Thursday, May 30, 2013

Food Bank Britain: Nearly half a MILLION people relying on charity to eat, report claims

Rising living costs and the government’s welfare reforms have pushed thousands more households into poverty and hardship
Crisis: Helper fills food bank shelf
Crisis: Helper fills food bank shelf
Nearly half a million people in the UK are now relying on food banks, leading charities claim today.
A new report says rising living costs and the government’s welfare reforms have pushed thousands more households into poverty and hardship.
The study by Church Action Poverty and Oxfam calls for a Parliamentary inquiry into how the Government’s cuts, the increased use of sanctions and benefit error have driven up the number of “hidden hungry.”
Recent figures from the Trussell Trust, the biggest provider of food banks in the country, said the number of people using its services had leapt from 40,000 in 2009/10 to more than 350,000 in 2012/13.
In their report, Walking the Breadline, Oxfam and Church Action Poverty say the true number of hungry people could be as high as 500,000 because the problem is not being monitored properly.
They say the surge has been mainly caused by changes to the benefit system such as the toughening of crisis loan eligibility rules, delays in payments, Jobseeker’s Allowance sanctions and sickness benefit reassessments.
Oxfam boss Mark Goldring said: “The shocking reality is that hundreds of thousands of people in the UK are turning to food aid.
"Cuts to social safety-nets have gone too far, leading to destitution, hardship and hunger on a large scale. It is unacceptable that this is happening in the seventh wealthiest nation on the planet.”
Niall Cooper of Church Action on Poverty added: “The safety net that was there to protect people is being eroded to such an extent that we are seeing a rise in hunger.
"Food banks are not designed to, and should not, replace the ‘normal’ safety net provided by the state in the form of welfare support.”
Shadow Environment Secretary Mary Creagh MP said: “The UK is the seventh richest country in the world yet we face a growing epidemic of hidden hunger with people increasingly unable to meet their family’s basic needs.
“These shocking figures show the extent of poverty in the UK with half a million people now relying on emergency food parcels for help.
“This incompetent government needs to wake up to the human cost of their failed economic policies and change course now.”
A Department for Work and Pensions spokeswoman said: “The benefits system supports millions of people who are on low incomes or unemployed so no-one has to struggle to meet their basic needs, and the vast majority of benefits are processed on time every day.
“We welcome the contribution voluntary organisations and foodbanks, including the Trussell Trust, play in supporting local communities, beyond the safety net provided by Government.
"That is why Jobcentre Plus - for the first time - is now referring people to their services.
“Our welfare reforms will improve the lives of some of the poorest families in our communities, with the Universal Credit simplifying the complex myriad of benefits and making three million households better off.”

Voice of the Mirror: Parcel farce

THE growing number of people reliant on food banks is a damning indictment of this Government’s policies.
Today two leading charities say there could be half a million “hidden hungry”.
And their report lays much of the blame on the Coalition’s welfare reforms. They have pushed the most needy deeper into poverty.
It is a disgrace that so many rely on emergency food parcels in the seventh richest country in the world.

Top two U.S. funeral companies merge as baby boomers boost demand

(Reuters) - Service Corp International (SCI.N) agreed to buy Stewart Enterprises Inc (STEI.O) for $1.13 billion, merging the two largest U.S. funeral home operators as the industry gears up to offer more services to aging baby boomers.
Large-scale consolidation in the highly fragmented funeral business has long been on the cards, with the industry looking to sell more pre-planned funeral contracts to the 76 million baby boomers in the United States.
Service Corp, which failed in a bid to take over Stewart in 2008, said on Wednesday the combined company would have a backlog of future revenue exceeding $9 billion from pre-planned bookings.
The group would own 1,653 funeral homes and 515 cemeteries in 48 states, eight Canadian provinces and in Puerto Rico, and have proforma revenue of nearly $3 billion.
Shares of Service Corp, which had revenue of $2.4 billion in 2012, rose as much as 11 percent, suggesting investors were happy with the deal, which was priced at 24.5 times Stewart's forward earnings.
The number of funeral homes and crematories owned by both the companies would be about 20 percent or less of the total in the United States, said Barbara Kemmis, Executive Director of Cremation Association of North America.
"I see this as evidence that there is room in this industry for economies of scale and consolidation," she said.
Just under 25 percent of the U.S. population was over the age of 55 in 2011, up from 20.4 percent in 2000, according to the Census Bureau.
The deal is valued at about $1.13 billion based on shares outstanding as of February 28, according to Thomson Reuters data.
Including debt, the transaction is valued at $1.4 billion.
Stewart rejected an unsolicited $1 billion takeover offer from Service Corp in 2008.
Excluding one-time costs, the deal is expected to immediately add to normalized earnings per share, Service Corp said.
Houston-based Service Corp will buy all of Stewart's outstanding Class A and Class B common stock at $13.25 per share, a premium of 36 percent to Tuesday's close.
Service Corp said it expected to generate about $60 million in annual cost savings, and anticipated the synergies to be fully realized over a 24-month period from the closing of the deal, expected late this year or early in 2014.
The acquirer said it intended to maintain an infrastructure presence in Stewart's New Orleans base.
Stewart Chairman Frank Stewart, whose grandfather founded the company in 1910, has agreed to vote his 30 percent stake in the company in favor of the takeover.
Service Corp said it had a financing commitment from JPMorgan Chase Bank and that together with cash on hand this would be sufficient to complete the acquisition.
J.P. Morgan and Shearman & Sterling LLP were financial and legal advisers respectively to the company.
Goldman, Sachs & Co advised Stewart's board, while Jones Walker LLP served as legal adviser. Latham & Watkins LLP served as legal adviser to chairman Stewart.
Service Corp shares were up 7.5 percent at $18.94 on the New York Stock Exchange at midday, while Stewart's stock was up 33.7 percent at $13.03 on the Nasdaq.
(Reporting by Chris Peters in Bangalore; Editing by Maju Samuel and Ted Kerr)

For Real Economic Recovery, Government Must Stop Favoring Banks Over Homeowners

Delta Hawkeye Security guard Darien Wilson patrols a vandalized foreclosed home in Stockton, Calif., July 11, 2012. (Photo: Max Whittaker / The New York Times)Delta Hawkeye Security guard Darien Wilson patrols a vandalized foreclosed home in Stockton, Calif., July 11, 2012. (Photo: Max Whittaker / The New York Times) Truthout is able to confront the forces of greed and regression only because we don’t take corporate funding. Support us in this fight: make a tax-deductible donation today by clicking here.

