Archive for the ‘Finance’ Category
In January 2008, President George W. Bush was scrambling to bolster the American economy. The subprime mortgage industry was collapsing, and the Dow Jones industrial average had lost more than 2,000 points in less than three months.
In the days that followed, Treasury Secretary Henry M. Paulson Jr. made frequent phone calls and visits to Boehner. Neither Paulson nor Boehner would publicly discuss the progress of their negotiations to shore up the nation’s financial portfolio.
On Jan. 23, Boehner (R-Ohio) met Paulson for breakfast. Boehner would later report the rearrangement of a portion of his own financial portfolio made on that same day. He sold between $50,000 and $100,000 from a more aggressive mutual fund and moved money into a safer investment.
The next day, the White House unveiled the stimulus package.
Boehner is one of 34 members of Congress who took steps to recast their financial portfolios during the financial crisis after phone calls or meetings with Paulson; his successor, Timothy F. Geithner; or Federal Reserve Chairman Ben S. Bernanke, according to a Washington Post examination of appointment calendars and congressional disclosure forms..
The lawmakers, many of whom held leadership positions and committee chairmanships in the House and Senate, changed portions of their portfolios a total of 166 times within two business days of speaking or meeting with the administration officials. The party affiliation of the lawmakers was about evenly divided between Democrats and Republicans, 19 to 15.
The period covered by The Post analysis was a grim one for the U.S. economy, and many people rushed to reconfigure their investment portfolios. The financial moves by the members of Congress are permitted under congressional ethics rules, but some ethics experts said they should refrain from taking actions in their financial portfolios when they might know more than the public.
“They shouldn’t be making these trades when they know what they are going to do,” said Richard W. Painter, who was chief ethics lawyer for President George W. Bush. “And what they are going to do is then going to influence the market. If this was going on in the private sector or it was going on in the executive branch, I think the SEC would be investigating.”
Boehner, now the speaker of the House, declined to discuss his transactions. His spokesman said they did not pose a conflict because a financial adviser executed them and they were made in diversified mutual funds. Other lawmakers also said their financial advisers handled their trades. They said that the timing of the trades and the conversations was “coincidental” and that they did not adjust their portfolios based on what they were told by the administration officials.
Questions about conflicts of interest and possible insider trading on Capitol Hill prompted Congress to pass the Stock Act this year. The act specifically bans lawmakers, their staffs and top executive branch officials from knowingly using confidential information gleaned from their legislative roles to benefit themselves, their family members or friends.
Talks between the Newspaper Guild of New York and the New York Times have been heated. In late March, the union forced the paper to drop its proposal to extend the workweek at the Times to 40 hours—any work over 35 hours and the paper has to pay overtime. The Times’s management bitterly noted that the shorter workweek costs real money and that “eight-hour days are the norm . . . in much of the world outside The Times.”
Following on the heels of this victory, the guild set its sights on another management proposal: transitioning workers out of a traditional pension plan and into a defined contribution plan, such as a 401(k). Again, this is now the norm in much of the world outside the Times, but the union is having none of it. On April 18, New York Times guild members began circulating a YouTube video featuring some of the paper’s most senior staff excoriating Times publisher Arthur O. Sulzberger Jr. and “corporate management.” The pension move is an affront because “we’ve already been investing in helping save the paper,” said Times columnist Jim Dwyer.
If the guild has been helping the paper out of its dire financial straits, their pension plan doesn’t reflect that. According to the paper’s last annual report, the company pension plans are $522 million underfunded and have enough money to cover only 77 percent of the plans’ liabilities. The federal government considers pension funds endangered if they are less than 80 percent funded, and 65 percent funding is the threshold below which the government declares a pension plan to be in “critical status.” That’s the point at which a fund is likely to go into an accounting tailspin and never be able to cover its obligations.
If the veteran journalists at the Times weren’t so busy trying to protect their generous benefits, they might realize there’s a story here. Union pension funds—particularly multi-employer plans—are on the verge of collapse across the country.
This problem has been building for a while, largely as a result of an aging unionized workforce. A Government Accountability Office report found that since 1998 more people have been collecting benefits from multi-employer plans than paying into them.
As bad as this sounds, new rules from the Financial Accounting Standards Board (FASB) requiring companies to disclose their pension liabilities have revealed the problems to be much worse than previously estimated.
Analysts at Credit Suisse crunched the numbers on 1,354 of the country’s 1,459 multi-employer pension plans and concluded they are collectively $369 billion short of the money needed to cover their liabilities and are only 52 percent funded. That’s more than double the $160 billion deficit previously estimated by FASB. Credit Suisse arrived at its figure by measuring the actual assets and obligations, as opposed to the plans’ “actuarial value,” an estimate that allows companies to discount their pension liabilities based on expectations of future returns that have turned out to be unrealistically optimistic.
“With multi-employer plans in bad shape, companies could get hit from a number of angles including increased contributions, difficult labor negotiations, higher withdrawal liabilities, and [mergers and acquisitions] could be impacted as acquirers have to price in the underfunding. The new insights may even change investor and rating agency opinions of certain companies,” according to Credit Suisse’s report, “Crawling Out of the Shadows: Shining a Light on Multi-employer Pension Plans.”
In other words, because of the new transparency requirements, the stock of unionized companies could take a big hit. What’s more, transparency about union pension liabilities could end up depressing entire industries. That’s because union pension plans are interconnected. If pension plans start failing in heavily unionized sectors such as construction, transportation, and supermarkets, it could have an ugly domino effect.
One of the reasons 401(k)s and defined contribution retirement plans began supplanting traditional defined benefit pension plans in the 1970s is that they had a big advantage for workers-—portability. Workers could quit their jobs and take their retirement plans with them. Multi-employer plans were Congress’s attempt to offer union members portability without sacrificing the advantages of being in a defined benefit plan. Unions can use collective bargaining to force companies to pool their pension plans. Workers can then move between companies—say from Ford to GM—with their pensions intact. Hence the term “multi-employer pension plans.”
By Robert Frank
One of the most controversial issues surrounding inequality is work effort. Some on the right argue that top earners are successful in part because they work harder than others. Many on the left argue that the middle class and poor work just as hard – maybe even harder, with multiple jobs — but that the economic deck is stacked against them.
A new study offers evidence that higher-educated (and therefore higher-earning) Americans do indeed spend more time working and less time on leisure than poorer income groups. In fact, while income inequality may be growing, “leisure inequality” – time spent on enjoyment – is growing as a mirror image, with the low earners gaining leisure and the high earners losing.
The paper, by Orazio Attanasio, Erik Hurst and Luigi Pistaferri, finds that both income inequality and consumption inequality (the stuff that people buy) have increased over the past 20 years.
The more surprising discovery, however, is a corresponding leisure gap has opened up between the highly-educated and less-educated. Low-educated men saw their leisure hours grow to 39.1 hours in 2003-2007, from 36.6 hours in 1985. Highly-educated men saw their leisure hours shrink to 33.2 hours from 34.4 hours. (Mr. Hurst says that education levels are a “proxy” for incomes, since they tend to correspond).
In fact the things are getting worst…
Two years after President Barack Obama vowed to eliminate the danger of financial institutions becoming “too big to fail,” the nation’s largest banks are bigger than they were before the nation’s credit markets seized up and required unprecedented bailouts by the government.
Five banks – JPMorgan Chase & Co. (JPM), Bank of America Corp. (BAC), Citigroup Inc., Wells Fargo & Co. (WFC), and Goldman Sachs Group Inc. — held $8.5 trillion in assets at the end of 2011, equal to 56 percent of the U.S. economy, according to central bankers at the Federal Reserve.
That specter is eroding faith in Obama’s pledge that taxpayer-funded bailouts are a thing of the past. It is also exposing him to criticism from Federal Reserve officials, Republicans and Occupy Wall Street supporters, who see the concentration of bank power as a threat to economic stability.
As weaker firms collapsed or were acquired, a handful of financial giants emerged from the crisis. Since then, JPMorgan, Goldman Sachs and Wells Fargo have continued to grow internally and through acquisitions from European banks, reeling from government austerity measures related to the rising cost of public debt in Greece, Spain, Portugal, Ireland and Italy.
The industry’s evolution defies the president’s January 2010 call to “prevent the further consolidation of our financial system.” Embracing new limits on banks’ trading operations, Obama said then that taxpayers wouldn’t be well “served by a financial system that comprises just a few massive firms.”
But, but, but, wait a minute! ….Didn’t they pass the Dodd- Frank Wall Street Reform and Consumer Protection Act to deal with the too big to fail banks?
Oh- yeah they did.
So, what did the government incompetent bureaucratic achieved?
Here you go…
Regulators have written only 185 of the expected 400 rules. But those 185 rules are expected to cost the private sector more than 24 million man-hours each year to comply.
The tracker has also found that those 185 rules take up more than 5,300 pages.
….let’s just get it down to the community banker — the person that loans money to most of the small businesses in our country,” Neugebauer said in a phone interview. “We’ve had a few community bankers come in here and say, ‘you know, they’re hiring a lot more compliance officer than they are loan officers.’ That is increasing the cost of banking and, ultimately, they have to charge higher interest rates and higher fees.”
The ordinary people got f@cked again…
From The Washington Post
A California solar energy company that was unable to meet a deadline for an Energy Department loan guarantee last year has sought bankruptcy protection in Delaware.
Solar Trust of America’s Chapter 11 filing on Monday listed assets between $1 million and $10 million, and liabilities between $50 million and $100 million.
Why did you bury this story so deep no one could find it?