SlideShare is a neat site where you can publish your PowerPoint presentations. Recently, they ran a competition to explain the credit crisis in 30 slides.
I put 12 slides together – after the deadline though – mainly to learn how to connect SlideShare with LinkedIn – the social networking site for professionals.
Categories: Campaigning · Cash Crumble · Credit Crunch · Crisis Analysis
Tagged: cash crumble, credit crisis
With thanks to David Weston:
Public budgets dwindle. The financial power of governments dwindle. Here is how Wall Street benefits:
Roads, airports on the block as budgets tighten
Fri Aug 1, 2008 12:37pm EDT
By Jonathan Stempel
NEW YORK (Reuters) – Cash-strapped U.S. state and city governments are likely to sell or lease more highways, bridges, airports and other assets to investors desperate for stable returns after being frazzled by the credit crisis.
The trend is set to pick up speed given worsening budget deficits in state capitals and city halls nationwide.
It will also be welcomed by Wall Street bankers hoping to help create and market so-called “infrastructure” transactions at a time many debt markets remain paralyzed, and after major U.S. stock indexes fell into bear market territory.
“When you are nervous about everything else, you put your money in a toll road,” said John Schmidt, a partner at the law firm Mayer Brown LLP in Chicago. “That’s the logic of infrastructure. Returns are stable and predictable. You won’t get fabulously rich, but you’ll get stable cash flow.”
The latest enthusiasm for at least partially privatizing infrastructure assets came on July 30 from New York Gov. David Paterson, who is trying to plug a budget deficit caused in part by lower tax revenue as Wall Street retrenches.
“We’re just looking at ways to be more efficient and that’s why I used the term public-private partnerships — trying to find some creative solutions,” Paterson said. “The reason I’m avoiding taxes is because I think taxes are addictive.”
Bankers and others in the industry say there is pent-up demand from dedicated infrastructure funds and public pension funds to invest in hard assets — perhaps $75 billion to $150 billion of equity capital — but not enough supply.
“Economic conditions are tough, and are going to be very harsh on the performance of state budgets in 2008 and 2009,” said Greg Carey, co-head of infrastructure banking at Goldman Sachs Group Inc (GS.N: Quote, Profile, Research, Stock Buzz). “States are looking for long-term solutions in running businesses. A public-private partnership is a tool in their toolboxes.”
A high-water mark came in May, when a group led by Spain’s Abertis Infraestructuras SA (ABE.MC: Quote, Profile, Research, Stock Buzz) and Citigroup Inc (C.N: Quote, Profile, Research, Stock Buzz) agreed to pay $12.8 billion to lease the Pennsylvania Turnpike for 75 years. The total could reach $18.3 billion, including promised improvements. Legislators must approve the lease.
Other transactions have included the $1.8 billion lease of the Chicago Skyway toll road bridge in 2005, and a $3.8 billion lease of the Indiana Toll Road the next year. Chicago Mayor Richard Daley is preparing to lease Midway Airport this year.
For Wall Street, infrastructure can be a bright spot at a time of deep job cuts and expected declines in bonuses.
“We’ve seen an unprecedented number of headhunters recruiting for positions on the buy and sell sides,” said Rob Collins, head of Americas infrastructure banking at Morgan Stanley (MS.N: Quote, Profile, Research, Stock Buzz). “Infrastructure investing can be counter-cyclical to economic trends.”
John Ma, the other Goldman infrastructure chief, added: “We’re very committed to this space. Our business activity has increased dramatically, even this year.”
ALTERNATIVE TO TAX HIKES
According to the nonprofit Center on Budget and Policy Priorities, 29 U.S. states plus the District of Columbia may face a combined $48 billion of budget deficits in fiscal 2009.
But politicians might be loathe to cut spending or raise taxes at a time mortgage debt, $4-a-gallon gas and rising food prices leave consumers — of whom many vote — dispirited. Tapping public debt markets might also be too costly.
Meanwhile the American Society of Civil Engineers estimates $1.6 trillion is needed over five years to raise the often aged U.S. infrastructure to “good” condition.
Pennsylvania Gov. Ed Rendell in July called for the United States to establish a capital budget to pay for such repairs. It was a year ago August 1 that the Interstate 35W bridge in Minneapolis plunged into the Mississippi River, killing 13.
Critics say some infrastructure transactions are short-term budget fixes that deprive governments of steady cash streams from taxpayer-funded assets. There is also the risk that private operators won’t do their jobs well.
