Today’s tales from the worlds of economics, politics and the environment — plus added Fukusihmapocalypse Now! — opens with hope for modest relief for some via the Guardian:
Sallie Mae and Justice Department in $60m deal over military student loans
- US government had claimed the student loan giant imposed interest rates on service members above the 6% allowed by law
Student lender Sallie Mae has reached a $60m settlement with the Justice Department to resolve allegations that it charged members of the military excessive interest rates on their student loans, the federal government announced Tuesday.
The deal settles a government lawsuit that asserted the student loan giant violated the rights of service members by imposing interest rates above the 6% permitted by federal law and by improperly seeking default judgments against them. Separately, the Federal Deposit Insurance Corporation announced a settlement of $30m in restitution arising from allegations that the company maximized consumer late fee charges, as well as $6.6m in civil penalties.
The lawsuit was the Justice Department’s first against owners and servicers of student loans for violating rights of service members. The settlement has been filed in federal court in Delaware and is awaiting a judge’s approval.
From the New York Times, business as usual:
Citigroup Says It Has Fired 12 in Mexico Over Fraud
Citigroup disclosed on Wednesday that it had fired a total of 12 employees in Mexico, including some senior executives, in connection with a $400 million fraud involving a Mexican oil services company.
In an internal memorandum to Citigroup employees, the bank’s chief executive, Michael L. Corbat, disclosed the terminations of the employees, including several managing directors, two of whom were business heads at the bank’s Banamex unit.
“Additionally, before our investigation concludes, we expect that several other employees, both inside and outside of Mexico, may receive forms of disciplinary action as well,” Mr. Corbat said in the memo.
From the Guardian, more business as usual:
Banks return to risky business: lax standards and subprime loans
- Big banks like JP Morgan have rewired troubling, familiar tactics as they scrounge for profit in a difficult market
With business lending sluggish and mortgage lending slumping, Wells Fargo has decided it can cut those credit standards. Last month, it raised eyebrows by cutting the minimum credit score required to qualify for an FHA mortgage. It’s also making a big push into another area of lending notorious for poor lending standards: auto loans. Forget subprime mortgages; by the end of 2013, Wells was the second-biggest subprime auto lender in the country.
At least we’re all alert to the risks tied to lending, thanks to the vivid memories of 2008. The other side of the banking business is how they manage their deposits, and the quest to replace missing profits from this part of the enterprise is much less obvious to the casual observer. Nonetheless, analyst Mike Mayo says it’s this that keeps him awake at night far more often than worrying about stupid lending practices. “We haven’t had enough loan growth yet to cause a big problem.”
Specifically, Mayo frets that bankers are too complacent about whether depositors will stick around in a rising interest rate environment – and how much they’ll have to pay out in interest rates to hang on to those deposits. Then, too, there’s the question of what the banks are doing with all those deposits in the meantime.
From the Guardian again, the elite indulges:
Christie’s racks up $745m in one night – and the bubble keeps inflating
This week’s mega-auctions are once again reaching obscenely high prices, with a Barnett Newman selling for $84.2m and a Bacon triptych close to that. Why is there no sign of a crash?
Christie’s evening sale racked up a wacky, near-incomprehensible $745m, the highest total in history for a single sale – smashing past the house’s own high estimate of $500m, and beating November’s $691.6m sale, whose own Bacon, Three Studies of Lucian Freud, set a record (in nominal terms) for the priciest painting ever. The sale established new record prices for 10 artists, including Newman, Alexander Calder, and Joan Mitchell – who became the most expensive woman at auction for a messy blue abstraction from 1960.
Boggling enough on its own, the $744m sale came just a day after the end of Frieze New York, where untold millions changed hands, and on the heels of Christie’s own warm-up auction highlighting the “gritty, underbelly-esque side of contemporary art,” a rather ludicrous phrase to describe $134.6m worth of safe, predictable painting and sculpture. And collectors are set to do it all again Wednesday, when Christie’s rival Sotheby’s mounts its own evening sale.
“We are not in a bubble,” Christie’s CEO Steven Murphy insisted after the sale on Monday. To which the correct response is the one Mandy Rice-Davies gave during the Profumo scandal: “He would, wouldn’t he?” All the same, here are four theories on why the bubble keeps inflating, and why it may be a while before it bursts.
