Hedge Fund Money Teams Up With Koch & BB&T

Gary Weiss, the Wall Street writer who was ahead of his time with his comprehensive chronicle of Wall Street corruption in 2006 (Wall Street Versus America) charts a bold new course this week with the release of Ayn Rand Nation: The Hidden Struggle for America’s Soul.

Thanks to Weiss, the nation might just escape the next wave of Ayn Rand’s radical capitalism and student brainwashing by corporate money vultures fanning out across U.S. campuses.

Thanks to the trail paved in Weiss’ book, we did some further digging into the money cartel financing this “spontaneous” outpouring of campus and Tea Party interest in Rand, whose work is regularly considered by top academics to be mediocre and simpleminded.

This cartel has a striking similarity to the network of university economists set up by Big Tobacco in a money for hire scheme from 1983 to the mid 90s to blanket Congress and the media with bogus OpEds and research papers.

While it has been well known that the oil billionaire, Charles Koch, has been funneling tens of millions of dollars through his foundation into economic programs at public universities and mandating approval of faculty and curriculum in some instances, it has not heretofore been reported that a sweeping partnership in these programs has sprung up between Koch and the southern banking giant, BB&T, the latter corporation mandating that Ayn Rand’s book Atlas Shrugged is taught and distributed to students.

Koch is based in Wichita, Kansas; BB&T in Winston-Salem, North Carolina. An email request to the Charles G. Koch Foundation for information on how this partnership evolved went unanswered, despite Koch’s copious web site claiming to want to set the record straight on his past funding schemes.

Raising more eyebrows is the discovery that the so-called populous craze for Ayn Rand’s seminal work, Atlas Shrugged, is also being financed by a decidedly non-populist pact of deep-pocketed hedge fund operators.

As we reported yesterday in this space, the Ayn Rand Institute (ARI) has already conceded the following on its web site:

“ARI seeks to spearhead a cultural renaissance that will reverse the anti-reason, anti-individualism, anti-freedom, anti-capitalist trends in today’s culture. The major battleground in this fight for reason and capitalism is the educational institutions—high schools and, above all, the universities, where students learn the ideas that shape their lives…To date, more than 1.4 million copies of these Ayn Rand novels have been donated to 30,000 teachers in 40,000 classrooms across the United States and Canada.

“Based on a projected shelf life of five years per book, we estimate that more than 3 million young people have been introduced to Ayn Rand’s books and ideas as a result of our programs to date…partnerships have been established between ARI and the corporate community to advance Ayn Rand’s ideas in the universities. (Italics added.)

“Through ARI’s assistance, Ayn Rand’s ideas are taught and studied at more than 50 of America’s most influential institutions of higher education, including: Clemson University, Duke University, University of Virginia, University of Texas at Austin, University of Pittsburgh, University of North Carolina at Chapel Hill, Brown University, University of Kentucky, University of South Carolina, University of Florida, University of West Virginia and Wake Forest University.”

Weiss piqued our curiosity when he mentions in his book that the Ayn Rand Institute based in Irvine, California is holding its annual gala fundraiser, not on the west coast, but at the swanky St. Regis hotel in Manhattan and charging $1500 a plate. We learn further from Weiss that Arline Mann, Managing Director and Associate General Counsel of the Board of Goldman, Sachs & Company is the Co-Chair of the Ayn Rand Institute. To move the money trail along, Weiss interviews Barry Colvin, Vice Chairman of a hedge fund, Balyasny Asset Management, who just up and decides to open a New York chapter of the Ayn Rand Institute and spearhead a fund drive.

Weiss attends the 2010 St. Regis event and was stuck at an ultraconservative press table, getting a sugar high on moelleux aux chocolat, coconut sorbet and berry chutney, as the mindless clap-trap of Objectivist theory drones into the microphone.

What happened at the September 15, 2011 redux of this fundraiser, “The Atlas Shrugged Revolution,” when Weiss’ book is no doubt already in galleys, might surprise even Weiss. The hedgies are fully in control of the event, dominating the podium and raising a little more than a cool $1 million, besting the prior year’s take by $600,000.

The key speakers included Dmitry Balyasny of the hedge fund, Balyasny Asset Management, as well as Colvin, also from this hedge fund and creator of the New York chapter of the Ayn Rand Institute. Another key speaker was Scott Schweighauser, partner and chief investment officer of Aurora Investment Management, L.L.C., a fund of hedge funds managing approximately $10 billion.

The biggest donors at the event who would allow their names to be published, included the following:

$50,000: Balyasny Asset Management

$25,000: Christopher (Chris) Asness, managing principal and co-founder of hedge fund AQR Capital Management. Asness is a former managing director at Goldman, Sachs & Co.

$25,000: Eric Brooks and Jeff Yass of hedge fund and private equity firm Susquehanna International Group.

$25,000: Jim Brown of hedge fund, Brandes Investment Partners.

$25,000: Scott Schweighauser of fund of hedge funds, Aurora Investment Management, L.L.C.

There are two simple words that sum up why hedge funds would be bankrolling the resurrection of a woman who’s been dead for thirty years: Dodd-Frank, the financial reform legislation that Wall Street is desperately trying to kill.

While the hedgies are financing the flood of books to high schools and campus, Koch and BB&T are taking care of business with the professors.

Among the multitude of co-opted campuses – three stand out as taking on the aura of right-wing flacks gone bonkers rather than a serious economic course.

Check out the web site for Florida Gulf Coast University’s Distinguished Professorship of Free Enterprise:

Here’s a few choice phrases from the BB&T/Koch jointly funded program: “students continued to develop a local chapter of Students for Liberty…Edson attended the CATO University sponsored in Washington, D.C. by the Cato Institute [founded by Charles Koch]…He was accepted into the Koch internship program…he is currently attending the graduate school of economics at George Mason University [effectively owned lock stock and barrel by Koch according to media reports]…Brandon [Wasicsko] will serve an internship this summer at the Ayn Rand Institute…Traivis Leicht…will be the first FGCU student to attend the Koch Associates Program…Brian Mitterko will serve a summer Koch internship with the Charles G. Koch Charitable Foundation…Cifuentes attended a special seminar program co-sponsored by The Liberty Fund and the Charles G. Koch Charitable Foundation in Washington, D.C…All Economics and Finance majors receive a copy of Atlas Shrugged in Intermediate Price Theory (a required course for both majors ). Professor Hobbs teaches a course employing this text – ECP 3009: The Moral Foundations of Capitalism – as part of the BB&T gift. The book has also been given to a number of other students who show an interest and to students who wish to give a copy to a friend or family member.”

That every exit door from this program leads to a Koch funded group or an Ayn Rand text is spine chilling. Where are the advocates for these impressionable young minds at this institution of higher learning? Forget about the nonsensical “Moral Foundations of Capitalism,” this whole program is a moral outrage.

Similarly conflicted is the Initiative for Public Choice and Market Process at the College of Charleston (SC), which was founded in the fall of 2008 with gifts from BB&T Charitable Foundation and the Charles G. Koch Charitable Foundation. With only minor exceptions, the internships are either directly run by Koch, nonprofits created by Koch or funded by Koch.

And then there is Troy University, a state-funded school in Alabama. Troy University was odd enough before BB&T and Koch emerged on campus. The Troy web site explains: “Troy University (TROY) in partnership with Federal Bureau of Investigation (FBI) provides opportunities for its employees to achieve personal and professional growth through TROY’s undergraduate and graduate degree programs…In 1973, the University opened sites at military bases in Florida. Today, TROY Global Campus operates more than 60 sites in 17 U.S. states and 11 nations.”

On September 10, 2010, Troy University announced that $3.6 million had been donated by BB&T, the Charles G. Koch Foundation, and a former graduate, Manuel H. Johnson. The funds would create the Manuel H. Johnson Center for Political Economy. (“Political economy,” “morality of capitalism,” “free enterprise,” these are buzz words strongly suggesting that if you pull back the curtain, you’ll find right wing corporate operatives skulking in the wings.)

The entire faculty of the program has a previous money link to Koch or BB&T:

The Executive Director, Dr. Scott A. Beaulier, was previously the BB&T Distinguished Professor of Capitalism at Mercer University. Dr. George R. Crowley, the Assistant Professor of Economics, previously received two research grants from the Mercatus Center (a Koch funded front group) and was awarded a Charles G. Koch Doctoral Fellowship while at West Virginia University. Dr. Daniel J. Smith, Assistant Professor of Economics, received awards and/or fellowships from the Institute for Humane Studies and the Mercatus Center, both long-term Koch funded programs at George Mason University, which has received over $30 million from Koch foundations. Dr. Daniel S. Sutter, the Charles G. Koch Professor of Economics, is also a senior affiliated scholar at Mercatus. Both Smith and Sutter received their Ph.D.s in Economics from George Mason University.

The concentration of Koch money and influence at Troy is a disgrace at a publicly funded institute of higher education. That it is occurring under the nose of an institution with an FBI partnership tells one a great deal about corporate money and Washington today.

Towards a Creditor State – One in Seven Americans Pursued by Debt Collectors

I went through the Federal Reserve’s Quarterly Release on Household Debt and Credit released today, and there were two notable trends. One is that the amount of consumer debt is declining, but that delinquency rates are stabilizing above what they were before the crisis. And the second is in this graph, which is that the number of people subject to third party collections has doubled since 2000, from a little less than 7% to a little over 14% of consumers. Ten years ago, one in fourteen American consumers were pursued by debt collectors. Today it’s one in seven.

The experience of debt collection can be chilling, as this 2007 ABC News report suggests.

Consumers around the country have taped threatening phone calls from collectors who have called in the middle of the night, used abusive language and have threatened to have people fired from work or thrown in jail. All of these tactics are illegal under federal law.

One of the characteristics of the new social contract ushered in by both George W. Bush and Barack Obama is the increasing power of creditors to govern outright, from tax farming by banks to the use of credit checks to access employment opportunities.

There are now thousands of people legally jailed because they aren’t paying their bills, ie. debtor’s prisons have returned. Occasionally elites let it slip that this is not an accident, but is their goal – former Comptroller General David Walker has wistfully pined for debtor’s prisons overtly (on CNBC, no less).

This may be somewhat mediated by government action, as the CFPB is beginning to make noise around debt collection and credit ratings, and Illinois Attorney General Lisa Madigan is working to stop debt-related arrest warrants. But only somewhat, only where the government can protect you and only when there is the political will to do so. Increasingly, creditors are coming to set up the institutional structures for financial surveillance, state-sponsored enforcement of their claims through tightened bankruptcy laws and the selective use of jail, and the denial of economic opportunity based on one’s interaction with the financial system.

This is part of the new social contract. The sheer percentage of consumers with third party collections in pursuit is striking. Additionally, the uptrend through both Bush boom and Obama bust years of the percentage of people being tracked down by third party collection agencies suggests we live in a different country than we did just ten years ago.

Again, ten years ago, one in fourteen Americans were pursued by debt collectors. Today it’s one in seven. I suspect this number will keep going up. And though debt collection is a highly competitive field, it’s also a growth industry.

G20 Wants to Push European Bailout Fund to $2 Trillion

This just out from Reuters:

•G20 Finance leaders push to increase European bailout fund to $2 Trillion
•Want to combine ESM & EFSF, creating ~$1 Trillion dollar fund
•IMF to request $500 - $600 Billion in "new resources", which combined with current funds puts it at ~$1 Trillion dollars
•Germany remains the thorn in the socialists Eurozone's side
◦Schaeuble: "It does not make any economic sense to follow the calls for proposals which would be mutualizing the interest risk in the euro zone, nor in pumping money into rescue funds, nor in starting up the ECB printing press"
So this is on top of Wednesday's $600B LTRO? Sweet.

As I pointed out here, U.S. contributes 17% of the total funds to the IMF. How much did Obama put into his contingency slush fund in his 2013 budget - hopefully $102 Billion.

And someone please tell Wolfgang that he's too late:

Foreclosure settlement a failure of law, a triumph for bank attorneys

After many months of wrangling, a foreclosure settlement has been reached between 49 state attorneys general and a consortium of banks.

It is an epic failure of law and a triumph for bank attorneys.

It will accomplish little of value, as I’ll explain. First, let’s recall what the “robosigning” foreclosure scandal was all about.

Foreclosure is an extremely serious issue in American jurisprudence. As a nation of laws with strong respect for property rights, we have always treated this process appropriately. After all, having a sheriff forcibly evict a family that typically made a down payment, moved into a home, lived there for some years, made payments, etc., is disruptive — for the family, the lender and the neighborhood.

Foreclosure laws vary from state to state. However, all are specific and precise as to the legal steps that must be followed, from the homeowner’s initial delinquency onward. There are benefits to giving the homeowner a chance to “cure their default.” It is in everyone’s interest for the homeowner to catch up if possible.

We never want to see an innocent party “accidentally” evicted from a home. The legal system has evolved so this has become a “legal impossibility.” Imagine returning home from work or vacation to find the front door padlocked, the belongings strewn all over the block, a big orange sticker screaming “FORECLOSED” on the garage door, with an auction sign in the front lawn. Now imagine that this occurred even though you are not in default or even delinquent on payments. Thanks to the robosigning banks, this legal impossibility has happened repeatedly, even to homeowners who paid cash for their houses and had no mortgages. Imagine that — foreclosed with no mortgage.

Before any foreclosure can proceed, a lender must run through a checklist of specifics for the court to move forward. This review can take 45 to 120 minutes per file and addresses, for instance:

●When was the original loan made, and for how much?

●Who is the borrower? Who is the original lender?

●What is the address of the property?

●Which bank holds the mortgage note? Was the note transferred? When?

●When was the last payment made?

●How much is owed on the loan?

●Was the borrower notified of the delinquency? Default?

●Has the borrower been served notice? When, where and how?

Banks review these details to make sure there was not an administrative error. (Oops! We applied payments to wrong account!)

The banker who reviewed these files fills out and signs an affidavit, which is then notarized. It is the written equivalent of sworn testimony in court. Judges take affidavits extremely seriously. False affidavits bypass the entire fact-finding and legal process, and the result can be a miscarriage of justice. Anyone who lies on one commits perjury, a felony punishable by jail time.

At least, they used to get jail time.

Before the settlement, we learned that nearly every aspect of the robosigned documents was false. None of the details were ever reviewed. The signatures attesting to the review of the documents were fabricated — made by someone other than the person whose name was on the document. Neither person — the supposed signatory to the document nor the hired forger — ever validated the facts of each case. All of the safeguards put in place to make sure foreclosures were done correctly and legally were bypassed. Even the notary stamps were bogus — they were not real, and not signed by a notary to validate that the signer and the signature matched.

Battle lines forming between MF Global customers, hedge funds

The MF Global saga could soon become a legal battle between hedge funds and the futures brokerage's shortchanged customers, with more than a billion dollars at stake.

As the investigation into the collapse of the Jon Corzine-led brokerage moves into more of a regulatory whodunnit than a criminal case, the guessing game centers on who the two court-appointed trustees overseeing MF Global's liquidation will sue to recoup money owed to customers of MF's broker-dealer unit and creditors of its parent.

Those decisions are not easy ones, legal experts say, and they could end up pitting hedge funds like David Tepper's Appaloosa Management and Paul Singer's Elliott Management - who own MF Global bonds - against brokerage customers trying to recover an estimated $1.6 billion shortfall in their accounts.

It's likely that James Giddens, the trustee in charge of recovering customer funds, and Louis Freeh, the trustee in charge of recovering money for parent creditors, will dispute the ownership of certain assets, said attorney Chris Ward, vice chair of Polsinelli Shughart's bankruptcy practice, who is not involved in the case.

A more complex battle could arise from the fact that both customers and bondholders claim priority for payouts from MF Global's general estate.

