Cuba continues to desert communism

HAVANA (AP) – Cuba legalized the sale and purchase of automobiles for all citizens on Wednesday, another major step in the communist run island’s economic transformation and one that the public has been clamoring for during decades.

The government announced the move in April, but sales have been on hold until the measure was published into law in the Official Gazette.

Under the law, which takes effect Oct. 1, buyers and sellers must each pay a 4 percent tax, and buyers must make a sworn declaration that the money used for the purchase was obtained legally.

Unrestricted sales had previously been limited to cars built before the 1959 revolution, one of the reasons Cuba’s streets are about the only place on the planet one routinely finds a multitude of finned American classics from the 1950s such as Chevrolets Bel Airs and Chrysler Imperials, all in various states of disrepair.

Doctors, athletes, artists and others sent abroad on official business were allowed to bring cars back or purchase a boxy, Russian-made Lada or Moscovich from the state. Some senior workers were given company cars, though gas usage is strictly monitored to make sure they are only driven for work reasons.

The new law will allow the sale of cars from all models and years, and it legalizes ownership of more than one car, although tax rates go up slightly.

“It is a very positive step,” said Rolando Perez, a Havana resident who was standing in line to get a license to go into business for himself. “They should have done it a long time ago.”

The purchase of new cars will be easier than in the past, but still extremely limited. Buyers will have to go to a small number of state-owned dealerships and demonstrate they made the money to buy the car through salary earned in an approved field, as opposed to from remittances sent from relatives abroad.

That would seem to limit such purchases to the same doctors, athletes and others who had been eligible to import cars following official travel abroad.

The 40-page Gazette also says that Cubans who leave the island for good can transfer ownership of their car to a relative or sell it outright. Previously, the state could seize the automobiles of those who emigrated.

While most car sales have been illegal without government permission since the early 1960s, used automobiles have been widely traded in a booming black market for years. Buyers would hand over large amounts of cash under what amounted to handshake agreements, with title not changing hands.

Many cars are generations removed from the original title holder, meaning ownership will have to be untangled once the new regulations take effect.

Because they could be legally traded among Cubans, old cars can fetch prices many times what their value would be off the island, often thousands more than modern cars. Several people involved in such trades told The Associated Press they did not expect prices to be greatly affected by the new law until the government starts to import new cars for wider distribution, and it was not clear when or if that will happen since few Cubans will be able to qualify.

Most islanders make just $20 a month, although doctors and others serving abroad can make much more. Most of it is saved for them in state-managed bank accounts they get access to once they complete their missions. A small number of successful new business owners may also be able to parlay their profits into a new set of wheels, though it was not clear whether they would qualify to purchase new cars.

Cuban President Raul Castro has instituted a series of free-market reforms designed to rescue the island from economic ruin. Cuba has legalized some private enterprise, and allowed citizens to rent out rooms and hire employees.

The government has also announced it plans to legalize the sale and purchase of real estate by the end of 2011.

Interesting take on U.S./Japan comparison and the nature of we two to the rest of the world.

TOKYO — Japan and the United States combined produce 30% of global economic output and register 50% of all new patents.

These two powerhouses of productivity and innovation should be leading the world into a dynamic new age of prosperity, right?

But they’re not. Why? That’s what I kept asking myself as I listened to a parade of global industrial executives, government policymakers and academic big brains hold forth at the 43rd annual Midwest-U.S.-Japan Association conference, where Gov. Rick Snyder began his weeklong Asian trade mission.

Why are the economies of both the U.S. and Japan stalled? Why are their middle classes hollowed out?

Why was Keiro Kitagami, vice-minister of Japan’s once-vaunted Ministry of Economy, Trade and Industry talking about his nation’s industrial giants rapidly shifting operations overseas, mostly to Southeast Asian countries? Doesn’t that sound like Michigan over the past few decades?

Why do government leaders in two such sophisticated nations seem clueless about how to stop the bleeding?

I put my questions to several attendees and speakers. The responses were intriguing.

Sandy Baruah, president of the Detroit Regional Chamber, noted the troubling parallels between Japan’s 20-year tailspin and America’s current funk. “They each began with real estate busts and breakdowns in financial services. Japan didn’t fix those problems fast enough and neither did we,” he said. “Are we repeating the same cycle?”

Are we, indeed?

Cheng-Guan Michael Quah, who was chief technology officer of the nonprofit NextEnergy incubator in Detroit before becoming chief scientist of the Energy Studies Institute at the National University of Singapore in 2009, said Wall Street and hedge fund lobbyists now control policy making in the once-rich nations — and their focus on short-term gains is choking the manufacturing sectors.

“I believe we are still a very innovative nation,” said Quah, who led a panel on innovation at the Tokyo conference and who travels often between Singapore and Farmington Hills, where his wife still resides. “We need to revive manufacturing. We need to get Wall Street off our backs.”

OK, but how?

Perhaps the most sober, but still unsettling, assessment came from Diego Donoso, president of Dow Japan and Korea, a unit of Midland-based Dow Chemical.

The dynamic economies of Asia at the moment — China, Singapore, South Korea — are “all tremendously focused on where they are and where they want to go, and their governments are all tremendously focused” on massive support of leadership in key technologies, Donoso said.

