Weekend Economists' Nights of the Living, Dead, and Undead October 30-Nov. 1, 2009

[Demeter]

Well, this is the weekend when the Zombie Banks get to strut their stuff and they don't even need costumes, because they are unnatural monsters to begin with.

I apologize in advance for the really bad mood I am in. I will try to restrain it and focus on the task at hand, but truly, if there were such a thing as a Calming Draught, I'd be first in line for treatment.

Living as I do with a daughter on the Autism Spectrum, I tend to see autistic tendencies all over (when it's not outright psychopathy). And while I tolerate the results as much as I can in the Kid, I get really pissed off when perfect strangers and people in positions of power act that way.

I think it's an epidemic--an epidemic of crime and lawlessness and unethical behavior, of Man's inhumanity to everything and everyone else, of monstrous artificial creations that came not from a laboratory (although I reserve judgment on the swine flu) but from the greedy grasping hands of profiteers who own no allegiance to anyone or anything.

These Sinners should not be surprised when at last the rest of the world smashes them. And it will come to pass. Nothing that cannot continue will endure.

But until then, there's the news to pore over, sift and analyze.


Trick or Treat!

[Demeter]

1. First We Go to the Obituaries---the Bank Obits, to Be exact!

And lo and behold, it's 7 PM Eastern Daylight, and no banks added to the list!

Check back later. (Does Sheila have to take the kiddies begging this weekend?)

[Demeter]

37. ANOTHER NO-SHOW WEEKEND

Rather spasmodic of the FDIC.

Evidently their workforce is dominated by Italians and Pagans...

[DemReadingDU]

42. uh oh - 9 banks, all at once

North Houston Bank Houston TX
Madisonville State Bank Madisonville TX
Citizens National Bank Teague TX
Park National Bank Chicago IL
Pacific National Bank San Francisco CA
California National Bank Los Angeles CA
San Diego National Bank San Diego CA
Community Bank of Lemont Lemont IL
Bank USA, N.A. Phoenix AZ

http://www.fdic.gov/bank/individual/failed/banklist.htm...



U.S. Bank, NA, of Minneapolis, Minnesota, Assumes All of the Deposits of Nine Failed Banks in Arizona, California, Illinois and Texas

The FDIC estimates that the cost of the nine banks to the DIF will be a combined $2.5 billion. U.S. Bank's acquisition of all the deposits was the "least costly" resolution for the FDIC's DIF compared to alternatives. The failure of the nine banks brings the nation's total number this year to 115.

more...
http://www.fdic.gov/news/news/press/2009/pr09195.html

[Zenlitened]

43. You spoke too soon...

1. North Houston Bank Houston TX 18776 October 30, 2009

2. Madisonville State Bank Madisonville TX 33782 October 30, 2009

3. Citizens National Bank Teague TX 25222 October 30, 2009

4. Park National Bank Chicago IL 11677 October 30, 2009

5. Pacific National Bank San Francisco CA 30006 October 30, 2009

6. California National Bank Los Angeles CA 34659 October 30, 2009

7. San Diego National Bank San Diego CA 23594 October 30, 2009

8. Community Bank of Lemont Lemont IL 35291 October 30, 2009

9. Bank USA, N.A. Phoenix AZ 32218 October 30, 2009

http://www.fdic.gov/bank/individual/failed/banklist.htm...

[DemReadingDU]

44. CIT Group to File Bankruptcy on Sunday

This is the CIT Group, not Citibank

10/30/09 CIT's Swoon Hits Taxpayers
Bankruptcy Filing Expected in Days; Government Infusion of $2.3 Billion at Risk

The $2.3 billion in taxpayer money spent to save CIT Group Inc. is likely to be wiped out, as the lender prepares to file for bankruptcy protection in a high-stakes restructuring plan aimed at keeping the firm in business.

People familiar with the plan said CIT, a major lender to small businesses, intends to file for bankruptcy-court protection in New York within days, perhaps as early as Sunday or Monday. Financial firms such as CIT have historically been sold off or wound down after a Chapter 11 filing, for fear that customers will draw down lending lines and cause a run on the bank. But CIT expects to have enough creditor support to complete a prepackaged reorganization by year-end, a relatively short period for a bankruptcy case of its size.

In a move smoothing its restructuring, the company said Friday that it had persuaded billionaire investor Carl Icahn to support its prepackaged bankruptcy plan. Mr. Icahn, who wanted to push CIT into liquidation, failed to persuade other bondholders to derail CIT's restructuring plan.

With $71 billion in assets, CIT would have the fifth-largest bankruptcy filing in U.S. history, trailing only those of Lehman Brothers Holdings Inc., Washington Mutual Inc., Worldcom Inc. and General Motors Corp. CIT's Utah bank, which has about $10 billion in assets, wouldn't be part of the bankruptcy filing.

more...
http://online.wsj.com/article/SB125689890371418331.html

If you search the title in Google, you can read the full WSJ article

[Demeter]

48. Bank Holiday Monday? Close or Suspend Trading?

Ought to be a fun week. I can hardly bear it.

[Demeter]

46. Well, I Apologize to Anyone Disconcerted, there are indeed 9

The Federal Deposit Insurance Corporation (FDIC) entered into a purchase and assumption agreement with U.S. Bank, NA, of Minneapolis, Minnesota, a wholly-owned subsidiary of U.S. Bancorp, to assume all of the deposits and essentially all of the assets of nine failed banks. The nine banks were closed this evening by federal and state bank regulators, which appointed the FDIC as receiver.

The nine banks involved in today's transaction are: Bank USA, National Association, Phoenix, Arizona; California National Bank, Los Angeles, California; San Diego National Bank, San Diego, California; Pacific National Bank, San Francisco, California; Park National Bank, Chicago, Illinois; Community Bank of Lemont, Lemont, Illinois; North Houston Bank, Houston, Texas; Madisonville State Bank, Madisonville, Texas; and Citizens National Bank, Teague, Texas. As of September 30, 2009, the banks had combined assets of $19.4 billion and deposits of $15.4 billion.

The nine banks had 153 offices, which will reopen as branches of U.S. Bank beginning tomorrow during their normal business hours. Depositors of the nine banks will automatically become depositors of U.S. Bank. Deposits will continue to be insured by the FDIC, so there is no need for customers to change their banking relationship to retain their deposit insurance coverage. Customers should continue to use their existing branches until U.S. Bank can fully integrate the deposit records of the nine failed banks.

Over the weekend, depositors of the nine banks can access their money by writing checks or using ATM or debit cards. Checks drawn on the banks will continue to be processed. Loan

customers should continue to make their payments as usual.

The FDIC and U.S. Bank entered into a loss-share transaction on approximately $14.4 billion of the combined purchased assets of $18.2 billion. U.S. Bank will share in the losses on the asset pools covered under the loss-share agreement.

The nine banks were subsidiaries of FBOP Corporation, Oak Park, Illinois. FBOP Corporation was not closed and was not subject to today's actions.

The FDIC's Board of Directors issued notices of assessment of cross guaranty liability against Park National Bank and Citizens National Bank. Under statutory authority, the FDIC may assess affiliated banks for losses incurred by the Deposit Insurance Fund (DIF) from the failure of other banks, such as those owned by FBOP Corporation. Congress granted the FDIC authority in 1989 to reduce the cost to the DIF for the resolution of affiliated institutions owned by the same company. The two banks were unable to pay the amounts assessed and were closed by their chartering authorities.

The FDIC estimates that the cost of the nine banks to the DIF will be a combined $2.5 billion. U.S. Bank's acquisition of all the deposits was the "least costly" resolution for the FDIC's DIF compared to alternatives. The failure of the nine banks brings the nation's total number this year to 115.


PRETTY IMPRESSIVE FEAT TO PULL OFF---$2.5B DOWN THE TUBES. DEFINITELY GOT THE TRICK AND NOT THE TREAT.



FDIC Cross Guaranty Provision

* The cross guaranty provisions in the Federal Deposit Insurance Act were enacted by Congress in the Financial Institutions, Reform, Recovery and Enforcement Act of 1989 (FIRREA). The bill was signed into law on August 9, 1989.

* The purpose of cross guaranty is to make every insured depository institution owned by the same company financially responsible for the failure or resolution costs of any affiliated insured institution. The provision lessens the cost to the FDIC’s Deposit Insurance Fund.

* Generally speaking, the amount of the cross guaranty liability is equal to the estimated loss to the DIF for the resolution of the affiliated institution(s) in default.

* The FDIC will assess cross guaranty liability only where such assessment is determined to result in the lowest cost to the DIF. The FDIC’s Board must approve the assessment of cross guaranty liability.

* The FDIC has assessed cross guaranty liability in approximately six cases since being given cross guaranty authority in 1989, all of which were in the early to mid 1990s.

[Demeter]

47. This hits rather close to the Presidential home

[Demeter]

2. Next the Funny Pages

I've already gone through my chocolate quota today--so here's hoping the cartoonists can do something...ah, yes! Just perfect! Oliphant comes through once again.



http://imgsrv.gocomics.com/dim/?fh=6d581ac4c68a87f5c613...




And Mark Fiore goes after credit card companies!

http://www.markfiore.com/political/watch-credit-card-re...

[Demeter]

3. Next, From Tansy Gold: Building An Economy From The Ground Up: Community Enterprise

http://www.metromodemedia.com/features/communityenterpr...


Dire economic times may call for different, if not drastic, measures. And while this recession too will end, it's become clear, some business leaders say, that rethinking how and what we build for our economic future might work best as a community exercise.

The idea, said Deborah Grobon Olson, an attorney who heads the non-profit Center for Community Based Enterprise, is to connect entrepreneurs with the wealth of local resources available in Metro Detroit to create new businesses in ways that root them in the community for long-term success.

Traditionally, economic development involves attracting new businesses and fomenting entrepreneurship at home, she says. But both of those avenues don't necessarily support sustained revival of a community, she explains.

"The model of entrepreneurs in the U.S. celebrates the image of the do-it-alone cowboy," she said. And big corporations who locate in a city are primarily interested in their own financial health, says Olson.

Metro Detroit's economic fate has historically hinged on a short-list of very large corporations that if they start growing again will likely grow somewhere else. The time is ripe, Olson says, to make a local economy in a grassroots way. "We need businesses and entrepreneurs that are rooted here, in the community."

Olson claims that employee-owned businesses, or other models of community-based businesses, could do far more to help revive the sputtering local economy while keeping an economic engine chugging into the future. She defines locally based business models as those that have sustainable revenue models, are committed to paying living wages and are located in the community they serve.

Olson has nearly 30 years of experience as an employee-side ownership attorney, creating and advising employee-owned companies and cooperatives. But she says that the group is "agnostic" about the form the businesses take.

The more important thing, she explains, is that we find new ways to "corral the talent that exists here," with the "facilities, high-tech machinery and intellectual capital," that's sitting idle as a result of failed enterprises.

If there's one thing Southeast Michigan has, Olson adds, it's plenty of people who know how to innovate, design and make things. Why not use that talent to build something sustainable?

She's not the only one that sees the value of such a model. Harriet Saperstein, a Center board member and former president of HP Devco, an economic development organization in Highland Park agrees.

"I see it as an important alternative," Saperstein says. "It's not a substitute," but it can get people thinking about how working cooperatively can retain regional talent and keep dollars at home.

Such models have worked elsewhere

The Mondragón cooperatives in the Basque region of Spain are perhaps the best cited example of how a co-op system might work. Created in 1956, the Mondragón co-ops took a region devastated by the Spanish Civil War and turned it into an economic powerhouse with more than 90,000 workers. In 2008 the co-ops had annual sales of nearly 16.8 billion euros.

According to the corporation's website, their success started with a priest named Jose Maria Arizmendiarrieta who in the early 1940s established a vocational school for the many working-class children in the region who would otherwise have no chance at education. A handful of those children went on to win engineering degrees and in 1956, started a factory in Mondragón that launched the region's first coop.

Pressured by governmental regulations, the fledgling co-op created its own banking system that used community member deposits to fund co-op members, creating and keeping jobs in the region. This and other co-op strategies helped Mondragón create 120 diverse cooperatives including businesses in the industrial, agricultural, research, education and services sectors.

When hard financial times would fall on one sector, workers could be retrained and deployed to another, instead of suffering job loss. Resources are consistently funneled into education and development, the massive coop's financial documents show, so that the organization doesn't stagnate or lose its competitive edge.

The idea, Olson says, is to continue to create business-minded ventures that can and do succeed, but to do it in a way that continues to distribute equity to workers and the overall community, even in hard times.

"When you're making money and getting mature, you don't fire yourself," Olson said. "You look for the next, new thing ."

Bologna, Italy is another example. That region's co-ops are legion, but have spurred intellectual property development on a per capita pace that would make Silicon Valley blush. The region has just seven percent of the country's population, but claims about 30 percent of the patents.

There are also examples closer to home

John Logue is a professor at Kent State University and executive director of that institution's Ohio Employee Ownership Center. The non-profit center was created in 1987 to provide outreach, information and start-up technical assistance to Ohio employees and business owners interested in employee ownership.

The Center operates with an annual budget of just $550,000, but estimates that it helps create about $60 in new employee-owner wealth for every $1 they spend on developing community-based companies.

The Center's network includes about 80 Ohio-based employee-owned companies that receive ongoing training and shared best practices through the center. Through mutual support, that network limited its job loss during the past decade to just one percent, compared to the 29 percent hemorrhaging experienced by manufacturing companies throughout the state.

Even if you had a group of rock star entrepreneurs like Bill Gates, he said, you'd still need community-based enterprises, because not everyone has the high-tech skill sets to work for Bill Gates. Robust communities demand a diverse array of skills and talents that can help support each other for success.

In a co-op model, Olson says "each business doesn't have to know everything."

It's the type of network that Gregg Newsom, co-founder of Detroit-based Detroit Evolution, a mission-minded small business that aims to create a holistic health change in the city, wishes existed when he and his wife and partner, Angela Kasmala Newsom started out.

Several years ago the pair began offering a robust array of health-oriented services - ranging from massage and yoga classes, to raw and vegan cooking classes and catering. They used profits from their business offerings to delve deep into the community, teaching people how to eat healthfully, or working with nonprofits to move the needle on other issues around sustainable and healthful living. But before long, Newsom says, they realized they needed help.

"We’re not accountants; we have great talent and good hearts, but to have that backbone, that support structure, would be a big boon to businesses like ours."

Detroit Evolution has regrouped, still offering their popular offerings and has even expanded their involvement with organizations such as the Great Lakes Bioneers Detroit. But is moving forward with the awareness that if the core business is to help the community, then it has to be financially sound.

Still, there are challenges to creating a grassroots business network in Detroit. Olson explains that the skeleton company to build a group of collaborating businesses has been established, and they're eyeing a handful of products to launch their concept.

But people still need to be educated on how such a structure operates, and how they might fit well within it.

"Part of the challenge is the culture," said Michael Friedman, a partner with Detroit-based law firm Honigman Miller Schwartz & Cohn and chair of the Center advisory board. "Everything is based on individual success."

And the time and energy of the group of like-minded people who are pushing to bring this model to the fore is limited, Olson says.

The group hosted a series of events in Detroit in late September featuring speakers from the Mondragón cooperative and John Logue from the Ohio Center. More than 300 people showed up, eager to hear how they might participate.

But answers about next steps are still not clear, and new business structures may need to be accommodated depending on which form the coop chooses.

Even successful coops such as Mondragón have drawn critiques from some who argue that very large cooperatives become unwieldy, and often begin to look like traditional corporations with centralized decision-making and ventures with conventional companies that don't uphold the coop ideals.

But in Metro Detroit, there is a growing sense that drawing ideas from outside conventional lines is where we may find our greatest opportunity.

A new Birmingham-based nonprofit called the Collaborative Group launched in early October with the idea of collecting a group of the area's leading thinkers and entrepreneurs to spur economic development in the region.

The group hasn't yet settled on a specific project, said Kerry Doman, founder of After 5 Detroit and a member of the group's board. Rather, she said, they're working to discover, "If we take all of these people that have found success in their areas and put them all in a room; what could we come up with?"

The hope, Olson says of her group asking the same question, is that it be something that benefits us as a region.

"There are practical ways to do this," she explains. "We're focused on making things better for all of us.

...........................

Michelle Martinez is a freelance writer and editor who has reported on Metro Detroit businesses and issues for five years. Her previous article was The State Of Metro Recycling. Send feedback here.

[Tansy_Gold]

90. from Tansy Gold -- on individual enterprise

http://www.democraticunderground.com/discuss/duboard.ph...


Link is to my thread in the DU Crafts Group. I'm shamelessly cross posting here in hopes my SMW and WEE friends will kick arts and crafts, Made in USA, local businesses and opportunities, community events, etc., etc., etc. to the front page. Maybe. I hope.

Oh, and just to whet your appetite and stimulate (he he he he he he) your curiosity, if it gets five recs I'll post info on the SRMHs. I lost several delightful hours on 'em yesterday.



TG

[Demeter]

96. What Are SRMHs?

And I can't rec in that forum, either. Hmmmm....

[Tansy_Gold]

109. SRMHs = Sears Roebuck Modern Homes

Oh, I guess you have to sign up for that forum in order to rec. I don't spend much time in there 'cause it's so freakin' quiet. . . .

Anyway, Sears Roebuck Modern Homes were "kit" homes manufactured from 1908 to 1940. My mother grew up in one in Park Ridge, IL, which she believes was built in 1933 or 1934. The house is still standing and looks to be well cared for. I wonder how many of the current crop of exurban mushrooms will still be standing 75 years from now?



http://www.arts-crafts.com/archive/kithome /

Provides some information on Kit Homes in general



http://www.arts-crafts.com/archive/sears-roebuck.shtml

Info specifically on the Sears homes



http://www.arts-crafts.com/archive/sears /

Reproduces the pages of the Sears Modern Home catalogues for each model and year. Some include prices. Such as ---



Please note that complete plumbing outfit and central heat plants (several options) are additional, but in 1909 central heat and indoor plumbing were still "modern" inventions in many homes.




TG

[KoKo]

130. There are tons of these homes still standing...all over America..

I saw them in NJ back in the 80's on "House Tours" where they were remodeled for those "Home Shows" but the bones were so strong that it was mostly a decorator feast for quirky painting and such. And now that I live here in NC they are all over in rural communities as well as the cities. They were well made of old wood you can't get today...and has some built in features that made them very liveable for small families.

