Tag: Economy

I realize that there has been a lot of speculation about what went down in the 24 hrs prior to the SOTU after Miller announced that there was no bank/state settlement deal. There is a lot of speculation about Schneiderman and not without good reason. When I was writing my article for Stars Hollow I was careful not to join in the “sell out” theme that was running hot with some very respected bloggers. I think Obama is desperate. He knows that he is losing the Independents and moderate Republicans and needed to do something fast, especially in the light of the unpopularity of the 50 state agreement and the massive push to stop it. On the other side, and I somewhat agree with RJ Eskow on this, Schneiderman has the upper hand. He is wildly popular and scares the crap out of Cuomo & company. Schneiderman is not dropping the investigation here in NY, he’s expanding it from what I hear.

That said, I think that if this unit doesn’t move quickly in the evidence they already have, evidence BTW Schneiderman has not had access to, he will drop this like a hot potato and walk. Obama is walking a thin line and realizes that Wall St money alone will not get him reelected. I think Schneiderman is playing on that and hopes to at least hold some of them more responsible and get some better compensation for the homeowners that got screwed along with some regulation of the securitization that caused this all.

I have my doubts. There are better ways to do this, namely appointing a special prosecutor with a budget, investigators and subpoena power. I’m not willing to throw Schneiderman under the bus just yet.

I also think Obama wants him to succeed Holder who said he would leave this year even if Obama is reelected. It’s either him or CA’s AG Harris.

This was a complete surprise, so I’m being very cautious here, knowing what I do about Schneiderman and who is politically afraid of him. Like after Obama was elected, I’m watching and listening very carefully. Hoping that it is not as bad as it looks.

Eskow’s opinion appeared in Huffington Post and he disclosed that he is a fellow at Campaign for America’s Future, a left wing strategy center. (This site, however, is not affiliated with any outside organization and opinions expressed here are solely are own.) He gives a good analysis of the reasons for the skepticism of David Dayen, Yves Smith and Duncan Black (Atrios) who said, “It’s hard to see the Schneiderman thing as anything but bad news.”

Eskow dissects the reasons for the skepticism

The administration’s lack of prosecutions has been inexcusable. His administration has refused to prosecute even the most compelling prima facie cases of and has appointed one revolving-door banker after another to key economic positions. Its financial settlements with Wall Street have been disgraceful. For far too long the president pushed the nonsensical argument that “Wall Street and Main Street rise and fall together.”

And with an election coming up, bankers can write big checks that most other people can’t.

He also points out that if the Department of Justice and the SEC had been doing their jobs in the first place neither the Financial Fraud Task Force or this unit would be necessary. It’s hard not to agree with him that committees are “designed for paralysis and gridlock, not efficiency” and that president who promoted “”streamlining government” and “eliminating bureaucracy” would create this committee. Looking back on what happened with health care and financial reform everyone on the left has good cause to be wary of anything that President Obama does at this point and some groups, perhaps shouldn’t have been so effusive in their praise of this deal. Eskow, as do I, thinks that the White House, left scrambling after Iowa AG Tom Miller announced that there was no settlement with the banks and presented with citizen petitions that had hundred of thousands of names, reversed course in desperation. Then with the announcement that Schneiderman would “chair” the committee, there was a rush of exuberant relief that Obama was finally showing some signs of supporting the 99%.

As to the possibility that Schneiderman “caved”to pressure from the White House, Eskow backs up what I have said, Schneiderman has too much leverage:

Whatever Eric Schneiderman’s goals are, I doubt they include being stigmatized by progressives as a sell-out. His actions over the last few months have not been those of a guy who rolls over easily. It’s safe to assume that he wants to prosecute bank fraud, and that this appointment will give him access to the resources he’s needed to conduct a thorough investigation. [..]

Consider this: What would it do to the White House if Schneiderman labeled the entire effort a sham, resigned in protest, and continued his investigations alone? He must know he has leverage now, and presumably will use it if necessary.

