It’s easy to understand why the government will have more trouble borrowing if it fails to pay its debts, or even has a difficult time paying its debts. It’s a bit harder to see why ordinary Americans, the city of Pittsburgh, hospitals in Iowa, and medium-sized corporations will have more trouble borrowing. But they will. And their trouble borrowing is the main channels through which a default, or even something too close to it for the market’s comfort, could deal a body blow to the economy.
On Wednesday, Moody’s warned that it was putting the U.S. government credit rating on review for a downgrade. But they didn’t stop there. Another 7,000 debt products that are “directly linked to the U.S. government or are otherwise vulnerable to sovereign risk” were also put on review for a possible downgrade. That’s about $130 billion worth of debt. If America tumbles, so do they. But Moody’s still wasn’t done. An unknown amount of “indirectly linked” debt is also getting reviewed.
If America’s credit rating falls, it’s taking a lot more than just Treasury securities with it. It’s going to take the whole credit market with it. Which, as you’ll remember, is exactly how the subprime housing sector took the economy down in 2008.
The first to fall will be “directly linked” debt. These are bonds that rely on payments from the federal government. Naomi Richman, a managing director in Moody’s Public Finance division, puts it bluntly: “There are certain kinds of municipal bonds that are directly reliant on Treasury paying or some other direct payment,” she says. “If those bonds don’t receive their payment, they have no other source of revenue.” So down they go.
Then there’s the “indirectly linked” debt. That’s debt from state government, local governments, hospitals, universities and other institutions that rely, in some way or another, on payments from the federal government. If Medicaid stops paying its bills, all the hospitals that rely on Medicaid’s payments become less creditworthy. If we stop funding Pell grants, then all the universities that enroll students who pay using financial aid become less creditworthy. And since the federal government passes one-fifth of its revenues through to the states, and the states pass those revenues through to cities, if the federal government stops paying its bills, all states and all cities are suddenly in worse financial shape, which will make it harder for them to get loans.
And then there’s everything else. Mortgages. Credit cards. Loans that businesses take out to expand. Much of the debt in the American economy, and in fact globally, is “benchmarked” to Treasury debt. When your bank quotes you a mortgage rate, the calculation begins with the rate on 10-year treasuries and then adds premiums for various types of risk specific to you and your area on top of that. “There’s a whole credit structure,” says Pete Davis, president of Davis Capital Investment Ideas. “Think of it as roads and bridges, but it’s finance, it’s all connected, and it’s all on top of treasuries. Your CD at a bank, your credit card interest rates, your car loans, your mortgages — that’s all built on Treasury rates. So when you shake the basis of it, everything on top of it shakes, too.”
The 2008 economic crisis wasn’t started by a nuclear bomb detonating in New York, or a campaign to sabotage the country’s factories, or a plague that struck our able-bodied young males. Rather, investors bought a lot of debt based on subprime mortgages. They performed some tricky financial wizardry that they thought made the debt low-risk. They found out they were wrong. And then, because the players in the financial system no longer knew how much money anyone had, the credit markets froze and the economy crashed.
Now imagine that happening, not with the housing market, but with the government of the United States of America. The cornerstone of the global financial economy is the idea that Treasuries are risk-free. If they’re not, then like in the financial crisis, no one knows how much money anyone who holds treasuries has. But they also don’t know how much money anyone who depends on the federal government — be they businesses or individuals — holds.
This is how a default gets into the rest of the economy: It takes everything the financial markets thought they could know and rely on and upends it. It then shuts off credit, or makes it prohibitively expensive, for nearly every participant in the economy, from states and cities to hospitals and universities to homebuyers and credit-card applicants. That, in turn, freezes all of their activity, which destabilizes everyone who relies on them, which then destabilizes financial markets further, and so on.
It was one thing to have forgotten that this sort of thing could happen in 2006, when America hadn’t seen it for 70 years. But we just went through it. And if we go through it again, the Federal Reserve, which has pushed interest rates as low as they can go, and Congress, which has vastly expanded the deficit, have a lot less ammunition left for a response.
