Sep 22, 2014 – Not only is carbon dioxide readily abundant, it is three to 10 times cheaper than other feedstocks used to make plastics and chemicals, according to Cole. … Eventually, it hopes to harness carbon emissions there and convert it …
Feb 26, 2014 – Could future clothes, bottles and chairs be made from carbonemissions? … The vast majority of plastic is produced from petroleum, which means that … By combining methane and carbon dioxide with a proprietary catalyst, …
Oct 28, 2015 – Pellets of urea fertilizer are made from carbon dioxide in a plant in … can convert CO2 emissions from coal and natural-gas power plants into useful … fuels and raw material for the manufacture of plastics and other chemicals.
Worldwide, we consume approximately 100 million tons of plastic each year. From the EPA’s more conservative estimate to the more liberal one, that’s anywhere from 100 million tons of carbon dioxide emitted to 500 million tons.
Wanting to write about the terrorist possibilities with nuclear materials, but a part of me wants to believe that our authorities and agencies responsible for these materials have them well secured. Time and time again, it becomes evident that there are lapses in both the security of facilities and nuclear materials as well as lapses in common sense in handling events that occur.
If a few simple things were done, security would certainly be better at anyplace housing, using, storing or creating electricity with nuclear materials.
Is to make sure all security cameras are far removed from access by a person wanting to simply turn them away.
Is to make sure that all security personnel and workers of every kind at any facilities with nuclear materials have been well vetted beyond a normal random check done for other types of businesses.
Is to make sure that all ID badges used by facility personnel of any kind, any contractors, any plumbers that come out to fix something, any technicians, any company executives inclusively – have RFID tracking on the badges.
Is to make sure that local constabulary, police supervisors, police and fire chiefs, and whoever else might make stupid or egotistical decisions locally about any event at a nuclear materials using facility – knows to immediately inform appropriate intel and counter-terrorism agencies about any and all irregular events concerning the plant. That would include murders of any personnel that works there, any loss of materials, any stuck valves that are made to look like they weren’t done intentionally though proof is visible that intentionality was likely, AND any bizarre occurrences out of the ordinary, such as having all the oil drained from a pump expected to be lubricating the turbines that causes significant damages, etc., etc., etc.,
IS TO MAKE SURE that every country using nuclear materials for civilian uses and any other uses understands that the international community will not accept pretense about these materials because of their inherent dangers to us all.
When TEPCO executives made statements straight out of a playbook of damage control for public consumption, they first downplayed the incidents and their dangers even as those events were unfolding and they knew the magnitude of the disaster. This is not an acceptable path for executives, decision-makers, industries, industry spokespeople, industry pr firms, politicians or even local officials to take when events can unfold quickly and impact such a massive swath of humanity and civilization for years to come.
This is to say, that as our leaders meet for the Nuclear Security Summit, the greatest danger we face is to watch events unfold concerning nuclear materials and it be a week later before some local executive or supervisor at the facility or other business using those materials actually tells somebody who can do concrete measures to fix it. Or, in the case of terrorist use of those materials, to tell a group of agencies from Interpol to counter-terrorism and national security agencies that the materials are missing in a timely and effective manner.
The same is true for local police jurisdictions in areas near nuclear and other chemical industry facilities. It cannot be up to them to say a matter is no more than criminal when in fact, it could be very likely tied to terrorism or a terrorist network intending greater harm. That information needs to be in the hands of those who are collecting it, analyzing it, interpreting its connectivity to other known information about terrorists operations and then acted upon appropriately. That can’t happen when the information is circumvented by jurisdictional ego building tactics.
There, I’ve had my say about it. But, I do want to believe that our authorities and security / intel agencies have it all well in hand. And, they’ve thwarted countless terrorist plans, prepared events of terrorism and some really incredibly stupid stuff that would’ve been massively dangerous to us all. So, maybe. Maybe with the addition of just a few simple things – it can be made safer. I hope so.
At the same plant where these jihadists once worked, an individual who has yet to be identified walked into the reactor No. 4 in 2014, turned a valve and drained 65,000 liters of oil used to lubricate the turbines. The ensuing friction nearly overheated the machinery, forcing it to be shut down. The damage was so severe that the reactor was out of commission for five months.
CAIRO — Egypt’s military rulers are dissolving the parliament and suspending the constitution, meeting two key demands of pro-democracy protesters.
In their latest communique, the military leadership that took power when President Hosni Mubarak stepped down Friday, said they will run the country for six months, or until presidential and parliament elections can be held.
This article is comprehensive and about halfway through it describes the police that have been protesting with demands of immunity from prosecution and higher pay. They were apparently making about $136 a month for brutalizing people and claim they were told by superiors to make up the money they needed by getting it from the people.
And, the most marvelous section is below the article where there is a map showing the region which, if the button for show more information is clicked, there are sections with maps, a photo of each ruler and a brief explanation for each country in the area. Absolutely amazing.
And, very, very nifty.
In fact, if I wanted my children (or friends) to better understand what the big deal is about all this “Egypt” stuff – I would encourage them to read this one article especially on this page from msnbc. It explains the situation and a little of what is at stake and puts it in perspective with the entire region.
Sounds like they don’t want this to work. And, we are subsidizing these vehicles being built, plants being built to build them, factories being tooled to produce them, research to have been done to create them and countless dollars for every single part of the operation – and then, they produce a few thousand cars which doesn’t reap the rewards of mass production to bring down the costs? What kind of jackasses would do that?
Sounds like the car companies simply don’t want electric vehicles to be purchased by mainstream car buyers in America. And, they’ve used our money to do it. Disgusting.
Federal Lanham Act Remedies for False Advertising –
1. Historical Background –
Section 43(a) of the Lanham Act prohibits any false description or representation of goods. Although this section was originally construed narrowly, to reach only “passing off” and other behavior resembling trademark infringement, modern cases regard the statute as providing a federal remedy against false advertising.
2. Standing: Who May Invoke Section 43 –
A plaintiff seeking injunctive relief under § 43(a) must show a likelihood of economic injury due to the defendant’s conduct in order to be entitled to relief. If the plaintiff seeks damages, it must demonstrate an actual loss of sales (and / or loss of revenue, my note – actual money, but can include lost opportunity costs.)
3. What Constitutes a False Description or Representation –
Any falsehood with a tendency to mislead or deceive is actionable under section 43(a), provided it is material. The plaintiff need not prove that the defendant acted intentionally.
(from – “Capsule Summary”)
pp. 20 – 21, also pp. 148 – 150
Unfair Trade Practices & Intellectual Property,
author – Roger E. Schechter,
Black Letter Series, West Publishing Co., St. Paul, Minn.; 1986
Hmmmm . . . . – wonder if those laws still exist? After watching the Goldman Sachs hearings in the Senate committee yesterday, when investors are told that a thing is good investment securities, when they know it is not – isn’t that applied to laws like this? Or rather, aren’t laws like this applied to situations like that?
I found another section of this book which had this sentence – “Nonetheless, some courts will impose a duty to pay if the equities of the situation require it to prevent unjust enrichment.” – What constitutes “unjust enrichment”?
English unjust enrichment law is a developing area of law in unjust enrichment. Traditionally, work on unjust enrichment has been dealt with under the title …
en.wikipedia.org/wiki/English_unjust_enrichment_law – Cached – Similar
English unjust enrichment law is a developing area of law in unjust enrichment. Traditionally, work on unjust enrichment has been dealt with under the title of “restitution“. Restitution is a gain-based remedy, the opposite of compensation, as a loss-based remedy. But the event it responds to is the “unjust enrichment” of one person at the expense of another.
Hazell v. Hammersmith and Fulham LBC  2 AC 1. Banks paid councils a lump sum (for Islington, £2.5m). The councils then paid the banks back at the prevailing interest rate. Banks paid councils back a fixed interest rate (this is the swap part). The point was that councils were gambling on what interest rates would do. So if interest rates fell, the councils would win. As it happened, interest rates were going up and the banks were winning. Islington was due to pay £1,354,474, but after Hazell, it refused, and waited to see what the courts said. At first instance Hobhouse J said that because the contract for the swap scheme was void, the council had been unjustly enriched with the lump sum (£2.5m) and it should have to pay compound interest (lots) rather than simple interest (lots, but not so much). But luckily for local government, three law Lords held that Islington only needed to repay with simple interest. There was no jurisdiction for compound interest. They said this was because there was no ‘resulting trust’.
Westdeutsche Landesbank Girozentrale v Islington LBC  AC 669, the council had no authority to enter into a complex swap transaction with the German bank. So the House of Lords held that the council should repay the money they had been lent and a hitherto unknown ‘unjust’ factor was added to the list. Birks argued that the better explanation in all cases is an ‘absence of basis’ for the transfer of property. Searching through or adding to a list of open ended unjust factors simply concludes on grounds of what one wishes to prove, grounds that ‘would have to be constantly massaged to ensure that they dictated an answer as stable as is reached by the shorter ‘non basis’ route.’ (Birks (2005) 113)
The following eleven categories are examples of “unjust factor” (or what Peter Birks argued could be unified under one principle of a basis of a right being absent) which may ground a claim of restitution for unjust enrichment.
Unjust enrichment is a developed and coherent field in continental civil law systems. Continental lawyers say someone is unjustly enriched when there is no basis for their possession or title to some right or property. A more correct way of saying it is that someone has been “unjustifiedly enriched”. In German, the term is Ungerechtfertigte Bereicherung (§812 BGB) and in France the term is Enrichissement sans cause. English lawyers, however, have been accustomed to identify an “unjust factor”. The difference between “unjust factors” and “absence of basis” as a unifying principle has generated a lot of debate, particularly since Peter Birks changed his mind in his second edition of Unjust Enrichment (2005) in the Clarendon Law Series, and argued that the continentals had got it right.
The two leading theorists that have revived unjust enrichment were Lord Goff, who produced Goff and Jones on Restitution and Professor Peter Birks.
Black Letter Series, West Publishing Co., St. Paul, Minn.; 1986
(excerpt – )
To constitute “unfair” conduct, an advertisement or commercial practice must pose a risk of substantial, unmitigated, unavoidable consumer injury.
(further – )
These advertisements may be deceptive, however, if analyzed under the historic definition of that term. Under the classic test, an advertising claim is deceptive if it has any tendency to deceive a significant number of consumers.
(also found on pp. 225 – )
2. True. The original version of the statute [VIII. Federal Trade Commission Regulation of Unfair and Deceptive Practices] only dealt with “unfair methods of competittion.” The 1938 Wheeler-La Amendment added the “unfair and deceptive acts and practices” language.
(and on pp. 228)
4. True. Such statutes have been applied against defendants who were making casual sales of used goods.
(and therefore, why shouldn’t it be applied to investment firms, banks, hedge funds and others in the investment community who engaged in deceptive and misleading practices that would’ve been illegal in any other context, including as the laws and statutes are applied to regular Americans being involved in casual sales of goods that were unlikely to have created the huge ramifications that the Wall Street players caused, my note.)
Unjust enrichment is a legal term denoting a particular type of causative event in which one party is unjustly enriched at the expense of another, and an obligation to make restitution arises, regardless of liability for wrongdoing.
Liability under the principle of unjust enrichment is wholly independent of liability for wrongdoing. Claims in unjust enrichment do not depend upon proof of any wrong. However, it is possible that on a single set of facts a claim based on unjust enrichment and a claim based on a wrong may both be available. A claim based on unjust enrichment always results in an obligation to make restitution. A claim based on a wrong always results in an obligation to make compensation, but may additionally result in an obligation to make restitution and on the other hand it will result in an obligation to make reimbursement which will allow the normal citizen to the courts for its wrongdoing which it never intended to do so. For discussion of restitution for wrongs, see the page on restitution.