Escow appeared with Cenk Uygur on “The Young Turks” to discuss the unit and Schneiderman with Cenk’s panel:

I certainly don’t agree with Michael Shure and what basically is “the lesser of two evils” meme. It can be just as bad with Obama. That said, could this turn out as the cynics are predicting? Sure and if it does we here at Stars Hollow, like Eskow, will say so.

Another good discussion of this new committee was with Delaware AG Beau Biden who appeared with Dylan Ratigan on MSNBC and his other guest real estate analyst, Jack McCabe:

I’m not ready to throw in the towel nor am I going to get on the cheer-leading band wagon. I will wait to see what transpires and keep my fingers crossed for the best outcome for the most people, the 99%.

Over the weekend while everyone was distracted by the South Carolina primary circus, the Super Bowl Championship playoffs and the Joe Paterno death watch, the Obama Justice Department is working to stab homeowners in the back and let the big banks off the hook for liability for the fraud they’ve committed and continue to commit.

Talks set out terms of US mortgage deal

By Shahien Nasiripour and Kara Scannell at Financial Times

Banks and government negotiators have cleared a big hurdle in efforts to resolve allegations of widespread mortgage-related misdeeds, agreeing on terms for a settlement that are being circulated to the 50 US states for approval, state officials and a bank representative say.

The proposed pact would potentially reduce mortgage balances and monthly payments by more than $25bn for distressed US homeowners, these five people said.

The tentative agreement still must be approved by all 50 state attorneys-general, and negotiators have previously missed proposed deadlines. Participants described the proposal terms as set, meaning the states will be asked either to agree to them or decline to participate.

The amount of potential aid is contingent on state participation and would decrease significantly if big states do not sign the agreement. New York and California are among several states that have voiced concerns about the terms of the proposed deal with Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial. New York and California are particularly concerned with the part of the deal that would absolve the banks of civil liability for allegedly illegal mortgage-related conduct.

California borrowers would be eligible to receive more than $10bn in aid if the state were to agree to the terms, according to several people involved in the talks.

It’s pretty obvious that by offering California 40% of the settlement that the Obama administration is trying very hard to pull their AG, Kamala Harris, back into the agreement. So far the pressure from her constituents is winning out over bribes that in the end would short change California home owners. From Marcy Wheeler at emptywheel:

Remember the “Cornhusker Kickback”? That was the $45 million in expanded Medicaid funding Ben Nelson demanded from the Obama Administration before he’d support Health Insurance Reform. The special treatment for Nebraska gave the reform effort a tawdry feel.

And just as importantly, it did nothing to improve Nelson’s popularity in his own state. When he announced he would not run for reelection in December, reporters pointed to the Cornhusker Kickback as one issue that was making his reelection increasingly unlikely. [..]

Yet it seems like Obama’s trying something similar in his effort to get CA’s Kamala Harris to join in his foreclosure settlement, with $10 billion in aid slated for CA’s struggling homeowners.

It would seem that Obama is having a hard time getting the Democratic AG’s on board.

Foreclosure Fraud Settlement Terms Laid Out, But Holdout AGs Not Signed On

by David Dayen at FDL News Desk

When I started digging into whether this Monday meeting with HUD and DoJ officials to go over a proposal for a foreclosure fraud settlement was legitimate, I couldn’t find one state Attorney General who mattered actually committed to showing up. When I say AGs who “matter,” I mean the ones who have been critical of a settlement in the past. I mean the Justice Democrats. I mean Eric Schneiderman in New York, Beau Biden in Delaware, Martha Coakley in Massachusetts, Catherine Cortez Masto in Nevada, Kamala Harris in California, not to mention the AGs from Hawaii, New Hampshire, Missouri, Mississippi, Maryland, Kentucky, Minnesota, Oregon and Montana who showed up (either themselves or representatives) at the meeting in DC last week to discuss alternatives to a settlement. I mean them. They aren’t going to Chicago, by all accounts. [,,]

But again, I’ve seen no evidence that anyone outside of the small circle of the Administration and the AGs on the executive committee negotiating the deal actually agree to it. Call it the 12-state deal, rather than the 50-state one. This is only closer to getting done in the sense that the folks who have wanted to cave all along are ready to do so.

