Campbell cites a lot of banks whose spokesmen declare that they have little exposure to the muni market, and what they have is only of the highest quality (Always is, after all; these are the smartest people in the world). He also says that lenders hold only 8% of the total $2.8 trillion market. So who holds the rest? Maybe you should ask your pension fund manager about that.
Warren Buffet said a month ago before the Financial Crisis Inquiry Commission that there would be a “terrible problem” for municipal bonds. He wasn't kidding. Tax revenues will keep on falling, forcing huge numbers of lay-offs, which in turn will lead to lower tax revenues as well as foreclosures, which in turn also lead to lower tax revenues.
This is a circle that won't be broken for years to come. And if the Federal government decides to bail out states and munis, will that raise those revenues, being back jobs, keep people in their homes? No, of course not, it will only (and only temporarily) help those who hold the bonds.
But if the government decides not to do another bail-out, markets will push banks and other large investors to take a giant haircut (think: lawn mower size), which will threaten to topple the entire financial system.
There is no way out of this. But step one should be to let investors take the losses that come with the risk of the assets they've invested in. Instead of loading the public up with those losses as well, on top of those incurred by their pension funds, and on top of all the lost jobs and services that now lie inevitably ahead of us, just around the corner. Given the history of the last few administrations nad their bail-outs, it's not hard to guess who will be forced to pay the piper. And still be left holding an empty bag.
They Keep Stealing - Why Keep Paying?
By Dylan Ratigan
The picture becomes increasingly clearer as Washington lifts its veil. A financial overhaul that was supposed to be a momentous effort has finally been voted in, only to reveal that none of the Wall Street banks will be effectively affected until 2022, which is the sort of number that you can read as meaning: "never". At the same time, Capitol Hill has thrown out a proposal to provide emergency support for millions of Americans who remain unemployed for more than 26 weeks, while those who haven't found a job for 99 weeks or more are in the indefinite doghouse.
It truly is a matter of bail the banks and screw the people. What remains to be seen is how those people will react. All the more so when they find out that those same Wall Street banks will soon come calling again for more bailouts, which is now inevitable and guaranteed to happen. Our fine leaders may try to find a creative way to do it, one that won't attract too much attention, but you can bet there’ll be more taxpayer money flowing to Lower Manhattan, while for "ordinary" citizens services will be cut, taxes raised, and jobs disappeared.
Nor is this an exclusively American phenomenon. European countries face the same fate, even though it's not as easy over there as a Republican filibuster to condemn citizens to abject poverty.
The options are dead(ly) simple. We will find out over the next few months that our banks are screamingly underfunded, and that not bailing them out will lead to bank runs and panics. How bad the situation already is becomes obvious through for instance Reuters' James Saft, who writes that in the next three years,
The financial crisis in America isn't over. It's ongoing, it remains unresolved, and it stands in the way of full economic recovery. The cause, at the deepest level, was a breakdown in the rule of law. And it follows that the first step toward prosperity is to restore the rule of law in the financial sector.
First, there was a stand-down of the financial police. The legal framework for this was laid with the repeal of Glass-Steagall in 1999 and the Commodities Futures Modernization Act of 2000. Meanwhile the Basel II process relaxed international bank supervision, especially permitting the use of proprietary models to value complex assets-an open invitation to biased valuations and accounting frauds.
Key acts of de-supervision came under Bush. After 9/11 500 FBI agents assigned to financial fraud were reassigned to counter-terrorism and (what is not understandable) they were never replaced. The Director of the Office of Thrift Supervision appeared at a press conference with a stack of copies of the Code of Federal Regulations and a chainsaw-the message was not subtle. The SEC relaxed limits on leverage for investment banks and abolished the uptick rule limiting short sales to moments following a rise in price. The new order was clear: anything goes.
Second, the response to desupervision was a criminal takeover of the home mortgage industry. Millions of subprime mortgages were made to borrowers with undocumented incomes and bad or non-existent credit records. Appraisers were selected who were willing to inflate the value of the home being sold. This last element was not incidental: surveys showed that practically all appraisers came under pressure to inflate valuations in order to make deals happen. There is no honest reason why a lender would deliberately seek to make an inflated loan.
Mortgages were made with a two-or three-year grace period, with a low, fixed interest rate called a "teaser." These were not real mortgages; they were counterfeits, whose value would collapse when exposed. As with any counterfeit, the profits came early, when the bad paper was first sold.
The first known system of taxation was in Ancient Egypt around 3000 BC - 2800 BC in the first dynasty of the Old Kingdom
Later, in the Persian Empire, a regulated and sustainable tax system was introduced by Darius I the Great in 500 BC
For instance, Babylon was assessed for the highest amount and for a startling mixture of commodities - 1000 silver talents, four months supply of food for the army.
Why New York City (and NYC Taxpayers) are Broke
Public pensions and public union benefits are increasingly under attack in the media, and justifiably so. Here is a case in point regarding NYC.
Please consider City taxpayers foot 90% of municipal pensions.
Taxpayers kick in an average $8.60 for every dollar that city employees contribute to their pensions, a sweet deal costing the Big Apple a bundle.
Taxpayers' share of city pension costs has skyrocketed more than 900 percent in the last decade -- from $703.1 million in 2000 to $6.5 billion in 2009, according to the city comptroller's annual reports.
The cost is expected to hit $7.6 billion this fiscal year and $8.7 billion next year.
Teachers get the biggest bang for their pension contributions -- the city puts in $15.50 for every $1 they contribute.
Taxpayers pay $10 for every $1 firefighters put in, $9 for every $1 from cops and $5.60 for every $1 from transit, sanitation and other civil servants, the 2009 report shows.
Average pension: $54,268
Taxpayer contribution: $15.50 to $1
Average pension: $53,347
Taxpayer contribution: $10 to $1
Average pension: $41,319
Taxpayer contribution: $9.13 to $1
SANITATION, TRANSIT, OTHER
Average pension: $24,889
Taxpayer contribution: $5.60 to $1
"The cost has risen because employee benefits were dramatically increased in 2000, just as the [stock] market began to collapse," said John Murphy, former executive director of the New York City Employee Retirement System, NYCERS, the largest city pension fund.
"In retrospect, it was one of the most irresponsible things to have done," he said.
Amazingly, unions have the gall to demand still more benefits at a time the private sector and ordinary taxpayers are getting hammered.
The article appears to be about NYC. It's not. It's about every public union in the country.
Also consider Padded Pensions and What to do About Them
It’s what the system promised, said Mr. Tassone, now 47, adding that he did nothing wrong by adding lots of overtime to his base pay shortly before retiring. “I don’t understand how the working guy that held up their end of the bargain became the problem,” he said.
"The working guy that held up their end of the bargain"
This is what the bargain looks like.
AussieMike wrote:Now back in the 70's i recall my father complaining because he was paying 57 cents tax on the dollar, and he was a public servant.
AussieMike wrote:Yeah, he was a Policeman. legalised Theft he called it
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