U.S. Economic/Financial News
'Bait and Switch' Insurance Tactic Threatens the Aged
May 17 (EIRNS)Regence BlueShield on May 15 began notifying its individual-plan customers in Washington State that their premium rates will rise, starting in July, with an average increase of 19%but, for the elderly, the increase will be 40%.
In a letter to state legislative leaders, Washington State Insurance Commissioner Mike Kreidler said: "I have serious concerns that consumers may have been whipsawed in an effort by Regence to increase market share." But the Seattle Times says that he is powerless under current law to stop the rate hike, which will force some to drop their insurance altogether.
In an e-mail, Don McCanne, the senior health policy fellow of the Physicians for a National Health Program, explained how the insurance "industry" runs the scam: The insurer holds premium rates down for a period to attract more customers, increasing its market share, diminishing its competition. Then the insurer raises premium rates sharply to recover deferred profits, and provide an additional generous profit margin for current insurance sales. Wall Street dignifies this process by calling it the insurance underwriting cycle, but it is nothing more than a devious bait-and-switch scheme.
"Those facing a 40% premium increase are not only aging, but many of them have developed significant medical problems. By making premiums unaffordable for this high-cost sector, many will have to drop their coverage. This advances Regence's business plan to selectively insure the healthy," McCanne wrote.
Schwarzenegger Budget Proves: He's Still Shultz's Fascist
May 17, 2007 (LPAC)California Governator Arnold Schwarzenegger's Fiscal 2008 budget plan ends his period of smiling "bipartisanship" and a return to his incarnation as the fascist creature of George P. Shultz.
Programs for the poor, blind, disabled, and elderly will be cut in Schwarzenegger's budget; Wall Street obligations will be met, and the Shultz/Felix Rohatyn privatization schemes to loot state assets are ready to go. Four months ago, Arnie bragged that he would eliminate the "net operating deficit" that has plagued California since the IT bubble popped in March 2000. With his revised budget, which he released on May 14, he acknowledged that the state's budget "still lives on the razor's edge" (i.e., that he cannot eliminate the deficit), but claimed that the revisions he has made to the budget are "very careful and very responsible."
Once again, he lied. Nonpartisan legislative analyst Elizabeth Hill released a quick evaluation of the governor's plan, in which she said that his future revenue estimate is overly optimistic; that the operating deficit, which Arnie's team of budget-cutting fascists claimed would be $1.5 billion, will more likely grow by an additional $1.7 billion, to over $3 billion; and the deficit could reach nearly $7 billion by 2009.
Since the figures don't add up, Schwarzenegger is moving to cut spending for those who can least afford cuts. More than $500 million will be cut from welfare, while $1.3 billion raised from fuel taxes will be diverted away from transportation, to cover other expensesthis despite his admission that state infrastructure is in an advanced state of disintegration. His new budget will eliminate grant increases previously approved for programs for the aged, blind, and disabled, and funds earmarked to help local governments reduce property taxes for farmers. At the same time, he is adding 10% to tuition fees for universities, and will begin a foot-in-the-door for privatization, by selling off the state lottery to private entities. Arnie's controller, synarchist banker George Shultz, has insisted repeatedly, that more state-run entitiesincluding infrastructurebe privatized.
Largest Drop in New Home Permits Since 1990
May 17 (EIRNS)The Washington Post reported today that the number of builders' requests for future home-construction permits fell by 8.9% in April, the largest drop in 17 years. A small gain was registered in April of homes constructed, but even with that slight improvement, "housing construction is 25.9 percent lower than a year ago...." The Post reports that analysts say that "the far more telling figure was the drop in permits, given that they are viewed as a better indicator of where housing is headed."
