The Housing Bubble

first?

* The Wall Street Journal
* POLITICS
* APRIL 29, 2010, 9:41 P.M. ET

Criminal Probe Looks Into Goldman Trading
By SUSAN PULLIAM And EVAN PEREZ

Federal prosecutors are conducting a criminal investigation into whether Goldman Sachs Group Inc. or its employees committed securities fraud in connection with its mortgage trading, people familiar with the probe say.
…

Whatever came of this probe; nothing, I assume?

Wall Street Criminal Probe Widens
POSTED: 03:08 PM ET, 09/29/2008 by Derek Kravitz

As news of Congress’ failure to pass a sweeping $700 billion bailout package for Wall Street sent stocks tumbling, investigators continued today to pursue potential criminal cases against firms and bankers accused of contributing to the market collapse.

Federal prosecutors on Friday issued subpoenas for mortgage-finance giants Fannie Mae and Freddie Mac to produce documents dating back to January 2007. Federal prosecutors with the Southern District of New York and officials with the Securities and Exchange Commission would not say what they are seeking.

Bloomberg reported that reviews of the two companies’ books in the weeks before their Sept. 7 takeover by the federal government found that they were using accounting methods that obscured the “low quality” of capital reserves.

The FBI has already begun an investigation into the subprime mortgage collapse. Investigators are looking at 26 companies, including Fannie and Freddie.
…

Well, I missed the day but happy second birthday to this listing in San Pedro.

2646 S PATTON AVE, San Pedro, CA 90731**

590K$ short sale….734 days on the market!

For those of you that don’t know, San Pedro is a borough of LA down by long beach. Kind of a halfway decent place to live in some parts. This is a nice section. Used to be inexpensive. Beach sucks. Crime is pretty nasty.

From what I’m hearing, the short sellers are generally lying about bank approval and the slimy bastards want some off the records cash on the transaction or a sellers fee.

F them. Liquidate the pukes.

Oh, in the incidental crime report, one of my regular lunch places got robbed at gunpoint with many of my coworkers there.

While the economy is sprouting green shoots… some 1 million people are at the end of their 99th week of unemployment.

Things are about to get very very ugly.

Thai protesters storm major hospital in Bangkok
By DENIS D. GRAY (AP) – 1 hour ago

BANGKOK — A major hospital in the Thai capital evacuated patients and suspended all but emergency surgery Friday after anti-government protesters who occupy a nearby zone stormed in to hunt for security forces they suspected were positioned there.

A group of so-called Red Shirts broke into Chulalongkorn Hospital late Thursday despite pleas from its director, then withdrew back into their enclave after not finding soldiers or police within the sprawling compound.
…
Parts of Bangkok’s commercial heart have become a barricaded Red Shirt protest camp, forcing the closure of some of the city’s ritziest malls and hotels. The “occupied zone” flanks Chulalonkgorn Hospital and abuts Silom Road, the capital’s “Wall Street” which has become a camp ground for military and police units.
…

Showdown on Wall Street:
Angry protestors march against banking industry

Michael Pantelidis and Wil Cruz
DAILY NEWS WRITERS

Thursday, April 29th 2010, 11:05 PM

Demonstrators march against banks in New York on Thursday.
The demonstrators demanded that the financial giants own up to their role in the recession.

You got us into this economic mess - now get us out!

That was the message thousands of protestors had for the banking industry Thursday in Manhattan.

Chanting “Save Our Homes” and waving signs that said “Bust Up Big Banks,” the demonstrators demanded that the financial giants own up to their role in the recession.

“We’re tired. They’ve gotten richer, but we’re still poor,” said Loretta Manning, 37, who mrached with nine relatives. “We’re getting poorer. It’s not fair.”

The protestors took their “Showdown on Wall Street” to JP Morgan Chase and Wells Fargo offices on Park Ave. before converging at City Hall Park.

They called on banks to rethink their lending practices and foreclosure policies that balloon up interest charges.

“We’re here to send a message to Wall St., Goldman Sachs and big banks that it’s time to invest in America, and stop ripping America off!” said James Mumm, 39, of the National People’s Action, a sponsor of the protest. “Enough is enough!”

Read more: http://www.nydailynews.com/ny_local/2010/04/29/2010-04-29_showdown_on_wall_street_angry_protestors_march_against_banking_industry.html#ixzz0mYwWP7sw

This Undead Pirate Does Not Support Taxpayer-Funded Bank Bailouts

07:22 pm April 29, 2010

Let’s say you’re a fatcat banker and recipient of a taxpayer-funded bailout, looking out into the crowd protesting you. Does the terrifying undead pirate make you think differently about taking the bailout? Or do you think, if the terrifying undead pirate is against me, maybe I’m the good guy?

Really the whole thing would be a lot more interesting if it was Wall Street Bankers versus Army of Undead Pirates.

Do You Blame Goldman? Government? Both?

April 27, 2010 11:46 PM

It was the government versus Goldman Sachs today on Capitol Hill.

On one side, a senate subcommittee lashing out at alleged conflicts of interest that helped the firm turn a profit amid the financial collapse.

On the other, a company resolute in its denial of any wrongdoing.

Senate Democrats and Republicans, meanwhile, continue to work on reforming the financial world that made so many rich, and left so many more financially wrecked.

But critics say Congress was a prime enabler of the crisis.

So tonight, we ask: Is Goldman at fault, at the very least, for unethical behavior?

Or does Congress share in the blame for turning a blind eye?

Tell us what you think.

UNCONTAINED CONTAGION ALERT! ICEBERG DEAD AHEAD!!!

Friday April 30, 2010

Bloomberg
Volatility Jumps as European Sovereign Debt Crisis Infects Asia
April 29, 2010, 11:52 PM EDT

By Katrina Nicholas

April 30 (Bloomberg) — Volatility indexes show Europe’s fiscal crisis is jolting markets in Asia’s largest economies, with gauges in China and India jumping as much as in the U.K.

India’s VIX index jumped 15 percent on April 28, the day after the downgrades, and yesterday fell 7 percent. The indexes are based on options prices, and assess near-term expectations for the magnitude and rate of price moves.

“When markets react to a big spike in stress they look at simple indicators like a country’s debt to gross domestic product,” Sebastien Barbe, head of emerging-market research for Credit Agricole CIB, said in a phone interview from Hong Kong. “India doesn’t have any dollar debt, but it does have huge local-currency debt.”

India, Asia’s third-biggest economy after Japan and China, has pledged to cut its budget deficit to 5.5 percent of GDP in the year starting April 1, from 6.9 percent last year. At 13.6 percent, Greece’s budget shortfall is more than four times the European Union’s limit.

