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EMERITUS NEWS FINANCIAL-PENSIONSCAUTIOUS ENCOURAGEMENT SEEN IN U-S ECONOMIC NUMBERSMore in this article from Reuters News Service, click here - 09/03/2010 CUTTING TAXES: KNOWING WHICH CUTS WORKMore in this MUST READ article from columnist David Leonhardt, click here- 09/01/2010 FDIC SAYS BANKS IN U-S MADE $21.6 BILLION IN PROFITS 2D QTR. / INCREASE OF TROUBLED BANKS SLOWSMore from the Emeritus Newsroom- In another sign that financial institutions are stabilizing, the Federal Deposit Insurance Corporation, which insures Americans deposits, reported today bank profits were up the second quarter and the number of troubled banks increased by only 54. There are now 829 banks listed as "problem banks", largely smaller banks, which is the highest number in 16 years. A total of 45 banks closed the second quarter, making 118 the number of banks which have been closed so far this year. The 21.6 billion profit is the best performance since the third quarter of 2007 and considerably better that the $4.4 billion loss the second quarter 2009. In the FDIC statement released today, FDIC Chair Sheila Bair, during a news conference today, said the agency expects the recovery to be slow, but that the stability of the financial sector is going in the, "right direction". FDIC press release on 2d qtr bank results, click here. Video of Bair news conference, click here. 08/31/2010 UNIVERSITY OF CALIFORNIA PENSION SYSTEM $20 BILLION IN THE HOLE / BENEFIT CUTS LIKELYMore from the Emeritus Newsroom- A diverse special task force of University of California employees released a report today saying cuts in retirement benefits are among the possibilities as the university's pension system faces a $20 billion deficit. In order fix the problem, the task force suggests:
The task force also recommends excluding employees who are nearing retirement from the changes in eligibility for retiree health care. Roughly 40 percent of current faculty and staff would be "grandfathered" in under the recommendations. "The task force has done a tremendous job in listening to the needs of the university and its people as they developed these proposals", according to University of California President Mark Yudof. "I am now asking members of the administration to continue the consultation process with faculty, staff and retirees in advance of my final recommendations to the regents." Yudof has asked Provost Lawrence H. Pitts, who chaired the task force steering committee; Nathan Brostrom, executive vice president of business operations; and Peter Taylor, chief financial officer, to continue the consultation process. The UC Board of Regents, which has final authority over UC's retirement plan, is expected to vote on UCRP contribution levels at its September meeting and take up other aspects of the plan at subsequent meetings in the fall. Pressure to accept benefit cuts has mounted on state employees, who along with their unions have reluctantly accepted in view of the state's general fiscal crisis. In UC's case, administratorhave have argued the the cost of the retirement system will cost it more than classroom instruction will, if nothing is done in the next 4 years. UC press release on the task force report, click here. Excellent summary of UC pension problems from writer Ed Mendel of CalPers.com, click here. 08/31/2010 FED CHAIR BERNANKE EXPECTS MORE GROWTH / HIGH UNEMPLOYMENT LIKELY TO CONTINUE / DIRECT LINK TO MUST SEE VIDEO REPORTMore from the Emeritus Newsroom- Admitting growth is spotty, Federal Reserve Chairman Ben Bernanke says the U-S economy is poised to make more progress next year but with continuing high long term unemployment. The mixed picture was presented at the Fed's annual economic symposium in Jackson Hole, Wyoming. In his prepared remarks this morning, Bernanke said, "Although output growth should be stronger next year, resource slack and unemployment seem likely to decline only slowly. The prospect of high unemployment for a long period of time remains a central concern of policy. Not only does high unemployment, particularly long-term unemployment, impose heavy costs on the unemployed and their families and on society, but it also poses risks to the sustainability of the recovery itself through its effects on households' incomes and confidence. In sum, the pace of recovery in output and employment has slowed somewhat in recent months, in part because of slower-than-expected growth in consumer spending, as well as continued weakness in residential and nonresidential construction. Despite this recent slowing, however, it is reasonable to expect some pickup in growth in 2011 and in subsequent years. Broad financial conditions, including monetary policy, are supportive of growth, and banks appear to have become somewhat more willing to lend. Importantly, households may have made more progress than we had earlier thought in repairing their balance sheets, allowing them more flexibility to increase their spending as conditions improve. And as the expansion strengthens, firms should become more willing to hire. Inflation should remain subdued for some time, with low risks of either a significant increase or decrease from current levels. Although what I have just described is, I believe, the most plausible outcome, macroeconomic projections are inherently uncertain, and the economy remains vulnerable to unexpected developments. The Federal Reserve is already supporting the economic recovery by maintaining an extraordinarily accommodative monetary policy, using multiple tools. Should further action prove necessary, policy options are available to provide additional stimulus. Any deployment of these options requires a careful comparison of benefit and cost. However, the Committee will certainly use its tools as needed to maintain price stability--avoiding excessive inflation or further disinflation--and to promote the continuation of the economic recovery". Full text of Bernanke speech, click here. Must see report from PBS NewsHour with economist Paul Krugman, click here (10 Minutes). 08/27/2010 V-A TELLS DISABLED VET THEIR COMPUTER SYSTEM HAS DECLARED HIM DEAD / LETTER ASKS HIS FAMILY RETURN BENEFIT MONEYMore in this MUST READ article from the Houston Chronicle, click here - 08/26/2010 EXISTING HOME SALES DOWN 27% ON EXPIRATION OF TAX CREDITS / TOTAL YEAR SALES EXPECTED TO BE ABOVE AVERAGEMore from the Emeritus Newsroom- Expiration of the home buyer tax credits fueled a drop in existing home sales by 27.2% in July. Even with that drop, existing home sales for the year are expected to be at or above the yearly average. According the National Board of Realtors, sales are at the lowest level since the total existing-home sales surveys launched in 1999, and single family sales – accounting for the bulk of transactions – are at the lowest level since May of 1995. However, NAR Chief Economist Lawrence Yun says, “Even with sales pausing for a few months, annual sales are expected to reach 5 million in 2010 because of healthy activity in the first half of the year. To place in perspective, annual sales averaged 4.9 million in the past 20 years, and 4.4 million over the past 30 years”. “Consumers rationally jumped into the market before the deadline for the home buyer tax credit expired. Since May, after the deadline, contract signings have been notably lower and a pause period for home sales is likely to last through September,” Yun said. “However, given the rock-bottom mortgage interest rates and historically high housing affordability conditions, the pace of a sales recovery could pick up quickly, provided the economy consistently adds jobs ". The Board also reports the national median existing-home price for all housing types was $182,600 in July, UP 0.7 percent from a year ago. Distressed home sales are unchanged from June, accounting for 32 percent of transactions in July; they were 31 percent in July 2009. Full text of press release from National Board of Realtors, click here. 08/24/2010 CBO LOWERS COST ESTIMATE FOR TARP PROGRAM BY NEARLY HALFMore from the Emeritus Newsroom- On the Director's blog from the Congressional Budget Office, Director Doug Elmendorf had some encouraging news about the cost of the Troubled Asset Relief Program. Elmendorf says, "In March, CBO estimated that the total cost of the Troubled Asset Relief Program (TARP) would be $109 billion over the life of the program. That estimate (which represented the present value, adjusted for market risk, of the program’s activities) was based on market values in February, actions that had occurred up to that time, and an assumption that additional amounts would be allocated to programs that were not yet specified. In the baseline budget projections that CBO released yesterday, the lifetime cost of the program has been reduced to $66 billion. Three factors account for the reduction: further repurchases of preferred stock and sales of warrants from banks, a lower estimated cost for assistance to the automobile industry, and the elimination (due to the passage of time and provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act, P.L. 111-203) of the opportunity to create new programs. Additional information about CBO’s current projections of the cost of the TARP can be found on page 9 of yesterday’s Budget and Economic Outlook: An Update. CBO will release its next report on the activities and cost of the TARP in the fall. Full text of Director's blog text, click here. 08/23/2010 PBGC MULTI EMPLOYER PENSION RESCUE FUND FACES DEFICIT / TWO MORE PENSION PLANS TAKEN OVERMore from the Emeritus Newsroom- A report issued by by the Pension Benefit Guaranty Corporation, which insured the pensions of private corporations, the multi employer pension bailout fund, "....there is about a 65 percent probability that the program’s deficit will grow over the next 10 years. The model’s mean estimated deficit at that time is $4 billion, nearly five times the current level. The model estimates there is only an 11 percent probability that the program will be in surplus in 2019". Much of this is due to the increasing numbers multi employer plans which have been underfunded and failed or would have failed and had to be assisted by the PBGC in 2009. As opposed to single employer plans, which in most cases, are taken over by the PBGC, the agency merely provides the money in multi employer plans to keep them solvent, with strings attached so as to insure the proper use of the PBGC funds. According to the PBGC report. "In the thirty years the multi employer program has been providing financial assistance to insolvent plans, it has helped 62 plans and paid out $500 million in financial assistance. Thirty-nine plans are currently receiving or are about to receive financial assistance and are classified as current probable plans. Another 65 plans have been designated as terminated future probable plans or ongoing future probable plans and are expected to need financial assistance in the future. The estimated present value of non-recoverable future financial assistance to these 104 probable plans is $2.3 billion. This $2.3 billion was the major component of the program’s liabilities at the end of FY 2009. At the same time, the program had less than $1.5 billion in assets and a deficit of $869 million". Full text of PBGC report, click here. Just since August 17th, the PBGC has acted to save pensions plans of two more companies, Irwin Financial Corp., Columbus, Indiana and The News-Journal Corp. of Daytona Beach, Florida. According to the PBGC, stepped in because Irwin Financial is liquidating under bankruptcy proceedings and there will be no sponsor left to fund or administer the plan. Retirees will continue to receive their monthly benefit payments without interruption, and other workers will receive their pensions when they are eligible to retire. According to PBGC estimates, the Irwin Financial Corporation Employees Pension Plan is 56 percent funded, with assets of $26.7 million to cover $47.2 million in benefit liabilities. The PBGC expects to be responsible for $19.1 million of the $20.5 million shortfall. The PBGC will take over the assets and use insurance funds to pay guaranteed benefits earned under the plan, which ended on Sept. 18, 2009. The agency assumed responsibility for the plan on Aug. 4, 2010. As for the pension for 1,100 workers with the News-Journal, the PBGC took action because News-Journal’s assets were sold under receivership and the buyer did not assume the pension plan. Retirees will continue to receive their monthly benefit payments without interruption, and other workers will receive their pensions when they are eligible to retire. According to PBGC estimates, the Pension Plan of News-Journal Corporation is 65 percent funded, with assets of $28.20 million to cover $43.66 million in benefit liabilities. The PBGC expects to be responsible for $15.39 million of the $15.47 million shortfall. The PBGC will take over the assets and use insurance funds to pay guaranteed benefits earned under the plan, which ended on March 23, 2010. The agency assumed responsibility for the plan on Aug. 6, 2010. Full Text of PBGC press release on Irwin Financial, click here. Press release on News Journal pension, click here. 08/23/2010 FORCLOSURE PREVENTION PROGRAM HINDERED BY RED TAPE & JOBLESSNESSMore from the Emeritus Newsroom- The "Making Home Affordable" program targeted troubled homeowners in an effort to keep them in their homes, stabilize the housing market, neighborhoods and cities. Statistics released Friday by the Treasury Department shows is working to stabilize home prices, however, the New york Times is reporting less than 20% of targeted homeowners are benefiting from the program. More than 3.15 million modification arrangements were done from April 2009 through the end of June 2010. This includes more than 1.3 million trial Home Affordable Modification Program (HAMP) modifications started, over 472,000 Federal Housing Administration (FHA) loss mitigation and early delinquency interventions, and 1.4 million proprietary modifications under HOPE Now. The number of agreements offered continues to more than double foreclosure completions for the same period (1.24 million). According to Treasury officials, in July, housing prices remained level after 30 straight months of decline, while some price predictions have improved. In addition, historic low interest rates continued to promote home affordability and refinancing options for the nation's families. However, the market remains fragile with foreclosure starts showing a slight increase and serious delinquencies continuing to work through the pipeline. The New York Times claims that 96,000 trial mortgage modifications were canceled in July, with a total number of canceled modifications more than 616,000. Thousands of homeowners were allowed into the program before all the details were worked out. This led to increasing cancellations since thousands of homeowners were not able to complete the program during the trial period, many of them due to loss of a job. Treasury Department press release, click here. New York Times report, click here. 08/20/2010 S-E-C ACCUSES NEW JERSEY OFFICIALS OF PENSION FRAUD / SAYS STATE LIED ABOUT PUBLIC WORKER PENSION FUNDINGMore from the Emeritus Newsroom- The Securities and Exchange Commission today charged the State of New Jersey with securities fraud for misrepresenting and failing to disclose to investors in billions of dollars worth of municipal bond offerings that it was under funding the state's two largest pension plans. According to the SEC's order, New Jersey offered and sold more than $26 billion worth of municipal bonds in 79 offerings between August 2001 and April 2007. The offering documents for these securities created the false impression that the Teachers' Pension and Annuity Fund (TPAF) and the Public Employees' Retirement System (PERS) were being adequately funded, masking the fact that New Jersey was unable to make contributions to TPAF and PERS without raising taxes, cutting other services or otherwise affecting its budget. As a result, investors were not provided adequate information to evaluate the state's ability to fund the pensions or assess their impact on the state's financial condition.New Jersey is the first state ever charged by the SEC for violations of the federal securities laws. New Jersey agreed to settle the case without admitting or denying the SEC's findings. SEC order against State of New Jersey, click here. Full text of SEC press release, click here. 08/18/2010 COMMENTARY: WHY PRESIDENT OBAMA'S ECONOMIC PROGRAMS DESERVE MORE CREDITMore in this essay from the Brookings Institution, click here- 08/18/2010 COMMENTARY: POLITICS CLOUDS FACTS ABOUT SOCIAL SECURITYMore from New York Times Columnist Paul Krugman, click here- 08/16/2010 OBAMA ADMINISTRATION PUTS $3 BILLION MORE INTO