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“In a little over a month, the risk of the 30 most systemically important global banks has jumped an impressive 45%. At 235bps, the FSB30 stands just shy of the peak levels that were seen in the initial March 2009 crisis moment – though remains below Q4 2011 peak crisis levels. Perhaps, despite all the protestations of ‘zee stabilitee’, self-sustaining record-profit-margin-driven recovery, and Chinese soft-landing, the vicious circles of austerity in Europe (and perhaps the US) and financials squandering their newly-found liquidity (and certainly not capital) is becoming too large to ignore?

What is intriguing is how absolutely end-of-the-world the situation felt heading into Q1 2009 and yet – with banks’ risk considerably higher now, we have become so much more ‘used’ to this state of chaos that our anchoring bias says – all is well?

Chart: Capital Context”

Read here:

A string of disappointing developments in Europe put heavy pressure on global markets Monday morning.

In recent trading, the Dow was down 150 points while major bourses in Germany and France were off by nearly 3% as Europe’s crisis completed its migration from the back burner to the forefront of the market’s consciousness.

Last week, financial markets became fixated on Spain’s debt crisis and then turned to focus on French elections heading into the weekend. (See: Martin Wolf on Europe’s “Very Significant Moment” and the IMF’s “Dangerous Game”)

But it was developments in the Netherlands, where budget talks broke down this weekend, that really unsettled the markets.

Next to Germany, the Netherlands was considered “the cleanest country” in the EU in terms of its fiscal discipline, says Sassan Ghahramani, president and CEO of SGH Macro Advisors. “The triple-A of triple-A is now having a big dogfight over the budget. They may put a budget together but the government is going to fall apart.”

Indeed, Dutch Prime Minister Mark Rutte said new elections were an “obvious scenario” after budget talks ended and Rutte’s government lost the support of the right-wing Freedom Party, led by Geert Wilders. The Freedom Party opposed Rutte’s plans to bring the country’s deficit toward 3% of GDP. The risk for financial markets is Netherlands losing its AAA rating.

In Europe, right-wing parties tend to be extremely conservative on social issues, like immigration, but not necessarily what Americans think of as “conservative” on fiscal issues. These parties are “very anti-bank, anti-establishment,” Gharamani says.

Right-wing politicians in the Netherlands and France, among others, have been critical of the EU and are pushing back against the austerity measures agreed to in the EU Fiscal Compact Treaty. The compact, which was approved in January, obliges EU members to keep budget deficits below 3% of GDP and keep public debt at 60% of GDP.

“Northern countries are drifting away from the fiscal austerity they’re preaching to southern countries,” Ghahramani observes. “That’s an issue people are concerned about.”

Read here:

A couple of weeks ago European finance ministers attended an informal meeting in Copenhagen to sign off on one of the final components of the plan to deal with the debt crisis once and for all. In return for funds from their richer EU partners in the form of bailouts and a firewall to deal with future problems, peripheral euro zone members were to put their house in order, imposing austerity measures to help cut, or at least slow the pace of incurring new debt.

Aided by nearly a trillion dollars of assistance from the ECB’s Long-Term Refinancing Operation (LTRO) which ended fears of a fully-fledged banking crisis in late 2011, policy makers met in Denmark hoping the worst was now behind them.

But having agreed upon extra funding for the IMF’s own rescue fund over the weekend, policy makers will unfortunately not be able to look forward to a calmer summer and two weeks on the beach.

The reason thousands of politicians and bureaucrats will not be able to hit the beach is an EU member that could do with as many people as possible spending the summer on its beaches: Spain. The cost of borrowing over 10 years for the Spanish government is now 6 percent after heavy selling of Spanish debt by bond traders who had just a few months ago been buying heavily using ECB money. The IBEX 35 in Madrid has seen huge volatility as investors question the sustainability of Spanish housing prices and the debt that banks hold against it.

“It is becoming increasingly likely that some kind of support program for Spain will be needed” said Carl Weinberg, the chief economist at High Frequency Economics in a research note on Monday. “The yield on Spanish 10-year debt is approaching borrowing rates that are destabilizing and un-economic.”

