Daily Archive: 12/13/2011

Dec 13 2011

Obama’s War On Women Goes To Court

The latest shot in the war on women by the Obama administration goes to court. A federal court judge in Brooklyn, NY will hear challenge by the Center for Reproductive Rights to the constitutionality of Health and Human Services Secretary Kathleen Sebelius’ veto of the Federal Food and Drug Administrations decision to make the “morning after” pill. Plan B, available without a prescription thus making it accessible to teen age girls under the age of seventeen.

The Center for Reproductive Rights and other groups have argued that contraceptives are being held to a different and non-scientific standard than other drugs and that politics has played a role in decision making. Social conservatives have said the pill is tantamount to abortion.

Judge Edward Korman was highly critical of the government’s handling of the issue when he ordered the FDA two years ago to let 17-year-olds obtain the medication. At the time, he accused the government of letting “political considerations, delays and implausible justifications for decision-making” cloud the approval process.

In court papers prior to Wednesday’s hearing, Assistant U.S. Attorney Scott Landau said the government had complied with Korman’s orders by lowering the cutoff for over-the-counter sales of the drug from 18 to 17.

He said the plaintiffs “unfairly accuse FDA of bad faith and delay.”

And will wonders never cease. Mayor Michael Bloomberg raised his voice in support of making Plan B morning-after contraceptive available over the counter to young teenage girls. And just where did NYC’s speak-his-mind mayor do this? At a press conference in Queens, NY during an event promoting the President’s Council on Jobs and Competitiveness with none other than Kathleen Sebelius in attendance:

“It would be much better if these young girls didn’t get pregnant, but once that happens I think this should be available,” Hizzoner told reporters.

Speaking minutes later at the same event, Sebelius said: “I felt that the data presented, and justification for [making Plan B available to] all ages, did not match.” [..]

He called FDA director Peggy Hamburg, who served as the city’s Health Department commissioner during the Dinkins administration, a “first rate scientist.”

“I think her advice should be followed,” he said prior to the jobs event at LaGuardia Community College in Long Island City.

Dec 13 2011

Did I mention…

That I told you so?

Holiday Sales Appear to Stall: Are Big Discounts Next?

By: John Melloy, CNBC

Published: Monday, 12 Dec 2011 3:57 PM ET

After early bird discounts fueled a Black Friday buying boom, retailers are seeing sales dry up halfway through the holiday sales period, a consumer survey completed Sunday showed. The trend may force discounts as deep as 70 percent on coats and flat panel TVs as Christmas Eve approaches.



“While Black Friday sales appeared to give the retailers an early leg up in the season, I believe that continued high unemployment and economic uncertainty will keep spending muted for the vast majority of American consumers,” said Patty Edwards of Trutina Financial.

“Retailers will announce a number of unplanned sales and discounts, hoping to surprise and delight customers into opening their wallets. The big question is how much is left in those wallets that isn’t pledged to the light bill.”

(h/t Chris in Paris @ Americablog)

Dec 13 2011

Punting the Pundits

“Punting the Pundits” is an Open Thread. It is a selection of editorials and opinions from around the news medium and the internet blogs. The intent is to provide a forum for your reactions and opinions, not just to the opinions presented, but to what ever you find important.

Thanks to ek hornbeck, click on the link and you can access all the past “Punting the Pundits”.

New York Times Editorial: Targeting the Unemployed

The latest Republican plan might extend the payroll tax cut and unemployment benefits, but it would do so at the expense of vulnerable Americans.

The House Republican leadership managed to get one thing right in its bill to extend the payroll tax cut and unemployment benefits. The bill does, indeed, extend the payroll tax cut for another year, but, beyond that, there is a lot to dislike. To help pay for the package, for instance, the bill would cut social spending more deeply than is already anticipated under current budget caps without asking wealthy Americans to contribute a penny in new taxes.

It also holds the expiring provisions hostage to irrelevant but noxious proposals to undo existing environmental protections. Worse, it would make unemployment compensation considerably stingier than it is now.

