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Wednesday's Top 10 with NZ Mint: Fran's 10 ways to slash debt; Zimbabwe sacks 1,600 central bankers; Obama kicks the can down the road; Dilbert

Wednesday's Top 10 with NZ Mint: Fran's 10 ways to slash debt; Zimbabwe sacks 1,600 central bankers; Obama kicks the can down the road; Dilbert

Here are my Top 10 links from around the Internet at 10 past 11 am, brought to you in association with New Zealand Mint for your reading pleasure.

I welcome your additions and comments below, or please send suggestions for Thursday's Top 10 at 10 via email to bernard.hickey@interest.co.nz.

I'll pop any surplus suggestions I get into the comment stream

1. 10 ways to cut the debt - Fran O'Sullivan unleashes at NZHerald.co.nz with 10 suggestions for debt reduction, just to help focus the government's mind.

This governnment shows no sign of listening or telling the public the truth about our vulnerabilities.

It's much easier to sleepwalk to victory and hope growth delivers us from hell.

Essentially, John Key is taking a punt that growth will solve our immediate debt problems and the ones bearing down on us as the Baby Boomers retire.

Yet the recovery has been slower than everyone expected, because of the debt. And policy hasn't changed much to produce the growth. Relying on China and Australia isn't a solution either.

Something has to change. Or the ratings agencies (or more correctly the Australian government and the Australian bank CEOs) will force us to do it.

Here's a couple of Fran's ideas. Your views? Comments below.

Ramp up GST to 20 per cent. Sure it's regressive - but essential food items could easily be omitted. Introduce a 20 per cent tax rate for small businesses which will encourage them to get into growth mode and employ more people.

Most top state bosses could usefully take a 30 per cent - or more - haircut. The reality is they have all done very well indeed in the payrate states during the past decade.  

2. US economy stalled - This chart tells the story of the physical US econony and how it's just not moving. Rail Activity has fallen for the last four months, Clusterstock reports.

3 'They had how many staff?' - The Daily Nation in Kenya reports Zimbabwe's central bank governor Gideon Gono has announced plans to sack 74% of the bank's staff. That's 1,600 people. To give you an idea, the Reserve Bank of New Zealand has 230 staff.

They must have been printing their currency by hand.

Gideon is most upset.

"I would like to say it is not one of the easiest tasks as it is going to be one of the largest retrenchments in the history of the country by a single institution,” Dr Gono told a parliamentary committee.

4. Blame Greenspan and Bernanke, not China - FTAlphaville republishes this useful chart below showing trade imblances and an academic paper looking at the long term history of such imbalances and financial crises. The end result is that loose credit is to blame, not the trade imbalances. Quelle Surprise.

In light of the evidence from 140 years of modern economic history, the big international crises are different in that they combine strong credit growth with an environment of low real interest rate (relative to real growth) and tame inflation.

External imbalances could play an additional role, but at a first glance they appear secondary to the role played by credit growth and interest rates.

5. Kicking the can  - Felix Salmon at Reuters points out the tax cut extension 'deal' done overnight by Obama and the Republicans is just another attempt by America to 'extend and pretend'.

This is expansionary fiscal policy, alright, but a large chunk of it is concentrated in exactly in those areas — like tax cuts for the rich — which have the lowest multipliers when it comes to kick-starting economic recovery. What the country needs is spending, and this bill instead looks very likely to give us hundreds of billions of dollars of saving.

The unemployment-insurance and payroll-tax aspects of the deal will be welcomed as exactly the kind of stimulus this economy needs: substantially all of them will be spent rather than saved. But the middle- and upper-class tax cuts, paid for by extra borrowing by Treasury, will be used in large part to pay down personal debt. Essentially, we’re replacing private debt with public debt. Just like Ireland! And the political dynamics of taxes — easy to cut, impossible to raise — will remain: this decision essentially kicks the can two years down the road, when we’re going to have exactly the same fight all over again.  

6. Another US$1 trillion in losses - Nouriel Roubini has warned via Dealbook that another US$1 trillion in losses are possible for US banks from the utterly broken US housing market. HT Gummy via Top 10.

Mr. Roubini said he was particularly focused on a recent study by Laurie Goodman, a senior managing director of Amherst Securities and a former co-head of fixed income research for UBS. In her October report, “The Housing Crisis — Sizing the Problem, Proposing Solutions,” Ms. Goodman comes to the dark conclusion that more than 11 million borrowers are in danger of losing their homes, or roughly one out of five borrowers.

