International Forecaster Weekly

Economic Pain For Upholding A Broken System

Bernanke underestimates exposure, anticipating the demise of the Euro, and its corrupt system, more fallout from Greece will hit Germany, employment grinds to a halt in Amercia, atop of more job cuts, uncertainty at home.

Bob Chapman | September 3, 2011

We find it amusing that Mr. Bernanke in his press conference after the FOMC last week said, US bank exposure to Greece was minimal. We guess he forgot part of that $16.1 trillion and the credit default swaps from NYC banks to the tune of $150 billion. In addition we do not see the US and England escaping the fallout from Europe. From the very beginning 1-1/2 years ago we told Greece to default and that it was inevitable. Of course, the Greek government did not do that, because they wanted to hand their Illuminist friends Greek assets on a silver platter - that is public and private assets. When Greece goes eventually the other five will fall as well. Banks all over Europe are at risk even German savings banks, many US money market and pension funds have as much as 60% of their assets in instruments belonging to the six weaker nations. That represents a far greater risk than what Mr. Bernanke had admitted. The biggest question is what will the German Federal Court say? Investors had best check with their funds or advisor, or banks and S&L’s to determine just how hard they can get hit. If the Court says it is ok, then in Germany it has to be voted on. It probably will be rejected and that creates a new set of problems.

Quite frankly we cannot wait for the euros demise. National currencies will return and a great deal of malinvestment will come to an end. It is the best thing for Europe and the world. The mistake of the euro will be over and sovereign nations can return to reality, not some one-world driven philosophy.

As we have said previously many European banks will be insolvent under any kind of default. In addition, US money center banks have written between $90 to $150 million in credit default swaps on Irish, Portuguese and Greek banks. If they default that could take several US banks under as well. We’ll be looking at 2008 all over again. We should have a good idea where this is all headed between the 7th and 15th of September. Even if the purchase of bonds from the weak nations and more bailout money is approved, the underlying problems will still be in place. The entire world is slowing down and those who believe that the US won’t be affected do not have a clue as to what is really going on. The ECB, if allowed to move bad assets off bank balance sheets, and to supply further funds, won’t solve the problems. They will be in the same situation the Federal Reserve is in moving from QE to QE and never attempting to solve the underlying mess created by these banks. Stalling the crisis is not the answer. There never can be enough economic growth for these six nations to reverse the process already well underway. They are insolvent and they will stay that way. The exercise is to keep the banks from failing and allowing the public to pay for it. In this coming year there will be no GDP growth in Europe, the UK or the US. There will be pockets of pluses, but not enough to be meaningful. All six should be allowed to go under along with the banks. Yes, the public and corporations along with the banks and government would become insolvent, but no matter what happens the system has to be purged.

We are already seeing a small example of bank runs in Europe, particularly in Germany where depositors are switching from euros to gold and silver related assets. The run on Greek banks began almost two years ago. That is one of the reasons Eurobank and Alpha Banks merged last week with funding from Qatar. You can all get prepared for more bank runs if circumstances do not work out over the next couple of weeks. Greece is close to such events, which would probably be accompanied by military government, like it experienced in 1974.

After having lived in central Europe for many years, four years of which were in Germany, we sense major changes are taking place. The past WWII occupation will come to an end soon, something that should have happened long ago. Germany has been bled long enough and the time for subsidizing the rest of Europe should end. The actions of the electorate in Hamburg in North Rhine Westphalia in March at the ballot box showed us that German attitudes are changing. They no longer believe they should be funding everyone else’s losses. If Germany cannot control their own destiny and that of the EU and euro zone, they are doomed to bailout Europe forever. Germany should lead Europe because it has the economic power to do so.

