greece

Lagarde to recommend USD36.7b loan for Greece

by on March 11, 2012

menafn.com…

(MENAFN) The International Monetary Fund’s (IMF) chief, Christine Lagarde, said that she would propose a USD36.7 billion loan for Greece under the Fund’s Extended Fund Facility (EFF), reported …

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Lagarde to recommend USD36.7b loan for Greece

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Obama To Call Income Inequality ‘The Defining Issue Of Our Time’

by The Huffington Post on January 25, 2012

Huffington Post…

The president has the wealth gap on his mind. Obama will identify the need for a level economic playing field as “the defining issue of our time” in his State of the Union address Tuesday night, according to early excerpts of his speech made available to the press . “No challenge is more urgent. No debate is more important,” reads the excerpt in part. “We can either settle for a country where a shrinking number of people do really well, while a growing number of Americans barely get by. Or we can restore an economy where everyone gets a fair shot, everyone does their fair share, and everyone plays by the same set of rules.” Obama will deliver his address after decades of divergence between America’s richest citizens and everybody else. A Congressional Budget Office report recently confirmed that the gap separating the wealthiest and poorest Americans is historically large, and that the nation’s top earners have seen their incomes skyrocket in the past 30 years while paychecks for the vast majority of people have barely changed at all. The address will also take place amidst a grim season for the American economy, a time when millions of people are out of work , and millions more have jobs that don’t pay enough to boost them out of poverty . Presently, income inequality is more severe in the U.S. than almost anywhere else in the developed world — a circumstance likely related to the country’s pervasive levels of poverty and economic struggle . In confronting the dearth of economic opportunities for ordinary workers, Obama seems to be echoing — whether intentionally or unintentionally — the concerns of the Occupy movement , which cast a spotlight this autumn on the national wealth gap and the harsh conditions faced by those looking for jobs. In evidence of how thoroughly the Occupy movement saturated the national conversation, the number of times the media mentioned the phrase “income inequality” increased nearly five-fold during the first two months of the Occupy protests, according to Politico. The president is also likely playing into Americans’ concerns about the issue. Nearly three-quarters of Americans said that they think income inequality is a problem for the United States, according to an October poll conducted by The Hill . More generally, countless polls in recent months have shown that the economy and the availability of jibs are the top concerns for Americans. Evidence suggests that the income gap may be holding back a broader economic recovery, which has yet to manifest despite the Great Recession officially ending in 2009. Income equality positively correlates with economic growth , according to a September study from the International Monetary Fund. In the hours leading up to Tuesday night’s address, onlookers raised their eyebrows at the news that Debbie Bosanek, secretary of billionaire financier and occasional Obama adviser Warren Buffett, will receive a seat of honor next to Michelle Obama during the proceedings . Buffett made headlines over the summer when he argued, in a widely read New York Times op-ed, that America’s very wealthiest citizens should pay higher tax rates than many of them currently do. Buffett cited the example of his office co-workers, who he said paid a higher percentage of their income as taxes despite earning much less than him. By seating Bosanek next to the First Lady, Obama appears to be aligning himself with Buffett and others who argue that the rich are given too much freedom to stockpile their wealth. A report earlier this month from the Congressional Research Service pointed to regressive alterations in the tax code — that is, high earners paying smaller and smaller shares — as one of the major reasons for the differences in income growth during those years. The report found that between 1996 and 2006, the top 0.1 percent of tax filers experienced an almost two-fold increase in income, while the bottom 20 percent of filers saw their incomes fall by 6 percent. Here are 15 charts to illustrate what Obama has termed “the defining issue of our time”:

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Coeli Carr: The Artist Talks Loud About Innovation in Business

January 24, 2012

The Artist , this century’s newly iconic and now Oscar-nominated black-and-white silent movie, is a cautionary tale about not embracing innovation. The story, set right before and after the depression, centers on George Valentin (Oscar-nominated Jean Dujardin), a silent film star. Valentin’s popularity, which is huge, is eclipsed only by the massive size of his ego. When his studio embraces talkies, he denigrates the new technological advances and leaves the business. If pride comes before a fall, Valentin stumbles big time. Can Peppy Miller (Oscar-nominated Bérénice Bejo) — the charming female ingenue who climbs the studio ladder to achieve leading-lady status — help bring him back from the abyss? It’s easy to point fingers at poor George. He’s the CEO of his own life — a legend in his own time who did just fine with the old ways — who’s too full of himself to see the value of embracing a more encompassing movie-going experience. Eighty years later, the challenge of companies embracing innovation is just as timely as it was pre-depression. “You’re given a choice between doing something new that has risk associated with it, and doing something you know has worked in the past which has propelled you to a peak,” says David A. Owens, professor of the practice of management at Vanderbilt University who has an expertise in innovation. “And no one can nail down for you that, in fact, this new way is going to work.” Not surprisingly, the world of commerce is rife with companies that — because they had no “proof” about the new way’s success — looked the other way. Remember Kodak? One of their people built a digital camera but they couldn’t shake their belief that digital would ever displace film, Owens says. “Often the fact that chief executives can’t quantify this new thing becomes an excuse for their not doing the thing they’re most afraid of embracing,” says Owens, author of Creative People Must Be Stopped: 6 Ways We Kill Innovation (Without Even Trying) . Another factor that keeps more traditionally bound top managers from seizing innovation is the fear of losing their legacy. After all, just like The Artist ‘s Valentin, messing with the decision-making process that got you to the top is a sort of admission that your modus operandi is no longer valid. Age has nothing to do with this stuck-in-the-mud stance. “I work with many young owners of start-ups who are frustrated that their funders can’t see the value of going in a certain direction,” says Owens. “But the younger person doesn’t see that he’s just buying risk, and that the funders wants to manage that risk because it’s what they know how to do.” When this type of stalemate occurs, Owens suggests that reframing the issue can work wonders. “See the opportunity not as giving up something you had, but as a way to add something new,” he says. For example, one company might say, “If we invest in a certain technology, we’ll keep up with the competition,” says Owens. Another company, making the same investment, might say, “We’ll jump four blocks ahead the competition.” “It’s all how you frame it.” Owens will often run tests, too. “They’re fast, cheap and they deliver good information to see which way is actually better,” he says. “But it happens that some people don’t want to believe tests results that go against preconceived notions, either.” The Artist ‘s Valentin’s saving grace was undoubtedly Peppy. Coming onto the scene just as silent movies were about to disappear, Peppy was not so heavily invested in holding on the past. “Somehow she reframed Valentin’s options for him, and made him more comfortable with the risks. She framed embracing talkies not as a loss, but as a gain.”

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Olivier Blanchard: Driving the Global Economy with the Brakes On

January 24, 2012

After the speech by the IMF’s Managing Director in Berlin yesterday , my main messages on the global outlook will not surprise you. Starting with the bad news — the world recovery, which was weak in the first place, is in danger of stalling. The epicenter of the danger is Europe, but the rest of the world is increasingly affected. There is an even greater danger, namely that the European crisis intensifies. In this case, the world could be plunged into another recession. Turning to the good news — with the right set of measures, the worst can definitely be avoided, and the recovery can be put back on track. These measures can be taken, need to be taken, and need to be taken urgently. And now the numbers, starting at the epicenter: The IMF’s forecast for growth in Euro Area for 2012 is ‑0.5 percent — this marks a decrease of 1.6 percentage points relative to our September 2011 projection. In particular, we predict negative growth in Italy (‑2.2 percent) and Spain (‑1.7 percent). We have also revised downwards our forecasts for other advanced countries, although by less. Only for the United States, is our forecast unchanged at 1.8 percent. The growth outlook in emerging and developing countries is also down, at 5.4 percent, a decrease of 0.7 percent relative to our September forecast. The revision is particularly sharp in Central and Eastern Europe, reflecting their links to the Euro area. But it is also substantial in China and India, where internal factors explain most of the decrease. What are the forces behind these numbers? Most advanced economies are operating with two major brakes on. The first is fiscal consolidation . Consolidation is necessary — debt levels are very high — but, in the short run, it is clearly a drag on demand, it is a drag on growth. The second is tight credit . In many countries, particularly in Europe, banks are still weak. They are deleveraging. And, in many cases, deleveraging means tighter credit to households or firms, another drag on growth. With those brakes on, the recovery cannot be very strong, and indeed this is something you see in past financial crises. What is happening in Europe, however, is making things worse. Doubts about fiscal sustainability are leading to high yields on sovereign bonds and, in turn, doubts about bank solvency. To reassure markets, governments have felt they had to consolidate further. To reassure investors, banks have deleveraged and tightened credit. Both actions have further decreased growth, leading to a dangerous downward spiral. This explains our forecasts of negative growth for some of the Euro periphery countries, and low growth in the rest of the Euro area. Looking beyond Europe, spillovers through trade are already visible among Euro trade partners. And bouts of risk aversion and uncertainty are leading to high volatility of capital flows to emerging markets. If not contained, this downward spiral can lead to even worse outcomes, be it disorderly default or Euro exit, with major spillovers, first to the rest of the Euro area, and then to the rest of the world. In this context, the required policies are clear. These are largely a repeat of the main messages from the Managing Director Christine Lagarde’s speech yesterday . First, fiscal consolidation must proceed, but at an appropriate pace. Decreasing debt is a marathon, not a sprint. Going too fast will kill growth, and further derail the recovery. It took more than two decades to successfully decrease debt from its World War II heights. We should expect that it may take as long or longer this time. Of the essence here is a credible medium term plan, something still missing in the United States and Japan. Once such a plan is in place, in most countries, automatic stabilizers should be left to play. In some countries, slower consolidation may even be appropriate. Second, a credit crunch must be avoided. Where banks need to increase their capital ratios, they should do it through an increase in capital, rather than a decrease in credit. Recapitalization through public funds will help credit, sustain activity, and may actually improve the fiscal outlook. Third, and to the extent that they are taking the tough measures they need to take, Euro periphery countries — such as Italy or Spain — must be able to borrow at low interest rates. As many investors have left the market and are unlikely to return soon, public liquidity provision may be needed. It can be provided in various ways, by the European Central Bank, by the European Union, and by the IMF. Whichever combination is used, the available funds must be large enough to maintain low interest rates and fiscal sustainability. Our forecasts are based on the assumption that these measures will be adopted, and the euro crisis will slowly decrease in intensity. If they are not, one can fear the worst. If they are adopted decisively, the world economy may perform better than our forecast. One should be under no illusion however. Even then, the brakes will still be on, and unemployment will decrease only slowly. We have a long way to go before the world economy has fully recovered. From iMFdirect blog

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Tom Fox: Sharing Best Practices Across an Agency

January 19, 2012

Oftentimes federal workgroups innovate and/or develop best practices, but we do not share across systems. How do high-performing government agencies or private sector companies spread best practices to ensure integration? — Supervisor (GS-15), U.S. Department of Veterans Affairs Anyone who’s worked in a large organization can tell you how it is difficult to spread best practices effectively across organizational stovepipes. However, regardless of your agency’s size, geographic diffusion or IT systems, there are a number of strategies for how to best share information successfully. The most high-performing organizations I’ve worked in or witnessed develop best practices as a result of their senior leaders setting clear expectations that employees should be sharing their knowledge across their agency. While online tools are useful, the most effective way to share information is still through face-to-face contact, and our federal government has a number of avenues to help connect you with colleagues. If we take the federal IT community as an example, there are several opportunities for sharing best practices including officially sanctioned communities like the Chief Information Officers (CIO) Council , professional associations, or external networking groups like my organization’s (the Partnership for Public Service) Strategic Advisors to Government Executives program, which connects senior-level IT executives in government with their predecessors in the private sector. You might also consider building your own group within your agency. Start by talking with others who are working on similar projects and then organize a coffee or brown bag lunch to begin sharing best practices. A web-based database can be helpful in facilitating this process also, so that teams can share project-oriented best practices and lessons learned in a consistent format. If you get really ambitious, you could also work with your internal information management team to figure out the best ways of using an existing Intranet or SharePoint site as means of storing and sharing information with a broader audience. Federal managers, how have you effectively shared best practices within your agency and across the federal government? Please share your ideas by adding a comment below, or by sending an email to me at fedcoach@ourpublicservice.org . This post originally appeared on the Washington Post’s Federal Coach blog.

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Ron Ashkenas: Stop Bashing HR

January 19, 2012

Especially today , recruitment, retention, and development of human capital is a critical success factor for almost any organization. Yet the area charged with helping line managers leverage their human capital — Human Resources — is often regarded with outright disdain . Just look at a few of the comments readers made in response to a recent (and thoughtful) HBR post by Brian Hults from Newell Rubbermaid called Why HR Really Does Add Value : “I have yet to see HR add value to any organization.” “[HR] is more often an obstacle that needs to be navigated to complete real business processes.” “The fact that the author essentially advocates turning HR into something that would be called ‘strategic planning and integration’ is exhibit A as to the complete uselessness of HR…” These comments are not unusual. In many organizations, HR is perceived as inefficient, ineffective, overly bureaucratic, and incapable of contributing to results — despite the fact that its role is absolutely critical. So what’s going on? One possibility is that the criticisms could be true. Some organizations do have weak HR functions that mostly perform transactional work that doesn’t add unique value. But in my experience, and that of consultants working with dozens of firms, this level of HR incompetence is rare. The more likely reason is that people have negative experiences with transitioning HR functions. This can happen in two ways: On one front, corporations are spending millions of dollars on systems (e.g. PeopleSoft, SAP, Workday) to streamline basic HR transactions and improve HR information. Putting these new processes in place takes time, not to mention major shifts in roles and responsibilities; and it rarely goes smoothly. Simultaneously, these same firms are trying to strengthen the more strategic and consultative roles of HR — such as talent assessment, leadership development, change management, and organization effectiveness. But this also takes time, both to develop people and to build the processes necessary for them to be effective. Jeff Shuman, who heads HR and Administration for the Harris Corporation, one company that values HR as a strategic business partner, explains what it takes to get through this transition: “Five years ago, managers wanted HR to do all the employment — and talent-related work. We had to push back and make it clear that managers were accountable too for their people and that HR was there to take an enterprise-wide approach, guide, and provide tools, but not do everything employment-related for them. We then invested in technology to help managers do the basic transactions, focus the HR generalists’ role, and grew our skills in OD, leadership development, and talent. Now managers have most of the HR components they need on their desktops — employee assessments, development plans, reward and recognition reminders, and things like that. That has freed up our HR staff to help managers solve more strategic problems, identify elephants in the room, look at the human capital implications of business strategies, and challenge them to assign the best people on the most critical assignments. This took a strategic approach, and it didn’t happen overnight.” So HR’s evolution — like the one that Shuman spearheaded at Harris — does not just concern changing HR. It’s also about helping managers take more accountability for people and culture, and eventually blurring the rigid distinction between “HR” and “management.” In fact one of the key contributors to success at Harris was much greater rotation of people between HR and the line organizations. This has created an environment where there is less “HR-talk” since managers and HR people have common perspectives and language. Given the human capital challenges facing almost every organization, perhaps it’s time to ease off the HR-bashing. Instead, let’s figure out what it will take to accelerate the transition that most HR functions truly want to make, and how line managers can make the journey with them, side by side. What’s your experience with the evolution of HR? Cross-posted from Harvard Business Online .

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The Possible Winners Of A Plan To Slash Greece’s Debt

January 13, 2012

* Funds positioned for talks to succeed or fail * Part bank-owned funds among the players * Size of fund holdings may derail deal By Tommy Wilkes and Sophie Sassard LONDON, Jan 12 (Reuters) – Hedge funds are positioning to profit from a plan to slash Greece’s towering debt pile as Athens enters final talks that could sway the country’s membership of the euro. York Capital, the $14 billion fund part-owned by Swiss banking giant Credit Suisse, New York-listed Och Ziff , and $10 billion-strong Marathon Asset Management are among those who collectively may have built up sufficiently large positions to scupper the bailout deal, several sources close to the debt restructuring told Reuters. The deal asks creditors to voluntarily write down 50 percent of the notional value of their bond holdings. But hedge funds may opt out, hoping that Athens will let them get away with it to save itself political embarassment. “I think we’ll hold out. People are so slow in Europe and by the time they’ve got everything in place logistically this might be the one window where investors might be paid back in full,” said one hedge fund manager who owns Greek bonds. The stakes for Greece are high. Without the deal, the international lenders will not bail Athens out a second time, which means it will likely default around March 20, when a 14.5 billion euro bond falls due. But hoping that Greece will pay out after all looks increasingly like a dangerous strategy. According to three senior euro zone sources on Thursday, the country is likely to force all creditors into the deal. “Unless these guys are all teaming up and getting a really good law firm, I still think it’s going to be touch and go,” said one of the sources close to the talks. “I think politically it would look bad for the Greeks and the Europeans to let (a payout to hedge funds) happen… This is the exact thing the official sector hates.” Funds that have bought credit insurance on the bonds they own could gain by staying away however, if the changing of Greek bond contracts would be seen to amount to a default and trigger Credit Default Swaps (CDS). BETS ON BAILOUT? Reuters spoke to thirteen sources including hedge funds, advisors and sources familiar with current Greek debt trading, but they declined to reveal details of their strategy in the Greek debt restructuring. New York-based York Capital Management, part-owned by Swiss banking giant Credit Suisse, is among the funds to have bought Greek debt, two of the sources said. One source familiar with the firm said it owned a chunk of a Greek bond maturing in March, and was betting there would be a last minute bailout for the country. Och-Ziff Capital Management, the $28 billion fund founded in 1994 by Daniel S. Och, also has a position in Greek bonds, three sources said. Och Ziff and York declined to comment. Many funds have followed a more traditional strategy of buying the Greek bonds at distressed prices from banks keen to get the toxic paper off their books. This means that these funds might sign up to the deal, if the terms on offer are better than the price they paid for their bonds. Others might hold out, hoping enough creditors will do the same and enabling them to exact a better payout from Greece. Some 206 billion euros of Greek debt is in private hands, but it is unclear how much of that is owned by hedge funds. Up to 25 percent of private creditors have not been identified, according to one source close to the talks. DECADES OF EXPERIENCE Other firms with an interest include Madrid-based Vega Asset Management, which resigned from the committee representing private creditors in talks over the bailout last year. Founded in 1996 by former Banco Santander star trader Ravinder Mehra, Vega was once among Europe’s largest hedge funds, managing close to $12 billion before suffering outflows. Vega declined to comment. Two New York-based funds with decades of experience profiting from buying distressed debt are also involved. One is Marathon Asset Management, a member of a private sector creditor-investor committee negotiating with Greece. A $10 billion credit focused fund run by Bruce Richards, it has an emerging markets credit team which specialises in distressed corporate and sovereign debt. The other is Greylock Asset Management. It is headed by Hans Humes, who represented some $40 billion of creditor holdings during Argentina’s record-breaking restructuring, and now sits on the steering committee. Funds who have bought Greek debt in the last few months are likely to have paid anywhere between 20 and 45 cents on the euro, depending on the maturity. By signing up to the deal, which is for a 50 percent haircut, they would still make a profit.

