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Monthly Archives: February 2013

$RIO’s $3 Billion Coal Bid in Mozambique Kept in Check by Lack of Infrastructure

Rio Tinto Group’s foray into Mozambique, which cost the world’s No. 2 mining company $3 billion, has highlighted a lack of rail and port capacity that threatens to check a coal boom in the southeast African nation.

Rio bought coal producer Riversdale Mining Ltd. for A$3.9 billion ($4 billion) in 2011 to access some of the world’s best untapped coking coal, in the Moatize basin in Mozambique’s northwest Tete province. Now Rio is writing the value down by 70 percent and a person familiar with the matter says the London- based company is considering selling them.

While finding coal in Mozambique has been a cinch, exporting it hasn’t. Rio’s plans have been stymied by the government’s refusal to allow it to barge coal down the Zambezi River and by the cost of accessing or building rail lines to a port on the east coast. The bottlenecks may scupper Mozambique’s bid to become one of the world’s top five coking coal producers and expand a mining industry that currently accounts for less than 5 percent of gross domestic product.

“We see a lot of problems now with the big players who are putting big money into Mozambique,” Peter Major, head of mining at Cape Town-based Cadiz Corporate Solutions, said in a Feb. 6 interview. “There are stockpiles of coal and they can’t get it onto trains. Even if the trains get the coal to the port, the port can’t handle it.”

Mozambique, which began commercial coal production in 2010, boosted output to about 5 million metric tons last year from 600,000 tons in 2011, according to the International Monetary Fund. About 280 million tons of coking coal, used in steelmaking, are traded annually on the seaborne market.

Top Exporter….”

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$AU to Cut Investments as Strikes Hurt Profits by 29%

AngloGold Ashanti Ltd., the third- biggest producer of the metal, will cut investment in projects this year and may reduce output estimates should labor unrest reawaken in South Africa following a spate of strikes in 2012.

Capital expenditure will decline to $2.1 billion from $2.2 billion in 2012, the company said today in a statement. Gold output, down 17 percent to 859,000 ounces during the fourth quarter because of strikes, may be as much as 950,000 ounces in the three months to March depending on the labor situation. Unrest cut production, reducing profit 29 percent last year.

“In terms of capital and spending disciplines, we tightened up considerably,” said Chief Executive Officer Mark Cutifani, who is leaving the Johannesburg-based company to replaceCynthia Carroll as CEO of Anglo American Plc on April 3. “Capital numbers are being kept tight and we will continue to trim where we don’t see real short-term uplift.”

Strikes that began at platinum operations in August spread to gold, coal and chrome producers, cutting mining output by 10.1 billion rand ($1.1 billion), according to South Africa’s National Treasury. AngloGold, which digs about a third of its metal in the country, may split off the assets from other mines should investors undervalue the business, Cutifani said Nov. 21.

Adjusted earnings excluding one-time items dropped to $924 million, or $2.39 a share, last year from $1.3 billion, or $3.36, the company said today in a statement. That compares with the $3.03 median estimate of 14 analysts surveyed by Bloomberg.

Earnings Decline…”

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Inflation Slows to 5.4% in South Africa

“South African inflation slowed to a five-month low in January after the statistics office adjusted the consumer price basket and food and fuel prices eased.

The inflation rate fell to 5.4 percent from 5.7 percent in December, Pretoria-based Statistics South Africa said on its website today. The median estimate in a Bloomberg survey of 19 economists was 5.7 percent. Prices rose 0.3 percent in the month.

The government cut the price of gasoline by 1.2 percent in January as a stronger rand in the previous month helped to curb import costs. Since then, the currency has plunged 4.8 percent against the dollar and fuel prices climbed, adding to pressure on inflation.

“All indications are that this is not going to last and the overall trajectory is still upward,” George Glynos, an economist at Econometrix Treasury Management, said in a phone interview from Johannesburg.

The rand strengthened after the release of the data, advancing 0.2 percent to 8.8371 against the dollar by 11:11 a.m. in Johannesburg. Investors pared back expectations of higher interest rates, with the yield on forward-rate agreements due as soon as six months dropping 5 basis points to 5.03 percent.