“That’s a scary number because the previous estimates I saw were in the three to four million range for the next four years” Mr. Roubini said. “Some say these numbers are too pessimistic, but I’ve spoken to experts in the mortgage industry who say these numbers are quite realistic.”  

7. Structural imbalances - This McKinsey quarterly paper by Lowel Bryan is a useful read to get a sense of the structural problems in the relations between developed and emerging economies and the potential for big financial shocks.

The conclusion is there is a risk the Euro and US dollar fall 30-50% in a hurry.

What would that do to our economy, or the global economy for that matter? HT Lance Wiggs via blog

Labor can’t be freely traded on a single global market, but capital and commodities can. This dynamic is creating significant tensions in global currency, commodity, and debt markets.As the GDP growth of emerging-market nations continues to out- strip that of the developed world, the pressure on currency values will continue to build. Eventually, the tension must be released, and currency values will readjust.

For all of us, the speed of that adjust- ment makes a big difference. The dollar and euro would need to be devalued by between 30 and 50 percent for financial foreign-exchange rates to reflect the purchasing-power-parity (PPP) exchange rates of emerging-market currencies more closely (and, therefore, for labor of equal quality and productivity to be priced relatively equally across geographies).  

8. Another cracking Rolling Stone article - Rolling Stone is the source of some of the best financial journalism around at the moment. We all remember Matt Taibbi's incendiary Vampire Squid article that changed the debate about Goldman Sachs. And the piece that ended General Stanley McChrystal's career.

Now Rolling Stone's Jeff Goodell has written a 7,600 word piece about Don Blankenship, the boss of Massey Energy, a coal miner with an appalling safety record. Blankenship resigned a week after it was published. He is no Peter Whittall. Here's why.

Unless you live in West Virginia, you've probably never heard of Don Blankenship. You might not know that he grew up in the coal fields of West Virginia, received an accounting degree from a local college, and, through a combination of luck, hard work and coldblooded ruthlessness, transformed himself into the embodiment of everything that's wrong with the business and politics of energy in America today — a man who pursues naked self-interest and calls it patriotism, who buys judges like cheap hookers, treats workers like dogs, blasts mountains to get at a few inches of coal and uses his money and influence to ensure that America remains enslaved to the 19th-century idea that burning coal equals progress.  

9. Muddling through isn't working - Daniel Gros writes at VoxEu that the various attempts to muddle through the European debt crisis simply aren't working. He suggests a big bang.

The only way out seems to be a big bang; to deal with all the problem cases in one go. The argument against a restructuring of, say, Greek public debt has always been that this would lead to contagion. But contagion is already a fact of life, and it focuses on countries with real problems. Portugal with its combination of high external debt and poor growth prospects looks like Greece.

Spain has the “Irish disease”; a real estate bust that leads to huge losses in the banking system. Every country is different, and some countries (Spain, for example) would under normal circumstances not need a bail out. But these are not normal circumstance, and it is not possible to deal with each country in sequence because each bailout lead the markets to expect the next one.

Only a big bang can resolve the impasse. How should this "big bang" look like? A sudden collective default would of course constitute a "mega Lehman" and would have catastrophic consequences. However, it is entirely possible for the countries in question to make investors an exchange offer while continuing to service their payment obligations. There should thus be no technical default, but simply an offer to bondholders to engage in discussions about debt restructuring accompanied by a concrete exchange offer.  

10. Totally funny video about encouraging readers to comment. All not true. We love our readers, but sometimes...

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

45 Comments

1 - "slower than everyone expected?

 Au contraire!

Repeat after me: "Economists aren't everyone"

8 - "The thing I admire most about Don Blankenship is that he's not afraid to tell the truth," Ben Parker, an engineering student, tells me as the applause fades. "He's just like Sarah Palin.".

gotta love it.

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1. yep.....im not suprised in the least....but actually you missed Steve Keen and Paul Krugman..  I think what you really mean is the neo-classical economists and the Pollies who believe in them like JK.

Small businesses get on and grow.....with what?  oil is pushing upwards.....to whom? consumers are already broke, or will be as petrol runs to $3 a litre...then it will probably collapse again to $40 a barrel....all this predicted for Peak oil....high volitility.....shortages...

Im glad there a re so many blinkers, they can be swapped on to horses in the next few years.

regards

 

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Forget the PSA in Kiwifruit ....... now the Oyster farmers need assistance  . Their oysters are taking a walk on the wildside , and have contracted herpes !

