definitive winners and losers, which is exactly the opposite of what the government wanted to do

TO BE NOTED: From Bloomberg:

"Short Selling of Banks Accelerates as New Financial Stress Test

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By Edgar Ortega and Elizabeth Hester

May 4 (Bloomberg) -- Short sellers, the bane of Wall Street executives last year, are back.

The number of Citigroup Inc. shares borrowed and sold short increased sixfold since Feb. 27, the day the U.S. Treasury announced it would convert some of its preferred shares in the New York-based bank into common stock.

Short interest in Bank of America Corp., MetLife Inc. and American Express Co. climbed more than 40 percent in the same period, according to data compiled by Bloomberg. In total, short sales of the 18 publicly traded financial companies undergoing government stress tests were twice as high on April 15 as they were at their peak last year in July, two months before Lehman Brothers Holdings Inc. collapsed.

“People are either positioning themselves for the potential of a preferred-to-common conversion, or they have an increased perception of risk in these companies,” said Andrew Baker, an equity strategist at Jefferies & Co. in New York.

The Federal Reserve plans to release results of the tests on May 7. At least six of the 19 firms under review will require additional capital to absorb losses if the recession worsens, people briefed on the preliminary results said last week.

Short sellers borrow shares and sell them hoping to make a profit by replacing the stock after prices fall.

Douglas Cliggott, manager of the Dover Long/Short Sector Fund in Greenwich, Connecticut, said he is shorting some bank stocks on expectations they will lose value as earnings deteriorate. New York-based hedge fund manager Daniel Loeb is betting that financial firms needing more capital will exchange preferred shares for common to bolster their balance sheets. He’s seeking to profit from the price difference between the two securities by buying preferreds and shorting the common.

Converting Preferreds

Citigroup is in the process of converting as much as $52.5 billion of preferred, including $25 billion held by the government. Charlotte, North Carolina-based Bank of America, the largest U.S. lender by assets, will change $25 billion to $45 billion of preferred shares into common to raise capital, said Richard Staite, an analyst at Atlantic Equities LLP in London, in a report to clients last week.

Wells Fargo & Co., based in San Francisco, and three smaller rivals -- BB&T Corp., SunTrust Banks Inc. and Regions Financial Corp. -- also may have to turn their preferred shares into common as a result of the stress tests, according to analysts at New York-based Creditsights Inc.

To entice investors to accept common shares, companies may offer preferred holders a premium to the current price, said Phillip Jacoby, a managing director of Stamford, Connecticut- based Spectrum Asset Management Inc., which oversees $6 billion. Citigroup is offering holders of the $2.04 billion 8.5 percent Series F preferred $21.70 worth of common shares, 24 percent more than their price of $17.48 as of May 1.

Tangible Common Equity

By exchanging preferred for common, banks would be able to increase their tangible common equity, or TCE, a measure of how much capital a firm has to withstand losses. The financial yardstick strips out intangible assets, goodwill -- the premium above net assets paid for acquisitions -- and preferred stock, including shares issued to the U.S. Treasury.

Regulators want TCE to equal about 4 percent of assets, up from an earlier target of 3 percent, people with knowledge of the situation said last week. Seven of the banks under review have ratios of less than 4 percent, company reports show.

“Banks are going to need more capital,” Jacoby said. “Treasury doesn’t care about dilution. All they care about is financial mass and loss-absorption ability to offset what could be more nonperforming loans and writedowns in the future.”

‘Vicious Cycle’

The increase in short selling occurred as the S&P 500 Financials Index posted its best two months since 1989, when Standard & Poor’s started keeping records. The 80-member index has surged 41 percent since Feb. 27.

Stephen Wood, who helps manage $151 billion as senior strategist at Russell Investments in New York, said the stress tests will narrow the breadth of the rally.

“It will end up resulting in a differentiation of the shares,” Wood said. “It will be a vicious cycle for the companies that are not doing well. The share price will go down in anticipation of dilution with the issuance of new shares.”

Short sellers were accused last year by Wall Street chief executive officers, including Lehman’s Richard S. Fuld and Morgan Stanley’s John J. Mack, of using abusive tactics to attack firms.