From the Los Angeles Times, a light frost in Hades?:
Howard Jarvis group won’t oppose bill to close Prop. 13 loophole
The staunchest defender of California’s politically untouchable property-tax initiative, Proposition 13, has tacitly approved a bid to change the landmark law for the first time since voters passed it 36 years ago.
The Howard Jarvis Taxpayers Assn., the anti-tax group named for the champion of the 1978 measure, dropped its opposition to a bill that would clamp down on companies avoiding higher property taxes when they buy commercial real estate by using a corporate ownership maneuver.
“I think that the withdrawal of our opposition, at least for now, suggests that we don’t see this as a direct threat to Prop. 13,” said Jon Coupal, president of the Jarvis group, whose crusade for the law sparked a nationwide tax revolt.
From BBC News, a story to shake you up:
Water extraction for human use boosts California quakes
Extracting water for human activities is increasing the number of small earthquakes being triggered in California.
A new study suggests that the heavy use of ground water for pumping and irrigation is causing mountains to lift and valleys to subside.
The scientists say this depletion of the water is increasing seismic activity along the San Andreas fault.
Another California water story, this time from the East Bay Express, reporting on Governor Jerry Brown’s Bay Delta Conservation Plan [BDCP]:
The Water Tunnel Boondoggle
- Experts say the eye-popping costs of Governor Brown’s plan to build two giant water tunnels far outweigh the financial benefits. And taxpayers may be left holding the bag.
The project — along with the costs of mitigating the damage wrought by it — also promises to be hugely expensive. Two water agencies — the Westlands Water District, which services about seven hundred farms in a vast strip of desert in the western San Joaquin Valley, and the Metropolitan Water District, which supplies 19 million Southern Californians with water — plan to cover the majority of the costs of the tunnels, an estimated $15 billion, along with any economic damage they cause to the Delta.
But even as the project’s public comment period draws to a close next month, the state has yet to develop a clear financial plan for the tunnels. Moreover, the relatively few financial facts that do exist are hotly contested. The Department of Water Resources, for example, often states that the entire plan will cost a total of $25 billion, yet many economists think that, when interest on the bonds is factored in, the true figure will run closer to $70 billion.
In terms of benefits, state officials say the tunnels will generate an overall net gain of roughly $5 billion for California’s economy. But other water experts contend the plan could actually result in an annual net loss of about $100 million a year for water contractors backing the project.
From the Los Angeles Times, more ominous signs of a deadly summer to come in the Golden State as a record drought continues:
San Diego County fires: ‘It’s like a scene from Armageddon’
Brush fires broke out in more than half a dozen spots in northern San Diego County and spread at a dangerous pace as hot, dry, erratic winds, backed by record temperatures, raked Southern California for a second day Wednesday.
The fires forced evacuations of schools, businesses, homes, a mobile-home park and Cal State San Marcos, along with causing massive traffic jams and stretching firefighting resources almost to the breaking point.
The most destructive of the blazes was the Poinsettia fire in Carlsbad, which burned several hundred acres, hopscotching between pricey neighborhoods near brushy canyons.
And another faint hope for reform from within via the Guardian:
Google investors press for code of conduct on tax
Proposal by group of activist investors will be voted on at annual shareholder meeting and is opposed by Google board
A group of activist investors are calling on other Google shareholders to press the company to adopt a code of conduct on tax that would bring its corporate structures back in line with its “Don’t be evil” motto.
“A set of principles to address misalignments between Google’s tax strategies and its commitments to employees, communities, shareholders and the environment would help protect long-term value,” they argue in a proposal to be voted on at Google’s annual shareholder meeting on Wednesday.
The proposal has been made by Domini Social Equity Fund, which has close to $1bn of assets, and five other investors in the internet firm. It is opposed by the Google chairman, Eric Schmidt, and his board.
From the Register, surrendering to the corporate tracking imperative online:
Mozilla agrees to add DRM support to Firefox – under protest
- ‘We don’t like it, but we have to use it’
Mozilla has announced that it will add Encrypted Media Extensions (EME) for digital rights management into a future build of Firefox, even if the organization disagrees with the technology on principle.
