Torture Report Even Nastier Than Expected, Gruber Apologizes For Insulting Everybody, Public Favors Charges for Eric Garner’s Killer: P.M. Links

  • TortureThat torture report that
    finally got released today… It’s
    even more appetite-suppressing
    than anticipated. It details
    illegally held detainees and widespread mistreatment.
  • The Obama administration, which dragged out raising the curtain
    on torture for six years,
    isn’t getting much mileage
    out of patting itself on the back
    for the Senate Intelligence Committee’s release of the report.
  • Polling finds that most Americans think the cop who killed Eric
    Garner
    should face charges
    .
  • Obamacare architect consultant jackass Jonathan
    Gruber is
    very, very sorry
    for insulting the entire U.S. population.
    Well, a little. But he still insists that his pet policy is just
    awesome.
  • A few misfired raids
    won’t deter the U.S. government from attempting to rescue kidnapped
    Americans
    from the various lowlifes snatching and murdering
    people around the globe, say officials. So maybe we do get
    something for our money.
  • Robert Wayne Holsey is
    slated to be executed today
    , after being represented by a
    vodka-guzzling defense attorney who has since been disbarred and
    imprisoned.

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Markets Turmoiled As 5th Hindenburg Looms

Summing today up in 7 seconds…

 

 

*  *  *

5th Hindenburg Omen in the last 6 days… Breadth todasy was horrible…

 

*  *  *

Wherever you look today there was dramatic moves in markets – Treasury yields plunged, credit spreads blew wider (especially HY and more especially energy), VIX jumped notably higher, USDJPY collapsed, gold and silver surged, oil rallied modestly…

But then – shortly after Europe closed… someone (cough BoJ cough) decided to catch USDJPY at 117.95 and lift it miraculously 170 pips to save risk assets from a serious day…

 

 

Mission NOT!! Accomplished…

The entire equity complex ripped higher led by "most shorted" stocks being squeezed and driving small caps to a big day… the Nasdaq avoids its first 2-day losing streak since the Bullard lows. But despite the best efforts the S&P could not hold green

 

Energy stocks were today's best performers…

 

Despite the panic-buying v-shaped recovery – on par with the bounce at the Bullard lows, stocks remain red post-Payrolls…

 

Volume faded away on the upswing as one would expect…

 

Notably while VIX helped it did not ramp like stocks…

 

Treasury yields bounced but 30Y remains down 9bps on the week, flattening significantly…

 

The USD slid for the 2nd day in a row… but bounced hard after Europe closed…

 

But gold and silver surged (and did not lose much as everything ripped) and oil gained modestly…

 

 

While the broad HY market is indeed widening, the following chart should give some context (albeit comparing a CDS spread to an OAS is not perfect) on just how totally screwed the energy sector is…

 

 

 

Charts: Bloomberg




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If At First You Fail Miserably & Blow Up The Financial System, Do It Again!

Via Jim Quinn's The Burning Platform blog,

Having government entities provide low down payment mortgages to people who can’t afford to buy a house is always a good move.

Keynesians like Krugman approve wholeheartedly. The housing market will get a nice boost and the working taxpayers will fund the bad debt through Fannie and Freddie. You own Fannie and Freddie. Everyone wins.

In case you forgot, the closing costs to sell a house are usually 8% of the home price. So these home buyers are immediately 5% underwater when they move in.

Sometimes I can’t believe I live in a world this fucked up. And no one notices and no one cares.

Where are the Republicans we elected to stop this shit?

*  *  *

Guest Post by Anthony Sanders

Fannie and Freddie officially approve 3% down payment mortgages (for 1st time homebuyers and lower incomes)

Here we go again! Mortgage giants Fannie Mae and Freddie Mac have now officially approved 3% down payment mortgages.

According to Brena Swanson at Housing Wire,

“The new lending guidelines released today by Fannie Mae and Freddie Mac will enable creditworthy borrowers who can afford a mortgage, but lack the resources to pay a substantial down payment plus closing costs, to get a mortgage with 3% down. These underwriting guidelines provide a responsible approach to improving access to credit while ensuring safe and sound lending practices,” FHFA Director Mel Watt said.

