Economy
Related: About this forumThe Weekend Economists' Panglossian Pandemic January 20-22, 2012
Eureka! Yes! I think with this title I can encompass all the suggestions I received in my usual weekly call for inspiration and advice, and bring in some art, as well.
First, some definitions:
Pan·gloss·i·an? (adjective) characterized by or given to extreme optimism, especially in the face of unrelieved hardship or adversity.
Origin: 182535; after Pangloss, an optimistic character in Voltaire's Candide;
compare Greek panglossía garrulousness, wordiness
http://2.bp.blogspot.com/_fHtiQn5hcbU/Sr68EQcc2VI/AAAAAAAAAMM/tYDkpS4Sgyk/S660/blog+header.png ?w=645
pan·dem·ic (n.) A pandemic disease. An epidemic that spreads over a very wide area, such as an entire country or continent.
(adj.)
1. Widespread; general.
2. Medicine: Epidemic over a wide geographic area and affecting a large proportion of the population: pandemic influenza.
From Late Latin pandmus, from Greek pandmos, of all the people : pan-, pan- + dmos, people; see d- in Indo-European roots.
Illustration of the Black Death from the Toggenburg Bible (1411)
Put them together, and what have you got? The Global Economy through the rose-colored lenses of far too many 1% Elites:
the Leibnizian mantra of Pangloss, "all is for the best in the best of all possible worlds".
Response to Demeter (Original post)
Tuesday Afternoon This message was self-deleted by its author.
Demeter
(85,373 posts)Candide is characterised by its sarcastic tone, as well as by its erratic, fantastical and fast-moving plot. A picaresque novel with a story similar to that of a more serious bildungsroman, it parodies many adventure and romance clichés, the struggles of which are caricatured in a tone that is mordantly matter-of-fact. Still, the events discussed are often based on historical happenings, such as the Seven Years' War and the 1755 Lisbon earthquake. As philosophers of Voltaire's day contended with the problem of evil, so too does Candide in this short novel, albeit more directly and humorously. Voltaire ridicules religion, theologians, governments, armies, philosophies, and philosophers through allegory; most conspicuously, he assaults Leibniz and his optimism.
As expected by Voltaire, Candide has enjoyed both great success and great scandal. Immediately after its secretive publication, the book was widely banned because it contained religious blasphemy, political sedition and intellectual hostility hidden under a thin veil of naïveté. However, with its sharp wit and insightful portrayal of the human condition, the novel has since inspired many later authors and artists to mimic and adapt it. Today, Candide is recognised as Voltaire's magnum opus and is often listed as part of the Western canon; it is probably taught more than any other work of French literature.
Historical and literary background
A number of deadly historical events inspired Voltaire to write Candide, most notably the Seven Years' War and the 1755 Lisbon earthquake: both are frequently referred to in the book and are cited by scholars as reasons for its composition. The 1755 Lisbon earthquake, tsunami, and resulting fires of All Saints' Day, had a strong influence on theologians of the day and on Voltaire, who was himself disillusioned by them. The earthquake had an especially large effect on the contemporary doctrine of optimism, a philosophical system which implies that such events should not occur. Optimism is founded on the theodicy of Gottfried Wilhelm Leibniz that says all is for the best because God is a benevolent deity. This concept is often put into the form, "all is for the best in the best of all possible worlds" (Fr. "Tout est pour le mieux dans le meilleur des mondes" . Philosophers had trouble fitting the horrors of this earthquake into the optimist world view.
Voltaire actively rejected Leibnizian optimism after the natural disaster, convinced that if this were the best possible world, it should surely be better than it is. In both Candide and Poème sur le désastre de Lisbonne ("Poem on the Lisbon Disaster" , Voltaire attacks this optimist belief. He makes use of the Lisbon earthquake in both Candide and his Poème to argue this point, sarcastically describing the catastrophe as one of the most horrible disasters "in the best of all possible worlds". Immediately after the earthquake, unreliable rumours circulated around Europe, sometimes overestimating the severity of the event. Ira Wade, a noted expert on Voltaire and Candide, has analysed which sources Voltaire might have referenced in learning of the event. Wade speculates that Voltaire's primary source for information on the Lisbon earthquake was the 1755 work Relation historique du Tremblement de Terre survenu à Lisbonne by Ange Goudar.
Apart from such events, contemporaneous stereotypes of the German personality may have been a source of inspiration for the text, as they were for Simplicius Simplicissimus, a 1669 satirical picaresque novel written by Hans Jakob Christoffel von Grimmelshausen and inspired by the Thirty Years' War. The protagonist of this novel, who was supposed to embody stereotypically German characteristics, is quite similar to the protagonist of Candide. These stereotypes, according to Voltaire biographer Alfred Owen Aldridge, include "extreme credulousness or sentimental simplicity", two of Candide's, and Simplicius's, defining qualities. Aldridge writes, "Since Voltaire admitted familiarity with fifteenth-century German authors who used a bold and buffoonish style, it is quite possible that he knew Simplicissimus as well."
A satirical and parodic precursor of Candide, Jonathan Swift's Gulliver's Travels (1726) is one of Candide's closest literary relatives. This satire tells the story of "a gullible ingenue", Gulliver, who (like Candide) travels to several "remote nations" and is hardened by the many misfortunes which befall him. As evidenced by similarities between the two books, Voltaire probably drew upon Gulliver's Travels for inspiration while writing Candide. Other probable sources of inspiration for Candide are Télémaque (1699) by François Fénelon and Cosmopolite (1753) by Louis-Charles Fougeret de Monbron. Candide's parody of the bildungsroman is probably based on Télémaque, which includes the prototypical parody of the sagacious tutor on whom Pangloss may have been partly based. Likewise, Monbron's protagonist undergoes a disillusioning series of travels similar to those of Candide.
Demeter
(85,373 posts)Candide: The title character. Illegitimate son of the sister of the baron of Thunder-ten-Tronckh. In love with Cunégonde.
Cunégonde: The daughter of the baron of Thunder-ten-Tronckh. In love with Candide.
Pangloss: The royal educator of the court of the baron. Described as "the greatest philosopher of the Holy Roman Empire".
The Old Woman: Cunégonde's maid while she was the mistress of Don Issachar and the Grand Inquisitor of Portugal. Fled with Candide and Cunégonde to the New World. Illegitimate daughter of Pope Urban X.
Cacambo: From a Spanish father and a Peruvian mother. Lived half his life in Spain and half in the Latin America. Candide's valet while in America.
Martin: Dutch amateur philosopher and Manichean. Met Candide in Suriname, travelled with him afterwards.
The baron of Thunder-ten-Tronckh: Son of the original Baron (a secondary character) and brother of Cunégonde. Thought to have been killed by the Bulgarians. Became a Jesuit in Paraguay.
Secondary characters
The baron and baroness of Thunder-ten-Tronckh: Father and mother of Cunégonde and the second baron. Both slain by the Bulgarians.
The king of the Bulgarians.
James the Anabaptist: Saved Candide from a lynching in the Netherlands. Drowned in the port of Lisbon.
Don Issachar: Jewish landlord in Portugal. Cunégonde became his mistress, shared with the Grand Inquisitor of Portugal. Killed by Candide.
The Grand Inquisitor of Portugal: Sentenced Candide and Pangloss at the auto-da-fé. Cunégonde was his mistress jointly with Don Issachar. Killed by Candide.
Don Fernando d'Ibarra y Figueroa y Mascarenes y Lampourdos y Souza: Spanish governor of Buenos Aires. Wanted Cunégonde as a mistress.
The king of El Dorado, who helped Candide and Cacambo out of El Dorado and made them rich.
Mynheer Vanderdendur: Dutch ship captain. Offered to take Candide from America to France for 30,000 gold coins, but then departed without him, stealing all his riches.
The abbot of Perigord: Befriended Candide and Martin, led the police to arrest them; he and the police officer accepted three diamonds each and released them.
The marchioness of Parolignac: Parisian wench who took an elaborate title.
The scholar: One of the guests of the "marchioness". Argued with Candide about art.
Paquette: The one who gave Pangloss syphilis. After the slaying by the Bulgarians, worked as a prostitute. Became the property of Friar Giroflée.
Friar Giroflée: Theatin friar. In love with the prostitute Paquette.
Signor Pococuranté: A Venetian noble. Candide and Martin visited his estate, where he discussed his disdain of most of the canon of great art.
In an inn in Venice, Candide and Martin ate with six foreigners who turned out to be deposed monarchs. They were:
Ahmed III
Ivan VI of Russia
Charles Edward Stuart
Augustus III of Poland
Stanisław Leszczyński
Theodore of Corsica
Demeter
(85,373 posts)Chapters IX
The tale of Candide begins in the castle of the Baron Thunder-ten-Tronckh in Westphalia, home to the Baron's daughter, Lady Cunégonde; his bastard nephew, Candide; a tutor, Pangloss; a chambermaid, Paquette; and the rest of the Baron's family. The protagonist, Candide, is romantically attracted to Cunégonde. He is a child of "the most unaffected simplicity", whose face is "the index of his mind". Dr. Pangloss, professor of "métaphysico-théologo-cosmolonigologie" and self-proclaimed optimist, teaches his pupils that they live in the "best of all possible worlds" and that "all is for the best".
All is well in the castle until Cunégonde sees Pangloss sexually engaged with Paquette in some bushes. Encouraged by this show of affection, Cunégonde drops her handkerchief next to Candide which entices him to kiss her. For this infraction, Candide is evicted from the castle, at which point he is captured by Bulgar (Prussian) recruiters and coerced into military service, where he is flogged, nearly executed, and forced to participate in a major battle between the Bulgars and the Abares (an allegory representing the Prussians and the French). Candide eventually escapes the army and makes his way to Holland where he is given aid by Jacques, an Anabaptist, who strengthens Candide's optimism. Soon after, Candide finds his master Pangloss, now a beggar with syphilis. Pangloss reveals he was infected with this disease by Paquette and shocks Candide by relating how Castle Thunder-ten-Tronckh was destroyed by Bulgars, and that Cunégonde and her whole family were killed. Pangloss is cured of his illness by Jacques, losing one eye and one ear in the process, and the three set sail to Lisbon.
In Lisbon's harbor, they are overtaken by a vicious storm which destroys the boat. Jacques attempts to save a sailor, and is in the process thrown overboard. The sailor makes no move to help the drowning Jacques, and Candide is in a state of despair until Pangloss explains to him that Lisbon harbor was created in order for Jacques to drown. Only Pangloss, Candide, and the "brutish sailor" who let Jacques drown survive the wreck and reach Lisbon, which is promptly hit by an earthquake, tsunami and fire which kill tens of thousands. The sailor leaves in order to loot the rubble while Candide, injured and begging for help, is lectured on the optimistic view of the situation by Pangloss.
The next day, Pangloss discusses his optimistic philosophy with a member of the Portuguese Inquisition, and he and Candide are arrested for heresy, set to be tortured and killed in an "auto-da-fé" set up to appease God and prevent another disaster. Candide is flogged and sees Pangloss hanged, but another earthquake intervenes and he escapes. He is approached by an old woman, who leads him to a house where Lady Cunégonde waits, alive. Candide is surprised: Pangloss had told him that Cunégonde had been raped and disemboweled. She had been, but Cunégonde points out that people survive such things. However, her rescuer sold her to a Jewish merchant who was then threatened by a corrupt Grand Inquisitor into sharing her. Her owners arrive, find her with another man, and Candide kills them both. Candide and the two women flee the city, heading to the Americas. Along the way, Cunégonde falls into self-pity, complaining of all the misfortunes that have befallen her. The old woman reciprocates by revealing her own tragic life, which included having a buttock cut off in order to feed some starving men.
Chapters XIXX
The trio arrive in Buenos Aires, where Governor Don Fernando d'Ibarra, y Figueroa, y Mascarenes, y Lampourdos, y Souza asks to marry Cunégonde. Just then, an alcalde (a Portuguese fortress commander) arrives, pursuing Candide for killing the Grand Inquisitor. Leaving the women behind, Candide flees to Paraguay with his practical and heretofore unmentioned manservant, Cacambo.
At a border post on the way to Paraguay, Cacambo and Candide speak to the commandant, who turns out to be Cunégonde's unnamed brother. He explains that after his family was slaughtered, the Jesuits' preparation for his burial revived him, and he has since joined the order. When Candide proclaims he intends to marry Cunégonde, her brother attacks him, and Candide stabs him through with his rapier. After lamenting all the people (mainly priests) he's killed, he and Cacambo flee. In their flight, Candide and Cacambo come across two naked women being chased and bitten by a pair of monkeys. Candide, seeking to protect the women, shoots and kills the monkeys, but is informed by Cacambo that the monkeys and women were probably lovers.
Cacambo and Candide are captured by Oreillons, the fictional inhabitants of the area. Mistaking Candide for a Jesuit by his robes, the Oreillons prepare to cook Candide and Cacambo; however, Cacambo convinces the Oreillons that Candide killed a Jesuit to procure the robe. Cacambo and Candide are released and travel for a month on foot and then down a river by canoe, living on fruits and berries.
After a few more adventures, Candide and Cacambo wander into El Dorado, a geographically isolated utopia where the streets are covered with precious stones, there exist no priests, and all of the king's jokes are funny. Candide and Cacambo stay a month in El Dorado, but Candide is still in pain without Cunégonde, and expresses to the king his wish to leave. The king points out that this is a foolish idea, but generously helps them do so. The pair continue their journey, now accompanied by one hundred red pack sheep carrying provisions and incredible sums of money, which they slowly lose or have stolen over the next few adventures.
Candide and Cacambo eventually reach Suriname, where they split up: Cacambo travels to Buenos Aires to retrieve Lady Cunégonde, while Candide prepares to travel to Europe to await the two. Candide's remaining sheep are stolen, and Candide is fined heavily by a Dutch magistrate for petulance over the theft. Before leaving Surinam, Candide feels in need of companionship, so he interviews a number of local men who have been through various ill-fortunes and settles on a man named Martin.
Chapters XXIXXX
This companion, Martin, is a Manichean scholar based on the real-life pessimist Pierre Bayle, who was a chief opponent of Leibniz. For the remainder of the voyage, Martin and Candide argue about philosophy, Martin painting the entire world as occupied by fools. Candide, however, remains an optimist at heart, since it is all he knows. As they arrive in England, they see an admiral (based on Admiral Byng) being shot for not killing enough of the enemy. Martin explains that Britain finds it necessary to shoot an admiral from time to time "pour l'encouragement des autres" (to encourage the others). Candide, horrified, arranges for them to leave Britain immediately. After various scenes satirising other European institutions, Candide and Martin meet Paquette, the chambermaid who infected Pangloss with his syphilis, in Venice. She is now a prostitute, and is spending her time with a monk, Brother Giroflée. Although both appear happy on the surface, they reveal their despair: Paquette has led a miserable existence as a sexual object, and the monk detests the religious order in which he was indoctrinated.
Later, while Candide and Martin are eating supper, Cacambo returns to Candide and informs him that Cunégonde is in Constantinople, and that she has been enslaved. She is now washing dishes for a prince of Transylvania, and has become ugly. On the way to rescue her, Candide finds Pangloss and Cunégonde's brother rowing in the galley. Candide buys their freedom and further passage at steep prices. The baron and Pangloss relate how they survived, but despite the horrors he has been through, Pangloss's optimism remains unshaken: "I still hold to my original opinions, because, after all, I'm a philosopher, and it wouldn't be proper for me to recant, since Leibniz cannot be wrong, and since pre-established harmony is the most beautiful thing in the world, along with the plenum and subtle matter."
The travellers arrive on the Ottoman coast where they rejoin Cunégonde and the old woman. Cunégonde has indeed become hideously ugly but Candide nevertheless buys their freedom and marries Cunégonde to spite her brother. Paquette and Brother Giroflée, too, are reconciled with Candide on a farm which he just bought with the last of his finances.
One day, the protagonists seek out a dervish known as a great philosopher of the land. Pangloss asks him why Man is made to suffer so, and what they all ought to do. The dervish responds by asking rhetorically why Pangloss is concerned about the existence of evil and good. The dervish describes human beings as mice on a ship sent by a king to Egypt; their comfort does not matter to the king. The dervish then slams his door on the group. Returning to their farm, Candide, Pangloss, and Martin meet a Turk whose philosophy is to devote his life only to simple work and not concern himself with external affairs. He and his four children work a small farm to keep "free of three great evils: boredom, vice and necessity", or "poverty" as per John Butt's 1947 translation. Candide, Pangloss, Martin, Cunégonde, Paquette, Cacambo, the old woman, and Brother Giroflée all set to work (on this "louable dessein", or "commendable plan", as the narrator calls it), each to one specific task. Candide ignores Pangloss's insistence that all turned out for the best by necessity, instead telling him "we must cultivate our garden".
