Inadequate Loan Loss Reserves At Numerous Minnesota Banks

At Minnesota banks, bad loans are piling up much faster than the amount of money being set aside to cover them. The StarTribune takes a look at the problem in State"s banks below norm in reserves.

Despite repeated warnings of economic trouble ahead, banks in Minnesota have failed to keep pace with the rise in bad loans. Among those banks, the ratio of past-due and nonaccrual loans -- or loans for which payment is in doubt -- as a percentage of total loans rose 50 percent since 2006, while the reserves to total loans ratio remained virtually unchanged.

Many Wall Street analysts watch bank reserves more closely than bank profits, said analyst Crabtree in Minneapolis. "Earnings mean very little nowadays, because no one believes them," he said. "Reserve levels and capital ratios are by far more important."

As of the third quarter, the average coverage ratio for Minnesota banks fell to its lowest level in nearly two decades.

As of Sept. 30, the coverage ratio for Minnesota banks was 61 percent, which means that for every $1 in noncurrent loans the banks have set aside 61 cents to cover future losses, according to the FDIC. That"s down from 81 percent a year earlier. Nationwide, the coverage ratio stands at 85 percent -- nearly a third higher than Minnesota"s.

Nearly 40 of the state"s 400 banks have coverage ratios below 30 percent, a level that is less than half the state average. Among the larger ones are First Minnesota Bank of Minnetonka, with more than $370 million in assets, and Minnwest Bank Minnesota Valley in Redwood Falls with assets of $510 million.

One reason Minnesota banks are reserving less than peers in other parts of the country is that the state experienced a boom in bank startups earlier this decade. So, like Summit, many of these banks are still building reserves.

Another theory is that Minnesota has a larger number of small, community banks than other states. Those banks made fewer of the subprime mortgages that defaulted in the credit crisis, but did more of the commercial real estate loans that have only just started to turn sour, said several bank experts.

The Article is 4 pages long with two interesting graphics worth a good look. Here is one of the graphs.



Nearly 40 Minnesota banks have coverage ratios below 30 percent. They are at severe risk. Mainstreet Bank, one of Minnesota"s largest and oldest community banks received an FDIC order to change. Please see Hazardous Lending and Lax Collection Practices for more details.

Three More Banks Shut Down

On Friday, Three More U.S. Banks Were Shut by Regulators.

Three banks, two in California and one in Georgia, were seized by regulators, bringing this year�s tally of closings to nine as a recession and record foreclosures extend the biggest financial crisis in more than 70 years.

County Bank of Merced, California, with deposits of $1.3 billion and assets of $1.7 billion, was shut yesterday by the state�s Department of Financial Institutions, according to an e-mailed statement from the Federal Deposit Insurance Corp. Westamerica Bancorporation, holding company for Westamerica Bank, acquired all the assets and deposits.

The Georgia Department of Banking and Finance closed McDonough-based FirstBank Financial Services Inc., which had $337 million in assets and $279 million in deposits as of Dec. 31, the FDIC said in a statement. The California Department of Financial Institutions shut Culver City-based Alliance Bank, with assets of $1.14 billion and $951 million in deposits.

Nine bank closings this year is a drop in the bucket for what is coming. And were it not for taxpayer bailouts of Citigroup (C) and Bank of America (BAC) they would already be under as well. For further discussion see Extreme Leverage In Reverse Portends Global Systemic Crash. In aggregate, the entire global banking system is insolvent.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Currency Intervention And Other Conspiracies

The US dollar rallied fast and furious last week. The dollar rally was the biggest in 8 years vs. the Euro. This immediately brought out calls of Dollar Intervention such as the one below. Note: the arrow and circle in deep blue were added by me.

click on chart for sharper image

The very large drop recently (the pale blue line) tells part of the story. Another part is told by the Treasury site itself - that recent data about the drop was delayed for almost three weeks before it was made public.

Another part is told by very recent data not being made public for the last two weeks running.

What the ESF did is simply sold about 10 billion Euros and bought dollars - plain and simple massive intervention that virtually everyone has missed or ignored or pretended doesn"t exist or whatever.

The raw facts are sitting there at U.S. International Reserve Position.

Assuming one buys the story, what stands out is 13 consecutive alleged interventions that all failed.

Mystery Solved

James Turk on GoldMoney is writing Mystery Solved.

On July 15th the US Dollar Index closed at 71.87, the lowest close since reaching its record low in April. However, rather than continue lower and fall off the edge of the cliff, the Dollar Index suddenly and mysteriously reversed course. It has now risen on 12 of the 17 trading days since reaching that low, and closed today at 74.55, a 5-month high. What caused this index to suddenly pull back from the brink and then reverse course to shoot higher over the past three weeks?

There has not been any news exceptionally favorable to the dollar. In fact, the banking problems in the United States continue to mount, while the federal government"s deficit continues to soar out of control. On July 28th Reuters reported that "The Bush administration on Monday plans to project the U.S. budget deficit will soar to a new record...because of the slowing economy and an economic stimulus plan approved this year."

So what happened to cause the dollar to rally over the past three weeks? In a word, intervention. ...

For the record, I respect James Turk. However, there was plenty of news favorable to the dollar.

• Oil was falling which would help the US balance of trade.
  
  
• Container shipments into the US were weakening which would also suggest an improvement in the balance of trade.
  
  
• Economic activity in Europe had started to crater.

Those are very significant items. I talked about them at length in Trichet Puts Spotlight on the Euro, Dollar.

The dollar rally continued on Friday and I posted some Thursday To Friday comparison charts on the Dollar Index, the Euro, and the British Pound in U.S. Dollar Rally Continues. Here are the charts of the dollar index.

$USD - US$ Index Daily (Thursday Evening)



Click on chart for sharper image

$USD - US$ Index Daily (Friday Evening)



Click on chart for sharper image

Marc Faber Weighs In

There is a very interesting Bloomberg video interview of Faber that I commented on in Marc Faber - Bullish On The US$, Bearish On Commodities.

I transcribed a portion of it. Here is the key snip:

Q: Is the Euro Doomed to keep falling?

A: Whenever global liquidity tightens relatively speaking, it is very US$ supportive. Obviously, there are always time lags between economic events until the the market perceives them. So as a result of weak demand in the US, lower imports, the demand for oil declines, and that led to a tightening of global liquidity which led to the strong dollar. Investors speak of weak oil price as being bullish but the point is that it signals the global economy is in recession already.

Can Currency Intervention Halt the U.S. Dollar�s Nosedive?

Now let"s address the question as to whether or not 10 billion Euros would be massive enough to do anything.

GATA the Gold Anti-Trust Action Committee is reporting on the currency intervention option and monetization of oil in its usual conspiracy-minded fashion:

The story below from the Associated Press, the largest news agency in the world, may be most notable for acknowledging the potential for government intervention in the currency markets -- market manipulation, really -- and for reporting the surmise of an expert in the energy business that oil has been monetized, replacing the U.S. dollar as the world currency, becoming the "new gold."

The one thing that made the most sense in the article mentioned was this paragraph. "It would take great sums of money to make any difference. The foreign exchange market is the largest in the world, with over $1 trillion traded each day."

