Central banks split over credit squeeze
By Chris Giles and Gillian Tett in London
Copyright The Financial Times Limited 2007
Published: September 12 2007 18:34 | Last updated: September 12 2007 18:34
A clear divide between the world’s leading central banks over how best to respond to the credit squeeze emerged on Wednesday after Mervyn King, Bank of England governor, warned that efforts by his counterparts to shore up the financial system could sow “the seeds of a future financial crisis”.
In a trenchant defence of the Bank’s refusal to address the abnormally high interest rates for longer-term lending between banks, Mr King questioned the effectiveness of the kind of measures taken by the European Central Bank and said their approach could encourage “excessive risk-taking”.
The ECB pumped an extra €75bn (£51bn) into the financial system in an effort to reduce the interest rate gap between overnight funding and lending over longer maturities.
But in a written submission to the Commons Treasury select committee, Mr King warned of the hazards of providing central bank insurance to those institutions that have engaged in reckless lending.
“The provision of large liquidity facilities penalises those financial institutions that sat out the dance, encourages herd behaviour and increases the intensity of future crises,” he added. Central banks should not “sensibly entertain” such cash injections just to maintain the status quo, he added.
His remarks came as Alistair Darling, the chancellor, attacked banks for lending too freely and allowing consumer debt to soar. In an interview in Thursday’s Daily Telegraph, he calls for a return to “good old-fashioned banking”.
In the money markets, the cost of borrowing for three months in the London interbank market fell slightly on Wednesday in all areas.
The dollar also fell to a lifetime low against the euro of $1.3914 on expectations that the Federal Reserve will cut interest rates.
The disagreement among central bankers centred on how far they should go to try to normalise conditions in money markets.
The ECB said last Thursday it would pump three-month money into the system to “support a normalisation of the functioning of the euro money market”. Both Mr King and Mr Dodge said commercial banks were strong enough to absorb the assets of troubled investment vehicles.
Separately, policymakers are set to step up calls for greater transparency in the structured finance world when EU finance ministers meet in Portugal on Friday. Discussions are also continuing over other responses to the crisis, such as a review of bank capital standards or efforts to pool distressed assets.
Additional reporting by Krishna Guha in Washington
Fed looks beyond discount rate to control liquidity
By Krishna Guha in Washington
Copyright The Financial Times Limited 2007
Published: September 12 2007 20:30 | Last updated: September 12 2007 20:30
As Federal Reserve policymakers look ahead to next week’s decision on interest rates, staff at the central bank are continuing to work on other potential steps that could be taken to address liquidity problems in financial markets.
The possible steps range from the relatively orthodox – a disproportionately large cut in the discount rate at which the Fed lends directly to banks – to more unorthodox measures.
At issue is whether it would be worth the Fed dusting down some rarely used tools – or improvising new ones – to help it reach beyond the banking system and channel liquidity to where it is needed most.
Ben Bernanke, the Fed chairman, flagged up the possibility in a speech at Jackson Hole at the end of last month when he said the Fed “stands ready to take additional actions as needed to provide liquidity and promote the orderly functioning of markets”.
The obvious step would be to cut the discount rate by more than the main federal funds rate. For instance, if the Fed cut the funds rate by 25 basis points, it could cut the discount rate by 50 or even 75 basis points, reducing (or in the latter case eliminating) the effective penalty on direct borrowing.
This would both encourage greater use of the discount window facility and make it a more effective back-stop for the money markets.
The Fed has already cut the discount rate by 50 basis points to reduce the direct borrowing penalty. The aim is to make banks feel comfortable lending to non-bank financial institutions against good collateral, by letting them know they will in turn be able to raise funds from the Fed against that collateral at reasonable rates.
The discount rate is set by the Washington-based board of governors, not the full federal open market committee, so there is no reason why the Fed would have to announce any change alongside the rate decision next Tuesday. But a number of analysts expect that it will.
Some also believe the Fed might consider extending the term of its open market operations, as the European Central Bank has done.
Meanwhile, work is believed to be continuing on more unconventional policy steps that could be deployed if required in the future.
Fed officials see ensuring the effective functioning of markets as a critically important mission but one that is distinct, at least in the first instance, from their other main mission of managing the macroeconomy.
So they are keen to revisit the liquidity support tools at their disposal – tools that in many cases are rusty from lack of use over the years.
There are a number of ways in which the Fed could try to reach beyond the banks to the stressed non-bank financial sector and the distressed markets for asset-backed commercial paper and non-agency mortgage-backed securities.
Indeed, some of these approaches have been tried in the past, as Richard Berner, chief economist at Morgan Stanley, points out in a recent research note.
One option would be to set up a facility to lend directly to non-banks against their collateral, loosely modelled on the joint lending programme put in place in 1989 at the height of the savings and loans crisis.
Another option would be to establish currency swaps with European central banks to deal with pressure on the offshore dollar money markets, similar to those put in place after the terrorist attacks of September 11 2001.
The Fed could also mimic measures used in 1999 to guard against the fear of a Y2K liquidity drought at the turn of the millennium.
These included the creation of a temporary special liquidity facility that would accept commercial paper at a discount and the sale of call options giving banks the right to tap Fed loans in the future if required at guaranteed rates.
None of these steps appears imminent but their use should not be ruled out, particularly if markets take a fresh turn for the worse.
Mr Berner said the Fed’s main concern would be to ensure it did not end up taking any credit risk and that any unorthodox arrangements were truly temporary.
“It is like a military operation – you need an exit strategy,” he said.
ECB loans banks further €75bn
By Gerrit Wiesmann in Frankfurt
Copyright The Financial Times Limited 2007
Published: September 12 2007 12:12 | Last updated: September 12 2007 12:12
The European Central Bank on Wednesday loaned commercial banks €75bn ($104bn) for three months, a sign that institutions in the money market remain wary of lending to each other for periods of more than a week.
The Frankfurt-based central bank said 140 banks had applied for €139bn in central bank deposits, agreeing to pay an average interest rate of 4.52 per cent as compared with current interbank prices of 4.75 per cent.
The size of the refinancing operation shows how worried commercial banks remain that the crisis in the US mortgage market could yet render fellow institutions in the money market unable to repay loans.
It chimes with remarks by US Treasury secretary Henry Paulson that, even as short-term lending normalises, the crisis of confidence in the credit markets could last longer than any recent financial crises.
The ECB in August led global central banks in making short-term cash available to commercial banks as worries about mortgage-induced defaults all but halted vital interbank lending on the money markets.
In a sign that short-term lending may be normalising, the ECB drained €60bn in so-called overnight cash from the market. But commercial banks remain reluctant to lend to each other for long periods.
As a result, demand for longer-term central bank loans is up. The €139bn in three-month ECB loans the banks bid for compares with €126bn in bids when the ECB carried out a first special three-month tender in August.
The size of Wednesday’s allocation of cash – €75bn against €40bn last month – also showed that the ECB recognises that longer-term interbank lending has become more fraught, and that it remains willing to act.
Jean-Claude Trichet, ECB president, has repeatedly pledged to make extra cash available to the credit markets if their smooth functioning is threatened by commercial banks hoarding money for fear of defaults.
Thursday, September 13, 2007
Wednesday, September 12, 2007
ENDA Hearing, Holsinger’s Troubles
ENDA Hearing, Holsinger’s Troubles
by Bob Roehr
Copyright by The Windy City times
2007-09-12
The House subcommittee on Health, Education, Labor and Pension held a hearing on the Employment Non-Discrimination Act ( ENDA ) on Sept. 5. The legislation would extend workplace protections to cover sexual orientation and gender identification. Passage of the measure has been a central goal of gay rights advocates for more than a decade.
“There is nothing more American than ensuring that people should have equal job opportunities,” Rep. Tammy Baldwin, D-Wis., said at the hearing. She is one of the lead sponsors of ENDA and the only open lesbian serving in Congress.
Massachusetts police officer Michael P. Carney and Texan Brooke Waits, who worked for a cell phone company, both testified to being fired because of their sexual orientation.
M.V. Lee Badgett, research director of the Williams Institute on Sexual Orientation Las and Public Policy at UCLA, reviewed the literature documenting the scope of such discrimination.