Demeter
(85,373 posts)thank goddess for the internet...I have no useful French at all.
Ghost Dog
(16,881 posts)hamerfan
(1,404 posts)Candide is one of those books I always "meant" to read but never did.
It's free for my Kindle, so I just downloaded it.
Demeter
(85,373 posts)I'd recommend seeing the play, first, so you have some idea where you are going.
Now you tells me.... Sheesh!
bread_and_roses
(6,335 posts)The juxtaposition of Pangloss and the "Global Economy through the rose-colored lenses of far too many 1% Elites" is PERFECT.
Demeter
(85,373 posts)Candide the operetta was originally conceived by playwright Lillian Hellman, as a play with incidental music. Leonard Bernstein, the American composer and conductor who wrote the music was so excited about the project that he convinced Hellman to do it as a "comic operetta". Many lyricists worked on the show, including James Agee, Dorothy Parker, John Latouche, Richard Wilbur, Leonard and Felicia Bernstein, and Hellman. Hershy Kay orchestrated all the pieces except for the overture, which Bernstein did himself.
Candide first opened on Broadway as a musical on 1 December 1956. The premier production was directed by Tyrone Guthrie and conducted by Samuel Krachmalnick. While this production was a box office flop, the music was highly praised, and an original cast album was made. The album gradually became a cult hit, but Hellman's libretto was criticised as being too serious an adaptation of Voltaire's novel. Candide would be more popular seventeen years later with a new libretto by Hugh Wheeler.
Candide Overture: Leonard Bernstein conducting
Demeter
(85,373 posts)Last edited Sat Jan 21, 2012, 06:23 AM - Edit history (1)
Central Florida State Bank, Belleview, Florida, was closed today by the Florida Office of Financial Regulation, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with CenterState Bank of Florida, National Association, Winter Haven, Florida, to assume all of the deposits of Central Florida State Bank. The four branches of Central Florida State Bank will reopen on Monday as branches of CenterState Bank of Florida, National Association...As of September 30, 2011, Central Florida State Bank had approximately $79.1 million in total assets and $77.7 million in total deposits. In addition to assuming all of the deposits of the failed bank, CenterState Bank of Florida, National Association agreed to purchase essentially all of the assets. The FDIC and CenterState Bank of Florida, National Association entered into a loss-share transaction on $53.6 million of Central Florida State Bank's assets...The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $24.4 million. Compared to other alternatives, CenterState Bank of Florida, National Association's acquisition was the least costly resolution for the FDIC's DIF. Central Florida State Bank is the first FDIC-insured institution to fail in the nation this year, and the first in Florida. The last FDIC-insured institution closed in the state was Premier Community Bank of the Emerald Coast, Crestview, on December 16, 2011.The First State Bank, Stockbridge, Georgia, was closed today by the Georgia Department of Banking and Finance, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Hamilton State Bank, Hoschton, Georgia, to assume all of the deposits of The First State Bank. The seven branches of The First State Bank will reopen during their normal business hours beginning Saturday as branches of Hamilton State Bank...As of September 30, 2011, The First State Bank had approximately $536.9 million in total assets and $527.5 million in total deposits. Hamilton State Bank will pay the FDIC a premium of 0.50 percent to assume all of the deposits of The First State Bank. In addition to assuming all of the deposits of the failed bank, Hamilton State Bank agreed to purchase essentially all of the assets. The FDIC and Hamilton State Bank entered into a loss-share transaction on $419.5 million of The First State Bank's assets...The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $216.2 million. Compared to other alternatives, Hamilton State Bank's acquisition was the least costly resolution for the FDIC's DIF. The First State Bank is the second FDIC-insured institution to fail in the nation this year, and the first in Georgia. The last FDIC-insured institution closed in the state was Community Bank of Rockmart, Rockmart, on November 10, 2011.
American Eagle Savings Bank, Boothwyn, Pennsylvania, was closed today by the Office of the Comptroller of the Currency, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Capital Bank, National Association, Rockville, Maryland, to assume all of the deposits of American Eagle Savings Bank. The sole branch of American Eagle Savings Bank will reopen on Saturday as a branch of Capital Bank, National Association...As of September 30, 2011, American Eagle Savings Bank had approximately $19.6 million in total assets and $17.7 million in total deposits. In addition to assuming all of the deposits of the failed bank, Capital Bank, National Association agreed to purchase essentially all of the assets...The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $3.2 million. Compared to other alternatives, Capital Bank, National Association's acquisition was the least costly resolution for the FDIC's DIF. American Eagle Savings Bank is the third FDIC-insured institution to fail in the nation this year, and the first in Pennsylvania. The last FDIC-insured institution closed in the state was Public Savings Bank, Huntingdon Valley, on August 18, 2011.
Demeter
(85,373 posts)AnneD
(15,774 posts)Hubby and I sat down and did the budget last night over Chinese food. We are lucky if we go out once a week anymore. The place was dead, even to call in orders for the 2 hours we were there. We figured how much I would draw from his Wells Fargo acct.
So today I pull in to the drive in. I am getting the money out so I can add it to my CU account, our household account.
"Mrs D., I notice that you don't have a savings account with us, would you like to open one with us today"
"No thank you"
"Are you sure, I could open one right now for you."
"No thanks"
The pneumatic tube comes in with my $750.
"Are you sure you don't want to have one of our bankers call you to discuss our savings accounts with you.
"No thanks" I said as I drove off to deposit the cash with my CU.
I have to hand it to her, she was working hard to keep that money in the bank. I didn't have the heart to tell her that if it were up to me, we would not even have an account there. Hubby is old fashioned, so I humor him. We left them with a little over $200, what are they so upset about
Demeter
(85,373 posts)You have probably heard a lot of noise about what was said about the housing bubble at Federal Reserve meetings in 2006. The Federal Reserve Board recently released the transcripts from its 2006 Open Market Committee (FOMC) meetings with the mandatory five-year lag and it turns out the Fed was pretty clueless. Dean Baker does a pretty good job of getting to the meat of the issue in his aptly titled post Alan Greenspans ship of fools. Baker concentrates on the housing substance but also offers up a quote from Timothy Geithner, then the NY Fed chief, that I think is quite revealing. Geithner remarks in addressing outgoing FOMC chair Greenspan:
"Id like the record to show that I think youre pretty terrific, too. And thinking in terms of probabilities, I think the risk that we decide in the future that youre even better than we think is higher than the alternative."
Who says stuff like that? Seriously. Were not talking about high school here. This is a Federal Reserve transcript.
I dont have anything else to say except that Geithner is now Treasury Secretary and has outlasted every major figure on President Obamas economic team. You needed to read that statement because it tells you how, behind the scenes, the American financial system actually works.
P.S. If you are thinking that sucking up to power doesnt work because people can see right through it, youre wrong. Sucking up definitely works.
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About Edward Harrison
Edward Harrison is the founder of Credit Writedowns and a former career diplomat, investment banker and technology executive with over twenty years of business experience. He is also a regular economic and financial commentator on BBC World News, CNBC Television, Business News Network, CBC, Fox Television and RT Television. He speaks six languages, a skill he uses to provide a more global perspective. Edward holds an MBA in Finance from Columbia University and a BA in Economics from Dartmouth College.
Demeter
(85,373 posts)The Fed's FOMC is supposed to steer the US economy to prosperity. As we now see, it was completely rudderless in 2006
...But there is more than obsequiousness on display here. There is also profound ignorance of the economy among the nation's top economic policymakers. Keep in mind: 2006 is the year that the $8tn housing bubble hit its peak and began to deflate. In other words, this covers the period in which the Titanic hit the iceberg and began to take on water. But no one on this sinking ship is even thinking about the lifeboats. There is no one in the eight FOMC meetings who suggests that the economy faces any serious turbulence ahead. There is not even discussion that a mild recession could be in sight. In fact, at the last meeting of 2006 (pdf), we hear Janet Yellen, who was then the president of the San Francisco Bank and is now vice-chair of the board of governors, comment that:
"There are some encouraging signs that the demand for housing may be stabilizing After a precipitous fall, home sales appear to have leveled off Finally, the gap between housing prices and fundamentals might not be as large as some calculations suggest."
Needless to say, this wasn't quite right. Monthly home sales fell by almost 40% over the course of 2007. House prices, which were just edging downward month to month up to that point, would begin to decline far more rapidly. By the end of 2007, there were falling at a rate of almost 2% a month. In addition to the direct impact that this sort of price decline had on the housing sector, it also implied a loss of almost $400bn a month in housing equity. It was inevitable that a loss of wealth of this magnitude would slow consumption. The FOMC seemed utterly oblivious to the fact that the savings rate had been driven to record lows by the wealth generated by the housing bubble; and that this consumption boom would end when the housing bubble wealth disappeared. People who no longer had equity in their homes could not borrow to support their consumption. Furthermore, those who had expected that home equity would support them in retirement would soon discover that they had to cut back in a big way on consumption in order to rebuild their savings.
It also should have been obvious that a serious wave of defaults was going to hit the financial system. Housing is always a highly leveraged asset, but that was far more true in 2006 than at any prior point in history, as many people were buying homes putting literally nothing down. With prices plunging, millions of homeowners would fall under water. This guaranteed more foreclosures and higher losses on each one. It may not have been obvious who was going to take the hits, but economists who could see the world with clear eyes knew that big hits were coming. Unfortunately, none of them was sitting on the FOMC.
................................................................................................................................................................
The public may be powerless at the moment to force our political leaders to take the steps necessary to bring the economy back to full employment. However, we certainly have the ability to ridicule the incompetence of those responsible for this preventable disaster. We should take full advantage of the opportunity provided by the latest Fed transcripts. This might not provide the same respite for a scared and suffering nation as movies did in the Great Depression, but it's a start.
Demeter
(85,373 posts)The Corporate Media in the U.S. is a handmaiden to the Financial and Political Elites, issuing simulacra of "news" and "analysis" in service of the Status Quo. If there is any America "industry" ripe for widespread discrediting, it is the U.S. Corporate Media--the six corporations that own most of the media outlets the conventional American sees, hears and reads. This week's theme is You Can't Fool Mother Nature For Long, and this is how it plays out in MediaLand:
when the disconnect between the actual economy
and what the American people are told is factual and true
about the U.S. economy and its Financial Elites by their Corporate Media
widens to surrealism,
then
the conventional American who has passively accepted propaganda in place of reality
will finally abandon belief in the "fairness and integrity" of the Mainstream Media,
and see it for what it is: a corporate house of prostitution,
where everything is for sale to the highest bidder.
Ask yourself how many hard-hitting, high-visibility series on the underbelly of American sickcare have been issued by any Mainstream Media outlet. Then look at how many of these outlets live off the revenues of adverts for pharmaceutical products, health insurance, fast foods and packaged foods-- all industries that are profiteering from the current sickcare system.
The answer, as far as I can discern, is (unsurprisingly) zero.
Present-day journalism in America has an unspoken double-standard. Any "news" story or analysis based on press releases from Central State fiefdoms such as the CBO, Medicare, BLS, etc. is accepted without reservations or independent inquiry, or indeed, even basic journalistic skepticism, while any reports that are critical of the Status Quo are treated quite differently: sources are treated as suspect, critical comments are always countered with official assurances, high-visibility "experts" are tapped to dismiss the criticism, and finally, the story is buried: it runs on a public-service broadcast in the wee hours of the morning, it is relegated to page B-19 in the newspaper, and it briefly appears at the bottom of a list of web stories that is quickly "refreshed" before too many people can spot it...
We now live in an era of unmitigated propaganda that is accepted much as propaganda in wartime: we all know it's been censored or gussied up with positive spin, but we accept it as "necessary" because the Status Quo is under threat. This "rally round the flag" mentality in wartime allows horrendous officially sanctioned errors and the resultant loss of life to be glossed over or simply buried, lest the Home Front get discouraged by official incompetence or error.
There is a subtext of this very belief system in the constantly cheery presentation of the "economic recovery" in painfully bogus unemployment statistics and analyses that are lacking in even Journalism 101 skepticism: we know it's all bogus but we fear the truth. So we accept the propaganda as "necessary for morale."There is a difference between now and World War II, though. In a full-blown global war, the nation itself was at risk. Now, it is the Financial and Political Elites who are risk. The Corporate Media's first and most critical line of propaganda is that if America's Financial and Political Elites fall, so too does the nation.This is of course false. The nation would be infinitely better off if its current crop of craven, corrupt Financial and Political Elites were revealed as financially and ethically bankrupt and delivered from great power into ignominious disgrace. A truly independent media would have been highlighting this reality daily since the financial house of cards began collapsing in 2007. Instead, the Corporate Media has presented the saving of the financial and political Status Quo Elites as the equivalent of saving the nation itself. This is self-serving, of course, but it is also fascist: the Corporate Media and the Central State are now essentially one.
Tansy_Gold
(17,873 posts)getting together in the coffee shop with their babies, all talking about how sad it is about Paula Deen and her diabetes but they're so glad she's not giving up her show because they just love her! she's soooooo nice! And so cute! And they wished somebody like her lived next door!
AnneD
(15,774 posts)She is a good cook, but I swear, I think that woman couldn't boil water without first adding a stick of butter.
Good to be posting, even if I have to come to the library.
For the theme. One of my fav books, author, and very subversive.
Demeter
(85,373 posts)As we've noted for years, the entire strategy of Washington towards the economy is to cover up the fraud which caused the financial crisis ... even though prosecuting fraud and re-establishing the rule of law is the only way to get out of this depression.
One major front in Washington's cover-up effort has been to settle fraud cases with the big banks for pennies on the dollar. This is a backdoor bailout for the banks, encourages them to commit more fraud, and fails to plug the basic holes in the economy which are preventing a recovery.
Why are we bringing this up now?
Because Obama is making a giant push to pressure the states attorneys general to settle all of their mortgage-related fraud claims against the banks for pennies on the dollar.
Yves Smith - who has an ear to the ground on this - warns that a settlement which hurts consumers and the economy will happen very quickly if people don't raise a ruckus.
Smith is asking people to call their state attorney general (not their elected reps) to oppose the settlement:
Here are some of the reasons to oppose a settlement:
1. There have been virtually no investigations, and the Administration has engaged in cover-ups rather than trying to get to the bottom of the mortgage mess
2. The big argument made in favor of the deal, that it will help borrowers, is patently false. Remember, Countrywide entered into a deal with attorney generals just like this, where they agreed to do mods in return for a settlement on abuses. Guess what? They didnt do the mods. To add insult to injury, they actually abused homeowners who should have gotten mods. Nevada AG is suing Countrywide now over its failure to comply with the terms of its settlement. And even if some mods miraculously did get done, the settlement is designed to have banks hit a dollar amount. That means they will focus on the biggest loans, which means any relief will go to a comparatively small number of people in (originally) big ticket houses.
3. The Administration has only one chance to get this right. Now you might argue that Team Obama has no intention of getting the mortgage mess right, but the tectonic plates suddenly seem to be moving in elite circles. The Fed realizes that housing is a BIG problem and has even started making noise about it. Yet Obama is moving forward with a plan cooked up in late 2010 that is completely out of whack with the urgency and severity of the problem. Note that this settlement will NOT stop private actions, such as borrowers fighting foreclosures. And we will continue to banks refuse to take losses and drag out foreclosures to maximize fees. That will lead to continued pressure on housing prices in many markets as buyers stay on the sidelines, fearful of buying before a large shadow inventory clears.
Leaving the AGs free to investigate and increase the pressure that is already building up in the system is the best chance we have to deal with widespread fraud.
The attorneys general really need your support. It helps them to hear that their constituents appreciate them standing up to the banks and the Obama administration.
PLEASE call them TODAY. Here is a list of phone numbers.
http://www.consumerfraudreporting.org/stateattorneygenerallist.php
If you cant get through, send an e-mail.
Please also sign this petition from Campaign for Americas Future (it has some talking points if you need them for the AG calls). Note you can opt out of being put on their mailing list (I know that has been a sore point with some past petitions). I know it is futile to ping Obama, but they will collect the number of people who sign, and that will in turn bolster the dissident AGs. http://action.ourfuture.org/p/dia/action/public/?action_KEY=160
Please call today. Unlike Congresscritters, who get a lot of constituent mail and phone calls, AGs get much less in the way of messages from state citizens, so your calls will make a difference.