At common law, a claim based on unjust enrichment can be submitted to five stages of analysis. These can be summarized in the form of the following questions:
Was the defendant enriched?
Was the enrichment at the expense of the claimant?
There are two established approaches to this issue. Traditionally, common law systems such as those of England and the US have proceeded on the basis of what may be termed the ‘unjust factor’ approach. Traditionally, civil law systems such as those of France and Germany have proceeded on the basis of what may be termed the ‘absence of basis’ approach. More recently, many common law systems have showed signs of a possible move towards the ‘absence of basis’ approach (see for example the law of North Dakota in the section on the United States below). Both approaches will be discussed.
The ‘unjust factors’ approach requires the claimant to point to one of a number of factors recognized by the law as rendering the defendant’s enrichment unjust. English law clearly recognises at least the following unjust factors:
‘Absence of consideration’ is particularly controversial because the cases that support its existence as an unjust factor can also be used to support the view that English law has begun to favour the ‘absence of basis’ approach (see next paragraph).
The ‘absence of basis’ approach does not deal in individual unjust factors. Instead it seeks to identify enrichments with no legitimate explanatory basis. Imagine that A contracts with B that A will pay $150 up front for B to clean his house. A pays the money. B’s enrichment has a legitimate explanatory basis – he was paid under a valid contract. However, let us now change the example and assume that the contract was in fact void. This is discovered after A has paid the money but before B cleans the house. B’s enrichment no longer has a legitimate explanatory basis so B must repay the $150 to A.
Notice that in the example just given, exactly the same conclusion would be reached using the ‘unjust factors’ approach. Under that approach, A would not be able to point to an unjust factor provided that the contract was valid, but could point to the unjust factor of total failure of consideration once we assume that it was void. In the vast majority of cases, a properly developed ‘unjust factors’ approach and a properly developed ‘absence of basis’ approach will reach the same result.
 What remedies are available to the claimant?
It is necessary to distinguish personal remedies from proprietary remedies. A personal remedy asserts that the defendant must pay the claimant a sum of money. By contrast, a proprietary remedy asserts that some property in the defendant’s possession belongs to the claimant, either at common law or in equity. There are several arguable examples in the English case law of the courts giving a proprietary remedy in an unjust enrichment claim. However, some commentators maintain that, in English law, unjust enrichment only ever triggers a personal remedy.
There are several reasons why it may be important for the claimant to seek a proprietary rather than a personal remedy. The most obvious is that showing that one is entitled to a proprietary interest in some property means that one need not compete with the defendant’s unsecured creditors in the event of his insolvency. It is also generally accepted, although with little justification, that a claimant who is entitled to a personal remedy only will be restricted to simple interest, while a claimant who is entitled to a proprietary remedy can get compound interest. The availability or non-availability of a proprietary remedy may also have consequences for limitation periods and for the conflict of laws.
English law gives effect to restitutionary proprietary interests (assuming that it does at all) through a number of devices. One of these devices will be discussed and another two will be mentioned briefly.
It doesn’t matter if you are a “market maker” or not, such as Goldman Sachs and about 2000 others are – they still can’t store explosives under their desks because they must abide by the laws which apply to that just as we all do, and they still can’t engage in failing to meet OSHA standards for a work place, nor can they be exempted from the regulations, statutes and laws governing the rest of us and the business laws that generally apply to everything.
I know yesterday during the hearings, the term “market maker” was used as a declaration of why “we get to get away with doing it this way, by law – because we qualify as a market maker.” That doesn’t mean everything else in the law and in international law doesn’t apply to them. It does not exclude their businesses, their business participation, their business practices and decisions, their business processes and their marketing practices from the laws governing everything else.
An Icelandic 1000-krónur note. The value of the Icelandic króna declined significantly during 2008.
Economic growth in Iceland, Denmark, Norway and Sweden from 2000 to 2007. Iceland is in red.
The 2008–2010 Icelandic financial crisis is a major ongoing economic crisis in Iceland that involves the collapse of all three of the country’s major banks following their difficulties in refinancing their short-term debt and a run on deposits in the United Kingdom. Relative to the size of its economy, Iceland’s banking collapse is the largest suffered by any country in economic history.
In late September 2008, it was announced that the Glitnir bank would be nationalised. The following week, control of Landsbanki and Glitnir was handed over to receivers appointed by the Financial Supervisory Authority (FME). Soon after that, the same organisation placed Iceland’s largest bank, Kaupthing, into receivership as well. Commenting on the need for emergency measures, Prime MinisterGeir Haarde said on 6 October, “There [was] a very real danger … that the Icelandic economy, in the worst case, could be sucked with the banks into the whirlpool and the result could have been national bankruptcy.” He also stated that the actions taken by the government had ensured that the Icelandic state would not actually go bankrupt. At the end of the second quarter 2008, Iceland’s external debt was 9.553 trillion Icelandic krónur (€50 billion), more than 80% of which was held by the banking sector. This value compares with Iceland’s 2007 gross domestic product of 1.293 trillion krónur (€8.5 billion). The assets of the three banks taken under the control of the FME totaled 14.437 trillion krónur at the end of the second quarter 2008.
The financial crisis has had serious consequences for the Icelandic economy. The national currency has fallen sharply in value, foreign currency transactions were virtually suspended for weeks, and the market capitalisation of the Icelandic stock exchange has dropped by more than 90%. As a result of the crisis, Iceland is currently undergoing a severe economic recession; the nation’s gross domestic product decreased by 5.5% in real terms in the first six months of 2009. The full cost of the crisis cannot yet be determined, but already it exceeds 75% of the country’s 2007 GDP. Outside Iceland, more than half a million depositors (far more than the entire population of Iceland) found their bank accounts frozen amid a diplomatic argument over deposit insurance. German bank BayernLB faces losses of up to €1.5 billion, and has had to seek help from the German federal government. The government of the Isle of Man will pay out half of its reserves, equivalent to 7.5% of the island’s GDP, in deposit insurance.
( . . . )
On 24 October, it emerged that Norway’s semi-public export credit agencyEksportfinans had made a complaint to Norwegian police concerning the alleged embezzlement of 415 million Norwegian kroner (€47 million) by Glitnir since 2006. The Icelandic bank had acted as an agent for Eksportfinans, administering loans to several companies: however Eksportfinans alleges that, when the loans were paid off early by borrowers, Glitnir kept the cash and merely continued with the regular payments to Eksportfinans, effectively taking an unauthorized loan itself.
OMX Iceland 15 closing prices during the five trading weeks from September 29, 2008 to October 31, 2008
Trading in shares of six financial companies on the OMXNordic Iceland Exchange was suspended on 6 October by order of the FME. On Thursday 9 October, all trading on the exchange was frozen for two days by the government “in an attempt to prevent further panic spreading throughout the country’s financial markets”. The decision was made to do so due to “unusual market conditions”, with share prices having fallen 30% since the start of the month. The closure was extended through Monday 13 October due to continuing “unusual market conditions”.
The market reopened on 14 October with the main index, the OMX Iceland 15, at 678.4, which corresponds to a plunge of about 77% compared with 3,004.6 before the closure. This reflects the fact that the value of the three big banks, which form 73.2% of the value of the OMX Iceland 15, had been set to zero. The values of other equities varied from +8% to –15%. Trading in shares of Exista, SPRON and Straumur-Burðarás (13.66% of the OMX Iceland 15) remains suspended. After a week of very thin trading, the OMX Iceland 15 closed on 17 October at 643.1, down 93% in króna terms and 96% in euro terms from its historic high of 9016 (18 July 2007).
Trading in the shares of two financial services companies, Straumur–Burðarás and Exista, resumed on 9 December: together the companies account for 12.04% of the OMX Iceland 15. The values of the shares in both companies dropped sharply, and the index closed at 394.88, down by 40.17% on the day. Trading in shares in SPRON and Kaupthing remains suspended, at prices of ISK 1.90 and ISK 694.00 respectively.
Ratings of Icelandic sovereign debt
(long-term foreign currency)
The four credit rating agencies which monitor Iceland’s sovereign debt all lowered their ratings during the crisis, and their outlook for future ratings changes is negative. The Icelandic government had a relatively healthy balance, with sovereign debt of 28.3% of GDP and a budget surplus of 5.5% of GDP (2007). Debt is now 90 percent of GDP with a budget deficit.
In addition, the value of foreign currency bonds which mature in the remainder of 2008 is only $600 million, and foreign currency debt service in 2009 is only $215 million, well within the government’s ability to pay. However the agencies believe that the government will have to issue more foreign currency bonds, both to cover losses as the banks’ overseas operations are liquidated and also to stimulate demand in the domestic economy as Iceland goes into recession.
On 24 October, the IMF tentatively agreed to loan €1.58 billion. However the loan had still not been approved by the Executive Board of the IMF on 13 November. Apparently, UK and the Netherlands had halted IMF’s aid to Iceland as the Icesave dispute had not been resolved. Due to the delay Iceland found itself caught in a classic catch-22 situation, loans from other countries could not be formally secured until the IMF program had been approved. The Icelandic government spoke of a $500M (€376M) gap in the funding plans. Dutch finance ministerWouter Bos stated that the Netherlands would oppose the loan unless agreement was reached over deposit insurance for Landsbanki customers in the Netherlands.
The IMF-led package of $4.6bn was finally agreed on 19 November, with the IMF loaning $2.1bn and another $2.5bn of loans and currency swaps from Norway, Sweden, Finland and Denmark. In addition, Poland has offered to lend $200M and the Faroe Islands have offered 300M Danish kroner ($50M, about 3% of Faroese GDP). The Icelandic government also reported that Russia has offered $300M. The next day, Germany, the Netherlands and the United Kingdom announced a joint loan of $6.3bn (€5bn), related to the deposit insurance dispute.
In 2001, banks were deregulated in Iceland. This set the stage for banks to upload debts when foreign companies were accumulated. The crisis unfolded when banks became unable to refinance their debts. It is estimated that the three major banks hold foreign debt in excess of €50 billion, or about €160,000 per Icelandic resident, compared with Iceland’s gross domestic product of €8.5 billion. As early as March 2008, the cost of private deposit insurance for deposits in Landsbanki and Kaupthing was already far higher (6–8½% of the sum deposited) than for other European banks. The króna, which was ranked by The Economist in early 2007 as the most overvalued currency in the world (based on the Big Mac Index), has further suffered from the effects of carry trading.
Coming from a small domestic market, Iceland’s banks have financed their expansion with loans on the interbank lending market and, more recently, by deposits from outside Iceland (which are also a form of external debt). Households also took on a large amount of debt, equivalent to 213% of disposable income, which led to inflation. This inflation was exacerbated by the practice of the Central Bank of Iceland issuing liquidity loans to banks on the basis of newly-issued, uncovered bonds — effectively, printing money on demand.
In response to the rise in prices — 14% in the twelve months to September 2008, compared with a target of 2.5% — the Central Bank of Iceland has held interest rates high (15.5%). Such high interest rates, compared with 5.5% in the United Kingdom or 4% in the eurozone for example, have encouraged overseas investors to hold deposits in Icelandic krónur, leading to monetary inflation: the Icelandic money supply (M3) grew 56.5% in the twelve months to September 2008, compared with 5.0% GDP growth. The situation was effectively an economic bubble, with investors overestimating the true value of the króna.
