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Tuesday, November 1, 2011

Prophecy of eclipse to the Earth

Home prices heading for triple-dip

NEW YORK (CNNMoney) -- The besieged housing market has even further to fall before home prices really hit rock bottom.

According to Fiserv (FISV), a financial analytics company, home values are expected to fall another 3.6% by next June, pushing them to a new low of 35% below the peak reached in early 2006 and marking a triple dip in prices.
Several factors will be working against the housing market in the upcoming months, including an increase in foreclosure activity and sustained high unemployment,explained David Stiff, Fiserv's chief economist.

Should home values meet Fiserv's expectations, it would make it the third (and lowest) trough for home prices since the housing bubble burst.

The first post-bubble bottom was hit in 2009, when prices fell to 31% below peak. The First-Time Homebuyer Credit helped perk prices up by mid-2010, but by the time the credit expired, prices fell again.

In the second dip, which was reached last winter, prices were down 33%before staging a mild rally that was artificially spurred as banks slowed the processing of foreclosures following the robo-signing scandal, which found that loan servicers were rapidly signing foreclosures without properly vetting them.

Now that the scandal is mostly resolved, lenders are speeding more cases through the foreclosure pipeline and back onto the market, weighing on home prices even further.

Earlier this month, RealtyTrac reported the first quarterly increase inforeclosure filings in three quarters. Even more discouraging: new default notices were up 14%.

Home prices: Check your local real estate market forecast

There's also a "shadow inventory" of homes in foreclosure that have yet to go back onto the market.

The specter that those foreclosed homes could flood the market at any time and drive prices significantly lower is a huge concern, said Mark Dotzour, an economist for Texas A&M University. "That's the elephant in the room," he said, noting that there are 6 million home currently in shadow inventory.
Biggest losers

Many of the regions that will be hardest hit were already beaten up during the previous two dips.

Naples, Fla., for example, is expected to take the biggest hit of any metro area, a price drop of another 18.9% by the end of next June, according to Fiserv. Home prices in the area have already fallen 61% from the peak.

Other cities expected to be hit hard include the not-so-lucky Las Vegas, which is expected to see home prices fall another 15.9% for a total loss of 66%; Riverside, Calif., is projected to fall another 14.8% (for a total decline of 61%); Miami is expected to decline by 13.2% (total loss: 57%), and Salinas, Calif. could drop by another 13% (for a total loss of 66%).


Israel warns West: Window of opportunity to thwart Iran nuclear program is closing

Benjamin Netanyahu  - Tomer Appelbaum - October 31 2011

Israeli ambassadors in Western countries have been instructed to inform high-ranking politicians that the window of opportunity for imposing effective sanctions on Iran is closing, as part of a renewed diplomatic offensive aimed at using new sanctions to stop Tehran from developing a nuclear bomb.

The Foreign Ministry campaign, which began in mid-September, seeks to convince the United States, European Union member states and other Western countries to impose the sanctions immediately because Iran is continuing to develop its nuclear program.

"The significant progress that has taken place on all the components of the Iranian nuclear program should be emphasized, especially uranium enrichment," said a classified cable sent to Israeli ambassadors in several dozen countries. "The Iranian program is military, and in light of International Atomic Energy Agency reports, there is an increased fear that the Iranians are developing a nuclear warhead for ballistic missiles."

The ambassadors were asked to tell the equivalent of the foreign ministries and prime minister's offices in the countries where they are serving that there isn't much time left to stop the nuclear program through diplomatic means.

The sanctions campaign comes ahead of the planned November 8 release of an IAEA report, which is expected to reveal new details about the scope of Iran's nuclear program. The IAEA is reportedly preparing to bring proof that Iran is attempting to build a nuclear bomb.

Israel and the U.S. are planning to use the report in a worldwide campaign to push for isolating Iran. Sanctions suggested by Israeli representatives in recent talks with the U.S., France, Britain and Germany include banning contact with Iran's central bank and banning the purchase of Iranian crude oil. Israeli officials also suggested imposing additional sanctions on Iranian airlines and ships.

Israeli officials noticed last month that international interest in stopping Iran was flagging, said a senior Foreign Ministry official. "International and Israeli attention was focused on the Arab Spring, on flotillas to Gaza and on the Palestinian move in the UN," he said.

Foreign Ministry officials were concerned that the reduced attention Iran was receiving made its pursuit of a nuclear program seem less urgent.

