Overstock.com Thinks Internal Controls are for B*tches



Update: You knew Sam E. Antar was comin' for dat ass.

It's a miracle, Overstock has released its remixed, er, restated financials for 2008/2009 we've been waiting for anxiously for and honestly I don't even need to look to know what's in it. Lucky for us, Gary Weiss skimmed it and found that Overstock owes California somewhere between $7.5 and $8.5 million for bad consumer practices - we aren't sure which number either entity is going with, knowing California and our little cash problem, I'm going to guess it's the larger of the two.

The least surprising of the filing is this little love letter from KPMG revealing (can I even use revealing in this context since we all knew Overstock was fucked to begin with and did not need an audit opinion - qualified or otherwise - to know as much?) Overstock has a bit of an internal control problem.

I just want to get this in print so KPMG can refer to it later - you know, put it in the scrapbook or what have you... I especially enjoyed the entire paragraph about the importance of internal control and the effect loose controls can have on statements. KPMG could have gone a step further and marked Overstock's financials toxic but that would violate the sanctity of the auditor/client relationship surely.

The Board of Directors and Stockholders
Overstock.com, Inc.:

We have audited Overstock.com, Inc.'s internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Overstock.com, Inc.'s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting (Item 9A(c)). Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis. Material weaknesses related to the lack of a sufficient number of accounting professionals with the necessary knowledge, experience and training to adequately account for and perform adequate supervisory reviews of significant transactions and the inadequate design of information technology program change and program development controls have been identified and included in management's assessment. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet as of December 31, 2009, and the related consolidated statements of operations, changes in stockholders' (deficit)/equity and comprehensive income (loss), and cash flows for the year ended December 31, 2009 of Overstock.com, Inc. These material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2009 consolidated financial statements, and this report does not affect our report dated March 31, 2010, which expressed an unqualified opinion on those consolidated financial statements.

In our opinion, because of the effect of the aforementioned material weaknesses on the achievement of the objectives of the control criteria, Overstock.com, Inc. has not maintained effective internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

KPMG LLP

/s/ KPMG

Salt Lake City, Utah
March 31, 2010

What is Overstock's answer to this? Well nothing, of course. They claim in the filing that they are "in the process" of fixing this but, uh, haven't made any progress on that to date [my emphasis].


There were no changes in our internal control over financial reporting that occurred during the fourth quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


As of December 31, 2009, we had not remediated the material weaknesses. We have done and/or initiated the following actions subsequent to December 31, 2009:

•We have and are continuing to hire additional accounting professionals with the necessary knowledge and experience to properly account for significant transactions.

•We have reorganized our accounting and financial reporting department to improve supervisory review.

•We are hiring additional experienced and qualified professionals for our internal audit department.

•We have reorganized our supply chain department to provide comprehensive oversight over our returns process and partner billing accuracy.

•We are reviewing the systems and controls in place to appropriately capture amounts to be paid to fulfillment partners or deducted from partner payments.

•We are enhancing our information systems testing to improve the completeness and accuracy of data provided by our information systems.

•We have engaged a consulting firm to evaluate our information systems for improvement opportunities.
Not content with letting the scum settle to the bottom of the glass on this one, our buddy Patrick Byrne just won't STFU and issued this cheerful little letter to shareholders (at this point, if you're long Overstock you pretty much deserve every little bit you have coming):

Dear Owner:

In Q4 our revenues grew 27%, twice the ecommerce industry's rate, and we earned $12.7 million in net income. In 2009 we grew revenues 6%, earned $7.7 million in net income, generated $46 million in operating cash flow, and generated $39 million in free cash flow.  It's nice to be profitable.

I am proud that, for the second year in a row, we rank number 2 in the NRF/Amex survey of American consumers, behind only LL Bean and ahead of Amazon, Zappos, eBay, Nordstrom, and many other fine firms.

As you may know, at the end of Q4 we engaged KPMG as our independent auditors, and announced that we were restating our FY 2008 and Q1, Q2 and Q3 2009 financial statements. I thank you for being patient with us as we worked through the questions raised by the SEC, the transition to the KPMG team, and the extra time it took to ensure that our financial statements are accurate.

I look forward to our conference call next Monday. Until then, I remain,

Your humble servant,

Patrick M. Byrne


The Company will hold a conference call and webcast to discuss its fiscal year and fourth quarter 2009 financial results on Monday, April 5, 2010 at 5:00 p.m. Eastern Time.

Be there or be square.

See also: Overstock.com Turns a Profit; Patrick Byrne Writes a Very Un-Patrick Byrne Letter to Shareholders (Going Concern) and California to Overstock.com: You Owe Us $8.5 million (or is it $7.5 million?) (Gary Weiss)

Dallas Fed's Fisher: Large Deficits Will Be Run For as Far as the Eye Can See


Apparently Richard Fisher is hip to the little debt problem the US has going right now and may not be the alone in expressing a going concern doubt on the entity. Burn.

Bloomberg:

Federal Reserve Bank of Dallas President Richard Fisher said the U.S. can’t ignore the effect of the growing federal deficit on Treasury yields and the outlook of investors.

“Even under the most optimistic of scenarios, large deficits will be run for as far as the eye can see,” Fisher said in the text of a speech today in Tucson, Arizona. “The markets, fearing the consequences of runaway deficit financing, have bid up longer-term nominal rates, resulting in a yield curve that is now historically steep.”

Fisher’s remarks underscore the view expressed last week by former Fed Chairman Alan Greenspan, who told Bloomberg Television that he’s “very much concerned” about the financial situation of the U.S. Greenspan said higher yields are a “canary in the mine” that may signal further interest-rate gains and reflect investor worry about the “huge overhang of federal debt.”

“Some of this, of course, may reflect an improvement in economic growth,” which should be about 3 percent this year, Fisher said during the speech at the University of Arizona’s Eller College of Management.

Still, “we cannot turn a blind eye to the effect that growing government indebtedness has on investors’ confidence and Treasury yields,” said the bank president, 61, who has led the Dallas Fed since 2005 and doesn’t vote on the Federal Open Market Committee again until 2011. The Fed shouldn’t step in to buy Treasuries just to hold longer-term rates down, which would create the perception that policy makers are “monetizing the debt,” he said.

Fisher, ever the teacher and poet, gives us this from Arizona (stick your pinky out while you're sipping your coffee and reading it):

Consider this quote, from an essay titled "A Time of Unexampled Prosperity" in Washington Irving's The Crayon Papers:

"Every now and then the world is visited by one of these delusive seasons, when ‘the credit system' ... expands to full luxuriance: everyone trusts everybody; a bad debt is a thing unheard of; the broad way to certain and sudden wealth lies plain and open; and men ... dash forth boldly from the facility of borrowing.

"Promissory notes, interchanged between scheming individuals, are liberally discounted at the banks.... Everyone talks in [huge amounts]; nothing is heard but gigantic operations in trade; great purchases and sales of real property, and immense sums [are] made at every transfer. All, to be sure, as yet exists in promise; but the believer in promises calculates the aggregate as solid capital....

"Speculative and dreaming ... men ... relate their dreams and projects to the ignorant and credulous, dazzle them with golden visions, and set them maddening after shadows. The example of one stimulates another; speculation rises on speculation; bubble rises on bubble....

"Speculation ... casts contempt upon all its sober realities. It renders the [financier] a magician, and the [stock] exchange a region of enchantment.... No ‘operation' is thought worthy of attention that does not double or treble the investment. No business is worth following that does not promise an immediate fortune....

