[Majorityrights News] Trump will ‘arm Ukraine to the teeth’ if Putin won’t negotiate ceasefire Posted by Guessedworker on Tuesday, 12 November 2024 16:20.
[Majorityrights News] Alex Navalny, born 4th June, 1976; died at Yamalo-Nenets penitentiary 16th February, 2024 Posted by Guessedworker on Friday, 16 February 2024 23:43.
[Majorityrights Central] A couple of exchanges on the nature and meaning of Christianity’s origin Posted by Guessedworker on Tuesday, 25 July 2023 22:19.
[Majorityrights News] Is the Ukrainian counter-offensive for Bakhmut the counter-offensive for Ukraine? Posted by Guessedworker on Thursday, 18 May 2023 18:55.
Posted by DanielS on Thursday, 31 January 2019 15:24.
Donald Trump is President of The United States because he vowed to overturn the Iran Deal for Israel. Overturning the deal was not in the interest of most of the world, except for Israel, Saudi Arabia and The Russian Federation. By contrast, the rest of the world was served by the deal in its business resource interests and more - while the focus on commerce and modernization served not only practical and humanitarian ends but also contributed to a gradual process of liberalizing Iran away from Islam.
Britain, France and Germany are taking steps in their rational interests to skirt the sanctions:
Skirting U.S. sanctions, Europeans launch trade mechanism for Iran
PARIS/BERLIN (Reuters), 31 Jan 2019: France, Germany and Britain have set up a mechanism for non-dollar trade with Iran to avert U.S. sanctions, although diplomats acknowledge it is unlikely to free up the big transactions that Tehran says it needs to keep a nuclear deal afloat.
The “Green New Deal” endorsed by Rep. Alexandria Ocasio-Cortez, D.-N.Y., and more than 40 other House members has been criticized as imposing a too-heavy burden on the rich and upper-middle-class taxpayers who will have to pay for it. However, taxing the rich is not what the Green New Deal resolution proposes. It says funding would come primarily from certain public agencies, including the U.S. Federal Reserve and “a new public bank or system of regional and specialized public banks.”
Funding through the Federal Reserve may be controversial, but establishing a national public infrastructure and development bank should be a no-brainer. The real question is why we don’t already have one, as do China, Germany and other countries that are running circles around us in infrastructure development. Many European, Asian and Latin American countries have their own national development banks, as well as belong to bilateral or multinational development institutions that are jointly owned by multiple governments. Unlike the U.S. Federal Reserve, which considers itself “independent” of government, national development banks are wholly owned by their governments and carry out public development policies.
China not only has its own China Infrastructure Bank but has established the Asian Infrastructure Investment Bank, which counts many Asian and Middle Eastern countries in its membership, including Australia, New Zealand and Saudi Arabia. Both banks are helping to fund China’s trillion-dollar “One Belt One Road” infrastructure initiative. China is so far ahead of the United States in building infrastructure that Dan Slane, a former adviser on President Donald Trump’s transition team, has warned, “If we don’t get our act together very soon, we should all be brushing up on our Mandarin.”
The leader in renewable energy, however, is Germany, called “the world’s first major renewable energy economy.” Germany has a public sector development bank called KfW (Kreditanstalt für Wiederaufbau or “Reconstruction Credit Institute”), which is even larger than the World Bank. Along with Germany’s nonprofit Sparkassen banks, KfW has largely funded the country’s green energy revolution.
Unlike private commercial banks, KfW does not have to focus on maximizing short-term profits for its shareholders while turning a blind eye to external costs, including those imposed on the environment. The bank has been free to support the energy revolution by funding major investments in renewable energy and energy efficiency. Its fossil fuel investments are close to zero. One of the key features of KfW, as with other development banks, is that much of its lending is driven in a strategic direction determined by the national government. Its key role in the green energy revolution has been played within a public policy framework under Germany’s renewable energy legislation, including policy measures that have made investment in renewables commercially attractive.
KfW is one of the world’s largest development banks, with assets totaling $566.5 billion as of December 2017. Ironically, the initial funding for its capitalization came from the United States, through the Marshall Plan in 1948. Why didn’t we fund a similar bank for ourselves? Simply because powerful Wall Street interests did not want the competition from a government-owned bank that could make below-market loans for infrastructure and development. Major U.S. investors today prefer funding infrastructure through public-private partnerships, in which private partners can reap the profits while losses are imposed on local governments.