"There's a feeling that even though the sanctions are harming Iran, the technological timetable is faster than the diplomatic timetable," said another Foreign Ministry official. "Now is the time to intensify the steps against Iran. The pressure influences Iran, and the present circumstances require us to increase that pressure. The Iranians are preparing a technological infrastructure that will enable them to have a breakthrough as they head for nuclear weapons within a short time span. If Iran passes this technological threshold, the ramifications will be severe - especially in light of the weakening of regional stability following the Arab Spring."

A few days ago, the ambassadors received another cable, directing them to highlight the alleged Iranian plot to assassinate the Saudi ambassador to Washington. "You should emphasize that this incident indicates the need to isolate Iran," the cable said.

The Israeli ambassadors were also informed that Iran is boosting arms smuggling to Syria, Hamas, Islamic Jihad and Hezbollah.

According to Israeli intelligence information, Iran has been carrying out low-level uranium enrichment at a stable pace, despite the existing sanctions. Iranian officials have been outspoken about their interest in tripling the pace of producing uranium enriched to 20 percent, moving the centrifuges from a non-reinforced facility in the central Iranian city of Natanz to an underground enrichment facility in Qom. At the same time, Iran is continuing to build a heavy water reactor in Arak, which would enable them to produce the plutonium needed for a nuclear bomb.

One of the Foreign Ministry officials said Israel wants Western countries to impose the sanctions on their own because domestic politics and leadership changeovers in Russia and China in 2012, along with the U.S. and French presidential elections, will make it impossible to secure another UN Security Council resolution approving sanctions.

Although Israel's latest push for sanctions is new, diplomatic efforts to thwart the Iranian nuclear program are ongoing, one of the Foreign Ministry officials said. An interministerial task force headed by Yaakov Amidror, the national security adviser, meets every few weeks to coordinate the diplomatic efforts. Other members of the task force include representatives of the foreign and defense ministries, the IDF and the Mossad.


US Treasury Estimates It Will Have to Borrow More

The U.S. Treasury Department said on Monday it will sharply increase its estimated borrowing over the next two quarters due to expected lower receipts and higher outlays.
Treasury Building
Treasury Building

Treasury said it expects to issue $305 billion in net marketable debt for the October-December quarter, an increase of about $21 billion from estimates issued on Aug. 1.
Treasury said it expected to issue $541 billion in net marketable debt securities in the January-March 2012 quarter, marking the second-highest quarter on record.
The highest was the October-December quarter of 2008, when the Treasury Department sold $569 billion in debt to fund bailouts of the financial sector and automakers during the depths of the financial crisis.

Occupy Denver...cops armed to teeth

Greece throws euro bailout into fresh crisis

The Greek prime minister, George Papandreou, stunned Europe's leaders on Monday after he proposed that his country should hold a referendum on the landmark European debt deal reached last week.

A Greek vote against the deal could scupper weeks of negotiations over how to rescue the country's economy and prevent a debt crisis to match the Lehman Brothers crash of three years ago.

Stock markets, which have rallied in recent weeks after a sustainable deal looked more likely, reacted immediately to the news with a sell-off of shares. In New York, the Dow Jones index of leading companies fell sharply as Papandreou's plan was revealed. The euro fell 2% against the dollar and the US Volatility index – the so-called "index of fear" – climbed 22%, its biggest one-day rise since mid-August.

Papandreou gave no date or other details of the proposed referendum, though the interior minister, Haris Kastinidis, said it would most likely be in January.

Last week, under intense pressure from global leaders fearful of the repercussions of Europe's mounting debt crisis, eurozone members agreed to cut Athens's debts by 50% and provide €130bn (£112bn) in additional rescue loans to supplement a bailout fund put together with the International Monetary Fund last year.

Greeks have already registered their dislike for the package. Polling has shown that 60% thought it was bad for the country, making the referendum a high stakes gamble for the socialist government.

In most polls, voters have voiced their support for remaining part of the euro, but have increasingly vented their frustration at austerity measures. Cuts in the bloated public sector, reductions in pay and pensions, new taxes and privatisations of airports, state lotteries, the Greek water supply and the postal service are part of the deal agreed by Papandreou's government.

Unveiling his referendum plan, Papandreou said: "Citizens are the source of our strength and citizens will be called on to say 'yes' or 'no' to the agreement. It is not for others to decide but the Greek people to decide … we have faith in the people. We believe in democratic participation. We are not afraid of it.

