LyrArc Article Gist
The turnaround at Ford Motor Company described in Detroit News reporter Bryce Hoffman's book "American Icon: Alan Mulally and the Fight to Save Ford Motor Company."

LyrArc Article Gist
The FDIC chairman, Mr. Gruenberg has defined the agency's strategy under the "orderly liquidation authority" given by the Dodd-Frank legislation to deal with financial firm failures. The Lehman Brothers collapse ruffled fianncial markets worldwide because of the lack of such authority and a organzed well defined plan to deal with bank failures. Gruenberg described the plans to the WSJ. Once the Treasury Department and federal agencies agree that a financial institution has to be taken over, the FDIC would first unwind the parent holding compay of the firm by putting it in receivership and revoking its charter. Unlike the situation for Lehman, the firm's subsidiaries can continue to operate, with financial support from the FDIC held parent company provided by the U.S. government under Dodd-Frank legislation. The next step would be for FDIC to create a "bridge company," with most of the firm's assets going into it. At that point equity holders would be wiped out and a debt for equity swap would be made with creditors. The firm would come out of this process as with a Chapter 11 bankrupcy, as a new recapitalized private firm. The FDIC is trying to build credibility in the markets that it has the ability to do this smoothly, and Gruenberg admits that till it happens its hard to convince markets in a decisive way. Another problem is that 85% of the international assets and derivatives of top U.S. banks are in the UK. Former Fed chairman Volcker is guiding the FDIC, and he sees the FDIC's efforts to work closely with the UK very favorably. These efforts are significant and vital to avoid the worldwide disruption in financial markets that ocurred after the Lehman collapse, and provide a well planned action plan in place of an ad hoc day by day response....

LyrArc Article Gist
White House visitors database shows lobbyists have frequent access to the White House. On one January day, Jan. 17, 2012, lobbyists came with the CEO's of their companies to 1600 Pennsylvania Avenue at 9 am for roundtable with President Obama. The CEO's are on the president's Jobs Concil. At 1 pm representatives from the meat industry arrive. And at 4 pm a lobbyist from Goldman Sachs comes for a meeting with Alan Krueger, chairman of the Council of Economic Advisors. Its a fairly routine day.

LyrArc Article Gist
Spain will allow a European banking supervisory authority to visit banks and exercize financial supervision over banks receiving aid from the EFSF, the EU rescue fund. In addition investors including small retail investors will have to take losses to reduce the loans required to recapitalize Spanish banks.

LyrArc Article Gist
The NASDAQ index reached 5000 by April 2015, a level reached in the stock market boom in 2000. Yet investment strategists who were wary of the stock market in the period before the 2000-2002 collapse of the market see this market differently. The NASDAQ itself is not what it was in 2000, with the 2015 NASDAQ component stocks being different for the most part, and the healthcare and other sectors better represented in the index. Only three of the stocks in the top ten in 2000 are in the top ten today, including Microsoft. The S&P 500 trades in April 2015 at 18.5 times its company earnings for the past 12 months, compared to an historical average of 15.5, according to research firm Bespoke. A big part of the difference today is the investment climate of low inflation, which gives the U.S. Federal Reserve flexibility in raising rates. Low rates make bonds with lower yields less attractive, and increase the present value of future earnings. The yield of the 10 year U.S. Treasury was 1.917% on April 25, 2015. In April 2000 it was 6%, and in mid 2007 it was 5.3% before the financial crisis in the two periods. James Paulsen, chief investment strategist at Wells Capital Management oversees $347 billion in fund investments. He also was wary of the U.S. stock market in 1999, yet he does not see the similiar kind of risks today, and sees a long term bullish trend. The scenario he envisages is more of a pause or temporary decline. Paulsen has shifted money to European markets, as U.S. stocks are becoming more expensive relative to their European counterparts, a strategy that is being followed by other money managers since 2014. Higher price volatility is seen in the markets in 2015, with the S&P 500 up 2.9% for the first four months of 2015, and the Dow up 1.4%. ...

LyrArc Article Gist
In a program of gradual change the new leadership under premier Li Keqiang steers China's economy in the new direction set by the DRC Report: China 2030 and the Third Plenum in Nov. 2013. New priorities listed under major Tasks in the annual work report by Li Keqiang place setting up deposit insurance at the top of the list. Policy changes include allowing cities to issue bonds directly to increase transparency in construction spending and control burgeoning debt.