Interest Rates…”

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China Orders Cities to Limit Home Purchases

“Chinese Premier Wen Jiabao called for local authorities to “decisively” curb real estate speculation and take steps to rein the property market after data showed prices surged the most in two years last month.

Cities that have witnessed “excessively fast” price gains should promptly impose home-purchase restrictions if they’ve not done so already, the central government said in a statement released after a meeting of the State Council headed by Wen. Provincial capitals and municipalities to report directly to the central government should also publish annual price control targets to keep new-home costs “basically stable,” according to the statement.

Shares of Chinese developers listed in Shanghai fell the most in more than six months yesterday on concerns the government would impose new measures to cool the real estate market. Home prices rose 1 percent last month from December, the most since January 2011, according to data from SouFun Holdings Ltd., the nation’s biggest property website.

China needs to maintain the “consistency and stability” in its property curbs because home supplies will remain tight in large cities as the nation’s urbanization accelerates, the government said in today’s statement….”

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Samurai Abe and His New Central Bank Leadership Say there is No Need to Buy Foreign Bonds

“Japanese Prime Minister Shinzo Abe said that buying foreign bonds will be unnecessary under a new central bank chief, backing away from a policy proposal that may be seen by other nations as an attempt to weaken the yen.

“We decided to consider this in November last year,” Abe said in parliament today, referring to a ruling party proposal to set up a fund to buy foreign bonds. “The need for this will basically disappear once we get the new BOJ governor and deputies in March.”

Avoiding foreign bond purchases would limit tension with Group of 20 nations that pledged this week to refrain from targeting exchange rates for competitive purposes. The yen is swinging as investors assess the limits of the economic campaign dubbed ‘Abenomics,’ with the prime minister preparing to choose a new BOJ governor next week.
“This effectively removes foreign bond buying as a policy option for Abe,” said Norio Miyagawa, a senior economist at Mizuho Securities Research and Consulting Co. in Tokyo. “The G-20 statement suggests that aiming to guide the yen lower by verbal intervention or other means such cannot be accepted.”
The yen rose 0.3 percent to 93.26 per dollar at 4:35 p.m. today in Tokyo after earlier falling as much as 0.3 percent. The Nikkei 225 Stock Average closed 0.8 percent higher.
Finance Minister Taro Aso said in the same parliamentary session today that the government has no intention to buy foreign bonds….”

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India Embarks on a Record Borrowing Binge

“India plans gross market borrowing of about 6 trillion rupees ($111 billion) in the year through March 2014, a record high, according to three Finance Ministry officials with direct knowledge of preliminary estimates.

The increase from 2012-2013’s level will provide funds for government spending and debt repurchases as existing sovereign bonds near maturity, the officials said, asking not to be identified as the details aren’t public. Another official said borrowings will climb next fiscal year, without giving a figure. Exact numbers have yet to be finalized, all four said.

India’s government faces the task of containing the widestfiscal deficit in major emerging nations to avert a credit- rating downgrade to junk status. Finance Minister Palaniappan Chidambaram, due to unveil the budget Feb. 28, has vowed to pare the gap even as economic growth falters and an election due by May 2014 adds pressure for spending to win the support of voters.

Chidambaram’s goal is a shortfall of 4.8 percent of gross domestic product in 2013-2014, from 5.3 percent this year. Government expenditure has contributed to price pressures that have limited room for interest-rate cuts in an economy expanding at the weakest pace in a decade.

Still, GDP growth will be sufficient for Chidambaram to meet his budget-gap goals as a percentage of the economy even as borrowings climb, the officials said.

Growth Challenge…”

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Japan’s Trade Deficit Hits a New Record

“Japan’s trade deficit swelled to a record 1.63 trillion yen ($17.4 billion) on energy imports and a weaker yen, highlighting one cost of Prime Minister Shinzo Abe’s policies that are driving down the currency.

Exports climbed 6.4 percent in January from a year earlier, the first rise in eight months, exceeding the median 5.6 percent estimate in a Bloomberg News survey of 24 economists. Imports increased 7.3 percent, the Finance Ministry said in Tokyo today.

