Citizens' Oversight Maryland---Maryland Progressives
CINDY WALSH FOR MAYOR OF BALTIMORE----SOCIAL DEMOCRAT
Citizens Oversight Maryland.com
  • Home
  • Cindy Walsh for Mayor of Baltimore
    • Mayoral Election violations
    • Questionnaires from Community >
      • Education Questionnaire
      • Baltimore Housing Questionnaire
      • Emerging Youth Questionnaire
      • Health Care policy for Baltimore
      • Environmental Questionnaires
      • Livable Baltimore questionnaire
      • Labor Questionnnaire
      • Ending Food Deserts Questionnaire
      • Maryland Out of School Time Network
      • LBGTQ Questionnaire
      • Citizen Artist Baltimore Mayoral Forum on Arts & Culture Questionnaire
      • Baltimore Transit Choices Questionnaire
      • Baltimore Activating Solidarity Economies (BASE)
      • Downtown Partnership Questionnaire
      • The Northeast Baltimore Communities Of BelAir Edison Community Association (BECCA )and Frankford Improvement Association, Inc. (FIA)
      • Streets and Transportation/Neighbood Questionnaire
      • African American Tourism and business questionnaire
      • Baltimore Sun Questionnaire
      • City Paper Mayoral Questionnaire
      • Baltimore Technology Com Questionnaire
      • Baltimore Biker's Questionnair
      • Homewood Friends Meeting Questionnaire
      • Baltimore Historical Collaboration---Anthem Project
      • Tubman City News Mayoral Questionnaire
      • Maryland Public Policy Institute Questionnaire
      • AFRO questionnaire
      • WBAL Candidate's Survey
  • Blog
  • Trans Pacific Pact (TPP)
  • Progressive vs. Third Way Corporate Democrats
    • Third Way Think Tanks
  • Financial Reform/Wall Street Fraud
    • Consumer Financial Protection Bureau >
      • CFPB Actions
    • Voted to Repeal Glass-Steagall
    • Federal Reserve >
      • Federal Reserve Actions
    • Securities and Exchange Commission >
      • SEC Actions
    • Commodity Futures Trading Commission >
      • CFTC Actions
    • Office of the Comptroller of the Currency >
      • OCC Actions
    • Office of Treasury/ Inspector General for the Treasury
    • FINRA >
      • FINRA ACTIONS
  • Federal Healthcare Reform
    • Health Care Fraud in the US
    • Health and Human Services Actions
  • Social Security and Entitlement Reform
    • Medicare/Medicaid/SCHIP Actions
  • Federal Education Reform
    • Education Advocates
  • Government Schedules
    • Baltimore City Council
    • Maryland State Assembly >
      • Budget and Taxation Committee
    • US Congress
  • State and Local Government
    • Baltimore City Government >
      • City Hall Actions
      • Baltimore City Council >
        • Baltimore City Council Actions
      • Baltimore Board of Estimates meeting >
        • Board of Estimates Actions
    • Governor's Office >
      • Telling the World about O'Malley
    • Lt. Governor Brown
    • Maryland General Assembly Committees >
      • Communications with Maryland Assembly
      • Budget and Taxation Committees >
        • Actions
        • Pension news
      • Finance Committees >
        • Schedule
      • Business Licensing and Regulation
      • Judicial, Rules, and Nominations Committee
      • Education, Health, and Environmental Affairs Committee >
        • Committee Actions
    • Maryland State Attorney General >
      • Open Meetings Act
      • Maryland Courts >
        • Maryland Court System
    • States Attorney - Baltimore's Prosecutor
    • State Comptroller's Office >
      • Maryland Business Tax Reform >
        • Business Tax Reform Issues
  • Maryland Committee Actions
    • Board of Public Works >
      • Public Works Actions
    • Maryland Public Service Commission >
      • Public Meetings
    • Maryland Health Care Commission/Maryland Community Health Resources Commission >
      • MHCC/MCHRC Actions
    • Maryland Consumer Rights Coalition
  • Maryland and Baltimore Development Organizations
    • Baltimore/Maryland Development History
    • Committee Actions
    • Maryland Development Organizations
  • Maryland State Department of Education
    • Charter Schools
    • Public Schools
    • Algebra Project Award
  • Baltimore City School Board
    • Charter Schools >
      • Charter Schools---Performance
      • Charter School Issues
    • Public Schools >
      • Public School Issues
  • Progressive Issues
    • Fair and Balanced Elections
    • Labor Issues
    • Rule of Law Issues >
      • Rule of Law
    • Justice issues 2
    • Justice Issues
    • Progressive Tax Reform Issues >
      • Maryland Tax Reform Issues
      • Baltimore Tax Reform Issues
    • Strong Public Education >
      • Corporate education reform organizations
    • Healthcare for All Issues >
      • Universal Care Bill by state
  • Building Strong Media
    • Media with a Progressive Agenda (I'm still checking on that!) >
      • anotherangryvoice.blogspot.com
      • "Talk About It" Radio - WFBR 1590AM Baltimore
      • Promethius Radio Project
      • Clearing the Fog
      • Democracy Now
      • Black Agenda Radio
      • World Truth. TV Your Alternative News Network.
      • Daily Censured
      • Bill Moyers Journal
      • Center for Public Integrity
      • Public Radio International
      • Baltimore Brew
      • Free Press
    • Far Left/Socialist Media
    • Media with a Third Way Agenda >
      • MSNBC
      • Center for Media and Democracy
      • Public Radio and TV >
        • NPR and MPT News
      • TruthOut
  • Progressive Organizations
    • Political Organizations >
      • Progressives United
      • Democracy for America
    • Labor Organizations >
      • United Workers
      • Unite Here Local 7
      • ROC-NY works to build power and win justice
    • Justice Organizations >
      • APC Baltimore
      • Occupy Baltimore
    • Rule of Law Organizations >
      • Bill of Rights Defense Committee
      • National Lawyers Guild
      • National ACLU
    • Tax Reform Organizations
    • Healthcare for All Organizations >
      • Healthcare is a Human Right - Maryland
      • PNHP Physicians for a National Health Program
      • Healthcare NOW- Maryland
    • Public Education Organizations >
      • Parents Across America
      • Philadelphia Public School Notebook thenotebook.org
      • Chicago Teachers Union/Blog
      • Ed Wize Blog
      • Educators for a Democratic Union
      • Big Education Ape
    • Elections Organizations >
      • League of Women Voters
  • Progressive Actions
    • Labor Actions
    • Justice Actions
    • Tax Reform Actions >
      • Baltimore Tax Actions
      • Maryland Tax Reform Actions
    • Healthcare Actions
    • Public Education Actions
    • Rule of Law Actions >
      • Suing Federal and State government
    • Free and Fair Elections Actions
  • Maryland/Baltimore Voting Districts - your politicians and their votes
    • 2014 ELECTION OF STATE OFFICES
    • Maryland Assembly/Baltimore
  • Petitions, Complaints, and Freedom of Information Requests
    • Complaints - Government and Consumer >
      • Sample Complaints
    • Petitions >
      • Sample Petitions
    • Freedom of Information >
      • Sample Letters
  • State of the Democratic Party
  • Misc
    • WBFF TV
    • WBAL TV
    • WJZ TV
    • WMAR TV
    • WOLB Radio---Radio One
    • The Gazette
    • Baltimore Sun Media Group
  • Misc 2
    • Maryland Public Television
    • WYPR
    • WEAA
    • Maryland Reporter
  • Misc 3
    • University of Maryland
    • Morgan State University
  • Misc 4
    • Baltimore Education Coalition
    • BUILD Baltimore
    • Church of the Great Commission
    • Maryland Democratic Party
    • Pennsylvania Avenue AME Zion Church
    • Maryland Municipal League
    • Maryland League of Women Voters
  • Untitled
  • Untitled
  • Standard of Review
  • Untitled
  • WALSH FOR GOVERNOR - CANDIDATE INFORMATION AND PLATFORM
    • Campaign Finance/Campaign donations
    • Speaking Events
    • Why Heather Mizeur is NOT a progressive
    • Campaign responses to Community Organization Questionnaires
    • Cindy Walsh vs Maryland Board of Elections >
      • Leniency from court for self-representing plaintiffs
      • Amended Complaint
      • Plaintiff request for expedited trial date
      • Response to Motion to Dismiss--Brown, Gansler, Mackie, and Lamone
      • Injunction and Mandamus
      • DECISION/APPEAL TO SPECIAL COURT OF APPEALS---Baltimore City Circuit Court response to Cindy Walsh complaint >
        • Brief for Maryland Court of Special Appeals >
          • Cover Page ---yellow
          • Table of Contents
          • Table of Authorities
          • Leniency for Pro Se Representation
          • Statement of Case
          • Questions Presented
          • Statement of Facts
          • Argument
          • Conclusion/Font and Type Size
          • Record Extract
          • Appendix
          • Motion for Reconsideration
          • Response to Defendants Motion to Dismiss
          • Motion to Reconsider Dismissal
      • General Election fraud and recount complaints
    • Cindy Walsh goes to Federal Court for Maryland election violations >
      • Complaints filed with the FCC, the IRS, and the FBI
      • Zapple Doctrine---Media Time for Major Party candidates
      • Complaint filed with the US Justice Department for election fraud and court irregularities.
      • US Attorney General, Maryland Attorney General, and Maryland Board of Elections are charged with enforcing election law
      • Private media has a responsibility to allow access to all candidates in an election race. >
        • Print press accountable to false statement of facts
      • Polling should not determine a candidate's viability especially if the polling is arbitrary
      • Viability of a candidate
      • Public media violates election law regarding do no damage to candidate's campaign
      • 501c3 Organizations violate election law in doing no damage to a candidate in a race >
        • 501c3 violations of election law-----private capital
      • Voter apathy increases when elections are not free and fair
  • Maryland Board of Elections certifies election on July 10, 2014
  • Maryland Elections ---2016

