It’s Not a Bailout — It’s a Funeral

The following guest post was contributed by Jennifer S. Taub, a Lecturer and Coordinator of the Business Law Program within the Isenberg School of Management at the University of Massachusetts, Amherst (SSRN page here). Previously, she was an Associate General Counsel for Fidelity Investments in Boston and Assistant Vice President for the Fidelity Fixed Income Funds.

In poetry and politics, metaphor matters. Expect some fighting figures of speech on Thursday, when the conference committee takes up the topic of the Orderly Liquidation Fund or “OLF.” Under the proposed financial reform legislation, the OLF is the facility that would hold the money needed by the FDIC to shut down a systemically important, insolvent financial institution before its failure can contaminate other firms and the broader economy. In other words, one purpose of the resolution authority and OLF is to avoid repeating the disorder and disruption of either the Lehman bankruptcy or the AIG bailout.

To be clear, many question whether regulators will have the courage to invoke this provision and pull the plug on a dying bank. Accordingly, the “prevention” measures under discussion in the legislation are critical — these included the swaps desk spinoff, hard leverage caps on financial firms, regulatory oversight over shadow banks and inclusion of off-balance sheet transactions in capital standards, among others.

Quest for EPA Documents Reveals Deliberate Misclassification By Agency Staff

For the past four years, as executive director of Citizen Action New Mexico, Dave McCoy has been hounding the local and federal government for documents.

McCoy alleges that Sandia National Laboratory’s Mixed Waste Landfill monitoring wells are mismanaged by the New Mexico Environment Department, and that the public water supply is in danger of contamination.

Education Department Pulls Student Debt Collectors Guide off Website

Students who defaulted on a college loan have one less tool to help them negotiate with collections agencies now that the U.S. Education Department pulled a manual for debt collectors off its website.

The department removed the Private Collection Agencies Procedures Manual from its website last month after a U.S. News and World Report blog, College Cash 101, detailed some useful tips from the manual for borrowers who have fallen behind in repaying their federal student loans.

U.S. Lacks Basic Security for e-Passport Manufacturing

Last month, a gunman opened fire on an insurance building in the ancient Thai city of Ayutthaya, piercing the glass windows of the People’s Alliance for Democracy headquarters with 11 millimeter caliber bullets.

A few weeks earlier, bombs made from powerful plastic explosives were detonated near transmission towers in the same city in an unsuccessful effort by terrorists to darken the manufacturing district.

The violent episodes hardly registered in the United States. Few Americans have heard of Ayutthaya, after all, or know of a reason to pay attention to it.

How to Spot a Republican

Posted on Jun 17, 2010

Spotted in the comments of a Crooks and Liars post, this laugher about a woman lost in a hot air balloon has been making its way around the Internet.

BaScOmBe commenting at Crooks and Liars:

A woman in a hot air balloon realized she was lost. She lowered her altitude and spotted a man in a boat below. She shouted to him, “Excuse me, can you help me? I promised a friend I would meet him an hour ago, but I don’t know where I am.”

The man consulted his portable GPS and replied, “You’re in a hot air balloon, approximately 30 feet above ground elevation of 2,346 feet above sea level. You are at 31 degrees, 14.97 minutes north latitude and 100 degrees, 49.09 minutes west longitude.

“She rolled her eyes and said, “You must be an Obama Democrat.”

Deficit Commission Co-Chair: Social Security T-Bills Have "Been Used"

By Dave Johnson

Created 06/18/2010 - 10:50am

t's astonishing, watch the video to see Alan Simpson, Co-Chair of the National Commission on Fiscal Responsibility and Reform ("Deficit Commission") explain that buyers of US T-Bills don't necessarily need to get paid back because the money has "been used"!

Background: In the 1980s the Social Security payroll tax was increased, supposedly to set aside funds to cover the retirement of the post-WWII baby-boomer generation. But this extra revenue was instead used to give huge tax cuts to the wealthiest Americans. (Yes, that's right, they taxed working people and used the money to cut taxes for the rich.) So now that the boomers are retiring the money is needed. They want those bonds paid back now to cover Social Security payments.

