Thursday, April 30, 2009

investment firms and hedge funds decided to hold out for the prospect of an unjustified taxpayer-funded bailout

TO BE NOTED: From the WaPo:

"In Chrysler Saga, Hedge Funds Cast As Prime Villain
Firms Say They Were Right to Hold Out

By Steven Mufson and Tomoeh Murakami Tse
Washington Post Staff Writers
Friday, May 1, 2009

President Obama's harsh attack on hedge funds he blamed for forcing Chrysler into bankruptcy yesterday sparked cries of protest from the secretive financial firms that hold about $1 billion of the automaker's debt.

Hedge funds and investment managers were irate at Obama's description of them as "speculators" who were "refusing to sacrifice like everyone else" and who wanted "to hold out for the prospect of an unjustified taxpayer-funded bailout."

"Some of the characterizations that were used today to refer to us as speculators or to say we're looking for a bailout is really unfair," said one executive who spoke on condition of anonymity because of the sensitivity of the matter. "What we're looking for is a reasonable payout on the value of the debt . . . more in line with what unions and Fiat were getting."

George Schultze, the managing member of the hedge fund Schultze Asset Management, a Chrysler bondholder, said, "We are simply seeking to enforce our bargained-for rights under well-settled law."

"Hopefully, the bankruptcy process will help refocus on this issue rather than on pointing fingers at lenders," he said.

Political veterans said, however, that it would be tough for hedge funds to overcome their image as villains. Most politicians have a favorite punching bag. Many Republican politicians like to bash trial lawyers. Many Democrats like to take aim at big oil companies. Hedge funds can serve as a safe diamond-studded scapegoat in tough economic times.

"It's hard to go wrong right now being tough on those guys," said Jeff Shesol, a former speechwriter for President Clinton who noted that Obama had been criticized earlier for not showing enough outrage about AIG bonus payments. He said that Obama's "frustration, while it may be calibrated, is real. And it's certainly where the public is."

A senior administration official said the tough words on hedge funds were born of frustration, not politics. "The president has been pretty hard-nosed about the whole matter," said the official, who spoke on condition of anonymity. "There was no calculation involved," he added. Obama "was very willing to praise those who went the extra mile to help make this work, and that included financial institutions."

"In particular, a group of investment firms and hedge funds decided to hold out for the prospect of an unjustified taxpayer-funded bailout," Obama said. "They were hoping that everybody else would make sacrifices, and they would have to make none. Some demanded twice the return that other lenders were getting. I don't stand with them."

The president's harsh criticism may play well on Main Street, but it flopped on Wall Street yesterday. There hedge funds -- privately run funds that invest in an unlimited variety of securities and which theoretically balance different kinds of risks -- are part of the landscape.

"It sounds like people are being bullied right now," said Ron Geffner, a partner at the law firm Sadis and Goldberg, which represents hedge funds. "To play the 'I stand with Chrysler, I stand with families, I stand with the dealers, I stand with the consumers' -- that's great conceptually, but . . . I stand with the fact that we live in a capitalist society where companies who don't modify their business plans and stay current die and go by the wayside."

Geffner added that Obama's remarks made it difficult for the lenders that rejected the offer to speak publicly for fear of appearing "anti-American."

Indeed, a group of lenders issued a statement yesterday -- but did not identify its members. The group said it included approximately "20 relatively small organizations" that represented "the country's teachers unions, major pension and retirement plans and school endowments who have invested through us in senior secured loans to Chrysler."

The funds hold about $1 billion in Chrysler bonds and have turned down the government's terms. The government would have paid just under a third of the value of those bonds. However, many funds bought the bonds at deep discounts from other investors who feared the bonds might ultimately be worthless.

A few firms stepped forward to defend themselves openly. "OppenheimerFunds sought fair treatment for the shareholders of our funds and we were willing to make very significant sacrifices to reach an agreement," the firm said in a statement. But it said the government "unfairly asked our fund shareholders to make financial sacrifices greater than those being made by" other creditors. The firm said its bonds "are entitled to priority in long-established U.S. bankruptcy law."

But other observers said that the hedge funds were oblivious to Americans' worries about jobs.

"They're not getting it in their heads that this is the worst crisis since the 1930s. People are going to have to take a hit," said Sarah Anderson, director of the Global Economy Project at the Institute for Policy Studies. "It seems rather short-sighted to risk having the auto sector collapse so that they can get a few more cents on the dollar for their investors."

five-year commitments could hamper the central bank's ability to withdraw money from the financial system down the road


Need a Real Sponsor here

Fed Hopes 5-Year TALF Loans Will Help Real-Estate Market


The Federal Reserve is preparing to announce new terms on one of its lending programs that officials hope will help revive the commercial-real-estate market, according to people familiar with the matter.

The program is the Term Asset-Backed Securities Loan Facility, or TALF, in which investors are given low-cost loans from the Fed and in turn use the money to buy securities backed by consumer debt. The loans in this program are three-year loans and so far have been aimed at car debt, credit-card debt and other consumer loans. The Fed is preparing to announce new loans with five-year terms to better match the needs of investors in commercial-mortgage-backed securities, an effort to boost that sector.

Officials have been reluctant to make such long-term loans, for fear five-year commitments could hamper the central bank's ability to withdraw money from the financial system down the road. They have been looking to design the expansion so the loans are less appealing in later years.

An announcement with the new terms could come as early as Friday, though, as with many of the Fed's rescue programs, discussions are often subject to last-minute changes that could alter those plans.

The $700 billion CMBS market has rallied in the past month on hopes TALF would be used to restart the market. Yields on triple-A CMBS bonds have fallen to about 10% from 12%, according to Trepp, which tracks commercial-property debt markets.

Bringing down the yields on existing debt is critical to spark new lending because, as long as investors can buy top-rated CMBS that yield as much as junk bonds, it would be unprofitable for banks to make new loans. That is because they would have to offer higher yields to attract investors, wiping out their profits.