Spanish and European officials will not agree with Weinberg, particularly in public, but whether they like it or not ,the bond vigilantes are back and ready to test their resolve. Those betting against the Spanish bond market are not just betting against Spain and its imbalances, they are betting against German Chancellor Angela Merkel and ECB President Mario Draghi’s resolve to protect the European project.

Up until now the support of Angela Merkel and Mario Draghi for countries finding themselves in trouble has been dependent on them implementing austerity measures and halting runaway government borrowing. So far those having to accept big cuts have played along, with Greece, Ireland and Portugal imposing massive cuts in return for bailout cash, and others have also gone along, to avoid the fate of Greece in particular.

Doubting the path set by Germany and the ECB has been frowned upon and in the case of former Italian Prime Minister Silvio Berlusconi led to him losing power. But opposition to austerity and plan A is beginning to grow in more prosperous places than Athens and Lisbon. In France, one of the architects of the plan to resolve the debt crisis, Nicolas Sarkozy, risks losing power to socialist candidate Francois Hollande.

Hollande won this weekend’s first round vote promising to focus on growth and is now favorite to win the French presidency despite over a third of all voters backing either the far right or extreme left. Whether or not Hollande will back Angela Merkel’s thinking on the debt crisis could define the EU response in the second half of 2012, but the optimists say his election would not have to be a negative.

“Let me point out that sometimes changes open up new opportunities for reforms – the “Nixon goes to China” paradox. For example, France needs labor market reforms and I suspect that a socialist president would have a better chance of getting that done than a center-right president would, but we will see,” said Erik Nielson, the chief economist at Unicredit in a research note on Monday.

To the north of Paris in the Netherlands, talks over slashing government debt collapsed over the weekend after an anti-euro right wing ally of the governing coalition walked out demanding elections as “soon as possible”

“It is very regrettable that this government cannot finish its job,” said Frans van Houten, the CEO of Philips in a CNBC interview following the release of forecast-beating numbers which had little to do with the health of the Dutch economy.

Alistair Newton, a political analyst at Nomura following the news from the Netherlands said: “Although failure by the Netherlands alone to ratify would not in theory spell the compact’s demise – only 12 out of 17 euro zone members need to ratify for it to come into force – it would at best significantly damage the compact’s credibility and at worst encourage other members to follow suit.”

With opposition to austerity measures rising and the debt crisis moving to Spain, the current plan A is under threat and this could spell trouble for euro zone resolve, according to Newton.

Crime is paying for some…..

[youtube://http://www.youtube.com/watch?v=9y9R0v96K48 450 300]

“Call it President Obama’s Committee for the Re-Election of the President — a political slush fund at the Health and Human Services Department.

Only this isn’t some little fund from shadowy private sources; this is taxpayer money, redirected to help Obama win another term. A massive amount of it, too — $8.3 billion. Yes, that’s billion, with a B.

Here is how it works.

The most oppressive aspects of the ObamaCare law don’t kick in until after the 2012 election, when the president will no longer be answerable to voters. More “flexibility,” he recently explained to the Russians.

But certain voters would surely notice one highly painful part of the law before then — namely, the way it guts the popular Medicare Advantage program.

For years, 12 million seniors have relied on these policies, a more market-oriented alternative to traditional Medicare, without the aggravating gaps in coverage.

But as part of its hundreds of billions in Medicare cuts, the Obama one-size-fits-all plan slashes reimbursement rates for Medicare Advantage starting next year — herding many seniors back into the government-run program.

Under federal “open-enrollment” guidelines, seniors must pick their Medicare coverage program for next year by the end of this year — which means they should be finding out before Election Day.

Nothing is more politically volatile than monkeying with the health insurance of seniors, who aren’t too keen on confusing upheavals in their health care and are the most diligent voters in the land. This could make the Tea Party look like a tea party….”

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Not so fun times…..

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Sweet. I love me some psychotic Islamist regimes. Now Israel is surrounded.

CAIRO (AP) — The head of the Egyptian Natural Gas Holding Company said Sunday it has terminated its contract to ship gas to Israel because of violations of contractual obligations, a decision Israel said overshadows the peace agreement between the two countries.

