Comments »NEW YORK (Reuters) – Applications for U.S. home mortgages tumbled last week as demand for refinancing sagged for the second week in a row, an industry group said on Wednesday.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, dropped 9.6 percent in the week ended Aug 26.
The MBA’s seasonally adjusted index of refinancing applications slumped 12.2 percent, while the gauge of loan requests for home purchases edged up 0.9 percent after setting a 15-year low set the week before.
“Refinance application volume declined for a second week from recent highs, despite rates staying near a 10-month low, while purchase volume remained near 15-year lows,” Mike Fratantoni, MBA’s vice president of research and economics, said in a statement.
The refinance share of mortgage activity decreased to 77.8 percent of total applications from 79.8 percent.
Fixed 30-year mortgage rates averaged 4.32 percent, down from 4.39 percent the week before.
U.S. crude supplies grow unexpectedly
Comments »LONDON (AP) — Oil prices slipped below $88 a barrel on Wednesday after a report showed U.S. crude supplies unexpectedly jumped last week, a sign demand may be weakening.
Benchmark oil for October delivery fell $1.16 to $87.74 by early afternoon European time in electronic trading on the New York Mercantile Exchange. Crude rose $1.63 to settle at $88.90 on Tuesday.
In London, Brent crude for October delivery was down 35 cents at $113.67 on the ICE Futures exchange.
The American Petroleum Institute said late Tuesday that crude inventories rose 5.1 million barrels last week while analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos., had predicted a drop of 1.2 million barrels.
Inventories of gasoline dropped 3.1 million barrels last week while distillates increased 276,000 barrels, the API said.
The Energy Department’s Energy Information Administration reports its weekly supply data later Wednesday.
Signs of waning consumer sentiment also weighed on crude. The Conference Board said Tuesday that its consumer confidence index sank more than expected in August from July, dropping to the lowest since April 2009.
“The latest readings on consumer behavior underscore the notion that the economy still has an awfully long way to go,” energy trader and consultant The Schork Group said in a report.
In other Nymex trading for October contracts, heating oil fell 1.1 cents to $3.07 per gallon and gasoline futures slipped 0.4 cents to $2.84 per gallon. Natural gas for October delivery gained 0.1 of a cent to $3.91 per 1,000 cubic feet.
FLASH: HERE COMES TROPICAL STORM KATIA OVER THE ATLANTIC
FLASH: BANK OF AMERICA LAWYERS PLAYED TRUTH OR DARE WITH SHAREHOLDERS
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Top Bank of America Corp lawyers knew as early as January that American International Group Inc was prepared to sue the bank for more than $10 billion, seven months before the lawsuit was filed, according to sources familiar with the matter.
Bank of America shares fell more than 20 percent on August 8, the day the lawsuit was filed, adding to worries about the stability of the largest U.S. bank. It wasn’t until Warren Buffett stepped up with a $5 billion investment that those fears were eased, though hardly eliminated.
The bank made no mention of the lawsuit threat in a quarterly regulatoryfiling with the U.S. Securities and Exchange Commission just four days earlier. Nor did management discuss it on conference calls about quarterly results and other pending legal claims.
The SEC’s rules for litigation disclosure are murky, and some lawyers said Bank of America may have been justified in not revealing AIG’s lawsuit before it was filed. The bank’s litigation disclosures are in line with those of many rivals.
But other lawyers said banks have an obligation to disclose legal threats that could have major consequences.
“Publicly owned companies are supposed to disclose material threatened litigation under generally accepted accounting principles,” said Richard Rowe, a former director of the SEC’s Division of Corporation Finance, who was commenting generally and not specifically about Bank of America.
Rowe, now a partner in the Washington, D.C., office of law firm Proskauer Rose, said bank executives must make a “judgment call” as to what is material, but “the general rule is, if it’s threatened litigation and it’s material, and you can put a number on it, you should disclose it.”
AIG’s lawsuit shows why investors are so fearful: they have no idea how much litigation lurks behind closed doors.