Policy makers believe it is critical to get credit flowing to the $6.5 trillion real-estate industry because a massive amount of commercial-real-estate debt is coming due.( NB DON )

Write to Jon Hilsenrath at and Lingling Wei at"

The stabilization trust is the latest nonprofit project aiming to ease the housing crisis since it began about two years ago


Need a Real Sponsor here

Foundation Backs Foreclosures Project


The Ford Foundation plans to pump $50 million into a new nonprofit venture that will help municipalities buy foreclosed homes from financial institutions, in an effort to stem property-value declines plaguing U.S. neighborhoods.

The money, among the largest so-called program-related investments by a foundation, will go to a consortium of community-based nonprofits that will serve as a middleman between cities trying to rehabilitate neighborhoods and mortgage servicers looking to unload seized properties.

The consortium, called the National Community Stabilization Trust, hopes to simplify and accelerate this market, which can get bogged down when municipalities have trouble negotiating with financial institutions. It will work with state and local governments and other groups that have received special grants from the Department of Housing and Urban Development to buy and redevelop foreclosed homes.

The stabilization trust is the latest nonprofit project aiming to ease the housing crisis since it began about two years ago. Housing & Neighborhood Development Services Inc., a nonprofit in Orange, N.J., recently bought 47 mortgages from J.P. Morgan Chase & Co. with plans to fix up the homes and sell them. The Center for New York City Neighborhoods provides counseling, legal services and other education for homeowners at risk of foreclosure.

Backed by Ford and a $3 million start-up investment from the Chicago-based MacArthur Foundation, the stabilization trust hopes to spur purchases in more than 100 cities before year's end.

The trust aims to serve two main functions. It is courting major financial institutions -- including J.P. Morgan, Bank of America Corp. and GMAC Financial Services -- and negotiating discounted prices on foreclosed homes before they are listed. The trust also plans to provide financing to municipalities or other local groups looking to buy those distressed properties.

Funneling the properties to buyers through the trust can save financial institutions time and money on marketing. And even a discounted price could be higher than what a property might fetch if it lingers unsold.

The trust hopes to accelerate purchases of foreclosed properties that can drag down nearby home values. Foreclosure filings hit 803,489 properties in the first three months of this year, up 24% from the same period a year ago, according to RealtyTrac Inc., a foreclosure-tracking firm.

Ford's $50 million investment will fund the stabilization trust's financing arm to help municipalities buy distressed properties. Ford, whose $9.5 billion of assets make it the second-largest U.S. philanthropy after the Bill & Melinda Gates Foundation, hopes the investment will attract private capital because the foundation will be second in line for losses behind government investments.

The trust hopes to raise some $400 million. Ford officials concede that is a small amount relative to the scope of the foreclosure mess, but hope the trust achieves enough success to prompt other similar efforts.

Unlike a typical grant, Ford's money comes from its endowment principal, in the form of a 10-year loan with a below-market interest rate of 1%. Ford has made such investments for decades, but this marks its largest bet on an untested project.

"It's risky," said Luis Ubinas, Ford's president. But "only a market-based solution is going to work to clear what is likely more than $1 trillion in real estate. Someone has to step up and put the risk capital in play that will come up with a model for that marketplace solution."

Mr. Ubinas, a former McKinsey & Co. consultant, took the foundation's helm in January 2008. In addition to the stabilization trust, Ford plans to spend an additional $100 million on housing over the next five years, Mr. Ubinas said, doubling what the foundation had put in that area over the past decade.

Write to Mike Spector at"

Continued claims are now at 6.27 million - the all time record.

TO BE NOTED: From Calculated Risk:

April Economic Summary in Graphs

by CalculatedRisk on 4/30/2009 04:00:00 PM

Here is a collection of real estate and economic graphs for data released in April ...

Click on graphs for larger image in new window.


New Home Sales Monthly Not Seasonally Adjusted New Home Sales in March

The first graph shows monthly new home sales (NSA - Not Seasonally Adjusted).

Note the Red columns for 2009. This is the lowest sales for March since the Census Bureau started tracking sales in 1963. (NSA, 34 thousand new homes were sold in March 2009; the previous low was 36 thousand in March 1982).

From: New Home Sales: 356 Thousand SAAR in March


Total Housing Starts and Single Family Housing Starts Housing Starts in March

Total housing starts were at 510 thousand (SAAR) in March, just above the revised record low of 488 thousand in January (the lowest level since the Census Bureau began tracking housing starts in 1959).

Single-family starts were at 358 thousand in March; just above the revised record low in January (356 thousand).

From: Housing Starts: Near Record Low


Construction Spending Construction Spending in February

This graph shows private residential and nonresidential construction spending since 1993. Note: nominal dollars, not inflation adjusted.

"Residential construction was at a seasonally adjusted annual rate of $275.1 billion in February, 4.3 percent below the revised January estimate of $287.4 billion. Nonresidential construction was at a seasonally adjusted annual rate of $390.7 billion in February, 0.3 percent above the revised January estimate of $389.5 billion."

From: Construction Spending Declines in February


Employment Measures and RecessionsMarch Employment Report

This graph shows the unemployment rate and the year over year change in employment vs. recessions.

Nonfarm payrolls decreased by 663,000 in March. January job losses were revised to
741,000. The economy has lost almost 3.3 million jobs over the last 5 months, and over 5 million jobs during the 15 consecutive months of job losses.

The unemployment rate rose to 8.5 percent; the highest level since 1983.

From: Employment Report: 663K Jobs Lost, 8.5% Unemployment Rate


Year-over-year change in Retail Sales March Retail Sales

This graph shows the year-over-year change in nominal and real retail sales since 1993.

On a monthly basis, retail sales decreased 1.1% from February to March (seasonally adjusted), but sales are off 10.7% from March 2008 (retail and food services decreased 9.4%). Automobile and parts sales declined 2.3% in March (compared to February), but excluding autos, all other sales declined -0.9%.