So what can we do as individuals to get our state Attorney Generals to support homeowners and reject this sell out to the big banks? Yves Smith at naked capitalism lays out three reasons they should oppose this settlement and says to call them:

Here are some of the reasons to oppose a settlement:

1. There have been virtually no investigations, and the Administration has engaged in cover-ups rather than trying to get to the bottom of the mortgage mess

2. The big argument made in favor of the deal, that it will help borrowers, is patently false. Remember, Countrywide entered into a deal with attorney generals just like this, where they agreed to do mods in return for a settlement on abuses. Guess what? They didn’t do the mods. To add insult to injury, they actually abused homeowners who should have gotten mods. Nevada AG is suing Countrywide now over its failure to comply with the terms of its settlement. And even if some mods miraculously did get done, the settlement is designed to have banks hit a dollar amount. That means they will focus on the biggest loans, which means any relief will go to a comparatively small number of people in (originally) big ticket houses.

3. The Administration has only one chance to get this right. Now you might argue that Team Obama has no intention of getting the mortgage mess right, but the tectonic plates suddenly seem to be moving in elite circles. The Fed realizes that housing is a BIG problem and has even started making noise about it. Yet Obama is moving forward with a plan cooked up in late 2010 that is completely out of whack with the urgency and severity of the problem. Note that this settlement will NOT stop private actions, such as borrowers fighting foreclosures. And we will continue to banks refuse to take losses and drag out foreclosures to maximize fees. That will lead to continued pressure on housing prices in many markets as buyers stay on the sidelines, fearful of buying before a large shadow inventory clears. [..]

PLEASE call them TODAY. Here is a list of phone numbers. If you can’t get through, send an e-mail.

Please also sign this petition from Campaign for America’s Future (it has some talking points if you need them for the AG calls). Note you can opt out of being put on their mailing list (I know that has been a sore point with some past petitions). I know it is futile to ping Obama, but they will collect the number of people who sign, and that will in turn bolster the dissident AGs.

Please call today. Unlike Congresscritters, who get a lot of constituent mail and phone calls, AGs get much less in the way of messages from state citizens, so your calls will make a difference.

Thanks for your help.

After having decided in December to delay raising the debt ceiling for the third time at the request of Congress until they returned from vacation in January, President Barack Obama has sent a letters to the House and Senate requesting the ceiling be raised. The debt ceiling has come within $100 billion of the current $15.194 trillion limit. The formal letters trigger a 15-day clock for Congress to consider and vote on a joint resolution disapproving of the increase. The vote a resolution of disapproval will be held in the House on January 18.

The trigger for the request actually occurred on December 30 while the President was vacationing in Hawaii and congress was “on a holiday break”. This is the third and final request to raise the ceiling that was agreed to last year when congress approved the budget. The last resolution of disapproval passed the Republican controlled House but failed in the Democratic controlled Senate. It’s expected that will again be the case, sparing President Obama the need to veto it.

This last bump will carry the government’s ability to pay its bills past the November elections when another raise will have to be discussed by the lame duck congress. Looking forward to that battle.

The current policy of austerity that is being forced on the European Union by Germany and England has been called “financially futile, economically erroneous, politically puzzling and socially irresponsible” by economists and monetary experts. Author and derivatives expert, Satyajit Das, writes in the first part of his series on “The Road to Nowhere, Part 1 – Fiscal Bondage” at naked capitalism that the December 2011 European summit to resolve the euro crisis was a failure:

The proposed plan is fundamentally flawed. It made no attempt to tackle the real issues – the level of debt, how to reduce it, how to meet funding requirements or how to restore growth. Most importantly there were no new funds committed to the exercise.[..]

