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European Union pushes cuts for indebted countries

To keep its debt crisis from mushrooming out of control, the European Union is imposing harsh cutbacks on millions of ordinary people in debt-plagued countries like Greece, Ireland and Portugal.

So far the pain includes cutbacks and freezes in teachers' and nurses' salaries, higher retirement ages and heavier taxes on everything from incomes to cigarettes and fuel.

Europe is barely expanding, with only 0.1 percent growth in the fourth quarter in the 16 countries that use the euro, leaving a renewed slide into recession impossible to rule out. And the recession is still on in several countries facing the cuts such as Greece, Ireland and Spain.

Icesave Talks Break Down

Talks between Iceland, Britain and the Netherlands over a fresh deal on Reykjavik's debts collapsed on Thursday, a blow for the North Atlantic island which needs a new accord to restart financial aid.

Hopes had been high that a deal on the more than $5 billion (3.3 billion pounds) "Icesave" debt was within reach following nearly two weeks of attempts to reach a new agreement which would have allowed the country to avoid a politically dangerous referendum.

Reykjavik had hoped to reach a deal in which the two countries would not be seen as turning a profit on the money owed.

A British government source said the deal offered by the UK government had been generous and that it had tried to support the Icelandic government as much as possible.

Iceland will probably have to go back to the drawing board, causing further delays to much-needed financial aid from the International Monetary Fund and its Nordic neighbours.

The dispute has also soured sentiment in Iceland over joining the European Union, with the breakdown in talks coming only a day after Brussels recommended launching accession talks with Iceland.

Justify £1.6bn bonuses in face of £7k-a-minute loss, RBS told and Bank loses £3.6bn – but finds £1.3bn to pay bonuses

The Royal Bank of Scotland is 84 per cent owned by the taxpayer.

More than 100 bankers at Royal Bank of Scotland will take home bonuses of at least £1 million even though RBS made a £3.6 billion loss last year.

The loss equates to £6,849 a minute, or almost £10 million a day.

RBS confirmed it would pay £1.3 billion in bonuses to 16,800 investment bankers, on average £77,000 each. Compensation as a percentage of revenue for RBS’s investment bankers came in at 27 per cent, the lowest in the industry and in contrast with 38 per cent at Barclays. Bankers in RBS’s branches, and other functions outside the investment bank, will share a £375 million bonus pool, giving them on average £2,600.

Truther consequences

For the young-uns, "Truth or Consequences" was, among other meanings, the name of a popular US TV quizz show many years back before the invention of personal computers, internet and googling.

It is also the name of a small New Mexico town that hoped to put its name on the map by changing its name, from whatever it had been, to Truth or Consequences, to coat-tail the popularity of the TV show. Guambat wonders how that worked out.

It's also the game now being played out in Texas.

Medina catches flak from Beck for comments on 9/11 conspiracies

Conservative pundit Glenn Beck threw a wrench into Debra Medina's gubernatorial campaign Thursday.

Beck asked her, "Do you believe the government was any way involved with the bringing down of the World Trade Centers on 9/11?"

"I don't, I don't have all of the evidence there, Glenn," Medina said. "So I don't, I'm not in a place, I have not been out publicly questioning that. I think some very good questions have been raised in that regard. There are some very good arguments, and I think the American people have not seen all of the evidence there. So I've not taken a position on that.".

A full transcript of the exchange is here.

Medina posted a message on her web site suggesting the issue isn't one that should matter to Texas voters.

Nope. The issues that count for Texans, according to the site, are "Private property and gun ownership [which] are essential elements of freedom." Specifically:

We must eliminate property tax in Texas. We can fund necessary government services more efficiently and fairly using a broader based sales tax. [Tax spending, not wealth.]

Texans must not compromise and must not surrender their right to keep and bear arms.

As governor I will make addressing illegal immigration and promoting sovereignty a top priority.

Texas must stop the over reaching federal government and nullify federal mandates in agriculture, energy, education, healthcare, industry, and any other areas D.C. is not granted authority by the Constitution.

Mark Davis: Can Medina recover from unmitigated disaster?

If I had not developed considerable respect for Debra Medina, I would not bother to offer urgent advice on how to save the political future she may have torpedoed Thursday morning.

