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Read the rules in the OP before posting, please.In order to ensure that this thread continues to meet TL standards and follows the proper guidelines, we will be enforcing the rules in the OP more strictly. Be sure to give them a re-read to refresh your memory! The vast majority of you are contributing in a healthy way, keep it up! NOTE: When providing a source, explain why you feel it is relevant and what purpose it adds to the discussion if it's not obvious. Also take note that unsubstantiated tweets/posts meant only to rekindle old arguments can result in a mod action. |
On March 29 2015 07:41 Millitron wrote:Show nested quote +On March 29 2015 07:19 GreenHorizons wrote:On March 29 2015 07:15 Millitron wrote:On March 29 2015 05:16 dAPhREAk wrote:On March 29 2015 04:56 Millitron wrote:On March 29 2015 03:42 WolfintheSheep wrote:On March 29 2015 03:24 Millitron wrote:On March 29 2015 02:40 WolfintheSheep wrote:On March 29 2015 00:35 KwarK wrote:On March 28 2015 09:17 dAPhREAk wrote: [quote] are you honestly arguing that WW2 Japan was culturally similar to the West? The experience of losing WW2 and being occupied triggered a huge cultural shift in Japan against traditionalism and towards westernization. There have been countless studies on why this happened, that it happened isn't debatable. The appearance of Japanese people in the media for example, changed hugely. People were shown wearing western clothes, ideals of beauty shifted towards rounder eyes, travelling etc. The Japanese traditional wedding was replaced within a generation by the American one. There is absolutely no argument to be made that Japan's culture survived WW2 unscathed. Japan has its own culture but it is not the culture that it had going into the Second World War. Japan was fundamentally changed by the experience of losing the war and the occupation, traditional "Japanese" cultural traits were discredited while modern culture, which was a byword for western culture, was promoted. The argument was that the American occupation of Japan only worked because Japan was already a homogeneous western nation before it happened. Not that the occupation had lasting effects. And again, the whole argument is rather stupid. No, Japan was not very close to Western nations culturally. It also wasn't an unstable political region, so using it (or Germany for that matter) as an example of foreign occupation that reforms an entire nation is rather dumb. I think you misunderstand. My point was that Japan and Germany were able to be reformed specifically BECAUSE they weren't unstable. Japan was also much closer to the west culturally than Iraq. Well, maybe you should have made that argument instead of some convoluted talk about how Japan was "westernized". I made both. Japan was much more western than you give them credit though. They were industrialized, many were christian, and many of the leaders had studied in western universities. so that we dont talk around each other, can you quantify many? edit: wolf ninja'd me =( I can't really quantify it, the numbers don't seem to exist. It must've been a good number though, because in 1940, Christianity was declared an official religion of Japan. http://www.newworldencyclopedia.org/entry/Christianity_in_Japan#World_War_IIFor a more general look at the westernization of Japan, you should look into the Meiji Restoration. http://en.wikipedia.org/wiki/Meiji_Restoration From your source (right below what your referring to) Since World War II, the number of Japanese Christians has remained relatively stable[20]. Japanese Christians are a religious minority, constituting about 1 million[21][22] to 3 million persons.[23] That doesn't really say there were only 1 million before WW2. I know they lost a great deal to emigration from outrage about other religious laws in the 1930's and early 40's. Show nested quote +On March 29 2015 07:19 dAPhREAk wrote: i actually was looking to find out what you meant by many, not an actual number.
i am very familiar with the Meiji Restoration. i don't need to read wiki on it. Well, millions seems like "many" to me.
If Japan is a Western country because there's 1-3 million Christians, then the US is just as much a Middle Eastern nation...
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okay. lets focus just on religion and christianity.
around WW2, 12% of the iraq population was christian (1947). i havent been able to find a good statistic for japanese christians in the same time period, but assuming your source is reliable it has remained stable around 1%.
ignoring everything else, wouldnt that mean that iraq would be more culturally similar to the west than japan?
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"If you took every penny of the 1 percent, including their dog, you wouldn't even begin to balance the budget." — Lindsey Graham on Sunday, March 8th, 2015 in a speech in Concord, N.H. Even if you use the income of the 1 percent, it’s still a number far greater than you would need to balance the budget. The data collected by Saez and Zucman show a national income of $14 trillion for 2012. The Federal Reserve reports the same number for the same year. On the low end, the IRS reported $9 trillion in adjusted gross income for 2012. The richest 1 percent’s share of the income for 2012, according to the Paris School of Economics’ interactive database, is 22.8 percent (including capital gains). That means taking the entirety of the group’s income that year would net us somewhere between $2 trillion and $3.2 trillion. In other words, if you use total income of the 1 percent, you don’t even have to raid Fido’s food bowl to do what Graham suggests. And what of the actual tax burden of the 1 percent? According to estimates from the independent Urban Institute-Brookings Institution Tax Policy Center, the richest 1 percent paid 27 percent of all federal income taxes in 2012. They had an average income of $1.8 million apiece that year and paid an average of $489,437 in taxes. That works out, roughly, to some $563 billion in taxes collected from the richest in 2012. A tidy sum, to be sure, but it has already been applied to offset our government’s costs. One would have to double the taxes collected from the group to cover current deficits. This is the one scenario in which Graham has a point.
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How Chicago has used Financial Engineering to Paper over its Massive Budget Gap Chicago made headlines at the end of February after Moody’s downgraded the city’s general obligation bond rating to Baa2. Moody’s has cut Chicago’s rating five notches in less than two years. This downgrade, however, placed the city’s credit below the termination triggers on some of its outstanding interest rate swaps. The city has been working to renegotiate the terms of those contracts with its counterparties. If Chicago’s general obligation rating falls below investment grade, the city’s credit deterioration will become a self-fulfilling prophesy. The city risks nearly $400 million of swap termination payments and the acceleration of its $294 million of outstanding short-term debt. Unsurprisingly, some of Chicago’s bonds are already trading at junk levels. Chicago CUSIPs are listed here. That said, the rating agencies and most other market participants still appear to be light years away from understanding the true scope of Chicago’s financial problems. The city has a very — well, let’s just call it unconventional — approach to borrowing money and probably should not be considered investment grade. Some budget history + Show Spoiler +In order for you to follow my discussion of Chicago’s borrowing shenanigans, it is necessary to understand the fiscal machinery behind its bond issues. Please be patient with me here. This story will blow your mind shortly.
Chicago’s budget is divided into seven different fund classifications, but only three funds are relevant to our narrative: the Corporate Fund, Property Tax Fund, and Reserve Funds.
The Corporate Fund is Chicago’s general operating fund. This fund is used to pay for essential government services and activities (e.g. public safety and trash collection). Corporate Fund revenues are derived from a wide variety of sources, including: (1) local tax revenue from utility, transaction, transportation, recreation, and business taxes; (2) intergovernmental tax revenue, which represents the city’s share of the state’s sales and use taxes, income tax, and personal property replacement tax; and (3) non-tax revenue from fees, fines, asset sales, and leases.
Chicago’s property tax revenues do not go into its general operating fund. These revenues go into a Property Tax Fund, which is used to make debt service payments on the city’s general obligation bonds; make required employee pension contributions; and (to a minor extent) fund the library system. The fund also includes tax increment financing revenues that flow to projects in designated TIF districts.
The city used some of the proceeds from long-term leases of city assets to establish Reserve Funds. The Chicago Skyway reserve funds were established in 2005 in the amount of $975 million. The Metered Parking System reserve funds were established in 2009 in the amount of $1.15 billion. Of these funds, $475 million of the Skyway reserves were designated for budgetary uses. What remained was $500 million for the Skyway; $400 million for the Metered Parking System; and $326 million for a budget stabilization fund.
There has been a structural gap in Chicago’s Corporate Fund budget since at least 2003. Although most governments are required to balance their budgets on a cash flow basis each fiscal year, a structural budget gap can arise when recurring expenditures are greater than recurring revenues. Some of the city’s offering documents suggest that this gap is a legacy of the last economic downturn, but in reality the gap pre-dates the economic downturn by several years. The impact of economic downturns on tax collections tends to have a considerable lag anyway.
So, Chicago’s structural budget gap is a political, not economic, creature. Rather than cut expenditures to a level that could be supported by recurring revenues, the city mostly used non-recurring resources to fill the gap from one fiscal year to the next. This is not surprising. Most of Chicago’s Corporate Fund budget goes to salaries and benefits for its employees, and 90% of the city’s employees belong to around 40 different unions. Attempts to adjust expenditures tend to have well organized opposition.
Between fund transfers and drawing down its reserves, the city blew through its financial cushioning quickly. The $326 million budget stabilization fund was exhausted by 2010. From 2009 to 2011, the city used $320 million from the Metered Parking Reserves. The city’s budget gap was at its widest in the wake of the last economic downturn, at over $600 million. Chicago’s dysfunctional debt program
Now things start to get interesting. Transfers from reserves and other funds have not been the only means Chicago officials (across administrations) have devised to subsidize the city’s Corporate Fund. The city has effectively been using its general obligation bond offerings and interest rate derivatives to accomplish the same thing.
State and local governments typically use the proceeds from their bond offerings to construct or renovate public buildings and infrastructure. These are projects that have long useful lives and will benefit residents for generations.
Dating back to at least 2003, however, Chicago has been issuing long-term tax-exempt and taxable bonds to:
(1) Roll over short-term debt used as working capital;
(2) Pay for maintenance activities that would otherwise be paid from the Corporate Fund;
(3) Pay for judgments and settlements that would otherwise be paid from the Corporate Fund, including wage increases and retroactive pension contributions for its employees; and
(4) Provide discretionary funds to each of the city’s 50 aldermen to pay for activities in their own districts.
