Hometown: Ann Arbor, Michigan
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Hometown: Ann Arbor, Michigan
Home country: USA
Member since: Thu Sep 25, 2003, 02:04 PM
Number of posts: 71,242
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The Chinese development firm that snagged three downtown Detroit properties at auction last year said it is moving forward with plans to renovate the 1920s-era buildings as it eyes future purchases in the city.
“We don’t hold buildings. We bought them, and we’re going to develop them,” said Ken Creighton, a local representative for the DDI Group, also known as the Shanghai-based Dongdu International Group, which is making its first foray in the U.S.
DDI paid $16.4 million for the three buildings it won in online auctions last fall:
DETAILS AT LINK
Creighton said his firm is actively looking at buying additional properties in the city, although he can’t yet offer specifics.
“We are still in acquisition mode,” he said. “We intend to invest even more money into Detroit.”
Posted by Demeter | Thu Mar 13, 2014, 09:39 PM (0 replies)
Is Detroit the canary in the coal mine for the 99 percent? When the city of Detroit filed for Chapter 9 bankruptcy in July 2013, America sucked in a collective gasp. This was the largest municipal bankruptcy filing in U.S. history by the amount of debt ($18–20 billion), and Detroit was the largest city ever to officially go bust...A few months before the bankruptcy, the state of Michigan appointed an emergency manager, Kevyn Orr, to sort things out in Motor City. Orr was given extraordinary powers to rewrite contracts and liquidate some of the city’s most valuable assets. The burning question: Who would be responsible for the enormous debt? Soon enough it became clear that the folks who would be asked to take the hit were not those who created the problems. Just as in so many other parts of the world in the wake of the 2007-'08 financial meltdown, innocent people who did nothing but get up every day and go to work would be asked to pay the bill. Last week, Orr blasted retirees for resisting his plan to drastically cut their pensions — 26 percent for general retirees and 6 percent for police and fire, and even more, 34 percent and 10 percent, respectively, if they do not agree quickly....
We Are All Detroit
...Robert Johnson, executive director of the Institute of New Economic Thinking, is an economist who has worked closely with the likes of Joseph Stiglitz and has served in Washington as chief economist of the U.S. Senate Banking Committee under William Proxmire. Johnson, who was my colleague when I served as Media Fellow at the Roosevelt Institute from 2009-2011, is an economist who believes that his work is about more than abstract mathematical models. It’s about human experience — the vivid hopes and challenges of ordinary people. When I asked Johnson how he came to think that way, a wistful smile crosses his lips: “I grew up in Detroit.” I sat down with Johnson in his New York City home, where his voice thickened with sorrow as he described the pain of looking on as the thriving city of his boyhood sank into an apocalyptic wasteland of crumbling buildings and bewildered people who mostly played by the rules but saw their lives "compressed and crushed." He recalled for me the Detroit of the 1960s, a great engine of the American economy and the cradle of many of the country’s most illustrious political figures, like Representative John Dingell (whose district started out in Detroit and gradually moved to the western suburbs through redistricting). It was also a cauldron in which the great currents of America’s deepest conflict swirled: the deadly race riots of 1967, the labor wrangling of the UAW and the Teamsters, the turmoil of the Vietnam War, and the drugs that flooded the city in the wake of deindustrialization....Johnson reflects upon the work of his friend, John A. Powell of Berkeley, a scholar of American culture who explores how we perceive some people and communities as “others.” Many things can be the basis of otherness, like race, or economic status, or gender. When we decide something is other, we absolve ourselves from having to care about it. Detroit, as Johnson explains, has become America’s urban other. As a city is liquidated for the creditors, the victims are blamed, the people become traumatized, and the trust in American institutions breaks down. Johnson’s work has shown that far from being a necessity, the decision to cut the pensions of teachers and other public workers is a choice — one that will hurt both them and future generations. As he talks about Detroit, Johnson eshews the antiseptic terms common among economists, pouring out visceral words like “pain,” “crushing” and “gut-wrenching” to describe what’s at stake for all of us.