July 21st, 2016

7/21/2016

0 Comments

 

Since this article was written US Treasury and state bond debt soared as in Maryland -----it was in 2013 our Baltimore $1 billion school building bond debt was passed.  Baltimore has these few years been allowed to add more and more bond debt knowing this crash is coming-----subpriming our Baltimore City government----


'This Ponzi scheme is getting ready to explode'.




Published March 08, 2013


The Coming Crash in the Bond Market

It is my contention that the 70-year debt supercycle has come to an end.
To put the current financial situation in perspective, here's a long-term history of the debt-to-GDP ratio, which reached a record high at the beginning of the current crisis. It was a dramatic change in 2009, unlike anything since the aftermath of the Great Depression.



The clear driver of this extreme expansion of government debt that I call a "Bond Bubble" is the Federal Reserve's flooding of markets with liquidity to drive rates to zero. The chart below shows a projection what will happen to the Fed's balance sheet as it continues to distort the rate to zero by extending its monthly purchases of $40 billion of mortgage-backed securities (MBS) and $45 billion of Treasuries out to 2016:


Published March 08, 2013



The Coming Crash in the Bond Market







  • ">
It is my contention that the 70-year debt supercycle has come to an end.
To put the current financial situation in perspective, here's a long-term history of the debt-to-GDP ratio, which reached a record high at the beginning of the current crisis. It was a dramatic change in 2009, unlike anything since the aftermath of the Great Depression.




The highest the debt-to-GDP ratio had previously been for the United States was 301% at the bottom of the depression in 1933 when GDP collapsed and debt was high. The level became unsustainable in 2009, despite low interest rates. Weak borrowers were signing up to finance houses that they thought would increase in price forever. The point of the chart is that this downturn is different from all the recessions since World War II.
Total market debt includes debt of the federal government, state governments, households, business, financial institutions, and to foreigners. The components of the above total debt are shown below, so you can see which ones are stabilizing and which may be approaching unsustainable levels.
Looking forward, the most important problem is that the federal government has inserted itself into the economy with huge deficits to try to combat the slowing of the private sector. As you can see, private-sector borrowing has not increased, even as federal government deficits have ballooned to unprecedented levels. In essence, we are building our recovery on government debt.


The clear driver of this extreme expansion of government debt that I call a "Bond Bubble" is the Federal Reserve's flooding of markets with liquidity to drive rates to zero. The chart below shows a projection what will happen to the Fed's balance sheet as it continues to distort the rate to zero by extending its monthly purchases of $40 billion of mortgage-backed securities (MBS) and $45 billion of Treasuries out to 2016:


It is my contention that the actions of the Fed, which were started to counter the credit crisis of 2008 with four programs of quantitative easing, have brought us the incredibly low interest rates (aka, the Bond Bubble) we have today. By purchasing so many credit assets, the Fed is driving the price of bonds higher, and thus interest rates much lower, than they would otherwise be.
The black line in the chart above is the 10-year Treasury rate – you can see that it drops with each of the big balance sheet expansions. The resulting asset bubbles in stocks and housing are a direct result of the monetary creation by the Fed.
The growth in Fed purchases will likely continue so that the low rates of the Bond Bubble don't collapse. But the effects of the Fed's economic stimulus decline with each new injection of money.


There will come a time when the Fed announces a new program of balance sheet expansion by asset purchases that will cause the interest rate to rise because of fears of inflation from money creation, rather than fall as the Fed desires. At that point, we'll know the Fed's power to manipulate the economy has dissipated.


Just How Low Can Interest Rates Go?


The chart of 10-year Treasuries below shows that the current level of 2% is lower than it has ever been, except for a brief low of 1.5% last fall (blue line). It is the lowest in 240 years. This is happening in spite of government deficits expanding at a trillion dollars per year as far as the eye can see. We are at the bottom of a 32-year bull market in bonds (drop in rate).
To get a view of how extreme today's rate is, I added the red line, which is 100 divided by the interest rate. It shows a rise as rates fall and makes the bubble of low rates more obvious – which is currently higher than ever.


The point is that these extremely low rates are unprecedented, even when looking back to the last Great Depression. They could spring back a long way.
The low rates induced by the Fed are transmitted to many other market rates, as shown in the following charts. These charts need little comment, except that all of them confirm the simultaneous movement to many-decade lows.


During the credit crisis, junk bonds were the worst performers as investors feared they would lose their money in default. Rates rose on BBB corporate debt as well. At the same time, government debt became the safe haven, and as people moved to the safe haven, they drove the price of Treasuries up and their interest rate down. The premium has gone out of the lower-rated markets, with rates even lower than before this crisis started. It's not that risk has disappeared: I think it is more likely that the flood of excess money is chasing any kind of return it can find, and that is driving rates to record-low levels.


Inflation spiked dramatically in the 1973 and 1979 oil crises. More recently, official government numbers haven't shown wild inflation. Prices for energy, food and domestic services – like medical care and education – have had big jumps. But thanks to cheap foreign manufacturing, we are able to import goods at attractive prices, so overall inflation doesn't reflect the extreme money creation by the Fed. Wage growth is nonexistent, largely due to foreign competition and high unemployment from offshoring manufacturing.
The forces of inflation can easily overcome a weak economy to destroy a currency: this has happened in countries like Zimbabwe, Argentina or Yugoslavia. Once things get out of hand, it is hard to say whether it is the weak economy that causes the government spending and further deficit destruction of the currency, or the reverse. But that doesn't matter once people lose confidence in the government and its paper issuance.


The chart below shows government numbers for inflation that seem awfully low compared to what most people experience. The erratic behavior of commodities is likely to continue, so I think prices will continue to rise.


But even using these conservative government numbers, when we subtract the inflation from the interest rate to show the real return to an investor, we get negative numbers. This, too, is unsustainable.


A Look at Interest Rates Worldwide

I've written extensively in previous articles about central bank expansion, but it's worth reminding ourselves that excessive money creation is not just a US phenomenon but a worldwide experiment. Once this feeds back on itself as ordinary people recognize the destruction of the fiat currency systems, we can expect inflation on a worldwide basis. The similar decline in interest rates in Germany and Japan is the result of their central bank interventions to support their economies by driving rates lower.


The chart below, which shows the interest rates of 187 countries, has some underlying patterns. At first blush it just looks like spaghetti, but if you step back, you can see that rates were rising into 1980. Then many fell until the recent crisis, after which new deviations appear. In Europe, rates went both ways: up for the PIIGS and down for the safe havens like Germany.


And here is a simplification of the above by just averaging the numbers to a single line in which you can see an imprecise confirmation that, despite wide variability, there is an underlying pattern in world markets.


The above six charts confirm that rates of all kinds are at 50-year record lows.


Debt and Interest Rates Suggest Higher Rates Are Possible

The chart below shows the comparison of Greece's growing debt (in blue) and the resulting rise in interest rate. You can see that as Greece's debt to GDP rose above 100%, the interest rate rose toward 20%. Lenders lost confidence in the ability of the Greek government to actually pay back its debt.


In contrast, the stronger countries have been able to accommodate their government debt increase and still maintain moderate interest rates. The United States is shown in the following chart. Central banks have aided the government in managing to keep rates low despite big deficits, by buying the debt. Balance sheets of the world's central banks are growing rapidly to support government deficits while forcing rates to low levels. It is a bubble.


