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A recent U.S. military policy decision now explicitly states that observations by hush-hush government spacecraft of incoming bolides and fireballs are classified secret and are not to be released, SPACE.com has learned.

The satellites’ main objectives include detecting nuclear bomb tests, and their characterizations of asteroids and lesser meteoroids as they crash through the atmosphere has been a byproduct data bonanza for scientists.

The upshot: Space rocks that explode in the atmosphere are now classified.

“It’s baffling to us why this would suddenly change,” said one scientist familiar with the work. “It’s unfortunate because there was this great synergy…a very good cooperative arrangement. Systems were put into dual-use mode where a lot of science was getting done that couldn’t be done any other way. It’s a regrettable change in policy.”

Scientists say not only will research into the threat from space be hampered, but public understanding of sometimes dramatic sky explosions will be diminished, perhaps leading to hype and fear of the unknown.

Incoming!

Most “shooting stars” are caused by natural space debris no larger than peas. But routinely, rocks as big as basketballs and even small cars crash into the atmosphere. Most vaporize or explode on the way in, but some reach the surface or explode above the surface. Understandably, scientists want to know about these events so they can better predict the risk here on Earth.

Yet because the world is two-thirds ocean, most incoming objects aren’t visible to observers on the ground. Many other incoming space rocks go unnoticed because daylight drowns them out.

Over the last decade or so, hundreds of these events have been spotted by the classified satellites. Priceless observational information derived from the spacecraft were made quickly available, giving researchers such insights as time, a location, height above the surface, as well as light-curves to help pin down the amount of energy churned out from the fireballs.

And in the shaky world we now live, it’s nice to know that a sky-high detonation is natural versus a nuclear weapon blast.

Where the space-based surveillance truly shines is over remote stretches of ocean – far away from the prospect of ground-based data collection.

With $45 billion in capital and $2.1 trillion in assets, the central bank would not withstand the scrutiny normally afforded other institutions, Grant said in a live interview.

“If the Fed examiners were set upon the Fed’s own documents—unlabeled documents—to pass judgment on the Fed’s capacity to survive the difficulties it faces in credit, it would shut this institution down,” he said. “The Fed is undercapitalized in a way that Citicorp is undercapitalized.”

Grant said he would support legislation currently making its way through Congress calling for an audit of the Fed.

Moreover, he criticized the way the Fed has managed the financial crisis, saying the central bank’s target rate should not be around zero.

“I think zero is the wrong rate for almost any economy,” Grant said, adding the Fed has “embarked on a vast experiment in moral hazard. Interest rates are the traffic signals in a market economy, and everything’s green. … You have to wonder whether these interest rates are the right clearing rate or rather they are the imposition of a central bank.”

Companies will face increased pressure to try to stem the tide, and need to be prepared to safeguard data as well as the cash, according to David Williams, the chief executive of Deloitte Financial Advisory Services.

Williams said this week that the money flowing from the current stimulus package is particularly vulnerable to fraud because almost all movement of money is now done electronically.

“We’re telling our clients to be very careful and to make sure their firms are resilient in terms of dealing with the potential opportunities for fraud and waste,” Williams said.

That means keeping an eye out for the traditional scams such as billing for services not performed. But it also means firms must become even more diligent about electronic records and network security.

“It becomes ever more important that firms remain diligent about their data,” Williams said.

Earlier this month, FBI director Robert Mueller warned the nation to brace for a potential crime wave involving fraud and corruption related to the economic stimulus package. “These funds are inherently vulnerable to bribery, fraud, conflicts of interest, and collusion. There is an old adage, that where there is money to be made, fraud is not far behind, like bees to honey,” Mueller said. See full story.

Earlier this month, Vice President Joe Biden said some stimulus-related scams had already happened and that mistakes were inevitable. President Barack Obama said Monday that the White House is trying to make sure the stimulus money isn’t being ill-spent.

He said many of the safeguards and transparency measures “so far seem to have worked” but added his administration will have to stay vigilant.

“At a time when everybody is tightening their belts, the last thing the American people want to see is that any of this money is being wasted,” Obama said.
Potential damage

Williams suggested that the fraud and theft losses from the roughly $787 billion stimulus package approved earlier this year could reach about $50 billion.

The U.K. pledged 781.2 billion euros ($1.1 trillion) to restore confidence in its lenders, the most of any of the 27 EU members, according to a May 26 document prepared by officials from the European Commission, the European Central Bank and member states and obtained by Bloomberg News. Denmark, where 13 of the country’s 140 banks were bailed out by the central bank or bought by rivals last year, committed 593.9 billion euros.

The measures, designed to save banks and revive economic growth, surpass Germany’s $3.3 trillion economy, the region’s biggest. They also helped to widen the Euro area’s budget deficit to the most in three years in 2008. The commission, the EU’s executive arm, is seeking to create the first EU-wide agencies with rule-making powers to monitor risk in the economy after the crisis led to $460 billion of losses and writedowns across the continent, according to data compiled by Bloomberg.

Principal is coming due on the so-called partial interest- only loans as an 18-month-old recession saps demand for commercial real estate. About $179 billion of such loans were written between 2005 and 2007 and bundled into bonds, according to data from Bank of America Merrill Lynch.

With soaring vacancies and falling rents, some cash- strapped borrowers will fail to cover the higher costs, said Andy Day, a commercial mortgage-backed securities analyst at Morgan Stanley in New York. About 87 percent of mortgages sold as securities in 2007 allowed owners to put off paying principal for several years or until maturity, compared with 48 percent in 2004, Morgan Stanley data show.

