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"Money, when considered as the fruit of many years’ industry, as the reward of labor, sweat and toil, as the widow’s dowry and children’s portion, and as the means of procuring the necessaries and alleviating the afflictions of life, and making old age a scene of rest, has something in it sacred that is not to be sported with, or trusted to the airy bubble of paper currency."
–Thomas Paine
Jim Sinclair’s Commentary
Commercial loans carried on the books of regional banks are in general not being marked down to a proper value.
When the loan goes bankrupt it can no longer be carried at this false value. This is now starting and in its own way will be many little Lehmans in terms of commercial loans.
The US dollar is no safe haven.
Silverstein May Default on Debt for 575 Lexington (Update2)
By Brian Louis and David M. Levitt
March 10 (Bloomberg) — New York developer Larry Silverstein, who teamed with the California State Teachers Retirement System to buy a 35-story skyscraper in 2006, now faces “imminent default” on debt tied to the property, Fitch Ratings said today.
Silverstein and Calstrs paid $400 million for the tower at 575 Lexington Ave. in Midtown Manhattan near the height of the U.S. property boom. A loan balance of $325 million was turned over to so-called special servicing today, Fitch said.
The transfer “was done at our request to help facilitate ongoing discussions with our lender about a modification to our loan, which is not currently in default,” Silverstein spokesman Dara McQuillan said in an e-mailed statement.
Investors are defaulting on loan payments for commercial real estate at record levels as vacancies at malls, offices and industrial properties climb and rents fall. Delinquencies on loans packaged and sold as commercial mortgage-backed securities rose to a record 6.7 percent in February from 1.7 percent a year earlier, according to New York-based research firm Trepp LLC.
Kushner Cos. said last week that it sought special servicing on the debt it used to buy Manhattan’s 666 Fifth Ave. in 2007 for $1.8 billion, what was then a record price for a U.S. office building. Vornado Realty Trust, the New York-based real estate investment trust founded by Steven Roth, last week asked that a $217 million loan on properties it owns in North Carolina be sent to a special servicer, saying it wasn’t prepared to fund any shortfalls on the debt.
Jim Sinclair’s Commentary
This is interesting because it is not friday.
Bank Closing Information – March 11, 2010
These links contain useful information for the customers and vendors of these closed banks.
LibertyPointe Bank, New York, NY
Jim Sinclair’s Commentary
Few understand that hyperinflation has already occurred in the bailouts and gifts to the financial industry, and the result of this hyperinflation are coming towards us like a freight train.
Maybe you should send this to those that are lost in semantics and therefore will be lost period.
Bernanke’s Dilemma: Hyperinflation and the U.S. Dollar
March 10, 2010
Ron Hera
Ben Bernanke, Chairman of the US Federal Reserve, faces a Sisyphean task because US banks are experiencing debt deflation and, because lending is now at much lower levels, monetary deflation is encumbering the domestic US economy as existing debts continue to be serviced. Government deficit spending can only offset lower consumer spending to a degree, and the mushrooming debt of the US government raises the question of whether the US can repay or roll over its debt obligations, given that tax receipts are likely to fall.
Despite deflationary pressure, the value of the US dollar is in a downtrend trend pointing to higher prices for imported goods and energy. Devaluing the US dollar will reduce the value of debts in real terms, thus it can make debt levels sustainable, but higher prices will exacerbate debt defaults, worsening the condition of US banks. Mr. Bernanke’s dilemma is how to salvage the balance sheets of US banks without sparking high inflation or unleashing hyperinflation.
Where the US dollar is concerned, opinions on hyperinflation range from the view that hyperinflation of the world reserve currency is impossible in principle (because, for example, the values of other currencies are linked to that of the US dollar), to the view that hyperinflation of the US dollar has already happened and that all that remains are the consequences.
The two most widely accepted theories of hyperinflation are the monetary model, where a positive feedback cycle is caused by a disproportionate increase in the velocity of money as a consequence of increasing the money supply too quickly, and the confidence model, where the monetary authority issuing a given currency is perceived to be insolvent or no longer legitimate.
