Paulson suggests covered bonds

http://www.reuters.com/article/newsOne/idUSWEQ00007020080728
WASHINGTON (Reuters) - U.S. Treasury Secretary Henry Paulson said the nation's four biggest banks were ready to kick-start a market for covered bonds that could help significantly expand home mortgage financing.

"I believe covered bonds have the potential to increase mortgage financing, improve underwriting standards and strengthen U.S. financial institutions by providing a new funding source," Paulson said in prepared remarks for a press conference on Monday.

Covered bonds, issued by banks and secured by pools of assets like home loans, are widely used in Europe but have only become attractive in the United States since the segment of the mortgage securitization market driven by investment banks dried up last year amid a wave of foreclosures.

http://www.portfolio.com/views/blogs/market-movers/2008/07/08/what-is-a-covered-bond Covered Bonds Explained

http://en.wikipedia.org/wiki/Covered_bonds

http://europe.pimco.com/LeftNav/Bond+Basics/2006/Covered+Bond+Basics.htm Pimco explains covered bonds

http://www.iht.com/articles/2007/11/22/bloomberg/bxloan.php German banks agreed Thursday to suspend trading in pfandbrief mortgage bonds to "calm down" the market following a slump that has shut down trading in the securities, which are the biggest source of funds for home lenders in Europe.

The Association of German Pfandbrief Banks, an industry group that represents securities firms and borrowers in the $1.3 trillion German market, was following advice Wednesday from the European Covered Bond Council to withdraw from interbank trading until Nov. 26.

 

 

 

Cuil debuts

Ex-Google engineers debut 'Cuil' way to search www.cuil.com

By MICHAEL LIEDTKE – 4 hours ago

SAN FRANCISCO (AP) — Anna Patterson's last Internet search engine was so impressive that industry leader Google Inc. bought the technology in 2004 to upgrade its own system.

She believes her latest invention is even more valuable — only this time it's not for sale.

Patterson instead intends to upstage Google, which she quit in 2006 to develop a more comprehensive and efficient way to scour the Internet.

The end result is Cuil, pronounced "cool." Backed by $33 million in venture capital, the search engine plans to begin processing requests for the first time Monday.

Cuil had kept a low profile while Patterson, her husband, Tom Costello, and two other former Google engineers — Russell Power and Louis Monier — searched for better ways to search.

Now, it's boasting time.

For starters, Cuil's search index spans 120 billion Web pages.

Patterson believes that's at least three times the size of Google's index, although there is no way to know for certain. Google stopped publicly quantifying its index's breadth nearly three years ago when the catalog spanned 8.2 billion Web pages.

Cuil won't divulge the formula it has developed to cover a wider swath of the Web with far fewer computers than Google. And Google isn't ceding the point: Spokeswoman Katie Watson said her company still believes its index is the largest.

After getting inquiries about Cuil, Google asserted on its blog Friday that it regularly scans through 1 trillion unique Web links. But Google said it doesn't index them all because they either point to similar content or would diminish the quality of its search results in some other way. The posting didn't quantify the size of Google's index.

A search index's scope is important because information, pictures and content can't be found unless they're stored in a database. But Cuil believes it will outshine Google in several other ways, including its method for identifying and displaying pertinent results.

Rather than trying to mimic Google's method of ranking the quantity and quality of links to Web sites, Patterson says Cuil's technology drills into the actual content of a page. And Cuil's results will be presented in a more magazine-like format instead of just a vertical stack of Web links. Cuil's results are displayed with more photos spread horizontally across the page and include sidebars that can be clicked on to learn more about topics related to the original search request.

Finally, Cuil is hoping to attract traffic by promising not to retain information about its users' search histories or surfing patterns — something that Google does, much to the consternation of privacy watchdogs.

Cuil is just the latest in a long line of Google challengers.

The list includes swaggering startups like Teoma (whose technology became the backbone of Ask.com), Vivisimo, Snap, Mahalo and, most recently, Powerset, which was acquired by Microsoft Corp. this month.

Even after investing hundreds of millions of dollars on search, both Microsoft and Yahoo Inc. have been losing ground to Google. Through May, Google held a 62 percent share of the U.S. search market followed by Yahoo at 21 percent and Microsoft at 8.5 percent, according to comScore Inc.

Google has become so synonymous with Internet search that it may no longer matter how good Cuil or any other challenger is, said Gartner Inc. analyst Allen Weiner.

"Search has become as much about branding as anything else," Weiner said. "I doubt (Cuil) will be keeping anyone at Google awake at night."

