A 8 years partial Government shutdown?

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| By Brianna Ebrahimi, Eric Pianin, the fiscal times

Sequestration is hardly the debt reduced. It exacerbated fiscal problems affect structure, national security and hinder the economic recovery.

Not long ago, the nation was pierced by $85 billion, looming, linear cuts of in public spending that President Obama and many others would predicted tank the economy, undermine defense and forcing drastic cutbacks of government programs and staff.

This automatic cuts or storage, are still chipping way spending on defense and national programmes with the Government, but they have a first largely by the Government shutdown and the threat of the shadow by default on the U.S. debt.

Widespread furloughs of Federal Republic forced workers to shut down the cuts, contracts required billions of dollars in reductions in Department of defense weapons and strong reduction of e government services and programs, to average Americans. The on State-funded programs assigned as lead, meals on wheels and residential consulting all the bite of sequestration have felt.

First announced last month, Department of health and human services provides for the head start program, that provides services such as meals, transportation, and medical care to low-income, preschool aged children, services for more than 57,000 children had cut. The $8 billion-budget for head start could already be reduced by 5.27 percent, and it will absorb probably even more cuts if the second wave of the seizure becomes effective.

Higher during the cuts hardships for the poor earn less than $30,000 points in said 74 percent of Americans who recently from the United Technologies/National Congress connection survey surveyed journal, they sequester no effect of cutbacks have noticed, which entered into force in March.

They sequester was while the designed negotiations of the 2011 debt ceiling as a poison pill, which would be nobody thought, ever take effect. The idea was that mindless, linear cuts would be so unattractive that Washington lawmakers motivated by new and to replace less disturbing reductions. The goal of the 2011 budget control Act was about $2.5 trillion savings over the next decade by meeting strict spending caps to reach, which would gradually narrow the budget.

But as a "super Committee" by House and Senate Republican and democratic leaders following failed, on about 1.5 trillion $ total savings some began last March the first installment of the automatic cuts occur.

The early reviews of the impact of freshmen of this automatic cuts are very mixed. Many conservative opponents once sequestration now are programs because of its negative impact on defense because of his forced savings sing his praises.

There is some evidence that sequester the discipline reign as the only real budget in Washington. Entire federal spending fall from a high of $3.6 trillion in the fiscal year 2011 to an estimated $3.45 trillion in the fiscal year 2013, which ends on June 30. If no recession and the compliance with the caps, continue federal spending as a share of the economy in the later this year of the Obama Presidency shrink.

"It's off is the best political influence Republicans have a concession by Democrats win - on Obamacare or anything else," conservative editorial page of the Wall Street Journal wrote recently. "Even tighter spending caps on domestic spending are the Liberal constituencies that squeeze life by the Government. Because planned parenthood and welfare and other transfer payments squeezed get, increased the political pressure on Democrats something tangible in return for the loosening of caps give up.

The Federal Government tightened the belt in the amount of $85.5 billion in the year, the end of September 30, and cut an additional $100 billion in the coming year, unless to blunt Republican and Democratic votes, or affecting sequester the as part of a larger budget to end the Government shutdown and debt crisis.

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5 years after the crisis: Blame Washington or Wall Street?

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| By Suzanne McGee, The Fiscal Times

Five years after the crisis peaked with the collapse of Lehman Brothers, it is still possible to hear bankers claim that Washington forced them to take risks. That claim simply doesn’t have much merit, however.

It all started with a house and a mortgage.

The first is a hallmark of American society, representing the ideal of home ownership: About two-thirds of our fellow citizens own the house or apartment in which they live, encouraged to do so by factors that include being able to deduct the interest on their mortgage payments. And it is the ready availability of those mortgages that has enabled them to buy those houses in the first place.

When the financial crisis brought the entire system to its knees five years ago, the heart of the problem wasn't some esoteric investment strategy but something fairly basic: poor-quality mortgage loans, repackaged by banks and other institutions in such a way as to temporarily mask their weakness. Banks had always made these subprime loans -- issuing mortgages to borrowers with poor credit quality, or financing purchases of homes for buyers who weren't putting anything down themselves. But that had been a fraction of their business, perhaps 8% of all new mortgages in a year. By 2006, the percentage had grown to 20% nationwide, and was far higher in some parts of the country, even as homeowners were taking on debt they simply couldn't afford.