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Is Austerity Helping Or Killing Greece’s Economy?

January 11, 2012

Deeply indebted and nearly bankrupt, this Mediterranean nation was forced to adopt tough austerity measures to slash its deficit and secure an international bailout. But as Greece’s economy slides into free fall, critics are scanning the devastated landscape here and asking a probing question: Does austerity really work?

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Ryan Mack: Year 2012: Back to Basics

January 10, 2012

Here we are in the middle of yet another bad economy. Technically it is not a recession as the GDP numbers were better than expected for the year of 2011, the Dow Jones has recovered its losses, and analysts are expecting a stronger 2012 for the banks. Yet if you ask the average Joe in the Detroit area and across the country, most are concerned about their own personal economic well-being. Is Greece going to successfully deal with their debt crisis? Is Congress ever going to function properly? Will the housing market recover? Will the banks start lending again? Will the labor market pick up pace to increase employment? All these and more are questions that loom within the minds of many across the country. However, are these questions the most appropriate questions to ask at this time? When the world seems to be in total chaos and you feel as if you are losing an economic grip, the beautiful element of financial literacy is there are always factors you can control, regardless of the economic situation. So for the year of 2012, it is time to start asking the right questions which enable us to focus on those things that we can control. Here are a few basic questions you should be asking yourself for this year: Are you spending less than you earn each month? This sounds like a simple question but most in this country are not accomplishing this task and operating their household in a deficit mode because of excessive amounts of personal debt. Don’t let another day go by this year without putting together a budget for your household that reflects less spending than your earnings. Have you done everything possible to minimize your debt? You would be surprised how few people actually take the time to assemble a strategy to eliminate their debt levels. This is the year that you must start your journey to being debt free; here are some simple steps. 1. Go to www.annualcreditreport.com and print a copy of your credit report. 2. Write down all the debt you see on your report from the largest debt on the top to the smallest. Make sure you organize the headings of each column to read the name of the creditor, telephone number, amount owed, total line of credit, interest rate, telephone number, minimum due, and any other information you feel is pertinent. 3. Call EACH creditor and attempt to negotiate both the amount owed and the interest rate. 4. With your budget you have already assembled, use any surplus to pay extra money on the smallest debt until it is completely paid off and then do the same for the next smallest debt owed. This is called the “snowballing” method. Are you ensuring more of your purchases add to your net worth rather than decrease your net worth? You should be putting yourself in a position to purchase more investments that add to your net worth, such as stocks, bonds, real estate, and savings accounts, where the interest works for you. You should be gradually eliminating as much wasteful spending as possible on items that depreciate (decrease in value), such as cars, clothes, material things and bad debt; these are items where the excessive interest works against you and your money disappears into “money heaven.” Are you doing all you can to minimize your taxes? The top 400 income earners in the country have a tax rate of less than 17% because they are very proficient in maximizing tax loopholes. You have access to loopholes as well but they mean nothing if you are not taking advantage of them. Purchasing a home, maximizing tax-deferred savings accounts and that new business that you should have started long ago are great ways to take advantage of tax advantages. Plan properly and succeed at minimizing your taxes. Is your social status more important than financial independence? This question resonates to the heart of financial literacy. Rent-A-Center preys on those who desire to look good on the outside with instant gratification, while being financially strapped because of excessive fees and interest paid for material items. The Rush Card preys on those who want to look good by using a card with a Visa logo because that gives you “status,” but those who hold it pay fees they can’t afford and more than likely don’t have a bank account which can help them accumulate wealth more effectively. Did you see the mob of people who were so desperate to purchase a pair of Jordan sneakers they trampled others upon opening the store doors? People waited in long lines for hours for the “privilege” of spending $200 for a pair of shoes that were perceived to add to their social status (and incidentally cost $5 to make.) How much time, energy, and thought have you allocated to create ways to build wealth? We must be real with ourselves in 2012. The jobs that once were will probably be never more. The companies that have been laying off have now discovered how to work more effectively with a smaller workforce by maximizing productivity from the current work pool and maximizing the use of technology. If you are amongst the unemployed, underemployed, or simply are looking for additional ways to increase streams of revenue, it is up to you to create opportunities for yourself. • If you currently have expertise in a specific area, are not looking to acquire additional skill sets but were laid off, you might consider relocating in order to find employment with a firm looking to hire someone like you. • If you are willing to invest the time and energy you might consider taking additional courses at the local community college or university to learn an entire new trade or skill set. • If you are looking to create another stream of revenue you might consider doing some research on the needs in your community and creating a business that intersects your passion in life with the needs of your community. None of these are quick, none of these are easy, none of these are without risk, and most likely you will have some setbacks. However, on the other side of your hard/smart work and effort lies empowerment for yourself and community. I recently saw a graph that outlined a few employment scenarios. According to the graph, if we duplicate the BEST jobs creating year of the 1990s we won’t return to full employment until 2017. We are in this for the long haul and there is no quick fix! The chickens have come home to roost as a result of the years of greed and excess on every level from the government, to corporations, and the people. While reality states that we will be in slow economy for some time, the bright side is that we can get out; we must, however, recognize that it will not be a quick turnaround. Let 2012 be the year where we ask the right questions, have the right mindset, and collectively do the right things that will benefit us and our communities. Let’s begin the task of righting a ship that has been going in the wrong direction far too long! Let’s get to work!

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Revenues Of U.S. States Back To Pre-Recession Levels

December 8, 2011

WASHINGTON (Lisa Lambert) – Total tax revenues of U.S. states returned to pre-recession levels in the 2011 third quarter, a public policy institute reported on Thursday, but revenue growth slowed during the period, a worrisome trend for states concerned that economic clouds are gathering as they begin drafting their budgets for next year. Total tax collections in 48 states rose by 7.3 percent in the July-to-September quarter, the Rockefeller Institute of Government reported. “After seven quarters of growth, overall state tax revenues have recovered to pre-recession figures,” said the institute. “Most states have not yet returned to peak levels, however, because those levels came several months into the Great Recession.” The institute’s study did not include data from Hawaii and New Mexico. States had experienced a slight lag from when the economic recession began in 2007 and when the fall in employment, housing prices and consumption hit their coffers. Their revenues reached record highs at the start of the recession, before plummeting in 2008. In much the same way, states are only now beginning to register the recession’s end, which officially was in June 2009, and are eager for revenues to return to the 2008 peaks. Despite the growth in revenues in the July-to-September quarter, a period that is the first fiscal quarter for most states, the rate failed to match growth in the second quarter. “This is a noticeable slowdown from the 10.8 percent year-over-year growth reported in the second quarter of 2011,” said the institute. The European debt crisis, stock market declines, and other economic troubles on the national level have states worried recent revenue improvements will not last. During the recession, their revenues fell sharply for five straight quarters, many to the lowest levels in more than 20 years. Because all states except Vermont have constitutional mandates to balance their budgets, they responded to falling revenues by hiking taxes and slashing spending, often in emergency sessions. After closing more than $500 billion budget gaps over four years, according to the National Conference of State Legislatures, they have few lifelines left. Numerous states instituted temporary tax hikes that are now expiring, and large infusions of funds from the federal government under the economic stimulus plan that helped bridge gaps ended last year. Among the 48 states in Rockefeller’s study, only Delaware, Iowa and Missouri failed to show gains in tax revenues during the third quarter. Moreover, 11 states reported double-digit growth in total tax collections. Personal income taxes, which provide the bulk of revenues for many states, grew 9.2 percent from the same quarter the year before. Sales taxes were up 3.9 percent, in the fourth consecutive quarter of growth. Illinois, Texas and Alaska had the largest rises in tax collections. In Illinois the gain was mostly fueled by legislated tax increases that took effect in January, and Alaska’s strength throughout the recession has rested on oil and mineral prices. Next month, state legislatures and governors will return to work, and to drafting the budgets for the next fiscal year. A slowdown could complicate their abilities to estimate how much money will be available to spend. A recent report by the National Governors Association and the National Association of State Budget Officers found that already 17 states are expecting budget gaps for next fiscal year totaling $40 billion. (Editing by Leslie Adler) Copyright 2011 Thomson Reuters. Click for Restrictions .

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Dean Baker: The Stop Online Piracy Act: Class War in Cyberspace

December 5, 2011

The 1 percent and their employees are masters of word play. They turned the estate tax into the “death tax,” life-saving health and environmental rules became “job-killing” regulations, and of course when it comes to taxes, the richest of the rich are now “job creators” who are supposed to be exempt from paying taxes. Given this track record, it is hardly surprising that a bill that would require every website in the country to become unpaid copyright enforcement officers for Time Warner, Disney, and the Washington Post comes packaged as the “Stop Online Piracy Act.” While the name may lead the public to believe that Congress is trying to keep our email pure and our computer screens safe, the real story is that the 1 percent are again trying to rig the rules so that they get as many dollars as possible from the rest of us. The Stop Online Piracy Act (SOPA) would place an enormous burden not just on Internet giants like Google and Facebook, but any website that allows people to post content or includes links to other sites. An owner of copyrighted material would be able to go the Justice Department and claim infringement and request that the whole site be taken down. While sites are already required to remove material that is determined to be infringing under the Digital Millennium Copyright Act, the SOPA requires that sites in effect preemptively screen material for potential infringements. If they fail, they risk having their whole site taken down for a period of time, in addition to paying damages to copyright holders. The question that serious people would ask is what problem is the SOPA intended to address? There is still plenty of money being made by online distributors of music, movies, books and software. The problem seen by the top executives at Disney and the other promoters of the SOPA is that they want to make more. A substantial amount of copyright-protected material does slip through the system, as does an even larger amount of material with ambiguous copyright status such as a home-made video with parts of a copyrighted song or material whose copyright may have expired. The big entertainment companies want to impose large costs on web intermediaries (which will be passed on to consumers) and make it more difficult for people to gain access to totally open material, in order to make them pay more money for their copyright-protected material. Although the SOPA strategy of reducing access while raising prices could fit the dictionary definition of “job-killing regulation,” its advocates have the incredible audacity to be touting the 19 million jobs at stake. People really should take a moment to look at the industry’s website to see what might well rank as the most outrageous misrepresentation of economic reality ever to appear in a Washington policy debate. The basic story is that if an industry is in any way directly or indirectly dependent on the output of a copyright-protected industry, then the jobs in that industry will be put at risk if Congress doesn’t approve the SOPA. By this methodology, all the jobs in the shipping industry will be at risk if we end the tax credit for solar power, since some of the materials used in solar panels is imported. This is patently absurd, but if you work for the 1 percent, you can get such arguments taken seriously in Washington policy circles. In reality, the higher costs that the SOPA will impose on consumers both directly, and indirectly by raising costs to intermediaries, are money out of their pocket. The additional money that will be collected by the entertainment industry is money that will not be spent in local stores or restaurants. It’s true that some of the money earned by entertainment industry will get back to writers, musicians and other creative workers, but this will be a very small amount compared with the additional cost to consumers. If we had forward thinking politicians in Washington, or economists who didn’t sell their services to the highest bidder, policy would be focused on devising more efficient mechanisms for supporting creative work. Copyright is an incredibly inefficient mechanism dating back from the 16th century. The costs of enforcement are soaring as the Internet makes it ever more difficult. This is a situation where we are relying on toll booths to pay for our roads, but it is becoming ever easier for travelers to evade the toll booths. Rather looking for alternative ways to finance road construction, we are building bigger more expensive toll booths and increasing the penalties for not paying tolls. Of course the point is to have money going to the road builders, not the people who run toll booths. There are alternative mechanisms for financing creative work. There is already a vast amount of creative and intellectual work that is not supported by copyrights. This includes work done by university faculty, work supported by non-profit organizations, and even to some extent work supported by the government. We should be looking to expand and improve these alternative mechanisms rather than turn cyberspace into a copyright protected police state. The SOPA is big government at its worst: an intrusion into the market to help the 1 percent at the expense of everyone else.

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Mohamed A. El-Erian: Prepare for a Different Financial Landscape

December 5, 2011

With the European crisis continuing to dominate the news, many people now realize that today’s global economy faces an unusually uncertain outlook. Indeed, Europe’s turmoil is but one of the multiple global re-alignments in play today. What may be less well-recognized is the extent to which specific sectors are already changing in a consequential and permanent manner. This is particularly true for global finance where volatility has increased, liquidity is evaporating, and the role of government is pronounced but inconsistent. This is a sector where the functioning of markets is changing, along with the outlook for institutions. The implications are relevant for both economic growth and jobs. The recent volatility in financial markets — be it the dizzying swings in equities around the world or the fragmentation of European sovereign bonds — far exceeds what is warranted by the ongoing global re-alignments. We are also seeing the impact of a consequential shift in underlying liquidity conditions — or the oil that lubricates the flow of the credit and the related ability of savers and borrowers to find each other and interact efficiently. Facing a range of internal and external pressures, banks seem to be limiting the amount of capital that they devote to market making. Combine this with the natural inclination of many market participants to retreat to the sidelines when volatility and uncertainty increase, and what you get is a disruptive combination of higher transaction costs, reduced trading volumes, and abrupt moves in valuations. We are also witnessing a loss of trust in instruments that many market participants — from corporations to individual investors and institutional ones — use to manage their balance sheet risks. The reduced ability to hedge current and future exposures is even forcing some to transition from using markets to manage their “net” exposures to simply reducing gross footings. Meanwhile western banks, whether they like it or not (and most do not), are now embarked on a journey — away from what some have called “casino banking” to what others label as the “utility model.” Whether in America or in Europe, banks are under enormous pressure from both the private and public sectors to become less complex, less levered, less risky and more boring. By withholding new credit, private creditors are forcing certain banks to de-lever — a process that is amplified by the sharp decline in bank stocks and the accompanying erosion in capital cushions. At the same time, the banks’ traditional global dominance is under growing competitive pressures from rivals headquartered in healthy emerging economies. The result of all this is a further, across-the-board shrinkage in the balance sheet of the western banking system. This is led by Europe where some institutions (e.g., in Greece) are also experiencing meaningful deposit outflows. After the 2008-09 debacle of the global financial crisis, governments also want their banks to be better capitalized and more disciplined. And while implementation has been both far from consistent and less than fully effective, the intention is clear: Much tighter guard rails and better enforcement to preclude any repeat of the wild west experience of over-leverage, bad lending practices, and inappropriate compensation approaches. The influence of central banks and governments are also being felt in other ways that impact the functioning and efficiency of markets. Some of the implications are visible and largely knowable while others, by their very nature, are unprecedented and therefore less predictable. For three years now, central banks have been pursuing a range of “unconventional policies,” particularly in America and Europe. The goal has been to reduce the probability of prolonged recessions and severe financial dislocations. In doing so, central banks have gone well beyond their prudential supervisory and regulatory roles. They have become important direct participants in markets — essentially using their printing presses to buy selective securities, and doing so not on the basis of the usual commercial criteria that anchor the normal functioning of markets. Market predictability is also being impacted by the erosion in the standing of sovereign risk in the western world. The cause is the twin problem of way too little economic growth and way too much debt. The effect is a less stable global financial system now that there are fewer genuine “AAA” anchoring its core. All this will translate into a very different financial landscape. The change will be most pronounced for banks. Look for western banks to be less complex, less global, somewhat less inter-connected and, therefore, less systemic. With some banks teetering on the edge, certain European governments (e.g., Greece) will have no choice but to nationalize part of their financial system. Also, with the western banking system shrinking in scope and scale, look for new credit pipes to be built around those that are now clogged. With the aim of supporting growth and jobs, particularly in longer-term investments such as infrastructure, some of these pipes will be directed or enabled by governments. Have no doubt, the financial landscape is rapidly evolving. Some of the changes are deliberately designed and implemented. Others are being imposed by the quickly changing reality on the ground. The ultimate destination is a smaller and safer financial services sector. When we get there, a better balance will be struck between private gains and the common good. Banks will be in a better position to serve the real economy without exposing it to catastrophic risk and harmful abuses. The next few months will shed light on the extent to which governments and, to a lesser extent, business leaders are able to properly orchestrate the process. The more they fall short, the less growth and fewer jobs there will be. This post was originally published at Reuters . The views expressed are the author’s own.

