Word from SIGTARP

Yep, after all the MSMBS about how the TARP program was "free" and saved the world, we found the report from the Office of the Special Inspector General for the Trouble Asset Relief Program out yesterday to be a bit eye-opening  - especially these notes from the Exec Summary:

• "It is a widely held misconception that TARP will make a profit. The most recent cost estimate for TARP is a loss of $60 billion. Taxpayers are still owed $118.5 billion (including $14 billion written off or otherwise lost).

• A significant legacy of TARP is increased moral hazard and potentially disastrous consequences associated with institutions deemed “too big to fail.” TARP’s legacy also includes the impact on consumers and homeowners from the large banks’ failure to lend TARP funds. TARP continues to be subject to criticism that TARP helped large banks but not homeowners.

• In addition, after 3½ years, community banks have an uphill battle to exit TARP because they cannot find new capital to replace TARP funds. Finally, TARP’s legacy includes whitecollar crime that SIGTARP is uncovering and stopping."

To be sure, a large number of readers were critical of my comments at the time that TARP was nothing more than a bankster-class hold-up of the taxpayers, but with a cost of $60 billion and IOU's for almost $120-billion, I'd say our skepticism was correct and - like it or not - SIGTARP data concurs. 

We been had.  And since the bankster class has pulled off too big to fail once, we can almost certainly expect bigger BOHICA's to come.  See why I'm a little bit skeptical of Fed happy-talk?

Sweden moving towards cashless economy

"I can't see why we should be printing bank notes at all anymore," says Bjoern Ulvaeus, former member of 1970's pop group ABBA, and a vocal proponent for a world without cash.

The contours of such a society are starting to take shape in this high-tech nation, frustrating those who prefer coins and bills over digital money.

In most Swedish cities, public buses don't accept cash; tickets are prepaid or purchased with a cell phone text message. A small but growing number of businesses only take cards, and some bank offices — which make money on electronic transactions — have stopped handling cash altogether.

"There are towns where it isn't at all possible anymore to enter a bank and use cash," complains Curt Persson, chairman of Sweden's National Pensioners' Organization.

He says that's a problem for elderly people in rural areas who don't have credit cards or don't know how to use them to withdraw cash.

The decline of cash is noticeable even in houses of worship, like the Carl Gustaf Church in Karlshamn, southern Sweden, where Vicar Johan Tyrberg recently installed a card reader to make it easier for worshippers to make offerings.

"People came up to me several times and said they didn't have cash but would still like to donate money," Tyrberg says.

Bills and coins represent only 3 percent of Sweden's economy, compared to an average of 9 percent in the eurozone and 7 percent in the U.S., according to the Bank for International Settlements, an umbrella organization for the world's central banks.

Three percent is still too much if you ask Ulvaeus. A cashless society may seem like an odd cause for someone who made a fortune on "Money, Money, Money" and other ABBA hits, but for Ulvaeus it's a matter of security.

After his son was robbed for the third time he started advocating a faster transition to a fully digital economy, if only to make life harder for thieves.

"If there were no cash, what would they do?" says Ulvaeus, 66.

The Swedish Bankers' Association says the shrinkage of the cash economy is already making an impact in crime statistics.

The number of bank robberies in Sweden plunged from 110 in 2008 to 16 in 2011 — the lowest level since it started keeping records 30 years ago. It says robberies of security transports are also down.

"Less cash in circulation makes things safer, both for the staff that handle cash, but also of course for the public," says Par Karlsson, a security expert at the organization.

The prevalence of electronic transactions — and the digital trail they generate — also helps explain why Sweden has less of a problem with graft than countries with a stronger cash culture, such as Italy or Greece, says economics professor Friedrich Schneider of the Johannes Kepler University in Austria.

"If people use more cards, they are less involved in shadow economy activities," says Schneider, an expert on underground economies.

In Italy — where cash has been a common means of avoiding value-added tax and hiding profits from the taxman — Prime Minister Mario Monti in December put forward measures to limit cash transactions to payments under euro1,000 ($1,300), down from euro2,500 before.

The flip side is the risk of cybercrimes. According to the Swedish National Council for Crime Prevention the number of computerized fraud cases, including skimming, surged to nearly 20,000 in 2011 from 3,304 in 2000.

Oscar Swartz, the founder of Sweden's first Internet provider, Banhof, says a digital economy also raises privacy issues because of the electronic trail of transactions. He supports the idea of phasing out cash, but says other anonymous payment methods need to be introduced instead.

