Saturday, May 28, 2016

Today's links

"The most worrisome risk is a contraction of the global economy," led by a slowdown in emerging economies, Japan's Shinzo Abe told a news conference after chairing the two-day summit. "There is a risk of the global economy falling into crisis if appropriate policy responses are not made."



1--US Dollar Begins to Re-Exert Real Stress


(Isn't that the point?...The Fed is trying to attract capital to USTs and US equities. And the ECB and BOJ are assisting)


2--Janet Yellen Sees Rate Hike Coming Soon

Fed is on watch to move as economy shows signs of pickup, but wild cards linger


3--Japan’s Abe Plans Up to $90.7 Billion Stimulus, Nikkei Says


Abe will seek a second supplementary budget worth 5 trillion yen to 10 trillion yen after July’s upper-house election, the Nikkei reported Saturday without attribution. Proposals will include accelerating the construction of a magnetic-levitation train line from Nagoya to Osaka, issuing vouchers to boost consumer spending, increasing pay for child-care workers and setting up a scholarship fund, the Nikkei said.

“When you want to get the economy going, as long as demand in Asia is weak, you need additional public spending,” Martin Schulz, a senior economist at Fujitsu Research Institute in Tokyo, said by phone. “Since private spending is still not picking up, the government is simply taking up the slack.”...


Meanwhile, the yen has surged about 9 percent versus the dollar this year, threatening profits for exporters including Toyota Motor Corp. and weighing on the nation’s stock market. The benchmark Topix index has fallen 13 percent in 2016.


Second Package

The stimulus package would be the second this fiscal year after Japan approved a 778 billion yen supplementary budget this month to aid recovery from earthquakes in the Kumamoto region


4--Companies Go on Worldwide Bond Bender With $236 Billion of Sales


("Nirvana of borrowing conditions"......Borrow in euros at 1 percent or dollars at 3 percent ECB touched off a wildfire of borrowing by promising to buy corporates bonds


so now companies are massively leveraging without any intention of investing in future growth or addressing demand.  Currently $9 negative yielding bonds....In the last crisis, banks had built up massive debts by creating toxic mortgages they borrowed on in the repo market..This time, corporations are selling corporate debt that funds their stock buybacks and dividends..The money is not being used to build capacity for the future, but line the pockets of greedy CEOs and shareholders.  and the facilitator of thi scam is the central banks )


A borrowing binge by companies globally is poised to make May one of the the busiest months ever, thanks to investors who continue to devour the relatively juicy yields on corporate debt in a negative-rate world.

Global issuance of non-financial company debt will be in excess of $236 billion by month-end, according to data compiled by Bloomberg, led by computer maker Dell Inc., which sold $20 billion of bonds to back its takeover of EMC Corp. in the year’s second-biggest corporate offering. In Europe, companies sold 48.5 billion euros ($54.2 billion) making it the busiest May on record. U.S. borrowers including Johnson & Johnson and Kraft Heinz Co. did deals of more than 1 billion euros....


Hans Mikkelsen, head of high-grade credit strategy at Bank of America, said spreads should grind even tighter as June supply fails to keep up with demand that’s been driven by foreign buyers. He said he expects foreign investors to purchase $400 to $500 billion of bonds in the U.S. this year. That’s as much as 38 percent of the market if issuance matches 2015’s levels....


In Europe, companies from outside that region will continue to issue bonds in euros, said Alex Hayes-Griffin, who ran Citigroup Inc.’s debt capital market and syndicate business in Sydney before moving to London in December to oversee cross-border funding. He expects more of those deals, especially when the European Central Bank begins buying corporate debt.

“Cross-border flows are increasing, with the U.S accounting for the bulk of the sales,” Hayes-Griffin said. “We expect this to continue, particularly as the CSPP actions take effect, driving down borrowing costs even for non-eligible paper,” he said referring to the ECB’s bond-purchase plan....


5--Amid strikes, French President Hollande pledges to impose labor law


the only way forward for workers in struggle against the PS’ labor law, and austerity measures across Europe, is to create organs of struggle independent of the trade unions.....


Hollande’s comments reflect the basic position of the French ruling class, which intends to impose austerity and social retrogression while crushing opposition with police violence. Nonetheless, Hollande also faces increasing calls and warnings from inside the ruling class itself, both in France and internationally, that he has provoked a confrontation with the working class that is fraught with immense danger.


In one comment, “Hollande at the end of his rope,” the Frankfurter Allgemeine Zeitung wrote, “The president knows that his country remains marked by the heritage of the French revolution. The heart of the political system goes back to 1789 … The president’s legitimacy is far too weak already to enter into conflict with a radical minority of CGT strikers. This all shows how reforms at the end of a presidential term are as good as impossible, above all in France.”...


The bourgeoisie has long experience handling and manipulating the unions, which have totally lost their base in the working class in France, and depend on corporations and the state for 95 percent of their yearly budget. Ruling circles are very clear that the union bureaucracies are part of the political establishment and allies of the bourgeoisie in their dealings with the working class, and have an immense financial and political stake in the existing social system.


6--Warnings of slump in US economy


The main factor is the fall in business investment, the key driver of economic growth in the capitalist economy.

“Spending on some of the building blocks of business—such as machines, computers and steel—is slipping,” an article in the Wall Street Journal noted. “Such expenditures are an important ingredient in improving employee productivity, workers’ wages and corporate profits. A lack of investment risks trapping the economy in a low-growth mode.”

The Commerce Department reported that orders for non-defence capital goods, excluding aircraft, an indicator of business investment, fell by 0.8 percent in April, bringing the total decline since April 2014 to almost 12 percent.

Well-known economic forecaster Diane Swonk told the Wall Street Journal it was “disturbing that businesses’ cash flow has improved dramatically and they have access to cheap debt, but they’ve deployed that on dividends and buybacks instead of investing in the future.”

Earlier this week, a report by Moody’s pointed out that US non-financial corporations were sitting on a cash stockpile of $1.7 trillion, almost one-third of it held by five major hi-tech US companies, a significant statistic given that these firms are regarded as a major driving force of the US economy.

The lack of business investment in the real economy, as opposed to financial speculation, finds expression in productivity data.


The lack of business investment in the real economy, as opposed to financial speculation, finds expression in productivity data.

In a speech on Thursday, reviewing trends in the US economy, Jerome Powell, a Federal Reserve Board governor, noted that labour productivity in the US had increased by only 0.5 percent a year since 2010, the slowest five-year growth rate since World War 2 and about one quarter of the average post-war rate. He noted that this was a trend that extended across the world economy.

The productivity slowdown is expected to continue, with the Conference Board, a major US economic think tank, warning that it could go negative this year for the first time in more than three decades.

According to Powell, estimates of the long-run potential growth of the US economy have dropped from 3 percent prior to the financial crisis to 2 percent “with much of the decline a function of slower productivity growth.”

A key factor in holding back productivity in recent years, he said, was the meagre growth in the business sector’s capital stock, consistent with “the weak recovery in demand.” But other longer-term factors may also be at work. Powell pointed that the so-called total factor productivity (TFP) growth, regarded as a measure of the impact of technological innovation, was also falling.

“A broad decline in the dynamism in our economy may also be contributing to lower TFP. There is strong evidence that the slowdown in TFP growth in the United States preceded the financial crisis, particularly in sectors that produce or use information technologies,” he said.

