No prosecutions will take place in Britain in connection with the multibillion-dollar fraud carried out by Bernard Madoff.Investigators from the Serious Fraud Office have been investigating Madoff Securities International, the British arm of his operations. But it said no further action would be taken against the firm or its directors owing to insufficient evidence. Madoff, aged 71, is s
No prosecutions will take place in Britain in connection with the multibillion-dollar fraud carried out by Bernard Madoff.
Investigators from the Serious Fraud Office have been investigating Madoff Securities International, the British arm of his operations.
But it said no further action would be taken against the firm or its directors owing to insufficient evidence.
Madoff, aged 71, is s
Toyota Motors says its massive vehicle recall could cost it up to $2bn (£1.25bn) in lost output and sales.It is in the process of recalling millions of vehicles which are potentially prone to uncontrolled acceleration. It said the massive vehicle check might spread from the US and Europe to include the Middle East, Latin America and Africa. The company said 180,000 cars had been sold in those regions. The carmaker has identified eight models as potentially at risk, but stresses that very few are actually faulty.
Toyota Motors says its massive vehicle recall could cost it up to $2bn (£1.25bn) in lost output and sales.
It is in the process of recalling millions of vehicles which are potentially prone to uncontrolled acceleration.
It said the massive vehicle check might spread from the US and Europe to include the Middle East, Latin America and Africa.
The company said 180,000 cars had been sold in those regions.
The carmaker has identified eight models as potentially at risk, but stresses that very few are actually faulty.
The yuan needs to appreciate to reduce China's dependence on exports for growth, says the Organisation for Economic Co-operation and Development.The OECD argues that more exchange rate flexibility and targeting inflation would help economic stability in China. Its report also said the Chinese economy was weathering the global crisis "remarkably well". It grew by 8.7% in 2009, setting it on course to become the world's second-largest, leaving Japan in third place.
The yuan needs to appreciate to reduce China's dependence on exports for growth, says the Organisation for Economic Co-operation and Development.
The OECD argues that more exchange rate flexibility and targeting inflation would help economic stability in China.
Its report also said the Chinese economy was weathering the global crisis "remarkably well".
It grew by 8.7% in 2009, setting it on course to become the world's second-largest, leaving Japan in third place.
Shadow chancellor George Osborne has said he wants a "more solid" economy for Britain built on savings, enterprise and exports.He said the economy under Gordon Brown was "severely unbalanced" and growth driven by "public and private debt". Easyjet founder Stelios Haji-Ioannou is among those backing a new Tory economic model, the shadow chancellor said. Meanwhile Mr Brown has denied the claim that Labour plans for the economy were not clear enough for the City.
Shadow chancellor George Osborne has said he wants a "more solid" economy for Britain built on savings, enterprise and exports.
He said the economy under Gordon Brown was "severely unbalanced" and growth driven by "public and private debt".
Easyjet founder Stelios Haji-Ioannou is among those backing a new Tory economic model, the shadow chancellor said.
Meanwhile Mr Brown has denied the claim that Labour plans for the economy were not clear enough for the City.
BP has reported a sharp drop in profits in 2009 as it grappled with cheaper energy prices and squeezed margins on refining.The oil company said underlying profits in the fourth quarter rose 70% on a year earlier to $4.4bn (£2.75bn), but that missed the City's forecasts. The year as a whole suffered a 45% fall in profits to $14bn.Still, BP sought to flag up a stronger-than-expected 4% rise in oil and gas production in 2009 thanks to the start-up of new projects, including the first full year of production from the Thunder Horse field in the US Gulf of Mexico.
BP has reported a sharp drop in profits in 2009 as it grappled with cheaper energy prices and squeezed margins on refining.
The oil company said underlying profits in the fourth quarter rose 70% on a year earlier to $4.4bn (£2.75bn), but that missed the City's forecasts. The year as a whole suffered a 45% fall in profits to $14bn.
