It always amazes me how the market and investment pundits always tell us to and hold. They said buy when the DJIA was 14,000 and when it fell to 7,000, and they are still saying it.

What if you bought at 14,000 and sold, when wiped out, at 7,000? What do you do now?

Overall, most investors and investment managers fail to use a very simple technique of "renting" your investment portfolio in good times or bad, never taking a loss, but receiving a steady "rental" income from your portfolio.

Simply put, nobody knows where the market will be going, or when. Most investors hold on to their investments and ride the markets up and down.

The options markets which are rarely utilized by investors, provide a way to satisfy the needs of those who do not want to sell out, while providing a steady stream of income, every year.

All that has to be done is to sell an option (and get paid for it) to agree to deliver the shares of stock you own at a certain price ( a higher price). If the shares never reach that price, nobody calls the shares to be delivered, and you pocket the option price. The object is to do this over AND OVER ON YOUR PORTFOLIO so that a steady income is generated.

In this strategy, you can continue to hold on to your shares yet receive a "rental" income throughout the time you hold them. Slow but steady income of 2%--5% a month can be generated.

If on the other hand, you are a market crystal ball reader, and believe that it will decline, or your particular shares will decline, yet you still want to hold them, the other way to take advantage of the market decline is to "sell-short" your shares at the present price and then deliver them to the buyer at a lower price point.

Contact your favorite broker to get a better explanation of the processes that may be available to you in these uncertain times to protect your portfolio.


I was watching a financial news show this morning while eating my fruit and oatmeal. To the shock of the regular hosts, the guest who was a person of substantial past financial clout and a co-president of a major investment firm shocked them.

He saw nothing in the future indicating a recovery, totally contradicting the news of the day. He also added that he thought that the mortgages that are now owned by government agencies ( 60% of all mortgages) will be showing very high default rates next year and into the future, thus causing more financial problems for the economy.

They sat there, mouths open, wondering what to say.

He then added that with tight credit for business, and tight credit for consumers, we can kiss the recovery good-bye. More shock! One of the hosts then said how people had their credit lines frozen or decreased on the credit cards...and it all spiraled down from there.

Is this the real forecast, or is this not?

If we analyze closely the numbers in all categories of consumer spending, this guess may be quite correct.

All the major indications of activity have slowed name it, housing starts, housing prices, factory output, salaries, -people working less, more part times who can not find the additional part time job, etc....does that foretell an economic boom or bust?

Lastly, the government from the federal to the state to the local level is seeking to raise taxes to make up budget shortfalls, a move that has historically been proven to kill or slow down any economic recovery.

What indicator is going to start the recovery?

None. However, watch out for bargains in all the key assets like purchasing that vacation home, or a new home or a resale home for less than you expected, if you have a means to finance it.

So, depending on your financial position, this may be a great time for you...or the worst time......


Risky business: States tax the rich at their peril
the yachts are all going to leave!

This year, New York's deep-pocketed rich were required to dig even deeper to help shore up state finances.

They now pay higher taxes on their income and on limousines and yachts, more to enter a horse in a race and more to dabble in real estate. Meanwhile, many are losing millions from the closing of business tax loopholes and those making over $1 million are losing tax deductions others get.

It even costs more to hunt foxes or pheasants and have their taxes prepared.

Now, a half-dozen states in this recession-driven movement are nervously eyeing New York to see if it's wise to demand so much from people rich enough to have a second home in less taxing states — and for whom a change of address can be its own tax break.

Early data from New York show the higher tax rates for the wealthy have yielded lower-than-expected state wealth. Gov. David Paterson, who had always warned targeting the rich could backfire, fears that's just what happened.

Paterson said last week that revenues from the income tax increases and other taxes enacted in April are running about 20 percent less than anticipated.

The concern about millionaire flight has prompted some states, including New York, New Jersey and California, to increase the highest tax rates only temporarily. For New York, it's the second temporary increase for high earners since 2001.

The first one ended as scheduled after three years. But Paterson and economists warn that came as the economy began to grow fast into another boom, something that isn't expected now because Wall Street — which historically provided 20 percent of state revenues — is perhaps permanently downsized.

"People aren't wedded to a geographic place as they once were. It's a different world," said New York Lt. Gov. Richard Ravitch. He said last year's surcharge on income taxes, set to last three years, won't likely meet expectations.

So far this year, half of about $1 billion in expected revenue from New York's 100 richest taxpayers is missing. The state budget office says losses suffered in the recession could be largely to blame, and it may still come in next year when filers exhaust their extensions.

Those seeking extensions nevertheless had to pay in April at least as much as they owed in 2008. The six-month extension for the balance ends in October, but given the hard times many filers likely didn't earn much more than a year ago.

State officials say they don't know how much of the missing revenue is because any wealthy New Yorkers simply left.

But at least two high-profile defectors have sounded off on the tax changes: Buffalo Sabres owner Tom Golisano, the billionaire who ran for governor three times and who was paying $13,000 a day in New York income taxes, and radio talk-show host Rush Limbaugh. Golisano changed his official address to Florida, and Limbaugh, who also has a Florida home, announced earlier this year that he was relinquishing his home in Manhattan.

Donald Trump told Fox News earlier this year that several of his millionaire friends were talking about leaving the state over the latest taxes.

Golisano, who created 5,000 jobs from his Rochester payroll processing company, Paychex, bristled when politicians said he was bailing on New York in the spring.

"If anything, New York state has bailed out on us," he said.

And it's not just the well-known leaving.

Nancy Bell is moving her Science First manufacturer of scientific products from the Buffalo site her father founded in 1960 to Florida, which aggressively courted her and her two business-partner sons. They are building a new facility there and, with the state's help, had 1,000 applications for 20 jobs.

"It was the higher tax brackets, the so-called millionaire's tax" that forced the move, she said. "We feel we have to look to the future ... I'm leaving wonderful, wonderful friends. It's not our first choice. It's our 100th."

Maryland enacted higher tax rates for wealthier residents in 2008 to boost revenues but income from those taxes is down 6.7 percent so far this year. Officials in Maryland, as in New York, hope much of the revenue is simply delayed because of filers' extensions, however.

"Overall, as in most states, revenues are down at the higher income levels," said Joseph Shapiro, spokesman for the Maryland Comptroller's Office. He said there's no concern yet that the higher tax rates on the wealthy are driving the rich out.

The approach has been tried before.

The conservative-leaning Tax Foundation said that through the early 1990s, several states maintained double-digit income tax rates for the higher earners. Those rates were dropped, however, in the boom of a fast-growing economy.

States also realized that having a higher tax rate than their neighbors would cost them talent, lose jobs and hinder economic growth, the foundation reported in May after Hawaii joined Maryland, New Jersey, California and New York to adopt a "millionaire's tax." New York, for example, has been careful not to raise its highest rates above New Jersey's, according to the foundation.

The trend toward hitting up the rich is re-emerging because states want to avoid spending cuts or assume that revenues will always grow in the long term, the foundation said. The result is a reliance on a volatile tax source that can contribute to more boom-and-bust cycles, even if revenue from the rich rises in the short term before high earners find a way to avoid or limit taxation.

The foundation said the taxes can undermine growth, and notes even states that increased taxes on high-income earners — New Jersey, Maryland, and California — face shortfalls comparatively worse than others.

In May, the most recent calculation available, Maryland reported that taxes collected from top earners fell by about $100 million. The number of Marylanders with more than $1 million in taxable income who filed by the end of April fell by one-third, to about 2,000.

Often pushed as a "fair tax" measure and backed by public worker unions, pinching the rich could backfire.

"You can say, 'The millionaire is evil,' but they don't just put their money in a coffee can," said Christopher Summers, president of the nonpartisan Maryland Public Policy Institute. "They employ people ... That fact is, you need rich people to keep working hard so they will invest."


When I want to buy something I first check my check-book balance to see if i have enough money to do so. When my business needs to pay the payroll I look at the balance available in that account.

This is not however how politicians running the State of Michigan or for that matter every state besides Alaska do it. They do not even look at the check book because their friends in Washington will bail them out, no matter how bad their decisions to overspend.

I am tired of paying my fair share of the numerous taxes, fees, surcharges, etc., and then paying for bad government decisions against my will and with my money!

Economically beleaguered Michigan (due to their dummy politicians) faces a possible government shutdown - shuttering highway rest areas, state parks, construction projects and the state lottery - if lawmakers fail to reach a budget deal in the next few days.

The state with the nation's highest unemployment rate (thanks to their tax rates and anti business climate)has a nearly $3 billion shortfall. Federal recovery act money will fill more than half the gap, but the spending cuts or tax increases needed to fill the rest have caused bitter infighting at the state Capitol.

Michigan is one of just two states whose budget year starts Oct. 1. The other, Alabama, already has a spending plan in place, according to the National Conference of State Legislatures. If lawmakers in Lansing don't make progress soon, Michigan could join the eight other states that failed to meet budget deadlines - but did not shut down - this year.

That's something neither Democratic Gov. Jennifer Granholm nor lawmakers want to do. They're haunted by memories of the fallout from an hours-long government shutdown in 2007 and want to avoid the resulting voter disgust and national derision.

Darin and Jenni Johnson of Howell were told to leave their campsite at Sleepy Hollow State Park near Laingsburg on a Sunday night two years ago as the state headed toward a shutdown.

"We had to cut our weekend short because they kicked everyone out. It was a gorgeous weekend," said Jenni Johnson, who was back at the park northeast of Lansing with her husband Thursday for an extended weekend in their pop-up trailer.

She recalled one couple from out of state who had planned to stay another week.

"I'm sure it didn't leave them with a good impression," Jenni Johnson said.

