THIS IS WHAT 1% WALL STREET GLOBAL CORPORATE POLS AND THOSE WALL STREET BALTIMORE DEVELOPMENT 'LABOR AND JUSTICE' ORGANIZATIONS WANT WHEN THEY PUSH BOND DEALS.
Every economic crash we have seen national media reports of how much our city, state, and Federal government has lost due to fraudulent transactions with Wall Street and this bond market fraud is going to be HUGE and taxpayers will be paying this for decades.
'This is because if the US government could not repay the money it owed bondholders, the value of the bonds would decrease. And the yield - the return the government pays to an investor - would rise'.
The default on Baltimore City bonds will send that $1 billion school building bond deal soaring. Already taxpayers will have to pay $1 billion in fees and interest to Wall Street for these FINANCIAL INSTRUMENTS---that doesn't include the fraud during 30 years to make that go higher. The default sends all those schools into the hands of the private investors ----ie. corporate campus K-CAREER college. We will be paying 30 years and more for corporate schools. US Treasury bonds were used to fund those public housing high rises---you can see why now as the same will happen to that real estate and bond deal.
SEE HOW THOSE GLOBAL 1% WALL STREET GLOBAL CORPORATE NEO-LIBERALS and Wall Street Baltimore Development 'labor and justice' PLAYERS sell these Federal development deals as helping low-income communities when again---as with Enterprise Zone funding----none of this was ever meant to be used for low-income community development. This $327 million US Treasury bond deal will create the default sending control to private investors AND raise the amount taxpayers will pay to satisfy the bond.
AND IT IS ALL DELIBERATE COURTESY OUR MARYLAND FAR-RIGHT WING POL RUNNING AS DEMOCRATS!
Treasury Guarantees $327 Million In Bond Funding For Projects In Low-Income Communities
WASHINGTON – The U.S. Department of the Treasury’s Community Development Financial Institutions Fund (CDFI Fund) announced today that an additional nine bond loans, totaling $327 million, were guaranteed in fiscal year (FY) 2015, bringing the total guaranteed to date to $852 million. All of the bond proceeds, provided through the Community Development Financial Institutions Bond Guarantee Program (CDFI Bond Guarantee Program), will provide long-term, fixed rate capital for projects in low-income and underserved communities.
“I am very pleased to recognize the CDFIs that are creating new partnerships and innovative ways to fully utilize the CDFI Bond Guarantee Program,” said CDFI Fund Director Annie Donovan. “The program is reaching diverse organizations and communities across the country, allowing us to greatly expand access to financing for low-income areas nationwide.”
The CDFIs that participate in the CDFI Bond Guarantee Program are at the cutting edge of community development finance. The FY 2015 program participants share an equal commitment to financing a wide range of job-creating and community-building projects in urban, rural, and Native American communities.
Three Bonds were issued on behalf of 9 Eligible CDFIs as follows:
- Community Reinvestment Fund, USA issued a $100 million bond on behalf of Raza Development Fund. Raza Development Fund is headquartered in Phoenix, Arizona and is the largest CDFI serving the Latino population on a national basis. Raza Development Fund plans to finance senior living and long-term care facilities, daycare centers, healthcare facilities, rental housing, not-for-profit organizations, and charter schools.
- Opportunity Finance Network issued a $100 million bond on behalf of Clearinghouse CDFI. Clearinghouse CDFI is headquartered in Lake Forest, California and is the first non-depository CDFI to receive a public rating from Standard and Poor’s. Originally approved in FY 2013, Clearinghouse CDFI is the first entity to receive multiple bond loans under the program. Clearinghouse CDFI has expanded its lending from California to Arizona and Native American communities, and will continue to serve the rental housing and commercial real estate market.
- Opportunity Finance Network also issued a $127 million bond on behalf of seven Eligible CDFIs serving urban, rural, and Native American communities in the most diverse application approved thus far in the CDFI Bond Guarantee Program. This bond issue includes the following CDFIs:
- Bridgeway Capital, headquartered in Pittsburgh, Pennsylvania, will provide financing to small businesses, commercial real estate, and not-for-profit organizations in Western Pennsylvania using its $15 million bond loan.
- Chicago Community Loan Fund, headquartered in Chicago, Illinois, will provide financing to commercial real estate, rental housing, not-for-profit organizations, and charter schools in low-income and underserved areas in Chicago using its $28 million bond loan.
- Citizens Potawatomi Community Development Corporation, headquartered in Shawnee, Oklahoma, is the first Native CDFI to participate in the CDFI Bond Guarantee Program and will provide financing for large scale commercial real estate projects in the Citizens Potawatomi Nation using its $16 million bond loan.
- Community Loan Fund of New Jersey, headquartered in New Brunswick, New Jersey, will provide financing for rental housing and charter schools in low-income and underserved areas in New Jersey using its $28 million bond loan.
