Implode-Explode Heavy Industries news feed http://implode-explode.com/ Tracking the many faces of the global credit implosion. en-us iehi-feed-59707 Thu, 05 May 2016 15:33:57 GMT Atlas Crumbles Under Weight of Italian Banks http://implode-explode.com/viewnews/2016-05-05_AtlasCrumblesUnderWeightofItalianBanks.html iehi-feed-59704 Thu, 05 May 2016 14:55:13 GMT Even 'small crisis' enough to tear EU apart, Moody's warns http://implode-explode.com/viewnews/2016-05-05_EvensmallcrisisenoughtotearEUapartMoodyswarns.html In a stark warning, the rating agency said the "painful adjustment" faced by some countries in the eurozone meant the collapse of the single currency area and wider EU was believed by some to be a question of "when" not "if".

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However, it said endless austerity demands in return for bail-outs had fuelled deep resentment across the region, especially in countries weighed down by sky-high unemployment.

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[Mervyn] King said the single currency area would have to choose between an economic "depression" in the south, higher inflation in northern states like Germany, permanent fiscal transfers or a "change of composition of the euro area".

However, he told an audience in Frankfurt that there was "a limit to the economic pain that can be imposed in pursuit of a federal Europe without risking a political reaction.

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iehi-feed-59702 Thu, 05 May 2016 00:53:13 GMT Wells Fargo problem loans jump 62 percent, driven by energy http://implode-explode.com/viewnews/2016-05-04_WellsFargoproblemloansjump62percentdrivenbyenergy.html iehi-feed-59701 Wed, 04 May 2016 16:31:30 GMT Why Cruz, and the G.O.P., Lost to Trump http://implode-explode.com/viewnews/2016-05-04_WhyCruzandtheGOPLosttoTrump.html There is a lot of anger in the electorate, which Trump's victory reflects. Yet one of the many problems that Cruz had in filling the stop-Trump role was that the anger he retailed came in packages of contempt that were too cunningly crafted and too widely strewn, like the mini-munitions in a cluster bomb, with too much indifference about whom he might hurt. Cruz's misanthropy doesn't seem to have been lost on voters. With his wife, Heidi, on one side, and Carly Fiorina, his play-acting running mate, on the other, Cruz ended his press conference by refusing to say whether he would support Trump as the nominee. They formed the same tableau a few hours later, when Cruz, in response to the Indiana results, unexpectedly stepped aside. He suspended, rather than ended, his campaign, and it's unclear what will happen to his delegates. But, at this point, any contested Convention would have to be premised on a gimmick--a rule change, for example--or a true upheaval in the Party. And the G.O.P. doesn't seem organized enough for that.

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The electoral map looks very good for the Democrats now, but complacency would be a mistake. Clinton lost Indiana to Bernie Sanders. Thanks to superdelegates, she still has a strong hold on her Party's nomination, but that doesn't remove the question of whether Sanders's endurance in the race points to unaddressed weaknesses in her candidacy, such as the way she talks about money. On Tuesday night, Sanders said that he would take the fight to the Convention, and also said that he wanted superdelegates to think hard about who would do better against Trump. They undoubtedly are, though it may lead not to support for Sanders but to more calls for him to get out of the race. The general election is going to be ugly, not easy, no matter how wide the final margin is. Those who wrote off Trump as a joke have, since the beginning, willfully ignored two factors that are, in retrospect, pretty obvious. First, Trump wants to be President. He has, in his way, imagined himself as a creature of politics for decades. Second, in order for him to lose, someone else had to beat him--and the Republican Party has failed to produce that person. If Jeb Bush doesn't become a byword for the collective delusions of a political class, then the lessons of this election won't have been learned.

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iehi-feed-59699 Wed, 04 May 2016 14:53:56 GMT AEP: US dollar plunges as world plays dangerous game of pass the parcel http://implode-explode.com/viewnews/2016-05-04_AEPUSdollarplungesasworldplaysdangerousgameofpasstheparcel.html The US dollar has plunged to a 16-month low in the latest wild move for the global financial system, tightening the currency noose on the eurozone and Japan as they struggle to break out of a debt-deflation trap.

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This is a massive shift in sentiment since the end of last year when investors were betting heavily that the US Federal Reserve was on track for a series of rate rises, which would draw a flood of capital into dollar assets. Markets have now largely discounted a rate rise in June, and are pricing in just a 68pc likelihood of any increases this year.

... it increases the pain for the eurozone and Japan as their currencies rocket. The world is in effect playing a high-stakes game of pass the parcel, with over-indebted countries desperately trying to export their deflationary problems to others by nudging down exchange rates.

