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Global Financial and Economic Crises

Project: Global Financial and Economic Crisis 2007-Present
Open-Content project managed by KJF, mtuck

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According to a survey of factories released by Credit Lyonnais South Asia (CLSA), a brokerage firm that monitors Asia-Pacific markets, although Chinese manufacturing contracted in January and February, the rate was slower in February than the previous month. The survey is issued as China’s legislature and a top government advisory body meet in Beijing. It is expected that the meeting will yield additional measures to stimulate the economy. In a statement released with the survey, CLSA declares, “The rate of contraction remained marked, reflecting a reduction in global demand and an uncertain economic outlook.” Manufacturing is reportedly 40 percent of China’s economic output. A drop in exports demand has led to thousands of factory closures, prompting protests by laid-off workers. Chinese leaders are concerned that additional job losses may fuel unrest. According to the CLSA survey, production and new orders fell in February, and manufacturers continued to shed jobs in an effort to cut costs. “Manufacturing activity is still contracting, only at a more moderate pace than at the end of 2008,” says Eric Fishwick, the head of CLSA’s economic research. China is one of the few major economies still growing, although growth fell to a seven-year low of 6.8 percent in the final quarter of 2008, compared with the same period a year earlier. Last November, the government announced a $586 billion plan to boost domestic consumption in an attempt to assist in cushioning the impact of the global slowdown. Officials say that the effects of public works spending will be slow. Quoting Premier Wen Jiabao, Xinhua News Agency reports that some indicators, such as recent upturns in power demand and rising steel output, suggest that the economy is stabilizing. However, trends remain dismal in the US and around the globe. “China cannot expect to recover just by spending its way out of the slowdown,” says Jing Ulrich, JP Morgan’s chairwoman of China equities in a report issued today. “While early signs of economic stabilization are encouraging, it remains to be seen if this uptrend is sustainable.” [International Herald Tribune, 3/2/2009]

Entity Tags: JP Morgan Chase, Credit Lyonnais South Asia, Jing Ulrich, Eric Fishwick, Xinhua News Agency, Wen Jiabao

Category Tags: Commentaries on Economic Issues, Other

US Federal Reserve Chairman Ben Bernanke tells a Senate committee that having to rescue the insurer AIG made him “more angry” than any other episode during the financial crisis. “AIG exploited a huge gap in the regulatory system, there was no oversight of the financial products division,” Bernanke says. “This was a hedge fund basically that was attached to a large and stable insurance company.” In addition, on this day stock in AIG closes at 43 cents. [Bloomberg, 3/5/2009]

Entity Tags: US Federal Reserve, Ben Bernanke, AIG (American International Group, Inc.)

Category Tags: Failing Companies, USA, AIG

John Boehner (R-OH), the House Minority Leader, calls on the Obama administration to implement a freeze on government spending, and for President Obama to veto a $410 billion spending bill. Boehner says recent spikes in unemployment figures are a sign of a worsening recession, and the only way to address the recession is to freeze government spending until the end of the fiscal year. He calls the spending bill, crafted in December with input from Congressional Democrats and Republicans as well as from the Bush White House, full of wasteful “earmarks” and “pork.” [Associated Press, 3/6/2009] Boehner introduces a resolution calling for the freeze in the House; it fails, even though all House Republicans present for the vote and eight Democrats vote for it. [Human Events, 3/6/2008] Two days after Boehner’s call for a spending freeze, conservative columnist David Brooks calls the proposal “insane” and blames the influence of conservative talk show host Rush Limbaugh for the idea. Brooks says that Limbaugh and the Republican Party is fixated on repeating a Reagan-era economic agenda. “The problem with them and the problem with Limbaugh in terms of intellectual philosophy is they are stuck with Reagan,” Brooks says. “They are stuck with the idea that government is always the problem. A lot of Republicans up in Capitol Hill right now are calling for a spending freeze in a middle of a recession/depression. That is insane. But they are thinking the way they thought in 1982, if we can only think that way again, that is just insane. And there are a lot of Republicans like David Frum… who are trying to say Reagan was right for his era, but it is time to move on. And there are just not a lot of them on Capitol Hill right now, and I think the party is looking for that kind of Republican.” [Huffington Post, 3/8/2009]

Entity Tags: Rush Limbaugh, David Brooks, Bush administration (43), Barack Obama, John Boehner, Obama administration, David Frum

Category Tags: Commentaries and Criticisms

Republican House member Patrick McHenry (R-NC) admits that his party’s resistance to Democratic initiatives are designed to bring down the approval numbers for House Speaker Nancy Pelosi (D-CA) and the Congressional Democratic leadership. Speaking of Republican resistance to the Democrats’ recent budget proposal and other economic initiatives from the Obama administration and House Democrats, McHenry says: “We will lose on legislation. But we will win the message war every day, and every week, until November 2010. Our goal is to bring down approval numbers for Pelosi and for House Democrats. That will take repetition. This is a marathon, not a sprint.” McHenry belongs to a group of Congressional Republicans helping to shape the party’s message in opposition to Obama and Congressional Democrats. Washington Post pundit Greg Sargent writes, “It’s likely that Dems will grab on to [McHenry’s] quote today to bolster their charge that Congressional Republicans aren’t interested in playing a constructive role in governing and see their hope for political revival in the eventual failure of the Democratic majority’s policies.” The article also cites a recent statement by House Minority Leader John Boehner (R-OH), who told a group of reporters that House Republicans would not bother crafting bills to provide alternatives to Democratic economic legislation: “I have been trying to get my Republican colleagues to understand that we are not in the legislative business. We will spend more time communicating [with the American people], because that is what we can do.” [National Journal, 3/7/2009; Plum Line, 3/9/2009]
Minority Leader: Comments 'Largely Correct, but Incomplete' - Through a spokesman, Boehner says of McHenry’s statement: “I think that’s largely correct, but incomplete. Obviously, as Leader Boehner has said repeatedly, we stand ready to work with the Speaker and the president when it is in the best interest of the American people. When we cannot work together, Republicans will offer better solutions—rooted in our principles—to the problems facing our country. If House Democrats push for the same tired liberal agenda of higher taxes to pay for more ineffective government spending, I imagine that their standing in the polls will suffer, but our first priority is doing the right thing for the American people, and we hope it is theirs as well.” Sargent notes: “My parsing of this is that Boehner believes that McHenry’s description of the party’s strategic goal as winning the message war and dragging down Dem poll numbers is ‘largely correct,’ but that McHenry left out the GOP’s willingness on principle to work with Dems and that the GOP’s ‘first priority is doing the right thing for the American people.’ That would appear to stop short of disagreeing with or criticizing McHenry.” [Plum Line, 3/10/2009]
McHenry's Previous Utterances - In April 2008, McHenry was reprimanded by the Pentagon for breaching operational security and and giving terrorists potentially useful information (see April 4-7, 2008). In February 2009, McHenry joined in falsely accusing the Obama administration of funding a “levitating train from Disneyland to Las Vegas” (see February 13, 2009 and After).

Entity Tags: Nancy Pelosi, John Boehner, Greg Sargent, Obama administration, Patrick McHenry

Category Tags: Commentaries and Criticisms

Regulatory reports on Bank of America, Citibank, HSBC Bank USA, JP Morgan Chase, and Wells Fargo indicate that, as loan defaults of every kind soar, the institutions face “catastrophic losses” should economic conditions “substantially worsen.” Already suffering as a result of what the banks term “exotic investments,” the reports disclose that, as of December 31, 2008, current net loss risks from derivatives—quasi-insurance bets tied to loans or other underlying assets—have swelled to $587 billion. According to McClatchy journalists Greg Gordon and Kevin G. Hall, obscured in the year-end regulatory reports that they reviewed were figures reflecting a jump of 49 percent net loss in just 90 days.
Bailout Money Shoring Up Reserves - Taxpayer bailout money has already shored up four of the five banks’ reserves, with Citibank receiving $50 billion and Bank of America $45 billion, in addition to a $100 billion loan guarantee. According to their quarterly financial reports as of December 31:
bullet JP Morgan had potential current derivatives losses of $241.2 billion, overrunning its $144 billion in reserves, and future exposure of $299 billion.
bullet Citibank had potential current losses of $140.3 billion, outstripping its $108 billion in reserves, and future losses of $161.2 billion.
bullet Bank of America reported $80.4 billion in current exposure, lower than its $122.4 billion reserve, but $218 billion in total exposure.
bullet HSBC Bank USA had current potential losses of $62 billion, over three times its reserves, and potential total exposure of $95 billion.
bullet San Francisco-based Wells Fargo, which took over Charlotte, N.C.-based Wachovia in October 2008, reported current potential losses totaling almost $64 billion, below the banks’ combined reserves of $104 billion, but total future risks of about $109 billion. [McClatchy Newspapers, 3/9/2009; Idaho Statesman.com, 3/9/2009]

Entity Tags: Kevin G. Hall, Citibank, Greg Gordon, Bank of America, HSBC Bank USA, Wells Fargo Bank, N.A., Wachovia Bank, N.A., JP Morgan Chase

Category Tags: Bailouts and Other Government Aid, Failing Companies, Commentaries on Economic Issues

Troubled insurer AIG discloses that several US and European banks have been beneficiaries of the government’s bailout of the insurance company (see September 17-October 7, 2008). It announces that more than $90 billion was paid to various banks between the September bailout and the end of 2008. The banks include Goldman Sachs, Société Générale, Deutsche Bank, Barclays, Merrill Lynch, and Bank of America. Goldman Sachs, which received $12.9 billion between mid-September and the end of December—making it the largest beneficiary, will later say it did nothing wrong by accepting payments to close out trades before and after the insurer was rescued. [Reuters, 4/17/2009]

Entity Tags: Barclays Bank, Bank of America, Société Générale, Goldman Sachs, AIG (American International Group, Inc.), Deutsche Bank, Merrill Lynch

Category Tags: Failing Companies, USA, AIG

Having received over $170 billion in taxpayer bailout funds in the last five months, troubled insurance giant American International Group (AIG) pays executives nearly $200 million in bonuses. The largest are bonus payouts that cover AIG Financial Products executives who sold risky credit default swap contracts that caused huge losses for the insurer (see September 16, 2008). Despite a request by US Treasury Secretary Timothy Geithner for the insurance conglomerate to curtail future bonus pay—and AIG’s agreement to do so—the global insurer cuts bonus checks on Sunday, March 15, 2009, in order to meet a bonus payment agreement deadline. The Treasury Department has publicly acknowledged that the government does not have the legal authority to block current bonus payments, although AIG stated in early March that it suffered its largest corporate loss in history, when it reported fourth quarter 2008 losses of $61.7 billion.
Treasury Tried to Prevent Payments - An anonymous Obama administration official says that on March 11 Geithner called AIG Chairman Edward Liddy demanding that the CEO renegotiate the insurer’s present bonus structure. In a letter, Liddy informed Geithner that outside lawyers had advised AIG that the company could face lawsuits, should they not make the contractually obligated payments. “AIG’s hands are tied,” Liddy wrote, although acknowledging that, with the company’s fiduciary situation, he found it “distasteful and difficult” to approve and pay the bonuses. He wrote that the early 2008 bonus payments agreement was entered into prior to the company being forced last fall to obtain the first taxpayer bailout because of the company’s severe financial distress.
Some Monies Already Paid Out - A white paper generated by AIG asserted that the firm had already distributed $55 million in “retention pay” to nearly 400 AIG Financial Products employees. According to the white paper, the global entity “will labor to reduce 2009 bonus payment amounts,” trimming payouts by at least 30 percent this year. [Associated Press, 3/15/2009]

Entity Tags: Edward Liddy, AIG (American International Group, Inc.), Timothy Geithner, US Department of the Treasury

Category Tags: Bailouts and Other Government Aid, USA, AIG, Failing Companies

US President Barack Obama attacks the payment of over $200 million in bonuses to top AIG employees (see March 15, 2009). As the company is being propped up by the government using public money (see September 16, 2008, October 8, 2008, and November 10, 2008), Obama calls the bonuses an “inappropriate use of taxpayer funds.” [Reuters, 4/17/2009]

Entity Tags: Barack Obama, AIG (American International Group, Inc.)

Category Tags: Failing Companies, USA, AIG, Obama Policies and Actions

The US House of Representatives passes a bill imposing a 90 percent tax on bonuses paid to AIG executives. The bonuses were set to be paid in December 2008 and earlier in the month, but there has been a public outcry against them, as the company had to be bailed out by the taxpayer six months ago (see September 16, 2008 and March 15, 2009). [Reuters, 4/17/2009] However, President Obama soon challenges the bill’s legality, saying: “I think that as a general proposition, you don’t wanna be passing laws that are just targeting a handful of individuals. You wanna pass laws that have some broad applicability. And as a general proposition, I think you certainly don’t wanna use the tax code to punish people.” The Democratic leadership in the Senate then says that it will wait and see what happens, instead of immediately acting on the bill forwarded by the House of Representatives. This effectively shelves the bill, although several of the executives give their bonuses back anyway (see March 24, 2009). [Politics Daily, 3/24/2009]

Entity Tags: Barack Obama, US Congress, AIG (American International Group, Inc.)

Category Tags: AIG, Failing Companies, USA, Obama Policies and Actions

Edward Liddy, chief executive officer of troubled insurer AIG, asks employees to repay part of their bonuses. The bonuses were to be paid out in late 2008 and earlier this month, but there has been a public outcry over them, due to the billions of dollars taxpayers have spent rescuing the company (see September 16, 2008 and March 15, 2009). According to Liddy, employees receiving more than $100,000 in bonuses should repay at least half. [Reuters, 4/17/2009]

Entity Tags: Edward Liddy, AIG (American International Group, Inc.)

Category Tags: Failing Companies, USA, AIG

At least 19 Congressional Republicans, including House Minority Leader John Boehner (R-OH) and Senate Minority Leader Mitch McConnell (R-KY), say that the Obama administration’s “cap-and-trade” proposal would cost American families $3,128 apiece in extra taxes.
Misrepresenting an MIT Study - Boehner, McConnell, and their fellow Republicans base their claim on a 2007 MIT study. However, one of the study’s researchers, John Reilly, says that the Republicans are misreading it. According to Reilly, any tax burden on American families would not be felt until 2015, and the cost would be closer to $31 per person and $79 per year. The controversial claim originates in a Web posting by the House Republican Conference on March 24, which says: “The administration raises revenue for nationalized health care through a series of new taxes, including a light switch tax that would cost every American household $3,128 a year. What effect will this have on Americans struggling to pay their mortgages?” The St. Petersburg Times explains that the GOP’s “light switch tax” is a reference to President Obama’s proposal to tax power companies for carbon dioxide emissions, and allow companies to trade emissions credits among themselves. The program is called cap-and-trade. Republicans say the power companies would pass the tax on to electricity consumers, thus creating what they call a “light switch tax”—a term the Times calls misleading in and of itself. According to the MIT study, such a program would raise around $366 billion per year; Republicans divide that figure by the 117 million households in the US and get $3,128 in additional costs. Reilly says the Republicans are “just wrong. It’s wrong in so many ways it’s hard to begin.”
Corrected by Study's Author - And, Reilly says, he told House Republicans so when they contacted him on March 20. “I had explained why the estimate they had was probably incorrect and what they should do to correct it, but I think this wrong number was already floating around by that time.” Republicans also claim that the Obama administration intends to use cap-and-trade money to pay for what they call “nationalized health care,” a claim refuted by details of the program released by Obama officials. (House Republicans later amend this claim to say that the program will pay for “increased spending.”) The Times notes that Boehner rebuffs a second attempt by Reilly to correct the claim that the program will cost American households over $3,000 per year.
Further Falsehoods - Instead, nine other Republicans and the neoconservative Weekly Standard begin echoing the claim, with the Standard claiming that their figures show an annual cost of over $3,900 and accusing Reilly of “low-balling the cost of cap-and-trade by using some fuzzy logic.” Reilly says the Standard “just completely twisted the whole thing.… It’s false.” Senator Judd Gregg (R-NH) takes the claim even further, saying that the huge annual tax would be levied on “every living American.” Representative Paul Ryan (R-WI) restates the cost to $4,500 per family, and fellow House colleague Cynthia Lummis (R-WY) raises the rate to $4,560. Fox News correspondent Jim Angle reports Gregg’s claim without refutation or examination; on a later Fox broadcast, Gregg says, “every time you turn on your light switch, you’re going to be paying a tax.”
Denouncing the Lies - Reilly has written to Boehner and the Select Committee on Energy Independence and Global Warming to denounce the GOP’s distortion of the MIT study. Democratic Representative Earl Blumenauer (D-OR) accuses the Republicans of “using an intentional misrepresentation of the study,” and says: “One of the things I find most distressing is their repeated falsehood about somehow a $3,000 increase in taxes on the American people based on a research done by MIT. They talked about it four times again last night!… The fact is that in the budget we have an opportunity for people who want to be legislators not communicators to help us allocate how those benefits will be utilized.” [St. Petersburg Times, 3/30/2009; Think Progress, 4/1/2009; Think Progress, 4/2/2009]

Entity Tags: Judd Gregg, Mitch McConnell, Paul Ryan, Obama administration, John Reilly, Jim Angle, Cynthia Lummis, Earl Blumenauer, House Select Committee on Energy Independence and Global Warming, House Republican Conference, John Boehner

Timeline Tags: Global Warming

Category Tags: Commentaries and Criticisms, Obama Policies and Actions

Arguing against taxing corporate bonuses, Fox Business Network anchor Dagen McDowell compares such taxation to sexual abuse: “You don’t want to think if you get in bed with Uncle Sam he’s going to strip you naked, chain you to the bed, leave you there, and then take nasty pictures of you and then put them on the Internet. Because that’s what’s been happening.” Fox News correspondent Bill Hemmer calls McDowell’s remarks “well stated.” [Think Progress, 3/24/2009]

Entity Tags: Bill Hemmer, Fox Business Network, Dagen McDowell

Category Tags: USA, Commentaries and Criticisms

Fifteen of the top 20 beneficiaries of bonuses at troubled insurer AIG have given the payments back, says New York Attorney General Andrew Cuomo. The bonuses were to be paid out at the end of 2008 and earlier this month, but there was a public outcry over them as the taxpayer had spent about $180 bailing the company out (see September 16, 2008, March 15, 2009, March 18, 2009, and March 19, 2009). [Reuters, 4/17/2009]

Entity Tags: Andrew Cuomo, AIG (American International Group, Inc.)

Category Tags: Failing Companies, USA, AIG

House Minority Leader John Boehner (R-OH) produces a Republican alternative to the Obama administration’s $3.6 trillion budget proposal. Calling President Obama’s budget “completely irresponsible,” Boehner holds up a booklet on the floor of the House and says: “Two nights ago the president said, ‘We haven’t seen a budget yet out of Republicans.’ Well, it’s just not true because—Here it is, Mr. President.” Boehner calls the booklet a “blueprint for where we’re going.” However, the booklet contains almost no details and no actual numbers; the Associated Press calls it “a glossy pamphlet short on detail.” Boehner’s House colleague Paul Ryan (R-WI) says more details will be revealed next week. “We’re going to show a leaner budget, a budget with lower taxes, lower spending, and lower borrowing,” Ryan says. “Our plan curbs spending, creates jobs, and cuts taxes, while reducing the deficit,” says Boehner. When asked about specifics, including where the cuts would come from, Boehner tells a reporter, “We’ll wait and see next week.” [CNN, 3/26/2009; Associated Press, 3/27/2009]
Cutting Deficits, Lowering Taxes for Wealthy Americans and Working Class - The proposal does not specify how it would reduce the federal deficit. It does advocate heavy cuts in domestic spending and lowering tax rates: the Republicans propose reducing the 35 percent, 33 percent, and 28 percent tax brackets to 25 percent, which would result in significant tax cuts for wealthier Americans. The proposal would also reduce the tax rate for those making below $100,000 to 10 percent. Liberal analyst Matthew Yglesias notes, “It’s strange that the Republicans railing about long-term deficits seem to love long-term deficits when the point of the deficits is to further enrich the rich.” [Think Progress, 3/26/2009]
No Actual Numbers - Representative Mike Pence (R-IN) says “[i]t’s not likely” that the GOP budget will be adopted. However, Pence says he believes “that a minority in Congress plus the American people equals the majority.” Pence adds, “We intend to take our case for fiscal discipline, growth, and tax relief to the American people from sea to shining sea and if the American people will rise up, anything is possible on Capitol Hill.” White House press secretary Robert Gibbs laughs at the Republicans’ budget proposal, noting that the blueprint contains more pictures of windmills than charts. “It’s interesting to have a budget that doesn’t contain any numbers,” he says. “I think the ‘party of no’ has become the ‘party of no new ideas.‘… The administration is glad that the Republicans heard the president’s call to submit an alternative,” he says. “We just hope that next time it will contain actual numbers so somebody can evaluate what it means.” Obama’s proposal is likely to be modified by more conservative Democrats in the upcoming days. Senate Republicans later say that they do not intend to submit a specific alternate proposal to Obama’s budget, a decision that the Associated Press notes “spares them the need to make politically difficult choices.” [CNN, 3/26/2009; Associated Press, 3/27/2009] Asked about the proposal’s effect on the federal deficit by MSNBC correspondent Norah O’Donnell, Pence is unable to answer the question. O’Donnell asks: “So you don’t have the numbers now? About what your plan would be in terms of how it would cut the deficit or add to the deficit? You don’t have any numbers on that?” Pence attempts to duck the question: “Well, it’s really a broad—when the White House a few minutes ago was attacking the numbers in this bill, the tax cut numbers. There’s plenty of numbers in the Republican recovery plan. And we just really believe the president’s plan to raise taxes by nearly 2 trillion dollars on almost every American… deserves a debate on Capitol Hill.” O’Donnell responds, “[H]ow is your plan credible?” Pence replies: “Well, I thought through this morning, we didn’t have a plan, so it may be progress our plan is being attacked.… This is the broad outline.” [Think Progress, 3/26/2009]
'Marketing Document' - Five days later, Ryan will admit that the “budget proposal” being offered by Boehner is nothing more than a “marketing document” (see April 1, 2009).

Entity Tags: Paul Ryan, Mike Pence, Matthew Yglesias, Norah O’Donnell, John Boehner, Obama administration, Robert Gibbs

Category Tags: USA, Commentaries and Criticisms

Dick Morris discussing the economy on Fox News.Dick Morris discussing the economy on Fox News. [Source: Fox News]Conservative political pundit Dick Morris tells a Fox News audience that the recent G20 economic summit advocated a “global approach” to the current economic crisis, and discussed putting both the Securities and Exchange Commission (SEC) and the Federal Reserve under the control of the International Monetary Fund—a position not advocated or discussed by anyone in the Obama administration. He worries that there will soon be what he calls “a supernational authority run by bureaucrats, not by elected officials, that will be telling the elected governments, including the United States, what its [economic] regulations should be.” President Obama is far more amenable to the idea of allowing a multinational authority to control the US economy, Morris insists, and adds that Obama intends to preside over what he calls “a global redistribution of income, downward,” using environmental policy as “an excuse.” “We’re about to meet Barack Obama the internationalist,” Morris continues, “not fighting for American interests, but looking for global coordination.” He concludes, “Those crazies in Montana who say, ‘We’re going to kill ATF agents because the UN’s going to take over’—well, they’re beginning to have a case.” [Media Matters, 3/31/2009]

Entity Tags: Fox News, Dick Morris

Timeline Tags: Domestic Propaganda

Category Tags: Commentaries and Criticisms, Obama Policies and Actions

Republican Representative Paul Ryan (R-WI) admits that the “budget proposal” offered the previous week by the GOP in response to President Obama’s own budget proposal (see March 26, 2009) was never anything more than a “marketing document.” On MSNBC’s “Morning Joe,” Ryan says, “The thing you saw last week was not the alternative budget, this is our alternative budget.” Ryan is referring to a budget the GOP intends to release later today. The “budget” touted on the floor of the House by Minority Leader John Boehner (R-OH) was a “marketing document,” Ryan says. “Somewhere along the line there was a misimpression given that that was our budget.” In the Wall Street Journal, Ryan says the GOP budget will include the following:
bullet A five-year non-defense spending freeze;
bullet Cutting the deficit 50 percent more than Obama’s proposal by 2019;
bullet More oil exploration and fewer regulations on pollution;
bullet A revamping of Medicare for those currently below age 55;
bullet Making permanent the Bush administration’s tax cuts for wealthy Americans, and a simplified tax code that taxpayers could choose to use.
Of President Obama’s budget, Ryan says, “If this agenda comes to pass, it will mark this period in history as the moment America turned European.” [The Hill, 4/1/2009] The Center for American Progress, a progressive think tank, says that a spending freeze as advocated by the GOP budget would be calamitous for the American economy. The freeze would negate the entirety of the Obama administration’s multi-billion stimulus package, and would rely entirely on economic recovery generated by supply-side tax cuts. MSNBC’s Chris Matthews compares the idea to the economic ideas that led to the Great Depression: “[I]t sounds very much like [former President Herbert] Hoover. This is a doctrine which was tried in 1932 and failed. In a period of international deflation, the worst thing you can do is join in the deflation by cutting spending.” [Think Progress, 4/1/2009]

Entity Tags: Paul Ryan, Chris Matthews, Center for American Progress, Barack Obama, John Boehner

