Texas Longhorns with newborn calf in Bluebonnets

Texas Longhorns with newborn calf in Bluebonnets

Please note I have a new phone number...

512-517-2708

Alan Maki

Alan Maki
Doing research at the LBJ Library in Austin, Texas

It's time to claim our Peace Dividend

It's time to claim our Peace Dividend

We need to beat swords into plowshares.

We need to beat swords into plowshares.

A program for real change...

http://peaceandsocialjustice.blogspot.com/2013/03/a-progressive-program-for-real-change.html


What we need is a "21st Century Full Employment Act for Peace and Prosperity" which would make it a mandatory requirement that the president and Congress attain and maintain full employment.


"Voting is easy and marginally useful, but it is a poor substitute for democracy, which requires direct action by concerned citizens"

- Ben Franklin

Let's talk...

Let's talk...

Tuesday, August 6, 2013

The Detroit Bail-In Fleecing Pensioners to Save the Banks

"A Safer, Saner, More Equitable Model
Interestingly, Lansing Mayor Virg Bernero, Snyder’s Democratic opponent in the last gubernatorial race, proposed a solution that could have avoided either robbing the pensioners or scaring off the bondholders: a state-owned bank. If the state or the city had its own bank, it would not need to borrow from Wall Street, worry about interest rate swaps, or be beholden to the bond vigilantes. It could borrow from its own bank, which would leverage the local government’s capital into credit, back that credit with the deposits created by the government’s own revenues, and return the interest to the government as a dividend, following the ground-breaking model of the state-owned Bank of North Dakota."

From: Mike Krauss <mike@publicbankinginstitute.org>
Date: Tue, Aug 6, 2013 at 5:15 PM
Subject: The Detroit Bail In: Fleecing Pensioners to Save the Banks
To: Mike Krauss <mike@mikekrausscomments.com>


PBI Chairperson Ellen Brown explains:


The Detroit Bail-In
Fleecing Pensioners to Save the Banks
by ELLEN BROWN
The Detroit bankruptcy is looking suspiciously like the bail-in template originated by the G20’s Financial Stability Board in 2011, which exploded on the scene in Cyprus in 2013 and is now becoming the model globally. In Cyprus, the depositors were “bailed in” (stripped of a major portion of their deposits) to re-capitalize the banks. In Detroit, it is the municipal workers who are being bailed in, stripped of a major portion of their pensions to save the banks.
Bank of America Corp. and UBS AG have been given priority over other bankruptcy claimants, meaning chiefly the pensioners, for payments due on interest rate swaps they entered into with the city. Interest rate swaps – the exchange of interest rate payments between counterparties – are sold by Wall Street banks as a form of insurance, something municipal governments “should” do to protect their loans from an unanticipated increase in rates. Unlike ordinary insurance, however, swaps are actually just bets; and if the municipality loses the bet, it can owe the house, and owe big. The swap casino is almost entirely unregulated, and it is a rigged game that the house virtually always wins. Interest rate swaps are based on the LIBOR rate, which has now been proven to be manipulated by the rate-setting banks; and they were a major contributor to Detroit’s bankruptcy.
Derivative claims are considered “secured” because the players must post collateral to play. They get not just priority but “super-priority” in bankruptcy, meaning they go first before all others, a deal pushed through by Wall Street in the Bankruptcy Reform Act of 2005.