When you buy Treasury bonds, you are putting your fate in the hands of the government, expecting it to give back your purchasing power and a reasonable amount of interest to you, in return for the use of your money. Should you trust these authorities with your money? I believe we are headed for a serious loss of confidence in the value of the dollar, which will be accompanied by a burst of the Bond Bubble.


This Ponzi scheme is getting ready to explode.


______________________________________________
WALL STREET BALTIMORE DEVELOPMENT AND A VERY, VERY, VERY NEO-CONSERVATIVE JOHNS HOPKINS IS LOADING BALTIMORE WITH BOND DEBT EVEN AS EVERYONE KNOWS A BOND MARKET CRASH IS COMING.  THEY ARE DELIBERATELY, WILLFULLY, AND WITH MALICE THROWING THE CITY OF BALTIMORE INTO WHAT MAY BE BANKRUPTCY...........who do they get to approve all this debt----they place these bond obligations on our primary election ballot and then tell citizens its good for the city.

To understand what we mean when we say ESTABLISHMENT CANDIDATES FOR MAYOR OF BALTIMORE we need to go back to Clinton era 1990s when MASTER PLANS and Development Corporations were given more power and the PRAGMATIC NILISM of suspending our US Constitution and centuries of common law court precedent to return to the DARK AGES of extreme wealth and extreme global corporate power.  An O'Malley, Dixon, Rawlings-Blake, Pugh were only Baltimore City council members then tasked by Wall Street Baltimore Development and a very, very, very, very global neo-conservative Johns Hopkins to privatize all that is public and dismantle oversight and accountability so system fraud and government corruption would be allowed in our US cities just as development corporations and Wall Street behave overseas in developing nations in war zones and International Economic Zones.  These same establishment candidates were the ones who advanced to positions of mayor or Baltimore Maryland Assembly to pass these laws statewide and brought us these financial institutions and predatory lending.  All this was done with a goal of keeping US citizens impoverished and moving Federal, state, and local government revenue to the 1% in exchange for pay-to-play few millions for the 5%.  When we say Embry and Warnock are those same establishment candidates---they and their families were the ones enriched by all this dismantling, privatization, fraud and corruption.  Embry was allowed to become a Maryland States Attorney tasked with protecting WE THE PEOPLE from all this corporate fraud and government corruption and of course our STATES' ATTORNEY OFFICE DOES NOT---NOR DOES OUR PUBLIC JUSTICE ORGANIZATIONS. 

All of these financial structures caused the crumbling communities, the loss of community resources and jobs, the rising crime and violence so these same establishment candidates passed laws to dismantle public justice and allowed all pathways to justice from these frauds and corruption be taken from WE THE PEOPLE. 

A LABOR AND JUSTICE ORGANIZATION OR ANYONE SAYING THEY ARE BLACK LIVES MATTER WOULD NOT BE ATTACHED TO WALL STREET BALTIMORE DEVELOPMENT, JOHNS HOPKINS, OR ANY OF THESE ESTABLISHMENT POLS/CANDIDATES IF THEY WERE REALLY WORKING FOR CHANGE.


During the 2008 economic crash national media had all the financial talking heads telling us why all of what was fraud was actually ONLY GREED.  Of course they were all global market neo-liberal economists and lawyers working on the premise our US CONSTITUTION AND CENTURIES OF WESTERN COMMON LAW NO LONGER APPLY.

We are now being told that it is PUGH'S turn to be mayor for her decades of commitment to Wall Street Baltimore Development and Johns Hopkins and our elections are rigged to assure this.


What is a 'Fiduciary'
A fiduciary is responsible for managing the assets of another person, or of a group of people. Asset managers, bankers, accountants, executors, board members, and corporate officers can all be considered fiduciaries when entrusted in good faith with the responsibility of managing another party's assets. 


BREAKING DOWN 'Fiduciary'

A fiduciary's responsibilities are both ethical and legal. When a party knowingly accepts a fiduciary duty on behalf of another party, they are required to act in the best interest of the party whose assets they are managing. The fiduciary is expected to manage the assets for the benefit of the other person rather than for his or her own profit, and cannot benefit personally from their management of assets. This is what is known as a prudent person standard of care, a standard that originally stems from an 1830 court ruling. This formulation of the prudent-person rule, required that a person acting as fiduciary was required to act first and foremost with the needs of beneficiaries in mind, and that they must work to preserve the estate or corpus of a trust, as well as the amount and regularity of income.

Types of Relationships

While the most common types of fiduciary relationships are between a trustee and a beneficiary, fiduciary duties appear in a wide variety of common business relationships. 

The way the relationship between a trustee and beneficiary would work is that the trustee, while legally owning property or assets, is bound by both equity and their fiduciary duty to manage the assets in accordance with the best interests of the beneficiary. A similar fiduciary duty can be held by corporate directors, seeing as they can be considered trustees for stockholders if on the board of a corporation, or trustees of depositors if service as director of a bank.


Politicians often set up blind trusts in order to avoid conflict of interest scandals. A blind trust is relationship in which a trustee is in charge of the investment of a beneficiary's corpus without the beneficiary knowing how the corpus is being invested. Even while the beneficiary has no knowledge, the trustee has a fiduciary duty to invest the corpus according to the prudent person standard of conduct. 


Other types of relationships where fiduciary duties are involved include:
  • Lawyers and clients
  • Executors and legatees
  • Guardian and ward
  • Investment corporations and investors
  • Promoters and stock subscribers



Regulation


The Department of the Treasury's agency, the Office of the Comptroller of the Currency is in charge of regulating federal savings associations and their fiduciary activities. Multiple fiduciary duties may at times be at conflict with one another, a problem that often occurs with real estate agents and lawyers. Two opposing interests can at best be balanced; however, balancing interests is not the same as serving the best interest of a client. 



A fiduciary cannot profit from their position, according to an English High Court ruling, Keech vs. Sandford (1726).

All profits made by the fiduciary as result of their position must be reported to the principal, and if the principal provides consent, then the fiduciary can keep whatever benefit they received. These benefits can be either monetary or defined more broadly as an "opportunity."


________________________________________________
I think it is clear that all laws around usury and predatory lending have been ignored and allowed to become systemically fraudulent.  Creating loopholes to allow one industry circumvent these laws----then creating more loopholes to allow other industries to circumvent other laws IS NOT LEGITIMATE LEGISLATION.  We now have banking overdraft fees that are allowed to ignore the cap of 2.7% per month fees on loans charging $38 every 5 days on accounts overdrawn by only $5 or $10.  THIS DOES NOT MEET THE 2.7% A MONTH and the loophole is that overdrafts do not fall into that category of fee limits on small loans.

Today we want to return to the massive frauds now called just GREED because they have loopholed and dismantled what FIDUCIARY DUTIES include.  The originator mortgage loan corporations were built to create the hundreds of millions of housing loans needed for global leverage and profits from Wall Street tranches targeting real estate Wall Street wanted to claim as part of the MASTER PLAN in our US cities.  Those originators failed in their FIDUCIARY responsibility to assure consumers were qualified and capable---that responsibility was to both the consumer and to the shareholders of that mortgage origination corporation.  This is why bankers for centuries have been PRUDENT in assuring to the best of his/her ability these loans would be REPAID.


When Obama, his US Justice Department and our Maryland States Attorneys close their eyes to this and say it was simply greed----THEY ARE LYING AND IGNORING CENTURIES OF COURT PRECEDENT IN FIDUCIARY DUTIES and at the same time they were usually the lawyers moving these fraudulent deals getting rich doing it.

These originators knew they were creating toxic loans that were not only bad for that consumer but SHOULD HAVE BEEN BAD FOR THOSE SHAREHOLDERS if not for the BAILOUTS.  It is the process of bailouts corrupting this financial structure allowing no CONSEQUENCE for fiduciary malfeasance.


'Two opposing interests can at best be balanced; however, balancing interests is not the same as serving the best interest of a client. 


A fiduciary cannot profit from their position, according to an English High Court ruling, Keech vs. Sandford (1726)'.


Many Americans thought this Obama policy push was for main street but it was simply posing progressive in protecting shareholders. Today's shareholders are going to be wiped out with this coming several years of US Treasury and state municipal bond subpriming and fraud all rolled out under Obama.




Is Your Financial Advisor a Fiduciary?

Many investors are not aware of the difference between fiduciary and suitability standards.


By Brett Carson | Contributor March 19, 2015, at 9:01 a.m.


Is Your Financial Advisor a Fiduciary?