“Management surely has a credibility problem with investors,” said Jonathan Finger, whose Finger Interests Number One Ltd in Houston owns Bank of America shares. “They continue to under-address or under-disclose on the mortgage issue.”
Finger in 2009 sued the bank over its disclosures related to the takeover of Merrill Lynch & Co.
Bank of America and AIG declined to comment for this article.
DISCLOSING MORE
SEC staff have this year advised banks including Bank of America, JPMorgan Chase & Co, Citigroup Inc, Wells Fargo & Co, Goldman Sachs Group Inc, and Morgan Stanley to disclose more information about lawsuits that have been filed, as well as legal proceedings that they know the government is considering.
Banks have responded by providing additional information, including legal loss estimates in some cases.
But the agency has given banks more leeway in disclosing the expected cost of early-stage litigation, or threats of litigation whose outcome is more difficult to predict, according to securities lawyers and current and former regulatory officials.
There are two standards for disclosing legal liabilities. One under banks’ legal proceedings relies on whether losses are “reasonably probable” and “reasonably estimable.” Another, under management’s discussion and analysis, is based on whether losses are “reasonably possible.” Disclosure relies heavily on management’s assessment of the merits of a case.
Companies might need to disclose large potential lawsuits, even if they believe a loss is improbable, as well as less consequential cases if a loss appears certain, said Meredith Cross, director of the agency’s Division of Corporation Finance, in an interview with Reuters about the SEC’s disclosure requirements.
“The goal has been to have better disclosures, which should result in fewer surprises,” said Cross, who was speaking generally and not commenting on any specific institution.
Legal experts say it is difficult for top bank executives to decide exactly what they have to disclose in relation to pending and potential legal matters. That is particularly true in the current environment, they said, in which confidence in large banks is so easily shaken by legal threats that may or may not have merit.
“This is a classic problem in the disclosure regime with litigation,” said Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware. “You’re required to disclose anything material. The question is, ‘is it material?’ You have to gauge the size and the probability of success, which is very hard to evaluate.”
NOT FRUITFUL
Before suing Bank of America, AIG spent months analyzing publicly available data on a sample of 262,322 loans behind mortgage-backed securities it bought from Bank of America and its Merrill Lynch and Countrywide units between 2005 and 2007.
In its court filing, AIG said marketing materials touted the loans as being much safer than they were.
For instance, AIG said that in almost every bond offering, it was told that none of the mortgages were worth more than the value of the underlying property, when in fact one in six loans were underwater from the day they were born.
AIG raised such issues with Bank of America in January and said it planned to sue unless a settlement could be reached, sources familiar with the matter told Reuters. The sources either had direct knowledge of the legal proceedings or were briefed on them, but were not authorized to discuss the case publicly.
Both sides entered a “tolling agreement” to stop any legal statutes of limitation from running out while settlement talks were underway, but by March it became clear that AIG was prepared to sue for more than $10 billion, the people said.
Bank of America disputed AIG’s claims, saying losses stemmed from the insurer’s flawed decision making, as well as broader declines in home values and capital markets, the people said. The parties agreed to enter mediation proceedings during the second quarter, and also floated other proposals to no avail, the people said.
“There were lots of efforts made to avoid the filing over a period of months, but ultimately the discussions were not fruitful,” said one of the people.
A key stumbling block was Bank of America’s refusal to provide data for all of the loans, to show whether AIG’s sample — the heart of its case — was representative.
Bank of America “ignored” AIG’s requests for such information, while trustees and mortgage-servicers that also had access to the information “flat-out refused to cooperate,” according to AIG’s complaint.
The Charlotte, North Carolina-based bank has yet to respond in court to AIG’s lawsuit, but has said the insurer should have been smart enough to understand what it was buying.
“AIG recklessly chased high yields and profits throughout the mortgage and structured financemarkets,” spokesman Larry DiRita said. “It is the very definition of an informed, seasoned investor, with losses solely attributable to its own excesses and errors.”
FULSOME DISCLOSURE?
Bank of America devotes plenty of space in its regulatory filings to mortgage litigation.