"One should be able to send money and donate money to different organizations without being traced every time," he says.

It's no surprise that Sweden and other Nordic countries are at the forefront of this development, given their emphasis on technology and innovation.

For the second year in a row, Sweden ranked first in the Global Information Technology Report released at the World Economic Forum in January. The Economist Intelligence Unit also put Sweden top of its latest digital economy rankings, in 2010. Both rankings measure how far countries have come in integrating information and communication technologies in their economies.

Internet startups in Sweden and elsewhere are now hard at work developing payment and banking services for smartphones.

Swedish company iZettel has developed a device for small traders, similar to Square in the U.S., that plugs into the back of an iPhone to make it work like a credit card terminal. Sweden's biggest banks are expected to launch a joint service later this year that allows customers to transfer money between each other's accounts in real-time with their cell phones.

Most experts don't expect cash to disappear anytime soon, but that its proportion of the economy will continue to decline as such payment options become available. Before retiring as deputy governor of Sweden's central bank, Lars Nyberg said last year that cash will survive "like the crocodile, even though it may be forced to see its habitat gradually cut back."

Andrea Wramfelt, whose bowling alley in the southern city of Landskrona stopped accepting cash in 2010, makes a bolder prediction: She believes coins and notes will cease to exist in Sweden within 20 years.

"Personally I think this is what people should expect in the future," she says.

But there are pockets of resistance. Hanna Celik, whose family owns a newspaper kiosk in a Stockholm shopping mall, says the digital economy is all about banks seeking bigger earnings.

Celik says he gets charged about 5 Swedish kronor (TEMPORARY_BODY_TAG.80) for every credit card transaction, and a law passed by the Swedish Parliament prevents him from passing on that charge to consumers.

"That stinks," he says. "For them (the banks), this is a very good way to earn a lot of money, that's what it's all about. They make huge profits."

By ROBERT PEAR

WASHINGTON — The Obama administration reported a significant deterioration in the financial outlook for Social Security on Monday, while stating that the financial condition of Medicare was stable but still unsustainable.

“The President appeared in a picture surrounded by secretaries who pay a higher tax rate than their millionaire bosses who were there too by their sides, a direct challenge to Romney, his wealth and his tax rate,” anchor Diane Sawyer conveyed in highlighting the Obama campaign stunt of the day.

“Reporter” David Muir proceeded to relay:

The President argues if you make more than a million dollars, you should pay the same tax rate as the middle class. One of those millionaires standing behind him, hedge fund founder Whitney Tilson, who stood outside with us today with his office manager Kelly Alaris (sp?). He makes 39 times what she makes. Their tax rate, not even close.

Tilson asserted “I pay a 24.6 percent tax rate, she pays a 33.4 percent tax rate,” which is ludicrous since the maximum marginal federal income tax rate is 35 percent and she’d only pay that on part of her income. (Muir said she’d “save” $9,300 “if she paid his tax rate,” thus putting her income in the $100,000 range – though the numbers are wrong so you really can’t estimate too well – and at $100,000 no one pays 33 percent.)

After failing to point out the fallacy, Muir ran a clip of Mitt Romney saying 92.3 percent of the people who have lost jobs during Obama’s term “have been women.” Muir pounced: “Now the non-partisan group PolitiFact saying that number right there is ‘mostly false,’ arguing the President can’t be held responsible for the job picture the day he took office.” PolitiFact did declare the stat “mostly false” – after admitting “the numbers are accurate.”

(In the Washington Post’s mis-named “The Fact Checker,” Glenn Kessler idiotically assessed the Romney number as “TRUE BUT FALSE.” How helpful.)

Yet Muir has no qualms about passing along preposterous Obama campaign talking points.

This wasn’t Muir’s first offense. He was just as disingenuous back in late January. “The secretary speaks,” fill-in anchor Muir excitedly teased at the top of World News, “billionaire investor Warren Buffett and his secretary, who pays a much-higher tax rate than him. He says not fair. She’s now at the center of a huge debate. What does she think? An ABC News exclusive.”

That ridiculous story claimed Buffett’s secretary paid a 35.8 percent rate, which is impossible since the top marginal income tax rate is 35 percent. Even including the non-income tax FICA tax of 7 percent would put the income tax rate at a still impossible 28 percent.

