Tag Archives: Bailout

Editor’s Pick, Featured, International, Politics

Eurozone Summit Reaches Deal On Greek Bailout

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Eurozone creditors reached a deal with Greece on Monday, to avoid the country’s exit from the Euro, and to “resolve Greece’s debt crisis,” in exchange for stricter austerity measures.

The deal, which is Greece’s third bailout package in the last five years, is awaiting the approval of Greece’s parliament, and sharply contrasts last week’s referendum, where Greek citizens voted to reject any bailout deal that would require further austerity.

While Greek Prime Minister Alexis Tsipras promised to reject further austerity when he came to power in January, the new bailout package will leave Greeks faced with even more rigorous measures than before.

The Guardian reported that after “31 hours of acrimonious discussions spread over one tense weekend,” the 19 leaders of the Eurozone came to an agreement that would require Greece to introduce “controversial economic reforms” and to sell off 50 billion Euros worth of state assets, “with the proceeds earmarked for a trust fund supervised by its creditors.”

Donald Tusk, the president of the European Council, took to Twitter to write that summit leaders had reached a unanimous agreement, which would require  “serious reforms” in exchange for “financial support.”

The New York Times reported that when speaking to reporters following the announcement of the deal on Monday, Tsipras “tried to put a positive spin on what might be seen as an almost total capitulation by Athens to creditors’ demands for tough austerity,” and said that the Greek government “assumed the responsibility of averting the extremist ambitions of the most conservative circles in Europe.”

“We gave a tough battle for six months and fought until the end in order to achieve the best we could, a deal that would allow Greece to stand on its feet,” Tsipras said. “We faced hard decisions, tough dilemmas.”

While French President Francois Hollande said that losing Greece from the Eurozone would be like losing “the heart of our civilization,” the president of the Eurozone finance ministers, Jeroen Dijsselbloem, said that the Greeks “have to show they’re credible, show that they mean it.”

The Associated Press reported that before Greece can receive 85 billion Euros, or $95.07 billion in bailout funds, the Greek government “will have to pass a raft of austerity measures that include sales tax increases, reforms to pensions, and labor market reforms.”

While Greek banks are expected to remain closed this week, requiring emergency loans in order to reopen, the New York Times noted that the European Central Bank is “unlikely to provide additional emergency cash,” until the Greek Parliament agrees to the bailout package.

The Guardian reported that the European commission, International Monetary Fund and European Central Bank asked Greece to come up with a “plan to ‘de-politicize’ its civil service by next Monday,” and that the country could be forced to reverse any measures deemed “counter to the bailout philosophy” which could leading to the firing of the “government cleaners that Syriza rehired with such fanfare.”

The Associated Press noted that while Greece has received two previous bailouts, totaling 240 billion Euros, or $268 billion, “in return for deep spending cuts, tax increases and reforms from successive governments,” Greece’s debt has continued to increase, “as the economy has shrunk by a quarter.”

Editor’s Pick, Featured, International, Politics

Greece Rejects Further Austerity Measures

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In a landmark referendum, Greek voters rejected a bailout deal on Sunday that was proposed by the European Union and International Monetary Fund and would have required greater austerity measures in exchange for emergency funds.

The vote signals a victory for Prime Minister Alexis Tsipras who promised to reject further austerity when he came to power in January. Although there were rumors from opposition parties that Greece was voting on whether to remain a part of Europe’s joint currency, Tsipras said that the vote was not requiring a “rupture” with Europe.

Following the vote in which over 61 percent of voters favored rejecting a bailout that would lead to greater austerity in the country, Tsipras called the results a “victory of democracy,” and said the country has “proved even in the most difficult circumstances that democracy won’t be blackmailed.”

The New York Times noted that despite several stories from the country’s media- which is “dominated by Greek oligarchs”- about citizens not having access to deposits and losing gasoline and medicine after the European Central Bank severely limited financial assistance to Greek banks a week before the referendum, many voters were “tired of more than five years of soaring unemployment and a collapsing economy,” and did not want to accept the EU’s bailout offer because it would impose even more “pension cuts and tax increases, without debt relief.”

Despite the country’s vote to reject the EU’s bailout, Greek Finance Minister Yanis Varoufakis resigned on Monday under pressure from European leaders after he infuriated them when he “compared Greece’s creditors to terrorists,” according to The Guardian.

Varoufakis announced his resignation in a blog post, writing that he will considers it his duty to “help Alexis Tsipras exploit, as he sees fit, the capital that the Greek people granted us through yesterday’s referendum,” and that he will “wear the creditors’ loathing with pride.”

“Soon after the announcement of the referendum results, I was made aware of a certain preference by some Eurogroup participants, and assorted ‘partners’, for my… ‘absence’ from its meetings,” Varoufakis wrote. “An idea that the prime minister judged to be potentially helpful to him in reaching an agreement. For this reason I am leaving the Ministry of Finance today.”

Varoufakis, who said that Tsipras thought his absence from Eurogroup meetings could be helpful in “reaching an agreement,” will be replaced by Euclid Tsakalotos, Greece’s deputy foreign minister for international economic affairs.

The Guardian reported that in speculating a further deal, “European leaders are calling on Athens to make the first move,” and while French finance minister Michel Sapin said it was up to the Greek government, Finland’s finance minister Alexander Stubb said talks could only restart when Greece agrees to “necessary reforms,” German chancellor, Angela Merkel, will begin talks with French president François Hollande on Monday evening.

All 19 Eurozone leaders are expected to gather on Tuesday for an emergency summit to discuss possible reform proposals from the Greek authorities.

