11/6/09
Obama Says Administration Pursuing More Jobs
President Barack Obama said his administration will continue to pursue measures that will stimulate job growth after the Labor Department reported the nation’s unemployment rate jumped to 10.2 percent last month.
The president made his remarks after signing into law a measure extending an $8,000 tax credit for first-time homebuyers and benefits for unemployed workers. It also provides tax refunds to money-losing companies. His spokesman said the administration expects the jobless rate will continue to rise before coming down again.
“My economic team is looking at ideas such as additional investments in our aging roads and bridges, incentives to encourage families and businesses to make buildings more energy efficient,” additional tax cuts, and more steps to ease the flow of credit to small business and promote exports, he said.
Employers have shed 7.3 million jobs since the recession began in December 2007, 3.5 million of those since Obama took office in January. Obama called the October jobs report “a sobering number that underscores the challenge that lies ahead.”
White House press secretary Robert Gibbs said at a later briefing that the administration expects the unemployment rate will get “a little worse before it gets better.”
Political Peril
The jobless rate carries political peril for Obama if the figure remains high in the months preceding the mid-term congressional elections a year from now.
The economy was listed as the most important issue facing the country by 47 percent of the American public in a CNN poll conducted Oct. 30 to Nov. 1, surpassing health care and the wars in Iraq and Afghanistan.
“Although it will take time and will take patience, I’m confident that our economy will recover,” Obama said.
The legislation Obama signed will funnel an estimated $45 billion into the economy this year. It is the first major expansion of provisions in February’s $787 billion economic stimulus package. The bill would extend until April 30 the tax credit for first-time homebuyers that would otherwise expire at the end of this month.
The jobless would get as many as 20 additional weeks of unemployment assistance. Companies would be given expanded ability to apply losses to previous years’ income, allowing them to qualify this year for $33 billion in tax refunds, according to Congress’s Joint Committee on Taxation.
The 10.2 percent jobless rate in October is a 26-year high, up from 9.8 percent in September. The Labor Department said employers cut 190,000 jobs last month, more than the 175,000 expected by economists in a Bloomberg News survey. The jobless rate exceeded 10 percent for the first time since 1983.
- Via Bloomberg
The president made his remarks after signing into law a measure extending an $8,000 tax credit for first-time homebuyers and benefits for unemployed workers. It also provides tax refunds to money-losing companies. His spokesman said the administration expects the jobless rate will continue to rise before coming down again.
“My economic team is looking at ideas such as additional investments in our aging roads and bridges, incentives to encourage families and businesses to make buildings more energy efficient,” additional tax cuts, and more steps to ease the flow of credit to small business and promote exports, he said.
Employers have shed 7.3 million jobs since the recession began in December 2007, 3.5 million of those since Obama took office in January. Obama called the October jobs report “a sobering number that underscores the challenge that lies ahead.”
White House press secretary Robert Gibbs said at a later briefing that the administration expects the unemployment rate will get “a little worse before it gets better.”
Political Peril
The jobless rate carries political peril for Obama if the figure remains high in the months preceding the mid-term congressional elections a year from now.
The economy was listed as the most important issue facing the country by 47 percent of the American public in a CNN poll conducted Oct. 30 to Nov. 1, surpassing health care and the wars in Iraq and Afghanistan.
“Although it will take time and will take patience, I’m confident that our economy will recover,” Obama said.
The legislation Obama signed will funnel an estimated $45 billion into the economy this year. It is the first major expansion of provisions in February’s $787 billion economic stimulus package. The bill would extend until April 30 the tax credit for first-time homebuyers that would otherwise expire at the end of this month.
The jobless would get as many as 20 additional weeks of unemployment assistance. Companies would be given expanded ability to apply losses to previous years’ income, allowing them to qualify this year for $33 billion in tax refunds, according to Congress’s Joint Committee on Taxation.
The 10.2 percent jobless rate in October is a 26-year high, up from 9.8 percent in September. The Labor Department said employers cut 190,000 jobs last month, more than the 175,000 expected by economists in a Bloomberg News survey. The jobless rate exceeded 10 percent for the first time since 1983.
- Via Bloomberg
U.S. Economy: Unemployment Jumps to 10.2%, Payrolls Decline
The unemployment rate in the U.S. jumped to 10.2 percent in October, the highest level since 1983, casting a pall over the prospects for a sustained recovery and risking further erosion of President Barack Obama’s popularity.
Payrolls fell by 190,000 last month, more than forecast by economists, a Labor Department report showed today in Washington. The jobless rate rose from 9.8 percent in September. Factory payrolls dropped by the most in four months, and the average workweek held at a record low.
Treasury two-year notes rose on bets the Federal Reserve is more likely to maintain its pledge to keep interest rates near zero. The figures prompted Obama, who signed a bill today extending jobless benefits, to promise fresh measures to help put some of the 15.7 million unemployed Americans back to work.
“We will certainly have very bad payroll numbers in November and December,” said Harm Bandholz, an economist at UniCredit Global Research in New York, whose forecast for a 10.1 percent unemployment rate matched the highest among economists surveyed by Bloomberg. “We don’t foresee businesses going on a hiring spree anytime soon.”
Two-year note yields fell three basis points, or 0.03 percentage point, to 0.85 percent at 1:16 p.m. in New York. The yield touched 0.83 percent, the lowest since Oct. 2. The Standard & Poor’s 500 Stock Index was little changed after falling as much as 0.7 percent.
Payrolls were forecast to drop 175,000 after an initially reported 263,000 decline for September, according to the median estimate of 84 economists surveyed by Bloomberg News. The jobless rate was projected to rise to 9.9 percent.
Homebuyer Tax Credit
Obama signed into law a measure extending a tax credit of up to $8,000 for homebuyers and benefits for unemployed workers, and he promised to pursue further measures to create jobs.
“My economic team is looking at ideas such as additional investments in our aging roads and bridges, incentives to encourage families and business to make buildings more energy efficient,” additional tax cuts, and more steps to ease the flow of credit to small business and promote exports, he said today at the White House.
For congressional Democrats facing challengers in midterm elections next year, the continuing erosion in the job market puts them at political risk. Voters on Nov. 3 overwhelmingly cited unease with the economy and worries about jobs as they ousted the Democratic governor of New Jersey and installed a Republican governor in Virginia after eight years of Democratic rule there. Obama carried both states in 2008.