JK : I reckon it's time for another bail-out !

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well that's a Switch GBH....I usually have the oysters then go get herpes.....now I can get it direct.....cutting out the middle ........man..?

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"Most top state bosses could usefully take a 30 per cent - or more - haircut. The reality is they have all done very well indeed in the payrate states during the past decade. "

Aha, sanity!

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But but Roger...how can we expect these uneek and highly skilled managers to survive on anything less than half a million a year....

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Go Fran - 10 out of 10.

We want it all - we want it now.

Though it might be useful to further explore carrots with some of the sticks - like the suggested GST hike (stick) but with an exemption for essential food items (carrot).

 

 

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Wikileaks on Rudd

 

http://www.stuff.co.nz/world/australia/4435191/WikiLeaks-cables-Rudd-a-…

The US regards Australian Foreign Affairs Minister, Kevin Rudd, as an abrasive, impulsive ''control freak'' who presided over a series of foreign policy blunders during his time as prime minister, according to a series of secret diplomatic cables.
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What I find funny is that there has been nothing in the diplomatic cable WikiLeaks that wasn't already bleeding obvious...

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But being arrested for not wearing a condom!

 

http://www.dailymail.co.uk/news/article-1336291/Wikileaks-Julian-Assang…

 

 

His point of contact was a female party official, whom we shall refer to as Sarah (her identity must be ­protected because of the ongoing legal proceedings).

An attractive blonde, Sarah was already a well-known ‘radical feminist’. In her 30s, she had travelled the world following various fashionable causes.

While a research assistant at a local university she had not only been the protegee of a militant feminist ­academic, but held the post of ‘campus sexual equity officer’. Fighting male discrimination in all forms, including sexual harassment, was her forte.

She had snagged perhaps the world’s most famous activist, and after they arrived at her apartment they had sex. According to her testimony to police, Assange wore a condom. The following morning they made love again. This time he used no protection.

Jessica reportedly said later that she was upset that he had refused when she asked him to wear a condom.

Again there is scant evidence — in the public domain at least — of rape, sexual molestation or unlawful coercion.

What’s more, the following morning, on the Tuesday, the pair amicably went out to have breakfast together and, at her prompting, Assange promised to stay in touch. He then returned to Stockholm, with Jessica again paying for his ticket.


Jessica was worried she could have caught a sexual disease, or even be pregnant: and this is where the story takes an intriguing turn. She then decided to phone Sarah — whom she had met at the ­seminar, and with whom Assange had been staying — and apparently confided to her that she’d had unprotected sex with him.What happened next is difficult to explain. The most likely interpretation of events is that as a result of a one-night stand, one participant came to regret what had happened.

At that point, Sarah said that she, too, had slept with him. 

As a result of this conversation, Sarah reportedly phoned an acquaintance of Assange and said that she wanted him to leave her apartment. (He refused to do so, and maintains that she only asked him to leave three days later, on the Friday of that week.)

How must Sarah have felt to ­discover that the man she’d taken to her bed three days before had already taken up with another woman? ­Furious? Jealous? Out for revenge? Perhaps she merely felt aggrieved for a fellow woman in distress.

Having taken stock of their options for a day or so, on Friday, August 20, Sarah and Jessica took drastic action.

They went together to a Stockholm police station where they said they were seeking advice on how to proceed with a complaint by Jessica against Assange.

According to one source, Jessica wanted to know if it was possible to force Assange to undergo an HIV test. Sarah, the seasoned feminist warrior, said she was there merely to support Jessica. But she also gave police an account of what had happened between herself and Assange a week before.

Read more: http://www.dailymail.co.uk/news/article-1336291/Wikileaks-Julian-Assanges-2-night-stands-spark-worldwide-hunt.html#ixzz17TuOLEiM

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SFO apparently making an arrest tomorrow in an investigation involving tens of millions of dollars of investors losses in a 'Ponzi scheme' - http://www.stuff.co.nz/business/money/4436008/SFO-poised-to-make-Ponzi-…

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"But other analysts, and especially the French government, think France's fundamentals are sound. " My parents are here from France for a visit at the moment and we've had a few discussions about all this but they'd agree with that statement from the article you linked to. I'd be surprised myself if it ended up in the same situation as the PIIGS - that said, everything is possible. 

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Elley, I have no idea about the exact details of France's situation, so hopefully their fundamentals are alright.

But as you say "everything is possible", even we in NZ are ranked regarding our debt load between Spain and Portugal (see mondays "Top 10") and our PM thinks we are doing fine..........