Winners in the global economy, by his reckoning, will be those companies and hands-on government units that collaborate intensively to implement key technologies in ways that are deemed to benefit their societies.

What we’ve witnessed in Japan, and seem to be seeing in the U.S. today, are endless rounds of federal monetary tinkering that are insufficient to re-ignite economic growth. Yet among free market purists and their powerful lobbies, there is an entrenched aversion to overt industrial policy that would choose winner and loser industries or — heaven forbid — decree that the manufacturing sector must be maintained at a certain scale for the national good.

Which leaves the rich nations of the U.S., Japan and Western Europe sort of sitting on the sidelines, watching the aggressive growth strategies of China, Singapore and Korea — and wondering whether they will fizzle or leave us in their dust.

Read here:

According to the English-language paper based in Tehran, the announcement came from a top Iranian naval officer on Tuesday.

“As the global arrogance (forces of imperialism) have a (military) presence near our sea borders, we also plan to have a strong presence near the U.S. sea borders with the help of the soldiers who are loyal to the vali-e faqih (supreme jurisprudent),” said Rear Admiral Habibollah Sayyari, as quoted and paraphrased by the Tehran Times.

“We’ve been pushing freedom of the seas for years and the Iranian navy can go wherever it wants,” said Pentagon Spokesman Capt. John Kirby.

Iranians might face a challenge in refueling its fleet. Some in the Pentagon have speculated it could gas up in Venezuela, whose President, Hugo Chavez, is known to have a close relationship with Iranian president Mahmoud Ahmadinejad.

The Iranians gave no indication of when or what kind of vessels they might deploy, but the announced plan comes just months after Iran sent warships through the Suez following the fall of Egyptian President Hosni Mubarak. It was the first time Iran had moved ships into the Mediterranean and the move put Israel on high alert.

The naval unit plans to establish direct contact with the U.S. when it hits the Gulf of Mexico, a commander in the Iranian navy said. Officials in the Pentagon strongly denied any planned port visits by the Iranians.

One senior official echoed Capt. Kirby in saying that Iran has the pleasure of moving wherever it desires in international waters. But with known intent to approach U.S. maritime borders, he added, “they might have some company.”

WHAT THE SHIT!?

Sitting at the center of the Solyndra scandal is an off-balance-sheet bank at the Treasury Department that dates back to 1973.

This little-known government bank, the Federal Financing Bank [FFB], had a zero balance in 2008 for green energy projects, but now, with little Congressional oversight, it is giving out billions of dollars in loans to White House pet projects often at dirt-cheap interest rates below 1%.

In July alone, the government bank, which had $61 billion in assets, lent nearly three quarters of a billion dollars in taxpayer funds with no Congressional checks and balances.

Plus the bank is funding the insolvent U.S. Post Office; the White House’s expensive green car projects at Ford Motor, Nissan and Tesla Motors; a $485 million loan to an expensive solar project that’s lost $160 million over the last three years that’s backed by Google, BP and Chevron; plus the FFB is funding the teetering HOPE housing bailout program, which gives delinquent mortgage borrowers breaks on their loans.

And according to KPMG’s audit report of the bank, the FFB is losing billions of dollars in taxpayer money because it is forgoing collecting interest costs on already inexpensive loans that are financing projects at agencies like the Agriculture Dept.

What’s scary for taxpayers is this: The FFB can borrow unlimited amounts of taxpayer money from the Treasury for these kinds of political pet projects. Under the 1973 “FFB Act, the bank may, with the approval of the Secretary, borrow without limit from the Treasury,” says the bank’s audited statements from KPMG.

The Treasury Department’s inspector general is now investigating the bank over its $528 million loan to Solyndra. FFB’s chairman of the board is Treasury Secretary Tim Geithner, and the bank’s board executives are Treasury officials.

Who is getting the FFB’s green energy money? As the White House and Democrats in Congress rail against tax breaks for oil companies, the FFB gave taxpayer loans to green companies with high cash burn that were spilling red ink.

For instance, Solyndra was still getting loans from the FFB up until it filed for bankruptcy. It got $3 million in loans at a 0.89% rate just a month and a half before it filed for bankruptcy protection.

The FFB is also giving loans to risky solar companies as well as to a money-losing solar energy outfit backed by companies such as Google, Morgan Stanley, Chevron and BP that has spilled $160 million in red ink for the last three years.

In the month of July alone, the FFB gave a $12.5 million loan to Abound Solar; 60% of Abound’s balance sheet will come from federal taxpayers, or $400 million in guaranteed federal loans.

FFB also gave a $117,330 loan to the struggling Kahuku Wind Power and more than $77 million to the Solar Partners companies, which are due $485 million in White House approved loans.

The Solar Partners companies are units of BrightSource Energy, which is building a massive solar-powered energy plant near the Mojave Desert in San Bernardino, California.

BrightSource lost $45 million in 2008, $44 million in 2009, and $72 million in 2010, even though it has rich backers that include Google, Chevron, Morgan Stanley and BP, among others, says FOX News analyst James Farrell.