Michael Hudson: Europe’s Transition From Social Democracy to Oligarchy

The easiest way to understand Europe’s financial crisis is to look at the solutions being proposed to resolve it. They are a banker’s dream, a grab bag of giveaways that few voters would be likely to approve in a democratic referendum. Bank strategists learned not to risk submitting their plans to democratic vote after Icelanders twice refused in 2010-11 to approve their government’s capitulation to pay Britain and the Netherlands for losses run up by badly regulated Icelandic banks operating abroad. Lacking such a referendum, mass demonstrations were the only way for Greek voters to register their opposition to the €50 billion in privatization sell-offs demanded by the European Central Bank (ECB) in autumn 2011.

The problem is that Greece lacks the ready money to redeem its debts and pay the interest charges. The ECB is demanding that it sell off public assets – land, water and sewer systems, ports and other assets in the public domain, and also cut back pensions and other payments to its population. The “bottom 99%” understandably are angry to be informed that the wealthiest layer of the population is largely responsible for the budget shortfall by stashing away a reported €45 billion of funds stashed away in Swiss banks alone. The idea of normal wage-earners being obliged to forfeit their pensions to pay for tax evaders – and for the general un-taxing of wealth since the regime of the colonels – makes most people understandably angry. For the ECB, EU and IMF “troika” to say that whatever the wealthy take, steal or evade paying must be made up by the population at large is not a politically neutral position. It comes down hard on the side of wealth that has been unfairly taken.

Dean Baker: A Tale of Two Deficit Charts

Not long after I first came to Washington 20 years ago I was at a conference dealing with Social Security privatization. One of the panelists used a number for the administrative costs of private accounts that was far lower than the numbers I had seen in the literature. After the panel, I asked one of the other panelists about her best estimate of the administrative costs of private accounts. She said that this depended on whether I was interested in advocacy or policy.

I was somewhat taken aback by her response, but after a moment I told her that I was interested in accuracy. I have always felt that this is the best approach to policy questions.

Accuracy has not featured prominently in Washington budget debates in recent decades. There is an enormous amount of misunderstanding about the deficit, much of it deliberately promoted by politicians. We hear endless tales of out-of-control government spending and chronic deficits. This is nonsense as the data clearly show, but unfortunately both parties have an interest in promoting the deceptions.

Jim Hightower: Don’t Call Gingrich a “Lobbyist”

Gingrich, his lawyers, and his staff adamantly insist that it’s rude and crude to call him a lobbyist.

Mea culpa, I misspoke, my bad. I stand corrected. I have called Newt Gingrich a lobbyist.

Apparently, he hates that tag, even though he has indeed gotten very wealthy by taking big bucks from such special interest outfits as IBM, Astra Zeneca, Microsoft, and Siemens in exchange for helping them get favors from federal and state governments.

But Gingrich, his lawyers, and his staff adamantly insist that it’s rude and crude to call him a lobbyist. No, no, they bark, the Newt is “a visionary.”

Eugene Robinson: A Mild Victory in Durban

I’m inclined to believe that the apparent result of the climate change summit in Durban, South Africa, might turn out to be a very big deal. Someday. Maybe.

That’s my view, but it’s hardly universal. After the meeting ended Sunday, initial reaction basically ranged from “Historic Breakthrough: The Planet Is Saved” to “Tragic Failure: The Planet Is Doomed.” Such radically different assessments came from officials and activists who have the same general view of climate change-that it’s real and something must be done about it-and who fully understand the agreement that the delegates in Durban reached.

The optimists and the pessimists disagree mostly on what they believe governments can do to curb the carbon and methane emissions that are warming the atmosphere, and when they are likely to do it. My conclusion is that for now, at least, the conceptual advance made in Durban is as good as it gets.

