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  Monday, 20 Dec 2010 | 4:55 PM ET

Muni Market Mayhem?

Posted By: Ash Bennington

If chaos in the municipal bond markets is the big financial story of 2011 heaven help us all.

Meredith Whitney
cnbc.com
Meredith Whitney

The story of weakness in the muni market is threatening to cross over into the mainstream media — just as the U.S. housing market story crossed when that bubble spectacularly imploded — like an economic supernova metamorphosed into a financial black hole.

60 Minutes did a layman's introduction last night to the budget woes faced by the states. (Meredith Whitney spoke on camera: She called the state debt issue "certainly the largest threat to the U.S. economy". ) The Wall Street Journal ran a piece this morning on the ongoing woes in muni-land. And The Financial Times Alphaville did a wrap-up today , linking to other troubling stories they'd done in the past.

So what is going on here?

If you're new to the topic, here's a summary necessarily stripped of nuance in the interest of concision.

Like seemingly everyone else in this economy, some of our individual states are in serious financial trouble.

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  Monday, 20 Dec 2010 | 2:17 PM ET

The Case Against John Carney, Revisited

Posted By: John Carney
Luring investors into a stock market trap, taking money from hedge funds, pumping stocks, helping investment banks fund a liquidity crisis, being a team player for Wall Street - quite a lot of nefarious things for me to have foisted upon CNBC in just six months! No wonder its felt so hectic. Gary Anderson has written a 2000-word attack on CNBC titled Why Is CNBC Trying So Hard To Defend Insider Trading? But, for the most part, it is about John Carney. »Read more
  Monday, 20 Dec 2010 | 1:34 PM ET

S&P Muni Expert Takes on Meredith Whitney

Posted By: Lori Ann LaRocco

Meredith Whitney predicts that we'll see 50 to 100 municipalities debt defaults next year. Experts within the industry are saying they can not reconcile her numbers with the situation they see on the ground. Some go as far as to say that her prediction does not make sense. First of all, when it comes to the number, my sources tell me that her numbers needs to be defined — are those muni's unrated? Rated? There is a big difference between the two and the spread of defaults is huge: 39 defaults that were rated vs. 1,400 unrated. Investors need to remember not all munis are the same in the 2.8 trillion market. I decided to sit down with Robin Prunty, Team Leader for State Ratings for S&P whose team recently did an extensive report on the health of the muni market.

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  Monday, 20 Dec 2010 | 1:27 PM ET

Ivy League Rocket Science Analysis: Why CFOs Cook the Books

Posted By: Ash Bennington

CFO's commit accounting fraud because of greed and because of pressure from their bosses.

»Read more
  Monday, 20 Dec 2010 | 11:42 AM ET

Insider Trading Case: Witness Revealed — Investigation to 'Grow Significantly'

Posted By: Ash Bennington

The Wall Street Journal has revealed the identity of the government's cooperating witness CW-2.

Digital Vision | Photodisc | Getty Images

According to the article by Susan Pulliam, CW-2 is Karl Motey — a 46 year old technology analyst who runs Coda Group, a research firm in Los Altos, California.

The Journal cites a "person familiar with the matter" as the source of the revelation: Neither Motey, nor the FBI, nor the Manhattan U.S. attorney's office would comment.

The Journal reports that "Mr. Motey [is] near the center of the action in helping federal authorities develop evidence to bring charges" We already know about the witness, identified as CW-2, from the government's complaint.

The WSJ reports that: "A key cooperating witness working for the U.S. in a major insider-trading investigation made more than 60 calls with corporate managers, seeking to gather evidence for the government…"

» Read More
  Monday, 20 Dec 2010 | 11:00 AM ET

Goldman Sachs' DC Office Hounded By Animal Rights Radicals

Posted By: John Carney

Animal rights radicals have been harassing Goldman Sachs employees in Washington, DC, according to a lawsuit filed in a DC Superior Court.

Goldman Sachs
Source: goldmansachs.com
Goldman Sachs

The radicals are members of two groups Stop Huntingdon Animal Cruelty (SHAC) and Defenders of Animal Rights Today and Tomorrow (DARTT). They accuse Goldman of earning blood money and torturing puppies.

Goldman filed a complaint alleging that the SHAC and DARTT members have been showing up with bullhorns and placards alleging that Goldman murders dogs. They've also been showing up at the home of Michael Paese, Goldman's head of government affairs.

