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Gazprom must really be demanding payment on overdue Ukraine invoices which is the only way we can explain the unprecedented speed with which the IMF has managed to cobble together a makeshift bailout package of up to $27 billion – the bulk of which will naturally go to Russia – which has just made Ukraine its latest vassal state.

As Bloomberg reports, Kiev reached a staff-level agreement with the Washington-based lender for a two-year loan of $14 billion to $18 billion. The IMF’s board must still sign off on the package, Ukraine’s third since 2008, and the government needs to complete “prior actions” to receive the first installment.  Approval is “expected in April, following the authorities’ adoption of a strong and comprehensive package of prior actions aiming to stabilize the economy and create conditions for sustained growth,” IMF mission chief Nikolay Gueorguiev said in the statement. Disbursement may start next month, he said at a news conference in Kiev.

There are of course, conditions: “Approval is “expected in April, following the authorities’ adoption of a strong and comprehensive package of prior actions aiming to stabilize the economy and create conditions for sustained growth,” IMF mission chief Nikolay Gueorguiev said in the statement. Disbursement may start next month, he said at a news conference in Kiev.”

Just like Troika disbursement for Greek aid may come any minute now… as long as Greece allows to extend the definition of fresh milk so European milk exporters can put Greek milk producers out of business. Yup: we know how the IMF works. That, and of course the requirement to hike gas prices by 40% or so.

And then comes the hyperinflation: “Monetary policy will target domestic price stability while maintaining a flexible exchange rate. This will help eliminate external imbalances, improve competitiveness, support exports and growth, and facilitate the gradual rebuilding of international reserves. The NBU plans to introduce an inflation targeting framework over the next twelve months to firmly anchor inflation expectations.”

Very high inflation targeting.

More:

The IMF agreement will clear the way for 1.6 billion euros ($2.2 billion) in emergency aid from the European Union, European Commission President Jose Barroso said March 5. The EU offered an 11 billion-euro aid package. Ukraine is also waiting for $1 billion in loan guarantees and $150 million in direct assistance from the U.S. “This represents a powerful sign of support from the international community for the Ukrainian government, as we help them stabilize and grow their economy, and move their democracy forward,” the White House said in an e-mailed statement.

Because there is nothing quite like insolvent Europe bailing out insolvent Ukraine.

As part of the IMF agreement, the Ukrainian government agreed to cut
the budget deficit to 2.5 percent of gross domestic product by 2016 and
to raise retail energy tariffs toward their full cost, according to the
Washington-based lender. The central bank will shift toward a flexible
exchange rate and the country will tackle bad debts in the banking
industry, it said.

As we said: welcome to IMF vassal state status. Enjoy your hyperinflation dear Ukrainians – at least you will have your “freedom”… just like Greeks have the Euro, if no economy to speak of.

Then again, with or without the IMF, Ukraine is likely a lost cause – earlier today, acting PM announced that the country is on the verge of bankruptcy, a statement which has no hyperbole in it whatsoever.

To wit: Ukrainian economy to shrink 3% this year, inflation to be 12%-14%, Prime Minister Arseniy Yatsenyuk tells parliament in Kiev. He added the GDP forecast based on passage of “unpopular reforms. If those laws aren’t adopted, we see default and 10% economic  decline. This package of laws is very unpopular, very difficult, very tough reforms, which we should have done in the last 20 years.”

Flashback to Hank Paulson waving a blank 3 page term sheet before Congress demanding ulimited power or else the global economy gets it.

Other disclosures:

• Russian trade restrictions to reduce GDP by 1ppt; Russia will also raise energy prices
• “This is the payment for Ukraine’s independence”
• Ukrainian state debt is 53%/GDP
• Ukraine to pay $480/kcm for Russia gas starting on April 1
• Ukraine didn’t use reserves to back hryvnia in March
• Govt seeks to introduce more progressive income tax system
• Govt to keep minimum wage unchanged this year
• Govt to index pensions, public wages to inflation
• Ukraine needs “urgent” constitutional reform

The full IMF statement is below:

An International Monetary Fund (IMF) mission worked in Kyiv during March 4-25, to assess the current economic situation and discuss the authorities’ economic reform program that could be supported by the IMF. At the conclusion of the visit, Nikolay Gueorguiev, Mission Chief for Ukraine, issued the following statement today in Kyiv:

 

“The mission has reached a staff-level agreement with the authorities of Ukraine on an economic reform program that can be supported by a two-year Stand-By Arrangement (SBA) with the IMF. The financial support from the broader international community that the program will unlock amounts to US$27 billion over the next two years. Of this, assistance from the IMF will range between US$14-18 billion, with the precise amount to be determined once all bilateral and multilateral support is accounted for.

 

“The agreement reached with the authorities is subject to approval by IMF Management and the Executive Board. Consideration by the Executive Board is expected in April, following the authorities’ adoption of a strong and comprehensive package of prior actions aiming to stabilize the economy and create conditions for sustained growth.

 

“Ukraine’s macroeconomic imbalances became unsustainable over the past year. The (until recently) pegged and overvalued exchange rate drove the current account deficit to over 9 percent of GDP, and a lack of competitiveness led to the stagnation of exports and GDP. With significant external payments and limited access to international debt markets, international reserves fell to a critically low level of two months of import in early 2014. The 2013 fiscal deficit was 4½ percent of GDP, and the government accumulated sizeable expenditure arrears. The 2013 deficit of the state-owned gas company Naftogaz reached nearly 2 percent of GDP, driven by the sharp increase in sales at below-cost prices. Without policy action, the combined budget/Naftogaz deficit would widen to over 10 percent of GDP in 2014.

 

“Following the intense economic and political turbulence of recent months, Ukraine has achieved some stability, but faces difficult challenges. To safeguard reserves and address currency overvaluation, the National Bank of Ukraine (NBU) floated the exchange rate in February. Measures implemented in February and March helped stabilize financial markets and ensured that critical budget payments have been met. Nonetheless, the economic outlook remains difficult, with the economy falling back into recession. With no market access at present, large foreign debt repayments loom in 2014-15.

 

“The goal of the authorities’ economic reform program is to restore macroeconomic stability and put the country on the path of sound governance and sustainable economic growth while protecting the vulnerable in the society. The program will focus on reforms in the following key areas: monetary and exchange rate policies; the financial sector; fiscal policies; the energy sector; and governance, transparency, and the business climate.

 

“Monetary policy will target domestic price stability while maintaining a flexible exchange rate. This will help eliminate external imbalances, improve competitiveness, support exports and growth, and facilitate the gradual rebuilding of international reserves. The NBU plans to introduce an inflation targeting framework over the next twelve months to firmly anchor inflation expectations.