... There is little that the Bank of Japan or the ECB can do to arrest this unwelcome appreciation. The Obama Administration warned them at the G20 summit in February that it any further use of negative interest rates would be regarded by Washington as covert devaluation, and would not be tolerated.

... Stephen Jen from SLJ Macro Partners said the Fed is pursuing a "weak dollar policy", reacting to global events in a radical new way. "They are forcing currency appreciation onto weaker economies. It is irrational," he said.

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iehi-feed-59696 Tue, 03 May 2016 22:58:11 GMT U.S. Warns Shkreli May Face More Charges in Securities Case http://implode-explode.com/viewnews/2016-05-03_USWarnsShkreliMayFaceMoreChargesinSecuritiesCase.html Disgraced drug company founder Martin Shkreli isn't rushing to have his next showdown with the government. The 33-year-old former executive asked a judge to wait before setting a trial date for his securities fraud case because he could soon face more charges.

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Shkreli additionally may face charges related to the distribution of stock in Retrophin and a 2013 private placement deal which helped provide financing for the company, Assistant U.S. Attorney Winston Paes said Tuesday at a hearing in Brooklyn federal court. A more expansive indictment might be filed next month, Paes said.

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Shkreli, founder and former CEO of Retrophin, is accused of illegally using as much as $11 million in the drug company's assets to pay off investors who lost money in his hedge funds. He also lied to investors about the amount of money he was managing, his past failings as a fund manager, and whether one of the funds employed an auditor, prosecutors said. A former corporate lawyer, Evan Greebel, is accused of helping Shkreli carry out part of the scheme and cover his tracks.

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iehi-feed-59694 Tue, 03 May 2016 19:33:55 GMT Freddie Mac posts $354M "Don't Worry, It's Just Derivatives" loss; Cuts Dividend; Won't Draw on Treasury http://implode-explode.com/viewnews/2016-05-03_FreddieMacposts354MDontWorryItsJustDerivativeslossCutsDividendWo.html Mortgage giant Freddie Mac reported a net loss of $354 million for the first quarter, mostly due to losses it sustained on the investments it uses to hedge against swings in interest rates. The government-controlled company said Tuesday the January-through-March loss mainly reflected accounting measures, while its business remained strong. The loss compared with net income of $524 million in the same period of 2015.

As a result of the loss the company, based in McLean, Va., is skipping paying a quarterly dividend to the U.S. Treasury next month. Freddie previously has paid $98.2 billion in dividends, exceeding its government bailout of $71 billion.

Freddie also sustained a loss in the third quarter of last year, $475 million, also largely due to losses on derivatives used to hedge against interest-rate swings. While Freddie and Fannie have shown volatility in their quarterly earnings, the housing market's gradual recovery in recent years has made them profitable again.

Regarding the latter point from the title, see Freddie Mac: No Draw on Treasury for Now, But. . .

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iehi-feed-59693 Tue, 03 May 2016 19:30:41 GMT NYC Icon Fairway Falls to Private Equity, Hip New Grocer Competition http://implode-explode.com/viewnews/2016-05-03_NYCIconFairwayFallstoPrivateEquityHipNewGrocerCompetition.html New York City supermarket Fairway, an icon of the Upper West Side of Manhattan, known for its meats, cheeses and smoked fish, in addition to its branded black & white cookies, has filed for bankruptcy. The grocer's downfall can be traced to a 2007 sale of the company from the founding Glickberg family to private equity firm Sterling Investment Partners, and a recent expansion from its flagship on 74th street and Broadway across the tri-state area.

Sterling Partners listed Fairway on the Nasdaq at a $536 million valuation three years ago, raising$177 million for a nationwide expansion. However, Fairway struggled on public markets, saddled with hundreds of millions of dollars in debt and rising competition in its New York City backyard from the likes of Trader Joe's , Whole Foods, West Side Market, and Eataly.

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iehi-feed-59689 Tue, 03 May 2016 14:32:22 GMT The US public pensions crisis ‘is really hard to fix' http://implode-explode.com/viewnews/2016-05-03_TheUSpublicpensionscrisisisreallyhardtofix.html Few public pension plans are fully funded, meaning they do not have enough money to pay current and future retirees. And the situation is getting worse.

According to Wilshire Consulting, an investment advisory company, state-sponsored pension plans in the US had just 73 per cent of the assets they needed in mid-2015, down from 77 per cent in 2014. Turbulent market conditions in the latter part of 2015 and early 2016 probably made this number even worse.

The scale of this pension crisis, as it has been dubbed, is huge. The Hoover Institution, a think-tank at Stanford University, estimates that US public pensions collectively have a $3.4tn funding hole. More conservative numbers put the funding gap at around $1tn.