The World Wide Web Consortium (W3C) is to add EME into the specifications for HTML5 at the behest of Microsoft, Google, and Netflix. Sir Tim Berners-Lee supports the move, but Mozilla had been objecting to the plans as technically unnecessary. However, it has decided to cave.
“We have come to the point where Mozilla not implementing the W3C EME specification means that Firefox users have to switch to other browsers to watch content restricted by DRM ,” said Chief Technology Officer Andreas Gal.
Opening shots from an academic battle from USA TODAY:
For-profit colleges, student advocates lobby Obama
As the Obama administration prepares to establish new rules governing for-profit colleges later this year, student advocates and the career college industry are waging a fierce battle to shape the coming regulations.
Stakeholders on both sides of the debate are ramping up their push on the administration just as the public comment period on a proposed “gainful employment” regulation is set to close May 26.
Under the proposal that the administration unveiled in March, colleges would have to demonstrate that graduates’ debt load on average does not exceed 30% of their discretionary earnings or 12% of their total earnings.
And another national shame, reported by former Secretary of Labor Robert Reich in the UC Berkeley Blog:
How the right wing is killing women
According to a report released last week in the widely-respected health research journal, The Lancet, the United States now ranks 60th out of 180 countries on maternal deaths occurring during pregnancy and childbirth.
To put it bluntly, for every 100,000 births in America last year, 18.5 women died. That’s compared to 8.2 women who died during pregnancy and birth in Canada, 6.1 in Britain, and only 2.4 in Iceland.
A woman giving birth in America is more than twice as likely to die as a woman in Saudi Arabia or China.
And another national shame, via The Contributor Network:
REPORT: Children as Young as 7 Working in US Tobacco Fields
- An international rights group is pushing the federal government and the tobacco industry to take further steps to protect children working on U.S. tobacco farms.
A report released Wednesday by Human Rights Watch claims that children as young as 7 are sometimes working long hours in fields harvesting nicotine- and pesticide-laced tobacco leaves under sometimes hazardous conditions. Most of what the group documented is legal, but it wants cigarette makers to push for safety on farms from which they buy tobacco.
Human Rights Watch details findings from interviews with more than 140 children working on farms in North Carolina, Kentucky, Tennessee and Virginia, where a majority of the country’s tobacco is grown.
New enterprise struggles from the New York Times:
The Bud Light-ification of Bud
There’s a pressing economic reason for the pot industry to get better if it is to survive, aside from its formidable legal challenges. The plant is relatively cheap and easy to grow, and not complicated to process either. Left to the whims of the open market — meaning ignoring taxes and regulations — the price of a joint could plummet to the price of a tea bag or a packet of sugar. So how will investors help the market mature while still making money?
The market for marijuana is nothing like the market for corn or wine or tobacco — at least not yet — and the reasons start in the ground: Marijuana growing and processing is downright bush-league compared to modern American agribusiness. Much of the pot produced in the United States still comes from illegal or semi-legal grow sites, even given the surge of production and processing in states with recreational or medicinal laws. And strains remain understudied and underanalyzed, compared with the wheat in your cereal or even the marigolds in your garden.
The inefficiencies continue to pile up after the harvest. Marijuana has to be cured, then trimmed, before it is sold, and much of this work is still done by hand. Workers use scissors to cut away tough outer leaves and expose the smokable part of the plant. It’s a labor-intensive process, the kind that in other instances is completed by a machine, like a thresher or a cotton gin.
And from the Japan Daily Press, still time to resist:
U.S. sees no conclusion to Trans-Pacific Partnership negotiations anytime soon
The stalemate is still on as the nations included in the Trans-Pacific Partnership are not expecting a conclusion to be met in the negotiations anytime soon. With a ministerial meeting happening in Singapore this month, members of what will be the world’s biggest free trade deal are yet to finalize the deal as both Japan and the United States, both key economies in the deal, failed to reach a conclusion on the negotiations last month.
While many expected progress to happen when US President Barack Obama himself went to Japan last month to discuss this, many were disappointed to learn that further talks are needed to come to a final agreement. The deadlock remains to be because of Japan’s refusal to give up tariffs on key products such as farming produce and automobiles, both the bread and butter of the Asian nation. This has affected widely the negotiations of the 12-nations included in the TPP as they wait for the final outcome of the talks between Japan and the U.S. The countries included in the TPP will meet in Singapore this week to give updates regarding other talks. They are expected to outline other details including regulations on labor, intellectual property and the environment as soon as the deal has been ironed out.