Besides the green energy projects, the FFB provides a backdoor government bailout of the US Post Office, which has been spilling red ink. The FFB has lent the US Post Office so far $12.6 billion. The Post Office faces an estimated $10 billion shortfall this year, as the Internet, companies like FedEx and UPS, and high retiree health-benefit costs slice into its bottom line.

And the government bank gave loans to car and car parts manufacturers to retrofit their plants to make green cars. The FFB lent Ford Motor $163 million for its green car programs. The FFB is now financing projects at Fisker Automotive, Nissan North America and Tesla Motors, with $528.6 million, $1.4 billion and $465 million in federal loans, respectively.

However, the FFB’s balance sheet is backed by U.S. taxpayers, “except for loans to the U.S. Postal Service,” says KPMG’s audited statements for the bank. Because you, U.S. taxpayers, are the cushion for the bank, unlike other banks, the FFB “does not maintain a reserve for loan losses,” says the KPMG report.

Not booking loan loss reserves would get any other bank in trouble with federal bank regulators such as the Federal Deposit Insurance Corp., the Federal Reserve and the Securities and Exchange Commission.

Why can the FFB get away with this?

Because the KPMG report says the bank told it in true Pollyannish fashion that “no future credit-related losses are expected,” even though Solyndra clearly disputes that optimistic bureaucratic resolve. (The bank did earn $449.5 million for the fiscal year ended September 30, 2010, up slightly from $444.2 million in fiscal 2009.)

Why was this federal government bank created in the first place? Congress launched the FFB in 1973 to “reduce the costs of Federal and federally assisted borrowings,” smoothing the way for the government’s fiscal policies — fiscal policies which at the time were wading into the private credit markets like never before.

At the time, the federal government first began to see an avalanche of Congressionally approved off-budget financing for Fannie Mae, Freddie Mac and Sallie Mae. These quasi-government operations began to help grease loans for housing and for students by aiding loans securitized as bonds in the secondary markets. Banks packaged these loans as securities and sold them on to Fannie, Freddie and Sallie Mae.

These bonds though began to compete with Treasury securities, and Congress at the time feared Treasury would have to offer higher yields to attract investors away from those securities. The Vietnam war was still going, and the government was struggling to pay for the war and at the same time was battling a deep recession that had hit the U.S. economy, along with an oil shock exacerbated when OPEC plus Egypt, Syria and Tunisia hit the U.S. with an oil embargo due to its support of Israel in the Yom Kippur War with Egypt and Syria.

So to keep the government’s borrowing costs low, Congress launched the FFB and gave it broad statutory authority to purchase any “bonds issued, sold, or guaranteed by federal agencies,” says KPMG’s audit report. The bank then became a vehicle through which all sorts of federal agencies could finance their programs.

Since then, the FFB has helped finance a broad range of government operations, from agricultural to military programs, to now green energy projects.

Congress almost got the FFB in hot water beginning in 2006 when lawmakers pressured then Treasury Secretary Henry Paulson to open the window at the FFB to help finance student loans.
At the time, Sallie Mae was posting losses as students in droves began defaulting on their high-priced college loans.

A slew of lenders, about a seventh of the student loan market at the time, had stopped giving federally guaranteed student loans. Sallie Mae then pressured lawmakers such as Senator Christopher Dodd (D-CT) to give student lenders a bailout via the Federal Financing Bank, but President George W. Bush frowned on that, and the effort went nowhere.

And now it’s the White House’s use of the FFB for green energy projects that will likely raise eyebrows.

The FFB lent no money to green companies backed by Department of Energy guarantees from 2007 to 2008, even though it could have done so starting in 2007 under the Energy Policy Act of 2005, signed into law under President George W. Bush.

That act authorized $42 billion in federal green energy loans, notes FOX News analyst Farrell.
Under the 2005 law, the government could make federal loans for companies battling greenhouse gas emissions, energy efficiency and renewable energy, as well as nuclear power projects.

The FFB then began giving green loans backed by the Dept. of Energy after the Obama Administration’s stimulus bill of 2009 was enacted. After stimulus was signed into law by President Barack Obama, the FFB then began funding clean energy programs, backed by $2.4 billion appropriated by Congress. Under this program, Solyndra got $528 million.

The FFB doesn’t just fund green energy projects. It also funds the Home Ownership Preservation Entity (HOPE) Fund, enacted under the Bush Administration to help distressed borrowers avoid foreclosure by reducing their mortgage payments.

The bank is going full bore in helping to fund the White House’s foreclosure bailouts via buying HOPE bonds, a program that could hit $300 billion in federal costs.

The bonds essentially give investors a stake in government housing bailouts. But what should give taxpayers pause is this: the Treasury Secretary can issue HOPE bonds “without any limitations as to the purchaser of the issuance,” KPMG’s audited statements note.

Translation: The Treasury can willy nilly issue these bonds, and the FFB then buys the HOPE bonds that investors don’t’ want.

“Due to the cost of issuing special purpose bonds to the public, the Secretary of the Treasury has decided to issue the HOPE bonds to the bank,” KPMG notes in its report.

That means those bonds now sit on FFB’s balance sheet, more than $492 million worth. “The bank (FFB) borrowed funds from Treasury,” says KPMG’s audit, “to purchase the HOPE bonds.”