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Greek Workers Plan General Strike To Protest Austerity Budget

November 22, 2011

ATHENS, Greece — Greece’s two largest labor unions will hold a 24-hour general strike to protest next year’s austerity budget – the first major walkout since the appointment of an interim coalition government earlier this month. The GSEE union, which represents mainly private sector workers, and the civil servants’ union ADEDY announced the strike for Dec. 1 to protest the 2012 budget, which lawmakers are to begin debating a few days later. The unions last held a general strike in October, shutting down services across the country for two days. Greeks have held dozens of strikes and demonstrations over the past two years as their country has been gripped by a severe financial crisis that saw the government impose repeated rounds of salary cuts and tax hikes and left the country reliant on international rescue loans. “The government has changed but the unjust and ineffective policy hasn’t changed at all,” GSEE head Yiannis Panagopoulos said in a statement. “For as long as this policy, which leaves social corpses in its wake, continues, we will stand firm against it … and oppose it with any means.” Workers at the capital’s subway, tram and electric rail network held a four-hour work stoppage Tuesday to protest measures that include the suspension on partial pay of about 30,000 civil servants. Separately, members of the electricity company’s workers’ union demonstrated outside the company’s bill-issuing building in continued protests over a new property tax that has been added to consumers’ power bills. Greece’s new government, appointed earlier this month after political turmoil led to the resignation of the Socialist prime minister and his replacement with a technocrat, is negotiating the details of a second bailout, worth euro130 billion ($175 billion). It includes provisions for banks and other private holders of Greek bonds to write off 50 percent of their Greek debt holdings – potentially cutting the country’s debt by euro100 billion. The country is also desperately in need of a vital euro8 billion installment from its initial bailout agreed on in May 2010. Without it, Greece will default before Christmas and be unable to pay salaries and pensions. European leaders have insisted they receive written commitments from the government and heads of the main parties in the coalition – the majority socialists and the conservatives – before they agree to release the funds. Conservative party leader Antonis Samaras has insisted his support for the interim government and the new debt deal should be enough. Prime Minister Lucas Papademos, a former central banker and deputy head of the European Central Bank, was to head to Frankfurt later Tuesday to meet with European Central Bank head Mario Draghi, after talks with eurozone head Jean-Claude Juncker in Luxembourg. Juncker said the disbursement of the next installment – the sixth from the initial bailout – would be discussed at the next meeting of eurozone finance ministers on Nov. 29, at which the ministers could decide to release the funds. “We have expressed the view … that (we) will be given a letter from the new Greek prime minister assuring us that all the commitments will be respected,” Juncker said. He said eurozone officials want to be sure that Greece’s main political leaders back the government in its deal with international rescue creditors. “I do think that from now to next Tuesday this will happen … and that we will be able to take a decision on the sixth disbursement.” European leaders began asking for written commitments amid anger over a sudden decision by Papademos’ predecessor, George Papandreou, to put Greece’s new debt deal to a referendum. Faced with a backlash both abroad and at home, where many of his own socialist lawmakers rebelled, Papandreou withdrew the plan and eventually stepped down after agreeing with Samaras on forming a unity government. Samaras has long opposed many aspects of Greece’s austerity program, including that of taxation. He has advocated cutting taxes instead of increasing them, saying this would help stimulate growth to pull the country out of recession. He accepted to cooperate with the socialists in a joint government, but has insisted its mandate run only to February before elections are held. Juncker said there would be “a written commitment by the Greek government before the next meeting of the eurogroup.” “It’s up to the Greece government and to the leaders of the different political parties inside Greece to give us the possibility to check if yes or no there is a cross party agreement in Greece,” he said. ____ Sylvain Plazy in Luxembourg contributed.

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In Wake Of MF Global Bankruptcy, Regulator Orders Review Of All Futures Firms

November 11, 2011

WASHINGTON — Federal regulators have ordered a review of all U.S. futures trading firms after hundreds of millions of dollars in client funds went missing from MF Global, a firm run by former New Jersey Gov. Jon Corzine. The Commodity Futures Trading Commission says it wants to make sure that firms are complying with federal rules that require customers’ money be kept separate from the firms’. The CFTC also said that Commissioner Jill Sommers will lead the agency’s investigation of MF Global. There are roughly 120 U.S. firms that trade futures. The CFTC will conduct audits of the biggest firms, which include major Wall Street banks. The futures exchanges will review the rest.

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1,200 Retailers Cited For Violating Tobacco Rules

November 10, 2011

RICHMOND, Va. — The Food and Drug Administration said Thursday it has issued about 1,200 warning letters to retailers in 15 states for violating federal tobacco regulations since beginning inspections under a 2009 law giving it authority to regulate the industry. The agency’s Center for Tobacco Products, using state contractors, has conducted more than 27,500 inspections of stores selling tobacco products. It is combating underage use of tobacco products, while also seeking to reduce tobacco-related diseases, which are responsible for about 443,000 deaths a year in the U.S. “We all recognize that almost all smokers start smoking when they are kids, and those kids have to get those tobacco products somewhere,” Dr. Lawrence Deyton, director of the Center for Tobacco Products, said in an interview with The Associated Press. “The retail community really is on the front line of helping to prevent our kids from initiating tobacco use. … It’s very important for every neighborhood to know that their retailers are enforcing this new law.” Inspectors visiting retailers nationwide were looking for violations of federal laws barring the sale of cigarettes or other tobacco products to anyone under 18 years old. There are also laws against the sale of flavored cigarettes or of cigarettes in packs that contain the words like “light,” “mild,” or “low-tar.” Other laws bar retailers from selling single cigarettes, giving away free samples or promotional items like hats and T-shirts with cigarette and smokeless tobacco brands or logos. Most of the warning letters were for retailers selling tobacco to minors, who were sent into stores to make undercover purchases. Once they receive a warning letter, retailers then have 15 days to respond on how they plan to address the violations. After one violation, retailers can be fined for breaking tobacco laws during follow-up inspections. Retailers with a second violation within a year can be fined up to $250, with penalties growing to $10,000 for six or more violations within four years. They also can be banned from selling tobacco products. Over the last two years, the FDA has contracted with 37 states and the District of Columbia to do retail compliance checks with at least 20 percent of stores in each state. The data released by the agency is only for the 15 states which the agency initially contracted in fiscal year 2010. States are trained by the FDA and paid by fees charged to the tobacco companies. How much the FDA pays states to participate varies on factors including the size of their enforcement plan and how many retail locations they have in the state. The agency says the contracts total $24 million have led to more than 265 jobs. The FDA collected nearly $260 million in user fees from tobacco companies for fiscal 2009 and 2010 combined, and should collect $450 million this year. User fees will grow to $712 million by 2019. Fees are collected quarterly and based on each company’s share of the U.S. tobacco market. The agency won the authority in 2009 to regulate tobacco products, including the ability to ban certain products, regulate marketing, reduce nicotine in tobacco products and block labels such “low tar” and “light.” About 46 million Americans – one out of every five – smoke, and more than 3 percent of American adults use smokeless tobacco, according to the Centers for Disease Control and Prevention. The agency also says 17 percent of high school students smoke and 6 percent of them use smokeless tobacco. ___ Michael Felberbaum can be reached at . http://www.twitter.com/MLFelberbaum

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Fears Of Italy Default Grow As Borrowing Costs Rise

November 10, 2011

Market confidence in Italy’s ability to pay its bills faded quickly on Wednesday, and experts warn that fears of Italian default could weigh heavily on the U.S. economy as it fights against a renewed economic downturn. Interest rates on 10-year Italian bonds rose above 7 percent on Wednesday to a euro-era high, increasing by almost a full percentage point from Tuesday’s rates. While the European Central Bank may yet step in to buy Italy’s debt, allowing the nation to keep making payments on its current debt load, some economists say that it is becoming increasingly likely for Italy to default, dragging Europe and the United States into recession anew. Italian Prime Minister Silvio Berlusconi, who has failed to fulfill his promises to European leaders to slash his government’s massive debt, vowed Tuesday to step down once the Italian parliament has passed austerity measures. But that did not stop investors from demanding higher interest rates from Italy on Wednesday as fears mounted that an Italian default could freeze lending and send banks falling like dominoes. “This is exponentially more serious than Lehman Brothers,” said Bernard Baumohl, chief global economist at the Economic Outlook Group. “The exposure of the global banking system is much greater, and there is really a lack of any solution to this.” Nariman Behravesh, chief economist at the economic forecasting firm IHS Global Insight, estimated a 15- to 20-percent chance that Italy will default on its debt, which he said would cause bank runs, a credit crunch and a year-plus-long recession in Europe, leading to a recession in the United States that would send unemployment over 10 percent, he said. Investors around the world panicked in response to the spike in Italian interest rates. The S&P 500 plummeted 3.67 percent, the DAX in Germany fell 2.21 percent and the value of the euro plunged 2 percent against the dollar. Bank stocks also took a beating, as shares for Goldman Sachs fell 8.21 percent, JPMorgan Chase stocks fell 7.08 percent and Morgan Stanley shares plunged 9.01 percent. Economists say borrowing costs are a leading factor in Italy’s possible default. Beyond the nation’s staggering debt and its own economic contraction, Behravesh attributed the spike in those costs to political dysfunction in Europe. Italy will become much more likely to default, he said, if the interest rate on its debt rises above 8 percent. The wider European bank failure likely sparked by an Italian default would likely cause other troubled countries in the euro zone — such as Spain, Portugal and Greece — to miss their debt payments, some economists say, as the other nations’ higher borrowing costs make their debt burdens likewise unsustainable. Before long, the whole of Europe could be plunged into recession. And that plunge would make wider waves. At 27 percent of the global economy, the European Union is the world’s largest player, according to IHS Global Insight, and economists fear a deep recession in Europe would drag the rest of the world down, too. Baumohl said that if Italy defaults on its debt, the United States would fall back into recession because exports to Europe would slow, banks would be forced to take losses on their European loans and debt insurance, and U.S. banks would tighten lending. Behravesh said he expects the European Central Bank to come to the rescue. The ECB most likely will print more money to buy Italian bonds, he said, to allow Italy to keep financing its debt, and European leaders will probably boost the size of the European Financial Stability Facility, the euro bailout fund, to an amount that can at least calm markets. “The ECB now is the only thing standing between Europe and the precipice, so in the end the Germans will come around,” Behravesh said. Borrowing costs for Italy would fall if the country implements the necessary budget cuts and structural reforms to allow its economy to grow and make its debt burden more sustainable, said Sung Won Sohn, an economist at California State University. But Italy seems increasingly unable to address the crisis on its own. Since the country’s liberal opposition party is “very beholden to unions” and the nation is entering a recession, it would be difficult for the government to implement the structural economic reforms and budget cuts necessary to reassure investors and lower interest rates, Behravesh said. Moreover, as the Italian economy shrinks, budget cuts are likely to worsen the economy and debt burden as taxpayers’ incomes fall, he said. An Italian default would endanger French banks the most, since they have invested $106.8 billion in Italian sovereign debt, according to the Bank for International Settlements. U.S. banks have invested $12.9 billion in Italian sovereign debt, which they would lose if Italy defaults. Some economists say that it is also unlikely for Italy to abandon the euro, since the value of the Italian lira would plummet in the international markets. The rush to move Italian money elsewhere would crater the nation’s banks people, rendering the move counterproductive, said New York University economist Nicholas Economides. Stronger European economies might leave the euro if Italy defaults, however, a scenario that some economists see as more threatening. If banks holding European sovereign debt fail absent needed capital, the broader European economy would shrink sharply, endangering the stability of the euro zone as a whole, the economists warn. Behravesh said he expects European leaders to strive to avoid a scenario in which Italy leaves the euro, which would likely precipitate a series of similar departures. After borrowing costs spike for other countries, he said, the temptation for them to devalue their own currencies to have cheaper exports and a cheaper sovereign debt burden would be irresistible. “If Italy leaves, it’s all over for the European experiment, as far as I’m concerned,” Behravesh said. Reuters reported on Wednesday that German and French leaders have discussed creating a smaller euro zone made up of stronger economies. Behravesh said that while he can’t imagine that European leaders have seriously discussed removing Italy from the euro zone, such “really irresponsible” political discussions are contributing to higher interest rates for Italy. “That’s not even playing with fire,” he said. “It’s playing with dynamite.”

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Mortgage Applications Surge

November 9, 2011

Applications for U.S. home mortgages surged last week, driven by increased refinancing demand as interest rates dropped, an industry group said on Wednesday. The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, climbed 10.3 percent in the week ended Nov 4. “Treasury rates dropped last week, as renewed turmoil in Europe once again led to a flight to quality, and 30-year mortgage rates dropped to their second lowest level of the year,” Mike Fratantoni, MBA’s vice president of research and economics, said in a statement. The MBA’s seasonally adjusted index of refinancing applications rose 12.1 percent to its highest level in a month. Fratantoni said some lenders saw even bigger increases. Fixed 30-year mortgage rates dropped 9 basis points to average 4.22 percent. The refinance share of total mortgage activity rose, after declining for three weeks, to 78.6 percent of applications from 77.1 percent the week before. The gauge of loan requests for home purchases gained 4.8 percent. The survey covers over 75 percent of U.S. retail residential mortgage applications, according to MBA. (Reporting by Leah Schnurr; Editing by Leslie Adler) Copyright 2011 Thomson Reuters. Click for Restrictions .

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Eric Margolis: Zorba – Less Dancing, More Work

November 8, 2011

Why should 330 million Europeans face a financial and likely political meltdown for the sake of 11 million profligate Greeks? They should not. Just ask the angry Germans who actually believe there is no free lunch. The best thing for the Greeks and for Europe is for Greece to be asked to quietly leave the Euro club. That’s the simple, brutal solution to the current financial crisis that is threatening to tear apart the European Union and provoke a global financial crisis. As the old New York expression goes, “first loss, best loss.” Meaning, the longer one delays taking a loss, the worse it gets. Greece, let’s recall, wriggled into the 17-member Eurozone by faking its accounts and falsifying economic and tax figures. The EU closed its eyes to these frauds because of a desire to unite all of Europe. So, it seems, did Italy, which currently owes money lenders €2 trillion and must borrow €300 billion this year alone just to service its gargantuan debts. Panic over Italy’s awesome debts has now begun, as Prime Minister Silvio Berlusconi — who has done a pretty good job of managing unmanageable Italy — clings to power by his well-manicured fingernails. Unlike the EU’s mostly dreary leaders, at least “il commendatore” has style and panache. Three other nations, Romania, Bulgaria and Cyprus, were also admitted to the EU for similar bad reasons. Greek Cyprus is in the Eurozone; Romania and Bulgaria are not, though euros are widely used by both nations. Greece’s financial and political crisis has infected Europe and threatens to ignite a banking crisis as destructive and dangerous as the 2008 collapse of Wall Street’s Lehman Brothers. It’s very sad to see this disaster. For me, Greeks are delightful people: fun-loving, zesty, smart, hard-working. The problem is that many of the most capable, industrious alpha Greeks long ago decamped to the US, Canada, Australia and the Mideast to escape their corrupt governments and unfriendly business environment. Greeks own many of America’s restaurants and the world’s ships. Left behind in Greece were too many lazy public sector workers and do-nothing bureaucrats who owed their sinecures to political patronage. Dynastic political clans rotated in power, weaving Byzantine intrigues as the economy went to the dogs. Greece’s socialists and conservatives both stuffed government with supporters to buy their votes. Since few Greeks paid any taxes, Greece’s corrupt political class had to borrow from abroad to keep the lights on in Athens. Europe’s witless lemming bankers poured into higher-yielding Greek debt, heedless of the dangers, believing the old truism, “government don’t go bankrupt.” But they do. Austerity or no austerity, there is no way Greece can ever make good on its debts unless Europe uses financial smoke and mirrors to sustain its massive borrowings. Few Europeans, however, are eager to support Greece’s “dolce vita” when they themselves face growing austerity. Besides, Greece will never be able to pay off its debts from tourism and exporting olives. Kicking Greece out of the Eurozone will obviously create a huge explosion. Many Greek banks, which are also active in the Balkans and Cyprus, will go under. There will be runs on the banks by panicked Greek depositors. Greek trade will be disrupted. Russian banks will be shaken. Europe’s reckless bankers, particularly the French, will suffer major losses on Greek public and private debt. They deserve it. The banking fools who piled into Greek debt should be fired. Greece must swallow bitter medicine. Doing so is absolutely vital if the poison of too much debt is to be purged from Europe’s sickly body. Debt addiction must be broken, both in Europe and the United States. Time for cold turkey. Germany, once the scourge of Europe but now hailed as its potential savior, will have to join France in shoring up banks that are holding pots of Greek debt. Some big banks should be nationalized, if necessary. If too big to fail, they are a national security risk and must be either taken over or broken up. Now is a good time to take action. The Greek debacle should be used by governments to break the power of the bankers by imposing taxes on financial transactions, heavily taxing banker’s unseemly bonuses, and sharply limiting bank’s ability to lend more than they hold in assets. Just this past week, the shocking collapse of Wall Street trading firm MF Global showed that even after the 2008 crash, US federal regulators have utterly failed to assure the financial system’s safety. We learn that MF Global had leveraged its capital 35 or even 42 to 1, the same perilous ratio that brought down Wall Street’s titans in 2008. That means MF Global lent out or invested $35-42 for every dollar it held. That’s crazy Las Vegas behavior and a formula for disaster. In the United States and many other nations, the cost of borrowing money is tax deductible. This unwarranted subsidy to borrowers encourages the dominance of finance over manufacturing, and encourages reckless risk-taking. It has allowed big finance to buy politicians in the US, Britain and Europe. Back to the Greeks. They will be fine on their own once the poison of debt leaves their system. Greece, always a poor nation, tried to live big like North Europeans — on credit. Greeks should go back to their former slower, more modest Mediterranean ways. Bring back the dear old drachma, make Greeks work again at home, and relearn to live within their means. But then what about the Italians, Irish, Portuguese and Spaniards? That’s the 64,000 lire question. copyright Eric S. Margolis 2011

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Greece’s Policy Of Denial Helped Push It To The Brink

November 5, 2011

THE warning was clear: Greece was spiraling out of control. But the alarm, sounded in mid-2009, in a draft report from the International Monetary Fund, never reached the outside world.

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Top Regulator Decides Against Participating In MF Global Review

November 5, 2011

WASHINGTON (Christopher Doering) – The head of the U.S. futures regulator working on a sweeping review into the business practices of failed futures brokerage MF Global has said he will not be participating in any further parts of the inquiry, a source told Reuters on Friday. Gary Gensler, the chairman of the Commodity Futures Trading Commission, and Jon Corzine, who recently resigned as MF Global’s chief executive, worked at Goldman Sachs Group Inc at the same time and held prominent positions. They both left the investment bank in the late 1990s. “I don’t know if there is an official recusal but he’s said he’s not going to participate in the MFG inquiry. He’s done with it,” said a source who has participated in meetings on MF Global. Gensler has not participated in meetings during the last few days, and has chosen to not participate in the review because he doesn’t want to create an appearance of a conflict of interest, the source said. U.S. regulators have launched an investigation into MF Global as they search for more than $600 million in missing customer money. The FBI also has shown a preliminary interest in regulatory probes looking into the missing funds. MF Global filed for bankruptcy protection on Monday after risky trades on European debt triggered its collapse. The decision by Gensler comes as Republican Senator Charles Grassley on Friday called on the CFTC chief to recuse himself from matters related to MF Global. “MF Global’s case is a big collapse that requires a lot of work from the commission to try to figure out what went wrong and minimize further investor losses if possible,” Grassley said in a statement. “It’s hard to see how the commission chairman could be completely objective in looking out for wronged investors when he has such strong ties to the principal of the failed firm,” he said. (Additional reporting by Karey Wutkowski in Washington; Editing by Sanjeev Miglani) Copyright 2011 Thomson Reuters. Click for Restrictions .