You couldn't compare those solid wood floors and beams to the pressed wood/plywood/ composite/plastic and glue that the stuff build in the last couple of decades were built with. Particularly the last ten years..you wouldn't want to deal with it. Fake Stucco and Masonite siding..all defective that homeowners mostly got stuck with bill replacing...no copper plumbing but plastic pipe that failed causing mush water damage and even the Class Action Suits didn't repay what folks had to pay out after their insurance deductible. Then there's the fumes from the carpets, the slipshod connections to appliances that wear out and the outsourcing to China for most of the appliances and parts for everything and you have more disasters coming. The latest the fumes from defective Chinese Wallboard allowed into the USA because of the Housing/Flip this House Bubble and the hurricanes that caused damage to existing homes.

[Tansy_Gold]

132. And they'll be standing for a long time to come

the little house my daughter and son-in-law have in NJ is probably a kit home, if not specifically from Sears. They think it was built as workers' housing by a large industrial operation in their town in the early 1900s, pre-WW1. Despite several remodelings and a long stint as a poorly-maintained rental, it's still square and solid. They did a major remodel last year with their contractor amazed at how sturdy the construction was.

I think it's indicative of a whole national mindset that we went from throw away paper dishes and plastic forks to disposable diapers and now even our houses are built to last halfway through the mortgage. . . . .


TG

[Demeter]

4. the State of the Union: Modern America, in a polarized funk

http://blog.buzzflash.com/carpenter/532



According to at least two recent polls, the American public is in a funk -- or perhaps I should say, is still in a funk, or is back in a funk, or worse, is maybe showing signs of fixed and permanent funkdom.

Although, says USA Today/Gallup, 6 in 10 Americans assume "the country will be better off in three years" -- by the end, that is, of President Obama's first term -- only 1 in 4 is "satisfied with the country's direction."

That may seem incongruent, and in statistical fact it is. One could write it off as the rather typical contradictoriness of public opinion polls; or, if one is acutely mired in what appears to be the nation's chronic funkness, conclude that our characteristic optimism still yearns to be free, but is being pulled under by a countervailing current of gloom.

In short, what we may be experiencing is not so much a crisis of character, but of confidence. That's bad enough -- especially in a recessionary period, despite what the econometricians tell us -- but worse is that the latter may be corrupting the former, and with a certain lastingness.

It is instructive, I think, that a year ago an almost invisible 13 percent of the public were "satisfied with the country's direction," which was quite understandable; but today, after a thoroughgoing change in upper management, the gauge remains at a depressingly low 26.

Says Democratic pollster Peter Hart, co-conductor of the latest (and equally depressing) NBC News/Wall Street Journal poll, "The mood in America may be blue, but the attitudes toward Washington are jet black." But why so suddenly? Why did the "right direction" number uptick briefly, which it did, but plummet just as dramatically?

Why, that is, does the latest NBC/WSJ poll "highlight," above all else, "the public's disgust at Washington"?

Is it substantially, pointedly directed at Mr. Obama? No, not really. Not yet, anyway. But when it comes to the United States Congress, national confidence has disintegrated.

So much so that a whopping 46 percent of respondents to the NBC/WSJ poll "support building an independent political party to compete with the Republicans and Democrats." What's more, "nearly six in 10 (57 percent) blame both Republicans and Democrats for the partisanship in Washington" (my emphasis), to which the electorate attributes aggravating gridlock (my conclusion).

As far as I know, the public wasn't asked how much they themselves have contributed to Washington's partisan gridlock -- remember, given the Senate's current configuration, even 40 Republicans assure a do-nothing majority out of 100 -- but it's undeniable that a stultifying polarization reigns on both Capitol Hill and throughout the republic.

On the matter of Afghanistan, 47 percent of America support more troops there, 43 percent don't. Within the health-care debate, 38 percent believe the proposed reforms are a good idea, 42 percent don't. On the (recently deceased or dying) public option, 48 percent favor it, 42 percent don't.

And when it comes to the folks in charge -- that sizable body elected to do the nation's housekeeping, the Democratic Party -- only 42 percent of the electorate which put them there have a favorable opinion of them, which, one assumes, means at least 42 percent hold an unfavorable opinion. The rest, one further assumes, are through caring.

But what can we make of all this?

Third-party advocates will be inspired by the remarkably high percentage of support for an independent party, but American political history stands vigorously athwart their higher hopes. Good or bad, the contemporary two-party system has a lock on both the electorate's ultimate actions and "the system" itself.

In other words, we are (as is Obama) stuck with the folks who have brought us gridlock -- and both political parties just happen to be quite content with that. As long as each member of Congress services the basest of ideological allegiances, fragmented as they are -- be they hyperliberal or pseudoconservative or even milquetoasted -- he or she will be returned to Congress. That is, he or she will have achieved the highest of ideals among modern American pols: one's own reelection.

The outcome? An utterly disarrayed, dysfunctional Congress, an institutional joke. There is, in reality, no majority party -- just 535 separate fiefdoms of self-preservationism -- and thus little national accountability (a few local lords do trade seats from time to time), and thus no national confidence in a representative democracy infused with a comprehensive and guiding vision.

Put simply, we are adrift, and there's no sign of a rope. And that leads to a massive, and possibly inescapable, funk.

THE FIFTH COLUMNIST by P.M. Carpenter

[Demeter]

5. Democracy Downgraded by Shirley Smith from Buzz Flash

http://blog.buzzflash.com/smith/343


From reason to what's reasonable: A wide gap for this country's citizens to cross. People are hurting and wondering why, when in MSM they read that the U.S. crisis is over. Wouldn't it be reasonable for all of us citizens to hear the truth and then try to deal with it? Or, do we have to wait until we see people in long lines for jobs and food and people living in cars or more and more just out on the street, all the while, our Congress discusses reasons and what is reasonable?

Twenty percent of people out of work or working at just anything to get by is not reasonable. The constant hype by MSM from one thing to another in order to remove the real news from the front-page news is not reasonable. The flu, for instance, has been reported to have already reached its peak, and yet media is peddling the vaccine that has just arrived and we are told it arrived in small amounts.

U.S. democracy has been downgraded by our big guy media, other corporations, and Congress to the point that it is no longer important, a much lower standard has been accepted and over the years, high standards are no longer expected, unless the person is found in bed with someone else. Bedroom follies still excite people (which is not the point, it's their example and their lack of job responsibility), while our government and the loyalties towards the people and to what is important to the citizens of this country are almost laughably nil . . . until elections, that is.

People like Senator Lieberman should have been put out of office years ago and yet, Connecticut still forces him upon the rest of this nation. He is arrogant about his willingness to go against the American people. Arrogant! People like Lieberman, who can't work for the people of this nation, should be put out of work with the rest of this nation: people he helped to put out of work. A sign that he has been at the same job for too many years, and as a Democrat and should have supported the Democratic Party candidate for Connecticut instead of running against the Party, if he was a true to the heart Democrat. That's what the Democratic Party gets back for supporting him all of those years.

Healthcare, good jobs, manufacturing jobs for products made in USA, healthy food . . . yet, people are put out of their homes, laid off and companies flee to other countries, even today, and our Congress still does nothing about this.

Every year, 76 million Americans are sickened and 325,000 are hospitalized from consuming contaminated food -- and 5,000 of these people die, according to the Centers for Disease Control and Prevention (CDC). Our food safety law clearly is not up to the task. Unbelievably, the Food and Drug Administration only inspects food factories on average once every 10 years, checks less than 1 percent of food shipments imported from China and other foreign countries and doesn't even have the authority to force food companies to recall contaminated foods. (snip)

Our current food system is broken and in need of reform. The House of Representatives overwhelmingly passed bipartisan food safety reform legislation in July 2009 that would update the law and strengthen the system: Now the Senate must act. Your Senators have the opportunity to change course and help protect children, families, senior citizens and all others from foodborne illness.

Top 10 Riskiest Foods (Page 12) | Healthy and Green Living

But what we really, really need . . . more money for military.

Obama Signs $680 Billion Military Bill, a Victory Over Lobbyists - NYTimes.com

As of October 20, the United States has a total resident population of 308 million.

Demographics of the United States - Wikipedia, the free encyclopedia

A victory over lobbyists?. . . How long was this amount debated? Are we Americans stupid? How do you get what you want and yet both sides can save face . . . you ask for something way out of line and then you get what you want. We are talking about $680 billion dollars for military. Why in the hell do we need that much money sunk into U.S. military? According to our population, that's three more zeros than our population, and if my math is close at all, those dollars represent at least $2,000 per person in this country that goes to U.S. military, not to healthcare, not to jobs, not to food . . . to military, in order to kill people cleaner, safer. Think about it, what is a life worth in today's world . . . we are either leaders around the world or we are not. Peace will not come from a military provided with such funds. It only makes the world want to arm themselves. Bush accomplished that . . . and the debt, death, and destruction that Bush and his ilk brought to this nation, still goes on . . . and, yet, we Americans have had to listen to day after day whether or not we could get single payer healthcare, which is what we need, or public option healthcare . . . and, many in Congress did not want Americans to have either one.

Maybe Congress and the Executive Branch can sell this kind of change to the people, but the world knows better and they will not buy it.

The Pentagon is speeding up delivery of a colossal bomb designed to destroy hidden weapons bunkers buried underground and shielded by 10,000 pounds of reinforced concrete.
Call it Plan B for dealing with Iran, which recently revealed a long-suspected nuclear site deep inside a mountain near the holy city of Qom. (snip)

The 15-ton behemoth — called the 'massive ordnance penetrator,' or MOP — will be the largest non-nuclear bomb in the U.S. arsenal and will carry 5,300 pounds of explosives. The bomb is about 10 times more powerful than the weapon it is designed to replace.
The Pentagon has awarded a nearly $52 million contract to speed up placement of the bomb aboard the B-2 Stealth bomber, and officials say the bomb could be fielded as soon as next summer.

Pentagon Wants Bunker-Buster Bomb Sooner

Oh, yeah, speed it up. We need to keep killing. I still remember the horror of the descriptions of those weapons used in Iraq, tested on innocent people who were stopped at U.S. military checkpoints, trying to get the hell out of Iraq.

MSM's favorite soap opera is in the news again today, and I would love to know who CNN polled to say that two-thirds of those people think Palin is a good role model for women. Maybe, if you are a Republican, yes. Frankly, I get suspicious when I see so much sass going back and forth between these two, Palin and (I guess he's an ex) ex-son-in-law, because it keeps them in the news, and we thinking Americans understand that most of our corporate news enjoys entertaining much more than reporting serious situations. And, in accordance to the Bush GOP profile and their arrogance, Palin thought she was a good candidate for VP . . . I would have more respect for her if she had turned them down. She's clearly an image of her own imagination . . . that, she has. Looks and a gift of gab seem to be what it takes today, with the Bush GOP, at least. More obvious signs of how our democracy and the responsibility that goes along with it has been so downgraded that selling one's loyalty is also common place.

This airing of the family's dirty laundry comes as a new CNN poll on Palin showed 71 percent of those surveyed think the former GOP vice presidential nominee doesn't have what it takes to be president. However, nearly two-thirds said she's not a conventional politician and is a good role model for women. One big plus for Palin, CNN's polling director noted, is that most Americans believe "she cares about people like them."

http://www.sphere.com/2009/10/29/the-point-palin-johnst... /

Call it backward, stupid, arrogant, or plain disrespectful . . . and it is said to be a 'longstanding' policy? Any American citizen on the street, who has suffered through a traumatic event in their life, understands what PTS is, and, it doesn't take a great amount of imagination to understand why some of these young people come back from war so stressed out . . . training does not prepare them for the death and destruction of real combat, real war.

Is that so hard for Congress to understand or is it simply because so many of them have failed to serve in U.S. military . . . or, is it because their lives are pretty safe and secure, and they feel that they want to punish those who are so frail and mentally straught that they take their own lives . . . that, they can't face life any more or even their own families . . . and, the fact that they served this country in such a way and it actually harmed them, yet, in the eyes of Congress, they should not hear from their Commander in Chief? Is that not downgrading this country and our own people? Shame on anyone who thinks this is the right thing to do. Well, if some think protecting those who rape, instead of protecting their victims, is okay . . . what more can we expect. Much, much more. We can expect respect for those who have served and been hurt so much that they kill themselves, what a price to pay trying to serve our country, and we Americans must expect real change . . . and, this policy must be changed.

Below an excerpt of an article by Amy Goodman


The War Condolences Obama Hasn't Sent | CommonDreams.org

Because U.S. Democracy had been downgraded, we Americans have become the downtrodden . . . oppressed and mistreated by those in power, and ignored. We cannot afford compromise after what this country has gone through for the last thirty years, and especially the last eight years of the Bush GOP regime.

"Compromise is but the sacrifice of one right or good in the hope of retaining another -- too often ending in the loss of both." Tryon Edwards (d. 1894), American theologian.

We have to listen to those who lived in the past. Ask many Americans today . . . do they feel that they live in a democracy and ask them if they understand what it is supposed to be like, living in a democracy.

Again, I have to listen to those who came before us, and when I do, I always think of how much I miss the voice of Senator Ted Kennedy, who was a great leader and was not afraid to speak out. In his book, America Back on Track, he lists seven challenges and the first one is, "The first challenge is to reclaim our constitutional democracy and keep it vital for the future. From 2006 and we are still unable to say that our Congress and our Executive branches resemble checks and balances of power. Certainly, the Bush GOP have done nothing except refuse to work for the people, and the Democrats have tried to please them, humor them, instead of making them accountable for the eight years they supported a criminal Bush GOP regime.

"Compromise makes a good umbrella, but a poor roof; it is a temporary expedient, often wise in party politics, almost sure to be unwise in statesmanship.: James Russell Lowell, Bigelow Papers, 1867.

I think the lesson here is that we Americans cannot accept change that comes with compromise, as it will not amount to change at all . . . . I'm not expecting miracles, however, we still have to listen to the Cheneys/Bushes/Rove comments when they should be preparing for accountability, following investigations . . . we are downgraded as a leader in the world today because of them and many innocent people lost their lives and their livelihoods because of them.

Where's the justice for all . . . who is going to speak for the dead and who is going to save those who are still living? We Americans brought about change in Congress and the Executive Branch, but our work is not done. It's quite evident that we Americans have much more work to do, and those members of Congress should take notice. That's not a compromise . . . that's a promise.

As I write this, a news item about the Healthcare bill coming from the Democrats in Congress . . . a wait and see . . . sorry, but, I won't hold my breath. I wanted the U.S. to have the kind of health care that Canada has for their people.

[DemReadingDU]

6. Must-read interview with Stoneleigh on TAE: The Case for Deflation

posted by GliderGuider
http://www.democraticunderground.com/discuss/duboard.ph...

direct link to interview at The Automatic Earth
http://theautomaticearth.blogspot.com/2009/10/october-3...

direct link to interview at The Oil Drum
http://europe.theoildrum.com/node/5917


interesting comments at both sites


Be back later, dinner with spouse

[Demeter]

7. Gota Feed the Kid Myself--Be Back Soon!

[Demeter]

8. How cheerful!

Stoneleigh: Unemployment will go through the roof as the prospects for selling most goods and services decline dramatically. In the developed world we are nations of middle men - generally service economies where we make a living figuratively taking in each other’s laundry.

Most of us produce relatively little. Even those who do will find almost no market for their exports, and those who could find buyers may not be able to send shipments as credit contraction prevents shippers from getting the letters of credit they need to ship goods...

Unfortunately middlemen are almost completely expendable, and the services of others are likely to become unaffordable for the majority very quickly. While there will be a huge surplus of labour, and the few who retain purchasing power will be able to hire anyone they want for very little, most people will have to do everything for themselves, as poor people have done throughout history and as most of the population of the world does now.

Not only will we lose access to the paid labour of others, but we will lose our virtual energy slaves as well. This will represent an enormous fall in the standard of living for the vast majority.

NEITHER A BORROWER NOR A LENDER BE--AND FOR GODS SAKES, NOT A MIDDLEMAN!

[DemReadingDU]

39. Most people have no clue

Too busy to pay attention...working, vacationing, football games, watching TV. Spouse hears me talk, but is in denial. For him, it's racing gokarts, even beginning to get the karts ready to race next year. He thinks he has all the time in the world to have fun,

[Demeter]

9. Healthcare and Politics (as Usual): Opting out of bait-and-switch ballyhoo

http://blog.buzzflash.com/carpenter/531


....Harry(Reid) hung the president out to dry, to twist in the wind, to take all the heat for Harry's preceding inability to move the public option along.

You may recall that shortly after the 2008 election Mr. Reid made the almost rudely insistent point that he wouldn't work for the president. He would work with him, but by God Harry Reid would be the Big Capitol Hill Cheese, navigating through the Senate whatever required navigation. You just let me handle things, said Reid, in effect, to the president.

And the president did, which, in part, is why "in recent weeks" Obama has been forced "to argue that the health care legislation is about so much more than the government-run insurance plan."

Harry couldn't deliver. Simple as that. At some unidentified point during the summer, that political reality became uncomfortably apparent to the White House; so then came its not-too-subtle but unavoidable murmurs of "slivers" and "glide paths." What also came was the administration's disproportionate -- but just as unavoidable -- reliance on Republican Olympia Snowe.

Harry still can't deliver. And he knew that before Monday's theatrical announcement, dangling a public option like raw red meat before a disbelief-suspending liberal base.

Harry knew that his opt-out scheme was starting life with a -1 margin -- hello, Joe "I will vote against cloture" Lieberman -- and its political Apgar score would only go down from there. Howdy, Ben Nelson et al.

What's more, perhaps not in procedure but at least in ultimate effect the opt-out is virtually indistinguishable from its moderately less evil twin, the opt-in, which, as The Hill reports this morning, GOP Whip Jon Kyl says he supports. Jon Kyl, and maybe even Tom Coburn. Tom Coburn. And if that fails to give you the GOP-creeps about opting this way or that from the original plan, then you've been watching too many horror movies this Halloween season.

But that's OK. It's all empty prattle -- nothing but posturing and posing and pretending. Even for an opt-out, Harry doesn't have the votes. He never did, he doesn't now, he won't in two weeks or twenty.

But even that, too, is OK with Harry. Because Harry has accomplished precisely what Harry intended to accomplish: "Now that Senate Majority Leader Harry Reid has announced he’ll try to push through a health care reform bill with a public option," reports the Politico, getting "a" correct, "liberals are turning their focus -- and their frustrations -- on Barack Obama," whose White House is now confronting what it regards with magnificent justification as "a drumbeat of unfair criticism."