The Commission: Now there is the Deficit Commission looking into how to raise money to cover what the government handed out as tax cuts to the rich. Rather than get the money from where the money went, the plutocrats are instead trying to convince people that it would make more sense to just cut Social Security instead, so they don't have to pay it back. The commission is meeting in secret, preparing to recommend cutting Social Security benefits. Hence the nickname for the Commission: "Catfood Commission," because cutting Social Security would force as many as 1.5 million old people into poverty and eating cat food for dinner because it costs less.

Paul Krugman: That ’30s Feeling

BERLIN

Suddenly, creating jobs is out, inflicting pain is in. Condemning deficits and refusing to help a still-struggling economy has become the new fashion everywhere, including the United States, where 52 senators voted against extending aid to the unemployed despite the highest rate of long-term joblessness since the 1930s.

Many economists, myself included, regard this turn to austerity as a huge mistake. It raises memories of 1937, when F.D.R.’s premature attempt to balance the budget helped plunge a recovering economy back into severe recession. And here in Germany, a few scholars see parallels to the policies of Heinrich Brüning, the chancellor from 1930 to 1932, whose devotion to financial orthodoxy ended up sealing the doom of the Weimar Republic.

But despite these warnings, the deficit hawks are prevailing in most places — and nowhere more than here, where the government has pledged 80 billion euros, almost $100 billion, in tax increases and spending cuts even though the economy continues to operate far below capacity.

Take the political heat out of climate scepticism

18 June 2010 by Roger Harrabin

CLIMATE scepticism is on the rise, boosted in large part by the hacked emails originating from the "climategate" scientists at the University of East Anglia (UEA) in the UK, and by the carelessness of fact checkers for the Intergovernmental Panel on Climate Change.

The damage to the public standing of climate science has been substantial. In the UK in February, a BBC poll of 1001 people found that just 26 per cent believed human-made climate change was an established scientific fact, down from 41 per cent only three months earlier. And in the US, Republicans hope to kill the "American Power Act", sponsored by Senators John Kerry, a Democrat, and Joe Lieberman, who sits as an independent.

Scientist links increase in greenhouse gases to changes in ocean currents

Findings released during the annual Goldschmidt Conference at the University of Tennessee, Knoxville

KNOXVILLE -- By examining 800,000-year-old polar ice, scientists increasingly are learning how the climate has changed since the last ice melt and that carbon dioxide has become more abundant in the Earth's atmosphere.

For two decades, French scientist Jérôme Chappellaz has been examining ice cores collected from deep inside the polar ice caps of Greenland and Antarctica. His studies on the interconnecting air spaces of old snow -- or firn air -- in the ice cores show that the roughly 40 percent increase of carbon dioxide in the atmosphere since the Earth's last deglaciation can be attributed in large part to changes in the circulation and biological activity of the oceanic waters surrounding Antarctica.

Liberals and Obama on the Oil Spill -- continued

By Theda Skocpol - June 16, 2010, 5:53PM

My most recent entry ended up with the extension cut off. Here is more of what I have to say, provoked by the senseless hysteria among liberal commentators, led by MSNBC and HuffPost.

Many liberal pundits are making absolute fools of themselves bashing Obama over the Gulf spill. They are just emoting and have no solutions anyone could try. There is no easy out on this, and the patience to build and support adequate government oversight of industries is the key here, as in many other areas.

Profiling 10 of the Deeply Troubled Individuals Leading the Right-Wing, Government-Hating Crusade

By , SPLC Intelligence Report
Posted on June 15, 2010, Printed on June 17, 2010
http://www.alternet.org/story/147218/

In the last year and a half, militias and the larger antigovernment "Patriot" movement have exploded, accompanied by the rapid expansion of other sectors of the radical right. This spectacular growth (see timeline) is the result of several factors, including anger over major political, demographic and economic changes in America, along with the popularization of radical ideas and conspiracy theories by ostensibly mainstream politicians and media commentators.

Although the resurgence of the so-called Patriots — people who generally believe that the federal government is an evil entity that is engaged in a secret conspiracy to impose martial law, herd those who resist into concentration camps, and force the United States into a socialistic "New World Order" — also has been propelled by people who were key players in the first wave of the Patriot movement in the mid–1990s, there are also a large number of new players.

Creating the Next Crisis

WASHINGTON, DC -- Informed opinion is sharply divided about how the next 12 months will play out for the global economy. Those focused on emerging markets are emphasizing accelerating growth, with some forecasts projecting a 5% increase in world output. Others, concerned about problems in Europe and the United States, remain more pessimistic, with growth projections closer to 4% – and some are even inclined to see a possible “double dip” recession.

