Consumer Confidence Collapses - Biggest Miss On Record

This is the first consecutive monthly drop in 14 months and the largest miss vs expectations on record. Printing at 76.8 (against an expectation of 82.0), ths is the lowest in 5 months and points to the picture we have been painting of a consumer increasingly affected by rising rates and saoring gas prices amid stagnant incomes.

As Citi notes below, this is the exact same pattern we have seen play out in the last 2 cycles and suggest significant downside risk to US equities. The economic outlook sub-index collapsed to its lowest since January. Read more >>

Citi: Are Gold And Silver Finding A Bottom?

"Gold advice from a bankrupt bailed out institution. Priceless."

Gold and Silver appear to be in the process of finding a bottom; however, the price action could continue to be choppy in the coming weeks. Ultimately Citi's FX Technicals group, as the following charts suggest, expect both precious metals to move much higher in the long term with the potential for Silver to be the outperformer, as was the case from 2008 to 2011.

Gold and Silver appear to be in the process of finding a bottom; however, the price action could continue to be choppy in the coming weeks. Ultimately we expect both precious metals to move much higher in the long term with the potential for Silver to be the outperformer, as was the case from 2008 to 2011.

Our original target for this Gold correction was $1,260, which was the target of the double top. This would also have resulted in the same high to low move on a percentage basis as seen in March – October 2008.

Gold has overshot that target, though only slightly (the 2008 high to low correction was 34% while this one has been 36%). The bottoming process in 2008 can still serve as a template for what might still come for Gold:

After rallying through September-October 2008, Gold made one final push down to a low 7.4% lower than the previous one

After rallying through April, Gold has made a push lower and similar move to the last one in 2008 would suggest a bottom would be put in at $1,224. The low so far has been $1,221 and consolidation seems to be taking place. Read more >>

How the Big Banks Are Trying to Destroy Our Justice System

It’s one of the few things predictable on Wall Street; an immutable signature on the reply briefs whenever Citigroup is charged with fraud – and that is quite often.

Brad Karp, a partner at the 737-attorney-strong Wall Street law firm, Paul, Weiss, Rifkind, Wharton & Garrison LLP, has been Citigroup’s go-to guy for fraud allegations since the company was born out of the too-big-too-fail merger of Travelers Group insurance, its myriad Wall Street investment banks, brokerage units, and Citicorp, parent of Citibank.

When the London-based private equity firm, Terra Firma, claimed it had been lied to and defrauded by Citigroup, making it overpay for the purchase of EMI, a British music label, in 2007, Karp and colleagues wrung an 8-0 decision from the jury in favor of Citigroup. Karp was also on hand to witness victory when the trustee for the bankrupt Italian dairy giant, Parmalat, charged Citigroup with fraud. Then there were fraud charges connected to Citigroup’s involvement in the collapse of WorldCom AND Enron – along with auction rate securities, rigged stock research and understating its exposure to subprime debt by $39 billion. Karp, Karp, and more Karp. Read more >>

Soybean Futures Rise To Set Another Record

U.S. soybean futures leapt to a record, buoyed by strong demand and concerns that global supplies will remain tight well into next year. Soybeans for September delivery gained seven cents, or 0.4%, to close at $17.7025 a bushel at the Chicago Board of Trade. Soybeans topped the previous record closing high set Wednesday and are up 48% for the year.

Soybean prices have surged for much of the summer as a severe drought has eroded the size of the coming U.S. harvest. Prices have picked up additional steam lately following reports of higher than expected demand. On Thursday, the U.S. Department of Agriculture said weekly export sales of soybeans totaled 721,300 metric tons, which was at the high end of traders' expectations, showing that demand for U.S. soybeans hasn't waned as prices have hit highs.

Such reports, combined with supply squeezed by drought, have made for an explosive market. "It's like watching kindling, and the smallest spark sets it on fire," said Sterling Smith, commodity strategist with Citigroup Inc. in Chicago. Read more >>

Bank Fees Push Consumers to Put Money Elsewhere

Occupy Santa Cruz - Bank of America refusing to close account

Alternative finance firms, from credit unions to online and pawn lenders, are gaining traction as banks turn off the tap for easy cash and start charging fees for services that customers have had for free.

