cryptogon.com

JPMorgan, which sent a default notice to Thornburg Mortgage Inc. after the lender missed a $28 million margin call, said more default notices and margin calls were likely. The Carlyle Group’s mortgage fund also failed to meet $37 million in margin calls this week.

“A systemic credit crunch is underway, driven primarily by bank writedowns for subprime mortgages,” according to the report co-authored by analyst Christopher Flanagan. “We would characterize this situation as a systemic margin call.”

The credit crisis that began about a year ago will likely intensify after Friday’s weak February U.S. employment report “that most definitely signals recession,” JPMorgan said.

Indeed, corporate bond spreads widened to a new record on Friday, surpassing levels seen in October 2002 during a boom in bankruptcies following the dot-com crash. U.S. employers cut payrolls in February for a second consecutive month, slashing 63,000 jobs, the biggest monthly job decline in nearly five years, the U.S. Labor Department reported on Friday.

“The weak February employment report points to an economy in recession,” JPMorgan said.

The JPMorgan report included a revised bleaker forecast for subprime-related home prices. The bank now sees prices falling 30 percent, from its prior 25 percent forecast. Those prices have declined 14 percent since mid-2006, JPMorgan said.

Lawmakers included the anti-torture measure in a broader bill authorizing U.S. intelligence activities.

“Because the danger remains, we need to ensure our intelligence officials have all the tools they need to stop the terrorists,” Bush said in his weekly radio address. He added that the vetoed legislation “would diminish these vital tools.”

House of Representatives Speaker Nancy Pelosi of California said Democrats would try to overturn Bush’s veto and said U.S. moral authority was at stake.

“We will begin to reassert that moral authority by attempting to override the president’s veto next week,” Pelosi said.

Democratic Sen. Edward Kennedy of Massachusetts called Bush’s veto “one of the most shameful acts of his presidency.”

Think presented its investment relationship with GE in Geneva at the 78th International Motor Show, where it unveiled a new platform concept for larger electric vehicles: The crossover TH!NK Ox is an electric five-seat car close to the size of a sport utility vehicle but lighter and more aerodynamic. Also in Geneva, the company launched to the market the TH!NK City, a plug-in electric car with over 100 miles range.

GE announced its electric transportation investments at the Washington International Renewable Energy Conference. The commercial supply agreement with A123Systems provides Think with patented Nanophosphate™ lithium-ion batteries for the TH!NK City, now in production at the company’s factory in Norway. Think is delivering its first cars in Norway, with international sales to follow later in the year.

A123 is now drawing on the research and technology development expertise of GE Global Research in Niskayuna, New York. The joint research will support A123’s battery development, including batteries for Think’s vehicles.

Blair, who stepped down as prime minister last year after 10 years in power, was to lecture on faith and globalization as the Howland Distinguished Fellow, and would start in the next academic year, the university said.

His work at the university would relate to the work of his Tony Blair Faith Foundation, which he is due to launch later this year. Blair is known as an observant Christian and converted to Roman Catholicism last year.

“The appointment of Mr. Blair provides a tremendous opportunity for our students and our community,” Yale President Richard Levin said in a statement.

“As the world continues to become increasingly interdependent, it is essential that we explore how religious values can be channeled toward reconciliation rather than polarization.

“Mr. Blair has demonstrated outstanding leadership in these areas and is especially qualified to bring his perspective to bear. We are honored that he is planning to join the Yale community,” he added.

Blair’s eldest son Euan is currently studying international relations at the university, which counts President George W. Bush, one of Blair’s closest allies during his time in power, among its alumni.

According to British media reports, Blair would continue in his role as special envoy to the Mideast Quartet working towards Palestinian statehood, an unpaid role that reportedly takes up around 10 days of every month.

There has also been speculation that Blair could be made the future EU president, a role enshrined in the European Union’s reforming Lisbon Treaty that the 27 member states hope to ratify by the end of the year.

However, some members are known to oppose his candidacy partly due to his role in supporting the US-led invasion of Iraq in 2003.

Besides his work with the Quartet, Blair has also been busy since leaving office advising Zurich Financial Services on issues including climate change and working as a part-time senior advisor to Wall Street bank JPMorgan Chase.

Last month he said he wanted to help Rwanda’s development, following a two-day visit to the tiny central African country.

Yale’s Howland fellowship is open to citizens of any country “in recognition of some achievement of marked distinction in the field of literature or fine arts or the science of government,” according to the university.