Category Tags: Commentaries on Economic Issues, Commentaries and Criticisms

Alisyn Camerota.Alisyn Camerota. [Source: Fox News]Several media outlets report discredited Republican claims that the Obama administration’s “cap-and-trade” global warming initiative would cost American taxpayers over $3,000 per year. Fox News anchors Eric Shawn and Alisyn Camerota (see October 13, 2009), CNN producer Ted Barrett, and the Washington, DC, newspaper Roll Call repeat the claim, which originated in a March 23 House Republican Conference (HRC) “talking points” press release. [GOP (.gov), 3/23/2009; Media Matters, 4/6/2009] The claim points to a 2007 study by the Massachusetts Institute of Technology, but one of the study’s authors, John Reilly, says the Republicans’ interpretation of it is wrong (see March 24 - April 2, 2009). Reilly says the average household cost of $3,128, as calculated by the HRC, is “nearly 10 times the correct estimate” based on his study’s cap-and-trade model. The HRC’s error is further shown by a March 30 analysis conducted by the St. Petersburg Times. [St. Petersburg Times, 3/30/2009; Media Matters, 4/6/2009] Both Reilly and the Times show that the average annual cost per household will be closer to $340. On Fox News’s America’s News HQ, Shawn claims “this cap-and-trade, or as the Republicans call it, cap-and-tax—could add $3,000 a year on our electric bills.… [T]hat’s about—$290 or so a month. I mean, imagine the American public, everyone watching right now—all of us—getting an extra 300 bucks or so a month tacked on to our utility bills.” Camerota tells viewers of Fox News’s America’s Newsroom that the cap-and-trade proposal “would be $3,100 per US household.” Roll Call’s Jay Heflin publishes a claim by Senator John Cornyn (R-TX) that “the effort equates to a ‘light switch tax’ of up to $3,128 each year for families” without informing readers of Reilly’s and the Times’s differing analysis. [Media Matters, 4/6/2009; Roll Call, 4/6/2009] Similarly, on CNN’s Political Ticker blog, Barrett repeats a similar claim, writing, “Senate Republican Leader Mitch McConnell praised the Senate for having ‘slammed the door on using the fast-track process to jam through a new national energy tax’ that Republicans say will cost families $3,000 a year in higher energy costs.” [CNN, 4/1/2009; Media Matters, 4/6/2009]

Entity Tags: Obama administration, Ted Barrett, St. Petersburg Times, John Reilly, House Republican Conference, Jay Heflin, Alisyn Camerota, John Cornyn, CNN, Fox News, Eric Shawn, Roll Call

Timeline Tags: Domestic Propaganda

Category Tags: Obama Policies and Actions, Commentaries and Criticisms

A proposal by two Senators, Jon Kyl (R-AZ) and Blanche Lincoln (D-AR), to cut $250 billion in estate taxes for the children of multi-millionaires, garners what progressive think tank the Center for American Progress calls “a disturbing amount of support.” The New York Times writes that for Kyl and Lincoln: “[T]he most pressing [economic] issue is clear: America’s wealthiest families need help. Now.” The Kyl-Lincoln proposal would raise the estate tax exemption from $7 million to $10 million per couple and lower the top rate from 45 percent to 35 percent. Kyl, Lincoln, and other supporters say the estate tax cuts would protect small farms and businesses. This claim is refuted by the Center on Budget and Policy Priorities, which notes that “only 0.2 percent of the additional cost of the proposal, relative to [the Obama proposal for estate taxes], would go toward tax cuts for small businesses and farms.” Around $249.5 billion of that money would go to the inheritors of estates worth over $7 million. According to both the Times and the Center for American Progress, less than 0.3 percent of Americans would pay estate taxes under Obama’s proposal; only those households worth over $7 million. The Times observes: “In addition to creating the false impression that the estate tax eventually hits everyone—by mislabeling it a ‘death tax’—opponents routinely denounce the 45 percent top tax rate as confiscatory. In fact, the rate applies only to the portion of the estate that exceeds the exemption. As a result, even estates worth more than $20 million end up paying only about 20 percent in taxes. Another misleading argument is that the estate tax represents double taxation. In truth, much of the wealth that is taxed at death has never been taxed before. That’s because such wealth is often accrued in the form of capital gains on stocks, real estate, and other investments. Capital gains are not taxed until an asset is sold. Obviously, if someone dies owning an asset, he or she never sold it and thus never paid tax on the gain. If those arguments aren’t enough to stop the Lincoln-Kyl show, lawmakers should consider this: The estate tax creates a big incentive for high-end philanthropy, because charitable bequests are exempt.” [New York Times, 4/1/2009; Think Progress, 4/1/2009]

Entity Tags: New York Times, Blanche Lincoln, Center for American Progress, Obama administration, Center on Budget and Policy Priorities, Jon Kyl

Category Tags: USA

Fox News on-screen chyron falsely claiming Obama’s 2010 budget is four times larger than biggest Bush budget.Fox News on-screen chyron falsely claiming Obama’s 2010 budget is four times larger than biggest Bush budget. [Source: Media Matters]Fox News’s flagship morning news broadcast, America’s Newsroom, displays an on-screen “chyron” that falsely claims the 2010 budget proposed by President Obama—$3.6 trillion—is four times the largest budget ever submitted by former President Bush. As progressive media watchdog Web site Media Matters notes, Bush submitted a $3.1 trillion budget for 2009 and a $2.9 trillion budget for 2008 (see October 13, 2009). [Media Matters, 4/3/2009]

Entity Tags: George W. Bush, Media Matters, Barack Obama, Fox News

Timeline Tags: Domestic Propaganda

Category Tags: US Monetary Policy, Obama Policies and Actions, Commentaries and Criticisms

The insurer AIG, bailed out by the US government the previous year (see September 16, 2008), is in talks with the US Federal Reserve over extra credit, according to the Financial Times. The negotiations concern a $5 billion credit line that could be used to facilitate the sale of the company’s aircraft leasing business. [Reuters, 4/17/2009]

Entity Tags: US Federal Reserve, AIG (American International Group, Inc.)

Category Tags: Failing Companies, USA, AIG

In a speech to the Tulsa Chamber of Commerce, Federal Reserve Bank of Kansas City President Thomas Hoenig declares that US banks’ ability to remain viable during a deeper recession—while undergoing federal government stress tests—demonstrates that most don’t need more taxpayer money. “Although the United States has several thousand banks, only 19 have more than $100 billion of assets,” Hoenig says. “After supervising authorities evaluate their condition, it is likely that few would require further government intervention.” Designed to demonstrate how much extra capital banks may need to survive a deeper economic downturn, the stress tests are to conclude by April 30, 2009, with the 19 biggest banks’ test results to be disseminated to President Barack Obama in meetings with his economic team. Hoenig reiterates his view that the government shouldn’t prop up failing financial institutions but take them over temporarily and wind them down, as with the 1984 takeover of Continental Illinois National Bank & Trust Co. “I encourage Congress to enact a new resolution process for systematically important firms,” he says. “There has been much talk lately about a new resolution process for systemically important firms that Congress could enact, and implement it as quickly as possible, but we do not have to wait for new authority. We can act immediately, using essentially the same steps we used for Continental. An extremely large firm that has failed would have to be temporarily operated as a conservatorship or a bridge organization and then reprivatized as quickly as is economically feasible. We cannot simply add more capital without a change in the firm’s ownership and management and expect different outcomes.” Hoenig declares that calling a firm “too big to fail” is a “misstatement” because a bank deemed insolvent “has failed.” “I believe that failure is an option,” he says. After the government’s fourth rescue of American International Group Inc. (AIG), Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke called for new powers to take over and sell off failing financial companies, and also called for stronger regulation to constrict risks that might endanger the financial system. The Federal Deposit Insurance Corporation has the authority to take over failing firms, and dispose of their assets, but no such authority exists for non-banking financial firms such as a hedge fund or AIG, which have extensive links throughout the banking system. During a Q&A after his speech, Hoenig tells the audience that the Fed must be prepared to make a timely removal of its stimulus to deter a period of high inflation that could be likened to that of the early 1980s. “You cannot wait until you know for sure the economy is recovering,” Hoenig says, adding that “employment growth tends to lag” and may not be the best indicator of recovery. “We will watch every indicator of data that suggests we have a recovery under way.” He also says that if the US manages its economy well, the US dollar should remain the world’s reserve currency. “It is a matter of running your economy properly,” he says. “When the US does that, and I think we will, I think we will remain the largest, most successful reserve currency on the face of the earth.” [Bloomberg, 4/9/2009]

Entity Tags: Federal Deposit Insurance Corporation, AIG (American International Group, Inc.), Ben Bernanke, US Federal Reserve, Thomas Hoenig, Timothy Geithner, US Department of the Treasury

Category Tags: Bailouts and Other Government Aid, AIG, Failing Companies

Wells Fargo, the second largest home lender in the US, posts a surprising record first-quarter profit, outperforming the most hopeful estimates on Wall Street. The bank’s earnings are the most since July 16, 2007, with shares down 33 percent in 2009. The report also states that Wachovia Corporation, acquired by Wells Fargo in October 2008, is exceeding expectations. According to data compiled by Bloomberg, Wachovia’s $101.9 billion in losses and writedowns are the most for any US lender, and its adjustable-rate home loans are considered among the industry’s riskiest. Yet, in its preliminary report, Wells Fargo states that acquiring Wachovia “has proven to be everything we thought it would be.” Official first-quarter results will be released the third week in April.
Other Banks Also Gain; Profits Expected - The preliminary earnings report rallies the stock market, and the S&P 500 caps a fifth consecutive weekly gain and adds 3.8 percent to a two-month high of 856.56, the longest stretch since the bear market began in October 2007. The Dow Jones Industrial Average rises 246.27, to 8,083.38. The largest US lender, Bank of America, gains 35 percent today; JPMorgan 19 percent, and Citigroup 13 percent. The 24-company KBW Bank Index surges 20 percent, its biggest one-day gain since May 1992. Oppenheimer & Co. analyst Chris Kotowski says of these firms, “Barring an act of God, they had better report some number that is in the black or potentially risk being involved in some of the most intense securities litigation on record.”
Accounting Rules May Have Helped Profit Statements - Christopher Whalen, a managing director of Risk Analytics, says that the Financial Accounting Standards Board’s relaxation of accounting rules may have helped banks—including Wells Fargo—report a profit. “Most analysts are expecting loss rates to be much, much higher than we have seen in the last 20 to 30 years, even longer,” he says. “Given that, provisions of the large banks are not high enough.”
Wells Fargo 'Underperforming?' - While Wells Fargo Chief Financial Officer Howard Atkins says that increasing the bank’s provision for loan losses to $23 billion is adequate compared with other large US banks, FBR Capital Markets analyst Paul Miller wrote in a report that the bank’s addition of a $4.6 billion provision was below his estimate of $6.25 billion. “We remain cautious based on what we don’t know.” Miller rates Wells Fargo shares “underperform” and said that the preliminary report did not contain the percentage of non-performing loans and trends in Wachovia’s option-adjustable rate mortgate portfolio, a percentage Miller deems important. Atkins says that Wells Fargo benefited from strong trading results at Wachovia’s capital markets business, which the bank continues to shrink. He said that the improvement will not reverse those plans. Approximately 75 percent of Wells Fargo’s mortgage applications are refinance. President Obama said that homeowner interest rates, at less than five percent, are the lowest since 1971, and that it was “money in their pocket” for homeowners. Wells Fargo’s biggest shareholder is Berkshire Hathaway Inc., an acquisitions and investments firm owned by Warren Buffett. [Bloomberg, 4/9/2009]

Entity Tags: Dow Jones Industrial Average, Christopher Whalen, Wells Fargo Bank, N.A., Bank of America, Wachovia Bank, N.A., Standard & Poor’s, Warren Buffett, Paul Miller, Howard Atkins, JP Morgan Chase, Chris Kotowski, Risk Analytics, New York Stock Exchange, Oppenheimer & Co.

Category Tags: Bailouts and Other Government Aid

President Barack Obama implements a home mortgage rescue plan that he says will prevent as many as 9 million Americans from losing their homes to foreclosure. Obama says that turning around the battered economy requires stemming the continuing tide of foreclosures. He says that the housing crisis that began last year set many other factors in motion and helped lead to the current, widening recession. “In the end, all of us are paying a price for this home mortgage crisis,” Obama says. “All of us will pay an even steeper price if we allow this crisis to deepen. The American dream is being tested by a home mortgage crisis that not only threatens the stability of our economy but also the stability of families and neighborhoods. While this crisis is vast, it begins just one house and one family at a time.” Of the nearly 52 million US homeowners with a mortgage, about 13.8 million, or nearly 27 percent, owe more on their mortgage than their home is currently worth. Obama’s plan contains three initiatives:
bullet Fannie Mae and Freddie Mac homeowners owing between 80 and 105 percent of what their homes are worth can refinance their mortgage. Prior to implementation of the rescue plan, only those borrowers with at least 20 percent home equity could refinance. Refinancing at a lower rate may save borrowers thousands of dollars yearly on their mortgage payments.
bullet Banks will be encouraged to work with homeowners to modify existing mortgages, which is different from refinancing. The Bush administration plan, “Hope for Homeowners,” passed late in 2008, tried to do what Obama has now accomplished, but, since banks were not eager to modify terms to help people stay in their houses, the Bush plan is considered a failure. Under Obama’s plan, banks who received TARP funding will have to participate and, if they do not, Obama may request that the Congress allow bankruptcy judges to modify mortgage terms. Before Obama’s new plan, judges already had the power to modify mortgage terms on a homeowner’s second and third homes, although not on their primary residences.
bullet Interest rates will be kept low by having the Treasury Department buy up mortgage-backed securities from Fannie Mae and Freddie Mac, in the hope of re-inflating the market for mortgage-related products, even if Treasury may be overpaying for toxic assets in a market with few, if any, other buyers. [Mother Jones, 2/18/2009; CNN, 4/16/2009]

Entity Tags: US Department of the Treasury, Barack Obama, Fannie Mae, Freddie Mac, George W. Bush, Troubled Asset Relief Program

Category Tags: Bailouts and Other Government Aid, USA, Obama Policies and Actions

The insurance company AIG sells its US auto insurance unit to Zurich Financial Services AG for $1.9 billion. This will make the Swiss company the third largest US personal line insurer. [Reuters, 4/17/2009] This sale is part of an AIG program to sell business units in order to repay bailout loans to the government (see September 18, 2008).

Entity Tags: Zurich Financial Services AG, AIG (American International Group, Inc.)

Category Tags: Failing Companies, USA, AIG

The US Senate rejects an amendment to the US Bankruptcy Code supported by President Barack Obama that would have saved nearly 2 million homeowners facing foreclosure. Sponsored for the second time in as many years by Senate Majority Whip Richard Durbin (D-IL), the controversial amendment would have given judges the power to modify home mortgages, but strong opposition from the banking industry—as well as 39 Republicans and 12 Democrats—prevents passage. The House version of the controversial measure passed in March 2009. Called the ‘cramdown,’ the provision was supported by Obama as a final recourse for people to keep their homes. The amendment was a major priority of congressional Democrats and the Obama administration in a drive to tackle the housing crisis. “[H]ard to believe in a time when we’re facing a banking crisis that many of the banks created—[that the banks] are still the most powerful lobby on Capitol Hill. And they frankly own the place,” Durbin said earlier in the week during an interview with Illinois radio. [ProgressIllinois.com, 4/29/2009; MinnPost.com, 4/30/2009]

Entity Tags: Barack Obama, Richard (“Dick”) Durbin

Category Tags: Bailouts and Other Government Aid, USA, Obama Policies and Actions

In its May 2009 Global Employment Trends Update, the United Nation’s International Labor Organization (ILO) revises its 2009 unemployment projections to levels ranging from 210 million to 239 million unemployed, with corresponding global unemployment rates of 6.5 and 7.4 percent respectively. The ILO specifically cautions that youth around the globe are hardest hit, and warns that the world was headed for an “impending labor crisis.” Describing the global unemployment crisis as “unprecedented,” ILO Director General Juan Somavia says that despite reports of a 2010 global economic recovery, “On average, it can take four to five years after a crisis starts for pre-crisis unemployment levels to be recuperated.” Somavia warns of political unrest should unemployment increase with little or no safety nets in place, and states that more workers are at risk of losing their jobs and falling into poverty. The report is released one week ahead of the June 3-19 Annual International Labor Conference in Geneva, Switzerland, where at least 10 heads of state, including US Secretary of Labor Hilda Solis, France’s Nicolas Sarkozy, and Brazil’s Luiz Inacio Lula da Silva, are expected to attend. Somavia also says that attendees will consider an emergency “global jobs pact” designed to promote a coordinated policy response to the global jobs crisis. “We are seeing an unprecedented increase in unemployment and the number of workers at risk of falling into poverty around the world this year,” he says. “To avoid a global social recession, we need a global jobs pact to address this crisis, and mitigate its effects on people. The choice is ours and the time to act is now.” [Thaindian News, 5/28/2009; International Labour Organisation, 5/28/2009]

Entity Tags: Juan Somavia, Hilda Solis, International Labor Organization (ILO), Nicolas Sarkozy, United Nations, Luiz Inacio Lula da Silva

Category Tags: Commentaries on Economic Issues, Other

Silverton Bank, a commercial bank that provided major wholesale banking services to client banks, is shuttered by regulators, making it the 30th US bank to fail in 2009. Based in Atlanta, it is the sixth Georgia bank to close this year and is taken over by the federal Office of the Comptroller of the Currency, which appoints the Federal Deposit Insurance Corp. (FDIC) as receiver. Silverton was a correspondent bank that did not take public deposits or make consumer loans, but provided credit card operations, investments, and loan purchases to client banks. At its closure, the bank’s total assets are approximately $4.1 million and total deposits are about $3.3 billion. The FDIC says it has created Silverton Bridge Bank N.A. to manage bank business and minimize disruption to customers over the next 60 days; the FDIC estimates it will cost the Deposit Insurance Fund $1.3 billion.
Consequences of Collapse - The failure’s impact is expected to ripple through the banking industry and industry experts believe it will have catastrophic consequences for banks across the Sun Belt, potentially impacting hundreds of bank balance sheets. Founded in the mid-1980s, Silverton provided credit and deposit services for other banks, acting as a middleman for fiduciary services for 1,500 small US banks in 44 states. Services included federal funds repayments, a check clearinghouse, and loans to bank holding companies, directors, and executives. Local bank attorneys describe Silverton as a mini-Federal Reserve for community banks.
Other Banks Also Closing - As the deepening recession makes it more difficult for consumers and businesses to pay their loans, local banks have closed in droves. So far, on nearly every Friday this year, there has been at least one bank failure. During the third week in April, while banks prepared for the Obama administration’s ‘stress tests,’ four regional banks closed. Despite federal commitment of amounts in the trillions to increase liquidity as well as jumpstart the economy, the speed of bank failures has accelerated. In 2008, a total of 25 banks failed, yet, in the first four months of 2009, 30 banks have failed. Prior to Silverton’s closure, American Southern Bank in Kennesaw, Georgia, was the last FDIC-insured bank to fail; it was shut down on April 24. [Marketwatch, 5/1/2009; CNN, 5/1/2009; Associated Press, 5/1/2009]

Entity Tags: Silverton Bank, Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency

Category Tags: Failing Companies, USA

According to unemployment statistics compiled by Eurostat, the European Union unemployment rate has risen to 9.2 percent, its highest since September 1999, with 3.1 million jobs lost in April 2009, an increase of 556,000 from March. In the Eurozone, 396,000 jobs were shed and almost 15 million became unemployed. The lowest unemployment figures were in the Netherlands at 3.0 percent and Austria at 4.2 percent. The highest figures were in Spain at 18.1 percent, Latvia, 17.4 percent, and Lithuania, 16.8 percent. Eurostat is the Statistical Office of the European Communities located in Luxumbourg and is charged with providing statistics for comparisons between European countries and regions. The Eurozone is comprised of the 15 EU states that have adopted the euro and created a currency union. [MercoPress, 6/3/2009; Eurostat.com, 6/3/2009; Ezine Articles, 6/3/2009]

Entity Tags: European Union, Eurostat

Category Tags: Other

The Congressional Oversight Panel, charged with monitoring the $700 billion TARP, says that as long as banks keep large amounts of toxic assets on their books, regulators should conduct stress tests on them. Noting that the worst-case unemployment rate used in recent bank stress tests will soon be surpassed, panel chair and Harvard law professor Elizabeth Warren tells Congress’s Joint Economic Committee, “We have not actually broken through the worst-case scenario, but the numbers are bad and they’re heading in the wrong direction.” The Congressional Oversight Panel, which includes a former senator and a current member of the House of Representatives, also advocates replicate periodic tests as long as banks hold “appreciable amounts” of illiquid mortgage securities. Warren says the “US unemployment rate average for 2009, now at 8.5 percent, will soon exceed the 8.9 percent as the worst-case scenario used in regulators’ capital evaluations of the 19 largest US bank holding companies.” Unemployment climbed to 9.4 percent in May; many analysts expect the rate to increase. “The worst-case scenario number for 2009 is in fact not the worst case. We’re going to see worse numbers,” Warren affirms. Ordered for the top 19 US bank holding companies by the US Treasury Department, the panel’s monthly report says the stress tests used a risk-modeling approach that, in its totality, was “reasonable and conservative.” However, the panel also says that an external party would find it impossible to imitate the loss projections forming the core of the tests. Warren adds that to ensure they are valued properly, the oversight panel will also review transactions in which banks repurchase stock warrants from the Treasury. Valuation of warrants, intended to provide taxpayers a potential for gains from government capital injections, will be a key focus of the panel’s July report. While the panel’s report acknowledges that the stress tests had a positive effect on market confidence, it cautions against assigning too much value to them. “They do not model bank holding company performance under ‘worst case’ scenarios and, as a result, they do not project the capital necessary to prevent banks from being stressed to near the breaking point,” the panel says. Warren notes her oversight board was rebuffed although it “pressed really hard on the Fed” for more stress test details. She adds that the Treasury under Secretary Timothy Geithner has been more open. She also tells lawmakers that giving the panel subpoena power would make it easier to acquire documents and testimony from officials at Treasury and the Federal Reserve. [Reuters, 6/9/2009]

Entity Tags: Timothy Geithner, US Department of the Treasury, Elizabeth Warren, US Federal Reserve

Category Tags: Bailouts and Other Government Aid

Wells Fargo & Co. confirms that it is not one of the 10 megabanks that will repay TARP capital and also says it is not hastening to repay the money. There had been rumors, perhaps because it had objected to the TARP funding in 2008, that Wells was prepared to write a check to repay its $25-billion TARP infusion—at any given moment—to escape government restrictions on executive pay, dividends, etc., but these rumors are now found to be false. The San Francisco-based bank bought Wachovia Corporation last year when it was on the verge of collapse and in its statement Wells cites its need to focus on assimilating loss-ridden Wachovia. “We want to pay back the government’s investment on behalf of the US taxpayer at the earliest practical date, but we haven’t applied yet to our regulators to repay the investment,” the statement says. From the beginning, Wells Chairman Richard Kovacevich stoked anti-TARP sentiment and opposed his bank’s inclusion in the program. Mr. Kovacevich said then-Treasury Secretary Henry Paulson “forced” the money on the bank because Mr. Paulson believed that all of the nation’s largest banks should have been TARP participants so that none appeared to be singled out for federal involvement. Mr. Kovacevich also attacked the government’s “stress test” of the 19 major banks to determine whether they had enough capital to survive a worse-than-expected economy over the next two years. “We do stress tests all the time on all of our portfolios,” Kovacevich said, according to Bloomberg News. “We share those stress tests with our regulators. It is absolutely asinine that somebody would announce we’re going to do stress tests for banks and we’ll give you the answer in 12 weeks.” On May 7, the Federal Reserve judged Wells and nine other major banks short of capital and Wells was ordered to raise $13.7 billion in additional capital by November 2009. The following day, Wells quickly raised $8.6 billion in a stock sale. Wells says it will “work closely with our regulators to determine the appropriate time to repay the TARP funds while maintaining strong capital levels.” [Los Angeles Times, 6/9/2009]

Entity Tags: US Department of the Treasury, Richard Kovacevich, Wells Fargo Bank, N.A., US Federal Reserve, Wachovia Bank, N.A.

Category Tags: Bailouts and Other Government Aid

The US Treasury Department concludes that financial firms American Express, Bank of New York Mellon, Branch Banking & Trust (BB&T), Capital One Financial, Goldman Sachs, JP Morgan Chase, Morgan Stanley, Northern Trust, State Street, and US Bancorp can return $68.3 billion in emergency bailout funds to government coffers although some of the banks have assets that are still government-controlled, with warrants worth approximately $4.6 billion. Twenty-two smaller banks already returned $1.9 billion. Morgan Stanley receives Treasury permission to return its TARP funding despite bank stress test details released early last May ordering the bank to increase its capital cushion fund by raising $1.8 billion. In a Treasury release, Secretary Timothy Geithner explains, “These repayments are an encouraging sign of financial repair, but we still have work to do.” President Obama comments that the ability of companies to repay the government does not detract from the need for reform. “The return of these funds does not provide forgiveness for past excesses or permission for future misdeeds,” he says. “This is not a sign that our troubles are over. Far from it.” [United Press International, 6/9/2009; New York Times, 6/9/2009]

Entity Tags: Capital One Financial, Bank of New York Mellon, American Express, Branch Banking & Trust (BB&T), US Bancorp, US Department of the Treasury, State Street, Goldman Sachs, JP Morgan Chase, Morgan Stanley, Northern Trust, Barack Obama, Timothy Geithner

Category Tags: Bailouts and Other Government Aid, USA

According to a recent Manpower, Inc. survey, US employers’ plans to hire for the third quarter of 2009 are at a record low, and the jobless will have to wait many months more before finding a job. The agency reported that after they adjusted results for seasonal employment variations, its employment gauge for July through September 2009 was negative. In a statement released to media, Jonas Prising, president of Americas for Manpower, says employers are “treading slowly and watching with guarded optimism, hoping a few quarters of stability will be the precursor to recovery.” The report underlines economists’ predictions that unemployment will continue to climb even if layoffs subside. Recent Labor Department statistics reported a loss of 345,000 US jobs in May. Although less than the job losses recorded in the last eight months, the May 2009 jobless rate surged to its highest level in nearly 26 years. In a repeat of results from the two previous periods, 67 percent of employers anticipated zero change in third quarter 2009, Manpower says. Those who expected to boost their payrolls remained at 15 percent for a second time in a row, while those projecting additional job cuts fell to 13-14 percent. “While the numbers may not be as optimistic as we would like, it is positive to see no further deterioration,” says Jeffrey Joerres, Manpower’s chairman and chief executive officer. Six of 13 industries employers surveyed estimated better employment conditions than in the second quarter, with gains in leisure, hospitality, wholesale, and retail trades, while those in construction stated they would add staff for the first time in a year. The biggest hiring corrosion occurred in education, health services, and at government agencies. In three of four regions, the net employment gauge measured negative, and was zero in the Northeast. The measurement improved in the South, dropped in the West, and was little changed in the Northeast and Midwest. Net employment gauge figures are tallied by subtracting the percentage of employers that predict an employment decrease from those that foresee an increase. Manpower’s global outlook survey demonstrated that the net employment gauge for third quarter 2009 improved in 12 countries from the previous three months. Plans for hiring were strongest in India, Norway, and Poland. The Manpower Inc. survey is a quarterly measurement with a margin of error of plus or minus 0.49 percentage point in the US. The employment agency interviewed over 28,000 US employers for its national outlook and surveyed 70,000 companies for its third quarter global measurement. Manpower Inc. is billed as the largest temporary workers employment agency in the world. [Bloomberg, 6/9/2009]

Entity Tags: US Department of Labor, Jonas Prising, Jeffrey Joerres, Manpower Inc.