“The worst is yet to come,” MetLife Inc. Chief Investment Officer Steven Kandarian said yesterday in a Bloomberg Television interview. “Typically there’s a lag between when the economy softens and when the defaults actually occur.”

Investors have already seen prices on top-rated senior debt drop below 70 cents on the dollar from 95 cents a year ago, according to Aaron Bryson, a commercial mortgage-backed securities analyst at Barclays Capital in New York.

Just a Stopgap

Interest-only mortgages were designed as a stopgap to allow owners to do renovations and absorb other costs. Owners delay paying principal for the first several years, lowering their initial monthly expenses. Partial interest-only loans allow for postponement of principal payments for a portion of the term. Full-term interest-only deals require the principal at maturity.

Loans that postpone principal payments had become the norm by the time the commercial-mortgage bond market peaked two years ago, said Frank Innaurato, managing director of analytical services at Realpoint LLC, a Horsham, Pennsylvania-based credit- rating service.

“The proliferation of interest-only loans was symptomatic of the loose underwriting standards of that time,” Innaurato said. “Borrowers were taking advantage of the best terms possible.”

“Treasuries have backed up enough that they offer respectable value,” said Andrew Brenner, co-head of structured products and emerging markets in New York at MF Global Inc., the world’s largest broker of exchange-traded futures.

The bonds drew a yield of 4.72 percent at the auction, the highest since August 2007. Benchmark 10-year note yields reached 4 percent earlier for the first time since October on concern the budget deficit and a falling dollar will prompt investors to reduce holdings of U.S. debt.

The yield on the 10-year note fell nine basis points, or 0.09 percentage point, to 3.86 percent, after climbing as high as 4.0038 percent, at 1:03 p.m. in New York, according to BGCantor Market Data. The yield last touched 4 percent on Oct. 16. The 3.125 percent security maturing in May 2019 rose 23/32, or $7.19 per $1,000 face amount, to 93 31/32.

Eight bond-trading firms surveyed by Bloomberg News had forecast a yield of 4.80 percent. The sale is a reopening of the $14 billion 30-year bond auction on May 7, which drew a yield of 4.288 percent.

…

Treasuries tumbled 6.5 percent so far this year, the worst performance since Merrill Lynch & Co. began tracking returns in 1978, as so-called bond vigilantes drove up yields to punish President Barack Obama for quadrupling the budget shortfall to $1.85 trillion and raising the risk of inflation. Ten-year notes rose as the highest yields in seven months lured investors.

“Clearly the supply issue is having a far-reaching impact,” said Jeffrey Caughron, an associate partner in Oklahoma City at The Baker Group Ltd., which advises community banks investing $20 billion of assets. “Virtually all can be attributed to the supply issue. The economic data has not been that bond bearish.”

Borrowing Costs

The rise in yields is undermining Federal Reserve Chairman Ben S. Bernanke’s efforts to cap consumer borrowing costs and pull the economy out of the worst recession in five decades.

Ten-year yields have risen over 140 basis points since the Fed announced its $300 billion, six-month Treasury purchase program on March 18. The average 30-year mortgage rate jumped to 5.59 percent from 5.29 percent a week earlier, Freddie Mac, the McLean, Virginia-based mortgage buyer, said today in a statement. The 15-year rate averaged 5.06 percent.

Yields on Washington-based Fannie Mae’s current-coupon 30- year fixed-rate mortgage bonds were at 5.07 percent, according to data compiled by Bloomberg. That’s the highest since Nov. 24, the day before the U.S. central bank announced its plans to buy home-loan bonds, and up from 3.94 percent on May 20.

Policy makers “now need to accept that they can’t control the back end and need to focus on the front end,” said Dominic Konstam, head of interest-rate strategy in New York at Credit Suisse Group AG, another primary dealer.

Big Leagues

Russia and Brazil announced plans yesterday to buy $20 billion of bonds from the IMF and diversify foreign-currency reserves. China will purchase $50 billion and India may announce similar funding, Brazil’s Finance Minister Guido Mantega said.

“They’re saying they are part of the big leagues,” Alberto Ramos, an economist in New York at primary Goldman Sachs Group Inc.. “They’re not buying IMF bonds to diversify reserves. They want to be seen as having a large voice” in global markets, he said.

The health ministry said the United Nations agency was raising its pandemic flu alert to the top phase 6 on a six-point scale, indicating the first influenza pandemic since 1968 is under way.

“Today… the Minister for Elderly Care and Public Health Maria Larsson has called a press conference following a decision by the WHO to raise the pandemic level to six for the influenza A H1N1 virus,” the ministry said in a statement.

WHO Director-General Dr Margaret Chan was due to give a news conference on the influenza (A) H1N1 pandemic at 1600 GMT, following a meeting of the WHO’s emergency committee of flu experts, and WHO spokesmen declined to comment before that.

The move will trigger heightened health measures in the WHO’s 193 member states as authorities brace for the worldwide spread of the virus that has so far caused mainly mild illness.

The move to phase 6 reflects the fact that the disease, widely known as swine flu, was spreading geographically, but not necessarily indicate how virulent it is.

“Phase 6, if we call a phase 6, doesn’t mean anything concerning severity, it is concerning geographic spread … Pandemic means global, but it doesn’t have any connotation of severity or mildness,” WHO spokesman Gregory Hartl said.