The magnitude of tax-exempt bond proceeds used for judgments and settlements over this period is staggering. The Chicago Tribune estimated it at approximately $400 million:
In 2002, for example, the city used tax-exempt bonds to pay an arbitration award involving the Fraternal Order of Police. Rank-and-file officers rejected a city contract offer in 2001, but an arbitrator ruled in favor of the city’s wage proposal a year later.
The deal included raises of 2 to 4 percent a year, to be applied retroactively. In bond documents, city officials deemed the back pay the city owed an extraordinary expense and paid $164 million of it with tax-exempt bonds.
The city ultimately will need to pay bondholders $280 million to cover the loan …
Bonds also ended up covering the $28 million a jury awarded to Joseph Regaldo in 1999. The jury found that, years earlier, a Chicago police officer had beaten him in the back of the head and neck with a blunt object, which ripped apart an artery and cut off the blood supply to his brain. The injuries left Regaldo unable to walk, talk or care for himself.
The judgment won’t be paid off until 2019 at the earliest; by then, the total cost will have grown to $53 million.
City officials eventually switched to paying judgments with taxable bonds, which are even more costly in the long run.
That is, until 2012:
About $54 million from a tax-exempt bond helped cover a legal judgment awarded to African-Americans who were denied a chance to become firefighters by a 1990s entrance exam that favored white applicants. An additional $8 million in tax-exempt bond money went to pay legal fees related to the case, records show.
By using bond money, the city created an irony for many of those awarded damages, as their future property taxes will help pay interest on the debt. In 2033, when the city starts paying down the $54 million, interest will have more than doubled the total cost.
Stop and let that sink in for a moment. That police brutality case? Wage increases negotiated with labor unions? Not just financed, but financed with long-term debt.
So why haven’t the city’s 50 aldermen protested the use of bond proceeds for these purposes? It probably has something to do with the “Aldermen’s Menu,” which allows the aldermen to use a portion of the proceeds from the city’s general obligation bond issues to pay for whatever they want for their district.
It is unclear (to me) whether the city tracks how the funds from the “Aldermen’s Menu” are spent, but in the aggregate they are not a negligible amount. From 2003 to 2012, these projects have ranged from $54.2 million to $102 million.
The use of bond proceeds to provide slush funds for policymakers has a historic analog in the revenue bonds Harrisburg issued for its incinerator project as the city was on its path to insolvency. Pennsylvania law limits the amount of debt local governments can issue to finance projects that are not self-supporting. Substantially all of the bonds tied to the incinerator project were issued to provide working capital, although city officials were able to locate financial advisory firms that were willing to certify the opposite to state regulators.
In order to win authorization for bond issues that outright defied state law, Harrisburg’s later bond issues included a “Special Projects Fund” for city officials to play with. They bought things like artifacts for a Wild West Museum. In Pennsylvania. Don’t think too hard, there is no why.
See? Reading the Sources and Uses provisions in official statements can be fun. I know, this makes you want to invite me to your next dinner party.
Our story gets even more interesting when you look at how Chicago’s past general obligation bond offerings have been structured.
First, the city has undertaken several large, non-traditional refundings to push the maturities on debt that is coming due out into later years.
A traditional refunding is akin to how a homeowner refinances a mortgage loan. A new loan is used to prepay an old loan to achieve an interest cost savings. A “scoop and toss” refunding, which is what Chicago has done, involves additional interest cost — even in a ridiculously low interest rate environment — because the debt remains outstanding for a longer period of time.
The objective of these deals was to provide budget relief for the city’s general operating fund in the short term, even if the structure means escalating debt service payments in the long term. These restructurings artificially inflated the city’s debt capacity, so the city could continue to use property tax-supported bonds to take out the city’s working capital credit facilities, which allowed the city to avoid balancing its Corporate Fund budget.
Chicago is far from the only government to restructure debt for budget relief. Quite a few state and local governments engaged in similar transactions following the last recession. What makes Chicago unique is, again, the magnitude of this activity. According to the Chicago Tribune, “since 2000, the city has used $3.6 billion in bond money to refund old debt as principal payments came due. Of that amount, half will end up costing taxpayers in the long run.” For the sake of comparison, Chicago has around $7.2 billion of general obligation bonds outstanding.
Second, Chicago’s past few general obligation bond offerings have involved considerable amounts of capitalized interest.
Capitalized interest is typically associated with project finance, not general obligation bond issues. Project finance is a sector where loans finance revenue-producing facilities and infrastructure. The debt is supported by those revenues, not taxes as with general obligation bonds.
With capitalized interest, a bond issuer borrows more money than a project requires for construction in order to pay the interest on the bonds while the project is being built. The idea here is that the project will eventually generate revenues that can support debt service payments and the cost added by capitalizing interest.
From 2010 to 2014, Chicago’s general obligation bond deals included over $235 million of capitalized interest, simply as a means for the city to avoid servicing its debt in the short term.
If you are a bondholder, there are two things you should take away from this segment of our narrative.
First, if you hold the tax-exempt portion of these deals and the Internal Revenue Service ever gets around to scrutinizing them, your bonds probably won’t be tax exempt for long. Many of these uses of bond proceeds are not eligible for tax-exempt financing under the federal tax code. These bonds have received extraordinarily aggressive tax opinions — including, incidentally, from the same law firm that drafted Illinois’s swap legislation, which I will get to momentarily.
Second, Chicago taxpayers are on the hook for billions of dollars of long-term debt and have little of tangible value to show for it. There is a good chance that residents do not understand the nature of their government’s borrowing activities, since these were complex offerings. (Well, unless they read what I have written here…) As debt service payments increasingly compete with other political priorities for funding, this revelation might eventually erode the city’s willingness to pay.
These transactions should never have happened. Chicago’s interest rate derivatives portfolio
Perhaps a third thing a bondholder should take away from our narrative is that to the extent Chicago is slapped with future termination payments on its interest rate derivatives, the security for your investment will be diluted. Since Chicago’s property tax revenues are also applied to pension contributions and the debt/derivatives of several other overlapping taxing districts, this is not an insignificant factor.
The State of Illinois authorized local governments to use interest rate derivatives in 2003. Here is a link to the legislation. The bill restricts the notional amount of a municipality’s interest rate derivatives to the outstanding debt the contracts will ostensibly hedge. Since the notional amount of a swap, etc. says nothing about an issuer’s risk exposure, this provision is pretty much worthless. And since the legislation was drafted by the financial industry, that probably wasn't an accident.
The legislation allows the municipality to make payments due under the swap contract (which would include termination payments) from any source of revenue it has, including property taxes. This probably wasn't an accident either.
Chicago used interest rate swaps on its 2003, 2005, 2007, and 2009 bond deals, apparently as part of a synthetic fixed rate strategy. (I explain the mechanics of synthetic fixed rate deals in this essay.) The city also recreationally experimented with more exotic contracts — swaptions and the like.
The associated bond offerings were multimodal. Multimodal bonds are bonds that can be converted to any of a number of interest rate modes at the option of the issuer. Bond documents allow the bonds to be remarketed daily, weekly, or monthly as variable rate tender option bonds, or in term or fixed rate modes. Like capitalized interest, this structure is typically used only in project finance. The multimodal structure allows long-term debt to function as both interim and permanent financing to accommodate the life cycle of a revenue-producing project.
Because the underlying debt is multimodal, Chicago never required interest rate derivatives to hedge its interest rate exposure. The city could have virtually any interest rate exposure it wanted as the bonds were remarketed. Why don’t all government issuers use this structure, you ask? Because most governments value predictable payments over trying to handicap interest rate trends and basis risk. That’s a function of being tethered to a budget.
As I noted at the beginning of this essay, Chicago is now almost $400 million out-of-the-money on its outstanding swaps. This only matters to the extent that the city’s credit ratings continue to sink toward termination triggers. Only one rating agency has to break these thresholds — so, even though S&P and Fitch still somehow believe Chicago is an A+/A- credit, Moody’s is the only rating agency that matters. If the city doesn’t get cut to junk and interest rates normalize, Chicago’s interest rate swap situation will eventually repair itself. The tipping point here either way is probably the outcome of the state/city’s pension litigation.
Chicago Public Schools — which already takes more property tax revenues from Cook County than the City of Chicago — has a swap/pension nightmare of its own to muddle through. Between the city and school system, area residents are at risk of making/financing $660 million of termination payments. The payments would compete with $28.3 billion of city and overlapping debt and billions of dollars of escalating pension contributions for funding. Basically, if you are in Chicago, your property is about to become more expensive.
From the outside, it looks like Chicago also used its interest rate swaps as a means of drumming up non-recurring resources to fill its budget gap in 2010 and 2011. If so, this is another example of the city’s willingness to trade long-term costs for avoiding politically inconvenient spending decisions.
The city made amendments to outstanding swap contracts by layering on forward-starting basis swaps. (This is something else Chicago has in common with Harrisburg.) These transactions changed the city’s net interest rate exposure on those deals from fixed to variable and introduced basis risk to the portfolio after they became effective in 2014. There was not an event that prompted these amendments and the city remains underwater on the deals. The city did receive a series of up-front payments, however. Judging from the swap confirmations from Deutsche Bank, PNC, and Wells Fargo, these payments amounted to around $25 million. Could Chicago file for Chapter 9 bankruptcy?
No. At least not right now. To be eligible to file for bankruptcy under Chapter 9, there must be a state law that specifically authorizes a municipality to do so. Illinois law does not currently permit municipalities to do so, except under a provision that relates to units of governments with populations under 25,000. Of course, Chicago would also have to meet the other eligibility criteria. The city does have a relatively large tax base.
That said, if state lawmakers wanted to give Chicago the ability to adjust its pension liabilities — its pensions have an aggregate funded ratio of 37% — amending a statute is a lot easier than amending the state constitution. Article 8, Section 5, of the Illinois Constitution says: “Membership in any pension or retirement system of the State, any unit of local government or school district, or any agency or instrumentality thereof, shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.”