Talk show host Glenn Beck asked if she was a "9/11 truther" – that is, a member of the deranged community that says the World Trade Center towers were brought down not by terrorists hijackers but rather a U.S. government hungry to spark a nation to war by killing its own people.

Her answer was an unmitigated disaster. What we have to figure out now is what she has revealed.

In the dampened quiet of the morning snowfall, two sounds rolled across the Texas prairie: the collective gasp of sensible people who thought they were backing a sensible candidate, and the sickening thud of a once-promising campaign dashed against the rocks.

Can it be saved? That presumes that she is not in fact tolerant of the 9/11 "truth" psychosis. If she is, then she has little business in polite society, much less high elected office.

Problem is, given time to examine the hole she had dug, she issued a statement that contained precisely none of the contrition her supporters desperately needed to hear.

Her press release should have contained about 30 words: "I am so sorry. I was exhausted and my brain had turned to jelly. Let me make clear today and forever that in no way do I share the inexcusable conspiratorial fantasies of these people."

Instead, after offering perfunctory comfort that she did not harbor their beliefs, she said the question was a "surprise" because it is not relevant to the campaign. Wow. One hopes that someone seeking to run a state is not so easily bamboozled by a subject plucked from the topical periphery.

Then: "The real underlying question here is whether or not people have the right to question the government."

No, that is most certainly not the question. Despite its execrable views, the truther cult has every right to spew its pathological delusions. The question is whether Debra Medina has committed political suicide.

"She is not a 9/11 truther" was the single-sentence reply to the e-mail I immediately sent her campaign. Fair enough, but not good enough. Rationality requires not just a certificate of non-membership in that disturbed subculture. It requires instant and clear condemnation for a set of beliefs that are an unparalleled combination of baseless venom, stunning gullibility and juvenile stubbornness.

Others fellow Texan commentators were downright rude:

Mad Hatter for Texas Guv by Jimmy Fowler

Now that Republican gubernatorial primary contender Debra Medina has told Glenn Beck she believes there are good arguments to be made that the U.S. government was involved in the 9/11 attacks, can we please please please stop pretending that she’s a serious candidate rather than a batshit crazy teabagger? The editorial pages of North Texas’ dailies have been bending over backwards to take Medina seriously and not offend the looney tunes demographic of their dwindling readership.

For that matter, when will the national press quit pretending that the whole teabagger movement is something more legit than a confused collection of reactionary libertarians, anti-Obama conspiracy theorists, anti-tax extremists, paranoid anarchists, and “traditional values” fetishists?

Where is Molly Ivins when we need her?

Triage, not arbitrage, suggested for banks

The Congressional Oversight Panel, the folks meant to oversee the oversights of those doling out the $700 billion bail out funds, has issued a report with two very scary prospects, according to MarketWatch.

The first item is not exactly new news inasmuch as many other people have been sounding the alarm for a while. It has to do with the unfinished business of the finished by not written off losses in commercial real estate. The article says,

According to a report by the Congressional Oversight Panel, about $1.4 trillion in commercial real-estate loans will reach the end of their terms between 2010 and 2014, of which nearly half are now under water (that is, the borrower owes more than the underlying property is currently worth).

For more on this aspect, see Tracy Alloway's post at FT Alphaville.

The second item is the scarier one. Realizing that this will put pressure on many banks, the report proposes that the winners be preselected by regulators, not the market.

The article says,

The oversight panel also urged bank regulators to take a more thorough look at which banks they decide to unwind.

"The [COP] is clear that government cannot and should not keep every bank afloat. But neither should it turn a blind eye to the dangers of unnecessary bank failures and their impact on communities," the report said.

The COP members said that not all banks should be treated the same way when it comes to recognizing losses.

Guambat is somehow not very comforted in expecting regulators to do a better job of selected the weak from among the strong banks. It seems to Guambat that only the week ones (except the smart lads at Goldies) have, so far, benefited from government largess, and this bodes poorly for the choices yet to come.

Goldies again in hot Greece?

This post is mainly about the confluence of two separate articles appearing on Guambat's radar screen:

First, from the WSJ: Greece’s Woes Not All Homegrown

Make no mistake about it: the Greeks are principally responsible for their own woes and dodgy finances. Years of widespread tax evasion, a bloated and dysfunctional public sector, corruption in the political ranks—all of those are home grown problems.