National Gay and Lesbian Task Force Policy Director Dave Noble called the hearing “a critical first step.” He urged lawmakers “to pass this bill into law, this year.”
“It is time for a federal law that would make it illegal to fire a GLBT person just because of who they are,” said Human Rights Campaign president Joe Solmonese. “ENDA will bring the value of meritocracy to a community that has haybd to do without for too long.”
Social conservatives continued their disinformation campaign against the legislation. “ENDA would radically transform the workplace discrimination law by granting special rights to homosexuals and transsexuals—while ignoring those of employers,” claimed the Family Research Council in a Sept. 5 e-mail to its supporters.
It acknowledged a religious exemption for churches, but not for religious affiliated commercial operations such as hospitals and public welfare organizations. But that is no change from existing non-discrimination requirements attached to recipients of public funds.
On the other side of Capitol Hill, the Senate voted on Sept. 6 to lift restrictions on funding family planning groups that offer abortion services. However that provision differs from what passed the House and the final resolution remains unclear.
The Senate also passed $4.2 billion in funding for PEPFAR, an increase of $940 million over the current year, as part of the overall foreign assistance bill.
HOLSINGER
There has been no movement on the nomination of conservative James Holsinger to be Surgeon General, despite a hearing in the Senate two months ago. What is likely to be the final nail in the coffin of his candidacy is a detailed indictment of Holsinger’s dealings as a trustee of a hospital/foundation that was posted to the Media Transparency Web site on Aug. 31, entitled “Milking a church cash cow.”
In it, the authors detailed how Holsinger led a fight to keep the Good Samaritan Foundation, created from the sale of a Methodist hospital in Lexington, Ky., from the control of the United Methodist Church that had owned the hospital prior to the sale. He chaired the Church’s supreme judicial council during the period in which the Church was suing the Foundation to regain control of the assets.
The report claims that most of the millions of dollars that the Foundation disbursed were to organizations favored by Holsinger, chiefly University of Kentucky medical programs that he oversaw as part of his day job. It says that the grants “were awarded in contradiction to the foundation’s own standards of grant-making.”
The foundation dropped its seven-year lawsuit two weeks after Holsinger resigned from it—at the time of his nomination to be Surgeon General. The church had to spend more than $4 million in legal fees in order to recover its own money.
by Bob Roehr
Copyright by The Windy City times
2007-09-12
The House subcommittee on Health, Education, Labor and Pension held a hearing on the Employment Non-Discrimination Act ( ENDA ) on Sept. 5. The legislation would extend workplace protections to cover sexual orientation and gender identification. Passage of the measure has been a central goal of gay rights advocates for more than a decade.
“There is nothing more American than ensuring that people should have equal job opportunities,” Rep. Tammy Baldwin, D-Wis., said at the hearing. She is one of the lead sponsors of ENDA and the only open lesbian serving in Congress.
Massachusetts police officer Michael P. Carney and Texan Brooke Waits, who worked for a cell phone company, both testified to being fired because of their sexual orientation.
M.V. Lee Badgett, research director of the Williams Institute on Sexual Orientation Las and Public Policy at UCLA, reviewed the literature documenting the scope of such discrimination.
National Gay and Lesbian Task Force Policy Director Dave Noble called the hearing “a critical first step.” He urged lawmakers “to pass this bill into law, this year.”
“It is time for a federal law that would make it illegal to fire a GLBT person just because of who they are,” said Human Rights Campaign president Joe Solmonese. “ENDA will bring the value of meritocracy to a community that has haybd to do without for too long.”
Social conservatives continued their disinformation campaign against the legislation. “ENDA would radically transform the workplace discrimination law by granting special rights to homosexuals and transsexuals—while ignoring those of employers,” claimed the Family Research Council in a Sept. 5 e-mail to its supporters.
It acknowledged a religious exemption for churches, but not for religious affiliated commercial operations such as hospitals and public welfare organizations. But that is no change from existing non-discrimination requirements attached to recipients of public funds.
On the other side of Capitol Hill, the Senate voted on Sept. 6 to lift restrictions on funding family planning groups that offer abortion services. However that provision differs from what passed the House and the final resolution remains unclear.
The Senate also passed $4.2 billion in funding for PEPFAR, an increase of $940 million over the current year, as part of the overall foreign assistance bill.
HOLSINGER
There has been no movement on the nomination of conservative James Holsinger to be Surgeon General, despite a hearing in the Senate two months ago. What is likely to be the final nail in the coffin of his candidacy is a detailed indictment of Holsinger’s dealings as a trustee of a hospital/foundation that was posted to the Media Transparency Web site on Aug. 31, entitled “Milking a church cash cow.”
In it, the authors detailed how Holsinger led a fight to keep the Good Samaritan Foundation, created from the sale of a Methodist hospital in Lexington, Ky., from the control of the United Methodist Church that had owned the hospital prior to the sale. He chaired the Church’s supreme judicial council during the period in which the Church was suing the Foundation to regain control of the assets.
The report claims that most of the millions of dollars that the Foundation disbursed were to organizations favored by Holsinger, chiefly University of Kentucky medical programs that he oversaw as part of his day job. It says that the grants “were awarded in contradiction to the foundation’s own standards of grant-making.”
The foundation dropped its seven-year lawsuit two weeks after Holsinger resigned from it—at the time of his nomination to be Surgeon General. The church had to spend more than $4 million in legal fees in order to recover its own money.
Thirteen Individuals and Three Organizations Chosen for 2007 Gay and Lesbian Hall of Fame
The Chicago Commission on Human Relations' Advisory Council on Lesbian,
Gay, Bisexual and Transgender Issues would appreciate your including the
following information in your editorial content as well as in your
community calendars.
***************************************************************
FOR IMMEDIATE RELEASE CONTACT: William W. Greaves
September 12, 2007 (312) 744-7911
Thirteen Individuals and Three Organizations Chosen for 2007 Gay and
Lesbian Hall of Fame
Former Mayor Harold Washington Honored as “Friend of the Community”
at 17th Annual Ceremony
The Chicago Commission on Human Relations’ Advisory Council on
Lesbian, Gay, Bisexual and Transgender Issues has named the 2007 list of
individuals and organizations for inclusion in the only known
government-sponsored hall of fame that honors members of the lesbian,
gay, bisexual, and transgender (LGBT) communities, announced Commission
Chairperson Clarence N. Wood.
Coinciding with the 20th anniversary of his death, former Mayor Harold
Washington will be honored as a “Friend of the Community.”
“Chicago is a city of many faces, and the LGBT community is an
important part of that diversity. The community is thriving and moving
forward, helping to build a strong social and economic foundation for
Chicago,” said Mayor Richard M. Daley.
Chosen nominees will be inducted at the Chicago Gay and Lesbian Hall of
Fame’s 17th annual ceremony, which will be held from 5:30 p.m. to 7:00
p.m. on Thursday, October 18, 2007, in Sidney R. Yates Gallery at the
Chicago Cultural Center, 78 E. Washington St. The reception begins at
5:30 p.m., and the program is scheduled to begin at 6:00 p.m. The event
is free and open to the public.
“The rich contributions made to Chicago by its various communities
are important to Chicago’s quality of life” said Clarence N. Wood.
“It is for that reason that we are pleased to recognize lesbian,
gay, bisexual and transgender individuals and their allies with these
Hall of Fame awards each year.”
The Chicago Gay and Lesbian Hall of Fame was established in 1991 under
the auspices of the Advisory Council, with continuing support from the
Chicago Commission on Human Relations and Mayor Richard M. Daley. Its
purpose is to recognize the achievements of LGBT Chicagoans, their
contributions to the development of the city, and the help they have
received from others.
Those inducted can fall into one of three categories: individual,
organization, or friend of the community. Potential nominees comprise
members of Chicago’s entire sexual-minority community, including
lesbian, gay, bisexual, and transgender Chicagoans, past, present,
living, and dead, as well as those who have supported or assisted the
community. A committee of prior inductees makes each year’s selections
from nominations submitted by members of the public.
Those honored in 2007 are:
Individuals
Dr. David Blatt, 56, and Dr. David Moore, 57, partners, groundbreaking
medical practitioners and advocates in HIV/AIDS care, known for their
personal attention to their patients.