We're now in the sixth year of the economic collapse and the home foreclosure crisis persists. It continues to drag down families, destroy wealth, weaken communities and prevent economic recovery. Inadequate government response has led to a long-term economic crisis that could have been avoided. With good policy, more losses can still be avoided and the economy can begin a real recovery. According to a 2010 report by the Center for Responsible Lending, 2.5 million homes completed the foreclosure process between 2007 and 2010. The 2011 report by the Center for Responsible Lending found that the country was not even halfway through the foreclosure crisis. In total, the Federal Reserve estimates that $7 trillion in home equity was lost from American households between 2006 and 2011 due to the housing crisis.
The crisis of foreclosure and lost wealth is not over. Every three months, 250,000 new families enter the foreclosure process. According to a May 2013 report of the Congressional Budget Office (CBO), more than 13 million homes are still underwater, which increases the risk of foreclosure.
This crisis could have been averted through government policy that placed the needs of people, rather than those of the bankers, first. Because that hasn't happened yet, people are coming together and demanding that the Department of Justice (DOJ) start holding the big banks accountable. The Home Defenders League, a coalition of local groups that are fighting foreclosure, held a series of actions at the DOJ last week.
In this article, we describe what individuals can do to protect themselves and what local and federal governments can do to resolve the foreclosure crisis and place the nation on a path of economic recovery for everyone, not just for the wealthy.
The Foreclosure Crisis and Fake Recovery Hurt Everyone
Homes are the most valuable asset of American workers. Each foreclosure results in an average of $131,200 in lost wealth for the homeowner. In 2012, a total of $192.6 billion in wealth was lost due to foreclosures across the United States. For each of the nation's 113.7 million households, that equals an average of $1,679 in lost wealth. If the 13 million homes still at risk are foreclosed, another $221 billion in wealth will be destroyed, according to a report by the Home Defenders League released on May 20, 2013, "Wasted Wealth: How the Wall Street Crash Continues to Stall Economic Recovery and Deepen Racial Inequity in America."
Foreclosures do not only destroy the wealth of the families who lost their homes; they also drag down neighbors and communities. A report, "The Municipal Cost of Foreclosures," shows that foreclosures can result in as much as an additional $220,000 in reduced property value and home equity for nearby homes. In addition, foreclosure can add costs to local governments. One foreclosure can impose up to $34,000 in direct costs on local government agencies, including inspections, court actions, police and fire department time, potential demolition, unpaid water and sewage, and trash removal. Foreclosures in Newark, New Jersey, have cost the city, and taxpayers, $56 million, according to a report by New Jersey Communities United.
The foreclosure crisis has been most devastating in poor communities of color. A July 2011 Pew Research analysis found the median wealth among Hispanic households fell by 66 percent and among African-American households it fell by 53 percent after the bursting of the housing market bubble in 2006 and the recession that followed. According to "Wasted Wealth," these were the people who were specifically targeted with sub-prime and high-risk loans - mortgages designed to fail. Communities in which people of color were the majority of residents saw an average of $2,198 in lost wealth per household, while people in predominantly white communities lost an average of $1,267 per household. This massive loss came from a corrupt banking industry pervaded with fraud which targeted these communities.
This massive loss of wealth for working Americans comes in the context of a deep and sustained unemployment crisis that has resulted in tens of millions of Americans giving up trying to work or struggling with long-term unemployment. And for many of those who do work, it has meant lower wages and underemployment. But that is just the most recent crisis.
The US middle class has been in a long period of decline as we experience a race to the bottom in the treatment of workers, combined with a culture of endless consumerism and easy credit, leading to high debts. At present, 52 percent of Americans live paycheck to paycheck, 43 percent spend more than they earn and 46 percent do not have $5,000 in savings. And this is also the result of a so-called "recovery" in which 121 percent of income growth since the economic crash in 2008 has gone to the richest 1 percent of Americans while the remaining 99 percent lost income.
The supposed recovery has been more smoke and mirrors than real. Over the last three years, the total national growth has been 6.3 percent, the slowest growth after an economic collapse compared to all 11 recessions since World War II. This is stagnation, not recovery. The housing market "recovery" being reported currently is a complete hoax created by the Federal Reserve's very low interest rates, which allow investors to borrow money cheaply to buy low-priced houses. The banks have kept 7 million houses in foreclosure off the market in order to create housing scarcity and raise prices. Actual families, who have lost wealth and income and cannot borrow easily, are unable to buy. The manipulation of the housing market is another way the wealthy are stealing wealth from the rest of us.
Protect Yourself
We talked with David Petrovich of the Society for the Preservation of Continued Home Ownership on the "Clearing the FOG" radio program we host about what steps people facing foreclosure can take to protect themselves.
Petrovich described how to keep a foreclosure workbook: a centralized binder to keep track of notices, log telephone calls, and record loan information and any promises made by the banks. He emphasized that the homeowner needs to know as much as possible about the loan's servicing. People should always try to keep track of who owns their loan. It is also important to keep a paper history by putting every request in writing.
When there is an attempt to collect on a mortgage, this should be immediately challenged in writing by certified mail, with copies to regulatory agencies, Congressional representatives and the CEO of the mortgage lending institution. The loan servicer needs to be put on notice that the homeowner will be challenging foreclosure every step of the way. Loan servicers do not want their loans investigated by regulatory authorities. Because many foreclosures are based on incomplete or false information, the banks fear allegations of fraud may arise when a loan's servicing record is subject to audit.
The homeowner should demand that the loan servicer make available the original mortgage loan documents. This should not be a copy, but the version with the actual ink of the signed promissory note, and the homeowner should verify any subsequent endorsements and assignments. This is important because Petrovich reports that an estimated 50 percent of mortgage loans may be deemed unenforceable as mortgage loans because they are in fact unsecured loans which are dischargeable in bankruptcy.
Homeowners should be on the lookout for robo-signed documents, which means forged signatures on backdated documents. Homeowners should be careful not to allow the lender to "fix" the deficient loan because they will attempt to seduce borrowers into executing NEW loan documents which are legitimate mortgage loans ... replacing the bad with good.
Petrovich warns that the homeowner will be put through an endless series of hoops and hurdles, but should be persistent and "jump through and around them." Throughout the process, the homeowner should continue to challenge the alleged lenders' purported standing to modify the loan, approve a pre-foreclosure short sale, or foreclose. These should all be challenged in writing and sent via certified mail. More information about these steps can be found in Petrovich's book, Fight Foreclosure.
Steve Bailey, who also appeared on "Clearing the FOG," is a homeowner who never missed a payment but still lost his home to foreclosure. He is now active with the Colorado Foreclosure Resistance Coalition. Bailey was negotiating to refinance his mortgage and though the refinancer claimed that the process was going fine, the mortgage holder foreclosed on his house. Petrovich says that you have to deal with people in the loan industry as though they are not your friends. You cannot trust loan officers because they have their own agenda which runs counter to the needs of the homeowner.
Petrovich cautions that people hear what they want to hear when they receive offers to apply for a loan modification. For example, when people are told they are "prequalified" and need to make three payments, they think their loan will be modified and their stressful problems will be solved. But there is always more to it. The three payments requested allow servicers to make it appear that loans are "performing" so they can be sold more easily to an investor, rather than modified, which brings no benefit to the homeowner.
Sometimes homeowners are directed by a loan servicing representative to discontinue making payments for several months in order to qualify for a particular loan modification program. If this occurs, the homeowner should set up their own escrow account and make payments into that account to have it ready in case the loan modification does not occur. The loan officer is paid more by investors who own the loans when the loans are delinquent, in default, or in foreclosure, which means the servicers' incentive to profit is in conflict with loan resolution.
There are two major federal programs designed to help homeowners. The Home Affordable Refinance Program (HARP) is for underwater mortgages when borrowers are current with their payments, and the Home Affordable Modification Program (HAMP) seeks to ease terms on borrowers who have missed payments.
The HARP program got off to a slow start but seems to be beginning to work. The Los Angeles Times reports that in 2013, "Nearly 1.1 million homeowners with little or no equity were able to refinance last year under HARP. That's nearly as many as in the three previous years combined, and the latest figures show that early this year, the pace of these refis abated only slightly." The program was revamped in 2011 to end the limit on percentage of home value that can be borrowed (which had been 125 percent of the home's value), streamline the process and extend the program to 2015. Approximately 2 million homeowners are eligible for HARP. A key to making the program work was eliminating the lender's responsibility for defects in the original loans. HARP is limited to loans already backed by Freddie Mac and Fannie Mae and is not available for mortgages that are privately held securities.