Almost $1 trillion of worldwide equity value was erased after S&P downgraded Greece, on concern Europe’s debt crisis may derail the global recovery, data compiled by Bloomberg show.
…
More From Businessweek
* Hong Kong Drop; Developers Fall Amid Concern on Home Prices
* Hong Kong Proposes Fines, Bans to Improve Disclosure (Update2)

It`s the 30th, better have that contract signed by midnight.

Home buyer tax credit ends Friday

By Jeff Ostrowski Palm Beach Post Staff Writer
Posted: 4:25 p.m. Thursday, April 29, 2010

With today’s deadline for a federal tax credit looming, the prospective home buyer called real estate agent Ed Farah and wondered if he could tour properties and ink a signed contract in 24 hours.

Farah, an agent at Better Homes and Gardens Real Estate in Port St. Lucie, advised the procrastinator not to bother.

“I said, ‘I think you waited too long. It’s just not going to happen that easily,’” Farah said.

But Farah has been working “feverishly” on another deal that he hopes to complete in time.

As the flurry of activity at Farah’s office shows, there’s a last-minute rush by buyers looking to take advantage of a soon-to-expire tax break.

To spur the nation’s moribund housing market, Uncle Sam has been dangling a tax credit worth up to $8,000 for first-time home buyers and up to $6,500 for those who already own homes. To collect the credit, the buyer must sign the contract on or before April 30 and close by June 30.

The tax break seems to have boosted sales. Nearly 1.8 million Americans had cashed in on the credit as of Feb. 20, and March home sales in Florida jumped 24 percent compared with a year ago.

Now real estate experts wonder what comes next. Many fear sales will slump once the federal tax incentive is gone.

Others worry that some buyers who have signed contracts won’t be able to close by the June 30 deadline. John Mike, an agent at Prudential Florida Realty, said one of his recent sales was delayed for two weeks as the buyer waited for her mortgage to be approved.

He blamed changes to a key mortgage law earlier this year, along with lenders’ general caution following their boom-time recklessness. Meeting the closing deadline “will be the real scramble,” Mike said.

But mortgage broker Jim Sahnger of Palm Beach Financial Network said borrowers should have plenty of time, so long as they have good credit scores and enough income to pay the loan.

“For people that are prepared, closing in 60 days shouldn’t be an issue,” Sahnger said.

But if the property is a short sale, all bets are off, said Myles Minns, owner of Continental Properties in West Palm Beach.

“If anybody anticipates closing a short sale in two months, they’re insane,” Minns said. “It’s like trying to win the lottery.”

got one baby, harassing REINZ used house salespeople

MADRID - Spain’s jobless rate has surpassed 20 percent for the first time since 1997, the government said Friday as it offered more dismal news for a recession-plagued economy that is being dragged into Europe’s debt crisis.

I’m not sure “dragged” is the word I’d use. “Dragged” implies “kicking and screaming” and “resisting”; I believe Spain went willingly, if not screaming “are we there yet?”

The way I see it, this country needs at least $2 trillion of porkus stimulus a year to get by and maintain a bubble living standard. We just watched this last year and how this money was added to the system and which means were used to justify the “injection”. I am left wondering what next years’ method will be to keep the money flowing at this rate?

Race is on for homebuyers to meet tax-credit deadline
By ALEJANDRO LAZO - Los Angeles Times

LOS ANGELES — The expiring federal tax credit for home shoppers has put some froth back in the real estate market: People are ditching work to search for new digs, plundering savings for down payments and striking as fast as they can to sign contracts ahead of the Friday deadline.

Buyers can get a tax break of up to $8,000 for first-time purchasers and $6,500 for some current homeowners if they reach agreements by April 30 and seal their deals by June 30.

California lawmakers sweetened the package last month by passing a $10,000 credit that kicks in Saturday. Now, some buyers in the state can qualify for as much as $18,000 in federal and state tax relief if they time their purchases just right.

The dual incentives have created a mind-set reminiscent of the bubble years, particularly among first-timers, who stand to gain the most money.

“I am looking at properties almost constantly, and it is just kind of a feeding frenzy right now, which frustrates me,” said Zeenath Shareef, 30, a Venice Beach, Calif., renter and finance director for a consulting firm who took half-days off to look for a home.

“In my mind, properties are going more quickly, and in some cases for more than what they would normally sell for, because people are in such a rush to buy ahead of this deadline,” she said. “I hear people saying, friends of mine saying, ‘I have to buy, I have to buy, I have to buy.’ ”

Los Angeles shoppers opened contracts on 911 houses in March, a 32.2 percent increase from March 2009, according to data from the California Association of Realtors. While that increase was sizeable sizable, it also reflects a rebound from a period last year when the nation was gripped by the financial crisis and talk of a second Great Depression abounded.

In Santa Ana, buyers opened contracts on 190 houses in March, an 8 percent increase from the same month a year earlier. In San Diego, buyers opened contracts on 721 houses in March, a 7.5 percent increase from March 2009.

Similar data for April weren’t available yet, but real estate professionals said the incentives had added kerosene to the traditionally busy spring season and analysts expect sales and prices to rise in coming months as contracts close.

In March, California lawmakers approved a credit of as much as $10,000 for people buying a new or first home. Buyers must claim the California credit over three years.

“The stimulus has worked,” said Rick Hoffman, president of Coldwell Banker Residential Brokerage in San Diego and Temecula Valley. “Buyers are confident that we have seen the bottom of the real estate market and that we are on the way back up.”

But many economists warn that once the effects of the credits wane, sales and prices are likely to drop.

“We had a serious uptick due to the tax credit, but whatever boost that gave us is now at the end,” said Dean Baker, co-director of the Center for Economic and Policy Research in Washington. “So I think we will see resumed declines. The only real question is how fast.”

The federal tax credit was created in 2008 by the Bush administration as a $7,500 incentive for first-time purchasers, who were required to repay the money in a series of installments. Congress increased the amount to $8,000 in February 2009 when it passed the economic stimulus package and waived the repayment requirement. As an initial deadline for the credit loomed last November, Congress extended and expanded it to include as much as $6,500 for some current homeowners.

“The bulk of the money is going to people who were going to buy anyway,” said Roberton Williams, a senior fellow with the Tax Policy Center in Washington. “It is a short-term fix to the market that is going to be reversed to some degree sometime down the road.”

Despite the criticism that the tax incentives are giving an artificial boost to the market, they do appear to be motivating buyers such as Keith Alvarez, 25, who works in human resources for the reality television company Bunim Murray Productions.

Last December, Alvarez and his partner, Levon Aharonyan, 24, a nurse, grew fed up with paying rent, so they cut back on meals out, worked overtime shifts and filed their 2009 taxes in January to save up for a deposit.

