The Guardian's Round-up on Moore's 9/11
http://film.guardian.co.uk/news/story/0,12589,1255850,00.htm Press review 'A dangerous man to flirt with' Commentators from left and right have been working hard to explain the importance and possible implications of the Fahrenheit 9/11 phenomenon. Here's what they had to say ... Wednesday July 7, 2004 The Guardian Mr Moore is enthusing the anti-Bush movement and that is a problem for John Kerry. Mr Kerry knows that in order to win, he has to appeal to middle America which means distancing himelf from his Massachusetts liberal background ... Michael Moore will help John Kerry to pile up huge majorities in Georgetown, Hollywood and Manhattan. But in Michigan, Missouri, Ohio and Pennsylvania, there will be a lot of disapproval. Many voters will turn against those whom they suspect of not only trying to trash the president, but American values and America itself. Whatever his own objectives, Michael Moore could help George Bush to be re-elected. Bruce Anderson, The Independent For most people on the left, Moore is welcome news. Some of us, however, have had enough ... When Moore actually cracks jokes, as he does in Downsize This! it becomes clear that his knack for comedy is shockingly third-rate. In this book (published five years after 1991) Michael Moore slaps his thigh over such laff riots as Barney the dinosaur, John Tesh and the guy responsible for the little silver tape you can't get off the CD box. Hey Mike, for your next book: airline peanuts, and how hard they are to open. It'll kill. Daniel Radosh, Salon.com Michael Moore responds to Radosh's article: This online magazine called Salon is sponsored and presented by Borders Books and Music, the nation's second largest bookstore chain. Last September, while on my book tour for Downsize This, Borders prohibited me from speaking at a scheduled event in their New York City store. They took this action because two days earlier I had voiced my support for the bookstore employees union at their Philadelphia store ... Salon chose not to inform you of this. Michael Moore, letter to Salon Mr Moore is a dangerous man to flirt with ... The Republicans are citing him as proof of their charge that the Democrats are a coalition of the wild-eyed. If they have any sense , they may even steal a Moore cinematic technique: show the Democratic elite traipsing along the red carpet to see Fahrenheit 9/11 and then cut to a grainy shot of Mr Moore telling Britons that Americans are possibly the dumbest people on the planet. Lexington column, the Economist The success of [Fahrenheit 9/11] proves the existence of an anti-establishment genre which is an increasingly profitable part of the entertainment industry. [...] The fact that political documentaries are gaining such notoriety is partly down to their directors' attempts to show an angle on the news that the media don't traditionally cover. It might also be due to favourable attitudes to change on the part of the public. Perhaps healthy cynicism, at one point the exclusive domain of leftist activists, will become widespread as films like Moores reach ever-larger audiences. Nomi Prins, La Vanguardia If Michael Moore had had his way, Slobodan Milosevic would still be the big man in a starved and tyrannical Serbia. Bosnia and Kosovo would have been cleansed and annexed. If Michael Moore had been listened to, Afghanistan would still be under Taliban rule, and Kuwait would have remained part of Iraq. And Iraq itself would still be the personal property of a psychopathic crime family, bargaining covertly with the slave state of North Korea for WMD. You might hope that a retrospective awareness of this kind would induce a little modesty. To the contrary, it is employed to pump air into one of the great sagging blimps of our sorry, mediocre, celeb-rotten culture. Rock the vote, indeed. Christopher Hitchens, Slate The film should make the media blush for its torpor and fake judiciousness and embedment with the administration. Moore displays footage never before seen of events most Americans know nothing about, unless they read The Nation, because the media haven't told them ... Moore's critics are going over the movie frame by frame, but he's phrased his most controversial contentions, about the Saudi flights, carefully. He doesn't actually say they took off while the airports were closed, and he doesn't say the bin Ladens weren't interviewed, although a viewer could get that impression. Katha Pollitt, The Nation [Moore]'s America has the violence and cupidity, the social injustice and single-minded religiosity, the fearmongering and the feckless foreign policy that Europeans have come to expect from a nation of gun-slinging cowboys and money-grubbing capitalists. But Moore ... also has the energy and irreverence and directness that many Europeans find so inspiring and appealing about Americans. Christopher Dickey, Newsweek, on Moore's popularity in Europe As a film critic
Re: query: trickle-down economics
Reverse-Robinhood? -Original Message- From: PEN-L list [mailto:[EMAIL PROTECTED] On Behalf Of Devine, James Sent: Thursday, June 24, 2004 11:39 PM To: [EMAIL PROTECTED] Subject: [PEN-L] query: trickle-down economics does anyone know of a good synonym for trickle-down economics besides supply side economics or Reaganomics or horse and sparrow economics? jd
Re: Options expensing
First, I must say I'm still blushing over Yoshie's generous compliments. Second, stock options should be expensed. They are a component of employee compensation just like salary or cash bonuses. Ironically, every congressional and corporate debate to the contrary uses the argument that stock options ARE compensation as the reason for them NOT to be treated AS compensation. As it stands, corporations can deduct stock options as wages on their income tax returns. They have no difficulty determining stock option values for this purpose. Yet, the related costs don't impact net income. The result is tax liability reduction and net earnings overstatement. Senator Joseph Lieberman last year argued that attempts to place a precise value on stock options will only confuse investors. (The same logic - still in place - allowed Enron and other corporations to abuse derivative trading disclosure) Apparently, confusion is a greater evil than deception. That selective use of stock option valuations causes significant earnings inflation. Even Alan Greenspan (a man oblivious to the inequity of the entire tax system) noted the result of the practice was corporate earnings inflation of 6-9%. This is beside the fact that 66% of US-based corporations pay no federal taxes anyway. It is interesting that the writer of the article is on Intel's policy board. Last August, Intel said it would have posted net income of $606 million for the second quarter of 2003, instead of the $896 million it did post if it had used the FASB's suggested fair-value method. But, hey, what's a 48% lie between corporate and congressional friends? In the end, the issue is one of integrity. Expensing expenses provides a more accurate picture of a company's true financial condition, period. For various Congressional factions to impede the transparency process is to enforce continued corporate mugging from the investing public. Nomi Prins -Original Message- From: PEN-L list [mailto:[EMAIL PROTECTED] On Behalf Of Sabri Oncu Sent: Friday, May 28, 2004 7:09 PM To: [EMAIL PROTECTED] Subject: [PEN-L] Options