 

“To mitigate risk, Fannie Mae and Freddie Mac will use their automated underwriting systems, which include compensating factors to evaluate a borrower’s creditworthiness. In addition, the new offerings will also include homeownership counseling, which improves borrower performance. FHFA will monitor the ongoing performance of these loans,” Watt continued.

What are these compensating factors? Lower down payment mortgages required higher credit scores among other things. Also, the 3% down loans are intended only to first-time buyers, buyers who haven’t owned a home for at least a few years and those with lower incomes. Many of the loans will also require borrowers to undergo home-buyer counseling before making a purchase.

But will this work? Not unless the labor market increases substantially.

mbapinv

 

House price growth is slowing, but is still over 2x wage growth.

cswageF

 

Let’s hope low downpayment loans perform better than the last time!!!!!

 




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Chart Of The Day: This Is What 6 Years Of Central Bank Liquidity Injections Look Like

Curious how over the past 6 years we got to a point where the market is now so irreparably broken, even the BIS couldn’t take it anymore and threw up all over the the world’s central bankers? Then look no further than the following chart summarizing 6 years of global central bank liquidity injections that have made it imperative to use quotation marks every time one writes the word “market”

Source: BlackRock




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Jonathan Gruber’s Weak New Excuse for His Obamacare Exchange Subsidies “Speak-O”

At a

hearing
in front of the House Oversight Committee this morning,
MIT economist and Obamacare Architect Jonathan Gruber attempted to
explain away recently unearthed comments about the Affordable Care
Act’s subsidies that could prove troublesome for the health law as
it heads to the Supreme Court again next year. But his new
explanation doesn’t make much sense.

To understand today’s testimony, you have to go back to a video
taken in January 2012.
The video shows Gruber at a conference
, where he’s asked about
what would happen if states declined to establish health insurance
exchanges under Obamacare. Gruber says in the video that “what’s
important to remember politically about this is if you’re a state
and you don’t set up an exchange, that means your citizens don’t
get their tax credits.”

This line was something of a bombshell when it was discovered
this summer, because it showed Gruber, one of the most influential
and widely quoted Obamacare experts, clearly saying
exactly what the challengers in a series high-profile
suits against the administration’s implementation of the health law
have argued: that, despite the Internal Revenue Service decision to
allow health insurance tax credits to flow through either federal
or state-run exchanges, the plain text of the law only allows for
tax credits (subsidies) in state-established exchanges. The
challenge was recently accepted by the Supreme Court, further
raising the prominence of the remarks.

When this remark initially surfaced over the summer,
Gruber described
it as a “speak-o,” the verbal equivalent of a typo. But that was
hard to believe given that Gruber elaborated on it at length, and
given that another recorded remarked quickly surfaced in which
Gruber said almost exactly the same thing. The recordings strongly
suggested that he meant to say what he said, and that he knew what
he meant when he said it. 

In today’s testimony, Gruber offered a new explanation, saying
that what he meant when he made the remarks in 2012 was that he
wasn’t confident the federal government would set up an exchange;
if the federal government didn’t build a fallback, then that would
mean that states choosing not to build their own would lose access
to tax credits. In the prepared version of his testimony, he

puts it like
 this: “The point I believe I was making
was about the possibility that the federal government, for whatever
reason, might not create a federal exchange.”

For several reasons, it’s difficult to buy this updated
explanation. For one thing, it conveniently ignores
the question Gruber was asked in that January 2012 presentation,
which was about the establishment of exchanges. “It is my
understanding that if states don’t provide them,” the questioner
says, “then the federal government will provide them for the
states.”

In his response, Gruber doesn’t dispute this at all. In fact, he
opens his response by saying, “yeah,” in agreement with the
questioner. He does mention that the federal government has
slow-walked the creation of its exchange, perhaps in order to
encourage states to set up their own, but he doesn’t once raise the
possibility that the federal fallback won’t exist at all. Instead,
he talks only about the consequences of states declining to
establish their own exchanges, not the consequence of what might
happen if states decline and the federal government also
fails to create an exchange.

