Who is Betting on Municipal Defaults?

The Buy America Bonds push and Obama's payoff to the banks has been incredibly beneficial to the Muni-Bond market leading to a banner year for the bond industry. The basis for this is that governments, in general will not collapse despite their massive obligations. Either the local government will raise taxes or be bailed out by the Fed. In regards to the Federal debt the ability to print money and keep inflation in manageable levels is still considered safe, all this should be comforting, except for the fact that the collapse which can never happen, sometimes does:

Greece and Spain both suffered S&P downgrades this week — Greece to junk — as bondholders realized the obvious. The nations cannot raise taxes and cut spending fast enough to pay their debt without killing off economic recovery.But nothing has shaken another massive debt market: American municipal bonds.

You might think that investors would pause before pouring money into obligations of muni debt, particularly obligations of California, New York or Illinois. Like mid-2000s homeowners, state and local governments spent boom years using illusory gains to justify ever-higher spending and borrowing.

By 2008, state and local debt rose to $2.2 trillion — 49% higher, after inflation, than in 2000. The biggest partners in profligacy also promised more benefits to public workers in the future.As the recession's severity became apparent, officials kept borrowing: States have already borrowed another $15 billion for operating costs over the past two years.

Yet gatekeepers consider municipal bonds low-risk. "We do not expect that states will default on general-obligation debt, even under the most stressed economic conditions," analysts at Moody's wrote in a February 2010 report.

Consider this though, there are plenty of people out there betting that municipalities will default:

As U.S. cities and towns wrestle with financial problems, investors are finding a new way to profit on their misery: by buying derivatives that essentially bet municipalities will default.

These so-called credit default swaps are basically insurance contracts that have long been available to protect holders of corporate bonds against default. They became available a few years ago for municipal debt, allowing investors to short sell—or bet against—countless cities, towns and bridges, and more than a dozen states, including California, Michigan and New York.

The derivatives are still thinly traded, but their existence has the potential to make investors skittish about the issuers of the bonds that underlie them. That has been the case for issuers ranging from Greece to Bear Stearns and Lehman Brothers during the financial crisis. When the price of this insurance goes up, nervous investors have sold off securities issued by these entities.

The proliferation of the derivatives is angering treasurers around the country, who say the derivatives are sending a negative message and possibly driving up their costs of borrowing at a time when they need all the help they can get. California planned to send out letters as soon as this week to big Wall Street firms that sell its bonds, seeking in-depth information about their roles in selling derivatives.

"Firms that are underwriting our bond sales are then telling the purchasers maybe they need to buy a CDS reflecting some risk," California Treasurer Bill Lockyer said in an interview. "They are speaking with two tongues, and we want to find out whether that impacts us in an adverse way."

In recent weeks, the treasurer received initial information in letters from the banks, but he is probing further to find out who is buying the products and whether the bank is trading in-house for its own profit. The underwriters who have been questioned are J.P. Morgan Chase & Co.; Merrill Lynch and its parent, Bank of America Corp.; Citigroup Inc.; and Barclays PLC. All the banks told California their activity is making it easier for the derivatives to trade without large prices moves and that they aren't driving up the issuers' borrowing costs.

As detailed here, many of the highlighted banks have been involved in significant legal issues, civil and criminal in nature and if muni-finances are "too big to fail", who is betting they will? Even worse, who might want them to for a direct financial gain? Of course the other side of the argument is that derivatives actually lower borrowing costs for governments.

Dems Outline Immigration Package

Whistling in the dark:

Under the outline of immigration changes drawn up by Senator Charles E. Schumer of New York, the No. 3 Senate Democrat, the federal government would enhance border security and create a new fraud-resistant Social Security card.

Illegal immigrants who wish to remain in this country would have to admit they had broken the law, pay back taxes and fees, and pass a criminal background check to qualify for legal residency after eight years.

“Our immigration system is broken,” the majority leader, Senator Harry Reid of Nevada, said late Thursday afternoon at a packed news conference. “We’re offering this framework as an invitation, an invitation to our Republican colleagues to work with us to solve this problem that has plagued our country for too long.”

Posturing, no more no less. Expect immigration to be forgotten as the left moves onto the energy sector after consumes as much as the financial sector as it can digest.

Congressional Hearings: Credit Default Swaps Not Responsible for Greek Collapse

Watching Greece collapse under its own socialist weight has led many on the left to avert their gaze and instead scream "Bankster" and claim the financial houses alone caused the collapse because of some of the deals Greece was connected to. This is nonsense, the overload of debt has driven the nation to the brink and only the fear that the disaster might spread has led to rescue attempts, the latest of which appears to have worked, for the week at least. Today Congress received testimony explaining how in fact the derivatives may have helped Greece rather then hurt:

WASHINGTON, April 29 (Reuters) - Credit default swaps did not cause or worsen Greece's debt woes, but actually helped markets realize the depth of its crisis, derivatives experts told U.S. lawmakers on Thursday.

Greece's debt problems, which have pushed it to request a bailout from the International Monetary Fund and the European Union, were of its own making, caused by Greece borrowing more than it could repay, the academics and industry experts said in testimony to the U.S. House of Representatives Financial Services subcommittee on capital markets.

"Credit default swaps (CDS) are the current "villain du jour" in the Greek debt fiasco," said Anthony Sanders, a finance professor at George Mason University in Fairfax, Virginia. "The Greek crisis is the result of massive government spending and debt issuance to fund the spending. In fact, CDSs on Greek sovereign debt actually served a positive role: it alerted everyone around the globe that Greece was in a credit death spiral."

Democratic lawmakers examined the issue as a way to further their case for tougher U.S. regulation of the derivatives markets and of credit ratings agencies. Some have criticized so-called naked credit default swaps, in which no underlying asset is hedged, for worsening the financial crisis by leading to a build-up of risks.

The argument on behalf of CDS contracts is that they help reduce the interest government would have to pay since they insure against default, the recent reports out of California attest that might be the case, more to the point the impact on Greece was negligible:

Pickel said it was unlikely that CDS trading volumes could have a significant impact on a country's overall debt spreads, and sovereign CDS also may moderate some downward pressure on troubled countries. If sovereign CDS were banned, investors would simply dump or short-sell a country's bonds directly, he said.

Darrell Duffie, finance professor at Stanford University's Graduate School of Business, said research he conducted with Boston College professor Zhipeng Zhang found no statistical correlation between amounts of credit default swaps on debt issued by Greece and California and their borrowing costs.