Category Tags: Commentaries on Economic Issues, Other, USA

In an interview with Bill Moyers, Robert Reich, former labor secretary under President Clinton, says: “I believe that there’s no doubt that we’re going down to government intervention everywhere, government ownership unprecedented in this country. And it’s a long road and a slippery slope. Essentially, capitalism has swamped democracy. The Bush administration started the bank bailouts because the financial system had overreached with wild speculation and was on the verge of breaking down. Tim Geithner and [President] Obama are continuing these big bank bailouts, and I happen to think the bailouts have not worked very well, except as a kind of socialism for big corporations. There’s no such thing as pure capitalism without rules and regulations that set limits on profit making, because otherwise it’s everybody out for themselves. Otherwise, nobody can trust anybody. Otherwise, it’s the law of the jungle.… We rely upon government to set the boundaries—this can’t happen because it’s fraud, that can’t happen because you’re stealing something, this can’t happen because you’re imposing a huge burden on other people. Unless you have a democratic system that allows the rules to be created not by the companies but by the people and the people’s representatives reflecting what the public needs—not what the corporations need—you’re going to have a system that is not a democracy and not democratic capitalism. It’s super capitalism without the democracy. People pressuring their individual Congress members and Obama standing up to the banking industry will force real regulation. There will be no recovery in the sense of going back to where we were because the old path was unsustainable. If we don’t lift middle class wages, if we don’t get some control over Wall Street, if we don’t have genuine health care reform, if we don’t do something about the environment and global warming, we will not have a recovery. The next downturn is going to be worse than the downturn we just had, so there’s no going backwards. In every conversation I’ve participated in with the president, I was left with the impression that he understood this very, very well. I think most of the people around him understand this. The question is can he pull this off? Can he overcome the vested interests? It will be a clear indication of his toughness with regard to the willingness to twist arms and demand that the public interest be foremost.” [Bill Moyers Journal, 6/12/2009]

Entity Tags: Timothy Geithner, Bill Moyers, Robert Reich, Barack Obama

Category Tags: Commentaries on Economic Issues, Commentaries and Criticisms, Bush Policies and Actions, Obama Policies and Actions

The World Bank predicts a 2.9 percent contraction in the global economy and adds that unemployment and poverty will continue to rise in developing nations in 2009. The revised previous estimate of a 1.7 percent decline causes a slide in US and European stocks and commodities. Three months ago, the World Bank issued a new estimate of 2 percent in 2010. Although the S&P 500 remains up 33 percent from its 12-year low in March, since June 12, the index has fallen 5.1 percent. Last week, the S&P 500 lost 2.6 percent, as a turndown in crude oil wounded fuel producers and Standard & Poor’s rating agency downgraded 18 banks’ credit ratings. Speaking in Paris today, economics professor Nouriel Roubini—who predicted the current financial crisis as early as 2006—says the global economy could suffer another slump due to higher oil prices and increasing budget deficits. “I see the worry of a double whammy” because of energy costs and fiscal burdens, thus increasing the risk of a setback in the economic recovery. He says that oil might rise to $100 a barrel. The increase in the value of the dollar blunted the appeal of commodities as an alternative investment, and sent copper, gasoline and oil prices lower. Amid the resignations of two more board members, bringing the total of departing directors to seven since April, Bank of America stock falls 6.1 percent to $12.41, the bank’s steepest intraday decline since May 15. It is expected that at the end of their two-day meeting on June 24, Federal Reserve officials might announce that the US is showing signs of surfacing from the worst recession in 50 years, although, after their last meeting in April, they announced that the economy would “remain weak for a time.” It is anticipated that central bankers will keep the benchmark interest rate in the range of zero to 0.25 percent. [Bloomberg, 6/22/2009]

Entity Tags: World Bank, Bank of America, Nouriel Roubini, US Federal Reserve, Standard & Poor’s

Category Tags: Commentaries on Economic Issues

The jobless rate in Britain climbs to its highest level since 1995, according to the Office of National Statistics in London. The number of people out of work hits 2.47 million, while unemployment claims rise to 1.61 million for the month of July. Data recently released by the statistics office indicate that unemployment through July rose to 7.9 percent, the most since 1996, compared to the European Union’s latest figure of 9.5 percent, 9.7 percent in the US, and 5.7 percent in Japan. Bank of England Governor Mervyn King says that even after the economy stops shrinking, households will continue feeling the recession’s pain, since “unemployment is either going to continue rising or remain high.” As much as £175 billion ($288 billion) is being printed to aid economic growth and avoid deflation. “If anything, the UK economy is only just emerging from recession, and this is a lagging indicator,” says economist Philip Shaw of London’s Investec Securities. “We’re looking at unemployment peaking towards the middle of next year. Things are likely to improve at a slow rate, but it’s likely to remain uncomfortable for a long time.” Employment minister Jim Knight tells BBC News: “Unemployment still remains a real problem for families up and down the country. We’ve got to keep the support going and not be tempted to celebrate the recovery.” In speaking on the recovery, Prime Minister Gordon Brown—up for re-election in 2010—says the economic rebound “is still fragile” and stimulus programs that boost the economy should be maintained. “There are no signs of recovery here,” Trades Union Congress General Secretary Brendan Barber says. “It might look rosier in city dealing rooms but, out in the real world, unemployment is the number one issue.” [Bloomberg, 9/16/2009]

Entity Tags: Investec Securities, Bank of England, Brendan Barber, European Union, Gordon Brown, United Kingdom, Office for National Statistics, Mervyn King, Jim Knight

Category Tags: Other, Britain

On his website “Roubini Global Economics (RGE) Monitor,” New York University economics professor Nouriel Roubini interprets June’s unemployment report as a strong indication that any economic recovery indicators are “alleged green shoots” that are “mostly yellow weeds that may eventually turn into brown manure.” Known as “Dr. Doom” for his prescient 2006 speech to the International Monetary Fund warning fellow economists that the housing bubble would eventually lead to major global recession, Roubini analyzed June’s loss of 460,000 jobs as a strong indication that conditions in the labor market remain “extremely weak.” He also predicts that unemployment could reach 10 percent by the end of summer and that, by the end of 2009, the jobless rate “may well be at 10.5 if not 11 percent.” Roubini cites numerous reasons that an economic recovery, stumped by record high joblessness, is not likely to occur until unemployment falls below 8.5 percent in late 2013.
Roubini June 2009 Jobs Report Analysis -
bullet Details of the unemployment report are worse than reported since, not only are there presently large job losses, but firms are inducing workers to reduce their hours and their hourly wages. According to Roubini, when observing the effect of the labor market on labor income, include three important elements in the total value of labor income—jobs, hours, and average hourly wages. Roubini says all three elements are currently falling, making their effects on labor income much more significant than job losses alone.
bullet Job losses continue to exceed those in the last two recessions, and the unemployment rate has been rising steadily in the current cycle.
bullet Rising unemployment will raise default on consumer loans and further pressure bank balance sheets.
bullet Without home equity or easy credit, ongoing job losses and slower income growth will also keep up the pressure on consumer spending.
bullet Large unemployment, underutilization of labor, and sharp slowdown in wages will add to deflationary pressures in the coming quarters.
bullet Bank losses and tight lending are impacting households who already face wealth losses from housing and equity markets.
bullet Impact of financial sector problems on the real economy are intensifying job losses and leading to lower work hours and wage growth. This puts further pressure on consumer spending while raising mortgage, credit card, and other debt defaults (the unemployment rate is highly correlated with delinquencies on credit cards and auto loans), also putting additional pressure on financial and corporate sector balance sheets.
bullet US labor market aspects are worsening. Factor discouraged and partially-employed workers into jobless statistics, and the true and current unemployment rate is above 16 percent.
bullet Temporary jobs are falling sharply, also an indicator that labor market conditions are becoming worse.
bullet The average unemployment duration is at an all-time high, indicating that people are not only losing jobs, they’re finding it much more difficult to find new jobs.
bullet Based on the birth/death model, the Bureau of Labor Statistics (BLS) continues to add approximately 150,000 to 200,000 jobs, distorting downward the number of job losses. However, based on the initial claims for unemployment benefits, job losses are closer to 600,000 per month rather than officially reported figures such as the 467,000 in the June report.
bullet Should unemployment rates peak at or around 11 percent in 2010, expected bank loans and securities losses will be much higher than estimated in recent stress tests.
bullet While there was a retail sales boost and a boost in real consumer spending during January and February 2009, the numbers from April, May, and now June remain extremely weak in real terms.
bullet The significant increase in real personal income in April and May occurred only because of tax rebates and unemployment benefits.
bullet There was a sharp fall in real personal spending in April, with only a marginal increase in May, suggesting that, just as in 2008, most tax rebates were saved rather than spent. In 2008, people expected the tax rebate to stimulate consumption through September, yet the personal spending increase in April, May, and June 2008 fizzled out by July.
bullet Expect further significant reduction in consumer spending in the fall after the effects of the tax rebates fade since, according to Roubini, 2009 households are much more worried about jobs, income, credit cards, and mortgages than they are in personal consumption and spending. Roubini suggests that only approximately 20 cents on the dollar—rather than the 30 cents of 2008—is going to be spent in the fall of 2009.
bullet By the end of 2010 and in 2011, large budgets and their monetization will eventually increase expected inflation, leading to a further increase in 10-year treasuries, long-term government bond yields, and mortgage and private-market rates. Combined with higher oil prices partly driven to increase by the treasuries, bonds, mortgage, and private market wall of liquidity, as opposed to fundamentals alone, this “could produce a double whammy that could push the economy into a double-dip or W-shaped recession by late 2010 or 2011, so the outlook ahead for the US and global economy remains extremely weak.”
bullet The unemployment rate is already over 10 percent in approximately 13 states—and steadily rising. The ISM Employment Index for manufacturing and non-manufacturing has been contracting at a slower pace in recent months. Manpower Survey shows most employers plan to hold head count steady in the third quarter of 2009 relative to the second quarter of 2009. Online job vacancies fell in June, but have shown some improvement since March. JOLTS: The job openings level in April was at its lowest point since the series began in 2001. The hiring and job openings rates were unchanged and remained low (see June 9, 2009).
Nobel Laureate Agrees - Economist Paul Krugman, 2008 Nobel laureate, comments: “Workers at any one company can help save their jobs by accepting lower wages and helping make the company more competitive. But when employers across the economy cut wages at the same time, the result is higher unemployment and lower wages in the economy. This will keep pressure on paying off debt and on consumer spending and the real economy.” [RGE Monitor, 7/2/2009]

Entity Tags: US Department of Labor, Paul Krugman, Nouriel Roubini, International Monetary Fund, Bureau of Labor Statistics

Category Tags: Commentaries on Economic Issues, USA

The Federal Deposit Insurance Corporation (FDIC) spent $314.3 million to shut down 16 banks in June 2009, according to reports released today. The federal insurer closed seven banks on June 25, pushing the number of bank failures for 2009 to 52, more than double the failures for all of 2008. The late June closures included six Illinois regional banks, all controlled by one family whose bank business model, according to the FDIC, “created concentrated exposure in each institution.” The FDIC says that the failure of the six family-owned banks is due to the banks’ investments in collateralized debt obligations and other losses. The failures and subsequent government takeover of the Illinois banks brought total 2009 Illinois bank failures to 12. Local and regional banks have been especially hard hit by plummeting home values that devalued mortgage-backed assets, while rising unemployment rates forced increased numbers of consumers to default on their loans.
June 2009 Bank Failures FDIC Update through July 2, 2009 -
bullet Founders Bank, Worth, Illinois, with approximately $962.5 million in assets, closed. The PrivateBank and Trust Company, Chicago, Illinois, agreed to assume all deposits, approximatedly $848.9 million.
bullet Millennium State Bank of Texas, Dallas, Texas, approximately $118 million in assets, closed. State Bank of Texas, Irving, Texas, agreed to assume all deposits, approximately $115 million.
bullet The First National Bank of Danville, Danville, Illinois, approximately $166 million in assets, closed. First Financial Bank, N. A., Terre Haute, Indiana, assumed all deposits, approximately $147 million.
bullet The Elizabeth State Bank, Elizabeth, Illinois, approximately $55.5 million in assets, closed. Galena State Bank and Trust Company, Galena, Illinois, agreed to assume all deposits, approximately $50.4 million.
bullet Rock River Bank, Oregon, Illinois, approximately $77 million in assets, closed. The Harvard State Bank, Harvard, Illinois, agreed to assume all deposits, approximately $75.8 million.
bullet The First State Bank of Winchester, Winchester, Illinois, approximately $36 million in assets, closed. The First National Bank of Beardstown, Beardstown, Illinois, agreed to assume all deposits, approximately $34 million.
bullet The John Warner Bank, Clinton, Illinois, with approximately $70 million in assets, was closed. State Bank of Lincoln, Lincoln, Illinois, agreed to assume all deposits, approximaedly $64 million.
bullet Mirae Bank, Los Angeles, California, approximately $456 million in assets, closed. Wilshire State Bank, Los Angeles, California, agreed to assume all deposits, approximately $362 million.
bullet MetroPacific Bank, Irvine, California, approximately $80 million in assets, closed. Sunwest Bank, Tustin, California, agreed to assume all non-brokered deposits, approximately $73 million.
bullet Horizon Bank, Pine City, Minnesota, approximately $87.6 million in assets, closed. Stearns Bank N. A., St. Cloud, Minnesota, agreed to assume all deposits, excluding certain brokered deposits, approximately $69.4 million.
bullet Neighbor Community Bank, Newnan, Georgia, approximately $221.6 million in assets, closed. CharterBank, West Point, Georgia, agreed to assume all deposits, approximately $191.3 million.
bullet Community Bank of West Georgia, Villa Rica, Georgia, approximately $199.4 million in assets and approximately $182.5 million in deposits, approved for payout by the FDIC board of directors.
bullet First National Bank of Anthony, Anthony, Kansas, approximately $156.9 million in assets, closed. Bank of Kansas, South Hutchinson, Kansas, agreed to assume all deposits, approximately $142.5 million.
bullet Cooperative Bank, Wilmington, North Carolina, approximately $970 million in assets, closed. First Bank, Troy, North Carolina, agreed to assume all deposits, excluding certain brokered deposits, approximately $774 million.
bullet Southern Community Bank, Fayetteville, Georgia, approximately $377 million in assets, closed. United Community Bank, Blairsville, Georgia, agreed to assume all deposits, approximately $307 million.
bullet Bank of Lincolnwood, Lincolnwood, Illinois, approximately $214 million in assets, closed. Republic Bank of Chicago, Oak Brook, Illinois, agreed to assume all deposits, approximately $202 million. [CNN, 7/2/2009; FDIC.gov, 7/2/2009]

Entity Tags: Martin J. Gruenberg, Sheila Bair, John E. Bowman, Thomas J. Curry, John C. Dugan, Federal Deposit Insurance Corporation

Category Tags: Bailouts and Other Government Aid, Failing Companies, USA, Obama Policies and Actions

Eighteen consecutive months of job losses and an economy on the verge of collapse have left record numbers of US consumers either unable to pay their debts or chronically late in payments during the first quarter of 2009. According to the American Bankers Association, home equity loan delinquencies rose to 3.52 percent, from 3.03 percent of all accounts in the last quarter of 2008. Late payments on home equity credit lines climbed a record 1.89 percent, and an index of eight types of loans rose to 3.23 percent from 3.22 percent for a fourth consecutive quarter. In a telephone interview with Bloomberg, the American Bankers Association’s chief economist, James Chessen says: “The number one driver of delinquencies is job losses, which we’ve seen build and build. Delinquencies won’t come down without a dramatic improvement in the economy, and businesses will have to start hiring again.” For the first quarter of 2009, the US economy lost an average of 691,000 jobs in each of the quarter’s three months. According to a Bloomberg survey of 61 economists, since the recession began in December 2007, more than 6.5 million jobs have been cut, and the US economy will shrink in 2009 the most since 1946. Outstanding debt on bank card delinquencies rose a record 6.60 percent in first quarter 2009, from 5.52 percent in the fourth quarter of 2008, indicating that unemployed borrowers are relying on bank cards, as housing prices corrode their home equity. The ABA stated that more borrowers are using cards to meet daily expenses following their job losses. US banks distributed 9.8 million credit cards from January through April 2009, a 38 percent decline from the same period a year earlier, with the average limit for a new bank card falling 3 percent to $4,594, according to data released by credit reporting agency Equifax. “There is less equity to draw on and certainly financial institutions have been scaling back the available lines of credit,” Chessen says. [Bloomberg, 7/7/2009; American Bankers Association, 7/7/2009]

Entity Tags: James Chessen, American Bankers Association (ABA)

Category Tags: Commentaries on Economic Issues, Other, Bush Policies and Actions, Obama Policies and Actions

While California grapples with budget problems as a result of the havoc wreaked by the global recession, a collection of banks—Bank of America, Citigroup, Wells Fargo, and JP Morgan Chase among them—say that commencing Friday, July 10, they will not accept state IOUs, adding pressure for the state to close its $26.3 billion budget gap.
IOUs Result of Credit Crisis - The banks initially made a commitment to accept IOU payments when the economically devastated state announced that it would issue more than $3 billion in IOUs beginning on or around July 1. Since the beginning of the year, state leaders have tried and failed to agree on a budget, and Governor Arnold Swarzenegger imposed monthly one to three-day monthly furloughs on at least 200,000 state employees; the furloughs are still in effect. The state began issuing IOUs—‘individual registered warrants’—to hundreds of thousands of creditors one day after the end of the 2009 fiscal year. John Chiang, California state controller, said, “Without IOUs, California will run out of cash by the end of July.” California’s annual budget is the eighth largest in the world. If the state continues issuing warrants, creditors will be forced to hold them until their maturity on October 2 or find other banks willing to honor them before maturity. The maturity of the IOUs will allow the state to pay back creditors directly at a 3.75 percent annual interest rate.
Response by California Bankers Association - California Bankers Association spokeswoman Beth Mills says that some banks might work with creditors to develop a short-term resolution, such as extending lines of credit to creditors. Mills says the banks were concerned that there aren’t processes in place to accept IOUs; she said that some of the banks were also worried about fraud issues, and notes that the July 10 deadline was not set by all banks. She adds that dozens of state credit unions would continue to accept IOUs.
Significance of California's Problems - Twelve percent of the nation’s gross domestic product comes from California and the state has the largest share of retail sales of any state. Retail consultant Burt P. Flickinger, managing director of Strategic Resource Group, explains, “California is the key catalyst for US retail sales, and if California falls further you will see the US economy suffer significantly.” Flickinger warns of more national retail chain and brand suppliers bankruptcies. At one dollar for every 80 cents, the state sends more in tax revenues to the federal government than it receives in return. Although California’s deep recession primarily only affects the state itself, it could make it harder for a national economic recovery since, because of its size—38.3 million people—it affects businesses from Texas to Michigan. Even if lawmakers solve the state’s deficit swiftly, there will likely be more government furloughs and layoffs with tens of billions of dollars more in spending cuts. This could cause a ripple effect throughout the state’s economy and fear of even more job losses. Jeff Michael, director of the Business Forecasting Center for the University of the Pacific at Stockton, predicts that one million jobs are expected to be lost in the state in two years, with unemployment estimated to peak at 12.3 percent in early 2010. In 2008, for the first time since the Great Depression, personal income of Californians declined. Income revenue fell 34 percent for the first five months of 2009. [Associated Press, 6/29/2009; Wall Street Journal, 7/7/2009]

Entity Tags: California Bankers Association, Bank of America, Arnold Schwarzenegger, Beth Mills, California, John Chiang, JP Morgan Chase, Jeff Michael, Wells Fargo Bank, N.A., Burt P. Flickinger, Citigroup, Strategic Resource Group

Category Tags: Commentaries on Economic Issues, Other, USA

The second quarter of any year is generally considered peak leasing season in the US, but reports show that during the second quarter of 2009, the apartment vacancy rate rose to a 22-year high because of rising unemployment that decreased apartment rental demand. Rents plunged fastest in markets such as New York and San Jose, California, where many white collar jobs have been lost. Additionally, markets such as Las Vegas and Orange County, California, that have transformed foreclosed homes and condominiums into rental property also suffered a decrease in vacancies. Nationally, vacancy levels rose from 6.1 percent in 2008 to 7.5 percent in the April to June 2009 period. Victor Calanog, Reis’s director of research, says: “Everyone expected spring leasing to save apartment landlords. That hasn’t happened.” Initially, the housing catastrophe offered property owners a chance to entice distressed homeowners into the leasing market, but job losses occurred at such a rapid pace that any increases that apartment leasing might have garnered from the housing crisis were destroyed. The rise in apartment vacancies began at the end of 2007, further quickening with the worsening of the economy in fall 2008. Meantime, rents have continued to fall at the swiftest pace in more than a decade and effective rents—concessions by landlords such as a month’s free rent—fell 1.1 percent in first quarter 2009 and 0.9 percent in the second quarter, and averaged $975 per month. At 5.8 percent, New York City marked the largest 12-month rent decrease with an average of $2,680 per month. Statistics are based on a survey by Reis Inc., a New York real estate research firm, which tracked 79 markets, of which 45 showed vacancy increases. [Wall Street Journal, 7/8/2009]

Entity Tags: Victor Calanog, Reis Inc.

