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The U.S. Financial System Is Effectively Insolvent
Nouriel Roubini | Forbes | Submitted by Peter Trottam
For those who argue that the rate of growth of economic activity is turning positive--that economies are contracting but at a slower rate than in the fourth quarter of 2008--the latest data don't confirm this relative optimism. In 2008's fourth quarter, gross domestic product fell by about 6% in the U.S., 6% in the euro zone, 8% in Germany, 12% in Japan, 16% in Singapore and 20% in South Korea. So things are even more awful in Europe and Asia than in the U.S.
Fresh off a U.S. victory over Swiss bank UBS AG, which admitted in a recent plea deal with the Justice Department that it aided tax evasion by wealthy American clients, Congress and the White House are trying to press a wider crackdown on the lucrative tax haven business.
UBS last month agreed to pay $780 million in fines as part of a deferred prosecution agreement with federal prosecutors. The bank is outing clients attached to about 250 accounts that the Justice Department alleges were set up as shell entities in tax avoidance schemes. The bank admitted to violating regulations set under a treaty that requires banks to submit information about their U.S. clients' tax obligations.
Last year, the Government Accountability Office reported that cost overruns on the Pentagon's 95 largest weapons acquisitions system totaled about $300 billion, even though the government cut quantities and reduced performance expectations. "A train wreck is coming," McCain said at a hearing yesterday on the bill.
A bill to end cost overruns in major weapons systems would create a powerful new Pentagon position -- director of independent cost assessments -- to review cost analyses and estimates, separately from the military branch requesting the program.
"AIG is a huge, complex, global insurance company, attached to a very complicated investment bank hedge fund that built -- that was allowed to build up without any adult supervision, with inadequate capital against the risks they were taking, putting your government in a terribly difficult position," Geithner said. "And your government made the judgment back in the fall that there was no way that you could allow default to happen without catastrophic damage to the American people....On Monday, AIG announced a loss of $61.7 billion for the fourth quarter of 2008, the biggest quarterly corporate loss in U.S. history. The federal government simultaneously announced that it would once again restructure the terms of the AIG bailout, which began in September and had grown to a $152 billion total package."
Bair Says Insurance Fund Could Be Insolvent This Year (Update1)
By Alison Vekshin | Bloomberg
Federal Deposit Insurance Corp. Chairman Sheila Bair said the fund it uses to protect customer deposits at U.S. banks could dry up amid a surge in bank failures, as she responded to an industry outcry against new fees approved by the agency.
“Without these assessments, the deposit insurance fund could become insolvent this year,” Bair wrote in a March 2 letter to the industry. U.S. community banks plan to flood the FDIC with about 5,000 letters in protest of the fees, according to a trade group.
Fairly or not, Countrywide Financial and its top executives would be on most lists of those who share blame for the nation’s economic crisis. After all, the banking behemoth made risky loans to tens of thousands of Americans, helping set off a chain of events that has the economy staggering.
So it may come as a surprise that a dozen former top Countrywide executives now stand to make millions from the home mortgage mess.
Stanford L. Kurland, Countrywide’s former president, and his team have been buying up delinquent home mortgages that the government took over from other failed banks, sometimes for pennies on the dollar. They get a piece of what they can collect.
By Dave Lindorff
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%.
This fall off in car buying was despite record discounting by the auto industry, and offers of 0% financing.
Clearly, obtaining financing is not the reason people are not buying cars.
People are not buying cars because they are worried about having a job to enable them to pay back the loan.
The budget battle being waged in cities and towns across Massachusetts reached the front lines last week, when a soldier serving his third tour of duty in Iraq received his pink slip.
NewsCenter 5’s Kelley Tuthill reported that Leo Pike, who was deployed to Iraq again in September with the Navy Reserves, opened his mail Thursday and learned that he will be losing his job as a New Bedford firefighter.