The 2005 natural gas deal has become a symbol of tensions between Israel and Egypt since the uprising. For many Egyptians, it typifies the close relations the regime of deposed President Hosni Mubarak forged with Israel and how his associates benefited greatly from such business deals.

Critics charge that Israel got the gas at below-market prices and that Mubarak cronies skimmed millions of dollars off the proceeds, costing Egypt millions of dollars in lost revenue.

Egyptian militants have blown up the gas pipeline to Israel 14 times since the uprising more than a year ago.

Israel insists it is paying a fair price for the gas.

Mohamed Shoeb, the head of the Egyptian Natural Gas Holding Company, said the decision to cancel the deal was not political.

“This has nothing to do with anything outside of the commercial relations,” Shoeb told The Associated Press.

He said Israel has not paid for its gas in four months. Israeli Foreign Ministry spokesman Yigal Palmor denied that.

Shoeb told Egyptian TV that the decision to cancel the contract was made Thursday because “each side has rights and we are representing our rights.”

On Sunday, Israel Finance Minister Yuval Steinitz said the unilateral Egyptian announcement was of “great concern” politically and economically.

“This is a dangerous precedent that overshadows the peace agreements and the peaceful atmosphere between Israel and Egypt,” he said in a statement. Israel and Egypt signed a peace treaty in 1979, but relations have never been warm.

The Israeli side said the decision was “unlawful and in bad faith,” accusing the Egyptian side of failing to supply the gas quantities it is owed.

Israel insists it is paying a fair price for the gas. Israel’s electricity company has been warning of possible power shortages this summer, partly because of the unreliability of the natural gas supply from Egypt.

For the long term, Israel is developing its own natural gas fields off its Mediterranean coast and is expected to be self-sufficient in natural gas in a few years.

Hussein Salem, a close friend of Mubarak was among the shareholders of East Mediterranean Gas Co., which is a joint Egyptian-Israeli company that carries the gas to Israel. Once a close friend of Mubarak, Salem fled Egypt for Spain and was sentenced in absentia to seven years in jail over the natural gas issue.

On the Israeli side, EMG sought international arbitration in October because of the Egyptian side’s failure to supply the quantity of gas stipulated in the contract — because of the frequent bombings.

Under the 2005 deal, the Cairo-based East Mediterranean Gas Co. sells 1.7 billion cubic meters of natural gas to the Israeli company at a price critics say is set at $1.50 per million British thermal units — a measure of energy.

The gas deal has been the subject of litigation in Egypt. An appellate court last year overturned a lower court ruling that would have halted gas exports to Israel. Opposition groups that filed the suit before the uprising claimed that Israel got the gas too cheaply under the 15-year fixed price deal between a private Egyptian company, partly owned by the government, and the state-run Israel Electric Corporation.

Ibrahim Yousri, a former Egyptian diplomat who had brought the issue to court, welcomed the decision announced Sunday.

“It has become a scandal bigger than the (ruling) military council can withstand,” Yousri said. He said there are gas shortages in Egypt, and growing economic woes, further enflaming popular unrest. He called the business deal a “treason” to national interests, adding, “This is a great political step.”

WASHINGTON (Reuters) – European Central Bank officials showed no sign of bending to renewed international pressure to do more to boost the euro zone’s struggling economy.

Top ECB policymakers, attending the International Monetary Fund’s spring meetings, politely but firmly rebuffed the IMF’s call that the bank should cut its policy interest rate below 1 percent and be prepared to provide more public funding to banks to reduce the risk of a new flare-up of the crisis.

“It’s a free world, we take note of this, but let me say that none of the advice of the IMF has been discussed by the Governing Council, in recent times at least,” ECB President Mario Draghi told a news conference on Friday.

And the ECB delegation to Washington had nothing to say, at least publicly, about a fresh suggestion by U.S. Treasury Secretary Timothy Geithner that the ECB had a role to play in helping European economies through tough reforms ahead.

