|From: IngotWeTrust||1/13/2008 5:29:59 PM|
|BoA F/R endorsed Mtg model benefits revealed.|
BofA's awesome Countrywide tax break
Brace yourselves, taxpayers of America. You're going to help Bank of America finance its $4 billion buyout of Countrywide.
By Allan Sloan, senior editor at large
Bank of America purchases Countrywide Financial, one of the companies hardest hit by the subprime mortgage meltdown.
NEW YORK (Fortune) -- Guess who's helping Bank of America pay for its $4.1 billion purchase of Countrywide Financial? Answer: The taxpayers of the United States.
That's because Bank of America (BAC, Fortune 500), which is solidly profitable, will be able to use some of Countrywide's losses to offset its own taxable income. The tax break could total about half a billion dollars over the first five years, according to an estimate by tax guru Robert Willens, who left Lehman Brothers Friday after a 20-year run and will be in business as Robert Willens LLC starting next week. The losses could be worth considerably more to Bank of America starting in the sixth year, depending on how big Countrywide's losses are when Bank of America formally acquires it.
At this point, of course, no one knows how much in losses Countrywide has run up since the junk mortgage market began souring and defaults accelerated. Countrywide (CFC, Fortune 500) itself probably doesn't know. But it seems almost certain to ultimately be in the billions.
In tax circles, Bank of America is famous for its 1988 purchase of the failed FirstRepublic Bank of Dallas, which was being auctioned off by federal regulators. Bank of America, then known as NCNB Corp., the parent of North Carolina National Bank, discovered a way to structure the deal to save $1 billion of taxes, using a convoluted strategy that none of the other bidders knew about. That allowed NCNB to outbid its rivals for the bank, and still come out way ahead.
The Countrywide tax break isn't in that league, but it would still be worth a lot of money. Willens estimates that Bank of America will be able to deduct $270 million of Countrywide's losses annually for the first five years it owns the firm.
That's based on a $6 billion purchase price - $4 billion to Countrywide's common stockholders, plus the $2 billion of preferred stock that Countrywide sold to Bank of America in August. Willens says that you multiply that $6 billion by 4.49 percent - the so-called "long-term tax-exempt rate" - to calculate how much of Countrywide's losses Bank of America can deduct annually for five years after the purchase.
A $270 million annual deduction would save Bank of America something more than $100 million a year in federal and state income taxes. The long-term tax-exempt rate, which is based on Treasury rates and other things so complicated that they make my teeth hurt. The rate changes each year, Willens says, but not by much. When I asked how it's calculated, Willens, a master of tax arcana, threw up his hands. (Metaphorically, of course.) "It's like the formula for Coca-Cola," he said, "no one outside the circle knows it" and it's so complicated that, "no one else wants to find out."
So over the first five years, Bank of America can use a total of $1.35 billion of Countrywide's losses to shelter its income. (That's five years of $270 million annual losses.) If Countrywide's embedded losses when Bank of America buys it exceed $1.35 billion, Willens says, the bank will be able to deduct the rest of the losses, without limit, starting in the sixth year.
Isn't life fun?
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|From: IngotWeTrust||1/13/2008 5:53:44 PM|
|Anna Schwartz blames Fed for sub-prime crisis|
Last Updated: 3:53pm GMT 13/01/2008
Anna Schwartz, the revered economist, shares her views on the credit bubble with Ambrose Evans-Pritchard She wrote a seminal text on the causes of the Great Depression
As rebukes go in the close-knit world of central banking, few hurt as much as the scathing indictment of US Federal Reserve policy by Professor Anna Schwartz.
The high priestess of US monetarism - a revered figure at the Fed - says the central bank is itself the chief cause of the credit bubble, and now seems stunned as the consequences of its own actions engulf the financial system. "The new group at the Fed is not equal to the problem that faces it," she says, daring to utter a thought that fellow critics mostly utter sotto voce.
"They need to speak frankly to the market and acknowledge how bad the problems are, and acknowledge their own failures in letting this happen. This is what is needed to restore confidence," she told The Sunday Telegraph. "There never would have been a sub-prime mortgage crisis if the Fed had been alert. This is something Alan Greenspan must answer for," she says.
Schwartz remains defiantly lucid at 92. She still works every day at the National Bureau of Economic Research in New York, where she has toiled since 1941.