Customer groups have said that if efforts to recoup customer cash do not make them whole, they have a right under Commodity Futures Trading Commission regulations to demand payment from the parent company.

"Customers are going to claim they should be satisfied in entirety first before one penny goes to" MF Holdings' bond holders and other creditors, said Fred Grede, an attorney who served as trustee for fallen cash-management firm Sentinel Management Group.

But distressed debt investors like Elliott and Appaloosa, who scooped-up MF Global's bonds after the firm filed for bankruptcy on October 31, say bankruptcy laws paint a different picture, one giving them priority over customers for general estate payouts.

"I will not be surprised at all if sometime in the near future you find Freeh and Giddens as adversaries," said attorney Chris Dickerson, who is not involved in MF Global but represented defunct financial services firm Refco in its 2005 bankruptcy.

A spokeswoman for MF Global Holdings said Freeh will not know exactly how much creditors of the parent company are owed until claims are filed. The company has $650 million in senior debt and another $850 million in subordinated debt, the spokeswoman said.

PICKING A TARGET

Before any decision can be made on the order of payouts, Giddens and Freeh, the former FBI director, must think strategically about which deep-pocketed institutions to pursue.

Some of the likely litigation targets are MF Global's main trading partners, its primary banker JPMorganChase, and clearinghouses that processed last minute trades for MF Global as it spiraled towards bankruptcy. Another possibility is MF Global's own United Kingdom affiliate, where about $700 million in customer money is tied up.

But recovering any funds won't be easy.

"In terms of resources, the worst counterparty in the world to go up against in court is the government," said one bankruptcy lawyer, who asked not to be named due to relationships with firms that have a stake in the outcome of potential litigation. "The next is JP Morgan."

A spokeswoman for JPMorgan declined to comment on whether either of the trustees have indicated that litigation may be in the offing.

"We lost money too" from MF Global's collapse, JPMorgan spokeswoman Mary Sedarat said on Thursday. "We're doing everything we can to assist in the investigations."

Connecticut-based broker-dealer CRT Capital Group told investors in November, and again earlier this month, that if they were looking at buying MF Global securities, they should expect at least a two-to-three-year battle to reclaim funds.

"You may see go after low-hanging fruit first," said Ward. "Pursue cases that are easy, get money back into the estate, and give them a war chest to go after bigger claims later."

JPMorgan is likely to make a strong argument, at least on the customer side, that its financial dealings were not improper because it did not have a responsibility to analyze the legality of the transactions it was clearing, Ward said.

UK FACE-OFF

One source close to Freeh said claims against MF Global's UK entity may be the first to be dealt with, noting that much of the money that changed hands in the company's last days wound up at the UK unit.

The source, who asked for anonymity because Freeh is still formulating his litigation strategies, said the UK unit will also have its own claims against various counterparties, adding another layer of complexity to recovery efforts.

One particular dispute likely to wind up in court is the battle over the ownership of about $700 million being held in the UK subsidiary. The money is associated with the accounts of US customers who traded on UK exchanges, and US and UK laws are inconsistent on who has a right to those funds.

A Giddens spokesman acknowledged the likelihood of a court battle, saying "We are hoping we can reach an accommodation with the UK administrators, but it looks very tough."

Giddens has hired a U.K. law firm to advise it on that issue.

Giddens and Freeh may also target individual executives, including Corzine, who resigned on November 4, Dickerson said. Hedge funds that own MF Global bonds also include potential litigation against executives on their laundry list of avenues that could bring money back to creditors.

Reuters has previously reported that investigators are having trouble finding an element of criminal intent in MF Global's downfall.[ID:nL2E8D9IKR] But they can still bring cases for civil infractions like breach of fiduciary duty, Dickerson said, and, because most executives are covered by insurance policies, there may be plenty of money to be recouped from those lawsuits.

MF Global's bankruptcy is In re MF Global Holdings Ltd, U.S. Bankruptcy Court, Southern District of New York, No. 11-15059.

The broker-dealer liquidation case is In re MF Global Inc, U.S. Bankruptcy Court, Southern District of New York, No. 11-2790.

Ex-Goldman analyst writes white collar crime tale

"The Darlings" tells a fictional tale about the downfall of a hedge fund and the wealthy family that owns it during Wall Street's 2008 meltdown, but many aspects of the novel are drawn straight from author Cristina Alger's reality.

As a former Goldman Sachs analyst and bankruptcy attorney at a white-shoe law firm in New York, Alger knew that the twists and turns that led to many a Wall Street fiasco could make for a fascinating story.

"It's easy to see finance as something that happens in a conference room, but white-collar crime is fascinating," Alger told Reuters. "No one's dying or no cars are blowing up, but it's incredibly fast-paced and interesting and complex."

"The Darlings", which is released on Monday in the United States, is one of the first works of fiction centered on the events of the 2008 financial crisis.

The book begins with an apparent suicide, which sets off a series of investigations and cover-ups by a web of characters that includes lawyers, financiers, government officials and journalists.

The dynamics and loyalties of the blue-blooded Darling family that runs the hedge fund, founded by patriarch and billionaire Carter Darling, are also thrown into tumult as the foundation of the family's wealth and status is threatened.

WITNESSING CORPORATE SCANDALS

Alger, 31, knows a thing or two about family businesses: her family founded prominent New York investment firm Fred Alger Management. In addition to her professional experience, she said that she also drew on her family background to write the book.

"I grew up going to my dad's office, and family dinners were filled with chatter about work life," she said. "One of the things I tried to draw from in 'The Darlings' was the sense that the whole family was involved in the business, and the demise of the business in their case was really like the demise of the family as a whole."

As Alger tried to make sense of the corporate scandals she witnessed as an attorney, she found that chalking up bad behavior to mere greed didn't quite get to the root of such scandals. As she pondered what could drive some investors to such extreme corruption, she found her thoughts circling back to family loyalties.

"One of the fun parts of writing the book for me was trying to get into the minds of people who caused huge amounts of damage professionally, and try to understand what their motivations were for the way they acted," she said.

The urge to protect and provide for children, parents, and spouses factor powerfully into the professional decisions of all characters in "The Darlings", from CEO Carter Darling to whistle-blowing secretary, Yvonne.

"I had deep affection for all my characters, and didn't like to see anyone as purely bad or purely good," she said. "People act well, and people act badly, and they're all doing it for the best interest of their families."

Alger said that another element in the collapse of firms such as Lehman Brothers and AIG was the widespread bending of rules by those high up in Wall Street's steel towers. This is reflected in the story as the Darling family scrambles to perform damage control once they become aware of the firm's problems.

"I think there were two sets of rules that were operating during that period," Alger said. "There were the rules that were on the books, and then there were the rules that were market-wide practice, and what a lot of people realized was that market-wide practice wasn't always legal."

Post-2008 crisis, Alger said she believed that real-life CEO's like that of Carter Darling seemed to be under more scrutiny, and hoped that any increased attention would provide a check on power, along with better regulation and increased market transparency.

55 Interesting Facts About The U.S. Economy In 2012

How is the U.S. economy doing in 2012? Unfortunately, it is not doing nearly as well as the mainstream media would have you believe. Yes, things have stabilized for the moment but this bubble of false hope will not last for long. The long-term trends that are ripping our economy and our financial system to shreds continue unabated. When you step back and look at the broader picture, it is hard to deny that we are in really bad shape and that things are rapidly getting worse. Later on in this article you will find a list of interesting facts that show the true state of the U.S. economy. Hopefully many of you will find this list to be a useful tool that you can share with your family and friends. Each day the foundations of our economy crumble a little bit more, and we need to wake up as many Americans as we can to what is really going on while there is still time. We have accumulated way too much debt, we consume far more wealth than we produce, millions of our jobs are being shipped overseas, our big cities are decaying, family budgets are being squeezed more than ever, poverty is rampant and we have raised several generations of Americans that expect the government to fix all of their problems. The U.S. economy is at a crossroads, and the decisions that the American people make in 2012 are going to be incredibly important.

The statistics listed below are presented without much commentary. They pretty much speak for themselves.

After reading this list, it will be hard for anyone to argue that we are on the right track.

The following are 55 interesting facts about the U.S. economy in 2012....

#1 As you read this, there are more than 6 million mortgages in the United States that are overdue.

#2 In January, U.S. home prices were the lowest that they have been in more than a decade.

#3 In Florida right now, some drivers are paying nearly 6 dollars for a gallon of gas.

#4 On average, you could buy about 10 gallons of gas for an hour of work back in the mid-90s. Today, the average hour of work will get you less than 6 gallons of gas.

#5 Sadly, 43 percent of all American families spend more than they earn each year.

#6 According to Gallup, the unemployment rate was at 8.3% in mid-January but rose to 9.0% in mid-February.

#7 The percentage of working age Americans that have jobs is not increasing. The employment to population ratio has stayed very steady (hovering between 58% and 59%) since the beginning of 2010.

#8 If you gathered together all of the workers that are "officially" unemployed in the United States into one nation, they would constitute the 68th largest country in the entire world.

#9 When Barack Obama first took office, the number of "long-term unemployed workers" in the United States was approximately 2.6 million. Today, that number is sitting at 5.6 million.

#10 The average duration of unemployment in the United States is hovering close to an all-time record high.

#11 According to Reuters, approximately 23.7 million American workers are either unemployed or underemployed right now.

#12 There are about 88 million working age Americans that are not employed and that are not looking for employment. That is an all-time record high.

#13 According to CareerBuilder, only 23 percent of American companies plan to hire more employees in 2012.

#14 Back in the year 2000, about 20 percent of all jobs in America were manufacturing jobs. Today, about 5 percent of all jobs in America are manufacturing jobs.

#15 The United States has lost an average of approximately 50,000 manufacturing jobs a month since China joined the World Trade Organization in 2001.

#16 Amazingly, more than 56,000 manufacturing facilities in the United States have been shut down since 2001.

#17 According to author Paul Osterman, about 20 percent of all U.S. adults are currently working jobs that pay poverty-level wages.

#18 During the Obama administration, worker health insurance costs have risen by 23 percent.

#19 An all-time record 49.9 million Americans do not have any health insurance at all at this point, and the percentage of Americans covered by employer-based health plans has fallen for 11 years in a row.

#20 According to the New York Times, approximately 100 million Americans are either living in poverty or in "the fretful zone just above it".

#21 In the United States today, corporate profits are at an all-time high. The percentage of Americans that are living in "extreme poverty" is also at an all-time high according to the U.S. Census Bureau.

#22 In the United States today, the wealthiest one percent of all Americans have a greater net worth than the bottom 90 percent combined.

#23 The poorest 50 percent of all Americans now collectively own just 2.5% of all the wealth in the United States.

#24 The number of children living in poverty in the state of California has increased by 30 percent since 2007.

#25 According to the National Center for Children in Poverty, 36.4% of all children that live in Philadelphia are living in poverty, 40.1% of all children that live in Atlanta are living in poverty, 52.6% of all children that live in Cleveland are living in poverty and 53.6% of all children that live in Detroit are living in poverty.

#26 Since Barack Obama entered the White House, the number of Americans on food stamps has increased from 32 million to 46 million.

#27 As the economy has slowed down, so has the number of marriages. According to a Pew Research Center analysis, only 51 percent of all Americans that are at least 18 years old are currently married. Back in 1960, 72 percent of all U.S. adults were married.

#28 In 1984, the median net worth of households led by someone 65 or older was 10 times larger than the median net worth of households led by someone 35 or younger. Today, the median net worth of households led by someone 65 or older is 47 times larger than the median net worth of households led by someone 35 or younger.

#29 If you can believe it, 37 percent of all U.S. households that are led by someone under the age of 35 have a net worth of zero or less than zero.

#30 After adjusting for inflation, U.S. college students are borrowing about twice as much money as they did a decade ago.

#31 According to the Student Loan Debt Clock, total student loan debt in the United States will surpass the 1 trillion dollar mark at some point in 2012. If you went out right now and starting spending one dollar every single second, it would take you more than 31,000 years to spend one trillion dollars.

#32 Today, 46% of all Americans carry a credit card balance from month to month.

#33 Incredibly, one out of every seven Americans has at least 10 credit cards.

#34 The average interest rate on a credit card that is carrying a balance is now up to 13.10 percent.

#35 Of the U.S. households that do have credit card debt, the average amount of credit card debt is an astounding $15,799.

#36 Overall, Americans are carrying a grand total of $798 billion in credit card debt. If you were alive when Jesus was born and you spent a million dollars every single day since then, you still would not have spent $798 billion by now.

#37 It may be hard to believe, but the truth is that consumer debt in America has increased by a whopping 1700% since 1971.

#38 At this point, about 70 percent of all auto purchases in the United States involve an auto loan.

#39 In the United States today, 45 percent of all auto loans are made to subprime borrowers.

#40 Mortgage debt as a percentage of GDP has more than tripled since 1955.

#41 According to a recent study conducted by the BlackRock Investment Institute, the ratio of household debt to personal income in the United States is now 154 percent.

#42 To get the same purchasing power that you got out of $20.00 back in 1970 you would have to have more than $116 today.

#43 When Barack Obama first took office, an ounce of gold was going for about $850. Today an ounce of gold costs more than $1700 an ounce.

#44 The number of Americans that are not paying federal incomes taxes is at an all-time high.

#45 A staggering 48.5% of all Americans live in a household that receives some form of government benefits. Back in 1983, that number was below 30 percent.

#46 The amount of money that the federal government gives directly to Americans has increased by 32 percent since Barack Obama entered the White House.

#47 During 2012, the U.S. government must roll over nearly 3 trillion dollars of old debt.

#48 The U.S. debt to GDP ratio has now reached 101 percent.

#49 At the moment, the U.S. national debt is sitting at a grand total of $15,419,800,222,325.15.

#50 The U.S. national debt is now more than 22 times larger than it was when Jimmy Carter became president.

#51 During the Obama administration, the U.S. government has accumulated more debt than it did from the time that George Washington took office to the time that Bill Clinton took office.

#52 If the federal government began right at this moment to repay the U.S. national debt at a rate of one dollar per second, it would take over 440,000 years to pay off the national debt.

#53 If Bill Gates gave every single penny of his fortune to the U.S. government, it would only cover the U.S. budget deficit for about 15 days.

#54 Right now, the U.S. national debt is increasing by about 150 million dollars every single hour.

#55 Spending by the federal government accounted for about 2 percent of GDP back in 1800. It accounted for 23.8 percent in 2011, and according to former U.S. Comptroller General David M. Walker, it will account for 36.8 percent of GDP by 2040.

Bad news, eh?

But it isn't just our economy that is decaying.

We are witnessing a tremendous amount of social decay as well. As I wrote about the other day, America is rapidly decomposing right in front of our eyes.

When the water level of a river drops far enough, it will reveal rocks that have been hidden from view for a very long time. Well, a similar thing is happening in America right now. For decades, our debt-fueled prosperity has masked a lot of the social decay that has been going on.

But now that our prosperity is evaporating, a lot of frightening stuff is being revealed.

Unfortunately, another major financial crisis is rapidly approaching and economic conditions in the United States are going to get a lot worse.

So what is our country going to look like when that happens?

That is a very good question.

