Subscribe to Dollars & Sense magazine. Recent articles related to the financial crisis. The Quiet Coup (Simon Johnson)This article, which hypothesizes that an "American financial oligarchy" has (re)emerged and is turning the United States into a Banana Republic, is getting a lot of attention. (See our Jan/Feb 2009 cover story for a related argument, though the meat of this one is the financial elite part.) Krugman mentioned it in his March 29th column. And Brad DeLong has a post about it on his blog, with many comments, some of them interesting. The excerpt I'm giving below is not from the beginning of the article, fyi.The Quiet Coup By Simon Johnson | The Atlantic | May 2009 ... Becoming a Banana Republic In its depth and suddenness, the U.S. economic and financial crisis is shockingly reminiscent of moments we have recently seen in emerging markets (and only in emerging markets): South Korea (1997), Malaysia (1998), Russia and Argentina (time and again). In each of those cases, global investors, afraid that the country or its financial sector wouldn't be able to pay off mountainous debt, suddenly stopped lending. And in each case, that fear became self-fulfilling, as banks that couldn't roll over their debt did, in fact, become unable to pay. This is precisely what drove Lehman Brothers into bankruptcy on September 15, causing all sources of funding to the U.S. financial sector to dry up overnight. Just as in emerging-market crises, the weakness in the banking system has quickly rippled out into the rest of the economy, causing a severe economic contraction and hardship for millions of people. But there's a deeper and more disturbing similarity: elite business interests—financiers, in the case of the U.S.—played a central role in creating the crisis, making ever-larger gambles, with the implicit backing of the government, until the inevitable collapse. More alarming, they are now using their influence to prevent precisely the sorts of reforms that are needed, and fast, to pull the economy out of its nosedive. The government seems helpless, or unwilling, to act against them. Top investment bankers and government officials like to lay the blame for the current crisis on the lowering of U.S. interest rates after the dotcom bust or, even better—in a "buck stops somewhere else" sort of way—on the flow of savings out of China. Some on the right like to complain about Fannie Mae or Freddie Mac, or even about longer-standing efforts to promote broader homeownership. And, of course, it is axiomatic to everyone that the regulators responsible for "safety and soundness" were fast asleep at the wheel. But these various policies—lightweight regulation, cheap money, the unwritten Chinese-American economic alliance, the promotion of homeownership—had something in common. Even though some are traditionally associated with Democrats and some with Republicans, they all benefited the financial sector. Policy changes that might have forestalled the crisis but would have limited the financial sector's profits—such as Brooksley Born's now-famous attempts to regulate credit-default swaps at the Commodity Futures Trading Commission, in 1998—were ignored or swept aside. The financial industry has not always enjoyed such favored treatment. But for the past 25 years or so, finance has boomed, becoming ever more powerful. The boom began with the Reagan years, and it only gained strength with the deregulatory policies of the Clinton and George W. Bush administrations. Several other factors helped fuel the financial industry's ascent. Paul Volcker's monetary policy in the 1980s, and the increased volatility in interest rates that accompanied it, made bond trading much more lucrative. The invention of securitization, interest-rate swaps, and credit-default swaps greatly increased the volume of transactions that bankers could make money on. And an aging and increasingly wealthy population invested more and more money in securities, helped by the invention of the IRA and the 401(k) plan. Together, these developments vastly increased the profit opportunities in financial services. Not surprisingly, Wall Street ran with these opportunities. From 1973 to 1985, the financial sector never earned more than 16 percent of domestic corporate profits. In 1986, that figure reached 19 percent. In the 1990s, it oscillated between 21 percent and 30 percent, higher than it had ever been in the postwar period. This decade, it reached 41 percent. Pay rose just as dramatically. From 1948 to 1982, average compensation in the financial sector ranged between 99 percent and 108 percent of the average for all domestic private industries. From 1983, it shot upward, reaching 181 percent in 2007. The great wealth that the financial sector created and concentrated gave bankers enormous political weight—a weight not seen in the U.S. since the era of J.P. Morgan (the man). In that period, the banking panic of 1907 could be stopped only by coordination among private-sector bankers: no government entity was able to offer an effective response. But that first age of banking oligarchs came to an end with the passage of significant banking regulation in response to the Great Depression; the reemergence of an American financial oligarchy is quite recent. Read the full article. Labels: Brad DeLong, financial crisis, oligopoly, Paul Krugman, recession, Simon Johnson Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). State-Owned Bank in ND Doing Just FineFrom Mother Jones. The comment section is worth reading; some debate about whether this is the only state-owned bank in the United States. (Doesn't the FDIC own many banks at any given time?) I weighed in, even though I am not so big on commenting on articles, just to contradict some guy who claimed that hedge funds never fail (he was arguing, preposterously, that over-regulation caused the banking crisis).How the Nation's Only State-Owned Bank Became the Envy of Wall Street By Josh Harkinson | Fri March 27, 2009 6:33 PM PST The Bank of North Dakota is the only state-owned bank in America—what Republicans might call an idiosyncratic bastion of socialism. It also earned a record profit last year even as its private-sector corollaries lost billions. To be sure, it owes some of its unusual success to North Dakota's well-insulated economy, which is heavy on agricultural staples and light on housing speculation. But that hasn't stopped out-of-state politicos from beating a path to chilly Bismarck in search of advice. Could opening state-owned banks across America get us out of the financial crisis? It certainly might help, says Ellen Brown, author of the book, Web of Debt, who writes that the Bank of North Dakota, with its $4 billion under management, has avoided the credit freeze by "creating its own credit, leading the nation in establishing state economic sovereignty." Mother Jones spoke with the Bank of North Dakota's president, Eric Hardmeyer. Mother Jones: How was the bank formed? Eric Hardmeyer: It was created 90 years ago, in 1919, as a populist movement swept the northern plains. Basically it was a very angry movement by a large group of the agrarian sector that was upset by decisions that were being made in the eastern markets, the money markets maybe in Minneapolis, New York, deciding who got credit and how to market their goods. So it swept the northern plains. In North Dakota the movement was called the Nonpartisan League, and they actually took control of the legislature and created what was called an industrial program, which created both the Bank of North Dakota as a financing arm and a state-owned mill and elevator to market and buy the grain from the farmer. And we're both in existence today doing exactly what we were created for 90 years ago. Only we've morphed a little bit and found other niches and ways to promote the state of North Dakota. MJ: What makes your bank unique today? EH: Our funding model, our deposit model is really what is unique as the engine that drives that bank. And that is we are the depository for all state tax collections and fees. And so we have a captive deposit base, we pay a competitive rate to the state treasurer. And I would bet that that would be one of the most difficult things to wrestle away from the private sector—those opportunities to bid on public funds. But that's only one portion of it. We take those funds and then, really what separates us is that we plow those deposits back into the state of North Dakota in the form of loans. We invest back into the state in economic development type of activities. We grow our state through that mechanism. MJ: Clearly other banks also invest their deposits. Is the difference that you are investing a larger portion of that money into the state's own economy? EH: Yeah, absolutely. But we have specifically designed programs to spur certain elements of the economy. Whether it's agriculture or economic development programs that are deemed necessary in the state or energy, which now seems to be a huge play in the state. And education—we do a lot of student loan financing. So that's our model. We have a specific mission that was given to us when we were created 90 years ago and it guides us throughout our history. MJ: Are there areas that you invest in that other banks avoid? EH: We made the first federally-insured student loan in the country back in 1967. So that's been a big part of what we do. It's become almost a mission-critical thing. I don't know if you have been following the student loan industry lately, but it's been very, very interesting as many have decided to leave. We will not though. MJ: So you are able to invest in certain areas because they provide a public good. EH: Yeah, or a direction, whether it's energy or primary sector type of businesses. We have specific loan programs that are designed at very low interest rates to encourage activity along certain lines. Here's another thing: We're gearing up for a significant flood in one of the communities here in North Dakota called Fargo. We've experienced one of those in another community about 12 years ago which prior to Katrina was the largest single evacuation of any community in the United States. And so the Bank of North Dakota, once the flood had receded and there were business needs, we developed a disaster loan program to assist businesses. So we can move quite quickly to aid with different types of scenarios. Whether it's encouraging different economies to grow or dealing with a disaster. MJ: What do private banks think of you? EH: The interesting thing about the bank is we understand that we walk a fine line between competing and partnering with the private sector. We were designed and set up to partner with them and not compete with them. So most of the lending that we do is participatory in nature. It's originated by a local bank and we come in and participate in the loan and use some of our programs to share risk, buy down the interest rate. We even provide guarantees similar to SBA to encourage certain activity for entrepreneurial startups. Aside from that, we also act as a bankers' bank or a wholesale bank. So we provide services to banks, whether it's check clearing, liquidity, or bond accounting safekeeping. There's probably 20 other bankers' banks across the country. So we act in that capacity as kind of a little mini-fed actually. And so we service 104 banks and provide liquidity to them and clear their checks and also we buy loans from them when they have a need to overline, whether it's beyond their legal lending limit or they just want to share risk, we'll do that. We're a secondary market for residential loans, so we have a portfolio of $500 to $600 million of residential loans that we buy. MJ: So what's the advantage of a publicly owned "bankers' bank" instead of a privately owned one? EH: Our model is we use our deposit base to help [other banks] with funding their loans, even providing fed funds lines with our excess liquidity—we buy and sell fed funds and act as a clearinghouse for check clearing activity. That would be the benefit or different model. We're a depository bank and can bring that to bear. MJ: If other states had a bank like yours, do you think they would have been more insulated from the credit crisis? EH: It all gets down the management and management philosophy. We're a fairly conservative lot up here in the upper Midwest and we didn't do any subprime lending and we have the ability to get into the derivatives markets and put on swaps and callers and caps and credit default swaps and just chose not to do it, really chose a Warren Buffett mentality—if we don't understand it, we're not going to jump into it. And so we've avoided all those pitfalls. That's not to say that we're completely immune to everything, certainly we've bought some mortgage-backed securities and we're working through some of those issues, but nothing that would cause us to be concerned. Read the rest of the interview. Labels: bailout, bank nationalization, financial crisis, North Dakota Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Companies Suspending 401(k) ContributionsFrom the Financial Times, March 11 (hat-tip to The Automatic Earth). The article notes that the median size of a 401(k) account at the end of 2007 was $19,000--probably a lot lower now!A wave of US companies are suspending payments to their staff 401(k) retirement plans in a bid to cut costs amid the economic downturn.Read the rest here. Labels: 401(k), AARP, Financial Times, pensions, The Automatic Earth blog Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Foreclosure Crisis Far from OverHat-tip to The Automatic Earth blog for this tidbit, from a recent investment fund memo. Although a majority of subprime mortgages have already seen their rates reset, there are a slew of other adjustable rate mortgages that are not technically subprime but that are likely to produce a huge new wave of foreclosures when their interest rates reset in 2010 and 2011.A broader profile of mortgage resets is presented below (though even this chart does not include the full range of adjustable mortgage products).The whole memo is well worth reading. Labels: ARMs, foreclosures, Hussman Funds, subprime crisis, The Automatic Earth blog Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). WE20--The People's G20A press release; hat-tip to Abby S.WE20 - THE PEOPLE'S G20 we20, the people's answer to the G20 group of nations, today announces the launch of its website at we20.org, enabling individual people and groups anywhere in the world to host their own G20 summits and formulate plans for economic recovery. In the run-up to the London G20 summit - and amid fears of street violence as protestors vent their feelings on the global economy - we20 offers a refreshing alternative: large-scale community involvement in planning the world's economic revival. People visiting we20.org can organise their own meetings, in their own communities, to draw up action plans - local, national or international - to fix economies. We20 plans are voted on at we20.org and the top we20 plans have the chance of appearing on the official G20 London Summit website. Lord Malloch-Brown, the UK's Foreign Office G20 Minister, has given his encouragement and advice to we20 meetings through a YouTube video. we20's twitter, Facebook and LinkedIn Communities are growing fast, plans have already been submitted to we20.org from the UK and Sweden, and we20 meetings are pledged in USA, Australia, Sweden, Belgium, Germany, Sudan, Thailand, Nigeria and the UK, representing communities in the media industry, local government, students and healthcare workers. As the we20 movement grows, it's expected that thousands of we20 meetings will take place around the world through 2009, with a goal of the first thousand to take place by the end of April 09. The website at we20.org acts as a facilitator and hub for these meetings. Visitors to the site can find an existing meeting or set one up to discuss and agree on a local, national or global challenge, or to read and vote on plans from other we20 meetings. Each we20 user gets 20 votes to award to the best recovery plans. The organisers of we20 hope to help favourite we20 plans become future realities as we20 develops. The we20 concept was hatched on January 6 this year by a group of volunteers in London who want to help people through the recession. The site was then developed entirely by voluntary contributions to become the start of a resource which its organisers hope will grow to be a public engagement platform alongside the G20. As a body, we20 is independent and neutral. The plans proposed on the site belong to the groups which propose them. Paul Massey, an internet lawyer from London and one of the volunteers organising we20 in his spare time, says: "The we20 initiative is a neat idea to help people organise their own G20 meetings of up to 20 people. There is speculation about what the London G20 Summit will achieve but we've already seen we20 meetings produce some great action plans to fix the economy. we20 sees the G20 Summit as a rallying call for everyone to work together to pull ourselves out of this economic mess." He continues: "There's no restriction on the challenges addressed and the plans formulated by people's we20 meetings. They may be directed towards, local, national or global issues, from the IMF, World Bank or climate change to local economic issues such as redundancies, plans for local shops, sports teams or growers' initiatives. we20 is driven by volunteers and word of mouth, and we are constantly amazed by the support we are receiving from across the board." Part of the inspiration for we20 arose from Barack Obama's use of the internet, demonstrating how ordinary people can make change happen by connecting on the internet and then meeting face to face. Massey concludes: "After the G20 Summit, we20 will assess its impact in consultation with members, continue to encourage the implementation of we20 plans and work towards future goals including the Copenhagen Climate Change Summit. we20 hopes to strengthen the policies produced by the G20, ensure transparency and encourage good governance. Whatever comes out of the London G20 Summit, we20 looks set to stay as a force of community empowerment for the longer term." Labels: bailout, Barack Obama, financial crisis, G20, G20 summit, WE20 Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Latin America's Reaction to the CrisisThe Council on Hemispheric Affairs (COHA) has put out a nice summary of the various responses by Latin American governments to the global economic meltdown.As the G-20 meeting is about to begin in London, the outlook for Latin American growth in 2009 is grim, as the tempo of foreign direct investment (FDI) and loans stand-by credits and development funds plummet, the demand for commodities diminish, and foreign remittances plunge.The World Bank vice president for Latin America and the Caribbean, Pamela Cox, is forecasting 0.3 percent growth for Latin America this year, down from the originally 2.7 percent predicted in January. Cox anticipates that countries most closely linked with the U.S. economy will be hit the hardest. Thus, NAFTA, CAFTA and the U.S.-Caribbean Basin Trade Partnership Act (CBTPA) may prove particularly harmful for Mexico, Central America, and the Caribbean in the foreseeable future. Click here for COHA's country-by-country analysis. Labels: COHA, Latin America, trade policy Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Two Items on Guadeloupe General StrikeTwo items on the recent massive general strike in Guadeloupe. First, from Friday's Democracy Now!:Labor Victory in Guadeloupe After Six-Week Strike Reverberates Across French Caribbean and France Hear it or read it here. Second, an article on the general strike by Immanuel Wallerstein: Guadeloupe: Obscure Key to World Crisis Read the rest of the article. Labels: activism, Democracy Now, financial crisis, general strike, global downturn, Guadeloupe, Immanuel Wallerstein Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Mike Davis on Socialism on Bill MoyersFrom the folks at SolidarityEconomy.net. Video is probably available somewhere, too.Bill Moyers Talks with Mike Davis on the Economic Crisis March 20, 2009 BILL MOYERS: For all the talk on the cable channels and in the blogosphere, you would think Washington has been invaded and conquered. Remember that scary movie from the 1950's, INVASION OF THE BODY SNATCHERS? MALE VOICE: Everyone! They're here already! You're next! You're next! Many film scholars believe the movie is a paranoid parable, warning of a Communist takeover of America. But today, the body snatchers are you ready for this? Socialists! That's right. Socialists, reportedly swarming over the city and making off with the means of production, namely the Federal budget. I'm not making this up. Newsweek was the first to spot the aliens a month ago and it was us. Here's the headline of a recent article on Salon.com. Newt Gingrich, reincarnated once again as himself, sounds as if Obama ate his Contract with America for lunch and coughed it up as "European Socialism."
