During this election season I may not have time to blog on weekends---but please come back during week days. I will segue from the post of Ivy League Universities tied to the massive subprime mortgage fraud through their endowments to taking another week talking about how to reverse public operations to stop systemic corporate fraud and government corruption ---something both Republican and Democratic voters want done and something global corporation controlling both parties with their neo-liberal and neo-con pols WANT -----FRAUD AND CORRUPTION TO SOAR NEXT DECADE.
I will simply take the advertisements on our local TV to show where the next frauds are happening----I'm sure Baltimore's media stations were filled with subprime mortgage originator ads even as everyone knew the real estate system was collapsing from massive fraud.
IT IS THE BALTIMORE STATE'S ATTORNEY AND MARYLAND ATTORNEY GENERAL THAT PROTECTS AGAINST MEDIA FRAUD AND BALTIMORE CITY COUNCIL AND MAYOR THAT EDUCATES AGAINST BAD ADVERTISING.
In Baltimore, it is the crony political machine that promotes these frauds because they work for corporate profit and power. Remember, Republicans work for corporate profit and power at the expense of labor and justice----Democrats protect labor and justice by holding corporations accountable. Neo-cons and neo-liberals are simply far-right global pols moving that profit and power to global rich.
The article below shows back in early Bush years global corporations were gearing up to be the ones profiting on rebuilding US cities into International Economic Zones-----so the Federal funding awards----state and city as well overwhelming go to these Wall Street corporations that then simply subcontract on the cheap to locals while keeping all the 'green construction recycling' profits for themselves. Obama and Congress----Maryland Assembly and Governor Hogan----and Baltimore City Hall and Mayor Rawlings-Blake all tied to awarding in exchange for pay-to-play.
THIS IS WHY US CITIES LIKE BALTIMORE ARE ALL TIED TO THE VERY REPUBLICAN AND CORPORATE POLICIES OF BLOCK GRANTING---IT HANDS CONTROL TO THE RICH TO DO WITH ANYTHING IT WANTS IN LOCAL DEVELOPMENT.
More companies recycling debris from demolition
Equipment World Staff| October 29, 2004 |
Approximately 124 million tons of debris are created by the demolition of buildings in the United States each year.
But as part of the increasingly popular green construction trend, more and more construction companies are recycling materials taken from demolished buildings. Scrap concrete can be ground up and used to fill in the site, steel from the structure’s frame can be melted to create new construction supports, scrap aluminum can be used to manufacture cans and foam board ceiling tiles can be returned to the manufacturer to be reused.
PNC Financial Services plans to recycle more than 70 percent of a seven-story building in downtown Pittsburgh that is being demolished. Approximately 2,500 tons of concrete, 350 tons of steel and 9 tons of aluminum window frames will be salvaged from the site.
Although the process will take longer than it would have if the building had been demolished with traditional methods — approximately two months in the PNC project– officials estimate recycling materials will save $200,000 in dumping fees. PNC expects that out of the 11,000 tons of waste from the demolition, it will be able to recycle 8,000 tons of material. After the demolition and recycling process is complete, PNC plans on using the site, which is adjacent to the company’s corporate office, for a park.
During the recent deconstruction of a tower at Bronson Methodist Hospital in Kalamazoo, Mich., construction crews had to carefully dismantle the building piece by piece over a four-month period. Sixteen crews were specially trained for the project, which required taking down the interior and exterior walls from inside the building, removing the debris and then trucking it offsite. The majority of the debris from the site was recycled, including 2,500 tons of structural steel and 14,000 tons of concrete. In all, less than 20 percent of the building’s remains were taken to a landfill.
According to the Institute for Local Self-Reliance, a non-profit research organization based in Minneapolis, some cities in the United States have passed ordinances that require construction crews to recycle debris from renovations or demolition projects. One of those towns, Atherton, Calif., requires that 50 percent of the debris from demolition be recycled in some way.
Some companies have found a unique niche in recycling building materials. Construction Junction, a non-profit construction material store in Pittsburgh, specializes in used and surplus building materials, including thousands of doors, windows and cabinets.
This construction recycling industry was being built a decade ago by those Wall Street investment firms fat from fraud----and Congress and Obama passed laws and appropriating funds under the guise of 'green construction recycling'. Of course we were made to think main street would get all that tax credit and funding ----but of course that is not what Obama and Clinton neo-liberals and neo-cons do---they move it to global corporations. When Hogan sends $600 million---again that being a subprime mortgage fraud settlement amount----meaning again, those defrauded received nothing and global corporate campus subsidy rules. On top of that will come billions of dollars in Federal subsidy tied to redeveloping cities----from HUD to green recycled construction debris that will fill the pockets of these same Wall Street players-----and insult to injury----they take all of a city's demolition debris for themselves often with the cities paying for that recycling debris that then comes to local communities sounding so 'progressive'. Then the development realtor often sells these homes for more because they are green.
THE CITY SHOULD HAVE THOSE ASSETS-----LOCAL BUSINESSES SHOULD BE THE DEMOLITION CONTRACTORS ----AND HOMES REHABBED WITH THIS DEBRIS SHOULD GO TO THE LOW-INCOME FAMILIES.
