Important News - Dec. 19

• 1) Moody’s Reviews $143 Billion of Jumbo-Mortgage Bonds

“It now expects losses of 3.8 percent on loans underlying 2005 prime- jumbo bonds, with estimates of 8 percent for 2006 securitizations, 10.9 percent for 2007 debt and 12.3 percent for 2008 securities.

The revisions were prompted by “the rapidly deteriorating performance of jumbo pools in conjunction with macroeconomic conditions that remain under duress,” Moody’s said.”

“Moody’s also said it expects the U.S. government’s effort to curb foreclosures to be less effective than it previously expected because the programs have “failed to gain traction.””

• 2) Conditions for gold rally could crush other assets (Market Watch)

“Gold at $3,000 an ounce would turn world to a “terrible place,” says one analyst

HONG KONG (MarketWatch) — Several analysts predict a rise in gold prices to dizzying heights in the next two years, but if those forecasts prove true, even gold bugs will need to stay alert to ensure that gains in the metal aren’t overwhelmed by losses on other parts of their portfolio.

That’s because the economic conditions under which one would expect gold to thrive resemble an investor’s nightmare — possible hyperinflation, collapse of the U.S. dollar or a surge in yields on Treasurys — may be conditions under which other asset classes such as fixed income and equities could take a major hit.”

• 3) Trillions Of Troubles Ahead (Forbes)

“Our colleague Rob Arnott, who always does terrific research, wrote in his recent report that “at all levels, federal, state, local and GSEs, the total public debt is now at 141% of GDP. That puts the United States in some elite company–only Japan, Lebanon and Zimbabwe are higher. That’s only the start. Add household debt (highest in the world at 99% of GDP) and corporate debt (highest in the world at 317% of GDP, not even counting off-balance-sheet swaps and derivatives) and our total debt is 557% of GDP. Less than three years ago our total indebtedness crossed 500% of GDP for the first time.”

Add the unfunded portion of entitlement programs and we’re at 840% of GDP.

The world has not seen such debt levels in modern history. This debt is not serviceable. Imagine that total debt is 557% of GDP, without considering entitlements. The interest on the debt will consume all the tax revenues of the country in the not-too-distant future. Then there will be no way out but to create more debt in order to finance the old debt.

It assures a period of economic devastation”

• 4) Official predicts distressed label (Harrisburg, PA)

“The incoming city controller said a consultant’s report makes it clear that Harrisburg must be declared a distressed city under state law.

“It seems like Act 47 is imminent,” said Dan Miller, city controller-elect. “Probably the sooner we get there, the better. We have to make real cuts. That’s it. There’s hard choices to make.”

Act 47 is the last line of defense before a city files for Chapter 9 bankruptcy. Under Act 47, a municipality works with the state Department of Community and Economic Development to create a fiscal plan while state loans help maintain basic city services. The loans must be repaid. ”

• 5) Colorado tax revenue drops by $40 million more

” Colorado revenues fell by an additional $40 million over the past three months, bringing this year’s shortfall to $601 million.

Budget officials told state lawmakers Friday the recession appears to be over in Colorado, but the economic recovery will be long and rocky.

Previous forecasts showed the state would have a $560 million shortfall this fiscal year. A budget shortfall of $1.5 billion is predicted for next year unless lawmakers take quick action when they convene in January.”

• 6) TN unemployment fund may need a loan

“The state probably will borrow about $20 million early next year to keep its unemployment trust fund solvent, as it deals simultaneously with a seasonal dip in taxes from employers and Tennessee’s still-high rate of joblessness.

The latest projections for the fund show it running out of cash sometime in the first three months of next year, leaving a shortfall that would not be covered until April, despite a tax increase passed last spring.”

• 7) Fight looming over unemployment fund (MD)

“Faced with an unemployment insurance fund that could go bankrupt because of the recession, Gov. Martin O’Malley’s administration on Thursrday proposed tapping into federal funds in a move that also could require businesses to pay substantially more per employee.

The governor’s plan is to pursue a bill to seek $126.8 million in federal stimulus money to stave off bankruptcy and reduce employers’ financial obligation by $83 million.”

• 8) Auto parts maker seeks PBGC takeover of pension plans

“The Pension Benefit Guaranty Corp., which would take over the plans, said the three plans sponsored by Van Buren, Mich.-based Visteon are underfunded by about $544 million. The PBGC would be liable for about $444 million in unfunded guaranteed benefits.

The plans have about 21,000 participants.”

• 9) Nelson supports health bill after tough bargaining

Nelson, D-Neb., said he made his decision after winning fresh concessions to limit the availability of abortions in insurance sold in newly created exchanges, as well as tens of million in federal Medicaid funds for his home state.

• 10) 2010 Food Crisis Means Financial Armageddon

If you read any economic, financial, or political analysis for 2010 that doesn’t mention the food shortage looming next year, throw it in the trash, as it is worthless. There is overwhelming, undeniable evidence that the world will run out of food next year.

• 11) Analysts Increasingly Expect Fed To Hike Interest Rates First Half Of 2010

Dollar gains on hope for quicker rate hike. Analysts say they increasingly expect the Fed to hike rates in the first half of next year, rather than the second half. The Fed has reiterated its pledge to keep interest rates near zero in its meeting earlier this week, but it detailed the beginnings of a plan to dismantle a number of its extraordinary lending measures in 2010.

• 12) Hackers Steal US And South Korean Military Secrets (M.W.)

South Korea’s military said Friday it was investigating a hacking attack that netted secret defense plans with the US and may have been carried out by North Korea. The latest case came months after hackers launched high-profile cyberattacks that caused Web outages on prominent government-run sites in the US and S Korea. Affected sites included the White House.

• 13) Thousands Of Greek Workers Strike As Debt Crisis Grows (M.W.)

The financial turmoil engulfing Greece intensified today as thousands of workers backed by militant trade unions went on strike, and international confidence in the economy plummeted following a second downgrading of its creditworthiness in as many weeks. Greeks took to the streets to protest austerity measures that the EU deems crucial if the country is to avoid financial collapse.