From: Retail Sales Decline in March


LA Area Port Traffic LA Port Traffic in March

This graph shows the loaded inbound and outbound traffic at the port of Los Angeles in TEUs (TEUs: 20-foot equivalent units or 20-foot-long cargo container). Although containers tell us nothing about value, container traffic does give us an idea of the volume of goods being exported and imported.

Inbound traffic was 6% below last March and 35% above last month.

Outbound traffic was 9.8% below March 2008, and 25% above February.

From: LA Port Import Traffic Rebounds


U.S. Trade Deficit U.S. Imports and Exports Through February

The first graph shows the monthly U.S. exports and imports in dollars through February 2009. The recent rapid decline in foreign trade continued in February. Note that a large portion of the recent decline in imports was related to the fall in oil prices, however the decline in February was mostly non-oil related.

From: U.S. Trade Deficit: Lowest Since 1999


Capacity Utilization March Capacity Utilization

This is some serious cliff diving. Also - since capacity utilization is at a record low (the series starts in 1967), there is little reason for investment in new production facitilies.

The Federal Reserve reported that "industrial production fell 1.5 percent in March after a similar decrease in February. For the first quarter as a whole, output dropped at an annual rate of 20.0 percent, the largest quarterly decrease of the current contraction. At 97.4 percent of its 2002 average, output in March fell to its lowest level since December 1998 and was nearly 13 percent below its year-earlier level.

From: Industrial Production Declines Sharply in March


Residential NAHB Housing Market Index NAHB Builder Confidence Index in April

This graph shows the builder confidence index from the National Association of Home Builders (NAHB).

The housing market index (HMI) increased to 14 in April from 9 in March. The record low was 8 set in January.

The increase in April follows five consecutive months at either 8 or 9.

From: NAHB: Builder Confidence Increases in April


AIA Architecture Billing Index Architecture Billings Index for March

"After a series of historic lows, the Architecture Billings Index (ABI) was up more than eight points in March. As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lag time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the March ABI rating was 43.7, up from the 35.3 mark in February. This was the first time since September 2008 that the index was above 40..."

From: Architecture Billings Index Increases in March


Vehicle Miles Driven Vehicle Miles driven in February

This graph shows the annual change in the rolling 12 month average of U.S. vehicles miles driven. Note: the rolling 12 month average is used to remove noise and seasonality.

By this measure, vehicle miles driven are off 3.6% Year-over-year (YoY); the decline in miles driven is worse than during the early '70s and 1979-1980 oil crisis.

From: DOT: U.S. Vehicle Miles Off 0.9% in February


Existing Home Sales Existing Home Sales in March

This graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1993.

Sales in March 2009 (4.57 million SAAR) were 3.0% lower than last month, and were 7.1% lower than March 2008 (4.92 million SAAR).

It's important to note that about 45% of these sales were foreclosure resales or short sales. Although these are real transactions, this means activity (ex-distressed sales) is under 3 million units SAAR.

From: Existing Home Sales Decline in March


Existing Home Inventory Existing Home Inventory March

This graph shows nationwide inventory for existing homes. According to the NAR, inventory decreased to 3.74 million in March. The all time record was 4.57 million homes for sale in July 2008. This is not seasonally adjusted.

Typically inventory increases slightly in March, and then really increases over the next few months of the year until peaking in the summer. This decrease in inventory was small, and the next few months will be key for inventory.

Also, most REOs (bank owned properties) are included in the inventory because they are listed - but not all. Recently there have been stories about a substantial number of unlisted REOs - this is possible, but not confirmed.

From: Existing Home Sales Decline in March


Case-Shiller House Prices Indices Case Shiller House Prices for February

This graph shows the nominal Composite 10 and Composite 20 indices (the Composite 20 was started in January 2000).

The Composite 10 index is off 31.6% from the peak, and off 2.1% in February.

The Composite 20 index is off 30.7% from the peak, and off 2.2% in February.

From: Case-Shiller: House Prices Fall Sharply in February


Homeownership Rate Homeownership Rate for Q1

The homeownership rate decreased to 67.3% and is now back to the levels of Q2 2000.

Note: graph starts at 60% to better show the change.

The homeownership rate increased because of demographics and changes in mortgage lending. The increase due to demographics (older population) will probably stick, so I expect the rate to decline to the 66% to 67% range - and not all the way back to 64% to 65%.

From: Q1 2009: Homeownership Rate at 2000 Levels


Homeowner Vacancy Rate Homeownership Vacancy Rate Q1

The homeowner vacancy rate was 2.7% in Q1 2009.

A normal rate for recent years appears to be about 1.7%. There is some noise in the series, quarter to quarter, so perhaps the vacancy rate has stabilized in the 2.7% to 2.9% range.

This leaves the homeowner vacancy rate about 1.0% above normal ...

From: Q1 2009: Homeownership Rate at 2000 Levels


Rental Vacancy Rate Rental Vacancy Rate for Q1

The rental vacancy rate was steady at 10.1% in Q1 2009.

It's hard to define a "normal" rental vacancy rate based on the historical series, but we can probably expect the rate to trend back towards 8%.

From: Q1 2009: Homeownership Rate at 2000 Levels


Weekly Unemployment Claims Unemployment Claims

This graph shows weekly claims and continued claims since 1971.

The four week moving average is at 637,250, off 21,500 from the peak 3 weeks ago.

Continued claims are now at 6.27 million - the all time record.

From: Unemployment Claims: Record Continued Claims


Restaurant Performance Index Restaurant Performance Index for March

"The outlook for the restaurant industry improved in March, as the National Restaurant Association’s comprehensive index of restaurant activity rose for the third consecutive month. The Association’s Restaurant Performance Index (RPI) – a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry – stood at 97.7 in March, up 0.2 percent from February and 1.3 percent during the last three months."