On July 2nd Peter Schiff stated Currency Intervention Won�t Halt the U.S. Dollar�s Nosedive

Intervention advocates must believe that if the European Central Bank (ECB) and a few other central banks joined the fray, that a better outcome would be achieved. However, any additional efforts to artificially prop up the ailing dollar will be equally ineffective.

Even if ECB intervention could slow the dollar�s descent, what possible reason would the Fed�s European counterpart have for doing so? The ECB is already concerned about inflation and is preparing to raise rates as a result.

Interestingly, Schiff claims intervention won"t work and the ECB is prepared to hike while others claim intervention was responsible for the rally even though intervention failed 13 consecutive times before there was a success .

A Look At Japan"s Intervention in 2003-2004

Japan was intervening in the currency market and you know they were doing it because they admitted it. Please consider this article from 2004 called The dollar and yen: why they matter.

Why is Japan intervening? Because it believes the yen needs to be held down to keep Japanese exports competitive.

The policy of intervention began in earnest in August last year, when the decline of the dollar gathered pace. In 2003, the Japanese government spent $100bn buying dollars in an attempt to hold down the value of the yen. In the first two months of this year, it spent another $100bn. And Japan�s parliament has authorised the spending of a further $360bn this year.

Note those numbers. Japan spent hundreds of billions in 2003 starting in August, attempting to prop up the dollar.

Japan halted its currency intervention in March of 2004 according to the International Herald Tribune article EU officials soften stance on yen"s weakness.

Yen vs. Japan"s Intervention 2003-2004



click on chart for sharper image

If ever there was proof of the absurdity of currency interventions there it is. Ironically the Yen started plunging shortly after Japan stopped trying to force down the value of the Yen.

So now we are supposed to believe the dollar rallied because of a so called "massive" one time 10 billion Euro trade when Japan produced negative results after spending $300 billion over the course of 7 months!?

The Primary Trend Cannot Be Suppressed

The primary trend in currencies cannot be suppressed and even a cyclical countertrend move cannot be suppressed. The same holds true for gold, silver, and even the equity markets. Sadly we see GATA and others arguing over every tick in gold and silver. The most frequently pointed out item is that there is an enormous cartel that is short silver, thereby suppressing the price.

No one ever bothers to mention that for every short there is a long. It would make nearly as much sense to say there is a massive conspiracy to force up the price of silver. And those doing this ridiculous whining better think through the implications of getting what they seem to be asking for.

Imagine what would happen if the futures trading commission decided to limit silver contracts to what could be delivered in a month"s time. I suggest it would not be pretty because the commercials would know what was coming and be prepared in advance. One nice lock limit down opening in silver would start the ball rolling for good.

It"s time to realize that gold and silver have rallied massively in 7 years. And if both can do that in the face of such massive intervention, the logical thing for gold and silver bulls might be to ask for more of it.

If and when the US dollar rally fails it will be because the rally was ready to fail. That might be a week from now, a month from now or even a year from now. No one knows. What we do know is intervention (or lack thereof) will not be a factor when it does happen.

There is one more point I want to mention about the US dollar. There is a secular shift underway in the US from consumption to saving. The word that best describes this is "frugality". An frugality is very dollar supportive.

And it was Professor Kevin Depew who coined the phrase It"s Cool to Be Frugal. I commented on frugality at great length in The Future Is Frugality.

Inquiring minds will certainly want to take a look.

Here"s the deal for dollar bears: The dollar rallied because it was damn good and ready to rally. Those with their eyes open spotted fundamental reasons in advance. Those who did not, blamed intervention.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

The man who knows too much

He exposed the My Lai massacre, revealed Nixon"s secret bombing of Cambodia and has hounded Bush and Cheney over the abuse of prisoners in Abu Ghraib... No wonder the Republicans describe Seymour Hersh as "the closest thing American journalism has to a terrorist". Rachel Cooke meets the most-feared investigative reporter in Washington

American investigative journalist Seymour Hersh. Photograph: Martha Camarillo
Every so often, a famous actor or producer will contact Seymour Hersh, wanting to make a movie about his most famous story: his single-handed uncovering, in 1969, of the My Lai massacre, in which an American platoon stormed a village in South Vietnam and, finding only its elderly, women and children, launched into a frenzy of shooting, stabbing and gang-raping. It won him a Pulitzer prize and hastened the end of the Vietnam war. Mostly, they come to see him in his office in downtown Washington, a two-room suite that he has occupied for the past 17 years. Do they like what they see? You bet they do, even if the movie has yet to be made. "Brad Pitt loved this place," says Hersh with a wolfish grin. "It totally fits the clich� of the grungy reporter"s den!" When last he renewed the lease, he tells me, he made it a condition of signing that the office would not be redecorated - the idea of moving all his stuff was too much. It"s not hard to see why. Slowly, I move my head through 180 degrees, trying not to panic at the sight of so much paper piled so precipitously. Before me are 8,000 legal notepads, or so it seems, each one filled with a Biro Cuneiform of scribbled telephone numbers. By the time I look at Hersh again - the full panorama takes a moment or two - he is silently examining the wall behind his desk, which is grey with grime, and striated as if a billy goat had sharpened its horns on it. LinkHere

Rail Traffic Down; Truck Traffic Down; Air Cargo Hoping For A Bottom

Green shoots are not yet showing up in cargo statistics. Let"s take a look starting with AAR: Rail freight traffic down from a year ago.

Freight traffic on U.S. railroads during the week ended May 23 remained down in comparison with last year, although it did show an increase from the previous week this year, the Association of American Railroads reported today.

U.S. railroads originated 259,265 cars during the week, down 21.5 percent from the comparison week in 2008, but up 4.9 percent from the previous week this year. In comparison with last year, loadings were down 16.4 percent in the West and 28.0 percent in the East.

All 19 carload commodity groups were down from last year, with declines ranging from 4.8 percent for farm products other than grain to 59.7 percent for metallic ores.

Intermodal volume of 188,885 trailers or containers was off 19.1 percent from last year, with container volume down 14.2 percent and trailer traffic off 37.2 percent. Intermodal volume was up 0.2 percent from the previous week this year.

For the first 20 weeks of 2009, U.S. railroads reported cumulative volume of 5,295,843 carloads, down 19.3 percent from 2008; 3,720,454 trailers or containers, down 16.8 percent; and total volume of an estimated 562.0 billion ton-miles, down 18.2 percent.

Canadian railroads reported volume of 53,316 cars for the week, down 33.5 percent from last year, and 37,052 trailers or containers, down 18.9 percent. For the first 20 weeks of 2009, Canadian railroads reported cumulative volume of 1,193,070 carloads, down 23.4 percent from last year; and 810,785 trailers or containers, down 14.5 percent.

Mexican railroads reported originated volume of 13,102 cars, virtually the same as last year, and 5,188 trailers or containers, down 18.8 percent. Cumulative volume on Mexican railroads for the first 20 weeks of 2009 was reported as 219,541 carloads, down 12.3 percent from last year; and 95,217 trailers or containers, down 19.8 percent.