HAMP has not worked. About 93 percent of the people who applied for a home loan modification didn't get one. According to Pro Publica, one problem with HAMP is that the government was not supervising the banks. Throughout 2009 and 2010, when the government provided little oversight and administered no sanctions, servicers reviewed 2.7 million modification applications and denied two-thirds of them. Homeowners regularly complained they had been mistreated by servicers in the program. A 2012 Government Accountability Office (GAO) report concluded that the program reached many millions fewer people than was hoped.
TARP Inspector General Neil Barofsky writes in Bailout: An Inside Account Of How Washington Abandoned Main Street While Rescuing Wall Street, HAMP brought "with it a rash of misconduct and criminal activity. Treasury's bungling of HAMP and its refusal to heed our warnings and those of other TARP oversight bodies resulted in the program harming many of the people it was supposed to help." Barofsky warned of a basic conflict in HAMP because the mortgage servicers who operated the program were the first to get their fees when there was a foreclosure.
Local Government Action: Eminent Domain and Making Foreclosure and Abandonment Expensive
There are ways that a local government that is motivated to protect its citizens, communities and city can respond to the foreclosure crisis. One power that has been discussed by dozens of cities - but not yet used - is eminent domain. Eminent domain enables municipal, state or federal governments to take property, which includes mortgages, for a public purpose. As Home Defenders League reports, the use of eminent domain to create the conditions for new sustainable mortgages at current home values while keeping homeowners in their homes serves the public interest.
The way it would work is for the government to condemn underwater mortgages for causing community harm and then issue new mortgages at rates consistent with real housing values. The city would allow the current homeowners to stay in their home. The mortgage holder would be put on notice and required to prove they own the mortgage debt, which is often difficult to do. If they are unable to do so, the lien on the property can be extinguished - leaving the property owned free and clear. If they can show they own the mortgage, then under a condemnation, the investors have the chance to contest in court the compensation they receive to ensure their rights. This threat has been discussed in cities and counties. San Bernardino, California, came the closest to using eminent domain but received threats from lenders which scared them away from it.
The threat of taking property by eminent domain could be coupled with an aggressive program to discourage lenders from abusing borrowers and instead encouraging them to find solutions with homeowners. In Los Angeles, the city attorney has taken the lead on making foreclosure expensive so lenders think twice about foreclosure or abandoning property. City attorney Carmen Trutanich has sued banks over blighted and abandoned homes and their costs to the city. The suits accused mortgage holders of allowing the homes to deteriorate into slums with hundreds of homes falling into disrepair. They also challenged 1,500 foreclosures. The city is seeking to have vacant properties cleaned up and to hold lenders responsible for the impact of loans that have gone bad.
Some cities have put fines in place for requiring registration of vacant properties and ensuring they do not become dilapidated. For example, Newark, New Jersey, has a vacant property registration ordinance requiring registration and maintenance of vacant properties. Cities should enact such laws and fully enforce them to bring in revenue and make vacancy and abandonment expensive. These ordinances should be designed to cover all vacant homes and cover the full cost of property vacancy problems to ensure that those responsible for the foreclosure crisis pay the cost.
These kinds of actions begin to change the dynamic by giving banks an incentive to avoid homes becoming vacant or falling into disrepair. By negotiating with homeowners, the banks avoid being sued or fined by the city, or worse, having their mortgage condemned.
To Prevent Loss of Wealth, Institute a Principal Reduction Program
One of the solutions recommended in "Wasted Wealth," is to institute a national policy of principal reduction. Underwater homeowners are paying housing bubble prices even though the falsely inflated bubble has burst. As a result, banks continue to profit from the high housing bubble prices created by their corrupt mortgage practices, and homeowners continue to suffer. A strategy of principal reduction would produce an average annual savings of $7,710 ($640 per month) for each underwater homeowner nationwide, boost the US economy by $101.7 billion, and create 1.5 million jobs.
Principle reduction would also bring benefits to those holding the mortgage loans. According to a Chicago Federal Reserve Board report, even investors that own distressed mortgages would stand to save significantly on the expensive costs foreclosures bring. The average foreclosure costs the lender $50,000. "For the lender, foreclosure means absorbing the full loss for outstanding principal, accrued interest, legal fees, costs of holding and maintaining the property, and real estate broker fees, less any amount recovered through the sale of the property." For loan servicers, the economic stream stops when homeowners stop paying their mortgage.
"Wasted Wealth" recommends that Congress, the Obama administration and federal officials take action to "keep people in their homes and preserve community wealth by resetting mortgages." The federal government controls $5 trillion in mortgage assets, but Fannie Mae and Freddie Mac have blocked principle reduction.
We recognize the dysfunction in Congress, so we prefer to focus on steps the Obama administration can take without Congress. "Wasted Wealth" points to the following:
  • Ensure that Fannie and Freddie and servicer practices discourage foreclosures and place principal reduction at the top of the list of options for helping distressed homeowners.
  • After exhausting all loan modification options, including resetting mortgage principal, ensure that Fannie and Freddie make it a priority to keep families in foreclosed homes through rental or buy-back programs and turn vacant homes over to affordable housing development and community control, not to sources of new speculation and profit-taking by Wall Street speculators.
  • Hold Wall Street executives and banks legally accountable for their actions and ensure that future settlements with lenders and servicers are commensurate with the real damage done.
  • Use the power of the Treasury, regulatory agencies, and law enforcement to ensure that promised relief (Home Affordable Modification Program, Hardest Hit Funds, National Mortgage Settlement, Independent Foreclosure Review, etcetera) actually reaches families and communities in need of help, starting with the communities of color and neighborhoods targeted for the most abusive lending practices. As a first step, the demographic and geographic data about who receives benefits from programs intended to aid homeowners should be tracked and made public.
  • End the practice of allowing the perpetrators of mortgage and foreclosure abuses to administer settlements and ensure that they adhere to fair lending practices.
Time to Correct a Mistaken Policy: Put People's Needs Before Bank Profits
The corruption of the executive and legislative branches in Washington, DC by the big banks has resulted in weak foreclosure and housing policies that have shifted wealth to the wealthiest while destroying the already limited wealth of working families. These policies would have been very different if the government had put people's needs before corporate profits.
President Obama filled his economic team with Wall Street advisers and put Timothy Geithner, who was head of the New York Federal Reserve when the economic crash occurred, in charge of Treasury. Barofsky, the TARP inspector, charged that Geithner focused less on the needs of homeowners and more on protecting bank profits. For example, Geithner said TARP funds were to "foam the runway for the banks," that is, lengthen the foreclosure process to spread out the coming wave of foreclosures, rather than refinance mortgages to protect homeowners, many of whom were ripped off by the big banks. Barofsky makes the point that TARP benefitted a single company, American Express, more than all struggling US homeowners combined. "Helping the banks, not homeowners, did in fact seem to be Treasury's biggest concern," Barofsky said in his book, Bailout.
Current TARP Special Inspector General Christy L. Romero said in 2012 that just 3 percent of TARP funds that were specifically designated for homeowners in the communities hit hardest by the crisis had been dispersed. She explained to The New York Times: "TARP wasn't supposed to be just a bank bailout. It was specifically designed with the goal of helping homeowners, and our concern is that that goal may not be met." She also faults the Obama administration, specifically Geithner's Treasury Department. The banks got the TARP money quickly, but homeowners are still waiting.
On top of receiving $700 billion in TARP money, as of March 2009, $7.77 trillion in low-cost loans were given to the banks by the Fed with no strings attached, at nearly zero percent interest. To this day, through qualitative easing, banks are getting $85 billion a month in low-interest money from the Fed. As noted above, this is leading to a fake housing "recovery" as investors seek to profit from low-cost housing while millions of homeowners still struggle.
Last week, the anger began to boil over as scores of people who have lost their homes or are struggling to keep them protested the DOJ's failure to prosecute the big banks. Days of protests included occupying the DOJ overnight and blocking the streets and entrances to the building, to which police reacted with arrests and Tasers. They also protested at Covington and Burling, the corporate law firm where Attorney General Eric Holder was a partner and where the head of the DOJ Criminal Division, Lanny Breuer, went after admitting to Frontline that there was no intent at DOJ to prosecute the big banks. Breuer will now receive an estimated $4 million annually from Covington and Burling.
Let's hope the anger of the people continues to show itself. The government and the big banks have colluded to deprive the people and the overall economy of what is needed. The needs of big banks are protected rather than the needs of millions of families who have been thrown out of their homes and the communities which are now in decay. This will change if the people continue to rise up and demand accountability and solutions that place people before profits.
You can listen to our interview, "Fighting Fraudulent Foreclosure," with Steve Bailey, David Petrovich, Debra Castilo and Kevin Whelan on Clearing the FOG.
This article was first published on Truthout and any reprint or reproduction on any other website must acknowledge Truthout as the original site of publication.

