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BNP To Halt Shale Oil Financing, Expand Funds For Renewables

October 18, 2017 - 12:01pm
Above Photo: From Department of Energy and Climate Change/ Flickr Banks are realizing they can get a political win and avoid stranding their assets by not investing in oil and gas French bank says shale, oil sands projects harm environment BNP also won’t fund oil or gas projects in the Arctic region BNP Paribas SA pledged to stop financing shale and oil sands projects, expanding earlier commitments in support of global efforts to tackle climate change. France’s largest bank will no longer do business with companies whose main activity stems from oil and natural gas obtained from shale or oil sands, it said in a statementWednesday. The policy covers companies involved in activities ranging from exploration to marketing and trading. The company also won’t fund oil or gas projects in the Arctic region. BNP Paribas said it’s committed to bringing its financing and investment activities in line with international efforts to keep global warming below 2 degrees Celsius by the end of the century. Achieving that goal relies on reducing the world’s dependence on fossil fuels,  starting with energy from shale and oil sands, the bank said. Echoing environmentalists on a disputed subject, the bank said the extraction of fuel from these sources emits high levels of greenhouse gases and harms the environment in other ways. BNP Paribas may be the first large bank to blacklist shale oil, which has enabled the U.S. to curb oil imports and pushed down energy prices. The lender’s financing for tar sands, Arctic oil and other carbon-intensive fuels totaled $1.94 billion last year, ranking it 17th among international banks, according to a report by the Rainforest Action Network and other environmental groups. That’s down from $3.74 billion in 2014. A BNP Paribas spokeswoman said she was unable to confirm the numbers. Coal Power Once a global leader in oil financing, BNP has withdrawn from funding coal mines and coal-fired power plants in recent years, along with other big European banks including Societe Generale SA, HSBC Holdings Plc and Credit Agricole SA. Energy excluding electricity represented 4 percent of BNP’s total lending commitments, down from 6 percent in mid-2015, according to its filings. “Our role is to help drive the energy transition,” Chief Executive Officer Jean-Laurent Bonnafe said in the statement. “We’re a long-standing partner to the energy sector and we’re determined to support the transition to a more sustainable world.” “In concrete terms, these decisions mean that we will cease providing finance to a number of companies and organizations that are not making an effort to be part of the transition to a less greenhouse gas-emitting economy,” Bonnafe elaborated in an article posted on his LinkedIn account. “Going forward, we will agree to finance only those energy sector companies that are pursuing a policy of diversifying their energy sources.” Shale Surge U.S. oil and gas output has surged over the past six years as drillers unlocked oil trapped in shale formations, partly by injecting water, sand and chemicals under high pressure to crack open reservoirs. Banned in France, the process known as hydraulic fracturing — or fracking — has been at the center of controversies about contaminating water sources and causing earthquakes. Meanwhile, investor sentiment toward oil sands — a heavy crude that is capital intensive to extract — has soured as prices halved from more than $100 a barrel over the past three years, with Royal Dutch Shell Plc selling out of its oil sands assets in Canada. Last year, BNP decided to halt further development of its reserve-based lending business, the key avenue for financing shale companies. In 2012 the bank sold its reserve-based lending activities in the U.S. and Canada to Wells Fargo & Co., including $9.5 billion of loans. BNP also repeated its target for 15 billion euros ($17.7 billion) in financing for renewable energy projects by 2020 and 100 million euros of investment in startups in areas such as power storage and efficiency. “This is definitely a pioneering policy among global banks,” said Jason Opena Disterhoft, a senior campaigner with Rainforest Action Network. “It’s a sign of things to come.”
Categories: Friends of GEO, SE News