Baltimore of course uses all this subsidy to build and market to middle-class families----BUT BEWARE OF BEING NEXT TO BE SOAKED WITH FRAUD AND CORRUPTION. Baltimore will be a great place to live IF we can reverse this fraud and corruption and Master Plan of International Economic Zone and Trans Pacific Trade Pact by building a local, domestic economy.
Fast forward to the global corporate policies of sending US cities into bankruptcy by Bains Capital looting of all government assets and filling government with fraudulent credit bond and Wall Street financial deals----and VOILA----global corporations are handed control of all this demolition and along with that all the profits from WHAT IS A VALUABLE CITY ASSET as happened in Detroit these several years under Obama.
Baltimore does not want to be the next Detroit in the total GIANT GLOBAL CORPORATE SQUID DESENDING TO SUCK ALL CITY ASSETS OUT AND CONTROL ALL DEVELOPMENT----and that is where Wall Street Baltimore Development, a very, very neo-conservative Johns Hopkins and their pols are going.
The Sustainable Initiatives Deconstructing Detroit
- by Rory Stott
As architects we generally see ourselves as providers of new buildings; we also often see architecture as a way to remedy social ills. For many architects, when presented with a social problem, we try to think of a design for a building which addresses it. But what happens when the problem itself is a surplus of buildings?
This is exactly the situation that Detroit finds itself in today. Thanks to the rapid decline in population since its heyday in the mid 20th Century, the City of Detroit is home to some 78,000 vacant structures. While politicians worldwide win public support by promising new construction and growth, Detroit Mayor Dave Bing proudly announced his plans to demolish 10,000 empty homes before the end of his term.
The process will be inherently wasteful. Fortunately, some are making the best of the situation, with sustainable initiatives that create jobs and economic benefits for residents. Read on after the break to find out how.
One such initiative is Recycle Detroit, a project by Christopher Siminski, a Masters student at Lawrence Technological University. Many buildings, demolished by the government or collapsed from neglect, have not been taken to landfill, leaving piles of waste material scattered around Detroit. Siminski's website provides an interactive map of these sites, detailing where there are materials to be salvaged, and the types of material at each site. The map is added to by users, who can document sites they find. His map provides residents of Detroit with a free resource to locate free building materials and share information about their city - all while reducing waste and costing nothing.
Another initiative is Reclaim Detroit, a non-profit organization which provides an alternative to demolition: deconstruction. The process of deconstruction aims to dismantle a building piece by piece, leaving the building's individual components in the best possible condition for reclamation. Though the process takes more time and requires more people, Reclaim Detroit is able to keep the cost of deconstruction competitive by selling the salvaged materials. Another benefit to the person paying for the deconstruction is that the value of the salvaged materials is tax deductible as it is classed as a donation.
The process of deconstruction provides more jobs than demolition, which means that the work of Reclaim Detroit is vital in a city with such high unemployment, as evidenced by their profile of one of their Deconstruction Specialists Billy Brown.
Both Recycle Detroit and Reclaim Detroit are initiatives that look at demolition and the contraction of Detroit in a different way. Where many see a symptom of decline and regression, they see demolition as a resource, which rather than being a wasteful way to remove the homes of people long gone, could be a way to benefit the lives of those still living in Detroit.
This is the next big fraud by global corporations along with the bond market collapse. Republican voters have for decades been tied to Block Granting and the pay-to-play patronage because that was how the Old South worked. Democratic voters always ask---why do working class Republicans tie to Republicans that kill them and keep them impoverished----and now we need to ask the same of Democratic voters fooled by Clinton/Obama neo-liberals doing the same to the middle-working class and poor----
STOP ALLOWING THESE CLINTON/OBAMA WALL STREET NEO-LIBERALS CONTROL OUR DEMOCRATIC PARTY! ALL MARYLAND POLS ARE CLINTON NEO-LIBERALS OR BUSH/HOPKINS NEO-CONS.
Block granting removes Federal controls that require Federal funding be divided with equity and meet the terms of Equal Protection so ALL COMMUNITIES GET THE FUNDS. It also takes away the process of funds coming down to a government agency which then disperses the money with transparency and oversight and instead hands the government funds right to a global corporations or their corporate non-profits.
THIS IS BLOCK GRANTING AND IT IS DESIGNED SPECIFICALLY TO ALLOW THE RICH TO GET TAXPAYER MONEY AND CONTROL DEVELOPMENT----SEE WHY IT IS A REPUBLICAN POLICY?
When I listen to a Democratic Maryland Assembly pol that I feel really wants to help citizens in Baltimore talk as though BLOCK GRANTING is the way to go----I feel he/she does not know what social Democratic policy is about -----keeping all those funds coming to public agencies and then very openly allowing citizens decide where they want those funds spent -----DEMOCRATIC POLS IN BALTIMORE DON'T EVEN KNOW THESE POLICY STANCES----BECAUSE THE DEMOCRATIC PARTY IS CAPTURED.
Republicans simply plan to make those Federal funds 'disappear' into misappropriation and Baltimore has lived with this for decades as a Wall Street Baltimore Development and Johns Hopkins policy.