expensing What does our Nomi say about this? Best, Sabri +++ Congress is right to challenge options expensing By JAMES GLASSMAN Financial Times / May 27, 2004 Friday A battle has erupted between the US House of Representatives and the Senate over an accounting rule that could profoundly affect the way fast-growing companies do business and whether the economy continues to thrive. The issue is how to treat stock options, but the point of contention is whether questioning the actions of a private accounting board is interference in the work of independent professionals or the responsible discharge of a legislator's duties. Companies award options that executives and other workers can cash in years later if the stock price rises. Since no one knows what the options will be worth, it is impossible to value them accurately at the time they are granted. Yet the Financial Accounting Standards Board, the private body that sets US accounting rules, has been waging a long war to require options to be treated as expenses. In 1972 the FASB's predecessor ruled that options need not be treated as expenses because of the concerns that (they) could not be reliably valued. But now the bureaucratic wheels are turning. The FASB issued its official proposal on March 31, with comments due by June 30. If it has its way it will institute options-expensing next year. Under current rules companies can choose to provide information in their financial reports about their options obligations, to estimate the expense without placing it on their profit-and-loss statements, and to show the impact on earnings as it occurs. Eliminating that choice is very worrying for policymakers, not to mention the many US corporate leaders who rely on options to attract motivated employees. With the FASB's new rule in effect, earnings for companies in the Standard Poor's 500 stock index would have been 11 per cent lower in 2003 and 19 per cent lower in 2002. Executives say they will have to cut or eliminate their options programmes as a result. George Chamillard, chair man of Teradyne, the chipmaker, says options have become an important recruiting tool for Asian companies, and the US is losing some of its brightest engineers. It was these concerns that earlier this month caused an influential subcommittee of the House of Representatives to approve a bill that would stop the Securities and Exchange Commission, the main financial watchdog, enforcing the FASB rule. The bill would oblige companies to treat as expenses only the value of options granted to a company's top five executives. It would also exempt small companies from having to treat options as expenses and would delay expensing by new companies for three years. The bill, introduced by Richard Baker, the subcommittee's chairman, has a good chance of passing the House, but there are objections
my Guardian piece: Truth, justice and corporate sway
http://www.guardian.co.uk/business/story/0,3604,1208340,00.html Truth, justice and corporate sway Nomi Prins Monday May 3, 2004 The Guardian Mark Twain once said: We have a criminal jury system which is superior to any in the world; and its efficiency is only marred by the difficulty of finding 12 men who don't know anything and can't read. More than 130 years later that is still true. But added to the stipulation is the requirement that the jurors live under a rock. In America, the more complicated the crime the less likely jurors will reach a conviction. If lawyers can bamboozle them sufficiently, a mistrial is as good as a victory. This works to the advantage of white collar criminals in intricate cases, usually those involving the most money extorted in the most convoluted ways. Take the second trial of Frank Quattrone, former CSFB investment banker, which began on April 13 and rested last Wednesday. His first trial resulted in a hung jury and a mistrial. In trial number two, prosecutors linked Quattrone's IPO churning activities to those of fellow brokers and stray emails. This increased the case's complexity and the likelihood of a similar outcome. Last month, another high profile corporate criminal case ended in mistrial. After six months, thousands of documents and hundreds of hours of court time, Tyco's former chief, Dennis Kozlowski, emerged with a smile and a presidential wave. The press was as much at fault for that mistrial call as the 79-year-old juror they vilified for her actions. It was the Wall Street Journal and New York Post which crossed conventional journalism lines by exposing her personal details. Trying criminal cases requires selecting 12 unbiased jurors. They have to reach a unanimous decision. They must also possess as little knowledge about the case as possible. Finding people who fit the bill is hard the first time; the second, it requires locating 12 cave dwellers. All but impossible for a Tyco retrial. Mistrial details were blasted across every big media outlet. Gossip about Kozlowski's $6,000 shower curtains, $2m parties and mistresses stoked many water cooler conversations. In a country fixated with reality shows, involvement in a highly publicised trial fulfills many people's desire for the spotlight. This is incongruous with juror impartiality. Indeed, after the Tyco mistrial, several jurors jumped on the bandwagon. One wrote an account for Time magazine; another awaits a book deal and others appeared on television. Meanwhile, the US press waxes oddly optimistic about corporate criminal justice. After Tyco's mistrial announcement, the New York Times ran two back-to-back stories extolling white collar victories. The reality is different. Because of the nature of the jury system, there have been precious few important convictions arising from actual proceedings. Mostly, closing complex high profile cases, such as that against Enron's former financial chief Andrew Fastow, has occurred via out of court deals. They were not litigated. Conversely, two of the biggest scandals to see courtrooms were declared mistrials. A third, Adelphia, tried to follow suit. The cases won in court were straightforward, involving simple actions such as obstruction of justice, not mountains of documents about how money was moved around a firm and out to offshore partnerships. That was as much Martha Stewart's problem as her poor choice in confidants. Change is possible, though few judges want to stretch boundaries. According to David Graeven and Mike Tiktinsky, jury selection consultants at Trial Consulting Behavior, the most important policy remedy is treating jurors like adults. This means prosecutors providing clearer information and judges imposing stricter time limitations. Jurors should be allowed to discuss material during the trial, take notes and ask questions. The most byzantine accounting cases should be handled like securities fraud - tried first by judges. Trying corporate crimes requires significant time for inadequately informed jurors. That's why big trials have ended as a result of technicalities, not decisions. This works in favor of white collar criminals and leaves intact the system that enables their crimes because the system is never on trial. It provides no-fault emergence from bankruptcy. That's the wrong side of justice. Nomi Prins is a former banker and the author of Other People's Money: The Corporate Mugging of America. Guardian Unlimited Guardian Newspapers Limited 2004
My Newsday Op-Ed: Give Retirees More Financial Security