Hundreds Of Billions In Taxes Avoided Off-Shore By Corporations

October 18, 2017 - 12:00pm
Above Photo: GotCredit/ Flickr Fortune 500 Hold $2.6 Trillion Offshore To Avoid Taxes U.S.-based multinational corporations are allowed to play by a different set of rules than small and domestic businesses or individuals when it comes to paying taxes. Corporate lobbyists and their congressional allies have riddled the U.S. tax code with loopholes and exceptions that enable tax attorneys and corporate accountants to book U.S.-earned profits in subsidiaries located in offshore tax haven countries with minimal or no taxes. Often a company’s operational presence in a tax haven may be nothing more than a mailbox. Overall, multinational corporations use tax havens to avoid an estimated $100 billion in federal income taxes each year. Every dollar in taxes that corporations avoid must be balanced by higher taxes on individuals, less public investments and services and more federal debt. But corporate tax avoidance is not inevitable. Congress could act tomorrow to shut down tax haven abuse by revoking laws that enable and encourage the practice of shifting money into offshore tax havens. This should be the cornerstone of any congressional tax reform effort. Instead, many in Congress are considering proposals that would make offshore tax avoidance worse. By failing to act, our elected officials are tacitly approving a status quo in which corporations don’t pay what they owe and ordinary Americans inevitably must make up the difference. This study explores how in 2016 Fortune 500 companies used tax haven subsidiaries to avoid paying taxes on much of their income. It reveals that tax haven use is now standard practice among the Fortune 500 and that a handful of the country’s biggest corporations benefit the most from offshore tax avoidance schemes. The main findings of this report are: Most of America’s largest corporations maintain subsidiaries in offshore tax havens. At least 366 companies, or 73 percent of the Fortune 500, operate one or more subsidiaries in tax haven countries.  All told, these 366 companies maintain at least 9,755 tax haven subsidiaries. The 30 companies with the most money officially booked offshore for tax purposes collectively operate 2,213 tax haven subsidiaries. The most popular tax haven among the Fortune 500 is the Netherlands, with more than half of the Fortune 500 reporting at least one subsidiary there. Approximately 57 percent of companies with tax haven subsidiaries have set up at least one in Bermuda or the Cayman Islands — two particularly notorious tax havens. Despite the small size of their economies, American multinationals implausibly claim to have earned billions each year in these island nations. In fact, the profits that all American multinationals claimed to earn in Bermuda and the Cayman Islands totaled 18 times and 13 times each country’s entire yearly economic output, respectively. In fact, a Congressional Research Service report found that American multinational companies collectively reported 43 percent of their foreign earnings in five small tax haven countries: Bermuda, Ireland, Luxembourg, the Netherlands and Switzerland. Yet these countries accounted for only 4 percent of the companies’ foreign workforces and just 7 percent of their foreign investments. By contrast, American multinationals reported earning just 14 percent of their profits in major U.S. trading partners with higher taxes — Australia, Canada, the UK, Germany, and Mexico — which accounted for 40 percent of their foreign workforce and 34 percent of their foreign investment. Fortune 500 companies are holding more than $2.6 trillion in accumulated profits offshore for tax purposes. Just four of these companies, Apple, Pfizer, Microsoft and General Electric, account for a quarter of the total. Just 30 Fortune 500 companies account for 68 percent or $1.76 trillion of these offshore profits. Only 58 Fortune 500 companies disclose what they would expect to pay in U.S. taxes if these profits were not officially booked offshore. In total, these 58 companies owe $240 billion in additional federal taxes. Based on these 58 corporations’ public disclosures, the average tax rate that they have collectively paid to foreign countries on these profits is a mere 6.1 percent, indicating that a large portion of this offshore money has been booked in tax havens. If we assume that the average tax rate of 6.1 percent applies to all 293 Fortune 500 companies with offshore earnings, they would owe a 28.9 percent rate upon repatriation of these earnings, meaning they would collectively owe $752 billion in additional federal taxes if the money were repatriated at once. Some of the most notable cases include:  Apple: Apple has booked $246 billion offshore, a sum greater than any other company’s offshore cash pile. It is currently avoiding $76.7 billion in U.S. taxes on these earnings. A 2013 Senate investigation found that Apple has structured two Irish subsidiaries to be tax residents of neither the United States, where they are managed and controlled, nor Ireland, where they are incorporated. A recent ruling by the European Commission, which is under appeal, found that Apple used this tax haven structure in Ireland to pay a rate of just 0.005 percent on its European profits in 2014, and has required that the company pay $14.5 billion in back taxes to Ireland.  Citigroup: The financial services company officially reports $47 billion offshore for tax purposes on which it owes $13.1 billion in U.S. taxes. That implies that Citigroup currently has paid only a 7 percent tax rate on its offshore profits to foreign governments, indicating that most of the money is booked in tax havens levying little to no tax. Citigroup maintains 137 subsidiaries in offshore tax havens.  Nike: The sneaker giant officially holds $12.2 billion offshore for tax purposes on which it owes $4.1 billion in U.S. taxes. This implies Nike has paid a mere 1.4 percent tax rate to foreign governments on those offshore profits, indicating that nearly all of the money is officially held by subsidiaries in tax havens. Nike likely does this by licensing trademarks for its products to subsidiaries in Bermuda and then essentially charging itself royalties to use those trademarks. The shoe company, which operates 1,142 retail stores throughout the world, does not operate one in Bermuda....
Categories: Friends of GEO, SE News