Google welcomed Cuil to the fray with its usual mantra about its rivals. "Having great competitors is a huge benefit to us and everyone in the search space," Watson said. "It makes us all work harder, and at the end of the day our users benefit from that."

But this will be the first time that Google has battled a general-purpose search engine created by its own alumni. It probably won't be the last time, given that Google now has nearly 20,000 employees.

Patterson joined Google in 2004 after she built and sold Recall, a search index that probed old Web sites for the Internet Archive. She and Power worked on the same team at Google.

Although he also worked for Google for a short time, Monier is best known as the former chief technology officer of AltaVista, which was considered the best search engine before Google came along in 1998. Monier also helped build the search engine on eBay's online auction site.

The trio of former Googlers are teaming up with Patterson's husband, Costello, who built a once-promising search engine called Xift in the late 1990s. He later joined IBM Corp., where he worked on an "analytic engine" called WebFountain.

Costello's Irish heritage inspired Cuil's odd name. It was derived from a character named Finn McCuill in Celtic folklore.

Patterson enjoyed her time at Google, but became disenchanted with the company's approach to search. "Google has looked pretty much the same for 10 years now," she said, "and I can guarantee it will look the same a year from now."

www.cuil.com

More banks fail in Nevada

http://apnews.myway.com/article/20080726/D925G0B00.html CARSON CITY, Nev. (AP) - The 28 branches of 1st National Bank of Nevada and First Heritage Bank, operating in Nevada, Arizona and California, were closed Friday by federal regulators.

Bad news for banks

http://online.wsj.com/article/SB121672195606273245.html?mod=hps_us_whats_news Bank of America led the way with a 13.3% jump. On the year, the Dow is down 13%.

Financial stocks surged even after Wachovia and a number of regional banks posted bleak quarterly numbers. Wachovia shares soared 27.4%.

Mexico halts USD sale

http://www.reuters.com/article/bondsNews/idUSN2539033720080725 MEXICO CITY, July 25 (Reuters) - Mexico's central bank said on Friday it would suspend a daily sale of foreign reserves after the government bought $8 billion from the bank to cover foreign exchange requirements for the coming months.

Bankruptcies Soar for Small Biz

http://www.mcclatchydc.com/227/story/44717.html
WASHINGTON — Driven by a sour economy and skittish consumers, U.S. business bankruptcies saw their sharpest quarterly rise in two years, jumping 17 percent in the second quarter of 2008, according to an analysis by McClatchy.

Commercial filings for the first half of 2008 are up 45 percent from last year, as the national climate for commerce continues to deteriorate amid rising energy and food costs, mounting job losses, tighter credit and a reticence among consumers to part with discretionary income.

Congress Pursues $80 Oil With Trading Limits, Disclosure Rules

http://www.bloomberg.com/apps/news?pid=20601109&sid=aI3KfJ0v2akE&refer=home July 23 (Bloomberg) -- Congress may outlaw elements of oil futures trading that lawmakers found distorted demand and contributed to the 69 percent surge in prices in the past year.

U.S. legislators are considering limits on the number of oil contracts an investor can hold and may increase disclosure requirements. Speculators such as Goldman Sachs Group Inc. use the practices to bet on price swings, which may drive up prices, though they have no intention of taking delivery of underlying goods, lawmakers say.

http://www.bloomberg.com/apps/news?pid=20601109&sid=aMz0dl3IdwjU&refer=home July 23 (Bloomberg) -- Fannie Mae, the largest U.S. mortgage finance company, couldn't find a buyer who would pay $6,900 for the three-bedroom house at 1916 Prospect St. in Flint, Michigan. So broker Raymond Megie, who is handling the foreclosure sale, advised cutting the price to $5,000.

Megie still couldn't sell it. ``There's oversupply,'' he said. The home sold in 2005 for $110,000.

Assured Guaranty Plunges, Bond Risk Soars on Review

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aMef1JhNKKcQ July 22 (Bloomberg) -- Assured Guaranty Ltd., one of two bond insurers with a AAA ranking from the three major ratings companies, fell as much as 58 percent in New York trading after Moody's Investors Service said it may downgrade the firm. The cost to protect against a default by Assured Guaranty soared to a record. Credit-default swaps on Financial Security Assurance Holdings Ltd., the unit of Europe's Dexia SA that was also placed under scrutiny by Moody's, also rose to a record.