Still, BP sought to flag up a stronger-than-expected 4% rise in oil and gas production in 2009 thanks to the start-up of new projects, including the first full year of production from the Thunder Horse field in the US Gulf of Mexico.
Reader's Digest in the UK was at risk of collapsing into administration today after a funding deal for its pension scheme failed.Negotiations between its embattled US parent group, Reader's Digest Association, and the UK pensions regulator appeared to have broken down over an agreement for the UK title's pension fund.The move is understood to leave the future of about 135 jobs hanging in the balance. There are 1,600 members of its pension scheme.
Reader's Digest in the UK was at risk of collapsing into administration today after a funding deal for its pension scheme failed.
Negotiations between its embattled US parent group, Reader's Digest Association, and the UK pensions regulator appeared to have broken down over an agreement for the UK title's pension fund.
The move is understood to leave the future of about 135 jobs hanging in the balance. There are 1,600 members of its pension scheme.
The Investment bank Goldman Sachs is facing a storm of criticism over reports its chief executive could pocket a bonus of up to $100m. Officials at Goldman Sachs say no decision has been made yet on how much compensation will be paid to its CEO after a year of record profits. The rumour, however, that Lloyd Blankfein might get a bonus of as much as $100m first surfaced last week at the annual shindig of the great and the good in global economics and business at Davos, Switzerland. Goldman Sachs is sensitive to criticism about how much it pays staff. All its London-based partners have agreed to limit their pay to £1 million (about $150m) after a levy was imposed on them by the UK government. Last month Goldman announced that only 35.8 per cent of its revenue for 2009 would be paid out to staff, down from 48 per cent in 2008.
The Investment bank Goldman Sachs is facing a storm of criticism over reports its chief executive could pocket a bonus of up to $100m.
Officials at Goldman Sachs say no decision has been made yet on how much compensation will be paid to its CEO after a year of record profits. The rumour, however, that Lloyd Blankfein might get a bonus of as much as $100m first surfaced last week at the annual shindig of the great and the good in global economics and business at Davos, Switzerland. Goldman Sachs is sensitive to criticism about how much it pays staff. All its London-based partners have agreed to limit their pay to £1 million (about $150m) after a levy was imposed on them by the UK government. Last month Goldman announced that only 35.8 per cent of its revenue for 2009 would be paid out to staff, down from 48 per cent in 2008.
Small firms have been hard hit by the economic crisis, and so must be given incentives and support, including easier access to credit, help with innovation, tax breaks and less red tape, MEPs on Parliament's Special Committee on the Financial, Economic and Social Crisis (CRIS), and experts agreed at a workshop on Monday. Small and medium-sized enterprises (SMEs), "represent the backbone of the European economy, provide most jobs and are the most creative. They therefore contribute considerably to the EU's success", declared Special Committee Chairman Wolf Klinz (ALDE, DE), opening the workshop on the impact of the crisis on SMEs. ... In Europe, greater freedom to "hire and fire", which Mr Braunerhjelm listed as a worthwhile labour market measure, is "almost the F-word (...) it is an American model," said Olle Schmidt (ALDE, SE). "We don't need to copy the US system", but we do need a "system that enables restructuring", replied Mr Braunerhjelm.
Small and medium-sized enterprises (SMEs), "represent the backbone of the European economy, provide most jobs and are the most creative. They therefore contribute considerably to the EU's success", declared Special Committee Chairman Wolf Klinz (ALDE, DE), opening the workshop on the impact of the crisis on SMEs.
...
In Europe, greater freedom to "hire and fire", which Mr Braunerhjelm listed as a worthwhile labour market measure, is "almost the F-word (...) it is an American model," said Olle Schmidt (ALDE, SE). "We don't need to copy the US system", but we do need a "system that enables restructuring", replied Mr Braunerhjelm.