What has caused Greek borrowing costs to rise is the revelation of information that has decreased the probability that investors will not be repaid, he said, adding, "It's quite hard to imagine how speculation by credit default swap investors has caused Greece to borrow more than it can pay back," Duffie said.

Now Robert Pickel, is the executive vice chairman of the International Swaps and Derivatives Association so he is hardly an unbiased source, and like most things in these crazy deals take it as you will. Anyway I don't see what the big deal is, the derivative market is only 448.7 TRILLION dollars.

Bid Rigging Case Against Goldman and Others Goes Foward, GE Safe for Now

An interesting development and one that details how stormy are the waters facing some of these financial institution and CDR Financial Products. The SEC is still going ahead against Chase, Bank of America has its own imbroglio, CDR's top people have begun to plead guilty and Goldman Sachs is busy getting crucified, from the Bond Buyer:

WASHINGTON — A federal judge in Manhattan has ruled(PDF) that a group of 11 California localities, including Los Angeles, may go forward with their civil cases against Goldman, Sachs & Co., Citigroup, and several other high-profile firms because they may have participated in an alleged conspiracy to rig bids for municipal investment contracts and derivatives.

At the same time, however, Judge Victor Marrero of the U.S. District Court for the Southern District Court of New York dismissed other firms named in the suits, including AIG Financial Products Corp. and a group of related firms referred to as “GE Trinity.” Marrero said that either there is not yet any plausible evidence to link these firms to the alleged conspiracy or the firms’ bids for guaranteed investment contracts fell outside a range cited by a former Internal Revenue Service official as a means of detecting sham or collusive bidding for the contracts.

Nanci Nishimura of Cotchett, Pitre & McCarthy, which brought the suits on behalf of the California localities, applauded the ruling, noting that Marrero refused to dismiss the suits against some of the largest firms in the market. She said the ruling also permits the plaintiffs to add back some of the defendants to the suit if the discovery process uncovers evidence to support that.

The ruling, she said, is “really significant” because “everyone is on notice now that there was plausible evidence of a bid-rigging conspiracy.”“All of the major financial institutions and major brokers are involved and some, quite significantly,” she said.Spokesmen for Goldman and Citigroup declined to comment for this article.

Now I have discussed the convergence of all these scandals last year when the AIG bonus hysteria broke out and pointed out how the real outrage was the government pouring hundreds of billions into these companies at the same time they were all in the docket for alleged bid rigging. As for GE there involvement was sketchy and they have hardly been cleared:

From Bloomberg News:

Trinity Funding Co., owned by General Electric Capital Corp., and Financial Security Assurance Holdings Ltd. were two of four unidentified companies in the Oct. 29 indictment of CDR Financial Products Inc., its founder, David Rubin, and two executives, according to the people, who spoke on the condition of anonymity because they weren't authorized to do so publicly. Trinity and FSA weren't charged.

Two of the unidentified companies paid CDR to win agreements from local governments that hired Rubin's adviser firm from 2002 to 2004, disguising kickbacks by paying his company to broker swaps with two unnamed financial institutions, according to the indictment............

The Securities and Exchange Commission, which also is conducting an investigation into bid-rigging of municipal investment contracts, has notified at least seven firms, including GE Capital and FSA, that they face civil lawsuits in a parallel investigation.GE and FSA have disclosed receiving so-called Wells notices from the SEC, giving them an opportunity to say why regulators shouldn't bring a civil action. GE said in a filing last year that the investigation related to bidding by former employees and that the firm disagreed with the SEC's recommendation to file suit.

(Basically UBS AG and Bank of America Corp. have also been contacted about the issue. In a nutshell CDR is being accused of many of the allegations that have followed it around the county From the, my words)

The government's charges against CDR center on its involvement with two unidentified firms. One, called Provider B, is a group of financial-services companies that is part of a corporation with headquarters in Connecticut, according to the federal indictment. The state is home to General Electric Co. The second, Provider A, is a "group of financial-services companies located -- or controlled by those -- in Manhattan," the indictment said.

In regards to today's developments:

In dismissing some of the defendants involving the 11 California issuers, Marrero said he was only adopting a range that the plaintiff issuers said Mark Scott, the former director of the IRS’ tax-exempt bond office, used to provide a “rough guideline” for detecting sham bids that are intentionally meant to lose the bidding for investment contracts.

“When a bid is 100 to 150 basis points below the market and there is no justification for that being so low, one of the assumptions you can draw is that there are courtesy bids being provided,” Scott reportedly said.Scott, who now runs his own law firm, declined to comment yesterday.

Based on Scott’s guidelines, Marrero said that he could not accept as proof of the alleged conspiracy a bid from Transamerica Life Insurance Co. in a March 2002 Los Angeles guaranteed investment contract auction.The bid was 51 basis points below a winning bid by MBIA Inc.

Similarly, Marrero said he could not accept that GE Trinity likely colluded with XL Capital, the former parent company of Syncora Guarantee Inc., for a July 16, 2003, Riverside GIC, even though XL’s bid was 73 basis points lower that GE Trinity’s.Removing GE Trinity from the list of defendants is significant because it is said to be a target in the Justice Department’s criminal antitrust investigation.

Sources believe that Trinity is one of the unnamed GIC providers in the October grand jury indictment of CDR, and note that GE, its parent company, has disclosed that its subsidiaries received subpoenas and one had received a Wells Notice from the Securities and Exchange Commission, warning that staff was considering filing civil charges against it

We shall see.

Spain Downgraded as Contagion Spreads

Add Spain to the list, as it we didn't see this coming:

One day after cutting Greece’s status to junk and downgrading Portugal, a major ratings agency also cut Spain’s debt rating by a notch and the euro reached a one-year low, underscoring how difficult it will be for Europe to contain problems that started in Greece.

“Every day which is lost is a day where the situation is getting worse and worse, not only in Greece but in the whole European Union,” said Dominique Strauss-Kahn, managing director of the International Monetary Fund. “It’s the confidence in the zone which is at stake and that’s why we need to act swiftly and strongly.” After meeting here with Mr. Strauss-Kahn, Chancellor Angela Merkel of Germany seemed to find a new sense of urgency in dealing with the crisis. “It’s completely clear that the negotiations by the Greek government with the European Commission and the I.M.F. must now be accelerated,” she said. “Germany will do its part to safeguard the euro as a whole.”

Over the debt cliff they go, and don't you know its Germany's job to bolster these socialist states.