Multiple federal bankruptcy judges have ruled that the federal bankruptcy code supersedes state constitutions, which theoretically provides a path for municipalities to adjust their pension commitments. The rulings have not been challenged in an appellate court, however, so there isn’t a bona fide legal precedent yet.
Illinois’s Constitution describes pension commitments as contractual in nature. For an obligation to be considered secured in bankruptcy, there has to be a property interest.
This logic also applies to the city’s general obligation debt though. For most of the city’s outstanding general obligation bonds, the city has pledged a specific property tax levy. Illinois is not one of the handful of states that provides general obligation debt a statutory lien. So it would seem, in my very non-legal opinion, that the bonds would be considered unsecured debt.
As I noted earlier, the city’s general obligation bond offerings have provided little of tangible value to taxpayers. If the city were authorized to file for bankruptcy and actually did so, there could potentially be political pressure to adjust general obligation debt before depriving pension beneficiaries their incomes.
It seems unlikely that the state or federal government would “Lehman” Chicago. It is the third largest city in the United States and a vital transportation hub. It seems reckless, however, to dismiss this possibility in its entirety over the medium term. When you tally up the ways bond proceeds have been used to offset operating expenses, scoop and toss restructurings, capitalized interest, and swap modifications, the city’s cumulative Corporate Fund budget gap is much, much larger than the city’s disclosures imply. At some point, this manner of doing business will collapse. Link
Bonus story: Obama’s claim that Keystone XL oil ‘bypasses the U.S.’ earns Four Pinocchios
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On March 29 2015 07:57 dAPhREAk wrote: okay. lets focus just on religion and christianity.
around WW2, 12% of the iraq population was christian (1947). i havent been able to find a good statistic for japanese christians in the same time period, but assuming your source is reliable it has remained stable around 1%.
ignoring everything else, wouldnt that mean that iraq would be more culturally similar to the west than japan? No, because Christianity was only one factor. Japan went through the Meiji Restoration. There was no Meiji Restoration analog for Iraq.
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On March 29 2015 08:55 Millitron wrote:Show nested quote +On March 29 2015 07:57 dAPhREAk wrote: okay. lets focus just on religion and christianity.
around WW2, 12% of the iraq population was christian (1947). i havent been able to find a good statistic for japanese christians in the same time period, but assuming your source is reliable it has remained stable around 1%.
ignoring everything else, wouldnt that mean that iraq would be more culturally similar to the west than japan? No, because Christianity was only one factor. Japan went through the Meiji Restoration. There was no Meiji Restoration analog for Iraq. Aaaaaand we're back to the ridiculous notion that Industrialization = Westernization.
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On March 29 2015 09:00 WolfintheSheep wrote:Show nested quote +On March 29 2015 08:55 Millitron wrote:On March 29 2015 07:57 dAPhREAk wrote: okay. lets focus just on religion and christianity.
around WW2, 12% of the iraq population was christian (1947). i havent been able to find a good statistic for japanese christians in the same time period, but assuming your source is reliable it has remained stable around 1%.
ignoring everything else, wouldnt that mean that iraq would be more culturally similar to the west than japan? No, because Christianity was only one factor. Japan went through the Meiji Restoration. There was no Meiji Restoration analog for Iraq. Aaaaaand we're back to the ridiculous notion that Industrialization = Westernization. It was more than just industrialization. There was the dissolution of feudalism. The rise of the free market. At least some emulation of western cultures. Note how the Japanese dressed just after the Meiji Restoration.
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On March 29 2015 09:02 Millitron wrote:Show nested quote +On March 29 2015 09:00 WolfintheSheep wrote:On March 29 2015 08:55 Millitron wrote:On March 29 2015 07:57 dAPhREAk wrote: okay. lets focus just on religion and christianity.
around WW2, 12% of the iraq population was christian (1947). i havent been able to find a good statistic for japanese christians in the same time period, but assuming your source is reliable it has remained stable around 1%.
ignoring everything else, wouldnt that mean that iraq would be more culturally similar to the west than japan? No, because Christianity was only one factor. Japan went through the Meiji Restoration. There was no Meiji Restoration analog for Iraq. Aaaaaand we're back to the ridiculous notion that Industrialization = Westernization. It was more than just industrialization. There was the dissolution of feudalism. The rise of the free market. At least some emulation of western cultures. Note how the Japanese dressed just after the Meiji Restoration. Yes, and note how Europeans cooked after they opened trade routes to India and opened the Silk Road, and how their art and design changed after opening routes to China.
And again, apparently you have to be a Western nation to progress away from feudalism. And apparently the free market is an exclusively Western concept.
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Gov. Mike Pence, scorched by a fast-spreading political firestorm, told The Star on Saturday that he will support the introduction of legislation to “clarify” that Indiana’s controversial Religious Freedom Restoration Act does not promote discrimination against gays and lesbians.
“I support religious liberty, and I support this law,” Pence said in an exclusive interview. “But we are in discussions with legislative leaders this weekend to see if there’s a way to clarify the intent of the law.”
The governor, although not ready to provide details on what the new bill will say, said he expects the legislation to be introduced into the General Assembly this coming week.
Asked if that legislation might include making gay and lesbian Hoosiers a protected legal class, Pence said, “That’s not on my agenda.”
Amid the deepest crisis of his political career, Pence said repeatedly that the intense blowback against the new law is the result of a “misunderstanding driven by misinformation.”
He adamantly insisted that RFRA will not open the door to state-sanctioned discrimination against gays and lesbians. But he did acknowledge that Indiana’s image — and potentially its economic health — has been hurt badly by the controversy.
I spoke with Pence on the same day that thousands of people rallied at the Statehouse in opposition to the law. And the same day that Angie’s List CEO Bill Oesterle announced that his company will abandon a deal with the state and city to expand the company’s headquarters in Indianapolis because of RFRA’s passage.
Oesterle’s statement is a telling sign that the outrage over RFRA isn’t limited only to the political left. Oesterle directed Republican Mitch Daniels’ 2004 campaign for governor. And it’s a signal that the damage from the RFRA debacle could be extensive.
Behind the scenes, Pence and his team have been scrambling to mitigate that damage — both to the state and to the governor’s political career.
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On March 29 2015 10:13 {CC}StealthBlue wrote:Show nested quote +Gov. Mike Pence, scorched by a fast-spreading political firestorm, told The Star on Saturday that he will support the introduction of legislation to “clarify” that Indiana’s controversial Religious Freedom Restoration Act does not promote discrimination against gays and lesbians.
“I support religious liberty, and I support this law,” Pence said in an exclusive interview. “But we are in discussions with legislative leaders this weekend to see if there’s a way to clarify the intent of the law.”
The governor, although not ready to provide details on what the new bill will say, said he expects the legislation to be introduced into the General Assembly this coming week.
Asked if that legislation might include making gay and lesbian Hoosiers a protected legal class, Pence said, “That’s not on my agenda.”
Amid the deepest crisis of his political career, Pence said repeatedly that the intense blowback against the new law is the result of a “misunderstanding driven by misinformation.”
He adamantly insisted that RFRA will not open the door to state-sanctioned discrimination against gays and lesbians. But he did acknowledge that Indiana’s image — and potentially its economic health — has been hurt badly by the controversy.
I spoke with Pence on the same day that thousands of people rallied at the Statehouse in opposition to the law. And the same day that Angie’s List CEO Bill Oesterle announced that his company will abandon a deal with the state and city to expand the company’s headquarters in Indianapolis because of RFRA’s passage.
Oesterle’s statement is a telling sign that the outrage over RFRA isn’t limited only to the political left. Oesterle directed Republican Mitch Daniels’ 2004 campaign for governor. And it’s a signal that the damage from the RFRA debacle could be extensive.
Behind the scenes, Pence and his team have been scrambling to mitigate that damage — both to the state and to the governor’s political career. Source
He's boned. I don't know about Indiana politics, but the guy looks like a schmuck. I know Seattle's mayor already was clear about where he stands. Along with several businesses.
Seattle Mayor Ed Murray is banning city-funded travel to Indiana. He plans to sign an executive order next week.
"Laws that say you can discriminate have no place in this country," he told reporters Saturday.
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+ Show Spoiler +
Tim Cook, the openly gay CEO of the tech giant Apple, tweeted on Friday that he was “deeply disappointed” in Indiana’s law. He urged Arkansas Gov. Asa Hutchinson (R) to veto similar legislation making its way through the legislature.
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On March 29 2015 09:09 WolfintheSheep wrote:Show nested quote +On March 29 2015 09:02 Millitron wrote:On March 29 2015 09:00 WolfintheSheep wrote:On March 29 2015 08:55 Millitron wrote:On March 29 2015 07:57 dAPhREAk wrote: okay. lets focus just on religion and christianity.
around WW2, 12% of the iraq population was christian (1947). i havent been able to find a good statistic for japanese christians in the same time period, but assuming your source is reliable it has remained stable around 1%.
ignoring everything else, wouldnt that mean that iraq would be more culturally similar to the west than japan? No, because Christianity was only one factor. Japan went through the Meiji Restoration. There was no Meiji Restoration analog for Iraq. Aaaaaand we're back to the ridiculous notion that Industrialization = Westernization. It was more than just industrialization. There was the dissolution of feudalism. The rise of the free market. At least some emulation of western cultures. Note how the Japanese dressed just after the Meiji Restoration. Yes, and note how Europeans cooked after they opened trade routes to India and opened the Silk Road, and how their art and design changed after opening routes to China. And again, apparently you have to be a Western nation to progress away from feudalism. And apparently the free market is an exclusively Western concept. You're being deliberately obtuse. "Westernization" means adopting Western technology, industry, culture, and attitudes. Millitron is just insisting on the same bad points, but Japan definitely experienced a period of Westernization which is unique to any non-Western country.