Bob Terranova worries any lottery suspension could cost him business at the convenience store he owns in the town of DeWitt just north of Lansing.

"It keeps your customer count down ... (and) may take away from your retail sales," he said.

One state lawmaker, Republican Rep. Ken Horn, introduced legislation that would give residents a grace period to renew licenses, apply for benefits and let businesses operate under existing permits if there's a government shutdown. The legislation hasn't had a hearing.

About the only thing Republicans and Democrats have agreed on is tapping up to $1.5 billion in federal recovery dollars to fill part of the $2.8 billion budget gap. Great, fiscal irresponsibility perpetuated at all levels.

Senate and House Republicans say they can deal with the shortfall with deep cuts to schools, college scholarship programs, Medicaid reimbursement rates for doctors, and money for local police and firefighters and the poor. They forgot the first one that should be cut...GOVERNMENT! They argue a cuts-only will prevent even deeper slashing in the next budget year when federal recovery dollars dry up.

Granholm and many Democratic lawmakers say cuts too deep will hurt the state's ability to educate students, retrain unemployed workers, help the poor and mentally ill and protect public safety. Wrong governor, you dummy, start with your salary first, you destroyed the economy of your state. I know I have to do business there.

With the Senate in Republican hands and Democrats holding a House majority, and the Democratic governor and House speaker disagreeing, a compromise has been slow in coming.

Republicans want Democratic lawmakers to propose and pass tax increases, giving the GOP possible fodder to use against Democrats in next year's elections. Democrats hope to get a leg up by painting GOP lawmakers as willing to hurt children rather than reinstate estate taxes on the rich.

The question now is whether Michigan will follow the path of the eight other states that failed to pass budgets on time: Arizona, California, Connecticut, Illinois, Mississippi, North Carolina, Ohio and Pennsylvania.

California's budget impasse lasted so long the state had to issue IOUs to cover debts. Connecticut Gov. Jodi Rendell had to issue an executive order keeping the government running past June 30 and only recently agreed to let a budget become law without her signature.

Pennsylvania didn't get a budget deal in place until about a week ago. It has operated since June under a stopgap measure that is paying state workers and allowing billions in other government spending while details are hammered out.

"It's the same thing that happened in 2007. The game has become more important than the results. Having an issue has become more important than having a solution," he said. "That's not the way democracy was designed to work."

I have an idea, close the GOVERNMENT offices only !


German Chancellor Angela Merkel said she’ll press ahead with tax cuts and labor-market deregulation after winning re-election with enough support to govern with the pro-business Free Democrats.

With Germany struggling to recover from the deepest economic slump since World War II, voters spurned plans by Merkel’s Social Democratic challenger to raise taxes on top earners. Frank-Walter Steinmeier’s SPD had its worst postwar result in what he called a “bitter day” after sharing power with Merkel for four years and governing for the previous seven.

This moron thinks that high taxes on the wealth creators will help an economy-dumb thinking, and something our government officials need to take heed.

“There’s a clear sentiment in favor of economic changes, especially on income taxes,” Tilman Mayer, head of the Bonn- based Institute for Political Science, said in an interview. “Voters have turned their back on grand coalition-style compromise politics.”

This is a clear signal that people want decisive moves not compromises.

Merkel, 55, said on ARD television that talks on forming a coalition with the Free Democrats will proceed quickly, and her focus will be on creating jobs in Europe’s biggest economy (hello anyone in washington listening?). She dismissed the FDP’s call for a complete overhaul of the tax system, saying she wanted to be seen as the “chancellor of all Germans” and won’t let her new junior partner dictate policy.

During the campaign, she pledged to pursue deregulation, extend the life of nuclear-power plants (hello listing again???) and introduce across- the-board tax cuts (hello, tax cuts stimulate ob creation) of 15 billion euros ($22 billion).

The result of yesterday’s election will “modestly enhance the long-run growth potential of the country,” Holger Schmieding, chief European economist at Bank of America-Merrill Lynch in London, said in a phone interview. “The government has a mandate, not for dramatic change, not for a Thatcherite revolution, but it is a mandate for some supply-side reforms.”

The euro may advance and bunds fall on the election result. The currency has climbed 5 percent against the dollar this year on speculation the euro region may be emerging from recession. Uto Baader, chief executive officer of Baader Bank AG, based in Unterschleissheim, said before the election that “the market will jump” with a Merkel-FDP government.

Merkel’s Christian Democrats and their Bavarian sister party, the Christian Social Union, won 33.8 percent in the elections to the 622-seat lower house of parliament and the Free Democrats 14.6 percent, according to provisional complete results. The Social Democrats had 23 percent, a drop of 11.2 percentage points from 2005, the biggest decline for any party in postwar history. The anti-capitalist (how do these moron think that people will be able to make a living) Left Party (party of NUTS) won 11.9 percent and the Greens 10.7 percent.

Voter turnout was 72.5 percent, a record low, compare that to the USA where basically soon we will have less than half the people registered to vote actually vote.

While CDU-FDP won a 42-seat majority, Merkel also steered her party to its worst result in modern Germany’s 60-year history. Merkel and Steinmeier’s two blocs saw their support plummet to 57 percent, compared with a combined 69 percent in 2005 and 77 percent in 2002. That is correct, people want decisive moves, they want to work, and they do not want to pay hig taxes to pay for those that do not work.

Guido Westerwelle’s FDP recorded its best-ever result, putting it in position to push its agenda.

Merkel pledged to cut the lowest tax rate to 12 percent from 14 percent and raise the threshold for the top rate to 60,000 euros from 52,000 euros. The Free Democrats want to replace the progressive income-tax system and its exemptions with just three brackets: 10 percent, 25 percent and 35 percent. That makes sense but it is still progressive, why not a FLAT tax at 20%?????

“Merkel can’t expect her coalition partner to slot into its historic role as the junior mascot,” Hans-Juergen Hoffmann, managing director of Berlin-based polling company Psephos, said in an interview. “The FDP made brash promises to voters to push economic growth, above all to cut taxes, and knows it will be measured by its resolve to see them through. Merkel could be in for a bumpy ride.”

Germany, the world’s biggest exporter, was worse hit than other Group of Seven economies as the global recession hurt foreign sales of Munich-based Siemens AG machinery and Wolfsburg-based Volkswagen AG cars.

Net new borrowing is forecast to almost double next year to 86.1 billion euros from a record 47.6 billion euros this year ( compare that to 1.4 billion euros borrowing equivalent by the USA), the government budget shows, prompting Finance Minister Peer Steinbrueck, a deputy leader of the Social Democrats, to reject tax cuts as “smoke and mirrors.” The Free Democrats may now control the Finance Ministry after the Social Democrats’ defeat.

“I feel very confident that a tax reform will be coming,” Fred Irwin, president of the American Chamber of Commerce in Germany, said in an interview. “With lower taxes and less bureaucracy, the economy will go up.” Hello, message to Washington...!!!!!!

Westerwelle, 47, who may replace Steinmeier as vice chancellor and foreign minister, said on ARD that the Free Democrats “now expect to deliver, step by step, on what we promised voters.”

Foreign policy is not expected to change significantly, analysts say. Westerwelle, an attorney, supports strong trans- Atlantic relations and advocates nuclear disarmament. He backs NATO’s military engagement in Afghanistan, where Germany has 4,200 troops. The FDP wants to abolish the draft and shift to an all-professional military.

Merkel and Westerwelle favor extending the lifespan of nuclear plants by as many as 15 years, overturning a law negotiated during former Chancellor Gerhard Schroeder’s SPD-led government with the Greens that will shut them by about 2021. Can they get any more will they generate power otherwise? Suggested is gerbils running in a cage in everyone's homes!

At stake are stations run by Dusseldorf-based E.ON AG, Karlsruhe-based EnBW Energie Baden-Wuerttemberg AG, RWE AG of Essen and Sweden’s Vattenfall AB that generated 23 percent of Germany’s electricity last year. Polls consistently show Germans opposed to an extension of nuclear power.

“The new coalition will almost certainly now seek to extend the life-cycle of the younger atomic plants,” said Claudia Kemfert, an analyst at the Berlin-based DIW economic institute. “The nuclear bogey plainly didn’t help the SPD, for it played no role in this election.”


Luxury hotel owners risk defaulting on their debt as the recession cuts occupancies and the credit crunch constrains refinancing.

Loans secured by more than 1,500 hotels with a total outstanding balance of $24.5 billion may be in danger of default, according to Realpoint LLC, a credit rating company that tracks commercial mortgage-backed securities. Some of the biggest loans, put on the company’s watch list because of late payments, decreasing occupancies or cash flow, were made to luxury properties where rooms can cost more than $850 a night.

“All segments are showing signs of distress but the luxury segment carries much higher loan balances and is more clearly affected,” Frank Innaurato, managing director of CMBS analytical services at Horsham, Pennsylvania-based Realpoint, said in a telephone interview.

Lodging owners are struggling after adding rooms and properties at the peak of the CMBS market from 2004 to 2007, when $83.4 billion in hotel-backed securities was issued. Occupancy among chains with the costliest rooms fell to 60 percent in the first half from 70 percent a year earlier, according to Smith Travel Research. The decline was the industry’s largest for that period.

“Luxury hotels have been aggressively financed during the peak CMBS issuance years,” David Loeb, an analyst at Robert W. Baird & Co., said in a phone interview. “That’s why luxury hotel loans crowd these watch lists.”

Four Seasons

A $90 million loan secured by the Four Seasons San Francisco, a 277-room, five-star property, is 90 days delinquent and foreclosure proceedings have begun, according to Realpoint. A notice of default has been filed, according to Bloomberg data.

