Housing Boom in London (No, This Is Not 2007)

with low inventory, seller's asking price all-time high.

More green shoots.

London Agents ‘Sold Out’ as Home Asking Prices Jump to Record
(10/19/09 Bloomberg)

"Oct. 19 (Bloomberg) -- London home sellers raised asking prices to a record high this month and led gains across the U.K. as the shortage of properties for sale intensified, Rightmove Plc said.

"The average cost of a home in the capital rose 6.5 percent, the most since records began in 2002, to 416,157 pounds ($680,000), the owner of the U.K.’s biggest residential property Web site said today in a statement. Prices climbed 2.8 percent across Britain as transaction levels dropped by half from 2007."

...and

"“There’s an acute shortage of property,” said Robert Green, a real-estate agent at John D Wood & Co. in Chelsea, southwest London. “Demand is very strong. Also mortgage availability is improving. It’s unlikely we’ll see enough supply come to the market to see prices falling.”

"Demand from foreign buyers is also helping drive up prices in central London due to the weakness of the pound, Green said. The U.K. currency has dropped about 17 percent against the euro in the past year."

(You can read the entire article by clicking on the link above.)

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Major Bank Earnings Reports This Week

Morgan Stanley and Wells Fargo report this week.

Tuesday October 20, 2009 (before market open)

• Bank of New York Melon (BK): Estimates: 0.60 0.467 0.30 (High Mean Low)
• Blackrock (BLK): Estimates: 2.17 1.901 1.68 (High Mean Low)
• State Street (STT): Estimates: 1.14 1.022 0.80 (High Mean Low)

Wednesday October 21, 2009 (before market open)

• Morgan Stanley (MS): Estimates: 0.56 0.286 0.11 (High Mean Low)
• Wells Fargo (WFC): Estimates: 0.50 0.364 0.04 (High Mean Low)
• US Bancorp (USB): Estimates: 0.33 0.267 0.17 (High Mean Low)

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SEC Names 29-Year-Old Goldman VP as Its COO

I thought it was a joke at first.

Goldman Exec Named First COO of SEC Enforcement
(10/16/2009 AP via NY Times)

"WASHINGTON (AP) -- A Goldman Sachs executive has been named the first chief operating officer of the Securities and Exchange Commission's enforcement division.

"The market watchdog agency said Friday that Adam Storch, vice president in Goldman Sachs' Business Intelligence Group, is assuming the new position of managing executive of the SEC division.

"The move came as the SEC has been revamping its enforcement efforts following the agency's failure to uncover Bernard Madoff's massive fraud scheme for nearly two decades despite numerous red flags.

"Storch, who will be responsible for project management and operations, will report to SEC Enforcement Director Robert Khuzami." (You can read the rest of the article by following the link above.)

AP's article doesn't say how old Mr. Storch is. But Bloomberg's article does, which says he is 29-year old. But Business Insider dug deeper than AP or Bloomberg, and they came up with a very youthful photograph of Mr. Storch at this link:

FOUND: Photo of Adam Storch, 29-Year-Old Goldman Guy Who Is Now COO Of The SEC (John Carney, 10/16/09 Business Insider)

If your confidence in SEC is inspired by looking at the photo, please let me know. I will sell you Golden Gate Bridge.

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What Is Your Political News IQ?

Pew Research Center has an online quiz you can take to test how well you know about prominent people and news in politics and finance.

After you take the test and your score is shown, be sure to click on "Demographic breakdowns by question" on the left. There are some interesting findings there.

Test Your Political News IQ (Pew Research Center)

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Bank of America Ken Lewis to Get No Salary/Bonus for 09

so decided Obama's Pay Czar Kenneth Feinberg.

BofA's Ken Lewis to get no '09 salary, bonus
(10/15/09 AP via Yahoo Finance)

"NEW YORK (AP) -- Bank of America Corp.'s outgoing CEO, Ken Lewis, will get no salary or bonus for 2009 under an agreement with the government pay czar, who is scrutinizing compensation at bailed-out banks

"Kenneth Feinberg, the U.S. Treasury Department's special master for compensation, suggested that Lewis should get no pay for the year and Lewis agreed, Bank of America spokesman Robert Stickler said Thursday.

"In fact, Lewis will pay back about $1 million he has received so far out of a $1.5 million annual salary.

""He will write a check to the company," Stickler said.

"The bank spokesman also added that Lewis agreed to the proposal because he felt it was not in the bank's best interest "to get into a dispute with the paymaster.""

The paymaster?? A privately appointed administration's official with no Congressional oversight who is accountable to the president who appointed him is the paymaster whose words are final??
And the public is supposed to cheer for this?