Commission clears acquisition of Pisto Group by Macquarie Funds and Antin IP The European Commission has granted clearance under the EU Merger Regulation to the acquisition of joint control of Macquarie Strategic Storage Facilities Holdings S.a.r.l. (MSSFH) of Luxembourg and its subsidiaries (together The Pisto Group) of France by Macquarie Funds and Antin Infrastructure Partners (Antin IP), also of France. Macquarie Funds is active in financial and infrastructure investment activities. Antin IP is an infrastructure investment fund sponsored by BNP Paribas, a French-based provider of banking and financial services. The Pisto Group is active in the oil products storage sector. The operation was examined under the simplified merger review procedure.
The European Commission has granted clearance under the EU Merger Regulation to the acquisition of joint control of Macquarie Strategic Storage Facilities Holdings S.a.r.l. (MSSFH) of Luxembourg and its subsidiaries (together The Pisto Group) of France by Macquarie Funds and Antin Infrastructure Partners (Antin IP), also of France. Macquarie Funds is active in financial and infrastructure investment activities. Antin IP is an infrastructure investment fund sponsored by BNP Paribas, a French-based provider of banking and financial services. The Pisto Group is active in the oil products storage sector. The operation was examined under the simplified merger review procedure.
In December 2009 compared with December 2008, industrial producer prices fell by 2.9% in the euro area and by 1.7% in the EU27 . The average industrial producer price index for 2009, compared with 2008, decreased by 5.1% in the euro area and by 4.3% in the EU27 . These figures come from Eurostat, the statistical office of the European Union .
The average industrial producer price index for 2009, compared with 2008, decreased by 5.1% in the euro area and by 4.3% in the EU27 .
These figures come from Eurostat, the statistical office of the European Union .
The Set-up--"The Court is Now in Session, the honorable Judge Peck presiding." ...Our friends at HousingWire report that a federal bankruptcy judge in New York sitting on the Lehman Brothers bankruptcy, has voided the seniority claims of holders of various qualified investment contracts, ruling that their ipso facto clauses which subordinated other claims to their own were "null and void in bankruptcy." This is an important victory for fans of equal protection and due process, and a big setback for the OTC derivative dealer banks which exert considerable influence at the Fed and OCC. We have always held the view that the attempts by the large dealer banks, ISDA and regulators to carve out a special, privileged place in the law for OTC derivatives contracts in the event of default is inherently unfair and is doomed to failure, or at least would be challenged, on Constitutional grounds. This case and others make that challenge and review process a reality and also leaves much of the world of complex structured finance in a shambles when it comes to the legal reality of counterparty risk. Indeed, the same legal art that gave the swap counterparties in this latest case the impression that they were senior to the other creditors of the bankruptcy estate was used by former Treasury Secretary Hank Paulson and his successor, Timothy Geithner, to justify the rescue of American International Group. The very same type of investment contracts that Secretary Paulson and Secretary Geithner swore under oath, over and over again, just had to be paid at par in the case if AIG were just set aside by New York Bankruptcy Judge James Peck. And notice that the world has not ended when the holders of OTC contracts are treated like everyone else. Indeed, Judge Peck has made a number of rulings over the past two years re-leveling the playing field between holders of OTC contracts and other claims against the Lehman bankruptcy estate. As we have noted before, the admirable conduct of the Lehman Brothers bankruptcy case by Judge Peck and US Bankruptcy Trustee Harvey Miller is the starkest condemnation possible of the AIG bailout, a hideous political contrivance that ranks with the great acts of political corruption and thievery in the history of the United States.
...Our friends at HousingWire report that a federal bankruptcy judge in New York sitting on the Lehman Brothers bankruptcy, has voided the seniority claims of holders of various qualified investment contracts, ruling that their ipso facto clauses which subordinated other claims to their own were "null and void in bankruptcy." This is an important victory for fans of equal protection and due process, and a big setback for the OTC derivative dealer banks which exert considerable influence at the Fed and OCC.