From: Restaurant Performance Index Increases Slightly


New Home Sales and Recessions New Home Sales: March

This graph shows New Home Sales vs. recessions for the last 45 years. New Home sales have fallen off a cliff.
Sales of new one-family houses in March 2009 were at a seasonally adjusted annual rate of 356,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development.

This is 0.6 percent (±19.0%)* below the revised February rate of 358,000 and is 30.6 percent (±10.7%) below the March 2008 estimate of 513,000.
From: New Home Sales: 356 Thousand SAAR in March


New Home Months of Supply and Recessions New Home Months of Supply: March

There were 10.7 months of supply in March - significantly below the all time record of 12.5 months of supply set in January.

"The seasonally adjusted estimate of new houses for sale at the end of March was 311,000. This represents a supply of 10.7 months at the current sales rate."

From: New Home Sales: 356 Thousand SAAR in March


IEF (Treasuries) are getting close to testing February support, and the ETF is down from more than $100 to the low $90s

TO BE NOTED: From Bespoke:


IEF is an ETF that tracks the price of long-term Treasuries (7-10 years), while HYG tracks the price of high yield (junk) bonds. During the flight to safety panic that occurred in late 2008, Treasuries soared (yields fell), while junk bonds tanked (yields rose). This caused high-yield spreads to spike to levels not seen in decades. As the market has regained some of its footing in the last couple of months, however, spreads have begun to come in, and the price charts of IEF and HYG highlight this convergence. As shown, IEF (Treasuries) are getting close to testing February support, and the ETF is down from more than $100 to the low $90s. HYG, on the other hand, has rallied from the low $60s to the high $70s since the March equity market lows. If IEF breaks this support in the coming days, it will probably be a sign that the current trend will continue on for longer.


an unprecedented transformation exemplified by increased regulation and a heightened risk aversion

TO BE NOTED: From AllAboutAlpha:

"The Ascendancy of Risk Management

Posted By Alpha Male On April 30, 2009 @ 8:36 pm In Today's Post | No Comments

We conclude a week covering hedge fund operations issues with a guest contribution from Abdul Sheikh, CAIA, a Vice President at State Street’s fund administration group. Sheikh makes the case that many attendees of GAIM Ops also made: that independent fund administration may be the only way to fully address investor concerns in the post-Madoff world.

Alternative Viewpoints: The Ascendancy of Risk Management

Special to by: Abdul Sheikh, State Street Fund Administration

In the past years, investors used to select fund managers based on three criteria: performance, philosophy and pedigree. But in Deutsche Bank’s annual Alternative Investment Survey released last month (see [1] related post) , “risk management” entered the ranks of the top three selection criteria for the first time, and “pedigree” fell to fifth.


It’s clear that we are witnessing a paradigm shift in manager selection and asset allocation criteria. Gone are the days of just looking at attributes like track records, top down vs. bottom up approaches, low correlations to markets, and manager size. Recent events have shown that investors need transparency, independent risk analysis, and independent asset servicing.

A State Street study conducted late last year in conjunction with the 2008 Global Absolute Return Congress (see [3] related post) reinforces this - indicating that five out of six institutions (84 percent) expect more disclosure of hedge fund positions and nearly half (49 percent) anticipate more frequent reporting from hedge fund managers. Meanwhile, only a few (19 percent) currently receive some level of consistent transparency across hedge fund holdings. (See chart below from report)


Institutional investors may believe their portfolios are well diversified. However, do they really know what their concentrations are and what these concentrations mean to them? Depending on the strategy, the managers may be allowed to take on leverage, but only a thorough analysis can determine whether that leverage is accidental or deliberate (and thus beneficial to the overall portfolio). However, this kind of thorough analysis usually requires position-level transparency.

Heightened concerns over transparency and risk management are increasing demand for independent asset servicing. Functions such as securities processing, fund accounting, reconciliations, security settlement and safekeeping are no longer viewed as value-added but necessary. Many industry experts think that the Darwinian processes occurring for the past year will separate the “premier league” of funds from the others. Based on the result of the surveys above, these premier league funds will likely be distinguished by their ability to employ independent asset servicing, provide transparency and use better risk management systems.

Some of these basic asset-servicing functions have traditionally been provided by investment banks and prime brokers. But some are now calling for third party custodians who hold customer assets “off the books” in custodial accounts. Since prime brokers have much more extensive rights in client’s assets - including their ability to rehypothecate their client’s assets - some argue that they expose investors to additional risks.

Without a doubt, we are witnessing an unprecedented transformation exemplified by increased regulation and a heightened risk aversion. As cases like Madoff and Stanford have proven, regulatory oversight sometimes provides a false sense of protection. And that is why investors seem to be saying that fund-level risk management has become more important than ever.

- A. Sheikh, April 2009

The opinions expressed in this guest posting are those of the author and not necessarily those of or State Street Corporation.

Editor’s Addendum: Sheikh’s State Street colleagues seem to agree with his assessment as evidenced by [5] this FT piece earlier in the week:

“‘The old system seemed to work pretty well as long as assets grew,’ says Jack Klinck, head of global investment product services at State Street. ‘But now investors are really nervous. There’s a tremendous focus on ‘who’s your counterparty?’”

“Mr Klinck expects to see a number of large US hedge funds, which have until now done all their administration in-house, outsource this function in order to reassure their clients. ‘Self-administered hedge funds are looking like outliers now. They’re having to break their operating model.’”

Finally, before the corporate jet departs the Cayman Islands, we thought you might find [6] this recent Hedge Funds Review Cayman supplement to be kind of interesting:

“There is no doubt the global financial crisis and the push for tighter and more onshore regulation of hedge funds will change the industry forever. Cayman’s role in this is unclear but the government, regulator and industry are confident they have the skills and will to keep the jurisdiction as the number one domicile.”

Article printed from

Steady improvement

TO BE NOTED: From Alea:

"Central Bank Liquidity Swaps

Steady improvement.