FORECLOSURE PREVENTION / FORECLOSURES FUELED BY UNEMPLOYMENTMore from the Emeritus Newsroom- High unemployment, in those states most affected by the recession, continues to elevate the number of foreclosures. According to RealtyTrac, foreclosures throughout the U-S were up nearly 4% in July, but down nearly 10% from July 2009. Nevada, Arizona, Florida continue to lead the pack. However, five states including California, Illinois, Michigan and Florida make up half of all foreclosures nationally. The Obama administration has announced it will be putting another $3 billion into its program to prevent foreclosures, especially in states with high foreclosure rates. In a press release, U.S. Department of the Treasury says it, "will make $2 billion of additional assistance available for HFA programs for homeowners struggling to make their mortgage payments due to unemployment. Additionally, the U.S. Department of Housing and Urban Development (HUD) will soon launch a complementary $1 billion Emergency Homeowners Loan Program to provide assistance – for up to 24 months – to homeowners who are at risk of foreclosure and have experienced a substantial reduction in income due to involuntary unemployment, underemployment, or a medical condition". Under the program, eligible borrowers must: 1) Be at least three months delinquent in their payments and have a reasonable likelihood of being able to resume repayment of their mortgage payments and related housing expenses within two years; 2) Have a mortgage property that is the principal residence of the borrower, and eligible borrowers may not own a second home; 3) Demonstrate a good payment record prior to the event that produced the reduction of income. HUD will announce additional details, including the targeted communities and other program specifics when the program is officially launched in the coming weeks. Depending on states and locations, the program is administered through state agencies or non-profit organizations. Check with your loan company, state representative, state senator or congressional representative.RealtyTrac press release, click here. Treasury Department press release including program amounts for 21 qualifying states , click here. 08/13/2010 PENSIONS FOR CHICAGO SUN TIMES NEWSPAPER TAKEN OVER BY PBGCMore from the Emeritus Newsroom- Seven pension plans covering almost 2,360 workers and retirees of the Chicago Sun-Times newspaper, have been taken over by the Pension Benefit Guaranty Corporation. This saves those pensions, which were collectively under funded, by $49 to $50 million. Pensioners will continue to get their checks without interruption. The Chicago Sun-Times was involved in bankruptcy proceedings in which all its assets were sold with the new owner not taking responsibility for the pensions. According to the PBGC, The Chicago Sun-Times and its subsidiaries experienced a severe decline in advertising revenue largely brought on by decreasing ad buys from the automotive and housing sectors, as well as companies posting employment opportunities. The company had an 18.2 percent drop in advertising revenue in the fourth quarter of 2008 and expected a continued decline of 30 percent in 2009. The Sun-Times and its units filed for Chapter 11 protection in the U.S. Bankruptcy Court in Wilmington, Del., on March 31, 2009. On Oct. 8, 2009, the court approved the sale of substantially all the company’s assets to STMG Holdings LLC. PBGC press release, click here. 08/13/2010 GREENSPAN URGES REPEAL OF BUSH TAX CUTSMore in this article from the New York Times, click here- 08/06/2010 SOCIAL SECURITY SHORT TERM OUTLOOK WORSENSMore from the Emeritus Newsroom-The Social Security Trust Fund will be paying out more than it is taking in for the forseeable future. It's the case during the current recession through 2014. A new report from the Social Security Trustees released today shows that the permanent imbalance of payouts, forecast to begin in 2016 is now projected to begin in 2015. According to the SSA press release, The combined assets of the Old-Age and Survivors Insurance, and Disability Insurance (OASDI) Trust Funds will be exhausted in 2037, the same as projected last year. The Trustees also project that program costs will exceed tax revenues in 2010 and 2011, be less than tax revenues in 2012 through 2014, and then permanently exceed tax revenues beginning 2015, one year earlier than estimated in last year’s report. The worsening of the short-range outlook for the Social Security Trust Funds is due in large part to the recent economic downturn. In the 2010 Annual Report to Congress, the Trustees announced:
“The impact of the current economic downturn continues to be felt by the Social Security Trust Funds,” said Michael J. Astrue, Commissioner of Social Security. “The fact that the costs for the program will likely exceed tax revenue this year is not a cause for panic but it does send a strong message that it’s time for us to make the tough choices that we know we need to make. I applaud President Obama for his creation of the Deficit Commission so we can start the national discussion needed to ensure that Social Security remains a foundation of economic security for our children and grandchildren.” Other highlights of the Trustees Report include:
GOLDMAN SACHS TO PAY $550 MILLION IN FRAUD CASE / SETTLEMENT AVOIDS ADMISSION OF WRONGDOINGMore from the Emeritus Newsroom- Wall Street considered the Goldman Sachs settlement of a massive securities fraud case to be good news. So good the stock actually went up more than $5 at the end of trading today. Of the billions lost by investors in securities of questionable value, only about $200 million of the settlement will for restitution. In return, Goldman Sachs admits no wrongdoing. The case arose from accusations that investors were not told the true story about the investments they were buying and that were also being sold to other investors on the bet that they would fail. One investment manager made $3.7 billion when the securities, mostly based on mortgages, failed. The settlement must still be approved in US District Court in New York City. Press release of SEC settlement, click here. Video of SEC news conference , click here. 07/15/2010 FINANCIAL REFORM BILL PASSES SENATE / OBAMA WILL SIGNMore from the Emeritus Newsroom- The Senate today passed a financial reform package (HR 4173) by getting enough votes to overcome another Republican delay. The final vote approving reform was 60-39. Three Republicans, Snowe, Collins and Scott Brown joined 57 Democrats voting in favor. One Democrat, Russ Feingold, voted against it, claiming more safeguards are needed to protect investors and consumers.Some provisions of the reform package include: Establishment of the Financial Services Oversight Council which, among other duties, will monitor the financial services marketplace to identify potential threats to the stability of the U.S. financial system, subject financial companies and activities to stricter prudential standards. Directs each financial regulatory agency to establish an Office of Minority and Women Inclusion to advise the agency administrator on the impact of agency policies and regulations upon minority-owned and women-owned businesses. Brings trading in credit default swaps under the control of the Commodity Futures Trading Commission, thereby repealing a portion of the Gramm-Leach-Bliley Act which prevented regulation of swaps and giving the Federal Reserve and other agencies the power to take direct and immediate action against risky or illegal trading and banking activities. SUPPORTERS WON THEIR BATTLE FOR A FINANCIAL CONSUMER PROTECTION AGENCY. The act establishes the Consumer Financial Protection Agency (Agency) to regulate consumer financial products or services, led by a Director. It requires the Director to seek to promote transparency, simplicity, fairness, accountability, and equal access in the market for consumer financial products or services. Authorize the SEC to restrict or prohibit mandatory pre-dispute arbitration affecting customers or clients of brokers and dealers, including municipal securities dealers. Amends the Truth in Lending Act (TILA) to prescribe fiduciary standards for originators of residential mortgages, including complete and timely written disclosure of: (1) the comparative costs and benefits of each residential mortgage loan product presented by the originator; (2) the nature of the originator's relationship to the consumer, including the cost of services provided by the originator; and (3) any relevant conflicts of interest between originator and consumer. (Sec. 9003) Prohibits steering incentives in connection with mortgage loan origination. Prescribes minimum standards for residential mortgage loans, including a requirement that a residential mortgage loan creditor: (1) make a reasonable and good faith determination based upon verified and documented information that the consumer has a reasonable ability to repay the loan and its applicable taxes, insurance, and assessments; and (2) use a fully amortizing repayment schedule for purposes of determining a consumer's ability to repay a variable rate loan that defers repayment of principal or interest. Prescribes standards for points and fees related to: (1) high-cost mortgages; (2) open-end consumer credit plans; and (3) bona fide discount points and prepayment penalties. (Sec. 9202) Repeals the allowance of prepayment penalties for certain mortgages. Directs the Secretary of the Treasury to transfer $3 billion in TARP funds to the HUD Secretary, which shall be credited to the Emergency Homeowners' Relief Fund for emergency mortgage assistance. Amends the Emergency Housing Act of 1975 to permit emergency mortgage assistance if the mortgagor has incurred a substantial reduction in income as a result of involuntary unemployment or underemployment due to medical conditions. Revises requirements for emergency mortgage assistance to replace the maximum amount of $250 per month with an amount determined reasonably necessary to supplement what the homeowner is capable of contributing toward the mortgage payment. Caps the aggregate amount of such assistance to any homeowner at $50,000. Thomas summary of Restoring American Financial Stability Act of 2010, click here. 07/15/2010 CONGRESSIONAL BUDGET OFFICE SAYS SOCIAL SECURITY FACES COLLAPSE BY 2039 WITHOUT CHANGESMore from the Emeritus Newsroom- A report prepared by the Congressional Budget Office finds that, in 2010, Possible options, suggested by the CBO, include,
Some options, such as those that would apply the payroll tax rate to all earnings or those that would index initial benefits to prices, would more than eliminate Social Security’s actuarial deficit; others would have far smaller financial effects.The study makes NO RECOMMENDATIONS. A Senate report from the Senate Special Committee on Aging found that Social Security is facing tough, but not insurmountable problems to remain solvent and can thrive with a small increase in taxes once the economy recovers. CBO report summary, click here. 07/13/2010 SEC AND FDIC PLACE NEW RULES ON PENSION PLANS AND BANKSMore from the Emeritus Newsroom- Two new initiatives from the Securities and Exchange Commission and the Federal Deposit Insurance Corporation are aimed at protecting pension funds and depositors. The SEC has announced a ban on so called, "Pay to Play" incentives to entice investments from managers of pension funds with payoffs. The SEC announcement on June 30th followed a unanimous vote approving the ban, ...to significantly curtail the corrupting influence of "pay to play" practices by investment advisers.
It prohibits an adviser from paying a third party, such as a solicitor or placement agent, to solicit a government client on behalf of the investment adviser, unless that third party is an SEC-registered investment adviser or broker-dealer subject to similar pay to play restrictions. SEC press release with VIDEO OF SEC MEETING, click here. The FDIC has announced that it will access more information to determine whether banks in danger of failing, and take an expanded role to act against risky behavior by banks. The revised agreement will improve the FDIC's ability to access information necessary to understand, evaluate, and mitigate its exposure to insured depository institutions, especially the largest and most complex firms. FDIC Chairman Sheila C. Bair said: "While the FDIC has had backup authority for several years, and for the most part it has worked rather well, the past financial crisis provided us with a strong and sober reminder that the activities of large banks are often very complex and opaque. The FDIC needs to have a more active on-site presence and greater direct access to information and bank personnel in order to fully evaluate the risks to the deposit insurance fund on an ongoing basis and to be prepared for all contingencies." Specifically, the revised MOU gives the FDIC backup supervision authority under an expanded list of circumstances, including when the insurance pricing system suggests an insured depository institution might be at higher risk, when institutions are defined as "large" under international regulatory guidelines, or when large, interconnected bank holding companies are defined as "systemic" by the financial reform legislation pending in Congress. At large, complex insured depositary institutions, the FDIC will establish an expanded continuous, full-time staff presence on-site. FDIC press release, click here. 07/13/2010 PBCG TAKES $1.5 BILLION HIT TO SAVE 61,000 PENSIONERS WITH SMURFIT-STONE CONTAINERMore from the Emeritus Newsroom- The pensions of at least 61,000 employees and pensioners with the Smurfit-Stone Container Corporation were saved during the bankruptcy of the company due to the Pension Benefit Guaranty Corporation agreement to take over $1.5 billion dollars in liabilities. According to the PBGC, termination of the pension plans would have meant benefit cuts for the 61,000 workers and retirees covered by the plans, and $1.5 billion in liabilities added to the PBGC's deficit. With the agreement on pension liabilities, the company officially emerged today from bankruptcy reorganization. Full text of PBGC press release, click here. Some other recent pension rescues and takeovers involving the PBGC: Three under funded pension plans covering over 3,700 former employees and retirees of bankrupt Penn Traffic Co., Syracuse, N.Y., a chain of supermarkets in western New York, northern Pennsylvania, Vermont and New Hampshire operating under the trade names BiLo, P&C and Quality. Click here for Penn Traffic press release. The under funded pension plan covering more than 4,800 former workers and retirees of Grede Foundries Inc., a metal components supplier based in Novi, Mich. Grede Foundries press release, click here. PBGC Home Page with chronological order of rescued pensions, click here. 06/30/2010 GOVERNMENT OFFICIALS DOUBLE DIPPING ON RETIREMENT FUNDSMore from the Seattle Times, click here- 06/29/2010 THE SKY IS NOT FALLING ON SOCIAL SECURITY : SENATE REPORTMore from the Emeritus Newsroom- Sen. Herb Kohl, chairman of the Senate Special Committee on Aging, says that with modest changes, Social Security will be saved. Kohl also says the committee does not ncessarily agree with all the ideas in the report, as it should be used as a tool for discussion on the issue. “This report shows that, contrary to popular belief, the sky is absolutely not falling for Social Security. By implementing one or more of these modest changes, we can ensure solvency and even strengthen benefits for those who count on their monthly check the most,” said Chairman Kohl. Copies of the report were delivered to all eighteen members of President Obama’s National Commission on Fiscal Responsibility and Reform. Many of the Commission’s members have publicly mentioned their interest in addressing Social Security as part of their work to reduce the federal deficit.