Japanese changed their clothes to wear Western-style suits and hats on diplomatic missions, they traded and did economic transactions in Western-style ways (adopting the gold standard, opening banks with lines of credit, etc.), they founded philharmonics and orchestras, they incorporated European words into their language, etc. Worth pointing out that they also developed an imperial constitution and an elected legislature, adopted Western military traditions and strategies, and yes, industrialized.
Again, this is all notable because every other foreign culture encountered by the West resisted doing all of this. They might pick and choose things that they like, which goes for the West as well, but they didn't change their culture fundamentally to adopt another like Japan did.
Japan wasn't a "Western country", but they were more similar than any other and certainly more than any other in Asia. And they were definitely more similar to the West in the 1930s than Iraq in 2003.
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This is about as scathing as it gets:
Just because the Middle East’s descent into chaos is hardly the fault of the Obama administration, that doesn’t mean its policies in the region are not an egregious failure.
The situation in the region is unprecedented. For the first time since the World Wars, virtually every country from Libya to Afghanistan is involved in a military conflict. (Oman seems to be the exception.) The degree of chaos, uncertainty, and complexity among the twisted and often contradictory alliances and enmities is mind-boggling. America and its allies are fighting alongside Iran to combat the Islamic State (IS) in Iraq and Syria but in Yemen, the United States and many of those same regional partners are collaborating to push back Iranian-backed Houthi forces. Israel and Saudi Arabia are closely aligned in their concerns about Iran while historical divisions between the two remain great. Iran supports Bashar al-Assad in Syria; the United States and Western allies deplore his policies but tolerate his presence while some of the rebel forces we are supporting in the fight against the Islamic State in that country seek his (long overdue) removal. The United States wants the states of the region to stand up for their own interests — just not in Libya or when they don’t get America’s permission first.
The technical foreign-policy term for this is giant cluster-fuck.
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So even though the Obama administration is clearly not responsible for most of the root and many of the exacerbating causes of the current melee in the Middle East, it is also true that it does not have the luxury of walking away from this upheaval/these conflicts, or the room to employ halfway measures, reactive or largely improvised initiatives that exist without benefit of any broader strategy. And unfortunately for America, for our allies, for the region, and for the world, those are the three primary approaches that have been employed by this White House.
These approaches have contributed materially to the situation we now face. The situation in Iraq was stabilizing and markedly improving in the last two years of the Bush administration, thanks to the surge, attention to the Sunnis, and the active week-to-week involvement of the president and senior officials in the details of trying to fix a situation — let’s be blunt, a catastrophe — of which they were the authors. That includes trying to manage their really bad choice as prime minister, Nouri al-Maliki. It was no Jeffersonian paradise. But the trend line was in the right direction when they left office. President Obama’s decision to rush to the exits (which took the form of not really doing what was necessary to produce the kind of Status of Forces Agreement that would have enabled a prolonged American troop presence) undid this. The inattentiveness to the mismanagement of Maliki’s government and the rise of unrest and later IS among the Sunnis exacerbated this.
Of course, the president’s fiasco of indecision, reversed decisions, and ignoring the recommendations of his team regarding addressing the growing unrest in Syria contributed to this. Sluggish and confused reactions to the Arab Spring were compounded by a major mishandling and dangerous weakening of the vital relationship the United States had with Egypt. Obama’s ambivalence about taking action and then doing what was necessary to produce successful outcomes in Libya was yet another such mismanaged effort that created more problems than it solved.
It is an irony of the Obama years that although he raised hopes of a new, better era in regional relations with a speech he gave in the heart of the Arab world in Cairo, that ultimately his only real efforts to change relations “for the better” in the region were not with Arabs at all but with Persians. The administration’s good first-term toughness toward Iran on nuclear sanctions was followed by a second-term hunger for a nuclear deal that was so great that everyone from Tehran to Toledo, Ohio, now believes that the United States wants the deal more than the Iranians do and has lost negotiating leverage as a result. This shift, which was not accompanied by sufficient coordination with our important regional allies from Israel to the Gulf that might allay their concerns about a deal or a U.S.-Iran rapprochement, became more troubling to those allies (and to students of the region) as Iran became the one country in the Middle East to actually make gains thanks to the growing chaos. It has done so in Yemen, through its ever-closer ties with Baghdad and the Iraqi government’s dependency on Iranian ground troops and advisors and weapons to help combat IS, and it has increased its influence on the regime in Syria (where Assad now looks like to outlast Obama in office).
The indignant comments of American Gen. Lloyd Austin this week denouncing the idea that he might ever command troops that would fight alongside Shiite militias after their treatment of Americans during the Iraq War were moving. But they rang hollow given that they hung on a semantic deception. The world knows that America is providing air support for Iranian-led, Shiite-militia-backed, Iraqi-supported forces in the war against IS in that country. They know that for all the talk of America’s coalition, Iran is gaining more influence in Baghdad because they are willing to put boots on the ground. That is why it is not Austin but Quds Force commander Qassem Suleimani who is celebrated as a hero in and around the Shiite and even in the Kurdish regions of Iraq. Do not think this reality, denials aside, has not fed the growing and acute distrust of the Obama administration among some of our most vital allies in the Gulf, in Egypt, and elsewhere. Do not think it did not lead them to the awareness that they would have to take action on their own in Yemen to counterbalance Iran’s gains. The United States has since scrambled to paper this over by arguing Washington is supporting both the fight against the Houthis in Yemen and not really working too closely with Iran in Iraq. (The retreat of Shiite militias, allegedly because of their discomfort with working alongside the United States, rings suspicious to me and a bit too conveniently orchestrated. We may not “coordinate” with the Iranians but we sure do play an active game of telephone with them through Iraqi interlocutors … at least.)
Meanwhile, the Iran nuclear talks have obviously also taken a toll on the deteriorating relationship with Israel. Now, as noted above, Benjamin Netanyahu is no walk in the park as a partner. But it is also undeniable that the White House has poured gasoline on the flames that have all but incinerated the traditional foundations of the relationship. Whatever the next 21 months may bring — and a further deterioration of the relationship is likely — it’s no exaggeration to say that the relationship between the leaders of the United States and Israel is at a historic low.
In fact, you can say what you want about the origins of the current mess in the Middle East, but the fact that America’s relations with every important country in the region are worse with the exception of Iran is telling.
Bad choices, mismanagement, and faulty diplomacy are not the primary causes of America’s problems of its own making in the region. The biggest culprit is strategic incoherence. We don’t seem to have a clear view of our interests or a vision for the future of the region fostered in collaboration with our allies there and elsewhere. “Leave it to the folks on the ground” is no more a U.S. foreign-policy strategy than is “don’t do stupid shit.” It is a modality at best and in fact, it is really an abrogation of responsibility when so many of these relationships do have trade, investment, political, military, and other elements that give the United States leverage that it could and should use to advance its interests. Our relations with other major powers likewise should provide us with such tools if we were to do the diplomatic heavy lifting to produce coordinated efforts. (And arguing that’s what we are doing in Iran is not compelling when we are not doing it with regard to the region’s many other problems or when we have done it to ill-effect in places like Libya or Syria.)
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We need to push back hard on the idea that somehow Iran is about to become our friend. The nuclear threat is just one the many threats it poses and not the greatest one. Geopolitically, our failings and inaction have created a sense among countries of the region to seek other support from other big powers. From Egypt to Israel to the Gulf, virtually every country in the region is (ironically) pivoting to Asia — to China and to India and, where possible, to Japan and Southeast Asia. And Russian influence is growing too in Cairo, in Tel Aviv, and in Tehran. Better burden-sharing is fine. Greatly reduced influence not so much. In the region that means rebuilding old alliances through attention to our partners’ needs, through actions, not words, through listening, not offering up placating speeches. Further, we must recognize that in some conflicts unless we are willing to commit some number of boots on the ground (and the fight against IS is one such conflict) we will not be seen to be truly leading, truly committed, and others who are willing to make such commitments (like the Iranians) will gain.
Should we aggressively seek diplomatic solutions to the fights in Syria, Iraq, Yemen, and Libya? Yes. But we will only be successful if our opponents know that they will pay a high price that would be inflicted by a committed coalition that includes the resources and genuine engagement of the leaders of the richest and most powerful nation on Earth alongside regional leaders it clearly trusts and empowers to take the lead on regional issues. And the negotiations will only work if we practice the kind of diplomacy that is not impeded by artificial deadlines and undercut by messages that we need the deal more than the other side does.
So, by all means, let’s acknowledge the complex origins of the current crisis. But let’s not minimize that the failure to be more effective in addressing it can and almost certainly will lead to major losses for American interests in the region. Further and finally, this is a moment that requires great vigilance and should be producing much greater multilateral action by the United States and our allies and within the U.N. Having effectively every country in the region at war is as likely to lead to escalation as it is to solutions. More so. We are not far from seeing the conflicts connect into what could be the biggest conflagration the world has seen since August 1945. And even if that does not happen, prolonged chaos will feed into the spread of extremism in Africa, Asia, and the spread of terrorism in Europe and North America. The stakes could not be higher. And it is clear, even if we recognize America’s limited ability to impact what is happening on the ground, that we have an urgent obligation to try and to try to do so in new ways. Because what we have done for the past six years is just not working and in fact is making the world’s worst situation worse.
Source.
Go read the whole article.
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Seems to be behind a paywall or something. Articulate grousing, but I'm not seeing an actual viable action plan from the quoted parts. Just things that there isn't enough support for. Also, it's not that scathing as I read it.
People always talk about strategic incoherence, but I don't see that having such a huge effect as claimed. A lot of details could be quibbled on, but I don't want to dispute his details without seeing the full article in case they're elaborated on.
Lot of nuisance to fix it all But, if you want me to take over the entire process and run American diplomacy, I'd be willing to be president or secretary of state.