The Real Pension Story
At a recent conference on pensions convened by the Roosevelt Institute, Johnson, along with Nobel laureate Joseph Stiglitz, political scientist Thomas Ferguson, economists Lisa Cook, Dean Baker, and others gathered to explore the meaning of America’s so-called pension crisis and its alarming connection to the country’s political underbelly. To understand this story, first you have to understand the truth of what is happening with pensions across America. Media accounts, often influenced by the campaigns of well-funded organizations and individuals like billionaire anti-pension activist John Arnold, have too often promoted the false image of a widespread crisis in which overpaid public workers have been promised unaffordable and bloated pensions. That’s far from reality, Johnson’s work shows. In a new paper that will serve as an antidote to a distorted national narrative, he makes several facts clear:
1. Pension underfunding is not widespread. Despite a devastating Wall Street-driven financial crisis which decimated sales, property and state income tax receipts and which led to big cuts in federal aid, many American cities and states have managed to keep their pensions reasonably healthy. In fact, gross underfunding is concentrated in certain states, such as Illinois and Kentucky, and in cities like Chicago. These areas seem to have a few things in common, such as poor governance and unreliable public officials who have mishandled funding. Outright corruption is also common. Detroit’s government would certainly win no prizes for responsible governance, and its pension funds’ accounting practices were less than perfect, but as Johnson reports, as of 2012, the “funding ratios” (actuarial assets divided actuarial liabilities) of the city’s two big pensions funds stood at 99.9% and 87.1 respectively. That's hardly the emergency many media accounts portray.
2. State and local employees are not overcompensated. Johnson explains that the widespread perception that public workers are overpaid is highly exaggerated. Citing studies by economist Alicia Munnell and others, his paper shows that at the lower levels, overall rates of pay vary little between workers in the public and private sectors. At the higher levels, public workers actually make less than their public sector counterparts. Cases of overcompensation exist, but they are not the norm and don’t significantly contribute to underfunding problems. Overcompensation clearly did not cause the pension crisis in places like Detroit, where levels of staffing and pay per employee are well under large Midwestern cities like Cleveland and St. Louis.
3. Instead, Detroit’s finances were done in by three developments that have zero connection with city employees.
(a) First, in 1998, a Republican governor pressured the city to cut income taxes in exchange for $333.9 million annually in increased state revenue sharing for nine years. In 2002, after Detroit had cut its tax rates, the state partially reneged, over time opening a huge cumulative hole in the city’s budget.
(b)In 2010 Detroit lost $24 million more a year when its share of the state’s sales tax revenue fell as a result of the 2010 Census. In fiscal year 2012, the state administered a final blow: the state legislature chopped an additional $43 million in revenue sharing to the city. As Johnson summarizes, “Between 2010 and 2013 over 47.8% of the total decline in city revenue was a result of the decline in state transfers to the city of Detroit. When Detroit went over a cliff into bankruptcy the state could rightly be accused of providing a major shove.”
4. Underfunding is linked to unrealistic expectations of returns. One of the key reasons pension problems have developed has to do with how future returns on funds are assessed. Accounting tricks can get you the results you want, and political pressures often cause pension stewards to play around with the numbers. In technical terms, it matters whether you use something called a high discount rate or a low discount rate to determine returns. As Joseph Stiglitz has pointed out, if you decide to care about something in the future, you make plans assuming that returns will be low, and you use a low discount rate. But if you decide you don’t care about something, you use a high discount rate, which allows you to project high future returns and lets you off the hook for investing in the fund right now. Pension stewards have often based their projections on periods of unusually high stock market returns, and have therefore avoided making the payments necessary to keep funds healthy.
5. Chasing big yield leads to big problems. Where pensions are in trouble, stewards often try the economic equivalent of a Hail Mary pass: They pour large sums into alternative investments in risky assets. Investments of this sort—handled by hedge funds, venture capital, and private equity—have risen sharply since the 1980s. They now constitute 20 percent of public pension fund allocations, despite the fact that fees are high and returns are often subpar — even disastrous in 2008 and after. The huge fees tempt the firms pushing these investments to create all kinds of questionable incentives for pension stewards...Pension funds rely heavily on a vast corps of advisers, whose advice has been shown in academic studies to add no value at all. Considering, as Dean Baker and Thomas Ferguson commented, that many city and state pensioners do not receive Social Security, it is scandalous that pension managers chase high yields through high-risk assets as opposed to prudent investment in index funds, which have low fees or no fees at all.
