by Mike Larson   04-24-09

The Federal Reserve is watching the backs of U.S. banks. But sometimes I wonder, “Who’s watching the Fed’s back? Is the Fed our next troubled bank?”

You see, all of this garbage paper that’s going bad — the troubled residential mortgage backed securities (RMBS), the commercial mortgage backed securities (CMBS), the asset backed securities (ABS), the Fannie Mae bonds, the corporate loans, and so on — hasn’t just gone “Poof.”

Instead, more and more of it has been landing on the Fed’s doorstep — either through direct ownership or as collateral against Fed loans that keep getting rolled over.

The result? The Fed’s once pristine balance sheet is starting to look more and more like the balance sheet of a troubled financial institution.

From AAA to
Something Else Entirely

What do I mean? Well, take a look at this April 26, 2007, Federal Reserve Statistical Release. Table 2, the Consolidated Statement of Condition of All Federal Reserve Banks, shows the breakdown of the Fed’s assets back then.

In 2007, 89 percent of the Fed’s assets were in risk-free Treasuries. Since then, that number has plummeted to a scary 24 percent.

You’ll see that the Fed banks listed total assets of $883.5 billion at the time. The lion’s share of those assets — $787.1 billion, or 89 percent — were “AAA” quality U.S. Treasury bills, notes, and bonds. There were a few other assorted line items (gold, bank premises, etc.) … but that’s about it.

Now compare that two-year old balance sheet, to this multi-headed hydra of a balance sheet that came out a few days ago. The equivalent table (number 9) shows that total Fed assets have exploded to $2.19 TRILLION. And those plain-vanilla, risk-free Treasuries? They make up just $526.1 billion, or 24 percent, of Fed assets!

The Fed now also owns more than $355 billion of mortgage backed securities and $61 billion in debt issued by Fannie Mae, Freddie Mac, and Ginnie Mae. Term auction credit comes to $455.8 billion. Those are short-term loans against just about anything and everything — from auto loans and credit card receivables to Brady Bonds and CMBS.

The Fed is also holding $238 billion in commercial paper as part of an October 2008 program to help corporations fund short-term debt obligations. And it has $111 billion in so-called “other loans.” This all-purpose category includes loans made to primary dealers ($12.9 billion), bailout baby AIG ($45.1 billion), and loans made as part of the Fed’s Term Asset-Backed Securities Loan Facility ($5.1 billion).

Finally, the Fed has lent money to so-called “Maiden Lane” LLCs that acquired dodgy asset portfolios as part of the Bear Stearns and AIG bailouts. The grand total there comes to $72 billion.

Bottom line:

• The quality of the balance sheet of the U.S. central bank is deteriorating. 

• The Fed is now heavily burdened by the same kind of crappy paper that has been hammering private U.S. banks for several quarters. 

• And the Fed banks are holding total capital of just $45.7 billion against the sum total of $2.19 trillion in assets, meaning the Fed is leveraging its capital 48-to-1. That compares to only 27-to-1 two years ago.

What’s the Risk?

With the Fed doing its best to tarnish its balance sheet and the Treasury borrowing like crazy (not to mention the Fed monetizing some of that debt), the natural question becomes: “What’s the risk?”

The answer is that it all comes down to the reaction of the capital markets …

• Do investors continue to aggressively bid on U.S. Treasuries at our debt auctions? 

• Do foreign creditors, who hold more than 53 percent of the privately held Treasury debt outstanding, start balking at supporting our profligacy? 

• Does the U.S.’s AAA credit rating come under closer scrutiny? 

• And does the dollar start to reflect the fact that the Fed is throwing money around like a drunken sailor — and taking on any and all kinds of crummy assets?

These questions likely won’t be answered today, tomorrow, or next week. We may not learn for months or even quarters. But that doesn’t mean we shouldn’t discuss these risks now … that those risks aren’t very real … and that you don’t want to start taking some protective steps now.

Now might be the time to get rid of long-term U.S. bonds and buy some gold.

I warned about an impending blow up in residential real estate in 2005. If you sold housing, construction, and mortgage stocks back then, you dodged the worst meltdown in modern history. I warned that commercial real estate was in big trouble in early 2007. If you sold your REITs then, you dodged the biggest crack up in office, industrial, and retail real estate shares in ages.

Now, I recommend you consider buying some gold and dump the heck out of any long-term U.S. bonds. Because some day, the trashing of the Fed’s balance sheet is going to matter, and in a potentially huge way.

Until next time,

Mike

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By Barry Grey
24 April 2009

President Barack Obama met Thursday at the White House with executives of major banks and credit card companies amidst growing public anger over sudden increases in interest rates and fees, in many cases by companies that have received billions of dollars in taxpayer bailout money.

Obama, who pledged during his presidential campaign to curb abuses by credit card firms, was silent on the issue until last week, when media reports emerged detailing how firms were doubling and tripling their charges to customers, including those with good credit who had remained current on their payments.

These reports coincide with others showing that banks that have received cash, cheap loans and debt guarantees from the $700 billion Troubled Asset Relief Program (TARP) and other government programs are ramping up home foreclosures while continuing to reduce lending. First the Bush and now the Obama administration have defended the transfer of public funds to Wall Street as the only means of ending the credit crunch and resulting recession.

Trillions have been pumped into the banks, but the recession has deepened, unemployment has soared and millions of people have been thrown into poverty and homelessness. The banks have used the bailout money to bolster their balance sheets and generate profits by speculating on turbulent financial markets and by finding ways to cash in on the collapse in home prices. They have intensified their assault on the working class, slashing hundreds of thousands of jobs, driving people out of their homes and raising the cost of credit upon which most Americans depend to pay their bills.

They adamantly oppose even the most modest restrictions on their activities, including certain limits on executive compensation, enhanced power of bankruptcy courts to alter mortgage terms for distressed homeowners, and laws that would restrict their ability to arbitrarily increase charges on credit card holders.

Obama’s White House meeting was typical of his public relations efforts to placate public opposition while taking no serious measures to rein in the banks. Participants, besides Obama and his top economic aides, included executives from Bank of America, JPMorgan Chase, Citigroup, Wells Fargo, US Bancorp, Visa, Mastercard, Capitol One Financial, American Express, Discover Financial Services and several other firms. Also present was the president of the American Bankers Association, which is lobbying against congressional bills that would curb abuses by credit card issuers.