Politics, US

Obama begins multi-million dollar Detroit bailout

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DETROIT, April 18, 2014– One hundred million dollars in taxpayer money is on its way to Detroit.

Only sixteen short months have passed since Obama took credit for Detroit averting bankruptcy.  “We refused to let Detroit go bankrupt. We bet on American workers and American ingenuity, and three years later, that bet is paying off in a big way,” said Obama in a reelection campaign speech. It was October, 2012. Obama won reelection. Detroit became the largest city in United States history to file for bankruptcy only nine months after Obama’s speech.

U.S. Bankruptcy Judge Steve Rhodes delivered the ruling, which declared Detroit could move forward with its plans for Chapter 9 bankruptcy, only five months after the filing. According to Judge Rhodes, “This situation has proved unworkable.” Detroit is more than $18 billion in debt.

With taxpayers exhibiting visceral reactions at even the slightest hint of a bailout, the Obama administration ensured Americans no more bailouts. In February, Gene Sperling, the director of the White House National Economic Council, announced that the administration would not bailout Detroit. Sperling called the prospects of a bailout “non viable” and said it would be misleading to float the idea of a bailout.

Regardless of the rhetoric, the bailout addicted administration has been stealthily executing a bailout of the city’s endangered pension funds.

According to the Detroit Free Press, Obama plans to send Detroit approximately $100 million to relieve the city’s pension funds. The report points to Obama’s tough mid-term prospects while stating that he and Democrats have been “under pressure from unions” not to let government retirees suffer in Detroit.

On Wednesday, White House spokesman Jay Carney declined to comment about the report.

Follow Michael Lotfi On Facebook & Twitter.

 

 

US

Obamacare and Crony Capitalism: Is Washington Engineering an Insurance Industry Bailout?

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The insurance and healthcare industries know how to play the game. In fact, the healthcare industry spent $243 million in 2013 to lobby for Obamacare.

So far business is booming. According to a Forbes’ report in October, the value of the S&P health insurance index has gained 43%, double the gains made in the S&P 500.  The shares of CIGNA are up 63%, Wellpoint 47% and United Healthcare 28%.

Rules in Obamacare continue to change for insurance companies, though. Originally Obamacare required everyone to purchase insurance or face penalties, but millions of Americans have lost their insurance plans because of high costs. The new rule changes will exempt those Americans who lost their plans from buying any insurance. This poses a problem for insurance companies. Insurance companies will suffer financial losses if only sick (high risk) people sign up for the exchanges. Analysts claim that this rule change could bankrupt the system.

Political commentator Charles Krauthammer believes that next year we’ll be bailing out the insurance industry.  “The cost to insure the people left in the exchanges is going to be exorbitant,” explained Krauthammer.

“The insurers understand that they are going to be completely ruined over this.  There is only one way out: A huge government bailout of the insurers is waiting at the end of next year. That’s an issue that Republicans should focus on more,” he said.

“Right now, it’s the only way Obamacare will survive. It ought to be stopped before it happens. Congress must say no to any bailouts because it’s not a natural disaster. It’s a man-made one,” he added.

 

Politics, US

Fmr. Head of Fed Reserve QE Program Confesses The Program Is Nothing More Than Wall Street Welfare

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Story by Sonya Sandage and Ben Swann

“I’ve come to recognize (Quantitative Easing) for what it really is: the greatest backdoor Wall Street bailout of all time”, writes Andrew Huszar, former head of Federal Reserve QE program in a stunning “confession” in the Wall Street Journal this week.

Consider the fact that up until 2008, virtually no American was aware of the economic term, Quantitative Easing. QE, as it is called by media is the Federal Reserve Bank’s policy of bond purchases in order to support bond prices. Bond buying via Fed Open Market Committee is a typical practice, but the $4 Trillion in QE we’ve seen over the last five years is anything but typical.

The Fed essentially is printing $85 Billion per month, out of thin air, using that digital money to buy bonds up, and trade them out with cash reserves or ultra-short term notes. Banks and hedge funds that owned the original bonds are then supposed to pump that money into the economy, creating a virtuous cycle.

What we now know, five years after the start of QE1, is that Quantitative Easing does virtually nothing to improve the U.S. economy. The reason for that is actually pretty simple, most of the loose money courtesy of Fed printing is being reinvested into even more bonds, as well as derivatives and stocks.

It’s not being invested in creating new businesses, or significantly increasing lending. The $85 Billion per month is not being reinvested into biomedical research, tech, space exploration, or really anything innovative that will create economic growth. This does not help the common man, aka Main Street. It does help investors, including 401(k) and IRA owners, and has made them richer than ever in their accounts. If there is a major market correction when a taper does start though, those gains could evaporate.

So what is the QE policy all about? According to Huszar, again the former head of Federal Reserve QE program, Quantitative Easing is really nothing more than Wall Street welfare.

“It has allowed QE to become Wall Street’s new ‘too big to fail’ policy.” writes Huszar.

Huszar goes on to write, “Unless you’re Wall Street. Having racked up hundreds of billions of dollars in opaque Fed subsidies, U.S. banks have seen their collective stock price triple since March 2009. The biggest ones have only become more of a cartel: 0.2% of them now control more than 70% of the U.S. bank assets.”

Long have critics alleged the policy is actually designed to prop up the balance sheets of the very same “Too Big to Fail” banks that caused the financial crisis by deregulation of Glass-Steagall, and irresponsible gambling in derivatives, as well as outright fraud.

To read the full confessional piece by Andrew Huszar, click here