“Social Security has never been responsible for one penny of the federal deficit, and by law is barred from doing so. In fact, it has been in surplus every year since its inception. If the Commission chooses to take a look at the program, it is my hope that they find our Aging Committee report of use,” Kohl said. According to Kohl, the report points out that the nation’s demographics have changed significantly since the Social Security program began in 1935. Americans are living longer, women’s participation in the labor force has significantly increased, and with a rise in the divorce rate, household composition has changed. The labor force is also growing more slowly and with fewer companies offering pensions, the nature of work and compensation has altered in ways that affect workers’ ability to save for retirement. Therefore, in addition to improving solvency, any future peforms to the program should take into account America’s evolving demographics in order to ensure that benefits are adequate and equitable for generations to come. The report includes an important disclaimer that the options laid out represent a range of commonly-considered proposals, and that none of them should be construed as having been endorsed by the Committee or its members. Links to full text and summary of the "The Wall Street Transparency and Accountability Act of 2010", click here...http://ag.senate.gov/site/legislation.html . Committee Video of today's proceeding, click here. Full text of Kohl Statement, click here. Full text of report, click here. 05/19/2010 ONE IN FIVE HOMEOWNERS LOSING AID IN "MAKING HOME AFFORDABLE PROGRAM"More from the Washington Post, click here- 05/17/2010 MONDAY IS DEADLINE FOR SMALL NON-PROFITS FILING NEW FORM TO I-R-SMore from the Emeritus Newsroom- According to teh National Center for Charitable Statistics,most tax-exempt organizations, other than churches, must file a yearly return or notice with the IRS. If an organization does not file as required for three consecutive years, the organization automatically loses its tax-exempt status. Loss of exempt status means an organization must file income tax returns and pay income tax, and its contributors will not be able to deduct their donations. This year non-profits making $25,000 or less face filing of a new form, the 990-N, which must be filed by Monday. National Center for Charitable Statistics home page with forms and instructions, click here. 05/15/2010 PENSION BENEFITS GUARANTY CORPORATION TAKES OVER 6 MORE PENSION PLANS IN LAST 6 WEEKSMore from the Emeritus Newsroom- Since the collapse of the United Motors pension plan with the closing of the Fremont, California plant in March, the PBGC has been busy picking of the pieces of six other pension plans. The PBGC has either taken over or provided financing to secure the following pension plans: For 1,300 former employees and retirees of bankrupt Meridian Automotive Systems Inc., a manufacturer of automobile and truck parts based in Grand Rapids, Mich. The PBGC stepped in because the pension plans faced abandonment as the company, liquidating in bankruptcy, would leave no entity to finance or administer the plans. Retirees under the plans will continue to receive their monthly benefit payments without interruption, and other workers will receive their pensions when they are eligible to retire. Roundy's Supermarkets Inc. Headquartered in Milwaukee, Roundy's owns and operates 154 grocery stores in Wisconsin, Minnesota, and Illinois under the trade names Pick 'n Save, Copps, Rainbow and Metro Market. Its pension plan covers 5,340 workers and retirees. Under the agreement, the company immediately will put $7.5 million into the Roundy's Supermarkets Inc. Retirement Plan. That distribution will be followed by a $5 million payment on April 29, 2011 and $2.5 million on April 29, 2012. Roundy's will put the $15 million into the plan on top of the plan's required minimum funding contributions. Lyondell Chemical Co. emerges from bankruptcy with its defined benefit pension plans intact. Thisplan covers 33,000 covered workers and retirees, who will continue to receive the full retirement benefits they worked so hard to earn. Colonial Bank, covering 3,250 former employees and retirees including the principal subsidiary of Colonial BancGroup Inc., Montgomery, Ala. The Alabama State Banking Department closed the insolvent Colonial Bank on August 14, 2009, and placed it into Federal Deposit Insurance Corp. (FDIC) receivership. The FDIC sold substantially all Colonial Bank assets to Branch Banking & Trust Co. (BB&T) of Winston-Salem, N.C. BB&T did not assume the pension plan. The PBGC stepped in because the plan would be abandoned by bankrupt Colonial BancGroup, now a liquidating corporate shell. The plan for the now closed Dubuque Packing Co., which operated a meat packing plant in Dubuque, Iowa, covering 1,300 former employees and retirees.The pension plan is 36 percent funded, with about $1.9 million in assets and nearly $5.2 million in benefit liabilities, according to PBGC estimates. The agency expects to cover the $3.3 million shortfall, and will take over the assets and use insurance funds to pay guaranteed benefits earned under the plan, which ended on March 31, 2010. The PBGC became trustee of the plan on April 8, 2010. The pension plan of almost 3,000 former workers at BorgWarner's shuttered facility in Muncie, Ind. BorgWarner is a manufacturer of automatic transmission parts based in Auburn Hills, Mich. An agreement stems from the April 2009 shutdown of the company's Muncie plant. Unlike situations where the PBGC assumes responsibility for failed pension plans, the Muncie pension plan (Retirement Income Program of BorgWarner Diversified Transmission Products, Inc., Muncie Plant), has not failed and remains ongoing under the company's sponsorship. EDITORS NOTE: However, the the plan would have failed without the PBGC contribution of $111million under the agreement, whereas BorgWarner made a $23 million cash contribution into the pension plan in December 2009, and will make additional cash contributions of $15 million per year in 2011, 2012, and 2013 in excess of any minimum required contributions. The company will also provide $35 million in the form of a letter of credit or other security, and will waive a credit balance valued at $8 million in 2014. PBGC RETAINS JURISDICTION AND MORE CONTROL OVER THE FUTURE OF THE PLAN, WHICH EFFECTIVELY REPRESENTS A LIMITED TAKEOVER. PBGC Home Page with directory to fialed pension plans, click here. Links to individual plans plans.....Meridian Automotive, click here......Roundy's Supermarkets, click here.....Lyondell Chemical, click here.....Colonial Bank, click here....Dubuque Packing, click here.....Indiana workers of Borg/Warner, click here.....05/07/2010 SENATE HEARING BRINGS ATTACKS AGAINST GOLDMAN SACHS / MUST SEE YOU TUBE VIDEOMore from the Emeritus Newsroom -Investment securities executives accused of selling fraudulent securities were blasted this morning before the Permanent Senate Sub Committee on Investigations. The most intense scene of the hearing was a "q and a" between Sen. Carl Levin (D) MI and Daniel Sparks, who once headed Goldman Sachs' mortgage division. Levin wasted no time badgering Sparks over e-mails in which Sparks is quoted as saying that he knew the mortgage securities his firm was selling were "shitty". Levin and others on the panel questioned why Goldman Sachs would sell securities that it then bet against on the market, setting up their own securities customers to bet on the firms mortgages which expected to fail. Sparks responded that he was making reference to his performance and not the quality of the securities he was selling. Goldman Sachs was sued by the Securities and Exchange Commission nearly two weeks ago for selling securities it then bet against in order to make money off defaulting mortgages. Goldman Sachs has denied selling fraudulent securities. Must see YouTube video of Levin and Sparks exchange, click here. Direct link to video webcast and other statements and testimony, including Sen. Levin hearing statement on Goldman Sachs , click here. 04/27/2010 SENATE DEMOCRATS PUT TEMPORARY HOLD ON FINANCIAL REFORM AS PRESIDENT OBAMA HITS THE ROAD TO PUSH PUBLIC SUPPORTMore from the Emeritus Newsroom - President Obama took to the road once again to campaign throughout the midwest pushing financial reforms. After losing a vote yesterday, mostly due to continued negotiations over the proposal now in the Senate, Democratic leaders decided to back off to give President Obama a chance to hit the road to boost public support. Obama was scheduled to tour Siemens Energy Inc Facility in Fort Madison for a talk with workers and company executives. The President was scheduled to stop in Mt. Pleasant before moving on to the town of Ottumwa, where he held a town hall at Indian Hills Community College. The President will depart from Des Moines International Airport tomorrow morning for stops in Macon, MO and Quincy, IL. 04/27/2010 PRESIDENT TO WALL STREET: "WORK WITH US NOT AGAINST US" / OBAMA SAYS FINANCIAL REFORM WILL BE GOOD FOR WALL STREET AND MAIN STREETMore from the Emeritus Newsroom- A crisis born from the lack of responsibility on the financial markets. President Obama used that phrase to sum up the climate on Wall Street which led to the financial collapse in 2008. Speaking "Behind every dollar traded there is a family trying to buy a house or save for retirement". The president appeared today at Cooper Union, an arts and sciences college, a short distance away from Wall Street. "What happens on Wall Street is an absolutely essential part of the recovery", said the President . "Our markets are only free when the markets work for all of us". And he defended proposal in both the House and Senate to reform the financial markets. "Without it the country will be vulnerable to future crisis". The President said both proposals are an improvement, but are, "...being fought by special interests. " Obama added, "The financial industry, not the taxpayers should be held accountable for failures and taxpayers should not be asked for a bailout ever again. The system as it stands is what led to costly taxpayers bailouts, and reform will put an end to taxpayer bailouts. Reform creates incentives so as that one company cannot bring down the entire economy. It places limits on financial institutions and what they can sell to instill confidence on the markets and strengthen investments of all Americans". The President also told the audience that reform would bring transparency to financial markets to reveal substance beyond the sales pitch. See videos of President's speech, Senate Democrats and Republican response at right . Text of President's speech, click here . 04/22/2010 OBAMA ADMINISTRATION MOVES TO STOP ILLEGAL WITHDRAWALS BY DEBT COLLECTORS FROM SENIORS CHECKING ACCOUNTSMore from the Emeritus Newsroom- Today was the beginning of a formal comment period, on a proposed rule from the Obama administration, restricting withdrawals by debt collectors from seniors bank accounts. “Once enacted, this regulation will stop banks from illegally freezing Social Security, SSI and veterans’ benefits to satisfy garnishment orders from debt collectors.” said Margot Saunders, an attorney with the National Consumer Law Center. The National Consumer Law Center claims existing law exempts Social Security, veterans and other federal benefits from being taken through court orders obtained by creditors and debt collectors. However, banks regularly freeze accounts that contain such funds and charge hefty overdraft, bounced check and garnishment fees to consumers. “This is a critical protection for seniors and others who depend on federal benefits to pay for food, medicine and shelter,” Saunders said. The NCLC says proposed rules will require banks to identify bank accounts which in the past 60 days have had direct deposit of Social Security, veterans and other federal benefits. All of the federal benefits deposited during those 60 days will be protected from seizure, regardless of whether other, non-exempt funds have also been deposited or withdrawn from the account. Full text of NCLC press release, click here. Full PDF FILE text of the Obama administration proposed rules on restricting debt collections from government benefits, click here (begins on right side of page 20299, follow to page 20313). Collections on railroad and other pension types follow beginning on page 20313. Summary of proposed Obama administration restriction on debt collections, click here. 04/19/2010 CONSUMER ADVOCACY GROUPS KEEP PUSHING FOR CONSUMER PROTECTION AGENCY AS PART OF FINANCIAL REFORMMore from the Emeritus Newsroom- Three consumer advocacy groups today called for congress to stand firm against the financial sector and pass a consumer protection agency with financial reforms. The groups says four main types of short term loan remain alrgely regulated by states since they are not traditional bank loans. these loans include: payday loans; auto title loans; six-month, $500 unsecured installment loans; and one-year, $1,000 unsecured installment loans. A review of how well states are regulating those businesses points to some big problems, according to those groups. There are some states where these loans come under close scrutiny.
Eight jurisdictions protect consumers against abusive lending practices for all four small dollar loan products: Arkansas, Connecticut, District of Columbia, Maryland, New Jersey, New York, Pennsylvania, and Vermont. In addition, Massachusetts and West Virginia come close to earning a perfect score but fees added to low interest for $500 unsecured installment loans in those states push the APR to 37 and 38 percent, respectively. By contrast, fifteen states currently fail taxpayers and the economy. Protects Jobs on Main Street: Protects Municipalities and Pensions: Regulates Foreign Exchange Transactions: Increases Enforcement Authority to Punish Bad Behavior: Press release on United Motors plan from the PBGC, click here. 04/06/2010 GAO SAYS PENSIONS FOR GM AND CHRYSLER WORKERS COULD FAIL / PENSIONS NEARLY $17 MILLION SHORTMore from the Emeritus Newsroom - More fallout from the recent financial problems at Chrysler and GM. A report released today by the Governmental Accountability Office says that, unless Chrysler and GM return to profitability, the pensions of the two automakers will default. The plans are already short a combined 17 billion dollars. The GAO says the plans cover 650,000 workers and retirees at GM and 250,000 at Chrysler. The added concern is that the U-S government could be stuck for the shortfall if it overwhelms the Pension Benefit Guaranty Corporation (PBGC) with defaults. The PBGC, a federally backed agency, covers private pension plans which go into default. GM is still 61% owned by the U-S government and Chrysler, 10%. Full text GAO report, click here. It was only last month that the pension plan for workers at the now closed, United Motors plant in Fremont, California, was taken over by the Pension Benefit Guaranty Corporation, in what is called a "pension abandonment". United Motors was a partnership between GM and Toyota and assembled various GM and Toyota models. The bailout was needed because the 2009 GM bankruptcy left United Motors partner Toyota, with most of the expense operating the plant. Toyota stopped production at the plant March 31st. The PBGC picked up the tab for the "abandoned" pension plan. Total cost, $126 million of the $131 million shortfall. Press release on United Motors plan from the PBGC, click here. 04/06/2010 NEW CBO REPORT SHOWS RECESSION CUTTING SOCIAL SECURITY TRUST FUNDS / RECOVERY FOR SHORT TERM, LOSS IN LONG TERMMore from the Emeritus Newsroom - A posting on the Directors blog today from the Congressional Budget Office updates the long term problem shaping up with the two Social Security Trust funds, which are the OASI (Old Age) trust fund for Social Security retirement income and the DI Trust Fund for disability income and other benefits. Director Doug Elmendorf says CBO projects revenues from payroll taxes credited to the trust funds will be $12 billion lower in 2010 than in 2009, while benefit payments will be $37 billion higher. This year, for the first time since the Social Security reforms of the early 1980s, benefit payments from the trust funds will exceed the trust funds’ receipts from the public (which consist mostly of revenues from payroll taxes and exclude interest on Treasury securities held by the trust funds). Elmendorf cautions against misreading projected trust fund surpluses in the short term. According to the CBO, Social Security’s benefit payments will exceed its receipts from the public in most years, according to CBO’s estimates. For 2010, the shortfall of such receipts relative to benefit payments—called a “primary deficit” because it excludes interest—will be $29 billion. The financial health of the trust funds will then improve temporarily as the economy recovers; the primary deficit will shrink every year through 2013, and small primary surpluses will re-emerge in 2014 and 2015. However, a longer-term decline in the trust funds’ financial condition is inevitable under current law, because the retirement of the baby-boom generation will cause benefit payments to increase more than revenues. CBO anticipates that a primary deficit will return in 2016 and that deficit will reach $77 billion in 2020. The OASI trust fund will begin to generate primary deficits in 2018, while the DI trust fund will experience primary deficits throughout the coming decade CBO projects that the combined annual surpluses of the two trust funds will rise from $91 billion in 2010, peak at $137 billion in 2015, and then fall to $102 billion by 2020. The OASI trust fund will show surpluses in every year while the DI trust fund will realize deficits in every year of the 2010-2020 period. Full text of CBO report on Social Security projections, click here. 03/31/2010 $600 MILLION MORE TO BE USED TO SAVE TROUBLED HOMEOWNERS FROM FORECLOSURE / OBAMA ADMINISTRATION UNLEASHES SECOND EFFORT SINCE FRIDAY TO CUT FORECLOSURESMore from the Emeritus Newsroom- Last month, during a campaign stop in Nevada for Senate Majority Leader Harry Reid, President Obama announced the the first installment of the "hardest Hit Fund". It included 1.5 Billion dollars for the hardest hit housing states of Nevada, California, Florida, Arizona and Michigan. Not only did those suffer the biggest drop in home values, which put many homeowners underwater, they are also the hardest hit states for homeowners who are unemployed or are in danger of foreclosure. Today the Obama administration announced $600 million dollars more for troubled homeowners in North Carolina, Ohio , Oregon, Rhode Island and South Carolina. The announcement today from the Treasury Department outlines expansion of the program and how homeowners may qualify. 