Robbin Burr, 53, for her pioneering work in founding corporate
marketing campaigns dedicated to gaining the loyalty of LGBT consumers
and for her leadership as the Executive Director of the Center on
Halsted.
Tarrina Dikes, 50, for her tireless work on behalf of LGBT
organizations and events, including Howard Brown Health Center, Gay
Games VII, POW WOW, the Lesbian Leadership Council, and Affinity.
Martin Gapshis, 60, president of Progress Printing, for long-standing
service to the city of Chicago, including the City’s green
initiatives, Lakefront Supportive Housing, Chicago International Film
Festival,
the AIDS Foundation of Chicago, the NAMES Project, and the Center on
Halsted.
Jeffrey E. McCourt (1955–2007), founding publisher of Windy City
Times, award-winning journalist, businessperson, and activist, for
helping to win mainstream respect and political victories for Chicago's
LGBT communities, including passage of the City's 1988 Human Rights
Ordinance.
Dr. Carlos T. Mock, 51, physician, author, and advocate, who has helped
found Latino community organizations and has raised crucial funds for a
variety of other organizations.
Chilli Pepper, one of Chicago's most celebrated entertainers, for
making herself an early symbol of gender diversity and using her
visibility to bring awareness of HIV/AIDS issues to the public.
Karen C. Sendziak, 50, for twenty years of documenting and preserving
the history of Chicago’s LGBT communities and advancing LGBT culture
through her work with Gerber/Hart Library.
Patrick Sheahan, 51, for his outstanding record of civic, business,
banking, education, and LGBT community leadership, including his
invaluable efforts in building the Center on Halsted.
Vera Washington, 55, promoter, HIV/AIDS counselor, and youth service
coordinator, for co-founding Executive Sweet Inc., which provides
opportunities for lesbians of color to build a strong community network,
for her HIV/AIDS awareness efforts, and for her work with LGBT youth.
Organizations
American Veterans for Equal Rights (AVER) — Chicago Chapter, for 15
years serving as a voice for LGBT veterans in the Chicago area and
providing moral, financial, and social support to LGBT veterans.
Chicago Games, Inc., for hosting Gay Games VII in Chicago, which
brought LGBT athletes and cultural participants together from around the
world and highlighted Chicago’s support for the LGBT communities.
A Real Read, an African American LGBT performance ensemble that, from
1996 to 2002, performed original poems, prose, and plays that gave voice
to the often-silenced black gay community while offering performances
that reflected the universal.
Friends of the Community
Ambassador Carol Moseley Braun, 60, a prominent supporter of LGBT
rights and marriage equality throughout her political career, she was
the first U.S. Senator to appoint an LGBT liaison and, while in the
Senate, firmly opposed the U.S. military’s “Don’t Ask, Don’t
Tell” policy.
Harold Washington (1922–1987), as mayor of Chicago, promoted and
facilitated LGBT political participation and empowerment, which laid
groundwork for passage of the City's 1988 Human Rights Ordinance. He
appointed the first mayoral liaison to the LGBT communities; was the
first Chicago mayor to headline a gay rights rally; and established the
City's first official Committee on Gay and Lesbian Issues (forerunner of
today's Advisory Council on Lesbian, Gay, Bisexual and Transgender
Issues) with an openly lesbian staff director.
Gay, Bisexual and Transgender Issues would appreciate your including the
following information in your editorial content as well as in your
community calendars.
***************************************************************
FOR IMMEDIATE RELEASE CONTACT: William W. Greaves
September 12, 2007 (312) 744-7911
Thirteen Individuals and Three Organizations Chosen for 2007 Gay and
Lesbian Hall of Fame
Former Mayor Harold Washington Honored as “Friend of the Community”
at 17th Annual Ceremony
The Chicago Commission on Human Relations’ Advisory Council on
Lesbian, Gay, Bisexual and Transgender Issues has named the 2007 list of
individuals and organizations for inclusion in the only known
government-sponsored hall of fame that honors members of the lesbian,
gay, bisexual, and transgender (LGBT) communities, announced Commission
Chairperson Clarence N. Wood.
Coinciding with the 20th anniversary of his death, former Mayor Harold
Washington will be honored as a “Friend of the Community.”
“Chicago is a city of many faces, and the LGBT community is an
important part of that diversity. The community is thriving and moving
forward, helping to build a strong social and economic foundation for
Chicago,” said Mayor Richard M. Daley.
Chosen nominees will be inducted at the Chicago Gay and Lesbian Hall of
Fame’s 17th annual ceremony, which will be held from 5:30 p.m. to 7:00
p.m. on Thursday, October 18, 2007, in Sidney R. Yates Gallery at the
Chicago Cultural Center, 78 E. Washington St. The reception begins at
5:30 p.m., and the program is scheduled to begin at 6:00 p.m. The event
is free and open to the public.
“The rich contributions made to Chicago by its various communities
are important to Chicago’s quality of life” said Clarence N. Wood.
“It is for that reason that we are pleased to recognize lesbian,
gay, bisexual and transgender individuals and their allies with these
Hall of Fame awards each year.”
The Chicago Gay and Lesbian Hall of Fame was established in 1991 under
the auspices of the Advisory Council, with continuing support from the
Chicago Commission on Human Relations and Mayor Richard M. Daley. Its
purpose is to recognize the achievements of LGBT Chicagoans, their
contributions to the development of the city, and the help they have
received from others.
Those inducted can fall into one of three categories: individual,
organization, or friend of the community. Potential nominees comprise
members of Chicago’s entire sexual-minority community, including
lesbian, gay, bisexual, and transgender Chicagoans, past, present,
living, and dead, as well as those who have supported or assisted the
community. A committee of prior inductees makes each year’s selections
from nominations submitted by members of the public.
Those honored in 2007 are:
Individuals
Dr. David Blatt, 56, and Dr. David Moore, 57, partners, groundbreaking
medical practitioners and advocates in HIV/AIDS care, known for their
personal attention to their patients.
Robbin Burr, 53, for her pioneering work in founding corporate
marketing campaigns dedicated to gaining the loyalty of LGBT consumers
and for her leadership as the Executive Director of the Center on
Halsted.
Tarrina Dikes, 50, for her tireless work on behalf of LGBT
organizations and events, including Howard Brown Health Center, Gay
Games VII, POW WOW, the Lesbian Leadership Council, and Affinity.
Martin Gapshis, 60, president of Progress Printing, for long-standing
service to the city of Chicago, including the City’s green
initiatives, Lakefront Supportive Housing, Chicago International Film
Festival,
the AIDS Foundation of Chicago, the NAMES Project, and the Center on
Halsted.
Jeffrey E. McCourt (1955–2007), founding publisher of Windy City
Times, award-winning journalist, businessperson, and activist, for
helping to win mainstream respect and political victories for Chicago's
LGBT communities, including passage of the City's 1988 Human Rights
Ordinance.
Dr. Carlos T. Mock, 51, physician, author, and advocate, who has helped
found Latino community organizations and has raised crucial funds for a
variety of other organizations.
Chilli Pepper, one of Chicago's most celebrated entertainers, for
making herself an early symbol of gender diversity and using her
visibility to bring awareness of HIV/AIDS issues to the public.
Karen C. Sendziak, 50, for twenty years of documenting and preserving
the history of Chicago’s LGBT communities and advancing LGBT culture
through her work with Gerber/Hart Library.
Patrick Sheahan, 51, for his outstanding record of civic, business,
banking, education, and LGBT community leadership, including his
invaluable efforts in building the Center on Halsted.
Vera Washington, 55, promoter, HIV/AIDS counselor, and youth service
coordinator, for co-founding Executive Sweet Inc., which provides
opportunities for lesbians of color to build a strong community network,
for her HIV/AIDS awareness efforts, and for her work with LGBT youth.
Organizations
American Veterans for Equal Rights (AVER) — Chicago Chapter, for 15
years serving as a voice for LGBT veterans in the Chicago area and
providing moral, financial, and social support to LGBT veterans.
Chicago Games, Inc., for hosting Gay Games VII in Chicago, which
brought LGBT athletes and cultural participants together from around the
world and highlighted Chicago’s support for the LGBT communities.