"Could this delusion always last, life ... would indeed be a golden dream; but [the delusion] is as short as it is brilliant."

Irving was writing about the Mississippi Bubble fiasco of 1719! So, yes, just as Wodehouse said: Fate has a nasty habit of repeatedly sneaking up behind contented financial markets with a bit of lead piping.

If only he were in a position to practice what he preaches. Poor bastard, surrounded by inflationary idiots who think 4% is a reasonable target. I'm not talking about running up inflation to 4% just to clear out some of the bad juju swarming around markets, I'm talking about people within the FOMC who think 4% is totally reasonable most of the time. I'm sure it would make their jobs easier when it comes to dictating monetary policy but vaporizing savings isn't really the way to win favor with the already pissed off unwashed masses.

Just a suggestion.

TLP: Ask For The Top Bunk, If It Comes To That

ashjian tea party
Wannabe candidate Scott Ashjian now has not just the Tea Party mad at him for running a U.S. Senate campaign under their banner. He's also potentially facing criminal charges over an accusation that he wrote a bad check.

CNN:

Scott Ashjian, the Tea Party candidate running for Senate in Nevada, could soon face a felony charge.

He's accused of writing a bad check for $5000 through his asphalt business. The Clark County District Attorney has filed paperwork requesting Ashjian's arrest, but is still awaiting a signature from a judge.

A spokesperson for the DA's office tells CNN these types of cases are often dismissed without charges if the debt is paid. So far, no word on whether Ashjian plans to settle up for the alleged debt.

That's not all.

The Nevada businessman-turned-candidate is also under fire from Tea Party organizations who have crafted an ad telling Ashjian to "get lost."

The groups insist Ashjian is a pretender who's only running in order to siphon votes from conservatives.

Ashjian apparently has some things to tend to, politically and with the authorities. Getting bounced from the ballot for not being a true teabagger is one thing. Learning about teabagging from your cellmate is another.

GSEs Get the Best Left Hand Jobs



What I would like to know is: how many of these 1st and 2nd loans belong to Fannie and Freddie?

Using our left hand to jerk off again I see.

A Backdoor Bank Bailout (WSJ):

Today President Obama announced an expansion and modification of his Home Affordable Modification Program (HAMP). While one can debate the merits of incentives to keep unemployed families in their homes while they search for jobs — I personally believe this will more often than not keep those families tied to weak labor markets — what should be beyond debate is the various bailouts to mortgage lenders contained in the program's fine print.

Several of the largest mortgage lenders, including some that have already received huge bailouts, carry hundreds of billions worth of second mortgages on their books. As home prices have nationally declined by almost 30 percent, these second mortgages are worthless in the case of a foreclosure. Second mortgages are usually wiped out completely during a foreclosure if the price has decreased more than 20 percent. Yet the Obama solution is now to pay off 6 cents on the dollar for those junior liens. While 6 cents doesn't sound like a lot, it is a whole lot more than zero, which is what the banks would receive otherwise. Given that the largest lenders are carrying over $500 billion in second mortgages that may need to be written down, we are looking at tens of billions of taxpayer dollars again being funneled to the very banks behind the mortgage crisis.

WSJ says it's a backdoor bank bailout (LOL twice) but JDA smells the stench of GSE all over it. Oh yeah, there it is (Business Week):

The Obama administration announced programs to help U.S. homeowners avoid foreclosure, including subsidies for borrowers who owe more than their home is worth.

The plan expands Treasury Department and Federal Housing Administration efforts and uses funds from the $700 billion Troubled Asset Relief Program. The administration faced a week of criticism from lawmakers and watchdog groups who say the government hasn’t helped enough homeowners stave off foreclosures.

The proposal is part of a broader effort to help the economy recover from the worst recession since World War II, said Diana Farrell, deputy director of the White House’s National Economic Council. The Obama administration will work to make sure “the nascent recovery is sustained” and to preserve confidence in Fannie Mae and Freddie Mac, the government- sponsored enterprise mortgage companies, she said.

“We’ll continue our very committed support to the GSEs,” she told reporters in Washington today.

Ouch. Have you ever been in a situation where you've stood by someone who didn't really deserve your loyalty? That's what's happening with GSEs and the federal government.

Of course, you knew someone had to pick up the slack after the Fed left the market for MBSs. If you thought there was going to be an alternate outcome, I'm sorry but you're wrong. Someone had to keep the market afloat, God forbid we feel the pain (temporarily) and then actually recover. Oh well. Pass the BP JBs.

And I repeat: TARP was not a fucking piggy bank!!

"The Actual Enemy of Liberty Remains Hidden From Our View"



(h/t Western Rifle Shooters Association)

It was at the Liberty Forum and warned: Later portions are not for the faint of heart. How could I not watch? Especially the later portions. Says WRSA:

Think about the challenges Baugh sets out.

Think hard.

There will be a test.

Pass or fail.

Watch the entire thing if you care to. And please stop bitchfighting amongst yourselves and with me about stupid ass shit like red vs blue. Maybe you guys are better off being dumb.

What Ever Happened to Goldman Sachs' Resident Pervert Lawyer?

But officer, I didn't know those CDOs were BBB grade, I swear...

He plead guilty to disseminating indecent material to a minor and was released on his own recognizance. He's due back in court May 11th. NY State won't allow me to link to it (eh, fuck 'em) but it's Case # 01275S-2009 in Westchester County Court.

JDA never postulated much on what indecent material meant but I'm guessing now it was cock shots. That's usually what does it. Snicker.

See also: Goldman Sachs Attorney Meets "To Catch a Predator"

TLP: Frustrated Sex.Com Lender Swears There's NO WAY That Was Involuntary

sex bankruptcy internet
If you work for a company called DOM Partners, you probably have a thing about being in control. Understandable, you know, if you roll that way.

So it's no surprise that the New Jersey lender seems just a bit pissed off by an effort to pull the very lucrative and potentially exceptionally filthy sex.com Internet domain out of its paws.

Reuters tries, sort of, to keep it clean:

A lender which claims it is owed millions by the Sex.com domain name operator is asking a U.S. bankruptcy court to dismiss an involuntary bankruptcy case against the company, so it can resume a foreclosure auction, according to new court documents.

The New Jersey lender, DOM Partners LLC, which said it loaned more than $4 million to Escom LLC to fund the website's operations, said in court papers on Friday that Escom shouldn't be in bankruptcy. DOM said it would be best able to recover the debt by holding a new auction for what may be the world's most valuable domain name.

An earlier auction was set to take place March 18 in New York, but was halted when three of Escom's other creditors, saying they are owed more than $10 million, filed an involuntary bankruptcy proceeding against the website owner in California.

DOM Partners claims, according to a very loose interpretation by The Lazy Paperboy, that Escom has been sitting around jerking off over sex.com since 2004, when it paid $14 million for the domain name. Maybe I'm reading this wrong, but "one employee, little income and little ability to achieve its intentions" has sticky keyboard written all over it. Awesome reporting, Reuters. How's your keyboard?

Reuters talked to Internet entrepreneur Mike Mann, who controls the creditors who filed the bankruptcy case. He blames the lenders and may be projecting just a bit about other issues.

Come on Reuters, you had to be giggling, right?

"The other investors interfered and blocked us, threatened us and caused us various troubles and losses. We had our hands tied, and our money stolen," Mann said.

Go to it. Let the judge work it out. Get your money or your domain or at least some spankworthy content. The Lazy Paperboy will be waiting for the next dirty Reuters story about sex.com while he watches out for a rolled-up newspaper. DOM Partners may not be the only ones with a thing about control.