Following the closed-door meeting, Obama told reporters, “We’re confident we can arrive at something that is commonsensical.” Seeking to reassure the bankers, he added, “We want to preserve the credit card market but we also want to do so in a way that eliminates some of the abuses and some of the problems that a lot of people are familiar with.” He did not say which abuses would be allowed to continue.

One indication of the seriousness of the administration’s effort was provided by Lawrence Summers, the director of the White House’s National Economic Council. According to reporters, he dozed off during Obama’s brief remarks to the press.

Executives leaving the meeting said it was “constructive.” They are confident that they will succeed in blocking passage of a bill, dubbed the “Credit Cardholders’ Bill of Rights,” that is moving through Congress. On Wednesday the bill was approved by the House Financial Services Committee, but a Senate version is opposed by Republicans on a party-line basis and by some Democrats, all but insuring its defeat.

The banks and credit card companies maintain that legislation is not necessary since the Federal Reserve has already announced restrictions on interest charges and fees. However, those regulations are not slated to take effect until July of 2010, giving the banks ample time to ramp up charges in advance of the new rules.

Earlier on Thursday, the special inspector general appointed to monitor the TARP program testified before the Joint Economic Committee of Congress and indicated that the bailout program is rife with conflicts of interest and fraud.

Neil Barofsky, a former prosecutor, told the panel that he had already initiated 20 criminal investigations into securities fraud, insider trading, collusion, price-fixing, money laundering and other illegal activities in relation to the government bailout. He suggested that there would be many more probes.

On Monday, Barofsky released a 250-page report to Congress on the TARP program in which he decried the refusal of the Treasury Department, despite his repeated urgings, to require firms that receive taxpayer handouts to report on how they are using the government money. He noted that the Obama administration has signed off on another $30 billion for the insurance giant American International Group (AIG), which had already received some $150 billion, without any requirement that the company explain what it has done with its bailout money.

The TARP program, he wrote, which began as a $700 billion plan to purchase toxic assets from the banks, has morphed into twelve separate programs involving more than $3 trillion in government cash, loans and loan guarantees—an amount roughly equal to the annual federal budget.

In his report and in his congressional testimony, Barofsky focused on the new bailout program detailed on March 24 by Treasury Secretary Timothy Geithner. He warned that the “Public-Private Investment Program” (PPIP), under which Wall Street investment firms will be given low-cost government loans and guarantees against losses to purchase toxic assets from the banks at inflated prices, was “inherently vulnerable to fraud, waste and abuse.”

He said that the program, which is to be run by the private firms, with between two-thirds and 92.5 percent of the funding provided by the government, had “significant issues relating to conflicts of interest facing fund managers, collusion between participants, and vulnerabilities to money laundering.” He urged that the program not go forward without the addition of serious safeguards against fraud.

In his testimony before the Joint Economic Committee, Barofsky said that the program was designed so as to allow the private fund managers to set the price for the securities purchased from the banks. “This is a lot of economic power given to a small number of fund managers,” he said. He pointed out that fund managers would likely be buying the same mortgage-backed securities they had in other accounts, giving them an incentive to pay inflated prices and thereby increase the value of their previous investments, which they could subsequently unload at a huge profit.

“The banks will also make a huge profit,” he said. “And when the securities go back to their real market price, the taxpayer will pay the loss.”

He also warned that the incorporation of the Federal Reserve’s Term Asset-Backed Securities Loan Facility (TALF) into the Public-Private Investment Program added another level of potential fraud. Investment firms running Public-Private funds would be able to borrow additional money under the TALF program.

That program, using $80 billion in TARP funds to leverage $1 trillion in Fed loans, was initially designed to subsidize the issuing of new securities backed by consumer loans. Now it is to be used to subsidize the purchase of existing toxic asset-backed securities on the banks’ books.

He decried the fact that the Federal Reserve was relying on credit rating agencies to rate the toxic assets to be purchased under TALF and the PPIP, noting that the same agencies had contributed to the financial collapse by giving dubious mortgage-backed securities their highest rating.

In effect, he suggested, the program would enable the banks to offload the worst of their bad debts, generating massive profits for Wall Street and huge taxpayer losses.

Asked at the hearing whether there were any provisions in the TARP bill passed last October that required banks to report on their use of bailout money, he said, “No.” Without fundamental changes in the structure and management of the bailout programs, he said, there would be “potentially catastrophic taxpayer losses.”

Barofsky was asked about a report published that morning by the Wall Street Journal citing testimony by Bank of America CEO Kenneth Lewis that Federal Reserve Chairman Ben Bernanke and then-Treasury Secretary Henry Paulson pressured him to conceal the dire financial position of Merrill Lynch last September, when the Bush administration engineered the takeover of the investment bank by Bank of America. Merrill Lynch lost more than $15 billion in the fourth quarter of 2008, liabilities that led to a government bailout of Bank of America last December.

Barofsky said that his office was investigating the Bank of America takeover of Merrill. He listed six audits he was conducting, including, besides the Bank of America deal, the use of bailout funds, compliance with executive compensation limits, external influences, AIG executive bonuses, and AIG counterparty payments.

The latter concerns the fact that AIG has used its government bailout funds to pay off banks and other firms that had entered into credit default swaps with the insurance giant at 100 percent of the face value of the deals, rather than forcing its counterparties to accept reduced payments.

One such deal that is ripe for criminal investigation involves Goldman Sachs, former Treasury Secretary Paulson and the current CEO of AIG, Edward Liddy. It has emerged that Paulson, who was CEO of Goldman before becoming treasury secretary under Bush, designed the AIG rescue so as to allow AIG to funnel $13 billion in bailout money to his former bank. He picked Liddy, a former board member of Goldman, to become the new CEO of AIG. Liddy, meanwhile, retains an investment of more than $3 million in Goldman Sachs.

Obama’s treasury secretary, Geithner, was president of the Federal Reserve Bank of New York at the time and played a critical role in designing and implementing the TARP program and the bailout of AIG. That neither he, nor Obama, nor the Democratic-controlled Congress has any intention of implementing the changes proposed by Barofsky was underscored by Geithner’s testimony Tuesday before the Congressional Oversight Committee for TARP.

Although Geithner’s appearance occurred the day after Barofsky released his report to Congress and the day it was released to the public, none of the committee members raised it. Geithner, for his part, announced that the “vast majority” of banks were more than adequately capitalized, stressed that banks shown to need more capital by government “stress tests” would have many options for raising money, in addition to government purchases of their stock, and warned Congress against placing new requirements on bailed out firms.

