What I’m Reading

I’ve been distracted lately from local blogging by questions of macroeconomic policy, the odds of a double dip and the latest developments in the class war.

The Panic of 1873 and the Causes which Produced It

GAO audit of emergency assistance authorized by the Federal Reserve

Registering the Poor to Vote is Un-American

Registering them to vote is like handing out burglary tools to criminals.

Goodbye to All That: Reflections of a GOP Operative Who Left the Cult

The Profession and the Crisis

What are you reading? Feel free to add your own links in the comments section.

Oakridge

Oakridge, a poor town in Oregon with dreams of becoming a major destination for mountain biking, has found itself in big financial trouble.

[A]ll of Oakridge’s 3,205 residents will shoulder the costs of an unexplained $420,000 hole in the city’s budget, a figure that is sure to grow and that by itself represents nearly half of all the property tax revenue this town takes in each year. The city must borrow $500,000 against future tax revenue just to pay its bills for the next six months, after allowing its bank account to be drained, plummeting from nearly $1.4 million in 2009 to less than $200,000 in June of this year.

“That’s $65,000 a month you’re overdrawing your account,” James Affa, a member of the city’s finance committee and a vocal critic of [city administrator Gordon] Zimmerman, said at a recent council meeting. “This is an incredible amount of money.”
[…]
It’s not just a bookkeeping issue when a town of this size and in these economic straits winds up short $420,000 — or more. The city is investigating whether to raise water rates to help close the fiscal gap, to the outrage of residents who have literally screamed at city officials in recent meetings that they can’t afford rate increases when Social Security hasn’t seen a cost-of-living increase in three years.

The shortfall developed on the watch of a city administrator who admits he should have done things differently. He has not resigned, and Oakridge residents have initiated a recall process against the town’s mayor and three city councilors who refuse to fire him. The recall election will be held next month.

No matter the outcome, residents will probably not find out what happened to the money. There are too many gaps and discrepancies in the information even to finish the 2008-9 audit.

RI City Filing Bankruptcy

A friend sent me this link to an article about Central Falls, RI, which has the motto, “A City with a Bright Future”.

CENTRAL FALLS, R.I. — The city of Central Falls, Rhode Island — one of a handful of U.S. cities and counties facing fiscal collapse in the wake of the economic recession — has filed for bankruptcy.

The Chapter 9 bankruptcy filing marks a symbolic blow as state and local governments struggle to pull themselves out of the recession.

The smallest city in the smallest U.S. state made the filing Monday as it grappled with an $80 million unfunded pension and retiree health benefit liability that is nearly quadruple its annual budget of $17 million.

My friend asked whether this was a sign of things to come for the Land of Opportunity and Innovation™.

Before I take a crack at it, let me tell you about delving into Comprehensive Annual Financial Reports (CAFRs). (FY2003-2010 are available online at the City of DeKalb’s Downloads page.) Right now I’m contemplating such questions as:

“Is it really a capital asset if you can’t sell it?” and

“What does it say about us that TIF property taxes are our No. 2 revenue producer?” and

“If this is audited, why am I finding mistakes?” Continue reading RI City Filing Bankruptcy

CSA

I have been reading the official Confederate States of America government website. From the FAQs:

President Davis and Secretary of State Benjamin both refused to surrender the Government of the C.S.A. and thus no surrender ever occurred and no Peace Treaty was ever signed. Thus a state of war, declared upon the South by Abraham Lincoln, still persists resulting in continued occupation and reconstruction by the military, civil, economic and judicial powers of the Federal Union.

The solution is pretty straightforward: a) get yourselves recognized as a sovereign nation, then b) get your treaty.

And guess who is choosing not to break U.S. federal law?

8. Confederate States registered citizenship shall be granted without regard to race. There shall be no special status, classification, privilege or grouping of any individual based upon race, nor shall hyphenated names be used as a descriptive substitute for proper names of racial groups.

Yeah, especially when the “substitute” is descriptive of a unique and thriving culture that has outlived CSA by 145 years and counting.