Smith tells me that it is especially important for residents of California, Virgina, Texas, Florida and South Carolina to call their attorneys general and tell them that they need to stand firm in the face of pressure from Obama.
Demeter
(85,373 posts)Investors are getting strangely bullish.
If youll recall, the entire European banking system nearly imploded just 8 weeks ago. Things were so dire that we even had a coordinated Central Bank intervention among other measures to try and prop things up over there. The Powers That Be have since launched the Long-Term Refinancing Operation or LTRO: essentially a program through which European banks can borrow from the ECB at just 1% for up to a year. The whole thing is essentially just another liquidity handout and its telling that those firms which do borrow from the LTRO are parking almost all the borrowed cash at the ECB soon after. And while the LTRO has been beneficial in terms of some liquidity concerns, its done nothing to address Europes solvency issues. Case in point, European banks in general are leveraged at 26 to 1. At that level even a 4% drop in asset prices wipes out all equity.
In this environment, the ability to borrow more money doesnt accomplish anything from a balance sheet perspective. Its simply a matter of common sense: you cannot solve a debt problem with more debt. But since the ECB cannot directly monetize EU bonds without Germany pulling out of the EU, and since the German rules Euro-bonds as illegal, the LTRO is about the best the ECB can do in these circumstances. Whats truly concerning however, is the fact that investors have piled into risk assets based on the LTRO (and misguided hopes of more QE) as though none of these issues exist.
Folks, just a few months ago, no less than the IMF, Bank of England, and others warned that we were facing a global meltdown and the worst financial crisis in history. Do you really think a few liquidity programs have solved all of this?
MORE AT LINK
Demeter
(85,373 posts)Demeter
(85,373 posts)hamerfan
(1,404 posts)xchrom
(108,903 posts)Demeter
(85,373 posts)Call me peculiar, but Im actually enjoying the spectacle of Mitt Romney doing the Dance of the Seven Veils partly out of voyeurism, of course, but also because its about time that we had this discussion...The theme of his dance, for those who havent been paying attention, is taxes his own taxes. Although disclosure of tax returns is standard practice for political candidates, Mr. Romney has never done so, and, at first, he tried to stonewall the issue even in a presidential race. Then he said that he probably pays only about 15 percent of his income in taxes, and he hinted that he might release his 2011 return. Even then, however, he will face pressure to release previous returns, too like his father, who released 12 years of returns back when he made his presidential run. (The elder Romney, by the way, paid 37 percent of his income in taxes).
And the public has a right to see the back years: By 2011, with the campaign looming, Mr. Romney may have rearranged his portfolio to minimize awkward issues like his accounts in the Cayman Islands or his use of the justly reviled carried interest tax break. But the larger question isnt what Mitt Romneys tax returns have to say about Mitt Romney; its what they have to say about U.S. tax policy. Is there a good reason why the rich should bear a startlingly light tax burden?
For they do. If Mr. Romney is telling the truth about his taxes, hes actually more or less typical of the very wealthy. Since 1992, the I.R.S. has been releasing income and tax data for the 400 highest-income filers. In 2008, the most recent year available, these filers paid only 18.1 percent of their income in federal income taxes; in 2007, they paid only 16.6 percent. When you bear in mind that the rich pay little either in payroll taxes or in state and local taxes major burdens on middle-class families this implies that the top 400 filers faced lower taxes than many ordinary workers.
The main reason the rich pay so little is that most of their income takes the form of capital gains, which are taxed at a maximum rate of 15 percent, far below the maximum on wages and salaries. So the question is whether capital gains three-quarters of which go to the top 1 percent of the income distribution warrant such special treatment. Defenders of low taxes on the rich mainly make two arguments: that low taxes on capital gains are a time-honored principle, and that they are needed to promote economic growth and job creation. Both claims are false. When you hear about the low, low taxes of people like Mr. Romney, what you need to know is that it wasnt always thus and the days when the superrich paid much higher taxes werent that long ago. Back in 1986, Ronald Reagan yes, Ronald Reagan signed a tax reform equalizing top rates on earned income and capital gains at 28 percent. The rate rose further, to more than 29 percent, during Bill Clintons first term. Low capital gains taxes date only from 1997, when Mr. Clinton struck a deal with Republicans in Congress in which he cut taxes on the rich in return for creation of the Childrens Health Insurance Program. And todays ultralow rates the lowest since the days of Herbert Hoover date only from 2003, when former President George W. Bush rammed both a tax cut on capital gains and a tax cut on dividends through Congress, something he achieved by exploiting the illusion of triumph in Iraq. Correspondingly, the low-tax status of the very rich is also a recent development. During Mr. Clintons first term, the top 400 taxpayers paid close to 30 percent of their income in federal taxes, and even after his tax deal they paid substantially more than they have since the 2003 cut....
So Mr. Romneys tax dance is doing us all a service by highlighting the unwise, unjust and expensive favors being showered on the upper-upper class. At a time when all the self-proclaimed serious people are telling us that the poor and the middle class must suffer in the name of fiscal probity, such low taxes on the very rich are indefensible.
Demeter
(85,373 posts)OK, thats not what I believe. But its apparently what Scott Brown believes....Ive written about this before; somehow the notion has entered our politics that supporting a cause that isnt in your personal financial interest makes you a hypocrite. Its really bizarre.
As I suggested in the title of this post, think of what this says about Washington. The fact is that he personally was doing very well under British rule he was a big landowner, a man of stature in the colonies. His life was just fine; yet he took huge personal risks to lead a rebellion for the cause of liberty. He was a hypocrite!
Or, maybe, he was a man of civic virtue, who placed the needs of his nation above his own comfort...Strange to say, however, its possible to have no special animosity toward rich people as people, and still believe that they should pay more in taxes, that their workers should have more bargaining power, and in general that policies that would make them not quite as rich would make this a better nation.
But then as a liberal, well-paid professor/journalist myself, I would say that, wouldnt I?
Demeter
(85,373 posts)Demeter
(85,373 posts)Demeter
(85,373 posts)The first casualty of war is said to be the truth but, in financial crises, it is trust that dies...Paul Seabright, a professor at the Toulouse School of Economics, has identified traits that underpin social systems such as money: the capacity to weigh up the costs and benefits of trusting others and the instinct to return favours in kind or seek revenge when trust is betrayed. When it is working well, the system enables strangers to safely deal with each other. But this fragile system, on which the global economy depends, is now at risk of failing. Money, a mechanism of exchange and a store of value, galvanised modern economies. Debasement of currencies through quantitative easing and artificially low interest rates undermine these functions.
This is encouraging interest in alternative paper money, such as the Bavarian Chiemgauer, the Lewes Pound or the BerkShares programme in Massachusetts. With limited acceptance within a small area and (sometimes) a finite expiry date, alternative currencies encourage local business and emphasise community values. They also indicate distrust of governments, banks and global finance. Once an unquestioned and secure store of wealth, government bonds are threatened by the risk of sovereign defaults or destruction of purchasing power. Instead of risk-free return, government bonds now offer return-free risk, in the words of Jim Grant.
The rising value of gold is also evidence of these concerns. Wealthy savers are switching from financial instruments to alternative assets farmland, fine arts and other collectibles to preserve the value of their savings. But these savings are locked in unproductive investments and cannot circulate freely.
Reviled and mistrusted, banks are losing legitimacy. In the US, on Bank Transfer Day (November 5, 2011), an online campaign launched by an unhappy Bank of America client, disgruntled customers withdrew money from traditional banks, transferring it to not-for-profit credit unions. The growth of peer-to-peer lending firms, such as Prosper and Lending Club is part of the same trend. If it continues, the trend may lead to a significant contraction in the availability of credit globally, with serious consequences for growth....The crisis has undermined the relationship between voters and elected politicians in many countries. The Greek prime ministers short lived and ill-fated attempt to stage a plebiscite to legitimise his policies was dismissed by larger eurozone states and the European Union as disruptive. European policymakers appear to believe that a suspension of democracy and sovereignty with the implementation by technocrats of centrally determined policies is the answer. A democracy deficit is now as much of a problem as budget and trade deficits. A widening gap between the electorate and the elites threatens the fragile compact at the heart of free societies. The decline in support for major political parties and the rise of Germanys Pirate party, Frances far right and Finlands True Finns testify to this breakdown in trust, as does the global Occupy movement. In seeking to resolve the financial crisis, the world must not destroy the trust central to modern societies or risk social as well as economic breakdown.
*********************************************************************************
The writer is author of Extreme Money: The Masters of the Universe and the Cult of Risk.
Demeter
(85,373 posts)Arizona sure loves it some privatization. Facing extreme budget shortfalls, the state attempted to sell off and then re-lease its state house in 2009 to earn some extra money, along with privatizing its entire prison system. But while that plan failed, the states thirst for privatization never waned. Though it already had multiple private prisons holding prisoners from other states and the federal government, a prominent republican in the state legislature introduced and helped pass SB1070, the now-infamous Breathing While Brown law. This law, as pointed out in an investigative report by NPR, was written by ALEC, a conservative legislation front group that has longed worked with the major players in the private prison industry and promoted privatization across the board. Theyre also the ones behind attacks on global warming, voting rights, and unions, but thats a different story.
So, the state basically gave a handout to private prison operators, who would undoubtedly benefit from stronger enforcement of federal immigration laws and increased detention. This came after the industry donated heavily in the 2010 election cycle, to candidates, political parties, and ballot initiatives favored by republicans. Then, even after 3 prisoners escaped from a private prison found to have numerous security deficiencies and went on a murderous rampage, state officials still pushed for more private prisons. They re-initiated a request for proposals from private companies to construct 5,000 prison beds. Thankfully, people began to take notice. An advocacy organization filed a lawsuit trying to block the RFP, which was dismissed on a technicality. But the substantive issue in the lawsuit wasnt resolved; namely, that the state, by law, is required to conduct performance audits of its existing private facilities every two years, including cost-comparisons with public institutions. So the state began its audit late last year to compare public and private prisons, and the request for proposals was put on hold until the state could evaluate whether or not it would save money by turning to for-profit incarceration.
Now, common sense would tell you that theres no way to improve services in a not-for-profit venture without raising the budget for that given venture. Private prison companies dont make money by generating more revenue; they make it by cutting costs, in things like maintenance, security, and medical care provided to prisoners. So private prisons simply dont offer better or even equivalent services and conditions compared to state-run facilities. But the findings of the audit may surprise those who arent familiar with this blog or the industry: the state wouldnt actually save any money by privatizing its prisons. Thats right; even though they pay less, offer less benefits, cherry-pick the cheapest prisoners, and cut corners in every area of operations, private prisons cost just about as much to operate in Arizona as state-run facilities.
As a result, Arizona has cancelled its request for proposals for new beds, and the plan to further privatize the system is on hold for now. This is a smart move for many reasons, including the fact that the states rate of prison population growth slowed dramatically over the past few years. And when one looks at the numbers a little deeper, the myth of cost-savings offered by private prison operators becomes even more apparent. For medium-security prisoners, it cost the state of Arizona $5 less per prisoner, per day to house than a private prison would. If say half of the states 6,400 privately-housed prisoners are medium security, that means the state paid private prison companies $5,840,000 more than it would have cost them to just house those prisoners itself. In just 2010. For minimum-security prisoners, private companies offered a whopping $0.03 in savings per prisoner per day. And thats for the cheapest possible population! Delving even further into the numbers, the audit seemed to show that private prison facilities value depreciates at an exorbitantly higher rate than public facilities (probably because they dont perform regular maintenance, as a way to increase the bottom line). For example; state-run facilities depreciated at a rate of about $1.40 per prisoner, per day. Private facilities in the state depreciate at a rate of $12 per prisoner, per day. Thats around eight times as fast as government-run facilities.
Demeter
(85,373 posts)As much as most market savvy observers are convinced that there is no explanation for how MF Global made $1.2 billion in customer funds go poof that could exculpate the firm, JP Morgans conduct isnt looking too pretty either.
a Reuters investigative piece on the MF Global collapse, and its a doozy. While in proper journalistic form it is careful about reaching firm conclusions on a post mortem that is still underway, the pattern it has uncovered is not surprising to those of us who are onto JP Morgan.
As many, including this blogger, have pointed out, it was JP Morgan that did in the doomed Lehman by withholding $7 billion of cash and collateral.
And weve written how it used one of its best private clients, billionaire investor and industrialist Len Blavatnik, as a stuffee for toxic subprime debt in summer 2007, when every financial firm was desperate to offload US housing dreck.
A Billionaire Army of One vs. a Bank By JOE NOCERA http://www.nytimes.com/2010/09/25/business/25nocera.html?ref=business
The short form of the Reuters story is that JP Morgan, by virtue of being both a lender to MF Global as well as clearing its trades, has a big information advantage and could see how distressed the firm was. MF Global drew down the full amount of a newly-syndicated $1.3 billion credit facility, a huge warning sign. The Reuters story makes clear that JP Morgan went into possession is 9/10ths of the law mode, calling for full compliance with transaction procedures when normal business practice was to be more forgiving. The New York bank offers up the excuse that it lost money to MF Global, but that is not the issue. Any creditor to a bankrupt company will lose money. The issue is whether JP Morgan did anything irregular or impermissible to cut its losses, which in this case appears to have come in no small measure out of the hides of customers...
Its also pretty clear that a lot of MFGLOBAL customer money is sitting at JP Morgan, but JP Morgan will argue in bankruptcy court that it should not have to disgorge it (it almost doesnt matter what the facts are, JP Morgan will lawyer up to make the case). Unfortunately, since most of the counterparties hurt dont have the political clout of TBTF bank, JP Morgan is unlikely to take a reputational hit anywhere close to what it might deserve.
Demeter
(85,373 posts)Demeter
(85,373 posts)Candide - 07 Auto-da-fé (What a day)
&feature=related
(BERNSTEIN'S VERSION OF "NOBODY EXPECTS THE SPANISH INQUISITION"
WITH A SPECIAL CAMEO APPEARANCE OF THE DONALD!
Demeter
(85,373 posts)I'm really enjoying posting all this chaos, confusion and disaster and following it with a cheerfully cynical clip.
Tomorrow is another day...it's going to be crazy. I will try to post, but it may not be much until Sunday. But We Will Get Through This! I promise you that. After all, nobody has ever invented a scam to keep Monday from showing up on schedule.
And since today was one in a series, I'm going for some shuteye. See y'all later!
Demeter
(85,373 posts)A story that has increasingly become a fixture in the mainstream media is It takes X {surprisingly large seeming number} days to foreclose. The implications of X being a really big sounding number is of course that it is taken to mean that Deadbeats Are Living Rent Free For An Ungodly Amount of Time. This in turn incenses the respectable sorts that are offended at the idea that irresponsible neighbors are getting a break to which they are not entitled.
The premise behind this reaction is wrong. The assumption is that a combination of overloaded courts plus Bad Borrowers Gaming the System is responsible for the length of the process. The reality is more complicated. First, in judicial foreclosure states, and even in a lot of non-judicial states, foreclosure is not a speedy process even in normal times. Second, the assumption is that borrowers are not paying while foreclosures are grinding forward. As many victims of HAMP mods can attest (see here for one example), borrowers in HAMP trial mods were almost without exception told to ignore foreclosure related notices. In fact, as the servicer was processing the trial mod, it was also moving ahead with the foreclosure (and remember, quite a few people were falsely told they had to be delinquent to qualify for a HAMP mod). Unbeknownst to most HAMP participants, if they did not get a permanent mod, their lowered trial mod payments would be deemed to be delinquent, and they would be expected to make up the shortfall plus late fees. Thus these borrowers would be treated as having defaulted when they had been making payments and got trapped by the programs design. Similarly, Adam Levitin and Tara Twomey wrote:
.servicers are not incentivized to maximize the net present value of a loan, but are instead incentivized to drag out defaults until the point that the cost of advances exceeds the servicers default income. In other words, servicers are incentivized to keep defaulted homeowners in a fee sweatbox, rather than moving to immediately foreclose on the loan.