"The people will be asked whether they want to adopt [the deal] or reject [the deal]. This vote of confidence will be a foundation stone on which we will build a new structure, a new Greece."

The Greek finance minister, Evangelos Venizelos, said the popular vote – the second to be held since democracy was restored to the country after the collapse of military rule in 1974 – would ultimately boil down to two choices. "Do Greeks want to remain in Europe, with the euro, in a country that belongs to the developed world, or do they want to return to the 60s? Do they think it is good to owe €100bn to the banks or do they not think it is good to live with such debt?"

Papandreou, addressing socialist members of parliament, also said he would seek a vote of confidence. His government has seen its majority reduced to three seats and its approval rating plummet amid harsh austerity measures that are likely to send the country into a fourth year of recession in 2012.

Greek opposition parties protested that the referendum posed huge risks: "Mr Papandreou is dangerous, he tosses Greece's EU membership like a coin in the air," said a spokesman for the main conservative opposition New Democracy party. "He cannot govern, and instead of withdrawing honourably, he dynamites everything."

Chris Williamson, of the analysts Markit, said: "A no vote would be a nightmare for the eurozone and in the meantime make everyone very nervous."

Raoul Ruparel, head of economic research at the anti-federalist thinktank Open Europe, said: "If the Greek public vote no in the referendum Greece could be left with no funds and no government, teetering on the edge of a disorderly default and a disorderly exit from the eurozone. It is only fair that the Greek people have their say, but the eurozone must begin preparing for a no vote and specifically how to handle a rudderless and broke Greece, which would probably include plans for allowing it to exit the euro."

Sony Kapoor, managing director of Re-Define, an economic thinktank, said: "With the scale of adjustment being asked of Greek citizens, a referendum would be good for democracy and legitimacy, but it's very hard to see how it can possibly be won."

During negotiations in Brussels last week between Germany, France and the other 15 eurozone members, workers across Greece held a general strike and hurled missiles at police.

European leaders had hoped to take an agreed deal to the G20 meeting in Cannes on Thursday. World leaders will gather there to discuss how to increase a global backstop fund to supplement the €1tn package to support Greece, Portugal and Ireland and insure against default by the other two most vulnerable eurozone countries, Italy and Spain.

Barack Obama has described the formation of the €1tn European Financial Stability Facility as a good start to resolving the debt problems that weigh on most eurozone members. The Chinese president, Hu Jintao, has expressed concern that the European deal remains fragile, though he is considering a request by Brussels to boost the EFSF with extra funds from Beijing.

Like the UK, Canada and most developing countries, the US and China have signalled their willingness to boost the International Monetary Fund's resources, but only in the event of a secure deal covering all 17 members of the euro. The prospect of a Greek referendum is likely to undermine efforts to forge an agreement.

Europe's creditors were already jittery following concerns that Silvio Berlusconi's government was unable to push through austerity measures demanded by Brussels. The Italian premier came under increased pressure to resign after the boss of carmaker Ferrari said he had lost the ability to push through measures needed to reduce budget overspends. Rome's cost of borrowing again jumped above 6%, which analysts regard as unaffordable for a country that has been growing at less than 1% for a decade and shows few signs of recovering in 2012. Italy has already borrowed heavily from the European Central Bank, after it became too expensive to borrow from foreign investors.

The Guardian

New recession 'will lead to civil unrest worldwide'

Cameron Clegg

The grim warning from the International Labour Organisation came as leaders of the G20 rich nations prepared to meet for a crisis summit in Cannes this week.

"We have reached the moment of truth. We have a brief window of opportunity to avoid a major double-dip in employment," said Raymond Torres, director of the ILO's International Institute for Labour Studies.

In 45 out of 118 countries examined, the risk of social unrest is rising, according to the World of Work Report 2011.

It will take at least five years for employment in advanced economies to return to pre-crisis levels, it added.

Fears of another recession grew today as a leading think tank slashed its eurozone growth forecast. The OECD predicted that the single currency area will almost come to a halt next year, with growth of 0.3 per cent. A slowdown would hit Britain's economic prospects.

The latest GDP figures for the UK, to be published tomorrow, are also expected to be grim. Labour leader Ed Miliband today argued that the UK was facing a "perfect storm" of rising unemployment and inflation, falling living standards and inequality.