The borrower was Millennium Partners LLC, a real estate firm founded in 1990 by Christopher Jeffries. The company controls 1,860 residential units, more than 2,000 hotel rooms and 1 million square feet (93,000 square meters) of office space, Realpoint said.

Nicola Blazier, a spokeswoman for Four Seasons San Francisco, didn’t respond to e-mails and phone calls for comment. Millennium principal Jeffries didn’t return a call.

The Dream Hotel, a 220-room hotel on West 55th Street in New York City that features 300-thread count Egyptian bed linens and iPods, is collateral for a $100 million loan taken by Surrey Hotel Associates LLC that’s at risk of default, Realpoint said.

The borrower is trying to restructure the debt and defer payments, said Riyaz Akhtar, vice president at Surrey.

More Defaults?

“What’s happening to us right now is happening, and will continue to happen, to many hotel properties given the current market,” Akhtar said in a telephone interview.

The U.S. hotel loan-delinquency rate may climb to 8.2 percent by year-end, Morgan Stanley analysts led by Andy Day said in a June 23 report. That would match the peak from the last recession in 2001.

Upscale hotels are suffering from “a heightened focus on prudent corporate travel expenditures,” as well as the pullback in vacation travel, Day said.

Microsoft Corp., coping with its first annual sales decline, said in July it would slash $3 billion in operating expenses, including travel spending.

The number of luxury-brand rooms in the U.S. as of the end of July rose 9.1 percent from a year earlier to 100,000, Loeb said.

Occupancy Decline

A $190 million loan secured by the 640-room Arizona Grand Resort is 90 days delinquent, according to Realpoint. If the loan is liquidated it may lead to a $111.9 million loss, the credit rating company said.

The property’s occupancy rate fell to 64 percent as of December 2008 from 70 percent a year earlier, Realpoint said. The borrower was Pointe South Mountain Resort LLC, a Grossman Company Properties affiliate. Pamela Kerner, a spokeswoman for Phoenix-based Grossman, declined to comment.

Realpoint also is monitoring a $1 billion loan taken by CNL Hotels and Resorts, a company acquired by a Morgan Stanley real estate fund. The loan is secured by five properties with 14 golf courses, including the Arizona Biltmore in Phoenix and the Grand Wailea Resort Hotel & Spa in Maui, Hawaii.

Falling cash flow and weakening economic conditions put those properties on the watch list, Realpoint said. Revenue is sufficient to meet interest payments, and the assessed collateral value of $1.4 billion lowered the loan’s risk, Realpoint said. Alyson Barnes, a Morgan Stanley spokeswoman, declined to comment on the analysis.

Westin Aruba

The Westin Aruba Resort & Spa, managed by Starwood Hotels & Resorts Worldwide Inc., was foreclosed on in May, according to Realpoint. The property is controlled by Wachovia Corp., the ratings company said.

The property’s occupancy rate dropped to 41 percent in May from an average of 63 percent in 2008, the report said. Servicers are used when a loan is in or near default and needs to be reviewed or modified, according to Innaurato.

The Westin Aruba has been hurt by competition from a 450- room luxury resort built next door, Realpoint said.

Another property on Realpoint’s watch list is the Four Seasons New York, where a standard room with a king-sized bed starts at $855 a night. The hotel is among four used as collateral for a $344.6 million loan, Realpoint said.

The properties’ occupancy rate fell to 57 percent in the 12 months through June. At the end of 2007 and 2008 it was 73 percent and 69 percent, respectively, Realpoint said.

‘Moderate’ Risk

Four Seasons New York’s net cash flow “is well below historical trends,” the credit rating company said, without being more specific. While the property’s revenue per available room and net cash flow have jumped since bottoming in 2003, the hotel “is more recently showing signs of New York’s weakening economy,” Realpoint said.

The property is owned by Ty Warner Hotels & Resorts.

“We consider this loan a moderate default risk based on declining performance along with the lower expectations on the lodging-resort industry given the current economic conditions,” Realpoint said in its report. “Our analysis of the collateral suggests that the combined value of the assets are below the current loan amount.”

Donna Snopek, chief financial officer of Ty Warner Hotels, said in an e-mail that the loan “is performing well.”

‘No Impact’

“Moreover, the properties in the pool are all performing at the top of their respective markets,” Snopek said. “We are fully committed to our loan and can assure you that there is no impact to the current high standard of services at this property.”

Lowe Enterprises Inc. of Los Angeles, the operator and developer of a 582-room resort on the Pacific Coast, said in August it’s trying to restructure a mezzanine loan after defaulting two months after the hotel opened.

The Terranea Resort in Rancho Palos Verdes, California, a $480 million property, opened June 12 with a golf course, three pools and eight restaurants. Lowe is among a group of investors in the property and is in negotiations about restructuring the loan, spokeswoman Jann Diehl said.


U.S. regulators said total losses from large loans at banks and other financial institutions nearly tripled to $53 billion in 2009, due to a deteriorating economic environment and continued weak underwriting standards.

According to an annual report released by the four federal bank-regulatory agencies on Thursday, credit quality deteriorated to record levels this year.

The report said total identified losses of $53.3 billion in 2009 surpassed last year's total of $2.6 billion, and nearly tripled the previous peak in 2002, when losses totaled $19.1 billion.

"While we expected a year-over-year increase in problem assets, given the weak economic environment, declining (commercial real estate) values, and previously weak underwriting, we were surprised by the magnitude of the increase," wrote FBR Capital Markets analyst Scott Valentin in a research note to clients Friday.

Since 2007, banks have been crushed by mounting losses tied to real estate. Rising mortgage defaults since have helped push the U.S. into a recession. While the economic downturn was first pegged to residential mortgage loans, banks and lenders are now having problems with commercial real estate.

The report, called the Shared National Credits Review program, is prepared and jointly released by the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency and the Office of Thrift Supervision. The report defines a "shared national credit" as any loan or formal loan commitment of at least $20 million that was financed by three or more banks.

Total loans across the institutions reviewed in 2009 was $2.9 trillion. The study looked at 8,955 loans given to about 5,900 different borrowers.

The losses are first computed as deductions from the banks' earnings, and then any shortfall is deducted from the banks' equity capital, thus weakening its financial position.

Will the taxpayers have to pony up again????


The number of newly laid-off Americans seeking unemployment benefits fell for the third straight week, evidence that layoffs are continuing to ease in the earliest stages of an economic recovery SAY SOME PUNDITS. But are we really seeing real signs of a recovery?

The Labor Department said Thursday that initial claims for unemployment insurance dropped to a seasonally adjusted 530,000 from an upwardly revised 551,000 the previous week.

Fewer layoffs "would be an important sign of improvement ... lessening the critical threat to consumer spending -- and to the overall economy -- represented by falling employment," Pierre Ellis, an economist at Decision Economics, wrote in a note to clients. What a genius he is, with this conclusion.

The Federal Reserve said Wednesday that spending "remains constrained by ongoing job losses," tight credit and falling home values. But consumer spending, which makes up 70 percent of the U.S. economy, could improve as workers feel more secure about their jobs.

This conclusion by the FED is more accurate, it depicts what appears to be the real facts behind the real story behind the numbers. As home values decline, there is less available credit to homeowners, and as credit is tight, there can be no growth!

Meanwhile, home resales dipped unexpectedly last month after four straight gains, a sign the housing market recovery remains fragile. How could they go as as sales are now concentrated in sales of foreclosures, and short sales and bargains?

The National Association of Realtors said sales dropped 2.7 percent to a seasonally adjusted annual rate of 5.1 million in August. Sales had been expected to rise to an annual pace of 5.35 million, according to economists surveyed by Thomson Reuters. The median sales price fell to $177,700, down 12.5 percent from the same month last year.

The four-week average of jobless claims, which smooths out fluctuations, dropped to 553,500. That's the lowest since late January, though still far above the 325,000 weekly claims typical in a healthy economy.

Economists closely watch initial claims, which are considered a gauge of layoffs and an indication of companies' willingness to hire new workers.

The four-week average has fallen by about 100,000 since reaching a peak for the current recession in early April. Economists say initial claims below 400,000 would be a signal that employers are adding to the net.

There are few reasons for employers to add employees or to create new jobs in the face of threats from the government of a variety of punishing actions for new employers, ranging from new taxes to union organizing rules.



The 1930s has become the sole object lesson for today's monetary policy. Over the past 12 months, the Federal Reserve has increased the monetary base (bank reserves plus currency in circulation) by well over 100%. While currency in circulation has grown slightly, there's been an impressive 17-fold increase in bank reserves. The federal-funds target rate now stands at an all-time low range of zero to 25 basis points, with the 91-day Treasury bill yield equally low. All this has been done to avoid a liquidity crisis and a repeat of the mistakes that led to the Great Depression.

Even with this huge increase in the monetary base, Fed Chairman Ben Bernanke has reiterated his goal not to repeat the mistakes made back in the 1930s by tightening credit too soon, which he says would send the economy back into recession. The strong correlation between soaring unemployment and falling consumer prices in the early 1930s leads Mr. Bernanke to conclude that tight money caused both. To prevent a double dip, super easy monetary policy is the key.

While Fed policy was undoubtedly important, it was not the primary cause of the Great Depression or the economy's relapse in 1937. The Smoot-Hawley tariff of June 1930 was the catalyst that got the whole process going. It was the largest single increase in taxes on trade during peacetime and precipitated massive retaliation by foreign governments on U.S. products. Huge federal and state tax increases in 1932 followed the initial decline in the economy thus doubling down on the impact of Smoot-Hawley. There were additional large tax increases in 1936 and 1937 that were the proximate cause of the economy's relapse in 1937.