But, at the same time, not all of Greece’s current problems are entirely of its own making. It is not responsible for the financial crisis that has swept the world since 2007—Greek banks held no toxic assets and remain among the most robust in Europe; its property market was nowhere near as frothy as those in Spain or Ireland and was starting to deflate normally before the crisis hit.

Nor is the country responsible for the ferocity of the bond markets’ reaction to its deficits—estimated at 12.7% of gross domestic product last year; the highest in the euro zone to be sure, but not far off from levels of its southern European neighbors, not to mention Ireland and the U.K.

Now this, from Germany's Der Speigel (online): How Goldman Sachs Helped Greece to Mask its True Debt

Goldman Sachs helped the Greek government to mask the true extent of its deficit with the help of a derivatives deal that legally circumvented the EU Maastricht deficit rules. At some point the so-called cross currency swaps will mature, and swell the country's already bloated deficit.

it looks like the Greek figure jugglers have been even more brazen than was previously thought. "Around 2002 in particular, various investment banks offered complex financial products with which governments could push part of their liabilities into the future," one insider recalled, adding that Mediterranean countries had snapped up such products.

Greece's debt managers agreed a huge deal with the savvy bankers of US investment bank Goldman Sachs at the start of 2002. The deal involved so-called cross-currency swaps in which government debt issued in dollars and yen was swapped for euro debt for a certain period -- to be exchanged back into the original currencies at a later date.

Such transactions are part of normal government refinancing.

But in the Greek case the US bankers devised a special kind of swap with fictional exchange rates. That enabled Greece to receive a far higher sum than the actual euro market value of 10 billion dollars or yen. In that way Goldman Sachs secretly arranged additional credit of up to $1 billion for the Greeks.

This credit disguised as a swap didn't show up in the Greek debt statistics. Eurostat's reporting rules don't comprehensively record transactions involving financial derivatives. "The Maastricht rules can be circumvented quite legally through swaps," says a German derivatives dealer.

Goldman Sachs charged a hefty commission for the deal and sold the swaps on to a Greek bank in 2005.

In previous years, Italy used a similar trick to mask its true debt with the help of a different US bank.

Sinatra song is still slayin' 'em

Guambat's burrow faces the Philippines, across the Philippine Sea. From personal experience, Guambat has learned that, in these parts of the Pacific, they take their karaoke seriously. Consequently, Guambat has learned to keep his mouth shut whenever a karaoke microphone is around.

Still, the following NYT story came as a bit of a shock, but only a bit.

Sinatra Song Often Strikes Deadly Chord

The authorities do not know exactly how many people have been killed warbling “My Way” in karaoke bars over the years in the Philippines, or how many fatal fights it has fueled. But the news media have recorded at least half a dozen victims in the past decade and includes them in a subcategory of crime dubbed the “My Way Killings.”

The lyrics, written by Paul Anka for Mr. Sinatra as an unapologetic summing up of his career, are about a tough guy who “when there was doubt,” simply “ate it up and spit it out.” Butch Albarracin, the owner of Center for Pop, a Manila-based singing school that has propelled the careers of many famous singers, was partial to what he called the “existential explanation.”

“ ‘I did it my way’ — it’s so arrogant,” Mr. Albarracin said. “The lyrics evoke feelings of pride and arrogance in the singer, as if you’re somebody when you’re really nobody. It covers up your failures. That’s why it leads to fights.”

Karaoke-related killings are not limited to the Philippines. In the past two years alone, a Malaysian man was fatally stabbed for hogging the microphone at a bar and a Thai man killed eight of his neighbors in a rage after they sang John Denver’s “Take Me Home, Country Roads.” Karaoke-related assaults have also occurred in the United States, including at a Seattle bar where a woman punched a man for singing Coldplay’s “Yellow” after criticizing his version.

It's a most entertaining story and you should read the whole thing.

And whenever next Guambat hears a crooning karaoke singer belting away like Ole Blue Eyes, Guambat will remain quietly content to let him do it his way.

Another Western Sheriff takes law into own hands

What's with the cowboy Sheriffs out West? First there was Arizona's Maricopa County's Sheriff, now this one from Texas.