 
It may be time to exercise skepticism and pick an advisor you know is working for you. (iStockPhoto)



President Barack Obama’s recent endorsement of fiduciary standards for financial advisors could have significant implications for the investment industry. Said differently, the president is pushing to require financial advisors to put the client’s needs before their own. That’s right. Your advisor may not have your best interests in mind. As the law currently stands, broker dealers, insurance salespersons and advisors operating under the “suitability standard” are merely required to ensure an investment is suitable for a client at the time of the investment.  
This contrasts with the “fiduciary standard” where registered investment advisors, or RIAs, and Employee Retirement Income Security Act-appointed fiduciaries must avoid conflicts of interest and operate with full transparency. In fact, the President’s Council of Economic Advisers estimates that non-fiduciary advice costs Americans 1 percentage point of their return annually, which amounts to $17 billion each year. 


To illustrate the difference between these two standards, consider a middle-aged client who is, by their own description, a long-term investor and is not bothered much by market volatility. Under the suitability standard, an advisor can meet with this client to determine what is suitable at that point in time. Based on goals and risk tolerance, the advisor may determine that the majority of savings should go into a stock mutual fund. The advisor typically hands the customer a prospectus that tells the client in deep legalese that the fund they recommend is operated by the bank that employs them, and that they received a perpetual trailing fee on top of the sales commission they pay. Once the client leave’s this advisor’s office, they have little further legal obligation to monitor this client’s investment. 
The picture is much different under the fiduciary standard. First, all conflicts of interest must be disclosed. Also, a fiduciary has a “duty to care” and must continually monitor not only a client’s investments, but also their changing financial situation. Maybe this client’s risk tolerance changed after going through a painful bear market. Perhaps there was a tragedy in the family, causing the client’s medical expenses to skyrocket. Under the suitability standard, the financial planning process can begin and end in a single meeting. For fiduciaries, that first client meeting marks only the beginning of the advisor’s legal obligation.

It’s time to be more proactive with your advisor. Here is a list of questions to consider.



"How often do you monitor my investments?"


 Investors don't ask this question often, because most investors assume the advisor keeps a close eye on their portfolio. A common reason for using an advisor is insufficient time to self-manage. Hopefully, you are not paying an annual fee for an advisor to put your money into passive index funds and not monitor their performance. However, the problem has become so prevalent that the Securities and Exchange Commission is increasing scrutiny of “reverse churning.” As more advisors move their compensation toward annual fees, the incentive has shifted from doing excessive transactions to generate commissions, toward inactivity. If your advisor is not analyzing your portfolio at least quarterly, you may want to discuss the services offered for the annual fee you pay.



"What is your investment philosophy?" 

Paying careful attention to the advisor’s answer can offer insight into the business model. Although there is no one-size-fits-all approach, all advisors should have a disciplined and repeatable investment approach. Markets fluctuate, and strategies that may have been in favor last year might perform terribly the next year. An advisor who chases performance and lacks an underlying process often generates poor returns. If they are pitching a new “hot” fund every time you meet, they may not have a have a disciplined long-term investment philosophy. The tried-and-true advisor with a transparent fee structure and disciplined approach may not provide fodder for cocktail party gossip, but over time, he or she will reward patient investors.



"How much am I really paying?"

 Disclosure requirements have improved since the financial crisis, but “hidden” fees remain. Often, when selecting a financial advisor, clients base their decision on the advertised fee. In some cases, there may be no fee referenced at all. Is the advisor working for free? A seemingly very low fee should be scrutinized by an investor. The advisor may be receiving ongoing service fees from the investment they are recommending. This undisclosed compensation is called “soft dollars,” but are basically kickbacks for selling a particular investment product.

Beware, as these fees can become a significant cost over time, compared to the explicit fees of a fiduciary advisor. A typical fee-based advisor has a tiered structure based on account size that is discussed and disclosed to a client upon entering into an advisory agreement. The average is about 1.3 percent, which does not include fund expenses, another meaningful cost to consider when choosing an advisor. Selecting an advisor with a reasonable fee is important, but what you get for that fee is equally relevant. If one advisor is a fiduciary and the other is only held to the suitability standard, the difference in fees may not paint the full picture. Investing in an advisor who has your best interests at heart could pay handsomely over time. 


In summary, when it comes to selecting a financial advisor, take nothing for granted. In an environment where the first question is, “Do you have my best interests in mind?” assumptions should be verified. Regardless of which advisor you choose, ask if they are held to the fiduciary standard. Know what you are paying for. A good advisor will have a customized plan to fit your lifestyle. Finally, make sure your advisor is grounded by a solid philosophy and has experience consistently applying it throughout market cycles. Only after finding advisors who exemplify these attributes should you concern yourself with fees. Remember, a discount broker focused on his or her next commission could cause you financial ruin.

_________________________________________________
What changed during the CLINTON/BUSH/OBAMA era was the ignoring of common law stating A FIDUCIARY CANNOT PROFIT FROM THEIR POSITION and indeed these origination corporations were profiting at the expense of not only that consumer but their shareholders.  Where for centuries DO YOU HAVE MY INTERESTS IN MIND was the court precedent----these few decades they are saying these financial institutions have no requirement to work in the interest of consumers or shareholders.  It is now only important if these financial agents are working for GLOBAL CORPORATE PROFITS----the very opposite of what common law has upheld.

'In summary, when it comes to selecting a financial advisor, take nothing for granted. In an environment where the first question is, “Do you have my best interests in mind?”'

'A fiduciary cannot profit from their position, according to an English High Court ruling, Keech vs. Sandford (1726)'.


Below you see mortgage originators are the realtors and yes they committed fraud and violated their fiduciary duties and should have been prosecuted and that fraud should have come back to homeowners and communities.  Instead most of those fraudulent mortgage originator corporations were folded into WELLS FARGO and BANK OF AMERICA two players tied to breaking more laws in this process.
  All of this is important today because these same players are behind moving all the fraud tied to this coming bond market collapse and economic crash and again they were allowed to ignore all FIDUCIARY DUTIES regarding


PHONEY STATE AND NATIONAL BOND RATINGS BY THE LIKES OF MOODYS AND S & P RATINGS CORPORATIONS STILL IN BUSINESS AFTER THE MASSIVE FRAUDS THEY PUSHED DURING THE BUSH YEARS.



Most realtors will not allow themselves to be that representative for buyer and seller because it does not allow them to best represent EITHER.  If we know what was fraud and not greed from last massive fraud----we understand nothing was fixed and they simply rolled out the next fraud this time to take down our national, state, and local bond market.


'As a REALTOR®, my relationship with my clients is clearly delineated. I have a fiduciary responsibility to the buyer or the seller I represent. The term "fiduciary" simply means that I must represent my client's best interests. In a case of dual representation, REALTORS® are expected to treat both parties fairly and equitably'.

Fiduciary Responsibility in the Mortgage Meltdown

Written by Ralph Roberts on Tuesday, 25 December 2007 6:00 pm

I was discussing the mortgage meltdown with a colleague the other day, when we encountered an interesting question: Who do mortgage originators (brokers and loan officers) represent? Do they represent themselves, the lenders whose products they sell, or the borrowers?

As a REALTOR®, my relationship with my clients is clearly delineated. I have a fiduciary responsibility to the buyer or the seller I represent. The term "fiduciary" simply means that I must represent my client's best interests. In a case of dual representation, REALTORS® are expected to treat both parties fairly and equitably.
A professional's responsibility varies according to the profession and the specific role the person plays. A stock broker, for example, is supposed to sell investments to clients that are in the clients' best interests. Someone who sells cars, however, is responsible for acting on behalf of the dealership, not the person who's buying the car. Condemning a car salesperson for trying to sell the buyer additional optional features the buyer didn't really need would be insane.
In real estate transactions, fiduciary responsibility is not always so clearly defined, and I believe this is at the root of many problems in the industry. For example, is an appraiser (paid by the buyer) responsible to the buyer or to the bank who uses the appraisal to deny or approve a loan? In the best of all possible worlds, the appraiser's job is to provide an accurate appraisal of a home's value, but in the real world, this doesn't always happen. At the direction of a homeowner, loan officer, or real estate agent, the appraiser may inflate the appraisal, fooling the lender into approving a loan it would otherwise deny.


The fiduciary responsibility of mortgage brokers and loan officers is even fuzzier. Like a car dealer, a loan officer is merely selling a product supplied by the lender. Like an investment broker, however, the loan officer has some responsibility not to saddle the borrower with an overly risky loan. As you can see, the role that the broker or loan officer plays between the lender and borrower is clouded in ambiguity.