Combined North American rail volume for the first 20 weeks of 2009 on 14 reporting U.S., Canadian and Mexican railroads totaled 6,708,454 carloads, down 19.9 percent from last year, and 4,626,456 trailers and containers, down 16.4 percent from last year.

Rail Carloading Report

The Weekly Railfax Rail Carloading Report has the hollowing charts of interest.

Total Industry Charts, US, Canada, Mexico



Additional charts show numbers up from earlier in the year. However the charts also show a seasonal dip at the beginning of the year.

Is truck freight bottom close?

Fleet Owner is asking Is truck freight bottom close?

Freight tonnage fell again in April, according to numbers released by the American Trucking Assns. (ATA), indicating that trucking companies are still facing lean times.

The ATA said its seasonally adjusted for-hire truck tonnage index fell 2.2% in April, after plunging 4.5% percent in March. Compared with April 2008, tonnage contracted 13.2%, which was the worst year-over-year decrease of the current cycle and the largest drop in thirteen years, said Bob Costello, ATA chief economist.

�While most key economic indicators are decreasing at a slower rate, the year-over-year contractions in truck tonnage accelerated because businesses are right-sizing their inventories, which means fewer truck shipments,� he explained. �The absolute dollar value of inventories has fallen, but sales have decreased as much or more, which means that inventories are still too high for the current level of sales. Until this correction is complete, freight will be tough for motor carriers.� Costello added that truck freight has yet to hit bottom and it could be a few more months before this occurs.

However, Eric Starks, president of research firm FTR Associates, pointed out that while the freight market might not have bottomed out as of yet, it�s very close to doing so. �We still think we�ll reach that bottom around the middle of summer,� he told FleetOwner.

The �million dollar question� from Stark�s perspective is how long the freight market will stay at the bottom. �Even once we reach the bottom, [trucking companies] are not out of the woods. We could sit with some very depressed freight levels for some time,� he cautioned.

Air cargo at a bottom?

The International Air Transport Association says air cargo market probably hit bottom.

A decline in the air cargo freight market following the international financial crisis seems to have hit bottom, the head of the International Air Transport Association said on Sunday. Air cargo, a key barometer of world trade, has slumped amid the global economic downturn and shortage of financing. Global air freight volumes in January saw a record 23 percent year-on-year dive.

"I would say, looking at the numbers, that it has hit bottom," the global association"s Director-General Giovanni Bisignani told Reuters.
Bisignani said the market had at least been stabilising at levels around 20 percent lower than a year ago.

"It"s not yet enough to say that the situation is picking up because this is also linked with the level of inventories of the manufacturers. So we have to wait at least another 3 or 4 months in order to see if we start moving."

Rebound Questionable

Shipping may have bottomed, but as long as the economy is losing 500,000 jobs a month and housing is still in a decline, any rebound will be anemic at best.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

The Corporation

Video

This is an extraordinary film about the creation of the American corporation, its legal organizational model, its global economic dominance and its psychopathic tendencies, and its incredible ambition to influence every aspect of culture in its unrelenting pursuit of profit. LinkHere

Weiner Takes Lieberman On For "Audacity" Of Filibuster

Rep. Anthony Weiner (D-N.Y.) took on Sen. Joe Lieberman (I-Conn.) on "Morning Joe" Monday, chastising the former Democrat for pledging to join a filibuster against health care reform if it contains a public option.

"It"s inconsistent with common sense to say I oppose something that will hold down costs for the taxpayers and residents of Connecticut," Weiner said. "The insurance industry is a powerful force in Washington and so is the status quo, but the audacity to saying, and I think he backed away from it, "I will not permit a vote on the concept?" Let"s let the majority decide this issue."

Weiner offered to debate the senator, saying "If you want to bring Lieberman here, I think that I can talk him into it." LinkHere

Visit msnbc.com for Breaking News, World News, and News about the Economy

�Holding him up in honor stimulates the worst impulses of human nature and makes a mockery of our nation"s values,"

COUNTY NAACP JOINS PROTEST AGAINST �GLENN BECK DAY� IN MOUNT VERNON

Sky Valley Chronicle Washington State
(REGIONAL) -- The NAACP has now added its voice to the protest against Mount Vernon Mayor Bud Norris" controversial decision to present FOX news TV and radio talk show commentator Glenn Beck with a key to the city Saturday September 26 in a $25 dollar a ticket event called "Glenn Beck Day" in Mount Vernon.
The Snohomish County Chapter of the National Association for the Advancement of Colored People announced its protest Friday with president Janice R. Greene, saying �Holding him up in honor stimulates the worst impulses of human nature and makes a mockery of our nation"s values," highlighting Beck"s inflammatory July 28th remark that he believed President Obama to be a "racist."
The statement cost Beck over three-dozen national advertisers who ordered their commercials not run within his show.
Beck is also known for such on- air musings as pondering about the killing of filmmaker Michael Moore (who�s new movie is �Capitalism: A Love Story�) and poisoning House Speaker Nancy Pelosi as well as perpetuating the long discredited "death panel" false claim about proposed health-care reform. LinkHere

Do you ever get tired of Fox News" crops?

Fox News Caught Repeatedly Cropping, Manipulating

Hey, kids! Do you ever get tired of Fox News" crops? I don"t mean the food they might be literally growing, in Glenn Beck"s Doom Room, in preparation for Imminent Socialist Panic. I"m talking about the way they manipulate video to make it look like people are just straight up saying the opposite thing they actually said. Well, it"s been bothering the media critics at Media Matters For America for some time, and they have, for a long time, been cataloging "examples of Fox News hosts and correspondents cropping comments by progressives and Democratic political figures in a manner that misrepresents them." A new mash-up video offers some side-by-side examples of what they"re talking about:

Fox Crops

REPORT: Time and again, Fox News doctors video to smear progressives

Media Matters 8 hours and 28 minutes ago
SUMMARY: Media Matters has documented numerous examples of Fox News hosts and correspondents cropping comments by progressives and Democratic political figures in a manner that misrepresents them.

by draftedin68

FOX NEWS...We Distort, You"re Deceived.

CNBC: Warren Buffett Tells CNBC He Wholeheartedly Supports Bailout Plan

Topics:Congress | Federal Reserve | Ben Bernanke | Henry Paulson | Credit | Politics & Government | Warren Buffett

Companies:Berkshire Hathaway Inc.

The Bush administration"s controversial financial bailout proposal may be getting a heavy dose of criticism today from angry lawmakers on Capitol Hill, but Warren Buffett tells us he wholeheartedly supports the plan.

He told CNBC"s Becky Quick over the weekend, "It"s what I would do if I were there."

If opposition does continues to grow, Paulson might think about asking Buffett to come to Washington and do some lobbying, a task he might find more palatable than taking on responsibility for the whole thing!

Becky also notes that the SEC"s "no-short" rules may indeed have been responsible for that enormous last-second spike in Berkshire Hathaway"s stock price late Friday.

