DEADLOCK LOOMS IN ITALY As Monti Threatens Resignation And Berlusconi Wants Euro Exit

Berlusconi's Women

Merkel Hardens Position

The EU summit is a day away and pre-summit bickering is so intense that it will be difficult if not impossible to get any major agreements.

Two days ago, in a speech in German parliament, Bloomberg reported Merkel Hardens Resistance to Euro-Area Debt Sharing

Chancellor Angela Merkel hardened her resistance to euro-area debt sharing to resolve the region’s financial crisis, setting Germany on a collision course with its allies at a summit of European leaders this week.

Merkel, speaking to a conference in Berlin today as Spain announced it would formally seek aid for its banks, dismissed “euro bonds, euro bills and European deposit insurance with joint liability and much more” as “economically wrong and counterproductive,” saying that they ran against the German constitution.

“It’s not a bold prediction to say that in Brussels most eyes -- all eyes -- will be on Germany yet again,” Merkel said. “I say quite openly: when I think of the summit on Thursday I’m concerned that once again the discussion will be far too much about all kinds of ideas for joint liability and far too little about improved oversight and structural measures.”

“There must not be an imbalance between liability and control,” she said today. “For instance, we would do a European deposit insurance immediately if it doesn’t lead to common liability but to improved oversight possibilities and standards.”

Monti Lashes out at Germany

In response his own falling support as much as his displeasure with Merkel, Monti lashes out at Germany ahead of summit

Italy’s technocratic prime minister’s frustration with Germany surfaced in a combative speech to parliament, saying he would not go to Brussels to “rubber-stamp” pre-written documents and was ready to extend the two-day summit until Sunday night if needed to reach agreements before markets reopen on Monday.

Speculation over the fate of his government has become so feverish in Rome that officials were forced to deny that the prime minister had threatened to resign if he were to leave Brussels without success.

Singling out Jens Weidmann by name, Mr Monti said the Bundesbank president had “badly misunderstood” his proposal to deploy eurozone rescue funds to bring down the borrowing costs of countries such as Italy and Spain that had honoured obligations to implement reforms and bring down their budget deficits.

Italy on Tuesday was forced to borrow at 4.71 per cent for two-year bills, its highest level since December, and will face a testing auction on Thursday of up to €5.5bn in five and 10-year bonds.

Italian officials said they were extremely concerned how markets might react Monday if the Brussels talks fail to break new ground. The summit was heading towards “complete uncertainty”, Mr Monti said.

Mr Monti is said by aides to be furious with Mr Berlusconi’s recent anti-European tack which is seen as undermining Italy ahead of the summit. Mr Berlusconi reportedly repeated on Tuesday that it would not be a bad thing if Germany exited from the euro.

Explaining Italian Politics

Reader Andrea who is from Italy but now lives in France, has some observations and comments on Italian politics in response to Monti Threatens to Resign if No Eurobonds; Specter of Early Elections

Hi Mish,

I have a few comments on your article.

First: Former prime minister Silvio Berlusconi made a third call for a euro exit, this time asking Germany to exit if the ECB will not print.

Berlusconi has a certain ability in "feeling" what people wants to hear and use it as his message. In my opinion he is testing the public opinion. I expect he will run polls to check if his anti-euro stance is allowing his party to increase consensus. In this case, I strongly believe that he will raise the level of his anti-euro stance given he has nothing to lose as his party is in freefall.

Second: Monti's days are indeed numbered because he will step down at the end of legislature (spring 2013) and he will not seek for renewal of his mandate in the new one.

However, his term could be even shorter. There could be early elections before the natural term.

In the Italian constitution, the President of the Republic appoints the prime minister, but the appointment must get Parliamentary approval. If a PM resigns or loses majority approval, a search is on to find another person. If parliament cannot find a coalition leader with sufficient votes, the only choice left is to call early elections.

Berlusconi's PDL party has the numbers to make Monti step down and to not allow any new majority. He may do just that.

Berlusconi is increasingly uncomfortable in supporting Monti. So are others. Government bond yields are back at very high levels and now Monti is losing popular support. Backing Monti has cost PDL to lose a lot of votes.

