Thursday, December 30, 2010

Last Call

People differ on what will be done in 2011 when states run out of stimulus cash --  the gamut runs from borrowing more tho Chapter 8 bunkruptcy -- but all the "experts" agree:  state employees will be the biggest losers.  CNBC's Nicole Lapin:

The mere idea of bankruptcy sounds unpalatable to some governors, including Mark Parkinson from Kansas. “Declaring bankruptcy is not the answer to the budget crisis facing many states,” he said, adding that “the crippling public relations message bankruptcy would send to businesses and investors and the ripple effect on local communities is too high a price to pay for any potential upsides.” 

True, at first glance, it seems nuclear. But, the potential upsides to allowing states to declare bankruptcy are far too compelling to dismiss outright. Namely, it would give bite to the barking we’ve been hearing from the states’ governors, like Parkinson, letting them play hardball with their biggest creditors — bondholders and union contracts. 

Granted, union contracts can theoretically be restructured outside of bankruptcy, but in no meaningful way. State bonds, in essence, can’t be restructured without bankruptcy. 

I’m not suggesting that bankruptcy is the only option. It’s not even a good one to see to fruition, but the mere threat might reduce the burden on Congress to push through more stimulus or a state bailout. 

“Some of the biggest benefits would occur even if no state ever actually filed for bankruptcy,” Skeel tells me. “Creditors might agree to much more meaningful concessions if the alternative is a messy bankruptcy that would require even greater concessions.” 

Yay, abrogating union contracts is an "upside".   So what more cuts will state employees be asked to suffer?  They're already losing benefits and work hours left and right.  States want to declare bankruptcy so they can throw out state employee contracts and screw them over.

What, you thought bondholders and multi-billion dollar institutional investors like hedge fund giants were going to have to eat crap sandwiches on this?  Yeah, right.

And as before, this article do I see "raising taxes in order to close budget gaps" as an option.  We're being told that bankruptcy and contract abrogation of state employees is the "only option" that must be considered before "turning on the printing press".

The reality is that allowing Congress to change federal law to allow states to consider bankruptcy before raising taxes is patently ridiculous.

Greek Fire, Part 25

We're now back to interest rates on the Greek 10-year bond above where they were when Greece needed a bailout.

Greek 10-year bonds on Thursday rose to a record high of 12.553 percent, breaking the previous record set earlier this year during its bailout by the European Union and International Monetary Fund.

In thin trading the yield, or return to investors, on Greek 10-year bonds rose from Wednesday's close of 12.489 percent to hit an intra-session high of 12.553 percent. It later dropped to 12.504 percent.

The records of 12.465 percent intra-session and 12.449 percent close were set in May, when the country secured a 110-billion-euro (150-billion-dollar) EU-IMF bailout.

Investors have been spooked by Greece's high deficit and debt levels, and been demanding higher returns.

You think?   The Greek bailout has failed.  The Irish bailout is looking pretty failtastic too.

From the report: "Deposits from the Irish resident private sector were 6.7 per cent lower on a year-to-year basis in November 2010. The annual rate of change in deposits from Irish households was minus 4.5 per cent, whereas deposits from Irish NFCs fell by 14.9 per cent on an annual basis in November." What this means simply said, is that as more deposit capital is withdrawn from Irish banks, the more they will need to rely on ECB and ICB funding, the more distressed they will be perceived as, the more capital will be withdrawn and so on... But that is a 2011 story.

Boy, is it.  Greece is crashing, Ireland is next, and the rest of the PIIGS are about to be barbecued.  I've been warning about Greece and Ireland for months now, and it's looking more and more like worst case scenario time.  The Eurozone is destabilizing across the board.  Italy's latest bond auction failed today.  Portugal is planning to sell all kinds of bonds in 2011 in a buyer's market.  There's no appetite for Spain's bonds at all.

The Greek Fire is raging across Europe, folks.  And it's looking like there's no way to put it out until everything is reduced to ashes.  As Digby reminds us, that's what's in store for us if we let it happen.