As all the postmortems take place around the fifth anniversary of the bankruptcy of Lehman Brothers, one of the most significant questions boils down to whether it was the financial institutions that made these loans and then restructured and resold them that should bear the blame for the near-meltdown of the system. Or, as others argue, was the crisis the fault of Washington (a convenient code word for politicians, regulators and their rules)?

One of those on Wall Street now viewed as having been blind to the problems that were taking shape in the mortgage world, former Citigroup (C) CEO Charles Prince, may go down in history for his comment that "as long as the music is playing, you've got to get up and dance." That is, as long as the subprime mortgage lending market was moving along and generating big profits for the industry as a whole, no bank could afford to sit it out and allow all those gains to flow to its rivals.

In the wake of the crisis, however, those who believe the blame for the near-meltdown can be laid at Washington's door seized on Prince's phrase as a way to explain what they think happened. In their view, policies ranging from the Alternative Mortgage Transactions Parity Act (which greatly increased the ranks of lenders allowed to write adjustable-rate, interest-only and other kind of mortgages that became so popular among subprime lenders) to the Community Reinvestment Act (which tried to stop discrimination in lending, but which some argue forced banks to lend to home buyers with poor credit) were responsible for the dramatic increase in subprime loans and the increase in leverage in the years leading up to the crisis. Moreover, they argue, other policies resulted in inadequate regulatory supervision of the institutions taking those risks.

Around the first anniversary of the collapse of Bear Stearns, on St. Patrick's Day of 2009, the issue came up for a formal debate at an event organized by Intelligence Squared U.S. The ranks of those arguing that Washington was more culpable included historian Niall Ferguson, who suggested that if Chuck Prince and his fellow Wall Street CEOs were dancing to the music, "you have to ask yourselves … who was playing the music." It wasn't that Ferguson didn't blame banks, he insisted, just that he and his fellow debaters blame Washington more.

Balderdash.

Five years after the crisis peaked with the collapse of Lehman Brothers, the forced merger of Merrill Lynch with Bank of America (BAC), and the near-implosion of many other institutions, it is still possible to hear bankers claim, with straight faces, that Washington forced them to take risks. That claim simply doesn't have much merit, however.

Let's first consider it from a common-sense perspective. How willing are banks to do things that they know in their gut are foolish or ill-conceived simply because the government wants them to? If anything, recent history has shown that they put their self-interest first -- and rightly so. Rock-bottom interest rates haven't sparked a flurry of new lending in the wake of the crisis; burned by the mortgage debacle, banks are guarding against credit risk more than they are abiding by the government's clear interest in seeing lending rise in order to fuel economic growth.

Historically, when banks haven't wanted to comply with a government rule or regulation, they have a tremendous track record in compelling whatever body is responsible to reverse the decision, PDQ. Remember that it was lobbying by banks, not by the government, that finally led to the collapse of the Glass-Steagall Act more than 60 years after it had been passed. If they could succeed in demolishing such a bedrock of financial regulation, could they really have been forced into acting against their best judgment by weaker, newer rules? It seems far more probable that these were rules they could live with or work around, or even rules that some of them believed would help make them more money.

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Five years after the crisis: what banks have not learned

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¦ By Suzanne McGee, the fiscal times

A near-death experience can be life-changing. But the mindset of big bank executives has changed little since they narrowly escaped the 2008 financial meltdown they helped cause.

This week brings with it two rather bleak Anni verse Aries. It has been 12 years since the Sept. 11, 2001, terrorist attacks, and five years since Lehman Brothers filed for bankruptcy as part of the 2008 crisis that nearly brought the global financial system to its knees.

Along with remembrance, these milestones should bring a that sense we have learned enough to ensure that history doesn't repeat itself, or at least a sense that the pain and misery is receding.

In the case of the financial crisis, at least, I'm not sure that we can say so. For proof, look no further than JPMorgan Chase (JPM), which emerged from the crisis a big winner. The bank had sailed in to buy Bear Stearns and prevent its collapse in March 2008 that what hardly a public service (it gave JPMorgan a big boost in Wall Street league tables, and JPMorgan CEO Jamie Dimon picked up the assets for a song, with government help), but it may so have sent the wrong message to the rest of Wall Street that their own institution would be too big to fail.

