Current Column: Chicago Tribune — March 12, 2010
CFTC's Gensler brings tough-love to futures
Financial reform is up for grabs on Capitol Hill, and one ex-Goldman Sachs big shot is trying to swing the vote — against his former firm.
Gary Gensler left Wall Street 13 years ago and doesn’t plan to return, which might explain why the Commodity Futures Trading Commission chairman is pushing harder than almost anyone else for sweeping regulation of the world’s largest banks.
Gensler wants big changes in the market for over-the-counter derivatives — high-stakes financial products traded dealer-to-dealer instead of through regulated exchanges. One type of these shadowy contracts led to American International Group Inc.’s $180 billion government bailout, or $600 per American citizen.
Given the AIG experience, you might think stringent new rules would be a sure thing. Not so.
The House passed a measure in December, and momentum is building for a Senate bill moving standardized OTC derivatives into clearinghouses that guarantee the trades in case of default.
The devil, however, is in the exemptions.
Those targeted in the reform effort have been chipping away at its scope. Financial firms want any new rules to cover the fewest possible products, while companies that use OTC derivatives worry costs would rise if the rules apply to them.
“Commissar Gensler,” as one Wall Street wag calls him, thinks exempting products and end-users could invite another financial tsunami down the line.
Gensler describes himself as “a washed-up old banker” who understands all too well how seemingly narrow loopholes can be expanded and exploited. As an official in the Clinton administration years ago, he helped exempt OTC energy contracts from regulatory safeguards such as position limits. Enron Corp. and others took advantage, and Gensler has since expressed regrets about failing to fight harder “for the American people.”
In light of a derivatives-related economic debacle in Greece, a few others are joining his once-lonely stand.
On Thursday, Gensler brings his tough-love message direct to the trade in an address before the Futures Industry Association here.
Read complete columnCurrent Article: Chicago Tribune — February 15, 2010
10 things you need to know about Social Security
It is among the most popular and important social programs in America, yet many Americans have only a vague idea about how it works. What nearly every American knows is that it’s in trouble.
“This program affects hundreds of millions of Americans,” said Jason Fichtner, chief economist at the Social Security Administration. “They’re paying for a system that they expect to be there for them.”
Is Social Security going under? How could it be fixed? Should everybody worry?
This report addresses Social Security, explaining what you need to know and how the system may change in years to come. The good news: Social Security can afford to pay benefits for decades. The bad news: After that, without reform, it’s up for grabs.
How Social Security works
Practically every American has a friend or relative on Social Security. More than 52 million of the nation’s 309 million citizens received benefits from it last year. That’s one in every six.
The 75-year-old program is partly retirement plan and partly insurance. About two-thirds of annual payouts go to retirees. The other third goes to disabled Americans who cannot work and to the children or spouses of people who are disabled or die prematurely. The agency employs more than 65,000 workers to keep the checks coming.
Read complete articleMy Bio
Greg Burns is a senior correspondent specializing in business and economics at the Chicago Tribune. His column runs Mondays and Fridays. He previously served as the Tribune’s associate managing editor for business, responsible for financial news coverage, plus feature sections on real estate, jobs, transportation and personal finance. Before joining the Tribune, Burns wrote for Business Week magazine and the Chicago Sun-Times. He holds bachelor’s and master’s degrees from Northwestern University.
Read Greg’s complete CV.Past Work
Chicago Tribune Column — Mar. 8th, 2010
Navistar CEO navigates recession, headquarters battle
Times sure seem tough in the trucking business. Along with the usual cutthroat pricing and strict new emission standards, the neighbors have gone on the warpath too.
It’s been that kind of year for Daniel Ustian, chief executive of Navistar International Corp., whose strategy for negotiating the recession paid off, even as his plan to move three miles down the street triggered a public brawl.
Warrenville-based Navistar has made it through the worst downturn in memory without losing a dime, no easy feat in a business so cyclical its sales charts look like roller-coaster tracks.
The financial success hasn’t shielded it from angry locals denouncing its alleged affinity for “corporate welfare” and diesel exhaust. It’s not every day a company with roots dating to 1831 finds itself pitted against a neighborhood school for autistic children.
Navistar’s newly revised proposal for moving to the former Alcatel-Lucentsite off Interstate Highway 88 is heading for a showdown next month before the village board of trustees in Lisle, coinciding with some bold moves in the marketplace.
Ustian pushed hard into government contracting a couple of years ago, and his company now produces dozens of military vehicles.
“We had nothing before that,” he explained in an interview.
Government orders, especially for heavily armored vehicles known as MRAPs, kept Navistar in the black last year despite its huge legacy costs, burdensome debt and the worst commercial truck market since the 1950s.
Those military revenues have peaked after a couple of losing battles for additional contracts, and the company could post much lower results in that sector when it reports earnings on Monday.
But Ustian remains confident in his staying power, forecasting 2010 military sales of at least $2 billion, plus $500 million from related parts. “We’ll be closer to $3 billion,” he predicted.
Read complete articleChicago Tribune Column — Mar. 4th, 2010
Benefits add to unemployment rate
Anyone ticking off the reasons long-term joblessness stands at its highest levels in decades needs to do a little arithmetic.
As of mid-2008, unemployment benefits ran out after 26 weeks. Under two presidential administrations and a more-than-willing Congress, however, they kept growing and growing.First, they expanded by 20 weeks, then another 13, then 20 more and then 13 more. One additional week got added to the first 13 to make 14. Finally, another six got tacked on.
Add it up, and that’s 99 weeks of unemployment benefits available to Illinois residents who qualify. Other states have different rules, but many also run to 99 weeks at the maximum.
Given the rotten economy, it’s easy to imagine why politicians keep pumping quarters into the jukebox. It takes time to get a job, so the long duration of benefits is not a sign of deliberate malingering. But those government checks come with an unwanted side effect, especially for workers at the low end of the economic food chain.
They go a long way toward explaining why 40 percent of jobless Americans have been out of work for at least 27 weeks, the highest level since the government started keeping score in the 1940s.
“Those programs subsidize unemployment,” explained Robert Shimer, economics professor at the University of Chicago. “There could be good reasons to do it, but we should be clear on the cost. It has a pretty substantial impact.”
He reckons that the current level of benefits probably accounts for 1 to 1.5 percentage points of the 9.7 percent national unemployment rate.
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