Jobs Lost
The U.S. economy has lost 7.3 million jobs since the recession began in December 2007, when the unemployment rate stood at 4.9 percent. Since Obama took office in January, the economy has lost 3.49 million jobs.
The administration said last week that the $787 billion stimulus package plan signed into law in February was directly responsible for saving or creating about 640,000 jobs.
The so-called underemployment rate -- which includes part- time workers who’d prefer a full-time position and people who want work but have given up looking -- reached a record 17.5 percent from 17 percent in September, today’s report showed.
“We’ve got lots of people just giving up and leaving the labor force,” said Julia Coronado, a former Fed economist who now works at BNP Paribas in New York. “Consumer incomes are under pressure, and that raises questions about the sustainability of the improvement we’ve seen in consumer spending.”
Average Work Week
The average work week held at a record low of 33 hours in October, while average weekly earnings rose to $617.76 from $616.11 a month earlier. Workers’ average hourly earnings were 2.4 percent higher than October 2008, the smallest gain since 2004.
Some companies are cutting payrolls amid concern spending will cool as government-assistance programs wane. The New Brunswick, New Jersey-based Johnson & Johnson, the world’s largest health-products company, said Nov. 3 it will shrink its workforce by as much as 7,000 workers.
Factory payrolls dropped 61,000 after decreasing 45,000 in the prior month, today’s report showed. The median forecast by economists called for a drop of 42,000. The decline included a gain of 4,600 jobs in auto manufacturing and parts industries.
Auto Sales
Sales of cars and light trucks rebounded last month after plunging in the wake of the government’s so-called cash-for- clunkers incentive plan. Vehicles sold at a 10.5 million annual pace in October, up from a 9.2 million rate in September.
Inventories at U.S. wholesalers dropped in September for a 13th consecutive month, a separate report today from the Commerce Department showed, clearing the way for a pickup in orders as sales improve.
Today’s report contained some bright spots. Revisions added 91,000 to payroll figures previously reported for September and August, and the number of temporary workers rose by 34,000, the third consecutive gain.
Payrolls at temporary-help agencies often turn up before total employment because companies are not certain increases in demand will be sustainable enough to warrant the expense of taking on permanent staff.
Builders cut payrolls by 62,000 after a loss of 68,000 in September. Financial firms cut payrolls by 8,000, after 9,000 reductions the prior month.
Banks, Restaurants
Service industries, which include banks, insurance companies, restaurants and retailers, subtracted 61,000 workers after cuts of 105,000 the prior month. Retail payrolls decreased by 39,800 after a decline of 44,200.
“The rise in the unemployment rate is very ugly,” Ethan Harris, head of North America economic research at BofA Merrill Lynch Global Research, said in an interview with Bloomberg Television in New York. “This is a big backward step to get this high of an unemployment number this early in the recovery.”
The U.S. economy expanded last quarter for the first time in a year, growing at a 3.5 percent pace as government incentives spurred consumers to spend more on homes and automobiles.
Some companies are gaining confidence. Deere & Co., the world’s largest maker of agricultural equipment, said last week it’s recalling 452 workers, the majority of manufacturing employees dismissed earlier this year at a factory in Iowa.
Fed officials met in Washington this week and signaled that a return to economic growth alone won’t result in higher interest rates. Economist Joseph LaVorgna of Deutsche Bank Securities Inc. in New York said in a note to clients that the jobless rate is “the dominant variable driving changes in the fed funds” rate, and the central bank “has never raised rates with unemployment rising.”
- Via Bloomberg
Payrolls fell by 190,000 last month, more than forecast by economists, a Labor Department report showed today in Washington. The jobless rate rose from 9.8 percent in September. Factory payrolls dropped by the most in four months, and the average workweek held at a record low.
Treasury two-year notes rose on bets the Federal Reserve is more likely to maintain its pledge to keep interest rates near zero. The figures prompted Obama, who signed a bill today extending jobless benefits, to promise fresh measures to help put some of the 15.7 million unemployed Americans back to work.
“We will certainly have very bad payroll numbers in November and December,” said Harm Bandholz, an economist at UniCredit Global Research in New York, whose forecast for a 10.1 percent unemployment rate matched the highest among economists surveyed by Bloomberg. “We don’t foresee businesses going on a hiring spree anytime soon.”
Two-year note yields fell three basis points, or 0.03 percentage point, to 0.85 percent at 1:16 p.m. in New York. The yield touched 0.83 percent, the lowest since Oct. 2. The Standard & Poor’s 500 Stock Index was little changed after falling as much as 0.7 percent.
Payrolls were forecast to drop 175,000 after an initially reported 263,000 decline for September, according to the median estimate of 84 economists surveyed by Bloomberg News. The jobless rate was projected to rise to 9.9 percent.
Homebuyer Tax Credit
Obama signed into law a measure extending a tax credit of up to $8,000 for homebuyers and benefits for unemployed workers, and he promised to pursue further measures to create jobs.
“My economic team is looking at ideas such as additional investments in our aging roads and bridges, incentives to encourage families and business to make buildings more energy efficient,” additional tax cuts, and more steps to ease the flow of credit to small business and promote exports, he said today at the White House.
For congressional Democrats facing challengers in midterm elections next year, the continuing erosion in the job market puts them at political risk. Voters on Nov. 3 overwhelmingly cited unease with the economy and worries about jobs as they ousted the Democratic governor of New Jersey and installed a Republican governor in Virginia after eight years of Democratic rule there. Obama carried both states in 2008.
Jobs Lost
The U.S. economy has lost 7.3 million jobs since the recession began in December 2007, when the unemployment rate stood at 4.9 percent. Since Obama took office in January, the economy has lost 3.49 million jobs.
The administration said last week that the $787 billion stimulus package plan signed into law in February was directly responsible for saving or creating about 640,000 jobs.
The so-called underemployment rate -- which includes part- time workers who’d prefer a full-time position and people who want work but have given up looking -- reached a record 17.5 percent from 17 percent in September, today’s report showed.