1. $600 Million to Help State Housing Agencies Further Address the Challenges Facing Housing Markets with the Most Concentrated Areas of Economic Distress · Funding will go to states with the highest share of their population living in counties in which the unemployment rate exceeded 12 percent in 2009 (excluding states already eligible for Help for the Hardest Hit Housing Markets funds). · HFAs must submit program designs to Treasury. Approaches that respond to problems caused by concentrated economic distress will be particularly welcomed. · To receive funding, HFAs' plans must satisfy the requirements for funding under EESA. · Funding will help support innovative foreclosure prevention efforts and help for unemployed homeowners. 2. Accountability and Transparency · All funded program designs will be posted online. · To create accountability for results, program effectiveness measures and results will be published online. · Program activity will be subject to effective oversight under EESA. 3. Allocation Caps -Allocation caps have been determined in proportion to the number of people in these five states living in counties with high unemployment. Full text of Treasury Department press release, click here. 03/29/2010 DEMOCRATS LOSE FIRST VOTE TO DEFEAT REPUBLICAN DELAY OF FINANCIAL REFORM PACKAGEMore from the Emeritus Newsroom- Senate Democrats were three votes short of defeating a Republican delay over the financial reform package. The vote was 57-41 with Democrat Ben Nelson lining up with Republicans. The Democrats are hoping to showcase Republican opposition to the measure since most polls show the American public favoring more restrictions on banks and financial firms. Though the first vote was a defeat for Democrats, negotiations continue to pry a few Republican votes loose. Senate sources report there are at least three Republicans willing to consider bolting from their ranks. They include Senators Collins, Snowe and Grassley. Some Republicans admitted they will consider voting for the measure once Republicans and Democrats on the Senate Banking Committee have come up with a deal. Among the provisions expected to survive the negotiations are those forcing banks to give up sales of derivatives and leaves those still selling them with the responsibility of looking out for their clients instead of selling, then betting against them. 03/26/2010 OBAMA ADMINISTRATION TAKES BOLDER STEPS TO BATTLE STUBBORN FORECLOSURE PROBLEMMore from the Emeritus Newsroom - In the aftermath of a poor report card on the government loan modification program, the Obama administration is making more changes. Today the Treasury Department announced modifications to expand the flexibility for mortgage servicers and originators to assist more unemployed homeowners and those who are "underwater", whereas the home is worth less than their mortgage. The department says, These changes will help the Administration meet its goal of stabilizing housing markets by offering a second chance to up to 3 to 4 million struggling homeowners through the end of 2012. Costs will be shared between the private sector and the Federal Government; the Federal cost of these changes will be funded through the $50 billion allocation for housing programs under the Troubled Asset Relief Program". The administration admits this will not help housing speculators or investors who do not live in homes they own. The target is homeowners whose home indebtedness is not in excess of $729,000, and their mortgage payments are more than 31% of their income, with a financial hardship such as the loss of a job. There will be some homeowners that simply will have to give up their homes, because they bought more than they could effort to begin with, the target is the homebuyer that did have an affordable mortgage which became unaffordable due to hardship or rapidly increasing finance charges. Full Text of Treasury Department press release, click here. 03/26/2010 FACING POSSIBLE HUGE TIDE OF FORECLOSURES, GAO SAYS FEDERAL MORTGAGE MODIFICATIONS NOT WORKINGMore from the Emeritus Newsroom-The "Making Home Affordable" program is not working. This declaration is not a new, unless you consider the mounting evidence of how badly it is not working. From the evidence presented at a hearing today of the House Committee on Oversight, agencies from the TARP Inspector General to the Governmental Accounting Office suggest the hopes of the program have been bogged down in red tape and complications with qualifying homeowners. In a report submitted by the GAO for today's hearing, the agency wrote: When Treasury announced the program in March 2009, it estimated that HAMP could help 3 to 4 million borrowers. Through February 2010, including both the portion funded by TARP and the portion funded by Fannie Mae and Freddie Mac: I-R-S SAYS AMERICANS GETTING MORE REFUNDS / AGENCY SAYS REFUNDS UP 10%More from the Emeritus Newsroom - Vice President Joe Biden, joined by Treasury Secretary Timothy Geithner and IRS Commissioner Doug Shulman, announced that average tax returns are up nearly 10 percent this year thanks to tax benefits in the Recovery Act. Commissioner Shulman says the most overlooked tax credit this year so far is the "Making Work Pay Tax Credit". The Average refund is up $266 over last year. Shulman says a new tax tool is available at www.WhiteHouse.gov/recovery to help remind people get the refund they deserve. The IRS is also reporting more customers are using E-File because the program helps them catch mistakes. The program has already gained converts because it speeds processing and refunds. The E-File system also is programmed with the latest tax related information, which filers may not remember or know. This year's filings will be complicated with business and individual tax filer changes due to the Stimulus Act and other incentives. Video of news conference, click here. Transcript of the news conference, click here.03/22/2010 ECONOMIC POLICY INSTITUTE SAYS RECENT A-P STORY ON U-S BORROWING MONEY FOR SOCIAL SECURITY IS FALSEMore from the Emeritus Newsroom - An Associated Press story that the U-S was being forced to borrow money to pay for shortages in Social Security revenues, is not true, according to one policy analyst at the Economic Policy Institute. Monique Morrissey, in a statement released today, claims: "Even though outlays will exceed payroll tax revenues, Social Security is not about to become a net seller of Treasury bonds, and is in fact still acquiring them to the tune of $100 billion a year. However, the story has taken off because it fits with the preconception that Social Security is in crisis and its finances are suspect. The AP article uses the notion that Social Security is about to start tapping into savings as a hook to revisit the famous filing cabinet in West Virginia where the trust fund is held in the form of Treasury bonds, which the author says are “worthless on the open market.” This is technically true in the sense that the bonds, though similar to those held by the public, are “special-issue securities” redeemable at face value before they mature. But this actually makes them more, not less, valuable. The fact that these bonds can be redeemed for cash at any time will come in handy when we do start drawing down the trust fund, which will probably begin some time after 2020. This is exactly what the trust fund is there for – to help finance the retirement of the large Baby Boom generation. Since Social Security has always been funded primarily out of current tax revenues, the trust fund balance should be close to zero under normal circumstances. This is not to say that the system faces no challenges. Because wages for most workers were flat even before the recession hit, Social Security’s finances have been slipping since the system was last in balance in 1983. The system also needs periodic adjustments to address changes in life expectancy and other long-term trends. Thus, CBO projects that payroll tax receipts will only cover about 80% of promised benefits after the trust fund is drawn down in coming decades". Full text of Morrissey statement, click here. A-P story, click here. 03/19/2010 AUTHOR MICHAEL LEWIS DETAILS THOSE WHO BET THEIR FUTURE ON FINANCIAL DISASTER / THOSE WHO PREDICTED DISASTER WERE DISCREDITED / AUTHOR OF NEW BOOK, "THE BIG SHORT, INSIDE THE DOOMSDAY MACHINE"More from the Emeritus Newsroom- Most of the new Michael Lewis book on Wall Street's financial collapse, centered on various characters who were in the pre-collapse bond markets. Lewis described the life of Michael Barry, who changed his vocation while being a resident physician, to that of a stock blogger and eventually a bond market guru. Barry, who would later discover he had Asperger's Syndrome, literally capitalized on his obsessive nature to build an investment empire betting on the demise of subprime mortgage loans. Lewis tells how Barry built his following and how Wall Street became part of a snow ball effect which had little regard for anyone willing to question or stop what was going on. In a must hear interview on NPR, Lewis describes how everything went so wrong for much of the rest of the country, and so right for those who profited....profit that eventually would overwhelm some of the the profiteers. We rate this a MUST HEAR OR MUST READ!!!! Transcript of NPR interview, click here. Audio of interview click here. 03/17/2010 PUBLIC PENSION FUNDS MAKING RISKIER INVESTMENTS / FACE SHORTFALL IN FUTURE PAYMENTS TO RETIREESMore in this article from the New York Times, click here - 03/09/2010 FED OFFERS HELP FOR UNDERWATER HOME OWNERS WHO WANT TO SELLMore from the Emeritus Newsroom- The New York Times and the Wall Street Journal are reporting the Obama administration is offering programs to help underwater homeowners with short sales, in order to avoid foreclosure. Those are sales of homes which are sold for less than what the homeowners owe mortgage holders. The New York Times is reporting that homeowners may be able to qualify for $1,500 in relocation assistance if they do "short sales" on their homes. These deals are often blocked or logistically impossible if there is more than one financial institution involved with the home, through second or third mortgages. There are no announcements posted on the press release pages of the Treasury Depaartment or the Making Home Affordable program, as of the posting of this story. More in this report from the New York Times, click here. More in this report from the Wall Street Journal, click here. Complications of short selling from the Wall Street Journal, click here. 03/08/2010 SENATE REJECTS ONE TIME PAYMENT FOR SENIORS / PAYMENT OF $250 WAS CONSOLATION FOR NOT RECEIVING COST OF LIVING ALLOWANCEMore from the Emeritus Newsroom- Advocates for seniors and the elderly chastised the Senate today for last night's rejection of a $250 one time payment, since no cost of living increase was granted this year. Former Congresswoman Barbara Kennelly, President and CEO of the National Committee to Preserve Social Security and Medicare, said in a statement today, "The Senate has unfortunately ignored the reality that despite a relatively low rate of general inflation, seniors' costs are going up. Health care costs especially are rising rapidly, and the elderly on fixed incomes spend a significantly larger share of their income on health care. $250 may not sound like much, but for millions of American seniors this one-time payment was desperately needed assistance. Assistance which should be as big a priority as Wall Street bailouts and tax breaks for millionaires." Kennelly's group claims, no cost of living adjustment (COLA) this year not only froze Social Security checks at last year's level, but also reduced many checks as Part D prescription drug premiums and other health care costs rose. 47 members of the Senate understand this and voted in support of a COLA fix; however, it wasn't enough for passage. Our work is far from over. The National Committee will continue to urge Congress to pass a COLA fix for seniors this year. Full text of Kennelly statement, click here. 03/04/2010 STOCK MARKET FINISHES ABOVE 11,000 FOR FIRST TIME SINCE 2008More from the Emeritus Newsroom - The New York Stock Exchange finished above 11,00 for an estimated 5,800 workers and pensioners, since the pension was facing abandonment in the aftermath of the GM bankruptcy. The New United Motor Manufacturing Inc. / UAW Hourly Defined Benefit Pension Plan is 55 percent funded, with assets of $161 million to cover benefit liabilities of $292 million, according to PBGC estimates. The agency expects to cover $126 million of the $131 million shortfall. Until the PBGC becomes trustee of the pension plan, the plan will remain ongoing under company sponsorship. The agency will send notification letters to all plan participants when it becomes trustee. The PBGC will take over the assets and use insurance funds to pay guaranteed benefits earned under the plan, which ends effective March 3, 2010. Retirees and beneficiaries will continue to receive their monthly benefit checks without interruption, and other participants will receive their pensions when they are eligible to retire. Full text of PBGC press release, click here. 03/04/2010 TIDE OF FORECLOSURES CONVINCES OBAMA TO EXTEND THE MAKING HOME AFFORDABLE PROGRAMMore from the Emeritus Newsroom- The Obama Administration had hoped the Making Home Affordable Program would help more than 5 million homeowners who are upside down on their mortgages. Homeowners unable to refinance since they have no equity in their homes. So far less than a quarter million homeowners have benefited from it, with the program set to expire this June. So the administration wants to extend it through June 2011. Computer backlogs, second mortgages and mortgage insurance complicated and often prevented targeted homeowners from getting through the process. During a visit in Nevada last month, to campaign for Senate Majority Leader Harry Reid, President Obama President Obama announced $1.5 billion more in funding for innovative measures to help families in the states that have been hit the hardest by the aftermath of the housing bubble. In each of these states, the average price for all homes in the state has fallen more than 20% from the peak. Home prices across the country are beginning to stabilize since the Administration’s economic policies began to take effect in mid-2009. But price declines, together with the effects of high unemployment, means that many working and middle-class families in these especially hard-hit areas are facing serious challenges, in many cases beyond what their families’ resources can handle. More at MakingHomeAffordable.gov, click here. 03/01/2010 SALES OF NEW HOMES LOWEST IN NEARLY 50 YEARSMore from the Emeritus Newsroom - Sales of new homes took a nose dive in January, losing 11.2% from the December figures. It was the lowest level in almost 50 years as unemployment seemed to take the edge off extending tax credits for home purchases.Also, the median price of new homes sold in January was $203,500, down 2.4 percent from a year ago and down 5.6 percent from December. The home buyer tax credits were extended to April 30th. Census Bureau press release on new home sales, click here. 02/24/2010 FED BOOSTS INTEREST RATEMore from the Emeritus Newsroom- The Federal Reserve feels the economy has made enough improvement to increase the discount interest rates charged banks, from .5% to .75%.The fed action takes effect February 19th. The Fed says in response to improving conditions in wholesale funding markets, on June 25, 2009, the Federal Reserve initiated a gradual reduction in TAF auction sizes. As announced on November 17, 2009, and implemented on January 14, 2010, the Federal Reserve began the process of normalizing the terms on primary credit by reducing the typical maximum maturity to 28 days. The increase in the discount rate announced Thursday widens the spread between the primary credit rate and the top of the Federal Open Market Committee (FOMC's) 0 to 1/4 percent target range for the federal funds rate to 1/2 percentage point. The increase in the spread and reduction in maximum maturity will encourage depository institutions to rely on private funding markets for short-term credit and to use the Federal Reserve's primary credit facility only as a backup source of funds. The Federal Reserve will assess over time whether further increases in the spread are appropriate in view of experience with the 1/2 percentage point spread. Full text of Fed press release, copy click here. 02/18/2010 FED CHAIR BERNANKE CONFIRMED BY SENATE TO NEW TERM 70-30More from the Emeritus Newsroom - After news of increasing opposition to the re-appointment of Ben Bernanke for another term as chair of the Federal Reserve. Bernanke won a Senate vote this afternoon 70-30. Although Bernanke was credited with decisive action and knowledge which prevented the country from sliding into a depression in late 2008 and 2009, he was seen by opponents, both liberal and conservative, as being too close to private sector financial bosses and not allowing more large financial institutions to fail as opponents felt should have happened. Bernanke also took heat, even from some supporters, for not doing more to regulated unregulated financial products, such as credit default swaps. Bernanke is also facing pressure to do more to help small businesses and smaller community banks, which have been particularly hard hit by the continuing credit crunch. President Obama has ordered 30 billion dollars from the TARP fund to be funneled to small business and community banks. 