Factoring in the benefits of the federal tax credit, they grew confident they could become homeowners and in March began scouring the market for good deals. Alvarez and Aharonyan were outbid on some properties and didn’t bother putting in contracts on others they thought too expensive. The deadline to qualify for the federal credit loomed.

Then, on Wednesday, the couple received the news that their offer of $300,000 for a short-sale property had been accepted.

The race is now on to close before the June 30 deadline and qualify for the credits.

Alvarez said he and Aharonyan planned to use the money to rehabilitate the four-bedroom, two-bath house on a quiet, tree-lined street in Van Nuys, Calif.

“The carpets are a mess, the tiles need to be redone, the kitchen cabinets are horrible and God knows what was in the refrigerator,” Alvarez said. “It needs some work. But what really caught my eye was the backyard. The backyard was huge.”

Maybe it aint easy, but it`s lucrative being green.

Al Gore buys $9 million seaside home
April 29, 12:53 PM Climate Change ExaminerTony Hake

Al Gore’s home in Nashville, Tennessee is said to use
twelve times as much electricity as the average Nashville home.
Will his new villa in Montecito, California be more green?
Apparently not as worried about dangerous sea level rises as he touts in his speeches, Former Vice President Al Gore and his wife Tipper have purchased a seaside villa in Montecito, California. The Nobel Laureate reported paid $8.8 million for the property.

The Los Angeles Times, via the Montecito Journal is reporting that the home is on a 1.5 acre lot complete with a swimming pool, spa and fountains in an area that is also home to Oprah Winfrey and other Hollywood celebrities. The Gore’s will have plenty of room for guests and entertaining with five bedrooms and nine baths in the home as well as six fireplaces.

Gore has come under fire in the past for leaving a carbon footprint far in excess of the average American leading to charges of “do as I say, not as I do.”

His 10,000 square foot mansion in Nashville, Tennessee was the subject of much discussion three years ago when it was revealed that it used 12 times as much electricity as the average home in the area. Similarly, he flies tens of thousands of miles a year further adding to his role as a lightning rod in the debate about global warming.

The former vice president says he lives a ‘carbon neutral’ life by purchasing carbon offsets. Those are purchased largely from Generation Investment Management, a firm in which Gore serves as chairman and profits from. The U.K. Telegraph speculated last year that Gore would become the world’s first “carbon billionaire.”

* OPINION: DECLARATIONS
* MAY 1, 2010

The Big Alienation
Uncontrolled borders and Washington’s lack of self-control.

* By PEGGY NOONAN

We are at a remarkable moment. We have an open, 2,000-mile border to our south, and the entity with the power to enforce the law and impose safety and order will not do it. Wall Street collapsed, taking Main Street’s money with it, and the government can’t really figure out what to do about it because the government itself was deeply implicated in the crash, and both political parties are full of people whose political careers have been made possible by Wall Street contributions. Meanwhile we pass huge laws, bills so comprehensive, omnibus and transformative that no one knows what’s in them and no one—literally, no one—knows how exactly they will be executed or interpreted. Citizens search for new laws online, pore over them at night, and come away knowing no more than they did before they typed “dot-gov.”

It is not that no one’s in control. Washington is full of people who insist they’re in control and who go to great lengths to display their power. It’s that no one takes responsibility and authority. Washington daily delivers to the people two stark and utterly conflicting messages: “We control everything” and “You’re on your own.”

All this contributes to a deep and growing alienation between the people of America and the government of America in Washington.
…

With the broad expansion of the financial services industry and the creation of a plethora of neatly packaged financially engineered products, coupled with the off-shoring of most of our manufacturing base, can we conclude the US’ economic model is one of Financial Mercantilism? Further, is this the end of the Paper Empire?

I wanted to follow up last evening’s discussion on Rand/libertarianism with some commentary.

First off - I wanted to state that even though I very often play the role of Rand apologist, I am most definitely not a acolyte; neither of her nor of any kind of total free-market systems (essentially anarchist, as some seem to believe). Specifically:

1. I believe she truly preaches a selfish philosophy. Her view seems to be generally that any help to those who are less able is counter-productive. As a Christian and as (what I hope) a relatively charitable person I believe this is wrong - that it is our responsibility to help those who are less able and less fortunate than us.

Where I draw the line though is government involvement. I strongly feel that charity is not the government’s responsibility. This is for three reasons - a) It is fraught with fraud; moreso than the also-sometimes-fraudulent private charty, b) It is forced and not voluntary; thus it is government forcing moral ideals upon the people. c) It is usually taken too far, way past the point of actually increasing dependency on the charity. I believe the current extension of unemployment benefits to insane lengths is a good example. There’s no doubt in my mind that these extensions, in addition to increasing our debt, have contributed greatly to the level of unemployment itself.

2. I believe in principle of the Tragedy of the Commons, and that it is the government’s role to get involved in this - because (by its nature) it is a role that otherwise no other entity will take, and thus if if the government doesn’t then society as a whole will be worse off. This, and its converse (”Benefit of the Commons” maybe? - not sure if it has a name) applies to many areas:
- Environmental protection
- National/state/etc parks
- Military
- Some infrastructure, like interstate highways (though I think this is debatable)
- Some level of scientific research (I hold this principle, though haven’t really delved into the details much. A couple of examples would be the CDC and NASA.)
While I think that most libertarians at least believe in the ToC principle, they (my impression at least) are still mostly for a “hands off” approach in government, which I disagree with.

3. I believe that a free-market capitalist system does not preclude regulation - in fact it requires it. Specifically for instance regulations are very much required to prevent fraud. This does also imply/require some level of transparency - e.g. banks need to be audited to ensure they have enough reserves, etc. Actually I believe most libertarians - including Rand - would agree with this. I just wanted to call this out because for some reason some people on HBB don’t feel this to be true.

4. Her writings are indeed very unrealistic from a lot of standpoints. E.g. the protagonists in her story are somehow always single people with no burdens of families, health issues, etc. For the most part (though not always) she does have a relatively fine delineation between protagonist and antagonist - though in the real world such a delineation is much more broad.

5. Aside from that even - she’s a horrible writer.

Usually (as was the case yesterday) the defense of Rand is in response to the initial shot being fired by someone else. I end up being a Rand apologist partly to try and correct misconceptions, and partly because we have swung (and are swinging) so far to the opposite extreme of nanny-statism. And yes I attribute this to both sides of the aisle - Republican and Democrat; though usually in different aspects and degrees.

The residential construction industry seems to be making a strong comeback.
—————————————————————————-
The Wall Street Journal
* EARNINGS
* APRIL 30, 2010, 8:56 A.M. ET

D.R. Horton Swings to Surprise Profit; Orders Soar
BY DAWN WOTAPKA AND NATHAN BECKER

Homebuilder D.R. Horton Inc. swung to a surprise fiscal second-quarter profit, its second-straight period in the black, helped by a focus on key first-time buyers.