http://www.newsday.com/news/opinion/ny-vpheni43755841apr14,0,2045400.story?coll=ny-viewpoints-headlines Give retirees more financial security BY NOMI PRINS Nomi Prins, a senior fellow at the public policy group Demos, is the author of Other People's Money. Ellis Henican is off. April 14, 2004 It's a scary world if you want to live a long life. All three forms of retirement benefits are under attack: Social Security, Medicare and private pension plans. Either they're bombarded by rumors of eventual depletion or undergoing enormous restructuring. But the real question isn't whether there's enough money to secure dependable retirement. It's who's taking responsibility for it at the federal and corporate level. We heard Social Security will face a $3.7-trillion shortfall within 75 years. But that didn't stop Federal Reserve Chairman Alan Greenspan from seizing on an opportunity to further assail the program. Missing from his alarm-inducing suggestions of slashing benefits was the fact that the Bush administration's tax cuts, which Greenspan supported, will create a shortfall three times greater over the same period. That math indicates money is available; it's a matter of appropriation. Today, 47 million Americans receive Social Security. About a third get 90 percent of their income from the program. It's criminal for anyone who doesn't have to rely on this average $900 per month stipend for survival to propose anything less than preserving it by all means possible. Then there are the health-care lies. Heralded as the pinnacle of Medicare overhaul, last year's Medicare Modernization Act introduced a prescription drug bill, supposedly to afford seniors cheaper drugs. But, par for an administration skilled in deceit, it passed under false pretenses. Said Representative Henry Waxman (D-Calif.), It's outrageous that this administration went out of its way to keep true cost estimates from Congress because they knew the bill wouldn't have passed otherwise. Now, there's a brewing investigation into the hidden $140 billion in costs. So what does the bill actually do? It restricts negotiations with drug companies for better prices or group rates on behalf of recipients and subsidizes private insurers up to 20 percent to administer the program. It's blatant corporate welfare. Also released were reports that Medicare, our second largest social insurance program, is at risk of insolvency. But as Medicare Rights Center Director Diane Archer says, We can afford Medicare, if we have the political will to pay for it. Turning to private pension plans: Corporations have been reducing defined-benefit (pre- specified, guaranteed payout) plans for years. By doing so, they are shifting retirement risk to employees. Meanwhile, they are weeping for legislation to further decrease responsibility to their retiring workforce. It's as if they'll stop outsourcing to India if only they can minimize their pension expense equations. The fact remains that companies with under-funded pensions were once over-funded. Yet, instead of surpluses being socked into a reserve fund for retirees, they became obscene CEO payouts. Some CEOs still make more than 1,000 times the average worker's salary. In addition to rising health costs and shrinking benefits, middle-income seniors witnessed a 36-percent drop in retirement wealth between 1983 and 1998. These people, who generally had children later in life, are facing skyrocketing tuition costs, often taking financial and physical care of parents and facing their own retirement uncertainty. So they borrow to make ends meet, an increasingly expensive endeavor. Banks responded to this desperation by steadily increasing credit-card rates. Meanwhile, they pay almost no interest on things like Federal Deposit Insurance Corp.-insured money-market accounts. Greenspan neglected suggesting they change that practice. Banks are offering uninsured mutual funds at uncapped advisory fees as alternative savings vehicles. There are solutions to securing future retirement. As Sen. Jon Corzine (D-N.J.) proposed, redirecting tax cuts for the rich into a Social Security reserve fund would be one. Instilling a progressive tax that has Bill Gates paying proportionately into the system would be another. We need a Medicare bill that uses pharmaceutical profits to defray consumer costs. And let's be allowed to buy cheaper drugs in Canada. Corporations should shoulder more retirement risk. Meanwhile, individuals must increase risk awareness through education and independent financial advice. In the end, more financially secure seniors become consumers instead of debtors. That helps the whole economy. Copyright 2004, Newsday, Inc.| Article licensing and reprint options
Re: WP: The Fed's Brilliant Oversight of Banking
Yes, and how many financial scandals does the entire banking community have to be involved in before we bring back Glass-Steagall? Gutting regulations and shirking public responsibility for the resultant fall-out should be regarded with the same type of thirst for penance and punishment as say, roasting Martha Stewart. Yet, Congress suffers from an equal dose of amnesia and inculpability regarding the immense financial instability caused by the so-called Financial Modernization Act. Similarly, the FCC has only rejected one telecom merger and is destined to bless the next mega-marriage of Cingular and ATT Wireless. Nomi -Original Message- From: PEN-L list [mailto:[EMAIL PROTECTED] On Behalf Of Michael Pollak Sent: Wednesday, March 17, 2004 7:03 PM To: [EMAIL PROTECTED] Subject: [PEN-L] WP: The Fed's Brilliant Oversight of Banking http://www.washingtonpost.com/ac2/wp-dyn/A64913-2004Mar16 Don't Expect Fed To Limit Banks' Bad Behavior By Steven Pearlstein Wednesday, March 17, 2004; Page E01 How many financial scandals does a banking company have to be involved in before the Federal Reserve will finally conclude it isn't up to the task of taking control of yet another big bank? We still don't know the answer to that question, given the Fed's boneheaded decision last week to approve Bank of America's purchase of FleetBoston, creating a behemoth with nearly $1 trillion in assets. In a single stroke, the Fed managed to reinforce its reputation as a patsy for the banking industry while undermining efforts of other regulators to get tough with corporate wrongdoers. Yes, this is the same Bank of America that agreed this week to pay $375 million, and reduce fees by $80 million, to settle civil charges that it defrauded mutual fund investors by helping a big hedge fund engage in illegal trading. It is the same Bank of America that last week agreed to pay a $10 million fine for withholding and destroying documents requested by the Securities and Exchange Commission. That's in connection with an ongoing investigation into whether B of A's securities unit engaged in illegal trading based on inside information about its upcoming analysts reports. It's the same Bank of America that helped Enron structure one of its infamous off-balance-sheet entities, then helped beat back an accounting reform that would have forced disclosure of such scams. The same Bank of America that was so proud of the one-stop service it provided to Adelphia Communications -- loans, securities underwriting, strategic advice and positive analyst reports -- that it actually detailed it in a case study it used with its new employees. The same Bank of America that helped dairy giant Parmalat place more than $1 billion in