I believe that this ambiguity led to many of the problems leading up to the mortgage meltdown. In some cases, loan officers were overly ambitious in representing the borrower's interests, which resulted in mortgage fraud. In other cases, loan officers who were overly eager to sell the lenders' products pushed risky loan products (subprime mortgages) on unwary borrowers. Ironically, by acting solely on the behalf of either the borrower or the lender, these loan officers served neither party. Both lenders and borrowers got stuck with bad loans.
Some states have passed legislation that gives mortgage brokers and loan officers fiduciary responsibility to borrowers, but that addresses only one half of the equation. Brokers and loan officers also have to protect the interests of lenders.
I don't intend to make mortgage brokers and loan officers the scapegoats in the mortgage meltdown. There's plenty of blame to go around. Real estate agents, appraisers, title companies, Wall Street, the Federal Reserve, legislators, politicians, and homeowners all share the blame. Unfortunately, mortgage brokers and loan officers play the role of gatekeepers and are saddled with an inordinate amount of responsibility. They must serve two masters in a way that is in the best interest of both parties.
Perhaps mortgage brokers and loan officers need to stop thinking about their vendors and their clients and think in more abstract terms. Instead of selling products from lenders or representing borrowers as clients, maybe they need to be committed to making good loans. In many ways, the relationship needs to be governed by the same rules that apply to dual representation in the real estate industry -- if it's not a good deal for everyone involved, then it's not a good deal. As an added incentive, perhaps brokers and loan officers should have their compensation tied to the success of the loan rather than receiving a commission on each sale.

___________________________________________

The global insurance corporation AIG was allowed to not only commit fiduciary fraud to its shareholders and consumers----it was allowed to openly throw all financial responsibilities to maintain corporate financial stability as part of a global TOO BIG TO FAIL network.  These fiduciary laws are tied to the well-being of our national economy and it is the Federal Reserve  THE FED charged with seeing all financial corporations operating in this network are operating under sound and fiscally responsible practices WHICH IT HAS NOT UNDER CLINTON/BUSH/OBAMA.  This was Greenspan, Bernanke, and now Yellen failing in their responsibilities and mission of the FED.  The fraudulent actions of global AIG brought trillions in profit to that corporation and it was allowed to SPIN OFF TO OTHER CORPORATIONS LIKE HIGHSTAR INVESTMENT CORPORATION all those fraudulent assets BEFORE the Bush US Treasurer came to pull it into bankruptcy---today we have Obama's LEW doing what Bush's US Treasurer did---Lew is ignoring all this global bond market fraud and will bail out whatever global insurance firm is tied to this subpriming of our US bond market.

If we again look at the word FIDUCIARY AND FIDELITY we now see our pension funds, our 401Ks, our municipal bond investment corporations all conspiring in these bond frauds by failing in their duties to protect against what we all knew in 2010 was to be a collapsing bond market.  These are the corporations that are allowed to always tie our public and private pensions, our government coffers to the worst of frauds--taking all the value and loses each economic crash from these transactions.


PUBLIC AND PRIVATE PENSION FUNDS



Fidelity Bond Versus Fiduciary Insurance



Retirement plans need protection from theft, fraud or employee claims of mismanagement. There are two types of protection available:

 Fidelity Bonds and Fiduciary Insurance. What is the difference and what do you need?


Fidelity Bonds protect the retirement plan against theft or fraud.  Plans are required to have a bond that covers at least 10% of plan assets, capped at $500,000.
The exception to this requirement is a plan that covers owners only.  In addition, if the plan contains assets that are not in custody of a documented trustee, additional coverage is required.
Fidelity bonds are generally inexpensive to purchase because retirement plan theft or fraud is relatively rare. When it does occur, carriers are aggressive in the pursuit of the wrong-doer.  Bonds typically cover a 1 to 5 year period and may have an ‘inflation guard’ which means that the coverage will adjust to cover 10% of the plan assets throughout the coverage period. Any insurance agency can sell fidelity bonds and they may be combined with other company insurance policies.
On the other side of retirement plan protection is Fiduciary Insurance. This coverage is not required but is probably more critical to have since it protects individuals responsible for the plan in case of a fiduciary mistake. A fiduciary is anyone who makes discretionary decisions in the plan. An example is someone who allocates funds in the retirement plan or makes eligibility decisions. People within the plan can get very upset about the investment results and claim that the fiduciaries are inept at making decisions. This has become more prevalent in recent years due to poor performance of the stock market.  The current focus on retirement plan fee disclosure has heightened awareness of fiduciary responsibilities.


Fiduciary Insurance is generally expensive.  It is generally sold by larger agencies and specialty companies.  If you maintain Errors and Omissions Insurance, check the provisions carefully; it may or may not provide adequate coverage in the case of negligence on the part of a fiduciary.


Fidelity Bonds and Fidelity Insurance are just an example of why Plan Sponsors need guidance from trusted advisors.  While coverage may be costly, the right coverage will provide peace of mind and can avert disaster if the unthinkable occurs.


________________________________________
I wanted to share both the article that rightly touts a coming municipal bond market collapse and one that wrongly states there is nothing to fear.  The Bush era had financial agencies shouted from 2005 through 2008 that the subprime mortgage fraud had the economy systemically criminal and would lead to a crash ----they said that because they were market specialists that knew where all these practices would lead.  Greenspan did as well---but as a 1% Wall Street extreme wealth and power far-right neo-liberal/Libertarian---he wanted all wealth moved to the top and allowed the frauds to continue.

Again, those financial agencies and analysts knew after Obama, Congress, and the FED passed policies to subprime our US Treasury and state municipal bond market---AND THEY DID THIS DELIBERATELY WITH THE FED'S BERNANKE TELLING THEM TO-----know these policies were designed to create a collapse of the bond market so they were out shouting to people in 2009 that this market collapse was coming.

So, the people like that in the article below who PRETEND there is no danger just to keep people in a criminal market for their or their corporations' profit ARE ACTING ILLEGALLY AND VIOLATING FIDUCIARY RESPONSIBILITIES to their consumers, the shareholders of these corporations and as we see this is the bond market source of fraud---BILL GROSS taking his global municipal bond corporation pedaled all these subprimed bonds now saying he doesn't see a collapse coming.  He is the AIG of this coming bond market crash.



'One of them is Bill Gross, the man who manages more fixed-income assets than anyone else on the planet. The Pimco chief recently declared, "I don't subscribe to the theory that there will be lots of municipal bankruptcies."'


So, WE THE PEOPLE are being told that even though the entire world and global financial analysts knew in 2009 these bond policies were leading to bond market collapse---that people like Bill Gross and Alexander Green, Chief Investment Strategist, The Oxford Club Tuesday, February 1, 2011 ----saying there is no problem cannot be held responsible for lack of fiduciary duties because who knew?
  Bill Gross not only knew where these bond deals were going----he an Bernanke manufactured this fraud to bring the great recession as this mirrors the banking policies that brought the GREAT DEPRESSION.  These people are conspiring and aiding and abetting massive frauds against the US Treasury and the American people.



The Coming Collapse of the Municipal Bond Market

philg - November 3, 2009 @ 12:18 am


A money manager friend showed me an interesting research report by Frederick J. Sheehan titled

“Dark Vision: The Coming Collapse of the Municipal Bond Market".



This is a product of weedenco.com and available only to subscribers, but I will summarize it here.

Sheehan starts off by noting that a lack of panic by the ratings and government agencies does not indicate health for a financial market. He cites the fact that the Fed did not anticipate how bad the subprime collapse was likely to be and obviously the Moody’s and Standard and Poor’s ratings were ridiculous.




Why Fears of a Municipal Bond Collapse Are Overdone



by Alexander Green, Chief Investment Strategist, The Oxford Club Tuesday, February 1, 2011

Why Fears of a Municipal Bond Collapse Are Overdone
by Alexander Green, Investment U's Chief Investment Strategist

Tuesday, February 1, 2011: Issue #1440


I once heard a comedian tell an audience, "Never forget that you are a completely unique individual ... just like everyone else."
It's a good line - one that reminds me how often investment analysts and various gurus who claim to offer "fiercely independent" advice generally end up saying much the same thing.
Take municipal bonds, for example - those supposedly safe securities issued by states, counties and cities to finance public works and which pay interest exempt from federal income taxes (and some state ones).
If you've been paying any attention at all, you've heard that the next shoe to drop - the next big financial crisis - will be major defaults by California, Illinois and other states with huge fiscal imbalances.

It won't happen. Here's why...
No Fluff... Just the Facts
Let me begin by saying that any pending crisis on everyone's radar screen is usually no crisis at all.

OH, REALLY?????????


(Remember Y2K?) A genuine crisis, almost by definition, is unpredictable.



How can all these "independent" analysts and Wall Street Cassandras be wrong? Mostly because they all have a tendency to listen to each other and adopt the viewpoint du jour, rather than looking at the plain facts.