Source: Fed H.4.1
Fed Explains Central Bank Liquidity Swaps
Foreign Currency Liquidity Swap Lines
Foreign Currency Liquidity Swap Lines, Redux"

Fed just disavowed the market of the notion that they would defend the 10-year at 3%

TO BE NOTED: From Accrued Interest:

"Fed to Treasury Market: It is you who are mistaken

Its flying a little under the radar this morning, but the Fed just disavowed the market of the notion that they would defend the 10-year at 3%. Today's Permanent Open Market action was to buy a paltry $3 billion in 10-year and longer notes.

Here are the last several POMOs of Treasury bonds (excluding TIPs)

I color coded it by the portion of the yield curve which the Fed was buying at each action. Notice that its very clear that the Fed isn't doesn't have a soft target of 3% on the 10-year. Moreover, the Fed isn't focused on the 10-year portion of the curve at all. Most of the buyer has occurred in the 4-7 year area, which I'm assuming the Fed thinks will be most influential on consumer borrowing rates.

This leaves me tactically short the 10 and longer part of the curve, looking to re-enter (I'm still a deflation believer) at a higher yield level. Technically, I don't see any stop points between 3.07% and 3.80%, so I'll probably we waiting a bit before re-entering the long-term Treasury market."

Educating ethnic minority children

TO BE NOTED: From Unicef:

Viet Nam: Educating ethnic minority children

reported incidents of children being trained or used by Palestinian militant groups. Children should not be used for political or military purposes

TO BE NOTED: From Unicef:

Situation of children in Gaza remains precarious 100 days after end of conflict GAZA, 28 April 2009 – More than three months after the cessation of hostilities in Gaza, the Israeli blockade and inter-Palestinian tension are hampering recovery efforts.

“Although the conflict ended 100 days ago, children in Gaza continue to suffer, both physically and psychologically,” said Patricia McPhillips, UNICEF Special Representative to the occupied Palestinian territory. “It is critical that supplies and materials needed for recovery and rehabilitation are allowed in.”

Ten per cent of the population in Gaza remains without electricity and nine per cent with little access to safe water. UNRWA primary health clinics in the south are recording significantly higher prevalence of water and sanitation-related infectious diseases, including acute bloody diarrhea, over the same period last year. For many households, food, fuel and cash are in short supply. According to the latest figures, 65 essential drugs were out of stock at Gaza’s Central Store.

Five children have died in unexploded ordnance-related incidents since the end of the 22-day conflict and at least 14 were injured in related violence.

The fighting took a particularly heavy toll on children’s psychological wellbeing. A recent United Nations study reaffirmed that mental health, anxiety and stress are the main health problems in Gaza.

Working with partners, UNICEF is ramping up psychosocial support to children and young people, providing mine-risk education in schools and communities, supporting remedial education, and organizing vaccination campaigns.

To improve maternal, newborn and child health, UNICEF is also focusing on improving skills of health care providers and caregivers –particularly in relation to managing severe malnutrition, breastfeeding and early detection of childhood illnesses.

However, lack of access continues to hamper recovery efforts.

Gaza has been under a blockade for 22 months. In March, an average of 132 trucks entered Gaza every day, compared with 475 in May 2007, one month before the Hamas takeover.

Since the cessation of hostilities:

• Destroyed and damaged homes, schools and health facilities can not be reconstructed or repaired due to Israeli restrictions against cement imports.
• Damaged water and sanitation systems still lack repair materials.
• UNICEF educational supplies, including teacher training and early childhood development kits, as well as recreational material including music instruments, have not been allowed in.

Children have also been affected by internal Palestinian tensions. Of particular concern is a dispute since 22 March affecting medical referrals for urgent care not available in Gaza. According to the World Health Organisation, at least three patients have died while waiting to exit Gaza for medical treatment. UNICEF welcomed news on Monday of positive moves on the ground to resolve the crisis.

In addition, there have been reported incidents of children being trained or used by Palestinian militant groups. Children should not be used for political or military purposes.

“Children are the innocent victims of this conflict,” McPhillips said. “All parties to the conflicts must put children’s interests first.”

Israel’s military operation from 27 December to 18 January killed or injured one out of every 225 Gazans. Some 431 children were killed and 1,872 wounded, accounting for roughly a third of all casualties. Thirteen Israelis were killed, including three civilians."

suing their banks because they claim they were not informed that they risked losing all their money should the bank go bust


04/28/2009 12:30 PM


German Bank Admits Giving Wrong Advice to Investors

Tens of thousands of German investors who had bought Lehman Brothers certificates lost their savings when the bank went under. Now one savings bank has admitted giving its customers the wrong advice and is offering compensation.

When the US bank Lehman Brothers went bust last September, tens of thousands of private German investors who had bought supposedly safe Lehman securities got burned. Since then, they have held protests and demanded compensation from their banks, claiming they were not warned of the risks.

"My bank is broke -- I am too": German investors protest outside a Citibank branch in Hamburg.

"My bank is broke -- I am too": German investors protest outside a Citibank branch in Hamburg.

Now a German bank has admitted that it gave customers the wrong advice relating to the purchase of Lehman Brothers certificates. According to a report on the German public television station ARD, the savings bank Frankfurter Sparkasse (Fraspa) said it had discovered that "in a very small number of cases the advice did not meet our quality standards."

In a statement confirming the television report later on Monday, the bank also said it had offered to compensate customers as a gesture of goodwill "in a small number of cases of financial hardship."

Fraspa began to compensate individual clients who had invested in Lehman certificates in March. It concentrated on investors who had been particularly hard hit when their securities lost their value after Lehman Brothers went bankrupt.

However consumer rights advocates have criticized the bank's approach to compensation. "Arbitrary compensation given at the whim (of the bank) is unacceptable," Hartmut Strube from the North Rhine-Westphalia Consumer Rights Center told ARD.