... fixing the schemes will require a lot of work and is likely to have unpleasant consequences for retirees, employees, taxpayers and politicians... But higher taxes or the issuance of bonds, another option used by local governments to raise money in order to reduce pension deficits, often proves unpopular with taxpayers.

... Unions, public sector employees and retirees do not want to give up the benefits promised to them, politicians do not want to impose tax hikes that could cost them votes, and taxpayers are reluctant to part with more cash to prop up the system.

... Public plans typically have high return targets of between 7 and 8 per cent, which are used to forecast how much money a pension fund will need to pay current and future retirees. Private sector pension plans, in contrast, typically use lower rates of 2.5 per cent on average to calculate future liabilities, says Ms Mitchell... An ageing public sector population is not helping matters. "There is no young blood coming in to keep their plans going," says Ms Mitchell.

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iehi-feed-59688 Tue, 03 May 2016 02:04:23 GMT Amazon Steps Up Blockchain Commitment With Digital Currency Group Partnership http://implode-explode.com/viewnews/2016-05-02_AmazonStepsUpBlockchainCommitmentWithDigitalCurrencyGroupPartner.html Amazon Web Services announces Monday that it will collaborate with New York City-based Digital Currency Group, one of the biggest investors in blockchain firms, to provide such a service so the blockchain providers in DCG's portfolio can work in a secure environment with clients who include financial institutions, insurance companies and enterprise technology companies.

A blockchain -- often called a distributed ledger -- is essentially a tamper-proof ledger, copies of which are held on multiple computers, that enables transactions to occur securely and quickly. It promises to make financial services more efficient, as well as cut costs and potentially shrink the industry as the software conducts functions currently executed by middlemen.

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The AWS announcement comes on the heels of a partnership between Microsoft and R3CEV, a consortium of 44 banks working to create standards for distributed ledger technology, for Microsoft to offer "blockchain as a service" via the cloud. IBM, which also offers a cloud-based blockchain, Friday released a framework for running blockchain networks securely, enabling enterprise players in industries such as financial services, healthcare and government conduct work on a blockchain while remaining compliant with relevant data security regulations.

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iehi-feed-59687 Tue, 03 May 2016 01:10:28 GMT Puerto Rico's Debt Crisis Deepens as Government Misses Payment http://implode-explode.com/viewnews/2016-05-02_PuertoRicosDebtCrisisDeepensasGovernmentMissesPayment.html Puerto Rico's debt crisis moved into a more perilous phase for residents, lawmakers and bondholders Monday after the Government Development Bank failed to repay almost $400 million.

The missed principal payment, the largest so far by the island, is widely viewed on Wall Street as foreshadowing additional defaults this summer, when more than $2 billion in bills are due.

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While Monday's default had been expected, it creates new complications for the local government. Its agencies maintain their bank accounts at the GDB, which serves as the government's fiscal agent and financial adviser and backs loans to private enterprises. The government had already passed legislation to limit withdrawals from the agency to avoid a potential bank run, and the commonwealth's treasurer last month began opening accounts at private banks.

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The default could mark a turning point after weeks of negotiations on Capitol Hill. House Republicans are completing legislation to create a federal oversight board for Puerto Rico with the power to sign off on local budgets and to authorize a court-supervised debt restructuring. The bill wouldn't commit U.S. taxpayer funds, but some creditors have described it as a bailout because they say it might violate existing contracts.

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Puerto Rico's debt crisis isn't seen as likely to spill into the U.S. economy or the broader $3.7 trillion municipal bond market because the island's troubles make it something of an outlier.

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iehi-feed-59686 Mon, 02 May 2016 21:24:02 GMT Treasury's Lew To Congress "Rescue Puerto Rico" Or Face "Cascading Defaults" http://implode-explode.com/viewnews/2016-05-02_TreasurysLewToCongressRescuePuertoRicoOrFaceCascadingDefaults.html iehi-feed-59684 Mon, 02 May 2016 15:08:47 GMT Schwab Ditching Money Markets For Fed Drip-line Proves U.S. Under Effective NIRP http://implode-explode.com/viewnews/2016-05-02_SchwabDitchingMoneyMarketsForFedDriplineProvesUSUnderEffectiveNI.html Bye-bye money market:

``... between June and October 2016, Schwab will update the cash feature on your account(s) from the current retail prime or municipal money market fund sweep to the Schwab Government Money Fund" or the SWGXX, which "will invest at least 99.5% of its total assets in cash, U.S. government securities and/or repurchase agreements that are collateralized fully by cash and/or U.S. government securities; under normal circumstances, at least 80% of the fund's net assets will be invested solely in U.S. government securities including repurchase agreements. "

Talk about proof positive that the Fed didn't truly RAISE rates (tighten conditions) when it went to .25% -- it LOOSENED CONDITIONS by creating new repos where it was PAYING extra money into the financial system at the new rate... and now Schwab has abandoned ship from the private money market in favor of the Fed's new money-drip.