Advocates of privatization say entities might do better managing assets than a government answering to voters.
Politicians could also get a boost if they can take credit for reinvesting sale or lease proceeds in needed projects.
“The argument for a public-private partnership is the private sector is a lot smarter about paying attention to costs, and because it has skin in the game will be more attentive to maintaining an asset over its life,” said Joseph Giglio, a privatization expert and professor at Northeastern University’s College of Business Administration in Boston.
“Elected officials often shortchange funding of maintenance because they don’t want to increase user fees or taxes to pay for it,” Giglio added. “Their election cycle is four years. They can pass it on to someone else’s watch.”
Collins, who also advised Pennsylvania on the turnpike, said infrastructure can also go beyond roads and airports. He said Morgan Stanley is advising Akron, Ohio, on exploring the leasing of its wastewater system, and Indiana on the possibility of private management for its state lottery.
“Lotteries have infrastructure characteristics in that they have stable cash flows and high barriers to entry,” he said. “They could even attract private equity investment because they are self-financeable and require minimal capital expenses.”
BIG NAMES
At Goldman, Carey and Ma replaced Mark Florian, who is moving to First Reserve Corp, a private equity firm specializing in energy, a person close to the matter said.
Goldman itself raised a $6.5 billion infrastructure fund in 2006, and is reportedly trying to raise a $7.5 billion fund.
Morgan Stanley raised a $4 billion fund in May. Global Infrastructure Partners, a joint venture between Credit Suisse Group AG (CSGN.VX: Quote, Profile, Research, Stock Buzz) and General Electric Co (GE.N: Quote, Profile, Research, Stock Buzz), raised a $5.6 billion fund the same month. Private equity firm Carlyle Group CYL.UL last year raised a $1.15 billion fund.
And Kohlberg Kravis Roberts & Co KKR.UL, which is preparing to go public, in May lured George Bilicic from Lazard Ltd (LAZ.N: Quote, Profile, Research, Stock Buzz), where he led power, energy and infrastructure efforts worldwide, to run its own infrastructure investments.
Two of the largest specialists in the area are Australian: Macquarie Group Ltd (MQG.AX: Quote, Profile, Research, Stock Buzz) and Babcock & Brown Ltd (BNB.AX: Quote, Profile, Research, Stock Buzz).
Schmidt, the Mayer Brown partner, said if the Midway transaction succeeds, other airports could also go private, perhaps leading to “lower and more predictable landing fees and terminal rentals for airlines, which certainly aren’t flush.”
That, he said, could bring the value of roads, bridges and airports that could be privatized to half a trillion dollars.
(Additional reporting by Joan Gralla in New York and Elizabeth Flood Morrow in Albany, New York, editing by Dave Zimmerman)
Disclaimer: The views expressed in this article are the sole responsibility of the author and do not necessarily reflect those of the Centre for Research on Globalization. The contents of this article are of sole responsibility of the author(s). The Centre for Research on Globalization will not be responsible or liable for any inaccurate or incorrect statements contained in this article.
To become a Member of Global Research
The CRG grants permission to cross-post original Global Research articles on community internet sites as long as the text & title are not modified. The source and the author’s copyright must be displayed. For publication of Global Research articles in print or other forms including commercial internet sites, contact: crgeditor@yahoo.com
www.globalresearch.ca contains copyrighted material the use of which has not always been specifically authorized by the copyright owner. We are making such material available to our readers under the provisions of “fair use” in an effort to advance a better understanding of political, economic and social issues. The material on this site is distributed without profit to those who have expressed a prior interest in receiving it for research and educational purposes. If you wish to use copyrighted material for purposes other than “fair use” you must request permission from the copyright owner.