 

“Financial sector reforms will focus on: (i) ensuring that banks are sound, liquid, and well-capitalized; (ii) upgrading the regulatory and supervisory framework of the NBU, including complying with international best practice and supervision on a consolidated basis, and (iii) facilitating resolution of non-performing loans in the banking sector.

 

”Fiscal policy will secure priority spending during the coming months and implement deeper fiscal adjustment over the medium-term. The initial stabilization in 2014 will be achieved through a mix of revenue and expenditure measures. For 2015-16, the program envisions a gradual expenditure-led fiscal adjustment—proceeding at a pace commensurate with the speed of economic recovery and protecting the vulnerable—aiming to reduce the fiscal deficit to around 2½ percent of GDP by 2016.

 

“Energy sector reforms will focus on reducing this sector’s fiscal drag, while attracting new investment and enhancing efficiency. A key step is the commitment to step by step energy reform to move retail gas and heating tariffs to full cost recovery, along with early action towards that goal. Importantly, this will be accompanied by scaled up social protection to mitigate the impact on the most vulnerable. Over time, the program will focus also on improving the transparency of Naftogaz’s accounts and restructuring of the company to reduce its costs and raise efficiency.

 

“Reforms to strengthen governance, enhance transparency, and improve the business climate will be central elements of the program. Policy measures in these areas will include adoption of a new procurement law to close loopholes allowing evasion of a competitive procedure; measures to facilitate VAT refunds to businesses; and an independent quarterly audit of the Naftogaz accounts. The above, and other measures, will be fully developed with the assistance of the World Bank, EBRD, and other international financial organizations and will help increase transparency of government operations, address long-standing governance issues, and remove barriers to growth. Moreover, the IMF will prepare a comprehensive diagnostic study that will cover the anti-corruption and governance framework, the design and implementation of laws and regulations, the effectiveness of the judiciary, and tax administration.

 

“The authorities’ economic reform program is rightly focused on addressing the key economic challenges faced by Ukraine. Its success in achieving these important objectives will be steadfast implementation, which will enable these efforts to be supported by the international community.”

Finally, if everything goes according to plan, Ukraine has a sterling role model to look forward to. Quoting German FinMin Wolfi Schauble from yesterday – “If ever we were to reach a situation in which we had to stabilize Ukraine, we would have many experiences from the Greek case to draw on.” In other words, Greece is now an example of “successful” economic reforms. Goodbye Ukraine, it was nice knowing you.

via Zero Hedge http://ift.tt/1fn3hP9 Tyler Durden

The price of gold is at a crossroads right now. Will it go higher or lower? The precious metal is keeping its cards close to the chest, so let us look at the fundamentals and the technicals of the gold price.

It has been two months again since we gave you an update on the gold price and, in that time, a lot has happened. Not only did gold jump up from under 1,200 USD to almost 1,400 USD, but we also noticed different changes in the gold complex as some 2013 trends had a turning point in the first quarter of this year. But let us start with a trend that is still standing: the enduring Chinese hunger for all the available physical gold in the market. Since April of 2013, demand for gold in China has truly exploded and that has not changed in 2014. In the first quarter of 2014, the demand for physical gold (through Hong Kong and the Shanghai Exchange) will probably amount to more than 500 tons; an increase of 30% in comparison to the same quarter of last year. It is probable that the demand for gold in China will decrease as the gold price increases, but these figures are remarkable for the gold market regardless.

On the other side of the spectrum, there are gold trends that are changing. As mentioned before, investors dumped their publicly listed gold funds en masse in 2013 (ETFs, ETPs…), with an exodus from their respective gold reserves as a consequence. That, however, all came to an end in 2014. Even more, the reserves of GLD – the biggest gold ETF in the world – had an inflow of 780 to 820 tons of gold; an increase of around 5 percent. Things are also changing on the futures markets. The inventory of the COMEX – the American gold futures exchange – recovered a bit in 2014, albeit modestly as you can see on the chart below.

The COMEX reserves hit a low on the 23rd of January 2014, when the inventory dropped back to just 370,000 ounces of gold. Meanwhile, the reserves have grown again to 640,000 ounces, although that is still a very long way from the April 2013 high of around 3 million ounces. If the Chinese are responsible for a large part of this drainage of COMEX gold, we suspect that the futures market’s reserves will remain unimpressive for a while longer. It would take a much higher gold price to inspire more influx of precious metal into the market, as the Chinese will not sell unless it is for a good reason or a higher price; that much is certain.

But as commodities markets often work, high prices are the best medicine for high prices and low prices are the best solution for low prices. What analysts actually mean by that is that a higher price elicits more selling activity, which in turn increases the supply and puts downward pressure on the price in the long run. On the other hand, lower prices cause for less gold to enter the market, which creates scarcity and, in turn, drives prices up. In the gold market, we have reached that boiling point. The market appeared to be literally and figuratively sold out in 2013, which is why the smallest rise in demand causes a jump in price. That is actually what we have actually experienced in 2014 as the gold price jumped up by almost 200 USD.

Although 60 USD has already been cut from the recent jump, the trend has not changed as you can see on the chart above. Moreover, the chart is about to make a ‘Golden Cross’, which involves a crossover to the upside of the short-term moving average (50-day) and the long-term moving average (200-day). In technical analysis books, this is signal is considered as one of the most powerful and bullish signals. Although it is still too early to tell, the situation and the above chart is shaping up to look a lot like the Golden Cross from 2009. In that year, negative sentiment among investors and scarcity on the physical market set the tone as well.

Still, it is important to keep our eyes on the ball here. If history is any indication, the gold price rose by 1,000 USD (+111%) in 2.5 years’ time after the 2009 ‘Golden Cross’ on the gold chart. A comparable increase in gold today would catapult us to 2,800 USD by the summer of 2015. We are not that far yet, however. At the moment, gold is consolidating its break-out and a further decrease to 1,275 USD is definitely possible, implying a 50% correction. The upward trend, however, will be confirmed over the coming weeks if the turnaround is validated. We are expecting the gold price to consolidate further over the second quarter after which the price can resume its ascent in H2 of 2014. The possibility is real that the previous record might be tested at that stage already, although it is a bit too early to tell. The 1,550 USD resistance level would have to be taken out with confidence to do that regardless, after which the road is open to 1,600 USD and beyond.

Gold is picking up the pieces from a very tough two years and investors have become side-tracked because of the velocity of last year’s price drop. Today, however, gold is surprising friend and foe and once again in the right direction. The Golden Cross, which is forming on the chart, should underline the change in trend. We foresee volatile times for gold, but we expect that the secular bull market has resumed after a cyclical correction and remain proponents of expanding portfolio positions in gold and gold mining stocks.