public and private debt, and now has three former employees under investigation by Italian authorities. Confronted with this embarrassing rap sheet, and a requirement that it consider the bank's compliance history and management competence, the Fed's opinion approving the FleetBoston purchase is a model of sophistry. Rather than focus on the past, the Fed's six governors lavish praise on Bank of America for cooperating with investigators and taking steps to make sure it doesn't happen again. They also reiterate their faith in the Fed's nifty new system for monitoring financial giants, which, as far as I can tell, consists of reading Eliot Spitzer's press releases. As is their wont, Fed officials declined to discuss their FleetBoston decision. But I certainly got a different take yesterday from another regulator who has spent months digging into Bank of America: They've been very cooperative and done a good job in dealing with this mess. But even now there's a striking absence of a coherent compliance culture. Given the fact that the Fed has disapproved only three of more than 350 bank mergers since 1996, the FleetBoston decision hardly comes as a surprise. The Fed reserves its regulatory zeal for cases like the 2002 proposal from Northern Star Financial, the 417th largest depository institution in Minnesota, when it apparently threatened the integrity of the entire U.S. financial system with its proposal to buy the much larger First Federal Savings, the state's 174th largest. But for big guys who have always looked to the Fed for political protection and regulatory coddling, the message from the FleetBoston decision is clear: Mergers are too important to let a few instances of corporate fraud stand in the way. All you have to do is launch an internal investigation, blame a few rogue employees, pay a fine that shaves a few pennies off quarterly earnings and promise not to let it happen again. Next up: J.P. Morgan Chase. Thanks to its leading role in Enron and other scandals, Morgan is already required to check in with its
Re: Iraq banking
The Trade Bank of Iraq, as led by JP Morgan Chase (who has never played this type of role on the international stage before) is a mechanism designed to achieve complete control over Iraq's money flow from an: a) lending b) external (oil) revenues extraction, and c) internal investment perspective. It is comprised by a consortium of banks mostly emanating from countries whose governments supported the war. It did not even pretend to include a single local bank. The operation of this Trade Bank would be akin to having all finances surrounding US trade controlled by, say, Deutschebank - except more extreme - Deutschebank owns US domiciled subsidiaries which pay taxes here. The new bank law of Iraq ensures that: a) JPM Chase will become Iraq's number one lender (Argentina, of course, didn't work out so well for them). It will be one of the two banks 'fast-tracked' by virtue of that lending. b) Most of the Iraqi local banks will be unable to make decisions about their own future or business strategy because up to 50% (read: no LESS than 50%) will be owned by some combination of international banks. Many will merge, first or during, these external bank takeovers. c) Any Iraqi local bank that is not taken over 50% by international banks, will have to compete with an 'unlimited number' of foreign bank subsidiaries with far greater lending capabilities. Banks in this situation will fold. As a related point, Iraqi oil revenues will be doing triple collateral duty: a) The external bank loans outpouring to Iraq will be collateralized by oil revenues. b) Already, the Ex-Im bank has announced its letters of credit will be collateralized by oil revenues. c) Much of the US financing of Iraq's 'liberation and reconstruction' is supposed to be offset by oil revenues. Expectations for those oil revenues went on a free-fall throughout 2003 (from $20 billion in March to $2.5 billion by year end. According to the administration, left over revenues, will belong to the 'people of Iraq.' Nomi -Original Message- From: PEN-L list [mailto:[EMAIL PROTECTED] On Behalf Of Michael Perelman Sent: Wednesday, January 07, 2004 1:45 PM To: [EMAIL PROTECTED] Subject: Re: [PEN-L] Iraq banking Nomi Prins is up on this subject. On Tue, Jan 06, 2004 at 11:09:10PM -0600, k hanly wrote: Here is a post from another list asking an economist about some rather interesting developments in Iraq.. Cheers, Ken Hanly One more question: As an economist, what do you envision would be possible consequences of both: (1) the newly-created Trade Bank of Iraq (Order 20) and its control by a US bank (JP Morgan will lead a group that includes 13 banks representing 13 countries to run the bank for three years); and (2) the new bank law of Iraq? (Order 40: Under the recently promulgated Iraq Banking Law, private banks may elect to sell a portion of their equity to domestic or foreign investors. The new banking law permits six foreign banks over the next five years the right to enter the Iraqi market. Two or more banks may be fast tracked, based on their agreement to accelerate the availability of local credit. An unlimited number of banks may purchase up to 50% of an Iraqi bank. Foreign banks may enter Iraq as branches, subsidiaries, representative offices, or through partnerships with Iraqi banks.) -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail [EMAIL PROTECTED]
Re: query: good will
Good Will, which is treated as a balance sheet asset, is technically the excess of the purchase price over the acquired company's book value of its equity balances ((primarily retained earnings and capital stock (from an accounting standpoint), and sometimes including treasury stock if the company being acquired has any, and all the same of the company's subsidiaries and minority interests if the company has any)) at the time of acquisition. -Original Message- From: PEN-L list [mailto:[EMAIL PROTECTED] On Behalf Of Devine, James Sent: Friday, November 14, 2003 6:10 PM To: [EMAIL PROTECTED] Subject: [PEN-L] query: good will how is good will measured by accountants? is it simply the difference between the stock-market valuation of a company and the reproduction cost of tangible assets? Jim Devine [EMAIL PROTECTED] http://bellarmine.lmu.edu/~jdevine
question on university corporate governance courses
Does anyone know anything about the number or nature of new corporate governance courses that have been added to undergraduate or MBA programs following the Enron/WorldCom scandals? Thanks, Nomi -Original Message- From: PEN-L list [mailto:[EMAIL PROTECTED] On Behalf Of Jurriaan Bendien Sent: Monday, October 13, 2003 7:43 AM To: [EMAIL PROTECTED] Subject: [PEN-L] Quote du Jour: Paul Bremer on economic justice I have to say that it is curious to me to have a country [like Iraq - JB] whose per capita income, GDP, is about $800 ... that a county that poor should be required to pay reparations to countries whose per capita GDP is a factor of 10 times that for a war which all of the Iraqis who are now in government opposed - Paul Bremer (in reply to a question whether, given Iraq's weakened economic condition, Kuwait and Saudi Arabia would accept a delay in the compensation payments related to Hussein's invasion - the external debt of Iraq is currently estimated at US$100 billion) Source: http://english.aljazeera.net/NR/exeres/9E792DC7-A1AD-4AC1-A291-D92E26178 F52. htm
Re: 30 yr. bond auctions