Nor does he raise the possibility that the federal government
might fail to set up an exchange in the other recording. In that
recorded speech, he says that “if your governor doesn’t set up an
exchange, you’re losing hundreds of millions of dollars of tax
credits to be delivered to your citizens.” Again, he’s not saying,
“if your governor doesn’t set up the exchange and the federal
government also doesn’t set up an exchange.” He’s just
saying that this is the result of a state not building its own
exchange. 

Gruber’s suggestion that he was thinking that the federal
government might fail to create an exchange is also odd given that
the federal government is required by law to do so if a
state does not. Asked about this requirement today by Rep. Justin
Amash (R-Mich.), Gruber claimed not to recall the exact details of
what the law entails. That’s tough to believe given that Gruber
spent years as a high-profile, well-paid consultant to states
considering setting up their own exchanges. But even if he does not
remember the details now, it is even harder to believe that Gruber
did not know about this requirement back in 2012, when he was in
the midst of consulting work for multiple states.

Finally, Gruber admitted that he has come up with this
explanation for what he must have been meant entirely after the
fact.  While “thinking about how I could have made that
statement, I believe that’s what I had in mind,” he said today.
This is an explicit admission that he’s rationalizing his prior
statement in order to fit with what he now believes.  

Gruber’s appearance before the committee came after numerous
additional videos surfaced this fall in which Gruber suggested that
the process leading to the passage of Obamacare was
not transparent
. In those videos he said that the law relied on
a convoluted structure to confuse the public about how it worked,
and was written in a “tortured” way to achieve a desirable score
from the Congressional Budget Office. His appearance was a kind of
penance and public shaming, and he repeatedly attempted to distance
himself from those remarks. Instead what he ended up proving was
that he could torture his own remarks too. 

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Rocket RENTAL to Russia: One Reason Supporter’s Tale!

We’re in the final stretches of Reason’s 2014 Webathon,
in which we’re looking to raise $200,000 from loyal readers of our
print, online, and video journalism. The effort ends at midnight
tonight and we’re within $50,000 of our goal.
Go here now to see giving levels
and associated swag
!

A few years ago, while seeing one of my sons off on a flight out
of D.C.’s Reagan National Airport’s threadbare old, original
terminal, a man with a baby strapped to his chest ran over
excitedly to me. “Hey! Can I talk to you?” he asked in a way that
was agitated and slightly unhinged-enough to make me reflexively
think: “OK, this is how it ends—getting blown up by a suicide
bomber. And not even in one of the newer, nicer parts of the
airport.”

But it turned out that the would-be jihadist with the baby
strapped to his chest like a dynamite belt was actually a fellow
named Scott Ewine. Originaly from North Dakota but now based in the
greater Washington, D.C. area, Scott was an avid reader of the
print and online editions of Reason, had recognized me
from old issues of the mag and some TV
appearances, and simply wanted to say hello and
thanks for doing what we do here at the planet’s leading source of
libertarian news, opinion, and commentary.

That sort of interaction is one of the great perks of working at
Reason. Since our founding in 1968, Reason has not only changed the
world we live in (starting with Reason Foundation founder Robert W.
Poole’s seminal work on deregulating airline ticket pricing) and
helped big names such as Drew Carey and John Stossel channel their
inner libertarians. Reason has also provided a source of
intellectual stimulation, ideological nourishment, and welcoming
community in a world that has often cast a withering eye on “Free
Minds and Free Markets.”

Scott’s experience actually parallels my own: My older brother
had discovered the magazine while at college in the late 1970s and
started sharing it with me while I was in high school. I loved the
way the magazine debunked moral panics and constantly undercut
scare stories by using facts and clear logic. It introduced me to a
whole alternative way of thinking about how people and societies
flourish and self-organize. Soon enough, I was calling myself a
libertarian and became a subscriber myself.

Reason is more than just a magazine (or a website or a video
platform). It’s a virtual conversation pit where
libertarians can gather to hash out their ideas about the world,
discover the best arguments for increasing freedom in every area of
human activity, read up on new and interesting “experiments in
living,” and know that we’re part of a growing movement that not
only excites us all with the potential of a limitless future but
scares the bejeezus out of liberals and conservatives. They had
their shot, they blew it, and they know they blew it.

