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Politics : Sioux Nation -- Ignore unavailable to you. Want to Upgrade?


To: SiouxPal who wrote (102331)3/18/2007 11:49:12 PM
From: Asymmetric  Read Replies (1) | Respond to of 362893
 
In Praise of Folly

By Randall W Forsyth / Barron's - UP AND DOWN WALL STREET

Monday, March 19, 2007

WHEN ALAN GREENSPAN FIRED OFF HIS RECESSION forecast heard 'round the world a couple of weeks ago, he delivered it to an audience of investors in Hong Kong via a video linkup from halfway around the world. Could it be that the former Federal Reserve Chairman might not feel so cozy and secure in Asia, given what's befallen ex-central bankers in the region?

Back in 2005, the former Thai central bank governor was fined $4.6 billion for his role in the financial crisis resulting from the crash of the baht. Rerngchai Marakanond was found by a civil court to be guilty of "grave negligence" in squandering Thailand's currency reserves in a futile attempt to prop up the baht.

The 1997 Asian currency crisis also led to the arrest of Korea's central bank governor at the time, Kang Kyong Shik, for "gross economic negligence." He was imprisoned for three months in 1998, while awaiting trial. Prosecutors made Kang appear in court in prison garb, handcuffed and in ropes, adding to his humiliation.

As Dresdner Kleinwort's global strategist Albert Edwards, once wrote, if central bank chiefs are to be held accountable for negligence, should Greenspan be worried?

That question was raised anew as the bubbling subprime mortgage crisis erupted last week. As several acerbic observers pointed out, there could be no more damning indictment of Sir Alan's role than his own words.

In a speech to the Fed's Community Affairs Research conference in April 2005, The Maestro sang the praises of "technological advances" that "have resulted in increased efficiency and scale within the financial services industry. Innovation has brought about a multitude of new products, such as subprime loans," he continued, adding that technology had allowed lenders to size up the creditworthiness of borrowers more cheaply.

"Where once more-marginal applicants would simply have been denied credit, lenders are now able to quite efficiently judge the risk posed by individual applicants and to price that risk appropriately. These improvements have led to rapid growth in subprime mortgage lending; indeed, today, subprime mortgages account for roughly 10% of the number of all mortgages outstanding, up from just 1% or 2% in the early 1990s."

Since then, subprime mortgages have burgeoned to about twice that level, to around 20% of the total, according to most estimates. And the results are becoming apparent. The purveyors of subprime loans are dropping like flies (having had a comparable lifespan) and delinquencies are soaring, even among the most newly minted loans.

In past cycles, iffy loans would take a few years to season and then sour. This time around, subprime loans are going bust almost before the ink is dry -- notwithstanding all the new and improved means to size up potential borrowers. It seems that an even older principle of technology is at work -- GIGO -- garbage in, garbage out. No verification of income or assets, fantasy appraisals -- all crunched quickly and at low cost.

Yet among the avalanche of coverage of the subprime debacle, the deterioration of adjustable-rate mortgages -- even of prime quality -- is still more dramatic. But three years ago, Greenspan was touting ARMs for Everyman. "American consumers might benefit if lenders provided greater mortgage product alternatives to the traditional fixed-rate mortgage," he told the Credit Union National Association in 2004. "To the degree that households are driven by fears of payment shocks, but are willing to manage their own interest-rate risks, the traditional fixed-rate mortgage may be an expensive method of financing a home."

As Greenspan spoke, the Fed's key interest-rate target, the overnight federal-funds rate, stood at a mere 1%. Just over four months later, however, the Fed began tightening its monetary policy, eventually raising the funds rate 17 times, to the current 5¼% level.

The impact on those who took Mr. G's advice has been dramatic. The latest data from the Mortgage Bankers Association show a sharp jump in delinquencies and foreclosures in the fourth quarter. People with ARMs with low "teaser rates" at the beginning are getting into trouble once they adjust up to prevailing market rates.

According to Goldman Sachs' chief domestic economist, Jan Hatzius, ARMs that aren't subprime are going down the tube even faster than riskier loans. Prime ARM delinquencies are comparable to their worst level of the 2001 recession, he points out. In contrast, fixed-rate subprime delinquencies are well below their recession levels.