BILL MOYERS: But the ghosts being conjured in the corridors of power aren't those great American radicals Eugene V. Debs or Norman Thomas. No, Stalin, Marx and Lenin have risen from the grave, stalking our highest officials. Just listen to CNBC's Jim Cramer:
BILL MOYERS: And others followed suit: RUSH LIMBAUGH: Liberal democrats and the drive-by media are speeding down the highway, implementing Socialism as fast as they can. BILL MOYERS: So what does a real live Socialist think about all this? We consulted the Endangered Species Act and actually found one, way out to the People's Republic of Southern California. That state's economy has tanked with one of the country's highest number foreclosures and unemployment above 10% and climbing. California is a financial earthquake off the Richter scale. All of this is grist for the socialist writer and historian who is sitting with me now. Once a meat cutter and a long haul truck driver, nowadays, Mike Davis teaches creative writing at the University of California, Riverside. This recipient of a MacArthur Foundation "genius grant" has written so many books we can barely get them on the screen for you. Two of his histories of Los Angeles and Southern California, CITY OF QUARTZ and ECOLOGY OF FEAR were best-sellers. His latest: IN PRAISE OF BARBARIANS: ESSAYS AGAINST EMPIRE. Mike Davis, welcome to the JOURNAL. MIKE DAVIS: My pleasure, Bill. BILL MOYERS: Did you ever in your life imagine that America's financial system would become insolvent or that our way of life would be in such a sudden freefall? MIKE DAVIS: No. And I found myself in the position of, say, a Jehovah's Witness, who, of course, believes the end is nigh but then one morning wakes up, looks out the window, and the stars are falling from heaven. It's actually happened. Of course, people a lot like myself are famous for I think the phrase is we predicted eleven out of the last three depressions. So, no. BILL MOYERS: But I do think this time most everyone would agree with what you how you've described what we're going through as the mother of all fiscal crisis. Do you have a sense of the people you know being frightened right now? MIKE DAVIS: Oh, people are terrified, particularly where I teach in Riverside County. People have no idea you know, where to turn. UC Riverside is the largest percentage of working-class students in the UC system. And their families have scrimped and saved. And they've worked hard to get into courses that pointed toward stable careers and jobs. And now those futures are incinerated. What kind of choice do you make? You know, what do you study? BILL MOYERS: You wrote an essay on one of my favorite websites, TomDispatch.com, in which you asked this question. "Can Obama see the Grand Canyon?" Now, help us understand the use of that metaphor. MIKE DAVIS: Well, the first explorers to visit the Grand Canyon, simply were overwhelmed. They couldn't visualize the Grand Canyon because they had no concept for it. That is, there was no analogue in their cultural experience, no comparable landscape that would allow them to make sense of what they were seeing. It actually took ten years of heroic scientific effort by John Wesley Powell and these great geologists, Clarence Sutton, before he was truly able to see the Grand Canyon in the sense that we see it now as a deep slice in Earth history. Before you just had confused images and, you know, feelings of vertigo. And so the reason I raised this is that do we really have an analogy? Do we have the concepts to understand the nature of the current crisis other than to step back shaking from the brink and say this is profound? Because, you know, we're in this situation where not only do we seem to be having a second depression, but this is occurring in the context of epochal climate change. It's occurring at a time when the two major benchmarks that survived for global social progress, the United Nations millennial goals for relieving poverty and child mortality, on one hand, and the Kyoto goals for reducing greenhouse admissions, both of those sets of goals are clearly not going to be achieved. They slowly failed. This would be a time of fierce urgency in any sense. And now we face a meltdown of a world economy in a way that no one anticipated, truly anticipated the possibility of another recession, even a financial crisis, but no one counted on the ability of this to happen in such a synchronized, almost simultaneous way across the world. Read the rest of the transcript. Labels: Bill Moyers, financial crisis, Mike Davis Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). The G20 Summit and UnionsFrom a blog I think I hadn't seen before (hat-tip to LF), Labor Is Not a Commodity. I will add it to our blogroll.The G20 Summit and Unions Tim Newman, Campaigns Assistant, International Labor Rights Forum Next week, representatives of G-20 governments will be meeting in London to discuss strategies for addressing the global economic crisis. As working people around the world are facing the LondonSummit-resized consequences of this crisis, unions are responding with their own proposals for the G-20. This Monday, the International Trade Union Confederation (ITUC) released a "London Declaration" that focuses on five key policy recommendations for the G-20:
You can read the full document online here. The introduction to the declaration states, Workers around the world, who are losing their jobs and their homes, are the innocent victims of this crisis: a crisis precipitated by greed and incompetence in the financial sector, but which is underpinned by the policies of privatisation, liberalisation and labour market deregulation of recent decades. The effects of these policies—stagnating wages, cuts in social protection, erosion of workers' rights, increased precarious work, and financialisation—have combined to increase inequality and vulnerability... While all of ITUC's policy recommendations are very important, the third recommendation definitely requires attention. As the full declaration explains, wage deflation and increasing inequality can be reversed in part "by extending the coverage of collective bargaining and strengthening wage setting institutions so as to establish a decent floor in labour markets." Here in the US, a report released this week by Government Accountability Office [we blogged on this NYT article here; it's the article that quotes Kim Bobo. —D&S] showed that the Department of Labor's Wage and Hour Division is failing in its role of protecting workers from wage theft, child labor and other abuses. With a new Secretary of Labor, it is vital that the government strictly enforce the labor laws we already have on the books. We also need to take additional steps to ensure that workers can use collective bargaining agreements to improve wages and working conditions. That means passing the Employee Free Choice Act (EFCA) as a first step. EFCA is an important part of ensuring that US workers are able to exercise the freedom of association and the right to collective bargaining. At the G20 summit in London, it is also essential that world leaders support alternative systems and Egg_a_Politician policies that can improve the lives of the workers facing poverty. Divine Chocolate, a pioneering Fair Trade chocolate company co-owned by cocoa farmers in Ghana, has shown that paying a fair price to farmers does more than create a sustainable future for a few farmers -- it is a model that can be replicated on a mass scale. Divine set up a new website where you can "Egg a Politician" -- meaning that you can toss a chocolate egg at one of the G20 leaders and then send them a message telling them to keep fair trade on the agenda. Unfortunately, I fear that the representatives at the G-20 will not be promoting policies focused on reducing inequality, protecting workers' rights and promoting fair trade. Labor rights advocates globally will have to keep the pressure on governments to support better policies and work together to raise standards for workers everywhere. As one example, workers all across the Americas are participating in an upcoming Continental Day of Action against the Crisis. How do you think unions and worker organizations around the world can work together to address the impact of the global economic crisis on workers? [This is the full post, though I didn't reproduce all the hyperlinks; to see them click here.] Labels: financial crisis, G20, labor, labor organizing, recession, unions Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Trust Your Guts (Greider)Joe Nocera likes Geithner's new plan. William Greider, not so much. Here is an excerpt from his recent article in The Nation. Hat-tip to LF.Some points I recommend people consider: Read the full article. Labels: bailout, financial crisis, Joe Nocera, The Fed, William Greider Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Obama vs. Cuomo on Bank InvestigationsFrom Bloomberg:Obama Backs Banks, Seeks to Block Fair-Lending Probe By Greg Stohr March 26 (Bloomberg) -- The Obama administration's call for greater financial regulation may have its limits. The administration late yesterday urged the U.S. Supreme Court to bar New York and other states from enforcing their fair-lending and other consumer-protection laws against federally chartered banks including JPMorgan Chase & Co. and Wells Fargo & Co. The legal brief, which adopts the Bush administration's position, is a setback for consumer and civil-rights groups that had urged President Barack Obama's team to switch positions. The filing puts the administration at odds with New York Attorney General Andrew Cuomo over the respective roles of state and federal regulators. The high court will hear arguments April 28. "National banks are created by the government to serve federal purposes," argued Solicitor General Elena Kagan, the Obama administration's top courtroom lawyer. "Oversight of the banks is therefore principally entrusted to the United States." The court filing coincides with this week's proposal by the administration to put large hedge funds, private-equity firms and derivatives under federal supervision for the first time. Reviving Investigation Cuomo is seeking to revive an investigation, begun by predecessor Eliot Spitzer, into the real-estate lending practices of units of JPMorgan, Wells Fargo and HSBC Holdings Plc. A lower court barred the probe, saying a regulation issued by the U.S. Comptroller of the Currency blocks state scrutiny of national banks. The case will determine whether federal regulators have exclusive governmental authority to press fair-lending and other types of complaints against national banks. More broadly, the case will shape how much ability agencies have to shield companies from state-level scrutiny. Kagan filed the brief on behalf of the OCC, an independent Treasury Department bureau still being run by Republican appointee John Dugan, whose term expires in 2010. Obama has decided to retain Dugan, two people familiar with the decision said last month. "We're disappointed to see it," said Gail Hillebrand, a San Francisco-based Consumers Union attorney who had sent a letter urging the administration to switch sides in the case. "We hope they just haven't gotten around to getting rid of those regulations. It's certainly a missed opportunity." Read the rest of the article (it's short). Labels: Andrew Cuomo, banking regulation, Barack Obama, Eliot Sptizer, financial crisis Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Single-Payer UpdatesFirst, we noticed this excellent webpage, with links and resources on single-payer, from Physicians for a National Health Care Program.Second, our friend Dr. Christine Adams, who is statewide secretary of Health Care for All Texas, sent us her response to an article in Wednesday's WSJ by Laura Meckler. It's an excellent summary of reasons in favor of single-payer. Here it is: Dear Ms. Meckler, I am a supporter of single payer national health care as proposed by HR 676 (John Conyers, D-Michigan). All other health care reform proposals involve some type of subsidy to private for-profit health plans via low to moderate income households. It makes no sense to subsidize private, for-profit health plans just for us to have the privilege of having private companies continue to play a central role in health care financing. Medicare Advantage is a perfect example of that model. For the privilege of continuing to include for-profit private health plans, the U.S. taxpayer gets to pay 14%-20% more per Medicare recipient than for those in traditional Medicare (a single payer model, albeit imperfect). For the privilege, we do not get any value for our extra tax dollars. Medicare Advantage members do not have better medical outcomes and frequently they have worse medical outcomes - even though Medicare Advantage programs cherry-pick the healthiest in the Medicare pool. And where do we find our best medical outcomes at the best price? Our socialized medicine Veterans Administration Medical System. No other nation that is controlling health care costs while maintaining quality has for-profit health insurance companies playing a central role in health care financing because it cannot be done. Other nations that include private health plans have placed heavy regulations on them so that they cannot make profits, must offer standard, comprehensive benefits, cannot exclude anyone or restrict treatment and must go to the government (the citizenry) to get permission to raise premiums. Nations that still include private plans, still spend more than nations that have either adopted single payer or straight-forward socialized medical systems (England, Spain). Economically, it will cost you more to include private health plans even if they are regulated. At any rate, I doubt our American for-profit health plans would ever agree to the level of regulation it would take to control costs, even without making health care universal. Frankly, I don't understand why conservatives in Congress, such as Sen. Grassley, would even consider subsidizing or protecting for-profit health plans from a public competitor. If a public health plan could deliver good care for less money, why wouldn't we want that system? Why would we want to use tax dollars to subsidize a for-profit health plan? I already pay for-profit health plans plenty of money for not much back in the way of health benefits. I don't want to direct more of my tax dollars to them just to keep them in business. They are not an industry vital to our national security. In fact, they suck up so much in the way of resources without adding value back, they are a drain on our economy and our health. They are detrimental to our well being in the same way that companies that pollute are detrimental to our well being. Two Nobel prize winners in economics, Drs. Joseph Stiglitz and Paul Krugman, have publicly stated that single payer makes the most sense for health care reform. They don't strike me as socialists or anti-business. To support a health reform measure that props up a private business when a public entity could do as good a job for less money seems opposite to what a conservative would support. When the data from so many forms of national health insurance, none of which include for-profit private health plans, are so clearly providing as good or better medical outcomes as we have here in the U.S. but with half the money and for all their people, I can only conclude that this resistance by a minority to single payer comes from irrational fears based on myths and outdated ideas in the same way that anti women's suffrage and anti integration are now seen as wrongheaded. Unfortunately, this minority position of pro for-profit, subsidized private health plans appears to have the ear of the Obama Administration—at least for the time being. Dr. Christine Adams Statewide Secretary, Health Care for All Texas Member, Physicians for a National Health Program Labels: health care, Health Care for All Texas, single-payer Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). New Home Sales Fell In February, Not RoseFrom Barry Ritholtz in the RGE Monitor:WSJ: Sales of new homes rose in February for the first time in seven months, the Commerce Department reported Wednesday, another sign that the housing market is thawing Bloomberg: Purchases of new homes in the U.S. unexpectedly rose in February from a record low as plummeting prices and cheaper mortgage rates lured some buyers. Sales increased 4.7 percent to an annual pace of 337,000 . . . Marketwatch: The U.S. housing sector continues to see signs of improvement. The latest government data showed new home sales climbed in February for the first time in seven months, sending shares of home-building companies soaring. The parade of the mathematically innumerate business writers continue to misread data. The latest evidence? New Home Sales. After incorrectly reporting the Existing Home Sales, the mainstream media misread the Census department report of New Homes. No, New Home Sales data did not improve. In fact, they were not only not positive, they were actually horrific. The year over year number was a terrible down 41%. Sales from this same period a year ago have nearly been halved. Why did the media report this as positive? If you only read the headline number, you saw a positive datapoint: February was plus 4.7% over January. To get the the facts, you need to read below the headline. In the present case, it wasn't the seasonality factor that was confusing, it was the "90-percent confidence intervals"—or as it is more commonly known, the margin of error. From the Census Bureau: Sales of new one-family houses in February 2009 were at a seasonally adjusted annual rate of 337,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 4.7 percent (+/-18.3%)* above the revised January rate of 322,000, but is 41.1 percent (+/-7.9%) below the February 2008 estimate of 572,000. The median sales price of new houses sold in February 2009 was $200,900; the average sales price was $251,000. The seasonally adjusted estimate of new houses for sale at the end of February was 330,000. This represents a supply of 12.2 months at the current sales rate. Note that the month over month data at 4.7% - plus or minus 18.3% - is statistically insignificant. (i.e., meaningless). The reported data does not inform us if sales improved month-over-month or not. It is a range, from down -13.6% to plus 23%. Since "zero" is part of that range, we can draw no conclusion. As the Census Department itself notes, "the change is not statistically significant; that is, it is uncertain whether there was an increase or decrease." The data does however, tell us that the year-over-year sales fell 41.1% plus or minus 7.9% gives us a range of -49% to -33.2%. The entire range is negative, therefore we can conclude sales fell year-over-year. These are facts. This is data. This is how you interpret it. Most of the MSM reports (WSJ, Marketwatch, Bloomberg) were simply wrong. Not nuanced, not shaded, but 2+2=5 wrong. Let me remind that many of these folks incorrectly misinformed you that Housing wasn't getting worse in 2006, 2007 and 2008 - just as Home sales and prices went into an historic freefall. Now, these same folks are misinforming you that Housing has turned around and is improving. That is simply unsupported by the data. (And don't even ask about television - they simply read the wrong news. Here is a life lesson for you: Never believe news people who read teleprompters. They have no idea what they are doing, they are reading what someone else wrote. When it comes to data interpretation, they are quite literally clueless. Rely on news readers to your personal financial detriment). The bottom line: Learn to interpret data correctly. Avoid using the people who cannot do so as primary news sources. Labels: Barry Ritholtz, home sales, housing market, RGE Monitor Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Official Unemployment Numbers GrimThe latest official unemployment numbers from the Labor Department show continuing deterioration in the job market, setting a record for the ninth straight week.Seasonally adjusted first time claims for unemployment insurance rose by 8,000 to 652,000, compared to 367,000 a year ago. The total number of people claiming benefits for more than a week increased by 122,000 to 5.56 million, the highest total since record-keeping began in 1967. This number a year ago was 2.8 million. Adding in the people that are receiving extended unemployment benefits under a special program approved by Congress brings the total to 7.03 million. The official unemployment rate is now at 8.1%, the highest in 25 years. Long-term jobless claims have jumped by over 100,000 four times in the past five weeks, indicating that companies continue to shed workers at a rapid rate. Again, these are the official numbers. As grim as they are, a more accurate assessment would give us an unemployment rate of 14.8% for February. This is from the Bureau of Labor Statistics' "U6" category that includes "Total unemployed, plus all marginally attached workers,* plus total employed part time for economic reasons, as a percent of the civilian labor force plus all marginally attached workers." *Marginally attached workers are "people who are neither working nor currently looking for work but indicate that they want and are available for a job and have looked for work at some time in the recent past," according to Steve Haugen, an economist at the Bureau of Labor Statistics. One out of every eight workers. Labels: unemployment, unemployment benefits, unemployment insurance Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Wage Theft (NYT, ABC News!)Kim Bobo, director of Interfaith Worker Justice and author of Wage Theft in America (which we excerpted here and here), appeared on Good Morning America yesterday:Plus, Tuesday's New York Times had a great article by Steven Greenhouse on nonenforcement of labor regulations by the Labor Department. The GAO report that is the focus of the article actually uses the term "wage theft": Labor Agency Is Failing Workers, Report Says Read the rest of the article. Labels: ABC News, Department of Labor, GAO, Interfaith Worker Justice, Kim Bobo, New York Times, Steven Greenhouse, wage theft Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Why Georgists Correctly Predicted the CrisisFor more on the Georgists, Henry George, and the idea of a land tax, see this excellent sidebar D&S co-editor Amy Gluckman wrote to Mason Gaffney's excellent article about how a land tax helped rebuild San Francisco in 1906, and could be used to rebuild New Orleans after Katrina.Why Georgists Correctly Predicted the Crisis, and Why Conventional Economists Couldn't Land bubbles of varying severity and universality recur roughly every eighteen to twenty years. Like Henry George, modern Georgists attribute recessions and depressions to these bubbles. A huge real estate bubble of the 1920's preceded the Depression of the 1930's. That bubble actually began to burst in 1926, three years before the stock market crash of 1929. So when "house values" exploded around the world during the last decade and then began to decline in 2006, many of us predicted the worst. I even convinced my husband it was time to sell our property--but alas, too late. A few prominent economists recognized the bubble's threat, notably Karl Case and Robert Shiller of the Case-Shiller Home Price Index. But most economists didn't see the crisis coming until it ran them over. Why couldn't they see what Georgists saw? (Non-economists can skip to the last paragraph.) 