LyrArc Article Gist
Einsinger points out that Treasury Geithner's performance reflects the mindset of U.S. president Obama, reflected also in Obama's other appointments in his administration which favored one group over another. Change that Obama talked about in the 2008 election campaign that propelled his candidacy, turned out to be more at the margins than change and action that reflected a vision of the priorities for America's middle class and vast majority of average Americans. By leaving homeowners to a wave of foreclosures, the administration weakened a middle class at the lower end already hit by the lower wages from globalization in manufacturing, other changes in the global economy, high levels of student debt of over $1 trillion, and the lasting damage to unemployment from the global financial crisis.

LyrArc Article Gist
The approach of the new Jinping-Keqiang administration to tackle the problem of surging credit growth, with poor quality lending in China's shadow banking system leading to problems of hidden debt and unknown quantity of loans in default. The central bank tightens credit in June 2013 sending a signal to lenders including small and medium sized banks and Trust companies in the shadow banking system that the government will let them default- that they are essentally on their own if they do not follow prudent financial practices.

LyrArc Article Gist
According to a report from China's Environment Ministry for the first half of 2013, only 4 cities met the acceptable air quality standards. The national grade 2 standard in China is for 35 micrograms per cubic meter for levels of airborne particulate matter smaller than 2.5 micrograms in diameter. WHO standard is for 25 micrograms per cubic meter in a 24 hour period. The 4 cities with acceptable air qualty out of 74 cities monitored by the Environment Ministry are Lhasa in Tibet, island city Haikou, coastal town Zhoushan, and Pearl River Delta city of Huizhou.

LyrArc Article Gist
Meet Victor Brown, one of the remaining 450 workers at Buick City, GM's sprawling plants in Flint, where in the 1980's 27,000 workers built GM cars. Victor Brown of Clio, Michigan, and O.C. Cooper do not want to leave, and have repeatedly turned down buyout offers from GM preferring to stay with GM even if it enters bankruptcy, and take their chances. Since 2006, GM has persuaded 60,000 of its hourly employees- about half of the total hourly workforce at GM in the USA- to take cash buyouts and leave. Cooper says, this is the only life he knows, he is 64, a machine operator at Flint North, a run down engine plant in Flint, Michigan. Every day for the 42 years he has worked here, he gets up, washes up, and drives to the plant. He can't imagine anything else. If he leaves he will give up $60,000, for apension half that amount, with no guarantee that its secure after a GM bankruptcy. Victor Brown is 55, a repairman with 36 years at GM, he is divorced and putting a son through college. A year ago he and others turned down a buyout offer for $62,500 to retire with all benefits, now this is down to $20,000, and a car voucher for $25,000. GM needs an additional 21,000 jobs to be cut and closing of 13 plants in its latest restructuring under help and supervision from the Obama administration. ...

LyrArc Article Gist
The FDIC acknowledges that it has not been able to get banks interested in a pilot program called the Legacy Loans Program. That program was designed to give the banks an opportunity to sell off $1 billion of troubled mortgages. Since November with the efforts of the Troubled Asset Program under Secretary Paulson to have the banks sell off these assets in an auction or some other way, the whole issue of getting the toxic or troubled assets off the books of the banks has been effectively shelved. The Obama administration's version of this was the Geithner Public Private Partnership program, but this like Paulson's TARP never really got off the ground. Instead several things have happened that have enabled banks to show higher profits and improve stock prices. The period from March 2009 to June 2009, a period of several months has seen bank stock prices recover and banks are now able to raise capital on their own from investors. The government's "stress tests" gave the banks credibility with investors and they were designed not to be so stringent as to affect confidence. The mark to market rule has also been relaxed so that banks are no longer required to show these toxic assets at prices that reflect large losses. Bank executives also are wary of the new executive compensation rules of the government. All of these things have combined to create asituation where some confidence has been restored, but at the same time experts are pointing out that the underlying problems of an estimated $1 trillion in troubled assets remains. Banks are even less likely to want to part with these assets at lower prices now that some semblence of confidence is returning, as they would then have to show large losses. What this implies is that if the economy suffered a setback, these problems would return and be just as intractable as ever....