I think it is grossly unfair to Mr. Ken Lewis, soon-to-depart CEO of Bank of America. Why has he been singled out like this? And not Mr. Vikram Pandit, CEO of Citibank, or Mr. John Stumpf, CEO of Wells Fargo? Mr. John Thain, CEO of Merrill Lynch, over which Ken Lewis was threatened by then-Treasury Secretary Hank Paulson to go forward with the purchase or else?

(And have we heard anything further about this story of a government official threatening a bank CEO? Noooo.)

Or how about the CEO of AIG, the company that has sucked in $180 billion of taxpayers' money?

Totally contrary to the treatment that the Pay Czar Feinberg has dished out to Mr. Lewis, the CEO of AIG, Mr. Robert Benmosche, appears to be in extremely good odor with Pay Czar:

AIG chief gets OK for $10.5 million pay package (10/6/09 CNN Money)

Pay Czar is just doing his job, I believe, of deciding who's been good and who's been bad, who's to be rewarded and who's to be punished, ALL ACCORDING TO HIS DISCRETION. Clearly, Mr. Benmosche is favored over Mr. Lewis, for reasons known only to Pay Czar.

What I don't quite understand is: why should anyone listen to him, even obey his orders?

What would happen if Bank of America protested against the unfair treatment of its CEO? Would Pay Czar direct labor unions and community organizers to picket Bank of America?

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Obama Wants to Give Seniors $250

$13 billion in total. Where's the money coming from, Mr. President?

If the President has his way, 50 million-plus seniors and veterans benefits, disability benefits, railroad retirees and retired public employees who don't receive Social Security will receive $250.

Obama calls for $250 payments to seniors
(STEPHEN OHLEMACHER, 10/14/09 AP via myway news)

"WASHINGTON (AP) - President Barack Obama called on Congress Wednesday to approve $250 payments to more than 50 million seniors to make up for no increase in Social Security next year. The Social Security Administration is scheduled to announce Thursday that there will be no cost of living increase next year. By law, increases are pegged to inflation, which has been negative this year.

"It would mark the first year without an increase in Social Security payments since automatic adjustments were adopted in 1975.

""Even as we seek to bring about recovery, we must act on behalf of those hardest hit by this recession," Obama said in a statement. "This additional assistance will be especially important in the coming months, as countless seniors and others have seen their retirement accounts and home values decline as a result of this economic crisis.""

As to how this would be funded, the article has this to say:

"However, Obama did not offer any alternatives to finance the payments. A senior administration official said Obama was open to borrowing the money, increasing the federal budget deficit."

There are similar bills already floated by several Senators.

My take: to placate seniors who crowded the townhall meetings this summer throughout the country to protest against the administration's health care "reform".

You can call me cynic.

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Dow Jones Average Broke 10,000 for a Split Second!

(Update)

And it stayed above 10,000, EOD (end of day).

Amazing ramp-up job. Here's as close to the intraday high as I could do print-screen. (I think it went slightly higher.)


And here's how it ended the day. Tomorrow, Goldman Sachs (GS) and Citigroup (C) will report before the market open. Google (GOOG) will report after hours.

If you feel like commemorating the occasion, here's a "Dow 10000" hat from NYSE. It's version 2.0.

------------------------------------------------------------------



And it was around 1:21 PM EST. The highest for the day (so far) happened a fraction of a second after I did the screen capture, at 10,001.58.

The last time Dow was 10,000 intraday was October 7, 2008. On the closing basis, October 3, 2008 was the last day Dow closed above 10,000.

The index has since pulled back, and right now trading at 9,990, up 119 points (1.21%).

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Can Fed Funds Rate Ever Rise from Zero?

If you look at the chart, it doesn't seem possible. You be the judge.

(The chart is from St. Louis Fed's FRED.)

Note how smooth the line has been since the dot-com bust. Unnaturally smooth.

(Now, if you do TA on this chart, you could say "Head and shoulders pattern, with neckline around 2.5. It's below the neckline but at the support at zero. The target would be the height of the head inverted, that would take it to around -20%. Hello high inflation.)

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Labor Union Is Against the Senate Bill

... what's going on here?

Unions will oppose Baucus bill unless it's changed
(10/13/09 AP via MyWay)

"WASHINGTON (AP) - About 30 unions will run a full-page ad in newspapers Wednesday announcing their opposition to the Senate Finance Committee's health overhaul bill, a top labor lobbyist said.

"The ad will state that unions will oppose the measure on the Senate floor unless improvements are made, according to Chuck Loveless, legislative director of the American Federation of State, County and Municipal Employees.