The view that hyperinflation is the inevitable result of a central bank issuing too much money or of a government taking on too much debt, while correct, both states the obvious and presupposes that some previously known or predictable limit is reached. The ability to service debt is one such measure, but the value of a debt in real terms depends on the value of the currency.
Jim Sinclair’s Commentary
Is there any question about that having occurred?
Mess with a Connecticut Yankee and there will be payback.
Connecticut gets moody over false ratings.
Connecticut’s attorney general is suing Moody’s (MCO) and S&P (MHP) over their ratings of risky investments. AG Richard Blumenthal claims the firms "violated public trust" by knowingly providing false ratings on investments that subsequently pushed the country into a recession. Blumenthal is seeking penalties and fines that could total hundreds of millions of dollars.
Jim Sinclair’s Commentary
Knowing the efficiency of government management of financial entities, can you imagine how many seniors that do not owe anything on loans will find the social security check garnered or non-existent?
Defaulted Loans May Haunt Seniors
by Ellen E. Schultz
Monday, March 8, 2010
A little–noticed law could soon result in smaller Social Security checks for hundreds of thousands of the elderly and disabled who owe the U.S. money from defaulted loans and other debts more than a decade old.
Social Security benefits are off–limits to creditors, such as credit–card companies and banks. But the U.S. can collect debts to federal agencies by "offsetting," or withholding Social Security and disability payments.
The Treasury currently withholds benefits of 3.1 million Social Security recipients to recover defaulted student–, farm– and small–business loans, unpaid income taxes, amounts veterans owe for health care, and other debts to the government.
Previously, the U.S. hasn’t been able to withhold Social Security payments to recover most debts delinquent for more than ten years.
But a provision in the 2008 Farm Bill lifted the ten–year statute of limitations on the government’s ability to withhold Social Security benefits in collecting debts other than student loans—for which the statute of limitations was lifted in 1997—and income taxes, where the limit remains 10 years.
Jim Sinclair’s Commentary
The snowball is rolling down hill and will obliterate December’s promised Jobless Economic Recovery.
Big ax looming at the FDNY: Threat of 1,000 layoffs, closing of 62 fire companies
BY Jonathan Lemire
DAILY NEWS STAFF WRITER
Thursday, March 11th 2010, 4:00 AM
The FDNY is bracing for doomsday.
The department will be forced to close a staggering 62 fire companies and lay off more than 1,000 firefighters if the bad-news state budget becomes reality, Commissioner Salvatore Cassano told the City Council Wednesday.
"We would be very, very taxed," warned a grim-faced Cassano. "Our operations would be impacted and every neighborhood in this city would feel the effect."
Even if lawmakers in Albany – already facing an April 1 deadline and a $9 billion budget gap – find a way to pump in more cash, the city’s fiscal woes may still force the FDNY to shutter 20 companies, Cassano warned.
"We’re going to try not to close a single company or a single firehouse," Cassano told the Fire and Criminal Justice Services Committee, "but if we have to, we will."
Sixteen fire companies were set to close last year until the Council restored funding for an extra 12 months.
Jim Sinclair’s Commentary
It would be quite wise to use the resources given here to see if your bank is on the list.
List of banks under stress keeps growing
Check the financial health of your financial institution with BankTracker
By Bill Dedman
updated 5:45 a.m. MT, Wed., March. 10, 2010
The number of banks with risky levels of bad loans rose only slightly in the last quarter of 2009, partly because the FDIC closed so many failing banks, according to federal data analyzed by the Investigative Reporting Workshop at American University in Washington.
Four ways to check your financial institution:
Look up any bank in the BankTracker.
Look up any credit union.
Check the list of the 400 largest banks.
Check the banks with the highest levels of bad loans.
A total of 389 banks had “troubled asset ratios” above 100 at the end of December, up slightly from 369 banks in September, according to the analysis. A ratio above 100 means a bank had more troubled loans than money set aside to cover potential losses.