Category Tags: USA

Group of 8 (G-8) leaders from across the globe release a statement from their meeting in L’Aquila, Italy, saying that economic recovery from the worst recession since World War II is too frail for them to consider repealing efforts to infuse money into the economy. US President Barack Obama, British Prime Minister Gordon Brown, European Commission President Jose Barroso, German Chancellor Angela Merkel, Canadian Prime Minister Stephen Harper, French President Nicolas Sarkozy, Japanese Prime Minister Taro Aso, Italian Prime Minister Silvio Berlusconi, and Russian President Dmitriy Medvedev assembled for the annual gathering where Obama pressed to maintain an open door for additional stimulus actions. A new drop in stocks generated global concern that, to date, the $2 trillion already sunk into economies had not provided the economic bump that would bring consumers and businesses back to life. “The G-8 needed to sound a second wakeup call for the world economy,” Brown told reporters after the gathering’s opening sessions. “There are warning signals about the world economy that we cannot ignore.” A G-8 statement embraces options ranging from a second US stimulus package—advocated by some lawmakers and economists—to an emphasis by Germany on shifting the focus to deficit reduction.
What Next? - Disagreements over what to do next, as well as calls from developing nations to do more to counteract the slump, emphasize that the Group of 8 has little if any room to maneuver, since the largest borrowing binge in 60 years has, so far, failed to stop rising unemployment and has left investors doubting the potency of the recovery. Even as G-8 leaders held their first meeting, the Morgan Stanley Capital International (MSCI) World Index of stocks continued a five-day slide, and the 23-nation index had dropped 8 percent since its three-month rally that ended on June 2. The International Monetary Fund (IMF) upgraded its 2010 growth forecast, saying the rebound would be “sluggish,” and urged governments to stay the course with economic stimuli. The IMF also said that emerging countries such as China would lead the way, with an expansion of 4.7 percent in 2010, up from their April prediction of 4 percent. “It’s a very volatile situation,” said European Commission President Barroso in a Bloomberg Television interview from L’Aquila. “We are not yet out of the crisis, but it seems now that the free fall is over.”
Exit Strategems Discussion - “Exit strategies will vary from country to country depending on domestic economic conditions and public finances,” the leaders conclude, but deputy US National Security Adviser Mike Froman tells reporters, “There is still uncertainty and risk in the system.” Froman says that although exit strategies should be drawn up, it’s not “time to put them into place.” The IMF forecasts that, in 2014, the debt of advanced economies will explode to at least 114 percent of US gross domestic product because of bank bailouts and recession-battling measures. German Chancellor Merkel, campaigning for re-election in September and the leading opponent of additional stimulus, warned against burgeoning budget deficits, which the IMF has predicted will rise to an average of 6 percent of the EU’s 2009 gross domestic product, from 2.3 percent in 2008. At last month’s European Union summit, Merkel pushed through a statement that called for “a reliable and credible exit strategy,” and insisted, “We have to get back on course with a sustainable budget, but with the emphasis on when the crisis is over.” [G8 Summit 2009, 7/2/2009; Bloomberg, 7/9/2009]

Entity Tags: Morgan Stanley Capital International (MSCI) World Index, Mike Froman, Jose Manuel Barroso, International Monetary Fund, Taro Aso, National Security Council, Nicolas Sarkozy, Silvio Berlusconi, Angela Merkel, Gordon Brown, Barack Obama, Standard & Poor’s, Stephen Harper, Dmitriy Medvedev

Category Tags: Britain, USA, Commentaries on Economic Issues

Orders for durable goods in the US fall by a seasonally adjusted 2.4 percent in comparison with July, according to a report that will be released by the Commerce Department in late September. One reason is a 40 percent monthly decline in orders for civilian aircraft. Computer, electrical equipment, and transportation equipment orders all fall as well, with durable goods shipments slipping 1.4 percent for the month. In total, durable goods orders are down 25 percent from the same time last year. Except for transportation, orders for durable goods are flat in August. [New York Times, 9/25/2009]

Entity Tags: United States, US Department of Commerce

Category Tags: USA

According to the US Labor Department, August jobless rates rise to record highs in California and Nevada; 27 other states see a rise in unemployment as well. Unemployment numbers climb to 12.2 percent in California and 13.2 percent in Nevada. With its unemployment rate rising to 15.2 percent in August, Michigan continues to lead all states, with Rhode Island rounding out the top four states with the highest unemployment since data collection began in 1976. Economists predict that the national unemployment rate will reach 10 percent in 2009, an indication that the recovery will not be led by consumers, although the job market is reportedly showing signs of stabilization, and economic growth may resume in the third quarter. States reporting at least 10 percent unemployment fell from 15 to 14 with Indiana’s rate dropping below the threshold. For a fourth consecutive month, joblessness in the District of Columbia exceeded 10 percent as well, rising from 10.6 percent to 11.1 percent. Nationally, unemployment climbed to a 26-year high, to 9.7 percent. According to Steven Cochrane, director of regional economics at Moody’s Economy.com: “There’s still a fair amount of weakness in some of the larger states. State finances are probably going to be among the last of all the various components of the broad economy to turn around.” Since the recession began in December 2007, the US economy has lost 6.9 million jobs. It is the largest national job loss since the Great Depression.
Jobless Benefits Claims - Ian Shepherdson of High Frequency Economics says first-time unemployment claims have to drop by 100,000 to about 432,000 to be steady with company payrolls. He expects a reasonable decline in first-time claims by next spring. Initial claims categorize those filing their first week of unemployment benefits, while continuing claims reflect those filing each week until the end of their 26-week benefit year. Jobless figures generally do not include those who have moved to state or federal extensions, nor do the figures include those whose benefits have ended. [Bloomberg, 9/18/2009; CNN, 9/24/2009]

Entity Tags: Ian Shepherdson, California, High Frequency Economics, US Department of Labor, Rhode Island, District of Columbia, Moody’s Economy (.com), Nevada, Steven Cochrane

Category Tags: USA

Tom Raum, a reporter and analyst for the Associated Press (AP), calls Social Security “a giant federal Ponzi scheme” destined to “bury… the nation ever deeper in debt.” Raum then writes: “Although calling Social Security a Ponzi scheme—think of the huge frauds that sent billionaires Bernard Madoff (see August 14, 2009) and R. Allen Stanford to prison—may be a bit of a stretch, there is one clear similarity. As in a Ponzi scheme, the concept works fine at first. So long as there are more new ‘investors’ pumping money into the system to pay off the earlier ones, everyone is happy. But at some point not enough new money is coming in and the scheme collapses.” Raum claims that Social Security system trustees have reported that by 2016, money paid out in benefits will exceed the revenues flowing in, and in 2037, the system will be entirely penniless. Thusly, Raum writes, Social Security “is projected to go insolvent in 2017.” [Associated Press, 8/16/2009] (The Raum article is reprinted over several days by different press outlets, but according to progressive media watchdog organization Media Matters, originally appears on August 12.) [Media Matters, 8/12/2009] However, the trustees did not say what Raum claims they said. In their May 12, 2009 report, the trustees said that the Social Security trust fund, not Social Security itself, will be completely depleted in 2037. And after that happens, according to the trustees, revenue from payroll taxes will be sufficient to pay about three-quarters of scheduled Social Security benefits through 2083: “Under the intermediate assumptions, the OASDI cost rate is projected to increase rapidly and first exceed the income rate in 2016, producing cash-flow deficits thereafter. Redemption of trust fund assets will allow continuation of full benefit payments on a timely basis until 2037, when the trust funds are projected to become exhausted. This redemption process will require a flow of cash from the general fund of the Treasury. Pressures on the federal budget will thus emerge well before 2037. Even if a trust fund’s assets are exhausted, however, tax income will continue to flow into the fund. Present tax rates are projected to be sufficient to pay 76 percent of scheduled benefits after trust fund exhaustion in 2037 and 74 percent of scheduled benefits in 2083.” The Associated Press accurately reported on the trustees’ report the same day it was issued. [Administration, 5/12/2009 pdf file; Associated Press, 5/12/2009; Media Matters, 8/12/2009] Stephen Moore of the Wall Street Journal made a similar claim to Raum’s in February (see February 2, 2009).

Entity Tags: Associated Press, Tom Raum, Stephen Moore

Timeline Tags: Domestic Propaganda

Category Tags: USA, Commentaries and Criticisms

Eric Bolling, a host on Fox Business Channel, appears as a guest on Fox News’s The Live Desk, where he attacks Social Security as a “Ponzi scheme.” Bolling explains that a lack of increase in July’s Consumer Price Index (CPI) means that Social Security benefits also fail to increase, but then shifts into a claim that Social Security is “underfunded or almost unfunded.… People are paying into Social Security. That money’s being used to pay for seniors right now, so, it’s kinda like a Ponzi scheme.… They should rename it the Madoff Social Security system, because down the road, there’s not going to be enough money.” Bolling is making reference to Wall Street financier Bernie Madoff, who stole billions of dollars from clients through a web of fraudulent schemes. [Media Matters, 8/14/2009; Media Matters, 9/7/2010] In February, the Wall Street Journal’s Stephen Moore made a similar claim (see February 2, 2009). And an Associated Press reporter made a similar claim two days before Bolling (see August 12-16, 2009).

Entity Tags: Eric Bolling, Bernard Lawrence (“Bernie”) Madoff, Stephen Moore, Fox News

Timeline Tags: Domestic Propaganda

Category Tags: USA, Commentaries and Criticisms

Federal Deposit Insurance Corporation (FDIC) regulators take over real estate lender Colonial BancGroup Inc. in the biggest US bank failure this year. Regulators also close four banks in Arizona, Nevada and Pennsylvania. This increases to 77 the number of federally insured banks that have failed in 2009. The FDIC is appointed receiver of Colonial BancGroup, based in Montgomery, Alabama; Community Bank of Arizona, based in Phoenix; Union Bank, based in Gilbert, Arizona; Community Bank of Nevada, based in Las Vegas; and Dwelling House Savings and Loan Association, located in Pittsburgh. The FDIC approves the sale of Colonial’s $20 billion in deposits and about $22 billion of its assets to BB&T Corp., which is based in Winston-Salem, North Carolina. According to the FDIC, the failed bank’s 346 branches in Alabama, Florida, Georgia, Nevada, and Texas will reopen at normal times starting on Saturday as BB&T offices. A temporary government bank is established by the FDIC for Community Bank of Nevada to give depositors approximately 30 days to open accounts at other financial institutions. As of June 30, Community Bank of Nevada had assets of $1.52 billion and deposits of $1.38 billion; Community Bank of Arizona had assets of $158.5 million and deposits of $143.8 million; Union Bank had assets of $124 million and deposits of $112 million as of June 12. MidFirst Bank, based in Oklahoma City, agrees to assume all the deposits and $125.5 million of the assets of Community Bank of Arizona, as well as about $24 million of the deposits and $11 million of the assets of Union Bank, with the FDIC retaining what’s left for eventual sale. Dwelling House had $13.4 million in assets and $13.8 million in deposits as of March 31. PNC Bank, part of Pittsburgh-based PNC Financial Services Group Inc., agrees to assume all of Dwelling House’s deposits and about $3 million of its assets; the FDIC will hold the rest for eventual sale. The FDIC expects Colonial BancGroup’s failure to cost it an estimated $2.8 billion and that of Community Bank of Nevada, $781.5 million; Union Bank, $61 million; Community Bank of Arizona, $25.5 million; and Dwelling House, $6.8 million. The 77 bank failures nationwide this year compare with 25 last year and three in 2007. As the economy spiraled downward, bank failures increased seismically, siphoning billions out of the FDIC which, at $13 billion as of the first quarter, is at its lowest level since 1993. While losses on home mortgages may be leveling, commercial real estate loan delinquencies remain a potential trouble spot, say FDIC officials. The FDIC’s list of problem institutions soared to 305 in first quarter 2009—the highest since the savings and loan crisis in 1994—increasing from 252 in fourth quarter 2008. Regulators anticipate US bank failures will cost the FDIC about $70 billion through 2013. The shutdown in May of Florida thrift BankUnited is expected to cost the federal insurer $4.9 billion, the second-largest hit since the financial crisis commenced. So far, the costliest is the seizure of big California lender IndyMac Bank in 2008, where it is estimated that the FDIC lost $10.7 billion. In September 2008, the largest US bank failure was the failure of Seattle-based Washington Mutual Inc. (WAMU), with about $307 billion in assets. In a deal brokered by the FDIC, JP Morgan Chase and Co. purchased WAMU for $1.9 billion. [fdic.gov, 8/2009; ABC News, 8/14/2009]

Entity Tags: Federal Deposit Insurance Corporation, Colonial BancGroup, Inc., IndyMac Bank, JP Morgan Chase, Washington Mutual Inc.

Category Tags: Failing Companies, USA, Obama Policies and Actions

Since implementing a program to help millions of homeowners restructure their mortgages to prevent foreclosure, only 235,247 loans have actually been modified, according to the US Treasury Department in its first progress report. After the plan was announced in February, the first banking institutions began accepting applications in April. Between now and 2012, the Obama administration says it is on track to assist 4 million homeowners. The report occurs a week after the administration summoned institutions to Washington to discuss speeding up the program after large numbers of borrowers’ complaints that assistance was barely occurring. The Obama administration plans 500,000 modifications by November 1, and hopes to hold the institutions responsible for their performance with the release of monthly reports that allow consumers to see which banks are slow to implement the plan. So far, institutions have extended offers to 15 percent or 406,542 homeowners in danger of losing their homes, with uneven performances by 38 participating servicers. Morgan Stanley’s subsidiary, Saxon Mortgage Services, tops the list with 25 percent of its delinquent loans placed in trial modifications. Saxon is followed by Aurora Loan Services, a Lehman Brothers Bank subsidiary, with 21 percent. GMAC Mortgage, partially owned by the US government, has put 20 percent of its troubled loans into trial modifications, while major banks JPMorgan Chase, Citigroup, Wells Fargo, and Bank of America have late loan trial modifications of 20 percent, 15 percent, 6 percent, and 5 percent respectively. The lenders acknowledge that they must improve their performance, and say that they are committed to President Obama’s foreclosure prevention plan, stressing that they were already performing modifications prior to the administration’s program. Wells Fargo says that it will soon have the ability to send eligible borrowers trial modification agreements within 48 hours. “We set a high bar for ourselves in terms of customer service, and we didn’t hit that bar in all cases in the first seven months of this year,” says Mike Heid, co-president of Wells Fargo Home Mortgage, “We have added 4,000 employees to our loan workout division this year. JPMorgan Chase says it has another 150,000 applications in need of processing and is currently training an extra 950 workout specialists hired earlier in 2009, bringing its modification staff to 3,500 people. “We know we’ve got more work to do,” says Chase spokesman Tom Kelly. “But the bank is pleased with its performance to date.” CitiGroup’s mortgage agency, CitiMortgage, added 1,400 staffers to its modification team, with 800 dedicated to loss mitigation at its recently opened Tucson, AZ call center. It began placing troubled borrowers in trial modifications in early June. “In the next quarter, one can expect the pace will be even higher,” Sanjiv Das, CitiMortgage head, says. Bank of America says it needs to improve its reach out efforts, while noting that it holds nearly one in four trial modifications offered under the Obama plan and has extended nearly 100,000 offers, although only 28,000 trial modifications are in process. Bank of America purchased mortgage giant Countrywide Financial last year, and has the largest number of eligible delinquent loans with almost 800,000. Borrowers have been pressuring the Obama administration as well as servicers and are complaining that servicers are not responding to applications and calls, are losing their paperwork, and are not making timely decisions. Servicers say they are increasing their staffing and upgrading their computer systems to handle the hefty increase in applications. Says Michael Barr, assistant US Treasury secretary for financial institutions, “We are working with servicers to ensure that they can adequately implement the program and servicers are increasing staff and training, but they must also treat borrowers more respectfully and respond in a much timelier manner.” [CNN News, 8/9/2009]

Entity Tags: Countrywide Financial, Wells Fargo Bank, N.A., Bank of America, Aurora Loan Services, US Department of the Treasury, Citigroup, Tom Kelly, Sanjiv Das, GMAC, JP Morgan Chase, CitiMortgage, Lehman Brothers, Morgan Stanley, Michael Barr, Saxon Mortgage Services

Category Tags: Bailouts and Other Government Aid, Commentaries on Economic Issues, Failing Companies, Obama Policies and Actions

McClatchy reports that economies in Latin America are beginning to improve following the global financial crisis. The signs of the recovery include a “booming” construction industry in Peru, strong property sales in Peru, and expanding software companies in Chile. However, McClatchy says that the recovery in Mexico and other Central American countries is lagging behind, due to the slow recovery in the US. Prior to the global financial crash, Latin America had experienced its best five years of prosperity since the 1950s. [McClatchy Newspapers, 9/28/2009]

Entity Tags: Peru, Brazil, Mexico, Chile

Category Tags: Other, Other Nations

In their new report, “The State of Working America 2008-2009,” two economists at leading US think tank Economic Policy Institute (EPI) issue warnings that US workers will face harsh challenges as what they term “the Great Recession of 2007” draws to a close.
Unemployment - Heidi Shierholz and Lawrence Mishel, co-authors of the report, say that the extent of the huge global crash would have been much worse without President Obama’s American Recovery and Reinvestment Act of 2009. “The disaster would have been even worse without the stimulus law President Obama pushed through earlier this year,” Shierholz says. “Job losses would have been so high that the July unemployment figures would have been 9.6 percent or 9.7 percent, not 9.4 percent. We expect a steady climb in the unemployment rate up and over 10 percent by the end of the year. And it’ll rise slightly above 10 percent for a few months in 2010 before turning downwards. Until the economy is adding 122,000 jobs per month to take care of the people coming into the job market, unemployment will stay high. We still have a long way to go.”
Human Cost - Both economists speak of the human penalty. “This is more than a bunch of dry numbers,” Mishel declares. “One-third of the jobless—a record—have been out of work at least six months. Many have exhausted their unemployment benefits, which translate into bankruptcies, lost homes, no medical care, and more ills afflicting workers—even employed workers. This recession is much more than just the numbers of unemployed and underemployed, which is also setting a record,” he says. “Employed workers are seeing their hours cut, there’s an implosion in wage growth, and about 17 percent of large private employers have resorted to unpaid furloughs to save money.” Mishel explains that a one-week furlough is the equivalent of a 2 percent pay cut for a worker and his or her family.
Media Coverage Poor - In their report, the economists also criticize major media’s coverage of the crisis, urging workers not to fall for the usual chatter that things will automatically improve once productivity rises. “In the popular media, economic experts endlessly debate dynamics and causes of the downturn but most of these debates have very little to do with the real economic challenges facing working families today. The men and women of the workforce have worked harder and smarter to make the US a world-class economy and the mantra among economists and policy makers is that ‘as grows productivity, so shall living standards improve.’ Would that it was so.”
'YOYO Economics' - Prior to the crash, the report says, workers faced “rising inequality and lower real incomes for all but the richest 5 percent, diminished bargaining power, less health coverage, riskier pensions if any at all, income constraints that prevent workers’ kids from getting college educations to better themselves, and fewer high-paying jobs for those college grads, due to off-shoring and outsourcing.” The report nicknames it “YOYO (‘You’re on your own’) economics.” “We are in a unique position to judge the results of this experiment in reduced worker bargaining power and YOYO economics,” write the two economists. “The macro-economy is in serious disrepair and policymakers must move beyond temporary patches to fundamentally remake the economy so that it works for workers.”
Effect of Stimulus - The two offer praise for the Obama administration’s move to correct economic imbalances with the $787 billion stimulus package, the “cash for clunkers” program, initiatives to help the Detroit auto industry, and the $500 million “green jobs” initiative that have “partially staunched the bleeding.” Mishel predicts that, in conjunction with these programs, Congress will pass a second federal extension of unemployment benefits. They also argue that there should be fundamental restructuring away from “free market” policies that give corporations and financiers free sovereignty while the masses are forced to tighten their belts. [People's Weekly World Newspaper, 9/4/2009]

Entity Tags: Lawrence Mishel, Economic Policy Institute, Heidi Shierholz

Category Tags: Commentaries on Economic Issues, Bush Policies and Actions, Obama Policies and Actions

Research conducted by the Experian credit bureau and the international management consulting group Oliver Wyman reveals an alarming tendency: homeowners with excellent credit are more likely to “strategically default” on their homes than those who are financially strapped. Using an enormous sample of 24 million individual credit files, the study found that those with super prime credit scores are 50 percent more likely to “abruptly and intentionally” dump their mortgage. Researchers found that, with foreclosures, delinquencies, and loan losses at record levels, so-called “walkaways” are at or near the top of the most-discussed real estate finance topics. The Experian-Wyman study group identified specific patterns with strategic defaults. Among its findings:
bullet Strategic default numbers are much higher than industry estimates. For example, 588,000 super-prime credit holders defaulted during 2008, double the number from 2007;
bullet Warning signs, such as non-payment of other debts, are virtually non-existent;
bullet Walkaways often go from perfect payment histories to no mortgage payments whatsoever, in severe contrast with most financially stressed borrowers, who attempt mortgage payments even when delinquent on other credit accounts;
bullet Strategic defaults are located mostly in negative equity markets where home values skyrocketed during the boom before taking a huge dive after 2006. For example, last year in California, strategic defaults were 68 times higher than in 2005; in Florida, they were 46 times higher than in 2005. In most of the rest of the country, walkaways were nine times higher in 2008 than in 2005;
bullet People with large mortgage balances are more likely to walk away. Those with the two highest VantageScore credit ratings (as created by Experian and the other national credit bureaus, Equifax and TransUnion) are far more likely to default than homeowners in lower score categories;
bullet Walkaways seem to understand the consequences of their actions but may view it as a business decision, and the most practical solution under the circumstances.
Although the Experian-Wyman study does not explore the ethical and legal facets of strategic defaults, a major suggestion arising from it is that lenders and loan servicers take steps to spot walkaways in advance to avoid offering them loan modifications, since they will probably default on these as well. [Los Angeles Times, 9/20/2009]

Entity Tags: Experian Credit Bureau, Oliver Wyman Group

Category Tags: Other, USA

“The global recession is now over and a recovery has begun,” says Olivier Blanchard, chief economist of the International Monetary Fund (IMF). However, he says, the global recession has not been typical, so neither will the economic revival be. Writing in an article released by the IMF, Blanchard states: “One should not expect very high growth rates in the recovery. The turnaround will not be simple. The crisis has left deep scars, which will affect both supply and demand for many years to come.” The word “recovery” has a precise technological meaning—that the economy is again growing but, essentially, has not returned to previous levels of output, wealth, and employment. In other words, the economy is healing, yet is not yet healed. According to Blanchard, “The recession has been so destructive that we may not go back to the old growth path [and] potential output may be lower than it was before the crisis.” Blanchard says that growth is coming for most countries, for at least the next few quarters, but will not be sturdy enough to decrease unemployment. He says growth is still dependent on fiscal and monetary government stimulus policies. “To sustain growth will require delicate rebalancing acts, both within and across countries,” he says. “Sustained recovery in the United States and elsewhere eventually requires rebalancing from public to private spending.” He also says that big fiscal deficits orchestrated to rouse the economy must be unwound. “The United States can’t rely on low interest rates to sustain the recovery, nor can it rely on consumer spending or investment filling the gap. Consumers are likely to save more in coming years. Businesses don’t need to invest much for the next few years, because so much of their capacity is idle. Sustained recovery is likely to require an increase in US net exports and a corresponding decrease in the rest of the world, coming mainly from Asia. China, for one, should increase its domestic demand,” he adds. [Marketwatch, 8/18/2009]

Entity Tags: International Monetary Fund, Olivier Blanchard

Category Tags: Commentaries on Economic Issues

Having received what the Obama administration calls “exceptional assistance,” American International Group (AIG), Citigroup, Bank of America, General Motors (GM), GMAC, Chrysler, and Chrysler Financial are now meeting with executive pay czar, Kenneth Feinberg, and must submit 2009 pay plans for their top 25 executives. In turn, Feinberg must perform a 60-day assessment while working with the seven companies on their salary configurations. Plans for the other 75 executives of the seven corporations are due later. Exorbitant executive pay and bonuses has its critics, with many outraged that the companies are collecting taxpayer money only to pay out expensive bonuses during a massive recession. Others fear that the feds have insinuated themselves too deeply into private business affairs. Feinberg himself admits that his job has built-in conflicts. “Historically, the American people frown on the notion of government insinuating itself into the private marketplace,” he says in an interview, one day after his appointment. “My answer to those critics is I understand that concern, I share that concern, and the question is how do you strike a balance between that legitimate concern and the populist outrage at prior industry compensation practices?” The Obama administration has already seen and experienced taxpayers’ fury; Feinberg hopes to avoid such outrage. Corporations must prove to him that they are rewarding good performance and discouraging undue risk-taking. “We are not going to provide a running commentary on that process, but it’s clear that Mr. Feinberg has broad authority to make sure that compensation at those firms strikes an appropriate balance,” say US Treasury Department spokespersons, while noting that Feinberg can’t force companies to renege on contract obligations executed prior to February 12, 2009. However, this hasn’t prevented cries of foul play by critics upset over excessive government interference in private businesses. “No matter which way I turn, you’re facing criticism either from those who are appalled at what these companies did versus those who question the value of the government getting involved,” Feinberg says. The recently appointed executive compensation czar is used to dealing with contentious sides having served as compensation fund chairman for the families of victims of the September 11 attacks. [ABC News, 8/12/2009]

Entity Tags: Chrysler Financial, AIG (American International Group, Inc.), Bank of America, Citigroup, Chrysler, General Motors, GMAC, US Department of the Treasury

Category Tags: Bailouts and Other Government Aid, Commentaries on Economic Issues, Obama Policies and Actions

After surveying 28,000 US companies on their future hiring plans, Manpower CEO Jeff Joerres reports that two-thirds of US employers will not change their staffing in the fourth quarter, thus dealing a blow to a consumer-led US economic recovery. Education and health services US employers are more positive about job prospects, while the remaining 11 employment sectors surveyed are more cautious in their plans to hire. The largest declines are in construction, leisure and hospitality, and professional and business services. The survey comes just a few days after the US jobless rate rose to a 26-year high in August to 9.7 percent, although job losses slowed. “Companies are still not going to be in hiring mode,” Joerres says. “They are in cautious mode.” According to Manpower’s international survey of 72,000 employers, previous quarter hiring expectations improved in 20 of 34 countries, although all 34 countries and territories report weaker hiring plans than a year ago. Employers in 15 countries and territories are cutting rather than adding jobs, but Asia and Europe are likely to be first to recover from the global recession. Job prospects in several Latin American countries improved. Prospects in most of Asia and Western Europe are stronger or more stable, although weaker in countries in Eastern Europe. As in the US, Mexico’s hiring plans are the weakest in the survey’s history, but optimism is higher in Canada, revealing better prospects in finance, construction, and real estate. The most optimistic employers in Asia are in India; future hiring looks improved in China, Hong Kong, and Singapore, while Japan’s fourth quarter employment view is flat. “Consumers in Asia and Europe had no need to curtail spending to the extent that Americans did,” says Joerres. “You look at major countries like the UK, Italy, France, Germany, Sweden, they’re all up. Their economies haven’t had the same hits. Other than Spain, you didn’t have a housing market as bad as this. Britain’s housing bust hurt the London area, but hiring plans are stronger in the Midlands.” Joerres cautions that because many economies still rely on exports, especially to the US, an Asian or European recovery could prove short-lived. “They can come out, but they can’t sustain the coming out until the US starts spending.” The US survey by Manpower, a global employment services company based in Milwaukee, is considered a leading indicator of labor trends. The company does business in 80 countries, generating most sales and earnings outside the United States, and conducts quarterly employer surveys. Its US survey dates back to 1962. [Reuters, 9/8/2009]

Entity Tags: Manpower Inc., Jeffrey Joerres

Category Tags: Other, USA

Iranian President Mahmoud Ahmadinejad orders that his country’s foreign exchange reserves be moved from the dollar to the euro, setting the stage for the Iranian Central Bank to cut its foreign currency reserve interests rates from 12 percent to 5 percent. The estimated rate cut makes it cheaper for the bank to acquire foreign currency. “They have been talking about switching their foreign currency reserve from the dollar to the euro for a while now, but it makes them more dependent on the euro and the European Union,” says Dr. Ali Ansari, director of Scotland’s St. Andrews University Iranian Studies Centre.
Followed Call Addressed to OPEC - Ahmadinejad’s decision comes shortly after he called for the Organization of Petroleum Exporting Countries (OPEC) to discard the dollar as the currency standard for oil-related deals. Despite recent declines in dollar value and the fact that most major oil producing countries are outside the US, the dollar remains the prevailing currency for pricing a barrel of oil. The dollar also remains the most frequently used international trade currency.
Possible Motivation - Some analysts believe that exchanging the dollar for the euro may be Iran’s attempt to lessen the effects of US economic sanctions in force since the 1979 Islamic revolution when the US backed the overthrown Shah of Iran, who was replaced by an Islamic republic. US sanctions include prohibiting US involvement with Iran’s petroleum development, as well as prohibiting all trade and investment activities by US citizens around the globe. Sanctions were softened somewhat in 2000, when the US Treasury amended its prohibition edict by allowing US citizens to buy and import carpets and food products like dried fruits, nuts, and caviar produced in Iran. Recent media reports suggest, however, that President Obama is considering an increase in sanctions if Iran persists in its alleged development of nuclear weapons. Iran maintains that its nuclear program is solely for power production. [Media Line, 9/22/2009]

Entity Tags: Iran, Organization of Petroleum Exporting Countries, Mahmoud Ahmadinejad, Ali Ansari