Stocks World Wide Tumble on Greece Fears

Stocks in Europe took another hit today as the the "PIGS" affect scared investors:

April 28 (Bloomberg) -- Stocks slid for a second day and the cost to insure against bond losses rose after credit-rating downgrades of Greece and Portugal fueled concern about sovereign defaults. Greek two-year note yields soared to 21.4 percent. The euro strengthened from a one-year low against the dollar.

The MSCI Asia Pacific Index declined 1.6 percent to 125.20 at 4 p.m. in Tokyo after the Standard & Poor’s 500 Index lost 2.3 percent, the most since February. The Stoxx Euro 600 fell 0.5 percent. The cost of protecting Asian bonds from default jumped to almost a two-month high. The euro traded at $1.3187 from $1.3145 yesterday. S&P 500 futures were little changed.

Stocks, commodities and the euro tumbled, while Treasuries rallied yesterday when S&P lowered Greece’s debt rating to junk and Portugal by two steps. European Central Bank President Jean- Claude Trichet and International Monetary Fund Director Dominique Strauss-Kahn will meet German politicians in Berlin today to promote a financial rescue plan. The euro rebounded on speculation that the IMF will provide more aid to Greece.

And in an Ironic twist:

Greece, Portugal Credit-default swaps on European sovereign debt surged to records. Contracts tied to Greek government bonds climbed 111 basis points to 821 and Portugal rose 54 basis points to 365, according to CMA DataVision.Yields on 10-year Treasuries tumbled 12 basis points to 3.68 percent, the biggest decline since Dec. 17, as investors sought the relative safety of U.S. government debt.

So you have capital fleeing the debt ridden nations of Europe at the exact same time Obama and his buddies are larding up the United States with the exact same systemic problems that destroyed Greece.

SEC Re-Opens Case Against Langford

Poor Mayor, first the conviction and his arrival in jail, then Jefferson County decides to it wants restitution, and now the SEC has decided to comer after him again!

The U.S. Securities and Exchange Commission today moved to reopen its civil case against former Birmingham Mayor Larry Langford after unsuccessful attempts to reach a resolution with him. The SEC, however, has reached proposed resolutions with Langford's three co-defendants in the lawsuit. They are former investment banker Bill Blount, Blount Parrish & Co., Inc., and former lobbyist Al LaPierre, court documents show.


Attorney Robert Levenson, in a motion filed today in Birmingham federal court, said the SEC wants to proceed quickly with the litigation against Langford. The case could be resolved without a trial, Levenson said, because of Langford's conviction last year on criminal charges stemming from the same conduct underlying the SEC's case.
He said the SEC intends to file a motion for summary judgment in the suit, which was put on hold in January of 2009 pending the outcome of the criminal charges. "We believe that motion will resolve the case," Levenson wrote.


He proposed a shorter schedule for the case as well, calling it appropriate because of Langford's criminal conviction.

Considering the damage done, it couldn't happen to a nicer guy.

Greece Hits Junk Bond Status. Portugal Downgraded as Well

The signs and portents of a total fiscal collapse for a significant amount of Europe are coming into shape. The reality is there is too much debt, the good times are over and the generous Social-welfare systems of these nations are collapsing underneath their own weight.

FRANKFURT — Greece’s credit rating was lowered to junk status Tuesday by a leading credit agency, a decision that rocked financial markets and deepened fears that a debt crisis in Europe could spiral out of control.The ratings agency, Standard & Poor’s, downgraded Greece’s long-term and short-term debt to non-investment status and cautioned that investors who bought Greek bonds faced dwindling odds of getting their money back if Greece defaulted or went through a debt restructuring. The move came shortly after S.&P. reduced Portugal’s credit rating and warned that more downgrades were possible.

The Europeans (and the Obama admin I suspect) are desperate for Greece to be propped up by Germany so as to avert the day of reckoning. The problem is that Germans don't feel like paying for the socialist utopia the Greeks managed to set up for themselves. In an ironic way this benefits America and papers over our own debt issues since the US dollar and T-Bills actually look like a good investment compared the faltering states of Europe. By the way, there are many on the left who claim its all about swap deals Greece got hooked into. Those deals clearly hurt their fiscal position, but in an of themselves are not what pushed the country off the fiscal cliff and are being used by some to avert their gaze from the socialist policies that have gutted these nations.The damage is just beginning.

Ominous Signs: Portugal Following Greece Towards the Cliff

With Greece set to default (restructure of the debt is the polite term) the great fear of European officials and investors is that the great default contagion would spread to other countries also in a precarious fiscal shape, it appears that may be happening:

April 27 (Bloomberg) -- Portugal risks becoming the new Greece.

With a higher debt burden and a slower 10-year growth rate than Greece, Western Europe’s poorest country is being punished by investors as the sovereign debt crisis spreads. The risk premium on Portuguese bonds rose to more than double the past year’s average this month. Portugal’s credit default swaps show investors rank its debt as the world’s eighth-riskiest, worse than for Lebanon and Guatemala.

“We do not ignore that Greece’s particular situation has contagion risks, and we are feeling it,” Finance Minister Fernando Teixeira dos Santos told reporters in Lisbon on April 22. “The performance of spreads in the market reveals that contagion risk.”

As of now Portugal has a public debt that is 83.7 percent of its of its GDP, not that far off from Greece which has hit 99% . Now debt percentage in relation to GDP is not a death knell in itself, for comparison, Japan has a whopping 191% debt per GDP. Of course Japan is coming off of decades of stagnation and an economic malaise that makes the USA in the seventies look like the our economy in the fifties. But despite that, Japan has managed to hold the country together and avoid the social strife that is currently rocking Athens.

Lieberman and Collins Continue Pressure on Obama Admin Over Hassan

They really are applying the heat and have been for some time now. Today's piece in the WSJ only confirms this issue will not go away for the Obama admin:

No administration should be the sole investigator or judge and jury of its own actions. The temptation to keep damaging information from Congress and the American people is too great.

The rampage at Fort Hood, Texas, on Nov. 5, 2009—after which U.S. Army Major Nidal Hasan was charged with 13 counts of murder and 32 counts of attempted murder—has been reviewed by the administration and its group of handpicked outsiders, who were all formerly with either the Department of Defense or the Department of Justice. But the administration continues to withhold much of the crucial information from the Homeland Security and Governmental Affairs Committee, of which we are chairman and ranking member.