Expressing a Going Concern Doubt on the United States Government, Not According to GAAP



A reality check from John Williams at Shadow Government Statistics.

WorldNetDaily:

Statistics generated in Williams' most recent newsletter demonstrate the real 2009 federal budget deficit was $4.3 trillion, not the $1.417 trillion previously reported by the Congressional Budget Office, according to the 2009 Financial Report of the United States Government as released by the U.S. Department of Treasury Feb. 26.

The difference between the $1.417 trillion "official" budget deficit numbers and the $4.3 trillion budget deficit based on data reported in the 2009 Financial Report of the United States Government is that the official budget deficit is calculated on a cash basis in which all tax receipts, including Social Security tax receipts, are used to pay government liabilities as they occur.

The calculations in the 2009 Financial Report of the United States Government are calculated on a GAAP basis (Generally Accepted Accounting Practices) that includes year-for-year changes in the net present value of unfunded liabilities in social insurance programs such as Social Security and Medicare.

Under cash accounting, the government makes no provision for future Social Security and Medicare benefits in the year in which those benefits accrue.

"The government now does not have the ability to raise taxes high enough to eliminate the deficit in a given year," Williams said.

"The government cannot raise taxes high enough to bring the budget into balance. You could tax 100 percent of everyone's income and 100 percent of corporate profits, and the U.S. government would still be showing a federal budget deficit on a GAAP accounting basis."

What would getting the shit scared out of you be without a handy chart?


Since when does honest accounting matter to the government? ANY government? Anyway, Williams insists (still) that the only possible way out is a doomsday hyperinflation scenario. I'm cool off that view these days, I'm convinced we can drag this out for quite a bit longer before it gets that bad.

GASB has a pretty cush job, it's not like they have to figure out how to make balance sheets balance. But when even the government accounting makes things look bad (see: pensions), you really know you've got a problem on your hands.

Shock and Awe: The NY Fed Bought Lehman Crap (Who Needs an Audit?)


Squeeeeeeeeal Audit the Fed! You can if you really want to but you'd need someone who knows Federal Reserve accounting, presumably the only people who do are Federal Reserve accountants. Skeptical CPA has also made it known that he's available and interested in the gig but beyond those select few, I still haven't seen evidence that a Fed "audit" would accomplish anything except waste time and tell us what we already know.

Keep FOIAing their asses but in the end, it's Congress' problem to deal with. That we have control over. Do your representatives in Washington give a rat's ass about the Fed?

Money News:

As Lehman Brothers headed toward bankruptcy in 2008, the New York Federal Reserve Bank, under the direction of now-Treasury Secretary Tim Geithner, reportedly allowed itself to be used as a "warehouse" for Lehman Brothers junk loans.

A report from Anton Valukas, an examiner appointed by the court to investigate how Lehman’s accounting, found clear evidence that the New York Fed knew that Lehman was sending it garbage that it had no intention to market, even though Fed guidelines say it can only accept investment grade bonds.

The move, in fact, created baskets of assets for the specific purpose of selling to the Fed for far more than they were worth, The Huffington Post reports.

Meanwhile, the Fed and Geithner both strongly oppose a congressional measure to authorize an independent audit of the central bank and its lending facilities, the Post said.

Without an audit, the Fed is able to conceal the specifics of what it holds on its balance sheet. If the Lehman deal is any indication, the Fed is hiding billions of dollars in toxic loans on its books.

The revelation provoked immediate comments from Congressman Alan Grayson.

"The Fed legally is forbidden from taking such assets, Grayson said. “There's a legal requirement that the Fed's assets be investment grade."

That's funny, we don't seem to care about the reverse for foreign governments who end up loaded up with our non-investment grade bullshit. And if that's the case, what is the Fed doing with Maiden Lane I - III and $1.25 trillion in mortgage-backed securities? That isn't a rhetorical question.

Speaking of those MBSs, if the Fed is smart, it will ignore the seizures and unload them as efficiently as possible moving forward. RIP OFF THE BAND-AID, it will never get better until they do.

We can go back to audit the Fed but I'm not sure what good that would do. I'm still clinging desperately to the literal definition of audit. On top of that, I've gotten awfully cozy with the Fed in the last year and a half and I've come out of it realizing that they are generally pretty obvious about all of this. It isn't too difficult to figure out what they're doing, they're bad at this game by now and get worse as they get distracted by keeping an ever growing number of balls in the air. Being both supply and demand in financial markets is hard work, how could they possibly keep up the anti-transparency campaign on top of it? But the same guys available to "audit" the Fed would be the ones who missed Lehman so what do you think that will accomplish?

And so they break.

Leave the Fed alone. I'm still serious. Grab some buttered popcorn Jelly Bellys and a seat.

See also: Don't Throw the Fed in the Briar Patch! and New Fed Financial Accounting Manual Shows Creative Ways to Cook the Fed's Books. Erm, "Guidance"

Care to Slap One on Your Black Helicopter?



BuildASign.com has been kind enough to provide me with a handful of these handy bumper stickers for distribution, advertisement, and just about anything else you can come up with except for defacing property that isn't yours (that's illegal and JDA would never dream of breaking the rules). If you'd like one (or two), shoot me a note and I'd be happy to hook it up (if the USPS can figure out how to deliver mail, seems to be a bit difficult for them these days).

Get a good shot of your sticker in action and I'll put it on Commuting Capitalist.

And though we've had our differences, I sincerely hope Janet Yellen gets in touch, I'll personally slap one on the back of her Prius myself.

If you hate JDA (it's cool, I'm used to haters), head over to Build A Sign to make your own custom bumper stickers. Might I suggest "Hating: It's What's for Breakfast" or "My Honor Student Sells Test Answers to Your Honor Student". Whatever. It's a free country.

Tim Geithner Wants You Believe That He's Going to Fundamentally Change Fannie and Freddie



Oh Timmy Timmy, why ya buggin? Surely it has nothing to do with the fact that GSE CEOs are pulling in $6 million a year, does it?

Tim Geithner forgets sometimes that we are paying attention.

WaPo:

Treasury Secretary Timothy F. Geithner on Tuesday told a congressional panel considering the future of Fannie Mae and Freddie Mac that the Obama administration would seek to keep in place aspects of the housing-finance system that have worked well during the past few decades as it overhauls the parts that did not.

In response to questioning, Geithner said mortgage-finance giants Fannie and Freddie were at the center of a system that "was in many ways the envy of the world" for many decades. "It's important as we think about the future to make sure we retain what was good in this system," he said.

But the Treasury secretary said that the old system would not be re-created and that Fannie and Freddie's status as shareholder-owned companies with the implicit backing of taxpayers would end. "We're going to have to do fundamental change," Geithner said, adding that the government would make clear what it stands behind and what it doesn't.

How does this impact Geithner's decision to offer essentially unlimited funding to keep Fannie and Freddie afloat? Geithner is going to have to take a stand on GSEs and if his past performance is any indication, he'll stand on the side of the line that leaves the taxpayer's ass rawest and sorest. That's my guess.

Whose Fault Is It: Obamacare's or Accounting's?



FT Alphaville has a truly useful elaboration of last week's billion dollar hit to corporations. Yours truly didn't do her research (happens) and blamed it all on Obamacare. Nope. In reality, it's 79% Obamacare, 15% stupid ass tax loopholes/subsidies and 6% accounting. Those percentages are approximate and as always, why are you taking anything I say seriously anyway?