KfW and Germany’s Energy Revolution
Renewable energy in Germany is mainly based on wind, solar and biomass. Renewables generated 41 percent of the country’s electricity in 2017, up from just 6 percent in 2000; and public banks provided over 72 percent of the financing for this transition. In 2007-09, KfW funded all of Germany’s investment in Solar Photovoltaic. After that, Solar PV was introduced nationwide on a major scale. This is the sort of catalytic role that development banks can play—kickstarting a major structural transformation by funding and showcasing new technologies and sectors.
KfW is not only one of the biggest financial institutions but has been ranked one of the two safest banks in the world. (The other, Switzerland’s Zurich Cantonal Bank, is also publicly owned.) KfW sports triple-A ratings from all three major rating agencies—Fitch, Standard and Poor’s, and Moody’s. The bank benefits from these top ratings and the statutory guarantee of the German government, which allow it to issue bonds on very favorable terms and therefore to lend on favorable terms, backing its loans with the bonds.
KfW does not work through public-private partnerships, and it does not trade in derivatives and other complex financial products. It relies on traditional lending and grants. The borrower is responsible for loan repayment. Private investors can participate, but not as shareholders or public-private partners. Rather, they can invest in “Green Bonds,” which are as safe and liquid as other government bonds and are prized for their green earmarking. The first “Green Bond—Made by KfW” was issued in 2014 with a volume of $1.7 billion and a maturity of five years. It was the largest Green Bond ever at the time of issuance and generated so much interest that the order book rapidly grew to $3.02 billion, although the bonds paid an annual coupon of only 0.375 percent. By 2017, the issue volume of KfW Green Bonds reached $4.21 billion.
Investors benefit from the high credit and sustainability ratings of KfW, the liquidity of its bonds, and the opportunity to support climate and environmental protection. For large institutional investors with funds that exceed the government deposit insurance limit, Green Bonds are the equivalent of savings accounts—a safe place to park their money that provides a modest interest. Green Bonds also appeal to “socially responsible” investors, who have the assurance with these simple and transparent bonds that their money is going where they want it to. The bonds are financed by KfW from the proceeds of its loans, which are also in high demand due to their low interest rates, which the bank can offer because its high ratings allow it to cheaply mobilize funds from capital markets and its public policy-oriented loans qualify it for targeted subsidies.
Roosevelt’s Development Bank: The Reconstruction Finance Corporation
KfW’s role in implementing government policy parallels that of the Reconstruction Finance Corporation (RFC) in funding the New Deal in the 1930s. At that time, U.S. banks were bankrupt and incapable of financing the country’s recovery. President Franklin D. Roosevelt attempted to set up a system of 12 public “industrial banks” through the Federal Reserve, but the measure failed. Roosevelt then made an end run around his opponents by using the RFC that had been set up earlier by President Herbert Hoover, expanding it to address the nation’s financing needs.
The RFC Act of 1932 provided the RFC with capital stock of $500 million and the authority to extend credit up to $1.5 billion (subsequently increased several times). With those resources, from 1932 to 1957 the RFC loaned or invested more than $40 billion. As with KfW’s loans, its funding source was the sale of bonds, mostly to the Treasury itself. Proceeds from the loans repaid the bonds, leaving the RFC with a net profit. The RFC financed roads, bridges, dams, post offices, universities, electrical power, mortgages, farms and much more; it funded all of this while generating income for the government.
The RFC was so successful that it became America’s largest corporation and the world’s largest banking organization. Its success, however, may have been its nemesis. Without the emergencies of depression and war, it was a too-powerful competitor of the private banking establishment; and in 1957, it was disbanded under President Dwight D. Eisenhower. That’s how the United States was left without a development bank at the same time Germany and other countries were hitting the ground running with theirs.
Ellen Brown is an attorney, chairman of the Public Banking Institute, and author of twelve books including “Web of Debt” and “The Public Bank Solution.”