Category Tags: Oil and OPEC, Other Nations

The tasks before the forthcoming Group of 20 (G-20) summit to be hosted by President Barack Obama in Pittsburgh, Pennsylvania, are rolled out in the media. The number one agenda item for global leaders will be restraining financial institutions’ compensation and forcing them to clean their balance sheets to avert a duplicate of the near-meltdown of global financial systems. They will also attempt to find new methods for controlling over-the-counter derivatives markets, which are said to have augmented the global crash. The leaders are also scheduled to “increase oversight of hedge funds, credit rating agencies, and debt securitization.” Most leaders agree that it is essential to find a resolution for the huge financial imbalances in trade, savings, and consumption, all of which played a role in the global financial crisis, and ultimately may leave global economies vulnerable to future financial shocks. Christine Lagarde, the French Finance Minister, says that signs of economic recovery should not act as an excuse to avoid economic reforms. Officials of France and Germany are recommending stringent financial sector regulations, which incorporate limits on executive pay. The mandate of the G-20 is to “promote open and constructive discussion between industrial and emerging-market countries on key issues related to global economic stability.” The G-20 is comprised of finance ministers and central bank governors from 19 countries: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom, the United States, and the European Union, which is represented by the rotating council presidency and the European Central Bank. [Reuters, 9/22/2009; New York Times, 9/22/2009; Voice of America, 9/22/2009; G-20.org, 9/22/2009]

Category Tags: Other, USA, Britain, Other Nations

Moody’s Investors Service reports that write-offs for credit cards have risen from 10.52 percent to 11.49 percent, and the number of 30 and 60 day overdue credit balances has increased as well. Many economists say that throughout the recession delinquency rates for credit cards are likely to continue to steadily rise because of a continuously high rate of unemployment. Experts warn that joblessness will stay high for a long time, even after the recovery. Currently, the national unemployment rate is 9.7 percent, with predictions that it will exceed 10 percent before heading for a significant decrease. In the short term, with so many unemployed people behind on credit card payments, delinquencies are expected to remain high. [Credit.com, 9/24/2009]

Entity Tags: Moody’s Investors Service

Category Tags: USA

With unemployment rates for American Indians at 27 percent, African-Americans logging jobless rates of 15 percent, and Hispanics at 13 percent, experts say that for these ethnic groups, the economic recession is more of a “Great Depression.” The foreclosure crisis is equally ominous, having worsened with increasing joblessness, unduly impacting minority groups at a staggering rate. Dr. James Carr, chief operating officer of the National Community Reinvestment Coalition, explains: “The crisis is now fueled by unemployment and loss of income. In 2009, nearly 60 percent of foreclosures are triggered by unemployment.… The Obama administration’s endeavors to curtail foreclosures aren’t working.” He emphasizes that the loan modification program has “plenty of carrots” for the banks, “but no meaningful sticks to compel more responsible actions.” On average, lenders lose 10 times as much on foreclosures than loan modifications, or about $144,000 as opposed to a loan modification tax write-off of $14,000. Because they can, banks are choosing to deduct the greater loss on their current tax bill by foreclosing rather than modifying the loan. Consequently, only 12 percent of homeowners eligible for modification have received such through voluntary Making Home Affordable program set up by the Obama administration. According to Raymond Skinner, Maryland’s secretary of housing and community development: “Foreclosures are taking on a different face. As of the second quarter of 2009, the majority of the nation’s foreclosures are now on prime loans.”
Bankruptcy Law Reform, Homeowners Loan Corporation - What is needed, says Carr, is bankruptcy reform to allow judges to modify mortgages using the same methods they use to modify yacht and investment property payments; at least 30 percent of loans on the way to foreclosure could be helped by reformation of bankruptcy laws. Still, experts agree that even loan modifications won’t help many unemployed persons. Carr is calling for “a new version of the Great Depression-era Homeowners Loan Corporation” (HOLC) to allow the use of eminent domain to purchase loans between current market value and face value cost. The discount could then be used to modify the loans so that the unemployed homeowner could enter into rental agreements to stay in their homes, or even obtain emergency grants or loans to continue paying their mortgages. HOLC, however, is not under consideration by either Congress or the Obama administration.
Insufficient American Recovery and Reinvestment Act Resources - Some argue that the 2009 American Recovery and Reinvestment Act did not provide the resources needed by those hardest hit by the recession, which was supposedly the goal of the bill. As a result, there is now an immediate need for a targeted stimulus for job creation and unemployment benefits extension. “Channeling dollars to the individuals and communities that need them most will immediately stimulate the economy and save and create jobs for both the neediest households and the US population generally,” Carr says. “Families that live on the edge of survival will pour these recovery dollars immediately back into the economy through spending on groceries, medicine, clothing, childcare, energy, transportation, and other basic necessities. That spending would support multiple sectors of the economy and have positive impacts far outside of the communities where dollars are immediately spent.” Additionally, racial barriers and continuing discrimination need to be addressed to guarantee access to affordable housing alternative, transportation, education, and economic opportunity. [Nation, 9/25/2009; NPR, 9/28/2009]

Entity Tags: James Carr, Maryland, American Recovery and Reinvestment Act of 2009, Obama administration, US Congress, Raymond Skinner, National Community Reinvestment Coalition

Category Tags: USA, Commentaries and Criticisms

Following the furloughs of nearly 8,000 workers in May, Puerto Rico announces that it will lay off an additional 16,970 public workers to prevent a government shutdown as well as to prevent damage to the island’s credit. Government officials are hoping that the layoffs will assist in allaying a $32 billion deficit. Cuts in contract spending, a freeze on hiring, and temporary taxes have already been implemented. The island is in the third year of a recession and the unemployment rate is at 15 percent. Says Carlos Garcia, president of the Government Development Bank of Puerto Rico, “Today is an extremely difficult day for all Puerto Ricans.” Garcia adds that, as a result of the layoffs, the island’s unemployment rate will rise to 17 percent, higher than any US state. Some of the workers will be contracted by the US Treasury to assist in collecting outstanding debts of over $3.6 billion owed by residents, private companies, and other entities. Others will be hired for jobs in education. Most workers will be laid off on or around November 6. According to Garcia, the move could save the island $386 million. “The layoffs are unavoidable,” Governor Luis Fortuno tells Puerto Ricans in a recorded news media event. “Not doing anything would have been devastating to our economy, your pocketbook, your family, and our society,” he says. “It would have meant more increases, more taxes, and another government shutdown.” Organized labor leaders have announced an October 15 protest to be held all over the island. [Huliq News, 9/25/2009; Associated Press, 9/26/2009]

Entity Tags: Carlos Garcia, Luis Fortuno, US Department of the Treasury, Government Development Bank of Puerto Rico, Puerto Rico

Category Tags: USA

The new Greek government headed by Georgios Papandreou of the Panhellenic Socialist Movement (PASOK) announces a draft budget that will cut the Greek deficit dramatically. According to the draft, the deficit will be cut from 12.7 percent of GDP, although measures to assist the poor will also be implemented. [Reuters, 3/3/2010]

Entity Tags: Georgios Papandreou, Panhellenic Socialist Movement

Category Tags: Greece

The Greek government releases a final draft of its budget that aims to cut the deficit to 8.7 percent of GDP in 2010. The deficit is now well over 10 percent, so such a reduction would show EU partners and markets that the country is trying to sort its finances out. However, the draft budget also sees public debt rising to 121 percent of GDP in 2010, from 113.4 percent in 2009. EU forecasts on Greece for 2010 are worse, with the deficit seen at 12.2 percent of GDP and national debt rising to 124.9 percent, the highest ratio in the EU. [Reuters, 3/3/2010]

Category Tags: Greece

The ratings agency Standard & Poor’s puts Greece’s credit rating, currently A-, on negative watch with a view to downgrading it. [Reuters, 3/3/2010]

Entity Tags: Standard & Poor’s

Category Tags: Greece

December 8, 2009: Fitch Cuts Greece’s Rating

Fitch Ratings cuts its assessment of Greek government debt to BBB+ and says that the outlook for the country is negative. Fitch had previously cut its rating for the debt to A-, when the Greek government revealed that its budget deficit was higher than expected. This reduction is the first time in 10 years a ratings agency has put Greece below the A investment grade. [Reuters, 3/3/2010]

Entity Tags: Fitch Ratings

Category Tags: Greece

In response to Greece’s financial problems, Greek Prime Minister Georgios Papandreou outlines policies to cut the country’s ballooning budget deficit and try to regain the trust of investors and EU partners. Papandreou pledges a 10 percent cut in social security spending in 2010. He also says he will abolish bonuses at government-run banks and put a 90 percent tax on private bankers’ bonuses. Further, he promises a serious fight against corruption and tax evasion, calling them the country’s biggest problems. In addition, he announces a drastic overhaul of the pension system in six months and a new tax system that will make the wealthier carry more of the burden. [Reuters, 3/3/2010]

Entity Tags: Georgios Papandreou

Category Tags: Greece

Fox News host Glenn Beck says that Social Security and Medicare are “socialist” programs that “should have never been created.” Beck tells his viewers: “Do you think programs like Social Security and Medicare represent socialism and should have never been created in the first place?… I’m an American. I read. I believe in the Constitution. And, of course, Social Security and Medicare represent socialism and should have never been created. Since FDR and his progressive buddies started Social Security, not our Founding Fathers, that should be fairly obvious to people.” Beck tells his viewers that Social Security was created by Harry Hopkins, an adviser to then-President Franklin Roosevelt who, Beck says, “had a relationship with [Josef] Stalin,” the then-dictator of the Soviet Union. Therefore, Beck says, Social Security is a Stalinist “redistribution of wealth” program that is inherently Marxist in its nature. [Media Matters, 1/27/2010; Media Matters, 9/7/2010] Beck’s allegation that Hopkins was some sort of “Stalinist” is false. The allegation originally came from KGB defector Oleg Gordievsky, who wrote a sensationlist book, KGB: The Inside Story, where he alleged Hopkins was “an unconscious spy” for the Soviet Union during World War II. In reality, Hopkins was the top official in the Roosevelt administration charged with dealing with Soviet officials during World War II. His job involved explaining American policies and positions to Stalin and other top Soviet officials. Since Soviets who spoke to Hopkins routinely reported the contacts to the Soviet national security agency, the NKVD, Hopkins was listed as a “source” or “agent” of information for Moscow. No evidence has ever surfaced that Hopkins provided any classified or unauthorized information to the USSR, or in any way worked to advance the cause of Soviet Communism. [New York Times, 10/28/1990]

Entity Tags: Josef Stalin, Fox News, Glenn Beck, Harry Lloyd Hopkins, Roosevelt administration, Oleg Gordievsky

Timeline Tags: Domestic Propaganda

Category Tags: Commentaries and Criticisms

On Fox News’s business show Bulls and Bears, Fox Business Channel host Eric Bolling tells viewers that he is glad young Americans will not have Social Security and will have to work instead of relying on what he calls that “Ponzi scheme” of a program. When Bolling calls Social Security a “Ponzi scheme,” the host and four other guests laugh and call out approving statements; host Brenda Buttner shouts repeatedly, “I love his show!” Bolling says that it is good young people “realize they’re not going to be able to suck at the teat of the nanny state too much longer, get off their butt, work, put some money away, and not have to rely on a system that’s gonna fold, probably by the time they get to collect a check.” [Media Matters, 7/24/2010; Media Matters, 9/7/2010] In February 2009, the Wall Street Journal’s Stephen Moore made a similar claim (see February 2, 2009).

Entity Tags: Eric Bolling, Brenda Buttner, Stephen Moore, Fox News

Timeline Tags: Domestic Propaganda

Category Tags: USA, Commentaries and Criticisms

Stephen Schwarzman.Stephen Schwarzman. [Source: Time magazine]Stephen Schwarzman, one of Wall Street’s leading hedge fund managers, equates the Obama administration’s plan to levy taxes on the private equity industry as akin to Adolf Hitler’s invasion of Poland, London’s Daily Telegraph reports. Schwarzman says America faces a “crisis of leadership” that is hindering the nation’s economic recovery. His concerns are echoed by Daniel Loeb, the founder of the Third Point fund, who accuses the Obama administration of attempting to implement economic “redistribution rather than growth.” Loeb decries an April 2010 lawsuit brought by the Securities and Exchange Commission (SEC) against Wall Street investment firm Goldman Sachs as “politically laced,” and blames the lawsuit for making investors lose confidence in the economic recovery. Loeb says that “so long as our leaders tell us that we must trust [them] to regulate and redistribute our way back to prosperity, we will not break out of this economic quagmire.” [Daily Telegraph, 8/31/2010]

Entity Tags: Obama administration, Daniel Loeb, Goldman Sachs, US Securities and Exchange Commission, Stephen A. Schwarzman

Timeline Tags: Domestic Propaganda

Category Tags: USA, US Monetary Policy, Commentaries and Criticisms

Fox News host Sean Hannity has as a guest Fox business commentator Stuart Varney. Varney accuses the Obama administration of implementing “socialist,” “un-American” economic policies. “We’ve had an 18-month experiment with American socialism,” Varney claims, and “we do not like it, we want to reverse it.” President Obama’s economic policies, Varney says, are “un-American.” [Media Matters, 11/17/2010]

Entity Tags: Fox News, Barack Obama, Sean Hannity, Obama administration, Stuart Varney

Timeline Tags: Domestic Propaganda

Category Tags: Bailouts and Other Government Aid, USA, Obama Policies and Actions, Commentaries and Criticisms

President Obama tells how his ideas of bipartisan compromise with Republican lawmakers were dashed. Obama reflects on the American Recovery and Reinvestment Act of 2009, signed into law in February 2009. Interviewer Jann Wenner of Rolling Stone asks: “When you came into office, you felt you would be able to work with the other side. When did you realize that the Republicans had abandoned any real effort to work with you and create bipartisan policy?” Obama responds: “Well, I’ll tell you that given the state of the economy during my transition, between my election and being sworn in, our working assumption was that everybody was going to want to pull together, because there was a sizable chance that we could have a financial meltdown and the entire country could plunge into a depression. So we had to work very rapidly to try to create a combination of measures that would stop the free-fall and cauterize the job loss. The recovery package we shaped was put together on the theory that we shouldn’t exclude any ideas on the basis of ideological predispositions, and so a third of the Recovery Act were tax cuts. Now, they happened to be the most progressive tax cuts in history, very much geared toward middle-class families. There was not only a fairness rationale to that, but also an economic rationale—those were the folks who were most likely to spend the money and, hence, prop up demand at a time when the economy was really freezing up. I still remember going over to the Republican caucus to meet with them and present our ideas, and to solicit ideas from them before we presented the final package. And on the way over, the caucus essentially released a statement that said, ‘We’re going to all vote “No” as a caucus.’ And this was before we’d even had the conversation. At that point, we realized that we weren’t going to get the kind of cooperation we’d anticipated. The strategy the Republicans were going to pursue was one of sitting on the sidelines, trying to gum up the works, based on the assumption that given the scope and size of the recovery, the economy probably wouldn’t be very good, even in 2010, and that they were better off being able to assign the blame to us than work with us to try to solve the problem.” No House Republican voted for the package; only three Republican Senators voted for it. [BBC, 2/14/2009; Rolling Stone, 9/28/2010]

Entity Tags: Barack Obama, American Recovery and Reinvestment Act of 2009, Republican Party, Jann Wenner

Category Tags: Bailouts and Other Government Aid, USA, Commentaries and Criticisms

US Senator Mike Lee (R-UT) posts a video on his YouTube channel in which he declares federal child labor laws “unconstitutional.” Lee says: “Congress decided it wanted to prohibit [child labor], so it passed a law—no more child labor. The Supreme Court heard a challenge to that and the Supreme Court decided a case in 1918 called Hammer v. Dagenhardt. In that case, the Supreme Court acknowledged something very interesting—that, as reprehensible as child labor is, and as much as it ought to be abandoned—that’s something that has to be done by state legislators, not by members of Congress.… This may sound harsh, but it was designed to be that way. It was designed to be a little bit harsh. Not because we like harshness for the sake of harshness, but because we like a clean division of power, so that everybody understands whose job it is to regulate what. Now, we got rid of child labor, notwithstanding this case. So the entire world did not implode as a result of that ruling.” Think Progress reporter Ian Millhiser calls Lee’s interpretation flawed. The Constitution gives Congress the power “[t]o regulate commerce… among the several states [and to] make all Laws which shall be necessary and proper for carrying into Execution” this power to regulate commerce. This provision has been upheld in many Court cases. Lee failed to note that in 1941, the Court unanimously overruled Hammer v. Daggenhardt in United States v. Darby. Moreover, Millhiser notes, child labor exploitation did not stop until Congress placed strict limits on it in the Fair Labor Standards Act of 1938, a law upheld by United States v. Darby. [Think Progress, 1/31/2011] Senate Republicans will give Lee a seat on the Senate Judiciary Committee, which works with constitutional interpretation. Lee has also declared Social Security, Medicare, the Federal Emergency Management Agency (FEMA), the Food and Drug Administration (FDA), food stamps, and income assistance to the poor all unconstitutional. [Think Progress, 1/27/2011]

Entity Tags: Ian Millhiser, US Supreme Court, Michael Shumway (“Mike”) Lee, Senate Judiciary Committee

Timeline Tags: Civil Liberties

Category Tags: US Labor Issues, Commentaries and Criticisms

Missouri State Senator Jane Cunningham (R-St. Louis ) introduces SB 22 into consideration. The bill would eliminate many state child labor protections, most notably lifting the ban on children under 14 being allowed to work. The bill’s official summary reads in part: “This act modifies the child labor laws. It eliminates the prohibition on employment of children under age 14. Restrictions on the number of hours and restrictions on when a child may work during the day are also removed. It also repeals the requirement that a child ages 14 or 15 obtain a work certificate or work permit in order to be employed. Children under 16 will also be allowed to work in any capacity in a motel, resort, or hotel where sleeping accommodations are furnished. It also removes the authority of the director of the Division of Labor Standards to inspect employers who employ children and to require them to keep certain records for children they employ. It also repeals the presumption that the presence of a child in a workplace is evidence of employment.” While the federal Fair Labor Standards Act would continue to protect child workers in Missouri, Lee’s law, if passed, would let employers hire children under 14, let them work far longer hours, and prohibit state oversight agencies from monitoring employers for possible exploitation or abuse. AFL-CIO blogger Mike Hall calls Lee’s proposal “absolutely insane.” [Mike Hall, 2/14/2011; Think Progress, 2/15/2011]

Entity Tags: Mike Hall, Fair Labor Standards Act, Jane Cunningham, Missouri Division of Labor Standards

Timeline Tags: Civil Liberties

Category Tags: US Labor Issues

A list of 10 companies that have avoided paying US income taxes is provided by Senator Bernie Sanders (I-VT), who is pushing for legislation that will close the legal tax loopholes that allow large corporations to avoid the bulk of their tax responsibilities. Chicago Sun-Times reporter Lynn Sweet writes, “Some people call the income tax system with generous loopholes for big companies corporate welfare or corporate entitlements.” Sanders’s list, based on returns and Securities and Exchange Commission (SEC) documents filed in 2009 and earlier, includes:
bullet ExxonMobil. The oil giant made $19 billion in profits in 2009, but paid no federal income taxes, and received a $156 million tax rebate.
bullet Bank of America (BoA). The financial corporation made $4.4 billion in profits in 2009, and received nearly $1 trillion in Federal Reserve and Treasury Department “bailout” funds. The bank received a $1.9 billion tax refund.
bullet General Electric. This multinational conglomerate made $26 billion in profits in the US, and over the last five years has received $4.1 billion in tax refunds.
bullet Chevron. The oil giant made $10 billion in profits in 2009, and received a $19 million refund from the IRS.
bullet Boeing. The defense contractor received a $30 billion contract from the US Department of Defense in 2009 to build 179 airborne tankers, and received a $124 million tax refund.
bullet Valero Energy. This energy corporation, the 25th largest company in the US, garnered $68 billion in sales in 2009, and received $157 million in tax refunds. Over the last three years, Valero has received a $134 million tax break from the oil and gas manufacturing tax deduction.
bullet Goldman Sachs. The financial giant paid only 1.1 percent of its income in taxes in 2008, though it recorded $2.3 billion in profits. It also received nearly $800 billion from the Federal Reserve and the Treasury Department.
bullet Citigroup. The financial conglomerate made over $4 billion in profits in 2010, but paid no federal income taxes. It received a $2.5 trillion “bailout” from the Federal Reserve and Treasury.
bullet ConocoPhillips. The oil conglomerate garnered $16 billion in profits from 2007 through 2009, paid no taxes, and received $451 million in tax breaks through the oil and gas manufacturing deduction.
bullet Carnival Cruise Lines. This entertainment giant made over $11 billion in profits between 2006 and 2011, but paid only 1.1 percent of its income in taxes during that period.
In a press release calling for “shared sacrifice,” Sanders writes: “While hard working Americans fill out their income tax returns this tax season, General Electric and other giant profitable corporations are avoiding US taxes altogether.… [T]he wealthiest Americans and most profitable corporations must do their share to help bring down our record-breaking deficit.” Sanders writes that “it is grossly unfair for Congressional Republicans to propose major cuts to Head Start, Pell Grants, the Social Security Administration, nutrition grants for pregnant low-income women, and the Environmental Protection Agency while ignoring the reality that some of the most profitable corporations pay nothing or almost nothing in federal income taxes.” Sanders calls for closing corporate tax loopholes and eliminating the deductions for oil and gas companies. He is also introducing legislation that would impose a 5.4 percent surtax on millionaires that would garner as much as $50 billion a year in tax revenues. Sanders says: “We have a deficit problem. It has to be addressed, but it cannot be addressed on the backs of the sick, the elderly, the poor, young people, the most vulnerable in this country. The wealthiest people and the largest corporations in this country have got to contribute. We’ve got to talk about shared sacrifice.” [Chicago Sun-Times, 3/27/2011]

Entity Tags: Boeing Company, Carnival Cruise Lines, Citigroup, Bernie Sanders, Bank of America, ConocoPhillips, Goldman Sachs, Chevron, Lynn Sweet, Valero Energy Corporation, General Electric, ExxonMobil

Category Tags: US Monetary Policy, Bailouts and Other Government Aid, USA, Bush Policies and Actions, Obama Policies and Actions

Maine State Representative David Burns (R-Whiting) introduces a child labor bill that would allow employers to pay workers under 20 years of age a $5.25/hour “training wage.” Such a law would go against Maine’s minimum wage of $7.50/hour. Critics say that Burns’s proposal devalues young workers, and takes money out of the hands of laborers and gives it to business. Burns’s proposal is part of a larger package he presents, LD 1346, which would make a number of changes to Maine’s child labor laws, including lifting restrictions that limit the maximum hours a minor over the age of 16 can work during school days. Burns calls his legislation “empowering” for young workers, and says employers would be more apt to hire minors if they could pay them the smaller wage. “An employer’s got to have employees, so they can decide what they want to pay,” he says. “The student wants to have a job, and they can decide what they’re willing to work for.” Maine Democrats and labor advocates have come out strongly against the bill. Maine Democratic Party chairman Ben Grant accuses Burns of “trying to erase the progress of child labor laws.” The bill, if passed, would roll back wages earned by teens to a point not seen since the 1980s. Laura Harper of the Maine Women’s Lobby says the bill would undermine efforts to “teach teens the value of hard work.” Instead, she says, the bill “sends them the message that they aren’t valued. That doesn’t fit with Maine values. At a time when business leaders recognize that student achievement is critical to Maine’s economic growth, this bill will shortchange students and impair Maine’s economic success.” She cites a 2000 US Department of Labor study that showed “working a limited number of hours in the junior and senior years of high school has a positive effect on educational attainment.” Representative Timothy Driscoll (D-Westbrook) says the bill, and another measure in Maine’s Senate, would result in “kids working more hours during the school week and making less money.” [Bangor Daily News, 3/30/2011] Think Progress reporter Ian Millhiser observes: “Burns’s bill is particularly insidious, because it directly encourages employers to hire children or teenagers instead of adult workers. Because workers under 20 could be paid less than adults under this GOP proposal, minimum wage workers throughout Maine would likely receive a pink slip as their 20th birthday present so that their boss could replace them with someone younger and cheaper.” Millhiser notes that Burns’s proposal is just one of a number efforts that would dramatically roll back child labor restrictions (see January 4, 2011 and February 14, 2011). [Think Progress, 3/31/2011] The Maine House Labor Committee will reject the bill on a unanimous vote that will come without discussion. Burns will not be present for the vote. Another proposal loosening work restrictions for 16- and 17-year-olds is pending in the Maine Senate. [Lewiston/Auburn Sun Journal, 5/6/2011]

Entity Tags: Ian Millhiser, Timothy Driscoll, David Burns, Ben Grant, Laura Harper

Timeline Tags: Civil Liberties, Domestic Propaganda

Category Tags: US Labor Issues

Bruce Caswell.Bruce Caswell. [Source: Hillsdale County GOP]Michigan State Senator Bruce Caswell (R-Hillsdale) suggests legislation that would force foster children to use their state-funded clothing allowance only in thrift stores. Caswell says that foster children should get “gift cards” to be used only at Salvation Army, Goodwill, or other thrift stores. He explains: “I never had anything new. I got all the hand-me-downs. And my dad, he did a lot of shopping at the Salvation Army, and his comment was—and quite frankly it’s true—once you’re out of the store and you walk down the street, nobody knows where you bought your clothes.” Gilda Jacobs of the Michigan League for Human Services says, “Honestly, I was flabbergasted” to hear of Caswell’s proposal. “I really couldn’t believe this. Because I think, gosh, is this where we’ve gone in this state? I think that there’s the whole issue of dignity. You’re saying to somebody, you don’t deserve to go in and buy a new pair of gym shoes. You know, for a lot of foster kids, they already have so much stacked against them.” Caswell initially admits his proposal would not save Michigan any money, but later says that the proposal would save money. He insists he has no interest in stigmatizing foster children. [Hillsdale County GOP, 2011; Michigan Radio 91.7 FM, 4/15/2011; Michigan Messenger, 4/22/2011] Jessica Pieklo of the humanitarian organization Care2 writes that the proposal is another example of what she calls “the single-focused attack on the poor and politically powerless” being carried out by Michigan’s Republican leadership. “Reasonable checks and transparency in the administration of public benefits is one thing, but Caswell’s proposal is hardly that. It is a pronouncement on the value of these kids, poor and almost homeless usually through no fault their own.” [Care2 (.org), 4/24/2011] In a post on Twitter, MSNBC talk show host Rachel Maddow says: “This is cartoon evil, right? This can’t be real. This cannot be a real thing. Gotta be performance art.” [Talksy, 4/24/2011]