Ari Berman: ‘Occupy the Voting Booth’-Thousands March to Protect the Vote

Tomorrow Attorney General Eric Holder will gave a major speech on voting rights at the LBJ presidential library in Austin. According to the library, “Holder will discuss the importance of ensuring equal access to the ballot box and strengthening America’s long tradition of expanding the franchise.”

Holder’s speech could not come at a more critical time. Over the last year we’ve witnessed an unprecedented GOP war on voting, with a dozen Republican governors and state legislators passing laws to restrict voter registration drives, require birth certificates to register to vote, curtail early voting, mandate government-issued photo IDs to cast a ballot and disenfranchise ex-felons who’ve served their time. The Brennan Center for Justice has estimated that “these new laws could make it significantly harder for more than 5 million eligible voters to cast ballots in 2012,” and notes that “these new restrictions fall most heavily on young, minority and low-income voters, as well as on voters with disabilities.”

George Zornick: Meltdown at the Nuclear Regulatory Commission

Tensions at the Nuclear Regulatory Commission, the nation’s chief overseer of civilian nuclear materials, finally boiled over into public finger-pointing and accusations of malfeasance late Friday-creating what one lawmaker called “a regulatory meltdown.” It’s a messy conflict, but one thing is clear: the nuclear industry has many friends on the NRC.

On Friday, Representative Darrell Issa released a letter written in October by four of the commission’s five members. It accused the fifth member, Gregory Jaczko-who is also the NRC Chairman-of “causing serious damage” to the agency with “increasingly problematic and erratic behavior.” The commissioners feel Jaczko limited their role and bullied them in an emergency review of the nation’s nuclear facilities following the Fukushima meltdown in March.

Dec 13 2011

Naked Euro

I wonder how many ‘the Emperor has no clothes’ moments we’re going to have to go through before Mr. Market finally realizes he’s nude?  The big news about the Euro is that nothing has changed at all, except to get worse.

What the pieces I’ve selected make clear is that goverments in the Euro Zone can’t afford to pay off the banksters crap assets at anything near their notional balance sheet value.  The European Central Bank (ECB) is the only one who can print Euros and impose investor haircuts through asset inflation and they can’t lend directly to governments, only to banks.  Any country that follows the Irish example of paying off their vampire bank failures is committing economic suicide.

What they don’t highlight, but which is none the less true, is that the ECB balance sheet is running out of room without a looser monitary policy (i.e. ‘printing’) AND that the assets it’s accepting as collateral are, even under the relaxed standards, made acceptable only through Credit Default Swap ‘Insurance’ issued by the self same banks that don’t have the reserves to cover their primary obligations.

Like AIG these ‘counter parties’ have absolutely no intention of paying off and no ability to do so even if they did.

‘House of Cards’ hardly begins to describe the tissue thin fictional fig leaf these insolvent banksters are trying to hide their behinds behind.

How the ECB could be forced to print money

Felix Salmon, Reuters

Dec 6, 2011 10:52 EST

The line to concentrate on, here, is the solid one in blue. It shows a key part of the Bundesbank’s assets – its loans to other institutions – falling perilously low to zero, even as its loans to other European central banks – the maroon dotted line – continue to rise inexorably. (These loans from one national central bank to another are known as the TARGET system.)

Up until now, the Bundesbank has managed to fund the latter by means of selling off the former: when it’s asked to lend money to PIIGS central banks, it just sells off some other loans and advances the cash to the Irish or Portuguese central bank instead.

But it can’t do that any more, because the Bundesbank is down to its last €21 billion in private loans. And when that hits zero, the only things left to sell are the Bundesbank’s gold and reserves. Which, it’s pretty safe to say, the Bundesbank is not going to sell.



Basically, there’s a constant flow of money out of the European periphery and towards the center. Up until now, that flow has been matched by an equal and opposite flow of central bank lending from the Bundesbank to the PIIGS central banks. And when the Bundesbank runs out of money to lend those central banks? The ECB will have no choice but to step in and print all the money necessary to stop those banks from going bust. And that, I think, is how we’re going to see the ECB finally take on the lender-of-last-resort role it has been so reluctant to adopt until now.