In fact, the average effective federal income tax rate for taxpayers is 11 percent, as I noted in my January 24 post, “Nets Use Romney’s Taxes to Advance Obama’s False ‘Fairness’ Narrative,” which includes a table showing those earning between $50,000 and $75,000 pay an average effective income tax rate of 7 percent, 8 percent for those taking in $75,000 to $100,000 and 12 percent for those between $100,000 and $200,000.

Muir, of course, failed Stephen Hayes’ test. On FNC’s Special Report on Tuesday night he noted the 30 percent income tax rate on capital gains earned by millionaires “would raise less than six percent of the total cost of the stimulus” and “would raise roughly the same amount in one year” as “the U.S. government accumulates in debt in a single day.” Declaring it “totally meaningless,” Hayes asserted “there’s nothing serious about” Obama’s economic plan and so, he suggested in an idea with little chance of occurring: “Reporters should do their job and put this in perspective.”

Americans Can't Wait For Their Tax Refunds... To Immediately File For Bankruptcy

US Editor Of The Economist: "Paper Dollar" And "Paper Euro" Will "Debase" In A "Big Way"

Submitted by Tyler Durden on 04/17/2012 - 08:08

Matthew Bishop, the US Editor of The Economist, has been interviewed by the Wall Street Journal TV about gold and why "people have lost faith in the 20th century religion of government backed fiat money." He says that he has become an agnostic or an atheist with regard to his belief in government-backed money as he fears that governments are in a position whereby they are going to debase currencies such as the "paper dollar and "paper euro" "in a big way." Gold becomes one of the "alternative religions" in that environment. History shows that a deleveraging downturn takes a long time and can take 7 or 8 years. Inflationary pressures are building and will be seen in the second half of the cycle, according to Bishop. Bishop says he would put some of his money into gold but is prohibited from this due to the investment policies of The Economist. He advocates owning gold as a "portfolio of money" and diversification and advocates having 5% to 10% of one’s money in gold. The Economist magazine has a strong Keynesian bias and has been one of the most anti-gold publications in the world with many simplistic, unbalanced and ill-informed articles. The publication has suggested on many occasions since 2008 that gold is a bubble. Clients of GoldCore have told us that they were prompted to sell their gold bullion as long ago as 2009 after reading such articles in The Economist.

Every once in a while an event crystallizes the stark reality behind the lacy curtain of propaganda and artifice. Here is one such event.

Correspondent R.T. is a retired accountant who has resided in Arizona since 2001. Prior to 2001, he resided in California.

On March 14, he received a letter from the California Franchise Tax Board (the agency that collects income taxes) claiming that he owed $1,343 for the tax year 2006. This was the first notification he'd ever received of this claim. This was an interesting claim given that R.T.:

-- Did not reside in California in 2006

-- Did not file a State income tax return in California in 2006

-- Did not have any outstanding tax issues with California in 2006

-- Did no business in California in 2006

-- Owned no property in California in 2006

The number $1,343 is also interesting, as R.T.'s total Federal tax liability in 2006 was $650. Since the top income tax rate in California is about 9%, and that only kicks in at relatively high income levels above $100,000 annually, then it's difficult to see how anyone could owe double their Federal tax in California state tax.

But the truly interesting part of the story is that the state took $1,343 out of R.T.'s Wells Fargo bank account on March 2, prior to notifying him of the claim. Wells Fargo charged R.T. $100 for handling the removal of his $1,343.

As R.T. observed: "If I had filed a 2006 California tax return the statute of limitations would have run out, but since I did not file a 2006 tax return there is no statute of limitations. This is the classic catch 22."

I do not have copies of the correspondence so I cannot verify this sequence of events, but I have corresponded with R.T. for many years and have found him to be a credible witness to national events. While some might claim he invented this story of state theft out of whole cloth, there is no basis in our years of correspondence to support that claim.

What is entirely believable is that the state of California, desperate for revenue, is churning out dubious income tax claims stretching back years and collecting the money without due process. This is theft, pure and simple, and charging the account owner $100 for transacting the theft is also theft.

Welcome to the predatory State of California--even if you don't live there. If any mainstream media journalist wants to pursue this story, email me and I will put you in touch with R.T.

Somehow I doubt this is a unique story. R.T. said he immediately tried to call the California Franchise Tax Board and was on hold for some time before his call was dropped. As of yesterday his attempts to contact the agency via phone were unsuccessful. Why are we not surprised by any of this? Perhaps it's because government/bank thievery and Catch-22 incompetence is now the backdrop of our culture.