The amounts involved can rise to $300 billion, because the Hope for Homeowners Act authorizes Treasury to issue up to $300 billion in HOPE bonds. “FFB does not have the money to buy the bonds, so it has to borrow money from Treasury to buy the bonds,” notes FOX News analyst Farrell.

However, KPMG notes in its report that “the purchase of HOPE bonds is consistent with the core mission of the Bank.”

The FFB also acts as essentially a slush bank for federal loans, an operation that helps clean up the balance sheets of other federal agencies. KPMG notes that the “lending policy of the bank is flexible enough to preclude the need for any accumulation of pools of funds by agencies.”
But the FFB also lets federal agencies slide on interest costs they owe the bank on loans, even though their interest rates are dirt cheap.

For instance, the FFB has been hit with losses on loans to the U.S. Department of Agriculture, loans the Agriculture Dept. received to service rural utilities. The Agriculture Dept. is stiffing the FBB on interest it owes on these loans, a cumulative $1.7 billion in losses here.

The bank also lets the General Services Administration [GSA], as well as “Historically Black Colleges and Universities,” and the Veteran Administration slide on interest costs on their loans, too. The bank lets them defer interest costs “on their loans until future periods,” the KMPG report says.

NEW YORK (AP) — Oil dropped Wednesday after the government reported weak fuel demand in the U.S. and an unexpectedly large increase in crude supplies.

Benchmark crude fell 94 cents to $83.51 per barrel in New York, while Brent crude lost $1.02 at $106.12 in London.

Prices had risen sharply earlier this week as Europe appeared to get a better handle on its debt crisis. They fell again as investors turned their attention back to the U.S., the world’s largest petroleum consumer.

The Energy Department reported that gasoline demand last week dropped 2.4 percent from the same time last year. U.S. crude supplies grew by 1.9 million barrels last week, while analysts expected oil supplies to remain unchanged.

Oil has stayed between $79 and $90 a barrel since Aug. 4, as investors have kept a worried eye on weak demand, Europe’s debt crisis and the chances of the U.S. sliding into another recession.

“There’s still a lot of weakness in the U.S.,” said Michael Lynch, president of Strategic Energy & Economic Research.

At the pump, gasoline prices fell 1.4 cents to a national average of $3.465 per gallon on Wednesday. Prices have dipped below $3 per gallon in some cities, including St. Louis, Mo.

In other energy trading, heating oil was virtually unchanged at $2.8846 per gallon and gasoline futures were down a penny at $2.6252 per gallon. Natural gas fell 4 cents to $3.833 per 1,000 cubic feet.

BERLIN (AP) — German officials on Monday downplayed prospects of any quick and dramatic change of course in the eurozone debt crisis, days before a parliamentary vote on beefing up the continent’s rescue fund.

Weekend meetings of global financial leaders in Washington raised hopes of a change in strategy, with officials indicating that would focus on further boosting the firepower of the euro440 billion ($595 billion) rescue fund — perhaps by allowing it to tap loans from the European Central Bank or otherwise leveraging its lending capacity.

Hopes for such a move boosted European stock markets on Monday, with German and French bank shares rising strongly.

However, ahead of a parliamentary vote Thursday on changes to the fund that eurozone leaders already agreed to in July, Berlin was keen to underline its attachment to its often-criticized step-by-step approach.

Thursday’s vote on expanding the powers of the rescue fund, the so-called European Financial Stability Facility, will be followed over the coming months by final decisions on a second bailout package for Greece and on a permanent rescue mechanism meant to replace the EFSF from 2013, Finance Ministry spokesman Martin Kotthaus noted.

“That is quite simply the procedure that lies in front of us — we will work through it step by step,” Kotthaus said.

When asked in Washington whether he supported the idea of leveraging the rescue fund, German Finance Minister Wolfgang Schaeuble said: “Of course we will use the EFSF in the most efficient way possible.”

The discussion about the new rescue fund powers is taking place amid speculation that Greece ultimately will be unable to pay its debts and will have to force heavy losses on bondholders. That would be beyond a 21 percent sacrifice agreed to under a second, euro109 billion bailout deal for Greece. Greek and other officials deny that will happen.

In an interview with n-tv television Monday, Schaueble was asked whether there is a plan to move up the effective July 2013 date of the long-term rescue mechanism, or ESM.

Schaeuble pointed out that the process of establishing the ESM, which would allow a country to go bankrupt and default on its debts, takes time.

“That doesn’t go very fast,” Schaeuble said. “If we could do it faster … it would be good, but probably we will need the time that we have calculated.”

If you haven’t noticed, it’s because nobody cares. Considerably more important issues going on than whether or not Congressment will spend this time deliberating what to name Post Office locations that may or may not be around next year.

Read here, if you even care to.

The standoff continues Monday between the House and the Senate over emergency funding, which is holding up a short-term spending measure to keep government running into the new fiscal year that begins this weekend.

The measure includes additional money to fill the almost depleted emergency aid coffers of the Federal Emergency Management Agency and Army Corps of Engineers following Hurricane Irene, Tropical Storm Lee, wildfires and tornadoes so far this year.

House Republicans have passed a bill that cuts spending elsewhere to offset some of the increased disaster relief aid. Democrats oppose offsets for emergency aid, saying disaster relief for Americans in need should be unencumbered. The Democratic-led Senate rejected the House measure on Friday by a 59-36 vote.