Some 60 million Americans — close to a fifth of the adult population — were underbanked or unbanked in 2009, according to the Federal Deposit Insurance Corp. That number is likely to rise as banks choke off free checking, and adjust to new rules that cut into their revenue.

Bank of America, Citigroup, J.P. Morgan Chase, Wells Fargo, PNC Financial, Suntrust and others are beginning to charge for once-free services, making a bank account more of a luxury to those living on a tight budget.

"Credit unions are an alternative source for the kind of services a bank provides," said professor Lawrence White of New York's Stern School of Business. "I'm hoping they would see the unbanked as part of their mission. That would be the most socially worthwhile thing they could do." More...

Ex-Citigroup VP Admits Embezzling Over $22 Million

Image via WikipediaA former vice president for Citigroup Inc pleaded guilty Tuesday to embezzling more than $22 million from the company and funneling the money to his personal bank account.

Gary Foster, 35, pleaded guilty to bank fraud, admitting that he took the money between 2003 and 2010. He appeared in U.S. district court in Brooklyn before Judge Eric Vitaliano.

Assistant U.S. Attorney Michael Yaeger said the government will request a prison sentence of eight to 10 years. Foster will remain free on $800,000 bail until he is sentenced.

Foster was arrested in June and at the time was charged with embezzling $19 million from the bank's accounts. He admitted in court Tuesday to taking more than $22 million, although his total seized assets were estimated at $16 million, Yaeger said.

The defendant, who worked for Citigroup for 10 years, said that between 2003 and 2010 he drafted emails and faxes directing the funds to his personal account. More...

Horror for US Economy as Data Falls off Cliff

Image by Getty Images via @daylifeThe last month has been a horror show for the U.S. economy, with economic data falling off a cliff, according to Mike Riddell, a fund manager at M&G Investments in London.

"It seems that almost every bit of data about the health of the US economy has disappointed expectations recently," said Riddell, in a note sent to CNBC on Wednesday.

"US house prices have fallen by more than 5 percent year on year, pending home sales have collapsed and existing home sales disappointed, the trend of improving jobless claims has arrested, first quarter GDP wasn’t revised upwards by the 0.4 percent forecast, durables goods orders shrank, manufacturing surveys from Philadelphia Fed, Richmond Fed and Chicago Fed were all very disappointing."

"And that’s just in the last week and a bit," said Riddell.

Pointing to the dramatic turnaround in the Citigroup "Economic Surprise Index" for the United States, Riddell said the tumble in a matter of months to negative from positive is almost as bad as the situation before the collapse of Lehman Brothers in 2008. More...

Meredith Whitney: The Hidden State Financial Crisis

Next month will be pivotal for most states, as it marks the fiscal year end and is when balanced budgets are due. The states have racked up over $1.8 trillion in taxpayer-supported obligations in large part by underfunding their pension and other post-employment benefits. Yet over the past three years, there still has been a cumulative excess of $400 billion in state budget shortfalls. States have already been forced to raise taxes and cut programs to bridge those gaps.

Next month will also mark the end of the American Recovery and Reinvestment Act's $480 billion in federal stimulus, which has subsidized states through the economic downturn. States have grown more dependent on federal subsidies, relying on them for almost 30% of their budgets.

The condition of state finances threatens the economic recovery. States employ over 19 million Americans, or 15% of the U.S. work force, and state spending accounts for 12% of U.S. gross domestic product. The process of reining in state finances will be painful for us all.

The rapid deterioration of state finances must be addressed immediately. Some dismiss these concerns, because they believe states will be able to grow their way out of these challenges. The reality is that while state revenues have improved, they have done so in part from tax hikes. However, state tax revenues still remain at roughly 2006 levels. More...

Stingy megabanks swimming in cash

Image by Rainforest Action Network via FlickrIf the megabanks are so big on lending, why do their loan books keep shrinking?

The biggest U.S. banks tell us they have spent the past quarter writing loans, renewing credit lines and generally being upstanding economic citizens. Bank of America (BAC) says it provided consumers and businesses with $144 billion in credit in the first quarter, Wells Fargo (WFC) ponied up $151 billion and JPMorgan Chase (JPM), swinging for the PR fences, claims to have lent out an improbable-looking $450 billion.