What many Europeans do not know and few outsiders know is that the European financial system is corrupt and cannot survive, as we knew it. The question is when will it end, because any resurrection is hopeless? We will have an idea on timing at the end of this coming week as, after the German Federal Court makes its decision on the legality of loans to the ECB for bailouts, and whether the European Central Bank can unilaterally buy bonds as failing nations. In addition, will the German Parliament vote to approve such actions? What the outcome will be no one knows for sure but the system has no provision for failure. The game that has been played allowing reckless lending and expecting hopeless Germans and others to pay the bills and the unconscionable dumping of CDS and MBS known as toxic waste securities on European banks has come back to haunt the Anglo-American establishment, as well as Europe. As we have said over and over again sovereign debt has to be defaulted upon and the system purged. Nations who lent will take large losses and the banks generally will be wiped out. Once Europe is purged the UK and US will follow. The Illuminists are going to find out they are not as smart as they think they are. Nations and banks are going to fall into insolvency and that means in that process debt has to be cancelled.

The current arrangement between the Greek government and other euro zone members has been facilitated. It was done to save the Greek banking system, but does not benefit the Greek people. It just puts more debt on their weary shoulders. Rolling over existing debt and extending maturities does not solve the debt problem, it just throws it into the future.

Greece has been the trigger and if the German constitutional court rules against the legality of the EU’s bailout machinery then the fallout could be enormous. The word is in the Bundestag, the House of Representative, Mrs. Merkel has lost some 23 votes from Bavaria’s Social Christian Union (CSU) and if she now wants passage she will have to depend on the Green’s, who will do anything for visibility. The CSU has also stated that plans put together by Merkel and Sarkozy two weeks ago involving economic government for euro zone states are unacceptable. It involves allowing nations to leave the euro zone and a pooling of debt. It seems any kind of compromise yet crafted so far is unacceptable.

The Cabinet of Germany may have approved new powers for the euro zone’s bailout fund, but the party and Congress don’t look like they’ll approve the proposal. If rejected early elections will be held and the CDU and SCU will lose control of the government. If lending was approved all it does is throw debt into the future for the unborn to pay for. Euro zone leaders may have approved an increase in bailout funds to $635 billion, but who will approve a bailout of banks, or a recapitalization? They caused the problem in the first place. These events are what have caused ever more Germans to doubt the validity of the euro. 76% of Germans say they have little or no faith in the euro, up from 71% two months ago. This is what we have been stating for ten years. Long-term 69% to 71% have never wanted the euro. The poll is not at all surprising. The Germany people are saying we have put up with the euro and euro zone for long enough – we want out now.

If these problems were not enough the European economic growth is faltering and that could prolong the debt crisis. The EFSF and the ECB should not have powers to intervene in the bond market. All that is fascist artificial subsidization that will just end up in another crisis. Just look at what the “President’s Working Group on Financial Markets” has done to the US bond market. It has guaranteed 10% losses at this point annually. Who would want to own such bonds? You would have to be an idiot to make such an investment. Don’t buyers in the US realize real inflation is 11.2%? That is what will happen in Europe if the ECB and the EFSF are allowed to intervene. Like in America, the friends of the banks will bypass Congress. The court may say Germany was right in engaging in bailouts, but Parliament should have been consulted more. The problem goes well beyond that. The German people want out of the euro and they do not want more bailouts. If the EFSF is ratified you could see demonstrations and rioting throughout Germany. This could push Germany and Europe over the edge.

We can remember in our early issues writing about the Maastricht Treaty and how it would never work. The basis was a limit of 3% public debt of GDP, a hurdle totally unachievable for a number of participants. As it has turned out we were right almost all participants never achieved the guideline. The idea was that German support for the euro would be endless. We believe that open-ended commitment is coming to an end. Subsidies shared by other strong economies, have turned out not to be the answer, because six members abused the trust. One interest rate could never fit all and anyone who has studied economics knows that. Europe got caught up in an impossible dream that simply turned out to be a dream and not reality. When these six economies saw the very low interest rates they not only used them, but they abused them. These low rates transformed the six nations boomed. Then came the disconnects that led to today’s problems. Germans have now reached a stage where they now realize the EU and the euro zone system does not work. Yes, Germany gained more in the exchange than others and they believe it is time to call it a day.