For our first European story, a plaintive pontifical plea from ANSA:
Pope condemns ‘massacre’ of migrants at sea as ‘shameful’
- Francis asks for prayers for people fleeing homelands by boat
Pope Francis on Wednesday condemned the “massacre” of desperate migrants who are killed in boat disasters on the Mediterranean Sea as they flee their homelands for a new life in Europe. During his weekly general audience, the pope said it was “shameful” that thousands of migrants are killed on the seas between North African and the southern borders of Italy.
Shortly before he spoke, police in southern Italy said they had arrested two alleged human smugglers who authorities say deliberately caused a boat carrying as many as 400 migrants to sink off the coast of Libya Monday to induce an Italian sea rescue.
So far, 17 have been confirmed dead and more than 200 rescued but as many as 200 more are still missing.
Next, via EUbusiness, another hint of things to come:
Eurozone industrial output slips back in March: Eurostat
Eurozone industrial output fell in March, official data showed on Wednesday, consistent with recent data showing the economic recovery to be patchy so far.
Industrial output in the 18-nation eurozone dropped 0.3 percent in March compared with the figure for February when it gained 0.2 percent, the Eurostat statistics agency said.
Compared with March 2013, eurozone industrial output was down 0.1 percent, after posting a year-on-year gain of 1.7 percent in February.
From Europe Online, another form of resistance to the austerian imperative:
Brussels expects stronger resistance to austerity in next EU assembly
The European Commission believes that it will be harder to get the European Parliament to approve austerity legislation after this month’s elections, internal documents seen by dpa showed Wednesday.
The European Union’s executive arm acknowledged that based on polling trends, the staunchest backers of recent budget discipline reforms, the conservative European People’s Party (EPP) and Alliance of Liberals and Democrats for Europe (ALDE), will be “substantially weakened.”
“Some of the winning coalitions” that supported reforms in the outgoing Parliament, which had “the EPP and ALDE at their core,” are likely to “no longer be sufficient to reach a majority” in the next EU assembly, according to an analysis by the commission’s economic and financial department.
EurActiv raises an objection:
Norway accuses Apple of breaching EU consumer law
Apple’s iCloud service violates European law by giving itself the right to change its terms and conditions at any time, without notifying its customers, according to a complaint lodged 13 May by the Norwegian Consumer Council.
The council, a government agency, earlier published a study accusing Apple iCloud’s terms of service of violating consumer rights and privacy before the complaint to Norway’s Consumer Ombudsman.
The unfair practice complaint is based on the EU’s directive on unfair terms in consumer contracts. Because people often store important information in the cloud, such as documents and photos, it is particularly important they understand the contract, the council said.
On to Britain and xenophobic fears fail to materialize, via Sky News:
East European Migrant Influx Fails To Emerge
The number of migrants from Romania and Bulgaria has fallen since border controls were lifted but rose over the long-term.
The number of Romanians and Bulgarians working in the UK has fallen by 4,000 since transitional controls on immigration were lifted on January 1.
Figures from the Office of National Statistics show 140,000 people born in one of the two countries were employed between January and March this year.
That is down from 144,000 between October and December, suggesting concerns about mass immigration following the New Year have been unfounded.
And some positive numbers from BBC News:
UK unemployment rate falls to five-year low
The number of people out of work in the UK fell by 133,000 to a fresh five-year low of 2.2 million in the three months to March, official figures show.
The jobless rate also fell to a five-year low of 6.8%, the Office for National Statistics (ONS) said.
The number of people in work rose to 30.43 million, the highest since records began in 1971, helped by a rise in self-employment. Average earnings in the three months to March were up 1.7% from a year earlier.
But other numbers hint of another reality, via the Independent:
Anger as Employment Minister Esther McVey denies food bank use is linked to welfare reforms
Charities and politicians have reacted with anger to a claim by the Employment Minister that the dramatic rise in the number of people using food banks has nothing to do with the Government’s welfare reforms.