"The ad will state, "Real health care reform and nothing less," Loveless said.

"Labor has been a major Democratic ally in the health care debate but is unhappy the legislation lacks a publicly run insurance plan and would tax expensive policies in an effort to drive down costs. Officials also want it to prevent insurance companies from refusing to cover some people and to force employers to cover their workers.

"The Finance Committee voted Tuesday to approve the bill, the most conservative of five health overhaul bills congressional panels have written this year. Senate Majority Leader Harry Reid, D-Nev., plans to combine it with the Senate health committee's more liberal version and bring it to the full Senate in perhaps two weeks.

"Besides AFSCME, sponsors included the AFL-CIO and the Communications Workers of America. The ad will run in The Washington Post, USA Today and Capitol Hill newspapers. "

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Senate Finance Committee Passed Health Care Bill

As expected. "History calls," says Senator Snowe.

The Senate Finance Committee passed its health care "reform" bill today in 14-9 vote. Senator Olympia Snowe, Republican, voted with the Democrats. Now the bill has to be reconciled with the bill from the Senate Health Committee before the combined bill is presented on the Senate floor for voting.

If the Senate Democratic leaders decide to use the "reconciliation" procedure then all it takes is a simple majority, instead of 60. But if the vote is strictly along the party line and Ms. Snowe voting with Democrats, then they may already have 60 votes, enough to pass the bill. Since Democrats have the majority in the House, the health care "reform" bill will most likely be passed. (For more on "reconciliation", please see my post from September.)

The insurance industry's about-face, I suspect, will be perceived just like the bankers protest against the Glass-Owen bill (which later became the Federal Reserve Act) was perceived. "Oh look, the industry is protesting against it, therefore they fear their power will be diminished by the bill. Let's vote for it and curb the excessive power of the industry lobby." Something like that. (If the Federal Reserve Act is any indication, they will end up voting exactly what the insurance industry wants.)

Congressional Budget Office concedes that it cannot yet determine the full impact of the bill on the nation's health care cost; its staff "has not had time to evaluate its effects on privately insured people."

For more, please read the article linked below.

Senate committee approves health care plan
(10/13/09 AP via Yahoo News)

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Insurance Industry Now Against Health Care Bill

because the Senate bill doesn't penalize enough.

The Senate Finance Committee is set to vote on its health care bill on Tuesday, just when the health insurance industry has (supposedly) turned against it...

One of the ostensible reasons for this new twist is that the industry now claims Senate legislation would increase premiums for the average household to "$17,200 a year by 2013 under the proposals compared with $15,500 without the reforms. Today’s average annual premium is $12,300". (10/12/09 Health insurance lobby attacks reforms, Financial Times)

I thought: Something doesn't add up here. An industry lobby who has spent $100 million in ad campaigns in support of the government's health care "reform" is now against it? ... So I dug around and found this article.

Insurers Fight Bid to Ease Penalties in Health Bill
(10/6/09 Wall Street Journal)

"WASHINGTON -- Hospitals and insurance companies are pushing back against changes to the latest Senate health-care bill that ease the penalties for Americans who don't carry health insurance.

"The Senate Finance Committee could vote late this week on a sweeping bill designed to expand health-insurance coverage. Senators refining the legislation last week narrowed the scope of a new requirement that all Americans carry health insurance out of concern it penalized people who can't afford to buy it.

"The changes mean the new mandate would apply to two million fewer people, largely those with lower incomes.

"Hospitals say that leaves too few people covered under the bill -- a shortfall that could undermine a cost-cutting pledge by the industry. In July, the hospital industry agreed to swallow $155 billion in government payment cuts over the next decade to help fund expanded coverage of the uninsured. Uninsured patients cost hospitals money when institutions provide treatment that isn't fully paid for.

"Chip Kahn, president of the Federation of American Hospitals, said the deal was based on lawmakers passing a bill that would leave 94% to 95% of Americans with health insurance. "It's something the agreement depends on," said Mr. Kahn, who helped strike the deal. He said he hoped the coverage levels will get closer to this target as the final bill comes together."

Mr. Kahn is crying foul, and saying to the White House and Congressional leaders "We thought we had a deal".

So there was a deal after all. And the deal was that the government would punish Americans without health insurance severely enough so that it would be cheaper to buy insurance than to pay the penalty.

Now the industry has turned against the Senate plan because the penality is not big enough for their liking:

"Alissa Fox, a senior vice president at the BlueCross BlueShield Association, which represents 39 independent insurers nationwide, estimated that the latest proposal's top penalties for not carrying insurance, which peak at $1,900 a year for families, represented only about 15% of the average health-insurance premium."