The bank suffered after buying Countrywide Financial Corp, the largest U.S. subprime lender, in 2008 for $2.5 billion. Litigation and loan losses linked to that deal have cost the bank more than $30 billion.
In its August 4 quarterly filing, Bank of America spent nearly 4,000 words on a footnote describing litigation and regulatory matters. The bank said it spent $2.3 billion on legal costs, not including external fees, during the period, and could be short on reserves for future legal liabilities by as much as $2.3 billion.
On June 29, Bank of America said it agreed to pay $8.5 billion to resolve what it said would be much of the litigation it faced over mortgage-backed securities, and set aside another $5.5 billion for future possible claims.
The agreement with 22 investors including the Federal Reserve Bank of New York, Blackrock Inc, Allianz SE’s Pimco and others, covered mortgages with $174 billion in unpaid principal balance. Still, many investors have challenged the planned payout and disclosures as inadequate.
On a conference call to discuss the agreement, Credit Suisse analyst Moshe Orenbuch asked for further explanation of securities litigation not covered by the deal.
“That will be an ongoing process,” Bank of America Chief Financial Officer Bruce Thompson replied. “And I think if you look at the disclosure and what we have out there, it is pretty fulsome.”
Many large U.S. banks offer limited disclosure about their potential future legal bills.
None of the six biggest U.S. banks have volunteered definitive estimates of future legal costs, exact numbers of lawsuits or the potential damages that plaintiffs seek.
In its most recent quarterly filing, for example, JPMorgan said it is facing more than 10,000 legal proceedings, and that it may have to pay about $5.1 billion more to resolve these claims than the sum it has set aside. What that sum is, it does not say. Citigroup and Wells Fargo have made similar disclosures.
Morgan Stanley has offered legal-loss estimates for a handful of cases, totaling $1.7 billion, while Goldman Sachs lowered its legal-loss estimate by $700 million last quarter to $2 billion, even though it also detailed a slew of new legal and regulatory matters.
Barclays analyst Roger Freeman describes such legal-loss estimates as little more than holding a finger to the wind.
“We do not believe that this represents the realistic expected value of legal liabilities,” he said of Goldman Sachs’ estimate.
Bank of America’s shares dropped 20.3 percent on August 8 when the AIG lawsuit was filed, though many other factors influenced bank stocks that day, including Standard & Poor’s downgrade of the United States.
Since that time, its stock recovered only after Buffett — whose Berkshire Hathaway has made several investments in financial firms since 2008 — expressed support with a $5 billion preferred stock investment.
On Monday, the bank said it sold about half its stake in China Construction Bank for $8.3 billion, which also boosted Bank of America’s shares.
But even with the extra capital, Bank of America is sure to face huge legal hurdles over the long term.
“I’m concerned about the litigation, obviously,” said University of Delaware’s Elson, who is also a Bank of America shareholder. “Until it happens, you just don’t know.” (Additional reporting by Jonathan Stempel, Joe Rauch and Ben Berkowitz. Editing by Robert MacMillan)
Comments »The Gladiators Cometh! Two Huge Ancient Roman Empire Discoveries
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Archaeologists have found a Roman British port near the fortress of Caerleon, just north of Newport, south Wales – the only known such port outside London.
This animated reconstruction shows how the fortress – constructed in AD74-75 – would have looked.
Soldiers would have arrived in numbers at the port, the furthest flung of all Roman outposts, from the Mediterranean to aid in the fight against fearsome and warlike Welsh tribes
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Archaeologists say they have located and excavated the ruins of a huge amphitheatre used to train gladiators east of Vienna, describing it as a “sensational discovery”.
They claim that the ruins found through ground radar measurements rival the Colosseum and the Ludus Magnus in Rome in their structure. The Ludus Magnus is the largest of the gladiatorial arenas in the Italian capital, while the Colosseum is the largest amphitheatre ever built in the Roman empire.
A statement on Tuesday from the Carnuntum archaeological park gave no details about when the find was located and excavated.