The suit seeks a permanent injunction against members of the group from committing violence, trespassing or making threats against Goldman employees.

» Read More
  Monday, 20 Dec 2010 | 10:20 AM ET

Young Citigroup Analyst Dies After Shocking Suicide Jump

Posted By: Ash Bennington

Citigroup analyst Jessica Fashano, 27, jumped to her death from the roof of the Trump Place apartment tower on Riverside Boulevard yesterday.

Why she chose the Trump building, where she did not live, is among the many unanswered questions surrounding her death.

A woman who is a resident of the building reported seeing Ms. Fashano in the elevator: Fashano reportedly asked the woman how she could get to the roof.

» Read More
  Monday, 20 Dec 2010 | 10:17 AM ET

Gunning For Ernst & Young With Civil Fraud Charges

Posted By: John Carney

Executives at Lehman Brothers and Ernst & Young should breathe a sigh of relief upon hearing the news that New York prosecutors are planning to file civil fraud charges alleging the accounting firm was complicit in misleading investors in the investment bank .

The charges will reportedly arise from Lehman's infamous Repo 105 transactions deals that Lehman allegedly put in place to make its balance sheet look healthier at the moment it was reporting its quarterly results to investors. Basically, Lehman said it was selling assets in deals that were really nothing more than short-term loans. The bankruptcy examiner highlighted these loans back in March.

Why should executives at Lehman and Ernst & Young be relieved?

» Read More
  Monday, 20 Dec 2010 | 9:48 AM ET

The European Union Is Over

Posted By: John Carney

The decision by the European Union last week to create a permanent bailout fund may not end the sovereign-debt crisis but it will—eventually—end the European Union as we know it.

The idea behind a common currency was to allow free trade and investment between European countries without the risk of competitive currency devaulations. It was supposed to make Europe more inviting to global capital and credit investment. It was an attempt to create monetary stability without the imposition of a centralized fiscal and political regime.

All of these were noble goals. But the attempt has failed.

The permanent bailout fund will create moral hazard, inviting euro zone members to engage in budgetary brinksmanship and free-riding that will make bailouts more likely. To ameliorate the moral hazard—and to satisfy the demands of the Germans—the Europeans promise that the bailouts will come with “strict conditionality.”

» Read More
  Monday, 20 Dec 2010 | 9:07 AM ET

Wall Street's Zero Bonus Club

Posted By: Ash Bennington

Quantitative Easing at Least Modestly Successful, Says Fed's Bullard (CNBC) "US economic growth will be stronger than previously expected in 2011 and quantitative easing has been "at least modestly successful so far," James Bullard, President of the Federal Reserve Bank of St. Louis said on Monday. 'I do think GDP will be stronger in 2011 than people thought ...60 days ago,' Bullard told CNBC. Squawk Box is live at FedEx's main hub in Memphis, which falls under the St. Louis district. 'The holiday season is looking good, retail sales are good. That bodes well for the current quarter and the coming quarters,' he said."

Tensions Rising on Korean Peninsula (Wall Street Journal) "South Korea on Monday afternoon test-fired artillery from an island North Korea attacked last month, defying North Korean threats of another attack and asserting its rights in a maritime area it has controlled since the Korean War of the 1950s. North Korea called Monday's drills, which began at 2:30 p.m. local time (12:30 a.m. Eastern time) at a marine outpost on Yeonpyeong Island, a 'reckless military provocation.' But North Korea said after the drills ended that it was holding its fire because Seoul had changed its firing zones. The two Koreas have been drawn to the brink of open fighting by North Korea's apparent effort to redraw the maritime boundary near the island and four others controlled by South Korea in the Yellow Sea off the countries' west coast."

Defining Employment Down: Temps Become Larger Share of Labor Market (CNBC via New York Times) "Despite a surge this year in short-term hiring, many American businesses are still skittish about making those jobs permanent, raising concerns among workers and some labor experts that temporary employees will become a larger, more entrenched part of the work force. This is bad news for the nation’s workers, who are already facing one of the bleakest labor markets in recent history. Temporary employees generally receive fewer benefits or none at all, and have virtually no job security. It is harder for them to save. And it is much more difficult for them to develop a career arc while hopping from boss to boss."

» Read More

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  • Jeff Cox is finance editor for CNBC.com.

  • Lawrence Develingne

    Lawrence Delevingne is the ‘Big Money’ enterprise reporter for CNBC.com and NetNet.

  • Stephanie Landsman is one of the producers of "Fast Money."

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