IT WILL SOAR NEXT DECADE WITH NO DEVELOPMENT CONTROL IF WE DO NOT GET A BALTIMORE CITY COUNCIL AND MAYOR THAT WILL CHANGE THIS BLOCK GRANTING.
As the Maryland Assembly pol told me when I shouted to end Block Granting----THAT IS SOMETHING BALTIMORE CITY HALL HAS TO DO.
Clinton neo-liberals have been bringing this Republican block granting to Democratic cities these few decades and it is why US cities are crumbling and third world poor. If a Democratic candidate is still using these Republican, Wall Street terms like block granting----we need change.
How Republican budgets hide huge spending cuts in “block grants"
Updated by Ezra Klein on March 16, 2015, 2:10 p.m. ET @ezraklein
The Senate GOP's new budget will be thick with block grants. So what are block grants? Mark Wilson/Getty Images At the Wall Street Journal, Kristina Peterson reports that the Senate GOP's upcoming budget will call for "block granting" Medicaid and food stamps. It's a really helpful article, but it includes a paragraph that's frustratingly common in press coverage of the GOP's various block grant proposals:
To get a sense of potential savings, under last year’s House GOP budget, converting the food-stamp programs into a block grant starting in 2019 would have saved $125 billion over 10 years. The document also estimated that overhauling Medicaid would trim $732 billion over a decade.
Republicans often use block grants to hide massive spending cuts, and you can see why in the language Peterson uses. If Republicans simply proposed cutting Medicaid by hundreds of billions of dollars, then the cuts would be described as, well, cuts, possibly with the word "draconian" in front of them. But tucking them behind block grants leads to gentler "saved."
The reality is block grants don't save money. But they're routinely used to hide the thing that does save money, which is fixed funding formulas that require huge spending cuts. That's how the Republican budget actually saves money in Medicaid and food stamps.
How block grants actually work
A block grant takes money the federal government is already spending on a program and gives it to the states to administer — usually with fewer rules and conditions. That's it. The hope is that states will use the money more efficiently. But block grants can cost more, cost the same, or cost less than the funding mechanisms they replace. Block grants change how money is spent, not necessarily how much money is spent.
Take the House GOP budget Peterson mentions. Yes, it block granted Medicaid. But the reason Medicaid spending fell by more than $700 billion was a change to Medicaid's funding formula.
Currently, the way Medicaid works is it ties federal funding to the actual costs of Medicaid in a given state. So if there's a recession and the number of people eligible for Medicaid swells, then the federal government's contributions to Medicaid rise automatically. Similarly, if a state's health costs rise unusually fast, so too does the federal contribution.
The House GOP's 2015 budget changed that. As the Center on Budget and Policy Priorities explains, federal spending on Medicaid "would rise annually with inflation and population growth." CBPP estimates that the new formula would mean the annual increase on federal spending on Medicaid "would average about 3.5 percentage points less per year than what CBO expects to be the Medicaid program’s average growth rate over the coming decade."
Another way of putting this is that the House GOP's 2015 budget doesn't cut Medicaid spending by moving to block grants. It cuts Medicaid spending by cutting Medicaid spending. It could make the same cut absent a block grant: Republicans could mandate that federal contributions to Medicaid rise with inflation and population growth, and if there's a gap between that number and a state's needs, it's on the state to figure it out.
Block grants may be good policy, or they may be bad policy. But Republicans tend to use them as a justification for an unrelated policy: massive spending cuts. There's nothing magic about block grants that makes Medicaid cost $700 billion less; it just sounds better to say you're going to save money by block-granting Medicaid and food stamps then by cutting hundreds of billions of dollars from Medicaid and food stamps. But reporters shouldn't conflate block grants and spending cuts.
So, Baltimore Development and Johns Hopkins creates corporate non-profits that pose progressive while they are behind all this BLOCK GRANTING----a very Republican thing to do. They always sound progressive and the media and pols always allow only these BLOCK GRANTING organization leaders talk----replacing the social Democratic voice altogether that would shout against BLOCK GRANTING.
First Baltimore BLOCK GRANTED all public works and services over these few decades-----these last several years is seeing public health and education being BLOCK GRANTED all while creating these global corporate systems in health and education.
Whether Maryland Health Care for All or Baltimore Education Coalition----these are two examples of Johns Hopkins and Baltimore Development controlling and moving policy to Wall STreet global control and loads of fraud and corruption AND THESE ORGANIZATION LEADERS KNOW IT AS DO POLS PARTNERED WITH THEM.
The Baltimore Education Coalition is the Michelle Rhee corporate education privatization group Johns Hopkins uses to privatize public K-12-----and again we are seeing all that is public in education dismantled and BLOCK GRANTING sending Federal, state, and local education funding anywhere they want ignoring all Federal laws, US Constitutional rights, and it always brings profits to corporations.
The folks working at the grassroots level of these organizations may not know what the wheeling and dealing is about---they simply want health care and education for their communities----but supporting these BLOCK GRANTING policies is what creates all the fraud, corruption, and profiteering.
If a corporation wants to partner with schools----then that corporation needs to PAY CORPORATE TAXES and 'donate' to the city school administration so the funds are distributed to all public schools----THAT IS HOW SOCIAL DEMOCRACY HAS HAD IT FOR A CENTURY.
