Archive for October, 2010


The Food Crisis Of 2011

Source: Forbes

Every month, JPMorgan Chase dispatches a researcher to several supermarkets in Virginia. The task is to comparison shop for 31 items.

In July, the firm’s personal shopper came back with a stunning report: Wal-Mart had raised its prices 5.8% during the previous month. More significantly, its prices were approaching the levels of competing stores run by Kroger and Safeway. The “low-price leader” still holds its title, but by a noticeably slimmer margin.

Within this tale lie several lessons you can put to work to make money. And it’s best to get started soon, because if you think your grocery bill is already high, you ain’t seen nothing yet. In fact, we could be just one supply shock away from a full-blown food crisis that would make the price spikes of 2008 look like a happy memory.

Fact is,  the food crisis of 2008 never really went away.

True, food riots didn’t break out in poor countries during 2009 and warehouse stores like Costco didn’t ration 20-pound bags of rice…but supply remained tight.

Prices for basic foodstuffs like corn and wheat remain below their 2008 highs. But they’re a lot higher than they were before “the food crisis of 2008” took hold. Here’s what’s happened to some key farm commodities so far in 2010…

  • Corn: Up 63%
  • Wheat: Up 84%
  • Soybeans: Up 24%
  • Sugar: Up 55%

What was a slow and steady increase much of the year has gone into overdrive since late summer. Blame it on two factors…

  • Aug. 5: A failed wheat harvest prompted Russia to ban grain exports through the end of the year. Later in August, the ban was extended through the end of 2011. Drought has wrecked the harvest in Russia, Ukraine and Kazakhstan – home to a quarter of world production
  • Oct. 8: For a second month running, the Agriculture Department cut its forecast for US corn production. The USDA predicts a 3.4% decline from last year. Damage done by Midwestern floods in June was made worse by hot, dry weather in August.

Continue Reading…

Source: The Economic Collapse Blog

Did you ever think that things in America would get so bad that we would need to put armed guards into our unemployment offices?  Well, that is exactly what is happening in Indiana.  Armed security guards will now be posted at all 36 full-service unemployment offices in the state of Indiana.  So why is this happening now?  Well, Indiana Department of Workforce Development spokesman Marc Lotter says that the agency is bringing in the extra security in anticipation of an upcoming deadline when thousands upon thousands of Indiana residents could have their unemployment benefits cut off.  But it is not just the state of Indiana that could have a problem.  In fact, one recent study found that approximately 2 million Americans will lose their unemployment insurance benefits during this upcoming holiday season unless Congress authorizes another emergency extension of benefits by the end of November.  At this point, however, that is looking less and less likely.

So perhaps all the states will have to start putting armed security guards in their unemployment offices.  The truth is that frustration among unemployed Americans is growing by the day.

Could we soon see economic riots similar to what we have seen in Greece and France?

Let’s hope not.

The following is a video news report about the armed guards that are going into Indiana unemployment offices….

So could things really get out of hand when thousands of unemployed workers in Indiana find out that they aren’t going to get checks any longer?

Indiana Department of Workforce Development spokesman Marc Lotter makes it sound like that is very much on his mind….

“Given the upcoming expiration of the federal extensions and the increased stress on some of the unemployed, we thought added security would provide an extra level of protection for our employees and clients.”

So who is paying for all of this extra security?

The Feds of course.

The additional cost of the new security will be approximately $1 million, and it will be paid for with U.S. government funds designated for the administration of the unemployment system according to Lotter.

This is not a good trend.  As you go through your daily life, just start taking note of the places that now have armed security that did not have armed security five or ten years ago.

Unfortunately, as the U.S. economy goes downhill even further, the amount of security that people feel is “necessary” is likely to go up even more.

So is America going to become an armed camp where the people and institutions with money are protected by armed guards from the hordes of frustrated unemployed workers that can’t feed themselves or their families?

Americans are certainly not in a good mood about the economy.  According to a recent poll conducted by CNBC, 92 percent of Americans believe that the performance of the U.S. economy is either “fair” or “poor”.

The lack of jobs is the main thing that the American people are so mad about.  In fact, it is hard for even highly educated people to find work in 2010.  In America today, 317,000 waiters and waitresses have college degrees.