So let's do just that.
  • Fact #1: Municipal bonds have plunged over the last several weeks, as the consensus has grown that we'll see widespread defaults this year.
  • Fact #2: Financial analyst Meredith Whitney, in particular, expects that we'll see 50 to 100 American cities go bust this year and the defaults will amount to hundreds of billions of dollars.


A lot of investors are listening, apparently. The Wall Street Journal reports that municipal bond funds have seen $22.7 billion of withdrawals since November 10 - about two-thirds of the $34.5 billion that had been invested since January 1, 2010.
Vanguard even withdrew the offering of several muni bond ETFs, citing chaotic and uncertain market conditions.


Digging Out of the Deficit Abyss


I'm not Dr. Pangloss. I realize that state budget deficits will increase from $120 billion this year to almost $150 billion next year, thanks largely to underfunded pensions and growing healthcare costs.
Yet many analysts assume these deficits will just keep growing in perpetuity. They won't.
Look at New Jersey Governor Chris Christie, for example. He's stood firm against unhappy public employee unions - a group that traditionally tells political leaders what they "must have," not what they "want" - and his poll numbers have surged.
In California, Governor Jerry Brown announced $12.5 billion in spending cuts on January 12. That same day, Illinois raised its state income tax to 5% from 3% to help plug an estimated $13 billion shortfall. (I'm not applauding this, just pointing it out.)
Moreover, revenue for U.S. municipalities as a group rose during the first three quarters of last year - and the trend will almost certainly continue as the recovery takes hold.


What Caused the Muni Bond Selloff... And What Will Arrest the Slide


Yes, there will be muni bond defaults this year. Lots of them. But they'll be mostly small, weak municipalities. Not even muni bond super-bear Meredith Whitney predicts that any state will default on its debt.
Bear in mind, much of the recent selloff is due to reasons other than fear of major defaults. For instance...


  • The extension of the Bush-era tax cuts for two years took away the urgency to invest in tax-free bonds.
  • Muni bonds also sold off, in part, because of a broader slump in U.S. Treasury securities.


But there are several reasons why this rout should soon come to an end.
For starters, many muni bonds now yield more than taxable bonds. And with top marginal rates likely to rise - not fall - in the years ahead, high-net-worth investors will step in to take advantage of this unusual situation.
For example, many 30-year AAA tax-free bonds now yield over 5%. If you reside in the top federal tax bracket, you'd have to earn almost 8% in a taxable bond to get that kind of after-tax yield. In this interest rate environment, that's nothing to sniff at.
Plus, municipal bond issuance will drop to $350 billion this year from $430 billion last year. If you took Economics 101, you know that decreasing supply generally firms prices up.



Fears of the Muni Bond Demise Are Greatly Exaggerated




I know most investors will scoff at the notion that a muni bond crisis isn't dead ahead. They've heard the media and Chicken Little analysts repeat their dire warnings so many times, they believe a muni bond debacle is a virtual certainty.

But a few independent thinkers agree with me. One of them is Bill Gross, the man who manages more fixed-income assets than anyone else on the planet. The Pimco chief recently declared, "I don't subscribe to the theory that there will be lots of municipal bankruptcies."

THIS IS FROM THE NEXT AIG-STYLE CORPORATE COLLAPSE.

_____________________________________________

This is to what O'Malley, Dixon, Pugh, Stokes, Embry, and Warnock worked through 1990s to today when they installed the INTERNATIONAL ECONOMIC ZONE POLICIES PRETENDING TO BE FREE-MARKET NO TAXES on corporations in our US cities. They deliberately erased major sectors of our tax base at the same time starting to install global corporate campus development. All revenue then went from our government coffers to those global corporate campuses ----removing all revenue sources from our government coffers while loading those US cities with more and more bond debt, Wall Street financial instruments and tax schemes knowing it would bring those US cities to BANKRUPTCY. Those knowing financial public policy KNEW THESE GOALS----and all of this violates FIDUCIARY responsibility for both public and private officials tasked with those duties.

Again, we see the same Wall Street rating corporations---Moody's and S & P giving states and the national government AAA or AA bond ratings while bond debt is $20 trillion nationally---and above our eyebrows in Baltimore. THESE ARE THE SAME FRAUDULENT RATINGS GIVEN TO TOXIC SUBPRIME MORTGAGES LAST DECADE....NOW IT IS OUR BOND MARKET.

So, yes this is FIDUCIARY fraud---yes, these officials and agencies are conspiring to defraud the American people----and yes THESE LOCAL, STATE, AND NATIONAL GOVERNMENT OFFICIALS SHOULD BE VOIDING ALL THIS BOND DEBT AS FRAUD.



'Sheehan starts off by noting that a lack of panic by the ratings and government agencies does not indicate health for a financial market. He cites the fact that the Fed did not anticipate how bad the subprime collapse was likely to be and obviously the Moody’s and Standard and Poor’s ratings were ridiculous'.

This is why Wall Street Baltimore Development 'labor and justice' organizations worked hard to allow only establishment candidates voice in major primary election venues---they needed a mayor that will allow all this fraud to stand----and

PUGH IS THE TOP 5% TO THE 1% IN THAT BALTIMORE MAYORAL RACE.



Philip Greenspun's Weblog

A posting every day; an interesting idea every three months…

The Coming Collapse of the Municipal Bond Market


philg - November 3, 2009 @ 12:18 am


A money manager friend showed me an interesting research report by Frederick J. Sheehan titled


“Dark Vision: The Coming Collapse of the Municipal Bond Market".

This is a product of weedenco.com and available only to subscribers, but I will summarize it here.

Sheehan starts off by noting that a lack of panic by the ratings and government agencies does not indicate health for a financial market. He cites the fact that the Fed did not anticipate how bad the subprime collapse was likely to be and obviously the Moody’s and Standard and Poor’s ratings were ridiculous.


Sheehan notes that “spending is rising and revenue is collapsing” for all levels of government. Pension fund losses will require governments to double their contributions to pension plans (see my blog posting on public employee pensions). Spending is rising, e.g., in New York City from an average of $65,401 in compensation per public employee in 2000 to $106,743 in 2009. The number of full-time employees in NYC grew as well, despite falling school enrollment. The number of state and local government workers grew from 4 million in 1955 to 20 million in 2008 (5x growth, against less than 2X growth in U.S. population). Those workers receive an average of 43 percent more pay and benefits than a private sector worker.
Municipalities dealt with the separation between taxes and expenses by borrowing. In the mid-1990s, states and cities were retiring as much debt as they were incurring. During the 2000s, though, they borrowed about $150 billion per year in aggregate, peaking at $215 billion in 2007 by which time $2.7 trillion in debt was outstanding, more than two years’ worth of tax receipts.
Barring some sort of miraculous boom in the economy and pension fund investment returns, state and local governments are headed for insolvency and default. This means that valuing a municipal bond becomes a matter for a legal expert rather than an accountant. Even for the legal expert, it is apparently tough to predict what will happen. Let’s start with the Wikipedia article on Chapter 9 bankruptcy: “Previous to the creation of Chapter 9 bankruptcy the only remedy when a municipality was unable to pay its creditors was for the creditors to pursue an action of mandamus, and compel the municipality to raise taxes. During the Great Depression this approach proved impossible so in 1934 the Bankruptcy Act was amended to extend to municipalities.”
Without bankruptcy protection, a city that couldn’t pay bondholders would be forced to raise taxes until it could. This happened to West Palm Beach, Florida in the Depression and property tax rates rose to 42.5 percent of assessed value. Potentially bondholders might demand that the city hand over real estate to satisfy its debts. With bankruptcy protection, it is unclear what happens. Vallejo, California went bankrupt 18 months ago and their obligations have not yet been resolved (story). If courts allow municipalities to walk away from debt they’ll have every incentive to declare bankruptcy and start afresh. There are no shareholders in a municipality to wipe out and therefore the only negative consequence of a bankruptcy filing would possibly be having to pay higher interest rates for future borrowing. If on the other hand, governments are not allowed to walk away from many of their obligations, they will simply run out of cash. Are bondholders senior to pension obligations or not? It may be up to the individual judge. This is “uncharted territory for investors” as my money manager put it (he does not buy U.S. muni bonds).


Municipal bonds are still perceived as almost risk-free by most investors and consequently offer a low yield, according to Sheehan. He points out that if the municipalities don’t default, the investor gets only a slightly better return than in Treasuries. Why take the risk if you’re not getting paid for it?