Yet loan balances actually shrank from a year ago at all three banks in the first quarter, just as they did at their old pal Citi (C). This at a time when the too-big-to-fail four are being drenched with new deposits (see chart, right).

All told, average loans outstanding at the fearsome four dropped 7% from a year earlier – a decline of $210 billion -- even as deposits rose 5%.

If this is what the bailed-out captains of the financial sector call supporting the recovery, no wonder the economy is going nowhere fast. More...

Banker Jumps Off Roof Committing Suicide

According to the police, Jessica Fashano, 27, an investment banking associate at Citi Global Markets, entered a West Side apartment house that she did not live in, took an elevator to the roof and jumped to her death.

"At 8:13 a.m., the police found her body in an internal courtyard, where she was pronounced dead. The police said they did not suspect foul play. Why Ms. Fashano chose the Riverside Boulevard building is among the many questions surrounding her death. She left no note, and although the police said she was undergoing treatment for depression, friends and associates said she was always in high spirits." More...

The Business of America Is Kleptocracy

Tomgram: William Astore, The Business of America Is Kleptocracy

It’s hard to miss these days. The headlines tell the story -- repetitively. Everyone, it seems, is on the take. The Securities and Exchange Commission has charged Goldman Sachs with securities fraud for creating and selling “a mortgage investment that was secretly intended to fail” -- and then betting against its own customers. JPMorgan Chase which, in a pinch in 2008, happily took taxpayer dough, just reported $3.3 billion in profits for the first quarter of 2010, a jump of 55% over the previous quarter. The bank set aside $9.3 billion in what’s called “compensation and benefits” for its employees in 2009.

Even when they lose, they win. According to James Kwak of the Baseline Scenario website, on a deal in which JPMorgan swallowed $880 million in losses, its bankers still managed to walk away with up to $10 million in compensation. As he wrote, “JPMorgan’s bankers did just fine, despite having placed a ticking time bomb on their own bank’s balance sheet.” Meanwhile, Robert Rubin, who helped create the world that led to the 2008 financial meltdown as Treasury Secretary under Bill Clinton, then took a top position at Citibank and made more than $100 million before it tanked on his watch. As economist Dean Baker puts it, “In the fall of 2008, when Citigroup was saved from bankruptcy with a taxpayer bailout, Rubin quietly slipped out the back door (with his money), resigning from his position at Citigroup.” Only recently Rubin made the headlines for offering the least apologetic (non-)apology imaginable for taking the American people to the cleaners.

And when it comes to taking, according to Eric Lichtblau of the New York Times, “more than 125 former Congressional aides and lawmakers are now working for financial firms as part of a multibillion-dollar effort to shape, and often scale back, federal regulatory power.” In other words, the regulators and their aides legislate the rules and then simply step through that infamous revolving door and pick up a handsome check on the other side. There are, in fact, at least 11,000 well-employed registered lobbyists in Washington today. A $3.4 billion “industry” in 2009, lobbying is definitely a field to get into, even in bad times, and according to the Christian Science Monitor, “when the cost of grass-roots efforts and of strategic advisers are all counted, total spending on influencing policy in Washington approaches $9.6 billion a year.”

As for the money flowing into politics from corporate deep pockets, 2008 not only saw the first billion-dollar presidential campaign, but at $1.7 billion, more than doubled the 2004 campaign’s costs, and no one expects 2012 to be anything but more expensive. All this is, of course, known to anyone who glances at the front page of a daily newspaper, but what exactly do we make of it all? What does it add up to? William Astore, historian and TomDispatch regular, has a suggestion, but before you start his piece, you might want to close your purse or button that back pocket with your wallet in it. Otherwise, they could be picked bare by the time you’re done. Tom

American Kleptocracy
How Fears of Socialism and Fascism Hide Naked Theft
By William J. Astore

Kleptocracy -- now, there’s a word I was taught to associate with corrupt and exploitative governments that steal ruthlessly and relentlessly from the people. It’s a word, in fact, that’s usually applied to flawed or failed governments in Africa, Latin America, or the nether regions of Asia. Such governments are typically led by autocratic strong men who shower themselves and their cronies with all the fruits of extracted wealth, whether stolen from the people or squeezed from their country’s natural resources. It’s not a word you’re likely to see associated with a mature republic like the United States led by disinterested public servants and regulated by more-or-less transparent principles and processes.