However, with early elections, a dangerous competitor like Beppe Grillo's Movimento 5 Stelle (Five Star Movement) will not have enough time to present candidates everywhere. Thus, Berlusconi might also use a poor EU summit as reason to withdraw support to Monti, given the side benefit of holding elections before the Five Star Movement grows stronger.

Third: the most likely outcome of the next election in Italy is a deadlock, assuming recent polls are accurate.

The reason is the electoral law. The current electoral law gives additional representatives and senators to the "coalition" that scores first. Coalition is the key term. Even if Grillo's Five Star Movement wins as a party, he will be politically isolated whereas the center-left can form a coalition.

However, additional share is given on national basis for the Chamber of Representatives and on regional basis for the Senate. For this reason, the Senate will most likely be fragmented with no majority at all. To govern, you need majority on both.

What would happen then? Very hard to guess.

Best regards

Andrea

For more on the Five Star Movement and Beppe Grillo's plan to dump the euro, please see ....


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Payments for Improper Bank Foreclosures Are No Undeserved Windfall

--> The Barbiere family goes through foreclosure eviction. Getty ImagesNo one disputes that the housing crash has had huge economic impacts throughout the nation. But once you start talking about evicted homeowners getting cold hard cash, tempers often flare among people who disagree about whether taxpayer dollars are going to the right place.

With a recent announcement from the Federal Reserve and the Office of the Comptroller of the Currency, though, it's hard to argue that homeowners are getting an unfair windfall. Given what happened to these homeowners, the compensation they're getting seems perfectly reasonable as a quick way to settle what otherwise could become a massive morass of litigation.

Foreclosures gone wrong

Last week, the Fed and the OCC announced a framework under which banks that improperly foreclosed on homeowners' properties would compensate homeowners for their mistakes. The figure that has drawn the most headlines is that homeowners could receive as much as $125,000 from banks under the program.

But this isn't just another government handout. For one thing, money is coming directly from the 14 mortgage servicing companies that made the mistakes. So while shareholders of the companies, which include PNC Mortgage (PNC) and Citigroup (C), could suffer, taxpayers won't see any hit.

What's fair is fair

More important, though, is that the biggest payments are reserved for situations in which homeowners actually had their homes taken away from them improperly, and in which the bank or other mortgage servicer can't undo the damage and get the home back in the hands of the homeowner.

In particular, the $125,000 payments apply to situations in which the company either violated a federal law protecting members of the U.S. armed forces, foreclosed on a borrower who wasn't in default, or failed to apply an already-approved permanent modification to the homeowner's loan. In any of these cases, homeowners would have legal recourse against the servicing companies regardless.

Moreover, if the bank or servicing company can get homeowners back in their homes, then any payments are far less. For instance, banks that rescind foreclosures and correct both credit reports and their own records would only have to pay $15,000 under the plan. That's not much when you consider the inconvenience that many homeowners have suffered from these mistakes.

Also, much smaller payments apply to less serious situations. For instance, servicers that violated the terms of federal loan modification programs by not contacting eligible homeowners would only have to pay $1,000.

Some of the complaints that homeowners have unfairly benefited from government programs related to housing are valid. But in this case, it's hard to argue that homeowners who were unfairly thrown out of their homes don't deserve what they'll get under this framework.

For more on housing and real estate:

Fool contributor Dan Caplinger won't get a dime from any of these programs. He doesn't own shares of the companies mentioned. You can follow him on Twitter here. The Motley Fool owns shares of Citigroup and PNC Financial.



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Source: http://www.dailyfinance.com/2012/06/26/improper-bank-foreclosures-payments-no-windfa/

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Payments for Improper Bank Foreclosures Are No Undeserved Windfall

--> The Barbiere family goes through foreclosure eviction. Getty ImagesNo one disputes that the housing crash has had huge economic impacts throughout the nation. But once you start talking about evicted homeowners getting cold hard cash, tempers often flare among people who disagree about whether taxpayer dollars are going to the right place.

With a recent announcement from the Federal Reserve and the Office of the Comptroller of the Currency, though, it's hard to argue that homeowners are getting an unfair windfall. Given what happened to these homeowners, the compensation they're getting seems perfectly reasonable as a quick way to settle what otherwise could become a massive morass of litigation.