The Maryland Citizens Health Initiative Education Fund, Inc.
The Maryland Citizens' Health Initiative established the Maryland Health Care for All! Coalition in 1999. It is the state's largest health care consumer coalition with over 1,200 diverse organizational members, including religious, health, community, labor, and business groups from across the state. The Initiative’s members want to solve Maryland's health care crisis by winning access to quality affordable health care for all Marylanders, especially children. See below for more information about the Maryland Health Care for All! Coalition’s recent activities, accomplishments, and advocacy work and tools!
The Baltimore Education Coalition is a partnership of more than 20 schools, organizations and religious institutions united by a mission and vision for public education in Baltimore City.
The other side of our government corruption is falling these days on the collusion of our government officials in this coming bond market fraud-----just as politicians worked with Baltimore Development in marketing all that subprime mortgage fraud---they are now bringing on the credit bond market fraud knowing US citizens, Maryland citizens, and especially Baltimore citizens are slated to be soaked from this bond fraud.
I watched on local TV our Mayor Rawlings-Blake advertising for citizens to go to CASH non-profit that took over our IRS free tax agency duties----saying people could place their refunds IN US TREASURY BONDS. Then I turn the station and there is EVEREST INVESTMENT local Wall Street firm selling the latest INSURANCE for stock equities everyone knows are going to be killed with the insurance being nothing but fraud. THIS IS WHAT BALTIMORE AND MARYLAND CITIZENS HAVE BEING HAWKED AS BUSINESS.
YOU DO NOT WANT YOUR SAVINGS IN THE BOND MARKET NOW FOR GOODNESS SAKE.
Know what Obama/Clinton neo-liberals and the FED did to protect Wall Street from losses in the bond market? The FED placed a hold on selling off bonds by main street calling it harmful for an unsteady market. The rich and corporations have been out of the bond market for a year-----it is only or Social Security and Medicare Trusts, our pensions, municipal bonds, and 401Ks stuck to these collapsing bonds----just as in 2008 they were tied to the subprime mortgage fraud.
EVeryone knew in 2013 this bond market crash was coming as Baltimore City Schools were tied to the credit bond leverage building funds by O'Malley and Rawlings-Blake and Maryland Assembly and City Council.......and you can bet all of Maryland and Baltimore public pensions are still heavily invested in the bond market.
These 'inflation savers' and 'insurance' being hawked now as innovative protectors from this coming crash are themselves fraud----they will not protect. Also, pushing all savings into CDs at a time Wall Street knows it is trying to bring a Great Depression means everyone will be trying to withdraw from CDs with all kinds of fees and fines taking more American people's savings.
This is what a social Democratic government would have been shouting these several years as I have----but global pols are conspiring with Wall Street to defraud the public.
'Goldman Sachs (GS) is the latest big Wall Street institution to sound the alarm about a potential bond market crash. Although bond-market dynamics are sophisticated and complex, the argument against bonds boils down to these simple points:'
Bond Market Crash: Is Disaster Ahead for the 'Safe' Part of Your Portfolio?
Dan Caplinger Feb 6th 2013 6:00AM
Just when you've finally gotten over the stock market crash from four years ago, there's a new threat that could potentially hit your portfolio. Even worse, it's in an area that many people think of as being safer than stocks: the bond market.
Goldman Sachs (GS) is the latest big Wall Street institution to sound the alarm about a potential bond market crash. Although bond-market dynamics are sophisticated and complex, the argument against bonds boils down to these simple points:
- Interest rates are near all-time lows, which means that the prices of bonds and bond funds, which go the opposite direction of rates, are extremely high right now.
- Nevertheless, investors have piled into bond investments over the past several years, accepting lousy guaranteed returns in exchange for the near-certainty that they won't lose any principal.
- Corporations and other borrowers have been issuing huge amounts of bonds into the market, raising cash and refinancing their debt to take advantage of low rates before the opportunity to get cheap financing disappears.
- In the past month, rates have started ticking upward, and further rate rises -- which many see as inevitable -- would send bond fund prices down.
Where Can You Take Cover
Goldman and other Wall Street firms can use expert strategies and complex financial products like derivatives to give them protection against rising rates and falling bond prices. For regular investors, though, the options are more limited.
Here are some ways you can take cover if you agree that a bond-market crash is coming:
- Think short-term. Investing in short-dated bonds reduces the interest rate you get now, but if rates rise, you don't have to wait as long before you get to reinvest in a new bond paying a higher rate. Bond funds that own short-term bonds also don't lose value in rising-rate environments as much as longer-term bond funds.
- Look at CDs instead of bonds and funds. Bonds and bond funds can rise and fall in price, but with CDs, you always have the option of withdrawing your money simply by paying an early-withdrawal penalty. With some banks letting you take money out by paying as little as three months of interest, if rates rise dramatically, you can grab your CD money early and reinvest it in a higher-paying CD.
- Consider inflation-protected savings bonds. One of the best deals in the market right now is the Series I savings bond, which pays returns based on the current rate of inflation. The rate changes automatically every six months, but you don't have to pay taxes on the interest until you cash them in. One caveat: you can't cash them in for a year, and if you hold them less than five years, you'll pay a three-month penalty. (By the way, don't confuse these with TIPS -- Treasury Inflation-Protected Securities. Series I bonds are similar, but not the same.)
