(News) Catholic Church: a faith and institution in crisis?

(News) Eurozone Crisis: Misery As Usual

(Opinion) AIG Lawsuit: A Lot of Nerve

 It is safe to say that financial institutions worldwide are not the most popular institutions in the current climate and AIG’s shocking consideration of a law suit against the US government is a key case study of why. AIG were over a barrel in 2008 when left to hold one the largest bags in the history of financial speculation after insuring risky loans against default thought to be of triple A value in the US housing market  forcing the US government  to bail the insurance company out. The situation was so bad that government officials “feared its collapse would wreck the financial system”[1].

AIG received the most cash out of all the companies that were bailed out in 2008 making even considering joining a lawsuit filed by its former chief executive Maurice Greenberg reprehensible. The reaction to AIG considering joining the lawsuit has been met with both shock and anger by taxpayers and Washington with  congressmen Peter Welch (D-Vt) and Michael Capuano (D-Mass) incensed enough to send a stern letter to AIG chairman Robert Miller telling him “don’t even think about it”[2]. The letter continued in admonishing the company stating that:

“Taxpayers are still furious that they rescued a company whose own conduct brought it down. Don’t rub salt in the wounds with yet another reckless decision that is on par with the reckless decision that led to the bailout in the first place.”[3]

Robert Reich shared his view through his twitter account and posited that AIG should be sued “for stupidity”[4]. While there is no doubt that there are grounds for such a lawsuit, the greater charge that should be made against the insurance company is greed and ingratitude. The company was in dire straits when the government stepped in and rescued it from the ineptitude of its own management and insurance policy.

There was protests in the streets at the time when AIG where bailed out and the ill will garnered from this has not gone away making AIG’s pondering over the lawsuit even worse.  AIG has revealed that it has ‘three options’ but in reality it only has one, rebuff the temptation to join its former employee in suing the government that saved it from ruin and gave it enough time to return to profitability or face a future of a hostile public and government should it ever get in trouble again,   

In sum, AIG was not the most popular financial giant in the land of the home and the brave to say the least before this story and certainly won’t after it as it risks drawing the ire of both the public and the government in one stroke.

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[1] Guardian.co.uk, 2013, AIG considers joining lawsuit against US  government over $182bn bailout, http://www.guardian.co.uk/business/2013/jan/09/aig-lawsuit-us-government-bailout

[2] Quoted by Fox News,2013, Lawmakers outraged after AIG announces potential suit against US over bailout, http://www.foxnews.com/politics/2013/01/09/lawmakers-outraged-after-aig-announces-it-is-weighing-joining-suit-against-us/

[3] Ibid

[4] Ibid

(Video) Predatory Lending: Why Bankers Rival Congressmen In Hate

The Young Turks give their take on a predatory lending story where bankers reveal what they really think about the people they predatory mortgage loans to.

(Opinion) Auto Loans: A crisis in waiting?

You would have thought the events of the last five years would have taught banks (Ok, not so much) rating agencies and insurance companies that dabbling in subprime loan debt is an unwise decision to say the least, but with the news of the boom in sub-prime auto loans, not much has been heeded. 

 Auto loan lenders, apparently not privy to the cause of the crisis five years ago are dropping barriers in the way of borrowers with bad credit reports taking on debt to buy cars to the chagrin of analysts and the joy of car dealers[1]. This may be a key factor in the current recovery and growth of the auto industry as there is, thanks to subprime auto loans, “more demand for new cars and more money available to finance them”[2] .

However these loans are toxic as dealers who sell them have an almost non-existent moral incentive to tell the truth about what they’re selling with lenders predicting that “auto loan delinquencies will go up”[3] . The current Boom in Subprime auto loans and the auto industry is largely down to the fundamental problems at the crux of why the crisis happened in the first have not really been addressed.  This is because these problems are more historic than they are financial or even economic.

Wages for ordinary people have been on the decline for the last 30 years which saw an explosion in credit as a response to their wages failing to cover expenses (rent, food, holiday etc). the bottom fell out of this process in 2007 when deals made by American banks went bad leaving the global economy has been reeling ever since as politicians have spent more time trying to shore up the financial system than solve the main problem, the lack of well-paying jobs and the less than honest business ethics of credit card and loan providers.  