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On March 29 2015 10:30 coverpunch wrote:Show nested quote +On March 29 2015 09:09 WolfintheSheep wrote:On March 29 2015 09:02 Millitron wrote:On March 29 2015 09:00 WolfintheSheep wrote:On March 29 2015 08:55 Millitron wrote:On March 29 2015 07:57 dAPhREAk wrote: okay. lets focus just on religion and christianity.
around WW2, 12% of the iraq population was christian (1947). i havent been able to find a good statistic for japanese christians in the same time period, but assuming your source is reliable it has remained stable around 1%.
ignoring everything else, wouldnt that mean that iraq would be more culturally similar to the west than japan? No, because Christianity was only one factor. Japan went through the Meiji Restoration. There was no Meiji Restoration analog for Iraq. Aaaaaand we're back to the ridiculous notion that Industrialization = Westernization. It was more than just industrialization. There was the dissolution of feudalism. The rise of the free market. At least some emulation of western cultures. Note how the Japanese dressed just after the Meiji Restoration. Yes, and note how Europeans cooked after they opened trade routes to India and opened the Silk Road, and how their art and design changed after opening routes to China. And again, apparently you have to be a Western nation to progress away from feudalism. And apparently the free market is an exclusively Western concept. You're being deliberately obtuse. "Westernization" means adopting Western technology, industry, culture, and attitudes. Millitron is just insisting on the same bad points, but Japan definitely experienced a period of Westernization which is unique to any non-Western country. Japanese changed their clothes to wear Western-style suits and hats on diplomatic missions, they traded and did economic transactions in Western-style ways (adopting the gold standard, opening banks with lines of credit, etc.), they founded philharmonics and orchestras, they incorporated European words into their language, etc. Worth pointing out that they also developed an imperial constitution and an elected legislature, adopted Western military traditions and strategies, and yes, industrialized. Again, this is all notable because every other foreign culture encountered by the West resisted doing all of this. They might pick and choose things that they like, which goes for the West as well, but they didn't change their culture fundamentally to adopt another like Japan did. Japan wasn't a "Western country", but they were more similar than any other and certainly more than any other in Asia. And they were definitely more similar to the West in the 1930s than Iraq in 2003. I'll definitely grant you the constitution and legislature.
But if a lot of those points count as "Westernizing", then the West became "Easternized" just as much
Not to mention how much of that "cultural" stuff applies to the Middle East just as much (or more so). Wow, the Japanese liked European music and use some latin-originated words, and wear suits when they're dealing with foreigners. And they adopted a money standard that the nations they wanted to trade with were using. How does any of that not apply to Middle East?
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On March 29 2015 12:03 WolfintheSheep wrote:Show nested quote +On March 29 2015 10:30 coverpunch wrote:On March 29 2015 09:09 WolfintheSheep wrote:On March 29 2015 09:02 Millitron wrote:On March 29 2015 09:00 WolfintheSheep wrote:On March 29 2015 08:55 Millitron wrote:On March 29 2015 07:57 dAPhREAk wrote: okay. lets focus just on religion and christianity.
around WW2, 12% of the iraq population was christian (1947). i havent been able to find a good statistic for japanese christians in the same time period, but assuming your source is reliable it has remained stable around 1%.
ignoring everything else, wouldnt that mean that iraq would be more culturally similar to the west than japan? No, because Christianity was only one factor. Japan went through the Meiji Restoration. There was no Meiji Restoration analog for Iraq. Aaaaaand we're back to the ridiculous notion that Industrialization = Westernization. It was more than just industrialization. There was the dissolution of feudalism. The rise of the free market. At least some emulation of western cultures. Note how the Japanese dressed just after the Meiji Restoration. Yes, and note how Europeans cooked after they opened trade routes to India and opened the Silk Road, and how their art and design changed after opening routes to China. And again, apparently you have to be a Western nation to progress away from feudalism. And apparently the free market is an exclusively Western concept. You're being deliberately obtuse. "Westernization" means adopting Western technology, industry, culture, and attitudes. Millitron is just insisting on the same bad points, but Japan definitely experienced a period of Westernization which is unique to any non-Western country. Japanese changed their clothes to wear Western-style suits and hats on diplomatic missions, they traded and did economic transactions in Western-style ways (adopting the gold standard, opening banks with lines of credit, etc.), they founded philharmonics and orchestras, they incorporated European words into their language, etc. Worth pointing out that they also developed an imperial constitution and an elected legislature, adopted Western military traditions and strategies, and yes, industrialized. Again, this is all notable because every other foreign culture encountered by the West resisted doing all of this. They might pick and choose things that they like, which goes for the West as well, but they didn't change their culture fundamentally to adopt another like Japan did. Japan wasn't a "Western country", but they were more similar than any other and certainly more than any other in Asia. And they were definitely more similar to the West in the 1930s than Iraq in 2003. I'll definitely grant you the constitution and legislature. But if a lot of those points count as "Westernizing", then the West became "Easternized" just as much Not to mention how much of that "cultural" stuff applies to the Middle East just as much (or more so). Wow, the Japanese liked European music and use some latin-originated words, and wear suits when they're dealing with foreigners. And they adopted a money standard that the nations they wanted to trade with were using. How does any of that not apply to Middle East? This is a comparison of Germany/Japan in 1945 with Iraq in 2003 (not the entire Middle East) and why occupation of the former worked but the latter did not, with the original assertion being that Westernization and modernity had a lot to do with it. Millitron seems to have mixed and used the two interchangeably, which is what seems to be the heart of the disagreement here, since the debate has settled on the question of whether Japan was Westernized or even Western.
It's a bit strange to compare Iraq on the "Westernization" spectrum, since it sits in the area that Westerners call the cradle of civilization and it was occupied by the Ottoman Turks for a long time and then the British for a few decades. So Iraq definitely does not lack for exposure to Western culture and ideas. Perhaps we could settle on simply saying Iraq has never conformed to modernity in the same way that Germany and Japan did prior to WWII.
I could stretch and make a side effects argument for the cultural stuff. Wearing foreign-designed clothes, playing foreign-composed music, adopting foreign words, and buying imported goods is not so much the action itself as the attitude it conveys that they're open to accepting new ideas, even if they're foreign and do not easily adapt to native traditions. Iraq has arguably never shown much taste for adopting Western or modern ideas and certainly to a much lesser degree than Germany or Japan. And of course there has been exchange - Japanese whisky is some of the best in the world and you can easily find excellent sushi restaurants in the US or Europe, run by non-Japanese chefs.
But Iraq has yet to be integrated into that global market, either importing or exporting culture, and this is salient to why the US occupation was never going to turn the country into an economic miracle. Note that this could change and very quickly - Iraq does have one orchestra and does participate in global sporting events, and they're buying up smartphones at a very fast rate. Even still, to say Iraq in fifty years will be a repeat of Asian tigers and the average Iraqi will have the same education and income as the average Spaniard would probably be difficult to believe. 55% youth unemployment...less so.
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On March 29 2015 14:07 coverpunch wrote:Show nested quote +On March 29 2015 12:03 WolfintheSheep wrote:On March 29 2015 10:30 coverpunch wrote:On March 29 2015 09:09 WolfintheSheep wrote:On March 29 2015 09:02 Millitron wrote:On March 29 2015 09:00 WolfintheSheep wrote:On March 29 2015 08:55 Millitron wrote:On March 29 2015 07:57 dAPhREAk wrote: okay. lets focus just on religion and christianity.
around WW2, 12% of the iraq population was christian (1947). i havent been able to find a good statistic for japanese christians in the same time period, but assuming your source is reliable it has remained stable around 1%.
ignoring everything else, wouldnt that mean that iraq would be more culturally similar to the west than japan? No, because Christianity was only one factor. Japan went through the Meiji Restoration. There was no Meiji Restoration analog for Iraq. Aaaaaand we're back to the ridiculous notion that Industrialization = Westernization. It was more than just industrialization. There was the dissolution of feudalism. The rise of the free market. At least some emulation of western cultures. Note how the Japanese dressed just after the Meiji Restoration. Yes, and note how Europeans cooked after they opened trade routes to India and opened the Silk Road, and how their art and design changed after opening routes to China. And again, apparently you have to be a Western nation to progress away from feudalism. And apparently the free market is an exclusively Western concept. You're being deliberately obtuse. "Westernization" means adopting Western technology, industry, culture, and attitudes. Millitron is just insisting on the same bad points, but Japan definitely experienced a period of Westernization which is unique to any non-Western country. Japanese changed their clothes to wear Western-style suits and hats on diplomatic missions, they traded and did economic transactions in Western-style ways (adopting the gold standard, opening banks with lines of credit, etc.), they founded philharmonics and orchestras, they incorporated European words into their language, etc. Worth pointing out that they also developed an imperial constitution and an elected legislature, adopted Western military traditions and strategies, and yes, industrialized. Again, this is all notable because every other foreign culture encountered by the West resisted doing all of this. They might pick and choose things that they like, which goes for the West as well, but they didn't change their culture fundamentally to adopt another like Japan did. Japan wasn't a "Western country", but they were more similar than any other and certainly more than any other in Asia. And they were definitely more similar to the West in the 1930s than Iraq in 2003. I'll definitely grant you the constitution and legislature. But if a lot of those points count as "Westernizing", then the West became "Easternized" just as much Not to mention how much of that "cultural" stuff applies to the Middle East just as much (or more so). Wow, the Japanese liked European music and use some latin-originated words, and wear suits when they're dealing with foreigners. And they adopted a money standard that the nations they wanted to trade with were using. How does any of that not apply to Middle East? This is a comparison of Germany/Japan in 1945 with Iraq in 2003 (not the entire Middle East) and why occupation of the former worked but the latter did not, with the original assertion being that Westernization and modernity had a lot to do with it. Millitron seems to have mixed and used the two interchangeably, which is what seems to be the heart of the disagreement here, since the debate has settled on the question of whether Japan was Westernized or even Western. It's a bit strange to compare Iraq on the "Westernization" spectrum, since it sits in the area that Westerners call the cradle of civilization and it was occupied by the Ottoman Turks for a long time and then the British for a few decades. So Iraq definitely does not lack for exposure to Western culture and ideas. Perhaps we could settle on simply saying Iraq has never conformed to modernity in the same way that Germany and Japan did prior to WWII. I could stretch and make a side effects argument for the cultural stuff. Wearing foreign-designed clothes, playing foreign-composed music, adopting foreign words, and buying imported goods is not so much the action itself as the attitude it conveys that they're open to accepting new ideas, even if they're foreign and do not easily adapt to native traditions. Iraq has arguably never shown much taste for adopting Western or modern ideas and certainly to a much lesser degree than Germany or Japan. And of course there has been exchange - Japanese whisky is some of the best in the world and you can easily find excellent sushi restaurants in the US or Europe, run by non-Japanese chefs. But Iraq has yet to be integrated into that global market, either importing or exporting culture, and this is salient to why the US occupation was never going to turn the country into an economic miracle. Note that this could change and very quickly - Iraq does have one orchestra and does participate in global sporting events, and they're buying up smartphones at a very fast rate. Even still, to say Iraq in fifty years will be a repeat of Asian tigers and the average Iraqi will have the same education and income as the average Spaniard would probably be difficult to believe. 55% youth unemployment...less so. Well, if the argument is that a developed and industrialized nation with a concept of individual rights and freedoms will have the same after foreign occupation, then I'm all for that. Or whatever various factors you want to talk about why Iraq or the Middle East in general rejects Western intervention and occupation. Just as long as it's actually, you know, sensible.