Current Berkshire stock prices:

Class A: [US;BRK.A 127650.0 -3350.00 (-2.56%) ]

Class B: [US;BRK.B 4260.0 -95.00 (-2.18%) ]

Share Investor Blog - Stockmarket & Business commentary
Share Investor New Zealand Business News- Get more business news
Shareinvestorforum.com - Discuss this topic further

What is this "Iraq war" charge on my bill?

What is this "Iraq war" charge on my bill? Part 2

Get this "Iraq war" charge off my bill!

Obama Introduces Supreme Court Nominee

President Obama announced Tuesday morning that federal appeals court judge Sonia Sotomayor is his nominee for the Supreme Court vacancy.
Praising her as "an inspiring woman" in his introduction, Obama said she had more experience than anyone on the court and has earned the "respect of colleagues on the bench," the admiration of lawyers and "the adoration of her clerks." He highlighted the barriers she faced in making it to this position, including her diabetes.
"My heart today is bursting with gratitude," Sotomayor said when she took the podium. The judge gave a touching tribute to her mother, telling the audience, "I have often said that I am all I am because of her, and I am only half the woman she is." LinkHere

Visit msnbc.com for Breaking News, World News, and News about the Economy

GOP Senators All Repeat Same Line Questioning Sotomayor

GOP Frets Over Sotomayor"s "Personal Politics, Feelings, And Preferences"

Specter Wants to Prosecute Yoo and Other DOJ Lawyers for Memos

Senator Arlen Specter is open to criminally prosecuting John Yoo and the other lawyers at the Department of Justice Office of Legal Counsel (OLC) for writing the memos justifying unconstitutional action:

Sen. Arlen Specter (R-PA) said he was opposed to any Truth Commission tasked with investigating Bush administration abuses, but that he could support criminal investigations into political appointees who authored the controversial OLC memos.

***

�I would not mind looking backward if there�s reason to do so. If we have evidence of torture � go after it. If there�s reason to believe that these Justice Department officials have knowingly given the president cover for practices they know not to be right or sound � go after them. Some of the [OLC] opinions are more than startling, they�re shocking. If [OLC counsel] did that knowingly�it sounds to me that it may fall within criminal conduct.

Specter said he supported the Justice Department pursuing an investigation into the writing of the memos.

Of course, Yoo and the other devil"s advocates at the OLC did commit illegal acts which warrant prosecution. Indeed, they are war crimes under U.S. and international law. See this, this, this, and this.

But as any lawyer will tell you, it is the client which decides what to do, and then the lawyer simply tries to find a way to justify it. In most cases, the lawyers aren"t the decision-makers, simply the lapdogs serving power. Clearly, Bush and Cheney decided on what they were going to do first, and then asked the OLC to provide cover for it.

Why just go after the devil"s advocate, and not the devils themselves?

Industrial Production Drops .6 Percent; Manufacturing Index Falls to Minus 25.8

Bloomberg is reporting Industrial Production Falls on Autos.

Manufacturing in the U.S. slumped further in November as exports tumbled and automakers slashed their assembly rate to the lowest level in more than 18 years.

Industrial production fell 0.6 percent, the third drop in four months, the Federal Reserve said today in Washington. The New York Fed reported the weakest factory performance in its region this month since its survey began in 2001.

Today�s figures may intensify pressure on the Bush administration to prevent a collapse of General Motors Corp., the biggest American carmaker. As consumer demand slides with higher unemployment and a cut-off of credit, manufacturing is poised to keep contracting into 2009, economists said.

The slide in manufacturing has idled almost one quarter of U.S. industrial capacity. The utilization rate, which measures actual production as a share of the maximum potential, fell to 75.4 percent, compared with an average of 79.7 percent in the past five years.

The nationwide industrial output report showed factory output, which accounts for four-fifths of industrial production, decreased 1.4 percent. Production of metals, furniture and construction supplies all dropped. Aircraft production was one of the only manufacturing categories showing gains during the month, as work resumed at Boeing Co. following a strike.

Industrial Production And Capacity Utilization

Let"s take a look at the official release of Industrial Production And Capacity Utilization for November.

Industrial production decreased 0.6 percent in November with declines widespread across industries. The drop in output in September was revised down, and the rebound in October was revised up, in large part because both the decrease due to the September hurricanes and the subsequent partial recovery in October were larger than previously reported.

The output of mines advanced 2.5 percent, primarily as a result of a further post-hurricane recovery in crude oil and natural gas operations in the Gulf of Mexico. Taken together, the rebounds after the strike and the hurricanes added almost 1 percentage point to the change in industrial production. The output of utilities rose 1.6 percent.

Among consumer durable goods, the decreases in production were broadly based: Automotive products dropped 2.6 percent; appliances, furniture, and carpeting fell 4.0 percent; home electronics moved down 1.7 percent; and miscellaneous goods declined 3.4 percent.

The output of business equipment rose 3.2 percent in November. The production of transit equipment jumped more than 40 percent after having plunged in September and October because of the strike in the commercial aircraft industry.

The only bright spots can be attributed to the end of the Boeing strike and a rebound in activity after hurricanes. Of course it is a fallacy to state there is any economic benefit derived from hurricanes or any other type of disaster.

Here are a couple of charts from the article.

Industrial production, capacity, and utilization



click on chart for sharper image



click on chart for sharper image

Durable goods, construction, and non-energy industrial materials are dropping sharply. Defense is going strong. Things might be a lot different under Obama given his stated desire to rebuild infrastructure and pull troops out of Iraq.

New York Manufacturing Index Falls to Minus 25.8

The Federal Reserve Bank of New York is reporting New York Manufacturing Index Falls to Minus 25.8

Manufacturing in New York contracted in December at the fastest pace on record as orders and shipments remained weak.

The Federal Reserve Bank of New York�s general economic index fell to minus 25.8, the lowest level since records began in 2001, from minus 25.4 in November, the bank said today. Readings below zero for the Empire State index signal manufacturing activity is shrinking.

Factories are scaling back production as consumers retrench in the face of a weaker job market and a recession that began a year ago. A deepening global credit crisis has hit overseas trading partners, undermining foreign demand for U.S. goods.

The New York Fed�s measure of new orders rose to minus 20.8 from minus 22.2 the prior month. A gauge of shipments increased to minus 8.8 from minus 13.9.

The report also showed inflation eased. The index of prices paid for raw materials decreased to minus 7.5 from 20.5 and the gauge of prices received dropped to minus 11.7, the lowest since July 2003, from 6.

A measure of employment rose to minus 23.4 from minus 28.9, the lowest reading since December 2001.

Prices paid are dropping and will continue to drop as year over year comparisons get easier. Deflation is here. Falling prices are a symptom of that deflation.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

FORBES.COM: Seven hours with Warren Buffett

Robert Lenzner 05.03.08, 5:35 PM ET, Forbes.com

The Berkshire Hathaway annual meeting was a classic example of shareholder meeting as farce. Incredibly, the seven-hour session before a record crowd of 30,000 had barely a mention of the financial crisis impacting markets worldwide for a year.

There were more questions about the dams on Oregon"s Klamath River shutting off the salmon run for Indian tribes than the damming up of the credit markets.