- Beware of high-risk bonds. The safest bonds tend to pay the lowest rates, with Treasuries at the highest level of safety and corporate bonds offering successively higher interest rates as credit quality weakens. Many investors have gravitated to speculative high-yielding "junk" bonds because they pay 6 percent or more compared to less than 2 percent for comparable Treasuries. But if those somewhat riskier companies default on their debt, you could lose much or all of your investment.
Baltimore local media has saturated life insurance and programs promoting annuity insurance as AARP has become a giant corporation as most US national non-profits and are not working to help seniors----but fleecing them. I imagine last decades local TV ads being flooded with the subprime mortgage fraud originators just as all this life insurance and investment programming is allowed to lure citizens to fraudulent products. LIFE INSURANCE CORPORATIONS ARE SLATED TO BANKRUPTCY JUST LIKE AIG IN 2008----THEY WILL NOT ALLOW YOUR FUNDS TO COME BACK TO YOU----Annuity insurances for main street will be VOIDED by the FED to cover all the credit default swaps being made by Wall Street global investment firms.
SOCIAL DEMOCRATS DO NOT SET CITIZENS UP FOR WALL STREET AND CORPORATE FRAUD---THEY PROTECT WITH OVERSIGHT AND ACCOUNTABILITY.
This is what building oversight and accountability in Baltimore City agencies mean------they protect citizens before they are defrauded.
Life Insurance and Annuity Scams: Don’t Be The Next Victim
By Donna Fuscaldo
Published October 28, 2014FOXBusiness
Insurance scams are far too common, often targeting seniors. While no area of insurance is immune, a lot of the fraud is happening within annuities and life insurance.
“Most agents are honest, but the unpleasant truth is that agents typically are at the heart of annuity and life-insurance cons,” says James Quiggle, a spokesman for the Coalition Against Insurance Fraud http://www.insurancefraud.org. “They know how to manipulate the products and sales pitches to their favor. Agents also have the incentive of earning large commissions when they make a sale, whether or not the sale benefits the trusting client.”
According to experts a common scam, particularly in the life insurance industry is the fake insurance company. Tony Steuer, creator of Insurance Literacy http://www.tonysteuer.com/, says criminals will go to great lengths to create bogus insurance companies and once you hand over the money, they often disappear. The best defense in this case says Steur is doing your research. “Go online and make sure you are dealing with a legitimate insurance company that is licensed in your state,” he says. “Always make your check payable to the insurance company and not to an agent or agency.”
Annuity insurance is another area that’s rife with scams. Quiggle says one fraud called “twisting” occurs when an agent convinces an elderly client to invest in pricey annuities that they have to hold on to for ten to 15 years or pay a severe penalty for cashing out. The agent gets a fat commission and the client is stuck with an investment that Quiggle says is “nearly worthless.” In another version, an agent will get a client to convert one annuity into another annuity with a different company all to get the commission on the sale. It doesn’t matter to the agent if the annuity is expensive or not suitable for the client.
Churning is another underhanded move in which an agent offers you a policy that is supposedly better than your existing one. Turns out it often costs more and doesn’t give you any extra value, says Quiggle. With churning, “you pay more for the same kind coverage, and the agent collects a new commission,” he says. “If your agent calls you to upgrade your insurance policy, make sure you understand the proposal completely before signing any forms.”
Seniors are undoubtedly the main target of insurance scams but seniors who are nearing their death are also popular with criminals. John Kuo, the insurance expert at NerdWallet www.nerdwallet.com says a lot of people who are elderly or near death can fall victim to the stranger-owned life insurance scam. The scammers will loan the seniors money to buy the life insurance, they will fake the applications and when the senior dies they get the payout. While stranger-owned life insurance isn’t illegal, defrauding the insurance companies with false information is. “A lot of the loopholes have been closed down,” Kuo of this particular type of fraud.
When it comes to life insurance and annuities not all the fraud that occurs is flat out scams. In many cases its bad advice that ends up hurting the client. “Products that are not suitable for you, that’s the thing we see most often,” says Steuer.
Taking out a life insurance policy or investing in an annuity doesn’t have to end up being a nightmare. It just requires you to be on the lookout for a few red flags and do your due diligence. Experts say if it seems too good to be true chances are it is. Very complex information or high pressure sales tactics are also telltale signs something is amiss. Also requests to send money directly to the agent or worse a P.O. Box are clues you may be getting taken.
Experts say a big thing to watch out for is pressure to sign on the spot. For instance be wary of anyone who says this offer is only valid for today or tries to get you to sign without giving you time to think about it.
“If you are an older person you’re probably a good target for a scam so it’s really important to look for red flags,” says Kuo. “If you think you are a target get a second opinion.”