Her fame comes from a joint opus with Nobel laureate Milton Friedman: A Monetary History of the United States. It revolutionised thinking on the causes of the Great Depression when published in 1965. The book blamed the Fed for causing the slump. The bank failed to use its full bag of tricks to stop the implosion of the money stock, and turned a bust into calamity by raising rates.
"The book was a bombshell," says British monetarist Tim Congdon. "Until then almost everybody thought the free-market system itself had failed in the 1930s. What Friedman-Schwartz say was that incompetent government bureaucrats at the Fed had caused the Depression."
"It had an enormous impact in revitalising free-market conservatism, and it broke the Keynesian stranglehold over policy," he says. Keynes himself was a formidable monetarist. He became a "Keynesian" big spender only once all else seemed to fail.
The tale of the early 1930s is intricate, but worth rehearsing in the climate of today's credit crunch.
The October 1929 crash did not cause the slump, it was merely a vivid detail. The US economy muddled through for another year, seemingly sound. Then it buckled as rising defaults in the farm belt set off a run on local banks.
It was at this juncture that critics claim the Fed lost the plot. Washington prohibited the pros at the New York Fed from injecting sufficient stimulus through open market operations [buying bonds].
Contagion spread. The Jewish-owned Bank of the United States was allowed to collapse by fellow clearing banks, for reasons of snobbery and malice.
The Chicago Fed insisted into the depths of the deflation that inflation still lurked, that there was an "abundance of funds", that speculators had to be punished, and that bad banks should fail. The staggering blindness of Fed backwoodsmen from 1930-1933 is hard to exaggerate.
In hindsight, it seems astonishing that the Fed raised the discount rate twice in late 1931 to 3.5 per cent even as global finance was disintegrating. It did so to halt bullion flight and defend the Gold Standard, but it failed to offset the effects with bond purchases. Britain was forced off the Gold Standard in September 1931 after the Atlantic Fleet "mutinied" at Invergordon over 10 per cent pay cuts. That proved a providential crisis - the pound fell. The Bank of England was soon able to slash rates. The slump proved less serious than in the US, and not a single bank collapsed in the British Empire.
Schwartz warns against facile comparisons between today's world and the Gold Standard era. "This is nothing like the Depression. I don't really believe the economy as a whole is going to fall apart. Northern Rock has been the only episode of a bank failure so far," she says.
Over 4,000 US banks - a fifth - collapsed in the 1930s. There was no deposit insurance. Real economic output fell by a third, prices by a quarter, and unemployment reached a third. Real income fell by 11 per cent, 9 per cent, 18 per cent, and 3 per cent in the years to 1933.
According to Schwartz the original sin of the Bernanke-Greenspan Fed was to hold rates at 1 per cent from 2003 to June 2004, long after the dotcom bubble was over. "It is clear that monetary policy was too accommodative. Rates of 1 per cent were bound to encourage all kinds of risky behaviour," says Schwartz.
She is scornful of Greenspan's campaign to clear his name by blaming the bubble on an Asian saving glut, which purportedly created stimulus beyond the control of the Fed by driving down global bond rates. "This attempt to exculpate himself is not convincing. The Fed failed to confront something that was evident. It can't be blamed on global events," she says.
That mistake is behind us now. The lesson of the 1930s is that swift action is needed once the credit system starts to implode: when banks hoard money, refusing to pass on funds. The Fed must tear up the rule-book. Yet it has been hesitant for three months, relying on lubricants - not shock therapy.
"Liquidity doesn't do anything in this situation. It cannot deal with the underlying fear that lots of firms are going bankrupt," she says. Her view is fast spreading. Goldman Sachs issued a full-recession alert on Wednesday, predicting rates of 2.5 per cent by the third quarter. "Ben Bernanke should be making stronger statements and then backing them up with decisive easing," says Jan Hatzius, the bank's US economist.
Bernanke did indeed switch tack on Thursday. "We stand ready to take substantive additional action as needed," he says, warning of a "fragile situation". It follows a surge in December unemployment from 4.7 per cent to 5 per cent, the sharpest spike in a quarter century. Inflation fears are subsiding fast.
Bernanke insists that the Fed has leant the lesson from the catastrophic errors of the 1930s. At the late Milton Friedman's 90th birthday party, he apologised for the sins of his institutional forefathers. "Yes, we did it, we're very sorry, we won't do it again."