“We’ve got lots of people just giving up and leaving the labor force,” said Julia Coronado, a former Fed economist who now works at BNP Paribas in New York. “Consumer incomes are under pressure, and that raises questions about the sustainability of the improvement we’ve seen in consumer spending.”
Average Work Week
The average work week held at a record low of 33 hours in October, while average weekly earnings rose to $617.76 from $616.11 a month earlier. Workers’ average hourly earnings were 2.4 percent higher than October 2008, the smallest gain since 2004.
Some companies are cutting payrolls amid concern spending will cool as government-assistance programs wane. The New Brunswick, New Jersey-based Johnson & Johnson, the world’s largest health-products company, said Nov. 3 it will shrink its workforce by as much as 7,000 workers.
Factory payrolls dropped 61,000 after decreasing 45,000 in the prior month, today’s report showed. The median forecast by economists called for a drop of 42,000. The decline included a gain of 4,600 jobs in auto manufacturing and parts industries.
Auto Sales
Sales of cars and light trucks rebounded last month after plunging in the wake of the government’s so-called cash-for- clunkers incentive plan. Vehicles sold at a 10.5 million annual pace in October, up from a 9.2 million rate in September.
Inventories at U.S. wholesalers dropped in September for a 13th consecutive month, a separate report today from the Commerce Department showed, clearing the way for a pickup in orders as sales improve.
Today’s report contained some bright spots. Revisions added 91,000 to payroll figures previously reported for September and August, and the number of temporary workers rose by 34,000, the third consecutive gain.
Payrolls at temporary-help agencies often turn up before total employment because companies are not certain increases in demand will be sustainable enough to warrant the expense of taking on permanent staff.
Builders cut payrolls by 62,000 after a loss of 68,000 in September. Financial firms cut payrolls by 8,000, after 9,000 reductions the prior month.
Banks, Restaurants
Service industries, which include banks, insurance companies, restaurants and retailers, subtracted 61,000 workers after cuts of 105,000 the prior month. Retail payrolls decreased by 39,800 after a decline of 44,200.
“The rise in the unemployment rate is very ugly,” Ethan Harris, head of North America economic research at BofA Merrill Lynch Global Research, said in an interview with Bloomberg Television in New York. “This is a big backward step to get this high of an unemployment number this early in the recovery.”
The U.S. economy expanded last quarter for the first time in a year, growing at a 3.5 percent pace as government incentives spurred consumers to spend more on homes and automobiles.
Some companies are gaining confidence. Deere & Co., the world’s largest maker of agricultural equipment, said last week it’s recalling 452 workers, the majority of manufacturing employees dismissed earlier this year at a factory in Iowa.
Fed officials met in Washington this week and signaled that a return to economic growth alone won’t result in higher interest rates. Economist Joseph LaVorgna of Deutsche Bank Securities Inc. in New York said in a note to clients that the jobless rate is “the dominant variable driving changes in the fed funds” rate, and the central bank “has never raised rates with unemployment rising.”
- Via Bloomberg
11/2/09
Sheila Bair: All Bark, No Bite
Sheila is apparently upset at the banks "pushing back" against reform:
Alternatively, just read a few Tickers.
- Via Market Ticker
Sheila Bair, chairman of the Federal Deposit Insurance Corp, said on Monday that some in the financial services sector are trying to argue that regulatory reform would stifle innovation and impede economic growth.
"That makes me angry," Bair said in a text of remarks prepared for a lecture at Kansas State University.
It does? You're not showing it.
How hard is this Sheila? You have the authority, along with the OTS and OCC, to walk into any bank in the United States with your examiners, look at every asset they hold, compare it against your standards of a "reasonable" mark and take action if you find that the bank could not be liquidated "at or above par."
You not only can do this but Prompt Corrective Action, US Code Title 12, Chap 16, Section 1831o mandates that you do, as that law is liberally peppered with "SHALL"s and has precious few "MAY"s.
Sheila is being gamed because the FDIC has shown over the last two years that whenever the banking industry say "Bark" the response from Sheila is "YIP!" Indeed, when I looked up "lapdog" in an online dictionary I got the following back:
lap*dog
Function: noun
Date: 1645
a small dog that may be held in the lap
a servile dependent or follower
Sheila Bair
Oops, did I make that last one up? Well....
There is already plenty of law on the books to cover what's been going on here, especially when it comes to banking regulation.
The examiners can have their mandate set by Sheila, along with the OTS and OCC. Their job, after all, is to determine what the odds are of loss to the deposit fund and whether a bank is safe and sound (for depositors), not whether the numbers will look good for Wall Street's quarterly parade.
Yes, I'm sure the banks would grouse if the examiners were to show up and demand that banks hold capital against the underwater portion of Home Equity loans, subprime CDOs and similar garbage. They'd also squeal if the examiners decided that any loan that was 60+ had to be reserved against at recovery value.
So what? The response ought from them to be "Talk to the hand."
Those banks that don't like these rules don't have to take FDIC insurance! They can run without it if they're so "safe" - let's see how many depositors they retain without it.
If Sheila doesn't like being the hard-nosed enforcer of capital adequacy and marking assets at recovery value as soon as loans fail to be paid on time then she should resign and cede the office to someone who has no problem getting on the phone - or showing up in person - and raising hell.
I'll volunteer, and suggest that anyone wondering if I have the "sack" for the job should find Mory Ejebat (formerly of Ascend) and mention my name.
Bring a tape recorder and post the result on YouTube.
- Via Market Ticker
U.S. FDIC's Bair angered by banks fighting reforms
A top U.S. bank regulator struck out against the portions of the financial industry that are fighting reforms, saying they are using fear tactics.
Sheila Bair, chairman of the Federal Deposit Insurance Corp, said on Monday that some in the financial services sector are trying to argue that regulatory reform would stifle innovation and impede economic growth.
"That makes me angry," Bair said in a text of remarks prepared for a lecture at Kansas State University.
Bair said the extreme market interventions that have occurred during the recent financial crisis have been difficult for her as a life-long Republican and market advocate.
But she said they were necessary and that government needs even more tools to discourage financial firms from getting so large that taxpayers are forced to provide assistance if the firms become unstable.
"The government has been going into places where we don't want to be," Bair said, but she added: "We simply cannot afford to maintain the status quo."