Man, that's beautiful. Sure, it was dirty pool on Reid's part, cynical rug-pulling and classic perfidy and all that; but, come on, we're adult spectators and that's what the major leagues are all about. Reid knifed the White House in the back to save his own skinny butt.

What's even more sublimely aesthetic, from a political black arts point of view, is that the base took the bait. Will it stay hooked? Who knows. But never discount the power of any rank and file's yearning to believe -- to really, really want to believe with nearly religious fervor in the unstained virtue of its secular leaders....

[Demeter]

67. COGENT QUOTE ON HEALTH CARE

"And nowhere in this fawning piece do you see mention made of the ugly fact that as recently as the early 1990s, 95% of every dollar spent on insurance claims went to medical care. It is now only 80%. That is a simply stunning change, and shows how completely fact free the industry’s defenses are. The insurers are a major culprit in America’s high medical costs.. But no, we are supposed to take the mere opinion of employees who are deeply vested in the current system as views worth considering."


YVES SMITH COMMENTARY ON A NYTIMES ARTICLE

[snot]

100. Great %'s; but wish he'd given a source.

[Demeter]

102. I'll See What I Can Dig Up

It may take a week, though. I've got an election to work on Tuesday, which tends to rain destruction upon the whole week.

[Demeter]

10. Dave Lindorff: Our Out-of-Whack Economy and the Happy Talk Propagandists

http://blog.buzzflash.com/lindorff/286


If you listen to the happy-talk folks at Treasury and the Fed, and on the tube, you'd think things had finally turned a corner. The economy grew at a 3.5% annualized rate in the third quarter that ended September 30. "The Economy is Back in Gear" shouted the headline on an article by CNN senior writer Chris Isadore. "The recession ended unofficially in September," said a reporter on NPR.

There was some mention of the fact that earlier in the week there were reports that consumer confidence had fallen, foretelling a sluggish Christmas retail season, and that new home sales slipped an unanticipatedly high 3.6% in September, when analysts had been expecting a rise in sales. Meanwhile, new unemployment claims filed during the third week of October jumped to 531,000, well above the predicted 520,000, indicating that the official unemployment rate is likely to top 10% in the next Department of Labor report due out in early November. As well, fully one-third of the nation's homeowners were now said to be "underwater," meaning that their outstanding mortgage balances are greater than the current value of their homes. Not surprisingly, foreclosures are continuing to surge.

How to explain this seeming oxymoronic situation? Well, that positive economic growth figure, which comes on the heels of a 6.4% decline in GDP in the first quarter and a .7% decline in the second quarter, is, according to government analysts, actually largely the result of two government stimulus programs -- the "cash for clunkers" program that induced people to rush out and buy a new car (usually a much smaller, cheaper and, for the carmakers, less profitable one than they had been buying in prior years), and the $8,000 new home tax credit, which led a lot of people to rush out and buy a first home.

The thing about those two stimulus programs is that they don't so much expand economic activity as they push it forward. That is to say, a person who takes advantage of the cash-for-clunker program is generally someone who owns a worn-out junker and needs to buy a new vehicle anyhow, so what the government subsidy does really is just push that purchase forward. Once the program ended, sales of cars plummeted (not to mention that the bulk of the payments went to people who purchased foreign cars, so the economic boost was just for dealers in the U.S., not carmakers). The same is true with houses. Very few people would make the decision about whether to buy a home or not based on just $8,000, but the availability of an $8,000 government subsidy for a limited time would lead people to push forward their plan to purchase a home.

What that means is, don't count on this "recovery" to last into next year. The cars that needed to be bought have been bought, and the homes that people wanted to buy have been bought. The car subsidy is gone now, and even extending the home buying subsidy, as the realty industry lobby is pressing Congress to do, isn't going to induce that many more people to buy.

Meanwhile it's worth noting an oddity about this "recovery" being trumpeted in government and media. The relationship between the dollar and the stock market has become very strange. If you look back to 2007 at stories on these two things before the financial crisis hit, and earlier, you'll see myriad articles explaining that the dollar and the U.S. stock market tend to move in tandem. This was always explained as being because as the dollar strengthens, foreign investors want to put their money into dollar-denominated assets. Similarly, if the dollar weakened, analysts would write confidently that the stock market would be hurt as investors pulled their money out of U.S. equities to invest in markets denominated in appreciating currencies.

Now, the analysts say that as equities strengthen, the dollar will fall, but if equities fall, the dollar will appreciate. The reason for this new inverse relationship should be cause for considerable alarm. Why? In fact, it turns out that the last eight months of a rising equities market has been largely the direct result of a shrinking dollar. This is because so much of the sales and earnings of companies in the S&P 500 and the much narrower Dow Index are earned overseas, denominated in foreign currencies, but accounted for on the books of these U.S.-incorporated firms in dollars, that as the dollar declines in value, corporate sales and earnings appear to be growing. Reportedly, as much as 80 percent of the appreciation in the S&P Index since last March 9 when the market hit bottom can be attributed to the dollar's fall against major world currencies.

Financial writers and reporters on TV don't mention this tectonic shift. They just report the new relationship (Stocks up, dollar down; stocks down, dollar up) as though that's the way it's always been. But actually, this is a phenomenon that has normally been characteristic of Third World, so-called "developing" economies. That it has become characteristic of the U.S. economy since the end of 2008 should be cause for concern.

So don't be conned by the happy talk salesmen at the Fed and Treasury and in the White House, or by their propagandists in the news media, who are trumpeting the latest GDP growth figure as a sign that the recession is over, apparently in the hopes that people will run out to the mall and start spending (in those remaining stores that don't have their windows taped or covered in plywood). What we've seen was a blip on the chart, engineered by a couple of "going out of business" sales by the car and housing industry.

Real unemployment -- measured the honest way it used to be 30 years ago, to include those who have given up looking for work or who are working part time involuntarily -- is hitting 20% (for those who are bad at math, that's one out of five working-age Americans). Foreclosures are hitting a record. Half of laid-off workers are cashing out their 401(k)s in order to buy food. State and local governments, both major employers, are hitting a wall as tax collections plummet and federal stimulus funds run out. This is not the foundation for a renewal of economic growth; it is the precondition for a renewed or prolonged recession.

And if the dollar continues its slide, which is likely given the U.S. huge budget deficits and trade deficits, as well as the Federal Reserve's inability to raise interest rates (a move that could strengthen the dollar but which would crush the economy), all those things that Americans buy abroad that are no longer made at home, as well as the oil that is imported, will cost that much more, driving consumers further into the hole. And remember, 70% of U.S. GDP is consumer spending, a result of our decimation of our industrial base.

Recession ending? Don't bet on it.

DAVE LINDORFF, a Philadelphia-based investigative journalist, was a Knight-Bagehot Fellow in Economics and Business Journalism. His latest book is "The Case for Impeachment" (St. Martin's Press, 2006). His work is available at www.thiscantbehappening.net.

[Demeter]

11. the Banking Subthread (or Much Ado About Nothing Much)

UK Government to break up the banks

http://www.independent.co.uk/news/business/news/governm...

Lloyds, Royal Bank of Scotland and Northern Rock will be broken up and parts of their businesses sold off to create three new banks, it emerged last night...


Bill would force financial firms worth $10 billion or more to pay for rivals’ failures

http://rawstory.com/2009/10/bill-force-financial-firms-... /

Financial companies with more than 10 billion dollars in assets will have to pay for rivals' failures or rescues under draft legislation released by the US Treasury and lawmakers.

The plan to address systemic risk in the financial sector will wind down failing institutions and end "too big to fail" bailouts that have been borne by taxpayers, the Treasury and the House of Representatives Financial Services Committee said.

The proposed Financial Stability Improvement Act "provides for the orderly wind-down of failing firms and ends 'too big to fail' to ensure that industry and shareholders absorb the risks and costs of failure, not taxpayers," they said in a statement.

The measure would be a cornerstone of President Barack Obama's commitment to reform financial regulation and avert costly taxpayer bailouts of banks and other financial firms.

"The Financial Services Committee and the Obama administration are committed to ensuring that the taxpayers are never again called upon to take responsibility for Wall Street?s business decisions," the sponsors said...



Has the Canadian Government Become one of the Largest Backers of Risky Mortgages in the World?

http://informedvote.ca/2009/10/27/has-the-canadian-gove... /

There’s a familiar joke in my province that “B.C.” stands for “bring cash”. The sentiment is fueled by the far-above average house prices in most of the major urban centres in British Columbia. According to the CBC the average house price in Canada is about $330 000 whereas Vancouver is about $610 000. Prices are above Canadian averages in smaller B.C. urban centres like Victoria, Kelowna and Kamloops as well. Affordability hits Canadians hard, especially in B.C. The joke is that average Canadians can not afford to buy houses. For example, Stats Canada lists the average wage in Canada as $22.21 as of September 2009 or approximately $40000 per year. According to the CMHC’s affordability calculator, a person making this wage can expect (with a 5% down payment; $100 per month heating cost; $250 dollar debt repayment; $150 property tax and assuming 4% over 30 year amortization) to be able to afford about a $200 000 house. I admit that I was generous with the numbers as often people have more than $250 debt especially with credit cards, line of credits, and car payments. With higher debt, the affordability drops significantly. This affordability is about $130 000 less than the average house price in Canada. Where I live, in Kamloops, $200 000 will usually buy you a small apartment or mobile home. This may be adequate for an individual but often these are too small for families who need 3 or more bedrooms. To make up for this both parents work usually work to buy a starter home or townhouse.

This is not new news to anyone. Most people are aware of the crunch and that two people need to work to pay a mortgage. However, are most people aware of how the government’s policy with CMHC may be contributing to this affordability crisis?

In Phoenix Arizona, a symbolic city of the American sub-prime collapse, one could expect to purchase a nice house for under $100 000. Phoenix is a great example because its unemployment number is nearly identical to Canada’s (8.6% in Phoenix according to the US Bureau of Labour and 8.4% in Canada according to Stats Canada). The major difference is that banks in Pheonix have clamped down on high-risk mortgages. Few banks are lending to people who are a high-ratio of debt to income and have small down payments. In Canada, you just need five percent down and an appropriate income. The math is more complicated obviously, but the CMHC will back a mortgage, through insurance premiums, for a bank in Canada. There is low risk because if one defaults, the CMHC will cover the mortgage. As a consequence, we haven’t seen the housing price collapse like in the USA. Housing prices did drop last year, but never to rock-bottom prices and house prices are already above levels before the recession.

Banks do not risk losing money because they know that defaults are covered by the CMHC. Banks are much more willing to lend Canadians money and as such housing prices have stayed relatively level compared against the USA. Many Canadians are stretched thin but still securing mortgages.

This problem, however, is complicated because without the minimal rules like 5% down and 35 year amortization few individuals could afford to buy. If we went back to rules like 25% down and 25 year amortization, the market would be completely shut down to many individuals. We are, in a way, stuck with the lax mortgage rules because if the government implemented tough rules (like 25% down) we would probably have a housing crisis like America because no one would be able to buy at current house prices. Prices would have to drop drastically.

When the government in 2007 directed the CMHC to allow 40 year amortization and zero down we committed ourselves to high house prices. The recent 5% down and 35 amortization is a start but it is still relatively easy. Furthermore, many banks offer “5% cash back” mortgages to ease those without 5% into the market.

For me back in B.C. I’ll be scouring the MLS for cheaper houses but probably will be saving up for a long time to come up with a down payment to buy into the market. Will this government work to make houses more affordable or are we committed to high house prices for the foreseeable future as long as the Government of Canada remains, arguably, one of the largest backer of risky mortgages in the world?

[Demeter]

13. Big Bank Pop Quiz: Why the Protesters in Chicago Matter More Than the Teabaggers Ever Did

http://blog.buzzflash.com/analysis/932

by Meg White

Yesterday when I was downtown interviewing protesters at the Showdown in Chicago, which continues today, I asked Keith Scribner, president of UE local 1174, how the protests against the big banks were different from the healthcare protests earlier this year. He looked at me with this surprised expression and confessed that he was entirely unprepared for that question.

I tried to explain what I meant, making note of how the tea party protests and the townhall participants screaming about a takeover of our healthcare system garnered a whole bunch of media attention. How did he see their "grassroots" as different from the grassroots movement he was a part of that day? Still, I got nothing.

Was I the only one who remembered those sticky August days?

A member of the media who was packing up his video camera within earshot nodded sympathetically and said he knew what I was asking about. Poor guy; he probably had to spend his summer interviewing those anti-everything teabaggers.

At least the people protesting at the annual conference for the biggest bank lobby in the country Monday had a target: The American Bankers Association and their efforts to shut down badly-needed reforms were clearly in need of a little shame, and the coalition of groups gathered in downtown Chicago this week were not shy about handing it out.

At that moment Leah Fried, an organizer with UE, stepped in. A savvy source I had first met when covering the sit-in at Republic Windows this summer, she warned me against passing judgment on the movement's popularity until after Tuesday.

"This is just getting started," she said of the public backlash to financial institutions. "People are really angry... They're furious at the banks; they're furious about the bonuses. They're disgusted by the attitudes of these bankers lobbying against financial reforms."

I asked her if perhaps the issues of derivatives and complex financial instruments weren't too esoteric to be applied to a regular Joe's everyday life. She said no, not when people's houses and businesses are at stake.

Fair enough. I admit that her words, along with the passion of protesters of every shape and size blocking the entrance to Goldman Sachs' Chicago headquarters at that moment, left me feeling more optimistic about the chances of real financial reform. Regardless, I hope those protesters in Chicago -- as well as others fighting for financial reform -- can learn from the mistakes made over the healthcare debate this summer.

There's no doubt that the recent pressure from progressives helped to keep the public option on life support. Great, but that's not what we were asking for. We wanted the single-payer, Medicare-for-all system.

Here's the thing, though: President Obama does not see the single-payer system as viable, even though countless doctors and economic experts said that it would save the most amount of money and cover the most amount of people, two major goals stated by the president in his pursuit of healthcare reform.

Which brings us back to the banks. Obama does not want to break up the big banks, even though scores of experts and former government officials say it is the only way to prevent another collapse, a goal the president laid out for his reform package.

So, will today's protester in downtown Chicago calling for the break-up of the big banks be in the same boat as the activist with the single payer sign from this summer?

Perhaps not, and here's the one-word reason why: Teabaggers.

Yes, while those paranoid, vaguely racist folks often use hypocritical statements tied together with a bunch of crazy non sequiturs to rail against anything progressives propose, a backlash against regulatory reforms would be too much. After all, other than hatred and distrust of Obama, the only thing that consistently united teabaggers over the summer was a denouncement of the bank bailout.

Why did they cling to this somewhat libertarian sentiment? Well, it was tough to argue against, and considering how terrible these newbie protesters were at making a rational argument, they needed something to fall back on.

Herein may lie the key to success for those protesting the big banks. The only argument supporting them is one of pay-offs and/or ignoring the issue entirely. Take for example the reasons former labor secretary and professor of public policy Robert Reich gives for the toothless-ness of the financial regulation legislation now in Congress:

Two things. First, America's attention wandered. We're now focusing on health care, Letterman's frolics, and little boys who hide in attics rather than balloons. And, hey, the Dow is up again. The politicians who put off Wall Street regulation for ten months knew that the public would probably lose interest by now.

Second, the banks keep paying off Congress. The big guns on Wall Street increased their political donations last month after increasing their lobbying muscle. Morgan Stanley's Political Action Committee donated $110,000 in September, for example, of which Democrats got $43,000.

That's about all you can counter arguments for financial reform with: hush money and distraction.

As is often the case the truth is far more terrible than the fiction cooked up by political operatives, and activists who truly believe new financial regulations are necessary must use those truths to their advantage. Thus, "bailouts" should be the new "death panels." "Too big to fail" should be the new "government-run healthcare." "Derivatives" should be the new "taxpayer-funded baby killing." This time we must learn from the real failure of the Office of Thrift Supervision, rather than the imaginary failure of Medicare that exists only in a neocon's dream.

What's important to remember here is that bailouts, the "too big to fail" doctrine and derivatives are real, while the teabagger lingo was based on absolute falsehoods. While in both the teabaggers' and the bank reformers' cases, the people have numbers on their side, there is a significant difference. Those gathered in Chicago this week have the facts and common sense that the teabaggers lacked. One cannot laugh off bank reform as partisan bickering.

And the truth is not as obscure as it first appears. Any consumer of any financial product, be it a mortgage or credit card or bank account, knows that what they're signing is incomprehensible to anyone who isn't a finance lawyer. It's easy to see how companies are incentivized to become too big to fail: They can borrow at lower rates because investors know the government will pay them back if the company cannot. And I think we can all agree that trading imaginary products is not a good base for the American economy. These things are not esoteric.

That is why we can win this one. The thing is, we need to kick it into high gear before it's too late.

The doctors getting arrested for demonstrating for single-payer are brave, but operating in vain. Their fight is over. But there's still time to demand true reform on Wall Street. And while everyone likes doctors, derivatives traders and mortgage brokers don't evoke that same warm, fuzzy feeling.

While Congress seems to be blinded by the mini-, reelection bailouts they're getting from the financial industry, and former regulators are cravenly lobbying against reform just as hard as the banks themselves, some in positions of power hear what the crowd in Chicago is saying. FDIC Chair Sheila Bair told protesters yesterday that while she spent some time pressuring bankers to accept a new consumer protection agency, she also hopes "to see other measures being taken that will create a more resilient, transparent and better regulated financial system, including an end to the 'Too Big to Fail' doctrine. Yes, no more bailouts. No more bailouts."

No more bailouts indeed; Bair is onto something. It's called a bandwagon, and this time it's the people, not political operatives, steering it.

[Demeter]

16. Wall Street firms should not be called banks, US official says

http://www.guardian.co.uk/business/2009/oct/26/wall-str...

One of America's top financial regulators has suggested that Wall Street institutions should be banned from calling themselves "banks" in an effort to clear a fog of confusion about the word in both political and consumer circles.

Sheila Bair, chair of the Federal Deposit Insurance Corporation (FDIC), suggested that only commercial deposit-taking institutions, where customers' cash is safeguarded by a guarantee, should be permitted to describe themselves as banks.

"Everything gets called a bank these days," Bair told the annual conference of the American Bankers Association. "Wall Street firms, mortgage firms ... Maybe there should be some legal constraints on who should call themselves banks – maybe only FDIC insured institutions should have that label."

Such a definition would exclude the likes of Goldman Sachs and Morgan Stanley, which do not take consumer deposits but often describe themselves as investment banks. It would also leave out thousands of "mortgage banks" that typically act as go-betweens linking consumer and secondary financial markets.