1. Like Adam Smith and other classical economists, Georgists assume a three-factor world: land, labor and capital, earning economic rent, wages and interest respectively. But starting in the early 20th century, conventional economics merged land into capital. Land disappeared so completely that Robert Solow could joke in 1955 that "...if God had meant there to be more than two factors of production, He would have made it easier for us to draw three dimensional diagrams." 2. Conventional economics airbrushes out economic rent. The National Income and Product Accounts omit or conceal rent. They exclude even realized capital gains, let alone unrealized gains. They lump rent received by business into profits. When I teach micro I have to explain to students that those cute little triangles we label "consumer surplus" and "producer surplus" are really economic rent. 3. Conventional microeconomics is static. Textbooks incorporate discounted present value poorly, or omit it altogether. In teaching micro, I've had to write a special section on discounting--after all, someday, students will buy houses and take out mortgages. Bubbles are just unrealistic projections of rent, capitalized into the present. Without discounting, how can we understand them? (Mind you, many Georgists don't understand discounting either; they explain bubbles as the work of "speculators." But at least they know bubbles are destructive.) 4. Conventional macroeconomics tosses out the good part of micro, namely, marginal analysis. So in conventional macro, all taxes are alike, all consumer spending is alike, all saving and investment is alike. Economists can truly believe that it's good for the economy now to borrow money (from whom?) and spend it on roads and bridges. How can they understand that overspending on infrastructure stimulates bubbles? 5. Conventional economics disregards a central Georgist assumption: distribution of wealth matters. Moreover, the tax and subsidy system is rigged to drive rent to the top of the heap. This very rigging of the system also encourages bubbles. So the Georgist cure is to reverse the rigging, capture the rent and redistribute it to society either in the form of public goods, or directly as tax credits or grants. That's a dangerously radical idea. One hundred years ago, Georgists allied with Progressives to form a powerful movement for political and fiscal reform. In The Corruption of Economics, Mason Gaffney argues that neoclassical economics assumed its blinkers precisely to thwart that movement--leaving modern economists helpless. Labels: economic crisis, financial crisis, Georgists, Henry George, housing bubble, land tax, Polly Cleveland Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Common Security Clubs An exciting new project spearheaded by Chuck Collins, D&S Associate, and of the Institute for Policy Studies. 'Common Security Club' as an Organizing Form for the Solidarity Economy By Chuck Collins The common security club model was born out of work done in the last few years by people struggling with overwhelming indebtedness. Participants spend some time discussing the root causes of the economic crisis, drawing on readings and materials provided by the network. But they mostly focus on what they can do together to increase their economic security and press for policy changes. "What becomes clear to participants is we are facing some major economic and ecological changes," said Andree Zaleska from the Boston office of Institute for Policy Studies, who is coordinating clubs in the Northeast. "We are not going back to some golden age of economic growth based on empire, unfettered capitalism, and cheap energy—nor do we want to! We have to prepare ourselves and our communities for transformation." As theologian Walter Brueggemann writes we need to shift from "autonomy to covenantal existence, from anxiety to divine abundance, and from acquisitive greed to neighborly generosity." Common security club participants are experimenting with ways to make the practical, political, and spiritual changes this entails. The three main functions of the clubs are: 1) Learn and reflect Through popular education tools, videos, Bible study, and shared readings, participants increase their understanding of the larger economic forces on our lives. Why is the economy in distress? How did these changes happen? What are the historical factors? How does this connect to the global economy? What are the ecological factors contributing to the changes? What is our vision for a healthy, sustainable economy? What are the sources of real security in my life? 2) Mutual aid and local action Through stories, examples, Web-based resources, a workbook, and mutual support, participants reflect on what makes them secure. What can we do together to increase our economic security at the local level? What would it mean to respond to my economic challenges in community? How can I reduce my economic vulnerability in conjunction with others? How can I get out of debt? How can I help my neighbor facing foreclosure or economic insecurity? Can I downscale and reduce my consumption and ecological footprint and save money? 3) Social action The economic crisis is in part the result of an unengaged citizenry and government. What can we do together to build an economy based on building healthy communities rather than shoring up the casino economy? What public policies would make our communities more secure? Through discussion and education, participants might find ways to engage in a larger program of change around the financial system, economic development, tax policy, and other elements of our shared economic life. Clubs can be autonomous or affiliated with an existing institution, secular or religious. The ideal size is 10 to 20 adults who make a commitment to an initial five meetings with a facilitator. Clubs then decide whether to continue meeting and self-manage. Starter sessions have been developed and include "The Roots of the Economic Crisis," "Personal Re sponses to Economic and Ecological Change," "Things We Can Do Together," and "Actions to Transform the Economy." Among the things "we can do together," the clubs examine stories and examples of various economic and mutual aid activities. These have included teaming up to help each other weatherize their homes, helping each other rework their personal budgets and reduce debt, and forming food-buying clubs. Faith-based groups weave together reflection, prayer, and action. "We can't be a bank for each other," said club participant Paul Monroe of Boston. "But there are so many things we can do to support one another and increase our economic security." One group, convened by a group of Haitian women in the Boston neighborhood of Dorchester, decided to push back against their credit card companies. "Everyone was paying really high fees," observed Charlotte Desire, who coordinated the group. "One of our best moments was when everyone in our group called their credit card company and threatened to cut up their cards unless fees were waived and interest rates were cut." Almost everyone in the group was able to save hundreds of dollars in interest payments and fees. Gerald Taylor, a veteran congregation-based organizer in Charlotte, North Carolina, has led discussions with several groups about what a healthy and democratic debt system would require. "All our religious traditions have prohibitions on usury for a reason," said Taylor. "So what would a fair and transparent credit system look like?" "We are piloting about a dozen common security clubs in different places and with very different groups," said Zaleska, describing the efforts in her region. "We're testing out several different curricula. Some clubs are pressing members of Congress to reform the casino economy, stop foreclosures, and pass an economic stimulus package." Whatever shape or focus members choose to take, common security clubs are pushing against the social isolation that may accompany a recession or depression. "I see the hurt and anxiety in my congregation—and how people privatize their pain," says Cecilia Kingman. "This is a chance for us to be real with each other." These clubs are also one of many building blocks that can move us toward a "solidarity economy" that affirms our true interconnection with one another. Coming together is a way to remind ourselves of the abundance we have, the wealth of our relationships and networks, and the mutuality of our economic security. Chuck Collins is an On the Commons Fellow and senior scholar at the Institute for Policy Studies, where he directs the Program on Inequality and the Common Good. He is co-author with Mary Wright of The Moral Measure of the Economy (Orbis, 2007). This is an excerpt of an article that originally appeared in Sojourners magazine, February 2009. For information on how to start or join a common security club, click here. Labels: Chuck Collins, Common Security Clubs, financial crisis, recession Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Pensions In PerilThose with their retirements in 401(k) plans have taken a huge hit. Those with defined pension plans aren't free of the carnage.From the Boston Globe:
Full article here. Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Successful bank rescue still far away (Martin Wolf)Interesting piece by Martin Wolf of the Financial Times.By Martin Wolf | March 24 2009 19:24 I am becoming ever more worried. I never expected much from the Europeans or the Japanese. But I did expect the US, under a popular new president, to be more decisive than it has been. Instead, the Congress is indulging in a populist frenzy; and the administration is hoping for the best. If anybody doubts the dangers, they need only read the latest analysis from the International Monetary Fund. It expects world output to shrink by between 0.5 per cent and 1 per cent this year and the economies of the advanced countries to shrink by between 3 and 3.5 per cent. This is unquestionably the worst global economic crisis since the 1930s. One must judge plans for stimulating demand and rescuing banking systems against this grim background. Inevitably, the focus is on the US, epicentre of the crisis and the world's largest economy. But here explosive hostility to the financial sector has emerged. Congress is discussing penal retrospective taxation of bonuses not just for the sinking insurance giant, AIG, but for all recipients of government money under the troubled assets relief programme (Tarp) and Andrew Cuomo, New York State attorney-general, seeks to name recipients of bonuses at assisted companies. This, of course, is an invitation to a lynching. Yet it is clear why this is happening: the crisis has broken the American social contract: people were free to succeed and to fail, unassisted. Now, in the name of systemic risk, bail-outs have poured staggering sums into the failed institutions that brought the economy down. The congressional response is a disaster. If enacted these ideas would lead to an exodus of qualified employees from US banks, undermine willingness to expand credit, destroy confidence in deals struck with the government and threaten the rule of law. I presume legislators expect the president to save them from their folly. That such ideas can even be entertained is a clear sign of the rage that exists. This is also the background for the "public/private partnership investment programme" announced on Monday by the US Treasury secretary, Tim Geithner. In the Treasury's words, "using $75bn to $100bn in Tarp capital and capital from private investors, the public/private investment programme will generate $500bn in purchasing power to buy legacy assets—with the potential to expand to $1 trillion over time". Under the scheme, the government provides virtually all the finance and bears almost all the risk, but it uses the private sector to price the assets. In return, private investors obtain rewards—perhaps generous rewards—based on their performance, via equity participation, alongside the Treasury. I think of this as the "vulture fund relief scheme". But will it work? That depends on what one means by "work". This is not a true market mechanism, because the government is subsidising the risk-bearing. Prices may not prove low enough to entice buyers or high enough to satisfy sellers. Yet the scheme may improve the dire state of banks' trading books. This cannot be a bad thing, can it? Well, yes, it can, if it gets in the way of more fundamental solutions, because almost nobody—certainly not the Treasury—thinks this scheme will end the chronic under-capitalisation of US finance. Indeed, it might make clearer how much further the assets held on longer-term banking books need to be written down. Read the rest of the article. Labels: bailout, financial crisis, Martin Wolf, Timothy Geithner Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Hey Paul Krugman (A Song, A Plea)Catchy tune from YouTube. Hat-tip to Bryan S.Labels: bailout, financial crisis, Paul Krugman, Timothy Geithner, YouTube Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Stiglitz On the Fiscal Crisis Of the StateFrom Common Dreams:Fiscal Plan Fails both Markets and Taxpayers Labels: fiscal policy, fiscal stimulus, Joseph Stiglitz Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). U.S. Seeks Expanded Power to Seize FirmsFrom the Washington Post. The plot thickens. Sure sounds to me like they're thinking Geithner's plan won't work and they'll have to nationalize after all. The "we've got to move quickly" line (2nd-to-last paragraph) is getting a little old.U.S. Seeks Expanded Power to Seize Firms Goal Is to Limit Risk to Broader Economy By Binyamin Appelbaum and David Cho Washington Post Staff Writers Tuesday, March 24, 2009; A01 The Obama administration is considering asking Congress to give the Treasury secretary unprecedented powers to initiate the seizure of non-bank financial companies, such as large insurers, investment firms and hedge funds, whose collapse would damage the broader economy, according to an administration document. The government at present has the authority to seize only banks. Giving the Treasury secretary authority over a broader range of companies would mark a significant shift from the existing model of financial regulation, which relies on independent agencies that are shielded from the political process. The Treasury secretary, a member of the president's Cabinet, would exercise the new powers in consultation with the White House, the Federal Reserve and other regulators, according to the document. The administration plans to send legislation to Capitol Hill this week. Sources cautioned that the details, including the Treasury's role, are still in flux. Treasury Secretary Timothy F. Geithner is set to argue for the new powers at a hearing today on Capitol Hill about the furor over bonuses paid to executives at American International Group, which the government has propped up with about $180 billion in federal aid. Administration officials have said that the proposed authority would have allowed them to seize AIG last fall and wind down its operations at less cost to taxpayers. The administration's proposal contains two pieces. First, it would empower a government agency to take on the new role of systemic risk regulator with broad oversight of any and all financial firms whose failure could disrupt the broader economy. The Federal Reserve is widely considered to be the leading candidate for this assignment. But some critics warn that this could conflict with the Fed's other responsibilities, particularly its control over monetary policy. The government also would assume the authority to seize such firms if they totter toward failure. Besides seizing a company outright, the document states, the Treasury Secretary could use a range of tools to prevent its collapse, such as guaranteeing losses, buying assets or taking a partial ownership stake. Such authority also would allow the government to break contracts, such as the agreements to pay $165 million in bonuses to employees of AIG's most troubled unit. The Treasury secretary could act only after consulting with the president and getting a recommendation from two-thirds of the Federal Reserve Board, according to the plan. Geithner plans to lay out the administration's broader strategy for overhauling financial regulation at another hearing on Thursday. The authority to seize non-bank financial firms has emerged as a priority for the administration after the failure of investment house Lehman Brothers, which was not a traditional bank, and the troubled rescue of AIG. "We're very late in doing this, but we've got to move quickly to try and do this because, again, it's a necessary thing for any government to have a broader range of tools for dealing with these kinds of things, so you can protect the economy from the kind of risks posed by institutions that get to the point where they're systemic," Geithner said last night at a forum held by the Wall Street Journal. The powers would parallel the government's existing authority over banks, which are exercised by banking regulatory agencies in conjunction with the Federal Deposit Insurance Corp. Geithner has cited that structure as the model for the government's plans. Labels: bailout, banking system, financial crisis, Timothy Geithner Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Down the dark path (Delasantellis on Geithner)Hat-tip to Larry P. for this; he says "it's by far the best thing I've read on this travesty."I am in absolutely no possession of any historical evidence that 16th-century English jailers employed modern stand-up comedians to bring a bit of levity to their inheritantly bleak workspaces, but what if they had? What if, as the clock ticked down in the Tower of London before the execution of Sir Thomas More ordered by King Henry VIII in July 1535, a comic, in the style of the late Rodney Dangerfield, was brought in to do stand-up? "Hey, everybody looks great here. Anybody here Papists? Don't worry, your secret's safe with me—I haven't even paid the withholding tax on my foodtaster yet. I just flew in from the Isle of Man, and boy, are my arms tired—you know what I mean? Hey, prison guards! I never knew why they called you guys Beefeaters until I saw your wives outside the gates!" Turning to the condemned man. "Hey, Tommy, I got good news for you. You're not going to be drawn and quartered tomorrow." "Pray tell sir, do not jest!" "I'm serious. Big H's gonna cut your head off instead!" That's a little bit like the situation with the newly revealed, final US Treasury Secretary Timothy Geithner toxic asset recovery bank program. It may work. It may not. Whatever happens with its effectiveness, one thing is certain. US taxpayers are definitely going to be getting the chop, maybe you could even say they're getting it in the chops, as a result of its implementation and administration. Read the rest of the article. Labels: bailout, financial crisis, Henry VIII, Julian delasantellis, Rodney Dangerfield, Sir Thomas More, Timothy Geithner, toxic assets Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). The Economics of WarWe get deluged with press releases, most of which we ignore (since the senders usually assume that we are a mainstream business or personal finance magazine). Recently we received some press releases from the site Antiwar.com, which humbly describes itself as "the oldest and most important antiwar Website." (It turns out that there is also an Antiwar.org, but it redirects to Antiwar.com.) The press releases were about the 6th anniversary of the beginning of the Iraq War (March 19th). I thought about re-posting an op-ed by their executive director, Alexia Gilmore, in the San Jose Mercury News, but I thought it might be better to find out whether they had some economic analysis of the war that we could share with our blog readers. What their communications guy sent me was this article by a David R. Henderson of the Hoover Institution. The gist of the article is that what Ludwig von Mises and Friedrich Hayek showed about how command economies are doomed to failure can also be applied to centrally planned foreign policy; the article makes the analogy between "acentrally planning an economy and centrally deciding to intervene in another country's affairs."Now, Antiwar.com makes a big deal about being a "big tent" organization; one press release says, "The site includes content from well-known authors around the world and across the political spectrum, from Daniel Ellsberg to Pat Buchanan," while Antiwar Radio features "interesting and noted guests such as Rep. Ron Paul, Noam Chomsky, and many more." And that's fine. I don't even mind reading about von Mises and Hayek on occasion. But the several articles by this Hoover Institution guy on Antiwar.com have impressive graphics granting him the title of "THE WARTIME ECONOMIST," and one gets the impression that he is almost the official economist of Antiwar.com. And there is not much sign of any left economic critiques of militarism on the site.  