KeNo's Housing and Economic Portal: Sunday October 17 Housing and Economic stories

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TOP STORIES:

Rampant Financial Corruption in State Legislature Taints 2010 Elections - (www.businessinsider.com) Amid all the midterms fearmongering, charges of corruption and embezzlement are falling through the cracks. John Avlon on 17 races dogged by scandal—and why they’ll motivate voters. News that four state legislators in Alabama were indicted on federal corruption charges yesterday is just the latest incident of corruption that has come to quietly characterize the 2010 elections. The watchdog group Citizens for Responsibility and Ethics in Washington (CREW) has tracked 26 known investigations of incumbent House members during the 111th Congress—12 Democrats and 14 Republicans. Most of these incumbents—including Ways and Means Committee Chairman Charles Rangeland Rep. Maxine Waters—represent gerrymandered “safe seats,” thereby virtually ensuring their reelection despite the investigations. No wonder a recent Zogby poll found that 77 percent of independent voters say that “the American government is broken.”

According to The Daily Beast’s Election Oracle, there are 17 House, Senate and governor’s races where chatter about “corruption” makes up at least 15 percent of the overall online conversation. This includes 35 percent of the digital debate surrounding the race to succeed Congressman Alan Mollohan in West Virginia's 1st District. Mollohan, the ranking Democrat on the House Ethics Committee, lost his primary this year after audits alleged that he’d steered at least $202 million in federal funds to five local nonprofit groups and received $146,000 in political donations from people affiliated with those organizations in return. (The Justice Department ultimately declined to press charges.)

Fed, ECB throwing world into chaos - (www.reuters.com) Ultra-loose monetary policies by the Federal Reserve and the European Central Bank are throwing the world into "chaos" rather than helping the global economic recovery, Nobel Prize-winning economist Joseph Stiglitz said on Tuesday. A "flood of liquidity" from the Fed and the ECB is bringing instability to foreign-exchange markets, forcing countries such as Japan and Brazil to defend its exporters, Stiglitz told reporters in a conference at Columbia University. "The irony is that the Fed is creating all this liquidity with the hope that it will revive the American economy," Stiglitz said. "It's doing nothing for the American economy, but it's causing chaos over the rest of the world. It's a very strange policy that they are pursuing." The U.S. dollar has weakened about 6.5 percent against a basket of major currencies since the beginning of September as prospects for further monetary easing by the Fed have led investors to seek higher returns elsewhere.

The Fed is dead, maybe by 2012 - (www.marketwatch.com) OK, so Nassim Nicholas Taleb, the “Black Swan” author, actually said: “The Fed won’t exist in 25 years.” Warning: It’ll happen much sooner, fallout of the coming Second American Revolution. It’s inevitable: Wall Street banks control the Federal Reserve system , it’s their personal piggy bank. They’ve already done so much damage, yet have more control than ever. Tea-party activists in their own words. Warning: That’s a set-up. They will eventually destroy capitalism, democracy, and the dollar’s global reserve-currency status. They will self-destruct before 2035 … maybe as early as 2012 … most likely by 2020. Last week we cheered the Tea Party for starting the countdown to the Second American Revolution. Our timeline is crucial to understanding the historic implications of Taleb’s prediction that the Fed is dying, that it’s only a matter of time before a revolution triggers class warfare forcing America to dump capitalism, eliminate our corrupt system of lobbying, come up with a new workable form of government, and create a new economy without a banking system ruled by Wall Street.

Amid backlash and budget deficits, government workers' pensions are targets - (www.washingtonpost.com) Faced with deep budget deficits and overextended pension plans, state and local leaders are increasingly looking to trim the lucrative retirement benefits that have long been associated with government employment. Public employees are facing a backlash that has intensified with the nation's economic woes, union leaders say, because of their good job security, generous health-care and pension benefits, and right to retire long before most private-sector workers. In California, where an estimated 80 cents out of every government dollar goes to employee pay and benefits, Gov. Arnold Schwarzenegger (R) has proposed a two-tier system of pensions that offers new state workers reduced benefits with tighter retirement formulas. He also wants state workers to kick in higher pension contributions to help deal with California's staggering deficit. New Jersey Gov. Chris Christie (R) calls reform of public employee pensions essential to fixing the state's enormous fiscal problems. Michigan Gov. Jennifer M. Gran-holm (D) recently signed a change to her state's teacher pensions that increases employee contributions. Illinois has pushed back the retirement age for new employees. Detailing his agenda for New York, Democratic gubernatorial nominee Andrew M. Cuomo has said, "We simply can't afford to pay benefits and pensions that are out of line with economic reality."

Just How Much Are America's Teachers Getting Paid? - (www.businessinsider.com) Illinois is broke. There is a great debate beginning in the state about public pensions. Teachers pensions are a part of that debate. An aside, another travesty in Illinois is public school administrators. They make an average of $106,217 in salary, not including pensions and health benefits. In the final three years of their contracts, school districts jack up the administrator salaries to increase their pension benefits for life. Of course, there is hardly a check or balance on the behavior. The taxpayer gets stung. Teachers also have a pretty good deal in Illinois. They are 100% unionized. The rent seeking teachers' union curries favor with the Democrats. Democrats at every level of government do whatever the union wants. The average teacher in the state of Illinois makes $61,402. Illinois teachers work around 176 days, 300 minutes, or 5 hours, per day. That's just over 35 weeks per year. On average, they make $348.88 per day, $1.16 per minute, or $69.60 per hour guaranteed. Teachers in Illinois work an average of 12 years. They can retire at age 55. In order to find out what they really make though, you should take their pension benefits, net present value them and amortize them over their career. As of 2010, the average pension for an Illinois teacher is $43,164. It compounds annually for life at 3% per year. Now it's time to do some math and make some assumptions. Assume that the lifespan of the teacher is no different than the average American, 78 years. If they start teaching at age 22, on average they will quit at 34. This means they will wait 21 years to collect their pension. The discount rate for the cash flows is a conservative 5%. When you crunch all the numbers, the net present value of that pension is $290,756. Amortizing that over a twelve year career adds $24,229.64 to their average salary, making their actual salary before health benefits are added in a tidy $85,631.67, or $97.31 per hour.