As with many banks around the world, the Icelandic banks found it increasingly difficult or impossible to roll over their loans in the interbank market, their creditors insisting on repayment while no other banks were willing to make fresh loans. In such a situation, a bank would normally have to ask for a loan from the central bank as the lender of last resort. However, in Iceland the banks were so much larger than the national economy that the Central Bank of Iceland and the Icelandic government could not guarantee the repayment of the banks’ debts, leading to the collapse of the banks. The official reserves of the Central Bank of Iceland stood at 374.8 billion krónur at the end of September 2008, compared with 350.3 billion krónur of short-term international debt in the Icelandic banking sector, and at least £6.5 billion (1,250 billion krónur) of retail deposits in the UK.
The Icesave logo, advertising it as “part of Landsbanki, Reykjavik, Iceland”
The situation was made worse by the fact that Icesave was operating as a branch of Landsbanki, rather than as a legally independent subsidiary. As such, it was completely dependent on the Central Bank of Iceland for emergency loans of liquidity, and could not turn to the Bank of England for help. The UK Financial Services Authority (FSA) was aware of the risk, and was considering imposing special liquidity requirements on Icelandic deposit-taking banks in the weeks before the crisis. However the plan—which was never implemented—would have forced the Icelandic banks to cut interest rates or stop taking new deposits, and might even have sparked the sort of bank run it was designed to prevent. The Guernsey authorities were also planning on bringing in restrictions on foreign banks operating as branches and on transfers of funds between Guernsey subsidiaries and parent banks (“parental upstreaming”). Landsbanki operated in Guernsey through a legally independent subsidiary.
The existence of a bank run on Landsbanki accounts in the UK in the period up to 7 October seems confirmed by a statement from the bank on 10 October, which said “Landsbanki Íslands hf. transferred substantial funds to its UK branch during this time to fulfil its Icesave commitments.” The transfer of funds from Landsbanki Guernsey to Heritable Bank, a Landsbanki subsidiary in the UK, also suggests a bank run in the UK. A transfer of “substantial funds” from Iceland to the UK would have been a significant downward push on the value of the króna, even before the effects of any speculation.
The current economic climate in the country has affected many Icelandic businesses and citizens. With the creation of Nýi Landsbanki, the new organisation which replaces the old Landsbanki, around 300 employees will lose their jobs due to a radical restructuring of the organisation which is intended to minimise the bank’s international operations. Similar job losses are expected at Glitnir and Kaupthing The job losses can be compared with the 2,136 registered unemployed and 495 advertised vacancies in Iceland at the end of August 2008.
Other companies have also been affected. For example, the private Sterling Airlines declared bankruptcy on 29 October 2008. The national airline Icelandair has noticed a significant slump in domestic demand for flights. However, the airline states that year-on-year international demand is up from last year. Guðjón Arngrímsson, a spokesman for the airline, said “we’re getting decent traffic from other markets… we are trying to let the weak [króna] help us.” He has also stated that it is impossible to predict whether the company will be profitable this year.Morgunblaðið, an Icelandic newspaper, is cutting some jobs and merging parts of its operations with the media corporation 365. The newspaper 24 stundir has ceased publication due to the crisis, resulting in the loss of 20 jobs.
Importers are particularly hard hit, with the government restricting foreign currency to essential products such as food, medicines and oil. The €400 million loan from the central banks of Denmark and Norway is sufficient to pay for a month’s imports, although on 15 October there was still a “temporary delay” which affected “all payments to and from the country”.
The assets of Icelandic pension funds are, according to one expert, expected to shrink by 15–25%. The Icelandic Pension Funds Association has announced that benefits will in all likelihood have to be cut in 2009. Iceland’s GDP is expected by economists to shrink by as much as 10% as a result of the crisis, putting Iceland by some measures in an economic depression.Inflation may climb as high as 75% by the end of the year.
Unemployment had more than tripled by late November 2008, with over 7000 registered jobseekers (about 4% of the workforce) compared to just 2136 at the end of August 2008. As 80% of household debt is indexed and another 13% denominated in foreign currencies, debt repayment is going to be more costly. Since October 2008, 14% of the workforce have experienced reductions in pay, and around 7% have had their working hours reduced. According to the president of the Icelandic Federation of Labour (ASÍ), Gylfi Arnbjörnsson, these figures are lower than expected. 85% of those currently registered as unemployed in Iceland stated that they lost their job in October, after the economic collapse.
Over £840 million in cash from more than 100 UK local authorities was invested in Icelandic banks. Representatives from each council are meeting to try to persuade the Treasury to secure the money in the same way that customers’ money in Icesave was fully guaranteed. Of all the local authorities, Kent County Council has the most money invested in Icelandic banks, currently £50 million.Transport for London, the organisation that operates and coordinates transport services within London, also has a large investment at £40 million. Local authorities were working under government advice to invest their money across many national and international banks as a way of spreading risk. Other UK organisations said to have invested heavily include police services and fire authorities, and even the Audit Commission. It is hoped that about one-third of the deposited money will be available fairly rapidly, corresponding to the liquid assets of the UK subsidiaries: liquidation of other assets, such as loans and offices, will take longer.
In an emergency sitting of Tynwald on 9 October, the Isle of Man government raised compensation from 75% of the first £15,000 per depositor to 100% of £50,000 per depositor. The Chief Minister of the Isle of Man, Tony Brown, confirmed that Kaupthing had guaranteed the operations and liabilities of its Manx subsidiary in September 2007, and that the Manx government was pressing Iceland to honour this guarantee. Depositors with Landsbanki on Guernsey found themselves without any depositor protection.
On 11 October, an agreement was reached between the Icelandic and Dutch governments on the savings of about 120,000 Dutch citizens. The Icelandic government will cover the first €20,887 on savings accounts of Dutch citizens held by Landsbanki subsidiary Icesave, using money lent by the Dutch government. The total value of Icesave deposits in the Netherlands is €1.7 billion. At the same time, Iceland and Britain reached an agreement on the general contours of a solution: Icesave deposits in the UK total £4 billion (€5 billion) in 300,000 accounts. The figure of €20,887 is the amount covered by the Icelandic Depositors’ and Investors’ Guarantee Fund (DIGF; Tryggingarsjóður in Icelandic): however, the DIGF had equity of only 8.3 billion krónur at the end of 2007, €90 million at the exchange rates of the time and far from sufficient to cover the Dutch and British claims.
The cost of deposit insurance in the UK is not completely clear as of November 2008. The Financial Services Compensation Scheme (FSCS) paid around £3 billion to transfer deposits from Heritable Bank and Kaupthing Singer & Friedlander to ING Direct, while the UK Treasury paid an additional £600 million to guarantee retail deposits that were higher than the FSCS limit. The Treasury also paid out £800 million to guarantee Icesave deposits that were higher than the limit. A loan of £2.2 billion to the Icelandic government is expected to cover the claims against the Icelandic DIGF relating to Icesave, while the exposure of the UK FSCS is expected to be £1–2 billion.
The crisis also prompted the Ministry of Foreign Affairs to reduce its foreign aid to developing nations, from 0.31% to 0.27% of GNP. The effect of the aid cut was greatly amplified by the falling value of the krona, leading the Icelandic International Development Agency (ICEIDA) to see its budget fall from $22 million to $13 million. Since Iceland’s foreign aid is targeted in sectors for which the country has particular expertise (e.g. fisheries, geothermal power), the cutbacks will have a substantial impact in countries which receive Icelandic aid – most noticeably in Sri Lanka, where ICEIDA is pulling out altogether.
On February 27, 2009, the Wall Street Journal reported that Iceland’s new government is trying to raise $25 million by selling its ambassadorial residences in Washington, New York, London and Oslo.
On August 28, 2009, Iceland’s parliament voted 34-15 (with 14 abstentions) to approve a bill (commonly referred to as the Icesave bill) to repay the United Kingdom and the Netherlands more than $5 billion lost in Icelandic deposit accounts. Initially opposed in June, the bill was passed after amendments were added which set a ceiling on the repayment based on the country’s Gross Domestic Product. Opponents of the bill argued that Icelanders, already reeling from the crisis, should not have to pay for mistakes made by private banks under the watch of other governments. However, the government argued that if the bill failed to pass, the UK and the Netherlands might retaliate by blocking a planned aid package for Iceland from the International Monetary Fund (IMF). Under the deal, up to 4% of Iceland’s Gross Domestic Product (GDP) will be paid to the UK, in sterling terms, from 2017-2023 while the Netherlands will receive up to 2% of Iceland’s GDP, in euro terms, for the same period. Talks between Icelandic, Dutch and UK ministers in January of 2010 dubbed as “Icesave” did not result in any specific actions being agreed upon. 
In April 2009, Iceland’s state prosecutor hired Eva Joly, the Norwegian-French investigator who led Europe’s biggest ever fraud investigations into bribery and corruption at oil group Elf Aquitaine, as special consultant to a 20-member ”economic crime team” to “investigate suspicions of criminal actions in the period preceding the collapse of the Icelandic banks” which may involve several Iceland’s business and banking leaders. Joly stated that the investigation will require a minimum of 2–3 years to build up enough evidence to secure prosecutions.
In an interview Joly stated that:
“Finding proof will start at home in Iceland, but my instinct is that it will spread. If there are things relevant to the UK we will get in touch with the Serious Fraud Office. If there are things relevant to Germany we will get in touch with their authorities. In Iceland, there is more than enough for a starting point for the investigation, given all the talk about market manipulation and unusual loans. If these are proved they are embezzlement and fraud. The priority is tracing any flow of assets from the banks and getting them back.”
The investigation is expected to focus on a number of questionable financial practices engaged in by Icelandic banks:
Almost half of all the loans made by Icelandic banks were to holdings companies, many of which are connected to those same Icelandic banks.
Money was allegedly lent by the banks to their employees and associates so they could buy shares in those same banks while simply using those same shares as collateral for the loans. Borrowers were then allowed to defer paying interest on the loan until the end of the period, when the whole amount plus interest accrued was due. These same loans were then allegedly written off days before the banks collapsed.
Kaupthing allowed a Qatari investor to purchase 5% of its shares. It was later revealled that the Qatari investor “bought” the stake using a loan from Kaupthing itself and a holding company associated with one of its employees (i.e. the bank was, in effect, buying its own shares).
Scrutiny of Icelandic business leaders
Since the crisis began, many of Iceland’s business leaders, who had previously been considered financial gurus who greatly developed Iceland’s economy, are now under intense public scrutiny for their roles in causing the financial crisis:
Reportedly, all of those under scrutiny are now rarely seen in public and some have apparently left the country. They are also reportedly the subjects of an ongoing investigation to determine if any of their business practices warrant criminal prosecution.
Statements from former politicians
Former Prime Minister Davíð Oddsson has claimed that Iceland needs to investigate “unusual and unconventional loans” given by the banks to senior politicians during the years before the crisis.
Björn Bjarnson, the former Minister for Justice and Ecclesiastical Affairs, has started a blog detailing the problems with the business sector and the efforts to cover them up. This was cited as an example of how politicians and businessmen, who traditionally held a tight grip over the Icelandic media, have lost this control and that dozens of similar blogs have been created. Björn stated that:
“I have written a lot about problems in the business sector over the last 14 years, and I can only compare some parts of it to Enron. Here companies have been playing a game, using the media and publishing to make themselves look good. We only hope that the foreign media will soon begin to understand what has been going on.”
Some of the 6000 protesters in front of the Alþingishús, seat of the Icelandic parliament, on 15 November 2008.
Parts of the Icelandic public have arranged protests against the Central Bank, the Parliament and the government’s alleged lack of responsibility before and after the crisis, attracting between 3000 and 6000 people (1–2% of Iceland’s population) on Saturdays.