His testimony was taken as a pledge that the Obama administration would continue to run interference for Wall Street and shield the wealth of the financial elite. It sparked a 127.8 point rise in the Dow, with bank stocks recording double-digit gains for the day.

www.wsws.org

By Luis Arce
24 April 2009

China’s recent announcement of multi-billion dollar deals with several Latin America countries will strengthen its already substantial presence in a region the US has historically regarded as its own backyard.

The Asian giant is negotiating with Venezuela to double a development fund to $12 billion.

In addition, China announced it was prepared to lend $1 billion to Ecuador to build a hydroelectric plant, and $10 billion to Brazil’s national oil company.

Even Jamaica, heavily indebted and confronting growing unemployment, turned to China after failing to secure credit from the US or Britain. The Caribbean island nation negotiated $138 million in loan packages from Beijing, turning China overnight into its principal financial partner.

But it is the $10 billion swaps in Chinese currency, the yuan, with Argentina that most clearly expresses the change in relations emerging from the present world financial crisis.

“This is how the balance of powers shifts quietly during times of crisis,” David Rothkopf, a former official in the Clinton administration, told the New York Times. “The loans are an example of the checkbook power in the world moving to new places, with the Chinese becoming more active.”

The Argentine deal brings to $95 billion the amount in currency-swaps negotiated by China. Similar deals were negotiated with Indonesia, Malaysia, South Korea, Hong Kong and Belarus. China is the largest holder of US Treasuries with $740 billion, and is looking for ways to do business away from the US currency.

China fears that the US financial crisis will undermine the dollar’s position as the world reserve currency. Last March, China called on the International Monetary Fund to create a “super-sovereign reserve currency.”

The yuan swap with Argentina was a direct blow to the US, which recently approved $30 billion swaps each for Brazil and Mexico, but was unwilling to extend a line to Argentina, which has yet to clear up its defaulted debt to the Paris Club.

The $10 billion currency swap provided a much-needed sign of confidence in the Argentine economy, giving it a means of counteracting its precarious position in the world financial markets.

“News of the China credit last week makes it look as though default isn’t a viable option now for the government, so these bond prices are inviting many investors to take positions,” Paulino Seoane, a portfolio manager with Buenos Aires-based Lopez Leon Brokers, told the New York Times.

The financial markets and the local press welcomed the currency-swap announcement.

The Argentine peso rose 0.5 percent, its largest gain this year in a four-day rally, and the yield in Argentina’s dollar bonds maturing in 2033 dropped 1.4 percent.

Alberto Ramos, a Latin American economist at Goldman Sachs in New York, told Bloomberg News that the agreement with Argentina is a “symbolic move and an indirect way to shun the US dollar.” The deal will promote bilateral trade and direct investment by allowing one country to pay for imports in the other nation’s currency.

The currency swap will serve as a precedent to use China’s yuan as an alternative reserve currency. “The yuan is one of the currencies with the greatest potential and has a significant role to play in the current redesign of the international monetary system,” Argentina’s central bank said.

These statements underscore the US loss of influence in the region, exacerbated by the years of Washington’s neglect of the region under the Bush administration. President Barack Obama sought to recast US relations with Latin America during his recent trip to the America’s Summit, but a change in rhetoric cannot reverse these more fundamental economic processes.

The strength of the US dollar is diminishing, while China’s currency is emerging as a viable alternative for emerging countries, which are struggling to overcome the collapse in commodity prices as result of the world recession.

China’s influence in Latin America has been increasing steadily over the past decade. Today, it is the region’s second largest, after the US. Chinese-Latin American trade has been growing at an impressive pace. It reached $35 billion in 2004, a 50 percent increase over the previous year.

China’s immediate interest in Latin America is to ensure access to the raw materials the region produces. Commodities imported by China include fishmeal, soybeans, oil and gas, iron ore, copper, steel, timber and coffee from Chile, Peru, Brazil, Argentina, Ecuador, Venezuela, Bolivia and Colombia.

But, with the US in its deepest financial crisis in seven decades, China’s move into the region goes well beyond satisfying its immediate needs for raw materials to fuel its industrial growth.

In the past, China had engaged in a series of steps to increase its presence in Latin America. In a 12-day tour to Latin America in 2004, President Hu Jintao said China would invest $100 billion in the next 10 years.

In Argentina, Mr. Hu unveiled nearly $20 billion in new Chinese investments, much of it in railways and energy exploration. Commercial activity flourished between the two countries. Total trade between Argentina and China, including Hong Kong and Macau, totaled $965 million last February, according to Argentina’s national statistics institute.

China is Brazil’s second-largest trading partner and at one point China displaced the US as the leading purchaser of Chilean copper. In Brazil, Peru, Ecuador and Colombia, China has been actively pursuing joint ventures in strategic industrial areas like refining, pipelines and exploration of energy resources.

The largest Chinese commitments in Latin America have been with Venezuela. In 2007, the two countries signed 11 bilateral agreements to deepen cooperation in areas of energy, technology and financing. Central to the agreements was a plan to increase the supply of Venezuelan oil to China.

China has accounted for 40 percent of global growth in oil demand over the past decade. Its consumption in 20 years is projected to rise to 12.8 million barrels a days. (Today, the US consumes 20.4 million barrels a day.) Most of China’s oil will have to be imported.

While Venezuela now exports 60 percent of its oil to the US, the agreements between Beijing and Caracas could change that. Venezuela aims to triple its exports to China to one million barrels a day by 2013. (Today, the US consumes 1.5 million barrels a day of Venezuelan oil.)

One of the agreements reached between China and Venezuela in 2007 calls for $6 billion to be invested in various development projects in both countries and to promote a cooperative relationship between them, according to venezuelanalysis.com.

The Chinese Development Bank will contribute $4 billion, and Venezuela’s National Development Fund (Fonden) will provide the other $2 billion. Venezuelan President Hugo Chavez has stated that the fund could grow to $10 billion in the near future.

In addition, venezuelanalysis.com reported, Venezuela’s Social Development Bank (Bandes) and the Chinese Development Bank are creating a joint technical office to direct future strategic development projects in infrastructure, industry, and energy.

The two countries also plan to increase China’s oil refining capacity and to develop the necessary fleet of oil tankers to transport the oil to the Chinese market.