People are really hurting and they are getting to the end of their ropes.  Over 41 million Americans are now on food stamps, and one out of every six Americans is enrolled in at least one federal anti-poverty program.  It is getting hard to believe that this is even America anymore.  For many more statistics that reveal the economic horror we are now facing as a nation, please see my previous article entitled “30 Reasons Why People Should Be Getting Really Nervous About The State Of The U.S. Economy“.

But it is not just unemployment that is the problem.  In recent years, millions upon millions of Americans have been forced to take reduced hours or a cut in pay due to the economy.  Millions of others have had to take jobs that barely enable them to survive.  In fact, the number of Americans working part-time jobs “for economic reasons” is now the highest it has been in at least five decades.

So why aren’t there even close to enough jobs for everyone?  Well, there are a number of contributing factors, including the fact that we have been “offshoring” and “outsourcing” millions of our jobs and now it is really starting to catch up with us.  I have discussed this so many times now that I am starting to sound like a broken record.

But instead of fixing the fundamental problems with our economy, the Federal Reserve wants to print yet another gigantic pile of paper money and throw it at the problem.  It is called “quantitative easing“, and it may help smooth things over for a few months, but it is also going to make our long-term problems even worse.

Unfortunately, the Federal Reserve does not really seem concerned about protecting the value of the U.S. dollar at this point.  Not that they ever did, but it would be nice to see Fed officials paying at least some lip service to the dangers of inflation.

Instead, various Fed officials have been publicly making statements about the need for more quantitative easing for weeks.  Right now they seem desperate to put the American people back to work – even if it ends up crashing the value of the dollar.

But now even the IMF seems supportive of a dollar devaluation.  On Thursday, the IMF actually said that the U.S. dollar is “overvalued” and that adjustments need to be made.

We’ll see what the Fed decides to do next week.  Most analysts believe that they will announce a quantitative easing program of some sort or another.

But what have we come to as a nation when those who control our economy believe that the best solution to our economic problems is to print another big pile of paper money and chuck it into the system?

We’ve got an absolutely gigantic economic mess on our hands, and none of our “leaders” seem to have any idea about how to fix it.

Meanwhile, millions of unemployed Americans are just going to become more and more frustrated – especially when it gets to the point when they aren’t receiving unemployment checks anymore.

Source: ALLGOV

The U.S. Department of Justice has requested that a federal judge seal the courtroom of a trial involving computer code theft in order to protect trade secrets of Goldman Sachs.
Sergey Aleynikov was arrested by the FBI on charges of stealing computer code that supports Goldman’s high frequency trading system, which allows the bank to buy and sell stocks in a fraction of a second.
Goldman Sachs and others use “flash trading” to send out automated sell offers at higher and higher prices until one comes back with no buyer. The program then drops back to the highest acceptable price and sells at what the buyer set as his maximum limit. This allows Goldman to always obtain the best possible selling price, while the buyer loses the normal give and take of bargaining. In the case of large orders, such as those from pension funds or mutual funds, this can cost the buyers a small fortune.
Federal prosecutors have argued that the general public should not be allowed to observe the trial when details of Goldman’s trade secrets are discussed. They also asked that any documents related to Goldman’s trading strategies be sealed.
While it is common to protect proprietary corporate information during trials, the case of Aleynikov is unusual because it involves “secrets about a potentially lucrative trading system, rather than, say, ingredients in a soda formula,” wrote the Wall Street Journal.

Source: Marketwatch

An investor has accused J.P. Morgan Chase & Co. (JPM 37.60, +0.06, +0.16%) and HSBC Holdings Inc. (HBC 51.99, -0.29, -0.55%) of manipulating the price of silver futures, according to news reports Thursday. Two separate lawsuits filed in federal court in Manhattan Wednesday allege that the two banks manipulated silver futures by “amassing enormous short positions,” according to a report from Dow Jones Newswires. The Commodity Futures Trading Commission has been investigating allegations of price manipulation in the silver market since 2008

Source: Time

What is the most likely cause today of civil unrest? Immigration. Gay Marriage. Abortion. The Results of Election Day. The Mosque at Ground Zero. Nope.