This is just not good enough for the American people. There are too many questions that still demand answers. Whatever mistakes were made in the run-up to the Fort Hood shootings need to be uncovered, and an independent, bipartisan congressional investigation is the best way to do it.

We know through press reports, for example, that Hasan's associates and superiors in the Army had for years noticed signs of his growing Islamist radicalization. We also know through press reports that the FBI and Defense Department were aware of emails he exchanged with radical Yemeni-American cleric Anwar al-Awlaki. With the rising threat of homegrown radicalization, it's critical to learn if signs were missed that could have led officials to avert the tragedy—so we can work to help prevent anything like it from happening again.

We first requested information on the incident in writing on Nov. 13. We followed that with three other written requests plus numerous follow-up conversations. The administration has refused to provide the key information we need to establish the facts of what happened and carry out our constitutional responsibility of oversight, and so on April 19 we subpoenaed it.

We shall see.

Laying the Groundwork for the Vat

Feel the VAT!

WASHINGTON (Reuters) - The United States cannot grow its way out of budget deficits and both revenue increases and spending cuts will be needed to stem the flow of red ink and create a brighter financial outlook, top members of a newly created budget commission said on Sunday.

The independent National Commission on Fiscal Responsibility and Reform created by President Barack Obama is to hold its first meeting on Tuesday. The co-chairmen of the 18-member panel told "Fox News Sunday" that everything had to be on the table as it considers ways to reduce huge deficits and mounting debt.

"We're not going to say we're going to grow our way out of this," said former Republican Senator Alan Simpson. "Hell, we could have double (-digit) growth for 30 years and never grow our way out of this."

Expect the Tax Increases coupled with spending cuts, of course they will renege on the cuts.

Greece Default Likely to Endanger Mediterranean Nations

With Greece now set to activate its rescue package and a default more then likely, it appears the PIGS might be all go under. Portugal, Italy, Greece, and Spain all of have varying degrees of debt problems:

April 26 (Bloomberg) -- Greece is unlikely to be the last euro nation to need an International Monetary Fund bailout, with Ireland, Spain and Portugal “conspicuously vulnerable,” said Harvard Professor Kenneth Rogoff.

“It’s more likely than not that we’ll need an IMF program in at least one more country in the euro area over the next two to three years,” Rogoff, a former IMF chief economist who has co-authored studies of financial and sovereign debt crises, said in a telephone interview. “The budget cuts needed in Europe in many countries are profound.”

Portuguese, Spanish and Irish bond yields jumped last week as investors questioned their ability to reduce budget deficits and avoid Greece’s fate. Greece on April 23 triggered a 45 billion-euro ($60 billion) rescue package from the IMF and the euro region after its soaring deficit sent borrowing costs surging and sparked concern about a default.

Too much Debt!

Climate Bill Burns Up

Waxmen-Markey was such a disaster that this might be the best news of the month:

WASHINGTON — In a move that may derail a comprehensive climate change and energy bill in the Senate, one of the measure’s central architects, Senator Lindsey Graham, has issued an angry protest over what he says are Democratic plans to give priority to a debate over immigration policy.

Mr. Graham, Republican of South Carolina, said in a sharply worded letter on Saturday that he would no longer participate in negotiations on the energy bill, throwing its already cloudy prospects deeper into doubt. He had been working for months with Senators John Kerry, Democrat of Massachusetts, and Joseph I. Lieberman, independent of Connecticut, on the a legislation, which they were scheduled to announce with considerable fanfare on Monday morning. That announcement has been indefinitely postponed.

In his letter to his two colleagues, Mr. Graham said that he was troubled by reports that the Senate Democratic leader, Harry Reid of Nevada, and the White House were planning to take up an immigration measure before the energy bill. Mr. Graham has worked with Democrats in the past on immigration matters and was expected to be an important bridge to Republicans on that issue, as well as on energy.

Cap and Tax basically called for an allotment system of carbon emissions that would be handed to various industries with only a handful of the US business community paying for the original licenses. (Think Oil and other groups the Democrats hate paying). Eventually the Government would begin charging business to emit and eventually they would be forced to adopt cleaner methods simply to stay in business . And who would suffer from this, why the working and middle class of course.

Greece to Face Tougher Austerity Package

Why should the Germans or the USA (Through the IMF) funnel money to Greece considering the wretched choices they have made:

BERLIN (Reuters) - Greece must agree to tough new austerity measures before it receives any financial aid from the European Union and failure to do so would endanger such support, German Finance Minister Wolfgang Schaeuble told a newspaper. "The fact that neither the EU nor the German government have taken a decision (on providing aid) means that the response can be positive as well as negative," Schaeuble told the Sunday edition of Bild.

"This depends entirely on whether Greece continues in the coming years with the strict savings course it has launched. I have made this clear to the Greek finance minister."

Greece bowed to pressure from financial markets on Friday, making a formal request for the activation of a joint aid package from the EU and International Monetary Fund (IMF) that is valued at up to 45 billion euros ($60.49 billion).

Considering that Greece has al ready jumped all over the first package, I do wonder what will happen on the streets of Athens as the Unions recognize that the good times are over.

Obama: Auto Bailouts Pay Off Themselves

Paid off for who?

ASHEVILLE, North Carolina (Reuters) - President Barack Obama said on Saturday taxpayer-funded bailouts of the auto industry that he approved had paid off, in what amounted to a rejection of conservative arguments against such government help.

In his weekly radio and Web address, Obama kept up the pressure for an overhaul of U.S. financial regulations, saying the promising news from the auto industry had not reduced the need for Wall Street changes.

Of course the shell guy in regards to using public money to pay its oblligations is notably missing from his statements.

Via HA:

The backers of the bailouts to General Motors cried with triumph this week when the automaker announced that they had repaid their bailout loans ahead of schedule. That amounted to proof of the wisdom of government intervention, the argument went, and wondered aloud why bailout critics didn’t acknowledge their errors. Perhaps it’s because the government essentially got paid off with even more government money:

During an April 20 hearing on Capital Hill, Sen. Tom Carper, (D-Del.) asked some pointed questions of Neil Barofsky, the “special watch dog” on the Wall Street Bailout, aka, TARP.“It’s good news in that they’re reducing their debt,” Barofsky said of the accelerated GM payments, “but they’re doing it by taking other available TARP money.”…

“It sounds like it’s kind of like taking money out of one pocket and putting in the other,” said Carper, who got a nod of agreement from Barofsky.“The way that payment is going to be made is by drawing down on an equity facility of other TARP money.”