By The Time I Get To Arizona, Part 13

The mastermind behind Arizona's War On The Brown kicks it into high gear as voters have rewarded GOP State Senator Russell Pearce as the President of the Arizona Senate.  Pearce, you'll remember, is the racist assclown behind Arizona's "Papers, Please" immigration law.  Now he's making good on his campaign pledge to revoke the citizenship of children born in the US to undocumented parents.

His plan is to pass such a blatantly unconstitutional law that it forces a Supreme Court ruling on the 14th Amendment.

PEARCE: Well, because we have about 18 states that have joined us in this effort, a coalition of 18 states that agree with us. Others do, too. They just don`t think they can pass it through their congress or -- I mean, their legislative bodies.

So we actually have the majority of Americans on this issue on our side, too. The polls show 62 percent to 70 percent of Americans know that birthright citizenship is unconstitutional, that the practice ought to be stopped.

What you`re doing, you are inducing -- it is against the law to enter the United States in violation of federal law. And it`s against law to remain here without permission. And yet we induce you to break the law. It is absolutely outrageous. The common sense...

Amazing.   And of course, the next step is to round up and deport all undocumented people in the country.   Hey, can you prove your parents were US citizens when you were born here?  Better hope you can in Russell Pearce's world.  He's been planning this for a while, hoping the "activist judges" of the Supreme Court will validate their hate-filled viewpoint as law.

Republicans continue to shift towards being the party of "screw you, minorities."  They are so afraid of Latinos that they are willing to try to rewrite the Constitution to get rid of them.

One Hell Of A Snow Job

Today's winger "How dare they!" poutrage is a NY Post story pinning the blame for the slow cleanup in NYC after last weekend's blizzard squarely on those Evil Unionized City Workers.

Selfish bosses from the snow-slammed outer boroughs ordered their drivers to snarl the blizzard cleanup to protest budget cuts -- a disastrous move that turned streets into a minefield for emergency-services vehicles, The Post has learned.

Miles of roads stretching from as north as Whitestone, Queens, to the south shore of Staten Island still remained treacherously unplowed last night because of the shameless job action, several sources and a city lawmaker said, which was over a raft of demotions, attrition and budget cuts.

"They sent a message to the rest of the city that these particular labor issues are more important," said City Councilman Dan Halloran (R-Queens), who was visited yesterday by a group of guilt-ridden sanitation workers who confessed the shameless plot.

Halloran said he met with three plow workers from the Sanitation Department -- and two Department of Transportation supervisors who were on loan -- at his office after he was flooded with irate calls from constituents.

The indignation is thick enough to weld to the front of a truck to use to plow the boroughs. The garbage slowdown killed people! String up the sanitation workers!

Of course a slightly less breathless look at the situation in the Big Apple this weekend reveals a lot more.

But the Bloomberg administration decided not to call a snow emergency. One city official briefed on the response to the storm said it was explicitly considered. But ultimately Mr. Doherty and Ms. Sadik-Khan decided against it, said Seth Solomonow, a spokesman for Ms. Sadik-Khan.

Mr. Solomonow said the forecast was not severe enough.

“As of about 5 p.m. on Christmas Day,” he said, “the forecast called for about a foot of accumulation, which is not uncommon and which is not a basis for a snow emergency declaration.”

Mr. Bloomberg, asked Tuesday why an emergency had not been declared, confused the issue by asserting that doing so would have put more cars on the roads, potentially creating more problems. But clearly, had he declared an emergency shortly after the Weather Service’s blizzard warning, there would have been ample time to move cars before the heavy snow began.

Mr. Hauer called the decision bewildering, and Mr. Bloomberg’s claims misleading.

“We’ve done snow emergencies in the city for decades, many decades, and people have always found a place to put their cars,” said Mr. Hauer, who has had many angry disagreements with Mr. Bloomberg over the years. “You’ve just got to give them enough time.” 

A snow emergency would have cleared the roads for emergency vehicles, but it was never declared by the Mayor's office.  Oh...and the city often hires private, non-unionized contractors to deal with snow emergencies too.