Anyhow, this inspired me to finally do what I've been intending to do for a while, which is to put together a special web page with the articles we've run in Dollars & Sense on war and militarism in recent years. I even made a nifty "guns and butter" graphic to go with it. We have a couple of new articles on militarism in the works—stay tuned. Labels: costs of war, iraq war, militarism, military spending, war Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). The Wealth Gap Gets WiderFrom Meizhu Lui, former executive director of United for a Fair Economy (our next-door neighbors and partners in various projects, including publishing The Wealth Inequality Reader), in Monday's Washington Post:The chips are in.Read the rest here. Labels: Meizhu Lui, race, racial wealth divide, racism, Survey of Consumer Finances, Washington Post, wealth inequality Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Market Up Krugman DownThe Dow Jones Industrials soared nearly 500 points today (about 6%) on news of the Geithner plan to buy up toxic bank assets. The stocks of troubled banks did particularly well, Citibank up 17%, Bank of America 18%, JPMorgan Chase up 18%, and Wells Fargo up 17%.As usual, if Wall Street is happy about a bailout plan, taxpayers should be worried. From Krugman: Tim Geithner, the Treasury secretary, has persuaded President Obama to recycle Bush administration policy - specifically, the "cash for trash" plan proposed, then abandoned, six months ago by then-Treasury Secretary Henry Paulson. Read the rest of the column here. In short, it won't work, it will enrich private investors at public expense, and it will close the door to other solutions that could work. Labels: bailout, Dow Jones Industrial Average, financial crisis bailout, Paul Krugman, Timothy Geithner, toxic assets Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Foreign Firms Want Piece of Stimulus PieWith Congress doling out $787 billion in stimulus money, foreign firms figure that no one will mind if they get some of it. And they'll probably only take 40% or so out of the country. All you need to win is a U.S. subsidiary, some well-placed lobbyists, and a dream.From the Washington Post: Spain's Prince Felipe and his wife, Princess Letizia, visited New York and Washington last week on an unusual mission for one of Europe's most glamorous celebrity couples: to drum up business for Spanish companies from the U.S. economic stimulus package. Labels: economic stimulus, fiscal stimulus, stimulus package Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). US Still #1 In Military Spending According to the Stockholm International Peace Research Institute as reported in the Economist, the U.S. spent more in 2007 on its military than the 14 largest countries combined. The U.S.'s $1.2 trillion in 2007 (hey, that could buy a bank bailout or two!) accounted for 45% of all global military spending. And this doesn't even account for the future expenses that will be incurred as a result of the wars in Iraq and Afghanistan. Labels: military spending Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Regulators Despair Of 'Ponzimonium'Is it Ponzimonium or Ponzapalooza?From Reuters: Hundreds of people in the United States are under investigation for financial scams, many involving Ponzi schemes, a U.S. regulator said on Friday, calling the phenomenon "rampant Ponzimonium." More here. Labels: banking regulation, Corporate Fraud, Corporate Swindles, financial regulation, ponzi, SEC Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Obama Plans To Avoid Repeat of CrisisFrom Bloomberg:Obama to Outline Regulation Changes to Avoid Repeat of Crisis By Hans Nichols March 22 (Bloomberg) The Obama administration will this week outline regulatory changes aimed at avoiding a repeat of the financial crisis that's crippled the banking system and pushed the U.S. into the deepest recession since 1982. The proposals will address the risks that remain in financial regulation, an administration official said, including the need for an agency to have the power to resolve a breakdown at a major financial institution. Federal Reserve Chairman Ben S. Bernanke two weeks ago called for regulators to be given the authority to seize such firms, in the way the Federal Deposit Insurance Corp. already has for deposit-taking institutions. Officials favor giving the Fed greater responsibility for managing risk across the financial system as was proposed almost a year ago by former Treasury secretary Henry Paulson, support for which is waning in Congress. President Barack Obama may also subject executive pay to greater scrutiny, the New York Times reported. An administration official denied that curbing compensation will be a major focus of the regulatory plan. "There’s still a need for a systemic-risk regulator," Representative Barney Frank, the Massachusetts Democrat who chairs the House Financial Services Committee, said on March 20. "The argument for the Fed alone has lost a lot of political support. I think that’s now got to be re-looked at." Treasury Secretary Timothy Geithner will testify before Frank's committee on March 26 as Obama prepares to travel to London for a summit of the Group of 20 industrial and developing nations. G-20 Summit Obama has said that the meeting must deal with how to prevent further crises like the current financial meltdown that began almost two years ago with the collapse of the market for subprime mortgages. American banks have suffered more than $800 billion in writedowns and credit losses since then. The credit contraction that followed dragged first the U.S., and then Europe and Japan, into recession. A surge in unemployment and collapse in house prices has added to bad loans and further discouraged banks from lending. The crisis also pushed the U.S. government into pouring hundreds of billions of dollars into financial institutions, including Citigroup Inc., Bank of America Corp. and American International Group Inc. Like the White House, Congress is trying to overhaul U.S. financial regulations and agencies that lawmakers have faulted for lax oversight. Frank, who is playing a lead role in the redesign, has been pushing to expand the Fed's authority. Read the rest of the article Labels: bailout, banking regulation, Barack Obama, barney frank, financial crisis, Timothy Geithner Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Proposed Plan To Deal With Toxic AssetsFrom The Wall Street Journal:MARCH 21, 2009 U.S. Sets Plan for Toxic Assets Wall Street Journal By DEBORAH SOLOMON WASHINGTON -- The federal government will announce as soon as Monday a three-pronged plan to rid the financial system of toxic assets, betting that investors will be attracted to the combination of discount prices and government assistance. But the framework, designed to expand existing programs and create new ones, relies heavily on participation from private-sector investors. They've been the target of a virulent anti-Wall Street backlash from Washington in the wake of the American International Group Inc. bonus furor. As a result, many investors have expressed concern about doing business with the government in this climate--potentially casting a cloud over the program's prospects. The administration plans to contribute between $75 billion and $100 billion in new capital to the effort, although that amount could expand down the road. The plan, which has been eagerly awaited by jittery investors, includes creating an entity, backed by the Federal Deposit Insurance Corp., to purchase and hold loans. In addition, the Treasury Department intends to expand a Federal Reserve facility to include older, so-called "legacy" assets. Currently, the program, known as the Term Asset-Backed Securities Loan Facility, or TALF, was set up to buy newly issued securities backing all manner of consumer and small-business loans. But some of the most toxic assets are securities created in 2005 and 2006, which the TALF will now be able to absorb. Finally, the government is moving ahead with plans, sketched out by Treasury Secretary Timothy Geithner last month, to establish public-private investment funds to purchase mortgage-backed and other securities. These funds would be run by private investment managers but be financed with a combination of private money and capital from the government, which would share in any profit or loss. All told, the three efforts are designed to unglue markets that have seized up as investors have stood on the sidelines. One big problem is that many of these assets no longer trade, which means it's very hard to put a price on them. Banks are unwilling to sell at too low a price, and investors are unwilling to take the risk. Read the rest of the article Labels: bailout, financial crisis, TALF, Timothy Geithner, toxic assets, US Treasury Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). RBoS To Become UK's Enron?From The Observer:RBS faces probe over 'threats' to directors Peer's criminal inquiry warning on bank Toby Helm and Jamie Doward The Observer, Sunday 22 March 2009 The scandal engulfing the Royal Bank of Scotland reaches new heights today with serious allegations from a senior Labour politician that at least three of its former non-executive directors may have been intimidated and threatened with the sack for asking searching questions about its financial affairs. The Observer can reveal that a former government minister, Lord Foulkes of Cumnock, who has been extensively briefed by former bank insiders, has written to the Financial Services Authority, the City watchdog, asking it to pursue the claims which, if true, could trigger a criminal investigation. The intervention by Foulkes, who is also a member of the Scottish parliament and sits on the Commons security and intelligence committee, comes amid fears that the bank will be exposed as the UK's equivalent of Enron--the US trader that collapsed amid systemic fraud. Last night Foulkes said there was "widespread public anger among the public and Parliament that bankers in the midst of this financial crisis appear to be profiting and no action is being taken in relation to action which could constitute criminal offences". In relation to claims of intimidation, Foulkes said: "If it were to transpire that executives were pressured in such a way, then that is a most serious matter indeed that needs urgent action." Read the rest of the article Labels: bailout, financial crisis, Labour Party, Royal Bank of Scotland Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). The People's Agenda (NYC event)Linda Pinkow and I (Chris Sturr) have been out in Amherst, Mass. for the Forum on the Solidarity Economy, which has been great, and inspiring. It has been great to see lots of comrades and meet new ones. We will aim to blog about it more extensively early this week.Below is an announcement for an event to be held next week. One or the other of the hosts of this event, Mimi Rosenberg and Ken Nash (hosts of Building Bridges on WBAI) will be part of the panel we have put together for this year's Left Forum, along with one or the other of the D&S co-editors (me or Amy Gluckman), Jerry Friedman (UMass-Amherst economist and D&S author, with whom we had a great chat over coffee yesterday), and Cecilia Rio, of Towson University and the Center for Popular Economics. But here's that annoucement—looks like a great event: WBAI Radio and the New York Society for Ethical Culture present The People’s Agenda: Working For An Economy By The People, For The People! Produced by WBAI’s Building Bridges: Your Community and Labor Report Hosted by Mimi Rosenberg and Ken Nash Wednesday, April 1, 2009, 7:00 – 9:30 PM (doors open at 6:30pm) NY Society for Ethical Culture, 2 W. 64th St (at Central Park West) An examination of the present crisis of capitalism and peoples’ demands that the road to economic recovery lies in directly increasing their living standard and abandoning trickle down economics. In the words of Rev. Martin Luther King Jr. who gave his life fighting for the rights of the Memphis sanitation workers and for a poor people’s movement for economic rights, "A true revolution of values will soon look uneasily on the glaring contrast of poverty and wealth…and say: 'This is not just.'" The program (partial list): . Ajamu Sankofa, Private Health Insurance Must Go Coalition . Lillian Roberts, Ex. Dir. DC 37, American Federation of State County & Municipal Employees (AFSCME) . video message from U.S. Representative Dennis Kucinich . Dean Baker, Co-Director, Center for Economic and Policy Research; author of Plunder and Blunder: The Rise and Fall of the Bubble Economy . Stanley Aronowitz, Prof. of Sociology, & Urban Education, CUNY Graduate Center; author of Left Turn: Forging a New Political Future ; University Wide Officer, Professional Staff Congress, AFT . Representatives of the April 3 and 4 marches on Wall Street Coalitions . presenters from housing and community service coalitions Suggested donation $10, (no one will be turned away) To Benefit for WBAI and the NY Society for Ethical Culture Further information: buildingbridgesradio--at--gmail.com Labels: bailout, Center for Popular Economics, financial crisis, Left Forum, WBAI Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). The Virtues of Public Anger, and Need for More Great piece by Glenn Greenwald at Salon.com; hat-tip to Ben C. Ben wrote me: "This article is pretty damn good. I predict that your proposed new title for D&S, 'Jump You Fuckers,' will be conventional wisdom by Sept/Oct." The virtues of public anger and the need for more Glenn Greenwald | Salon | Saturday March 21, 2009 09:08 EDT With lightning speed and lockstep unanimity, opinion-making elites jointly embraced and are now delivering the same message about the public rage triggered this week by the AIG bonus scandal: This scandal is insignificant. It's just a distraction. And, most important of all, public anger is unhelpful and must be contained or, failing that, ignored. This anti-anger consensus among our political elites is exactly wrong. The public rage we're finally seeing is long, long overdue, and appears to be the only force with both the ability and will to impose meaningful checks on continued kleptocratic pillaging and deep-seated corruption in virtually every branch of our establishment institutions. The worst possible thing that could happen now is for this collective rage to subside and for the public to return to its long-standing state of blissful ignorance over what the establishment is actually doing. It makes perfect sense that those who are satisfied with the prevailing order -- because it rewards them in numerous ways -- are desperate to pacify public fury. Thus we find unanimous decrees that public calm (i.e., quiet) be restored. It's a universal dynamic that elites want to keep the masses in a state of silent, disengaged submission, all the better if the masses stay convinced that the elites have their best interests at heart and their welfare is therefore advanced by allowing elites -- the Experts -- to work in peace on our pressing problems, undisrupted and "undistracted" by the need to placate primitive public sentiments. While that framework is arguably reasonable where the establishment class is competent, honest, and restrained, what we have had -- and have -- is exactly the opposite: a political class and financial elite that is rotted to the core and running amok. We've had far too little public rage given the magnitude of this rot, not an excess of rage. What has been missing more than anything else is this: fear on the part of the political and financial class of the public which they have been systematically defrauding and destroying. * * * * * These endless lectures from sober, rational pundits about the relative quantitative insignificance of the AIG bonuses are condescending straw men. Nobody thinks that $165 million in bonuses for the people who destroyed AIG is what has caused the financial crisis. Nobody thinks that recouping those bonuses or having prevented them in the first place would solve or even mitigate systemic collapse. The amounts are miniscule in the context of the broader economic issues. Everyone is aware of that; nobody needs to have that pointed out. As Armando astutely observed, the attempt now to dismiss the anger over the AIG bonuses as the by-product of simple-minded ignorance and/or ideological rigidity (class warfare! crass populism!) is quite similar to how anti-war arguments were stigmatized before the attack on Iraq : ignore the screeching pacifists and let the sober Experts make the decisions, for they know best. The AIG scandal is significant and has resonated so powerfully because it is a microscope that enables the public to see what and who has wreaked the destruction that threatens their security and future and, most important of all, to realize that these practices haven't ended and the perpetrators haven't been punished. The opposite is true: those who caused the crisis continue to exert control over what happens and continue to have huge amounts of public money transferred in order to enrich them. Eliot Spitzer is absolutely right that, even at AIG, there are far larger scandals than the bonuses, such as the undiscounted compensation of AIG's counter-parties such as Goldman Sachs (and just by the way: it is indescribably symbolic that Spitzer has been punished and disgraced for his acts of consensual adult sex while the targets of his prescient Wall St. investigations, who basically destroyed the world economy, remain protected and empowered). But the bonus scandal is illustrative of why the crisis happened, who caused it to happen, and the ongoing political dominance of the perpetrators. It is, as Robert Reich put it, "a nightmarish metaphor for the Obama Administration's problems administering the bailout of Wall Street." The financial crisis has merely unmasked the corruption and rot in our establishment institutions that are staggering in magnitude and reach. Just as the Iraq War was not the by-product of wrongdoing by a few stray bad political and media actors but instead was reflective of our broken institutions generally, the financial crisis is a fundamental indictment on the way the country functions and of its ruling class. What would be unhealthy is if there weren't substantial amounts of public rage in the face of these revelations. Read the rest of the article. Labels: AIG, anger, bailout, financial crisis, Glenn Greenwald, populism, ruling class, Timothy Geithner, Wall Street, Wall Street bonuses Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Krugman: The Zombies Have WonGeithner's plan has been announced. Late on a Friday when nobody will notice, right? Never a good sign.Basically, it's heads the banks win, tails we lose. Actually, heads we lose too. From Paul Krugman's blog: The Geithner plan has now been leaked in detail. It’s exactly the plan that was widely analyzed — and found wanting - a couple of weeks ago. The zombie ideas have won. And from Yves Smith: If the money committed to this program is less than the book value of the assets the banks want to unload (or the banks are worried about that possibility), the banks have an incentive to try to ditch their worst dreck first. Rest of Smith's analysis here. Labels: bailout, financial crisis bailout, Timothy Geithner, toxic assets, Treasury Department Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). AIG Sues To Get $306 Million In Taxes BACK!AIG gets $170 billion from taxpayers. Taxpayers now own 80% of the company. Company hands out hundreds of millions in bonuses. Congress and Treasury claim they had no idea and can't stop the payments. Congress announces new taxes to recover most egregious bonuses (e.g. million dollar "retention" payouts to people that have left). And now this. The company is suing the federal government to get $306 million it paid after being busted for illegal use of offshore tax shenanigans. A government-owned company is suing the government to get back tax money it paid for not paying its taxes, and is using taxpayer money to pay the lawyers.My head hurts. From the NYT: While the American International Group comes under fire from Congress over executive bonuses, it is quietly fighting the federal government for the return of $306 million in tax payments, some related to deals that were conducted through offshore tax havens. Labels: AIG, tax dodges, tax havens Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Jamie Galbraith: No Return to NormalExcellent insight from James K. Galbraith in The Washington Monthly:Barack Obama's presidency began in hope and goodwill, but its test will be its success or failure on the economics. Did the president and his team correctly diagnose the problem? Did they act with sufficient imagination and force? And did they prevail against the political obstacles—and not only that, but also against the procedures and the habits of thought to which official Washington is addicted? Full article here. Labels: economic stimulus, James K. Galbraith Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Auto Parts Suppliers Get $5 Billion LoanBeleaguered auto parts suppliers will receive up to $5 in loan government loan guarantees. Parts suppliers usually get paid by car manufacturers 45 days after delivery. The program will guarantee those payments.Labels: auto industry, auto industry loans Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Time For A 'Managed Bankruptcy' For BanksFrom CEPR:Getting Lehman Wrong a Second Time Labels: bank nationalization, CEPR, Dean Baker, Lehman Brothers Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Bailout Firms Owe $220 Million In Unpaid TaxesFrom the Washington Post:
Full article here. Labels: bailout, financial crisis bailout, Henry Paulson, John Lewis Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Why Are AIG INVESTORS Getting Billions?Before he went down for, ahem, going down, Eliot Spitzer was the guy Wall Street feared most. He's worth listening to.From Salon.com The Real AIG Scandal Rest of article here. Labels: AIG, bailout, Bank of America, Barclay's Bank, Deutsche Bank, Eliot Sptizer, Goldman Sachs, JP Morgan Chase, Merrill Lynch, Morgan Stanley, UBS, Wall Street bonuses Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Unemployment Rate On Par With 1982 RecessionA new report from CEPR. Download the pdf of the full report here.