A Real Read, an African American LGBT performance ensemble that, from
1996 to 2002, performed original poems, prose, and plays that gave voice
to the often-silenced black gay community while offering performances
that reflected the universal.
Friends of the Community
Ambassador Carol Moseley Braun, 60, a prominent supporter of LGBT
rights and marriage equality throughout her political career, she was
the first U.S. Senator to appoint an LGBT liaison and, while in the
Senate, firmly opposed the U.S. military’s “Don’t Ask, Don’t
Tell” policy.
Harold Washington (1922–1987), as mayor of Chicago, promoted and
facilitated LGBT political participation and empowerment, which laid
groundwork for passage of the City's 1988 Human Rights Ordinance. He
appointed the first mayoral liaison to the LGBT communities; was the
first Chicago mayor to headline a gay rights rally; and established the
City's first official Committee on Gay and Lesbian Issues (forerunner of
today's Advisory Council on Lesbian, Gay, Bisexual and Transgender
Issues) with an openly lesbian staff director.
Cheetah Gym Reopens
Cheetah Gym Reopens
News Update, Mon., Sept. 10, 2007
by Amy Wooten and Andrew Davis
Copyright by The Windy City Times
All Cheetah Gym locations have reopened, capping a tumultuous week in which the now-former owner shut down all three sites on Sept. 5 due to what he called pervasive employee corruption.
According to a letter addressed to the gym’s members, the management staff reopened in Andersonville ( 5248 N. Clark ) and Bucktown ( 1934 W. North ) on Sun., Sept. 9, and will reopen the Edgewater facility ( 5838 N. Broadway ) on Wed., Sept. 12. ( Also, a new gym is scheduled to open in Logan Square at 2618 N. Milwaukee early next year. )
The letter also stated that “ [ t ] hrough the cooperation of Cheetah Guym’s lender, MB Financial, it was decided it is in the best interest of our Members, Staff and Communities to reopen as soon as possible.”
The closing of all three locations came as a surprise to many who came up to the doors of their gym after having worked out the previous day, only to find them permanently closed. Calls to all three facilities went unanswered, and the company’s Web site had been taken down. ( The Web site, www.cheetahgym.com , was back up on Sunday. )
Other gyms capitalized on the development. Representatives from some health clubs stood in front of the Cheetah Gym in Andersonville, and others reportedly offered discounts to those displaced from Cheetah.
Former owner David Wilshire, in a recent letter to members, stated that alleged “theft and graft” forced him to permanently close shop. “The degree of corruption was enormous,” Wilshire stated in the letter. “I was left in a position where I could trust no-one [ sic ] or anything.”
Wilshire spoke to Windy City Times shortly after the letter was sent out.
“It’s been very recent, and pretty much every day another development of a scam that was being played,” Wilshire said. “They were only stealing from me, it looks like.”
A few members stated that money had already been deducted from their bank accounts for September dues. ( If members had electronic fund transfer [ EFT ] memberships, monthly dues were billed automatically to a credit card or checking account. )
The letter also included that the alleged theft mainly took place in the Bucktown facility. Wilshire included that he felt that many of his employees were “good and honest people.” Also in the letter, Wilshire added that he tried hard to take control of the situation and save the gyms; claimed that the regional general manager quit, leaving him understaffed and with the task of taking care of payroll; and that he was “forced to employ people I thought should be fired.”
“I had hoped to be able to run them long enough to reinstate the infrastructure. But the task was too great,” the letter stated.
The gym’s staff tackled Wilshire’s statements in the more recent lettter. “We would also like to take this opportunity to dispel any rumors or prior statements made regarding members’ credit or debit card information being compromised in any way,” the letter stated. “Any statements that were made in this regard were completely false. We want to assure you that all of this information is secure and safeguarded. The owner is no longer actively involved in the management.”
Those with questions and/or concerns are urged to contact Kristen at cheetah@cheetahgym.com .
News Update, Mon., Sept. 10, 2007
by Amy Wooten and Andrew Davis
Copyright by The Windy City Times
All Cheetah Gym locations have reopened, capping a tumultuous week in which the now-former owner shut down all three sites on Sept. 5 due to what he called pervasive employee corruption.
According to a letter addressed to the gym’s members, the management staff reopened in Andersonville ( 5248 N. Clark ) and Bucktown ( 1934 W. North ) on Sun., Sept. 9, and will reopen the Edgewater facility ( 5838 N. Broadway ) on Wed., Sept. 12. ( Also, a new gym is scheduled to open in Logan Square at 2618 N. Milwaukee early next year. )
The letter also stated that “ [ t ] hrough the cooperation of Cheetah Guym’s lender, MB Financial, it was decided it is in the best interest of our Members, Staff and Communities to reopen as soon as possible.”
The closing of all three locations came as a surprise to many who came up to the doors of their gym after having worked out the previous day, only to find them permanently closed. Calls to all three facilities went unanswered, and the company’s Web site had been taken down. ( The Web site, www.cheetahgym.com , was back up on Sunday. )
Other gyms capitalized on the development. Representatives from some health clubs stood in front of the Cheetah Gym in Andersonville, and others reportedly offered discounts to those displaced from Cheetah.
Former owner David Wilshire, in a recent letter to members, stated that alleged “theft and graft” forced him to permanently close shop. “The degree of corruption was enormous,” Wilshire stated in the letter. “I was left in a position where I could trust no-one [ sic ] or anything.”
Wilshire spoke to Windy City Times shortly after the letter was sent out.
“It’s been very recent, and pretty much every day another development of a scam that was being played,” Wilshire said. “They were only stealing from me, it looks like.”
A few members stated that money had already been deducted from their bank accounts for September dues. ( If members had electronic fund transfer [ EFT ] memberships, monthly dues were billed automatically to a credit card or checking account. )
The letter also included that the alleged theft mainly took place in the Bucktown facility. Wilshire included that he felt that many of his employees were “good and honest people.” Also in the letter, Wilshire added that he tried hard to take control of the situation and save the gyms; claimed that the regional general manager quit, leaving him understaffed and with the task of taking care of payroll; and that he was “forced to employ people I thought should be fired.”
“I had hoped to be able to run them long enough to reinstate the infrastructure. But the task was too great,” the letter stated.
The gym’s staff tackled Wilshire’s statements in the more recent lettter. “We would also like to take this opportunity to dispel any rumors or prior statements made regarding members’ credit or debit card information being compromised in any way,” the letter stated. “Any statements that were made in this regard were completely false. We want to assure you that all of this information is secure and safeguarded. The owner is no longer actively involved in the management.”
Those with questions and/or concerns are urged to contact Kristen at cheetah@cheetahgym.com .
Census data shows high birth rates fuel Latino growth
Census data shows high birth rates fuel Latino growth
By Darnell Little and Mary Ann Fergus
Copyright © 2007, Chicago Tribune
September 12, 2007
Lourdes and Sacramento Delgado, both natives of Mexico, met and married in Elgin where they started a family that is larger than the American norm but considered small in their homeland.
The Delgados gave birth to four children, now ages 9 to 14, in hospitals where bilingual health-care providers took care of their needs. The children attend Elgin-based Unit School District 46, where two are in bilingual programs and two have moved to English-only classes.
This burgeoning family is symbolic of a rising demographic trend. According to information released Wednesday by the U.S. Census Bureau, the continuing growth of the Latino community in the Chicago area has more to do with high birth rates than with immigration.
In Cook County, 74 of every 1,000 Latino women ages 15 to 50 gave birth in the previous year, according to the census estimates for 2006. That compares with a rate of 57 for black women and 41 for white women. Latino births also outpaced those of whites and blacks in several of the region's outlying counties.
Kenneth Johnson, a demographer at Loyola University, estimates that 70 percent of the Latino growth in the area is from natural increase, not immigration. In addition to high birth rates, U.S. Latinos have a lower death rate because their median age is lower than other major racial and ethnic groups.
Nationally, Johnson calculates, there are seven Latino births for every death, compared with 1.3 white births for every death.