Radically Changing How We Face Food Insecurity And Climate Change

October 18, 2017 - 12:00pm
Above Photo: Agroecology works, writes Gauthier, but in order for its promise to thrive, it will need supportive policies. (Photo: David Costa) What we need is a profound and radical transformation, or dare we say, conversion of the world food system. Around the world, people are migrating within and across borders, and for many of them, hunger and food insecurity are driving them. We know that climate change, conflict, and political instability are adversely affecting food security, but if communities are still facing hunger today it is because of the flawed and damaging way in which we produce and distribute food around the world. Indeed, at the heart of the problem, and perhaps the solution, is our very relationship to food and the land it grows on. Food insecurity is largely driven by a food system that is highly controlled by agribusiness, believed to be the only model capable of producing large volumes of food – and waste. But more food is not the same as less hunger! The figures are clear: in 2016 the number of undernourished people in the world came to an estimated 815 million—from 777 million people in 2015. In addition, 75% of the world’s poor rely on agriculture and natural resources for their livelihoods yet, despite this, they are also the most food insecure, leading many to migrate to urban areas or other countries in search for better living conditions with great uncertainty for their own and their children’s futures. Hunger is not diminishing, it is increasing. We must be tackling its root causes, not increasing production. “In different contexts around the world, agroecology has demonstrated the potential to increase productivity, yields and biodiversity; revitalize damaged soils, improve health and nutrition, enhance resilience and cohesion in communities while addressing climate change.” The question is, how do we move from this worrying prospect? We must make a radical change. The most difficult change is perhaps viewing the wealth and resources of this planet, not as commodities at our disposal, but as other living organisms with which we must interact and share the earth, our common home. As Pope Francis’ Laudato Si Encyclical reminds, “Every effort to protect and improve our world entails profound changes in lifestyles, models of production and consumption, and the established structures of power which today govern societies.” Why agroecology? We need a system and policies that enable people and small-scale farmers to access land, seeds and resources. We need to create the conditions that can allow rural communities to work, flourish and live. Agroecology offers us access to a truly sustainable food system and radically transforms how we understand and practice food production and consumption. Agroecology works. In different contexts around the world, agroecology has demonstrated the potential to increase productivity, yields and biodiversity; revitalize damaged soils, improve health and nutrition, enhance resilience and cohesion in communities while addressing climate change. It not only revitalizes ecosystems, but also communities, as it empowers farmers and peasants, especially women. It also brings consumers closer to farmers and the food they eat, challenging current practices, by reconnecting us to local and seasonal produce and restoring our relationship to nature. These are essential ingredients for vibrant, sustainable, and just communities, where every person and every ecosystem counts and flourishes. But in order for agroecology to thrive, it will need supportive policies. Nevertheless, while leaders have signed and committed to the Paris Agreement and Agenda 2030 to tackle our most pressing challenges, we see an ever increasing concentration in the agribusiness sector, as two recent mergers—Syngenta-ChemChina and Dow Chemical-DuPont—show, limiting access, reducing small-scale farmer’s autonomy, weakening the social fabric of their communities, affecting our health and the planet. Unfortunately, instead of supporting innovative practices such as Agroecology, false solutions such as ‘Climate-smart agriculture’ and other high-tech based solutions, continue to be favored by policy makers and big business. Behind such initiatives, what keeps being promoted is a food system dominated by large-scale industrial agriculture and monocultures that rely heavily on chemical fertilizers and pesticides, making the agricultural sector a high GHG emitter. We already experience biodiversity loss, soil erosion and devastating yield losses in case of extreme weather across the world – it’s therefore a dangerous mix in the face of climate driven impacts. This is why we share these stories, as widely as possible, building on theexperiences and on the work that has been carried out by social movements, farmer and peasant organizations, civil society and academics across the world to develop the concept of agroecology. At CIDSE, we have engaged in the process of both clarifying what agroecology means, in order to avoid cooptation and misuse of the term by proposers of the  status-quo, and to join like-minded organizations and movements in the fight against false solutions, while putting into practice true alternatives. This year’s World Food Day focuses on the interlinkages between food (in)security and migration but unless we name and address the true root causes of injustice, food insecurity and the climate crises, and hold up solutions that take into account the well-being of people, the respect for their human dignity and the protection of our ecosystems, we cannot make the type of deep transformation that is needed.
Categories: Friends of GEO, SE News