The FDIC closed 140 failed banks in 2009, including 45 in the fourth quarter alone. Nearly all had very high levels of bad loans.
The new analysis relies on information reported by banks to the Federal Deposit Insurance Corp. as of Dec. 31. Journalists at American University calculated each bank’s troubled asset ratio, which compares troubled loans against the bank’s capital and loan loss reserves.
Jim Sinclair’s Commentary
While talking out one side of their mouth about draining liquidity, they are guaranteeing obligations beyond their ability to meet at today’s dollar value.
Fed Shoulders AIG Loan Losses to Ease Sale to MetLife (Update1)
By Hugh Son
March 11 (Bloomberg) — The Federal Reserve Bank of New York and American International Group Inc. agreed to shoulder as much as $450 million in losses tied to the insurer’s Japan real estate bets as part of the sale of a division to MetLife Inc.
MetLife won an accord to split most declines on $1 billion in commercial mortgages included in the $15.5 billion purchase of the AIG unit, according to a MetLife regulatory filing and the company’s chief financial officer. A corporate vehicle owned by the Fed and New York-based AIG will use MetLife stock gained in the sale to pay for future real estate losses, reducing the assets left to repay taxpayers, said two people with knowledge of the arrangement.
AIG’s Japan mortgage holdings were deemed a “more troubled asset” by MetLife, which is also indemnified from losses on one of the U.K. businesses it will acquire in the purchase of American Life Insurance Co. AIG said March 8 it is divesting Alico, which operates in more than 50 countries including Japan, to pay down bailout debts on a $60 billion Fed credit line.
“You have to ask yourself, ‘does the American taxpayer have any hope of getting their money back any other way besides selling this business?’” said William Cohan, a former JPMorgan Chase & Co. banker and author of “House of Cards,” about the financial crisis. An agreement for one side to retain some risk is typical in deals “when the buyer and seller have a difference of opinion about an asset,” he said.
Jim Sinclair’s Commentary
The state ward is starting to overflow. They are guaranteeing everything without consideration that may be called upon to perform.
Sounds a little like the mono-line companies that sold credit guarantees that ended up worthless.
Fannie, Freddie’s $125 billion tab still growing
Sixteen months after being seized, the firms remain wards of the state
updated 4:06 a.m. MT, Thurs., March. 11, 2010
The federal government has spent the past half year seeking to roll back its emergency efforts at propping up the financial markets ― with the notable exception of its involvement in mortgage giants Fannie Mae and Freddie Mac.
As the government has pledged more and more money to cover the companies’ losses, it has assured the public that planning was underway for overhauling the firms so the bailouts would end. As recently as December, the Obama administration said it expected to release a preliminary report on how to remake Fannie Mae and Freddie Mac around Feb. 1.
But no plan was produced, and in response to questions from lawmakers, Treasury Secretary Timothy F. Geithner clarified last month that it would be another year before the government proposes how to restructure the firms.
Sixteen months after they were seized to prevent their collapse, the companies remain wards of the state, running a tab that has now exceeded $125 billion in what has become the single costliest component of the federal bailout for the financial system.
Some members of Congress have complained that the huge public commitment is unsustainable. But the administration has been reluctant to start reforming Fannie Mae and Freddie Mac, officials and analysts say, because the firms in their current form play an essential role in supporting the housing market at a time when it is still under severe stress.
Jim Sinclair’s Commentary
A business without an exit strategy is an example of government management – none.
GMAC Bailout Could Cost Taxpayers $6.3B
Updated March 10, 2010
New watchdog report says the Treasury Department sank billions into auto finance giant GMAC without an exit strategy or proof the company was viable – a decision that could cost taxpayers $6.3 billion.
WASHINGTON – The Treasury Department sank billions into auto finance giant GMAC Inc. without an exit strategy or proof the company was viable — a decision that could cost taxpayers $6.3 billion, a new watchdog report says.
The government said the $17.2 billion bailout was a necessary step to save troubled automakers General Motors and Chrysler. GMAC provides critical financing to auto dealers, who borrow to finance their fleets until the cars can be sold to consumers.