"Despite all the discussion about immigration, most of the Hispanic growth in the United States, and certainly in the Chicago area, is coming from natural increase," Johnson said. "So even if the borders were to be closed tomorrow, there's so much momentum in the large number of young Hispanics in America now that the Hispanic population will continue to grow at a fairly rapid rate."
The new census data come from the annual American Community Survey, a program that will replace the extensive long-form questionnaire that is part of the decennial U.S. census.
The data also show that incomes across the area have fallen significantly since 1999, reflecting the Midwest's struggle to share in the economic growth seen in other parts of the country. The income gaps between blacks and whites and between Latinos and whites have grown.
Latinos are the largest minority group in the six-county Chicago area. In Cook County, Latinos made up 22.7 percent of the population in 2006, up from 19.9 percent in 2000. In DuPage, Latinos grew to nearly 12 percent in 2006 from 9 percent, and they are 18.7 percent in Lake County, up from 14.4 percent.
The rapid growth of the Latino population in so many suburban counties will have many policy implications for these communities, particularly in education, said Scott Watkins, an economist with the Anderson Economic Group.
"As this natural growth continues and you have more Hispanic children entering the K-12 public school system, that puts more demand on the system in terms of teaching either in a foreign language or teaching remedial English classes at an entry level," Watkins said.
Demand for children's health care can be expected to rise, as well as the need for bilingual workers providing services such as housing and food assistance.
It's in these areas that many suburbs are falling short, said Amy Rynell, director of policy and research at the Chicago-based Heartland Alliance.
"The human services structure in the suburbs is very different than in the city," Rynell said. "It's very spread out and there's not as much service. There's also a tremendous amount of confusion on behalf of both Latinos seeking services as well as the providers themselves around how immigration policy impacts their ability to help or seek service. So there's a lot of fear on both sides in terms of getting what someone needs or providing what someone needs."
Elgin District 46 has been hiring more bilingual teachers to instruct children. This year the district added Spanish literacy and general education classes to the English-as-a-second-language and bilingual computer classes offered at night to families.
"You need to have a whole spectrum of services," said Wilma Valero, who directs the district's programs for English-language learners.
At St. Alexius Medical Center in Hoffman Estates, a bilingual social worker position recently was created to help Latino families deal with long-term needs both within the hospital and the community after complicated births that required acute care.
"The more people who are fluent speakers and educated in the health field, the more able we're going to be able to reach this ever-growing population," said Melanie Furlan, vice president of advancement for Alexian Brothers Hospital Network.
Bilingual specialists in diabetes, obesity, asthma and other conditions common among Latinos are also increasing in the Alexian system. A pediatric pulmonologist dedicated a weekly day to treat Spanish-speaking children with asthma and other lung problems.
Income trends reported in the new census data reflect the continuing loss of manufacturing jobs in the Midwest, said Rebecca Blank, an economist at the University of Michigan.
After adjusting for inflation, median household income for Cook County fell nearly $5,000 from 1999 to $50,691 in 2006. DuPage County fell more than $8,000 to $73,677 and Lake County dropped nearly $6,000 to $75,170.
"There's been very real aggregate economic growth, but it's disproportionately gone to people in certain industries," Blank said.
Blacks and Latinos, meanwhile, lost ground compared with white earners. In 2006, blacks in Cook County had a median household income that was 54 percent of whites' income, down from more than 60 percent in 1999. Cook County Latinos had an income that was 66.5 percent of whites' in 2006, down from 73 percent in 1999.
"Blacks and Latinos tend to disproportionately occupy lower income cohorts and hence they're likely bearing the brunt of this income inequality to a greater extent than the population as a whole," said Richard DeKaser, chief economist at National City Corp.
----------
dlittle@tribune.com
mfergus@tribune.com
By Darnell Little and Mary Ann Fergus
Copyright © 2007, Chicago Tribune
September 12, 2007
Lourdes and Sacramento Delgado, both natives of Mexico, met and married in Elgin where they started a family that is larger than the American norm but considered small in their homeland.
The Delgados gave birth to four children, now ages 9 to 14, in hospitals where bilingual health-care providers took care of their needs. The children attend Elgin-based Unit School District 46, where two are in bilingual programs and two have moved to English-only classes.
This burgeoning family is symbolic of a rising demographic trend. According to information released Wednesday by the U.S. Census Bureau, the continuing growth of the Latino community in the Chicago area has more to do with high birth rates than with immigration.
In Cook County, 74 of every 1,000 Latino women ages 15 to 50 gave birth in the previous year, according to the census estimates for 2006. That compares with a rate of 57 for black women and 41 for white women. Latino births also outpaced those of whites and blacks in several of the region's outlying counties.
Kenneth Johnson, a demographer at Loyola University, estimates that 70 percent of the Latino growth in the area is from natural increase, not immigration. In addition to high birth rates, U.S. Latinos have a lower death rate because their median age is lower than other major racial and ethnic groups.
Nationally, Johnson calculates, there are seven Latino births for every death, compared with 1.3 white births for every death.
"Despite all the discussion about immigration, most of the Hispanic growth in the United States, and certainly in the Chicago area, is coming from natural increase," Johnson said. "So even if the borders were to be closed tomorrow, there's so much momentum in the large number of young Hispanics in America now that the Hispanic population will continue to grow at a fairly rapid rate."
The new census data come from the annual American Community Survey, a program that will replace the extensive long-form questionnaire that is part of the decennial U.S. census.
The data also show that incomes across the area have fallen significantly since 1999, reflecting the Midwest's struggle to share in the economic growth seen in other parts of the country. The income gaps between blacks and whites and between Latinos and whites have grown.
Latinos are the largest minority group in the six-county Chicago area. In Cook County, Latinos made up 22.7 percent of the population in 2006, up from 19.9 percent in 2000. In DuPage, Latinos grew to nearly 12 percent in 2006 from 9 percent, and they are 18.7 percent in Lake County, up from 14.4 percent.
The rapid growth of the Latino population in so many suburban counties will have many policy implications for these communities, particularly in education, said Scott Watkins, an economist with the Anderson Economic Group.
"As this natural growth continues and you have more Hispanic children entering the K-12 public school system, that puts more demand on the system in terms of teaching either in a foreign language or teaching remedial English classes at an entry level," Watkins said.
Demand for children's health care can be expected to rise, as well as the need for bilingual workers providing services such as housing and food assistance.
It's in these areas that many suburbs are falling short, said Amy Rynell, director of policy and research at the Chicago-based Heartland Alliance.
"The human services structure in the suburbs is very different than in the city," Rynell said. "It's very spread out and there's not as much service. There's also a tremendous amount of confusion on behalf of both Latinos seeking services as well as the providers themselves around how immigration policy impacts their ability to help or seek service. So there's a lot of fear on both sides in terms of getting what someone needs or providing what someone needs."
Elgin District 46 has been hiring more bilingual teachers to instruct children. This year the district added Spanish literacy and general education classes to the English-as-a-second-language and bilingual computer classes offered at night to families.
"You need to have a whole spectrum of services," said Wilma Valero, who directs the district's programs for English-language learners.
At St. Alexius Medical Center in Hoffman Estates, a bilingual social worker position recently was created to help Latino families deal with long-term needs both within the hospital and the community after complicated births that required acute care.
"The more people who are fluent speakers and educated in the health field, the more able we're going to be able to reach this ever-growing population," said Melanie Furlan, vice president of advancement for Alexian Brothers Hospital Network.
Bilingual specialists in diabetes, obesity, asthma and other conditions common among Latinos are also increasing in the Alexian system. A pediatric pulmonologist dedicated a weekly day to treat Spanish-speaking children with asthma and other lung problems.
Income trends reported in the new census data reflect the continuing loss of manufacturing jobs in the Midwest, said Rebecca Blank, an economist at the University of Michigan.
After adjusting for inflation, median household income for Cook County fell nearly $5,000 from 1999 to $50,691 in 2006. DuPage County fell more than $8,000 to $73,677 and Lake County dropped nearly $6,000 to $75,170.
"There's been very real aggregate economic growth, but it's disproportionately gone to people in certain industries," Blank said.
Blacks and Latinos, meanwhile, lost ground compared with white earners. In 2006, blacks in Cook County had a median household income that was 54 percent of whites' income, down from more than 60 percent in 1999. Cook County Latinos had an income that was 66.5 percent of whites' in 2006, down from 73 percent in 1999.