Eurozone Crisis, Act Two: Has the Bundesbank Reached its Limit?

Authors: Aaron Tornell & Frank Westermann, EconoMonitor

December 7th, 2011

In the wake of the 2008 crisis, some national central banks, especially those in Greece, Ireland, Italy, Portugal, and Spain (the GIIPS), have dramatically increased their loans to financial institutions. To fund these loans, GIIPS central banks borrowed mainly – via the ECB – from other central banks, in particular the Bundesbank.



In principle, the limit on the amount of claims on the Eurosystem that the Bundesbank can accumulate equals the assets in its balance sheet plus the amount it can borrow in capital markets. Pressure from the German public, however, might prevent the Bundesbank from reaching the theoretical limit. There are several political thresholds. The first is when the stock of Bunds in the Bundesbank hits zero. As Table 2 shows, this threshold has been reached. Even before the 2008 crisis the stock of Bunds in the Bundesbank was practically zero. The second threshold will be reached when the stock of loans from the Bundesbank to the private sector is depleted. As we described above, the stock of loans to private credit institutions has fallen to almost zero. At the end of October 2011, it stood at €21 billion.



As we have described, in the European monetary union, the stock of securities held by a central bank can increase in a member country even though the ECB might not pursue an expansionary policy for the Eurozone as a whole. This creation of base money is not done via the printing press as in old times, but electronically. To illustrate the mechanism consider the following example. An owner of Greek government bonds uses them as collateral to borrow from his commercial bank, which in turn borrows from the Bank of Greece. The Greek central bank wires the funds via the ECB to the Bundesbank, which in turn deposits them in the Frankfurt bank account of the Greek resident. As a consequence, the Bundesbank gets a ‘TARGET claim’ on the ECB and the Bank of Greece gets a ‘TARGET liability’ at the ECB. This TARGET claim is secured by collateral – the Greek government bonds – deposited at the ECB that were previously in the possession of the Greek resident. Through this operation, the increase in the stock of securities at the Bank of Greece is matched by a reduction of securities in the Bundesbanks’ balance sheet. The Bundesbank sells some of its assets to be able to deposit the funds into the Greek residents’ private Frankfurt bank account. As a result, German assets are replaced by ECB collateral (TARGET claims) in the balance sheet of the Bundesbank.



How long can the central banks of the GIIPS accumulate TARGET liabilities at the ECB? In theory, as long as they have collateral that is acceptable to the ECB, which is the total stock of government debt plus other marketable assets (such as mortgage-backed securities) recognised by the ECB. However, running out of collateral won’t necessarily stop the borrowing. Should central banks run out of government bonds, the national governments could issue more bonds, and sell them to private banks. Banks in turn could use them as collateral to borrow from their central banks. Thus, practically, there is no limit to the amount of domestic government bonds the national central banks could use as collateral to accumulate TARGET claims at the ECB.



Up to now, Bundesbank loans have allowed GIIPS central banks to buy government bonds without a corresponding increase in the monetary base of the Eurozone as a whole – ie, without the ECB printing more money (after an expansion in 2008, the monetary base returned to trend growth). Before long, however, the Bundesbank’s stock of domestic assets is going to hit zero, and it is highly unlikely that it will agree to sell its gold or borrow more in private capital markets. At that point, the Bundesbank will not be able to lend more funds to the Eurozone TARGET mechanism. As a result we are heading towards the multiple equilibria zone in which beliefs of a breakdown of the Eurozone are self-fulfilling. In such a situation, market participants may transfer funds from financial institutions in fiscally weak countries to other ‘safe’ countries like Germany. In tranquil times, such transfers can be done seamlessly through the TARGET mechanism of the ECB. However, if a critical mass of agents were to engage in such capital flight away from fiscally weak countries, the TARGET system would be overwhelmed. In principle, a speculative attack could occur within a day, and the ECB would have to assume all of the marketable securities from countries that suffer the speculative attack. Since the ECB has a relatively small capital base, it would not be able to purchase a large amount of assets from countries that suffer the attack.