The Real Reason Behind Trump’s Angry Diplomacy In North Korea

October 18, 2017 - 11:00am
Above Photo: Trump and Kim are dubious figures, driven by fragile egos and unsound judgement. (Photo: File) To understand the United States’ stratagem in the Pacific, and against North Korea in particular, one has to understand the fundamental changes that are under way in that region. China’s clout as an Asian superpower and as a global economic powerhouse has been growing at a rapid speed. The US’ belated ‘pivot to Asia’ to counter China’s rise has been, thus far, quite ineffectual. The angry diplomacy of President Donald Trump is Washington’s way to scare off North Korea’s traditional ally, China, and disrupt what has been, till now, quite a smooth Chinese economic, political and military ascendency in Asia that has pushed against US regional influence, especially in the East and South China Seas. Despite the fact that China has reevaluated its once strong ties with North Korea, in recent years, it views with great alarm any military build-up by the US and its allies. A stronger US military in that region will be a direct challenge to China’s inevitable trade and political hegemony. The US understands that its share of the world’s economic pie chart is constantly being reduced, and that China is gaining ground, and fast. The United States’ economy is the world’s largest, but not for long. Statistics show that China is blazing the trail and will, by 2030 – or even sooner – win the coveted spot. In fact, according to an International Monetary Fund report in 2014, China is already the world’s largest economy when the method of measurement is adjusted by purchasing power. This is not an anomaly and is not reversible, at least any time soon. The growth rate of the US economy over the past 30 years has averaged 2.4 percent, while China soared at 9.3 percent. Citing these numbers, Paul Ormerod, an economist and a visiting professor at University College, London, argued in a recent article that “if we project these rates forward, the Chinese economy will be as big as the American by 2024. By 2037, it will be more than twice the size.” It is no wonder why Trump obsessively referenced ‘China’ in his many campaigning speeches prior to his election to the White House, and why he continues to blame China for North Korea’s nuclear weapons program to this day. As a business mogul, Trump understands how real power works, and that his country’s nuclear arsenal, estimated at nearly 7,000 nuclear weapons, is simply not enough to reverse his country’s economic misfortunes. In fact, China’s nuclear arsenal is quite miniscule compared to the US. Military power alone is not a sufficient measurement of actual power that can be translated into economic stability, sustainable wealth and financial security of a nation. It is ironic that, while the US threatens to ‘totally destroy North Korea,’ it is the Chinese government that is using sensible language, calling for de-escalation and citing international law. Not only did fortunes change, but roles as well. China, which for many years was depicted as a rogue state, now seems like the cornerstone of stability in Asia. Prudent US leaders, like former President Jimmy Carter understand well the need to involve China in resolving the US-North Korean standoff. In an article in the Washington Post, Carter, 93, called for immediate and direct diplomatic engagement with North Korea that involves China as well. He wrote on October 4, the US should “offer to send a high-level delegation to Pyongyang for peace talks or to support an international conference including North and South Korea, the United States and China, at a mutually acceptable site.” A few days leader, Chinese foreign ministry spokeswoman, Hua Chunying, quoted Carter’s article, and reasserted her country’s position that only a diplomatic solution could bring the crisis to an end. In a recent tweet, Trump claimed that “Presidents and their administrations have been talking to North Korea for 25 years, agreements made and massive amounts of money paid … hasn’t worked.” He alleged that North Korea has violated these agreements even “before the ink was dry”, finishing with the ominous warning that “only one thing will work!”, alluding to war. Trump is a bad student of history. The ‘agreements’ he was referring to is the ‘Agreed Framework’ of 1994, signed between President Bill Clinton and Kim Jong-il – the father of the current leader Kim Jong-un. In fact, the crisis was averted, when Pyongyang respected its side of the agreement. The US, however, reneged, argued Fred Kaplan in ‘Slate’. “North Korea kept its side of the bargain, the United States did not,” Kaplan wrote. “No light-water reactors were provided. (South Korea and Japan were supposed to pay for the reactors; they didn’t, and the U.S. Congress didn’t step in.) Nor was any progress made on diplomatic recognition.” It took North Korea years to react to the US and its partners’ violation of the terms of the deal. In 2001, the US invaded and destroyed Afghanistan. In 2003, it invaded Iraq, and actively began threatening a regime change in Iran. Iraq, Iran and North Korea were already blacklisted as the “axis of evil” in George W. Bush’s infamous speech in 2002. More military interventions followed, especially as the Middle East fell into unprecedented chaos resulting from the so-called Arab Spring in 2011. Regime change, as became the case in Libya, remained the defining doctrine of US foreign policy. This is the actual reality that terrifies North Korea. For 15 years they have been waiting for their turn on the US regime change path, and their nuclear weapons program is their only deterring strategy in the face of US military interventions. The more the North Korean leadership felt isolated regionally and internationally, the more determined it became in obtaining nuclear devices. This is the context that Trump does not want to understand. US mainstream media, which seems to loathe Trump in every way except when he threatens war or defends Israel, is following blindly. Current news reports of North Korea’s supposed ability to kill “90% of all Americans” within one year is the kind of ignorance and fear-mongering that has dragged the US into multiple wars, costing the...
Categories: Friends of GEO, SE News