 

Position for Gold: Download our free GUIDE TO GOLD!

 

Sprout Money offers a fresh look at investing. We analyze long lasting cycles, coupled with a collection of strategic investments and concrete tips for different types of assets. The methods and strategies from Sprout Money are transformed into the Gold & Silver Report and the Technology Report.

Follow us on Twitter @SproutMoney

via Zero Hedge http://ift.tt/1gFhiwJ Sprout Money

• BOE to Sign Agreement With China on Yuan Clearing Next Week (BBG)
• U.S. law firm plans to bring suit against Boeing, Malaysia Airlines (Reuters)
• Citigroup Fraud Stings Mexico Star as Medina-Mora Chased (BBG)
• Fraternity Chief Feared for Son as Hazings Spurred JPMorgan Snub (BBG)
• UBS suspends six more forex traders (FT)
• Goodbye CSCO Q1 EPS: China to strengthen Internet security after U.S. spying report (Reuters)
• Good luck: Spain Banks With $55 Billion of Property Seek Deals (BBG)
• Citic Pacific Said to Plan About $4 Billion Public Offering (BBG)
• Yahoo Japan to buy eAccess from SoftBank for $3.2 billion (Reuters)
• “Whatever it takes” to talk down the Euro: Euro, peripheral bond yields fall on ECB easing debate (Reuters)
• Obama and Pope Francis Meet in Rome (Reuters)
• License Plate Technology at Risk Post-Snowden (BBG)
• Robert Shiller on the art of stock-picking and the complex psychology of investors (WSJ)
• U.S. jobs market dropouts increasingly likely to stay out (Reuters)

 

Overnight Media Digest

WSJ

* Citigroup Inc failed to get Federal Reserve approval to reward investors with higher dividends and stock buybacks, a surprising blow to Chief Executive Michael Corbat’s effort to bolster the bank’s reputation following a 2008 government rescue. The Fed rejected capital plans from five large banks and approved 25 as part of its annual “stress tests” measuring a firm’s ability to continue lending during a severe economic downturn. (http://ift.tt/1gEoGZk)

* Bank of America Corp and former Chief Executive Kenneth Lewis took big steps to put the financial crisis behind them by paying state and federal agencies to settle lawsuits over the acquisitions of Countrywide Financial Corp and Merrill Lynch & Co. The Charlotte, North Carolina-based lender said it would pay $9.5 billion to settle mortgage claims with Fannie Mae, Freddie Mac and their federal regulator. (http://ift.tt/1gEoERb)

* Brookstone Inc, which sells consumer gadgets ranging from travel electronics to massage chairs, is preparing to file for bankruptcy protection as early as Sunday, with a plan in place to be bought by another specialty retailer Spencer Spirit Holdings Inc, people familiar with the matter said. (http://ift.tt/1gEoERf)

* Microsoft Corp’s new boss on Thursday will have his first shot at outlining a new, less Windows-dependent path for the company. Chief Executive Satya Nadella, at an event in San Francisco, is expected to disclose a new version of Microsoft’s popular Office software for the iPad, people familiar with the matter said. (http://ift.tt/1gEoERi)

* An internal investigation into the George Washington Bridge lane closures conducted by lawyers hired by the Christie administration is expected to absolve additional members of Governor Chris Christie’s senior staff from being involved in the matter. (http://ift.tt/1gEoGZw)

 

FT

Sources said the International Monetary Fund would announce a rescue package for Ukraine of about $15 billion as early as Thursday, hoping that the initial aid payments could be made by the end of April.

Bank of America agreed on Wednesday to pay $9.5 billion to settle claims it sold U.S. housing regulators faulty mortgage bonds.

The U.S. Federal Reserve rejected the capital plans of five large banks including Citigroup as part of its annual stress test, but cleared Bank of America and Goldman Sachs after they agreed to lower buyback and dividend proposals.

Mexico expects to issue tenders for some deep water oilfields next year as it welcomes private investment at its oil and gas exploration and production sector.

King Digital Entertainment’s shares fell more than 15 percent on its New York stock market debut, making the Candy Crush Saga maker the largest new U.S. listing to flop on its opening day in 20 years

 

NYT

* The Federal Reserve dealt an embarrassing blow to Citigroup Inc on Wednesday when it rejected the company’s plans to manage its capital, citing concerns about the “overall reliability of Citigroup’s capital planning process.” It was the only one among the top five banks that failed to persuade the Fed to bless its plans of increasing dividends and repurchasing stock. (http://ift.tt/1hwDDHW)

* Rupert Murdoch appointed his two sons, Lachlan and James to senior positions at his companies News Corp and Twenty-first Century Fox, ensuring that a media conglomerate that has always been run like a small family business would have a Murdoch in charge for years to come.(http://ift.tt/Qj7bDp)

* Children of elderly borrowers are learning that their parents’ reverse mortgages are now threatening their own inheritances. Under federal rules, survivors are supposed to be offered the option to settle the loan for a percentage of the full amount. Instead, reverse mortgage companies are increasingly threatening to foreclose unless heirs pay the mortgages in full. (http://ift.tt/1hwDBjq)

* Bank of America Corp is paying $6.3 billion to settle a lawsuit arising out of troubled mortgage-backed securities it sold to Fannie Mae and Freddie Mac in the run up to the financial crisis. As part of the settlement, Bank of America will also repurchase mortgage securities from Fannie and Freddie that are valued at about $3.2 billion. (http://ift.tt/Qj7bTC)

* Candy Crush Saga-developer King Digital Entertainment saw its stock slump as trade opened on Wednesday, and ended the day down 15.6 percent, closing at $19 per share. The sheer drop disappointed investors who scooped up the stock at the initial public offering, as well as those who bought shares Wednesday morning. (http://ift.tt/1hwDDHZ)

* In the fifth huge recall for automakers this year, Nissan Motor Co Ltd is recalling nearly a million vehicles because the front passenger-side air bag might not deploy in a crash, the company said in a report to regulators published on Wednesday. (http://ift.tt/Qj7e1Z)

* A growing number of big corporate clients are demanding that their law firms demonstrate that their computer systems are employing top-tier technologies to detect and deter attacks from hackers bent on getting their hands on corporate secrets either for their own use or sale to others. (http://ift.tt/1hwDDI0)

* Yet another proposal to overhaul United States’ housing finance system will be put before Congress on Thursday. The major distinction of this proposal is that it would make the mortgage lending system more like a public utility, by creating a co-op of lenders that would be the sole issuer of mortgage-backed securities guaranteed by the government. (http://ift.tt/Qj7bTF)