This dovetails with the point made in the comments at the bottom of this post -- namely that this sort of "NIRP structure", once put in place by a central bank, cannibalizes the private financial market and suffocates the economy, thus "incentivizing" central banks to do more of the same. Even though the Fed isn't "officially" at negative rates (because a few bucks occasionally change hands in the other direction in the rump-Fed funds market), it's structuring the money flows in and out of itself like any negative rate central bank... i.e. it is cannibalizing the normally-functioning financial system in a way that feeds on itself...

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iehi-feed-59681 Mon, 02 May 2016 14:49:45 GMT World's Longest Negative Rate Experiment Shows Destruction of Savings & Investment Machinery http://implode-explode.com/viewnews/2016-05-02_WorldsLongestNegativeRateExperimentShowsDestructionofSavingsInve.html In Denmark, where rates have been below zero longer than anywhere else on the planet, the private sector is saving more than it did when rates were positive (before 2012). Private investment is down and the economy is in a "low-growth crisis," to quote Handelsbanken. The latest inflation data show prices have stagnated...

Denmark has about $600 billion in pension and investment savings. The people who help oversee those funds say the logic of cheap money fueling investment doesn't hold once rates drop below zero. That's because consumers and businesses interpret such extreme policy as a sign of crisis with no predictable outcome.

The problem here is really quite obvious: when you peg rates at negative, the result is only "simulative" from the perspective of people borrowing from the central bank. All other borrowing and lending in the economy (which is supposed to be the main part of it) becomes anti-stimulative, because who wants to lend at negative rates (i.e., be guaranteed to lose money)? Thus you get a snake-eating-its-own-tail effect as central bank forced-lending consumes the market, while the overall financial market continues to shrink amidst the contrary incentives, leading to more of the same.

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iehi-feed-59680 Mon, 02 May 2016 14:44:19 GMT Fed is "Afraid of Its Own Shadow": Boockvar http://implode-explode.com/viewnews/2016-05-02_FedisAfraidofItsOwnShadowBoockvar.html On a recent CNBC's "Futures Now," Lindsey Group chief market analyst Peter Boockvar made the case that the Fed will never get the "perfect" conditions they seek before increasing short-term rates once again.

The Fed's mandate "isn't to have a perfect world. That only exists in fairy tales, dreams and in your econometric models," Boockvar said in a recent note to clients. He believes that the Fed's monetary has been far too accommodative under Yellen as well as under Ben Bernanke. Boockvar argued that the Fed has been taking cues from shaky international banks, and that doing so will always offer a reason to keep interest rates low.

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"It's been excuse, after excuse, after excuse," Boockvar said. "This is why, eight years into an expansion, they've only raised interest rates once. They're afraid of their own shadow. They're in a terrible hole that they're not going to be able to get out of."

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Based on this, Boockvar said that central bankers are losing their credibility and their ability to generate higher asset prices, putting the stock market in a precarious position.

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iehi-feed-59678 Sun, 01 May 2016 22:07:32 GMT Gold And Silver: Bull Markets Are Just Beginning http://implode-explode.com/viewnews/2016-05-01_GoldAndSilverBullMarketsAreJustBeginning.html iehi-feed-59677 Sun, 01 May 2016 18:43:23 GMT China's debt reckoning cannot be deferred indefinitely - Magnus http://implode-explode.com/viewnews/2016-05-01_ChinasdebtreckoningcannotbedeferredindefinitelyMagnus.html iehi-feed-59676 Sun, 01 May 2016 18:24:39 GMT The Cult Of Central Banking Is Dead In The Water | Stockman http://implode-explode.com/viewnews/2016-05-01_TheCultOfCentralBankingIsDeadInTheWaterStockman.html The Fed has been sitting on the funds rate like some monetary mother hen since December 2008. Once it punts again at the June meeting owing to Brexit worries it will have effectively pegged money market rates at the zero bound for 90 straight months.

There has never been a time in financial history when anything close to this happened, including the 1930s. Nor was interest-free money for eight years running ever even imagined in the entire history of monetary thought.

So where's the fire? What monumental emergency justifies this resort to radical monetary intrusion and repression? Alas, there is none. And that's as in nichts, nada, nope, nothing!