- Community Ventures Corporation, headquartered in Lexington, Kentucky, will provide financing to small business and commercial real estate in Kentucky using its $15 million bond loan.
- Federation of Appalachian Housing Enterprises, headquartered in Berea, Kentucky, will provide financing for rental housing in the greater Appalachian region using its $15 million bond loan.
- Kentucky Highlands Investment Corporation, headquartered in London, Kentucky, will provide financing to small businesses and commercial real estate in Kentucky using its $10 million bond loan.
The CDFI Bond Guarantee Program was created through the enactment of the Small Business Jobs Act of 2010. In the three rounds of the CDFI Bond Guarantee Program completed to date, Treasury has guaranteed bonds for $852 million dollars for investment in the nation’s most underserved rural and urban areas. While participants are allowed up to five years to fully deploy bond loan funds, it’s anticipated that borrowers in the FY 2015 round will completely commit their capital to community development projects by the end of calendar year 2018. This means new jobs, new community and neighborhood facilities, and enhanced economic opportunities for Americans who need it most.
The CDFI Bond Guarantee Program was extended until September 30, 2015. The President’s Fiscal Year 2016 budget proposes to extend the program, subject to reauthorization by Congress.
To learn more about the CDFI Fund and its programs, please view the Fact Sheet or visit the CDFI Fund’s website at www.CDFIund.gov. For more information about the CDFI Bond Guarantee Program, please view the Fact Sheet or visit the CDFI Fund’s website at www.cdfifund.gov/bond.
Below we see a typical state or city municipal bond tied in this case to public universities and public K-12 in Los Angeles----there is that ONE WORLD ONE GOVERNANCE MAYOR ANGELIDES setting the city of LA up for Wall Street bond fraud. These kinds of policy only a person crazy enough to read go largely without public notice ---only what media tells citizens---OH, THIS IS GOING TO CREATE JOBS AND REBUILD OUR PUBLIC EDUCATION!
If we look at the details of debt obligation or general bonds we see they are written in a way that default sends value to investors. Here we see as well a default or failure to meet terms has the city paying the IRS------take for example all the construction at Coppin or Morgan State---two public universities as regards STEM research facilities. One can bet general obligation bonds et al are tied to these structures as well. All across the US states are using these municipal bonds to rebuild our public schools and the entire time CLINTON/BUSH/OBAMA and especially these several years of OBAMA pols have been subpriming the sovereign bond market globally.
CONGRESSIONAL POLS KNOW US TREASURY BONDS ARE SUBPRIMED----MARYLAND ASSEMBLY AND BALTIMORE CITY HALL POLS KNOW MUNICIPAL BONDS ARE SUBPRIMED.
When the economic crash occurs it will be a Catherine PUGH and a Trump or Hillary that would send in a MANAGER----AND WALL STREET BANKS---to settle all this bond debt that cannot be afforded. A Hillary or Trump would say with this much debt we need the World Bank or IMF----and VOILA---THE US AND OUR US CITIES LOOK LIKE GREECE----- that is what 2016 election was about---CATHERINE PUGH needed to win because she led in pushing for all this bond debt and passing it---and she will be the one saying Baltimore needs that MANAGER/WALL STREET to bail out the city.
We can see in reading this one article---this is LA but all US cities have this bond debt that the 30 year obligation to taxpayers will be massive. This does not even include the fraud we know will occur.
Topics in Public Finance
California Debt and Investment Advisory Commission
Phil Angelides, Chair
and Bond Proceeds
This report is based upon research conducted by the California
Debt and Investment Advisory Co
The content of the report is the responsibility of CDIAC and not of those who may have contributed to its development or review. Nothing in this report is intended to provide legal advice. To resolve issues of a legal nature, readers should consult an attorney.
The California Debt and Investment Advisory Commission (CDIAC) staff recently learned that a number of school and community college districts are being counseled by financial professions about investing bond proceeds in long-term investments as a way to generate general fund revenues. In light of the state’s fiscal condition, the desire to do so may be driven by the real possibility that districts will have to curtail or eliminate educational services as a result
of insufficient funds.
In the particular cases brought to
CDIAC’s attention, school and community college districts are being encouraged to invest the proceeds of reimbursement bonds in long-term investments and draw out the term of the investment by using funds received from the state to cover the cost of construction and renovation. Doing so, however, may violate the intended use of reimbursement bonds as well as the arbitrage restrictions contained in the Internal Revenue Code (Revenue Code).
This report seeks to provide information on reimbursement bonds that may guide issuers in the appropriate use of such bonds.
In addition to describing what issuers are required to do prior to issuing a reimbursement bond, the report includes a case study drawn from school facilities financing. While the case focuses on school districts, other public entities may issue reimbursement bonds and, as a result, benefit from the information presented therein. The report recognizes the possi
bility that allocations made from reimbursement bond proceeds may be made inappropriately.