Germany cannot be faulted for their attitude and conclusions. They have freely subsidized the EU many times, and they were forced by the French, British and US to pay all the costs of German unification and they accepted of Reich marks for Deutsche marks, one for one, when it should have been 20 to 1 and they paid for the cleanup of eastern Germany, which is still ongoing. German leadership acceded to the first Greek bailout 1-1/2 years ago, which we thought was a mistake inasmuch as any clear thinking professional knew that Greece was doomed financially. The crumbling edifice known as the European financial Security Facility, EFSF, a stopgap procedure is now being used again to act as a conduit for a second bailout. The result is that all over Germany the majority of voters do not want any more bailouts. Of course, German leadership thinks otherwise. Like all countries Germany’s voters have been sold out to the bankers and one-world government. Will that happen once again? We do not know, but we are going to find out shortly. The guarantees for the bonds to raise bailout funds in exchange for austerity programs are done and will be unsuccessful. How can you grow and bring in added tax revenue to pay interest to the bankers when you are cutting back and laying off. It is the old IMF nostrum used to keep nations in financial captivity since WWII. Such a program prohibits these nations from growing out of their problems. $400 billion has already been wasted and now more good money will be thrown after bad. The need for funds is so great that the EU Council of Ministers had to increase the term of the bonds from 7.5 years to 40 years. In addition interest rates on the bonds were lowered. That is because the borrowers cannot repay the loans. The German $640 billion program does not sit well with the public. When it is found that is not nearly enough money. That is part of the reason German voters want to cut further aid immediately. This is in spite of the fact that Germany controls and runs the fund. This additional German sacrifice has put it in the driver’s seat in Europe and enhances it geopolitical potential. It took 66 years, but Germany is leading Europe again.

Next week the Germans vote on the proposed new bailout package, that is their representatives do. If passed it will signal Germany will bail out the rest of Europe indefinitely. This in no way will solve any problems. It will be subsides in perpetuity. German’s are very deeply concerned regarding the sellout of their country to fund banker loans and bonds. In fact a vote to continue the largess could easily prompt demonstrations, riots and major civil unrest. The public is ready to act. They refuse to be penalized for the financial profligacy of other nations, including France. If such legislation is passed Angela Merkle will be political history and the CDU, the Christian Democratic Union will be out of power for the next 20 years or more. If Merkel and the other bureaucrats and politicians, who are owned by the bankers, fails in getting it passed the entire western banking system will collapse. Germans know a refusal of the bill will destroy what is left of the financial structure and they obviously are willing to accept that. They rebuilt Germany over the past 66 years and they figure they can do it again. Lack of a bill and bailout of $4 to $6 trillion will purge and cleanse the system. This is what should have been done to the system three years ago when the credit crisis began. The western world had chances to easily purge the system in 1990 and again in 2000, but the bankers, Wall Street and the City of London were making too much money looting the public. The re-inflation that the US, UK and Europe have been going through won’t work, and will end up in financial and economic collapse. This is what gold and silver are telling us. The game is over. It is now only a question of when. The fraud has been exposed, so it is only a question of when the majority in the world figures it out. Most professionals do not even understand that for 66 years every country has been devaluing their currencies, so they can compete with giants of industry and in that process have destroyed their currencies. Now you can better understand why the intelligent are buying gold and silver related asserts. You had best listen or you will lose almost everything you have.


U.S. employment growth ground to a halt in August as sagging confidence discouraged already skittish businesses from hiring, piling pressure on the Federal Reserve to provide more stimulus to aid the economy.

Nonfarm payrolls were unchanged last month, the Labor Department said on Friday, and employers created a combined 58,000 fewer jobs than had been thought in June and July.

The bleak report fueled recession fears. Prices for U.S. stocks and oil tumbled, while U.S. government debt prices rose as traders bet on a further easing of monetary policy.