This prompted a stern letter from Senator Charles Grassley (R-IA), who backed the bailouts, to Treasury Secretary Tim Geithner about the shell game being played by the Obama administration and GM (via Yid with Lid, emphases mine):

General Motors (GM) yesterday announced that it repaid its TARP loans. I am concerned, however, that this announcement is not what it seems. In fact, it appears to be nothing more than an elaborate TARP money shuffle.

California Gives Thumbs Up to CDS Underwriters

Considering the disaster of AIG, this is one of the few times where the news actually sounds downright positive about swaps:

SAN FRANCISCO — California’s big underwriters make markets in credit default swaps on the biggest municipal issuer’s general obligation bonds, but they don’t seem to be betting against the state.That’s the conclusion an investigation by California Treasurer Bill Lockyer into the emerging municipal CDS market. Lockyer last month demanded that six big banks — which collected a total of $215 million in underwriting fees from the state since 2007 — explain their participation in the market for California CDS and its impact on the state’s borrowing costs.

The six banks — Bank of America Merrill Lynch, Barclays Capital, Citigroup, Goldman, Sachs & Co., JPMorgan, and Morgan Stanley — told the state they traded California CDS with a notional value of $27.5 billion from 2007 to March 31, 2010.That’s enough to insure 63.2% of the $43.5 billion of bonds the state issued during the period, or 39% of the state’s $70.4 billion of outstanding GOs at the end of fiscal 2009.

Bank of America has numerous legal problems and issues and only dodged a further bullet by co-operating with the government, Chase has been in the thick of it for sometime now, Goldman Sachs, well is Goldman Sachs, add to that the fact that Merrill Lynch and Morgan Stanley have also been name in the same civil suit that was launched 2 years about abuses in the muni-bond industry. In regards to a CDS, which is often connected to but not the same as a CDO, the Bond Buyer lays out this rather swift explanantion:

A credit default swap is an insurance policy against default by a bond issuer. They’re common in the taxable bond market but a relatively new phenomenon in the municipal marketplace, where bond insurers traditionally played the role of guarantor of muni credits.The seller of a CDS contract agrees to pay the buyer the par value of a bond in the case of default.Theoretically, the CDS market helps investors reduce the risk in their bond portfolios and could reduce their anxiety about buying the bonds issued by California — the lowest-rated U.S. state.

In a nutshell it might help states like California keep their borrowing rates down, since investors would have less risk, hence charge lower intrest.

Greece Taps Loan Package

The package was supposed to be a in the wings as Greece got its fiscal house in order, apparently that didn't work out to well as the cliff approached:

The Greek government formally requested an international funding package Friday aimed at pulling the euro-zone member out of a debt crisis.

Prime Minister George Papandreou announced on Greek television the activation of up to €45 billion, or $60 billion, in loans expected from the European Union and International Monetary Fund, Reuters reported.

(previous post, but quite relevant to this development)In a nutshell the plan is for the Left leaning Greek government to push an austerity package to keep their house in order, all the while other European nations provide financing to keep the country afloat. The problem comes from both ends, Europeans (Read Germans) don't feel like paying for the Greeks and their entitlement ethic, whereas the Greeks (Read Unions and Leftists) refuse to give up their benefits over what they consider the mistakes of previous governments. An additional wrinkle is that previous Greek governments became entangled in many of the complicated derivative swaps that have plagued numerous American municipalities from Jefferson County to Philadelphia. For the record, whenever Greece and its collapse comes up their is an amazing ability of those from the left to focus on the "Banksters" and ignore the disastrous economic policies of the state. I do not discount the impact of these bad deals, but they make a bad situation worse, they alone are not driving the collapse. How bad can it get? Well, lost among the headlines is the very real chance that Iceland will default on its debts, money owed to English financial houses. Spain, Italy, and Portugal are holding on but approaching the cliff, and finally Euro-zone economic growth is literally nil or in some case contracting. Their is simply too much debt. Of course let he who is without sin cast the first stone. Don't worry though, Krugman says its all good here and we need more spending!

AP Report: Obamacare Will Increase Costs

Well at least they aren't calling it an unintended consequence:

WASHINGTON (AP) — President Obama's health care overhaul law will increase the nation's health care tab instead of bringing costs down, government economic forecasters concluded Thursday in a sobering assessment of the sweeping legislation.A report by economic experts at the Health and Human Services Department said the health care remake will achieve Obama's aim of expanding health insurance — adding 34 million Americans to the coverage rolls.

But the analysis also found that the law falls short of the president's twin goal of controlling runaway costs. It also warned that Medicare cuts may be unrealistic and unsustainable, driving about 15% of hospitals into the red and "possibly jeopardizing access" to care for seniors.The mixed verdict for Obama's signature issue is the first comprehensive look by neutral experts.

In particular, the warnings about Medicare could become a major political liability for Democratic lawmakers in the midterm elections. Seniors are more likely to vote than younger people and polls show they are already deeply skeptical of the law.

The report from Medicare's Office of the Actuary carried a disclaimer saying it does not represent the official position of the Obama administration. White House officials have repeatedly complained that such analyses have been too pessimistic and lowball the law's potential to achieve savings.The report acknowledged that some of the cost-control measures in the bill — Medicare cuts, a tax on high-cost insurance and a commission to seek ongoing Medicare savings — could help reduce the rate of cost increases beyond 2020. But it held out little hope for progress in the first decade.

"During 2010-2019, however, these effects would be outweighed by the increased costs associated with the expansions of health insurance coverage," wrote Richard S. Foster, Medicare's chief actuary. "Also, the longer-term viability of the Medicare ... reductions is doubtful." Foster's office is responsible for long-range costs estimates.

For starters the basis for the lefts cost control, arguments comes int several forms, they include:

• Paying less for services will force the system to lower prices and do away with "Obscene" profits. (This is why the public option is always held up as a cost saving measure.)
  
• A more structured and rational approach will lead to lower costs as redundancy is removed from the system.
• Corruption and waste will be rooted out.
• Preventive medicine will reduce future costs.

In regards to paying less, the left assume we can squeeze water from a stone and somehow starving the health providers of money will somehow not result in lack of services, doctor and nurse shortages and hospitals closing their doors. There might be some merit in ironing out differences in costs and expenses which fluctuate wildly across the country for the same procedures, but hardly at the level that would save the requisite money. Corruption and waste? Every politician spouts that nonsense and it would be a safe guess that the increase in government control and spending will lead to an increase is waste and theft. Preventive medicine may also have merit on an individual level, but it has been shown to be ineffective as a cost control measure. So on top of our already rising budget how are we gonna pay for all of this, well Obama might just have an idea!