In other words, there is a basic dysfunction in the workings of the American economy in which the cycle of business investment in the expectation of higher profits leads to higher productivity, economic expansion, resulting in further investment, has broken down....


The summit communiqué noted that since the last meeting of the group in April 2015 “downside risks to the global economic outlook have increased” and that “weak demand and unaddressed structural problems are key factors weighing on actual and potential growth.” There were also “potential shocks” of a noneconomic origin—a reference to the increasingly tense geopolitical situation....


As the summit was taking place, new data from Japan pointed to the global deflationary trends that have increasingly gripped its economy. The consumer price index for April fell by 0.3 percent in the year to April, following a decline of 0.1 percent in March with indications from preliminary forecasts that it will show an even larger decline next month.

Falling prices will put increased pressure on the Bank of Japan to further ease monetary policy and may even lead to direct intervention by government authorities in currency markets to lower the value of the yen in an effort to boost the economy, despite warnings from the US against such action and a declaration in the G7 communiqué that countries should not engage in competitive currency devaluations.


7--Abe’s grim warning about global economy highlights G7 divisions (charts)

8--The Economy vs. Earnings: Companies Aren’t Winning   GDP will grow but not profits

U.S. economy isn’t as weak as the first-quarter GDP report suggests ...


Gross domestic product grew at a 0.8% annual rate in the first quarter, according to revised estimates released by the Commerce Department on Friday. That was better than the initially reported 0.5% rate. But it was still awfully soft, marking the slimmest gain since the first quarter of last year when a harsh winter walloped the economy.


The weakness in the GDP report dovetails with the weak first-quarter results many companies reported. Indeed, the Commerce Department also reported its measure of pretax corporate profits (which unlike GDP aren’t adjusted for inflation) rose just 0.3% from the fourth quarter—1.4% at an annual rate. From a year earlier, profits were down 5.7%. ...


But if GDP isn’t as bad as advertised, why are earnings so weak?

One reason is that the share of the economy going to corporate profits, which has been near historic highs as profit margins expanded, appears to be shifting lower. Another is that profits from abroad—which play an even greater role in public-company earnings reports than in the Commerce Department figures—have been walloped by overseas weakness and dollar strength. Public companies are also more focused in the goods sector, which has been a weaker spot for the economy than services...


In the second quarter, GDP should look a lot better. Macroeconomic Advisers, for one, estimates it will grow at a 2.5% annual rate, based on the data that has come in so far. But considering the profits headwinds, earnings may not see much of a revival.


Companies may have to figure out how to explain away another round of disappointing earnings without relying on a weak economy as a crutch. 





10-- U.S. Cellphone Study Fans Cancer Worries

Researchers found incidences of tumor in rats exposed to low-level radio waves, reigniting debate over safety




11--Russia Hints At Nuclear War After US Deploys Ballistic Missile Shield



Friday, May 27, 2016

Today's links

Today's quote: "Young people in America are part of the first generation that is worse off than their parents and grandparents’ generations. It is a damning indictment of capitalism that it has nothing to offer but low wages, tenuous employment, austerity and ever expanding plans for war for which young people and workers will be deployed as cannon fodder for the rich." Niles Niemuth, SEP candidate for VP



1--The Reemergence of Class Struggle; Why you should be keeping an eye on France


Twenty-five years after the Stalinist dissolution of the USSR fueled a right-wing shift of all the so-called left parties, an extended period of political disorientation is coming to a close. A movement of the working class has emerged. The wholesale repudiation of the working class, Marxism and socialism that came to dominate in middle-class intellectual circles after the betrayal of the 1968 French general strike by the Stalinist French Communist Party is being refuted by the objective development of the political crisis of European capitalism and the resurgence of class struggle...

The repression bearing down on workers in France is a warning to the international working class. The basic answer of the ruling elite in France and internationally to the growth of social tensions and working class resistance is to move rapidly toward dictatorship.
...
The events in France demonstrate how the working class is left with no option but to take the revolutionary road, fighting to bring down pro-austerity governments in France and across Europe. As struggles spread, France and all of Europe are entering into a pre-revolutionary situation...

The European Union of the corporations and banks is a prison for the working class and breeding ground for national chauvinism, militarism and war. It must be overthrown. But a retreat behind national borders on the basis of French, German, British, Greek or any other chauvinism is no less reactionary and destructive of the interests of working people. The only progressive alternative to the European Union is the unification of Europe on a new, revolutionary and egalitarian basis through the coordinated struggle of workers across Europe for workers’ power and socialism.

2--Why is there “no money” for basic social needs?


All around the world, from Greece and France to the US and throughout Asia, governments are seeking to dismantle even the most crucial social programs—welfare entitlements, minimum wages, retirement pensions, and access to education and healthcare—because of the worsening breakdown of world capitalism that erupted with the 2008 financial crash....

But now, say the representatives of finance capital, there must be an even more brutal offensive against working-class people. “There is no money” to meet the most basic social needs....

But these resources flow only into the coffers of a tiny super-rich layer of society, siphoned off by way of billion-dollar profits, underpinned by ever-lower tax rates for corporations and high-income recipients, and outright fraud and tax evasion.
This insatiable drive for private profit blocks any resolution to the social crisis. Such is the anarchy and insanity of the capitalist market that there is now a global “over supply” of dairy products and an “over-capacity” of steel production.....

The Socialist Equality Party (SEP) is advancing the only alternative—the complete reorganisation of society along genuinely socialist lines in order to secure the fundamental social rights of all, which include well-paying jobs, free, high-quality public education and health care, affordable housing and decent retirement incomes.
None of these essential requirements of modern society can be secured without ending the domination of the financial aristocracy over economic life. Social need must replace corporate profit as the guiding principle. All the large corporations—the major banks, mining and energy conglomerates, retail chains, pharmaceutical corporations and communications giants—must be taken out of the grip of the billionaires and placed under public ownership and the democratic control of the working class, the vast majority of the population

3--Deepening national antagonisms dominate G7 summit


In a bid to win support for more economic stimulus measures, especially in Europe, Abe presented a series of graphs comparing the present economic conditions to those which prevailed in 2008, which led to the collapse of Lehman Brothers and the global financial crisis.
Abe’s charts focused on falling commodity prices and significantly lower growth in emerging markets in order to highlight the dangers of a new crisis in financial markets. His arguments were brushed aside in the Western press as “implausible,” with reports suggesting he had brought them forward to justify moving away from a commitment to lift Japan’s consumption tax from 8 to 10 percent next year. Abe has previously said that he would only make such a move in response to a major earthquake or a Lehman-type failure in the international banking system.

4--Young people in America: A lost generation stuck at home


A detailed analysis of Census data by Pew revealed that, in 2014, approximately 32.1 percent of young Americans were living with their parents, compared to 31.6 percent who were living with a spouse or partner. The last time the share of young adults living at home was higher was in 1940, at the end of the Great Depression, when 35 percent lived with their parents.

Among 18- to 24-year-olds without a college education, approximately 36 percent now live with their parents, well above the 27 percent who are living with a spouse or cohabitating.

Even for the growing share of young people who have attained a college education, it has become increasingly difficult to become economically independent. Graduates are burdened with student loan debt—an average of $30,000 for each student who had to borrow to pay for their schooling. Approximately 19 percent of college graduates are living at home in order to survive.