Labels: CEPR, Dean Baker, unemployment Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Fed Spends Another $1.2 Trillion On BailoutAnother trillion plus to lower mortgage rates? Is this really supposed to help anything?From the Washington Post: The Federal Reserve said today that it will deploy an additional $1.2 trillion to try to lower interest rates and stimulate the economy, an aggressive move aimed at containing the recession. Labels: bailout, bond market, Fannie Mae, Federal Reserve, financial crisis bailout, Freddie Mac, mortgage backed securities, Treasury bonds, US Treasury Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Europe Defended Against KrugmanIn a New York Times op-ed Monday, Paul Krugman criticized European governments for under-reacting to the financial crisis:The clear and present danger to Europe right now comes from a different direction—the continent’s failure to respond effectively to the financial crisis.A strong rebuttal appears on the Models & Agents blog (also posted on RGE Monitor). Here's an excerpt: Krugman’s latest “prey” are European policymakers, in an op-ed piece that is so shallow and uncorroborated in its assertions, and so one-size-fits-all in its prescriptions, that it might have well been written by an American freshman student of European studies in a rush to finish his midterm exam.Read the whole piece here. Labels: Europe, european central bank, financial crisis bailout, Paul Krugman Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Amazon Kindle Equals the Death of Personhood, Ownership, and Free Speech?An interesting if broad-brush attack on e-book readers in today’s Christian Science Monitor:All you really need to know about the dangers of digital commodification you learned in kindergarten. Read it here. Labels: Amazon, digital rights management, e-books, Kindle Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Capital Flowing Out of Developing CountriesFrom Nouriel Roubini’s RGE Monitor:The reversal of capital inflows due to deleveraging or losses in financial markets has been one of the most significant effects of the financial crisis on emerging and frontier economies. After a period in 2007 and 2008 when many emerging markets faced the problem of dealing with extensive capital inflows, now capital flows have reversed. Private capital flows in 2009 are expected to be less than half of their 2007 levels, posing pressure on emerging market currencies, asset markets and economies. Countries that relied on readily available capital to finance their current account deficits are particularly vulnerable. Furthermore, capital outflows pose the risk that governments may react with some type of capital controls or barriers to the exit of foreign investments.Note that the piece later adopts a different tone on capital controls, accepting their use on a temporary basis and noting that Iceland, Ukraine, Argentina, Indonesia and Russia, among others, have already adopted them. Foreign direct investment (FDI) is considered by many to be a major and more stable source of financing for many developing countries. FDIs slowed down sharply in recent quarters ...Read the whole analysis here. Labels: capital controls, economic crisis, Emerging markets, IMF, Nouriel Roubini Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). A Bit More on Madoff and WieselIn my earlier post expanding on Joe Nocera's column on Madoff's victims, I'd meant to include an excerpt from this article from a while back in the New Yorker. The article was compelling for going at least some of the way toward answering a question that many of us have asked ourselves, but maybe never expected to get an answer: Who falls for those Nigerian scam emails? I mean, if they keep sending them, the scammers must be finding victims. But who? The article profiles an ordained minister and Christian psychotherapist from the suburbs of Boston who got drawn in, and was victimized, by some Nigerian email scammers in a check fraud scheme—and was prosecuted for his role in the scheme. Part of the burden of the article—besides answering that question we thought no one ever would—is to assess the victim's culpability. He was victimized, but he did also participate in fraud. There's a paragraph early in the article that struck me, and that I've been thinking about in recent weeks as the Madoff victims have their say (including especially Elie Wiesel's public expressions of scorn and retributive sentiment for Madoff):Robert B. Reich, the former Labor Secretary, who has studied the psychology of market behavior, says, "American culture is uniquely prone to the 'too good to miss' fallacy. 'Opportunity' is our favorite word. What may seem reckless and feckless and hapless to people in many parts of the world seems a justifiable risk to Americans." But appetite for risk is only part of it. A mark must be willing to pursue a fortune of questionable origin. The mind-set was best explained by the linguist David W. Maurer in his classic 1940 book, "The Big Con": "As the lust for large and easy profits is fanned into a hot flame, the mark puts all his scruples behind him. He closes out his bank account, liquidates his property, borrows from his friends, embezzles from his employer or his clients. In the mad frenzy of cheating someone else, he is unaware of the fact that he is the real victim, carefully selected and fatted for the kill. Thus arises the trite but none the less sage maxim: 'You can't cheat an honest man.'" The whole article is definitely worth a read. Labels: Bernard Madoff, control fraud, Elie Wiesel, Greed, Nigerian Scam, Wall Street Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). D&S in PolishWe just received a pdf copy of the March issue of the Polish edition of Le Monde diplomatique, which includes our May/June 2008 cover story, Ryan Dodd's article on WPA-style Employer of Last Resort programs. The article is still timely. There is a lengthy sidebar by our Polish contact at Le Diplo, Grzegorz Konat. I will have to get him to send an English translation of his sidebar.I couldn't even begin to figure out how to code all the Polish diacritical marks in xhtml, so I've posted a pdf of the article here. If your Polish is as rusty as mine, you can find the original English version here. (The last time I tried to say anything in Polish was when, at age eight or so, I called my grandmother "babka" (coffee cake) instead of "babcha" (grandma), to the amusement of my extended family in Utica, NY.) Labels: Employer of Last Resort, Le Monde Diplomatique, Poland, Ryan Dodd, unemployment, WPA Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Madoff's Accomplices: His Victims (Nocera)Finally, somebody in a mainstream publication says something close to what I have been thinking about the Madoff victims. In a column last Friday entitled Madoff Had Accomplices: His Victims, Joe Nocera argues that the investors whom Madoff cheated were irresponsible. As I will argue below, I think they were showed not just personal irresponsibility, but possibly also ethical and political irresponsibility. But here's Nocera:[J]ust about anybody who actually took the time to kick the tires of Mr. Madoff's operation tended to run in the other direction. James R. Hedges IV, who runs an advisory firm called LJH Global Investments, says that in 1997 he spent two hours asking Mr. Madoff basic questions about his operation. "The explanation of his strategy, the consistency of his returns, the way he withheld information—it was a very clear set of warning signs," said Mr. Hedges. When you look at the list of Madoff victims, it contains a lot of high-profile names—but almost no serious institutional investors or endowments. They insist on knowing the kind of information Mr. Madoff refused to supply. I like Nocero's line of thinking, but I wish he'd gone beyond personal investment advice. There is an argument to be made that Madoff's victims—or some of them, at least—and (it should be added) plenty of other big-money investors, are guilty not only of failing in their duties to themselves to invest their money wisely, but also failing ethically to invest their money in ways that don't harm other people. And if this is true of the Madoff investors, then it's true of a lot of other investors in Wall Street's latest high-flying phase. Take Elie Wiesel, for example. Here are some excerpts from the NY Times article about Wiesel's comments at the Portfolio forum Nocera mentions: Elie Wiesel Levels Scorn at Madoff And this:
Now, the punishment Wiesel describes sounds a lot like torture to me—solidary confinement alone is torture—so I was a little taken aback that Wiesel called for it. But what about a humanitarian and professor of ethics like Wiesel failing to look into the source of his and his foundation's investment profits? In the case of Madoff, the source was theft—Madoff and his accomplices used new investors' money to pay interest to older investors (this is what a Ponzi scheme is). But what if Madoff had just been a "good" (i.e., effective) money-manager (albeit with less consistently, and suspiciously, reliable returns), and had been paying Wiesel and his foundation interest that came from, say, companies that outsourced jobs to sweatshops; leveraged buyouts of companies that were then gutted and resold; companies that pollute; companies engaged in predatory lending; etc. etc.—that is to say, the usual sources of Wall Street megaprofits? Madoff was stealing from people, but many a money-manager who hasn't been branded "the most hated man in New York" (as one of the tabloids, I believe, put it), or called a "monster" on the cover of New York magazine has been complicit in plenty of human misery. Would Wiesel have known? Labels: Bernard Madoff, Elie Wiesel, financial crisis, Joe Nocera, Wall Street Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). AIG, Labor, and the Sanctity of ContractsToday's main columnist in the New York Times business section, Andrew Ross Sorkin, echoes the comments Larry Summers made on TV this weekend with regard to the AIG bonuses and the sanctity of contracts. Sorkin quotes Obama: "[The issue of AIG bonuses] isn't just a matter of dollars and cents. It's about our fundamental values." Sorkin goes on:On that last issue, lawyers, Wall Street types and compensation consultants agree with the president. But from their point of view, the "fundamental value" in question here is the sanctity of contracts. Sorkin frets about whether government "abrogating contracts left and right" would lead companies to break contracts willy nilly. But it's more about the government, and companies, breaking contracts left, but not right. As Ali Frick points out at Think Progress, companies already seize opportunities to break inconvenient contracts—with unions. And the government, egged on by the right-wing, encouraged them to do so: Yesterday on ABC's This Week, Larry Summers, head of President Obama's National Economic Council, called insurance giant AIG's plan to pay out $165 million in bonuses "outrageous" but insisted there was little the government could do about it. This despite the $170 billion in taxpayer funds that have been given to AIG. Summers cited the sanctity of contracts:SUMMERS: We are a country of law. There are contracts. The government cannot just abrogate contracts. Every legal step possible to limit those bonuses is being taken by Secretary Geithner and by the Federal Reserve system. Labels: AIG, auto industry, bailout, contracts, financial crisis, larry Summers, unions Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Single-Payer Rally in Burlington TODAYThis is happening in about 45 minutes, but in case any of our readers happen to be in Burlington...Hundreds of Activists to Rally in Burlington, Vermont Outside White House Regional Forum on Healthcare—TUESDAY Nurses, Doctors, Patients Call for Guaranteed Healthcare on the Single-Payer Model…And an End to Insurance Industry Denial of Care WHAT: Hundreds of healthcare activists from throughout New England and across the country will rally outside the White House’s latest regional summit on healthcare, and demand that Congress include single-payer reforms in its debate and discussion, including U.S. Rep. John Conyers' HR 676 WHO: A broad coalition of healthcare reformers brought together by the Leadership Conference on Guaranteed Healthcare, which includes the National Nurses Organizing Committee/California Nurses Association (NNOC/CNA), Physicians for a National Health Program (PNHP), Healthcare Now, and Progressive Democrats of America (PDA) WHEN: Tuesday March 17th; rally @ 11:30 a.m. featuring Dr. Deb Richter from PNHP WHERE: Davis Center, University of Vermont-Burlington WHY: "We can look around the world’s other industrialized democracies and see very clearly that a guaranteed healthcare system, such as an expanded and improved 'Medicare for All,' is the only way to provide patients with the care they need. We will come to Vermont to make sure that Congress hears from the nation's healthcare reformers as they are drafting this life-and-death legislation," said Geri Jenkins, RN, co-President of NNOC/CNA. Labels: Burlington, health care, single-payer Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Jobless Hit with Bank Fees on BenefitsHere's another one that I have been meaning to post for a while. I haven't seen this anywhere else, so maybe you haven't either.Bank of America is particularly egregious, imho. A few examples: although I am not among the "unbanked," I can identify with them, since sometimes I am close enough to living paycheck-to-paycheck that I need money fast and can't wait for a check to clear at my bank. The bank I use is a locally-owned one (Cambridge Trust), but my (other) employer, Harvard University, pays me in two lump sums twice a year drawing on Bank of America. The BoA branch in Harvard Square has appalled me for many years. Over the past few years (ten or so) Harvard Square, formerly chocked full of locally-owned businesses, independent bookstores, coffee shops, etc. (does anyone else remember The Tasty?) has been repopulated by high-end chains, cellular phone stores, and ATMs. Sometime in this period, the Harvard Square BoA branch remodeled itself so that the street-level part of the branch, gleaming with marble and flat-screen TVs with stock-tickers, is reserved for—I'm not sure for whom, but I'm assuming big-account investors (with huge banks of ATMs, too, of course). Anyone who wants to go to a teller has to go downstairs into a dingy and low-ceilinged space reminiscent of a welfare office. Last fall when I went to cash my twice-yearly paycheck from Harvard, not only did I have to go to the dingy downstairs, but the teller informed me that I would have to pay a $6 fee. For BoA to cash a check drawing on a BoA account. A check made payable to me, not to BoA. Since I really needed the money, I reluctantly agreed. Then the kicker: the teller pointed to a small black ink pad. They needed my fingerprint before they would cash my check. "It's for security," I was told. Apparently all this is legal. When I went to deposit my cash at my own bank, I told the teller about my experience. She was appalled. "That check was payable to you," she said. (More recently, I've noticed that at least some BoA ATMs charge an outrageous $3 for out-of-network users.) BoA (and the other big banks) are still following a profit model that involves leeching huge amounts of money, bit by bit, from the "unbanked" and the semi-banked. The big banks want a piece of the huge payday loan and check-cashing industry (which they themselves fund), and they are able to get it because so many people are locked out of mainstream banking, or are otherwise living on a financial edge. (For background on the big "respectable" banks' role in the "fringe economy," see this article from D&S a couple of years ago.) Anyhow, this article from the Associated Press shows how such practices might fit into BoA's model for returning to profitability: Jobless hit with bank fees on benefits Read the rest of the article. (By the way, does anyone else wish that Carolyn Maloney had been NY Gov. Patterson's pick to replace Hillary Clinton? I don't know much about her, but I like what I've heard.) Labels: Bank of America, banking crisis, banking regulation, Harvard University, unemployment, unemployment benefits Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). New Report on Global Gender Pay GapCatching up on a backlog of stuff to post. Here is something that I should have posted for International Women's Day, March 8th. There's information about the pay-gap between men and women globally, and also information about the impact of the global financial crisis on women. Related D&S article here. Hat-tip to Bob F.Brussels, 5 March 2009: A new report released by the ITUC for March 8, International Women's Day, has revealed that the pay gap between men and women worldwide may be much higher than official government figures. The report, "Gender (in)Equality in the Labour Market", is based on survey results of some 300,000 women and men in 20 countries. It puts the global pay gap at up to 22%, rather than the 16.5% figure taken from official government figures and released by the ITUC on March 8 last year. The report also confirms previous findings that union membership, and particularly the inclusion of women in collective bargaining agreements, leads to much better incomes for both women and men, as well as better pay for women relative to their male co-workers. The study, which follows the March 8 ITUC Global Gender Pay Gap report, was written by London-based pay specialists Incomes Data Services and is based on internet surveys conducted in industrialised and developing countries in 2008 by the WageIndicator Foundation. "This report clearly confirms the advantage which men and women workers gain from union membership, which is all the more important in the current global economic crisis when jobs and living standards for millions of workers are under severe threat," said Guy Ryder, ITUC general secretary. Other key findings in the report include confirmation that women with higher educational qualifications actually experience a larger income gap compared to males with similar qualifications and that the pay gap increases with age. "There are a number of reasons why women still earn so much less than men, including overt as well as subtle discrimination against women in the labour market and in the workplace, the way that employers, especially in the private sector, handle promotions to better-paid jobs, and lack of maternity protection for women and parenting leave that both men and women can access," said Sharan Burrow, president of the ITUC and of the Australian Trade Union Centre ACTU. Read the rest of the press release. Labels: financial crisis, International Trade Union Confederation, International Women's Day, pay gap, recession, women Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Our RSS Feed Is Working AgainTo blog subscribers: You may have noticed that our feed was down this weekend (starting at around 2pm on Friday). It's back up. It was a problem with Google/Blogger; apparently lots of other blogs had the same problem.Here's what you missed (unless you visited the site directly):