In days like these, I hate welfare and wall street…. I just got a nice 20% raise two weeks ago, and today I got the first ‘new’ paycheck.

Total deductions ~25% (not including 401k)

Go free healthcare!
Go bailouts!
Go first-time homebuyer credit!

F8ck the system!!!!!!

20% sounds high and it is. But the UE rate was 16% in 2000 and only dropped to about 9% in the entire decade.

US went from a low of 5% in the mid 2000s to 10% today.

Spain went form a low of 9% to 20% today.

In both countries the rate doubled. Spain just started out in a much worse position. But relatively speaking, Spain and the US are equally worse off compared to their lowest level.

Anybody read the NYT editorial on AZ? No big surprise that they shut off comments after 30 posts. No, not foaming-at-the mouth redneck opposition (though maybe some that were rejected?), but a calm, rational, 4- or 5-to-1 repudiation of their nonsense.

Don’t you have to wonder whether Gollum is shorting its own stock today?

market pulse
April 30, 2010, 10:01 a.m. EDT
S&P downgrades Goldman Sachs to sell

By Greg Morcroft

NEW YORK (MarketWatch) — Analysts at Standard & Poor’s on Friday downgraded shares of Goldman Sachs (GS 148.23, -12.01, -7.50%) to sell from hold and trimmed their price target for Wall Street’s most profitable investment bank to $140 from $180. The rating agency cited a Wall Street Journal report that said the company is now the target of a federal criminal probe into its mortgage dealings as the reason for the downgrade. “Though traditionally difficult to prove, we think the risk of a formal securities fraud charge, on top of the SEC fraud charge and pending legislation to reshape the financial industry, further muddies Goldman’s outlook,” S&P analysts wrote to clients Friday morning. Goldman Sachs shares fell 6.8% in early trade.

Irrational exuberance lives on. Thank you, Fed!

Mark Hulbert

April 30, 2010, 12:01 a.m. EDT

Extraordinary bullishness
Commentary: Nasdaq timers now most bullish in nearly a decade

By Mark Hulbert, MarketWatch

ANNANDALE, Va. (MarketWatch) — These are times that try contrarians’ souls.

Maddeningly, it’s unclear whether the mood out there is too positive (which would be bearish), or too negative (which would be bullish).

On the one hand, individual investors remain profoundly skeptical of the stock market. Domestic equity mutual funds, for example, over the last year have actually suffered a net outflow. That’s extraordinary, since the usual pattern is for investors to pour huge amounts of new money into the stock market in the wake of rallies as strong as the one we’ve experienced over the last year.

Furthermore, according to the latest data for April, there is no sign that this trend is about to change. (Read my Apr. 27 column).

On the other hand, investment advisers are bullish right now — more bullish, in fact, at least by some measures, than they have been in a decade.

Since I devoted a column earlier this week to discussing the mutual-fund flow data, I’m focusing this column on the data showing the mood to be too optimistic.
…

There’s trouble in River City! Beware the 10 pct or so falling knife price drop predicted for the next year. Unless median prices are $80,000 or less in your market, this will more than completely offset the value of the $8,000 tax credit.

Tomorrow’s real estate trouble spots

The housing crisis is expected to get worse in these cities, where buying a home could be a gamble.
…
List: Tomorrow’s Real Estate Trouble Spots

While metros like Miami, Las Vegas and Los Angeles have gained notoriety for plummeting home prices, it’s not those markets that have the most to worry about now. These new housing trouble spots, most of which saw home prices peak after the national average, are set to see major price corrections in the next year. To identify them, Local Market Monitor, a Cary, N.C.-based real estate research firm found the Metropolitan Statistical Areas where it forecast the biggest average-home-price drops in the next 12 months, and where the actual average home price was 10% or more above what it would be without market volatility. Forbes relied on Local Market Monitor to rank each metro.

1. Metropolitan Statistical Area: Atlantic City-Hammonton, N.J.
Equilibrium Home Price: $159,117.00
Overpriced: 54%
12-month Price Forecast: -9%

2. Metropolitan Statistical Area: Provo-Orem, Utah
Equilibrium Home Price: $136,247.00
Overpriced: 44%
12-month Price Forecast:-12%

3. Metropolitan Statistical Area: Portland-Vancouver-Beaverton, Ore.-Wash.
Equilibrium Home Price: $189,818.00
Overpriced: 31%
12-month Price Forecast: -9%

4. Metropolitan Statistical Area: Glens Falls, N.Y.
Equilibrium Home Price: $177,003.00
Overpriced: 22%
12-month Price Forecast: -11%

5. Metropolitan Statistical Area: Bellingham, Wash.
Equilibrium Home Price: $230,024.00
Overpriced: 22%
12-month Price Forecast: -9%

6. Flagstaff, AZ
7. Salt Lake City, UT
8. Charleston - North Charleston - Summerville, S.C.
9. Eugene - Springfield, Ore.
10. Salisbury, Md.

FRIDAY SMACKDOWN! (Winner to determine nation’s policy)

WAR AND PEACE vs ATLAS SHRUGGED

Lets get it on!

Atlas Shrugged by Ayn Rand and War and Peace by Leo Tolstoy are two great novels written to share two conflicting philosophies with their readers. Their philosophies are so different that Rand once said “I cannot stand Tolstoy . . . his philosophy and his sense of life are not merely mistaken, but evil…

The philosophies in Atlas Shrugged and War and Peace differ in their views on human rationality, reality, the purpose of life, happiness, religion, and free will.

In Atlas Shrugged, Rand emphasizes rationality as the basis of our humanity. …..In War and Peace Tolstoy illustrates the irrationality of mankind by showing how often we do things that are contrary to our desires…

In War and Peace Tolstoy shows his belief in an unseen force that governs the actions of the masses. He says that the only way to explain the events that happened is belief in an unseen force that is beyond human reason. This contradicts Rand’s belief that reason is the only way to discern truth…

Ayn Rand believed that the purpose of life is for man to pursue his own happiness (Atlas Shrugged 927) and to exist for his own sake with a rational self interest (”Introducing Objectivism”). She also believed that for a man to truly live he must have reason, purpose, and self-esteem (Atlas Shrugged 932). She said that living for the good of others forces you to admit that you are worth less than the rest of society (Atlas Shrugged 943) and that you shouldn’t sacrifice your values for the sake of anyone (Atlas Shrugged 923). In fact one of the protagonists in Atlas Shrugged proudly declares “I’m selfish, conceited, heartless, cruel. I am. I don’t want any part of that tripe about working for others. I’m not”..