Yes, Half Of Americans Are In Or Near Poverty: Here’s More Evidence

October 18, 2017 - 11:00am
Above Photo: A family with bags from a service that provides for people in need in Oswego, N.Y. in 2012. (Photo: Spencer Platt/Getty Images) Too many Americans have been cheated out of opportunities to share in our nation’s prosperity. The proof is overwhelming. “Fact checker” Ballotpedia said that presidential candidate Jill Stein’s claim that “one in two Americans remain in or near poverty” was “untrue according to most conventional measures and definitions of near poverty.” But a responsible fact-checker should know that an issue of this magnitude demands more than a cursory look at “conventional measures” of poverty. Furthermore, Ballotpedia may have been engaging in fake-factchecking. The service is run by the Lucy Burns Institute, a right-wing Koch–funded organization that has every incentive to avoid popular resistance by convincing Americans that they’re not really poor. The Definitions of Poverty are Way out of Date  The poverty threshold is still based on a formula from the 1960s, when food expenses were a much greater part of the family budget. It hasn’t kept up with other major expenses. Since 1980, food costs have gone up by 100%, housing 250%, health care 500%, and college tuition 1,000%. The Congressional Research Service (CRS) says, “If the same basic methodology developed in the early 1960s was applied today, the poverty thresholds would be over three times higher than the current thresholds.” Three times higher! The median household income in the U.S. in 2016 was $59,039. The Economic Policy Institute’s 2015 Family Budget Calculator determined that the median budget for a two-parent, two-child family is $63,741. As CRS concluded, that’s about three times higher than the current poverty threshold. In 2014, according to Bureau of Labor Statistics data, median household expenses were $36,800, against income of about $54,000. But that includes very little for wealth-building investments, such as short- and long-term savings, college education, and life insurance. After accounting for annual outlays for these essential and/or typical family expenses, the median household in the lower third was $2,300 in debt. For the middle third of households, which reaches well into the “middle class,” only $6,000 remained for wealth-building and other discretionary expenses. That $6,000 dissipates quickly. Says Pew Research: “Because income is measured before taxes, some families will have had even less slack in their budgets than this figure implies.” Expenses Beyond the Essentials: Getting Higher & Higher  In the past 20 years median household expenses increased by 25 to 30 percent, while wages have stagnated. As a result, 3 out of 5 Americans spend more than they earn, not on frivolous extras, but on essential needs. Housing, in particular, is crushing Americans. Nearly HALF of renters are cost-burdened, paying 30 or more of their income to their landlords. Renters in the poorest third of American households spend nearly HALF OF THEIR INCOME on housing. Child care is another essential but overwhelming cost. The median American household in most states would have to spend over 10 percent of its income just to send a 4-year-old to full-time preschool. Children bear the brunt of a breakdown in society. The Center for Children in Poverty confirms that nearly half of our nation’s children live “dangerously” close to the poverty line. Numerous other expenses are conveniently overlooked by the poverty skeptics: taxes; medical emergencies; car repairs; plumbing problems; appliance breakdowns; phone costs; work expenses, especially for members of the gig economy. As economist Constantin Gurdgiev puts it: “Quite frankly, it is idiotic to assume that gross median income matters to anyone. What matters is after-tax income net of the cost of necessities required to earn that income.” Americans Are Working Hard…Just to Survive  People are working more hours for decreasing wages and benefits. A Princeton study concluded that a stunning 94 percent of the nine million new jobs created in the past decade were temporary or contract-based, rather than traditional full-time positions. It’s estimated that over three-quarters of Americans are living paycheck to paycheck, and about half of this group has reported “material hardship” (running out of food [or worrying about running out of food], not being able to afford a place to live or medical treatment, or having utilities turned off). Worse yet, most people who survive paycheck to paycheck are ill-prepared for the future. Only a third of workers are putting money into a 401(k). The median working-age couple has saved only $5,000 for retirement, and almost 70 percent of Americans have less than $1,000 saved. The American Dream, Fading Away for Half of America  We still have our houses and cars, right? Maybe not. The poorest 50% of American adults had an average net worth (home and financial assets minus debt) of just $7,500 in 2016. A year earlier it was $9,000, but the richest 1% took it away, gaining an average of $1.5 million in that single year. A revolution has to come. A peaceful revolution, ideally, toward a Guaranteed Income for everyone, paid for by a financial transaction tax and the removal of outlandish tax subsidies for the wealthy. Too many Americans have been cheated out of opportunities to share in our nation’s prosperity. Too many remain in poverty, or have fallen into poverty, or are beginning to experience its frightening symptoms.
Categories: Friends of GEO, SE News