Today some U.S. states have infrastructure and development banks, including California, but their reach is very small. One way they could be expanded to meet state infrastructure needs would be to turn them into depositories for state and municipal revenue. Rather than lending their capital directly in a revolving fund, this would allow them to leverage their capital into 10 times that sum in loans, as all depository banks are able to do, as I’ve previously explained.
The most profitable and efficient way for national and local governments to finance public infrastructure and development is with their own banks, as the impressive track records of KfW and other national development banks have shown. The RFC showed what could be done even by a country that was technically bankrupt, simply by mobilizing its own resources through a publicly owned financial institution. We need to resurrect that public funding engine today, not only to address the national and global crises we are facing now but for the ongoing development the country needs in order to manifest its true potential.
Central Europe, Hungary, China – Shanghai became the center of attention for a week in November where the first China International Import Expo took place with the participation of over 2800 companies from 130 countries and regions of the world. Hungary was a guest of honor among many other great nations such as the United-Kingdom, Russia and Germany. Hungarian companies promoted their products as politicians paved the way for smooth cooperation.
This is an enormous achievement for Hungarian diplomacy as we were the only country from the CEE region to be invited as main guests. For several days the Hungarian press analyzed all the benefits of this landmark expo, praising Hungarian-Chinese relations which have never been so strong in our 70 years of official cooperation. However, an event of even greater significance was held right after Mr Viktor Orbán, Prime Minister of Hungary, traveled back from Shanghai; an event that the press did not deal with so much, perhaps because it wasn’t as spectacular as the one in China.
Leaders of the 16+1 central banks met in Budapest to strengthen their ties in the field of finance, opening a new chapter in CEE-China relations. Mr Orbán gave a speech that contained certain thoughts that must be noted because they are visionary.
This was the first time that the central bankers of the sixteen countries and China have held a joint conference.
“The past ten years have proved that the rise of the Chinese economy is not a temporary phenomenon. China will be a fixed star in the period ahead, and will be a major player in the world economy for a very long time,” the PM said. He further noted that in addition to historical and geographical relations, economic relations will also come into being between the two rising power centres: China and Central Europe. The two regions will be increasingly connected to each other.
“This involves no less than China and Central Europe forming part of a single contiguous geographical region,” continued Mr Orbán, adding that by rail it may be possible to travel and transport any goods between China and CEE in two weeks. If we are able to build a rapid rail link from the Greek ports to Europe, this journey will be even faster.
There’s one big issue, though, that makes building Eurasia harder than it should be. The emotional and ideological trap that some western European countries are in. However, eventually everyone will realise that we must adopt an approach to China that is free from ideology. We must accept that we are different, we organise our lives differently and we lead our countries in different ways.
When it comes to Hungary the trade volume between us and China is close to 70 billion dollars, and its rate of growth is staggering, standing at an average of 10 per cent; and it grew by 18 per cent in the first three quarters of 2018.
Another very important point was made by the Prime Minister, stating that it seemed increasingly likely that we would need to prepare ourselves for the dollar losing its monopoly in world trade. This is a statement not to be taken lightly.
Well, Hungarians take it seriously, which is reflected in our monetary policy as well. Orbán told his audience: “When we issue bonds abroad, we will do so in the direction of the East, and we shall work on creating the possibility for the yuan to be the currency in which bilateral trade is settled”. Can you see why I believe that this event, with this speech, is more important than the expo in Shanghai?
The shocking remarks kept coming: According to analyses – partly Hungarian and partly international – that land on the Premier’s desk, there is a 70 per cent probability of another approaching crisis. They claim that we should expect an economic decline of unspecified nature: smaller than 2008, but almost certain to take place. This makes it all the more essential for Hungary to stand on two feet and stick to her policy of opening to the East.
If we are serious about building Eurasia, we must implement major developments, primarily infrastructure developments, because we must link China, Central Europe and the Balkans to a single network: a network on a global scale.
Hungary is in the front-line of history, yet again. We are on the cusp of a new era, and our Central European friends can trust us and look to us when it comes to building cooperation with China, after all we must be doing something right, being the only ones in the heart of Europe to enjoy the most special attention and strategic political partnership with the Asian giant. Building a truly unitary Eurasia will depend on how CEE countries finally find a common ground and work together to make the journey on the New Silk Road a future success.