Lawmakers are hammering out a major piece of legislation that would tackle fears that a few elite financial giants are "too big to fail."
The legislation would grant vast powers to a new systemic risk regulatory council, the Federal Reserve and the FDIC to monitor and address risks to economic stability posed by shaky financial holding companies.
It would also create a new consumer agency to police financial products -- a change that is desperately needed to protect the public, Bair said.
"Given the importance of the consumer to our overall economy, it is amazing to me that we haven't done a better job in protecting them," she said.
- Via Reuters
Sheila Bair, chairman of the Federal Deposit Insurance Corp, said on Monday that some in the financial services sector are trying to argue that regulatory reform would stifle innovation and impede economic growth.
"That makes me angry," Bair said in a text of remarks prepared for a lecture at Kansas State University.
Bair said the extreme market interventions that have occurred during the recent financial crisis have been difficult for her as a life-long Republican and market advocate.
But she said they were necessary and that government needs even more tools to discourage financial firms from getting so large that taxpayers are forced to provide assistance if the firms become unstable.
"The government has been going into places where we don't want to be," Bair said, but she added: "We simply cannot afford to maintain the status quo."
Lawmakers are hammering out a major piece of legislation that would tackle fears that a few elite financial giants are "too big to fail."
The legislation would grant vast powers to a new systemic risk regulatory council, the Federal Reserve and the FDIC to monitor and address risks to economic stability posed by shaky financial holding companies.
It would also create a new consumer agency to police financial products -- a change that is desperately needed to protect the public, Bair said.
"Given the importance of the consumer to our overall economy, it is amazing to me that we haven't done a better job in protecting them," she said.
- Via Reuters
Food Stamps Will Feed Half Of US Kids, Study Says
Nearly half of all U.S. children and 90 percent of black youngsters will be on food stamps at some point during childhood, and fallout from the current recession could push those numbers even higher, researchers say.
The estimate comes from an analysis of 30 years of national data, and it bolsters other recent evidence on the pervasiveness of youngsters at economic risk. It suggests that almost everyone knows a family who has received food stamps, or will in the future, said lead author Mark Rank, a sociologist at Washington University in St. Louis.
"Your neighbor may be using some of these programs but it's not the kind of thing people want to talk about," Rank said.
The analysis was released Monday in the November issue of Archives of Pediatrics and Adolescent Medicine. The authors say it's a medical issue pediatricians need to be aware of because children on food stamps are at risk for malnutrition and other ills linked with poverty.
"This is a real danger sign that we as a society need to do a lot more to protect children," Rank said.
Food stamps are a Department of Agriculture program for low-income individuals and families, covering most foods although not prepared hot foods or alcohol. For a family of four to be eligible, their annual take-home pay can't exceed about $22,000.
According to a USDA report released last month, 28.4 million Americans received food stamps in an average month in 2008, and about half were younger than age 18. The average monthly benefit per household totaled $222.
Rank and Cornell University sociologist Thomas Hirschl studied data from a nationally representative survey of 4,800 American households interviewed annually from 1968 through 1997 by the University of Michigan. About 18,000 adults and children were involved.
Overall, about 49 percent of all children were on food stamps at some point by the age of 20, the analysis found. That includes 90 percent of black children and 37 percent of whites. The analysis didn't include other ethnic groups.
The time span included typical economic ups and downs, including the early 1980s recession. That means similar portions of children now and in the future will live in families receiving food stamps, although ongoing economic turmoil may increase the numbers, Rank said.
An editorial in the medical journal agreed.
"The current recession is likely to generate for children in the United States the greatest level of material deprivation that we will see in our professional lifetimes," Stanford pediatrician Dr. Paul Wise wrote.
Wise said the Archives study estimate is believable.
"I find it terribly sad, but not surprising," Wise said.
James Weill, president of Food Research and Action Center, a Washington-based advocacy group, said the analysis underscores that "there are just very large numbers of people who rely on this program for a month, six months, a year."
"What I hope comes out of this study is an understanding that food stamp beneficiaries aren't them – they're us," Weill said.
The analysis is in line with other recent research suggesting that more than 40 percent of U.S. children will live in poverty or near-poverty by age 17; and that half will live at some point in a single-parent family. Also, other researchers have estimated that slightly more than half of adults will use food stamps at some point by age 65.
- Via Huffington Post
The estimate comes from an analysis of 30 years of national data, and it bolsters other recent evidence on the pervasiveness of youngsters at economic risk. It suggests that almost everyone knows a family who has received food stamps, or will in the future, said lead author Mark Rank, a sociologist at Washington University in St. Louis.
"Your neighbor may be using some of these programs but it's not the kind of thing people want to talk about," Rank said.
The analysis was released Monday in the November issue of Archives of Pediatrics and Adolescent Medicine. The authors say it's a medical issue pediatricians need to be aware of because children on food stamps are at risk for malnutrition and other ills linked with poverty.
"This is a real danger sign that we as a society need to do a lot more to protect children," Rank said.
Food stamps are a Department of Agriculture program for low-income individuals and families, covering most foods although not prepared hot foods or alcohol. For a family of four to be eligible, their annual take-home pay can't exceed about $22,000.
According to a USDA report released last month, 28.4 million Americans received food stamps in an average month in 2008, and about half were younger than age 18. The average monthly benefit per household totaled $222.
Rank and Cornell University sociologist Thomas Hirschl studied data from a nationally representative survey of 4,800 American households interviewed annually from 1968 through 1997 by the University of Michigan. About 18,000 adults and children were involved.
Overall, about 49 percent of all children were on food stamps at some point by the age of 20, the analysis found. That includes 90 percent of black children and 37 percent of whites. The analysis didn't include other ethnic groups.
The time span included typical economic ups and downs, including the early 1980s recession. That means similar portions of children now and in the future will live in families receiving food stamps, although ongoing economic turmoil may increase the numbers, Rank said.
An editorial in the medical journal agreed.
"The current recession is likely to generate for children in the United States the greatest level of material deprivation that we will see in our professional lifetimes," Stanford pediatrician Dr. Paul Wise wrote.
Wise said the Archives study estimate is believable.
"I find it terribly sad, but not surprising," Wise said.
James Weill, president of Food Research and Action Center, a Washington-based advocacy group, said the analysis underscores that "there are just very large numbers of people who rely on this program for a month, six months, a year."