And a little about the Freedom of Information Act and financial firms –
§ 38:249 (US Code)
K. Eighth Exemption: Reports by Financial Institutions
1. In General
§ 38:249 (US Code) Introduction
5 USCS § 552(b) (8) provides an exemption from FOIA disclosure for matters that are contained in or related to examination, operating, or condition reports prepared by, on behalf of, or for the use of an agency responsible for the regulation or supervision of financial institutions.
Accordingly, a number of federal offices and agencies, including the Treasury Department, the Comptroller of the Currency, the Federal Reserve System, and the Pension Benefit Guaranty Corporation have promulgated regulations affirmatively applying Exemption 8 to relevant information in their possession.
Some regulations, however, such as those of the Federal Deposit Insurance Corporation, may contain provisions for the discretionary release of reports that are otherwise exempt.
As stated in the legislative history of the FOIA, Exemption 8 is designed to insure the security and integrity of financial institutions, since the sensitive details collected by government agencies which regulate financial institutions could cause great harm if they were to be indiscriminately disclosed. A major concern is that the disclosure of such reports containing frank evaluations of investigated banks might undermine public confidence in the soundness of such institutions and cause unwarranted runs on banks.
A secondary purpose behind the enactment of Exemption 8 is to safeguard the relationship between the banks and the supervising agencies. There was concern that if bank examinations are freely made available to the public and to the banks’ competitors, the banks will be less likely to give the agencies their full co-operation – (which they don’t do now, my note).
The courts have indicated that Exemption 8, like the other FOIA exemptions, must be narrowly construed, but this does not mean that the plain meaning of the language of the exemption can be overlooked.
Practice pointer: Although reports prepared by bank regulatory bodies are beyond the scope of FOIA disclosure, such reports might nevertheless be subject to discovery in the course of litigation.
Exemption 8 does not create independently any evidentiary privilege, its effect being only to permit the withholding of such information from the public generally.
If, however, the federal banking agency forbids the bank to disclose a report of an examination without agency approval, discovery of examination reports must be sought from the agency and not from the bank as part of pretrial discovery in litigation involving the bank. (or financial investment, financial brokerage, stock market records, or investment “auction” facility, my note).
(from pp. 256 – 257, 15 Fed Proc, L Ed; )
§ 38:250. What “financial institutions” are governed by
The term “financial institution” has been interpreted to include banks and other related institutions.
Thus, two sets of federal regulations, those of the Comptroller of the Currency and the Federal Reserve System, indicate that the exemption is applicable to reports relating to the affairs of any bank or affiliate thereof, bank holding company or subsidiary, broker, finance company, or any person engaged, or proposing to engage, in the business of banking, extending credit, or managing or controlling banks.
It has been held that examination reports of federal savings institutions are also exempt from disclosure. Although some fears have been expressed that if Exemption 8 is construed literally, the records relating to a closed bank will be perpetually sealed, it has been held that such records come within the scope of Exemption 8, at least where the bank has only recently been closed and where the records have not yet been turned over to GSA.
One question is whether national securities exchanges are considered to be “financial institutions” within the meaning of Exemption 8.
In one case, a Securities and Exchange Commission staff study on an off-board trading problem raised by a rule of the New York Stock Exchange, as well as of the transcripts made and documents received by the SEC in the course of its investigation, were held not? to be exempted from FOIA disclosure by reason of Exemption 8.
But it has been held that an SEC report regarding an inspection of one of the lesser stock exchanges is exempt as pertaining to a financial institution.
(and from pp. 259, 15 Fed Proc, L Ed)
§ 38:252 Other exempt information
Other types of information that have been held to be exempted from disclosure under 5 USCS § 38:252 (b) (8) include reports of the Comptroller of the Currency concerning the policies of a national bank, reports of FDIC examiners, and reports of the Federal Home Loan Bank Board concerning the financial conditions of savings associations.
Information concerning disciplinary proceedings involving specific stock exchange members, since it is of value to SEC supervision of the stock exchange, is protected by Exemption 8.
Freedom of Information
Federal Procedure, Lawyers Edition; 1990
§ 38:249 (US Code)
§ 38:250 (US Code)
§ 38:252 (US Code)
Volume 15, § 38:1 – 38:600
So much for the concept of transparency. It seems that is simply a term to be used in public displays of political arena working and not an application used in fact, in process, nor in financial services processes.
Conflict of Laws –
Entry, pp. 1085, Vol. 4, Encyclopedia Britannica, 1978
The law of conflict of laws has to do with the resolution of problems that result from the fact that there exists in the world a multiplicity of different sets of courts and different systems of private laws; that is, law dealing with relations between persons. As the earth is presently organized, its surface is divided among nations that are independent of each other and that have no world government above them. Each of these nations maintains its own set of courts in complete independence of every other nation, and each nation has its own set of laws, written or unwritten.
The Law of Conflict of Laws: Function and Sources –
While in such countries as France, Sweden, Peru, or Japan, one single system of law obtains for the whole country, diversity exists in many others, especially nations organized upon a federal pattern, such as the United States, Canada, and, to a minor degree, West Germany, Switzerland, Mexico, or Soviet Union [today, Eastern European nations and Russia]. ( . . . )
Even in countries whose political structure is of the unitary rather than the federal pattern, differences can be found. In the United Kingdom, for example, considerable difference exist between the laws of England, Scotland, the Isle of Man, the Channel Islands, and Northern Ireland. (I’m not sure the extent to which that is true today, my note).
Diversity of laws exists frequently between a country and its colonies. (etc.)
Diversity of laws develops where a country is divided. (etc.)
Diversities of law within one country may also exist on an ethnic or religious basis. (etc.)
Because of the spread of Western civilization over the entire planet, the laws of modern nations, at least insofar as they are concerned with relations between private individuals, present a considerable measure of uniformity. (to some extent, my note).
They are sufficiently different, however, to make it important to know to what situations one ought to apply the law of one country, state, region, or group rather than that of another, especially when dealings are carried on between persons of different law units.
This question of determining which of the world’s numerous laws is the proper one to apply in a particular situation is in itself a legal question.
Those rules of law by which such questions of choice of law are determined constitute a major part of that field of the law that is known as private international law or the law of conflict of laws.
Other parts of this field of the law are concerned with the problem of jurisdiction — that is, the problem of determining in what cases the courts of a particular country or state are, or are not, to go into action — and, furthermore, with the problem of stating what weight, if any, is to be given in one country or province to the judgments and other decisions of the courts or other agencies of other countries or provinces.
In countries adhering to the French legal tradition it is customary to regard as parts of private international law also those rules that deal with nationality and with the legal position of aliens and nonresidents.
In accordance with usage in countries of the English legal tradition, however, the present article will be limited to jurisdiction, foreign judgments, and choice of law.
The name private international law, which is generally used in countries of European-continental tradition, and occasionally also in England, seems to indicate that it is a part of international law — that is, that system of law that is superior to all sovereign states and that, at least in theory, is uniform throughout the world.
This view was commonly held for many centuries, and when the name private international law was coined in the 19th century it was meant to signify that the supranational body of international law consisted of two parts, public and private international law.
While the former would determine the proper conduct of sovereign nations toward each other in both peace and war, the latter would, in a uniform way, tell all nations in what cases their courts ought or ought not to take jurisdiction, under what conditions foreign judgments were to be enforced or otherwise recognized, and in what cases the laws of one nation were to be applied rather than those of another.
pp. 1087, Vol. 4 (same entry – Conflict of Laws)
In the United States, the Constitution provides that “full faith and credit shall be given in each state to the public acts, records and judicial proceedings of every other state.”
Under this clause, the states, and by statute, the territories, are obliged mutually to enforce their money judgments and to recognize the res judicata and law-changing effects of their judicial acts, provided the state by which the judgment was rendered was acting within the scope of its jurisdiction as defined by the Supreme Court of the United States.
The only other defenses that might be raised are grave irregularity of the proceedings in which the judgment was obtained and, in certain cases, lack of finality.
In countries that follow the general principles of the common law, a foreign judgment usually is willingly enforced and otherwise recognized unless (1) the country by which it was rendered lacked jurisdiction according to the notions prevailing in the place where recognition is sought, or (2) the proceedings in which the judgment was obtained were tainted with fraud or were otherwise grossly unfair, or (3) the recognition or enforcement of the foreign judgment would seriously interfere with an important public policy of the country or state where recognition or enforcement is sought.
In addition to these requirements, most civil-law countries (except, of course, those few in which foreign judgments as such are not enforced at all) also demand that reciprocity with the country whose judgment is sought be recognized. (. . . )
Nowhere will a foreign judgment be enforced or recognized unless the country by which it was rendered had jurisdiction to do so under the notions obtaining where recognition is sought. These limits are sometimes wider, however, than those that a country will concede to others for the exercise of their jurisdictions.
pp. 1088, Vol 4
The greatest difficulties have arisen in the field of contract. Many courts and writ have held that problems of the law of contract are generally to be decided under the law of the place where the contract was made.
Under a refinement of this theory (1978, my note), problems concerning performance are to be decided under the law of the place where the contract was to be performed.
But where is a contract made when it was concluded by the exchange of letters between Tokyo and Paris, or San Francisco and Chicago? Where is the contract of sale to be performed when the seller has to obtain the goods in New Orleans and ship them from New York to Amsterdam, and the buyer, a business firm in Oslo, has to pay the price at a bank in London?
furthermore, what intrinsic connection with the parties’ relationship does the place of contracting have at all, if, as frequently happens, the contract was made at a place at which quite accidentally the parties’ minds met. Should German law really be applied to a contract concluded by a Dane and an Italian while they were flying over Germany in an airplane?
The view most widely followed by the courts of both civil-law and common-law countries is that problems concerning an alleged contract are to be decided in accordance with that law which the parties expressly agreed to be applicable, or which is recognizably that law upon the basis of which the parties negotiated and made their contract.
Theoretical objections to this practical view still carry some weight, especially in the United States. Where no particular law can be discovered as the one upon the basis of which the parties transacted their business, detailed differentiations must be made depending on the kind of contract in question (sale, insurance, transportation, contract for services, suretyship, etc.) and on the particular problem to be decided.
Although the field of contract is the most important for international and interstate trade, it is the one beset with the most uncertainties as to choice of law. Fortunately, the substantive laws do not widely differ from one another, and business has learned to avoid many of the difficulties through resorting to arbitration and appropriate drafting. Through skillful draftsmanship the experienced international lawyer can prevent many of the difficulties that can so easily arise under private international law.
(out of the order offered in the text – but important here)
The notion that the courts of a country should ever have to decide problems under foreign law rather than invariably deciding all problems coming before them under the law of their own country is by no means self-evident.
It has its rationale mainly in the thought that it would be unjust to teh parties concerned if a problem were decided under a law that they did not know might cover their situation when they began the transaction that led to the subsequent litigation. (but does not apply to false advertising, misrepresentation, fraud and other illusory, illegal, fraudulent, corrupt, unfair, unscrupulous or criminal business practices, my note, because even at a very basic level, those engaging in it know by its nature to be wrong and likely to fail the merits of any legal test of acceptable practices. – cricketdiane)
(further, on pp. 1088, Vol 4 – Conflict of Laws)
The necessity to apply the law of a foreign country or province, however, constitutes an inconvenience to the court and the parties. Although judges are familiar with the law of their own country, they cannot be expected to be familiar with the laws of the whole world. (but they can read at least as good as I can, my note.) Foreign law must therefore be especially pleaded and proved, often at considerable inconvenience and expense.
European and American scholars of the late 19th centuries attempted to reduce the whole field of choice of law to a few principles that could be expressed in a small number of highly generalized maxims.
Their results, however, proved impractical. Since the problems of choice of law are almost as manifold as those of substantive private law, these efforts turned out to constitute oversimplifications.