“We think we have done our task in the last months by quite a number of standard and non-standard measures we have taken,” ECB executive board member Joerg Asmussen said on Friday on the sidelines of the IMF meetings.

He said the ball was now in the court of euro zone governments, which are trying to narrow budget deficits and undertake other reforms to restore market confidence and generate growth.

Unlike the U.S. Federal Reserve, which pursues full employment as well as low inflation, the ECB’s marching orders are to focus on keeping price growth in check, a point underscored by ECB officials several times over the weekend.

The Fed may yet provide more stimulus, on top of its near-zero interest rates and the $2.3 trillion in bonds it has already bought, even though the U.S. economy is stronger than Europe’s.

Economists polled by Reuters expect growth in the euro area to shrink by 0.4 percent in 2012 and to stay in a mild recession until the third quarter as weakness in Italy, Spain and Greece outweighs the stronger performance of regional powerhouses Germany and France.

“The stance of our monetary policy is fully appropriate,” ECB Vice President Vitor Constancio said in a speech. “It’s appropriate to the situation and the prospects that we (face) right now.”

The pressure on the ECB in Washington to do more to help growth contrasted with concerns among many policymakers from the 17-nation euro zone that their unprecedented stimulus to date could spark inflation when the region’s economies regain health.

ECB officials said they have met their responsibilities by lowering interest rates to 1 percent and providing two rounds of long-term loans to banks to prevent a credit crunch.

Bundesbank President Jens Weidmann said there was no shortcut for the ECB to restore market confidence.

“You cannot solve structural problems in the economy with instruments of monetary policy,” Weidmann said.

via The Big Picture

In hindsight, it’s easy to see that you should have sold a stock in a crisis. But in the midst of a financial debacle, it’s not so clear. Here’s how to figure out what to do.

Source 

“John McCain’s 2008 campaign staff allegedly had evidence that Democrats stuffed ballot boxes in Pennsylvania and Ohio on election night, but McCain chose not to pursue voter fraud, according to internal Stratfor emails published by WikiLeaks.

In an email sent on November 7, 2008, and titled ” Insight – The Dems & Dirty Tricks ** Internal Use Only – Pls Do Not Forward **,” Stratfor vice president of intelligence Fred Burton wrote:

1) The black Dems were caught stuffing the ballot boxes in Philly and Ohio as reported the night of the election and Sen. McCain chose not to fight. The matter is not dead inside the party. It now becomes a matter of sequence now as to how and when to “out”. 

In an email sent two days earlier and titled “Insight – McCain #5 ** internal use only – Pls do not forward **,” Burton wrote:

After discussions with his inner circle, which explains the delay in his speech, McCain decided not to pursue the voter fraud in PA and Ohio, despite his staff’s desire to make it an issue. He said no. Staff felt they could get a federal injunction to stop the process. McCain felt the crowds assembled in support of Obama and such would be detrimental to our country and it would do our nation no good for this to drag out like last go around, coupled with the possibility of domestic violence.

The Nov. 7 email also contains allegations that Democrats made a “six-figure donation” to Rev. Jesse Jackson to silence him on the topic of Israel after an October 2008 interview in which he said Obama’s presidency would remove the clout of “Zionists who have controlled American policy for decades.”

Burton, who appears to be friendly with Israeli Prime Minister Benjamin Netanyahu, wrote:

2) It appears the Dems “made a donation” to Rev. Jesse (no, they would never do that!) to keep his yap shut after his diatribe about the Jews and Israel. A little bird told me it was a “nice six-figure donation”. This also becomes a matter of how and when to out. 

The email also refers to an accusation that Obama’s campaign took money from Russia, recalling memories of Bill Clinton’s 1996 presidential campaign when the Justice Department uncovered evidence that China sought to make direct contributions to the Democratic National Committee.

Burton wrote:

3) The hunt is on for the sleezy Russian money into O-mans coffers. A smoking gun has already been found. Will get more on this when the time is right. My source was too giddy to continue. Can you say Clinton and ChiCom funny money? This also becomes a matter of how and when to out.

If true the allegations prompt questions of how the fallout has affected the politics of Obama’s current administration and how it will effect this year’s presidential election.