The package would fund the government for the first seven weeks of the new fiscal year that starts Saturday.

For the third time in six months, a partial government shutdown is possible if the Republican-led House and Democratic-controlled Senate fail to agree on the short-term spending plan by Friday — the end of the current fiscal year.

The measure currently under deliberation — which would keep Washington running through Nov. 18 — includes critical new disaster funding assistance for states hit hard by Hurricane Irene, Tropical Storm Lee, and a series of recent wildfires and tornadoes.

But Republicans want less disaster aid than their Democratic counterparts, and want to pay for it partly by cutting funding for programs designed to spur clean energy innovation.

The House passed a “common sense measure,” House Speaker John Boehner, an Ohio Republican, told reporters during the Senate vote. “It’s time for the Senate to move.”

Senate Majority Leader Harry Reid, a Nevada Democrat, announced his intention to push for a new vote Monday on a compromise package incorporating the GOP’s lower overall disaster relief spending levels while eliminating any cuts to clean energy programs.

Congressmen and senators need to “cool off for a little bit,” Reid said Friday. “There’s a compromise here.”

“More reasonable heads will prevail,” he predicted.

Meanwhile, the agency responsible for doling out disaster relief money — FEMA — could run out of funds as soon as Monday, according to Reid.

WASHINGTON (AP) — The number of Americans who bought previously occupied homes rose in August. But sales were driven by an increase in foreclosures, a sign that home prices could fall further next year and slow a housing recovery.

The National Association of Realtors said Wednesday that home sales rose 7.7 percent last month to a seasonally adjusted annual rate of 5.03 million homes. That’s below the 6 million that economists say is consistent with a healthy housing market.

Last month’s pace was slightly ahead of the 4.91 million sold in 2010, the worst sales level in 13 years.

Homes at risk of foreclosure made up 31 percent of sales. That’s up from 29 percent in July. Many are being bought by investors.

NEW YORK (AP) — It was a bumpy summer for credit card issuers, but most of the top banks reported that their customers continued to make their payments on time.

Default rates were down at four of the five companies that reported their August results by midday Thursday. Only Capital One Financial Corp. had an uptick in the rate of its write-offs of uncollectible balances.

Capital One also posted a slight increase in its rate of payments late by 30 days or more, which is considered an indicator of future default.

Discover Financial Services, American Express, Chase and Bank of America reported continued declines in both rates.

Citibank is expected to report August results to the Securities and Exchange Commission later Thursday.

The results were similar in July, with a few banks reporting slight increases but most reporting improvements in defaults, or charge-offs, and delinquencies.

Overall, both defaults and delinquencies have dropped sharply since hitting their peaks. Late payments, in particularly, are now at historically low points.

Charge-off rates for cards peaked in the second quarter of 2010 at 10.96 percent, according to Fed data, and were down to 5.6 percent in the latest second quarter. Monthly data from most card issuers has shown continued declines, which will be reflected in third-quarter figures. Industrywide delinquency rates were down to 3.62 percent in the second quarter, after peaking in the second quarter of 2009 at 6.76 percent.

One reason consumers are able to keep up with their payments is that balances have dropped sharply since the height of the recession. Lower balances translates to lower minimum payments.

Read here:

Solyndra, the solar panel company whose highly publicized failure and consequent investigation by federal authorities has flashed across headlines recently, isn’t the only business to go belly up after benefiting from a piece of the $800 billion economic stimulus package passed in 2009.

At least four other companies have received stimulus funding only to later file for bankruptcy, and two of those were working on alternative energy.

Evergreen Solar Inc., indirectly received $5.3 million through a state grant to open a $450 million facility in 2007 that employed roughly 800 people. The company, once a rock star in the solar industry, filed for bankruptcy protection last month, saying it couldn’t compete with Chinese rivals without reorganizing. The company intends to focus on building up its manufacturing facility in China.

SpectraWatt, based in Hopewell Junction, N.Y., is also a solar cell company that was spun out of Intel in 2008. In June 2009, SpectraWatt received a $500,000 grant from the National Renewable Energy Laboratory as part of the stimulus package. SpectraWatt was one of 13 companies to receive the money to help develop ways to improve solar cells without changing current manufacturing processes.

The company filed for bankruptcy last month, saying it could not compete with its Chinese competitors, which receive “considerable government and financial support.”

On Tuesday, Deputy Secretary of Energy Daniel Poneman wrote an editorial for “USA Today” in which he blamed China in part for the failure of U.S. solar energy manufacturers to compete.

“Winning will require substantial investments. Last year, for example, the China Development Bank offered more than $30 billion in financing to Chinese solar manufacturers, about 20 times more than U.S.-backed loans to solar manufacturers,” Poneman wrote.

“Unfortunately, expanding production has coincided with short-term softening demand, a product of the banking crisis in Europe and its wider economic effects. The combination has had a dramatic effect on the price of solar cells, which has plummeted 42 percent in the past nine months. This has taken a serious toll on solar manufacturers everywhere, including the U.S,” he continued.

On Thursday, White House spokesman Jay Carney noted that the U.S. is on track to double its renewable energy power in 2012, but it will require commitment in the U.S. to grow.

