Economy

The World Gives Greece Another Loan

Today's Balance Sheet: The IMF moves forward with its contribution to the bailout. 

Moneybox
The International Monetary Fund (IMF) approved a $36 billion contribution toward the latest Greek bailout. Along with more than $170 billion from other European governments and institutions, the IMF loans will be doled out over the course of four years, hopefully allowing the country and the eurozone to regain their financial standing. “The main function of this agreement is to contain the crisis for the next few months in order to provide a more stable environment for Italy and Spain to carry out their adjustments and therefore stabilize the euro area as a whole,” said Domenico Lombardi, a former IMF board official and senior fellow at the Brookings Institution. IMF Managing Director Christine Lagarde said the risks with this type of bailout are "exceptionally high," and that Greek politicians will likely need to make many difficult and unpopular decisions on the road to recovery. IMF rescue plans are also in the works for Ireland and Portugal. The Latest Can It Be … the Recovery?...

With Santorum’s Goofy Views, Why’s Obama Down in the Polls?

(Flickr/sangroncito)
What should we make of those scary poll numbers? The most recent New York Times /CBS poll, conducted March 7 to March 11, reported a big drop in President Obama’s favorability ratings, which declined to 41 percent from 50 percent just a month ago. This occurred during a period when the economic news was relatively good—the economy created more than 200,000 jobs for the third straight month; gas prices rose but not steeply; and Obama acquitted himself well on the treacherous terrain of resisting Iran’s nuclear ambitions without embracing war. It was also a period when the Republicans seemed to be imploding with women, thanks to their clumsy blurring of the issues of abortion and contraception. The White House has revved up its outreach to women voters, who presumably don’t want the government messing with their right to contraception. Yet in this poll, the president’s approval rating declined among all groups, even women. What gives? First, it’s only one poll. In the most recent Gallup...

The Truth about Goldman Sachs

The investment firm headed south as soon as it started prioritizing short-term gain over its long-term interests.

(Flickr/macten)
Former Goldman Sachs employee Greg Smith wrote an op-ed in yesterday’s New York Times that simmers with pathos. Smith describes the devolution of the culture at Goldman: Whereas in the past, the company worked in the interests of its clients, they are now seen merely as the source of transactional profit, to be manipulated for the benefit of the firm. His story emerges in the midst of a huge effort by Wall Street to eviscerate and delay the implementation of the Volcker Rule, which limits bank traders to running a client-service businesses by prohibiting trading for the bank’s own account. Having spent 12 years at Goldman prior to 1997, I sympathize with Smith’s feelings of loss and betrayal. I left just at the beginning of the institution’s evolution into its current form and have observed the process with despair—not only for the organization but for the loss suffered by the nation. Some context might provide greater meaning to Mr. Smith’s story. At its best, Wall Street serves an...

Hating Wall Street Springs Eternal

Today's Balance Sheet: The Goldman Sachs employee strikes back.

NPR
After Goldman Sachs employee Greg Smith quit his job with a loud and blistering New York Times op-ed , Wall Street is once again at the forefront of the national conversation. Questioning Wall Street definitely isn't new—we've been calling the stock market greedy ever since it was founded in 1792, and even more in the past year with the birth of the Occupy Wall Street movement. “When you’ve been around 40 years, you always say things were better back then,” said David Dreman, a veteran money manager. “But it is different now. There have been enormous changes on Wall Street. ... Unless the client is very sophisticated, the client gets clipped.” The public shaming of Goldman Sachs wasn't limited to the op-ed claiming that the financial giant favors profits over clients— Bloomberg Businessweek wrote a long piece on the company yesterday, and many major newspapers had lead stories on the firm this morning. Goldman's stock slipped 3.4 percent in the wake of Smith's departure. Right now,...

Time for Government and Public Workers to Be Friends Again

Labor-management cooperation is the key to treading the line between budget shortfalls and unions' demands.

(Flickr/Wxmom)
A lost theme in improving public services—labor-management cooperation—has begun to receive long-overdue attention in recent weeks. Over the weekend The Washington Post gave front-page coverage to a Maryland teachers’ union collaborating with school authorities to accelerate curricular reform and improve teacher performance while disciplining ineffective teachers. Last month, Nicholas Kristof wrote approvingly in the New York Times of a comparable collaboration in New Haven. These examples hardly reflect a new development. In 2001, Toledo won an Innovations in American Government award from Harvard University’s Kennedy School of Government for its collaboration of organized teachers and school administrators. Parts of the Toledo Plan were replicated in other large Ohio cities. When Indianapolis decided to “contract out” some street repair work, the city’s unions persuaded Mayor Stephen Goldsmith to allow them to bid on the contract. The city workers won the contracts and saved the...