Investment Opportunity At Your Local Bank, Buy Nickels!! (Original Blog)

By, TheLasersShadow

Investment Opportunity At Your Local Bank, Buy Nickels!! Yes those little round 5 cent coins called nickels.
Jefferson Nickel Price 1946-2011 Nickel

There are bills right now in the works that will change the metals that make up our nickels. Currently they are 75% copper and 25% nickel, when this bill passes the new coins will as worthless as paper bills.

Right now you can walk into almost any bank and hand them a dollar bill and get 20, 0.0685cent coins..... your making 37cents PER DOLLAR you change into nickels! YES NO JOKE!

I in no way am telling you to melt these down, that would be dumb as well as illegal. Really just store them as is for barter later on when the dollar crashes. This is almost like being given a chance to go back in time and buy silver dimes, quarters and half dollars!! I'll bet you 10 years from now the copper and nickel will be worth many times the face value depending on how bad the dollar crashes. These are hedges against inflation just like silver or gold. Whats great is your getting the copper / nickel coins below spot!

Every time you go to the bank put a part of your check into nickels, TRUST ME you will thank me later. These coins will always be worth something.

Gold A `Good Buy’ At Current Levels, Barratt Says

May 27 (Bloomberg) — Jonathan Barratt, chief executive officer of Barratt’s Bulletin, a commodity newsletter in Sydney, talks about metals. He also discusses the outlook for the Australia dollar. He speaks with Rishaad Salamat on Bloomberg Television’s “On the Move.” (Source: Bloomberg)