In 1930-31, during the Hoover administration and in the midst of an economic collapse, there was a very slight increase in tax rates on personal income at both the lowest and highest brackets. The corporate tax rate was also slightly increased to 12% from 11%. But beginning in 1932 the lowest personal income tax rate was raised to 4% from less than one-half of 1% while the highest rate was raised to 63% from 25%. (That's not a misprint!) The corporate rate was raised to 13.75% from 12%. All sorts of Federal excise taxes too numerous to list were raised as well. The highest inheritance tax rate was also raised in 1932 to 45% from 20% and the gift tax was reinstituted with the highest rate set at 33.5%.

But the tax hikes didn't stop there. In 1934, during the Roosevelt administration, the highest estate tax rate was raised to 60% from 45% and raised again to 70% in 1935. The highest gift tax rate was raised to 45% in 1934 from 33.5% in 1933 and raised again to 52.5% in 1935. The highest corporate tax rate was raised to 15% in 1936 with a surtax on undistributed profits up to 27%. In 1936 the highest personal income tax rate was raised yet again to 79% from 63%—a stifling 216% increase in four years. Finally, in 1937 a 1% employer and a 1% employee tax was placed on all wages up to $3,000.

Because of the number of states and their diversity I'm going to aggregate all state and local taxes and express them as a percentage of GDP. This measure of state tax policy truly understates the state and local tax contribution to the tragedy we call the Great Depression, but I'm sure the reader will get the picture. In 1929, state and local taxes were 7.2% of GDP and then rose to 8.5%, 9.7% and 12.3% for the years 1930, '31 and '32 respectively.

The damage caused by high taxation during the Great Depression is the real lesson we should learn. A government simply cannot tax a country into prosperity. If there were one warning I'd give to all who will listen, it is that U.S. federal and state tax policies are on an economic crash trajectory today just as they were in the 1930s. Net legislated state-tax increases as a percentage of previous year tax receipts are at 3.1%, their highest level since 1991; the Bush tax cuts are set to expire in 2011; and additional taxes to pay for health-care and the proposed cap-and-trade scheme are on the horizon.

In addition to all of these tax issues, the U.S. in the early 1930s was on a gold standard where paper currency was legally convertible into gold. Both circulated in the economy as money. At the outset of the Great Depression people distrusted banks but trusted paper currency and gold. They withdrew deposits from banks, which because of a fractional reserve system caused a drop in the money supply in spite of a rising monetary base. The Fed really had little power to control either bank reserves or interest rates.

The increase in the demand for paper currency and gold not only had a quantity effect on the money supply but it also put upward pressure on the price of gold, which meant that dollar prices of all goods and services had to fall for the relative price of gold to rise. The deflation of the early 1930s was not caused by tight money. It was the result of panic purchases of fixed-dollar priced gold. From the end of 1929 until early 1933 the Consumer Price Index fell by 27%.

By mid-1932 there were public fears of a change in the gold-dollar relationship. In their classic text, "A Monetary History of the United States," economists Milton Friedman and Anna Schwartz wrote, "Fears of devaluation were widespread and the public's preference for gold was unmistakable." Panic ensued and there was a rush to buy gold.

In early 1933, the federal government (not the Federal Reserve) declared a bank holiday prohibiting banks from paying out gold or dealing in foreign exchange. An executive order made it illegal for anyone to "hoard" gold and forced everyone to turn in their gold and gold certificates to the government at an exchange value of $20.67 per ounce of gold in return for paper currency and bank deposits. All gold clauses in contracts private and public were declared null and void and by the end of January 1934 the price of gold, most of which had been confiscated by the government, was raised to $35 per ounce. In other words, in less than one year the government confiscated as much gold as it could at $20.67 an ounce and then devalued the dollar in terms of gold by almost 60%. That's one helluva tax.

The 1933-34 devaluation of the dollar caused the money supply to grow by over 60% from April 1933 to March 1937, and over that same period the monetary base grew by over 35% and adjusted reserves grew by about 100%. Monetary policy was about as easy as it could get. The consumer price index from early 1933 through mid-1937 rose by about 15% in spite of double-digit unemployment. And that's the story.

The lessons here are pretty straightforward. Inflation can and did occur during a depression, and that inflation was strictly a monetary phenomenon.

My hope is that the people who are running our economy do look to the Great Depression as an object lesson. My fear is that they will misinterpret the evidence and attribute high unemployment and the initial decline in prices to tight money, while increasing taxes to combat budget deficits.

Mr. Laffer is the chairman of Laffer Associates


Marc Faber, editor of The Gloom, Boom & Doom Report is, by his own account, "ultra-bearish" on the long-term fundamentals of the U.S. market.

However, in the near term, Faber sees plenty of money-making opportunities in stocks. Sure, prices aren't as cheap as they were in March, yet he's confident, "in this environment cash will become worthless." As a result, he says investors are, "better off being in equities," for the next two to three years.

Faber is most bullish on mining and energy companies. He recommends:

* Newmont Mining and FreeportMcMoran as relative inexpensive. He also mentions Nova Gold, as another, more speculative buy.
* In a contrarian call, on natural gas, he says Chesapeake Energy will be a winner when prices eventually rebound.
* Oil giant ExxonMobil is another stock he thinks offer good value.

Outside of that, Faber says buying large-cap pharmaceuticals like Pfizer and Johnson & Johnson offer good defensive options.

Finally, he suggests U.S. airlines are poised for a rebound. If that happens, international airlines will follow and Thai Airways stock could double.

The side note to all this is that this assumes a lot having to do with world events, all of which could turn the entire market upside down.

What happens if........
Iran is attacked by Israel
What if Afghanistan is a lost cause
What if the economy tanks further
What if taxes increase next year as various tax incentives expire
What if the health taxes kick in
What if unemployment continues to grow and grow and people lose their benefits

Did you remember that in 2008, the best performing investment strategy was keeping your investment funds in your mattress? It created NO LOSSES, and was the best performer, beating all the various investor gurus.


Ok, you lost your job and applied to unemployment benefits to help with the temporary set back, but...that was 52 weeks ago! Get real what is the job you are seeking to get?

It is higher paying than the last one, are your expectations too high? Probably you are expecting to find a better position paying more money, when that is exactly the type of job that is NOT now available.

People who search for a new job to be better than the old one, the one they lost or were displaced from, are in for a reality check. The new job can be considered temporary, while still searching, and it is unlikely that a better position is what one should be looking for is a recession...a quick fix is better than NO fix.

I knew people who used the unemployment checks as "vacation time" checks and made up the searches for the jobs to just simply get the money, and when the money ran out they got a job....if the benefits rum longer, they stay unemployed longer.

What incentive is there to get a job if they are happy with the checks?

Now congress will make those checks last prolong the job search for many who just are not looking anyway as long as the checks keep coming.

Despite predictions the Great Recession is running out of steam, the House is taking up emergency legislation this week to help the millions of Americans who see no immediate end to their economic miseries.

A bill offered by Rep. Jim McDermott, D-Wash., and expected to pass easily would provide 13 weeks of extended unemployment benefits for more than 300,000 jobless people who live in states with unemployment rates of at least 8.5 percent and who are scheduled to run out of benefits by the end of September.

The 13-week extension would supplement the 26 weeks of benefits most states offer and the federally funded extensions of up to 53 weeks that Congress approved in legislation last year and in the stimulus bill enacted last February.

People from North Carolina to California "have been calling my office to tell me they still cannot find work a year or more after becoming unemployed, and they need some additional help to keep their heads above water," McDermott said.

Critics of unemployment insurance argue that it can be a disincentive to looking for work, and that extending benefits at a time the economy is showing signs of recovery could be counterproductive.

But this recession has been particularly pernicious to the job market, others say.

Some 5 million people, about one-third of those on the unemployment list, have been without a job for six months or more, a record since data started being recorded in 1948, according to the research and advocacy group National Employment Law Project.

"It smashes any other figure we have ever seen. It is an unthinkable number," said Andrew Stettner, NELP's deputy director. He said there are currently about six jobless people for every job opening, so it's unlikely people are purposefully living off unemployment insurance while waiting for something better to come along.

The current state unemployment check is about $300 a week, supplemented by $25 included in the stimulus act.

That doesn't go very far when a loaf of bread can cost $2.79 and a gallon of milk $2.72, Senate Finance Committee Chairman Max Baucus, D-Mont., said at a hearing last week on the unemployment insurance issue.

"We need to keep our unemployed neighbors from falling into poverty. We need to figure out how best to make our safety net work," Baucus said.

The jobless rate currently stands at 9.7 percent and is likely to hover above 10 percent for much of 2010. Gary Burtless, a senior fellow at the Brookings Institution, said at the Finance Committee hearing that, according to Labor Department figures, 51 percent of unemployment insurance claimants exhausted their regular benefits in July, the highest rate ever.

"It is likely the exhaustion rate will continue to increase in coming months" as the unemployment rate continues to rise, he said.

Stettner predicted that Congress will likely have to continue extending jobless benefits through 2011.

McDermott in July introduced a more ambitious bill that would have extended through 2010 the compensation programs included in the stimulus act. Those benefits are now scheduled to expire at the end of this year.

But with a price tag of up to $70 billion, that bill would have been far more difficult to pass. McDermott instead decided to offer the scaled-down 13-week extension to meet the urgent needs of those seeing their benefits disappear this year.

McDermott said his bill would not add to the deficit because it would extend for a year a federal unemployment tax of $14 per employee per year that employers have been paying for more than 30 years. It would also require better reporting on newly hired employees to reduce unemployment insurance overpayments.