* Two Democratic senators on Wednesday criticized Target Corp’s management for not stopping a huge data breach of its systems, citing several missed opportunities to thwart the attack and protect customer data. John D. Rockefeller from West Virginia, chairman of the Senate Commerce Committee, and Richard Blumenthal from Connecticut said Target’s failure to heed warning signs of incursions by cyber criminals ultimately was the fault of its top executives. (http://ift.tt/1hwDDI1)

* Connecticut lawmakers on Wednesday became the first in the country to pass legislation that would increase a state’s minimum wage to $10.10 an hour by 2017, the same rate President Obama wants for the federal minimum wage. (http://ift.tt/Qj7e22)

 

Canada

THE GLOBE AND MAIL

* Canadian Prime
Minister Stephen Harper and his U.S. counterpart Barack Obama are urging
European allies to support sanctions targeting Russia’s energy sector,
with both leaders saying North America could help Western Europe end its
dependence on Russian natural gas. (http://ift.tt/1hwiuxK)

*
After a day of tense negotiations under threat of a back-to-work order,
British Columbia Premier Christy Clark signed a settlement with union
and non-union truckers to end the strike that has snarled shipping at
the Port Metro Vancouver for almost a month.
(http://ift.tt/1hwiw8I)

Reports in the business section:

*
Just one week after Jim Flaherty stepped down as the Canadian finance
minister, Bank of Montreal is shaking up the mortgage market,
aggressively cutting its five-year rate to levels that caused him to
intervene last year. BMO is now offering five-year fixed mortgages at
2.99 percent, slashing its rate from 3.49 percent.
(http://ift.tt/1hwiw8O)

NATIONAL POST

*
Toronto Mayor Rob Ford took more than a few punches but remained light
on his feet at the inaugural televised debate in mayoral election that
saw challengers skirt around the police investigation into him and not
once utter the words “crack cocaine.” (http://ift.tt/1jxYbXK)

*
Quebec Premier Pauline Marois’s insistence that her party is a model of
political integrity took a hit on Wednesday as it emerged that Quebec’s
anti-corruption police are looking into past Parti Quebecois
fundraising practices. (http://ift.tt/1hwiw8X)

FINANCIAL POST

*
Quebec’s Liberal Party says the separatist Party Quebecois has gone too
far in its dream of the province as a petroleum promised land and that
no public money should be spent on early-stage oil drilling projects
such as those on Anticosti island. (http://ift.tt/1hwiuOb)

*
BlackBerry Ltd Chief Executive John Chen says he is fighting against
future product leaks by taking “legal action” that he hopes will set an
example. The head of the Waterloo, Ontario-based smartphone company
alleges that a person he did not name stole confidential details about a
future BlackBerry product and leaked them to the public.
(http://ift.tt/1jxYce8)

 

China

CHINA SECURITIES JOURNAL

– China’s pension investment fund reported a net profit of 69.6 billion yuan ($11.21 billion) in 2013, up 6.29 percent from a year earlier, the National Council for Social Security fund said.

– Average daily power output and daily rail transport volume has picked up in March, a sign that the economic activities were gaining pace, said Li Pumin, spokesman of the National Development and Reform Commission.

SHANGHAI SECURITIES NEWS

– China will launch the Baotou Rare Earth Products Exchange on March 28, the first such exchange in the country that aims to provide open prices for rare earth products, it said on its official website.

CHINA DAILY

– The central government will introduce a credit rating system for provinces, cities and counties as it seeks to establish a foundation for a well-regulated municipal debt market, said a source at the Ministry of Finance.

 

Britain

The Telegraph

RBS CITIZENS FAILS FEDERAL RESERVE STRESS TEST

Royal Bank of Scotland’s U.S. business has been barred from raising its dividend by the Federal Reserve after being deemed unable to survive another financial crisis. (http://ift.tt/1hwDBjx)

PENSION CHANGES MUST NOT CREATE MIS-SELLING RISK, SAYS L&G BOSS

Changes to Britain’s pension rules must not be allowed to create an “open-ended liability” for the insurance industry, the boss of Legal & General has warned, as he forecast a 75 percent contraction in the individual annuity market. (http://ift.tt/Qj7bTI)

CANDY CRUSH MAKER’S SHARES TUMBLE ON DEBUT

Shares in the London-based smartphone games developer King tanked on their first day of trading on Wall Street on Wednesday, as the company failed to overcome fears it could prove to be a flash in the pan. (http://ift.tt/1hwDDI6)

The Guardian

WONGA LOOKS BEYOND PAYDAY TO TRY OUT LONGER LOANS

The online lender Wonga is testing out new loans repaid over a six-month period, and has dropped a service that allowed consumers to pay for goods from online retailers using credit. (http://ift.tt/Qj7e23)

LLOYDS SHARE SALE MAKES GOVERNMENT 4.2 BLN STG

The taxpayer’s stake in Lloyds Banking Group has been cut to 25 percent, after the government sold shares worth 4.2 billion pounds on Tuesday night. (http://ift.tt/1hwDDI7)

SSE PLEDGES TO HOLD GAS AND ELECTRICITY PRICES UNTIL 2016

SSE, the UK’s second-largest energy provider, is to freeze gas and electricity prices for its 5 million customers until 2016, putting pressure on rivals to follow. (http://ift.tt/Qj7bTN)

The Times

SCOTS BELIEVE OSBORNE IS ‘BLUFFING’ OVER CURRENCY

George Osborne’s high-stakes gamble of ruling out a currency union between an independent Scotland and the rest of the UK appears to have backfired, with more Scots believing that he is “bluffing” than telling the truth, a poll for The Times has found. (http://ift.tt/1hwDDIa)

The Independent

ROW AS SWISS PICK UK BANKER TO RUN WATCHDOG

Switzerland has named the British banker Mark Branson as the new head of its financial market regulator, it emerged yesterday. (http://ift.tt/Qj7eig)

 

 

Fly On The Wall 7:00 AM Market Snapshot

ECONOMIC REPORTS

Domestic economic reports scheduled today include:

Fourth quarter GDP growth at 8:30–consensus 2.7%
Jobless claims for week of March 22 at 8:30–consensus 323K
Pending home sales for February at 10:00–consensus up 0.2% for the month

ANALYST RESEARCH

Upgrades

BankUnited (BKU) upgraded to Overweight from Equal Weight at Morgan Stanley
Federated Investors (FII) upgraded to Neutral from Underperform at Sterne Agee
New York Times (NYT) upgraded to Overweight from Equal Weight at Evercore
PVH Corp. (PVH) upgraded to Conviction Buy from Buy at Goldman