This is an interesting debate, but it misses the bigger picture. In response to the crisis of 2007-2009, governments in most industrialized countries put in place some of the most generous bailouts ever seen for large financial institutions. Of course, it is not politically correct to call them bailouts – the preferred language of policymakers is “liquidity support” or “systemic protection.” But it amounts to essentially the same thing: when the chips were down, the most powerful governments in the world (on paper, at least) deferred again and again to the needs and wishes of people who had lent money to big banks.

It’s time to restore the social safety net

By Michelle Chen, June 16, 2010

After years of punishing the poor, it’s time for Washington to repair the shredded social safety net.

In the mid-1990s, President Clinton vowed to make welfare history by smothering critical economic aid programs. But it turns out that while those reforms shuffled the bureaucracy of public assistance, the structure of poverty remains firmly intact.

The Jobs Deficit: What Can Be Done Now

By Terrance Heath

Created 06/16/2010 - 12:31pm

In his column concerning last month's jobs number, George Will does a nearly "Noonan-eque" job of spreading disorientation and doubt about what government should do— if anything — about chronic unemployment, delivering a simple-but-subtle message: Nothing can be done. Of course, that's not true. There's a lot that can and should be done, immediately, to address unemployment.

I have to admit, I was surprised. Until now, I thought that almost no conservative columnist alive could beat Peggy Noonan — who should henceforth be known as "Our Lady of the Blessed Dolphins" [1] — for the kind of mind-numbing blather that causes the eyes to glaze over, and a reader to wonder why the writer isn't on some kind of medication, instead of on the op-ed page. But Washington Post columnist George Will has emerged as a surprising contender.

Senator aims to force unemployed to take drug tests

By John Byrne
Wednesday, June 16th, 2010 -- 10:01 am

Though the Clinton Administration passed a law years ago allowing states to test welfare recipients for drug abuse, one Republican senator wants to go farther: require drug tests of anyone who applies for government assistance.

Sen. Orrin Hatch (R-UT) offered an amendment Tuesday that would require drug tests for those who seek welfare and unemployment benefits. States have the authority to enact drug testing requirements for their welfare programs under the 1996 Welfare Reform Act, signed into law by President Bill Clinton, but they are not mandated to conduct tests under current law.

EPA analysis: Senate energy bill would lower electric bills

By Renee Schoof | McClatchy Newspapers

WASHINGTON — The energy and climate bill that Republicans call a light-switch tax would lower electricity bills, at least in its early years, the Environmental Protection Agency reported Tuesday.

The EPA study of the proposed American Power Act, sponsored by Sens. John Kerry, D-Mass., and Joe Lieberman, a Connecticut independent, said that energy bills for the average household — not including gasoline — would decrease by 10 percent by 2020, rise by 1 percent in 2030 and rise by 16 percent in 2050. The increases after 2030 largely would be offset by rebates, protective plans for low-income households and other measures, the analysis said.

In a recession, it's government's job to lean against market logic

Lord Myners's criticism of Labour's deficit legacy ignores Keynesian economics in favour of rightwing thinking

Bryan Gould
guardian.co.uk, Wednesday 16 June 2010 16.38 BST

When Lord Myners proclaimed this month that "there is nothing progressive about a government that consistently spends more than it can raise in taxation" he gave support and comfort to one side of an argument that is at the heart of the new government's agenda – what to do about the government deficit.

Lord Myners's intervention was all the more significant because it came from someone who, just a few weeks ago, was a minister in the Labour government. He weighed in on the side of those who seem to assert that the first priority of the new government must be to get the deficit down; but he may have also given us a clue as to why Labour's position on this issue during the election campaign was so confused.

Questioning the effectiveness of oil dispersants in Gulf oil spill

The widespread belief that chemical dispersants will enhance the breakdown of oil from the Gulf of Mexico disaster is based on weak scientific data. That's among the topics in a comprehensive status report that is the cover story in Chemical & Engineering News (C&EN), ACS' weekly newsmagazine.

volcker: New Government Powers Won't Be Able to Dismantle Megabanks

Former Federal Reserve Chairman Paul Volcker believes the centerpiece of the administration's effort to end Too Big To Fail -- the perception that the nation's largest banks will always be bailed out when in trouble -- will not actually apply to megabanks.