Try the Federal Reserve. November 3rd is when the Federal Reserve’s next policy committee meeting ends, and if you thought this was just another boring money meeting you would be wrong. It could be the most important meeting in Fed history, maybe. The US central bank is expected to announce its next move to boost the faltering economic recovery. To say there has been considerable debate and anxiety among Fed watchers about what the central bank should do would be an understatement. Chairman Ben Bernanke has indicated in recent speeches that the central bank plans to try to drive down already low-interest rates by buying up long-term bonds. A number of people both inside the Fed and out believe this is the wrong move. But one website seems to believe that Ben’s plan might actually lead to armed conflict. Last week, the blog, Zerohedge wrote, paraphrasing a top economic forecaster David Rosenberg, that it believed the Fed’s plan is not only moronic, but “positions US society one step closer to civil war if not worse.” (See photos inside the world of Ben Bernanke)

I’m not sure what “if not worse,” is supposed to mean. But, with the Tea Party gaining followers, the idea of civil war over economic issues doesn’t seem that far-fetched these days. And Ron Paul definitely thinks the Fed should be ended. In TIME’s recent cover story on the militia movement many said these groups are powder kegs looking for a catalyst. So why not a Fed policy committee meeting. Still, I’m not convinced we are headed for Fedamageddon. That being said, the Fed’s early November meeting is an important one. Here’s why:

Usually, there is generally a consensus about what the Federal Reserve should do. When the economy is weak, the Fed cuts short-term interest rates to spur borrowing and economic activity. When the economy is strong and inflation is rising, it does the opposite. But nearly two years after the Fed cut short-term interest rates to basically zero, more and more economists are questioning whether the US central bank is making the right moves. The economy is still very weak and unemployment seems stubbornly stuck near 10%.

The problem is the Fed only directly sets short-term interest rates. And they are already about as close to zero as you can go. That’s why Ben Bernanke has been recently talking about something called “quantitative easing.” That’s when the Fed basically creates money to buy the long-term bonds that it doesn’t directly control, and drive down those interest rates as well. That should further reduce the cost of borrowing for large companies and homeowners. Some people are calling this “QE2” because the Fed made a similar move during the height of the financial crisis when it bought mortgage bonds. (See photos of the Tea Party movement)

Not everyone agrees this is a good move. In fact, a number of presidents of regional Fed banks, not all of which get to vote at Fed policy meetings, have recently come out against Bernanke’s plans. Some say it sets bad policy. Others think it will stoke inflation, which might be the point. Few, though, have warned of armed conflict. Here’s how Zerohedge justifies its prediction of why the Fed’s Nov. 3rd meeting will lead to violence:

In a very real sense, Bernanke is throwing Granny and Grandpa down the stairs – on purpose. He is literally threatening those at the lower end of the economic strata, along with all who are retired, with starvation and death, and in a just nation where the rule of law controlled instead of being abused by the kleptocrats he would be facing charges of Seditious Conspiracy, as his policies will inevitably lead to the destruction of our republic.

OK. The idea that Bernanke might kill large swaths of low-income neighborhoods or Florida by his plan to further lower interest rates is a little ridiculous. But there is a point in Zerohedge’s crazy. Lower rates do tend to favor borrowers over savers. And the largest borrowers in the country are banks, speculators and large corporations. The largest spenders in our country though tend to be individuals. Consumer spending makes up 70% of the economy. And the vast majority of consumers are on the low-end of the income scale. So I think it is a valid question to ask whether the Fed’s desire to drive down interest rates at all costs policy is working. Companies are already borrowing at low rates. They are just not spending. (Read a special report on the financial crisis blame game)

That being said, civil war, probably not. “It is a gross exaggeration,” says Allan Meltzer, who is a top Fed historian at Carnegie Mellon. “I cannot recall ever learning about riots or civil war even when the Fed made other mistakes.” When I called, David Rosenberg was traveling and couldn’t talk, but he did send me a quick e-mail to stress that he has never, ever suggested that any moves the Fed makes will lead to a militia uprising.

Some smart people, though, including Meltzer, it appears, and Rosenberg do think the path of quantitative easing that the Fed looks likely to embark on is the wrong move. John Taylor, a top Fed scholar at Stanford, says eventually you will have to pull the support out, and when you do a year from now when the economy is recovering he thinks it could be quite disruptive. So even if you don’t double dip now, you might double dip then. And even if you don’t it would make for a slow recovery. Others, such as Raghuram Rajan, who has became famous for warning about the possibility of a financial crisis back in 2005, believe low-interest rates could be creating new bubbles in say gold or commodities.