"The economy is slowly grinding to a halt," said Steve Blitz, senior economist at ITG in New York.

It was the weakest reading on jobs in nearly a year and far below the 75,000 job gain Wall Street had expected. The unemployment rate, however, held at 9.1 percent as a survey of households found both job growth and an expanding labor force.

With the jobless rate stuck above 9 percent and confidence collapsing, President Barack Obama faces pressure to come up with ways to spur job creation. The health of the labor market could determine whether he wins re-election next year.

Obama will lay out a new jobs plan in a speech to the nation on Thursday.

"This better be one hell of a speech next week," said Sal Arnuk, co-manager of trading at Themis Trading in Chatham, New Jersey.

The data, which pushed the Standard & Poor's 500 stock index down by 2 percent in early trade, could strengthen the hand of officials at the U.S. central bank who were ready at their August meeting to do more to help the sputtering economy. The Fed next meets on September 20-21.

The Fed cut overnight interest rates to near zero in December 2008 and it has bought $2.3 trillion in securities in two bouts of bond buying, known as quantitative easing, or QE. Many analysts say its arsenal is now largely depleted, although expectations grew on Friday of further action.

"The Fed has gained greater political ability to enact a version of QE3 at their meeting in September," said Douglas Borthwick, managing director at Faros Trading in Stamford, Connecticut.


The number of planned layoffs at U.S. firms declined 23 percent in August after rising for three straight months, with the government sector again leading the job cuts, a report showed on Wednesday.

Employers announced 51,114 planned job cuts, down from 66,414 in July, according to the report from consultants Challenger, Gray & Christmas, Inc. Planned cuts in July had marked a 16-month high.

"In August, the private sector once again took a backseat to the government sector, which saw job cuts surge to the second highest monthly total this year," John Challenger, chief executive officer of Challenger, Gray & Christmas, said in a statement.

But July's planned job cuts were up 47 percent from August 2010, when they were at 34,768. For 2011 so far, employers have announced 363,334 cuts, somewhat better than the 374,121 cuts announced in the first eight months of 2010.

More job cuts are expected at the federal government level with pressure to cut the federal budget, the report said.

Cuts in the government sector accounted for 18,426 of the announced layoffs in August, and 105,406 for the year so far.

"Meanwhile, the private sector is still being hampered by low consumer and business spending. While we do not see any indication of a sudden resurgence in private-sector job cuts, conditions definitely are not ideal for hiring," said Challenger.

The report comes two days ahead of the key U.S. jobs report. It is forecast to show nonfarm payrolls increased by 75,000 in August, according to a Reuters survey, slowing from July's 117,000 rise.


The US Postal Service, expecting about $9 billion in losses this year amid slumping mail volume, is still paying thousands of its workers millions of dollars each year to do nothing.

Longstanding labor agreements with the largest postal unions prohibit the Postal Service from laying off or reassigning workers because of broken equipment or periods of low mail volume. Instead, some idled employees report for work and are instructed to sit in a break room or cafeteria and do nothing.

Standby time totaled 170,666 hours in the first six months of 2011, costing the Postal Service $4.3 million, according to an audit by the Postal Service inspector general’s office.

Standby time is down considerably this year from 2009, when workers billed 1.2 million such hours at a cost of $30.9 million, according to the report.

Members of the American Postal Workers Union and the National Association of Letter Carriers are eligible for standby time payments, but the option was rarely exercised by supervisors until 2009, when mail volume began to plummet.

The Postal Service said it would require new monthly monitoring of standby payments by the end of September.


Companies in the U.S. added 91,000 workers to payrolls in August, according to a private survey.

The increase followed a revised 109,000 gain the prior month, according to data from ADP Employer Services. The median forecast of economists surveyed by Bloomberg News called for an advance of 100,000.

The economy needs to generate more jobs on a sustained basis in order to bring down unemployment, which has been at 9 percent or higher in 25 of the past 27 months. A Labor Department report in two days is projected to show businesses added 100,000 jobs in August, down from a 154,000 increase in July, according to the median forecast of economists surveyed by Bloomberg


Employers in the U.S. announced more job cuts in August than a year ago, signaling little progress in the labor market more than two years after the recession ended.