In a letter to the Scottish government, Esther McVey said “the rise in food banks predates most of the welfare reforms this Government has put in place”, adding that there was “no robust evidence linking food bank usage to welfare reform”.
Figures from the Trussell Trust, Britain’s biggest food bank provider, have shown that demand has increased by more than 300 per cent in the past year.
Sky News hints at a bankster victory:
Banks Warn Regulator On ‘Illegal’ Bonus Rules
Bank of England proposals to toughen bank bonus rules could be legally unenforceable, a document obtained by Sky News warns.
New rules that would force bankers to wait more than a decade to get their hands on bonuses would breach “the principle of natural justice” and leave lenders exposed to costly legal challenges, a trade body has warned.
In a document obtained by Sky News, the British Bankers’ Association (BBA) argued that plans to apply clawback provisions retrospectively would be illegal in Brazil, France, Germany and Mexico, countries in which UK-based lenders such as HSBC have a substantial presence.
The BoE’s proposals would force banks to reclaim variable compensation from senior employees for up to six years after it has been handed over and spent.
On to Norway and trepidation from TheLocal.no:
Norway slashes growth forecast on oil slowdown
Norway’s government on Wednesday slashed its growth forecast for this year, citing a slowdown in spending by the key oil sector in the Nordic country.
In a revised budget the government said the Norwegian economy is now forecast to grow by 1.9 percent in 2014, compared to the 2.5-percent increase expected in the original budget submitted last November.
This forecast concerns the country’s “mainland” GDP, which leaves out fossil fuels and maritime transport and is preferred as an indicator in Norway
since it excludes the strong cyclical variations related to oil, one of the country’s main exports.
However the purchase by the oil sector of goods and services is included in the country’s “mainland” GDP calculation, and the finance ministry expects this to stabilise then decrease.
Hypocritical criticism of the day award goes to. . .Well, you get the idea. And imagine if the U.S. had the same priorities as one of the happiest nations on earth. From TheLocal.se:
‘Swedes prioritize welfare and jobs above security’
No one doubts the Swedes’ ability to fight, but they do doubt Nato-ambivalent Sweden’s commitment to helping its neighbours, argues former US defence attaché to Sweden Bruce Acker.
In the wake of Russian annexation of Crimea, the Swedish defense debate has intensified over the nature of its security structures and partnerships. The Swedish solidarity declaration of 2009 is frequently criticized for being unresourced and therefore weak:
On to Austria and a slowdown from TheLocal.at:
Verbund shuts five power plants
Verbund, Austria’s leading electricity company, is mothballing five power stations to cut costs.
The company said it would temporarily decommission several combined cycle gas-fired power plants in Austria and France, including the 848-megawatt Mellach power station that was commissioned only three years ago.
Additionally, a coal-fired power plant in Dürnrohr and an oil-fueled plant in Styria will be closed, the company added.
The reason for the closures is the “massive disruption in the European electricity market” and “sector-wide economic pressures”, Verbund said. It hopes the restructuring will lead to “lasting economic improvements”.
TheLocal.at again, with a shortfall:
Austrian army ‘going broke’
The Austrian army is in serious financial trouble – so much so that regiments can’t afford fuel and soldiers are forced to march on foot.
Defence Minister Gerald Klug (SPÖ) has said that with its current budget the army “is no longer financially viable”.
His staff have done an analysis of the army’s current saving plan and found that by autumn it won’t even be able to afford its fuel bill.
And a good use for a house linked to a murderous xenophobe extraordinaire from TheLocal.at:
Hitler’s house to become migrant centre?
A long-running debate over the future of the house where Hitler was born finally appears set to be resolved.
The Renaissance-era structure, located near the central square of the picturesque town of Braunau in Upper Austria, is considered prime real estate.
At a recent ‘Birthplace Summit’, held at the Interior Ministry in early May, the house’s current owner and representatives from Braunau met with Austria’s Interior Ministry to discuss the fate of the controversial building.
For decades however, the shadow of Adolf Hitler – its most infamous son – has hung over the former guest house, creating a constant headache for Braunau’s administration.
On to Spain with thinkSPAIN and political provocation:
Mock ‘abortion package tour’ travel agency launched in protest over Spanish law reform
CAMPAIGNERS fighting the proposed restrictions on abortion announced by Spain’s minister of justice have set up a spoof travel agency offering trips to Europe for women wishing to terminate a pregnancy.