“He loves being a firefighter,” said Pike’s fiancée Renee Garbitt. “He loves his job and he says that he’s one of those people that’s happy to go to work every day.”
Garbitt, who is raising their 2-year-old son, Leo, on her own while Pike is deployed over seas, said that the layoffs were enacted with little consideration for the disadvantages the family would face as a result of Pike’s military service.
“He’s going to have to come home to no job and, now, competing with 76 others who have had quite a head start on him,” Garbitt said.
Obama seeks major change in federal contracting
By Phillip Elliott | Yahoo!News
President Barack Obama approved an order Wednesday to overhaul the way the U.S. government awards contracts for work to be done by the private sector, reversing a Bush administration policy.
Obama joined Republican Sen. John McCain, his presidential campaign rival, and other congressional figures to announce an executive memorandum that commits his administration to a new set of marching orders for awarding contracts. Obama said "the days of giving government contractors a blank check are over" and said changes could save up to $40 billion a year.
One area in particular that is targeted is no-bid contracts, which the administration is seeking to change so that there will be more competition for government-paid work.
"Even if these were the best of times, budget reform would be overdue in Washington," Obama said.
By Corporate Crime Reporter [reporting what Chairman Conyers should be reporting himself but is apparently afraid to]
President Obama’s White House made crystal clear this week: a Canadian-style, Medicare-for-all, single payer health insurance system is off the table.
Obama doesn't even want to discuss it.
Take the case of Congressman John Conyers (D-Michigan).
Conyers is the leading advocate for single payer health insurance in Congress.
Last week, Conyers attended a Congressional Black Caucus meeting with President Obama at the White House.
During the meeting, Congressman Conyers, sponsor of the single payer bill in the House (HR 676), asked President Obama for an invite to the President’s Marchy 5 health care summit at the White House.
[Note for TomDispatch readers: Not to be missed -- the Nation Institute, which so nobly supports TomDispatch.com, Nation Books, and Alternet are co-hosting a panel discussion, "Meltdown: The Economic Collapse and a People's Plan for Recovery," with an all-star cast that includes Katrina vanden Heuvel, Joseph Stiglitz, Barbara Ehrenreich, Jeff Madrick, Bill Fletcher, Jr., and Christopher Hayes. Some of them should be consulting for the Obama administration in place of Tim Geithner, Larry Summers et al. instead of offering us their thoughts for free at 8 pm this Friday at 2 West 64th Street in New York City. Doors open at 7:15, first come, first served.]
Back in December, I wrote about the layoffs -- what a polite word for a terrible act -- then coursing through book publishing, my own business of more than 30 years. "When you get the word," I commented, "the call, the notice that you're a goner, or when your little world shudders, that's something else again. Even if the call's not for you, but for a friend, an acquaintance, someone close enough so you can feel the ripples, that can do the trick."
Supporters of Single Payer Health Care will rally this Thursday at noon in Lafayette Square. Can you be there? Pass it on, and bring friends!
Want to restore jobs and stimulate the economy? A new study (pdf) released by the California Nurses Association says that establishing a national single-payer healthcare system would do both — in addition to providing health insurance for 47 million uninsured individuals.
According to the study, expanding Medicare to include the uninsured, and those on Medicaid or employer-sponsored health plans, and expanding coverage for those with limited Medicare, would have the following immediate impacts:
On Thursday, the U.S. House of Representatives postponed helping homeowners and the economy by delaying action on a crucial bill (H.R. 1106). Please take the time to tell them the only way to get the economy back on track is to stop foreclosures.
For each day that Congress delays this vote:
* Another 6,600 families lose their homes.
* More families living near foreclosed properties see their home values drop.
* More senior citizens lose their life savings.
* More families can't send their children to college because they have lost their home equity.
* Towns and cities lose tax revenue and struggle with the extra costs of dealing with vacant properties.
* Economic recovery remains that much more out of reach.