A horrific situation and hardly anybody blinks an eyelid.

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Hey Elley, did you know a bag or two of gold coins were dropped in a French river some time back and they have never been found? Honest!

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and who would be silly enough to trust the French Govn?  by that I mean any Govn?

Belgium is now being mentioned...that wasnt in the PIIGS either...

regards

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To give you an idea, the Reserve Bank of New Zealand has 230 staff.

And that's 230 too many!

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Average salary...$400ooo.....92 million.....couldn't do without them!

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Firstly a big hats of to Journo's attending the RBNZ announcement....take a pillow...or a comic...sure to be a snore fest.....you guys should be compensated for coma endangerment.

Bernard why not do a scoop release today.....While the economy is showing small improvement..bla bla bla it remains delicate...bla bla bla..with the situation in Europe and possibility of contagion...bla bla bla....on the bright side the banks are taking on board our direction in regard SME's...bla bla bla...in view of what we see the Global economy doing (remaining constipated) there will be no change...bla bla bla while core funding will remain a point of focus for the coming BLa BLA BLa..................aw just shut the hell up Bolly......

Headline..........................DO Nothing...Wait and See...

Sub Header.....................Still the best policy say RBNZ 

If it's a hot day it will be almost unbearable. 

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 Mary is the proprietor of a bar in Dublin. She realises that virtually all of her customers are unemployed alcoholics and, as such, can no longer afford to patronise her bar. To solve this problem, she comes up with a new marketing plan that allows her customers to drink now, but pay later. She keeps track of the drinks consumed on a ledger (thereby granting the customers loans).

Word gets around about Mary's "drink now, pay later" marketing strategy and, as a result, increasing numbers of customers flood into Mary's bar. Soon she has the largest sales volume for any bar in Dublin.

By providing her customers freedom from immediate payment demands, Mary gets no resistance when, at regular intervals, she substantially increases her prices for wine and beer, the most consumed beverages. Consequently, Mary's gross sales volume increases massively. A young and dynamic vice-president at the local bank recognises that these customer debts constitute valuable future assets and increases Mary's borrowing limit. He sees no reason for any undue concern, since he has the debts of the unemployed alcoholics as collateral.

At the bank's corporate headquarters, expert traders figure a way to make huge commissions, and transform these customer loans into DRINKBONDS, ALKIBONDS and PUKEBONDS. These securities are then bundled and traded on international security markets. Naive investors don't really understand that the securities being sold to them as AAA secured bonds are really the debts of unemployed alcoholics. Nevertheless, the bond prices continuously climb, and the securities soon become the hottest-selling items for some of the nation's leading brokerage houses.

One day, even though the bond prices are still climbing, a risk manager at the original local bank decides that the time has come to demand payment on the debts incurred by the drinkers at Mary's bar. He so informs Mary.

Mary then demands payment from her alcoholic patrons, but being unemployed alcoholics they cannot pay back their drinking debts. Since Mary cannot fulfill her loan obligations she is forced into bankruptcy. The bar closes and the eleven employees lose their jobs.

Overnight, DRINKBONDS, ALKIBONDS and PUKEBONDS drop in price by 90%. The collapsed bond asset value destroys the banks' liquidity and prevents it from issuing new loans, thus freezing credit and economic activity in the community.

The suppliers of Mary's bar had granted her generous payment extensions and had invested their firms' pension funds in the various BOND securities. They find they are now faced with having to write off her bad debt and with losing over 90% of the presumed value of the bonds. Her wine supplier also claims bankruptcy, closing the doors on a family business that had endured for three generations, her beer supplier is taken over by a competitor, who immediately closes the local plant and lays off 150 workers.

Fortunately though, the bank, the brokerage houses and their respective executives are saved and bailed out by a multi-billion euro no-strings attached cash infusion from their cronies in Government. The funds required for this bailout are obtained by new taxes levied on employed, middle-class, non-drinkers who have never been in Mary's bar.

Now, do you understand economics in 2010?

Regards,

Bill Bonner, 
for The Daily Reckoning

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Brilliant!

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NZ manufacturing has slumped to a 10 year low !

I reckon that we need the less rude guys at the NZMEA to provide a comment on this . Apparently wood processing and paper production  are well down , along with oil and chemical  processing ........... However , to buck the trend , tobacco production in NZ is up 4.1 % y.o.y ............ COUGH , COUGH ........... yay !

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But but Gummy we are having a recovery...they told us this was a recovery....it is isn't it?.....what else could it be?....