Entity Tags: Bruce Caswell, Rachel Maddow, Jessica Pieklo, Gilda Jacobs

Timeline Tags: Domestic Propaganda

Category Tags: USA, Other

Representative Michele Bachmann (R-MN), a contender for the 2012 Republican presidential nomination, says Congress should not raise the nation’s debt limit (sometimes called the “debt ceiling”) even though many economists and financial leaders warn of economic catastrophe if the US does not raise that limit. Bachmann says Congress is considering bills that would force the government to make payments on debts even if the debt ceiling remains unchanged. [Associated Press, 4/30/2011]

Entity Tags: Michele Bachmann

Category Tags: USA, 2011 US Credit Default

Alan Binder.Alan Binder. [Source: PBS]TPMDC reporter Brian Beutler notes that many Congressional Republicans, led by but not limited to those who consider themselves “tea party” members (see April 30, 2011), are heeding the advice of a small number of unorthodox financial experts who go against the “common wisdom” that a possible credit default by the US would lead to potential catastrophe among national and global financial markets. The issue centers on Congressional Republicans’ insistence that they will not raise the US debt limit, or debt ceiling, unless the Obama administration gives them a wide array of draconian spending cuts; in the past, raising the US debt limit has been a routine matter, often handled with virtually no debate and little, if any, fanfare. Beutler says that the most influential of these advisors is Stanley Druckenmiller, who made billions managing hedge funds. Druckenmiller’s advice was that the US could weather several days of missed interest payments if the US debt ceiling were not immediately raised without serious consequences. House Budget Committee chairman Paul Ryan (R-WI), House Majority Leader Eric Cantor (R-VA), and Senator Pat Toomey (R-PA) are all echoing Druckenmiller’s claims in media interviews and in Congress. Beutler writes that the newfound popularity of Druckenmiller’s claims “alarms everyone from industry insiders to Treasury officials to economists, conservative and liberal, to non-partisan analysts who say the consequences of the US missing even a single interest payment to a debt-holder would be catastrophic—even if it was followed immediately by a legislative course correction.” Former Federal Reserve chairman Alan Binder, now a Princeton economist, warns that if the US were to default on its debt even for a few days, the US dollar would crash in value, interest rates would spike, and the US economy would find itself spiraling into a full-blown recession. Binder writes: “For as long as anyone can remember, the full faith and credit of the United States has been as good as gold—no one has better credit. But if investors start to see default as part of US political gamesmanship, they will demand compensation for this novel risk. How much? Again, no one can know. But even if it’s as little as 10-20 basis points on the US government’s average borrowing cost, that’s an additional $10 billion to $20 billion in interest expenses every year. Seems like an expensive way to score a political point.” JPMorgan CEO Jamie Dimon agrees, telling PBS viewers: “Every single company with treasuries, every insurance fund, every—every requirement that—it will start snowballing. Automatic, you don’t pay your debt, there will be default by ratings agencies. All short-term financing will disappear. I would have hundreds of work streams working around the world protecting our company for that kind of event.” JPMorgan issued a statement after Dimon’s comment saying that even a brief default would trigger “a run on money market funds… that would leave businesses unable to meet their short-term obligations and teetering on the bring of bankruptcy.” JPMorgan compares the money-market run to the aftermath of the 2008 Lehman Bros collapse, which sent the US into a recession. Analyses and reports by the Treasury Borrowing Advisory Committee and Government Accountability Office have warned of dire consequences following a default even of a day or two. Toomey and others insist that a credit default would simply make the Treasury Department find other ways to avoid missing interest payments, but, economists and financial leaders warn, the consequences of that would be enormous. Binder writes: “If we hit the borrowing wall traveling at full speed, the US government’s total outlays—a complex amalgam that includes everything from Social Security benefits to soldiers’ pay to interest on the national debt—will have to drop by about 40 percent immediately. That translates to roughly $1.5 trillion at annual rates, or about 10 percent of GDP. That’s an enormous fiscal contraction for any economy to withstand, never mind one in a sluggish recovery with 9 percent unemployment.” Druckenmiller and some Republicans believe that forcing a credit default would end up benefiting the country, as the Obama administration would give in to Republican demands for enormous spending cuts in return for Republicans’ agreement to raise the debt ceiling. Business Insider reporter Joe Weisenthal recently wrote: “Of course, a default by the world’s most stable nation would probably have impacts in ways nobody can imagine, but one thing seems to be clear. The notion—as some people suggest—that a default would somehow increase US credit-worthiness is absurd.” [Business Insider, 4/20/2011; New York Times, 4/26/2011; TPMDC, 5/20/2011]

Entity Tags: Government Accountability Office, Eric Cantor, US Department of the Treasury, Alan Binder, Treasury Borrowing Advisory Committee, Stanley Druckenmiller, US Congress, Brian Beutler, JP Morgan Chase, Jamie Dimon, Paul Ryan, Pat Toomey, Joe Weisenthal, Obama administration

Category Tags: USA, 2011 US Credit Default, Commentaries and Criticisms

Instead of releasing €12 billion ($17.2 billion) to help the Greek government’s worsening economic and political crises, EU leaders assembling in Luxembourg for seven hours, from Sunday night into Monday morning, place more pressure on the Greek government after the International Monetary Fund (IMF) required Europe to guarantee Greece’s finances for the next 12 months. Rather than act with a sense of urgency, EU finance ministers expect the Greek Parliament and President George Papandreou to pass an austerity bill. Greece’s crises threaten to topple the euro and EU financial markets. [New York Times, 6/20/2011]

Entity Tags: European Union, International Monetary Fund, Greece, Georgios Papandreou

Category Tags: Bailouts and Other Government Aid, Greece

Eurozone policymakers fail to reach an agreement over the weekend on financial aid to bail out Greece, resulting in a sharp market drop on Monday morning as disappointed traders react to the leaders’ failure to guarantee the next €12 billion installment of Greece’s original bailout. Widespread speculation is that a disorganized Greek default will send Eurozone single-currency nations, as well as nations around the globe, into another panic. [Guardian, 6/20/2011]

Entity Tags: European Union, International Monetary Fund, Greece, Eurozone

Category Tags: Bailouts and Other Government Aid, Greece

Representative Michele Bachmann (R-MN) tells a CBS News viewing audience that the Obama administration is lying when it says the US government would default on its loans if Congress refuses to raise the US debt ceiling. Bachmann accuses the Obama administration of using “scare tactics” to push for a debt-ceiling increase. Bachmann has said previously that Congress should not raise the debt ceiling (see April 30, 2011). Treasury Secretary Timothy Geithner and other Obama adminstration members, along with a bevy of economists and financial leaders including Federal Reserve Chairman Ben Bernanke and former Chairman Alan Greenspan, have urged Congress to raise the debt ceiling by August 2 to avoid the US defaulting on its outstanding loans and engendering what many call an economic catastrophe (see May 20, 2011). The US Treasury has used accounting steps, what it calls “extraordinary measures,” to avoid default since the nation reached its debt limit on May 16. The final deadline for the US to raise its debt limit is August 2. Bernanke and others have said that even a brief US default could cause an uproar in the global economy. But Bachmann says she has “no intention” of voting for a hike to the limit, saying instead: “It isn’t true that the government would default on its debt. Because, very simply, the Treasury secretary can pay the interest on the debt first, and then, from there, we have to just prioritize our spending.” Face the Nation host Bob Schieffer asks Bachman: “Experts inside and outside the government say that, if we don’t raise the debt ceiling, we face the United States having to default on its financial obligations. Are you saying these are scare tactics? Or are you saying that’s not true? How can you say that?” Bachmann replies: “It is scare tactics. Because, Bob, the interest on the debt isn’t any more than 10 percent of what we’re taking in. In fact, it’s less than that. And so the Treasury secretary can very simply pay the interest on the debt first, then we’re not in default.… What it means is we have to seriously prioritize. It would be very tough love. But, I have been here long enough in Washington, DC, that I’ve seen smoke and mirrors time and time again.” Bachmann says if elected president, she would end the nation’s deficit problem by making extreme cuts in spending. “I would begin very seriously by cutting spending,” she says. “President Obama, again, he spent a trillion dollar stimulus program that’s been an abject failure. We need to seriously cut back on spending first and foremost, and then prioritize.” Her only recommendation to handle the job crisis is to cut corporate tax rates; she explains: “We have one of the highest corporate tax rates in the world; we need to drop that significantly, so that we have a pro-business, pro-job creation environment. So if we cut back the corporate tax rate, if we would zero out the capital gains rates, allow for 100 percent expensing when a job creator buys equipment for their business, that would go a long way toward job creators recognizing that this is a pro-business environment.” She says that the administration’s health care package, which she calls “Obamacare,” will cost “800,000 jobs.” Schieffer says, “That is data that other people would question,” and she retorts by saying the Congressional Budget Office (CBO), not she herself, has made that claim. A recent analysis by the St. Petersburg Times’s PolitiFact showed that Bachmann’s claim of “Obamacare” costing 800,000 jobs is an “exaggeration” of the CBO’s figures, and is “misleading.” Bachmann dodges questions about the elimination of the minimum wage, which she has advocated since 2005, and the elimination of farm subsidies, from which she and her family have benefited. [CBS News, 6/26/2011]

Entity Tags: CBS News, Alan Greenspan, Barack Obama, Bob Schieffer, US Department of the Treasury, PolitiFact (.org ), Congressional Budget Office, Ben Bernanke, Obama administration, Michele Bachmann, Timothy Geithner

Category Tags: USA, 2011 US Credit Default, Commentaries and Criticisms, Obama Policies and Actions

President Obama tells CBS News interviewer Scott Pelley that he cannot guarantee Social Security recipients will get paid on August 3 if Congressional Republicans block the government from raising its debt ceiling by August 2. If the debt ceiling is not raised by that date, the US will go into default on the debt it owes to other nations. “I cannot guarantee that those checks go out on August 3rd if we haven’t resolved this issue,” he says, “because there may simply not be the money in the coffers to do it.” The Obama administration and a large number of economists and financial leaders have warned of economic catastrophe if America defaults on its debt (see May 20, 2011); many Congressional Republicans, led by the House Tea Party Caucus, have refused to consider the idea of raising the debt ceiling (see April 30, 2011 and June 26, 2011), and some even welcome the idea of a debt default. Many Republicans and Democrats are attempting to use the debt ceiling issue to work out a larger economic approach to long-term deficit reduction. Republicans want huge federal spending cuts, mostly from social safety-net programs such as Social Security, Medicare, and Medicaid, while Democrats want smaller spending cuts balanced by increased revenue through tax increases on the wealthy and the closing of corporate tax loopholes. Obama warns: “[T]his is not just a matter of Social Security checks. These are veterans checks, these are folks on disability and their checks. There are about 70 million checks that go out.” Senate Minority Leader Mitch McConnell (R-KY) states flatly that Congressional Republicans have no intention of attempting to work with Democrats or the Obama administration to balance the budget or reduce the deficit, saying, “After years of discussions and months of negotiations, I have little question that as long as this president is in the Oval Office, a real solution is probably unattainable.” However, McConnell says Congressional Republicans would work to avoid default. “The president has presented us with three choices: smoke and mirrors, tax hikes, or default,” McConnell says in remarks on the Senate floor. “Republicans choose none of the above. I had hoped to do good, but I refuse to do harm. So Republicans will choose a path that actually reflects the will of the people, which is to do the responsible thing and ensure that the government doesn’t default on its obligations.” Obama says he would refuse to sign a short-term debt ceiling increase, a tactic advocated by Republican strategists who want to bring the issue up again, and perhaps force another economic crisis, in the middle of the 2012 presidential campaign. “This is the United States of America and, you know, we don’t manage our affairs in three-month increments,” Obama tells reporters. “You know, we don’t risk US default on our obligations because we can’t put politics aside.” [CBS News, 7/12/2011; Daily Mail, 7/13/2011] The next day, McConnell offers an “alternative” debt ceiling plan which many see as fraught with political costs for Obama and Congressional Democrats (see July 13, 2011).

Entity Tags: Scott Pelley, Barack Obama, CBS News, Mitch McConnell, US Congress, US House of Representatives Tea Party Caucus

Category Tags: USA, 2011 US Credit Default, Obama Policies and Actions

Three members of the US House of Representatives’ “tea party” caucus introduce a measure to force the federal government to pay the principal and interest on the debt, and to continue to pay military personnel, even if the government goes into default because Congress refuses to raise the debt ceiling. The Obama administration and a bevy of economists and financial leaders have warned that if Congress refuses to raise the debt ceiling by August 2, the US will go into default on its debt, sending the nation’s economy into a tailspin and perhaps triggering a worldwide economic downturn (see May 20, 2011). Representatives Michele Bachmann (R-MN), Steve King (R-IA), and Louis Gohmert (R-TX) introduce House Resolution 2496, the PROMISES Act (Payment Reliability for Our Obligations to Military and Investors to Secure Essential Stability Act). All three accuse the Obama administration of lying about the potentially disastrous effects of a national default (see April 30, 2011 and June 26, 2011). President Obama recently said he could not promise that Social Security and disability checks would go out to senior citizens and veterans on August 3 if the nation defaulted on its debt on August 2 (see July 11-12, 2011); Bachmann and the others accuse Obama of lying and “fear mongering.” Bachmann says, “Don’t allow military men and women to dangle over a fire and claim they won’t get paid.” All three say that even if the government defaults on its loans, there is enough money to pay the Defense Department, Medicare, Medicaid, and Social Security benefits. Gohmert says that Obama should have told the nation, “The only thing that you have to fear is fear itself,” and says House Speaker John Boehner (R-OH) should “not… trust the president anymore.” King says of Obama, “I can’t imagine what his argument would be against paying our military and keeping our credit rating up.” Obama has offered Congress a package containing $4 trillion in spending cuts and small tax increases on the wealthy, a package that has been rejected by Congressional Republicans. Instead, Bachmann says, “President Obama is holding the full faith and credit of the United States hostage so he can continue his spending sprees.” Bachmann refuses to say who would not get paid if the nation went into default, saying instead, “We want to take the politics out of this issue.” [Minnesota Independent, 7/13/2011]

Entity Tags: Obama administration, US House of Representatives Tea Party Caucus, John Boehner, Michele Bachmann, Payment Reliability for Our Obligations to Military and Investors to Secure Essential Stability Act, US House of Representatives, Louis Gohmert, Steve King

Category Tags: USA, 2011 US Credit Default, Commentaries and Criticisms

Mitch McConnell.Mitch McConnell. [Source: Daily Political (.com)]Senate Minority Leader Mitch McConnell (R-KY) proposes an alternative to the Obama administration’s economic proposal to raise the nation’s debt ceiling and avoid the US defaulting on its debt. Republicans in the House and Senate have repeatedly refused to consider raising the debt ceiling (see April 30, 2011, June 26, 2011 and July 13, 2011); some have welcomed the possibility of a default, simultaneously saying that the nation will suffer little real economic damage by defaulting on its debt and blaming the Obama administration for any such damage. Obama officials and an array of economists and financial leaders have warned that if the US defaults on its debt, such a default could trigger a national economic collapse and send the world’s economies into a downward spiral (see May 20, 2011). McConnell’s alternative would raise the debt ceiling in three short-term increments of up to $2.5 trillion in total over the next year, as long as President Obama matched the raises with equivalent spending cuts; House Republicans could vote for non-binding resolutions of disapproval. The London Daily Mail notes that McConnell’s proposal would put the onus of raising the debt ceiling, and the negative impact of draconian spending cuts, directly on Obama and the Democrats, absolving the Republicans of blame and giving Republican presidential candidates the opportunity to slam Obama’s economic policies during the height of the 2012 presidential campaign. McConnell has blamed what he calls the intransigence of the Obama administration for the nation’s deficit, which was largely inherited from the Bush administration, and has told the Senate, “After years of discussions and months of negotiations, I have little question that as long as this president is in the Oval Office, a real solution is probably unattainable.” Obama has said that if Congress does not raise the debt ceiling by August 2, Social Security recipients and veterans may not get the checks they are due to receive on August 3. Few Obama officials or Congressional Democrats have any positive remarks about McConnell’s plan, and House Speaker John Boehner (R-OH) refuses to endorse it. [Daily Mail, 7/13/2011]

Entity Tags: London Daily Mail, Bush administration (43), Mitch McConnell, John Boehner, US Senate, Obama administration

Category Tags: USA, 2011 US Credit Default, Commentaries and Criticisms

Mo Brooks.Mo Brooks. [Source: Public domain / Wikimedia]Many Congressional Republicans, particularly “tea party” freshmen, believe that not only is the Obama administration lying about the potentially catastrophic consequences of a US credit default that would follow the failure of Congress to raise the nation’s debt ceiling (see April 30, 2011, May 20, 2011, June 26, 2011, and July 11-12, 2011), but some even say that a credit default would be ultimately good for the nation. President Obama is joined by House Speaker John Boehner (R-OH), the chairman of the Federal Reserve, and Moody’s credit rating agency in saying that Congress’s failure to raise the debt ceiling by August 2 would be an economic disaster and must be avoided. But Representative Eric A “Rick” Crawford (R-AK) says otherwise. Crawford says all Obama would have to do to handle a default and the subsequent halt in US borrowing would be to use existing tax revenue to pay for what Crawford sees as “essential” federal services: the military, Medicare and Social Security, and interest on existing debt. If other government services, programs, and agencies such as the FBI, veterans’ benefits, and others would be interrupted, Crawford says that would be acceptable. “That wouldn’t work for just a few days. That would work for a few years,” he says, adding that he will not vote for a debt ceiling increase unless it is coupled with massive federal spending cuts. Budget deficits require “that we take some painful measures now. I’d rather swallow that bitter pill today.” Most of the cuts Crawford and fellow Republicans want would be in social safety-net programs, from Social Security, Medicare, Medicaid, and disability benefits to funding for education and veterans programs. Crawford and a number of House Republicans simply refuse to accept statements that economic calamity would result from a missed deadline, the Washington Post reports. That opinion, the Post says, will make raising the debt ceiling far more difficult than similar ceiling raises of previous years. Representative Mo Brooks (R-AL) says that not raising the debt ceiling would actually benefit the economy in the long run. Raising the debt ceiling, he says, just enables the federal government to spend itself into more debt. “A debt ceiling problem, as large as it is, is not anywhere near as a big or as bad as” more debt, he says. He adds that the government can continue paying creditors even if it is refused further credit. “There should be no default on August 2,” he says. “In fact, our credit rating should be improved by not raising the debt ceiling.” Most financial leaders in government and the private sector believe that the US credit rating will be dropped, perhaps significantly, if the US defaults on its debt, and the consequences of that drop could send the nation’s economy into a full-blown recession or even a depression. Even Boehner says the debt ceiling must be lifted. “Missing August 2nd could spook the [stock] market,” he says. “And you could have a real catastrophe. Nobody wants that to happen.” An Obama official recently said of legislators like Crawford and Brooks, “These are the kinds of people who get eaten by bears.” Washington Monthly editor Steve Benen writes: “The problem that plagues the nation is not about competing parties, ideologies, or creeds. It comes down to a dispute between those who believe empirical reality exists and deserves to be taken seriously vs. those who don’t. With Republican members of Congress and their supporters choosing the latter, it’s increasingly difficult to imagine the United States thriving in the 21st century.” [Politico, 5/13/2011; Washington Post, 7/14/2011; Washington Monthly, 7/15/2011]

Entity Tags: Morris Jackson (“Mo”) Brooks, Jr., Barack Obama, Eric A. (“Rick”) Crawford, Moody’s Investors Service, US Congress, John Boehner, Washington Post, Obama administration, US Federal Reserve, Steve Benen

Category Tags: USA, 2011 US Credit Default, Commentaries and Criticisms

In an interview with CBS News’s Scott Pelley, House Speaker John Boehner (R-OH) says that he got “98 percent” of what he wanted in a deal with Senate Democrats and the White House in the just-concluded debt ceiling extension legislation. Boehner says he and his House Republicans successfully blocked a comprehensive “grand bargain” with the Obama administration because, as he says, the “president was insisting on more taxes [and] never got serious about the kind of spending cuts that were necessary in order to get America back on a sound fiscal footing.” He tells Pelley that he “walked away” from Obama’s final proposal. “We had a lot of productive conversations, a lot of tense conversations,” Boehner says. “But it became pretty clear to me that I wasn’t going to be for higher taxes, and the president wasn’t going to cut spending as he should.… I told the president: ‘I’m not going there. I can’t do that.’” Boehner says that he has no intention at this time of ever supporting revenue increases of any sort, whether it be tax increases, closing of corporate tax loopholes, or other ways to bring more revenue into federal government; instead, he hopes that the future focus of Congressional debate “will be on reducing expenditures coming out of Washington.” Asked if Republicans would ever support tax increases, Boehner says: “I think that would be a stretch. It doesn’t seem likely to me that that would be recommended, much less supported, but I’ve been surprised before.” He concludes: “When you look at this final agreement that we came to with the White House, I got 98 percent of what I wanted. I’m pretty happy.” Sixty-six House Republicans voted against Boehner’s final plan, though it passed both chambers and was signed into law by Obama hours before the US would have defaulted on its debt. According to the Congressional Budget Office, the deal cuts federal deficits by $2.1 trillion over 10 years while also raising the debt limit by an equal amount. The deal also creates a joint, bicameral committee of legislators charged with finding additional cuts. [CBS News, 8/1/2011; The Hill, 8/1/2011] Days later, Standard & Poor’s cuts the US credit rating (see August 5, 2011). Republicans, including Boehner, will blame Obama for the legislation and the resulting credit reduction (see August 6-9, 2011).

Entity Tags: Standard & Poor’s, Congressional Budget Office, CBS News, John Boehner, Scott Pelley, US House of Representatives, US Senate, Obama administration

Category Tags: USA, 2011 US Credit Default, Commentaries and Criticisms

The outside of the Standard & Poor’s office complex on Wall Street.The outside of the Standard & Poor’s office complex on Wall Street. [Source: Satellite Radio Playground (.com)]The US loses its top-rank AAA credit rating from the financial services company Standard & Poor’s; the firm drops the US credit rating one notch to AA-plus. The US has never had anything but top-tier credit ratings in its financial history, and has top credit ratings from S&P since 1941. S&P makes its decision based on the huge Congressional battle over raising the US’s debt ceiling, normally a routine procedural matter that was used by Congressional Republicans, who threatened to block the ceiling raise unless they were given dramatic spending cuts by the entire Congress and the White House. (House Speaker John Boehner (R-OH) boasted that he and his Republican colleagues got “98 percent” of what they wanted in the debt ceiling deal—see August 1, 2011.) Because of the dispute, the US was hours away from an unprecedented credit default until legislation was finally signed and the default avoided. S&P also cites the government’s budget deficit and rising debt burden as reasons for the rating reduction, saying in a statement, “The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government’s medium-term debt dynamics.” The drop in the US credit rating will result in a rise in US borrowing costs for American consumers, companies, and the government. US treasury bonds, once seen as the safest securities in the world, are now rated lower than bonds issued by countries such as Britain, France, Germany, and Canada. S&P says the outlook on the US’s credit rating is “negative,” implying another downgrade is possible in the next 12 to 18 months. A senior investment officer with a West Coast management company says such a downgrade was “once unthinkable,” and says the entire global economic system will be affected. After the fierce Congressional battle, President Obama signed legislation mandating $2.1 trillion in spending cuts over the next decade, but S&P officials had asked for $4 trillion in savings as a “down payment” for restoring the US’s financial stability. Part of S&P’s rationale for the downgrade is its assumption that Congressional Republicans will not allow tax cuts implemented by the Bush administration in 2001 and 2003 to expire as scheduled by the end of 2012. The Obama administration immediately notes that S&P’s made a $2 trillion error in calculating the US debt, an error that the firm acknowledges but says does not affect its decision to downgrade the US credit rating. A Treasury Department spokeswoman says, “A judgment flawed by a $2 trillion error speaks for itself.” [New York Times, 8/5/2011; Reuters, 8/6/2011] Credit rating agencies such as S&P have suffered tremendous damage to their credibility in recent years; a Congressional panel called the firms “essential cogs in the wheel of financial destruction” after what the New York Times calls “their wildly optimistic models [that] led them to give top-flight reviews to complex mortgage securities that later collapsed.” [New York Times, 8/5/2011]
S&P Explains Decision: 'Political Brinksmanship' - S&P explains its decision in a press release. The firm is “pessimistic about the capacity of Congress and the [Obama a]dministration to be able to leverage their agreement this week into a broader fiscal consolidation plan that stabilizes the government’s debt dynamics any time soon.” Fiscal policy decisions between Congress and the White House, the firm says, “will remain a contentious and fitful process.” The firm accuses Congressional Republicans in particular of “political brinksmanship” in threatening to allow a debt default if their conditions were not met, and says such tactics destabilize both the US and the global economy. “The statutory debt ceiling and the threat of default have become political bargaining chips in the debate over fiscal policy,” the firm says. “[T]he majority of Republicans in Congress continue to resist any measure that would raise revenues, a position we believe Congress reinforced by passing the” legislation. “The outlook on the long-term rating is negative.” [Standard and Poor's, 8/5/2011] In an email before the debt ceiling was raised, S&P’s global head of sovereign ratings wrote: “What’s changed is the political gridlock. Even now, it’s an open question as to whether or when Congress and the administration can agree on fiscal measures that will stabilize the upward trajectory of the US government debt burden.” [New York Times, 8/5/2011]
GOP Presidential Candidates, Congressional Members Blame Obama - The day after the downgrade, Republicans in Congress and on the campaign trail blame the Obama administration for the downgrade (see August 6-9, 2011).
Economist Lambasts S&P, Blames Congressional Republicans - Nobel Prize-winning economist Paul Krugman lambasts S&P and blames Congressional Republicans for the downgrade (see August 5-6, 2011).