01/28/2010 FLUID ROUTING SOLUTIONS, LATEST COMPANY PENSION TAKEN OVER BY PBGCMore from the Emeritus Newsroom- Fluid Routing Solutions, a suburban Detroit company which filed for bankruptcy last February, had their pension plan assumed by the Pension Benefit Guaranty Corporation. The company, based in Southfield, Michigan, had sold all its assets during the bankruptcy, leaving the pension plan under funded and headed for failure. The PBGC takeover protects the pensions of 2,400 workers and pensioners, who will continue to get their pension benefit checks without interruption. According to PBGC estimates, the Fluid Routing Solutions Employees' Retirement Income Fund is 45 percent funded, with assets of $23.9 million and benefit liabilities of $53.6 million. The agency expects to be responsible for about $24.9 million of the $29.7 million shortfall. The PBGC will take over the assets and use insurance funds to pay guaranteed benefits earned under the plan, which ended on May 11, 2009, when the bankruptcy court approved the asset sale. Within the next several weeks, the PBGC will send notification letters to all participants in Fluid's plan. Under provisions of the Pension Protection Act of 2006, the maximum guaranteed pension the PBGC can pay is determined by the legal limits in force on the date of the plan sponsor's bankruptcy. Therefore participants in the plan are subject to the limits in effect when Fluid filed for bankruptcy protection on Feb. 6, 2009, which set a maximum guaranteed amount of $54,000 a year for a 65-year-old. The maximum guaranteed amount is lower for those who retire earlier or elect survivor benefits. In addition, certain early retirement subsidies and benefit increases made within the past five years may not be fully guaranteed. Fluid's products were used in vehicles produced by General Motors, Chrysler, Ford, and Toyota. On Feb. 6, 2009, the company and three of its affiliates sought Chapter 11 protection in the U.S. Bankruptcy Court in Wilmington, Del. The filing was spurred by poor market conditions in the automotive sector and the company's inability to access capital markets for funding. Full text of PBGC press release, copy click here. 01/25/2010 FIVE MORE BANKS BITE THE DUSTMore from the Emeritus Newsroom- Friday night brought more bank takeovers and sales to other financial institutions. The latest bunch to be taken by the FDIC are:
Click on each bank for additional details. 01/22/2010 FDIC TAKES THREE MORE BANKSMore form the Emeritus Newsroom- Three more financial institutions were closed, take over by teh FDIC and sold off to other banks over the weekend. The FDIC identifies the banks as:
Click on each bank for details on the closure. 01/18/2010 BANKS BACK TO THEIR OLD SELVES / RECORD BONUSES BRING WARNINGS FROM OBAMA / PARTING A-I-G ATTORNEY GETS 3.9 MILLION SEVERANCEMore from the Emeritus Newsroom- As banking giant JP Morgan reported that its profits for 2009 doubled and that the firm would pay record bonuses to executives, President Obama warned Wall Street that it would face increasing demands for accountability and paying back the American people who bailed them out. JP Morgan posted profits of $11.7 billion for the year to 31 December – up from $5.6bn in 2008. The Obama administration plans to get back more than $100 billion in costs associated with the bailout, through a ten year tax on banks and warned them not to get back to their old habits. The President said, during his weekend address from the White House, "Many originally feared that most of the $700 billion in TARP money would be lost. But when my administration came into office, we put in place rigorous rules for accountability and transparency, which cut the cost of the bailout dramatically. We have now recovered most of the money we provided to the banks. That’s good news, but as far as I’m concerned, it’s not good enough. We want the taxpayers’ money back, and we’re going to collect every dime. That is why, this week, I proposed a new fee on major financial firms to compensate the American people for the extraordinary assistance they provided to the financial industry. And the fee would be in place until the American taxpayer is made whole. Only the largest financial firms with more than $50 billion in assets will be affected, not community banks. And the bigger the firm – and the more debt it holds – the larger the fee. Because we are not only going to recover our money and help close our deficits; we are going to attack some of the banking practices that led to the crisis. That’s important. The fact is, financial firms play an essential role in our economy. They provide capital and credit to families purchasing homes, students attending college, businesses looking to start up or expand. This is critical to our recovery. That is why our goal with this fee – and with the common-sense financial reforms we seek – is not to punish the financial industry. Our goal is to prevent the abuse and excess that nearly led to its collapse. Our goal is to promote fair dealings while punishing those who game the system; to encourage sustained growth while discouraging the speculative bubbles that inevitably burst. Ultimately, that is in the shared interest of the financial industry and the American people". AND THE WALL STREET JOURNAL IS REPORTING THAT THE PARTING A-I-G ATTORNEY ANASTASIA KELLY WILL BE GETTING A $3.9 MILLION SEVERANCE. OTHER REPORTS HAVE THE SUM SET AT $2.8 MILLION. KELLY IS REPORTEDLY LEAVING DUE TO COMPENSATION LIMITS IMPOSED ON THE BANK BY THE OBAMA ADMINISTRATION, WHICH IS CALLING THE SHOTS AT THE LARGELY GOVERNMENT OWNED INSURER, WHICH WAS BROUGHT TO THE BRINK OF FAILURE DURING THE FINANCIAL CRISIS IN THE FALL OF 2008 DUE TO ITS HEAVY LOSSES ON DERIVATIVES AND OTHER COLLATERAL INVESTMENTS. Full text of press release from the National Consumer Law Center, click here. 01/12/2010 SENATE COMMITTEE PASSES FINANCIAL REFORMS / RESTRICTS SALES OF DERIVATIVESMore from the Emeritus Newsroom- The Senate Agriculture Committee today, by a vote of 13-8 passed a financial sector reform proposal, "The Wall Street Transparency and Accountability Act of 2010", that will restrict the sale of , so called, "derivatives", which often include bundled credit default swaps and other previously unregulated securities. A summary from the committee states the bill: Brings 100 Percent Transparency to Market with Real-Time Price Reporting: Wall Street will no longer be able to make excessive profits by operating in the dark. Exposing these markets to
the light of day will put this money where it belongs – on Main Street. The public will see what is being traded,
who is doing the trading and, most importantly, regulators can go after fraud, manipulation and excessive
speculation. Lowers Systemic Risk by Requiring Mandatory Trading and Clearing: Prevents Future Bailouts and Address “Too Big to Fail”: Closes Loopholes: RISE IN NUMBER OF FAILED PENSION PLANS / PBGC TAKEOVERS OF PENSIONS EXPECTED TO BE EXPENSIVEMore from the Emeritus Newsroom- Two more employers have been added to the list of pension failures this year with the number of such pensions expected to increase this year. The latest pensions to fail and be taken over by the Pension Benefit Guaranty Corporation to protect pensioners are Chesapeake Corp., Richmond, Va., a maker of paperboard and plastic packaging materials for the food, beverage, pharmaceutical and specialty chemical industries, with 1,700 beneficiaries, as well as 3,600 former workers and retirees of Crucible Materials Corp., a manufacturer of specialty metal products based in Syracuse, N.Y., with operations in Pittsburgh, Pa. The Chesapeake pension plan faced abandonment after the company, in bankruptcy, sold substantially all of it assets to buyers unwilling to assume the plan. Retirees and beneficiaries will continue to receive their monthly benefit checks without interruption, and other participants will receive their pensions when they are eligible to retire. According to PBGC estimates, the Chesapeake Corp. Retirement Plan is 68 percent funded, with assets of $43.4 million and benefit liabilities of $63.5 million. The agency expects to cover the entire $20.1 million shortfall. The Crucible plans failed to meet minimum funding requirements and faced abandonment due to the company’s liquidation in bankruptcy proceedings. There would have been no entity left to finance or administer the plans. Crucible retirees will continue to receive their monthly benefit checks without interruption, and other workers will receive their pensions when they are eligible to retire. Collectively, the plans are 58 percent funded, with assets of $147.1 million to cover $277.3 million in benefit liabilities, according to PBGC estimates. The agency expects to be responsible for $106.4 million of the $130.2 million shortfall. PBGC press release directory, copy click here. In its 2009 annual report, the PBGC said the single-employer program’s net position declined by $10.40 billion, increasing the program’s deficit to $21.08 billion. The multiemployer program's net position declined by $396 million, increasing that program’s deficit to $869 million.During FY 2009, 144 underfunded single-employer plans were terminated. Because of PBGC’s previous efforts to evaluate its exposure to probable terminations, $3.08 billion of the net claims for these plans were already reflected in PBGC’s 2008 results. The 144 plans had an average funded ratio of approximately 63%. Their terminations resulted in an aggregate net loss to PBGC of $5.83 billion. Twenty-seven plans with underfunding of $1.64 billion were newly classified as probable terminations in FY 2009. Probable terminations represent PBGC’s best estimate of claims for plans that are likely to terminate in a future year. Full Text of PBGC annual report, copy click here. 01/14/2010 U-S GOVERNMENT'S FEDERAL RESERVE BANK TAKES RECORD 2009 PROFITS MAKING BANKS PAY FOR BAD BEHAVIOR / BAILOUTSMore from the Emeritus Newsroom - The U-S Federal Reserve Bank today released its preliminary unaudited financial results from 2009. The Fed is reporting it provided for payments of approximately $46.1 billion of their estimated 2009 net income of $52.1 billion to the U.S. Treasury. This represents a $14.4 billion increase over the 2008 results ($31.7 billion of $35.5 billion of net income). The increase was primarily due to increased earnings on securities holdings during 2009. Their earnings were primarily from securities acquired through open market operations (U.S. Treasury securities, government-sponsored enterprise (GSE) debt securities, and federal agency and GSE mortgage-backed securities), $5.5 billion in net earnings from consolidated limited liability companies (LLCs), which were created in response to the financial crisis, and $2.9 billion in earnings on loans extended to depository institutions, primary dealers, and others. The significant increase in earnings on securities was primarily due to increased securities holdings as a result of the Federal Reserve's response to the severe economic downturn. Net earnings from currency swap arrangements, which have been established with 14 central banks, and investments denominated in foreign currencies totaled $2.6 billion. Additional net earnings of $1.5 billion were derived primarily from fees of $0.7 billion for the provision of priced services to depository institutions. Full text of Fed press release, copy click here. 01/12/2010 FEDERAL DEPOSIT INSURANCE CORPORATION BOARD NARROWLY APPROVES PLAN TO CRACK DOWN ON RISKY BANKSMore from the Emeritus Newsroom- In a close 3-2 vote, the board of the Federal Deposit Insurance Corporation has approved new requirements to prevent risky behavior by banks, behavior which led scores of banks to bail outs, take overs and/or closures in a shameless pursuit of profits over the past year and a half. In a press release from the FDIC today, The agency said it would be seeking public comment on the new rules which focus on whether certain employee compensation structures pose risks that should be captured in the deposit insurance assessment program. "A broad consensus of academic studies agrees that poorly designed compensation structures can misalign incentives and induce risk taking. I share those concerns. The recent crisis has shown that compensation practices that encourage excessive risk can create significant losses in the financial system and the deposit insurance fund," FDIC Chairman Sheila Bair said. The ANPR includes a broad set of questions designed to solicit information on the types of structures that should be encouraged and on whether and how employee compensation should be factored into the risk-based pricing system. The ANPR will go out for public comment for 30 days after publication in the Federal Register. "I believe this ANPR suggests a good approach by targeting compensation structures, rather than levels of compensation. It contains no features which would limit the amount of compensation paid to employees. And I feel that the supervisory efforts underway can be strengthened by the FDIC's effort to provide incentives for banks to achieve higher standards," Chairman Sheila Bair said.Full text of FDIC press release, copy click here. Full Text of Proposed Rule (PDF), copy click here. 01/12/2010 13,000 PENSIONERS FROM HARTMARX PROTECTED AS COMPANY PLAN FAILS / TAKEN OVER BY PBGCMore from the Emeritus Newsroom -Chicago based Hartmarx , a clothing manufacturer came up short by $163.8 million to pay its pension plan, so the Pension Benefit Guaranty Corporation has announce it will take over the plan immediately. Cost to the PBGC will be at least $158.5 million. The maximum guaranteed amount of $54,000 a year for a 65-year-old. The agency became trustee of the plan on Dec. 28, 2009. The maximum guaranteed amount is lower for those who retire earlier or elect survivor benefits. In addition, certain early retirement subsidies and benefit increases made within the past five years may not be fully guaranteed. Hartmarx produced and marketed business, casual, and golf apparel under its own brands, which included Hart Schaffner Marx, Hickey-Freeman, Palm Beach and Coppley among others. A drop off in demand for tailored clothing led to poor sales. The company and 51 affiliates sought Chapter 11 protection in the U.S. Bankruptcy Court in Chicago. Full test of PBGC press release, copy click here. 01/11/2010 SECURITIES AND EXCHANGE COMMISSION PUTS MORE HEAT TO BANK OF AMERICAMore from the Emeritus Newsroom- As it pursues a lawsuit against bank of America over the Bank's alleged deception to hide massive financial losses at Merrill Lynch before the bank took over the firm. The SEC claims Bank of America hid the brokerage firms losses to get bank stockholder approval of the takeover. Then in January 2009, B of A revealed that Merrill Lynch lost $15 billion in the last quarter of 2008. Investigators claim the bank knew of $4.5 billion in losses at Merrill for october, which