Daily Digest - March 20

• 1) Hawaii’s ‘Lax Management’ Freezes $1 Billion Deal

"March 19 (Bloomberg) -- Hawaii State Auditor Marion M. Higa found “lax management” of the state’s treasury led to a $1 billion investment in auction-rate securities that will result in $254 million in writedowns.

The conclusion came in a 122-page report to the governor and state Legislature that the auditor released yesterday. Hawaii’s Department of Budget and Finance, which manages the state’s cash, failed to file reports on time, made investments that exceeded the maximum allowable and didn’t evaluate risk before more than doubling its stake in auction-rate securities, the auditor said."

• 2) Seven banks closed down; U.S. total this year hits 37 (costs FDIC $1.2 billion)

"Regulators on Friday shut down seven banks in five states, bringing to 37 the number of bank failures in the U.S. so far this year.

The closings follow the 140 that succumbed in 2009 to mounting loan defaults and the recession.

The Federal Deposit Insurance Corp. took over First Lowndes Bank, in Fort Deposit, Ala.; Appalachian Community Bank in Ellijay, Ga.; Bank of Hiawassee, in Hiawassee, Ga.; and Century Security Bank in Duluth, Ga.

The agency also closed down State Bank of Aurora, in Aurora, Minn.; Advanta Bank Corp., based in Draper, Utah; and American National Bank of Parma, Ohio.

This week's closings are expected to cost the FDIC a total of $1.2 billion."

• 3) US-China Currency War Worries Korea

"In this climate, 130 lawmakers in the U.S. House of Representatives have urged the U.S. government this week to label China a currency manipulator in its report slated for April 15.

Earlier this week, a bipartisan group of U.S. Senators also presented legislation that could make the U.S. levy duties on some Chinese merchandise if the populous nation does not raise the value of its currency.

Should the Barack Obama administration blacklist China as a currency manipulator and put higher tariffs on Chinese goods, the wrangling between the two superpowers - dubbed G-2 - could lead to a trade war. If this happens, Korea could suffer.

The Korea International Trade Association (KITA) said that the Sino-American feud is the single-most important risk for Asia's fourth-largest economy."

• 4) U.S. Banks' Q4 Trading Revenue Down 66% Sequentially  (Lists trillions in derivatives)

"Credit derivatives grew 8% in the fourth quarter to $14.0 trillion.

As of December 31, total derivatives exposures stood at $78.55 trillion for JPMorgan Chase Bank (JPM: News ), $44.31 trillion for Bank of America (BAC: News ), $41.6 trillion for Goldman Sachs Bank (GS: News ), $37.55 trillion for Citibank National and $4.18 trillion for Wells Fargo Bank NA (WFC: News ). "

• 5) NY's outstanding debt per resident jumps nearly 25%

"New York state has $3,089 of outstanding debt per resident—almost a 25 percent jump in four years, according to a new report from state Comptroller Thomas DiNapoli."

"New York has $3,089 of debt per capita, $583 more than March 2006’s average of $2,506. The debt rates have risen far faster than inflation, DiNapoli said.

Only New Jersey has more debt per capita, with $3,652 of debt per resident.

State-funded debt now totals $60.4 billion—15 percent, or $8 billion, higher than debt totals two years ago."

• 6) AIG CDOs Sold to Fed May Be Downgraded by Moody's

"March 19 (Bloomberg) -- The largest collateralized debt obligations insured by American International Group Inc. and taken over by the Federal Reserve as part of AIG’s bailout may be downgraded by Moody’s Investors Service.

The credit-ratings firm put $7.88 billion of slices of the two CDOs, underwritten by Deutsche Bank AG, under review because of downgrades to the underlying commercial-mortgage securities, New York-based Moody’s said today in a statement. The CDOs -- MAX CMBS I Ltd. Series 2007-1 and Series 2008-1 -- were created in October 2007 and June 2008, respectively, according to data compiled by Bloomberg."

• 7) Build America Bond Use May Rise After Moody's Muni Rating Shift

"March 19 (Bloomberg) -- Moody’s Investors Service’s shift of its municipal ratings scale to make it comparable with other debt will expand the $85.9 billion Build America Bond market as better ratings cut borrowing costs, Janney Montgomery Scott LLC said in a report.

