Oh this was looked at favorably... but should it be?

Consumer credit increased at an annual rate of 7-1/2 percent in the fourth quarter. Revolving credit increased at an annual rate of 4-1/2 percent, and nonrevolving credit increased 9 percent. In December, consumer credit increased at an annual rate of 9-1/4 percent.

That sounds good, right?  Well....

That doesn't look all that hot.  I suppose the non-revolving figures are good, but ex-FedGov while the rate is improving it's still negative.  Revolving, on the other hand, is flat.

How about amounts outstanding?

On a level basis revolving upticked a bit, but non-revolving was up significantly, with about half being student loans.  (Is the rest newly-revived subprime auto?)

Hmmm......

Is this "competitiveness" in America, or something else?

Caterpillar has caused an uproar in Canada with a controversial plant closing. But the company attracted so many people to an Indiana jobs fair that the event had to be shut down earlier than planned.

On Friday, Caterpillar‘s Progress Rail Services said it was closing the 62-year-old Electro-Motive Canada plant in London, Ontario, about two hours west of Toronto.

The plant had been locked out since the New Year due to a labor dispute; the Canadian Auto Workers (CAW) rejected a 50% pay cut proposal for their contract renewal.

Here's the problem:

But at the moment, Caterpillar is the toast of Muncie, in east central Indiana.

Over the weekend, Caterpillar held a jobs fair that attracted about 3,000 applicants for jobs paying between $12.50 and $18 an hour, according to the Muncie Free Press.

They're moving the jobs to Muncie.  But at $18/hour for the top skilled position, and a likely median wage of about $15, what does this say about America and skilled assembly labor?

$15/hour is $30,000/year.  Pretax.  The average family income is about $50,000, and the federal poverty line for a family of four is $23,050. 

Muncie is not a particularly high-cost area, but this illustrates the problem -- Cat believed (with good cause) they could replace the workers in Canada with ones in the Untied States at half the price.  They're doing so.  Is this a "win" or a "lose"?

For Canada, it's a loss of good jobs.  But is it a win for the United States?

How much implicit government subsidy, such as through health care costs, will Cat effectively extract from everyone else in America to "provide" these jobs in Muncie? 

And what of the direct and indirect $28 million that Muncie agreed to provide in incentives to Cat between tax abatements, job training and infrastructure improvements that Cat would otherwise have had to eat?  That amounts to $43,000 per job gained which the people of Muncie will have to fork out through some means, probably via higher property and other taxes, equal to close to 1-1/2 year's pay for each job gained.

Is this "progress"?  If you're unemployed it arguably is, at least at some level.  But the question remains open -- wage arbitrage followed to its logical conclusion has some fairly ugly outcomes. 

Were these wages fully free-market negotiated then they would be what they are, but they're not -- those who are working at these wages are also able to access "government cheese", effectively forcing everyone else to cover part of their living expenses and adding downward pressure on the wage these employees are willing to accept.  In short the access to government handouts, including health insurance subsidies, reduced-price school lunches, food stamps and similar all serve to drive down the required wage to attract employees by shifting those employment costs to everyone in the nation.  Muncie has also added to this distortion by forcing all the other residents and businesses to pay the taxes necessary to "induce" Cat to locate the plant there, amounting to more than a year's wages per job added.

These implicit and explicit subsidies, which are effectively bribes, prevent calling this a free market outcome, and therefore they also prevent me from calling this a "win" for anyone but Cat.

(An attempt to discern the time period over which the $28 million was payable so as to be able to annualize the soaking Muncie residents would be abosrbing in terms of time was not immediately successful.)

I think we can assume this means the answer is "no" on the robosigning settlement...

Jefferson City, Mo. –Attorney General Chris Koster today announced that a Boone County grand jury has handed down 136-count indictments against DOCX, LLC and its founder and former president, Lorraine Brown, for forgery and making a false declaration related to mortgage documents processed by DOCX.

“The grand jury indictment alleges that mass-produced fraudulent signatures on notarized real estate documents constitutes forgery,” Koster said.  “Today’s indictment reflects our firm conviction that when you sign your name to a legal document, it matters,” Koster said. 

The forgery and false declaration counts each allege that the person whose name appears on 68 notarized deeds of release on behalf of the lender is not the person who actually signed the paperwork.  The documents were then submitted to the Boone County Recorder of Deeds as though they were genuine.

Koster’s office requested the indictment, and the Attorney General’s Office will prosecute the case.

Well now, that's not a "fine" or a "handslap", it's an alleged felony.....

Forgery is a Class C felony and False Declaration is a Class B misdemeanor.  If convicted on the most serious count, Brown could face up to seven years in prison for each count.  DOCX could be fined up to $10,000 for each forgery conviction and $2,000 for each false declaration conviction.

The charges against DOCX and Lorraine Brown are merely accusations and, as in all criminal cases, the defendant is innocent until or unless proved guilty in a court of law.

Yes indeed, everyone is entitled the presumption of innocense and the evidence will be presented in a court of law before a jury of their peers.

I'm wondering if the "peers" would be wrongfully-foreclosed homeowners or banksters?

PS: It's about damn time, and this makes two with the previous one being Nevada, which returned a ~600-odd count indictment late last year.

You have to wonder....

Banks, accelerating efforts to move troubled mortgages off their books, are offering as much as $35,000 or more in cash to delinquent homeowners to sell their properties for less than they owe.

