless speculation in American real estate into kindling for a global financial inferno. Credit rating agencies are widely seen as having demonstrated the intellectual integrity of a political campaign advertising shop in the runup to the crisis, eagerly signing off on whatever message the client paid for.
Not this time, the Fitch analysts said.
“We told them we’re not going to underwrite based on an increase in the current rent roll,” Somerville told The Huffington Post. “We’re not saying they’re not going to achieve what they’re saying they’re going to achieve. We’re just saying AAA bondholders shouldn’t have to depend on that risk.”
Fortunately for the Citigroup bankers, analysts at rival Moody’s Investors Service did not share Fitch’s qualms. On Monday, Moody’s rated a slice of the bonds AAA. Kroll Bond Ratings, another Fitch competitor, had already affixed its AAA rating to a slice of the deal.
But for Fitch, the episode isn’t over. Somerville, the Fitch managing director, now cites the Citi bond deal as a sign of what he portrays as a dangerous trend -- the resumption of ratings that are not reliable, their details determined by something less than a rigorous process, injecting risk and uncertainty throughout the financial system.
In the prelude to the Great Recession, as major Wall Street banks turned sub-prime home mortgages into the raw materials for a lucrative trade in securities, bankers generally got what they wanted, according to insider accounts. They ran roughshod over credit rating agencies that dared question the deals they put together, while taking their business to more pliable alternatives.
The result: a kind of reverse alchemy that turned trillions of dollars into so-called toxic securities. The investments built of mortgages became nearly worthless as the markets absorbed the reality that many of the assumptions undergirding their value were bogus. As home prices fell and homeowners sunk into default, bonds built of mortgages became risky assets prone to default -- and never mind the AAA ratings. Savers who had assumed that their AAA investments made them impervious even to financial catastrophe lost huge sums.
“The loans last 10 years, but the memory of them lasts seven years,” Somerville said. “We’re coming up on seven years. People have forgotten how bad it was last time.”
As head of the group that rates commercial mortgage-backed securities for Fitch, Somerville directs a group of analysts who pore over the details of bonds put together by Wall Street bankers, crunching numbers in a complex model to determine how likely it is those bonds will default. Those analysts only apply the top ‘AAA’ rating to instruments that are likely to pay off in all but catastrophic scenarios.
Somerville claimed analysts at other firms are not holding themselves to those lofty standards.
“This push to make loans and the competition to rate them to is making competition more aggressive,” Huxley said “We’re seeing transactions that are not being underwritten as conservatively as they should. If we continue to see what we’re seeing, it’s going to get worse, because it becomes a question of moving the limit, and moving the limit again, and moving the limit again.”
Eric Thompson is a senior managing director at Kroll Bond Ratings whose group was directly involved in rating the Citigroup deal. Analysts at that firm did not take the bankers' model estimates on future rent increases at 375 Park at face value when rating the bonds. But they did calculate a decrease in vacancy at the building and other factors would drive cash flow up to levels over $58 million a year, from current levels around $54 million. (The bankers’ more optimistic calculations pegged future cash flow at about $71 million yearly.)
“We sleep very well with the ratings that we put out in these securities,” Thompson said, noting their model indicated it would be unlikely AAA bonds would default even if cash flow from rents fell by 30 percent from estimates. “At the end of the day, even if there is a downturn, over the term of this loan, it’s fairly resilient.”
He added that competition from smaller agencies like his, rather than promote a deterioration of standards as Fitch is suggesting, was raising the bar on transparency and quality in the credit rating sector. Fitch was merely making a stink about the ratings on this current deal out of unhappiness that it failed to secure the business, and was being disingenuous by not releasing their full assessment of the deal.
"Fitch's opinion is a one-page document and whatever accusations come with it would have been better served by putting out their whole analysis," Thompson said. "375 Park is one subway stop away from Fitch’s office. If Fitch has a major problem with the sector, and they consider themselves an industry leader, they should put out their full report."
Thomas Lemmon, a spokesman for Moody’s, defended his company's rating on the unique quality of the loan underpinning it.
“This particular building is one of the premier buildings in the country,” Lemmon said. “We certainly gave that a lot more credit. We’re able to say that the building in good times would be able to do better, and even if it’s empty, it wouldn’t be valued at zero.”
Those explanations do not convince Somerville, a 17-year credit ratings veteran, who estimates if current credit rating industry practices go unchecked, the market is about two years away from a financial crisis like that one that began in late 2007.
“Everyone just needs to recognize what’s going on,” he said “The whole market needs to remind itself that we’re here for the long-run and not just for the next quarter.”
CORRECTION: The original story misidentified Kroll Bond Ratings as Kroll Rating Agency. It has been corrected.

Ford owners sue, saying EcoBoost engine defective

3 Ford owners sue in federal court, saying EcoBoost engine is defective

DETROIT (AP) -- Three Ohio drivers are suing Ford Motor Co., claiming the company's six-cylinder EcoBoost engine is defective.
The lawsuit says the 3.5-liter V6 EcoBoost engine can shudder, shake and then rapidly lose power while drivers are accelerating. Two of the plaintiffs, a married couple, say their 2010 Ford Taurus SHO has lost power and stalled on multiple occasions. The third says he has lost power when he was accelerating in his F-150 pickup.
The lawsuit says more than 100 drivers have complained to the National Highway Traffic Safety Administration about the V6 EcoBoost rattling or losing power. Ford hasn't recalled any vehicles for the alleged defect, and NHTSA hasn't opened an investigation, which is often the first step in the recall process.
The lawsuit claims Ford has acknowledged the problem in messages to dealers, but hasn't informed owners.
Ford declined to comment Tuesday, saying it hasn't seen the lawsuit. The company wouldn't say how many vehicles it has sold with the V6 EcoBoost engine.
Ford has been selling vehicles equipped with the V6 EcoBoost since late 2009. It's an option on the Ford Flex, Taurus SHO, Lincoln MKT and Lincoln MKS sedans from the 2010-2013 model years; the F-150 pickup from the 2011-2013 model years; and the Ford Explorer Sport from the 2013 model year.
Ford also makes four-cylinder and three-cylinder EcoBoost engines, but those aren't cited in the lawsuit. All three engines use turbocharging and direct injection to give them the power of a larger engine with the fuel economy of a smaller one.
The lawsuit was filed late last week in U.S. District Court in Columbus. A similar lawsuit involving different drivers was filed last month in U.S. District Court in Louisiana.