Moody’s said March 16 it will realign municipal ratings to a global scale comparable with corporate and other debt, a move that may raise rankings of some 70,000 bonds it covers by as much as three rating levels. The new ratings, to be unveiled next month, shouldn’t be viewed as upgrades, Moody’s said.

The higher ratings will make the taxable bonds more attractive to buyers of other taxable debt because more municipalities will fit their ratings criteria, said Alan Schankel, head of fixed-income research at Philadelphia-based Janney, one of the authors of the study. "

• 8) Depleted cash reserves leave some local cities on edge of financial crisis (California)

"COLTON - Pricey pension packages, budget breakdowns and deep deficits have reduced or jeopardized the reserves some cities have amassed over recent years.

Both Colton and San Bernardino are struggling with dwindling incomes that have burned cash reserves to dangerously low levels.

Rialto is struggling with higher pension costs set to start July 1, which a top official has said will deplete a sizeable $31 million reserve within three years if employees don't agree to concessions.

"I'm very sympathetic to cities right now," said Jessica A. Levinson, director of political reform for Los Angeles-based Center for Governmental Studies. "Some are in very difficult situations."

The lack of substantial reserves means that any significant, unexpected expenditure, like a lawsuit judgement or natural disaster, could leave the cities with a financial catastrophe."

• 9) Union Projects Up To 5000 Teacher Layoffs (Indiana)

"INDIANAPOLIS -- The Indiana State Teachers Association predicts up to 5,000 teachers could lose their jobs in the wake of state budget cuts.

Union Mark Shoup said Friday the union forecasts that about 8 percent of public school teachers statewide could have their positions cut.

State schools Superintendent Tony Bennett said he believed districts should be able to reduce spending without layoffs when he and Gov. Mitch Daniels announced the $300 million funding cut in December.

But Shoup said that isn't realistic because salaries and benefits make up the largest chunk of the school budget."

• 10) Governor Accused of Holding Education Captive In Exchange for Tax Increase (Illinois)

"The governor's proposed budget -- carrying a $1.2 billion cut in education funding -- faced a room of skeptical lawmakers Thursday. Members of both parties on the House Appropriations-Elementary and Secondary Education Committee said for the record what a lot of people around the Capitol have been saying: Gov. Pat Quinn is asking schools to take a big hit to make a case for an income tax increase.

During last week's budget speech, Quinn said the state could avoid education cuts -- including 17,000 teacher layoffs -- if the legislature approves a 1 percentage point increase in the icome tax. That would bring the state's flat income tax to 4 percent."

• 11) Toledo to reap a larger share of red-light camera fines

"Toledo will get a greater percentage of the money from red-light and speed camera tickets when vehicles are towed or immobilized, police Chief Mike Navarre said.

The city will keep $95 of the $120 fine, during the first 90 days after the violation. In cases where the violator's vehicle is not immobilized or towed by Toledo police, the city will get $65 of the $120 fine, the chief said.

Redflex Traffic Systems Inc. of Arizona operates the camera system for the city.

"We went to them and said if we are going to do all this work and buy these immobilization devices, we should get a greater percent of the fine," Chief Navarre said. "[Redflex] has also expressed a willingness to renegotiate the terms of the entire contract."

Toledo City Council on March 2 authorized police to tow or immobilize a person's vehicle by putting a "boot" on it if the owner fails to pay red-light or speed-camera tickets.

Mayor Mike Bell's plan to bal-ance a $48 million budget deficit includes collecting $1.2 million from unpaid tickets.

Under the law, which takes effect April 1, police will be able to immobilize a vehicle after a fine has gone unpaid for 21 days. Having the apparatus removed will cost the owner $75 plus the outstanding fine. A boot is clamped onto a wheel to prevent the vehicle from being moved."