Interestingly, Mitt Romney is also facing allegations of voter fraud in Massachusetts as he cast a ballot for Republican Scott Brown in January 2010 in the special election to replace the late Sen. Ted Kennedy but didn’t own property in the state at the time.

Romney registered to vote listing his son’s unfinished basement as his residence, but the Romneys’ former realtor told long-shot GOP candidate Fred Karger that they moved to California. Anyone found guilty of committing voter fraud faces up to five years in prison and a fine of $10,000.

Burton is a former Deputy Chief of the Department of State’s counterterrorism division for the Diplomatic Security Service (DSS). The DSS assists the Department of Defense in following leads and doing forensic analysis of hard drives seized by the U.S. government in ongoing criminal investigations.

Stratfor provides confidential intelligence services to large corporations and government agencies, including the U.S. Department of Homeland Security, the U.S. Marines and the U.S. Defense Intelligence Agency.

WikiLeaks has published 973 out of what it says is a cache of 5 million internal Stratfor emails (dated between July 2004 and December 2011) obtained by the hacker collective Anonymous around Christmas.”

Source

“He revolutionized the world by inventing the World Wide Web. Decades later, though, MIT professor Tim Berners-Lee is warning consumers of his creation against Google and Facebook, as well as the government’s attempts to censor the Internet.

In an interview published by the Guardian on Wednesday, Berners-Lee celebrates the marvels made possible by the Web but cautions users to be weary of what companies could be doing with thought-to-be-private info. While the Internet offers endless answers, solutions and opportunities for entertainment, the British-born professor warns that the companies that consumers invest their personal data into might not necessarily be their friend.

“My computer has a great understanding of my state of fitness, of the things I’m eating, of the places I’m at. My phone understands from being in my pocket how much exercise I’ve been getting and how many stairs I’ve been walking up and so on,” says the scientist.

As helpful as that could be, though, Berners-Lee says it has its downside.

“One of the issues of social networking silos is that they have the data and I don’t,” he explains. “There are no programs that I can run on my computer which allow me to use all the data in each of the social networking systems that I use plus all the data in my calendar plus in my running map site, plus the data in my little fitness gadget and so on to really provide an excellent support to me.”

Who is benefiting then? Companies like Facebook, Google and Apple, which are monopolizing not just the Internet, but their user’s information.

“It’s interesting that people throughout the existence of the web have been concerned about monopolies. They were concerned [about] Netscape having complete control over the browser market until suddenly they started worrying that Microsoft had complete control of the browser market. So I think one of the lessons is that things can change very rapidly,” he says.

Berners-Lee’s comments eerily mirror warnings made earlier in the week to the Guardian by Sergey Brin, the co-founder of search engine giant Google. Discussing the hold the company has over its users, Brin said in his interview that consumers are forced to “play by their rules,” which, he added, are “really restrictive.”

“The kind of environment that we developed Google in, the reason that we were able to develop a search engine is the Web was so open. Once you get too many rules, that will stifle innovation,” said Brin.

On his part, Berners-Lee says that as companies monopolize out way of receiving and delivering information, consumers are quickly becoming more and more vulnerable to be left at their mercy. In attacking Apple over how they attempt to force their customers into using their own applications, the professor says it should be up to the users to decide how they want to control their own devices.

“I should be able to pick which applications I use for managing my life, I should be able to pick which content I look at, and I should be able to pick which device I use, which company I use for supplying my internet, and I’d like those to be independent choices,” he says….”

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The SEC & CFTC gives in to watered down regulation over swaps. Does anyone have gonads anymore?

Source 

“Corporate America, with help from the Obama administration, has struck yet another blow against the scary financial regulations it claims will hurt the economy.

On Wednesday they undercut new regulations on derivatives, which the detail-obsessed among us might point out didn’t just hurt the economy but nearly destroyed it. Just a few years ago.

It’s just the latest in a growing string of defeats and surrenders by regulators to the same financial industry that helped nearly destroy the economy, and needed massive bailouts as a result. Just a few years ago.