Foreclosures gone wrong

Last week, the Fed and the OCC announced a framework under which banks that improperly foreclosed on homeowners' properties would compensate homeowners for their mistakes. The figure that has drawn the most headlines is that homeowners could receive as much as $125,000 from banks under the program.

But this isn't just another government handout. For one thing, money is coming directly from the 14 mortgage servicing companies that made the mistakes. So while shareholders of the companies, which include PNC Mortgage (PNC) and Citigroup (C), could suffer, taxpayers won't see any hit.

What's fair is fair

More important, though, is that the biggest payments are reserved for situations in which homeowners actually had their homes taken away from them improperly, and in which the bank or other mortgage servicer can't undo the damage and get the home back in the hands of the homeowner.

In particular, the $125,000 payments apply to situations in which the company either violated a federal law protecting members of the U.S. armed forces, foreclosed on a borrower who wasn't in default, or failed to apply an already-approved permanent modification to the homeowner's loan. In any of these cases, homeowners would have legal recourse against the servicing companies regardless.

Moreover, if the bank or servicing company can get homeowners back in their homes, then any payments are far less. For instance, banks that rescind foreclosures and correct both credit reports and their own records would only have to pay $15,000 under the plan. That's not much when you consider the inconvenience that many homeowners have suffered from these mistakes.

Also, much smaller payments apply to less serious situations. For instance, servicers that violated the terms of federal loan modification programs by not contacting eligible homeowners would only have to pay $1,000.

Some of the complaints that homeowners have unfairly benefited from government programs related to housing are valid. But in this case, it's hard to argue that homeowners who were unfairly thrown out of their homes don't deserve what they'll get under this framework.

For more on housing and real estate:

Fool contributor Dan Caplinger won't get a dime from any of these programs. He doesn't own shares of the companies mentioned. You can follow him on Twitter here. The Motley Fool owns shares of Citigroup and PNC Financial.



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Source: http://www.dailyfinance.com/2012/06/26/improper-bank-foreclosures-payments-no-windfa/

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3 Options for Overcoming an Underwater Mortgage

A Bunch Of Bernie Madoff?s Ponzi Scheme Victims To Get $405 Million In Settlement

A recent settlement will see a group of Bernie Madoff's victims in his Ponzi scheme receive $405 million. Clients of hedge fund manager J. Ezra Merkin, including New York Law School, Bard College, Harlem Children's Zone, Homes for the Homeless and the Metropolitan Council on Jewish Poverty are included in the settlement. New York state [...]

Source: http://consumerist.com/2012/06/a-bunch-of-bernie-madoffs-ponzi-scheme-victims-will-get-405-million-in-settlement.html

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Lost US Output Over $3 Trillion And Rising

Still traveling, so just a quick post, but this really can't be emphasized enough.

Andrew Fieldhouse at the Economic Policy Institute reports that the Congressional Budget Office now has cumulatively reduced its estimate of 2017 gross domestic product by 6.6% since the beginning of the recession in December 2007. As Fieldhouse points out, that doesn't sound like much, but when it's 6.6% of a $15 trillion economy, we are looking at about $1 trillion (with a "T") of lost income in 2017.

To put it another way, that is well over $3000 of income per person that year. That is on top of $3 trillion in potential GDP already lost since the recession began, according to Fieldhouse.

The culprit, of course, is the lack of further stimulus to the economy. After the totally inadequate $800 billion stimulus package in 2009, we have had essentially nothing. At the end of 2011, Republicans had to be shamed into approving a payroll tax cut they previously favored. Indeed, as Thomas Mann of the Brookings Institute and the Norman Ornstein of the American Enterprise Institute have pointed out, it is not the case that both parties are getting more partisan.

As they put it, "Let's just say it. The Republicans are the problem." It is the Republicans in Congress who are blocking further stimulus measures. Electing a new Congress that will not pass a stimulus bill will cost Americans thousands of dollars out of their pockets.

We are a long way away from George Wallace's famous claim that there was not "a dimes' worth of difference" between the two parties.

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