SEC Ban

Fuld, 63, told congressional investigators on Oct. 6, less than a month after Lehman filed the biggest bankruptcy in history, that short sellers played a role in a “storm of fear” that led to the demise of the 158-year-old firm. Mack, 64, helped persuade government officials in the days following Lehman’s collapse to suspend short selling, which he said was sending his New York-based firm’s shares into a free fall.

The U.S. Securities and Exchange Commission imposed an emergency ban on bearish bets on more than 900 finance-related companies for a three-week period that ended Oct. 8. The agency also tightened requirements on delivering borrowed securities and imposed rules that require hedge funds to privately report short sales to the agency.

The SEC will convene a meeting May 5 to discuss proposals for restricting short sales, including an outright ban when a stock’s price declines.

“The ban last year crushed a lot of hedge funds and their investment strategies,” Perrie Weiner, a partner at the law firm DLA Piper in Los Angeles, said in a telephone interview. “There are much cooler heads now. They are looking at ways by which they can say, ‘We’ve got a better regulated market, and we are on the road to recovery.’”

Short Interest Rising

Short interest rose after Feb. 27 for 14 of the 18 publicly traded companies under review by the Fed, according to Bloomberg data. Citigroup’s increase was the biggest at 509 percent, followed by New York-based insurer MetLife at 66 percent, American Express at 44 percent and Bank of America at 42 percent. The average increase for the 18 companies was 47 percent. It was 201 percent excluding Citigroup.

Representatives for Citigroup, Bank of America, MetLife, and American Express declined to comment.

Detroit-based GMAC LLC, the auto and mortgage lender that received a $6 billion government bailout and is one of the 19 companies undergoing stress tests, wasn’t included in the Bloomberg data because it isn’t publicly traded.

The total short interest for the 18 firms as of April 15, the last date for which New York Stock Exchange data are available, was 2.1 billion shares, or 7.1 percent of those available for trading. That compares with 1.05 billion shares on July 15, or 4 percent of those available for trading.

‘Winners and Losers’

Excluding Citigroup, which accounted for about half of the increase, the total stood at 866.1 million shares on April 15, higher than all but one period last year and 2.9 percent shy of the July peak.

The number of shares sold short in Morgan Stanley totaled 52 million on April 15. While that’s down 12 percent since Feb. 27, it’s higher than the 45.3 million shares on Sept. 15, when Mack was lobbying lawmakers and regulators for a ban.

The large short positions will fuel volatility in stock prices when regulators announce the results of the stress tests, said Matthew McCormick, a fund manager at Cincinnati-based Bahl & Gaynor Investment Counsel Inc., which oversees $2.1 billion.

“With that massive amount of short interest, what those traders are saying is that they feel this process is not going to be managed well,” said McCormick, whose firm doesn’t own any bank stocks. “There are going to be definitive winners and losers, which is exactly the opposite of what the government wanted to do.”

Shorting Citigroup

Loeb’s Third Point LLC, which oversaw $1.8 billion as of April 1, was among investors shorting Citigroup stock and buying the preferreds. While the bank’s delay in completing the exchange has eroded his returns, Loeb told investors last week that he expects to reap gains when other banks swap preferred for common stock.

“We expect to see more opportunities in this area as restructurings create more movement in markets,” Loeb told his investors in an April 28 note. He confirmed the authenticity of the letter and declined to comment further when contacted by Bloomberg News.

Cliggott, whose fund beat 97 percent of its peers last year, according to Bloomberg data, said he’s short New York- based American Express and Goldman Sachs Group Inc. because of his outlook for diminished earnings for the two firms. He unwound his short positions in New York-based JPMorgan Chase & Co. and Wells Fargo, saying the outcome of the stress tests for those banks is “too big of a wildcard.”

“There are a fair number of people in the marketplace who believe many financial stocks are extremely expensive given the rapid contraction of earnings,” Cliggott said, citing the decrease in leverage in the industry as well as deterioration in consumer credit. “The government has added tremendous uncertainty about the future of the U.S. financial sector.”

To contact the reporter on this story: Edgar Ortega in New York at ebarrales@bloomberg.net; Elizabeth Hester in New York at ehester@bloomberg.net"

"Firms That Got Bailout Money Keep Lobbying "

Just as I've been saying, from the NY Times:

"Firms That Got Bailout Money Keep Lobbying

By DAVID D. KIRKPATRICK and CHARLIE SAVAGE

WASHINGTON — The financial giant Bank of America says it is no longer lobbying the federal government about its unfolding bank bailout. After receiving $45 billion in bailout money, lobbying was just too unseemly.