The word "recession" was never mentioned. "Inflation" only once. No one asked about the $1.6 billion loss Berkshire took on a derivative position in the last quarter. Not a soul inquired about the decline in Berkshire"s earnings. Buffett"s brilliant call in buying Brazilian currency (the real) never got a nod, even though Standard & Poor"s raised that nation"s credit to investment grade last week.

Nor did anyone raise the provocative theme put forth in Buffett"s letter to shareholders (See "Croesus, Buffett: New Advice From On High") that investors should not expect to earn on their common stock positions the modest 5.3% rate of return earned during the whole of the 20th century. Were none of the 30,000 shareholders alert enough to take the opportunity to ask Buffett what rate of return they could expect? After all, many small investors count on their Berkshire holdings as an important stake and nest egg.

"Anyone who wants us to repeat the past should sell [his or her] stock," said the Oracle of Omaha, without any follow-up questions from alarmed shareholders. Be fairly warned.

This passivity cannot be due to Buffett"s willingness to appear on a certain cable network nine times and another one five times since October 2007. This was a chance blown to find out how Buffett and Munger weighed the risks in the world.

It was Buffett"s acerbic partner Charles Munger who finally exclaimed that "we are having convulsions that make Enron look like a tea party. We will have changes in regulation but they won"t work perfectly." No one asked Munger what changes he saw on the horizon. Later on the 84-year-old Los Angeles lawyer described the convulsion as "a huge dislocation that was very extreme but very brief. It"s interesting how brief these opportunities are."

Nevertheless, Berkshire was able to accumulate a $4 billion position in auction rate notes when that market froze up some weeks ago. It included the short-term debts of the nonprofit Los Angeles County Museum of Art at interest rates of 8% to 10%--triple the 3% to 4% the same notes sold for in January. Perhaps it was this opportunity that Munger chose to describe in his no-holds-barred style--"some idiot hedge fund bought municipal bonds on incredible margin. These things were disposed on a margin call," meaning that the fund had to sell because it didn"t have the capital to support its position.

After a lunch break, Buffett finally got in some licks at the regulator of Fannie Mae (nyse: FNM - news - people ) and Freddie Mac (nyse: FRE - news - people )--Office of Federal Housing Enterprise Oversight--for allowing accounting irregularities to go on for some time. Buffett, who describes himself as "the chief risk officer" of Berkshire, also slammed the large commercial and investment banks as both too big to manage and too big to fail, according to the government. He reckoned that the failure of Bear Stearns (nyse: BSC - news - people ) would have caused the failure of "another investment bank or two going down in a day or two."

The panic would have been caused by financial institutions "trying to undo $14.5 trillion [worth of] derivatives contracts in just hours, not days or weeks. Hardly anyone caught Buffett"s words when he muttered that "to some extent it"s an evil culture." The evil culture he was talking about was Wall Street, the commercial and investment banks who had no idea that their risk models were utterly useless. "They didn"t have the faintest idea what risks were involved," he said.

As for politics, Buffett, a Democrat, said all three candidates are intelligent. But he scoffed at the way both Clinton and Obama "ask for an excess profits tax on Exxon"--but not on the farmers getting rich off the boom in commodity prices. Munger added that "while we don"t like inflation because it"s bad for our country, we"ll probably make more money over time because there is inflation."

On oil prices, Buffett predicted that production will level off and then start to decline, which will tend to put a floor under the price of oil. His politically incorrect partner Munger declared that "in the 1930s [when oil was first discovered in the Middle East] we should have taken the oil out of the Middle East and put it in the ground" in the U.S. "Eventually," Munger predicted, "we"ll have to use the sun for our power."

On a lighter note, the high point of the meeting was a cartoon film that had Munger being elected president on the Financially Independent ticket--and naming Buffett secretary of commerce, secretary of the Treasury and chairman of the Federal Reserve all at once. In a serious vein, Buffett later said his inclination would be to raise taxes on the super-rich (himself included, of course) and lower them on the middle class, a position shared by both of the Democratic candidates.

As for the stock market, Buffett, made it crystal clear that "Charlie and I haven"t the faintest idea where [it"s] going."

More from Croesus in Omaha Sunday. Stay tuned. If you have any questions for Warren, send them along in the comments below.

Visit Share Investor Blog

8 Year To Late Don"t You Think?

Pope criticises US for ignoring diplomacy before Iraq war

Pope Benedict XVI made a veiled attack on the United States for failing to listen to the international community before starting the war in Iraq.
In a carefully-worded speech to the United Nations� General Assembly, the Pope underlined the need for diplomacy.
�Multilateral consensus continues to be in crisis because it is still subordinated to the decisions of a few, whereas the world�s problems call for interventions in the form of collective action,� he said, adding that international rules must be �binding�.
He continued: �There have been painful lessons for the US, the UN and other member states. I think in the end everybody�s concluded it�s best to work together with our allies and through the UN,� the Pope said.
Archbishop Celestino Migliore, the Vatican�s UN representative, said the Pope wanted to attack �the false notion that might makes right�.

LinkHere

Treasuries Massacred; Yield Curve Steepest On Record

Bernanke cannot have his cake and eat it too. If the economy is recovering the yield curve should steepen. And steepen it has. The Yield Curve Is Steepest On Record.

The difference in yields between Treasury two and 10-year notes widened to a record on concern surging sales of U.S. debt will overwhelm the Federal Reserve�s efforts to keep borrowing costs low.

The so-called yield curve steepened to 2.75 percentage points, surpassing the previous record of 2.74 percentage points set on Aug. 13, 2003.

Ten-year notes have lost 10.3 percent this year, according to Merrill Lynch & Co. indexes, while 30-year bonds have lost 27.5 percent. Two-year notes have gained 0.2 percent.

Rising 10-year Treasury yields are pushing yields on mortgage bonds higher, prompting holders of the securities to sell government debt used as a hedge to protect portfolios against rising interest rates.

As mortgage rates rise, the expected average lives of mortgage bonds and mortgage-servicing contacts extend as potential refinancing drops, leaving holders with portfolios of longer-than-anticipated durations. Duration is a measure of bond price sensitivity to interest-rate change.

�The back-up is mostly related to convexity selling by mortgage investors,� said Gary Pollack, who helps oversee $12 billion as head of fixed-income trading at Deutsche Bank AG�s Private Wealth Management unit in New York. �This will be a test for the Fed.�

Yield Curve 1999 - Present



click on chart for sharper image

If the economy is recovering, the Fed should welcome this steepening. However, what if the yield curve is simply reacting at the thought of Bernanke monetizing Obama"s massive deficits and the various stimulus plans?

I doubt the economy is recovering but it is may be getting worse at a lesser rate. Moreover, if the curve flattens, it sure will not be because of intervention, it will be because the so-called recovery has stalled. Heaven help Bernanke if the economy worsens and the yield curve continues to steepen.

Regardless why the yield curve is steepening, Bernanke"s belief that he can control both the long and short end of the curve is seriously misguided. The fact is he cannot really control either, at least for long.