Planned firings climbed 47 percent from August 2010 to 51,114, according to figures released today by Chicago-based Challenger, Gray & Christmas Inc. The announcements were led by reductions at government agencies and in the financial industry.

Job cuts in federal, state and local governments are another restraint on consumer spending that accounts for about 70 percent of the economy. Job growth this month probably fell shy of the gain needed to reduce the unemployment rate, according to a Bloomberg News survey before a Sept. 2 report.

“The private sector once again took a backseat to the government sector, which saw job cuts surge to the second- highest monthly total this year,” John A. Challenger, chief executive officer of Challenger, Gray & Christmas, said in a statement. “More workforce reductions at the federal level are undoubtedly coming down the road. Congress and the White House are under immense pressure to cut federal budgets.”

Compared with July, job-cut announcements decreased 23 percent. Because the figures aren’t adjusted for seasonal effects, economists prefer to focus on year-over-year changes rather than monthly numbers.

Government agencies led the August firings with 18,426 job- cut announcements, followed by 8,094 in finance and 5,901 in the retail industry.


Manufacturing in the U.S. unexpectedly expanded in August, allaying concern the world’s largest economy is headed for another recession.

The Institute for Supply Management’s factory index fell to 50.6 last month from 50.9 in July, the Tempe, Arizona-based group said today. Figures greater than 50 signal expansion. Economists projected the gauge would drop to 48.5, according to the median forecast in a Bloomberg News survey.


The Chicago business barometer, which also is called Chicago PMI, slowed in August to a 56.5% reading from 58.8% in July, as managers in the region reported slowing production and new orders and a shrinking in order backlogs. Though the reading was ahead of expectations -- economists polled by MarketWatch had anticipated a 53.0% reading -- the indicator is at a 21-month low. Any reading over 50% indicates expansion, and Chicago PMI has been in expansion territory for 23 straight months. The Chicago PMI is closely followed because it's the last major regional indicator before the national Institute for Supply Management's manufacturing gauge, which is due for release Thursday.


Small U.S. businesses in July moderated what had been a blistering pace of borrowing, held back by uncertainty over U.S. economic growth and the debt crisis.

The Thomson Reuters/PayNet Small Business Lending Index, which measures the overall volume of financing to U.S. small businesses, gained 13 percent in July from a year earlier, PayNet said on Wednesday. That followed a revised 22 percent gain in June, and a 27 percent gain in May.

As measured from a month earlier, the index declined 7 percent, and is now just above the level reached in April. The setback illustrates the "saw-toothed" pattern of the current recovery, said William Phelan, PayNet's president and founder.

"It's two steps forward, one step back," Phelan said in an interview. "It's really an indication of the slow growth of activity."

Uncertainty about the economic outlook surged as July drew to a close, as U.S. lawmakers appeared at an impasse over a deficit-cutting deal that if not reached could have put the U.S. into its first ever sovereign default. In early August a deal was reached, but worries remain over the nation's will and ability to bring its long-term debt problem under control.

Signs that the U.S. recovery was faltering also grew in July, with manufacturing slowing and job growth anemic.

Against that background, the fact that small businesses borrowing continued at the pace it did suggests there is no risk of recession, Phelan said.

Borrowing by small businesses is seen as a harbinger for the broader economy because they account for as much as 80 percent of new hiring.

The Federal Reserve earlier this month promised to keep rates exceptionally low for another two years to support the ailing recovery.

The loans PayNet tracks are typically used to buy or update plants and equipment, and on average are for four-year projects.


New orders for U.S. factory goods rose more than expected in July as demand for transportation equipment surged, a government report showed on Wednesday, pointing to some resilience in manufacturing at the start of the third quarter.