should have been revealed to stockholders in November. Attorneys for Bank of America claim the SEC's attempt to add to the lawsuit amounts to denial of due process, presenting an unfair burden on the bank. Full Text of Bank of America letter to the court. Full Text of SEC amended complaint, copy click here. 01/11/2009 HORIZON BANK, BELLINGHAM, WASHINGTON, FIRST BANK TO FAIL IN 2010 / TAKEN OVER BY WASHINGTON FEDERAL SAVINGS & LOANMore from the Emeritus Newsroom-Washington Federal Savings and Loan of Seattle has taken over Horizon Bank of Bellingham, Washington. Cost of the Horizon Bank Failure to the FDIC insurance fund is $539.1 million dollars. The Horizon Bank and its 18 branches will reopen as Washington Federal branches. FDIC press release on Horizon Bank failure, copy click here. 01/11/2010 PBGC TAKES OVER PENSIONS AT RETAILER EDDIE BAUERMore from the Emeritus Newsroom- World famous retailer Eddie Bauer has been added among the companies having difficulty maintaining their pension plans. The Pension Benefit Guaranty Corporation has announced it is taking over the plan to protect 1,800 pensioners. Eddie Bauer is a specialty retailer of sportswear and accessories based in Lake Forest, Ill. it has been in bankruptcy since July 17th, 2009. PBGC says the Eddie Bauer Pension Plan is 58 percent funded, with assets of $29.8 million to cover $51.4 million in benefit liabilities, according to PBGC estimates. The agency expects to be responsible for the entire $21.7 million shortfall. The PBGC will take over the assets and use insurance funds to pay guaranteed benefits earned under the plan which ended as of August 4, 2009. Within the next several weeks, the PBGC will send notification letters to all participants in the plan. Under federal pension law, the maximum guaranteed pension at age 65 for participants in plans that terminate in 2009 is $54,000 per year. The maximum guaranteed amount is lower for those who retire earlier or elect survivor benefits. Eddie Bauer, founded in Bellevue, Wash., in 1920, was acquired by General Mills Inc. in 1971 and then sold to catalog retailer Spiegel Inc. in 1988. Spiegel emerged from bankruptcy in 2005 under the Eddie Bauer name. PBGC press release, copy click here. 01/07/2010 PBGC STEPS IN TO PREVENT FAILURE OF WHIRLPOOL PENSIONMore from the Emeritus Newsroom- Stopping short of saying the pension plan at Whirlpool Corporation would have failed without intervention, the Pension Benefit Guaranty Corporation announced today it would provide the company with $11.7 million to "shore up funding". In this case, the PBGC claimed the situation was different since the Whirlpool Production Employees Retirement Plan at LaVergne, which covers about 1,500 workers and retirees, remains ongoing and under the company's sponsorship. The agreement stems from the Aug. 15, 2008 closure of the company's LaVergne, Tenn., facility, in which 649 active participants in the Whirlpool Production Employees Retirement Plan at LaVergne lost their jobs. The Whirlpool plant at LaVergne was also the subject of a settlement last month in which the company agreed to pay $1 million to settle a race discrimination lawsuit brought by the Equal Employment Opportunity Commission. So far there is no indication whether the company's payment of the lawsuit interfered with its ability to make payment to its pension plan. In the meantime, Whirlpool has agreed to put up an $11.7 million dollar bond to insure repayment of the money. Full text of the PBGC press release, copy click here. 01/05/2010 FED CHAIR BERNANKE SAYS MORE SAFEGUARDS NEEDED IN FINANCIAL SECTOR / CRISIS MAY GO DOWN AS WORST IN MODERN HISTORYMore from the Emeritus Newsroom - In a speech to the American Economic Association meeting in Atlanta Sunday, Fed Chairman Ben Bernanke said the failure of the regulatory system was the responsible for the financial meltdown of 2008-2009. Specifically, Bernanke said the regulatory failure led to the housing bubble and the crisis that arose from it. And in a surprising departure from earlier discriptions of the crisis as being the worst since the Great Depression, Bernanke said, "Once one takes into account the global scope of the crisis, its broad effects on a range of markets and institutions, and the number of systemically critical financial institutions that failed or came close to failure--the worst in modern history. Although forceful responses by policymakers around the world avoided an utter collapse of the global financial system in the fall of 2008, the crisis was nevertheless sufficiently intense to spark a deep global recession from which we are only now beginning to recover". Bernanke seemed poised for a defense of the Fed's actions over a controversial period where many critics claim the central bank added to the crisis or looked the other way. In a detailed explanation of monetary policy by the Fed, Bernanke claimed, " Since we cannot know how the economy would have evolved under alternative monetary policies, any answer to this question must be conjectural. Although monetary policy from 2002 to 2006 appears to have been reasonably consistent with the Federal Reserve's mandated goals of maximum sustainable employment and price stability, we have not yet addressed the possibility that accommodative policies--though perhaps appropriate for achieving medium-term inflation and output goals--inadvertently contributed to the housing bubble". But Bernanke concluded, "Cross-country evidence shows no significant relationship between monetary policies and the pace of house price increases. The increasing use of more exotic types of mortgages and the associated decline of underwriting standards. That conclusion suggests that the best response to the housing bubble would have been regulatory, not monetary. Stronger regulation and supervision aimed at problems with underwriting practices and lenders' risk management would have been a more effective and surgical approach to constraining the housing bubble than a general increase in interest rates. Moreover, regulators, supervisors, and the private sector could have more effectively addressed building risk concentrations and inadequate risk-management practices without necessarily having had to make a judgment about the sustainability of house price increases". Although Bernanke faces opposition to his second term from such diverse Senators as Jim Bunning (R) KY and Bernie Sanders (I) VT, his confirmation is expected later this month. Full Text of Bernanke speech, copy click here. 01/03/2010 PBGC TAKES OVER FAILED PENSION FROM P-T-C ALLIANCE TO PROTECT 750 WORKERSMore from the Emeritus Newsroom - The Pension Benefit Guaranty Corporation reports its has take over the pension plan at P-T-C Alliance, covering about 750 employees and retirees of the Wexford, Pa., based company, a bankrupt maker of specialty steel tubing and bars with facilities in seven states, primarily Pennsylvania, Ohio and Illinois. The pension insurer’s action comes as PTC Alliance, in chapter 11 bankruptcy since October 1, 2009, prepares to sell substantially all of its assets at a hearing tentatively set for January 4, 2010. The company will seek bankruptcy court approval of the transaction that currently will not include the pension plan. If the PBGC delayed action until after the sale, the plan would face abandonment and there would be no assets to pay the agency’s claims for unfunded pension liabilities. By taking this action prior to the sale, the PBGC matures a claim for the entire pension shortfall against domestic and foreign assets of PTC Alliance. Any purchaser of PTC Alliance assets will have to make provision for the pension plan before it can take clear title to these assets. The PTC Alliance Corp. Pension Plan is 51 percent funded, with $39.7 million in assets to cover $77.1 million in benefit liabilities, according to PBGC estimates. The agency expects to be liable for $37.0 million of the $37.4 million shortfall. Full Text of PBGC press release, copy click here. 12/29/2009 TWO MAJOR PENSION FAILURES / PBGC TAKES OVER / INVOLVES VISTEON AND FAIRCHILD AFFECTING NEARLY 28,000 PENSIONERSMore from the Emeritus Newsroom - In what has been one of the costliest weeks for pension failures, officials with the Pension Benefit Guaranty Corporation have agreed to take over three failing pension plans from Visteon Corporation and two failing plans from Fairchild Corporation. The Visteon plan involves more than 21,000workers and pensioners and the Fairchild plans 6,600. The PBGC claims that takeovers were necessary due to both firms' bankruptcy filings, which are still being resolved. PBGC says it will have to spend $544 million to cover workers on the Visteon pension shortfall and $53 million in the Fairchild pension failure. PBGC press releases for Visteon, copy click here. Press release for Fairchild, copy click here. 12/18/2009 FRIDAY NIGHT BANK TAKEOVERS: SIX MORE BANKS FAIL / INCLUDES BANKS IN LA- ATLANTAMore from the Emeritus Newsroom -The Federal Deposit Insurance Corporation has taken over and sold the following banks, and sold them to other financial institutions which will take over their operations. More information on each bank is available by clicking on their names.
The failures bring to 140, the number of financial institutions closed and taken over by the FDIC this year. 12/18/2009 OBAMA TELLS BANKS HE NEEDS THEIR COMMITMENT FOR MORE LOANS TO SMALL BUSINESS / MOST BANKS AT MEETING RESPOND FAVORABLY / BANK OF AMERICA PROMISES 5 BILLION FOR SMALL BUSINESS / WELLS FARGO ANNOUNCES RETURN OF TARP MONEYMore from the Emeritus Newsroom - We were there for you. Now you need to do more for us. That was the message from President Obama to bank executives during a meeting at the White House today. After the meeting, Richard Davis of US Bankcorp said his bank would be willing to redouble their efforts to make loans to credit worthy customers. Critics of major banks claim that, in the reality of a recession, banks will have to lower their standards or else be left to loan money to those who don't need it. The difficulty is determining just how low to go, being that the driver behind much of the financial collapse last year, was making loans to customers with substandard credit. Consumer advocates, who admit thousands were given loans they had no way of paying, say the larger problem was predatory lending and contracts which set consumers and businesses up to fail, regardless of credit history. Another problem has been the low number of refinancings most of the banks have initiated. Also today Well Fargo announced it would be returning $ 25 billion in TARP money it w3as given when it took over real estate troubled Washington Mutual. And after today's meeting, Bank of America, said it would be setting aside $5 billion for small business loans. In addition to Davis from US Bankcorp, others attending the meeting in the Roosevelt room of the White House were be Treasury Secretary Timothy Geitnner and Rahm Emmanual, Obama's chief of staff.
On a conference call with the group:
Video of President Obama's news conference on C-SPAN, after the meeting, click here. Video of bank executives statement following the meeting, from C-SPAN, click here. Full Transcript of the President's comments from news conference, copy click here. Press release from Bank of America on $5 billion for small and medium business loans, click here. 12/14/2009 UPDATE: FRIDAY NIGHT BANK TAKEOVERS / REPUBLIC BANK OF MIAMI AMONG THREE CLOSED AND TAKEN OVER BY FDICMore from the Emeritus Newsroom - Miami based Republic bank, has been closed and taken over by the Federal Deposit Insurance Corporation on Friday along with two other banks, SolutionsBank, Overland Park, KS and Valley Capital Bank, NA, Mesa, AZ. To protect the depositors, the FDIC entered into a purchase and assumption agreement with 1st United Bank, Boca Raton, Florida, to assume all of the deposits of Republic Federal Bank, N.A. so, on Monday, the bank and its branches will reopen as United Bank locations. the Republic failure will cost the FDIC insurance fund $122.6 million. Today's closing of Republic and the other two banks raise to 133, the number of failed financial institutions this year. Despite the high number of failure this year, regulators expect the number of failures to peak NEXT year. 12/11/2009 SOCIAL SECURITY ADMINISTRATION SENDS LETTER TO CORRECT WRONG PAYMENT DATESMore from the Emeritus Newsroom- Human error has forced the Social Security Administration to send out correction notices for previous notices which had erroneous payment dates. “We apologize for the inconvenience and confusion these incorrect notices will cause,” said Michael J. Astrue, Commissioner of Social Security. “ We are correcting the misinformation as quickly as possible, and we are reviewing our processes closely to prevent this type of mistake from happening in the future. People receiving Social Security benefits in January 2010 should know that their payment will arrive on the same payment day that it has arrived in the past”. The Social Security Administration earlier this month mailed notices that contained incorrect January 2010 payment dates. These erroneous notices went to about 6 million beneficiaries who receive their payments on either the second, third, or fourth Wednesday of each month, and are part of the annual benefit notices that go to 52 million Social Security beneficiaries. In the notice the payment date is incorrectly shown as one week before what the actual date of payment will be. The other information in the notice, including the payment amount, is correct. Social Security is sending a letter explaining the error to beneficiaries who received the incorrect one as soon as possible. Full Text of Social Security Administration press release. 12/11/2009 STATES TAKE BIG DROP IN TAX REVENUES / TOTAL STATE EXPENSES ARE UP FORCING DEEP CUTS IN SERVICESMore from the Emeritus Newsroom- State governments took in nearly $1.7 trillion in total revenues in TREASURY EXPECTS TO GET BACK A THIRD OF $370 BILLION FROM BANKS IN TARP MONEYMore from the LA Times, copy click here- 12/07/2009 OBAMA ADMINISTRATION TAKES BOLDER STEPS TO BATTLE STUBBORN FORECLOSURE PROBLEMMore from the Emeritus Newsroom - In the aftermath of a poor report card on the government loan modification program, the Obama administration is making more changes. Today the Treasury Department announced modifications to expand the flexibility for mortgage servicers and originators to assist more unemployed homeowners and those who are "underwater", whereas the home is worth less than their mortgage. The department says, These changes will help the Administration meet its goal of stabilizing housing markets by offering a second chance to up to 3 to 4 million struggling homeowners through the end of 2012. Costs will be shared between the private sector and the Federal Government; the Federal cost of these changes will be funded through the $50 billion allocation for housing programs under the Troubled Asset Relief Program". The administration admits this will not help housing speculators or investors who do not live in homes they own. The target is homeowners whose home indebtedness is not in excess of $729,000, and their mortgage payments are more than 31% of their income, with a financial hardship such as the loss of a job. There will be some homeowners that simply will have to give up their homes, because they bought more than they could effort to begin with, the target is the homebuyer that did have an affordable mortgage which became unaffordable due to hardship or rapidly increasing finance charges. Full Text of Treasury Department press release, click here. 03/26/2010 FACING POSSIBLE HUGE TIDE OF FORECLOSURES, GAO SAYS FEDERAL MORTGAGE MODIFICATIONS NOT WORKINGMore from the Emeritus Newsroom-The "Making Home Affordable" program is not working. This declaration is not a new, unless you consider the mounting evidence of how badly it is not working. From the evidence presented at a hearing today of the House Committee on Oversight, agencies from the TARP Inspector General to the Governmental Accounting Office suggest the hopes of the program have been bogged down in red tape and complications with qualifying homeowners. In a report submitted by the GAO for today's hearing, the agency wrote: When Treasury announced the program in March 2009, it estimated that HAMP could help 3 to 4 million borrowers. Through February 2010, including both the portion funded by TARP and the portion funded by Fannie Mae and Freddie Mac: Mark A. Calabria, from the Cato Institute, told the committee that predatory lending practices and exploding adjustable rate mortgages are not the main reasons for the foreclosure problem in the U-S. Calabria emphasized that, "The vast majority of mortgage defaults are being driven by the "Despite the strong connection between mass layoffs In response