"Blacks and Latinos tend to disproportionately occupy lower income cohorts and hence they're likely bearing the brunt of this income inequality to a greater extent than the population as a whole," said Richard DeKaser, chief economist at National City Corp.
----------
dlittle@tribune.com
mfergus@tribune.com
More than 100,000 jobs may well be lost from the US mortgage industry/Domino effect leads to huge job cuts
More than 100,000 jobs may well be lost from the US mortgage industry
By David Wighton in New York
Copyright The Financial Times Limited 2007
Published: September 12 2007 03:00 | Last updated: September 12 2007 03:00
More than 100,000 jobs may well be lost from the US mortgage industry in the next few months as the turmoil in the credit markets begins to bite.
Industry experts predict that lenders and brokers will cut at least 20 per cent of their headcount as volumes look set to fall more than 25 per cent next year.
"It could be considerably more," said Guy Cecala, of Inside Mortgage Finance. "The boom brought tons and tons of people into the business, which has been carrying excess weight for several years."
US Department of Labor figures show that 457,000 people were employed in real estate credit and mortgage broking in July - 174,000 more than in the same month in 2000. But officials say this significantly understates the number of jobs directly affected by mortgage volumes.
It takes no account of jobs in areas such as mortgage insurance or investment banks' mortgage securitisation businesses.
Although investment banks such as Lehman Brothers have cut jobs in the mortgage origination arms, they are cautious about cutting bankers and traders. But senior executives admit that if market conditions persist, cuts are inevitable - particularly in securitisation.
The turmoil in the mortgage market was putting more pressure on the US housing market, the National Association of Realtors said yesterday. It forecast that existing home sales would fall 8.6 per cent this year, down from its 6.8 per cent prediction a month ago. New home sales are forecast to tumble 24 per cent, after an 18 per cent fall last year.
There were nearly 80,000 announced job cuts in August, up 85 per cent on July, according to Challenger, Gray & Christmas, the outplacement consultants. Financial companies announced nearly 36,000 job losses in August, the highest since 1993. Most were in mortgage lending.
The financial sector has announced 103,000 cuts in 2007 and is on court to outdo the high of 117,000 in the recession 2001.
"There were early warning signs in April as a few major subprime lenders went under and released workers. However, what had been a relatively small number of job cuts suddenly turned into a deluge in August as financial institutions shut down operations overnight," said John Challenger, chief executive.
The August data do not include the 12,000 job cuts announced last week by Countrywide Financial, the largest mortgage lender in the US. The cuts amount to 20 per cent of its headcount.
Domino effect leads to huge job cuts
By David Wighton
Copyright The Financial Times Limited 2007
Published: September 12 2007 03:00 | Last updated: September 12 2007 03:00
Forecasts of the medium- term impact of the credit market turmoil vary wildly.
But even the optimists agree that one thing appears inevitable - huge job losses in the US mortgage industry.
Mortgage volumes have already fallen sharply and industry forecasts predict that they will fall below $2,000bn next year, down by a third on last year and half the peak recorded in 2003.
Countrywide Financial, the largest US mortgage lender, last week announced plans to cut 12,000 jobs, or 20 per cent of its workforce, in the next few months.
Guy Cecala, of Inside Mortgage Finance, said that, on a conservative view, it was likely that the cuts across the industry would be at least as deep.
"It could be considerably more. My personal feeling is that this is just the first run of cuts and that people are making cuts now with a view to seeing what happens. Countrywide could easily cut another 10,000 in the fourth quarter."
A cut of 20 per cent would mean about 100,000 job losses from an industry headcount of about 457,000 in July, according to US Department of Labor figures.
But these figures significantly understate the total number of jobs tied to the US mortgage market.
For example, they do not include jobs in mortgage insurance, where cuts are already being made. Nor do they include thousands of highly paid jobs in the mortgage securitisation departments of the investment banks.
Lehman Brothers has announced about 2,000 mortgage job losses, including the closure of its subprime mortgage business. These relate to originating mortgages not securitisation.
But cuts in securitisation staff at the investment banks appear inevitable given the collapse of the subprime market that fuelled its growth in recent years.
Beyond the jobs tied directly to mortgages, there are millions linked to the residential property market that is being given another kick by the turmoil in the mortgage market.
For the mortgage industry itself, a cut of 20 per cent looks modest in the context of the extraordinary growth that the industry has seen over the last 10 years. According to the US Bureau of Labor Statistics, there were 323,000 people working in US real estate credit in July, a rise of 70 per cent over 10 years.
For mortgage loan brokers, the growth has been even stronger with the figure rising almost 160 per cent to 134,000 since 1997.
"There is no question that there are too many people in the mortgage business," says Mr Cecala. "The boom brought everybody and his dog into the industry."
The strongest growth came between 2001 and 2004 after the Federal Reserve aggressively cut interest rates in the wake of the dotcom bubble burst.
This was bonanza for the mortgage industry as homeowners refinanced their loans at lower rates and extracted cash from their appreciating properties with home equity loans.
Although mortgage volumes peaked in 2003, job numbers stayed fairly stable as the industry made its ill-judged expansion into subprime lending.
Subprime loans to people with weaker credit histories are more labour-intensive than standard loans and are more profitable (at least initially), justifying high staff numbers.
But it is precisely these types of loans that have disappeared and are unlikely ever to return to the levels seen in recent years.
For the foreseeable future, mortgages will revert to being a largely commodity business focused on standard loans that can be sold on to Fannie Mae and Freddie Mac, the government-sponsored mortgage investment giants.
And as Mr Cecala says: "You don't need a lot of people in a commodity business."
By David Wighton in New York
Copyright The Financial Times Limited 2007
Published: September 12 2007 03:00 | Last updated: September 12 2007 03:00
More than 100,000 jobs may well be lost from the US mortgage industry in the next few months as the turmoil in the credit markets begins to bite.
Industry experts predict that lenders and brokers will cut at least 20 per cent of their headcount as volumes look set to fall more than 25 per cent next year.
"It could be considerably more," said Guy Cecala, of Inside Mortgage Finance. "The boom brought tons and tons of people into the business, which has been carrying excess weight for several years."
US Department of Labor figures show that 457,000 people were employed in real estate credit and mortgage broking in July - 174,000 more than in the same month in 2000. But officials say this significantly understates the number of jobs directly affected by mortgage volumes.
It takes no account of jobs in areas such as mortgage insurance or investment banks' mortgage securitisation businesses.
Although investment banks such as Lehman Brothers have cut jobs in the mortgage origination arms, they are cautious about cutting bankers and traders. But senior executives admit that if market conditions persist, cuts are inevitable - particularly in securitisation.
The turmoil in the mortgage market was putting more pressure on the US housing market, the National Association of Realtors said yesterday. It forecast that existing home sales would fall 8.6 per cent this year, down from its 6.8 per cent prediction a month ago. New home sales are forecast to tumble 24 per cent, after an 18 per cent fall last year.
There were nearly 80,000 announced job cuts in August, up 85 per cent on July, according to Challenger, Gray & Christmas, the outplacement consultants. Financial companies announced nearly 36,000 job losses in August, the highest since 1993. Most were in mortgage lending.
The financial sector has announced 103,000 cuts in 2007 and is on court to outdo the high of 117,000 in the recession 2001.
"There were early warning signs in April as a few major subprime lenders went under and released workers. However, what had been a relatively small number of job cuts suddenly turned into a deluge in August as financial institutions shut down operations overnight," said John Challenger, chief executive.
The August data do not include the 12,000 job cuts announced last week by Countrywide Financial, the largest mortgage lender in the US. The cuts amount to 20 per cent of its headcount.
Domino effect leads to huge job cuts
By David Wighton
Copyright The Financial Times Limited 2007
Published: September 12 2007 03:00 | Last updated: September 12 2007 03:00
Forecasts of the medium- term impact of the credit market turmoil vary wildly.
But even the optimists agree that one thing appears inevitable - huge job losses in the US mortgage industry.
Mortgage volumes have already fallen sharply and industry forecasts predict that they will fall below $2,000bn next year, down by a third on last year and half the peak recorded in 2003.