58 Banks Closed So Far in 2011

There have been 58 bank closures through July 22, five of them in Illinois, including one in St. Charles.

Daily Markets looks at the current climate.

Looking back, there were 157 bank failures in 2010, 140 in 2009 and 25 in 2008.

While the financials of bigger banks have been stabilizing on the back of an economic recovery, many smaller banks are still struggling to survive. Nagging issues like rock-bottom home prices along with still-high loan defaults and unemployment levels continue to trouble such institutions.

Lingering effects of the financial crisis continue to weigh on many banks. It becomes a prerequisite for such banks to absorb bad loans offered during the credit explosion, making them susceptible to severe problems. The uncertain environment is aggravating the risk of bank failures even further.

Failures were expected to peak in 2010, and it looks like the numbers are on track for fewer failures in 2011, but it won’t be a precipitous fall.

Must Read: How Goldman Sachs Created the Food Crisis

Frederick Kaufman explains how our daily bread has become fodder for Wall Street speculators, at Foreign Policy.com.

Since the bursting of the tech bubble in 2000, there has been a 50-fold increase in dollars invested in commodity index funds. To put the phenomenon in real terms: In 2003, the commodities futures market still totaled a sleepy $13 billion. But when the global financial crisis sent investors running scared in early 2008, and as dollars, pounds, and euros evaded investor confidence, commodities — including food — seemed like the last, best place for hedge, pension, and sovereign wealth funds to park their cash. “You had people who had no clue what commodities were all about suddenly buying commodities,” an analyst from the United States Department of Agriculture told me. In the first 55 days of 2008, speculators poured $55 billion into commodity markets, and by July, $318 billion was roiling the markets. Food inflation has remained steady since.

The money flowed, and the bankers were ready with a sparkling new casino of food derivatives.

Major Abraham Lincoln Event, February 11th

LOCKPORT and WORLD RECORD ATTEMPT

The City of Lockport and The Gaylord Building, a historic site of the National Trust for Historic Preservation, will take part in a world record attempt on Friday, February 11, 2011 to help kick off nation’s Civil War Sesquicentennial.

People of all ages are invited to help The Gaylord Building and the City of Lockport take part in a Guinness World Record™ attempt as part of the national commencement of the 150th anniversary of the American Civil War.
Continue reading Major Abraham Lincoln Event, February 11th

Bank Troubles 2010

The Washington Post reports that 2010 brought the largest number of bank failures since 1992.

The total comes to 157 this year, the most since the savings & loan crisis. The Federal Insurance Deposit Corporation (FDIC) lists 16 Illinois banks with 2010 closure dates.

The list of failed institutions at the FDIC is filled with community banks that would not be considered “too big to fail.”

The loans that brought them down were predominantly commercial loans, Hernandez said, which sets them apart from the banking giants whose problems were rooted in home mortgages.

About half of the the 2010 failures involved banks headquartered in four states: California, Florida, Georgia and Illinois.

Bank financial strength, like employment, reportedly lags other indicators of economic recovery. Experts quoted in the WaPo article see 2010 as getting us “over the hump” and predict fewer bank failures for 2011.

However, FDIC reports that 860 banks in the U.S. were on a “problem bank” watch list as of the end of September and that historically, about 20% of problem banks fail (which would be 172, but not all would close in 2011, presumably). FDIC does not publish the watch list.

The bank regulatory roles of FDIC, Office of the Currency Comptroller (OCC) and Office of Thrift Supervision (OTS) were summarized in a previous CB posting.

OCC local enforcement actions in 2010:

Resource Bank: Comptroller of the Currency “found unsafe and unsound banking practices relating to credit administration at the Bank” and the February Agreement specifies actions to be taken in regards to commercial loan risk management.

Castle Bank: The Agreement imposed June 2009, which addresses a half-dozen areas of practices deemed unacceptable by OCC, was terminated November 1 as a result of the merger of the institution with First National Bank of Omaha.