""It's essentially creating a marketplace where people can wait to buy coverage until they get sick," Ms. Fox said."

Instead of buying $12,000 health insurance for the family, you pay the penalty of $1,900 per year until you get sick. Over $10,000 savings per year for cash-strapped families going through the worst recession since the Great Depression. They could use that penalty money and more, if the government weren't so keen on taking everything that's left.

What a perverse, immoral system we have.

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Carbon Emissions Fall By Steepest in 40 Years

said Reuters, although hardly anyone seems to have paid attention.

Carbon emissions fall by steepest in 40 years (9/21/09 Reuters)

Despite the cold wave sweeping through the country, people pushing the climate change legislation (domestic and international) are upbeat as ever. Cold weather, hot weather, as long as it is "extreme", they can call it "the result of global warming".

Former Vice President Al Gore, who is set to profit tremendously from so-called green business once the climate bill passes, is naturally the lead proponent for the cap and trade that would potentially raise the income tax for most Americans by 15%. His Generation Investment Management, nicknamed "blood and gore", and co-founded by ex-Treasury Secretary Hank Paulson, owns 10% of Chicago Climate Exchange.

But did you know that the carbon emission in the U.S. dropped 9% in the past two years and is set to drop even further (6% drop)? You don't hear about it much, do you?

What did it? Recession.

Proponents for the climate legislation want to attribute the decline to the clean energy initiatives (see the Washington Post article from September 20, 2009). I am sure solar, wind, and other forms of alternative energy generation must have helped, but the main reason is global recession that has caused the global tumbling of factory output, as Reuters put it.

If the Senate passes its climate bill and this cap and trade tax is forced on the populace, the carbon emission is set to decrease for a foreseeable future. Not because of cap and trade, but because of prolonged recession/depression thanks to the added tax burden on productive citizens and private businesses. Unless those businesses of course are Mr. Gore's companies.

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Major Bank Earnings This Week

"Sell the news" event? We shall see. (The banks below will all report before the market open.)

Wednesday October 14, 2009

• J.P. Morgan Chase (JPM): Estimates: 0.65 0.49 0.32 (High Mean Low)

Thursday October 15, 2009

• Citigroup (C): Estimates: -0.07 -0.21 -0.51 (High Mean Low)
• Goldman Sachs (GS): Estimates: 4.75 4.237 3.82 (High Mean Low)

Friday October 16, 2009

• Bank of America (BAC): Estimates: 0.08 -0.067 -0.33 (High Mean Low)

Morgan Stanley (MS) and Wells Fargo Bank (WFC) will report next week.

I can't see why they would miss. Big fat spread between their borrowing and lending, increased fees and APRs on consumer credits (JPM, C, BAC), profitable trading operations in the bond market, stock market, and commodities market (flash trading is still legal and going strong), LBO coming back...

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"Going Commando" Index to Gauge Economy

Want to figure out where the economy stands? Look no further than men's underwear.

How is the economy doing? Look in your underwear drawer
(Bruce Watson, 9/29/09 Daily Finance at AOL)

"It looks like 2009 was a bad year for men's underwear. Mintel, a consumer research firm, says that sales of men's skivvies dropped 2.3 percent from 2008. Meanwhile, NPD Group, another firm, argues that the decline was more on the order of 12 percent. Either way, it's a fair bet that many underwear drawers are looking a bit ragged.

"Some analysts refer to this economic measure as the "underwear index." While seasonal outerwear, flashy luxury clothes, and women's lingerie are often tied to seasons or holidays, men's undies tend to be pretty straightforward. They are replaced as needed, which means that their sales should remain relatively constant.

"In this context, 2009's drop in the sales of men's underwear means that many men are walking around with busted elastic, fabric that has worn thin, or a much-reduced stock of spare BVDs. Given the difficulty of getting a few extra months out of a pair of boxers, it suggests that many men are reaching the end of their easily-absorbed cutbacks. After all, while eating out less or taking fewer trips can be a minor annoyance, wearing tired underwear or -- worse yet -- going commando suggests that consumers are truly caught on the horns of a financial dilemma."

Don't laugh. The underwear index is a favorite of Alan Greenspan.

"While an unusual measure of the economy, the underwear index is reportedly one of Alan Greenspan's favorite statistics to consult. Part of its significance probably lies in the possibility that, for many men, buying underwear is largely unconscious. When asked about the state of his underclothes, one consumer (who chose to remain nameless) stated, "Actually, I'm running out. I don't know how it happened." He went on to note that he has been cutting back on some expenses. As the drop in underwear sales continues, it seems to be shifting from an unconscious to a conscious trend; in the process, it is becoming increasingly significant, as consumers deliberately sacrifice comfort for cash."