Greece Heads Back for the Fiscal Cliff

The nation was nearing default but a rescue package gave the impression t they were saved. Instead the situation has gone from bad to worse:

April 22 (Bloomberg) -- The European Union said Greece’s budget deficit last year was worse than previously forecast and Moody’s Investors Service cut the country’s creditworthiness, sending Greek bond yields soaring.Greece’s deficit was 13.6 percent of gross domestic product in 2009 and may be revised to as high as 14.1 percent because of “uncertainties” about Greek economic data, Eurostat, the EU’s statistics office in Luxembourg, said today in a statement.

Moody’s cut its rating on Greece one notch to A3, saying the EU’s “fractious mobilization” of emergency aid for the cash-strapped nation means it will be “significantly more difficult” for the rating to remain “within the A range.”Greece’s benchmark 10-year bond yield rose to 9.03 percent, the highest since 1998 and almost three times the comparable German rate. The cost of insuring government debt against default climbed to a record today. The yield on the two-year note soared more than 275 basis points to breach 11 percent, indicating that investors perceive a growing risk of default or restructuring.

Greece’s widening deficit and questions about the accuracy of its economic data have undermined the credibility of the EU’s budget rules and contributed to a 7.2 percent slide in the euro this year. Greece’s soaring financing costs have forced the EU and the International Monetary Fund to offer as much as 45 billion euros ($60 billion) in emergency loans.

Breaking Rules

“They have played against the rules and now they’re getting the bill,” said Sylvain Broyer, chief European economist at Natixis in Frankfurt. “It’s a very uncomfortable situation for the Greek government. Greece has very much benefited from the currency region, but ignored the rules.

Could it happen here?

Obama Opens Up to the VAT

He is just toying with the idea, don't you know?

WASHINGTON – President Barack Obama suggested Wednesday that a new value-added tax on Americans is still on the table, seeming to show more openness to the idea than his aides have expressed in recent days.Before deciding what revenue options are best for dealing with the deficit and the economy, Obama said in an interview with CNBC, "I want to get a better picture of what our options are."

After Obama adviser Paul Volcker recently raised the prospect of a value-added tax, or VAT, the Senate voted 85-13 last week for a nonbinding "sense of the Senate" resolution that calls the such a tax "a massive tax increase that will cripple families on fixed income and only further push back America's economic recovery."

For days, White House spokesmen have said the president has not proposed and is not considering a VAT."I think I directly answered this the other day by saying that it wasn't something that the president had under consideration," White House press secretary Robert Gibbs told reporters shortly before Obama spoke with CNBC.

They want it, but they are too scared to come out and say it. Expect in the future liberal pundits and media outlets describing how great it could be for the country. By the way if they really push for a VAT the GOP will retake the Congress with ease.

Bill Richardson Named One of Nations Worse Governors

For this blog, it all began with the Governor and its been so long since Richardson has been in the news, but this is probably not how he wanted to made headlines again:

Citizens for Responsibility and Ethics in Washington (CREW) issued a report today naming what it considers the nation’s “most incompetent and unethical governors.”And Gov. Bill Richardson’s name is on it thanks to recent scandals and federal investigations into his administration’s actions involving state contracts.According to a thumbnail description of the governor’s transgressions, CREW said Richardson:

• Used state investments to benefit political allies
  
• Allowed pay-to-play scandals to plague his administration
• Rewarded close associates with state positions or benefits, including providing a longtime friend and political supporter with a costly state contract
• Failed to make state government more transparent

The governor’s office didn’t immediately respond to a request by the Independent for a response to CREW’s putting him on the list.Most of CREW’s charges today stem from the ongoing investment scandal that has centered on the State Investment Council and Marc Correra’s sharing in $22 million in so-called placement fees for playing matchmaker between state investment agencies and funds looking for clients.

Correra is the son of a Richardson friend and fundraiser.

That scandal has produced some interesting connections to New York and California, with New Mexico’s former investment adviser, Saul Meyer of Aldus Equity, pleading guilty to securities fraud last fall as perhaps the most striking.

Now this scandal is different from the original scandal that torpedoed is cabinet bid way back in January. His connections to the now indited CDR financial products and his eventual non/exoneration we bad enough, but it appears there is still plenty for the Governor to lose sleep over. By the way the group leans left and included a handfull of indefenible Democrats along with mostly Republicans who they clearly have policy differences with. (Well Mark Sanford is on the list its not all policy.)

The List:

In compiling Worst Governors, CREW reviewed the job performances of all 50 U.S. governors before identifying the worst 11. Though ethics laws, campaign finance rules and financial disclosure regulations vary from state to state, CREW found these governors’ proclivities for corruption, cronyism and self-enrichment outweighed their competency, integrity and commitment to transparency.

CREW’s unranked list of the 11 worst governors includes:

• Gov. Haley Barbour (R-MS);
• Gov. Donald Carcieri (R-RI);
• Gov. Jim Gibbons (R-NV);
• Gov. Bobby Jindal (R-LA);
• Gov. David Paterson (D-NY);
• Gov. Sonny Perdue (R-GA);
• Gov. Rick Perry (R-TX);
• Gov. Bill Richardson (D-NM);
• Gov. Mike Rounds (R-SD);
• Gov. Mark Sanford (R-SC); and
• Gov. Arnold Schwarzenegger (R-CA).

How long before they add Chris Christie to the list?

DOJ Intervenes in Muni-Bond Civil Suit

A safe assumption is that the DOJ wishes to keep certain things under wrap so the evidence has a good showing at the criminal trial. Of course after the non/exoneration of Bill Richardson and the Byzantine nature of these cases who can say what is really going on:

The department's antitrust unit is seeking to limit the pre-trial exchange of information among the parties in the civil lawsuit, according to a court order yesterday by U.S. Magistrate Judge Gabriel Gorenstein in Manhattan federal court. The 2008 lawsuit was brought by Mississippi, municipalities and other bond issuers.

The Justice Department previously filed criminal charges in a related bid rigging probe. In February, a former worker at CDR Financial Products Inc. pleaded guilty to conspiring to rig bidding on investment contracts sold to local governments.

In the civil lawsuit, banks, brokers and dealers are accused of conspiring with one another to not compete and to rig bids for municipal derivatives sold to issuers of municipal bonds. The defendants allegedly allocated customers among themselves and fixed and stabilized prices, including the interest rates paid to issuers.