Not a ton of posts. To be honest, I took the downed RSS feed as an excuse to relax a little over the weekend. There will be more today, though. Labels: AIG, American Axle, auto industry, bankruptcy, California, marijuana, RSS feed, Six Flags Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). AIG Head Insists On Giving Millions In BonusesAIG, the company that has received more bailout billions than any other institution ($140 billion and the meter is still running), is forging ahead with its plan to dole out over $700 million in bonuses and "retention pay" to the "indispensable" people in charge of its financial products operation.Despite a reported angry phone call from Treasury Secretary Timothy Geithner, AIG CEO Edward Liddy claims that his hands are tied lest his top talent leave the firm in search of better offers. "I do not like these arrangements and find it distasteful and difficult to recommend to you that we must proceed with them," Liddy wrote in a letter to Geithner, as reported in the Washington Post. "Our competitors understand how valuable our top executives are, and we are acutely aware that they would like to siphon off our most talented leaders," he continued. Apparently the prospect of AIG geniuses finding work at other financial institutions deemed "too big to fail" (read "will demand taxpayer bailout after looting ceases") convinced Geithner to forget the whole thing. Incidentally, the Post notes that if the Treasury had decided to properly nationalize the company instead of just taking on an 80% stake as a silent partner, the government could have canceled all such payments and unilaterally rewritten the the company's employment contracts. Labels: AIG, Corporate Swindles, corporate welfare, executive pay, Timothy Geither, Treasury Department Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Pity the Overtaxed RichA letter to the editor in the Boston Globe today, not the first of its kind in recent days, asserts that high-income households already pay an unfair share of taxes.Dr. Dollar debunked this idea back in 2002. The federal income tax may be mildly progressive, but add in payroll taxes (Social Security and Medicare) and state and local taxes, mostly regressive, and tax collections overall leave the highly-skewed distribution of income relatively untouched. Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Can Marijuana Rescue the Cali Economy?From Time.com (the website of Time magazine). There is a "related" link to an article entitled: "The Doctor's View: Why I'm Not Against, Like, Oh Wow Man, Pot." Should we be offended by the stereotype of people who enjoy MJ? Or maybe that's just how doctors talk in Cali.By Alison Stateman | Los Angeles | Friday, Mar. 13, 2009 Could marijuana be the answer to the economic misery facing California? Democratic state assemblyman Tom Ammiano thinks so. Ammiano introduced legislation last month that would legalize pot and allow the state to regulate and tax its sale — a move that could mean billions of dollars for the cash-strapped state. Pot is, after all, California's biggest cash crop, responsible for $14 billion a year in sales, dwarfing the state's second largest agricultural commodity — milk and cream — which brings in $7.3 billion a year, according to the most recent USDA statistics. The state's tax collectors estimate the bill would bring in about $1.3 billion a year in much needed revenue, offsetting some of the billions of dollars in service cuts and spending reductions outlined in the recently approved state budget. "The state of California is in a very, very precipitous economic plight. It's in the toilet," says Ammiano. "It looks very, very bleak, with layoffs and foreclosures, and schools closing or trying to operate four days a week. We have one of the highest rates of unemployment we've ever had. With any revenue ideas, people say you have to think outside the box, you have to be creative, and I feel that the issue of the decriminalization, regulation and taxation of marijuana fits that bill. It's not new, the idea has been around, and the political will may in fact be there to make something happen." Ammiano may be right. A few days after he introduced the bill, U.S. Attorney General Eric Holder announced that states should be able to make their own rules for medical marijuana and that federal raids on pot dispensaries in California would cease. The move signaled a softening of the hard-line approach to medicinal pot use previous Administrations have taken. The nomination of Gil Kerlikowske as the head of the Office of National Drug Control Policy may also signal a softer federal line on marijuana. If he is confirmed as the so-called drug czar, Kerlikowske will take with him experience as police chief of Seattle, where he made it clear that going after people for possessing marijuana was not a priority for his force. Read the rest of the article. Labels: California, marijuana, recession, states' fiscal crises Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Auto Supplier and Six Flags Going DownThe car won't run and the park is closed.GM and Chrysler parts supplier American Axle appears headed for bankruptcy. The company's stock traded at $30 a share in 2007, but is now worth only pennies and will soon be delisted by the NYSE. Although the auto companies have received billions in federal bailout funds, parts suppliers have not, although proposals are floating around to include them in future plans. American Axle slashed 3,000 workers last year while losing $118 million. Theme park operator Six Flags Inc seems next in line for bankruptcy protection. The company appears unable to meet future payments to investors and creditors after a report that the company lost over $200 million in the final quarter of 2008. Labels: auto industry, auto industry loans, bankruptcy, Chrysler, GM, Six Flags Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Insider Report on the Health Care SummitThanks to activist pressure, single-payer advocate Oliver Fein, MD, was allowed to participate in the White House health care summit. In his extensive post, Dr. Fein gives an inside account of the summit and lays out some reasons for cautious optimism for those pushing for a single-payer universal health care system.The major single-payer bill in the House is HR 676. Dr. Fein reports that Senator Bernie Sanders is planning on proposing a counterpart bill in the Senate shortly. From the Beaver County Blue website: Thanks to many grassroots activists and physicians who called the White House and threatened to demonstrate outside its gates, I was at the Health Care Summit at the White House on March 5 along with Rep. John Conyers Jr. (D-Mich.). And it was good thing. It meant that the single-payer position was recognized as one pathway to health care reform. It also meant that one of our concerns was present: namely, that any health care reform that includes the for-profit, private health insurance companies will fail to provide universal coverage, will not be able to reduce heath care costs, and will increase the number of underinsured. Read the full post here. Read Joel A. Harrison's article on how U.S. taxpayers aren't getting what they're paying despite massive health care spending (from our May/June 2008 issue), and go here for more D&S coverage of health care issues. Labels: Bernie Sanders, health care, HR676, John Conyers, national health insurance, single-payer Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Berkeshire Hathaway Loses AAA RatingHat-tip to the guy I overheard at the next table at the internet cafe I'm hanging out in.Buffett's Berkshire Has AAA Debt Rating Cut by Fitch By Erik Holm | March 12 (Bloomberg) Billionaire Warren Buffett's Berkshire Hathaway Inc. had its top-level AAA credit rating cut by Fitch Ratings, which cited concern about the potential for losses on the insurer’s equity and derivatives holdings. Buffett's role as chief investment officer also puts the company at risk if he becomes unable to do the job, Fitch said in a statement. Fitch cut the so-called issuer default rating on Berkshire to AA+, and senior unsecured debt to AA. The insurance and reinsurance units kept their AAA status, with a negative outlook for all entities, Fitch said. "Fitch views this risk as unrelated to Mr. Buffett's age, but rather Fitch's belief that Berkshire's record of outstanding long-term investment results and the company's ability to identify and purchase attractive operating companies is intimately tied to Mr. Buffett," Fitch said. Buffett is 78. Berkshire joins General Electric Co., which was downgraded by Standard & Poor's today and lost its status as one of the remaining AAA companies in the U.S. Berkshire stock fell 35 percent in 12 months on concern that Buffett's bets on derivatives—instruments he has called "financial weapons of mass destruction"—will crush profit at the firm. Read the rest of the article. If I'd been keeping up with Yves Smith at Naked Capitalism, I'd have found out sooner. Here's what she had to say:
Labels: 303 Cafe, Berkshire Hathaway, financial crisis, recession, Warren Buffet, Yves Smith Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). FDIC Collected No Premiums From 1996 to 2006The Boston Globe reports that Congress prevented the FDIC from collecting premiums from banks for 10 years because it was considered "well capitalized" and because bank failures were so rare.The agency, which insures bank deposits up to $250,000, is currently seeking emergency powers to borrow up to $500 billion from the U.S. Treasury as strained banks are unable to pay the increased fees necessary to fully restore the fund. At the end of 2007 the FDIC had $52.4 billion in its insurance fund. A year later this was reduced to $18.9 billion, in addition to the $22 billion set aside for pending bank failures. The agency estimates that it will need $65 to cover bank failures through 2013, however it will likely need far more if it is forced to take over megabanks like Citibank or Bank of America. Labels: bank failures, Bank of America, Citibank, FDIC Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Net Worth PlummetsThe Fed reported today that household net worth has fallen for a sixth straight quarter. The latest quarterly drop was a staggering 9%, the largest quarterly drop since record-keeping began in 1951.Household net worth has fallen 20% from its high of $64.36 trillion in the second quarter of 2007 to $51.48 trillion in the fourth quarter of 2008. Over 4 million jobs have been lost since the recession formally began at the end of 2007. Labels: economic crisis, Household net worth, recession Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Singing the Same Old Song: An EFCA GameThis is from vivaelbund at the Labor Nerd blog, via Talking Labor, a project of the DSA Labor Network. Hat-tip to Ben C.Let's play a game! Below are six quotes from various conservative politicians, business representatives and other organizations. Three of them are from the 1930s and were aimed at the Wagner Act. The other three are about the Employee Free Choice Act. Can you guess which are which? Answers at the bottom. 1. "Specifically, the provisions of the bill will operate to provoke and encourage labor disputes, rather than diminish them . . . Its real effect will be to serve as a vehicle for the advancement of the selfish interests of minority labor organizations." 2. "Unions want it because it would make it easier to recruit dues-paying members, not because it would somehow defend workers' right to choose freely to unionize." 3. "To support labor in this objective by enacting this bill would permanently close the door to recovery." 4. "The act is a poison pill for our ailing economy, which is why every major business organization from every industry sector has come out in strong opposition to it." 5. "My general criticism of the . . . bill is not so much that it supports unionization as that it will in operation result in enforced unionization." 6. "Labor unions are supposed to protect workers' rights, yet union bosses want Congress to pass a law that actually robs workers of their democratic right . . . through a forced unionization process." 1. Walter Harnischfeger, National Association of Manufacturers, March 21, 1935 2. Heritage Foundation, April 23, 2007 3. Guy Harrington, National Publishers Association, March 29, 1935 4. Brian Worth, Coalition for a Democratic Workplace, February 25, 2009 5. J.M. Larkin, Bethlehem Steel, April 5, 1935 6. Senator Orrin Hatch, June 26, 2007 vivaelbund is nomme de blog of a member of the Labor Nerd blog, an exciting new blog by young union staffers, academics, and activists, where it originally appeared. Labels: Employee Free Choice Act, financial crisis, labor, recession, unions Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Christina Romer Defends Fiscal StimulusRomer is chair of the president’s Council of Economic Advisers (and an economic historian at Berkeley). In a talk at the Brookings Institution on Monday, she took on the crowd claiming that Keynesian fiscal stimulus policies failed in the 1930s:I wrote a paper in 1992 that said that fiscal policy was not the key engine of recovery in the Depression. From this, some have concluded that I do not believe fiscal policy can work today or could have worked in the 1930s. Nothing could be farther from the truth. My argument paralleled E. Cary Brown’s famous conclusion that in the Great Depression, fiscal policy failed to generate recovery “not because it does not work, but because it was not tried.” The key fact is that while Roosevelt’s fiscal actions were a bold break from the past, they were nevertheless small relative to the size of the problem.A good omen for fiscal policy. Alas, her remarks were disappointing on the deeper question of the causes of the crisis: Most obviously, like the Great Depression, today’s downturn had its fundamental cause in the decline in asset prices and the failure or near-failure of financial institutions.Too bad she didn't talk about the steep rise in inequality; stagnant real wages; households’ expanding use of credit to fill the gap between those stagnant wages and rising living costs; excess capacity and overproduction... Read the whole talk here. Labels: Christina Romer, fiscal policy, fiscal stimulus, Great Depression, Keynesianism Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Treasury Lacks Oversight Of Bailout BillionsCongressional investigators have discovered that some of the largest banks receiving U.S. taxpayer bailout funds have been lending billions of dollars overseas.Among the findings, Citigroup (recipient of $45 billion in bailout funds) lent $8 billion to investors in Dubai, and Bank of America (which got another $45 billion) lent $7 billion for a project in China. The investigators found that the Treasury had few controls for tracking the bailout money for the 20 largest banks, and no controls at all for the other 297 smaller banks. According to the Washington Post: The report also raises questions about Goldman Sachs's $2 billion repurchase of its own stock in December, which caused the share value to increase almost 20 percent. That would have been a significant financial benefit for senior executives, who usually own large amounts of company stock. Congressional investigators are looking at whether the deal was an inappropriate way to enrich those top employees despite a public clamor for strict limits on executive compensation. Full story here. Labels: bailout, Bank of America, Citibank, Dennis Kucinich, financial crisis bailout, Goldman Sachs, Treasury Department Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Renters Hit Hard In Foreclosure CrisisRenters make up 40% of the people facing eviction because of foreclosure. Banks don't care if the tenants have a lease or have been paying on time, they just want the buildings to be emptied out.While this might have made some sense during boom years, it is a terrible deal for everyone in a bust. Vacant buildings are targets of vandals, so the buildings can lose almost all their value. Vacant properties are a blight on surrounding properties, sinking the property values and social wealth of entire neighborhoods. Worst off are the tenants. They often receive threatening letters from banks and lenders with only days or a few weeks notice. The paltry sums offered by the banks rarely covers lost security deposits, moving expenses, or the substantial costs of moving into a new place. The Obama housing plan skipped over the issue. Activist groups like Boston's City Life/Vida Urbana and legal aid organizations are organizing tenants and fighting back, but it will take government action and new laws and tough enforcement to change the equation. Check out the article Renters in the Crosshairs in the latest Dollars & Sense. Labels: eviction, foreclosures, homeownership, Renters Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). A Couple of Items on the Bank BailoutHere are a couple of items on the bank bailout that I've been meaning to post. First is a post from back in late February (seems like years!) on Megan McArdle's blog at the Atlantic (whose spiffy redesign I admire, if not the politics of its columnists). It is a response to this post on Paul Krugman's blog at the New York Times, but it relates to Fred Moseley's cover article in the March/April issue of D&S. Here's McAdle's post in full:Lost I asked Fred Moseley (who, again, wrote our current cover article on bank nationalization) how he would respond to McArdle. Here's what he wrote back to me: My main response to McArdle is this: if it is true that the only way to avoid an economic catastrophe is to bail out the banks and their bondholders with taxpayer money, then I would say that this strengthens the case for the nationalization of systematically significant banks. If taxpayers have to pay for their losses this time, then surely we want to make sure that we never have to pay again, that we are never put in this situation again. And the best way to ensure that it never happens again is to nationalize the systemically significant banks. Then we would never again be forced to decide between bailing out the bondholders or economic armageddon. When Fred says "the only way to avoid this is real nationalization," he's including under the rubric of "nationalization" the possibility that the gubm't could set up "good banks," and I'm assuming that in that scenario the "too big to fail" banks could be allowed to whither and die (i.e. enter into bankruptcy, and let the good assets be sorted from the bad in court). This is what Joseph Stiglitz seemed to be saying in his presidential address to the Eastern Economics Association meetings a few weeks ago (about which I blogged here; his article in the current issue of The Nation seems to be more of a proposal for pseudo-(i.e., temporary) nationalization, however). Something like a "whither and die" proposal also seems to be Dave Lindorff's position in a recent piece over at Counterpunch: The futility and stupidity of the Fed's and the Obama administration's policy of pumping ever more money into failing banks and insurance companies in a vain effort to get them lending again was demonstrated—if anyone was paying attention—by the collapse in auto sales this past month, with all the leading companies, Ford, GM and Toyota, reporting sales down by about 40%. Read the rest of the article. Labels: bank nationalization, credit crisis, Dave Lindorff, financial crisis, Fred Moseley, Joseph Stiglitz, Megan McArdle, nationalization, Paul Krugman Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Ha-Joon Chang on Democracy NowCambridge University economist Ha-Joon Chang was on Democracy Now! today. (Hat-tip to Taki M.) We ran an online review of his book Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism by Mark Engler a couple of months ago. Here are some excerpts from the DN! interview:AMY GOODMAN: The US government has poured hundreds of billions of dollars into the US economy in the wake of the financial crisis. But what steps are being taken to address the crisis on a global scale? On Sunday, the World Bank warned of the first global recession since World War II, with the world economy set to shrink for the first time since the 1940s. The bank also cautioned that the cost of helping poorer nations in crisis would exceed the current financial resources of multilateral lenders. The economic crisis is projected to push around 46 million people into poverty this year. The financial crisis is forcing some to rethink the neoliberal policies widely blamed for the financial collapse. On Monday, British Prime Minister Gordon Brown called for a new international fund to support poorer countries during the global recession. He also acknowledged richer Western nations have often imposed economic policies on poorer countries that they haven't followed themselves. PRIME MINISTER GORDON BROWN: We will work with the World Bank and our G20 partners to build support for a new fund specifically to help the world's poorest through the downturn. Too often, our responses to past crises have been inadequate or misdirected, promoting economic orthodoxies that we ourselves have not followed and that have condemned the world's poorest to a deepening crisis of poverty. AMY GOODMAN: Brown says he'll raise the issue of a global fund at the next G20 meeting in July. Well, my first guest has been among the leading economists to criticize the neoliberal policies imposed on poor nations but not followed by the West. Ha-Joon Chang is an economist at the University of Cambridge specializing in developmental economics. In 2005, he was awarded the Leontief Prize for Advancing the Frontiers of Economic Thought. He is author of the books Kicking Away the Ladder: Development Strategy in Historical Perspective, and his latest is called Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism. Welcome to Democracy Now!, as you come from, well, Gordon Brown's country to this one. First, what is your assessment of the situation right now? Warren Buffett has just said that the economy has gone off a cliff. HA-JOON CHANG: Well, I think we are facing the biggest economic crisis since the Great Depression. Now, it probably wouldn't get as bad as the Great Depression, because, unlike in the Great Depression, governments are more willing to intervene with deficit spending and nationalizing financial institutions and giving subsidies to industry and so on, whereas in the 1930s they more kind of adamantly held onto free market doctrines, which they subsequently abandoned, but, I mean, there was a period of time when they just held onto it and lost the opportunity. So I don't think the impact would not be as severe as what it was in the 1930s, but yes, I mean, there's no question that this is as big or possibly even bigger a crisis than what we saw in 1929. Read the rest of the transcript, or watch the video. Labels: Amy Goodman, Democracy Now, financial crisis, free trade, Gordon Brown, Ha-Joon Chang, Mark Engler, neoliberalism Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Hey Econ Profs - Get Your Textbooks HereAn economist is walking down the street with a friend.The friend stops and says "Hey look, a $20 bill on the ground!" The economist coolly replies "Can't be. If there was a $20 bill on the ground someone would have picked it up by now." That old joke pretty much describes the current mindset of orthodox economics in U.S. academia despite the current global financial meltdown, as nicely described in the NYT article below. For those teaching economics who don't have time for new generation of textbooks to be written, check out Dollars & Sense classroom readers and books. Ivory Tower Unswayed by Crashing Economy Read the full article here. Get D&S exam copies here. Labels: economics education Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Several Links on Capitalism/SocialismHere are some links that have crossed our virtual desks on the topic(s) (roughly) of capitalism's implosion, allegations that the bailout constitutes "socialism," and what the crisis means for the prospects of establishing actual socialism. (These are from a variety of viewpoints.)