Countrywide Financial, the largest US mortgage lender, last week announced plans to cut 12,000 jobs, or 20 per cent of its workforce, in the next few months.
Guy Cecala, of Inside Mortgage Finance, said that, on a conservative view, it was likely that the cuts across the industry would be at least as deep.
"It could be considerably more. My personal feeling is that this is just the first run of cuts and that people are making cuts now with a view to seeing what happens. Countrywide could easily cut another 10,000 in the fourth quarter."
A cut of 20 per cent would mean about 100,000 job losses from an industry headcount of about 457,000 in July, according to US Department of Labor figures.
But these figures significantly understate the total number of jobs tied to the US mortgage market.
For example, they do not include jobs in mortgage insurance, where cuts are already being made. Nor do they include thousands of highly paid jobs in the mortgage securitisation departments of the investment banks.
Lehman Brothers has announced about 2,000 mortgage job losses, including the closure of its subprime mortgage business. These relate to originating mortgages not securitisation.
But cuts in securitisation staff at the investment banks appear inevitable given the collapse of the subprime market that fuelled its growth in recent years.
Beyond the jobs tied directly to mortgages, there are millions linked to the residential property market that is being given another kick by the turmoil in the mortgage market.
For the mortgage industry itself, a cut of 20 per cent looks modest in the context of the extraordinary growth that the industry has seen over the last 10 years. According to the US Bureau of Labor Statistics, there were 323,000 people working in US real estate credit in July, a rise of 70 per cent over 10 years.
For mortgage loan brokers, the growth has been even stronger with the figure rising almost 160 per cent to 134,000 since 1997.
"There is no question that there are too many people in the mortgage business," says Mr Cecala. "The boom brought everybody and his dog into the industry."
The strongest growth came between 2001 and 2004 after the Federal Reserve aggressively cut interest rates in the wake of the dotcom bubble burst.
This was bonanza for the mortgage industry as homeowners refinanced their loans at lower rates and extracted cash from their appreciating properties with home equity loans.
Although mortgage volumes peaked in 2003, job numbers stayed fairly stable as the industry made its ill-judged expansion into subprime lending.
Subprime loans to people with weaker credit histories are more labour-intensive than standard loans and are more profitable (at least initially), justifying high staff numbers.
But it is precisely these types of loans that have disappeared and are unlikely ever to return to the levels seen in recent years.
For the foreseeable future, mortgages will revert to being a largely commodity business focused on standard loans that can be sold on to Fannie Mae and Freddie Mac, the government-sponsored mortgage investment giants.
And as Mr Cecala says: "You don't need a lot of people in a commodity business."
The Short View By John Authers - We are back to the old parlour game of second-guessing the Fed/The policy challenge of rescuing the world economy
The Short View By John Authers - We are back to the old parlour game of second-guessing the Fed
Copyright The Financial Times Limited 2007
Published: September 12 2007 03:00 | Last updated: September 12 2007 03:00
We are back to the old parlour game of second-guessing the Fed. It might be quite fun if the stakes were not so high.
Last week's dreadful US payrolls data make life a little easier. A fall in payrolls makes it easier for the Federal Reserve to justify a cut in the Fed funds rate without appearing merely to be bailing out Wall Street. It would arguably justify a cut even if the money markets were not in crisis. So a Fed cut would not look like a rescue for irresponsible traders. The problem is that this has egged on traders (possibly including responsible ones) to bet that the Fed must cut by 50 basis points, to 4.75 per cent, when it meets next week. A cut of "only" 25 bps would now be a disappointment.
So the parlour game enters a new phase, with Fed governors signalling how much they will cut, even without mentioning numbers. With a cut almost certain, hawkish talk is now taken as a signal that the cut will be only 25 basis points.
That is how the market interpreted comments by Dennis Lockhart, head of the Atlanta Fed, that the jobs report should be balanced with strong retail sales figures; by Janet Yellen of the San Francisco Fed, that borrowing costs have not risen much for normal borrowers; and by the Dallas Fed's Richard Fisher that monetary policy is "not a popularity contest".
But when Fed governor Frederic Mishkin, a one-time academic colleague of chairman Ben Bernanke, said the credit squeeze "poses an important downside risk to economic activity", that was seen as signalling a 50 bps cut.
Mr Bernanke himself achieved the near-impossible. He gave a long speech but dropped no hints on rates. So it passed off without any market impact. His next big pronouncement, to accompany the Fed's decision on interest rates next Tuesday, will garner more attention.
The policy challenge of rescuing the world economy
By Martin Wolf
Copyright The Financial Times Limited 2007
Published: September 12 2007 03:00 | Last updated: September 12 2007 03:00
The financial markets have taken the world economy hostage. This has presented the world's central banks with a dilemma. They fear the consequences of paying off those responsible for the mess. But they cannot let hundreds of millions of innocents suffer. Last week's announcement of the first US monthly fall in employment for four years has made a cut in interest rates from the Federal Reserve this month a virtual certainty. So act it will. But making the right decisions is going to be hard.
Martin Feldstein of Harvard University put the case for big cuts in a powerful summing up at this year's Jackson Hole monetary conference.* He argued that the US housing sector was at the heart of three interrelated events. First was "a sharp decline in house prices and the related fall in home-building that could lead to an economy-wide recession". Second was "a subprime mortgage problem that has triggered a substantial widening of all credit spreads and the freezing of much of the credit markets". The third was "a decline in home equity loans and mortgage refinancing that could cause greater declines in consumer spending".
Prof Feldstein pointed, for example, to a 3.4 per cent year-on-year decline in US house prices, with the chance of substantially more to come (see chart). Robert Shiller of Yale argued at the same conference that US house prices might ultimately fall by as much as 50 per cent, which would lower US household wealth by more than $10,000bn (£4,930bn).
Prof Feldstein also noted the damage done to the financial markets by the crisis in subprime lending. This is partly because credit spreads are correcting, albeit modestly so far. More important, "as credit spreads widened, investors and lenders became concerned that they did not know how to value complex risky assets". With confidence gone, banks have been forced to advance loans to their off-balance-sheet "special investment vehicles", which uses up their capital and so starves other borrowers.
Finally, as house prices and borrowing fall, household saving rates will rise towards more normal levels and residential investment fall still further. This combination seems sure to generate a rapid decline in the personal sector's financial deficit (discussed in my column of August 21 2007).
Prof Feldstein concluded by recommending a "risk-based approach", which treats the risk of a recession as more important than that of an upsurge in inflation. If the latter were indeed to happen, "the Fed would have to engineer a longer period of slower growth to bring the inflation rate back to its desired level. How well it would succeed in doing this will depend on its ability to persuade the market that a risk-based approach in the current context is not an abrogation of its fundamental pursuit of price stability."
If the Fed did what Prof Feldstein recommends, it would risk undermining its credibility. How, then, did it get into this mess? At Jackson Hole, John Taylor of Stanford university - inventor of the "Taylor rule" (which relates monetary policy to movement in output and inflation) - blamed the Fed for excessively loose policy between 2002 and 2006 (see chart).
Thus, Prof Taylor believes the Fed made a mistake under Alan Greenspan's leadership. Prof Feldstein suggests it should risk repeating it. But these distinguished academics and, indeed, most of the US academic discussion ignore the international dimension to both the origin and resolution of this turmoil.
Prof Taylor dismisses the "savings-glut" explanation for the low US interest rates, with the observation that global savings rates are lower than three decades ago. But the world, without the US, had a rapidly rising excess of savings over investment in the early 2000s, much of it directed to the US. Given the huge capital inflow, the Fed's monetary policy had to generate a level of demand well above potential output.
The international dimension also shapes the resolution of the crisis. The Fed has a delicate judgment to make, not just between saving the hostages and rewarding the hostage-takers, but also between saving the US economy and risking confidence in the dollar.
In essence, the dollar needs to weaken, but not to crash. The Fed cannot risk a big rise in long-term interest rates, in response to loss of confidence in US price stability and an exchange-rate collapse.
Yet when house prices are expected to fall, lower interest rates themselves are unlikely to persuade people to borrow and spend. Thus a large part of the impact of lower interest rates must come via a weaker dollar and large improvements in the external balance.