Reason’s audience and reach is growing expontentially—our
web traffic alone has more than doubled over the past few years and
we now pull over 4 million visits to Reason.com a month. Our
staffers and writers appear in print all over the place and haunt
cable news and radio with our upbeat message of freedom and
liberty. In the wake of the absolute failure of conventional
politics and ideology so far in the 21st century, we’re bring a new
way of thinking to people at exactly the right moment.

We’re able to do all of this because of your
essential help. Your tax-deductible donations make it possible for
us to keep bringing the best libertarian journalism and thought to
you—and to the wider world. As
we enter the final hours of our 2014 Webathon, please give what you
can and help us reach our goal of $200,000
. Help us make the
world a freer, fairer, more interesting place as we make the moral
and pragmatic case for giving us all more say in how we live our
own lives.

Back to Scott: After that initial run-in at the airport,
Scott attended several D.C.-area Reason events, became a supporter,
and even sailed on our initial Reason cruise (where he and his
friends engaged, if memory serves, in a grand xperiment to see
whether they could drive down the effective price-per-drink of the
cruise’s booze package to zero through heavy consumption.) He sends
me occasional updates about the globe-trotting that he does for his
work. Among his recent trips was one to Russia, where he placed a
Reason tote bag at the feet of a statue of Lenin (see above) and
had a cautionary adventure that is worth relating to all world
travelers. Plus, he wrote “If you want to get the backing of all of
the the North Dakota libertarians (~9) you have to eventually do
something with my little story!”

His tale involves Russian cops, suprised pedestrians,
international rental-car agreements, and a comparative analysis of
justice here and in the land of autocrats. Read on after the
break:

Here are a couple pictures I got on the last trip to Russia.
 Life is all about experiences and learning, and occasionally
taking the time to pass that knowledge onto others.  It is in
that spirit I will try to enlighten you with a few things I have
learned in the last day or so in the hope that you may someday find
it useful.

1. In Russia, what appears to be a small winding road
through a park may actually be a wide, paved pedestrian
path.

2. Due to changes in elevation, the continuity of a
pedestrian path through a Russian park may be interrupted on
occasion by a flight of stairs.

3. When driving on an overcast day in the late
afternoon along a pedestrian path through a Russian park, it is
nearly impossible to detect an approaching flight of
stairs.

4. When driving through a Russian park, the interpreter in
the passenger seat may become immobilized with fear and unable to
render guidance, even though he is intimately familiar with the
customs and traditions of driving in Russia.

5. A Volkswagen Polo makes a hell of a lot of noise when
you drive it down a flight of stairs.

6. If you drive a car down flight of stairs in a
Russian park with your interpreter in the passenger seat, it may
take several minutes for him to speak to you again, and then he may
only be able to repeatedly mutter “Cowboy!”

7. When visiting parks,
Russians, by their nature, tend to congregate in areas where
someone recently drove a car down a flight of stairs.

 8. Upon learning the nationality of the person that
drove a car down a flight of stairs in their park, Russians may
respond by slowly shaking their heads back and forth saying
“Americanski”.

9. Police that arrive on the scene will respond in the
same manner.

10. It takes approximately four hours at the station for
Russian police to complete the paperwork required to give you a
2000 ruble (56$) “administrative fine” for driving a car through a
park and down a flight of stairs.

Thanks for reading and supporting Reason. Your
tax-deductible donations help us bring you cutting-edge stories,
videos, and more. In the final hours of our annual webathon,
please give what you
can!

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Georgia Set to Execute Mentally Disabled Man Whose Lawyer was Drinking Heavily Throughout His Trial

Tonight at 7 p.m. EST, Georgia is scheduled to execute Robert
Wayne Holsey, a man whose I.Q. is around 70 and whose lawyer
admitted was drinking heavily throughout his trial.

In 1996, Holsey robbed a convenience store, then shot and killed
a pursuing police officer. He was convicted of armed robbery and
murder and sentenced to death in 1997.