Twilight Zone Treasuries

Flashback April 23 2009: Twilight Zone Treasuries

The Fed said at its last meeting it intends to buy $300 billion in Treasury securities over six months in a bid to lower long-term borrowing costs and revive economic growth.

$TNX - 10 Year Treasury Note Yield




click on chart for sharper image

Professor Fil Zucchi on Minyanville had this succinct comment:

"Today the Federal Reserve printed $7 billion dollars and used it to buy an equivalent amount of 7 and 10 year Treasury bonds. As I publicly asked before, if Mr. Fed can"t rig the price of an asset by buying it with printed money, why should anyone else buy it?"

Those wishing to keep an eye on these price rigging attempts can follow the Federal Reserve Bank Permanent OMOs: Treasury link.

Bernanke"s Hubris

It is ridiculous for the Fed to think it can control the vast $trillion treasury market with pea shooting efforts at $7 billion a pea. However, as the charts above show, the Fed announcement hugely distorted the market in smaller timeframes.

As Prof. Zucchi says "If Mr. Fed can"t rig the price of an asset by buying it with printed money, why else should anyone else buy it?"

Other than the initial pop, the Fed"s silly attempt to game the system may have caused so much mistrust that it is putting upward pressure on yields.

Treasury Yields Where To From Here?

A couple of people wrote me today saying I have been wrong about treasuries.

Let"s backtrack for a moment to set the record straight for those who think I have been bullish on treasuries all year. Although the strength of the selloff this year has been surprising, I stepped aside in December.

Prior to that I was hugely bullish, more so than anyone I know.

Mish Treasury Calls

Sunday, January 20, 2008: Time To Short Treasuries?

Kass Says Sell Bonds Short.

Kass: The bond market is in a bubble that is reminiscent of (and quite possibly as extreme as) other bubbles during previous eras. From my perch, the only issue is the timing of this trade.

Mish: Timing is indeed everything and perhaps there is a temporary selloff. But the primary trend is for lower yields. Perhaps much lower yields. There is no bubble in bonds. Not yet.

...

Anyone who wants to short treasuries with impunity on this economic backdrop can be my guest. For the record, I have no grudge against Kass. He puts out a good column that I frequently agree with. However, I take the other side of this debate.

There is no bubble in treasuries if you look closely at the fundamental issues. Those who want to see how low treasury yields can get and stay there, need to look at Japan. Yields in the US are going to go far lower and stay lower longer than nearly everyone thinks.

Thursday, June 26, 2008: Is The Inflation Scare Over Yet?

Those focused on the CPI failed to see any chance of the Fed Fund"s Rate at 2.00 again. On the other hand, those focused on the destruction of credit from an Austrian economic perspective got this correct. That is just one reason why it makes more sense to watch the credit markets than the CPI. The second is the CPI is so distorted it is useless.

In my opinion, it is very likely new all time lows in the 10-year treasury yield and 30-year long bond are coming up.

Wednesday, November 19, 2008: Misguided Bets On The Yield Curve

Someone from one of the big brokerage houses emailed me last week saying the yield curve would steepen. My response was "Why should it?"

A bet on the yield curve to steepen is a bet the economy improves. Why should it? An even better question is "How low do 10 year and 30 yields go?" Certainly 3% or lower on the 10 year and even 30 year are in the realm of possibilities. That"s how nasty this recession is likely to get.

Tuesday, January 06, 2009: Reflections On 2008, Themes For 2009

It is quite possible the lows in treasury yields are in. Unlike 2008 where I was constantly beating the drums for lower yields, 2009 could be different. Here are the facts: 3 month and 6 month yields hit 0% and the 10 year came close to hitting 2%. Could there be lower yields still? Yes, quite easily. Is it worth playing for other than as a hedge or part of an overall investment strategy? No.

Thursday, March 26, 2009 Quantitative Easing Begins; "Operation Twist" Revisited

Appearance vs. Reality

Yields may drop. If they do it will not be because quantitative easing is working. If yields drop from here, in spite of the massive supply of treasuries stemming from Obama"s sky high budget, it will be because the economy is in worse shape than anyone thinks.

Those hoping for a second half economic recovery should be hoping yields rise, not sink.

"Operation Twist" failed. So will "Operation Twist Again" in one way or another, or perhaps multiple ways. For example there is no specific reason mortgage rates will drop even if [treasury] yields do. Default risk is simply too high.

Are Yields Going Up Or Down From Here?

Yes they are. I guarantee it. If you want to know which way short term, I do not know, nor does anyone else.

Monday, April 06, 2009: Fed"s Effort To Roll Snowball Uphill Is Failing

Bernanke thinks he can manipulate treasury yields by purchasing long dated treasuries. He can"t. The market is simply too big.

The Fed"s problem is that it cannot force rates where it wants no matter how many treasuries it buys, short of owning them all. If the Fed is buying treasuries at an unnatural price, supply will be unlimited.

Friday, May 15, 2009: Nonexistent "pre-recovery" in Manufacturing Suggests US Treasuries a Buy

Yield Curve as of 2009-05-15



Treasuries Are A Buy

I went cautious on treasuries in December, but it"s now time to become bullish again. Talk of "green shoots" and "pre-recoveries" is way overdone. Let"s come back to this chart in September and October. My bet is the yield curve will be flatter and yields on the high end (10 year and 30 year) will be lower than today.

In September and October we will see if I was right or wrong, but looking back I am quite pleased with 2008 calls culminating with taking the treasury chips off the table in December 2008 (via public blog comments) and officially posted January 6, 2009.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Suck Eggs McSame McBush, who is Presidential? Obama That"s Who

Get a load of the excitement and smiles

Senator Obama With U.S. Troops in Kuwait

Senator Obama Opening Remarks in Kuwait



Obama Meets Afghan Leaders, Makes Stop in Kuwait

Now watch this drive...



McCain: 100 years in Iraq "would be fine with me"

McCain: Bringing Troops Home from Iraq "Not Too Important"

Confirmed: McCain pulls all ads.

Source: MSNBC First Read

Virginia-based firm Smart Media, which conducts media buying around the country for the McCain campaign, sent out this urgent memo this afternoon addressed to "All National Managers."

RE: Suspend all McCain for President Advertising
"As you are aware, the John McCain for President Campaign has suspended all campaigning to address the current national financial crisis. Effective 5pm today, September 24th, 2008, all advertising for the McCain for President Campaign must cease. Please notify your stations immediately."
LinkHere

Palin Implicated By Witness in �Troopergate� Probe

Source: The Public Record

An Alaska woman who owns a company that processes workers� compensation claims in the state has told an independent investigator that she was urged by the office of Gov. Sarah Palin to deny a benefits claim for Palin�s ex brother-in-law, a state trooper who was involved in an ugly divorce and child custody dispute with Palin�s sister, despite evidence that the claim appeared to be legitimate, according to state officials who were briefed about the conversation.

Murlene Wilkes, the proprietor of Harbor Adjusting Services in Anchorage, had originally denied there was any pressure by Gov. Palin�s office to deny state trooper Mike Wooten�s claim for workers compensation benefits.