Grassley Hits Hedge Fund Secrecy in New Bill
May 16 (EIRNS)Sen. Charles Grassley (R-Iowa), the ranking minority member on the Senate Finance Committee, introduced a bill on May 15 to require hedge funds to register with the Securities and Exchange Commission. "The Hedge Fund Registration Act," Grassley said on the floor of the Senate, would "clarify that the Securities and Exchange Commission (SEC) has the authority to require hedge funds to register, so the government knows who they are and what they're doing." Currently, hedge funds operate in "total secrecy," Grassley noted.
Congress needs to act, Grassley insisted, because the D.C. Circuit Court of Appeals in 2006 overturned an SEC regulation requiring hedge funds to register. Grassley concluded, "These funds don't want people to know what they do and have fought hard to keep it that way. Well, I think that's all the more reason to shed some sunlight on them to see what they're up to."
"A lot of pension holders are in the dark about their exposure to hedge fund losses because transparency is so inadequate," Grassley said in a press release.
Banks Frantically Dumping Foreclosed Homes
May 14 (EIRNS)The unbroken surge of U.S. home foreclosures over the last 20 months has led many banks, which own a glut of repossessed homes, to begin selling them, and pushed the U.S. banking system deeper into bankruptcy. Here are some recent examples:
* At an auction of 100 banker-repossessed homes, held May 12 in San Diego, America's eighth most-populous city, "houses and condos typically sold for 30% below the previous sale or appraisal prices," the May 14 Wall Street Journal reported. "In a few cases, discounts were around 50%." Previously in San Diego, an inventory of 8 to 9 months of unsold condo homes was considered typical; currently the city has an inventory of 29 months!
* The May 13 Detroit Free Press reported that, by the end of the first quarter 2007, in metro Detroit, one in every 51 households has filed for foreclosure, the highest rate for any major city in America. This has driven down home prices. Ron Simpson, Detroit Association of Realtors president, explained, "In the past, foreclosed or distressed houses were not considered as part of the appraisal process, but because they've become such a norm in this market, they are assessed as any other home. Because they are included, they are driving the values down."
* The Charlotte, North Carolina-based Lending Tree, one of the most heavily advertised mortgage lending institutions in the nation, announced May 11, that it will fire 440 workers, one-fifth of its 2,200-person workforce.
* Four mortgage lending institutions have gone under since April 27: Millennium Lending, a non-prime mortgage lender; Dana Capital Group, a mortgage lender; Nation One Mortgage, an Alt-A lender; and Homeland Capital Group, a mortgage lender. This brings to 66 the number of mortgage lenders that have failed since late 2006.
Hedge Fund Managers Admit the End Is Nigh
May 14 (EIRNS)A newly released book, Inside the House of Money, by Steven Drobny, quotes from a number of hedge fund managers about the disaster ahead. Jim Leitner of Falcon Management, says: "Right now there are a lot of bad things lurking, but I'm just not sure when we're going to fall on the knife." Scott Bessent of Bessent Capital: "At some point, we will have the Big One. It's out there." A fund manager who preferred to remain anonymous, said: "When you look at the whole world and see what it's built on, it is totally, clearly, not sustainable."
Ambrose Evans-Pritchard reports these quotes in today's Daily Telegraph, adding that "regulators are now fretting, afraid that the funds have grown too big. They warn that speculators clustered on the same trades might lurch en masse across the deck, capsizing the boat."
Bernanke: 'More Home Foreclosure Equals More Demand'
May 18 (EIRNS)Federal Reserve chairman Ben S. Bernanke, speaking yesterday at the 43rd Annual Conference on Bank Structure and Competition at the Chicago Federal Reserve Bank, reviewed the increasing mortgage delinquencies of home loans, but concluded that there will be no consequential effects on the economy, and moreover, there should be no regulations imposed that might "inadvertently suppress responsible lending."
Using Fed-speak, Bernanke stated in his prepared speech, "We are likely to see further increases in delinquencies and foreclosures this year and next as many adjustable-rate loans face interest-rate resets. All that said, given the fundamental factors in place that should support the demand for housing, we believe the effect of the troubles in the subprime sector on the broader housing market will likely be limited, and we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system...."