Be that as it may, JPMorgan Chase came through the crisis relatively stronger than it had been. But take a look at some of the comments and disclosures it made only this week, during a presentation to the Barclays Global financial services Conference in New York, and it becomes clear that five years after the crisis, we have yet to put many problem behind US.

And even the winners still have a lot to learn.

JPMorgan Chase is the biggest of these, and critics including Sheila Bair, former head of the Federal Deposit Insurance Corp., aren't at all confident that any of them have a good strategy for addressing the "too big to fail" conundrum. That means that if a future risk management snafu or business misjudgment trigger the collapse of a big financial institution, we could be right back at square one.

While JPMorgan Chase CFO Marianne Lake bragged about the bank's giant market share and capital position at the Barclays conference, Bair's broader point is that that child of market share brings systemic risk with it, and unless and until there's a workable "resolution" structure in place, the size of some of these of institutions today is still worrying.

Nor do many of Wall Street's critics draw much comfort from the Federal Reserve's annual stress tests - especially after the last one showed Citigroup (C) as being more resilient than JPMorgan.

"That's just downright odd," one analyst back in the spring told me, when those results were released.

The financial crisis what a reminder of how often Wall Street failed to ask itself the - "what might go wrong here?" - and failed to put in place systems that most basic child of question would increase the odds of identifying the biggest sources of risk before they morphed into large losses and write-downs.

Risk management - which, after all, isn 't a profit center but instead eats into returns on equity – still isn't embedded in Wall Street's DNA.

JPMorgan Chase is a great example of that, as the "London whale" trading losses reminded everyone last year. The bank's own reports on the problematic trades displayed myriad gaps in risk management, including evidence that some of the bank's managers manipulated internal risk models. Two of the directors who served on the bank's risk committee stepped down in July. JPMorgan Chase announced on Sept. 9 their replacements both have solid track records in finance; one of them, Linda Bammann, is a banking exec with risk management expertise.

But why wait five years to do this?

Government agencies have been busy filing lawsuits of all kinds against Wall Street institutions, many of them related to the way mortgage securities were originated, packaged, priced and sold before the crisis.

At JPMorgan Chase, the federal government and its agencies are conducting criminal investigations into the mortgage-backed securities operations as well as its energy-trading activities. other investigations target the London whale losses, the bank's credit card collections policies and activities and the way it handles mortgage foreclosures and guards against money-laundering.

Not all of these problems are historic in nature; the energy trading kerfuffle has surfaced only in the last year. New or old, the cost of defending against these allegations information, paying fines to settle regulatory claims and providing against other penalties, is climbing.

Lake, the chief finance officer, told her conference audience on Sept. 9 that to increase to the bank's litigation reserve to address a "crescendo" of these actual and potential lawsuits wants "more than offset" the $1.5 trillion of consumer loan loss reserves that will be released as credit quality when the bank's loan portfolio has improved. "We are still finalizing the number," she said.

Back in 2008, "subprime" ones stuck banks were with big portfolios of mortgages, and especially low-quality. They had been lending foolishly, assuming that they could always repackage those loans in such a way as to make them look appealing to someone out there.

Fast forward five years and the mortgage arena once more is a problem area for banks such as JPMorgan Chase. This time it isn't a question of losses, but of revenue - or rather, a steep decline in revenues from the home-lending business that the bank is likely to see as interest Council rise.

Mortgage-refinancing demand has falling Lake said this week that 60% from its peak in may, sooner and more rapidly than the bank had expected. Add that to competitive pressures and the time it takes to complete 'taking expenses of the system' out (translation: eliminating some jobs in this part of the business) and profit margins here want to be negative. At least this time, the mortgage business is likely to be only a drag on profits rather than a big question mark hanging over the future of the industry.

None of these are reasons to panic or to expect a re-run of the events of 2008 what is disconcerting, however, is the limited extent to which big financial institutions have changed the way they function in the wake of their near-death experience.

New regulations have been slow to emerge and have had unintended consequences. others haven't even materialized.

On the part of the banks themselves, a new mindset may be even further away today than it in the autumn of 2008, when CEOs and CFOs were still scared silly by the narrowness of their escape from complete disaster.