Also contemplated is the formation of joint companies to produce telecommunications equipment in Venezuela such as cellular phones to be sold throughout Latin America, and electrical appliances such as refrigerators, stoves and air conditioners.

The many years of joint collaboration between the two countries led to Chavez’s sixth visit to China on April 8 and 9. The Venezuelan president used the occasion to launch another left-nationalist denunciation of Washington and to declare that “the center of gravity of the world has moved to Beijing,” laying the basis for a “new world order.” The interest of the ruling Chinese Communist Party, however, lies primarily in securing access to Latin American natural resources.

Reporting on Chavez trip to the Middle East and China, the Brunei Times web site said, “While China’s Communist leaders have been low key in their response to Chavez’s political rhetoric, Beijing’s state-run industries have been eager to use Venezuela as a jumping-off point for their entry into South America.”

In an announcement that surely will provoke consternation in Washington, the Venezuelan daily El Universal reported on a joint political agreement reached in Beijing: “The Venezuelan ruler announced that members of his United Socialist Party of Venezuela (PSUV) are to be trained at the Central Party School, as proposed by Xi.”

Xi Jinping is the Chinese Vice President who is likely to succeed Hu Jintao as leader of the Communist Party of China in the party congress of 2012. The announcement points to China’s growing economic power in Latin America being used to increase its political and even military influence in the region, defying the US in both spheres.

Such moves indicate that China’s interests in the region are long term. In recent years, China and Venezuela have been discussing the possibility of building a Panamanian pipeline or, alternatively, one crossing Colombia.

The pipelines would allow the shipping of crude oil from a port in the Pacific Ocean in supertankers too big to pass through the Panama Canal. Such a project will not eliminate the economic importance of the Panama Canal—a key symbol of US dominance of the region throughout the 20th Century—but will diminish its significance.

Chinese investments and mutual visits of Chinese and Latin American heads of states will unquestionably increase China’s say in the economic and political future of Latin America, directly challenging US supremacy. Early this year, China became a member and contributor to the Inter-American Development Bank, where the US has exercised quasi-dictatorial powers since its creation after World War II.

As the New York Times reports, “Just one of China’s planned loans, the $10 billion for Brazil’s national oil company, is almost as much as the $11.2 billion in all approved financing by the Inter-American Bank in 2008.”

www.wsws.org

Huge “shadow inventory”

by Mike Whitney
Global Research, April 21, 2009

Due to the lifting of the foreclosure moratorium at the end of March, the downward slide in housing is gaining speed. The moratorium was initiated in January to give Obama’s anti-foreclosure program—which is a combination of mortgage modifications and refinancing—a chance to succeed. The goal of the plan was to keep up to 9 million struggling homeowners in their homes, but it’s clear now that the program will fall well-short of its objective.

In March, housing prices accelerated on the downside indicating bigger adjustments dead-ahead. Trend-lines are steeper now than ever before–nearly perpendicular. Housing prices are not falling, they’re crashing and crashing hard. Now that the foreclosure moratorium has ended, Notices of Default (NOD) have spiked to an all-time high. These Notices will turn into foreclosures in 4 to 5 months time creating another cascade of foreclosures. Market analysts predict there will be 5 MILLION MORE FORECLOSURES BETWEEN NOW AND 2011. It’s a disaster bigger than Katrina. Soaring unemployment and rising foreclosures ensure that hundreds of banks and financial institutions will be forced into bankruptcy. 40 percent of delinquent homeowners have already vacated their homes. There’s nothing Obama can do to make them stay. Worse still, only 30 percent of foreclosures have been relisted for sale suggesting more hanky-panky at the banks. Where have the houses gone? Have they simply vanished?

600,000 “DISAPPEARED HOMES?”

Here’s a excerpt from the SF Gate explaining the mystery:

“Lenders nationwide are sitting on hundreds of thousands of foreclosed homes that they have not resold or listed for sale, according to numerous data sources. And foreclosures, which banks unload at fire-sale prices, are a major factor driving home values down.

“We believe there are in the neighborhood of 600,000 properties nationwide that banks have repossessed but not put on the market,” said Rick Sharga, vice president of RealtyTrac, which compiles nationwide statistics on foreclosures. “California probably represents 80,000 of those homes. It could be disastrous if the banks suddenly flooded the market with those distressed properties. You’d have further depreciation and carnage.”

In a recent study, RealtyTrac compared its database of bank-repossessed homes to MLS listings of for-sale homes in four states, including California. It found a significant disparity – only 30 percent of the foreclosures were listed for sale in the Multiple Listing Service. The remainder is known in the industry as “shadow inventory.” (“Banks aren’t Selling Many Foreclosed Homes” SF Gate)

If regulators were deployed to the banks that are keeping foreclosed homes off the market, they would probably find that the banks are actually servicing the mortgages on a monthly basis to conceal the extent of their losses. They’d also find that the banks are trying to keep housing prices artificially high to avoid heftier losses that would put them out of business. One thing is certain, 600,000 “disappeared” homes means that housing prices have a lot farther to fall and that an even larger segment of the banking system is underwater.

Here is more on the story from Mr. Mortgage “California Foreclosures About to Soar…Again”

“Are you ready to see the future? Ten’s of thousands of foreclosures are only 1-5 months away from hitting that will take total foreclosure counts back to all-time highs. This will flood an already beaten-bloody real estate market with even more supply just in time for the Spring/Summer home selling season…Foreclosure start (NOD) and Trustee Sale (NTS) notices are going out at levels not seen since mid 2008. Once an NTS goes out, the property is taken to the courthouse and auctioned within 21-45 days….The bottom line is that there is a massive wave of actual foreclosures that will hit beginning in April that can’t be stopped without a national moratorium.”

JP Morgan Chase, Wells Fargo and Fannie Mae have all stepped up their foreclosure activity in recent weeks. Delinquencies have skyrocketed foreshadowing more price-slashing into the foreseeable future. According to the Wall Street Journal:

“Ronald Temple, co-director of research at Lazard Asset Management, expects home prices to fall 22% to 27% from their January levels. More than 2.1 million homes will be lost this year because borrowers can’t meet their loan payments, up from about 1.7 million in 2008.” (Ruth Simon, “The housing crisis is about to take center stage once again” Wall Street Journal)

Another 20 percent carved off the aggregate value of US housing means another $4 trillion loss to homeowners. That means smaller retirement savings, less discretionary spending, and lower living standards. The next leg down in housing will be excruciating; every sector will feel the pain. Obama’s $75 billion mortgage rescue plan is a mere pittance; it won’t reduce the principle on mortgages and it won’t stop the bleeding. Policymakers have decided they’ve done enough and are refusing to help. They don’t see the tsunami looming in front of them plain as day. The housing market is going under and it’s going to drag a good part of the broader economy along with it. Stocks, too.

www.globalresearch.ca

by Victor Shih and by Chris Hedges

Beijing’s ‘Legless’ Stimulus

Even if China’s stimulus manages to produce some positive numbers, it is likely to fall short. This result is not accidental. It is the outcome of a political system dominated by state planners, large state corporations, and local officials.