Nurse to Stand Trial for Reporting Doctor

Mrs. Mitchell is scheduled to stand trial in state court on Monday for “misuse of official information,” a third-degree felony in Texas.

Mrs. Mitchell and Mrs. Galle had worked a combined 47 years at Winkler County Memorial Hospital here, most recently as its compliance and quality improvement officers.

It was not long after the public hospital hired Dr. Arafiles in 2008 that the nurses said they began to worry. They sounded internal alarms but felt they were not being heeded by administrators.

Frustrated and fearing for patients, they directed the medical board to six cases “of concern” that were identified by file numbers but not by patient names. The letter also mentioned that Dr. Arafiles was sending e-mail messages to patients about an herbal supplement he sold on the side.

Mrs. Mitchell typed the letter and mailed it with a separate complaint signed by a third nurse, who wrote that she had resigned because of similar concerns about Dr. Arafiles.

When the medical board notified Dr. Arafiles of the anonymous complaint, he protested to his friend, the Winkler County sheriff, that he was being harassed. The sheriff, an admiring patient who credits the doctor with saving him after a heart attack, obtained a search warrant to seize the two nurses’ work computers and found the letter.

The hospital administrator, Stan Wiley, said in an interview that Dr. Arafiles had been reprimanded on several occasions for improprieties in writing prescriptions and performing surgery and had agreed to make changes. Mr. Wiley, who said it was difficult to recruit physicians to remote West Texas, said he knew when he hired Dr. Arafiles that he had a restriction on his license stemming from his supervision of a weight-loss clinic.

In a surprise inspection last September, state investigators found several violations by Dr. Arafiles and concluded that the hospital had discriminated against the nurses by firing them for “reporting in good faith.”

Dr. Arafiles, 47, who attended medical school in his native Philippines and trained in Baltimore and Buffalo, said his lawyer had advised him not to talk. “I’ve been brutalized and abused,” he said. “I’m the victim in this case, and that is all I can say.”

Sheriff Roberts, who has held the post for 18 years, said the state would show that the complaint had been filed in vengeance. “If it’s made to destroy somebody’s reputation or forcing them to leave town,” he said, “then I don’t believe it is good faith.”

POSTING POST SCRIPT: Nurse Whistle-Blower Not Guilty for Reporting Doctor

A Texas jury has found veteran nurse Anne Mitchell not guilty of harassment.

Her lawyer, John H. Cook IV, announced the verdict today on the fourth day of the trial in Andrew, Texas. Jurors took less than an hour to reach their verdict. "But there was great damage done in this case, and this does not make them whole."

OK, the wrongeed nurse has been wrecktified, but what about the wrongor?

Commentary: Give sheriff and DA own medicine By RICK CASEY HOUSTON CHRONICLE

Now it's time for the sheriff who investigated her and the district attorney who prosecuted her to be brought to justice. We can only fantasize.

The sheriff wrote the Texas Medical Board asking for a copy of the anonymous letter for a criminal investigation. Medical Board officials assumed he was investigating the doctor, according to a spokeswoman.

In a letter to him, they said that under the law the letter could not be released except to a law enforcement official “conducting a criminal investigation of a license holder of the TMB.” Nurses are not licensed by the Medical Board.

“It is our understanding that your agency is a bona fide law enforcement agency and is conducting a criminal investigation of a license holder of the TMB,” the letter said, adding, “If we are incorrect in any of these understandings , please advise us immediately.”

Instead of correcting the board's assumptions, the sheriff used the letter to identify the nurse who was over 50 and had been with the hospital since the 1980s. He obtained a search warrant of her computers and found a copy of letter.

He also questioned all the patients to whom the complaint referred.

On June 1 hospital officials abruptly fired Mitchell and Vickilyn Galle, who had admitted to helping draft the complaint.

Ten days later the two women were indicted on charges of felony “misuse of official information,” which carries a sentence of up to 10 years.

Within weeks however, District Attorney Mike Fostel offered a deal: The indictment would be dropped if the women agreed not to sue the county or its hospital.

Smart man, but it didn't work. The nurses filed a federal lawsuit.