An annual gathering of banking chief executives, held in Chicago this year, has been greeted with protests organised by unions furious at irresponsible lending, home foreclosures and bailouts.

Several hundred demonstrators wielding placards with slogans such as "stop robber barons" and "hold banks accountable" rallied outside the Sheraton hotel, where the financial bosses were gathering. Amid tight security, activists tried to get into an opening drinks reception on Sunday evening but were kept back by police. Protests were also staged at the Chicago office of Goldman Sachs. The American Bankers Association includes JP Morgan Chase, Bank of America and Citigroup. But it argues that the majority of its members are community banks which should not be blamed for the ills of Wall Street.

"The financial crisis is unfortunately often referred to as a banking crisis," said Edward Yingling, chief executive of the association, adding high-profile failures such as AIG, Lehman Brothers, Fannie Mae and Freddie Mac were not banks.

More than 100 smaller banks have been seized by regulators in the US this year, with the FDIC stepping in to safeguard customers' deposits. Many industry regulators argue that large institutions, too, should be allowed to fail rather than being bailed out by the government.

Bair said the concept of banks becoming "too big to fail" had become a moral hazard following aid to keep firms such as Citigroup and Bank of America afloat, and that the government ought to develop a way of winding down unviable firms in a sensible manner. She added that there was a growing political consensus between Republicans and Democrats on this.

[Demeter]

21. GMAC to get up to $5.6bn capital injection

http://www.ft.com/cms/s/0/55463ab6-c3ca-11de-a290-00144...


GMAC, the car financing company, is set to receive up to $5.6bn in a new capital injection from the Treasury, filling a hole identified in the “stress tests” earlier this year and paving the way for the government to become the majority shareholder.

The company, formerly the financing arm of General Motors, was one of 19 institutions to submit to a capital adequacy programme led by the Federal Reserve and completed in May. That determined that GMAC had a shortfall, which will now be provided by the government in the form of preferred equity, according to two people familiar with the situation.

As widely expected, GMAC has been unable to raise the necessary capital in the market and the company – which will take on fresh lending responsibilities when it merges with Chrysler Financial – was seen as vital to the government-led restructuring of the US automotive industry and deserving of more funds from the $700bn troubled asset relief programme....

[Demeter]

26. Rebounding Norway lifts rates

http://www.ft.com/cms/s/0/49f0c8ee-c3c4-11de-a290-00144...

Norway on Wednesday became the first western European country to raise interest rates since the financial crisis as its central bank reported “signs of renewed growth” in the global economy.

The Norges Bank lifted its main rate by 25 basis points to 1.5 per cent and signalled more increases ahead in a move that highlighted the shift towards higher official borrowing costs as the world economy stabilises.
EDITOR’S CHOICE
Lex: Higher interest rates - Oct-28
Krone set to gain from latest rate rise - Oct-28
Australia’s inflation rate accelerates - Oct-28
Iceland pins hopes on financial outsider - Oct-28
Norway's 'Thatcher' eyes opportunity - Sep-14
Oil policy debates drive Norway’s election - Sep-11

The decision, which had been widely expected, means three of the world’s leading central banks have now embarked on monetary tightening, following rate increases in Israel in August and Australia earlier this month.

Svein Gjedrem, Norges Bank governor, said in a statement: “The global economy is in a deep downturn but there are signs of renewed growth. Activity in the Norwegian economy has picked up more rapidly than expected.”

The Norwegian government used its oil wealth to shield the country from the worst of the global downturn and is now rebounding more strongly than the rest of Europe after its first recession in two decades.

This has revived long-standing concerns about the risks of inflation and currency appreciation that have befallen other oil and gas-rich nations, a danger that Mr Gjedrem reiterated.

The monetary tightening process is likely to be slower in countries with more fragile recoveries but other central banks are well advanced in thinking about “exit strategies” to unwind exceptional measures taken to combat the crisis.

India’s central bank this week prepared for an interest rate rise early next year.

In Australia, a faster-than-expected increase in consumer prices on Wednesday raised the prospect of a further interest rate rise next week.

Chart on Norwegian krone

The Norges Bank said its main rate should remain between 1.25 and 2.25 per cent until next March and should be “raised gradually” thereafter.

While the Norges Bank decision has symbolic importance as the first rate rise in Europe, the small size of Norway’s economy and its particular characteristics means it will have little immediate impact on the European Central Bank. The ECB is widely expected to keep its main interest rate unchanged at the record low of 1 per cent at its meeting next week.

But at its December meeting, its governing council will have to consider the future of the extensive emergency actions it took in the wake of the Lehman Brothers collapse. Any reversal of those steps, on the grounds that economies were stabilising, would be seen by financial markets as a tightening.

Norway’s finance minister said on Wednesday that the government must reduce spending as the economy recovers after digging deeper into the country’s $450bn (€306bn, £274bn) oil fund this year to prop up demand. Sigbjorn Johnsen said: “Monetary and fiscal policy must work together to contribute to a stable development in the Norwegian economy.”

Copyright The Financial Times Limited 2009. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.

SHALL WE ALL MOVE TO NORWAY, THEN? IT'S NOT TOO HARD A LANGUAGE

[Demeter]

29. UBS hires McCann to lead US wealth unit

http://www.ft.com/cms/s/0/892320e6-c2a9-11de-be3a-00144...

UBS on Tuesday named Robert “Bob” McCann, the former head of Merrill Lynch’s “thundering herd” of financial advisers, as the new chief executive of its wealth management operations in the Americas.

Mr McCann’s arrival followed several months’ courtship between him and Oswald Grübel, the Swiss bank’s boss, and immediately triggered speculation the veteran US manager could eventually succeed Mr Grübel as the group’s chief executive.

Mr Grübel, who is almost 66, came out of retirement in February to head UBS after having overseen a successful turnround at Credit Suisse, the bank’s rival, which he left in 2007...

[Demeter]

32. FROM FINANCIAL TIMES: Banks face costs under ‘polluter pays’ bill

http://www.ft.com/cms/s/0/74ec1f2c-c25b-11de-be3a-00144...

Large US banks will have to bear the cost of winding down failing systemically important financial companies under a bill being finalised on Monday night by a key congressional committee.

The proposed law, being drafted by the US Treasury and the House of Representatives’ financial services committee, is the centrepiece of the Obama administration’s regulatory reform package.

The bill would allow the government to seize a wide variety of financial companies in addition to commercial banks. Such cases would allow them to fire directors, wipe out shareholders and force creditors to take big discounts on their debt. It is designed to prevent a repeat of Lehman Brothers’ damaging bankruptcy or AIG’s bail-out.

Barney Frank, chairman of the committee, and the Obama administration have rebuffed an attempt to levy a super-premium on the biggest banks that would provide funds for any seizure – although they will still have to contribute an amount after the event. “The principle ‘polluter pays’ is still in but it’s just a matter of when,” said one person involved.

A senior banker said the lack of the levy was good news, but added: “The big issue is that we don’t know how much we will end up paying . Is it $250m or $2.5bn? That will make all the difference.”

The White House hopes efforts to have banks bear some of the cost will win over Democrats wary of what has been described as “perpetual bail-out”.

Brad Sherman, a Democratic member of the House financial services committee and leading critic of the proposal, said: “My whole effort for the next several weeks is to try to prevent a permanent bail-out authority.” He said the only way he could vote for the bill would be if it had large insurance premiums levied on the biggest banks, an idea that was causing concern across the industry.

Simon Johnson, professor at MIT Sloan School of Management, said charging banks after the fact was “a non-starter”.

Most Republicans want a new bankruptcy regime rather than a government-ordained seizure and wind-down.

John Dugan, the comptroller of the currency, said the new resolution authority should “make it far more likely that equity holders and creditors sustain losses”.

The legislation would also require regulators to impose higher capital standards on systemically important companies.

[Demeter]

33. Eurozone lending to private sector declines

http://www.ft.com/cms/s/0/f7e77b94-c2e0-11de-8eca-00144...

The eurozone saw the first year-on-year fall in bank lending to the private sector last month, even as signs became stronger that the 16-country region’s economy had returned to growth.

September’s eurozone credit numbers indicated lending had been scaled back at an unprecedented pace, strengthening the case for the European Central Bank to maintain its ultra-loose interest rate policy.

Loans to the private sector contracted at an annual rate of 0.3 per cent, after a 0.1 per cent rise in August, according to the ECB. That was the first time the annual growth rate had turned negative since comparable statistics began in 1992. The euro was launched in 1999.

Although the data showed signs of a pick-up in lending to households in September compared with August, they could fuel policymakers’ fears that a weakened banking sector will fail to provide business with the credit needed to reboot the economy.

“A lack of credit growth could certainly undermine the pace of recovery,” said Colin Ellis, European economist at Daiwa Securities SMBC Europe. Unlike the UK, the eurozone is thought by economists to have expanded in the third quarter compared with the previous three months, marking the formal end of its recession.

Purchasing managers’ indices last week suggested growth had continued into the final quarter of the year. The ECB remains wary about the strength of the recovery, however, and argues that it will take time before the extra emergency liquidity it has pumped into the banking system feeds through into a pick-up in lending. In a downturn, companies typically draw on internal resources and delay investment plans. “To get a fully fledged business cycle upswing emerging, you need to see credit taking off – but that normally takes one or two years,” said Julian Callow, European economist at Barclays Capital.

Euro area loans to private sector

But Mr Callow argued that the latest data might have been distorted downwards by banks securitising loans, which would have removed them from the ECB’s statistics even though the credit was still available to the economy.

The ECB’s main interest rate is widely expected to remain at the record low of 1 per cent well into next year. But at its meetings next week and in December, the ECB’s governing council will have to start considering whether to extend emergency measures implemented after the collapse of Lehman Brothers last year.

Eurozone companies on balance repaid €4bn ($6bn, £3.6bn) in borrowings last month, according to data. In the past 12 months, the biggest slowdown has been in loans of up to a year, which in September were almost 10 per cent lower than a year before.

The ECB may take encouragement from a month-on-month €14bn pick-up in lending to households last month. Still, lending to households was 0.3 per cent lower than a year before, compared with a year-on-year contraction of 0.2 per cent in August.

[Demeter]

34. FOR MATT S: Russian one-company towns face decline (SORRY, WRONG PLACE)

http://www.ft.com/cms/s/0/8e047eea-c324-11de-8eca-00144...

Decked in yellow autumn foliage and perched on the banks of the picturesque River Volga, the city of Tolyatti in southern Russia at first seems a picture of serenity. But tension is not far from the surface. For the 700,000 inhabitants, the next weeks and months will be critical as the city’s main economic enterprise, the carmaker Avtovaz, battles bankruptcy and unemployment.

Russia has hundreds of towns and cities like Tolyatti, a monogorod, or mono-city, where a single industry or factory accounts for most of the local economy.

Fearing social instability and unable to keep many far-flung Soviet-era enterprises afloat, Russia’s government has launched a wide-ranging review of up to 400 such towns and is pondering how to restructure local enterprises, bring in new sources of employment or, as a last resort, shut them down and move the people to new lives and uncertain futures.

Most monogoroda are not more than half a century old, having been built over coal seams or ore deposits or near hydroelectric dams under the Soviet Union’s rapid industrialisation drive starting in the 1930s. Life in these cities has been harsh, for the most part, over the span of their existence.

Now, spread out amid Russia’s vast steppes and forests, many have little economic reason to exist following the fall of communism and the end of central planning. Their products are uncompetitive with imports, they have seen ­little investment and have been kept barely afloat by a government that until this year was awash in oil revenues. With the onset of the economic crisis, many of these towns have gone from limping along to a slow death spiral.

The biggest monogorod in Russia, Tolyatti is home to what remains of the country’s Soviet-era domestic auto industry. Avtovaz employs 102,000 workers making the boxy Lada cars ubiquitous on Russia’s roads. Built a half-century ago near the shores of the gigantic Volga, it was named after Palmiro Togliatti, the Italian communist leader, and this misplaced Soviet optimism can still be found in the peeling socialist murals depicting red flags and happy proletarians on the walls of high-rise apartment blocks.

The city is perhaps the most expensive social headache facing the Russian government, with the largest projected unemployment and highest debts of any one-industry city. Projected redundancies have been estimated at 17,000 to 27,500 (25 per cent of Avto­vaz’s workforce) and auth­orities are working round the clock to keep the factory from going bankrupt.

Referred to in the Russian press as a financial “black hole”, Avtovaz has already swallowed Rbs25bn ($850m, €570m, £500m) in state support, to little effect.

Mismanagement at the factory is at the root of the problem. Last week Avto­vaz admitted 7,500 vehicles were missing from its dealer network. Avtovaz cars just barely compete with imported cars, despite 30 per cent import tariffs. The plant has had a variety of owners. In 2005 Rostechnologiya, the state arms monopoly, took over the plant. France’s Renault took a 25 per cent stake in 2008. Troika Dialog, the Moscow investment bank, owns a similar sized stake.

Politicians and businessmen are bickering about whose fault the situation is and Vladimir Putin, the prime minister, has asked Renault to contribute to Avtovaz’s resuscitation.

Meanwhile, the social dimension is dire and getting more so. Avtovaz was completely closed down in August and has since re­opened, running just one of two normal shifts, with workers on half pay. Many now drive taxis or stand round idly in parks playing chess or football.

“Everyone is worried,” said Mikhail Akhmetov, who drives a taxi on his off days. His salary is Rbs12,000 a month, of which rent is Rbs4,000 and costs such as school fees leave little left for food. “We’re getting close to the edge,” he said.

Car dealerships on the city’s edge stand empty, shops and restaurants have seen a drop-off in clientele. Federal employment centres and social services offices are packed and unable to cope, say residents.

Anatoly Pushkov, the city’s mayor, said out-of-work factory staff have been given temporary public works jobs with Rbs790m in federal employment programme money. He is in constant negotiations with central government officials over how to share the cost of the city’s transformation. “We have to create 20,000 to 23,000 work places,” he says. “It is not as easy as snapping your fingers.”

Over the long term, Tolyatti is relatively lucky in one respect: there is interest abroad in investing in Russia’s automobile industry. Russians bought about 3m vehicles in 2008, nearly overtaking Germany in market volume.

Other towns are not so lucky. Of the 400 mono­goroda under scrutiny by the economy ministry, about 20 will be targeted by special federal programmes, and could theoretically face closure, Elvira Nabiullina, economy minister, told the Financial Times. “In principle, this is possible if we don’t have any alternative forms of employment, no private investors ready to invest,” she said. In that case, “we should create conditions for resettlement, create conditions for mobility of human resources. But as of today such projects do not yet exist.”

Moscow clearly fears instability in these towns, where economic conditions can get very bad, very quickly. A series of strikes in the Kuzbass region of Siberia in 1989, for example, helped hasten the collapse of the Soviet Union two years later. Last June a strike in one monogorod, Pikalevo, brought national attention after Mr Putin flew to the city to address strikers, forcing industry leaders to get the town’s cement factory back on its feet.

Ms Nabiullina said that soon after the Pikalevo disruption the government began developing the new measures aimed at addressing the monogoroda’s economic problems. “It was one of a number of factors which drew the attention of the government to study the situation in these towns,” she said.

In Tolyatti, there have been at least three separate government announcements about imminent layoffs, all with different numbers. The confusion has heightened tensions in the normally placid town and demonstrators have taken to the streets twice in recent months.

Underlying those expressions of frustration are the rising expectations of its residents, which, if unmet, could cause a more severe backlash, said Rimma Mikhareva, editor of local news agency RIA.

“The past eight years the people have got used to living better, and no one wants to go back to how things were in the 1990s, with wage delays unemployment. That could cause an explosion.”

[Demeter]

35. Spanish bank BBVA seeks US acquisitions

http://www.ft.com/cms/s/0/e2126762-c2d5-11de-8eca-00144...

BBVA remains on the lookout for acquisitions in the US, its new chief executive said on Tuesday, as Spain’s second-largest bank unveiled a 3.3 per cent year-on-year decline in net profits for the nine months to September.

Angel Cano, who was tapped to replace José Ignacio Goirigolzarri a month ago, told analysts that the bank’s expansion strategy “has not changed”.

“We are clearly focusing on the US,” he said.

BBVA has expanded its footprint in the US over the past five years. In 2007 it bought Compass Bancshares for $9.6bn and in August it snapped up Guaranty Financial, a struggling Texas bank with $13.5bn in assets.

However, the US remains a tiny part of BBVA’s business, accounting for less than 3 per cent of profits.

Mr Cano’s comments came as the bank unveiled profits of €4.2bn ($6.2bn) for the nine months to the end of September, compared with €4.3bn last year.

The €830m proceeds of a sale and leaseback of BBVA offices and branches, which was signed last month, had gone straight into bad loan provisions, the bank said, “and had no impact on net attributable profit”.

Revenues for the nine-month period were up 6.6 per cent, at €15.4bn.

For the three months to the end of September, net profit fell less than 1 per cent, to €1.38bn, on revenues up 4.3 per cent at €5bn.

The results were in line with expectations, but the shares closed down slightly at €12.45 in Madrid.

It said non-performing loans as a percentage of the total stood at 3.4 per cent at the end of September, exactly double the rate at the same stage last year but still among the lowest in the Spanish financial system.

Mr Cano’s comments came as the bank unveiled profits of €4.2bn ($6.2bn) for the nine months to the end of September, compared with €4.3bn last year.

The €830m proceeds of a sale and leaseback of BBVA offices and branches, which was signed last month, had gone straight into bad loan provisions, the bank said, “and had no impact on net attributable profit”.

Revenues for the nine-month period were up 6.6 per cent, at €15.4bn.

For the three months to the end of September, net profit fell less than 1 per cent, to €1.38bn, on revenues up 4.3 per cent at €5bn.

The results were in line with expectations, but the shares closed down slightly at €12.45 in Madrid.

It said non-performing loans as a percentage of the total stood at 3.4 per cent at the end of September, exactly double the rate at the same stage last year but still among the lowest in the Spanish financial system.

[Demeter]

12. Car Talk--With Apologies to Tom and Ray!

From hybrids to SUVs, unsold cars pile up

http://www.reuters.com/article/idUSTRE4B61NA20081207

LONG BEACH, California (Reuters) - From pricey luxury sedans to popular hybrid cars, automobiles made overseas are stacking up at ports and parking lots around the United States as supplies far outstrip demand amid the nation's worst auto market in more than 25 years.