The margin calls against Carlyle portend an ominous development one day after the fund was served with default notices, convulsing already skittish markets.

Shares in the fund, a listed mortgage-bond fund managed by private equity firm the Carlyle Group, were suspended Friday. The stock closed down Thursday almost 60 percent at $5.00 on Euronext Amsterdam.

Carlyle Capital said it received additional margin calls and default notices Thursday from banks that help finance its portfolio of residential mortgage-backed securities. It said it may not be able to meet the increased requirements.

The fund said it was unable to meet margin calls from four banks Thursday, raising fears that its entire portfolio could be unwound. Securities have dropped sharply in recent weeks as banks pull back on their lending, forcing investment vehicles and funds like Carlyle to dump assets.

In Friday’s statement, Carlyle Capital said it had received “substantial additional margin calls and additional default notices from its lenders.” It also said that lenders were selling off securities held as collateral.

…

Carlyle Capital leverages its $670 million equity 32 times to finance a $21.7 billion portfolio of residential mortgage-backed securities issued by U.S. housing agencies Freddie Mac and Fannie Mae.

To do this, it enters into repurchase agreements with banks, which involve posting the mortgage securities as collateral in exchange for cash.

If the value of the security held as collateral falls, the lender will ask for more collateral — a “margin call” — in order to secure the loan. If the borrower does not meet the margin call by putting up more collateral, the lender may sell the security.

The Labor Department’s report, released Friday, also showed that the nation’s unemployment rate dipped to 4.8 percent as hundreds of thousands of people — perhaps discouraged by their prospects — left the civilian labor force. The jobless rate was 4.9 percent in January.

Job losses were widespread, with hefty cuts coming from construction, manufacturing, retailing, financial services and a variety of professional and business services. Those losses swamped gains elsewhere including education and health care, leisure and hospitality, and the government.

The latest snapshot of the nation’s employment climate underscored the heavy toll of the housing and credit crises on companies, jobseekers and the overall economy.

To provide relief to persistent credit problems, the Federal Reserve announced Friday additional steps to inject cash into the nation’s financial system to keep banks lending to customers.

The central bank will increase the amount of loans it will auction to banks on March 10 and March 24 to $50 billion each, up from the $30 billion apiece originally planned.

The Fed also said that starting Friday it will enlarge another series of transactions, called repurchase agreements, so that they will pump a net total of $100 billion into the financial system at any one time.

The Labor report also showed that the job losses suffered in January were worse than the government first reported. Employers cut 22,000 jobs, versus 17,000.

“Every California child deserves a quality education, and parents should have the right to decide what’s best for their children,” Schwarzenegger said in response to the ruling, which said children educated at home must be taught by a credentialed teacher.

“Parents should not be penalized for acting in the best interests of their children’s education,” Schwarzenegger said. “This outrageous ruling must be overturned by the courts, and if the courts don’t protect parents’ rights then, as elected officials, we will.”

State Education Secretary David Long, a Schwarzenegger appointee, said that meant the governor supported allowing parents without teaching credentials to educate their children.

“Parents do not have a constitutional right to home school their children,” Justice H. Walter Croskey wrote in a Feb. 28 opinion for the 2nd District Court of Appeals.

Noncompliance could lead to a criminal complaint against the parents, Croskey said.

An estimated 166,000 students in California are home schooled.

California has allowed home schooling if parents either file paperwork to establish themselves as small, private schools; hire a credentialed tutor; or enroll their child in an independent study program run by an established school while teaching the child at home.

Bush asserted the new authority Dec. 20 after signing legislation that overhauls some postal regulations. He then issued a “signing statement” that declared his right to open mail under emergency conditions, contrary to existing law and contradicting the bill he had just signed, according to experts who have reviewed it.

A White House spokeswoman disputed claims that the move gives Bush any new powers, saying the Constitution allows such searches.

Still, the move, one year after The New York Times’ disclosure of a secret program that allowed warrantless monitoring of Americans’ phone calls and e-mail, caught Capitol Hill by surprise.

“Despite the president’s statement that he may be able to circumvent a basic privacy protection, the new postal law continues to prohibit the government from snooping into people’s mail without a warrant,” said Rep. Henry Waxman, D-Calif., the incoming House Government Reform Committee chairman, who co-sponsored the bill.

Experts said the new powers could be easily abused and used to vacuum up large amounts of mail.

“The [Bush] signing statement claims authority to open domestic mail without a warrant, and that would be new and quite alarming,” said Kate Martin, director of the Center for National Security Studies in Washington.