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|From: IngotWeTrust||1/13/2008 6:05:50 PM|
|Bush convenes Plunge Protection Team|
By Ambrose Evans-Pritchard, International Business Editor
Last Updated: 1:18am GMT 11/01/2008
Bears beware. The New Deal of 2008 is in the works. The US Treasury is about to shower households with rebate cheques to head off a full-blown slump, and save the Bush presidency.
On Friday, Mr Bush convened the so-called Plunge Protection Team for its first known meeting in the Oval Office. The black arts unit - officially the President's Working Group on Financial Markets - was created after the 1987 crash.
It appears to have powers to support the markets in a crisis with a host of instruments, mostly by through buying futures contracts on the stock indexes (DOW, S&P 500, NASDAQ and Russell) and key credit levers. And it has the means to fry "short" traders in the hottest of oils.
The team is led by Treasury chief Hank Paulson, ex-Goldman Sachs, a man with a nose for market psychology, and includes Fed chairman Ben Bernanke and the key exchange regulators.
Judging by a well-briefed report in the Washington Post, a mood of deep alarm has taken hold in the upper echelons of the administration. "What everyone's looking at is what is the fastest way to get money out there," said a Bush aide.
Emergency measures are now clearly on the agenda, apparently consisting of a mix of tax cuts for businesses and bungs for consumers. Fiscal action all too appropriate, regrettably.
We face a version of Keynes's "extreme liquidity preference" in the 1930s - banks are hoarding money, and the main credit arteries of the financial system remain blocked after five months.
"In terms of any stimulus package, we're considering all options," said Mr Bush. This should be interesting to watch. The president is not one for half measures. He has already shown in Iraq and on biofuels that he will pursue policies a l'outrance ["with excesses"--->courtesy of BabelFish] once he gets the bit between his teeth.
The only question is what the president can manage to push through a Democrat Congress.
The Plunge Protection Team - long kept secret - was last mobilised to calm the markets after 9/11. It then went into hibernation during the long boom.
Mr Paulson re-activated [PPT] last year, asking the staff to examine "systemic risk posed by hedge funds and derivatives, and the government's ability to respond to a financial crisis", he said.
It seems he failed to spot the immediate threat from mortgage securities and the implosion of the commercial paper market. But never mind.
The White House certainly has grounds for alarm. The global picture is darkening by the day.
The Baltic Dry Index has been falling hard for seven weeks, signalling a downturn in bulk shipments.
Singapore's economy contracted 3.2pc in the final quarter of last year, led by a slump in electronics and semiconductors.
The Tokyo bourse kicked off with the worst New Year slide in more than half a century as the Seven Samurai exporters buckled. The Topix is down 24pc from its peak. If Japan and Singapore are stalling, it is a fair bet that China's efforts to tighten credit are starting to bite. Asia is not going to rescue us. On the contrary.
Keep an eye on Japan, still the world's top creditor by far, with $3 trillion in net foreign assets. The Bank of Japan has been the biggest single source of liquidity for the global asset boom over the last five years. An army of investors - Japanese insurers and pension funds, housewives and hedge funds borrowing at near zero rates in Tokyo - have sprayed money across the Antipodes, South Africa, Brazil, Turkey, Iceland, Latvia, the US commercial paper market and the City of London.
The Japanese are now bringing the money home, as they always do when the cycle turns. The yen has risen 13pc against the dollar and 12pc against sterling since the summer. We are witnessing the long-feared unwind of the "carry trade", valued by BNP Paribas in all its forms at $1.4 trillion.
The US data is now relentlessly grim. Unemployment jumped from 4.7pc to 5pc - or 7.7m - in December, the biggest one-month rise since the dotcom bust and clear evidence that the housing crunch has spread to the real economy.
"At this point the debate is not about a soft land or hard landing; it is about how hard the hard landing will be," said Nouriel Roubini, professor of economics at New York University.
"Financial losses and defaults are spreading from sub-prime to near-prime and prime mortgages, to commercial real estate loans, to auto loans, credit cards and student loans, and sharply rising default rates on corporate bonds. A severe systemic financial crisis cannot be ruled out. This will be a much worse recession than the mild ones in 1990-91 and 2001," he said.
