[sunnykerr]

US shutdown is starting to hit business, says Commerce Secretary US Commerce Secretary Penny Pritzker has warned that business is starting to suffer from the federal shutdown. Her comments at the Asia-Pacific Economic Cooperation (Apec) came as leaders gathering for the summit voiced worries about the US situation. Philippine President Benigno Aquino said that what happens in the US "affects us all". On Friday, the US defence contractor Lockheed Martin said it would put 3,000 workers on unpaid leave. The US government closed non-essential operations on Tuesday after Congress failed to agree a new budget. And President Barack Obama cancelled a scheduled trip to Asia because of the shutdown. "The shutdown is not good for business. It's not good for the economy," Ms Pritzker said. One consequence of the shutdown had been her department's inability to collate vital economic data. "We're a huge source of data for American business and that is a problem... It's affecting businesses and it's affecting their ability to get data," she said. From Monday, Lockheed will put 3,000 staff on leave, but the defence giant said this number would rise if the shutdown continued. "I'm disappointed that we must take these actions and we continue to encourage our lawmakers to come together to pass a funding bill that will end this shutdown,'' Marillyn Hewson, Lockheed's chief executive and president, said in a statement. "We hope that Congress and the Administration are able to resolve this situation as soon as possible," she added. The announcement followed United Technologies' decision to temporarily lay off 2,000 employees. The company, which makes Blackhawk helicopters, said some manufacturing had been halted because there were no government inspectors working to sign off products. Global impact The widening impact of the shutdown sparked concern at Apec meeting in Bali on Sunday. Mr Aquino said: "The US economy is the number one economy in the world, what happens there affects all of us. "The world economy obviously is not in a position to withstand too much shock at this time when we are just recovering as a global economy." Meanwhile, Chilean President Sebastian Pinera said the US had to confront its fiscal problems "in a better way than they are doing it now with shutting down the government". Mr Obama is refusing to negotiate with the Republicans over the budget issues until they pass a temporary bill to reopen the government. He also wants agreement to raise the $16.7 trillion US borrowing limit, to avoid the country defaulting on its debts.

I want to say that, now that it's affecting businesses, the Republicans will have to budge, but I doubt it.

They haven't before, when they could, and this was a foregone conclusion.

Plus, I very much doubt the captains of industry are having lean days because of this anyway.

[quaist]

Republicans must have been aware of what's gonna come of their stalling tactics beforehand.

But at least pressure on them is clearly mounting.

[sunnykerr]

I honestly think they believe the GOP think enough people will side with them in the end.

Or that, if they stall long enough, the Democrats will get landed with "their share" of the blame.

Which is insane.

They're throwing a tantrum over the government insisting on putting forward a health-care plan that will serve everyone and be sustainable.

But, yeah, they only listen to corporations, so maybe now that businesses have started to feel the burn, they'll start listening.

[quaist]

Hopefully, yeah.

Meanwhile, we're apparently about to see the first Federal Reserve chairwoman. Telling from the statements of people who ought to know though, she's gonna continue her predecessor Bernanke's path by and large.