What the popular press accounts miss (or choose not to include) is not just that a lot of the delays are driven by the servicers, who are not only out to maximize their fees, but also avoid showing losses on second liens and home equity lines of credit. Both considerations argue for delay. But on top of that, this discussion of averages misses that they are mixing apples and oranges. There are foreclosures that are moving forward (and remember, normal foreclosures timetables are often not fast, particularly in judicial foreclosure states) and ones that will probably never happen. What happens when you throw in delinquencies where the time to foreclosure is infinity because the servicer cant prove the trust has standing to foreclose, and no one is willing to incur the risk that they get caught trying? That concern is not theoretical in New York, New Jersey, and Nevada. Each state, via different mechanisms, now has measures in place that are effective deterrents to filing questionable or even unverified foreclosure documents. The result? Foreclosures have come to a near dead halt in those states. For instance, in New York, pre a certification requirement, state-wide foreclosures were almost always in the 100 to 200 a day range. Now the normal daily volume is five or fewer.
In a recent post, in Florida, a state which has not seen any toughening of legal procedures but is widely reported as having long foreclosure timetables, Michael Olenick describes a widespread pattern of servicer foot dragging:
Foreclosure defense lawyers have clients who have not paid their mortgage in years, but face neither a foreclosure nor even a negative mark on their credit report. I recently received a call from a man who said he had not paid his $1.6 million mortgage in two years but his servicer has not foreclosed, and he faces no derogatory information on his credit report; he was frustrated because he is retired and just wants to move to a cottage. This phenomenon, which apparently isnt rare, might explain why shadow inventory reports that rely on credit reports to extrapolate shadow inventory are often dramatically lower than these calculations.
Every year the Republican dominated Florida legislature introduces legislation to speed along foreclosures, and every year the legislation fails. I personally believe this legislation to be both immoral and arguably illegal. However, it is impossible to believe this bank beholden governmental body is willing to repeatedly bite the hand that feeds them .. unless their master makes it quietly clear that they do not actually wish to accelerate liquidations but cannot publicly admit as much.
It is common for foreclosure mill lawyers to argue for delays in selling a home when nobody is representing a borrower. Judges, who want to clear their dockets, will rail at bank lawyers about the age of the case even while bank lawyers argue for yet another delay, while the other table where the borrower, the defendant, is supposed to sit is empty.
Bank-instituted delay tactics are not limited to Florida. Not long ago I spent the day with Sean OToole, CEO of foreclosureradar.com. Sean knows the foreclosure world and his data is, literally, the best in the Western states he covers. He noted the same effect in CA; lender-initiated delay after delay after delay selling a home. In CA, after three delays both parties must approve a further delay but Sean said banks routinely file stipulated delays when, in fact, borrowers just want to literally move on.
There is the well-known tendency of servicers to lose paperwork, where borrowers beg for mortgage modifications, short-sales, or deeds-in-lieu. These delay tactics rather than just answering no to a request make sense in this context because leaving a house in foreclosure limbo, forever, is the only solution that delays the inevitable balance sheet busting write-offs.
Attorney Lynn Szymoniak in her Fraud Digest has done a small scale study in Florida that she intends to expand. Her initial results indicate that the time to foreclosure numbers used for Florida are exaggerated. Note that Palm Beach County is considered to be pretty typical for the state:
Realty Trac provides the statistics in most stories. Realty Trac reported in January, 2012, that in Florida it took an average of 806 days to complete a foreclosure, the third longest time in the nation. New York reportedly took the longest to foreclose 1,019 days and New Jersey was second at 964 days.
An examination of actual foreclosure cases in Palm Beach County does not support the Realty Trac findings. In this study, all of the cases filed by a major forecloser, Deutsche Bank National Trust Company (DBNTC), in December, 2009, were examined. DBNTC filed 170 new cases in December 2009.
Of the 170 cases, 76 cases (43.5%) remained open as of January 15, 2012.
54 of the cases were closed with entry of a final judgment of foreclosure.
40 of the cases were voluntarily dismissed by DBNTC. In many cases, a voluntary dismissal indicates the parties have reached a settlement. In foreclosures, it is also common for a bank to dismiss when the file is being transferred to another firm, a very common occurrence. Of the cases with voluntary dismissals, the average time from filing to dismissal was 342 days.
Of the cases closed with a final judgment of foreclosure, the average number of days from the initial filing to the closing of the case was 345 days. A few cases continue long after the entry of a final judgment of foreclosure, because of post-judgment motions to re-open or set aside the final judgment. In such cases, the actual sales date was used as the end date. Of the 94 resolved cases, 58 (62%) were resolved in less than one year.
In many of the open cases, there had been very little effort by the banks to move the case to a final resolution. It was not unusual to find open cases where there had been no docketed activity for over six months, and there were numerous cases where there had been no docketed activity for over one year.
When a foreclosure is completed, and the home sold, it is often sold for less than half of the amount of the original loan. The median sales price for existing homes in Palm Beach County fell from $406,800 in June, 2005 to $183,700 in November, 2011. A trustee may actually benefit, in the short term, from prolonging the foreclosure process because the final realized loss does not have to be reported to investors until the sale, thus allowing the trustee to delay the inevitable bad news to the investors. The servicer certainly benefits as the average servicer fees for servicing a loan in foreclosure are often three to five times the fees for servicing a performing loan.
There were a few hard-fought cases, with discovery disputes appearing regularly on the docket. In such cases, these disputes often involved delays by the banks in responding to discovery requests by the homeowner/defendants, particularly where the banks were asked to produce trust-related documents such as the Pooling and Servicing Agreement from the trust or original loan documents. Many of the cases involved Affidavits of Lost Notes and Lost Mortgages. The delays were caused by the plaintiff/bank.
Her report sets forth all the loans in question if youd like to have a look for yourself. But consider the implications: homeowners fighting foreclosures is not a major source of delay. Instead it is the servicers lethargy, inability to prove standing, desire to maximize fees rather than do what is best for investors, and efforts to preserve the value of their second liens that are major contributors and in most cases the main drivers of delays. Yet the media has taken up the bank flattering line that the problem is really an overloaded court system and scheming borrowers. But urban legends die hard, and I suspect this one will prove to be frustratingly durable.
Demeter
(85,373 posts)There is a slow moving but nevertheless troubling effort underway to change foreclosure laws across the US. The Uniform Law Commission, the same body that created the Uniform Commercial Code, a model set of laws that sought to harmonize commercial laws in all 50 states, has had two full day public but not well publicized meeting of a study group on mortgage foreclosure. Note that it took over a decade to draft the first version of the UCC and a protracted period for it to be implemented by states (most states have adopted the updated version of the UCC, although certain articles of the new version have not been implemented in any states).
Given its august history, one would think the ULC would be above political influences. That would appear to be a naive assumption these days. The study committees public meetings meetings to solicit opinion from stakeholders on problems with foreclosures. Curiously enough, these stakeholder meetings had no representation of investors (Tom Deutsch of the American Securitization Forum would claim he played that role, but everyone in mortgage land knows the ASF is a sell side organization) and effectively no input from homeowners or consumer advocates (none at the first meeting, and only, at the second, in Washington last week).
I got reports from three people who attended the latest session, in Washington, last week, and all were disheartening. Tom Cox, the Maine attorney who broke the robosigning scandal, provided a memorandum that argues that the commission has effectively assumed that the problems require a legislative solution:
Before there can be a determination made as to whether there is a need for a new uniform act dealing with foreclosure issues, there must be an clear accounting of (1) what the problems are that cause legislation to be considered, (2) what has caused those problems to occur, and (3) only then, whether the problems lend themselves to a legislative solution that would be offered by a new uniform act. Unfortunately, it appears that the JEBURPA letter of May 30, 2011 and all of the subsequent steps leading to this stakeholders meeting have failed to conduct the step 2 analysis. Further, it appears that the assumption has been made that new legislation is the solution to the perceived problems without there having been analysis of whether other non-‐legislative solutions might be more appropriate.
I suggest you read Coxs memo in full: SEE LINK
Demeter
(85,373 posts)Demeter
(85,373 posts)If I had Onion-level parody skills, Id treat the latest story in The Hill on Team Obamas latest housing headfake masquerading as an initiative by riffing on one of its planned new program. Call it HUMP, Homeowners Upward Mobility Program. In true Ministry of Truth style, mortgage borrowers facing foreclosure would be moved, discreetly, into tent cities that would do Potemkin proud, with names like Country Club Lane and Lake Shore Drive and painted facades in front of their tents and shanties. Local merchants would praise the new subdivision and the inhabitants would say how nice it was to now be living in a McMansion, even if it was only really a couple of inches deep.
But instead you get my normal shtick.
The Administration is so far from having a plan that it is only talking about having a plan: White House signals more aggressive stance to protect homeowners. Its a little late to be talking about doing something in January of an election year, particularly when youve spent over a year (starting in November 2010) with the coverup known as the Foreclosure Task Force, which dovetailed nicely with the administration basically taking over the attorney general settlement talks, but letting Iowa AG Tom Miller get a lot of media profile so as to disguise who was running the show. Now the only thing the Administration could conceivably do (well it could in theory do a lot, but that would require being in a parallel universe in which Obama had realized he could go down in history as a great president if he leashed and collared the banks) is a really big refi program by Fannie and Freddie. Oh, but the Administration already has that happening, sort of. We talked about their new scheme last October:
Even the Administration conceded this wasnt much of a program
This plan is yet more proof that this Administration is not about to inconvenience banks to help homeowners and communities. It has tools in its power than would change the incentives for banks and make them far more willing to do what the overwhelming majority of mortgage investors would prefer, which is provide deep principal mods for viable borrowers. Forcing banks to write down seconds, and taking an aggressive stance on foreclosure fraud would restructuring debt more attractive than it is now. But just as the banks and their captured governments in Europe seem intent on grinding down entire economies to extract their pound of flesh, so are banks in the US continuing to operate a doomsday machine that grind up housing with no regard for the economic and social costs.
Note weve been skeptical of refi programs as a form of relief, since mere interest reduction wont make enough of a difference for borrowers in serious negative equity land. But having resorted, in typical fashion, to a path of little resistance option, what pray tell can Team Obama do now? The Hill tells us:
Theres an understanding now in the administration that there needs to be a comprehensive strategy to diminish the foreclosure rate and clean up the housing problem, said Rep. Barney Frank (Mass.)
Theres a lot of conversation going on, Frank said of talks with the administration to find solutions that do not require the expenditure of taxpayer money, a constraint during a time of record budget deficits
We need to put more pressure on the banks, Frank said.
The four largest servicers are the four largest banks. I dont believe investors have a right to resist that, he added.
OMG, there are so many layers of dissimulation in this that it is hard to know where to begin. I guarantee that There are a lot of conversations going on is code for They are flailing around but I am never gonna admit that to you on the record. How can Frank talk about We need to put more pressure on the banks and then talk about investors, and not bank second liens? He immediately presents investors as the obstacle, when banks dont want to take the losses. In fact, the New York Feds William Dudley said in a stunning argument in the Financial Times that first mortgage investors should take principal writedowns, but really, it was just too hard to do anything about the bank owned second liens. Huh? This the reverse of what is true and what ought to be done, but welcome to the Fed-backed world of cream for the banks, crumbs for the rest of us....And back to Frank, you may have missed the significance of this remark: I dont believe investors have a right to resist that. Um, what about a contract dont you understand? Ex bankruptcy or sovereign debt restructurings, investors have to AGREE to a restructuring. The amazing thing about this remark is Frank already lost this fight. There was a servicer safe harbor provision in the initial version of HAMP that was not present in the final version of the program. Why? Because some investors contended that it raised 5th Amendment issues. But more important, the horse has left the barn and is in the next county as far as being tough on bank is concerned. Obama has already given so much ground to services that its inconceivable that he could claw much back. The OCC has already entered into consent orders that are toothless by design. The seemingly neverending mortgage settlement negotiations if they ever get done are intended to be another get out of jail almost free card for bank miscreants. The article does indicate that the Administration is waking up to the idea that housing could be a contentious election issue. But the article is all grand talk, no new ideas, and most important, no evidence of real will.
But the reality is Obama is relying on looking less awful than the Republican candidate (the risk that disillusioned voters will stay home does not seem to be taken seriously enough by his team). So despite the palaver, fundamentally the Administration does not see the housing issue through the impact on individuals and families, communities, and the broader economy. If he did, you would have seen more aggressive action on jobs and foreclosure fraud some time ago. Instead, the mortgage mess is simply another opportunity to differentiate Candidate Obama from Brand Republican.
Demeter
(85,373 posts)So the ratings agencies have finally followed through on the big threat and downgraded a number of the eurozones credit ratings, including France and Austria, both of which have now lost their coveted Triple AAA status. Italy, Portugal and Spain were downgraded a further two notches. What does this mean and why does it matter? Investors (often badly informed) use ratings agencies like Fitch, Moodys and S&P as an indicator of default risk of a country. Countries that receive lower credit ratings are at a disadvantage when they sell bonds because buyers will not pay as much for bonds from a country perceived to be at risk. In effect, ratings agencies are able to bully countries into adopting policies that are friendly to the ratings agencies investors. A compliant government often reacts like Pavlovs dog to the threat or implementation of a downgrade, putting aside the interests of its citizens and starting to introduce discretionary contractions in its net spending, which it does by either raising taxes or cutting spending. My take is that the ratings downgrade causes a vicious cycle in which countries will end up adopting policies that will put their economies even more at risk than they were already. The reason for this is that in Europe, youve got a flawed financial structure that cant be fixed by austerity measures because it is incapable of dealing with huge external shocks to the demand for goods and services on the part of consumers.
As readers of this blog are well aware, Eurozone countries have faced two types of problems by entering the euro regime that have made them unstable.
First, they have given up their monetary sovereignty by giving up their national currencies and adopting a supranational one. By divorcing the fiscal authority (that which governs a countrys public treasury) from the monetary authority (that which governs the supply of money) member countries have relinquished their public sectors capacity to provide high levels of employment and output because they are restricted in what they can spend and how they can introduce stimulation in the form of jobs programs or infrastructure projects.
Second, by entering the eurozone, these countries have also agreed to abide by something called the Maastricht Treaty, an agreement which created the European Union and led to the creation of the euro in 1992. This treaty restricts each member countrys budget deficit to only 3 % and debt to 60% of GDP. Therefore, even if a country is able to borrow and finance its deficit spending, like Germany and France, it is not supposed to use fiscal policy above those limits. So countries have resorted to different means to keep their national economies afloat, from trying to foster the export sector, as Germany does, to cooking the books through Wall Street wizardry, like Greece and Italy did. Nations that exceed the limits by the greatest amounts are punished with high interest rates that drive them into a vicious death spiral because deficits rise and lead to further credit downgrades. That is what has happened to Greece, Ireland, Portugal, etc., and now threatens Italy and Spain. Vultures will soon be looking further into the core to places like France.
By contrast, a sovereign government which issued its own currency (such as the US or Canada) could respond to a huge drop in economic activity by expanding fiscal stimulus, or allowing the currency to fall (thereby enhancing growth through exports). On the other hand, eurozone governments ceded their national currencies to the European Central Bank (ECB), the sole entity that can issue unlimited amounts of euros. That is why were left with a situation in which the solvency crisis can only be solved by the ECB: It is the only entity which is in a position to buy unlimited quantities of national sovereign bonds in order to ensure that these countries do not continue to pay ruinous rates of interest and suffer further declines in economic activity as a consequence. Fiscal austerity only adds to the problem. And despite the ongoing hawkish rhetoric from the ECB, there are signs that they are getting it: The LTRO cant work, as youre essentially just swapping one liability for another one (albeit more long term in duration, therefore making it better for the banks). But note the way the ECB balance sheet is expanding: The consolidated assets of the European system of Central Banks is now 4.4 trillion euros or $5.7 trillion. In effect, the consolidated ESCB balance sheet is almost two times that of the Fed and its increase over the last 6 months is almost equal to the entire increase in the Feds balance sheet over the last several years. The figures on the ESCB balance sheet neither includes the recent half trillion euro Long Term Refinancing Option (LTRO) introduced last December, nor further mooted policies in that direction. CLSA has suggested that the speculation on the February 29th LTRO is EUR1trn. Some have suggested even higher numbers.
Bottom line: the system of European Central Banks (ESCB) has been engaged in massive QE and much more is in the pipeline.
With such massive injections of liquidity into the European banks, a European Lehman type failure with Lehmans systemic consequences becomes ever less likely.