The plan may result in a further slowdown in growth in Europe, worsening public finances and increasing pressure on credit ratings. This is precisely the experience of Greece, Ireland, Portugal and Britain as they have tried to reduce budget deficits through austerity programs. This would make the existing debt burden even harder to sustain. The rigidity of the rules also limits government policy flexibility, risking making economic downturns worse.[..]

The fiscal compact did not countenance any writedowns in existing debt. It also did not commit any new funding to support the beleaguered European periphery. Germany specifically ruled out the prospect of jointly and severally guaranteed Euro-Zone bonds. Instead, there were vague platitudes about working towards further fiscal integration.[..]

Instead of dealing with the financial problems of the central bailout mechanism (the EFSF – European Financial Stability Fund), European leaders chose the re-branding option.

Actions, or rather inactions, have consequences.

As I predicted in a message to Credit Writedowns Pro subscribers on Monday, statistics have shown that the German economy has finally succumbed to the deflationary economic policy of the euro zone.

   Germany showed first signs of feeling the pain from the euro zone’s debt crisis as the economy shrank in the last three month of 2011, despite outperforming its peers for main part of the year thanks to strong domestic demand and exports.

   Gross domestic product (GDP) grew 3.0 percent in 2011, preliminary Federal Statistics Office data showed on Wednesday, below the previous year’s growth rate of 3.7 percent – the fastest since reunification – and in line with a Reuters poll estimate.

   But GDP contracted by around 0.25 percent in the fourth quarter of 2011, an official from the Statistics Office added.

   “Germany cannot isolate itself so easily from tensions within the euro zone. In addition the export sector is facing a difficult period given the fall in global demand,” said Joerg Zeuner, chief economist at VP Bank.

Harrison wrote in November in the New York Times

that Europe is already in a double-dip recession. Already two months ago, the Markit Eurozone Manufacturing Purchasing Managers Index, which measures activity across Europe in services and manufacturing, had fallen to 50.4, the lowest since September 2009. The divider between expansion and contraction is 50, so Europe was still expanding. But last Wednesday, Markit data indicated that the situation has since deteriorated; the latest data showed a drop in private sector activity in the euro zone for the first time since July 2009. Moreover, the data are poor in the core of the euro zone as well as in the periphery, with Germany and France’s economies stalling as well. The sovereign debt crisis and the fiscal consolidation implemented to deal with it have taken their toll.[..]

Until the banks take substantially more credit write-downs and recapitalize, this crisis will continue and get worse.

The downward spiral is evident throughout Europe with even the strong German economy feeling the effects of erroneous policies

The German economy expanded faster than any other Group of 7 nation last year, official data showed Wednesday, but the stress of the euro crisis and a slowing global economy appear to be already weighing on output.

Germany expanded by 3 percent last year from 2010, the Federal Statistical Office said in Wiesbaden. It noted, however, that the growth came mostly in the first half of 2011, and estimated that the economy actually contracted by about 0.25 percent in the fourth quarter from the prior three months.

Some economists now predict another contraction for Germany in the first three months of 2012, which would meet the usual definition of a recession as two consecutive quarterly declines in output.

And austerity measures in Greece are making their budget deficits even worse:

Greece’s budget deficit widened last year as an austerity-fuelled recession cancelled out much of the extra revenues the government was hoping to raise through emergency taxes, data showed on Thursday. The central government budget gap widened 0.8 percent year-on-year to 21.64 billion euros ($27.45 billion) last year, according to figures from the finance ministry.

David Dayen at FDL News Desk thinks it is probably worse since “the EU uses a different measure to assess the Greek budget.”  He points out that even with increased taxes, the fall in tax compliance from an already lax system has reduced income. It all looks good on paper but that’s not the reality of what is actually in the treasury.

There is some hope that Europe’s leader are waking up to reality that there needs to be a growth strategy, although it may not be enough, or soon enough, to reverse the spiral.

It is a crisis in the € zone. The divergent trends in the € zone are too large. It is not an “optimum currency area”

It’s not just government, to “sovereign debt” but also excesses in the financial sector, real estate etc.