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HERE’S THAT VIDEO OF A CAR BEING SWEPT AWAY IN VERMONT BY HURRICANE IRENE
[youtube:http://www.youtube.com/watch?v=8aHA7w9b1XI&feature=youtu.be 550 412]
Comments »SEC Settles with Former Beazer CEO
The Securities and Exchange Commission on Tuesday announced it had cut a deal with the former chief financial officer of Beazer Homes USA that will have him reimburse the firm his bonus compensation and stock sale profits from a time when the homebuilder was committing accounting fraud.
While James O’Leary is not personally charged with misconduct, he will be required to give back more than $1.4 million he received “after Beazer filed fraudulent financial statements during fiscal year 2006,” the SEC said. Regulators had earlier reached settlements with the company and its former chief executive, Ian McCarthy.
Litigation against former Beazer chief accounting officer Michael Rand, who the SEC alleges perpetrated the fraud, is ongoing.
Read more: http://www.foxbusiness.com/2011/08/30/sec-settles-with-former-beazer-cfo/#ixzz1WYGy2Bym
Comments »BEARSHITTER ENERGY! Scientists Turn to Panda Poop for Alternative Fuel
The waste of one of the world’s most endangered animals may hold the key to producing biofuels. The potency of the discovery had scientists talking about it at a major chemistry conference in Denver on Monday.
CBS4′s Kathy Walsh was at the national meeting of the American Chemical Society for all the fuss about panda feces. It turns out panda droppings could solve one of the major hurdles to producing biofuels.
They are adorable and endangered. Every giant panda birth is a worldwide wonder.
“It’s probably the most pleasant fecal material to actually work with,” Dr. Ashli Brown said.
Brown and grad student Candace Williams discovered something amazing in panda excrement. They analyzed the fresh feces of bamboo-eating pandas at the Memphis Zoo. They found microbes in panda droppings break down super-tough plant materials — grasses, corn stalks and wood chips.
“Once you have the bacteria you can grow them outside of the intestinal track of the panda,” Brown said.
Comments »FLASH: IRAN AND ISRAEL MADDOGGING EACH OTHER
Military sources tell AP Israeli Navy sent additional warships to maritime border with Egypt following intelligence indicating viable terror threat. Meanwhile, Iran set to send 15th fleet to area as well as ‘to thwart pirate activity’
Comments »Michigan looks to avoid defense R&D cuts
Comments »Michigan’s $385-billion defense contracting industry — the 10th-largest in the country — likely will be spared a direct hit when the newly formed Joint Selection Committee on Deficit Reduction begins targeting potential cuts in the federal budget in September, said key federal lawmakers.
Cuts will come first to U.S. bases abroad, said U.S. Sen. Carl Levin, D-Mich., who chairs the Senate Armed Services Committee. The last to be cut will be research and development of weapons and other equipment aimed at the post-Afghan war military. And R&D is one of the biggest items Michigan sells to the defense industry, especially with the Army’s key research and development arms located here.
“The focus is going to be on a new ground combat vehicle with new technologies on it, and that’s where our great strength is,” Levin said.
Defense, homeland security and related businesses comprise one of the few growth areas in Michigan’s economy.
“There’s always going to be a percent of the budget spent on defense and homeland security,” said U.S. Rep. Candice Miller, a Harrison Township Republican. “It’s not as though border security is going to go away. If anything, we are going to continue to ratchet it up.”
Metro Detroit remains the worst housing market in nation
Comments »Metro Detroit home prices were down 6.6% annually through June, as the region continues to struggle in its position as America’s weakest market, according to the S&P/Case-Shiller indices.
Yet, prices gained a seasonal boost, rising 2.2% in June as compared to May data for the metro area, according to the data released today.
While the rest of the country returned to 2003 home pricing levels, metro Detroit and Las Vegas are the only two major metropolitan areas where prices were at pre-2000 levels.
The seasonal rise should “wear off in the fall” and prices will likely drop again as demand wanes, said Patrick Newport, U.S. economist with IHS Global Insight.
Newport said in a statement that seasonally adjusted prices were down in 11 cities.
“Detroit, where prices have dropped nearly 50% since peaking in late 2005, remains, by far, the weakest market,” he said. “Detroit avoided a big run-up in housing prices during the boom years, but was hit hard by the recession.”