American Express Profit Falls on Higher Defaults

http://money.cnn.com/2008/07/21/real_estate/mortgage_delinquencies.ap/index.htm?postversion=2008072111 Delinquencies among commercial mortgages rose slightly in June due to increases in delinquencies among office and retail sectors, credit ratings agency Fitch Ratings said Monday.

http://www.bloomberg.com/apps/news?pid=20601087&sid=adfHH7wZsJjY&refer=home

American Express Profit Falls on Higher Defaults (Update2)

By Hugh Son

July 21 (Bloomberg) -- American Express Co., the biggest U.S. credit-card company by purchases, withdrew its 2008 earnings forecast after second-quarter profit fell 37 percent on worse-than-expected consumer defaults. The shares slumped 11 percent in extended trading.

Profit from continuing operations declined to $655 million, or 56 cents a share, from $1.04 billion, or 86 cents a year earlier, the company said today in a statement. The average estimate of 17 analysts surveyed by Bloomberg was 82 cents. American Express said it added $600 million before taxes to reserves for U.S. loan losses.

``By almost any measure, the U.S. economy and business environment are much weaker than the assumptions'' the company had in January, Chief Executive Officer Kenneth Chenault said today in a conference call. ``Unemployment rates took the largest jump in over twenty years. Home prices declined at the fastest rate in decades and consumer confidence is at one of its all-time low points.''

The U.S. economic slowdown worsened in June, affecting even American Express's wealthier cardholders with high credit scores, Chenault, 57, said in the call. Late and uncollectible loans were higher than expectations in the quarter and will rise as the year progresses, Chenault said. The U.S. lost 62,000 jobs in June, the sixth straight period of shrinking payrolls.

American Express fell $4.55 to $36.40 in trading after the close of regular U.S. markets at 5:58 p.m. The company's results sparked a 0.9 percent decline in Standard & Poor's 500 Index futures contracts expiring in September.

Previous Forecast

``They're like any other consumer lender right now, caught behind the 8-ball,'' Craig Maurer, analyst at New York-based Calyon Securities who rates the company ``buy,'' said in a Bloomberg Television interview. ``I don't think the environment's going to be helpful to the company over the next nine to 12 months.''

American Express is ``no longer tracking'' to a prior forecast for 4 percent to 6 percent earnings per share growth for this year, he said. The company won't meet longer-term targets until the U.S. economy improves, Chenault said.

Profit in the company's U.S. card business dropped 96 percent to $21 million from $580 million a year earlier as provisions for losses more than doubled to $1.5 billion from $640 million. Uncollectible debt in the unit rose to 5.3 percent of loans from 2.9 percent a year earlier.

``We are seeing very affluent people who have had historically very, very strong spending history with us cutting back,'' Chenault said.

Discontinued operations related to American Express Bank Ltd., which the lender sold last year, resulted in a loss of $2 million, compared with income of $17 million a year ago.

Negative Outlook

American Express, Capital One Financial Corp. and Discover Financial Services shares have dropped by more than a third in the past year as consumers have a harder time repaying debt of all kinds.

Moody's Investors Service has a negative outlook on credit- card lenders and said defaults ``will most certainly'' rise this year. Stressed consumers are tapping plastic as access to home- equity loans falls off, New York-based Moody's said in a February report.

American Express's net income declined to $653 million, or 56 cents a share, from $1.06 billion, or 88 cents a year earlier, the New York-based company said.

Consumer prices surged 1.1 percent in June on higher food and fuel prices, more than analysts had expected, the Labor Department said this month. The cost of living rose 5 percent in the year leading to June, the biggest increase since 1991.

Rising Defaults

Delinquent credit-card accounts rose more than a full percentage point from a year earlier to 3.99 percent in May, according to Bloomberg data.

Rising defaults hurt second-quarter profit at Capital One, where earnings fell 40 percent to $452.9 million. The McLean, Virginia-based company said it expected as much as $7 billion in soured loans in the next year. Discover, based in Riverwoods, Illinois, said last month that profit from continuing operations in the quarter ended May 31 fell 19 percent to $202 million.

Some of American Express's rising loan losses will be cushioned by about $4 billion in settlement payments from Visa Inc. and MasterCard Inc. American Express said last month it settled an antitrust suit against MasterCard for $1.8 billion. Visa and bank partners settled in November for $2.25 billion.

American Express was ranked first by the total value of purchases and cash advances to U.S. cardholders in the first half of 2007, according to the Carpinteria, California-based Nilson Report, a trade publication. JPMorgan Chase & Co. and Bank of America Corp. are ranked second- and third-largest.

Billionaire Warren Buffett's Berkshire Hathaway Inc. owns the largest American Express stake with 151.6 million shares, 13 percent of outstanding stock at year-end, according to Bloomberg data.

