Saturday, August 21, 2010

Bum rush proving to be a REALLY bad deal for Chicago

Nice to know that Chicagoans are really helping out Morgan Stanley improve their bottom line this year. Here's the lead in a recent Bloomberg story:

"Chicago drivers will pay a Morgan Stanley-led partnership at least $11.6 billion to park at city meters over the next 75 years, 10 times what Mayor Richard Daley got when he leased the system to investors in 2008."

Privatizing the parking meters in Chicago's been great for Morgan Stanley. But what about for Chicago?

Well - we signed over a lucrative franchise for BILLIONS less than it appears to be worth.

Morgan Stanley and its partners seem poised to reap phenomenal profits from this deal. Again, from the Bloomberg story:

"Morgan Stanley, Abu Dhabi Investment Authority and Allianz Capital Partners may earn a profit of $9.58 billion before interest, taxes and depreciation, according to documents for a $500 million private note sale by their Chicago Parking Meters LLC venture. That is equivalent to 80 cents per dollar of projected revenue

That's one HELL of a return! Wish I had access to investments like that!

Parking meter costs skyrocketed almost immediately after Mayor Daley shoved the deal through with no time for the aldermen to consider it. Now today, as a result of privatization, we pay more in Chicago to park at a meter than the Morgan Stanley bankers will pay to park in NYC. From the article:

"Morgan Stanley’s partnership raised parking rates twice since the lease began, and more are planned, the debt document says. Fees at some central business district meters rose to $4.25 an hour from $3 since January 2009 and will go to $6.25 in 2013. In midtown Manhattan, hourly rates are as much as $2.50, according to the New York City Department of Transportation."

The dubious deal gives Morgan Stanley the profit, and the people who pay to park in Chicago the shaft. Business as usual when an investment bank is involved.

The benefits of government assistance...

Wall Street Journal has a fabulous story today about the success of one particular government entitlement program - the bailout of the banks. While unemployment remains high in America, while those on Social Security are likely to see cuts in their entitlement program in the near future, while our federal, state and local governments are seriously in debt, our financial sector gleams brightly as a vision of success.

According to the WSJ story, the average monthly salary in 2009 in finance and insurance is nearly $12,000.

A month.

Up 23% from a year earlier.

More than double the average in NYC.

And that's just the wages paid to the new hires.

Imagine the possibilities for growth in this sector!!!

Especially when you can sell an instrument to one party and sell insurance (or take out insurance for yourself) that allows one to profit when the instrument you created blows up after you sell it off.

(As long as you disclose the names of the people who purchase the insurance!)

Also according to the story, we've seen a great divide grow in recent years between the salaries of bankers compared to the salaries of everyone else:

"Back in the 1970s, bankers’ salaries didn’t differ much from those of other folks. Amid the deregulation and financial innovation that followed, though, they began to break away from the pack. As of 2006, wages in finance were about 72% higher than the average for all professions, according to economists Ariell Reshef of the University of Virginia and Thomas Philippon of New York University

The bailout that was supposed to help the general economy start purring again has failed in that regard. But the engine that drove us off the cliff – the financial sector – the sector that got bailed out and bonused – is humming strongly now.

Don't let ANYONE tell you that government assistance doesn't work. Just look at our bankers. After requiring billions and billions of dollars in in federal assistance, they've managed to secure top wages during one of the worst recessions our country has experienced. What's been a terrible crisis for much of the country has been a bounty of riches for Wall Street. But that's what happens when failed bankers get the full backing support of the US government. They win. We lose. Or at least that's how it's looking today.

Sunday, August 8, 2010

On the language of unemployment...

I am slowly realizing that what we talk about when we talk about unemployment in this economy is largely fictional. A couple of months ago, we celebrated a decline in unemployment. We're no longer looking at 10% unemployment; the number is now hovering at 9.5%.

But when you look closer, that decline is not the result of improved employment and expanding economy. It's the result of not counting people who've despaired of finding a job in this market. If you stop looking for a job, you're no longer considered "unemployed."

That's a pathetic way to look at unemployment - that we're not going to count people who've given up hope of getting a job. Because for us to truly recognize the enormity of the problem, we need to fully count ALL the millions of people who are not employed, not just the ones who remain hopeful of getting a job once again someday.

Here's a link to Mark Thoma's post on the August unemployment report. Two years ago, we rescued our financial sector, we were told, to help the economy. However, two years after the rescue, two years of nice bonuses packages for those on Wall Street, the economy remains in peril.