"What I hope comes out of this study is an understanding that food stamp beneficiaries aren't them – they're us," Weill said.
The analysis is in line with other recent research suggesting that more than 40 percent of U.S. children will live in poverty or near-poverty by age 17; and that half will live at some point in a single-parent family. Also, other researchers have estimated that slightly more than half of adults will use food stamps at some point by age 65.
- Via Huffington Post
Ultrasecret NSA Has Conspicuous Role in New Federal Cybersecurity Center
Congress and civil libertarians have always been twitchy about involving the ultrasecretive National Security Agency—masters of electronic spying—more deeply in domestic security matters. Revelations that George W. Bush authorized the NSA (Motto: Never Say Anything) in the wake of 9/11 to expand warrantless electronic eavesdropping on Americans caused heartburn for both intelligence officials and private industry. Dragged into the controversy were phone companies and Internet service providers who took part in the program, although Congress later passed legislation that both tweaked and largely ratified Bush administration practices. (Congress gave retroactive immunity from civil lawsuits to private firms that collaborated.)
If anything, the Obama administration, citing the threats of computer hacking and cyberterrorism, is now moving to involve the NSA more deeply in domestic security issues. The growing role of the NSA—a Defense Department agency with thousands of military personnel—in domestic matters was on semi-public display on Friday. Homeland Security Secretary Janet Napolitano visited a nondescript office complex in Arlington, Va., for the formal opening of a new high-tech command post called the National Cybersecurity and Communications Integration Center (NCCIC, pronounced "en-kick"). The facility is officially described as “a 24-hour, DHS-led coordinated watch and warning center that will improve national efforts to address threats and incidents affecting the nation’s critical information technology and cyber infrastructure.” The NSA’s official seal was displayed prominently on a big-screen graphic listing the center’s participants. The NSA’s director, Army Lt. Gen. Keith Alexander, was among the dignitaries standing at Napolitano’s side as she formally cut a ribbon inaugurating the facility, which, without its spooky graphics and tight security cordon, would look like a large newsroom or trading floor equipped with rows of computer workstations.
In keeping with the NSA’s character, Alexander wasn’t exactly bubbling with good cheer when Declassified asked him what his agency’s role would be in operating the cybersecurity command post. “We support DHS [Homeland Security] like everybody else,” is all the general would say. In introductory remarks, officials noted that Alexander has also been tapped by the Pentagon to head U.S. Cyber Command, a new military organization to be based alongside the NSA at Fort Meade, Md., that is intended to consolidate and improve cybersecurity and, presumably, cyberwarfare capabilities. Other officials were vague when asked for more details on the NSA’s role in NCCIC, whose principal mission, according to Homeland Security officials, will be to monitor and assure the security and safety of civilian-government computer networks and to provide early warning to private businesses about cyber-attack threats. As NEWSWEEK reported earlier this year, some cybersecurity experts have long argued that because the NSA traditionally has had the most formidable computer hardware and related brainpower of any agency in the government, it is essential that it become more deeply involved in protecting both domestic government computer networks and the privately run grids that now help run virtually every aspect of American daily life, including this blog.
Amy Kudwa, a Homeland Security Department spokeswoman, said that while NSA does provide "technical expertise" to DHS in connection with its cyber-security responsibilities, details of this assistance are classified. She said that although Alexander was present for the opening of the NCCIC, it was her information that the spy agency would not have representatives seated in the command center on a daily basis. She said that private sector companies eventually will be invited to assign personnel to work in the command center.
- Via Newsweek
If anything, the Obama administration, citing the threats of computer hacking and cyberterrorism, is now moving to involve the NSA more deeply in domestic security issues. The growing role of the NSA—a Defense Department agency with thousands of military personnel—in domestic matters was on semi-public display on Friday. Homeland Security Secretary Janet Napolitano visited a nondescript office complex in Arlington, Va., for the formal opening of a new high-tech command post called the National Cybersecurity and Communications Integration Center (NCCIC, pronounced "en-kick"). The facility is officially described as “a 24-hour, DHS-led coordinated watch and warning center that will improve national efforts to address threats and incidents affecting the nation’s critical information technology and cyber infrastructure.” The NSA’s official seal was displayed prominently on a big-screen graphic listing the center’s participants. The NSA’s director, Army Lt. Gen. Keith Alexander, was among the dignitaries standing at Napolitano’s side as she formally cut a ribbon inaugurating the facility, which, without its spooky graphics and tight security cordon, would look like a large newsroom or trading floor equipped with rows of computer workstations.
In keeping with the NSA’s character, Alexander wasn’t exactly bubbling with good cheer when Declassified asked him what his agency’s role would be in operating the cybersecurity command post. “We support DHS [Homeland Security] like everybody else,” is all the general would say. In introductory remarks, officials noted that Alexander has also been tapped by the Pentagon to head U.S. Cyber Command, a new military organization to be based alongside the NSA at Fort Meade, Md., that is intended to consolidate and improve cybersecurity and, presumably, cyberwarfare capabilities. Other officials were vague when asked for more details on the NSA’s role in NCCIC, whose principal mission, according to Homeland Security officials, will be to monitor and assure the security and safety of civilian-government computer networks and to provide early warning to private businesses about cyber-attack threats. As NEWSWEEK reported earlier this year, some cybersecurity experts have long argued that because the NSA traditionally has had the most formidable computer hardware and related brainpower of any agency in the government, it is essential that it become more deeply involved in protecting both domestic government computer networks and the privately run grids that now help run virtually every aspect of American daily life, including this blog.
Amy Kudwa, a Homeland Security Department spokeswoman, said that while NSA does provide "technical expertise" to DHS in connection with its cyber-security responsibilities, details of this assistance are classified. She said that although Alexander was present for the opening of the NCCIC, it was her information that the spy agency would not have representatives seated in the command center on a daily basis. She said that private sector companies eventually will be invited to assign personnel to work in the command center.
- Via Newsweek
Schwarzenegger Budget Director to Step Down as Deficits Loom
California Governor Arnold Schwarzenegger’s finance director plans to step down after four years of crafting budget proposals for a state that has been battered by the U.S. recession.