Bernanke Has Losing Control Over The Economy - Bill Gross

Central Banks' Central Bank Warns About Rehypothecation Threats

Just a few years ago, central bankers dared not breathe the word rehypotehcation - after all it was the secret fabric that held the shadow banking system together, which was a critical hub to perpetuating the central bankers' plan of reflating assets and creating a wealth effect if only for the 1%, while keeping the rest content with free Obamaphones and endless promises of "trickling down" which four years into Bernanke's grand monetary experiment has yet to materialize. Then, little by little, more and more started to realize that the shadow banking system, whose fiath-based (sic) liabilities amount to somewhere between $60 and $100 trillion (of credit money) globally, is precisely the inflation buffer that has allowed central banks to engage in round after round of QE, which has sent global stocks to all time highs, while keeping the world mired in the longest economic depression since the 1930s (explained here).
Of course, the one inadvertent side effect of all this constant meddling which be definition requires the monetization of quality collateral in order to generate new fungible money, was the gradual disappearance of all such quality assets which private investors could buy, then pledge back via repo and other conduits and use proceeds for risky investments. Such as Treasurys. Which is why recently none other than the TBAC warned that the US is suddenly facing a $10+ trillion high quality collateral shortage in the next decade. As we have also explained, this is a major problem for the Fed which at current rates of QEeing, will monetize all Treasury duration exposure in roughly 5 years - at that point there will be virtually no collateral left and the Fed will be finally out of both tools and ammo. Which in turn is why the Fed is desperate to restore the "moneyness" of assorted private sector assets in the time it still has with QE, and convert them to "high quality collateral" status, or eligible for repo and money creation via conventional bank conduits.
Indeed, the TBAC admitted as much in the confidential appendix to its Q2 slide presentation to the US Treasury when it said:
Private sector generation of moneylike collateral helps policymakers over long periods by:
  • Slowly reducing the demand for money
  • Increasing financial deepening
  • Supporting financial globalization
The more restricted the private sector’s ability to create safe, liquid, and moneylike collateral, the harder the public sector must work to supply it through deficits and easy monetary policy.
We will have more to say on this in a future post when we discuss just what the real catalysts for the Fed's unwind are (hint: nothing to do with the market, and nothing to do with inflation or unemployment) and what Ben Bernanke is seeking to accomplish. It is a fascinating topic, and one which we are confident means Bernanke's replacement will be none other than... Bernanke.
But before we go there, a key thing to ponder is that in all activities involving shadow banking, and now that quality collateral, in its definition of being "accepted by all", is scarcer than ever, involve the rehypothecation of certain assets using collateral chains of assorted lengths, which in turn dilute the links of title and ownership between owner and owned, in some cases (like MF Global and Lehman) to infinity, in effect confiscating an asset and plunging it into the bottomless abyss of the shadow banking system.
Furthermore, as we reported recently, none other than Europe has started a crack down on rehypothecation. We are confident that once Deutsche Bank et al realize that this may in fact be serious - a development which would, if completed, collapse their ability to operate on shadow margin and extend their asset base, they will promptly put an end to the silliness.
However, the good news is that with every incremental public instance of the rehypothecation discussion, more are focusing their attention on just how it is that true credit money creation works in the modern world (hint: nothing at all like how the textbook monetarists, Magic Money Tree growers, and all those others who still rely on economic concepts developed in the 1980s and before think).
The most recent, and perhaps most notable, observation on the topics of asset encumbrance, collateral and rehypothecation was none other than the BIS with its just released report titled appropriately enough, "Asset encumbrance, financial reform and the demand for collateral assets." In this report, variants of the word "rehypothecate" appear no less than 24 times. More importantly, the whole point of the paper is to serve as a warning, which means that slowly but surely the world's bankers are finally willing to expose in broad daylight (ironically), the true risks permeating the real financial system located deep in the shadows, where maturity, risk and collateral transformation all take place, however without the nuisance of deposits. Whether this is so they can abuse it all over again (most likely) or out of actual altruistic (unlikely) motivates, is unclear.
However, for those still confused by what remains a very nebulous topic for most, here is what the BIS has to say on the key topic of rehypothecation and its assorted instances in modern finance.
Rehypothecation and reuse of collateral assets
Rehypothecation refers to the right of financial intermediaries to sell, pledge, invest or perform transactions with client assets they hold; and it allows prime brokers and other financial intermediaries to obtain funding using their client collateral. Collateral reuse, in turn, usually covers a broader context where securities delivered in one transaction are used to collateralise another transaction, including the ability to reuse collateral through change in (temporary) ownership. Yet the terms rehypothecation and reuse of securities are often used interchangeably; they do not have distinct legal interpretations.
Certain types of collateral rehypothecation (and reuse) can play an important role in financial market functioning, increasing collateral velocity and potentially reducing transaction and liquidity costs. Rehypothecation decreases the (net) demand for collateral and the funding liquidity requirements of traders, since a given pool of collateral assets can be reused to support more than one transaction. This lowers the cost of trading, which is beneficial for market liquidity.
Securities lending-type transactions (including collateral swaps), which have been structured as collateralised loans, would not exist without rehypothecation. In the repo market, participants would not be able to cover short positions without the ability to reuse collateral. However, repos do not directly rehypothecate collateral because they are structured as a sale and repurchase transaction.
While certain types of rehypothecation can be beneficial to market functioning, if collateral collected to protect against the risk of counterparty default has been rehypothecated, then it may not be readily available in the event of a default. This, in turn, may increase system interconnectedness and procyclicality, and could amplify market stresses. Therefore, when collateral is rehypothecated, it is important to understand under what circumstances and the extent to which the rehypothecation has occurred; or in other words, how long the collateral chain is.
And some of the more vocal warnings:
A particular aspect that has received considerable scrutiny in the policy debate on securities financing markets is the extent to which rehypothecation activities should be permitted. The recent crisis experience suggests that greater reliance on rehypothecation in financial intermediaries’ balance sheets will increase interconnectedness and make them more vulnerable to financial shocks. Rehypothecation of client assets can also delay the recovery of assets or even impose losses on beneficial owners. In addition, it can prompt intermediaries to build up leverage in good times, contributing to increased procyclicality of the financial system.
But most importantly:
Financial intermediaries should provide sufficient disclosure to clients when collateral assets posted by them are rehypothecated; rehypothecation should be allowed only for the purpose of financing the long position of clients and not for financing the own-account activities of the intermediary; and only entities subject to adequate regulation of liquidity risk should be allowed to engage in the rehypothecation of client assets.
Ironically, using rehypothecation for the purposes of financing the own-account activities of the intermediary, is precisely what happens every single day in every single, and certainly TBTF large (see JPM) bank.
Could it be that some of the forces behind the bank of central banks are starting to realize just how close to the precipice the world truly is and are now actively cautioning their private sector peers to step back from the ledge or everyone gets it?
If so, and here is a chance this is true, we expect to see one of the most epic public-private sector conflicts in financial history, because in a world rapidly devoid of collateral and quality assets against which to margin and build leveraged operations, without rehypothecation the ability to generate mindnumbing bonuses for the banker superclass becomes null and void.
And after all, preserving the cash flow associated with levering every possible asset as many times as inhumanly possible and wagering it, preferably with zero risk, in a coopted and manipulated market, is what it is all about...

All Eyes On Japan!! They’re Headed For The Mother of All Crashes

Is the euphoria starting to wear off? Japan is headed for collapse and people are rushing into USD lately. 
I have not seen the USD this strong in 5 years at least..
Declines of 30% to 60% have taken place EVERY TIME here for 20-years!

The hottest index on the planet, up over 50% more than the S&P500 over the past year is facing a resistance line that has saw it decline from 30% to 60% every time for the past 20 years.
Many of these declines have ended up impacting the S&P500.
Can the Nikkei do something different this time at (2)?
Japan’s Debt Problem Visualized
A short, visual explanation of Japan’s debt crisis by Addogram. Visit for large, data-rich prints on financial history.
The US Debt clock is still on fire !
Columbia Economist Dr. Jeffrey Sachs speaks candidly on monetary reform [Full version speech]
We’re Headed For A Crash: Let’s Go Medieval Instead
The only option in the end.
These nervous ones are looking ever more closely these days at the distant nation of Japan, where an interesting scenario is playing out: the last days of a giant industrial-technocratic economy. The story there is actually pretty simple if you peel away the quasi-metaphysical bullshit it comes wrapped in these days from astrologasters like John Mauldin and Paul Krugman, viz. Japan has no fossil fuel resources. Zip. You can’t run their kind of economy without the stuff. And they can’t.
Japan is crapping out, as they say in Las Vegas. Tilt! Game over. As this happens, Japan issues a lot of distracting financial noise that involves evermore “creation” of their own “money,” and the knock-on effects of that, but it’s all just noise.
Japan’s only good choice is to go medieval, that is, to give up on the rather hopeless 150-year-long project of being an industrial-technocratic modern super-state, and go back to being an island of a beautiful artistic hand-made culture. I call that “going medieval,” though you could quibble as to whether that’s the best word for it, since I’m not talking about cathedrals or crusades.
One of Japan’s other choices is to “go mad-dog,” something they actually tried back in the mid-20th century. It didn’t work out too well then. The Japanese leadership is making noises about “re-arming,” and a nice state of conflict is already simmering between them and their age old rivals-victims next door in China, a country that has lately enjoyed the upper hand in the industrial-techno racket (though it will be faced with the same choices as Japan not too many years hence).