But what about the sheriff and the prosecutors, who appear to have engaged in “misuse of official information” to indict two women who were trying to protect patients?

History offers little hope that the state or the bar will hold them accountable.

Tobin Hood tax??

As Guambat mentioned in a post last November, world leaders (except in America) were calling for imposition of what was then termed a "Tobin tax".

As explained in the post, the idea was the brainchild of James Tobin, an American economist, Noble Prize winner. He came up with the idea back in the 1970's. He proposed a minuscule tax, at least as measured on a per transaction basis, on currency transfers to discourage purely speculative gambits without interfering with the real business of currency transfers.

The current idea is to attach it to derivatives to discourage the speculative volatility seen in the markets and the speculative bubbles that have predominated in financial instruments of late.

Curiously, we now, suddenly, are seeing it caste as a "Robin Hood tax".

Robin Hood banking tax 'would raise billions'

Last month, the World Economic Foundation gave its backing to a levy on financial institutions that would be used to help bail out banks in any future crisis. The call was backed by politicians and the International Monetary Fund (IMF) at its gathering in Davos.

Meanwhile, the European Union has been calling on the IMF to back the plans for a so-called "Tobin Tax" on international transactions.

The tax, named after the Nobel Prize-winning economist James Tobin, was originally designed to raise funds for developing nations, but many supporters now say it is one way to ensure that banks do not take excessive risks that could trigger another financial crisis.

Under the Robin Hood Tax plan, the tax would not be levied on banks' transactions with their high street customers.

The outcome of a debate is all about how you frame it. Curiously, the people framing the debate as a Robin Hood matter are not people opposed to the idea. Guambat says "curiously" because he is certain that anything as populist sounding as a Robin Hood anything is bound for derision.

It appears the Robin Hood proponents are all from the lands of the Sheriff of Nottingham:

A coalition of charities, unions and aid agencies have called on the UK's political parties to support a global "Robin Hood tax" on financial transactions that could raise up to £250bn every year to fight poverty, protect public services and tackle climate change.

Guambat reckons they ought better be advised.

earning big money in the private sector

Perhaps taking a page out of the Australian Wheat Board's book (and whatever became of that?), Scott Anthony Walker, a 36 year old ex-Australian Army soldier, has been jailed for nine months in the US for his role in a $US900,000 Afghanistan security contract kickback scandal.

Walker took a job as security co-ordinator in Kabul with engineering companies Louis Berger Group and Black & Veatch.

The companies, as a joint venture, won a $US1.4 billion ($A1.62 billion) US government contract and Walker used his position on a committee to attempt to solicit $US900,000 in kickbacks from private security vendors seeking subcontracts.

After leaving the Australian Army, Walker was lured to Afghanistan by the prospect of earning big money in the private sector.

The bloke should have stayed in Australia: AUSTRALIANS' individual wealth rose by an average of more than $10,000 in the last three months of 2009, data from the Reserve Bank revealed on the same day as the share market took its worst plunge in nine months.

And the bloke definitely should have gone into banking, instead:

Goldman Chief Gets Bonus of Only $9 Million in Record Year

The award is well below the $68 million bonus Mr. Blankfein received in 2007, even though 2009 was a record year for the Wall Street bank.

Guambat will lie awake tonight in his burrow fantasizing what it must be like to make $750.000.00 PER MONTH. In a bad year!

Commentary: J.P. Morgan's bonus is low by Wall Street standards

Jamie Dimon's paycheck may be the biggest blow to Wall Street reform this year.

The chairman and chief executive of J.P. Morgan Chase & Co. was awarded a $17 million bonus

The bonus, which is for 2009, is at a level far below previous bonus paydays for Dimon who collected $27.8 million in 2007 and $39.1 million in 2006. But the bonus is up from 2008, when Dimon didn't collect a bonus at all, just a $1 million salary.

Deleveraging by default

One of the aspects of going bust and bankrupt is that your debts are discharged. That is not just an economic consequence, it is a balance sheet event.

This plainly obvious fact hit Guambat smack dab twixt the eyes when he read it in this very easily read interview with one of the economic authors du jour in a post in the Real Time Economics blog in the WSJ.