TELL YOUR REPRESENTATIVE TO STAND UP FOR ORDINARY AMERICANS AND VOTE FOR H.R. 1106. DON'T WEAKEN IT. SUPPORT ENACTMENT NOW.
Why is Geithner dithering? Because he is asking the wrong question. The question he is posing is: how can the government save Citigroup? The right question is: how can the government rebuild the banking system?
President Obama deserves immense credit for being willing to spend serious money to prevent recession from becoming depression. He has resisted pressures from fiscal conservatives to put budget balance first, or to make social insurance bear the brunt of spending cuts down the road. And he has used his gifts as a teacher to enlist the broad support of the American people for a far-reaching strategy of public investment.
These days, the way executives make money instead is in the form of bonuses for years where they bring in a lot of return (and often times for years they don't), but the threat of being fired for too much risk taking is minimal. The more risk you take, the more money everyone makes. And it's not the partner's money you're playing with anymore. You're playing with house money. No one is minding the store anymore....These executives did not actually fail. They succeeded wildly. It's just that they had a different goal - to take home as much money as they possibly could for themselves. Mission accomplished!
“The Last Picture Show”: President Barack Obama’s Fiscal Year 2009 Budget
by Richard C. Cook
Greenbacks and programs like the Alaska Permanent Fund are part of what I call Dividend Economics. It’s why I’ve proposed the “Cook Plan,” which would be a system of vouchers for the necessities of life in the amount of $1,000 a month for any adult citizen who applied. A smaller amount would be provided as an allowance for children.
The vouchers would be taxed like any other income and would supplement other entitlements such as unemployment compensation, Social Security, etc. But taxes would be low for those who would use the vouchers as a main source of income. Under the plan, the vouchers would then be accepted as deposits at a new network of community savings banks that would lend at one percent interest to consumers, students, small businesses, local manufacturing establishments, and family farms.
Systemic Failure: Capitalism "Lays An Egg"
by Stephen Lendman
After the 1929 October 24, 28 and 29 market crash, the weekly entertainment industry magazine Variety (on October 30) published its most famous ever headline: "Wall Street Lays an Egg." In October 2008, history repeated, and since the October 2007 peak, equity prices plunged over 50% after the Dow and S & P (in February) posted their second worst ever monthly percentage declines - topped only in 1933 during the depths of the Great Depression. So far, the current market drop matches its 1929 - 1932 pace, and like then, shows no signs of abating.
Older soldiers find a niche in new Army | 'GI Jorge,' a father, grandfather and struggling property appraiser, is becoming a soldier at 40 to secure his family's financial future.
By Carol Rosenberg | Miami Herald
As the South Florida real estate market disintegrated and the number of jobless rose, 40-year-old Jorge Gil Muela made a young man's decision.
The five-foot-seven, 235-pound property appraiser walked into a recruiting center in a Kendall strip mall in December to join the Army. He was told to shed 50 pounds. It's a small price, he said, for the job security and pay, family health insurance and new career as a cargo handler.
A 185-pound Muela will report for duty at Fort Sill, Okla., next month, leaving his wife, children and grandchildren behind in Miami.
Karl Rove spars with Katrina vanden Heuvel on ABCNews' "This Week with George Stephanopoulous." Watch the complete roundtable here.
This is Rove's first time on ABCNews. Should Rove get a paycheck from ABCNews while ignoring Congressional subpeonas?
Why wasn't Rove arrested?
This is dated, but I decided to post it here for just that reason: "If we knew then, what they knew..." It's graph-intensive, and the source notes at the bottom of the screens are noteworthy, too, given the bailouts.
Here's a bit of background on Carlyle:
Remarkably, one of the most powerful organizations of the federal government, the Federal Reserve, is not subject to audit. Congressman Ron Paul wants to change that. He announced yesterday that he will be submitting a bill in the House of Representatives calling for an audit of the Fed. Paul states:
The Fed is now pledging to reveal to the public more about its economic predictions, and calls this greater transparency. This is little more than window-dressing, at best, utterly useless at worst...