Demand for Physical Gold and Silver is Extraordinary, Bail-Ins Inevitable and More: James Turk

James Turk of predicts, “It’s inevitable you are going to see bail-ins as we go forward from here because the capital just doesn’t exist.” He also says gold is going much higher in a scramble for tangible assets. Turk points out, “The problems we’ve been confronting the past several years haven’t gone away . . . governments have been trying to buy time, but they aren’t coming up with any solutions.” Join Greg Hunter as he goes One-on-One with Gold expert James Turk from the UK.

James Turk & John Williams – GoldSeek Radio Interview

The Student Loan Delinquency Rate In The United States Has Hit A Brand New Record High

By Michael
College Graduation - Photo by Mando vzl
37 million Americans currently have outstanding student loans, and the delinquency rate on those student loans has now reached a level never seen before.  According to a new report that was just released by the U.S. Department of Education, 11 percent of all student loans are at least 90 days delinquent.  That is a brand new record high, and it is almost double the rate of a decade ago.  Total student loan debt exceeds a trillion dollars, and it is now the second largest category of consumer debt after home mortgages.  The student loan debt bubble has been growing particularly rapidly in recent years.  According to the Federal Reserve, the total amount of student loan debt has risen by 275 percent since 2003.  That is a staggering figure.  Millions upon millions of young college graduates are entering the “real world” only to discover that they are already financially crippled for decades to come by oppressive student loan debt burdens.  Large numbers of young people are even putting off buying homes or getting married simply because of student loan debt.
So why is this happening?  Well, a big part of the problem is that the cost of college tuition has gotten wildly out of control.  Since 1978, the cost of college tuition has risen even more rapidly then the cost of medical care has.  Tuition costs at public universities have risen by 27 percentover the past five years, and there appears to be no end in sight.
We keep encouraging our young people to take out all of the loans that are necessary to pay for college, because a college education is supposedly the “key” to their futures.
But is that really the case?
Sadly, the reality of the matter is that millions of young Americans are graduating from college only to discover that the jobs that they were promised simply do not exist.
In fact, at this point about half of all college graduates are working jobs that do not even require a college degree.
This is leading to mass disillusionment with the system.  One survey found that 70% of all college graduates wish that they had spent more time preparing for the “real world” while they were still in college.
And because so many of them cannot get decent jobs, more college graduates then ever are finding that they cannot pay back the huge student loans that they were encouraged to sign up for.  The following is from a recent Bloomberg article.
Eleven percent of student loans were seriously delinquent — at least 90 days past due — in the third quarter of 2012, compared with 6 percent in the first quarter of 2003, according to the report by the U.S.Education Department.  Almost 30 percent of 20- to 24-year-olds aren’t employed or in school, the study found.
Everyone agrees that we are now dealing with an unprecedented student loan debt bubble, but none of our leaders seem to have any solutions.
The two charts posted below come from a recent Zero Hedge article, and they are very illuminating.  The first chart shows how the amount of student loan debt owned by the federal government has absolutely exploded in recent years, and the second chart shows how the percentage of student loan debt that is at least 90 days delinquent has risen to a brand new record high…
Delinquent Student Loans - Zero Hedge Chart

How is the economy ever going to recover if an increasingly large percentage of our young college graduates are financially crippled by student loan debt?
And things are about to get even worse.
If Congress takes no action, the interest rate on federal student loans is going to double to 6.8 percent on July 1st.  That rate increase would affect more than 7 million students.
And debt burdens just continue to increase in size.  In fact, according toone recent study, “70 per cent of the class of 2013 is graduating with college-related debt – averaging $35,200 – including federal, state and private loans, as well as debt owed to family and accumulated through credit cards.”
This is one reason why there is so much poverty among young adults in America today.  As I mentioned in a previous article, families that have a head of household that is under the age of 30 have a poverty rate of 37 percent.  For much more on the student loan debt bubble and how it is crippling an entire generation of Americans, please see my recent article entitled “29 Shocking Facts That Prove That College Education In America Is A Giant Money Making Scam“.
And of course delinquency rates remain very high on other forms of debt as well.  For example, delinquency rates on home mortgages have typically been around 2 to 3 percent historically.  But as you can see from the chart below, the delinquency rate on single-family residential mortgages is currently close to 10 percent…
Delinquency Rate On Single-Family Residential Mortgages
So are we really having an “economic recovery”?
Of course not.
Things are good for those that have lots of money in the stock market (for now), but for the vast majority of Americans things continue to get worse.
And we continue to forget the lessons that we should have learned from the financial crisis of 2008.  Right now, we are seeing a resurgence of cash out financing.  But this time, people are leveraging their inflated stock portfolios instead of their home equity.  The following is from a CNN report
The recent run-up in the market, financial advisers say, has led to a resurgence of the type of loan not seen since the end of the housing boom — cash out financing. But this time, though, people aren’t tapping their inflated house for money. These days stock portfolios appear to be the well of choice.
Financial planners say in recent months clients have taken out so-called margin loans to buy real estate, fund small business acquisitions, or to provide gap financing before a traditional loan could be secured from a bank.
“No one wants to be out of the market for 90 days,” says Mark Brown, a financial planner for Brown Tedstron in Denver. “People just don’t want to sell right now.”
We are a nation that is absolutely addicted to debt.  We know that it is wrong, but we just can’t help ourselves.
We are like the 900 pound man that recently died.  He knew that he was eating himself to death, but he just couldn’t stop.
In the end, we are going to pay a great price for our gluttony.  Everyone in the world can see that we are killing the greatest economy that ever existed, but we simply do not have the self-discipline to do anything about it.