Are we likely to get to that point? No, of course not. But between here and there are worlds where the economy doesn’t crash, but because the federal government panics the market, interest rates rise and the economy slows. In a recovery this weak, that would be a disaster. And it would be entirely of our own making.
By: Ezra Klein, The Washington Post, July 15, 2011
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July 17, 2011
Posted by raemd95 |
Banks, Budget, Businesses, Congress, Conservatives, Consumer Credit, Consumers, Debt Ceiling, Deficits, Democrats, Economic Recovery, Economy, Financial Institutions, GOP, Government, Government Shut Down, Ideologues, Ideology, Lawmakers, Medicaid, Middle Class, Politics, Public, Republicans, Right Wing, States | Bonds, Cities, Credit Ratings, Default, Federal Reserve, Global Economy, Homeowners, Housing, Interest rates, Loans, Markets, Moody's, Mortgages, Pell Grants, Students, Tax Revenue, Treasuries |
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Protest fatigue? Not in Wisconsin.
Three months after Governor Scott Walker proposed to strip state, county and municipal employees and public-school teachers of their collective bargaining rights, the governor’s agenda remains stymied. Legal challenges,moves to recall Republican legislators who have sided with the governor and the fear on the part of legislative leaders of mass protests have prevented implementation.
That fear is well-founded.
The Wisconsin protests have inspired similar demonstrations in states across the country, including state Capitol confrontations in Indiana, Massachusetts, Michigan, Ohio and, most recently, California and New York.
Yet, the energy in Wisconsin remains unmistakable, and unrelenting.
Three months to the day after the first large demonstration against Walker’s proposal, tens of thousands of Wisconsinites returned to the great square around the state Capitol and to town and village squares across the state to declare: “This Fight is NOT Over!”
“We’ve stopped Governor Walker’s plan to take away workers rights for three months — but he is not done. He has expanded his attack to seniors, college students, local schools and more. And he is still intent on ending collective bargaining rights in Wisconsin,” went the message from the Wisconsin unions and their allies — along with the “This Fight is NOT Over!” battlecry.
Saturday’s mass rally in Madison and other demonstrations came at a time when the Republican-controlled state legislature is weighing Walker’s budget proposal, which seeks to cut more than $1.5 billion from education and local services, while restructuring state government to take power away from elected school boards and local governments.
The fight inside the Capitol over the budget, and the rest of Walker’s economic, social and political agenda will be intense in coming weeks. Wisconsin AFL-CIO President Phil Neuenfeldt warns that Walker and allies are rushing “to ram through their right wing priorities on corporate deregulation, school privatization and voter suppression before recall elections.”
The union leader was referring to special elections, which are expected as soon as July, that will determine the control of the state Senate.
Six Republican state senators face the threat of recall elections that could remove them, while three Democratic senators are similarly threatened.
The political intensity of the moment has kept the state on high alert, as Saturday’s demonstrations illustrated.
Organizers of the Madison demonstration — the We Are Wisconsin and Wisconsin Wave coalitions — estimated that Saturday’s rally drew between 15,000 and 20,000 Wisconsinites. Smaller rallies and events were held over the weekend across the state.
The crowd in Madison extended far beyond the base of public employees and teachers to include farmers, small business owners and students.
The demonstration in Madison took place on the same day as University of Wisconsin graduation ceremonies. A number of new graduates, wearing their caps and gowns, made their way to the Capitol after collecting their degrees.
One young woman stood outside the Capitol with a large sign that read: “UW Graduate — Thanks to Wisconsin Public School Teachers!”
By: John Nichols, Washington Correspondent for The Nation: Editor, Capital Times, Madison, WI.
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May 18, 2011
Posted by raemd95 |
Class Warfare, Collective Bargaining, Conservatives, Democracy, Elections, GOP, Gov Scott Walker, Governors, Ideology, Labor, Lawmakers, Politics, Public Employees, Republicans, Right Wing, Seniors, State Legislatures, States, Union Busting, Unions, Wisconsin, Wisconsin Republicans | Activists, AFL-CIO, Protests, Recalls, Students, University Of Wisconsin, Wisconsin Legislature, Wisconsin Unions |
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This afternoon, the People’s Rights Campaign, a coalition of labor and community organizations, organized a community action on Madison’s Capitol Square. Activists scrounged for their last pennies and taped them to “deposit slips” so that they could be deposited directly into the accounts of the CEOs of M&I Bank, Bank of America and JPMorgan ChaseBank.