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Greek Prime Minister Survives Critical Confidence Vote

November 5, 2011

ATHENS, Greece — Greek Prime Minister George Papandreou survived a confidence vote early Saturday, calming a vicious revolt in his Socialist party with an emotional pledge to step aside if necessary and seek a cross-party government lasting four months to safeguard a new European debt agreement. Papandreou won the critical parliamentary confidence motion 153-145 after a week of drama in Athens that horrified Greece’s European partners, spooked global markets and overshadowed the Group of 20 summit in the French resort of Cannes. The threat of a Greek default or exit from the common euro currency has worsened the continent’s debt crisis, which is already struggling under bailouts for Greece, Ireland and Portugal. Finance Minister Evangelos Venizelos, who warned that the debt-ridden country still faced “mortal danger,” said the new government would last until the end of February. But conservative opposition leader Antonis Samaras demanded immediate elections. He did not say whether he would join coalition talks, due to be formally launched later Saturday when Papandreou meets the country’s president. “The masks have fallen,” Samaras said. “Mr. Papandreou has rejected our proposals in their entirety. The responsibility he bears is huge. The only solution is elections.” Midway through its four-year term, Papandreou’s government came under threat after his disastrous bid this week to hold a referendum on a major new European debt agreement. The idea was swiftly scrapped Thursday after an angry response from markets and European leaders who said any popular vote in Greece would determine whether the country would keep its cherished euro membership. They also vowed to withhold a critical euro8 billion installment of loans from an existing bailout deal that Greece needs urgently to stave off an imminent and catastrophic default. Papandreou’s shock referendum gamble, and the hostile international response, horrified many of his own party stalwarts. It prompted an open rebellion with senior socialists saying they would only back the confidence vote if he pledged to seek a cross-party coalition with a mandate to secure the new debt deal and the disbursement next bailout loan installment. Struggling to face down the revolt, Papandreou insisted his only priority was to save the country. He insisted he was not concerned with retaining the premiership, but warned that elections now would have been “catastrophic,” jeopardizing Greece’s continued bailout funding, the new debt deal and the country’s euro membership. He sought the vote of confidence “to safeguard a steady course for the country – with no power vacuum, without being dragged to election,” he said. “We must proceed in an organized way. And regardless of developments, the country must be governed tomorrow without turbulence.” Several thousands supporters of Greece’s Communist Party protested outside parliament just ahead of Friday’s vote to demand elections, in a rally that ended peacefully. Government officials said they were not deterred by an initial hostile response by opposition parties to the coalition offer. “We will keep inviting (Samaras), and re-inviting him, again and again until we have a result,” Agriculture Minister Costas Skandalidis said. After seeing nearly two years of harsh austerity measures that spurred crippling strikes, violent demonstrations and street attacks against his lawmakers, Papandreou insisted the burden of painful reform could not be carried without help from opposition parties. “We, the Socialist party deputies, carried the cross of reform … But one group in Parliament is not enough,” he said. “This great task requires sincere and broad support.” Greece has been surviving since May 2010 on a first euro110 billion bailout. But its financial crisis was so severe that a second rescue was needed as the country remained locked out of international bond markets by sky-high interest rates and facing an unsustainable national debt increase. The new European deal, agreed on Oct. 27 after marathon negotiations, would give Greece an additional euro130 billion ($179 billion) in rescue loans and bank support. It would also see banks write off 50 percent of Greek debt, worth some euro100 billion ($138 billion). The goal is to reduce Greece’s debts to the point where the country is able to handle its finances without relying on constant bailouts. In return for bailout money, Greece was forced to embark on a punishing program of tax hikes and cuts in pensions and salaries that sent Papandreou’s popularity plummeting and his majority in parliament whittled down from a comfortable 10 seats to just two. ____ Associated Press writers Demetris Nellas and Nicholas Paphitis in Athens contributed to this report.

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Papandreou Survives No-Confidence Vote

November 4, 2011

George Papandreou has survived the crucial no-confidence vote on his leadership. Members of the Greek parliament returned a result of 153 to 145. The prime minister needed 151 votes to survive. The eurozone bailout package now looks certain to be passed. Tomorrow, Papandreou will meet the Greek President and request to form a coalition government. The result will raise a sigh of relief across the eurozone, particularly with the leaders at the G20 summit in Cannes, France. Had the prime minister lost the vote, Greece would have publically defaulted throwing the beleaguered eurozone project into further chaos. The much-needed tranche of bailout cash will now be paid to Greek treasury.

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Report: Greek Prime Minister Agrees To Step Down

November 3, 2011

ATHENS/CANNES, France (Reuters) – Intense European pressure forced debt-stricken Greece to seek political consensus on a new bailout plan instead of holding a referendum after EU leaders raised the prospect of a Greek exit from the euro to preserve the single currency. Fast-moving events in Athens overshadowed the first day of a summit of the Group of 20 major economies on the French Riviera on Thursday, with anxious world leaders urging Europe to act to stop contagion from its sovereign debt crisis. Greek Prime Minister George Papandreou bowed to cabinet rebels and agreed to step down and make way for a negotiated coalition government if his Socialists back him in a confidence vote on Friday, government sources told Reuters. “He was told that he must leave calmly in order to save his (PASOK) party,” one source said on condition of anonymity. “He agreed to step down. It was very civilized, with no acrimony.” Papandreou, son and grandson of left-wing prime ministers, hinted he was ready to quit for the sake of national unity, telling parliament he was not wedded to his job. G20 leaders meeting in Cannes discussed increasing the International Monetary Fund’s resources and building a financial firewall to protect vulnerable euro zone economies Italy and Spain from a possible Greek default. Papandreou said his call this week for a referendum, which sparked panic on global financial markets and infuriated European partners, “was never a purpose in itself”, and he would be happy if the vote were not held. Papandreou told PASOK lawmakers he had agreed to talks with the center-right opposition on a transitional government to implement a new EU/IMF bailout program agreed last week, and pave the way for early elections. At a bruising meeting in Cannes on Wednesday night, French President Nicolas Sarkozy and German Chancellor Angela Merkel warned him that Athens would not receive a cent more in aid until it met its commitments to the euro zone. Greece was due to get a vital 8 billion euro installment this month and says it will run out of money in mid-December if it does not get the loan. Despite the turmoil in Athens and uncertainty over the euro zone, European stock markets and the euro rallied in volatile trading as the likelihood grew that Greece would not hold the highly risky referendum. The European Central Bank also provided a surprise boost by cutting interest rates by 25 points to 1.25 percent and saying its policy of buying euro zone government bonds would continue for now with limited scope to support its monetary policy. The leaders of China, Russia and the United States pressed the Europeans to move more swiftly to contain the debt crisis, with Washington urging Germany to relent and let the ECB play a greater role in financial firefighting, G20 sources said. “Europe should aid itself. The European Union has everything for that today — the political authority, the financial resources and the backing of many countries,” Russian President Dmitry Medvedev said. Canadian Prime Minister Stephen Harper said the leaders had discussed contingency plans if Greece were to leave the euro zone, “but my expectation is that cooler heads will prevail and the package will be accepted (by Greece)”. ITALY NEXT Italy was next in the euro zone firing line, facing fierce pressure to make good on long delayed economic reforms. European G20 leaders along with U.S. President Barack Obama, IMF Managing Director Christine Lagarde and new ECB President Mario Draghi met on the sidelines to press Italian Prime Minister Silvio Berlusconi for a timetable for key labor market, pension and privatization measures, EU sources said. Berlusconi failed to win agreement from his divided center-right cabinet for the reforms just before flying to Cannes. A draft plan agreed with the G20 on Thursday includes a commitment by Italy to get its budget deficit “near balance” by 2013 and to rapidly reduce its debt-to-GDP ratio, sources told Reuters. That is less ambitious than Italy’s promise only last month to balance its budget in 2013. EU leaders are concerned that if Italy cannot get its finances in order, the economy — the eurozone’s third largest — could go the way of Greece, Ireland and Portugal in needing a bailout from the EU. GREECE REVOLT In Athens, Finance Minister Evangelos Venizelos led the revolt against Papandreou, saying Greece’s euro membership was a historic achievement and “cannot depend on a referendum”. Dissident PASOK lawmakers called for a temporary national unity government, which some suggested could be led by former ECB vice-president Lucas Papademos. Signaling for the first time a will to compromise, opposition leader Antonis Samaras called for a transitional government to lead Greece to early elections within weeks and said parliament should first ratify last week’s 130 billion euro ($178 billion) bailout deal. European Union leaders have long called for national unity in support of painful austerity measures required to cut the country’s crippling debt, expected to reach 160 percent of gross domestic product this year. Sarkozy told a news conference the tough message delivered by France and Germany to Greece’s political class was starting to bear fruit. “Things are progressing,” he said, welcoming Samaras’ support for the bailout plan. Euro area leaders talked openly of a possible Greek exit from the 17-nation currency area, seeking to maximize pressure on Athens and preserve the euro in case of a “no” vote. Merkel repeated that the stability of the euro had priority for Germany over Greece’s euro membership, touching a popular nerve at home. Germany’s best selling Bild newspaper railed against Greece and demanded it be ejected from the euro. A telephone poll found 86 percent of Germans want Greece out of the currency. The chairman of euro zone finance ministers, Luxembourg Prime Minister Jean-Claude Juncker, said policymakers were working on possible scenarios for a Greek exit. The specter of a possible hard Greek default and euro exit hung over the G20 summit, highlighting Europe’s frailty and divisions just when Sarkozy had hoped to showcase his leadership of the world’s major economies. The summit had been meant to focus on reforms of the global monetary system and steps to rein in speculative capital flows and regulate commodities markets, but the shockwaves from Greece upended the talks. Obama said Europe had taken some important steps toward a comprehensive solution to its debt crisis but now needed to flesh out and implement the plan quickly. A disorderly Greek default would reverberate across the euro zone, engulfing big economies like Italy and Spain, and potentially plunging the global economy into a recession. CREDIT LINES? Euro zone finance ministers are working to accelerate implementation of an anti-crisis package agreed on October 27. That plan, which includes debt relief for Greece, a recapitalization of European banks and a leveraging of the bloc’s rescue fund, was meant to stem the two-year old crisis before Papandreou’s referendum call cast the bloc into turmoil. Officials said the meeting focused on speeding up the creation of a firewall to protect other vulnerable euro zone states from the fallout from Greece. The risk premium on Italian bonds over safe-haven German Bunds has hit euro-lifetime highs this week, despite European Central Bank buying of its bonds. Spain had to pay its highest yield since 2008 at a bond auction on Thursday. The G20 is considering an IMF proposal to create a new short-term line of credit to help countries that are facing economic shocks beyond their control, a G20 official familiar with the talks said. British finance minister George Osborne said leaders discussed increasing the global lender’s resources, which China strongly backed, and he had heard no dissenting voices. (Additional reporting by Lefteris Papadimas in Athens, David Ljungren, Abhijit Neogy, Giselda Vagnoni, Catherine Bremer, Gernot Heller, Daniel Flynn, Luke Baker, Gui Qing Koh and Alexei Anischuk in Cannes; Writing by Paul Taylor; Editing by Janet McBride) Copyright 2011 Thomson Reuters. Click for Restrictions .

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Greece Threatened With Eurozone Expulsion

November 3, 2011

CANNES, France — European leaders drew a line in the sand for Greece on Wednesday, saying its referendum on a hard-won bailout deal will decide whether it stays in the eurozone – and vowing Athens will not get new aid until the result is in. The acknowledgment that the vote – which will likely take place on Dec. 4 – could see Greece leaving the currency union is the first official admission that such an exit is possible and follows almost two years of pledges to the contrary. The move to tie the vote to the fate of the euro is a huge gamble that could endanger the future of the currency union, the centerpiece of Europe’s postwar unity, and potentially push the world economy into another recession. “The referendum … in essence is about nothing else but the question, does Greece want to stay in the eurozone, yes or no?” German Chancellor Angela Merkel said at a news conference together with French President Nicolas Sarkozy. The leaders of the two biggest eurozone economies spoke to the press after emergency talks with Greek Prime Minister George Papandreou in Cannes, France. The discussion also included International Monetary Fund head Christine Lagarde and other top EU and eurozone officials. By turning the referendum into a popular vote on whether Greece wants to remain in the eurozone – the currency union that gave it access to the club of Europe’s richest countries but also allowed it to pile up a massive debt mountain – leaders are taking a risky bet. The exit of the eurozone’s weakest member could trigger a dangerous domino effect that could quickly see Ireland and Portugal, the other two countries that have received bailouts, also leave the currency bloc and cause the financial collapse of Italy and Spain, which are barely hanging on. Papandreou said that he was forced to call a referendum after it became clear that there was no “broad support” from opposition parties for a bailout deal reached with the rest of the eurozone and big banks just a week ago. That deal would supply Greece with an extra euro100 billion ($138 billion) in rescue loans from the rest of the eurozone and the IMF – on top of the euro110 billion it was granted a year ago – and would see banks forgive Athens 50 percent of the money it still owes them. However, in return Greece had to accept another painful round of austerity measures and privatizations – harboring years of more pain for a people already reeling from two years of deep cuts. “I felt that it was important that the Greek people make a decision on these important developments,” Papandreou said. “It is their democratic right and the Greek people, I believe, are mature and wise to make the decision that is to the benefit of the Greek people and the country.” The alternative to the new rescue deal would be a hard default by Greece within days after the referendum, potentially toppling banks across Europe and further undermining an already slowing economic recovery. Europe’s increasingly shaky condition is the center of attention at a summit of the Group of 20 leading world economies in Cannes on Thursday and Friday. The United States, China and other nations are looking to Europe to get its house in order and avoid harming the global recovery. The United States has an important role to play but it is ultimately Europe’s problem to solve, the White House said Wednesday as President Barack Obama headed for Cannes. Merkel and Sarkozy said that a crucial euro8 billion ($11 billion) loan installment to Greece that was due to be paid out by mid-November won’t be transferred until after the vote. Eurozone finance ministers had already signed off on their part of the payment two weeks ago, but leaders said that without the second bailout assured there was no point in carrying on with the first one. “We want to continue with the Greeks but there are rules and it’s unacceptable that these rules are not followed,” Sarkozy told journalists. Papandreou said that Greece would be able to stay afloat until after the referendum – Greek officials had previously said that Athens would run out of money by mid-November – but acknowledged that the schedule was tight. “If everything goes well – which we hope everything will go well in the referendum – it’s quite a few days before the 6th tranche is needed to pay up salaries and pensions and so on,” he said on his way out of the meeting. While eurozone leaders tried to display a concerted front, with Merkel and Sarkozy briefing the press in their now habitual tandem, the referendum is uncovering growing cracks in the eurozone’s unity. “This did not happen in a coordinated fashion,” she said of Papandreou’s sudden decision to call a vote on the bailout deal. Merkel said that because of the referendum, the rest of the currency union now had to build up its defenses more quickly. To make progress in that direction the finance ministers of France and Germany will meet with the EU’s Monetary Affairs Commissioner Olli Rehn Thursday to work on a plan to boost the firepower of the region’s bailout fund to euro1 trillion ($1.4 trillion). That was one of the commitments of last week’s eurozone summit, but investors remained unconvinced by the promise of a larger rescue fund as many questions on how it will work were left unanswered. In Rome on Wednesday, Italy’s Cabinet proposed legislation to sell off government-owned real estate, encourage investment in infrastructure and privatize local public companies in a bid to avoid becoming the next victim of Europe’s debt crisis. While Merkel and Sarkozy both stressed the democratic right of the Greek people to decide its own destiny, Jean-Claude Juncker, the prime minister of Luxembourg and chairman of the Eurogroup, was more direct. “Greece had 8 billion – Greece has lost 8 billion after having made a decision to put all these questions to a referendum,” he told journalists. “That’s a pity.” ___ Angela Charlton and Jamey Keaten contributed to this report.