In a September 2009 speech on Wall Street, President Barack Obama said that the administration's preferred way to dismantle failing systemically-important firms is a new "resolution authority" outside the normal bankruptcy process. The authority, which would enable regulators to wind down failing financial behemoths, "is intended to put an end to the idea that some firms are 'too big to fail,'" Obama said.

His top economic adviser, Lawrence Summers, has said that ending Too Big To Fail is the administration's "central objective" in reforming the financial system, and that resolution authority is the "most crucial" part of that plan.

Stop Playing Defense, Obama

How the president can stop the spreading plume of national despair.

By Eliot Spitzer
Posted Monday, June 14, 2010, at 2:54 PM ET

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Much as we might wish to believe we as a nation are masters of our own fate, stuff happens. As Monty Python said so eloquently, "Nobody expects the Spanish Inquisition." Unexpected events roil societies, but they are also opportunities for great leaders to alter national conversation and, paradoxically, move us forward. When events place you on defense, as they have done to President Obama, the imperative is to change the terms of debate. Reject the existing framework.

In stark contrast to his "Yes, we can" rhetoric, the president now risks letting events render his administration weak and ineffective, bringing back long-repressed memories of the Carter years.

Surprises in store for economists

Some analysts are shocked that US retail sales have declined. Have they lost their grasp of basic economic concepts?

Dean Baker
guardian.co.uk, Monday 14 June 2010 21.00 BST

The commerce department reported that retail sales in May were down by 1.2% from April. This surprised most economists who had expected a modest increase. The media were filled with accounts of economists trying to explain why consumers were still reluctant to open up their wallets and spend in a big way. It would have been much more interesting to hear accounts of why economists were surprised.

There is always a large random element in month-to-month movements in retail sales or any other economic variable. Therefore no one is ever going to be able to explain these changes with any precision. (The data are also subject to large revisions, so it is entirely possible that revised data will look very different from the report released last week (pdf).)

Giving In on Trading, Bankers Turn to Other Losses

By EDWARD WYATT

WASHINGTON — Bankers have all but given up on defeating one of the most contentious provisions in the financial regulation bill — one that would effectively bar federally insured banks from trading for their own accounts — and are now focusing on battles like heading off a prohibition on derivatives trading.

As House and Senate negotiators head into a final push to send the legislation to President Obama, they have largely agreed to stricter limits on so-called proprietary trading than those envisioned in the versions passed by either chamber.

That outcome would be a victory for the White House and for the provision’s most dogged advocate, Paul A. Volcker, the former Federal Reserve chairman.

But with the so-called Volcker Rule now likely to become law after appearing to be dead at earlier points in the legislative process, banks are battling hard to fend off further restrictions on their activities.

Don’t Forget The Kanjorski Amendment

By Simon Johnson

Substantive discussion in the House-Senate financial reform reconciliation conference is focusing on the Lincoln amendment, with some back-and-forth on the Volcker Rule (as manifest in the Merkley-Levin amendment). The FT reports today that Paul Volcker is no longer opposed to the Lincoln approach – now it has become clear that this is really just about (substantially) raising the capital that banks need to back derivatives trading. And the influential Tom Hoenig, of the Kansas City Fed, appears to be strongly in the Lincoln camp.

While our most experienced regulators weigh in, the lobbyists start to struggle. The mobilization of broader support against gutting the legislation also helps – the earlier Senate debate has raised sensitivity levels and there is a new concentration to the public scrutiny. The reconciliation process itself is much more open than would ordinarily be the case – a result of outside pressure.

But amidst all this excitement and potential moving parts, don’t forget about the Kanjorski amendment (not currently on the list of most prominent topics).

"Free-Market Fundamentalism" Is an Invention of Progressives

Monday 14 June 2010

by: Dean Baker, t r u t h o u t | Op-Ed

The right showed once again that they have no allegiance whatsoever to the free market when House Republicans pushed through a bill that would prohibit the Federal Housing Authority (FHA) from insuring the mortgage of anyone who had "strategically defaulted" on an earlier mortgage. The intention was to punish people who had taken advantage of this option and, therefore, make it less likely that others would go this route in the future.