The stimulus projects will demand large tracts of land from the local land banks at little compensation. Thus, local governments do not want to “waste” this land on public projects, especially when the central government has set a strict limit on the amount of farmland that can be developed. Local governments sometimes stall on central projects, especially when it comes to welfare housing. In other cases, they forcefully resettle residents with little compensation to reduce the cost of obtaining land. The Ministry of Land and Resources has organized an internal work group to monitor these problems.

Generating employment is not the only means of holding on to power. Powerful rent-seeking lobbies, including the state corporations and local officials who demand their large slices of the stimulus package, directly influence the leadership’s ability to stay in power. Ordinary citizens and small firms, in contrast, are largely absent from the political process, and thus exert no direct influence on the implementation of the spending.

JJS: Amusing that even specialists think that such behavior is specific to the nation they study. But it’s everywhere. And such cheating is returning America to the rest of the pack.

Who Should Resist, and Who Will Become Serfs?

America is devolving into a third-world nation. And if we do not immediately halt our elite’s rapacious looting of the public treasury we will be left with trillions in debts and widespread human misery. Our anemic democracy will be replaced with a robust national police state. The elite will withdraw into heavily guarded gated communities where they will have access to security, goods, and services that cannot be afforded by the rest of us.

The Obama administration, rather than chart a new course, is intent on re-inflating the bubble. Vast, unimaginable sums are being placed into corporate hands. They will use this money as they always have — to enrich themselves at our expense.

Since the bailout started last September, the banks haven’t lent it. They have used some of it for acquisitions or to preserve their bonuses or their dividends. If they quit, they get a golden parachute.

Ironically, American International Group Inc.’s former chairman, Maurice R. Greenberg, said AIG would have been better off filing for Chapter 11 bankruptcy protection than seeking government help.

“Bankrupt corporate capitalism is on its way to bankrupting the socialism that is trying to save it,” Ralph Nader added.

Our commitments now total some $12 trillion. It was only a couple of months ago that our expenditures totaled $9 trillion. And it was not long ago that such profligate government spending was unthinkable.

Households lost $5.1 trillion, or 9%, of their wealth in the last three months of 2008, the most ever in a single quarter in the 57-year history of record keeping. For the full year, household wealth dropped $11.1 trillion, or about 18%. These figures did not record the decline of investments in the stock market, which has probably erased trillions more.

We have been borrowing at the rate of more than $2 billion a day over the last 10 years, and at some point it has to stop. The moment China, the oil-rich states, and other international investors stop buying treasury bonds the dollar will become junk. Inflation will rocket upward.

A furious and sustained backlash by a betrayed and angry populace, one unprepared intellectually and psychologically for collapse, will sweep aside the Democrats and most of the Republicans. Fascists will find a following with promises of revenge and moral renewal. The elites will retreat into their sheltered enclaves of privilege and comfort. We will be left bereft and abandoned outside the gates.

The stimulus and bailout plans are not about saving us. They are about saving them. We can resist — which means street protests, disruptions of the system, and demonstrations — or become serfs.

JJS: Every society’s history shows how when a few capture “rent”, that creates class and state and privilege. Thus, to create equality and community and rights as customs, we need to share rents. That is, we need the policy of geonomics — replace counterproductive taxes with land dues for exclusive use of sites and resources and replace addictive subsidies with rent dividends to all citizens. On the platform of economic reform we could enjoy political justice — and far fewer disputes to settle politically.

www.progress.org

Tuesday 14 April 2009

by: Jacques Attali  |  Visit article original @ L’Express 

  In some people’s eyes, a miraculous emergence from the crisis is brewing: Through the combined play of the Geithner plan, (which allows investment funds and banks to buy other banks’ toxic assets, borrowing most of what they need to do so from the Federal budget) and accounting changes (which allow banks to carry those assets at an inflated value), we see a derivatives market take hold in which some will sell these assets at a very high price to others in order to buy more of those assets at a still higher price: so that an asset value bubble will form, entirely financed by the taxpayer. The value of banks’ capital funds, up until now totally corrupted by the presence of these toxic assets, will be raised naturally by this operation, without the government having to spend any money apart from that which will have allowed the banks to buy these products and make their price rise. Then growth will be able to take off again, creating new financial fortunes in the midst of innumerable industrial bankruptcies.

    This bubble is already underway: It can be measured by the difference between the stock market ( in full growth mode), in particular, stocks of at-risk sectors (especially the financial sector) and the (totally anemic) credit market, by the difference between the (negative) change in estimated profits and the (positive) change in stock prices, by the increase in company multiples, by the foreseeable nature of central bank actions, allowing the return of mechanisms for currency transfer, the so-called carry trade, on the dollar and the yen.

    All by itself, this bubble could soon impart the feeling that the crisis is over: Banks will become solvent again, will reimburse the government the sums they’ve borrowed – recovering along the way their rights to distribute bonuses; the price increase in financial assets will relaunch investment, employment and growth. Thus will the unemployed and the taxpayers have reactivated the bonus pump that jobholders and lenders could no longer feed.

    The optimistic discourse of the period before the crisis will resume; it is already resuming. People will even say that those who predicted the worst crisis since 1929 were attention hogs, that capitalism is full of resilience, and that the American economy has no need whatsoever for some planetary regulation to come along and slow down its dynamism.

    We may hope that this scenario occurs: An immoral emergence from the crisis is better than a depression. However, unfortunately, nothing will have been settled: The risks will remain intact – surrounding company survival – surrounding the immensity of public debt – surrounding asset values – surrounding employment. Then people will wonder how a Democratic president could have put himself at the service of such a scandalous maneuver for some bankers to get wealthy again with the taxpayers’ money, without the taxpayers having the slightest power over the banks.

