Important News - Dec. 24

• 1) City controller: LA payroll $85 million over budget

“City Council President Eric Garcetti agreed the city needs to save money.

“Bankruptcy could visit Los Angeles in less than 12 months if we don’t continue to downsize the workforce, focus on our core issues — public safety and public works, in my opinion — and make some very difficult decisions,” Garcetti said.”

“Based on the latest financial status report, the city is projecting a $406 million deficit in fiscal year 2010-2011.”

• 2)  Banks Bundled Bad Debt, Bet Against It and Won

“But Goldman and other firms eventually used the C.D.O.’s to place unusually large negative bets that were not mainly for hedging purposes, and investors and industry experts say that put the firms at odds with their own clients’ interests.

“The simultaneous selling of securities to customers and shorting them because they believed they were going to default is the most cynical use of credit information that I have ever seen,” said Sylvain R. Raynes, an expert in structured finance at R & R Consulting in New York. “When you buy protection against an event that you have a hand in causing, you are buying fire insurance on someone else’s house and then committing arson.””

• 3) Fannie and Freddie CEOs to Get up to $6M in Pay

“Fannie and Freddie, which were seized by regulators in September 2008, have needed $111 billion in taxpayer money to stay afloat. The news of the chief executives’ pay could spark new criticism about the government’s numerous bailouts.”

• 4) Denial of Aid Averts N.Y. Insolvency, Paterson Says

“New York Governor David Paterson said he will argue in court that making payments to school districts this month would render the third-most populous U.S. state insolvent.

“We are operating really under a fundamental precept that’s really beyond the law: you can’t spend money that you don’t have,” the governor said at a news conference today at his Manhattan office, responding to a suit challenging his authority to withhold the funds.”

• 5) Dollar Share of New Reserves Dropped Last Quarter, Barclays Says

Central banks reduced purchases of U.S. dollars in the third quarter, possibly cutting them to a record low of less than 30 percent of new foreign-exchange reserves, Barclays Capital said in a note to clients.

Global central banks probably bought $50 billion in the quarter, out of some $250 billion of reserves that were added in the period through transactions, Barclays said, citing calculations based on data from the International Monetary Fund and U.S. official reports.

• 6) Serious U.S. mortgage delinquencies up 20 percent (Ben Johnson)

Serious delinquencies among U.S. prime mortgages rose nearly 20 percent in the third quarter from the prior quarter, as the percentage of current and performing mortgages fell for the sixth consecutive quarter, banking regulators said on Monday.

……………….Be back on the 26th.