Collective student debt in the US is now well above $1.3 trillion, a burden compounded by the fact that the average wage for college graduates has been on the decline since 2001. Meanwhile, rapidly increasing rent and housing prices since the collapse of the housing market in 2008 have made it increasingly difficult for young people with lower wages to live either on their own or with a partner.

Young people in America are part of the first generation that is worse off than their parents and grandparents’ generations. It is a damning indictment of capitalism that it has nothing to offer but low wages, tenuous employment, austerity and ever expanding plans for war for which young people and workers will be deployed as cannon fodder for the rich


5--The NIRP Refugees Are Coming to America


And then they invest it elsewhere — wherever yields are not negative, particularly in US Treasuries. This no-questions-asked demand from investors overseas has done a job on Treasury yields. That’s why the 10-year yield in the US has plunged even though the Fed got serious about flip-flopping on rate increases and then actually raised its policy rate, with threats of more to come....


“According to an analysis by Bank of America Merrill Lynch, for every $100 currently managed in global sovereign benchmarks, avoiding negative yields would result in roughly $20 being pushed into overweight US Treasuries assets,” wrote Christine Hughes of OtterWood Capital.


That’s a lot of money in markets where movements are measured in trillions of dollars. As long as NIRP rules in the Eurozone and Japan, US Treasury yields will become even more appealing every time they halfheartedly try to inch up just one tiny bit.


6--Wall Street Journal Tallies DoJ and SEC’s Pathetic Record in Tacking Wall Street Crime

7--New IMF Paper Challenges Neoliberal Orthodoxy


The publication of this IMF paper is a sign that the zeitgeist is, years after the crisis, finally shifting. It is becoming too hard to maintain the pretense that the policies that produced the global financial crisis, which are almost entirely still intact, are working. And the elites and their economic alchemists may also recognize that if they don’t change course pretty soon, they risk the loss of not just legitimacy but control. With Trump and Le Pen at the barricades, the IMF wake-up call may be too late


8--Clashes erupt at labour reform protests in France

9--Democratic Convention Hosted by Republican Donors, Anti-Obamacare Lobbyists

10--National Media Retracts Its Claim That There Was Violence at the Nevada State Democratic Convention

Branded "yourFirstMortgage," Wells Fargo's new product has a minimum down payment of 3 percent for a fixed-rate conventional mortgage of up to $417,000. Down payment help can come from gifts and community-assistance programs. Customers are not required to complete a homebuyer education course, but if they do, they may earn a 1/8 percent interest rate reduction. The minimum FICO score for these loans, which are underwritten according to Fannie Mae standards, is 620. Mortgage insurance can either be rolled in to the cost of the loan or purchased separately by the borrower. ...


"I don't know what offsetting factors you have for a 620 credit score with such a low down payment. Unless you require them to have a million dollars in the bank, I'm not sure what else you can do," said Cecala, who notes that a 620 credit score usually denotes someone who has an inability to manage credit. "I think it's problematic to make a loan to borrowers in a subprime credit range with a very low down payment like 3 percent down."

Wells Fargo will service the loans, but Fannie Mae will buy them, and that means the loans must be underwritten to Fannie Mae's standards, which are high. Jonathan Lawless, vice president of product development at Fannie Mae, admits that a borrower with a 620 score would be unlikely to qualify....

"It is true that it's a rare event that we see borrowers at that low a FICO score," he said. "There needs to be compensating factors — one is to have a lot of money in the bank or a very good debt to income ratio."
In other words, the borrower would have to have a very high income to negate the credit risk. Lawless does think the Wells Fargo loan will be far more popular than others on the market because of the financial incentive for homeowner education, the lack of restrictions on funding the down payment and the sheer simplicity of the product. Liking the loan is easy enough, but for first-time, low- to moderate-income borrowers, qualifying for the loan may be harder.
"Loans today are remarkably safe because the underwriting has improved so much. That will be the test with this," said Cecala

12--Japan Fails in Bid to Have G-7 Warn of Global Crisis Risk


Austerity, Stimulus

The G-7 statement compromised on the austerity-versus-stimulus debate by leaving each country’s road map open -- saying they will take "into account country-specific circumstances" as they move to use "all policy tools -- monetary, fiscal and structural -- individually and collectively to strengthen global demand and address supply constraints while continuing our efforts to put debt on a sustainable path."
The need for fiscal measures and structural reforms was underscored with the statement saying that "monetary policy alone cannot lead to strong, sustainable and balanced growth."

13--Helicopter Money Is Putting the Yen's Value at 'Great Risk': Noguchi

If these fiscal and monetary policies continue, the yen’s value is at great risk,” the 75-year-old professor at Tokyo’s Waseda University said in an interview on May 11. “If you base your thinking on the efficient-markets hypothesis, you can’t predict a level for the currency. But, if the nation’s economic strength weakens, it is possible the yen could drop to 300, or 500, or 1,000 to the dollar.”

Growth has stagnated for a decade despite fiscal and monetary stimulus efforts that left the government with a debt burden that is the highest in the world, at about 2.5 times the value of the nation’s economic output. Noguchi believes the Bank of Japan is already financing fiscal spending, providing so-called helicopter money. That echoes comments by billionaire bond investor Bill Gross, who said the likely endgame was for the BOJ to forgive sovereign debt....

The reason consumption isn’t growing is that real incomes haven’t risen, and this is due to the weak yen since the Abe government came to power,” he said. “In the long-term, it is of course better if the yen strengthens.”

14--Al-Nusra Front in Syria gets daily weapons supplies from Turkey - Russian military

15--Moderate forces in Syria – ‘figment of imagination’

16--A World-Wide French Connection

Workers should not give up any of these rights. Instead, they should be consolidated and extended to all countries, not rolled back. Rolling back labour protections is “a race to the bottom” whereby workers around the world are pitted against one another to erode all rights.

17--New Turkish-U.S. Quarrels About Syria
18--Is R+6 collapsing?




Thursday, May 26, 2016

Today's Links

1--The Looting Stage of Capitalism: Germany’s Assault on the IMF  PCR


The banks don’t want Greece to be able to service its debt, because the banks intend to use Greece’s inability to service the debt in order to loot Greece of its assets and resources and in order to roll back the social safety net put in place during the 20th century.  Neoliberalism intends to reestablish feudalism—a few robber barons and many serfs: the One Percent and the 99 percent....

Greece is being destroyed by the EU that it so foolishly joined and trusted.  The same thing is happening to Portugal and is also underway in Spain and Italy.  The looting has already devoured Ireland and Latvia (and a number of Latin American countries) and is underway in Ukraine.


2--Gross Trying to Short Credit to Reverse Four Decades of Instinct


Bill Gross, who built a career and a $1.9 billion personal fortune trading bonds, is trying to go short on credit, a position that he said runs contrary to his instincts and training as an investor.
Gross, who manages the $1.3 billion Janus Global Unconstrained Bond Fund, said he is moving to sell credit risk and insurance on market volatility rather than buying long-term debt, because he believes a day of reckoning will come when central banks will no longer be able to prop up asset prices and investors will withdraw from markets.