Pension Obligation bonds were designed to allow Clinton neo-liberals to hide debt while taking on more and more debt to prepare for this coming bond market collapse and economic crash----Wall Street wanted to make sure governments were loaded in sovereign debt and Obama, O'Malley, and Rawlings-Blake with Congress, Maryland Assembly, and Baltimore City Hall made sure as well. O'Malley knew as did Baltimore City Hall decades ago when he was a city council pols and then Mayor that he had no intention of paying public pensions and was allowed to defund, use them as fodder, and now has slated to end them with these bond deals----as with all state and local pols voting for these Wall Street financial instruments.
RAISE YOUR HAND IF YOU KNEW IN 2008 ALL OF WALL STREET FINANCIAL INSTRUMENTS ARE FILLED WITH FRAUD INTENDED TO MOVE BILLIONS OF TAXPAYER MONEY TO WALL STREET?
Everyone including incumbent pols spending these several years setting the stage for the next huge losses by the American people and their savings and retirements.
Pension Obligation Bonds: Risky Gimmick or Smart Investment?
Pension obligation bonds have bankrupted whole cities. Yet some governments are still big players. BY: Eric Schulzke | January 2013
Pension Obligation Bonds: Risky Gimmick or Smart Investment? Pension obligation bonds have bankrupted whole cities. Yet some governments are still big players. BY: Eric Schulzke | January 2013
“It’s the dumbest idea I ever heard,” Jon Corzine told Bloomberg.com in 2008 when he was still governor of New Jersey. “It’s speculating the way I would have speculated in my bond position at Goldman Sachs.”
Corzine, who followed up his tenure as governor with a $1.6 billion investment debacle as chairman of MF Global, seemed to know a thing or two about risky ventures. In this case, he was speaking of pension obligation bonds. POBs are a financing maneuver that allows state and local governments to “wipe out” unfunded pension liabilities by borrowing against future tax revenue, then investing the proceeds in equities or other high-yield investments. The idea is that the investments will produce a higher return than the interest rate on the bond, earning money for the pension fund. It’s a gamble, but one that a lot of governments are willing to take when pension portfolio returns plummet, causing unfunded liabilities to run dark and deep.
Almost every fund has faced such liabilities from time to time, though current times have been more treacherous than others. As Paul Cleary, executive director of the Oregon Public Employees Retirement System (PERS) points out, since 1970 his state’s pension fund has suffered annual losses only four times. But three of those losses were in the last decade, and one, in 2008, was a catastrophic 27 percent decline.
Faced with such losses -- and with a dearth of state and local revenue to make up for the shortfalls -- POBs have become a favored tool to fix pension woes. Oregon is a big player in the POB market, along with scores of its cities, counties and school districts. Other major POB issuers include California, Connecticut, Illinois and New Jersey.
The bonds took on some notoriety this past summer when two California cities, Stockton and San Bernardino, went bankrupt. Generous pensions awkwardly propped up with ill-timed POBs contributed to both debacles.
Over the years, returns on POBs have often fallen below the interest rate the state or locality paid to borrow the money, digging the liability hole even deeper. Nonetheless, they remain popular with politicians in a revenue pinch. Politically, it is easier to borrow money to pay for pension costs than it is to squeeze an already-stressed budget. While many economists and policy analysts view them as risky gimmicks and question the high market growth assumptions that make them seem viable, POBs have defenders who believe that with careful timing they can pay off.
When Oakland, Calif., launched the first pension obligation bond in 1985, it appeared to be a reasonable strategy. It qualified as a tax-free bond that could be issued at the lower municipal bond rates. A state or city could then pivot and invest the funds in safe securities -- a corporate bond, for instance -- at a slightly higher rate. “That was classic arbitrage,” Cleary says. “You were locking down the difference between nontaxable bonds and taxable bonds.”
The Tax Reform Act of 1986 ended that strategy by prohibiting state and local governments from reinvesting for profit the money from tax-free bonds. When the concept resurfaced, the strategy called for states or localities to issue a taxable bond and leverage the higher interest rate of that bond against higher return but riskier equity market plays. So long as markets boomed, the new tactic seemed savvy. “Some people call this arbitrage, but it’s not,” Cleary says of post-1986 POBs. “It’s really an investment gamble.”
Arbitrage occurs when prices for the same product differ between two markets, allowing a nimble player to exploit the difference. “Real arbitrage is free money,” says Andrew Biggs, a scholar at the American Enterprise Institute. “But it doesn’t hang around very long.”
Safe bonds and risky equities are not the same product, but public pension accounting currently permits state and localities to treat them as if they were. “They are counting the return on the stocks before the return is there,” Biggs says. “If you borrowed money to invest in the real world, you would factor the current value of the debt with the current real value of the stocks.”
Given the inherent risks and possible rewards, how have POBs fared? In 2010, a research team led by Alicia Munnell, director of the Center for Retirement Research at Boston College, ran some numbers to find out. The team took 2,931 POBs issued by 236 governments through 2009. They used each bond’s repayment schedule to calculate interest and principal, and then clustered them into cohorts based on the year issued. They assumed a 65/35 investment split between equities and bonds and tracked the results with standard indexes. They then produced two composite graphs -- one at the height of the market in 2007 and the second in 2009, after a crash and before recovery.
In general, bonds issued in the early stages of a stock boom performed well prior to the crash. Thus, POBs issued in the early 1990s were healthy, ranging from 2 to 5 percent net growth. Borrowings in 2002 or 2003 also looked good.
