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Municipal Bankruptcy May Create a Template - (www.nytimes.com) Jefferson
County, Ala., which just became the first municipality to tap the public bond
markets while bankrupt, will go to court on Wednesday to seek approval for its
plan to exit bankruptcy by the end of this year. But there is a catch: Even if
Jefferson County does emerge from bankruptcy soon, it will not fully sever its
ties to the Federal Bankruptcy Court in Birmingham for 40 more years. The
county’s unusual exit plan, which could offer a possible template for other
bankrupt municipalities, calls for the court to retain jurisdiction for the
life of $1.8 billion in sewer-revenue debt that it sold over the last few days.
If the county falters at some point, even decades from now, the bankruptcy
court is supposed to have the power to enforce rate increases to produce the
cash needed to pay back the $1.8 billion on schedule, with interest. For now,
the new mechanism appears to have helped Jefferson County, which includes the
city of Birmingham, Ala., solve the problem of how to win back lenders after a
big default. Municipalities typically go to great lengths to avoid defaulting
out of fear that the stigma will ruin their credit for many years.
ECB
Said to Consider Mini Deposit-Rate Cut If Needed - (www.bloomberg.com) The
European Central Bank is considering a smaller-than-normal cut in the deposit
rate if officials decide to take it negative for the first time, according to
two people with knowledge of the debate. Policy makers would reduce the rate for
commercial lenders who park excess cash at the ECB to minus 0.1 percent from
zero, said the people who asked not to be identified because the talks aren’t
public. It would be the first time the central bank has adjusted interest rates
by less than a quarter of a percentage point. The concept, which has been
discussed by Governing Council members, doesn’t yet have a consensus, the
people said. Members of the council, which is holding a mid-month meeting in Frankfurt this week, have said that a negative
deposit rate is a potential tool for warding off deflation. They’ve also
cautioned that the consequences of such an unprecedented measure aren’t clear.
The central bank this month refrained from cutting the deposit rate even as it
reduced its benchmark lending rate to a record low of 0.25 percent, and
Governing Council member Jens Weidmann has warned against further loosening of
monetary policy.
Young and Educated in Europe, but Desperate for
Jobs - (www.nytimes.com) Alba
Méndez, a 24-year-old with a master’s degree in sociology, sprang out of bed
nervously one recent morning, carefully put on makeup and styled her hair. Her
thin hands trembled as she clutched her résumé on her way out of the tiny room
where a friend allows her to stay rent free. She had an interview that day for
a job at a supermarket. It was nothing like the kind of professional career she
thought she would have after finishing her education. But it was a rare flicker
of opportunity after a series of temporary positions, applications that went
nowhere and employers who increasingly demanded that young people work long,
unpaid stretches just to be considered for something permanent. Her parents
were imploring her to return home to the Canary Islands to help run her
father’s fruit business. It was a sign of the times, though, that even her own
father probably would not be able to afford to pay her. “We’re in a situation
that is beyond our control,” Ms. Méndez said. “But that doesn’t stop the
feelings of guilt. On the bad days, it’s really hard to get out of bed. I ask
myself, ‘What did I do wrong?'”
Retired union workers facing 'unprecedented'
pension cuts - (money.cnn.com) Hundreds
of thousands of retired union workers are facing pension cuts that could slash
their monthly payments in half — or even more. The proposed cuts are part
of a desperate effort to head off insolvency at multiemployer pension plans,
pensions that typically provide benefits for workers at several companies. It's
an unconventional move: Pension law has long maintained that cutting the
benefits of those already retired is off-limits. Current law allows troubled
multiemployer plans to reduce the benefits that employees earn going forward,
cut early retirement and disability benefits and hike employer
contributions instead. But things have gotten so dire that a coalition of
employers and labor unions is asking Congress to change the law. Multiemployer
pension plans cover more than 10 million workers and retirees in the trucking,
construction, retail, mining, manufacturing and other industries. Historically,
the plans were considered more secure since multiple employers pay into the
plans instead of relying on the fortunes of just one company.
How Wall Street Has Profited From Puerto Rico's
Misery - (www.forbes.com) Puerto
Rico’s economy and bond ratings are starting to resemble those of Detroit and
Greece. Larry Summers, the former Treasury Secretary last week
called Puerto Rico’s bonds “the junkiest of the junk”. The question, burned UBS
retail bond investors are asking is, how did this happen? Look no further than
the pockets of Wall Street for the answer. The Street’s endless thirst for
underwriting fees and brokerage commissions has brought the municipal bond
market in Puerto Rico to the brink. The Wall Street Journal recently reported that in 87 bond deals since
2006, Puerto Rico sold $61 billion of bonds which resulted in fees to Wall
Street firms and their cohorts of $1.4 billion. The fees charged were higher
than those assessed on other financially troubled US states and cities. In
fact, according to Reuters, banks such as UBS, were paid gross spreads
averaging 31% higher than spreads charged to Detroit.
Wall
Street Keeps Swagger in CMBS as Sales Surge: Credit Markets
Printing money not the way out of crisis: ECB's Weidmann - (www.chicagotribune.com)
Marc Faber sees bubbles, says Yellen could make it worse - (www.marketwatch.com)
Printing money not the way out of crisis: ECB's Weidmann - (www.chicagotribune.com)
Marc Faber sees bubbles, says Yellen could make it worse - (www.marketwatch.com)
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