EU Banks Must Raise $153B of Extra Capital: EBA

By Ben Moshinsky and Jim Brunsden, Bloomberg News

Dec 8, 2011 8:01 PM ET

German banks need to raise an additional 13.1 billion euros, Italian banks 15.4 billion euros, and Spanish lenders 26.2 billion euros in core tier 1 capital, the European Banking Authority in London said yesterday. The capital shortfalls include 15.3 billion euros for Spain’s Banco Santander SA (SAN) and 7.97 billion euros for Italy’s UniCredit SpA. (UCG)



Other lenders needing to bolster their reserves include Deutsche Bank AG, with a shortfall of 3.2 billion euros, Banco Bilbao Vizcaya Argentaria SA (BBVA), which missed the target by 6.33 billion euros, BNP Paribas (BNP) SA, with a shortfall of 1.5 billion euros, and Societe Generale SA (GLE), which needs 2.1 billion euros. Commerzbank AG (CBK) needs 5.3 billion euros to meet the target, German regulator Bafin said. France’s Groupe BPCE, the owner of Natixis SA, had a 3.7 billion euro shortfall, and Italy’s Banca Monte dei Paschi di Siena SpA (BMPS) needs to raise 3.27 billion euros.



Regulators more than doubled the amount of capital German lenders need to raise from the original 5.2 billion-euro estimate for the country’s banks in October.



French banks will have to raise 7.3 billion euros, 1.5 billion euros less than previously estimated.

German Funds to Sell $3.6 Billion of Best Properties as Liquidation Looms

By Simon Packard, Bloomberg News

Dec 11, 2011 7:00 PM ET

Three German funds facing a May deadline to avoid liquidation aim to raise about 2.7 billion euros ($3.6 billion) selling trophy real estate including Berlin’s Potsdamer Platz and the European Bank of Reconstruction & Development’s London headquarters.



Raising cash from real estate sales became more difficult after Europe’s growing sovereign-debt crisis led buyers to favor properties in prime locations occupied by tenants on long leases. Selling most-prized assets risks making more investors withdraw money from the funds when they re-open.



Germany’s 85 billion-euro real-estate mutual fund industry may be facing the biggest crisis in its 50-year history. A dozen of the 44 funds, which own 28 percent of the industry’s assets, are liquidating or have suspended redemptions, according to Frankfurt-based BVI Bundesverband Investment & Asset Management.



The German government stepped in to shore up an investment product favored by savers because of the reliable income returns it generates and the country’s lack of a developed real estate investment trust market. Legislation adopted in May and taking effect in 2013 will introduce notification periods, caps on withdrawals and staggered repayments to free funds from a potential liquidity trap.

EU Banks Taking Government Cash Seen Sparking ‘Vicious Cycle’

By Yalman Onaran, Bloomberg

Dec 11, 2011 7:01 PM ET

Ireland’s effort to back its banks brought the country to the verge of collapse last year. After issuing a blanket guarantee on all bank debt in 2008, the government was compelled to keep plugging holes as losses mounted. Sovereign debt doubled to more than 100 percent of GDP after about 60 billion euros were put into the nation’s lenders. Ireland sought a rescue package from the EU and the IMF in November 2010.

“The European banks (BEBANKS) can’t get fresh capital, so governments are going to have to cough up the money,” said Barbara Matthews, managing director of BCM International Regulatory Analytics LLC, a Washington-based consulting firm. “Germany is re-establishing its bank rescue fund, and it has the money to put in its banks. But when you look at public sources, you run into a problem. Do the other sovereigns have the cash to do it?”



“The EFSF doesn’t have enough money to support Italian and Spanish sovereign debt as well as put money into the European banks,” said Desmond Lachman, resident fellow at the American Enterprise Institute in Washington. “It just can’t do all of that.”