    In the face of the persistence of risks, consumers will then start to live in a truly different way, that is, to save, to consume frugally, to flee ostentation, to change their lifestyle. Companies, like nations, will have to invent new equilibria. Then the G20 will no longer be able to avoid the reforms it carefully eluded in London.

    In the meantime, Europe, if it resists the illusion of the Geithner bubble, will find a unique opportunity to get a little bit ahead of the United States in the mastery of its financial system, in the service of the common good. In order for that to happen, we must have the courage to preach reform, even when the world will want to believe that the crisis is over.

    ——–

    Professor, writer, honorary government adviser, special adviser to the president of the Republic from 1981 to 1991, founder and first president of the European Bank for Reconstruction and Development in London from 1991 to 1993, Jacques Attali is now president of A&A, an international consulting firm specialized in new technologies, based in Paris, and president of PlaNet Finance, an international charitable organization that brings together the world’s microfinance institutions.

www.truthout.org

By Barry Grey
18 April 2009

The recent spate of better-than-expected earnings reports by major US banks is a testament, not to a strengthening of the basic economy as a result of the government’s bailout program, as the Obama administration would have the American people believe, but rather to the undiminished rapaciousness of the bankers.

The trillions of dollars in cash, virtually interest-free loans and government guarantees the banks have been given with no strings attached first by Bush and now by Obama, have, not surprisingly, begun to register as handsome profits on major banks’ balance sheets.

Emboldened and confident, based on the financial policies of the Obama administration and the Wall Street personnel who are carrying them out, that they have a pliant instrument of their interests in the White House, the financial barons are employing the same deceptive accounting procedures and gambling with borrowed money that precipitated the crisis in the first place. They are combining these methods with an escalation of predatory policies that threaten millions of workers with destitution.

In recent days, bank CEOs like Jamie Dimon of JPMorgan Chase and Lloyd Blankfein of Goldman Sachs have issued what amount to ultimatums to the government that they will refuse to collaborate further in its restabilization schemes unless it drops even the mild limits on executive pay and other restrictions it imposed in return for cash infusions under the $700 billion Troubled Asset Relief Program (TARP). They want to repay the bailout money they received last October so they can free their hands to wage economic war against surviving rivals, such as Citigroup and Bank of America, which are in worse financial straits than they are.

Given the repeated assurances by Obama and his top economic advisers that they will do “whatever is necessary” to keep the big banks afloat and keep them in private hands, the bankers have every reason to be as arrogant as they are confident. They have been given a carte blanche by the state.

Amidst reports that the banks are ramping up their foreclosures of distressed homeowners and sharply raising interest rates and fees on credit cards, some of the biggest institutions over the past week reported strong profits for the first quarter of 2009. Wells Fargo projected a record quarterly profit of $3 billion, ahead of the actual release of its earnings report next week.

On Monday, Goldman Sachs issued its quarterly report, showing a profit of $1.8 billion. It used this unexpectedly strong showing to sell $5 billion worth of stock the next day, as part of its plan to pay back the $10 billion it received in TARP money.

This was followed by Thursday’s report by JPMorgan Chase of a $2.14 billion profit, which it used to carry out a successful sale of $3 billion in bonds not insured by the Federal Deposit Insurance Corporation (FDIC). Since last fall, the FDIC has been guaranteeing the debt offerings of the banks, thus far allocating more than $300 billion in another huge windfall, ultimately to be paid for by the taxpayers.

CEO Dimon told a conference call that he wanted to pay back his $25 billion in TARP money as soon as the government would allow him to do so, calling it a “scarlet letter” and promising to refuse any further government assistance.

On Friday, Citigroup, which has received $45 billion in TARP money plus a government guarantee on more than $300 billion of its toxic assets, announced a profit of $1.59 billion for the first quarter. It was the bank’s first reported profit in more than a year. Since the credit bubble burst in late 2007, the company, which speculated heavily in subprime mortgages and related securities, has posted net losses of more than $28 billion.

The profit reports follow a five-week run-up on the stock market, led by financial stocks, which roughly tracks a series of initiatives announced by the Obama administration to further bolster the banks and protect the wealth of the financial elite. These include Treasury Secretary Timothy Geithner’s plan to allocate up to $1 trillion in public funds to subsidize hedge funds and other financial companies that buy the banks’ toxic assets at inflated prices, with the government virtually guaranteeing double-digit profits for the firms that buy the banks’ assets and the public assuming virtually all of the risk.

The Geithner plan coincided with the intervention by Obama and his top economic advisors to squelch legislation in Congress that would have imposed a surtax on executive bonuses awarded by bailed-out companies, such as the insurance giant American International Group (AIG).

It was followed by the decision of the Financial Accounting Standards Board (FASB) to weaken “mark-to-market” accounting rules so as to allow the banks to vastly inflate the value of illiquid home loans and other bad debts on their balance sheets. This move not only allows the banks to manipulate their balance sheets so as to conceal losses and boost reported profits, it also gives them greater leeway to borrow money for speculative purposes.

Even a cursory examination makes clear that there is a large element of deceptive accounting in this week’s bank profit reports. Some, if not all, of the banks made use of an obscure accounting rule change enacted several years ago that allows them to book as a gain a decline in the market evaluation of their outstanding bonds, the result of investor concerns about their financial health. According to one press report, this gimmick may account for as much as a third of Wells Fargo’s reported first quarter profit. On the same basis, Citigroup posted a one-time gain of $2.5 billion.

Goldman Sachs omitted from its earnings reports the month of December, when it lost more than a billion dollars, on the pretext of a change in the starting month of its fiscal year.

It is not clear to what extent the FASB rule change on “mark-to-market” accounting contributed to the banks’ first-quarter profit reports. But it is well known that the banks are essentially concealing many billions of dollars in bad loans and other toxic assets.

It is estimated that US banks are still holding some $1 trillion in bad home loans and mortgage-backed assets that they have not downgraded. They are reportedly holding another trillion dollars in questionable assets related to commercial real estate, credit cards, auto loans and other consumer debt.

The banks refuse to either account for these bad debts or sell them off, so as to avoid having to absorb further write-downs and losses. Instead, according to a Goldman Sachs analysis, the banks are valuing their mortgage-backed assets at the absurdly high level of 91 cents on the dollar.

Meanwhile, the banks have refused to significantly increase their lending to other businesses or consumers—the ostensible purpose of the government bailout. As the financial Web site RGE Monitor noted on Wednesday, “[I]n the real economy credit growth to the private sector has continued to slow at a fast pace in the US….”