Weakness in the yen that aids exporters such as Sharp Corp. and Sony Corp. also means the country pays more to import fossil fuels needed as nuclear reactors stand idle after the Fukushima crisis in 2011. That burden may encourage the government to limit the currency’s slide, with Deputy Economy Minister Yasutoshi Nishimura signaling in a Jan. 24 interview that the government may prefer a yen stronger than 110 per dollar.

“The trade deficit means the yen can’t just keep weakening,” said Takeshi Minami, chief economist at Norinchukin Research Institute Co. in Tokyo. “Abe will probably restart some nuclear plants after the upper house elections in July as, without them, the costs to the economy are too great.”

The yen fell after the data were released, before reversing course to trade 0.1 percent higher at 93.51 at 12:33 p.m. in Tokyo. The Nikkei 225 Stock Average was 0.8 percent higher.

Nearly 80 percent of Japan’s imports were denominated in foreign currencies in the second half of last year, compared with about 60 percent of exports, according to the Finance Ministry.

Export Increase….”

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Samurai Abe and His Currency Chief Will Visit D.C. to Smooth Over Worries About the Yen

“Prime Minister Shinzo Abe will be accompanied by his top currency official when he visits the U.S. to meet with President Barack Obama, as Japan tries to limit international friction over a weakening yen.

Vice Finance Minister Takehiko Nakao is part of a delegation arriving in Washington tomorrow, according to two officials with knowledge of the matter who asked not to be named because of government policy. Usually, a more junior official, the director-general of the international bureau, would accompany Abe on such a trip, two officials said.

Abe’s first visit to the U.S. since becoming prime minister in December comes amid international concern at the speed of the yen’s decline and Japanese officials indicating acceptable levels for the currency. U.S. Treasury Undersecretary Lael Brainard has welcomed Japan’s efforts to “reinvigorate growth,” while saying that nations need to avoid “loose talk about currencies.” …”

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The Kiwi Dollar Tanks as Central Bank Reveals Intent to Devalue

“New Zealand’s dollar weakened the most in two months as the central bank said it’s ready to intervene in the market, a week after the Group of 20 nations vowed to refrain from currency wars. European stocks and U.S. equity-index futures were little changed.

The so-called kiwi depreciated 1.2 percent to 83.68 U.S. cents at 7:25 a.m. in New York. The pound slid 0.9 percent to $1.5295 after the Bank of England said three of nine policy makers voted to expand asset purchases at their meeting this month. The Stoxx Europe 600 Index slipped 0.2 percent and Standard & Poor’s 500 Index futures lost less than 0.1 percent. Soybeans climbed for a third day and European Carbon permits rebounded after falling 20 percent yesterday.

New Zealand’s Reserve Bank Governor Graeme Wheeler said today in Auckland that he’s “prepared to intervene to influence the kiwi” and that the currency isn’t a one-way bet. The Commerce Department may say U.S. housing starts cooled in January from a four-year high, while the European Commission’s index of consumer confidence probably rose, according to Bloomberg surveys of economists. The Federal Reserve releases minutes of its January meeting.

“It’s interesting that the RBNZ have upped the rhetoric around the potential for intervention,” said Geoff Kendrick, head of European currency strategy at Nomura International Plc in London. “This is the first time Wheeler has laid his cards on the table and talked the currency down.”

Kiwi Rally

The so-called kiwi dollar surged 45 percent against the dollar since the end of 2008, the biggest advance after its Australian counterpart among more than 150 currencies tracked by Bloomberg. The kiwi lost as much as 1.3 percent today, the most since Dec. 21. New Zealand isn’t a member of the G-20….”

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Rumors Circulate on Arrest Warrant for the Pope Regarding Allegations of Child Sex Crimes

“We knew something had to be up with the resignation of Pope Benedict. After all, Popes don’t just resign; in fact, this is the first time a Pope has resigned in 600 years. Therefore, the hoopla surrounding this is more than understandable. However, as per usual with the Catholic Church, there seems to be a catch, and, lo and behold, it likely surrounds the infamous abuse scandals that have plagued the church’s image for so long.