In fact, when Americans today wish to critique or condemn their government, the typical epithets used are “socialism” or “fascism.” When my conservative friends are upset, they send me emails with links to material about “ObamaCare” and the like. These generally warn of a future socialist takeover of the private realm by an intrusive, power-hungry government. When my progressive friends are upset, they send me emails with links pointing to an incipient fascist takeover of our public and private realms, led by that same intrusive, power-hungry government (and, I admit it, I’m hardly innocent when it comes to such “what if” scenarios).

What if, however, instead of looking at where our government might be headed, we took a closer look at where we are -- at the power-brokers who run or influence our government, at those who are profiting and prospering from it? These are, after all, the “winners” in our American world in terms of the power they wield and the wealth they acquire. And shouldn’t we be looking as well at those Americans who are losing -- their jobs, their money, their homes, their healthcare, their access to a better way of life -- and asking why?

If we were to take an honest look at America’s blasted landscape of “losers” and the far shinier, spiffier world of “winners,” we’d have to admit that it wasn’t signs of onrushing socialism or fascism that stood out, but of staggeringly self-aggrandizing greed and theft right in the here and now. We’d notice our public coffers being emptied to benefit major corporations and financial institutions working in close alliance with, and passing on remarkable sums of money to, the representatives of “the people.” We’d see, in a word, kleptocracy on a scale to dazzle. We would suddenly see an almost magical disappearing act being performed, largely without comment, right before our eyes.

Of Red Herrings and Missing Pallets of Money

Think of socialism and fascism as the red herrings of this moment or, if you’re an old time movie fan, as Hitchcockian MacGuffins -- in other words, riveting distractions. Conservatives and tea partiers fear invasive government regulation and excessive taxation, while railing against government takeovers -- even as corporate lobbyists write our public healthcare bills to favor private interests. Similarly, progressives rail against an emergent proto-fascist corps of private guns-for-hire, warrantless wiretapping, and the potential government-approved assassination of U.S. citizens, all sanctioned by a perpetual, and apparently open-ended, state of war.

Yet, if this is socialism, why are private health insurers the government’s go-to guys for healthcare coverage? If this is fascism, why haven’t the secret police rounded up tea partiers and progressive critics as well and sent them to the lager or the gulag?

Consider this: America is not now, nor has it often been, a hotbed of political radicalism. We have no substantial socialist or workers’ party. (Unless you’re deluded, please don’t count the corporate-friendly “Democrat” party here.) We have no substantial fascist party. (Unless you’re deluded, please don’t count the cartoonish “tea partiers” here; these predominantly white, graying, and fairly affluent Americans seem most worried that the jackbooted thugs will be coming for them.)

What drives America today is, in fact, business -- just as was true in the days of Calvin Coolidge. But it’s not the fair-minded “free enterprise” system touted in those freshly revised Texas guidelines for American history textbooks; rather, it’s a rigged system of crony capitalism that increasingly ends in what, if we were looking at some other country, we would recognize as an unabashed kleptocracy.

Recall, if you care to, those pallets stacked with hundreds of millions of dollars that the Bush administration sent to Iraq and which, Houdini-like, simply disappeared. Think of the ever-rising cost of our wars in Iraq and Afghanistan, now in excess of a trillion dollars, and just whose pockets are full, thanks to them.

If you want to know the true state of our government and where it’s heading, follow the money (if you can) and remain vigilant: our kleptocratic Houdinis are hard at work, seeking to make yet more money vanish from your pockets -- and reappear in theirs.

From Each According to His Gullibility -- To Each According to His Greed

Never has the old adage my father used to repeat to me -- “the rich get richer and the poor poorer” -- seemed fresher or truer. If you want confirmation of just where we are today, for instance, consider this passage from a recent piece by Tony Judt:

In 2005, 21.2 percent of U.S. national income accrued to just 1 percent of earners. Contrast 1968, when the CEO of General Motors took home, in pay and benefits, about sixty-six times the amount paid to a typical GM worker. Today the CEO of Wal-Mart earns nine hundred times the wages of his average employee. Indeed, the wealth of the Wal-Mart founder’s family in 2005 was estimated at about the same ($90 billion) as that of the bottom 40 percent of the U.S. population: 120 million people.