Mike Genest, Schwarzenegger’s longest-serving finance director, will leave whenever a replacement is found, said H.D. Palmer, a spokesman for the finance director. Genest, 62, told Schwarzenegger a month ago that he was considering leaving and expected to do so before the end of the year, Palmer said.
The departure comes as Schwarzenegger, a Republican who can’t seek re-election because of term limits, girds for his last political struggle over the state’s $85 billion budget. As tax revenue continues to slide, California is expected to have a deficit of at least $7 billion for the year that begins in July, according to Treasurer Bill Lockyer. Legislators eliminated $60 billion in budget deficits for 2009 and 2010.
“Mike Genest’s tenure has been one of the most challenging fiscal times in modern California history,” Palmer said. “He has served the governor, the public and the Legislature extremely well.”
Genest’s planned departure was reported by the Los Angeles Times.
- Via Bloomberg
Mike Genest, Schwarzenegger’s longest-serving finance director, will leave whenever a replacement is found, said H.D. Palmer, a spokesman for the finance director. Genest, 62, told Schwarzenegger a month ago that he was considering leaving and expected to do so before the end of the year, Palmer said.
The departure comes as Schwarzenegger, a Republican who can’t seek re-election because of term limits, girds for his last political struggle over the state’s $85 billion budget. As tax revenue continues to slide, California is expected to have a deficit of at least $7 billion for the year that begins in July, according to Treasurer Bill Lockyer. Legislators eliminated $60 billion in budget deficits for 2009 and 2010.
“Mike Genest’s tenure has been one of the most challenging fiscal times in modern California history,” Palmer said. “He has served the governor, the public and the Legislature extremely well.”
Genest’s planned departure was reported by the Los Angeles Times.
- Via Bloomberg
California to withhold a bigger chunk of paychecks. Try 10% bigger!
Starting Sunday, cash-strapped California will dig deeper into the pocketbooks of wage earners -- holding back 10% more than it already does in state income taxes just as the biggest shopping season of the year kicks into gear.
Technically, it's not a tax increase, even though it may feel like one when your next paycheck arrives. As part of a bundle of budget patches adopted in the summer, the state is taking more money now in withholding, even though workers' annual tax bills won't change.
Think of it as a forced, interest-free loan: You'll be repaid any extra withholding in April. Those who would receive a refund anyway will receive a larger one, and those who owe taxes will owe less.
But with rising gas costs, depressed home prices and double-digit unemployment, the state's added reach into residents' regular paycheck isn't sitting well with many.
"The state's suddenly slapping people upside the head," said Mack Reed, 50, of Silver Lake. "It's appalling how brash that is."
Brittney McKaig, 23, of Santa Ana said she expects the additional withholding to affect her holiday spending.
"Coming into the holidays, we're getting squeezed anyway," she said. "We're not getting Christmas bonuses and other perks we used to get. So it all falls back on spending. The $40 gift will become a $20 gift."
The extra withholding may seem like a small amount siphoned from each paycheck, but it adds up to a $1.7-billion fix for California's deficit-riddled books.
From a single taxpayer earning $51,000 a year with no dependents, the state will be grabbing an extra $17.59 each month, according to state tax officials. A married person earning $90,000 with two dependents would receive $24.87 less in monthly pay.
California will probably continue to collect the tax at a higher rate for many years -- or find an additional $1.7 billion to slice from a future budget, an unlikely occurrence. All workers who have state taxes withheld will see their paychecks shrink.
"Many families are sitting at their kitchen table wondering how they're going to make ends meet," said state Sen. Tony Strickland (R-Thousand Oaks). "At the same time, the state of California is taking a no-interest loan."
The provision is one of numerous maneuvers state lawmakers and Gov. Arnold Schwarzenegger approved in the summer to paper over the state's deficit. Many of the changes, including the extra withholding, were little noticed outside of Sacramento.
Savvy taxpayers can get around the state's maneuver by increasing the number of personal withholding allowances they claim on their employer tax forms, said Brenda Voet, a spokeswoman for the state's Franchise Tax Board.
"People can get out of this," she said, noting that most people would have to change their allowances through their employers. California's budget leaders are banking on the hope that most won't.
The increase is coming at a bad time for store owners, many of whom depend on the holiday shopping season to keep their businesses alive.
"I don't think there's any question it's going to impact consumers' spending," said Bill Dombrowski, president of the California Retailers Assn. "Any time you reduce people's disposable income, there's going to be a negative effect on the retail sector."
But Stephen Levy, director of the Center for Continuing Study of the California Economy, wasn't so sure.
"It's having a relatively small impact on people's income," Levy said, pointing out that many families will receive only $12 to $40 less each month.
Yet Erika Wendt, 28, of San Diego said she already lived on a tight budget: She rides her bike to work, for instance, to save on gasoline and parking costs.
"I am frustrated as this directly impacts my weekly budget -- what groceries I buy, how much I drive and can spend on gas," she said. "Now money will just be tighter, and I'm not sure where else I can cut back."
The extra withholding comes in addition to tax hikes the state enacted this year.
In February, state income tax rates were bumped up 0.25 of a percentage point for every tax bracket. The dependent credit was slashed by two-thirds. The state sales tax rate rose 1 percentage point. The vehicle license fee nearly doubled to 1.15% of a car's value.
Lawmakers and the governor also approved deep cuts to schools, social services and prisons to fend off one of the steepest revenue losses in California history.
Temporary budget bandages, such as the increase in withholding, were included at several points this year to avoid higher taxes and deeper cuts, said H.D. Palmer, a spokesman for the state Department of Finance.
Sacramento, meanwhile, is awash in red ink again. The state controller recently said revenue in the budget year already had fallen more than $1 billion short of assumptions. Outsize deficits are projected for years to come.
Such temporary measures as the withholding tax increase don't really fix the budget gap, "they just more or less hid it," said Christopher Thornberg, a principal with Beacon Economics in Los Angeles. "I call it a fraud."
- Via LA TIMES
Technically, it's not a tax increase, even though it may feel like one when your next paycheck arrives. As part of a bundle of budget patches adopted in the summer, the state is taking more money now in withholding, even though workers' annual tax bills won't change.
Think of it as a forced, interest-free loan: You'll be repaid any extra withholding in April. Those who would receive a refund anyway will receive a larger one, and those who owe taxes will owe less.