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S & P 500 closes for the first time in five years over 1,500

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From news agencies, NBC News

The S & P 500 index on Friday the 1,500 above sea level for the first time closed in more than five years as the strong U.S. earnings reports by & gamble Procter and others helped the benchmark to extend their rally in eight days.

The Dow Jones industrial average was 70.50 points or 0.51 percent to 13,895.83. The standard & poor's 500 index was 8.11 points, or 0.54 percent, to 1,502.93. The Nasdaq composite index was 19.33 points or 0.62 percent to 3,149.71.

For the week, the Dow Jones rose 1.8 percent, the S & P rose 1.1 percent and the NASDAQ rose by 0.5 percent. Profits for all three indexes, it was the fourth straight week.

Data showed sales of new U.S. single-family homes fell in December but rose in the year 2012 to its highest level since 2009, has turned a corner a shield the troubled US housing market.

"Economic data in the United States is higher, albeit modest been running." Things are incrementally better, "said Quincy Krosby, market strategist at Prudential Financial in Newark, New Jersey.

"The market was despite deterioration in the Apple move forward and this is also a positive."

Apple's shares fell 1.2 percent to $444.99 and was the iPhone manufacturer swap places as the most valuable U.S. company with ExxonMobil Corp by the afternoon.

In addition to the optimistic tone, improved morale of the German economy for a third month in a row in January to the highest in more than six months. In addition, said European banks, that they pay back more than the loans, which gave the Bank during the crisis the European Central Bank are expected much.

"Good news in the credit markets will help the stage for (further investments in) put risky assets," Krosby said.

Procter & gamble shares rose 3.6 percent to $72.99 after the world's best products for domestic manufacturers quarterly profit expectations rose. The company said sales and earnings Outlook for the fiscal year.

The benchmark S & P 500 index is more than 5 percent so far in January. Strong start this year, the equity market has solid balance sheet presentation, an agreement in Washington attributed to the expansion of the powers of the Government borrowing, encouraging signs of the global economy and seasonal inflows in equities.

Helping to lift the NASDAQ Composite rose Starbucks, 4.5 per cent to $57.01 after the coffee retailers stronger than expected sales in the United States and Asia.

Thomson Reuters data until Friday showed that 68 percent of the 147 S & P 500 companies that have reported the result exceeded expectations. Since 1994 62 percent of companies exceeded, while the average for the past four quarters is 65 percent expectations.

Halliburton co shares jumped 5 percent to $39.69 after the world's second largest oilfield service companies higher than expected profits and sales in the fourth quarter reported.

Reuters contributed to this report.

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Ex-Citigroup VP gets 8 years for stealing $22M

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NEW YORK (Reuters) - A former Citigroup Inc vice president who admitted to embezzling more than $22 million was sentenced on Friday to 8 years in prison, federal prosecutors said.

Gary Foster, 35, pleaded guilty in September to siphoning the money from his employer between 2003 and 2010, transferring the funds to Citigroup's cash account before wiring it into his own personal account at a different bank.

He was sentenced by U.S. District Judge Eric Vitaliano in Brooklyn federal court to 97 months on the bank fraud charge.

An attorney for Foster was not immediately available for comment. A spokesman for Citigroup declined comment.

Federal prosecutors said Foster "steadily and repeatedly enriched himself for many years at his employer's expense," according to a pre-sentencing court filing.

Foster was able to evade detection for years by making false accounting entries that made it seem like the wire transfers were in support of existing Citigroup contracts, when they were actually being transferred to his account, according to the complaint. He used the money to fund a lavish lifestyle, purchasing luxury automobiles including a Ferrari and Maserati, and properties in Brooklyn, Manhattan and New Jersey, prosecutors said.

The fraud was uncovered during an internal audit of Citigroup's treasury department. Citigroup immediately informed the authorities and cooperated with the federal investigation, according to an affidavit from Thomas D'Amico, a special agent with the Federal Bureau of Investigation.

The government said it had seized cars and property from Foster worth approximately $14 million, which he forfeited pursuant to a plea agreement.

Foster, who worked for Citigroup for 10 years, was a vice-president in the treasury finance department when he left the company in January 2011. He was arrested in July at John F. Kennedy Airport.