His attorney, Andy Prince, later
testified
that during Holsey’s trial, he would go back to his
hotel room in the evenings and drink until he “couldn’t drink
anymore.” According to Prince, he was consuming roughly a quart of
vodka every night—the equivalent of 21 shots. “What I considered
doing fine at the time was just barely getting by. I shouldn’t have
been representing anybody in that case,” Prince has said.

Prince later
voluntarily forfeited his law license
and was sentenced to
serve three years in prison for stealing over $100,000 from one of
his clients.

Eventually, a Georgia Superior Court judge would rule that
Holsey’s lawyer failed to present mitigating evidence that may have
led to a different outcome, including facts about Holsey’s
intellectual disability and his violent family history. Georgia
requires a unanimous jury vote to impose the death penalty; if this
evidence had been presented, perhaps one or more jurors may have
voted otherwise. The judge
vacated Holsey’s death sentence and ordered him to be
resentenced
.

However, the Georgia Supreme Court
reversed that decision and ruled
Holsey had failed to show that
the outcome would have been different if his lawyer had presented
this additional evidence. In 2012, a federal appeals court ruled
Holsey had not proved the Georgia Supreme Court’s decision was
“unreasonable.”

In 2002, the United States Supreme Court barred the
execution of inmates with mental disabilities
, but left the
states to determine who qualifies as mentally sound. This year, the
United States Supreme Court invalidated a
Florida statute
that allowed inmates with an I.Q. of 71 or
higher to be executed. In their Hall v. Florida ruling,
the court argued Florida’s rigid cutoff excluded the state from
considering other evidence that may prove an inmate’s
disability.

Lawyers for Holsey argue his I.Q. is around 70, and say he never
rose above a fourth grade level of intellectual functioning. His
prison records, they argue, further document his mental
disability.

But in Georgia, state law requires Holsey to prove he’s mentally
disabled “beyond a reasonable doubt.” That’s the strictest standard
in the nation and extremely difficult to meet. Holsey filed an
appeal with the Georgia Supreme Court that argued Georgia’s
standard is unconstitutional in light of the U.S. Supreme Court’s
ruling in Hall v. Florida. This afternoon, however, the
Georgia Supreme Court
denied that appeal along with a motion for a stay of execution
,
thus clearing the way for Holsey to be executed this evening unless
the United States Supreme Court intervenes.

All inmates should have the right to be represented by lawyers
not completely inebriated during trial. Even those who support the
death penalty should be able to concede that allowing a mentally
disabled man to be executed is a barbaric act that flies in the
face of justice. 

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As Oil Prices Plunge, Nigeria Exclaims It Is Not Zimbabwe

Having already raised rates and devalued the Naira (and widened its trading bands), the Nigerian currency continues to collapse to new record lows as crude crashes lower and lower. Having tumbled 11.5% since oil prices peaked, the Naira is holdinga round 184/USD – over 9% above the new peg and dramatically outside of the new trading bands of +/-5% as it seems capital flight is out of control. That is probably why, as Bloomberg reports, Finance Minister Ngozi Okonjo-Iweala has commented that Nigeria won’t resort to printing money or imprudent borrowing as it adjusts to lower prices of oil. “This is not the first time this country has gone through lower oil prices and it will not be the last,” she said – making it very clear that Nigeria is not Zimbabwe (yet).

 

 

As Bloomberg reports,

Nigeria won’t resort to printing money or imprudent borrowing as it adjusts to lower prices of oil, the mainstay of its economy, Finance Minister Ngozi Okonjo-Iweala said.

 

“This is not the first time this country has gone through lower oil prices and it will not be the last,” she said at a conference in the capital, Abuja. “We should avoid the kind of fear that will paralyze us or make us do the wrong things out of fear and alarm.”

 

Nigeria, which is facing general elections in February, lowered its proposed budgeted oil price last week to $65 per barrel, the second cut in less than a month, signaling government revenue is set to plunge in Africa’s biggest crude producer.

 

Any borrowing will be done “judiciously,” Okonjo-Iweala said. Increased tax revenue and an expanding private sector would help the West African country offset the impact of falling oil prices, she said.