Sovereign wealth funds stand ready to rescue banks, as they have already rescued Citigroup and UBS. But as Moody's pointed out this week, the estimated $2,500bn in lost wealth from the US house price crash is more than the entire net worth of all the sovereign wealth funds in the world.
Add fresh losses as the property bubbles pop in Britain, Ireland, Australia, Spain, Greece, The Netherlands, Scandinavia and Eastern Europe, as they surely must unless central banks opt for inflation (which would annihilate bonds instead, with equal damage), and you can discount $1,500bn in further attrition.
Not even a Bush New Deal can hold back the post-bubble tide that is drawing in across the globe. What it can do is buy time. Fortunately for America - and the world - the US budget deficit is a healthy 1.2pc of GDP ($163bn). Washington has the wherewithal to fund a fiscal blitz.
Britain has no such luxury. Our deficit is 3pc of GDP at the top of the cycle. Gordon Brown has shut the Keynesian door.
An aside to JES--
Jim, It appears this British Pundit "gets it...."
This IS it.
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|From: IngotWeTrust||1/20/2008 6:42:01 PM|
|Good Lord God, have mercy on us all!|
By Doreen Hannes
January 20, 2008
I want to tell you how I found out about NAIS (National Animal Identification System) in the hope that you will see how disturbing this is and why we have to fight it with everything we have.
In July of 2005, I went to a meeting at the Ava Missouri Sale Barn regarding a new electronic cattle identification program that was to be mandatory in January of 2006 in order to sell cattle in the State of Missouri. Yes, January of 2006.
Dr Taylor Woods, a member of the NAIS Subcommittee, was the one speaking. He never said what the name of the program was, nor offered any website where one could go for information.
I asked a couple of questions and then made a statement. That statement was, "It sounds like you just want to have
complete control of the food supply."
Dr Woods replied, "We already do."
is a frightening prospect to consider any group of men in complete control of the food supply, much less a bunch of people who fear microbes. Needless to say, much of what Dr Woods stated was not entirely true. We would not be
required to electronically identify our cattle to be able to sell them in January of 2006, and it wasn't really a done deal except in the minds of bureaucrats who hate the fact that we still have this irritating thing called the United States Constitution that needs to at least be given lip
service from time to time or chance a full scale revolt.
Then, in late November of 2005, I went into a local feed store, MFA, and was greeted by a flame orange sign on the counter saying, "Due to the Bioterrorism Act We must have your name, address and phone number to sell you feed."
As creepy as that is, I now had a starting place.
In a short amount of time, I found myself with the name of the program Dr Woods was talking about, which was indeed the National Animal Identification System, and a whole lot of information on the Bioterrorism Act of 2002, which is
basically NAIS for food and feed up to the final consumer.
Incidentally, the Bioterrorism Act passed was part of the 2002 Farm Bill, which included the Animal Health Protection Act (the USDA claims AHPA as their authorizing legislation for NAIS) introduced by none other than current Ag Chair Senator
Harkin of Iowa. This same man has now introduced the first probable statutory reference to NAIS in the 2007 Farm Bill.
Is this a coincidence? Not likely.
The USDA recently released new documents that will make NAIS next to impossible to fight without going on the offensive and filing suit against the Federal government.
The USDA states in their Business Plan that in a scant few weeks (February 2008) they will issue a proposed rule to roll all breed registry identification into NAIS.
They will also issue rules to roll all disease control programs into NAIS compliant identification standards. Brucellosis, Tuberculosis, Coggin's and Pseudorabies will magically roll
right in through the rulemaking process.
NPIP for poultry will just roll on in.
Scrapies for sheep and goats will simply be turned in to NAIS premise ID without the knowledge or even consent of participants in this program.
Certificates of health to move animals across state lines, or even within the state will be rolled in as well.
If you get the idea that NAIS is like a bulldozer on steroids, you'd be about right. Remember that NAIS is a three-part program with it's foundation being premise identification. You must have a premise id to get an animal id, and you must have premise id and animal id to have animal tracking.
The USDA is busily making Cooperative Agreements with all states and tribes and any non-profit organization that will stick it's hand out for the taxpayer money to encourage and probably require their members to enroll in premise id and animal id in order to reap the benefits of membership in
The states are to help make NAIS compulsory in order to engage in commerce under these contracts.
There is an exception allowed for individual animal identification...
If you never move an animal off your property other than directly to slaughter, it will not require an NAIS animal
id, but there is no exception mentioned or alluded to for premise id under USDA's plan.