But with rising gas costs, depressed home prices and double-digit unemployment, the state's added reach into residents' regular paycheck isn't sitting well with many.
"The state's suddenly slapping people upside the head," said Mack Reed, 50, of Silver Lake. "It's appalling how brash that is."
Brittney McKaig, 23, of Santa Ana said she expects the additional withholding to affect her holiday spending.
"Coming into the holidays, we're getting squeezed anyway," she said. "We're not getting Christmas bonuses and other perks we used to get. So it all falls back on spending. The $40 gift will become a $20 gift."
The extra withholding may seem like a small amount siphoned from each paycheck, but it adds up to a $1.7-billion fix for California's deficit-riddled books.
From a single taxpayer earning $51,000 a year with no dependents, the state will be grabbing an extra $17.59 each month, according to state tax officials. A married person earning $90,000 with two dependents would receive $24.87 less in monthly pay.
California will probably continue to collect the tax at a higher rate for many years -- or find an additional $1.7 billion to slice from a future budget, an unlikely occurrence. All workers who have state taxes withheld will see their paychecks shrink.
"Many families are sitting at their kitchen table wondering how they're going to make ends meet," said state Sen. Tony Strickland (R-Thousand Oaks). "At the same time, the state of California is taking a no-interest loan."
The provision is one of numerous maneuvers state lawmakers and Gov. Arnold Schwarzenegger approved in the summer to paper over the state's deficit. Many of the changes, including the extra withholding, were little noticed outside of Sacramento.
Savvy taxpayers can get around the state's maneuver by increasing the number of personal withholding allowances they claim on their employer tax forms, said Brenda Voet, a spokeswoman for the state's Franchise Tax Board.
"People can get out of this," she said, noting that most people would have to change their allowances through their employers. California's budget leaders are banking on the hope that most won't.
The increase is coming at a bad time for store owners, many of whom depend on the holiday shopping season to keep their businesses alive.
"I don't think there's any question it's going to impact consumers' spending," said Bill Dombrowski, president of the California Retailers Assn. "Any time you reduce people's disposable income, there's going to be a negative effect on the retail sector."
But Stephen Levy, director of the Center for Continuing Study of the California Economy, wasn't so sure.
"It's having a relatively small impact on people's income," Levy said, pointing out that many families will receive only $12 to $40 less each month.
Yet Erika Wendt, 28, of San Diego said she already lived on a tight budget: She rides her bike to work, for instance, to save on gasoline and parking costs.
"I am frustrated as this directly impacts my weekly budget -- what groceries I buy, how much I drive and can spend on gas," she said. "Now money will just be tighter, and I'm not sure where else I can cut back."
The extra withholding comes in addition to tax hikes the state enacted this year.
In February, state income tax rates were bumped up 0.25 of a percentage point for every tax bracket. The dependent credit was slashed by two-thirds. The state sales tax rate rose 1 percentage point. The vehicle license fee nearly doubled to 1.15% of a car's value.
Lawmakers and the governor also approved deep cuts to schools, social services and prisons to fend off one of the steepest revenue losses in California history.
Temporary budget bandages, such as the increase in withholding, were included at several points this year to avoid higher taxes and deeper cuts, said H.D. Palmer, a spokesman for the state Department of Finance.
Sacramento, meanwhile, is awash in red ink again. The state controller recently said revenue in the budget year already had fallen more than $1 billion short of assumptions. Outsize deficits are projected for years to come.
Such temporary measures as the withholding tax increase don't really fix the budget gap, "they just more or less hid it," said Christopher Thornberg, a principal with Beacon Economics in Los Angeles. "I call it a fraud."
- Via LA TIMES
Delaware beats Switzerland as most secretive financial center
Move over Switzerland. The tiny state of Delaware beats the Alpine country in a contest for the most secretive financial jurisdiction, a tax justice rights group said on Saturday.
The United States, led by the eastern seaboard state, took in $2.6 trillion in deposits from non-resident corporations and individuals in 2007, according to a survey of financial jurisdictions analyzed by the Tax Justice Network.
The survey of laws, practices and size of inflows in 60 jurisdictions found Delaware coming in first, followed by Luxembourg and then Switzerland. The Cayman Islands and the United Kingdom round out the top five.
"While the U.S. has been jumping up and down and saying 'Aha, bad, wicked Swiss banks,' the U.S. is doing exactly the same things as far as non-resident bank account holders," said Sarah Lewis, executive director of the group, based in the U.K.
Switzerland has been the poster child for financial secrecy over the past year. The United State sued Swiss global banking giant UBS AG, which paid a $780 million fine to settle a lawsuit against it by the government. As part of the deal, UBS admitted it actively helped Americans evade U.S. taxes.
The ranking is based on a composite of total offshore activity and measures such as whether a jurisdiction obtains beneficial ownership information about companies and the degree of cooperation in turning over requested financial information.
Delaware is attractive because it does not tax profits realized outside the state and does not require companies to be physically present, according to the Tax Justice Network.
UBS and Credit Suisse have about 200 entities in the state, according to the group.
There are nearly 700,000 active entities registered in Delaware -- and about half of those publicly traded in the United States, according to the group.
Total U.S. deposits of non-residents rose from about $1 trillion in 2001 to $2.6 trillion in 2007, according to the study.
In Luxembourg, non-resident deposits rose to $500 billion from $101 billion over the same period. In Switzerland, such deposits rose to $1.45 trillion from $103 billion during the period.
Larry Hamermesh, a business law professor at Widener University in Delaware, said the state gets an unfair rap.
For example, he said tax justice groups criticize the state for not obtaining companies' beneficial ownership information when they incorporate in the state.
But no other U.S. state actually requires such information, Hamermesh said.
"Delaware is no more secret than any other U.S. state," he said, noting that Delaware's attraction to business is its flexible laws and expert courts.
- Via Reuters
The United States, led by the eastern seaboard state, took in $2.6 trillion in deposits from non-resident corporations and individuals in 2007, according to a survey of financial jurisdictions analyzed by the Tax Justice Network.
The survey of laws, practices and size of inflows in 60 jurisdictions found Delaware coming in first, followed by Luxembourg and then Switzerland. The Cayman Islands and the United Kingdom round out the top five.