The jump in adjustable-rate mortgage delinquencies is of particular concern in that more of these loans will reset in 2007, some $400 billion worth, write Robert E. Blake and Matthew Moore of Banc of America Securities. Few of these borrowers are likely to be able to refinance, given the tightening of credit standards, resulting in more defaults, they add. (The primary criterion to qualify for an ARM previously had been a pulse.)

By now, it's evident that the thousands of American homeowners borrowed neither wisely nor well. And that set off the predictable yowls on Capitol Hill last week, with the pursuit of scapegoats and calls to make feckless borrowers whole (in time for the 2008 elections, naturally).

But this latest fiasco goes beyond mortgages. "Subprime is today's dot-com -- the pin that pricks a much larger bubble," writes Steve Roach, Morgan Stanley's chief economist.

Back around the turn of the century, he recalls, optimists denied that there was a bubble, just a bit of irrational exuberance in the Internet pure plays, which accounted for a mere 6% of the total stock market at the end of 1999. "That view turned out to be dead wrong," Roach says. The dot-com bust led to a 49% plunge in the Standard & Poor's 500 and the asset-dependent U.S. economy slipped into a mild recession, dragging the rest of the world along.

"Fast-forward seven years, and the actors have changed, but the plot is strikingly similar," he continues. "This time, it's the U.S. housing bubble that has burst, and the immediate repercussions have been concentrated in a relatively small segment of the market -- subprime mortgage debt.

"As was the case seven years ago, I suspect a powerful dynamic has been set in motion by a small mispriced portion of a major asset class that will have surprisingly broad macro consequences for the U.S. economy as a whole," Roach concludes.

The fear in the financial markets, according to RBC Capital Markets, is that the subprime defaults will lead to a meltdown in the market for collateralized debt obligations, which would trigger a flight to quality that snowballs into an unwinding of the yen-carry trade (and massive mixing of metaphors).

As Jackie Doherty describes in Delinquency Problem1, CDOs are derivatives made up of all sorts of debt, including securities backed by subprime mortgages, that are then magically sliced and diced in all manner of wondrous ways by the wizards of Wall Street. The demand for the underlying collateral -- the so-called CDO bid -- has been a major driver in the demand for debt securities.

But if the buyers of CDOs begin to shy away, that will mean less credit for all sorts of things, including the buying binge by private equity. In that regard, according to a posting by Mark McQueen of Wellington Financial on the Seeking Alpha blog, one private-equity shop principal mentioned that the credit market was causing concern as it was trying to line up financing for a deal.

The flight to quality -- a euphemism for panic buying of government notes and dumping of riskier debt and equity -- has waxed and waned, and with it the notorious yen-carry trade. But the causality may run counter to the conventional wisdom.

When the urge to sell erupts -- as when the Chinese stock market took a header a couple of weeks ago -- volatility surges. Under the current modus operandi known as value at risk, or VAR, the jump in volatility results in an immediate reining in of positions. (For oldsters who remember 1987, this sounds more than vaguely reminiscent of portfolio insurance.) In the process, yen borrowings -- taken on at rates reflecting the Bank of Japan's 0.5% benchmark -- get repaid, resulting in a spike in the yen's exchange rate in the currency market. That, in turn, squeezes the vise on those still in the yen-carry trade, begetting more selling.

Lurking in the background of all this is the expectation that Ben Bernanke's Fed will renew the "Greenspan put" -- the ex-Fed head's implicit insurance policy for the financial markets, resulting from his willingness to slash rates to bail them out -- if the supposed doomsday scenario of subprime defaults leading to panic in credit derivatives and a plunge in the dollar versus the yen comes to pass. "As we see it, the problem and the main risk with the U.S. economy is that there is too much credit, not too little," according to the Daily Observations of Bridgewater Associates, one of the biggest and most successful money managers.

As the Federal Open Market Committee convenes this week, the subprime mess no doubt will be a matter of discussion, but don't look for Bernanke & Co. to open the spigots. "In fact, the amount of leverage in the system is a reason for the Fed to lean against the wind and keep rates higher than they would otherwise, unless things begin spinning out of control," the Bridgewater folks write.

"Ultimately, it is up to Ben Bernanke -- and whether he has both the wisdom and courage to break the daisy chain of the 'Greenspan put'," adds Morgan Stanley's Roach.