Three-fourths of the 400,000 workers projected to exhaust their benefits this month live in high unemployment states that would qualify for the additional 13 weeks of benefits under his bill, McDermott said.

They include Alabama, Arizona, California, District of Columbia, Florida, Georgia, Illinois, Indiana, Kentucky, Massachusetts, Michigan, Mississippi, Missouri, Nevada, New Jersey, North Carolina, New York, Ohio, Oregon, Pennsylvania, Puerto Rico, South Carolina, Tennessee, Washington, Wisconsin and West Virginia.

Other states could qualify for more benefits if their unemployment rates are approaching the 8.5 percent threshold.


As a kid in the 1960's, I liked going with my dad to the monstrous sized SEARS store which took up an entire city block and then it also occupied 4 adjoining city blocks for its parking lots.

We would go there mostly to buy tools, and handy stuff for home improvement and car repair. Also, when we needed a washer, refrigerator or lawn mower, we went to SEARS. Everybody went to SEARS.

They were really something. Whenever my dad made a big purchase, the store manager would call my dad to thank him for the purchase. That call kept my dad coming back.

Since then SEARS has stopped that type of service, it fired its commission salesmen, and joined the ranks of dowdy tired retailers.

Their strategy back then was to acquire all the adjoining land for parking or possible expansion and to build 200,000 square foot stores which would dwarf anything in the area. What a collection of real estate.

That retail model is now dead, and so appears to be the future for SEARS.

As I grew up, in the 80's we formed an investment group to buy SEARS on a fully leveraged deal and actually put together a financing structure with the countless pieces of real estate and of course their 100 story SEARS TOWER to be pre-sold for $1 billion. Word got out about the TOWER sale and the company later mortgaged it so that it would not be so attractive to much for our buyout.

In 2003 it was finally seen as a potential investment vehicle by Eddie Lampert and a merger with K-Mart provided a possible interesting match-up.

Nothing happened, the stores still look like they are stuck in the 1980's with some merchandise and salesmen looking the same.

The long awaited turnaround story at Sears may never happen. Why? Because reclusive hedge fund impresario and Sears Holding Corp. Chairman Edward Lampert doesn't know how to run a retail business, says Jeff Matthews of hedge fund RAM Partners.

After Sears posted a surprise quarterly loss, a Barron's report on August 24 stated the stock could fall another 50%. Lampert shot back with a letter claiming the article was "inaccurate" and "biased."

Matthews says facts are facts: Shopping at Sears remains a lackluster experience, five years after Lampert bought the company and merged it with Kmart. "They've totally lost touch with the American consumer," says Matthews, who has no position in Sears stock.

Here's what bothers him about Lampert's management of the once fabled retailer:

* Lack of investment in stores. "The stores are terrible; they don’t look any better than they did five years ago. In fact, they look worse." Matthews notes Wal-Mart spends tens of billions a year on stores, while Sears is spending about $200 million. That's no way to compete.
* No retail expert at the helm. For more than 18 months, Sears has had an "interim" CEO, Matthews notes. Until they hire someone more permanent with retail know-how they're doomed, he says. "I kept waiting for five years: when is he going to hire the guy? Never happened."

Will it ever?


The M3 "broad" money supply, watched as an early warning signal for the economy a year or so later, has been falling at a 5% annual rate.

Similar concerns have been raised by David Rosenberg, chief strategist at Gluskin Sheff, who said that over the four weeks up to August 24, bank credit shrank at an "epic" 9% annual pace, the M2 money supply shrank at 12.2% and M1 shrank at 6.5%.

"For the first time in the post-WW2 [Second World War] era, we have deflation in credit, wages and rents and, from our lens, this is a toxic brew," he said.

It is unclear why the US Federal Reserve has allowed this to occur.

Chairman Ben Bernanke is an expert on the "credit channel" causes of depressions and has given eloquent speeches about the risks of deflation in the past.

He is not a monetary economist, however, and there are indications that the Fed has had to pare back its policy of quantitative easing (buying bonds) in order to reassure China and other foreign creditors that the US is not trying to devalue its debts by stealth monetisation.

Mr Congdon said a key reason for credit contraction is pressure on banks to raise their capital ratios. While this is well-advised in boom times, it makes matters worse in a downturn.

"The current drive to make banks less leveraged and safer is having the perverse consequence of destroying money balances," he said. "It strengthens the deflationary forces in the world economy. That increases the risks of a double-dip recession in 2010."

Referring to the debt-purge policy of US Treasury Secretary Andrew Mellon in the early 1930s, he added: "The pressure on banks to de-risk and to de-leverage is the modern version of liquidationism: it is potentially just as dangerous."

US banks are cutting lending by around 1pc a month. A similar process is occurring in the eurozone, where private sector credit has been contracting and M3 has been flat for almost a year.

Mr Congdon said IMF chief Dominique Strauss-Kahn is wrong to argue that the history of financial crises shows that "speedy recovery" depends on "cleansing banks' balance sheets of toxic assets". "The message of all financial crises is that policy-makers' priority must be to stop the quantity of money falling and, ideally, to get it rising again," he said.

He predicted that the Federal Reserve and other central banks will be forced to engage in outright monetisation of government debt by next year, whatever they say now.

The economy can not improve with shrinking credit. banks are NOT lending to a normal deal flow, they are restricting credit. recently, we noticed that on acquisitions, it was not unusual to demand 30%-40% equity in deals, which obviously does not make them LBO's anymore. It is similar to the Eastern European lending...where the bank does not trust the borrower and credit is restricted.



The Obama administration's decision to impose tariffs on imports of Chinese tires Friday has been met with a swift and sharp response: China has threatened to retaliate by imposing tariffs on imports of automobiles and chicken meat from the U.S. These measures are of course symbolic and amount to political posturing for the benefit of domestic audiences. But both governments are playing with fire—unless they douse the protectionist flames quickly, they could find things spiraling out of control.

The U.S. administration has backed itself into a corner, promising to be tough on trade and using this as a bargaining chip to strengthen political support for its other domestic priorities. The U.S. may well be on firm ground by the letter of the law in seeking temporary "safeguards" protection from certain Chinese imports, a technical provision that was part of China's accession agreement to the World Trade Organization in 2001.

The problem is that these technical issues are difficult to disentangle from purely protectionist measures, especially in the public eye. Hence, symbolic measures to get tough on China mainly serve as an excuse for China to impose its own explicit protectionist measures or bring implicit measures out in the open.

The Chinese are hardly saints in this process. They have maintained a variety of subsidies and other measures to boost their exports, including an undervalued exchange rate and weak enforcement of intellectual property rights. Beijing continues to rely on export growth to generate job growth, something that their still-dominant and stultified state enterprises are not much good at. Chinese officials also continue to maintain the canard that trade with the U.S. would become more balanced if only the U.S. would lift restrictions on certain high-tech exports to China. That would barely make a dent in the bilateral or multilateral trade surpluses that the Chinese need to run to sustain their growth model.

The risk is that the actions by the two governments may be just the leading edge of more protectionist measures to come from both sides. Indeed, both the U.S. and China have already violated the much-hyped pledges to refrain from protectionist measures that they and other Group of 20 leaders have been making at their various summits. The "Buy America" provision in the U.S. fiscal stimulus bill let the Chinese put in place an explicit "Buy China" provision in their own stimulus package. The U.S. recently imposed duties on certain types of steel pipes from China, at the prodding of the steelworkers' union and a few domestic manufacturers of those pipes. All of this hardly improves the economic welfare of the average American or Chinese citizen.

Each action by either side simply invites an equal and opposite reaction, leaving everyone worse off, except for a small group of domestic producers in each country who are happy to have to face less foreign competition. But the collateral damage might be broader. An escalating trade war between these two large economies has the potential to disrupt the world trading system and set back the fragile global economic recovery that has just gotten started.

Heightened trade tensions between the two countries would also hinder progress on important multilateral initiatives where the two countries play important roles. The U.S. and China invariably set the tone for international discussions on key matters, including initiatives to control climate change, promote reform of the international financial institutions and handle rogue nations like North Korea. A dysfunctional economic relationship between these two countries could spill over into other areas and have huge costs.

The reality is that both economies need each other more than they would like to admit. The Chinese need the U.S. export market to maintain their own GDP and employment growth—a dependence that will only rise with all the new industrial capacity being built up thanks to Beijing's stimulus package. With surging public deficits, the U.S. government needs every bit of financing it can get, including Chinese purchases of U.S. government bonds.

The timing of the Obama administration's action suggests that it is intent on solidifying its domestic political base even at the risk of damaging this important relationship and fostering the perception that it is willing to gut free trade if that's what it takes to push other reforms domestically.

This is a dangerous strategy. Protectionist measures, both explicit and implicit, could be difficult to pull back once they become entrenched. The bigger risk is that the administration might have tipped the China-U.S. relationship into a more contentious and perilous phase. And all for the sake of keeping a few trade unions happy.

Mr. Prasad is a professor of trade policy at Cornell University and a senior fellow at the Brookings Institution.


As a banker for almost 30 years, I have seen the rise of government intervention in the lending arena, especially through the CRE (COMMUNITY REINVESTMENT ACT), supported and enforced with "thug like" mandates over the years.

The government forced our bank and others to make loans to marginal credit people, people that did not qualify to get a mortgage, and to people who put no money down with marginal income and credit. We sold these loans as fast as we could since they were a problem from the start, and guess who owned them?

If the regulators were alerted by various community organizations that applicants were getting rejected, the government thugs would show up and write a report describing our institution as non compliant with the CRE.

Then when we wanted another branch to be approved, they would not allow it due to our "non-compliance" with the provisions of the CRE.

