03/19/2013 archive

The Cyprus Parliament has rejected the European Union’s bail out deal that would have imposed a hefty one time tax on all deposits to raise  €5.8 billion of the total €10 billion bailout cost. The original terms of the bailout called for a one-time tax of 6.75 percent on deposits of less than €100,000, or $129,000, and a 9.9 percent tax on holdings of more than €100,000.

NICOSIA – The Cypriot Parliament on Tuesday overwhelmingly repudiated a €10 billion international bailout package that would have set an extraordinary precedent by taxing ordinary depositors to pay part of the bill.  The lawmakers sent President Nicos Anastasiades back to the drawing board with international bailout negotiators to devise a new plan that would allow the country to receive a financial lifeline and avoid the specter of a devastating default that would reignite the euro crisis.

Lawmakers rejected the plan with 36 voting no and 19 abstaining arguing that it would be unacceptable to take money from account holders. Some in the opposition party even suggested abandoning a European Union bailout altogether and appealing to Russia or China to lend Cyprus the funds it needs to keep the economy and its banks afloat.

The deal was brokered last week with Cypriot President Nicos Anastasiades in a meeting at a European Union summit in Brussels. According to reports in The Guardian, the newly elected president was literally “sucker punched” by  the International Monetary Fund, the European Commission, and the European Central Bank as it sought to broker a bailout for its ailing banks:

(..) (T)he centre-right Cypriot leader was given a 12-hour stay of execution until the early hours of Saturday on what, highly conveniently, was a Cyprus bank holiday weekend. He went home with a €10bn euro bailout and a eurozone taboo-busting obligation to expropriate every saver in every bank in Cyprus. [..]

It was not the two-day summit that decided to confiscate savers’ money for the first time in more than three years of currency, banking and sovereign debt crisis. Rather, the Dutch finance minister Jeroen Dijsselbloem called an emergency session of the eurogroup in the same drab building in Brussels to kick off on Friday just as the leaders were heading for the airport. [..]

The key players were Wolfgang Schaeuble, the German finance minister, his former deputy, Jörg Asmussen, from the ECB, Christine Lagarde of France for the IMF, and Finland’s Rehn from the commission.

Anastasiades lingered in the building, but did not take part in the meeting which began at 4.30pm on Friday and ended with a bombshell – under the terms of the bailout he would need to find €5.8bn by raiding bank accounts.

Needless to say the reaction of the Cypriots was predictable with attempts to withdraw as much cash from ATM’s which were quickly emptied over the weekend. The banks were ordered to keep the cash machines replenished even though the banks would remained closed until Thursday. There were worries in other EU member states that depositors would start pulling savings from accounts, particularly Italy, Spain and Greece where the economic conditions are still uncertain.

The market reactions on Monday were predictable, they fell. While the Asian market today was fairly stable on the plus side, the European market fell. On Wall Street, the S&P and NASDAQ fell while the DOW which was in the red most of the day had a late rally to end the day with a 0.03% gain, hardly impressive.

At Reuters, Felix Salmon presented an alternative solution that designed the godfather of sovereign debt restructuring by Lee Buchheit, “the godfather of sovereign debt restructuring,” and Mitu Gulati of Duke University, in a three page paper:

First, leave all deposits under €100,000 untouched. Hitting those deposits was by far the biggest mistake of the Cyprus plan as originally envisaged, and everybody would be extremely happy if guaranteed depositors could be kept whole.

Second, term out everybody else by five years, or ten if they prefer.

That’s it! That’s the whole plan, and it’s kinda genius. If you have bank deposits of more than €100,000, they will be converted into bank CDs, with a maturity of either five years or 10 years – your choice. If you pick the longer maturity, then your CD will be secured by future Cypriot gas revenues, which could amount to hundreds of billions of dollars.

And if you have sovereign bonds, they too will be termed out by five years, giving Cyprus a bit of breathing room to get its act together.

According the paper, this plan would reduce the size of the bailout by more that the €5.8 while not touching anyone’s principle. There would still be a “present value haircut” to accounts over €100,000 but that is going to happen in any bailout scenario.

Cyprus has long been a money stashing haven for Russian oligarchs who have over €20 billion in the banks, nearly one third of all deposits.  

This was an unprecedented move by the EU to force regular depositors and, rightly, the outrage was justified, immediate and predicted. Even Paul Krugman was predicting bank runs. That question looms large:

if the taxpayers of the rich northern members of the eurozone are going to force a country that represents only 0.2% of the club’s GDP to part-finance their own bailout, will they be any more generous when it comes to some of the big-country members such as Italy and Spain that might be next in line? And in the event that the Italians and the Spanish get an inkling that a bailout is looming, won’t they immediately withdraw all their euros immediately, triggering a bank run?