At the Long Beach port near Los Angeles, Toyota Motor Corp vehicles including Prius hybrids, FJ Cruiser sport utility vehicles and Lexus IS 250 luxury sedans are being stored on a vast construction site that will one day be a new container terminal.

The site became a gigantic parking lot when Toyota and Daimler AG's Mercedes-Benz asked the port for space to store thousands of vehicles that dealerships have not been able to take on due to sluggish sales.

"It's unusual that they would be here longer than a few days, but that's the situation now," said Art Wong, a spokesman for the Port of Long Beach. "They can't move it through their pipeline fast enough so they are asking for additional space while they keep their vehicles here more than a few days, and in some cases more than a few weeks."

The port has not counted how many additional cars were being stored, but Wong said Toyota has leased an additional 23 acres of space while Mercedes-Benz has leased about 20 more acres.

Nissan Motor Co Ltd, which brings its cars in through the neighboring Los Angeles port, had been talking to Long Beach about leasing space, Wong said, though that arrangement fell through.

A Port of Los Angeles spokeswoman, Theresa Adams-Lopez, said Wallenius Wilhelmsen Logistics (WWL), which operates the terminal that brings in Nissan's vehicles, had shifted vehicle storage to another state.

Nissan spokeswoman Katherine Zachary said the company last increased its space at the Port of Los Angeles in February.

"As a normal course of business, we've got cars moving out of there all the time to various points across the country," Zachary said in an e-mail.

WWL, which is based in Norway, would not comment on specific customers, but said auto inventories were building up across the United States.

"We are seeing cargo buildup at ports of entry on both coasts as well as at other inventory points such as factories and rail yards and dealerships," Christopher Connor, the head of WWL's business in the Americas, said in a statement.

Other ports are also seeing a buildup of cars, though not all of them are leasing large tracts of land to automakers. The San Diego port, which brings in Honda Motor Co, Volkswagen AG and Mitsubishi Corp vehicles, has about 14,000 cars on its property. That's about 2,000 more vehicles than usual, according to spokesman John Gilmore, who said the additional cars belong to a range of manufacturers.

COLLAPSING DEMAND

Global automakers have been sideswiped by the collapsing demand for new cars and trucks. A market slowdown that began in the United States has spread to Europe and Asia.

Detroit's embattled automakers have been pushed to the brink of failure by the downturn and are asking the U.S. Congress for a $34 billion rescue package.

But the sharp decline in sales in October and November blindsided even the industry's better-performing manufacturers like Toyota and Honda.

Toyota said on Friday that it was cutting North American output by idling factories that produce vehicles such as the Camry and Corolla, the Japanese automakers' top-selling cars.

Toyota spokesman Mike Goss said inventory had been pushed to "unacceptably high" levels that would take 80 to 90 days of sales to clear.

That is still less than the 115-day supply of inventory on average for General Motors Corp, Ford Motor Co and Chrysler LLC, but it is double Toyota's inventory levels of just a year earlier.

The surge in inventories has been a small blessing to some in the industry. Automobile processors, who wash, repair and accessorize imported cars before they head to dealerships, said revenue from storing cars is helping offset the market's overall sluggishness.

MidTexas International Center Inc, whose Midlothian, Texas, facility processes vehicles for Kia Motors Corp, Mazda Motor Corp and Toyota's Lexus, expects to break even this year despite the dismal auto market because automakers are paying for cars to sit on its lots for longer.

"The inflow of vehicles is a lot greater than the outflow," MidTexas President Randy Denton said. "That helps to offset the loss of income from the vehicles that we're not processing."

[Demeter]

36. Honda almost trebles profit forecast (WHAT ABOUT THEM DOCKS?)

http://www.ft.com/cms/s/0/78114340-c2c3-11de-8eca-00144...

Honda Motor on Tuesday displayed resilience amid an industry crisis that has bankrupted two US competitors and dragged local rivals deep into the red, as it trebled its net profit forecast for the year to Y155bn ($1.7bn).

Japan’s second-biggest carmaker, which is alone among the top three Japanese producers in forecasting a profit for the year to March, now expects to increase its earnings by 13 per cent year on year.

Honda has weathered the recession better than rivals Toyota and Nissan thanks to its focus on small, fuel-efficient cars and motorcycles, sales of which have fallen less sharply than those of larger cars.

Toyota, which has become the world’s largest carmaker by units sold, in part by selling pick-up trucks alongside compacts and hybrids, expects to lose Y450bn this year.

Honda attributed the latest improvement in its outlook to aggressive cost-cutting and a partial recovery in the market for used cars in the US, which has pushed up the residual value of vehicles leased by the company’s finance arm.

The group also raised its forecast for worldwide car sales by 105,000 units to 3.4m, in part to reflect the increased demand generated by government incentives, such as this summer’s “cash-for-clunkers” scrappage scheme in the US.

Even so, the carmaker warned that its sales volumes were likely to remain about 3 per cent below last year’s level.

Koichi Kondo, executive vice-president, said the scrappage programme had lifted Honda’s sales in the vital North American market by 10,000-20,000 vehicles, but that turnover had been “disappointing” after the programme ended. “I can’t say that I can see clear signs of a recovery,” he said.

[Zenlitened]

45. Dated. This is from December 7, 2008.

[Demeter]

49. How Odd!

It wasn't from an old email--but quite recent. I wonder if the poster screwed up and got the wrong http

[Demeter]

14. White Collar Crime Beat

Is there any other kind, these days? Well, yeah, the drugs war goes on, and murder-suicides are picking up, but aren't those both collateral to the white collar criminals?

[Demeter]

15. Wall Street's Naked Swindle MATT TAIBBI

http://www.rollingstone.com/politics/story/30481512/wal...

A scheme to flood the market with counterfeit stocks helped kill Bear Stearns and Lehman Brothers — and the feds have yet to bust the culprits.

On Tuesday, March 11th, 2008, somebody — nobody knows who — made one of the craziest bets Wall Street has ever seen. The mystery figure spent $1.7 million on a series of options, gambling that shares in the venerable investment bank Bear Stearns would lose more than half their value in nine days or less. It was madness — "like buying 1.7 million lottery tickets," according to one financial analyst.

But what's even crazier is that the bet paid.

At the close of business that afternoon, Bear Stearns was trading at $62.97. At that point, whoever made the gamble owned the right to sell huge bundles of Bear stock, at $30 and $25, on or before March 20th. In order for the bet to pay, Bear would have to fall harder and faster than any Wall Street brokerage in history.

The very next day, March 12th, Bear went into free fall. By the end of the week, the firm had lost virtually all of its cash and was clinging to promises of state aid; by the weekend, it was being knocked to its knees by the Fed and the Treasury, and forced at the barrel of a shotgun to sell itself to JPMorgan Chase (which had been given $29 billion in public money to marry its hunchbacked new bride) at the humiliating price of … $2 a share. Whoever bought those options on March 11th woke up on the morning of March 17th having made 159 times his money, or roughly $270 million. This trader was either the luckiest guy in the world, the smartest son of a bitch ever or…

Or what? That this was a brazen case of insider manipulation was so obvious that even Sen. Chris Dodd, chairman of the pillow-soft-touch Senate Banking Committee, couldn't help but remark on it a few weeks later, when questioning Christopher Cox, the then-chief of the Securities and Exchange Commission. "I would hope that you're looking at this," Dodd said. "This kind of spike must have triggered some sort of bells and whistles at the SEC. This goes beyond rumors."...

[Demeter]

18. Galleon paid banks millions for ‘edge’

http://www.ft.com/cms/s/0/9b7b329e-c400-11de-8de6-00144...

By Henny Sender in New York


The Galleon hedge fund at the centre of an insider trading scandal paid hundreds of millions of dollars a year to its Wall Street banks and in return regularly received market information that would not have been disclosed to most investors, executives familiar with the matter say.

A person familiar with Galleon, whose founder, Raj Rajaratnam, was charged with insider trading this month, said it paid about $250m to its banks last year. Executives who dealt with the fund said it paid more in fees and other charges during the boom years of this decade.

Morgan Stanley, which counted Galleon as one of its top-five hedge fund clients, and Goldman Sachs were Galleon’s top providers of hedge-fund services – or prime brokerage.

Galleon, which had about $7bn in assets at its peak, paid large amounts to banks because it specialised in short-term trading strategies, which put its officials in close contact with Wall Street traders and salespeople. As it grew, the hedge fund became known for pushing its contacts at banks for hints about market developments such as big buy and sell orders.

Although bank policies often prohibit employees from divulging specific information about orders, executives who dealt with Galleon said it regularly received “colour” on market developments, frequently delivered in Wall Street slang. One example would be traders discussing a “page one seller” of shares – a reference to the first page of the Bloomberg list of top holders of listed companies.

One executive who dealt with Galleon said: “They wanted anything the public did not have. They got various pieces and put them together and that was their edge.” A former Goldman executive who provided services to funds including Galleon said: “They were tough and aggressive. They cared about short-term returns and cared a lot about the impact of their trading and the costs. They expected a lot of market information.”

Market “colour” has not usually figured in insider-trading enforcement. Prosecutions – including the charges in the Galleon case – have focused on leaked corporate information.

“There is a big distinction between information from corporate issuers and information from elsewhere, and information about companies and about the market,” said David Moody, a New York securities lawyer.

However, market participants say the Galleon case could have a chilling effect on the distribution of market “colour” – possibly affecting other hedge funds that trade frequently to make quick returns. “High-velocity hedge funds aren’t really about investing,” said one hedge fund founder. “It is a cat and mouse kind of thing, a game.”

Goldman, Morgan Stanley and a Galleon representative declined to comment.

[Demeter]

19. M Stanley court battles over China derivatives

http://view.ed4.net/v/73UJGG/EZ2W6/YQ9BR5/MJTKN /


Morgan Stanley has been dragged into a risky Chinese court battle over a hedging contract with a local company in the latest stand-off between foreign investment banks and mainland enterprises over loss-making derivatives deals.

[Demeter]

22. K1 founder faces fraud inquiry

http://www.ft.com/cms/s/0/4b0e8bb4-c3fe-11de-8de6-00144...

German prosecutors revealed on Wednesday they are investigating possible fraud and breach of duty by the founder of a hedge fund group known as K1.

Prosecutors in the southern city of Würzburg confirmed they were looking into the affairs of Helmut Kiener, founder of the K1 Group, but refused to comment further.

The move came after Bloomberg had earlier reported that authorities in Europe and the US were investigating whether a group of banks had been deceived in dealings with K1.

Barclays, JPMorgan and BNP Paribas are among a group of banks that are believed to have lost tens of millions of dollars by providing K1 with credit. All three said they are co-operating with law enforcement authorities, while declining to comment further. Bafin, the German financial regulator, declined to comment on the current investigation. The US Federal Bureau of Investigation also declined to comment.

Between 2001 and 2004 Bafin published at least four prohibitions against either Mr Kiener or funds linked to K1 for carrying out unauthorised business in Germany. Two of those bans, involving companies based in the British Virgin Islands, were overturned after court appeals, Bafin said on Wednesday.

JPMorgan is thought to have inherited its exposure to K1 through its acquisition of Bear Stearns, the collapsed US investment bank that did business with the fund manager.

Some of the banks said to be affected, including JPMorgan and Barclays, are believed to have already recognised their potential losses, limiting any impact on the bottom line.

A search of Mr Kiener’s home and office in the town of Aschaffenburg took place on Wednesday, according to someone answering the phone there who described himself as a K1 employee. Mr Kiener was said to be unavailable.

Mr Kiener – described on the group’s website as psychologist and the creator of the ”K1 fund allocation system” – is a relative unknown in hedge fund circles.

According to the website, the K1 Group manages several fund of funds – specialist funds that themselves make investments in an underlying portfolio of hedge funds. The website says the group manages some €800m ($1.2bn) of assets.

[Demeter]

30. SEC head urges fresh securities laws

http://www.ft.com/cms/s/0/dd118b54-c30b-11de-8eca-00144...

US securities laws are outdated and legislation is needed to govern new investment products that blew up during the financial crisis, the Securities and Exchange Commission chairman told an industry gathering on Tuesday.

Speaking as Congress is already drafting legislation to wind down big financial companies, Mary Schapiro said laws were also needed to fill the gaps in the regulation of thousands of billions of dollars in securities backed by assets such as mortgages and credit cards.

Ms Schapiro’s call highlights the huge challenges in creating a regulatory mechanism necessary to prevent a repeat of the financial crisis.

“Not all problems with can be addressed under our current rule-making authority,” she said at a conference. “I believe legislative action is also necessary to deal with some of the issues that have been highlighted by the credit crisis.”

Ms Schapiro said statutes governing the sale of securities were written decades before asset-backed securities “were even dreamed of” and that current amendments to improve disclosure did not go far enough.

Ms Schapiro proposed an act specifically for the ABS markets rather than any amendment of existing securities laws. “Creating a new act directed solely at securitisations would allow Congress to specifically tailor solutions for these investment vehicles – much like the Investment Company Act of 1940.”

She said this would have the advantage of avoiding potentially compromising changes to the fundamental structure and underpinnings of existing securities statutes.


SEE LINK FOR Our interactive graphic explains the existing framework and proposed changes to financial regulation in the EU, US and UK

Securities laws, most of which were written in the years following the Great Depression of the 1930s, were written for companies and other entities that actively managed funds.

Asset-backed securities, in contrast, are backed by a pool of financial assets without the benefit of any day-to-day management. Securitisation is a technique to finance assets such as mortgages by pooling them and converting them into securities that can be sold to investors in the capital markets.

Before the financial crisis, securitisation provided the bulk of the financing for consumer loans such as mortgages and credit cards. But as the housing bubble burst and high-risk mortgages defaulted in record numbers, investors shunned such securities and the securitisation markets all but dried up.

Industry advocates are looking for ways to improve regulation, disclosure and transparency of securitisation markets to revive consumer access to such funds. The Federal Reserve has also spent tens of billions of dollars trying to revive the market. Ms Schapiro said new legislation could, for example, set minimum requirements for issuers’ representations about the quality of the assets being securitised.

Ms Schapiro reiterated fears that technological advances gave some types of investor better access to price data, leaving retail investors at a potential disadvantage.

The SEC is seeking comment on so-called “dark liquidity pools” – systems that allow trading of large blocs of shares anonymously – to help tailor new oversight of the area, but warned that current rules may not be sufficient to address the problem.

“We need to consider whether there are additional legislative authorities needed to address new types of market professionals whose activities may not be sufficiently regulated,” said Ms Schapiro.

[Demeter]

56. Madoff: Had 'too much credibility' with SEC

http://news.yahoo.com/s/ap/20091031/ap_on_bi_ge/us_sec_...

As Bernard Madoff sat in jail a few months after pleading guilty to fraud, he sounded faintly boastful.

The only problem with officials at the Securities and Exchange Commission's Washington headquarters, he said, is that he had "too much credibility with them and they dismissed" the idea that he was scheming people out of billions of dollars.

A document released Friday details a prison interview conducted June 17 by the SEC inspector general in which Madoff says he had the impression that "it never entered the SEC's mind that it was a Ponzi scheme."

Madoff seemed convinced SEC staff did not suspect him, despite the agency's numerous probes of his business. He said in the interview that the SEC examiners "never asked" for basic records to corroborate his operations.

The disgraced financier also confided that he didn't bring an attorney with him when he testified in an inquiry by the SEC's enforcement division because he believed he didn't need one — and he was trying to fool the government investigators into thinking he had nothing to hide.

The details emerged in a summary of Inspector General David Kotz's interview with Madoff at the Metropolitan Correctional Center in New York, released along with hundreds of other documents related to Kotz's extensive investigation of the SEC's stunning failure to detect Madoff's fraudulent scheme for 16 years.

Kotz also issued a statement Friday saying his probe found no evidence to support Madoff's claim of having a "close relationship" with SEC Chairman Mary Schapiro, who previously headed the Financial Industry Regulatory Authority, the brokerage industry's self-policing organization. In the interview, Madoff called Schapiro a "dear friend," saying she "probably thinks, I wish I never knew this guy."

Like the SEC, FINRA made periodic exams of Madoff's brokerage operation, which functioned separately from his investment business hidden from regulators' view. An internal review by FINRA found a regulatory breakdown on the part of the organization in the Madoff case.

As the SEC inspectors carried out probe after probe of his business, Madoff said in the interview he was "worried every time" that he'd be caught. "It was a nightmare for me," he said. "I wish they caught me six years ago, eight years ago."

Madoff, 71, a former Nasdaq stock market chairman, pleaded guilty in March to charges that his secretive investment-adviser operation was a multibillion-dollar Ponzi scheme that destroyed thousands of people's life savings and wrecked charities. It was possibly the largest-ever Ponzi: the classic scheme in which investors are paid with other investors' money rather than actual profits on their investment.

He is serving a 150-year sentence in federal prison in North Carolina.

The new details from Kotz's inquiry came the same day as word that Madoff's longtime auditor is expected to plead guilty next week in a cooperation deal. Prosecutors told a federal judge in New York that accountant David Friehling was expected to offer a guilty plea at a conference Tuesday to revised charges that accuse him of securities fraud, investment adviser fraud, making false filings to the SEC, and obstructing or impeding administration of the Internal Revenue laws.

The charges carry a prison term of up to 108 years, though significant cooperation with prosecutors can bring leniency.

In his interview with Kotz, Madoff said the SEC never asked him about his tiny accounting firm. It seemed incongruous that, with more than $65 billion in private investments he claimed he oversaw for thousands of people, Madoff used what seemed to be a small-time auditor with a minuscule office in suburban New City, N.Y. Authorities say that Friehling appeared to have rubber-stamped Madoff's records.

Kotz's report of his investigation, made public in early September, painstakingly detailed how the agency's investigations of Madoff were bungled, with disputes among inspection staffers over the findings, lack of communication among SEC offices in various cities and repeated failures to act on credible complaints from outsiders forming a sea of red flags.

An inspection of Madoff's operation in 2003-04, for example, "was put on the back burner" even though the exam team still had unresolved questions, Kotz found.

Madoff's former finance chief, Frank DiPascali, is cooperating with prosecutors after pleading guilty in August to helping Madoff carry out his fraud. Madoff was asked in the interview whether he was concerned about DiPascali's testimony. His answer: "No, he didn't know anything was wrong, either."

[Demeter]

17. ENERGY (Something we could all make use of)

Shell in talks with Essar to sell refineries

http://view.ed4.net/v/NA70KK/6868G/F6OKVP/VTVRG /

Royal Dutch Shell, the Anglo-Dutch energy group, confirmed it was in negotiations to sell three European refineries to Essar, the Indian conglomerate. FT.com reported in August that Essar had bid for the European refineries.

