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Moody&rsquo,Moncler Outlet;s this week published a (subscription required) that crystallizes a lot of the discussion regarding bankruptcies and defaults that has been going around muniland lately:

Recent decisions to seek bankruptcy protection by two large California cities – Stockton and San Bernardino – provide some indication that willingness to pay debt obligations may be eroding in the US municipal market. Although many municipalities have faced severe fiscal pressures since the start of financial crisis, only a handful of municipalities have chosen not to pay their debt.

Most of these municipalities have defaulted due to exposure to failing enterprises, such as a convention center, sports arena,air jordan france, or other project that was backed by a government until the project and related debt were left to falter. In contrast,piumini moncler, Stockton and San Bernardino’s pursuit of bankruptcy are different and potentially more significant given that these defaults emanate not from enterprise risk but instead from stress on core government operations, notably high pension and other compensation costs and debt service.

Moody’s is saying that defaults in this space typically come from municipalities collapsing from the weight of some public project whose cash flow was never enough to cover its expenses and debt service,Moncler Outlet Online. These are projects that were either never vetted properly or were undertaken by municipalities with insufficient professional expertise to manage them. Some were outrightboondoggles.

With the recent moves by San Bernardino and Stockton, Moody’s says that there is a developing trend of cities using bankruptcy to cleanse themselves of liabilities,http://www.airjordanmagasinfrrr.com/, including those todebtholders, rather than raising taxes or pursuing other sources of revenue,nike air jordan. The audience for Moody&rsquo,air jordan pas cher;s commentary is bondholders, so it makes sense for them to view this as an alarming trend. But as a citizen I think of these moves toward bankruptcy as a positive for communities that are groaning under the weight of bloated labor contracts and pensions for public safety workers. I think in many cases adjustments to labor contracts, which for most municipalities make up 50 to 80 percent of general fund expenses, can only happen in a setting where municipal leaders have the right to throw them out. That only happens in bankruptcy court.

Moody’s does not rate all municipal bond issuers, but they do rate 8,100 local governments. Out of that pool they provide a list of the handful of places where they see high default risk. I thought it would be interesting to determine whether the problems these local governments face came from enterprise debt – such as airports, sport stadiums, etc. – or from this emerging trend of general fiscal weakness. Here is what I found:

Since Stockton’s and San Bernardino&rsquo,jordan pas cher;s bankruptcies were announced, we’ve had an outburst of weak municipalities coming forward to air their dirty laundry. Many of these likely have falling revenues and bloated expenses. The jury is still out on how widespread this new trend may be, and it’s likely we will see more analysis like Moody’s published soon.

Outside President Asif Ali Zardari’s , I chatted to a middle-aged woman passing by about the floods in Pakistan. “I have every sympathy for Pakistan and the Pakistanis,jordan pas cher, but he is not helping them much, is he?” she said. Another womanasked me to explain why it was that the protesters were not focused on the floods but demonstrating “about all sorts”. Inside the rally, a young British Pakistani who had recently returned from a visit to his family home in Kashmir complained about negativestereotypingin the media of Pakistan that had reduced a country of some 170 million people to “a terrorist threat”.

If there is a common thread to to, it is asense of confusion,Moncler, not about whether to help, but how to help. That, andthe dehumanising impact of stereotypes -corrupt politicians,angry bearded protesters,suicide bombers to name but a few &ndash,chaussures air jordan;that obscure the impact of the floods on thevery real people &ndash,moncler doudoune; 14 millionof them -affected by the disaster.

In the short term, the weak civilian government has been slammedfor failing to come up with a clear plan to address the immediate needs of those hit by the floods. Nor has itprovided the leadership that might rally all institutions and people behind it. The result has been that the Pakistan Army, long , has stepped in to fill the void, leading efforts to rescue flood victims. Meanwhile, asPakistani politicians squabbled amongst themselves and , and as Zardaritravelled abroad to France and Britain,the banned Jamaat-ud-Dawa &ndash,Piumino Moncler; the humanitarian wing of the Lashkar-e-Taiba militant group -, as itdid in the 2005 earthquake in Kashmir.

The United States, alongwithother countries, has been ratcheting up its aid efforts, and sending military helicopters for relief and rescue operations. However, I can’t help but feel a bit uneasywhen withIslamist charities like the Jamaat ud-Dawa. Thismay be partially true, but it isalso part of the same dehumanising process, as though the flood victims are no more than “hearts and minds” to be won over, rather than ,doudoune moncler.International and Pakistani NGOs are doing what they can – although for those who want to help,itcan be hard for outsiders to work outwhich charity best deserves donations (inside Pakistan, is widely respected.)

But ifunderstanding how to alleviatethe short-term crisis is hard enough, the question of how to help Pakistan in the long term is even more perplexing.The damage to itsfragile economy is likely to be feltnot just this year – -but ingrain sowings for food supplies in the future. The impact on society in a country in a battle against Islamist militancy is yet to be fully understood, although popular anger against the government over its response to the floods does not bode well.Add to that&ndash,moncler; – and the need to bolster Pakistan’s defences in the future against water crises (both shortage and excess) and you have a reconstruction challenge which would defy even the strongest of governments.