The article continues. You can read the rest of the article by clicking the link above.

According to the writer, the underwear index, like the unemployment rate, is a lagging indicator. If one examine the index components, there seems to be a subtle shift from boxers to briefs (briefs sales up 0.6% against boxers sales), indicating cash-strapped consumers seeking more bang for the money. The article cites a 7-pack of BVDs costing the same as a 2-pack of boxers at Hanes.

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Nobel Peace Prize for ... Election Campaign??

John Nichols at The Nation thinks so.

Obama's Campaign Merits a Peace Prize (John Nichols, 10/10/09 The Nation)

Mr. Nichols starts the article by saying how he is not satisfied with President Obama's policies and actions since he took office. But then,

"So why not join the chorus of critics on the right and the left who object to the Nobel committee's decision to award a freshman president what remains the most important international recognition of individual accomplishment?

"Because, much as I might like to pen a piece with a snappy headline like Guardian writer Michael White's "I Hope Nobel Members Feel Pleased With Themselves, The Smug Idiots," I can't."

Why not? The answer is given in the second half of the article:

"I may have plenty of complaints about the man and his presidency. But I believe that Barack Obama did something that merits his selection as the recipient of the 2009 Nobel Peace Prize.

"I am not talking here about an official act taken since he replaced the lamentable George Bush – although an argument can be made that replacing Bush's reign of error is sufficient accomplishment. What I'm talking about is actually something Obama did before his election – in fact, before his nomination as the Democratic Party's 2008 standard-bearer."

Specifically,

"In the July, 2007, "YouTube Debate," the Democratic candidates were asked if they would be willing to meet "with leaders of Syria, Iran, Venezuela" during their first term. Obama responded that, yes, he would be willing to do so. He explained that "the notion that somehow not talking to countries is punishment to them -- which has been the guiding diplomatic principle of this (Bush) administration -- is ridiculous.""

His concluding paragraph:

"Obama is being honored for what he did as a contender for the presidency -- a contender whose winning run charged the political debate in a party and a country that desperately needed to take a new direction. As such, he is not merely worthy. Barack Obama, the candidate, is the right recipient of the Nobel Prize for Peace."

This takes the cake so far.

So, for this writer, putting the diplomacy in front of escalating armed conflicts during the party nomination campaign and successive presidential campaign was enough to win Obama the Nobel Peace Prize. Never mind that he started bombing an ally (Pakistan), is about to further increase manpower poured into Afghanistan, continues to arm and train Georgians and a host of other nations in volatile central Asia. As long as he meant well during the campaign, it was good enough.

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U.S. Telecom Companies Are Part of Government

according to the Justice Department.

I used to read the Wired magazine in the 1990s, back when the Internet was still treated as curious niche. I liked reading about new gadgets of all sorts, as I was one of those people who had to have "it", whatever it was, as long as it had never existed before. Buggy? So what? I'd boldly go where no one had gone before. Something like that.

So, it is rather shocking for me to see the headline like this on the Wired's site. Probably the magazine has always covered technology and its social and political impact, and I didn't notice or care when I was a subscriber.

Telephone Company Is Arm of Government, Feds Admit in Spy Suit (Ryan Singel, 10/8/09 Wired)

"The Department of Justice has finally admitted it in court papers: The nation’s telecom companies are an arm of the government — at least when it comes to secret spying.

"Fortunately, a judge says that relationship isn’t enough to squash a rights group’s open records request for communications between the nation’s telecoms and the feds.

"The Electronic Frontier Foundation wanted to see what role telecom lobbying of Justice Department played when the government began its year-long, and ultimately successful, push to win retroactive immunity for AT&T and others being sued for unlawfully spying on American citizens.

"The feds argued that the documents showing consultation over the controversial telecom immunity proposal weren’t subject to the Freedom of Information Act since they were protected as “intra-agency” records:

"“The communications between the agencies and telecommunications companies regarding the immunity provisions of the proposed legislation have been regarded as intra-agency because the government and the companies have a common interest in the defense of the pending litigation and the communications regarding the immunity provisions concerned that common interest.”" [emphasis is mine]

Get this? The government is saying, as the Wired writer (or editor) summarizes in the title, that the telecom companies are part of government agencies. Information exchange between the federal government (in this case the Justice Department) and the telecom companies are "intra-agency" information. 'Intra' means 'within'.