The Commerce Department said orders for manufactured goods increased 2.4 percent after a revised 0.4 percent fall in June.

Economists had forecast orders rising 1.9 percent after a previously reported 0.8 percent fall in June.

While the report showed strength in a sector that has carried the economic recovery, regional manufacturing surveys for August have shown a sharp drop in activity, raising the risk the factory sector may have stalled this month.

The Institute for Supply Management's index of national manufacturing activity probably fell to 48.5 in August, according to a Reuters survey, from 50.9 in July. A reading below 50 indicates a contraction in manufacturing.

The August ISM survey will be published on Thursday.

The Commerce Department report showed orders for transportation equipment jumped 14.8 percent in July, the largest increase since January, as demand for motor vehicles advanced 9.8 percent. That was the biggest gain since January 2003 and suggested that motor vehicle shortages caused by supply chain disruptions following the March earthquake in Japan were easing.

Civilian aircraft orders soared 43.4 percent, unwinding the prior month's 24 percent drop. Orders excluding transportation rose 0.9 percent in July after gaining 0.4 percent the prior month.

Unfilled orders rose 0.8 percent after climbing 0.3 percent in June, suggesting factories will have to ramp-up production. Shipments increased 1.6 percent after rising 0.6 percent the prior month, while inventories increased 0.5 percent. That was up from June's 0.4 percent increase.

The department said orders for durable goods, manufactured products expected to last three years or more, rose 4.1 percent instead of the 4.0 percent rise reported last week. Durable goods orders excluding transportation were up 0.8 percent rather than 0.7 percent.

Orders for non-defense capital goods excluding aircraft -- seen as a measure of business confidence and spending plans - fell 0.9 percent in July instead of the previously reported 1.5 percent decline.


A recent and acrimonious dispute among state officials over a possible legal settlement to address nationwide mortgage abuses is underscoring basic questions about what the effort should accomplish.

In settling claims against the largest banks related to “robo-signed” foreclosure documents and other flawed paperwork, should officials seek to rectify all the wrongs of the mortgage crisis? How big a settlement is big enough? What approach will net the best deal for struggling homeowners?

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Last fall, Iowa Attorney General Tom Miller and a handful of counterparts from other states began pursuing a settlement aimed specifically at overhauling the mortgage servicing industry, which has been plagued with problems.

That endeavor alone has proven complex and time-consuming. So many parties are involved that 50 people or more have regularly crowded into negotiating sessions held in hotel conference rooms in and around Washington. Some rounds have lasted more than eight hours. The state and federal officials, as well as the bank lawyers and executives who have crammed into the sessions, have a running joke that the negotiations resemble the Paris peace talks on Vietnam.

Despite the intricate issues and numerous parties, officials say they are on the brink of securing a settlement that would revamp the way banks service millions of mortgages, lead to more loan modifications for troubled homeowners and extract roughly $20 billion in penalties that quickly could go toward foreclosure prevention efforts.

But New York Attorney General Eric Schneiderman has been arguing in favor of investigating an even wider range of mortgage-related practices, leading to “comprehensive resolution” that places homeowners and large investors in mortgage securities at the same table.

He has suggested that officials involved in the 50-state talks have been too hasty in seeking a settlement and are at risk of releasing banks from future claims that go beyond the issues probed so far.

Miller, who has been leading the multi-state effort, last week removed Schneiderman from the coalition’s executive committee, saying he had “actively worked to undermine” the efforts to reach a settlement. Some lawmakers and activists have rallied behind Schneiderman, calling his opposition to the yet-unfinished deal heroic.

Those involved in the settlement talks are increasingly frustrated at how their efforts have been perceived.

“We’ve been accused of being in bed with the banks. To say that to a group of people who have spent the last seven to 10 years fighting mortgage abuses day in and day out is an insult of the highest order,” said Iowa Assistant Attorney General Patrick Madigan, a longtime Miller deputy, who has worked on major settlements with subprime lenders such as Countrywide and Ameriquest. “It’s just unreal.”

