California Diminished by 1978 Tax Revolt Shows U.S. in Decline - (www.bloomberg.com) ANOTHER STORY WAY OFF BASE... THIS PROPOSITION HASN'T MORTGAGE THE STATE'S FUTURE, RATHER OUT OF CONTROL GOVERNMENT SPENDING HAS!!.
California voters approved Proposition 13 to rein in property taxes that had doubled in 10 years. More than three decades later, that rebellion has mortgaged the state’s future, saddling it with the nation’s highest debt and lowest credit rating. The measure led to reductions that dropped per-student school spending from seventh to 29th nationally, prompted cities to pursue sprawling retail development to compensate for lost revenue, and pushed the state into budget gridlock, including a $705 million revenue shortfall announced Oct. 10, by requiring two-thirds approval for any tax increase. “Proposition 13 set up an unfair and dysfunctional two- tiered system of property taxes,” said Kevin Starr, a history professor at the University of Southern California and the author of a series of books on the state. “It choked off a source of revenue, and the lack of that revenue has brought California to the edge.”
Are Wall Street Protesters Capable Of Starting A Run On A Too Big To Fail Bank? - (www.businessinsider.com) We hear the cries each day, “the movement is growing”, “this is unstoppable” etc… Some pundits and participants within the OWS movement have even called for the average American to take their money out of big banks and move them to either a credit union or community bank. Could OWS actually cause a run on our banks? For the fun of it, let’s see how feasible this actually would be. Assumption 1: For the sake of example, let’s assume that every single OWS protester or American interested in “sticking it to the big banks” kept their deposits at Bank of America and had ~$5,000 in the bank. After all, these would be the “slighted” customers who are now paying fees for using a debit card. Let’s assume, to be generous, that one million people would participate in this movement.
Bankers Balk at EU Push for Bigger Greek Losses - (www.bloomberg.com) Josef Ackermann, the head of Deutsche Bank AG (DBK) and chief lobbyist for the world’s largest financial firms, has pressed European leaders for months to devise a strategy to stamp out the sovereign debt crisis. Now that European Union officials are moving toward an agreement that may include bigger losses on Greek debt holdings and the forced recapitalization of lenders, the Deutsche Bank chief executive officer and Washington-based Institute of International Finance he chairs are pushing back. He travels to Brussels this week for talks with policy makers. Forcing lenders to boost capital would be counterproductive, and getting investors to accept larger losses on Greek holdings difficult, Ackermann said on Oct. 13. Opposition from banks may hamper efforts by German Chancellor Angela Merkel and French PresidentNicolas Sarkozy to present a breakthrough at an Oct. 23 summit of euro leaders in combating the crisis, which has driven Greece toward default, roiled global markets and dented confidence in the survival of the 17- nation currency.
Germany Shoots Down ‘Dreams’ of Early End to Europe Sovereign-Debt Crisis - (www.bloomberg.com) Germany said European Union leaders won’t provide the complete fix to the euro-area debt crisis that global policy makers are pushing for at an Oct. 23 summit. German Chancellor Angela Merkel has made it clear that “dreams that are taking hold again now that with this package everything will be solved and everything will be over on Monday won’t be able to be fulfilled,” Steffen Seibert, Merkel’s chief spokesman, said at a briefing in Berlin today. The search for an end to the crisis “surely extends well into next year.” Group of 20 finance ministers and central bankers concluded weekend talks in Paris endorsing parts of Europe’s emerging plan to avoid a Greek default, bolster banks and curb contagion. Providing a week to act, they set the Oct. 23 meeting of European leaders in Brussels as the deadline.
THE MONEY PIT: The Real Reason Harrisburg Pennsylvania Went Bankrupt - (www.businessinsider.com) Basically, it was one disastrous political decision after another. Harrisburg’s situation, however, is not typical of government borrowers in the municipal bond market. Of course, the only way to make this point clear is to go into detail about how Harrisburg landed itself in financial distress. So let me tell you a story. (My fascination with project finance is endless, so you might want to get comfortable.) The vast majority of Harrisburg’s bonded indebtedness stems from improvements made to the city’s trash incinerator plant. According to the Patriot-News, Harrisburg’s local newspaper (a lot of the information in this post is derived from their excellent coverage), the incinerator plant has been a major source of financial trouble for the city since it opened in the early 1970s, yet city officials have demonstrated an inexplicable devotion to throwing money at the project. (This story is, in fact, one long lesson in not allowing sunk costs to influence decision-making. Not everyone pays attention in economics, apparently.)