LyrArc Article Gist
IHS Global Insight estimates that output in the US for the auto industry for 2009 will be 9.5 million vehicles, with capacity of 16.9 milllion vehicles this amounts to 56% capacity utilization number which is very low. Center for Automotive Research estimates that the sales began moving ahead of trend in 1996 and really accelerated after 1998. The easy financing fueled the boom. Now the 16-17 million sales years that were considered normal are seen as inflated and way above the trend. All this suggests that there is a lot of restructuring ahead for the auto industry.

LyrArc Article Gist
A new West Coast Model is emerging with ballot measures in the states of Washington, California and Oregon. The model is to make up for decades of faulty income distribution which favored tech communities in west coast states leaving behind people from minority communities and the working class outside tech hubs such as San Francisco, San Jose and Seattle. During this period budgets for education and healthcare, social services and essential infrastructure suffered as budgets were squeezed for local governments. Minimum wage also lagged behind and communities struggled to keep up. Washington votes for a ballot measure that raises the minimum wage to $13.25 statewide and mandate paid sick leave for workers. In California a ballot measure makes permanent an income tax surcharge on millionaires to use these funds for education. In Oregon measure 97 places a gross receipts tax on corporations with annual sales in Oregon over $25 million, raising $3 billion a year for schools, health care and other programs. The California and Washington measures are likely to pass, Oregon uncertain, say experts. And even in Oregon supporters have learned from the experience to put forward new proposals on the ballot. The Washington measure is supported by Nick Hanauer, and Zach Silk, president of Civic Ventures in Seattle, who say it is essential to put more money in workers wages to increase growth and to bring better lives outside the tech hub areas. Most of the tech booms of the last two decades have not touched the areas outside tech hub metropolitan areas. The conservative approach adopted in Louisiana and Kansas of reducing taxes first and then when holes in state budgets developed to cut education, health and other service expenditures has not worked, and it has led to the backlash in the form of the new West Coast Model, which is expected to be brought up in other states in the east and midwest. The tech hub areas have grown with the boom in tech but this has largely ignored the rural areas, communities just outside of the tech cities, and led to uneven and distorted growth shortchanging the working class and the middle class, and hurting investment in education and healthcare across each state. Bill Whalen, a research fellow at Stanford University's Hoover Institution conservative think tank ,says that its hard to deny that the balanced growth for all communities across the state has lagged far behind as the tech booms boosted growth in the economies of California, Oregon and Washington. An article in the German online site Zeit on Silicon Valley described this vividly showing how this can happen in communities sitting side by side in the San Jose area, with minority Hispanic communities and working class communties seeing very little of the benefits of growth. ...

LyrArc Article Gist
The truth is very different from the rhetoric coming from the Obama administration about helping Main Street America and ordinary workers against "fat-cat bankers," says Goldfarb. Under the Obama administration banks have grown larger and gained more influence over administration decisions. No conditions were made part of the agreement that would require banks to lend a portion of the money handed out to the banks to ordinary borrowers. And not much of significance was done to help homeowners under water, which would enable a faster recovery. In this respect the policies slanted in favor of banks of the Obama administration worsened the prospects of an economic recovery. Experts from Reagan advisor Martin Feldstein- who as early as 2008 advocated serious help to homeowners under water to reduce principal and interest- to the FDIC's Sheila Bair and Princeton Prof. Krugman, across the ideological spectrum, perceived this being in the national interest. Feldstein's first op-ed on his plan appeared in the Wall Street Journal on 3/7/2008, followed by ones on 4/15/2008, 10/4/2008, 1/20/2010/ 10/12/2011 in WSJ, and a oped on 10/30/2008 in the Washington Post, repeating the call for siginificant debt reduction to homeowners. Banks had extraordinary influence on successive administrations in the U.S., both Republican and Democratic- the Clinton, Bush and Obama administrations- so that policy actions could be distorted from what would otherwise take place. A study by two University of Michigan professors shows that banks did not increase lending after receiving government money. Instead taxpayer money was used to invest in risky securities for profits from short term price movements, resulting in gains of about 10% in investment returns. Ran Duchin, one of the two professors, says helping ordinary borrowers was not the most profitable use of capital for banks. Without the necessary conditions from the Obama administration, the banks depolyed capital in ways that did not help the economy. Similiarly when banks needed to be restructured no preparatory action was taken because of resistance within the administration- a request by President Obama to Treasury Secretary Geithner for preparing a plan for the restructuring of Citigroup was ignored, according to a report by Goldfarb and Wallsten on 9/17/2011 in the Washington Post....