There is a structural growth problem, of course. But it has absolutely nothing to do with monetary policy; and it can't be fixed with cheap money and more debt, anyway.

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The following two graphs dramatize the cargo cult essence of today's Keynesian central banking regime. Since the year 2000 when monetary repression began in earnest, the balance sheet of the Fed has risen by 800%, while the amount of labor hours used in the US economy has increased by 2%.

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iehi-feed-59672 Sun, 01 May 2016 14:11:52 GMT Inside the rocky billionaire bromance of Donald Trump and Carl Icahn http://implode-explode.com/viewnews/2016-05-01_InsidetherockybillionairebromanceofDonaldTrumpandCarlIcahn.html For Trump, who has taken pride in punching back hard at his attackers, his rapport with Icahn shows a side of the brash real estate tycoon that Americans rarely see: a willingness to show deference to someone who once insulted his business and who has, by many measures, been more successful.

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"Carl is a master strategist and easily one of the brightest people I've ever had the pleasure of working for," said Edward Weisfelner, head of the corporate restructuring practice at the law firm Brown Rudnick, who represented bondholders and Icahn in two of the casino bankruptcies. "I couldn't say the same about Donald."

Trump, in the interview, said he never lost leverage in the Atlantic City deal. Because so many bankers and bondholders were owed so much -- and because many agreed that an open Trump casino would make more money than a shuttered one -- Trump said people such as Icahn needed him to agree to a deal just as much as he needed them.

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The episode with the Taj and Trump's other loans left a mark on his grandeur. To shrink his massive bank debts, Trump agreed to relinquish his plane and other luxuries, and bankers forced Trump to limit his personal and household spending to $450,000 a month.

Icahn transformed the casino's downfall into handsome gains. In 1993, according to the Wall Street Journal, he sold his Taj bonds for $150 million -- more than double what he had paid for them three years earlier.

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By 2009, debt continued to plague Trump Entertainment Resorts, which controlled the Taj and two other casinos.

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As the company entered bankruptcy restructuring yet again, investors offered competing plans. Trump sided with a hedge fund that pledged to give him a 10 percent stake if he let the company continue to use his name.

Icahn, who had sold off his Taj shares years earlier, saw a new opportunity to profit off the Trump company's struggles -- this time on the opposite side of Trump. Icahn backed a Texas billionaire who was mobilizing a full takeover and whose lawyers argued that the Trump name had been tarnished by repeated bankruptcies.

In 2010, Trump took the stand in a Camden, N.J., courtroom and swatted back, saying, "Mr. Icahn has led companies into many, many bankruptcies" and reasserting that he still had one of America's most valuable brands. "I wouldn't switch my assets for his assets any day of the week," Trump said.

Icahn was unconvinced. "I like Donald personally, but frankly I'm a little curious about the big deal about the name," he told the Wall Street Journal. "If the name is so powerful, then how come they went bankrupt three times?"

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In 2014, the casino group slid again into bankruptcy, sparking more maneuvers that dragged on until this past February, when Icahn gained full control.

The takeover took place as Trump began cruising to victories in Republican primaries. And Icahn, it seemed, had changed his view on the Trump brand -- signing an agreement that said he could still use the mogul's name.

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The best solution for this financial mess, Icahn said, would be to bring in "a guy like Donald Trump . . . [who's] not beholden to an establishment." "I disagree with him on certain issues and certainly would talk to him more," Icahn added. "But this is what this country needs. Somebody to wake it up."

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iehi-feed-59671 Sun, 01 May 2016 13:50:58 GMT Puerto Rico debt rescue plan engulfed in Great Recession ‘bailout' politics http://implode-explode.com/viewnews/2016-05-01_PuertoRicodebtrescueplanengulfedinGreatRecessionbailoutpolitics.html A group called the Center for Individual Freedom has spent millions of dollars on ads calling the Puerto Rico bill a "bailout," targeting specific congressional districts, including Bishop's. Jeff Mazzella, CFIF's president, did not reply to email or phone calls Friday. The group does not disclose its donors, but there is a widespread belief on Capitol Hill that the group is acting at the behest of those bondholders opposed to a court or board-imposed restructuring.

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Supporters of a congressional rescue plan got a boost on Tuesday, when Pimco, which manages $40 billion of municipal bonds, supported the current House bill.

"It would be incorrect to classify [the bill] as a ‘bailout,'" said a blog posting on the Pimco website. "No incremental federal tax dollars are allocated to the Territory under the bill. In fact, if this legislation does not advance, the probability of future federal tax dollars flowing to the Territory or bondholders may actually increase."

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