MORE AT LINK
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About Marshall Auerback
Marshall Auerback has 29 years experience in the investment management business, serving as a global portfolio strategist for Madison Street Partners, LLC, a Denver based hedge fund. He also has also worked as an economic consultant to PIMCO, the worlds largest bond fund management group. He is a Fellow at the Economists for Peace and Security, a Research Associate at the Levy Institute, and a non-executive director of Pinetree Capital in Toronto, Ontario, Canada.
jtuck004
(15,882 posts)is no solution to the inequity that infests this country to be found in continuing our present course. I know there are people who think there is a solution to be found in continuing to play the current game, but I think they are deluding themselves, and being dishonest with others. There are currently three powerful parties in existence; the Democratic Party, the Republican Party, and the Financial Sector. Of the three, and although not elected by the people, the most powerful and also the most serious enemy of the American people by any measure is the Financial Sector. They have thoroughly mingled with both parties to the extent that there really is no hope of change without a true realization of who is controlling their lives by a large number of people.
Yet we are so divided that the educational effort and political likelihood of such an effort is Quixotic. Harriet Tubman is quoted as saying "I saved a thousand slaves. I could have saved a thousand more if only they knew they were slaves". In November we will have a choice between a sitting president who, despite his good work, is actively protecting the criminals that brought us our current financial crisis, (one need only to look at the charges and prison sentences that resulted from the S&L scandal, the racketeering and other crimes, to gain an understanding of the fraud that continues to be perpetrated), vs rich greedy bastards whose plans include making more structural changes that will increase their considerable advantage, and leverage, over most Americans.
There is no question that regardless of the election's outcome it will be at least a full decade or more before we even have a possibility of full employment (and that is remote). Based on the information provided us by the labor department every month, those jobs will be primarily service-oriented, providing little to no disposable income, continuing the downward spiral of misery and poverty that drove 2 1/2 million people into poverty last year, (that's more than the number of jobs that were created, btw) numbers that will continue to increase unless something drastic is done to create new opportunities. Our economy has traditionally been driven by the spending of those with decent jobs, but that and the tax base for the public sector is evaporating into the air as we speak. (Note: Obama may have given food stamps to more people than at any time in history, but I am DAMN GLAD HE WAS THERE TO DO IT, given that the previous president left us losing 700,000 jobs a month. So no, I am not an Obama hater, (the man has music in his soul, and it's on display today. How could you not like that? His opponents have NOTHING to compare to that, baby). But I think when the history books are written it will be seen as a terrible strategic mistake to have taken office while we were losing hundreds of thousands of jobs a month, after millions of wealth-creating manufacturing jobs had been lost, and not make a huge job and education program the first and only priority. It's only too bad the people that were advising him won't take the blame.
Business gets nowhere without investment, and a country is no different. We have forgotten to invest in our people. Unemployment doesn't move people forward, it just ends. Food stamps just barely keep them alive ($4 a day - Orange juice, 6 eggs and a loaf of day old bread - think there's enough there to keep you learning in school?). We need 30 million jobs, not in construction but in research and develpment, science, energy, medicine, and training for 100 million people at no cost to them. Instead we get pissy little job contracts and insurance mandates for people who have no jobs to pay for it, and a bunch of "Look, stopped the leak, and the boat is not sinking any lower in the water" - while the waves are lapping over the deck. We need to INVEST $5 to $10 Trillion at a minimum. But it's not happening. We are continuing to circle the drain as people cash out their pensions and millions are still to be foreclosed on, with more job loss and misery ahead for tens of millions of people.
We are not just poor - we have been pressed, not into involuntary, but voluntary servitude, with the Financial Sector as our masters. Elizabeth Warren's book details how our major expenses are no longer those we have much control over, such as transportation or food, but things we really can't lower by just having less, such as a simple roof over our heads or insurance to pay for medical care. And those are owned by the 1%.
From "An Essay on Voluntary Servitude", Étienne De La Boétie
...
"Poor, wretched, and stupid peoples, nations determined on your own misfortune and blind to your own good! You let yourselves be deprived before your own eyes of the best part of your revenues; your fields are plundered, your homes robbed, your family heirlooms taken away. You live in such a way that you cannot claim a single thing as your own; and it would seem that you consider yourselves lucky to be loaned your property, your families, and your very lives. All this havoc, this misfortune, this ruin, descends upon you not from alien foes, but from the one enemy whom you yourselves render as powerful as he is, for whom you go bravely to war, for whose greatness you do not refuse to offer your own bodies unto death...I do not ask that you place hands upon the tyrant to topple him over, but simply that you support him no longer; then you will behold him, like a great Colossus whose pedestal has been pulled away, fall of his own weight and break in pieces."
Many will vote for Obama, perhaps not because they expect great things, but because the alternatives are worse. Others will vote for the Republican Candidate. Regardless of the outcome we are supporting the tyrants, because the ultimate winner will be the Financial Sector.
We have allowed this to become an asset-driven country where the 1%, those with the gold, rule. One can play with politics and rules and regulations all day long, but except perhaps for a few local fights, those with the assets are going to control the power. Would it be possible to create a workable alternative to playing their game, begin to build a power structure that actively works against the greedy bastards by develping assets that aren't under their control? Maybe dozens, or scores of small groups that begin to take back power locally, but are part of a larger organization? Take back the school boards, create your own industry to the extent that you can.Get people together that are like-minded, have them put whatever money they can together and create business that relies less on the existing structures? Gather property and assets without mortgaging your effort to a bank, make it a community effort (Savings and Loan? Shades of George Bailey). Create your own schools? It was done in 1900, 1940. Maybe we could learn from the experience of those who began to build the country?
It doesn't have to be a third party, it could be Democrats that want a more progressive bent, one that invests in people and not banks, people who simply won't support candidates that favor the Financial Tyrants.
And if that isn't the solution, what is? Both parties favor the Financial Sector, our real enemy, and it is pretty clear that an appeal to most politicians basic humanity can be easily bought in enough numbers to influence the legislation that keeps the Financial Sector in power.
Saul Alinsky pointed out that when a group successfully challenges another for power, they often become just as bad as the ones they replaced. When people pointed out the irony in this, and asked him his solution, he said he would then go to work for the underdog.
Not for me. He liked the fight, I want to see people thrive, not just go through a lot of effort over and over again.
I know, Quixotic. What then is the solution if it is not rebuilding our assets away from the control of the Financial Sector?
This really doesn't have anything to with Obama, or even the next pres, it's more a long-term action focused on finding a way to stop serving the banksters. Regardless, come 2020, tens of millions of people will be poorer than they are today. But they\we don't have to be servants.
Just thinkin' out loud...
DemReadingDU
(16,000 posts)Fuddnik
(8,846 posts)Keep thinking and talking.
... the one enemy whom you yourselves render as powerful as he is.
Demeter
(85,373 posts)http://rt.com/news/iran-us-drone-toy-965/
Reports say the US is to get its top secret surveillance drone back from Iran. The catch is, the device, intercepted in December, has been reduced to 1:80 of its original size and is being marketed as a popular toy.
Iranian state radio was quoted by Associated Press as saying on Tuesday that the US RQ-170 Sentinel stealth drone toy models would soon be on sale in Tehran. They are expected to sell for 70,000 rials around US$4.
One of the models will even make it to the White House in response to a formal request from Washington last month asking Iran to return the top-secret device.
State radio reports that the model will be of the original aircraft, but one eightieth of the actual size...
THERE'S A MARKETING GENIUS SOMEWHERE IN IRAN...I HOPE THE US GOVT. DOESN'T FIND HIM. IMAGINE HIM BEING IN CHARGE OF A POLITICAL CAMPAIGN!
Demeter
(85,373 posts)Who are the real villains on Wall Street? When it comes to institutionalized greed and corruption, nothing tops the too-big-to-fail banks like JP Morgan Chase, Bank of America and Goldman Sachs. But these financial giants form only one part of the financial oligarchy. Lurking in the shadows are aggressive hedge funds that are just as lethal to our economic well being. If Goldman Sachs is a vampire squid, as Matt Taibbi so aptly named it, then hedge funds are like schools of piranhas or sharks, eager to strip the financial carcass to the bone...The sharks at this very moment are circling Greece, waiting to devour that nations resources. To understand this attack we need to enter into the rotting innards of our financial system. Lets starts with a closer look at why Greece has accumulated so much debt. The answer is not because they sit around sipping retsina rather than working. Instead it has everything to do with the attempt of Europe to improve the lot of the Greek people so they would embrace democracy. Lets not forget that from 1967 to 1974 Greece was ruled by a military junta that inflicted enormous pain on its people. Helping the Greek people escape poverty was critically important. Greeces entry into the European Union and the access to capital it provided, allowed the Greek people to rebuild the foundations of prosperity and democracy....Of course, our vampire squid banks also played a critical role in exacerbating the debt problem. When Greece hit the debt limits set by the EU, large U.S. banks profited mightily by structuring loans to Greece to skirt those rules. But the biggest blow came from the 2008 financial crash, which was wholly caused by Wall Streets reckless gambling spree. When the world economy nearly collapsed into another Great Depression, the weaker economies in the EU took the biggest hit. Ireland, Portugal and Greece suffered enormous job loss and massive declines in tax revenues. These countries became the victims of the vast housing bubble that was pumped up by Wall Street's fantasy financial schemes. Yes, they had accumulated too much debt, but the problem would have been manageable were it not for the Wall Street-created crash.
Enter the piranha hedge funds
Hedge funds are lightly regulated, privately managed investment funds created and designed for the super-rich, who expect to get much higher rates of return than the rest of us. While you and I are lucky to see a 2 percent increase in our 401ks, hedge funds hope to see gains far in excess of 10 percent. Pension funds and endowments have also followed the super-rich into these funds to gain access to these outsized returns. There are 8,000 or so hedge funds that now manage a total of nearly $2 trillion. But making these super-profits doesnt come easy. Hedge funds dont just get lucky on a few stocks or bonds. They look for an edge, and more than a few go over the edge by engaging in criminal activity like insider trading. Others hope to get to the Promised Land by being tough SOBs who dont think twice about impoverishing people. Those SOB hedge funds are circling Greece right now, doing all they can to get their hands on the money the European Union wants to lend Greece to reduce its long-term debt problems.
Heres the play: Greece does not have enough money to pay off the loans that are coming due in the next year. So the EU and the International Monetary Fund have assembled a bailout package to help Greece make those payments. In exchange, the Greek people are being asked to suffer through enormous cuts in government spending which means cuts in jobs, incomes, healthcare, pensions and public education. Everyday citizens are making enormous sacrifices. But the European Union also insists that the bond holders of Greek debt take a hit. After all, under the supposed rules of capitalism, if you make a bad loan, you suffer the losses. So the EU wants to recall the old bonds and replace them with new ones at lower interest rates more suited to Greeces financial condition. Imagine that! Financial elites are being asked to sacrifice a bit to pay for the problems they helped to create....Well guess what? The elites dont like it. You see, hedge funds have been buying up Greek bonds at steep discounts. They want to milk the deal for as much as possible. So they are refusing to accept what the EU is offering. The hedge funds want to capture as much of the bailout money as possible. They could care less if the Greek people suffer. (Think Bain.)
But wait -- why are the hedge funds refusing the offer when the alternative is having Greece default on the very bonds the hedge funds now own? If they continue to hold out, wont the hedge funds risk ending up with nothing at all? Heres where we dive into rotten core of modern finance. These hedge funds think they have covered their bets by taking out financial insurance on their bonds, which would pay them the full value of the bonds (not just the discounted price) if Greece defaults. (These insurance policies are called credit default swaps, and are issued usually by big banks that profit on the insurance premiums.) So the hedge funds that are playing hardball think they have their bets covered. If Greece doesnt give them a better deal on their bonds, the hedge funds will welcome a default in order to collect fully on their financial insurance policies....Theres only one little problem: The entire financial system might collapse, including our own, if Greece defaults. Thats because no one is sure if all the financial insurance can actually be paid off. It could be like AIG all over again, when that giant insurance company couldnt pay off its financial insurance policies. If one big bank fails to deliver it could set off a chain reaction of financial defaults around the globe.
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Les Leopold is the executive director of the Labor Institute and Public Health Institute in New York, and author of The Looting of America: How Wall Street's Game of Fantasy Finance Destroyed Our Jobs, Pensions, and Prosperityand What We Can Do About It (Chelsea Green, 2009).
Demeter
(85,373 posts)Candide - 11 You were dead, you know
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Candide - 12 I am easily assimilated (The Old Lady's tango)
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Demeter
(85,373 posts)York Capital Management
The group, which is housed above an Apple store in New York, has $14bn (£9bn) in assets. It was founded in 1991 and is part-owned by the Swiss banking group Credit Suisse. Founder and senior managing director Jamie Dinan has a reported net worth of about $1.2bn.
Marathon Asset Management
Another New York fund, Marathon describes its "core competency" as "distressed and situational investing". The 14-year-old, $10bn firm, founded by CEO Bruce Richards, is a member of the private sector creditor-investor committee, which is involved in protracted negotiations with the Greek government.
Och-Ziff
One of the largest hedge funds in the world, it manages about $28.4bn for its clients. Listed on the New York Stock Exchange in 2007, the fund was founded in 1994 by Daniel Och with support from the Ziff family. Mr Och spent 11 years at Goldman Sachs before forming the fund, a joint owner of the Peacocks retail chain.
GreyLock Asset Management
GreyLock claims to have dealt with $75bn of sovereign and corporate debt since it started operations in 1998. It is run by Hans Humes, who represented around $40bn of interests while Argentina's balance books were being restructured.
Vega Asset Management
Formerly one of Europe's largest hedge funds, Vega is not as powerful as it was but still unsettled markets when it threatened to sue Greece if restructuring of its debt made losses too big for its liking. Founded in 1996 by a former trader at Banco Santander, it resigned from the steering committee and demanded that at least half of Greece's debts be repaid.
Demeter
(85,373 posts)By Scot J. Paltrow
U.S. Attorney General Eric Holder and Lanny Breuer, head of the Justice Departments criminal division, were partners for years at a Washington law firm that represented a Whos Who of big banks and other companies at the center of alleged foreclosure fraud, a Reuters inquiry shows.
The firm, Covington & Burling, is one of Washingtons biggest white shoe law firms. Law professors and other federal ethics experts said that federal conflict of interest rules required Holder and Breuer to recuse themselves from any Justice Department decisions relating to law firm clients they personally had done work for....Both the Justice Department and Covington declined to say if either official had personally worked on matters for the big mortgage industry clients. Justice Department spokeswoman Tracy Schmaler said Holder and Breuer had complied fully with conflict of interest regulations, but she declined to say if they had recused themselves from any matters related to the former clients.
Reuters reported in December that under Holder and Breuer, the Justice Department hasnt brought any criminal cases against big banks or other companies involved in mortgage servicing, even though copious evidence has surfaced of apparent criminal violations in foreclosure cases.
The evidence, including records from federal and state courts and local clerks offices around the country, shows widespread forgery, perjury, obstruction of justice, and illegal foreclosures on the homes of thousands of active-duty military personnel.
Demeter
(85,373 posts)...In recent weeks the Justice Department has come under renewed pressure from members of Congress, state and local officials and homeowners' lawyers to open a wide-ranging criminal investigation of mortgage servicers, the biggest of which have been Covington clients. So far Justice officials haven't responded publicly to any of the requests.
While Holder and Breuer were partners at Covington, the firm's clients included the four largest U.S. banks - Bank of America, Citigroup, JP Morgan Chase and Wells Fargo & Co - as well as at least one other bank that is among the 10 largest mortgage servicers....
Covington represented Freddie Mac, one of the nation's biggest issuers of mortgage backed securities, in enforcement investigations by federal financial regulators. A particular concern by those pressing for an investigation is Covington's involvement with Virginia-based MERS Corp, which runs a vast computerized registry of mortgages. Little known before the mortgage crisis hit, MERS, which stands for Mortgage Electronic Registration Systems, has been at the center of complaints about false or erroneous mortgage documents...
Court records show that Covington, in the late 1990s, provided legal opinion letters needed to create MERS on behalf of Fannie Mae, Freddie Mac, Bank of America, JP Morgan Chase and several other large banks. It was meant to speed up registration and transfers of mortgages. By 2010, MERS claimed to own about half of all mortgages in the U.S. -- roughly 60 million loans. But evidence in numerous state and federal court cases around the country has shown that MERS authorized thousands of bank employees to sign their names as MERS officials. The banks allegedly drew up fake mortgage assignments, making it appear falsely that they had standing to file foreclosures, and then had their own employees sign the documents as MERS "vice presidents" or "assistant secretaries." Covington in 2004 also wrote a crucial opinion letter commissioned by MERS, providing legal justification for its electronic registry. MERS spokeswoman Karmela Lejarde declined to comment on Covington legal work done for MERS. It isn't known to what extent if any Covington has continued to represent the banks and other mortgage firms since Holder and Breuer left...
BOOK 'EM, DANNO!