But David Cameron warned against politicians talking down the economy and pledged an "all-out mission" to kick-start infrastructure projects.
The OECD called for bold action on the economy as it was just as "imperative" as that agreed at the G20 summit in London in 2008 which "avoided a second Great Depression".

It cut its GDP growth prediction for the eurozone next year to 0.3 per cent, compared with two per cent made in May, and reduced its prediction for next year from two per cent to 1.6.

The OECD also warned that some eurozone countries could see contractions of up to five per cent by the first half of 2013 if EU leaders fail to restore confidence and the debt crisis worsens.

The forecast for America's economic growth next year was also cut from 3.1 per cent to 1.8 per cent.

OECD secretary general Angel Gurria warned the slowdown would hit Britain. He backed the "strong message" sent by Chancellor George Osborne to the markets by sticking to his deficit cutting plans but hinted he could tinker with them to boost growth.

The Prime Minister said he had given the go-ahead for two power plants in the north of England that will create 1,000 construction jobs

London Evening Standard

Be Honest – The European Debt Deal Was Really A Greek Debt Default

Once the euphoria of the initial announcement faded and as people have begun to closely examine the details of the European debt deal, they have started to realize that this "debt deal" is really just a "managed" Greek debt default.  Let's be honest - this deal is not going to solve anything.  All it does is buy Greece a few months.  Meanwhile, it is going to make the financial collapse of other nations in Europe even more likely.  Anyone that believes that the financial situation in Europe is better now than it was last week simply does not understand what is going on.  Bond yields are going to go through the roof and investors are going to start to panic.  The European Central Bank is going to have an extremely difficult time trying to keep a lid on this thing.  Instead of being a solution, the European debt deal has brought us several steps closer to a complete financial meltdown in Europe.
The big message that Europe is sending to investors is that when individual nations get into debt trouble they will be allowed to default and investors will be forced to take huge haircuts.
As this reality starts to dawn on investors, they are going to start demanding much higher returns on European bonds.
In fact, we are already starting to see this happen.
The yield on two year Spanish bonds increased by more than 6 percenttoday.
The yield on two year Italian bonds increased by more than 7 percent today.
So what are nations such as Italy, Spain, Portugal and Ireland going to do when it costs them much more to borrow money?
The finances of those nations could go from bad to worse very, very quickly.
When that happens, who will be the next to come asking for a haircut?
After all, if Greece was able to get a 50% haircut out of private investors, then why shouldn't Italy or Spain or Portugal ask for one as well?
According to Reuters, German Chancellor Angela Merkel is already trying to warn other members of the EU not to ask for a haircut....
Chancellor Angela Merkel said on Friday it was important to prevent others from seeking debt reductions after European Union leaders struck a deal with private banks to accept a nominal 50 percent cut on their Greek government debt holdings.
"In Europe it must be prevented that others come seeking a haircut," she said.
But investors are not stupid.  Greece was allowed to default.  If Italy or Spain or Portugal gets into serious trouble it is likely that they will be allowed to default too.
Investors like to feel safe.  They want to feel as though their investments are secure.  This Greek debt deal is a huge red flag which signals to global financial markets that there is no longer safety in European bonds.
So what is coming next?
Hold on to your seatbelts, because things are about to get interesting.
Around the globe, a lot of analysts are realizing that this European debt deal was not good news at all.  The following is a sampling of comments from prominent voices in the financial community....
*Economist Sony Kapoor: "The fact that a deal has been agreed, any deal, impresses people. Until they start de-constructing it and parts start unravelling."
*Economist Ken Rogoff: "It feels at its root to me like more of the same, where they’ve figured how to buy a couple of months"
*Neil MacKinnon of VTB Capital: "The best we can say is that the EU have engineered a temporary reprieve"
First off, let’s call this for what it is: a default on the part of Greece. Moreover it’s a default that isn’t big enough as a 50% haircut on private debt holders only lowers Greece’s total debt level by 22% or so.
Secondly, even after the haircut, Greece still has Debt to GDP levels north of 130%. And it’s expected to bring these levels to 120% by 2020.
And the IMF is giving Greece another $137 billion in loans.
So… Greece defaults… but gets $137 billion in new money (roughly what the default will wipe out) and is expected to still be insolvent in 2020.
*Max Keiser: "There will be another bailout required within six months - I guarantee it."
The people that are really getting messed over by this deal are the private investors in Greek debt.  Not only are they being forced to take a brutal 50% haircut, they are also being told that their credit default swaps are not going to pay out since this is a "voluntary" haircut.
This is completely and totally ridiculous as an article posted on Finance Addictpointed out...
We now know that private holders of Greek bonds will be “invited” (seriously–this was the word used in the EU summit statement) to take a write-down of 50%–halving the face value of the estimated $224 billion in bonds that they hold. This will help bring the Greek debt-to-GDP ratio down from 186% in 2013 to 120% by 2020. The big question–apart from how many investors they will get to go along with this, given that they couldn’t reach their target of 90% investor participation when the write-down was only going to be 21%–is whether this will trigger a CDS pay-out.
That this is even up for discussion is mind-boggling. These credit default swaps are meant to be an insurance policy in case Greece doesn’t pay the agreed upon interest and return the full principal within the agreed timeframe. If they don’t pay out when bondholders are taking a 50% hit then what’s the point?
European politicians may believe that they have "solved" something, but the truth is that what they have really done is they have pulled the rug out from under the European financial system.
Faith in European debt is going to rapidly disappear and the euro is likely to fall like a rock in the months ahead.
The financial crisis in Europe is just getting started.  2012 looks like it is going to be an extremely painful year.
Let us hope for the best, but let us also prepare for the worst.