There is the widespread notion that Hitler was fighting the Money Power and that he was a problem for the Bankers because he created a Usury free economy. But there was no Usury free Third Reich economy. The German taxpayer continued to pay interest over the substantial national debt and commercial banking received interest for its fractional reserve banking based loans, which to a large extent financed the war.
“Our greatest social task is the abolition of interest slavery. This responsibility to abolish interest slavery towers above all other issues of the day. It is the only solution to the greatest problem of our time. The breaking of interest slavery is the most important moral imperative in social terms, it rises in its general significance far beyond all questions of the day, it is the solution of social questions, it is the only way out of the terrible confusion of the time. The abolition of interest slavery will deliver us from ultra-capitalist domination while avoiding both Communist destruction of the human spirit and Capitalist degradation of labour. The abolition of interest slavery opens the way to a truly social economy, by liberating us from the overwhelming domination of money. It opens the way to a state based on creative work and genuine accomplishment.”
– Gottfried Feder 1919
Where does Hitler’s reputation for anti-Usury activism come from? It was more Nazi propaganda to get him to power than his actual policies after he did. It was not Hitler, but Gottfried Feder who was the anti-Usury man of the Nazi.
Hitler in Mein Kampf:
” For the first time in my life I heard (through Feder, AM) a discussion which dealt with the principles of stock exchange capital and capital which was used for loan activities. After hearing the first lecture delivered by Feder, the idea immediately came into my head that I had found a way to one of the most essential prerequisites for the founding of a new party.
To my mind, Feder’s merit consisted in the ruthless and trenchant way in which he described the double character of the capital engaged in stock exchange and loan transactions, laying bare the fact that this capital is ever and always dependent on the payment of interest.”
And:
“The struggle against international finance capital and loan capital has become one of the most important points in the program on which the German nation has based its fight for economic freedom and independence.”
Point 11 of the NSDAP 25 point program, a manifesto that officially (but not in practice) expressed Nazi policy:
“Abolition of unearned (work and labour) incomes. Breaking of debt (interest)-slavery.”
Hitler put it this way:
“Our financial principle: Finance shall exist for the benefit of the state; the financial magnates shall not form a state within the state. Hence our aim to break the thralldom of interest.
Relief of the state, and hence of the nation, from its indebtedness to the great financial houses, which lend on interest. Nationalization of the Reichsbank and the issuing houses, which lend on interest.”
But as we shall see, Hitler did not implement any serious monetary reform after he came to power. He did make finance completely subservient to the State and, more specifically, rearmament. But he did not nationalize any banks and the Reichsbank was already nationalized by the Weimar Republic by the time he came to power. He did not end interest payments to ‘the issuing houses’, who must have made an uncanny fortune throughout the war. He did nothing to decouple the Stock Exchange from the economy.
Feder was made Secretary of State for Economic Affairs, but was from day one sabotaged by Reichsbank President Hjalmar Schacht and replaced by him in August 1934. It was Schacht who was to manage the Nazi economy, not Feder.
Schacht’s and Hitler’s policies allowed full control of the economy, which was used to maximize production for the sake of war. But it did absolutely nothing to limit in any way massive war profiteering by the financial and industrial classes that brought him to power.
The Reichsmark
The Reichsmark was created 1924 after its predecessor, the Papiermark, had been inflated into oblivion. 1 Reichsmark was 1 Trillion Papiermark. The Reichsmark lasted until 1948, when it was replaced by the Deutsche Mark. So Hitler simply used the monetary system that he inherited from the Weimar Republic. The Reichsmark, like any other banking unit, was lent into circulation. It was a Gold backed unit until 1931, when the depression forced the Reichsbank (the Central Bank) to implement exchange controls, which effectively took Germany off the Gold Standard. A Gold peg remained in place. There were 1, 2 and 5 Reichsmark silver coins.
Hitler inherited the official Weimar 4,5% maximum interest rate. He ruled by decree, but never changed this. In fact, after the Nazi economy began to boom due to heavy spending on rearmament, it seems interest rates were raised to combat inflation. I’ve been unable to find any data on real interest rates during the Nazi era.
Who was Hjalmar Schacht?