Wealth concentration is only one aspect of our increasingly kleptocratic system. War profiteering by corporations (however well disguised as heartfelt support for our heroic warfighters) is another. Meanwhile, retired senior military officers typically line up to cash in on the kleptocratic equivalent of welfare, peddling their “expertise” in return for impressive corporate and Pentagon payouts that supplement their six-figure pensions. Even that putative champion of the Carhartt-wearing common folk, Sarah Palin, pocketed a cool $12 million last year without putting the slightest dent in her populist bona fides.

Based on such stories, now legion, perhaps we should rewrite George Orwell’s famous tagline from Animal Farm as: All animals are equal, but a few are so much more equal than others.

And who are those “more equal” citizens? Certainly, major corporations, which now enjoy a kind of political citizenship and the largesse of a federal government eager to rescue them from their financial mistakes, especially when they’re judged “too big to fail.” In raiding the U.S. Treasury, big banks and investment firms, shamelessly ready to jack up executive pay and bonuses even after accepting billions in taxpayer-funded bailouts, arguably outgun militarized multinationals in the conquest of the public realm and the extraction of our wealth for their benefit.

Such kleptocratic outfits are, of course, abetted by thousands of lobbyists and by politicians who thrive off corporate campaign contributions. Indeed, many of our more prominent public servants have proved expert at spinning through the revolving door into the private sector. Even ex-politicians who prefer to be seen as sympathetic to the little guy like former House Majority Leader Dick Gephardt eagerly cash in.

I’m Shocked, Shocked, to Find Profiteering Going on Here

An old Roman maxim enjoins us to “let justice be done, though the heavens fall.” Within our kleptocracy, the prevailing attitude is an insouciant “We’ll get ours, though the heavens fall.” This mindset marks the decline of our polity. A spirit of shared sacrifice, dismissed as hopelessly naïve, has been replaced by a form of tribalized privatization in which insiders find ways to profit no matter what.

Is it any surprise then that, in seeking to export our form of government to Iraq and Afghanistan, we’ve produced not two model democracies, but two emerging kleptocracies, fueled respectively by oil and opium?

When we confront corruption in Iraq or Afghanistan, are we not like the police chief in the classic movie Casablanca who is shocked, shocked to find gambling going on at Rick’s Café, even as he accepts his winnings?

Why then do we bother to feign shock when Iraqi and Afghan elites, a tiny minority, seek to enrich themselves at the expense of the majority?

Shouldn’t we be flattered? Imitation, after all, is the sincerest form of flattery. Isn’t it?

William J. Astore is a TomDispatch regular; he teaches History at the Pennsylvania College of Technology and served in the Air Force for 20 years, retiring as a lieutenant colonel. He may be reached at wjastore@gmail.com.

Citibank exposes 600,000 customers' Social Security numbers

Image via Wikipedia

chicagotribune.com
Ralph Remakel received a Citibank letter postmarked Feb. 16 that notified him of a recent Citibank error. It turns out he wasn't the only one.

In late January, Citibank mailed year-end tax statements to 600,000 Citi customers via the U.S. Postal Service that included the customers' Social Security numbers ... on the outside of the envelope.

Citi called the mistake a "processing error."

Although the nine-digit numbers were not identified as Social Security numbers (they were printed at the lower edge of the envelope with other numbers and letters and resembled a mail routing number), Citi still reacted to the mistake. EVP and Director of Citibank Client Services Norman White sent customer notification letters to every affected Citi customer during the week of Feb. 15, apologizing for the error.

The letter offered Citi customers the option to enroll in a free, 180-day credit monitoring service arranged by Citibank, but White also encouraged customers to regularly review activity on their accounts.

Remakel said he did not take advantage of Citibank's credit monitoring service offer.

"It’s like small change compared to the effect of me getting my Social Security number compromised," Remakel said. "Who would would really see it except the post office? But it’s not like it’s hidden in any way. What’s the easiest way to take someone’s identity? Their Social Security Number."

(See the full text of the letter below)

Citibank said in a statement that the company believes the error produced little to no risk to its customers and that it has been corrected for all Citibank's future mailings.

"Although there is little or no risk to our customers, we decided to be completely transparent to our customers by notifying them of the error," the statement said. "It is an important part of our commitment to our customers to be fully transparent and to give them the peace of mind that comes from banking with people they trust."