Sorry I got all pissy. I'm only a tad butthurt.

FT:

Currently many corporations, particularly in the industrial and telco sectors, receive a 28 per cent subsidy towards paying for prescription-drug coverage. They are also able to deduct the total amount they spend on such drugs from taxes.

Under the new law, companies will still receive the subsidy but will no longer be able to write off the subsidy against taxes, which will cause their tax bills to rise.

Still, the damage appears worse than it is. Because of accounting rules, the companies have to take the entire charge now even though the impact of the health-care law won’t be felt until 2013, when their yearly tax bills will increase – but only modestly.

More ominously however, the new legislation looks like it might cause the affected companies to take another look at the benefits they provide workers.

“As a result of this legislation, including the additional tax burden, AT&T will be evaluating prospective changes to the active and retiree health care benefits offered by the company,” AT&T said in its regulatory filing.

Praise Obama, our prayers have been answered!

Market Ticker and I both jumped the gun. Now if we end up getting stabbed by it later, you know why.

The PCAOB Thinks You Have a Communication Problem, Auditors

 Miscommunication is a terrible, terrible thing

It really does sound like a bad relationship. The PCAOB wants auditors to listen and communicate and get all warm and fuzzy with financial statements but let's face it, auditors are frigid and would much rather do what they did last year which was reluctantly hang out with inventory on December 31st and use the work papers as coasters.

The PCAOB thinks audit committees need to learn how to communicate. Funny. Communication is the ONE section of the CPA exam that candidates appear the most allergic to, in fact, my most common CPA exam question these days is "if I take BEC this year and AUD, FAR, and REG in 2011 does that mean I can avoid the written communication section completely??" (the answer is yes but come the fuck on, you little future guardians of capital markets could really use the practice, I've been reading your e-mails for 3 years...)

Really? All this because of Lehman? I don't think communication was the problem, in fact, perhaps it was excessive communication that is to blame. You know like "Hey, let's do some Repo 105s" and "well sure, fuck audits, it's all bullshit anyway, right?" "Right. Sign that shit off and let's go get a drink."

Good luck with that.

See also The PCAOB Proposes Ideas on How Auditors Can Better Communicate with Other Human Beings (Going Concern)

TLP: Is Michael Steele Trying Too Hard? Or Not Hard Enough?

republican fail
So Michael Steele could totally have played this one cool. Private jets, limousine service, expensive parties. And, we mean, parties. Dropping the dollars as soon as the donors cut the checks. "No game? Says who?" All for the good of the GOP, don't you know.

But no. On the heels of getting owned over Obamacare, trying to figure out WTF about the Tea Party, watching an attempt to get Reagan on the $50 flop — fuck, GOP politicians can't even get threatened properly without seeming to provoke a nut job — the Republican National Committee found itself explaining that Steele isn't so much of a player after all.

NYT:

A Republican Party spokesman said Monday evening that a staff member has been dismissed following a February outing to a risqué Hollywood nightclub, where a party donor submitted a $2,000 tab and asked for reimbursement from the Republican National Committee

Doug Heye, the communications director for the R.N.C., issued this statement:

“At the outset, Chairman Steele was not at Voyeur West Hollywood. He had no knowledge of the expenditure, nor does he find the use of committee funds at such a location acceptable. While some in the press have suggested Chairman Steele was at the venue, he was not and no proof has been offered that he was. When the expense was incurred, Chairman Steele was on United flight # 0084, returning from the RNC Winter Meeting.

“Upon finding out of the expenditure this morning, Chairman Steele demanded the committee get to the bottom of this matter immediately."

Aside from pissing off donors who might rather have enjoyed a little bit of "Oh. Wow." for the two-grand they donated to the conservative cause, what harm was Steele, or whomever, doing to the party? After all, everybody knows how Mark Sanford ended up as the happiest Republican around these days.

NYT on Obamacare's Economic Inequality Neutralizer



You thought this administration was all about wealth distribution before? Obama is not content with perpetuating the anti-citizen policies of his sycophant predecessor, he's taking it one step further and insisting Obamacare is his attempt to put wealth back into the hands of the lazy, stupid, or otherwise unqualified.

I've been punished my entire life for being intelligent, now I might as well accept my fate, get fat on government cheese and soak the government for all its worth while I still can. Hell, why don't I squeeze out another kid or two too?

NYT:

For all the political and economic uncertainties about health reform, at least one thing seems clear: The bill that President Obama signed on Tuesday is the federal government’s biggest attack on economic inequality since inequality began rising more than three decades ago.

Over most of that period, government policy and market forces have been moving in the same direction, both increasing inequality. The pretax incomes of the wealthy have soared since the late 1970s, while their tax rates have fallen more than rates for the middle class and poor.

Nearly every major aspect of the health bill pushes in the other direction. This fact helps explain why Mr. Obama was willing to spend so much political capital on the issue, even though it did not appear to be his top priority as a presidential candidate. Beyond the health reform’s effect on the medical system, it is the centerpiece of his deliberate effort to end what historians have called the age of Reagan.

Speaking to an ebullient audience of Democratic legislators and White House aides at the bill-signing ceremony on Tuesday, Mr. Obama claimed that health reform would “mark a new season in America.” He added, “We have now just enshrined, as soon as I sign this bill, the core principle that everybody should have some basic security when it comes to their health care.”

What was that about Reagan?

Since Mr. Obama began his presidential campaign in 2007, he has had a complicated relationship with the Reagan legacy. He has been more willing than many other Democrats to praise President Reagan. “Reagan’s central insight — that the liberal welfare state had grown complacent and overly bureaucratic,” Mr. Obama wrote in his second book, “contained a good deal of truth.” Most notably, he praised Mr. Reagan as a president who “changed the trajectory of America.”

But Mr. Obama also argued that the Reagan administration had gone too far, and that if elected, he would try to put the country on a new trajectory. “The project of the next president,” he said in an interview during the campaign, “is figuring out how you create bottom-up economic growth, as opposed to the trickle-down economic growth.”

Listen, I'm not your average conservative. I may own a "Reagan for President" t-shirt but I don't believe in the Republican utopia of the conservative majority. Gays getting married? Hell yes, let them. Abortion? It's not for me to tell you what you can do with your bag of unborn babies, you can work that out with your conscience yourself, Dr Death. But wealth distribution? How in the hell do you encourage a country that already gave up its industry to the third world to actually work when you have guys like Obama insisting what's yours is his and what's his is, well, still his?

Anyone want some Jelly Bellys?

Rain, Sleet, or Snow Won't Do It But Unfunded Pensions TOTALLY Will

 Pic credit: MTTS

Well, let's see if this solves all of the USPS's problems.

LA Times :
The discussed demise of Saturday mail delivery would become a reality early next year under a cost-cutting U.S. Postal Service plan unveiled Monday that would also slash thousands of front-line jobs.

"Given the fact that we're facing such a huge deficit, we'd like to move as quickly as possible," Postmaster General John E. Potter told a news conference.

Faced with a projected $238-billion deficit over the next decade, the Postal Service board of governors approved the cuts last week and ordered Potter to submit the proposal to the Postal Regulatory Commission on Tuesday.

In addition to cutting one day a week from the delivery schedule, the proposal would eliminate the equivalent of 40,000 full- and part-time jobs, about 8% of the current workforce of 600,000. Officials said the changes would save the Postal Service a projected $3.3 billion in the first year and about $5.1 billion annually by 2020.
Part of the problem with the Postal Service, as reported last month here and CPA Trendlines, may be Sarbanes-Oxley compliance. Yes, you read that correctly: SOX has struck again. Still, SOX has nothing to do with the USPS's raging pension problem.