Downgrades

BlackBerry (BBRY) downgraded to Sell from Hold at Societe Generale
CECO Environmental (CECE) downgraded to Market Perform at FBR Capital
Citigroup (C) downgraded to Market Perform from Outperform at Bernstein
Citigroup (C) downgraded to Market Perform from Outperform at Keefe Bruyette
Five Star (FVE) downgraded to Market Perform from Outperform at JMP Securities

Initiations

Active Power (ACPW) initiated with a Buy at Roth Capital
Amgen (AMGN) initiated with an Overweight at Morgan Stanley
Associated Banc-Corp (ASBC) initiated with a Neutral at DA Davidson
Biogen (BIIB) initiated with an Overweight at Morgan Stanley
Celgene (CELG) initiated with an Equal Weight at Morgan Stanley
Cemig (CIG) initiated with a Buy at Goldman
Gilead (GILD) initiated with an Equal Weight at Morgan Stanley
ICON plc (ICLR) initiated with an Outperform at Credit Suisse
Independence Realty Trust (irt) initiated with a Buy at Deutsche Bank
Pharmacyclics (PCYC) initiated with an Equal Weight at Morgan Stanley
Regeneron (REGN) initiated with an Equal Weight at Morgan Stanley
RingCentral (RNG) initiated with an Outperform at Macquarie
Roundy’s (RNDY) initiated with a Buy at BofA/Merrill
TCF Financial (TCB) initiated with a Neutral at DA Davidson

COMPANY NEWS

Bank of America (BAC) received approval from the Federal Reserve for its 2014 capital plan; the bank will repurchase $4B of its common stock and increase its dividend to 5c from 1c per share
Bank of America (BAC) also announced a more than $9B settlement with the FHFA related to mortgage-backed securities sold to Fannie Mae (FNMA) and Freddie Mac (FMCC) between 2005 and 2007
JPMorgan (JPM) and Morgan Stanley (MS) both received approval from the Federal Reserve for their proposed 2014 capital plans
The Federal Reserve rejected Citigroup’s (C) capital plan for 2014, which included a proposed $6.4B share repurchase program and an increase of the bank’s dividend to 5c per share. Citi will be allowed to continue with its current capital actions, which include a $1.2B share repurchase program and a 1c per share dividend
Essex Property Trust (ESS) will join the S&P 500, replacing Cliffs Natural (CLF), as of the market close on April 1
Santander (SAN) said it will resubmit capital plan after Fed objects for qualitative reasons
Yahoo Japan (YHOO) to buy eAccess from SoftBank (SFTBF) for Y324B

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
Leidos (LDOS), Vince Holding (VNCE), Paychex (PAYX)

Companies that missed consensus earnings expectations include:
Signet Jewelers (SIG), H.B. Fuller (FUL), American Eagle Energy (AMZG), Revance Therapeutics (RVNC), Cancer Genetics (CGIX)

NEWSPAPERS/WEBSITES

Twitter (TWTR) expected to introduce new music strategy this week, WSJ reports
Microsoft (MSFT) expected to announce new version of Office for iPad, WSJ reports
UBS (UBS) has suspended six more forex traders, FT reports
Amazon (AMZN) received clearance to provide more cloud services to Pentagon, FT reports
Intel to support Cloudera and stop its distribution of Hadoop, Venture Beat says
Target (TGT) and Visa (V) say fraud limited following data breach, WSJ reports
Facebook (FB) denies Oculus hardware redesign, Re/code reports

SYNDICATE

500.com  (WBAI) files to sell $360M of American Depositary Shares
Advaxis (ADXS) 4.08M share Spot Secondary priced at $3.00
Applied Genetic Technologies (AGTC) 4.17M share IPO priced at $12.00
Ford (F) files to sell 1.34M shares of common stock for holders
Marchex (MCHX) 5.714M share Secondary priced at $10.50
Old Second Bancorp (OSBC) files to sell 13.5M shares of common stock
PennyMac (PFSI) 5.555M share Secondary priced at $16.50
Realty Income (O) 12M share Spot Secondary priced at $39.96
SciQuest (SQI) 3M share Secondary priced at $26.75
Solazyme (SZYM) 5M share Secondary priced at $11.00
Square 1 Financial (SQBK) 5.78M share IPO priced at $18.00
TriNet (TNET) 15M share IPO priced at $16.00
William Lyon Homes (WLH) 2M share Secondary priced at $27.25

via Zero Hedge http://ift.tt/1gFhk7V Tyler Durden

The capital plans of Citigroup, HSBC and several other large, foreign bank holding companies were rejected by the Federal Reserve yesterday.  Most of the media reports about this significant rebuttal for Michael Corbat, Citi’s chief executive, focus on operational issues, but a more obvious explanation is that Citi business model is more risky.  Indeed, you cannot really compare Citi to either Wells Fargo, Bank of America or JPMorgan.  Allow me to convey a polite “Duh” to the media and analyst community.

Looking at the most recent Fed Y-9 performance report for Citi, the first thing that should strike you is that Citi’s loss rate is 4x that of the large bank peer group.  Citi’s business model is more focused on subprime than the average for the peer group.  Net losses on average loans and leases were almost 2% for Citi at the end of 2013 vs just 45bp for the large bank peers.  So given this fact, you can understand why the Fed is more critical of Citi’s loss rates and capital plan than with other banks.

Another clue for the media is the composition of Citi’s assets.  Over 20% of Citi’s loan book are in credit cards vs just 2% on average for the large bank peers.  Indeed, the only good large asset peer for Citi is HSBC, which also has a higher loss rate and more of a subprime, consumer focus than do the other 90 banks in the large bank peer group.  

Larry Lindsey noted on CNBC this morning that HSBC never took a dime of bailout money from UK authorities, but the fact remains that the bank’s loss profile is far more aggressive than that of most large banks.  In the extreme stress test scenario posed by the Fed, both Citi and HSBC would likely see the highest loss rates of any large US banking operation.

Another metric to give you a sense of the relative riskiness of the Citi business vs. other banks is loan commitments, which are 2x the average for the large bank peer group. Another way to think of this metric is “loss given default,” because an obligor could draw on the commitment and then file bankruptcy.  Citi has historically had a much higher loss given default than other large banks, in part because of the large credit card book.  There are actually four time series for loan commitments reported by banks on the form Y-9 and Citi is higher than other large banks in every category.

So when you read about Citi’s rejection by the Fed in terms of capital planning, remember that the bank’s business model is significantly different than that of BAC, JPM and especially WFC.  No credible analyst would even compare Citi with these large asset peers. Indeed, going back to the Fed capital stress tests of several years ago, the best domestic peer for Citi in the large bank peer group is Capital One Financial, a business which is mostly subprime credit cards.