The question now is what next? Will the Russians or Chinese come to the aid of Cyprus to protect their citizens deposits? Can they afford to? Will Cyprus withdraw from the EU and risk the failure of its banks? Can a tiny island nation of 1.1 million be the downfall of the euro?

Stand by, as events will happen very fast to avert a global monetary disaster.

March Madness 2013!

Yup, I have to be crazy to do this.

Tonight is not so hard, only 2 play in games-

• N.C. A&T (19 – 16)  v. Liberty (15 – 20) @ 6:30 on True
• Middle Tennessee (27 – 6) v. St. Mary’s (28 – 5) @ 9 on True

W/L Stats from ESPN.

Yup, Jerry Falwell’s Liberty University.  Guess you know how to root, don’t you?

Spring arrives promptly at on March 20 at  7:02 a.m. EDT/4:02 a.m. PDT. As you know the Spring Equinox is also called the “Vernal Equinox”, ver bring the Latin derivative for “spring.”  It occurs when the sun crosses the celestial equator and night and day are equal. It is really just a moment in time and if you blink, you missed it. In the Southern Hemisphere where the seasons reverse it is the start of Autumn.

Spring comes with lots of traditions, cultural, religious and mythical. The egg, a symbol of fertility is the subject of one of the biggest myths. The balancing of an uncooked egg derives from the notion that due to the sun’s equidistant position between the poles of the earth at the time of the equinox, special gravitational forces apply. Actually, it can be done anytime of the year on a flat, level surface, a steady hand and no vibrations. It’s the same with that broom balancing That works best with a new broom that has uniform, even bristles.

I once stood an egg on the dining room table and left it there. One of my cat, Mom Cat, sat staring at it for quite some time. After several minutes, she very gently reached out with one paw and tapped it. It rolled off the table and smashed on the floor before I could reach it. As I cleaned up the mess, Mom Cat sat on the edge of the table watching, as if to say, ‘yes, gravity still works.”

There are lots celebrations in many countries and cultures including the internet. Google celebrates with its popular animated “doodles.”

In Iran, ancient new year’s festival of Nowruz is celebrated:

According to the ancient Persian mythology Jamshid, the mythological king of Persia, ascended to the throne on this day and each year this is commemorated with festivities for two weeks. These festivities recall the story of creation and the ancient cosmology of Iranian and Persian people.

In many Arab countries, Mother’s Day is celebrated on the Spring equinox and the Jewish celebration of Passover starts on the first full moon after the Northern Hemisphere vernal equinox.

Most Christian churches calculate Easter as the first Sunday after the first full moon on or after the March equinox but the Eastern Orthodox Churches use the older Julian calendar so the actual date of Easter differs.

In Japan the Spring Equinox became an official holiday in 1948, Shunbun no hi.

We Pagans celebrate Ostara, one of the Eight Sabats of the Wheel, as a season of rebirth. The name is derived from Eostre, the Anglo-Saxon goddess of spring and fertility, and many symbols are associated with Ostara, including colored eggs and, what else? Rabbits:

In medieval societies in Europe, the March hare was viewed as a major fertility symbol — this is a species of rabbit that is nocturnal most of the year, but in March when mating season begins, there are bunnies everywhere all day long. The female of the species is superfecund and can conceive a second litter while still pregnant with a first. As if that wasn’t enough, the males tend to get frustrated when rebuffed by their mates, and bounce around erratically when discouraged.

Colored eggs are one of the symbols of fertility with an interesting, and this unconfirmed scary, history from Witches’ Voice :

(T)he traditional coloring and giving of eggs at Easter has very pagan associations. For eggs are clearly one of the most potent symbols of fertility, and spring is the season when animals begin to mate and flowers and trees pollinate and reproduce. In England and Northern Europe, eggs were often employed in folk magic when women wanted to be blessed with children. There is a great scene in the film The Wicker Man where a woman sits upon a tombstone in the cemetery, holding a child against her bared breasts with one hand, and holding up an egg in the other, rocking back and forth as she stares at the scandalized (and very uptight!) Sargent Howie. Many cultures have a strong tradition of egg coloring; among Greeks, eggs are traditionally dyed dark red and given as gifts.

As for the Easter egg hunt, a fun game for kids, I have heard at least one pagan teacher say that there is a rather scary history to this. As with many elements of our “ancient history, ” there is little or no factual documentation to back this up. But the story goes like this: Eggs were decorated and offered as gifts and to bring blessings of prosperity and abundance in the coming year; this was common in Old Europe. As Christianity rose and the ways of the “Old Religion” were shunned, people took to hiding the eggs and having children make a game out of finding them. This would take place with all the children of the village looking at the same time in everyone’s gardens and beneath fences and other spots.