Obama to Pick Yellen as Leader of Fed, Officials Say WASHINGTON — President Obama will nominate Janet L. Yellen as chairwoman of the Federal Reserve on Wednesday, White House officials said Tuesday night, ending an unusually prolonged and public search to fill one of the most important economic policy-making jobs in the world. Ms. Yellen, 67, has been the Fed’s vice chairwoman since 2010, when Mr. Obama nominated her to the post and she was easily confirmed on a voice vote by the Senate. She would be the first woman to run the central bank. She is also expected to win bipartisan support for her new role in the Democratic-controlled Senate, said Senator Charles E. Schumer of New York. But some Republicans could throw up hurdles. Senator Bob Corker of Tennessee voted against her appointment as vice chairman because of what he called “her dovish views on monetary policy,” and he was already expressing reservations on Tuesday night about her nomination for the top job. “We will closely examine her record since that time,” said Mr. Corker, who sits on the Banking Committee, which must clear her nomination before it moves to the full Senate. “But I am not aware of anything that demonstrates her views have changed.” Ms. Yellen’s nomination was widely expected, but she was not thought to be Mr. Obama’s first choice for the job. For months, the speculation was that the president would nominate Lawrence H. Summers, a former adviser of Mr. Obama’s. But Mr. Summers dropped out of the running on Sept. 15 in the face of opposition from Democratic senators. Some in the administration blamed Yellen advocates for churning up the opposition to Mr. Summers. A native of Brooklyn, she was previously president of the Federal Reserve Bank of San Francisco, a White House adviser, a Fed governor during the Clinton administration and a longtime professor at the University of California, Berkeley. The most important decisions awaiting Ms. Yellen involve how quickly to wind down the expansionary monetary policy engineered by the current chairman, Ben S. Bernanke. Ms. Yellen worked closely with Mr. Bernanke, whose term ends on Jan. 31, in shaping and building support for that approach in an effort to stimulate the economy and bring down unemployment. If anything, Ms. Yellen has wanted the Fed to take even more aggressive measures to lift growth, believing the risks of inflation are modest. But her views and Mr. Bernanke’s appear close enough that markets have considered her potential ascension a sign of continuity at the Fed. Both Ms. Yellen and Mr. Bernanke will join the president at 3 p.m. Wednesday in the East Room of the White House for a formal announcement. Since 2009, Mr. Obama had anticipated that he might eventually nominate Mr. Summers, who for the first two years of his presidency was chief White House economic adviser as director of the National Economic Council. Mr. Obama came to admire Mr. Summers, a former Treasury secretary in the Clinton administration, for the advice he provided at the depths of the recession and financial crisis. In contrast, he does not know Ms. Yellen well. Mr. Obama’s loyalty to Mr. Summers pitted him this summer against many progressives in his party’s base, as well as liberal Democratic senators, who wanted him to make history by nominating Ms. Yellen. Senator Sherrod Brown of Ohio, whose letter endorsing Ms. Yellen and signed by a third of Democratic senators helped turn the tide against Mr. Summers, said in a statement late Tuesday, “Today is a historic moment for the Federal Reserve, for women everywhere and for all of us who care about job creation.” Administration officials and allies said the timing of the Yellen announcement had nothing to do with the fiscal impasse between the White House and the Republican-controlled House. Instead, they said, it was a coincidence caused by Mr. Obama’s delay in deciding finally on Ms. Yellen, and getting her vetted, after Mr. Summers withdrew from contention.

[sunnykerr]

Well, she apparently worked closely with him, so I guess it'll make the transition somewhat easier, no?



It's hard to tell.

Economically speaking, she's been handed a hornet's nest, hasn't she?

[quaist]

Yeah, it's certainly not the easiest of jobs she 'inherited'...

[sunnykerr]

Never was going to be, of course.

That's part and parcel of the United States being the largest in the world.

The fact that it's a crapshoot right now just makes a complicated situation worse, really.

[quaist]

