Thursday, March 21, 2013

Today's links

1---The stupidest man alive?, Economist

GEORGE OSBORNE, Britain's Chancellor of the Exchequer, is out with the government's new budget. The Spectator, which live-blogged the proceedings, posted this interesting chart:
Not exactly what the government had in mind when it rolled out its austerity plans, I'm sure. And the sort of thing that should make it difficult for the chancellor to continue arguing that it is confidence in the government's commitment to fiscal prudence that is responsible for Britain's low interest rates. Stephanie Flanders does the explaining:
Whitehall departments have stuck to the chancellor's budget plans since then. In fact, they have spent rather less than he first asked them to.
That is why he has again felt able to take a few billion more pounds out of their budgets for the next two years, to increase infrastructure spending and perhaps deliver other minor goodies later today.
No, it's not Whitehall, but the UK economy that's wildly departed from the chancellor's original script.
Britain's national output has risen by just over 1% since the election, instead of the 7% George Osborne was hoping for in his first Budget.
 
2---Taxpayers to backstop risky derivatives bets by big banks, Huff Post

A House Committee approved six new bills to deregulate Wall Street derivatives on Wednesday, advancing legislation that would expand taxpayer support for derivatives and create broad new trading loopholes allowing banks to shirk risk management standards created by the 2010 Dodd-Frank bill.

The House Agriculture Committee passed all six bills with broad bipartisan support, just five days after Sen. Carl Levin (D-Mich.) released a report detailing extensive failures to contain derivatives risks at JPMorgan Chase -- troubles that lead to billions of dollars in losses from a single trade.
The legislation will next be considered by the full House of Representatives.
The most controversial bill to advance Wednesday is explicitly designed to expand taxpayer backing for derivatives. It was the only legislation that lawmakers were required to cast individual votes for or against; the others were all approved by unanimous voice votes. The bill to increase taxpayer support for bank derivatives dealing was approved by a vote of 31 to 14....

Dodd-Frank forced banks to move some of their derivatives sales operations out of the unit that receives government insurance, in an effort designed to prevent taxpayers from having to repay depositors if risky derivatives forced a bank to fail. On Wednesday, the House committee approved a bill that would eliminate that safeguard and allow banks to deal derivatives from their taxpayer-backed unit. The repeal was sponsored by Reps. Jim Himes (D-Conn.), Sean Patrick Maloney (D-N.Y.), Randy Hultgren (R-Ill.) and Richard Hudson (R-N.C.). Banks like the provision because it allows them to earn higher profits from their derivatives sales, since credit rating agencies issue higher ratings to derivatives sold with taxpayer support.

3---ECB to Push Cyprus Over the Brink, naked capitalism

During the day yesterday, Eurozone officials made it clear that they would not accept some other ideas that Cyprus had developed to try to shield depositors, such as accessing pensions fund assets, restructuring the two largest banks, and selling its gas rights to Russia. ....

Now some believe that the ECB might extend the timetable. But I can think this will happen only if Cyprus has capitulated and there are merely some formalities to be tidied up. Eurozone officials were making threatening noises all during the day Wednesday about how Cyprus could not keep its banking system shut much longer.
So all eyes will be on the Cyprus parliament. Will it defy the Eurocrats or surrender to their will

4---UK unleashes the dogs of subprime, IFR

Cry ‘Bubble!’ and let slip the dogs of subprime. Britain on Wednesday unveiled a new budget including £130bn of mortgage guarantees which will enable patsies, er, hardworking home-buyers, to buy properties worth as much as £600,000 (US$900,000) with as little as 5% down