"If he doesn't, this liquidity-driven era of excesses and imbalances could well go down in history as a huge failure for modern-day central banking."



To: SiouxPal who wrote (102331)3/18/2007 11:57:22 PM
From: Asymmetric  Read Replies (2) | Respond to of 362893
 
Check This Out - I fell out of my chair on this one.

- A

sandwalk.blogspot.com



To: SiouxPal who wrote (102331)3/19/2007 12:12:16 AM
From: stockman_scott  Read Replies (1) | Respond to of 362893
 
Nearly 4 years after invasion, many Iraqis long for old days

By Leila Fadel

McClatchy Newspapers

BAGHDAD — Four years ago, Iraqi poet Abbas Chaychan, a Shiite Muslim forced into exile during the predominantly Sunni Muslim regime of Saddam Hussein, hailed the American presence here in a poem that praised the top U.S. diplomat in Iraq, L. Paul Bremer.

"We have breakfasts of kabab and qaymar," he wrote, describing the new Iraq with a reference to a rich cream that's considered a sign of wealth. "We put, in your stead, Mr. Bremer / Better than a tyrant of our own flesh and blood, and his torture."

Last January, shortly after Saddam was hanged, Chaychan again put words to paper. But his outlook had changed.

"History is proud to write about him," he said of Saddam. "It wasn't a rope that wrapped around the neck / It was the neck that wrapped around the rope. ...

"From his childhood he was a leader, stubborn and against the occupation."

As the anniversary of the March 20, 2003, U.S.-led invasion of Iraq nears, many Iraqis, like Chaychan, are expressing nostalgia for the time more than 1,000 days ago when Saddam's statue stood proudly in Baghdad's Fardos Square.

Chaychan's reading of his most recent work, in which he calls Saddam the Arab world's "knight" and compares his death to the eclipsing of the sun, has become a popular Iraqi destination on video-sharing services such as YouTube, where his pained voice rings out over a montage of shots of the dictator: clenching his fist in the air, sporting his signature beret, at trial with a Quran and a noose around his neck.

In a January interview with CBS News' "60 Minutes," President Bush told correspondent Scott Paley that the American invasion had taken "care of a source of instability in Iraq."

"Envision a world in which Saddam Hussein was rushing for a nuclear weapon to compete against Iran," Bush said. "My decision to remove Saddam Hussein was the correct decision, in my judgment. We didn't find the weapons we thought we would find or the weapons everybody thought he had. But he was a significant source of instability."

In interviews across Baghdad, few Iraqis agreed, however. Instead, they displayed a collective fatigue, even as another plan to bring about security got under way. They're tired of waiting for better days when each morning brings new terrorism. Trapped in their homes, afraid that death will knock, they're worn down, they said.

Law and order — even under a bloody dictator who killed thousands and tortured many others — was better than this, many said. Even those who are glad to see Saddam dead expressed a longing for more orderly times.

Promise unfulfilled

Layla Mohammed, a Sunni Muslim mother of three, remembered that heady day four years ago when a noose tightened around the neck of Saddam's statue.

"I felt that I was at the highest point of a roller coaster, just about to plunge into what I hoped would be an exhilarating experience," Mohammed said. "I thought, 'Oh, my God, it's happening. I live to see my sons set free.' "

A pharmacist, she said she had voted in all three elections that Iraq has had since Saddam was toppled: first for an interim government, then for a new constitution, then for a permanent government. She remembers dipping her finger in purple ink — to indicate she had voted — with her two sons and her daughter. Together they held up their fingers and took a family photo to commemorate their future democracy.

"At that moment I felt that I was, at last, a sated human being. I had an opinion and it carried weight! I shall treasure that moment all my life," she said. "If only I could have that moment back; its joy was untainted. Now I know better."

The life of freedom and liberty she was promised never came. Her sons are trying to flee the country. She can't afford to keep her house warm, and no longer goes to her pharmacy in the neighborhood of Hurriyah, a once mixed-sect neighborhood emptied of most Sunnis in December.

"I have been conned," Mohammed said.

When Saddam was executed she told herself, "There goes the one man who could stop this bloodbath. I thought we would have to pay oil for freedom and democracy, but not our life's blood. It's too much."