Labels: Barbara Ehrenreich, Bill Fletcher Jr., capitalism, Carl Bloice, financial crisis, Michael Parenti, socialism, Tariq Ali Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Financial Times on 'The Future of Capitalism'FT launches this new series today. The first day’s pieces dutifully concede that neoliberal policies with respect to the financial sector have failed—but the questioning doesn't go too much deeper so far...Check it out here. Labels: capitalism, economic crisis, financial crisis, Financial Times Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Sen. Labor Committee Hearing on Abuse--TODAYA press release from our friends at Interfaith Worker Justice, about a hearing this afternoon. Kim Bobo, author of Wage Theft in America (and this excerpt we posted here) will testify. Sorry for the delay posting.Senate Labor Committee to Hold Hearing on Extreme Abuses Wage Theft Expert Kim Bobo to Deliver Testimony Kim Bobo, Founder and Executive Director of Interfaith Worker Justice and the author of the recently-published Wage Theft in America: Why Millions of Working Americans Are Not Getting Paid—And What We Can Do About It, will present testimony on Monday (March 9) at 2:30 p.m. in Room 430 of the Dirksen Senate Office Building, at Senate Committee on Health, Education, Labor, and Pensions hearings on "Preventing Worker Exploitation: Protecting Individuals With Disabilities and Other Vulnerable Populations". Bobo will be available for media interviews immediately following the hearings. The hearings were prompted by recent shocking reports of the squalid housing conditions and illegal deductions from the paychecks of disabled workers at a turkey processing plant in eastern Iowa. Last month federal police, state health inspectors and county prosecutors ordered an emergency evacuation of the living quarters and launched a major investigation into Texas-based Henry's Turkey Service, a company that for more than three decades has employed mentally retarded men with Iowa's West Liberty Foods meat-processing plant. As alarming as this report is, it is not nearly as uncommon as one might imagine. In her testimony Monday, Bobo will underscore the pervasiveness of the practice of illegal paycheck deduction—one of the many faces of wage theft. Bobo's is the first book-length study of the national epidemic of wage theft, which has been called "the crime wave no one talks about." Wage Theft in America not only anatomizes the crisis but offers a bold new vision for how the Department of Labor can fix the problem. In a jacket blurb for the book, Senator Edward M. Kennedy (D-MA), who chairs the Senate committee, praised Bobo for writing "an excellent and informative book on one of the most pressing issues facing millions of hardworking Americans." The book, he said, "offers bold, practical, and progressive solutions for how policymakers and advocates can end the growing crisis of wage theft in America." WHAT: Senate Committee Hearing: "Preventing Worker Exploitation: Protecting Individuals With Disabilities and Other Vulnerable Populations" WHO: Kim Bobo, Founder and Executive Director of Interfaith Worker Justice (and others) WHEN: Monday, March 9, 2:30 p.m. WHERE: Room 430 of the Dirksen Senate Office Building Labels: Interfaith Worker Justice, Kim Bobo, Senate Labor Committee, wage theft Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). More Craziness: Japan Runs Record CA DeficitFrom The Financial Times:Japan in record current account deficit By Michiyo Nakamoto in Tokyo Financial Times Published: March 9 2009 02:07 | Last updated: March 9 2009 05:39 Japan suffered its largest current account deficit ever in January, reflecting the impact of plunging global demand on its export-dependent economy and raising concerns that it was now in a depression. Japan's current account fell into deficit for the first time since 1996 and at Y172.8bn ($1.75bn, €1.39bn) was much larger than the Y15.3bn shortfall forecast by economists. The sharp deterioration in the current account balance highlights the impact that falling demand, a higher yen and lower interest payments have had on Japan's revenues from overseas. That in turn has led to a rash of job cuts and factory closures that have added to the economic gloom. Corporate bankruptcies in Japan rose 10.4 per cent year-on-year in February, in the ninth straight month of increases, according to Tokyo Shoko Research. Japanese policymakers have scrambled to counter the damage wrought by the global financial crisis, but have had limited success so far. The government last week won passage of a Y5,000bn stimulus package, which it rammed through the Diet following months of wrangling with the opposition. The Bank of Japan has been buying commercial paper and corporate bonds but growth in bank lending slowed in February, for the second month. January's deficit was the biggest since the government started compiling comparable data in 1985. Copyright The Financial Times Limited 2009 Labels: Bank of Japan, financial crisis, trade deficit Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). ADB: Asset Prices May Have Fallen $50 TrnFrom The Financial Times:Plunging assets cost $50,000bn By Raphael Minder in Hong Kong and Alan Beattie in Washington Financial Times Published: March 8 2009 18:43 | Last updated: March 8 2009 23:31 Falls in the value of financial assets worldwide might have reached more than $50,000bn, equivalent to a year’s global economic output, the Asian Development Bank will warn on Monday. Asia has been hit disproportionately hard, the bank will say, in a report that warns of many Asian stimulus plans lagging behind those of the leading global economies. Separately, the World Bank said on Sunday that developing countries faced a financing gap of between $270bn and $700bn a year as capital flows dried up, with only a quarter of vulnerable countries able to cushion the blow of the economic downturn. The ADB report estimates capital losses last year in Asia, excluding Japan, at $9,625bn, or 109 per cent of gross domestic product, compared with a global average of 80-85 per cent of GDP. For Latin America, the study estimates 2008 losses at $2,119bn, or 57 per cent of GDP. "Even as Asia and Latin America have diversified their investment and trading partners, the effect of the slowdown on exports, finance and investment is earthshaking," the report warns. The ADB’s estimates take into account falling stock market valuations and losses in the value of bonds supported by mortgages and other assets, though not financial derivatives. About a fifth of the losses in dollar terms arise from the depreciation of many currencies against the US dollar. The World Bank report said $2,500bn-$3,000bn in public and private debt in emerging markets needed to be rolled over in 2009, most of it denominated in foreign currencies. This would put pressure on developing country governments, many of which had inadequate reserves to help their banks and companies refinance, the bank said. Although the bank itself and other official institutions such as the International Monetary Fund have been increasing their lending, even at the lower end of the $270bn--$700bn range "existing resources of international financial institutions would appear inadequate to meet financing needs this year", it said. The ADB study, to be presented on Monday by Haruhiko Kuroda, president, was commissioned from Centennial Group, a consultancy company. Mr Kuroda says: "I am afraid things may get worse before they get better. However, I remain confident that Asia will be one of the first regions to emerge from it, and it will emerge stronger than ever before." Copyright The Financial Times Limited 2009 Labels: Asian Development Bank, bailout, financial crisis Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). TDCotE (viii): The Use and Abuse of TrustThe Dull Compulsion of the Economic (viii)A series of blog postings by D&S collective member Larry Peterson Links: (1) Scientists think sea level rise from global warming may be far greater than previously thought. (2) On the economics profession's adamant refusal to seriously engage with the crisis. (3) Yves Smith eviscerates former Fed governor Alan Blinder's arguments against nationalization of the banks. (4) How could the brutal job losses shape the future economy? Perhaps should be read in conjunction with this 2005 piece where manufacturing is concerned. (5) Nice piece on CDSs and AIG's collapse. Reminds one of the staggering sums involved. (6) Private Equity meltdown to turn into "the greatest transfer of ownership from equity owners to creditors in history?" (7) Will stimulus packages reverse green gains? (8) Another relatively recent (December) thought-provoking piece on the crisis, by David McNally (9) Michael Mandel on something of relevance to the last link, the striking developments in the relation of financial to nonfinancial profits in the economy over the last few years. (10) A bank run on a country: the UK. (11) Odds are very much against self employment as a means to escape the crisis. Commentary The Use and Abuse of Trust Last week I wrote a piece about the tendency of economists to speak of the crisis in overly psychological terms, or in a manner that suggests that the crisis is (still) primarily about the confidence of consumers, investors and employers. Accordingly, the implication seems to be that the economy is basically sound at best, once we--somehow--strip even historically high levels of abuse out of it, or that it needs perhaps a serious overhaul at worst, but that in all cases we cannot even think about the establishment of a fundamentally alternative economic system. This week I saw yet another Nobel-laureate economist weigh in along these lines. But Amartya Sen, in a piece in the New York Review of Books, seems to attempt to finesse this problematic out of existence altogether. Sen distinguishes himself by stating that looking at the present crisis as one peculiar to capitalism is misleading: capitalism and markets have always relied on independent legal, cultural and ideological supports, and, in this sense, to try to isolate "capitalism" out of the mix, especially in the context of today's hyper-complex societies, is bound to lead to confusion, particularly of an historical sort: Underlying this issue is a more basic question: whether capitalism is a term that is of particular use today. The idea of capitalism did in fact have an important role historically, but by now that usefulness may well be fairly exhausted. Sen then goes on to show how Adam Smith had a far more nuanced view of the role of the market mechanism even in the society of his time, in which markets played a far lesser role than they do today, and suggests that, precisely because of Smith's extraordinary institutional sensitivity, it behooves us to look to Smith in an attempt to rehabilitate our appreciation for the proper role of markets in society. But then he begins, to me, anyway, a very strange meditation. First he notes, once again, that capitalism did not emerge until new systems of law and so on, which solidified notions of private property, allowed for economic growth and capital accumulation. And he says, "Profit-oriented capitalism has always drawn upon support from other institutional values." But then he shifts gears: The moral and legal obligations and responsibilities associated with transactions have in recent years become much harder to trace, thanks to the rapid development of secondary markets involving derivatives and other financial instruments. A subprime lender who misleads a borrower into taking unwise risks can now pass off the financial assets to third parties—-who are remote from the original transaction. Accountability has been badly undermined, and the need for supervision and regulation has become much stronger. Moreover, The insufficient regulation of financial activities has implications not only for illegitimate practices, but also for a tendency toward overspeculation that, as Adam Smith argued, tends to grip many human beings in their breathless search for profits. Smith called the promoters of excessive risk in search of profits "prodigals and projectors"--which is quite a good description of issuers of subprime mortgages over the past few years. So, even if you accept that the fundamental problematic surrounding the present crisis has more to do with some sort of unchanging psychology of investors (the tendency to get carried away with temptation of excess profits) than the real economic conditions under which investments are made (and which invariably appear in and influence relations between classes), there is a question here. Why was it that the institutional supports that allowed for the spectacular growth of postwar capitalism became so quickly and thoroughly undone from the 'seventies on? He says, as we have seen, that capitalism has always relied on institutional support from non-market entities and structures, but he fails to explain the extraordinary turn away from such entities and structures during the deregulatory period that followed and went more-or-less unchallenged until last year. So rather than explaining this development, he simply describes it: And yet the supervisory role of government in the United States in particular has been, over the same period, sharply curtailed, fed by an increasing belief in the self-regulatory nature of the market economy. Precisely as the need for state surveillance grew, the needed supervision shrank. There was, as a result, a disaster waiting to happen, which did eventually happen last year, and this has certainly contributed a great deal to the financial crisis that is plaguing the world today. But then he makes yet another transition: The present economic crisis is partly generated by a huge overestimation of the wisdom of market processes, and the crisis is now being exacerbated by anxiety and lack of trust in the financial market and in businesses in general--responses that have been evident in the market reactions to the sequence of stimulus plans, including the $787 billion plan signed into law in February by the new Obama administration. Here Sen touches upon something that has really been making the rounds in the financial press these days, namely, the role of trust in market interactions and in capitalist societies. Most commentators I have seen tend to focus, again, on the role of investors in this vein, in speaking of the present crisis. So, to explain things like the pronounced lack of willingness of banks to lend, or of investors to buy into government-sponsored bailout programs, writers focus on the idea that, having been burned so badly already, such people are naturally extremely reluctant to put more money down. But such a situation then leads, inexorably, to further contractions of economic activity. Investors know this. And governments are going to great lengths to make money available to combat this. But takers have been few. So the reason must be an essentially irrational lack of trust. Sen doesn't actually say this, but I sense in the progression of his argument that this is a key assumption. Sen, like Alan Blinder (see link 3 above), seems to believe that once we sober up, we can, with the aid of governments, sort the mess out and live happily ever after. And despite the huge damage done to the economy, we need more confidence in our leaders, and, presumably, in ourselves, to emerge from the mess. But the problem here is that Sen looks at trust in exactly the same way he does all the other psychological propensities that influence market behavior: as relatively unchanging constants in stable equations. But the type of trust engendered in the lead up to the crisis was a wholly peculiar one, which was influenced by all sorts of specific factors, many--perhaps to a peculiar degree--of which reflected intensified class dynamics. So, in the period before the crisis in the US, virtually no-one was prepared to imagine that the entire system could melt down with the speed it did. But many noted that the underlying dynamic, of hyper-consumption (as Stephen Roach has noted, US consumption still amounts to some 70% of the economy, down only a percentage point or two from the height of the bubble) aided by copious amounts of credit, but unaccompanied by rises in savings, or wages that came even close to tracking key outlays like those involving education, healthcare and pensions (not to mention lodging or home-finance, which is another story) that were rising out of sight, was dangerously unsustainable. But everyone trusted that, at the end of the day, someone else would take the fall if things fell apart. And this kind of thinking was encouraged by the incentive structures that proliferated from a governmental/business complex that was noteworthy for its venality and conspicuous corruption. And this, almost certainly, had much to do with the kind of degradation of social feeling that was a factor behind, and consequence of wider deregulatory dynamic. "Trust", under such conditions, far from being the strangely lacking factor behind a partially inexplicable collapse of the financial system, should perhaps be viewed, in the highly skewed from it took on as a result of the severely distorted economic conditions that came to become prevalent in the final years of neoliberalism and deregulation, the Bush years, as a key occasioning cause of it. After such a denouement, it's hardly surprising that "trust" is noticibly lacking; but it's even more unsettling to think that the authorities (many of whom, as we all know too well, like Summers, Geithner et al, were instrumental in conditioning us in the new variant of "trust") want to revive it. Labels: Adam Smith, AIG, Alan Blinder, Amartya Sen, bailout, CDSs, climate change, David Hale, David McNally, financial crisis, Larry Peterson, Michael Mandel, the dull compulsion of the economic, Yves Smith Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). London G20 Protest: Biggest Since Iraq War?From Sunday's (it's still Saturday EST) Observer:The voices in G20's chorus of protest A mass demonstration ahead of the London G20 summit is set to attract a huge mix of different interest groups as a new coalition, Put People First, takes shape. Ed Vulliamy and Richard Rogers report Ed Vulliamy and Richard Rogers The Observer, Sunday 8 March 2009 The G20 summit of industrialised nations in London next month will be marked by one of the biggest demonstrations since a million people marched against war in Iraq in 2003. On that Saturday, the issue was simple. This time the protest--although it draws on equally diverse social and political quarters--is a complex weave of movements and priorities united by one emotion: a disgust at the latest incarnation of capitalism that demands a different way of organising the economy of the planet. To say that the protests will invoke the causes of social justice, the environment and fair trade would be to put it too simply, so we have published brief statements by some of the prime movers about why they will be taking to the streets. Some preach the message of Jesus, while others urge outright revolution and much in between, forming perhaps the widest coalition of pressure groups ever assembled in Britain. And there will be the thousands of normal people angry at the way politicians and their friends in the banks, thinktanks and corridors of power are mismanaging our lives. Apart from the main demonstration on Saturday 28 March, a flurry of further protests is envisaged, including Financial Fools Day, a blockade of financial institutions to prevent people from getting to work on 1 April. While trade unions will be aware that the protest comes close to the 25th anniversary of the Eighties miners' strike, a group called G20 Meltdown will stage carnivalesque parades, one of which will "honour the 360th full circle anniversary of the Diggers" - Civil War revolutionaries. Read the rest of the article Labels: bailout, financial crisis, G20, labor, labor unrest Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). FDIC Bill Attempt To Bypass TARP battleFrom The Wall Street Journal:MARCH 7, 2009 FDIC Bill Dodges a New TARP Fight Wall Street Journal By DAMIAN PALETTA WASHINGTON A three-page bill designed to bolster the Federal Deposit Insurance Corp. could let the Obama administration sidestep a huge political problem: securing more financial firepower without opening a debate over the Troubled Asset Relief Program. The legislation, introduced late Thursday by Senate Banking Committee Chairman Christopher Dodd, would temporarily allow the FDIC to borrow $500 billion to replenish the fund it uses to guarantee bank deposits, if the Federal Reserve and Treasury Department concur. Those funds would be distinct from the contentious $700 billion financial-sector bailout, which lawmakers are loathe to expand. The FDIC can presently only borrow $30 billion from Treasury. The bill would permanently raise that level to $100 billion, which the FDIC could tap without prior approval from the Fed and Treasury. Mr. Dodd, a Connecticut Democrat, already has four Republican co-sponsors for the bill and it could quickly gain momentum, in part because of strong backing by community bankers. Read the rest of the article Labels: bailout, Christopher Dodd, FDIC, financial crisis, Sheila Bair, TARP program Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). January Consumer Borrowing RisesFrom The International Herald Tribune:Borrowing in U.S. rises unexpectedly The Associated Press Friday, March 6, 2009 WASHINGTON: U.S. consumer borrowing rose unexpectedly in January after three months of declines, but the small increase did not shake economists' views that borrowing will remain weak this year as mass layoffs persist amid the recession. The Federal Reserve said Friday that borrowing increased at an annual rate of $1.76 billion in the first month of the year. Economists expected borrowing to decline at a rate of $5 billion. The small gain came mainly from the category that includes credit cards, which rose at a 1.2 percent rate in January after dropping 9.5 percent in December. The category that covers auto loans rose 0.6 percent after a smaller 0.1 percent rise in December. The increases were attributed to the stronger performance of retail sales which posted a 1 percent rise in January, the best showing in 14 months. While that increase was unexpected, analysts noted that it was still modest and followed a six-month decline. Consumer spending accounts for about 70 percent of U.S. economic activity, and borrowing fell at an annual rate of $7.48 billion in December after a $9.13 billion drop in November. The December figure was slightly larger than previously reported while the November number was smaller. But the economy, especially the labor market, appeared to darken last month. The government reported Friday that the unemployment rate surged to a 25-year high of 8.1 percent in February as employers slashed another 651,000 jobs. Since the recession began in December 2007, the economy has lost a net total of 4.4 million jobs, with more than half coming in the past four months. Americans, worried about the possibility that they could be laid off, have cut back on their spending and reduced borrowing. Many are trying to rebuild their savings to help cope with a recession that is already the longest in more than a quarter-century. Read the rest of the article Labels: bailout, consumer debt, financial crisis Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Scargill: We Had Deal with ThatcherFrom The Guardian:We could surrender - or stand and fight' It has been 25 years since the miners' strike began - now, for the first time, the then president of the NUM writes his account of the most divisive and bitter industrial dispute in living memory Arthur Scargill The Guardian, Saturday 7 March 2009 Twenty-five years ago, the Tory government led by Margaret Thatcher declared war on the National Union of Mineworkers. The Tories had been preparing for a showdown with the NUM since before the 1979 general election. They could not forget the victorious miners' strikes of 1972 and 1974, the second of which had brought down the Tory government in a general election. But the NUM's historic battle did not begin in March 1984, as so many pundits claim. The seeds of the dispute had been sown long before. A pit closure plan in 1981 resulted in miners, including miners in Nottinghamshire, taking unofficial strike action (without a ballot) and forcing Thatcher into a U-turn, or in reality a body swerve. At that time, Britain's coal industry was the most efficient and technologically advanced in the world, a result of a tripartite agreement, the Plan For Coal, signed by a Labour government, the National Coal Board (NCB) and the mining trade unions in 1974, and endorsed by Thatcher in 1981. And yet, shortly after I became national president of the NUM in 1982 I was sent anonymously a copy of a secret plan prepared by NCB chiefs earmarking 95 pits for closure, with the loss of 100,000 miners' jobs. This plan had been prepared on government instructions following the miners' successful unofficial strike in 1981. I took this document to the union's National Executive Committee (NEC)--its contents were not only denied by government and NCB chiefs, but were disbelieved by militant NUM leaders who had been assured that their pits had long-term futures. However, the exposed revelations struck a chord among our members throughout Britain's coalfields where colliery managers - clearly acting on instructions from above--had already begun unilaterally changing agreed working practices, affecting shift patterns and supplementary payments. It became clear that the union would have to take action, but of a type that would win maximum support and have a unifying effect. The NEC accepted a report from me recommending that we call a special national delegate conference, and link our opposition to the pit closure plan with a demand that the coal