to the uproar over dysfunction in loan modifications, the Obama administration has proposed that those homeowners who are now in bankruptcy be "referred" to the federal modification program in order to avoid foreclosure. Federal officials are also asking that financial institutions involved with such mortgages evaluate homeowners for possible modifications through the program. Full text of GAO report, click here. Calabria testimony, click here. Committee hearing page with testimony from others, click here. 03/25/2010 BANK OF AMERICA OFFERS LIMITED PRINCIPAL FORGIVENESS ON SUBPRIME HOME LOANSMore from the Emeritus Newsroom- As the nation's banks face another and potentially more devastating blow to the housing market, Bank of America has proposed limited forgiveness of loan principal on sub prime home loans. The program is offered at the invitation to selected bank customers only. In an announcement today B of A says it will look first at principal forgiveness – ahead of an interest rate reduction – when modifying certain sub prime, Pay-Option and prime two-year hybrid mortgages qualifying for its National Home ownership Retention Program (NHRP). Several enhancements are being made to the program, including the introduction of an earned principal forgiveness approach to modifying mortgages that are severely underwater. The program changes are designed to encourage greater customer participation in the company's aggressive home ownership retention programs, including our continued strong commitment to the federal government's Home Affordable Modification Program. Full text of Bank of America announcement, click here. 03/24/2010 NEW HOME SALES REACH NEW LOWMore from the Emeritus Newsroom- Sales of new homes in the U-S in February were 13% below those of February 2009. The results were also 2.2% lower than in the previous month (Jan.). as for the numbers, new single-family houses in February 2010 were at a seasonally adjusted annual rate of 308,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. The supply of homes on the market is also proving troublesome for those trying to sell their homes. The median sales price of new houses sold in February 2010 was $220,500; the average sales price was $282,600. The seasonally adjusted estimate of new houses for sale at the end of February was 236,000. This represents a supply of 9.2 months at the current sales rate. Full text of press release and statistical table, click here. 03/24/2010ECONOMIC POLICY INSTITUTE ANALYST SAYS U-S ECONOMY HAS "TURNED THE CORNER" / EMPLOYMENT AND FAMILY INCOME LAGMore from the Emeritus Newsroom-According to Economic Policy Institute analyst Christian Weller, "The focus first needs to be on personal income through job creation and support for the unemployed". Weller's "Economic Snapshot" for March shows that Gross domestic product grew at an annual rate of 5.9 percent in the fourth quarter of 2009, the largest gain since the third quarter of 2003. The Recovery Act provided additional income to consumers and businesses, which led to more business investments. Weller says unemployment, particularly the problems of the long term unemployed remain the biggest issues, affecting nearly everything else that has impact on a recovery. The rate of job losses have slowed, but the fortunes of the long term unemployed and minorities remain. The African-American unemployment rate that month stood at 15.8 percent, the Hispanic unemployment rate at 12.4 percent, and the unemployment rate for whites at 8.7 percent. Youth unemployment stood at a high 25.0 percent. And the unemployment rate for people without a high school diploma stayed at 15.6 percent, compared to 10.5 percent for those with a high school degree, and 5.0 percent for those with a college degree. Economic Snapshot by Christian Weller, click here. 03/23/2010 SENATE BANKING COMMITTEE DEMOCRATS MOVE FINANCIAL REFORM BILL TO SENATE FLOORMore from the Emeritus Newsroom - Thirteen Democrats on the Senate Banking Committee today approved a proposal from Committee Chairman Sen. Chris Dodd (D) CT, to reform financial markets. The ten Republicans opposed, did not object to the proposal being sent to the full Senate for debate and amendments. One of the big points of contention is an outside consumer advocacy agency to monitor activities of banks and investment firms, an idea that has come under fire from those sectors. Last week, Fed Chair Ben Bernanke testified before congress he felt an oversight or consumer protection division should be added to the Federal Reserve instead. That idea has faced opposition from consumer advocates, who say it was complicity and lack of oversight by the Federal Reserve under Alan Greenspan, which made conditions favorable for the Wall Street collapse of 2008 and political pressure within the Federal Reserve could silence consumer advocates within the Fed. FDIC Chair Sheila Bair also opposes a consumer agency within the Fed, telling a gathering of the Community Bankers Association last week, "We do have serious concerns about other sections of the Senate draft which seem to allow the potential for backdoor bailouts through the Federal Reserve Board's 13(3) authority. We will work closely with the Senate to make sure there are no loopholes around the carefully crafted resolution procedures. If the Congress accomplishes anything this year, it should be to clearly and completely end too big to fail". Full text of Bair speech, click here. Senate Republicans say they will be meeting with Sen. Dodd on possible amendments. Video of Senate Banking Committee meeting and vote on Financial reform bill, click here. 03/22/2010 I-R-S SAYS AMERICANS GETTING MORE REFUNDS / AGENCY SAYS REFUNDS UP 10%More from the Emeritus Newsroom - Vice President Joe Biden, joined by Treasury Secretary Timothy Geithner and IRS Commissioner Doug Shulman, announced that average tax returns are up nearly 10 percent this year thanks to tax benefits in the Recovery Act. Commissioner Shulman says the most overlooked tax credit this year so far is the "Making Work Pay Tax Credit". The Average refund is up $266 over last year. Shulman says a new tax tool is available at www.WhiteHouse.gov/recovery to help remind people get the refund they deserve. The IRS is also reporting more customers are using E-File because the program helps them catch mistakes. The program has already gained converts because it speeds processing and refunds. The E-File system also is programmed with the latest tax related information, which filers may not remember or know. This year's filings will be complicated with business and individual tax filer changes due to the Stimulus Act and other incentives. Video of news conference, click here. Transcript of the news conference, click here.03/22/2010 ECONOMIC POLICY INSTITUTE SAYS RECENT A-P STORY ON U-S BORROWING MONEY FOR SOCIAL SECURITY IS FALSEMore from the Emeritus Newsroom - An Associated Press story that the U-S was being forced to borrow money to pay for shortages in Social Security revenues, is not true, according to one policy analyst at the Economic Policy Institute. Monique Morrissey, in a statement released today, claims: "Even though outlays will exceed payroll tax revenues, Social Security is not about to become a net seller of Treasury bonds, and is in fact still acquiring them to the tune of $100 billion a year. However, the story has taken off because it fits with the preconception that Social Security is in crisis and its finances are suspect. The AP article uses the notion that Social Security is about to start tapping into savings as a hook to revisit the famous filing cabinet in West Virginia where the trust fund is held in the form of Treasury bonds, which the author says are “worthless on the open market.” This is technically true in the sense that the bonds, though similar to those held by the public, are “special-issue securities” redeemable at face value before they mature. But this actually makes them more, not less, valuable. The fact that these bonds can be redeemed for cash at any time will come in handy when we do start drawing down the trust fund, which will probably begin some time after 2020. This is exactly what the trust fund is there for – to help finance the retirement of the large Baby Boom generation. Since Social Security has always been funded primarily out of current tax revenues, the trust fund balance should be close to zero under normal circumstances. This is not to say that the system faces no challenges. Because wages for most workers were flat even before the recession hit, Social Security’s finances have been slipping since the system was last in balance in 1983. The system also needs periodic adjustments to address changes in life expectancy and other long-term trends. Thus, CBO projects that payroll tax receipts will only cover about 80% of promised benefits after the trust fund is drawn down in coming decades". Full text of Morrissey statement, click here. A-P story, click here. 03/19/2010 AUTHOR MICHAEL LEWIS DETAILS THOSE WHO BET THEIR FUTURE ON FINANCIAL DISASTER / THOSE WHO PREDICTED DISASTER WERE DISCREDITED / AUTHOR OF NEW BOOK, "THE BIG SHORT, INSIDE THE DOOMSDAY MACHINE"More from the Emeritus Newsroom- Most of the new Michael Lewis book on Wall Street's financial collapse, centered on various characters who were in the pre-collapse bond markets. Lewis described the life of Michael Barry, who changed his vocation while being a resident physician, to that of a stock blogger and eventually a bond market guru. Barry, who would later discover he had Asperger's Syndrome, literally capitalized on his obsessive nature to build an investment empire betting on the demise of subprime mortgage loans. Lewis tells how Barry built his following and how Wall Street became part of a snow ball effect which had little regard for anyone willing to question or stop what was going on. In a must hear interview on NPR, Lewis describes how everything went so wrong for much of the rest of the country, and so right for those who profited....profit that eventually would overwhelm some of the the profiteers. We rate this a MUST HEAR OR MUST READ!!!! Transcript of NPR interview, click here. Audio of interview click here. 03/17/2010 PUBLIC PENSION FUNDS MAKING RISKIER INVESTMENTS / FACE SHORTFALL IN FUTURE PAYMENTS TO RETIREESMore in this article from the New York Times, click here - 03/09/2010 FED OFFERS HELP FOR UNDERWATER HOME OWNERS WHO WANT TO SELLMore from the Emeritus Newsroom- The New York Times and the Wall Street Journal are reporting the Obama administration is offering programs to help underwater homeowners with short sales, in order to avoid foreclosure. Those are sales of homes which are sold for less than what the homeowners owe mortgage holders. The New York Times is reporting that homeowners may be able to qualify for $1,500 in relocation assistance if they do "short sales" on their homes. These deals are often blocked or logistically impossible if there is more than one financial institution involved with the home, through second or third mortgages. There are no announcements posted on the press release pages of the Treasury Depaartment or the Making Home Affordable program, as of the posting of this story. More in this report from the New York Times, click here. More in this report from the Wall Street Journal, click here. Complications of short selling from the Wall Street Journal, click here. 03/08/2010 FRIDAY NIGHT BANK TAKEOVERS / SIX MORE BANKS FAILMore from the Emeritus Newsroom- Six Banks, some in major metropolitan areas, have failed and have been taken over and sold by the FDIC. Click on each bank for more information as to who has purchased the bank and the conditions of continued operations. The banks area: Greater Atlantic Bank, Reston, VA Total cost of the six bank failures is not yet fixed as the FDIC is sharing yet undetermined losses in the AmTrust Bank and Buckhead Community Bank failures. However, estimates range from $5-7 billion. So far this year, there have been 130 bank failures in the U-S. The FDIC insurance fund is now in the red. However, the agency is advancing charges for bank insurance payments which will put the fund into the black in 2012. 12/04/2009 FED CHAIR BERNANKE SAYS FED COULD HAVE DONE MORE / TESTIFIES BEFORE SENATE FOR SECOND TERM APPOINTMENTMore from the Emeritus Newsroom- During the beginning of his confirmation before the Senate Banking Committee today, Federal Reserve Chairman Ben Bernanke admitted the Federal Reserve could have done more to avert the financial crisis which led to the worst recession since the 1930's. Bernanke also admitted the Fed has been "slow' to protect homeowners from high risk mortgages and which eventually landed them into foreclosure. But, the Chairman also pointed out what he felt to be the Fed's positive contributions and leadership during a crisis, saying, "We played a central role in efforts to quell the financial turmoil, for example, through our joint efforts with other agencies and foreign authorities to avert a collapse of the global banking system last fall; by ensuring financial institutions adequate access to short-term funding when private funding sources dried up; and through our leadership of the comprehensive assessment of large U.S. banks conducted this past spring, an exercise that significantly increased public confidence in the banking system. We also created targeted lending programs that have helped to restart the flow of credit in a number of critical markets, including the commercial paper market and the market for securities backed by loans to households and small businesses. Indeed, we estimate that one of the targeted programs--the Term Asset-Backed Securities Loan Facility--has thus far helped finance 3.3 million loans to households (excluding credit card accounts), more than 100 million credit card accounts, 480,000 loans to small businesses, and 100,000 loans to larger businesses. And our purchases of longer-term securities have provided support to private credit markets and helped to reduce longer-term interest rates, such as mortgage rates. Taken together, the Federal Reserve's actions have contributed substantially to the significant improvement in financial conditions and to what now appear to be the beginnings of a turnaround in both the U.S. and foreign economies". Full text of Bernanke Testimony, copy click here. Although Bernanke is widely reported to likely win another term, he has several foes in the Senate who are just as likely to create problems for him. Both Liberal Independent Senator Bernie Sanders of Vermont, and Conservative Republican Senator Jim Bunning of Kentucky say they are opposed to his nomination. Video of Committee Hearing, click here. EDITORS NOTE ON VIDEO: THERE ARE EXCELLENT EXCHANGES BETWEEN BERNANKE AND SEN. JIM BUNNING AT 86 MINUTES INTO THE VIDEO, OTHER NOTEWORTHY SEGMENTS ARE AT 53 AND 45 MINUTES INTO VIDEO. 