“It’s really hard to change your psychological makeup and to be a hedge manager that is comfortable with being short,” he said in an interview with Bloomberg’s Erik Schatzker. “I’m working on it, because I’m an investor that ultimately does believe in the system, but believes that the system itself is at risk.”


Central bankers, seeking to stimulate economies, have lowered rates below zero in Europe and Japan, driving down returns on national debt, while investors seeking higher yield have pushed up the value of other credit. Stimulus from central banks worldwide has artificially pushed up values of stocks and credit, which has made Gross cautious on such assets, he said.

Eliminating credit as an investment means “not buying stocks, not buying high-yield bonds,” Gross said. “It means going the other way, which comes at a price.”

The U.S. Fed Funds target rate is between 0.25 percent and 0.5 percent. Eventually, central bankers will have to raise rates to reward individual savers, insurance companies and other investors who depend on fixed-income returns, or the economy and markets will suffer, according to Gross


3--The Financial Invasion of Greece


IMF's concern about Greek debt is bogus, this is full scale financial war, forcing Greece give up ports, pensions, properties and much more



4--Bank of America Tipster Gets to Keep His Reward

Edward O’Donnell blew the whistle on “the Hustle,” a high-speed mortgage-selling scheme that led to a $1.27 billion fine against Bank of America BAC -0.74 % in 2014.....


The U.S. attorney’s office in Manhattan, which brought the case, had argued in a court filing that the contracts “expressly stated” that the representations about the quality of the loans were essentially renewed each time a loan was sold.

Mr. Wasinger said the average person would view the decision as a technical ruling, in which “the bank got off the hook after a jury and federal judge both found them liable.”


5--The lawsuit centered on a program at Countrywide nicknamed the hustle, which rewarded employees for producing more loans regardless of the quality....


. O’Donnell’s lawsuit said the division “continued to push loan production to record levels in spite of clear signals that there were problems with early loan repayment performance.”


6--In the U.S. and abroad, more young adults are living with their parents


(All the coverage fails to report that young people cannot find work to afford to move out....)

For many millennials, Pew's conclusions might seem both unsurprising and easy to explain: The Great Recession happened, of course!

But the rise in the number of young adults living at home started before the economic crash — and so did the possible contributing factors. Male unemployment has been on the rise for decades, Pew says. Even those who have jobs are making less than they would have in their parents' day — for young men, Pew notes, inflation-adjusted wages have been falling since 1970.


7--More Young Adults Living With Parents Than a Romantic Partner (more excuses for the shitty economy)


Pew researchers suggest several factors, including declining employment among young men in recent decades and lingering effects of the recession.  But the researchers said that the chief reason is a “dramatic drop in the share of young Americans who are choosing to settle down romantically before age 35” either with a spouse or a partner.

“Forming a new family is not nearly as important as it was for young adults,” said Richard Fry, a senior researcher with Pew, a nonpartisan think tank that conducts public-opinion polling, and does demographic and social-science research.


8--Wall Street Crime: 7 Years, 156 Cases and Few Convictions   --Proceedings against individual bank employees are rare, and authorities have had difficulty winning cases  Unprecedented corporate crime spree leads to zero convictions of higher-ups on Wall Street



The Wall Street Journal examined 156 criminal and civil cases brought by the Justice Department, Securities and Exchange Commission and Commodity Futures Trading Commission against 10 of the largest Wall Street banks since 2009. In 81% of those cases, individual employees were neither identified nor charged. A total of 47 bank employees were charged in relation to the cases. One was a boardroom-level executive, the Journal’s analysis found.

The analysis shows not only the rarity of proceedings brought against individual bank employees, but also the difficulty authorities have had winning cases they do bring...


Most of the bankers who were charged pleaded guilty to criminal counts or agreed to settle a civil case, with those facing civil charges paying a median penalty of $61,000. Of the 11 people who went to trial or a hearing and had a ruling on their case, six were found not liable or had the case dismissed. That left a total of five bank employees at any level against whom the government won a contested case. ...



The most senior banker charged in the reviewed cases was Gary Crittenden, former chief financial officer of Citigroup. The bank’s negotiations with the SEC related to his 2010 case show how the pressure on all parties to reach a settlement—rather than face expensive litigation, with the risk of losing—can affect cases against individuals.

Citigroup tried to “use whatever leverage they had” during the settlement talks to get the government to “lay off the individuals,” one unnamed SEC official said, according to a report in 2011 by the regulator’s inspector general. The agency was planning fraud charges in the 2010 case against Mr. Crittenden, who had left Citigroup by then, and another executive who was still with the bank, in parallel with a $75 million pact with the bank to resolve allegations investors were misled about its subprime-mortgage exposure.

After Mr. Crittenden refused any settlement that included fraud charges, the SEC agreed to bring the less serious charges, the report said.

The two men paid a total of $180,000 to settle their cases, without admitting liability. Mr. Crittenden’s lawyer didn’t respond to requests for comment


9--Trillions in Debt—but for Now, No Reason to Worry  


U.S. household borrowing nears precrisis peaks; global debt has already topped 2008 levels...


If current trends persist through the end of the year, U.S. households will owe as much as they did at the peak of borrowing in 2008.


Global debt has already topped 2008 levels and keeps rising. That’s pretty astonishing so soon after debt-driven crises in the U.S. and Europe and endless worries about too much borrowing in Japan, China and emerging markets.


But for all the hand-wringing, a near-term debt crisis is unlikely. Lower interest rates mean debt payments are far lower than they were before the crisis. In the U.S., household debt compared with the overall economy is way down. And overseas, loans can easily be rolled over.


U.S. households owed $12.25 trillion at the end of the first quarter, up 1.1% from the end of 2015, according to the Federal Reserve Bank of New York’s Quarterly Report on Household Debt and Credit, released Tuesday. If the first quarter repeats itself through the end of the year, U.S. household debt will approach its peak of $12.68 trillion, which it hit in the third quarter of 2008...


“In a  world where rolling over debt is not difficult, the sustainability of debt should be driven by interest costs,” said J.P. Morgan analyst Nikolaos Panigirtzoglou....


The losers in all of these scenarios are savers and lenders, who hardly get paid at all for providing capital—and then risk losing money in real terms....


The circumstances that allow big accumulations of debt can go on a very long time, but they never last forever.


10--Big Banks Ladle On the Risk


Hungry for revenue, Wall Street banks are taking on more risk to help companies sell large chunks of stock....


About half of all share sales by already-public companies listed in the U.S. have been block trades this year, according to data provider Dealogic. In the past five years, these deals typically accounted for about a third of all share sales, and in the past decade that figure averages about a fifth, according to Dealogic. Energy companies, in particular, have sought block trades this year to quickly raise funds and pay down debt....


But lately, ... banks have been doing a higher percentage of block-trade deals, exposing them to more risk.

The increase in such deals comes as a slump in banks’ trading revenue and the low-interest-rate environment have pressured profits.


The bankers paid $80 a share and reoffered the shares to clients for $80.10, aiming to make as much as $1.5 million, according to regulatory filings and Dealogic.

Walgreens’s stock fell 2.5%, to close at $79.43, the first day of trading after the share sale was announced. It is unclear whether Citigroup was able to flip all the shares. Walgreens’s shares closed above $80 the next three trading sessions. On Wednesday, Walgreens’s stock closed at $77.63.