But she changed her story when she was subpoenaed by Steven Branchflower, the former federal prosecutor who was appointed in July to probe allegations Gov. Palin, Republican presidential candidate John McCain�s running mate, abused her office by abruptly ousting Public Safety Commissioner Walt Monegan, state officials knowledgeable about her conversation with Branchflower said.

Monegan has said Gov. Palin pressured him, several of her aides, and her husband, Todd Palin, to fire Wooten. Branchflower�s investigation centers on whether Palin fired Monegan because he refused to fire Wooten.

LinkHere

Cuban government shunned, saying in a statement Monday that it cannot accept help from ``government that blockades them.""

Cuba rejects U.S. supplies, asks for suspension of trade embargo

Source: Miami HeraldCuba rejects U.S. supplies, asks for suspension of trade embargoResponding to criticism, the U.S. offered $2 million in supplies. Cuban officials asked for a suspension of the trade embargo instead.

LinkHere

Bush, Cheney, Ashcroft, Powell, Tenet, Rice, and Yoo Have All Committed War Crimes Punishable by Life in Prison, Death Or Impeachment

Anyone who violates the Geneva Convention by engaging in murder, torture, or inhuman treatment is guilty of a crime under U.S. law.

Specifically, the War Crimes Act of 1996, a federal statute set forth at 18 U.S.C. � 2441, makes it a federal crime for any U.S. national, whether military or civilian, to violate the Geneva Convention

The statute applies not only to those who carry out the acts, but also to those who ORDER IT, know about it, or fail to take steps to stop it. The statute applies to everyone, no matter how high and mighty.

Indeed, anyone who is a policy-maker who helps create, promote, or justify policies that violate the Geneva Convention is guilty under 18 U.S.C. � 2441. See this, this, this, and this.

What Does This Mean?

Well, according to the Associated Press, Cheney, Ashcroft, Powell, Tenet, and Rice all approved torture, and Bush knew about and approved what they were doing (see also this).

In addition, in addition to Ashcroft, other high-level Justice Department officials such as John Yoo approved of and justified torture.

All of these people are guilty of war crimes under 18 U.S.C. � 2441.

18 U.S.C. � 2441 has no statute of limitations, which means that a war crimes complaint can be filed at any time. The penalty may be life imprisonment or -- if a single prisoner dies due to torture -- death. Since the U.S. military has admitted that they have tortured some prisoners to death, that means that Bush, Cheney, Ashcroft, Powell, Tenet, Rice, and Yoo could all be sentenced to life in prison, or even death.

Additionally, violation of the war crimes act almost certainly constitutes a "high crime or misdemeanor" which would allow impeachment of such officials.

Indeed, many high-level officials in the U.S. and abroad have stated that those who crafted the torture policies are guilty of war crimes. For example, Colin Powell"s former chief of staff stated that Dick Cheney might be guilty of war crimes. And Former Malaysian premier Mahathir Mohammad is calling for an international tribunal to try western leaders for war crimes over the Iraq war.

And for those who question whether waterboarding is torture, see this, this, this, and this.

Indeed, waterboarding is not the only form of tortures which has been used by the U.S. recently.

Finally, Donald Rumsfeld appears to have also committed war crimes. For example, the general in charge of the notorious Abu Ghraib prison in Iraq stated this week that Secretary of Defense Donald Rumsfeld and other top administration officials ORDERED that inhuman treatment and torture be conducted as part of a deliberate strategy. This confirms what the Pullitzer prize-winning reporter who uncovered the Iraq prison torture scandal and the Mai Lai massacre in Vietnam previously wrote.

Alberto Gonzales probably also committed war crimes by promoting and covering up torture.

MCCAINS BAD JUDGEMENT

After 9/11, no Bush plan on Osama?

Dems ease impact of health bill, big advance nears

Source: AP
WASHINGTON � Fearing a backlash, Democrats smoothed the impact of sweeping health care legislation on working-class families Thursday night and steered President Barack Obama"s top domestic priority toward a crucial Senate advance. The most far-reaching overhaul in decades aims to protect millions who have unreliable coverage or none at all.
Republicans on the Senate Finance Committee attacked the bill as riddled with tax increases that violated Obama"s campaign promises, but failed to remove any of them.
After marathon public debate, agreement by the committee is all but certain for the legislation, although no final vote was expected until next week. That formality � Democrats hold a 13-10 majority on the panel � will clear the way for the full Senate to begin work on the measure at mid-month.
The legislation, like a companion bill under construction in the House, would bar insurance companies from denying coverage or charging higher premiums on the basis of pre-existing medical conditions. It also includes federal subsidies to make insurance available to millions who lack it, and it takes steps to slow the skyrocketing growth in health care costs nationwide.
snip
Senate Democrats coalesced behind two of their own that could alter the legislation in significant ways. Link Here

SandWalker1984

The harsh, cold facts & my conclusions regarding health care reform.