Failing to correctly follow federal reimbursement rules contained in the Revenue Code and Treasury Regulations can ultimately lead an issuer to inappropriately invest bond proceeds as if they were general fund money not subject to arbitrage and rebate regulations. By violating the reimbursement rules, an issuer could place the tax-exemption of its bonds at risk. In addition, issuers may be obligated to rebate illegal arbitrage earnings from their general funds to the Treasury.
Federal Regulation of Reimbursement Bond Proceeds
Treasury Regulation, Section 1.150-2 allows a bond issuer to use the proceeds of its issuance to reimburse a prior
Provided that the issuer or borrower follows specified operating rules, expenditures that may be reimbursed include capital expenditures, costs of issuance, extraordinary working capital items, grants and certain loans. When bond proceeds qualify as and are actually used for a reimbursement of general funds or other funds of the issuer, the proceeds are treated as spent for the reimbursed expenditure. This means that the reimbursed funds are no longer bond proceeds and may be invested free of the yield restrictions and rebate requirements set forth in the Revenue Code. The funds, therefore, may be invested at a higher rate of return than is allowed for bond proceeds under arbitrage limits.
In establishing limits on arbitrage earnings, the federal government sought to deter issuers of tax-exempt bonds
from capitalizing on the spread between tax-exempt borrowing
rates and taxable rates paid to investors. Indirectly,
the federal government also hoped to keep tax-exempt issuers from issuing more bonds than needed to meet public goals, issuing bonds earlier than necessary, or delaying repayment of those bonds. Each of these actions was perceived to have a negative impact on both the pricing of municipal bonds and the availability of capital (as well as depriving the Treasury of income taxes from the taxable investments investors would otherwise buy).
To limit the unnecessary or abusive issuance of tax-exempt bonds, the Revenue Code places restrictions on the
yield issuers may receive from investing bond proceeds. In addition, the Revenue Code requires that issuers “rebate” earnings that exceed these yield limits (i.e., pay such excess earnings over to the Treasury, either through“rebate” payments, or “yield reduction payments” for qualifying issues). Issuers may qualify for exemption from both yield restrictions and rebate requirements under certain conditions. Nonexempt issuers that do not comply with these limits are subject to fines and penalties, and the interest earned by investors on the bonds may be deemed to be taxable.
What is Required Before Issuing Reimbursement Bonds?
Section 1.150-2 provides that, under certain conditions, an issuer may treat an expenditure of bond proceeds as a
reimbursement of an original expenditure.
Accepting the notion that bond proceeds used to make a reimbursement have been spent, earnings derived from the investment of these funds are not subject to yield restriction. As a result, the issuer is not required to rebate profits obtained by investing funds at a higher rate of return than the interest rate on the bonds issued.
The Revenue Code has deemed proceeds to be spent “only in those circumstances in which the substance of the transaction indicates that the bond proceeds are being used to reimburse prior expenditures.”
In general, an issuer must take the following steps to reimburse a prior expenditure and treat bond proceeds as spent for purposes of yield restriction and arbitrage rebate:
Declare its intent to spend money on a project and to pay itself back with bond proceeds;
Spend its own municipal money on the project;
Issue reimbursement bonds;
Allocate bond proceeds to pay back the expenditure on its books in the time period permitted; and
Treat the bond proceeds as “spent,” freeing them from any arbitrage restriction. More specifically, Section 1.150-2(d) requires that the issuer of a reimbursement bond meet three primary requirements when allocating bond proceeds to a prior expenditure.
These requirements are:
1) an official intent
2) a reimbursement period requirement; and
3) a nature of expenditure requirement.
(1) Official Intent Requirement
The official intent requirement “is designed to ensure that, on or about the date of payment, the issuer intended to reimburse the expenditure and that the reimbursements are not an artifice to avoid tax-exempt bond requirements” associated with arbitrage.
“The official intent rules require the issuer to declare a reasonable intention to reimburse the expenditure with proceeds of a borrowing.”
The declaration of official intent to reimburse must be made no later than 60 days after the payment of the original expenditure. It may be made in one of several forms, including issuer resolution, legislative authorization, or declaration by an authorized officer, and any reasonable form is acceptable.
Although the Internal Revenue Service
(IRS) allows that a declaration of official intent may be very broad, blanket declarations are not reasonable, and a pattern of failure to reimburse is evidence of unreasonableness.
An issuer must describe the project in the declaration and state the expected maximum size of the obligations to be
issued. A project may include any property, project, or program, such as a school building renovation. Also, a
project description will be sufficient if it identifies a fund
or account from which the original expenditure is paid,
assuming a specific purpose account exists.