Mid-20th-century writers and courts regard it as their task to elaborate patiently those detailed rules of narrow application that are necessary to do justice to the infinite variety of actual life.
Some U.S. scholars also stress the interests of states to implement their policies over divergent policies of other states. The results of the manifold efforts can be found in the works listed in the bibliography. Here no more can be done that state some overall approaches, which must not be regarded as rules of immediate applicability. (their note, not mine.)
(also out of order from the text – )
In their general approach to the problem of jurisdiction, the common-law countries still proceed from the long-obsolete notion that no civil suit could be commenced in any way other than by the defendant’s arrest by the sheriff. Consequently, an action can still be brought in any place in which the defendant is personally served with process, (or in which they own property or have conducted business, my note), even though he may be there only for a few minutes to change airplanes.
In modern times it has come to be widely held, however, that personal service upon the defendant is no longer an indispensable requirement of jurisdiction and that an individual may be sued in the country or state of his residence, even if the summons is not personally pressed upon him. a corporation can always be sued in the country or state in which it has been incorporated.
(and, also out of order – but very interesting – )
As another example, the courts of New York regard themselves as an “inconvenient forum” for suits between nonresidents concerning a tort committed outside New York.
With few exceptions, Anglo-U.S. courts will not try controversies concerning title to, or trespass upon, land situation outside the state. (my note, but this changes when it involves money, securities, exchange of securities, fraud, fraudulent business practices, currency manipulation or currency forms as the property in question.)
(etc. – lots more good information here, but I need to lookup something else.)
Encyclopedia Britannica, 1978
pp. 1085 – 1088; Vol. 4, “Conflict of Laws”
Essentials of Business Law, Second Edition –
1984, 1986, West Publishing Company, St. Paul, Minn.
authors – Smith, Mann, Roberts
pp. 700 – 701, 702 – Part Nine, Regulation of Business
Figure 39 – 3 Restraints of Trade
Restraint – Standard
Price fixing … Per se illegal
Market allocations … Horizontal: per se illegal
Vertical: rule of reason
Group boycotts … per se illegal
Tying arrangements … per se illegal (* if seller has power in tying product or a not insubstantial amount of interstate commerce is affected in the tied product.)
However, in the text –
Economic analysis indicates that a monopolist will use its power to limit production and increase prices. Therefore, a monopolistic market will produce fewer goods at a higher price than a competitive market. Addressing the problem of monopolization, Section 2 of the Sherman Act prohibits monopolies, attempts to monopolize, and conspiracies to monopolize.
Thus Section 2 prohibits both agreements among businesses and, unlike Section 1, unilateral conduct by one firm.
Although the language of Section 2 appears to prohibit all monopolies, the courts have not interpreted it in that manner. Rather, they have required that in addition to the mere possession of market power there also must be either the unfair attainment of the monopoly power or the abusive use of that power once attained.
It is extremely rare to find an unregulated industry with only one firm, so the issue of monopoly power involves defining what degree of market dominance constitutes monopoly power. Monopoly power is the ability to control prices or to exclude competitors from the marketplace. The courts have grappled with this question of monopoly power and have developed a number of approaches, but the most common test is market share.
A market share greater than 75 percent generally indicates monopoly power, while a share less than 50 percent does not. (but what constitutes the actual market base is subjectively determined, my note). A 50 to 75 percent share is inconclusive (1986).
Market share is the fractional share possessed by a firm of the total relevant product and geographic markets, but defining the relevant markets is often a difficult and subjective project for the courts.
The relevant product market, as demonstrated in the case which follows (at the bottom of pages 701 – 702), includes products that are substitutable for the firm’s product on the basis of price, quality, and adaptability for other purposes. For example, although brick and wood siding are both used in buildings as exteriors it is not likely that they would be considered as part of the same product market. On the other hand, Coca Cola and Seven-Up are both soft drinks and would be considered part of the same product market.
The relevant geographic market is the territory in which the firm sells its products or services. This may be at the local, regional, or national level. (or in the cases we have today – in the international arenas, my note.)
For instance, the relevant geographic market for the manufacture and sale of aluminum might be national, whereas that of a taxi company would be local. The scope of the relevant geographic market will depend on such factors as transportation costs, the type of product or services, and the location of competitors and customers.
If sufficient monopoly power has been proved, it must then be shown that the firm has engaged in unfair conduct. The courts have not yet agreed on what constitutes unfair conduct (that is not true even when it was written and certainly not now – my note).
One judicial approach is that a firm possessing monopoly power has the burden of proving that it acquired such power passively or that it had the power “thrust” upon it. An alternative view is that monopoly power, when combined with conduct designed to exclude competitors, violates Section 1. a third approach requires monopoly power plus some type of predatory practice, such as pricing below marginal costs (among others, my note.)
(from – )
Essentials of Business Law, Second Edition –
1984, 1986, West Publishing Company, St. Paul, Minn.
authors – Smith, Mann, Roberts
pp. 700 – 701, 702 – Part Nine, Regulation of Business
excerpt from “Operations Management, Strategy and Analysis” by Krajewski, Ritzman: 1993, Addison-Wesley Publishing Co.
(pp. 296 – 299: also pp. 300 about diseconomies of scale, found below first reference passages and Managerial Practice 8. 1 “The Agony of Too Much – And Too Little – Capacity”)
Capacity is the maximum rate of output for a facility. The facility can be a work station or an entire organization. The operations manager must provide the capacity to meet current and future demand or suffer the consequences of missed opportunities.
Capacity plans are made at two levels. Long-term capacity plans, which we describe in this chapter, deal with investments in new facilities and equipment. These plans look at least two years into the future, but construction lead times alone can force much longer time horizons.
Currently, U.S. investment in new plant and equipment is $550 billion annually (1986). Service industries account for more than 64 percent of the total. Such sizable investments require top-management participation and approval because they are not easily reversed.
Short-term capacity plans, which we discuss in later chapters, are constrained by long-term plans. Short-term plans focus on work-force size, overtime budgets, inventories, (short-term capital plays, etc., my note), and the like, rather than on capital investment decision.
Capacity planning is central to the long-term success of an organization. Too much capacity can be as agonizing as too little, as Managerial Practice 8. 1 demonstrates. When choosing a capacity strategy, managers have to consider questions such as, should we have one large facility or several small ones? Should we expand capacity before the demand is there or wait until demand is more certain? A systematic approach is needed to answer these and similar question and to develop a capacity strategy appropriate for each situation.
Capacity planning requires a knowledge of current capacity and its utilization. A statistic often used to indicate the degree to which equipment, space, or labor (or throughput of product, my note) is currently being utilized is the average utilization rate, calculated as follows:
Average Utilization Rate = Average Output Rate divided by Capacity
and expressed as a percentage. The average output rate and the capacity must be measured in the same terms, that is, time, customers, units, or even dollars.
Output Measures – are the usual choice of product-focused firms. Nissan Motor Company confidently states its capacity to be 450,000 vehicles per year at its Tennessee plant. Capacity is well understood as an output rate because customization is low.
For multiple products, however, the capacity measure must recognize the product mix. For example, ( . . . )
Input Measures – are the usual choice of process-focused firms. For example, managers of a job shop think of capacity as machine hours or number of machines. Just as product mix can complicate output capacity measures, so also can demand complicate input measures.
Demand, which invariably is expressed as an output rate, must be converted to an input measure. Only after making the conversion can a manager compare demand requirements and capacity on an equivalent basis.
(pp. 297 – Managerial Practice 8. 1)
The Agony of Too Much and Too Little Capacity
Too Much Capacity –
The commercial real estate market in most major U.S. cities is sick, (1993) caused in part by the recession in the early 1990s. At the same time many tenants, especially those in the financial industry, are undergoing restructurings expected to cut demand for office space for years to come.
The vacancy rate of office space is 26 percent in Miami, Oklahoma City, Phoenix, and Dallas alike; it is 20 percent nationwide. Values have declined as much as 30 percent in some markets, and the capacity glut hurts everyone. For example, the CenTrust Tower in Miami, a 47-tower building built by a failed thrift for $165 million, was recently sold for only $38 million.
To make matters worse, the real estate industry is suffering from a virus becoming known as the “rollover risk.” Tenants from well-planned and pricey buildings are being lured to cheaper, empty buildings.
With the exception of the credit squeeze, rollover risk may be the single greatest obstacle to the recovery of the real estate market.
“There isn’t a tenant in Washington who pays the rent who isn’t getting two calls a week from brokers asking the tenant to break the lease and move into cheap space elsewhere,” says a banking consultant in Washington, D.C. “The entire market is being cannibalized.”
Too Little Capacity –
In the late 1980s the world’s airlines re-equipped their fleets and vied to buy a record number of commercial passenger jets. Orders for Boeing, Airbus, and McDonnell Douglas surged to more than 2600 planes.
Douglas alone had a backlog of some $18 billion in firm orders for its MD-80 and new MD-11 widebody. That’s enough to keep its plant fully utilized for more than three years.
Despite the number of orders, Douglas’ commercial aircraft division announced a startling loss, Airbus had yet to make money, and even the mighty Boeing fought to improve subpar margins.
The large number of orders caused many problems. For one, Douglas’ suppliers in the metal forging industry were unable to keep pace with sales. Another problem was with its own work force: In two years, Douglas’ work force doubled, but training periods were abbreviated and the new hires were much less productive than seasoned employees.
Plant managers tried to keep on schedule by pushing planes along the assembly process, even if all the work at one particular station had not been completed.
Work was also subcontracted to other plants, including a sister plant that makes combat planes and a leased plant owned by the U.S. Air Force.
Because of the capacity shortage, costs skyrocketed and profits plummeted. By the start of the 1990s, the capacity pressure was relieved because American had cut back on the hypergrowth strategy that had set the pace for the entire airline industry in the 1980s.
Sources: “Office Buildings, Under Pressure Already, Face Threat to Their Leases,” Wall Street Journal, September 27, 1991; and “Planemakers Have It So Good, It’s Bad,” Business Week, May 8, 1989.
(from pp. 297, Operations Management, Strategy and Analysis, 1993)
Diseconomies of Scale –
New Rules Breed Wasteful Mergers – Law in the News pp. 705, Part Nine – Regulation of Business, Essentials of Business Law, Second Ed., 1986
New Rules Breed Wasteful Mergers by Herman Schwartz
Public policy is always fertile ground for irony. Today, for example, the economic landscape is strewn with merger fiascos, but current antitrust policy toward these combinations is increasingly lenient. “economic efficiency” is now the “only goal” of merger policy, according to a former Justice Department official.
As a result, the merger wave of the 1980s surges ahead, reachinng a new peak last week with the Allied Corporation’s $5 billion plaanned union with the Signal Companies, the largest industrial merger ever (outside the oil industry).
This preoccupation with economic efficiency ignores Congressional intent and judicial precedent. The legislative history of the antitrust laws contains almost no mention of efficiency, production or price. Rather, there is an insistent Jeffersonian concern for the small entrepreneur – for social, not economic reasons.
Thus, the Supreme Court has always ruled that efficiencies cannot save an otherwise illegal merger.
Steel mergers were supposed to “rationalize” a sick industry. But LTV, for example, is having so much trouble digesting Republic that, even though LTV’s own steel sales rose substantially in the first quarter of 1985, it lost $156 million and operated less efficiently than the other top steelmakers; before the merger LTV had been among the most efficient.
Elsewhere, the once-voracious ITT will spin off 12 industrial technology acquisitions in its third major asset sale in eight months, with more to follow. G.E. has shed Utah International, after a loss of perhaps $3 billion.
Du Pont’s acquisition of Conoco was described by one market analyst as “dead weight pulling Du Pont down all the time.” And the history of railroad mergers like that of Penn Central (permitted in the name of “efficiency”) is dismal: in 1979, Forbes magazine concluded that 14 out of 17 rail mergers were unsuccessful.