We must do everything to avoid recession. … We need a fiscal strategy that is “growth friendly”

Fiscal consolidation will not tell us to say “no” to all or which is cut everywhere. We must “prioritize”

We ask each member state to establish a “job plan”, we make commitments we can evaluate

The next meeting of the Eurozone member is the end of this month where a tax on financial transactions will be considered and, hopefully, they will discuss job creation and debt reduction.

The New York City Occupiers took back Zucchotti Park a couple of hours before midnight on New Year’s Eve despite the presence of NYPD and private security:

About 100 people arrived at the park at about 7 p.m., according to witnesses, and someone put up what was described as a small multicolored tent, about two feet tall, made for a child. Two young girls, who were at the park with their mother, began playing inside.

Though the New York City Police Department had officers fanned out throughout the city for the holiday, there were police officers lined up across the street from Zuccotti Park, at the ready alongside private security guards. They stepped in.

Police officers and security guards, who stood at the ready across the street, told protesters to remove the tent, saying it violated rules issued by the park’s owner, Brookfield Properties. Meanwhile, an officer and a guard blocked other protesters, and at least one reporter, from entering the park. Some people disregarded their instructions and squeezed through the spaces between metal barricades along other parts of the perimeter.

That number swelled to over 500 by 10:30 as text messages and signal went out across the city. They draped the piled barricades with Christmas lights and the lighted Christmas tree was wrapped with the Occupy Wall Street banner as the OWS “bat signal” was projected on the side of a building. As the protesters were chased from the park, they took to the nearby streets, drumming and chanting as they marched. Most of the arrests were of demonstrators who were obeying police directions or walking peacefully on the side walk. Many of the protesters and others not involved in the demonstration were “kettled” into groups then arrested for obstructing pedestrian traffic or for moving as directed by the officers. Even legal observers and the press were again arrested and threatened by the NYPD. The observer from the National Lawyers Guild was later released.

Welcome to the United Police State of America where you can be “legally” detained indefinitely on the president’s word.

While he is on vacation in Hawaii, President Barack Obama will ask Congress to raise the debt ceiling for the third and last time under the agreement that was negotiated last August. The increase, which is expected to be made by December 30, can only be stopped by passage of a “resolution of disapproval” which the President can veto. That isn’t likely since the last resolution was blocked by the Democrats in the Senate and since Congress in recess until the end of January, well past the 15 days Congress has to vote in the resolution of disapproval.

Pres. Obama is expected to ask for authority to increase the borrowing limit by $1.2 trillion which is within $100 billion of the current cap of $15.194 trillion. The motivation to request this raise now is mostly political and tied to the election next November, as noted by David Dayen at FDL:

In numbers that came out earlier this month, the deficit under current law for Fiscal Year 2012, ending September 30, is set to be right around $1 trillion. That doesn’t leave a lot of wiggle room for the White House to get to the next election without having to deal with the debt limit again, especially if new measures like the payroll tax go unfunded. [..]

That seems to be the motivating factor here. The White House simply does not want to go through another bruising debt limit fight again before the election. That places a limit on borrowing in the next fiscal year. It explains why the “fight” over the American Jobs Act wasn’t that major a fight, because passing all of the measures without paying for them immediately would require raising the debt limit again. And paying for them immediately would make the stimulative effect irrelevant. A couple of the measures, like the payroll tax and unemployment benefits, could conceivably pass while allowing the Treasury to squeeze past the elections under the debt limit. But the numbers are pretty close.

David Weigel at Slate points out, with some amusement, another reason to make the request now:

Both parties like to vote against debt limit hikes, when they can — makes for good TV ads. The problem this time is that they may never get a chance. The Washington Post‘s sharp congressional reporter Felicia Sonmez points out that Congress is actually out of town until January 17. [..]

Congress is still playing the unconstitutional game of pro forma sessions to prevent the president form making recess appointments. Technically, the resolution could be passed but it would have to be by unanimous consent and that is just not going to happen. So as Weigel notes unless some renegade congress critter demands a vote, even Congress keep from getting near the “burning wreckage” of this fight.