Economic Collapse

Nearly £30BILLION was wiped from the value of Britain's biggest companies in an HOUR

NEARLY £30BILLION was wiped from the value of Britain's biggest companies in an HOUR this morning.

Greece's shock decision to hold a referendum on the eurozone's rescue package sent shockwaves through the City.

Experts fear a "no" vote will trigger a full scale default by the country and see it booted out of the Euro.

By 9am the FTSE 100 was down 124.39 at 5418.83 after a £41billion plunge yesterday.

Today's grim start came as it was announced that the UK economy grew by 0.5 per cent between July and September, compared with 0.1 per cent growth in the previous quarter.

And it followed 24 hours of unprecedented gloom yesterday as eurozone growth forecasts were slashed and Greece announced its plans to vote on the EU rescue package.

Greek Prime Minister George Papandreou said voters will be asked if they approve plans to cut the nation's debt in a high risk move that could sink the whole delicate debt crisis deal.

And he will call a vote of no-confidence in his struggling Socialist government, which has seen its ratings plummet and parliamentary majority cut.

The bailout package - thrashed out by eurozone chiefs last week will mean a 50 per cent "haircut" for private banks and investors holding Greek debt.

In exchange, Greece will get a new 100billion euro loan (140bn US dollars).

Amid massive anti-cuts protests across Greece, Mr Papandreou said: "We trust citizens, we believe in their judgment, we believe in their decision."

Nearly 60 per cent of Greeks view the EU bailout package as negative, a poll found on Saturday.

Foreign Secretary William Hague said: "Every country has to have its own domestic political approach to these problems.

"Clearly the Greek government want to show there is support in their country for the action they are taking - but that is a matter for the Greeks."

George Osborne ... cuts hailedFears of a devastating global slump soared yesterday as a think tank warned debt-ridden Europe will grind to a HALT next year.

Growth forecasts for the eurozone in 2012 were slashed to a mere 0.3 per cent from the two per cent expected in May.

Americans ‘Hooked on Government’ as Record Number Get Benefits

Oct. 28 (Bloomberg) -- Political dysfunction is often blamed for Congress’s inability to curb the U.S. budget deficit. An even bigger obstacle may be the American public.

A record 49 percent of Americans live in a household where someone receives at least one type of government benefit, according to the U.S. Census Bureau. And 63 percent of all federal spending this year will consist of checks written to individuals for which the government receives currently no services, the White House budget office estimates. That’s up from 46 percent in 1975 and 18 percent in 1940.

Those figures will climb in coming years. The 75 million baby boomers have only begun their long march into retirement, while President Barack Obama’s health-care overhaul will extend insurance coverage to more than 30 million additional people.

“The more households that are benefiting from the programs, the more difficult it is to rein in their costs,” said Bob Bixby, head of the Concord Coalition, an Arlington, Virginia- based group that promotes balanced budgets. “It’s a troubling phenomenon” and “it explains why it’s politically difficult to deal with these things.”

