![[Most Recent USD from www.kitco.com]](http://www.weblinks247.com/indexes/idx24_usd_en_2.gif)
Jim Sinclair’s Commentary
Regional banks are now in deep trouble.
Commercial Mortgage Defaults Jump for U.S. Banks
By Hui-yong Yu
Aug. 31 (Bloomberg) — The default rate on commercial mortgages held by U.S. banks more than doubled in the second quarter from a year earlier amid falling rents and occupancies for malls, office buildings and warehouses.
Loans that were 90 days or more past due climbed to 2.88 percent of outstanding balances in the second quarter, from 1.18 percent a year earlier, according to New York-based property research firm Real Estate Econometrics LLC. Defaults increased from 2.25 percent in the first quarter.
“A delinquency may have resolved itself two years ago,” said Real Estate Econometrics President and Chief Economist Sam Chandan. “Today, even one missed payment may be more indicative of an underlying problem, so banks have to be very proactive in addressing the issue.”
Banks held $1.087 trillion of commercial property loans in the quarter, up from $1.077 trillion in the previous three months. That’s almost 15 percent of all loans and leases held by banks, Real Estate Econometrics said. Defaults are rising both for lenders who hold commercial mortgages and for bondholders in the $700 billion U.S. market for securities backed by commercial mortgages.
The CMBS market accounts for about 22 percent of the nation’s $3.4 trillion in commercial real estate debt, according to the Real Estate Roundtable. Defaults and late payments on loans bundled into CMBS could surpass 7 percent by the end of this year, research firm Reis Inc. said on July 30.
Jim Sinclair’s Commentary
These economic problems are so far from over it is hard to understand how talking heads keep a straight face.
The FDIC will run out of money. The FDIC will go to the US Treasury. The US Treasury will loan the FDIC whatever they need.
The loan will start as cash but end up as short term non-marketable US Treasury instruments. Either way it is more money thrown into the swirling dark hole of hyper inflation.
This is fact. All arguments to the contrary are noise signifying stupidity.
FDIC problem bank list hits 416, but recovery eyed
Thu Aug 27, 2009 3:41pm EDT
By Karey Wutkowski and Steve Eder
WASHINGTON (Reuters) – Problem U.S. banks and thrifts on an official watchlist rose more than a third to 416 in the second quarter of 2009, as bad loans continued to bite, but regulators saw signs of stabilization in the industry.
The Federal Deposit Insurance Corp said on Thursday that the industry swung back to a $3.7 billion loss in the second quarter, after reporting a $7.6 billion profit in the first quarter, primarily due to costs associated with rising levels of bad loans and falling asset values.
"Banking industry performance is — as always — a lagging indicator," FDIC Chairman Sheila Bair said.
She said the source of the banking industry’s problems had migrated from residential loans and complex mortgage-related assets to more conventional types of retail and commercial loans that have been hit hard by the recession.
But Bair pointed to a smaller quarterly increase in troubled loans and decreases in the volume of some delinquent loan categories, as a possible turning point in the quality of assets that have weighed heavily on banks’ balance sheets.
Jim Sinclair’s Commentary
China keeps marching on its "Dollar Distribution" for minerals and energy.
Only a pinhead would consider China in dollar prison.
PetroChina to take 60 percent stake in Athabasca Oil Sands for $1.7 billion
Bureau News
August 31st, 2009
PetroChina to take oil sands stake for $1.7B
TORONTO — PetroChina Co., Asia’s largest oil and gas company, is making a $1.7 billion investment in the Canadian oil sands.
Athabasca Oil Sands Corp. said Monday that PetroChina is buying a 60 percent working interest in its Mackay River and Dover oil sands projects in northeastern Alberta.
Bill Gallacher, chairman of privately held Athabasca, said it is hard to finance oil sands developments in the traditional equity markets. He said a joint venture with one of the world’s largest oil companies will ensure the two projects are completed on time.
“Oil sands projects are very capital-intensive, long-term investments and difficult to fully finance in the traditional equity market,” Gallacher said in a statement.
He said striking strategic joint venture arrangements with PetroChina “can ensure that the MacKay River and Dover projects will be developed in timely manner, which is excellent news for Alberta and the rest of Canada.”
Jim Sinclair’s Commentary
Yeah, sure, more MOPE.
If they don’t buy them this year, they will buy them all in January 2010.
Fed May Not Need to Buy All Authorized MBS, Two Officials Say
By Vivien Lou Chen and Steve Matthews
Aug. 28 (Bloomberg) — The Federal Reserve may not need to buy the full $1.25 trillion in mortgage-backed securities the central bank has authorized by year-end, two regional Fed bank chiefs said.