Those issued in the latter years of the 1990s or 2000, however, were in negative territory even before the 2008 crash, having suffered serious losses to their principal in the 2001-2002 downturn. After 2008, all POBs were under water -- except those issued in the trough of the collapse, which by 2009 were already pushing 25 percent gains.
Oregon’s numbers mirror Munnell’s findings. Local government POBs issued in 2002 at the depth of that market collapse and managed by Oregon PERS gained an annual average of 8.84 percent through 2012, before principal and interest on the bond. Less lucky were bonds issued in 2005. The Springfield School District’s POB earned just 5.53 percent, for example. Since that bond carried 4.65 percent interest, it likely earned roughly one point annually -- not much, but slightly above neutral. Oregon’s 2007 issuers earned just 2 percent on their investments through 2012, and are upside down today after debt service.
The same fate befell Stockton, Calif., which also came to market in 2007. Similarly, New Jersey issued a $2.8 billion POB in 1997 -- on the wrong side of another stock bubble.
“The whole thing is the timing,” Oregon’s Cleary says. “You are trying to issue them when the market has bottomed out and when interest rates are reasonable, because really what you are doing is making an investment bet. If people thought when they did POBs that they were refinancing a debt or doing a locked-in arbitrage, rather than an investment play, I’m sure they have been very surprised by the results.”
And yet that is exactly how they were sold. When Oregon voted on new POBs in 2009, the voter education pamphlet argument in favor of issuance explicitly framed the choice as a “refinance” and cast the projected returns as money “saved.”
“Just like many homeowners are refinancing their home mortgages,” the pamphlet read, “the State should take advantage of these historically low rates, which can save Oregon more than $1 billion over the next 25 years. The money saved will help reduce cuts and protect services that all Oregonians rely on.”
Because POBs demand headroom between the interest an issuer pays to borrow and the high returns promised on resulting investments, their investment strategies tend to chafe against safer portfolios. Without a hefty “discount rate” -- as the projected annual gain assumed by a pension fund is known -- the pension bonds would not be possible.
In a 2012 paper, Andrew Biggs argues that the aggressive 8 percent discount used by many states overstates likely earnings and understates risks. A fund that required $100 million in 20 years and employed an 8 percent discount rate would be “fully funded” with $21 million, Biggs notes. But if that same fund were to gain only 5 percent annually, it would need $38 million today to be fully funded in 20 years.
Many experts argue that because public pension obligations are legally binding, pension funds should be discounted at close to zero risk on the front end -- at or near the rates offered by government bonds. “While economists are famous for disagreeing with each other on virtually every conceivable issue,” wrote then-Federal Reserve Board Vice Chairman Donald Kohn in 2008, “when it comes to this one there is no professional disagreement: The only appropriate way to calculate the present value of a very-low-risk liability is to use a very-low-risk discount rate.”
In point of fact, the 8 percent discount rate may be on its way out. The Governmental Accounting Standards Board (GASB) is launching a complex hybrid discount standard in 2014, which will affect the assumptions states make with their funds. Some fear the GASB rule will only create more confusion. Bond rater Moody’s is taking a simpler tack in weighing government pension plans, having recently proposed to shift its pension discount rate down to the level of AA taxable bonds, which are now at 5.5 percent. “Currently, discount rates used by state and local governments are all over the place,” says Tim Blake, Moody’s managing director of public finance. “Most are in the range of 7.5 to 8 percent. We need a uniform rate.”
Not surprisingly, 5.5 percent is very close to the rate at which many POBs are sold to investors.
With aggressive 8 percent discount rates now under attack by economists, oversight boards and rating agencies, issuers who counted on rosier outcomes have learned some hard lessons. Five years ago, when Connecticut State Treasurer Denise L. Nappier announced a new $2.28 billion pension bond, she noted that the state had “achieved a favorable borrowing cost of 5.88 percent, which is well below the 8.5 percent assumed long-term return on assets of the Teachers’ Retirement Fund. This will provide significant cash flow savings over the long term and a potential savings to taxpayers of billions of dollars.”
When the bond was issued in April, the Dow Jones average stood just shy of 13,000. By November, the market was in free fall. It bottomed out the following March at just over 6,600. Connecticut’s timing could hardly have been worse. As the market plunged, Pensions & Investments lit into POBs, singling out Connecticut. The editors argued that POBs shove obligations “that should have been paid as earned” onto future generations, along with the risk of the debt.
By 2010, with the market still emerging from the trough, Connecticut’s finances were as messy as ever. But now there was little appetite for more bonds. POBs “are certainly a risky proposition,” Michael J. Cicchetti, chairman of Connecticut’s Post Employment Benefits Commission, told the CT Mirror. “Things are different now than they were then.”
Even as Connecticut licked its wounds, Boulder, Colo., was launching its own new POB, designed to clean up some tangled threads from pension programs long since closed to new employees. With the market down, Boulder’s CFO Bob Eichem was ready to take a chance. “POBs are not for the faint of heart,” Eichem says. “You have to understand them.”
Boulder’s bond, for a tame $9 million, was issued into a recovering market, and the city got a low 4.29 percent interest rate. Boulder also ran worst-case scenarios and decided it could absorb any likely loss.