3 American Professors Awarded Nobel in Economic Science WASHINGTON — Three American professors — Eugene F. Fama, Lars Peter Hansen and Robert J. Shiller — were awarded the Nobel Memorial Prize in Economic Science on Monday for competing theories about the movements of asset prices. The three men, who worked independently, were described as having collectively illuminated the financial markets by showing that stock and bond prices moved unpredictably in the short term but with greater predictability over longer periods. The prize committee said these findings showed that markets were moved by a mix of rational calculus and human behavior. The decision to honor Mr. Fama and Mr. Shiller as contributors to a shared understanding of financial markets, however, papered over differences in their work that have been enormously consequential in recent years. Mr. Fama was honored for his work in the 1960s showing that market prices are accurate reflections of available information. Mr. Shiller was honored for circumscribing that theory in the 1980s by showing that prices deviate from rationality. The difference in a nutshell? Mr. Shiller issued prescient warnings about the housing bubble, while Mr. Fama continued to insist, even after the financial crisis, that prices had been rational. “I don’t even know what a bubble means,” he said in 2010. Mr. Hansen was honored for technical contributions that have made it easier to evaluate reasons for the movement of asset prices. His work has helped expand the extent to which rational considerations can explain price movements. Mr. Fama and Mr. Hansen are professors at the University of Chicago; Mr. Shiller is a professor at Yale University. Their work “laid the foundation for the current understanding of asset prices,” according to a statement from the Royal Swedish Academy of Sciences, which awards the annual prize. Mr. Fama, 74, was honored for showing that asset prices are “extremely hard to predict over short horizons.” His work, beginning in the 1960s, showed that asset prices moved efficiently in the short term, quickly incorporating new information and leaving little opportunity for predictable profits. The theory basically asserted, in the words of the economist Burton G. Malkiel, that “a blindfolded monkey throwing darts at a newspaper’s financial pages could select a portfolio that would do just as well as one carefully selected by experts.” It has influenced the way many people invest, contributing to the popularity of index funds that invest in broad, diversified baskets of equities and other assets. Mr. Shiller, 67, introduced in the early 1980s an important caveat to the idea that markets operate efficiently, finding that stock and bond prices show greater predictability over longer periods. Mr. Shiller and other economists see evidence that these movements cannot be entirely explained by rational decision-making, and instead reflect the irrational behavior of investors. In 2000, Mr. Shiller published “Irrational Exuberance,” a book that detailed his view that stocks were overvalued at the time. The market crashed soon thereafter. Mr. Shiller’s work does not contradict Mr. Fama’s findings about the short-term movement of stock prices. But it has helped to underpin a new generation of economic research into the mechanics of bubbles. The committee also honored Mr. Hansen, 60, for his work in developing a statistical method for testing theories of asset price movements, which has helped to show that risk measures can explain some price changes. Mr. Shiller, reached by phone during the news conference announcing the award, described his reaction. “Disbelief,” he said. “That’s the only way to put it.” Mr. Fama, asked whether he had anticipated this moment, said, “I didn’t want to presume that I would win.” He added, “I knew that I would be thrilled, of course.”

Once again, not sure what or if any impact this is gonna have on our day-to-day lives, but most certainly these three men are somewhat smart minds...

[sunnykerr]

As far as I can tell, they got the prize for having been able to tell that things weren't on the up-and-up, but I'm not sure I understand any of it.

[quaist]

I didn't even know that finding out whether a city's bankrupt is that difficult/long a process