The effects of defaulting on Auto loans are damaging as it can seriously affect credit history of borrowers, their ability to get loans in the future, and the car bought with the loan can be repossessed as the car is usually considered ‘collateral’[4]. Most people who have taken out auto loans are likely to be subject to the consequences of default as “more than half of… (Auto loans) default” due to astronomical interest rates[5]

However there appear to be some good news as Marketwatch reported a drop in May this year was the “lowest in its (the Auto loan default rate) 8+ year history” with another decrease a month later[6].

In sum, while the subprime auto loan market may be booming and the rate of default declining slightly, the systemic problems that underlined the 2007-2008 crisis still exists and can send the auto loan default into record figures of debt at any time as families still find it hard to cover expenses without credit and the job market offering jobs that are weak in wage and benefits. Lenders have not learned from the mistakes of 2007-2008 but , hopefully, for their sakes, they do not get a second lesson.

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[1] M C. White, 2012, Is Subprime Lending Fueling the Auto Surge?,

 http://moneyland.time.com/2012/07/12/is-subprime-lending-fueling-the-auto-surge/

[2] Ibid

[3] Ibid

[4] Carsdirect.com, 2009 Defaulting on a car loan: the effects of Car Loan Default, http://www.carsdirect.com/auto-loans/what-happens-if-you-default-on-a-car-loan

[5] L. Picker, 2012, Why subprime Auto loans default,

http://www.nber.org/digest/dec07/w13067.html

[6] Marketwatch, 2012, ConsumerCredit Default Rates Decreased for the Sixth Consecutive Month According to the S&P/Experian Credit Default Indices,

http://www.marketwatch.com/story/consumer-credit-default-rates-decreased-for-the-sixth-consecutive-month-according-to-the-spexperian-credit-default-indices-2012-07-17

(Opinion) ‘Innocence of Muslims’ film controversy: more an affront to cinema than Islam

After watching the innocence of Muslims’ extended trailer you can come to number of conclusion but two will probably be most among them, firstly, it is as offensive as it is poorly executed, and secondly, surprise that such a silly attempt at hateful propaganda lead to the death  of U.S ambassador to Libya, J. Christopher Steven. While the film is insulting to Islam and its prophet as it depicts Muhammad as a barbaric idiot, it is more of an insult to cinema as a medium.

Why such awful film from the writing, directing , acting and production of such flagrant propaganda even got made or any backing goes to show that there no such thing as merit in the movie industry when a real estate developer who reckons himself the next Leni Riefenstahl can even helm a movie.

The trailer itself reveals quite quickly that the director has no type of skill or taste for dialogue or comedy as this comes off at a very bad attempt  to imitate the Monty Python’s classic send up of the story of Jesus ‘the life of Brian’. The comedy in the piece is unfunny and thus comes off as offensive as characters run totally off script into ignoble tirades about the prophet Muhammad and his supposed penchant women and girls.

The fact that followers of Islam saw this film as an affront to their faith and their prophet says a lot more about followers of the faith than the trailer in question. This film is affront to good taste and valuable time not the prophet Muhammad as the only question after watching the trailer is that if this film had a $5 million budget, why backers of this film aren’t asking for their 4,999,999 back.

In sum, The Innocence of Muslims is no affront to Islam or its prophet as it is more of an affront to cinema as a medium. The only travesty is that this film ever got made and its release led to the death of a human being. The death of  J. Christopher Steven says more about certain followers of the faith that such a silly film should inspire such outrage as there have been releases of films about other faiths that have been much more libellous and insulting that this one which serves to buffer the divisive argument (the central argument in the trailer) that Islam is not a religion of peace.

   

(Opinion) Tesla Motors: Revenge of the electric car?

On the poster for revenge of the electric car it has the tagline 'its alive’, well, looking at Tesla motors progression since the release, the tagline should be ‘just barely’. In the film, we are given a glimpse behind the scenes of a revolution led by battle hardened money men, rich dewy eyed idealists and small entrepreneurs invested in the future as all parties involved are the quest to make the electric car viable. 

Through the course of the movie we witness the struggles of getting the cars to market with product malfunctions and the price to make the product compared to expected market price being too close for comfort, production and distribution issues and near bankruptcy in all in the name of the electric car. 