“We have a choice to make as a nation because we will be buying renewable energy projects (in the future) …do we want to buy it with a stamp on it that says ‘made in America’ or do we want to buy it from the Chinese or other countries?” Carney asked. “High-tech clean energy industries are going to be key to (economic prosperity) in this century.”

But Republicans balk at claims that the Obama administration can decide which companies are winners or losers, and questioned a plan to approve $10 billion more in loans before the stimulus program expires.

“Solar panels have been subsidized by the federal government. States’ governments are also subsidizing or giving taxpayers write-off on their tax return. And yet, these solar panels cannot make it in the competitive world without all these subsidies. And even with them, China is flooding the market with this cheap labor and the solar panels just don’t make sense,” House Energy and Commerce Oversight and Investigations Subommittee Chairman Cliff Stearns R-Fla., told Fox News.

“So I think the administration is on this fervent religion of green jobs and clinging to the idea that solar panel is the answer and it is not the answer,” he said.

Another winner of stimulus who ultimately lost is Mountain Plaza Inc. Despite declaring bankruptcy in 2003, the company received $424,000 from the Tennessee Department of Transportation as part of a grant aimed at installing “truck stop electrification” systems that allow idling truckers to plug-in during extended stops and turn off their exhaust-belching, environment polluting diesel engines.

Mountain Plaza had filed for bankruptcy protection again in June 2010. TDOT, which received a $2 million stimulus grant from the Environmental Protection Agency for the project, said it didn’t learn about the bankruptcy until October, but it is closely monitoring the project.

Elsewhere, Olsen’s Crop Service and Olsen’s Mills Acquisition Co. also failed despite Olsen’s Mills receiving $10 million to increase employment, add equipment and machinery, refinance existing debts and work capital for operations and acquire land. The payout — part of a $64 million package to nine rural businesses in Wisconsin for economic development loan assistance — was delivered in January 2010, after Olsen’s Mills filed for bankruptcy protection for defaulting on a $60 million bank loan.

Read here:

House Speaker John Boehner drew a line in the sand on taxes on Thursday, saying that a special debt committee tasked with cutting at least $1.2 trillion from federal deficits shouldn’t consider tax hikes.

“Tax increases, I think, are off the table,” Boehner said in a speech to the Economic Club of Washington, D.C. “It’s a very simple equation. Tax increases destroy jobs. And the Joint Committee is a jobs committee. Its mission is to reduce the deficit that is threatening job creation in our country.”

The only things the 12-person super committee should tackle are spending cuts and entitlement reform, he said.

Congress established the super committee when it raised the debt ceiling this summer. It has until Nov. 23 to propose ways to reduce deficits, and Congress must hold an up or down vote by Dec. 23. That panel started meeting last week.

Boehner’s marching orders contrast with a more cordial tone the GOP has taken this past week in reaction to President Obama’s new jobs package.

But his stance warning against new tax hikes reflects the message that GOP leaders have sent this week on the president’s push for a new jobs bill.

This paper basically sums up the key problem with bailouts in general. The banks that received funds, realizing they had the option to never lose, started throwing hail mary passes buying up high yielding garbage with the off chance hope that they could luck out and regain their former glory.

What a huge waste of resources.

ANN ARBOR, Mich. (TheStreet) — The government bailout made banks appear safer but actually caused them to take on more credit risk, according to a University of Michigan study released Wednesday.

According to a working paper by finance professors Ran Duchin and Denis Sosyura of the university of Michigan’s Ross School of Business, banks participating in the government’s Capital Purchase Program as part of the Troubled Assets Relief Program, or TARP, “significantly increased their investments in risky securities,” by 10%, “displacing safer assets, such as Treasury bonds, short-term paper, and cash equivalents.”

The study also found that although the banks receiving TARP money weren’t any more likely to expand their lending, the group’s lending activity shifted toward riskier mortgages “as measured by the borrower’s loan-to-income ratio and the high-risk loan indicator based on the loan rate.” According to the study, “the fraction of the riskiest mortgages in the originated credit increased for banks approved for participating in TARP but declined for banks denied TARP money by the regulators.”

According to the study, the receipt of TARP money also led to “significant effect on the risk profile of corporate lending,” similar to that seen for mortgage lending.

Duchin and Sosyura say that although TARP helped improve participating banks “capitalization ratios,” the net effect was “the net effect is a significant increase in systemic risk and the probability of distress due to the higher risk of bank assets.”

Among banks participating in TARP by selling preferred shares to the U.S. Treasury, the largest bailout recipients were Citigroup , which received $49 billion from the U.S. Treasury, and Bank of America , which received $45 billion in government money. Bank of America fully repaid TARP and Citigroup repaid $20 billion in TARP money, after converting $25 billion its TARP preferred shares to common shares, which were later sold by the government.

Other large banks receiving $25 billion in TARP money apiece included JPMorgan Chase and Wells Fargo , both of which fully repaid the government.

The publicly traded bank with the largest amount of TARP preferred shares outstanding is Regions Financial , which owes $3.5 billion in government bailout funds.

DALLAS (Reuters) – There is little the Federal Reserve can do at this point to help a U.S. economic recovery battered by problems at home and abroad, a top Fed official said on Monday, adding that he believes it is it incumbent on politicians to attack fiscal problems.