Richmond Fed President Jeffrey Lacker said yesterday in a speech in Danville, Virginia, that he’ll evaluate “whether we need or want the additional stimulus” from buying the full amount. St. Louis Fed President James Bullard, speaking to reporters in Little Rock, Arkansas, said “it might not be necessary.”
The Fed’s program to buy $1.25 trillion in mortgage bonds guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae is aimed at reducing home-finance costs and arresting the housing slump that triggered the recession. The central bank also intends to buy $300 billion of long-term Treasuries and $200 billion of federal agency debt.
Lacker and Bullard may be “staking out a position rather than reflecting the current consensus on the Federal Open Market Committee,” said Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey. The FOMC “is going to be much more concerned about how they manage the phasing out of the mortgage program because the Fed is providing a substantial percentage of the investment in conforming home loan bonds.”
Jim Sinclair’s Commentary
The bad banks go up and FDIC’s funding is dwindling.
US problem banks at 15-year high
The number of problem US banks rose to the highest level in 15 years between April and June, the industry’s regulator has revealed.
The Federal Deposit Insurance Corporation (FDIC) said 416 banks had failed its test criteria during the quarter, up 111 from January to March.
It added that 81 US banks had now been forced to close this year.
The FDIC judges banks on criteria such as the quality of their outstanding loans and the reserve funds they hold.
‘Difficult process’
The regulator said that due to the large number of failed banks, its deposit insurance fund – which safeguards up to $250,000 (£154,000) per personal bank account – had fallen by 20% between April and June to $10.4bn (£6.4bn).
While this was the lowest the fund has been since 1992, FDIC chairman Sheila Bair said she had no plans as yet to ask the Treasury for more funds.
Jim Sinclair’s Commentary
I will stick with my position that the $9 trillion in deficits is low and should be multiplied by at least a factor of two.
This article states the $9 trillion deficit is only 66% of the real number.
Is $9 trillion estimate on deficit too low?
August 27, 7:15 AM
Mark Vargus
The midyear budget corrections from the White House and the CBO have been issued, and the item most people talk about is the fact that the White House increased its deficit estimates $2 trillion from the $7 trillion that had been the centerpiece of their economic policy back in January to approximately $9 trillion.
Most pundits have pointed this out, but some economists have started to observe that even the $9 trillion estimate of the CBO is potentially only 66% of the true deficit we shall see in the next ten years.
Jim Sinclair’s Commentary
The long term situation is extremely bad. It cannot be righted.
Alf and Armstrong are correct. Do not be deterred by the cappers.
Stay the course and you will prevail.
Pangloss revisited
Aug 27th 2009 | WASHINGTON, DC
From The Economist print edition
America’s long-term budget outlook has worsened. Not for the last time
EVERY gnarled hack knows that the best way to bury bad news is counter it with a splashy new announcement. Small wonder then that the Obama team chose August 25th to renominate Ben Bernanke for a second term at the Fed—the same day the administration was due to release its updated budget figures. Unfortunately, no amount of diversion can hide the message from the new numbers: America’s budget is on a dangerously unsustainable course.
Jim Sinclair’s Commentary
One in five is better than most places.
One in five Wisconsin banks in the red
The Business Journal of Milwaukee
Wisconsin bank earnings were down in the second quarter, with nearly one out of every five institutions reporting a net loss, representing an increase of more than 14 percent over the previous quarter.
A combination of lower loan demand, fewer qualified borrowers and increased bank operating costs led to a drop in total lending by Wisconsin banks in the second quarter of 2009, according to the Wisconsin Bankers Association. The figures were pulled from consolidated Wisconsin bank performance numbers released Thursday by the Federal Deposit Insurance Corp.
Wisconsin bank CEOs predicted earlier this year in a Wisconsin Bankers Association economic survey that 2009 would be a challenging year for earnings, said Kurt Bauer, the association’s president and CEO. He said higher interest rates and fewer qualified customers have slowed the mortgage refinancing business that propelled earnings in the first quarter.
Bauer said Wisconsin banks are recording increased delinquencies for both commercial and retail bank customers.
“There are many factors outside of the banking industry’s control influencing bank performance numbers,” Bauer said.
Jim Sinclair’s Commentary
The Surge in Pakistan will be recorded in history as what it was, a total zero.
