German Court Expected to Approve ECB’s Bond Buying Policy

“Germany’s top court probably won’t intervene in the European Central Bank’s plan to buy bonds of crisis-torn countries, in line with previous cases involving the country’s integration with the European Union.

The ECB’s Outright Monetary Transactions program and the European Stability Mechanism will be reviewed by the Federal Constitutional Court in Karlsruhe at hearings this week. While the judges may voice doubts about the central bank’s plans, the court won’t stop it, said Christoph Ohler, a law professor at Jena University.

“It’s tough to say exactly how the court will handle this, but we can expect something close to the ’yes, but’ approach the judges have used before in European integration and euro-rescue operation cases,” said Ohler. “The court has never blocked anything on the European level, but in the ’strings-attached’ part unusual and surprising details can always pop up.”

The dispute will pit the ECB against Bundesbank President Jens Weidmann, who voted against the OMT, in a case that could underline the limitations the ECB faces in its crisis policy. The court last year allowed Germany to ratify the 500 billion-euro ($660 billion) ESM bailout facility and the EU fiscal pact while ruling the measures must include provisions that the country won’t be forced to assume higher liabilities without its consent.

The September ESM ruling was preliminary and didn’t cover the bond program. The plaintiffs, including an opposition political party and a lawmaker from Chancellor Angela Merkel’s CSU Bavarian sister party, can address the central bank and some remaining ESM issues at a two-day hearing that starts tomorrow.

Government Bonds…”

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“The U.K., defeated in a campaign to derail European Union curbs on banker bonuses, goes to the bloc’s top court tomorrow in a bid to overturn the powers of an EU agency to ban short selling.

Britain will argue at the Luxembourg-based EU Court of Justice that the European Securities and Markets Authority’s decision-making ability comes at the expense of national supervisors, in the latest skirmish against the EU’s growing powers over financial services.

“The Brits have a tradition of objecting to more power being given to the European Commission or EU agencies,” said Karel Lannoo, chief executive officer of the Centre for European Policy Studies in Brussels. If ESMA has been handed the powers to “avoid a bad functioning of the single market, then there’s nothing against this” in the bloc’s rules, he said.

Prime Minister David Cameron has promised to seek a new settlement with the EU, amid a rising tide of opposition that saw the U.K. Independence Party, which advocates a divorce from the bloc, gains seats in local elections last month. While Cameron has said he plans a referendum on EU membership by the end of 2017, this has failed to quell calls from members of his Conservative Party for Britain’s European destiny to be put to the people sooner.

Bonus Curbs…”

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“Italy’s economy shrank more than initially reported in the first quarter and French industrial confidence stalled in May, as the euro area struggled to emerge from a record-long recession.

Italian gross domestic product fell 0.6 percent from the previous three months, the Rome-based National Statistics Institute, said today, after a May 15 estimate of a 0.5 percent drop. A French index of sentiment among factory managers was unchanged at 94, while an index of service companies fell to 88 from 89, according to the Bank of France….”

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“Russia’s central bank left its main interest rates unchanged at Sergey Ignatiev’s final meeting as chairman, signaling that his successor Elvira Nabiullina may have grounds to cut once inflation begins to slow.

The refinancing rate will remain at 8.25 percent for a ninth month, the central bank in Moscow said in a statement on its website today. That matched the prediction of 22 of 26 economists in a Bloomberg survey, with four forecasting a quarter-point cut. Some longer-term borrowing costs were cut for a third month, with the key lending and deposit rates kept unchanged….”

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“China’s passenger-vehicle sales rose at a slower pace in May as consumer confidence waned amid signs that momentum for economic growth is slowing.

Wholesale deliveries of cars, multipurpose and sport utility vehicles increased 9 percent to 1.4 million units in May, according to the state-backed China Association of Automobile Manufacturers yesterday. That compares with growth of 13 percent in April and 13.3 percent in March.

The slowing auto-sales growth follows data showing average inventory levels at dealerships rose in April. Government reports yesterday showed trade, inflation and lending in May all trailed estimates, signaling weaker domestic demand that adds pressure on Premier Li Keqiang to shore up economic growth.

“Strong inventory building in the first four months of 2013 and a softer GDP in 2Q13 lead us to expect gradually slower sales growth for the rest of the year,” Ole Hui, a Hong Kong-based analyst with Mizuho Financial Group Inc. (8411), wrote in a research note on June 6.

Total sales of vehicles, including buses and trucks, gained 9.8 percent to 1.76 million units last month, the association said. Growth in motor vehicle output slowed to 15.7 percent year-on-year in May from 18.3 percent in April, National Bureau of Statistics data released yesterday showed.

Vehicle sales for the first half are expected to be between 10 million and 11 million units, CAAM Secretary General Dong Yang said at a briefing yesterday. He said there’s no overcapacity in China’s auto industry.

Three Decades…”

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“China’s new leaders face a test of their resolve to forgo short-term stimulus for slower, more-sustainable growth after May trade, inflation and lending data trailed estimates, signaling weaker global and domestic demand.

Industrial production rose a less-than-forecast 9.2 percent from a year earlier and factory-gate prices fell for a 15th month, National Bureau of Statistics data showed yesterday in Beijing. Export gains were at a 10-month low and imports dropped after a crackdown on fake trade invoices while fixed-asset investment growth moderated and new yuan loans declined….”

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“Japan’s economy grew more than the government initially estimated in the first quarter, helping Prime Minister Shinzo Abe to sustain confidence in his campaign to defeat deflation.

Gross domestic product expanded an annualized 4.1 percent, compared with a preliminary calculation of 3.5 percent, the Cabinet Office said in Tokyo today. Nominal GDP, which is unadjusted for changes in prices, rose 0.6 percent from the previous three months, leaving the economy 7 percent smaller than in the same period in 1997. Consumer confidence in May was at its highest level since 2007, a Cabinet Office survey showed….”