Rand has an extremely negative view of religion. She says that if those who believe in God declare good to be a god who is beyond man’s comprehension, then they invalidate man’s rationality and consciousness

In War and Peace Tolstoy shows religion positively. He shows how religion isn’t just a system of beliefs used to explain the world but that instead it should be a way of life and demonstrated through actions and words.

Atlas Shrugged emphasizes free will a great deal. It emphasizes the ability of those who were being oppressed by the government to stop the oppression by simply withdrawing from society

In War and Peace Tolstoy emphasizes the lack of control we have over the people around us. He says that large events cannot be caused by one man’s will (1222) and says that we have free will in respect to our own actions (raising your hand) but when other people are included nothing is guaranteed.

Tolstoy also says that great men’s actions aren’t really the result of any special genius or ability but are really caused by series of coincidences that just happen to benefit them. Another point he makes is that collectively humans seem to be influenced by an unseen divine force and also seem to follow certain historical laws.

In conclusion, Atlas Shrugged and War and Peace have very different philosophies. While Rand emphasizes the rationality of humans, Tolstoy emphasizes the irrationality. While Tolstoy stresses the existence of an unseen force unable to be explained through reason, Rand declares reality to be only determinable by reason. When Tolstoy says the purpose of life is to love humankind, Rand says a selfish and rational ambition for happiness is the reason for our existence.

Tolstoy and Rand seem to agree on a definition for happiness but Tolstoy includes loving others and being loved in his definition, something Rand excludes from hers. Rand shows a passionate dislike of religion due to its disagreement with her philosophy, while Tolstoy shows a positive attitude about religion due to its agreement with his. While Rand shows her belief in the free will of humankind, Tolstoy shares his belief that individually we have free will while collectively we are bound by an unseen force and historical laws.

My conclusion: Both have something to say but I’d base an entire economic system on neither.

http://www.associatedcontent.com/article/1783034/a_comparison_of_the_philosophies_in.html?cat=37

Anyone else read the “Looting Main Street” article in Rolling Stone April 15?
Matt Taibbi wrote about bonds issued to Jefferson County, Alabama to build a new sewer system. A bunch of people were charged with accepting bribes, JP Morgan was fined. At the end of the article, he writes, “…the way that big banks like JP Morgan and Goldman Sachs have systematically set out to pillage towns and cities from Pittsburgh to Athens…isn’t capitalism. Its nomadic thievery.” I like that: Nomadic Thievery.

I didn’t quite understand why so many municipalities around the world were broke, but now I do. Even after the SEC canceled JP Morgan’s fees to Jefferson County, it still owes debt equivalent to $4800 per resident. It just goes to show that government from top to bottom needs an enema.

From a guy who works at BofA used to be Countrywide

I’m currently working on an enhancement a foreclosure application because the business is expecting a big surge.
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a7s4OSax0Y.0

MHA projects are moving fast in my group; lots of new analysis and programming work http://homeloanhelp.bankofamerica.com/en/mha-announcement.html
http://makinghomeaffordable.gov/

By the way, I was on travel status last week and missed Bank Failure Friday (BFF). I just realized - it was an all-Illinois edition, with seven banks in that state taken down.

Anyone seen a bunch of strange men flying into their state? What state gets it today? I got my eye on Minesota. Just thinking the FDIC waiting until it was warmer to go to the northern states, having concentrated on southern states during the winter.

CNBC

Call it the do-it-yourself stimulus.

With tonight’s expiration of the government’s homebuyer tax credit, real estate firms, developers and home owners are already taking matters into their own hands-offering incentives or refunds to buyers after the credit expires.

The expiring credit-which gives first-time homebuyers and some current homeowners a tax credit of up to $8,000 if they sign a contract by midnight tonight and close the sale by June 30-has been widely viewed as helping boost home sales in recent months.

For that reason, some real estate firms are pushing home sellers to offer incentives of their own, usually by agreeing to refund some of the purchase price to the buyer

ie lower your price without actually lowering my commission, or dropping the value of housing so that my customers get scared.

Friday April 30, 2010

Bloomberg
High-Frequency Trading Faces EU Market Abuse Probe (Update1)
April 30, 2010, 8:20 AM EDT

(Adds Barnier’s comments on fines in eighth paragraph.)

By Ben Moshinsky

April 30 (Bloomberg) — High-frequency trading faces a European Union clampdown, as regulators investigate whether traders could use the practice to manipulate financial markets.

The European Commission, the EU’s executive arm, said it’s summoning hedge funds and banks “in the coming months” for fact-finding talks on the practice, as it considers stricter rules on market abuse due before the end of the year.
…
High-frequency trading entails hedge funds and other firms using powerful computers to execute orders in milliseconds to profit from tiny discrepancies in the prices of shares.

“The high-frequency trading case is difficult because no- one is saying it does any harm,” Simon Gleeson, a regulatory specialist at Clifford Chance LLP, said in a telephone interview in London today. “No one has complained about it.”

Abusive Trading

The current Market Abuse Directive, which came into force in 2005, sets common rules across the 27-nation EU. The law requires firms to report suspected abusive trading to regulators.

“I will look at the Market Abuse Directive to extend its coverage,” Barnier said in a speech in London last month. “We cannot have different sanctions in case of non-application of the rules or abuse.”

Changes to the law would need to be approved by finance ministers and members of the European Parliament before entering into force.

The practice now accounts for 42 percent of the U.S. market, Celent, a consulting firm in Boston, said in a study in December. Proponents of the technique say it has lowered fees, boosted liquidity and increased volume. Firms such as Citadel Investment Group LLC, Getco Holding Co LLC, and Optiver Trading U.K. Ltd. operate high-frequency trading in Europe.
…

http://www.larouchepub.com/pr_lar/2010/lar_pac/100428lar_eurozone_meltdown.html

Eurozone meltdown spurs calls for mega-bailout (of bankers with public money).

The stock market always goes up, even in months that end with selloffs! Buy now or get priced out forever.
———————————————————————————- * APRIL 30, 2010, 4:44 P.M. ET

US Stocks Cap Worst Week Since January But Post Monthly Gains

By Donna Kardos Yesalavich
Of DOW JONES NEWSWIRES

NEW YORK (Dow Jones)–U.S. stocks tumbled Friday, led by financial stocks including J.P. Morgan and Bank of America, following the report of a criminal probe into Goldman Sachs.

While stocks ended in negative territory for the week, marking the biggest weekly declines since January, they still rose for April, marking the third-straight month of gains.

The Dow Jones Industrial Average fell 158.71 points, or 1.42%, to 11008.61. The measure fell 1.75% this week, snapping an eight-week winning streak, but rose 1.4% in April.