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Facebook Facing Property Tax Dispute In Oregon

October 31, 2011

SALEM, Ore. — The promise of lucrative tax breaks helped persuade Facebook to build a data center in one of Oregon’s most economically depressed counties. Now, the state and the company are in a dispute over how much Facebook may owe in property taxes, and the social networking giant fears it could be taxed on intangible assets like the value of its powerful brand. Facebook has said the state’s action has the potential to rewrite an economic development deal it cut with Crook County, but not even state tax officials seem to know for sure whether the company is overreacting or it’s truly facing a tax surprise. Facebook chose Prineville in central Oregon as the site of its first company-owned data center, where a collection of servers stores and transmits photos, links and status updates for many of the social networking service’s 800 million users. The facility employs 55 people and expansion plans are already in the works. Such “server farms” are popping up around the world to facilitate a voracious appetite for high-bandwidth applications like streaming video and cloud-based computing. Facebook chose Prineville based in part on the tax breaks, but also because of the cool and dry high-desert climate that helps reduce the amount of energy needed to cool rows of humming computers. The company this week announced plans to build its first data center outside the U.S. in Sweden near the Arctic Circle. It’s also expanding a facility in North Carolina. Google Inc. last month opened a data center in Oklahoma, and Microsoft Corp. recently announced it will expand a facility in Iowa. Many of the projects have benefited from tax incentives offered by local governments eager to lure high-paying jobs. Officials in Crook County, where unemployment reached a high of 18.7 percent in June 2009 and still sits above 15 percent, hoped Facebook’s decision to build in Prineville would help incubate a new industry for a region decimated economically by the decline of Oregon’s timber industry. Under its agreement with local officials, Facebook built its data center in a rural enterprise zone, allowing the Palo Alto, Calif., company to pay property taxes only on its land, not on its buildings and other assets, for 15 years. Confusion arose when the state Department of Revenue asserted that Facebook is a utility company because it’s involved in the communications business, and its taxes should therefore be assessed by the state under a different section of the tax code. Oregon lumps Facebook with 75 other corporations classified as cable and Internet companies. Many of them are television and Internet access providers, but the list includes technology companies including Google, Microsoft, Yahoo Inc. and AOL Inc. State officials say their decision doesn’t change Facebook’s tax bill – about $26,000 this year – and the money still goes to local governments in Crook County. But Facebook is concerned that the state will someday try to tax the company based on the value of its intangible assets, perhaps including computer files, patents, its labor force and goodwill. The company says state tax officials sent a letter in August saying, in part, that Oregon law requires the Department of Revenue “to assess any property, real and personal, tangible or intangible.” Investments this year have pegged Facebook’s total value at as much as $50 billion. Tax officials say the company’s Oregon property taxes are calculated based only on the share of its business that is tied to the state. Last week, tax authorities told the Bend Bulletin newspaper that Facebook would be taxed on $25 million in assets, leading to an annual property tax bill of $390,000. The next day, authorities said they made a mistake and backtracked, pegging Facebook’s taxes at $26,000 on $1 million in assets. After a public kerfuffle last week, Facebook and state officials have tightened their lips. They say they’re researching the complicated tax laws involved and won’t have more to say until they wade through them. “We are looking forward to receiving further clarification as to the Department of Revenue’s policies, so that the data center industry in Central Oregon can move forward,” Facebook said in a statement. The dispute has concerned Roger Lee, director of Economic Development for Central Oregon, who said murkiness surrounding taxation makes companies nervous. “Companies want some type of certainty to be able to proceed in whatever they’re doing,” Lee said. “This provides a great deal of uncertainty and ambiguity.” People involved say it’s unclear what a final agreement might look like, but it could involve new legislation next year, a definitive legal opinion from the state Department of Justice, or litigation in tax court. The dispute has risen to the governor’s office, where aides have tried to intervene. “We are researching the issues to be able to provide clarity to all parties,” said Tim Raphael, a spokesman for Gov. John Kitzhaber.

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Robert Reich: The Wall Street Occupiers and the Democratic Party

October 9, 2011

Will the Wall Street Occupiers morph into a movement that has as much impact on the Democratic Party as the Tea Party has had on the GOP? Maybe. But there are reasons for doubting it. Tea Partiers have been a mixed blessing for the GOP establishment — a source of new ground troops and energy but also a pain in the assets with regard to attracting independent voters. As Rick Perry and Mitt Romney square off, that pain will become more evident. So far the Wall Street Occupiers have helped the Democratic Party. Their inchoate demand that the rich pay their fair share is tailor-made for the Democrats’ new plan for a 5.6 percent tax on millionaires, as well as the President’s push to end the Bush tax cut for people with incomes over $250,000 and to limit deductions at the top. And the Occupiers give the President a potential campaign theme. “These days, a lot of folks who are doing the right thing aren’t rewarded and a lot of folks who aren’t doing the right thing are rewarded,” he said at his news conference this week, predicting that the frustration fueling the Occupiers will “express itself politically in 2012 and beyond until people feel like once again we’re getting back to some old-fashioned American values.” But if Occupy Wall Street coalesces into something like a real movement, the Democratic Party may have more difficulty digesting it than the GOP has had with the Tea Party. After all, a big share of both parties’ campaign funds comes from the Street and corporate board rooms. The Street and corporate America also have hordes of public-relations flacks and armies of lobbyists to do their bidding — not to mention the unfathomably deep pockets of the Koch Brothers and Dick Armey’s and Karl Rove’s SuperPACs. Even if the Occupiers have access to some union money, it’s hardly a match. Yet the real difficulty lies deeper. A little history is helpful here. In the early decades of the twentieth century, the Democratic Party had no trouble embracing economic populism. It charged the large industrial concentrations of the era — the trusts — with stifling the economy and poisoning democracy. In the 1912 campaign Woodrow Wilson promised to wage “a crusade against powers that have governed us … that have limited our development … that have determined our lives … that have set us in a straightjacket to so as they please.” The struggle to break up the trusts would be, in Wilson’s words, nothing less than a “second struggle for emancipation.” Wilson lived up to his words — signing into law the Clayton Antitrust Act (which not only strengthened antitrust laws but also exempted unions from their reach), establishing the Federal Trade Commission (to root out “unfair acts and practices in commerce”), and creating the first national income tax. Years later Franklin D. Roosevelt attacked corporate and financial power by giving workers the right to unionize, the 40-hour workweek, unemployment insurance, and Social Security. FDR also instituted a high marginal income tax on the wealthy. Not surprisingly, Wall Street and big business went on the attack. In the 1936 campaign, Roosevelt warned against the “economic royalists” who had impressed the whole of society into service. “The hours men and women worked, the wages they received, the conditions of their labor … these had passed beyond the control of the people, and were imposed by this new industrial dictatorship,” he warned. What was at stake, Roosevelt thundered, was nothing less than the “survival of democracy.” He told the American people that big business and finance were determined to unseat him. “Never before, in all our history, have these forces been so united against one candidate as they stand today. They are unanimous in their hate for me, and I welcome their hatred!” By the 1960s, though, the Democratic Party had given up on populism. Gone from presidential campaigns were tales of greedy businessmen and unscrupulous financiers. This was partly because the economy had changed profoundly. Postwar prosperity grew the middle class and reduced the gap between rich and poor. By the mid-1950s, a third of all private-sector employees were unionized, and blue-collar workers got generous wage and benefit increases. By then Keynesianism had become a widely-accepted antidote to economic downturns — substituting the management of aggregate demand for class antagonism. Even Richard Nixon purportedly claimed “we’re all Keynesians now.” Who needed economic populism when fiscal and monetary policy could even out the business cycle, and the rewards of growth were so widely distributed? But there was another reason for the Democrats’ increasing unease with populism. The Vietnam War spawned an anti-establishment and anti-authoritarian New Left that distrusted government as much if not more than it distrusted Wall Street and big business. Richard Nixon’s electoral victory in 1968 was accompanied by a deep rift between liberal Democrats and the New Left, which continued for decades. Enter Ronald Reagan, master storyteller, who jumped into the populist breach. If Reagan didn’t invent right-wing populism in America he at least gave it full-throated voice. “Government is the problem, not the solution,” he intoned, over and over again. In Reagan’s view, Washington insiders and arrogant bureaucrats stifled the economy and hobbled individual achievement. The Democratic Party never regained its populist footing. To be sure, Bill Clinton won the presidency in 1992 promising to “fight for the forgotten middle class” against the forces of “greed,” but Clinton inherited such a huge budget deficit from Reagan and George H.W. Bush that he couldn’t put up much of a fight. And after losing his bid for universal health care, Clinton himself announced that the “era of big government” was over — and he proved it by ending welfare. Democrats have not been the ones to engage in class warfare. That was the distinct product of right-wing Republican populism. Anybody recall the Republican ad in the 2004 presidential election describing Democrats as a “tax-hiking, government spending, latte-drinking, sushi-eating, Volvo-driving, New York Times -reading, body-piercing, Hollywood-loving, left-wing freak Show?” Republicans repeatedly attacked John Kerry as a “Massachusetts liberal” who was part of the “Chardonnay-and-brie set.” George W. Bush mocked Kerry for finding a “new nuance” each day on Iraq — drawing out the word “nuance” to emphasize Kerry’s French cultural elitism. “In Texas, we don’t do nuance,” he said, to laughter and applause. House Republican leader Tom DeLay opened his campaign speeches by saying “Good morning or, as John Kerry would say, Bonjour.” The Tea Party has been quick to pick up the same class theme. At the Conservative Political Action Conference of 2010, Minnesota Governor Tom Pawlenty attacked “the elites” who believe Tea Partiers are “not as sophisticated because a lot of them didn’t go to Ivy League Schools” and “don’t hang out at … Chablis-drinking, Brie-eating parties in San Francisco.” After his son Rand Paul was elected for Kentucky’s Senate seat that May, Congressman Ron Paul explained that voters want to “get rid of the power people who run the show, the people who think they’re above everyone else.” Which brings us to the present day. Barack Obama is many things but he is as far from left-wing populism as any Democratic president in modern history. True, he once had the temerity to berate “fat cats” on Wall Street, but that remark was the exception — and subsequently caused him endless problems on the Street. To the contrary, Obama has been extraordinarily solicitous of Wall Street and big business — making Timothy Geithner Treasury Secretary and de facto ambassador from the Street; seeing to it that Bush’s Fed appointee, Ben Bernanke, got another term; and appointing GE Chair Jeffrey Immelt to head his jobs council. Most tellingly, it was President Obama’s unwillingness to place conditions on the bailout of Wall Street — not demanding, for example, that the banks reorganize the mortgages of distressed homeowners, and that they accept the resurrection of the Glass-Steagall Act, as conditions for getting hundreds of billions of taxpayer dollars — that contributed to the new populist insurrection. The Wall Street bailout fueled the Tea Party (at the Utah Republican convention that ousted incumbent Republican Senator Robert Bennett in 2010, the mob repeatedly shouted “TARP! TARP! TARP!”), and it surely fuels some of the current fulminations of Occupy Wall Street. This is not to say that the Occupiers can have no impact on the Democrats. Nothing good happens in Washington — regardless of how good our president or representatives may be – unless good people join together outside Washington to make it happen. Pressure from the left is critically important. But the modern Democratic Party is not likely to embrace left-wing populism the way the GOP has embraced — or, more accurately, been forced to embrace — right-wing populism. Just follow the money, and remember history. Robert Reich is the author of Aftershock: The Next Economy and America’s Future , now in bookstores. This post originally appeared at RobertReich.org .

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Moody’s Downgrades Eight Greek Banks On Exposure To Government Bonds

September 23, 2011

ATHENS, Greece — Moody’s ratings agency downgraded eight Greek banks by two notches Friday due to their exposure to Greek government bonds and the deteriorating economic situation in the country, whose government has struggled to meet the terms of an international bailout. Moody’s Investors Service downgraded National Bank of Greece, EFG Eurobank Ergasias, Alpha Bank, Piraeus Bank, Agricultural Bank of Greece and Attica Bank to CAA2 from B3. It also downgraded Emporiki Bank of Greece – which is majority owned by French bank Credit Agricole – and General Bank of Greece – majority owned by another French bank, Societe Generale – to B3 from B1. The agency said the outlook for all the banks’ long-term deposit and debt ratings was negative. Shares on the Athens Stock Exchange plunged, with the general price index shedding 4.6 percent in afternoon trading to dip below the 800 mark at 791.7 points. Bank shares were down by more than 8 percent. Moody’s cited “the expected impact of the deteriorating domestic economic environment on non-performing loans” and “declines in deposit bases and still fragile liquidity positions” in its reasoning for the downgrade. Greece has been kept solvent by a euro110 billion ($149 billion) bailout in 2010 from other eurozone countries and the International Monetary Fund. But it has needed another massive bailout this summer, and has angered international creditors by lagging behind in its commitments to implementing reforms and carrying out pledges. European officials have begun to speak openly of the possibility of a Greek default, and the fears have further roiled international markets. A Greek default could send shockwaves through the eurozone banking system and the global economy. European officials have tried to prevent one because it could mean losses for banks that hold Greek government bonds and prompt speculation that other governments with shaky governments could face increasingly acute funding pressures. Dutch central bank president Klaas Knot said he could no longer rule out the possibility that the country will be unable to pay back its debts. “I won’t say that Greece cannot default,” Knot said in an interview with Dutch newspaper Het Financieel Dagblad, published Friday. Knot, who recently became president of De Nederlandsche Bank, is also a European Central Bank governing council member. The ECB has insisted Greece must stick with its bailout plan and has opposed default as a solution. “I have long been convinced that a default is not necessary,” Knot said. “But the news from Athens is sometimes not encouraging. All efforts are aimed at preventing this, but I am now less positive in ruling out a default than I was a few months ago.” Greek bondholders have already agreed to take a 21 percent loss on the value of their investments in a swap for new bonds. That loss is relatively mild by the standard of government defaults, which often inflict losses of 50 percent or more. But some economists say the current swap arrangement does not give Greece enough debt relief. Greece needs an euro8 billion ($11 billion) bailout installment by mid-October to keep from defaulting on its massive debts as it moves into a fourth year of recession. Debt inspectors from the IMF, ECB and European Commission, collectively known as the troika, are due back in Athens next week to complete their review of Greece’s progress and make a recommendation on whether it should receive the next loan installment. To secure the money, the government this week announced another round of tax hikes and pension cuts, angering an already austerity-weary public. Metro, tram and train workers in Athens went on strike Friday, while all public transport workers and taxi drivers are to hold a 48-hour strike next week. However, an Athens court ruled a 24-hour air traffic controllers’ strike set for Sunday was illegal, meaning flights will operate normally over the weekend. A nationwide general strike is set for Oct. 19. Moody’s said despite its downgrade, it “recognized the continued potential for the Troika to extend systemic support to the Greek banks in case of need,” as well as the potential of a Greek financial stability fund to do the same. This “results in a one notch of uplift in the senior debt and deposit ratings of the domestically owned banks from their standalone credit strength,” the agency said. After more than a year and a half of repeated rounds of austerity measures that have included salary and pension cuts in the public sector and waves of tax hikes, Greece has found itself in the grips of a major recession, with its chances of returning to growth next year all but out of reach. The government insists it hopes to post a primary surplus – spending less than it earns before taking interest rates on outstanding debt into account – next year. Moody’s pointed out that Greece’s economy contracted 7.3 percent year-on-year in the second quarter of this year, while unemployment has risen to more than 16 percent. This, it said, also affected the potential benefits of the announced merger of Greece’s second and third largest lenders, EFG Eurobank Ergasias and Alpha Bank. While the merger “has some potential positive elements for the credit standing of the future joint entity … Moody’s believes that these are offset by the currently fragile operating environment,” the agency said. ____ Mike Corder in The Hague contributed.

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Fed Launches Stimulus To Abate ‘Continuing Weakness’ In Labor Market

September 21, 2011

WASHINGTON (Reuters) – The Federal Reserve on Wednesday dialed up its aid to the beleaguered U.S. economy, launching an effort to put more downward pressure on long-term interest rates over time and help the battered housing sector. The Fed said it would launch a new $400 billion program that will tilt its $2.85 trillion balance sheet more heavily to longer-term securities by selling shorter-term notes and using those funds to purchase longer-dated Treasuries. It will now also reinvest proceeds from maturing mortgage and agency bonds back into the mortgage market, an acknowledgement of just how weak conditions in the sector have remained. “Recent indicators point to continuing weakness in overall labor market conditions, and the unemployment rate remains elevated,” Fed said in its statement. Faced with a lofty 9.1 percent jobless rate, consumer and business confidence sapped by a troubling U.S. credit downgrade, and an escalating sovereign debt crisis in Europe, Fed officials have signaled they would seek to prevent already sluggish U.S. growth from weakening further. But even as Fed Chairman Ben Bernanke has indicated the central bank’s reluctance to stay on the sidelines, Fed activism has become a punching bag for politicians as an election year nears. Top Republican congressional leaders wrote to Fed Chairman Ben Bernanke this week urging the central bank to desist from further economic interventions, echoing criticism voiced by Republican presidential candidates in recent weeks. Fed officials, however, believe that by shifting their bond holdings they could encourage mortgage refinancing and push investors into riskier assets, such as corporate bonds and stocks, without stoking a run-up in consumer prices. The U.S. central bank is not alone in its concerns. The Bank of England on Wednesday signaled it was ready to pump more money into the weakening British economy, potentially as soon as October. Similarly, the Norwegian central bank held its main interest rate unchanged and signaled it might refrain from rate increases for longer than previously expected due to a weaker global economy and the euro zone debt crisis. The U.S. economy grew at less than a 1 percent annual rate over the first half of the year and analysts have warned of a heightened risk of recession. A report showing U.S. employers added no new jobs on net in August provoked widespread fear growth could stall. The Fed has already embarked far down one of the most aggressive monetary easing paths on record. It cut overnight interest rates to near zero in December 2008 and then moved to more than triple its balance sheet to $2.8 trillion through a series of bond purchases. After its last meeting on August 9, the Fed said it expected to hold rates at rock-bottom levels at least through the middle of 2013, a decision that drew three dissenting votes. BROOKING DISSENT The International Monetary Fund warned on Tuesday that the United States could fall back into recession if the government tightened its budget too quickly. It recommended the Fed consider a further easing of monetary policy as long as there was no sign an inflationary psychology taking root. The Fed has already embarked far down one of the most aggressive monetary easing paths on record. It cut overnight interest rates to near zero in December 2008 and then moved to more than triple its balance sheet to $2.8 trillion through a series of bond purchases. After its last meeting on August 9, the Fed said it expected to hold rates at rock-bottom levels at least through the middle of 2013, a decision that drew three dissenting votes. Critics claim the easing campaign has failed to produce results and warn it could actually cause damage. “We have serious concerns that further intervention by the Federal Reserve could exacerbate current problems or further harm the U.S. economy,” Republican congressional leaders wrote in the letter to Bernanke, which they released on Tuesday. The central bank’s policies have become a topic on the presidential campaign trail as well. Texas Governor Rick Perry, a leading Republican candidate, said any further Fed money printing would be “almost treacherous, treasonous.” Copyright 2011 Thomson Reuters. Click for Restrictions .