Now the conglomerate that spans mobile phones, steel, shipping and energy, and is founded and controlled by Ravi and Shashi Ruia, is understood to have beaten out several other suitors from the US and the Middle East and is in bilateral negotiations with Shell...


Conoco details plans to sell assets

http://www.ft.com/cms/s/0/e67a2e04-c3c8-11de-a290-00144...

ConocoPhillips, the third largest US oil company, outlined plans to sell $10bn worth of assets over the next two years on Wednesday, including its 9 per cent stake in the Syncrude oil sands project in Canada.

Jim Mulva, chief executive, said Conoco also would sell the bottom-performing 10 per cent of its exploration and production assets in Canada and the continental US, some natural gas assets in the North Sea, and pipelines and terminals in the US.

“We have received a lot of phone calls,” he said. “We think that what we have in mind is achievable.”

The asset sale programme was announced earlier this month, along with a $1.5bn cutback in 2010 capital spending.

The company this year pledged to scrap its growth-through-acquisition strategy to focus on organic growth.

The flaws in that strategy emerged when falling commodity prices forced it to take a $34bn writedown on the reduction in its asset values at the start of the year, cut 1,300 jobs, and scale back capital expenditures to $12.5bn this year from $15.3bn in 2008.

Mr Mulva said Conoco would not cut spending in exploration and production, which would receive 90 per cent of the $11bn in capital spending planned annually for the next few years.

The fall in oil and natural gas prices from last year’s highs is still taking its toll.

Conoco on Wednesday rep-orted earnings of $1.5bn, or $1 per share, in the third quarter, down 71 per cent from the year-earlier quarter.

Conoco’s shares fell $1.41, or 2.7 per cent, to $49.49.

ConocoPhillips’ stake in Syncrude is expected to attract interest both from companies that have a stake in the oil sands and from newcomers.

One likely bidder is Calgary-based Canadian Oilsands Trust, Syncrude’s biggest shareholder with 37 per cent. Its partners include, among others, ExxonMobil, Nippon Oil, Suncor and Nexen.

Chinese and South Korean oil groups have stepped up their interest in the oil sands as a way of securing future oil supplies.

Korea National Oil Corporation bought Harvest Energy Trust for $1.8bn earlier this month, while PetroChina paid $1.9bn for two oil sands projects.

The Alberta oil sands are estimated to contain the world’s biggest oil reserves after Saudi Arabia.

Mr Mulva said its full-year cost-reduction target of $1.4bn had been achieved, and said the company’s “refocused exploration programme” was delivering strong results, pointing to efforts in the Gulf of Mexico, onshore US shale gas and in Australia’s Browse Basin.

BP cost-cutting boosts results

http://www.ft.com/cms/s/0/370d1d2c-c2ca-11de-8eca-00144...

BP on Tuesday provided evidence of its operational turnround when the company unveiled far better third-quarter results than expected and plans to cut costs by an additional $1bn (€676m).

It reported that its headline third-quarter profit had fallen by half to just under $5bn because of the collapse in oil and natural gas prices, which is expected to have cut the profits of all industry players.

But BP’s shares rose 5 per cent to 597.4p on the news because the overall results were 30-50 per cent higher than analysts had expected.

Analysts said the results reflected the impact of cuts and operational improvements under chief executive Tony Hayward. In the past 18 months, BP has shed 6,500 jobs, significantly more than the 5,000 it had announced it would cut. Much of the other cost saving came from favourable exchange rate movements and lower energy bills for BP itself.

Thomas Pearmain, analyst at IHS Global Insight, the consulting group, noted that it was two years since Mr Hayward had announced a major restructuring of BP and a fundamental shift in the way the company operates. The results had shown that Mr Hayward had put his stamp on the company.

“Cash costs are down by more than $3bn compared with the same period last year, which indicates that the efficiency drive that Hayward has implemented since taking over as chief executive is making strong progress,” Mr Pearmain said.

Citigroup analysts called the results “stellar” but warned that momentum was likely to slow because the operational turnround had been largely delivered.

BP’s replacement cost profit – a measure that strips out the effect of changes in the value of inventories – was $4.98bn in the third quarter, 50 per cent less than in the same period of 2008.

Underlying profit, excluding non-operating items and swings in the valuations of derivative instruments, was $4.67bn, beating the consensus forecast of $3.16bn from a Reuters poll of 11 analysts.

BP said cash costs – a measure that covers the bulk of its cost base – for the first nine months had been more than $3bn lower than in the same period of 2008. It was now expecting to save about $4bn for the year as a whole – $1bn more than it had forecast at its second-quarter results and double the $2bn it had predicted earlier this year. BP pledged to maintain its dividend of $0.14 a share, although in sterling terms the pay-out fell from 8.705p to 8.512p.

BP’s production grew 7 per cent. But had BP not reinstated 100,000 barrels of oil and gas lost from hurricanes in 2008, its output growth would have been closer to 4 per cent.



DIDN'T THESE GUYS EVER HEAR ABOUT SAVING FOR A RAINY DAY? WHERE ARE ALL THOSE OBSCENE PROFITS?

[bread_and_roses]

20. Every time I think I can't get any downer, something else. Like today's "health insurance" Bill

I have totally given up on the political process as a means to change. I talked myself into it for the past ten years, which now look like ten wasted years to me. I have returned to my roots. We either go into the streets, or we continue the descent into serfdom. We can't "buy" our way out of this, even if we had the means to do so. Or, if we do, we just keep killing the earth. Yet nothing else is talked about. There are no jobs. We make next to nothing real. We live on ethanol in our cars and high-fructose fueling our bodies. The president we sweated blood to elect has secret meetings with Ins and Pharma Vampires and sells us out. The rich get rescued, our states and cities and counties lay off teachers and caseworkers and cut housing programs and tell seniors to just die in their homes and relieve us of their expense - I mean, what the hell else does cutting home-care services say? While our Un-Representatives mournfully tell us these are the "hard choices" we have to make while we line the pockets of the Banksters, and the robot media never blinks, just repeats it like it had any real meaning. I can hardly even read anything on this site anymore - probably a good thing. But, I do read SMW and WE. At least I am not subjected to Pollyanna and Little Miss Sunshine (why are these avatars of false, saccharine cheer all female?).

[Demeter]

23. Cultural Indoctrination

It's the Happy Face Phenomenon. Stand by your man, even if he's killing you and the kids, etc.

[bread_and_roses]

28. LOL. Good point. (n/t)

[Demeter]

24. Proposal aims to curb raids on 401(k)s (NEXT STOP--OUTRIGHT CONFISCATION)

http://www.ft.com/cms/s/0/b18e498a-c3f2-11de-8de6-00144...

US lawmakers were set to propose a new law on Wednesday that would discourage people from raiding their retirement savings early to see them through tough financial times or to splash out on expensive items.

The robustness of the US retirement system has come under close scrutiny since the financial crisis crushed the value of many so-called “defined contribution” pension plans such as 401(k)s, which invested in the markets. Legislators have already proposed bills trying to improve transparency, particularly over fees and conflicts of interest.

Herb Kohl, chairman of the Senate special committee on ageing, was on Wednesday set to go one step further and propose a law that would discourage people from dipping into their 401(k)s before they retire, which can seriously reduce the pot of money they have to live off in old age.

Some 15 per cent of Americans between the ages of 15 and 60 raid their 401(k) retirement savings plans, either by taking a “hardship withdrawal”, borrowing money from it or simply cashing it out when they leave their employer. Some fear that more people will be driven to do this as unemployment mounts and people struggle to pay bills and other expenses, though the Government Accountability Office has found no evidence of this.

“Americans’ retirement savings have taken a huge hit due to the recession,” said Mr Kohl last month after the GAO released a report into so-called “leakage” from plans. “Despite the financial hardships many are facing, people need to resist raiding their 401(k) because it can be a really bad deal for them over the long-run.”

Taking money from 401(k)s can incur a 10 per cent tax penalty as well as fees and the loss of compound interest the account would otherwise have accrued. The GAO study found that a low-earning 35-year-old who took a $5,000 hardship withdrawal would forgo 12 per cent in retirement savings.

Mr Kohl’s bill, which has yet to be introduced, was expected to ban products such as “401(k) debit cards” – a niche item that allows people to dip frequently into their savings.

It would also increase the interest rate that people have to pay on so-called 401(k) loans – when they effectively borrow money from themselves and are required to pay it back with interest. The bill would cut the number of loans people can take at one time, and eliminate a provision that stops people contributing to their 401(k) for six months after taking a hardship withdrawal, which the GAO found was ultimately damaging rather than helpful.

The Senate ageing committee is also investigating “target date funds” which have become the most popular default option for people automatically enrolled into 401(k)s. These plans are intended to shift from riskier investments such as stocks into safer ones such as bonds as the saver ages.

But the financial crisis exposed a big disparity in such funds: 2010 target funds had anything from 21 to 79 per cent of their investments in stocks, for example, meaning some were badly hit when Wall Street tanked last year.

[DemReadingDU]

58. just 401(k)s, not IRAs?

Seems they want us to perceive that these new regulations are for our own good. Yeh, right.
They are fearful we will drain out the remaining balances, and there is not enough money there to pay us. IMO, there will probably be limits on the amount withdrawn from not only 401(k)s, but also IRAs, and bank saving accounts too. It could get ugly when everyone tries to get out their money from all sources, at the same time.

[Demeter]

60. I Expect All Funds on Deposit Are Fair Game to the Greedy

and then they will go house to house.

It's gonna get uglier, long before it gets better.

Some people never have enough--and that's their problem. They steal from the rest of us, and we let them. that's OUR problem.

[DemReadingDU]

69. A lot has to do with perception and propaganda

When the media propaganda constantly reports that the economy is getting better, recession is over, jobs are being created (jobs?), people perceive that it's not that bad. They buy more stuff on credit and put money into the stock market. It's good, it's rallying!

Then while all this is going on, the banksters take out their gains, the market declines leaving the people bewildered. It's just a greedy game to the banksters, and most people don't realize the game, until it's too late that they've been robbed.

It isn't so much that we let them steal from us, it's more that people believe the propaganda. If people would rely on some critical thinking, they would conclude that what they are hearing is spinning headlines. If people would take a bit of time, and actually look at the data, the data clearly shows an economy in freefall.

But people are busy working, enjoying hobbies (mine is DU!), their kids, vacationing. Most people don't want to hear that their world is quickly falling apart, that the party is ending. They're in denial.

And those of us who know what is going on, what are we doing to stop it? I call my Senators and Congressman. It doesn't do any good, as most politicians work for the lobbyists and banksters to keep their status quo. They really don't represent us. For now, I'm stockpiling some extra food and supplies, some extra cash so the banksters don't steal it (hiding it in a safe spot).

What it will eventually happen, is when lots of people are jobless, homeless, hungry, they will rise up and revolt. Yeh, it will get ugly. Might not happen in my lifetime, but it's coming.

[Demeter]

70. Five Years, Maybe Less

before the Bush-Reagan time bomb goes off.

[DemReadingDU]

72. as you say in OP, an epidemic

"an epidemic of crime and lawlessness and unethical behavior"

It's all going to come crashing down when the people have lost everything. It's unwinding as we speak, but I'm not convinced there will be a revolt in five years though. I do believe the government has lots of things they can do to keep civil order. I certainly worry about my 2 toddler grandbabies' future.

[Demeter]

25. Spain must scrap corporate tax break

http://www.ft.com/cms/s/0/e0b57944-c3e9-11de-a290-00144...

The European Commission has demanded that a tax break that fuelled a spate of Spanish international mergers and acquisitions during the credit bubble be abolished and some of the money refunded.

Brussels claims that a corporate tax provision that allows Spanish companies to reduce their tax bills by writing off part of the acquisition costs is illegal under EU state aid rules.

Neelie Kroes, the competition commissioner, ruled against the tax break after an 18-month investigation. She ordered the Spanish government to collect the savings from some of the companies involved.

Under the tax rules adopted in 2002, Spanish companies could write off the difference between the price they had paid for a European company and the value of its underlying assets, an accounting procedure known as amortising goodwill.

Wednesday’s ruling was widely expected by Spanish companies after recent comments by Elena Salgado, finance minister, that none would have to pay back large sums in deducted tax.

In a concession to the Spanish, Mrs Kroes ruled that only those companies making acquisitions after December 2007 would be liable to refund the tax break.

The cut-off exempts all the most important foreign deals by Spanish companies, including Santander’s £9.5bn takeover of Abbey in 2005 – 60 per cent of which was accounted as goodwill – Telefónica’s €27bn acquisition of O2 in 2006, and Iberdrola’s €17bn purchase of Scottish Power in 2007.

Those three deals catapulted Spain’s first, second and fourth biggest companies by market capitalisation into the global league at a time of cheap credit and overcrowding in the domestic market.

The way Spanish authorities treated goodwill in foreign takeovers during the credit bubble was much more generous than its European neighbours, leading to complaints that Spanish companies had an unfair advantage when bidding for European rivals.

Deutsche Telekom, the Germany telecommunications group, made a formal complaint to Brussels after Telefónica’s knock-out offer for O2, which it had also been eyeing.

The Iberdrola deal upset several Scottish politicians, while bidders in a French government auction of toll road concessions in 2006 also complained about the Spanish advantage.

But Wednesday’s ruling will claim at least one victim: Santander, which last year paid £1.26bn ($2.1bn, €1.4bn) for Alliance & Leicester, the UK bank, will probably be forced to return any tax deducted under the old rules.

Alfredo Saenz, chief executive of the Spanish bank, said on Wednesday that the impact would be negligible, even though €464m ($685m, £415m) of goodwill was booked at the time.

The Spanish government said it was happy with the ruling.

[Ghost Dog]

80. Please allow me: (Van Morrison):

http://www.youtube.com/watch?v=Ge99LJ3BPiw&feature=chan...

[Demeter]

27. US weighs tax credit as jobless cure

BECAUSE IT FEELS SO GOOD WHEN I STOP!

http://www.ft.com/cms/s/0/ddbd11bc-c3f2-11de-8de6-00144...

The Obama administration has a serious unemployment problem. Economists inside and outside the government are wrestling with whether a targeted jobs tax credit might be part of the answer.

While output is now growing in the US and the economy is expected to expand by roughly 3 per cent next year, unemployment – already at 9.8 per cent – is projected to keep on rising for several months, peaking at about 10.3 per cent in early 2010.

Even when unemployment starts to decline, most economists expect it will do so very slowly, with the jobless rate at the end of next year still above 9 per cent, higher than it was in the depths of the crisis in March this year.

While much better than a second Great Depression, this is a bleak prospect for US society. And it carries with it political peril for an administration whose congressional allies face mid-term elections in November 2010. On current forecasts unemployment then will be higher than on any national election day since the second world war with the sole exception of the November 1982 mid-terms, in which President Ronald Reagan’s minority Republicans lost 26 seats in the House of Representatives.

Not surprisingly, policymakers are examining every possible lever that might help bring unemployment down more rapidly than forecast, within the tight constraints imposed by the deficit.

Some economists favour a direct targeted subsidy for hiring via a jobs tax credit, while others favour using any available funds to boost overall demand or target stress points such as housing or small business lending instead.

Advocates of a jobs tax credit argue it would mean more jobs being created for a given growth trajectory. Labour unions opposed an early version advocated by Barack Obama in his election campaign for fear that it would spur companies to fire existing workers and replace them with new ones. But they appear sympathetic to alternative versions of such schemes that would subsidise increases in overall payroll spending or number of employees.

The last time the US had a jobs tax credit was in 1977-1978 under the Carter administration. A 1979 study by economists Jeffrey Perloff and Michael Wachter showed that companies that knew about the scheme hired 3 per cent more new workers than those that did not.

Tim Bartik and John Bishop, the authors of a jobs tax credit plan released this month by the leftwing Economic Policy Institute, claim their version would generate 2.8m net new jobs in 2010 for a gross cost of $80bn. Critics point out that even with this bullish estimate, four out of every five dollars would go to subsidise job creation that would have taken place anyway. Moreover, companies may be less responsive to the subsidy than this analysis suggests.

Advocates respond that even allowing for this, a jobs tax credit can still be a relatively efficient way to boost employment compared with other government programmes.

Using fairly conservative assumptions, the cost per job per year under a tax credit plan would be in the region of $50,000 gross and perhaps $40,000 net of tax receipts flowing back to the government from increased economic activity.

The question for policymakers is whether a tax giveaway to growing companies is a price worth paying for the genuinely additional jobs that would be created – or whether the money could be better deployed elsewhere. Some economists think a better way to support employment would be to boost transfers to states that face brutal budget cuts and would otherwise have to fire public sector workers.

Tom Gallagher, an analyst at ISI, the broking firm, says debate on a jobs tax credit inside the administration appears linked to the planning process for next year’s budget. But he says: “If the next employment report pushes unemployment above 10 per cent this could accelerate things.”

[AdHocSolver]

84. Giving companies tax credits to create jobs is stupid for two reasons.

First, the idea of giving tax credits to companies to hire people to "create jobs" is totally asinine. The government is borrowing money to provide the tax breaks, and the amount of income tax generated by the new jobs won't even cover the extra debt created to provide the tax breaks. This is a plan created by complete idiots.

Secondly, when companies received tax credits from cities and states to create jobs in their area, in almost every case, when the tax breaks ended, the factories were closed and the jobs sent overseas. Using tax breaks in this way is a losing proposition. Governments had to raise taxes to pay off this debt, at the same time that the job losses meant lost revenue.

[Demeter]

31. McDonald’s pulls out of Iceland

http://www.ft.com/cms/s/0/5a371544-c268-11de-be3a-00144...

Iceland edged further towards the margins of the global economy on Monday when McDonald’s announced the closure of its three restaurants in the crisis-hit country and said that it had no plans to return.

The move will see Iceland, one of the world’s wealthiest nations per capita until the collapse of its banking sector last year, join Albania, Armenia and Bosnia and Herzegovina in a small band of European countries without a McDonald’s.

The loss of the Golden Arches highlights the extent of Iceland’s economic demise since the pre-crisis boom years when its “Viking Raider” entrepreneurs turned Reykjavik into an international finance centre and launched a buying spree of high-profile European assets.

McDonald’s blamed the closures on the “very challenging economic climate” and the “unique operational complexity” of doing business in an island nation of just 300,000 people on the edge of the Arctic Circle.