6. Not surprisingly, another disastrous blow to Detroit’s finances came with a ridiculous derivatives deal connected with a special financing offer. As Johnson explains,
“The Detroit facts are really quite simple. The revenue losses have resulted from declines in real estate values, loss of income and loss of sales volume attributable to the crisis emanating from Wall Street after 2008. A drastic cut in state revenue sharing from the state of Michigan to Detroit in 2012 occurred on the back of previous cutbacks from the state to the city over nine years. The coup de grace was the derivatives transaction that led to diminished 'other revenues' from the Detroit Water and Sewage Department and a swaps termination penalty that led to marked increases in cash flow demands on the city of Detroit."
7. Big money politics and corruption are major culprits. As Thomas Ferguson has noted, pension underfunding and corruption go hand in hand: areas which have seen pension crises tend to have high rates of corruption, as measured by such indicators as the number of public officials who wind up in prison. Pay-to-play schemes are rampant, and reports of bribery, such as those revealed in Detroit, are common. Even in the absence of corruption, big money politics has a major influence over how pensions are managed and allocated — a major reason why campaign finance reform is urgent. As Ferguson observes, local and state politicians are relying more and more on Wall Street and other anti-pension business interests.
8. Cutting pensions is a choice, not a necessity. As Johnson and others have noted, there seems to be a discrepancy in how the sanctity of contracts is viewed in America. When it comes to the bonuses of AIG executives after the financial crisis, we were told by experts and pundits that contracts must not be broken, and that taxpayers should foot the bill to avoid breaking this fundamental trust. But in Detroit or Chicago, we are told that the contracts of pensioners are not really worth the paper they're written on. The difference? AIG executives are powerful and well-connected. Pensioners are not....There are resources to meet pension obligations, if only politicians could make decisions in the interests of ordinary people, rather than the 1 percent who do not wish to see their taxes raised. Johnson further notes that where pension shortfalls exist, they are far smaller than giveaways to corporations.
9. Decisions made now have far-reaching implications. Johnson finds that among the key themes in the pension discussion are what our choices say about the dysfunction in America politics and the kind of society we are creating for the future. High-quality workers are attracted to decent-paying jobs and promises they can rely upon. When you cut the pensions of teachers, for example, you can’t attract the highly educated workers needed to fill these jobs, and the quality of education suffers. This means that it’s not just public workers who suffer when their pensions are cut, but the children who rely on schools and the businesses that rely on a well-maintained, thriving city. It is also likely, Johnson warns, that overall compensation in the private sector will be driven down, and inequality exacerbated if public pensions are chopped. All of these factors, he points out, only serve to increase the instability of the overall economy and society. Stiglitz added an important consideration: that once any major pension system is revised shotgun-style, employees everywhere will doubt the value of their contracts and over time leave in droves. How does that bode for America's future?
Detroit is a city being looted and stripped bare. If we decide that those who are weak and vulnerable will be sacrificed to protect the wealthy and the powerful, then no one is safe. When promises are made, but then broken, a “train wreck is set up,” as Johnson puts it, and emergency manager Kevyn Orr appears to have his foot on the gas. Johnson ends his pension study with a lyric from the great jazz artist Gil Scott-Heron, who wrote a haunting song about a partial nuclear meltdown that occurred in Detroit in 1966:
If we don’t do the right thing in Detroit, Johnson warns, we might just lose America this time.
Lynn Parramore is an AlterNet senior editor. She is cofounder of Recessionwire, founding editor of New Deal 2.0, and author of "Reading the Sphinx: Ancient Egypt in Nineteenth-Century Literary Culture." She received her Ph.D. in English and cultural theory from NYU. She is the director of AlterNet's New Economic Dialogue Project. Follow her on Twitter @LynnParramore.
KEVIN ORR IS GOV. SNYDER'S HIT MAN. CURSES UPON THEM BOTH!
Posted by Demeter | Thu Mar 13, 2014, 09:28 PM (2 replies)
Since most of us don't need that fake extra hour of daylight to plow the fields and bring home the cows after supper, time theft is exactly what the annual abomination of Daylight Saving Time is. No benefits are accruing to those being ordered to save. To the contrary: the first Monday of DST has been scientifically proven to be the most dangerous day of the entire year. Chances are that you might not even live to see another night because of all that pretend extra sunshine being inflicted upon you. Heart attacks and fatal car accidents and workplace mishaps reach their annual peak Monday, the intensity decreasing slightly for the rest of the week. Night-owls suffer more than day-owls. Outbreaks of workplace cyber-loafing are not uncommon.