“You’ve got to pay that debt every year,” Eichem says. “So if the market goes against you, you will have to decrease your other expenditures to make up for what the market did to you.”
With the bond money in hand, Boulder staged its investment. “There was great uncertainty in the market, as there still is,” Eichem says. The city put the funds in a holding account and “income averaged” them into the market over a year.
“That would hold you down if the market really rose in that year, but it would also protect you if the market really dropped,” Eichem says of the gradual strategy. After stringing out three quarters of the fund through the year, Eichem put the remainder in when the market bottomed in early 2011.
“Issuing a POB may allow well heeled governments to gamble on the spread between interest rate costs and asset returns or to avoid raising taxes during a recession,” Alicia Munnell and her team wrote in 2010, warning that “most often POB issuers are fiscally stressed and in a poor position to shoulder the investment risk.”
“Good for Boulder,” says Munnell when told of how Eichem had gauged its risk. What would she tell others set on a similar path? “You better have deep pockets. It’s gambling, and you have to be able to absorb any losses.”
Munnell is less approving of Oakland. In 1997, San Francisco’s cross-Bay neighbor followed up its 1985 invention of the POB with a $417 million pension bond, designed to buy the city a 15-year “holiday” from its police and fire pension contributions.
The timing was poor. As noted earlier, bonds issued in 1997 were, on average, underwater in 2007, even before the stock market crash. And so was Oakland’s. In 2010 Oakland’s city auditor did a careful analysis of the 1997 POB and found that “the amount still owed by the City is approximately $250 million higher than the scenario where the POBs were not issued in 1997 and the same payments were made to the pension fund instead.”
With the “pension holiday” over, Oakland’s City Council approved a new $210 million POB to be paid off in 2026 -- once again borrowing money -- cash that it would have had in hand had it not borrowed the last time.
And so, back where it all began, the POB wheel takes another spin. As columnist Len Raphael wrote in Oakland North, a local online newspaper, “That’s like a compulsive gambler telling you that he has to bet it all on red to make up for his past losses.”
The point is this-------social Democrats know people are being taken and would work hard to educate and keep these corporations knowingly setting people up for losses out of local media. Global pols work to make sure people don't know what is happening and making sure governments are tied to the worst of Wall Street financial deals.
When you see a commercial for Life Insurance to anyone with a pulse-----saying you will get all money back that you pay----
THEY ARE LYING AND ARE DELIBERATELY TYING THEMSELVES TO INVESTMENTS LIKE THE BOND MARKET THAT WILL SEND THEM INTO BANKRUPTY JUST LIKE THE SUBPRIME MORTGAGE LOAN ORIGINATION COMPANIES.
Politicians working for their constituents----and main street investors never have enough time to know all that will be sound investments---would never allow all this conspiracy to defraud all savings, retirements, and investments----
Pensions, life insurance, and 401Ks are all heavily invested in bonds and that is what allowed this market to continue to sell globally super-heating the bond market into implosion.
How Do Insurance Companies Invest Money?
by Giulio Rocca, Demand Media
Insurance is a big business. In the United States approximately 1,800 insurance companies offer a range of product lines from property and casualty protection, such as homeowners and auto insurance, to life and health insurance. In exchange for regular payments, or premiums, insurers indemnify individuals, businesses and governments against losses. To operate profitably, insurers must earn more from premiums, which are invested across a range of asset classes, than they pay out in claims.
Internal vs. External Managers
Insurance companies face a choice when it comes to investing policyholders' premiums. The first option is to build a team of in-house investment professionals assembled from existing or new staff. This approach is often taken by larger insurance companies with multibillion dollar balance sheets. In contrast, smaller insurance companies usually find it more economical to appoint external investment managers. In some cases, insurers may adopt a hybrid model, keeping some investment functions in house while outsourcing others.
The insurance industry invests colossal amounts across a range of asset classes. In 2012, U.S. insurers held $5.4 trillion in assets, a 2.3 percent increase from the previous year. The largest asset type is bonds, totaling $3.7 trillion, or 68.4 percent of total assets. The next two largest asset types are common stock ($589 billion) and first-lien mortgages ($351 billion). Other investments include preferred stock, real estate, derivatives and contract loans.
Bond Investments by Type
Bonds are attractive to insurance companies because regular principal and interest payments can be matched against expected claims. Corporate bonds represent the lion's share of the industry's bond investments, amounting to $1.9 trillion, or 51.6 percent of bond holdings. Municipal bonds represent the second-largest bond type, amounting to $524 billion, or 14.3 percent of bond holdings. Other fixed-income investments include U.S. Treasury bonds as well as agency-backed and private label mortgage-backed securities.
Bond Investments by Rating and Industry
Insurance companies are inherently conservative, with 94 percent of their bond holdings funneled into investment-grade securities -- those bonds carrying credit ratings of at least BBB- by Standard & Poor's and Baa3 by Moody's. Bonds from financial services companies represent the largest portion: $447 billion, or 23.7 percent of total bond holdings. Other significant industry exposures include utilities ($264 billion), energy ($223 billion) and industrials ($172 billion).