Nuclear talks fail to take off after Pakistan protest
REUTERS 1 September 2009, 12:49am IST
GENEVA: Arms negotiators failed to clear the way on Monday for the start of talks this year on nuclear disarmament as Pakistan said its security interests had not been respected. “The window of opportunity for this year is closing today,” Austrian envoy Christian Strohal, the current president of the UN-sponsored Conference on Disarmament, told the 65-member forum.
The conference, which is the world’s sole multinational forum for negotiating disarmament, broke a 12-year stalemate in May when it agreed a work plan to start negotiations on banning production of fissile material for nuclear bombs.
It also agreed to discuss three other issues — nuclear disarmament, prevention of an arms race in outer space and “negative security assurances”, where countries vow not to use nuclear weapons on non-nuclear-weapon states.
Pakistan says implementing the proposals could threaten its national security. Its main concern is that the proposals would have the talks focus on the fissile material treaty, and not seek results in the other three areas.
Jim Sinclair’s Commentary
Now here is an example of job security.
Two key GOP lawmakers seek audit of AIG trust
Aug 31, 2009, 2:13 p.m. EST
By Ronald D. Orol
WASHINGTON (MarketWatch) – Two key Republican lawmakers on Monday said they are seeking an audit of the trust that manages the government’s controlling stake in American International Group Inc. "While the trustees have the discretion to exercise full control over AIG, the trustees cannot be fired if their decisions conflict with the preferences of government officials," said House Oversight Committee ranking member, Darrell Issa, R-Calif., and Rep. Spencer Bachus, R-Ala., House Financial Services ranking member. "This raises a troubling and urgent question: Who can the American taxpayers hold accountable if the trustees make a decision that is not in their best interest?"
Jim Sinclair’s Commentary
This proves that somebody reads JSMineset.
As I told you last week, the issue of SDR is an international form of QE, which equals printing money.
IMF Pumps $250 Billion Into Global Foreign-Currency Reserves
By Sandrine Rastello
Aug. 28 (Bloomberg) — The International Monetary Fund said it today pumped about $250 billion into foreign-exchange reserves worldwide, acting on an April call from leaders of the Group of 20 nations to boost global liquidity.
Countries will be able to convert the money, to come from so-called Special Drawing Rights, into hard currencies through “voluntary trading arrangements” with other members, the IMF said on its Web site today. The SDRs are the institution’s unit of account based on a basket of currencies.
The allocation, approved by the IMF’s board of governors earlier this month, will not increase the fund’s pool of money available for lending, the IMF said. “It will, however, provide members with an additional method to obtain hard currencies.”
Another smaller reserves allocation of about $33 billion will take place Sept. 9 and will be limited to members that joined the lender after 1981, such as countries from the former Soviet bloc, the IMF said.
About $110 billion of the total allocation will go to emerging-market and developing countries and $20 billion to low- income nations.
Jim Sinclair’s Commentary
It is amazing how no one asks the right question. Where is the $50 plus billions?
Nobody can spend that in a lifetime, especially a person who is not in markets.
Report May Shed Light on SEC’s Madoff Blunders
August 31, 2009 10:32 AM
Posted by Daniel Carty
The SEC inspector general is set to submit a report Monday detailing how the agency failed to uncover Bernard Madoff’s multi-billion dollar fraud, according to a Fox Business report.
SEC inspector general H. David Kotz, seen left, started the probe in December after Madoff’s massive Ponzi scheme came to light. Madoff is currently serving a 150-year prison sentence in a North Carolina medium-security facility.
For years, the SEC heard allegations of fraud but didn’t take them seriously. Christopher Cox, who ran the agency at the time of Madoff’s revelation, commissioned the investigation to figure out why.
Kotz didn’t reveal the contents of the report, but told Fox Business that he would submit it to current SEC chairman Mary Schapiro Monday. The agency will determine when to make it public.
Back in January, Kotz told a congressional panel that his probe would be "independent and as hard-hitting as necessary" and vowed not to "hesitate to report the facts and conclusions as we find them."
Jim Sinclair’s Commentary
Credit Default Swaps will break the bank on the double dip depression.
Anyone with common sense knows that, but this will not stop the banksters as they continue to ruin the world.
ECB Highlights ‘Systemic Risk’ of Credit Swaps Market
By Paul Armstrong
Aug. 31 (Bloomberg) — The credit-default-swaps market is concentrated in the hands of a small group of dealers, which is stoking concern about “systemic risk to financial-market stability,” according to the European Central Bank.
The 10 most active counterparties in Europe account for 62 percent to 72 percent of the credit-swap exposure of lenders surveyed by the ECB, the Frankfurt-based central bank said in a report on its Web site after the market closed Aug. 28.