11--Quantitative Easing and the Corruption of Corporate America


For every one job created in the United States in the last decade, $296,000 has been spent on share buybacks....


But now, it looks as if the trend is finally cresting. A fresh report by TrimTabs Investment Research found that companies have announced 35 percent less in buybacks through May 19th compared with the same period last year. And while $261.5 billion is still respectable (for the purpose of placating shareholders), it is nevertheless a steep decline from 2015’s $399.4 billion. Even this tempered number is deceiving – only half the number of firms have announced buybacks vs last year....


Six years on, corporate leverage is hovering near a 12-year high and domestic capital expenditures have plunged. In the interim, reams of commentary have been devoted to share buybacks and with good reason. Companies reducing their share count have, at least in recent years, been where the hottest action is, courtyard-seat level action....


The contextual backdrop is key: Just weeks before at Jackson Hole, Ben Bernanke had unleashed the mother of all stock market rallies by hinting that QE2 was indeed coming down the FOMC pipeline. The hawks were understandably hopping mad as the debate on the inside was anything but settled. Fisher indicated as much, albeit with notoriously diplomatic panache:

“In my darkest moments I have begun to wonder if the monetary accommodation we have already engineered might even be working in the wrong places. Far too many of the large corporations I survey that are committing to fixed investment report that the most effective way to deploy cheap money raised in the current bond markets or in the form of loans from banks, beyond buying in stock or expanding dividends, is to invest it abroad where taxes are lower and governments are more eager to please.”


12--Wells Fargo to Offer Low-Down-Payment Mortgages Without FHA Backing


Wells Fargo & Co. is rolling out a new mortgage for borrowers making minimal down payments, an offering that could allow the bank to step back significantly from a controversial Federal Housing Administration program ..


Wells Fargo WFC 0.11 % & Co. is rolling out a new mortgage for borrowers making minimal down payments, an offering that could allow the bank to step back significantly from a controversial Federal Housing Administration program.....The move comes as most of the country’s main banks exit from any substantial role making loans guaranteed by the FHA....


The bank’s new mortgage allows borrowers​with credit scores​as low as 620 on a scale of 300 to 850​to make down payments of as little as 3%, while also allowing them to use income from family members or renters to qualify. The requirements don’t represent a significant expansion of mortgage access, but will allow Wells Fargo to make more loans to low- and middle-income borrowers without going through the​FHA.....


In April, Wells Fargo and the government wrapped up a $1.2 billion settlement in which the lender admitted it submitted ineligible​loans for FHA backing and failed to notify the government when it became aware of the problems. With the settlement, Wells Fargo joined J.P. Morgan Chase JPM -0.63 % & Co., Bank of America Corp. BAC -1.04 % , SunTrust Banks Inc. STI -0.90 % and many other lenders that have been penalized or threatened with penalties for FHA-related problems.


13--Capex in the tank --US corps are not investing in their companies


the government just confirmed what many had said for years, namely that capex spending had been far lower than reported all along when it revised the capital goods orders nondefense ex-aircraft series lower by a whopping 6%, taking down the March print from $66.9 billion to only $62.4 billion, the lowest absolute number since early 2011.



So how did this downward revision to a critical historical series, and key driver of GDP, change the current GDP estimte?  Well, according to the Atlanta Fed, "the GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2016 is 2.9 percent on May 26, up from 2.5 percent on May 17. The forecast for second-quarter real gross private domestic investment growth increased from -0.3 percent to 0.4 percent following this morning's durable manufacturing release from the U.S. Census Bureau."
Oddly not a word about the sharp revisions to the core data

Wednesday, May 25, 2016

Today's Links

Today's quote: "In the view of the ruling financial elites, the entire post-war system of social services and regulations introduced to stave off the threat of social revolution after the experiences of fascism in the 1930s has made Europe uncompetitive and must now be destroyed. This is the essential content of the demand for “structural reforms.” Nick Beams, WSWS




1--Stocks are "dead money". All that matters is Yellen: Gundlach

2--What Will Sink the US Auto Boom?


The auto industry is crucial to the US economy and jobs. Auto sales account for 21% of total retail sales so far this year. They’re up 4.5% year-over-year. New Vehicle sales in 2015 hit an all-time record, even as the rest of brick-and-mortar retail was weak....

But if the flow of money slows, the entire growth machine starts grinding down. Pressures are already building up – and far beyond subprime auto loans....

The New York Fed’s Household Debt and Credit Report, released today, shows that total household indebtedness rose 1.1% over the first quarter, to $12.25 trillion, just 3.3% below the peak of the last credit bubble in Q3 2008 that blew up with spectacular fanfare.

But this time the distribution is different: housing debt is lagging behind (due to the presence of institutional and foreign investors), but non-housing debt has jumped far ahead, led by student loans, which more than doubled since the Financial Crisis to $1.26 trillion, and auto loans which soared 29% to an all-time high of $1.07 trillion

3--French workers show grit: Reader Note on Strikes in France: “Pass the Popcorn”

4--Crooked to the bone:  Unsealed Documents Reveal Former White House Officials Violated Fannie/Freddie Conservatorship Rules, Apparently to Advance Bank-Enriching “Reforms”

if the Administration is forced to cough up some of the documents is it keeping from the court, the stench of corruption may be rank enough to keep the banks from creating yet another source of enrichment at public expense.

The documents demonstrate that former Obama Administration officials violated the intent and purpose of HERA [Housing and Economic Recovery Act of 2008]. The goal of HERA was to rectify shortcomings in the oversight of Fannie Mae while choosing a path not provided for in that statute or any other. ....Rather than retaining earnings and building capital in accordance with the goal of rehabilitation (as required in a conservatorship pursuant to HERA, and as was demanded of every other financial institution after the crisis), the Third Amendment ensured that the GSEs could never rebuild capital nor – no matter how much money they returned to the Treasury – be allowed to ever repay the government. These actions clearly violate the most basic requirement of HERA that instruct the Director of FHFAiii “to oversee the prudential operations of each regulated entity and to ensure that …

The newly-released documents also show the actions of these former senior officials were premeditated and defended with false public statements which falsely articulated there was an imminent risk the GSEs would need more financial assistance


5--Leaked Tapes Expose Coup Plot Against Brazil’s Dilma Rousseff

6--More Young Adults Are Living With Their Parents Than At Any Time Since the Great Depression


7--Household Debt Still Below 2008 Peak

8--Existing Home Sales

Going sideways..

er-5-20-3


9--International finance capital and the strikes in France ; resurgence of the class struggle


In the view of the ruling financial elites, the entire post-war system of social services and regulations introduced to stave off the threat of social revolution after the experiences of fascism in the 1930s has made Europe uncompetitive and must now be destroyed. This is the essential content of the demand for “structural reforms.”

The mobilisation of the forces of the French state by the Socialist Party government of Francois Holland against striking oil refinery and other workers is the spearhead of a long-demanded offensive against the French and European working class by the representatives of international finance capital.

Since the global financial crisis in 2008, and particularly since the crisis of the euro in 2012 and the second phase of a double-dip recession, the International Monetary Fund, the European Central Bank and other financial institutions have been demanding the implementation of what are euphemistically described as “structural reforms.” The real agenda is to boost profitability of French and European capitalism as a whole.