 

Global oil prices have plunged more than a third since June, prompting monetary policy makers to devalue the naira for the first time in three years, and threatening to erode public finances in a country that relies on crude sales for 70 percent of government income.

*  *  *

So they better hope oil comes back soon…




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55 Trillion Reasons Why Bank Of New York And State Street Better Not Get Any Ideas From China

While everyone knows the direct consequence of China’s tinkering with collateral rules last night led to the biggest Chinese stock market crash in years, not many understand what caused this. In a nutshell, what China did was severely curb its shadow banking industry, when China’s securities clearing house said it raised the quality threshold for corporate bonds qualifying as collateral for repurchase agreements, or repos, which are short-term loans with maturities spanning from overnight to 182 days. And since the  proceeds of such repo deals are usually used to purchase stocks, suddenly a major source of “dry powder” for Chinese stock buying was violently and unexpectedly yanked away.

As those who are familiar with the US shadow banking industry are aware, this is precisely the very much unregulated lending pathway that froze up in the aftermath of the Lehman collapse, and which the Fed has been warning for years, is the most likely locus of the next financial crisis. Putting China’s action into numbers, Shenyin Wanguo Securities analyst Kang Chen calculated this collateral adjustment would disqualify some 1.25 trillion yuan (or $202 billion) in corporate bonds as repo collateral, or 60% of all outstanding corporate bonds listed on China’s two stock exchanges.

This may sound huge but it actually is quite tiny, especially if one looks at it in the context of the market cap loss on the Shanghai Composite overnight. What is far more curious is that China would proactively pursue the same kind of action that the US and all western banks are terrified of: clogging up a key shadow banking conduit in the form of well-functioning repos.

So what would a comparable action look like in the US? For the answer we go to the two biggest players in the US repo market, those legacy asset custodians who perform asset transformation by matching assets held by Client X with assets demanded by Client Y on a rented, or repo, or better yet, rehypothecated basis: State Street and Bank of New York.

Just how big is the total asset pool of repoable securities as represented by America’s two custodian banks? The answer: shown on the chart below.

One thing to note: when pundits discuss China’s shadow banking system, unlike in western nations where this relates more fo the method and tenor of funding (as well as including the traditional risk, maturity and credit transformations), such as “unsecured overnight” in China shadow banking usually refers to the source of funds, not so much whether repo or other shadow conduits are employed. But both go directly to the most important aspect of the modern hyper-financialized economy: leverage.

In any event, if China managed to lead to the biggest crash of its market since 2009 when it halted a tiny leverage pathway which amounted to just $200 billion, imagine what would happen if – for whatever reason – BoNY and/or State Street decided to cut off some of their $55 trillion in custody assets, which in a time of ZIRP, effectively doulble as virtually free “dry powder” for anyone who wants to use them.

In short: let’s hope that America’s two venerable custody banks don’t get any ideas from China and certainly don’t decide, any time in the near future, to slam the shadow banking system shut – a system whose “assets” at just these two banks are about 3 times greater than the market cap of the S&P500.

Source: STT 10-K, BK 10-K




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Congress Plans to Allow Legal Marijuana in D.C. but Not Legal Marijuana Businesses

Under an agreement between Senate Democrats and
House Republicans, National Journal reports,
omnibus spending legislation that Congress needs to pass this week
will include a rider that prevents Washington, D.C., from taxing
and regulating marijuana. But the bill will not
override Initiative 71
, the marijuana legalization measure that
D.C. voters
approved
by a 2-to-1 margin last month.

Initiative 71
makes it legal for adults 21 or older to possess two ounces or less
of marijuana in public, share up to an ounce at a time with each
other, and grow up to six plants at home, where they will be
allowed to keep whatever those plants produce. Because of legal
limits on the changes that can be made through ballot measures, the
initiative does not address commercial production and distribution,
but the D.C. Council is
considering
legislation that would. The congressional rider,
demanded by hardline prohibitionists such as Rep. Andy Harris
(R-Md.) and House Appropriations Committee Chairman Harold Rogers
(R-Ky.), would bar the District from spending money to license and
regulate marijuana businesses.

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