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After tumbling overnight to just around 101.80, the USDJPY managed to stage a remarkable levitating comeback, rising all the way to 102.3, which in turn succeeded in closing the Nikkei 225 at the highs, up 1% after tumbling in early trade. The Shanghai Composite was not quite as lucky and as fear continue to weigh about a collapse in China’s credit pipeline, the SHCOMP was down more than 0.8% while the PBOC withdreww even more net liquidity via repos than it did last week, at CNY 98 billion vs CNY 48 billion. That said, this morning will be the fifth consecutive overnight levitation in futures, which likely will once more surge right into the US market open to intraday highs, at which point slowy at first, then rapidly, fade again as the pattern has seemingly been set into algo random access memory. Which in a market devoid of human traders is all that matters.

Turning to the overnight markets, Asian equities started the day on the back foot but the Nikkei (+0.7%) has managed to recover from the lows thanks to a bounce in USDJPY (+0.15%). There have been a number of BoJ-related headlines suggesting that further stimulus is on the cards in May to help cushion the blow from next month’s sales tax hike. The Hang Seng (-0.4%) and HSCEI (-0.2%) are both a touch weaker. With the strong performance in EM yesterday (more below) and lower US yields, the demand for Asian credit has been strong and Asian IG bonds are trading around 5-10bp tighter. Chinese macro headlines have been rather thin in the last 24 hours but there is further talk from the State Council of mini-stimulus – this time reports suggest the Council could accelerate development of the environmental protection industry (Securities Journal).

Coming back to the Fed who made headlines with the release of its “Comprehensive Capital Analysis and Review” after the US market close. The Review was essentially part two of the Fed’s annual bank stress tests. Of the 30 banks tested, the capital plans of five banks were rejected by the Fed. The largest of these five banks was Citigroup, followed by the US units of three foreign banks (HSBC, RBS and Santander). Zions Bancorporation’s capital plan was also rejected by the Fed, but this was expected after they failed to meet minimum capital requirements in part 1 of the Fed’s test last week. The Fed said its reason for objecting to Citigroup’s 2014 capital plan was that there were “a number of deficiencies in its capital planning practices, including in some areas that had been previously identified by supervisors as requiring attention, but for which there not sufficient improvement”. The Fed said that the three US units of foreign banks were new to the Review and therefore “may face challenges in developing appropriate capital planning processes that meet the Federal Reserve’s high expectations”. The shares of Citi, Zions, HSBC (ADRs), RBS (ADRs) and Santander all sold off between 2-5% after the close.

Turning to the day ahead, the latest Euroarea money supply data is due for the month of February, coming one week ahead of the ECB’s April meeting. UK retail sales, French consumer confidence and Italian business confidence are the other data releases in Europe. The Bank of England publishes its Financial Policy Committee statement. Stateside, the third estimate of Q4 GDP is due together with jobless claims (consensus 323k) and pending home sales. Cleveland Fed President Pianalto (a FOMC voter) will be speaking today.

Headline

• Growing expectations of the ECB carrying out QE to support credit markets in Eurozone, together with month-end related flow supporting Bunds, dominated the price action in Europe this morning.
• EUR remained under pressure, with the release of better than expected UK retail sales data prompting further downside in EUR/GBP which also saw the cross move below the 100 and also the 50DMA lines.
• 5 of 30 lenders failed the Fed’s stress test; Citigroup (C), Zions Bancorp (ZION), Santander (SAN SM), RBS (RBS LN), and HSBC US (HSBA LN) all failed.
• Treasuries steady, 10Y holding just below 2.692% 200-DMA; week’s auctions conclude today with $29b 7Y notes. Yield 2.27% in WI trading; stopout yield at that level would be highest since December.
• Yesterday’s 5Y auction awarded at 1.715%, 1.5bps below WI yield at 1pm according to Stone & McCarthy, biggest stop through by a 5Y since Jan. 2012
• Sale benefited from highest yield since May 2011 and post-Yellen press conference curve flattening that pushed 5/30 spread to tightest since Oct. 2009 on Monday
• U.K. retail sales rose 1.7% in Feb., more than three times as much as economists forecast, as Internet sales and spending on food surged
• Ukraine reached a preliminary deal with the IMF to unlock $27b of international support to avert default and limit economic damage from a four-month political crisis
• The yuan fell for a third day as the central bank weakened the fixing amid signs China will struggle to meet it 7.5 percent growth target this year
• Thai satellite images of more than 300 objects in the southern Indian Ocean produced another lead in the search for Malaysian Air Flight 370 as bad weather forced aircraft to suspend their operations today
• Sovereign yields lower. Nikkei +1%, Shanghai -0.8%. European equity markets mostly higher, U.S. stock-index futures gain. WTI crude little changed, gold falls; copper +0.42%

US Event Calendar

• 8:30am: GDP q/q, 4Q final, est. 2.7% (prior 2.4%); Personal Consumption, 4Q, est. 2.7% (prior 2.6%); GDP Price Index, 4Q, est. 1.6% (prior 1.6%); Core PCE q/q, 4Q, est. 1.3% (prior 1.3%)
• 8:30am: Initial Jobless Claims, March 21, est. 324k (prior 320k); Continuing Claims, March 14, est. 2.882m (prior 2.889m)
• 9:45am: Bloomberg Consumer Comfort, March 23 (prior -29.0)
• 10:00am: Pending Home Sales m/m, Feb., est. 0.2% (prior 0.1%); Pending Home Sales y/y, Feb., est. -9% (prior -9.1%)
• 11:00am: Kansas City Fed Manufacturing, March, est. 5 (prior 4)
• 1:00pm: U.S. to sell $29b 7Y notes
• 11:00am POMO: Fed to purchase $3.75b-$4.5b in 2018-2019 sector

Asian Headlines

JGBs softened overnight, with swaps curve bull flattening amid yet another session of light volume ahead of the fiscal year-end. Recovery by USD/JPY, which also saw the Nikkei 225 (+1.0%) retrace early losses and climb above the 14600 level weighed on FI prices.

Over in China, a source close to China’s State Administration of Foreign Exchange said there is no need to worry about capital outflows, adding that the reserve requirement ratio in China can help. Nevertheless, 7-day repo rate rose to 4.83% from 3.88% after the PBoC drained CNY 20bln via 28 day repos and CNY 32bln via 14 day repos, its 11th consecutive drain.