LyrArc Article Gist
Peters and Wessel provide profiles of middle aged American men in 2014- as tech workers out of jobs as technology shifts and worker skills fall behind, younger men with masters degrees in fields such as public administration where it is hard to find jobs and workers lack retraining, and other men who lost jobs from globalization or the 2009 economic crisis. About one in 6 working age American men 25-54 are without jobs- about 10.4 million. Of this group two thirds are not looking for work either because they cannot find decent paying jobs or are too discouraged looking for work, and are not counted in the unemployment rate calculated by the Labor Department. About three quarters of the working age men not working have only a high school education compared to 55% with jobs. Wages for highschool dropouts have declined by 25% since the 1970's, and 15% for those without a college degree but having a high school diploma- some of these men are going back to school, others lacking retraining are too discouraged to look for work and depending on a spouse or government benefits. It is these people U.S. Fed chairpersons Ben Bernanke and Janet Yellen have in mind as they shape Fed policies since 2009 to not leave them behind....

LyrArc Article Gist
Efforts to boost the share of national income that goes to rural households and workers in China. The share of income taken by state owned enteprises and taxes paid by the enterprises would have to change for reducing the gap in incomes and reducing inequality in China.

LyrArc Article Gist
A shift in priorities away from focussing on high growth to lower sustainable growth was announced by China's premier Wen Jiabao at the National People's Congress, China's parliament, in March 2012. This shift will reduce investment in infrastructure, power generation and exports, which will affect the level of imports of commodities from commodity producing nations in the Middle East, Australia, Canada and Brazil. It should increase imports of software, computers, entertainment, tourism and high tech goods from the U.S. and Europe. Chinese leaders have said they would make this kind of shift for some years now but growth has consistently increased more than the target rate, and domestic consumption as a percentage of the economy has actually decreased in the last decade. Now 9-10% growth rates may be a thing of the past and the target of 7.5% set this year may be actually closer to the real figure. The Chinese leaders have belatedly realized the need to make these changes now because slowing markets in Europe -which is seeing declining growth and high unemployment- and in the U.S., make the issue impossible to avoid. Wen told the Congress: "Accelerating the transformation of the pattern of economc development... is both a long term task and our most pressing task at present... Domestically it has become more urgent but also more difficult... to alleviate the problem of unbalanced, uncoordinated and unsustainable development." This is his way of saying that its unavoidable and better to start in earnest now, and at the same time recognizing the resistance to change from the stateowned companies and the other interests who have benefitted from surging growth, and now occupy a central role in the power structure. An opinion article in the People's Daily, China's official newspaper, said: "imperfect reforms are to be preferred to a crisis caused by no reforms." The World Bank's president Zoellick is respected by the Chinese leaders. He also urged them to make changes now. The recent report of the DRC, China's planning research arm, and the World Bank, also laid out the new direction away from a focus on infrastructure to domestic consumption. The fear is sudden deceleration in the absence of policy action. The impact of this will be negative for commodities over time, leading to slower growth in Australia, Brazil, and Canada. It should boost imports from Europe and the U.S. of high tech, consumer, pharmaceutical goods over time....