“Why should they have to pay any taxes at all when grubby peasants and working stiffs still have a few pennies left in their pockets?” asked the group’s press release.
Kim Grveles of Wisconsin Resists”What we’re trying to do here is call a spade a spade,” National Nurses United organizer Pilar Schiavo said. “Walker’s budget takes from the poor, seniors, students and workers at a time when people most need help. Walker is taking our last pennies and giving them to the rich and to corporations.”
Kim Grveles of Wisconsin Resists added, “We’re demonstrating Walker’s agenda to transfer money from people to corporate sponsors of the governor and other GOP members of the legislature. Every bill is making us poorer and making the big corporate campaign contributors wealthier just like a reverse Robin Hood– stealing from the working class poor and giving to the rich.
“The corporations aren’t paying their fair share in taxes, they’re getting bailout money and they’re making millions in profits every year.”
Organizers referenced a May 1st article in the Wisconsin State Journal that pointed out that “changes to a corporate tax law proposed in Walker’s budget may mean businesses would pay the state about $46 million less in taxes over the next two years– and $40 million less each year after that.”
Reverse Robin Hook Mike Amato speaks in front of M&IGroups of protestors spread out and took their pennies and deposit slips to the branches of M&I Bank, Bank of America and JPMorgan Chase Bank closest to the Capitol.
At M&I, security guards locked the front door as soon as the group of a dozen or so approached. Mike Amato of the Teaching Assistants’ Association, who was dressed as a Reverse Robin Hood, tried giving his deposit slip to a guard, saying, “They want to create a peasant system, so we’re helping them out by being reverse Robin Hoods, stealing pennies from the poor to give to the rich.”
The security guard seemed unimpressed, later blocking off the entrance to the drive-thru teller window as well, saying that it was “private property” and making deposits to the CEO’s account would not be allowed, but he was later seen with a bank manager, discussing the text of one of the deposit slips the group had left behind.
Reverse Robin Hood’s BandAccording to Schiavo, a group of protestors succeeded in getting into the local Bank of America investment branch, where they deposited their pennies into CEO Brian Moynihan‘s account. Protesters were locked out of JPMorgan Chase Bank’s branch but were able to deposit their slips through the slit between the glass doors and leave them in a pile in the entryway.
Schiavo noted that the People’s Rights Campaign seeks, through this action, to call attention to their platform, which calls for “restored rights to living wage jobs, access to healthcare and retirement security rather than giving back to corporations that have already received money from the government and continue to give huge bonuses to their CEOs.”
By: Rebecca Wilce, Center for Media and Democracy, May 11, 2011
May 12, 2011
Posted by raemd95 |
Bank Of America, Banks, Businesses, Collective Bargaining, Conservatives, Consumers, Corporations, Financial Institutions, GOP, Gov Scott Walker, Ideologues, Ideology, Income Gap, Jobs, Middle Class, Politics, Public Employees, Republicans, Taxes, Union Busting, Unions, Wealthy, Wisconsin, Wisconsin Republicans | Activists, Campaign Contributions, CEO's, Community Action, J. P. Morgan Chase Bank, M & I Bank, National Nurses United, Peoples Rights Campaign, Poor, Seniors, Students, Teachers Assistant Association, Wisconsin Resists, Wisconsin State Journal, Workers, Working Class |
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Donald Trump has been aggressively questioning Barack Obama’s academic record, suggesting that the president was a “terrible student” who did not deserve to get in to Columbia University and Harvard Law School. While Trump has no evidence to back up these claims, there are strong indications that Trump has repeatedly inflated his own academic record — and that he used family connections to gain admission to the Wharton School at the University of Pennsylvania.
“I heard [Obama] was a terrible student, terrible. How does a bad student go to Columbia and then to Harvard?” Trump asked in an interview last month. “I’m thinking about it, I’m certainly looking into it. Let him show his records.”