For media inquiries: crgeditor@yahoo.com
© Copyright , Reuters, 2008
The url address of this article is: www.globalresearch.ca/PrintArticle.php?articleId=9736
Categories: Globalisation
Tagged: credit crisis, Credit Crunch, Wall Street
In the spirit of Thomas Attwood and after receiving the Attwood Award, Austin Mitchell MP was so re-inspired that he tabled Early Day Motion No. 1449 on April 29th. Since an EDM may only consist of one phrase, it is hard to read. For Austin put a lot into it: all the reasons why credit creation should be taxed – which is a new and interesting angle in this credit crisis which should really be called “cash crumble”:
That this House considers that
in the light of the nationalisation of one failing buiding society, the help given to markets by the Bank of England’s boost to interbank liquidity and the huge benefit given to the financial sector by the Bank’s proposal to take on up to £50 billion of unsaleable special purpose vehicles of bundled debt to help the banks, building societies and lending institutions escape the consequences of their own follies is disproportionate,
and should be now balanced by ensuring that the financial institutions which have benefited so substantially from the effective privatisation of the great bulk of credit creation by their power to create money via credit cards, bank accounts, mortgages, loans, special purpose vehicles and other financial instruments
thus ensuring that the seigniorage on money creation which once came to the people on public credit created by the minting and printing of money, now goes into bank profits are taxed on the credit they create
to compensate the taxpayer for the fact that the 97 per cent. of credit creation arrogated by the private sector to use and abuse for its own profit and purposes, rather than the benefit of the public, has been so badly misused and has led to yet another financial crisis of the type financial flesh is all too frequently heir to.
Anybody wanting to contact MPs to sign this proposal could use WriteToThem.
Categories: Banks · Early Day Motions · Governments · Parliamentarians
Tagged: Austin Mitchell MP, cash crumble, credit crisis, early day motion
With thanks to Campaigner Frank Taylor from Shropshire, a letter to the Editor of the Independent, in response to 10 ways out of the credit crisis:
Sir
Re: The Eleventh Chinese Way
Your lead article (Wednesday 16th April) recommends ten, largely palliative, measures to stem the credit crunch hemorrhage. May we, the undersigned, offer an eleventh by way of a more helpful cure?
Many might wonder how it was that the post war Attlee government was able to embark on such an ambitious programme of social and industrial reform in a country so recently bankrupted by war, whilst maintaining full employment and keeping government debt and inflation under control.
The answer is quite simple. In that era as much as 40% of the broad money supply was issued in the form of notes and coins. This was inevitably so in a time when far fewer people had bank accounts. Importantly such government currency created no debt and paid no interest.
Today less than 4% of the broad money supply is created by government. The remainder is created by private banks in the form of interest bearing debt. This is commonly called ‘credit’ although the Chinese, call it ‘quasi money’. China is also one of the few remaining states to maintain a high level of state money, the results of which are being poured into infrastructural investment, on an audacious scale, in the form of ’soft loans’.
You cannot run an economy by piling debt upon debt upon debt forever. Current problems are caused by bank created quasi money feeding a debt-asset bubble. Throwing even more interest-bearing money in the form of central bank credit at such a situation is like curing an alcoholic with a truck load of whiskey.
Perhaps the most toxic of modern myths is that infinite growth is possible within a finite system. Such logic applies to debt as much as it does to pollution, population, production and resource consumption. All that the palliatives so far proposed can achieve is to stave off events for a few more years until we reach the stage when the mathematical limit of how much interest bearing debt the world can repay is reached. The longer that goes on the bigger the ultimate crash.
The only hope, as an alternative to economic depression, is to restore the government’s share of the money supply to at least the levels prevalent in the post war era, together with associated controls such as special deposits and reserve ratios. If it works so well in China, it can work here.
Yours sincerely
Frank Taylor, Monetary Campaigner, Shropshire
Sabine McNeill, Organiser, Forum for Stable Currencies
Alistair McConnachie, Editor, Prosperity UK
James Gibb Stuart, Convenor, Bromsgrove Group
Brian Leslie, Editor, Sustainable Economics
Mary Fee, Coordinator, LETSLINK UK
Anne Belsey, Leader, Money Reform Party
Categories: Banks · Central Banks · Treasury · United Kingdom
Tagged: credit crisis, editor, Editor Letters, Independent
The Independent UK
10 ways out of the credit crisis
Slash? Spend? Guarantee? Co-ordinate? We analyse the options for Gordon Brown as he heads for US talks on the credit crunch
Analysis by Sean O’Grady
Wednesday, 16 April 2008
1. Call urgent summit of banks
2. Cut interest rates again… and again
3. Slash stamp duty for first-time buyers
4. Force the Bank of England to lend more to banks
5. Co-ordinate a global fightback
6. Guarantee or buy surplus mortgage-backed bonds
7. Relax all the rules on lending
8. Bail out, don’t repossess
9. Order banks to reveal losses
10. Spend, spend, spend!
Categories: Banks · Central Banks · Globalisation
Tagged: credit crisis, Independent
sabine at 3d-metrics.com
