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Gary Edwards

California and Bust | Vanity Fair - Michael Lewis - 1 views

www.vanityfair.com/...michael-lewis-201111

Michael-Lewis Arnold-Schwarzenegger California

shared by Gary Edwards on 13 Dec 12 - No Cached
  • Gary Edwards on 13 Dec 12
     
    "The smart money says the U.S. economy will splinter, with some states thriving, some states not, and all eyes are on California as the nightmare scenario. After a hair-raising visit with former governor Arnold Schwarzenegger, who explains why the Golden State has cratered, Michael Lewis goes where the buck literally stops-the local level, where the likes of San Jose mayor Chuck Reed and Vallejo fire chief Paige Meyer are trying to avert even worse catastrophes and rethink what it means to be a society. By"
Gary Edwards

California and Bust - by Michael Lewis | Vanity Fair - 0 views

www.vanityfair.com/...michael-lewis-201111

California Michael-Lewis State-Bankruptcy

shared by Gary Edwards on 30 Sep 11 - No Cached
  • Gary Edwards on 30 Sep 11
     
    Incredibly well written article.  Simply awesome and totally engaging piece of well researched writing and story telling.  But wow what a sad story.  Still, if you want to understand California, and perhaps America, this is the living truth.  Sadly. intro excerpt: The smart money says the U.S. economy will splinter, with some states thriving, some states not, and all eyes are on California as the nightmare scenario. After a hair-raising visit with former governor Arnold Schwarzenegger, who explains why the Golden State has cratered, Michael Lewis goes where the buck literally stops-the local level, where the likes of San Jose mayor Chuck Reed and Vallejo fire chief Paige Meyer are trying to avert even worse catastrophes and rethink what it means to be a society.
Paul Merrell

"Destroying" the Johnson Amendment is a poor idea, Mr. President « Hot Air - 0 views

hotair.com/...nt-is-a-poor-idea-mr-president

Trump religious-freedom johnson-amendment

shared by Paul Merrell on 05 Feb 17 - No Cached
  • The National Prayer Breakfast appearance by the President drew the usual rounds of pans and praise this week. (Just as a side note, it’s not really the best forum for stand up comedy and Schwarzenegger jokes.) One item which cropped up and drew a lot of media fire was President Trump’s renewed pledge to do away with the Johnson Amendment. As you will recall, that’s the 1954 law which restricts churches and other tax exempt, non-profit organizations from certain political activities. (NPR actually has a pretty good rundown of it here.) Most specifically in this case – and what most of the debate centers on – is the restriction on preachers who wish to tell their flocks who to vote for from the pulpit. Doing so theoretically places their tax exempt status in jeopardy. That’s the part that the President seems to want to see discarded. (WaPo)
  • This is one of those areas where I once again fall outside much of the conservative mainstream and my inner libertarian hackles are raised. The Johnson Amendment is a relatively toothless artifact of an earlier era and removing it would have almost zero real world impact for the most part, but it at least represents some lip service to a worthwhile principle in government. The amendment itself is really not the issue here. It’s almost entirely symbolic in terms of its effect on the day to day life of Americans. As a previous report indicated, since 2008 (when churches began seriously challenging the law) there has been only one example of a church being investigated on such charges and none have been punished. It’s extremely difficult to enforce and doing so would be met with huge resistance in some quarters. (No politician or law enforcement officer wants to be enshrined in the front page photo of a preacher being hauled off to jail.) So why support the amendment at all? Because we leave decisions about voting to the individual in the United States and, as with many other social and professional interactions, we protect the individual from undue influence by those who hold power over them. I wrote about this exact subject last summer when Trump was first talking about it. Here’s the key portion of the argument.
  • Preaching politics from the pulpit and using that platform to encourage the election of any candidate from either party is simply wrong. We give churches tax exempt status for a variety of reasons, but one of them is that they are outside of the political and governmental body of the nation. Further, a preacher telling you to vote for Candidate A over Candidate B isn’t just appealing to your intelligence and general sensibilities. They are speaking with the authority of the Almighty and providing you with guidance as to the maintenance of your immortal soul. This provides them with a position of vastly undue influence over your choices. It’s a parallel to the reason we don’t allow doctors to engage in sexual relations with their patients… they simply hold too much influence over them from positions of assumed trust.
  • Paul Merrell on 05 Feb 17
     
    Let's not forget that corporations are artificial beings; the notion that they have constitutional rights is anathema to our constitution.
Gary Edwards

Swimming with the Sharks: Goldman Sachs, School Districts, and Capital Appreciation Bon... - 0 views