As US Debt To GDP Passes 101%, The Global Debt Ponzi Enters Its Final Stages

Today, without much fanfare, US debt to GDP hit 101% with the latest issuance of $32 billion in 2 Year Bonds. If the moment when this ratio went from double to triple digits is still fresh in readers minds, is because it is: total debt hit and surpassed the most recently revised Q4 GDP on January 30, or just three weeks ago. Said otherwise, it has taken the US 21 days to add a full percentage point to this most critical of debt sustainability ratios: but fear not, with just under $1 trillion in new debt issuance on deck in the next 9 months, we will be at 110% in no time. Still, this trend made us curious to see who has been buying (and selling) US debt over the past year. The results are somewhat surprising. As the chart below, which highlights some of the biggest and most notable holders of US paper, shows, in the period December 31, 2010 to December 31, 2011, there have been two very distinct shifts: those who are going all in on the ponzi, and those who are gradually shifting away from the greenback, and just as quietly, and without much fanfare of their own, reinvesting their trade surplus in something distinctly other than US paper. The latter two: China and Russia, as we have noted in the past. Yet these are more than offset by... well, we'll let the readers look at the chart below based on TIC data and figure out it.


That the Fed is now actively monetizing US debt is beyond dispute (although some semantic holdouts remain - we are quite happy for them). Alas, with China, which has traditionally been the biggest buyer of US paper, no longer buying Treasurys, we are confident that the Fed will have no choice but to be dragged kicking and screaming once again into the fray, especially since traditional buyers of paper, even when allowing for exponential repo market leveraging (and someone please look at what is going on in the BoNY, State Street sponsored $15 trillion quicksand of repo'ed securities, which is the biggest black hole in the shadow banking system and will be the next pillar of the ponzi system to collapse) will be unable to keep up with US issuance. Especially since Primary Dealers already saw their Treasury holding rise to an all time high in the past week, and are loaded to the gills with US paper. So who is buying? Why Japan and the UK.

Japan and the UK? Hmm, if these two names sound oddly familiar, allow us to refresh one's memory. Behold the pristine leverage condition of both these two countries, in all its glory.


Hint: look at the far left.

So somehow the world's two most indebted countries (recall that Japan is about to in total pass 1 quadrillion debt) are out there and buying up the biggest amount of US debt (after the Fed of course)? Sorry, but while we are amusing by this attempt by the global ponzi regime to keep itself alive (even as Russia and China prudently step aside from the mauling that is sure to follow), whereby the most indebted nations keep buying each other's debt in the most transparent and potentially deadly shell game in history, we are also confident this is unsustainable. Which means the Fed will have no choice but to step in. And since when it comes to the capital markets, the ride up is over since we have now crossed the point where incremental profits are drowned by incremental input costs (thank you $106 WTI), the Fed now has just one mandate: to keep the US fiscal machine well-greased by buying up US debt at zero (and beginning in May negative) rates, through wanton monetization. 2012 may prove to be quite eventful after all.

Presenting The Full Greek (Un)Sustainability Analysis - Take It Away German Media

You read headlines that Greece is saved (in a carbon copy release from July 21). Now read the truth behind the lies - presenting the 9 page (so it's brief enough) Greek sustainability (or lack thereof) analysis.

Here is the punchline:

The debt trajectory is extremely sensitive to program delays, suggesting that the program could be accident prone, and calling into question sustainability (Table 2). Under the tailored scenario described above, the debt ratio would peak at 178 percent of GDP in 2015. Once growth did recover, fiscal policy achieved its target, and privatization picked up, the debt would begin to slowly decline. Debt to GDP would fall to around 160 percent of GDP by 2020, well above the target of about 120 percent of GDP set by European leaders. Financing needs through 2020 would amount to perhaps €245 billion. Under the assumption that stronger growth could follow on the eventual elimination of the competiveness gap, the debt ratio would slowly converge to that in the baseline, but likely only in the late 2020s. With debt ratios so high in the next decade, smaller shocks would produce unsustainable dynamics, leaving the program highly accident-prone.


And if the downside case means the country is about to need 100% of its GDP in additional funding needs, the reality is that this number most likely be 200%, bringing the total bailout bill for Greece to nearly 3x its GDP!

Becase wait, there's more: the downside case assumes -1.0% GDP decline in 2013. As a reminder, in Q4 Greek GDP imploded by -7%! Somehow we are to believe that within a year, the country will not only turn around its economy, which is foundering courtesy of infinite austerity and striking tax collectors, but almost generate growth???

The German media is about to have a field day.

MF Global sold assets to Goldman before collapse: sources

MF Global unloaded hundreds of millions of dollars' worth of securities to Goldman Sachs in the days leading up to its collapse, according to two former MF Global employees with direct knowledge of the transactions. But it did not immediately receive payment from its clearing firm and lender, JPMorgan Chase & Co (JPM.N), one of the sources said.

The sale of securities to Goldman occurred on October 27, just days before MF Global Holdings Ltd (MFGLQ.PK) filed for bankruptcy on October 31, the ex-employees said. One of the employees said the transaction was cleared with JPMorgan Chase.

At the same time MF Global, which was run by former Goldman Sachs head Jon Corzine, was selling securities to Goldman to raise badly needed cash, the futures firm was also drawing down a $1.2 billion revolving line of credit it had with JPMorgan, according to one of the former MF Global employees.

JPMorgan spokeswoman Mary Sedarat said the bank did not withold money because of the line of credit. She declined further comment on details of the transactions.

JPMorgan has fought aggressively in bankruptcy court to protect its interests, and received a lien on some of MF Global's assets in exchange for granting the firm $8 million to fund its bankruptcy costs. The lien puts JPMorgan's interests ahead of MF Global customers who have not yet received an estimated $900 million worth of money from their accounts, which remain frozen as regulators search for missing funds.

The hastily crafted transactions and the seeming inability of MF Global to recoup some of the money in the sale to Goldman may start to explain why so much money remains unaccounted for at the futures firm.

It is unclear what type of assets Goldman bought from MF Global, but the securities were worth hundreds of millions of dollars, the former employees said. The sources spoke on the condition of anonymity.

The Wall Street Journal previously reported that George Soros' fund was a buyer of securities sold by MF Global, scooping-up some of its European sovereign debt at a deep discount. Panic among investors and clients about MF Global's $6.3 billion bet on European sovereign bonds led to its demise.

Corzine, who was CEO of MF Global at the time of the collapse, headed Goldman Sachs from 1994 to 1999 before being ousted after a power struggle with co-CEO Henry Paulson.

Corzine and other top MF Global executives reached out in desperation to Goldman Sachs Group Inc (GS.N) and JPMorgan, as well as Jefferies Group Inc (JEF.N) Barclays Plc (BARC.L), Citigroup Inc (C.N), Deutsche Bank AG (DBKGn.DE), Macquarie Group Ltd (MQG.AX), State Street Corp (STT.N) and Wells Fargo & Co (WFC.N), as potential buyers in its final days as the firm teetered toward collapse, Reuters earlier reported.

Goldman Analyst Is Said to Face Insider Trading Inquiry

A Goldman Sachs stock analyst has been drawn into the government’s sweeping investigation into insider trading at hedge funds.

Federal investigators are examining whether Henry King, a senior technology industry analyst for Goldman based in Asia, provided confidential information to the bank’s hedge fund clients, according to a person with direct knowledge of the matter who requested anonymity because he was not authorized to discuss it publicly.

Mr. King recently took a leave of absence from Goldman, according to this person.

Mr. King could not be reached for comment. A spokesman for the firm declined to comment. The Federal Bureau of Investigation declined to comment.

The Wall Street Journal reported earlier on Mr. King’s role in the investigation.

Goldman has figured prominently in the government’s insider trading inquiry. Last year, federal prosecutors charged Rajat K. Gupta, a former director of Goldman, with leaking secret boardroom discussions to Raj Rajaratnam, the former head of the Galleon Group hedge fund who is serving an 11-year prison term after a jury convicted him of insider trading crimes last May.

Mr. Gupta has denied the charges. His trial is set to begin in May.

During pretrial hearings in Mr. Gupta’s case, it emerged that there was a second insider at Goldman who was said to have leaked Mr. Rajaratnam illegal stock tips. A letter filed with the court by federal prosecutors in the Gupta case said that another unidentified Goldman executive had provided Mr. Rajaratnam with confidential information.

Judge Jed S. Rakoff, the judge presiding over the case, agreed to keep the content of the leaks under seal because they were unrelated to the charges against Mr. Gupta.

Goldman had a close relationship with Mr. Rajaratnam’s Galleon Group, which at its peak was one of the world’s largest hedge funds. The fund, which paid out more than $200 million in trading commissions annually, was one of Goldman’s largest hedge fund clients. Employees at Galleon, which primarily invested in technology stocks, regularly consulted with Mr. King on his research, said a former executive at the fund.

Galleon also aggressively hired talent away from Goldman. Many of the fund’s top traders and portfolio managers had worked at Goldman earlier in their careers.

As a research analyst based in Asia, Mr. King provided hedge funds with insights into the technology industry. Having an understanding of the supply chain in Asia, where nearly all computers, tablets and smartphones are manufactured, can give technology traders an investment edge.

In 2010, for example, Mr. King published a research note on Apple, predicting that its new iPad would be thinner and lighter, with a built-in camera.

The central role that Asian research played in technology stock investing was on full display during the Rajaratnam trial. Adam Smith, a former Galleon portfolio manager, testified that in order to gain an investment edge, he regularly traveled to Asia to meet with technology industry sources. Galleon also had an office in Singapore, and based as many as 20 employees there.

Several other banks besides Goldman Sachs have become ensnared by the government’s insider trading investigation. During the Rajaratnam trial, Mr. Smith said that Kamal Ahmed, a former banker at Morgan Stanley, had tipped him off about a pending merger.

A lawyer for Mr. Ahmed has said his client has done nothing illegal or unethical and is cooperating with the investigation.

Another insider trading case from 2010 involved an investment banker at UBS and a hedge fund trader at the Jefferies Group. The former UBS banker, Nicos Stephanou, pleaded guilty to tipping off the former Jefferies executive, Joseph Contorinis, about merger deals. A jury convicted Mr. Contorinis, who is serving a six-year prison term.

Why Were The Trillions In Fake Bonds Held In Chicago Fed Crates?

While there is precious little in terms of detail coming out of the latest and literally greatest "fake" bond story in history, the BBC has been kind enough to release the pictures of the boxes that the supposedly fake bonds were contained in. While we reserve judgment on the authenticity of the bonds, what we wonder is whether the boxes were also fake. Because while we can understand why someone would counterfeit the Treasury paper itself, what we don't get is why someone would go the extra effort to also create a "fake" compartment in which to store it. In this case a compartment that is property of the "CHICAGO FEDERAL RESERVE SYSTEM." Perhaps Fed uberdove and Chicago Fed President Charles Evans will be kind enough to explain why Versailles Treaty Chicago Fed crates are floating around in Europe (and filled with $6 trillion in supposedly fake bearer bonds)?

What is also interesting is that a simple google search for Mother Box Treaty of Versailles yields the following:

Transferring rights over Mother Box Treaty of Versailles 1934-Illinois Bank

We transfer rights over Mother Box Treaty of Versailles 1934-Illinois Bank having the next status:
1. Has been verified by the authorities, being legal, certain and real existence.-
2. With SKR in an Reputable Security House in an European Country .-
3. History of mother box and baby boxes (13 ) certified by a public notary.-
4. Print amount in the front of Mother Box includes:
M.B. Control...G7777xxxxxxxxxxxx
Serial
Sec Code
Public Debt Nº
Total Face Value: Three Trillions
5. Inside 13 baby boxes closed, with certificates, numbers, size and height.-
6. 13 JPG Images (In High Definition) Front, Up, Down, Right, Left, Inside, each with notary seal and sign.-

Transfer rights under conditions as follows:
1. Deal only with direct interested with Bank POF (Proof of Funds) in hands (Non negotiable point).
2. No broker chains or pretenders in the middle.
3. Verification when buyer wants and wish face to face.
4. Meeting with the owner without problem, ever in the European Country.
5. We are able and open mind about any reasonable offer.
6. We not send images, numbers of information in advance.
7. First step for any interested person: LOI and Passport.
8. Second step: We reply with the same.
9. Third Step: Both parties disclose addresses, phone numbers, mails and skype (Owners don´t speak english)
10. Operation is clear: after all previous steps is Box against Money.

If interest please write to secretisimo@mail.com
And some other examples of Chicago Fed Mother Boxes courtesy of divinecosmos:

The Petro Business Cycle

Oil is the lifeblood of modern society, powering over 90% of our transportation fleet on land, sea, and air. Oil is also responsible for 95% of the production of all goods we buy and ultimately drives the natural rhythms of recession and recovery. We define this as the “Petro Business Cycle”

The post-crash world we have inhabited since the credit crisis of 2008 has been defined as “The New Normal.” A term used to describe an economic and market environment much different than the three decades that preceded it. In contrast to the past, the “New Normal” will mean a lower living standard for most Americans. It will be a world of lower economic growth, higher unemployment, stagnant corporate profits, and the heavy hand of government intervention in all aspects in the economy. For investors it will be an environment marked by volatility, zero interest rates, and disappointing equity returns.

The age of leverage is coming to an end as consumers, businesses, and governments are forced to rein in their balance sheets. For consumers it will mean less discretionary spending as higher taxes and inflation erode the purchasing power of wages. Businesses will have fewer profit opportunities and find it more difficult to replicate the growth rates of the booming 80’s and 90’s. Governments will struggle with the illusion that their fiscal and monetary stimulus will produce long lasting effects on the economy. Eventually profligate government spending will give way to an age of austerity now beginning to spread across Europe. It will either be done voluntarily or involuntarily by the heavy hand of the market.

It should be obvious by now to the casual observer that change is in the air. The economy and the markets aren’t acting normal. Despite trillions of dollars of fiscal stimulus, unemployment has remained high and economic growth has remained anemic. It has taken zero percent interest rates and copious amounts of money printing to keep the economy from falling back into a recession. The deflationary forces of deleveraging have fused with inflationary monetary forces with the end result leading to stagflation.

There are new drivers of economic growth that are altering the way the economy behaves. In the past, the rise and fall in interest rates determined economic booms and busts. When economic growth accelerated and inflation heated up, the Fed would raise interest rates to cool the economy down and combat higher inflation. In a normal business cycle, rates would rise until either the economy fell into recession or the stock market contracted. Oftentimes we got both a recession and a bear market.

Source: Bloomberg

Conversely, when the economy fell into recession or stocks headed into a bear market the Fed would reverse course and lower interest rates in an effort to re-stimulate the economy. This remained the pattern for over half a century as shown in the graphs above. The normal business cycle would last between 3-5 years between trough and peak. This pattern was altered during the 80’s and the 90’s due to the debt supercycle. Rising levels of debt and falling interest rates extended the business cycle leading to only one recession per decade and an extended bull market in stocks that lasted nearly two decades, as seen below:

Source: Bloomberg

The extension of the business cycle during the 80’ and 90’s was made possible by the combination of four macro forces: low oil prices, declining long and short term interest rates, disinflation, and fiscal stimulus. This produced an average growth in GDP of 3.6% during these two decades—a time period heralded as the “New Economy” with above average economic growth, low levels of inflation, and booming stock markets. As most investors came to find out however, the “New Economy” turned out to be a chimera, shattered by the bursting of the technology bubble and the 2001 recession.

The government and the Fed fought the bursting technology bubble and the recession with the same tools used in previous decades. The Greenspan Fed lowered the fed funds rate from a high of 6.5% in 2000 to 1.0% by the summer of 2003. The Bush administration ramped up government spending dispelling the myth of government surpluses. The deficit exploded along with government spending.

This time, the results weren’t the same. Instead of the robust economic growth of the 1980’s and 1990’s the average growth rate of GDP had declined to 2.4%, more than a full percentage point despite burgeoning budget deficits and the lowest interest rates in half a century. Like the previous two decades both long and short-term interest rates continued to decline and the government provided constant fiscal stimulus. However, two macro forces changed the outcome. Oil prices no longer remained stable. Instead they were rising to record levels. Inflation was also on the rise. These two forces were intertwined.