Entity Tags: US Congress, US House of Representatives, Timothy Geithner, Paul Krugman, Obama administration, Barack Obama, John Boehner, New York Times, Standard & Poor’s, US Department of the Treasury

Category Tags: USA, Other Events in Economic History, US Monetary Policy, 2011 US Credit Default

Hours after financial services firm Standard & Poor’s downgrades the US credit rating from AAA to AA+ (see August 5, 2011), Paul Krugman, a liberal economist and Nobel Prize winner, blasts both the firm and Congressional Republicans for the downgrade. “On one hand, there is a case to be made that the madness of the right has made America a fundamentally unsound nation,” he writes. “And yes, it is the madness of the right: if not for the extremism of anti-tax Republicans, we would have no trouble reaching an agreement that would ensure long-run solvency. On the other hand, it’s hard to think of anyone less qualified to pass judgment on America than the rating agencies. The people who rated subprime-backed securities are now declaring that they are the judges of fiscal policy? Really?” Krugman states that he and other economists believe S&P’s call for a $4 trillion cut in US spending is “nonsense,” writing: “US solvency depends hardly at all on what happens in the near or even medium term: an extra trillion in debt adds only a fraction of a percent of GDP to future interest costs, so a couple of trillion more or less barely signifies in the long term. What matters is the longer-term prospect, which in turn mainly depends on health care costs.” He concludes that S&P is “in no position to pass judgment” on the US economic situation. [New York Times, 8/5/2011] The next day, the National Journal’s Edmund Andrews agrees with Krugman, writing: “[I]t’s hard to read the S&P analysis as anything other than a blast at Republicans. In denouncing the threat of default as a ‘bargaining chip,’ the agency was saying that the GOP strategy had shaken its confidence. Though S&P didn’t mention it, the agency must have been unnerved by the number of Republicans who insisted that it would be fine to blow through the debt ceiling and provoke a default.” [National Journal, 8/6/2011] Krugman’s criticisms are echoed a week later by an array of economists and private-sector financial leaders (see August 12, 2011).

Entity Tags: Edmund L. Andrews, US House of Representatives, Standard & Poor’s, Paul Krugman, US Congress

Category Tags: USA, 2011 US Credit Default, Commentaries and Criticisms

Stung by the recent decision by Standard & Poor’s to downgrade the US government’s credit rating (see August 5, 2011) and the economic turmoil triggered by that decision in response to Republican-backed debt ceiling legislation (see May 20, 2011), US Republicans begin blaming the Obama administration for the downgrade. After the legislation passed, House Speaker John Boehner (R-OH) boasted that he and his fellow Republicans had gotten “98 percent” of what they wanted from the legislation (see August 1, 2011). Boehner now says, “Democrats who run Washington remain unwilling to make the tough choices required to put America on solid ground.” He quotes the S&P report in making his criticisms of Washington Democrats, failing to note that the S&P report singled out Republicans as responsible for the legislative decisions that led to the downgrade. “This decision by S&P is the latest consequence of the out-of-control spending that has taken place in Washington for decades. The spending binge has resulted in job-destroying economic uncertainty and now threatens to send destructive ripple effects across our credit markets.” Senator Ron Johnson (R-WI) says the downgrade and subsequent stock market plummet “provide further evidence that President Obama’s agenda has been a disaster for our economy.” Mitt Romney (R-MA), the former governor of Massachusetts and a frontrunner for the 2012 Republican presidential nomination, says the downgrade is “a deeply troubling indicator of our country’s decline under President Obama.” Longshot GOP candidate Jon Huntsman (R-UT) says the downgrade is due to the spreading of a “cancerous debt afflicting our nation” and calls for “new leadership in Washington” to address the ongoing crisis. Republican presidential candidate Tim Pawlenty (R-MN) calls Obama “inept.” Michele Bachmann (R-MN), a House Republican who led the “tea party” fight to block the debt ceiling from being raised (and thereby triggering a government debt default—see April 30, 2011, June 26, 2011, July 13, 2011, and July 14, 2011), now blames the Obama administration and particularly US Treasury Secretary Timothy Geithner for the debacle. Campaigning for the Republican presidential nomination in Des Moines, Iowa, Bachmann says that President Obama should fire Geithner: “The president’s refusal to remove Treasury Secretary Tim Geithner shows the president has no plan to restore the AAA credit rating to the United States of America. The president is not listening to the people of this country, nor is he providing the leadership that is necessary to bring about economic recovery.… I once again, today, in Polk County, Iowa, call for Treasury Secretary Tim Geithner to resign immediately for the sake of our country and to return our economy to full status.” Bachmann accuses Obama of “destroying the foundations of the US economy one beam at a time.” In robocalls targeting House Democrats, the National Republican Congressional Committee (NRCC) pins the blame for the downgrade on House Democrats. One call targeting David Loebsack (D-IA) says: “… Loebsack continues to oppose a [Constitutional] Balanced Budget Amendment that would force Washington to live within its means. Loebsack and his fellow Democrats’ addiction to big government spending has led to a downgrade of America’s credit rating and a dramatic loss in the global markets that could force you to pay more for everyday expenses. While David Loebsack keeps standing in the way of real fiscal reform, middle-class families in Iowa could now see a loss in retirement savings while mortgage rates, car payments, and student loans could become even more expensive.” Democrats respond with criticisms of their own. Tim Kaine (D-VA), a Senate candidate, says that “the continuing resistance of Congressional Republicans to entertain the need for new revenue as part of a reasonable solution is a critical part of the downgrade decision.” Senator Chris Coons (D-DE) adds, “By refusing to negotiate in good faith, Republicans turned the debt-ceiling debate into a hostage crisis and last night we saw its first casualty.” Obama campaign spokesman Ben LaBolt says, “The Republican candidates would have put our economy at great risk by allowing the nation to default on its obligations.” Senate Majority Leader Harry Reid (D-NV) calls for a “balanced approach” to future economic decisions, which would include revenue increases such as tax hikes and the closing of tax loopholes for rich corporations as well as spending cuts. [Washington Post, 8/6/2011; Reuters, 8/6/2011; National Journal, 8/6/2011; Politico, 8/7/2011; Politico, 8/9/2011]

Entity Tags: Harry Reid, Timothy Geithner, David Loebsack, Ben LaBolt, Tim Pawlenty, Tim Kaine, Willard Mitt Romney, Obama administration, John Boehner, Jon Huntsman, Chris Coons, Ronald H. Johnson, National Republican Congressional Committee, Michele Bachmann

Category Tags: USA, 2011 US Credit Default, Commentaries and Criticisms

In a Republican presidential primary debate in Iowa, candidate Michele Bachmann (R-MN) claims that the recent decision by financial services firm Standard & Poor’s to downgrade the US credit rating (see August 5, 2011) proved that she and her fellow “tea party” Republicans in the House of Representatives were right to resist an increase in the debt ceiling. S&P itself (see August 11, 2011), along with an array of economists and private-sector financial leaders (see May 20, 2011, August 5-6, 2011, and August 12, 2011), says that the battle by Bachmann and her fellow House Republicans to refuse a debt-ceiling increase, even if it meant the US would default on its debt, is what led to the downgrade. But Bachmann sees the issue very differently. She reiterates her position in a post-debate interview on Fox News, saying, “Standard & Poor’s essentially proved me right.” The firm’s decision to downgrade the US credit rating came about, she says, because “we don’t have an ability to repay our debt.… We just heard from Standard & Poor’s, when they dropped our credit rating and what they said is we don’t have an ability to repay our debt. That’s what the final word was from them. I was proved right in my position. We should not have raised the debt ceiling.” Pat Garofalo of the progressive news Web site Think Progress writes that “it’s blatantly clear that Bachmann has no idea what S&P said, because just about every word out of her mouth regarding the agency’s decision was incorrect.” Garofalo notes that “S&P never said ‘we don’t have an ability to pay our debt.’ After all, the agency still rates the US as AA+, meaning it has a ‘very strong capacity to meet financial commitments.’ One S&P analyst characterized the difference between AA+ and AAA as just ‘degrees of excellence.’” Moreover, Garofalo notes, S&P downgraded the nation’s credit rating because, as it said in its own press releases and subsequent statements, “the use of the debt ceiling as a political football and GOP intransigence on taxes.” Bachmann has long derided the idea that not raising the debt ceiling would be detrimental to the US economy (see June 26, 2011, and July 13, 2011). [Think Progress, 8/12/2011]

Entity Tags: Michele Bachmann, Fox News, Pat Garofalo, US House of Representatives Tea Party Caucus, US House of Representatives, Standard & Poor’s

Category Tags: USA, 2011 US Credit Default, Commentaries and Criticisms

Joydeep Mukherji, the senior director for the credit firm Standard & Poor’s, says that one of the key reasons the US lost its AAA credit rating (see August 5, 2011) was because many Congressional figures expressed little worry about the consequences of a US credit default, and some even said that a credit default would not necessarily be a bad thing (see May 20, 2011). Politico notes that this position was “put forth by some Republicans.” Mukherji does not name either political party, but does say that the stability and effectiveness of American political institutions were undermined by the fact that “people in the political arena were even talking about a potential default. That a country even has such voices, albeit a minority, is something notable. This kind of rhetoric is not common amongst AAA sovereigns.” Since the US lost its AAA credit rating, many Republicans have sought to blame the Obama administration (see August 6-9, 2011), even though House Speaker John Boehner (R-OH) said that he and his fellow Republicans “got 98 percent” of what they wanted in the debt ceiling legislation whose passage led to the downgrade (see August 1, 2011). Representative Michele Bachmann (R-MN), running for the Republican presidential nomination in 2012, led many Republican “tea party” members in voting against raising the nation’s debt ceiling, and claimed that even if the US did not raise its debt ceiling, it would not go into default, a statement unsupported by either facts or observations by leading economists (see April 30, 2011, June 26, 2011, July 13, 2011, and July 14, 2011). “I want to state unequivocally for the world, as well as for the markets, as well as for the American people: I have no doubt that we will not lose the full faith and credit of the United States,” she said. Now, however, one of Bachmann’s colleagues, Representative Tom McClintock (R-CA), says that the media, and S&P, misinterpreted the Republican position. “No one said that would be acceptable,” McClintock says of a possible default. “What we said was in the event of a deadlock it was imperative that bondholders retain their confidence that loans made to the United States be repaid on schedule.” Treasury Secretary Timothy Geithner says of S&P’s response to the default crisis: “They, like many people, looked at this terrible debate we’ve had over the past few months, should the US default or not, really a remarkable thing for a country like the United States. And that was very damaging.” [Politico, 8/11/2011] TPMDC reporter Brian Beutler recalls: “For weeks, high-profile conservative lawmakers practically welcomed the notion of exhausting the country’s borrowing authority, or even technically defaulting. Others brazenly dismissed the risks of doing so. And for a period of days, in an earlier stage of the debate, Republican leaders said technical default would be an acceptable consequence, if it meant the GOP walked away with massive entitlement cuts in the end.” He accuses McClintock of trying to “sweep the mess they’ve made down the memory hole” by lying about what he and fellow Republicans said in the days and weeks before the debt ceiling legislation was passed. Beutler notes statements made by House Budget Committee chairman Paul Ryan (R-WI) and House Majority Leader Eric Cantor (R-VA), where they either made light of the consequences of a possible credit default or said that a default was worthwhile if it, as Cantor said, triggered “real reform.” Representative Louis Gohmert (R-TX), one of the “tea party” members, accused the Obama administration of lying about the consequences of default; Beutler writes, “This was a fairly common view among conservative Republicans, particularly in the House” (see July 14, 2011). [TPMDC, 8/11/2011]

Entity Tags: Michele Bachmann, Eric Cantor, Brian Beutler, Joydeep Mukherji, US Congress, Standard & Poor’s, Timothy Geithner, Paul Ryan, Obama administration, John Boehner, Tom McClintock, Politico

Category Tags: USA, 2011 US Credit Default, Commentaries on Economic Issues

Ethan Harris of Bank of America.Ethan Harris of Bank of America. [Source: National Association for Business Economics]Many prominent economists and financial leaders lay the blame for the US credit rating downgrade (see August 5, 2011) at the feet of Congressional Republicans. Republicans have been unified in blaming the Obama administration’s economic policies for the downgrade (see August 6-9, 2011), though House Speaker John Boehner boasted that he and his fellow Republicans received “98 percent” of what they wanted in the debt-ceiling legislation that led to the downgrade (see August 1, 2011). Nobel Prize-winning Paul Krugman, a self-described liberal, blamed Congressional Republicans for the downgrade hours after credit rating agency Standard & Poor’s announced it (see August 5-6, 2011), and S&P itself implied that Republicans were at fault for the downgrade for being willing to risk sending the nation into default if they were blocked from getting their way in the debt-ceiling legislation (see August 11, 2011). Even before the credit rating downgrade, the New York Times reports, “macroeconomists and private sector forecasters were warning that the direction in which the new House Republican majority had pushed the White House and Congress this year—for immediate spending cuts, no further stimulus measures and no tax increases, ever—was wrong for addressing the nation’s two main ills, a weak economy now and projections of unsustainably high federal debt in coming years” (see May 20, 2011). These economists and forecasters generally agree with the Obama administration’s wishes to immediately stimulate the economy to include greater private-sector spending and create more jobs, with spending cuts more useful as a long-term remedy. Republicans in Congress and on the presidential campaign trail, however, continue to insist that their policies are what will rescue the US economy; House Majority Leader Eric Cantor (R-VA) says that he and his fellow Republicans “were not elected to raise taxes or take more money out of the pockets of hardworking families and business people,” and will never consider tax or revenue increases of any sort. Even Republican economic figures such as Reagan advisor Martin Feldstein and Henry Paulson, the Treasury secretary under President George W. Bush, say that revenue increases should balance any spending cuts, a position Congressional Republicans—particularly “tea party” Republicans such as presidential candidate Michele Bachmann (R-MN)—refuse to countenance. Bank of America senior economics research official Ethan Harris writes: “Given the scale of the debt problem, a credible plan requires both revenue enhancement measures and entitlement reform. Washington’s recent debt deal did not include either.” Ian C. Shepherdson, the chief US economist for research firm High Frequency Economist, says, “I think the US has every chance of having a good year next year, but the politicians are doing their damnedest to prevent it from happening—the Republicans are—and the Democrats to my eternal bafflement have not stood their ground.” Joel Prakken, chairman of Macroeconomic Advisers, and Laurence H. Meyer, former Federal Reserve governor, both call the Republicans’ calls for spending cuts “job-kill[ers].” Bill Gross, head of the bond-trading firm Pimco, lambasts Republicans and what he calls “co-opted Democrats” for throwing aside widely accepted economic theory for Republican-led insistence that draconian spending cuts, largely in social safety-net programs such as Social Security and Medicare, will “cure” the US’s economic ills. Instead, Gross writes: “An anti-Keynesian, budget-balancing immediacy imparts a constrictive noose around whatever demand remains alive and kicking. Washington hassles over debt ceilings instead of job creation in the mistaken belief that a balanced budget will produce a balanced economy. It will not.” [New York Times, 8/12/2011]

Entity Tags: Ian Shepherdson, US Congress, Eric Cantor, Bill Gross, Standard & Poor’s, Henry Paulson, Paul Krugman, New York Times, Joel Prakken, John Boehner, Laurence H. Meyer, Martin Feldstein, Michele Bachmann, Ethan Harris, Obama administration

Category Tags: USA, 2011 US Credit Default, Bush Policies and Actions, Commentaries and Criticisms

Business Insider reporter Zeke Miller says flatly that Representative Michele Bachmann (R-MN), a leading candidate for the 2012 Republican presidential nomination, is the reason why the US suffered a recent credit downgrade (see August 5, 2011). Yesterday, Bachmann insisted that the credit downgrade proved her argument against raising the US debt ceiling was correct (see August 11, 2011), but, Miller writes, the evidence, including statements by Standard & Poor’s, the agency that lowered the nation’s credit rating, shows that she and her fellow Congressional Republicans who fought to prevent Congress from authorizing the raising of the debt ceiling (see April 30, 2011, June 26, 2011, July 13, 2011, July 13, 2011, and July 14, 2011), are themselves responsible. S&P officials have said that Congress’s intransigence on raising revenues in any fashion is one of the central reasons why it lowered the US’s credit rating (see August 11, 2011). Bachmann led “tea party” Republicans in voting against every plan offered to raise the debt ceiling; she told reporters that the only way she would even consider voting for a raise in the debt ceiling was if the same legislation repealed entirely the health care reform act recently passed by Congress. Miller goes on to note that all eight Republican presidential candidates, including Bachmann, have said that they would not sign a bill into law that provided 10 times the amount of government spending cuts as it authorized tax and revenue increases. Miller concludes: “Bachmann’s statements on the debt ceiling come off either as stunningly uninformed about the issue, or deliberately misleading. Either way, this line of attack will only weaken her campaign with mainstream and business voters.” [Business Insider, 8/12/2011]

Entity Tags: Business Insider, Standard & Poor’s, Zeke Miller, Michele Bachmann

Category Tags: USA, 2011 US Credit Default, Commentaries and Criticisms

New Republic senior editor John Judis writes of his disappointment that the financial services firm Standard & Poor’s did not explicitly cite the actions of House Republicans as the reason why it issued its downgrade to the US credit rating (see August 5, 2011). One of the reasons why S&P issued its credit downgrade, it said, was because of the “political brinksmanship” waged by members of Congress, resulting in policymaking that has become “less stable, less effective, and less predictable.” Judis notes that while it is virtually indisputable that the firm was referring to the actions of House Republicans who worked furiously to block debt-ceiling legislation (see July 13, 2011 and August 11, 2011), “the statement was sufficiently vague that Republicans could take it as laying the blame on the Obama administration for not agreeing to their proposals for raising the debt ceiling. And, indeed, Mitt Romney and other Republican presidential candidates have blamed President Barack Obama for S&P’s decision” (see August 6-9, 2011). “[T]hose appearing to discount the danger of a default were right-wing Republicans like Representative Michelle Bachmann and Senator Pat Toomey, who are identified with the Tea Party,” Judis writes. Senior S&P director Joydeep Mukherji “acknowledged that a major factor driving the downgrade was the utter irresponsibility and ignorance of a significant minority of Republican legislators,” but refused to cite those Republican lawmakers as responsible for the downgrade. Judis writes: “Why didn’t S&P say this more clearly in the original statement? I suspect it was out of a desire to appear non-partisan, but the effect was to apportion the blame equally on both parties. That is a disservice to the country because it allows a deranged faction of the Republican Party to continue to run riot in the Congress and to undermine any possible of a constructive response to the economic crisis.” Judis concludes, “I stand second to no one in criticizing the White House for failing to fight the Republicans, but it is worth recalling here that the principal cause of our counterproductive fiscal policy is the Republican opposition.” [New Republic, 8/12/2011]

Entity Tags: Pat Toomey, John Judis, Joydeep Mukherji, Obama administration, Standard & Poor’s, US House of Representatives, Republican Party, Willard Mitt Romney, Michele Bachmann, The New Republic

Category Tags: USA, 2011 US Credit Default, Commentaries and Criticisms

After President Obama exhorts Congress to pass his jobs legislation package, which he calls the “American Jobs Act of 2011,” during his address to a joint session on September 8, some Republican lawmakers note that no legislator has officially submitted the bill and thusly there is no legislation to pass. Representative Louis Gohmert (R-TX) submits his own quickly written “American Jobs Act of 2011” hours before a Democratic House member can submit Obama’s 155-page, $447 billion legislative package. Gohmert’s bill is two pages long and would “amend the Internal Revenue Code of 1986 to repeal the corporate income tax.” Gohmert issues a press release that reads: “We have heard a lot of rhetoric about job creation from President Obama over the last several days. After waiting to see what the president would actually put into legislative language, and then waiting to see if anybody would actually introduce the president’s bill in the House, today I took the initiative and introduced the ‘American Jobs Act of 2011.’ It is a very simple bill, which will eliminate the corporate tax which serves as a tariff that our American companies pay on goods they produce here in America. This bill will actually create jobs in America. Right now, American manufacturing jobs are shipped overseas. What is really insidious about this tax is that corporate taxes are paid by the consumer—built in to the cost of the good or service. Corporate taxes are paid for by people in the form of lower wages to American workers and less money paid out in dividends in everything from 401K retirement accounts and to those who would risk their capital in business ventures. This type of capital investment is where jobs come from. Unlike President Obama’s bill, which clocks in at 155 pages, the ‘American Jobs Act’ is only two pages. The American people want to see jobs and economic growth and this bill guarantees that outcome. America would instantly become a safe haven for businesses resulting in an explosion in revenue increases. If we really want to create jobs and grow the economy, we must pass ‘The American Jobs Act’ now.” [Daily Caller, 9/14/2011; Louis Gohmert, 9/14/2011; Los Angeles Times, 9/15/2011] Gohmert objects to a provision in the Obama legislative package which would forbid employers from discriminating against unemployed workers, accusing Obama of trying to create a “new protected class” of Americans and saying that the point of the anti-discrimination language would be to give “trial lawyers… 14 million new clients.” The National Employment Law Project (NELP) says that Gohmert is wrong in his accusations, and that the legislation “would not make employment status a protected class like race or sex,” but “simply bans hiring discrimination against the jobless.” Employer discrimination against unemployed job applicants is well-documented and on the rise, according to NELP. [Huffington Post, 8/11/2011; Huffington Post, 9/14/2011] Kirsten Boyd Johnson of the satirical political news Web site Wonkette calls Gohmert’s legislation “childish,” and says that, according to recent polls, Americans largely blame Congressional Republicans for, as she writes, “destroying America with their petulant refusal to govern like a dignified body of elected lawmakers in favor of running around like naughty children stealing other peoples’ homework.” Bloomberg News, which reports on the polling, quotes retired New York citizen Ray DiPietro as saying: “I’ve been a registered Republican for 50 years or more, but I don’t like what they are doing. [Republicans] are more concerned about getting Obama out of office than with making things right.” DiPietro says he receives emails on a daily basis from Republicans who denigrate Obama and “tear him apart, and that’s no way for grownups to talk.” Indianapolis Republican Nicole Olin agrees, saying: “I do put the majority of the blame on the Republicans, because they seem to be the least willing to give up anything. Just because a majority votes you in doesn’t mean you don’t have to compromise in one way, shape, or form to make sure you do what’s good for everyone.” Senator Mike Lee (R-UT) warns of the dangers of taking any set of polls in “isolation,” and says the poll result “highlights a broad dissatisfaction among the American people with the way their government has been operating.” [Wonkette, 9/15/2011; Bloomberg, 9/15/2011] David Weigel of Slate writes that Gohmert “prank[ed]” the White House in submitting his legislation, which has no real chance of ever being enacted. Although House Democrats have not yet formally submitted the actual American Jobs Act, it has been posted online by the Obama administration. [Slate, 9/12/2011; Slate, 9/15/2011] Democrats can submit the bill under its original title, as House rules do not forbid two separate pieces of legislation having the same name, though as Los Angeles Times reporter James Oliphant notes, “[I]t could result in a lot of Democrats and Republicans shouting on the floor about two different bills.” [Los Angeles Times, 9/15/2011] In the past, Gohmert has accused the Obama administration of orchestrating the deaths of “one in five” Americans through its health care legislation (see July 16, 2009), of implementing “eugenics” and creating Nazi-like “youth brigades” (see July 24, 2009), and of lying about the likelihood that failing to raise the debt ceiling would lower the nation’s credit rating (see July 13, 2011).