In other words, it's information WITHIN THE SAME AGENCY.

The Justice Department and its intradepartmental subordinate, the telecom companies, continue the practice of warrantless wire-tapping of US citizens.

How nothing has changed.

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More on Obama's Nobel Peace Prize

The most magnanimous gesture President Obama could have given that would have won many fans (instead of derision) was to decline the Nobel Prize, saying his job, to put America on the right track (even though what is "right" is highly debatable), first and foremost, has barely started, appreciate your gesture, but no thank you, there are more worthy candidates than me.

(Unless of course the Nobel Committee was awarding the prize for his community organizing days.)

Or as some say, he hasn't killed enough yet. Here's one from Antiwar.com's Justin Raimondo:

Bizarro Peace Prize Awarded to Obama
(Justin Raimondo, 10/9/09 Antiwar.com)

"Let’s say you’re the President of the United States — okay? And you’re on the brink of escalating what promises to be a wider, more intense war than that which George W. Bush launched in Iraq. You’ve already sent in reinforcements, but you’re undecided about just how many more troops you’re going to send to Afghanistan – could be 20,000, could be 40,000, or even 60,000. But, in any case, you’ve ruled out withdrawal and diplomacy: the only option you have left is more war.

"In addition, you’re moving – slowly but surely – toward full-scale involvement in Pakistan, where your drones are daily wreaking death and destruction on innocent civilians, and destabilizing a government that is increasingly hostile to your machinations – even though you’re bribing them with billions that never reach their ostensible beneficiaries and only serve to fatten the purses of your Pakistani sock-puppets.

"On top of that, you’ve just told the Palestinians that they must live with Israeli “settlements” and forced the UN to ignore an official report detailing the killing of thousands of innocent men, women, and children by IDF forces armed by the US.

"On top of that, you’re pushing through Congress a record military spending bill that keeps the US spending more than the top 45 nations on earth combined on weapons and methods of war.
So, naturally, as a reward for all your strenuous efforts on behalf of keeping the world a place that is less safe, less stable, and less worth living in than at any time since the outbreak of World War II, you are bestowed with – yes, that’s right, the Nobel Peace Prize. This, however, isn’t just any Nobel Peace Prize – oh no It’s a Bizarro Peace Prize – the natural result of us having slipped through a crack in the space-time continuum, and landed in a world where up is down, right is left, and war is peace – Bizarro World!"

The article continues. You can read the rest by following the link to the article above.

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Obama Gets Nobel Peace Prize

Deeply humbled, says the president.

Uh-hum.

His nomination came on the 12th day of his office, on February 1, which is the deadline set by the 1-man, 4-women Nobel Committee.

Who nominated the president before his work hardly started? (Or did someone nominate him for his work as a community organizer in Chicago?)

According to the Committee's website, you can nominate a person for consideration if you fall into any of these categories:

1. Members of national assemblies and governments, and members of the Inter-Parliamentary Union
2. Members of the Permanent Court of Arbitration at the Hague and of the International Court of Justice at the Hague
3. Members of Institut de Droit International
4. University professors of history, political science, philosophy, law and theology, and university presidents and directors of peace research institutes and institutes of international affairs
5. Former Nobel Peace Prize Laureates and board members of institutions that have previously been awarded the Nobel Peace Prize
6. Present and past members of the Norwegian Nobel Committee
7. Former permanent advisers to the Norwegian Nobel Institute

I know from several past Nobel Prize winners' remarks that winning the Prize involves intense lobbying, sometimes over several years if not longer.

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Ron Paul & Alan Grayson to Chris Dodd: No Bernanke Confirmation Until...

... the Federal Reserve releases documents of their activities ...

Ron Paul and Alan Grayson Want the Answers
(10/8/09 Lewrockwell.com)

Congress of the United States
Washington, DC 20515
10/7/09

Chairman Chris DoddUS Senate Committee on Banking, Housing, and Urban Affairs
534 Dirksen Senate Office Building
Washington, DC 20551

Dear Chairman Dodd and members of the Banking Committee,

We are writing to ask you to postpone the confirmation of Ben Bernanke until the Federal Reserve releases documentation that will allow the public and the Senate to have a full understanding of the commitments that the Federal Reserve has made on our behalf. Without such an understanding, it is impossible to know whether Chairman Bernanke is fit to serve another term and fulfill the Federal Reserve’s dual mandate to ensure price stability and full employment. A list of said documentation is enumerated below.