Healthcare Bill to Cause U.S. Hyperinflation By 2015 (National Inflation Association)

Bernanke Says Large Bank Bailouts 'Unconscionable,' Must End

Russian 'Day of Anger' tests govt

Cities decry Water Agency's proposed 10% rate hike (Santa Rosa, CA)

Accounting change may bring $59 bln tax bill-Moody's

LA Unified to halt inter-district school transfers

Falling enrollment may force Detroit to shut 44 schools

Isn't The story of stuff just a little over the top? While I recognize the main message and generally agree with it, it comes significantly closer to eco-nuttery and deindustrialization than sustainable growth. Also, ms Leonard uses the words fair and our share a lot, which tends to raise my hackles.

This being my first posting in the 36 weeks I've been reading here, I apologize for being negative. Apart from the sporadic Keynesian stuff that appears (and often gets resolutely criticized), this is one of the best resources I've found for following our steepening decent. Great thumbs up to both CM, Sax, Davos and the other regulars.

-S

FYI  The Story of Stuff was funded by George Soros' Tides Foundation

Simentt-

Welcome,  and I apologize that your first post happens to be a disagreement from me.

I for one think it is perfectly appropriate and not over the top.  I think it cuts right to the heart of why we are at the turning point of the various "hockey stick" curves.  The richest 20% of the world- (that's you and I), consume 80% of the worlds resources.  Whether anyone sees this as "fair" or more than "our share" is highly subjective, but when the other 80% wants a piece of the action, we certainly have no right to say no.  The video is all about the cult of consumerism, and it is why we are in the bind that we are in- mankind was not upsetting ecosystems and depleting resources until the industrial revolution.  People need to wake up to the fact that we have been collectively trained to consume- and that it needs to be stopped or at least slowed down.   I think the video is a great starting point.

Welcome, but I disagree, the Story of Stuff is not over the top at all; it's an excellent and concise primer for people who still believe in the oxymoronic concept of "sustainable growth", which unfortunately is most people.

For detailed (video) lecture on why growth ain't sustainable see Dr. Bartlett on the exponential curve.

Grouch

PS, you can tell Ms. Leonard she can come round my place when she's finished the video and and raise my heckles.

The Story of Stuff may or may not be 'over the top.'  I checked out after two minutes when she said, 

"It's the government's job to watch out for us, to take care of us; that's their job." 

Yeah, well, whatever...

@simentt

if you are looking for "sustainable growth," you really need to watch the Crash Course again.

best wishes ... dons

<http://www.nytimes.com/2010/03/20/business/energy-environment/20saudi.html>

By JAD MOUAWAD

Published: March 19, 2010

Last summer, Saudi Arabia put the final bolt in its largest oil expansion project ever, opening a new field capable of pumping 1.2 million barrels a day - more than the entire production of Texas. The field, called Khurais, was part of an ambitious $60 billion program to increase the kingdom's production to meet growing energy needs.

Only two years ago, consumers were clamoring for more supplies, OPEC producers were straining to increase their output, and prices were rising to record levels. But now, for the first time in more than a decade, the world has more oil than it needs.

As demand slumped because of the global recession, Saudi Arabia was forced to shut about a quarter of its production. After raising its capacity to 12.5 million barrels a day, Saudi Arabia is now pumping about 8.5 million barrels a day, its lowest level since the early 1990s.

"2009 was painful for us as it was for everybody else," said Khalid A. al-Falih, the president and chief executive of Saudi Aramco, the kingdom's state-owned oil giant, and a company veteran who was promoted to the top post at the beginning of last year. "We experienced the same cash flow constraints that everybody did. But we adjusted quickly and, certainly, everything that was strategic to us was not touched."

The recession also precipitated a milestone for Saudi Arabia and the global energy market. While China's successful economic policies paved the way for a quick rebound there, the recession caused a deeper slowdown in the United States, slashing oil consumption by 10 percent from its 2005-7 peak. As a result, Saudi Arabia exported more oil to China than to the United States last year.

"The government's job is to take care of us. That's their job." -- The Story of Stuff

I beg to differ with this and a number of other statements which ultimately make the The Story of Stuff more of a political video disguised as a sustainability piece. As a non-frequent poster I don't want to contribute to a political debate, as the absense of these on this site is one of it's greatest attributes, but I couldn't let this post go without comment.

Add in the fact that the Story of Stuff was designed to teach our young about "Stuff" and it is even more inappropriate.

Can we get Bernanke, Geithner and Obama in cryogenic storage until the job market improves?  Please.