5---Cyprus votes "NO", yanis varoufakis

The ‘No!’ vote in Cyprus’ parliament was, indeed, momentous. For the first time since the Eurozone Crisis began, a Parliament has called the bluff of those with more power than sense. My fear now is that, as they heard themselves say ‘No!’, Cypriot parliamentarians may have become scared by the sound of their own courageous voice, and may therefore be more prone to succumbing to an equally terrible proposal; indeed that they may accept, next time a proposal is brought to them, an even worse deal than they one they rejected. For instance, the Eurozone may decide to offer Cyprus a deal closer in spirit to that of Greece or Ireland; i.e. a bailout package whereby the banks’ depositors take a much smaller hit (e.g. 2 billion as opposed to 5.8 billion) with the remaining burden pushed on the shoulders of the struggling taxpayer or of the island’s pension funds. This would be tragic: If more than 10 billion of loans is unloaded on the taxpayer, the austerity strings that will come attached with it will crush small pensions, the health system, schools, unemployment benefits and the whole of the private sector as the debt-deflationary cycle will cause the troika, Greece-style, to force Nicosia to impose hefty new taxes on property, consumption, you name it.

6---Zillow home values rise for 16 consecutive months, Housingwire

7----Banks behind Detroit ‘emergency manager’ takeover, workers world

Michigan’s multimillionaire Gov. Rick Snyder on March 14 appointed Washington lawyer Kevyn Orr as “emergency manager” over the city of Detroit. This has become the latest majority African-American municipality in Michigan to fall under the dictatorship of the state, which is serving as an agent of the banks. The banks claim the people owe them approximately $16.9 billion in long-term debt.

The Detroit City Council filed an unsuccessful appeal on March 12 against the state takeover, but Snyder went ahead with the seizure just two days later.

As Snyder introduced Orr at a press conference at the state office building in the New Center area, demonstrators picketed outside. They condemned the governor’s act of dictatorship and total abrogation of the democratic rights of voters, who just in November had voted down the emergency manager law in a statewide ballot initiative.....

Detroit city workers have already been forced to take up to 20 percent pay cuts and see the erosion of their health care and pension benefits. Since corporate-oriented Mayor Dave Bing took office in 2009, some 4,000 city jobs have been eliminated.
The city is facing a monumental economic crisis. Public transportation is in an abysmal state, lighting is out in large sections of the city, and streets are in gross disrepair.
The emergency manager’s main role, however, is to guarantee that debt service is paid to the banks. All existing labor contracts and other measures can be thrown out based upon the interests of capital.....

The Moratorium NOW! statement read in part: “Snyder along with the corporate media is blaming the people of Detroit for their current plight, yet the situation … in the city is a direct result of racist and exploitative practices of the financial institutions and the corporations. Over the last decade more than 237,000 people were forced out of the city due to home foreclosures, utility shut-offs and the elimination of jobs.”
Regarding the debt, the statement continues: “Piled on top of this massive loss of employment and fraudulent mortgage lending, the city government was forced into credit default swaps (cds) and other questionable municipal loans which have rendered the people to indebtedness that can never be paid off. In addition, the bond rating agencies such as Moody’s, Standard & Poor’s and Fitch have continued to lower the creditworthiness of the city and [are] therefore driving up interest and penalties where the banks can now claim all tax revenues that should be utilized to pay for municipal services and education.”....

The Moratorium NOW! Coalition calls for “an immediate halt to all debt-service payments to the banks which would immediately provide enough revenue to operate the city. The banks must then be held accountable for their robbery and consequent destruction of Detroit.”
The coalition also calls for “mass demonstrations, rallies, press conferences to protest and denounce the actions of Snyder and his collaborators. These protests should expose the criminal nature of the banks and the corporations who are at the root of the financial crisis in Detroit and throughout the state of Michigan.”
Meanwhile, the first batch of some 2,700 documents has been released by the city of Detroit as part of the Freedom of Information Act lawsuit filed by Moratorium NOW! in February. The organization is setting up a people’s review board to analyze the documents and expose that the existing crisis is the direct result of the banks’ usurious policies.

8---On eve of emergency manager take-over---Unions move to ram through concessions against Detroit workers, wsws

In order to preserve its dues income and institutional interests, the union bureaucracy has made it clear it is willing to hand over everything and sign bogus “contracts” that are little more than slave charters, guaranteeing management free reign to slash wages and pensions and destroy working conditions. In any case, under the new emergency manager law, Orr has dictatorial powers to tear up any labor agreement and impose his own terms...