“If we had the private industry and the front-end loaders early, come in, it would have been a big help, no question about it,” Mr. Doherty said in an interview on Wednesday. “It is a problem.”

The problem, he said, rested largely with him. He said he might have taken too long to make the first calls for private help. He said he had become too consumed with deploying thousands of his own workers.

“Why did we wait so long?” he asked. “Well, maybe that is something we have to look at, no questions about it.”

There are, though, an array of questions about the system for soliciting private assistance. The city’s list of reliable, proven, untainted businesses has shrunk. Any new volunteers have to be vetted; it can take 12 hours to get them rolling.

Unlike years ago, Mr. Doherty said, the private workers just do not seem “interested in the work anymore.”

“Are we paying enough?” he said. “It may be the reason.” 

Seems to me the blame for this lies with a city administration that didn't take the threat of a blizzard seriously enough because it would have meant somewhere in America that a local government was spending money on something, clearly an illegal, unconstitutional act in the eyes of wingers.  Decisions were made pretty high up to cut corners and this was the result.

But blaming the city sanitation workers for the clogged streets is just idiotic.  Wingers expect all this stuff to magically be cleaned up, but don't think anyone should have to foot the bill...especially taxpayers.  Governance itself is the enemy, it seems.

This Year In Busted Banks

Unless there are any surprises tomorrow, 2010 will end with 157 bank failures, surpassing last year's 140. In 2011 more will be on the way.

The FDIC's list of "problem" banks - those whose weaknesses "threaten their continued financial viability"- stood at 860 as of Sept. 30, the highest since 1993. Historically, about a fifth of banks on the watch list end up failing.

Bank failures have left the FDIC insurance fund in the red, but the agency predicts that it will have more than enough money to meet the anticipated cost of failures through 2014.

As the financial crisis of recent years recedes, the FDIC has been predicting that 2010 will be the high-water mark for bank implosions.

"Going forward, the FDIC looks to see fewer failures," agency spokesman Greg Hernandez said.
Some industry observers agreed.

"I think we're over the hump of the problem but far from the end," banking consultant Bert Ely said.

Gary B. Townsend, president of Hill-Townsend Capital, said the industry is not just out of the woods, "we are far beyond the woods."

By one measure, the trouble is already abating. On average, the banks that failed this year were much smaller than those that failed last year.

The banks that failed this year had assets totaling $92.1 billion, a decrease of 45.7 percent from the $169.7 billion in assets of the banks that failed in 2009.

"These are very small institutions," Townsend said. "The total assets that they represent is insignificant compared to the financial system as a whole. It's quite manageable."

Well gosh, that's nice.  If that one-fifth rule holds true, there will be 172 bank failures in 2011.  Sure the banks are smaller, and there's a reason for that:  these are the banks below the "Too Big To Fail" line, community and regional banks.  They are getting snapped up by the megabanks, while the taxpayer foots the bill for the rest of the mess.

The forced consolidation by FDIC attrition of the industry will continue in 2011.  Fewer banks means less competition, means higher lending costs to the customer.

The community bank is on the endangered species list.

Working Over Veterans

Veterans of Iraq and Afghanistan are finding that transitioning back to the civilian workforce is pretty damned difficult when there's no jobs.

While their nonmilitary contemporaries were launching careers during the nearly 10 years the nation has been at war, troops were repeatedly deployed to desolate war zones. And on their return to civilian life, these veterans are forced to find their way in a bleak economy where the skills they learned at war have little value.

Some experts say the grim employment landscape confronting veterans challenges the veracity of one of the central recruiting promises of the nation's all-volunteer force: that serving in the military will make them more marketable in civilian life.

"That [promise] works great in peacetime," said Lawrence J. Korb, an assistant secretary of defense for manpower under President Ronald Reagan who is now a senior fellow at the Center for American Progress. "But that does not work too well in war. . . . If you are in there four years and deployed twice, what kind of skills have you learned other than counterinsurgency?"