It seems that with his resignation announced, the Pope, whose given name is Joseph Ratzinger, has a meeting with the Italian President, Giorgio Napolitano on February 23 to beg for immunity against prosecution for allegations of child sex crimes. Apparently, this hastily arranged meeting, and likely the resignation as well, are the result of a supposed note received by the Vatican from an undisclosed European government that stated that there are plans to issue a warrant for the Pope’s arrest. This letter was allegedly received on February 4, and Ratzinger resigned a week later. Now, there’s no way people can ignore how fishy this is. The first Pope to resign in 600 years does so after panicking about an impending arrest and in the midst of a hastily arranged meeting begging for protection from the Italian government? How they will keep people from connecting the two is beyond me. Chances are, the world will be popping popcorn and steadily watching.

Well, for once, the guy might not get off easy. The International Tribunal into Crimes of Church and state calls upon the Italian President to deny help to Ratzinger, and to “not collude in criminality. Let’s just hope that Napolitano does not cave. However, there may be another avenue to make sure the Pope is brought to justice if the Italian President does cave…..”

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Why More Than 8% Unemployment Could Lie Ahead

“Severe fiscal tightening in the U.S. will lead to no growth or a contraction in the first two quarters of 2013 and will push unemployment over the 8 percent level, according to Lombard Street Research.

The knock-on effect will mean pain for the business sector, with corporate profits falling after a hit to consumer spending power, the firm said.

“Our view that unemployment could rise above 8 percent and that profits will be squeezed reflects a forecast of nil to negative 2013 (first quarter) growth, and further stagnation in (the second quarter),” a Lombard Street report released on Friday said.

The view contrasts sharply with that of other analysts who are considerably more bullish on the U.S. economy.

Keith McCullough, CEO of Hedgeye Risk Management told CNBC last week that he thinks employment could actually improve below 7 percent by the fourth quarter, adding that from a housing and employment perspective U.S growth is “pretty solid”.

(Read MoreKudlow: Sequester Will Grow Private Economy)

Lombard Street does not agree.

At the start of the year, the payroll tax that funds Social Security was raised two percentage points to its 2010 level of 6.2 percent. This was the largest component of tax increases approved by Congress in the resolution to the “fiscal cliff”.

Retail sales rose 0.1 percent in January, data released by the Commerce Department showed on Wednesday. These two events together should set alarms bells ringing as tax increases suggest a slowdown in the pace of consumer spending, Lombard Street said….”

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The Dirty Little Secrets of Non Profits

In 2009, a network of online media outlets began popping up in state capitals across the nation, each covering the news from a clearly conservative point of view. What wasn’t so clear was how they were funded.

“The source is 100 percent anonymous,” said Michael Moroney, a spokesman for the Franklin Center for Government and Public Integrity, the think tank that created the outlets.

In fact, 95 percent of Franklin’s revenue in 2011 came from a charity calledDonors Trust, according to Internal Revenue Service records.

Conservative foundations and individuals use Donors Trust to pass money to a vast network of think tanks and media outlets that push free-market ideology in the states — $86 million in 2011 alone. The arrangement obscures the identity of the donors wishing to keep their charitable giving private, especially “gifts funding sensitive or controversial issues,” according to the group’s website.

The $6.3 million donation to the Franklin Center was the second-largest gift made in 2011 by the group, a tax-exempt “public charity” that takes tax-deductible donations from donors “dedicated to the ideals of limited government, personal responsibility, and free enterprise,” according to its website.

Donors Trust includes 193 contributors, the majority of whom are individuals. “A lot of donors are flying totally under the radar,” says president and CEO Whitney Ball.

Donor-advised fund

Since its founding in 1999, Donors Trust and its affiliated organization, Donors Capital Fund, have distributed nearly $400 million, becoming major vehicles for tax-exempt giving from wealthy conservatives such as billionaire industrialist Charles Koch.

Koch is among an exclusive pool of donors who have used Donors Trust as a “pass-through,” says Marcus Owens, the former director of the IRS Exempt Organizations Division, now in private legal practice. “It obscures the source of the money. It becomes a grant from Donors Trust, not a grant from the Koch brothers.”

Ball helped found Donors Trust in 1999 as a “donor-advised” fund. Donors can open an account and protect their identity from the public and even the recipient of their grants.

In addition, donor-advised funds offer contributors an extra level of control over where their money ends up, which seeks to remedy what Ball sees as the tendency for foundation money to “drift left.”