Entity Tags: Kirsten Boyd Johnson, Obama administration, Nicole Olin, Louis Gohmert, Michael Shumway (“Mike”) Lee, James Oliphant, National Employment Law Project, David Weigel, US House of Representatives, Barack Obama, Bloomberg News, Ray DiPietro, US Congress

Timeline Tags: Domestic Propaganda

Category Tags: USA

Newt Gingrich during a recent debate among Republican presidential candidates.Newt Gingrich during a recent debate among Republican presidential candidates. [Source: Associated Press]Former House Speaker Newt Gingrich (R-GA), a Republican candidate for the 2012 presidential nomination, says that schools should save educational expenses by firing all custodians except for one “master janitor” and have the children do the rest of the maintenance work for their schools. Gingrich recommends this particularly for schools in poorer areas.
Attacks Unions, Child Labor Laws - Child labor laws prohibit such actions; Gingrich blames these laws, and the unions to which many maintenance workers and custodians belong, for causing “unnecessary” expenditures and for what he says is blocking poorer children from bootstrapping their way to economic success. “This is something that no liberal wants to deal with,” he tells an audience at the John F. Kennedy School of Government at Harvard. “Core policies of protecting unionization and bureaucratization against children in the poorest neighborhoods, crippling them by putting them in schools that fail has done more to create income inequality in the United States than any other single policy,” he continues. “It is tragic what we do in the poorest neighborhoods, entrapping children in, first of all, child laws, which are truly stupid. You say to somebody, you shouldn’t go to work before you’re what, 14, 16 years of age, fine. You’re totally poor. You’re in a school that is failing with a teacher that is failing. I’ve tried for years to have a very simple model. Most of these schools ought to get rid of the unionized janitors, have one master janitor, and pay local students to take care of the school. The kids would actually do work, they would have cash, they would have pride in the schools, they’d begin the process of rising.… You go out and talk to people, as I do, you go out and talk to people who are really successful in one generation. They all started their first job between nine and 14 years of age. They all were either selling newspapers, going door to door, they were doing something, they were washing cars. They all learned how to make money at a very early age. What do we say to poor kids in poor neighborhoods? Don’t do it. Remember all that stuff about don’t get a hamburger flipping job? The worst possible advice you could give to poor children. Get any job that teaches you to show up on Monday. Get any job that teaches you to stay all day even if you are in a fight with your girlfriend. The whole process of making work worthwhile is central.”
Proposal Called 'Absurd,' 'Insane' - Gingrich, who in 1994 proposed placing children whose families were on welfare into state-run orphanages, is quickly targeted for criticism by experts and observers. Randi Weingarten, the president of the American Federation of Teachers (AFT), calls Gingrich’s proposal “absurd,” and says: “Who in their right mind would lay off janitors and replace them with disadvantaged children—who should be in school, and not cleaning schools? And who would start backtracking on laws designed to halt the exploitation of children?” Gingrich says he has a number of “extraordinarily radical proposals to fundamentally change the culture of poverty in America and give people a chance to rise very rapidly.” [Politico, 11/18/2011; New York Times, 11/19/2011] Jordan Weissman, an associate editor of The Atlantic, calls Gingrich’s proposal “insane.” He writes: “This suggestion is, on its face, insane. It sounds like a bad Stephen Colbert joke [referring to a popular political satirist]. But if you stop and consider its merits for a minute or two… well no, it’s still quite insane. And if you spend an evening researching the nitty gritty of what public school custodians actually do for a living, it turns out to be downright cruel.” He says the proposal is “a jarring illustration of Gingrich’s casual disdain for American workers.” Weissmann refers to a job description for a New York City public school custodial engineer: that job requires the worker to use hazardous chemicals such as hydrochloric acid; repair heating and air conditioning systems; do electrical and plumbing repair; and other potentially dangerous tasks. Weissman asks, “What parent wants a nine-year-old, or even a 13-year-old, toying with the HVAC in her school?” Custodial jobs are among the most physically taxing of all jobs, causing workers to suffer an unusually high number of on-the-job injuries and causing long-term physical debilitation. Weissman concludes: “It would be easy to chalk Gingrich’s comments up simply to his well-known animus towards unions. But I don’t think that quite explains it. Rational people can argue about how much someone should be paid to clean.… But that decision starts from the respectful assumption that maintaining a school is something worthwhile for an adult to spend their lives on. That’s not the case in Gingrich’s worldview. Forget that an adult might need that job to put food on the table for their own children. Forget that he’s suggesting we flood an ailing job market with part time, minimum-wage-earning students. This isn’t about labor economics. It’s about respect, and the fact that the leading Republican presidential candidate doesn’t have a spit’s worth of it for manual labor. In his eyes, a janitor’s job just doesn’t mean much. It’s so easy, a child could do it.” [Atlantic Monthly`, 11/21/2011]
Former Custodian: Gingrich 'Doesn't Even Know Why' He is Wrong - A diarist for the liberal blog Daily Kos describes himself as a former “custodian for a very large child care center.” He writes: “I was the guy mopping up vast amounts of wet, sticky rice from the floor, sanitizing the tables, chairs and high-chairs, and washing the dishes. I sanitized doorknobs. I filed down jagged parts of metal that somehow, every once in a while, stuck out from steel door jam[b]s and bathroom stalls. I hauled out dozens of bags of dirty diapers Every Single Day… and yes, I cleaned up an unholy amount of poop from a dozen itty bitty toilets. [T]hese are many of the things Newt Gingrich believes should be jobs for poor children in our public school systems. Cleaning up vomit. Cleaning feces off of toilet seats. Handling cleaning solvents that can eat right through latex gloves. Washing dishes with an industrial dish washer that heats the water over 180 degrees, enough to scald young skin.… Plunging toilets plugged with diarrhea and toilet paper, then sanitizing the toilet seat for the Non Poor students. Newt Gingrich wants our children cleaning blood, mucous, feces, urine, dried snot, vomit loaded with God-Knows-What pathogens from floors and walls and door knobs with chemicles [sic] that can eat the skin right off your arm or cause permanent blindness if it splashed into the eyes or loss of smell if some Janitor Kid jammed his finger up his nose… which kids never do, right? Never. Because an eight-year-old is going to observe strict safety regulations, right?” The diarist concludes: “[Gingrich] should be embarrassed for suggesting we make poor children clean our schools. There is SO much wrong with that statement and the most irritating thing is, he doesn’t even know WHY.” [Daily Kos, 11/21/2011]

Entity Tags: Daily Kos, Jordan Weissman, Randi Weingarten, Newt Gingrich

Timeline Tags: Domestic Propaganda, 2012 Elections

Category Tags: USA, US Labor Issues, Commentaries and Criticisms

Republican presidential candidate Newt Gingrich (R-GA) issues accusations that Americans on government aid programs are in many cases wasteful drug users who use their aid money to go on lavish vacations. Gingrich, riding a surge of popularity as the Iowa caucuses approach, calls President Obama “the food stamp president” during his stump speeches. In an appearance in Council Bluffs, Iowa, Gingrich says: “Remember, this is the best food stamp president in history. So more Americans today get food stamps than before. And we now give it away as cash—you don’t get food stamps. You get a credit card, and the credit card can be used for anything. We have people who take their food stamp money and use it to go to Hawaii. They give food stamps now to millionaires because, after all, don’t you want to be compassionate? You know, the Obama model: isn’t there somebody you’d like to give money to this week. That’s why we’re now going to help bailout Italy because we haven’t bailed out enough people this week, the president thought let’s write another check. After all, we have so much extra money.” The nonpartisan fact-checking entity PolitiFact calls Gingrich’s accusations complete lies. The “food stamp program,” known as the Supplemental Nutrition Assistance Program (SNAP), has very strict guidelines about what can and cannot be bought with federal aid dollars. Except for very limited exceptions, SNAP recipients cannot use aid money for restaurant meals or to buy anything other than groceries. SNAP funds cannot be used to buy alcoholic beverages. The “electronic benefits transfer” card, or EBT cards, are similar in appearance to credit cards, but have a very different function. EBT cardholders cannot use their cards to buy airline tickets, whether it be for Hawaiian vacations or anything else. PolitiFact doubts that any recipients would have enough funds to buy such tickets in the first place; the average monthly SNAP benefit is $134 per person. Julia Isaacs of the Brookings Institution says, “There is undoubtedly some illegal bartering of EBT cards—though I understand trafficking in EBT cards is less than under the old food stamps—but I am having trouble imagining how you could barter an EBT card for an airplane ticket.” PolitiFact notes that Gingrich’s claims may have come from a recent news broadcast in St. Louis, which found that some Missouri SNAP recipients spent $2,737 on food in Hawaii in January 2011. The money, though spent out of state, was spent on legitimate goods such as groceries. The amount was .07 percent of the total money allocated to SNAP residents in Missouri for January 2011. And the Missouri beneficiaries had legitimate reasons to be in Hawaii—some of them were members of the military transferred to new duty bases, for example. If the Missouri story is the source of Gingrich’s claims, PolitiFact notes, then Gingrich completely misrepresented the facts of the story. As far as the “food stamps for millionaires” claim, anyone who earns over 130 percent of the poverty line cannot receive benefits. No such beneficiaries have been identified, and if they do exist, they are breaking the law. Michael Wiseman of George Washington University says, “I would challenge Newt Gingrich to find a millionaire in annual income who gets on food stamps legally.” PolitiFact says that Gingrich’s claims are “so ridiculous” that the researchers thought for a time that he might be joking. Think Progress reporter Marie Diamond calls Gingrich’s claims “absurd.” At a recent campaign event in Iowa, citizen Don Brantz confronted Gingrich, saying: “You don’t always tell the truth, Mr. Gingrich, and that food stamp thing is one of them. Iowa already has a computer system. We do not pay money so the people on food stamps can buy beer and anything else. It’s a very specific thing.” (Diamond notes that Gingrich is a frequent world traveller, taking lengthy vacations in luxury spots around the world. In one instance, he told reporters that after taking a luxury cruise in Greece, he came away with a deeper understanding of the European financial crisis.) [St. Petersburg Times, 12/1/2011; Think Progress, 12/2/2011; ABC News, 1/2/2012] MSNBC talk show host Ed Schultz will say that Gingrich, like fellow Republican candidate Rick Santorum (R-PA), “is also quick to connect programs like food stamps to the African-American community.” Schultz’s guest, author and radio host Michael Eric Dyson, says: “I don’t think we need Newt Gingrich’s pedagogy in the NAACP. I think this is condescension at its most poignant. And, as with Rick Santorum, when you have pet Negro causes, you tend to treat Negros like pets.” New York Times columnist Charles Blow will say of Gingrich’s remarks that “this sort of racial pandering is exactly what happens at this point in a race.” Blow calls Gingrich’s remarks “extreme, very racist.” [Politico, 1/6/2012]

Entity Tags: Michael Wiseman, Don Brantz, Charles M. Blow, Barack Obama, Edward Andrew (“Ed”) Schultz, Michael Eric Dyson, PolitiFact (.org ), Supplemental Nutrition Assistance Program, Marie Diamond, Newt Gingrich

Timeline Tags: Domestic Propaganda, 2012 Elections

Category Tags: Commentaries and Criticisms

Donald Trump and Newt Gingrich. The two have combined to offer 10 poor children a chance to become Trump’s ‘apprentices.’Donald Trump and Newt Gingrich. The two have combined to offer 10 poor children a chance to become Trump’s ‘apprentices.’ [Source: MSNBC / Raw Story]Republican presidential candidate Newt Gingrich (R-GA) modifies his previously stated stance that union janitors at public schools should be fired and poor schoolchildren should be put to maintenance and custodial tasks in their places (see November 18, 2011 and After). Gingrich now says that he recognizes some custodial jobs are dangerous, and says that poor students should be limited to jobs such as cleaning bathrooms. During a campaign rally, he asks, “What if they became assistant janitors and their jobs were to mop the floor and clean the bathroom?” Gingrich goes on to say that making poor kids work as janitors is similar to a successful program, Earning by Learning, that pays children to read books. He also says that poor children “have no habit of work” and no knowledge of how to make an income “unless it’s illegal.” He says: “Really poor children in really poor neighborhoods have no habits of working and have nobody around them who works, so they literally have no habit of showing up on Monday. They have no habit of staying all day. They have no habit of ‘I do this and you give me cash’ unless it’s illegal.” Gingrich then goes on to attack child labor laws and the “liberals” who support them, saying: “This is something that no liberal wants to deal with. Core policies of protecting unionization and bureaucratization against children in the poorest neighborhoods, crippling them by putting them in schools that fail has done more to create income inequality in the United States than any other single policy. It is tragic what we do in the poorest neighborhoods, entrapping children in, first of all, child laws, which are truly stupid.… If we are all endowed by our creator with the right to pursue happiness, that has to apply to the poorest neighborhoods in the poorest counties, and I am prepared to find something that works, that breaks us out of the cycles we have now to find a way for poor children to work and earn honest money.” Alex Seitz-Wald of the progressive news Web site Think Progress responds, “Of course, reading books is not hard labor and is directly relevant to education—cleaning bathrooms is not.” [Think Progress, 12/1/2011; The Hill, 12/1/2011; ABC News, 12/1/2011] The next day, Fox News anchor Megyn Kelly opines, “He seemed to try to clarify that… and say what he’s talking about is maybe having kids be assistants to those union members.” Jeremy Holden of the progressive media watchdog site Media Matters says of Gingrich’s entire proposal: “Here’s a thought. What if we focused on fixing the economy and schools, and the students’ ‘job’ was to go to school?” [Media Matters, 12/2/2011] Fox News correspondent Geraldo Rivera later writes that it is obvious Gingrich knows little to nothing about the daily lives of poor people: “If he knew about the culture of poverty… Gingrich never would have proposed suspending child labor laws and putting ghetto public school students to work as junior janitors in fifth or sixth Grade. Like his earlier calls to bring back orphanages and to deny support to unmarried woman who have children while on welfare, this Gingrich proposal is crass and creepy.” Rivera notes that many poor families have breadwinners who work long hours in menial, physically demanding jobs, so poor children have many, many working role models in their lives. “[T]hese children know about work,” Rivera observes. [Fox News, 12/8/2011] Gingrich later says that he will address the issue of poor children and work by taking part in a “program” by billionaire Donald Trump, the host of NBC’s The Apprentice, where Trump will hire 10 poor children as “apprentices.” Gingrich will elaborate, “I’ve asked [Trump] to take one of the poorer schools in New York and basically offer at least 10 apprenticeships to kids from that school to get them into the world of work, and to get them into an opportunity to earn money, and get them into the habit of showing up and realizing that effort gets rewarded, and that American is all about the work ethic.” [Raw Story, 12/5/2011]

Entity Tags: Megyn Kelly, Alex Seitz-Wald, Geraldo Rivera, Donald Trump, Jeremy Holden, Newt Gingrich

Timeline Tags: Domestic Propaganda, 2012 Elections

Category Tags: USA, US Labor Issues, Commentaries and Criticisms

The nonpartisan Center on Budget and Policy Priorities (CBPP) finds that the Supplemental Nutrition Assistance Program (SNAP), formerly the “food stamp” program, is playing a critical role in keeping American citizens from starving during the economic recession. The program has long been reviled by Republicans and conservatives, and recently Republican presidential contender Newt Gingrich (R-GA) smeared President Obama as “the food stamp president” (see November 30 - December 2, 2011 and January 5, 2012), and falsely claimed that Obama has presided over the largest increase of Americans receiving SNAP assistance in US history (see January 17, 2012). The program benefits a disproportionately large number of children and disabled and elderly people, according to the CBPP. Since the recession began in late 2007, the CBPP says, “SNAP has responded effectively to the recession” in providing much-needed assistance to Americans, particularly since the recession has driven many families into “low-income” status. “According to the Census Bureau’s Supplemental Poverty Measure, which counts SNAP as income, SNAP kept more than 5 million people out of poverty in 2010 and lessened the severity of poverty for millions of others.” As the economy recovers and legislative provisions expire, SNAP spending will decrease, according to Congressional Budget Office (CBO) predictions. “By 2022 SNAP is expected to return nearly to pre-recession levels as a share of GDP. Over the long term, SNAP is not growing faster than the overall economy and thus is not contributing to the nation’s long-term fiscal problems.” The payment accuracy of SNAP is extraordinarily high, the CBPP claims, refuting the claims of massive fraud made by Gingrich and other opponents of the program. And, according to the CBPP, economists say that the program is “one of the most effective forms of economic stimulus,” helping grow the economy as it protects poverty-stricken families. [Center on Budget and Policy Priorities, 1/9/2012]

Entity Tags: Center on Budget and Policy Priorities, Barack Obama, US Census Bureau, Supplemental Nutrition Assistance Program, Newt Gingrich, Congressional Budget Office

Category Tags: USA, Bush Policies and Actions, Obama Policies and Actions

The nonpartisan FactCheck.org finds that recent claims by presidential candidate Newt Gingrich (R-GA) that “more people have been put on food stamps by Barack Obama than any president in American history” are wrong. In fact, far more Americans were added to the Supplemental Nutrition Assistance Program (SNAP) rolls under President George W. Bush than under Obama. Gingrich has made the claim in a number of political speeches (see November 30 - December 2, 2011 and January 5, 2012), but his reiteration of the claim during a recent Republican debate in South Carolina has drawn a great deal of media attention (see January 16, 2012). FactCheck finds: “Gingrich would have been correct to say the number now on food aid is historically high. The number stood at 46,224,722 persons as of October, the most recent month on record. And it’s also true that the number has risen sharply since Obama took office. But Gingrich goes too far to say Obama has put more on the rolls than other presidents.” Information from the US Department of Agriculture (USDA)‘s Food and Nutrition Service going back to January 2001 “show[s] that under President George W. Bush the number of recipients rose by nearly 14.7 million. Nothing before comes close to that.” Moreover, “the program has so far grown by 444,574 fewer recipients during Obama’s time in office than during Bush’s.” The trend in recent months has been for the number of food-stamp recipients to decline, another fact Gingrich fails to note. FactCheck finds that the rise in the number of Americans on food stamps—currently one out of seven—began during the second term of the Bush presidency. “In the 12 months before Obama was sworn in, 4.4 million were added to the rolls, triple the 1.4 million added in 2007,” the organization writes. “To be sure, Obama is responsible for some portion of the increase since then. The stimulus bill he signed in 2009 increased benefit levels, making the program more attractive. A family of four saw an increase of $80 per month, for example.… The stimulus also made more people eligible. Able-bodied jobless adults without dependents could get benefits for longer than three months.” Part of the reason for the higher number of recipients under Obama is the new outreach to eligible citizens by state governments, according to the USDA; many state governments have worked harder to inform eligible citizens of their right to apply for government assistance, and have reduced the amount of information that claimants must provide to receive assistance. FactCheck concludes: “We don’t argue that the program is either too large (as Gingrich does) or too small. It has certainly reached a historically high level, and may or may not grow even larger in the months to come. But the plain fact is that the growth started long before Obama took office, and participation grew more under Bush.” And it quotes the USDA’s Kevin Concannon, who recently told a Wall Street Journal reporter, “I realize Mr. Gingrich is a historian, but I’m not sure he’d get very high marks on that paper.” [USA Today, 1/17/2012] CBS News notes that the White House has called Gingrich’s claims “crazy,” and finds: “While the number of people on food stamps is indeed at a record level, that’s in part because of eligibility rules being relaxed under the administration of George W. Bush. It’s also due in part to the economic downturn that began under Mr. Bush.… [T]hat percentage increase hardly makes Obama the ‘best food stamp president in American history,’ at least when you look at the question proportionally. The percent increase in beneficiaries during Mr. Bush’s presidency was higher than it has been under Mr. Obama: The number of beneficiaries went from 17.3 million in 2001 to 28.2 million in 2008—an increase of 63 percent in years that are mostly considered non-recessionary.” [CBS News, 1/17/2012] US News and World Report agrees with FactCheck, finding that “SNAP participation has been on the rise since well before President Obama took office. Nearly 17.2 million people in FY 2000 participated in the program, a figure that increased by nearly 64 percent by 2008.” [US News and World Report, 1/17/2012] The Associated Press accuses Gingrich of distorting the facts and notes: “It’s gotten easier to qualify for food stamps in the past decade but that is because of measures taken before Obama became president. It’s true that the number of people on food stamps is now at a record level. That’s due mainly to the ailing economy, which Republicans blame on Obama, as well as rising food costs. The worst downturn since the Great Depression wiped out 8.7 million jobs, pushed the unemployment rate to a peak of 10 percent in October 2009, and increased poverty.” [Associated Press, 1/17/2012] The nonpartisan Center on Budget and Policy Priorities has found that SNAP is a critical element in keeping poverty-stricken Americans, particularly children and the elderly, from starving during the economic recession (see January 9, 2012).

Entity Tags: Kevin Concannon, CBS News, Barack Obama, Associated Press, Center on Budget and Policy Priorities, George W. Bush, US News and World Report, Obama administration, FactCheck (.org), US Department of Agriculture, Supplemental Nutrition Assistance Program, Newt Gingrich

Timeline Tags: Domestic Propaganda, 2012 Elections

Category Tags: USA, Bush Policies and Actions, Obama Policies and Actions

Shadrack McGill.Shadrack McGill. [Source: Huntsville Times]State Senator Shadrack McGill (R-AL) tells listeners at a prayer breakfast in Fort Payne, Alabama, that state legislators such as himself deserve pay raises, but raising schoolteachers’ pay would lead to less-qualified teachers in the classrooms and violate a “Biblical principle.” Alabama legislators were given a 62 percent raise in 2007, and McGill says the raise discourages corruption among lawmakers. The previous low salaries “played into the corruption, guys, big time,” he says. “You had your higher-ranking legislators that were connected with the lobbyists making up in the millions of dollars. They weren’t worried about that $30,000 paid salary they were getting.” By paying lawmakers more up front, he says, they are less susceptible to taking bribes: “He needs to make enough that he can say no, in regards to temptation.” However, if teachers were given pay raises, then people who are not “called” to teach would begin joining the profession, he says. “Teachers need to make the money that they need to make. There needs to be a balance there. If you double what you’re paying education, you know what’s going to happen? I’ve heard the comment many times, ‘Well, the quality of education’s going to go up.’ That’s never proven to happen, guys. It’s a Biblical principle. If you double a teacher’s pay scale, you’ll attract people who aren’t called to teach. To go in and raise someone’s child for eight hours a day, or many people’s children for eight hours a day, requires a calling. It better be a calling in your life. I know I wouldn’t want to do it, OK? And these teachers that are called to teach, regardless of the pay scale, they would teach. It’s just in them to do. It’s the ability that God give ‘em. And there are also some teachers, it wouldn’t matter how much you would pay them, they would still perform to the same capacity. If you don’t keep that in balance, you’re going to attract people who are not called, who don’t need to be teaching our children. So, everything has a balance.” In 2010, McGill introduced a bill in the Alabama Senate that would tie legislators’ pay to teachers’ pay, requiring the state to give raises to legislators if it gave teachers raises. He claimed, falsely, that Alabama teachers’ salaries were the fourth highest in the nation. Some Alabama Republicans are backing a bill that would give a 2.5 percent raise to teachers with less than nine years’ experience. Representative Craig Ford (D-Gadsden) says the small raise unfairly excludes veteran teachers, and the entire controversy surrounding teachers’ and legislators’ raises is “one of the most absurd things… the Republican supermajority ha[s] ever tried to pull.” [DeKalb County Times-Journal, 1/31/2012; Huffington Post, 2/1/2012] Currently, part-time legislators in Alabama such as McGill make more than full-time teachers with master’s degrees and 15 years of experience. [Think Progress, 2/1/2012] After the national media picks up on McGill’s comments, WAAY-TV airs an interview with McGill taped earlier in the week where he told a reporter he did not believe in the separation of church and state (see 1782-1786). According to a WAAY report, both the television station’s commentators and editorial writers and commentators around the nation “raked [McGill] over the coals” for his comments. McGill tells a WAAY reporter: “Some things got taken out of context. I’m not hearing any negative feedback out of those who were there.” The audience at the prayer breakfast was very supportive of his stance, he says. “The point that I was trying to make in the speech is simply that.… Things ought to be in balance. I believe God made everything to be in balance. He weighed the Earth and the valley and the mountains and the hills on a scale to keep them in balance because he knew he was going to be spinning it real fast, so that’s the [g]ist of it.… Legislators pay ought to be in balance. They don’t need to make too much, they don’t need to make too little, both lead to corruption. Likewise, I think with teachers salaries, things need to be balanced on their education, based on the performance, class size, etc. Work load.… But by no means was I insinuating that a teacher should make less.” McGill says he hopes that after the economy turns around, Alabama teachers can get raises. McGill says he is learning that legislators such as himself are constantly being pursued by those who want to “turn” an innocent statement “into a dagger and stab you with it.” He says that he cannot understand how those who gave him “negative feedback” on his comments can call themselves Christians. [WAAY-TV, 2/2/2012]

Entity Tags: Alabama State Senate, Shadrack McGill, WAAY-TV, Craig Ford

Category Tags: US Labor Issues

President Obama speaks on the topic of clean energy in front of the Copper Mountain Solar Project in Boulder City, Nevada, in March 2012.President Obama speaks on the topic of clean energy in front of the Copper Mountain Solar Project in Boulder City, Nevada, in March 2012. [Source: CleanTechnica (.org)]An analysis by Reuters claims that the $90 billion investment made by the federal government to generate jobs in the field of clean energy (see February 2009) has not produced as many jobs as initially touted. In March 2012, President Obama spoke in front of the Copper Mountain Solar Project in Boulder City, Nevada, which uses 1 million solar panels to power 17,000 homes. The facility only employs 10 people. The green initiative has put people to work retrofitting over a million homes to lower heating and cooling costs, and energy generation from solar and wind sources has nearly doubled since 2008. But some say the program has not created enough jobs. Critics say the program was expected to lower the unemployment rate, currently hovering above 8 percent, and say it has not done so. Supporters say the administration promised too much in the short term and fear a backlash that might undermine support for clean-energy policies across the board. Clean energy specialist Mark Muro of the Brookings Institution says, “All of this stuff is extraordinarily worthy for driving long-term economic transformation but extremely inappropriate to sell as a short-term job program.” Janet Bluman, head of the Foundation for an Independent Tomorrow, says, “From my perspective it makes more sense for us to arm our clients with the basic skills, rather than saying, ‘By golly, you will do something in the green economy or you won’t work.’” Bluman claims that her organization, which trains people for jobs in the Las Vegas area, has seen positions in trucking and accounting go unfilled because training money had been earmarked for green efforts. The federal program earmarked some $500 million for job training, and has employed some 20,000 people, far short of its stated goal. Republicans say the clean-energy program is merely a way for the Obama administration to give money to Obama’s friends (see October 15, 2012). GOP presidential candidate Mitt Romney has claimed, “[Obama] handed out tens of billions of dollars to green energy companies, including his friends and campaign contributors at companies like Solyndra that are now bankrupt.” Romney and other Republicans have not advanced proof of their allegations. Supporters say that in the long term, clean energy will “create a bounty of stable, middle-class jobs and fill the gap left by manufacturing work that has moved overseas,” as Reuters reports. White House officials say that there is more to the clean energy program than creating jobs. “We have a record of success that has created tens of thousands of jobs and is ensuring that America is not ceding these industries to countries like China,” White House spokesman Clark Stevens says. “Thanks to the investments we’ve made, these industries will continue to grow, along with the jobs they create.” Senator Charles Grassley (R-IA), an opponent of the program, says: “The green jobs-training program just didn’t work. It was a poor investment of tax dollars.” Darren Devine of the College of Southern Nevada says: “Will it add a significant number of jobs, enough to make a real dent in our unemployment? No, I don’t see that happening.” What it will do is help the country reduce its energy consumption, lower the amount of carbon dioxide being pumped into the atmosphere, and help create jobs in the clean-energy and other fields, such as health care, education, and technology. [Reuters, 4/13/2012]

Entity Tags: Janet Bluman, Barack Obama, Charles Grassley, Darren Devine, Obama administration, Copper Mountain Solar Project, Reuters, Willard Mitt Romney, Mark Muro

Timeline Tags: US Solar Industry

Category Tags: Obama Policies and Actions

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