Calling something 'saving' is SOP to make you feel resigned to being abused without your permission. (see: Republicans' "health savings accounts" to replace Medicare, and Obama's MyRa "retirement savings accounts" to maybe someday replace Social Security.)
The Turn of the Screw Clocks is tantamount to mandated sleep deprivation in an already sleep-deprived society. Sleep deprivation has, after all, been deemed torture by the Geneva Convention. Hyperbolic to call Daylight Saving Time torture, you say? Well, not so much, when studies show that even occasional or "minor" sleep deprivation has a cumulative effect, permanently altering brain chemistry and damaging health. You cannot catch up on lost sleep. For some, that one mandated lost hour could be the difference between life and death.
Sleep deprivation has been blamed for the Chernobyl meltdown, the Exxon-Valdez oil spill, and the Challenger disaster. Most recently, the engineer of the ill-fated Metro-North train that killed four people in New York reported "zoning out" as a result of his work schedule having recently shifted from late night to early morning. Factor in our chronic lack of sleep with the exhaustion pinnacle that is Nighttime Stealing Week, and you've got a recipe for a whole bunch of tragedies....
I DIDN'T WRITE THIS, BUT I COULD HAVE...
Posted by Demeter | Wed Mar 12, 2014, 08:01 AM (5 replies)
President Barack Obama's 2015 budget proposal has targeted one of the best retirement income planning tools on advisers' shelves: Social Security-claiming strategies.
Buried on the 150th page of the 214 page, $3.9 trillion budget for 2015, which was released on Tuesday, is a sentence spelling out the plan to prevent duplicative or excessive benefit payments (!) through the disability insurance program and Social Security. “In addition, the budget proposes to eliminate aggressive Social Security-claiming strategies, which allow upper-income beneficiaries to manipulate the timing of collection of Social Security benefits in order to maximize delayed retirement credits,” the budget reads.
The proposal, if it could be passed in the present divided Congress, could throw a monkey wrench at advisers who are crafting retirement income plans for their clients. Essentially, Social Security provides retirees with a guaranteed stream of income for the remainder of their lives without any of the complexity or hassle of an annuity. It's also income that can grow if the client is able to delay receipt of those Social Security benefits. If you claim at 62, you get 75% of your benefits. If you wait until the retirement age of 66, you collect full benefits. By delaying until 70, the income stream grows by 8% per year for the four years after 66 — a rate that advisers won't be able to duplicate with any product.
Lo and behold, there's a growing demand for tactics on maximizing those Social Security income streams. For instance, there's the “claim now and claim more later” strategy: The older spouse takes advantage of the delayed retirement credits that boost his income stream by waiting until 70 to claim Social Security. His wife, who is a few years younger, then claims a spousal benefit for several years until she reaches age 70. At that point, the wife then claims the income stream she is entitled to, which will be based on her own work history.
The Social Security Administration appears to have become hip to these strategies and their growing popularity. The administration already has eliminated a provision that allowed “do-overs,” where someone would claim at 62 and receive the income. At age 70, that person could change their mind, repay the benefits received without interest and take on the higher income stream they would receive at age 70 — as if they hadn't filed the previous claim. The phrasing of the provision in the budget is vague enough that there is no clear procedure by which the Social Security Administration would eliminate these claiming strategies. As a result, policy experts differ on whether the administration could use institute an internal rule change or if it would have to go through Congress. The administration used an internal rule change to curtail use of “do-over” strategies, and it could do the same for what it deems aggressive claiming strategies, noted Andrew G. Biggs, a resident scholar at the American Enterprise Institute and former principal deputy commissioner at the Social Security Administration.
“I don’t think they need Congress to do this,” he said.
On the other hand, Jason Fichtner, a senior research fellow at the Mercatus Center at George Mason University and a former deputy commissioner for Social Security, believes the proposal is specifically targeting spousal claiming strategies. Any change to the formula for spousal benefits would require congressional approval. “I’m inferring they’re going after the spousal benefit, and they can do that through a legislative change,” said Mr. Fichtner...From a planning perspective, it's still up in the air whether this provision becomes a reality or how it'll be executed. But in the meantime, Mr. Tomlinson believes that single-premium immediate annuities can step in if clients become unable to use their claiming strategies.