Lenders have routinely delayed or blocked such transactions, known as short sales, in which they accept less from a buyer than the seller’s outstanding loan. Now banks have decided the deals are faster and less costly than foreclosures, which have slowed in response to regulatory probes of abusive practices. Banks are nudging potential sellers by pre-approving deals, streamlining the closing process, forgoing their right to pursue unpaid debt and in some cases providing large cash incentives, said Bill Fricke, senior credit officer for Moody’s Investors Service in New York.

You mean like, for example, Nevada deciding to actually treat perjury as the felony that it is, and issue a 606 count indictment (along with materially beefing up laws that criminalize this practice.)

It seems to me that perhaps -- just perhaps -- banks are coming to the conclusion that recovering something on an improperly-documented loan beats recovering nothing, and the latter is becoming increasingly likely.

The better question however is what sort of title is something who buys such a short sale getting?  Is the chain of title any good and did they actually get marketable title?  If not, and they bought owner's title insurance, is that insurance able to pay (and is the defect not excluded)?

For homeowners who are dramatically underwater and not paying, however, these sorts of "bribes" do make sense.  Recovery value is going to be dramatically impaired if the person in the house is uncooperative and simply sits and waits for the sheriff to show up.  It's also often that person's best move if their credit is already trashed, and if they haven't paid in a year, it is.

One item I've noted in the local area is that banks are stringing along short-sale buyers for months, often allegedly telling them they'll approve a deal in 60 or 90 days and then when there's a week or two left they ask for more time -- usually another month.  Not only does that prevent the house from becoming part of the "cleaning" in the market it also holds the proposed buyer off the market -- they are neither a homeowner or looking for another, conventional deal!

To the extent that we're actually getting decisions and clearing of the market, even as a small incremental step, this is a positive development -- even if the motive of the bank making the offer is questionable at best.

The truth is starting to dribble out....

After tracing 840 transactions of $327 billion in the company’s final days, Giddens is still analyzing where some of the $1.2 billion in missing customer money “ended up,” he said in the report. Corzine’s firm failed after credit-rating downgrades, a record quarterly loss and revelations about its $6.3 billion European debt trade unnerved investors. The missing money has sparked Congressional hearings and former customers have said it undermined confidence in the futures industry.

“For three months, our investigative team has worked to understand what happened during the final days of MF Global when cash and related securities movements were not always accurately and promptly recorded due to the chaotic situation and the complexity of the transactions,” Giddens said in a statement.

Yes, it's so chaotic that you're moving money around without recording where it went and where it came from?  That sounds like someone who's not balancing their checkbook eh?

The investigation to date has found that transactions regularly moved between accounts and that funds believed to be in excess of segregation requirements in the commodities segregated accounts were used to fund other daily activities of MF Global. In the past, such transfers were in amounts of less than $50 million, but as liquidity demands increased and could not be met from internal sources, much larger amounts were used, apparently with the assumption that funds would be restored by the end of the day. By Wednesday, October 26th, as the result of increasing demands for funds or collateral throughout MF Global, funds did not return as anticipated.

Ah, I see.  It's only $50 million that was "moved" (notice that the word "stole" wasn't used) during the day, replacing the end of the day.

This is sort of like me deciding to "move" your car when you're sleeping, and as long as I "replace" it by 6:00 AM when you need it to go to work, it's all ok, right?  If the cops stop me it's not really stealing because I was going to bring it back, right?

The point here is that it appears from this report that it was common practice for the firm to use customer funds on an intraday basis, essentially like kiting checks, with the presumption that they could make it all good by the close of business.  This leads to the obvious question as to whether this is going on in other firms without detection, as it is strongly implied that this was an absolutely routine thing for the company to do, and it also appears that either CME didn't catch it or worse they didn't care.

What's even worse is that as I've pointed out repeatedly since 2007 when I started writing The Ticker off-balance-sheet vehicles are utterly toxic as they hide risk and make it essentially impossible to accurately determine exactly what is going on at any given point in time.  The Trustee's filed report states:

The sovereign debt investments undertaken on a repo to maturity basis allowed some immediate gains to be booked, but these were purely paper profits generating negligible cash while the underlying transactions resulted in calls for substantial additional margin.

In other words the actual amount of the risk was hidden by not having it out in the open where people could see it, as the repo-to-maturity deals appeared to be "risk free" and off balance sheet but in fact were not risk free and ultimately led to the detonation of the firm.

The heightened risk and apparent loss of confidence drove customers to close their accounts and withdraw funds, resulting in even greater demands on a relatively limited amount of available cash.

Were the firm not "temporarily" stealing customer funds for operating capital then the loss of customer accounts and withdrawal of funds would have shrunk the firm's operating profit (since the customers would have left) but that should not have caused the company to fail.  More to the point if segregation is being maintained such a "flight" situation can't lead to the loss of customer money.

There is one interesting chart in the report, on the second-to-last page. Have a look:

This chart appears to imply that new positions were opened in the last days, as initial margin grossly increased, more than doubling between 10/24 and 10/31.  This is not explained in the narrative thus far, but it certainly appears to require some explanation, since initial margin, as the name implies, is posted when one initiates a position.

I may be mis-reading this chart (or some entries are mis-characterized) but if I'm not it looks like it is not the variation margin that blew the firm up (from changes in value) but rather it was initial margin that got them in trouble, and the obvious question that raises is "How?"