Many investors who were sold the Lehman certificates -- which were specially developed for the German market -- are suing their banks because they claim they were not informed that they risked losing all their money should the bank go bust. Many of the customers were pensioners who thought they were buying rock-solid investments. The banks are accused of deliberately targeting unsophisticated older clients who they dismissively referred to as "AD" customers, which stood for "old and dumb" in German. Unlike normal savings accounts, the securities were generally not covered by Germany's deposit protection scheme, which guarantees investments in the event of banks going bust.

Consumer rights organizations estimate that around 40,000 people in Germany lost money when Lehman went under. Some of the banks have already offered voluntary compensation to their clients. The Hamburger Sparkasse savings bank announced in February that it had already compensated 1,000 of a total of 3,700 investors affected by Lehman's collapse.

Fraspa was one of the German savings bank which sold the most Lehman securities, flogging around 5,000 Lehman certificates to their clients. The German branch of Citibank, which is now owned by France's Crédit Mutuel, and Dresdner Bank were also active in selling the certificates to their retail customers.

dgs -- with wire reports

15 % of total liabilities of 12 major US financial firms stood at $110 billion in March 2008 and had a projected upper bound of $250 billion in Jy 08


"A Framework for Assessing the Systemic Risk of
Major Financial Institutions
Xin Huang †
Hao Zhou ‡
Haibin Zhu §
April 2009

Abstract: In this paper we propose a framework for measuring and stress testing the systemic risk of a
group of major financial institutions. The systemic risk is measured by the price of insurance against
financial distress, which is based on ex ante measures of default probabilities of individual banks
and forecasted asset return correlations. Importantly, using realized correlations estimated from
high-frequency equity return data can significantly improve the accuracy of forecasted correlations.
Our stress testing methodology, using an integrated micro-macro model, takes into account dynamic
linkages between the health of major US banks and macro-financial conditions. Our results suggest
that the theoretical insurance premium that would be charged to protect against losses that equal
or exceed 15 % of total liabilities of 12 major US financial firms stood at $110 billion in March 2008
and had a projected upper bound of $250 billion in July 2008."

I believe we are disclosing a national network of actors who often acted in concert and did this all across the country

TO BE NOTED: From the NY Times:

"May 1, 2009
Fraud Charge in N.Y. Pension Case

An inquiry into corruption at the New York State pension fund continued to broaden nationwide on Thursday when a top consultant to pension funds around the country was charged with a fraud-related felony by the office of Attorney General Andrew M. Cuomo.

The consultant, Saul Meyer of Aldus Equity, a Dallas-based firm, was also charged with violations of securities laws by the Securities and Exchange Commission as part of what the agency called “a multimillion-dollar kickback scheme involving New York’s largest pension fund.” The commission also charged Aldus Equity with multiple securities violations.

Mr. Meyer, 38, is a co-founder of Aldus, which has advised several of the nation’s largest pension funds, including those overseen by the states of New York and Oklahoma as well as the cities of Los Angeles, San Antonio and Fort Worth. Aldus is also among more than a dozen private equity consultants approved by the board of Calpers, the giant California pension fund, though its staff has not used Aldus’s services.

Mr. Meyer surrendered to the authorities in New York and pleaded not guilty to the fraud-related felony, a violation of the Martin Act, a sweeping state securities statute, on Thursday in Manhattan Criminal Court. A judge ordered him released on $200,000 bail.

In a teleconference on Thursday, Mr. Cuomo said his investigation, which is continuing, had uncovered what amounts to a conspiracy involving politicians, professional investors and consultants to defraud public pension funds in New York and other states by paying millions of dollars in kickbacks in exchange for access to the funds. Investment firms reap lucrative fees by managing portions of the funds.

“I believe we are disclosing a national network of actors who often acted in concert and did this all across the country,” Mr. Cuomo said.

James Clarkson, director of the S.E.C.’s New York regional office, said: “Aldus was chosen by the pension plan because of Aldus’s willingness to illegally line the pockets of others. When another investment manager refused to pay kickbacks, that firm was rejected and Aldus cashed in.”

In the wake of the charges, many Aldus clients were scrambling to sever their ties with the firm. Gov. Bill Richardson of New Mexico, caught up in a public investment scandal in his state, ordered the New Mexico State Investment Council, which manages the state’s trusts, to fire Aldus on Wednesday; the comptrollers of New York State and New York City took similar actions on Thursday.

“I learned years ago that it’s far easier for a prosecutor to file a complaint than to prevail at a trial,” said Paul L. Shechtman, Mr. Meyer’s lawyer. “Time and the evidence will show that Saul Meyer did nothing wrong.”

In a statement, a lawyer for Aldus, Matthew D. Orwig, accused the S.E.C. of conducting a “trial by news release” and called its action “appalling and careless.”

Mr. Cuomo’s office and the commission have been investigating Alan G. Hevesi, the former New York State comptroller, since 2007, and the S.E.C. recently began scrutinizing pension transactions in California. Federal investigators have also been looking into public investment funds in New Mexico. The tentacles of the various investigations increasingly appear to lead back to one another.

Aldus is accused of helping Daniel Hevesi, Mr. Hevesi’s son, profit from a deal in New Mexico at the same time that the New York comptroller’s office, then run by his father, agreed to increase by $200 million the amount of pension money overseen by Aldus.

Laura A. Brevetti, a lawyer for Daniel Hevesi, said on Thursday that her client did not have “any knowledge of a so-called quid pro quo arrangement for his benefit.” Bradley D. Simon, a lawyer for Alan Hevesi, said his client did not engage “in a quid pro quo to benefit his son.”

Hank Morris, a former political consultant to Alan Hevesi, also received money as part of deals in New Mexico and California. Mr. Morris was accused last month in an indictment of demanding millions of dollars from investment firms in exchange for access to the New York State pension fund.

He has pleaded not guilty.

“We are purposefully and aggressively looking to cooperate with other enforcement agencies across the country,” Mr. Cuomo said. “This is sort of like when you pull a thread on the sweater and that one thread starts to unravel the entire fabric.”