EU & UK Headlines

While as evidenced in the latest ECB O/N liquidity ops that excess liquidity has increased to c. EUR 117bln vs. EUR 111bln, easing pressure on EONIA fixings as banks continue to repay 3y LTRO loans, Euribor curve underwent further bull flattening this morning. The release of the latest M3 data, which showed that loans to private sector are contracting at -2.2% Y/Y, which marked the 22nd monthly decline. This, together with reports that European regulators are preparing to ease rules on asset-backed securities (ABS) in a bid to revive the market and provide lending to credit-starved small businesses prompted further speculation of easing by the ECB.

Looking elsewhere, the release of better than expected UK retail sales report ensured that despite the monthend related demand, UK Gilts have underperformed its EU peers, with the Short-Sterling curve undergoing bear steepening following the release. According to the ONS, the growth in retail volumes was led by food stores which contributed more than a half of the growth in retail sales.

Barclays preliminary pan-Euro agg month-end extensions: (+0.07y) (12m avg. +0.08y) Barclays preliminary Sterling month-end extensions: (-0.02y) (12m avg. +0.06y)

US Headlines

Flattening of 2/10s US swaps spread in anticipation of good demand for today’s 7y note auction by the US Treasury failed to filter through into USTs which traded relatively steady this morning. 4-10y area of the swaps curve benefited the most today from a very strong 5y auction yesterday which stopped through the WI by 1.2bps (the largest since Jan 2012) and revealed that dealer take-down fell to 26%, the lowest on record. Barclays preliminary US Tsys month-end extensions: (+0.07y) (12m avg. +0.08y)

Equities

Although stocks in Europe recovered off the lowest levels of the session, with credit spreads tightening as speculation of QE supported sentiment, the FTSE-100 index remained in the green amid lower base and precious metal prices, which resulted in basic materials underperforming. Firmer USD (+0.18%) weighed on both spot gold and silver prices this morning, with spot gold falling below the 200DMA line in the process.

At the same time, EU banking names came under pressure after yesterday’s release of the Fed stress tests showed that 5 of 30 lenders failed the Fed’s stress test.

– Following this announcement after-market yesterday, US stock futures hit a fresh low, with Citigroup shares down as much as 6%, RBS’s ADR down 2.7%, HSBC’s ADR down 2% and Santander’s ADR down 1%. The failure of the stress tests means Citigroup’s 2014 dividend and stock buyback plans have been rejected

FX

Expectations of more policy easing by the ECB ensured that EUR remained under pressure, with the release of better than expected UK retail sales prompting further downside in EUR/GBP which saw the cross move below the 100 and also the 50DMA lines to touch on lowest level since early March. Looking elsewhere, NZD was the notable outperformer overnight in Asia, topping April highs in the process, after New Zealand reported a larger than expected trade surplus of NZD 818mln vs. Exp. NZD 600mln which was the highest ever surplus for the month of February.

Commodities

Precious metals traded lower this morning, with spot gold falling below USD 1,300 and also the 200DMA line, with palladium also under pressure on the back of a firmer USD and touted profit taking flow. Of note, analysts at ABN AMRO forecasts gold at USD 1250/oz end-June, revised from USD 1,100 and sees prices at USD 1,200 end-Sep, revised from USD 1,050. Analysts cited weaker USD and economic data, lower Treasury yields and tensions between Ukraine/Russia. At the same time, analysts at Goldman Sachs see 2014 as last year of global aluminium surplus on China and said that some aluminium smelters in China may shut this year.

* * *

In conclusion, here is Jim Reid’s overnight recap

A 0.85% slide in the S&P500 (-0.7% on the day) during the final hours of US trading yesterday has set the tone for a mixed start to Thursday. A number of theories for the dip in risk were put forward, including President Obama’s warning of further sanctions “unless Russia alters its course”. However this was offset to a large extent by comments by Chancellor Merkel who said she was “not interested in escalation” of tension with Russia and that the West “has not reached a stage that implies the imposition of economic sanctions”. In reality, the market was also being dragged lower by US bank shares which had already begun selling off earlier in the day, and well in advance of the release of part two of the Fed’s stress tests which we discuss in more detail below. US tech stocks also led the broader declines after the -16% first day post-IPO performance of mobile gamemaker King Digital.

The retreat in equities saw USTs retrace most of their post-FOMC losses, led by the longer end as the UST curve continued to flatten and the front-end underperformed. Helping the bid for treasuries was a well received 5yr treasury auction which recorded a bid-to-cover ratio of 2.99x, the highest since September 2012 and higher than the average of prior ten 5-year auctions which had a bid-to-cover ratio of 2.60x. With yesterday’s move 10yr UST yields (-5.6bp) are now back at their pre-FOMC levels, joining 30yr treasury yields which dipped below FOMC levels a few days ago, while Eurodollar futures are only a few bp away from doing the same. Comments from a couple of Fed officials including Bullard and Plosser were also supportive of US yields. Bullard reiterated a number of times that Fed policy is data dependent. In a television interview, the usually-hawkish Plosser appeared to soften his recent stance somewhat. Plosser said although he saw QE ending in the fall, he wanted to see inflation creep higher and commented that policymakers must defend their 2% inflation objective both to the upside and downside. Plosser also said that that Yellen’s six month estimate between QE ending and the start of rate hikes is dependent on data and economic conditions at the time.

Coming back to the Fed who made headlines with the release of its “Comprehensive Capital Analysis and Review” after the US market close. The Review was essentially part two of the Fed’s annual bank stress tests. Of the 30 banks tested, the capital plans of five banks were rejected by the Fed. The largest of these five banks was Citigroup, followed by the US units of three foreign banks (HSBC, RBS and Santander). Zions Bancorporation’s capital plan was also rejected by the Fed, but this was expected after they failed to meet minimum capital requirements in part 1 of the Fed’s test last week. The Fed said its reason for objecting to Citigroup’s 2014 capital plan was that there were “a number of deficiencies in its capital planning practices, including in some areas that had been previously identified by supervisors as requiring attention, but for which there not sufficient improvement”. The Fed said that the three US units of foreign banks were new to the Review and therefore “may face challenges in developing appropriate capital planning processes that meet the Federal Reserve’s high expectations”. The shares of Citi, Zions, HSBC (ADRs), RBS (ADRs) and Santander all sold off between 2-5% after the close.

This was partly countered by other banks such as Morgan Stanley and Wells Fargo who announced upsized dividend and share buyback programs after the Fed’s stress tests were released. S&P 500 futures and USDJPY dipped slightly following the announcement, but the dip was relatively small and short lived. The dataflow on both sides of the Atlantic was largely ignored though we noted a fairly disappointing February US durable goods report. Orders were strong in the headline (2.2% vs 0.8% expected) but the ex-transportation (0.2% vs 0.3% expected) and non-defense, ex air orders (-1.3% vs 0.5%) disappointed relative to expectations. According to Reuters, the headline number was boosted by a large order from Boeing, reversing a slump in orders reported by the aircraft maker in the previous month. Equities dipped slightly following the data but losses were pretty minimal.

