U.S. Economic/Financial News
Small U.S. Banks Demand SEC Protection from Speculators
July 22 (EIRNS)Small U.S. banks, likely to be wiped out in the current financial meltdown, are demanding that the Securities and Exchange Commission include them on the list of financial institutions protected from the practice of abusive naked short-selling. The SEC order went into effect July 21, but protects only 19 large companies, including Freddie Mac and Fannie Mae, Goldman Sachs, and Lehman Brothers. It is set to expire on July 29 (!), although there is some talk of it being extended for another month.
Smaller banks not on the SEC list, represented by the American Banking Association or the Financial Services Roundtable, now fear that their stock will be targetted by speculative short-sellers. Not so with groups representing hedge funds, such as the Managed Funds Association and the Coalition of Private Investment Companies. These have written to SEC chairman Christopher Cox, arguing that any expansion of the SEC's emergency order to cover a broader list of stocks "will inflict catastrophic damage on the U.S. equity markets," threatening their status "as the world's equity markets of choice."
State Budget Gaps Triple in One Year
July 23 (EIRNS)The National Conference of State Legislatures (NCSL) has issues a "State Budget Update" report, which reveals that the size of states' budget deficits tripled from $13 billion to $40 billion, since July 2007. Economic sectors having the greatest negative impact on state budgets over the fiscal year were identified as "financial services," of concern to 20 states; "manufacturing," problematic for 22 states; and "housing," seriously impacting 17 states. Michigan has had its "eighth consecutive year of decline" in wages and salaries.
"As state lawmakers were enacting FY 2009 budgets, state fiscal conditions worsened," the NCSL press release states, indicating that the worst is not over yet. The report is based on a survey of state budget directors, which asked questions about the fiscal year that ended June 30 (FY 2008) and the new one that began July 1, for most states. It notes that most states "closed" their imbalances by "cutting spending." California, with the largest budget shortfall15% of its budgetis still wrangling over how and what to cut.
Bankers and Speculators: At Long Last, the Frog March?
July 25 (EIRNS)Federal and state officials are finally cracking down on speculators, who have been behind the buildup of the hyperinflationary bubble, which is now blowing out.
The U.S. Commodities Futures Trading Commission (CFTC) has filed suit in the U.S. District Court in Manhattan, charging a Dutch company, Optiver Holdings, with manipulating oil prices; and New York State Attorney General Andrew Cuomo has filed civil action in New York State Court against Union Bank of Switzerland (UBS), charging the bank and top executives with fraud, in their efforts to prevent the collapse of the $330 billion auction-rate securities market, which did collapse in February 2008. The action mirrors a similar suit filed against UBS by the Massachusetts Secretary of State.
The CFTC action charged Optiver with a price-manipulation scheme called "banging the close," which aims to manipulate the closing price of a commodity. Three company officials, including the CEO Bastiaan van Kempen, are named in the CFTC action, and two operating subsidies in Chicago and Amsterdam are also charged. The CFTC worked closely with the United Kingdom's Financial Services Authority and with NYMEX (New York Metals Exchange), where some of the alleged price manipulations took place.
Cuomo accused UBS of "multi-billion dollar consumer and securities fraud," in which top executives of the firm sold off $21 million in their own holdings of auction-rate securities, while urging clients to pour money into the already collapsing market. UBS clients lost an estimated $37 billion.
Lyndon LaRouche commented that the identification of specific individuals, as key players in the fraud schemes, opens the door for potential criminal actions, in the future. Such a frog march of speculators off to jail is long, long overdue, he noted.
A Chicken in Nobody's Pot
July 26 (EIRNS)The doubling of soybean and corn prices in the United States in the past two yearsthanks to the biofuels fakery championed by Al Gore, and commodities speculationhas increased the price of raising chickens in poultry-producing centers of Virginia, Maryland, and Delaware. The cost of feed threatens to put poultry producers out of business and price chickenthe most affordable meat in the United Statesout of the range of the Americans whose income is in the lower 80%.
Pilgrim's Pride, Tyson Foods, and Cargill run big poultry operations around Harrisonburg, Va. Pilgrim posted a loss of $111.5 million in the first quarter of 2008. Chicken prices increased 2.8% from June 2007 to June 2008.
Poultry companies in Virginia's Shenandoah Valley support about 900 farmers, and employed 5,000 workers in 2007; on the Delmarva Peninsula (eastern shore of Delaware, Maryland, and Virginia), poultry operations supported about 1,900 farmers and nearly 15,000 workers, according to the Delmarva Poultry Association.
An attack on the levels of ethanol production for gasoline required by the Federal government, at a highly subsidized price, has been made by Texas Gov. Rick Perry (R), on behalf of the cattle raisers, with no success in the U.S. Congress.