Financial-Crisis Loans

“A World Upside Down? Deficit Fantasies in the Great Recession”: Thomas Ferguson and Robert Johnson Expose Unnecessary Deficit Hysteria – This paper demonstrates that the current hysteria over deficits in the US is unjustified. Markets for even long term US government debt are strong. Key findings:

  • · Claims that economic growth falls off at anywhere near current US levels of debt to GDP are untrue. Neither is it the case that cutting deficits magically stimulates the economy. And stories about 90% limits are untrue.
  • ·· The CBO August 2010 budget revision implies that the U.S. is less endangered than most analysts claim.
  • · Private oligopolies in health and defense spending, along with the possibility of another banking crisis, are the real threats to the deficit, not entitlements.
  • · Social Security is in essentially no danger for decades and does not require any fix.
  • · It would be easy to stimulate the economy with a program of public investment that would substantially reduce public debts in the long run.

NPR Does an Editorial for Deficit Reduction – NPR again abandoned journalistic standards in pushing deficit reduction by insisting that doing so is courageous. Given the wealth of the people pushing for cuts to Social Security and Medicare, and the fawning attention that these people get from media outlets like NPR and the Washington Post, it is difficult to see what it is courageous about trying to take away benefits for middle class retirees. It also wrongly described the deficit as "spiraling." Of course the deficit is not spiraling. The deficit rose in 2008-2010 because the housing bubble collapsed.  An honest discussion would point out that the deficit has temporarily ballooned because of the incompetence of people who carry through and report on economic policy. In the longer term the deficit is projected to rise, but that is because of the projected explosion of U.S. health care costs. Our per person costs are projected to rise from more than twice the average in countries with longer life expectancies to more than three times as much.

Fed Withholds Collateral Data for $885 Billion in Financial-Crisis Loans – The Federal Reserve withheld details on individual securities pledged as collateral by recipients of $885 billion in central bank loans, denying taxpayers a measure of the risks they faced from its emergency aid.  The central bank yesterday released data on 21,000 transactions from $3.3 trillion in emergency lending to stem the financial crisis. July’s Dodd-Frank law required the Fed to disclose the names of borrowers, the size and interest rates of loans, and “information identifying the types and amounts of collateral pledged or assets transferred.”  For three of the Fed’s six emergency facilities, the central bank released information on groups of collateral it accepted by asset type and rating, without specifying individual securities.

Productivity Increased 2.3% – And This May Be Bad News – According to the Bureau of Labor Statistics (BLS),  labor productivity increased in 3Q2010 at an annual rate of 2.3%.  The headline: Nonfarm business sector labor productivity increased at a 2.3 percent annual rate during the third quarter of 2010, the U.S. Bureau of Labor Statistics reported today. Labor productivity is calculated by dividing an index of real output by an index of the combined hours worked of all persons, including employees, proprietors, and unpaid family workers.Do not confuse the above discussion with the “bean counter” productivity used by the BLS in this report.  Because, in addition to the factors allowed to be included in productivity analysis – bean counters allow the introduction of disconnects in vertical integration to be counted in productivity.  In layman’s terms, bean counters allow outsourcing to be counted as a productivity improvement.

Money For Nothing: Wall Street Borrowed From Fed At 0.0078 Percent  — For the lucky few on Wall Street, the Federal Reserve sure was sweet. Nine firms — five of them foreign — were able to borrow between $5.2 billion and $6.2 billion in U.S. government securities, which effectively act like cash on Wall Street, for four-week intervals while paying one-time fees that amounted to the minuscule rate of 0.0078 percent. That is not a typo. On 33 separate transactions, the lucky nine were able to borrow billions as part of a crisis-era Fed program that lent the securities, known as Treasuries, for 28-day chunks to the now-18 firms known as primary dealers that are empowered to trade with the Federal Reserve Bank of New York. The program, called the Term Securities Lending Facility, ensured that the firms had cash on hand to lend, invest and trade. The European firms — Credit Suisse (Switzerland), Deutsche Bank (Germany), Royal Bank of Scotland (U.K.), Barclays (U.K.), and BNP Paribas (France) — borrowed $5.2-6.2 billion in Treasuries 20 different times. The one-time fees they paid on each transaction ranged from $403,277.78 to $481,110. Deutsche led the way with seven such deals. On each transaction, the fee paid for the 28-day loan is equal to a rate of just 0.0078 percent.

  Hedge Funds Tapped Rescue Program –– Hedge funds and investors whose bearish trades on housing helped them profit amid the credit crisis were among those that benefited from a U.S. government emergency rescue program to kick-start lending, according to Federal Reserve data released Wednesday. That program, known as the Term Asset-Backed Securities Loan Facility, or TALF, and established during the financial crisis, provided low-cost loans from the Federal Reserve to investors buying bonds backed by student, auto and commercial-property loans and other assets. The program, which lasted from March 2009 until June 2010, was aimed at helping banks move loans off their books by repackaging them into bonds and selling them. Funds managed or backed by Magnetar Capital, Tricadia Capital and FrontPoint Partners, which made large profits from the downturn in the U.S. housing market, were among those who obtained loans from the Fed to buy securities during the ensuing credit crisis, according to the Fed data.

NASA Discovers New Life: Arsenic Bacteria With DNA Completely Alien To What We Know – Astrobiology research funded by NASA has made a tremendous new discovery which could "fundamentally change the knowledge about what comprises all known life on Earth," according to NASA. (Scroll down for live video and updates.) The major finding announced today has fueled speculation recently that reached a fever pitch after the agency said the finding "will impact the search for evidence of extraterrestrial life." While the discovery is not extraterrestrial life, NASA has indeed uncovered an entirely new life form on our planet that "doesn’t share the biological building blocks of anything currently living" on Earth, The New York Daily News reports. In a bombshell that upends long-held assumptions about the basic building blocks of life, scientists have discovered a a whole new type of creature: a microbe that lives on arsenic. It is unlike every other lifeform on the planet – from the simplest plant to the most complex mammal.

No Representation Without Taxation! – Erskine Bowles, co chair with Alan Simpson of the president’s fiscal commission, has announced with stupefying self-satisfaction that whatever the legislative outcome, "We’ve won big: The era of deficit denial in Washington is over." Enjoying the victory, Republican leaders Mitch McConnell and John Kyl have written to Majority Leader Harry Reid saying they will permit no business to proceed in the Senate unless the Bush tax breaks for the rich are extended.  Deficit denial may be over, but tax denial is reaching warp speed. Bowles and Simpson address the deficit first of all by proposing more tax cuts. America’s deficit crisis has been presented as a puzzle that can be solved only through zero-sum spending cuts. Can’t do a thing with revenues, that would require taxation. Yet, truth is, the deficit crisis and the Social Security crisis and the Medicare crisis and the jobs crisis and the stimulus crisis can all be solved without cutting a single dollar from the budget: Just (don’t gag when you say it)… R… R… RAISE TAXES!

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