A second major factor in the improved earnings of the banks is reduced costs resulting from mass layoffs. US financial firms have laid off more than 400,000 employees over the past two years, and 148,000 in the final quarter of 2008 alone. In its report, Citigroup said it had cut the size of its work force to 309,000 people from 374,000 at its peak—a reduction of more than 17 percent. The bank has laid-off 13,000 people just since the end of 2008.

A third source of improved earnings is an escalation of the banks’ direct attacks on working people. Having been assured that they will face no opposition from the Obama administration, the banks have intensified their drive to foreclose on delinquent home owners. They have also begun to sharply ramp up their credit card charges. The Detroit Free Press reported Friday that some 4 million Bank of America customers were notified in the past week that their annual percentage rate will jump from less than 10 percent to a range of 14 percent to 16 percent. For some customers, the newspaper said, the changes mean a doubling of rates.

Beyond these factors, the banks have been able to take advantage of certain profit opportunities thrown up by the worsening economic and social crisis. One major source of increased revenues was a spurt in mortgage refinancings. This was made possible by the Federal Reserve’s drive to lower mortgage rates by massively increasingly the volume of dollars in circulation and adding another trillion dollars of debt to its balance sheet, a policy that will eventually rebound on the public in the form of inflation and massive cuts in social programs.

At the same time, the collapse in home prices and household savings, and the escalating wave of layoffs have provided an unlimited supply of working people desperate to lower their monthly mortgage payments by extending their loans and, over time, giving the banks an even bigger share of their income.

In the case of Well Fargo, which is based in California, the catastrophic fall in house prices has led to a certain uptick in new mortgages, a lucrative source of profit. A major portion of the new home sales are of foreclosed properties.

All three of the banks that issued quarterly reports registered strong gains in the bond and currency trading departments. This, however, was largely an expression of the general financial turmoil. Speaking of Goldman Sachs, Financial Times columnist John Gapper wrote on Thursday, “Yet its fixed income and currencies trading desks have exploited the wide spreads caused by market disarray to make more money than ever.”

All three banks that released their earnings reported a huge increase in credit losses from delinquent or defaulted home loans, credit card debt and other consumer loans, and they warned of more to come as the unemployment rate continues to rise.

Nouriel Roubini, professor of economics at New York University’s Stern School of Business, aptly summed up the state of affairs as follows: “In brief, banks are benefiting from close to zero borrowing costs and fewer competitors; they are benefiting from a massive transfer of wealth from savers to borrowers given a dozen different government bailout and subsidy programs for the financial system; they are not properly provisioning/reserving for massive future loan losses; they are not properly marking down current losses from loans in delinquency; they are using the recent mark-to-market accounting changes by FASB to inflate the value of many assets; they are using a number of accounting tricks to minimize reported losses and maximize reported earnings; the Treasury is using a stress scenario for the [bank] stress tests that is not a true stress scenario as actual data are already running worse than the worst case scenario.”

The banks are continuing, with the blessings of the Obama administration, the same predatory policies that generated massive fortunes on Wall Street and eventually plunged the US and world economy into the deepest crisis since the Great Depression.

In his Financial Times column, John Gapper gave an example of the continuity between the pre- and post-crash policies of the banks. “Mr. Blankfein,” he wrote, speaking of the Goldman Sachs CEO, “criticized Wall Street’s past pay practices as ‘self-serving and greedy,’ but Goldman is still putting aside 50 percent of revenues—$4.7 billion in the first quarter—for the bonus pool. Inside, it may feel ‘humbled,’ as Mr. Blankfein said, but it looks like the same old bank.

“Once it has repaid the $10 billion, Goldman hopes to go back to paying employees what it wants, buying and selling more or less what it fancies and operating as before.”

www.wsws.org

By Bill Moyers and Michael Winship
April 7, 2009

Editor’s Note: Wall Street’s gamesmanship in recent years brought the U.S. – and the world’s – economy to the brink of collapse, but so far neither the Bush nor the Obama administration has undertaken the level of investigation that the crisis warrants.

In this guest essay, Bill Moyers and Michael Winship argue that the multi-trillion-dollar crisis deserves at least the attention that followed the savings-and-loan scandal in the 1980s or the post-1929 crash investigations that exposed Wall Street wrongdoing of that era:

A cartoon in the Sunday comics shows that mustachioed fellow with monocle and top hat from the Monopoly game – “Rich Uncle Pennybags,” he used to be called – standing along the roadside, destitute, holding a sign: “Will blame poor people for food.”

Time to move the blame to where it really belongs. That means no more coddling banks with bailout billions marked “secret.” No more allowing their executives lavish bonuses and new corporate jets as if they’ve won the mega-lottery and not sent the economy down the tubes.

And no more apostles of Wall Street calling the shots. 

Which brings us to Larry Summers. Over the weekend, the White House released financial disclosure reports revealing that Summers, director of the National Economic Council, received $5.2 million last year working for a $30 billion hedge fund.

He made another $2.7 million in lecture fees, including cash from such recent beneficiaries of taxpayer generosity as Citigroup, JP Morgan and Goldman Sachs. The now defunct financial services giant Lehman Brothers handsomely purchased his pearls of wisdom, too.

Reading stories about Summers and Wall Street you realize the man was intoxicated by the exotic witches’ brew of derivatives and other financial legerdemain that got us into such a fine mess in the first place. Yet here he is, serving as gatekeeper of the information and analysis going to President Obama on the current collapse.

We have to wonder, when the President asks, “Larry, who did this to us?” is he going to name names of old friends and benefactors?

Knowing he most likely will be looking for his old desk back once he leaves the White House, is he going to be tough on the very system of lucrative largesse that he helped create in his earlier incarnation as a de-regulating Treasury Secretary?

(“Larry?” “Yes, Mr. President?” “Who the hell recommended repealing the Glass-Steagall Act back in the 90s and opened the floodgates to all this greed?” “Uh, excuse me, Mr. President, I think Bob Rubin’s calling me.”)

That imaginary conversation came to mind last week as we watched President Obama’s joint press conference with British Prime Minister Gordon Brown. When a reporter asked Obama who is to blame for the financial crisis, our usually eloquent and knowledgeable President responded with a rambling and ineffectual answer.

With Larry Summers guarding his inbox, it’s hardly surprising he’s not getting the whole story. 