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America’s Poorest States

September 15, 2011

From 24/7 Wall St.: The U.S. Census Bureau released two pieces of widely followed data Tuesday — one on poverty and the other on median income for 2010. The most interesting findings in this release were the state-by-state figures, especially when compared to national averages. A closer look at the statistics shows that a relatively small number of states suffer such widespread levels of low income and poverty that they skew the national numbers downward. The national poverty rate last year was 15.1%. That is up from 11.3% in 2000 and is the highest it has been since 1993. Over 46 million people lived below the poverty line in 2010. The cut-off for that line is households of four people who made under $22,314. The other troubling news was that median income per household nationwide was an inflation-adjusted $49,445. This is about the same as in 1989 and down 2.3% from 2009. Economists fear that Americans are not consumers. It is easy to tell why when their real income has been frozen in place for more than two decades. The problems of poverty and low income are as much local as national. The poverty rate is 21% in Mississippi. The state also has the lowest median income at $36,850. Mississippi is among the states with the worst education systems, highest obesity levels, highest unemployment, and lowest rates of health insurance coverage. The state is an economic black hole, and it shows in the way people suffer there. And, as is true with black holes, it is nearly impossible for the residents of Mississippi to escape their difficult financial situations. There is a dearth of federal programs that target specific states and cities based on local economic need. 24/7 Wall St. reviewed census data from all 50 states on median income, poverty rates, unemployment, and lack of health insurance. We then identified the ten states that have the lowest median income. We also looked at why low-income households are concentrated in these states and what, in some cases, has been done to reverse the difficult situations. These are the poorest states in America, according to 24/7 Wall St. :

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German FDP calls delay in Greek talks blow to euro

September 3, 2011

BERLIN (Reuters) – The interruption of talks between Greece and international lenders on a new aid tranche is a blow to the stability of Europe’s currency, the deputy leader of Germany’s junior coalition partners said on Saturday. Christian Lindner, general secretary of the Free Democrats, (FDP) junior coalition partners in Chancellor Angela Merkel’s center-right government, said Athens was endangering European solidarity. “The breakdown of talks between the Troika and Greece is a blow to the stability of the euro,” he said at a news conference in Berlin. Referring to Greece’s failure to meet deficit targets set in exchange for a second bailout package, Lindner said Athens was shirking responsibilities to which it had agreed. “This is not about non-binding statements of intent, but contractually secured reciprocity for the emergency loans,” he said. “We insist these agreements are observed.” Talks between Greece and the EU, IMF and ECB were put on hold on Friday after disagreement over why Athens has fallen behind schedule in cutting its budget deficit and what it must do to catch up. The unplanned early departure of senior inspectors from the three bodies showed tension between Athens and its lenders over reforms, as clouds gathered over the second bailout package aiming to pull the country out of a severe debt crisis. The pro-business FDP styles itself as a defender of the German taxpayer, a stance Lindner reiterated in his statement over Greece. “Taxpayers in Northern Europe and especially Germany cannot accept inability or reluctance. In the eyes of the FDP, Greece must reaffirm it will for stability and reform.” “Mediation or postponements are no longer acceptable for us. The heads of the IMF and euro countries should therefore travel to Athens immediately to obtain binding declarations toward the fulfillment of the agreed goals.” (Reporting by Brian Rohan)

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Top Greek banks merger to boost banking system

August 28, 2011

(MENAFN) Greece’s Vima Weekly News reported that two of the country’s top lenders are planning to announce a merger this week that would give a vital confidence boost to the debt-hit country’s …

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Fernando Espuelas: Why Republicans Can’t Say Yes to Obama

July 20, 2011

So it’s not about the deficit after all. For months we’ve heard the increasingly shrill alarms being sounded by supposedly sober-minded Republican Congressional leaders that America is the next Greece — balancing carefully over a debt precipice, destruction inevitable unless radical action is taken. These alarms have been so effective that the true nature of our national crisis — chronic unemployment at unacceptably high levels, overall slack economic demand — has been relegated to a secondary plane of importance. Some 20 million people unemployed or under employed are not just a human tragedy but a major contributor to our still under-performing economy. The GOP trope that the federal government deficit is somehow responsible for high unemployment defies common sense and basic economics. Yet this fallacy is repeated often and loudly as if it were a proven fact. Meanwhile, the chairman of the Federal Reserve recently told Congress that the Fed is ready to take even more aggressive action — read some massive stimulus — if the economy falters. So we come to the intransigence of Republican “negotiators” trying to hammer out some compromise to raise the debt ceiling with the Democrats. It would seem that these elected leaders’ responsibility to the country, their oaths of office, is seemingly trumped by their religious oath to Grover Norquist, the founder of special interest group Americans for Tax Reform and the godfather of the “all taxes are evil” movement, to never raise taxes regardless of the economic conditions This fetishistic oath, seemingly sworn and signed in blood, has kept the Republicans from saying “yes” to President Obama’s offer for raising the nation’s debt ceiling — a deal that would whack some $4 trillion dollars from the national deficit. Charlie Cook, one of America’s most respected non-partisan political analysts, is brutal on the Republican’s stance on the debt ceiling — and thinks that it may cost them the support of Independent voters in 2012.  Cook writes in the National Journal : …What has happened is that the New Republican Party has come to hate taxes a lot more than it hates deficits and the country’s growing indebtedness. It has rewritten history to omit any acknowledgment that President Reagan, when it was necessary, went along with tax increases. The memory of Reagan accepting tax increases, however reluctantly, has been supplanted by President George H.W. Bush’s fateful decision to go along with tax increases in the 1990 budget negotiations. What the New Republican Party remembers is Bush losing reelection, not the fact that those tax increases were pivotal in eliminating the federal budget deficit under President Clinton and in the resulting period of strong economic growth. Bush’s loss is remembered, and the period of fiscal responsibility is forgotten. At least history will treat Bush 41 with more gratitude than his own party does… Why did the Congressional Republicans walk away from the biggest deficit reduction pact in history?   Based on a several recently published polls, Americans everywhere outside of Washington are befuddled by their elected leaders’ stance in these negotiations. A new CBSNews poll found that “only 21 percent of the people surveyed said they approved of Republicans’ handling of the negotiations, while 71 percent disapprove.” Other recent polls point to a similarly stark divide between Republican voters and their elected representatives. So why walk away from a great deal to shrink the government deficit?  Could the “of the 1%, by the 1%, for the 1%” be the reason?  A recent  article in Vanity Fair by Nobel-winning economist Joseph Stiglitz is as cogent as it is alarming: Americans have been watching protests against oppressive regimes that concentrate massive wealth in the hands of an elite few. Yet in our own democracy, 1 percent of the people take nearly a quarter of the nation’s income — an inequality even the wealthy will come to regret. Stiglitz goes on to say that enlightened self-interest — the patriotic desire for the whole country to prosper, for the middle-class to thrive, so you too can be successful – should provoke the “1%” to support policies that improve the whole of society, not just those initiatives that dump tax benefits to the wealthiest Americans paid for by the middle class. Warren Buffett, the iconic self-made American man, is clear on this subject. No one has made a dime in this country without the unique advantages that America offers, he repeats and repeats. From an ethos of fairness, hard work and sacrifice, to a belief (at least in classical American mythology) that any kid can grow up to be president, the success of every American is tied to, as the U.S. Constitution states in its preamble “the general Welfare.” Stiglitz writes that the 1% no longer identify with the bottom 99% — and that this division is bad for all Americans, rich, middle class and poor. When the “1%” fund and elect elect representatives that are committed to the welfare of that “1%” at the expense of the 99%, we find ourselves in a dire situation with negatively profound implications to the future of America and our ability to remain the world’s leader. In fact, we find ourselves in a self-created, completely avoidable, national crisis that shatters Americans’ faith in their own government while also damaging America’s standing in the world.

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iPhone Customers Gear Up For Class Action Suit Against Apple

July 16, 2011

SEOUL, South Korea — A South Korean lawyer who is an avid user of the iPhone is waging a privacy battle against Apple Inc. over the device’s tracking capabilities. Kim Hyeong-seok said Friday he has gotten at least 16,000 people in South Korea to join him in a class-action lawsuit he plans to file against the company in a Seoul court in early August. The 36-year-old international trade and business attorney has already gotten Apple’s Korean unit to pay him 1 million won ($945) over a lawsuit he took to a regional South Korean court in April. His complaint was that the iPhone’s tracking of users’ locations violated South Korea’s constitutional right to privacy and also caused him “mental stress.” That hasn’t stopped him from continuing to use his iPhone 4 as well as an iPad. “I like Apple,” Kim said in a phone interview from his office in the city of Changwon, located about 240 miles (380 kilometers) southeast of Seoul. In fact, Kim says he is afflicted with “Apple mania.” But he adds his legal fight is about “right or wrong.” Apple spokesman Steve Park in Seoul could not immediately be reached for comment. Kim said that he plans to file the class-action lawsuit in Seoul sometime during the first three days of August and that the targets will be both Apple Korea as well as Cupertino, California-based Apple Inc. The suit will seek 1 million won in damages for each participant, he said. Kim’s fight comes as the iPhone has shaken up the South Korean mobile phone market since it went on sale in November 2009. The phone has unleashed a smartphone war and prompted local companies Samsung Electronics Co. and LG Electronics Inc. to raise their games. Samsung has challenged the iPhone with its Galaxy line of Android-based smartphones while LG has been pushing its Optimus line. Kim began his legal fight in April after reading that iPhones could store data which could potentially be used to track the movements of users. He filed a lawsuit in the local Changwon District Court seeking damages. Kim said the court ruled in his favor in May and awarded him the monetary damage he sought. The company did not contest the ruling and Apple Korea paid the money on June 27, Kim said. A Changwon District Court spokesman confirmed the ruling and payment. Kim said he believes the payment was the first Apple has made anywhere in the world regarding the tracking issue, which surfaced in April. South Korea’s Yonhap news agency reported it was the first in South Korea. Apple admitted that iPhones were storing the locations of nearby cellphone towers and Wi-Fi hot spots for up to a year. Such data can be used to create a rough map of the device owner’s movements. Apple also faces another legal challenge in South Korea. A total of 29 iPhone users filed a class-action lawsuit over the tracking issue in late April, Yonhap news agency reported. __ Associated Press writer May Cho contributed to this report.

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Rev. Seamus P. Finn, OMI: The Power Of Religion To Influence Corporate Responsibility

July 16, 2011

The recent experience of the near calamitous meltdown of the financial system was a clear indication of what can happen when unbridled greed and inadequate regulation are given free rein. The controversies swirling around News Corp are another ugly example of what happens when an ethical values system isn’t in place in the boardroom and powerful, intimidating personalities are given permission to create a culture that prizes “scooping” their competitors over serving the public good. The question is: what can these debacles teach us about the role of ethics and morality in the marketplace and, perhaps more importantly, are we ready to learn? As the director of the Faith Consistent Investment ministry of my congregation, I have been engaged in shareholder advocacy and corporate social responsibility since the early 70s. Recognizing the enormous influence global corporations have to impact the “common good”, my colleagues and I press CEOs and management to scrutinize their business practices on a myriad of issues from policies on lending and executive compensation, to water use in drought-prone areas and to human rights abuses in the supply chain wherever they source products or services. In the early 90′s I began to notice that corporate management referred quite often to the unique culture of their particular company and the values and practices that flowed from that culture. It became clear to me that there was a concerted effort on the part of responsible management to codify these values within the context of an identity statement that was part of the organizational DNA that would govern both its internal and external behavior. An ethical values system has proven to be an important ingredient in the delivery of quality services and products, and the key to building customer loyalty, employee satisfaction and long term viability. But where do these values systems come from? Historically, it can be demonstrated that the impact of faith on the social responsibility of any given corporation can be traced directly to the religion and character of the owner or CEO and how he/she integrated their value system into the corporation’s identity and operations. It was generally assumed that the decisions and actions of the business leader directing the corporation were significantly influenced by the religious principles at the foundation of their personal lives. Religion’s impact is also seen through debate in the legislative and rule making processes whereby societies regulate businesses. As corporations are granted a license to operate they are expected to comply with the principles and constraints that are included. Basic values such as honesty, transparency, responsibility, fairness and integrity that are common to most faith traditions are included in this social contract. A number of things that have changed over the last 75 years have profoundly impacted the intersection of religion and corporations. Let me briefly identify four of these changes and the consequences that flow from them. Evolving Business Models : The Limited Liability Corporation (LLC) is the predominant business model today. LLCs whether public or privately held are managed and owned by a diverse group of professionals and shareholders, each with their own religious beliefs. These new models are less likely to be strongly shaped by the values and beliefs that business leaders or employees bring to them. Influence of Corporations on all aspects of life : The legislative and political landscape, our culture and priorities are all profoundly shaped by the influence of corporations. This is true within the business and economic sectors, but also in the development initiatives that are taking place in some of the remotest villages and communities across the world. These are spaces where religious institutions, as spiritual guides and teachers of their followers, compete directly for public influence. Access to information : The democratization of information through the development of the Internet and other modes of communication and travel have uncovered accounts of corporate abuses from all corners of the world. This has awakened an acute awareness of the relatedness that exists between people and communities because of the products and services that they rely on. Active ownership of shareholders : Church communities and values-driven individuals who hold shares in corporations or are stakeholders in corporations have become increasingly more organized and active in the responsible exercise of their ownership and their stakeholder positions. This has resulted in direct and productive engagement by religious institutions with the management of major global corporations on a host of issues. But for too many of us, corporate behavior is an abstraction and disconnected from our daily lives and so, the Banking and News Corp headlines are just that: headlines that produce momentary outrage but no meaningful change in corporate behavior. We must demand that corporations behave ethically and in service of the common good and bring values back to the boardroom.

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European Banks Must Bolster Capital Cushion: ECB Official

July 16, 2011

(Reuters) – Banks that barely passed the European financial stress tests must swiftly reinforce their capital, ECB Governing Council member Erkki Liikanen told Finnish public broadcaster YLE on Saturday. The European Banking Authority said on Friday that five banks in Spain, two in Greece and one in Austria flunked the tests, which made 90 lenders reveal for the first time their profit forecasts, a breakdown of their sovereign bond holdings and funding costs. “Not only those (banks) failing need quickly to fix their capital, but also those barely scraping through. Maybe the last time around not enough attention was paid to this,” Liikanen said. “Both of these (groups) need to increase capital — a real capital that can be used to cover the losses.” Liikanen also urged all countries to curb their borrowing to avoid worsening of the financial crisis. “Also those countries that are not part of some programs must have a credible stabilization program to ensure their borrowing can be got under control and widening deficits stopped.” (Reporting by Terhi Kinnunen, editing by Jane Baird) Copyright 2010 Thomson Reuters. Click for Restrictions .

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Horror Stories Flying About Damage That Could Ensue If Debt Deal Unreached

July 16, 2011

WASHINGTON — Horror stories are flying about the damage that might be wreaked should Congress and President Barack Obama fail to cut a deal by the Aug. 2 deadline to increase America’s borrowing limit. Nearly every American is in harm’s way, either directly or indirectly. Absent a deal by then, the government would find itself tight on cash and unable to borrow – and have to start deciding which of the 80 million bills due in August it should pay and which it should put off. Tough decisions would come immediately: On Aug. 3, some $23 billion in Social Security benefit payments are due to be processed. On Aug. 4, the Treasury Department must pay $87 billion to investors to redeem maturing Treasury securities. On Aug. 15, more than $30 billion in interest payments come due. In addition to those costs, the government normally pays $5 billion to $10 billion daily to defense contractors, Medicare providers, federal employees and others. Obama has said he can’t guarantee Social Security checks and payments to veterans and the disabled will go out on schedule in the absence of a deal: “There may simply not be the money in the coffers to do it.” He could be challenged on that, however, because some legal and congressional budget experts question whether he can unilaterally decline to pay Social Security benefits if there are still assets in the program’s trust fund. Regardless of how that issue is resolved, there’s no question that government services, programs and benefits could take an enormous hit. No one knows exactly what choices Obama and his top officials would make if the crisis comes. The White House Office of Budget and Management is the agency charged with reviewing possible cuts in benefits and payments while the Treasury Department handles cash flow. All have been mum about their crisis plans, apparently to avoid market speculation or panic. But Treasury Secretary Timothy Geithner has insisted the deadline is real. “There is no credible way to give Congress more time,” he said recently. One analysis, by the Bipartisan Policy Center, suggests that once the government runs out of cash and lacks the power to further borrow, it would need to slash spending at once by as much as a whopping 44 percent. The U.S. now borrows more than 40 cents for every dollar it spends. So long as the Treasury has tax revenues coming in, it can still make interest payments to technically avoid default. Some analysts think it would lean that way at first, so as to do less harm to the country’s long-term credit rating. Default would be a “major crisis” that would radiate “shockwaves” through the financial system, Federal Reserve Chairman Ben Bernanke told Congress recently. But putting a priority on paying interest on maturing debt to avoid a default would simply force spending cuts instead – some of them more likely to hit ordinary people. Parks and monuments can be temporarily shut. That’s been done before. But is it worth taxpayers’ money to pay the costs of pursuing a second trial against former baseball star Roger Clemens if the judge who declared a mistrial in his perjury case this week clears the way? And what about clinical trials on new drugs or other scientific research projects? Or completing half-finished highway construction projects? The government is even weighing the prospect of selling off some of its assets – gold in Fort Knox, buildings, property, even some national parklands – to make ends meet, if absolutely necessary. Government contractors are likely to be among the early victims, says Paul Light, professor of public policy at New York University. “No new contracts. Delayed payments. Stop work orders. I can’t imagine that Obama would ever touch soldiers’ pay. But you’d get closing of parks, as we’ve seen in Minnesota, the national monuments, freezes on discretionary spending including Medicaid.” He suggested other early austerity steps would likely include halting of highway projects and research grants, and orders to stop clinical trials of new drugs and cancer research. The state government shutdown in Minnesota may indeed offer a preview of what lies ahead on a larger scale. State parks were closed. Driver’s licenses weren’t issued. Beer giant MillerCoors was told it couldn’t sell beer in the state because its licenses hadn’t been renewed. Some conservative congressional Republicans have questioned whether there would really be a crisis if the Aug. 2 deadline were missed. They note that the government could cut programs instead and still make interest payments at least for a while. But Congress’ top two Republicans, House Speaker John Boehner and Senate Minority Leader Mitch McConnell have agreed that failure to raise the limit could provoke an epic economic catastrophe. And major rating agencies such as Moody’s and Standard and Poor’s have already signaled they’re poised to lower the nation’s coveted Triple-A credit ratings if no agreement is reached. They also hinted that the ratings might be lowered even if the U.S. continues to make interest payments on its debt. “Global investors will start asking themselves, how long will they get paid if Social Security recipients don’t?” said Mark Zandi, chief economist at Moody’s Analytics. “There would be long-lasting economic damage. The economy would be back in recession. Tax revenues would be falling again and the deficit increasing.” The U.S. has gone through short government shutdowns before – most recently in late 1995 and early 1996 – because of political standoffs. But now the stakes are far higher because the dispute may capsize the entire U.S. economy, not just shut down government agencies and delay benefit checks. Any unprecedented default on the U.S. debt would send the price of Treasury bonds – long viewed as the world’s safe-haven investment – tumbling and interest rates soaring. And the higher rates wouldn’t just be on Treasury bills and bonds but also on a wide variety of consumer and business loans pegged to Treasury rates, from mortgages to credit cards, car loans and student debt. A U.S. default, or near-default, could also cause financial panic around the globe as international investors flee Treasury bonds and bills and other dollar-denominated investments. The value of the U.S. dollar against other major currencies could tank. Given the nation’s already high unemployment rate and shaky housing markets, it would likely send the economy quickly back into recession. “There’s a huge amount of misunderstanding about the seriousness of this among the American people,” said Robert Reischauer, former head of the Congressional Budget Office and now director of the Urban Institute. “One reason is that, while experts have been apoplectic about this for the better part of four months, there is no tangible evidence of any of these consequences coming to pass,” because the stock market has still been going up and interest rates have remained low. “Most people spend their lives worrying about the things that affect them immediately and the things they have some control over. And this is not one of them,” Reischauer said. “But it will be very soon.” The Dow Jones Industrial Average lost 778 points on one day in October 2008 when the House voted down the bank bailout bill, known as the Troubled Asset Relief Program – a vote that was quickly reversed. Economists can easily see a 1,000-point or larger plunge in the Dow if the negotiations to raise the debt ceiling fail – dealing a savage blow to already fragile 401(k) plans and similar retirement investments. How hard and fast really is the Aug. 2 date? The national debt, the legacy of years of accumulated deficit spending by presidents and legislators of both parties, now stands at $14.34 trillion. The government blew past the legal debt limit on May 16. Treasury has kept paying bills with accounting footwork ever since but is nearing the end of that, officials say. Now, said Geithner recently, “We’re left running on fumes.” ___ AP Economics Writer Martin Crutsinger contributed to this report.