The U.S. economy was no longer the sole engine of economic growth. Emerging markets—especially the BRIC countries—were experiencing rapid industrialization that required greater amounts of energy to produce the goods and services demanded by a growing middle class.

In turn, this combined economic growth placed additional strains on the energy sector. Supply wasn’t keeping pace with demand. The result was market forces drove the price of oil higher. OPEC and non-OPEC production was simply unable to keep up with global energy demand. The result was prices rose and spare capacity shrunk. Prices rose at the margin.

Source: BP Statistical Review of World Energy, pg. 12

It is this new dynamic of rising energy prices that is now determining economic outcomes. Few have recognized this new economic pattern. Francois Trahan describes this new dynamic as the outcome of inflation. In a period when interest rates are at zero, inflation is acting as the new fed funds rate. As shown in the graph below there is a close correlation between the ISM Manufacturing Index Prices and the ISM Manufacturing Index. When prices rise economic growth weakens, when prices fall economic growth strengthens.

Source: Bloomberg

Trahan would argue that there is a close correlation between inflation rates and anticipatory indicators such as the LEI’s and the stock market. This can be viewed in the graph below of CPI, the LEI’s, and the stock market.

Source: Bloomberg

What can be noted here is the close interrelationship between a leading indicator like the ISM Manufacturing Index and the stock market. This pattern has emerged from the economic recovery that began in March of 2009. What we have seen emerge over the last few years is a new economic paradigm that repeats itself with increasing regularity. We have entered a period whereby policy makers' ability to sustain economic expansions has become limited. The limiting factor has become inflation. No longer can the government or the Fed count on long protracted periods of economic growth. In its place has emerged an entirely new dynamic of shorter and more volatile economic cycles, a fact we’ve seen demonstrated in 2010 and 2011. This dynamic is likely to be repeated this year and beyond.

In our own work we have found that there exists a closer relationship between the price of oil, the LEI’s, and the stock market, as seen below:

Source: Bloomberg

If you want to know where the economy is heading, watch the price of oil. Oil is used to power over 90% of our transportation fleet from land, sea, to air. It is responsible for 95% of the production of all goods found in stores. It is also directly linked to 95% of our food products, from the fertilizer used in the planting cycle to the diesel used in tractors to the trucks that transport the food to processing plants and grocery stores. Look behind any consumer item, building material, to medical device and you will find it linked to oil in some way. Plain and simple, we live in a petroleum based society. It is the common thread behind all industrial/modern economies. Without oil our present way of life would cease to exist. For this reason, it is not only the most highly sought after resource by nations worldwide, but also critical in driving the natural rhythms of recession and recovery. We define this as the “Petro Business Cycle".

Products Using Oil

There are eight phases to this cycle which have been repeating since this economic recovery began in March of 2009.

The eight steps are as follows:

The Petro Business Cycle
1.Fiscal & monetary stimulus is applied to the economy
2.Economic growth accelerates as a result of stimulus
3.Demand for energy picks up as global GDP growth picks up
4.Energy prices rise along with energy demand as supply struggles to keep pace
5.Rising energy prices cause the prices paid component to rise leading to a rise in both the PPI and CPI
6.Rising inflation feeds through to the economy—LEI’s begin to peak and roll over
7.Falling LEI’s lead to slower economic growth and falling equity markets
8.A weakening economy and faltering equity markets force another policy response and the cycle repeats itself

This is exactly what happened in 2010 and in 2011. As energy prices and inflation rose in the spring of 2010 the economy and the markets began to weaken. By the beginning of summer, Mr. Bernanke was writing op-ed pieces in the Wall Street Journal highlighting the Fed’s exit strategy. As the summer progressed and the economy weakened the Fed chairman surprised the markets at the central banker’s conclave at Jackson Hole. The markets got their first glimpse of QE2 which was launched in November. By early spring of the following year the LEI’s and the stock market were rising again as monetary and fiscal stimulus were reapplied through quantitative easing and a payroll reduction tax which began in January. Things worked fine for the first six months of the year. Then came the oil shock triggered by the Arab Spring. Libyan oil production went offline. Fukishima also created demand for more diesel fuel. The result was West Texas Intermediate oil prices went from $95 to $115 a barrel by May 2nd. Brent crude rose even higher reaching the upper $120’s. Naturally, the LEI’s began to roll over as higher oil prices fed through the economic system leading to a rise in the PPI and the CPI.

Source: Bloomberg

Higher rates of inflation caused by the rise in oil prices led to a weakening economy and stock prices fell.

The trend continued until oil prices troughed in early October. By mid-summer the effects of falling oil prices were first seen in the drop in the prices paid components of the regional Fed surveys and ISM reports.

This eventually led to a falling PPI and CPI by early fall. By then the Fed announced “Operation Twist”, and clearly indicated that it was willing to keep interest rates at zero until at least mid-2013. That date has been extended to late 2014, with QE3 on the table in case the economy weakens again...especially in an election year.

Currently, the economy has been gathering strength as reflected in a rise in leading economic indicators and the stock market, both supported by subsequent economic reports at the regional level. Since oil prices and the LEI’s troughed in early October, both the economy and the stock market have risen.

For the moment, like 2010 and 2011, things look good as long as oil prices hold around current levels. On the economic front things are firing on all cylinders. The unemployment rate is falling, housing is improving, credit is expanding, and money supply is growing again. Investor risk appetites have improved along with rising stock and commodity prices. The “risk on” trade has been put back on.

However, within the context of the ongoing “Petro Business Cycle”, an improving economy should eventually lead to rising energy prices. Rising energy prices will act like a tax on consumers as more of their discretionary income will be diverted to pay for basic necessities. As consumption falls the economy will weaken once more. Thus, the whole cycle will repeat itself again.

I believe we're beginning to see the first glimpse of this in rising gasoline prices nationwide. If energy prices continue their upward climb this will eventually give way to another deflationary burst in the economy and fearful markets. Perhaps the Fed is already preparing for this by hinting at QE3 and by extending ZIRP well into late 2014. The latest FED and CBO forecasts for next year call for a rising unemployment rate and slower GDP growth. It would appear at the moment that 2012 is shaping up to look similar to 2010 and 2011—a good first half, a weak summer and early fall, to be followed by a strong yearend finish.

Summary

For the skeptical among you I’ve provided the graph below courtesy Stifel Nicolaus.

The graph illustrates the impact of gasoline spikes and their impact on the year-over-year change in GDP growth. It is a graph the Fed and the administration should ponder. In an age of tight energy supply/demand dynamics it should act as a subtle reminder of the limits to government policy. We live in an era of energy supply constraints, a time of emerging market growth which is adding demand far beyond the margin. Rising emerging market growth is exceeding the drop in demand experienced in the moribund developed economies. Like all market prices their outcome is determined at the margin. For the moment that margin is the emerging world.

The tight energy supply/demand dynamics places a limit on government policy response. The Fed can no longer count on the benign disinflationary environment of the 80’s and 90’s. That world no longer exists. There is a new paradigm that has been created by the advent of resource scarcity. This places limits on what the government can do to affect economic outcomes. What I believe we will see in the future is shorter business cycles that will be analogous to the weather patterns in nature. Since this new paradigm is unlikely to be recognized at first I suspect the same policy mistakes will be repeated. The first half of the year will be the strongest part of the cycle. This will be followed by weakness in late Q2 and early Q3, leading to a strong year-end finish in Q4; a complete business cycle within a single year. Welcome to a new era, the birth of the petro business cycle and the “New Paranormal.”

IMF's Disastrous Neo-Keynesianism Is 'Groovy Idea,' Says TNR

How the IMF Got Its Keynesian Groove Back ... Two events in recent years put the IMF back on the Keynesian track: The 2008 financial meltdown, and the arrival of a new fund director, Dominique Strauss-Kahn. Under Strauss-Kahn's leadership, the IMF grew into a bulwark against German caution and orthodoxy. "DSK really did change things," Boorman tells me. "He is a brilliantly gifted politician and a very good economist. That allowed him to insert himself into the G20 process in November 2008. He seized the moment in a brilliant fashion. Any decisions that were going to be taken, the IMF was moved right into the center of them." Some of Europe's orthodox leaders argued for austerity. But, according to Kirkegaard, "the IMF got countries to put their feet on the Keynesian pedal." – The New Republic

Dominant Social Theme: Keynes lives, and a good thing, too. Let statists celebrate
everywhere.

Free-Market Analysis: The socialist John Maynard Keynes is once again having an impact on world finance, according to The New Republic, a leftist "thought" magazine. The New Republic is yet another mouthpiece for the Anglosphere power elite, like the Economist, New Yorker and Weekly Standard (to name a few).

Actually, Keynes, a favorite state economist of statists everywhere, never left. He is the patron saint of the modern, ruinous, central banking economy that has collapsed economies around the world. He was a covert and sometimes overt member of the socialist/fascist Bloomsbury Group and, even worse, the Fabian Society.

Keynes was an elitist, an economic trigger man for the small group of powerful families (and their enablers and associates) that runs the world's central banks and are attempting to create global governance.

This tiny, inordinately powerful group is increasingly blatant and ruthless in its attempts at installing their New World Order. But throughout the past century or so, they've been inordinately careful to present the world with so-called intellectual justifications for their globalist plans.

Within this context, John Maynard Keynes, a man with obvious contempt for the world-at -large, was a valuable individual indeed. A math-o-phile, he had an uncanny knack for marrying absolutely turgid and incomprehensible prose to econometrics in order to come up with justifications for the most logically bankrupt economic conclusions.

He once met with Franklin Delano Roosevelt to go over his General Theory and so befuddled FDR with equations that the president later confessed he'd hardly understood a word that Keynes had said. And yet without further thought, FDR and his administration put Keynes's theories into play. They basically became the economic law of the land, even though FDR may not have understood them.

FDR and his socialist minions used Keynes's meretricious and complex theorems because they justified massive government and central banking interference in the marketplace. Keynes never explained how recessions and depressions came into being, so far as we can tell, but he knew the solution: Print lots of money is how his prescriptions have been applied in the modern era.

This was the "genius" of Keynes. When an economy's "animal spirits" slowed, the government had the right – nay, the duty – to step in and manufacture employment. In Keynes's view, the government could pay people to dig holes and fill them back up, anything that put people to work.

What Keynes was after was getting money to circulate again. He wanted the government to pay people so that they would be able to avoid poverty and to buy goods and services that would reignite the economy.

Keynes believed that the state should save for a "rainy day." But in practice, what this has meant is that the state's central banks have printed the money that the state has then used to "stimulate" the economy by paying people for make-work jobs.

In the case of the Obama administration – a regime with an institutionalized Keynesian bias – tens of TRILLIONS have been disbursed to prop up the central banking economy and its commercial and merchant banks and also to favored "green" industries, infrastructure boondoggles and other inefficient or useless enterprises.

It's been estimated in some cases that a single job may cost hundreds of thousands of dollars of government money. Under Obama, the national debt has expanded dramatically and the amount of inflationary dollars that the Fed has printed is literally incomprehensible.

But all of this is "good" and "groovy" according to The New Republic. This is a magazine that promotes government activism on numerous levels. The staff of such thought magazines invariably argue for SOME sort of state involvement in the economy or in people's lives generally.

This is because these publications have been set up to promote power elite points of view. They are part of a larger dialectic that must always advocate state power within some ambit. Without state power, the power elite has no mercantilist levers to pull and cannot hide behind the democratic process.

The power elite absolutely needs state activism and needs to create vehicles that advocate for state power. The International Monetary Fund is one such example of a facility that forcefully promotes interference in the marketplace as a way of ameliorating economic difficulties.

Ironically, as we pointed out yesterday, the more "right wing" publications like the Weekly Standard often argue for expanded military and civil policing authority while not paying too much attention to economic issues or the welfarist state.

But The New Republic is bad enough. And its defense of Keynesianism is intellectually bankrupt. There is no way round the larger issue of price-fixing when it comes to government interference in the marketplace.

The only entity that can determine how much money an economy needs is the market itself. Money must be privately circulated and subject to the laws of supply and demand. But Keynes's anodynes have been utilized by government econo-crats as a justification for central bank management of the money supply.

These days, around the world, central banks determine the amount of money that an economy needs. The results have been an absolute disaster. As free-market Austrian economists have long pointed out, the overprinting of money leads to booms and disastrous busts.

Keynes's prescription, reigniting the economy by injecting yet MORE money into the economy, merely prolongs the problems. But it suits the power elite just fine.

That's because it gives the power elite the justification to print trillions of new dollars to prop up its failing and bankrupt financial entities. These entities NEED to fail so that people can differentiate between bankrupt facilities and healthy firms. But that's not how it works anymore.

Thanks to Keynes – or the way that Keynes has been interpreted – the elites have used his General Theory as a justification for printing money, ruining economies, bankrupting honest businesses and propping up hundreds of failed and failing banking entities.

Keynes's theories have been an unparalleled disaster. They have allowed the power elite to print money with impunity and to justify propping up its corrupt financial system. Today, the world reels from depression and economic inefficiency. This is a direct result of the justifications that Keynes provided the power elite via his crackpot econometrics.

The article in The New Republic lauding the IMF's use of Keynesianism discusses none of the above of course. It doesn't grapple with Keynes's Fabianism, his contempt for ordinary people or the obvious failures of his general theory.

The IMF itself is a bankrupt institution with a deserved reputation for making bad economies worse and literally starving people to death in the process. The idea that one can marry the illegitimate monetary science of Keynesianism to the thuggery of the IMF and come up with something better than either of the two parts is in our view nothing but wishful thinking.

These articles are empyrean intellectual creations. They have little or nothing to do with real life. They pile on one fantasy after another of the way the world is supposed to work. But it doesn't work that way.

Keynes was wrong in almost every aspect of his "General Theory." The IMF has been a plague among impoverished nations for most of its existence. The best thing that could happen would be that both Keynes and the IMF would be erased from the annals of history.

Conclusion: Either one is horrible. Together, they are a terrible poison, responsible for misery and economic mayhem worldwide.

MF Global: Where's the Cash? David Wooley on the Risk of Defective Commercial Land Titles

"What none of the experts are analyzing (in specific terms) is the destructive effect that the MERS system will have on 400 years of recorded property rights in the United States. Most articles mention lost chain of title but stop short of explaining what this means, or how these problems will affect homeowners with or without mortgages in the MERS system. These problems deal with determining (1) property boundaries (senior and junior property rights) and (2) proof of ownership in order to obtain title insurance and financing. Because MERS is utilized for transferring title and these transfers are not publically recorded (thereby imparting constructive notice), MERS does not comply with race (first in time) or (constructive or actual) notice statutes and therefore, senior/junior property rights cannot be determined when a discrepancy arises in property boundary lines."

But before we get to David's fine article, we need to slip into our Dennis Miller persona for a couple of minutes to vent on MF Global. Last week Ben Protess of the New York Times reported that "MF Global Trustee Sees $1.6 Billion Customer Shortfall."

Where is the lost customer money? At JP Morgan Chase and other banks, or course. See, "How JP Morgan and George Soros Ended Up with MF Global Customer Money", www.clearingandsettlement.com

So why is it that the Large Media have such trouble reporting this story? The fact seems to be that the political powers that be in Washington are protecting JPM CEO Jaime Dimon from a possible career ending kind of stumble with respect to MF Global. By stuffing the commodity customers of the broker dealer via an equity bankruptcy resolution supervised dutifully by SIPIC, JPM and Soros apparently get to benefit at the expense of the commodity customers of MF Global. This situation stinks to high heaven and everyone on the Street we've spoken to about the matter knows it. As the article above notes:

"Rather than being treated as a bankruptcy of a commodities brokerage firm under sub-chapter IV of the Chapter 7 bankruptcy law, MF Global was treated as an equities firm (sub-chapter III) for the purposes of its bankruptcy, and this is why the MF Global customer money in so-called segregated accounts "disappeared".