See also: The Mail: Sucking Harder Than Ever and Ernst and Young Expresses a Going Concern Doubt... on the Post Office?

Will Mary Schapiro Personally Review Every SEC Filing From Now On?

 Mary Mary, why ya buggin?
Felix Salmon knows why

Good call, SEC, I'm sure focusing on frauds that have already happened is a really productive use of the Commission's precious time and energy. It's not like criminals haven't already come up with new, easier to hide methods to execute their financial misdeeds.

Better start signing those SEC filings with "love ya, Mary!"

Business Week:

The U.S. Securities and Exchange Commission will examine whether Wall Street firms used accounting strategies like Lehman Brothers Holdings Inc.’s transactions that allegedly hid leverage, SEC Chairman Mary Schapiro said.

“We are looking at the Lehman activities very, very carefully,” Schapiro said today in a CNBC television interview. The regulator plans to review “every major financial institution very thoroughly” in coming weeks, she said.

The SEC’s Corporation Finance division, which monitors company disclosures, released a letter today that it is sending to finance chiefs at about two dozen firms. The letter asks how often the companies use transactions similar to Lehman’s, how they account for them and whether the dealings are concentrated in specific countries or with specific counterparties.

Because Lehman didn’t disclose the accounting, the firm’s financial statements were “deceptive and misleading,” Valukas concluded. Regulators haven’t accused Lehman and its former executives of wrongdoing over the transactions.

So, uh, is this honor system regulating, then?

H&R Block Identity Theft Victim Gets Victimized Again in IRS Audit

 FML!

Tim Geithner is probably laughing somewhere going "well shit, shoulda used TurboTax!" and frankly, JDA is kind of giggling herself.

First the guy gets ripped off by an unscrupulous H&R Block employee and then gets audited by the IRS. It's a hard knock life, eh?

The Post Tribune live from East Chicago:
A victim of an alleged identity theft scam by a tax preparer still is waiting for his refund check.

Byron "Duke" Florence was counting on a few thousand dollars from the IRS this January when he went to file his 2009 tax return at an H&R Block at 3932 Main St. in his Indiana Harbor neighborhood, the same place he'd filed the previous three years.

Staff at the branch told him he'd apparently already filed his 2009 form, and the IRS told him his check had been sent-- and deposited. Florence went to police, where he found three other H&R Block clients waiting in line to report similar stories.

Last Thursday, tax preparer Francesca Foster was arrested and charged with identity theft for allegedly using H&R Block tax records to file fraudulent claims-- totaling nearly $300,000-- for at least 60 customers.

Shortly after he made his report, Florence said he filled out a second tax return with the help of IRS agents assigned to his case. Last week, he received a letter from the IRS with the heading "We're Auditing Your Tax Return And Delaying Your Refund."

"I thought, 'Damn. I went through all this, got robbed, and now I'm getting an IRS audit?' " Florence said Thursday. "I didn't do anything wrong but trust people to look after my business."

Alright, let's break this down issue by issue.

First and foremost, WTF was Florence doing at H&R Block in the first place? It's the McDonald's of tax preparation and I'm sorry but if you go in there expecting filet mignon, don't go whining that you ended up with a Filet O Fish. The kids at the Block make just about as much as the kids at McDonald's so if you want to put your Schedule C in those hands, by all means. Just don't bitch when it gets screwed up.

Secondly, what happened to doing your own taxes? Seriously. I'm asking. And I expect an answer. My grandpa taught me how to do it in high school, it's really not that fucking difficult. Grab a calculator and stop being lazy.

Thirdly, if you're not of the set that can pull together a W-2 and a few 1099s, find a CPA, cheap ass.

And finally... well... there is no finally. I've said enough.

InterOil Responds to Allegations That They've Never Actually Found Oil

interoil dry wells


Unfortunately, their press release this morning did not discuss rumors that their pumper in chief Shia LaBeouf has a tiny dick. Oh well.

In case you missed it, catch up on the awesome story here: Before We Talk About Anything Else, Let's Get the Tiny Dick Out of the Way (Then Get to the InterOil Fraud). I also did it for Going Concern this morning (JDA can't resist a good dick story with convenient Texas gusher photos), which you can find here.

So, the press release:

CAIRNS, Australia and HOUSTON, March 29 /PRNewswire-FirstCall/ -- InterOil Corporation (NYSE: IOC) (POMSoX: IOC) believes that allegations made in an article concerning certain litigation which has been ongoing in Texas since 2005, have been raised now in an attempt to divert attention from the successful operations of the company. Operations conducted by the company which were evaluated by independent engineering evaluations consultants, GLJ Petroleum Consultants Ltd., resulted in an increase in our gross best case contingent resources estimate by 889 million barrels of oil equivalent resources, to a revised total of 8.2 tcf of natural gas and 156 million barrels of condensate, in the past fiscal year. The article was timed to benefit recent short selling activities. The "short" interest in InterOil increased to 3,548,056 shares in mid-March.

That makes sense. Best not to talk about ongoing litigation, that's a good rule to run with. But, uh, then the press release basically reveals what everyone already knows: after 7 years of promising explosive stores, InterOil has come up short every time.

Someone tweet me if they ever find some oil, I've got shit to do and can't sit around waiting for them to figure out what "successful operations" actually means.

The PR footnotes:

InterOil currently has no production or reserves as defined in Canadian NI 51-101 or under the definitions established by the United States Securities and Exchange Commission. The resources information set forth in this press release is based on the GLJ Report and is a summary of information to be included in the Statement of Resources and Other Oil and Gas Information of InterOil for the year ended December 31, 2009, which will be prepared in accordance with NI 51-101 and will be included in InterOil's annual information form for the year ended December 31, 2009, a copy of which will be filed on SEDAR (www.SEDAR.com) and on InterOil's website (www.interoil.com).

Contingent resources are those quantities of natural gas and condensate estimated, as of a given date, to be potentially recoverable from known accumulations using established technology or technology under development, but which are not currently considered to be commercially recoverable due to one or more contingencies. The economic status of the resources is undetermined and there is no certainty that it will be commercially viable to produce any portion of the resources. The following contingencies must be met before the resources can be classified as reserves:

* Sanctioning of the facilities required to process and transport marketable natural gas to market.
* Confirmation of a market for the marketable natural gas and condensate.
* Determination of economic viability.


Although a final project has not yet been sanctioned, pre-Front End Engineering and Design (FEED) studies are ongoing for liquid natural gas (LNG) and condensate stripping operations as options for monetization of the gas and condensate.

The "low" estimate is considered to be a conservative estimate of the quantity that will actually be recovered. It is likely that the actual remaining quantities recovered will exceed the low estimate. With the probabilistic methods used, there should be at least a 90 percent probability (P90) that the quantities actually recovered will equal or exceed the low estimate. The "best" estimate is considered to be the best estimate of the quantity that will actually be recovered. It is equally likely that the actual remaining quantities recovered will be greater or less than the best estimate. With the probabilistic methods used, there should be at least a 50 percent probability (P50) that the quantities actually recovered will equal or exceed the best estimate. The "high" estimate is considered to be an optimistic estimate of the quantity that will actually be recovered. It is unlikely that the actual remaining quantities recovered will exceed the high estimate. With the probabilistic methods used, there should be at least a 10 percent probability (P10) that the quantities actually recovered will equal or exceed the high estimate.