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Americans Deeply Pessimistic About Economy

July 14, 2011

WASHINGTON (Reuters) – Americans are deeply pessimistic about the future as economic concerns rise and White House talks on raising the U.S. debt limit sputter, according to a Reuters/Ipsos poll released on Wednesday. The number of Americans who believe the country is on the wrong track rose to 63 percent this month, up from 60 percent in June, with stubbornly high unemployment and prolonged gridlock in Washington dashing hopes of a swift economic recovery. But voters do not appear to be holding President Barack Obama responsible for the problems so far. Obama’s approval rating held relatively steady at 49 percent, down 1 percentage point from June. His approval rating among independents — a group Obama needs to win re-election — fell to 39 percent from 44 percent. Obama’s standing could deteriorate quickly if the economy does not begin to generate jobs and if Washington cannot show it is capable of solving problems, Ipsos pollster Julie Clark said. “If those things don’t happen, Obama will be in for a real challenge in getting re-elected next year,” Clark said. Obama and Republicans have hit an impasse in negotiations to raise America’s borrowing limit before the government runs out of money to pay all of its bills on August 2. That could force the government to try to prioritize its payments. Asked what bills the government should stop paying if the debt limit is not raised, 36 percent listed international creditors like banks and 12 percent listed government departments like agriculture and education. The sputtering economy and high unemployment are certain to dominate the race for the White House in 2012, and the Republican candidates for the nomination to challenge Obama repeatedly have criticized his economic leadership. Copyright 2011 Thomson Reuters. Click for Restrictions .

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Moody’s Cuts Irish Bonds To ‘Junk’ Status

July 12, 2011

Credit ratings agency Moody’s downgraded Ireland’s foreign and local government bond ratings to junk status on Tuesday, increasing the cost of borrowing in the country and putting further pressure on the eurozone. Moody’s said that the country would likely to need another bailout before its situation recovered. Ireland’s bonds were cut by one notch from from Baa3 to Ba1, and Moody’s said the overall outlook remains negative. Investors are likely to read the move by the credit-ratings agency as further evidence that the problems affecting the Greek economy could spread. Last month Moody’s downgraded Portugal’s ratings on similar fears, and there are now growing concerns about the situation in Italy and Spain. In its statement Moody’s recognised Ireland’s economy for its “continued competitiveness and business-friendly tax environment”, but said the government there would have to work hard before the agency would consider raising its rating: Moody’s Investors Service has today downgraded Ireland’s foreign- and local-currency government bond ratings by one notch to Ba1 from Baa3. The outlook on the ratings remains negative. The key driver for today’s rating action is the growing possibility that following the end of the current EU/IMF support programme at year-end 2013 Ireland is likely to need further rounds of official financing before it can return to the private market, and the increasing possibility that private sector creditor participation will be required as a precondition for such additional support, in line with recent EU government proposals.

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Azeem Ibrahim: Saving Greece or Saving the Euro?

July 11, 2011

The EU’s bailout is simply postponing the inevitable. Greece is about 300 billion Euros in debt, with a jobless rate of 16% (42.5% for youth) and its budget deficit is more than four times the Eurozone limit at 13.6% of GDP. Greece is nominally insolvent with a newly imposed austerity program which may or may not work and a disaffected population taking to the streets and squares in violent reaction. Only time will tell if Greece has been “saved” and there is considerable doubt about the future of the Euro. Greece has reached this point through years of mismanagement and profligacy; its reporting to the EU consisted of “severe irregularities” based on “submission of incorrect data.” Yet rescue has come in the form of an EU bailout plus the added contribution from the International Monetary Fund which provides a stringent monitor less prone to political pressures than a European institution might be. Greece has responded by passing the first of a series of austerity measures in its Parliament, ending immediate worries about a Greek debt default. Pressure is now intense to put together a second bailout package, as the markets respond with what Sweden’s Finance Minister, Anders Borg, has called “wolf pack behavior.” Speculators and credit rating agencies are being blamed for trying to break up the monetary union to eliminate it as a potential rival to the US dollar as international reserve currency. As the crisis deepens, Jean-Claude Trichet, President of the European Central Bank, is calling for a single Euro Finance Ministry to be formed to oversee fiscal and competitive policies and direct responsibilities for countries “in fiscal distress.” This is seen as taking one step closer to a United States of Europe with a central fiscal policy, putting an end to the latitude in monetary affairs that has caused the recent crisis. The unpalatable truth becomes glaringly obvious — the EU simply cannot afford to keep bailing out insolvent members, even with the help of the IMF. IMF members will soon get restless if their new head, Christine Lagarde, is too euro-centric in her funding allocations. The Greek crisis has revealed a fault line so deep that it can no longer be ignored. The hypothesis of European convergence has failed to materialize. The imbalance between the Northern countries (Germany, France, etc) and the Southern (Spain, Greece, etc) is growing rather than shrinking. Since the introduction of the euro in 1999, GDP averages have drifted apart by as much as 11% and distinct groups of debtor and creditor countries have emerged. The dream of European monetary convergence has soured, and a Greek EU Commissioner, Maria Damanaki, said on May 25, 2011, “The scenario of removing Greece from the euro is now on the table.” This was contradicted by Greece’s Prime Minister, George Papandreou, who insisted he was determined to keep Greece in the Eurozone, but the issue is still very much alive. However, with France and Germany committed to bailing out the weaker countries, a breakup of the Euro does not look likely in the short term. How important to Europe is the survival of the Euro? The European Union existed for decades before the Euro and a number of successful EU countries have refused to join the Eurozone, notably Great Britain, Sweden and Denmark. One alternative is to forget about convergence and return to an “asymmetric architecture” with Germany as the benchmark economy. Germany’s trade surplus has already caught the attention of Christine Lagarde, the new IMF head, who warned in a Financial Times article on March 15, 2010, that Germany’s position could be unsustainable. If Germany’s strength has become a problem, as is Greece’s weakness, then it emphasizes again the difficulty of creating a one-size-fits-all fiscal and monetary policy for 16 countries. Perhaps it is time for the EU to not just swallow its pride and ask the IMF for help, but to take a deeper swallow and allow the weaker economies to secede from the Eurozone, releasing the others from their obligation to keep bailing them out. But this is not the overruling concern of the IMF. “The IMF does no t bail out poor nations. It bails out banks in rich nations that have made imprudent loans to poor nations.” The French and German banks that made those loans to Greece, Portugal and Ireland have to be protected and it is the survival of the banks, not the welfare of the people of the EU, that is the primary goal of both the EU and the IMF. EC President Jose Manuel Barosso, said in his first State of the Union address on September 7, 2010, “Europe must show that it is more than 27 different national solutions. We must swim together, or sink separately.” Somebody should look more closely to see whether the Euro is still swimming or instead, drowning. Dr Azeem Ibrahim is a Fellow and Member of the Board of Directors at the Institute of Social Policy and Understanding and a former Research Scholar at the Kennedy School of Government at Harvard and World Fellow at Yale. More writings here: www.azeemibrahim.com

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Unexpectedly Large Recession Causes Greece To Miss Budget Targets

July 11, 2011

A deeper-than-expected recession caused Greece’s central government deficit to widen by almost one third in the first half of the year, widely missing an interim budget target under the country’s bailout plan, the finance ministry said on Monday. Budget slippages amid the recession caused the government last month to agree even harsher austerity measures in a bid to qualify for its second EU/IMF rescue package in one year. “The current shortfall of revenues is expected to be covered in the second half of the year, as a result of the tax measures of the 2011-2015 mid-term budget plan,” said the finance ministry. The central government deficit stood at 12.78 billion euros ($18.28 billion) between January and June, higher than a 10.37 billion euro target for the period, the government said in a statement. Net budget revenues dropped 8.3 percent year-on-year to 21.81 billion euros, compared with a 25.08 billion euro target. Spending before payments on the country’s debt increased 4.5 percent to 25.62 billion euros, 7.1 percent above target. The ministry attributed the revenue shortfall to a more severe economic slump than had been anticipated, and one-off road taxes that boosted revenue in the previous period. Spending rose to settle public hospital debts, the statement added, even though the government kept sharply cutting public investment, down 42 percent year-on-year. Hurt by austerity, the Greek economy contracted at an annual pace of 5.5 percent in the first quarter. The Greek government revised downwards its 2011 growth forecast for this year to 3.9 percent. The budget data refer to the state budget deficit which excludes local authorities and social security spending and does not coincide with the general government shortfall — the benchmark for the EU’s assessment of Greece’s fiscal progress. On a cash basis, the central government’s budget deficit widened by an annual 15 percent in the first half to 13.15 billion euros, Greece’s central bank said separately on Monday. (Reporting by Harry Papachristou) Copyright 2011 Thomson Reuters. Click for Restrictions .

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Eurozone Seeks To Prevent Spillover Of Greek Debt Crisis

July 11, 2011

(AP) BRUSSELS — European officials are trying to work out a strategy Monday to prevent the eurozone’s debt crisis from spilling over into bigger economies such as Italy and Spain, as they discuss details of a second bailout for Greece. Intense debate over how, and how much, banks and other private investors can contribute to a new rescue package for Greece has unsettled financial markets in the currency union, most dramatically in Italy, as rating agencies warn that even a voluntary involvement will likely be seen as a partial default of Greece on its massive debts. Though the proposals currently doing the rounds may be less severe that a Greek payment halt, for example, Moody’s said in a note Monday that the “prospect of any form of private sector participation in debt relief is obviously negative for holders of distressed sovereign debt.” Moody’s warning follows a report last week from Standard & Poor’s that said that even a relatively market-friendly French proposal on a voluntary rollover of Greek debt would likely trigger a “selective default” rating. Investors are concerned that the debt crisis, which has so far been contained to the small economies of Greece, Ireland, and Portugal, could soon drag down bigger countries like highly indebted Italy and unemployment-ridden Spain. The mere size of their economies could easily overwhelm the rescue capacity of the rest of the eurozone. The yield, or interest rate, on Spanish and Italian government bonds shot up Monday morning, in contrast to other big economies, while the euro dropped 0.6 percent to $1.412. Yields on Spanish 10-year bonds rose from 5.7 percent at the start of trading to 5.8 percent, while the yield on Italian 10-year bonds meanwhile increased to 5.4 percent from 5.3 percent, following sharp rises on Thursday and Friday. “The fact that contagion is spreading marks the failure of politicians to draw a line under the Euro-crisis to date,” Rabobank analyst Jane Foley said. “As yields rise and debt financing costs become even more exaggerated the difficulties of containing the crisis become even bigger.” The threat of contagion and the wider financial market jitters are set to feature prominently in a meeting of eurozone finance ministers in Brussels Monday afternoon. The ministers will debate whether a substantial contribution from banks to a second bailout is worth letting the country temporarily slip into default. However, senior eurozone officials warned that no decisions are expected Monday, with talks likely to drag into September. To stay afloat until mid-2014, Greece will need an extra euro115 billion ($164 billion)_ on top of the euro110 billion ($157 billion) it was granted last year – according to the European Commission, although some of the money will come from privatizations. Frustrated with the slow progress on Greece, European Union President Herman Van Rompuy, usually in charge of the summits of EU leaders, called in top officials – including European Central Bank President Jean-Claude Trichet, the EU’s Monetary Affairs Commissioner Olli Rehn and European Commission President Jose Manuel Barroso – for an unscheduled get-together ahead of the finance ministers meeting. Trichet in particular has stressed the potential negative consequences of a default rating, even a temporary one.

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Chinese Local Debt Might Be Half A Billion More Than Estimated: Moody’s

July 5, 2011

China’s local government debt burden may be 3.5 trillion yuan ($540 billion) larger than auditors estimated, putting banks on the hook for deeper losses that could threaten their credit ratings, Moody’s said on Tuesday. Addressing the estimate by China’s state auditor that its local governments have chalked up 10.7 trillion yuan of debt, Moody’s said it found more potential loans after accounting for discrepencies in figures given by various Chinese authorities. “The potential scale of the problem loans at Chinese banks may be closer to its stress case than its base case,” Moody’s said in a statement. In view of that, the non-performing loan ratio for Chinese banks could be as high as 8-12 percent, compared with 5-8 percent in the base case and 10-18 percent in the stress case. Unless China comes up with a “clear master plan” to clean up its pile of local government debt, the credit outlook for Chinese banks could turn negative, the ratings agency said. In a bid to assuage investor worries about the potential souring of its massive local government debt, different Chinese authorities including the state auditor, the bank regulator and the central bank have tried to assess the situation. But all three agencies have used different definitions and accounting methods to review the debt, resulting in a hodgepodge of official forecasts. Moody’s said it derived the additional 3.5 trillion yuan of debt after comparing the estimates of China’s state auditor with that of the bank regulator’s. The ratings agency said the Chinese state auditor likely omitted the 3.5 trillion yuan of debt from its assessment because they were not considered as real claims on local governments. “This indicates that these loans are most likely poorly documented and may pose the greatest risk of delinquency,” said Yvonne Zhang, a Moody’s analyst. Moody’s said it expects Beijing to “implement gradual discipline” over the stock of government debt, and that would involve the Chinese government leaving banks to manage a part of the problem loans on their own. (Reporting by Koh Gui Qing; Additional reporting by Kim Coghill in Singapore; Editing by Jacqueline Wong) Copyright 2011 Thomson Reuters. Click for Restrictions .