U.S. Bankruptcy Court to decide if Detroit really is broke (Reuters) - Is Detroit bankrupt? A federal judge began hearing arguments Wednesday morning in Detroit on the largest municipal bankruptcy filing in U.S. history that will ultimately will answer that question. For a city saddled with massive debts and fighting to deliver services to its residents, the answer may sound simple. But the decision by U.S. Bankruptcy Judge Steven Rhodes on whether Detroit is eligible to restructure its debts and liabilities under Chapter 9 of the U.S. Bankruptcy Code that covers municipalities will rest on a slew of complicated issues to be addressed over a multi-day hearing. Prominent politicians and other public officials are expected to testify. Kevyn Orr, the city's emergency manager who has broad powers over Detroit's finances, is expected to testify on Friday, his spokesman, Bill Nowling said by a Twitter message. Michigan Governor Rick Snyder, who appointed Orr, is expected to testify on Monday, Matthew Schneider, chief legal counsel for the Michigan attorney general, told Rhodes on Wednesday morning minutes before the hearing started. Detroit Police Chief James Craig also is expected to testify this week about the city's poor public services, including its sorely strained police department. The need to tackle Detroit's battered public services was one of several issues discussed in opening arguments on Wednesday. "Without solving that problem, there may not be a city to reorganize," Bruce Bennett, an attorney with Jones Day who is representing the city, said in his opening statement. Orr resigned from Jones Day to take the emergency manager position. The hearing will pit retirees, pension funds and unions trying to preserve retirement benefits for city workers against the city in the fight over bankruptcy -- which will determine how Detroit's emergency manager can try and right the city's strained finances. Outside the federal courthouse on Wednesday, about 300 protesters rallied, most of them union members who face cuts to their pension benefits under Orr's plan. They carried signs and chanted slogans saying that banks and not people should be made to feel the pain of any payment cuts the city makes. "Hands off our pensions! Take it from the banks!" they chanted. That Detroit is struggling is no secret. Whether its massive troubles amount to bankruptcy under federal law is still to be decided. More than one-third of the city's residents live below the government poverty line. There are some 78,000 abandoned structures and just 40 percent of the street lights work. The population has shrunk to less than 700,000, from a peak of 1.8 million in 1950, and only 53 percent of property owners paid their 2011 property taxes. THE CITY'S INSOLVENT. NO IT ISN'T. At the multi-day hearing at the Theodore Levin U.S. Courthouse, Detroit's attorneys are expected to tick off arguments meant to meet the standard to prove the legal requirements for Chapter 9 bankruptcy protection. Among the arguments: Detroit had proper authorization to file the case; it is financially insolvent; it negotiated in good faith with its creditors or had so many creditors that such negotiations were not feasible, and it requires bankruptcy protection in order to deal with $18 billion in debt and other liabilities. Objectors have argued that Chapter 9 is unconstitutional and that Michigan's constitution protects pensions from being slashed. And unions, pension funds and retirees, which have all filed objections to the bankruptcy, are expected to argue that the city is not insolvent. Many bankruptcy experts say Rhodes is likely to find Detroit eligible, though his ultimate ruling is hardly a foregone conclusion. "Chapter 9 is never routine," said Juliet M. Moringiello, a law professor at Widener Law School in Harrisburg, Pennsylvania, who has followed proceedings in the Detroit case. The city filed the case on July 18, and it said about half of its liabilities stem from retirement benefits, including $5.7 billion for healthcare and other obligations, and $3.5 billion involving pensions. How the city restructures its debt may set precedents for other struggling municipalities, bankruptcy experts said. "We'll see other Chapter 9s," said Kenneth Klee of Klee, Tuchin, Bogdanoff & Stern in Los Angeles, who is representing Jefferson County, Alabama, in its Chapter 9 case. "The pension problem is one that will require resolution, and with the labor relations being strained in parts of the country and some politicians not able to say no to employees and retirees, I expect there will be other chapter 9s to be filed." The opening of arguments on the eligibility for bankruptcy followed a pre-trial hearing that finished on Monday on legal authority issues surrounding the bankruptcy as objectors argued that Chapter 9 is unconstitutional and that Michigan's constitution protects pensions from being slashed. "It's one of those moments that I think that we will look back on and say, 'This is where Chapter 9 changed,'" attorney Barbette Ceccoti told the court on Monday on behalf of the United Auto Workers union, which represents some city workers. Moringiello said parties tend to object to bankruptcy filings because they think they can do better under state law, and she said if Rhodes does not grant eligibility the creditors likely will try to get a state court to force the city to pay its debts. "Those are not terribly effective remedies," she said. "You don't have the same remedies you have against a private debtor." UNION OBJECTIONS A lawyer representing the city's pension funds said in court on Wednesday that the city and the governor's office were fully intent on filing for bankruptcy without negotiating with the city's unions. Jennifer Green, of law firm Clark Hill, displayed copies of emails and documents from city and state officials that she said show the city had planned weeks ahead of time to file for bankruptcy on July 19. She said that Orr used a pencil to the filing date on legal documents, to show a date of July 18, in order to beat a state court filing that had the potential to prevent the city from filing with the federal bankruptcy court. The unions, pension funds and retirees that are fighting against bankruptcy, have said that the city did not appropriately negotiate with its creditors because Orr only held informational meetings, not formal negotiating sessions, before filing for bankruptcy. They also are expected to contend that Detroit is not insolvent, with assets that include its water and sewer system or the works of the Detroit Institute of Arts that it could be monetize. City attorney Bennett, in his opening statement on Wednesday, countered the claim that part of the museum's collection could be easily sold. No sale would be possible without "significant change in the current management of the museum or litigation," he said. Michigan's attorney general earlier this year issued an opinion saying the museum could not sell any of its art. Bennett said it was impossible for the city to negotiate with all its creditors, but said that the city tried "really hard" to negotiate with the creditors out of court in good faith. Rhodes has scheduled 10 days of hearings over the next three weeks, but attorneys have indicated the arguments could wrap up as early as next week. It is not clear how soon Rhodes could issue his ruling. "There are only so many things they can fight about," said John Pottow, a University of Michigan professor who specializes in bankruptcy law. "They can fight about the solvency and they can fight about the negotiating in good faith. It probably won't take too long to have a trial, but it's a big stakes thing."