The political rationale was that due to the post-Clinton surplus, there was less need to issue as much Treasury debt (corporate debt, however, increased dramatically), so treasury auction sizes were reduced. Both the 3 year note (several years earlier) and the 30 year bond auctions ceased. In actuality, there had been a decline in demand for the 30 year for some time amongst corporations, agencies and investors, all of whom became more interested in churning debt than sitting on it long term, particularly as falling interest rates throughout the 2001 period increased the values of shorter term bonds more quickly. This decline in demand proceeded cessation; 30 year issuance had already been cut in half from $30 billion to $15 billion in 2000 and 2001. Plus, greater demand for the 10 year note created wider spreads between 10 and 30 year bonds, making it comparatively more expensive for the Treasury to borrow 30 year paper. -Original Message- From: PEN-L list [mailto:[EMAIL PROTECTED] On Behalf Of Michael Perelman Sent: Tuesday, October 07, 2003 12:35 PM To: [EMAIL PROTECTED] Subject: [PEN-L] 30 yr. bond auctions What was the rationale (and the real reason) for ceasing the 30 yr. bond auctions? -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail [EMAIL PROTECTED]
Re: 30 yr. bond auctions
In theory, it could be construed as such. In reality, it only raised demand temporarily. Plus, no one trading believed long term corporate debt would do well if long term government debt wasn't, though it was certainly marketed aggressively and increased in volume. The fact remained that there was less demand for 30 year governments even before their issuance stopped, meaning less demand in general for long term paper, corporate or otherwise. So, though there was an increase in 30 year corporate issuance to try to fill the gap, in terms of liquidity and demand, it met a similar fate. And, that was before higher quality corporate issuers started getting downgraded or investigated throughout 2002. -Original Message- From: PEN-L list [mailto:[EMAIL PROTECTED] On Behalf Of Michael Perelman Sent: Tuesday, October 07, 2003 1:24 PM To: [EMAIL PROTECTED] Subject: Re: [PEN-L] 30 yr. bond auctions I had heard that it was also a subsidy, since it would raise the demand for long term corporate bonds by removing competing government bonds. Is that true? On Tue, Oct 07, 2003 at 01:13:40PM -0400, nomi prins wrote: The political rationale was that due to the post-Clinton surplus, there was less need to issue as much Treasury debt (corporate debt, however, increased dramatically), so treasury auction sizes were reduced. Both the 3 year note (several years earlier) and the 30 year bond auctions ceased. In actuality, there had been a decline in demand for the 30 year for some time amongst corporations, agencies and investors, all of whom became more interested in churning debt than sitting on it long term, particularly as falling interest rates throughout the 2001 period increased the values of shorter term bonds more quickly. This decline in demand proceeded cessation; 30 year issuance had already been cut in half from $30 billion to $15 billion in 2000 and 2001. Plus, greater demand for the 10 year note created wider spreads between 10 and 30 year bonds, making it comparatively more expensive for the Treasury to borrow 30 year paper. -Original Message- From: PEN-L list [mailto:[EMAIL PROTECTED] On Behalf Of Michael Perelman Sent: Tuesday, October 07, 2003 12:35 PM To: [EMAIL PROTECTED] Subject: [PEN-L] 30 yr. bond auctions What was the rationale (and the real reason) for ceasing the 30 yr. bond auctions? -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail [EMAIL PROTECTED] -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail [EMAIL PROTECTED]
Re: pensions legislation
Companies say that if nothing is done they will be forced to pour cash into their pensions next year. How tragic, that way they'd be forced to create longer term growth strategies instead of focusing on short term quarterly earnings announcements. Or say, contribute to employee pension plans instead of executive compensation. Companies would prefer as a solution a single rate based on corporate bonds. Such a rate would typically be higher than one based on Treasuries, easing their liabilities. Of course they would. Then, they could discount pension liabilities, at not just a higher rate than Treasuries, but one that is arbitrarily based on some ill-defined corporate interest rate for which there'd be tons of room to tinker. Corporate yield curves are less liquid than Treasuries and thus offer more opportunities to manipulate their values. Plus, from a balance sheet perspective, it would mean every company could effectively set their own individual pension calculation, with no common bar across corporate America, creating less transparency in a system that's been proven so sorely lacking in transparency to begin with. This measure and all prior versions of it, as I mentioned here a couple months ago, would allow corporations to rig pensions such that the worse the corporation performs, the less it would have to pay out in pension liabilities. In the process, workers would get screwed twice, once due to instability in their current jobs and salaries resulting from poor corporate performance, and the second time due to decreased pension payouts in the future. Nomi -Original Message- From: PEN-L list [mailto:[EMAIL PROTECTED] On Behalf Of Eubulides Sent: Monday, September 15, 2003 1:03 AM To: [EMAIL PROTECTED] Subject: [PEN-L] pensions legislation Bill Would Modify Pension Plan Rules By Albert B. Crenshaw Washington Post Staff Writer Monday, September 15, 2003; Page A06 Senate Finance Committee Chairman Charles E. Grassley (R-Iowa) plans to sponsor legislation that would require operators of pension plans to take into account the age of their workforce when computing pension liabilities. The proposal, which Grassley aides said could be marked up by the committee on Wednesday, is strongly opposed by companies that sponsor pension plans, though they agree that present law needs to be revised. Grassley said through an aide that his proposal has a solid core of bipartisan support in the committee and is important because workers need reliable funding of their pensions and employers need a reliable basis on which to calculate pension payments. The underlying issue involves funding of traditional pensions, called defined-benefit plans, which are insured by the federal government through the Pension Benefit Guaranty Corp. Many are underfunded under current market conditions, and the PBGC has expressed concern that a savings-and-loan-like crisis could emerge if nothing is done. The liabilities of a pension fund are computed by adding up its promised future benefits and discounting that sum back to the present using an interest rate as a discount factor. The lower the interest rate, the higher the present value of the liabilities and the more likely a plan will appear underfunded. Current law requires plan operators to base these calculations on the rate of the 30-year Treasury bond. But the long bond has been discontinued, and demand for those remaining in circulation has driven down their yield -- the current rate of return for a purchaser. Combined with the stock market's poor performance, the result as been a large number of badly underfunded plans. Congress temporarily eased the rules last year, but