Remakel, however, was not satisfied with his notification letter.

"I was almost to the point of calling them and saying, 'Hey, for your blunder, how about wiping out everything I owe you?',” he said.

Full text of Citibank's notification letter:We are writing to inform you that due to a processing error the nine digits in your Social Security number, along with a string of other numbers and letters all resembling a mail routing number, were printed on the lower edge of an envelope containing a year-end tax statement that we mailed to you recently.

We believe there is little or no risk to you. However we wanted to bring this to your attention, apologize and confirm that changes have been made for all future mailings.

Should you nonetheless remain concerned, we have arranged for you at your option to enroll in a credit monitoring service at no cost to you for the next 180 days. To activate this coverage, please call the toll-free number or visit the website listed below and enter the redemption code. The redemption code is required for enrollment. As always, we encourage you to regularly review activity on your accounts.

For credit monitoring service coverage:
Toll-Free Number: 1-866-212-9114
Website: www.identityguard.com/alert
Redemption Code: _______________

We are sorry for any inconvenience this may have caused you. Do not hesitate to contact us at 877-478-6597 if you have any questions.

Sincerely,

Norman Wright
EVP & Director, Citibank Client Services

S&P cuts BofA, Citi outlook to negative

bizjournals.com
Standard & Poor’s Ratings Service said Tuesday that it downgraded its outlook on Bank of America and Citigroup to negative from stable.

The move underscored that the global financial crisis is far from over despite BofA, California’s largest bank, repaying the government’s investment of $45 billion in the bank under the federal Troubled Asset Relief Program in December. The revised outlook signals possible downgrades to their credit ratings.

S&P assigns counterparty and debt ratings on Bank of America and Citigroup of “A” and “A-1”

The ratings agency’s change in its outlook for the two big banks reflects the more onerous terms BofA or Citi would face if another government bailout is needed.

“We believe there is increased uncertainty about the U.S. government’s willingness to provide additional extraordinary support to highly systemically important financial institutions in a way that will benefit debt holders,” S&P analyst John Bartko said in lowering the outlook on the banks.

“We previously stated our belief that the extraordinary support was temporary. We believe markets are beginning to stabilize and the U.S. government is seeking ways to reduce the potential for moral hazard and systemic risk associated with large financial institutions,” Bartko added.

S&P pointed to proposals to tax the big banks to help recoup the cost of the bailout and a bill introduced in December to prohibit company-specific bailouts as raising concerns about the terms of another big bank bailout, if needed.

S&P’s rating on BofA gets a lift of three credit notches based on expectations that the government would step in to help BofA (NYSE: BAC) and Citigroup, (NYSE: C) given their status as systemically important financial institutions.

“We are uncertain whether BofA will be able to show sufficient additional improvement over the next two years in its operating performance and profitability to benefit its stand-alone credit profile,” Bartko said.

Citibank loaned $8 billion in bailout money to Dubai

http://www.7days.ae/

Wednesday 11 Mar, 2009

US outrage over Citi loan to Dubai

The US public will be “outraged” by Citibank’s $8 billion loan to Dubai just six weeks after the bank was bailed out, US House of Representatives domestic policy subcommittee chair-man has said. Dennis Kucinich commented on the Dubai loan and other US banking investments as a congressional panel released a report that strongly questioned Citibank’s actions. The report, shown to 7DAYS, cites the Dubai loan as the largest of the “questionable transactions” by banks after the US government bailed them out. It notes that the loan to Dubai’s public sector came on December 14, just six weeks after the US government gave Citibank a $25 billion bail-out.

The report quotes Win Bischoof, then chairman of Citi, as saying the bank agreed to the Dubai loan because “we continue to place the Gulf region among our globally most significant markets”. The report also questions JP Morgan’s $1 billion investment in India and Bank of America’s $7 billion investment in China. “When the American people find that their tax dollars, which were supposed to be used to get us out of this financial crisis, are instead being used to ship jobs and investments overseas, there will be outrage,” Kucinich said. The report notes the loans were not illegal and that it is not known if they were directly funded by bail-out funds. A Citibank official was quoted at the time as saying the $8 billion came from the bank’s own funds and third party sources. The report was released as the committee prepares to question banking chiefs about their use of bail-out funds.