At least some of these deals would have been blocked by an antitrust policy more consistent with Congressional intent and established law. ( . . . )
One merger consultant estimated that 70 percent fail.
(out of order in the content of the article – )
Nevertheless, when the Administration (1985 article, my note), took office, William F. Baxter, then the Assistant Attorney General in charge of anti-trust, promptly redrew Federal guidelines to ease restrictions on mergers between competitors. The guidelines further legitimized virtually any “vertical” merger — between customer and suppliers — or between companies in neither a directly competitive nor supply relationship.
Soon, deals — such as the proposed Allied-Signal merger — were proposed “that never would have been . . . before the Reagan Administration took office,” as one businessman put it. (etc. Last June, the Antitrust Division further softened the guidelines.
Experience shows that the supposed benefits of a merger are often illusory.
( . . . ) Today, Mobil is trying to spin off Montgomery Ward, after pouring over $600 million into it, and is taking a $500 million charge against earnings. Exxon has written off a $1.3 billion investment in Reliance Electric. . . . And Arco’s divestiture of its refining and retailing operations shows that vertical integration may yield not efficiencies, but trouble.
pp. 705, Essentials of Business Law, 2nd Ed.
inset article from New York Times Company, 1985
Managerial Considerations in Job Design and Work Measurement pp. 279 – 281, Operations Management, Strategy and Analysis
Compensation Plans –
Compensation plans based on work measurement typically involve incentive schemes. Those used most often are piece rate and individual incentive plans.
Piece Rate Plans – piece rate is a compensation plan based on the number of units processed during a day or week. (my note – that is whether it is stocks, bonds, investment “deals”, seams in a pair of blue jeans or what management must specify as a “fair day’s work.” – that last part came from the text.)
Individual Incentive Plants – sometimes, incentive plans are used to motivate workers. Such plans reward output that exceeds a predetermined base level. (etc.)
Quality and Compensation Plans – the purpose of incentive pay is to encourage high levels of output from employees. However, a high rate of output may be achieved at the expense of quality. What is the advantage to a company if a worker produces at 115 percent of standard but has a 20 percent defective rate?
In Chapter 3, when we discussed total quality control, we argued that quality at the source is critical for achieving world-class quality performance. Incentive plans that do not recognize and reward quality may not motivate the worker to produce high-quality goods.\
Two basic approaches are used to recognize quality in incentive pans. The first is the autocratic approach, which docks the worker’s pay for defective production or requires the worker to repair all defects at a lower rate of pay.
The second is the motivational approach, which is based on the concept of extra pay for extra effort. (etc.)
Many variants (including game theory popular in the last twenty-five years whereby the extreme levels of compensation, rewards, perks and bonuses of the executives are used as a motivating carrot for all mid-level performs who would be enticed to think they could have that eventually too, my note) of the motivational approach of including quality in work measurement are used in practice. the important point is that quality should be clearly recognized when compensation plans are being developed.
(Apparently, there also needs to be a standard set for what represents “quality” especially in the financial investment industries – because not every deal qualifies as “the deal” nor should it be, as exemplified by yesterday’s Senate hearings with the mid-level management / decision makers of the Wall Street investment firm, Goldman Sachs, – 04-27-10, Senate investigations committee.)
It has resulted in the collapse of large financial institutions, the bailout of banks by national governments and downturns in stock markets around the world. In many areas, the housing market has also suffered, resulting in numerous evictions, foreclosures and prolonged vacancies.
It contributed to the failure of key businesses, declines in consumer wealth estimated in the trillions of U.S. dollars, substantial financial commitments incurred by governments, and a significant decline in economic activity.
Many causes have been proposed, with varying weight assigned by experts. Both market-based and regulatory solutions have been implemented or are under consideration, while significant risks remain for the world economy over the 2010–2011 periods.
And on pages 300 – 301 of the same book – Operations Management, Strategy and Analysis, 1993 -in the section titled “Economies of Scale”
there is also – Diseconomies of Scale
. . . Historically, many organizations have subscribed to the concept of economies of scale. The concept seems simple: Increasing a facility’s size (or scale) decreases the average unit cost.
But in reality, it’s not at all simple. At some point a facility (or business, corporation, bank or conglomerate, my note) becomes so large that diseconomies of scale set in. Excessive size can bring complexity, loss of focus, and inefficiencies, which raise the average unity cost. (etc.)
muckety map - good example of diseconomies of scale - AIG / Goldman Sachs / Wall Street bailouts
(Figure 8.1 found on page 300 of the book below – not really applicable)
Figure 8.1 also shows a second dimension to the concept. Not only is there an optimal size for a facility but also an optimal operating level for a facility of a given size. Economies and diseconomies of scale are represented not just between cost curves but also within each one.
As the output rate approaches a facility’s best operating level, economies of scale are realized. Beyond that level, diseconomies set in.
pp. 300 – 301, Operations Management, Strategy and Analysis
My Note – I had another chart or two about these general concepts and some online information that I found awhile back, however – by the time I find it in my computer – it could be awhile. Therefore, I’m going to take a break, start a new blog entry and check online for the ones I was trying to find, which would have to be easier.
Share in GDP of U.S. financial sector since 1860 - must not include derivatives - Leonard N. Stern School of Business at New York University - Thomas Philippon, The future of the financial industry
Derivatives were suggested to be over $600 Trillion dollars – I don’t think that is included in the GDP . . .
(of anywhere, now that I think about it, my note) – cricketdiane
Here is why I know Washington is lying – all of them that we’ve elected to be there making decisions who are at the table –
1. They didn’t invite us to the table (as in, the American people). Oh no, they invited the insurance companies to be at the table, the automakers CEOs, the banking industry and financial services industry CEOs, pharmaceutical company representatives, oil company lobbyists and big industry consortium representatives to be at the table – not us.)
2. If they (legislators in Washington) had wanted to pass a health care insurance bill to serve the US population, they could’ve passed one bill to make it illegal for insurance companies to charge 80% more in premiums based on gender and to make it illegal to deny coverage in pre-existing conditions. (Period – nothing else in the bill, no “riders”, no pork, no bullshit.) But they didn’t do that – no, not even after a year of fussing, cussing, discussing and putting off other more important issues to play with this one. Time consuming at best – energy, manpower, effort, money, resource, time and opportunity wasting at worst.
3. If they were very concerned about the health and well-being of the American people and our quality of life throughout the US, these legislators would’ve stopped a lot of common practices in industries, including the release of toxic chemicals into their surrounding living communities. They would’ve stopped corporations from taking profits made in the US into other countries in order to evade taxes on those profits. They would’ve funded schools first and the re-building of Iraq and Afghanistan second. They would’ve thought more of us than to allow 2600 complaints about cars with defective design elements to be disregarded while causing deaths and injuries to people throughout the US. They would’ve made sure our food supply and food providers were using safe food handling methods and processes across the board whether the manufacturer sneaked the production facilities into another country with lax standards or was sitting here in the US right under their noses breeding salmonella and E.Coli in their production facilities. They would’ve required standards of accounting in our corporations that show everything on the balance sheet, not off-balance hidden accounting for liabilities and they would’ve required that accounting to be prudent and truthful and accurately reflect the true values of those assets and liabilities across the board. They would’ve made financiers who got into trouble dig into their own pockets to get themselves out of it, since that is the same thing required of us. And, they would’ve made sure that nobody, but nobody could buy the goodwill and rubber stamp of the consumer protection agency that was intended to keep us safe from defective products and fraudulent business practices. They didn’t do any of that.
4. The elected officials in Washington also never, never, never create and apply policy that does what they claimed it would do, either by their intentional design of it which is the antithesis of what they claimed it would be or by virtue of some very basic misunderstanding of applied common sense which escapes their abilities and that of their staff members. Rarely, if ever, are the people of the United States doing anything that they can hear, acknowledge, believe or understand to express the accurate facts about what their policy decisions are destroying, causing, distorting, screwing up, manipulating in negative ways or otherwise resulting in some unnecessary and expensive suffering of some kind. That information is either discounted, discredited or just plainly not heard in Washington no matter how it is done and no matter what measures are used to get the information to them. Then, why do I know they are lying because of this – because I can hear it, I can see it, I know about it, I find it easy to get the information about what their policies have done in real factual reflections of reality. To say they can’t or don’t know or can’t see it or can’t hear it or don’t know about it – has to be either a lie or a lying excuse to do nothing about it.
5. I also know they are lying because the evidence is there in their choices, decisions and actions. One side of their mouths says that the American people are at fault for our financial meltdown, while their backhand is giving away our money to financial institutions and insurance companies like it is a private bank account of free money to cover whatever they want at the moment. The other side of those mouths they have are saying that they want us to innovate and create solutions, while behind their backs they are doing everything possible to hinder the growth and opportunities of entrepreneuship, raising fees and licenses, requiring absurd groups of regulations to be met by small businesses and startups, hindering business grants and loan packages to any but the large business communities and foreign investors, and generally, laying every complexity of intellectual prowess in the path of starting up any business from scratch at all – particularly those that are innovative, new, and competitive to larger industries.
6. At every turn, they have taken out the checks and balances systems that would ensure our Constitutional rights and guarantees are upheld and that would insure our government doesn’t become the bully state of Orwellian novels which we’ve all seen come to fruition in dictatorships, regimes of absolute tyranny, despotism, aristocratic rule, profit-driven anything goes industrialism, and in Nazi Germany’s Aryan race atrocities. Enough is enough, none of us like the America that has become so close to those things as to mitigate the belief it can be something else. If our government legislators in the states and federal levels cared about that as they say they do, they simply wouldn’t be doing half the things they are doing now and wouldn’t have done 90% of the things they’ve already done. The checks and balances built into our system would be restored to what it was intended in order to accomplish what was intended and offer accountability both individually and collectively from our government officials at every level as well as our agencies. The sovereign immunity clause offering no accountability to government personnel is only appropriate in a tyranny or a dictatorship where there are no rights afforded the citizens – not in a free and democratic society where the government serves the people who are their primary source of power.
7. One side of our government party system says that small government is desirable and offers a list of benefits they assume come with that territory – and they did their best to accomplish that while they spent the last thirty years in power. They were lying then and they are lying now. Those benefits did not materialize during their reign. And, the word for small government is “king” with the tentacles of an octopus doing all his dirty work. Which, by the way, is exactly what we’ve had in the US for the last thirty years and more so in each and every day throughout that time and still yet from the damages that they caused. States underfunded programs that the Republican administratorship did not want, removed checks and balances because they didn’t want to be accountable for the heinous crimes they committed everywhere they touched, acted like mini-dictatorships at the behest of the federal government lackeys who were serving the interests of industries, big business, and financial conglomerates and genuinely, treated the American people like slaves and undesirables along with establishing a caste system in America where it didn’t belong that is still there to this day. They were lying when they said that is the “American Way.” They were lying when they said it would be the best for America. They were lying when they told us our lives would be better and America would be stronger for it. They were lying when they said they weren’t criminals. They were lying when they said they had the interests of the American people first and foremost on their agenda and on their minds when they did these things and numerous others (both at state levels and federal levels). It was all lies.
8. I also know they are lying now because they do know better. They have the finest resources available, all of our money, the best in education, the best in the educated minds of our country available to them, the most in money, materials and manhours to get any job done, the best in intellectual and data resources from around the world available to them, the instant information resources from the American people to use as feedback on how their decisions are actually working out – if they choose to see them or hear them, the best opportunities, the most egregious pool of combined resources that belong to us which we’ve made available to them from every hard earned dime and dollar we’ve sent there along with the resources that have been bought with it – as well as having resources available to them on a daily basis that cover every basic need, want, income, delight, luxury, comfort, opportunity and desirable life experience for each of them personally – so they could want for nothing while doing our national and state business. How the hell can you screw it up with that much to work with?