(2) Reimbursement Period Requirement
A reimbursement allocation is an allocation in writing, demonstrating use of the proceeds of a reimbursement bond
to reimburse the original expenditure. Generally, the re
imbursement allocation must take place no later than 18
months after the date of the original expenditure or 18 months after the date the project is either placed in service or
abandoned, whichever occurs last. In most cases, this period cannot exceed 3 years after the original expenditure.
The 18-month period is extended to 3 years for certain “small issuers” while not applying to certain others, namely
issuers that issue no more than a specified amount of bonds in the calendar year. The reimbursement period requirement exists as a way to ensure that the money paid for the expenditure is not available on a long-term basis.
The issuer must make a reimbursement within a set time period. In the absence of a term limit on reimbursement, issuers may be motivated to invest bond proceeds on a long-term basis to achieve higher yields.
(3) Nature of Expenditure Requirement
Finally, the nature of expenditure requirement limits,
in general, the use of proceeds to reimburse capital
expenditures or the costs of issuing the reimbursement bond. The purpose of this requirement is to keep the proceeds from being used for working capital or to cover the operating costs of a project. An issuer may reimburse certain preliminary expenditures up to 20 percent of the proceeds of the bonds without regard to the tests and limitations described above. These may include architectural, engineering, surveying, soil
testing, reimbursement of bond issuance costs, and similar costs incurred prior to the commencement of acquisition,
construction, or rehabilitation of the project. However, land
acquisition, site preparation, and similar costs are not
included in the preliminary expenditure exception. Accord
ingly, reimbursements of these latter expenditures require
that the issuer satisfy the official intent and reimbursement period requirements.
A reimbursement allocation is not valid if, within one year
after the allocation, the allocated proceeds are used to
create replacement proceeds.
In such cases, the allocation will not be an expenditure of proceeds and the proceeds still would be restricted to the yield on the reimbursement bonds for the purpose of calculating arbitrage. Likewise, a reimbursement allocation that fails in any way to satisfy the reimbursement rules discussed above does not qualify as an expenditure, and the bond proceeds must
continue to be treated as unspent.
Reimbursement Bonds and School Facilities Financing: A Case Study
Based upon information provided to CDIAC staff, school and community college districts may seek to take advantage of the exemption to arbitrage restrictions and yield limits to generate general fund revenues. Although reimbursement bonds may be issued by other public agencies, the following example is derived from the use of these bonds by educational entities. School district financing provides a unique opportunity for issuers to access different sources of funds, freeing bond
proceeds for investment purposes while still allowing the district to cover construction or renovation costs.
This case study considers the following topics:
1) an overview of school facilities
financing in California;
2) rules concerning the investment of bond proceeds;
3) reimbursement bonds proceeds as a
part of the flow of funds in a school construction project; and 4) the consequences of misapplying the rules concerning reimbursement bonds to school construction and renovation projects.
(1) School Facilities Financing in California
The funding for school construction and renovation
under the California School Facilities Program (SFP) is based
on a partnership between local agencies and the stat
e government. State funding comes from voter-approved
general obligation bonds and is allocated to school districts by the State Allocation Board pursuant to the Leroy F. Green School Facilities Act of 1998.
The SFP provides a funding source in the form of grants for school districts to acquire school sites, construct new school facilities, or modernize existing school facilities.
New construction grants are provided on the basis of a 50-50 cost sharing arrangement with the local agency while renovation grants are based on a 60-40 local agency-state split.
Local government contributions may be derived from local general obligation bonds, Mello-Roos bonds, developer fees, donations and contributions, or other sources, including certificates of participation (COP). School districts approaching their statutory debt limit may prefer to use COPs rather than bonds because the former are not technically considered debt under California law. Because they may be
issued without a vote of the electorate,
COPs may be the only source of financing for capital projects or for “bridge” financing need prior to the issuance of bonds.
(2) Investing Bond Proceeds
California school districts, like all California public entities, may invest funds not otherwise dedicated to another purpose or required for immediate needs in specified investments. California Government Code Sections 53601, 53601.7, and 53635, which set forth these authorized investments, generally limit the maturity on investments to a
maximum of five years.
The proceeds derived from the sale of debt securities, however, are treated separately.
The authority to invest bond proceeds is provided by various sections of California statute, including Government
Code Sections 5903(e), 5922(d), and 53601(l), which, in ge
neral, allow the public agency to follow the controlling
provisions governing the issuance of the bonds or the bond resolutions and indentures. In most cases, the decisions related to the investment of bond proceeds, which are contingent upon the intended uses of the proceeds and the
repayment plan, have been made before the bonds are sold.
Those decisions appear in bond documents, including
the trust agreement between the issuer and the trustee.
To the extent provided in these documents, bond proceeds
may be invested in securities that exceed the five-year limit set forth in Government Code Section 53601.