The increasing reliance on the federal safety net comes as a congressional supercommittee -- charged with coming up with a plan by Thanksgiving to find $1.5 trillion in savings in the U.S. budget -- faces mounting pressure to pare back spending. If the panel fails to meet its goal, $1.2 trillion in across-the-board domestic and defense spending cuts will be triggered.

It’s the Economy

Senator Jon Kyl, an Arizona Republican who sits on the 12- member supercommittee, said the swelling number of beneficiaries is “very distressing” because it means much of the population is “hooked on government” and will oppose any cuts.

The census figure showing 49 percent of Americans, or about 147 million people, live in households where someone gets a federal benefit, is from the first quarter of 2010, the most recent numbers available, according to the bureau.

A confluence of elements is helping drive up the number of beneficiaries. The biggest is the economy. With the unemployment rate stuck at about 9 percent for 30 consecutive months, demand for unemployment benefits, food stamps and Medicaid has soared.

The number of Americans receiving food stamps alone is up 72 percent over the past five years, to a record 45.3 million. Their annual cost, projected this year to reach $80 billion, tops the yearly budgets of most federal agencies.

Another cost-driver is the wars in Iraq and Afghanistan. Even with the Iraq conflict winding down -- Obama said last week all U.S. troops will be home by the end of the year -- the more than 2 million Americans who have served in one of the theaters have begun claiming promised health-care and education benefits.

Good, Bad News

Those medical bills could reach $55 billion over the next decade, according to the Congressional Budget Office. The number claiming education benefits is up almost 60 percent since 2009, according to the Department of Veterans Affairs.

“The good news is their survival rate, but the bad news is their survival rate,” said Bill Hoagland, a former staff director of the Senate Budget Committee.

Demographics also play a major role. The eldest baby boomers became eligible this year for Medicare, three years after beginning to receive Social Security checks. Though much of the debate over the programs’ finances has focused on what to do about spiraling health-care costs, the CBO said the main challenge over the next 25 years will be the number of people claiming benefits.

“Of the two factors, aging is the more important,” the CBO said in a June report. With 10,000 Americans turning 62 every day, the ranks of Social Security recipients are projected to almost double to 97 million by 2035.

Expanding Benefits

Congress also has repeatedly expanded benefits in recent years, adding to the ranks of potential losers in any deficit- reduction deal.

A 2010 law eased eligibility standards for Pell college tuition grants, one reason the number of recipients is up about 70 percent in five years to a projected 9.4 million this year. The increase in veterans claiming education benefits is partly driven by a 2008 “Post-9/11 G.I. Bill” that expanded assistance to cover the entire cost of a college education, including tuition, housing and books.

Even in the face of calls to cut the deficit, Congress came up with a new entitlement program.

Last year, as lawmakers prepared to leave for the Christmas recess, they agreed to create a program for emergency responders to the Sept. 11 terrorist attacks, promising medical care for conditions ranging from panic disorders to sleep apnea.

More than 60,000 people have enrolled since the program opened for business in July.

‘Helping Everybody’

“You’ve got to be seen helping everybody,” said Senator Tom Coburn, an Oklahoma Republican who was criticized when he temporarily blocked creation of the program. Coburn had complained that the government had already appropriated money for responders’ care, and Congress shouldn’t be developing additional entitlements amid so much concern over financing existing ones.

Senate Budget Committee Chairman Kent Conrad, a North Dakota Democrat, complained that opinion polls show the public neither wants benefits cut nor taxes raised.

A Bloomberg News-Washington Post poll earlier this month found more than four-fifths of Americans opposed reducing Social Security or Medicare benefits. A similar share said they didn’t want taxes increased on the middle class either, although they favored raising them on wealthier people.

“None of this adds up,” said Conrad. “One of the biggest obstacles to doing what has to be done is public opinion.”

--Editors: Mark McQuillan, Jim Rubin.

To contact the reporter on this story: Brian Faler in Washington at bfaler@bloomberg.net

MF Global collapses under euro zone debts

(Reuters) - Jon Corzine's bid to revive his Wall Street career crashed and burnt on Monday when his futures brokerage MF Global Holdings Ltd filed for bankruptcy protection following bad bets on euro zone debt.

Corzine, 64, who once ran Goldman Sachs before becoming a U.S. senator and then governor of New Jersey, had been trying to turn the more than 200-year-old MF Global into a mini Goldman by taking on more risky trades.