“Structural reform” is aimed at savagely attacking the conditions of the working class by opening the way for employers to hire and fire at will, scrapping legal protections against sackings, cutting unemployment benefits and reducing government social services spending.

As police were being brought in to attack striking oil refinery workers in Marseilles, the IMF set out its latest prescriptions for economic policy measures in France. They centred on techniques to increase labour market “flexibility” and reduce pensions and other social services. ...

Setting out the factors which had made France’s labour market “less adaptable” to developments in the global economy, the IMF cited “centralized labour agreements for over 700 branches; long and uncertain judicial procedures around dismissals; relatively easy access to unemployment and welfare benefits” as well as a “relatively high minimum wage.”
The other major demand is for a reduction in government spending which the IMF insisted was “at the heart of France’s fiscal difficulties.” It called for limiting the “wage drift at all levels of government that would help reduce the wage bill,” a reduction in pensions by lifting the retirement age, the extension of means-testing for social benefits and the rationalisation of hospital services to reduce costs...

These measures have done nothing to revive the real economy. Their only effect has been to promote speculation in financial markets, leading to ever-widening social inequality. Investment in the real economy, the driving force of economic growth, remains around 25 percent below where it was prior to 2008 and large sections of the euro-zone economy have not returned to the levels of output they reached eight years ago....

resurgence of the class struggle

10--French government seeks to crush strikes against labor law

It is not the working class but the PS that is threatening basic democratic and social rights, which it is tearing up in authoritarian fashion to conform to the dictates of the banks. Three-quarters of the French people oppose the law, which increases work hours, undermines overtime pay and job security, and allows the unions to negotiate contracts that violate the Labor Code. Due to its unpopularity, the PS imposed the law without a formal vote in the National Assembly, using the reactionary provisions of Article 49-3 of the Constitution

11--Revealed! SouthFront Is Run by ‘the Russian Military’ (yeah, right)

12--US angling to control Falluja to Raqqa corridor

The US CENTCOM commander, General Joseph Votel, visited the Kurdish areas of Syria last Saturday and met with officials of the Syrian Democratic Forces (SDF) to coordinate future operations aimed to liberate the ISIS-controlled town of Raqqa. The visit comes as the first of 250 additional U.S. special operations forces are beginning to arrive in Syria to work with local forces.

Iraqi forces supported by US-led coalition warplanes have launched a military operation in order to re-take the ISIS-controlled city of Fallujah. According to the Iraqi military’s Joint Operations Command, the Iraqi army, counter-terrorism forces, police, tribal fighters and the Popular Mobilization Forces participate in the assault. Last week there were reports that Kata’ib Hezbollah units also deployed to the area in order to support the operation. Iraqi Prime Minister Haider al-Abadi reportedly traveled to a command center east of Fallujah to supervise the offensive.



                      

Tuesday, May 24, 2016

Today's Links

1--Manufacturing Recession Goes Global as Demand Withers


Then Japan hit the world with its collapsing trade figures.

Exports plunged 10.1% in April from a year ago, on weakness in China and other emerging markets, as Japan’s Ministry of Finance reported on Monday. Imports plummeted 23% on lower commodity prices and weak demand at home, despite (or because of) the Bank of Japan’s reckless scorched-earth monetary double whammy of QQE and negative interest rates.

So it fits in nicely that the Nikkei Japan Manufacturing PMI, also released on Monday, dropped to 47.6 (below 50 = contraction), with the output index plunging to 46.9, the sharpest decline in 25 months.

The new orders index, a harbinger for future business, dropped to 44.1, the sharpest decline in 41 months. Turns out, one of the primary reasons for the drop wasn’t the April earthquake, but “a marked contraction in foreign demand, which saw the sharpest fall in over three years.”

2--Growing signs of a resurgence of class conflict in the US

An estimated 8,788 collective bargaining agreements, covering 2.2 million workers, are due to expire or be modified in 2016. The chief obstacles to a fight against the companies are the AFL-CIO and Change to Win unions, which are allied with the Obama administration and the Democrats. The unions function as an arm of corporate management and the state. They support the policy of lowering wages and cutting health care and pension costs to make US corporations more “globally competitive.”

The unions have long abandoned the principle of “no contract, no work,” keeping workers on the job for months or even years without a contract. On Friday night, the National Association of Letter Carriers (NALC) announced that it would continue negotiations with the US Post Office past the contract expiration date for 204,000 city letter carriers. Another 370,000 USPS workers were forced to accept arbitration by the American Postal Workers Union (APWU) and other unions....

In the US elections, the radicalization of workers and young people is expressed in the widespread support for Bernie Sanders, who has centered his campaign on social inequality and opposition to the “billionaire class.” Sanders role, however, has been to try to channel growing anti-capitalist sentiment back behind the Democratic Party, which, under the Obama administration, has overseen a historic transfer of wealth from the working class to the corporate and financial elite.

3--Temp-Worker Freeze Bodes Ill for Economy

One of the labor market’s early-warning signs may be flashing trouble.
Hiring by staffing agencies has ground to a halt so far in 2016, a worrisome sign because the category fell off before a broader job-market slowdown ahead of the past two recessions. Many economists look at the sector as a leading indicator because cautious firms tend to first hire temps when an expansion begins and dismiss those nonpermanent workers when they sense the economy is faltering.
The question now is whether the recent flattening in temp employment points to another economic downturn or is just respite for an industry that has capitalized on a shift toward flexibility for workers and firms..

More than one in 50 U.S. workers were employed as temps at the end of 2015, eclipsing a record set in early 2000. At that prior peak, the unemployment rate was near a cyclical low and payrolls were growing steadily, albeit at a slightly slower rate than the prior two years. By spring 2001, the economy was in recession.
“It’s the first sector that really begins to lose jobs,” said Donald Grimes, a labor economist at the University of Michigan. “If you start seeing those numbers go negative, you’ve got a real problem.”

The temp sector has shed 27,400 jobs since December, a reversal from the preceding five years, when the temporary-help category grew five times as fast as overall employment. That suggests the sector, which did add jobs in April, bears careful watching, especially because the slowdown comes alongside other red flags.


The long decline in initial jobless claims, another leading labor-market indicator, appears to have ended this spring. Average payroll growth this year slowed to the weakest pace since early 2014. The unemployment rate has plateaued. And industrial production suffered the largest decline to start the year, outside of a recession, on record...

Executives in the staffing industry say they now serve different types of clients. Temp staffers are less often in the clerical and light-industry sectors—which have been in decline for decades—and more frequently work in technology, health care and finance. Those staffers might roll out a mobile app or develop​a strategy to meet new regulations.

The typical staffing-agency worker is increasingly a specialist rather than an entry-level employee, said Kelly Services Inc. Chief Operating Officer George Corona. Most temp and freelance workers prefer the work to a permanent placement, he said, while others want to try out employers before making a commitment.
“The younger generation of workers hasn’t seen the loyalty from employers” and don’t expect to provide it in return, he said. “They’re looking for different things in terms of work-life balance

Temp workers also are paid less, on average, than their permanent peers. The average hourly wage for temporary help workers was $16.83 in March, compared with $25.45 for all private-sector workers.
“Structural changes in the labor market mean that higher volatility is likely to persist, in part through a weakening of the social compact between workers and firms,” Treasury Chief Economist Karen Dynan said in a recent speech.