Goldman Sachs In Government Pushes Profits Of Goldman Sachs

October 16, 2017 - 10:00am
Above Photo: Gary Cohn, Director of the National Economic Council, and Treasury Secretary Steven Mnuchin are both former Goldman Sachs employees. A new report documents all the ways former Goldman Sachs employees are using their high-level government jobs to push an agenda that would boost the bank’s profits — at the expense of the rest of us. Goldman Sachs has been a conspicuous presence at the scene of one disaster after another in the past half century. The bank is a leader in a Wall Street business model that relies on market manipulation and unsustainable financial bubbles to enrich a few insiders, but that produces disastrous consequences for the rest of us. We are witnessing what may be a new Golden Age for Goldman Sachs. After running a campaign in which he lambasted the “corrupt” ties between Wall Street and Washington, President Trump has handed the job of shaping economic policy over to Wall Street insiders generally, and to alumni of Goldman Sachs in particular. These appointments add up to a level of inside influence that is unusual even by Goldman’s historic standards. And future picks could produce even more Goldman influence. In choosing Gary Cohn as National Economic Council Director and Steve Mnuchin as Treasury Secretary, along with Jay Clayton at the Securities and Exchange Commission, Trump has turned to Wall Street veterans with deep knowledge of the financial crisis—knowledge gained as champions of the dangerous practices that helped cause it. In areas ranging from financial regulations, to taxes, to infrastructure, to trade, this Goldman-heavy Administration is promoting policies that would boost Goldman Sachs’s profits, in many ways, at the expense of taxpayers and the broader public. Goldman’s stock price has already soared. Meanwhile, Goldman’s drumbeat of scandal continues right on up to the present. Since 2010 alone, according to one recent study, Goldman Sachs has paid over $9 billion in fines and penalties associated with thirteen different patterns of fraud, abuse, or misconduct. Suspicion is also growing that Goldman may have been involved in manipulation of the U.S. Treasury markets—one of the world’s largest and most important financial markets, and a market with profound implications for American taxpayers. Since the Trump Administration is responsible for completing this investigation, the extensive Goldman Sachs influence in the Administration creates a major conflict of interest. Drawing from a new report by Americans for Financial Reform, we highlight below what Goldman’s economic policy agenda could mean for us. Cutting back Wall Street oversight and reducing consumer protections          As the major bank that is most dependent on revenues from aggressive trading practices, Goldman Sachs is in the forefront of efforts to roll back financial regulations that makes things fairer and safer for the rest of us, in order to preserve high profits from speculative and dangerous activity. These include protections against fraud at the expense of investors and consumers, restrictions on bank risk-taking, and measures to separate ordinary commercial banking from Wall Street trading activities which were enacted under the Dodd-Frank Act of 2010 in response to the financial crisis. In developing these protections, Congress paid particular attention to the pre-crisis conduct of the big banks, citing some of the activities of Goldman Sachs as prime examples of the need for key reforms. Since the Dodd-Frank Act was adopted, Goldman has continued to be profitable, but it has been forced to shed many of its riskiest investments and activities and to raise additional capital to support others, in order to come into compliance with new protections. In a naked push for higher profits, Goldman has staunchly opposed many of the new rules, falsely claiming they are a “burden” on financial markets and “damaging to the economy.” Cutting business and investment taxes Goldman Sachs is already an expert tax dodger. The bank avoided $5.5 billion in taxes between 2008 and 2015. And under Trump’s tax plan it will be well positioned to avoid much more. When it comes to U.S. earnings, cuts in the overall corporate tax rate disproportionately benefit major Wall Street banks. That’s because financial firms typically have fewer deductions for their on-shore earnings than do other companies such as manufacturing firms. Goldman’s effective U.S. income tax rate in 2016, for example, was in the range of 28%, which would translate to a massive tax cut of almost 10 percentage points based on the proposed new lower corporate rate of 20%. The exemption for overseas earnings would generate windfall profits for Goldman and other large corporations, but the evidence of past cuts in taxes on offshore profits suggest that there would be no benefit for U.S. workers. Goldman currently has some $25 billion in foreign earnings technically held overseas to avoid U.S. taxes. By also significantly cutting tax rates on business entities structured as partnerships or pass-through entities, the plan would cut taxes on hedge fund managers and owners. Managing an investment fund is a frequent choice for Wall Street professionals when they decide to leave major firms, like Goldman. Steve Mnuchin built a considerable share of his post-Goldman fortune by managing an investment fund. These tax changes are gold to Goldman and its executives, but threaten the rest of us by draining away revenue needed to pay for crucial public goods. Reform of the tax system to benefit the majority of Americans would include having Wall Street pay a larger share of taxes, not a shrinking share. Privatizing government infrastructure The Trump campaign promised to “Make America Great Again”—and a massive infrastructure package was a big part of that promise. But from what the Administration has said so far, its infrastructure plan would do more for the greatness of Goldman Sachs and other big Wall Street players than it would for ordinary Americans. As presented thus far, the infrastructure plan would rest heavily on the idea of giving Wall Street investors tax credits in exchange for contracting with the government to finance, construct, maintain, and operate critical infrastructure. That amounts to a government-subsidized privatization of infrastructure through so-called “Public Private Partnerships,” known as...
Categories: Friends of GEO, SE News