This ends my summary of Sheehan’s report. My own opinion is that the main lesson of subprime is that an investor cannot rely on the ratings agencies or the government to protect his or her interests.  The never-employed guy in Cleveland with the house in a crummy neighborhood and no down payment? The risk that he would never make a payment should have been apparent to any investor who dug underneath the asset-backed security. Similarly, an investor in muni bonds can look at the municipality. Does the state have a shrinking population, high public employee salaries, and a big pension obligation overhang from when the population was larger? They probably will eventually default. And if an insurance company was dumb enough to insure the bonds, they’ll probably be bankrupt too.
http://www.taxfoundation.org/research/show/268.html gives a table of per-capita debt in each state and also the ratio of that debt to GDP. Massachusetts comes in at #1, with more than $10,000 of debt for each citizen and 20 percent of GDP. Each Texan owes about $1,000, by contrast, or 2 percent of GDP. The difference in yield between a Massachusetts bond and a Texas bond is probably not large enough to compensate for the increased risk of Massachusetts defaulting. This LA Times article contrasts California’s spending versus Texas’s.
[Separately, this table should be looked at whenever you’re reading about an economist who says that the U.S. should borrow and spend more on “stimulus”. They’ll tell you that we can afford to borrow another 20 percent of GDP, citing the current federal debt-to-GDP ratio. What they don’t tell you is that your state and local government may already have borrowed an additional 20 percent of GDP!]

The most serious weakness in the article is that Sheehan does not identify the mostly likely candidates to default. Surely Greenwich, Connecticut, whose residents were recently showered with billions of dollars in federally-funded bonus payments, is not going to have trouble repaying obligations incurred when investment bank salaries were much lower. But what about the Rust Belt? There must be cities whose factories have closed, residents have moved on, yet whose bond obligations remain. If so, let’s have the names! If not, how bad can the “crisis” really be?

______________________________________________
The article below is a good one that I cannot post but it tells us that Obama/Congress/the FED and Wall Street have allowed the US economy to become $600 trillion in leverage debt by using these financial instruments like subprimed US Treasury and state municipal bonds.  It is unbelievable to think there are people sitting around a table planning all this----and the 5% to the 1% simply say---SHOW ME THE MONEY AND WE WILL DO ANYTHING.

Looking at bond debt locally---the $1 billion school building bond debt requires Baltimore taxpayers to pay back not only that $1 billion---but $1 billion in Wall Street fees and interest.  So, already it was a very, very, very, very bad deal.  Wall Street takes all those bond deals and creates BUNDLES OF TRANCHES----tranches being that vehicle that insures the rich against loss at the expense of the rest of our investments.  These bundles are sold over and over and over to global investors bringing Wall Street profits with each sale---bringing nothing to the taxpayers of Baltimore but losses from fraud.

That just is not enough profit for Wall Street so now it goes with SELLING INSURANCE WITH CREDIT DEFAULT SWAPS AND DERIVATIVES.  This is where EXTREME LEVERAGE occurs taking that $1billion Baltimore taxpayer commitment and leveraging that to hundreds of times that amount---this is done with our US Treasury bonds as well for much more money.  This is from where that $600 trillion leverage comes---and it is from where the $20 trillion in national debt comes.  This will be why Wall Street Baltimore Development and their pols will push Baltimore into bankruptcy PRETENDING BALTIMORE CITIZENS OWE WALL STREET AND THOSE INVESTMENT FIRMS ALL THAT MONEY.....WHEN WE DO NOT.



High level of bond fund leverage alarms IMF -...www.ft.com/cms/s/0/f9555ac0-bea9-11e5-846f-79b0e3d20eaf.html... Feb 7, 2016 ... This can lead to high levels of leverage, where a fund has potential ... Pimco's Global...

It is the duty of our Maryland Treasurer-----KOPP, our Maryland Comptroller FRANCHOT-----our Baltimore Comptroller PRATT---and of course all our Maryland Attorneys Office to keep this fraud from happening---

POLITICIANS HAVE A FIDUCIARY DUTY TO WE THE PEOPLE TO ASSURE THESE DEALS TIED TO OUR STATE AND LOCAL GOVERNMENT FUNDS AND ASSETS ARE NOT KNOWN TO BE CRIMINAL----TO FAIL TO DO THIS IS CONSPIRACY TO DEFRAUD----DONE WITH MALICE---DELIBERATELY, AND WILLINGLY.


So, how do these elected officials involved in all this failure to protect the citizens of Maryland and Baltimore stay in office?  Election fraud and rigging.

The IMF is not alarmed-----the IMF works with the FED and Wall Street to create these sovereign debt situations to bring the US and Europe into the hands of IMF and bankruptcy and yes, Bill Gross and PIMCO is the peddler of global bond fraud.


What is Leveraged Finance?


Prof. Ian Giddy, New York University

Leveraged Finance Defined
Leveraged finance is funding a company or business unit with more debt than would be considered normal for that company or industry. More-than-normal debt implies that the funding is riskier, and therefore more costly, than normal borrowing. As a result, levered finance is commonly employed to achieve a specific, often temporary, objective: to make an acquisition, to effect a buy-out, to repurchase shares or fund a one-time dividend, or to invest in a self-sustaining cash-generating asset.
Although different banks mean different things when they talk about leveraged finance, it generally includes two main products - leveraged loans and high-yield bonds. Leveraged loans, which are often defined as credits priced 150 basis points or more over the London interbank offered rate, are essentially loans with a high rate of interest to reflect a higher risk posed by the borrower. High-yield or junk bonds are those that are rated below "investment grade," i.e. less than triple-B.
A key instrument in much of leveraged finance, particularly in leveraged buy-outs, is mezzanine or "in between" debt. Mezzanine debt has long been used by mid-cap companies in Europe and the US as a funding alternative to high yield bonds or bank debt. The product ranks between senior bank debt and equity in a company's capital structure, and mezzanine investors take higher risks than bond buyers but are rewarded with equity-like returns averaging between 10 and 20 per cent.
Companies that are too small to tap the bond market have been the traditional users of mezzanine debt, but it is increasingly being used as part of the financing package for larger leveraged acquisition deals. Although mezzanine has been more expensive for companies to use than junk bonds, the low coupons coupled with high returns often makes some sort of mezzanine or hybrid debt an essential buffer between senior lenders and the equity investors.
There are often different layers of finance involved in leveraged financing. These range from a senior secured bank loan or bond to a subordinated loan or bond. A large part of the role of leveraged financiers is to calculate how each type of finance should be raised. If they overestimate the ability of the company to service its debt, they may lend too much at a low margin and be left holding loans or bonds they cannot sell to the market. If the value of the company is underestimated, the deal may be lost.



Leveraged Acquisition Finance
Leveraged acquisition finance is the provision of bank loans and the issue of high yield bonds to fund acquisitions of companies or parts of companies by an existing internal management team (a management buy-out), an external management team (a management buy-in) or a third party (an acquisition).The leverage of a transaction refers to the ratio of debt capital (bank loans, bonds and subordinated mezzanine instruments) to equity capital (money invested in the shares of the target company). In a leveraged financing, this ratio is unusually high. As a result, the level of debt service (payment of interest and repayment of principal) absorbs a very large part of the cashflow produced by the business. Consequently, the risk of the company not being able to service the debt is higher and thus the position of the lenders is riskier than in a conventional acquisition. The interest rate on the debt will be high.



Leveraged Recapitalizations

A technique whereby a company takes on significant additional debt with the purpose of either paying an extraordinary dividend or repurchasing shares, leaving the remaining shareholders with a continuing interest in a more financially-leveraged company. This is often used as a "shark repellant" to ward off a hostile takeover, or as an interim means of cashing in on the comapny's performance following a leveraged buyout.



Leveraged Asset-Based Finance

Leveraged asset-based finance entails raising debt capital for companies where the physical assets or a defined, contractual cash flow form the basis for highly levered non- or limited-recourse funding of assets or projects. Leasing, project financing and whole business securitization are examples of these techniques.



Leveraged finance, like other parts of structured finance, primarily involves identifying, analysing and solving risks. These risks can be arranged into the following groups:


Leveraged Finance Risks
Credit risks are concerned with the business and its market. Financial risks which lie within the economy as a whole, for instance, interest rates, foreign exchange rates and tax rates. 
Structural risks are risks created by the actual provision of finance including legal, documentation and settlement risks.
Liquidity risks are those associated with the inability of a leveraged company to refinance itseld in tight credit conditions

0 Comments

Your comment will be posted after it is approved.


Leave a Reply.

    Author

    Cindy Walsh is a lifelong political activist and academic living in Baltimore, Maryland.