The Schrodinger Inflation: Ignore All Time High March Gas Prices, BLS Tells You Inflation Is Lower Than Expected

The Bank for International Settlements, which acts on behalf of central banks, has been buying significant quantities of gold on the international market amid falling prices, traders said.

According to several estimates, the BIS bought 4-6 tonnes of gold, worth roughly $250m-$300m at current prices, in the over-the-counter physical market last week, with purchases particularly strong at the end of the week. The total purchases over the past three or four weeks were likely to be as much as double that, the traders added.

In a note to clients this week, Credit Suisse referred to “aggressive central bank buying seen last Friday”.

Of course, central banks are well aware what they are doing. In fact, they have been buying up gold pretty much non-stop in the past few years.

As a group, they made their largest purchases of gold in more than four decades last year, led by emerging economies such as Mexico, Russia and South Korea intent on diversifying their dollar-heavy foreign exchange reserves. The World Gold Council has also pointed to the possibility of significant unreported purchases by China at the end of last year.

 

At the same time, European central banks have all but halted a run of large sales.

 

“Central banks have definitely been looking at gold as an asset class much more closely ever since European central banks stopped selling,” a senior gold banker said. “There has been a huge interest."

 

While some countries, such as Russia, China or the Philippines, have traditionally accumulated gold produced by their domestic mining industry, others use the BIS as an agent to carry out purchases and sales on their behalf, preserving anonymity.

 

The central bank buying comes as gold prices have slid in the past three weeks as strong economic data from the US has lowered investors’ expectations of quantitative easing by the Federal Reserve and made other investments, such as equities, appear more attractive.

A Gold (And Physical Platinum) Bug At The Fed?

US Budget Deficit Hits All Time High In February

NAR Continues Tradition Of Making Mockery Of Itself, Revises December Home Sales From +5% to -0.5%

Published: Thursday, 16 Feb 2012 | 12:04 AM ET

By: Diana Olick
CNBC Real Estate Reporter

After a year-long reprieve from rising foreclosures, the numbers are going up again.

One in every 624 U.S. households received a foreclosure filing in January, up 3 percent from the previous month, according to a new report from RealtyTrac. Foreclosure activity froze in many states in 2011, due to processing delays after fraud, or so-called "Robo-signing," were uncovered in the fall of 2010. The thaw is now on.

"We expect the pattern of increasing foreclosures to continue in the coming months, especially given the finalized mortgage and foreclosure settlement reached in early February between 49 state attorneys general and five of the nation's largest lenders," said RealtyTrac's CEO Brandon Moore in a written release. "Foreclosure activity increased on a year-over-year basis for the first time in more than 12 months in Florida, Illinois, Indiana and Pennsylvania, following a pattern we saw in late 2011 in states such as California, Arizona and Massachusetts."

While states that do not require a judge to preside over foreclosure proceedings, like California, saw a jump in filings toward the end of last year, judicial states have all but stalled. That will now change, thanks to the $26 billion dollar government-lender/servicer settlement. There will still be some delays on individual state levels, but the wheels are turning again, and that means more bank repossessions and more foreclosed properties heading to the re-sale market.

Bank repossessions, the final stage of the foreclosure process, increased at least 30 percent year-over-year in several states, including Massachusetts, which saw a 75 percent spike. Bank-owned or REO (real estate owned) activity hit a 16-month high in Illinois and a 15-month high in Indiana. Default notices, the first stage of foreclosure, were flat nationally in January, but spiked in judicial states, like Connecticut and Pennsylvania (up 112 percent) and even in non-judicial states like Maryland (up 100 percent).

Nevada still posted the highest foreclosure rate, with one in every 198 households receiving a filing, despite an 8 percent drop in foreclosure activity. Nevada is a non-judicial foreclosure state, so the foreclosure backlog has been clearing for the last several months.

The situation is the same in California, where foreclosure activity dropped to a 50-month low, but the state still posted the second highest foreclosure rate in the nation. More than 51,000 borrowers received a foreclosure filing in January. California cities still account for nine of the top ten metro foreclosure rates, according to RealtyTrac.

As optimism seems to abound for the spring, at least among the nation's home builders whose sentiment index jumped to the highest level in four years this month, foreclosures still stand in the way of a robust recovery.

Distressed property sales lower the value of homes around them, and that pushes more borrowers into a negative equity position, owing more on their mortgages than their homes are currently valued. Until banks work through the enormous backlog of foreclosures, which number in the millions, home prices will not hit a firm bottom, especially in the most troubled local real estate markets.