Libyan freedom fighters demand Qaddafi forces surrender
Comments »TRIPOLI, Libya – Libyan rebels pledged Tuesday to launch an assault within days on Muammar Qaddafi’s hometown, the ousted strongman’s last major bastion of support.
The rebels and NATO said that Qaddafi loyalists were negotiating the fate of Sirte, a heavily militarized city some 250 miles east of the capital, Tripoli.
Mustafa Abdel Jalil, the head of the rebels’ National Transitional Council, said that negotiations with forces in Sirte would end Saturday after the Muslim holiday of Eid al-Fitr, when the rebels would “act decisively and militarily.”
We can’t wait more than that,” he told reporters in the eastern city of Benghazi. “We seek and support any efforts to enter these places peacefully. At the end, it might be decided militarily. I hope it will not be the case.”
Col. Roland Lavoie, a NATO spokesman, said it’s possible Sirte might surrender without a fight.
Justice department restructures after Operation F&F
Comments »Acting ATF Director Kenneth Melson has been reassigned to a lesser post in the Justice Department and the U.S. attorney for Arizona was also pushed out Tuesday as fallout from Operation Fast and Furious reached new heights.
Melson’s step down from his role as head of the Bureau of Alcohol, Tobacco, Firearms and Explosives to the position of senior adviser on forensic science in the Department of Justice’s Office of Legal Programs is effective by close of business Tuesday, administration officials announced. U.S. Attorney for the District of Minnesota B. Todd Jones will replace Melson.
U.S. Attorney for Arizona Dennis Burke, one of the officials closely tied to Fast and Furious, is also a casualty in a shakeup tied to the botched gun-running program. Burke was on the hot seat last week with congressional investigators and, according to several sources, got physically sick during questioning and could not finish his session.
The purge of those responsible for the firearms trafficking scandal continued as new documents reveal a deeper involvement of federal agencies beyond ATF.
In Phoenix, Assistant U.S. Attorney Emory Hurley, who oversaw Fast and Furious on a day-to-day basis, was reassigned from the criminal to civil division. Also in Phoenix, three out of the four whistleblowers involved in the case have been reassigned to new positions outside Arizona. Two are headed to Florida, one to South Carolina.
Cameco Corp. goes forward with offer to acquire Hathor
Comments »SASKATOON, SASKATCHEWAN–(Marketwire -08/30/11)- ALL AMOUNTS ARE STATED IN CDN $ (UNLESS NOTED)
Cameco (TSX: CCO.TO – News) (NYSE: CCJ – News) today announced that it has commenced its offer to acquire all of the outstanding shares of Hathor Exploration Ltd. (TSX: HAT.TO – News) for cash consideration of $3.75 per share in a transaction which values the fully diluted share capital of Hathor at approximately $520 million(1) (the “Offer”).
Bill Gross says he feels like a jackass – basically
Comments »Treasuries rose before a report that economists said will show U.S. residential real-estate prices dropped. Bill Gross, who runs the world’s largest bond fund, said it was a mistake to cut his Treasury holdings.
U.S. government debt has returned 2.58 percent in August, the most since December 2008, Bank of America Merrill Lynch data show. Pacific Investment Management Co.’s Gross said in a Financial Times interview that it had been a “mistake to bet so heavily against the price of U.S. government debt.” Treasuries slid yesterday after Federal Reserve Chairman Ben S. Bernanke said last week the economy isn’t weak enough to warrant immediate stimulus.
“Watching the data continues to confirm this dip is going to lead to at least a quarter of negative growth,” said Peter Chatwell, a fixed-income strategist at Credit Agricole Corporate & Investment Bank in London. “Then I think the market will be happy to assume that some further stimulus from the Fed does indeed come its way, and that will be bond supportive, particularly the long end.”
Benchmark 10-year yield dropped four basis points to 2.22 percent at 10:29 a.m. in London, according to Bloomberg Bond Trader prices. The 2.125 percent note maturing in August 2021 rose 3/8, or $3.75 per $1,000 face amount, to 99 6/32.