Meanwhile, our federal level legislators blithely reiterate to us "NAIS is voluntary at the Federal level" and say that they are doing so well because they cut the budget for NAIS.
Well, the infrastructure has already been laid, folks. Unless you specifically stop NAIS via statute or a moratorium,
it's going to roll over all of our rights through all disease control programs!
Why do you refuse to uphold your oath of office, [Alan Harkin?] You didn't take an oath to pervert "general welfare" for the benefit of corporations and bureaucrats, did you?
Did our forefathers bleed and die so that an agency could require birth certificates on chickens?
Many people seem to have a very difficult time understanding that NAIS is and always has been 48-hour traceback on all livestock. If you want 48-hour traceback, you must have 24 hour reporting of movements.
NAIS is not a marketing program; it is being brought to bear at the point of market.
NAIS, cannot, by very definition, be a voluntary program.
The USDA is holding states hostage at the point of interstate commerce by attaching NAIS premise id, and animal id to health certificates and disease control programs. To up the ante even further, they are buying the participation of feedlots, breed organizations, farm groups, youth groups and processors.
To move across state lines, or in many cases, even within that state, you will need to be in NAIS.
How can that be voluntary?
NAIS opposition has been fairly effective fighting this on a state by state level in a disorganized and haphazard fashion.
The original plans called for mandatory in January of 2008 and mandatory with enforcement of all aspects in January of 2009.
We've pushed the USDA back, and sideways, but we have not stopped them because the people in positions of power have not had the will to take on the fight.
The anti-NAIS movement has had a grand total of one case filed; and the Pennsylvania Department of Agriculture backed off just because of the filing.
Why are all the attorneys who have stepped into this battle against NAIS not going after the federal government for an injunction or more? The entire program is patently and assuredly un-Constitutional. The USDA is trying to shift all lawsuits to the states by saying "NAIS is voluntary at
the federal level" while they push the states into full implementation through perverting the Interstate Commerce Clause.
Certainly, if we still have a Constitution, we can win on simply the religious objection alone.
But our arguments go further than even the First Amendment. We also have the 4th, 5th, 9th, 10th, 13th and 14th amendments
that are being violated with NAIS.
There are issues of unfair competition that will need to be addressed, as well as real estate effects of this
Why can't we get on the offensive and file suit? We have harm in many of those who were rolled in, or coerced into the program, and they are not all Amish who won't file suits.
We have the Alliance Defense Fund who won the case without even going to court in PA, and the Farm to Consumer Legal Defense Fund, who have taken on Greg Niewendorp's case in Michigan, the Center for Law and Religious Freedom involved in Wisconsin where the Amish have been assigned PIN's without their
consent; they have all broken their teeth on NAIS.
We have several individual attorneys who are well researched on the subject, and still, no filing on the federal level to stop the USDA from shoving this down our throats.
The states of
.....already have mandatory NAIS to a large degree.
With the myriad of roll ins
North Carolina Fairs and hay,
Tennesse hay share,
NY calfhood vaccination,
any farm programs, ad infinitum, ad nauseum, etc.)
....without proper authorization,
there is no doubt where this is going.
And it doesn't take a [college] degree to see it.
While I readily concede that suing the USDA is not something to be done on a whim, surely if some of these learned individuals could get together and keep their egos out of the way, we could find someone with the proper experience and expertise to bring suit against the USDA and get it stopped before we have to fight every single rule they promulgate related to NAIS
for every one of the species covered under the program.
This is a plea from one who knows without a doubt that if this program is not stopped that there will be bloodshed....and not just the blood of
I am fully committed to doing everything within my power to stop this before it comes to that point.
Please, please, stop playing politics and start filing before we have a complete disaster on our hands.
And to the unwashed masses, people like me that is, we cannot and must not fail to call our representatives on a regular basis and let them know we expect them to uphold the Constitution and the principles of freedom we have
been endowed with.
When we get a federal suit filed, we will need to reach
into our wallets and support the one bringing the suit. When we get meaningful legislation to stop this, we must rally support for those pushing for us. It is going to take every one of us in whatever capacity we have to get this thing stopped. Don't wait for someone else to do it, or it won't
Your freedom is your responsibility.
We have a gigantic secret weapon... there are way more of "us" than "them," and we're right!
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