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Triple Crunch Log                                                                                                            

US Attorneys General jointly investigate fraud in foreclosure proceedings: much at stake for banks. Business Week: “Speculation over mortgage issues helped drive down bank stocks last week after attorneys general from all 50 states said they had jointly opened an investigation into whether lenders and mortgage companies falsified documents in foreclosure proceedings. Home-loan servicers including Ally Financial Inc., Bank of America Corp. and JPMorgan, which manage outstanding mortgages, had earlier suspended some foreclosures or evictions while they review paperwork. JPMorgan analysts said mortgage repurchase costs stem from $2 trillion of loans that have defaulted or are likely to go bad, among the $6 trillion of U.S. mortgages and home-equity debt originated from 2005 through 2007. The defaults will create about $1.1 trillion of losses for banks, government-supported Fannie Mae and Freddie Mac, bond investors and insurers. Losses from forced repurchases may total $23 billion to $35 billion for loans sold to or insured by government-backed companies; $40 billion to $80 billion for so-called non-agency mortgages that aren’t backed by Fannie Mae, Freddie Mac or other government agencies, and $20 billion to $31 billion for home- equity loans, they said. Banks have already realized or reserved for a portion of the losses, the analysts wrote.”956

Could the US repossession scandal sink the banks again? Money Week: “The long and the short of it is that the piece of paper which explains who the homeowner actually owes money to for the home loan, isn't correctly filled in. To use the jargon, the "chain of title" is broken. This isn't a problem as long as no one is worrying about the paperwork. After all, you buy a house, you pay the bill every month – you aren't fretting about the ultimate recipient of that money. As Kevin Hassett puts it on Bloomberg, "the only thing between banks and a humungous legal fiasco is the possibility that trial lawyers and state attorneys general will show restraint. Ask tobacco companies how that might work out." We suspect that if it looks as though things are going to get seriously nasty on this front – adding up to serious losses for the banks or even threatening the US property system

“Will Chris Huhne succeed with nuclear where Mrs Thatcher failed? I wouldn't bet on it.” So Geoffrey Lean argues. “The new announcement by the formerly anti-nuclear Chris Huhne takes me back some thirty years to the time when Mrs Thatcher’s government unveiled its atomic ambitions, the last serious British attempt to expand the country’s use of the technology. The iron lady originally wanted to build ten new nuclear power stations, two more than are now envisaged by ministers. By the time her government got to publishing a White Paper, in 1981, the number had shrunk to five.  Only one of these was ever built, at Sizewell, on the East Anglian coast. It produced its first watt a full 15 years later, and its cost more than doubled during construction. Indeed, it transpired much later, it had only been possible to build it at all through a massive, if underhand, subsidy; money provided to the nuclear industry by Government  ‘to deal with the decommissioning of old and unsafe plants’ was diverted to bring into being the shiny new one instead. That was then, you might say. This is now. Indeed so. Back then things were much easier for nuclear power. Britain had a nationalised electricity industry, a monopoly headed by atomic advocates. If they and the government wanted reactors, they could just go ahead and build them. If costs overran, they could be hidden, or cash conjured up to cover them: there was no competition to worry about. Now the landscape is infinitely harsher. Britain has a liberalised, highly competitive energy market, and ministers are swearing blue that no nuclear subsidies will be provided. No nuclear power station has yet successfully been built, anywhere in the world, in such circumstances.957

20.10.10. UK spending review: “this looks far from being the 'greenest government ever',” Guardian concludes. “The department for energy and climate change's (Decc) central budget is slashed 20% but capital expenditure is going up 28% by 2014-15, mainly on nuclear decomissioning, carbon capture and storage and the renewable heat incentive for green home heating. The department for the environment, farming and rural affairs(Defra) got hammered - the third biggest cut of all departments. At the department for international development (DfID), the budget appears to be rising an astonishing 50% by 2015, with the chancellor, George Osborne, boasting that the UK by 2013 will be the first major country to spend 0.7% of its GDP on overseas aid, the rate recommended by the United Nations. … The green investment bank, which appears not to have a departmental home. The bank will get £1bn of public cash as a "backstop", Osborne said, while asset sales in the future will add "significant" proceeds, with the aim of then leveraging private capital to invest in low-carbon projects. … On the crucial question of whether the bank will be a real bank – independent, able to raise bonds – or simply a government fund, it is wait and see once the "final design" is revealed. … Big new carbon tax: This is a bombshell for medium and bigger businesses and a real U-turn for the government. The Carbon Reduction Commitment Energy Efficiency Scheme requires companies to buy permits to cover the greenhouse gas emissions from their energy use. The proceeds were going to be handed back, rewarding those companies that cut the most carbon, penalising those that cut the least. But now the Treasury has nabbed the lot, to "support the public finances", earning them £1bn a year by 2014-15.958

Solar energy feed-in-tariffs narrowly escape the chop: Jeremy Leggett accuses 'elements' within traditional energy companies of declaring war on renewables. “For years we have heard a mantra in the anguished national debate about how to keep the lights on that goes like this: "We need all the sources of power we can lay our hands on. That means we need both nuclear and renewables." Today this is changing. Lobbyists for big energy roam Whitehall talking renewables down at best, and trying to shoot down government support for them at worst. As for the other side, the editor of the premier solar industry trade journal, Michael Schmela of Photon, recently wrote the following portentous words: “The fact is that base load plants and solar can't peacefully coexist”.”959

Coal India is 12 times oversubscribed on third day of IPO as foreign investors flood in, seeking emerging markets exposure. The institutional portion of the offering on Wednesday covered 22 times the shares available in the state-run company. Most of the bids came at the top of Coal India’s Rs225-Rs245 IPO price range, valuing the world’s largest coal miner at about $35bn. Investors have been pouring billions of dollars into emerging economies such as India, which has seen capital inflows hit record levels this year.960

Eon scraps plans for a new coal plant at Kingsnorth. FT: “The company said it took the decision because current low power prices made the progect uneconomic. …But environmentalists will claim it as a victory, as it means no new coal power station.961

21.10.10.Coal India IPO: the $3.5bn offer is subscribed 15 times over when the books close. Trading starts on November 4.962

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