But once regulators forced it to fully disclose the bets on debt issued by countries including Italy, Portugal and Spain, it rapidly unravelled with no buyers willing to step in.

MF Global's meltdown in less than a week made it the biggest U.S. casualty of Europe's debt crisis, and the seventh-largest bankruptcy by assets in U.S. history.

The company's shares plunged last week as its credit ratings were cut to junk. The Chapter 11 bankruptcy filing came after talks to sell a variety of assets to Interactive Brokers Group Inc broke down earlier on Monday, a person familiar with the matter said.

There were also signs that some of its customer accounts that are supposed to be segregated and protected from the rest of the business had suffered what regulators described as "possible deficiencies."

"Early this morning, MF Global informed the regulators that the transaction had not been agreed to and reported possible deficiencies in customer futures segregated accounts held at the firm," the U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission said in a joint statement.

A bankruptcy proceeding led by the Securities Investor Protection Corporation would be the "most prudent course of action to protect customer accounts and assets," they said.

The New York Times reported later on Monday that federal regulators had discovered that hundreds of millions of dollars in customer money had gone missing from MF Global.

Less than $700 million was missing by late Monday, down from nearly $1 billion earlier, the paper reported on its website.

Regulators are looking into whether the brokerage used some of the money to support its own trades, the Times reported, citing unnamed sources.

MF Global was not immediately available to comment on the Times' report.

Regulators had expressed "grave concerns" about the viability of MF Global, which filed for bankruptcy only after "no viable alternative was available in the limited time leading up to the regulators' deadline," the company's chief operating officer, Bradley Abelow, said in a court filing.

One of the regulators that pressed MF Global, the CFTC, was unhappy with the brokerage's failure to give it the required data and records.

"(T)o date we don't have the information that we should have," said a source close to the CFTC.

In the end, regulators and markets reacted swiftly to MF Global's troubles, which may have been exacerbated by Corzine's affinity for risk-taking over the course of a career that took him to the top echelons of Wall Street and then into politics.

"They went for what would be a very profitable trade with European sovereign debt that obviously has blown up in their face, and brought the company down," said Dave Westhouse, vice president of Chicago retail broker PTI Securities and Futures.


The bankruptcy is reminiscent of the collapse of Lehman Brothers in 2008 at the height of the financial crisis. But market participants said the impact from this collapse, far smaller, would likely be contained.

Still, MF Global's 2,870 employees, as well as trading counterparties, were left scrambling and confused on Monday, as MF Global halted its shares but did not file for bankruptcy until well after U.S. markets had opened.

Trading activity in gold, crude oil and grain futures slowed to a crawl as the bankruptcy forced a chaotic scramble to untangle trading positions.

"Ultimately it will have lost all confidence of its investor base," Michael Epstein, a restructuring adviser with CRG Partners, said of MF Global. "I'm not sure what restructuring it actually does. In some respects, it's a baby Lehman, in effect."

There was also uncertainty over Wall Street's exposure.

JPMorgan Chase & Co's exposure for a $1.2 billion syndicated loan to MF Global is less than $100 million, a source at the bank said. Deutsche Bank AG is listed in the court filing as a trustee for bondholders with $1 billion of claims. The banks declined to comment.

The impact on the markets should be smaller and nothing like when Lehman failed and hedge funds had money locked up with the firm for months, said Jeff Carter, an independent futures trader in Chicago.

At the Chicago Board of Trade, three traders wearing MF Global jackets were seen leaving prior to the opening of pit trading, and floor sources told Reuters they had been turned away after their security access cards were denied.

Back outside the Manhattan office, one MF Global employee said all he knew about the bankruptcy was what has been on TV. The company's HR department, meanwhile, was busy making calls withdrawing job offers it made in the past few weeks, according to a person familiar with the situation.

"A sale here is potentially the best outcome for employees because the company will continue to operate as opposed to slowly winding down," said Dan McElhinney, the managing director of corporate restructuring for Epiq Systems.

"I think there will be a lot of effort to tee up the sale pretty quickly here."

The New York Federal Reserve terminated MF Global as one of its primary dealers. CME Group Inc, IntercontinentalExchange Inc, Singapore Exchange Ltd and Singapore's central bank, among others, halted the broker's operations in some form except for liquidations.

European clearinghouse LCH.Clearnet declared MF Global in default.


Corzine was trying to transform MF Global from a brokerage that mainly places customers' trades on exchanges into an investment bank that bets with its own capital.