The effort by former New Jersey governor and MF Global CEO Jon Corzine to save his firm by stealing customer funds seems to warrant further discussion, yet instead we have silence. Here's a question: When is Corzine going to be indicted for securities fraud and other high crimes and misdemenors? The answer seemingly is that the Obama Justice Department is afraid to go there. Thus the fraud at MF Global continues and Washington does nothing to inconvenience the banksters as customer funds are expropriated.

But please, to our friends in the Big Media, could we stop saying that we don't know the location of the missing $1.6 billion of client funds from MF Global? The money is safe and sound at JPM and other counterparties. As with Goldman Sachs et al and American International Group, the banks have been bailed out at the cost of somebody else. And the various agencies of the federal government are complicit in the fraud.

Alert To Problems Of Grossly Inaccurate Documents Used In The Land Title Underwriting For Commercial Real Estate Financing
David E. Woolley
Harbinger Analytics Group


January 31, 2012

I. Introduction:

The Commercial Mortgage Backed Securities ("CMBS") market is bracing for record levels of defaults on commercial loans in 2012. According to Trepp, LLC, in October, 2011, troubled commercial real-estate loans accounted for more than 65% of failed banks' $617 million in problem loans.

o What if there was a way out of these commercial loans so that owners, lenders and CMBS holders could recover 100% of their loan values rather than the 40% to 60% of purchase price that these commercial properties are currently worth in the marketplace?

o What if the way to recover 100% of a commercial property's purchase price was through the property's title insurance policy?

Harbinger Analytics Group has discovered a widespread problem of inaccurate (and fraudulent) documents used in the land title underwriting for commercial real estate financing. This fraud is accomplished through inaccurate and incomplete filings of statutorily required records (commercial land title surveys detailing physical boundaries, encumbrances, encroachments, etc.) on commercial properties in California, many other western states and possibly throughout most of the United States.

Because title insurers performing land surveys in-house and independent land surveyors (often hired by lenders, title insurers and/or national land survey brokerages claiming ownership of completed work product) have committed actual and/or constructive fraud by knowingly failing to conduct accurate boundary surveys and/or failing to file the statutorily required documentation in public records, owners, lenders or CMBS holders of these commercial properties may be able to recover 100% of their purchase price from their title insurers based on contract rescission claims.

Owners, lenders and CMBS holders may also be eligible for "put backs" of these afflicted properties if the loans were insured by the FDIC (for example, assets acquired, packaged and resold through bank closures or TALF via the PPIP program). Harbinger Analytics informed the FDIC (by detailed reports) about potential problems in the commercial real estate loans in July 2009. Harbinger Analytics also informed one of the four primary title insurer's executives and general counsel (by detailed reports) of the failures, fraud and exposure to liability in their underwriting way back in early 2007.

o Why wouldn't a title insurer be concerned about underwriting poor quality ALTA land title surveys?

Prior to the financial crisis of 2008, title insurance companies realized an average of 5% in loss/loss adjustments (compared to 70-85% in most other casualty insurance coverage). Title insurers were able to outsource and reduce costs without realizing a loss/loss adjustment change. Presumably today, the title insurers have seen a spike in payable claims due to loss of priority (subordination), but they have not felt the effects of the flawed commercial loans to date.

In context, we were offering to demonstrate fraud within the records maintained by one of the four main title insurer's offices. These same records were relied upon for the underwriting of title insurance policies. I believed, at the time we contacted this title insurer's executives and general counsel in 2007, that this title insurer was unwittingly a victim of land surveying fraud.

Later, it was discovered that this title insurer was inserting themselves into land surveying contracts by performing land title surveys in house and/or through their own network of subcontractors and then claiming the survey work product as their own via copyright protection. For example, First American also created eAppraiseIT that was subsequently sued by the FDIC in FDIC v. Corelogic Valuation Services, LLC. Although several causes of action were subsequently dismissed from this complaint, appraisal services are much more subjective than land surveying. After being warned about these fraudulent activities, this major title insurer apparently never changed their business model and/or demanded statutorily required records of survey in California.

II. Title Insurance, Insurers and Land Surveyors:

Title insurance is a form of indemnity insurance predominantly found in the United States that insures against financial loss from defects in title to real property and from the invalidity or unenforceability of mortgage liens. There are basically only four (4) U.S. national families of title insurers which underwrite approximately 92% of the title insurance market. Most states are dominated by a group of two or three title insurers, sometimes including a regional title insurer.

Land surveyors and land title insurers play a crucial role in buying and selling commercial properties. Most mortgage lenders require an American Land Title Association ("ALTA") land title survey for properties to evaluate and define the property's boundaries, site improvements, easements and encroachments as a condition of obtaining title insurance (required for mortgage financing by lenders). The insurance policies generated by title companies are called ALTA Owner's and Loan Policies. An ALTA policy insures against off-record defects. The ALTA policy also provides "covered risk" for "unmarketable title" and "fraud". The title insurer and lender each understand a title defect will tie up a property for years and can cost hundreds of thousands of dollars to remedy, therefore, they require that a property is surveyed as a matter of due diligence prior to funding. This need for title information is further evidenced by an inherently frugal lender's willingness to spend $5,000 - $50,000 per land title survey.

Prior to conducting an actual survey, the land surveyor receives a "preliminary title report" from the title insurer describing what that title insurance company is willing to insure. The land surveyor takes the preliminary title report's property description and compares it to the actual condition of the property on-site. The surveyor researches public records looking for previously discovered defects or discrepancies in title. The land title surveyor is tasked with identifying and documenting these material defects in title as a part of the surveyor's due diligence.

Because land title surveyors are often hired directly by title insurers, lenders, attorneys or national land surveying brokerages, various parties may claim ownership of the surveyors' work product. Foolishly, outside parties will occasionally insert themselves into the land surveyor's contract to realize additional fees through mark-up costs. Some title insurers even insert themselves into the land surveying contract and/or offer land title surveying services by way of their employees or vendor subcontractors. They further insert themselves by specifying the format of the information displayed and claiming a copyright to the information. The contracting parties realize larger profits by selecting lowest bidding surveyors (who then cut corners by failing to properly research properties and failing to complete statutory filings). In comparison, it is very unlikely the contracting parties select their professionals, such as counsel, by the same low bid process.

In California and in many western states, if the land title surveyor finds any material discrepancies between the property description supplied by the title insurer and the actual condition or location of the land and, if no Record of Survey has been previously filed to document these discrepancies, the surveyor must submit a proper Record of Survey within 90 days, to the County Surveyor's Office (subject to third party review and approval) pursuant to California Business & Professions Code §§ 8762, 8766, et seq. Once reviewed for procedures, statutory compliance and accepted by the County, this document becomes available to the general public.

Despite these explicit requirements, surveyors are not performing the required ALTA land title surveys, pursuant to adopted written standards, are not conducting thorough due diligence (i.e. proper research, evidence collection/evaluation in relation to the insured deed), are not filing Records of Survey and are not providing accurate boundary and chain of title information to title insurance underwriters. These repeated statutory violations go beyond mere negligence and constitute constructive fraud and/or actual fraud. The breach of statutory laws constitutes negligence per se and negligence (violation of a standard of care) is then presumed. Therefore, title insurance policies are based upon fraudulent and/or (at least) negligently prepared survey documents.

This isn't the last of the bad news - additional claims may exist from third parties when a boundary line is common between adjacent owners.

III. Claims Against Title Insurers and Land Surveyors:

o What if the ALTA land title survey is fraudulent?

o Who is liable? The title insurance company? The land title surveyor?

There is an opportunity for owners, lenders and CMBS holders to recoup losses incurred by decreased property values by filing contract rescission claims based on unmarketable title, fraud , constructive fraud and/or negligence and/or negligence per se against the property's title insurer and land surveyor. Although a representation of opinion is ordinarily not actionable, misrepresentations of opinion are actionable where the defendant holds himself out to be specially qualified. The surveyor's work is often viewed as an expression of professional opinion and may be considered as representations of fact. It only takes one false representation of a material fact [encroachment] to create a case for fraud.

"Unmarketable title" is defined in Section 1(k) of the ALTA Owner's Policy and Section 1(m) of the ALTA Loan Policy as:

"title affected by an alleged or apparent matter that would permit a prospective purchaser or lessee of the title or lender on the title to be released from the obligation to purchase, lease, or lend if there is a contractual condition requiring delivery of marketable title."

Conversely, "marketable title" is defined as:

"such a title free from reasonable doubt, and such that a reasonably prudent person, with full knowledge of the facts and their legal bearings, willing and anxious to perform his contract, would, in the exercise of that prudence which business men ordinarily bring to bear upon such transactions, be willing to accept and ought to accept. Title must be so far free from defects as to enable the holder, not only to retain the land, but possess it in peace, and, if he wishes to sell it, to be reasonably sure that no flaw or doubt will arise to disturb its market value."

A title insurance policy promises that, if the state of the title is other than as represented on the face of the policy, and if the insured suffers loss as a result of the difference, the insurer will reimburse the insured for that loss and any related legal expenses, up to the face amount of the policy. From the information supplied by the surveyor, the title insurance company writes the actual title insurance policy including any defects found by the surveyor and specifically excludes those defects from title insurance coverage unless a specific endorsement is written.

A. Title Insurer:

An inaccurate ALTA land title survey gives rise to an unmarketable title claim by an owner, lender or CMBS holder against the title insurer for the value of the property at the time it was insured. A property may be deemed unmarketable if material flaws in an ALTA land title survey are discovered. In fact, no "adverse claimant" need be present for an owner or lender to raise an unmarketable title or fraud claim under their title insurance policy. The possibility of a "cloud" on title is enough to trigger title insurance coverage through the title insurer.

If owners, lenders and CMBS holders of commercial properties (with these fraudulent survey documents) have title insurance with specific endorsements covering unmarketable title, fraud and negligence claims, these groups may be entitled to damages including contract rescission for the full balance of loan amounts (plus attorney's fees and costs) against their title insurer based unmarketable title, fraud, constructive fraud (requiring less intent), negligent misrepresentation and negligence theories. Title insurance companies may be liable for a failure to defend if they deny title insurance coverage.

B. Surveyors:

Surveyors providing inaccurate surveys and/or failing to file records of survey are in violation of various California statutes including California Business & Professions Code §8762 et. seq., California Business & Professions Code § 17200, et seq. Surveyors may also be liable to owners, lenders and CMBS holders based on the theory of negligence per se for violation of California Code of Regulations, Title 16, Division 5, § 419 (e) (C) (2) and California Business & Professions Code §§ 8762, et seq. Most western states have statutes similar to those cited for California. Nevada (whose commercial real estate has been particularly hard hit), recently enacted A.B.284, which states fraudulent documents used in a financial transaction are a Category C Felony. Nevada land surveyors should quickly order a recent edition of Incarceration 101 or Behind Bars now, before they are sold out to recently indicted California title officers. These owners (and possibly adjacent owners), lenders and CMBS holders may also have claims of fraud, constructive fraud, negligent misrepresentation and negligence against the licensed land surveyor (who typically carries a large errors and omissions policy ranging from $1-5 million).

Moody's Downgrades Italy, Spain, Portugal And Others; Puts UK, France On Outlook Negative

Moody's adjusts ratings of 9 European sovereigns to capture downside risks

As anticipated in November 2011, Moody's Investors Service has today adjusted the sovereign debt ratings of selected EU countries in order to reflect their susceptibility to the growing financial and macroeconomic risks emanating from the euro area crisis and how these risks exacerbate the affected countries' own specific challenges.

Moody's actions can be summarised as follows:

- Austria: outlook on Aaa rating changed to negative

- France: outlook on Aaa rating changed to negative

- Italy: downgraded to A3 from A2, negative outlook

- Malta: downgraded to A3 from A2, negative outlook

- Portugal: downgraded to Ba3 from Ba2, negative outlook

- Slovakia: downgraded to A2 from A1, negative outlook

- Slovenia: downgraded to A2 from A1, negative outlook

- Spain: downgraded to A3 from A1, negative outlook

- United Kingdom: outlook on Aaa rating changed to negative

Please see the individual country specific statements below for more detailed information relating to the rating rationale and the sensitivity analysis for each affected sovereign issuer.

The implications of these actions for directly and indirectly related ratings will be reported through separate press releases.

The main drivers of today's actions are:

The uncertainty over (i) the euro area's prospects for institutional reform of its fiscal and economic framework and (ii) the resources that will be made available to deal with the crisis.
Europe's increasingly weak macroeconomic prospects, which threaten the implementation of domestic austerity programmes and the structural reforms that are needed to promote competitiveness.
The impact that Moody's believes these factors will continue to have on market confidence, which is likely to remain fragile, with a high potential for further shocks to funding conditions for stressed sovereigns and banks.
To a varying degree, these factors are constraining the creditworthiness of all European sovereigns and exacerbating the susceptibility of a number of sovereigns to particular financial and macroeconomic exposures.

Moody's has reflected these constraints and exposures in its decision to downgrade the government bond ratings of Italy, Malta, Portugal, Slovakia, Slovenia and Spain as listed above. The outlook on the ratings of these countries remains negative given the continuing uncertainty over financing conditions over the next few quarters and its corresponding impact on creditworthiness.

In addition, these constraints have also prompted Moody's to change to negative the outlooks on the Aaa ratings of Austria, France and the United Kingdom. The negative outlooks reflect the presence of a number of specific credit pressures that would exacerbate the susceptibility of these sovereigns' balance sheets, and of their ongoing austerity programmes, to any further deterioration in European economic conditions and financial landscape.

An important factor limiting the magnitude of Moody's rating adjustments is the European authorities' commitment to preserving the monetary union and implementing whatever reforms are needed to restore market confidence. These rating actions therefore take into account the steps taken by euro area policymakers in agreeing to a framework to improve fiscal planning and control and measures adopted to stem the risk of contagion.

The rating agency considers the ratings of the following European sovereigns to be appropriately positioned, namely Denmark (Aaa), Finland (Aaa), Germany (Aaa), Luxembourg (Aaa), Netherlands (Aaa), Sweden (Aaa), Belgium (Aa3), Estonia (A1) and Ireland (Ba1). Moody's review of Cyprus' Baa3 rating, as announced in November 2011, is ongoing, while the developing outlook on Greece's Ca rating remains appropriate as the rating agency awaits clarification on the country's debt restructuring.

As for Central and Eastern European sovereigns outside the euro area, Moody's will be assessing the credit implications of the fragile financial market conditions and weak macroeconomic outlook during the first half of this year.

In related rating actions, Moody's has today also downgraded the rating of Malta Freeport Co. to A3 from A2, and that of Spain's Fondo de Reestructuración Ordenada Bancaria (FROB) to A3 from A1. Both of these issuers are government-guaranteed entities and therefore have a negative outlook in line with the outlook on their respective sovereign. Moody's has today also changed the outlook on the Aaa debt rating of the Bank of England to negative, in parallel with its decision to change the outlook on the UK's sovereign rating. Similarly, Moody's has changed to negative the outlook on the Aaa debt ratings of the Société de Financement de l'Economie Française (SFEF) and the Société de Prise de Participation de l'Etat (SPPE) in line with the change of outlook on France's sovereign rating.

The principal methodology used in these ratings was Sovereign Bond Ratings Methodology published in September 2008. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

Moody's changes the outlook on Austria's Aaa rating to negative

Moody's Investors Service has today changed the outlook on the Aaa rating of the Republic of Austria to negative from stable. Concurrently, Moody's has affirmed Austria's short-term debt rating of Prime-1.