The economist is University of Maryland Professor Carmen Reinhart, co-author of one of the most important economics books of 2009, “This Time Is Different: Eight Centuries of Financial Folly,” a catalogue of financial crises, their causes and consequences. The book was written with her co-author, Harvard Professor Kenneth Rogoff, both of them former International Monetary Fund economists.

Here are some excerpts:

Q&A: Carmen Reinhart on Greece, U.S. Debt and Other ‘Scary Scenarios’

REINHART: There are a lot of scary scenarios out there. Take governments that were virtuous governments, and continue to be virtuous. I’m talking about Ireland now. Their public debts were trending down and they have acted quickly and they’re credible. But external debt in the private sector is huge, more than 300% of GDP. In a crisis environment, private debts become public debts pretty quickly.

It is the pattern that has been prevalent in the past, that these major financial crises have been followed by an afterwave of debt crises.

What lies ahead is a rough patch. We are going to have a period of subpar growth. We’re all in agreement we’re going to have a recovery. Everything points to a recovery. But debt is very much at the forefront of the subpar growth. There are public debt issues and private debt issues. There is still a lot of serious deleveraging that lies ahead of us. For households, deleveraging implies curbs on spending. And don’t forget that households have been the engine of growth during recoveries from more recent past recessions. Households are overstretched.

WSJ: But households have started to make some progress on deleveraging.

REINHART: How is that being achieved? Not entirely by repayment, but importantly also by default. And default has lasting consequences.

And we have a prodigious buildup in public debts and that prodigious buildup in public debts begets uncertainty in the private sector about future taxes and public sector benefits. If you’re a firm, you become more cautious about investing. If you’re a household with long-term plans, you’re also more careful. Debts are a big drag on our economy right now, and that is not going to go away quickly.

WSJ: Your research shows that when public debt hits about 90% of GDP, that is almost like a threshold for slow growth. There is some disagreement about where we are on that spectrum. If you take just debt held by the public, it is in the 60s. But if you look at all debt, gross debt, including debt held by government agencies like Social Security, it’s much higher. Where are we on that spectrum?

REINHART: Debt is debt. We’re very close to that 90%. Other government agencies are holding government debt and netting that out, but in the end the federal government is going to be liable. And gross debt of the federal government still doesn’t take into account the massive guarantees (by government-owned Fannie Mae and Freddie Mac). If anything, 90% is a generous measure.

What the data seem to reveal is that at lower ranges of debt, you really can’t make a link between debt and growth. But once you hit a certain threshold, you hit a wall. You can pile on the debt for a while, and you’re not seen as risky. You can accumulate a certain amount of debt without a threat to your debt sustainability. But then you reach a point where that debt sustainability is called into question. It becomes an issue.

And, for Guambat at least, all that academic talk needs a place to roost in the real world. Maybe it's roosting in places like Colorado Springs, Colorado:

Colorado Springs cuts into services considered basic by many

This tax-averse city is about to learn what it looks and feels like when budget cuts slash services most Americans consider part of the urban fabric.

More than a third of the streetlights in Colorado Springs will go dark Monday. The police helicopters are for sale on the Internet. The city is dumping firefighting jobs, a vice team, burglary investigators, beat cops — dozens of police and fire positions will go unfilled.

The parks department removed trash cans last week, replacing them with signs urging users to pack out their own litter.

Neighbors are encouraged to bring their own lawn mowers to local green spaces, because parks workers will mow them only once every two weeks. If that.

Water cutbacks mean most parks will be dead, brown turf by July; the flower and fertilizer budget is zero.

City recreation centers, indoor and outdoor pools, and a handful of museums will close for good March 31 unless they find private funding to stay open. Buses no longer run on evenings and weekends. The city won't pay for any street paving, relying instead on a regional authority that can meet only about 10 percent of the need.

"I guess we're going to find out what the tolerance level is for people," said businessman Chuck Fowler, who is helping lead a private task force brainstorming for city budget fixes. "It's a new day."

"How are people supposed to live? We're not a 'Mayberry R.F.D.' anymore," said Addy Hansen, a criminal justice student who has spoken out about safety cuts. "We're the second-largest city, and growing, in Colorado. We're in trouble. We're in big trouble."

Read more: http://www.denverpost.com/news/ci_14303473#ixzz0eh0GoMex