The rate has fallen 57 basis points, or 0.57 percentage point, since July 29.
Home prices rise in U.S. cities for 3rd month
Comments »WASHINGTON (AP) — Spring buying pushed home prices up for a third straight month in most major U.S. cities in June. But the housing market remains shaky, and further price declines are expected this year.
The Standard & Poor’s/Case-Shiller home-price index shows prices increased in June from May in 19 of the 20 cities tracked. A separate figure shows prices rose 3.6 percent in the April-June quarter from the previous quarter. Those numbers aren’t adjusted for seasonal factors.
Over the past 12 months, home prices have declined in all 20 cities after adjusting for seasonal factors.
Chicago, Minneapolis Washington and Boston posted the biggest monthly increases. Metro areas hit hardest by the housing crisis, including Las Vegas and Phoenix, reported small seasonal increases.
Private Equity Wannabes Charged in $22 Million Ponzi Scheme
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The Securities and Exchange Commission sued two Florida men, claiming that they had defrauded teachers and retirees in a $22 million Ponzi scheme by posing as a private equity fund while enriching themselves.
The two, James D. Risher and Daniel Sebastian, fraudulently lured more than 100 investors with promises of annual returns of as much as 124 percent, the S.E.C. said Monday in a lawsuit filed in United States District Court in Florida. Mr. Risher, who spent 11 of the last 21 years in jail, used customers’ funds on jewelry, gifts and real estate in North Carolina and Florida, the S.E.C. said.
“Risher, who masqueraded as a highly successful equity trader, teamed up with Sebastian to tout sophisticated trading strategies they claimed would generate substantial profits,” Eric Bustillo, head of the S.E.C.’s regional office in Miami, said in a statement. “Instead, Risher and Sebastian used investors’ life savings and retirement nest eggs to line their own pockets.”
Mr. Sebastian attracted clients from his previous job as an insurance broker, persuading at least one investor to liquidate an annuity and invest the proceeds in the fund, according to the S.E.C. The two men paid themselves millions of dollars in fees and sent customers false account statements, the S.E.C. said.
Burton Wiand, Mr. Sebastian’s lawyer, said in a telephone interview that his client had been “deceived” by Mr. Risher and voluntarily reported the scheme to the S.E.C. and criminal authorities once it became evident to him. Mr. Sebastian has since cooperated with government officials as well as lawyers representing former clients, Mr. Wiand said.
Mr. Risher was indicted on related criminal charges June 29. A phone call to Adam Allen, a public defender who has represented Mr. Risher in the criminal matter, was not immediately returned.
Comments »U.S. Futures Flat-to-Slightly-Down
Off 0.11% now. Click here to follow.
Comments »Trichet Decides to be Less of an Idiot About “Inflation” Risks as Europe Deflates
European Central Bank President Jean-Claude Trichet said the bank is reviewing its assessment of inflation risks after growth in the 17-nation euro area slowed.
“Risks to the medium-term outlook for price developments are under study in the context of the ECB staff projections that will be released early September,” Trichet told the European Parliament’s economic committee in Brussels today. The comment contrasts with Trichet’s last policy statement on Aug. 4, when he said risks to the inflation outlook were “on the upside.”
A switch in the ECB’s language on price risks may herald a change in its policy stance. The central bank, which has raised its benchmark interest rate twice this year to 1.5 percent, is unlikely to increase it again until 2013, Citigroup Inc. economists said last week.
“The ECB is preparing the ground for no further rate increases,” said Alexander Krueger, head of capital market analysis at Bankhaus Lampe KG in Dusseldorf. “Against the background of the sovereign debt crisis and an easing of the inflation situation, I can’t imagine them raising rates.”
Euro-area growth slowed to 0.2 percent in the second quarter from 0.8 percent in the first — with the German economy almost grinding to a halt — as Europe’s debt crisis roiled financial markets and weighed on confidence.
Growth, Inflation
European Union Economic and Monetary Affairs Commissioner Olli Rehn, speaking to the same parliamentary panel today, indicated the EU may lower its growth forecasts when it issues new projections on Sept. 15, saying it is “seriously concerned” about financial turbulence spilling over into the broader economy.