    Archives

    April 2019
    March 2019
    February 2019
    January 2019
    December 2018
    November 2018
    October 2018
    September 2018
    August 2018
    July 2018
    June 2018
    May 2018
    April 2018
    March 2018
    February 2018
    January 2018
    December 2017
    November 2017
    October 2017
    September 2017
    August 2017
    July 2017
    June 2017
    May 2017
    April 2017
    March 2017
    February 2017
    January 2017
    December 2016
    November 2016
    October 2016
    September 2016
    August 2016
    July 2016
    June 2016
    May 2016
    April 2016
    March 2016
    February 2016
    January 2016
    December 2015
    November 2015
    October 2015
    September 2015
    August 2015
    July 2015
    June 2015
    May 2015
    April 2015
    March 2015
    February 2015
    January 2015
    December 2014
    November 2014
    October 2014
    September 2014
    August 2014
    July 2014
    June 2014
    May 2014
    April 2014
    March 2014
    February 2014
    January 2014
    December 2013
    November 2013
    October 2013
    September 2013
    August 2013
    July 2013
    June 2013
    May 2013
    April 2013
    March 2013
    February 2013
    January 2013
    December 2012
    November 2012
    October 2012
    September 2012
    August 2012
    July 2012
    June 2012
    May 2012
    April 2012

    Categories

    All
    2014 Economic Crash
    21st Century Economy
    Affordable Care Act
    Affordable Care Act
    Alec
    Americorp/VISTA
    Anthony Brown
    Anthony Brown
    Anti Incumbant
    Anti-incumbant
    Anti Incumbent
    Anti Incumbent
    Attacking The Post Office Union
    Baltimore And Cronyism
    Baltimore Board Of Estimates
    Baltimore Board Of Estimates
    Baltimore Development Corp
    Baltimore Development Corp
    Baltimore Recall/Retroactive Term Limits
    Bank Fraud
    Bank Fraud
    Bank Of America
    Bank Settlement
    Bank-settlement
    B Corporations
    Bgeexelon Mergerf59060c411
    Brookings Institution
    Business Tax Credits
    California Charter Expansion
    Cardin
    Career Colleges
    Career Colleges Replacing Union Apprenticeships
    Charters
    Charter School
    Collection Agencies
    Common Core
    Consumer Financial Protection Bureau
    Consumer-financial-protection-bureau
    Corporate Media
    Corporate-media
    Corporate Oversight
    Corporate-oversight
    Corporate Politicians
    Corporate-politicians
    Corporate Rule
    Corporate-rule
    Corporate Taxes
    Corporate-taxes
    Corporate Tax Reform
    Corporatizing Us Universities
    Cost-benefit-analysis
    Credit Crisis
    Credit-crisis
    Cummings
    Department Of Education
    Department Of Justice
    Department-of-justice
    Derivatives Reform
    Development
    Dismantling Public Justice
    Dodd Frank
    Doddfrankbba4ff090a
    Doug Gansler
    Doug-gansler
    Ebdi
    Education Funding
    Education Reform
    Edwards
    Election Reform
    Election-reform
    Elections
    Emigration
    Energy-sector-consolidation-in-maryland
    Enterprise Zones
    Equal Access
    Estate Taxes
    European Crisis
    Expanded And Improved Medicare For All
    Expanded-and-improved-medicare-for-all
    Failure To Prosecute
    Failure-to-prosecute
    Fair
    Fair And Balanced Elections
    Fair-and-balanced-elections
    Farm Bill
    Federal Election Commissionelection Violationsmaryland
    Federal Election Commissionelection Violationsmarylandd20a348918
    Federal-emergency-management-agency-fema
    Federal Reserve
    Financial Reform Bill
    Food Safety Not In Tpp
    For Profit Education
    Forprofit-education
    Fracking
    Fraud
    Freedom Of Press And Speech
    Frosh
    Gambling In Marylandbaltimore8dbce1f7d2
    Granting Agencies
    Greening Fraud
    Gun Control Policy
    Healthcare For All
    Healthcare-for-all
    Health Enterprise Zones
    High Speed Rail
    Hoyer
    Imf
    Immigration
    Incarceration Bubble
    Incumbent
    Incumbents
    Innovation Centers
    Insurance Industry Leverage And Fraud
    International Criminal Court
    International Trade Deals
    International-trade-deals
    Jack Young
    Jack-young
    Johns Hopkins
    Johns-hopkins
    Johns Hopkins Medical Systems
    Johns-hopkins-medical-systems
    Kaliope Parthemos
    Labor And Justice Law Under Attack
    Labor And Wages
    Lehmann Brothers
    Living Wageunionspolitical Action0e39f5c885
    Maggie McIntosh
    Maggie-mcintosh
    Martin O'Malley
    Martin O'Malley
    Martin-omalley
    Martin-omalley8ecd6b6eb0
    Maryland Health Co Ops
    Maryland-health-co-ops
    Maryland-health-co-ops1f77692967
    Maryland Health Coopsccd73554da
    Maryland Judiciary
    Marylandnonprofits
    Maryland Non Profits
    Maryland Nonprofits2509c2ca2c
    Maryland Public Service Commission
    Maryland State Bar Association
    Md Credit Bondleverage Debt441d7f3605
    Media
    Media Bias
    Media-bias
    Medicaremedicaid
    Medicaremedicaid8416fd8754
    Mental Health Issues
    Mental-health-issues
    Mers Fraud
    Mikulski
    Military Privatization
    Minority Unemploymentunion And Labor Wagebaltimore Board Of Estimates4acb15e7fa
    Municipal Debt Fraud
    Ndaa-indefinite-detention
    Ndaaindefinite Detentiond65cc4283d
    Net Neutrality
    New Economy
    New-economy
    Ngo
    Non Profit To Profit
    Nonprofit To Profitb2d6cb4b41
    Nsa
    O'Malley
    Odette Ramos
    Omalley
    O'Malley
    Open Meetings
    Osha
    Patronage
    Pension-benefit-guaranty-corp
    Pension Funds
    Pension-funds
    Police Abuse
    Private-and-public-pension-fraud
    Private Health Systemsentitlementsprofits Over People
    Private Health Systemsentitlementsprofits Over People6541f468ae
    Private Non Profits
    Private-non-profits
    Private Nonprofits50b33fd8c2
    Privatizing Education
    Privatizing Government Assets
    Privatizing-the-veterans-admin-va
    Privitizing Public Education
    Progressive Policy
    Progressive Taxes Replace Regressive Policy
    Protections Of The People
    Protections-of-the-people
    Public Education
    Public Funding Of Private Universities
    Public Housing Privatization
    Public-libraries-privatized-or-closed
    Public Private Partnerships
    Public-private-partnerships
    Public Transportation Privatization
    Public Utilities
    Rapid Bus Network
    Rawlings Blake
    Rawlings-blake
    Rawlingsblake1640055471
    Real Progressives
    Reit-real-estate-investment-trusts
    Reitreal Estate Investment Trustsa1a18ad402
    Repatriation Taxes
    Rule Of Law
    Rule-of-law
    Ruppersberger
    SAIC AND INTERNATIONAL SECURITY
    Sarbanes
    S Corp Taxes
    Selling Public Datapersonal Privacy
    Smart Meters
    Snowden
    Social Security
    Sovereign Debt Fraudsubprime Mortgage Fraudmortgage Fraud Settlement
    Sovereign Debt Fraudsubprime Mortgage Fraudmortgage Fraud Settlement0d62c56e69
    Statistics As Spin
    Statistics-as-spin
    Student-corps
    Subprime Mortgage Fraud
    Subprime-mortgage-fraud
    Surveillance And Security
    Sustainability
    Teachers
    Teachers Unions2bc448afc8
    Teach For America
    Teach For America
    Technology Parks
    Third Way Democrats/new Economy/public Union Employees/public Private Patnerships/government Fraud And Corruption
    Third Way Democratsnew Economypublic Union Employeespublic Private Patnershipsgovernment Fraud And Corruption
    Third-way-democratsnew-economypublic-union-employeespublic-private-patnershipsgovernment-fraud-and-corruptionc10a007aee
    Third Way/neo Liberals
    Third-wayneo-liberals
    Third-wayneo-liberals5e1e6d4716
    Third Wayneoliberals7286dda6aa
    Tifcorporate Tax Breaks2d87bba974
    Tpp
    Transportation Inequity In Maryland
    Union Busting
    Unionbusting0858fddb8b
    Unions
    Unionsthird Waypost Officealec3c887e7815
    Universities
    Unreliable Polling
    Unreliable-polling
    Van Hollen
    Van-hollen
    VEOLA Environment -privatization Of Public Water
    Veterans
    War Against Women And Children
    War-against-women-and-children
    Youth Works

    RSS Feed

Powered by Create your own unique website with customizable templates.