"While the U.S. has been jumping up and down and saying 'Aha, bad, wicked Swiss banks,' the U.S. is doing exactly the same things as far as non-resident bank account holders," said Sarah Lewis, executive director of the group, based in the U.K.
Switzerland has been the poster child for financial secrecy over the past year. The United State sued Swiss global banking giant UBS AG, which paid a $780 million fine to settle a lawsuit against it by the government. As part of the deal, UBS admitted it actively helped Americans evade U.S. taxes.
The ranking is based on a composite of total offshore activity and measures such as whether a jurisdiction obtains beneficial ownership information about companies and the degree of cooperation in turning over requested financial information.
Delaware is attractive because it does not tax profits realized outside the state and does not require companies to be physically present, according to the Tax Justice Network.
UBS and Credit Suisse have about 200 entities in the state, according to the group.
There are nearly 700,000 active entities registered in Delaware -- and about half of those publicly traded in the United States, according to the group.
Total U.S. deposits of non-residents rose from about $1 trillion in 2001 to $2.6 trillion in 2007, according to the study.
In Luxembourg, non-resident deposits rose to $500 billion from $101 billion over the same period. In Switzerland, such deposits rose to $1.45 trillion from $103 billion during the period.
Larry Hamermesh, a business law professor at Widener University in Delaware, said the state gets an unfair rap.
For example, he said tax justice groups criticize the state for not obtaining companies' beneficial ownership information when they incorporate in the state.
But no other U.S. state actually requires such information, Hamermesh said.
"Delaware is no more secret than any other U.S. state," he said, noting that Delaware's attraction to business is its flexible laws and expert courts.
- Via Reuters
It is Japan we should be worrying about, not America
Japan is drifting helplessly towards a dramatic fiscal crisis. For 20 years the world's second-largest economy has been able to borrow cheaply from a captive bond market, feeding its addiction to Keynesian deficit spending – and allowing it to push public debt beyond the point of no return.
The rocketing cost of insuring against the bankruptcy of the Japanese state is telling us that the model has smashed into the buffers. Credit default swaps (CDS) on five-year Japanese debt have risen from 35 to 63 basis points since early September. Japan has suddenly decoupled from Germany (21), France (22), the US (22), and even Britain (47).
Regime-change in Tokyo and the arrival of Yukio Hatoyama's neophyte Democrats – raising $550bn (£333bn) to help fund their blitz on welfare and the "new social policy" – have concentrated the minds of investors at long last. "Markets are worried that Japan is going to hit a brick wall: the sums are gargantuan," said Albert Edwards, a Japan-veteran at Société Générale.
Simon Johnson, former chief economist of the International Monetary Fund (IMF), told the US Congress last week that the debt path was out of control and raised "a real risk that Japan could end up in a major default".
The IMF expects Japan's gross public debt to reach 218pc of gross domestic product (GDP) this year, 227pc next year, and 246pc by 2014. This has been manageable so far only because Japanese savers have been willing – or coerced – into lending for almost nothing. The yield on 10-year government bonds has been around 1.30pc this year, though they jumped to 1.42pc last week.
"Can these benign conditions be expected to continue in the face of even-larger increases in public debt? Going forward, the markets capacity to absorb debt is likely to diminish as population ageing reduces saving," said the IMF.
The savings rate has crashed from 15pc in 1990 to near 2pc today, half America's rate. Japan's $1.5 trillion state pension fund (the world's biggest) has become a net seller of government bonds this year, as it must to meet pay-out obligations. The demographic crunch has hit. The workforce been contracting since 2005.
Japan Post Bank is balking at further additions to its $1.7 trillion holdings of state debt. The pillars of the government debt market are crumbling. Little wonder that the Ministry of Finance has begun advertising bonds in Tokyo taxis, featuring Koyuki from The Last Samurai. If Japan's bond rates rise to global levels of 3pc to 4pc, interest costs will shatter state finances.
No one knows exactly when a country tips into a debt compound trap. But Japan must be close, even allowing for the fact that liabilities of the state Loan Programme (FILP) have fallen by 40pc of GDP since 2000.
"The debt situation is irrecoverable," said Carl Weinberg from High Frequency Economics. "I don't see any orderly way out of this. They will not be able to fund their deficit. There will be a fiscal shutdown, a pension haircut, and bank failures that will rock the world. It is criminally negligent that rating agencies are not blowing the whistle on this."
Mr Hatoyama inherited a country that was already hurtling into sovereign "Chapter 11". The Great Recession has eaten up 27pc in tax revenues. Industrial output is down 19pc, even after the summer rebound; exports are down 31pc; the economy is 10pc smaller today in "nominal" terms than a year ago – and nominal is what matters for debt.
Tokyo's price index fell 2.4pc in October, the deepest deflation in modern Japanese history. Real interest rates have risen 300 basis points in a year. It reads like a page from Irving Fisher's 1933 paper, Debt Deflation Causes of Great Depressions.
The Bank of Japan seems oddly insouciant. It will end its (feeble) quantitative easing in December by suspending purchases of corporate debt, much to the fury of the Finance Ministry.
"This is incredibly dangerous," said Russell Jones from the RBC Capital Markets. "The rate of deflation is shocking. The debt dynamics are horrible and there is the risk of a downward spiral."
Tokyo has let the yen appreciate violently – 90 to the dollar, 13 to the Chinese yuan – giving another twist to the deflation knife. Top exporters are below break-even cost, says RBS. The government could stop this, as it did in a wave of manic dollar purchases from 2003-2004. It could print money à l'outrance to stave off deflation. Yet it sits frozen, like a rabbit in the headlamps.
Japan's terrible errors are by now well known. It failed to jettison its mercantilist export model in time. It resisted the feminist revolution, leading to a baby strike by young women. It acquiesced in a mad investment bubble (like China now) in the 1980s, stealing growth from the future.
It wasted its immense fiscal firepower, scattering money for 20 years on half-baked spending projects to keep the economy afloat. QE was too little, too late, and this is the lesson for the West. We must cut borrowing drastically over the next decade, and offset this with ultra-easy monetary policy. Does Downing Street understand this? Does the White House? Does the European Central Bank? Clearly not.
- Via Telegraph UK
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