But an examination of Trump’s own academic record yields a distinctly unflattering picture of the celebrity businessman. Among other things, Trump has allowed the media to report for years that he graduated first in his class at Wharton, despite strong evidence that this is not true and indications that he was, in fact, an undistinguished student.
Trump did not go to Wharton’s prestigious MBA program. Rather, he received an undergraduate degree offered by Wharton to University of Pennsylvania students. And Trump didn’t attend Wharton for a full four years. Instead, he transferred there after spending his first two undergraduate years at Fordham, the Jesuit university in the Bronx.
“I decided that as long as I had to be in college, I might as well test myself against the best,” he explains in his 1989 autobiography, “The Art of the Deal.”
So how did Trump get into Wharton?
Gwenda Blair’s book on the Trump family reports that he gained admission as a transfer student only because of “an interview with a friendly Wharton admissions officer who was one of Freddy’s old high school classmates.” (Freddy is Donald’s older brother.) Trump was also the son of one of the wealthiest New York businessmen of the era, the developer Fred Trump. That certainly couldn’t have hurt his admission chances.
Blair also reports in her Trump biography that his grades at Fordham were merely “respectable.”
Trump has consistently portrayed himself as an exceptional student at Wharton. In March, for example, he explained his doubts about the president’s birthplace by saying, “Let me tell you, I’m a really smart guy. I was a really good student at the best school in the country.”
In 2004, Trump told CNN, “I went to the Wharton School of Finance, I got very good marks, I was a good student, it’s the best business school in the world, as far as I’m concerned.”
Over the years, myriad profiles of Trump have claimed that he was “first in his class” at Wharton in 1968.
Here’s what the New York Times reported in a January 1973 piece:
Donald, who was graduated first in his class from the Wharton School of Finance of the University of Pennsylvania in 1968, joined his father about five years ago. He has what his father calls “drive.” He also possesses, in his father’s judgment, business acumen. “Donald is the smartest person I know”, he remarked admiringly. “Everything he touches turns to gold.”
The Times repeated the “fact” again in a 1976 profile, “Donald Trump, Real Estate Promoter, Builds Image As He Buys Buildings”:
Donald, who grew up in the Trump-built home in Jamaica Estates, Queens, began learning the business when he was only 12. He continued helping his father make deals while a student at the Wharton School of Finance at the University of Pennsylvania, from which he graduated first in his class in 1968.
The clear narrative being presented is of Trump as an intellectual heavyweight — starting a business at age 12, first in his class at Wharton, “the smartest person I know.” Who told the Times reporters that Trump graduated first in his class? It’s not clear, though Trump himself is an obvious possibility. We also know that Trump, a voracious consumer of media coverage of himself, would almost certainly have seen these references to his graduating “first in his class.”
The “fact” that Trump graduated first in his class made its way into various books, magazines, and websites.
So what’s the truth about Trump’s record at Wharton?
Writing in the New York Times magazine in 1984, William Geist reported that “the commencement program from 1968 does not list him as graduating with honors of any kind,” even though “just about every profile ever written about Mr. Trump states that he graduated first in his class at Wharton in 1968.”
The writer Jerome Tuccille reported in his 1985 biography of Trump that while “it has been reported that he graduated first in the class … Donald denied that he ever made such a claim. Actually he was not among the honor students that year.” Emphasis added.
Tuccille continues:
“Donald agreed to attend Wharton for his father’s sake. He showed up for classes and did what was required of him but he was clearly bored and spent a lot of time on outside business activities.”
In 1988, New York magazine reported that the idea that Trump had graduated first in his class was a “myth.” The writer snarked that, in fact, Trump had gotten merely the “highest grades possible.”
I wanted to get Trump’s response to all this, but his spokesman has not replied to a request for comment. A Wharton spokeswoman tells me that the school does not release information about alumni beyond year of graduation and degree granted.
I will update this post if Trump gets back to me. The easy solution to clear this all up, of course, would be for Trump to release his academic records — something he has repeatedly demanded that Obama do with his own academic records.
Trump’s academic performance at Wharton, good or bad, didn’t affect his career much. When he graduated, he promptly went to work for his father’s real estate firm, where he was made president a few years later.