We have always held the view that the attempts by the large dealer banks, ISDA and regulators to carve out a special, privileged place in the law for OTC derivatives contracts in the event of default is inherently unfair and is doomed to failure, or at least would be challenged, on Constitutional grounds. This case and others make that challenge and review process a reality and also leaves much of the world of complex structured finance in a shambles when it comes to the legal reality of counterparty risk.
Indeed, the same legal art that gave the swap counterparties in this latest case the impression that they were senior to the other creditors of the bankruptcy estate was used by former Treasury Secretary Hank Paulson and his successor, Timothy Geithner, to justify the rescue of American International Group. The very same type of investment contracts that Secretary Paulson and Secretary Geithner swore under oath, over and over again, just had to be paid at par in the case if AIG were just set aside by New York Bankruptcy Judge James Peck.
And notice that the world has not ended when the holders of OTC contracts are treated like everyone else. Indeed, Judge Peck has made a number of rulings over the past two years re-leveling the playing field between holders of OTC contracts and other claims against the Lehman bankruptcy estate. As we have noted before, the admirable conduct of the Lehman Brothers bankruptcy case by Judge Peck and US Bankruptcy Trustee Harvey Miller is the starkest condemnation possible of the AIG bailout, a hideous political contrivance that ranks with the great acts of political corruption and thievery in the history of the United States.
All by itself this is great news. The big banks can buy favorable laws, but they can't make them constitutional. (Have to wait for the SCOTUS to do that. :-/ But even John Roberts may fear to tread on the Leahman Bankruptcy proceeding. If he does, the lawyers could end up owning the economy instead of the bankers.) So what will be the wider effects of this ruling?
Ruling to be the dance music for the Zombie Ball The question of the enforceability of the documentation in a complex structured securitization involving OTC swaps is not just a matter of debate in the AIG case. Across the US and around the world, investors and trustees are grappling with this same issue. The result is litigation by bond trustees against bond issuers as well as claims by guarantors such as MBIA (MBI) and the housing GSEs, including the Federal Home Loan Banks, against sponsor banks. Many of these claims regarding derivatives are being made in the context of claims for the repurchase of defaulted residential and commercial loans. The wave of loan repurchase demands on securitization sponsors is the next area of fun in the zombie dance party, namely the part where different zombies start to eat one another. The GSE's are going to tear 50-100bp easy out of the flesh of the banking industry in the form of loan returns on trillions of dollars in exposure, this as charge-offs on the several trillion in residential exposure covered by the GSEs heads north of 5%. The damage here is in the hundreds of billions and lands in particular on the larger zombie banks, especially Bank of America (BAC) and Wells Fargo (WFC). (My bold)
The question of the enforceability of the documentation in a complex structured securitization involving OTC swaps is not just a matter of debate in the AIG case. Across the US and around the world, investors and trustees are grappling with this same issue. The result is litigation by bond trustees against bond issuers as well as claims by guarantors such as MBIA (MBI) and the housing GSEs, including the Federal Home Loan Banks, against sponsor banks. Many of these claims regarding derivatives are being made in the context of claims for the repurchase of defaulted residential and commercial loans.
The wave of loan repurchase demands on securitization sponsors is the next area of fun in the zombie dance party, namely the part where different zombies start to eat one another. The GSE's are going to tear 50-100bp easy out of the flesh of the banking industry in the form of loan returns on trillions of dollars in exposure, this as charge-offs on the several trillion in residential exposure covered by the GSEs heads north of 5%. The damage here is in the hundreds of billions and lands in particular on the larger zombie banks, especially Bank of America (BAC) and Wells Fargo (WFC). (My bold)
Aww, just when Hank and Tim and Ben get Humpty together again and back up on the wall and pull off the TARP--now this. Who could have known? Wait! Didn't I recently predict that the Zombies would soon turn to canabilism?