Richard Fisher, president of the Dallas Federal Reserve Bank, did not outright reject further monetary easing, but he emphasized he remains skeptical that such action would be fruitful.

His comments echoed his own dissent to the U.S. central bank’s decision last month to commit to ultra-low interest rates until at least 2013, a stance driven not by fears of reigniting inflation, but because he did not believe the move would do any good.

“If I believe further accommodation or some jujitsu with the yield curve will do the trick and ignite sustainable aggregate demand, I will support it,” Fisher told the National Association of Business Economics on Monday. “But the bar for such action remains very high for me until the fiscal authorities do their job, just as we have done ours. And if they do, further monetary accommodation may not even be necessary.”

He said uncertainties over the domestic fiscal and regulatory outlook and a reignited European debt crisis have knocked the wind from the U.S. economic recovery.

Fisher, who remains a voting member of the Fed’s policy-setting panel through the end of the year, noted that monetary policy is super-loose already, but businesses are not hiring because the regulatory and tax outlook is too uncertain.

He expressed encouragement, however, that Congress and President Barack Obama are “going at it hammer and tongs” to find a balance between short-term stimulus and long-term fiscal restraint.

Although recent economic data, such as the government report showing the U.S. economy added no jobs August, has been “discouraging,” he said, it is misguided to look to the U.S. central bank for a “fix,” when most of the problems stem from issues beyond its control.

The Fed has kept interest rates near zero since December 2008 and has bought $2.3 trillion in long-term securities to give the economy an added boost.

Inflation should gravitate toward 2 percent in coming months, Fisher said.

Worries over the European debt crisis are also hurting the U.S. and global economy, but resolving those problems are beyond the Fed’s writ, he said.

Those woes have spurred purchases of Treasuries, seen as relatively safer assets, pushing down long-term borrowing costs and “doing some of the work for us,” Fisher said.

“We don’t want to be helped at the expense of our largest trading partner,” he said, referring to Europe.

The Fed’s policy-setting panel meets next week to discuss possible actions to further boost the economy. One widely discussed option is to replace some of the Fed’s short-term securities with longer-maturity assets to push down borrowing costs.

WASHINGTON (AP) — The largest U.S. banks will be required to show regulators how they would break up and sell off their assets if they are in danger of failing.

The Federal Deposit Insurance Corp. voted 3-0 Tuesday to approve the rules, which were mandated under the financial overhaul passed by Congress last year. They are designed to reduce the chances of another government bailout of Wall Street banks in the event of another financial crisis.

The rules require banks with $50 billion or more in assets to submit so-called living wills to the FDIC, the Federal Reserve and the Financial Stability Oversight Council and send revised plans annually.

Among the banks affected are Bank of America Corp., Citigroup Inc., Goldman Sachs Group Inc. and JPMorgan Chase & Co.

The biggest banks of the group would have to start filing their plans next July. The others wouldn’t be due until 2013.

The FDIC says that 124 financial firms plus 37 federally insured banks and thrifts will be subject to the requirements. Twenty-six of the institutions are U.S. banks or financial firms. The rest are U.S. subsidiaries of banks based in foreign countries.

Jim Jubak at MSN has out an assessment of the EU crisis and banking issues, in his regular, esteemed form. You really must read the thing in its entirety.

Financial markets are behaving as if they expect a European banking crisis that would require the bailout or nationalization of some European banks. That would feel like a replay of the financial crisis that followed the bankruptcy of Lehman Brothers in the fall of 2008. Only this time, the epicenter would be Europe instead of the United States, and the ripples would expand from the eurozone outward into global financial markets.

How realistic is that fear? Very, I’m afraid. European banks are facing a very real liquidity and capital crisis that could lead to the need for a government rescue of some globally significant banks.

But the crisis isn’t an exact replay of the 2008 crisis. The effects of the crisis would not be limited to Europe, but the likelihood that a European crisis would take down a major U.S. bank — in a mirror image of the 2008 crisis where problems originating in the United States did lead to the bailouts of banks in the United Kingdom, Germany and Belgium — is relatively small. On the other hand, the crisis is potentially worse this time around because the European Central Bank is much less able to intervene as a lender of last resort than the U.S. Federal Reserve was in 2008.

Understanding this crisis
The current European banking crisis is rooted in the Greek, Italian, Spanish, Portuguese and Irish debt crises. But the repeated collapse-bailout-collapse-again pattern of the prices of bonds of those countries wouldn’t have produced the current mess without a series of missteps by banks, bank regulators and central banks.

European banks hold a huge amount of government debt from the countries involved in the crisis. German banks, for example, held $22 billion in Greek government debt at the end of 2010, according to the Bank for International Settlements. If you add holdings of Greek government debt to holdings of private-sector Greek debt, the exposure gets much higher. For example, in May, Fitch Ratings said that French bank Credit Agricole (CRARY +3.59%, news) had $35 billion in exposure to Greek government and private debt. BNP Paribas (BNPQY -0.82%, news) and Société Générale (SCGLY +6.83%, news) had exposure of about $11 billion each.