So it seems clear what the Fed is likely to do. How the economy, the militias and the rest of us react is up in the air. The count down is on. T minus 15 days to Fedamageddon. See you there, hopefully.

Source: AlterNet

Nearly a dozen major banks and hedge funds, anticipating quick profits from homeowners who fall behind on property taxes, are quietly plowing hundreds of millions of dollars into businesses that collect the debts, tack on escalating fees and threaten to foreclose on the homes of those who fail to pay.

The Wall Street investors, which include Bank of America and JPMorgan Chase & Co., have purchased from local governments the right to collect delinquent taxes on several hundred thousand properties, many in distressed housing markets, the Huffington Post Investigative Fund has found.

In many cases, the banks and hedge funds created new companies to do their bidding. They gave the companies obscure, even whimsical names and used post office boxes as their addresses, masking Wall Street’s dominant new role as a surrogate tax collector.

In exchange for paying overdue real estate taxes, the investors gain legal powers from local governments to collect the debt and levy fees. At first, property owners may owe little more than a few hundred dollars, only to find their bills soaring into the thousands. In some jurisdictions, the new Wall Street tax collectors also chase debtors over other small bills, such as for water, sewer and sidewalk repair.

Some states allow the investors to tack on as much as 18 percent interest and a passel of legal fees and other charges. When property owners fail to make full payment, the investors can sue to foreclose – in some states within as little as six months.

In June, Bank of America snatched up liens on properties in Florida owned by low-income residents and nonprofit public interest groups, including a Salvation Army shelter, a preschool and a wildlife rescue group involved in the Gulf of Mexico oil spill cleanup, the Investigative Fund found in its examination. Bank of America also bought liens on properties of the wealthy, including a professional basketball star with the Los Angeles Lakers, Lamar Odom.

Continue Reading…

Source: Bloomberg

Home to more foreclosures than 47 U.S. states, Florida sought to clear out its backlog with a system of special court hearings that dispensed with cases quickly, sometimes in less than a minute.

Homeowners like Nicole West now threaten to slow that system, Florida’s so-called rocket docket, to a crawl. West, who has been fighting to save her Jensen Beach house from foreclosure, has leveled a new allegation in her three-year battle: the entire process is based on fraud.

West said her case is rife with the kind of flawed mortgage documents that have caused lenders including Bank of America Corp. and JPMorgan Chase & Co. to stop the process of foreclosures and evictions across the country. The banks said they are investigating homeowner charges like West’s that signatures were forged and documents were backdated.

“It’s not right,” said West, 40, who lives about an hour’s drive north of West Palm Beach. “It’s like lying to the judge. It’s like lying about what’s really going on.”

The bank moratoriums are already thwarting the initiative by Florida officials to clear jammed court dockets. Now, efforts by homeowners such as West to bring claims of fraud to the attention of judges are further prolonging evictions, and in turn slowing purchases of foreclosed properties.

Third-Highest Rate

Florida has the third-highest foreclosure rate in the U.S. behind Nevada and Arizona. One in every 34 housing units — double the U.S. average — was in the foreclosure process or bank-owned as of Sept. 1, data vendor RealtyTrac Inc. said.

Florida’s legislature appropriated $9.6 million this year to pay semi-retired judges and case managers to clear the backlog of foreclosures. Some judges have been churning through cases at a rapid clip, such as those last week in Tampa who considered dozens of foreclosures per day, sometimes in as little as 30 seconds.

The goal is to clear 62 percent of the backlog by next July, according to Craig Waters, a spokesman for the Florida Supreme Court. J. Thomas McGrady, chief judge of Florida’s Sixth Judicial Circuit, said he once thought that was achievable. Now that Charlotte, North Carolina-based Bank of America, New York- based JPMorgan and Detroit-based Ally Financial Inc. have put the brakes on foreclosures or evictions to look for irregularities, he said he’s “very doubtful” his courts can resolve that many cases. The circuit, which covers the area around Clearwater and St. Petersburg, has a backlog of 33,000 foreclosure cases, he said.