Short-term projects and less-loyal workers can be a recipe for volatility. The average tenure for a temp employee was 10.7 weeks last year, down from 11.3 in 2014, marking the shortest engagement time since 2003, according to the American Staffing Association. The industry group said the shorter tenure could be an indication temps are more quickly converting to full-time work. About one-third of temps are offered permanent work.
Volatility in the sector can make the leading indicator hard to read.
“When temp employment is moving sideways, as it is now, it could mean things are frothy and firms are jumping straight to permanent hires,” said Erik Weisman, economist at MFS Investment Management. “Or it could signal we’re on the precipice of a downturn and firms don’t want to hire, and even start firing temp workers.”

4--Investors Check Out of Europe  


Fractious politics, economic malaise, negative rates discourage fund managers   ...

Investors have sold exchange-traded funds tracking European shares for nearly 15 weeks—the longest stretch since 2008—according to UBS Group AG. Meanwhile, annual net outflows from eurozone bonds were running at over half a trillion euros as of the end of March, according to a Pictet Wealth Management analysis of data from the European Central Bank. That is happening as investors are turning away from Europe’s growing pool of negative-yielding debt.

The money is finding a home in places from U.S. Treasurys to emerging economies, helping to push up prices in those markets.

Just last year, Europe was a top pick by global fund managers as it recovered from the sovereign-debt crisis of 2010 to 2012. The current retreat shows that this rehabilitation has faded, and fast...

In recent weeks, investors have been selling equities around the world over concerns about the global economy. But the selling in Europe has been particularly pronounced.

Funds have sold around $22.6 billion worth of ETFs that track European equity since March, which is equivalent to roughly 9.4% of the total held of these investments, according to Mr. Gheedia. ...

Meanwhile, global fund managers’ allocation to eurozone equities dropped to 17-month lows in May, according to a survey by Bank of America Merrill Lynch. When prospects seemed sunnier last year, a net 55% of fund managers favored the region.

This is already taking a toll on European markets. The Stoxx Europe 600 is down nearly 8% this year, compared with a roughly flat S&P 500.

Banks are Europe’s worst-performing sector, having fallen nearly 19%.

Investors are concerned that negative interest rates are eating into the sector’s margins, while lenders in Southern Europe continue to grapple with bad loans.

That could have a knock-on effect on a continent where companies rely on bank lending for around three-quarters of their funding needs. Banks also make up an outsize chunk of local equity markets.

Investors’ concerns over banks are already being borne out after a poor set of results in the most recent earnings seasons.

The downbeat news about profits wasn’t just from banks. Overall, that earnings season has deepened investors’ doubts about profitability in Europe....

The ECB’s stimulus measures, including cutting interest rates below zero to boost sagging inflation, have dragged down the yield on eurozone government bonds. Yields fall as prices rise.

Roughly €3.5 trillion ($3.9 trillion), or 54%, of these securities trade at a negative yield currently, according to Bank of America Merrill Lynch.

That is pushing investors to look elsewhere for returns, including in emerging markets and U.S. Treasury bonds, analysts say. With the 10-year German bond yielding 0.181%, the 1.85% yield on the 10-year Treasury bond looks a lot more appetizing.

“We’ve seen a lot of flows into anything with a positive yield,” said Steve Thompson, senior client-portfolio manager at Invesco Fixed Income.


5--CLO Debt Market Peps Up      


Uptick coincides with other signs of a healthier loan market  ...


The esoteric securities market underpinning demand for the riskiest corporate loans is perking up, raising hopes that it could become easier for banks to sell a range of loans, including those that they failed to syndicate last year.

More corporate loans are being bundled this spring into collateralized loan obligations, which buy loans from junk-rated companies and repackage them into securities that pay varying levels of interest based on which get paid off first if the underlying loans go bad....

CLOs, one of the only asset-backed investment vehicles that performed well during the financial crisis, have taken on increased importance in recent years, providing a major source of demand for low-rated corporate loans. More than $200 billion worth of the securities were sold across 2014 and 2015 before the market started tailing off....


Loans have “come a long way since mid-February,” when new issues were still scarce, and it has helped that CLOs “are starting to find some sea legs,” said Frank Ossino, a loan-fund manager at Newfleet Asset Management....

Last year, CLOs bought 61% of all new institutional loans from junk-rated companies, up from 53% in 2013, according to LCD.

The loan and CLO markets are still far from healed. Both the Vectra and the Premiere Global loans were sold at steep discounts of 90 cents on the dollar, having been originally offered last year at 98 cents on the dollar and 99 cents on the dollar respectively, according to LCD.

Just $17.6 billion of CLOs have been created this year, down 62% from a year earlier and the lowest volume at this point since 2012. The market set an issuance record of $124.1 billion in 2014, when other riskier assets such as stocks were surging to records


6--Hit the Taliban Harder (WSJ calls for escalation in America's longest war)


The Mansour strike will be wasted without more U.S. help from the air...


U.S. ground forces don’t have to re-engage to make more military progress. As David Petraeus and Michael O’Hanlon wrote on these pages Saturday, what’s needed is more vigorous bombing in support of Afghan security forces...

The U.S. should help Afghans press the offensive before the Taliban reconstitute their leadership.

Mr. Obama’s eagerness to declare the war over by the time he leaves office has ceded the military advantage to the Taliban, and security has deteriorated significantly since 2014 in much of the country. Afghan leaders have been pleading for more support, and for a commitment of 10,000 or more U.S. troops into 2017 and beyond. Mr. Obama wants 5,500 or fewer, but the Pentagon may soon recommend more. Listen to your generals, Mr. President, and take the air battle to the Taliban wherever they are.




7--Balance Due: Credit-Card Debt Nears $1 Trillion as Banks Push Plastic

Outstanding balances near precrisis levels as banks promote cards and borrowers regain confidence ...

Capital One, the nation’s fourth-largest credit-card issuer, said credit-card sales jumped 14% in the first quarter from a year earlier. The company’s strategy to boost card usage by raising spending limits and giving out more cards is also paying off: Capital One customers spent 20% more on their cards during the first three months of the year than they did a year ago.

At Citigroup Inc., average credit-card balances in the first quarter posted the first year-over-year increase since 2008. Such balances also grew at Discover Financial Services Inc. and J.P. Morgan Chase & Co., the nation’s largest lender.

Even American Express Co., which historically has focused on customers who pay their bills off every month, is now concentrating on lending money to consumers who keep a balance....


Outstanding balances reached nearly $952 billion in the first quarter, up 6% from a year earlier, and the highest level since August 2009, according to the Federal Reserve.

“You could see $1 trillion this year,” said David Blitzer, managing director and chairman of the S&P Dow Jones index committee, which tracks consumer-loan performance.

Overall consumer-spending trends remain uneven. Retail sales were stronger than expected in April, although there are signs that consumers are cutting back on nonessential purchases.


Because many creditworthy consumers are still cautious about spending, lenders are turning more aggressively to subprime borrowers. Lenders issued some 10.6 million general-purpose credit cards to subprime borrowers last year, up 25% from 2014 and the highest level since 2007, according to Equifax.

Citigroup and Discover, which typically focus on prime customers, have rolled out cards aimed at less creditworthy borrowers that carry a lower risk for issuers if those customers can’t pay their bills. Known as “secured” cards, they require subprime borrowers to make a deposit that equals their card’s spending limits....