I long ago stopped with the Holiday shopping and spending madness that now starts in September. I can’t remember the last time I set foot in a store the day after Thanksgiving. There isn’t anything that my family needs that badly that I would subject myself to obsessed drivers vying for the parking spot closest to the doors if over crowded shopping centers. Or to the rudeness of shoppers, young and old, who will do just about anything from pepper spraying you to walking over your dead body to get to one of the 24 pairs of Nike Air Jordan’s on the shelf, or some other heavily discounted item, that they have waited countless hours for with a thousand other shoppers.

This isn’t just shoppers behaving badly, this is pure insanity driven by greed.

Despite the all this spending frenzy, the economic outlook for retailers isn’t all the booming:

Half off at the entire store at Ann Taylor. Sixty percent at Gap. Forty percent off almost everything at Abercrombie & Fitch.

Aggressive last-minute deals in the days before Christmas are good for procrastinators, but they could be an alarm bell for the retail industry.

While scattered markdowns are standard every year, discounts across entire stores – which analysts say are more widespread than last year – suggest merchants are stuck with too much merchandise.

“It’s really a game of chicken,” said David Bassuk, managing director and head of the retail practice at the consultant firm AlixPartners.

Many retailers entered the season “with pretty optimistic plans” that shoppers would rush into stores and pay full price, Mr. Bassuk said. But that did not pan out, and the final days before Christmas have retailers being “much more aggressive in terms of promotions being offered,” he said.

Shoppers are filling their holiday lists against the backdrop of an uncertain year, with stubbornly high unemployment, increased food prices, volatile gas prices and unpredictability for stocks and Europe’s debt crisis. The government on Thursday said that third-quarter economic growth had not been as brisk as it previously estimated, because of a drop in consumer spending on services like health care.

The American worker is taking home less, if he’s even lucky enough to still have a job, with the real unemployment rate is 11%. The big deal in the news today is the House Republicans caved to demands for a two month extension of the payroll tax cut and unemployment benefits that will have to hashed out again when Congress comes back from their extended Winter vacation then end of January.  

Another slap on the wrist by the government for the banks that caused the housing bubble and the crash that sank the economy world wide with unregulated derivatives and credit default swaps:

The Department of Justice has announced a $335 million settlement with Countrywide, the former subprime mortgage giant now subsumed into Bank of America, on claims of housing discrimination.

   The Justice Department on Wednesday announced the largest residential fair-lending settlement in history, saying that Bank of America had agreed to pay $335 million to settle allegations that its Countrywide Financial unit discriminated against black and Hispanic borrowers during the housing boom.

   A department investigation concluded that Countrywide had charged higher fees and rates to more than 200,000 minority borrowers across the country than to white borrowers who posed the same credit risk. It also steered more than 10,000 minority borrowers into costly subprime mortgages when white borrowers with similar credit profiles received prime loans, the department said.

   The pattern and practice covered the years 2004 to 2008, before Countrywide was acquired by Bank of America.

   “The department’s actions against Countrywide makes clear that we will not hesitate to hold financial institutions accountable, including one of the nation’s largest, for discrimination,” Attorney General Eric H. Holder Jr. said. “These institutions should make judgments based on applicants’ creditworthiness, not on the color of their skin.”

I’m waiting for someone to hold financial institutions accountable for discrimination against every one of its customers, by defrauding them and destroying the residential home mortgage market. That’s obviously not going to happen here.[..]

Here’s the settlement agreement, and once again you see that Countrywide doesn’t have to admit wrongdoing for their crimes.

But the Department of Justice and the Securities and Exchange Commission will enthusiastically pursue the one agency that didn’t cause the crash but just inherited it, at tax payers expense:

The walls have closed in over the past couple weeks on mortgage giants Fannie Mae and Freddie Mac. The SEC charged former CEOs and executives at the companies with fraud. California Attorney General Kamala Harris sued them for imformation (sic)in a wide-ranging fraud investigation. And now we learn that the FBI is investigating them[..]