More Backlog

“All of a sudden all of these issues pop up with the lenders,” McGrady said in an interview at his Clearwater office. “It’s going to slow down the whole process because there will be more backlog. We’re still getting 1,000 cases a month.”

At the Clearwater court, lenders as of yesterday had canceled more than half of the 84 hearings to approve foreclosures that were scheduled for today, according to Ron Stuart, a court spokesman. Half of the 110 hearings originally set to take place tomorrow were canceled as well.

Among the alleged defects the banks are examining are lender affidavits signed by people, often described as “robo signers,” who repeatedly failed to verify the accuracy of the information in the documents.

In December, an employee at Ally’s GMAC Mortgage unit said his team of 13 people signed about 10,000 documents a month without verifying their accuracy, according to a deposition taken in a foreclosure case filed in West Palm Beach.

False Affidavits

Ally has been accused of committing fraud by submitting hundreds of false affidavits in foreclosure cases, according to a lawsuit filed last week by Ohio Attorney General Richard Cordray. Ally said in a statement that it “believes there was nothing fraudulent or deceitful about its foreclosure practices.

Continue Reading…

Source: Business Insider

Turns out the reason for foreclosure gate isn’t that the people who caused foreclosure-gate didn’t have enough time to read all of the documents – it’s that they had no idea what they were reading.

Banks hired foreclosure and loan officers that were former employees of Burger King, factories, and hair salons when they were hit with a wave of foreclosures in 2007.

A piece in the New York Times today reveals that many of bank employees reading and signing foreclosure documents barely knew what a mortgage was.

You won’t believe the things these uneducated bank employees admitted.

“I don’t know the ins and outs of the loan,” a Goldman Sachs employee, who worked at Litton Loan Servicing, said in a deposition last year. “I’m not a loan officer.”

The kicker: he was a loan officer.

And some admitted they knew they were lying when they signed foreclosure documents, according to CTV News.

A former JPMorgan executive called these workers the “Burger King kids.” In essence they are employees who banks rushed to hire for their loan servicing arms starting in 2007 even though they had only a high school education, because the banks were faced with a startling rise in foreclosures and they were desperate for warm bodies to “read” the documents.

Of course since then, many of them have admitted they did not read foreclosure documents, hence the banks’ halting foreclosures and causing the scandal that has been termed “foreclosure-gate.”

Now we know that they did not have time to read the documents, because there were too many, and they weren’t qualified to read and sign the documents.

As the Canadian news network CTV puts it:

An avalanche of home foreclosures in 2007 required US financial institutions and their mortgage departments to hire hair stylists, retail workers and people who had worked on assembly lines to handle homeowners’ papers even though they did not have any formal training

Source: RawStory

Congress will pass a bill to “forgive” banks the potentially criminal errors made in foreclosure proceedings, a senior CNBC editor predicts.

In a blog column Friday, John Carney argues that lawmakers in DC won’t allow the country’s largest issuers of mortgages to suffer financial losses following revelations of numerous mishandled foreclosure proceedings, especially when bailing them out this time “won’t cost taxpayers a dime.”

Here’s what is going to happen: Congress will pass a law called something like “The Financial Modernization and Stability Act of 2010” that will retroactively grant mortgage pools the rights in the underlying mortgages that people are worried about. All the screwed up paperwork, lost notes, unassigned security interests will be forgiven by a legislative act….

The [foreclosure] crisis is not driven by economics. It is driven by legal rights. And there’s simply zero probability that the politicians in Washington are going to let Bank of America or Citigroup or JP Morgan Chase fail because of a legal issue.

Carney predicts that the lame-duck session of Congress following this November’s elections will pass the law. “Every member of Congress … who has been voted out of office will cast a vote for the bill. And the President will sign it.”

Major banks’ stocks have suffered losses this week as an increasingly large body of evidence has emerged suggesting that banks and their contractors may not have done the most basic vetting of foreclosure paperwork, instead using “robo-signers” to rubber-stamp whatever foreclosure applications were brought forward.

The Associated Press reported this week:

In an effort to rush through thousands of home foreclosures since 2007, financial institutions and their mortgage servicing departments hired hair stylists, Walmart floor workers and people who had worked on assembly lines and installed them in “foreclosure expert” jobs with no formal training, a Florida lawyer says.