board negotiate the union's wage claim. The NEC agreed, and the special conference was held on 21 October 1983. Delegates from all NUM areas were given a detailed report so that they could vote on what action--if any--should be taken. Following a full debate, they agreed to call a national overtime ban from 1 November--until such time as the NCB withdrew its closure plan and agreed to negotiate an increase in miners' wages with the NUM. Over the next four months, the overtime ban had an extraordinary impact. It succeeded in reducing coal output by 30%, or 12m tonnes, thus cutting national coal stocks to about the same level as they had been during the miners' unofficial strike in 1981. Then, on 1 March 1984, acting I believe on national instruction, NCB directors in four areas announced the immediate closure of five pits: Cortonwood and Bullcliffe Wood in Yorkshire, Herrington in Durham, Snowdown in Kent and Polmaise in Scotland. Coalfield reaction was electrifying. On Saturday 3 March, accompanied by the NUM Yorkshire president, Jack Taylor, I spoke at a packed meeting in South Yorkshire initially organised to discuss various issues that had already brought seven Yorkshire pits out on strike. I knew we had to do everything possible to persuade our members to direct their rage in a united way at the pit closure plan and its threat to butcher our industry. On Sunday evening Taylor and I attended a Yorkshire Brass Band Festival in Sheffield city hall. By then I had consulted my fellow national officials, the vice-president, Michael McGahey, and the national secretary, Peter Heathfield. It was essential to present a united response to the NCB and we agreed that, if the coal board planned to force pit closures on an area by area basis, then we must respond at least initially on that same basis. The NUM's rules permitted areas to take official strike action if authorised by our national executive committee in accordance with Rule 41. If the NEC gave Scotland and Yorkshire authorisation under this rule, it could galvanise other areas to seek similar support for action against closures. During an interval in the concert, I used the back of a programme to draft a strike resolution which I asked Taylor to present the following morning to the Yorkshire area council meeting. I told him that McGahey would be doing the same thing at the same time in Scotland. On 6 March, at a consultative meeting at NCB London headquarters, the coal board chairman, Ian MacGregor, not only confirmed what we had been expecting, but announced that in addition to the five pits already earmarked for immediate closure, a further 20 would be closed during the coming year, with the loss of more than 20,000 jobs. This, he said, was being done to take four million tonnes of "unwanted" capacity out of the industry, and bring supply into line with demand. Read the rest of the piece Labels: Arthur Scargill, labor, labor law, labor unrest, margaret thatcher, Neil Kinnock, NUM Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). UK Government Takes over Lloyd'sFrom The Guardian:Government takes over Lloyds Taxpayer will own up to 77% of banking group after disastrous merger with HBOS as pressure grows on board to resign guardian.co.uk, Saturday 7 March 2009 10.33 GM Jill Treanor , Nick Mathiason and agencies The government today confirmed it will take majority control of Lloyds Banking Group, with the taxpayer owning 65% of the voting shares in return for insuring 260bn pounds the group's toxic assets. After days of detailed negotiations the terms of the takeover were announced by the Treasury, with Lloyds making a commitment to lend at least 28bn pounds over the next few years. The government is to insure the bank's riskiest loans and in return the taxpayer will up its ownership of the bank from 43% to 65%--rising to 77% when non-voting shares are included. Alongside taking extra shares and obtaining the commitment to lend to businesses and individuals, the Treasury will upgrade £4bn of the non-voting shares it already holds. The government's fee for limiting Lloyds' losses from 260bn pounds of potentially bad assets totals £15.6bn. Under the insurance scheme, Lloyds will take the first hit of up to 25bn pounds on toxic assets before the taxpayer steps in. The new ordinary shares in the bank will be offered to existing private shareholders first, with the government committing to buy whatever is left. Stephen Timms, the chief secretary to the Treasury, told BBC Radio 4's Today programme: "I think in due course this new Lloyds...is going to be a strong and successful bank, and the arrangements that we have been able to facilitate I think will ensure that this is going to be the case." Asked about speculation that the taxpayer could lose up to £100bn on the deal, Timms replied: "Precedents would suggest that the loss would be a great deal less than that, but as I said we just don't know." Timms rejected suggestions that the prime minister had "destroyed a great bank" by pushing Lloyds to take over HBOS as it neared collapse. Eric Daniels, the group chief executive for Lloyds Banking Group, said: "Participating in the government's asset protection scheme substantially reduces the risk profile of the group's balance sheet. Read the rest of the article Labels: bailout, financial crisis, HBOS, Lloyd's TSB Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). IMF Blames Crisis On Lack of RegulationFrom the International Monetary Fund, you know, the people who shoved unfettered global profit-seeking down the throats of impoverished countries for decades, comes this fabulous insight: inadequate regulation was the major cause of the current financial crisis.You can read about it in the Economist, or you can read Dollars & Sense's own Dr. Dollar (Arthur MacEwan) in a recent column. Labels: Arthur MacEwan, Ask Dr. Dollar, financial regulation, global imbalances, Greed, IMF, The Economist Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Nation Institute Panel on Crisis Tonight in NYCMeltdown: The Economic Collapse and a People's Plan for RecoveryA Free Panel Discussion Join Joseph Stiglitz, Barbara Ehrenreich, Bill Fletcher, Jr., Christopher Hayes and Jeff Madrick as they discuss the financial collapse. If you can't make the event, watch the live videostream or chime in on Twitter, where you can leave questions or comments. March 6 at 8 p.m. at the New York Society for Ethical Culture. Doors open at 7.15 p.m. FREE OF CHARGE. Labels: Barbara Ehrenreich, Bill Fletcher Jr., Christopher Hayes, financial crisis, Jeff Madrick, Joseph Stiglitz, The Nation Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Job Bytes, March 6 (Dean Baker)Hat-tip to reader Panayiotis M. for reminding us about Dean Baker's weekly employment notes, available here (and you can subscribe). Here is this week's, in full:Unemployment Jumps to 8.1 Percent as Job Loss Accelerates By Dean Baker | March 6, 2009 This report shows that recent economic projections were overly optimistic. The February employment report showed the labor market deteriorating at an even faster rate, with the unemployment rate rising from 7.6 percent to 8.1 in February. The economy lost 651,000 jobs in the month, but job loss for the prior two months was revised up as well. Job loss for the last three months is now reported at 2,013,000, an average of 671,000 per month. Job loss continues to be disproportionately in construction and manufacturing. Construction lost 104,000 jobs in February; it has lost 512,000 jobs since September, 7.2 percent of employment in the sector. Employment in the non-residential sector is falling almost as rapidly as in the residential sector. Manufacturing lost 168,000 jobs in February, bringing job loss in the sector to 845,000 since September, a decline of 6.3 percent. Hours per worker have also been reduced; the index of aggregate hours is down 9.6 percent since September. All sectors of manufacturing have been hit hard, but the auto sector has seen the sharpest decline, with employment down by 128,600, or 15.3 percent, since September. The hours index is down by 21.9 percent over this period. Retail lost 39,500 jobs, bringing its loss since September to 318,300. Employment in auto dealers has been holding up in spite of the plunge in sales. Employment is down by only 167,000, or 13.4 percent, since the pre-recession peak, even though sales are down more than 30 percent. In the same vein, employment in real estate is down by just 70,000, or 4.7 percent, even though sales are down by 40 percent. In both cases, workers are paid largely on commission and therefore have likely seen their wages slashed even though they still have their jobs. Employment in trucking fell by 33,400 in February. It is down by 88,000 since October, a drop of 6.5 percent. This reflects the huge decline in goods being shipped. The employment services sector lost 87,500 in February. As a result of a sharp downward revision to prior data, this sector reportedly lost 402,000 jobs, 13.2 percent of employment, since September. The rise in the unemployment rate was accompanied by a 0.2 percent drop in the employment rate. The 3.1 percentage point drop in the employment rate already exceeds the decline in any downturn since 1948. Men have been disproportionately hit by the downturn, with their unemployment rate rising by 3.8 percentage points over the last year to 8.1 percent. The unemployment rate for women rose by 2.4 percentage points to 6.7 percent. This gap is not surprising with construction and manufacturing as the big job losers. Black men saw a 6.9 percentage point jump in their unemployment rate over the last year to 14.9 percent. The employment rate for black teens dropped to 17.0 percent, the lowest level on record. The unemployment rate for Hispanics hit 10.9 percent, up 1.2 percentage points from January and 4.6 percentage points from last February. Unemployment has risen sharply for workers at all education levels. The 12.6 percent rate for workers without a high school degree is 5.2 percentage points above the year ago level. The 4.1 unemployment rate for college grads is nearly double the 2.1 percent rate of last February, and 0.7 percentage points higher than the previous high in 1992 when this series was first published. The number of people involuntarily employed part-time rose by 838,000 in February and is now 3,753,000 above its year ago level. This is consistent with the sharp decline in hours in the establishment survey. The one piece of somewhat good news in this report is that wages are continuing to rise, with nominal wages rising at 3.5 percent annual rate over the quarter. However, everything else in this report is extremely bad. The economy is in a free fall with no obvious brakes in place. The recent forecasts, used in analyzing the stimulus and the budget, which projected 8.5 percent unemployment for the 4th quarter, now look impossibly optimistic. The unemployment rate is likely to hit 8.5 percent by March and will almost certainly cross 9.0 percent by the early summer. Without substantial additional stimulus, it could cross 10.0 percent by year-end. Dean Baker is the Co-director of the Center for Economic and Policy Research. CEPR's Jobs Byte is published each month upon release of the Bureau of Labor Statistics' employment report. For more information or to subscribe by fax or email contact CEPR at 202-293-5380 ext. 102, or chinku [at] cepr [dot] net. Labels: Dean Baker, jobs, recession, unemployment Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Confusion, Tunneling, and LootingInteresting post from the blog Baseline Scenario.Emerging market crises are marked by an increase in tunneling—i.e., borderline legal/illegal smuggling of value out of businesses. As time horizons become shorter, employees have less incentive to protect shareholder value and are more inclined to help out friends or prepare a soft exit for themselves. Boris Fyodorov, the late Russian Minister of Finance who struggled for many years against corruption and the abuse of authority, could be blunt. Confusion helps the powerful, he argued. When there are complicated government bailout schemes, multiple exchange rates, or high inflation, it is very hard to keep track of market prices and to protect the value of firms. The result, if taken to an extreme, is looting: the collapse of banks, industrial firms, and other entities because the insiders take the money (or other valuables) and run. This is the prospect now faced by the United States. Treasury has made it clear that they will proceed with a "mix-and-match" strategy, as advertized. And people close to the Administration tell me things along the lines of "it will be messy" and "there is no alternative." The people involved are convinced—and hold this almost as an unshakeable ideology—that this is the only way to bring private capital into banks. Read the rest of the post. Labels: bank nationalization, Baseline Scenario, Corporate Fraud, financial crisis, fraud, nationalization Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Blue-Green InsurgencyThis is by Carl Davidson, at the excellent website SolidarityEconomy.net.Blue-Green Insurgency Gets Fired Up at the DC Green Jobs Conference By Carl Davidson Beaver County Blue When you walk into a large Washington, DC hotel lobby and find it teeming with thousands of smiling, buzzing people—half in labor union jackets and ball caps, the other half dressed in 30-something hip-hop causal—you know some special is happening. This was the lively, energized scene for three cold wintry days this Feb 4-6 at the Marriott Wardman Park Hotel, as nearly 3000 activists and organizers gathers for the "Good Jobs, Green Jobs" National Conference. The gathering was convened by more than 100 organizations, representing every major trade union and every major environmental group in the country, among others. It's called the "blue-green alliance," the core of which is the United Steel Workers and the Sierra Club, which jointly launched the "Green Jobs" movement nationally at a conference in Pittsburgh, PA a year ago. The turnout this year is triple in size and highly energized by both the victory of President Barack Obama and the looming onset of an economic crisis unmatched in scope since the Great Depression of the 1930s. In addition to the steelworkers, the building trades were well represented, and the green groups spanned a wide range of concerns, for toxics to energy to climate change. Also notable was the participation of a contingent of "high road" corporations rooted in the growing "green economy." Gamesa, a major Spanish firm specializing in wind turbines, and Piper Jaffray, a large paper company focused on recycled paper products, are two examples. But a critical new dimension was added by Green For All, an organization rooted among inner city youth, and headed up by Van Jones. Jones is the author of "The Green Collar Economy" and an inspirational voice for a rising generation of multinational, multicultural insurgent youth. Read the rest of the article. Labels: Carl Davidson, energy, Environment, green jobs, solidarity economics Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Black Male Jobless Rate: 16.1% in FebruaryFrom Bob Feldman; includes key excerpts from today's BLS report.Black Male Worker Jobless Rate: 16.1 Percent In February The official "not-seasonally adjusted" unemployment rate for Black male workers over 20 years of age in the United States increased from 15.8 percent to 16.1 percent between January 2009 and February 2009, while the "seasonally adjusted" unemployment rate for Black male workers increased from 14.1 percent to 14.9 percent, according to the latest Bureau of Labor Statistics data (http://www.bls.gov/news.release/empsit.t02.htm ) . The "not-seasonally adjusted" jobless rate for all Black workers over 20 years of age increased from 13.4 percent to 13.8 percent during this same period, while the "seasonally adjusted" jobless rate for all Black workers increased to 13.4 percent. For all U.S. workers, the "not-seasonally adjusted" jobless rate jumped from 8.5 percent to 8.9 percent between January 2009 and February 2009, while the "seasonally adjusted" jobless rate for all U.S. workers increased to 8.1 percent. The "not-seasonally adjusted" unemployment rate for white male workers also increased from 8.3 percent to 9 percent between January 2009 and February 2009. The "not-seasonally adjusted" jobless rate for Hispanic or Latino male workers increased from 11 percent to 12.1 percent between January 2009 and February 2009. Between January 2009 and February 2009, the "seasonally adjusted" jobless rate for Black youth between 16 and 19 years-of-age increased from 36.5 percent to 38.8 percent, while the "seasonally adjusted" jobless rate for white youth between 16 and 19 years-of-age was 19.1 percent. According to the Bureau of Labor Statistics' March 6, 2009 press release: "The number of unemployed persons increased by 851,000 to 12.5 million in February... "Among the unemployed, the number of job losers and persons who completed temporary jobs increased by 716,000 to 7.7 million in February... "The number of long-term unemployed (those jobless for 27 weeks or more) increased by 270,000 to 2.9 million in February... "In February, the number of persons who worked part time for economic reasons (sometimes referred to as involuntary part-time workers) rose by 787,000, reaching 8.6 million...This category includes persons who would like to work full time but were working part time because their hours had been cut back or because they were unable to find full-time jobs... "There were 731,000 discouraged workers in February, up by 335,000 from a year earlier. Discouraged workers are persons not currently looking for work because they believe no jobs are available for them... "Total nonfarm payroll employment dropped by 651,000 in February... "Employment in professional and business services fell by 180,000 in February. The temporary help industry lost 78,000 jobs over the month....In February, job declines also occurred in services to buildings and dwellings (-17,000), architectural and engineering services (-16,000), and business support services (-12,000). "Widespread job losses continued in manufacturing in February (-168,000). The majority of the decline occurred in durable goods industries (-132,000), with the largest decreases in fabricated metal products (-28,000) and machinery (-25,000). Employment in nondurable goods manufacturing declined by 36,000 over the month. "The construction industry lost 104,000 jobs in February... "Employment in truck transportation declined by 33,000 in February...The information industry continued to lose jobs (-15,000)... "Employment in financial activities continued to decline in February (-44,000).... In February, job losses occurred in real estate (-11,000); credit intermediation (-11,000); and securities, commodity contracts, and investments (-8,000). "Retail trade employment fell by 40,000 over the month...In February, employment decreased in automobile dealerships (-9,000), sporting goods (-9,000), furniture and homefurnishing stores (-8,000), and building material and garden supply stores (-7,000). Employment in wholesale trade fell by 37,000 over the month, with nearly all of the decline occurring in durable goods. "Employment in leisure and hospitality continued to trend down over the month (-33,000), with about half of the decrease in the accommodation industry (-18,000)..." --b.f. Labels: Black jobless rate, Bob Feldman, Bureau of Labor Statistics, jobs, recession, unemployment Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Feb. Unemployment tops 8%......and December's figure revised, making it the worst reading since 1949. From Reuters:U.S. February payrolls fall 651,000; jobless rate 8.1 percentFri Mar 6, 2009 8:48am EST WASHINGTON (Reuters) U.S. employers axed 651,000 jobs in February, pushing the unemployment rate to its highest in 25 years, as companies buckled under the strain of a recession that is showing no signs of ending, according to a government report. While that figure was near economists' expectations for a 648,000 drop in non-farm payrolls, January and December job losses were revised sharply higher. The Labor Department on Friday said the unemployment rate surged to 8.1 percent in February, the highest level since December 1983. That was above market forecasts for a rise to 7.9 from January's 7.6 percent. January's job cuts were revised to show a steep decline of 655,000, while December's payrolls losses were adjusted to 681,000, the deepest since October 1949. Since the start of the recession in December 2007, the economy has purged 4.4 million jobs, with more than half occurring in the last 4 months. Job losses in February were broad based, with only government, education and health services adding jobs. "Since the recession began, the rise in unemployment has been concentrated among people who lost jobs, as opposed to job leavers or people joining the labor force," said Bureau of Labor Statistics Commissioner Keith Hall The manufacturing sector shed 168,000 jobs in February, after eliminating 257,000 positions the prior month. Construction industries bled 104,000 jobs in February after losing 118,000 in January. The service-providing industry slashed 375,000 positions after shedding 276,000 in January. (Reporting by Lucia Mutikani; Editing by Neil Stempleman) Labels: bailout, financial crisis, unemployment Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Can My Boss Do That?We received a press release from the good folks at Interfaith Worker Justice in Chicago. They had a conference call on this today that we weren't able to listen in on, but it sounds like a really great project. For more info contact: Cynthia Brooke (773) 728-8400, ext. 40; cbrooke--at--iwj .org. Or just visit the site.Can My Boss Do That? New website with vital information on rights and protections during a job loss www.CanMyBossDoThat.com responds to overwhelming need. The numbers are staggering: 3.6 million jobs lost between December 2007 and January 2009. The February unemployment figures, due out this week, will continue to be grim. When workers face job loss, they often don't know where to turn for answers. They may be improperly denied their last paycheck, money due when their plant closes, or told by their employer that they cannot collect unemployment benefits. Interfaith Worker Justice (IWJ) has created a website, Can My Boss Do That? (www.CanMyBossDoThat.com), which enables workers to understand their rights and protections and advocate for themselves. It offers state-specific information geared to help real life situations:
"The need for clear, usable information for people who are facing unemployment is overwhelming," said Anne Janks, worker advocate and website creator. "We're seeing more bosses cutting corners and breaking employment laws. This website is one way workers can make sure they understand how best to protect themselves." Labels: closures and layoffs, Interfaith Worker Justice, jobs, unemployment, worker rights Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Unemployment (Including Closures and Layoffs)Two more unemployment items:
Labels: closures and layoffs, jobs, Mark Heschmeyer, Massachusetts, unemployment Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Citi and GM DeathwatchCitibank has now joined the ranks of the penny stocks. In 2006 the stock was trading at $55.70 and the company had a market capitalization of $277.2 billion. Today, the stock is trading at under $1 per share and the market cap is $5 billion. However, the US government has already lent the company $45 billion, so the actual value of the company is probably far less (i.e. negative).Bank of America isn't doing much better. On the auto front, auditors for GM are debating whether to continue to portray the carmaker as a "going concern." This determination will factor heavily in the company's ability to access more loans from the government or whether it will be headed straight for bankruptcy. GM stock is trading just below a lofty $2 mark. Labels: auto industry, auto industry loans, bad bank, Citibank, Citigroup, GM Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Two Items on the Employee Free Choice ActEconomist Dani Rodrik had this nice post on his blog last week:What do Philippe Aghion and Dean Baker have in common?You will notice that the link leads to a petition sponsored by the Economic Policy Institute of prominent economists in support of the Employee Free Choice Act, the legislation before Congress that promises to level the playing field somewhat for workers trying to organize unions. (Thanks to Dani for reminding us about Arrow and Solow winning on American Idol.) And there's this new video from SEIU: I love the bit about how EFCA will (horrors!) turn us into France or Germany. It reminds me of Mitt Romney's speech to the conservatives when he quit the presidential race and fretted that the liberals were going to turn the United States into "the France of the 21st century" (to which John Stewart responded: "Isn't France the France of the 21st century?"). Labels: Dani Rodrik, Employee Free Choice Act, France, John Stewart, Mitt Romney, SEIU, unions Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). WSJ and Hightower on Wall Street CompensationThe bonuses and compensation at Merrill Lynch are front-page news in today's Wall Street Journal; here's the teaser from their site:Merrill's $10 Million Men Here's the link, but it's a subscriber-only article. Meanwhile, here's a piece by Jim Hightower on Wall Street compensation from his website: EX-WALL STREET CEO'S STILL GETTING PERKS Labels: Andrea Orcel, ceo pay, Charles Prince, Citigroup, Jim Hightower, Merrill Lynch, Sandy Weill, Wall Street, Wall Street bonuses Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). File Under 'Have They No Shame?'Two items from today's New York Times to file under "Have They No Shame?".
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