At the end of the movie however, it defaults to the standard Hollywood story arc where the protagonists end the story on a high with Tesla motors successfully (I use this word lightly) floating on the stock exchange in a bid to raise capital after production and distribution issues had pushed Tesla Motors' CEO Elon Musks' vast resources to the limit.

However the progression of Tesla Motors since the October release of the film has been worrying to say the least.  The company has not made any profit but suffers tremendous losses with the recent reports of tesla’s losses shooting up to 79% in the second quarter[1]. It has recently has its’ stock fall 3.6 percent with news of a stock analyst downgrading Tesla Motors rating from ‘hold’ to ‘sell’[2].Yet despite the bleak indicators, the company still remains optimistic.

Elon Musk publicly predicted that by 2032, “half of all new cars sold would be plug-in electric cars”,  dwarfing president Obama realistic goal of 1 million by 2015 considering less than 100,000 plug-in cars will be new cars globally in at the end of this year (3) . This prediction seems like the classic ruse entrepreneurs play on themselves to take their mind off the tough times of the present as Steve jobs did it, Ford did it, so Elon Musk taking a page out of their book is to be expected.

Tesla are not alone in its recent woes as it hasn’t been a great year for American carmakers GM, Ford and Chysler in general as their one of its competitors, Toyota managed more second quarter earnings than the big three ‘combined’[4].  However there has been a slight upturn for as tesla’s shares have grown with the news that Tesla will meet its projected production levels  [5].

In sum, Tesla Motors has been victim of the fact that they belong two industries with one in slight decline and one trying to establish it viability despite crushing indicators. Yet despite this, the company remains optimistic with an eye firmly placed far in to the future, which serves as positive sign that everybody at Tesla look set to make it’s CEO right, and more importantly, rich.

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[1] D. R. Baker, 2012, Tesla Motors’ Losses Jump 79 percent, http://www.sfgate.com/business/article/Tesla-Motors-losses-jump-79-percent-3735511.php

[2] H. Dudar, 2012, Tesla Falls After Analyst Downgrades Rating To Sell, http://www.bloomberg.com/news/2012-07-18/tesla-falls-after-analyst-downgrades-rating-to-sell.html
(3) J. Voelcker, 2012, Elon Musk Bets Half Of All Cars Built In 20312 Will Be Electric, http://idealab.talkingpointsmemo.com/2012/07/elon-musk-bets-half-of-all-cars-built-in-2032-will-be-electric.php

[4] Forbes, 2012, Toyota Outearns The Detroit Carmakers Combined, http://www.forbes.com/sites/michelinemaynard/2012/08/03/toyota-outearns-the-detroit-carmakers-combined/

[5] Bloomberg businessweek, 2012, Tesla shares rise on Model S production numbers, http://www.businessweek.com/ap/2012-08-03/tesla-shares-rise-on-model-s-production-numbers

(Opinion) government inefficiencies bad, Private sector inefficiencies wors

While there have been many failures to lie at the door of government, its failures are nothing compared to the failures of the private sector. For the last 30 year or so, we have been subject to a very successful campaign extolling the vices of government citing horror stories of government waste, failed policies and personal tragedy while at the same time deifying the marketplace.

However the arguments that would have ended pretty quickly any debate on the reform of the marketplace have fallen by the wayside as they have been disproved in the most dramatic fashion. The last five years have confirmed just about every argument made for reform or even the abolishment of the marketplace as the never ending drive for growth has led to the collapse and concentration of banks in a bid to survive the biggest crisis since the great depression.

We have been exposed to the folly and the outright deception of respected financial institutions as they risked their reputations to increase profits and ended up causing market failure on a grand scale. The recent LIBOR scandal involving Barclays is another example of what happens when profit motive is the only motive involved in the market sector, as banks actively shirk their responsibilities to their clients and customers in the pursuit to make money.

While the government cannot escape a large portion of blame for economic difficulties of the five years as it has failed in its task of regulating the activities of Banks as even  regulatory bodies have been subject to widespread logic that dictates that in order for markets to flourish, government intervention must be minimal or avoided altogether.