With US treasury yields back at one-week lows, EM extended its positive run yesterday with LATAM rates tracking about 5-10bp lower on the day. BRL recorded its fifth straight day of gains against the USD, which comes after Brazil’s Ibovespa notched up a seven day winning streak. The CDX EM credit index tightened (-7bp) for the fifth consecutive day and the search for yield extended to European periphery rates markets where Spanish and Italian bond yields were 5bp firmer. EURUSD continued to lose ground after Tuesday’s round of dovish ECB-speeches. Comments from the ECB’s Linde emphasising the non-zero risk of deflation seemed to add to the Euro bearishness.

Apart from the comments from Obama and Merkel, the other headlines from Ukraine related to a potential funding package being put together by the IMF. The FT is reporting that an IMF funding package will be announced as early as today which will provide US$15bn in emergency funding by the end of April. This is at the lower end of the $15bn-$20bn that Ukraine’s finance minister Shlapak said the country was seeking, although other nations are expected to contribute. Japanese PM Shinzo Abe this week announced his government would contribute about $1.5bn, and the EU is attempting to get final agreement for another EUR1.6bn. US assistance, in the form of $1bn in loan guarantees, is still being debated by Democrats and Republicans in Congress. The news of an IMF package will be welcome news for the Ukrainian hryvnia which has lost 20% against the USD in the last two weeks as reports suggest that the country’s FX reserves continue to deplete (Reuters).

Turning to the day ahead, the latest Euroarea money supply data is due for the month of February, coming one week ahead of the ECB’s April meeting. UK retail sales, French consumer confidence and Italian business confidence are the other data releases in Europe. The Bank of England publishes its Financial Policy Committee statement. Stateside, the third estimate of Q4 GDP is due together with jobless claims (consensus 323k) and pending home sales. Cleveland Fed President Pianalto (a FOMC voter) will be speaking today.

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Bloomberg reports that Citigroup has failed the Fed’s new round of stress tests:

Citigroup Inc.’s capital plan was among five that failed Federal Reserve stress tests, while Goldman Sachs Group Inc. and Bank of America Corp. passed only after reducing their requests for buybacks and dividends.

 

Citigroup, as well as U.S. units of Royal Bank of Scotland Group Plc, HSBC Holdings Plc and Banco Santander SA, failed because of qualitative concerns about their processes, the Fed said today in a statement. Zions Bancorporation was rejected as its capital fell below the minimum required. The central bank approved plans for 25 banks.

In reality, Citi “flat lined” – went totally bust – in 2008.  It was insolvent.

And former FDIC chief Sheila Bair said that the whole bailout thing was really focused on bringing a very dead Citi back from the grave.

Indeed, the big banks – including Citi – have repeatedly gone bankrupt.

For example, the New York Times wrote in 2009:

Over the past 80 years, the United States government has engineered not one, not two, not three, but at least four rescues of the institution now known as Citigroup.

So why did the U.S. government give Citi a passing grade in previous stress tests?

Because they were rigged to give all of the students an “A”.

Time Magazine called then Secretary Treasury Tim Geithner a “con man” and the stress tests a “confidence game” because those tests were so inaccurate.

But the bigger story is that absolutely nothing was done to address the causes of the 2008 financial crisis, or to fix the system:

• Even though everyone knows that breaking up the big banks is essential to stabilizing the economy, it hasn’t happened. Indeed, they’re bigger than ever

• The faulty incentive system – huge bonuses that encourage reckless risk-taking by bankers – are still here

• Even though rampant speculation helped destabilize the economy, speculation has shot through the roof

• Another big problem – shadow banking – has only gotten worse

• Derivatives?  Washington has poured gasoline on the fire

• Cracking down on fraud and holding criminals accountable?  Nope … just phony P.R.

Indeed, the only the government has done is to try to cover up the problems that created the 2008 crisis in the first place … and to throw huge amounts of money at the the guys who caused the mess in the first place.

via Zero Hedge http://ift.tt/1jNjJex George Washington

Submitted by Michael Krieger of Liberty Blitzkreg blog,

One of the primary topics on this website since it was launched has been the extremely destructive and explosive rise of crony capitalism throughout the USA. It is crony capitalism, as opposed to free markets, that has led to the gross inequality in American society we have today. Cronyism for the super wealthy starts at the very top with the Federal Reserve System, which consists of topdown economic central planners who manipulate the money supply and hence interest rates for the benefit of the financial oligarch class. It then trickles down through lobbyist money into the halls of Washington D.C., and ultimately filters down to local governments and then the average person on the street gaming welfare or disability.

As such, we now live in a culture of corruption and theft that is pervasive throughout society. One thing that bothers me to no end is when fake Republicans focus their criticism on struggling people who need welfare or food stamps to survive. They have this absurd notion that the whole welfare system doesn’t start with the multinational corporations and Central Banks at the top. In reality, it is at the top where the cancer starts, and that’s where we should focus in order to achieve real change.

That’s where a new report from Open the Books on corporate welfare comes in. In a preview of the publication, the organization notes:

If Republicans are going to get truly serious about cutting government spending, they are going to have to snip the umbilical cord from the Treasury to corporate America.  You can’t reform welfare programs for the poor until you’ve gotten Daddy Warbucks off the dole. Voters will insist on that — as well they should.

 

So why hasn’t it happened? Why hasn’t the GOP pledged to end corporate welfare as we know it?

 

Part of the explanation is that too many have gotten confused about the difference between free-market capitalism and crony capitalism.

 

 

And part of the problem is corporate welfare that is so well hidden from public view in the budget that no one has really measured how big this mountain of giveaway cash to the Fortune 500 really is. Finding out is like trying to break into the CIA.

 

Until now. Open the Books, an Illinois-based watchdog group, has been scrupulously monitoring all federal grants, loans, direct payments and insurance subsidies flowing to individuals and companies.

 

It’s an attempt to force federal agencies to release information on where the $4 trillion budget is really spent — and Open the Books will release a new report on corporate welfare payments to the Fortune 100 companies from 2000 to 2012.

 

Over that period, the 100 received $1.2 trillion in payments from the federal government.

 

That number does not include the hundreds of billions of dollars in housing, bank and auto company bailouts in 2008 and 2009, because those payments and where they went are kept mostly invisible in the federal agency books.

As suspected, the biggest welfare queens in the U.S. are the super wealthy themselves, but they’d rather you focus on some single mother on welfare simply trying to survive.

via Zero Hedge http://ift.tt/1lnAVf5 Tyler Durden