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Greece Would Likely Default If It Followed French Banks’ Plan: S&P

July 4, 2011

ATHENS (Angeliki Koutantou) – Greece would likely be in default if it follows a debt rollover plan pushed by French banks, S&P warned on Monday, deepening the pain of a bailout that one European official said will cost Athens sovereignty and jobs. European politicians and bankers had expressed confidence last week that the French proposal would not trigger a default, but ratings agency Standard & Poor’s said it would involve losses to debt holders, most likely earning Greece a “selective default” rating. “It is our view that each of the two financing options described in the (French banks’) proposal would likely amount to a default under our criteria,” S&P said. French banks, major holders of Greek sovereign debt, proposed voluntarily renewing some of the bonds when they fall due, but on different terms. S&P cut Greece’s sovereign rating to “CCC” last month, from “B,” on a view that any restructuring of the country’s massive debt load would count as an effective default. The euro fell from around $1.4550 to a session low around $1.4510 after the latest S&P comment. Derivatives industry body ISDA said before the French proposal was released in late June that a voluntary agreement to roll over Greek debt would “typically” not trigger payments on credit default swaps. Greece was already facing an uphill struggle this week to start the process of selling off state-owned assets and reform its tax system to meet European Union and IMF conditions for bailing it out. The deep spending cuts required under the loan terms have sparked angry protests on the streets of Athens. Eurogroup Chairman Jean-Claude Juncker said Greece will lose sovereignty and jobs to meet those criteria, a comment that has enraged unions. Any suggestion of foreign intervention in running the country is an incendiary political issue that will make implementing reforms even tougher. Public-sector union ADEDY, which has launched crippling strikes and protests, reacted angrily to his comments. ADEDY President Spyros Papaspyros said Juncker was out of line: “Mr Juncker interferes in the internal affairs of a country, provokes European rules and is an embarrassment for the country whose government tolerates him.” Juncker’s comments could trigger more of the anti-austerity street protests that have roiled the country for months as Greece stays stuck in its worst recession since the 1970s with a youth unemployment rate of more than 40 percent. “The sovereignty of Greece will be massively limited,” Juncker told Germany’s Focus magazine in an interview released on Sunday. Teams of experts from around the euro zone would be heading to Athens, he said. “One cannot be allowed to insult the Greeks. But one has to help them. They have said they are ready to accept expertise from the euro zone,” Juncker said. EASIER SAID THAN DONE Greece last week passed austerity measures worth 28 billion euros ($40 billion) and promised to deliver 50 billion euros in sell-off revenues by 2015, including raising 5 billion euros by the end of this year alone. On the list are public utilities whose sale is sure to prompt public reaction. “Greece now needs to push faster fiscal adjustments and structural reforms,” said EFG Eurobank economist Platon Monokroussos. “On the privatization front, it is of essence the government delivers fast results to send a strong signal to financial markets.” That is easier said than done. The socialist government, which came to power on a social welfare platform, has yet to launch a single state sale in 18 months in power and must set up a privatization agency within weeks to meet its target. It must also start to sell state property, estimated at up to 300 billion euros but often entangled in legal complications. “The 50 billion euro target is not achievable,” said Constantinos Mihalos, head of the Athens Chamber of Commerce. “Share values are very low right now because of the recession.” At the same time, Greece needs to deliver on pledges to reform a chronically inefficient tax system that has relied too much on middle class salary earners and let wealthy tax evaders off the hook, producing disappointing revenues this year. Finance Minister Evangelos Venizelos told Reuters in an interview on Friday that Greece would tap for the first time private-sector expertise but tax offices around the country are notoriously resistant to any change. “A greater effort is needed to rein in tax evasion and broaden the tax base in a bid to bring the ratio of revenues to GDP closer to euro area average and reduce expenditure and waste in the broader public sector,” Monokroussos said. Investors have feared that default by Greece would send shockwaves through the world finance system with some commentators saying such an eventuality could call the whole euro zone into question. Another hurdle is the law on a uniform pay scale for the public sector, sure to cut further the salaries of civil servants who have already seen their pay reduced by an average 15 percent as a result of a wave of austerity measures to secure the 110-billion-euro bailout last year. On Saturday, euro zone finance ministers approved a 12 billion euro loan Greece needs to avert default. The IMF will meet on July 8 to approve the 12-billion euro loan tranche, which is expected to be handed over by July 15 and allow Greece to avoid the immediate threat of debt default. But the country still needs the second rescue package, which is also expected to total around 110 billion. EU officials will now look at how private creditors can be involved voluntarily so that rating agencies do not declare the rescue a “credit event.” (Additional reporting by Wayne Cole in Sydney) (Writing by Dina Kyriakidou and Emily Kaiser; Editing by Louise Ireland, Peter Millership and Neil Fullick) Copyright 2011 Thomson Reuters. Click for Restrictions .

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Vivian Norris: Dominique Strauss Kahn, the Missing Cell Phone, Women and the Timing

July 1, 2011

Finally we can speak about what is really at stake in the DSK case. More information is coming out, one day after the new IMF head if officially named, is this also a coincidence? And while we do not know the outcome, nor were any of us in that hotel room, (and yes maids are confronted with horrific sexual advances and worse all the time by clients of hotels all over the world and that needs to stop) we are not naïve children and what is at stake here is not simply one woman’s reputation and well-being, nor the Presidency of France, it is much bigger than that. The world is changing dramatically. The West is losing its dominance and many forces are at work as a new rebalancing process of power and wealth tilts us in varying directions. The metaphor of an African immigrant coming to America, looking for a better life, is now turning into a nightmare of lost dreams and deceit. The Sofitel maid’s veracity is being questioned, her background now seems to include money laundering, boyfriends linked to drugs, lies on her application for admittance to the US of A. So what’s new? Look into anyone’s background enough and you will come up with something not so nice. This is about power and a shifting balance of power. It also became a story about the powerful versus the powerless. And it is still, whatever the outcome, a story of women and men and the sad reality of how the former will continue to be depicted by what the latter finds them good for…sex. If this was a set up, why did an intelligent man, just about to announce his run for Presidency, in one of the most important jobs in the world, not see through it? Or did he feel his position would allow him to do what he wished because he was so powerful? Or even more disturbing, did he even think about it, or was it so the norm in his world that he did not have to worry? This story is about Narcissism, the idea that we in the West, can actually still control things. We cannot. The dominance is over. We have to live in a world in which power is not only shared, sometimes we are going to lose. We can dig up yet another reason to go bomb the hell out of a country, but the reality is, we need to approach this shifting world with dignity, respect for others and integrity, not with final, desperate grasps at power which will then be taken from us forcibly if we do not pay attention. Reading an article about the DSK case a few days ago, one thing struck me as glaringly disturbing. The missing cell phone, the one he called the hotel about at least three times, demanded that it be brought to the airport several times, and sent his step daughter to crawl around on the ground with an employee of the restaurant McCormick and Schmick’s to look for, was one of several phones DSK had with him. Why would a man who supposedly had violently attacked a woman for sexual favors keep calling the hotel where the alleged crime occurred, asking for his cell phone? Why would he assume that when the people asked for him at the entrance to the Air France plane at JFK, that they were there to return his precious phone (and not arrest him)? Because it was the phone used for official IMF business. Sorry, but this time the conspiracy theorists have a lot in their favor. That phone had information in it which was not only highly confidential, surely had exchanges which would foretell the direction the IMF, banks and others would take in the days and weeks to come, heck, it was worth a fortune. The question we should all be asking is, “Why now?” Why, just prior to major decisions about Greece, the euro, a possible domino effect which could bring down major banks, add to the already crippling financial crisis and ultimately shift in the balance of power and money, does something like this come out? Who had access to the important information in that phone? The information was worth enormous amounts to banks, hedge funds, sovereign wealth funds, heads of state, who were all hanging on edge, waiting to see what the next steps would be regarding a possible domino effect if Greece defaulted, if the euro was saved, etc. The numbers called, messages and emails sent and received, including vital information and strategies and perhaps even what was going to happen the following day as DSK joined Merkel to discuss the future of, well, the world’s economy, were all in that cell phone. I have been listening to the French mostly saying that this was a set up, all while admitting that sex was involved. No one once said to me that DSK did not have sex with the woman. They said he confused her with his “regular woman” or that he stayed in that hotel because they knew to send him women etc etc (some of this dinner banter came from a former head of Accor in charge of the hotel where DSK stayed). No the French were never naïve about the sex part, they sort of assumed it as normal. Violence, perhaps not, but the sex part is never questioned. And while I am actually happy that this case has brought a very important topic to the forefront here in France, sexism and the use of power to basically keep women from important posts, (heck, perhaps the feminists set him up…all to get a woman into one of the most powerful positions in the world), we have to admit that there was a lot of money to be made and lost based on the decisions DSK and the IMF are making. The IMF has a lot of critics, not least in the developing world, where it is often seen as a way to keep the West in control of the developing economies (which are doing much better than the West at the moment thus the unusual situation of countries from the once wealthy West turning to the IMF for help). I like a lot of things Christine Lagarde has said, even if I politically have a hard time stomaching what the government she belongs to stands for, but as a woman, I like her directness. I like the fact that she and Angela Merkel seem to create a united front. As a woman, it feels good to see women making decisions. But the question we should all be asking now is, not only, “Who gets to buy Mykonos”? But, how will the IMF’s actions in the days and weeks ahead either strengthen or undermine the inevitable shift of power and wealth, not only into the hands of what has become the most outrageous concentration of wealth in history, Who benefits from the situation? Private interests? Those billionaires being driven around Greece in vans while at a conference hosted by Steve Forbes while Athens was burning a few weeks ago looking at properties to be potentially privatized? DSK’s Achilles’ heel is sex, he said so himself. And it is not by chance that the financial Achilles’ heel in Europe, is also the cultural birthplace of much of what the West stands for, Greece. As protesters place banners declaring their anger, symbolically on the Parthenon, so too will those in whose hands great wealth have accumulated, accumulate even more, and they will, perhaps, buy the Parthenon. What is missing in all this mess are the great minds, those philosophical giants, asking us to go down to the port of Piraeus and ask ourselves some very poignant questions. They all got lost on the way, or even worse, stopped off for a Starbucks and never made it to the place where they would offer prayers to the goddess. And when the goddess is forgotten, she becomes really angry. Imagine if we had cared about Plato and Socrates’ sexual activities? There would be no West to speak of; it would have ended before it began. But they knew well enough to respect the goddess. I am hopeful. We are placing more women in positions of power. This will change everything.

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JPMorgan: Tax Holiday Would Pack ‘Bigger Punch’ Than Fed Policies

June 30, 2011

JPMorgan would really, really like a tax repatriation holiday. The company released a report this Monday in which it asserted that a repatriation holiday — a one-off occasion where companies could bring overseas earnings into the U.S. at dramatically reduced taxation rates — could carry “a bigger punch than QE.” QE refers to quantitative easing , the Federal Reserve’s long-running program of asset purchases intended to stimulate the economy. The latest round of quantitative easing, known as QE2, came to an end on Thursday. During QE2, the Fed spent eight months buying up $600 billion in long-term Treasury securities. The strategy has received mixed reviews , especially as it comes to an end. According to Thomas Lee, chief U.S. equity strategist at JPMorgan and author of Monday’s report, a tax repatriation holiday would do a comparable amount of good for markets and the economy in general. Lee’s report estimated that companies could have as much as $1.4 trillion parked overseas, and that they might bring between $500 billion and $1 trillion into the U.S. if Congress passes a proposal allowing business to repatriate cash at a 5.25 percent tax rate, rather than the standard 35 percent. “In our view, this carries greater positive implications for equities compared to QE,” Lee writes. “In other words, from a market’s perspective, this likely represents a substantial catalyst.” However, Lee’s findings stand in marked contrast to another report issued by JPMorgan in May. That release, compiled by JPMorgan researchers, concluded that even if a tax holiday is passed, most of the money would likely be reinvested overseas. In other words, it “would not result in a flood of repatriation,” according to CNBC . JPMorgan is far from the only major corporation to call for a repatriation holiday recently. In mid-June, advocates at a corporate conference in Washington, D.C. referred to the proposed repatriation holiday as “ the next stimulus .” JPMorgan recently agreed to a $153.6 million settlement with the Securities and Exchange Commission regarding allegations that it misled investors about a mortgage securities transaction.

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Greek Parliament Approves Austerity Bill

June 29, 2011

ATHENS, Greece — Greece’s lawmakers approved a key austerity bill Wednesday needed to avert default, despite a second day of rioting on the streets of Athens that left dozens of police and protesters injured. The passage of the bill was a decisive step for the country to get the next batch of bailout loans from international creditors due from last year’s financial rescue. Another bill has to be passed Thursday for the government to secure the money. The bill to cut spending and raise taxes by euro28 billion ($40 billion) over five years has provoked widespread outrage, coming after a year of deep cuts that have seen public sector salaries and pensions cut and unemployment rise to above 16 percent. While deputies voted, stun grenades echoed across the square outside the Parliament building and acrid clouds of tear gas hung in the streets. Authorities and emergency services said 21 police and 15 protesters were injured and transferred to hospitals, while 26 people were detained. The European Union and International Monetary Fund have demanded both bills pass before it releases euro12 billion of bailout funds – without the money, Greece was facing defaulting on its debts by the middle of next month, potentially triggering a banking crisis, particularly in Europe, and turmoil in global markets. “We must avoid the country’s collapse with every effort,” Prime Minister George Papandreou said in his speech prior to the vote. “Outside, many are protesting. Some are truly suffering, other are losing they privileges. It is their democratic right. But they and no one else must never suffer the consequences and for their families of a collapse. We must do everything so that there is no freeze in payments.” The Greek vote was greeted by a sense of relief in Europe’s capital cities, who have been fretting about the impact of a potential Greek default both on their banking systems and on the future of the euro currency itself. “That’s really good news,” German Chancellor Angela Merkel said when told of the outcome of the vote on her way out of an economic forum in Berlin. Germany is Greece’s biggest creditor. Equally, relief was the main response in markets too. Soon after the vote, the euro was trading at a fairly elevated level around the $1.44 mark while stock markets around the world were posting big gains. In Greece, the main Athens stock market closed up 0.5 percent at 1,264, while borrowing costs eased some 80 basis points from a morning high, with the yield on 10-year bonds settling at the still high 16.55 percent. “The fact that the Greek parliament has passed the government’s medium-term fiscal plan clearly reduces the chances of a near-term disaster,” said Ben May, European economist at Capital Economics. The unpopular package of spending cuts and tax hikes passed by 155 votes to 138, with five opposition deputies voted “present” – a vote which backs neither side. A sole deputy from the governing socialists, Panayotis Kouroublis, dissented over government plans to sell a further stake in Greece’s state electricity company and was soon expelled from the parliamentary group by Papandreou. In a dramatic vote, socialist deputy Alexandros Athanassiadis, who had previously vowed to vote against the bill, overturned his decision at the last minute and backed the package, saying he had been swayed by the prime minister’s comments in parliament. A conservative deputy broke ranks with her party’s line to also vote in favor, bolstering the government’s majority of five seats in the 300-member parliament. In the run-up to the vote, violence engulfed the square outside for the second day, while services across the country ground to a halt in the last day of a 48-hour general strike. Riot police fired volleys of tear gas at swarms of young men who were hurling rocks and other debris as well as setting fire to trash containers. After a lull in the fighting around the time of the vote, the riot started up again with intensity. Protesters threw flares and orange and green smoke bombs, and a few sprayed fire extinguishers at police, who picked up rocks and tossed them back. Heavy clouds of tear gas wafted over the chaotic scene in front of parliament. ____ Christopher Torchia, Demetris Nellas and Menelaos Hadjicostis in Athens and Geir Moulson in Berlin contributed.

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Europe will survive Greece’s crisis: German govt

June 27, 2011

Europe will survive Greece’s crisis: German govt

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Iran Condemns Decision By Consumer Nations To Tap Oil Reserves

June 25, 2011

TEHRAN – Iran condemned on Saturday a decision by oil consumer nations to release strategic crude stocks as politically motivated interference in the market that would not have a sustained impact on prices. “The measure by the International Energy Agency in consuming their oil stockpile is meddling in the natural oil market trend and the drop in oil prices will not be sustainable,” Iran’s OPEC governor Mohammad Ali Khatibi was quoted as saying by the Oil Ministry website SHANA. The 28-member IEA said on Thursday it would release 60 million barrels a day over an initial 30 days to fill the gap created by the disruption to Libya’s output. Earlier this month, OPEC failed to reach consensus to increase production, which consumer countries wanted and leading exporter Saudi Arabia had pushed for, but which other producers, including Iran, opposed. After the OPEC meeting, Saudi Arabia said it would unilaterally increase output to meet the needs of the market. Iran said the move was politically motivated as Saudi Arabia was under western pressure. “After the United States and Europe failed to raise the organization’s output in the recent OPEC meeting, they used their utmost efforts to lower the global oil price. The consumption of stocks by the IEA to compensate for the oil shortage will push down prices in an artificial way,” Khatibi said. Khatibi reiterated Iran’s hawkish position about the current situation of the market. “The international oil market is not facing any shortage and supply and demand are balanced and any measure to increase output is a political act and maneuver,” said Khatibi. “The Americans’ meddling in the oil market and the consequent drop in its price is an attempt to influence the outcome of the presidential election next year ,” Khatibi said. (Reporting by Hashem Kalantari; Writing by Ramin Mostafavi; Editing by Sugita Katyal and Toby Chopra) Copyright 2011 Thomson Reuters. Click for Restrictions .

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Americans Have Never Been More Distrustful Of Banks: Poll

June 24, 2011

The recession might be officially over, but American views toward the institutions that brought the economic system close to collapse have never been worse. According to a new poll by Gallup , 36 percent of Americans now say they have “very little” or “no” confidence in U.S. banks, the highest percentage on record since Gallup first started tracking that data. Those saying they have a “great deal” or “quite a lot” of confidence in banks has also stagnated, stuck at 23 percent for the second straight year, after falling to a low of 22 percent in 2009. Safe to say it’s been a tough year in the banks’ public relations departments. U.S. banks have spent much of the past year aggressively lobbying against the implementation of Dodd-Frank financial reform. This week, Treasury Secretary Timothy Geithner called out banks for the “huge amount of money [spent by banks] to erode, weaken, walk back” financial reform. Indeed, the largest-lobbying institutions of last year spent 2.7 percent more in the first months of this year in an attempt to combat rules including higher capital requirements and restrictions on swipe fees. The nation’s five largest mortgage servicers — Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial — have also been the focus of a federal investigation into whether the banks defrauded taxpayers in their handling of foreclosures, first reported by The Huffington Post in mid-May. In addition, in April, Goldman Sachs, the nation’s first-largest bank by assets, was accused in a Senate report of systematically misleading clients by selling them assets known to be junk and then subsequently betting against that junk. So this year’s Gallup results only further emphasize the growing animosity toward banks in America. Never before 2009 had more Americans expressed more distrust than trust in banks. That has not only been the norm for three years now, but the gap is widening. Gallup, who has been tracking confidence in banks for over thirty years now, notes the steady decline of confidence in their release, pointing out that 60 percent of Americans had at least “quite a lot” of confidence in banks in 1979. That fell to 30 percent in the early 1990s, but then steadily rose to 53 percent in the mid-200s. The percentage of Americans with a good deal of trust in banks has been nearly halved since 2007: Although levels of confidence have fallen in all regions since the first years of the financial crisis in 2007, confidence is again on the rise in the Midwest and West. This year, it is the East that has the least confidence in banks, at 20 percent. The below graph charts levels of confidence since the financial crisis:

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Greece Seals Austerity Deal With EU And IMF: Reuters

June 23, 2011

ATHENS (Ingrid Melander) – Greece has won the consent of a team of EU-IMF inspectors for its new five-year austerity plan on Thursday after committing to an additional round of tax rises and spending cuts, sources with knowledge of the talks said. “We have a deal,” said one of the sources. Another source close to the negotiations said that a few remaining technical details would be finalized on Friday. Finance Minister Evangelos Venizelos announced on Thursday Greece’s Socialist government would lower the minimum threshold for income tax to 8,000 euros a year, increase the tax on heating oil and impose a one-off solidarity levy on income of between 1 and 5 percent. (Editing by Daniel Flynn) Copyright 2011 Thomson Reuters. Click for Restrictions .

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