To be clear here, I thought the whole chain of discussion was quite hilarious from start to finish, not only that Japan was a "Western culture", but that being similar to another country makes you more accepting of complete military occupation from a foreign country. And when the line was drawn that a military occupation is less likely to backfire if the country's business-men wear suits and bowler hats and people have philharmonic orchestras...
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On March 29 2015 14:55 WolfintheSheep wrote:Show nested quote +On March 29 2015 14:07 coverpunch wrote:On March 29 2015 12:03 WolfintheSheep wrote:On March 29 2015 10:30 coverpunch wrote:On March 29 2015 09:09 WolfintheSheep wrote:On March 29 2015 09:02 Millitron wrote:On March 29 2015 09:00 WolfintheSheep wrote:On March 29 2015 08:55 Millitron wrote:On March 29 2015 07:57 dAPhREAk wrote: okay. lets focus just on religion and christianity.
around WW2, 12% of the iraq population was christian (1947). i havent been able to find a good statistic for japanese christians in the same time period, but assuming your source is reliable it has remained stable around 1%.
ignoring everything else, wouldnt that mean that iraq would be more culturally similar to the west than japan? No, because Christianity was only one factor. Japan went through the Meiji Restoration. There was no Meiji Restoration analog for Iraq. Aaaaaand we're back to the ridiculous notion that Industrialization = Westernization. It was more than just industrialization. There was the dissolution of feudalism. The rise of the free market. At least some emulation of western cultures. Note how the Japanese dressed just after the Meiji Restoration. Yes, and note how Europeans cooked after they opened trade routes to India and opened the Silk Road, and how their art and design changed after opening routes to China. And again, apparently you have to be a Western nation to progress away from feudalism. And apparently the free market is an exclusively Western concept. You're being deliberately obtuse. "Westernization" means adopting Western technology, industry, culture, and attitudes. Millitron is just insisting on the same bad points, but Japan definitely experienced a period of Westernization which is unique to any non-Western country. Japanese changed their clothes to wear Western-style suits and hats on diplomatic missions, they traded and did economic transactions in Western-style ways (adopting the gold standard, opening banks with lines of credit, etc.), they founded philharmonics and orchestras, they incorporated European words into their language, etc. Worth pointing out that they also developed an imperial constitution and an elected legislature, adopted Western military traditions and strategies, and yes, industrialized. Again, this is all notable because every other foreign culture encountered by the West resisted doing all of this. They might pick and choose things that they like, which goes for the West as well, but they didn't change their culture fundamentally to adopt another like Japan did. Japan wasn't a "Western country", but they were more similar than any other and certainly more than any other in Asia. And they were definitely more similar to the West in the 1930s than Iraq in 2003. I'll definitely grant you the constitution and legislature. But if a lot of those points count as "Westernizing", then the West became "Easternized" just as much Not to mention how much of that "cultural" stuff applies to the Middle East just as much (or more so). Wow, the Japanese liked European music and use some latin-originated words, and wear suits when they're dealing with foreigners. And they adopted a money standard that the nations they wanted to trade with were using. How does any of that not apply to Middle East? This is a comparison of Germany/Japan in 1945 with Iraq in 2003 (not the entire Middle East) and why occupation of the former worked but the latter did not, with the original assertion being that Westernization and modernity had a lot to do with it. Millitron seems to have mixed and used the two interchangeably, which is what seems to be the heart of the disagreement here, since the debate has settled on the question of whether Japan was Westernized or even Western. It's a bit strange to compare Iraq on the "Westernization" spectrum, since it sits in the area that Westerners call the cradle of civilization and it was occupied by the Ottoman Turks for a long time and then the British for a few decades. So Iraq definitely does not lack for exposure to Western culture and ideas. Perhaps we could settle on simply saying Iraq has never conformed to modernity in the same way that Germany and Japan did prior to WWII. I could stretch and make a side effects argument for the cultural stuff. Wearing foreign-designed clothes, playing foreign-composed music, adopting foreign words, and buying imported goods is not so much the action itself as the attitude it conveys that they're open to accepting new ideas, even if they're foreign and do not easily adapt to native traditions. Iraq has arguably never shown much taste for adopting Western or modern ideas and certainly to a much lesser degree than Germany or Japan. And of course there has been exchange - Japanese whisky is some of the best in the world and you can easily find excellent sushi restaurants in the US or Europe, run by non-Japanese chefs. But Iraq has yet to be integrated into that global market, either importing or exporting culture, and this is salient to why the US occupation was never going to turn the country into an economic miracle. Note that this could change and very quickly - Iraq does have one orchestra and does participate in global sporting events, and they're buying up smartphones at a very fast rate. Even still, to say Iraq in fifty years will be a repeat of Asian tigers and the average Iraqi will have the same education and income as the average Spaniard would probably be difficult to believe. 55% youth unemployment...less so. Well, if the argument is that a developed and industrialized nation with a concept of individual rights and freedoms will have the same after foreign occupation, then I'm all for that. Or whatever various factors you want to talk about why Iraq or the Middle East in general rejects Western intervention and occupation. Just as long as it's actually, you know, sensible. To be clear here, I thought the whole chain of discussion was quite hilarious from start to finish, not only that Japan was a "Western culture", but that being similar to another country makes you more accepting of complete military occupation from a foreign country. And when the line was drawn that a military occupation is less likely to backfire if the country's business-men wear suits and bowler hats and people have philharmonic orchestras... You were more of a "draw your own picture on top of the picture" instead of "color inside the lines" kind of kid, weren't you?
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On March 29 2015 14:07 coverpunch wrote:Show nested quote +On March 29 2015 12:03 WolfintheSheep wrote:On March 29 2015 10:30 coverpunch wrote:On March 29 2015 09:09 WolfintheSheep wrote:On March 29 2015 09:02 Millitron wrote:On March 29 2015 09:00 WolfintheSheep wrote:On March 29 2015 08:55 Millitron wrote:On March 29 2015 07:57 dAPhREAk wrote: okay. lets focus just on religion and christianity.
around WW2, 12% of the iraq population was christian (1947). i havent been able to find a good statistic for japanese christians in the same time period, but assuming your source is reliable it has remained stable around 1%.
ignoring everything else, wouldnt that mean that iraq would be more culturally similar to the west than japan? No, because Christianity was only one factor. Japan went through the Meiji Restoration. There was no Meiji Restoration analog for Iraq. Aaaaaand we're back to the ridiculous notion that Industrialization = Westernization. It was more than just industrialization. There was the dissolution of feudalism. The rise of the free market. At least some emulation of western cultures. Note how the Japanese dressed just after the Meiji Restoration. Yes, and note how Europeans cooked after they opened trade routes to India and opened the Silk Road, and how their art and design changed after opening routes to China. And again, apparently you have to be a Western nation to progress away from feudalism. And apparently the free market is an exclusively Western concept. You're being deliberately obtuse. "Westernization" means adopting Western technology, industry, culture, and attitudes. Millitron is just insisting on the same bad points, but Japan definitely experienced a period of Westernization which is unique to any non-Western country. Japanese changed their clothes to wear Western-style suits and hats on diplomatic missions, they traded and did economic transactions in Western-style ways (adopting the gold standard, opening banks with lines of credit, etc.), they founded philharmonics and orchestras, they incorporated European words into their language, etc. Worth pointing out that they also developed an imperial constitution and an elected legislature, adopted Western military traditions and strategies, and yes, industrialized. Again, this is all notable because every other foreign culture encountered by the West resisted doing all of this. They might pick and choose things that they like, which goes for the West as well, but they didn't change their culture fundamentally to adopt another like Japan did. Japan wasn't a "Western country", but they were more similar than any other and certainly more than any other in Asia. And they were definitely more similar to the West in the 1930s than Iraq in 2003. I'll definitely grant you the constitution and legislature. But if a lot of those points count as "Westernizing", then the West became "Easternized" just as much Not to mention how much of that "cultural" stuff applies to the Middle East just as much (or more so). Wow, the Japanese liked European music and use some latin-originated words, and wear suits when they're dealing with foreigners. And they adopted a money standard that the nations they wanted to trade with were using. How does any of that not apply to Middle East? This is a comparison of Germany/Japan in 1945 with Iraq in 2003 (not the entire Middle East) and why occupation of the former worked but the latter did not, with the original assertion being that Westernization and modernity had a lot to do with it. Millitron seems to have mixed and used the two interchangeably, which is what seems to be the heart of the disagreement here, since the debate has settled on the question of whether Japan was Westernized or even Western. It's a bit strange to compare Iraq on the "Westernization" spectrum, since it sits in the area that Westerners call the cradle of civilization and it was occupied by the Ottoman Turks for a long time and then the British for a few decades. So Iraq definitely does not lack for exposure to Western culture and ideas. Perhaps we could settle on simply saying Iraq has never conformed to modernity in the same way that Germany and Japan did prior to WWII. I could stretch and make a side effects argument for the cultural stuff. Wearing foreign-designed clothes, playing foreign-composed music, adopting foreign words, and buying imported goods is not so much the action itself as the attitude it conveys that they're open to accepting new ideas, even if they're foreign and do not easily adapt to native traditions. Iraq has arguably never shown much taste for adopting Western or modern ideas and certainly to a much lesser degree than Germany or Japan. And of course there has been exchange - Japanese whisky is some of the best in the world and you can easily find excellent sushi restaurants in the US or Europe, run by non-Japanese chefs. But Iraq has yet to be integrated into that global market, either importing or exporting culture, and this is salient to why the US occupation was never going to turn the country into an economic miracle. Note that this could change and very quickly - Iraq does have one orchestra and does participate in global sporting events, and they're buying up smartphones at a very fast rate. Even still, to say Iraq in fifty years will be a repeat of Asian tigers and the average Iraqi will have the same education and income as the average Spaniard would probably be difficult to believe. 55% youth unemployment...less so.