Schacht was born in 1877 as the son of an aristocratic family. He joined Dresdner Bank in 1903 and already in 1905 was meeting people like JP Morgan and Theodore Roosevelt. He studied Hebrew to advance his career. In 1908 he joined Freemasonry. He oversaw the financing of Belgian/German trade during WW1 and used his former employer Dresdner Bank for this. This blatant conflict of interest led to his dismissal, but the revolving door was not invented recently and he was taken back by Dresdner Bank after this.
In 1923 he joined the Reichsbank and played a key role in ending the hyperinflation of the day. A little later he was made President of the Reichsbank and remained in this post until 1930. Since at least 1923 he was actively resisting the war reparations that were destroying the German economy and called for resurrection of German power. In 1926 he became involved with the NSDAP and supported their rise to power, although he never became a member.
He oversaw the formation of I.G. Farben in the twenties.
Schacht was a member of the Keppler Circle, a small group of businessmen that were at the heart of the Nazi movement and which financed Hitler’s rise to power. Wall Street was very influential in this group and contrary to what many Hitler apologists claim, played a heavy role in both financing him and war profiteering.
Shortly after Hitler came to power he was reinstated as President of the Reichsbank and when he replaced Feder as Reichscommissar for the Economy, he basically gained full control over the economy. This lasted until he was fired in 1939, when the German economy was overheating and Schacht wanted to limit spending on rearmament and was accused of ‘mutiny’ by Hitler.
Banking in Nazi Germany before the war
After becoming President of the Reichsbank, Schacht immediately started implementing policies aiming at giving the State full control of financial markets. This was known as ‘the New Plan’:
Individuals can declare themselves bankrupt but it’s not so easy for nations. Argentina defaulted in 2001 and she is still suffering the consequences. The UK national debt currently stands at £1.8 trillion, which is almost as much as our GDP. The annual cost of this debt is £48 billion.
Few modern states earn more than they spend. The exceptions are oil-rich states with small populations, like Norway or Qatar. Most states spend more than they earn, particularly on fighting wars. They cover the deficit by borrowing from the banks and by selling bonds. This is known as the National Debt. Hilaire Belloc explained it in ‘Economics for Helen’:
“When these national loans began the Government honestly intended to pay back what they had borrowed. But the method was so fatally easy that as time went on, and the debt piled up and up until there could be no question of repaying it all: all the State could do was to pay the interest out of taxation. It remained indebted to private rich men for the principle, that is the whole original sum, and meanwhile, through further wars, this hold of the rich men upon all the rest of the community perpetually increased.”
Countries with vast natural resources and reserves of gold and foreign currencies, like the United States, can function with massive debts because the banks and bondholders trust them. But countries with no collateral can only borrow more money, for as long as they can.
When countries run out of credit they are reduced to starvation, unless some help is extended. Germany’s national debt was partly written off at the Lausanne Conference in 1932 and again at the London Conference in 1953. The Allies decided that it made more sense to get Germany back on her feet. At least, that way they would get some of their money back. It worked, and Germany cleared her debts as her economy recovered.
In 2000 a Canadian proposal for a debt moratorium was rejected by the World Bank and the International Monetary Fund, but eventually, all national debts will have to be rescheduled, reduced or abolished. Creditors, including private bondholders, insurance companies and pension fund managers, will cling to the present system because they want their money back, but ultimately it’s unsustainable.
My parents came from widely diverse backgrounds, for my Father was a motor car tester, and my Mother was Governess to the children of a very senior army officer, I was born in the summer of 1924, and had a very reasonable education, initially at a state school, and then at ten years of age, to a well respected Grammar School in the Home Counties. At the age of 14, when I was on my way home from School, I came across a poorly dressed old man wheeling a pram on which he had fixed a wind-up gramophone and was playing a recording of a speech by Sir Oswald Mosley, who was addressing his audience as “my Blackshirt brothers”. I listened intently until the record was finished, and then thanked the old man, giving him a penny from my pocket. Arriving home, I explained to my Father what I had heard, and he told me how on one occasion he had gone up to London to make trouble at a Mosley meeting, but he had been so impressed that he had finished up cheering his support. I remember that. Before I was old enough to follow my Father’s example, the war was upon us. I was at University, and Sir Oswald and Lady Mosley were in prison under law 18B, together with scores of his senior officers. In fact, I never wore a black shirt myself.