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“Asian stocks rose, with the regional benchmark index heading for the biggest rally in more than a week, after a report showed the U.S. added more workers than expected. Japanese shares surged after a three-week, $600 billion rout.

Japan’s Topix index jumped 5.2 percent, the most since March 2011, after the Government Pension Investment Fund, the world’s biggest manager of retirement savings, said on June 7 it will sell bonds to buy more equities. Toyota Motor Corp., the No. 1 global carmaker, gained 8.6 percent. Yue Yuen Industrial Holdings Ltd. (551), a shoemaker that gets 29 percent of its revenue in the U.S., rose 2.7 percent in Hong Kong. Sharp Corp. (6753) jumped 15 percent after Qualcomm Inc. agreed to a second purchase of the unprofitable Japanese TV maker’s shares….”

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World Markets

Currencies

Commodities

USD Libor

Euribor

Yields for Japan, Italy, Spain, France,  and Germany …

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[youtube://http://www.youtube.com/watch?v=Etm4dHdaApo 450 300]

[youtube://http://www.youtube.com/watch?v=7j5dG-KzGk8 450 300]

CIA’s ‘Facebook’ Program Dramatically Cut Agency’s Costs

“The Pentagon has been paying hundreds of millions of tax dollars a year to people and companies that don’t deserve it, but its financial management shortcomings are so severe that it’s made little progress in halting the errors or even measuring their magnitude, according to a report released by a Senate committee Thursday.

Although the Defense Department reported making over $1.1 billion in overpayments in fiscal year 2011 to military personnel and retirees, civilian defense workers, contractors, and others, investigators from the Government Accountability Office said that figure is not credible due to missing invoices and other flawed paperwork, as well as errors in arithmetic.

The Pentagon is required by law to ferret out programs susceptible to significant payment errors and then use statistical sampling to estimate the size of those errors, so that Congress can determine the size of the problem. But GAO found defense finance officials didn’t have procedures in place to collect and maintain the data they need to come up with a credible estimate.

Even when the department could find and document mistaken payments, it frequently did not take cost-effective steps to recover the money, the GAO said. The U.S. Army Corps of Engineers, for example, has spent $256,000 since 2009 on an automated overpayment-detection program that has recovered just one improper payment of $20.79, GAO said.

The Pentagon’s payment system is so weak that sometimes it doesn’t pay what’s owed.  By its own estimate, for example, the Pentagon made $238.2 million in overpayments and $48.4 million in underpayments related to travel alone during fiscal 2011, for a total of $286.6 million in incorrect payments.

But when pressed by GAO, defense finance officials were only able to identify $1.6 million, or less than 1 percent, of the program’s estimated overpayments as recoverable, explaining that they lacked supporting documentation for a significant portion of the total.

The Defense Department “is at risk of foregoing the detection and recovery of potentially substantial funds owed to the government,” the GAO report said….”

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“Last week saw a crazy full schedule of economic data accompanied by market volatility. This week has much quieter calendar.

“The first important data release does not arrive until Thursday, when we get May retail sales,” said Deutsche Bank’s Joe LaVorgna.

Talks of a “taper” have also been put off giving investors and traders a few days to gather their thoughts and reposition their portfolios before the news flow picks up again….”

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The Nikkei

The Story

“Two grim IRS agents travelled to Harv’s Metro Car Wash in Sacramento to hand him a demand-letter for his taxes owing in arrears: $0.04 worth.

Update: To be clear: it was $0.04 in unpaid tax that had accrued over $200 in penalties.

Arriving at Harv’s Metro Car Wash in midtown Wednesday afternoon were two dark-suited IRS agents demanding payment of delinquent taxes. “They were deadly serious, very aggressive, very condescending,” says Harv’s owner, Aaron Zeff…. “It’s hilarious,” he says, “that two people hopped in a car and came down here for just 4 cents. I think (the IRS) may have a problem with priorities.” …”

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“LOS ANGELES –  Five former elected officials of the small, blue-collar California city of Bell were convicted Wednesday of multiple counts of misappropriating public funds by paying themselves huge salaries while raising taxes on residents.

Former Mayor Oscar Hernandez and co-defendants Teresa Jacobo, George Mirabal, George Cole and Victor Belo were all convicted of multiple counts and acquitted of others.

Former Councilman Luis Artiga was cleared entirely.

The charges against the officials involved paying themselves inflated salaries of up to $100,000 a year in the city of 36,000 people, where one in four residents live below the poverty line.

An audit by the state controller’s office previously found the city had illegally raised property taxes, business license fees and other sources of revenue to pay the salaries. The office ordered the money repaid….”

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“Ray Cortopassi/Eyewitness News

Indianapolis – A call to the city’s SWAT team was the final move against one property owner who let his grass grow higher than a foot.

Specially trained officers were called out to the 9000 block of Harrison Run Drive as city crews tried to groom one unruly yard on the northeast side.

Harrison Run is a neighborhood well cared for. At home after home in this subdivision near 71st and Fall Creek Road, neighbors tend to their yards. That’s why one in particular stood out – or in this case, stood up.

“We’re talking about a foot and half tall,” said Luis Araoz, neighbor.

But the high grass produced more than just dandelions. Monday morning, it called out Metro’s SWAT team.

“This is a first for something I had to run up against,” said Lt. Jeff Duhamell, IMPD.

The city’s Office of Code of Enforcement responded after a notice of high grass and weeds went unheeded for at least five days. So it showed up with a mowing crew to do the job. But police say when contractor Dominique Thompson climbed up on the riding mower, he noticed the homeowner pointing a shotgun directly at him….”

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