(3) Reimbursement Bonds and Project Funds Flow
The fact that an issuer may have reimbursable expenditures and be able to invest bond proceeds in securities that
exceed a 5-year term limit, provides a nexus of opportunity that may cause the issuer to inappropriately use reimbursement bonds. The following steps, outlined without regard to order of occurrence, depict how a hypothetical school district may seek to generate earnings income through arbitrage (Figure 1)
Assume the district has construction costs of $2 million. The district initiates the project using general fund monies while meeting all of the requirements for the issuance of reimbursement bonds. The district applies to and receives
a reimbursement from the State through the California School Facilities Program (SFP) for 50 percent of the project (40 percent for a renovation project). At the same time, the district issues a reimbursement bond. The amount of the bond may fall somewhere between the full cost of the project, $2 million, and
the district’s share of the project costs, $1 million, depending on the issuance process. The district, then, invests either the full amount of the bonds or a portion representing the difference between the project’s full costs and the state reimbursement in a 30-year guaranteed investment contract (GIC). The amount of this investment depends upon the issuance process.
An issuer that follows this method benefits in one important way from the use of reimbursement bonds. That is, it can replace prior expenditures from the general fund with bond proceeds and invest those monies free of arbitrage rebate and yield restrictions applied to bond proceeds.
Using the reimbursement received from the SFP, as well as available general funds, the issuer is able to complete the project without drawing on the GIC. This flow of funds, however, requires the issuer to time the receipt of the bond proceeds, the receipt of the SFP reimbursement, and the placement of the GIC so as to minimally stress its finances.
Failing to do so, may subject the issuer to funding or cash shortfalls in this project as well as other program areas.
(4) The Consequences of Misapplying Section 1.150-2
Compliance with Section 1.150-2 is determined after the fact. The IRS may audit an issuer’s adherence to Section 1.150-2 as part of its ongoing oversight of the tax-exempt market. Based upon discussions with the IRS, CDIAC believes that IRS auditors may use a “substance-over-form” argument in their review of the transaction that seeks to determine whether or not Section 1.150-2 was circumvented. That argument may incorporate a review of local
accounting rules and policies to determine whether the proceeds of the bonds were allocated in accordance with the
issuer’s own rules and policies. To the extent that the flow of funds conforms to existing rules and policies and the
evidence from public documents, including board minutes and public meetings, support the claim that the bonds are, in fact, reimbursement bonds, the issuer is likely to emerge from an IRS review without adverse findings.
If the IRS finds that the issuer has not complied with Section 1.150-2, the issuer faces the risk that the bonds will be declared taxable. The issuer, then, may be forced to pay a settlement amount to the IRS and/or to redeem the bonds.
If the IRS’ review leads to a settlement that forces the issuer to redeem the bonds, the issuer may be subject to penalties for calling the bonds early. In order to pay-off bondholders, the issuer may have to cash out its investments, which invites a second wave of problems, including early termination penalties and possible capital losses due to market illiquidity. Failing to reach an agreement with the IRS may provoke a bondholder’s lawsuit as investors seek compensation for investment losses. Finally, an issuer who inappropriately allocated reimbursement bond proceeds may have additional financial losses, including the inability to recover the cost of issuance.
While the circumstances of each issuance differ, issuers must meet the requirements for issuing reimbursement bonds, including the “nature of the expenditure” requirement, in
order to invest the bond proceeds independent of
arbitrage limits and yield restrictions. Issuers who seek to supplement their general funds through interest earnings
generated with reimbursement bond proceeds may be violating the substance or intent of these requirements. The
risk of doing so, including the forced repayment of arbitrage earnings, may outweigh the supposed benefits of such
strategies. Should an issuer incur unanticipated costs as a result of punitive actions taken by the IRS or bondholders it may find its fiscal condition in jeopardy and its ability to meet its goals impeded.
To avoid such adverse outcomes issuers should closely examine existing laws and regulations when seeking to issue reimbursement bonds.
Here we see where the US and US cities deemed Foreign Economic Zones like Baltimore will be as this coming economic crash unfolds. If Greece had a REAL left-leaning President and not a global 1% Wall Street neo-liberal poser in place---that President would have rejected all that bond debt as fraud-----which it is.
ALL OF THIS IS CONSPIRACY TO DEFRAUD THE CITIZENS OF BALTIMORE ---THE CITIZENS OF THE US----BECAUSE THEY KNEW THEY WERE CREATING THE CONDITIONS FOR ECONOMIC CRASH AND DEFAULT.
Of course the early reactions will be a Congress that FREEZES GOVERNMENT PAYMENTS----OF COURSE HITTING WE THE PEOPLE LIKE SOCIAL SECURITY, PENSIONS, SALARIES FOR FEDERAL WORKERS-----ETC. Since Obama and Clinton neo-liberals tied the US Treasury to $20 trillion in debt there will be no BAILOUT OF WALL STREET, COMMUNITY, OR CREDIT UNION BANKS-----and all assets from the smaller banks will be channeled to prop up Wall Street banks because---you know---they are TOO BIG TO FAIL.