The credit default-swaps market has become more concentrated because of the failure of dealers and counterparties such as Lehman Brothers Holdings Inc. and Bear Stearns Cos. LLC, the ECB said in the report, titled “Credit Default Swaps and Counterparty Risk.”
The “interconnected nature” of the credit-swaps market and its “structural opacity” may also increase risk, the ECB said.
“In practice, the transfer of risk through CDS trades has proven to be limited, as the major players in the CDS market trade among themselves and increasingly guarantee risks for financial reference entities,” according to the report.
Jim Sinclair’s Commentary
We know that these people are in need, however, to borrow big to give away big is not good business.
This only makes matters infinitely worse.
Fla. Unemployment Borrowing May Top $1 Billion
by Olga Pierce, ProPublica – August 31, 2009 9:49 am EDT
Florida has become the 19th state to borrow money to keep unemployment benefits flowing after the trust fund ran dry.
So far the state has borrowed $45 million, but officials estimate that it will have borrowed $1.2 billion by the end of the year.
As we detailed earlier this year in our series with public radio’s Marketplace, states operate their own unemployment insurance systems with little federal control over benefit levels and how well they choose to finance their systems. Like many states, Florida requires employers to pay unemployment insurance tax only on the first $7,000 of each employee’s income — the federal minimum, which has not been updated since 1983.
Is your state’s trust fund in danger of running out?
Because of the stimulus bill, states have until January 2011 to pay back their loans with no interest. But if Florida’s balance is not repaid before then — a process that in many states has necessitated business tax increases or benefit cuts — Florida will face tens of millions of dollars of interest payments that must be repaid from its general fund, taking money away from other state priorities
Jim Sinclair’s Commentary
Will FASB pull back from their present degraded state of blessing lawless abandon?
UPDATE 1-FASB eyes more disclosure on illiquid assets
08.31.09, 11:33 AM EDT
NEW YORK, Aug 31 (Reuters) – U.S. accounting rulemakers have proposed requiring new disclosures on how companies value illiquid assets, a move designed to make it easier for investors to assess businesses’ financial health.
The rules proposed by the Financial Accounting Standards Board would require a company to provide alternative means to calculate how much its hardest-to-value assets are worth, using ‘reasonably possible’ scenarios.
Robert Herz, FASB’s chairman, in a statement said the proposed disclosures would result in ‘increased transparency’ for investors.
U.S. rules for fair value accounting divide assets into three categories: Level 1, Level 2 and Level 3.
The value of a Level 1 asset can typically be determined from market prices. A Level 2 asset is often valued based on prices for similar assets, sometimes known as ‘mark-to-model.’ A Level 3 asset is considered illiquid, and often valued based on complex mathematical models.
Jim Sinclair’s Commentary
To understand our Chinese friends, reading one statement is to totally fail.
The following is the correct answer.
The Renminbi as a Reserve Currency (Part 1)
August 31, 2009
Patrick Chovanec
Earlier this year, NYU professor Nouriel Roubini attracted worldwide attention by speculating in a New York Times op-ed that the Chinese Yuan, or Renminbi (RMB), might someday supplant the U.S. dollar as the world’s main reserve currency. Chinese officials have been quick to embrace the notion, regularly floating either its negative (the U.S. dollar should not be the global reserve currency) or positive (the RMB should be) formulation in their public pronouncements. Just a week ago, a leading Chinese economist told Bloomberg that “Eventually, the yuan should be demanded as a reserve currency,” but noted that China was still far away from this goal.
It’s no surprise, then, that the Renminbi’s prospects as a reserve currency is one of the issues I am most frequently asked to speak or consult on. In particular, people are eager to understand how recent moves by China to swap currencies with other countries and establish offshore clearing markets fit into the equation, and whether they represent significant steps towards a more prominent international role for the RMB. These are some of the topics I’d like to address over the next few days.
First of all, however, it’s worth defining what we mean by “currency reserves” and why countries keep them. It may help to begin by noting the obvious: everyone needs to live and function primarily in their own country’s currency. Americans need dollars, Europeans need Euros, Indians need rupees, and so on. We only need a foreign currency when we want to pay someone who requires it to live and function somewhere else, where that currency is used. Each country’s currency is like a special kind of commodity that allows us to offer something of immediate value to people in that country’s economy. Certain actual commodities like gold and silver can be used as a kind of super-currency whose value is recognized and easily exchanged for local currency in all economies.