If Fannie and Freddie are guilty of misleading investors, they deserve to pay the penalty. And yet, I do sense more enthusiasm to go after these government sponsored enterprises than to go after the private banking firms which were far more responsible for subprime. This feeds a false narrative that government somehow caused the financial crisis by forcing lending to poor people. Fannie and Freddie followed the market in subprime and did not originate it.

Round and round, downward, repeating the same mistakes, shoveling good money after bad, all to save themselves.

ECB lends Europe’s banks a massive €489 billion over unprecedented 3-year period

FRANKFURT, Germany – The European Central Bank flipped its credit tap wide open Wednesday to help Europe’s troubled banking system, allowing hundreds of nervous banks to take out a record €489 billion ($639 billion) in loans.

The move was the biggest ECB infusion of credit into the banking system in the 13-year history of the shared euro currency. It aimed to keep the Europe’s debt crisis from choking off credit to businesses – since a credit crunch could cause a continent-wide recession that would make the debt loads hanging over the 17 nations that use the euro even harder to pay.[..]

Although the ECB credits can help banks and the economy get through the crisis, they don’t attack the cause of Europe’s problems – too-large amounts of government debt – or convince markets that European governments can get a grip on their public finances. And it doesn’t remove one of the main reasons why banks remain wary of lending to each other – their thin levels of capital reserves against potential losses.

All that means despite the massive influx of cash, Europe’s debt crisis will still be churning in the New Year.

Spain awaits a painful dose of medicine

It was an election victory the polls had predicted. Second guessing what policies Mariano Rajoy will pursue has not been so easy. Behind his centre right party is a huge parliamentary majority, ahead of him what seems to be a contagious European disease, debt.

Healing the Spanish economy teetering on the edge of recession will be painful, where, when and how will the medicine be administered?

He has promised deep spending cuts announcing he aims to cut the budget deficit by 16.5 billion euros in 2012 and yet such action needs to be balanced against measures to stimulate growth.

Successful Spanish Debt Auction

PARIS – Spain’s borrowing costs plummeted Tuesday at a debt auction, helping to lift the euro and stocks, as the European Central Bank began rolling out a new lending program that could encourage banks to buy euro-zone government bonds. [..]

The central bank’s policy move “is something very big,” Mr. Fransolet said, but he questioned whether it represented “a complete change of direction” for the euro zone.

“I think you need a lot of other things,” he said. With a huge round of government debt up for refinancing next year, he added, “The jury is still out.”

In a reminder of the sword hanging over the heads of European leaders, Fitch Ratings warned that the AAA rating it has assigned to the debt issued by the euro-zone bailout vehicle, the European Financial Stability Facility, “largely depends on France and Germany retaining their AAA status.”

Italian economy shrinks by 0.2% fuelling recession fear

Italy’s economy shrank by 0.2% in the three months to the end of September, fuelling fears of a recession in the eurozone giant.

The figures, released by the country’s official statistical agency, Istat, show the first contraction in the Italian economy since 2009.

Italy’s government has predicted the economy will contract by 0.4% in 2012.

Earlier this month, the government announced an austerity plan to “save Italy”.

The package of emergency austerity measures included raising taxes on the assets of the wealthy, increasing pension ages, and a major drive to tackle tax evasion. Italian Prime Minister Mario Monti also said he would give up his own salary as part of the effort.

However, analysts expect Italy’s economy will struggle for some time yet.

Moody’s gives UK high scores but warns of ‘challenges’

Ratings agency Moody’s has given the UK high scores for economic governance but warns the country it faces “formidable and rising challenges”.

In its annual guidance for investors, Moody’s says the UK has “significant structural strengths” and deserves its top AAA rating.

But it says weakness in the eurozone could hold back growth and weaken the government’s debt-cutting plans.

Rating agency opinion affects the cost of borrowing.