He voluntarily returned to the United States from a trip to Bangkok after his family told him there was a warrant for his arrest, his lawyers said.

The case is U.S. v. Foster, U.S. District Court for the Eastern District of New York, No. 11-601.

For the U.S.: Michael Yaeger and Karen Hennigan.

For Foster: Isabelle Kirshner of Clayman & Rosenberg.

(Reporting by Jessica Dye)

(c) Copyright Thomson Reuters 2012.

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Consumer prices drop by most in 3 years

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By msnbc.com staff and news wires
U.S. consumer prices fell in May by the most in over three years as households paid less for gasoline, possibly giving the U.S. Federal Reserve more room to help an economy that is showing signs of weakening.

The Labor Department said on Thursday its Consumer Price Index dropped 0.3 percent last month after being flat in April. May's decline was the sharpest since December 2008 although analysts polled by Reuters expected a bigger decline.

Outside the volatile food and energy category, inflation pressure appeared to be modest. Core CPI climbed 0.2 percent higher as expected, matching the increase posted in April.

Mild price increases leave consumers with more money to spend, which boosts economic growth. Lower inflation also gives the Fed more leeway to keep interest rates low.

Steady increases in rents for homes and apartments are pushing up core prices, though at a modest pace. Rents are increasing as more people forgo homeownership and rent instead.

Gas prices have tumbled 40 cents after peaking April 6. Prices at the pump averaged $3.54 on Wednesday, according to AAA. That's down 19 cents from a month earlier.

Still, American workers are seeing little growth in pay. Workers' average hourly earnings have risen just 1.7 percent in the past 12 months, less than the pace of inflation over that same period.

Without more jobs or higher pay, consumers could be forced to cut back on spending later this year. Consumer spending is critical because it accounts for 70 percent of economic activity

A small amount of inflation can be good for the economy. It encourages businesses and consumers to spend and invest money sooner rather than later, before inflation erodes its value.

The economy is growing but at a sluggish pace. That is keeping a lid on price increases. Slow growth makes it harder for consumers and businesses to pay higher costs. The economy expanded at just a 1.9 percent annual rate in the January-March quarter.

Lower prices also could make Fed Chairman Ben Bernanke more willing to take action to boost growth. If inflation was threatening to accelerate, Fed policymakers could feel compelled to raise interest rates or take other steps to fight rising prices. But with inflation tame, the Fed can focus on stimulating growth.

Reuters and The Associated Press contributed to this report.

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Durable goods orders drop by most in 3 years

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The report added to signs that manufacturing exited the first quarter with less momentum. Data last week showed industrial production was flat in March for a second straight month, while some gauges of regional factory activity weakened in April.

"If you look at it from a momentum perspective, this adds to the evidence that momentum in the economy sort of fell flat in March. You had the first two months coming in with a lot of upward surprises, then the data started to become more mixed and many of the indicators in March came in to the downside," said Ellen Zentner, senior U.S. economist for Nomura Securities.

Manufacturing has been one of the main sources of economic growth, but is slowing as euro zone economies slide into recession and China cools.

The plunge in orders for transportation equipment reflected a 47.6 percent drop in bookings for civilian aircraft. Boeing received only 53 orders for aircraft, according to the plane maker's website, down from 237 in February.

Orders for motor vehicles barely rose last month.

Adding to the report's weak tenor, non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, fell 0.8 percent after an upwardly revised 2.8 percent rise the prior month.

Economists had expected this category to rise 0.9 percent after a previously reported 1.7 percent increase.

But shipments of non-defense capital goods orders excluding aircraft, which go into the calculation of gross domestic product, rose 2.6 percent after increasing 1.4 percent in February.

This suggests that growth in business investment in capital goods increased in the first quarter, but probably not as much as in previous periods.

Reuters contributed to this report.

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ECB lends banks $639 billion over 3 years

9:40 AM Banks, billion, lends, years No Comments

FRANKFURT, Germany — Struggling banks snapped up €489 billion ($639 billion) in cheap loans from the European Central Bank on Wednesday, a sign of just how hard or expensive it has become to borrow from each other.

The huge demand for newly available three-year loans comes as fears rise that heavily indebted European governments could default and force banks and other bond holders to take big losses.