As a private owned bank we have a responsibility to our stockholders to keep their investment safe, we have a responsibility to our depositors to invest their funds in a safe and prudent manner to protect those deposits. Yet, the CRE would force us to lend to people who would never qualify for a mortgage loan.

Then as there were defaults, we bankers are somehow to blame?

The entire crisis was precipitated by the forced regulations that forced financial institutions to make marginal loans, sold to or guaranteed by the various federal agencies who were then on the hook for defaults.

So let's not blame the banks...we all know how hard they can be to give a loan...yet the CRE was their LAW that forced them to do it, forced them to make bad loans.

Put the blame where it belongs...


Wall Street is making money again in essentially the same ways that thrust the banking system into chaos last fall is reason for concern on several levels, financial analysts and government officials say.

-- There have been no significant changes to the federal rules governing their behavior. Proposals that have been made to better monitor the financial system and to police the products banks sell to consumers have been held up by lobbyists, lawmakers and turf-protecting regulators.

-- Through mergers and the failure of Lehman Brothers, the mammoth banks whose near-collapse prompted government rescues have gotten even bigger, increasing the risk they pose to the financial system. And they still make bets that, in the aggregate, are worth far more than the capital they have on hand to cover against potential losses.

-- The government's response to last year's meltdown was to spend whatever it takes to protect the financial system from collapse -- a precedent that could encourage even greater risk-taking from the private sector.

Lawrence Summers, director of the White House National Economic Council, says an overhaul of financial regulations is needed as soon as possible to keep the financial system safe over the long haul.

"You cannot rely on the scars of past crises to ensure against practices that will lead to future crises," Summers says.

No one is predicting another meltdown from risky trading in the near term. Rather, the concern is what happens over time as banks' confidence grows and the memory of the financial crisis of 2008 fades.

Will they pile on bets to the point that a new asset bubble forms and -- as happened with mortgage-backed securities -- its undoing endangers banks and the broader economy?

"We're seeing the same kind of behavior from the banks, and that could lead to some huge and scary parallels," says Simon Johnson, former chief economist with the International Monetary Fund.

Some risk-taking is good. When banks are willing to invest in companies or lend to home-buyers, that nurtures economic growth by generating employment and consumer spending, feeding a cycle of expansion.

The problem is when banks' quest for profits leads them to take on too much risk. In the case of the housing bubble, which burst last year, banks lent too freely to consumers with weak credit and wagered too much on complex financial instruments tied to mortgages. As real-estate prices turned south, so did the financial industry's health.

Because the largest banks' trading divisions make their bets with each other, their fortunes are intertwined. The collapse of one can threaten another -- and another -- if it is unable to pay off its debts.

This so-called counterparty risk is a major reason the Obama administration's regulatory overhaul plan calls for the creation of a "systemic risk regulator."

The administration is also seeking tougher capital requirements for banks, arguing that banks' buying of exotic financial products without keeping enough cash on reserve was a key cause of the crisis. Treasury Secretary Timothy Geithner has urged the Group of 20 nations -- which meets this month in Pittsburgh -- to agree on new capital levels by the end of 2010 and put them in place two years later. Geithner hasn't said how much extra capital banks should be required to keep on hand.

Data from the April-June quarter show that the banks are leaning heavily again on their trading desks for revenue.

-- During the fourth quarter of 2008, when the financial crisis made even the shrewdest bankers risk-averse, Goldman's trading of risky assets nearly stopped. But in the second quarter of 2009, trading revenue had climbed to nearly 50 percent of total revenue, closer to where it was two years ago before the recession began. JP Morgan's reliance on trading revenue has exhibited a similar pattern.

-- Also in the second quarter, the five biggest banks' average potential losses from a single day of trading topped $1 billion, up 76 percent from two years ago, according to regulatory filings.

The government hasn't just watched banks resume their freewheeling ways and prosper. It has been an enabler in the process. The Federal Reserve, the Treasury Department and the Federal Deposit Insurance Corp. -- during both the Bush and Obama administrations -- have made trillions of dollars available to the biggest banks through bailouts, low-cost loans and loss guarantees designed to stabilize the financial system.

The failure of Lehman Brothers -- the biggest bankruptcy in U.S. history -- and the panicky sales of Bear Stearns to JPMorgan and Merrill Lynch to Bank of America, also have transformed Wall Street. The surviving investment banks have fewer competitors and more market share.

Five of the biggest banks -- Goldman, JPMorgan, Wells Fargo, Citigroup and Bank of America -- posted second-quarter profits totaling $13 billion. That's more than double what they made in the second quarter of 2008 and nearly two-thirds as much as the $20.7 billion they earned in the second quarter of 2007 -- when the economy was strong.

Meanwhile, Bank of America and Wells Fargo today originate 41 percent of all home loans that are backed by Fannie Mae and Freddie Mac, according to Inside Mortgage Finance. The banks made $284 billion in such loans in the first half of this year, up from $124 billion during the same period last year.

"The big banks now are more powerful than before," said Johnson, now a professor at the Massachusetts Institute of Technology's Sloan School of Management. "Their market share has grown and they have a lot of clout in Washington."

Wall Street's recovery is also being aided by a stock-market rally that has driven the S&P 500 index up nearly 54 percent since March 9, when it hit a 12-year low.

Despite the return to profitability, these aren't the high-octane days from before the crisis. To qualify for government backing, the biggest Wall Street firms are no longer allowed to supercharge their returns by borrowing up to 30 times the value of their assets to place bets on stocks, bonds and other investments.

Businesses supported by Wall Street bankers and traders say they've also noticed changes. Namely, their customers aren't spending as much on food, drinks and entertainment as they did during the boom years.

At Fraunces Tavern, a high-end bar just around the corner from the New York Stock Exchange, the Wall Street workers who used to drink $25 glasses of port are scarce these days.

"Now we're doing happy hours," says Damon Testaverde, one of the owners of Fraunces Tavern. "We never did that. There's just less bodies around."

But one thing fundamental to Wall Street hasn't changed: Big banks and their traders are still finding creative -- some say speculative -- ways to profit.

They're still packaging risky mortgages into securities and selling them to investors, who can earn higher returns by purchasing the securities tied to the riskiest mortgages. That was the practice that helped inflate the real estate bubble and eventually spread financial pain around the globe.

In a way, the government has emboldened banks to keep selling risky securities: Since the crisis erupted, federal emergency programs have helped keep the banks from failing. But now, as the financial system recovers, the government plans to phase out these backstops -- leaving banks more vulnerable to big bets that go bad.

One investment gaining popularity is a direct descendant of the mortgage-backed securities that devastated many banks last year. To get some lesser performing assets off their books, banks are taking slices of bonds made up of high-risk mortgage securities and pooling them with slices of bonds comprised of low-risk mortgage securities. With the blessing of debt ratings agencies, banks are then selling this class of bonds as a low-risk investment. The market for these products has hit $30 billion, according to Morgan Stanley.

"It may be unpleasant to hear that the traders are riding high," said Walter Bailey, chief executive of boutique merchant banking firm EpiGroup. "But, hey, it's a pay-for-performance thing, and they're performing like mad."

And that means the return of another Wall Street mainstay: Lavish compensation.

After 10 of the largest banks received a $250 billion lifeline from the government last fall, some lawmakers were outraged that employees were being paid seven-figure salaries even though their companies nearly collapsed. A handful of top executives, including Citigroup CEO Vikram Pandit, have agreed to accept pay of just $1 this year. But the compensation of most high-performing traders hasn't changed.

Goldman spent $6.6 billion in the second quarter on pay and benefits, 34 percent more than two years ago. And Citigroup, now one-third owned by the government after taking $45 billion in federal money, owes a star energy trader $100 million.

The CEO of Goldman, Lloyd Blankfein, said at a banking conference in Germany last week that excessive banker pay works "against the public interest." He said bonuses are important to attract and retain top talent, but "misapplied, they can also encourage excess."

The Obama administration has proposed measures to diminish the risk posed by large banks. They include forcing banks to hold more capital to cover losses and trying to increase the transparency of markets in which banks trade the most complex -- and potentially risky -- financial products.

One major component of the Obama plan -- creating an agency to oversee the marketing of financial products to consumers -- will be difficult to pass in Congress. Industry lobbying against it and other proposed financial rules has been fierce.

Lobbyists for hedge funds, the large investment pools that cater to the rich, have been able to fend off proposals that would require them to register with the SEC and regularly disclose their holdings.

And they, too, are profitable again after a dismal 2008. The 1,000 largest hedge funds in Morningstar's database posted average returns of 11.9 percent through July. In 2008, those same funds lost 22 percent on average.


The wackos are at it again starting in the UK and Europe.

Tens of billions of pounds ( BRITISH CURRENCY) will have to be raised through flight taxes to compensate developing countries for the damage air travel does to the environment, according to the Government’s advisory body on climate change.

Ticket prices should rise steadily over time to deter air travel and ensure that carbon dioxide emissions from aviation fall back to 2005 levels, the Committee on Climate Change says. It believes that airlines should be forced to share the burden of meeting Britain’s commitment to an 80 per cent cut in emissions by 2050.

The Times has leared that it may challenge the Government’s decision to approve a third runway at Heathrow, suggesting that this would be inconsistent with that commitment.

The committee was established under last year’s Climate Change Act. It has a strong influence on government policy and proposed the 80 per cent target accepted by ministers.
Related Links

* Climate change talks may fail, warns Miliband

* Government to be challenged over third runway

* Storing CO2 could be Britain’s next boom industry


* Committee on Climate Change

It says that initially the cost per passenger of compensating for climate change would be small but would rise over time and eventually reach a level that would put people off flying.