All of the DJIA’s components ended Friday in the red, led by J.P. Morgan, which dropped 1.42, or 3.2%, to 42.58. Bank of America was also particularly weak with a slide of 47 cents, or 2.6%, to 17.83. The declines in the financial sector came as investors grew increasingly concerned about how a criminal investigation into Goldman could eventually affect other big banks.

The probe, being conducted by federal prosecutors, is looking into whether Goldman or its employees committed securities fraud in connection with its mortgage trading. Goldman, which isn’t a DJIA component, tumbled 15.04, or 9.4%, to 145.20. It dropped 14.9% this month, the stock’s worst monthly loss since October 2008.

The Nasdaq Composite fell 50.73, or 2.02%, to 2461.19. It climbed 2.64% in April but dropped 2.73% this week, ending an eight-week winning streak.

The Standard & Poor’s 500 slipped 20.09, or 1.66%, to 1186.69. This week, it fell 2.51%, although it climbed 1.48% this month.

http://www.larouchepub.com/other/2010/3717goldmansachs_bric.html

Goldman Sachs debacle raises questions about BRIC.

http://www.larouchepub.com/pr/2010/100429euro_collapse_intv.html

EIR To Publish Exclusive Interview With Anti-Euro Professor

April 29, 2010 (EIRNS)—Prof. Joachim Starbatty, one of the four German Professors who will file a constitutional complaint against the EU bailout policy, has given an exclusive interview [that will] come out in the next issue of EIR.

In the interview, Starbatty says that as soon as the German government issues a bill for participation in the Greek bailout, the four professors “will proof the text and immediately act.” If the Constitutional Court supports the complaint, “this will create a dynamic situation. This means that an exit of Germany [from the Euro] is not excluded.” If this happens, other nations would follow, giving birth to “a new, stable bloc,” he said. This would be less painful than it seems, and “the United States would gain an ally in any future reorganization of the world currency system and the global economy”.

The EU intention to introduce a control mechanism on national budgets amounts to “the development of the EU into a quasi-federal state through the back door. This conflicts with the ruling of the German Constitutional Court on the Lisbon Treaty.” Article 136 of the Lisbon Treaty, used by EU leaders to back their intentions, “is no basis for a transfer of political competencies. The Bundestag must express its opinion on that.”

Prof. Starbatty exposes the shock therapy to be imposed on Greece as “fatal.” He added: “It is like German Chancellor Brüning’s policy in the early 1930s: in a severe recession, to cut expenditures, increase taxes, freezing and cutting wages. Brüning did that in order to gain reputation on the international capital markets. The Greeks are currently in a similar situation. No other industrial country carries out this Brüning-like policy because it leads from a recession to a depression.”

Instead, Greece should leave the European Monetary Union (EMU) and its “Euro-debts should be cut down according to the [currency] devaluation. The banks should participate in the consolidation; they consciously took a high risk.”

They just effectively postponed the downturn in California for God knows how long.

http://www.dsnews.com/articles/california-to-implement-four-distinct-programs-with-hardest-hit-funding-2010-04-30

Now I understand better why the banks have not been processing the foreclosures in my area and pushing them out infinitum. Free Money for the Banks - again.

They are impressive to watch, they are getting what they want, can kicking and therefore successful in their endeavor.

Well, since “Ki Ki Dee” fired me as an “entry level cost benefit analyst … all’s I got to say is:

BWAHAHAHicHAHAHicHAHAHAHAHicHAHAHic* (DennisN™)

11 dead , $560 million dollar rig gone, 5,000 barrels per day (42 x 5,000 = 220,000 gallons of crude per day, est.), a slick the size of Jamaica, US military involvement, Shell + everyone else giving a helping $$$$$$$ hand, Insurance claims to follow, damaged environment & animals…

verses,

$500,000 for an acoustic automatic shut-off valve

“Hwy50, …”you’re fired!” Ki Ki Dee

By Anna Driver and Bill Rigby, Reuters News

US Gulf oil spill set to trigger lawsuit flood:

“This is a multi-billion dollar event,” said Keith Hall, an attorney with the firm Stone Pigman in New Orleans. “There are going to be huge environmental clean-up costs.”

The explosion killed 11 workers and sank the rig. The oil well, which the companies have been unable to cap, was gushing about 5,000 barrels of crude per day.

The rig was owned and operated by Zug, Switzerland-based Transocean Ltd (RIGN.S). British oil major BP Plc (BP.L) hired Transocean to drill the well, and oilfield services companies Halliburton Co (HAL.N) and Cameron International Corp (CAM.N) were also doing work on the rig.

Question about foreclosures: There is a house in my Maryland neighborhood that just went on the market as a foreclosure, listed on the MLA. I went to go look at it, and I like it, but am suspicious. Deutsche Bank is listed as the owner, with a Florida address. They took possession of the house in March for $387,000; it last sold in 2007 for $582,000. It is now on the market for $317,000. Why would the bank be willing to take a $70,000 haircut after only one month? Does this suggest the house has major issues and they are just cutting their losses? After my tour, I believe the house needs a new roof, re-painting inside, minor drywall and trim work, new light fixtures (most have been removed, but what are left are still operational); a French drain installed in one section of the basement, and possibly a furnace replacement (from the current oil to maybe a heat pump). Would that be enough work to cause the $70k adjustment? Of course I would have an inspection first if I were going to make an offer … but I’m not at that stage yet. Still mulling it over. Appreciate any insight, thanks.

“They” have forever lost “Us”.

I was flying my airplane today far away from this blog (mercifully for all of you - I am sorry for posting my venting incessantly latley) and I thought about things. The biggest net effect of this whole F-ed up thing - you know all of the exend and pretend, bailout the irresponsible bs - is that forever “We” (the real free-thinkers, and if you ask me the only people that will ever matter on this planet) have forever grown mistrustful of our leaders. And I don’t just mean the usual amount of mistrust that all of us have always had since our teen “question authority” days. This time it truly is different (and Elena if you ever were still monitoring this blog since Valentine’s day when you last posted here, please aknowledge). “We” will never trust “Those people” ever again. I feel that somehow this is actually significant. I know you might not agree with me right now, but I know that I am right. “We” really do matter. Thank you Ben for at least letting me at least say this.

So, begs the question: Who’s the head steer at GoldenmanSucks?

Ap news, RAMSAY, Mont.
Cletus, the nearly 3,000-lb steer sold at auction:

“He had a nice life, just eating and sleeping,” McIntosh said.

Cletus was used as the lead steer, which keeps the herd calm and headed in the right direction. A steer is a castrated male.

This financial reform legislation is a band-aid on a gunshot wound which is expected to fix nothing in the broken financial system.