~Chip's note: Ford Motor Company refused government bailout funds.
Congressman Dennis Kucinich (D-OH) today released the following statement after the Ford Motor Company announced that the Cleveland Engine Plant No. 1 will resume production and become the first Ford manufacturing site in the world to produce EcoBoost engines:
“This is a new beginning for Cleveland and the Ford Motor Company. I thank Ford management and the members of the United Auto Workers who have made this possible.
Islands, it's well known, are more vulnerable to species extinctions than continents. Could the same be true with economic extinctions? After all, as Rebecca Solnit wrote at this site, the small North Atlantic island of Iceland (pop. 320,000) went bust first in this ongoing, roiling economic crisis. Its economy had been riding high on speculative funny money for years when, in little more than a week in October, all three of its major banks cratered and the country's currency essentially ceased to have value. Not long after, Icelanders hit the streets of their capital, Reykjavik, launching protests, which have yet to end. Soon after, the government fell.
Now, the details: Treasury to give banks unlimited refills
By Kevin G. Hall | McClatchy Newspapers
Taking the wraps off its much anticipated bank-rescue plan, the Obama administration on Wednesday announced that it will provide a virtually unlimited solvency guarantee to the nation's 19 largest banks.
Shortly after Treasury unveiled details of its plan, President Barack Obama appeared before TV cameras with congressional leaders to launch what he hopes will be a quick move to replace what he called a 20th century financial regulatory system.
"This financial crisis was not inevitable," Obama said, noting that his goal wasn't to inhibit the free market but to regulate it better to prevent a repeat of the global meltdown now occurring.
Early this winter, the PBS "NewsHour with Jim Lehrer" interviewed the medical director at a community clinic in Northern California. He recalled the sight of military equipment moving along railroad tracks next to his office. "I've joked with my colleagues," Dr. David Katz said, "if we could just get one of those Abrams tanks we could probably fund all the primary care clinics for a year."
The comment didn't make it on the air - it was only included in video on a PBS Web site - and that was unfortunate. We need more public focus on what our tax dollars are buying.
Now to the day's post: All forms are made to be broken. It's been an unbroken form at TomDispatch for me to introduce each post. Sometimes, when no introductory comments spring to mind (particularly on subjects I know less about), I'll ask an author if he or she has come across a relevant news clipping or has any passing thoughts about what to write. When I asked Chip Ward the other day, he responded with an introduction so striking that I decided to turn the space over to him. And so here he is, in a site first, introducing himself. Tom]
The U.S. Economy: Designed to Fail
by Richard C. Cook | February 25, 2009
President Barack Obama showed a great deal of gumption in standing before Congress last night delivering his first speech to the joint assembly. All the trappings of power were on display as members of the House and Senate, the Supreme Court, the Joint Chiefs, the Cabinet, and the VIP guests hugged and waved at each other, radiant in their tailored attire only two nights after the Hollywood stars put on their own show on Oscar night.
Too bad neither the president, nor Vice President Joe Biden and Speaker of the House Nancy Pelosi applauding on the podium behind him, nor the jubilant Democrats with their solid majorities, nor the grumpy Republicans slouching in the minority across the aisle, know what they are doing as economic extinction stares the United States of America in the face.
When Barack Obama traveled to Elkhart, Indiana, to push his $800 billion economic recovery package two weeks ago, he made the former "RV capital of the world" a poster-child for the current economic crisis. Over the last year, as the British paper The Independent reported, "Practically the entire [recreational vehicle] industry has disappeared," leaving thousands of RV workers in Elkhart and the surrounding area out of work. As Daily Show host Jon Stewart summed the situation up: "Imagine your main industry combines the slowdown of the auto market with the plunging values in the housing sector." Unfortunately, the pain in Elkhart is no joke, and it only grew worse recently when local manufacturers Keystone RV Co. and Jayco Inc. announced more than 500 additional job cuts.