Wednesday, September 12, 2012

Today's links

1--Mortgage REITs' leverage poses significant risks to the overall mortgage market, sober look

So how is it that a mortgage product can generate some 30% return in a year when the universe of mortgages securities generated roughly 3.4% over the same period? The answer as always is leverage. Mortgage REITs are able to pay high dividends because of the tremendous leverage they maintain

2--Prop. 37: Will California be first state to label genetically modified food? , CSM

Proponents of Prop. 37, which is on the California ballot in November, say consumers have a right to know what kinds of food they are eating. But similar labeling laws have failed in 19 states

3--EU unveils banking union plan to tackle crisis, IFR
4--The Great Deregulator, smirking chimp

...before he left office Clinton signed off on the game-changing legislation that ended the sensible rules imposed on Wall Street during the Great Depression? It was Clinton who cooperated with the Republicans in reversing the legacy of FDR’s New Deal, opening the floodgates of unfettered avarice that almost drowned the world’s economy during the reign of George W. Bush.

How convenient to ignore the Financial Services Modernization Act, which Clinton signed into law to summarily end the Glass-Steagall barrier against the commingling of investment and commercial banking. Do the Democrats not remember that Citigroup, the first too-big-to-fail bank made legal by the law Clinton signed, became the $15 million employer of Robert Rubin, the Clinton treasury secretary who led the fight for the law that legalized the creation of Citigroup? Or that Citigroup—led by Sanford Weill, to whom Clinton gave one of the souvenir pens he used to approve that onerous legislation—went on to be a major player in the subprime mortgage swindles and had to be bailed out with more than $50 billion of taxpayer funds?

5--Regulatory Measures to Reduce Systemic Risk Are Proving to Be Ineffective, Possibly Counterproductive, naked capitalism

Understand what is happening here: clearinghouses are one of the major elements of Dodd Frank to reduce counterparty risks. But the banks are proposing to vitiate that via this “collateral transformation” which will simply create new, large volume counterparty exposures to deal with fictive clearinghouse risk reduction program.

6--As Paul Ryan Lines Up Behind Rahm, the Scheme to Privatize Chicago Schools Becomes Clear, Firedog Lake (Obama's righthand man leads the push to privatize public schools)

But it’s not that hard to see what this is about. Significant sections of the Chicago Public Schools system are starved for funds. They are putting 40-50 students in classrooms without air conditioning. The kids don’t have books or materials weeks into the term. And ultimately, the goal is to make those schools so poorly maintained, staffed and administered that they “fail,” allowing Rahm Emanuel and his hedge fund buddies to essentially privatize them:

What we’re seeing in Chicago is the fallout from Jonah Edelman’s hedge fund backed campaign to elect Illinois state legislators who supported an anti-collective bargaining, testing based education proposal giving Edelman the “clear political capability to potentially jam this proposal down [the teachers unions'] throats,” political capability he used as leverage to jam an only slightly less awful proposal down their throats. It’s a political deal that explicitly targeted Chicago teachers, while trying to make it impossible that they would strike by requiring a 75 percent vote of all teachers, not just those voting, for a strike to be legal. But more than 90 percent of Chicago teachers voted to strike.

It’s not just Jonah Edelman, though. Rahm Emanuel worked with a tea party group to promote Chicago charter schools and denigrate traditional public school teachers and their unions. Emanuel’s political allies have been caught paying protesters to show up at hearings on school closures. Every story you read about the greedy teachers (greedy? does that description fit the teachers you know?) has years of big money anti-teacher campaigning behind it, pushing us to believe that teachers, who bring work home every night and routinely spend their own money on school supplies and even food for their students, are overpaid, selfish, lazy. Now, all those narratives that the right wing has built up—anti-union narratives coming together with pro-privatization narratives—are being used against Chicago’s teachers.

Privatizing the services of public schools, or the entire schools themselves, has become big business. If it takes a standardized test to force that into being, if that becomes the data that “proves” the need for privatization, that’s what will get used.

7--Are Chinese Banks Hiding “The Mother of All Debt Bombs”?, The Diplomat

8--The troika's subjugation of Greece, WSWS

In a letter to Greece’s most important ministries, the Troika demanded a six-day work week, increases in the numbers of hours worked per day, new cuts to wages, and the abolition of labour regulations in Greece...