“We are very sensitive to the fact that we have taxpayer money,” said Shirley Norton, a spokeswoman for the company.

Citigroup, recipient of another $45 billion, made the opposite call. While trying to keep a low profile, the company is still fielding an army of Washington lobbyists working on a host of issues, including the bailout. In the fourth quarter, it spent $1.77 million on lobbying fees, according to its lobbyists’ filings. ( YES )

The different approaches from the two banks that have received the most money underscores the growing quandary facing private companies, which increasingly deal with the federal government not only as rule-maker but also as shareholder, lender and trading partner.

Pressing federal policy makers risks the appearance of recycling public money to advance a private agenda, while staying on the sidelines could put a company at a comparative disadvantage.( A HYBRID DILEMMA )

Citigroup and Bank of America are hardly the only two financial firms to confront the issue. During the last three months of 2008, at least seven other firms receiving bailout funds — American Express, Capital One, Goldman Sachs, KeyCorp, Morgan Stanley, PNC and Bank of New York Mellon — all lobbied the government about the bailout, according to a review of their most recent disclosure reports. ( GEE )

The automakers that received billions under the same program lobbied as well( WOW. WHO KNEW? ): including General Motors; its financing arm, GMAC; and Cerberus Capital Management, the private equity firm that controls Chrysler. Other recipients of federal financing also lobbied Congress, the Treasury or both about other matters.( WHAT A SURPRISE )

The American International Group, taken over by the government during an injection of more than $40 billion last fall to prevent the company’s collapse, has discontinued all its federal lobbying; it is now in effect government-owned. But its former executives continue to lobby.( YEP )

Its former chief executive, Maurice R. Greenberg, ousted a few years ago amid allegations of securities fraud, is leading a group of shareholders lobbying for a chance to renegotiate the terms of the government takeover or buy back a bigger stake in the company.

According to a recent filing, A.I.G. shareholders paid $90,000 in the fourth quarter to a lobbying team at Ogilvy Government Relations that includes the Republican lobbying powerhouse Wayne L. Berman, a former assistant secretary of commerce under the first President George Bush and a major fund-raiser for the second.

The group also includes three Democrats who had been top aides to the House speaker, Nancy Pelosi; Senator Edward M. Kennedy; and the former House majority leader, Richard A. Gephardt. (Mickey Kantor, secretary of commerce under President Bill Clinton, has advised the group as a lawyer as well.)

Lawmakers, troubled by the prospect of taxpayer-subsidized influence-peddling, are threatening to crack down. Senator Dianne Feinstein, a California Democrat, and Senator Olympia J. Snowe, a Maine Republican, are pushing legislation that would explicitly bar companies from using bailout funds for lobbying or campaign contributions. ( YOU THINK? )

Although hard to enforce, the measure would put banks on notice that aggressive lobbying could set off a negative reaction from Congress.( NOT LIKELY )

“That taxpayer dollars intended to stabilize the economy could find their way into the bank accounts of lobbying firms” is “completely unacceptable,” Ms. Feinstein said in a speech supporting the measure.

On Friday, President Obama issued his own call for more oversight and transparency, citing “companies that have received taxpayer assistance then going out and renovating bathrooms or offices, or in other ways not managing those dollars appropriately.” This was an apparent allusion to reports of office renovations by the former chief executive at Merrill Lynch, a recent acquisition by Bank of America whose heavy losses led to an expanded bailout for the bank.

Bankers, though, defend their right to a voice in public policy debates about the industry’s future. “Nobody mentioned that you are giving up your Constitutional right to petition the government” when accepting federal money, said Edward L. Yingling, president of the American Bankers Association.( HE'S GOT A POINT )

He acknowledged, however, that Citigroup and Bank of America were in a more ambiguous position than the rest of the roughly 200 banks that accepted money from the Treasury and agreed to pay it interest as part of the bailout program. While most banks are required to demonstrate financial health to qualify for the deal, the two giants received $90 billion in emergency measures to prop them up and agreed to give the government a larger say in management.

The two banking behemoths had entered a “middle ground( THEY'RE ALL HYBRIDS. THIS IS BS ),” Mr. Yingling said, between the other private banks accepting federal investments and the three financial firms under full federal control: A.I.G. and the failed mortgage giants Fannie Mae and Freddie Mac. “I would expect that institutions in that middle ground would be well aware that they need to be careful about the tone and manner in which they lobby,” he said.