Posted by Demeter | Tue Mar 11, 2014, 07:28 AM (1 replies)
A Healthy Economy Requires Fewer People Working on Wall Street, Making Much Less Money / Les Leopold
“I wish someone would give me one shred of neutral evidence that financial innovation has led to economic growth — one shred of evidence.” —Paul Volker (2009)
All of us suspect the obvious — that Wall Street not only is too big to fail, but also just too damn big. But where's our evidence? It's one thing to direct our anger at financial elites and the top one percent. It's quite another to make a factual case that Wall Street, indeed, is much too big, and therefore should be radically reduced in size. So here's some data.
1. Explosion in Financial Sector Incomes But No Rise in Economic Growth
Check out this chart: Between WWII and 1980, the wages of financial workers were the same as those who worked in non-financial industries. Then the two lines split apart with Wall Street extracting an enormous premium. Do the financiers deserve it? And how would we know if they do or don't? The answer should depend on how much value the financial sector, in fact, produces for our economy. Is there a correlation between the explosion in Wall Street incomes and economic growth?
Yes, there is, but it's negative. As Wall Street wages rise, economic growth slows down.
1950s (1950-1959): 4.17 percent
1960s (1960-1969): 4.44 percent
1970s (1970-1979): 3.26 percent
1980s (1980-1989): 3.05 percent
1990s (1990-1999): 3.2 percent
2000s (2000-2009): 1.82 percent
2: The Decline of Workers' Share of the Economy
Wall Street apologists argue that financiers are responsible for boosting U.S. productivity and creating new, decent-paying jobs. Well, we're still waiting. In fact, in the decade following the early 1990s, labor's share of our national income actually declined by 7.2 percent. Why? The usual suspects include globalization, technology and too much government spending on the social safety net. You know the arguments: we are falling behind the global competition; we are losing our jobs to new technology; government "entitlements" are crippling the economy; and so on.
The International Labor Organization (ILO) produced an eye-popping study concluding that the biggest factor in the decline in workers' share of income is financialization — that it accounts for almost 50 percent of the decline in labor's share (from ILO, Figure 38).
3. Wall Street Costs Too Much
A compelling measure of financial bloat can be found in an excellent paper by economists Gerald Epstein and James Crotty. They look at the "financing gap" which "measures the extent to which different sectors of the economy depend on external finance as opposed to financing with internal savings."
So for every dollar consumers and businesses borrow, how much does Wall Street charge? More and more, which is the exact opposite of what is supposed to happen in capitalism. The rise of advanced technologies, global markets and more creative work organization should lead to a drop in price, not an increase. But not on Wall Street. If we compare the booming 1960s with the last decade, we see that Wall Street is now charging four times more for its services...
Posted by Demeter | Mon Mar 10, 2014, 06:28 AM (1 replies)
This is a snowdrop. I have a clump of them in the sunniest, warmest spot in what I can call my own garden in this condo association. I have been waiting 2 months already, and I'm probably going to have to wait another for the snowdrops to return to Capitstrano....I mean, Ann Arbor.
Snow drops will force their way through the last inch of snow to reach the light, but they cannot manage the 8-12 inches of ice that cover them right now. I looked. I wait.
There are lots of people waiting for Spring, around here. Or jobs, or the final collapse of Western civilization. Everything is in suspended animation, a state of being once described by Samuel Becket.
Waiting for Godot (/ˈɡɒdoʊ/ GOD-oh) is a play by Samuel Beckett, in which two characters, Vladimir and Estragon, wait endlessly and in vain for the arrival of someone named Godot. Godot's absence, as well as numerous other aspects of the play, have led to many different interpretations since the play's 1953 premiere. Some categorize this as an absurdist play.
Waiting for Godot is Beckett's translation of his own original French version, En attendant Godot, and is subtitled (in English only) "a tragicomedy in two acts". It was voted "the most significant English language play of the 20th century". The original French text was composed between 9 October 1948 and 29 January 1949. The première was on 5 January 1953 in the Théâtre de Babylone, Paris. The production was directed by Roger Blin, who also played the role of Pozzo.