The key drivers of today's action on Austria are:

1.) The uncertainty over the prospects for institutional reform in the euro area and the weak macroeconomic outlook across the region, which will continue to weigh on already fragile market confidence.

2.) The balance sheet of the Austrian government is exposed to larger contingent liabilities than is the case for other Aaa-rated sovereigns in the EU, mainly on account of the relatively large size of Austria's banking sector, its substantial exposure to the more volatile economies in Central and Eastern Europe and the reliance of the banks on wholesale funding markets. The stand-alone credit strength of the Austrian banking sector is low for a Aaa-rated sovereign.

3.) While the concerns over the banking sector are not new, Austria's debt metrics are weaker today than they were in 2008-2009, the last time that the Austrian government provided support to its banks. The Austrian government's debt metrics are also weaker than some of those of other Aaa-rated peers.

RATIONALE FOR NEGATIVE OUTLOOK

As indicated in the introduction of this press release, a contributing factor underlying Moody's decision to change the outlook on Austria's Aaa bond rating to negative is the uncertainty over the euro area's prospects for institutional reform of its fiscal and economic framework and over the resources that will be made available to deal with the crisis. Moreover, Europe's weak macroeconomic prospects complicate the implementation of domestic austerity programmes and the structural reforms that are needed to promote competitiveness. Moody's believes that these factors will continue to weigh on market confidence, which is likely to remain fragile, with a high potential for further shocks to funding conditions for stressed sovereigns and banks.

While constraining the creditworthiness of all European sovereigns, the fragile financial environment increases Austria's susceptibility to financial shocks. Moody's decision to change the outlook to negative reflects the large contingent liabilities to which the Austrian sovereign is exposed, given the relatively large size of its banking sector and in particular its exposure to the Central, Eastern and South-Eastern European (CESEE) region. According to the Austrian banking regulator FMA, total consolidated assets of Austria's banks amounted to 390% of Austria's GDP in Q3 2011 and their exposure to the CESEE region remains elevated at EUR225 billion, or 75% of GDP, as of September 2011 (see OeNB Financial Stability Report, December 2011). Moody's notes that the stand-alone credit strength of the Austrian banking sector is low compared with the banking sectors of other Aaa-rated sovereigns.

The decision to assign a negative outlook mainly reflects Moody's lower "tolerance" for high levels of contingent liabilities at the very high end of the rating spectrum, rather than concerns over a further increase in the government's potential exposure. Austrian banks' capitalisation levels are lower than they are in other Aaa-rated countries, and their business models continue to exhibit higher risks than those of banks in most of Austria's peers. This was acknowledged by Austria's central bank in its latest Financial Stability Report (published in December 2011).

Moody's acknowledges the active attempts by the Austrian banking regulator to reduce the country's exposure by requiring the Austrian banks that operate in the region to reduce the funding mismatch that is prevalent in some of the countries. However, we believe that this reduction will most likely happen only gradually over the next few years. In the meantime, a potential further downturn in the CESEE region (for example, from contagion from a further deterioration of economic and financial conditions in the euro area) could generate considerably higher capital and funding support needs, which Moody's would deem to be incompatible with the Austrian government maintaining its Aaa rating.

The third factor underpinning the outlook change is Austria's weakened public debt metrics compared with some of the other Aaa-rated peers. Austria's debt metrics are not as strong as they were in 2008/09, the last time that the Austrian government provided support to its banks. Austria's public debt ratio stood at around 75% of GDP in 2011, which is significantly above the median debt ratio for all Aaa-rated sovereigns of around 52% of GDP. This estimate includes the full debt of the government-related issuer OeBB Infrastruktur (EUR17 billion as of end-2011). Even under base case assumptions, Moody's expects Austria's debt ratio to rise to around 80% of GDP in 2013, an increase of 20 percentage points compared to 2007, and to decline only gradually thereafter.

The upward trajectory of Austria's outstanding debt places it amongst the most heavily indebted of its Aaa-rated peers, alongside the United States, France and the United Kingdom whose Aaa ratings also carry a negative outlook.

RATIONALE FOR UNCHANGED Aaa RATING

Austria's Aaa rating is supported by the country's strong, diversified economy with no major private sector or external imbalances to correct. Growth performance has been strong by comparison with other European economies, unemployment is low, the current account has been in surplus since 2002 and the leverage of the private sector is moderate. Austria has a good track record of achieving and maintaining low budget deficits, recording a budgetary shortfall of above 2.5% of GDP only once in the period of 1997 to 2009. The deficit outturn in 2011 was better than budgeted, with a deficit of 3.3% of GDP (versus an expected 3.9% budget shortfall) due to much stronger revenue growth and very strict monitoring of spending. This compares favourably with the budgetary performance of some of the other Aaa-rated peers. However, given the expected slowdown in growth across the euro area in 2012, Moody's is not expecting the Austrian government to make any material progress in reducing the fiscal deficit, which will in turn keep the debt ratio on an upward trajectory. Moody's acknowledges the government's recently presented fiscal consolidation package which aims to bring the budget deficit to zero by 2016. While the accelerated fiscal consolidation is welcome, Moody's notes that Austria's debt ratio will remain above 70% of GDP in 2016, even assuming full implementation of all the proposed measures.

WHAT COULD MOVE THE RATING DOWN

The Austrian government's bond rating could potentially be downgraded to Aa1 if further material government support were needed to support the country's banking sector. A sharp intensification of the euro area crisis and further deterioration of macroeconomic conditions in Europe, leading to material fiscal and debt slippage in Austria, could also pressure the rating.

Conversely, the outlook on the sovereign Aaa rating could be returned to stable if government contingent liabilities were materially reduced, for example, by a further significant strengthening of the banking sector's capital base through private sector capital or organic capital growth, so as to remove any doubt about the need for future public sector support.

Moody's changes the outlook on France's Aaa rating to negative

Moody's Investors Service has today changed the outlook on the Aaa rating of France's local- and foreign-currency government debt to negative from stable.

The key drivers of today's outlook change on France are:

1.) The uncertainty over the prospects for institutional reform in the euro area and the weak macroeconomic outlook across the region, which will continue to weigh on already fragile market confidence.

2.) The ongoing deterioration in France's government debt metrics, which are now among the weakest of France's Aaa-rated peers.

3.) The significant risks to the French government's ability to achieve its fiscal consolidation targets, which could be further complicated by a need to support other European sovereigns or its own banking system.

Concurrently, Moody's has today also changed to negative the outlook on the Aaa debt ratings of the Société de Financement de l'Economie Française (SFEF) and the Société de Prise de Participation de l'Etat (SPPE) in line with the change of outlook on France's sovereign rating.

RATIONALE FOR NEGATIVE OUTLOOK

As indicated in the introduction of this press release, a contributing factor underlying Moody's decision to change the outlook on France's Aaa government bond rating to negative is the uncertainty over the euro area's prospects for institutional reform of its fiscal and economic framework and over the resources that will be made available to deal with the crisis. Moreover, Europe's weak macroeconomic prospects complicate the implementation of domestic austerity programmes and the structural reforms that are needed to promote competitiveness. Moody's believes that these factors will continue to weigh on market confidence, which is likely to remain fragile, with a high potential for further shocks to funding conditions. In addition to constraining the creditworthiness of all European sovereigns, the fragile financial environment increases France's susceptibility to financial and macroeconomic shocks given the concerns identified below.

The second driver underpinning the negative outlook is the ongoing deterioration in France's government debt metrics, which are now among the weakest of France's Aaa peers. France's primary balance is in deficit and compares unfavourably with other Aaa-rated countries with a stable outlook. The upward trajectory of France's outstanding debt over the decade preceding the crisis, at a time when most other governments were reducing their debt ratios, places it amongst the most heavily indebted of its Aaa-rated peers, alongside the United States and the United Kingdom whose Aaa ratings also carry a negative outlook. France's capacity to support higher government debt levels is also complicated by the limitations of operating without the advantage of being the single "risk-free" issuer of debt denominated in its currency.

The third driver of today's announced action is the significant risk attached to the government's medium-term ability to implement consolidation targets and achieve a stabilisation and reversal in its public debt trajectory. While the rating agency acknowledges the French government's efforts to implement important economic and fiscal reforms since 2008, and meet fiscal targets over the past two years, the agency notes that France's prior reluctance to decisively reform and consolidate have left its finances in a challenging position amid an ongoing global financial and euro area debt crisis. Stabilising, and ultimately reducing, France's stock of outstanding debt will be contingent on the French government maintaining its fiscal consolidation effort. Meanwhile, the fragile financial market environment, which will endure for many months to come, constrains the French government's room to manoeuvre in terms of stretching its balance sheet in the face of further direct challenges to its finances -- for example, from the possible need to provide support to other European sovereigns or to its own banking system, both of which would further complicate its own fiscal consolidation process.

RATIONALE FOR UNCHANGED Aaa RATING

France's Aaa rating is supported by the economy's large size, high productivity and broad diversification, together with high private sector savings and relatively moderate household and corporate liabilities. This provides considerable capacity to absorb shocks, as demonstrated by the resilience of domestic demand during the 2008-2009 global crisis. The ability of the French government to finance its very high debt level at affordable interest rates in an uncertain financial and economic environment will be crucial to it retaining its Aaa rating.

WHAT COULD MOVE THE RATING DOWN

Moody's would downgrade France's government debt rating in the event of an unsuccessful implementation of economic and fiscal policy measures, leading to failure of the government's attempt to stabilise and reverse the high public debt ratio, generating a further weakening of the debt metrics against peers and further reducing France's resiliency to potential economic and financial shocks. A material increase in exposure to contingent liabilities from the national banking system or a requirement for further support to neighbouring euro area member states if the euro area crisis were to intensify could also prompt a rating downgrade.

A return to a stable outlook on France's sovereign rating would require significant progress towards improving the debt metrics and an easing of the euro area sovereign crisis given Moody's concerns regarding the country's exposure to contingent liabilities.

Moody's downgrades Italy's government bond rating to A3 from A2, negative outlook

Moody's Investors Service has today downgraded the Italian government's local- and foreign-currency debt rating to A3 from A2. The outlook remains negative. Concurrently, Moody's has downgraded the country's short-term rating to Prime-2 from Prime-1.

The key drivers of today's rating action on Italy are:

1.) The uncertainty over the prospects for institutional reform in the euro area and the weak macroeconomic outlook across the region, which will continue to weigh on already fragile market confidence.

2.) The challenges facing Italy's public finances, especially its large stock of debt and high cost of funding, as well as the country's deteriorating macroeconomic outlook.

3.) The significant risk that Italy's government may not achieve its consolidation targets and address its public debt given the country's pronounced structural economic weakness.

Moody's is maintaining a negative outlook on Italy's sovereign rating to reflect the potential for a further decline in economic and financing conditions as a result of a deterioration in the euro area debt crisis.

RATIONALE FOR DOWNGRADE

As indicated in the introduction of this press release, a contributing factor underlying Moody's one-notch downgrade of Italy's government bond rating is the uncertainty over the euro area's prospects for institutional reform of its fiscal and economic framework and over the resources that will be made available to deal with the crisis. Moreover, Europe's weak macroeconomic prospects complicate the implementation of domestic austerity programmes and the structural reforms that are needed to promote competitiveness. Moody's believes that these factors will continue to weigh on market confidence, which is likely to remain fragile, with a high potential for further shocks to funding conditions. In addition to constraining the creditworthiness of all European sovereigns, the fragile financial environment increases Italy's susceptibility to financial and macroeconomic shocks given the concerns identified below.

The deteriorating macroeconomic environment is in turn exacerbating a number of Italy's own challenges that are weighing on its creditworthiness and constitute the second driver of Moody's one-notch downgrade of Italy's bond rating. The multiple structural measures introduced by the government to promote economic growth will take time to yield results, which are difficult to predict at this stage. Moreover, the recent volatility in funding conditions for the Italian sovereign remains a risk factor that needs to be reflected in the government bond rating. Overall, the combination of a large debt stock (equivalent to 120% of GDP) and low medium-term economic growth prospects makes Italy susceptible to volatility in market sentiment that results in increased debt-servicing costs.

The third driver of today's rating action is the significant risk that the Italian government may not achieve its consolidation targets and prove unable to reduce the large stock of outstanding public debt. Moody's acknowledges that the new Italian government's fiscal consolidation and economic reform efforts have helped to maintain a primary surplus. The government has targeted primary surpluses in excess of 5% in the coming years. However, in an environment of pronounced regional economic weakness, the Italian government faces considerable challenges in generating the high primary surpluses required to compensate for higher interest payments and ultimately reduce its outstanding public debt.

These credit pressures have intensified and become more apparent in the period since Moody's last rating action on Italy in September 2011, and are contributing to the need to reposition Italy's rating at the lower end of the 'A' range.

The decision to downgrade Italy's debt rating also reflects Moody's view that Italy's credit fundamentals and vulnerabilities due to its high debt burden are difficult to reconcile with a rating above the lower end of the "single-A" rating category. Indeed, peers at the top of the single-A category (like the Czech Republic and South Korea) as well as those in the middle of the category (like Poland), do not face Italy's high debt and structural growth challenges.

WHAT COULD MOVE THE RATING UP/DOWN

Italy's government debt rating could be downgraded further in the event of evidence of persistent economic weakness, reform implementation difficulties, or increased political uncertainty, which translate into a significant postponement of Italy's fiscal consolidation and reversal of the public debt trajectory. A substantial and ongoing deterioration of medium-term funding conditions for Italy due to further substantial domestic economic and financial shocks from the euro area crisis would also be credit-negative. Moreover, Italy's sovereign rating could transition to substantially lower rating levels if the country's access to the public debt markets were to be constrained and the long-term availability of external sources of liquidity support were to remain uncertain.

Conversely, a successful implementation of economic reform and fiscal measures that effectively strengthen the Italian economy's growth pattern and the government's balance sheet would be credit-positive and could stabilise the outlook. Upward pressure on Italy's rating could develop if the government's public finances were to become less vulnerable to volatile funding conditions, further to a reversal of the upward trajectory in public debt and, ultimately, the achievement of substantially lower debt levels.

Moody's downgrades Malta's government bond rating to A3 from A2, negative outlook

Moody's Investors Service has today downgraded Malta's government bond rating to A3 from A2. The outlook remains negative.

The key drivers of today's rating action on Malta are:

1.) The uncertainty over the prospects for institutional reform in the euro area and the weak macroeconomic outlook across the region, which will continue to weigh on already fragile market confidence.

2.) Malta's relatively weak debt metrics compared with 'A' category peers and the country's reliance on the strength of the European economy, which will dampen its own growth prospects in the medium term and worsen its debt dynamics.

Moody's is maintaining a negative outlook on Malta's sovereign rating to reflect the potential for a further decline in economic and financing conditions as a result of a deterioration in the euro area debt crisis.

In a related rating action, Moody's has today also downgraded the foreign- and local-currency debt ratings of Malta Freeport Co. to A3 from A2 given its status as a government-guaranteed entity. The outlook remains negative in line with the sovereign rating.

RATIONALE FOR DOWNGRADE

As indicated in the introduction of this press release, a contributing factor underlying Moody's one-notch downgrade of Malta's government bond rating is the uncertainty over the euro area's prospects for institutional reform of its fiscal and economic framework and over the resources that will be made available to deal with the crisis. Moreover, Europe's weak macroeconomic prospects complicate the implementation of domestic austerity programmes and the structural reforms that are needed to promote competitiveness. Moody's believes that these factors will continue to weigh on market confidence, which is likely to remain fragile, with a high potential for further shocks to funding conditions. In addition to constraining the creditworthiness of all European sovereigns, the fragile financial environment increases Malta's susceptibility to financial and macroeconomic shocks given the concerns identified below.