that expires at the end of December. Companies say that if nothing is done they will be forced to pour cash into their pensions next year. Companies would prefer as a solution a single rate based on corporate bonds. Such a rate would typically be higher than one based on Treasuries, easing their liabilities. Grassley plans to propose that, but only for three years. After that a corporate-based, interest rate yield curve would be phased in. The senator's plan, somewhat similar to one suggested recently by the Treasury Department, calls for pension operators to use a variable formula in calculating the present value of the benefits they have promised workers when they retire. This value -- the plan's liabilities -- is matched against its assets in determining whether the plan is adequately funded. The yield curve would mean using different interest rates to figure liabilities of workers of different ages, on the grounds that benefits promised to older workers must be paid sooner than those promised to younger workers and that timing difference should be taken into account. Janice M. Gregory of the ERISA Industry Committee, a group of large employers, called Grassley's idea undeveloped, untested and unknown. It's not something that will calm troubled waters, she said. As Gregory put it: You
Re: A question to Nomi
Sabri, The book is called Money for Nothing - The Corporate Mugging of America. It's being published by The New Press, the same publishers as for Doug's book, After the New Economy, and will be out Spring 2004. Here's part of the blurb that will be in the Spring catalog: In the first years of the Bush administration some of America's most prominent corporate executives cashed out billions of dollars of stock and stock options before driving their companies to ruin through fraud and bankruptcy. They left in their wake a tangle of lost jobs, depleted pensions and shattered lives. To write off the corruption as no more than unbridled greed on the part of a few is an oversimplification. Rather, as Nomi Prins shows in this devastating expose, corporate malfeasance resulted from a mixture of hollow legislation, a false sense of entitlement, and utter lack of accountability. Years of deregulation obliterated the rules of responsible corporate behavior, the stock market roared on the back of phony balance sheets; politicians and regulatory agencies were MIA. The result? Executives won and ordinary Americans lost. With the knowing eye of an insider, Nomi Prins uncovers the old boy networks and hot money flows between Wall Street, Corporate America and Capitol Hill and exposes the white wash of reforms brought in to control them. Nomi -Original Message- From: PEN-L list [mailto:[EMAIL PROTECTED] On Behalf Of Sabri Oncu Sent: Tuesday, September 09, 2003 8:07 PM To: [EMAIL PROTECTED] Subject: [PEN-L] A question to Nomi Hi Nomi, I was reading Doug's archives and there I saw Ian mentioning a book you wrote or are writing. Can you give me some information about it? Best, Sabri PS: My apologies to the rest for posting this to the list. My other machine died and with it gone Nomi's e-mail address.
Re: Pension question again
Kuttner generalized the amount by which certain corporations inflated pension projections as a percentage of total earnings, to all of them. This is not wrong, but should be considered accordingly. The circular effect of companies inflating pension assets based on stock values that were in turn inflated by the reporting of more profitable pension plan projections was indeed a bubble / bust factor. Companies like Verizon, IBM, Lucent, and GE always possessed pension assets that constituted a higher percentage of overall assets (due to decades of accumulation of combined contributions from employees and matched corporate plans). Having more assets to begin with meant that increasing projections of those assets inflated the balance sheets of those companies by more, some by as much as 15% in the late 1990s and 2000, as can be gleaned from their SEC filings. Also, those pension projections were reported net of taxes by the corporations, because they were not on funds being paid out. If you generalize completely, also not entirely accurate, you could do so by considering all the companies in the Dow Jones index. Pension shortfalls over the 2002 / 2003 period were about $300 billion. The market value loss for those companies was about $7 trillion from the March 2000 highs. So, pension shortfalls comprised almost 4.5% of the total market value loss. Adjusted for tax at about 40-50%, you'd have a ratio of around 7%, not counting what the total pension surplus value was for the year 2000. If anyone has that total pension surplus number for the year 2000, that'd be an interesting comparative stat to consider. Nomi -Original Message- From: PEN-L list [mailto:[EMAIL PROTECTED] On Behalf Of michael Sent: Sunday, September 07, 2003 9:01 PM To: [EMAIL PROTECTED] Subject: [PEN-L] Pension question again In the latest Business Week, Kuttner wrote: Project an unrealistically high rate of return and claim that the plan is overfunded. Then reduce contributions to the plan and divert the plan's assets to fattening the bottom line. This maneuver allowed corporations to hype reported earnings by 10% to 15% during the 1990s, which in turn contributed to the same stock market bubble that supposedly justified the inflated rate of return. When the bubble burst, pension plans found themselves underfunded. Does anybody (Nomi?) know about the data to support this statement. -- Michael Perelman Economics Department California State University michael at ecst.csuchico.edu Chico, CA 95929 530-898-5321 fax 530-898-5901
Re: Trade Question
You can't. US firms report foreign (and sometimes offshore) income and profits separately on their books, but unless they explicitly state they are using offshore profits to invest in specific US assets in the commentary sections of their SEC filings, there's no way to track that flow of funds. There's no explicit required accounting heading for that information. The BEA data gives the total direct foreign investment in US plants and equipment by industry, but doesn't specify how much of that amount is profit vs. say debt. However, you could compute the proportion of foreign debt by industry to foreign profits by industry and multiply that by that total investment figure to get a rough estimate of offshore profits invested in US PE. Nomi -Original Message- From: PEN-L list [mailto:[EMAIL PROTECTED] On Behalf Of Michael Perelman Sent: Monday, September 08, 2003 7:05 PM To: [EMAIL PROTECTED] Subject: Re: [PEN-L] Trade Question How could you identify the flow of funds within a corporation to know that question -- even if you had access to the books? On Mon, Sep 08, 2003 at 06:59:01PM -0400, Max B. Sawicky wrote: Int'l accounts were never my cup of tea. Can someone tell me how to answer this question (pls keep it simple; I'm not writing a dissertation on this) using the nat'l/int'l BEA data: how much of profits of U.S. firms earned from offshore operations are invested in plant and equipment in the U.S. of A.? thanks. -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail [EMAIL PROTECTED]
Re: Krugman on faux ferc fines