Most ingredients used by McDonald’s in Iceland are imported from Germany – leading to a doubling in costs as the krona has collapsed while the euro has strengthened.

Magnus Ogmundsson, managing director of Lyst, the McDonald’s franchise holder in Iceland, said that price rises of at least 20 per cent were needed to produce an acceptable profit. That would have pushed the price of a Big Mac burger well above the $5.75 it costs to buy one in Switzerland, home to the world’s most expensive McDonald’s, according to the Big Mac index.

Lyst plans to rebrand its three restaurants – all in the Reykjavik area – under a new name, Metro, and adapt the menu to use more locally produced meat and vegetables after its McDonald’s franchise ends on Saturday.

Mr Ogmundsson admitted that some customers were alarmed by the symbolism of such a recognisable brand abandoning Iceland but others have reacted positively. “People are pleased that we will be sourcing more goods locally,” he says.

[Demeter]

38. Maybe a Musical Interlude? The Nightmare Before Christmas and CapSteps

http://www.capsteps.com/sounds/economy-monstercash.rm

http://www.youtube.com/watch?v=xpvdAJYvofI

http://www.youtube.com/watch?v=Wv1HX80u5x4&feature=rela...

http://www.youtube.com/watch?v=Yw0aoVpFCDw&feature=rela...

[Demeter]

40. And a Video Tribute to Bela Lugosi

http://www.youtube.com/watch?v=dZ2ObnoXLpY

http://www.youtube.com/watch?v=IVPxAgy7lBA&feature=rela...

[Demeter]

41. Good Evening, Everyone! Sleep Well, If You Can Sleep at All!

Muahahahahaha!

[MattSh]

50. Things falling apart quickly. - A View from Kiev.

I've felt for months that government reports were to good to be true, and the truth being covered up. I'm sure you know that feeling too. Well, things have broken down in a big way this week.

Swine Flu - Or is it?

As of a few days ago, Ukraine had officially reported only two cases of Swine Flu. Now it seems that's changing in a big way, They are still waiting for official confirmation of most of these cases, so some are calling it a Swine Flu outbreak, some are calling it a mutation of Swine Flu, and most mysteriously, in the spirit of Halloween no doubt, some local politicians are calling it the "California Flu". Only in the Ukrainian media though. No English sources have used that term.

Ukraine shuts schools, halts campaigning over H1N1

Ukraine closed schools and banned public meetings including election rallies and restricted travel on Friday for a three-week period after confirming its first death from H1N1 flu.

Prime Minister Yulia Tymoshenko announced the measures, saying the virus had reached epidemic levels in three parts of western Ukraine, where there has been an outbreak of respiratory illness since mid-October.

The epidemic coincides with the start of campaigning for a presidential election on Jan. 17. Tymoshenko, herself a front-runner, said the emergency would affect campaign rallies.

...and...

"All educational institutions without exception ... will be put on a three-week holiday period," Tymoshenko said. She indicated this could be extended if necessary.

"Apart from this, we will cancel all mass meetings ... for three weeks," she told an emergency government session. "We will introduce a special system to stop unnecessary travel from one region to another."

http://www.kyivpost.com/news/nation/detail/51542 /

Ukraine defies IMF warnings. Wages and Pensions to increase 20%. Looks like Mr 4% approval hasn't given up on another term just yet.

IMF deal off-track as Yushchenko signs wages bill

Ukrainian President Viktor Yushchenko signed a bill on Friday that would raise the minimum wage by over 20 percent -- a move the International Monetary Fund chief said pushed its $16.4 billion bailout "off-track."

Uncertainty over IMF funding for Ukraine, one of Europe's worst performing economies, prompted credit ratings agency Standard & Poor's to cut its outlook to "stable" from "positive", while Fitch said the wage rises would pressure its own already low 'B' rating.

Prime Minister Yulia Tymoshenko has said the wage rises would place "an atom bomb under the finances of the country" and would cost an extra $10 billion.

But Yushchenko told reporters: "I would like to inform you that I have signed the bill."

Analysts have said the issue has become a political football ahead of a Jan. 17 presidential election in which Yushchenko, his bitter rival Tymoshenko and former premier Viktor Yanukovich will run.

IMF chief Dominique Strauss-Kahn reacted to Yushchenko's decision swiftly, telling Reuters it concerned him greatly.

...and...

Analysts warned that if the increases come into force, the government would either pressure the central bank to print cash or be forced to raise already sky-high yields of over 27 percent on its domestic bonds to cover this year's budget gap.

Foreign debt insurance costs show Ukraine's debt to be the riskiest in the world with a 52 percent probability of default.

http://www.kyivpost.com/news/nation/detail/51572 /

And what would this time of year be without a disagreement about natural gas shipments to Europe? Yep, we've got that too. Seems the Kremlin is concerned if Ukraine has the necessary gold reserves, while Ukraine says they have plenty of dollars. Is the Kremlin hoping for gold instead of dollars? Stay tuned.

Putin warns Yushchenko on gas payment

OVO-OGARYOVO, Russia, Oct 30 (Reuters) - Russian Prime Minister Vladimir Putin said on Friday that Ukrainian President Viktor Yushchenko risked provoking a new gas crisis that could disrupt supplies to Europe.

"It looks like we will again have problems with energy payments," Putin said after a telephone call with Ukrainian Prime Minister Yulia Tymoshenko, Yushchenko's main political foe and a frontrunner in a Jan. 17 presidential election.

Putin's warning raises the spectre of a new gas dispute, though diplomats have said Russia may be wary of entering a row with Kiev on the eve of the vote, which Moscow hopes will bring a more pro-Russian president to power.

Ukraine's deep economic crisis has raised fears about its ability to pay for Russian gas.

The European Commission on Friday said it had proposed to European Union governments that they lend Ukraine 500 million euros ($741 million).

But the International Monetary Fund's managing director said that a wage bill signed by Yushchenko on Friday, which the fund had asked him to veto, cast doubt on the next tranche of a $3.8 billion IMF bailout programme for Ukraine.

http://www.kyivpost.com/news/business/bus_general/detai... /

.

[Demeter]

51. I Don't Know If You Saw This Friday, Matt

FBI Lets Barred Tycoon Visit U.S.

http://online.wsj.com/article/SB125685578903317087.html...

One of Russia's most powerful tycoons -- barred entry to the U.S. for years due to U.S. government concerns about possible ties to organized crime -- visited the country twice this year under secret arrangements made by the Federal Bureau of Investigation.

Aluminum magnate Oleg Deripaska met with FBI agents in August and earlier this month as part of a continuing criminal probe, according to two administration officials. The focus of that probe couldn't be learned.

Mr. Deripaska used the opportunity of his recent U.S. visits to meet with top executives of U.S. investment banks Morgan Stanley and Goldman Sachs Group Inc. The aluminum giant he controls, UC Rusal, is preparing for an initial public offering, a vital part of Mr. Deripaska's efforts to save his debt-burdened business.

Mr. Deripaska, left, in Detroit on a recent trip to the U.S. arranged with FBI help. Beside him is GM's chief executive, Fritz Henderson, German Gref of Russia's Sberbank and Siegfried Wolf of Magna, a Canadian auto supplier.


The U.S. trips came at an opportune moment to help reassure bankers his visa difficulties may be easing. Mr. Deripaska's visa troubles are a potentially sensitive issue for investors, bankers say.

Mr. Deripaska also stopped in Detroit to meet with top executives at General Motors Co. to discuss the sale of a stake in its Adam Opel AG unit to a Russian-backed consortium that includes Mr. Deripaska's AO GAZ auto maker, people familiar with the visit said.

The State Department, which rules on requests for U.S. visas, hasn't publicly said why it previously denied entry to Mr. Deripaska, and declined to comment on the recent visits.

Mr. Deripaska controls a Russian business empire that stretches from metals to finance to construction and which, by itself, accounts for just under 2% of Russia's gross domestic product. He enjoys good relations with the Kremlin, which provided a $4.5 billion bailout loan -- the biggest granted to any Russian company -- through a state bank to Rusal a year ago as the financial crisis hit Russia hard.

He is a regular member of the delegation on Prime Minister Vladimir Putin's international trips, and the Kremlin lobbied hard in support of the GAZ-backed bid for Opel.

Deripaska's Empire

Companies he controls account for nearly 2% of Russia's GDP. Some of his main holdings (stakes in each vary):

* Rusal (world's largest aluminum producer)
* GAZ (cars and trucks)
* VPK (armored military vehicles)
* Aviakor (aircraft)
* Ingosstrakh (insurance)
* Continental Management (pulp and paper)
* Glavstroi (construction)

Source: WSJ research


* Deripaska Accused U.S. of Blackmail

In the past, Russian officials including Mr. Putin repeatedly have raised the visa issue with their U.S. counterparts. Mr. Deripaska also hired top Washington lobbyists in 2003 and 2005, including former Republican Sen. Bob Dole, to plead his case.

Mr. Deripaska's recent visits were arranged outside of regular State Department visa procedures because the U.S. continues to have concerns about Mr. Deripaska's business associations, according to administration officials. Instead, FBI officials arranged for a limited-entry permit from the U.S. Department of Homeland Security, as allowed in special cases related to sensitive matters, officials said.

Another person familiar with the case said there was some opposition from other U.S. agencies to Mr. Deripaska's visits, but that the FBI prevailed. The FBI had previously been at loggerheads with the State Department over Mr. Deripaska; FBI officials have said they were getting interesting information from him, this person said.

Spokesmen for the FBI, DHS and the U.S. Embassy in Moscow declined to comment.

Mr. Deripaska has repeatedly denied any links to organized crime and blamed the U.S. visa ban on a smear campaign by business rivals.

In an interview with the BBC in July, Mr. Deripaska accused American authorities of trying to blackmail him by revoking his visa, which he said undermined investor confidence after the actions became public. "They tried to push me in a corner, maybe believing that at this point I will cooperate with them," he said.

He denied providing sensitive information to the FBI. There are "Russian interests that I would never" betray, he said. A spokesman for Mr. Deripaska described as "inaccurate" the assertions that the billionaire entered the U.S. on special permits arranged by the FBI and that he provided information to FBI investigators during the trips.

"Mr. Deripaska did visit the U.S. twice this year for business meetings," the spokesman said. "Mr. Deripaska has no travel restrictions to any country including the U.S."

A State Department official said Mr. Deripaska doesn't hold a valid U.S. visa.

FBI investigators, as well as authorities in Britain and Spain, have probed Mr. Deripaska's business interests in the past amid allegations of money-laundering from investigators and prosecutors. He has never been charged with a crime in those probes. Mr. Deripaska has met with FBI investigators before. It isn't known what was discussed.

After granting a visa in 2005 to allow Mr. Deripaska to come to the U.S. to talk to investigators, the State Department revoked it a year later when officials raised questions about the truthfulness of his statements during the course of those talks, according to people familiar with the situation.

During the early October trip he met top investment-banking executives including Goldman Chief Executive Lloyd Blankfein, according to people familiar with the meetings.

Neither of this year's trips was announced publicly. A Russian newspaper owned by a former Deripaska lieutenant last month published photos of him with GM executives in Detroit. In a telephone interview, the paper's owner said he took the photos on the August trip.

Questions about Mr. Deripaska's business dealings trace to the 1990s, when he emerged as one of the dominant players in the highly profitable aluminum industry. A rival tycoon, Mikhail Cherney, is suing in London for what he says is a 13% stake in Rusal that Mr. Deripaska owes him. Mr. Deripaska's lawyers have sought to have the suit thrown out. The court of appeals in July rejected their latest attempt.

In court documents, Mr. Deripaska testified that he paid Mr. Cherney $250 million as a payoff for "protection" provided by Mr. Cherney and others. He denies Mr. Cherney is owed any stake in Rusal. Mr. Cherney, who now resides in Israel, rejects Mr. Deripaska's account. He also has produced testimony from other former associates that says Mr. Deripaska maintained friendly ties with several alleged mafia figures long after he had claimed to have severed those ties.

Mr. Deripaska denies the allegations.

[MattSh]

88. Well hell,

he's got ties to organized crime, AKA Goldman Sachs?

I thought that was a positive these days!

.

[Demeter]

98. Maybe If You Have Larceny in Your Heart, It Is

[Demeter]

52. Keep safe!

If there is any spot on the planet safe from the stomping of corporate criminality these days....

[Demeter]

53. Hoping to Post a Series Here From Naked Capitalism

Guest Post: Debate on Deficits

We are going to feature a series of posts this week on the merits of the idea of using Federal deficits to stimulate an economy in severe recession or depression. The first offering is from DoctoRx, who writes at EconBlog Review:

[Demeter]

54. Debate on Deficits

http://www.nakedcapitalism.com/2009/10/guest-post-debat...

Part I. INTRODUCTION

Robert Rubin’s home town of Miami Beach contains any number of hotels and apartment buildings, plus a movie theater that honor the progressive Presidents Roosevelt, especially FDR.

How ironic then that Mr. Rubin would end up as such a key person in the 1999 evisceration (Gramm-Leach-Bliley) of part of Roosevelt’s first major securities law, the Glass-Steagall Act of 1933. How further ironic – and tragic- that this Beach boy would help rebuild much of the entire financial structure of the United States on sand, as if he were still in his hometown, rather than on the granite of his adopted New York.

Economists have been struggling to deal with the crisis caused by the crumbling of much of what he encouraged to be built.

Some now believe that as in FDR’s New Deal, the U. S. should increase its governmental debt even more than is currently in the works. One recent essay by Dr. Edward Harrison was of special interest in that it argued that the private sector of America is so burdened by excessive debt that the government needs to take on more and more debt in response.

While I am sympathetic to much that is in this wide-ranging article, this argument merits comment.

Part II. Discussion of “The recession is over but the depression has just begun”

Dr. Harrison believes that a chronic “depression” state is underway, regardless of any “Fake Recovery” that he believes has begun. He states:

“This is the core of our problem-debt.”

Re the title, while a chronic depression may be underway, who really knows? How would that opinion, even if widely shared, justify major changes in policy which themselves have unpredictable effects for better or for worse, given all the uncertainties?

Is debt really the core of our problem(s)?

Focusing on private debt as the core problem may be analogous to focusing one’s attention on one species of tree within a much larger stand.

How can it be that in a democracy, if the people and their companies are too heavy with debt, the solution can be that their government–which is the people in another form and whose debts are therefore the people’s debts– should take on debt which is additional to the existing debts? (It would be somewhat different if the government borrowed the money to extinguish the debt.) Is this a case of circular reasoning? Dr. Harrison implicitly says no, first saying:

1. The government plays a crucial role here because of the huge private sector indebtedness. In the U.S. and the U.K., the public sector is not nearly as indebted.

The author does not present the data he is using to support this statement. Published estimates of net existing Federal debt plus the present value of future obligations are north of $50 trillion; with current revenues around $2 T, the government has a debt:revenue ratio of 25 or worse. How many companies, individuals, or aggregate private sectors have that indebtedness ratio?

Statistics I have seen suggest that private debt is not as much above 1959 levels as one would think, but that it is Federal debt and unfunded obligations that is vastly worse than 50 years ago. For example, the Fed reports (http://www.federalreserve.gov/releases/z1/Current/z1r-5... ) that the household sector has $67 T of assets and $14 T of liabilities. (I do not believe that the promised Social Security benefits are counted as household assets, and assuming I am correct, either household assets are thereby understated or the Federal liabilities estimated above are overstated.) Personal income is running about $12 T. So in the aggregate, is not the household sector healthier re debt:income (and probably debt:equity) than the Federal government?
I am excluding private business debt from this sort of comparison. Business can take care of itself. The proposal that all of us should indebt ourself either to each other or foreigners because some businesses may have too much debt does not resonate with me.

2. Dr. Harrison then introduces the following argument:

So while, the private sector rebuilds its savings and reduces debt, the public sector must pick up the slack. Why do I say must? It’s because of an accounting identity which comes from the financial sector balances model. Marshall Auerback says it best in a recent post:

Here is Mr. Auerback’s wording in bold:

We’ve said it before and we’ll say it again. As a matter of national accounting, the domestic private sector cannot increase savings unless and until foreign or government sectors increase deficits. Call this the tyranny of double entry bookkeeping: the government’s deficit equals by identity the non-government’s surplus.

So, if the US private sector is to rebuild its balance sheet by spending less than its income, the government will have to spend more than its tax revenue. . .

DoctoRx here.

Mr. Auerback was kind enough to provide references so I could learn about this model. Without making the argument for or against any particular level of government spending or surpluses/deficits, here are comments on the general argument for more government spending, to be followed by a discussion of the model.

1. A model is just that; it is not reality. Reliance on a value-at-risk financial model initially generated at J. P. Morgan helped create the recent/ongoing financial crisis. A more basic identity than the above one is the “Accounting Identity”, which says that profit is what is left after costs are subtracted from gross income. No evidence has been presented that in a $14 T economy, the costs of running the economy exceed $14 T. If in fact the economy is net unprofitable, then kicking the can over to our doppelganger, the Federal Government that the States created, will not change the underlying economics.

2. No model, however intriguing, can change the basic facts that a profitable individual, company, State, or private sector has the potential ability to repay with interest even a heavy debt load out of true ongoing economic profits. Absent proof that the private sector debt load is crushing in the aggregate, and with a bankruptcy system that allows crushing individual debts to be extinguished,why is it both fair and beneficial all of us should borrow more funds through the special purpose vehicle of our government because some unwise or unlucky borrowers and lenders are in a jam.

3. Theory aside, how strong is the empirical evidence, or even better what is the proof that increasing government annual and aggregate deficits are good things to add to the economic mix following large increases in both private sector and governmental debt?

4. Could the government either simply let creditors work things out with borrowers, or use at least moral suasion to encourage the debt-reduction process to move along as fast and fairly as possible, and why would that not be superior to adding more credits and debits to the system?

5. There are all the standard other questions about crowding out private borrowers, worries about excessive governmental debt leading to higher interest rates on that debt, fears of continued/renewed debt monetization, etc. There are also less standard theoretical arguments to the model, such as that is is arbitrary and even political to set up government and the private sector as the two sectors to compare financial flows between. In 1858 in the U. S., for example, perhaps the more relevant comparison was between the East, which sent capital to the developing West, while the Federal government was small and had little or no net debt.

Let us discuss the financial sector balances model in detail. From a post by Rob Parenteau, courtesy of Marshall Auerback:

The financial balance of any sector in the economy is simply income minus outlays, or its equivalent, saving minus investment. A sector may net save or run a financial surplus by spending less than it earns, or it may net deficit spend as it runs a financing deficit by earning less than it spends.