Hotler
(11,445 posts)President Obama is as much to blame as Holder and crew. I just read this in LBN before I popped in here this morning. I'm so fucking pissed I want to start throwing things, but I know if do I'll just break something I'll regret later. And to think that our president had the guts to go on 60 Minutes and say that that the banksters did nothing illegal just immoral. Fuckers, all of them. I'm back to having no hope. The only future I see is hanging on by a thin thread for survival. I don't have much fight left in me anymore.
Demeter
(85,373 posts)1. Mitt Romney is worth $250 million.
2. He got rich by laying off American workers.
3. He pays a lower tax rate than you and the rest of the middle class.
4. He wants to be president so he can keep it this way.
If last night was any indication, it's a subject that makes Romney uncomfortable, but it's not going away.
OH, I THINK THERE'S MORE THAN THAT....THOSE ARE MERE BAGATELLES
Fuddnik
(8,846 posts)That he actually paid well below the 15% he's admitting to.
Right now, he's talking about releasing his current return in April. The one his accountants are doctoring up now.
With carried interest, and a whole slew of possible deductions, credits, and loop holes, I'm willing to bet that in past years, he's paid really close to 0%. And he really thinks he's entitled to that treatment.
What he's really entitled to is:
Hotler
(11,445 posts)Lloyd Blankfein can be next follow by ................
Demeter
(85,373 posts)(newsflash, Demeter has a social life, at least 2-3 times a year!)
I met a long-time friend and computer expert and he said:
There's going to be an armed revolution. We have to take 500 bankers and corporate CEOS and hang them. The economy will be fixed in two weeks.
Now this man is not a hotheaded fanatic. But there it is, unprovoked (by me).
Demeter
(85,373 posts)xchrom
(108,903 posts)it would even be better if i had coffee.
i must remedy that or i will surely perish.
Fuddnik
(8,846 posts)Past coffee time. Time for bloody mary's, screwdrivers, and mimosa's.
Hotler
(11,445 posts)Fuddnik
(8,846 posts)But, I'll do vodka. I start on tequila, and I need a bail bondsman.
xchrom
(108,903 posts)xchrom
(108,903 posts)(Reuters) - The representatives of Greece's private creditors left Athens unexpectedly on Saturday without a deal on a debt swap plan that is vital to avert a disorderly default, sources close to the negotiations told Reuters.
Negotiations will continue over the phone during the weekend but it is unlikely that an agreement can be clinched before next week, the sources said, as Athens races against the clock to strike a deal.
A lot of progress has been made on the details of the plan during talks between Athens and Institute of International Finance chief Charles Dallara, sources say, but any deal needs the approval of the IMF and euro zone countries, who insist on a substantial cut in the debt load.
The IMF and EU countries, and in particular the bloc's paymaster Germany, want to make sure the deal puts Greece's derailed finances back on a sustainable track before they agree to a new, 130-billion euro bailout, which is also crucial to avoid a messy default.
DemReadingDU
(16,000 posts)1/21/12 Greek Bondholder Talks Stalled, Agreement Unlikely By Monday Deadline
We were not at all surprised to learn this morning that not only has an agreement not been met ahead of Monday's critical Eurozone FinMin meeting (the first of many for 2012) in Brussels, but talks have "stalled". Dow Jones reports: "Talks between Greece and its private sector creditors over a debt writedown plan appeared to stall Saturday as the banks' top negotiator left Athens amid signs of fresh disagreements over how much Greece would pay its bondholders in the future.
Officials close to the talks said they may not conclude before a meeting Monday of euro-zone finance ministers where a second bailout which will keep Greece from defaulting is supposed to be discussed. Without a deal on the write-down of the debt held in private hands, the loan can't be released. Institute of International Finance chief Charles Dallara, who has been negotiating with Greek officials on the bond swap plan for the last two days, left Athens Saturday as hurdles remained over the interest rate the new bonds would pay private sector creditors.
"Right now there are no talks. There will be consultations with the EU and the IMF to determine where we stand and then we'll see. It (negotiations) has again become complicated with the new demands over the coupon," said a person with direct knowledge of the talks." Which is why any statements that Greece, or the ECB, has all the leverage are total rubbish - if Greece wanted to get the deal done over Hedge Funds' dead bodies, it would have. It hasn't. And yes, a forced cram down of UK-indentured Greek bonds is still a possibiliy, but we will shortly make all too clear that should Greece proceed with this last ditch scorched earth approach, it would mean a complete overhaul of the entire PIIGS bond market, and why a sell off in 800 billion of it would be imminent.
http://www.zerohedge.com/news/greek-bondholder-talks-stalled-agreement-unlikely-monday-deadline
Demeter
(85,373 posts)Nouriel Roubini and Ian Bremmer spoke to Bloomberg Televisions Margaret Brennan about the state of the global economy. Roubini said that the "probability of a recession in the United States is lower than 60 percent right now." On Europe, he said that even if an agreement is reached on Greece, "there are going to be so many holdouts that then theyll have a problem" and "either way youre going to get a credit event." This is my take as well. In Europe, the concern has to be more Italy and Spain and whether the periphery can meet deficit targets given the poor economic outlook in the euro zone.
Heres what Bloomberg writes about the interview:
"Even if they reach an agreement there are going to be so many holdouts that then theyll have a problem. Theyll either pay the holdouts and that becomes expensive, or if they dont pay them youll have a series of defaults, because theyre going to stop paying them. Or the way to avoid the holdouts from being holdouts is then to change domestic legislation, to cram down the terms of the majority on the holdouts. But if that happens then the CDS will trigger and that becomes a credit event. So either way youre going to get a credit event."
"The credit event can be two forms, either a form of default another one is if there are holdouts and you dont pay them and technically thats a default on the bonds on which you dont pay so theres a series of defaults on which you dont pay. Or three, if you change the terms of the bonds through legislation then thats considered a credit event by ISDA by the event triggering the CDS. And one way or another you get a credit event. One extreme is a default, another one is CDS triggering."
Roubini on the chances of recession in the U.S.:
"I would say latest numbers out of the US have been better for the fourth quarter. I even expect a slowdown so I think the probability of a recession in the United States is lower than 60 percent right now .A lot depends on the eurozone, if the eurozone situation becomes disorderly."
Bremmer on geopolitics:
"The economics are driving the geopolitics and thats after decades when security issues drove the geopolitics, the U.S. talking about geopolitics. U.S. talking about economic statecraft right now about, theyve done this not in a proactive way, theyve done this because American allies in Asia have been begging for the US to show commitment, whether its Singapore or Vietnam, whether its Japan or all the rest."
Bremmer on Chinas Obama concern:
"The Chinese are very concerned about what the Obama administration defense policy will be in the region, and saying that the Chinese are opaque. This will lead to more confrontation over the South China Sea, over the East China Sea, because the Chinese clearly want to ensure that theyre not on the back foot in a part of the world thats utterly critical for their own security sensibilities."
Roubini, Bremmer on China:
Roubini: "I do expect theres going to be a significant slowdown of growth in China this year. Were going to see it already in the Q1 numbers the Chinese will react by reducing the reserve requirement ratio and interest rates to try and jumpstart the economy I think its going to happen in the first half of the year."
Bremmer: "When it comes to the United States and China lets be clear. Structurally these countries are moving towards more conflict. These are the worlds two largest economies and that clearly is problematic in terms of economics volatility over the longer term. But as of this year the American economy is dominating, not foreign policy. And there can be a little bit of noise on Iran, a little bit of noise on China. When it comes to currency, the Chinese have been moving at their pace, very slowly, very incrementally, and American politicians have to show they dont like it. But to be clear, American multinational corporations are perfectly happy with it, they manufacture in China. They are on the other side of it. Its American Labor that has the problem with it. And they dont have a lot of influence with the Republicans right now."
Roubini on whether the slowdown in Europe and the United States will spread:
"In the case of the eurozone its clearly the periphery is not just in a recession but a deepening recession. So the eurozone is in a recession, the UK looks like its going towards a recession. The data from the United States has been somehow more mixed, positive lately but in my view the process of deleveraging the public and private sector is going to continue that implies slow domestic growth demand and the exports of the United States are not going to improve."
Bremmer on Iran oil sanctions:
"The main implication behind the oil sanctions against Iran is that China will get cheaper oil from Iran, lets be clear about that. But leaving that aside, the Obama administration has actually recently said that purpose of those sanctions is regime change in Iran and theyre doing that for domestic reasons because the Republicans have outflanked them a little bit. They said well we might have to engage in military actions. Obama doesnt want to look soft but wants to change his policy. So heres a way of saying same policy, tougher line. Great for domestic policy, not so great for dealing with Iran."
Source: Bloomberg Television
Demeter
(85,373 posts)Demeter
(85,373 posts)Private owners of Greek debt have made their maximum offer for the losses they are willing to accept, the bondholders lead negotiator has said, implying that any further demands could kill off a voluntary deal and trigger a default
Read more >>
http://link.ft.com/r/2SRI11/5VEVWC/6ADGM/AMDHFC/IILBQ8/T3/t?a1=2012&a2=1&a3=22
Ghost Dog
(16,881 posts)xchrom
(108,903 posts)Id love to make this product in America. But Im afraid I wont be able to.
My host, a NASA engineer turned Silicon Valley entrepreneur, has just conducted a fascinating tour of his new clean-energy bench-scale test facility. Its one of the Valleys hottest clean-technology startups. And hes already thinking of going abroad.
Wages? I ask.
His dark eyebrows arch as if I were clueless, then he explains the reality of running a fab -- an electronics fabrication factory. Wages have nothing to do with it. The total wage burden in a fab is 10 percent. When I move a fab to Asia, I might lose 10 percent of my product just in theft.
Im startled. So what is it?
Everything else. Taxes, infrastructure, workforce training, permits, health care. The last company that proposed a fab on Long Island went to Taiwan because they were told that in a drought their water supply would be in the queue after the golf courses.
So begins my education on the hollowing-out of the American economy, which might be titled: Its not the wages, stupid.
Demeter
(85,373 posts)Startups are at a tremendous disadvantage here, expected to spend and spend to comply with rules designed for well-established and generally corrupt rust-belt era manufacturing. Or even service industries face such huge hurdles that unless you are indispensable, and some big firm pays you handsomely so you can swing the gargantuan overhead, it's hopeless. That's why universities are trying to be "incubators" to protect the inventor/entrepreneur from doing battle with Regulation right off the bat.
Some of those regulations seem designed to prevent competition, to protect established businesses.
xchrom
(108,903 posts)Is how much better off business would be w/ Medicare for all.
Demeter
(85,373 posts)They will just throw away the people who get sick.
xchrom
(108,903 posts)take boomers -- lay them off in the time of the 'new reality' and they never find another job.
Demeter
(85,373 posts)George Washington: http://www.nakedcapitalism.com/2012/01/george-washington-corrupt-regimes-crumble-when-the-foot-soldiers-refuse-to-carry-out-the-tyrant%E2%80%99s-draconian-orders.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+NakedCapitalism+%28naked+capitalism%29
Its Always When The Foot Soldiers of the Elite Wont Carry Out the Forms of Draconian Control that These Dead Regimes Crumble
Pulitzer prize winning reporter Chris Hedges pointed out recently (starting at 5:05):
I was in Leipzig on November 9, 1989 with leaders of East German opposition and they told me that - perhaps within a year there would be free passes back and forth across the Berlin wall.
Within a few hours, the Berlin Wall, at least as far as an impediment to human traffic, did not exist.
Week after week, month after month, these clergy in Leipzig held these candlelit vigils. And it was slow at first
people forget. Just like the Egyptian revolution has been percolating for many many months, and even years.
And suddenly, it began to grow. [Indeed, a study of history shows over and over that people don't realize how close they may be to a positive turning point ... if they just persist.]
And Honecker who had been in ruling East Germany since the time of the dinosaurs sent down a paratroop division to Leipzig .. . and they wont attack the demonstrators.
Its always when the foot soldiers of the elite wont carry out the forms of draconian control that these dead regimes crumble.
And thats why its so important not to respond to police provocation.
No wonder veterans appear to have been targeted. See this and this LINKS AT ORIGIN.
No wonder returning veterans are treated as suspected terrorists.
No wonder images such as this, this and this are so powerful LINKS AT ORIGIN.
xchrom
(108,903 posts)So who really lost Detroit? Why did the U.S. auto industrys domestic market share decline from 71.1 percent in 1998 to 44.8 percent in 2009? Why does the U.S. now produce fewer cars than China? And what does this story tell us about the overall causes of decline in American manufacturing?
The conventional wisdom is that wages and union contracts simply made American cars too expensive. During the auto- industry collapse of 2008, the news media bombarded the public with data about how much higher labor costs are in Detroit factories compared with those in non-unionized Southern states. The New York Times reported, for example, that at GM the average worker was paid about $70 an hour.
Trouble is, that figure was wrong.
In 2007, the average hourly wage in a unionized Detroit auto plant was $29. The average hourly wage in a non-unionized Toyota plant in Kentucky? $30. In Japan, Toyota paid assembly- line workers about $22 an hour. True, thats less expensive. But when you consider that wages make up about 10 percent of a cars cost, it becomes clear that wages are not the reason for Detroits struggles.
As for that $70-an-hour figure, its the sum of the hourly wage plus the cost of retiree health-care benefits and pensions. U.S. auto companies have carried these costs like a ball and chain.
Demeter
(85,373 posts)If there was ever a news story that crystalized the moral dementia of modern Wall Street in one little vignette, this is it.
Newspapers in Colorado today are reporting that the elegant Hotel Jerome in Aspen, Colorado, will be closed to the public from today through Monday at noon, because a local squire has apparently decided to rent out all 94 rooms of the hotel for three-plus days for his daughters Bat Mitzvah. The hotels general manager, Tony DiLucia, would say only that the party was being thrown by a "nice family," but newspapers are now reporting that the Daddy of the lucky little gal is one Jeffrey Verschleiser, currently an executive with Goldman, Sachs....At first, I couldn't remember how I knew that name. But then I looked it up and saw an explosive Atlantic magazine story, published last year, called, "E-mails Suggest Bear Stearns Cheated Clients Out Of Millions." And then I remembered that piece, and it hit me: Jeffrey Verschleiser is one of the biggest assholes in the entire world! The story begins at Bear Stearns, where Verschleiser used to work, up until the company exploded, in large part because of him personally. Back in the day, you see, Verschleiser headed Bears mortgage-backed securities operations. Toward the end of his tenure, his particular specialty began with what at the time was the usual industry-wide practice, putting together gigantic packages of crappy subprime mortgages and dumping them on unsuspecting clients. But Verschleiser reportedly went beyond that. According to a lawsuit later filed by a bond insurer called Ambac, Verschleiser also masterminded a kind of double-dipping scheme. What he would do is sell a bunch of toxic mortgages into a trust, which like all mortgage trusts had provisions written into their pooling and servicing agreements (PSAs) that required the original lenders to buy the loans back if they went into default. So Verschleiser would sell bad mortgages back to the banks at a discount, but instead of passing the money back to the trust, he and other Bear execs allegedly pocketed the funds.
From the Atlantic story by reporter Teri Buhl:
Imagine giving someone a hundred bucks to buy a bushel of apples, but making a deal with him that he has to buy back any apples that turn out to have worms in them. That's what happened here: Bear sold the wormy apples back to the farmer, but instead of taking the money from those sales and passing it on to you, they simply kept the money, according to the suit. How wormy were those apples? In one infamous email cited in the suit, a Bear exec colorfully described the content of the bonds they were selling:
So did Verschleiser himself know the mortgages were bad? Not only did he know it, he went so far as to tell his colleagues in writing that it was a waste of money to even bother performing due diligence on the bad bonds:
One of the ways that banks like Bear managed to convince investors to buy these bonds was by wrapping them in bond insurance through companies like Ambac, commonly known as monoline insurers. Investors who knew the bonds were insured were less worried about default. Verschleiser, seeing that Bear had gotten firms like Ambac to insure its sack of shit bonds, saw here a new opportunity to make money. He first induced the monolines to insure the worthless bonds, then bet against the insurers! (Is it any wonder this guy ended up hired by Goldman, Sachs?)...So in essence, Verschleiser was triple-dipping. First he was selling worthless sacks of shit to investors, representing them as good investments. Then, he kept the money from the return sales of the wormy apples. And then, on top of that, he made money by betting against the insurers he was sticking with these toxic assets. We all know what happened from there. Bear, Stearns went under, thanks in large part to insane schemes like Verschleisers, and all of us were forced to pick up at least part of the tab as the Fed spent billions subsidizing Bears emergency takeover by JP Morgan Chase. In subsequent litigation, Chase has steadfastly refused to buy back the bad mortgages dumped on investors by the likes of Verschleiser, and has even fought tooth and nail to prevent the information in the Ambac suit from being made public. Ambac went into Chapter 11 bankruptcy in 2010 for a variety of reasons, some of which had nothing to do with its losses in deals like these. But certainly Ambac and other monoline insurers like MBIA suffered for having insured worthless mortgage bonds sold onto the market by the Verschleisers of the world. Ambac in its suit asserted that it paid out over $641 million in claims related to the bonds from the Bear deals.