LyrArc Article Gist
Arvind Panagriya, Prof. of Economics at Columbia University, points out the key initiatives of the Modi government in its first four years which will show results in future years for development of the country.  He mentions the Swachh Bharat Mission and cites results that show rural households with toilets are now 84% up from 38%.  By 2019 the whole country will be defecation zone free on the 100th anniversary of the birth of Mahatma Gandhi. The Dhan Jan Yojana DJY accounts opened for rural households are up to 316 million. Aadhar cards for identification are up from 650 million to 1.2 billion. The Aadhar and DJY work together to enable direct transfer of benefits to poor households, eliminating the leaks in benefits transfer and ghost accounts of the period since independence in 1947. Not mentioned by Panagriya is the Health Insurance scheme for lower income households that enable families to survive a sudden medical expense that could put them in dire straits.  These efforts work in a way to change India from the ground up from its villages and rural areas as envisioned by Mahatma Gandhi in the struggle for independence. The land acquisition law amendments were put on hold till farmers concerns could be better accomodated, an area of concern for industrial development cited in an editorial in the Hindu newspaper. Fiscal consolidation and inflation targeting have resulted in an average inflation rate of 4.3% for the 4 years of the Modi government. Inflation was over 9% in the last 2 years of the previous Congress UPA government with GDP growth dropping to 5.9% for the last two years. Average GDP growth for four years for the Modi government is 7.3%, even after the changes to implement GST taxation for one national tax eliminating state barriers in interstate commerce and demonetization to fight corruption and black money. Rate of GDP growth should be higher after the gains from the initiatives and the new GST integration of the country are felt, with increase in investment and FDI, after infrastructure improvements and land acquisition arrangements are made. Transportation infrastructure modernization initiative pushes ahead with the first bullet train in the pilot project for Ahmedabad- Mumbai set to start in 2022. This is a $17 billion project financed for $13 billion by the Japanese government at 0.1% loan for 50 years, moratorium on repayments for 20 years, using E5 Shinkansen series technology. Implementation of this project on a sound financial basis should lead to transformation of the Indian rail network, raising the level of technology implementation across the entire Indian rail system. Such an achievement would rival the first introduction of railways into India in the nineteenth century under the British. A new bankruptcy law is intended to free up capital for investment by putting behind the large number of non performing loans in the Indian banking system. Changes made by the central bank RBI are designed to speed up this process so that loss making enterprises are absorbed, consolidated or shut down, a legacy from the earlier period.     ...

LyrArc Article Gist
Chrysler reported second quarter 2012 income of $436 million, compared with a loss of $370 million in the prior year quarter. The prior year quarter included charges for repaying U.S. government loans. First quarter 2012 income was $473 million. Fiat reported a loss of 246 million euros for the second quarter 2012. The combined operations Fiat-Chrysler reported aloss of 103 million euros. This shows how the effort by Sergio Marchionne to takeover Chrysler and turn it around have proved to be a very successful move for Fiat. With a relatively small investment Fiat is now a majority owner of Chrysler having invested mainly its management knowhow and leadership.

LyrArc Article Gist
Izzo looks at the diverging picture presented by two Labor Department surveys of unemployment in the U.S. for July 2012- an increase of 163,000 jobs or 195,000 fewer people working. One, the Household Survey is based on survey of individual households counts people and the other the Establishment Survey based on a survey of employers counts jobs. If one person holds two jobs he would be counted twice in the Establishment Survey and once in the Household Survey. If a person is a unincorporated self employed person, a family employee who isn't paid, a farm worker who is employed but not paid he is counted in the Household Survey, but left out in the Establishment Survey. The Labor Department prepares a third measure of the number of people working by adjusting for multple jobholders and for workers not counted in the survey of businesses. By this third measure the U.S. economy added 108,000 jobs in July, which is far less than the 163,000 jobs shown added in the Establishment Survey. Because of the increase in parttime work it is likely that more people are doing multiple jobs which may explain some of this difference. Another reason could be the severe drought in the U.S. that may be reducing the opportunities for work for freelance construction maintenance and day laborers because of restrictions on water use. This shows that it takes several months of data to get some sense of where unemployment is headed, adjusting the numbers for unusual events or weather, and looking behind the numbers to the sectors generating jobs. In the first quarter of 2012 more jobs were generated in the U.S. because of a mild winter, followed by fewer jobs in the second quarter, which required looking at the two quarters together to get a better picture. Adjusting for the long term unemployed who have quit looking is also necessary to get a correct reading of U.S. unemployment levels....

LyrArc Article Gist
Jon Huntsman, Republican candidate for President in 2012, calls for a fee on banks with a size that is above a certain percentage of the GDP. This would cover the cost banks impose on taxpayers when they are bailed out. It would eliminate the advantage banks gain from "too-big-to-fail," a subsidy Huntsman estimates to be one half percentage point in today's market. He points to efforts by the UK and Switzerland for more stringent financial standards than the U.S.

LyrArc Article Gist
Declining manufacturing wages in the U.S. and the return of manufacturing jobs. Indiana's experience with new manufacturing plants.