In the past week, the company posted a quarterly loss and its shares fell by two-thirds as investors focussed on the euro zone bets and the effect of low interest rates, which hurt profits from its core brokerage operations.

MF Global scrambled through the weekend and into Monday to find buyers for all or parts of the company, while at the same time hiring restructuring and bankruptcy advisers in case nothing could be done.

In the court filing explaining what went wrong, MF Global pointed a finger at regulators. The bankruptcy was hastened by pressure from the CFTC, SEC and the Financial Industry Regulatory Authority, wrote Abelow, the COO.

FINRA ordered that its U.S. broker-dealer unit, called MFGI, boost net capital, and then reveal a $6.3 billion stake in short-term debt from European sovereigns with "troubled economies," he wrote.

Market concerns over such exposures led to MF Global being downgraded to "junk" status by various credit rating agencies, sparking margin calls that threatened liquidity, he added.

"Concerned about the events of the past week, some of MFGI's principal regulators -- the CFTC and the SEC -- expressed their grave concerns about MFGI's viability."

MF Global in the filing did not elaborate on the regulators' concerns or the reasons behind them.

FINRA declined to comment.

According to a July proxy filing, Corzine would be entitled to $12.1 million in severance, prorated bonus and other benefits upon being terminated without cause. Two other executives would be entitled to more: retail operations chief Randy MacDonald could get $17.9 million and Abelow could get $13.7 million.

However, federal bankruptcy law may limit any possible severance payouts.

First-day hearings in the case were scheduled for Tuesday at 3 p.m. in U.S. Bankruptcy Court in Manhattan. Among other things, MF Global is expected to seek permission from Judge Martin Glenn to use cash collateral to keep operating its business, court papers show.


By filing for bankruptcy, MF Global freezes the value of its free-falling notes and gives potential suitors a clearer picture of the losses they would be taking on, said Bill Brandt, CEO of Chicago-based turnaround firm Development Specialists Inc.

If a sale is in the offing, he added, the buyer may be a European bank or sovereign government, as such entities would be particularly keen on stopping the slide and maximizing the value of the notes.

"The real question is how many assets will be left to transfer," said Niamh Alexander, an analyst at Keefe, Bruyette & Woods. "Customers might move very quickly and it may be that every hour that passes shrinks the portfolio of assets that could be transferred" to a buyer, she said.

The bankruptcy is the latest flop for finance-focussed private equity fund J.C. Flowers, whose other recent investments include nationalized German bank Hypo Real Estate.

After dividends the private equity firm has received for its preferred shares, J.C. Flowers' net exposure to MF Global is $47.8 million, according to a source familiar with the matter. The firm declined to comment.

MF Global hired boutique investment bank Evercore Partners to help find a buyer, separate sources said last week.

The broker's deeply distressed 6.25 percent notes maturing in 2016 fell 4 cents to 46 on the dollar, according to the Trace, which reports bond trades. The price had earlier fallen as low as 15 cents.

MF Global shares remained halted in New York.

George Soros attacks Brussels rescue deal

Mr Soros, who achieved world wide fame when he bet against sterling remaining within the Exchange Rate Mechanism in the 1990s, said that the 50pc "haircut" on private bond holders would only reduce Greek debt by 20pc. He said that was insufficient to stop an economic decline in Greece which would lead to greater social unrest.

His words come as the eurozone appeared to be heading for further economic trouble as investors started to express scepticism about the rescue deal announced in the early hours of Thursday morning. This weekend Goldman Sachs said that the eurozone countries were heading for a "mild recession" as confidence waned.

"Given the magnitude of the crisis it is again too little too late," Mr Soros said of the Brussels deal at a dinner organised by Pi Capital investor network on Thursday. "It will bring relief partly because the markets were so obsessed by the lack of leadership. The mere fact that something was achieved was a major relief and it will be good for any time from one day to three months.

"Unfortunately it is not the last crisis because the fundamental issues have not been settled. It is clear that the amount of debt that Greece has accumulated and is accumulating is untenable and the country is effectively insolvent."

Mr Soros argued that many banks might not voluntarily join the deal as they will want to wait for the insurance offered by the credit default swaps they hold against the debt to be triggered. At present because the haircut is voluntary European leaders have said the Greek default is not considered a "credit event" which would spark CDS payouts and possibly a new financial crisis.

The Telegraph