Too Big To Succeed

Hackers who targeted media last year now targeting think tanks

"The hackers who penetrated the computer network of The New York Times last year have resurfaced with an attack on 'an organization involved in shaping economic policy,' experts warned Monday. The security firm FireEye said the original perpetrators 'appear to be mounting fresh assaults that leverage new and improved versions of malware.' Chinese officials repeatedly denied responsibility for the attacks, and since then the United States has in turn been accused of penetrating foreign networks through the spy programs revealed by leaker Edward Snowden. FireEye said it had detected 'a retooling of what security researchers believe is a massive spying operation based in China.'" Continue reading →

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The Beginnings of a Chinese Banking Crisis?

"The Industrial and Commercial Bank of China (ICBC) displaced Bank of America to become the world's biggest bank in 2012, marking the first time in history a Chinese bank has reached this pedestal. China now has four of the world's ten biggest banks. Together, these Chinese banks have a combined market capitalization of close to $1 trillion Canadian dollars, or three times the market cap of the Canadian banking sector. ICBC alone has 393 million individual customers, which according to the Telegraph is the equivalent of a single bank managing the bank accounts of every man, woman, and child in Western Europe." Continue reading →

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Top Chinese official warn of ‘empty cities’ emerging in China

"In a grim warning against rapid urbanisation in China, a top development official has said that reckless expansion of cities has turned many of them into ghost towns with no occupants in sight. Qiao Runling, deputy director of the China Centre for Urban Development, said local governments had relied on quick urbanisation to stimulate economic growth and generate fiscal revenue. State-run broad cater CCTV recently carried a report showing two such 'ghost cities' with massive apartment and commercial complexes with no occupants, leaving local governments in deep debts." Continue reading →

Continue ReadingTop Chinese official warn of ‘empty cities’ emerging in China

The Source of Systemic Crisis: Risk and Moral Hazard

"No government agency ever projects deep, long-lasting recessions, because such a period of stagnation would upend all the rosy projections that the status quo is eternally sustainable and stable. Where does all this lead us? To this: Programs that backstop banks and social insurance systems like Medicare are not like fire or life insurance because they are effectively open-ended in terms of costs and in exposure to risk. A system which pools risk without distributing it to the participants and eliminates the causal connection between risk and consequence introduces moral hazard on a grand scale." Continue reading →

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“Government Laboratory” for “Unlimited Taxpayer Risk” Now Slated for Demolition

"House Financial Services Committee Chairman Jeb Hensarling (R-TX) has described Fannie and Freddie as the product of a ‘government laboratory’ and one that exposes taxpayers to ‘unlimited risk.' Hensarling and others in the House are working on legislation to end the companies for good. Now that the president is on board, with apparent bipartisan support, it seems that reality may not be far off. Investors appear to be speculating on news the feds may actually pay off debt to taxpayers and recapitalize. Since liquidation appears to have broad support in the government, Fannie and Freddie look like stock to steer clear of." Continue reading →

Continue Reading“Government Laboratory” for “Unlimited Taxpayer Risk” Now Slated for Demolition

Watchdog: Fannie, Freddie should be required to recognize bad mortgages ‘immediately’

"Fannie Mae and Freddie Mac are masking billions of dollars losses because of the level of delinquent home loans they carry, a federal watchdog said, and it said the companies should be required immediately to recognize the costs of some bad mortgages. Fannie Mae and Freddie Mac were seized by the U.S. government in September 2008 as rising mortgage losses threatened them with insolvency. The mortgage companies have cost taxpayers almost $188 billion to stay afloat. Fannie and Freddie have reduced their funds reserved to cover potential losses on bad loans due to the strengthening housing sector and higher home prices." Continue reading →

Continue ReadingWatchdog: Fannie, Freddie should be required to recognize bad mortgages ‘immediately’

Philadelphia Borrows $50 Million So Its Schools Can Open on Time

"Superintendent William R. Hite Jr. said the $50 million was necessary to provide the minimum staffing needed for the basic safety of the district’s 136,000 students. In June, the district closed 24 schools and laid off 3,783 employees, including 127 assistant principals, 646 teachers and more than 1,200 aides, leaving no one even to answer phones. For a number of years, Mayor Michael A. Nutter and the City Council have been working, with some success and a fair amount of taxpayer pain, to shore up the city’s finances, which have been troubled by mounting debt, a shrinking tax base and unfunded pension and health care obligations to retirees." Continue reading →

Continue ReadingPhiladelphia Borrows $50 Million So Its Schools Can Open on Time

Philadelphia Borrows $50 Million So Its Schools Can Open on Time

"Superintendent William R. Hite Jr. said the $50 million was necessary to provide the minimum staffing needed for the basic safety of the district’s 136,000 students. In June, the district closed 24 schools and laid off 3,783 employees, including 127 assistant principals, 646 teachers and more than 1,200 aides, leaving no one even to answer phones. For a number of years, Mayor Michael A. Nutter and the City Council have been working, with some success and a fair amount of taxpayer pain, to shore up the city’s finances, which have been troubled by mounting debt, a shrinking tax base and unfunded pension and health care obligations to retirees." Continue reading →

Continue ReadingPhiladelphia Borrows $50 Million So Its Schools Can Open on Time

How the Fed Goes Bust With Richard Ebeling

"Little ink has been spilled about the Austrian economists, such as Friedrick Hayek, Ludwig von Mises and Murray Rothbard. So we've taken it upon ourselves to interview someone who knew two of them personally. Bob speaks with Richard Ebeling, economics professor at Northwood, about quantitative easing and the future of Bernanke's so-called 'exit.' Then Perianne explores US aid to Egypt and the problems with doling out money to foreign groups. Finally Bob duels Prime Interest regular, Sam Sacks on the BP oil settlement and intellectual property rights." Continue reading →

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Larry Kotlikoff: Detroit Today, Washington Tomorrow

"The debt Uncle Sam publicly acknowledges is now $12 trillion. But the true measure of our debt -- the one suggested by economic theory -- is the fiscal gap, which totals $222 trillion. The fiscal gap is the present value of all future expenditures, including servicing outstanding official federal debt, minus the present value of all future receipts. Detroit's main means of hiding its true liabilities was discounting its future obligations at a rate far higher than appropriate, thus giving the appearance that less saving was needed to cover the shortfall. Washington's dirtier trick has been to keep virtually all of its future liabilities off the books." Continue reading →

Continue ReadingLarry Kotlikoff: Detroit Today, Washington Tomorrow