For a look at the civil suit check here. For more on the intervention check here.

Navy Seal Cleared in Iraq Abuse Case

Well this is good news:

BAGHDAD (AP) -- A U.S. military jury has cleared a Navy SEAL in an abuse case involving an Iraqi prisoner accused of masterminding an attack that left four Blackwater security contractors dead.

1st Petty Officer Julio Huertas, 28, was the first of three Navy SEALs to go on trial for the alleged assault. He was not accused of abusing the prisoner but of failing to safeguard him and attempting to influence the testimony of another service member.

Senate Moves to Regulate Derivatives

Well, Lincoln got her victory:

Mr. Grassley, who is up for re-election this year, said in a statement that his vote did not mean that he would support the larger bill, which he noted had “a number of flaws that need to be resolved before I’d support it.”

Nevertheless, his decision to side with the Democrats underscored the potential political peril for Republicans in opposing tighter rules for Wall Street, at a time of public frustration over the return of huge earnings and blockbuster bonuses even as unemployment remains high and recovery limps along in much of the country.

The Agriculture Committee voted 13-8 to approve the bill, which was sponsored by Senator Blanche Lincoln of Arkansas, the committee chairwoman. The bill would require most derivative contracts to be traded on a public exchange and to be processed, or cleared, through a third party to guarantee payment if one of the traders went out of business.

It also would require most big banks and Wall Street firms to put their derivatives trading business into a separate subsidiary, a move opposed by the banks as well as the Obama administration.

The larger question is if this new bill does what its intended and whether it will prevent the abuses that almost destroyed the muni-bond market. On that account its far to early to tell even if it will be folded into the larger regulatory package Dems and Repubs appear to be working on.

Blanche Lincoln Erroneously Cites Jefferson County Muni-Scandal as an Example of "Local Ignorance"

She manages to bring up JeffCo in her push for new laws, of course she left out it was a bunch of crooked Democrat politicians that signed off on the deal. Considering the connections Democrats have to the muni-bond scandal this isn't much of a surprise.

WASHINGTON — Senate Agriculture Committee chairman Blanche Lincoln and other Democrats contend it’s necessary to impose a fiduciary duty on dealers that act as swap ­counterparties to state and local governments because some of them have misled municipalities into entering swaps they didn’t understand.

Asked about the provision in her bill to regulate derivatives, which imposes a fiduciary duty on dealers who pitch, advise, or enter into swaps with localities and pension funds, the ­Arkansas Democrat said: ­“Maybe you ought to ask the people of ­Alabama,” a reference to the muni-related scandals in Jefferson County.

The county, home to Birmingham, has teetered on the edge of bankruptcy for well over a year while officials have tried unsuccessfully to negotiate a restructuring of $3.2 billion of variable- and auction-rate sewer warrants for which interest rates have skyrocketed.

Meanwhile, the Justice Department and the Securities and Exchange Commission have taken enforcement action against former county officials and participants in its bond and swap transactions, charging that former dealers made payments and gifts to county officials in exchange for its business.

Lincoln’s committee is expected to vote on the bill today. Market ­participants have expressed skepticism about imposing a fiduciary duty on transaction ­participants whose interests are generally counter to states and localities — by the very nature of their being “counterparties.”

Clearly her criticisms of the "Black Box Deals" and their exploitation of the ignorance of local boards in dealing with complicated financial transactions has some merit. Just the other day another School district was burnt by deals they didn't understand. Its also clear she is misunderstanding or misstating what happened in Jefferson County. It wasn't ignorance, it was corruption that opened the door to the disaster. Langford and his buddies have been found guilty of giving and taking bribes in agreeing the deals that destroyed the county.

Gen. Petraeus statement on deaths of AQI leaders

Lets see Muslims in Iraq in partnership with the United States killing Al Qaeda's most vicious killers, and there are people who still scream "No Blood for Oil":

MACDILL AIR FORCE BASE, Fla. (April 19, 2010) – U.S. Central Command Commander, Gen. David Petraeus, has released the following statement today on the deaths of Abu Ayyub al-Masri, head of Al Qaeda-Iraq, and his partner, Abu Umar al-Baghdadi, head of the Islamic State of Iraq, west of Tikrit during a joint Iraqi-U.S. operation:I congratulate the Iraqi and U.S. forces who conducted the operation that resulted in the deaths of the heads of Al Qaeda-Iraq and the Islamic State of Iraq.

These two extremist leaders were responsible for barbaric attacks that killed thousands of innocent Iraqi citizens and Iraqi and Coalition Security Force members. Their deaths constitute another major milestone in the effort to defeat extremism in Iraq.The operation that resulted in the deaths of the two leaders is a further illustration of the development of the capabilities of the Iraqi Security Forces.

Good Work.

Greece Debt Woes Worsen

Going from bad to worse seems like the pattern here:

ATHENS (Reuters) - As international lenders hammer out the tough austerity measures Greece must take to escape a debt crisis shaking the euro zone, more and more Greeks are losing jobs with no visible recovery in sight."No matter where I ask for a job, I am turned down. I don't know how to feed my two children anymore," said Thanassis Avgeris, 46, who lost his construction job more than a year ago.

Waiting in the queue at an Athens branch of the state Unemployment Agency, Avgeris is one of many suffering the effects of the near collapse of the construction sector, which had boomed before the 2004 Olympics.Figures released on Tuesday showed the January jobless rate jumped to a six-year high of 11.3 percent from 9.4 percent in the same month last year. A total 567,000 jobless were reported, a 22 percent year-on-year increase.

"Conditions in the labor market are deteriorating sharply," said Nikos Magginas, economist at the National Bank of Greece. "Current trends suggest that the average unemployment rate will exceed 12 percent in 2010," Magginas added.

Airmen Deliver Aid to Kyrgyzstan

Jeff Villemarette carries needed medical supplies to the National Hospital in Bishkek, Kyrgyzstan, from the Transit Center at Manas. Airmen delivered medical supplies and food to two Bishkek hospitals April 15.

We do what we can when we can:

MANAS, Kyrgyzstan (April 16, 2010) — Airmen delivered medical supplies and food to two Bishkek hospitals April 15, 2010, and visited with patients who were injured last week in Kyrgyzstan. This is a continuation of efforts started just a couple of days ago when 16,000lbs - approximately $82,000 worth - of supplies including bandages, sutures, antibiotics, and antiseptics, were delivered to the Transit Center at Manas from the U.S. Army Medical Material Center, Southwest Asia. A total of four hospitals were helped with these supplies.