A City of Baltimore having almost all of Federal funding already channeled to NGOS AND GLOBAL CORPORATIONS and not our city coffers will have no financial resources to withstand this economic crash. This is why all Federal funding is tied to sources rather than coming to government coffers to be sent to public agencies. This will create the conditions of default and threats of bankruptcy----with a Catherine PUGH and a Governor HOGAN pretending a CITY MANAGER PARTNERED WITH WALL STREET will be needed to save the city----same will be happening with our Federal government and US Treasury as Congress pretends it has to stop funding all that is public service---public program----closing public buildings ---like the US Post OFFICES.
Greece Defaults on IMF Loan Despite New Push for Bailout Aid
European finance chiefs shut down Athens’s last-minute request for emergency financial aid
Gabriele Steinhauser and
Viktoria Dendrinou in Brussels and
Nektaria Stamouli in Athens
Updated July 1, 2015 12:12 a.m. ET Greece became the first developed country to default on the International Monetary Fund, as the rescue program that has sustained it for five years expired and its creditors rejected a last-ditch effort to buy more time.
What happens to all developing nations these several decades being forced to tie with IMF and World Bank ====is this=== the nation always fails to be able to meet terms of agreement with global banks and this keeps the nation or the City of Baltimore constantly needing bailing out---new terms----more debt ---and it goes on for decades-----
CAPTURING ALL ECONOMIC POLICIES TO THOSE GLOBAL BANKS.
Look to Greece to see where Obama and Clinton 1% Wall Street neo-liberals partnered with Republicans left the US and our US cities these several years of Obama's terms. Did you hear any candidate for city hall, state assembly, Congress educate on these REAL issues? That means they were a global Wall Street player.
Greece Will Shut Banks in Fallout From Debt Crisis
By JIM YARDLEYJUNE 28, 2015
Cabinet members applauded Greece's prime minister, Alexis Tsipras, on Sunday amid debate over a bailout referendum. Credit Simela Pantzartzi/European Pressphoto Agency
ATHENS — Prime Minister Alexis Tsipras announced Sunday night that Greece’s banks would be closed as of Monday, as the fallout from ruptured debt negotiations with the nation’s creditors began inflicting pain on ordinary people while raising alarm in Washington, Brussels and Berlin.
The emergency measures escalated the confused and unpredictable state of a crisis that some analysts say could ripple through global financial markets and undercut European unity. Most Asian markets opened lower on Monday.
With so much at stake, leaders in other capitals encouraged a continued search for a way to prevent Greece from being forced out of Europe’s currency union. Greece owes a large debt payment by the end of Tuesday, and has scheduled a referendum for next Sunday on whether to accept the terms of an offer from its creditors to release bailout aid it needs to meet its financial obligations.
Mr. Tsipras announced the emergency banking shutdown, which will also close the stock exchange, and imposed capital controls several hours after the European Central Bank said it would not expand an emergency loan program that had been propping up Greek banks for weeks. The banking system had neared insolvency after panicked account holders withdrew billions of euros, a pattern that continued over the weekend.
“It is clearer than ever that this decision has no other goal than blackmailing the Greek people and obstructing the smooth democratic procedure of the referendum,” Mr. Tsipras said in a brief televised address.
Mr. Tsipras attributed the action to the unwillingness of the country’s creditors to extend the bailout program, set to end Tuesday, until next Sunday, so that Greece could hold its national referendum. The referendum was a surprise move by Mr. Tsipras, announced early Saturday, as he declared that voters should decide whether to accept the terms of the creditors’ latest aid proposal — terms he considers onerous.
Greece’s creditors — the other 18 eurozone countries, the European Central Bank and the International Monetary Fund — in effect cut off negotiations with Mr. Tsipras after he called for the referendum, raising concerns that Greece would default on its debt and potentially seek to solve its financial problems by abandoning the euro.
But on Sunday, international leaders appeared to be seeking a way to calm the situation and explore the potential for common ground with the Greek government.
President Obama and Chancellor Angela Merkel of Germany spoke by phone on Sunday and “agreed that it was critically important to make every effort to return to a path that will allow Greece to resume reforms and growth within the eurozone,” said the White House. Ms. Merkel is expected to make a public statement on Monday in Berlin.
Christine Lagarde, managing director of the International Monetary Fund, who has at times been sharply critical of Greece’s negotiating stance, released a softer statement, declaring her “commitment to continue to engage with the Greek authorities.”
Greece must make a 1.6 billion euro debt payment to the I.M.F. on Tuesday or risk falling into default.
Before this weekend, the four-month negotiations focused on getting the Greek side to agree to fiscal overhauls, tax increases and pension cuts in exchange for creditors releasing a €7.2 billion bailout allotment that Greece needs to meet its short-term debt obligations, equivalent to about $8.1 billion. Mr. Tsipras had consistently called for a broader, comprehensive deal that would liberate Greece from the economics of austerity. Attention will now likely shift to Brussels and Berlin.