The EU banks’ capital holes are bigger than the EBA’s latest estimate, Lachman said, citing a September IMF estimate of a 300 billion-euro risk based on more favorable prices for government bonds at the time.

Because banks can’t raise capital from the market and some governments can’t afford to provide cash, compliance most likely will be through asset sales and reduced lending in the region, said Lannoo of the Centre for European Policy Studies. The EBA has told banks not to meet the new capital requirements through such measures, instead asking them to refrain from paying dividends.



The size of potential losses at European banks has scared away short-term creditors, squeezing the region’s lenders. The European Central Bank has stepped in to replace funds being withdrawn, providing unlimited cash and lowering requirements on the quality of collateral it will accept.

“We’re in a death spiral,” said Andy Brough, a fund manager at Schroders Plc in London. “As the yields on the peripheral bonds increase, value of the bonds decreases and the amount of capital the bank has to raise increases.”

Dec 13 2011

On This Day in History December 13

This is your morning Open Thread. Pour your favorite beverage and review the past and comment on the future.a

Find the past “On This Day in History” here.

December 13 is the 347th day of the year (348th in leap years) in the Gregorian calendar. There are 18 days remaining until the end of the year.

On this day in 1642, Abel Tasman discovers New Zealand.

New Zealand is an island country in the south-western Pacific Ocean comprising two main landmasses (the North Island and the South Island), and numerous smaller islands, most notably Stewart Island/Rakiura and the Chatham Islands. The indigenous Maori language name for New Zealand is Aotearoa, commonly translated as land of the long white cloud. The Realm of New Zealand also includes the Cook Islands and Niue (self-governing but in free association); Tokelau; and the Ross Dependency (New Zealand’s territorial claim in Antarctica).

The majority of Zealand’s population is of European descent; the indigenous Maori are the largest minority. Asians and non-Maori Polynesians are also significant minority groups, especially in urban areas. The most commonly spoken language is English.

New Zealand is a developed country that ranks highly in international comparisons on many topics, including lack of corruption, high educational attainment and economic freedom. Its cities also consistently rank among the world’s most liveable.

Elizabeth II, as the Queen of New Zealand, is the country’s head of state and is represented by a Governor-General, and executive political power is exercised by the Cabinet of New Zealand.

Polynesian settlers

New Zealand is one of the most recently settled major landmasses. The first known settlers were Eastern Polynesians who, according to most researchers, arrived by canoe in about AD 1250-1300. Some researchers have suggested an earlier wave of arrivals dating to as early as AD 50-150; these people then either died out or left the islands. Over the following centuries these settlers developed into a distinct culture now known as Maori. The population was divided into iwi (tribes) and hapu (subtribes) which would cooperate, compete and sometimes fight with each other. At some point a group of Maori migrated to the Chatham Islands where they developed their distinct Moriori culture.

European explorers

The first Europeans known to have reached New Zealand were Dutch explorer Abel Janszoon Tasman and his crew in 1642. Maori killed four of the crew and no Europeans returned to New Zealand until British explorer James Cook’s voyage of 1768-71. Cook reached New Zealand in 1769 and mapped almost the entire coastline. Following Cook, New Zealand was visited by numerous European and North American whaling, sealing and trading ships. They traded European food and goods, especially metal tools and weapons, for Maori timber, food, artefacts and water. On occasion, Europeans traded goods for sex.

The potato and the musket transformed Maori agriculture and warfare, beginning in the frequently visited north then spreading southwards. The resulting Musket Wars encompassed over 600 battles between 1801 and 1840, killing 30,000-40,000 Maori, although introduced diseases would play an even greater role in the Maori population’s decline to around 40% of its pre-contact level during the 19th century. From the early 19th century, Christian missionaries began to settle New Zealand, eventually converting most of the Maori population, although their initial inroads were mainly among the more disaffected elements of society.