The president of the Federation of German Industries (BDI), Hans-Peter Keitel, said this openly to news magazine Der Spiegel on Monday. He wants to make the whole of Greece into “a kind of special economic zone” and provide them with “foreign EU personnel”. On this basis Greece will attract foreign investment, he claimed.

9--Obama and the teacher's strike, WSWS

The Obama administration’s pose of official “neutrality” in the strike is a fraud. Emanuel is Obama’s right-hand man. Since taking office, Obama has gone further than the Republicans in promoting charter schools and the privatization of public education. He has outdone his predecessor George W. Bush in scapegoating teachers and encouraging school closures and mass layoffs.

Public school systems nationwide, starved of funding as a result of the economic crisis, have eliminated more than 300,000 teaching positions since 2008. Obama has responded by tying meager federal funds to the elimination of restraints on charter schools and the implementation of test-based evaluation systems.

In this process, the trade unions—including the Chicago Teachers Union (CTU) and its parent organization, the American Federation of Teachers (AFT)—have been active participants. Whatever their occasional criticisms of Emanuel and other “reformers,” the unions have collaborated every step of the way. At every point they sacrifice the interests of teachers to maintain their political alliance with the Democratic Party.

10--Regulator Claims New Rules Will Loosen Mortgage Lending, Realty Check

Through the first half of 2012, lenders have had to repurchase a total of $41.95 billion in mortgages from Fannie and Freddie. (Read More: Fannie Mae COE: 'Comfortable' With Decision Not to Slash Mortgage Balances.)...

FHFA has released new guidelines that will go into effect on new loans starting the first of next year. Part of the new “framework,” is relief for lenders from mortgage repurchase obligations on loans where the borrower has made on-time monthly payments for 36 consecutive months. On refinances through the government’s Home Affordable Refinance Program (HARP), that term would be knocked down to 12 months. (Read More: Why Millions of Americans Still Can't Refinance Their Mortgage.)...

The FHFA is trying to get banks to lend, take more risk when they sell these loans to the GSE’s,” said FBR’s Paul Miller. “There is a huge problem with people with lower FICO scores not getting access to credit, so the GSE’s have come under a lot of criticism.”

Will it work?

“This will have minimal impact,” claimed Miller, who points to still huge put-backs in process on legacy loans from Fannie Mae, Freddie Mac and the FHA. Put-back risk is one of, if not the top reason lenders are not loosening mortgage credit availability.

11--Poverty and inequality are up. Median income, down, WSJ 

The lost decade continues. Median household income, adjusted for inflation, fell 1.5% in 2011, to $50,054. That’s 8.1% lower than before the recession and 8.9% lower than in 1999.

Inequality rose. Income inequality, as measured by the Gini index, rose 1.6% in 2011 from 2010, the first annual increase since 1993. Other measures of inequality also increased. The top 5% of earners—those making $186,000 or more—received 22.3% of all income in 2011, up from 21.3% in 2010.

Jobs are increasing, but pay is falling. The number of people with full-time, year-round jobs rose by more than 2 million in 2011, although it’s still well short of the pre-recession level. But the inflation-adjusted earnings of such workers fell by 2.5%

Poverty declined slightly. There were 46.2 million people living in poverty in 2011, for an official poverty rate of 15%. That’s down slightly—and statistically insignificantly—from 15.1% in 2011, after three straight years of increases. The poverty line for a family of four was $23,021 in 2011.

Two-fifths of the poor had jobs. Of the 26.5 million Americans living in poverty in 2011, 10.3 million had jobs, though only 2.7 million worked full-time, year-round. The other 16.1 million didn’t work in 2011.

Fewer people are living without health insurance. The ranks of the uninsured fell to 48.6 million in 2011 from 50 million in 2010. For the first time in the past decade, the percentage of people with private insurance didn’t fall, holding steady at 63.9%.

Immigrants were much less likely to have health insurance. One third of foreign-born residents—and more than 44% of non-citizens—lacked health insurance in 2011, compared to 13.2% of those born in the U.S. 30.1% of Hispanics were uninsured, compared to 11.1% of non-Hispanic whites, 19.5% of blacks and 16.8% of Asians

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