21 Facts About Rising Government Dependence In America That Will Blow Your Mind

by Michael
Uncle Sam Is Broke
Government dependence in the United States has reached a level never seen before.  50 years ago, the federal government handed out about 10 cents for every dollar that American workers earned.  Now, the federal government hands out about 35 cents for every dollar that American workers earn.  Yes, there are always poor people that cannot take care of themselves.  We never want to see a single American going hungry or sleeping in the streets.  But we are rapidly approaching the point where so many people are jumping on to the “safety net” that it is going to break.  If you can believe it, more than 100 million Americans are enrolled in at least one welfare program, and more than 70 percent of all spending by the federal government goes to “dependence-creating programs”.  If we really are “the greatest economy on earth”, then why is the number of people dependent on the government absolutely exploding?  Of course the truth is that all of this just shows that we are in the midst of a long-term economic decline that is rapidly accelerating.  Our economy simply does not produce enough jobs anymore, and there are a whole lot of people out there that are really suffering.
It is good to want to help all of the people that are hurting, but the reality is that we are spending far more money than we can afford to.  We have been borrowing (stealing) more than 100 million dollars from our children and our grandchildren every single hour of every single day to pay for all of this.  Our national debt is rapidly approaching 17 trillion dollars, and if future generations get the chance, they will look back and curse us for handing such a mountain of debt down to them.
It is absolutely criminal what we are doing to future generations.  But we cannot help ourselves.  We are like the 400 pound union executive in New York that takes long naps at his desk every afternoon.  We know that what we are doing is not right, but we cannot help ourselves.  For much more on the horror of our national debt, please see my previous article entitled “55 Facts About The Debt And U.S. Government Finances That Every American Voter Should Know“.
So what should we do?  We certainly don’t want millions of Americans to go without food or a place to sleep, and yet the number of Americans that need government assistance just continues to grow.  Of course the ultimate solution would be to provide a job for all of those people, but our economy is falling apart.  Unless a miracle happens, the U.S. economy will never produce enough jobs ever again.  As our economy continues to crumble, dependence on the government is likely going to continue to rise.
The following are 21 facts about rising government dependence in America that will blow your mind…
1. Back in 1960, the ratio of social welfare benefits to salaries and wages was approximately 10 percent.  In the year 2000, the ratio of social welfare benefits to salaries and wages was approximately 21 percent.  Today, the ratio of social welfare benefits to salaries and wages is approximately 35 percent.
2. According to the U.S. Census Bureau, 49 percent of all Americans live in a home that gets direct monetary benefits from the federal government.  Back in 1983, less than a third of all Americans lived in a home that received direct monetary benefits from the federal government.
3. Overall, more than 70 percent of all federal spending goes to “dependence-creating programs”.
4. According to the Survey of Income and Program Participation conducted by the U.S. Census, well over 100 million Americans are enrolled in at least one welfare program run by the federal government.  Sadly, that figure does not even include Social Security or Medicare.
5. Today, the federal government runs about 80 different “means-tested welfare programs”, and almost all of those programs have experienced substantial growth in recent years.
6. The number of Americans on Social Security disability now exceeds the entire population of the state of Virginia.
7. If the number of Americans on Social Security disability were gathered into a separate state, it would be the 8th largest state in the country.
8. In 1968, there were 51 full-time workers for every American on disability.  Today, there are just 13 full-time workers for every American on disability.
9. Right now, there are approximately 56 million Americans collecting Social Security benefits.  By 2035, that number is projected to soar to an astounding 91 million.
10. Overall, the Social Security system is facing a 134 trillion dollar shortfallover the next 75 years.
11. The number of Americans on food stamps has grown from 17 million in the year 2000 to more than 47 million today.
12. Back in the 1970s, about one out of every 50 Americans was on food stamps.  Today, about one out of every 6.5 Americans is on food stamps.
13. Today, the number of Americans on food stamps exceeds the entire population of the nation of Spain.
14. According to one calculation, the number of Americans on food stamps now exceeds the combined populations of “Alaska, Arkansas, Connecticut, Delaware, District of Columbia, Hawaii, Idaho, Iowa, Kansas, Maine, Mississippi, Montana, Nebraska, Nevada, New Hampshire, New Mexico, North Dakota, Oklahoma, Oregon, Rhode Island, South Dakota, Utah, Vermont, West Virginia, and Wyoming.”
15. According to a report from the Center for Immigration Studies, 43 percentof all immigrants that have been in the United States for at least 20 years are still on welfare.
16. Back in 1965, only one out of every 50 Americans was on Medicaid.  Today,one out of every 6 Americans is on Medicaid, and things are about to get a whole lot worse.  It is being projected that Obamacare will add 16 million more Americans to the Medicaid rolls.
17. As I wrote about recently, it is being projected that the number of Americans on Medicare will grow from 50.7 million in 2012 to 73.2 million in 2025.
18. At this point, Medicare is facing unfunded liabilities of more than 38 trillion dollars over the next 75 years.  That comes to approximately $328,404 for every single household in the United States.
19. Back in 1990, the federal government accounted for just 32 percent of all health care spending in America.  It is being projected that the federal government will account for more than 50 percent of all health care spending in the United States very soon.
20. The amount of money that the federal government gives directly to the American people has increased by 32 percent since Barack Obama entered the White House.
21. When you total it all up, American households are now receiving more money directly from the federal government than they are paying to the government in taxes.
About the author: Michael T. Snyder is a former Washington D.C. attorney who now publishes The Truth.  His new novel entitled “The Beginning Of The End” is now available on

Ron Paul: I'm Waiting For The Fed To Self-Destruct

Democrats Accept More Cuts in Food Stamp Program

We’re proud to collaborate with The Nation in sharing insightful journalism related to income inequality in America. The following is an excerpt from Nation contributor Greg Kaufmann’s “This Week in Poverty” column.