Right. Deregulation with a) more responsible federal oversight and b) a set of rules which would create a 'more robust transmission system' equals regulation, period. There's no point in debating the free market argument for deregulation while condemning its results. Doing so plays into the hands of people like Spencer Abraham who suggested that increasing the (still regulated) returns utilities receive for transmitting electricity, would somehow spur Wall Street investment and apparently a feeding frenzy of utilities and power marketers buying up the lines they all sold off during the past few years and upgrading them. This will not happen. Deregulation caused irresponsible mergers, hyper-debt, capital intensive speculative trading and manipulation operations, bankruptcies and power outages. In its wake, unregulated power marketers are selling assets left and right to stay solvent, and trying to back out of supply contracts with utilities in the process. The FERC has been hopeless and deliberately negligent in fulfilling any semblance of public responsibility (their self-ordained, but ignored job) by not fining power marketers sufficiently for proven manipulation, and upholding CA contracts signed during the height of the worst manipulation period. The fact that individual states, like Montana, are suing culprit companies, underscores the severe lack of federal accountability. The FERC, aside from being comprised of Bush appointees, hasn't even had all 5 of its commissioner seats filled for years. What's needed is legislation that compels any power or utility company to pay for, maintain, and update a portion of the country's transmission lines in every state in which it wants to be in the power business at all. PUHCA should not have been repealed. Doing so makes it less likely any energy or utility company will focus on low margin business like transmission. And in the absence of federal action, states should continue to plague power marketers with fraud lawsuits until more false profits are recouped, an uphill, but necessary battle. Nomi There is a theoretical case for a deregulated electricity market. But making such a market work, it's now clear, requires at least three preconditions. First, it requires a robust transmission system, yet the recent blackout made it clear that we have now created a system in which nobody has clear responsibility for the transmission network. Second, it needs a watchdog agency with adequate powers to prevent and punish price manipulation; FERC doesn't have those powers. Third, that watchdog must not be an agent of the very companies it's supposed to be policing. Enough said. -Original Message- From: PEN-L list [mailto:[EMAIL PROTECTED] On Behalf Of Eugene Coyle Sent: Tuesday, September 02, 2003 10:38 PM To: [EMAIL PROTECTED] Subject: Re: [PEN-L] Krugman on faux ferc fines This is a good column by Krugman but he still hasn't gotten over his training. He argues that there is a theoretical case for electric market deregulation when there is no such case. If you study enough Micro theory you are screwed for life. Gene Coyle Michael Pollak wrote: The New York Times September 2, 2003 Another Friday Outrage By PAUL KRUGMAN W hen the E.P.A. makes our air dirtier, or the Interior Department opens a wilderness to mining companies, or the Labor Department strips workers of some more rights, the announcement always comes late on Friday when the news is most likely to be ignored on TV and nearly ignored by major newspapers. Last Friday the Federal Energy Regulatory Commission, known as FERC, announced settlements with energy companies accused of manipulating markets during the California energy crisis. Why on Friday? Because the settlements were a joke: the companies got away with only token payments. It was yet another demonstration of how electricity deregulation has gone wrong. Most independent experts now believe that during 2000-2001, price manipulation by energy companies, mainly taking the form of economic withholding keeping capacity offline to drive up prices added billions of dollars to California's electricity bills. A March FERC report concluded that there had been extensive manipulation of prices in both the natural gas and electricity markets. Using methods widely accepted among economists, the California Independent System Operator which operates the power grid estimated that withholding by electricity companies had cost the state $8.9 billion. This estimate doesn't include the continuing cost of long-term contracts the state signed, at inflated prices, to keep the lights on during the crisis. Yet the charges energy companies agreed to added up to only a bit more than $1 million. That is, the average Californian was bilked of more than $250, but the state will receive compensation of about 3 cents. Was the fix in? Given the Bush
Re: Iraq: JP Morgan takes over U.N. role (no joke)
It is no surprise that JPM Chase bagged the lead role running Iraq's financial system. When in doubt about how to extend credit on egregious terms (which will happen), controlling the entire banking mechanism helps. JPM Chase and their consortium are front running the IMF and Worldbank in the drive to pile debt on Iraq. JPM Chase is directly connected to Iraq's other corporate controller, Bechtel. George Shultz, Reagan's former secretary of state and Bechtel board member, is the honorary chairman of JPM Chase's international advisory council. The council includes Henry Kissinger (also a member of Rumsfeld's defense policy board) and former Saudi Arabia finance minister H.E. Sheikh Mohammed Ali Abalkhail. Bechtel CEO, Riley Bechtel, is both a JPM Chase board member and sits on Bush's international advisory council. Further details about JPM's role and predictions for the financial deconstruction of Iraq are discussed in my piece 'Making a Killing in Iraq', in the latest LBO #105. http://www.leftbusinessobserver.com/LBO_current.html Nomi -Original Message- From: PEN-L list [mailto:[EMAIL PROTECTED] On Behalf Of Paul Sent: Saturday, August 30, 2003 5:40 PM To: [EMAIL PROTECTED] Subject: [PEN-L] Iraq: JP Morgan takes over U.N. role (no joke) The occupation government in Iraq has announced that the U.N. 'Oil For Food Programme' now been replaced by a bank consortium run by J.P. Morgan. The J.P. Morgan consortium (it will run the Iraq Trade Bank controlling all foreign transactions governmental and private). The initial capital will be $100 million of which $95 m. is Iraqi funds from previous oil sales transferred by the U.N and $5 is from the Provisional Authority (no indication whether the source was Iraqi or U.S. funds). No funds will be advanced by the private banks. It is not clear what role the associated banks will play. No doubt selected on merit and the interests of the Iraqi people, the associated banks include financial powerhouse countries like Poland, Portugal, Spain, Australia, Italy, Turkey and Kuwait. Germany is not included; France has one Bank. Saturday August 30, 6:53 AM UPDATE/Iraq Trade Bank: List Of Consortium Banks By Rebecca Christie Of DOW JONES NEWSWIRES WASHINGTON (Dow Jones)--A consortium of more than a dozen international banks led by J.P. Morgan Chase Co. (JPM) will lead the newly created Trade Bank of Iraq, the Coalition Provisional Authority in Iraq announced Friday. The U.S.