This was a chief concern of Daniel Searle, the late philanthropist and pharmaceutical executive who was one of Donors Trust’s early board members.

In 1998, with help from Donors Trust co-founder and board chairman Kim Dennis, Searle established an endowment called the Searle Freedom Trust, now worth $114 million, which has in turn given generously to Donors Trust.

‘Great guys’

The Searle Freedom Trust is one of dozens of conservative foundations that have given tens of millions of dollars to Donors Trust from 2001 to 2011. Among the group’s donors is the Knowledge and Progress Fund, a Wichita, Kan.-based foundation run by Charles Koch.

The foundation gave almost $8 million to Donors Trust between 2005 and 2011.

Where those funds ended up is a mystery, though some Donors Trust recipients, including the Mercatus Center and the Institute for Humane Studies based at George Mason University in Virginia, have also received major funding from foundations set up by Charles Koch and brother David.

Nearly half of the revenue for David Koch’s Americans for Prosperity Foundation came from Donors Trust in 2010, in the form of $7.6 million in grants.

Representatives for the Koch foundations did not return calls for comment.

Before Donors Trust, Ball was the director of development for the libertarian Cato Institute, which Charles Koch was instrumental in founding.

“We think they’re great guys,” she says of the Kochs, “but if they weren’t around, we’d still be successful.”

At a private Koch fundraising meeting in the summer of 2010, Donors Trust hosted cocktails and dessert for what Ball called a “target-rich environment” of wealthy donors.

Several wealthy conservatives who have attended Koch fundraising parties have Donors Trust accounts, including Amway co-founder and longtime booster of conservative causes Richard DeVos; hedge fund billionaire Paul Singer; and Philip Anschutz, owner of the conservative Examiner newspapers.

Dozens of other major conservative philanthropies have Donors Trust accounts, including the Lynde and Harry Bradley Foundation, the John M. Olin Foundation and the Coors family’s Castle Rock Foundation, according to IRS records….”

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Reinsurance Companies are Permitting U.S. Taxpayers to Defer Taxes Indefinitely

“Last year, about $450 million belonging to top executives at billionaire hedge fund manager John Paulson’s New York firm took a quick round trip to Bermuda.

In April, the executives sent the money to a reinsurance company that they’d set up on the island 650 miles off the North Carolina coast. By June, the Bermuda company, which has no employees and sells far less reinsurance than the industry norm, had sent all the cash back to New York, to be invested in Paulson & Co. funds.

By recycling the funds through Bermuda-based Pacre Ltd., the Paulson executives are positioned to legally exploit a little-known tax loophole, reduce their personal income taxes and delay paying the bill for years.

“These types of reinsurance companies are permitting U.S. taxpayers to defer — indefinitely — U.S. tax,” said David S. Miller, a tax lawyer at Cadwalader Wickersham & Taft LLP. For some, he said, it’s “an unjustified benefit.”

A decade after the U.S. Internal Revenue Service threatened to crack down on what it said were abuses by hedge-fund backed reinsurers, more high-profile money managers are setting up shop in tax havens. Paulson, SAC Capital Advisors LP’sSteven A. Cohen and Third Point LLC’s Daniel Loeb have started Bermuda reinsurance companies since 2011, following a similar Cayman Islands venture by Greenlight Capital Inc.’sDavid Einhorn….”

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Sheriff Warns Of “Second American Revolution”

“A Milwaukee County Sheriff has warned that a second American Revolution may be sparked if unconstitutional gun laws are enforced by police and sheriff’s department officials.

Sheriff David Clarke recently urged the citizens he serves to consider learning firearm safety because of “a duty to protect yourself and your family.”

In a message posted on the Sheriff’s website, Clarke wrote “I need you in the game, but are you ready? With officers laid-off and furloughed, simply calling 9-1-1 and waiting is no longer your best option. You can beg for mercy from a violent criminal, hide under the bed, or you can fight back; but are you prepared?”

“Consider taking a certified safety course in handling a firearm so you can defend yourself until we get there. You have a duty to protect yourself and your family. We’re partners now. Can I count on you?” the message urged.