With all of this, though, Verschleiser landed happily on his feet. He reportedly heads Goldmans mortgage division now. And after cutting a mile-wide swath of losses through the American economy, helping destroy two venerable firms in Bear and Ambac, bilking the taxpayer for untold millions more (he is also named in a lawsuit filed by the Federal Housing Finance Agency for allegedly speeding bad loans onto securitization before they defaulted), Verschleiser is now living the contented life of a proud family man, renting out a 94-room hotel for three days for his daughters Bat Mitzvah.
................................................................................................................................................................
Demeter
(85,373 posts)-- how could it be possible that what Verschleiser did is not illegal? How is he not in jail? The answer is that if the allegations in the Ambac suit are true, it certainly would seem to be illegal. Most notably, the pocketing of putback money almost has to be a form of theft or embezzlement. The rest of Bear/Verschleiser's scheme, however, is also illegal, but in a more complicated way. If you read the complaint in the Ambac suit, what you see is a sort of extreme blueprint for how mortgage securitization worked in general during that period....There is a veritable sea of fraudulent and corrupt practices one may gaze upon here, if the SEC were looking for something to target -- everything from withholding material facts from customers and ratings agencies, to threatening ratings agencies with lost business if they didn't overrate bonds, to lying in offering documents, to the manipulation of accounting procedures (this went on after the loans had moved onto Chase's books), etc. -- but the most flagrant violation in the suit involves the issue of due diligence, and here we do know a lot about Verschleiser's role.
It seems that when Bear did do due diligence in these deals, it very frequently overrode the firms they'd hired to do that due diligence, and put the loans in the deals anyway. In the third quarter of 2006, Bear overrode its due diligence firm an incredible 65% of the time, putting loans into their securitizations despite an outside firm finding red flags in the notes. Even worse, Bear went out of its way to hide the evidence that it was knowingly ignoring due diligence....This is fraud because in its agreements with investors, Bear promised to conduct "due diligence," it promised to conduct "quality control" testing of the loan pools, it promised to "repurchase" defective loans, and it also promised to implement "seller monitoring," i.e. to prevent the securitization of loans from bad suppliers. But it not only didn't do these things, it engaged the opposite behavior and knowingly covered up its fraud by deleting its communications. Verschleiser was personally named in the evidence offered in the Ambac suit. In a letter to Ambac, Bear's RMBS Investor Relations managing director Cheryl Glory wrote that "Jeff will... provide you with the due diligence results of all three deals once complete." But this is the same Jeff who we now have in writing saying this about those promised due diligence results: "We are wasting way too much money on Bad Due Diligence," and "We're just burning money hiring them." It doesn't take a genius to deduce that Bear was not upholding its contractual obligations by delivering what it itself considered "bad due diligence" to Ambac. At the very least, this is actionable.
Verschleiser undermined due diligence in other ways. One good one was to demand that his due diligence people operate at speeds that made genuine due diligence impossible. At one point during these deals, Verschleiser reamed out his immediate subordinate, co-head of mortgage finance Baron Silverstein, over the "problem" of the due diligence department taking too much time to do its work. Silverstein responded by issuing the following tirade to John Mongelluzzo, Bear's VP for Due Diligence, demanding that he not get in the way of Bear's insane goal of funding 500 mortgages a day:
Whenever any right-wing loon, or Bloombergite, tries to tell you the mortgage crisis was caused by the government forcing the poor banks to lend to broke black people, please direct them to this passage. The banks not only wanted to give out these loans, they wanted to give them out at the speed of light. They wanted to crank them out so fast that their own auditors literally couldn't read the writing on the loan applications. This was greed, not policy. Anybody who says anything else is high on something.
Anyway, given that much of Verschleiser's questionable behavior is in writing, his case sure seems court-ready. But for whatever reason, he has not been indicted. One can almost understand a regulator not wanting to take on the whole circular securitization scheme -- Bear lends money to corrupt mortgage firm, mortgage firm makes bad loans, Bear packages bad loans and sells to investors, then takes the proceeds and creates more bad loans -- because it is so complex and difficult to prove. But in this case there are simple issues of fraud and theft thatcould be taken on without having to prosecute broader crimes related to securitization. But prosecutors, apparently, just blew those off. In the current environment, regulators even miss the layups.
Demeter
(85,373 posts)Phil Angelides, formerly the chairman of a federal commission who led investigations into why the financial markets collapsed, is heading an investment group that hopes to "do a good thing" for America while turning a profit from the wreckage of the housing market. VULTURE CAPITALISM, IN PEACOCK'S FEATHERS The startup company, of which Angelides is executive chairman, seeks to raise money from investors to purchase troubled mortgages from banks and other financial institutions in order to help keep homeowners from being foreclosed upon, according to a January 4 letter reviewed by Reuters.
The company, Mortgage Resolution Partners, claims its strategy of using "legal and political leverage" to acquire the loans could generate a 20 percent annual return for investors. The company intends to purchase mortgages at a steep discount and re-work them to enable the homeowners to continue making payments, with the firm collecting the proceeds. "We just might do a good thing for America, and along the way get a great return on investment," says the letter to prospective investors. "If our hopes do not pan out, the amount wagered should be a deductible loss." In the letter, the mortgage company refers to its political connections as its "secret formula."
Angelides, a former California state treasurer, Democratic politician and land developer, was head of the Financial Crisis Inquiry Commission until last February. Planning for the Mortgage Resolution Partners began last summer, less than five months after the Commission wrapped up its work in Washington, D.C. In January 2011, the Commission issued a 662-page report that highlighted Wall Street's role in the collapse of the U.S. housing market....The idea of investment groups buying distressed mortgages and writing down the principal and attempting to make money by keeping homeowners current on their new mortgages isn't totally new. A handful of other investment funds are trying that, including Selene Residential Mortgage Opportunity Fund, founded by mortgage-backed securities pioneer Lewis Ranieri. But the more common approach is for investors to raise money to buy foreclosed homes and rent them out. Lenzner, the spokeswoman for Mortgage Resolution Partners, said since the group has just been launched "it's premature to determine" the firm's final approach to the mortgage problem because it is "still in the research and development stage."
Response to Demeter (Reply #68)
Ghost Dog Message deleted by the DU Administrators
Demeter
(85,373 posts)xchrom
(108,903 posts)When businesspeople complain about regulations, you should generally be skeptical. The regulations, after all, are there precisely because some businesses can make more money by despoiling the environment, endangering public health and safety, and threatening the financial system. A regulation thats not annoying someone by wrecking his money-making scheme would be completely pointless.
But there is one category of complaints about regulations that should earn your sympathy: the complaints that too many government regulations are unreadable. Incomprehensible rules undermine, rather than enhance, the goal of preventing misconduct. They create unique burdens on smaller organizations or new entrants into a line of work. Hard-to-understand rules are a lawyers best friend, and the need for companies to lawyer up is a huge advantage to large or established entities.
Consider, for example, the relevant federal rules about renovating an old building suspected of containing lead paint. I hesitate to even quote examples of confusing regulatory language lest my column itself become unreadable, but surely the U.S. government can do better than: On or after July 6, 2010, all renovations must be performed in accordance with the work practice standards in §745.85 and the associated recordkeeping requirements in §745.86(b)(1) and (b)(6) in target housing or child-occupied facilities, unless the renovation qualifies for the exception identified in §745.82(a). Youll be glad to know, however, that §745.82(a) does, among other things, offer an exemption for emergency renovations (which has a word salad definition of its own)with the sub-exception that emergency renovations are not exempt from the cleaning requirements of §745.85(a)(5), which must be performed by certified renovators or individuals trained in accordance with §745.90(b)(2), the cleaning verification requirements of §745.85(b), which must be performed by certified renovators, and the recordkeeping requirements of §745.86(b)(6) and (b)(7). Got it? Me neither.
Into this stew dives Iowa Democrat Rep. Bruce Braley, who unveiled his Plain Regulations Act on Wednesday, saying, Gobbledygook dominates the regulations issued by government agencies, making it almost impossible for small businesses to understand the rules of the road. Forcing the government to write in plain English is a great idea. So good, in fact, that its enough to make you wonder why it hasnt happened already.
Demeter
(85,373 posts)'The law is clear': Judge jails 84-year-old billionaire for contempt after failing to finish Michigan-Canada bridge project
http://www.dailymail.co.uk/news/article-2085900/Billionaire-84-jailed-finishing-Michigan-Canada-bridge-project.html
The elderly billionaire owner of Detroit's Ambassador Bridge has been jailed January 13th... for failing to meet court-ordered deadlines on a multimillion dollar construction project. Manuel 'Matty' Moroun, along with company president Dan Stamper, has been sent to jail until his company complies with a 2010 court order to get the work on the $230m Gateway project done. It is not yet clear how long the men will stay behind bars, but the work could take up to a year. Detroit International Bridge Co. was declared in contempt of court in November for failing to finish work on the state ordered project linking the U.S.-Canada span with two Detroit interstates. The bridge, which handles 8,000 trucks a day and $100 billion in trade every year, accounts for the bulk of Mr Moroun's £1.5 billion fortune...'It is clear that the Detroit International Bridge Co. does not intend to comply with the court orders unless meaningful sanctions are imposed,' Wayne County Judge Prentis Edwards said. Lawyers for Mr Moroun and Mr Stamper asked Judge Edwards to suspend his decision so they could appeal, but the judge declined.
Ken Mogill, lawyer for Mr Stamper, said the judge was 'absolutely wrong' since it is the company, not the men, that was earlier found in contempt. 'Neither Mr Moroun nor Mr Stamper had received a notice that they individually could be facing consequences,' Mr Mogill said. 'Its not enough that a company has been found in contempt. The law is so clear.' Stunned Mr Moroun, who according to Forbes is the 259th richest American, and Mr Stamper were escorted out of the courtroom to be booked in by deputies. The bridge company must also pay $7,500, the maximum under state law for civil contempt, and the states legal fees. Their lawyers said they would immediately go to the Michigan Court of Appeals seeking to suspend the judges order and free them.
The state of Michigan sued the company after it failed to meet a 2008 deadline to finish its part of a $230-million project to improve traffic at the bridge connecting Detroit to Windsor, Canada. The privately-owned Ambassador Bridge is the busiest crossing between the United States and Canada, providing a continuous flow of auto parts and completed vehicles each way from Detroit to Windsor, Canada.The project was intended to link the bridge with Interstate 75 and Interstate 96 in the United States directly, pulling the almost continuous flow of semitrailer trucks off surface streets. Instead, the company has failed to correct variations from the plan and the other parts have not been completed. Gregory Johnson, MDOT chief of operations, said it could take a year to get the work done. 'We take no joy or satisfaction in seeing these gentlemen incarcerated,'Mr Johnson said. 'Our only goal is to see this contract, this project, completed.'
The hearing began with lawyers for Mr Moroun insisting he is not the real owner. They say a Moroun trust has a minority stake in a holding company that owns the bridge. But state officials say Mr Moroun clearly is in charge, and the judge agreed. 'Mr Moroun has the power, the authority to make sure there is compliance.' with court orders, Judge Edwards said.
After a November hearing, state engineer Tony Kratofil said the bridge company has done only 'superficial' work to follow the judges previous orders. Without the improvements, he said, trucks are stuck using neighbourhood roads. Mr Kratofil said on Thursday there was still a lack of progress on the project.
xchrom
(108,903 posts)(Reuters) - Profit warnings from companies jumped more than 70 percent in the final three months of 2011, the biggest quarterly rise for a decade, as markets were rocked by economic uncertainty, Ernst & Young said on Sunday.
Companies quoted on London's main list and junior AIM market issued 88 profit warnings in the final quarter, up from 51 in the third quarter, the accountancy firm said.
"As evidenced by the sharp jump in the number of warnings, 2011 was a tough year for many companies and this year is likely to continue in the same vein with the gap between the winners and losers widening," said Alan Hudson, head of Ernst & Young's UK restructuring practice.
"Many businesses are still expanding profitably, but others - the zombie companies - remain moribund by debt or defunct business models, unable to build value or gain momentum in these challenging economic conditions."
xchrom
(108,903 posts)The housing market ended the year on a positive note with strong sales in December, but a glut of unsold homes will likely push prices lower through much of this year, forecasters said Friday.
Sales of existing homes hit an 11-month high last month and the number of properties on the market fell to the lowest level in nearly seven years, according to the National Association of Realtors.
Unseasonably warm weather may have helped boost sales, but analysts said a strengthening job market and record low mortgage rates should buoy housing in coming months. Still, they were troubled by the high level of "distressed homes" for sale, including short sales of underwater properties or sales of foreclosed properties. Nearly one-third of existing-home sales were distressed last month, according to the Realtors.
advertisement
In addition, one-third of Realtors said home sales fell through last month because of declined mortgage applications or appraisals that fell short of the required values.
Demeter
(85,373 posts)Jon Corzine, MF Global Holdings Ltd.s former chief executive officer, was sued under U.S. racketeering law by commodity customers alleging he and other executives unlawfully took money from their accounts and failed to segregate their money as the law requires. The suit alleges that hundreds of millions of dollars were transferred from customers accounts to other MF Global units, at a time when the company was short of cash and faced calls for collateral as its risky Eurobond and other investments fell in value.
Named in the suit, JPMorgan Chase & Co., the companys banker, should have noticed the depletion of customer money, and should have investigated, according to the plaintiff. The customers are seeking unspecified restitution and damages. The suit, filed in federal court in Manhattan today on behalf of Robert Marcin and other MF Global segregated account holders by Grant & Eisenhofer PA of New York, is one of at least 10 against Corzine and other MF Global executives. Plaintiffs including the Virginia Retirement System have been competing to lead a consolidated lawsuit seeking so-called class-action status. Mary Sedarat, a JPMorgan spokeswoman, declined to comment on the suit. Andrew Levander, a lawyer for Corzine, didnt immediately respond to an e-mail seeking comment.
Following the Rules
JPMorgan did contact MF Global on at least one occasion when customer money was used to pay an overdraft and was reassured the transaction followed all the necessary rules, according to a person familiar with the transfer. Corzine has said his staff told him that a transfer of customer money was following the rules, which allowed for some use of segregated assets.
.......................................................................................................................................
The case is Marcin v. Corzine, 12-cv-0499, U.S. District Court, Southern District of New York (Manhattan).
Demeter
(85,373 posts)A consortium led by Chinese media entrepreneur Bruno Wu is scouring Hollywood for film companies to acquire, in a sign of Chinas growing interest in the US entertainment industry
Read more >>
http://link.ft.com/r/XYEWFF/IITIIJ/NRHD3/8ZXLMA/XHMWBL/28/t?a1=2012&a2=1&a3=22
HOW BAD COULD IT GET? (SHAKES HEAD SADLY) THEY COULDN'T DO WORSE THAN WHAT'S COMING OUT OF HOLLYWOOD NOWADAYS.
At least he's got the name for Hollywood....
Demeter
(85,373 posts)Would an increase in IMF funds to bail out the eurozone be justified? In particular, should non-eurozone countries participate in raising this new capital? I think not!
Read more >>
http://link.ft.com/r/P75VYY/PF0R9Q/6ADGM/YBC98T/16XY6A/B7/t?a1=2012&a2=1&a3=22
THE MAN'S GOT GUTS, YOU HAVE TO ADMIT....GOING AGAINST THE 1% LIKE THAT, AND IN PUBLIC, TOO.
Demeter
(85,373 posts)Mitt Romney is casting the 2012 campaign as free enterprise on trial defining free enterprise as achieving success through hard work and risking-taking. Tea-Party favorite Senator Jim DeMint of South Carolina says hes supporting Romney because we really need someone who understands how risk, taking risk is the way we create jobs, create choices, expand freedom. Chamber of Commerce President Tom Donahue, defending Romney, explains this economy is about risk. If you dont take risk, you cant have success. Wait a minute. Who do they think are bearing the risks? Their blather about free enterprise risk-taking has it upside down. The higher you go in the economy, the easier it is to make money without taking any personal financial risk at all. The lower you go, the bigger the risks.