"Last week...Kyrgyz citizens, the majority of them young people, suffered serious injuries, mostly gunshot wounds," said Col. Jerry Flyer, Deputy Director for Medical Services at the Transit Center at Manas, who is also a surgeon. "During this time, Kyrgyz surgical and medical colleagues worked heroically around the clock to operate and save hundreds. What they accomplished was nothing less than incredible considering the lack of equipment and supplies they had to work with. In donating these supplies, we are helping to replenish what they have used and provide them the means to continue ongoing care of these patients."

Good work.

Its Official: Jefferson County Wants 1 Million from Langford.

It was well understood they would go after Langford and company, so today's actions was something of a formality:

The Jefferson County Commission this morning voted unanimously to file a petition with the U.S. attorney's office seeking $1.6 million forfeited by Larry Langford, Al LaPierre and Bill Blount in the federal public corruption case against the three.
Langford, former Birmingham mayor and commission president, was sentenced to 15 years in prison after being convicted on 60 counts including bribery, fraud, money laundering and conspiracy stemming from his time on the commission.


Commission President Bettye Fine Collins said any money recovered would likely go to the environmental services department.
Langford, who took an estimated $235,000 in bribes from Blount in exchange for steering county business to Blount's investment firm, was ordered to pay $119,985 in back taxes and forfeit $241,843.


Blount pleaded guilty last summer to conspiracy and bribery and was sentenced to 52 months in prison. LaPierre, a lobbyist who acted as the go-between and also pleaded guilty to conspiracy and filing a false tax return, was sentenced to 48 months.
Blount was ordered to forfeit $1 million, the amount he pocketed from the crime, while LaPierre was ordered to forfeit $371,932 and also pay $98,433 in back taxes.

A far cry from designer suits as the final page on his guilty convictions appears to turn and the disaster for Jefferson County unfolds.

Who Else is at Risk for CDO Litigation?

Considering the hits from the CDO market that keep popping up and their role in the various fiscal storms that have buffeted this Nation, it makes sense to look at market and who might be at risk. According to Bloomberg News Merrill Lynch and Bank of America might have the most to lose by further litigation:

Bank of America and Merrill Lynch, which combined in 2009, were collectively the largest underwriters of CDOs with components of the Goldman Sachs offering --“structured finance collateral and an ‘arbitrage plus cash flow’ structure,” Credit Suisse said in the report. Goldman Sachs has denied wrongdoing in the offering. That type of security was a subset of the total CDO market, which peaked at $418 billion in 2007, according to UBS analysts. Bank of America and Merrill Lynch together ranked first that year with $9.97 billion of those offerings, said the Credit Suisse report, citing Dealogic data.

Moynihan’s View

Bank of America Chief Executive Officer Brian T. Moynihan said April 16 he had “no knowledge” of claims such as the ones leveled against Goldman Sachs by U.S. regulators about a 2007 CDO offering. The Charlotte, North Carolina-based bank doesn’t comment on analyst reports, spokesman William Halldin said.

For the entire 2005-2008 span, Zurich-based UBS AG ranked second on the Credit Suisse list with $15.8 billion, and JPMorgan Chase & Co. was third with $9.9 billion. Spokesmen Brian Marchiony at JPMorgan and UBS’s Doug Morris declined to comment. New York-based JPMorgan bought Bear Stearns Cos., one of the biggest underwriters of mortgage securities, in 2008.

“Clearly, not every structured synthetic CDO issued during the period will necessarily be the subject of litigation,” Credit Suisse said in the report. The firm didn’t allege that any of the firms allowed outsiders to influence the composition of the CDOs for their own benefit.

The Securities and Exchange Commission filed a fraud suit against Goldman Sachs last week that accused the New York-based firm of selling a CDO linked to subprime mortgages without disclosing that hedge fund Paulson & Co. helped pick the underlying securities and bet against the vehicle, known as Abacus 2007-AC1. Clients lost about $1 billion from the trade, the SEC alleged.

My understanding of a CDO is that several borrowers are pooled together and then this "package" of debt can be kept as an investment or sold for quick cash. Its also my understanding that on paper it looks good, but in reality we don't know what these assets are worth since some borrowers won't pay them back. When the housing market went under, these CDO's became poison pills that wrecked numerous fiscal houses. As for Lynch, we all know what happened to them, in regards to Bank of America, they have been buffeted by their own in-house scandals.

State Department Warns Syria Over Scuds to Hezbollah

The SCUD, first made famous during desert storm provides Hezbollah with a great deal of credibility in regards to regional relations. I mean you are talking about a weapon that nations use, not some short range rocket to lob over the border. The other danger is that these ballistic missles can be mounted with all sorts of nasty warheads:

WASHINGTON (AP) -- The State Department summoned the senior Syrian diplomat in Washington on Monday to accuse his government of ''provocative behavior'' in supplying arms to the Iranian-aligned militant group Hezbollah in Lebanon.

A department statement announcing the complaint was imprecise about the alleged arms deals by the Syrians. It alluded to the transfer to Hezbollah of Scud ballistic missiles but did not say explicitly that Syria was behind such a deal.

Israel's President Shimon Peres last week directly accused Damascus of providing the missiles, which can carry a warhead of up to one ton, making them far larger than the biggest rockets previously in Hezbollah's arsenal. They are also more accurate.

Now a SCUD is a big weapon, so they can be struck if found, but a larger question is what will Israel do to Syria if in fact some type of conflict breaks out. As for Hezbollah , they have admitted as much but claim the weapons are junk:

Hizbullah sources confirmed on Thursday that the group had received a shipment of Scud missiles from Syria, the Kuwaiti paper Al-Rai reported.

But the missiles were old and unusable, according to the sources. Hizbullah also accused Israel of blowing the incident out of proportion to provoke a media ruckus.
“Our organization has many surface-to-surface missiles spread across all of Lebanon, in case Israel attacks the country again,” the Hizbullah sources said.


Despite this confirmation of what Jerusalem has been saying for days, the Syrian Foreign Ministry denied the reports, saying Israel was trying to stoke tensions in the region and could be setting the stage for an Israeli “aggression” to avoid Middle East peace requirements.

For more on the technical capabilities of the scud check here.

Here is a clyp of a scud on a mover, I am unsure if it is a launcher though: