Have nothing to do with the [evil] things that people do, things that belong to the darkness. Instead, bring them out to the light... [For] when all things are brought out into the light, then their true nature is clearly revealed...

-Ephesians 5:11-13

Tag Archives: Bankruptcy

Do Negative Interest Rates Portend a Negative Economy?

This article first appeared online at TheNewAmerican.com on Monday, May 4, 2015:

Last Thursday the London Daily Telegraph’s assistant editor, Jeremy Warner, reported an astonishing statistic: Almost a third of all government debt in the eurozone is paying negative interest rates. That’s more than $2 trillion in government bonds, and, it appears, investors are happy that they aren’t paying even more.

Fifty percent of French bonds now trade with a negative yield, while 70 percent of Germany’s bonds trade at a negative yield. More remarkably, in Spain, which was on the verge of insolvency just a few years ago, 17 percent of its government bonds now trade with a negative yield.

This is counterintuitive, which explains why Keynesians, those who believe that “demand” in an economy can be artificially increased by manipulating taxes and the money supply, have no explanation for it. In theory,

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Hybrid Owners Trading Them in for SUVs

This article was first published by The McAlvany Intelligence Advisor on Friday, April 24, 2015:

English: A Tesla Roadster, Reva i and Ford Th!...

A Tesla Roadster, Reva i and Ford Th!nk electric

 

Back before his credibility had been so greatly tarnished along with his confidence in government as a solution to every problem, President Obama made a promise in his 2011 State of the Union speech that realists knew he couldn’t keep: he was going to put one million electric and hybrid vehicles (EVs) on the road by 2015:

With more [government funded] research and [tax credit] incentives, we can break our dependence upon oil … and become the first country to have a million electric vehicles on the road by 2015.

The Department of Energy (DOE) called his proclamation a “key milestone toward dramatically reducing dependence on oil and ensuring that America leads in the growing electric vehicle manufacturing industry.” The agency boasted that already those manufacturers were ramping up to produce more than 1.2 million EVs by 2015, thanks to government subsidies, consumer tax credits, federally funded programs to help cities prepare for the growing demand for EV charging stations, as well as continued and increasing “support” [read: grants and loans] for R and D.

It’s 2015. The manifesto proclaimed from on high in January 2011 has fallen a little short:

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Boston University Economist Calls Out Congress on Enormous Fiscal Gap

This article first appeared online at TheNewAmerican.com on Thursday, March 12, 2015:

Logo of the United States Government Accountab...

Logo of the United States Government Accountability Office

During his annual trek to Washington, D.C., to lecture Congress on its spendthrift habits, Boston University economist Laurence Kotlikoff took the gloves off this year. He dressed down Senator Mike Enzi, chairman of the Senate Budget Committee, along with the committee’s members:

Let me get right to the point. Our country is broke. It’s not broke in 75 years or 50 years or 25 years or 10 years.

 

It’s broke today.

 

Indeed, it may well be in worse fiscal shape than any development country, including Greece.

It isn’t just Enzi, or his committee, or the present Congress, that’s responsible for a fiscal gap that’s vastly larger than that projected by the Congressional Budget Office (CBO). It’s the idea that the country can borrow without limit because

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Moody’s Downgrades Chicago Again

This article first appeared online at TheNewAmerican.com on Tuesday, March 3, 2015:

English: in Chicago, Illinois, USA.

Downtown Chicago, Illinois

Within hours of Moody’s Investors Service announcing another downgrade to Chicago’s general obligation bonds last Friday, Mayor Rahm Emanuel’s administration responded, saying that Moody’s was out of touch with reality:

We strongly disagree with Moody’s decision to reduce the city’s credit rating and would note that Moody’s has been consistently and substantially out of step with the other rating agencies [Standard & Poor’s and Fitch Ratings], ignoring progress that has been achieved.

At the moment those other two agencies rate Chicago’s debt at A-plus or A-minus, each with a negative outlook. But in light of an imminent court ruling that could invalidate efforts to cut pension benefits, along with the crushing and increasing burden of those benefits, observers are just waiting for the next two shoes to drop.

As Moody’s noted, its downgrade will stand even if the court validates those pension modifications: 

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Will this be OPEC’s Final Failed Gamble?

This article first appeared at The McAlvany Intelligence Advisor on Wednesday, February 18, 2015: 

Cover of "The Prize: The Epic Quest for O...

Six years ago historian Daniel Yergin wrote in The Prize about OPEC’s failed gamble in 1986. The cartel tried to secure its preeminent place among the world’s oil producers by forcing crude oil prices down:

Was the price now poised for a great fall? Most of the exporters [primarily OPEC] thought so, but they expected no more than a drop [from more than $30 a barrel] to $18 or $20 a barrel, below which, they thought, production … would not be economical….

 

Actually, operating costs – the cash costs to extract oil – were only $6 per barrel [at the time], so there would be no reason to shut down production at any price above that.

The cartel was hoping to squeeze out marginal producers, which would result in cuts in supply, allowing it to raise prices at will. It didn’t work then, and it isn’t working now. The Saudis apparently suffer from an appalling lack of understanding about how the free market works.

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Judge Approves Detroit’s “Grand Bargain” to End Bankruptcy

 

English: City seal of Detroit, Michigan.

City seal of Detroit, Michigan.

This article first appeared at TheNewAmerican.com on Monday, November 10, 2014:

 

 

The party began immediately after bankruptcy Judge Steven Rhodes approved the plan to get Detroit out of bankruptcy last Friday. Rod Meloni, a local journalist who has been following Detroit’s woes from the beginning, was there:

There was nothing short of a party atmosphere around the federal courthouse….

Attorneys hugged, shook hands, slapped backs, promised to get together soon and said goodbye.

The only thing missing was the signing of yearbooks!

This was evidence of the rule that no matter who takes a haircut in a bankruptcy, the attorneys always get paid first, one hundred cents on the dollar. As of October 2013, those fees had mounted to

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Stockton Bankruptcy Judge Hammers CalPERS

This article first appeared at The McAlvany Intelligence Advisor on Friday, October 3, 2014:

English: CalPERS headquarters at Lincoln Plaza...

CalPERS headquarters at Lincoln Plaza in Sacramento

All Franklin Templeton Investments wanted was a fair shake. All CalPERS wanted is what it already has: exemption from bankruptcy laws. As attorneys for CalPERS – the California Public Employees Retirement System – tried to defend the country’s largest pension plan from contentions that it was getting off scot-free in the Stockton bankruptcy reorganization plan while other creditors were getting hammered, they sounded rather silly.

They claimed that a combination of state laws and statutes dating back into history protected the $300 billion that CalPERS manages from sharing the pain with other creditors in bankruptcy proceedings. They referred to something called

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California Retirement System Loses Big in Stockton Bankruptcy Ruling

This article first appeared at TheNewAmerican.com on Thursday, October 2, 2014:

On Tuesday, U.S. Bankruptcy Judge Christopher Klein surprised nearly everyone with his ruling that Stockton could cancel its contract with the California Public Employees Retirement System (CalPERS) as part of its plan for reorganization after filing for Chapter 9 bankruptcy two years ago. CalPERS immediately issued a statement claiming that Klein’s decision was not legally binding:

This ruling is not legally binding on any of the parties in the Stockton case or as precedent in any other bankruptcy proceeding and is unnecessary to the decision on confirmation of the city of Stockton’s plan of [reorganization].

CalPERS is certainly hoping so. It manages $300 billion of funds for municipal employees across the state and has been spearheading a drive to negate a similar decision by a bankruptcy judge in the Detroit bankruptcy case. These two similar rulings could open the door

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Katrina Mayor Fails to Make Worst 10 Mayors list

This article first appeared at The McAlvany Intelligence Advisor on Friday, July 11, 2014:

U.S. President George W. Bush and Nagin meet t...

U.S. President George W. Bush and Nagin meet the week after Hurricane Katrina, September 2, 2005.

When his sentence of 10 years in federal prison for corruption while mayor of New Orleans was announced on Wednesday, some wondered if Ray Nagin would make it into the top ten most corrupt mayors in history.

No way.

He might have done better if the court was giving out prizes for play-acting innocence or for hypocrisy. When he learned where he was going to be spending the next 10 years, Nagin claimed he was framed:

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“Katrina Mayor” Ray Nagin Gets 10 Years on Corruption Charges

This article was first published at TheNewAmerican.com on Thursday, July 10, 2014:

English: Photographic portrait of Mayor Nagin ...

Former New Orleans Mayor Ray Nagin

Wednesday New Orleans’ former mayor Ray Nagin  was sentenced to 10 years in federal prison after being convicted on 20 of 21 felony charges ranging from bribery to conspiracy to wire fraud to money laundering to filing false income tax returns. Not included were charges of over-acting and hypocrisy.

In acting the part of innocence betrayed, Nagin said:

    In my opinion I’ve been targeted, smeared, tarnished … for some reason some of the stances I took after Katrina didn’t sit well with some very powerful people. So    now I’m paying the price for that.

The prosecutors were fairly magical in their ability to take something that supposedly happened and paint it as reality when it didn’t really happen.

Serving as mayor of New Orleans from 2002 to 2010, Nagin generated controversy over his handling of the crisis the city faced during Hurricane Katrina, which hit the city in late August 2005. Reluctant to issue the first mandatory evacuation in the city’s history, Nagin was held responsible for at least some of the 1,800 deaths and more than $100 billion of damage inflicted by the storm.

During his second term, his image as mayor began to unravel. In April 2009, a local paper alleged certain specific conflicts of interest with regards to trips taken by Nagin and paid for by Greg Meffert, who at the time was Nagin’s chief technology officer. Meffert was found later to be working a lucrative kickback scheme with business owners seeking city contracts to help rebuild the city. Meffert was charged with 63 felony counts of corruption.

The same paper in June 2012 unveiled more criminal behavior with its disclosure that another businessman seeking favors had not only paid Nagin $50,000 in exchange for favorable treatment by the city but also delivered truckloads of granite — gratis — to Nagin’s sons’ countertop business, Stone Age, LLC. By the time the long list of corruption was tallied by federal prosecutors, Nagin was charged with receiving more than $500,000 in cash payments in exchange for $5 million worth of city contracts.

Neither before or after the trial did Nagin mention his staggering hypocrisy. Shortly after taking office as mayor in May 2002, he mounted an anti-corruption campaign within New Orleans’ city government. His efforts received national attention after television stations across the land broadcast live video of corrupt city officials being led away in handcuffs. He received additional acclaim when asked if he would order the arrest of his cousin who was implicated in one of the scandals. Responded Nagin: “If he’s guilty, arrest him.” His cousin was later arrested.

When Nagin’s sentence of 10 years behind bars was announced, it was met with outrage by the federal prosecutors who had sought a 20-year term. Said Matthew Coman, assistant United States Attorney:

[Mr. Nagin’s testimony was] a performance that can only be summed up by his astounding unwillingness to accept any responsibility….

These repeated violations, at the expense of the citizens of New Orleans in a time when honest leadership was needed most, do not deserve leniency.

Coman added:

What Ray Nagin did was sell his office over and over and over again. The damage that Ray Nagin inflicted upon this community … is incalculable. We as a community need not and should not accept public corruption.

Nagin is neither the first, nor the worst, of a lengthening list of mayors who have failed to resist the temptation to take advantage of their position of trust for their personal benefit. There’s Patrick Cannon, who served as mayor of Charlotte, North Carolina, for less than five months before being arrested and charged with accepting more than $48,000 in bribes from undercover FBI agents posing as businessmen seeking city contracts.

There’s Kwame Kilpatrick, former Mayor of Detroit, who is now serving 28 years in a federal pen for mail fraud, wire fraud, and racketeering. There’s former San Diego Mayor Bob Filner, who was in office less than a year before being charged criminally for a false arrest and battery on three unnamed females. Filner got off easy. He could have faced up to five years in jail for his indiscretions, but a plea bargain reduced it to just three months of house arrest (which ended in April).

There’s Vincent “Buddy” Cianci, who not only served as mayor of Providence, Rhode Island twice, but resigned twice due to felony convictions. After serving four years in federal prison, Cianci — perhaps the master of chutzpah among the growing list of mayoral miscreants — announced in June that he would run once again for mayor of Providence.

There’s Larry Langford, who served as mayor of Birmingham, Alabama. Langford is now serving a 15-year sentence in federal prison for his role in bringing the city the distinction of having the largest municipal bankruptcy in American history in November 2011. He was charged with 60 counts of corruption and fined more than $119,000.

At the top, or perhaps the bottom, of the growing list of mayoral frauds and convictions is the on-again, off-again mayor of the District of Columbia, Marion Barry. His celebrity status was assured in January 1990 when he was videotaped smoking crack cocaine, which netted him six months in federal prison. Following his release, he was elected to the D.C. city council in 1992 and then awarded mayorship in 1995. His list of corruption events is so long that it covers almost three pages of closely-typed paragraphs at Wikipedia and so outrageous that it has drawn the vitriolic attention of the usually tolerant and forgiving Washington Post. In an opinion piece offered by Colbert King, the paper’s Pulitzer Prize-winning columnist, he sums up Marion as the master of mayoral misdeeds:

Barry, however, is in a category of his own.

In fact, the four-term-mayor-turned-council-member is so far out there he may function in an alternate reality.

How else to explain how someone convicted of possessing crack cocaine in a federal bust seen around the world, who served six months in prison, who has been sentenced to three years’ probation for failing to file and pay federal and local taxes, who has been slapped with federal liens because of unpaid taxes, who has been censured twice by the council for misconduct and who has leveled racist remarks against Asian Americans and slurs against Poles … still functions as if his universe is so superior to ours that he is free to recidivate to a fare-thee-well.

In perspective, then, Nagin’s modest infringements of morality and federal laws when compared to his competition fade into relative insignificance, placing him near the bottom of the list. Nagin is not the first, nor the last, nor the worst. He’s just the latest.

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GM Bailout Cost Taxpayers far more than just $11 Billion

General Motors HydroGen4

General Motors HydroGen4 (Photo credit: Wikipedia)

The Detroit Free Press’ announcement on Wednesday that taxpayers lost more on the General Motors bailout in 2009 than originally thought was brief, to the point, and missed most of the real story behind the GM bailout. Taxpayers lost $11.2 billion following the government’s sale of the last of the stock it held in GM following the company’s government-assisted bankruptcy and restructuring, according to the announcement.

The key quote from a Treasury spokesman, however, was revealing. Said Adam Hodge:

The goal of Treasury’s investment in GM was never to make a profit, but to help save the American auto industry, and by any measure that effort was successful.

Not if one was a bondholder in GM. Not if one believed that

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Solution to LA’s Pension Troubles? Continue to Study Them Until They Blow Up!

BonzoIQ

This article first appeared at The McAlvany Intelligence Advisor on Monday, April 14, 2014:

It has been said that if you ask a liberal his opinion on how to solve a current problem he’ll analyze it and then give you a dim view of the obvious. But when you ask a group of liberals what they think, they’ll

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Solution to LA’s Pension Shortfalls? Create Another Commission!

City Heights

City Heights (Photo credit: Christopher.F Photography)

Expectations that the Los Angeles 2020 Commission’s second report would address reality and set in place strong recommendations to rescue the foundering city were dashed with its publication on April 9.

In simple terms, the commission wimped out.

A year ago Los Angeles City Council President Herb Wesson asked former Clinton Secretary of Commerce Mickey Kantor to put together a group of experts familiar with Los Angeles’ problems and come up with some recommendations. In December its first report was alarming if not downright chilling:

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ARMs are Costing People their Homes

Subprime Crisis No Barrier to Affordable Housing

Subprime Crisis (Photo credit: woodleywonderworks)

Back in September, the Associated Press took a close look at U.S. census data and learned that the supposed economic recovery was leaving an awful lot of people behind. One segment is homeowners who bought the dream of owning a home using ARMs – adjustable rate mortgages – and who are now finding out how these sub-prime mortgages really work. They are working to

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Denial is a River in Vallejo, California

This article first appeared at The McAlvany Intelligence Advisor on Wednesday, Mary 19, 2014:

Denial of reality seems to be a job requirement to hold a position on the city council in Vallejo, California. Despite increased payments demanded from the city by CalPERS (the California Public Employees’ Retirement System), everything’s OK in Vallejo. Despite a warning from Moody’s in February that everything is not OK in Vallejo, everything’s OK in Vallejo.

Just ask the mayor, Osby Davis:

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Despite Denials, the City of Vallejo is Headed for its Second Bankruptcy

Back in February, 2008, Vallejo, California, was in desperate shape. Councilwoman Stephanie Gomes saw what was coming: “Our financial situation is getting worse every single day. No [one] wants to declare bankruptcy, but if you’re facing insolvency, you have no choice….” Two months later her council voted 7-0 to declare Chapter 9 bankruptcy. In that two month period the city’s budget shortfall ballooned from $9 million to $15 million despite cuts to museums, libraries, senior centers and other publicly supported services like road repair. Now, according to Moody’s Investors Service, the city is

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British Think Tank Predicts Financial Catastrophe for US

Titled “The Government Debt Iceberg”, the latest report from The Institute of Economic Affairs (IEA) in London was meant primarily for British eyes, but there’s enough in there to concern Americans worried about how

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President Proposes Doubling the tax Subsidy for the Poor

President Obama’s proposal to double the earned income tax credit (EITC) for the working poor on March 4 came with all the attendant benefits such an expansion would provide: it would reduce poverty while encouraging people not working to get a job. It would expand the existing law to cover an additional 16 million families with 30 million children.

In his State of the Union Address in January, the president warned this was coming,

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Detroit’s Grand Bargain will Satisfy no one

The so-called “grand bargain” that Detroit’s emergency financial manager rolled out on Friday – all 440 pages of it – was welcomed by Michigan Governor Rick Snyder with words that perfectly encapsulated the nearly year-long effort to settle the city’s bankruptcy:

Kevyn Orr has submitted a thoughtful, comprehensive blueprint directing the city back to solid financial ground … [but] there will be

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Establishment Republicans cave, give the President Unlimited Spending Power

Following Tuesday’s passage of a “clean” debt ceiling bill in the House of Representatives, the Senate approved it on Wednesday and sent it on to the president who is expected to sign it without delay. The bill allows the president unlimited spending authority until well after the November elections so that Republicans can focus instead on the failings of Obamacare to leverage their chances in that election. It also neatly

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Many of the articles on Light from the Right first appeared on either The New American or the McAlvany Intelligence Advisor.