Meanwhile, the municipal workers, whose pensions are theoretically protected under the Michigan Constitution, are classified as “unsecured” claimants who will get the scraps after the secured creditors put in their claims. The banking casino, it seems, trumps even the state constitution. The banks win and the workers lose once again.
Systemically Dangerous Institutions Are Moved to the Head of the Line
The argument for the super-priority of derivative claims is that nonpayment on these bets represents a “systemic risk” to the financial scheme. Derivative bets are cross-collateralized and are so inextricably entwined in a $600-plus trillion house of cards that the whole financial scheme could go down if the betting scheme were to collapse. Instead of banning or regulating this very risky casino, Congress has been persuaded by the masterminds of Wall Street that it needs to be preserved at all costs.
The same tortured logic has been used to justify the fact that the federal government deigned to bail out Wall Street but not Detroit. Supposedly, the mega-banks pose a systemic risk and Detroit doesn’t. On July 29th, former Obama administration economist Jared Bernstein pursued this line of reasoning on his blog, writing:
[T]he correct motivation for federal bailouts — meaning some combination of managing a bankruptcy, paying off creditors (though often with a haircut), or providing liquidity in cases where that’s the issue as opposed to insolvency – is systemic risk. The failure of large, major banks, two out of the big three auto companies, the secondary market for housing – all of these pose unacceptably large risks to global financial markets, and thus the global economy, to a major industry, including its upstream and downstream suppliers, and to the national housing sector.
Because a) there’s not much of a case that Detroit is systemically connected in those ways, and b) Chapter 9 of the bankruptcy code appears to provide an adequate way for it to deal with its insolvency, I don’t think anything like a large scale bailout is forthcoming.
Holding Main Street Hostage
Detroit’s bankruptcy poses no systemic risk to Wall Street and global financial markets. Fine. But it does pose a systemic risk to Main Street, local governments, and the contractual rights of pensioners. Credit rating agency Moody’s stated in a recent report that if Detroit manages to cut its pension obligations, other struggling cities could follow suit. The Detroit bankruptcy is establishing a template for wiping out government pensions everywhere. Chicago or New York could be next.
There is also the systemic risk posed to the municipal bond system. Bryce Hoffman, writing in The Detroit News on July 30th, warned:
Detroit’s bankruptcy threatens to change the rules of the municipal bond game and already is making it more expensive for the state’s other struggling towns and school districts to borrow money and fund big infrastructure projects.
In fact, one bond analyst told The Detroit News that he has spoken to major institutional investors who have already decided to stop, for now, buying any Michigan bonds.
The real concern of bond investors, says Hoffman, is not the default of Detroit but the precedent the city is setting. General obligation municipal bonds have always been viewed as a virtually risk-free investment. They are unsecured, but bondholders have considered themselves protected because the bonds are backed by the “unlimited taxing authority” of the government that issued them. Detroit, however, has shown that the city’s taxing authority is far from unlimited.  It already has the highest property taxes of any major city in the country, and it is bumping up against a ceiling imposed by the state constitution. If Detroit is able to cut its bond debt in half or more by defaulting, other distressed cities are liable to look very closely at following suit. Hoffman writes:
The bond market is warning that this will make Michigan a pariah state and raise borrowing costs — not just for Detroit and other troubled municipalities, but also for paragons of fiscal virtue such as Oakland and Livingston counties.
However, writes Hoffman:
Gov. Rick Snyder dismisses that threat and says the bond market is just trying to turn Detroit away from a radical solution that could become a model for other struggling cities across America.
A Safer, Saner, More Equitable Model
Interestingly, Lansing Mayor Virg Bernero, Snyder’s Democratic opponent in the last gubernatorial race, proposed a solution that could have avoided either robbing the pensioners or scaring off the bondholders: a state-owned bank. If the state or the city had its own bank, it would not need to borrow from Wall Street, worry about interest rate swaps, or be beholden to the bond vigilantes. It could borrow from its own bank, which would leverage the local government’s capital into credit, back that credit with the deposits created by the government’s own revenues, and return the interest to the government as a dividend, following the ground-breaking model of the state-owned Bank of North Dakota.
There are other steps that need to be taken, and soon, to prevent a cascade of municipal bankruptcies.  The super-priority of derivatives in bankruptcy needs to be repealed, and the protections of Glass Steagall need to be restored. While we are waiting on a very dilatory Congress, however, state and local governments might consider protecting themselves and their revenues by setting up their own banks.
ELLEN BROWN is an attorney and president of the Public Banking Institute.  In Web of Debt, her latest of eleven books, she shows how a private banking oligarchy has usurped the power to create money from the people themselves, and how we the people can get it back. Brown’s latest book is The Public Bank Solution. Her websites are http://WebofDebt.comhttp://EllenBrown.com, and http://PublicBankingInstitute.org



-- 
Alan L. Maki
Director of Organizing,
Midwest Casino Workers Organizing Council
 
58891 County Road 13
Warroad, Minnesota 56763

Phone: 218-386-2432
Cell: 651-587-5541

Primary E-mail: amaki000@centurytel.net

Today is Hiroshima Day; Fukushima is out of control and the Plowshare Three sit in jail awaiting long prison sentences.

Today is Hiroshima Day... and the Fukushima reactor is out of control spewing its atomic poison.

And, as we come together to say "never again," the nuclear question continues to plague Japan and haunt the rest of world as if humanity has learned nothing.

Perhaps the greatest lesson from the barbaric and savage atom bombing of Hiroshima and Nagasaki, and now the Fukushima disaster, has yet to be learned: that we cannot allow these hideous creatures of the secretive corporate world the most dangerous of them all from the Military-Financial-Industrial Complex at the helm in the most "advanced" countries to dominate human society any longer because their one and only concern is for the bottom line of maximum corporate profits.

"Ironic" doesn't seem like the proper word to use but there is something horrible and horrific and terribly wrong in the fact that as the peoples of the world come together to insist that nuclear war shall never be unleashed on any peoples anywhere for any reason ever again, the same grouping of industrialists who profit from keeping this insane nuclear arms race spiraling out of control are the very same parasitical profiteers who have created this nuclear mess in Fukushima without the common people having had any say but in the end getting stuck with the consequences--- and the bill--- while TRYING to clean up this mess.

Another irony is that our fellow concerned citizens, members of the Plowshares Movement, are sitting in jail facing very long prison sentences for taking the initiative to draw the consequences of this nuclear insanity to our attention hoping we will join them in action:

http://transformnowplowshares.wordpress.com/

There is something wrong with the picture here--- those who have made the decisions to carry out the most barbaric and savage acts of intentionally dropping atomic bombs on two huge civilian populations and those corporate heads who have bribed corrupt politicians to give them the "right" to knowingly build an unsafe nuclear power plant which now contaminates large areas of the world's oceans, the air we breath, the water we drink and the land food grows on... these corporate criminals walk away free--- and richer.

The entire business class should be the ones sent into Fukushima to clean up this mess not poor working people for whom this rotten capitalist system has no other employment for.

Put the entire business class in shackles and chains and march them off to their deaths trying to clean up the mess in Fukushima. This is the just punishment they deserve... no cold, dark prison cells, unsafe coal mines or sped-up factory assembly lines for them.

http://www.japantimes.co.jp/news/2013/08/03/national/huge-leak-of-tritium-feared-in-fukushima/#.UgDsOG0iW0Q