The fragile external environment is exacerbating a number of Malta's own challenges which continue to weigh negatively on the country's debt rating and constitute the second driver of Moody's downgrade. Malta's debt metrics are among the weaker of the 'A'-rated sovereigns. Growth prospects over the medium term also appear poorer for Malta than for its peers, given the country's dependence on tourism from the euro area as its main source of economic growth. This will hinder the narrowing of the fiscal imbalance. Lower business confidence and tighter credit conditions are likely to result in weak private-sector investment, and real output growth is likely to be significantly lower than the government's forecast of over 2%. The deteriorating growth prospects and the concomitant impact on already weak debt dynamics will further reduce government financial strength and expose it to more constrained, higher-cost funding conditions.

WHAT COULD MOVE THE RATING UP/DOWN

Downward pressure on the rating could develop if Malta's economic growth prospects deteriorate significantly, thereby obstructing fiscal consolidation and leading to a significant further deterioration in the sovereign's key credit metrics. The rating could also be downgraded if an intensification of the euro area crisis were to result in materially higher cost or constrained funding conditions for the government. A further deterioration of macroeconomic conditions in Europe, leading to material fiscal and debt slippage in Malta, could also pressure the rating.

Conversely, the negative outlook on Malta's sovereign rating would be changed to stable in the event of a sustained improvement in investor sentiment across the euro area. Although unlikely in the foreseeable future, the government's ratings could move upward in the event of a significant improvement in the government's balance sheet, leading to greater convergence with 'A' category medians. Substantial structural reforms focused on enhancing competitiveness and boosting potential output growth rates would also be credit-positive.

Moody's downgrades Portugal's government bond rating to Ba3 from Ba2, negative outlook

Moody's Investors Service has today downgraded the government of Portugal's long-term debt ratings to Ba3 from Ba2. The outlook remains negative.

The key drivers of today's rating action on Portugal are:

1.) The uncertainty over the prospects for institutional reform in the euro area and the weak macroeconomic outlook across the region, which will continue to weigh on already fragile market confidence.

2.) The resulting potential for a deeper and longer economic contraction in Portugal than previously anticipated, and the ongoing deleveraging process in the country's economy and banking system.

3.) The higher-than-expected general government debt ratios, which are due to reach roughly 115% of GDP within the next two years, thereby significantly limiting the room for fiscal manoeuvre and commensurately reducing the likelihood of achieving a declining debt trajectory.

4.) Potential contagion emanating from the impending Greek default, which is likely to extend the period during which Portugal is unable to access long-term private markets once the current support programme expires.

Moody's is maintaining a negative outlook on Portugal's sovereign rating to reflect the potential for a further decline in economic and financing conditions as a result of a deterioration in the euro area debt crisis.

RATIONALE FOR DOWNGRADE

As indicated in the introduction of this press release, a contributing factor underlying Moody's one-notch downgrade of Portugal's government bond rating is the uncertainty over the euro area's prospects for institutional reform of its fiscal and economic framework and over the resources that will be made available to deal with the crisis. Moreover, Europe's weak macroeconomic prospects complicate the implementation of domestic austerity programmes and the structural reforms that are needed to promote competitiveness. Moody's believes that these factors will continue to weigh on market confidence, which is likely to remain fragile. This will in turn mean a high potential for further shocks to funding conditions, which will affect weaker sovereigns like Portugal first, increasing its susceptibility to other financial and macroeconomic shocks given the concerns identified below.

This backdrop is exacerbating Portugal's domestic challenges and informs the second driver of Moody's rating action, which is the weakening outlook for the country's economic growth prospects and the implications for the government's efforts to place its debt on a sustainable footing. Moody's expects the Portuguese economy to contract by more than 3% in 2012 given the multitude of downside risks from the region, including the impact of the ongoing deleveraging in the financial and private sector as well as the immediate impact of the government's austerity measures. The unemployment rate is likely to remain high and nominal wages will remain under pressure due to cutbacks in public-sector bonuses and staff levels, thus depressing domestic demand. Moreover, Moody's expectation of a slowdown among Portugal's main trading partners in 2012 will undermine the contribution from net exports, the only driver of GDP growth since the 2009 recession. Lastly, the macroeconomic impact of the targeted fiscal tightening in 2012 is programmed to be as intense as that of 2011, further subduing domestic growth prospects.

The third driver for the downgrade of Portugal's sovereign rating is the unfavourable revision of the forecast for government debt metrics, which are now projected to rise to around 115% of GDP or higher before stabilising. This greater-than-anticipated level is a consequence of the government's assumption of debt from state-owned enterprises and regional governments in 2008, 2009 and 2010, as well as the expectation that the government will need to draw the EUR12 billion bank recapitalisation package that is part of the IMF/EU program. At these levels, the government has very little room to manoeuvre in the event of further economic, financial or political shocks originating from either domestic or external sources. Moreover, in a low-growth environment, higher initial debt levels will further complicate the government's deleveraging efforts, especially since debt affordability (i.e. the cost of servicing the debt as a share of government revenues) is likely to remain more onerous than previously estimated.

The fourth driver of today's rating action is Moody's view that the increasing likelihood of a disorderly default by Greece (if it fails to gain the required level of support of investors for the proposed restructuring terms, or further financial assistance from official-sector supporters) will very likely make Portugal unable to access long-term market funding in September 2013 as planned, and increase pressure on the government to seek a debt restructuring. Moody's believes that there is a high risk of contagion from Greece among weaker euro area sovereigns in particular. While unfavourable market perceptions will not affect Portugal's access to long-term official-sector funding under its International Monetary Fund/European Union support programme until at least 2014, and probably beyond, Moody's notes that access to official-sector funding is not a guarantee of support from private-sector creditors. Moreover, the longer official-sector support is needed, the greater the pressure for a restructuring of Portugal's private-sector debt becomes.

While risks remain weighted to the downside, there are several reasons why Moody's downgrade of Portugal's government debt rating is limited to one notch. The first is the government's success in exceeding fiscal targets, as set out in its IMF/EU-supported economic adjustment programme. This was possible despite the initial significant divergence in the government deficit from these targets in the first half of 2011, additional setbacks such as assuming the debt and debt-servicing obligations of some state-owned enterprises under recent EU accounting rules, as well as EUR1.1 billion in previously unreported debt stemming from the autonomous region of Madeira. These setbacks were partly overcome with the help of the one-off transfer of pension assets worth 3.5% of GDP from the big four commercial banks to the central government, which facilitated a total reduction in Portugal's nominal general government deficit by nearly 6% of GDP in 2011.

The second reason for the limited rating adjustment is Moody's expectation that the Portuguese government will have achieved a structural budget correction in 2011 equivalent to around 4% of GDP, which the IMF estimates to be the largest such adjustment in Europe in 2011. A third reason is that, in 2011, the Portuguese government also began to design and implement a set of further structural reforms intended to bolster the economy's potential growth rate. The Portuguese government, unlike that of Greece, has managed to secure the cooperation of a large segment of the labour force for these reforms.

WHAT COULD MOVE THE RATING UP/DOWN

The rating could be further downgraded if the government's deficits are not kept sufficiently low to place the debt ratios on a clear downward path within the next three years, or if the government fails to meet its fiscal targets or fails to implement its planned structural reforms. An intensification of the euro area crisis and further deterioration of macroeconomic and financial market conditions in Europe, leading to material fiscal and debt slippage in Portugal, could also pressure the country's rating.

Although positive rating pressure is not likely over the near to medium term, Moody's considers that the outlook on Portugal's debt rating could stabilise if the government were to pursue macroeconomic policies that place its debt on a sustainable downward trajectory and buoys the economy's growth potential. The credit would also benefit from continued compliance with the IMF/EU programme and ongoing enactment of the promised structural reforms, which would improve market confidence and increase the likelihood that the Portuguese government will regain access to the private long-term debt market.

Moody's downgrades Slovakia's government bond rating to A2 from A1, negative outlook

Moody's Investors Service has today downgraded Slovakia's government bond ratings to A2 from A1. The outlook has been changed to negative.

The key drivers of today's rating action on Slovakia are:

1.) The uncertainty over the prospects for institutional reform in the euro area and the weak macroeconomic outlook across the region, which will continue to weigh on already fragile market confidence.

2.) Slovakia's increased susceptibility to financial and political event risk, presenting considerable challenges to achieving the government's fiscal consolidation targets and reversing the adverse trend in debt dynamics.

3.) The increased downside risks to economic growth due to weakening external demand.

Moody's has changed the outlook on Slovakia's sovereign rating to negative to reflect the potential for a further decline in economic and financing conditions as a result of a deterioration in the euro area debt crisis.

RATIONALE FOR DOWNGRADE

As indicated in the introduction of this press release, a contributing factor underlying Moody's one-notch downgrade of Slovakia's government bond rating is the uncertainty over the euro area's prospects for institutional reform of its fiscal and economic framework and over the resources that will be made available to deal with the crisis. Moreover, Europe's weak macroeconomic prospects complicate the implementation of domestic austerity programmes and the structural reforms that are needed to promote competitiveness. Moody's believes that these factors will continue to weigh on market confidence, which is likely to remain fragile, with a high potential for further shocks to funding conditions. In addition to constraining the creditworthiness of all European sovereigns, the fragile financial environment increases Slovakia's susceptibility to financial and macroeconomic shocks given the concerns identified below.

The fragile external environment is directly increasing Slovakia's susceptibility to financial event risk, which is the second driver informing the one-notch downgrade of the country's government bond rating. Specifically, the volatile market conditions are increasing Slovakia's financing costs and its growing funding risks. At the same time, political event risk has also been heightened by the recent collapse of the government led by Prime Minister Iveta Radicova following a confidence vote in October 2011. Increased susceptibility to financial and political event risk present considerable challenges to achieving the government's fiscal consolidation targets and reversing the recent adverse trend in debt dynamics. Slovakia's general government debt-to-GDP ratio has climbed from 28% in 2008 to over 44% in 2011, and will not stabilise in 2012-13 as had been initially expected.

The third factor underlying the downgrade is Slovakia's exposure to the deteriorating regional macroeconomic environment given the dependence of the economy on external demand, a key channel for contagion from the euro area crisis. Subdued activity in the euro area will continue to negatively affect the export-driven Slovak economy, constraining its ability to implement its fiscal consolidation targets, especially in light of the downfall of the ruling coalition, which had been committed to achieving these targets. While Moody's forecasts a 1.1% growth in real GDP for 2012, risks remain firmly on the downside as continued uncertainty hinders business and consumer confidence in Slovakia and the broader euro area. Weaker revenue collection will hamper the government's efforts to reduce its deficit going forward, resulting in a further deterioration of the government's balance sheet. The potential for further fiscal slippage remains high, while the willingness of the new Slovak government to take the steps needed to achieve the revised fiscal targets presents considerable implementation risks.

WHAT COULD MOVE THE RATING UP/DOWN

Downward pressure on the rating could develop if Slovakia's economic growth prospects deteriorate significantly, thereby obstructing fiscal consolidation and leading to a significant further deterioration in the government's balance sheet. A sharp intensification of the euro area crisis and further deterioration of macroeconomic conditions in Europe, leading to material fiscal and debt slippage in Slovakia, could also pressure the country's rating. Moody's would view such fiscal slippage negatively as it would lead to a deterioration of policy credibility and debt dynamics. This would in turn adversely affect Slovakia's funding prospects, increase rollover risk and result in a higher cost of funding for the government.

Moody's would consider changing the negative outlook to stable in the event of a sustained improvement in investor sentiment across the euro area, thereby materially reducing the risk of contagion from the euro area periphery. Similarly, a stabilisation in Slovakia's debt metrics would reduce negative pressure on the rating. Although unlikely in the foreseeable future, Moody's would upgrade the rating in the event of a resumption of structural improvements, a significant strengthening of the government's balance sheet and debt ratios relative to the 'A' category, and resumed convergence of Slovakia's credit metrics with EU levels.

Moody's downgrades Slovenia's government bond rating to A2 from A1, negative outlook

Moody's Investors Service has today downgraded Slovenia's local- and foreign-currency government bond ratings to A2 from A1. The outlook remains negative.

The key drivers of today's rating action on Slovenia are:

1.) The uncertainty over the prospects for institutional reform in the euro area and the weak macroeconomic outlook across the region, which will continue to weigh on already fragile market confidence.

2.) The risk to Slovenia's public finances from potential further shocks, especially the possible need to provide further support to the nation's banking system.

3.) The difficulties that Slovenia's small and open economy faces in view of weak growth among key European trading partners, and the resulting significant challenge to the government's ability to achieve its medium-term fiscal consolidation plans.

Moody's is maintaining a negative outlook on Slovenia's sovereign rating to reflect the potential for a further decline in economic and financing conditions as a result of a deterioration in the euro area debt crisis.

RATIONALE FOR DOWNGRADE

As indicated in the introduction of this press release, a contributing factor underlying Moody's one-notch downgrade of Slovenia's government bond rating is the uncertainty over the euro area's prospects for institutional reform of its fiscal and economic framework and over the resources that will be made available to deal with the crisis. Moreover, Europe's weak macroeconomic prospects complicate the implementation of domestic austerity programmes and the structural reforms that are needed to promote competitiveness. Moody's believes that these factors will continue to weigh on market confidence, which is likely to remain fragile, with a high potential for further shocks to funding conditions. In addition to constraining the creditworthiness of all European sovereigns, the fragile financial environment increases Slovenia's susceptibility to financial and macroeconomic shocks given the concerns identified below.

The deteriorating macroeconomic environment is exacerbating a number of existing and potential pressures on the Slovenian government's balance sheet, which are weighing on its creditworthiness and constitute the second driver of Moody's one-notch downgrade of Slovenia's bond rating. While somewhat shielded by manageable (but rising) debt and debt servicing levels, Slovenia's public finances are at risk from potential further shocks, stemming from a possible further deterioration in the economic growth outlook in the euro area and globally and the likely need to provide further support to the country's banks.

In particular, the country's largest banks face asset quality, capitalisation and funding challenges. In comparison with other systems in Central and Eastern Europe, Slovenia has a large banking sector, with total assets equivalent to 136% of GDP. Asset quality pressure and the euro area debt crisis are weighing on the sector's solvency and threaten its ability to continue to access private funding markets. Non-performing loan ratios are continuing to rise, reflecting concentrations of exposure towards the highly leveraged corporate sector. Slovenian banks' asset quality, profitability and funding position remain under considerable stress, increasing the risk of additional governmental support being needed, which would further pressure the sovereign's debt metrics.

The third driver informing Moody's rating decision on Slovenia is the threat to growth in the country's small and open economy given the poor growth prospects among Slovenia's principal export markets in Europe. Moreover, the ongoing significant adjustment in Slovenia's highly leveraged corporate sector, particularly the construction sector, and the deleveraging across all sectors of the economy, are expected to continue to represent a drag on economic activity for the next year or so. The weak economic outlook poses a significant challenge to the Slovenian government's ability to achieve its medium-term fiscal consolidation plans and may necessitate additional fiscal measures that could further pressure the sovereign's debt metrics.

These credit pressures have intensified and become more apparent in the period since Moody's last rating action in December 2011, and are contributing to the need to reposition Slovenia's rating in the middle of the 'A' range.

WHAT COULD MOVE THE RATING UP/DOWN

A further downward adjustment in Slovenia's sovereign rating could result from (i) a substantial intensification of the risks and uncertainties for the Slovenian government's balance sheet, stemming from the potential need for further support to banks; or (ii) a further marked deterioration in economic growth prospects due to external shocks stemming from the euro area crisis, which would in turn lead to the potential failure of the government to stabilise and reverse the general government debt trajectory.