How can you lump Germany and Japan together? Germany was Europes crown jewel of culture and modernity for arguably hundreds of years from the 16th to early 20th Century, more so before unification, but I digress. We're not talking Germanic peoples from the Roman era here. We're talking about Kant, Bach, Einstein, Wagner, Leibniz, etc. Even before WWII Germany was probably the most advanced nation on the Earth, considering the fact that the reason where we are today are because of German scientists (Einstein, von Braun, etc.). So it seems quite odd to me to talk about Germany conforming to modernity when they're one of its architects.
The reason why German 'occupation' was successful and I suppose we're defining success here as becoming relatively non-violent, is that Allied powers pretty much outlawed German war-making capabilities (the same as it did the Japanese) as well as transforming their educational teaching from institutions to the small family units (as in, the allied narrative penetrated all parts of society and the youth). It didn't hurt that the Communists had East Germany and most Germans felt it preferable living under British and American rule than Russian. In this view, Japanese occupation was successful as well as we decimated their war-capabilities. Now, as far as economies goes, Germany and Japan were world-leaders by the time of WWII, had developed modern infrastructures and financial systems, and had recent history of being well-to-do and powerful entities. Iraq has none of this history. No contemporary resemblances. Similarly, the people never initiated conflict upon the powers occupying them, which makes them resist the occupiers even more. It's more complex, but the situations couldn't be more different and I agree with you that 'modernity' and 'westernization' has nothing to do with either scenario.
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On March 29 2015 08:50 JonnyBNoHo wrote:Show nested quote +How Chicago has used Financial Engineering to Paper over its Massive Budget Gap Chicago made headlines at the end of February after Moody’s downgraded the city’s general obligation bond rating to Baa2. Moody’s has cut Chicago’s rating five notches in less than two years. This downgrade, however, placed the city’s credit below the termination triggers on some of its outstanding interest rate swaps. The city has been working to renegotiate the terms of those contracts with its counterparties. If Chicago’s general obligation rating falls below investment grade, the city’s credit deterioration will become a self-fulfilling prophesy. The city risks nearly $400 million of swap termination payments and the acceleration of its $294 million of outstanding short-term debt. Unsurprisingly, some of Chicago’s bonds are already trading at junk levels. Chicago CUSIPs are listed here. That said, the rating agencies and most other market participants still appear to be light years away from understanding the true scope of Chicago’s financial problems. The city has a very — well, let’s just call it unconventional — approach to borrowing money and probably should not be considered investment grade. Some budget history + Show Spoiler +In order for you to follow my discussion of Chicago’s borrowing shenanigans, it is necessary to understand the fiscal machinery behind its bond issues. Please be patient with me here. This story will blow your mind shortly.
Chicago’s budget is divided into seven different fund classifications, but only three funds are relevant to our narrative: the Corporate Fund, Property Tax Fund, and Reserve Funds.
The Corporate Fund is Chicago’s general operating fund. This fund is used to pay for essential government services and activities (e.g. public safety and trash collection). Corporate Fund revenues are derived from a wide variety of sources, including: (1) local tax revenue from utility, transaction, transportation, recreation, and business taxes; (2) intergovernmental tax revenue, which represents the city’s share of the state’s sales and use taxes, income tax, and personal property replacement tax; and (3) non-tax revenue from fees, fines, asset sales, and leases.
Chicago’s property tax revenues do not go into its general operating fund. These revenues go into a Property Tax Fund, which is used to make debt service payments on the city’s general obligation bonds; make required employee pension contributions; and (to a minor extent) fund the library system. The fund also includes tax increment financing revenues that flow to projects in designated TIF districts.
The city used some of the proceeds from long-term leases of city assets to establish Reserve Funds. The Chicago Skyway reserve funds were established in 2005 in the amount of $975 million. The Metered Parking System reserve funds were established in 2009 in the amount of $1.15 billion. Of these funds, $475 million of the Skyway reserves were designated for budgetary uses. What remained was $500 million for the Skyway; $400 million for the Metered Parking System; and $326 million for a budget stabilization fund.
There has been a structural gap in Chicago’s Corporate Fund budget since at least 2003. Although most governments are required to balance their budgets on a cash flow basis each fiscal year, a structural budget gap can arise when recurring expenditures are greater than recurring revenues. Some of the city’s offering documents suggest that this gap is a legacy of the last economic downturn, but in reality the gap pre-dates the economic downturn by several years. The impact of economic downturns on tax collections tends to have a considerable lag anyway.
So, Chicago’s structural budget gap is a political, not economic, creature. Rather than cut expenditures to a level that could be supported by recurring revenues, the city mostly used non-recurring resources to fill the gap from one fiscal year to the next. This is not surprising. Most of Chicago’s Corporate Fund budget goes to salaries and benefits for its employees, and 90% of the city’s employees belong to around 40 different unions. Attempts to adjust expenditures tend to have well organized opposition.
Between fund transfers and drawing down its reserves, the city blew through its financial cushioning quickly. The $326 million budget stabilization fund was exhausted by 2010. From 2009 to 2011, the city used $320 million from the Metered Parking Reserves. The city’s budget gap was at its widest in the wake of the last economic downturn, at over $600 million. Chicago’s dysfunctional debt program
Now things start to get interesting. Transfers from reserves and other funds have not been the only means Chicago officials (across administrations) have devised to subsidize the city’s Corporate Fund. The city has effectively been using its general obligation bond offerings and interest rate derivatives to accomplish the same thing.
State and local governments typically use the proceeds from their bond offerings to construct or renovate public buildings and infrastructure. These are projects that have long useful lives and will benefit residents for generations.
Dating back to at least 2003, however, Chicago has been issuing long-term tax-exempt and taxable bonds to:
(1) Roll over short-term debt used as working capital;
(2) Pay for maintenance activities that would otherwise be paid from the Corporate Fund;
(3) Pay for judgments and settlements that would otherwise be paid from the Corporate Fund, including wage increases and retroactive pension contributions for its employees; and
(4) Provide discretionary funds to each of the city’s 50 aldermen to pay for activities in their own districts.
The magnitude of tax-exempt bond proceeds used for judgments and settlements over this period is staggering. The Chicago Tribune estimated it at approximately $400 million:
In 2002, for example, the city used tax-exempt bonds to pay an arbitration award involving the Fraternal Order of Police. Rank-and-file officers rejected a city contract offer in 2001, but an arbitrator ruled in favor of the city’s wage proposal a year later.
The deal included raises of 2 to 4 percent a year, to be applied retroactively. In bond documents, city officials deemed the back pay the city owed an extraordinary expense and paid $164 million of it with tax-exempt bonds.
The city ultimately will need to pay bondholders $280 million to cover the loan …
Bonds also ended up covering the $28 million a jury awarded to Joseph Regaldo in 1999. The jury found that, years earlier, a Chicago police officer had beaten him in the back of the head and neck with a blunt object, which ripped apart an artery and cut off the blood supply to his brain. The injuries left Regaldo unable to walk, talk or care for himself.
The judgment won’t be paid off until 2019 at the earliest; by then, the total cost will have grown to $53 million.
City officials eventually switched to paying judgments with taxable bonds, which are even more costly in the long run.
That is, until 2012:
About $54 million from a tax-exempt bond helped cover a legal judgment awarded to African-Americans who were denied a chance to become firefighters by a 1990s entrance exam that favored white applicants. An additional $8 million in tax-exempt bond money went to pay legal fees related to the case, records show.
By using bond money, the city created an irony for many of those awarded damages, as their future property taxes will help pay interest on the debt. In 2033, when the city starts paying down the $54 million, interest will have more than doubled the total cost.
Stop and let that sink in for a moment. That police brutality case? Wage increases negotiated with labor unions? Not just financed, but financed with long-term debt.
So why haven’t the city’s 50 aldermen protested the use of bond proceeds for these purposes? It probably has something to do with the “Aldermen’s Menu,” which allows the aldermen to use a portion of the proceeds from the city’s general obligation bond issues to pay for whatever they want for their district.