She put her hand to her head. "It's too much."

Deaths take a toll

Ahmed al Yasseri, a Shiite, also remembers his excitement at the fall of Saddam. He excitedly set up a once-forbidden satellite dish. For the first time he watched Arabic news channels and foreign stations. He bought a cellphone and subscribed to an Internet service.

His brother, a former officer in Saddam's army, then was shot as he returned from his electronics shop in 2004. Yasseri fled his neighborhood looking for somewhere safer.

Three months later his uncle was killed, caught in a crossfire as he waited in a line to buy gasoline. Yasseri moved again.

"In a short time you lose your dear ones, and for what?" he asked with despair. "Believe me, for nothing."

His current neighborhood, Mansour, once an upscale shopping district in central Baghdad, now has grown dangerous as well. The crowded Shorja market, where he works, is a tempting target for bombs: A triple car bomb there killed at least 67 people a few weeks ago. He travels nowhere but the path between home and work. He always worries that he'll die in the kind of bombing that fills the morgue with body parts.

"We envy the people who die in one piece now," he said.

From bad to worse

Saddam was caught nearly nine months after the invasion, hidden in an underground hole with a pistol. Bilal Ali, 40, a Shiite, remembers that night. He pulled out an AK-47 rifle and fired into the air in celebration, then handed the weapon to his mother, then to his 7-year-old son.

But it didn't bring the peace that the shopkeeper in the Shiite area of Karada had imagined. Car bombs became prevalent in Shiite areas. Shiites were afraid to pray in their mosques, and Iraqis were afraid to shop in outdoor markets, targets of the Sunni insurgency.

Shiite militias struck back. Men, mostly Sunnis, turned up in the morgue, shot in the head, hands tied behind their back, drill holes in their bodies. The perpetrators eventually were linked to the Ministry of Interior, which oversees the police.

Electricity grew scarcer, at first available for eight hours, then six, then as few as three hours a day. Salaries went up, but so did the cost of living.

Still, Bilal Ali is happy that Saddam was hanged.

"I had hope at that time that life would be much better after his regime's collapse," he said. "But I'm very happy with his end even if the security situation is bad."

Fear for the children

Every morning as Mona Ali, a single Shiite mother, prepares sandwiches and breakfast for her three children she wonders whether they won't return to her. She leaves her 4-year-old son at home and tightly grips the hands of her two young daughters. On the daily walk to school, bullets sometimes have whizzed above their heads in the Shiite Amil neighborhood in west Baghdad.

"There is fear in my heart every day that my kids will go and not come back to me," she said.

Daily she walks to the neighborhood marketplace. On one trip, a car bomb ripped through the vegetable stands as she approached. The blood, the dead, the injured lay in front of her and she thought, it could have been me. She had a nightmare about her children as orphans.

"I remembered the fear I had for my children, and I realized I might not return safely to them," she said.

She remembers the bombing of the gold-domed Shiite shrine in Samarra more than a year ago. She knew the attack was different from the others.

"I felt bitterness in my heart that day," she said. "I knew that things would not rest; I knew that we shall have torment for a long time, and it was true."

Shiite revenge killings soared. Neighbors soon couldn't live with one another. Sunnis feared Shiite militias and their dreaded checkpoints; Shiites feared the Sunni insurgency and its bloody bombings. People fled, and families were torn apart.

Many, like Ali, feel numb to the pain, cheated out of the lives they expected.

On the morning Saddam was hanged, Ali said, she wept. Not for the dictator, but for the death of her hope and the loss of confidence in a government that she thinks is worse than the one that came before it.

"I want safety," she said. "Saddam's time was a safe time for us."

seattletimes.nwsource.com



To: SiouxPal who wrote (102331)3/19/2007 8:27:27 AM
From: see clearly now  Respond to of 362893
 
during 'THE LAST DAYS OF THE AMERICAN REPUBLIC'..if only the people of American knew ...there is so much to UNDUE!!

I am in the middle of NEMESIS by Chalmers Johnson..its an Eye OPener

Just read the Prologue; The Blowback Trilogy
and
CHapter 3: Central Intelligence Agency: The President's Private Army
and
you will want to read the rest with great care.