It is said, however, that those people who sought to seek out heathens and heretics would bribe children with coins or threats, and once those children uncovered eggs on someone’s property, that person was then accused of practicing the old ways. I have never read any historical account of this, so I cannot offer a source for this story (though I assume the person who first told me found it somewhere); when I find one, I will let you know!

Whatever you believe, or not, get out there in the garden or the park and celebrate the warmth of the sun, the longer days, renewal and rebirth.

In a day long Senate hearing, Ina Drew, the former head of the chief investment office that oversaw the London trading operation, Braunstein, JP Morgan’s former chief financial officer,  acting chief risk officer Ashley Bacon and Peter Weiland, Chase’s former head of market risk, appeared to answer questions about it disastrous “London whale” trading loss. Along with high-ranking federal regulators, they face withering questions if front of Senator Carl Levin’s Permanent Subcommittee on Investigations a day after the committee release a damning 300-page report on JP Morgan’s $6.2bn debacle. While the report lays out the evidence that JP Morganwas plating fast and lose with regulations and investor’s money, the report is heavily redacted giving the appearance that even Sen. Levin’s committee is covering for Jamie Dimon and, perhaps higher ups in the White House, under the guise of “protecting the markets.”

In an article by Pam Martens at Wall Street On Parade, she partially reconstructs some of the missing pieces:

Although the “Redacted” stamp has censored much of the relevant information on this stock trading, a few snippets can be pieced together. We learn, for example, that the original budget proposed for stock trading in 2006 was twice that for credit trading. The plan was to trade a maximum of $5 million in credit derivatives and $10 million in stock trading – the specific type of stock transactions have been redacted from the document while those for credit trading have been left in. Since the notionals (face amount) of the credit derivatives eventually grew to hundreds of billions of dollars by early 2012, one has to wonder what the stock-related trading grew to from a proposed $10 million since it was originally slated to be twice as large as credit trading.

Another item that slips through is that “ETFs will also be treated as trading instruments.” ETF is an acronym for “Exchange Traded Fund,” portfolios of stocks that trade on stock exchanges. In a memo dated May 5, 2006 to Jason Hughes at JPMorgan from Roger J. Cole in the Compliance Department, we learn that there is a plan to trade stock market indices. The caveat is given by Cole that: “…compliance approval required before trading in credit/equity indices with less than 20 names as we discussed.”

She concludes that the Senate needs to release the redacted portions of the report to let in some “disinfecting sunshine.” The article also contains and excellent chart of the hierarchy of the International Chief Investment Office that was headed by Javier Martin-Artajo, that blogger bobswern at Daily Kos gives us further incite:

If you take a look at the organizational chart provided by Pam Martens, immediately above, it’s topped-off with Javier Martin-Artajo. The reality was that, at the time, Martin-Artajo reported to JPMC CIO head Ina Drew who, in turn, reported to JPMC CEO Jamie Dimon, among others.

I’ve italicized “others” in the paragraph above this because in-between Ms. Drew and Mr. Dimon was none other than William M. Daley, Vice Chairman of the JPMC Board of Directors, who was, among many other duties including that of chief (unregistered) lobbyist for the bank and Chair of the JPMC Board’s Risk Management Committee, also in charge of supervising the bank’s corporate governance, up until January 9th, 2011, when President Obama appointed Daley as his chief of staff, replacing current Chicago Mayor Rahm Emanuel in that job.

It was fairly widely reported, in early November 2011, that Bill Daley was tacitly demoted in his position as White House Chief of Staff, when he was required to share duties with Pete Rouse. Interestingly, in January 2012, around the time that the first, industry-circulated reports of JPMC’s CIO meltdown appeared in the blogosphere, it was then reported that Daley would be leaving 1600 Pennsylvania Avenue, altogether, later that month.

The readers can draw their own conclusions from there.

Contributing Editor of Rolling Stone, Matt Taibbi, live blogged the hearing giving some amusing observations. In a phone interview with Sam Seder of the Majority Report discussed the testimony:

(h/t Susie Madrak @ Crooks & Liars)

“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”.

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Joseph E. Stiglitz: Singapore’s Lessons for an Unequal America

Inequality has been rising in most countries around the world, but it has played out in different ways across countries and regions. The United States, it is increasingly recognized, has the sad distinction of being the most unequal advanced country, though the income gap has also widened to a lesser extent, in Britain, Japan, Canada and Germany. Of course, the situation is even worse in Russia, and some developing countries in Latin America and Africa. But this is a club of which we should not be proud to be a member. [..]