If only someone with nothing to lose would remind the President of that old story – perhaps apocryphal but containing a powerful truth – of the Great Wall of China. Four thousand miles long and 25 feet tall.

Intended to be too high to climb over, too thick to break through, and too long to go around. Yet in its first century of the wall’s existence, China was successfully breached three times by invaders who didn’t have to break through, climb over, or go around. They simply were waved through the gates by obliging watchmen. 

The Chinese knew their wall very well. It was the gatekeepers they didn’t know.

A Real Investigation

Shifting the blame for the financial crisis to where it belongs also means no more playacting in round after round of congressional hearings devoted more to posturing and false contrition than to truth.

We need real hearings, conducted by experienced and fiercely independent counsel asking the tough questions, or an official commission with subpoena power that can generate evidence leading, if warranted, to trials and convictions – and this time Rich Uncle Pennybags shouldn’t have safely tucked away in his vest pocket a “Get Out of Jail Free” card.

So far, the only one in the clink is Bernie Madoff and he was “a piker” compared to the bankers who peddled toxic assets like unverified “liars’ loan” mortgages as Triple-A quality goods.

So says Bill Black, and he should know. During the savings and loan scandal in the 1980s, Black, who teaches economics and law at the University of Missouri, Kansas City, was the federal regulator who accused then-House Speaker Jim Wright and five U.S. Senators, including John Glenn and John McCain, of doing favors for the S&L’s in exchange for campaign contributions and other perks.

They got off with a wrist slap but Black and others successfully led investigations that resulted in convictions and re-regulation of the savings and loan industry.

Bill Black wrote a book about his experiences with a title that fits today as well as it did when he published it four years ago – The Best Way to Rob a Bank Is to Own One. On last Friday night’s edition of “Bill Moyers Journal,” he said the current economic and financial meltdown is driven by fraud and banks that got away with it, in part, because of government deregulation under prior Republican and Democratic administrations.

“Now we know what happens when you destroy regulation,” Black said. “You get the biggest financial calamity for anybody under the age of 80.”

What’s more, the government ignored warnings and existing legislation to stop it before the current crisis got worse.

“They didn’t even begin to investigate the major lenders until the market had actually collapsed, which is completely contrary to what we did successfully in the savings and loan crisis,” Black said. “Even while the institutions were reporting they were the most profitable savings and loans in America, we knew they were frauds. And we were moving to close them down.”

There was advance warning of the current collapse. Black says that the FBI blew the whistle; in September 2004, “there was an epidemic of mortgage fraud, that if it was allowed to continue it would produce a crisis at least as large as the Savings and Loan debacle.”

But after 9/11, “The Justice Department transfers 500 white-collar specialists in the FBI to national terrorism. Well, we can all understand that. But then, the Bush administration refused to replace the missing 500 agents.”

So today, despite a crisis a hundred times worse than the Savings and Loan scandal, “there are one-fifth as many FBI agents” assigned to bank fraud.

Cover-up

Treasury Secretary Timothy Geithner “is covering up,” Black said. “Just like Paulson did before him. Geithner is publicly saying that it’s going to take $2 trillion – a trillion is a thousand billion – $2 trillion taxpayer dollars to deal with this problem. But they’re allowing all the banks to report that they’re not only solvent, but fully capitalized. Both statements can’t be true. It can’t be that they need $2 trillion, because they have massive losses, and that they’re fine…

“They’re scared to death of a collapse. They’re afraid that if they admit the truth, that many of the large banks are insolvent, they think Americans are a bunch of cowards, and that we’ll run screaming to the exits… And it’s foolishness, all right?

“Now, it may be worse than that. You can impute more cynical motives. But I think they are sincerely just panicked about, ‘We just can’t let the big banks fail.’ That’s wrong.”

Black asked, “Why would we keep CEO’s and CFO’s and other senior officers that caused the problems? That’s nuts… We’re hiding the losses instead of trying to find out the real losses? Stop that… Because you need good information to make good decisions…

“Follow what works instead of what’s failed. Start appointing people who have records of success instead of records of failure… There are lots of things we can do. Even today, as late as it is. Even though we’ve had a terrible start to the [Obama] administration. They could change, and they could change within weeks.”   

He called for a 21st century version of the Pecora Commission, referring to hearings that sought the causes of the Great Depression, held during the 1930s by the U.S. Senate Committee on Banking and Currency.

Ferdinand Pecora was the committee’s chief counsel and interrogator, a Sicilian émigré who was a progressive devotee of trust busting Teddy Roosevelt and a former Manhattan assistant district attorney who successfully helped shut down more than a hundred Wall Street “bucket shops” selling bogus securities and commodity futures. He was relentless in his cross-examination of financial executives, including J.P. Morgan himself.

Pecora’s investigation uncovered a variety of Wall Street calumnies – among them Morgan’s “preferred list” of government and political insiders, including former President Coolidge and a Supreme Court justice, who were offered big discounts on stock deals. The hearings led to passage of the Securities Act of 1933 and the Securities Exchange Act of 1934.

In the preface to his 1939 memoir, Wall Street under Oath, Ferdinand Pecora told the story of his investigation and described an attitude amongst the Rich Uncle Pennybags of the financial world that will sound familiar to Bill Black and those who seek out the guilty today.

“That its leaders are eminently fitted to guide our nation, and that they would make a much better job of it than any other body of men, Wall Street does not for a moment doubt,” Pecora wrote. “Indeed, if you now hearken to the Oracles of The Street, you will hear now and then that the money-changers have been much maligned.

“You will be told that a whole group of high-minded men, innocent of social or economic wrongdoing, were expelled from the temple because of the excesses of a few. You will be assured that they had nothing to do with the misfortunes that overtook the country in 1929-1933; that they were simply scapegoats, sacrificed on the altar of unreasoning public opinion to satisfy the wrath of a howling mob….”   

According to Politico.com, at his March 27 White House meeting with the nation’s top bankers, President Obama heard similar arguments and interrupted, saying, “Be careful how you make those statements, gentlemen. The public isn’t buying that…. My administration is the only thing between you and the pitchforks.”   

Stand aside, Mr. President, and let us prod with our pitchforks to get at the facts.

Bill Moyers is managing editor and Michael Winship is senior writer of the weekly public affairs program Bill Moyers Journal, which airs Friday night on PBS.  Check local airtimes or comment at The Moyers Blog at www.pbs.org/moyers.

www.consortiumnews.com