Friday, April 30, 2010

Listen to the show
Weekly Wrap: Goldman Sachs, reform
A Wall Street sign

Freelance business journalist John Carney and Fortune Magazine’s Leigh Gallagher talk with Tess Vigeland about the latest with Goldman Sachs and where we are with financial reform.

Always bear in mind that a closely-watched pot never boils over.

Friday, April 30, 2010

Listen to the show
The mortgage crisis
Why the rise in ’strategic’ defaults?
Mortgage help

A new study finds a spike in the number of so-called “strategic” defaults. That’s when someone can afford payments, but abandons a home because it’s worth less than the mortgage. Jeff Tyler reports.

Tess Vigeland: If you haven’t yet signed on the dotted line to buy a house, you will have to do it without Uncle Sam’s help. The homebuyer tax credit expires today. Gotta have a contract in hand. But there is also news today on the other end of the market. A new study finds a spike in the number of so-called “strategic” defaults. Also known as walking away from your mortgage.

Marketplace’s Jeff Tyler has more on what’s behind the willingness to just hand the keys to the bank.

Jeff Tyler: The Financial Trust Index is a quarterly snapshot of just that — our collective trust in the nation’s financial system. The study found that the number of strategic defaults rose to 31 percent of all U.S. foreclosures in March. That’s up about 10 percent from a year ago.

Paola Sapienza: It’s a little bit like a contagion effect, like a disease.

That’s Northwestern University finance professor Paola Sapienza, who co-wrote the study. She says people consider more than their bank balance when thinking about defaulting on a home.

Sapienza: Do I have to move my kids to a different school? Do I lose my friends because they are looking at me in a way that I don’t like that, so here is the social stigma.

But Sapienza’s research found that fear of social stigma is eroding.

Sapienza: If everybody else is doing it, then it may become more acceptable, socially.

Overall, foreclosure activity is up about 16 percent compared to the same time last year.

Rick Sharga follows foreclosures for Realty Trac. He’s noticed what he calls a new mentality.

Rick Sharga: I think we’re looking at a different social construct than what we’ve seen historically, where your home was your castle and you would fight just about to the death to do anything you could to avoid losing it.

He says we could see another avalanche of foreclosures begin this summer, as adjustable loans reset at higher rates. In psychological terms, those higher rates could help borrowers rationalize defaulting on a home.

I’m Jeff Tyler for Marketplace.

Given that the state is $20 bn or so in the hole, where do they find all this money to give away to home buyers?

Note that $200m = 20,000*$10,000 = enough stimulus credit for 20,000 additional CA housing purchases. Sounds like enough to keep the CA market artificially liquid until the next stimulus program starts. Meanwhile, UHS can continue with their fictional narrative about how the housing market is back on its own two feet.

Friday, April 30, 2010, 1:55pm PDT
State opens homebuyer tax credit

Sacramento Business Journal - by Michael Shaw Staff writer

A new homebuyer tax credit is available in California beginning Saturday. The credit will provide $10,000 or 5 percent of the purchase price of a newly built home, and a $10,000 tax credit for first-time purchasers of an existing home.

Gov. Arnold Schwarzenegger in March signed the credit into law.

The credit will remain available through December 31, or when funding is exhausted, whichever comes first. The $200 million allocated for the program is split evenly, with $100 million going to purchasers of new homes and $100 million going to first-time buyers of existing homes.

Read more: State opens homebuyer tax credit - Sacramento Business Journal:

You can be sure that any endeavor so heavily dominated by Uncle Sam’s footprint will turn into a huge money loser down the road. And I expect the buyers who got into these government-sponsored loans to complain loudly when they realize they caught themselves falling knives with Uncle Sam’s encouragement.

* The Wall Street Journal
* HOMES
* APRIL 30, 2010, 7:46 P.M. ET

U.S. Role in Mortgage Market Grows Even Larger
By NICK TIMIRAOS

The U.S. government’s massive share of the nation’s mortgage market grew even larger during the first quarter.

Government-related entities backed 96.5% of all home loans during the first quarter, up from 90% in 2009, according to Inside Mortgage Finance. The increase was driven by a jump in the share of loans backed by Fannie Mae and Freddie Mac, the government-owned housing-finance giants.

By providing a steady source of liquidity to the mortgage market, the government has helped housing markets to stabilize. However, “Fannie and Freddie have to get smaller and less relevant in order to revamp them, and instead, every day they’re getting bigger and bigger and bigger,” said Paul Bossidy, chief executive of Clayton Holdings LLC, a mortgage analytics firm.

The collapse of the mortgage market in 2007 steered more business to the Federal Housing Administration, which insures loans, and Fannie and Freddie, which were taken over by the government in 2008 as rising losses wiped out thin capital reserves. Congress also increased the limits on the size of loans that Fannie, Freddie and the FHA can guarantee, raising the ceiling to as high as $729,750 in high-cost housing markets such as New York and California.

Over the past year, rates on those “conforming-jumbo” loans have improved, and more banks have stepped up their offerings, helping to boost the government’s already hefty share of the mortgage market, said Guy Cecala, publisher of Inside Mortgage Finance. By the end of 2009, the share of jumbo loans that were sold or backed by government entities exceeded the non-government jumbo share of the market.
…

There might be a great opportunity for anyone left financially solvent at the point when the housing market finally bottoms out to go with an interest-only (100% tax deductible) Fannie loan.

* The Wall Street Journal
* REAL ESTATE
* APRIL 30, 2010, 6:24 P.M. ET

Fannie Mae Tightens Underwriting for Interest-Only Mortgages

BY NICK TIMIRAOS

Fannie Mae on Friday said it will tighten lending standards on adjustable-rate mortgages and “interest-only” loans that helped fuel the housing bubble and have led to a disproportionate share of losses for the mortgage-finance giant.

The changes, which will take effect in September, will require lenders to qualify borrowers based on whether or not they can afford potentially higher payments once adjustable-rate loans reset, and will require much more stringent criteria for interest-only borrowers.
…

* The Wall Street Journal
* BUSINESS
* MAY 1, 2010

FDIC Closes Three Banks in Cleanup in Puerto Rico
Four banks in Michigan, Missouri, Washington Are Also Shuttered

By MATTHIAS RIEKER and DAMIAN PALETTA

WASHINGTON – Regulators shuttered seven banks in Puerto Rico, Michigan, Missouri, and Washington Friday as the banking sector continues to shrink under the weight of bad loans, bringing the total number of failures this year to 64.

Regulators are still expecting the total number of failures in 2010 to eclipse the 140 that failed last year, but Federal Deposit Insurance Corp. Chairman Sheila Bair said Friday that conditions in parts of the banking industry were improving and that fewer banks would fail this year than previously estimated.