The exposure of European banks to Greece, however, is small souvlaki compared with exposure to the much larger Italian economy. BNP Paribas, for example, has an estimated $31 billion in exposure to Italian government and private-sector debt. Even where the total for Italy is not as high as for Greece, the additional exposure is big enough to add to worries. Credit Agricole has an estimated $17 billion in Italian exposure.

But the current banking crisis owes as much to the reaction of banks and bank regulators to the problem as to the size of this exposure. Nobody now expects that Greece will be able to avoid a default in the end. Even Sunday’s announcement of new measures to close a $3 billion budget gap just served to convince financial markets that the more Greece cuts, the more the economy will slow, and the fewer taxes the government will collect. Like last year’s rescue package, this year’s deal, if ultimately approved, only buys time.

Read here:

OPEC cut its forecast Monday for global oil demand and production, citing the slowing economic recovery.

In a monthly report, the Organization of Petroleum Exporting Countries said it expected demand to drop to 1.1 million barrels per day worldwide. That’s a reduction of 150,000 barrels per day from its earlier forecasts.

OPEC also trimmed back its oil production outlook, saying it still expects output to increase, but by a slightly smaller 500,000 barrels per day in 2011 — 80,000 barrels below its prior forecast.

“The downward adjustment has been due to a weaker-than-expected driving season in the US and the ongoing sluggish economic performance in the OECD,” said the report, referring to an organization of 32 member nations that includes the United States., the United Kingdom, Germany and Japan.

OPEC said weaker-than-expected demand from China and “ongoing economic uncertainties” were reflective of a global slowdown in industrial activity in most major economies.

Read here:

The chairman of the Republican National Committee is pouncing on the investigation of a California solar company that took a federal loan before laying off over 1,000 workers, saying it is “the prime example of stimulus failure” just as the Obama administration unveils its latest stimulus proposal.

Solyndra, a solar company President Obama visited in 2010 to highlight green jobs, got a $500 million loan guarantee as a part of the federal stimulus program. But the company declared bankruptcy last month and suddenly laid off 1,100 workers before the FBI and Department of Energy began investigating it.

In his statement Monday, RNC Chairman Reince Priebus calls for more transparency about federal involvement with the company.

“As the FBI and Energy Department expand their investigation into solar energy company Solyndra, it is time for the self-proclaimed most transparent White House in history to release all documents related to their involvement with the failed government-backed company,” Priebus said in a statement.

The RNC sent out the statement just ahead of a Monday morning Rose Garden event during which President Obama formally presented his $447 billion jobs and stimulus proposal. He laid the plan out before a joint session of Congress on Thursday evening where he continually implored members to “pass the bill.”

But Priebus says the Solyndra case should teach a lesson about the president’s new plan.

Read here:

Republicans slammed the White House Monday after the president’s budget director proposed paying for a $447 billion jobs bill with a string of tax increases that Republicans have long opposed.

White House Budget Director Jack Lew gave an overview Monday of how the president plans to keep his jobs bill deficit-neutral, as the administration sent the bill over to Congress. The proposals range from a limit on itemized deductions for high-income earners to provisions that would raise taxes on oil and gas companies as well as corporate jet owners.

House Speaker John Boehner spokesman Brendan Buck, noting the president has pushed these proposals before, suggested the president was getting off on the wrong foot.

“It would be fair to say this tax increase on job creators is the kind of proposal both parties have opposed in the past. We remain eager to work together on ways to support job growth, but this proposal doesn’t appear to have been offered in that bipartisan spirit,” he said in a statement.

House Republican Leader Eric Cantor’s office sent out an email after the briefing titled: “Beware of the Tax Man.”

WASHINGTON (AP) — Despite the turmoil that shook the financial markets last month, the Federal Reserve says its 12 bank regions grew modestly this summer because consumers spent more in most parts of the country.

The Fed survey notes growth was mixed and some regions reported weaker expansion. But the survey appeared to be an improvement from the previous report, when the central bank said growth had slowed in eight of its 12 regions in June and early July.

The survey looked at economic conditions around the country from mid-July through Aug. 26. It was based on reports provided by the Fed’s 12 regional banks. The regional outlook will help shape the discussion at the central bank’s next meeting on Sept. 20-21.

BERLIN (Reuters) – Germany’s top court handed its country’s parliament a greater say over euro zone bailouts, potentially hampering Berlin’s ability to act decisively against a debt crisis which Chancellor Angela Merkel said needed a fundamental rethink to solve.

The Constitutional Court rejected a series of lawsuits aimed at blocking the participation of Europe’s biggest economy in emergency loan packages but said the government must get approval from parliament’s budget committee before granting such aid.

“This was a very tight decision. But it should not be mistakenly interpreted as a constitutional blank check authorizing further rescue measures,” the judge told plaintiffs, government officials and members of parliament in the courtroom in Karlsruhe.

The euro briefly rose against the dollar in response.

“Today’s ruling should bring some relief to financial markets as a total chaos scenario has been avoided, but it should not lead to euphoria,” said Carsten Brzeski at ING.

“The ruling confirms our view that the German piecemeal approach on the debt crisis is not likely to change but eventually the German parliament will vote in favor of a second Greek bailout package and the beefed-up EFSF (euro zone rescue fund).”