"Check It Out" for Monday, February 23rd
Nick Turse at TomDispatch writes about the tough time for troubled towns that are closing down Main Street in this depression.
"Elkhart, as it happens, is but one of countless towns and small cities across the U.S. that have proven particularly vulnerable to tough times simply because their economies relied on just a few major employers, or a single industry, or even a single company that has gone under or cut back drastically. Places like Elkhart are feeling the pain in ways most of the country isn't -- yet; and even worse, from the out-of-work to local officials, no one knows how to stop the bleeding.
"Across the country, individuals, foreclosed or suddenly jobless, have been melting down like the economy and so bubbling up into the news in the form of extreme acts ranging from suicide and murder to arson and robbery. The same might now be said for news about whole troubled communities.
"A few months ago, stories of economically-troubled towns were strictly local fare. Now, more and more of them are rising to regional or national attention...
"But it's important to note that Elkhart, Dalton, and Lehigh Acres aren't American oddities. Other towns and cities in surprising numbers are following fast down the path they have already cleared. Such places are now hurt or possibly, in some cases, even dying -- with little in the way of hope or help in sight. Under the circumstances, they should no longer be treated as individual stories, locally or nationally. They represent a pattern, and putting even a small number of their stories together casts a light on a disturbing countrywide trend that may determine the tomorrows of a remarkable number of Americans.
"Towns like Elkhart, Lehigh Acres, and Mendota may now be media poster-towns for tough times nationwide, but most distressed small towns are still suffering in silence and, as a group, they may only be the proverbial canaries in the coal mine. It isn't surprising that towns which relied heavily on the collapsing auto industry and the building trades are going belly-up first, but what about the rest of America's towns and even big cities? The same economic forces are battering them, and while they may have been able to withstand immediate collapse, there's no guarantee that town after town won't be deep in the red, drowning in joblessness, and facing catastrophe as the American depression drags on."
From AsiaTimes comes the news that the IAEA created a firestorm regarding its Iran nuclear report and now tries to douse the flames.
"The International Atomic Energy Agency (IAEA) is increasingly appearing like a dysfunctional fire station - it's become an agency designed to put out fires triggered by the heat of nuclear proliferation, and yet can't help but ignite a few flare-ups along the way.
"The recent handling of Iran's nuclear issue has been such a brushfire for the United Nations' watchdog.. The latest report by director general Mohammad ElBaradei has instigated a media furor over the disclosure that the IAEA had previously underestimated the volume of enriched uranium at Iran's nuclear facilities by some 30%.
"From the New York Times, the Los Angeles Times and London's Mirror, the Guardian and the Financial Times, among leading international newspapers, the reaction has been a steady stream of alarmist commentaries. Many reports regard this an Iranian "milestone" in reaching "nuclear break-out capability".
"At a crucial time when the Barack Obama administration is pursuing carefully quilted diplomacy to reach out to Tehran, such new alarms are bound to impact the tempo and speed of the White House's approach. Israel has already criticized Washington's tactics as "too slow".
"The US government spokesperson, Gordon Duguid, was quick to denounce Iran and parrot the line that Iran must suspend all its "uranium-enrichment related reprocessing". This despite the fact that all the IAEA reports - including this most recent one - state categorically that "there are no indications of ongoing reprocessing activities" at Iran's nuclear facilities.
"Wouldn't it be nice if the US officials first bothered to read - or read carefully - the reports that they rely on to sledgehammer Iran? It would be equally important for Washington, and the wealth of Iran-bashers in the Western media, to ponder the IAEA clarification on the issue of Iran's under-reporting the volume of its enriched uranium that has been communicated to this author by the agency's spokeswoman, Melissa Fleming.
"Hopefully, after learning of the IAEA's important clarification - which in essence exonerates Iran of any nuclear foul play - the rest of the Western media will follow suit."
Paul Krugman at the NYTimes:
"The case for nationalization rests on three observations.
'First, some major banks are dangerously close to the edge — in fact, they would have failed already if investors didn’t expect the government to rescue them if necessary.
"Second, banks must be rescued. The collapse of Lehman Brothers almost destroyed the world financial system, and we can’t risk letting much bigger institutions like Citigroup or Bank of America implode.
"Third, while banks must be rescued, the U.S. government can’t afford, fiscally or politically, to bestow huge gifts on bank shareholders.