Another person close to the talks, who like several others spoke on the condition of anonymity to discuss the situation more freely, said many in the group are “just exasperated. This smear campaign of lies and innuendo, it’s uncalled for, it’s unprecedented, and it threatens substantial consumer harm.


Fixed mortgage rates this week continued the downward trend that has been relatively consistent throughout 2011, while mortgage applications also decreased week-over-week, according to the latest report from the Mortgage Bankers Association (MBA).

For the week ending August 26, 2011, the MBA’s Weekly Mortgage Applications Survey revealed drops in average rates for both 15-year and 30-year fixed mortgages.

The average contract interest rate for 30-year fixed-rate mortgages (FRMs) tested yearly lows yet again, sliding to 4.32 percent from 4.39 percent the previous week. Average points on 30-year FRMs increased to 1.30 from 0.88 one week prior.

Average interest rates for shorter-term 15-year FRMs also decreased this week, seeing a drop to 3.49 percent from 3.56 percent the week before. Average points for 15-year FRMs remained unchanged week-over-week at 1.00.

“Accounting for the increase in average points paid, effective mortgage rates were little changed last week,” Mike Fratantoni, MBA’s Vice President of Research and Economics, said in a statement.

Despite mortgage rates that are again reaching down to historically low levels, mortgage application volume decreased for the week ending August 26, 2011. Both purchase and refinance application activity declined on a weekly basis, the MBA said.

The Purchase Index fell 9.6 percent week-over-week, while Refinance Index fell 12.2 percent from the previous week. The total amount of activity associated with mortgage refinancing also decreased to 77.8 percent of total mortgage applications, down from 79.8 percent the previous week.

“Refinance application volume declined for a second week from recent highs, despite rates staying near a 10-month low, while purchase volume remained near 15-year lows,” Fratantoni said.


Former Galleon Group LLC hedge fund trader Craig Drimal was sentenced to 5 1/2 years in prison after admitting his part in an insider-trading scheme that stretched from technology firms to pharmaceutical companies.

Drimal, 55, pleaded guilty in April to six counts of conspiracy and securities fraud, admitting that he and others at Galleon traded on inside information obtained from lawyers working on transactions involving 3Com Corp. and Axcan Pharma Inc. Drimal said the tips came from Arthur Cutillo and Brien Santarlas, lawyers at Boston-based Ropes & Gray LLP.


Applications for U.S. unemployment benefits fell last week as the influence of the strike at Verizon Communications Inc. waned.

Jobless claims fell by 12,000 to 409,000 in the week ended Aug. 27, Labor Department figures showed today in Washington. Economists surveyed by Bloomberg News projected a drop to 410,000, according to the median forecast. The figure remains higher than it was three weeks earlier, before the labor dispute at Verizon pushed the numbers up.


About $11.6 billion in California tax-allocation bonds are at risk of a downgrade, Moody’s Investors Service said, due to “substantial uncertainty” over the future of redevelopment agencies in the most-populous state.

Two new laws that divert money from California’s 400 redevelopment agencies and eliminate tracking of revenue used to repay their bonds may diminish the credit quality of the debt, Moody’s said yesterday. Governor Jerry Brown signed the laws as part of a deal to balance California’s $86 billion budget for 2011-12 in June.

On Aug. 11, the California Supreme Court blocked the Brown administration from diverting $1.7 billion from the agencies, which provide tax incentives for development projects in areas that are deemed blighted. Moody’s said the ongoing court challenge is a “key contributor” to its decision to review the tax-allocation bonds.

“The fact that a state supreme court ruling could invalidate one, both, or neither of these bills, in whole or in part, creates uncertainty that is negative for the credit quality of all California tax allocation bonds,” Moody’s said.

Moody’s noted that the state’s top court isn’t scheduled to rule until Jan. 15 on whether the Brown administration was within its rights to redirect the redevelopment funds to public schools. The firm said it may take longer than the normal 90 days to decide on any ratings changes.