-led coalition authority in Baghdad created the Trade Bank to allow Iraqi ministries to begin making big-ticket purchases abroad. The program is on track to start up in September. It's expected to handle annual purchases of hundreds of millions of dollars. The J.P. Morgan-led group will be paid about $2 million to run the Trade Bank, once a contract is drawn up. The winning consortium also will benefit from billions of dollars in anticipated business that will eventually flow through the facility, said Peter McPherson, director of economic development for the Coalition Provisional Government in Iraq. The real action here isn't the contract to run the trade bank, to oversee the trade bank, McPherson told reporters in a conference call from Baghdad. It is the trade credit that will go through the trade bank. The winning consortium was picked last week by an Iraqi-led selection committee that gathered in Bahrain. The group includes 13 banks representing 14 countries: the U.S., Canada, France, the U.K., Japan, Turkey, Kuwait, South Africa, Italy, Spain, Portugal, Poland, Australia and New Zealand. Nearly 60 banks initially applied to take part in the Trade Bank, and six consortia made it to the final screening, U.S. Treasury officials said. There was enormous response to this and it became of intense interest to a large, large number of banks, reflecting a view...that Iraq is important to these banks, McPherson said. These banks were making a commercial judgment about the future of Iraq. The Trade Bank will initially work with the government, but is expected to expand to handle private-sector projects as well. McPherson said private-sector purchases would require a different administrative set-up. The Iraqi government will pay for the Trade Bank operations and also provide most of its staff, McPherson said. In the long run, it is hoped that Iraqis would be able to take on more the facility's operations, he said. We are very much looking to Iraqis taking steadily more leadership in this, McPherson said. There are many people in this country we believe can do it, particularly with some exposure and training. A J.P. Morgan spokeswoman reached Friday afternoon said no one at the bank was available for comment. Iraq Trade Bank Replaces U.N. Oil-For-Food Program The Trade Bank will make it possible for Iraq to import major equipment needed for reconstruction by reassuring exporters that they will get paid, Treasury officials said. More than 50 years ago, the U.S. set
Re: J.P. Morgan et al in Iraq: it goes on
Paul, I'm not sure about all the details with San Paolo, Berlusconi and the Italian mafia beyond what you've stated, but the most striking commonality amongst the list of the 13 banks (so far, stay tuned) controlling Iraq's financial future is: With the exception of the National Bank of Kuwait (interested because they control more oil profits than any other bank in the region, plus have obvious US and European ties) and the Bank Millennium in Poland (too small to matter), each bank possesses the most sophisticated securitization operation in its respective country. In other words, it excels at packaging assets (like oil) or anticipated returns from those assets (like future oil revenues) and selling them globally as debt to institutional investors. Each of these banks has created some first of its kind, esoteric, structured asset backed security at some point in recent history. As to your (so sadly rhetorical) question about why it takes so many banks to divvy up Iraq; global economic downturns and instability spawn some remarkably desperate predators, no matter how small the attracting pie. Plus, it's not about the scraps from the UN program, but the low probability potential for a future oil related windfall and lots of collateralized loan extensions in the meantime, that's got 'em salivating. Same reason why over 1000 wanna be sub-contractors showed up to Bechtel's tri-city 'you can work with us, if you're not from Iraq' call for inclusion in its massive reconstruction contract. Fine line between reality and fantasy out there. Nomi J.P. Morgan Chase Co., New York, N.Y., USA Credit Lyonnais, Paris, France Australia and New Zealand Banking Group (ANZ), Melbourne, Australia Standard Chartered PLC (U.STA), London, U.K. National Bank of Kuwait SAK (C.NBK), Safat, Kuwait Bank Millennium SA (R.BML), Warsaw, Poland The Bank of Tokyo-Mitsubishi, Tokyo, Japan San Paolo IMI S.p.A., Turin, Italy Royal Bank of Canada (RY), Toronto, Canada Caja De Ahorros Y Pensiones De Barcelona, or la Caixa, Barcelona, Spain Standard Bank Group Limited (O.SBK), Johannesburg, South Africa Akbank, T.A.S. (C.AKB), Istanbul, Turkey Banco Comercial Portugues (E.BCP), Lisbon, Portugal -Original Message- From: PEN-L list [mailto:[EMAIL PROTECTED] On Behalf Of Paul Sent: Saturday, August 30, 2003 9:57 PM To: [EMAIL PROTECTED] Subject: [PEN-L] J.P. Morgan et al in Iraq: it goes on Inspired by Nomi I checked a bit about the Italian Bank San Paolo IMI. It turns out this is the very same bank that, along with Berlusconi and Co., has allegedly dived into bribery of judges and all the rest that has given Mr. Berlusconi and his friends such a good name. To our Italian friends this scandal is known as IMI-SIR (when your Bank has the biggest European scandal of the day named after it...well, this is not good). Berlusconi's right hand man Casare Previta has been sent to jail for it this Spring. Berlusconi himself escapes prosecution only for technical reasons and, in U.S. terms, continues to have the legal status of unindicted co-conspirator in the IMI scandal. He now has gotten his party in Parlement to give him official immunity so that these charges (and others?) can not be pursued. Perhaps there is someone on the list more familiar with this scandal? My Italian is weak; I caught references to Mafia and all sorts of people you would want to help run the national bank in Iraq. Sigh (A good student project?: list all 13 Banks, their government's support for the war and their patronage links to that government. And why does Iraq need 13 Banks to handle what a small group of U.N. bureaucrats did? So much for public sector inefficiency)
The Guardian - Energy's Moribund Tendencies
Some of my current thoughts on the deteriorating state of the US energy sector - in today's Guardian. Comments most welcome. And thanks to Eugene. Nomi
Re: Pensions, yet again
This is yet another insidious measure that double penalizes employees for flailing or fraudulent corporate performance. Not only have pension funds been depleted due to negligent or criminal corporate leadership over the past couple years, but by discounting, or dividing, future pension liabilities by a bigger number - i.e. the yield of a corporate bond vs. that of a treasury bond, their overall pay-out will continue to be reduced. This is just because corporations are still reeling from their own inadequacies and top heavy compensation structures. The measure would also ensure that in the future, the worse a corporation performs - and thus the higher the yield on its bonds, the even smaller pension payouts will be. Completely the wrong relationship from a public perspective. Nomi -Original Message- From: PEN-L list [mailto:[EMAIL PROTECTED] On Behalf Of Eubulides Sent: Tuesday, July 08, 2003 9:25 PM To: [EMAIL PROTECTED] Subject: [PEN-L] Pensions, yet again Bush Seeks To Change Pension Calculation Employers Would Set Aside Less Money, Release More Data By Jonathan Weisman Washington Post Staff Writer Tuesday, July 8, 2003; Page E01 The Bush administration yesterday proposed linking the calculation of corporate pension liabilities to corporate bond rates instead of Treasury bonds, which would lower the amount of money many companies would have to put into their pension plans.