It is unclear (to me) whether the city tracks how the funds from the “Aldermen’s Menu” are spent, but in the aggregate they are not a negligible amount. From 2003 to 2012, these projects have ranged from $54.2 million to $102 million.
The use of bond proceeds to provide slush funds for policymakers has a historic analog in the revenue bonds Harrisburg issued for its incinerator project as the city was on its path to insolvency. Pennsylvania law limits the amount of debt local governments can issue to finance projects that are not self-supporting. Substantially all of the bonds tied to the incinerator project were issued to provide working capital, although city officials were able to locate financial advisory firms that were willing to certify the opposite to state regulators.
In order to win authorization for bond issues that outright defied state law, Harrisburg’s later bond issues included a “Special Projects Fund” for city officials to play with. They bought things like artifacts for a Wild West Museum. In Pennsylvania. Don’t think too hard, there is no why.
See? Reading the Sources and Uses provisions in official statements can be fun. I know, this makes you want to invite me to your next dinner party.
Our story gets even more interesting when you look at how Chicago’s past general obligation bond offerings have been structured.
First, the city has undertaken several large, non-traditional refundings to push the maturities on debt that is coming due out into later years.
A traditional refunding is akin to how a homeowner refinances a mortgage loan. A new loan is used to prepay an old loan to achieve an interest cost savings. A “scoop and toss” refunding, which is what Chicago has done, involves additional interest cost — even in a ridiculously low interest rate environment — because the debt remains outstanding for a longer period of time.
The objective of these deals was to provide budget relief for the city’s general operating fund in the short term, even if the structure means escalating debt service payments in the long term. These restructurings artificially inflated the city’s debt capacity, so the city could continue to use property tax-supported bonds to take out the city’s working capital credit facilities, which allowed the city to avoid balancing its Corporate Fund budget.
Chicago is far from the only government to restructure debt for budget relief. Quite a few state and local governments engaged in similar transactions following the last recession. What makes Chicago unique is, again, the magnitude of this activity. According to the Chicago Tribune, “since 2000, the city has used $3.6 billion in bond money to refund old debt as principal payments came due. Of that amount, half will end up costing taxpayers in the long run.” For the sake of comparison, Chicago has around $7.2 billion of general obligation bonds outstanding.
Second, Chicago’s past few general obligation bond offerings have involved considerable amounts of capitalized interest.
Capitalized interest is typically associated with project finance, not general obligation bond issues. Project finance is a sector where loans finance revenue-producing facilities and infrastructure. The debt is supported by those revenues, not taxes as with general obligation bonds.
With capitalized interest, a bond issuer borrows more money than a project requires for construction in order to pay the interest on the bonds while the project is being built. The idea here is that the project will eventually generate revenues that can support debt service payments and the cost added by capitalizing interest.
From 2010 to 2014, Chicago’s general obligation bond deals included over $235 million of capitalized interest, simply as a means for the city to avoid servicing its debt in the short term.
If you are a bondholder, there are two things you should take away from this segment of our narrative.
First, if you hold the tax-exempt portion of these deals and the Internal Revenue Service ever gets around to scrutinizing them, your bonds probably won’t be tax exempt for long. Many of these uses of bond proceeds are not eligible for tax-exempt financing under the federal tax code. These bonds have received extraordinarily aggressive tax opinions — including, incidentally, from the same law firm that drafted Illinois’s swap legislation, which I will get to momentarily.
Second, Chicago taxpayers are on the hook for billions of dollars of long-term debt and have little of tangible value to show for it. There is a good chance that residents do not understand the nature of their government’s borrowing activities, since these were complex offerings. (Well, unless they read what I have written here…) As debt service payments increasingly compete with other political priorities for funding, this revelation might eventually erode the city’s willingness to pay.
These transactions should never have happened. Chicago’s interest rate derivatives portfolio
Perhaps a third thing a bondholder should take away from our narrative is that to the extent Chicago is slapped with future termination payments on its interest rate derivatives, the security for your investment will be diluted. Since Chicago’s property tax revenues are also applied to pension contributions and the debt/derivatives of several other overlapping taxing districts, this is not an insignificant factor.
The State of Illinois authorized local governments to use interest rate derivatives in 2003. Here is a link to the legislation. The bill restricts the notional amount of a municipality’s interest rate derivatives to the outstanding debt the contracts will ostensibly hedge. Since the notional amount of a swap, etc. says nothing about an issuer’s risk exposure, this provision is pretty much worthless. And since the legislation was drafted by the financial industry, that probably wasn't an accident.
The legislation allows the municipality to make payments due under the swap contract (which would include termination payments) from any source of revenue it has, including property taxes. This probably wasn't an accident either.
Chicago used interest rate swaps on its 2003, 2005, 2007, and 2009 bond deals, apparently as part of a synthetic fixed rate strategy. (I explain the mechanics of synthetic fixed rate deals in this essay.) The city also recreationally experimented with more exotic contracts — swaptions and the like.
The associated bond offerings were multimodal. Multimodal bonds are bonds that can be converted to any of a number of interest rate modes at the option of the issuer. Bond documents allow the bonds to be remarketed daily, weekly, or monthly as variable rate tender option bonds, or in term or fixed rate modes. Like capitalized interest, this structure is typically used only in project finance. The multimodal structure allows long-term debt to function as both interim and permanent financing to accommodate the life cycle of a revenue-producing project.
Because the underlying debt is multimodal, Chicago never required interest rate derivatives to hedge its interest rate exposure. The city could have virtually any interest rate exposure it wanted as the bonds were remarketed. Why don’t all government issuers use this structure, you ask? Because most governments value predictable payments over trying to handicap interest rate trends and basis risk. That’s a function of being tethered to a budget.
As I noted at the beginning of this essay, Chicago is now almost $400 million out-of-the-money on its outstanding swaps. This only matters to the extent that the city’s credit ratings continue to sink toward termination triggers. Only one rating agency has to break these thresholds — so, even though S&P and Fitch still somehow believe Chicago is an A+/A- credit, Moody’s is the only rating agency that matters. If the city doesn’t get cut to junk and interest rates normalize, Chicago’s interest rate swap situation will eventually repair itself. The tipping point here either way is probably the outcome of the state/city’s pension litigation.
Chicago Public Schools — which already takes more property tax revenues from Cook County than the City of Chicago — has a swap/pension nightmare of its own to muddle through. Between the city and school system, area residents are at risk of making/financing $660 million of termination payments. The payments would compete with $28.3 billion of city and overlapping debt and billions of dollars of escalating pension contributions for funding. Basically, if you are in Chicago, your property is about to become more expensive.
From the outside, it looks like Chicago also used its interest rate swaps as a means of drumming up non-recurring resources to fill its budget gap in 2010 and 2011. If so, this is another example of the city’s willingness to trade long-term costs for avoiding politically inconvenient spending decisions.
The city made amendments to outstanding swap contracts by layering on forward-starting basis swaps. (This is something else Chicago has in common with Harrisburg.) These transactions changed the city’s net interest rate exposure on those deals from fixed to variable and introduced basis risk to the portfolio after they became effective in 2014. There was not an event that prompted these amendments and the city remains underwater on the deals. The city did receive a series of up-front payments, however. Judging from the swap confirmations from Deutsche Bank, PNC, and Wells Fargo, these payments amounted to around $25 million. Could Chicago file for Chapter 9 bankruptcy?
No. At least not right now. To be eligible to file for bankruptcy under Chapter 9, there must be a state law that specifically authorizes a municipality to do so. Illinois law does not currently permit municipalities to do so, except under a provision that relates to units of governments with populations under 25,000. Of course, Chicago would also have to meet the other eligibility criteria. The city does have a relatively large tax base.
That said, if state lawmakers wanted to give Chicago the ability to adjust its pension liabilities — its pensions have an aggregate funded ratio of 37% — amending a statute is a lot easier than amending the state constitution. Article 8, Section 5, of the Illinois Constitution says: “Membership in any pension or retirement system of the State, any unit of local government or school district, or any agency or instrumentality thereof, shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.”
Multiple federal bankruptcy judges have ruled that the federal bankruptcy code supersedes state constitutions, which theoretically provides a path for municipalities to adjust their pension commitments. The rulings have not been challenged in an appellate court, however, so there isn’t a bona fide legal precedent yet.
Illinois’s Constitution describes pension commitments as contractual in nature. For an obligation to be considered secured in bankruptcy, there has to be a property interest.
This logic also applies to the city’s general obligation debt though. For most of the city’s outstanding general obligation bonds, the city has pledged a specific property tax levy. Illinois is not one of the handful of states that provides general obligation debt a statutory lien. So it would seem, in my very non-legal opinion, that the bonds would be considered unsecured debt.
As I noted earlier, the city’s general obligation bond offerings have provided little of tangible value to taxpayers. If the city were authorized to file for bankruptcy and actually did so, there could potentially be political pressure to adjust general obligation debt before depriving pension beneficiaries their incomes.
It seems unlikely that the state or federal government would “Lehman” Chicago. It is the third largest city in the United States and a vital transportation hub. It seems reckless, however, to dismiss this possibility in its entirety over the medium term. When you tally up the ways bond proceeds have been used to offset operating expenses, scoop and toss restructurings, capitalized interest, and swap modifications, the city’s cumulative Corporate Fund budget gap is much, much larger than the city’s disclosures imply. At some point, this manner of doing business will collapse. LinkBonus story: Obama’s claim that Keystone XL oil ‘bypasses the U.S.’ earns Four Pinocchios
Re: Chicago.
I am from that area, and lived in the city for a while. What is particularly disturbing about Chicago's (and Illinois) situation is that it has these massive financial issues without having lost its rich citizens (ala Detroit, Jefferson County). They have a tax base that is being taxed at fairly high rates and still are hemorrhaging money.
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