nsnbc.me/...and-capital-appreciation-bonds

Banksters Goldman-Sachs

shared by Gary Edwards on 21 Feb 15 - No Cached
  • In 2008, after collecting millions of dollars in fees to help California sell its bonds, Goldman urged its bigger clients to place investment bets against those bonds, in order to profit from a financial crisis that was sparked in the first place by irresponsible Wall Street speculation. Alarmed California officials warned that these short sales would jeopardize the state’s bond rating and drive up interest rates. But that result also served Goldman, which had sold credit default swaps on the bonds, since the price of the swaps rose along with the risk of default.
  • In 2009, the lenders’ lobbying group than proposed and promoted AB1388, a California bill eliminating the debt ceiling requirement on long-term debt for school districts. After it passed, bankers traveled all over the state pushing something called “capital appreciation bonds” (CABs) as a tool to vault over legal debt limits. (Think Greece again.) Also called payday loans for school districts, CABs have now been issued by more than 400 California districts, some with repayment obligations of up to 20 times the principal advanced (or 2000%).
  • The controversial bonds came under increased scrutiny in August 2012, following a report that San Diego County’s Poway Unified would have to pay $982 million for a $105 million CAB it issued. Goldman Sachs made $1.6 million on a single capital appreciation deal with the San Diego Unified School District.
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  • . . . AB1388, signed by then-Gov. Arnold Schwarzenegger in 2009, [gave] banks the green light to lure California school boards into issuing bonds to raise quick money to build schools. Unlike conventional bonds that have to be paid off on a regular basis, the bonds approved in AB1388 relaxed regulatory safeguards and allowed them to be paid back 25 to 40 years in the future. The problem is that from the time the bonds are issued until payment is due, interest accrues and compounds at exorbitant rates, requiring a balloon payment in the millions of dollars. . . . Wall Street exploited the school boards’ lack of business acumen and proposed the bonds as blank checks written against taxpayers’ pocketbooks. One school administrator described a Wall Street meeting to discuss the system as like “swimming with the big sharks.” Wall Street has preyed on these school boards because of the millions of dollars in commissions. Banks, financial advisers and credit rating firms have billed California public entities almost $400 million since 2007. [State Treasurer] Lockyer described this as “part of the ‘new’ Wall Street,” which “has done this kind of thing on the private investor side for years, then the housing market and now its public entities.”
  • The Federal Reserve could have made virtually-interest-free loans available to local governments, as it did for banks. But the Fed (whose twelve branches are 100% owned by private banks) declined. As noted by Cate Long on Reuters:
  • The Fed has said that it will not buy muni bonds or lend directly to states or municipal issuers. But be sure if yields rise high enough Merrill Lynch, Goldman Sachs and JP Morgan will be standing ready to “save” these issuers. There is no “lender of last resort” for muniland.
  • Among the hundreds of California school districts signing up for CABs were fifteen in Orange County. The Anaheim-based Savanna School District took on the costliest of these bonds, issuing $239,721 in CABs in 2009 for which it will have to repay $3.6 million by the final maturity date in 2034. That works out to $15 for every $1 borrowed. Santa Ana Unified issued $34.8 million in CABs in 2011. It will have to repay $305.5 million by the maturity date in 2047, or $9.76 for every dollar borrowed. Placentia-Yorba Linda Unified issued $22.1 million in capital appreciation bonds in 2011. It will have to repay $281 million by the maturity date in 2049, or $12.73 for every dollar borrowed.
  • In 2013, California finally passed a law limiting debt service on CABs to four times principal, and limiting their maturity to a maximum of 25 years. But the bill is not retroactive. In several decades, the 400 cities that have been drawn into these shark-infested waters could be facing municipal bankruptcy – for capital “improvements” that will by then be obsolete and need to be replaced.
  • Then-State Treasurer Bill Lockyer called the bonds “debt for the next generation.” But some economists argue that it is a transfer of wealth, not between generations, but between classes – from the poor to the rich. Capital investments were once funded with property taxes, particularly those paid by wealthy homeowners and corporations. But California’s property tax receipts were slashed by Proposition 13 and the housing crisis, forcing school costs to be borne by middle-class households and the students themselves.
  • According to Demos, per-student funding has been slashed since 2008 in every state but one – the indomitable North Dakota. What is so different about that state? Some commentators credit the oil boom, but other states with oil have not fared so well. And the boom did not actually hit in North Dakota until 2010. The budget of every state but North Dakota had already slipped into the red by the spring of 2009.
  • One thing that does single the state out is that North Dakota alone has its own depository bank.
  • The state-owned Bank of North Dakota (BND) was making 1% loans to school districts even in December 2014, when global oil prices had dropped by half. That month, the BND granted a $10 million construction loan to McKenzie County Public School No. 1, at an interest rate of 1% payable over 20 years. Over the life of the loan, that works out to $.20 in simple interest or $.22 in compound interest for every $1 borrowed. Compare that to the $15 owed for every dollar borrowed by Anaheim’s Savanna School District or the $10 owed for every dollar borrowed by Santa Ana Unified.
  • How can the BND afford to make these very low interest loans and still turn a profit? The answer is that its costs are very low. It has no exorbitantly-paid executives; pays no bonuses, fees, or commissions; pays no dividends to private shareholders; and has low borrowing costs. It does not need to advertise for depositors (it has a captive deposit base in the state itself) or for borrowers (it is a wholesale bank that partners with local banks, which find the borrowers). The BND also has no losses from derivative trades gone wrong. It engages in old-fashioned conservative banking and does not speculate in derivatives. Unlike the vampire squids of Wall Street, it is not motivated to maximize its bottom line in a predatory way. Its mandate is simply to serve the public interest.
  • Gary Edwards on 21 Feb 15
     
    " Remember when Goldman Sachs - dubbed by Matt Taibbi the Vampire Squid - sold derivatives to Greece so the government could conceal its debt, then bet against that debt, driving it up? It seems that the ubiquitous investment bank has also put the squeeze on California and its school districts. Not that Goldman was alone in this; but the unscrupulous practices of the bank once called the undisputed king of the municipal bond business epitomize the culture of greed that has ensnared students and future generations in unrepayable debt."
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