To contact the reporter on this story: Hugh Son in New York at hson1@bloomberg.net

Last Updated: July 21, 2008 18:52 EDT

The global economy is at the point of maximum danger

It feels like the summer of 1931. The world's two biggest financial institutions have had a heart attack. The global currency system is breaking down. The policy doctrines that got us into this mess are bankrupt. No world leader seems able to discern the problem, let alone forge a solution.

The International Monetary Fund has abdicated into schizophrenia. It has upgraded its 2008 world forecast from 3.7pc to 4.1pc growth, whilst warning of a "chance of a global recession". Plainly, the IMF cannot or will not offer any useful insights.

Its "mean-reversion" model misses the entire point of this crisis, which is that central banks have pushed debt to fatal levels by holding interest too low for a generation, and now the chickens have come home to roost. True "mean-reversion" would imply debt deflation on such a scale that would, if abrupt, threaten democracy.

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/07/21/ccview121.xml

Fed Panics

In a dizzying day, investors grappled with a spate of mostly bleak economic developments, including pessimistic testimony from Ben S. Bernanke, the Federal Reserve chairman, who warned that significant economic risks remained and that inflation would accelerate.... http://www.nytimes.com/2008/07/16/business/worldbusiness/16markets.html?em&ex=1216267200&en=cecc9c6e9874f84c&ei=5087%0A

In his zeal to crack down on false market rumors, here are a couple of places for Securities and Exchange Commission Chairman Christopher Cox to start looking: the U.S. Treasury Department and the Office of Federal Housing Enterprise Oversight.... http://www.bloomberg.com/apps/news?pid=20601039&sid=aODKrCjnCK0Q&refer=home

The US Treasury may have just days to act before foreign patience snaps, writes Ambrose Evans-Pritchard

Merrill Lynch has warned that the United States could face a foreign "financing crisis" within months as the full consequences of the Fannie Mae and Freddie Mac mortgage debacle spread through the world.... http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/07/16/ccusdebt116.xml

Run on Wall St. Banks as White House begins to purchase equity

Feds spell out FREDDIE-FANNIE backstop plan...
White House Will Ask for Authority to Buy Stock...

Not expected to help more companies...

Government as the Big Lender...

'Unmitigated Disaster'...
CITIGROUP's $1.1 Trillion of Mysterious Assets Shadows Earnings...

Down and out in Vegas

http://www.independent.co.uk/news/world/americas/down-and-out-in-las-vegas-860513.html

Financial losses can top 1.6 Trillion http://www.earthtimes.org/articles/show/217143,financial-market-losses-could-top-1600-billion-dollars-report.html

Kunstler’s recent comments on $500 barrel oil : Penetration

Penetration

My new novel of the post-oil future, World Made By Hand, is available at all booksellers.
____________________________________