A strategic default is when a person stops paying a mortgage even when they can still afford it, and, instead, turns the house back to the lender. This can be a desirable move for borrowers if the price of the house has fallen below the value of the home due to the collapse of the housing bubble.

A Painless Fix for America's Budget Squeeze

By Sam Pizzigati

Created 06/13/2010 - 1:10pm

Home Feature Box:

An emergency 1 percent 'wealth tax' on the nation's richest 1 percent could raise enough revenue to keep all our teachers on the job and libraries open. But our dysfunctional political system can't even raise that possibility.

An emergency 1 percent 'wealth tax' on the nation's richest 1 percent could raise enough revenue to keep all our teachers on the job and libraries open. But our dysfunctional political system can't even raise that possibility.

Last year may have been the worst year, economically, that most Americans alive today have ever experienced. By the year’s end, one of every ten Americans couldn’t find work. Millions more, over the course of the year, lost wages and benefits — or both.

But some Americans, says an eye-opening global wealth survey released [1] last week, survived 2009 quite nicely. U.S. households that hold over $1 million in “assets under management” — a financial category that covers everything from stocks and bonds to money market savings — have essentially recovered almost all the ground they lost right after the 2008 meltdown.

These millionaire households now hold over half of America’s wealth. In no other society outside the oil-rich Middle East, notes [2] a Los Angeles Times analysis, do millionaire households currently hold as large a share of their nation's treasure.

Austerity Now!

Can the United States and Europe cut their way to economic prosperity? Probably not.

By Daniel Gross
Posted Monday, June 14, 2010, at 12:06 PM ET

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If British voters thought they had replaced the dour visage of Labour Prime Minister Gordon Brown with an optimistic one in fresh-faced Tory David Cameron, they were sadly mistaken. On June 7, the new PM Cameron brought down the hammer, telling the British public that the most urgent issue ahead "is our massive deficit and our growing debt. How we deal with these things will affect our economy and our society, indeed our whole way of life." With a deficit set to top 11 percent of gross domestic product this year, and a debt of $1.12 trillion and rising, Cameron prescribed a harsh regimen of spending cuts and possible tax increases. Tony Blair's motto was "Cool Britannia." Cameron's is likely to be "Austerity Now!"

At first, most developed economies responded to the global financial crisis in 2008 and '09 with stimulus: They increased government spending and cut taxes. John Maynard Keynes provided the playbook: In slack times, the government needs to fill in for diminished private demand. But 2010 is shaping up to be a year of parsimony. To win support for an international bailout, Greece enacted a tough package of budget cuts and tax increases. Spain's left-wing government at the end of May slashed civil-servant pay by 5 percent and froze pensions—even though one in five Spaniards is out of work. Recently, German Chancellor Angela Merkel unveiled a $144 billion package that would raise taxes on airline flights and cut defense spending and public works—and Germany's deficit is a manageable 5 percent of GDP. "We can't have everything we want if we are to shape the future," Merkel said.

How All of Us Pay for the Derivatives Market

By Zach Carter, AlterNet
Posted on June 11, 2010, Printed on June 14, 2010
http://www.alternet.org/story/147179/

For the Wall Street reform package currently making its way through Congress to work, it has to accomplish two broad goals: It must take a huge bite out of banking profits and end the too-big-to-fail oligopoly that encourages megabanks to take megarisks and stick taxpayers with the tab. Neither of these goals can be accomplished without taking on derivatives -- the wild, unregulated market that brought down AIG. Right now, the U.S. government pays big banks for operating derivatives casinos. If we're going to clean up the derivatives mess, we have to move taxpayer money out of the market.

"The dirty little secret here is that the American government has been subsidizing the derivatives market through the Fed and other avenues since its inception," says Adam White, director of research for White Knight Research and Trading. "That's crazy."

The Corporate Court

One thing that’s been frustrating progressive lawyers for a few years now, but increasingly so over time, is the belief of the public and the press that the federal judiciary is primarily a venue for tackling “hot button” issues like abortion and the death penalty. In reality, the bulk of federal litigation has to do with businesses suing each other, workers or consumers suing businesses, or businesses trying to fight off regulators.

The Constitutional Accountability Center has a new study out (PDF) that takes a look at this issue through the lens of the US Chamber of Commerce, the premiere group that can be found arguing that corporate executives should be able to get away with doing whatever they want.