After the war, they were all discharged from prison without being charged, and ‘Union Movement’ was formed. The new party had headquarters at an address in London and produced a newspaper called ‘Action’ with the front emblazoned with the Blackshirt emblem, a circle crossed by one flash, not two as in SS.
By this time I was making regular visits to London on business and would call into the London Office, and chat at length with Mr Raven Thomson, who was Editor of the newspaper. I used to make a contribution now and then to ‘Action’ and kept in touch. We had a group called ‘Friends of Union Movement’, and every now and again would attend a dinner in London, with ‘OM’ as speaker. He always spoke well, and his following was intensely loyal.
Of course, prompted by the Jewish lobby, things were made very difficult. We were obliged to drop ‘The European Salute’, and then the blackshirt emblem. The Home Office declared that the wearing of a black shirt constituted a uniform, and in spite of the fact that OM insisted that wearing the black shirt was merely to identify Party members during a commotion it was banned.
Raven Thomson died from the long-term effects of his brutal treatment during his stay in prison, and OM went to live in Orsay, France.
All these people have left their mark, and although several splinter movements have started up to maintain the creed, none have really been able to rally the public as OM was able to do.
This is not necessarily to do with their inadequacies, but the result of well organised, and Jewish funded publicity blocks that have prevented both reporting and any publicity leaking out, however small.
Once the administration was changed in Germany after the war, OM adopted a slogan “Europe a Nation”, which was his frequent cry. Were he to be here in 2016, he would have been aghast to note that the Jewish lobby is once again running things over there.
When OM retired into France he went there on the basis that eventually he would be called. He never was of course, which is a tragedy, for he would have been a brilliant statesman.
Nevertheless, he always kept his ear to the ground and clearly read the UK papers. This is made clear when some reporter named Peterborough reported on a rowdy meeting in Oxford, that the stewards had dealt with the rowdies as savagely as OM had done at his Olympia meeting. His reply is appended below.
“Sir, a note by Peterborough (May 14th) appears to compare the actions of stewards in defending my meeting at Olympia from attack, with the action of those recently attacking someone else’s meeting at Oxford. The difference is surely clear to any impartial mind.
Facts regarding Olympia are also on public record in contemporary Press reports and are now worth recalling. The attack on a perfectly legal meeting was openly organised and publicised for three weeks in advance, without any intervention of authority to prevent a flagrant breach of the law.
The assault of armed roughs was defeated by our young men who were accused of using their fists too vigorously. Soon after the occasion (the largest public meeting ever held in Britain) at Earls Court Exhibition Hall, was conducted in perfect order. Previously free speech had been systematically denied to anyone unpopular with Communism or the anarchic left. e.g. Sir Winston Churchill’s election meeting in Dundee when he was just out of hospital, reported in the Times under the heading “Mr Churchill shouted down.”
Authority was supine during a period when free speech ceased to exist. This was the origin of the Blackshirt movement, which opponents described as my “private army”. The means to defend ourselves were subsequently removed by special act of Parliament.
It then became more than ever, the duty of Government itself to maintain order, and in this duty, then and now, it conspicuously fails. In agreeing that no man should be allowed a private army, I suggest that Britain needs a Government with the will to maintain order which includes free speech for all. ”
Posted by DanielS on Thursday, 25 October 2018 15:46.
Student Debt Slavery II: Time to Level the Playing Field
2018 by Ellen Brown
This is the second in a two-part article on the debt burden America’s students face. Read Part 1 here.
The lending business is heavily stacked against student borrowers. Bigger players can borrow for almost nothing, and if their investments don’t work out, they can put their corporate shells through bankruptcy and walk away. Not so with students. Their loan rates are high and if they cannot pay, their debts are not normally dischargeable in bankruptcy. Rather, the debts compound and can dog them for life, compromising not only their own futures but the economy itself.