9. If they wanted to stop waste and fraud, they could stop giving themselves raises. If they wanted to help the budget deficit, they wouldn’t have been charging the American people to cover each of them with 100% fully paid health care coverage when they, if anybody could afford it for themselves. If they wanted to cut government dole, they would’ve only hired lawyers to cover their asses as needed instead of keeping armies of them on the payroll at anywhere from $187,000 – $450,000 a year each as they have done. If they wanted to insure good health in America, they would’ve changed the fuel on school buses from diesel to natural gas and they would’ve made polluting industries stop polluting in the same year they discovered they were doing it, not years into the future after really damaging the health of everybody for hundreds of miles around and many generations thereafter. If they had ever wanted to get legislation passed that was sane, sober and built on some kind of common sense, they would’ve made it illegal to place riders into bills that are in no way related to the material subject of the legislation. At the very least, if they had wanted to do a good job for the American people, they would’ve considered the American people and their interests in light of what they were doing, what they are doing and in light of what choices they are making in order to serve industries that basically have no use for them or us in the overall scheme of their activities.
10. I’m sad to say that I know they are lying because to get to Washington requires being the better liar, the more convincing liar and the best opportunistic lying bastard of the lot or people just don’t get to be elected to go to Washington. Isn’t that the shame of it all, that we, as Americans would choose the best liar of the lot to send into Washington to get our business done than to choose an honest, decent man or woman to serve our interests? And, isn’t it the shame and tragedy of it all, that we let them get away with it without doing a damn thing to change it when we knew what they were doing was wrong and even, as most of us noticed that they weren’t listening to any of us with any real regard – that we let them get away with demonizing us, discrediting us, disregarding us, and generally, dismissing us and our concerns? They lied to us in Washington and in our state legislators and administrations. The Republican Party and the Democratic Party have served the interests of their financial power base while lying to us and using us to further their own personal opportunities and enrichment. The lies have been so pervasive and perverse that the media and the American people alike believe that the truth, the facts and the reality are no more than a matter of opinion and rhetoric as presented by whosever side is representing it and irregardless of those facts. And, isn’t it the greater shame of all of it that the truth, in fact – will be the reality that we all suffer, endure or experience – no matter what perspective we might have about it. Dead is dead and broke is broke and polluted beyond recognition is still polluted beyond recognition – climate change is, because we are experiencing it whether the “rhetoric” told us it didn’t exist or not, and most of us in America are living in a “Depression Economy” whether it is called that or not and no matter what the politicians tell us it is.
11. Just for good measure, the problem with these lies and probably the reason most religions suggest that it is a bad idea in the first place, is because reality will win out every time. Sooner or later, the propaganda doesn’t work and the deflected, distorted perspectives about reality and about the facts just doesn’t make any difference in changing what is what. It still is whatever it is. And sooner or later, people know about it and they do understand it for what it is, and sooner or later, they do get up and make things different starting right where they are with a power that is unknown and misunderstood by the people who think they hold all the power. One change, changes everything a little bit and another change, changes it even more, and as another person and another person join in making those changes one at a time from where they are with their own personal abilities and perceptions, the whole thing changes even more.
That is the truth. And, that is what made the Boston Tea Party so monumental. The American Revolutionaries said – You will not tax us without representation. You will not steal from us without our voice. You will not indenture us in enslavement to you and you will not indenture our lands and the abilities of our hands. You will not tread on me nor force me to set below your feet for you to stand on nor for your power to rest upon. You will not use me to do your bidding without my will or choice. You will not remove from Us nor from me that which God has given: life, liberty and the pursuit of happiness and the right of every man to set his own course and to pursue his own destiny. Try as you might, once a human being knows the taste of freedom, democracy and the rights to life free of the burdenous yoke of tyranny – there is no going back.
Don’t believe for one minute that perception is everything. It just isn’t. The power and truth of our Constitution does not exist in a piece of paper or some flimsy document resting in a museum somewhere. It is in each of us and that is where the true power of our nation’s substance exists and where it will always exist. It is in the power and wonder of freedom that we already know exists and can exist for each of us that can never be taken away no matter the circumstances where we find ourselves. It is the truth of what we see and know in our hearts and minds which is defined by the reality of the facts at hand that can never be distorted by politicians or religious fervor or zealousness of a cause or by the disregard for human life that we have experienced or have seen those in authority exemplify. It is the desire for human dignity and decency and fairness for all without discrimination, contempt or disregard. It is the sword of justice that is not blind, deaf and dumb to the plight of suffering and inhumanity to human lives and human dignity at the hands of others. It is the will of the American people, both individually and collectively that define the power of the government to govern by no more and no less than the consent of the governed. And, it is the true power that comes from the intimate knowledge of the freedom, rights and accountability to those tenets of America’s founding fathers that spilled our blood to protect it and have made us the soldiers of freedom that we are and will always be as American citizens and as citizens of the World.
The FDIC is often appointed as receiver for failed banks. This page contains useful information for the customers and vendors of these banks. This includes information on the acquiring bank (if applicable), how your accounts and loans are affected, and how vendors can file claims against the receivership. Failed Financial Institution Contact Search displays point of contact information related to failed banks.
This list includes banks which have failed since October 1, 2000.
AIG Decides to Keep Unprofitable Mortgage Insurer (Update1)
February 12, 2010, 04:20 PM EST
AIG, which was rescued in September 2008 after losses from bad bets tied to housing markets, posted a $1.43 billion operating loss from mortgage insurance in the first nine months of 2009 as U.S. foreclosure filings climbed to a record. The company said in November that it tapped the Treasury Department line within its $182.3 billion rescue package for about $4.2 billion, in part to restructure United Guaranty.
Feb. 12 (Bloomberg) — American International Group Inc., the insurer divesting assets to repay a government bailout, opted to keep its money-losing U.S. mortgage guarantor after selling Canadian and Israeli subsidiaries of the unit.
AIG made a “recent decision” to hold onto Greensboro, North Carolina-based United Guaranty, Arlene Isaacs-Lowe, a Moody’s Investors Service analyst, wrote yesterday in a research note. AIG executives told her of the move within the past few months, Isaacs-Lowe said today in an interview.
United Guaranty was founded in 1963 and sold to AIG in 1981. The business generated $2.8 billion in operating income and $600 million in dividends for AIG in the eight years prior to the housing slump, the company has said.
United Guaranty was ranked the fourth-largest U.S. mortgage insurer in the first six months of 2009, behind No. 1 MGIC Investment Corp., Radian Group Inc. and PMI Group Inc., according to Inside Mortgage Finance, a trade journal. All the firms were unprofitable in the first nine months of 2009.
Essent Guaranty Inc., backed by investors including Goldman Sachs Group Inc. and JPMorgan Chase & Co., became the first newcomer to the U.S. mortgage-guaranty business since the housing collapse, leaving it unburdened by policies sold in 2005 and 2006 when underwriting standards were lower.
Until 2007, private mortgage policies had been among the most profitable types of coverage sold by insurers. From 2004 to 2006, members of the Mortgage Insurance Companies of America reported a profit margin of at least 35 cents for every dollar they collected in premiums. Auto insurers made less than 5 cents on every dollar in 2006, according to A.M. Best Co.
Last week offered some sobering news on the housing market: Even with broad government support for housing, data from the National Association of Realtors showed that the median price of single-family homes continued to decline in 2009. RealtyTrac, an online marketer of foreclosed properties, said foreclosure filings rose by 15 percent in January compared with a year ago.
Foreclosure is generally a long process, with multiple filings as delinquent borrowers fall ever further behind. What is most ominous about the latest RealtyTrac numbers is that nearly 88,000 people had their homes repossessed in January, a 31 percent increase from a year ago. The big jump indicates that many foreclosures that were in process in 2009 are now beginning to move to repossession and, eventually, auction. With more than four million homes in that pipeline, the foreclosure crisis shows no sign of abating.
[ . . . ]
There is an emerging consensus among financial experts and policy makers that the key to successful modifications is to reduce the amount of the borrower’s loan balance, rather than merely reducing the monthly payment. The goal is to lower the payment while restoring equity, thus giving borrowers both the means and the incentive to keep up with their payments.
Administration officials have resisted that approach, in part because they believe it would be too expensive. Another obstacle is the lenders themselves. In general, a lender is unwilling to take losses by reducing principal unless the owners of the second mortgage on a home also take a hit. For banks that own the second mortgages, such losses would be huge — something they clearly would prefer not to face up to.
Banks’ unwillingness to take losses on second mortgages may also be holding up so-called short sales, in which a lender agrees to retire a first-mortgage debt by taking the proceeds from the sale of the home, even when the amount is less than the mortgage balance.
The number of Americans who owed more than their homes were worth was virtually nil when the real estate collapse began in mid-2006, but by the third quarter of 2009, an estimated 4.5 million homeowners had reached the critical threshold, with their home’s value dropping below 75 percent of the mortgage balance.
They are stretched, aggrieved and restless. With figures released last week showing that the real estate market was stalling again, their numbers are now projected to climb to a peak of 5.1 million by June — about 10 percent of all Americans with mortgages.
“We’re now at the point of maximum vulnerability,” said Sam Khater, a senior economist with First American CoreLogic, the firm that conducted the recent research. “People’s emotional attachment to their property is melting into the air.”
Suggestions that people would be wise to renege on their home loans are at least a couple of years old, but they are turning into a full-throated barrage. Bloggers were quick to note recently that landlords of an 11,000-unit residential complex in Manhattan showed no hesitation, or shame, in walking away from their deeply underwater investment.
[ . . . ]
It would cost about $745 billion, slightly more than the size of the original 2008 bank bailout, to restore all underwater borrowers to the point where they were breaking even, according to First American.
Using government money to do that would be seen as unfair by many taxpayers, Mr. Barr said. On the other hand, doing nothing about underwater mortgages could encourage more walk-aways, dealing another blow to a fragile economy.
With prices now down by about 30 percent, underwater borrowers fall into two groups. Some have owned their homes for many years and got in trouble because they used the house as a cash machine. Others, like Mr. Koellmann in Miami Beach, made only one mistake: they bought as the boom was cresting.
Guy D. Cecala, publisher of Inside Mortgage Finance magazine, says he does not hear much sympathy from lenders for their underwater customers.
“The banks tell me that a lot of people who are complaining were the ones who refinanced and took all the equity out any time there was any appreciation,” he said. “The banks are damned if they will help.”
David Rosenberg, the chief economist of the investment firm Gluskin Sheff, wrote recently that borrowers were not victims. They “signed contracts, and as adults should also be held accountable,” he wrote.
Of course, this is not necessarily how Wall Street itself behaves, as demonstrated by the case of Stuyvesant Town and Peter Cooper Village. An investment group led by the real estate giant Tishman Speyer recently defaulted on $4.4 billion in debt that it had used to buy the two apartment developments in Manhattan, handing the properties back to the lenders.
Moreover, during the boom, it was the banks that helped drive prices to unrealistic levels by lowering credit standards and unleashing a wave of speculative housing demand.
[ . . . ]
Mr. Koellmann applied last fall to Bank of America for a modification, noting that his income had slipped. But the lender came back a few weeks ago with a plan that added more restrictive terms while keeping the payments about the same.
“That may have been the last straw,” Mr. Koellmann said.
For the truth is that lack of fiscal discipline isn’t the whole, or even the main, source of Europe’s troubles — not even in Greece, whose government was indeed irresponsible (and hid its irresponsibility with creative accounting).