This logic, despite all the events in the last five years that have damaged its credibility beyond repair, still holds strong among those endowed with the power to craft a new financial regime based on sustainable polices as the world has just found out just how finite the possibilities of the marketplace really are.

This can explain why most of the regulatory reforms are mostly weak and allow banks to use the same practices that caused the collapse in the first place. Regulating the financial system is going even more difficult as banks, due to government forced mergers, have become an even bigger liability than before as if there should be another market failure, the ‘too big to fail’ arguments for government intervention will be untenable.

In sum, the arguments against government agency in the marketplace were part of an effort to glorify the market in the interest of those who sought to benefit from a weak government which has now collapsed under the weight of events of the last five years. Regulating the financial marketplace will be even more difficult as banks have become even more concentrated due to forced mergers. Government official must make reforming the financial system a top priority as due to the banks being concentrated, the taxpayers maybe be able never mind willing to fit the bill.

(Opinion) who would be a middle east president

While being a politician job is far from a walk in the park in any country or region, you would have to be insane to want to be a member of the political class in any country in the middle east of your choice. while the worst a politician can face in the west is the odd protest and chronic voter apathy, his counterpart in hthe middle east are either hound out of office by his fellow citizens or forced out by his own state apparatus.

Now this is not to say that politicians in the middle east have not earned this pressure as they frequent the top 20 of  the transparency corruption index and have either ordered or supported the brutal suppression of their own people.Nevertheless. Pakistan is perfect example of the point made above as Asif Zardari, the remarkably disliked president finds himself disliked a by the majority of Pakistani's, has to suffer the open ambivalence of the security forces and courts towards his presidency, and has a bad relationship with one of Pakistans very few allies anywhere, the united states.

 However some of it has brought upon himself as he has a string of untried corruption cases against his name and is seen as not really addressing any of Pakistan's many problems.With the Pakistani Supreme court reopening a corruption case against Zardari, leading to the president having appoint new prime minster after the last one refused to accept a court order, it adds to the well believed case the judiciary  favors the military over the president.

This dynamic can be seen in many middle eastern countries no better example than Egypt where the judiciary supported the Mubarak and the army positions wholeheartedly explaining the recent judicial dissolution of the constitution and parliament.

In sum, politics can be a dirty business were loyalty is low and apathy and suspicion is high but in the middle east being a politician is a dangerous and for some a deadly proposition.  

(Opinion) Unemployment and the 'Work For Experience scam'

While the coalition government pats itself on the back as 45,000 people found work despite of the well into 2 million people in the Britain who haven't, and the UK economy set to further contract, the future for many Britons looks bleak to say the least. While it was not bed of roses for working people as they saw their debt obligations rise and their wages stagnate or actively decrease, a dignified existence could be maintained, that is until the bottom fell out in 2007.

Now Britons, especially those of the working class variety, find ourselves in the quagmire of excessive competition for limited places and having to work for free which can explain why the stewards used for the Queen's Diamond Jubilee were largely apprentices or unemployed job-seekers.

While some may rush into the debate and see the relationship between apprentices and job-seekers drafted in by companies for free as purely exploitative, they largely haven't experienced job-seeking at the lower end of the labour market where the unemployed have to deal with one of the oldest catch-22s in the labour market; experience.

With their being a shortage of jobs and surplus in available labour, the main factor used to pick a candidate from all the others is experience, as it is rather costly for employers to train new staff and mitigate the likely cost of rookie mistakes.

To deal with this disadvantage, inexperienced or unskilled workers have to take work where they will probably will work for free or work well below the minimum wage. While those who see this relationship as exploitative are right to say so, without such a relationship there will be no way for inexperienced  or unskilled workers to deal with the major disadvantage in the labour market, and employers know it.

Now with their being a major labour surplus, many unemployed jobseekers, especially those who lack experience, have to work for free while companies may say they are working for experience, anyone with sketchy knowledge of  exploitation will see those people are working for free and companies who take advantage of the labour surplus profit.

In conclusion,  while the relationship between companies and inexperienced workers has always been exploitative, it has increasingly, especially due to large unemployment levels, become necessary as workers seek to mitigate one of the biggest barriers to employment.The furore over the stewards who took part in guarding the event were working for free has only revealed a relationship that has existed for decades and, at one point, was about to become a government backed scheme.