U.S. airlines collected more than $6 BILLION in extra fees last year by charging for carry-ons, soda, and prime seats

U.S. airlines collected more than $6billion in baggage and reservation change fees from passengers last year — the highest amount since the fees became common five years ago.
Passengers shouldn't expect a break anytime soon as those fees— along with extra charges for boarding early or picking prime seats — have helped return the industry to profitability.
Airlines started charging for a first checked suitcase in 2008 and the fees have climbed since. Airlines typically charge $25 each way for the first checked bag, $35 for the second bag and then various extra amounts for overweight or oversized bags.
Up and away: Frontier is just one of the airlines who charged customers extra fees- like penalties for booking through third-party sites. Such fees helped the various airlines return to profitability
Up and away: Frontier is just one of the airlines who charged customers extra fees- like penalties for booking through third-party sites. Such fees helped the various airlines return to profitability
The nation's 15 largest carriers collected a combined $3.5 billion in bag fees in 2012, up 3.8 per cent from 2011, according to the Bureau of Transportation Statistics. Fees for changing a reservation totaled $2.6billion, up 7.3 per cent.
The airlines took in $159.5billion in revenue last year and had expenses of $153.6billion, according to the government. That 3.7 per cent profit margin comes entirely from the baggage and change fees.
Delta Air Lines once again took in the most fees — $865.9million from baggage alone — but it also carried more passengers than any other airline.
Delta collected $7.44 per passenger — about average for the industry. Low-cost carrier Spirit Airlines collected the most, an average $19.99 per passenger in baggage fees last year.
The government only requires the airlines to report revenue from baggage and change fees.
The bad news doesn’t stop there as passengers can expect to pay even more this summer.
Not so friendly skies: In addition to the extra fees, fliers also had to deal with delays caused by the sequester
Not so friendly skies: In addition to the extra fees, fliers also had to deal with delays caused by the sequester
American Airlines, Delta, United Airlines and US Airways all recently raised the fee for changing a domestic flight reservation from $150 to $200.
Even Southwest Airlines, which promotes its lack of change fees and 'bags fly free' policy, recently announced a new policy on no-shows.
Passengers who buy the cheapest tickets will have to cancel a reservation before departure; otherwise they won't be able to apply credit from the missed flight toward a later trip.
Many fees were first introduced to allow airlines to offset rising fuel costs. In 2008, jet fuel spiked 46 per cent to an average $3.06 per gallon as the price of oil hit an all-time high.
Packed: Frontier fliers have complained about overhead bins being too crowded, the airline said, justifying their fees as ;service enhancements'
Packed: Frontier fliers have complained about overhead bins being too crowded, the airline said, justifying their fees as ;service enhancements'
Airfares have climbed in recent years but jet fuel remains costly — in 2012, the airlines paid an average of $2.96 a gallon.
Passengers have shown reluctance to book tickets if the base fare is too high, hence the introduction of more fees — collectively referred to in the industry as ancillary revenue.
Besides baggage and change fees, airlines are charging fees for extra legroom, the ability to skip security lines and for premium meals.
But the airlines are being aggressive about expanding those fees. United recently said in an internal newsletter that it hopes to collect $19.29 in average ancillary revenue per passenger by the end of 2013, up 9.1 per cent from the amount it collected last year.
JetBlue, which doesn't charge for the first checked bag, took in a record $22 per passenger in other fees in the first quarter, up 3 per cent from the year-ago quarter.
Costly carry ons: Some airlines charge up to $100 now for fliers to bring any bags on board
Costly carry ons: Some airlines charge up to $100 now for fliers to bring any bags on board
Airlines are also increasing certain fees depending on demand.
Thanks to a computer upgrade, United can now charge passengers different prices to upgrade to an Economy Plus seat, which has more legroom, depending on the route, day of the week, time of day and the location of the seat.
The airline said it increased the dollar value of those seats 25 per cent in 2012.

UPDATE: Comex Gold Extends Early Losses to Challenge Key Support at $1,400.00 Level

(Kitco News) - Comex gold futures are seeing intensified selling pressure in late-morning trading Wednesday. The surging U.S. dollar index and faltering crude oil prices this week have worked against the gold market bulls. The weakening near-term technical posture of the gold market this week has also led to fresh chart-based selling pressure. The gold market bears are now working hard to push June futures prices below key technical and psychological support at the $1,400.00 level. A daily close below $1,400.00 would then open the door to a challenge of major chart support at the April spike low of $1,321.50 in June futures. June gold last traded down $20.00 an ounce at $1,404.00.
Follow me on Twitter to immediately get the very latest market developments. If you are not on board, then you are not getting key analysis and perspective as fast or as often as you could! Follow me on Twitter to get my very timely intra-day and after-hours briefs on precious metals price action. The precious markets will remain very active. If you want market analysis fast, and in after-hours trading, then follow my up-to-the-second precious metals market perspective on Twitter. It's free, too. My account is @jimwyckoff.

By Jim Wyckoff