A GOP Governor Is Pushing Tax Hikes?

(Flickr/soukup)
Nevada Governor Brian Sandoval came into office with tough talk about taxes. Since then, it seems, he's grown disenchanted with Grover Norquist-style governance. For the second time in as many years, he's pushing to extend a group of temporary tax increases, rather than cut public-education funding. What is the world coming to? Nevada's budget crisis last year was among the worst in the country, with a shortfall that amounted to 45 percent of state expenses according to Stateline.org . When courts ruled the state could not draw on local government funds appropriated by a prior legislature to balance the budget, Sandoval opted to maintain tax rates rather than make more core cuts. This year, he's going with the same philosophy it seems. As the Las Vegas Sun reports: “Let me be clear, as I’ve said before, the economy is improving, but I believe we must begin this budgeting process with all the information available,” Sandoval said in a written statement. “In addition to avoiding further...

Fingers Crossed for Greece

The second Greek bailout gets the green light, but the country isn't out of the woods.

AP Photo/Thanassis Stavrakis
The successful conclusion last Friday of the PSI (Private Sector Involvement), the bond exchange process for Greece’s private creditors, was good news—both for the country and for the eurozone. Voluntary participation in the deal reached 85.8 percent (out of a total of 206 billion euros in Greek government bonds which were up for exchange). The level of participation reached 95.7 percent with the decision to activate the Collective Action Clauses (CAC) recently added to the legal contracts governing 177 billion euros of bonds under Greek law, forcing recalcitrant creditors to participate in the process. This means a 105 billion euro gross reduction in Greek debt—out of a total of 368 billion. This number, which makes Greece’s sovereign debt restructuring the largest in history, should rise further once the process for the holders of Greek government bonds under foreign law is concluded. The government bondholders represent about 10 percent of the 206 billion euro total, and almost 70...

A Stealth Attack on Democratic Governance

Why are Obama trade negotiators pushing the extreme Trans-Pacific Partnership, and why is it being negotiated in such an untransparent manner?

AP Photo
It takes quite a “trade” agreement to undermine financial regulation, increase drug prices, flood us with unsafe imported food and products, ban Buy America policies aimed at recovery and redevelopment, and empower corporations to attack our environmental and health safeguards before tribunals of corporate lawyers. Trade, in fact, is the least of the Trans-Pacific Partnership (TPP). Backdoor deregulation and imposition of new corporate investor and patent rights via trade negotiation began in the 1990s with the World Trade Organization (WTO) and North American Free Trade Agreement (NAFTA). But the TPP now threatens a slow-motion stealth attack against a century of progressive domestic policy. At stake is nothing less than a democratic society’s ability to regulate a market economy in the broad public interest. Under the framework now being negotiated, U.S. states and the federal government would be obliged to bring our existing and future policies into compliance with expansive norms...

The Pacific Pivot

America needs to try something new when it comes to international trade.

(Flickr/James O'Sullivan)
On November 12, 2011, I listened as President Barack Obama told business leaders attending the Summit of the Asia-Pacific Economic Cooperation forum in Honolulu that “we’ve turned our attention back to the Asia Pacific region” and announced two vehicles for that return. These were the Trans-Pacific Partnership (TPP) Free Trade Agreement, now under negotiation and to be concluded by the end of this year, and the Pivot to Asia, meaning a redeployment of American priorities and military forces away from Europe and the Middle East to Asia. The president said that Asia will be central to America’s future prosperity and that it was imperative to correct unsustainable trade and financial imbalances while continuing to expand economic ties. This would require that all countries play by the same rules appropriate to the current global economy. The TPP, he said, would be a template for a “21st-century agreement” that would eventually be open to all the countries of the region. He emphasized...

Not a Great Deal for Asia

The Trans-Pacific Partnership could end up hurting the broader economic interests of both the U.S. and smaller Asian nations.

(Flickr/images_of_money)
The Trans-Pacific Partnership is best understood as President Barack Obama’s extension of the Bush-era doctrine of “competitive liberalization.” Frustrated with pushback at the World Trade Organization by nations like China, Brazil, India, and South Africa, the United States seeks a coalition of the willing to import a commercial framework that rewards private firms at the expense of the common good. That policy regime is ailing in the U.S. and gets worse when exported. The Trans-Pacific Partnership (TPP) certainly isn’t about raising standards of living. The most ambitious estimates of the gains from the TPP suggest that participating nations will gain a mere one-tenth of 1 percent of the gross domestic product. Sixty percent of the projected gains go to Vietnam and the United States, and the other 20 percent goes to Malaysia—largely because the U.S. already has trade pacts with the other proposed big players in the TPP. However, the proposed deal is far from popular in Asia. In...