Bwhahahahahaha LOL! Why bother? That peak oil thing suuuuure is a bitch, ain't it?

The FDIC Takes on JP Morgan



Did JP Morgan really think WaMu was going to go down without a fight?

If you believe what some of us believe, WaMu was a murder. In broad daylight. Now it's starting to look like JP Morgan should have considered its potential prey more carefully.

Now wait a second, not that long ago Washington Mutual, JP Morgan, and the FDIC had reached this cozy little settlement whereupon JPM would give up the $4 billion in WaMu deposits it was holding hostage (easy) and in return would receive $6 billion in "other" assets which could probably be your crap mortgages and other risky bullshit. WaMu's bankrupt parent was supposed to get $2 billion in tax breaks, with $1.5 billion in refunds (on top of that) due to the FDIC. This satiated WaMu's thirst for JP Morgan's ass (weak) but apparently the FDIC isn't happy with the deal. Run, WaMu, run! It's JP Morgan's problem now!

WSJ:
The Federal Deposit Insurance Corp. backed away from its support for a $1.4 billion tax break benefiting J.P. Morgan Chase & Co., setting up a battle between the regulator and the nation's second-largest bank.

The tax benefit stems from J.P. Morgan's acquisition of Washington Mutual and is part of the bankruptcy proceedings of the failed Seattle thrift's parent company. Washington Mutual is eligible for $2.7 billion to $2.8 billion in refunds based on a 2009 economic stimulus bill that allowed companies to apply losses from 2008 and 2009 against taxes paid in the previous five years.

Is this what you wanted, JPM? Because now you have asshole customers in California like myself and don't doubt for a second that I'm not taking notes every time I call customer service and get some asshat in India pretending his name is Steve.

Hope it was worth it.

Full report on Chase's bitch ass at a later date. After I have withdrawn all of my deposits at the end of this experiment. Naturally.

TLP: Careful, Remember How That Whole 'MBA President' Thing Ended Up

business politics money
What does it say about establishment Republicans if some of the party's best candidates are riding on their success in business instead of politics? And what does it say about Democrats if their experienced insider hopefuls are trailing the outsider newcomers?

Chris Cillizza games the GOP races in The Washington Post:

Early returns in governors' and Senate races across the country show men and women who have spent their entire lives in the private sector making significant gains in their first runs for office.

Take Meg Whitman, the former eBay chief executive who has catapulted into a general-election lead over California Attorney General Jerry Brown (D) fueled by a sustained run of ads touting her business background. "The professional politicians have been fighting in Sacramento for years," Whitman says in one campaign ad. "I think a business perspective is a bit of what California needs right now."

Whitman is the best known but far from the only businessperson making waves in electoral politics this year.

Wealthy businessman Bill Binnie, regarded as the main threat to former state Attorney General Kelly Ayotte in the New Hampshire Republican primary for the seat being vacated by Sen. Judd Gregg (R), makes clear he plans to highlight his business background during the campaign.

In Michigan, Rick Snyder, a former Gateway computer company chief executive, has emerged as a serious contender for the Republican gubernatorial nod, thanks to a series of ads that tout his business experience and portray him as "one tough nerd."

Other GOP candidates with business backgrounds who are doing well, Cillizza reports, include former, um, "wrestling executive" Linda McMahon in Connecticut, ex-HP CEO Carly Fiorina in California and health care executive Charlie Baker in Massachusetts. Campaign similarities include a "new blood" theme and the willingness to raid personal fortunes.

Not that a successful career outside of politics always bodes well for the wealthy candidate who gets elected. Ask JDA sometime about her governor.

FASB and IASB Holding Hands and Frolicking in the Fair Value


 My, David Tweedie, what large exposure drafts you have...

I find it funny, as an angry American with a FASB bone to pick, that our own FASB and the IASB have taken so well to playing nice these days what with that whole "We don't want your US GAAP" thing and the whole global financial crisis that was - pretty much - our fault.

WebCPA's Debits and Credits:

The Financial Accounting Standards Board and the International Accounting Standards Board have been hashing out various issues surrounding fair value measurement, leases and other topics at a joint meeting this week.

For example, they have arrived at a definition of “class” in disclosures about fair value measurement. According to a summary of the board decisions published online, this entails defining “class” on the basis of the following principles: “An entity should determine the appropriate classes of assets and liabilities based on the nature, characteristics and risks of the assets and liabilities, and their classification in the fair value hierarchy. A class of assets and liabilities will often require greater disaggregation than the entity's line items in the statement of financial position. Judgment is needed to determine the appropriate classes of assets and liabilities.”

Lots of other stuff is up was up for grabs at this FASB/IASB pow-wow, mostly stuff on what to report and what to blow off and every CPA exam candidates favorite: leases. Yawn. Wake me when the financial world is imploding again.

If you really don't have anything to do, you have until July 15 to comment on IASB and FASB's joint project Conceptual Framework for Financial Reporting: The Reporting Entity.

I'll save you the comment: neither of these organizations is independent enough at this point to create or oversee anything of value to financial statement users. See what happens when you let politics get in the way?

FASB used to be but we all know what happened with mark to market and the IASB? Bwhahahaha, don't get me started.

Before We Talk About Anything Else, Let's Get the Tiny Dick Out of the Way (Then Get to the InterOil Fraud)

oil gusher


Not to be vulgar or anything but priorities are priorities and before we get into this mess with InterOil and its "less than meets the eye" (teeny weenies + Transformers = maybe I'm not clever enough to make references to movies I haven't seen) pusher come lately, let's discuss what's important: Shia LaBeouf's oversharing problem (that is making him the brunt of whatever joke I'm going to make by the end of this).

The NY Post did Shia LaBeouf: "I'm Not Extremely Well-Endowed":

In the new issue of Playboy, Shia talks -- among other things -- about the time he lost his virginity. "I was shaking in my boots," he says about the romp, four years ago.

"Getting naked was very strange. It was the first time I'd been naked in the light, in front of a girl, with no hiding place."

Things took a turn for the worse when Shia, who was pretending to be a Lothario, made the age-old mistake of trying to copy a porn he'd seen.

"I remember putting a pillow underneath her because I had seen that in a porn movie...[It] put her at a weird angle, where I couldn't get in correctly. I'm not extremely well-endowed ... and clearly this wasn't the move.

Keep in mind the dude is 23... but if you've seen his early work, you might get why he didn't get any until 4 years ago.

Anyway, I digress.

That brings us to InterOil and FUCK could there BE a funnier stock for Shia LaBeouf to be pumping with his self-confessed tiny dick?! OMG! It TOTALLY writes itself! It makes What's The Story Of Shia LaBeouf Pumping InterOil? (Business Insider) even funnier, as if the idea of the dork from Transformers pumping ANY stocks isn't funny enough on its own:

Earlier this week, we noted the actor's investing tips from a GQ profile, including energy company InterOil:

"Look at IOC. IOC's momentum is major and it will surprise to the upside."

Hey, plenty of people are betting on oil, so why not?

But there's a back-story to the very specific pick. As felon-turned-financial blogger Sam Antar and others have implied, the apparent reason for choosing IOC at virtual random is Shia's relationship with brokerage John Thomas Financial.

As part of his Wall Street preparation, LaBeouf spent time at John Thomas in New York to understand high finance. So good was the training, LaBeouf says, he turned a $20,000 investment into $489,000 with the help of advisers at John Thomas and others.