Wall Street has become the center of riskless free enterprise. Bankers risk other peoples money. If deals turn bad, they collect their fees in any event. The entire hedge-fund industry is designed to hedge bets so big investors can make money whether the price of assets they bet on rises or falls. And if the worst happens, the biggest bankers and investors now know theyll be bailed out by taxpayers because theyre too big to fail. But the worst examples of riskless free enterprise are the CEOs who rake in millions after they screw up royally....Near the end of 2007, Charles Prince resigned as CEO of Citgroup after announcing the bank would need an additional $8 billion to $11 billion in write-downs related to sub-prime mortgages gone bad. Prince left with a princely $30 million in pension, stock awards, and stock options, along with an office, car, and a driver for five years....Stanley ONeals five-year tenure as CEO of Merrill Lynch ended about the same time, when it became clear Merrill would have to take tens of billions in write-downs on bad sub-prime mortgages and be bought up at a fire-sale price by Bank of America. ONeal got a payout worth $162 million....Philip Purcell, who left Morgan Stanley in 2005 after a shareholder revolt against him, took away $43.9 million plus $250,000 a year for life.
Pay-for-failure extends far beyond Wall Street. In a study released last week, GMI, a well-regarded research firm that monitors executive pay, analyzed the largest severance packages received by ex-CEOs since 2000. On the list: Thomas E. Freston, who lasted just nine months as CEO of Viacom before being terminated, and left with a walk-away package of $101 million. Also William D. McGuire, who in 2006 was forced to resign as CEO of UnitedHealth over a stock-options scandal, and for his troubles got pay package worth $286 million. And Hank A. McKinnell, Jr.s, whose five-year tenure as CEO of Pfizer was marked by a $140 billion drop in Pfizers stock market value. Notwithstanding, McKinnell walked away with a payout of nearly $200 million, free lifetime medical coverage, and an annual pension of $6.5 million. (At Pfizers 2006 annual meeting a plane flew overhead towing a banner reading Give it back, Hank!) Not to forget Douglas Ivester of Coca Cola, who stepped down as CEO in 2000 after a period of stagnant growth and declining earnings, with an exit package worth $120 million. If anything, pay for failure is on the rise. Last September, Leo Apotheker was shown the door at Hewlett-Packard, with an exit package worth $13 million. Stephen Hilbert left Conseco with an estimated $72 million even though value of Consecos stock during his tenure sank from $57 to $5 a share on its way to bankruptcy.
**
But as economic risk-taking has declined at the top, its been increasing at the middle and below. More than 20 percent of the American workforce is now contingent temporary workers, contractors, independent consultants with no security at all. Even full-time workers who have put in decades with a company can now find themselves without a job overnight with no parachute, no help finding another job, and no health insurance. Meanwhile the proportion of large and medium-sized companies (200 or more workers) offering full health care coverage continues to drop from 74 percent in 1980 to under 10 percent today. Twenty-five years ago, two-thirds of large and medium-sized employers also provided health insurance to their retirees. Now, fewer than 15 percent do. The risk of getting old with no pension is also rising. In 1980, more than 80 percent of large and medium-sized firms gave their workers defined-benefit pensions that guaranteed a fixed amount of money every month after they retired. Now its down to under 10 percent. Instead, they offer defined contribution plans where the risk is on the workers. When the stock market tanks, as it did in 2008, the 401(k) plan tanks along with it. Today, a third of all workers with defined-benefit plans contribute nothing, which means their employers dont either. And the risk of losing earnings continues to grow. Even before the crash of 2008, the Panel Study of Income Dynamics at University of Michigan found that over any given two-year stretch about half of all families experienced some decline in income. And the downturns were becoming progressively larger. In the 1970s, the typical drop was about 25 percent. By late 1990s, it was 40 percent. By the mid-2000s, family incomes rose and fell twice as much as they did in the mid-1970s, on average...
Demeter
(85,373 posts)Robert Reich explains how the governments role has veered away from serving the people.
Thanks to the Supreme Court and Citizens United, the same big corporations and billionaires that destroyed our economy and caused millions of us to lose our jobs and homes, are spending obscene amounts to drown out our voices in elections and take over our government.But together, "We the People" can set things right.Stand with Robert Reich and join the movement for a constitutional amendment today.
Demeter
(85,373 posts)but there is a complete copy of the show in several sections:
http://www.youtube.com/user/ALYSSZ?feature=watch#p/c/AF61DE27898383EC/0/FaeYUouI6x4
http://www.youtube.com/user/ALYSSZ?feature=watch#p/c/AF61DE27898383EC/1/LLjRZOlZdmI
http://www.youtube.com/user/ALYSSZ?feature=watch#p/c/AF61DE27898383EC/2/lAs_us2I3gE
http://www.youtube.com/user/ALYSSZ?feature=watch#p/c/AF61DE27898383EC/3/RuLRIYLHkbc
http://www.youtube.com/user/ALYSSZ?feature=watch#p/c/AF61DE27898383EC/4/HroguO-dsTU
http://www.youtube.com/user/ALYSSZ?feature=watch#p/c/AF61DE27898383EC/5/fs_YgxnVfNc
http://www.youtube.com/user/ALYSSZ?feature=watch#p/c/AF61DE27898383EC/6/1JfkSgJ4ZLg
http://www.youtube.com/user/ALYSSZ?feature=watch#p/c/AF61DE27898383EC/7/8WjAC_Pq8Mk
http://www.youtube.com/user/ALYSSZ?feature=watch#p/c/AF61DE27898383EC/8/DFUsHqn6c6Q
http://www.youtube.com/user/ALYSSZ?feature=watch#p/c/AF61DE27898383EC/9/bZVASgbF_ho
http://www.youtube.com/user/ALYSSZ?feature=watch#p/c/AF61DE27898383EC/10/XWEgb33aUfI
http://www.youtube.com/user/ALYSSZ?feature=watch#p/c/AF61DE27898383EC/11/vDETC5HTxvA
Demeter
(85,373 posts)...As the U.S. economy struggles to pull out of the worst funk since the 1930s, public services for the countrys most vulnerable populationschildren, the elderly, the mentally illare being cut or disappearing at a time when the need for them is greater than ever. Faced with gaping deficits, states have slashed $1.6 billion from mental health programs over the past four years, according to a report by the National Alliance on Mental Illness. The pain is being felt everywhere....
...Meanwhile, homelessness, domestic violence, and child abuse are rising. Nationally, nearly 1 million schoolchildren were homeless in the 2009-2010 school year, a 38 percent increase in four years, according to the U.S. Department of Education.
University of Pittsburgh researchers reviewing hospital records from parts of Washington, Pennsylvania, Ohio, and Kentucky found that the rate of children younger than five brought to emergency rooms with abusive head traumabrain injuries from being shaken or struck was 65 percent higher during the 19 months of official economic recession that began in December 2007 than in the previous four years. Sixteen percent of the children died.
Families are losing their jobs, theyre losing their housing, theyre on the street, said Amy Weiss, director of Parents Place, a San Francisco program that offers counseling and support services to children and families. Were seeing more domestic violence, more complicated cases, more poverty. Our caseloads are bigger because there are fewer people and resources. Were trying to do more with less....
Demeter
(85,373 posts)One of the extraordinary things that arose in a recent discussion about whether employment guarantees are better than leaving workers unemployed was the assumption that the costs of unemployment are relatively low compared to having workers engaged in activities of varying degrees of productivity. Some of the discussion suggested that there were microeconomic costs involved in having to manage employment guarantee programs (bureaucracy, supervision, etc) which would negate the value of any such program. The implicit assumption was that the unemployed will generate zero productivity if they are engaged in employment programs. There has been a long debate in the economics about the relative costs of microeconomic inefficiency compared to macroeconomic inefficiency. The simple fact is that the losses arising from unemployment dwarfed by a considerable margin any microeconomic losses that might arise from inefficient use of resources. ...The daily losses from unemployment. In terms of estimates, not much has changed in the US economy over the last 2 years. The daily losses in income alone are enormous. One of the strong empirical results that emerge from the Great Depression is that the job relief programs that the various governments implemented to try to attenuate the massive rise in unemployment were very beneficial. At that time, it was realised that having workers locked out of the production process because there were not enough private jobs being generated was not only irrational in terms of lost income but also caused society additional problems, such as rising crime rates. Direct job creation was a very effective way of attenuating these costs while the private sector regained its optimism. In fact, it took about 50 years or so for governments to abandon this way of thinking. Now we tolerate high levels of unemployment without a clear understanding of the magnitude of costs that that policy position imposes on specific individuals and society in general.
The single most rational thing a government could do was to ensure that there were enough jobs to match the available labour force....It is well documented that sustained unemployment imposes significant economic, personal and social costs that include:
- loss of current output;
- social exclusion and the loss of freedom;
- skill loss;
- psychological harm, including increased suicide rate (which I will return to later);
- ill health and reduced life expectancy;
- loss of motivation;
- the undermining of human relations and family life;
- racial and gender inequality; and
- loss of social values and responsibility.
We know that the losses encountered during a prolonged recession reverberate into tortured recoveries and that the damage that unemployment causes spans the generations. Even before the crisis hit, these costs in most countries were huge as policy makers began using unemployment as a policy tool rather than a policy target as the obsession with inflation-targetting took hold. Most people do not consider the irretrievable nature of these losses. Every day that unemployment remains above the full employment level (allowing for a small unemployment rate arising from frictions people moving in-between jobs) the economy is foregoing billions in lost output and national income that is never recovered. The magnitude of these losses and the fact that most commentators and policy makers prefer unemployment to direct job creation, shows the powerful hold that neo-liberal thinking has had on policy makers. How is it rational to tolerate these massive losses which span generations? Neo-liberalism has also changed the way we think about unemployment. In the past we understood clearly that it arose as a result of a shortage of jobs. However, in recent decades, we have been conditioned by a relentless (lying) press and government statements to perceive unemployment as an individual problem. So the unemployed are type-cast as being lazy; having poor work attitudes; refusing to invest in appropriate skills; and subject to disincentives arising from misguided government welfare support, and all the rest of the arguments that mainstream uses to obfuscate the social problem. The focus in the public debate is to blame the victim and suggest that most are unemployable and prefer to live on welfare, where that support is available. The overwhelming evidence from the informed research literature is that almost all the unemployed (when surveyed) prefer to work and are willing to take work if offered. The overwhelming evidence from studies in most countries suggests that the unemployed are highly motivated to find work and are victims of a shortage of jobs rather than personal/individual deficiencies. The dominance of the neo-liberal ideology led governments in most countries to have eschew the adoption of policies of direct job creation to reduce the rate of unemployment and to minimise these massive costs. Fiscal policy has became geared to the achievement of budget surpluses as some sort of token of prudent financial management.
NUMBER CRUNCHING ENSUES---SEE LINK
Conclusion
Even under conservative assumptions, the economic and social costs of sustained high unemployment are extremely high. The inability of unemployed individuals and their families to function in the market economy gives rise to many forms of social dysfunction, in addition to output loss. The apparent failure of neo-liberal supply side policies to reduce unemployment prior to the crisis is now highlighted during the crisis. There is now an urgent need to address the large pools of unemployment in world economies. The daily income losses alone are enormous and overwhelm other inefficiencies notwithstanding the productivity heterogeneity that exists across the workforce. There is no financial reason why the government should not deal with this problem directly by introducing a Job Guarantee as a starting point. Then broader investment in public infrastructure could follow according to political preferences. If the Government had the political will, it could readily overcome the problem of persistently high unemployment.
Demeter
(85,373 posts)...it might prove helpful to review some aspects of the Works Progress Administration (renamed in 1939 as Work Projects Administration). While the WPA was not a job guarantee program, it nevertheless points to a number of issues that are under current discussion, including those of the nature of the projects undertaken, impact on the larger economy, concerns surrounding bureaucratic impediments, etc. Lets begin with an introductory statement pertaining to the political and economic orientation of Franklin Delano Roosevelt (and his Administration)....Roosevelt was not a progressive. He ran on a balanced budget platform, and initially attempted to fulfill his campaign promise of reducing the federal budget by slashing military spending from $752 million in 1932 to $531 million in 1934, including a 40% reduction in spending for veterans benefits which eliminated the pensions of half-a-million veterans and widows and reduced the benefits for those remaining on the rolls. As well, federal spending on research and education was slashed and salaries of federal employees were reduced. Such programs were reversed after 1935. And one might recall that Roosevelt attempted to return to a balanced budget program in 1937, just as the economy appeared to be slowly recovering. The result was a renewed depression that began in the fall of that year and ran through 1938.
Thus, the Roosevelt Administration was forced into progressive activism because of massiveand organizedpopular discontent based mainly in working class and small farmer organizations. The union movement was rejuvenated through the formation of the CIO, farmers organized to prevent the forced sales of their properties (and this often included the threat of armed action), rent strikes were rampant, etc. Chicago, New York, other cities saw massive demonstrations. Riots shook the Kentucky coal fields. One must remember that the communist party was large (as these parties go), active, and popular. The specter of revolution was in the air and some politicians responded. Hamilton Fish Jr. instructed his fellow Congressmen, (i)f we dont give (security) under the existing system, the people will change the system. Make no mistake about that.
The WPA was one of several programs developed to respond to this supposed threat. Initially, the Roosevelt Administration authorized the Federal Emergency Administration of Public Works in 1933 (renamed in 1939 as the Public Works Administration). The PWA allocated over $6 billion to private firms that actually undertook the large scale projects ordered by government. Dams, including Grand Coulee, hospitals, bridges (the Triborough Bridge and Lincoln Tunnel in New York City), etc. In the same year, the Civilian Conservation Corps (ostensibly Roosevelts favorite such program) was organized. Exceptionally active in erosion control, reforestation, the creation of public parks, etc., the CCC hired 2 million young men over the course of its history. The fundamental difference between the CCC and the PWA was that workers on CCC projects were hired directly by the government. And this funding relationship served as the model for the WPA.
The WPA was under the direction of Harry Hopkins, a notable figure in his day. While the program was officially terminated in 1943, U.S. entry into WWII effectively ended its existence. On average through 1941, the WPA employed about 3 million people each month. If we include employees in the CCC and the National Youth Administration (a separate program under the WPA), total employment in government contracted work came to roughly 4.3 million per month. This represented 8-9% of the U.S. labor force. Originally, the WPA was an extension of the Federal Emergency Relief Administrationthe first federally-funded welfare program in the U.S. One rationale for the WPA was that it was better to put people to work performing useful tasks rather than merely receiving assistance: off the dole and on the job...The WPA was not intended as a full employment program. Only one household member could be employed under the program (it was usually males), though one does find female heads of households so employed. It should also be noted that state and local governments were required to contribute 10-30% of the costs of the various projects undertaken. Over its life, total spending on WPA projects amounted to about $13.4 billion, roughly 2% of GDP over those years.
And what were those projects? Was this simply a make work program that made little difference in the long run? Or, was the WPA integral to the larger economy and its contributions socially useful? A truncated tally follows. (See below for a slideshow of projects under the WPA)
560,000 miles of roads built or improved
20,000 miles of water mains, sewers constructed
417 dams built
325 firehouses built; 2384 renovated
5,000 schools constructed or renovated
143 new hospitals, 1,700 improved
2,000 stadiums, grandstands built
500 landing fields; 1,800 runways (including participation in the construction of LaGuardia Airport, NYC)
State and municipal parks, including the foundation of the extensive California state park system.
100 million trees planted
6,000 miles of fire and forest trails created
Education: Through 1941, 1 million enrolled in adult education courses, 37,000 children in classes and nursery schools; 280,000 received music instruction, 67,000 art instruction.
Libraries were built. These were especially directed toward poor and rural communities.
Zoo buildings constructed
In addition to the above, one should note the WPAs contribution to the cultural life of the country....MORE AT LINK
GOOD RESOURCE
Demeter
(85,373 posts)Demeter
(85,373 posts)HE JUST TALKS ABOUT CUTTING INTEREST PAYMENTS.....NOT EVEN A WHISPER OF CRAM-DOWNS FOR UNDERWATER HOUSES.
Demeter
(85,373 posts)THE HEART BURN (NOT HEART-BURN, BUT THE RAGE AT THE STUPIDITY OF THE ADMINISTRATION'S IDEOLOGUES AND BOUGHT -AND-PAID-FOR LACKEYS) IS KILLING ME.