The loans to 523 banks surpassed the €442 billion ($578 billion) in one-year loans extended in June 2009, when the global financial system was reeling from the collapse of the U.S. investment bank Lehman Brothers. It was the biggest ECB infusion of credit into the banking system in the 13-year history of the euro.

The ECB wants banks to use the money to help pay off or refinance some €230 billion ($300 billion) in existing loans early in 2012. Without the special support from the ECB, banks would have had to cut back on loans to businesses and further squeeze the European economy.

While the loans will help stabilize banks and make it easier for them to lend to businesses, they do not attack the root of Europe's financial crisis — heavily indebted governments face unsustainable borrowing costs. Many economists believe that to solve that problem the ECB needs to become the lender of last resort to European governments, buying up their bonds in large quantities in order to lower their borrowing costs. ECB President Mario Draghi has said governments should not depend on a central bank bailout.

Markets initially rose after the amount of the ECB borrowing was announced; it was far higher than the €300 billion ($392 billion) expected. But the optimism faded as investors weighed the broader problems facing Europe's economy and financial system. The broad Stoxx 50 index of European shares fell 0.5 percent. Indexes in Germany and Italy closed about 1 percent lower. The euro fell nearly 2 cents, to $1.3023 from $1.3198 earlier Wednesday. U.S. stocks traded lower as well.

"The good news is, the ECB's efforts to increase liquidity are working," said Jennifer Lee, an analyst at BMO Capital Markets. "The bad news is, high demand for the loans creates worries that banks are urgently in need of funds to boost liquidity."

There was some speculation that the loans could indirectly help governments. In theory, banks could borrow from the ECB at an interest rate of 1 percent and then use that money to lend at much higher rates to European governments.

But many analysts think it was unlikely that banks would increase their exposure to government bonds, given ongoing fears of a possible default among troubled eurozone nations. Many banks have struggled to cut their holdings of debt from governments in financial trouble.

"We still believe it is difficult to reconcile a government desire for banks to continue buying debt with the need for banks to reduce risk exposure associated with government debt," said Chris Walker, an analyst at UBS.

Many economists think that the eurozone is heading toward at least a mild recession. Data released Wednesday showed that Italy, the eurozone's third-largest economy, contracted 0.2 percent in the third quarter.

The deeper the economic slowdown is in the eurozone, the more tax revenues may suffer — and the harder it will be for Europe's indebted governments to handle their debt loads.

Italy and Spain have been at the center of investor concerns in recent months as their borrowing costs have risen amid concerns over their debts. Both are considered too big to bail out with the current eurozone bailout funds, which have some €500 billion ($654 billion) in financing.

A default on debt payments by either could ignite a new financial crisis and send the global economy into a slump.

Some of that European rescue money is already committed to bailouts of smaller Greece, Ireland and Portugal, which needed outside financial help after default fears drove their borrowing costs to unsustainable levels.

Italy alone has some €1.9 trillion ($2.5 trillion) in outstanding debt.

In making the loans, the ECB was playing its role of supplier of liquidity to banks, a typical job for central banks.

ECB president Mario Draghi has stressed the central bank's role in supporting the banking system but has balked at suggestions it should be offering the same level of support for indebted governments themselves by buying up their risky bonds. Draghi says governments must be the ones to reduce their spending and deficits.

The 37-month term of the loans permits the banks to stock up on money for a much longer period and reduces stress on their finances. Draghi has said the extra-long credit period will allow banks to lend for longer periods and not cut credit to businesses.

Alongside efforts to shore up banks, the ECB has also been cutting interest rates to support the ailing eurozone economy. It has reduced its main refinancing rate from 1.5 percent to 1.0 percent over the last two months in the hope that lower borrowing costs will stimulate growth by making credit cheaper.

Under the terms of Wednesday's loans, the banks will pay the average refinancing rate over the three years. The ECB reviews the rate each month and it will almost certainly change. Banks also have the flexibility of repaying the money after a year if their situation improves. Wednesday's offering was the first of two that the ECB has planned.

European officials have said banks need to raise €115 billion ($150 billion) in new capital in 2012. But finding that money is not an easy task in the current environment of fear. Investors are leery of putting more money into banks and it would be politically unpopular for debt-strapped governments to do it either.

Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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