World Turmoil, More Examples of Government Helping/Hurting Business, and New Housing Data

The whole world seems to falling apart today.  Standard & Poor's has downgraded Portugal to triple B-minus and Greece to double B-Minus today.  No surprise there.  The Syrian government has resigned amid massive protests.  That was inevitable, yet our president who claims to have invaded Libya for the sake of saving innocent lives has yet to mention the atrocities going on there.  And now China is experiencing a shortage of raw gold.  What does this tell you?  China's rating agency Dagong has an idea:

"The second round quantitative easing policy ongoing in the United States can not change its weak domestic demand in the short term. In fact, it can only lower the interest rate of US Treasuries so as to maintain stable interest rate in the capital market in the long term, playing the indirect role of clearing some obstacles for a stable recovery. However, the plan of purchasing 600 billion US dollar Treasury bonds can not realize its predicted goal; and therefore, the United States will hardly change its predetermined monetary policy in 2011." What does this mean for China and the rest of the world: "The continuous implementation of such unconventional monetary policy in the United States will lead to the escalation of world credit war and inflict greater losses for related parties in the world credit system."

The United States, as the biggest country involved in sovereign debt crisis around the world, will continue its  quantitative easing policy when the country is in danger, and the world credit war will be escalated due to the overflow of US dollars

And now the NYTimes reports that TEPCO (the owners of the Fukushima reactor) may not have to pay for damages caused by the radiation leak:

Mr. Scalise said that under Japanese law governing compensation for nuclear damage, companies were liable for the cost of all nuclear accidents resulting from reactor operations except when the accidents were provoked by a “grave natural disaster of an exceptional nature or by an insurrection.” The company might plausibly seek to avoid liability altogether within that definition, he said.

Wow, nothing says "built a nuclear reactor here without worry of outside interferences" like a law such as that.  In the name of promoting nuclear energy and private business, the government of Japan may have allowed TEPCO to get off scott-free.

Speaking of laws that promote business (at the taxpayers expense of course) check out this provision in Dodd-Frank from MarketWatch:

The long-awaited proposal is due to be publicly released by the Federal Deposit Insurance Corp. Tuesday, and the proposal was obtained ahead of that by MarketWatch. At issue is a provision in the Dodd-Frank Act that requires banks to have “skin in the game” — namely, by retaining 5% of the risk of loans they package and sell.

According to the proposal obtained by MarketWatch, loans sold to mortgage-refinance giants Fannie Mae and Freddie Mac would carry no risk-retention requirement as long as the mortgage giants remained in government conservatorship. Fannie and Freddie were both taken under conservatorship in September 2008, at the height of the financial crisis.

Mish sums it up perfectly:

90% of loans are sold to Fannie and Freddie . Thus, 90% of loans will be exempt from the new rule.

There you have it folks, mortgage lenders and big banks ring up the profits while we absorb the risks and losses.  Nothing new here, move along.  And yet the regulators, even after helping their well-connected friends, will still try to stop someone from making a decent profit.  From Securities Docket:

SEC Enforcement is now focusing on hedge funds that outperform “market indexes by 3% and [are] doing it on a steady basis.” Khuzami referred to such performance as “aberrational,” and stated that Enforcement is “canvassing all hedge funds” for such “aberrational performance.”

Punishing success?  If you need a reminder on why insider trading should not be a crime, Robert Wenzel has the refresher. Nothing like government promoting and inhibiting business at the same time.  This is like a repeat from the New Deal era.  Jim Powell, author of FDR's Folly explains:

It didn't bother [Roosevelt] that New Deal policies contradicted one another. When an adviser gave FDR two different drafts of a speech, one defending high tariffs and the other urging low tariffs, FDR told the adviser: "Weave the two together." The Agricultural Adjustment Act forced food prices above market levels, in an effort to help farmers, but higher food prices hurt everybody who wasn't a farmer. The National Recovery Administration forced up prices of manufactured goods, hurting farmers who had to buy farm tools and equipment. Agricultural allotment policies cut cultivated acreage, while the Bureau of Reclamation increased cultivated acreage. Relief spending helped the unemployed, while corporate income taxes, undistributed profits taxes, Social Security taxes, minimum wage laws, and compulsory unionism led to higher unemployment rates. New Deal spending was supposed to stimulate the economy, but New Deal taxing depressed the economy.

New housing data is in today from the S&P's Case Shiller Index and, you guessed it, things aren't looking good.  Stagflation anyone?

Mish has outlined a few good graphs on mortgages from the LPS report for March:
Delinquencies remain about twice the 1995-2005 average, foreclosure inventories are 7.8 times historical “norms”.

30% of loans in foreclosure have not made a payment in over 2 years.

Here are the conclusions from the report:

February Month-End Data: Conclusions

• Delinquency rates resumed their decline after an increase in January and foreclosure inventories remain stable, slightly below historic highs.
• Delinquencies continue to improve as new problem loan rates decline and cure rates increase.
• Foreclosure start declines and foreclosure suspensions are reducing the upward pressure on inventories caused by foreclosure sale moratoria.
• An enormous backlog of foreclosures still exists with overhang at every level:
• There are three times the number of loans deteriorating greater than 90+ days delinquent as compared to foreclosure starts.
• There are also three times the number foreclosure starts vs. foreclosure sales.
• Foreclosure inventory levels are over 30 times monthly foreclosure sale volume.

Here is the Huffington Post's list of cities with the biggest lost in housing prices in the past year:

Eleven of the twenty cities posted their lowest average home prices since 2006-07 peaks. Here they are along with their percent decrease in the last year:

• Atlanta, 7.0%
• Charlotte, 4.8%
• Chicago, 7.5%
• Detroit, 8.1%
• Las Vegas, 4.4%
• Miami, 4.7%
• New York, 3.0%
• Phoenix, 9.1%
• Portland (OR), 7.8%
• Seattle, 6.7%
• Tampa, 7.0%

I will end with a few videos.  One is initial reactions of Atlast Shrugged Part One and the other is Rand Paul on Freedom Watch:

Oh, and the Fed is supposed to release the Bloomberg requested documents Thursday.  Keep a look out.