No, the real story behind the euromess lies not in the profligacy of politicians but in the arrogance of elites — specifically, the policy elites who pushed Europe into adopting a single currency well before the continent was ready for such an experiment.
Consider the case of Spain, which on the eve of the crisis appeared to be a model fiscal citizen. Its debts were low — 43 percent of G.D.P. in 2007, compared with 66 percent in Germany. It was running budget surpluses. And it had exemplary bank regulation.
But with its warm weather and beaches, Spain was also the Florida of Europe — and like Florida, it experienced a huge housing boom. The financing for this boom came largely from outside the country: there were giant inflows of capital from the rest of Europe, Germany in particular.
The result was rapid growth combined with significant inflation: between 2000 and 2008, the prices of goods and services produced in Spain rose by 35 percent, compared with a rise of only 10 percent in Germany. Thanks to rising costs, Spanish exports became increasingly uncompetitive, but job growth stayed strong thanks to the housing boom.
Then the bubble burst. Spanish unemployment soared, and the budget went into deep deficit. But the flood of red ink — which was caused partly by the way the slump depressed revenues and partly by emergency spending to limit the slump’s human costs — was a result, not a cause, of Spain’s problems.
(etc. – he claims that the single currency Euro has created the problem – – I don’t agree, but it does mean that some options for currency adjustments are not available to use for fixing the situation as a result of the single currency – my note)
My Notes – Who decided that the value and costs of property, including basic shelter / housing would be at a price far beyond the reach of any real wages made in a year or in five years of a citizen’s efforts?
When was that created and was it by the natural laws of supply and demand at the time or was it constructed with intention?
And, what has it become now / as a natural outgrowth of housing values having exceeded the real income of the majority of our population, along with the uses of mortgages as an asset class to be bought and sold and leveraged against – what do we have now as a result of this huge disparity between income and housing costs?
What happens when banks are allowed to borrow at 0% interest from our Treasury using our money, although they are a bad credit risk in every respect at the time they are allowed to borrow many millions at 72 to 1 (or more) against every dollar of assets they pretend to have? (and at asset valuations they pretend are at a level that was taken before the economic downturn)?
Not only are people walking away from their upside down mortgages, they are also not being employed in any reasonable period of time after being dumped by companies whose only interest was to pad the bottom line for a short period of time to inspire conditional confidence in their stock shares?
What happens when people realize that they are not going to be employed anytime in the next five years, are not going to be able to own another house in their lifetimes, watch their children not have access to a higher education because the money intended for it was returned to them depleted of over 75% of its initial value, and begin to understand the disparity of return on their time and efforts if and when companies do choose to hire them back?
Who was it that decided the next natural progression in the economic foundation of our country would drop manufacturing and replace it with money making money industries? Who decided that it would be a strong, healthy foundation for our economic future? What bunch of ninnies came up with that?
So, now that companies do not have to profit or to be profitable in the primary business model under which their business operates, but simply have to manipulate investment portfolios to their advantage, what real value do those companies (and state budgets and Wall Street firms) have to the employment base, in interactive services and products available to the benefits of our population, and in our longterm financial growth as a nation?
When large corporate and institutional players are the only ones basically manipulating the markets, the stock markets, the commodities markets, the futures and speculative plays marketplaces, and international economies and markets, what actual real values exist for any of the things being traded?
Just as when in 2008, the speculative increase in the oil futures drove prices up to record profits for those speculators and their firms, entire industries across the United States suffered massive losses as they covered the extra costs of those oil prices at the consumer level. But, the entire play was no more than a manipulated construct. It wasn’t the real value of the commodity in any sense but it was passed along to the consumers, including throughout the increased business costs passed along secondarily to consumers.
And, what value do those speculators have and the profits they skimmed off that play when their time, effort, talents, resources, and availability of cash isn’t used for anything productive that enhances the overall economic foundation and future of the United States? It isn’t being used to underwrite alternative energy options, it isn’t the speculators that are inventing something which solves real problems in our communities nor that solves climate change causes nor do those resources make our companies more solvent and more competitive. What good do they do?
When housing mortgages are packaged and sold, then resold and a number of financial products are made based on them, including the credit default swaps, the mortgage insurance products, leverages are made against them in huge loan packages based on their value, then what real value do they have going forward? Are they real? Are they a pretense with no more value than what someone in Wall Street or the backrooms of a banking firm somewhere says that they have? Are they real capital formation, or are they in fact, not worth the paperwork they are printed on? What trade actually exists on them in any solvent form once people across the world in every aspect of our society and financial systems are aware that the values are unfairly being manipulated and don’t exist in the real world?
Trickle down economics is a failed economic policy from the Reagan years and beyond Greenspan’s idea of an unregulated economy – at what point do the Wall Street firms and gigantic banking conglomerates realize the basis of their comparative valuation structures have re-valued real assets somewhere below zero? Why don’t they know that now? Losses that required a loan over $180 Billion dollars for AIG seem to be a clear indication of what that means. As they have tried to sell off assets, which have borne little of their estimated and accounting values – it would indicate the disparity that exists between the real economy, the real values and their perceptions of values? Why does it not tell them anything that makes sense to them in a broader understanding of what they are doing?
To me, it indicates that using a “money making money” basis for our overall economic foundation is not a sound choice, among other things. It also shows me that the integral factors of trading values are manufactured and not real.
Over the course of all these elements put together, it tells me that our economy and our economic growth, our economic foundation, our economic future, it set out over air with no real foundation whatsoever. The basic relationships that should exist to maintain a stable structure of values for the purposes of comparison and realistic values being set to actual assets, values, housing, properties, corporations, loans, loan products or whatever financial instruments does not exist in any actual sense.
It also shows me that the rules do not exist for either the values nor for the plays that can be made with them which makes the system more like a polished poker game of bluffing than a real market or any other monetary concept of actual values.
What happens when those banks, financial firms, investment banks, investment houses, stock brokerages, financial investment funds, insurance companies acting as hedge funds, and other exaggerated examples of financial imprudence get to play by a set of rules which offers large grants, loans and offsets when they are insolvent, defaulting on loans, exemplify a bad credit score and a bad credit risk, whose past behavior indicates bad choices and even tremendous bad judgments and bad plays, insider trades, conflicts of interest and abuse of their fiduciary trust?
What basis of economic growth and what new understanding of fiduciary trust does that become when those same people and institutions are refusing credit to anyone whose credit score resembles what they had when they used and continue to use the American taxpayer’s money and our National Treasury to cover their losses?
(An implicit obligation of the United States means what now?)
– cricketdiane, 02-15-10
I watched as the economic forecasters and analysts continued to say it is all better now, the same way they said in 2008 that we weren’t in a Recession (while not being willing to even use the word in many cases). Either they don’t know what the hell they are doing or they are lying about what they do know. I’m not sure which it is, but to continue paying analysts and advisors whose sole intent is to propagate lies in the name of instilling a falsely founded confidence in a system whose values are distorted, at best – is beyond me to understand.
The economic models that I understand are dimensional and well-founded in larger pictures of integrated values. When the Reagan administration cronies and Republican administration policy makers decided to fudge the numbers throughout statistical data sets that they had to collect and make public by law, it did not change the facts. The unemployment numbers inclusively are not the numbers published by the US Labor Department as a result of the changes made by Republican administrators, however – it didn’t change the facts on the ground in this country. And, since everyone making analyses knows that those employment and unemployment numbers have been divided into unnatural categories of data and statistically manipulated by that division, they should know better than to assume the rate of unemployment is anywhere close to 10% in the United States. Even adding the admitted unemployment figures across every state, yields a figure much higher on any given date and even those do not include those citizens who are in our prisons at the moment, put in mental hospitals for some reason, having to work part-time when they can’t afford to live at that rate, retired by having to go back to work because their pensions have been stolen by Wall Street, and those who have not continued to collect unemployment benefits but are still unemployed. The real loss in consumer buying power can be significant enough that even China knew to put its focus on other markets that don’t include the United States.
Don’t tell me that everything is all okay now – that isn’t even close to the truth.
If nobody can afford to buy a house except those people who “flip houses” – then what is a house really worth?
If 90% of the bread produced goes unsold and into the trash bin, then what is a loaf of bread worth? Is it really worth the $4.29 that is being charged for that loaf of bread?
(everything from my notes on down are my thoughts about it – understandably I still have more questions that are unanswered – I will study it some more.)
To be fair, finance theorists didn’t accept the efficient-market hypothesis merely because it was elegant, convenient and lucrative. They also produced a great deal of statistical evidence, which at first seemed strongly supportive. But this evidence was of an oddly limited form.
Finance economists rarely asked the seemingly obvious (though not easily answered) question of whether asset prices made sense given real-world fundamentals like earnings. Instead, they asked only whether asset prices made sense given other asset prices.
Larry Summers, now the top economic adviser in the Obama administration, once mocked finance professors with a parable about “ketchup economists” who “have shown that two-quart bottles of ketchup invariably sell for exactly twice as much as one-quart bottles of ketchup,” and conclude from this that the ketchup market is perfectly efficient.
But neither this mockery nor more polite critiques from economists like Robert Shiller of Yale had much effect. Finance theorists continued to believe that their models were essentially right, and so did many people making real-world decisions.
Not least among these was Alan Greenspan, who was then the Fed chairman and a long-time supporter of financial deregulation whose rejection of calls to rein in subprime lending or address the ever-inflating housing bubble rested in large part on the belief that modern financial economics had everything under control.
There was a telling moment in 2005, at a conference held to honor Greenspan’s tenure at the Fed. One brave attendee, Raghuram Rajan (of the University of Chicago, surprisingly), presented a paper warning that the financial system was taking on potentially dangerous levels of risk. He was mocked by almost all present — including, by the way, Larry Summers, who dismissed his warnings as “misguided.”
By October of last year, however, Greenspan was admitting that he was in a state of “shocked disbelief,” because “the whole intellectual edifice” had “collapsed.”
Since this collapse of the intellectual edifice was also a collapse of real-world markets, the result was a severe recession — the worst, by many measures, since the Great Depression. What should policy makers do?
Unfortunately, macroeconomics, which should have been providing clear guidance about how to address the slumping economy, was in its own state of disarray.
[Etc. – it is worth reading the whole thing – all 8 pages]
On August 17, someone who wanted to see how the Earth looks from 440 miles away in space downloaded the one-millionth Landsat satellite image scene from a U.S. Geological Survey web site at its Earth Resources Observation and Science (EROS) Center in Sioux Falls, South Dakota. Since the USGS opened its full Landsat archive to user access at no charge last October, the response from across the nation and around the globe has grown exponentially.
“USGS satellite operations and its data archives at EROS enable experts, or any interested member of the public, to see the land objectively with unbiased, consistently calibrated data,” said Secretary of the Interior Ken Salazar. “The historical depth and reliability of these earth observations are vital to scientists and land managers across the country and across the Department of the Interior in projects that range from climate change studies and invasive species surveys to the monitoring of drought and assessment of wildfire damage.”
One development of particular note is that the very oldest data in the archive, dating to over three decades ago, is being downloaded at unprecedented levels – with land-surface change detection emerging as a primary use of Landsat data.
“The opening of the Landsat archive to free, web-based access is like giving a library card for the world’s best library of Earth conditions to everyone in the world,” said Adam Gerrand, Food and Agriculture Organization of the United Nations
Landsat 1 was launched on July 23, 1972, and subsequent Landsat missions have continually acquired land-image data across the globe. Scientists, educators, and the general public use these data for a wide array of activities ranging from supporting disaster relief efforts to making agricultural crop assessments to identifying sites for cell phone towers.