[quaist]

And it's about time, too, if you ask me. Although, of course, it's highly doubtable if this sum's anywhere near enough to cover the kind of damage they caused.

JPMorgan to Pay $5.1 Billion to Settle Mortgage Claims JPMorgan Chase & Co. (JPM) agreed to pay $5.1 billion to settle Federal Housing Finance Agency claims related to home loans and mortgage-backed securities the company sold to Fannie Mae and Freddie Mac, resolving part of a $13 billion accord the firm is negotiating with the government. The deal includes $4 billion to end the FHFA’s 2011 lawsuit accusing JPMorgan of selling Fannie Mae and Freddie Mac (FMCC) faulty mortgage bonds, the agency said yesterday. The remaining $1.1 billion settles claims that the firm sold the companies defective loans that they packaged into their own securities. JPMorgan Chief Executive Officer Jamie Dimon, 57, is seeking to settle state and federal probes into whether the company misrepresented the quality of mortgage bonds packaged and sold at the height of the U.S. housing boom. JPMorgan, the biggest U.S. bank, didn’t admit wrongdoing in the FHFA deal. The pact is “an important step towards a broader resolution of the firm’s MBS-related matters with governmental entities,” the New York-based bank said in a statement. The firm has been negotiating with the U.S. Justice Department to resolve probes by its staff, as well as claims from other authorities including New York Attorney General Eric Schneiderman and California Attorney General Kamala Harris, people briefed on the matter said this week. FDIC Claims The FHFA settlement “provides greater certainty in the marketplace and is in line with our responsibility for preserving and conserving Fannie Mae’s and Freddie Mac’s assets on behalf of taxpayers,” the agency’s acting director, Edward J. DeMarco, said in a statement. “I am pleased that a resolution of single-family, whole-loan representation and warranty claims could be achieved at the same time.” JPMorgan preserved its right to seek reimbursement from the Federal Deposit Insurance Corp. for FHFA claims stemming from Washington Mutual Bank’s estate, which is managed by the FDIC. JPMorgan has been in a legal battle with the FDIC over who should pay certain liabilities from the failed thrift, which the agency placed into receivership in 2008 while selling assets to JPMorgan. While the agreement prohibits JPMorgan from seeking money directly from the FDIC, it doesn’t preclude the bank from seeking reimbursement from Washington Mutual’s receivership for some of the settlement costs. The Justice Department is opposing JPMorgan’s effort to shed the Washington Mutual liabilities, according to a person familiar with the talks. False Statements The FHFA, the conservator of Fannie Mae (FNMA) and Freddie Mac, sued JPMorgan and 17 other banks over faulty mortgage bonds two years ago in an effort to recoup some of the losses taxpayers were forced to cover when the government took control of the failing mortgage finance companies in 2008. Fannie Mae and Freddie Mac have taken $187.5 billion in federal aid since then. They’ve paid about $146 billion in dividends on the U.S. stake, which doesn’t count as a repayment of the taxpayer aid. The FHFA had accused JPMorgan and its affiliates of making false statements and omitting material facts in selling about $33 billion in mortgage bonds to the two companies from Sept. 7, 2005, through Sept. 19, 2007. Executives at JPMorgan, Washington Mutual and Bear Stearns Cos., which was also acquired by JPMorgan in 2008, knowingly misrepresented the quality of the loans underlying the bonds, the regulator wrote in the lawsuit in federal court in Manhattan. First Loss JPMorgan reported its first quarterly loss under Dimon earlier this month after taking a $7.2 billion charge to cover the cost of mounting litigation and regulatory probes. The bank, which still faces investigations into its hiring practices in Asia, energy-trading business, and financial services provided to Ponzi scheme operator Bernard Madoff, has already tapped $8 billion of $28 billion in reserves set aside since 2010 to cover its legal costs. UBS AG (UBSN), Switzerland’s largest bank, agreed in July to pay $885 million to settle claims it misrepresented the quality of the loans backing $4.5 billion in residential mortgage bonds it sponsored and $1.8 billion of third-party mortgage bonds sold to Fannie Mae and Freddie Mac. UBS was the third bank to reach an agreement with FHFA. Citigroup Inc. and General Electric Co. (GE) both paid undisclosed amounts to settle the regulator’s complaints. The case is Federal Housing Finance Agency v. JPMorgan Chase & Co., 11-06188, U.S. District Court, Southern District of New York (Manhattan).