Since 2007, the Federal Reserve has expanded its balance sheet by $1.2 trillion and taken on substantial credit, interest-rate and foreign exchange risk. It has lent immense sums to some financial institutions against overvalued collateral, while refusing to lend to others with no clear standards as to who was rescued and who was not. It has set up holding companies using no-bid contracts, and guaranteed substantial liabilities of Citigroup, all the while keeping information about its actions secret from the public and Congress. This is in stark contrast to the analogous period in the 1930’s, when the Reconstruction Finance Corporation fully disclosed loans and collateral to Congress.

Today, big banks are being bailed out and have a substantially lower cost of capital through an implicit government backstop even as Americans themselves are seeing their pay cut. This lower cost of capital – at government expense – coupled with increased scarcity of credit is resulting in the banks recapitalizing by charging American consumers higher credit costs, including record overdraft fees and much higher credit card rates.

As you know, the Federal Reserve has a chartered mandate of both price stability and "full" employment. Since 2002, the Bernanke joined the Federal Reserve board has aligned himself with Alan Greenspan’s activities, the incomes of Americans have actually declined in absolute terms, with incomes projected to decline a further 5% in 2009. One quarter of all mortgage holders owe more than they own, with that number projected to rise to nearly 50% by 2010. Consumer asset prices, most importantly housing, continue to fall, and unemployment continues to rise. This raises real questions about Bernanke’s tenure as Federal Reserve chairman, and about where trillions of dollars have gone.

Federal Reserve secrecy must be understood in the context of an intellectual dogma which Alan Greenspan inculcated into the fabric of the Federal Reserve and the economic profession, and which has severely harmed ordinary Americans. Bernanke’s "Great Moderation" speech in 2004 didn’t even consider the idea that the economy was becoming more unstable, even as risks were being built into the system by the politics he encouraged. He ignored evidence of a crisis, saying in 2007 that the turmoil was contained to subprime mortgages, ignoring the bankruptcy of over 100 mortgage originators, and the clear evidence the crisis would spread. Now, even as the crisis is said to be subsiding, we still do not have credit markets that are able to function without substantial government support, we have not addressed institutions that are "too big to fail" which the Fed oversees, bank credit availability is again shrinking (posing risk of further increasing already high unemployment), and toxic assets in the system on the books of both private banks and the Federal Reserve have still not seen price discovery.


Chairman Bernanke’s policy-making errors might be chalked up to errors of judgment, and it’s possible to argue that he has been chastened by the last few years of turmoil. What is more disturbing is how the Federal Reserve has refused to disclose the details of its commitments to the bankers who came close to destroying the economy. The Bernanke Fed’s execution of its dual mandate cannot be judged without consideration of those commitments, which would require the Fed to disclose documents which it still contends the public has no right to see. Specifically, we ask that you postpone the confirmation of the Chairman until after the Federal Reserve discloses:

(1) Information that Bloomberg reporter Mark Pittman has requested via a Freedom of Information Act Request on the Bear Stearns rescue and that the Federal Reserve is contesting in the courts,* and which Manhattan Chief US District Judge Loretta Preska has ordered be turned over by the Federal Reserve.

(2) Information that Rep. Grayson requested in February at a hearing and the follow-up letter on which institutions received the $1.2 trillion added to the Federal Reserve’s balance sheet, how much each institution received, and what was promised in return.

(3) All Federal Reserve documents that went to Attorney General Andrew Cuomo’s office relating to the Bank of America/Merrill Lynch merger in which potentially illegal and coercive activity might have occurred, as well as all Federal Reserve documents relating to the lawsuit pursued by the Merrill Lynch shareholders in the US District court for the Southern District of New York.

(4) Transcripts of all Open Market Meeting Minutes up to and including that of June 2009, transcripts of which are normally withheld from the public for five years.

(5) Full disclosure of all terms and conditions of all off-balance sheet Fed Transactions in the past three years.

The Federal Reserve must become transparent and open with Congress and the public about its behavior during the financial crisis. Thank you for your consideration of this matter.

Best,

Alan Grayson, Member of Congress
Ron Paul, Member of Congress

Cc: Richard C. Shelby Tim Johnson Robert F. Bennett Jack Reed Jim Bunning Charles E. Schumer Mike Crapo Evan Bayh Mel Martinez Robert Menendez Bob Corker Daniel K. Akaka Jim DeMint Sherrod Brown David Vitter Jon Tester Mike Johanns Herb Kohl Kay Bailey Hutchinson Mark Warner Jeff Merkley Michael Bennet

*For all securities posted between April 4, 2008 and May 20, 2008 as collateral to the Primary Dealer Credit Facility, the discount window, the Term Securities Lending Facility, the Term Auction Facility (the "Relevant Securities"), we request copies of:

1. All forms of other documents submitted to the party posting the Relevant Securities as part of the application for the loan;
2. All receipts and other documents given to the party posting the Relevant Securities as part of the application for the loan;
3. Records sufficient to show the names of the Relevant Securities;
4. Records sufficient to show the dates that the Relevant Securities were accepted and the dates that the Relevant Securities were redeemed;
5. Records sufficient to show the amount of borrowing permitted as compared to the face value, also known as the "haircut";
6. Records sufficient to describe whether valuations or "haircuts" for the Relevant Securities changed over time;
7. Records sufficient to show the terms of the loans and rates that the borrower must pay;
8. Records Sufficient to show the amount that the Federal Reserve has accepted of each of the Relevant Securities;
9. Records sufficient to show which, if any Relevant Securities have been rejected as collateral and the reasons for the rejection;
10. All databases and spreadsheets that list or summarize the Relevant Securities; and
11. Records, including contracts with outside entities, that show the employees or entities being used to price the Relevant Securities and the conduct the process of lending.

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Sneak Attack on U.S. Dollar?

or is it the result of an on-going process that started back in March?

Politico thinks this is a "sneak attack" on U.S. dollar this week.

People at Politico are not stock market or forex traders, that's for sure. Current U.S. dollar decline is mild, compared to what has transpired since March this year.

Not to be deterred by the lack of perspective, however, Politico sets to find out...

Whodunit? Sneak attack on U.S. dollar (Eamon Javers, 10/8/09 Politico)

"It’s the biggest mystery in global finance right now: Who conducted a sneak attack on the U.S. dollar this week?

"It began with a thinly sourced but highly explosive report Monday in a British newspaper: Arab oil sheiks are conspiring with the Russians and Chinese to quit using the dollar to set the value of oil trades — a direct threat to the global supremacy of the greenback.

"Is it true? Everyone from the head of the Saudi central bank to U.S. officials scrambled to undercut the story, but no matter.

"With the U.S. economy on the ropes and America by far the world’s biggest debtor, investors aren’t feeling as secure about the dollar as they used to. And the notion of second-tier economies ganging up on Uncle Sam didn’t sound so far-fetched.

"For American officials, the possibility of the dollar losing its long-term dominance in global commerce is a nightmare scenario because it would likely mean sharply higher interest rates at home and a declining ability to finance the U.S. debt. No one believes it could really happen right now, but stories like the British report this week make it seem incrementally more likely."

While trying to undermine the Independent story by casting doubt on Robert Fisk (a highly respected veteran journalist, in my opinion), the writer concludes:

Whodunit? "No one knows."

I think I have a suspect, or an event that may have contributed to the rapid decline of the U.S. dollar. Not the decline of U.S. dollar this week, but since its recent peak back in March when the U.S. dollar index was near 90.

The U.S. Federal Reserve.

It is probably just a coincidence, but it's a little more interesting answer than "no one knows".



Take a look at this chart. This is a year-to-date daily chart of the U.S. dollar index (DXY). Red arrows on the chart indicate big negative flows out of the Fed's central bank liquidity swaps, as shown on their balance sheet. The weekly change of the swaps is shown in the table, with numbers in red corresponding to the arrows in the chart. The location of the arrows is approximate, as we don't know exactly which day of the week the Fed unwound the swap.

That's foreign currencies going back to the foreign central banks, and U.S. dollar coming back to the Federal Reserve. The Fed is not saying which central banks got how much, or what foreign currencies the Fed was and is still holding.

Where did those returning dollars go? My guess is they went to agency bonds and agency-backed MBS, thus preventing the decrease in the accommodative balance sheet. It could have gone to Treasuries to support the auction.

The dollar decline coincides very well with the stock market advance since March low. In fact, right after a sizeable chunk (over $50 billion) of dollars came back, the stock market bottomed and started the furious ascent as U.S. dollar cratered (the left-most arrow in the chart).

For fun, here's another set of charts - the top is the above DXY-Fed swap chart, vertically flipped, and the bottom is S&P 500 index.

Where is the Federal Reserve buying those agency bonds and MBS from? They are not saying. It's a trade secret. Again, my wild guess is from foreign central banks and U.S. financial institutions who get to dump them on the Fed at face value. (Well, that's how the Fed accounts for them, at face value.)

In the beginning of March, the foreign currency swap balance on the Fed's balance sheet was $375 billion. In the October 8th balance sheet, it was down to $50 billion, with about $7 billion U.S. dollar swapped back. That's a significant size for the past 2 months, and sure enough, U.S. dollar resumed the descent.

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