Senate Agriculture Committee Chair Sen. Debbie Stabenow, D-Mich. speaks on Capitol Hill in Washington, Tuesday, May 14, 2013, during the committee's hearing on the Farm Bill, officially known as the Agriculture Reform, Food and Jobs Act of 2013.  (AP Photo/J. Scott Applewhite)
Senate Agriculture Committee Chair Sen. Debbie Stabenow, D-Mich. speaks on Capitol Hill in Washington, Tuesday, May 14, 2013, during the committee's hearing on the Farm Bill, officially known as the Agriculture Reform, Food and Jobs Act of 2013. (AP Photo/J. Scott Applewhite)
I always expect the worst from the House Republicans when it comes to SNAP (food stamps) and the Farm Bill. So while much attention and anger has been focused on the $20.5 billion cut proposed by the House Agriculture Committee — which would take food stamps away from nearly 2 million people and result in several hundred thousand low-income children no longer receiving free school meals — my reaction was more along the lines of… yeah, what did you expect?I was actually more disturbed that the Democratic Senate Agriculture Committee would vote for a $4.1 billion cut in food stamps — even though the average benefit is about $1.46 per person, per meal, and a recent Institute of Medicine report demonstrates that benefit levels are already too low to stave off hunger. The cut “would mean $90 less a month for 500,000 families already struggling to make ends meet,” according to Joel Berg, executive director of the New York City Coalition Against Hunger. Berg noted that an amendment by Senator Kirsten Gillibrand would have prevented the SNAP cuts “by instead cutting subsidies for crop insurance companies, many of which are foreign owned.”
Unfortunately, the committee failed to pass Sen. Gillibrand’s amendment, and Senate Democrats proved yet again that the party’s commitment to those who are the most economically vulnerable is about as thin as Republican cut proposals are deep.
But the party outdid itself on Wednesday when the Farm Bill was debated on the Senate floor. As Center on Budget and Policy Priorities president Robert Greenstein describes:
Senator David Vitter offered — and Senate Democrats accepted — an amendment that would increase hardship and will likely have strongly racially discriminatory effects. [It] would bar from SNAP, for life, anyone who was ever convicted of one of a specified list of violent crimes at any time — even if they committed the crime decades ago in their youth and have served their sentence, paid their debt to society, and been a good citizen ever since…. The amendment would [also] mean lower SNAP benefits for their children and other family members. So, a young man who was convicted of a single crime at age 19 who then reforms and is now elderly, poor and raising grandchildren would be thrown off SNAP, and his grandchildren’s benefits would be cut…. Senator Vitter hawked his amendment as one to prevent murderers and rapists from getting food stamps. Democrats accepted it without trying to modify it to address its most ill-considered aspects.
Antipoverty advocates suggest contacting your senators — particularly Harry Reid, Debbie Stabenow and Richard Durbin — to tell them that you oppose this provision. They suggest doing it as soon as possible since it’s unclear how quickly the Farm Bill will move.
You might also suggest to them that the party check Lost and Found for its spine, too.
But at Least We Have Congresswoman Barbara Lee
Congresswoman Barbara Lee and Democratic Whip Steny Hoyer introduced the Half-in-Ten Act of 2013, which would establish the Federal Interagency Working Group on Reducing Poverty. The working group would develop and implement a national strategy to reduce poverty by half in ten years, integrating federal policies on poverty reduction, and also provide regular progress reports to Congress.
“Our policies and programs addressing poverty have not kept pace with the growing needs of millions of Americans,” said Congresswoman Lee, who chairs the new Democratic Whip Task Force on Poverty and Opportunity and consistently represents the interests of low-income Americans. “It is time we make the commitment to confront poverty head-on, create pathways out of poverty and provide opportunities for all.”
I would imagine this bill has about as much a shot at passing the House as this blog has at becoming Speaker Boehner’s favorite bedtime reading. Nevertheless, I’m always thankful for Representative Lee — I’m glad the Democratic whip is supporting her efforts — and it’s always worthwhile to keep up with her work and listen to what she has to say.
And That Goes for Senator Bernie Sanders, Too
Senator Bernie Sanders, chairman of the Senate Subcommittee on Primary Health and Aging, introduced legislation last week to reauthorize and strengthen the Older Americans Act, which supports Meals on Wheels and other critical programs for seniors such as in-home care, transportation, benefits access, caregiver support, chronic disease self-management, job training and placement, and elder abuse prevention.
“With 10,000 Americans turning 65 every day, our country’s growing population of seniors includes many who rely on these critical programs to help them stay in their own homes and communities,” said Sanders, speaking at an Older Americans Summit.
Funding has not kept pace with the growth in need or numbers, and recent cuts before the sequester hit have further eroded investments in key services.
In a letter endorsing Senator Sanders’s bill, National Council on Aging president and CEO James Firman writes that the legislation “can empower seniors and improve their health and economic security, bend downward the long-term entitlements cost curve, and promote greater program efficiency and coordination.”
The bill would also require the Bureau of Labor Statistics to create a consumer price index for the elderly that would account for spending on high-inflation goods and services like healthcare, prescription drugs and heating homes.

Bad News for Bitcoin? Feds Shut Down 'Paypal for Criminals'

In what could be a bad sign for the future of Bitcoin, the feds have shut down Liberty Reserve, a virtual currency exchange system that prosecutors claim was a $6-billion money-laundering scheme designed to help criminals and hackers conceal the origin of their illicit money.
Liberty Reserve is a Costa Rica-based online payment network that U.S. authorities dubbed the "financial hub of the cyber-crime world." According to the indictment (.PDF) unsealed on Tuesday, the service was one of the world's largest digital currency systems with more than 1 million users and more than 12 million transactions.
For the feds, Liberty Reserve facilitated "a broad range of online criminal activity, including credit card fraud, identity theft, investment fraud, computer hacking, child pornography, and narcotics trafficking," and "was in fact used extensively for illegal purposes, functioning in effect as the bank of choice for the criminal underworld."
The indictment, first reported on by Internet security reporter Brian Krebs, and filed in the U.S. District Court for the Southern District of New York, accused Liberty Reserve's founder Arthur Budovsky, 39, and five alleged co-conspirators, of running the illegal money-laundering service.
The five were arrested on Friday in Spain, Costa Rica and Brooklyn, N.Y. The arrests culminated an operation that involved law enforcement agencies form 17 different countries, making it possibly the largest money laundering prosecution ever.

Liberty Reserve's unregulated nature and almost complete anonymity attracted the likes of hackers and criminals.
Even two of the defendants charged in the indictment published today admitted Liberty Reserve's nature in an online chat. In a conversation intercepted by the authorities between Vladimir Kats and Ahmed Yasine Abdelghani, Kats wrote that "everyone in the USA," including the "DOJ," knows that Liberty Reserve is a "money-laundering operation that hackers use."
Even though Liberty Reserve was used by at least 200,000 American customers, it never registered in the U.S. as a money transmitting service, remaining on the edge of legality as an almost completely unregulated money transfer business. To use the service, a user had to provide name, address, and date of birth, but these were never verified.
For all intents and purposes, all a user had to provide to register was a valid email address.
In fact, a law enforcement agent told the New York Times that he was able to register under the name of "Joe Bogus," and even state that the purpose of his registration was "for cocaine."
And this was true for other customers, some even used blatantly fake names like "Russia Hackers."

Liberty Reserve used a complicated system to transfer money across the globe, allowing its users to do it anonymously. The service used third party "exchangers" to avoid collecting cash directly. These exchangers were mostly unlicensed money transmitting services based in Malaysia, Nigeria, Russia, and Vietnam, according to the indictment.
For a senior law enforcement agent, Liberty Reserve was the "Paypal for criminals," as he put it to the New York Times.
The service was started in 2006 by the Ukrainian native Budovsky, who at the time had just been indicted by the feds for money-laundering charges relating to Gold Age, another money-transferring business. After the indictment, he incorporated Liberty Reserve in Costa Rica, and in 2011 he renounced his U.S. citizenship to become a national of the Central American country. In 2007 Budovsky was sentenced to five years of probation after pleading guilty to the Gold Age charges.
The system was used, among others, by the hackers behind the recent $45-million ATM heist.
As indicated by Tymothy B. Lee at the Washington Post, Liberty Reserve's anonymity features resemble those of Bitcoin, and it's thus not completely far-fetched to imagine the feds going after Bitcoin.
The main difference between the two is that even though Bitcoin potentially allows users to be anonymous, every transaction is unique and traceable, even years after it was made. Moreover, there's no one to charge if the feds decide that Bitcoin is illegal. Bitcoin's creator, the mysterious Satoshi Nakamoto, has completely disappeared since 2011, and it's widely believed that his name is just a pseudonym. And nobody really knows who hides behind it.
Image via iStockphoto, DNY59