“Students should not be asked to pay more on their debt than they can afford,” said Donald Trump on the presidential campaign trail in October 2016. “And the debt should not be an albatross around their necks for the rest of their lives.” But as Matt Taibbi points out in a December 15 article, a number of proposed federal changes will make it harder, not easier, for students to escape their debts, including wiping out some existing income-based repayment plans, harsher terms for graduate student loans, ending a program to cancel the debt of students defrauded by ripoff diploma mills, and strengthening “loan rehabilitation” – the recycling of defaulted loans into new, much larger loans on which the borrower usually winds up paying only interest and never touching the principal. The agents arranging these loans can get fat commissions of up to 16 percent, an example of the perverse incentives created in the lucrative student loan market. Servicers often profit more when borrowers default than when they pay smaller amounts over a longer time, so they have an incentive to encourage delinquencies, pushing students into default rather than rescheduling their loans. It has been estimated that the government spends $38 for every $1 it recovers from defaulted debt. The other $37 goes to the debt collectors.
The securitization of student debt has compounded these problems. Like mortgages, student loans have been pooled and packaged into new financial products that are sold as student loan asset-backed securities (SLABS). Although a 2010 bill largely eliminated private banks and lenders from the federal student loan business, the “student loan industrial complex” has created a $200 billion market that allows banks to cash in on student loans without issuing them. About 80 percent of SLABS are government-guaranteed. Banks can sell, trade or bet on these securities, just as they did with mortgage-backed securities; and they create the same sort of twisted incentives for loan servicing that occurred with mortgages.
According to the Consumer Financial Protection Bureau (CFPB), virtually all borrowers with federal student loans are currently eligible to make monthly payments indexed to their earnings. That means there should be no defaults among student borrowers. Yet one in four borrowers is now in default or struggling to stay current. Why? Student borrowers are reporting widespread mishandling of accounts, unexplained exorbitant fees, and outright deception as they are bullied into default, tactics similar to those that homeowners faced in the foreclosure crisis. The reports reveal a repeat of the abuses of the foreclosure fraud era: many borrowers are unable to obtain basic information about their accounts, are frequently misled, are surprised with unexpected late fees, and often are pushed into default. Servicers lose paperwork or misapply payments. When errors arise, borrowers find it difficult to have them corrected.
Abuses and fraud in handling student loans have brought the Education Department’s loan contractors under fire. In January 2017, the Consumer Financial Protection Bureau sued Navient, one of the largest contractors, alleging that the company “systematically and illegally [failed] borrowers at every stage of [student loan] repayment.”
Getting a Fair Deal
The federal government could relieve these debt burdens, given the political will. A stated goal of the changes being proposed by the Trump Administration is to simplify the rules. The simplest solution to the student debt crisis is to make tuition free for qualified applicants at public colleges and universities, as it is in many European countries and was in some US states until the 1970s. If the federal government has the money to lend to students, it has the money to spend on their tuition (capped to curb tuition hikes). It would not only save on defaults and collections but could turn a profit on the investment, as demonstrated by the seven-fold return from the G.I. Bill. (See Part 1 of this article.)
Alternatively, the government could fund tuition costs and debtor relief with a form of “QE for the people.” Instead of buying mortgage-backed securities, as in QE1, the Fed could buy SLABS and return the interest to students, making the loans effectively interest-free (as were the $16+ trillion in loans made to the largest banks after the 2008 crisis). QE that targeted the real economy could address many other budget issues as well, including the infrastructure crisis and the federal debt crisis; and this could be done without triggering hyperinflation. See my earlier articles here, here and here.
Needless to say, however, the government is not moving in that direction. While waiting for the government to act, there are things students can do; but first they need to learn their rights. According to a new survey reported in November 2017, students are often in the dark about key details of their student loan debt and the repayment options available to them. To get started, see here and here.
Under the Borrower’s Defense to Repayment program, you can get your loans completely discharged if you can prove they were based on deception or fraud. That is one of the alternatives the Administration wants to take away, so haste is advised; but even if it is taken away, fraud remains legal grounds for contract rescission. A class action for treble damages against offending institutions could provide significant financial relief.
Students also have greater bankruptcy options than they know. While current bankruptcy law exempts education loans and obligations from eligibility for discharge, an exception is made for “undue hardship.” The test normally used is that paying the loan will prevent the borrower from sustaining a minimum standard of living, his financial situation is unlikely to change in the future, and he has made a good faith effort to pay his loans. According to a 2011 study, at least 40 percent of borrowers who included their student loans in their bankruptcy filings got some or all of their student debt discharged. But because they think there is no chance, they rarely try. Only about 0.1 percent of consumers with student loans attempted to include them in their bankruptcy proceedings. (Getting a knowledgeable attorney is advised.)