At a crude level, Pakistan needs better water management,nike air jordan, better irrigation and a reversal of the deforestation which has been widely blamed for exacerbating the flooding. Deforestation has a double impact.Firstly there isnothing to slow flood waters and mudslides,air jordan pas cher. Secondly, it contributes to soil erosion, silting up river waters so that dams and levees downstream .Pakistan’s forests have been ravaged by an illegal timber mafia, .Reversing that processis both an obvious need and -as with so many obvious needs in Pakistan -a political nightmare.

The economy itself might actually tick up slightly,Moncler Outlet. Naturaldisasters are often followed by a reconstruction boom. But reconstruction which does not take account of the need for sustainable development wouldleave Pakistan exposed to more natural disasters in the future, particularly if uneven monsoons combinewith fastermelting of the Himalayan glaciers which feedits rivers. Reconstruction which exacerbates incomedisparities and feeds corruptionwill tug even harder at the country’s fragile social fabric.

Wouldresuscitating aDepression-era banking law strengthen the financial system that we have today? There are many, including me, who believe a reinstatement of would help separate the risks of high-velocity, high-volume securities speculation from the pedestrian activity of holding retail deposits. Often forgotten in the discussion of Glass-Steagall is the law’s primary accomplishment: the creation of deposit insurance through the FDIC, which promptly ended the recurring curse of mass withdrawal of retail deposits during financial crises. My grandparents lost all their savings in the banking crisis of 1933. In the wake of Glass-Steagall, the idea that their bank deposits were insured must have seemed like a miracle to them. This act established confidence in the banking system among everyday savers.

Yesterday, DealBook’s Andrew Ross Sorkin in a piece focusing on Massachusetts Senate candidate Elizabeth Warren. Sorkin argues that the dismantling of Glass-Steagall was not the cause of the financial crisis. Furthermore, he says that Warren’s proposal to reinstate Glass-Steagall is misguided and would not have prevented the global meltdown of 2008.

I don’t want to speak for Warren, a Harvard Law School professor, but I think what she is pointing to is the need for an updated version of the law, a Glass-Steagall 2.0,Jordan Pas Cher. Sorkin’s description of why Glass-Steagall would have done little to avert the financial crisis of 2008 parrots the argument made by Wall Street’s elite. See this fromDecember 2009,air jordan, for instance:

“If you look at what happened, with or without Glass- Steagall, it would have made no difference,” said H. Rodgin Cohen, chairman of New York-based law firm Sullivan & Cromwell LLP, who represented one side or the other in more than a dozen transactions stemming from the financial crisis last year, including the rescues of Bear Stearns Cos., Fannie Mae, Wachovia Corp., and American International Group Inc.

Cohen and others say the law wouldn’t have saved Bear Stearns or Lehman Brothers Holdings Inc., both of which were pure investment banks, from collapse. And the government would not have been able to enlist JPMorgan Chase & Co. to take on the assets of Bear Stearns or allow Goldman Sachs Group Inc. and Morgan Stanley to become bank holding companies, giving them access to the Federal Reserve’s discount window.

Sorkin and Cohen are attacking a straw man. Few are advocating a reinstatement of the statute as it existed on the books in 1933. Banks are different beasts now; the largest of them are massive depository institutions with securities trading and investment banking operations bolted on the side,doudoune moncler femme. It’s the massive leverage and the speculation of the trading and investment banking arms that concern so many. Adair Turner, the former chairman of the UK&rsquo,Doudoune Moncler Pas Cher;s Financial Services Authority, to the British Bankers Association:

The key point to recognize is that the activities which caused the crisis were not ones which had been previously defined,Doudounes Moncler, under for instance Glass Steagall, as clearly outside commercial banking – activities such as equity underwriting and distribution – but activities which seemed close to the core functions of commercial banks such as credit intermediation,moncler, liquidity provision and interest rate risk management. Much of what went wrong went wrong in activities which a commercial bank was free to perform even before Glass Steagall was dismantled.

It is, I think, difficult to imagine applying a law which says that a commercial bank cannot hold fixed income securities in its Treasury portfolio, turn loans into securities for distribution but hold them until distribution is achieved, or use credit derivatives to manage credit risks. And you certainly cannot say that a commercial bank cannot take any proprietary positions, without making it impossible to perform necessary market-making functions in, for instance,Doudoune Moncler, foreign exchange and interest rate markets.

But once you have said that a commercial bank can do all of those functions,air jordan femme, you have allowed it to do most of the activities which, pursued on a large scale and in a risky fashion, caused the crisis.

Let’s not fight the last war. It’s the spirit of the old law that Warren and others are advocating,Doudoune Moncler. Glass-Steagall 2.0 proponents like me would like to see a return to a sound banking system where speculative activities are isolated from insured deposits. Many have said that Dodd-Frank has given regulators the tools to dismantle a failing megabank, but no one believes that will avert the next financial crisis.