Many issuers are now lending to borrowers with a broader range of credit scores, said Wayne Best, chief economist at Visa Inc. That includes “some of the areas that have not been as fully explored or serviced before, such as near-prime and subprime.”

Overall, lenders gave out more than 104 million general-purpose and store credit cards in 2015, up 6.5% from a year earlier and up 47% from the bottom in 2010, according to Equifax.

The boom isn’t without risks. A return to economic turbulence could trigger more defaults, which now stand near historic lows. Industry wide, default rates on general-purpose credit cards increased each of the first four months this year. In March, default rates registered the largest month-over-month increase since March 2010, according to Mr. Blitzer.


Delinquency rates on credit cards and car loans are rising in several states hit by the energy slump as a growing number of unemployed workers battle to keep up with their bills.

So far, though, business is good. Credit-card returns on assets, a measure of profitability, are expected to hit 4.25% to 4.50% this year for big lenders, compared with 4% in 2015, according to R.K. Hammer Inc., a credit-card consulting firm. Overall bank returns are roughly 1%, according to industry estimates.

“Credit cards are the best business in banking,” said Robert Hammer, who runs the consulting firm

Card profits could rise further as the Federal Reserve raises benchmark interest rates, as most credit cards have variable rates that move in tandem with the Fed.


The binge marks a reversal for lenders, many of whom retreated from the credit-card market during the recession as defaults increased. Some lowered credit lines for existing customers in an attempt to limit additional losses, and others pulled back on soliciting new customers.

Now, as the national unemployment rate remains low and more borrowers have the income to pay their debts, competition among lenders for new card customers is heating up again.

The new plastic comes with richer perks. Just a few years ago, new customers who received Chase’s popular co-brand card with United Airlines received 30,000 miles and other perks. The lender now is offering 50,000 miles on its British Airways card, with a chance to pump that up to 75,000 miles.

In another popular perk, creditworthy borrowers can now receive cash-back bonuses of as much as 5% in certain categories, compared with longtime standards of 1%.

Keith Little, a telecom analyst in Maumelle, Ark., says he and his wife recently signed up for a Citi card that returns 2% of all purchases in cash. The couple, who stopped using credit cards in 2005 after paying off $10,000 in balances, now favors the cash-back card for most of their purchases, which total about $2,500 a month. The couple hopes that the windfall will defray some of the costs on their next trip.


“Anything [that] can, goes on the Citi card,” Mr. Little said.




9--Banks Dealt Blow in Libor Lawsuits

Appeals court restores private suits against Bank of America, J.P. Morgan Chase, Citigroup and others


The lawsuits accuse 16 major banks—including J.P. Morgan Chase & Co., Bank of America Corp. BAC 1.73 % and Citigroup Inc. C 1.85 % —of collusion in manipulating the London interbank offered rate, or Libor, to the detriment of the banks’ customers.

The plaintiffs, who owned various financial instruments that were affected by Libor, claim the returns on their investments were depressed by the banks’ alleged collusion. The lawsuits were filed by several groups of plaintiffs, including the local governments of cities such as Baltimore, San Diego and Houston....


Libor, a widely used benchmark that helps set interest rates for everything from mortgages to corporate loans, is calculated daily for different currencies based on estimated borrowing rates submitted by banks on panels. The lawsuits are targeting banks on the panel that sets U.S. dollar rates under Libor.

These lawsuits are separate from the sprawling criminal and civil probes around Libor rigging, which began in 2008 and have implicated traders around the world. Regulators have accused big banks of letting their traders and executives shift Libor rates up or down to benefit their trading positions.

About a dozen financial firms have settled charges of manipulating Libor and many have pleaded guilty to criminal charges. The largest penalty imposed was the $2.5 billion paid by Deutsche Bank DB 2.19 % AG last year.


In total, U.K. and U.S. authorities have imposed sanctions of more than $6 billion in the Libor cases. A series of global investigations still are under way, but The Wall Street Journal reported in February that regulators in the U.S. and U.K. are preparing to bring a final round of civil charges against several banks in the probe.


The defendants affected by the appellate ruling Monday are Bank of America; Bank of Tokyo-Mitsubishi UFJ Ltd.; Barclays BCS 4.38 % PLC; Citigroup; Credit Suisse CS 2.10 % Group AG; Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A. (Rabobank); Deutsche Bank AG; HSBC Holdings HSBC 3.13 % PLC; J.P. Morgan Chase; The Norinchukin Bank; Portigon AG/Westdeutsche ImmobilienBank AG; Lloyds Banking Group LYG 3.76 % PLC; Royal Bank of Canada RY 1.06 % ; Société Générale SCGLY 3.67 % ; UBS AG and The Royal Bank of Scotland Group RBS 5.29 % PLC.


10--Helicopter Money: The Illusion of a Free Lunch

11--The coup in Brazil


Brazil today awoke to stunning news of secret, genuinely shocking conversations involving a key minister in Brazil’s newly installed government, which shine a bright light on the actual motives and participants driving the impeachment of the country’s democratically elected president, Dilma Rousseff. The transcripts were published by the country’s largest newspaper, Folha de São Paulo, and reveal secret conversations that took place in March, just weeks before the impeachment vote in the lower house was held. They show explicit plotting between the new planning minister (then-senator), Romero Jucá, and former oil executive Sergio Machado — both of whom are formal targets of the “Car Wash” corruption investigation — as they agree that removing Dilma is the only means for ending the corruption investigation. The conversations also include discussions of the important role played in Dilma’s removal by the most powerful national institutions, including — most importantly — Brazil’s military leaders.


The transcripts are filled with profoundly incriminating statements about the real goals of impeachment and who was behind it. The crux of this plot is what Jucá calls “a national pact” — involving all of Brazil’s most powerful institutions — to leave Michel Temer in place as president (notwithstanding his multiple corruption scandals) and to kill the corruption investigation once Dilma is removed. In the words of Folha, Jucá made clear that impeachment will “end the pressure from the media and other sectors to continue the Car Wash investigation.” Jucá is the leader of Temer’s PMDB party and one of the “interim president’s” three closest confidants.


12--Sanders names Cornel West, Keith Ellison to DNC platform committee


Zogby is likely the most controversial of Sanders' picks thanks to his activist work on behalf of pro-Palestinian causes. He's repeatedly criticized Israeli Prime Minister Benjamin Netanyahu, who himself hasn't always been the favorite of pro-Israel Democrats, and he's compared the "plight of the Palestinians" to the Holocaust in a 2010 column for The Huffington Post. 

 

While Sanders, the most successful Jewish presidential candidate in American history, supports Israel, his views on the Israeli-Palestinian conflict don't mesh with that of the party's establishment. 

 

He's argued that Israel took "disproportionate" actions against the Palestinians in the 2014 conflict and has called on Israel to pull back on settlement building and trade restrictions. 

 

Zogby is not the only name that potentially telegraphs potential platform fights by Sanders' supporters. 

 

Ellison, the first Muslim elected to Congresss and the head of the Congressional Progressive Caucus, is a co-author of legislation meant to raise the minimum wage to $15. Clinton and other members of the Democratic establishment, including President Obama, back a $12 minimum wage