"Let’s be concrete here. There’s a reasonable chance — not a certainty — that Citi and BofA, together, will lose hundreds of billions over the next few years. And their capital, the excess of their assets over their liabilities, isn’t remotely large enough to cover those potential losses.
"Arguably, the only reason they haven’t already failed is that the government is acting as a backstop, implicitly guaranteeing their obligations. But they’re zombie banks, unable to supply the credit the economy needs.
"To end their zombiehood the banks need more capital. But they can’t raise more capital from private investors. So the government has to supply the necessary funds.
"But here’s the thing: the funds needed to bring these banks fully back to life would greatly exceed what they’re currently worth. Citi and BofA have a combined market value of less than $30 billion, and even that value is mainly if not entirely based on the hope that stockholders will get a piece of a government handout. And if it’s basically putting up all the money, the government should get ownership in return.
"Still, isn’t nationalization un-American? No, it’s as American as apple pie.
"Lately the Federal Deposit Insurance Corporation has been seizing banks it deems insolvent at the rate of about two a week. When the F.D.I.C. seizes a bank, it takes over the bank’s bad assets, pays off some of its debt, and resells the cleaned-up institution to private investors. And that’s exactly what advocates of temporary nationalization want to see happen, not just to the small banks the F.D.I.C. has been seizing, but to major banks that are similarly insolvent.
"The real question is why the Obama administration keeps coming up with proposals that sound like possible alternatives to nationalization, but turn out to involve huge handouts to bank stockholders.
"Now the administration is talking about a “public-private partnership” to buy troubled assets from the banks, with the government lending money to private investors for that purpose. This would offer investors a one-way bet: if the assets rise in price, investors win; if they fall substantially, investors walk away and leave the government holding the bag. Again, heads they win, tails we lose.
"Why not just go ahead and nationalize? Remember, the longer we live with zombie banks, the harder it will be to end the economic crisis."
And the NYTimes editorial about Cerberus Capital Management, the private equity fund, that wants to gamble on Chrysler's survival with taxpayers' money.
"For its $5.3 billion — on top of the $4.3 billion it has received since December — Chrysler offered little more than an assurance that it has already cut costs and accomplished most of what it had to do to become a valuable, viable company. It offered to trim production by a paltry 100,000 units — leaving it with capacity to make almost one million vehicles more than it will sell this year — on the questionable assumption that demand, and its market share, will bounce back next year.
"Chrysler said the only reason it was back asking for more money so soon was that the car market was worse than it had expected two months ago.
"This cavalier approach to the public purse raises a very big question. If Chrysler is really on track for a turnaround and all it needs is some financing to get over a bad patch in sales and debt markets, why doesn’t Cerberus Capital Management, which owns 80 percent of the company, put up the money itself? Why should taxpayers have to take the risk? That’s what private equity funds like Cerberus are supposed to do.
"Cerberus and Daimler, which retained a stake in Chrysler, have promised to convert $2 billion in loans to Chrysler into equity, which should help reduce its debt. But Cerberus said giving fresh money would violate its fiduciary duty to investors, breaking company rules limiting how much it can commit to any given investment.
"We suspect these rules would be more pliant if Cerberus deemed Chrysler to be a good deal.
"It seems the secretive private-equity fund is willing to gamble on Chrysler’s survival with the taxpayer’s dime, but not its own."
As for Cerberus, Emptywheel had a posting that shows it is filled with insider Washington retreads like Dan Quayle, John Snow who know how to manipulate government for the benefit of companies like Cerberus, and make out like bandits with their philosophy of government of, by and for the wealth few.
It gives money to the likes of Senators Richard Shelby (currently flogging the rumor about the constantly debunked lie that Obama wasn't born in the US; send this idiot a copy of the Hawaii birth certificate on the Internet), John Kyl and Orrin Hatch, some of the infamous GOP bottom feeders on Capitol Hill.
"In other words, some of these Republicans who are so adamant that the Big Two and a Half shouldn't be bailed out also happen to be the same guys pushing to bail out their buddies at Cerberus.
"So when you hear that an auto bailout may "require" a Chrysler merger, what you're hearing is Chris Dodd saying that certain Republicans are holding the auto industry--and with it the American economy--hostage so their well-connected buddies can get bailed out of their crappy investments."
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