According to an overseer's report released on Tuesday, the U.S. Treasury Department is pressing the bailed out insurer American International Group Inc. (AIG) to reduce $198 million in scheduled retention payments after the government missed the opportunity to defend against controversial bonuses to AIG employees last year. The special inspector general of the government’s $700 billion bailout program, Neil Barofsky, said that Treasury official Kenneth Feinberg has not specified the amount by which retention payments should be reduced. Feinberg is supervising pay practices at seven companies, including AIG, which received extraordinary government assistance. Though all the firms that received bailout money are subject to limits on their compensation practices, for these seven firms the situation is critical due to the special assistance they received from the Treasury. The seven firms whose compensation plans are under scrutiny are American International Group, Citigroup (C), Bank of ...

Pandora’s Box of rate hikes is opened! Is the dollar being removed from oil trades? Deficits do matter, eh? Gold heads toward its all-time high…And Now… Today’s Pfennig!

Good day… And a Terrific Tuesday to you! A Tuesday morning that is seeing a HUGE currency rally VS the dollar on the news that the Reserve Bank of Australia (RBA) opted to go ahead and hike rates now, and not wait for November’s meeting,

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Neil Barofsky, the U.S. special inspector general for the Troubled Asset Relief Program (TARP) plans to audit a federal guarantee granted last year to protect Citigroup Inc. (C) from potentially massive losses. The U.S. special inspector general is in charge of keeping a check on bank bailouts and will convene a team to audit the Citigroup guarantees. The appointed team will examine why the guarantees were given, how they were structured and whether the bank’s risk controls are adequate to prevent government losses. The Federal Reserve, the Treasury and Federal Deposit Insurance Corporation (FDIC) in November 2008 guaranteed a $306 billion pool of Citigroup mortgage assets aiming at preventing the collapse of the U.S. banking system amidst a global financial crisis. Citigroup’s guarantees came on top of $45 billion of bailout funds obtained last year through TARP. The audit is a result of the questions ...

Starting with the re-opening of formal trade arrangements in 1971, China has undergone a near unprecedented level of economic transformations. The country’s per-capita income doubled from 1978 to 1987 and again from 1987 to 1996.

In those 20 years, more than 300 million Chinese ascended out of poverty with accompanying dramatic changes in lifestyle, professions, and diet: between 1985 and 2008, average Chinese meat consumption more than doubled from 44 pounds to 110 per annum.

However, most Americans (including the Government) have been blind to this economic reality, choosing to focus instead on China’s social qualities. Indeed, it was not until the Chinese Dragon was literally breathing down Uncle Sam’s neck ¾ China overtook the US as the world’s largest consumer of coal, meat, grains, and steel in 2004¾ that the latter became aware of the former’s economic developments in any real fashion.

Which brings us to today, where the US is trapped …

Upbeat headlines have been everywhere in recent weeks, and they all seem to point to a single conclusion: The U.S. economy is in the early stages of a very rapid recovery.

In fact, when you peruse the news it’s difficult to come to any other conclusion. For instance:

A number of key earnings reports have been much better than expected, and company executives buttressed those profit figures with positive comments about the next 18 months. The trading operations of Goldman Sachs Group Inc. (NYSE:GS) and JPMorgan Chase & Co. (NYSE: JPM) both just reported record profits. U.S. housing prices rose in May for the first time in three years. Initial jobless claims have plunged 15% since their April peak. The Conference Board’s Index of Leading Economic Indicators rose 0.7% in June, its third successive positive reading. And just ...

Where are we now? It’s a question we’ve been grappling with here at Notes since the bizarre events of March 9, when equities took off on a wild run. They haven’t stopped since.

The bull run/bear market rally has had three major phases. This from our favorite underground analyst, David Rosenberg:

1. March 9 to May 6 when financials led the way

2. May 6 to July 10 when it was all about defensive growth and strong balance sheets (tech and health care leading the way)

3. Since July 10 it’s all been about basic materials and consumer discretionary stocks.

Whatever way you look at it, however, it’s clear that we underestimated the level of euphoria backing this rally.

The recent run-up in stocks has been closely linked with the “green shoots” hypothesis, as we pointed out in yesterday’s Notes. We’re deeply suspicious of this hypothesis, however.

First, the data points don’t support a V-shaped recovery, something the green

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Is the credit issues became apparent in October 2008, much of the press with respect to the Troubled Asset Relief Program (TARP) has revolved around the nine largest financial institutions, including but not limited to Citigroup (C), Bank of America (BAC), Wells Fargo (WFC), State Street (STT) and Goldman Sachs (GS). However, more than 600 institutions have received investments from the U.S. government. When dealing in hundreds of billions of dollars, accountability should be expected. Unfortunately, the U.S. Treasury so far has required only 21 of the largest institutions to issue public filings on their dollar volumes of new lending monthly. While the largest institutions have received the lion’s share of the funds, it seems a bit unfair they are the only ones being held accountable. Moreover, it appears the Treasury has been less than willing to date to collect such data. ...

Investors in common stocks tend to ignore warning signs coming from the credit markets, often at their peril. Right now, the credit markets are broadcasting the following warning: The equity of overleveraged REITs is at risk of elimination or permanent impairment.

Yet the stocks of real estate investment trusts (REITs), which are popular among income-oriented retail investors, are still trading at high enough levels that discount just a garden-variety recession in commercial real estate. REITs were designed to invest in portfolios of rental properties, and generally pay no corporate income taxes if they distribute at least 90% of their profits as dividends to their shareholders.

REITs were designed to thrive in an environment of steadily rising property values and rents. But in this ice age for commercial real estate, the REIT business model will cease to function properly; a REIT’s tax-free status doesn’t allow it to retain much excess

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Investors in common stocks tend to ignore warning signs coming from the credit markets, often at their peril. Right now, the credit markets are broadcasting the following warning: The equity of overleveraged REITs is at risk of elimination or permanent impairment.

Yet the stocks of real estate investment trusts (REITs), which are popular among income-oriented retail investors, are still trading at high enough levels that discount just a garden-variety recession in commercial real estate. REITs were designed to invest in portfolios of rental properties, and generally pay no corporate income taxes if they distribute at least 90% of their profits as dividends to their shareholders.

REITs were designed to thrive in an environment of steadily rising property values and rents. But in this ice age for commercial real estate, the REIT business model will cease to function properly; a REIT’s tax-free status doesn’t allow it to retain much excess capital during lean

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Representative Alan Grayson (D-Fla) is proving that Ron Paul isn’t the only one with a pulse up on Capitol Hill. Grayson is going after the “Citigroup Three” – Ben Bernanke, Tim Geithner and Vikram Pandit – in an attempt to bust up the Wall Street crony alliance.

Grayson is doing what any Congress member worth his or her salt should have done a long time ago. He’s calling for an inquiry into the $300 billion government guarantee extended to Pandit’s Citigroup. Put simply, he’s asking who should be held responsible for putting the taxpayer – you and me, dear reader – on the hook for a third of a trillion dollars of toxic Citigroup assets.

Here’s a quick breakdown of what Grayson is putting to the special inspector general of the TARP program Neil Barofsky courtesy of Tyler Durden at ZeroHedge.com.

1. How was the deal negotiated by Citigroup,

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