Citigroup and Bank of America say internal policies prohibit the use of any bailout money for lobbying. Neither, however, has stopped pressing its interests in Washington, albeit more quietly. ( YES )

Though Bank of America says it has stopped lobbying about the bailout legislation — the Troubled Asset Relief Program, or TARP — it continues to lobby on other matters. The bank spent about $1 million on federal lobbying in last year’s fourth quarter, including $820,000 for its own lobbyists, according to filings.

Ms. Norton, the spokeswoman, declined to comment on whether Bank of America was lobbying on other financial crisis proposals, such as creation of a government-controlled “bad bank”( I SAID THAT THIS WOULD HAPPEN ) to take over toxic securities.( WHY NOT? )

Nicholas Calio, Citigroup’s top lobbyist, handled Congressional relations for both the first and second President George Bush. Its team of outside lobbyists has also included a former Congressional liaison for President Clinton, a former chairman of the Federal Deposit Insurance Corporation, a former deputy assistant Treasury secretary and the veteran Democratic strategist Steve Elmendorf.

The two banks’ problem is an increasing one for the industry, said Scott Talbott, top lobbyist for the Financial Services Roundtable. “There is a TARP blowback problem,” he said. "

This was all predictable. I predicted it in the beginning of October. This is our system. This is what happens with a Hybrid Plan, and why Nationalization, while not perfect, is preferable to Hybrid Plans like TARP or a Bad Bank.

Below we highlight current credit default swap prices for 24 financial firms across the globe.

From Bespoke:

"Financial Company Default Risk

While default risk has dropped dramatically( GOOD NEWS ) for the financial companies listed below, it's still interesting to see how the firms compare with each other on the CDS front. Below we highlight current credit default swap prices for 24 financial firms across the globe. These prices represent the cost per year to insure $10,000 worth of debt for 5 years. As shown, default risk is the highest for Morgan Stanley, followed by Goldman Sachs, American Express, UBS, and Citigroup. The premium against default for JP Morgan is the lowest among US financial firms, with Wachovia, Wells Fargo, and Bank of America not far behind. BNP Paribas and Credit Agricole have the lowest default risk of the 24 financial firms shown.

" Either way you cut this, it's a lie. ": Hand Me A Knife

Yves Smith on Paulson. No mincing of words here. I'm giving her the last word. She insists on it, and usually deserves it:

"Paulson Now Admits Mendacity

As readers may have noticed, we have gotten exercised about how brazenly the Treasury has been in lavishing cash on favored interests. Felix Salmon took up the theme, admittedly with less choler:

There does indeed seem to have been a visible change in Treasury policy since the election. Until that point, it cared a little about optics. Now, it's giving monster bailouts to the likes of AIG and American Express; it's dragging its feet on homeowner relief; and in general Hank Paulson's Wall Street buddies seem to be getting much better access than anybody in Detroit. And no one's even trying very hard to defend these actions in public: they know they'll be out of a job in January anyway, so they're just doing what they want to do and what they feel is right, without caring much whether anybody else agrees with them

Ed Harrison provided an alert on another bit of Treasury dishonesty, although the admission was coded, so you'd have to be paying attention to catch it. From the text of Paulson's remarks today (boldface ours):

During the two weeks that Congress considered the legislation, market conditions worsened considerably. It was clear to me by the time the bill was signed on October 3rd that we needed to act quickly and forcefully, and that purchasing troubled assets—our initial focus—would take time to implement and would not be sufficient given the severity of the problem. In consultation with the Federal Reserve, I determined that the most timely, effective step to improve credit market conditions was to strengthen bank balance sheets quickly through direct purchases of equity in banks.

Either way you cut this, it's a lie. Either Paulson let his intentions be misrepresented via his silence, or he is now falsely claiming to have changed direction earlier than he did. Nouriel Roubini has claimed that Treasury was resisting the idea of of inserting language that would allow for capital injections into banks but that some members of Congress thought it was necessary, and put statements into the Congressional record via floor debates to allow for that interpretation. Roubini further contends that Paulson changed his mind only as a result of the adverse market reaction after the bill was signed.

But if Roubini is wrong and Paulson's statement is accurate, it is still completely in keeping with the conduct of an Administration that told the public that there were weapons of mass destruction in Iraq. The bill was drafted to be extraordinarily vague and sweeping, and yet did not clearly give Paulson the authority he now says he realized back then that he needed while it was still being renegotiated.

As I said in a post titled, "Paulson's Cosmetic, Cynical Financial Regulation 'Reform'":

Why is it that the media feels compelled to take pronouncements from government officials more or less at face value? By now, they ought to know that if someone from the Bush Administration is moving his lips, odds are it's a lie.

Nothing has changed, neither the dishonest of the Bush crowd nor the reluctance of the media to call them on it. "

The last word today on this.

"Paulson changes focus to pumping up banks."

Here's Ruthie Ackerman on Forbes:

"Treasury Secretary Henry Paulson did a lot more backpedaling than explaining in his Wednesday update of the U.S. government's $700.0 billion financial rescue package.

The original plan was to use the money in the Troubled Assets Relief Program to purchase, as the name suggests, troubled assets, especially mortgage-backed securities. Well, not anymore, Paulson revealed. Instead, the administration decided that buying troubled assets of financial institutions at the current time was "not the most effective way" to use the bailout package.

The government will use $250.0 billion of the money to purchase stock in banks it deems in need of a boost and encourage them to resume more normal lending. In addition, the focus of the program will change: It will now support financial markets, which deal with consumer credit in areas such as credit-card debt, auto loans and student loans.

On Wednesday, reports circulated that American Express (nyse: AXP - news - people ) was seeking $3.5 billion in funds from the government, after announcing on Monday it would become a commercial bank, making it eligible to receive Federal Reserve funding. (See "American Express Banks On The Fed.") PaulsonIt will now support financial markets,which deal with consumer credit in areas such as credit-card debt, auto loans and student loans.

What I like about her report is that she clearly suggests that there is an unusual amount of ambiguity in this presentation.

1) It will now support financial markets ( Meaning what? )
2) did not clearly delineate what the requirements would be for a firm to become a bank holding company ( Not good )

Here's Mark Thoma, saying basically the same thing:

"Here is part of Treasury Secretary Paulson's prepared remarks this morning. It looks like they are moving in the right direction, but all the statements about "we are designing," "we are carefully evaluating," "we are looking at," "we are examining strategies," etc. leave the impression that they are still behind the curve. For example, he says "we are examining strategies to mitigate mortgage foreclosures," but why are they still trying to figure out how to design the program? This program shouldn't be in the design phase, it should already be in place: "

"Can I have myself declared to be a bank? ": Redux

This must be a worldwide movement. Robert Peston on the BBC:

"For me, the most interesting story of the past 24 hours is that VW, the stressed German carmaker, is trying to raise €2.8bn (£2.2bn) from the European Central Bank.

It plans to raise cash from the ECB in exchange for €2.8bn of securities backed by car loans.

In effect, the ECB - and ultimately taxpayers in the eurozone - would be financing purchases of automobiles.

Crikey, is all that comes to mind.

What next?

Perhaps Marks & Spencer will be able to dump its unsold jumpers and knickers on the Bank of England, in exchange for a bit of useful short-term credit (the contraction in retail sales for October reported today by the British Retail Consortium is the first fall that the trade body has ever reported that wasn't caused by special factors, such as the timing of public holidays).

Or perhaps the Bank of England will allow Taylor Wimpey - which reported pretty dire results again today - to swap its unsold houses and land for some Treasury bills via a re-worked special liquidity scheme."

Or how about this from Yves Smith:

"Does Everybody Get To Be a Bank? Now Amex Joins the Club

James Carville said that when he died, he wanted to come back as the bond market, that way he could intimidate everybody. If asked today, i suspect he'd ask to come back as a bank. They get all the bennies.

Seriously, Amex becoming a bank? This is patently ludicrous. Amex poses no systemic risk, so they don't have a case for needing access to the Fed window. They once owned a bank in connection with their wealth management business, but that is a thing of the past.

The process has now become ludicrous. Amex gets to become a bank to help with its credit card business, which in case you have not been paying attention, has been cutting credit lines to existing customers en masse (I have heard of a case with eight figure net worth, infrequent user, impeccable credit score, who nevertheless had his credit line cut by 50%).

And since no credit card bonds were sold last month, the purpose of this exercise is so that Amex can borrow against its credit card receivables at the Fed window at preferred rates. I am not making this up.

Willem Buiter once said that US regs permitted the Fed to lend against any collateral, including a dead dog. We are getting perilously close to that.

America needs to get its consumption down, but apparently the powers that be are going to use any trick possible to try to keep the American shop-a-holic habit going.

From Bloomberg:

American Express Co. won Federal Reserve approval to convert to a commercial bank."

Now, here's my post from a while back:

Wednesday, October 22, 2008
"Quite frankly, it is a very attractively priced alternative,"

It doesn't get much clearer than this that our credit stimulus plan without a stimulus was negotiated by the government with far too generous a deal. From the Washington Post:

"When the Treasury's program was announced last week, some bank executives said they didn't need the money and resented the federal intrusion. But in a number of earnings calls and interviews in recent days, several bank executives were more receptive.

The federal deal is relatively sweet in financial terms -- it requires banks to pay 5 percent interest annually on the investment over the first five years -- and some bankers said they would not pass it up.

A number of local banks are strongly considering applying for the Treasury program.

Virginia Commerce Bank, which has 26 branches and $2.2 billion in deposits, said it is looking to add $25 million to its capital base by the end of the year. In the past, the company said it was considering issuing stock to raise that capital, but the bank said yesterday that it may apply to the Treasury's program.

"Quite frankly, it is a very attractively priced alternative," chief executive Peter A. Converse told analysts."

How about this, from the NY Times:

"Only a week after the government announced $250 billion in capital for banks, some investors are getting creative in their suggestions on who should qualify.

David Bullock, managing director of Advent Capital Management, wrote a letter to the chief financial officer of GMAC on Tuesday, suggesting that the former General Motors financing arm turn itself into a bank holding company so that it can grab some of the cash.

In Europe, Mr. Bullock pointed out, parts of the auto industry are benefiting from bank rescue.plans. So why not in the United States?."

I'm not making this up. Here's my comment ( For more on GMAC, go here ):

“Only a week after the government announced $250 billion in capital for banks, some investors are getting creative in their suggestions on who should qualify.

David Bullock, a hedge fund manager in New York, wrote a letter to the chief financial officer of GMAC on Tuesday, suggesting that the former General Motors financing arm turn itself into a bank holding company so that it can grab some of the cash.”

Come on ! How onerous can the terms of TARP be that people who don’t need it are starting to line up to receive it? What more proof do we need that the government negotiated a terrible deal for the taxpayer?

The next thing we know, Google and Apple will be turning themselves into banks. Can I have myself declared to be a bank?

— Posted by Don the libertarian Democrat

"Credit card companies were shut out of the market for bonds backed by customer payments"

Bloomberg on Credit Card Bonds:

"Credit Card Bond Sales at Zero, First Time Since 1993 (Update1)

By Sarah Mulholland

Nov. 5 (Bloomberg) -- Credit card companies were shut out of the market for bonds backed by customer payments in October for the first time in more than 15 years, as investors shunned the debt amid the global credit freeze.

A weakening job market and a looming recession are making it harder for consumers to make monthly payments, eroding confidence among investors about the safety of credit-card-backed bonds. It's the first month since April 1993 that there have been no sales, according to Wachovia Corp. data. Issuers sold $17.1 billion of the debt in October 2007, the data show.

``Nobody is eager to put money to work given the uncertainty in the market,'' said James Grady, a managing director at Deutsche Bank AG's asset management unit. ``When you think it can't get worse, it continues to get worse. There is not a demand'' for these bonds.

Top-rated credit card-backed securities maturing in three years traded at a gap, or spread, of 475 basis points over the London interbank offered rate, or Libor, during the week ended Oct. 30, JPMorgan Chase & Co. data show, 25 basis points higher than the previous week. The debt was trading at 50 basis points more than Libor in January.

The higher cost to sell the bonds makes it more expensive for banks and credit card companies to fund loans to customers. New York-based American Express Co. paid 160 basis points more than Libor at a Sept. 11 sale of the securities compared with 30 basis points over the benchmark at a similar sale in October 2007, Bloomberg data show."

This interests me. I'd like to know what investors are afraid of. Credit Card companies defaulting? In America? Wow. That would be revolutionary. Maybe Yves Smith was correct.