Posted by Demeter | Fri Mar 7, 2014, 05:58 PM (68 replies)
“Repo has a flaw: It is vulnerable to panic, that is, ‘depositors’ may ‘withdraw’ their money at any time, forcing the system into massive deleveraging. We saw this over and over again with demand deposits in all of U.S. history prior to deposit insurance. This problem has not been addressed by the Dodd-Frank legislation. So, it could happen again.”
–Gary B. Gorton, Professor of Management and Finance, Yale School of Management (lifted from Repowatch)
October 23, 2013 "Information Clearing House - Subprime mortgages did not cause the financial crisis, nor did the housing bubble or Lehman Brothers. The financial crisis originated in a corner of the shadow banking system called the repo market. That’s where the bank run occurred that froze the secondary market, sent prices on mortgage-backed assets plunging, and pushed the financial system into a death spiral. In the Great Crash of 2008, repo was ground zero, the epicenter of the global catastrophe. As analyst David Weidner noted in the Wall Street Journal, “The repo market wasn’t just a part of the meltdown. It was the meltdown.”
Regrettably, the Federal Reserve’s nontraditional monetary policies (ZIRP and QE) have succeeded in restoring the repo market to it’s precrisis level of activity, but without implementing any of the changes that would have made the system safer. Repo is as vulnerable and crisis-prone today as it was when the French bank PNB Paribas stopped redemptions in its off-balance sheet operations in 2007 kicking off the tumultuous bank run that would eventually implode the entire system and push the economy into the deepest slump since the Great Depression. By failing to rein in repo, the Fed has ensured that financial crises will be a regular feature in the future occurring every 15 or 20 years as was the case before banks were more strictly regulated and government backstops were put in place. Repo returns us to Wild West “anything goes” banking.
Why would the Fed be so reckless and pave the way for another disaster? We’ll get to that in a minute, but first, let’s give a brief explanation of repo and how the system works.
Repo is short for repurchase agreement. The repo market is where primary dealers sell securities with an agreement for the seller to buy back the securities at a later date. This sounds more complicated than it is. What’s really going on is the seller (primary dealers) are getting short-term loans from money market funds, securities firms, banks etc in order to maintain a position in securities in which they’re suppose to make markets. So, repo is like a loan that’s secured with collateral. (ie–the securities) It is a “funding mechanism”.
What touched off the Crash of 2008, was the discovery that the collateral that was being used for repo funding was “toxic”, that is, the securities were not Triple A after all, but subprime mortgage-backed gunk that would only fetch pennies on the dollar. So, when PNB Paribas stopped redemptions in its off-balance sheet operations on August 9, 2007, the rout began. Cash-heavy investors (like money markets) turned off the lending spigot, which reduced trillions of dollars of MBS to junk-status, precipitated massive fire sales of distressed assets that were dumped on the market pushing prices further and further down wiping out trillions in equity and reducing the financial system to a smoldering pile of rubble. That’s why the Fed stepped in, backstopped the system with explicit guarantees for both regulated and unregulated financial institutions and set about to reflate financial asset prices to their precrisis highs.
Newly appointed Fed chairman Janet Yellen summarized what happened in the panic in a speech she gave earlier this year. She said:
“The trigger for the acute phase of the financial crisis was the rapid unwinding of large amounts of short-term wholesale funding that had been made available to highly leveraged and/or maturity-transforming financial firms.”
In other words, the crisis began in repo. Unfortunately, Wall Street has fended off all attempts to fix the system, because repo is a particularly lucrative area of activity. And we are talking serious money here, too. Tri-party repo alone–which is a small subset of the larger repo market–represents “about $1.6 trillion in outstanding repos daily.” That means that the prospect of a big dealer dumping his portfolio of securities on the market at a moment’s notice igniting another panic, is never far away.