It sounds like he needed to spend some time at John Thomas (Urban Dictionary, people, come on, keep up). JDA spends some time there every few weeks with her partner in crime who shall remain nameless and Lord knows he would never say something like that to Playboy, nor would he be caught pumping fraudulent bullshit like InterOil. Then again, that's why JDA's partner in crime is getting some and poor little Shia is all tied up pumping crap stocks. It's all about the big swinging dicks, Shia, you might want to stay away from Wall Street until you figure that out (sorry no one told you that when you were researching your role, you should have hit JDA up and she woulda taught you all about large pairs.) Ask my partner in crime.

Any-fucking-way, Sam "It Takes a Crook to Know One" Antar has tipped me off to this and he's not the only one who smells something funny  so I guess we'll have to sit back and watch this little show play out. Personally I'd rather be watching some real dick swinging like Goldman Sachs v the Universe or The Federal Reserve vs Andrew Jackson but a girl's got to take what she can get and a few weeks off every now and then.

Meanwhile, please continue with this nonsense.

See also: The InterOil Saga: Convicted Felons Battle Current Breed of Crooks Scamming Investors Today (White Collar Fraud)

InterOil CEO Slapped for 'Bad Faith' Bankruptcy Filing (The Street Sweeper)

Interoil's Strange Comments on Stock Price (Blogging Stocks)

Oh and the Wall Street: Money Never Sleeps trailer if, you know, you're into movies. Meh.

TLP: GOP Congressman Learns That It Doesn't Count Without Penetration

political vandalism health care
As if the Republicans weren't having enough trouble last week. Seems like they don't even make good targets for vandals and nuts with guns.

After Democratic lawmakers reported threats and vandalism they said were related to their support of Obamacare, Virginia Congressman Eric Cantor, the second-ranking Republican in the House, held a news conference to say, "Me, too. Me, too."

NYT:

“Just recently, I have been directly threatened,” he said. “A bullet was shot through the window of my campaign office in Richmond this week, and I have received threatening e-mails. ...”

A preliminary investigation indicated that the incident in question took place around 1 a.m. Tuesday, when a bullet was apparently fired into the air, striking the office window as it traveled back downward, the Richmond police said in a statement.

The bullet struck the window with enough force to break a pane, the police said, but did not penetrate the blinds inside the window. The bullet landed about one foot inside the office, which Mr. Cantor had occasionally used for meetings, the police said.

According to the police, Cantor's window was hit by a "random" shot. Even if they're not especially dangerous, those can be messy, so it's probably a good thing there was glass in the way.

What I'm Beating TLP With This Week



It's been a long exciting week filled with Greece action, Obamacare, and failed Treasury auctions. Since JDA's resident paperboy doesn't believe the Fed is an evil institution and tends to read too much HuffPo and not enough Ron Paul, I'm grabbing the paper, rolling it up and whacking him (hard) with the following:

It's Official - America Now Enforces Capital Controls Gee, think we should start reading the bill? (Zero Hedge)

Goldman Sachs' controversial 'mommy-track' In fairness to TLP, he did read this one. You should too. (The Week)

Does Unemployment Insurance Cause Unemployment? It's a legitimate question. Does the FDIC encourage moral hazard? Mmm hmm. (Wall St Cheat Sheet)

On Deficits And Debt-Financed Government Market Ticker is always good for a nice reality check. Especially one that comes out to $760 billion in interest expense alone - and yes, that's American debt. (Market Ticker)

The “shop till you drop” economy "Who would want to invest in the United States when there are fiscally solvent, rapidly growing emerging economies to invest in?" Who indeed. (The Animal Spirits Page)

Throwing Gas On The Fire Wait a second, are the regulators the problem? (Bank Lawyer's Blog)

Repo 105: Was Lehman's Accounting Only Ticking Boxes? Or Is It A Ticking Box? I smell smoke, Jim Peterson smells something awry with financial reporting (as in journalism, not statements) and rules-based accounting. JDA humbly concurs. (Re:Balance)

Is InterOil Built on a Foundation of Fraud? InterOil better look out, you don't want Sam Antar on your ass (I'm not scared, he's afraid of me and I'm training him for his next bout) (White Collar Fraud)

TGIF - Greece Fixed AGAIN! Phil seems to think the EU is bipolar. Has the EU asked its doctor about Abilify? (Phil's Stock World)

The Latest To Get Ripped Off By The Banksters? The States I'm shocked. Completely and totally shocked. (LOLFed)


Here Comes the Debt Pushback (Where's the Fed with the Firehose?)

 Bernanke wobbles but he won't fall down

Down go the dominoes. The out-of-the-loop financial media will probably blame this largely on the Fed ending its MBS program but let's be honest about the real factor behind it: remedial economics. Surprise surprise; when the market is flooded with supply with few takers, you get bond auctions like we got last week.

It had to end at some point.

FT:

For more than a year, analysts have been warning that record sized debt sales by the US Treasury were at odds with a 10-year yield sitting comfortably below 4 per cent. This week, the yield on 10-year notes jumped from 3.65 per cent to a peak of 3.92 per cent on Thursday. On Friday it was 3.87 per cent.

I'm afraid someone has to point out the obvious here: credit markets don't like getting the crack unceremoniously taken away, no more than the investors who have been buying into this ridiculousness thinking the free money will never end. Guess what? It's over.

WSJ on last week's wake-up call:

Mortgage investors got an unwelcome wake-up call last week after Treasury yields surged, a jolt that indicated that the Federal Reserve's exit from the market may not go as smoothly as thought.

As the yield on 10-year Treasury notes jumped, yields on Fannie Mae's benchmark 30-year bond followed, rising to 4.45% from 4.33%. That sent mortgage rates above 5%.

It was an unsettling surge as the Fed prepares to end its $1.25 trillion program of buying mortgage securities on Wednesday. Many in the market had come to believe the Fed's exit would have little effect on mortgage bonds. They reasoned there were enough investors hungry for extra yield that they would step in to buy once the Fed left.

Here's what I see... the skittish Fed, scared to death to let markets work out their own kinks lest they allow the cancerous bits to rot off (that might put Fannie and Freddie in an uncomfortable position), backpedals on its plan to start unloading MBSs and instead holds on to (and/or increases) its holdings to wait out the expiration of the first-time homebuyer credit in April, despite dismal numbers after the December extension. If you call 180,000 new homes dismal.

Yeah? Sounds about right.

I wonder if they have consulted with Tim Geithner on this - after all, any indigestion on the part of the housing market might not pair well with his unlimited bailout plans.

The Cleveland Fed on the Fed (In Convenient Picture Form)



I should really read TLP's work-related emails more often (perhaps if he sent me less non work-related material I'd be better equipped to do so *ahem*), apparently this landed in my inbox weeks ago and I somehow missed it.

Please allow me to remedy my tardiness now and I swear I won't let it happen again.

Check it out:



I respectfully correct Zero Hedge, who said this quality flick came from the same PR team who brought you Enron when in fact it was produced by Cleveland Fed and therefore had nothing to do with the Board's PR team. Trust me, if the Board had been behind it, that drawing of Bernanke would have been far higher quality. And seriously, what's up with misrepresenting the FOMC? I expected a tiny little shrunken head for Janet Yellen. You disappoint me, Cleveland.

TLP: Let's Mark That 'Exhibit XXX'

edwards sex tape
The first rule of sex tapes is, you do not talk about sex tapes. The second rule of sex tapes is, you do not let sex tapes get into the hands of people who want to fuck you over.