Marketplace Pushes Tripe on Social Security

Saturday, 12 June 2010 14:53

I often think it's too bad that Social Security isn't a private company. If it were, it could sue Marketplace Radio for libel for this sort of reporting. Does Marketplace's host have any idea what she is talking about when she says: "Social Security is in such a sorry state"? According to the Congressional Budget Office the program can pay all benefits for the next 34 years with no changes whatsoever and even after that can pay more than 75 percent of benefits indefinitely. The program is in much better shape in this respect that it was in the 40s, 50s, 60s, or 70s. So what on earth is this person talking about? Can Marketplace Radio pay all its expenses for the next 34 years?

Deficits short-term vs long-term & the health care disconnect

by: Paul Rosenberg
Sun Jun 13, 2010 at 12:00

Last weekend, Brad DeLong had an illuminating little post correcting the sloppy thinking of Henry Blodget at Business Insider.

Trying to position himself "in the middle" between Keynesian expansionists and so-called "deficit hawks", Blodget complained that:

we don't think Krugman has yet offered a persuasive explanation for how we're going to climb out of the gigantic debt and spending hole we're digging without serious future pain.

To which DeLong responded:

Two observations:

1.We are not going to get out of our long-run health-care spending overcommitments without serious future pain. The pain--in the sense of severe spending cuts relative to baseline or tax increases--is already baked into the cake.

The Female Factor: In Sweden, the Men Can Have It All

By KATRIN BENNHOLD

SPOLAND, SWEDEN — Mikael Karlsson owns a snowmobile, two hunting dogs and five guns. In his spare time, this soldier-turned-game warden shoots moose and trades potty-training tips with other fathers. Cradling 2-month-old Siri in his arms, he can’t imagine not taking baby leave. “Everyone does.”

From trendy central Stockholm to this village in the rugged forest south of the Arctic Circle, 85 percent of Swedish fathers take parental leave. Those who don’t face questions from family, friends and colleagues. As other countries still tinker with maternity leave and women’s rights, Sweden may be a glimpse of the future.

In this land of Viking lore, men are at the heart of the gender-equality debate. The ponytailed center-right finance minister calls himself a feminist, ads for cleaning products rarely feature women as homemakers, and preschools vet books for gender stereotypes in animal characters. For nearly four decades, governments of all political hues have legislated to give women equal rights at work — and men equal rights at home.

Finally, Borrowers Score Points

By GRETCHEN MORGENSON

WHILE the wheels of justice have turned very slowly in the years since our nation’s financiers and regulators nearly cratered our economy, the Federal Trade Commission’s settlement last Monday with Countrywide Home Loans suggests that they haven’t entirely ground to a halt.

Countrywide, now a unit of Bank of America, was once led by Angelo Mozilo and was the nation’s largest mortgage lender in the glorious, pre-crisis days of the housing boom. But it was also a predatory institution, and the F.T.C., citing Countrywide’s serial abuse of troubled borrowers, extracted a $108 million fine from Bank of America last week.

That money will go back to some 200,000 customers whom Countrywide forced to pay outsized fees for foreclosure services. These included billing a borrower $300 to have a property’s lawn mowed and levying $2,500 in trustees’ fees on another borrower, when the going rate for that service was about $600.

Frank Rich: Two Weddings, a Divorce and ‘Glee’

THOSE of us left off the guest list could only fantasize about Rush Limbaugh’s nuptials last weekend. Now cruising into marriage No. 4 — an impressive total for a guy not quite 60 — Rush staged a lavish luau at the Breakers in Palm Beach. The revelers included what some might regard as the Rat Pack from hell — Sean Hannity, Rudy Giuliani, James Carville and Clarence Thomas. The scriptural readings remain a mystery. But we did learn the identity of the pop deity anointed as the wedding singer. That would be Elton John, whose last, albeit second-class, wedding was a civil union with David Furnish in 2005.

Why would America’s right-wing radio king hire an openly gay entertainer to star at his wedding? And why would one of the world’s foremost AIDS activists sing “Can You Feel the Love Tonight” for a gay-baiting provocateur who has trivialized AIDS and speculated that same-sex marriage could lead people to marry dogs? Sir Elton’s fee was reported to be a cool $1 million. Which goes to show that pop music and cash have the power to make even stranger bedfellows than politics.