Why do banks borrow in the unregulated, shadow system instead of conducting their business in the light of day where regulators can check the quality of the underlying collateral, oversee the various transactions on public trading platforms, and make sure that capital requirements are maintained? It’s because the banks want to deploy all their capital, leverage up to their eyeballs and play fast-and-loose with the rules. Here’s what the New York Fed has to say on the topic:
“One clear motivation for intermediation outside of the traditional banking system is for private actors to evade regulation and taxes. The academic literature documents that motivation explains part of the growth and collapse of shadow banking over the past decade…
Regulation typically forces private actors to do something which they would otherwise not do: pay taxes to the official sector, disclose additional information to investors, or hold more capital against financial exposures. Financial activity which has been re-structured to avoid taxes, disclosure, and/or capital requirements, is referred to as arbitrage activity.” (“Shadow Bank Monitoring“, Federal Reserve Bank of New York Staff Reports, September, 2013)
In other words, the banks are conducting their operations in the shadows because it’s cheaper. That’s what this is all about. Here’s more from the same report:
“While the fundamental reason for commercial bank runs is the sequential servicing constraint, for shadow banks the effective constraint is the presence of fire sale externalities. In a run, shadow banking entities have to sell assets at a discount, which depresses market pricing. This provides incentives to withdraw funding—before other shadow banking depositors arrive.”
...The point is, had the system been adequately regulated with the appropriate safeguards in place, there would have been no fire sales, no panic, and no crisis. Regulators would have made sure that the underlying collateral was legit, that is, they would have made sure that the subprime borrowers were creditworthy and able to repay their loans. They would have made sure that repo borrowers (the banks) had sufficient capital to meet redemptions if problems arose. And regulators would have limited excessive leveraging of the securitized assets. Regulation works. It provides safety, stability, and security as opposed to panic, bankruptcy and severe recession which is the scenario that Wall Street’s profiteers seem to prefer....
MORE MISERY AHEAD--PREDICTIONS AT LINK
Mike Whitney lives in Washington state. He is a contributor to Hopeless: Barack Obama and the Politics of Illusion (AK Press). Hopeless is also available in a Kindle edition. He can be reached at firstname.lastname@example.org.
Posted by Demeter | Wed Mar 5, 2014, 07:01 AM (0 replies)
The year 2014 could be shaping up as the year that the chickens come home to roost.
Americans, even well-informed ones, don’t know all of the mistakes made by neoconized and corrupted Washington in the past two decades. However, enough is known to see that the US has lost economic and political power, and that the loss is irreversible.
The economic cost of this lost will be born by what remains of the middle class and the increasingly poverty-stricken lower class. The one percent will have offshore gold holdings and large sums of money in foreign currencies and other foreign assets to see them through.
In the political arena, the collapse of the Soviet Union presented Washington with the grand opportunity to reallocate the Pentagon budget to other uses. Part of the reduction could have been returned to taxpayers for their own use. Another part could have been used to improve worn out infrastructure. And another part could have been used to repair and improve the social safety net, thus insuring domestic tranquility. A final, but perhaps most important part, could have been used to begin repaying the Treasury IOUs in the Social Security Trust Fund from which Washington has borrowed and spent $2 trillion, leaving non-marketable IOUs in the place of the Social Security payroll tax revenues that Washington raided in order to fund its wars and current operations.
Instead, influenced by neoconservative warmongers who advocated America using its “sole superpower” status to establish hegemony over the world, Washington let hubris and arrogance run away with it. The consequence was that Washington destroyed its soft power with lies and war crimes, only to find that its military power was insufficient to support its occupation of Iraq, its conquest of Afghanistan, and its financial imperialism.
Now seen universally as a lawless warmonger and a nuisance, Washington’s soft power has been squandered. With its influence on the wane, Washington has become more of a bully. In response, the rest of the world is isolating Washington....
THIS IS THE REAL STATE OF THE UNION....READ IT CAREFULLY, AND WEEP
Posted by Demeter | Wed Mar 5, 2014, 06:51 AM (1 replies)
Bosses hate a salt—a pro-union worker who’s taken a job with the intent to organize.
A few unions are recruiting salts these days, usually young people who apply for low-wage jobs in retail, hospitality, or logistics. But unions are reluctant to talk about salting, not wanting to alert management to look out for suspicious characters. In this article every worker will use a pseudonym and their situations will be disguised.
Former salt Kendra Baker says salting offers something the labor movement badly needs: a “space for young people to develop skills as workplace organizers.” The 2011 uprising in Wisconsin and the Occupy movement created “a lot of curiosity and enthusiasm about the labor movement,” she said.
Now coordinating a salting program, she stresses that salting ensures a union drive will have “a workplace-organizing component, to maintain a level of militancy on the shop floor and make sure the campaign is putting the workers first. Workers should be taking a lead on the messaging and on the goals and planning the actions.”
Posted by Demeter | Mon Mar 3, 2014, 03:55 AM (2 replies)