Banks Holding Up to the Downturn Stress

Today's Balance Sheet: The next round of bank stress tests finish up this week.

The Federal Reserve is scheduled to release the results of the latest bank stress tests this Thursday, which are expected to signal healthy balance sheets—a marked difference from the 2009 round of stress tests, and another indicator that our slowly recovering economy has been on an even sunnier upswing the past few months. The previous round of stress tests—which ended last March—weren't released to the public. The purpose of the stress tests is to see how well financial institutions could survive an economic downturn worse than the one that followed the Lehman collapse, with 13 percent unemployment and 50 percent stock market decline. If banks don't fare well under the stress test, they might have to raise billions of dollars in order to get on safer ground. “Everybody wants to avoid headlines,”Oppenheimer analyst Chris Kotowski told The New York Times . “People are angry at the banks, and both the banks and the regulators just want to do something to show we’re working our way back...

February Jobs Numbers: +227,000

Today's Balance Sheet: Job numbers keep on keeping on. 

The unemployment rate remained at 8.3 percent after a gain of 227,000 jobs this February, according to the monthly report released by the U.S. Bureau of Labor Statistics this morning. This marks the third month in a row where the economy gained more than 200,000 jobs, a streak we haven't seen since early 2011. The best news in the report was a substantial upward revision from December and Janaury's jobs numbers—61,000 more jobs were added during those months than originally thought. The economy isn't adding enough jobs to improve at a rapid pace, but three months of steady growth shows we're heading in the right direction. After the report's release, Craig Dismuke, chief economic strategist at Vining Sparks, told Reuters , "This is a healthy number. It confirms that the labor market is gradually improving. I also liked the revisions. All in all, it's really a positive report." The Latest Consumers Shape Up Their Finances The Wall Street Journal Obama unveils new foreclosure measures...

Tea Party Sharpens Its Budget Scissors

Today's Balance Sheet: Time for Congress to get feisty again. 

Perhaps afraid of tarnishing their hard-earned obstructionist cred, congressional Republicans look like they're heating up for another big fight over the budget. Tea Party legislators are pushing a plan that would cap agency appropriations at almost $20 billion below the $1.047 trillion limit agreed to last August as part of the Budget Control Act. This cap is already substantial and will force cuts or freeze spending in many government agencies—imagining Congress trying to agree on where to shave off an additional $20 billion the federal budget is headache-inducing. But with the government continuing to run $1 trillion-plus deficits, fiscal conservatives are hungry for an opportunity to take a symbolic stand. House Budget Committee Republicans are meeting today to discuss their options for the 2013 budget, and Republican House Appropriations chairman Hal Rogers is still committed to the agreed target and may be able to force the more intractable elements of his party to acquiesce...

We Want Our Money Back

Good-governance groups are fighting back against companies that take state subsidies and then head out of town.

(Flickr/401K)
One can understand why North Carolinians hold a grudge against Dell Computers. In 2009, the company shuttered its Winston-Salem plant, laid off 900 people, and made off with $6 million in state subsidies and incentives. Most states and cities will do almost anything to induce companies to set up shop within their borders—or to keep them there. It seems no tax incentive is too plush, no subsidy too bountiful. Businesses, in turn, will make grand claims about the jobs and other benefits they bring to a community. But what happens if they renege on the deal and pack up or simply don't live up to their promises? Too often, the answer has been "nothing." States and municipalities are left scrambling to explain why they spent the taxpayers’ money and got nothing in return. Fortunately, this is starting to change. Good-governance groups are putting forth a simple message for businesses that do not deliver on their promises: We want our money back. Nonplussed by lax subsidy standards,...

The Cost of Financial Favoritism

If Republicans and Democrats can't find common ground on giving assistance to small banks and Community Development Financial Institutions, they aren't liable to agree on anything.

(Flickr/Images_of_Money)
A merica’s knack for invention and risk-taking has long been a source of competitive advantage. Entrepreneurs depend not just on ingenuity and nerve but also on capital and credit, which come, or don’t, from a variety of sources, including their own savings, venture capital, as well as loans from banks and other institutions. Until recently, our deep and varied capital markets have complemented America’s entrepreneurial zeal. Investment bankers could help innovators sell shares to the public. Silicon Valley’s technical genius got a huge lift from venture capitalists. However, the extreme financial engineering that ultimately led to the collapse of 2008 has whipsawed America’s entrepreneurs. At first, financial innovation produced a credit boom. But as regulatory and lending standards dropped far below prudent levels and banks became more leveraged, the financial excesses produced first a bubble, then a bust. Bankers and their regulators belatedly turned risk averse, producing a credit...

Pages