What harm could these zombies possibly do? To put the growing combat in the loan repurchase channel into perspective, keen analysts will already know that a new item has appeared in the disclosure for non-interest income by many larger banks that have been active in the securitization markets. In the case of WFC in Q4 2009, gross income of $1.2 billion in mortgage loan originations was net of $316 million in loss reserves for loan repurchases. Imagine if we add a zero to the loss allocation, then another, and you get to the worst-case exposure on OBS loan repurchases. Watch this heretofore obscure part of the mortgage banking business become downright material in coming quarters as a race of sorts develops between banks that want to restart the securitization markets and those that are being dragged under water by the weight of legacy liabilities. Notice, for instance, that in the MBI litigation against Countrywide Financial et al, MBIA Insurance Corporation v. Countrywide Home Loans, Inc. et al. that now includes BAC explicitly. The action "arises out of the alleged fraudulent acts and breaches of contract of Countrywide in connection with fifteen securitizations of pools of residential second-lien mortgages" Take particular care to savor the fact that these are second lien pools and that, where defaults have occurred on the primary mortgage, loss severities on the seconds will tend to be 100%. Or the cost could be more than par if you count the cost of remediation and recovery efforts. With private issuers trying to find a workable formulation for new securitizations, the mounting litigation in the secondary market for structured deals comes at a bad time for efforts to revive the patient and confirms our worry that there is a lot of tough work ahead in the loss mitigation channel. More, we worry that the level of claims and defaults now visible in the US markets is just a taste of the high tide we could see in 2010-2011, especially as and when interest rates start to rise even modestly. Did somebody say "interest rates?" (My bold)
To put the growing combat in the loan repurchase channel into perspective, keen analysts will already know that a new item has appeared in the disclosure for non-interest income by many larger banks that have been active in the securitization markets. In the case of WFC in Q4 2009, gross income of $1.2 billion in mortgage loan originations was net of $316 million in loss reserves for loan repurchases. Imagine if we add a zero to the loss allocation, then another, and you get to the worst-case exposure on OBS loan repurchases.
Watch this heretofore obscure part of the mortgage banking business become downright material in coming quarters as a race of sorts develops between banks that want to restart the securitization markets and those that are being dragged under water by the weight of legacy liabilities. Notice, for instance, that in the MBI litigation against Countrywide Financial et al, MBIA Insurance Corporation v. Countrywide Home Loans, Inc. et al. that now includes BAC explicitly.
The action "arises out of the alleged fraudulent acts and breaches of contract of Countrywide in connection with fifteen securitizations of pools of residential second-lien mortgages" Take particular care to savor the fact that these are second lien pools and that, where defaults have occurred on the primary mortgage, loss severities on the seconds will tend to be 100%. Or the cost could be more than par if you count the cost of remediation and recovery efforts.
With private issuers trying to find a workable formulation for new securitizations, the mounting litigation in the secondary market for structured deals comes at a bad time for efforts to revive the patient and confirms our worry that there is a lot of tough work ahead in the loss mitigation channel. More, we worry that the level of claims and defaults now visible in the US markets is just a taste of the high tide we could see in 2010-2011, especially as and when interest rates start to rise even modestly. Did somebody say "interest rates?" (My bold)
There was a time when interest rates reflected risk.
Acronyms used: REO = Real Estate Owned (by lender after foreclosure) OTC = Over The Counter (Typically, unregistered two party transactions. Total unknown?) OCC = Office of Currency Controller - US Government. ISDA - International Swaps and Derivatives Association, Inc. = Global trade association for OTC derivatives MBIA Inc., headquartered in Armonk, New York is a holding company whose subsidiaries provide financial guarantee insurance, fixed-income asset management, and other specialized financial services. (Why I don't trust annuities.) GSE = Government Sponsored Enterprise - backed by the "full faith and credit of the US Government and People"? OBS = Off-balance-sheet, financing activity not on the company's balance sheet? As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