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But but Gummy - him self doesn't know where we are going. One day everything is fine the other day he's gloom and doom.

Make a decision man - are you Lowburn only or part of this world ?

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Wolly : I reckon that the recovery is starting in civil serpents' salaries ( as if the GFC impacted upon any of them , in the slightest ) .............. And may trickle down to the masses , the great unwashed . ............. Hey , a $ 92 million salary bill at the NZRB , amongst just 230 staff ! That's the way to cream it . And all at the tax-payers' expense ........ hee hee hee !

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See Gummy - I reckon we have our own little greedy "NZWall Street" !

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Having been one meself at one time Gummy, I can tell you there are the unwashed civil serpents and the others who always smell of roses.( known to the unwashed as the "untouchables") Very much a class system in the English tradition...jolly good old boy...Gin or a spot of Scotch Sir?

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Why not Fran suggest that every one should cut down on one meal a day and live on water, so there would be heaps of collective savings which could be blown again on helping the rich like Hotchin, Watson, etc and other rich-listers to screw the system and make money for their clan ?

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Not related to the above at sorry folks but cant seem to find the info on here yet......FYI

http://www.stuff.co.nz/business/money/4436008/SFO-poised-to-make-Ponzi-scheme-arrest

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Gareth was on to it :   by Gareth Vaughan | 08 Dec 10, 1:26pm SFO apparently making an

SFO apparently making an arrest tomorrow in an investigation involving tens of millions of dollars of investors losses in a 'Ponzi scheme' - http://www.stuff.co.nz/business/money/4436008/SFO-poised-to-make-Ponzi-s...

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I think Fran and other journalists are very frustrated with our parliamentarians and understandably write a lot of BS – like most of us in the same situation would do too. Fingers are often faster then brains in such situations. High Gummy above !

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Walter : I reckon that as long as our cricket team isn't as pathetic as Australia's , we're doing A.O.K.  Bugger worrying aboot the economy . It's summer . Kick back on the terraces with a coldie or three !

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I reckon our Crikey -team doesn't do well  - are they funded by the washed masses or sponsered by Kiwis living in Hawaii ?

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I'm aware everyone has their own opinion on this company, but surely a good start would be a bit of transparency:

http://www.stuff.co.nz/business/blogs/the-bottom-line/4435577/Can-you-guess-who-it-is-yet

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I just chocked on my coffee... have you guys seen this:

http://www.stuff.co.nz/national/politics/4434849/Constitutional-review-to-consider-four-year-term

LATEST: Prime Minister John Key says there is an appetite among the public for a four year fixed term of Parliament, which would be discussed in a sweeping constitutional review announced today.

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We sure have Matt.....hey how does one chock on their coffee....Gummy do you know?

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I reckon that usually coffee is served well after the chocks are removed from the air-craft .

Do you know what de-planing is Wolly  ? Here's a clue , you do it sometime after a Cebu Pacific flight ends . .........  " De-Plane ! " ........ Saints preserve us .

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It sounded like something that happened under Helen....I hear she's in Cancun skirts and all probably de-planing.

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 "US banking giant Bank of America has admitted it committed fraud in the bond derivatives market and will pay $US137.3 million ($A138.94 million) in damages, the government said on Tuesday.

"Bank of America entities have agreed to pay a total of $137.3 million in restitution to federal and state agencies for its participation in a conspiracy to rig bids in the municipal bond derivatives market," the Department of Justice said in a statement." the age .com

It couldn't happen to more deserving group.

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In a functioning/legitimate free market democracy, one would expect them to lose their banking licence.

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Why not fess up to a few more frauds, pay some more fines and carry on?

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 "Payment of the damages is a condition of Bank of America's admission into the department's antitrust corporate leniency program, in which corporations and individuals can avoid criminal conviction and fines."

 

See, that's how you do it!

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From the anti-trust website. And they even have a customer service questionnaire when you leave - nice touch!

The Antitrust Division and other agencies involved in this matter are part of the l Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. For more information on the task force, visit www.StopFraud.gov.

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Re Fran O'Sullivan, number 8 is about right, why does Auckland always seems to think it deserves funding for things that no other parts of the country get, it's bizarre how convinced they are that they deserve it.

-number 7, the gov't stuffed up big time when they cut taxes by so much, now they have to try to tinker with things to make up for it, and can't make up for it.
You could see it coming, all the rubbish about how it was going to be a tax neutral budget was a load of bollocks, it was just a big election bribe.

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