This is only because England has a sovereign currency

On the other side of the globe from Herr Prof.Krugman:

I’ve been reluctant to weigh in on the Chinese situation, in part because it’s so hard to know what’s really happening. All economic statistics are best seen as a peculiarly boring form of science fiction, but China’s numbers are more fictional than most. I’d turn to real China experts for guidance, but no two experts seem to be telling the same story.

Still, even the official data are troubling – and recent news is sufficiently dramatic to ring alarm bells.

The most striking thing about the Chinese economy over the past decade was the way household consumption, although rising, lagged behind overall growth. At this point consumer spending is only about 35 percent of G.D.P., about half the level in the United States.

So who’s buying the goods and services China produces? Part of the answer is, well, we are: as the consumer share of the economy declined, China increasingly relied on trade surpluses to keep manufacturing afloat. But the bigger story from China’s point of view is investment spending, which has soared to almost half of G.D.P.

Some encouraging news in the on going call for an investigation into foreclosure fraud, Sen Maria Cantwell (D-WA) called for Attorney General Eric Holder to investigate the fraud before letting the bank off with a pitiful settlement $20 billion and a “get out of jail” card for criminal charges, She also demanded a full investigation into robo-signing scandal and ‘pump and dump’ mortgage bubble scheme:

I am concerned that recently reported settlement proposals will effectively absolve these financial institutions of substantial civil and criminal liability in one of the largest alleged fraud schemes during the financial crisis. Specifically, I am concerned that the proposed settlement includes a release from liability that may be far too sweeping, does not adequately compensate victims, does not require enough of banks to reform the system that led to the crisis in the first place, and is being made before all the facts are known and without the backing of a full inquiry into the size and scope of the alleged fraud.

…

Without a thorough investigation, it is impossible to truly estimate just how pervasive the defects in the foreclosure and securitization process are. Continued reports of wrongful foreclosures, forged documents, and an inability of servicers and banks to prove chain of title and the legal right to foreclosure, raises the very alarming possibility that these defects were endemic to the mortgage servicing industry across the country. The sheer magnitude of the potential fallout from these defects demands that we undertake a full investigation to uncover the true scope of wrongdoing before providing blanket immunity to the perpetrators.

I am also concerned that reports of a settlement in the range of $20 billion, as recently reported, may not adequately compensate the victims of the foreclosure crisis. As a result of the pump-and-dump scheme perpetrated by the nation’s largest banks that inflated – and burst – the housing bubble, an estimated 14 million Americans are underwater, owing $700 billion more on their homes than those homes are worth. A $20 billion settlement is woefully inadequate to compensate the wrongfully evicted or homeowners struggling to stay in their homes. Much more should be required of banks to provide meaningful help underwater homeowners and compensate foreclosure fraud victims.

And some good news for homeowners facing foreclosure in Florida:

WEST PALM BEACH – Home­owners in foreclosure may have a better chance of getting a true trial, instead of a quickie judgment, following a 4th District Court of Appeal decision that requires banks to prove ownership of the note at the time they file for repossession.

The ruling Wednesday in Palm Beach County was heralded by foreclosure defense attorneys who said it may even force banks to dismiss some cases and start over with new paperwork.[..]

Wednesday’s ruling was on the case of Robert McLean vs. JPMorgan Chase, and involved a 2009 Broward County foreclosure.

According to the decision, which reversed a lower court’s verdict in favor of the bank, Chase originally filed the foreclosure claiming the note – basically the IOU from the borrower – was “lost, stolen or destroyed.”

The claim has been made thousands of times as lenders rushed without the proper documentation to take back homes tangled up in the real estate boom’s securitization frenzy.

Although most notes are found before a final foreclosure judgment is entered, the 4th DCA said the note also must be correctly dated and endorsed to show ownership before the foreclosure was initially filed – something that Chase didn’t have, according to the ruling. The court also questioned a mortgage assignment made to Chase that was dated three days after the foreclosure was initially filed.

If there is substantial doubt about the note, the bank should dismiss and refile the case or the home­owner should be entitled to an evidentiary hearing instead of a more hasty “summary judgment,” the ruling said.