How To Erase Puerto Rico’s Debt Without Hurting Mom And Pop

October 15, 2017 - 2:00pm
Above photo: From Exchanging Ideas and More. Google is blocking our site. Please use the social media sharing buttons (upper left) to share this on your social media and help us breakthrough. During his visit to hurricane-stricken Puerto Rico, President Donald Trump shocked the bond market when he told Geraldo Rivera of Fox News that he was going to wipe out the island’s bond debt. He said on October 3rd: You know they owe a lot of money to your friends on Wall Street. We’re gonna have to wipe that out. That’s gonna have to be — you know, you can say goodbye to that. I don’t know if it’s Goldman Sachs but whoever it is, you can wave good-bye to that. How did the president plan to pull this off? Pam Martens and Russ Martens, writing in Wall Street on Parade, note that the U.S. municipal bond market holds $3.8 trillion in debt, and it is not just owned by Wall Street banks. Mom and pop retail investors are exposed to billions of dollars of potential losses through their holdings of Puerto Rican municipal bonds, either directly or in mutual funds. Wiping out Puerto Rico’s debt, they warned, could undermine confidence in the municipal bond market, causing bond interest rates to rise, imposing an additional burden on already-struggling states and municipalities across the country. True, but the president was just pointing out the obvious. As economist Michael Hudson says, “Debts that can’t be paid won’t be paid.” Puerto Rico is bankrupt, its economy destroyed. In fact it is currently in bankruptcy proceedings with its creditors. Which suggests its time for some more out-of-the-box thinking . . . . Turning Disaster into a Win-Win In July 2016, a solution to this conundrum was suggested by the notorious Goldman Sachs itself, when mom and pop investors holding the bonds of bankrupt Italian banks were in jeopardy. Imposing losses on retail bondholders had proven to be politically toxic, after one man committed suicide. Some other solution had to be found. Italy’s non-performing loans (NPLs) then stood at €210bn, at a time when the ECB was buying €120bn per year of outstanding Italian government bonds as part of its QE program. The July 2016 Financial Times quoted Goldman’s Francesco Garzarelli, who said, “by the time QE is over – not sooner than end 2017, on our baseline scenario – around a fifth of Italy’s public debt will be sitting on the Bank of Italy’s balance sheet.” His solution: rather than buying Italian government bonds in its quantitative easing program, the European Central Bank could simply buy the insolvent banks’ NPLs. Bringing the entire net stock of bad loans onto the government’s balance sheet, he said, would be equivalent to just nine months’ worth of Italian government bond purchases by the ECB. Puerto Rico’s debt is only $73 billion, one third the Italian debt. The Fed has stopped its quantitative easing program, but in its last round (called “QE3”), it was buying $85 billionper month in securities. At that rate, it would have to fire up the digital printing presses for only one additional month to rescue the suffering Puerto Ricans without hurting bondholders at all. It could then just leave the bonds on its books, declaring a moratorium at least until Puerto Rico got back on its feet, and better yet, indefinitely. According to the Bureau of Labor Statistics jobs data, 33,000 US jobs were lost in September, the first time the country has had a negative figure since 2010. It could be time for a bit more economic stimulus from the Fed. Successful Precedent Shifting the debt burden of bankrupt institutions onto the books of the central bank is not a new or radical idea. UK Prof. Richard Werner, who invented the term “quantitative easing” when he was advising the Japanese in the 1990s, says there is ample precedent for it. In 2012, he proposed a similar solution to the European banking crisis, citing three successful historical examples. One was in Britain in 1914, when the British banking sector collapsed