Dubbed ‘Abortion Travel – the agency that shouldn’t exist’, the pretend online ‘company’ offers packages to London, Paris and Berlin ranging from 1,940 euros to 2,620 euros.
Its organisers even give women advice relating to where to travel to in Europe depending upon how far gone their pregnancy is and the national law relating to their stage of gestation.
TheLocal.es covers a dismal ratio:
Spain: One vacancy for every 110 jobseekers
Spain had only one job opening for every 110 unemployed people in the final three months of 2013, the second worst rate in the European Union, a new study released on Wednesday shows.
Before Spain’s economic crisis kicked off in 2007, this rate was one job opening for every 17.5 jobseekers, the latest labour market bulletin by job agency Asempleo and financial consultants Afi shows.
Only Cyprus had a worse ratio: there the ratio was one job per 154 people searching for work.
The lack of job openings in Spain — where the official unemployment rate is 25.93 percent — is also in stark contrast with the EU average for the final quarter of of 2013. That figure was 12.3 unemployed people for each job on offer.
Italy next and a Bunga Buna bloviation from ANSA:
Berlusconi says accord with Renzi ‘useless’
- Forza Italia leader says party will vote as it sees fit
Ex-premier Silvio Berlusconi said Wednesday that continuing an accord with Premier Matteo Renzi on government reforms would be “useless”. Instead of advance agreements, he said, his opposition centre-right Forza Italia (FI) party would decide for itself how to vote on each reform measure.
“It is useless to make arrangements before,” any vote, Berlusconi said in a television interview with Rai.
“We expect to see the reforms in Parliament (and) if we believe they are the best, we will vote for them,” and otherwise, FI will vote against the measure, he added.
TheLocal.it asks for a helping hand:
‘EU officials asked US for help to oust Berlusconi’
EU officials asked the US government for help to oust Silvio Berlusconi from the Italian premiership at the height of the economic crisis in 2011, a former advisor to US President Barack Obama has claimed.
Tim Geithner, former US treasury secretary, said that he refused to cooperate in a plot against the then Italian prime minister in the autumn of 2011. “European officials contacted us with a plot to find a way of forcing the Italian Premier Berlusconi to stand down,” Geithner was quoted in La Stampa as saying in his new book – Stress Test: Reflections on Financial Crises.
The EU officials wanted their US counterparts to refuse to back an Italian rescue package from the International Monetary Fund (IMF) unless Berlusconi resigned, Geithner alleged. The former treasury secretary claimed that he refused to go along with the plot, telling the Europeans “we cannot have blood on our hands.”
Blissful high level ignorance from ANSA:
Napolitano didn’t participate in Berlusconi ‘plot’ meetings
- Geithner book feeds speculation Berlusconi was felled in 2011
President Giorgio Napolitano said in a statement Wednesday that he did not participate in any of the international meetings in which European officials allegedly plotted to bring down Silvio Berlusconi’s government in 2011.
Rumours that the third Berlusconi’s government was scuppered by a conspiracy were fueled this week by a new book by former US Treasury secretary Timothy Geithner. The former Treasury secretary wrote that in 2011, at a G-20 meeting, Europeans were pushing the White House to get involved in pressuring Berlusconi out of office, as Italy risked a Greek-style financial meltdown with the spread between Italian 10-year bonds and their German counterpart ballooning to over 500 points and yields above 7%.
Napolitano was instrumental in engineering the emergency technocrat administration led by ex-premier Mario Monti that replaced Berlusconi’s administration in November 2011.
After the jump, the latest anxieties from Greece, More Ukrainian turmoil and Russian retaliation [including a lethal blow the U.S. space program], a Georgian courtship, Turkish outrage, agrofuel and presidential woes in Latin America, Australian austerity run amok, a blow for GMOs in Pakistan, Thai turmoil, Southern Korean economic woes, bubble-plugging measures, corruption and economic and corporate imperialism in China, economic winners and losers in China, Trans-Pacific Partnership wheeling and dealing, MERS warnings, historical tragedy, and the latest chapter of Fukushimapocalypse Now! . . .