May 3, 2011
Posted by raemd95 |
Birthers, Donald Trump, Journalists, Politics, President Obama, Press, Racism | Academics, Birth Certificates, Birtherism, Business School, CNN, Columbia University, Fordum University, Freddy Trump, Gwenda Blair, Harvard Law Shcool, Jerome Tuccille, MBA, New York Magazine, New York Time, NY, Queens, Students, University of Pennsylvania, William Geist |
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Less than a year before the 2012 presidential voting begins, Republican legislatures and governors across the country are rewriting voting laws to make it much harder for the young, the poor and African-Americans — groups that typically vote Democratic — to cast a ballot.
Spreading fear of a nonexistent flood of voter fraud, they are demanding that citizens be required to show a government-issued identification before they are allowed to vote. Republicans have been pushing these changes for years, but now more than two-thirds of the states have adopted or are considering such laws. The Advancement Project, an advocacy group of civil rights lawyers, correctly describes the push as “the largest legislative effort to scale back voting rights in a century.”
Anyone who has stood on the long lines at a motor vehicle office knows that it isn’t easy to get such documents. For working people, it could mean giving up a day’s wages.
A survey by the Brennan Center for Justice at New York University School of Law found that 11 percent of citizens, 21 million people, do not have a current photo ID. That fraction increases to 15 percent of low-income voting-age citizens, 18 percent of young eligible voters and 25 percent of black eligible voters. Those demographic groups tend to vote Democratic, and Republicans are imposing requirements that they know many will be unable to meet.
Kansas’ new law was drafted by its secretary of state, Kris Kobach, who also wrote Arizona’s anti-immigrant law. Voters will be required to show a photo ID at the polls. Before they can register, Kansans will have to produce a proof of citizenship, such as a birth certificate.
Tough luck if you don’t happen to have one in your pocket when you’re at the county fair and you pass the voter registration booth. Or when the League of Women Voters brings its High School Registration Project to your school cafeteria. Or when you show up at your dorm at the University of Kansas without your birth certificate. Sorry, you won’t be voting in Lawrence, and probably not at all.
That’s fine with Gov. Sam Brownback, who said he signed the bill because it’s necessary to “ensure the sanctity of the vote.” Actually, Kansas has had only one prosecution for voter fraud in the last six years. But because of that vast threat to Kansas democracy, an estimated 620,000 Kansas residents who lack a government ID now stand to lose their right to vote.
Eight states already had photo ID laws. Now more than 30 other states are joining the bandwagon of disenfranchisement, as Republicans outdo each other to propose bills with new voting barriers. The Wisconsin bill refuses to recognize college photo ID cards, even if they are issued by a state university, thus cutting off many students at the University of Wisconsin and other campuses. The Texas bill, so vital that Gov. Rick Perry declared it emergency legislation, would also reject student IDs, but would allow anyone with a handgun license to vote.
A Florida bill would curtail early voting periods, which have proved popular and brought in new voters, and would limit address changes at the polls. “I’m going to call this bill for what it is, good-old-fashioned voter suppression,” Ben Wilcox of the League of Women Voters told The Florida Times-Union.
Many of these bills were inspired by the American Legislative Exchange Council, a business-backed conservative group, which has circulated voter ID proposals in scores of state legislatures. The Supreme Court, unfortunately, has already upheld Indiana’s voter ID requirement, in a 2008 decision that helped unleash the stampede of new bills. Most of the bills have yet to pass, and many may not meet the various balancing tests required by the Supreme Court. There is still time for voters who care about democracy in their states to speak out against lawmakers who do not.
By: The New York Times, Editorial, April 26, 2011
April 27, 2011
Posted by raemd95 |
Conservatives, Constitution, Democracy, Elections, Governors, Politics, State Legislatures, States, Voters | Advancement Project, American Legislative Exchange Council, Arizona, Brennan Center for Justice, Citizens, Civil Rights, Democrats, Florida, High School Registration Project, Kansas, Rick Perry, Sam Brownback, Students, Supreme Court, Texas, Voter Fraud, Voter ID, Wisconsin |
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