Industry estimates suggest that the average passenger would pay less than £10 extra per return ticket when aviation joins the EU emissions trading scheme in 2012. This would depend on the price of allowances to emit CO2, which is expected to rise over time.

The committee proposes a global cap on aviation emissions, with airlines required to buy allowances, and that the revenue generated should be given to developing countries to help them to adapt to climate change — for example, by building flood defences to cope with rising sea levels.

In a letter to the Government published today, the committee says that an increase in global temperatures is inevitable and that developed countries must pay for the consequences. It says that the EU trading scheme does not go far enough and could result in airlines making windfall profits.

Under the scheme, airlines will be given free carbon permits covering 85 per cent of their emissions and will have to buy permits for the remaining 15 per cent. The committee says that they should have to pay for all their emissions. This would more than double the cost to passengers.

The Greenskies Alliance, a coalition of environmental groups, estimates that the EU scheme would add £4 to the cost of a return ticket from London to Madrid and £18 for a round trip from London to Los Angeles. These would rise to £10 and £40 if the committee’s proposal was accepted.

David Kennedy, chief executive of the committee, said: “A global scheme could raise tens of billions of pounds a year. You can still go on holiday abroad but there isn’t going to be room for massive increases in flying.”

Somebody, please stop the idiocy before we will all be living in caves lit by fire.


Everybody said so, the politicians did not care when they spent our taxpayer BILLIONS. Now taxpayers face losses on a significant portion of the $81 billion in government aid provided to the auto industry, an oversight panel said in a report to be released Wednesday.

The Congressional Oversight Panel did not provide an estimate of the projected loss in its latest monthly report on the $700 billion Troubled Asset Relief Program. But it said most of the $23 billion initially provided to General Motors Corp. and Chrysler LLC late last year is unlikely to be repaid.

"I think they drove a very hard bargain," said Elizabeth Warren, the panel's chairwoman and a law professor at Harvard University, referring to the Obama administration's Treasury Department. "But it may not be enough."

The prospect of recovering the government's assistance to GM and Chrysler is heavily dependent on shares of the two companies rising to unprecedented levels, the report said. The government owns 10 percent of Chrysler and 61 percent of GM. The two companies are currently private but are expected to issue stock, in GM's case by next year.

The shares "will have to appreciate sharply" for taxpayers to get their money back, the report said. Right like that will ever happen.

For example, GM's market value would have to reach $67.6 billion, the report said, a "highly optimistic" estimate and more than the $57.2 billion GM was worth at the height of its share value in April 2008. And in the case of Chrysler, about $5.4 billion of the $14.3 billion provided to the company is "highly unlikely" to ever be repaid, the panel said.

Treasury Department officials have acknowledged that most of the $23 billion provided by the Bush administration is likely to be lost. But Meg Reilly, a department spokeswoman, said there is a "reasonably high probability of the return of most or all of the government funding" that was provided to assist GM and Chrysler with their restructurings.

Administration officials have previously said they want to maximize taxpayers' return on the investment but want to dispose of the government's ownership interests as soon as practicable.

"We are not trying to be Warren Buffett here. We are not trying to squeeze every last dollar out," Steve Rattner, who led the administration's auto task force, said before his departure in July. "We do want to do well for the taxpayers but the most important thing is to get the government out of the car business."

Greg Martin, a spokesman for the new GM, said the company is "confident that we will repay our nation's support because we are a company with less debt, a stronger balance sheet, a winning product portfolio and the right size to match today's market realities."

The Congressional Oversight Panel was created as part of the Troubled Asset Relief Program, or TARP. It is designed to provide an additional layer of oversight, beyond the Special Inspector General for the TARP and regular audits by the Government Accountability Office.

The panel's report recommends that the Treasury Department consider placing its auto company holdings into an independent trust, to avoid any "conflicts of interest."

The report also recommends the department perform a legal analysis of its decision to provide TARP funds to GM and Chrysler, their financing arms and many auto parts suppliers. Some critics say the law creating TARP didn't allow for such funding.

The panel's members include Rep. Jeb Hensarling, a Texas Republican, who dissented from the report. Hensarling said the auto companies should never have received funding and criticized the government for picking "winners and losers."

Other agencies have also projected large losses on the loans and investments provided to the industry. The Congressional Budget Office estimated in June that taxpayers would lose about $40 billion of the first $55 billion in aid.

Just as expected, and what did the "taxpayers" gain by all this besides subsidize a bloated and overpaid workforce and their underfunded pensions?

Another government plan, and another loss.



A Doctor's Plan for Legal Industry Reform
My modest proposal to rearrange how lawyers do business.
Since we are moving toward socialism with ObamaCare, the time has come to do the same with other professions— especially lawyers. Physician committees can decide whether lawyers are necessary in any given situation.

At a town-hall meeting in Portsmouth, N.H., last month, our uninformed lawyer in chief suggested that we physicians would rather chop off a foot than manage diabetes since we would make more money doing surgery. Then President Obama compounded his attack by claiming a doctor's reimbursement is between "$30,000" and "$50,000" for such amputations! (Actually, such surgery costs only about $1,500.)

Physicians have never been so insulted. Because of these affronts, I will gladly volunteer for the important duty of controlling and regulating lawyers. Since most of what lawyers do is repetitive boilerplate or pushing paper, physicians would have no problem dictating what is appropriate for attorneys. We physicians know much more about legal practice than lawyers do about medicine.

Following are highlights of a proposed bill authorizing the dismantling of the current framework of law practice and instituting socialized legal care:

• Contingency fees will be discouraged, and eventually outlawed, over a five-year period. This will put legal rewards back into the pockets of the deserving—the public and the aggrieved parties. Slick lawyers taking their "cut" smacks of a bookie operation. Attorneys will be permitted to keep up to 3% in contingency cases, the remainder going into a pool for poor people.

• Legal "DRGs." Each potential legal situation will be assigned a relative value, and charges limited to this amount. Program participation and acceptance of this amount is mandatory, regardless of the number of hours spent on the matter. Government schedules of flat fees for each service, analogous to medicine's Diagnosis Related Groups (DRGs), will be issued. For example, any divorce will have a set fee of, say, $1,000, regardless of its simplicity or complexity. This will eliminate shady hourly billing. Niggling fees such as $2 per page photocopied or faxed would disappear. Who else nickels-and-dimes you while at the same time charging hundreds of dollars per hour? I'm surprised lawyers don't tack shipping and handling onto their bills.

• Legal "death panels." Over 75? You will not be entitled to legal care for any matter. Why waste money on those who are only going to die soon? We can decrease utilization, save money and unclog the courts simultaneously. Grandma, you're on your own.

• Ration legal care. One may need to wait months to consult an attorney. Despite a perceived legal need, physician review panels or government bureaucrats may deem advice unnecessary. Possibly one may not get representation before court dates or deadlines. But that' s tough: What do you want for "free"?

• Physician controlled legal review. This is potentially the most exciting reform, with doctors leading committees for determining the necessity of all legal procedures and the fairness of attorney fees. What a wonderful way for doctors to get even with the sharks attempting to eviscerate the practice of medicine.

• Discourage/eliminate specialization. Legal specialists with extra training and experience charge more money, contributing to increased costs of legal care, making it unaffordable for many. This reform will guarantee a selection of mediocre, unmotivated attorneys but should help slow rising legal costs. Big shot under indictment? Classified National Archives documents down your pants? Sitting president defending against impeachment? Have FBI agents found $90,000 in your freezer? Too bad. Under reform you too may have to go to the government legal shop for advice.

• Electronic legal records. We should enter the digital age and computerize and centralize legal records nationwide. All files must be in a standard, preferably inconvenient, format and must be available to government agencies. A single database of judgments, court records, client files, etc. will decrease legal expenses. Anyone with Internet access will be able to search the database, eliminating unjustifiable fees charged by law firms for supposedly proprietary information, while fostering transparency. It will enable consumers to dump their clunker attorneys and transfer records easily.

• Ban legal advertisements. Catchy phone numbers such as 1-800-LAWYERS would be seized by the government and repurposed for reporting unscrupulous attorneys.

• New government oversight. Government overhead to manage the legal system will include a cabinet secretary, commissioners, ombudsmen, auditors, assistants, czars and departments.

• Collect data about the supply of and demand for attorneys.Create a commission to study the diversity and geographic distribution of attorneys, with power to stipulate and enforce corrective actions to right imbalances. The more bureaucracy the better. One can never have too many eyes watching these sleazy sneaks.

• Lawyer Reduction Act (H.R. -3200). A self-explanatory bill that not only decreases the number of law students, but also arbitrarily removes 3,200 attorneys from practice each year. Textbook addition by subtraction.

Enthusiastically embracing the above legal changes can serve as a "teachable moment" and will go a long way toward giving the lawyers who run Congress a taste of their own medicine.

Dr. Rafal is a radiologist in New York City.


The national media and the political spinners have never showed up for a debate or Town Hall with a copy of the proposed HEALTH CARE proposal-all 1,000 pages of it, or 1,300 pages or whatever is being bandied around. If they had a copy, then people could actually ask real questions about what is really in the bill.

As a medical professional of some 30 years since medical school, I can tell you first hand how another government sponsored or mandated health "insurance" program will NOT work nor will it do anything that the politicians are saying, including the bald faced lies of the president himself.

There are some basic and simple facts that need to be considered before believing the various hype and half truths, purposeful omissions and outright lies about the proposed wonderful health care for everyone.

First consider just the facts to see if what is being promised makes any sense, and add it to the fact that literally nobody touting the program, including the president has not read any proposed health care bill!