The seven failures cost the FDIC’s deposit insurance fund more than $7 billion.
…

The Financial Times
Papandreou braced for fresh fury
By Kerin Hope
Published: April 30 2010 22:35 | Last updated: April 30 2010 22:35

George Papandreou stands at the centre of a storm that could soon turn into a hurricane.

Social unrest looms as the Greek prime minister’s government braces itself for a wave of strikes and street protests in response to the launch next week of the toughest economic reform programme ever undertaken by Athens.

His Panhellenic Socialist Movement (Pasok) is increasingly divided over the harsh measures needed to stabilise the soaring public debt and put the country back on track for growth.

Mr Papandreou’s response has been a mixture of nationalist rhetoric and behind-the-scenes consensus-building – hoping to stop the volatile situation getting out of hand.

The tensions stirred by the country’s debt crisis run deep. Greeks of all political persuasions feel resentful over the humiliating prospect, as they see it, of surrendering sovereignty to the International Monetary Fund and Greece’s eurozone partners.

The IMF’s imminent arrival also taps into an enduring seam of anti-Americanism in Greek politics.

To left-of-centre Greeks, the government’s willingness to take instructions from a Washington-based supranational institution seems a throwback to the cold-war era, when US political and military support helped rightwing Greek governments stay in power.

“This is the most difficult moment the country has faced since 1974,” said Andreas Loverdos, the social affairs minister.

He was referring to the summer when Greece’s military regime collapsed within days of threatening to go to war with Turkey over its invasion of northern Cyprus – and democracy was unexpectedly restored.

“We’ve come under tremendous pressure to take very painful measures indeed,” said Mr Loverdos, who had to bring forward his plans for a gradual consolidation of the state pension system after tough negotiations this week with the visiting team from the IMF and the European Union.
…

Is anyone in the mood for a game of the sovereign debt version of kick the can?

The Financial Times
Lessons for the Greek crisis from Philip II of Spain
By Alan Beattie
Published: April 30 2010 21:31 | Last updated: April 30 2010 21:31

If you want to go back to the roots of Greece’s financial crisis, you could always start with Philip II of Spain. Born in 1527; acceded to the Spanish throne in 1556; defaulted on the national debt in 1557, 1560, 1575 and 1596; died in 1598. Now there’s a sovereign who knew how to renounce sovereign debt. Philip would leave an Argentine finance minister standing.

The path of default he laid down has seen heavy traffic across the centuries from monarchies and republics, democracies and dictatorships. Europe – and increasingly the world – is now watching the chaos in Greece and wondering if this is a Lehman Brothers of the public sector. So it is striking that after all this time the world still treats restructuring, or the rewriting of sovereign debt contracts, as an act of extraordinary calamity.

Despite the sounds of garment-rending catastrophe that generally accompany them, defaults are not at all unusual. Outstanding historical research by Ken Rogoff and Carmen Reinhart, which forms part of their drily titled book This Time is Different, shows defaults coming in waves. Some reflect the cost of maintaining armies: there was a flood of defaults during the Napoleonic wars. Others simply reflect a downturn when a sudden stop in capital flows and economic growth makes previously tractable debt burdens unsupportable.

The wave of defaults triggered by the Great Depression extended to the 1950s, when nearly half the countries in the world were in default. Even the US in effect repudiated obligations by legislating forcibly to sever a link between Treasury bonds and the gold price. Greece itself built up a rich history of welching on its debts. Crises starting in 1826 shut it out of capital markets for 53 years; its Depression-era external default lasted from 1932 until 1964.

In 2010, there are widespread sovereign debt problems. They are unusually concentrated in the advanced world. The proximate cause is governments taking on massive private sector debt as part of their financial sector bail-outs. But that came on top of nearly a decade of underlying fiscal deficits in many rich countries, funded by borrowing and often masked by a short-lived surge in tax revenue pumped up by a housing boom and an asset bubble.

So that is how we got here. And there is a big divide between official and private views of how to get out. Most economists and investors think Greece will have to restructure – the fiscal arithmetic is too unpleasant and Greek society too divided to deliver the cuts needed. But European finance ministers and the International Monetary Fund insist that is unthinkable.

Public musing about restructuring may indeed incur costs. Yet history suggests that hanging on can make matters worse. On the way to the world’s biggest sovereign default in 2001, Argentina managed to extract misconceived IMF loans with the implied threat that the fund would be blamed if it pulled the plug. In the meantime, Buenos Aires undertook a bond swap, which bought it a few months’ respite at the cost of a rise in the debt burden, worsening the default when it came.

Although there are differences, Greece looks increasingly like Argentina on the Aegean. If Athens does start to draw down large amounts from the eurozone-IMF rescue loan package, it could merely throw good (public) resources after bad (private) money. If Greece loads up on IMF and eurozone government debt it will merely push existing creditors further down the pecking order in any restructuring without making much difference to the probability of default.
…

Friday April 30, 2010

Bloomberg
Rogoff Says Greece May Not Be Europe’s Last Bailout (Update1)
April 26, 2010, 5:53 AM EDT

More From Businessweek

* Spain’s Tax-Dodging Landlords Add to State’s Burgeoning Debt
* Dollar, Euro, Pound Are All ‘Ugly Sisters,’ HSBC’s King Says
* Rand Rallies to 7-Week High as Sarkozy Pledges Greece Support
* Papandreou Aid Request Angers Greeks as Cuts Readied (Update1)
* Feldstein Says Greece Will Default and Portugal May Be Next

(Updates yield spreads in ninth paragraph. See {EXT3 } for more on Greece and {GMEET } for IMF meetings.)

By Simon Kennedy

April 26 (Bloomberg) — Greece is unlikely to be the last euro nation to need an International Monetary Fund bailout, with Ireland, Spain and Portugal “conspicuously vulnerable,” said Harvard Professor Kenneth Rogoff.

“It’s more likely than not that we’ll need an IMF program in at least one more country in the euro area over the next two to three years,” Rogoff, a former IMF chief economist who has co-authored studies of financial and sovereign debt crises, said in a telephone interview. “The budget cuts needed in Europe in many countries are profound.”

Portuguese, Spanish and Irish bond yields jumped last week as investors questioned their ability to reduce budget deficits and avoid Greece’s fate. Greece on April 23 triggered a 45 billion-euro ($60 billion) rescue package from the IMF and the euro region after its soaring deficit sent borrowing costs surging and sparked concern about a default.

At 14.3 percent of gross domestic product, Ireland had the euro region’s largest deficit last year. Greece’s was 13.6 percent, Spain’s was 11.2 percent and Portugal’s 9.4 percent.

The likelihood is “better than 50-50” that others in the 16-nation euro area will end up requiring help from the Washington-based lender, said Rogoff, 56. He expects the IMF will eventually dispatch more loans to Greece than the as-much- as 15 billion euro it’s currently offering.
…