     The telling moment last week was Robert Hirsch's appearance on the CNBC morning "Squawkbox" financial show in which he proposed the probability of $500-a-barrel oil within "a three-to-five-year time-frame." Squawkhead Becky Quick was clearly nonplussed by the stolid Mr. Hirsch, author of a (then)-startling 2005 US Dept of Energy report (since referred to as the Hirsch Report and buried by the Secretary of Energy) that warned of dire effects on the American way of life as the Peak Oil predicament gained traction.
     Perhaps more reality-challenged was the uber-idiot Larry Kudlow on CNBC's night-time money show, who kept repeating the mantra "drill, drill drill" when presented with signs that something other than "oil speculators" was driving up the price and creating global scarcity. These idiots always return to the shibboleth that "there's plenty of oil out there." What they don't get is that even while the world is enjoying the all time peak of production (somewhere around 85-million barrels-a-day), that same world is demanding at least 86-million barrels -- so even though there's more oil than ever, there's not enough. And the gap is only bound to get bigger.
     The difference between what's available and what's demanded is being felt by poor countries and poor people in richer countries. Third world nations lacking their own oil are simply dropping out of the bidding, and the lower classes in the US are having to choose between buying gasoline and velveeta. The floods in the corn belt will surely aggravate the problem here in the USA. Lunch breaks may soon be a thing of the past for WalMart Associates. Maybe they'll just play video games on their cell phones in the parking lot to allay their hunger.
      Meanwhile the notion that drilling drilling drilling offshore the US and up in Alaska will solve this problem shows how incredibly misinformed the news media itself is. The probability is next to zero that anything found off California or Florida would even fractionally offset ongoing depletion in the handful of old, established super-giant fields that the world gets most of it oil from. By the way, I support the idea of drilling in Alaska's ANWAR reserve because I think it can be done in a sanitary way and, more importantly, it would get the idiot cornucopian right-wing assholes to finally shut up about it -- before they discover that it contains less than half a year's oil supply for the US at current rates of use.
      Also on the "meanwhile" front, the OPEC meeting Sunday at Jeddah, Saudi Arabia, was simply a desperate dodge, a mummery, a kabuki theater of powerlessness. Once again, the Saudis are pretending that they can increase their production -- in essence, pretending that they actually have some power in the game. As Jeffrey Brown has pointed out on THEOILDRUM.COM, the Kingdom will still show a steady three-year decline over their 2005 production rates even if they're able to goose current output as much as they say they will in 2008.
    All this reality content is beginning to penetrate the collective consciousness in the US, but the result is mostly panic or paralyzed disbelief rather than any set of intelligent responses. For example, I got a call from one of Katie Couric's producers at CBS news on Friday. Somehow, they had noticed that oil prices were becoming a problem in America. They called me for a comment. The scary part was they were clearly treating the issue as a "lifestyle" story. Did I think more suburbanites would move downtown? And would that be a good thing...?  They have no fucking clue how broadly and deeply these dynamics will affect the life of this nation, or even our ability to remain a nation. Also, by the way, this demonstrates how the nightly network news has become the equivalent of the old "women's pages" of the daily newspapers.
     The parallel universe of the financial world is showing the strain of all this oil anxiety -- since, after all, oil is the primary resource for running industrial economies. It has been some time since the banker boyz embarked on their fateful venture to alchemize a new mutant strain of investment instruments to replace the tired old stocks and bonds which represented the hope for production of surplus wealth from industrial activity -- now mooted by the oil story. The idea of the mutant investments was to produce wealth with no real wealth-producing activity. This old trick, formerly known as Ponzi finance or a "pyramid scheme," was naturally self-limiting, and in a way that would prove ultimately very destructive to society as a whole. In fact, it has fatally undermined the legitimacy of the entire financial system, and a state of comprehensive nausea has set in as we all witness the dissolving foundation of the US economy under a tsunami of debt that will never be repaid.
      The markets seem to know this, the more vocal playerz are squawking more about it, some banks are issuing frightening "duck-and-cover" warnings, using horror movie phrases such as "...worse than the Great Depression of the 1930s..." and the general public is sinking into the quicksand of bankruptcy, repossession, and ruin. I haven't been to any lawn parties in the Hamptons this year, but I imagine that eczematous anxiety rashes are competing with suntans and Versace separates out there this year. Really, we're right back where we were last year about this time, only worse. Oil has doubled, food is outasight, the levees have broken, the people who run things are shitting their pants, and everybody is waiting for a whole lotta other shoes to drop.

http://jameshowardkunstler.typepad.com/clusterfuck_nation/

IMF begins general examination of US financial system

http://business.theage.com.au/imf-finally-knocks-on-uncle-sams-door-20080629-2yui.html?page=fullpage#contentSwap2

Der Spiegel wrote that the IMF had "informed" Federal Reserve chairman Ben Bernanke of plans that would have been unheard of in the past: a general examination of the US financial system. The IMF's board of directors has ruled that a so-called Financial Sector Assessment Program is to be carried out in the US.

This, Der Spiegel wrote, "is nothing less than an X-ray of the entire US financial system", adding that "no Fed chief in US history has been forced to submit to the kind of humiliation that Ben Bernanke is facing".

The fact that the IMF is knocking on the very doors of its parents and waving legal papers about who lost the house, the car and the kids will, if the past is anything to go by, be buried in the US by pom-pom waving on CNBC telling all what a great time it is to buy.

But the news that the US Fed has now lost its last vestige of credibility did not end with the German report.

The Telegraph from London weighed in, following the Royal Bank of Scotland's statement last week (also lost on the US public) that it was time to head for the crags, and reported Barclays Capital's closely watched Global Outlook analysis that said US headline inflation would hit 5.5% by August and the Fed would have to raise interest rates six times by the end of next year to prevent a wage spiral.

If the Fed hesitates, the bond markets will take matters into their own hands. "This is the first test for central banks in 30 years and they have fluffed it," the report found. "They have zero credibility, and the Fed is negative if that's possible. It has lost all credibility."

http://video.google.com/videoplay?docid=8098419943467199200&q=stock+market+will+colapse&ei=p-NnSMv7CZqarQLl74C0CA Schiff says USD INX 50