This is another way of saying that the era in which the world could rely on the engine of US consumption is now at an end. If anything, the engine is more likely to go into reverse.
So the long-awaited and much-discussed "rebalancing" of the world economy is about to accelerate. Should the rest of the world fail to respond appropriately, a significant global slowdown is foreseeable.
Yet the US is not the only country in such a predicament. In an era of low interest rates, house prices soared in a number of developed countries (see chart). These also are vulnerable to a house price correction.
Much of the adjustment to lower growth, or even a decline, in US consumption must come elsewhere. Among others, China will be in the eye of this storm. Suppose, for example, that the dollar went down against the floating currencies, notably the euro, accompanied by the renminbi. Suppose, too, that the Chinese authorities took no measures to expand domestic demand. Then the external adjustment would fall elsewhere in the world. This would prove highly disruptive, particularly in continental Europe. Even the commitment to open markets might be endangered.
The combination of house price falls with a financial crisis in the core country of the world economy means big challenges for policymakers everywhere, particularly for the Fed, since it must respond without destroying trust in the dollar, and for policymakers in savings-surplus countries, who must anticipate a world in which the US demand engine slows sharply. Will they manage to keep the world economy expanding stably? A year or so from now we will have a far better idea of the answer.
* 'Housing, Housing Finance and Monetary Policy', September 1 2007, www.kc.frb.org
Copyright The Financial Times Limited 2007
Published: September 12 2007 03:00 | Last updated: September 12 2007 03:00
We are back to the old parlour game of second-guessing the Fed. It might be quite fun if the stakes were not so high.
Last week's dreadful US payrolls data make life a little easier. A fall in payrolls makes it easier for the Federal Reserve to justify a cut in the Fed funds rate without appearing merely to be bailing out Wall Street. It would arguably justify a cut even if the money markets were not in crisis. So a Fed cut would not look like a rescue for irresponsible traders. The problem is that this has egged on traders (possibly including responsible ones) to bet that the Fed must cut by 50 basis points, to 4.75 per cent, when it meets next week. A cut of "only" 25 bps would now be a disappointment.
So the parlour game enters a new phase, with Fed governors signalling how much they will cut, even without mentioning numbers. With a cut almost certain, hawkish talk is now taken as a signal that the cut will be only 25 basis points.
That is how the market interpreted comments by Dennis Lockhart, head of the Atlanta Fed, that the jobs report should be balanced with strong retail sales figures; by Janet Yellen of the San Francisco Fed, that borrowing costs have not risen much for normal borrowers; and by the Dallas Fed's Richard Fisher that monetary policy is "not a popularity contest".
But when Fed governor Frederic Mishkin, a one-time academic colleague of chairman Ben Bernanke, said the credit squeeze "poses an important downside risk to economic activity", that was seen as signalling a 50 bps cut.
Mr Bernanke himself achieved the near-impossible. He gave a long speech but dropped no hints on rates. So it passed off without any market impact. His next big pronouncement, to accompany the Fed's decision on interest rates next Tuesday, will garner more attention.
The policy challenge of rescuing the world economy
By Martin Wolf
Copyright The Financial Times Limited 2007
Published: September 12 2007 03:00 | Last updated: September 12 2007 03:00
The financial markets have taken the world economy hostage. This has presented the world's central banks with a dilemma. They fear the consequences of paying off those responsible for the mess. But they cannot let hundreds of millions of innocents suffer. Last week's announcement of the first US monthly fall in employment for four years has made a cut in interest rates from the Federal Reserve this month a virtual certainty. So act it will. But making the right decisions is going to be hard.
Martin Feldstein of Harvard University put the case for big cuts in a powerful summing up at this year's Jackson Hole monetary conference.* He argued that the US housing sector was at the heart of three interrelated events. First was "a sharp decline in house prices and the related fall in home-building that could lead to an economy-wide recession". Second was "a subprime mortgage problem that has triggered a substantial widening of all credit spreads and the freezing of much of the credit markets". The third was "a decline in home equity loans and mortgage refinancing that could cause greater declines in consumer spending".
Prof Feldstein pointed, for example, to a 3.4 per cent year-on-year decline in US house prices, with the chance of substantially more to come (see chart). Robert Shiller of Yale argued at the same conference that US house prices might ultimately fall by as much as 50 per cent, which would lower US household wealth by more than $10,000bn (£4,930bn).
Prof Feldstein also noted the damage done to the financial markets by the crisis in subprime lending. This is partly because credit spreads are correcting, albeit modestly so far. More important, "as credit spreads widened, investors and lenders became concerned that they did not know how to value complex risky assets". With confidence gone, banks have been forced to advance loans to their off-balance-sheet "special investment vehicles", which uses up their capital and so starves other borrowers.
Finally, as house prices and borrowing fall, household saving rates will rise towards more normal levels and residential investment fall still further. This combination seems sure to generate a rapid decline in the personal sector's financial deficit (discussed in my column of August 21 2007).
Prof Feldstein concluded by recommending a "risk-based approach", which treats the risk of a recession as more important than that of an upsurge in inflation. If the latter were indeed to happen, "the Fed would have to engineer a longer period of slower growth to bring the inflation rate back to its desired level. How well it would succeed in doing this will depend on its ability to persuade the market that a risk-based approach in the current context is not an abrogation of its fundamental pursuit of price stability."
If the Fed did what Prof Feldstein recommends, it would risk undermining its credibility. How, then, did it get into this mess? At Jackson Hole, John Taylor of Stanford university - inventor of the "Taylor rule" (which relates monetary policy to movement in output and inflation) - blamed the Fed for excessively loose policy between 2002 and 2006 (see chart).
Thus, Prof Taylor believes the Fed made a mistake under Alan Greenspan's leadership. Prof Feldstein suggests it should risk repeating it. But these distinguished academics and, indeed, most of the US academic discussion ignore the international dimension to both the origin and resolution of this turmoil.
Prof Taylor dismisses the "savings-glut" explanation for the low US interest rates, with the observation that global savings rates are lower than three decades ago. But the world, without the US, had a rapidly rising excess of savings over investment in the early 2000s, much of it directed to the US. Given the huge capital inflow, the Fed's monetary policy had to generate a level of demand well above potential output.
The international dimension also shapes the resolution of the crisis. The Fed has a delicate judgment to make, not just between saving the hostages and rewarding the hostage-takers, but also between saving the US economy and risking confidence in the dollar.
In essence, the dollar needs to weaken, but not to crash. The Fed cannot risk a big rise in long-term interest rates, in response to loss of confidence in US price stability and an exchange-rate collapse.
Yet when house prices are expected to fall, lower interest rates themselves are unlikely to persuade people to borrow and spend. Thus a large part of the impact of lower interest rates must come via a weaker dollar and large improvements in the external balance.
This is another way of saying that the era in which the world could rely on the engine of US consumption is now at an end. If anything, the engine is more likely to go into reverse.
So the long-awaited and much-discussed "rebalancing" of the world economy is about to accelerate. Should the rest of the world fail to respond appropriately, a significant global slowdown is foreseeable.
Yet the US is not the only country in such a predicament. In an era of low interest rates, house prices soared in a number of developed countries (see chart). These also are vulnerable to a house price correction.
Much of the adjustment to lower growth, or even a decline, in US consumption must come elsewhere. Among others, China will be in the eye of this storm. Suppose, for example, that the dollar went down against the floating currencies, notably the euro, accompanied by the renminbi. Suppose, too, that the Chinese authorities took no measures to expand domestic demand. Then the external adjustment would fall elsewhere in the world. This would prove highly disruptive, particularly in continental Europe. Even the commitment to open markets might be endangered.
The combination of house price falls with a financial crisis in the core country of the world economy means big challenges for policymakers everywhere, particularly for the Fed, since it must respond without destroying trust in the dollar, and for policymakers in savings-surplus countries, who must anticipate a world in which the US demand engine slows sharply. Will they manage to keep the world economy expanding stably? A year or so from now we will have a far better idea of the answer.
* 'Housing, Housing Finance and Monetary Policy', September 1 2007, www.kc.frb.org
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