12/03/2009 FIVE OHIO PENSION FUNDS SUE WALL STREET CREDIT RATING COMPANIESMore from the Emeritus Newsroom- The Wall Street ratings companies Fitch, Moody's and Standard and Poor's, have been sued by Ohio Attorney General Richard Cordray. The suit has been filed in United States District Court for the Southern District of Ohio in Columbus on behalf of five Ohio public employee retirement and pension funds, charges the rating agencies with wreaking havoc on U.S. financial markets by providing unjustified and inflated ratings of mortgage-backed securities in exchange for lucrative fees from securities issuers. The pension funds were identified as: The Ohio Public Employees Retirement System, The State Teachers Retirement System of Ohio, The Ohio Police & Fire Pension Fund, The School Employees Retirement System of Ohio and The Ohio Public Employees Deferred Compensation Program. In his filing to the court, Cordray claims the ratings companies made spectacularly misleading evaluations of mortgage-backed securities due in part to the lucrative fees they received from the same issuers they were supposed to be objectively evaluating. Public statements and testimony indicate that rating agency executives and analysts knew their ratings of mortgage-backed securities were wrong. Indeed, one rating agency analyst admitted that the market for mortgage-backed securities was “little more than a house of cards” with a much higher risk of devaluation than indicated by the purported investment-grade “AAA” rating. Another rating agency analyst said that “we rate every deal. It could be structured by cows and we would rate it.” Raymond McDaniel, CEO and Chairman of Moody’s, described the ratings frenzy: “What happened in ’04 and ’05 … is that our competition, Fitch and S&P, went nuts. Everything was investment-grade. It really didn’t matter… No one cared because the machine just kept going.” McDaniel added that Moody’s also “[drank] the Kool-Aid.” “This misconduct has caused immense harm to Ohio police officers, firefighters, teachers, government workers, investors and retirees,” said Cordray. “Our lawsuit against these rating agencies is another step toward holding Wall Street accountable for its wrongs.” Cordray claims his involvement in 8 major lawsuits against Wall Street firms have recovered more than $2 billion to date. Recent settlements include $284.5 million with secondary defendants in a case involving AIG; $400 million with Marsh & McLennan; $475 million with Merrill Lynch; and the cancelling of $922 million in improperly granted stock options to corporate executives at UnitedHealth. Attorney General Cordray continues to represent the Ohio Funds in several major securities cases, including class action securities lawsuits against AIG, Bank of America, Fannie Mae, and Freddie Mac. Text of Attorney General's press release, copy click here. 11/20/2009 AT LEAST 14,700 DECLARE OFFSHORE BANK ACCOUNTS IN I-R-S AMNESTY PROGRAMMore from the Emeritus Newsroom- The Justice Department and IRS announced that over 14,700 taxpayers have come forward to report previously-undisclosed foreign bank accounts under the voluntary disclosure program the IRS implemented following the settlement. This figure represents almost double the initial numbers the IRS announced in October and dwarfs the number of voluntary disclosures received in 2008. ALSO TODAY THE OBAMA ADMINISTRATION ANNOUNCED THE CREATION OF A FINANCIAL FRAUD TASK FORCE. Obama issued an executive order to establish the interagency Financial Fraud Enforcement Task Force. The Department of Justice says it will lead the task force and the Department of Treasury, HUD and the SEC will serve on the steering committee. The task force’s leadership, along with representatives from a broad range of federal agencies, regulatory authorities and inspectors general, will work with state and local partners to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, address discrimination in the lending and financial markets and recover proceeds for victims.The task force, which replaces the Corporate Fraud Task Force established in 2002, will build upon efforts already underway to combat mortgage, securities and corporate fraud by increasing coordination and fully utilizing the resources and expertise of the government’s law enforcement and regulatory apparatus. The attorney general will convene the first meeting of the Task Force in the next 30 days. Text of the Justice Department press release, click here. 11/17/2009 FIVE MORE BANKS FAIL / TAKEN OVER AND SOLD BY FDIC / INCLUDES UNITED COMMERCIAL BANK OF SAN FRANCISCOMore from the Emeritus Newsroom- Five more banks were declared insolvent today by the Federal Deposit Insurance Corporation and sold to other financial institutions. The loss to the FDIC insurance fund for the United Commercial Bank failure alone is $1.4 billion. The total charge to the FDIC insurance fund from the remaining four bank failures is $132.7 million. Click on each bank to get press releases. The banks involved are:
11/06/2009 NINE MORE FAILED BANKS ADDED TO FDIC CLOSURE LISTMore from the Emeritus Newsroom- Nine banks, mostly in the midwest and western regions, were taken over, closed and sold by the Federal Deposit Insurance Corporation. The FDIC released statements on the following banks (Click on each bank for more detailed information):
The combined cost of the nine bank failures, takeovers and sale, is approximately $2.5 billion, which will b covered by the FDIC insurance fund. That brings to 115, the number of failed financial institutions taken over by the FDIC. 11/02/2009 CIT FINANCIAL FILES BANKRUPTCYMore from the Emeritus Newsroom- CIT Financial, a major loan source for thousands of small and medium businesses, announced Sunday it was filing Chapter 11 bankruptcy. CIT’s Board of Directors approved the voluntary filings for CIT Group Inc. and CIT Group Funding Company of Delaware LLC with the U.S. Bankruptcy Court for the Southern District of New York. CIT Financial had received $2.3 billion in a federal loan from the financial bailout. Although it has been widely reported the $2.3 billion dollar federal loan will be lost in the bankruptcy, sources tell Emeritus News the loss will be substantial, though not the full loan amount that has been widely reported. In addition, the sources add, the government does have options for recovery before the bankruptcy is approved by the court , even though this bankruptcy is reported to be a "pre-packaged "plan worked out with other creditors. The CIT bankruptcy is one of the largest bankruptcies on record. Text of CIT Financial press release, copy click here. 11/01/2009 FDIC'S BAIR TAKES AIM AT OBAMA ADMINISTRATION FINANCIAL INSTITUTION REFORM PLANMore from the Emeritus Newsroom- FDIC Chair Sheila Bair announced today that she opposes an Obama Administration plan, she says, gives too little power to a proposed council of regulators and too much to the Treasury Department. Her comments came during a hearing on financial regulatory reform before the House Financial Services Committee. Bair told the committee,: "Some have suggested that a council approach would be less effective than having this authority vested in a single agency because of the perception that a deliberative council such as this would need additional time to address emergency situations that might arise from time to time. Certainly, some additional thought and effort will be needed to address any dissenting views in council deliberations. However, a Council with regulatory agency participation will provide for an appropriate system of checks and balances to ensure that decisions reflect the various interests of public and private stakeholders. In this regard, it should be noted that the board structure at the FDIC, with the participation of the Comptroller of the Currency and the Director of the Office of Thrift Supervision, is not very different from the way the Council would operate. In the case of the FDIC, quick decisions have been made with respect to systemic issues and emergency bank resolutions on many occasions. Based on our experience with a board structure, we believe that decisions could be made quickly by a deliberative council". Text of Bair testimony, copy click here. 10/29/2009 FDIC WEEKEND TAKEOVERS PUSH NUMBER OF FAILED BANKS TO 106 THIS YEARMore from the Emeritus Newsroom - Seven banks were closed and taken over by the Federal Deposit Insurance Corporation this weekend, with more on the way, as commercial and residential loan losses are expected through 2010. Partners Bank of Naples, Florida, achieved the status as the 100th failed bank taken over and sold by the FDIC. Partners was heavily involved in residential and commercial real estate in the Fort Myers metropolitan area, which was one of the worst hit areas for real estate during the recession. It consistently rates among the highest foreclosure areas in the country. 10/24/2009 TREASURY DEPARMENT ORDERS EXECUTIVE PAY CUTS FOR BAILED OUT COMPANIESMore from the Emeritus Newsroom- The Treasury department has announced Special Master for TARP Executive Compensation Kenneth R. Feinberg has determined compensation packages for the top executives at firms that received exceptional TARP assistance. Under the Emergency Economic Stabilization Act (EESA) as amended in 2009, the Special Master has a mandate to review all forms of compensation for five most senior executive officers and the next 20 most highly compensated employees at the seven firms that received exceptional TARP assistance (AIG, Citigroup, Bank of America, Chrysler, GM, GMAC and Chrysler Financial). According to the Treasury Department announcement, the determinations will affect the 25 most highly paid executives at each of the companies. The criteria involved in the determinations involve: 1. Reform Pay Practices for Top Executives to Align Compensation With Long-Term Value Creation and Financial Stability · Reject cash bonuses based on short-term performance, as required by statute, in favor of company stock that must be held for the long term · Restructure existing cash "guarantees" into stock that must be held for the long term 2. Significantly Reduces Compensation Across the Board · Average cash compensation down by more than 90 percent · Approved cash salary limited to $500,000 for more than 90 percent of relevant employees · Average total compensation down by more than 50 percent · Exceptions where necessary to retain talent and protect taxpayer interests 3. Require Salaries to Be Paid in Company Stock Held Stock Over the Long Term · Stock is immediately vested, requiring executives to invest their own funds alongside taxpayers · Stock may only be sold in one-third installments beginning in 2011--or, if earlier, when TARP is repaid--aligning executives' interests with those of taxpayers 4. Require Incentive Compensation to be Paid in the Form of Long Term Restricted Stock – and to be Contingent on Performance and on TARP Repayment · Require executives to meet goals set in consultation with the Special Master, and certification of achievement of goals by an independent compensation committee · Any incentives granted paid only in stock that requires three years of service and can be cashed in only when TARP is repaid 5. Require Immediate Reform of Practices Not Aligned with Shareholder and Taxpayer Interests · Limits "other" compensation and perquisites · No further accruals under supplemental executive retirement plans or severance plans Text of Treasury Department press release, copy click here. Treasury Secretary Tim Geithner statement on pay determinations, copy click here. 10/22/2009REUTERS REPORTS "SIGNIFICANT" INSIDER TRADING CASES IN THE WORKS AS S-E-C INVESTIGATES WALL STREETMore from the Emeritus Newsroom - Reuters is reporting that there are more insider trading cases coming down the pipeline in the wake of last week's arrest of billionaire Raj Rajaratnam, who established Galleon Group in 1997 He's accused having a network of company insiders to tip him off to information that netted $20 million in il1egal profits between 2006-2009. At stake in his case, are a number of pension funds and endowments which have placed money with his firm. Officials with the New York Stock Exchange reported unusual trading activity connected to Galleon in 2007, but that little or no action was taken by the S-E-C. The increased load of investigations came as the Obama administration came to power. Reuters says sources are telling them other hedge funds face investigations. The FBI is also reported to have used wiretaps in the investigations. Reuters report, copy click here. 10/19/2009 NEW PROGRAM FOR LOW AND MIDDLE INCOME HOME BUYERSMore from the Emeritus Newsroom- In another attempt to boost the sagging housing market, the Obama administration is linking with other agencies to provide loans for low and middle income Americans. In a press release from the Treasury Department, it's described as a new initiative for state and local housing finance agencies (HFAs) that will help borrowers to purchase or rent homes that are affordable over the long term. Following up on the intent to support HFAs first outlined in February under the Homeowner Affordability and Stability Plan, the Administration's initiative has two parts: a new bond purchase program to support new lending by HFAs and a temporary credit and liquidity program to improve the access of HFAs to liquidity for outstanding HFA bonds. The HFA Initiative using authority provided to Treasury by the Housing and Economic Recovery Act of 2008 (HERA) will also assist in the development of more rental properties. The Treasury Department says the initiative will cost little or no additional taxpayer dollars. Treasury Department press release, copy click here. 10/19/2009 STATE OF BANKING IN U-S: RATE OF PROBLEM LOANS REMAINS AT RECORD HIGH / BANKING SYSTEM IMPROVING BUT MORE SMALLER INSTITUTIONS WILL FAILMore from the Emeritus Newsroom- Strong but with major problems. That's the message from representatives of nearly all sectors of the banking and financial sectors in testimony before a subcommittee of the Senate Banking Committee today. Comptroller of the Currency, John Dugan told the subcommittee that credit quality continues to worsen as banks experience the highest rate of poor loan performance in history. But, Dugan says national banks remain strong as assets have increased by $186 billion, however, they would need additional capital for anticipated losses. he also told the committee that some smaller institution would fail. Daniel Tarullo, a member of the Federal Reserve Board of Governors, told the committee that much of the financial sector is still not functioning effectively. Tarullo said the sector will continue to suffer with more commercial real estate losses. FDIC Chair Sheila Bair offered few new observations beyond those previously known, explaining that the FDIC insurance fund was on course for regaining solvency in 2012, after plans for charging banks three years worth of insurance fund payments in advance. The FDIC insurance fund has been pummeled by 95 bank failures, this year alone. Some of the failures, over the past year, taking more than a billion dollars each to cover insured deposits and losses. The FDIC troubled bank list consists of an estimated than 416 banks. Bair admitted that bank failures would "continue at a good pace this year and next". She said her agency is prepared and that all depositors would be protected to the maximum amount. FDIC Chair Sheila Bair testimony text, copy click here. Comptroller of Currency John Dugan testimony text, copy click here. Federal Reserve Governor Daniel Tarullo testimony text, copy click here. 10/14/2009 SOCIAL SECURITY FILING BACKLOG FALLS FOR FIRST TIME IN TEN YEARS / GETTING WORSE AT V-A FOR VETERANSMore from the Emeritus Newsroom- Social Security Administration officials today claim the agency has reduced the backlog of claims for the first time since 1999. Commissioner Mike Astrue says the SSA : "...ended fiscal year (FY) 2009 with 722,822 hearings pending compared to 760,813 hearings pending at the start of the year, a reduction of more than 37,000 cases. Over the same period, the average processing time for these cases improved from 514 days in FY 2008 to 491 in FY 2009. “Our backlog reduction plan is working, and progress is accelerating,” Commissioner Astrue said. “Even in the face of a significant increase in our workloads as a result of the worst recession since the Great Depression, we have reduced the hearings backlog for nine consecutive months. Thanks to the efforts of thousands of hardworking Social Security employees and the additional funding we received from President Obama and the Congress, we have exceeded our backlog reduction goal for this year.” The SSA says in order to achieve its backlog reduction goals, the agency has embarked on the largest expansion in decades of its capacity to hear disability appeals. This year, the agency hired 147 new Administrative Law Judges (ALJs) and 850 support staff and plans to hire 226 additional ALJs plus support staff in FY 2010. To provide flexibility to assist the most backlogged hearing offices, the agency opened three new National Hearing Centers (NHCs) in Albuquerque, New Mexico; Baltimore, Maryland; and Chicago, Illinois. The agency also has aggressive plans to open 14 new hearing offices and 4 satellite offices by the end of next year with the first of those new offices opening in Anchorage, Alaska in the next few months. In addition to reducing the number of cases awaiting a hearing decision, the agency again targeted the oldest and most difficult cases for processing. Beginning in FY 2007 with 65,000 cases that were 1,000 days old or older, the agency has continually attacked its “aged” cases. This year, the agency targeted 166,838 cases that were 850 days or older and virtually eliminated this entire universe of cases. The goal in FY 2010 has been reset again to eliminate cases over 825 days old. SSA press release, copy click here. ALSO THIS WEEK, AN INSPECTOR GENERAL'S REPORT REGARDING PRCESSING OF VETERANS AFFAIRS BENEFITS HAD A MUCH DIFFERENT STORY. IT WAS JUST ANOTHER CHAPTER TO REPORTS LAST YEAR THAT FOUND BENEFIT APPLICATIONS IN DISCARD AND SHREDDER BINS AT HANDFUL OF OFFICES THAT WERE SURVEYED. The Inspector General's Office claims a review of more processing at the V-A revealed cases of more than 11,000 veterans had taken more than a year to be processed, causing more than 43 million dollars in claims to be delayed, LAST YEAR. The V-A has added more claims processing personnel since the Obama Administrtion took over and Congress approved more money for processing as part of the V-A budget. But, so far there are no firm numbers as to the impact on application filing backlogs. 10/02/2009 |
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