Singapore has had the distinction of having prioritized social and economic equity while achieving very high rates of growth over the past 30 years – an example par excellence that inequality is not just a matter of social justice but of economic performance. Societies with fewer economic disparities perform better – not just for those at the bottom or the middle, but over all.

Dean Baker: Worms, Pond Scum, and Economists

The effort to blame the awful plight of the young on Social Security and Medicare is picking up steam. In the last week there were several pieces in the Washington Post and New York Times that either implicitly or explicitly blamed older workers and retirees for the bad economic plight facing young people today. There is now a full court press to cut Social Security and Medicare benefits, ostensibly out of a desire to help young workers today and in the future. [..]

There is no doubt that this is not a pretty picture, but this story has nothing to do with Social Security and Medicare. There is a simple and obvious cause of the dire economic conditions of the nation’s young: the downturn created by the collapse of the housing bubble. This downturn caused the high unemployment rate and weak labor market that has made it impossible for most young people to secure decent jobs with rising wages.

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

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

March 19 is the 78th day of the year (79th in leap years) in the Gregorian calendar. There are 287 days remaining until the end of the year.

On this day in 1941, the 99th Pursuit Squadron also known as the Tuskegee Airmen, the first all-black unit of the Army Air Corp, is activated.

The Tuskegee Airmen is the popular name of a group of African American pilots who fought in World War II. Formally, they were the 332nd Fighter Group and the 477th Bombardment Group of the U.S. Army Air Corps.

The Tuskegee Airmen were the first African American military aviators in the United States armed forces. During World War II, African Americans in many U.S. states still were subject to racist Jim Crow laws. The American military was racially segregated, as was much of the federal government. The Tuskegee Airmen were subject to racial discrimination, both within and outside the army. Despite these adversities, they trained and flew with distinction. Although the 477th Bombardment Group “worked up” on North American B-25 Mitchell bombers, they never served in combat; the Tuskegee 332nd Fighter Group was the only operational unit, first sent overseas as part of Operation Torch, then in action in Sicily and Italy, before being deployed as bomber escorts in Europe where they were particularly successful in their missions.

The Tuskegee Airmen initially were equipped with Curtiss P-40 Warhawks fighter-bomber aircraft, briefly with Bell P-39 Airacobras (March 1944), later with Republic P-47 Thunderbolts (June-July 1944), and finally the fighter group acquired the aircraft with which they became most commonly associated, the North American P-51 Mustang (July 1944). When the pilots of the 332nd Fighter Group painted the tails of their P-47’s red, the nickname “Red Tails” was coined. Bomber crews applied a more effusive “Red-Tail Angels” sobriquet.

Background

Before the Tuskegee Airmen, no African American had become a U.S. military pilot. In 1917, African-American men had tried to become aerial observers, but were rejected, however, African American Eugene Bullard served as one of the members of the Franco-American Lafayette Escadrille. Nonetheless, he was denied the opportunity to transfer to American military units as a pilot when the other American pilots in the unit were offered the chance. Instead, Bullard returned to infantry duty with the French.

The racially motivated rejections of World War I African-American recruits sparked over two decades of advocacy by African-Americans who wished to enlist and train as military aviators. The effort was led by such prominent civil rights leaders as Walter White of the National Association for the Advancement of Colored People, labor union leader A. Philip Randolph, and Judge William H. Hastie. Finally, on 3 April 1939, Appropriations Bill Public Law 18 was passed by Congress containing an amendment designating funds for training African-American pilots. The War Department managed to deflect the monies into funding civilian flight schools willing to train black Americans.

War Department tradition and policy mandated the segregation of African-Americans into separate military units staffed by white officers, as had been done previously with the 9th Cavalry, 10th Cavalry, 24th Infantry Regiment and 25th Infantry Regiment. When the appropriation of funds for aviation training created opportunities for pilot cadets, their numbers diminished the rosters of these older units. A further series of legislative moves by the United States Congress in 1941 forced the Army Air Corps to form an all-black combat unit, despite the War Department’s reluctance.

Due to the restrictive nature of selection policies, the situation did not seem promising for African-Americans since, in 1940, the U.S. Census Bureau reported only 124 African-American pilots in the nation. The exclusionary policies failed dramatically when the Air Corps received an abundance of applications from men who qualified, even under the restrictive requirements. Many of the applicants already had participated in the Civilian Pilot Training Program, in which the historically black Tuskegee Institute had participated since 1939.

Cyprus-

Antidote-