Speaking on the Alex Jones Show yesterday, the Sheriff hit home his opinions on the gun control proposals that are being pushed via presidential executive orders.

“First of all, to me that would be an act of tyranny. So the people in Milwaukee County do not have to worry about me enforcing some sort of order that goes out and collects everybody’s handgun, or rifles, or any kind of firearm and makes them turn them in.” Clarke said.

“The reason is I don’t want to get shot, because I believe that if somebody tried to enforce something of that magnitude, you would see the second coming of an American Revolution, the likes of which would make the first revolution pale by comparison.” the Sheriff urged….”

 

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Twitter Lists the Happiest and Saddest States in the Union

“Sorry, Louisiana, you are the saddest state. And Hawaii (shocker!) you are the happiest.

That’s according to a team at the Vermont Complex Systems Center, who posted their new analysis of 10 million geotagged tweets to to arXiv.org. They call their creation a “hedonometer.”

They also found that the Bible belt stretching across the American south and into Texas was less happy than the west or New England. The saddest town of the 373 urban areas studied was Beaumont in east Texas. The happiest was Napa, California, home of many drunk people wine makers. The only town among the 15 saddest that was not in the south or Rust Belt was Waterbury, Connecticut. (Although Waterbury has appeared on several “worst places to live” lists, which seems like mean lists to make.) …”

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$HLF Beats Estimates and Raises Guidance

 

“Nutritional and weightloss supplement seller Herbalife just beat fourth-quarter earnings estimates and raised its sales guidance.

Herbalife posted $1.05 EPS. Sales came in at $1.1 billion, according to the earnings release.

On average, analysts polled by Bloomberg expected the multi-level marketing firm to post an adjusted EPS of $1.03 on sales of $1.049 billion.

Here’s an excerpt from the release:

Herbalife Ltd. (HLF) today reported fourth quarter net sales of $1.1 billion, reflecting an increase of 20 percent compared to the same time period in 2011 on volume point growth of 18 percent. Net income for the quarter of $117.8 million, or $1.05 per diluted share, compares to 2011 fourth quarter net income of $105.4 million and EPS of $0.86, respectively.

For the twelve months ended December 31, 2012, the company reported record net sales of $4.1 billion, an 18 percent increase on 20 percent growth in volume compared to 2011. For the same period, the company reported net income of $477.2 million, or $4.05 per diluted share, reflecting an increase of 16 percent and 23 percent, respectively, compared to the 2011 results of $412.6 million and $3.30 per diluted share.

“Herbalife continues to deliver record results in sales and profitability as our independent distributors go deeper into existing markets, developing more and more customers using our nutrition products every day,” said Michael O. Johnson, Herbalife’s chairman and CEO. “Obesity and poor nutrition are global public health problems. Our distributors are proud to be part of the solution.” …”

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Networking Helps $DELL to Beat Estimates, Revenues Fall by 11%

Source

“NEW YORK (TheStreet) — Dell (DELL_) reported fourth-quarter results that beat Wall Street estimates after market close, snapping a string of misses

The Round Rock, Texas-based company reported fourth-quarter non-GAAP earnings of 40 cents a share on $14.3 billion in revenue, down 11% year-over-year, but up 4% over the previous quarter. The company noted that networking was strong, with revenue from this segment growing 42%.

Analysts polled by Thomson Reuters were looking for earnings of 39 cents a share on $14.1 billion in revenue.”

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Obama Administration Asks Banks to Regulate Their Own Foreclosure Abuses

“Having bungled the so-called independent review of foreclosure mistakes, the Obama administration has now decided that the best way to help homeowners is to have the banks—which were responsible for the foreclosure errors—examine the case files and decide how best to fix the situation.

In January, the Office of the Comptroller of the Currency (OCC) shut down the foreclosure review by independent consultants—which had already cost about $2 billion— after it was revealed that the banks had selected said consultants. The process also proved to be taking too long to resolve homeowner grievances, so the administration decided to reach a $3.6 billion settlement with the banks.

But before the money can be distributed to individuals wronged during the foreclosure crisis, more than four million cases need to be reviewed. Instead of federal regulators doing the work, they are trusting the financial institutions, including Bank of America and Wells Fargo, to do it properly this time…”

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