The unemployment rate for Iraq and Afghanistan war veterans was 10 percent in November, compared with 9.1 percent for non-veterans, according to the federal Bureau of Labor Statistics. Unemployment rates for combat veterans of the wars in Iraq and Afghanistan have been higher than the overall rate since at least 2005, according to the bureau. 
And it's pretty simple, really.  Employers these days can pick and choose the most qualified candidate for the job, and that usually means somebody with recent experience, not somebody who has spent the last several years out of the job market.

But note that it's not the recession that caused this.  Iraq and Afghanistan vets have been unemployed at a higher rate since 2005, well before the bottom fell out of the job market.  Employers wonder about the mental health history of a returning vet who served three or four tours in the sandbox.

That means the job market, or lack of it, is driving a lot of vets back into active service.  The larger problem is after nine years of war, we're discovering new and heartbreaking costs everywhere.

If It's Thursday...

New jobless claims finally...finally...fall under 400k for the first time in nearly two and a half years.

Initial claims for state unemployment benefits fell 34,000 to a seasonally adjusted 388,000, the lowest reading since early July 2008, the Labor Department said Thursday. That was well below economists' expectations for 415,000.

The prior week's claims figure was revised modestly up to 422,000 from the previously reported 420,000. A Labor Department official said there was nothing unusual in the state-level data and described the report as clean.

That's good news if the trend keeps up and businesses are hiring in 2011.  Unfortunately, I see a reversal in much of the gains made in the labor market next year.   I'd very much like to be wrong about this, but I doubt I will be.

The Epic Year In Politics Win

I've got five folks in consideration for this year's EPIC WIN, Political category:

  • Sen. Lisa Murkowski (R-AK) -- who came back from Tea Party primary hell served up by Joe Miller and Sarah Palin to win as a write-in.
  • Rep. Nancy Pelosi (D-CA) -- who SMASHED a path through health care reform with her gavel, got smashed in return by voters, and still remained minority leader going into 2011.
  • Sen. Scott Brown (R-MA) -- who succeeded Ted Kennedy and turned out to be a better Democrat than some Democrats in the Senate, going from GOP hero to goat in less than a year (and Donk goat to hero in the same time period.)
  • Rep. Barney Frank (D-MA) -- who laid the smacketh down on reporters, Republicans, and critics by getting both Wall Street reform and DADT repeal through the House.
  • President Barack Obama -- who rolled the dice on the lame duck, yelled Yahtzee and came away with a hell of a bag of Christmas legislation out from under the Republicans' noses.

So, of those five players in 2010, which one had the biggest EPIC WIN in Washington this year?

More Recess Success

President Obama made six recess appointments on Wednesday as Senate Republicans stalled the confirmation process in 2010.

Obama first nominated James Cole to the No. 2 Justice Department post in May. But Republican lawmakers blocked his confirmation in part because of questions about his role as an independent consultant for AIG before its near collapse and government bailout in 2008. Senate Republicans complained that confidentiality agreements prevented them from receiving answers about his work for the company.

Cole is a close friend of Attorney General Eric Holder and a partner at a private Washington law firm. His appointment is one of six Obama announced from his vacation in Hawaii, including ambassadors to Turkey and Syria.

Both Republican and Democratic presidents have made recess appointments, which circumvents the Senate's authority to confirm nominees, when they could not overcome delays in the Senate. President George W. Bush made more than 170 such appointments in his two-term presidency. President Bill Clinton made nearly 140.

Obama has made 28 recess appointments this year. The White House said Bush had made 23 at this point in his presidency.

Obama has often warned that he is willing to turn to recess appointments to overcome Republican opposition. The White House said the appointees he named Wednesday had their nominations pending for an average of five months.

Several ambassadors to former Soviet republics and Middle Eastern countries were appointed last night.  It's hard to imagine why Republicans would sit on vital ambassadorial confirmations like that, but then again Democrats did delay many of Bush's appointments as well.

It's one of the valid "both sides do it" situations out there.  You would think some sort of Senate reform on the filibuster and secret holds would be welcomed by both sides, but you'd be wrong.


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