In Brussels, the European Commission made its own unexpected moves on Sunday. Jean-Claude Juncker, the commission president, released a statement suggesting that creditors had been willing to discuss Greece’s debt load, a key demand of the Tsipras government. But more surprisingly, the commission published details of the offer made to Greece, a move intended to show that creditors had gone to great lengths to satisfy Greek demands, one European Union official said.
“This is a last bridge we are building for them,” the official said about the decision to publish the terms of proposal. The goal was to pressure Mr. Tsipras to “change course” and encourage voters to choose “yes” in the coming referendum, the official said, while acknowledging that the chances for such a switch were slim.
Perhaps the key figure in finding a compromise, assuming there is still time to do so, is Ms. Merkel, the most powerful political figure in Europe. She remained silent on Sunday, with officials saying that Wolfgang Schäuble, the German finance minister, spoke for the government in Brussels on Saturday. Following the collapse of talks, the finance minister declared that Germany and the other eurozone nations would like to continue to hold talks, but blamed the Greeks for declaring the discussions a failure.
But Mr. Schäuble also indicated readiness to “do everything to prevent every possible threat of contagion” of the situation, should Greece fail to reach a deal with its creditors, reflecting growing frustration in Berlin with the Athens government.
Norbert Röttgen, a senior member of Ms. Merkel’s party who is responsible for foreign affairs, emphasized the wider geopolitical implications of what he called a “vagabond Greek government,” which could say no to the next round of European sanctions against Russia. He warned that after five years of bailouts, “it cannot just collapse over a week.”
The immediate question in Greece revolved around the specifics of the emergency actions announced by Mr. Tsipras. He did not mention the stock market in his public address, but a senior official confirmed it would close.
The prime minister indicated that restrictions would be placed on A.T.M. withdrawals and money transfers, but he provided no details. A legislative decree said that banks would be closed through July 6 and that the cap on daily cash machine withdrawals would be €60. That would not apply to tourists using cards issued in their home countries.
Such a small cash withdrawal limit would highlight the dire condition of the Greek banking system. Cyprus avoided a banking collapse in 2013 by taking similar steps, though the daily withdrawal limit was €300. The Cypriot government also acted in concert with other European governments as part of a new bailout program, while the Greek actions are the result of a breakdown in bailout talks.
The European Central Bank, in refusing to expand emergency funds to Greek banks, did not cut off support entirely, which will provide the government some flexibility in the coming days.
The central bank’s decision to cap the emergency loan program, as opposed to canceling it, “allows the Greek banks to remain in a sort of coma — not functioning but not dead,” said Karl Whelan, an economics professor at University College in Dublin. That way, he said, the Greek financial system might be revived if Greece secures a deal with its creditors.
And several analysts still predicted that despite the confrontation and fireworks, the two sides might well return to the table. Even as Mr. Tsipras and other members of his government are imploring people to vote “no” in the referendum and reject the creditors’ proposal, some experts predict that Greek voters, equating such a vote with leaving the euro system, will vote “yes.”
Raoul Ruparel, an economist and co-director of Open Europe, a London-based research group, said the breakdown in negotiations was “merely a prelude” to yet more talks in a week or so, after Greece holds its referendum.
“I think we are just getting started on this merry-go-round,” Mr. Ruparel said, predicting that Greek voters would probably vote to endorse proposals put forward by creditors. “We would then be back where we started, only in a worse situation.”
He predicted that Mr. Tsipras’s government and the creditors would need to negotiate an entirely new, and probably short-term, bailout in an atmosphere poisoned by even deeper distrust than before.
“The whole thing is an absolute nightmare,” he said.
AND OF COURSE THIS WILL BE TRUE FOR THE US AND OUR CITY OF BALTIMORE-----NONE OF THIS BOND DEBT SHOULD HAVE OCCURRED WITH THE ECONOMY IN DEPRESSION AND CERTAINLY NOT IN A COLLAPSING BOND MARKET. Other European nations have fought some of this AUSTERITY----but none of them are so deeply indebted as our US pols made sure we are......
'When it comes to the prospect of a bailout, it should be remembered that it is not Greece that is being bailed out - it's the institutions that recklessly doled out the Euro loans, writes Ian Verrender'.
It's not Greece being bailed out - it's the banks
By Ian Verrender Updated 21 Jun 2015, 5:31pm
Photo: A financial bail-out, should it occur, will once again shift private debt onto the public books. (Reuters: Yannis Behrakis)
When it comes to the prospect of a bailout, it should be remembered that it is not Greece that is being bailed out - it's the institutions that recklessly doled out the Euro loans, writes Ian Verrender.