Yet GMAC faced far fewer conditions than the bailed-out automakers, the report says. When the automakers were rescued, they were forced into bankruptcy. Shareholders lost their investments, creditors took a hit and executives were forced to detail plans for making the companies viable.
GMAC was treated more like banks that received bailouts without having to explain what they were doing with the money, the report says.
Jim Sinclair’s Commentary
Who owns Washington?
Geithner warns EU on hedge fund regulation plan
LONDON (AFP) – – US Treasury Secretary Timothy Geithner has warned the European Commission its plans to regulate hedge funds and private equity groups could spark a transatlantic row, a paper reported Thursday.
Geithner hit out at a draft European Union directive that would impose tighter restrictions on the investment funds in a letter to the EU’s internal market commissioner, Michel Barnier, the Financial Times said.
Proposed new rules might damage US hedge funds, private equity groups and banks by curbing their ability to do business with Europe, Geithner argued in the one-page letter sent on March 1.
The changes would restrict the access of EU investors to funds based outside the 27-nation bloc, and non-EU funds would also be forced to comply with new rules in order to do business inside the bloc.
The directive could also force EU-based investment funds to use local banks for parts of their business, said the report.
Jim Sinclair’s Commentary
I wonder if the Fed has figured out that they could buy state debt and camouflage a bailout via QE.
They bought trillions of OTC derivatives from Wall Street.
Detroit Sells $250 Million of Its Debt Without Recent Disclosure Filings
March 11 (Bloomberg) — Detroit, the largest U.S. city whose debt is rated below investment grade, will ask investors today to buy $250 million of its debt without having filed annual financial reports on time for five years.
The city, which warned investors in its preliminary official statement of the possibility of filing for Chapter 9 bankruptcy protection, is providing a June 30, 2008, financial statement, its most recent, to investors. A fiscal 2009 report is expected to be complete by May 31, said city spokesman Dan Lijana, in an e-mail
“This issue is not for the faint of heart,” said Richard Ciccarone, chief research officer of Oak Brook, Illinois-based McDonnell Investment Management, which oversees $6.8 billion of municipal debt. “It certainly raises eyebrows.”
Detroit will provide backing by payments of state aid from sales taxes to the general obligation issue, which enabled the issue to maintain investment grade. Michigan’s state treasurer can pay the aid directly to the trustee for the bonds, bypassing the city to ensure the debt is serviced, according to offering documents. The treasurer also agreed not to withhold payments when the city is late filing financial statements, as it has in the past.
Jim Sinclair’s Commentary
Interested is where we are all going in the Western world?
Gov. Pat Quinn wants 33 percent tax hike for education
March 10, 2010
Posted by Ray Long, Monique Garcia, Bob Secter and Rick Pearson at 12:23 p.m.; last updated at 6:20 p.m.
SPRINGFIELD — Gov. Pat Quinn today called for a 33 percent increase in the state income tax rate to raise money for education and ease deep cuts he’s proposed in his new budget plan.
In his short budget speech to the House and Senate, Quinn argued that an income tax "surcharge" would be enough to restore Illinois’ education budget to current levels and allow the state to get caught up on some of the millions owed to public schools, community colleges and four-year universities.
Quinn wants to increase the personal income tax rate from 3 percent to 4 percent — a 33 percent increase — with the corporate tax rate rising from 4.8 percent to 5.8 percent. The tax hike would bring in $2.8 billion a year.
"I believe this 1 percent for education makes sense, and I think the people of Illinois will understand. We must invest in the future, even in these tough economic times," Quinn said. This is urgent. We don’t have six months. We don’t have six weeks. I challenge the General Assembly to take immediate action to enact the 1 percent for education initiative."
Last year, Quinn unsuccessfully tried to raise the personal income tax rate from 3 percent to 4.5 percent and provide some tax relief.
The political dynamics for a tax increase have grown only worse as the election-seeking Democratic governor confronts campaigning legislators who fear a voter backlash in the Nov. 2 general election.