“All in all, the short-term growth prospects have somewhat worsened compared to our spring forecast,” he said. In May, the EU projected gross domestic product would grow 1.6 percent in the euro area this year and 1.8 percent in 2012.
“Inflationary risks, which were already low before this summer’s turmoil, now seem irrelevant,” said Marie Diron, an economist at Oxford Economics in London. “In this context, the ECB needs to make it clear that the outlook has changed and that it is adjusting policy accordingly.”
German inflation slowed more than economists forecast in August, with the rate dropping to 2.4 percent from 2.6 percent, a report showed today.
Expectations
Trichet said euro-area inflation, currently at 2.5 percent, will stay above the ECB’s 2 percent ceiling “for some months” and policy makers are determined to ensure that price expectations remain contained.
ECB council member Ewald Nowotny said in an interview published Aug. 27 that he sees no upward pressure on inflation expectations.
In June, the ECB forecast inflation would average 2.6 percent this year and 1.7 percent in 2012. It predicted economic growth would slow to 1.7 percent next year from 1.9 percent in 2011. The central bank updates its projections every three months.
“Looking ahead, we continue to see the euro-area economy growing at a modest pace in a context of overall relatively sound economic fundamentals for the euro area as a whole,” Trichet said. “At the same time, not least because of the recently re-emerged tensions in financial markets, uncertainty remains particularly high.”
Bond Purchases
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Trichet defended the ECB’s purchases of government bonds on the secondary market, saying they are aimed at restoring the transmission of monetary policy and are not a substitute for fiscal discipline.
The ECB was forced to start buying Italian and Spanish securities on Aug. 8 after politicians failed to convince investors they could contain the region’s debt crisis.
The bank said today it settled 6.65 billion euros ($9.7 billion) of purchases in the week through Aug. 26, down from 14.3 billion euros in the previous week and a record 22 billion euros the week before that.
Comments »ENRON WINS AGAIN! KEN LAY WINS COURT CASE FROM THE GRAVE
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The U.S. Tax Court ruled in favor of deceased Enron Corp. Chief Executive Officer Kenneth Lay, rejecting a bid by the Internal Revenue Service to collect $3.9 million from his estate and his wife.
The case was related to transactions among Lay, his wife, Linda, and Enron that were executed on Sept. 21, 2001. The Lays sold $10 million in annuities to Enron as part of an agreement for him to retake the CEO position, under the stipulation that the annuities would be returned to him if he worked a 4.25-year term. The company didn’t survive that long, and it filed for bankruptcy protection in December 2001.
The IRS contested the Lays’ contention that the annuities were sold to Enron, according to the Tax Court decision by Judge Joseph Goeke. In 2009, the IRS filed a notice of tax deficiency for $3.9 million, arguing that the Lays should have reported the $10 million as income in 2001. Instead, they reported that they sold the annuities to Enron at their cost basis for no gain.
Goeke said in the decision that the agency’s position was incorrect and ruled for Linda Lay and for Kenneth Lay’s estate. The transactions, he wrote, were legitimate, and neither of the Lays nor the estate received any distributions or death benefit from the annuity.
“The benefits and risks of ownership of the annuity contracts were transferred to Enron in the annuities transaction,” he wrote. “The Lays, therefore, properly reported the transaction on their federal income tax return as a sale of the two annuity contracts.”
Lay’s Conviction
Lay, who died in 2006 at age 64, was convicted in May 2006 by a federal jury in Houston. He and the company’s former CEO, Jeffrey Skilling, were found guilty of deceiving shareholders about Enron’s financial condition by hiding debt and losses in a series of off balance-sheet entities.
More than 5,000 jobs and $1 billion in employee retirement funds were wiped out when the world’s largest energy trader plunged into bankruptcy in December 2001, following revelations of widespread accounting fraud.
Lay’s convictions were later thrown out because he didn’t have a chance to appeal the cases before he died.
Enron’s creditors, the government, Lay’s estate and Linda Lay have been involved in a variety of lawsuits since the company’s demise.
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