Under heavy pressure from the energy industry and other corporate interests, the Commodity Futures Trading Commission and the Securities and Exchange Commission are retreating from a plan to regulate many reaches of the U.S. trade in financial derivatives known as swaps, including the credit derivatives that nearly brought down the financial system.

The CFTC and SEC voted on Wednesday to decide just who, exactly, should be considered a “swap dealer” in this market. Dealers will be subjected to greater regulation and oversight. Non-dealers get a pass.

Originally these regulators wanted to say that anybody who handled less than $100 million in swaps per year was not a dealer and thus would be exempt from regulatory oversight. This arbitrary number was far, far too low, cried energy companies and other players in the swaps market. After careful consideration, they thought another arbitrary number, say $3 billion, or maybe $8 billion, would be more reasonable.

These companies argued that they dealt in many billions of dollars in swap trades each year — $3 billion to $8 billion, to be ridiculously precise — just to hedge their risks of doing business. To subject their trades to the scrutiny of regulators would impose terrible costs that could very well hurt the economic recovery, for goodness’ sake.

These groups, using a large and well-supplied army of lobbyists, as Ben Protess of the New York Times noted, cried to regulators that $3 billion — no make that $8 billion — was the absolute level of trades that turned one from an innocent bystander in the swaps market into a “dealer” in need of regulation.

And the regulators listened, bless ’em, continuing a recent string of victories for the banking industry, among others, to roll back or confuse regulations passed in the wake of that pesky financial crisis.

Not only did they make it easier for a swaps trader to be exempt from regulation, but they also left it up to individual companies to decide whether their swaps trades were commercial “hedges,”which would also get them off the regulatory hook, Reuters notes.

“This rule is an indefensible defeat for financial reform,” Better Markets, a non-profit advocacy group, wrote on its blog on Wednesday. “It is also a poster child for the pernicious effect of industry’s army of lobbyists and the influence that the financial industry has at the regulatory agencies.”

Americans for Financial Reform, another advocacy group, wrote on Tuesday, in urging the SEC not to raise the trading limit for swaps dealer exceptions:

Under an $8 billion de minimis exemption, a swaps entity could advertise itself as a dealer to the market and conduct 1,600 such transactions a year, without any requirement to register with the either the SEC or the CFTC. Commodity companies able to take advantage of the hedge exemption, or hedge funds and commodity trading desks able to use a possible own book trading exemption, could expand even further without designation.

The regulators argue that an $8 billion limit for swaps dealers will capture all of the too-big-to-fail banks and the bulk of swaps trading in the U.S., and they may yet lower the bar back down to the other arbitrary number floated by the industry, $3 billion.

But Wednesday’s failure follows the JOBS Act, pushed by President Obama himself, which will strip away investor protections in the name of addressing an imaginary crisis of small companies being unable to raise money from investors in private or public markets.

Then there was H.R. 3283, a bill that would create a massive loophole to let banks trade derivatives without having to hold extra capital to protect against losses. That bill is still out there waiting to be passed.

Then there is the banking industry’s constant, withering assault on the Volcker Rule forbidding banks from taking risky bets with their own money, which banks say is a necessary part of hedging their risks, sort of like the swaps market. As Jesse Eisinger of ProPublica writes today, lobbyists and complicit regulators have managed to so confuse the issue that they have rendered the Volcker Rule meaningless.

What all of these retreats have in common — and this is not an exhaustive list — is an industry successfully pleading to the government to loosen some of the fetters placed on them after their past jaw-dropping acts of malfeasance, all in the name of avoiding the hazily defined “costs” such regulations could impose on the economy.

What’s lost is that these “costs” are almost certainly not going to be higher than the cost of, say, bailing out the entire banking industry, as we have had to do once before and likely will be asked to do again, at the rate we’re going. The costs of regulation might not even be higher than the cost of simply bailing out one insurance company, American International Group, which nearly got itself annihilated by massive positions in the very swaps market regulators are taking a pass on fully regulating now.”

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The silliest protest ever…..

CISPA coming for you soon….

Source

“The Department of Veterans Affairs is so behind in processing claims and benefits that the waiting list for decisions has doubled since President Barack Obama took office.