after the government declared war on Germany. This was not a good time for a banking crisis, so the Bank of England simply bought the banks’ NPLs. “There was no credit crunch,” wrote Werner, “and no recession. The problem was solved at zero cost to the tax payer.” For a second example, he cited the Japanese banking crisis of 1945. The banks had totally collapsed, with NPLs that amounted to virtually 100 percent of their assets: But in 1945 the Bank of Japan had no interest in creating a banking crisis and a credit crunch recession. Instead it wanted to ensure that bank credit would flow again, delivering economic growth. So the Bank of Japan bought the non-performing assets from the banks – not at market value (close to zero), but significantly above market value. Werner’s third example was the US Federal Reserve’s quantitative easing program, in which it bought $1.7 trillion in mortgage-backed securities from the banks. These securities were widely understood to be “toxic” – Wall Street’s own burden of NPLs. Again the move worked: the banks did not collapse, the economy got back on its feet, and the much-feared inflation did not result. In each of these cases, he wrote: The operations were a complete success. No inflation resulted. The currency did not weaken. Despite massive non-performing assets wiping out the solvency and equity of the banking sector, the banks’ health was quickly restored. In the UK and Japanese case, bank credit started to recover quickly, so that there was virtually no recession at all as a result. The Moral Hazard Question One objection to this approach is the risk of “moral hazard”: lenders who know they will be rescued from their bad loans will recklessly make even more. That is the argument, but an analysis of data in China, where NPLs are now a significant problem, has relieved those concerns. China’s NPLs are largely being left on the banks’ books without writing them down. The concern is that shrinking the banks’ balance sheets in an economy that is already slowing will...
Categories: Friends of GEO, SE News

How Public Banks Can Fund Renewable Energy

October 12, 2017 - 11:00am
Above Photo: Wolfram Morales (left) of Sparkasse public banks in Germany, speaks with Al Weinrub (right), coordinator of the Local Clean Energy Alliance based in Oakland (Courtesy Oakland North) September 25, Friends of Public Bank of Oakland organized a public forum to hear Wolfram Morales of the German Sparkasse (East German Savings Bank Association) explain how Public Banking works in his country to fund renewable energy development. The East Bay Times as well as Oakland North covered the event and connected it to how Public Banks here could do the same thing in the US that Sparkasse do in Germany: offer low-interest rates to companies providing solar and wind resources, driving development. The East Bay Times: “Though public banks are a fixture in Europe, the only one that exists in the United States is the Bank of North Dakota, Morales said. There are more than 600 in Germany, most of which are county-level, putting billions into renewable energy development. Those banks are able to offer interest rates as low as 1 percent on loans, which is much lower than what commercial banks offer. “Speakers at the forum talked about how a public bank can help give the community more control over its energy sources.” Oakland North: “Public banks are mission-driven alternatives to Wall Street banks. They are controlled at the local level, and designed to respond to community needs. They offer more affordable financing to community-driven development, such as solar and wind infrastructure, small businesses and affordable housing. … “Germany currently has 400 municipally-owned public banks, known as Sparkassen, which first formed 200 years ago, said Morales.  He gave a detailed PowerPoint presentation to nearly 200 people who filled the seats of the council chamber floor, as he described how this network of local banks have been essential to Germany’s ‘energy transition.’”
Categories: Friends of GEO, SE News