[sunnykerr]

On the Detroit bankruptcy, I think the problem is that the court has to decide whether Detroit can get away with stopping payment to retired city employees.

That's what's at stake. So, basically, the city is trying to argue that there is no more money and the unions (and there must be a fair amount of them) are trying to prove that there is money.

From the news reporting in the U.S., it seeems Detroit is in really bad shape. A lot of abandoned buildings (and I mean, a lot of them) and people fleeing to, well, greener pastures I guess, inasmuch as they can.

So maybe a couple of weeks to wade through all the facts and arguments isn't all that much, considering the possible outcome of leaving thousands of retirees without a pension and/or benefits.

As to JPMorgan, I'm really short on sympathy for them. First of all, a few billion is precious little to their bottom line. Second of all, they fought like demon in holy water (bad translation of a French expression) to get out of paying it when they knew about this problem when they bought Bear Stearns.

So, you know what? Screw them.

[quaist]

Originally Posted by sunnykerr (View Post) So, you know what? Screw them.

Word!

[sunnykerr]

Spain ends two-year recession with 0.1% growth Spain has seen its first quarterly economic growth since 2011, according to data from the country's National Statistics agency INE. The country's GDP grew 0.1% in the July-to-September period, after contracting for the previous nine quarters. Its growth confirmed last week's estimates from the Bank of Spain. Spain was one of the countries worst hit by the global economic crisis, with street riots and soaring unemployment. The statistics mean Spain is officially out of recession. The INE said an increasing number of exports supported the growth, with a boost to the tourist industry from holidaymakers avoiding northern Africa and the Middle East. Ben May, economist at Capital Economics, said the growth was encouraging and cited business surveys that suggested there "may be more to come in the near term". Mr May said: "However, domestic demand is still contracting and against that backdrop, it's hard to see a strong and sustained recovery." Spain's economy has been ailing since its property bubble burst in 2008. Its banks needed government bailouts from other European countries to survive, after they were left with hundreds of billions worth of euros in bad debts. Since then, the country has endured Europe's highest level of unemployment, at 26%. There have been huge street protests in response to government austerity cuts and thousands of businesses have gone bust. Spain's government recently predicted the end of its recession was near, saying its reforms and cuts were paying off.

Obviously, that's a piddling little bit of growth, assuming the data is accurate and that it stabilizes long enough to be considered a sustainable sort of growth.

Having said that... well, here's to hoping it does stabilize.

[sunnykerr]

Blackberry shares plunge after sell-off plan abandoned Shares in struggling smartphone maker Blackberry have fallen 16% after it announced it had abandoned a plan to sell itself to its biggest shareholder, Fairfax Financial Holdings. Instead, it intends to raise $1bn (£627m) in fresh financing. Chief executive Thorsten Heins will step down and former Sybase chief executive John Chen will serve as interim chief executive. Last month, Blackberry reported a second-quarter net loss of $965m. Those losses were blamed on poor sales of its new smartphone, the Z10. 'Substantial cash' Fairfax was planning to lead a consortium of firms in a takeover of Blackberry worth $4.7bn. But that plan, announced last month, has fallen through. Last week, Reuters reported that Fairfax was struggling to raise the financing needed for the deal. Instead, Fairfax, which owns a 10% stake in Blackberry, is contributing $250m to the new fund-raising. "This financing provides an immediate cash injection on terms favourable to Blackberry, enhancing our substantial cash position," said Barbara Stymiest, chair of Blackberry's board of directors. In September, the company announced a plan to cut 4,500 jobs, or 40% of its workforce, to reverse giant losses. The interim chief executive, John Chen, acknowledged the challenge ahead: "Blackberry is an iconic brand with enormous potential - but it's going to take time, discipline and tough decisions to reclaim our success." Some analysts remain sceptical about the firm's prospects. "Now we're back to the downward spiral," said BGC Partners analyst Colin Gillis. "They've got $1bn more cash that buys them time. The drumbeat of negativity is likely to continue."

They have a plan to save things, it falls apart, stocks go down, and yet lower.


At some point, it all loses meaning to me.