Moody's would stabilise the outlook on Slovenia's rating in the event of government progress in implementing economic and fiscal policies that pave the way for a substantial and sustainable trend of increasing primary surpluses, and lead to a significant reversal in the public debt trajectory.

Moody's downgrades Spain's government bond rating to A3 from A1, negative outlook

Moody's Investors Service has today downgraded the government bond rating of the Kingdom of Spain to A3 from A1. The outlook on the rating is negative.

Concurrently, Moody's has also downgraded the rating of Spain's Fondo de Reestructuración Ordenada Bancaria (FROB) to A3 with a negative outlook from A1, in line with the sovereign rating action, given that FROB's debt is fully and unconditionally guaranteed by the Kingdom of Spain. Both Spain's and the FROB's short-term ratings have been downgraded to (P)Prime-2 from (P)Prime 1.

The key drivers of today's rating action on Spain are:

1.) The uncertainty over the prospects for institutional reform in the euro area and the weak macroeconomic outlook across the region, which will continue to weigh on already fragile market confidence.

2.) The country's challenging fiscal outlook is being exacerbated by the larger-than-expected fiscal slippage in 2011, mainly on account of budget overshoots by Spain's regional governments. Moody's is sceptical that the new government will be able to achieve the targeted reduction in the general government budget deficit, leading to a further increase in the rapidly rising public debt ratio.

3.) The pressures on the Spanish economy, which is close to entering a renewed recession, will be further increased by the need for even stronger action to achieve a deficit reduction. A renewed recession will also negatively affect the profitability of Spanish banks at a time when they are required to clean up their balance sheets.

Moody's is maintaining a negative outlook on Spain's sovereign ratings to reflect the potential for a further decline in economic and financing conditions as a result of a deterioration in the euro area debt crisis.

RATIONALE FOR DOWNGRADE

As indicated in the introduction of this press release, a contributing factor underlying Moody's two-notch downgrade of Spain's government bond rating is the uncertainty over the euro area's prospects for institutional reform of its fiscal and economic framework and over the resources that will be made available to deal with the crisis. Moreover, Europe's weak macroeconomic prospects complicate the implementation of domestic austerity programmes and the structural reforms that are needed to promote competitiveness. Moody's believes that these factors will continue to weigh on market confidence, which is likely to remain fragile. This will in turn mean a high potential for further shocks to funding conditions, which will affect weaker sovereigns like Spain first, increasing its susceptibility to other financial and macroeconomic shocks given the concerns identified below.

The second driver underpinning the downgrade of Spain's sovereign rating is Moody's expectation that the country's key credit metrics will continue to deteriorate. The larger-than-expected fiscal deviation reported for 2011 (with a general government deficit of around 8% of GDP vs. a target of 6%) make the country's fiscal outlook for 2012 even more challenging than Moody's anticipated at the time of its last rating action on Spain. Moody's acknowledges that the new government has taken timely action to compensate for a large part of last year's fiscal slippage, and has also taken steps to place the regional governments' finances under closer supervision. However, the effectiveness of these steps remains to be seen. Overall, the adjustment required to bring the public finances back onto the targeted path (a budget deficit target of 4.4% of GDP in 2012) is unprecedented. According to Moody's estimates, a total fiscal adjustment of approximately EUR40 billion (3.7% of GDP) will be needed, compared to a reduction in the deficit of around EUR28 billion in aggregate in 2010 and 2011.

Moody's is therefore sceptical that the target can be achieved and expects the general government budget deficit to remain between 5.5% and 6% of GDP. This in turn implies that the public debt ratio will continue to rise. Under Moody's base-case assumption, the debt ratio will be around 75% of GDP at the end of the year, more than double the trough reached in 2007, and will likely approach the 80% of GDP mark in the coming two years. One of Spain's key relative credit strengths -- its lower debt-to-GDP ratio compared to some of its closest peers in Europe -- is therefore eroding.

The third driver of today's rating action is the weakening Spanish economy, which is likely to come under even greater pressure because of the need for stronger action to achieve a deficit reduction. Spain recorded a contraction in real GDP of 0.3% quarter-on-quarter in Q4 of 2011 and Moody's expects Spain's GDP to contract by a further 1%-1.5% in 2012, compared to a forecast of low but positive growth of around 1% just a few months ago.

A renewed recession will further affect the profitability of Spanish banks at a time when they are expected to remove impaired real-estate-related assets from their balance sheets. Moody's views positively the new government's attempt to force the banking sector to increase provisioning against problematic assets related to banks' exposure to the real estate sector, thereby improving the transparency of banks' balance sheets and contributing to restoring market confidence. However, Moody's is doubtful that the government's plan to encourage stronger banks to merge with weaker ones will be achievable without further support from the public sector. The rating agency therefore continues to believe that the contingent risks arising from the banking sector are higher and more likely to crystallise in the case of Spain than among many of its peers. Moody's recognises that the labour market reforms, announced by the government on 10 February, are important steps to increase the flexibility in the labour market and should help foster faster employment growth once the economic recovery begins.

The decision to downgrade by two notches is explained by Moody's view that Spain's credit fundamentals and outlook are difficult to reconcile with a rating above the lower end of the "single-A" rating category. Indeed, peers at the top of the single-A category (like the Czech Republic and South Korea) as well as those in the middle of the category (like Poland), do not face Spain's fiscal and growth challenges, nor do they have banking systems with similar issues.

WHAT COULD MOVE THE RATINGS UP/DOWN

Moody's expects Spain's A3 rating to exhibit some degree of tolerance to potential downside scenarios that may emerge in coming quarters, including (i) a further modest deterioration in the macroeconomic outlook relative to the rating agency's base case expectation; (ii) a moderate deviation from the government's current fiscal targets and limited additional cost to the government from supporting the restructuring of the banking sector; as well as (iii) occasional political set-backs in the progress towards agreeing and implementing the necessary reforms to restore confidence.

However, Moody's rating would not be immune to a further substantial deterioration in macroeconomic or financial market conditions, leading to sharp fiscal and debt slippage in Spain, or to a substantial erosion in Spanish policymakers' commitment to reform implementation.

The rating outlook could be stabilised at the current level if the wider euro area situation were to be resolved conclusively. The rating could be upgraded if and when the economy is placed on a clear and improving trend and the public debt ratio has stabilised at sustainable levels.

Moody's changes the outlook on the United Kingdom's Aaa rating to negative

Moody's Investors Service has today changed the outlook on the United Kingdom's Aaa government bond rating to negative from stable.

The key drivers of today's action on the United Kingdom are:

1.) The increased uncertainty regarding the pace of fiscal consolidation in the UK due to materially weaker growth prospects over the next few years, with risks skewed to the downside. Any further abrupt economic or fiscal deterioration would put into question the government's ability to place the debt burden on a downward trajectory by fiscal year 2015-16.

2.) Although the UK is outside the euro area, the high risk of further shocks (economic, financial, or political) within the currency union are exerting negative pressure on the UK's Aaa rating given the country's trade and financial links with the euro area. Overall, Moody's believes that the considerable uncertainty over the prospects for institutional reform in the euro area and the region's weak macroeconomic outlook will continue to weigh on already fragile market confidence across Europe.

Concurrently, Moody's has today also changed to negative the outlook on the Aaa debt rating of the Bank of England in line with the change of outlook on the UK's sovereign rating.

RATIONALE FOR NEGATIVE OUTLOOK

The primary driver underlying Moody's decision to change the outlook on the UK's Aaa rating to negative is the weaker macroeconomic environment, which will challenge the government's efforts to place its debt burden on a downward trajectory over the coming years. These challenges, reflecting the combined effect of a commodity price driven hit to real incomes, the confidence shock from the euro area and a reassessment of the lasting effects of the financial crisis on potential output, were already evident in the government's Autumn Statement. The statement announced that a further two years of austerity measures would be needed in order for the government to meet its fiscal mandate of achieving a cyclically adjusted current budget balance by the end of a rolling five-year time horizon, and to reach its target of placing net public sector debt on a declining path by fiscal year 2015-16.

Moody's central expectation is that these objectives will be met, with a general government gross debt-to-GDP ratio peaking at just under 95% in 2014 or 2015, before gradually declining thereafter. However, Moody's expects the UK's debt to peak later, and at a higher level, than in most other Aaa-rated countries. Moreover, risks to the rating agency's forecasts are skewed to the downside. In part, these risks are the by-product of a necessary fiscal consolidation programme and the ongoing parallel deleveraging process in both the household and financial sectors. Moody's also believes that the further cutbacks announced last autumn indicate that the government has a reduced capacity to absorb further abrupt economic or fiscal deterioration without incurring a further slippage in its consolidation timetable.

A combination of a rising medium-term debt trajectory and lower-than-expected trend economic growth would put into question the government's ability to retain its Aaa rating. The UK's outstanding debt places it amongst the most heavily indebted of its Aaa-rated peers, alongside the United States and France whose Aaa ratings also carry a negative outlook.

The second and interrelated driver of Moody's decision to change the UK's rating outlook to negative is the fact that the weaker environment is also, in part, a by-product of the ongoing crisis in the euro area. Although the UK is outside the euro area, the crisis is affecting the UK through three channels: trade, the financial sector and consumer and investor confidence.

Moody's believes that there is considerable uncertainty over the euro area's prospects for institutional reform of its fiscal and economic framework and over the resources that will be made available to deal with the crisis. Moreover, Europe's weak macroeconomic outlook complicates the implementation of domestic austerity programmes and the structural reforms that are needed to promote competitiveness. Moody's believes that these factors will continue to weigh on market confidence, which is likely to remain fragile, with a high potential for further shocks to funding conditions.

In addition to constraining the creditworthiness of all European sovereigns, the fragile financial environment increases the UK's susceptibility to financial and macroeconomic shocks. Any such shock would pose further risks to the performance of the UK economy and to the strength of its financial sector, with inevitable consequences for the government's ability to achieve fiscal consolidation on schedule. Moreover, while the UK currently enjoys 'safe haven' status, there is also a growing risk that the weaker macroeconomic outlook could damage market confidence in the government's fiscal consolidation programme and cause funding costs to rise.

RATIONALE FOR CONTINUED Aaa RATING

Although Moody's has some concerns about the UK's macroeconomic outlook for the next few years, the UK's Aaa sovereign rating continues to be well supported by a large, diversified and highly competitive economy, a particularly flexible labour market, and a banking sector that compares favourably to peers in the euro area. The economy generally benefits from the significant structural reforms undertaken in the past. As a result of these strong structural features, Moody's expects the UK to eventually return to its trend growth rate of around 2.5%, although the return to trend growth is expected to be slower than originally expected, reflecting the nature and depth of the financial crisis.

The current fiscal consolidation programme remains intact and the government has demonstrated its willingness and ability to take action to address shortfalls. The UK has been proactive in pushing banks to hold more capital and in taking steps to reduce the probability and impact of the sovereign having to use its own balance sheet to support British banks. Further, the outstanding debt stock has important structural features that give the UK government a very high shock-absorption capacity.

The government is implementing an ambitious fiscal consolidation programme and so far has been meeting , and even exceeding, its deficit reduction forecasts. In the Autumn Statement, the Office for Budget Responsibility (OBR) announced weaker economic growth forecasts, to which the government responded by announcing further spending cuts, both over the medium and long term. Although Moody's sees rising challenges in achieving debt reduction within the timeframe that has been laid out by the government -- not least the possible impact of any future cutbacks on short-term growth -- the rating agency believes that the UK government's response to negative developments late last year indicates its commitment to restoring a sustainable debt position. This suggests that the UK's track record of reversing increases in debt is likely to continue going forward.

The UK's Aaa rating is also supported by the robust structure of government debt. The UK has the lowest refinancing risk of all the large Aaa economies, based on the average maturity of the UK's debt stock (nearly 14 years), its large domestic investor base, and the willingness and ability of its central bank to undertake accommodative monetary policy.

WHAT COULD MOVE THE RATING DOWN

The UK's Aaa rating could potentially be downgraded if Moody's were to conclude that debt metrics are unlikely to stabilise within the next 3-4 years, with the deficit, the overall debt burden and/or debt-financing costs continuing on a rising trend. This could happen in one of three scenarios, all of which would imply lower economic and/or government financial strength: (1) a combination of significantly slower economic growth over a multi-year time horizon -- perhaps due to persistent private-sector deleveraging and very weak growth in Europe -- and reduced political commitment to fiscal consolidation, including discretionary fiscal loosening or a failure to respond to a deteriorating fiscal outlook; (2) a sharp rise in debt-refinancing costs, possibly associated with an inflation shock or a deterioration in market confidence over a sustained period; or (3) renewed problems in the banking sector that force a resumption of official support programmes and spill over into the real economy, indirectly causing lower growth and larger budget deficits.

Conversely, the rating outlook could return to stable if the combination of less adverse macroeconomic conditions, progress towards containing the euro area crisis and deficit reduction measures were to ease medium-term uncertainties with regards to the country's debt trajectory.

REGULATORY DISCLOSURES

Although the following credit ratings have been issued in a non-EU country which has not been recognized as endorsable at this date, these credit ratings are deemed "EU qualified by extension" and may still be used by financial institutions for regulatory purposes until 30 April 2012. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.

Government of Finland

Government of Malta

Government of Portugal

Government of Slovakia

Fondo de Reestructuracion Ordenada Bancario

Malta Freeport Corporation Limited

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

The ratings Government of France, Government of Germany, Government of Italy, Government of Luxembourg, Government of Netherlands and Government of United Kingdom were initiated by Moody's and were not requested by these rated entities.

All rated entities or their agents participated in the rating process. The rated entities or their agents provided Moody's access to the books, records and other relevant internal documents of the rated entity.

The ratings have been disclosed to the rated entities or their designated agent(s) and issued with no amendment resulting from that disclosure.

Information sources used to prepare the ratings for Governments of Slovenia, Slovakia, Portugal, Malta and Malta Freeport Corporation Limited are the following: parties involved in the ratings, parties not involved in the ratings, and public information.

Information sources used to prepare the ratings for Governments of France, Italy, Societe de Financement de L'Economie Francaise and Societe de Prise de Participation de l'Etat are the following: parties involved in the ratings, public information, and confidential and proprietary Moody's Investors Service information.

Information sources used to prepare the ratings for Government of United Kingdom and Bank of England are the following: parties involved in the ratings, parties not involved in the ratings, public information, confidential and proprietary Moody's Investors Service information, and confidential and proprietary Moody's Analytics information.

Information sources used to prepare the ratings for Government of Spain are the following : parties involved in the ratings, parties not involved in the ratings, public information, and confidential and proprietary Moody's Investors Service information.

Information sources used to prepare the ratings for Fondo de Reestructuracion Ordenada Bancario are the following: parties involved in the ratings, and public information.

Moody's considers the quality of information available on the rated entities, obligations or credits satisfactory for the purposes of issuing these ratings.

Moody's adopts all necessary measures so that the information it uses in assigning the ratings is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Moody's Investors Service may have provided Ancillary or Other Permissible Service(s) to the rated entities or their related third parties within the two years preceding the credit rating action. Please see the special report "Ancillary or other permissible services provided to entities rated by MIS's EU credit rating agencies" on the ratings disclosure page on our website www.moodys.com for further information.

The below contact information is provided for information purposes only. Please see the issuer page on www.moodys.com for Moody's regulatory disclosure of the name of the lead analyst and the office that has issued the credit rating.

The relevant Releasing Office for each rating is identified in "Debt/deal box" on the Ratings tab in the Debt/Deal List section of each issuer/entity page of the Website. A link from the Releasing Office name is provided to lead to the full address of the respective MIS Releasing Office.