For relief as a class, students need to get the attention of legislators, which means getting organized. Along with degree mill fraud and contract fraud, a cause of action ripe for a class action is the student exclusion from bankruptcy protection, a blatant violation of the “equal protection” clause of the Fourteenth Amendment. If enough students filed for bankruptcy under the “undue hardship” exception, just the administrative burden might motivate legislators to change the law.
Posted by DanielS on Sunday, 21 October 2018 06:00.
Ilan Goldfajn (born March 12, 1966) is an Israeli-born Brazilian economist and the current President of the Central Bank of Brazil. Biography: Goldfajn was born in Haifa, Israel. He graduated in Economics from the Federal University of Rio de Janeiro, received a master’s degree from the Pontifical Catholic University of Rio de Janeiro and a doctorate from MIT. He was appointed to the position of President of the Central Bank by Minister of Finance Henrique Meirelles on May 12, 2016.
SAO PAULO (Reuters) - Brazil’s presidential front-runner Jair Bolsonaro said on Saturday he does not rule out keeping acclaimed central bank chief Ilan Goldfajn in the job, on a day that thousands took to the streets of major cities to protest against the far-right candidate: “I am not sure if he will be kept but what is working should be kept,” Bolsonaro told journalists in Rio when asked about Goldfajn’s future.
At the helm of the central bank since June 2016, Goldfajn has kept a tight lid on inflation and was considered the best central banker by The Banker magazine for taming inflation in Latin America’s largest economy.
Goldfajn is preparing to step down by year’s end, Bloomberg reported on Thursday.
As the Brazilian central bank does not have full institutional independence, incoming presidents typically replace its top official, creating political risk for monetary policy. President Michel Temer will leave office on Jan. 1.
Bolsonaro also said on Saturday that he intends to tap astronaut Marcos Pontes as science and technology minister in his eventual government. The candidate had already announced part of his potential cabinet, including banker Paulo Guedes as economy minister, retired Army general Augusto Heleno Pereira as defense minister and Congressman Onyx Lorenzoni as his chief of staff.
WOMEN-LED PROTESTS
FILE PHOTO: Presidential candidate Jair Bolsonaro is pictured during a news conference in Rio de Janeiro, Brazil October 11, 2018. REUTERS/Ricardo Moraes
Bolsonaro, a polarizing candidate who has been charged with hate speech for his comments regarding gays, blacks and women, faced a second wave of women-led protests in a month on Saturday.
A Facebook group called Women United Against Bolsonaro invited protesters to gather in 26 Brazilian cities, including Rio de Janeiro and Sao Paulo. Other movements also organized protests against Bolsonaro.
In the most polarizing election in a generation, Bolsonaro’s opponent in the Oct. 28 runoff is leftist candidate and former Sao Paulo Mayor Fernando Haddad.
According to a recent survey by pollster Datafolha, Bolsonaro was expected to win 59 percent of votes, compared to Haddad’s 41 percent.
Bolsonaro has successfully pitched himself as the anti-establishment candidate, gaining voters fed up with political graft and violent crime.
The far-right candidate nearly died from a stab wound at a rally in early September and skipped debates and most campaign events after spending weeks in the hospital.
Reporting by Rodrigo Viga Gaier in Rio de Janeiro; Writing by Carolina Mandl; Editing by Alistair Bell and Bill Trott
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Ilan Goldfajn (born March 12, 1966) is an Israeli-born Brazilian economist and the current President of the Central Bank of Brazil. Biography: Goldfajn was born in Haifa, Israel. He graduated in Economics from the Federal University of Rio de Janeiro, received a master’s degree from the Pontifical Catholic University of Rio de Janeiro and a doctorate from MIT. He was appointed to the position of President of the Central Bank by Minister of Finance Henrique Meirelles on May 12, 2016.
FILE PHOTO: Presidential candidate Jair Bolsonaro is pictured during a news conference in Rio de Janeiro, Brazil October 11, 2018. REUTERS/Ricardo Moraes