“We’re pulling threads and it turns out the other end of the thread is in New Mexico or Connecticut or Illinois or in California,” he said.

In court filings, the S.E.C. has described a range of improper transactions undertaken in connection with an investment pool run by Aldus for the New York State pension fund. Among other things, Aldus agreed to split fees with Mr. Morris as part of its advisory deal with the pension fund, the filings said.

Deutsche Bank, which had owned a significant minority interest in Aldus, said on Thursday that it had exercised an option to terminate its stake.

According to the complaint from Mr. Cuomo’s office, Mr. Meyer sought to sever his deal with Mr. Morris in 2006 when Deutsche Bank was considering buying a stake in Aldus. He asked a hedge fund manager to intercede on his behalf and sound out Mr. Morris about ending their arrangement.

The complaint said that Mr. Morris told the hedge fund manager: “Tell that little peanut of a man that I can take the business away as easily as I provided it.”

Mr. Cuomo said on Thursday there was more to come. “It’s an ongoing investigation,” he said, “and I would say, ‘Stay tuned.’ ”

The LTTE is a terrorist organisation that is now using innocent civilians as human shields.


Times Online Logo 222 x 25

April 30, 2009

Victory without humanity can be no triumph

We have seen for ourselves why an international relief effort is now urgently needed in Sri Lanka

Recent demonstrations in London, Paris and elsewhere have brought the situation in Sri Lanka to wide public attention. But the island's civil war has been running for 28 years. The Tamil minority in the north has long argued that it is marginalised politically and economically.

In the early 1980s the LTTE (the Liberation Tigers of Tamil Eelam, or Tamil Tigers) started fighting for an independent Tamil state. By 1986 it had full control of the northern Jaffna peninsula. What began with violent protest soon led to civil war - to the majority the assertion of military power by a sovereign government against a murderous terrorist organisation, to the minority the abuse of violent power by the State. Repeated attempts to find a political solution ran aground.

The Government of Sri Lanka now believes that it is in the final stages of that campaign. Its military advance is undoubted. The LTTE leadership appears trapped in an ever-diminishing strip of land, now only a few square kilometres. But despite its size, at least 50,000 civilians remain there with the LTTE, the others having fled to “screening centres” and IDP (internally displaced people) camps. So civilian suffering and loss of life continues, and the chances of any kind of political settlement recede.

We visited Sri Lanka yesterday for a simple reason: time is running out for those trapped or displaced by the fighting. Our mission was simple too: to make, in person, the case for the humanitarian relief that the UN, the EU and the G8 have called for.

We saw the situation for ourselves in Vavunja, close to the fighting, where we visited displaced Tamils and saw the newly arrived French field hospital. We heard stories of individual human tragedy: civilians forced by the LTTE not to leave its stronghold, deaths and injuries from bombs and artillery, and families separated, desperately seeking news of their loved ones - fears from the recent past, fears for their present situation and fear of what might happen in the future.

The UN and EU have spoken loud and clear about the immediate needs. First, both sides must act to protect civilians inside the so-called no-fire zone (which has become the opposite). We have called for some time for the Government of Sri Lanka to set a ceasefire in place and for the LTTE to allow all civilians under its control to leave the conflict area safely and as quickly as possible, preferably under UN auspices.

The Government of Sri Lanka's announcement of a cessation of heavy military combat is a welcome step towards the protection of civilians. Similar announcements have been made in the past. This one must be implemented and kept to. The UN had an agreement with the Government to send a mission into the conflict zone to help to assess and address civilian needs. That agreement has not been implemented. It must be.

The second concern is over arrangements and conditions for the displaced persons fleeing the zone. Here the refusal to allow the UN, the aid agencies, and the media full and proper access is quite wrong. The Government wants to “screen” civilians escaping the fighting to ensure that LTTE fighters cannot get into the wider community to continue the struggle using terrorist means. But it is vital that this process is transparent - the Government must allow the UN and other international agencies proper access to all stages of the screening process.

Third, conditions for civilians who have fled the fighting are an important concern. Any country would struggle with 200,000 IDPs. When these include many who are injured and traumatised, as well as the old and children, this is doubly the case. In the past, the Sri Lankan Government has been unwilling to let international aid agencies get involved directly. But without a properly managed, resourced and co-ordinated humanitarian aid effort, their suffering will only intensify. That is why we fully supported the visit this week to Sri Lanka of Sir John Holmes, the UN Under-Secretary General for Humanitarian Affairs. Within the IDP camps, there must be better medical facilities and improved access to food and shelter. Britain and France have made commitments of money and medicine and shelter. So have others. But there needs to be proper access.

Finally, while our focus today is short term, we cannot ignore the long-term context. The Government of Sri Lanka is an elected one and is rightly held to the high standards expected of members of the UN - so all its obligations under international humanitarian law must be respected. To the LTTE we repeat the EU's longstanding position that violence will not serve the Tamil people and affirm that only the renunciation of violence will bring progress.

In the future, the communities of Sri Lanka will have to find ways to live together. That will not be achieved through military victory alone. The deep-seated sense of political alienation that has fuelled Tamil resentment towards successive governments in Sri Lanka must be addressed through a political process of integrity and decency. We are under no illusions about how entrenched positions are on either side. The Government of Sri Lanka believes it is days away from the victory that it has sought for three decades, but at the cost of too many civilian lives. The LTTE is a terrorist organisation that is now using innocent civilians as human shields. The gravity of the situation means that the international community has a duty to respond and to do all that we can to halt the suffering.

People ask what does it have to do with us? As members of the UN Security Council we do not shy away from the responsibility of sovereign governments and the international community to protect civilians. Hillary Clinton, the US Secretary of State, has joined us in describing the failure to protect civilians in Sri Lanka as truly shocking. Yesterday we took our plea direct to the Sri Lankan Government. In its moment of triumph it must show the humanity and self-interest to find a way to win the peace.

Bernard Kouchner is France's Minister of Foreign Affairs; David Miliband is Foreign Secretary"

That brings the 4-week average down for the third consecutive week and puts it 3.3% below the peak reached April 9

TO BE NOTED: From Econbrowser:

April 30, 2009

Further progress for initial claims for unemployment insurance

The Labor Department reported today that initial claims for unemployment insurance fell by 14,000 during the most recent available week. That brings the 4-week average down for the third consecutive week and puts it 3.3% below the peak reached April 9.

Black line: seasonally adjusted new claims for unemployment insurance, weekly since January. Blue line: average of 4 most recent weeks as of each date.

That ongoing drop in the 4-week average is noteworthy because in each of the last 5 recessions, once the new claims number began declining from its peak value reached during the recession, the NBER subsequently dated the recovery from that recession as beginning within 8 weeks.

Black line: 4-week average of seasonally adjusted weekly initial claims for unemployment insurance, from Department of Labor via Webstract. Vertical lines: first week of the first month of a business cycle expansion as subsequently dated by the National Bureau of Economic Research.

Reasoning as in my last discussion of these data, one can try to judge how meaningful the latest numbers might be as follows. If we leave out the 1970 recession, there are 230 weeks in which the NBER declared the economy to have been in recession during the 5 recessions of 1974, 1980, 1982, 1990, and 2001. In 22 of these weeks, we saw as big a drop as we've seen this month, namely, the 4-week average dropped by more than 3.3% over a 3-week period. Of these 22 favorable readings, 11 turned out to be part of the final move out of recession, while in the other 11, new claims turned back up to reach a subsequent higher peak. Thus, if all you had to go on was the data on new unemployment claims and its behavior in previous recessions, you might conclude that there's a 50% chance that an economic recovery will have started by the beginning of June.

Technorati Tags: , , ,

Posted by James Hamilton"

God in His own wisdom gave you DRC as your country, and God is no longer in the process of creating more countries

TO BE NOTED: From Irin:

ZAMBIA-DRC: Free trip back home only 'til December

Photo: Nebert Mulenga/IRIN
Rosta Kafwimbi wants to harvest her entire maize crop before returning home
KALA REFUGEE CAMP, 30 April 2009 (IRIN) - Thousands of Congolese who sought refuge in Zambia during years of fighting in their country have been warned that they have until the end of December to get a free trip back home.

Most refugees are reluctant to return to the Democratic Republic of Congo (DRC), saying they feel it is not safe to go back because fighting continues in some parts of the country; others are waiting to harvest their maize crops in the two refugee camps, Kala and Mwange, where they are living in northern Zambia.

But the Zambian government seems to be losing its patience with the Congolese refugees. "God in His own wisdom gave you DRC as your country, and God is no longer in the process of creating more countries," Misheck Bonshe, Zambia's deputy minister of the interior, told refugees at Kala camp in Luapula Province, northern Zambia, this week.

"All the problems which made you leave your beautiful country are now over, and the safety of your return has now been guaranteed. Your own government has made arrangements for your safe return. You can no longer continue to stay in camps; this country belongs to Zambians."

''All the problems which made you leave your beautiful country are now over, and the safety of your return has now been guaranteed''
Years of armed conflict in the vast, mineral-rich former Belgian colony forced thousands of Congolese to flee to neighbouring countries, but few have been upbeat about going home even though relative peace has returned to their country.

Zambia houses 45,307 Congolese refugees; of these, 28,591 reside in camps and settlements, 1,716 in urban areas, and an estimated 15,000 are self-settled. A total of 7,323 Congolese refugees were repatriated during 2007, and a further 9,692 went home in 2008.

In January 2009, about 18,549 camp-based Congolese refugees expressed willingness to repatriate, prompting the UN Refugee Agency (UNHCR) to launch the final phase of the repatriation programme, which is expected to begin on 9 May 2009 and end in December. But, with barely a week before the project kicks off, only 129 have registered.

Bonshe said the Zambian government would close the two camps in northern Zambia, housing a total of 25,095 Congolese refugees from the Katanga Province districts of Tanganyika and Haut Katanga, in 2009.

He warned that the refugees who chose to remain and were still in Zambia by the end of the repatriation programme would lose protection and be subjected to the country's immigration laws, and would then be dealt with as illegal immigrants.

Zambia's immigration laws require any person wishing to settle in the country after being stripped of their refugee status to possess a professional qualification and obtain a work permit, but Bonshe said most of the refugees in the camps had no professional qualifications.

Anderson Nakaya, 42, a Congolese refugee, has lived in Zambia since Kala camp opened in 2000 and earns a living making reed mats, which he sells in the camp and the surrounding host community for US$2 each.

"Why I wouldn't want to go back to Congo? First, I don't know whether there is a market for my products there, and also I have heard many rumours of fighting in my country. My family is afraid - I have five children, all born in Zambia, and I wouldn't like them to go through what I went through when escaping to come here," Nakaya told IRIN.

Another Congolese refugee, Rosta Kafwimbi, a mother of four, said she was waiting to harvest her maize crop. "We have been staying well, we are well-fed and we have not experienced a problem, but we have to go; I am only waiting to finish my maize harvest, then I go ... Maybe in October we will be gone."

Derrick Fee, head of the European Union delegation in Zambia, a major donor to the refugee repatriation programme, told camp residents: "We are going to fund the repatriation only for a limited time and if you are to benefit, you must act within this limited time."

At the peak of Zambia's hospitality in the 1990s, the country accepted about 300,000 refugees fleeing the Angolan civil war and conflicts in the Great Lakes region. This number has dropped to about 86,000 - of which about 56,000 live in settlement camps - since the repatriation of Congolese, Rwandese and Angolan nationals began.

Congolese make up the majority of refugees (over 45,000) in Zambia, followed by Angolans (27,000) with the remainder being from Rwanda, Burundi and Somalia. "

Reference map of Zambia

Map of 'Reference%20map%20of%20Zambia'

  • Source(s):
    - United Nations Cartographic Section