And the first rule of setting a fire to burn alleged sex tapes that are potential evidence in a lawsuit is, make it a motherfucking inferno. A better rule might be, make sure the alleged sex tape is in the courthouse when you torch it. Allegedly. Whoever you are.

CNN tells this pitiful story:

A sex tape allegedly showing former Sen. John Edwards survived a fire that torched a North Carolina courthouse on Thursday.

Actually, the tape that was the subject of a February court hearing at the historic Chatham County Courthouse was not at the courthouse during the blaze, city officials said.

The tape, said to show Edwards and his former mistress Rielle Hunter, had been moved to another facility, said Debora Henzey, community relations director for Chatham County.

Seven fire departments responded to the blaze at the courthouse in downtown Pittsboro about 4:45 p.m. Thursday. It took firefighters hours to quell the blaze, which severely damaged the courthouse.

"Hours to quell the blaze ..." Is that what she said?

Alan Greenspan on the Bubble and Janet Yellen's Big Mouth



A-ha! He may be a homicidal maniac but Alan Greenspan and I can agree on one thing: Janet Yellen sucks.

Business Week:

Alan Greenspan disputed suggestions by his former central bank colleague and current San Francisco Federal Reserve Bank President Janet Yellen that the Fed could have headed off the housing bubble by raising interest rates.

“The general notion the Fed was propagator of the bubble by monetary policy does not hold up to the evidence,” the former Fed chairman said in an interview on Bloomberg Television’s “Political Capital With Al Hunt” airing this weekend.

Alright, so the beef jerky bastard is wrong and in denial but at least he agrees with me. Too bad it's on the one point Janet has ever made that is correct.

Let it be known Greenspan will admit the Fed may have missed the bubble but in his shriveled brain, it had absolutely nothing to do with exceptionally low interest rates nor his easy money whoring.

When Currency Reform Goes Wrong. Really Wrong.



Well hey, look on the bright side, Bernanke, we may give you a lot of shit but it could be a whole lot worse. Keep this in mind next time you're feeling attacked.

North Korea Executes Head of Finance After Currency Reform Led to 50% Devaluation (Prudent Investor)

Remedial Economics with Obamacare



Some of us obviously need a refresher in Econ 101 (Ben Bernanke, OMGObama if he ever actually took it, Nancy Pelosi, etc etc) but it's all good; Obamacare is here to teach us that there is no "something for nothing". Pelosi should probably listen to the lesson twice.

Reuters:

AT&T Inc (T.N) said on Friday it would record a $1 billion non-cash charge for the current quarter related to the new U.S. health care reform law, as lawmakers called on the company and three other large employers to testify about expected cost hikes.

AT&T's charge appeared to be the largest in a series of charges announced by U.S. companies this week.

A House Energy and Commerce subcommittee said on Friday it will call on the chief executives of AT&T, Caterpillar (CAT.N), Verizon (VZ.N) and Deere (DE.N) to testify on April 21 about how the reform might adversely affect their ability to provide health insurance.

"The new law is designed to expand coverage and bring down costs, so your assertions are a matter of concern," the subcommittee said in the letters.

AT&T, whose annual revenue is expected to be $124.1 billion this year, said the charge is the result of a provision in the law related to the tax treatment of Medicare subsidies.

And where, exactly, are companies supposed to come up with the difference? Public company accounting - in case you are not aware, I'll save you the filthy GAAP details - is not like government (fund) accounting. While the Obama administration may have the advantage of a conveniently-located printing press in town at Bernanke's place and fund accounting on its side, public companies actually have to make balance sheets balance and put something aside or borrow to comply with this awesome new health reform plan.

Way to encourage economic growth, Washington.

Money that could have easily gone into infrastructure, technology, inventory, human capital, or R&D ends up going to Washington (as if the printing press and fund accounting weren't pay day enough in DC. Here's a hint: there is never enough) to be redistributed. Partially to the IRS to pay all these new "auditors".

See where we've gone wrong yet?

And hey! All you asshat iPhone users can also blame Obamacare for the ever-crappier network you'll be on as AT&T will, naturally, have to take $1 billion from somewhere else.

If Threats Won't Work, Maybe Google Maps Will



Better hurry up and get that Census form in the mail, your neighbors are making you look bad.

(San Francisco, proudly, has a 33% return rate as of today. Go, my fellow Sodom and Gomorrahans!)

See also: Google Map Lets Users Track Neighborhood Census Participation (WSJ)

Fed's Warsh: An Ode to Independence

 Someone forgot to read the sign...

It amazes me that Fed governor Kevin Warsh was able to get through most of this speech with a straight face. Then again, I've only read the text so who knows, he might have been giggling uncontrollably to the Shadow Open Market Committee in NY this morning through the entire spiel.

We can't have a Fed speech without the opening "Hallelujah, the economy is saved!" statement, now can we?

The overall profitability and balance sheet strength of large U.S. enterprises is impressive at this stage of recovery. Equity prices and credit terms in liquid markets corroborate these improved fundamentals. And for these firms, financial market conditions appear quite supportive of economic growth. 

The "profitability" of US firms is, generally speaking, a farce. If Warsh believes our financial statements have any level of integrity, I invite him to give me a call as I'd be happy to explain why financial reporting in this country is absolute bullshit. I got 5 minutes, Warshy, hit me up, Sugar Pop.

Anyway. The Board of Governors' resident poet laureate gave central bank independence one hell of a eulogy - though he obviously doesn't realize it has long since been compromised. Still operating under the delusion that the Fed is independent (has he not been reading the news?), he had this to say:

The Fed's greatest asset is its institutional credibility. This institutional credibility is rooted in its inflation-fighting credibility, but it is broader still.2 It is tied up in the full range of Fed actions and balance sheet commitments. This credibility is essential. It increases the heft of our communications. It gives weight to our economic assessments. It amplifies the effect of announced changes in the short-term policy rate on longer-term rates. It is, in some sense, the real money multiplier in the conduct of policy.

Given its immense value, we should not forget that the Federal Reserve's hard-earned credibility is no birthright. It is as much nurture as nature. It was earned by our predecessors in the conduct of their duties, making considered judgments consistent with the statutory mandate of price stability and maximum employment. Fortunately, for the asset to be burnished and bestowed upon the current crop of central bankers, it did not demand perfect clairvoyance or infallible judgments. But it did require fierce independence from the whims of Washington and the wants of Wall Street, and from a pernicious short-termism that can undermine the proper conduct of policy. This fierce independence is needed, perhaps now more than ever.

Central bank independence is precious. It can be taken for granted in benign times, but it is tested when times get tough. And we still have tough times ahead of us. My colleagues and I must demonstrate that Fed independence has not been relegated, and the Fed's long-term objectives not compromised. Ensuring Fed independence--as the cornerstone of institutional credibility--is our charge to keep. It is central to what the Federal Reserve represents, and to how policy is conducted.

Beautiful on paper, useless in reality. Warsh waxes poetic about Fed credibility at a time when the Fed is under more scrutiny than it has ever experienced in its near 100 year history, where does he get this view from? Someone's passing Kool-aid around the Board...

The Fed has been all but villainized; in the media, in Washington, and let's not get into how this all looks from the outside (are the Europeans laughing at us yet?). Unless Warsh is speaking of some other Federal Reserve that I am not familiar with, I have to argue that he's confused. Or maybe just entirely full of shit and tooting that same Save the Fed's Ass horn they've all been blowing for months now.

Just my $0.02, for whatever it's worth. By my calculations, it will be worth $0.000002 by the end of business today.