English poet William Blake captured the imagination of generations with his revolutionary and romantic vision of the afterlife in one of his most famous works, Proverbs of Hell.
One of his more famous lines, written around 1793, goes thus: "The road of excess leads to the palace of wisdom."
It was a proverb endorsed with enthusiasm by everyone from the idle upper classes to the hippie movement. In more recent times, however, it appears to have been the credo of a legion of central bankers and financiers who have flooded the world with cheap cash and a mountain of public debt.
As asset bubbles form around the globe - from the Shanghai Stock Exchange to the Nasdaq, in real estate from London to Lidcome while bond markets from New York to Tokyo shake and gyrate - this week could mark the beginning of the end of the great monetary experiment.
While it could take some time yet before we reach the palace of wisdom, the unfolding climax in Athens, Brussels and Berlin has begun to harden views on the role of debt and radically shift the conventional wisdom on finance, banking and how to manage an economy.
For months now, even our own chief central banker, Glenn Stevens, has taken to delivering warnings of the limitations of monetary policy; that cutting interest rates is not the panacea to recession that Milton Friedman and his acolytes once proclaimed.
In a world swimming in debt, and still reeling from a debt fuelled financial crisis, the idea that it all could be fixed by throwing even more debt into the mix was always a gamble that at best seemed counterintuitive.
But with the monetarists firmly in control, and the ethos that loose fiscal policy amounts to economic recklessness, it was seen as the only lever to pull.
Regardless of whether Athens and its creditors reach a compromise this week, one thing is certain. The Greek people will endure years more of hardship. But the private sector banks that lent the cash and helped hide the debt for years, will walk away unscathed.
Global banks have risen beyond the scope of national electoral oversight. They have become sacrosanct, particularly since Lehman Brothers hit the wall in 2008, turning global finance into a chaotic maelstrom that threatened the future of Western democracy.
Forty-odd years of financial deregulation and innovation have turbocharged economic growth. But it has helped create a monster.
Once was a staid occupation; the interface between those with excess cash and those who needed money to borrow, banking has come to dominate our economies.
It has become an industry that sucks our brightest and most creative minds into its vortex who, instead of engaging in productive work to benefit mankind, spend their lives shuffling paper, trading obscure instruments and devising new methods by which to enrich themselves.
In good times, our bankers proclaim the benefits of laissez-faire free market economics. But when the going gets tough, they demand taxpayer support. And they get it.
It found that our banking system is sucking the life out of our economy. Not just here, but in developed countries around the globe.
The OECD study has found that financial deregulation and expanded lending boosts economic growth - up to a point.
But when loans exceed 60 per cent of gross domestic product, they start to sap economic growth. Lifting loans from 100 to 110 per cent of GDP actually reduces economic growth by 0.25 per cent.
As Drum regular Michael Janda points out, Australia is off the chart when it comes to debt with a credit to nominal GDP rate of 140 per cent.
A large part of that debt is in ordinary Australian households. Back in 1990, household debt represented about 60 per cent of income. By 2013 - the last time the ABS measured it - household debt had soared to 180 per cent of income.
A large part of that debt is related to mortgages, which now total $1.4 trillion. Prior to deregulation in 1983, most mortgages were funded domestically from the cash banks raised as deposits.
But in the years since, the development of global capital markets and wholesale debt markets has seen our private foreign debt soaring as our banks have tapped ready cash and pushed it into mortgage loans.
In 2013/14, net private foreign debt totalled $639.26 billion, accounting for 74 per cent of all foreign debt and dwarfing the government debt that, according to Prime Minister Tony Abbott, was a "disaster".
An interesting finding in the OECD report was that the growth in banking and the financial sector fostered greater financial inequality.
Bankers, it found, earned a premium to those in other industries as the higher wages "draw the most talented workers into the financial sector where they may not contribute as much to economic growth as compared to jobs in sectors with greater potential for productive innovation".
Bankers created the global financial crisis. As Mike Smith, the soon-to-depart head of ANZ Banking Group, once candidly noted to me: "Bankers found new and interesting ways to destroy wealth."
Only one banker ever saw jail time as a result of the financial crisis. And when it comes to Greece, will anyone call Goldman Sachs to account for its role in hiding Greece's debt from the rest of the European Union and the world?
As for the now shaky prospects of a bailout by the European Commission, the European Central Bank and the International Monetary Fund, it should be remembered that it is not Greece that is being bailed out.
It is the European banks, the French and German institutions that recklessly doled out Euro loans to Greece, safe in the knowledge that any losses would be covered by Frankfurt.
As at December last year, German banks still had 10.63 billion euros outstanding, with American banks following closely and British banks in third place with 9.74 billion euros.
A bail-out, should it occur, will once again shift private debt onto the public books and hopefully deliver central bankers closer to the palace of wisdom. A default, on the other hand, may see financiers for once confront Blake's vision of hell.