In depositions released Tuesday, many of those workers testified that they barely knew what a mortgage was. Some couldn’t define the word “affidavit.” Others didn’t know what a complaint was, or even what was meant by personal property. Most troubling, several said they knew they were lying when they signed the foreclosure affidavits and that they agreed with the defense lawyers’ accusations about document fraud.

The result has been a steady stream of allegations of wrongly foreclosed homes. In one notorious incident last month, a Florida man who had bought his home for cash and carried no mortgage was stunned to find his home in foreclosure. In another incident, a woman who was behind on payments but not in foreclosure called 911 when she heard what she thought was a burglar, but was in fact a JPMorgan contractor coming to change the locks on her home.

In many instances, those shortcuts and mistakes may have violated laws. Attorneys general in all 50 states have now launched probes into foreclosure practices. Bank of America has halted foreclosure proceedings in all states, while Ally Financial (formerly GMAC), JPMorgan and others have announced partial suspensions.

Carney admits that, with outrage growing over unscrupulous foreclosure practices, a second bailout of banks would be politically unpopular.

“Will the public be outraged?” he writes. “Probably. Financial bloggers will scream from the high heavens against another bailout of the banksters. Congress may try to create some cost for banks in exchange for the forgiveness, perhaps requiring more mortgage modifications. But the much feared [foreclosure] apocalypse will be laid to rest.”

Source: AP

Countrywide Financial Corp. co-founder Angelo Mozilo and two other former executives have agreed to pay tens of millions of dollars to avoid a trial on civil fraud and insider trading charges, a federal judge said in court Friday.

Mozilo and the others were to face trial on the Securities and Exchange Commission’s charges next week.

Mozilo agreed to repay $45 million in ill-gotten profits and $22.5 million in civil penalties. Former Countrywide President David Sambol will repay $5 million in profits and pay $520,000 in civil penalties, and former Chief Financial Officer Eric P. Sieracki will pay $130,000 in civil penalties.

Sambol’s attorney Walter Brown said in a statement after the hearing that Bank of America Corp., which bought Countrywide in July 2008, would pay his client’s $5 million in ill-gotten profits.

The payment comes on top of $600 million that Bank of America agreed to pay in August to end a class-action case filed by former shareholders against Countrywide.

Mozilo lawyer David Siegel did not return a message asking whether the former countrywide chairman’s $45 million forfeiture would also be paid by the bank.

Messages left with Charlotte, N.C.-based Bank of America were not immediately returned.

Under the settlement, the three men did not admit wrongdoing.

“Mr. Sambol has agreed to settle the SEC lawsuit and put the matter behind him for the benefit of his family and loved ones,” Brown said in the statement.

Sieracki’s lawyer, Shirli Fabbri Weiss, said in a news release that all fraud-based claims against her client had been dropped and that his civil penalty was to settle negligence-based charges.

An SEC spokesman did not return a phone message.

The SEC accused the men of misleading shareholders about the quality of the loans on Countrywide’s books. The civil complaint also accused Mozilo of acting on his inside knowledge of the company’s precarious state when he sold shares between November 2006 and October 2007 ahead of its collapse, reaping more than $139 million.

Mozilo was not in court when the settlement was announced.

The former Countrywide chairman is the nation’s highest-profile defendant yet to face trial for risky business practices leading to the housing collapse that sent the country into recession.

In legal filings, regulators portrayed the three defendants as engaging in a single-minded pursuit of market dominance, even if it meant knowingly taking disastrous risks.

The company was a major player in the market for high-risk subprime mortgages and became the biggest U.S. mortgage lender overall before it spiraled into disaster when the mortgage meltdown hit.

The settlement talks involving Mozilo were disclosed after U.S. District Judge John F. Walter filed a notice Thursday for trial lawyers to attend a status conference Friday.

Countrywide’s lending practices are reportedly also the subject of a criminal probe in Los Angeles. Thom Mrozek, a spokesman for the U.S. attorney’s office, declined to comment about the situation.

Countrywide was based in Calabasas, Calif.

(This version CORRECTS that Sieracki’s lawyer said fraud charges were dropped and penalty was to settle negligence charges.)

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