Before we can have any meaningful reform of the health care industry (and it has become too big of a business), we must face the harsh, cold facts of what we are up against.
PROFITS - the focus of these companies is PROFITS, not people and not health care. What kind of profits? Huge, excessive profits, achieved by rationing health care.
HEALTH INSURANCE COMPANY PROFITS IN 2007:
1. UnitedHealth Group�$ 4.654 BILLION. UnitedHealth Group owns Oxford, PacifiCare, IBA, AmeriChoice, Evercare, Ovations, MAMSI and Ingenix, a healthcare data company
2. WellPoint�$ 3.345 BILLION. Wellpoint owns BLUES across the US, including Anthem Blue Cross Blue Shield, Blue Cross Blue Shield of Georgia, Blue Cross Blue Shield of Wisconsin, Empire HealthChoice Assurance, Healthy Alliance, and many others
3. Aetna Inc.�$ 1.831 BILLION
4. CIGNA Corp�$ 1.115 BILLION
5. Humana Inc.�$ 834 million
6. Coventry Health Care�$626 million. Coventry owns Altius, Carelink, Group Health Plan, HealthAmerica, OmniCare, WellPath, others
7. Health Net�$ 194 million
****************
EXCESSIVE SALARIES AND COMPENSATION - the CEO"s that run these corporations are compensated well for denying and rationing YOUR health care. How much do they make?
(from dailykos.com)
2008 Salaries & Compensation - the top 10 in Health Care
Ron Williams - Aetna
Total Compensation: $24,300,112
Details: Williams earned $24,300,112 in total compensation for 2008, with more than half of that ($13,537,365) coming from option awards. He also received an additional $6,456,630 in stock awards to go along with his base salary of $1,091,764.
Personal use of a corporate aircraft and vehicle, as well as financial planning and 401(k) company matches added up to $101,487 for Williams.
H. Edward Hanway - CIGNA
Total Compensation: $12,236,740
Details: Hanway took a significant pay cut from 2007 to 2008, due mainly to a drop off of more than $11 million in his non-equity incentive plan compensation. Still, his base salary of $1,142,885 surpasses that of Aetna"s Williams, and is supplemented by just over $3.6 million in option awards, and just over $820,000 in non-qualified deferred compensation earnings.
Also, nearly $21,800 in "other compensation" included the use of a company car with a driver, in-office meals, and emergency assistance services relating to medical exams.
Angela Braly - WellPoint
Total Compensation: $9,844,212
Details: Braly, like Williams, earned more money in 2008 ($9,844,212) than in 2007 (9,094,271), increasing her option rewards by nearly $1.5 million, and also receiving a $200,000-plus bump in base salary, from $922,269 to $1,135,538. Braly"s stock awards dropped from $2,160,159 to $1,750,015 because, according to the SEC, "performance-based restricted stock units awarded in 2008 were cancelled because our ROE target for 2008 was not met."
Braly"s "other compensation" comprised use of a private jet for her and her family on business trips, just under $10,000 for legal services relating to her employment agreement and cash credits.
Dale Wolf - Coventry Health Care
Total Compensation: $9,047,469
Details: Wolf is the only CEO on this list who is no longer employed with his associated health plan; he retired from his position on Jan. 30 of this year after serving in that role since Jan. 1, 2005, and was replaced by former CEO Allen Wise.
Wolf, whose total compensation dipped quite a bit from 2007 ($14,869,823) to 2008 ($9,047,469), was pleased with the direction the company was headed in at the time of his departure.
"I am proud of what a talented group of people have accomplished over the past 13 years of my association with the company," Wolf said, "and I am confident that the fundamentals which are in place today will carry the company forward to continued success."
Wolf carried a base salary of $965,000 in 2008, and earned just over $1.9 million in stock awards. His "other compensation," which amounted to $486,447, included transportation on the company"s airplane, a company match retirement savings plan and a company match 401(k) plan.
Michael Neidorff - Centene
Total Compensation: $8,774,483
Details: Neidorff, who"s base salary remained at $1 million, received increases in both his bonus ($1.25 million, up from $1 million) and his stock awards ($4.7 million, from $3.98 million) in 2008. According to the SEC, "Neidorff"s agreement was amended twice in the past twelve months; (1) to eliminate the non-compete and non-solicitation requirements if there was a �hostile change in control" as defined in his agreement and (2) to add language to the agreement to make it compliant with Internal Revenue Section 409A."
Neidorff"s "other compensation" of just over $418,000 comprised of use of the company airplane "for all travel," life insurance benefits, security services, and tax preparation services, among other things.
James Carlson - AMERIGROUP
Total Compensation: $5,292,546
Details: Despite a lawsuit regarding Medicaid fraud that cost the Illinois plan $225 million, Carlson himself earned roughly $2 million more than he did in 2007. All aspects of his compensation increased in 2008, from his base salary (up from $608,000 to just over $761,000) to his non-equity incentive plan compensation (up to about $2.8 million from $1.98 million a year ago). Carlson"s bonus also grew quite a bit, going from $225,000 in 2007 to $520,312 in 2008; much of that amount was based on long term incentive program goals being met.
Carlson"s "other compensation," which nearly tripled (going from about $7,000 to just over $20,000), included his employer 401(k) contribution, life insurance premiums, an executive health screening, flight services and a medical insurance stipend.
Michael McCallister - Humana
Total Compensation: $4,764,309
Details: Despite its pick ups of two smaller health plans (OSF Health Plans of Peoria, IL and Cos/Cariten Healthcare of Knoxville, TN), Humana"s McCallister earned roughly $5.5 million less in 2008 than in 2007. While his base salary ($1,017,308), option awards ($3,078,897) and "other compensation" ($668,104) all increased, his non-equity incentive plan compensation and his nonqualified deferred compensation earnings totaled zero dollars. The latter represents a discontinuation of the Officers" Target Retirement Plan, according to the SEC.
McCallister"s "other compensation" included personal use of the company aircraft for him, and sometimes his family; company contributions to the Supplemental Executive Retirement & Savings Plan and the Humana Retirement & Savings Plan; a once-a-year physical, financial planning assistance, and more.
Jay Gellert - Health Net
Total Compensation: $4,425,355
Details: Gellert, whose company is considering selling off divisions in at least four states, earned nearly $740,000 in additional compensation for 2008. His overall base salary increased to a little more than $1.2 million from about $1.18 million in 2007, and his stock awards also rose (from about $1.4 million to more than $1.8 million).
Gellert"s "other compensation," which totaled $131,526, included, but were not limited to, a $53,000 housing allowance, a corporate car and tax reimbursements of nearly $41,000.
Richard Barasch - Universal American
Total Compensation: $3,503,702
Details: After taking a pay cut from 2006 to 2007, Barasch more than doubled his total compensation for 2008, jumping up from $1,564,293 in 2007. Barasch"s base salary jumped up to $857,851 from $798,340 in 2007; his stock and option awards also increased, as did his "other compensation," which reflected a car allowance, relocation benefits and a matching contribution to his 401(k).
Also of note for Barasch was the fact that his non-equity incentive plan compensation earnings totaled $1,195,147; in 2007, he did not receive any money in 2007 for such compensation, but took home $1.1 million in 2006.
Stephen Hemsley - UnitedHealth Group
Total Compensation: $3,241,042
Details: An $895 million class-action lawsuit over stock-option back dating aside, Hemsley still manages to make the cut for this list at No. 10. The UHG CEO"s base salary was $1.3 million in 2008, to go along with a non-equity incentive plan compensation worth just over $1.8 million and "other compensation" amounting to slightly more than $119,000.
Hemsley"s other compensation was a combination of the company matching his contributions under the 401(k) plan and the company matching contributions under his executive savings plan. According to the SEC, "in May 2006, the amount of Hemsley"s supplemental retirement benefit was frozen based on his current age and average base salary and converted into a lump sum of $10,703,229." Because of this, "there was no increase in the benefit payable to Mr. Hemsley under his supplemental retirement benefit" in 2008.
***********
I"ve reached the following conclusions regarding Congress & health care reform:
(1) The profits are too large, the pay scales too excessive for the health care industry to willingly allow meaningful reform that benefits us, the people.
(2) Many, if not most, members of Congress, along with Obama, are recipients of large donations from these health industry corporations. Donations they do not wish to see stopped or given to opponents in the next election cycle.
(3) Therefore, Congress is attempting to make the so called health care reform into token reform to try to appease us, the voters, while in reality they are planning the biggest giveaway (500 billion dollars or more, according to Jay Rockefeller) to that industry ever. They also plan to mandate we purchase private, overpriced and under delivering insurance from this industry to keep their donations rolling in.
(4) No meaningful regulation of the health care industry will take place as long as the industry is calling the shots with Congress. Most of the Baucus bill was written by lobbyists from WellPoint.
Unless some more Democrats suddenly get religion regarding true health care reform, it is better to defeat the Democrats and this sham legislation. It is better to defeat it now rather than hand the health care industry more customers, more money, more power so they can buy even more members of Congress.
NO legislation is better than bad legislation.
Better to end this battle now and fight again later than to surrender our well being to these mega, profit generating, out of control machines.
No wonder the Republicans have been sitting this one out - do the math, it"s far more advantageous politically for them to let the Democrats hang themselves on this corporate giveaway of a bill.