I did, and the medical staff in my practice least what is out there to read.

The legalese is stifling. The descriptions confusing, the rules ominous and very much showing the big fist of government intervention.

Let's take the big picture-they claim that 47 million people are not insured. Forget the illegals, forget the people that want to insurance or pay cash (like many well to do people do or just carry catastrophic insurance).

Now my simple question: If we add 47 million people making appointments for health care how will the system handle that influx, especially as doctors like me are getting ready to leave and retire from the practice?

Second question: If the baby boomer generation is going to add millions and millions of people to the medicare system, and that system is proposed to TAKE OUT $500 billion in funding to support the newcomers into a health care system, how will the Medicare system pay for health care with such reduced funding and such an increase in its participants?


The older the patient, the more care he typically needs, and Medicare provides that payment (forces one to buy it and use it after reaching a certain age), and if the payment for that patient's services is going to be lowered, why would a doctor accept such patients if their payment rates do not cover the office costs?

It gets worse.

Under the proposal as drafted, doctors can NOT refuse to treat patients on the new system, they are forced to do so and at rates that apparently will also be mandated by the government.

There are countless penalties in the bill for not falling in line. Everyone will pay for this, and those who do not sign up will have a IRS tax penalty at year end. Employer will be penalized, doctors will be, and insurance companies in essence will be PROHIBITED, NOTE-PROHIBITED, from writing new policies for health insurance!

Thus as the president says, you can keep your present insurance, but if you leave, they can not write you a new policy, it will only be made by and through the government.

Eventually, there will be NO insurance companies. Also, currently each state licenses insurance companies and they can not write the insurance in a neighboring state. The government however will write across all state lines thus forcing independent companies to be unable to compete.

As this happens, the government will mandate what will be paid for a procedure.

The president in one of his "explanations" of how bad our health care is, used a totally made up and patently false example of "greedy doctors". You will remember that nutty example and his totally inaccurate speech. To date nobody from the AMA has yet to challenge the crazy example.

The president said something like go to a doctor, you have diabetes, and instead of suggesting a drug treatment or healthy diet, the doctor suggests that the patient's leg be amputated and that he gets $30,000 or so for that procedure...that is wrong, the doctor should not make such a suggestion.


I was stunned, this statement was pure non-sense and used to sell the wonders of the new propose care...but it was patently WRONG and the president either had no facts or he outright lied.

For the record, as a doctor advising a patient on a diabetic treatment and procedure, that doctor is NOT going to be a surgeon who will amputate the leg of that patient! What crock spoken directly and outright falsely by the president himself.

I rushed to our billing office and asked about the typical procedure payment from MEDICARE or standard insurance policies for an "amputation".

I was shocked and asked if we would receive $30,000 for such a procedure as the president claimed that we would (first of all we do not do amputations) but we could look up the appropriate code for billing Medicare to see what that would be.

I waited anxiously for the reply from the office. As usual medicare or insurance billings are not as simple and straight forward as one would think that they could be. There were apparently lots of different reimbursements for the procedure depending on other factors, and the billing clerk must decide on what CODE number to enter fee reimbursement.

To my shock, the various codes provided for fees of $approximately $500 to $790 for a variety of amputations. The fee was not $30,000 paid to the supposedly greedy doctor as stated factually by the president. This was shocking to me, as millions and millions listened to the speech and now think that a doctor will be getting such absurd fees, while that is not the case.

As a matter of fact, most payments under the Medicare system tend to be below the cost that covers our office overhead but if the patients are a part of others covered by standard insurance and cash payers, we can provide the services and accept less fees.

What happens often is that long time patients who get older and are forced into MEDICARE expect that our practice will continue to provide services to them, and they do not realize that the fees we will be getting through the MEDICARE payments are vastly smaller than we received before. Literally, we will have to stop providing certain services because their payments are not sufficient to cover our costs.

I noticed that we got about $15 for a lab blood test. Our outside lab costs more, so if we send it out we will receive less than its cost!

So my fellow Americans, there will be less doctors to service another 47 million patients, and that is a fact. Younger doctors are more interested in a quality of life that us old guys, and they work less hours, thus providing less access to medical care.

So lastly think about how it will be possible to serve 47 million more people for less money? Does that make sense?

Oh, by the way, Congressmen and senators and staff will NOT be part of the new health care system, they are exempt!

I did not even touch upon the rules, the fines, the penalties for all types of violations throughout the proposed regulations. Note, there will be NO PRIVATE service possible, like in the UK where patients can obtain PRIVATE care as an alternative to unavailable services.

Now it has been revealed that DEATH panels exist in the UK, the model for our new proposed health care. Here is the story:

Patients with terminal illnesses are being made to die prematurely under an NHS scheme to help end their lives, leading doctors warn today.

By Kate Devlin, Medical Correspondent
Published: 10:00PM BST 02 Sep 2009

In a letter to The Daily Telegraph, a group of experts who care for the terminally ill claim that some patients are being wrongly judged as close to death.

Under NHS guidance introduced across England to help doctors and medical staff deal with dying patients, they can then have fluid and drugs withdrawn and many are put on continuous sedation until they pass away.

But this approach can also mask the signs that their condition is improving, the experts warn.

As a result the scheme is causing a “national crisis” in patient care, the letter states. It has been signed palliative care experts including Professor Peter Millard, Emeritus Professor of Geriatrics, University of London, Dr Peter Hargreaves, a consultant in Palliative Medicine at St Luke’s cancer centre in Guildford, and four others.

“Forecasting death is an inexact science,”they say. Patients are being diagnosed as being close to death “without regard to the fact that the diagnosis could be wrong.

“As a result a national wave of discontent is building up, as family and friends witness the denial of fluids and food to patients."

The warning comes just a week after a report by the Patients Association estimated that up to one million patients had received poor or cruel care on the NHS.

The scheme, called the Liverpool Care Pathway (LCP), was designed to reduce patient suffering in their final hours.

Developed by Marie Curie, the cancer charity, in a Liverpool hospice it was initially developed for cancer patients but now includes other life threatening conditions.

It was recommended as a model by the National Institute for Health and Clinical Excellence (Nice), the Government’s health scrutiny body, in 2004.

It has been gradually adopted nationwide and more than 300 hospitals, 130 hospices and 560 care homes in England currently use the system.

Under the guidelines the decision to diagnose that a patient is close to death is made by the entire medical team treating them, including a senior doctor.

They look for signs that a patient is approaching their final hours, which can include if patients have lost consciousness or whether they are having difficulty swallowing medication.

However, doctors warn that these signs can point to other medical problems.

Patients can become semi-conscious and confused as a side effect of pain-killing drugs such as morphine if they are also dehydrated, for instance.

When a decision has been made to place a patient on the pathway doctors are then recommended to consider removing medication or invasive procedures, such as intravenous drips, which are no longer of benefit.

If a patient is judged to still be able to eat or drink food and water will still be offered to them, as this is considered nursing care rather than medical intervention.

Dr Hargreaves said that this depended, however, on constant assessment of a patient’s condition.

He added that some patients were being “wrongly” put on the pathway, which created a “self-fulfilling prophecy” that they would die.

He said: “I have been practising palliative medicine for more than 20 years and I am getting more concerned about this “death pathway” that is coming in.

“It is supposed to let people die with dignity but it can become a self-fulfilling prophecy.

“Patients who are allowed to become dehydrated and then become confused can be wrongly put on this pathway.”

He added: “What they are trying to do is stop people being overtreated as they are dying.

“It is a very laudable idea. But the concern is that it is tick box medicine that stops people thinking.”

He said that he had personally taken patients off the pathway who went on to live for “significant” amounts of time and warned that many doctors were not checking the progress of patients enough to notice improvement in their condition.

Prof Millard said that it was “worrying” that patients were being “terminally” sedated, using syringe drivers, which continually empty their contents into a patient over the course of 24 hours.

In 2007-08 16.5 per cent of deaths in Britain came about after continuous deep sedation, according to researchers at the Barts and the London School of Medicine and Dentistry, twice as many as in Belgium and the Netherlands.

“If they are sedated it is much harder to see that a patient is getting better,” Prof Millard said.

Katherine Murphy, director of the Patients Association, said: “Even the tiniest things that happen towards the end of a patient’s life can have a huge and lasting affect on patients and their families feelings about their care.

“Guidelines like the LCP can be very helpful but healthcare professionals always need to keep in mind the individual needs of patients.

“There is no one size fits all approach.”

A spokesman for Marie Curie said: “The letter highlights some complex issues related to care of the dying.

“The Liverpool Care Pathway for the Dying Patient was developed in response to a societal need to transfer best practice of care of the dying from the hospice to other care settings.

“The LCP is not the answer to all the complex elements of this area of health care but we believe it is a step in the right direction.”

The pathway also includes advice on the spiritual care of the patient and their family both before and after the death.

It has also been used in 800 instances outside care homes, hospices and hospitals, including for people who have died in their own homes.

The letter has also been signed by Dr Anthony Cole, the chairman of the Medical Ethics Alliance, Dr David Hill, an anaesthetist, Dowager Lady Salisbury, chairman of the Choose Life campaign and Dr Elizabeth Negus a lecturer in English at Barking University.

A spokesman for the Department of Health said: “People coming to the end of their lives should have a right to high quality, compassionate and dignified care.

"The Liverpool Care Pathway (LCP) is an established and recommended tool that provides clinicians with an evidence-based framework to help delivery of high quality care for people at the end of their lives.

"Many people receive excellent care at the end of their lives. We are investing £286 million over the two years to 2011 to support implementation of the End of Life Care Strategy to help improve end of life care for all adults, regardless of where they live.”