AFSCME is demanding workers at the Water and Sewerage Department—members of Locals 207, 2394 and 2920—accept a six-year deal, which will impose a pay freeze for the life of the contract, schedule 10-12 hour shifts, facilitate the firing of workers and impose higher worker contributions for health care and pension benefits.
Moreover, the agreement is not even a contract in any serious sense, since the federal judge overseeing the water department or the emergency manager can reopen it after July. If there is no deal within 30 days of renewed negotiations, the judge or EM can unilaterally impose a new contract and slash pensions, wages and other benefits
.......

AFSCME is demanding workers at the Water and Sewerage Department—members of Locals 207, 2394 and 2920—accept a six-year deal, which will impose a pay freeze for the life of the contract, schedule 10-12 hour shifts, facilitate the firing of workers and impose higher worker contributions for health care and pension benefits.
Moreover, the agreement is not even a contract in any serious sense, since the federal judge overseeing the water department or the emergency manager can reopen it after July. If there is no deal within 30 days of renewed negotiations, the judge or EM can unilaterally impose a new contract and slash pensions, wages and other benefits

9---Vampire Capitalism Comes to Detroit, Michigan and Dekalb County, Georgia. Where is the Black Political Class?, Bruce Dixon, Black Agenda Report

the “crises” are fabrications of corporate media, and the wealthy banksters, bondholders and privatizers whose “solutions” are inevitably pushed upon us. In Detroit, bondholders and banksters declared they feared the city would miss or default on the interest payments for previous loans, and that was just about all the governor needed to sweep aside Detroit City Hall and appoint what amounted to a dictator over every aspect of local government. In Georgia, the private organization which accredits public school systems is a captive of the US Chamber of Commerce and right wing pro-charter and privatization foundations, so it threatened to revoke the accreditation of a county school system serving 100,000 children based upon spurious, insubstantial, and in some cases anonymous charges against elected school board members, so the governor could fire and replace them with his own appointees. In both locations, the gubernatorial appointees will impose massive job, wage and service cuts, and are expected to privatize everything that's not nailed down.

This is the hollow soul of vampire capitalism --- the conversion of local government from an engine which collects local tax revenue, user fees and dollars from state and federal levels to pay living wages, health care and pensions to its service-providing employees, into an engine that diverts tax revenue straight into the pockets of banksters for debt repayment, and sells off public assets like city and school district real estate for a song to well-connected looters and privatizers. On the economic level bloodsucking fiscal austerity is just about as rational a the brain deciding to strip mine the liver and kidneys for minerals.
 
10---Double Vision, Metro Times
 
According to Irvin Corley Jr., who heads the Detroit City Council’s Fiscal Analysis Division, Bank of America/Merrill Lynch is one of the counterparties in a complex credit swap deal that includes a stipulation where the city would be forced to pay lenders a $400 million lump-sum payment in the event certain “termination events” occur. One of those triggers is the appointment of an emergency manager.
 
For his part, Orr has pledged to wield the “cudgel” of bankruptcy as a threat to wring concessions out of bondholders.

But he’s also going to be doing a lot of other types of “restructuring.”

Which brings us to the point of view held by skeptics. They are people like the Rev. Wendell Anthony, head of the Detroit branch of the NAACP. Anthony looks at the Jones Day client list and sees, along with some of the country’s biggest financial institutions, the name Amway — the source of billionaire Dick DeVos’ wealth. DeVos was also a major proponent of the anti-union “right to work” measure Snyder signed into law last year.

And this is what the skeptics fear: that Detroit and its 700,000 residents are going to be used to test the theories of the right wing, which believes that the route to fiscal salvation is found through imposed austerity and privatization.
“Emergency managers,” said Anthony, “perform three particular functions: Cut, Slash and Sell! Our city cannot cut its way into the future or slash its way into stability or wind up selling every asset that it has to stimulate growth in the economy.”
Maybe not, but it sure looks like the pieces are in place to give it a try

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