Furthermore, a net saving sector can cover its own outlays and accumulate financial liabilities issued by other sectors, while a deficit spending sector requires external financing to complete its spending plans. At the end of any accounting period, the sum of the sectoral financial balances must net to zero. Sectors in the economy that are net issuing new financial liabilities are matched by sectors willingly owning new financial assets. In macro, fortunately, it all has to add up. This is not only true of the income and expenditure sides of the equation, but also the financing side, which is rarely well integrated into macro analysis. (Emph. added in bold)

So what Mr. Parenteau is explaining is that just as the income-expenditures relationship balances, so must the “financing side”. But what if the private sector simply accumulates equity, which has no debt financing characteristics? No government intervention or new debt issuance has to occur.

In addition, the financing issues may be somewhat more complicated than one might think.

After all, the private sector has to debit its bank account to send the funds to the government in order to buy the debt. All that is really happening is that the private sector had cash, and now the government has the cash with some repayment terms.

Now, if the government had a special relationship with tall aliens with big heads who arrived from another planet To Serve Man, and these aliens divulged to the government and only to the government the ways to make the deserts bloom, eliminate illness, etc., then the government would be able to have a great return on investment from the borrowed funds. But that’s sci-fi.

There is of course direct monetization of the government debt. The prospect of more of that behavior costs taxpayers directly in the form of higher interest rates. The greater the governmental debt issuance, the higher the unnecessary interest rates will go for this and other reasons.

It is thus hard to see how this model, useful though it may be (click HERE for an academic discussion), can change the facts that absent monetization of its debt, the government withdraws the same amount of funds from the private economy that it borrows. Whether this borrowing is “good” or “bad” for the economy depends on what the government does with the money versus what the private sector would have done with it had the government not traded debt for cash.

There are infinite examples of real savings that add to the net worth of the private sector and do not become anyone’s liability. Consider obtaining enough milk to meet the needs of many children from a cow that eats free grass, building a cabin from logs cut from nearby trees, or building a bridge to create an important crossing point of a river.

Please consider these simple examples as fractals with regard to the complex American economy. In these examples, government is irrelevant to private wealth creation, and the private sector may be able to eliminate its debt to zero on its own with its profitable activities.

The private sector can be profitable while the public sector is simultaneously profitable. Or, both can be unprofitable. One can be profitable and the other unprofitable. Double entry bookkeeping is a convention and is not tyrannical. It allows for wealth creation, for equity accumulation.

The world of profit and loss is in concept a single-entry world. Click HERE and scroll down for an example of a service provider’s accounts kept in single- vs. double-entry form (when all the service provider really cares about is profit, which is not even shown) and finally for a summary of the uses double-entry system.

(This discussion has for simplicity ignored imports/exports, because the thinking expressed herein would be just as valid if we were talking not about the U. S. but about the United Countries of the World, where the trade balance of each country would be just as irrelevant as the trade balance of each State of the United States.)

A follow-up post will suggest unconventional approaches to get to a healthier economy as well as a healthier America.

[Demeter]

66. Debate on Deficits: A Reply from Rob Parenteau

http://www.nakedcapitalism.com/2009/10/debate-on-defici...


Rob Parenteau, CFA, sole proprietor of MacroStrategy Edge, editor of the Richebacher Letter, and a research associate with the Levy Economics Institute, responds to DoctoRx’s post, “Debate on Deficits.”

DoctoRx raises a wide swath of excellent questions regarding the correct approach to financial crises, the economic contractions they can induce, and the best way forward. I will focus on some of the key points he introduced with regard to the financial balance approach, since he cites some summary comments of mine on the basic orientation and conclusions of the model, while perhaps Marshall and Ed will chime in later during the week to address the questions he poses for some of their prior posts on the issue of policy orientation.

Early on, DoctoRx asks, is debt the core of the problem? Debt related issues certainly seem to be a recurring contributor to some of the sharpest economic dislocations we witness across time, across regions, and even across economic systems. A lifetime ago, a highly esteemed US economist and entrepreneur named Irving Fisher had to lose his fortune and his house in order to question the general equilibrium approach which still to this day guides mainstream economics. In act born no doubt out of humility and direct experience, he subsequently stepped beyond his general equilibrium conclusions and tried to make sense of the conditions that spawned the Great Depression.

Fisher’s conclusions included the insight that the degree of financial leverage in the private sector matters greatly to the ability of the economy to right itself after any disturbance. His insights are fortunately summarized in a 1933 article, published in the first issue of the journal Econometrica. If you take the time to read it – it is written in plain English, not technical jargon or abstract calculus – and if you consider the parallels with recent events that can be found in his cursory model of what he called a debt deflation dynamic, I suspect you will find yourself agreeing that debt is indeed the core of the problem. If Fisher’s contribution fails to be persuasive, then I would recommend taking a look at the chapter in Hy Minsky’s recently reissued book, John Maynard Keynes that is entitled “Financial Institutions, Financial Instability, and the Pace of Investment”. Either one should do the trick.

To grossly oversimplify, the problem with debt is it sets up fairly fixed future cash flow commitments, of which there is no automatic mechanism guaranteeing that future cash flow generation by the economy will be sufficient to meet. If private sector leverage gets large enough – and Minsky argues there are inherent dynamics that drive the economy in this direction – then the failure to meet contractual commitments can lead to forced asset sales, falling asset prices, and a restricted propensity to invest out of profit income flows and to spend out of wage and salary income flows, all of which can fuel a vicious, self-reinforcing cycle very much like we witnessed from September 2008 to March 2009 before massive policy intervention broke the maelstrom.

DoctoRx suggest that as long as the entire private sector is not bankrupt, and only some units in the economy are debt distressed, then bankruptcy or debt renegotiation for those units is the best response. This sounds eminently sensible, and it is also a central tenet of the Austrian School approach to financial instability. However, many of you may recall there were central bank officials, including the Chairman, as well as many Wall Street executives and analysts, who repeatedly asserted the subprime mortgage crisis was, to put it in their words, “contained”. This assessment was clearly incorrect. There apparently was enough leverage within the financial system itself, within the household sector, and within the nonfinancial business sector, that the “contained” subprime crisis spilled over into the deepest and longest economic contraction since the Great Depression. So perhaps there is some threshold level of indebtedness beneath which bankruptcy and debt renegotiation can be a successful approach, but clearly, we crossed that line, and given the number of episodes of financial instability I have witnessed over the past quarter century of my career, I would have to add we seem to have an uncanny ability to keep crossing that line.

DoctoRx next considers a contradiction in using policy responses to debt deflation dynamics that require higher government debt. He suggests we best think of the government balance sheet as consolidated with the domestic private sector balance sheet, since Treasury debt is an obligation that ultimately must be paid by taxpayers. This of course is a variant of the Ricardian equivalence argument, whereby fiscal stimulus is deemed to be ineffective at inducing economic growth since the households receiving higher income from deficit spending simply save the entire proceeds in expectation of future tax liabilities of equal magnitude. DoctoRx is probing along similar lines when he observes, “after all, the private sector has to debit its bank account to send the funds to the government in order to buy the debt. All that is really happening is that the private sector had cash, and now the government has the cash with some repayment terms.” Fiscal deficits are, in other words, just an asset swap.

This takes us directly into some of the most controversial and powerful observations of what can be called a functional finance view of government deficit spending. We can start from the realization that the household and nonbank business segments of the private sector cannot create cash – that is called counterfeiting. They have essentially 3 ways they can net accumulate cash: 1) by selling assets to or borrowing from banks (bank loans and bank security purchases create deposits); or 2) by the federal government spending more than it receives in tax revenues, such that the private sector receives more cash inflows from government spending than it pays in cash outflows in federal taxes; or 3) by the central bank (the Federal Reserve) expanding its balance sheet by purchasing assets from nonbank firms and households.

In general, the federal government can and does create the cash that the private sector receives when the federal government deficit spends or when the central bank purchases assets from the private sector. For example, when a household receives an unemployment benefit from the federal government and deposits it in its bank account, the Federal Reserve credits that bank account. Neither the Treasury nor the Fed needs to collect the cash from the private sector before hand. Indeed, the private sector can only net accumulate cash if it sells labor time, products, or existing assets to the federal government or the central bank first. What is missing from most depictions is a clear idea of how money is created and destroyed in the economy that we actually inhabit. Until it is understood how the nonbank business and household sector as a whole can get their hands on money, since they cannot create money without risking a jail term for counterfeiting, then much about fiscal policy, monetary policy, and private saving remains mystified or misunderstood.

Next, DoctoRx proposes several examples of how the private sector can accumulate equity, net worth, or real savings that “do not become anyone’s liability”. He cites as possible demonstrations the following: “consider obtaining enough milk to meet the needs of many children from a cow that eats free grass, building a cabin from logs cut from nearby trees, or building a bridge to create an important crossing point of a river”. Here, we are dealing with a primitive economy that appears to have limited private property rights and no money. Most would agree that does not resemble the economy we inhabit.
Typically, modern production requires large scale capital equipment, and the acquisition of that equipment must be financed. Even the proverbial two guys in the garage creating the next Apple have credit cards they are maxing out. Moving to the macro level, assuming for simplicity no foreign trade and no government sector, it is possible to demonstrate the conditions required for business capital investment to be internally financed, which is probably closer to the point he is trying to make. It is quite simple: the household saving rate must be zero, which means we all die of starvation upon retirement.

By way of illustration:

Total income = profits + wages = P + W

Total spending = investment + consumption = I + C

Total income = Total spending

P + W = I + C

P = I + (C – W)

Assuming no payments to households out of profit income, W – C = household saving

P = I only if W – C = 0

But even then, with investment equal to profit, there is a timing problem, since profits only show up after the sales of produced goods and services. In a monetary production economy – that is, one not characterized by barter exchange of products for products, where production takes place only in the expectation of or search for money profits – the business sector has to gets its hands on cash to set production in motion (since sales revenue follows the act of and the costs of production with a lag), and they usually do this by borrowing from a bank, which creates money and debt in the process (loans create deposits, deposits are acceptable means of settlement, or money). So credit and money are deeply intertwined with real production and the accumulation of tangible plant and equipment, at least in the economy we inhabit, rather than the hypothetical Hobbit shire DoctoRx offers up.

Finally, DoctoRx suggests “the private sector can be profitable while the public sector is simultaneously profitable. Or, both can be unprofitable…If in fact the economy is net unprofitable, then kicking the can over to our doppelganger, the Federal Government that the States created, will not change the underlying economics.”

The financial balance approach may shed some light on these three configurations. If in the aggregate, total income must equal total expenditures, and total investment must equal total saving, and we define the financial balance of any sector of the economy as sector income minus sector expenditures, or sector saving minus sector investment (they are algebraically equivalent), then the following must hold true:

Household FB + Business FB + Government FB + Foreign FB = 0

In other words, the sum of the sector financial balance must be zero. Note the foreign financial balance is the negative of the current account or trade balance. When foreigners net save, we are running a trade deficit, spending more on imports than we earn on exports. So yes, the business sector and the government sector can run a financial surplus (what DoctoRx calls being “profitable”) if the household sector is willing to deficit spend, and/or the trade balance is in surplus. Or both the business sector and the government sector can run a financial deficit, if the household sector is net saving and/or the trade balance is in deficit (and hence the foreign sector is net saving). Finally, the business sector will run a net saving position (or will be net profitable, in DoctoRx’s terms) when the government deficit spends as long as household net saving or the trade deficit do not increase as much as the government deficit.

There are obviously many permutations that we could investigate on end. The point is to think coherently and consistently about these sector flow imbalances, to try to understand what combinations are indeed compatible and possible, and then try to find ways to support sustainable growth trajectories. In the period following a financial crisis, it is not unusual for the private sector to seek a net saving position. For the private sector to achieve its desired financial surplus, the fiscal balance must fall and/or the trade balance increase in an offsetting fashion, or income will fall, and debt deflation dynamics will take hold. Without the financial balance framework, it is difficult to see such things very clearly, but even Paul Krugman is starting to get it.

So keep going DoctoRx – you are asking some very important questions. Finance matters – especially debt and leverage in general – to real economic outcomes. Money and finance are not neutral with respect to real economic outcomes, nor is money simply a veil for real exchange, as is taught in mainstream economics and as is held as holy truth by contemporary central bankers. Read a little Fisher or a little Minsky, and then reflect on recent events. Did we destroy some productive resources, lose some technical knowledge, or otherwise experience an exogenous productivity shock to drop into the deepest recession of the post WWII period, or was the drop in real economic activity in no small part a result of a highly leveraged private financial and nonfinancial sector encountering some very drastic financial conditions as fraudulent loans and fraudulent debt ratings were exposed? Does the government need the private sector’s money to “fund” its expenditures when a) the nonbank private sector cannot create money, and b) the government creates the money the private sector accumulates to pay taxes and buy bonds? Under what conditions can the business sector as a whole accumulate tangible capital without issuing financial liabilities, and are those conditions we observe in the real world around us?

Finally, how can we think coherently and consistently about sector financial balances, and what does an analysis of these sector flow imbalances reveal to us in regard to sustainable growth trajectories? These are all timely and relevant questions that we all could stand to explore more deeply and openly if we are going to find a sensible way out of the recent mess without yielding to the default solution of simply creating more asset bubbles, which unfortunately appears to be the preferred path at the moment.

[AdHocSolver]

83. To summarize: If you constantly spend more than your income, you will eventually go broke.

Huge trade deficits increase debt. If you borrow in order to spend more than you earn, and you reach a tipping point from which you can never earn enough to repay the debt, then you go bankrupt.

The idea of giving tax credits to companies to hire people to "create jobs" is totally asinine. The government is borrowing money to provide the tax breaks, and the amount of income tax generated by the new jobs won't even cover the extra debt created to provide the tax breaks. This is a plan created by complete idiots.

Subsidizing purchases with tax incentives is equally stupid when most of the money spent is used to buy imports. The government is borrowing more money that just goes overseas.

The ONLY sane way to save the U.S. economy is to get rid of NAFTA, cancel MFN status to China and just about everyone else, get rid of the WTO, the IMF, the World Bank, and tax imports from countries that use wage slave labor that competes with U.S workers, and which provides huge profits to these importers at America's expense.

Bring jobs back to the U.S. and you solve most of our economic problems. Americans will earn income to pay their bills, goverments will collect income taxes, and corporate taxes now evaded by offshoring jobs, so that we can maintain infrastructure, provide education and health care for all, and fund the regulatory agencies that are supposed to maintain the environment and our food supply.

Money is a circulation medium like the coolant in an automaobile. Our economy has a big hole in the radiator hose (all our money is fleeing to Asia and the oil states), and we keep borrowing money to continually buy more antifreeze to keep the engine from being destroyed. Those foreign lenders are deciding that we are looking more and more like bad risks, and are going to cut their losses and cease lending to us. That is when the current depression becomes the Great Depression II.

What I have written in this post describes most of what anyone needs to know to understand our economic problem and its solution. Most of the rest of what is published is obfuscation or pure drivel.

[Tansy_Gold]

110. I vote for pure drivel, aka utter bull shit

[Hugin]

55. Kick or Treat!

[Demeter]

61. All I ever Seem to Get are the Kicks

That's okay for the thread, however, my posterior could use a break...

[Hugin]

78. Hey, I've got a suggestion for a future WEE theme.

Let's take a VACATION (ala The Vacation series of movies.)

There's some great lines in those!

[Demeter]

57. Inflation in China at 15%?

http://www.nakedcapitalism.com/2009/10/inflation-in-chi...


This tidbit, from a report on impressions of conditions in China, via a steel buyer who has been making the rounds in Asia (hat tip reader Michael) is more significant than it appears. High inflation levels in China (and the powers that be seem to get worried when it goes over 11%-12%) is consistent with the authorities having started to ease up on stimulus, particularly pushing banks to lend.

And high interest rates feed stock market speculation. Interest rates on deposits are low, so the routes for investors to preserve cash are stockpiling commodities (we’ve read various reports of both businesses and speculators going this route) and the stock market. But stocks often backfire as a store of value when too many people latch on to the same strategy.

I was at presentation a couple of years ago at the Asia Society on China, and one of the panelists observed that if you wanted to design a system guaranteed to produce hyperinflation, it would be hard to do a better job. The global financial crisis has provided a wee bit of a respite on that front for China; we’ll see, when world growth resumes, if this view proves correct.

From Steel Market Update:

Construction appears to be booming around Shanghai. A world expo will be held here in May 2010 and there is much construction ahead of the Expo. Funny thing is you see tons of cranes but very little actual work except on the government projects. A high speed train is being built between Shanghai and Beijing. Everything appears very prosperous and the traffic is almost as bad as India….Mill yesterday said that pricing within China has bottomed and is beginning to rebound. Judging by Shanghai this is believable but I don’t know how far this extends.

I have been told that times are really tough in Taiwan….

I have been to some rerollers and have not seen what I would consider excess inventory and the lines have been running. However, there seems to me that there is a similar feeling as the summer of 2008 – everyone feeling that the good times would last forever.

As usual the drivers are the best source of information. The average person in Shanghai area earns equivalent of $500 US per month. The average high rise apt (400 sq ft) is US $100K. So where does the average person live?

There has been a lot in local papers about the govt pulling back from stimulation because of concern about a too hot economy. I am told actual inflation is at 15%. The economy is not exporting.

[Demeter]

59. Twelve Reasons For A Job Loss Recovery-- Mike "Mish" Shedlock

http://globaleconomicanalysis.blogspot.com/2009/10/twel...


July 14: Bernanke Sees Chance of Jobless Recovery

Given that the Fed's first mission is to delay, confuse, hope, and otherwise attempt to buy time while engaging in wishful thinking along the way, that Bernanke is willing to admit this may be a jobless recovery is a sign that things will likely be at least that bad. In other words, prepare for a job loss recovery.

August 3: Thoughts On The "Recoveryless Recovery"

Most know that I am in favor of an "L shaped recession", but that definition includes a "WW" or even a "WWW" where the economy slips in and out of recession for a decade, as happened in Japan.

August 6: Dismal Unemployment Situation In Chart Form

Job Loss Recovery



The last three recessions are unlike the eight preceding recessions. For numerous reasons described below we are heading for another job loss recovery.

Job Loss Recovery Detail



click on chart AT LINK BELOW for sharper image

If the pattern holds, unemployment will rise until 2011 or beyond.

So while everyone is tooting horns and cheering the end of the end of the recession before it has even ended, those graphs and comments from Bernanke himself will