From Volume 38, Issue 36 of EIR Online, Published September 16, 2011

U.S. Economic/Financial News

JP Morgan Chase Given Control Over Kentucky's Cash

Sept. 9 (EIRNS)—Predator bank JP Morgan Chase, which is British by pedigree, if not ownership, is now running the finances of the Commonwealth of Kentucky. The shift went into effect July 1, whereby JPM now "receives all deposits, writes all checks, and makes all wire transfers on the $12-15 billion" that Kentucky receives during the course of a year, according to investigative reporter Danny Mayer of North of Center free paper. For controlling the flow, JP Morgan receives $1.3 million in fees, and the ability to re-lend idle state funds for its own gain!

Talk about the fox guarding the chicken coop! Not only is JP Morgan one of the world's biggest derivatives swindlers (and therefore, actually bankrupt many times over), but it has been caught swindling municipalities around the world—including in Kentucky! But, Morgan Chase has bought its way out of these potential prosecutions, and continues to reap the benefits.

San Diego Power Outage Reflects Dominance of Green Policy

Sept. 9 (EIRNS)—The electricity outage that affected 1.4 million customers on the afternoon of Sept. 8, from San Diego to points East and South, began during an apparently botched repair to a substation in Yuma, Arizona. It then spread to a 500-kilovolt transmission line that brings power into southern California, and also affected customers in Mexico's state of Baja California. Federal and state regulators, and the utilities and North American Electric Reliability Council, will be investigating the causes.

The fragile state of the electric grid, and the insanity of greenie politics in California contributed to the extent of the blackout. California imports a significant portion of its electricity from out of state, because it has prohibited the construction of new nuclear plants, most fossil fuel plants, and instead has an insane policy of building solar and other "renewables." No state should have to import power, on a regular basis, from hundreds, or thousands, of miles away. And intermittent and unreliable sources weaken the reliability of a highly complex and interdependent system.

Bankrupt States Becoming Ungovernable; We Need a President!

Sept. 6 (EIRNS)—With most of the 50 states bankrupt and falling into worse conditions by the day, Rhode Island is now considering cutting pension benefits to existing recipients, not just new ones. Bills currently in the legislature are proposing a combination of reducing retirement payments; replacing part of the guaranteed pensions with 401(k)-type accounts; and sharply reducing what it calls "generous" cost-of-living increases. The legislation would affect "51,000 public workers and retirees," according to the Sept. 6 Washington Post.

"If it isn't illegal, it certainly wouldn't sit right morally," said J. Michael Downey, a plumber and president of Rhode Island Council 94 of the American Federation of State, County and Municipal Employees (AFSCME), which represents 8,000 state and local government workers. "They are going to fix this for Rhode Island on the backs of people who have worked their entire lives."

The states of Virginia and Maryland have attacked their pension problems by cutting benefits for new hires while preserving retirement packages for current employees. Last year, South Dakota, Colorado, and Minnesota moved to reduce cost-of-living increases for retirees in their public pension systems. Similarly, New Jersey and Maine this year cut cost-of-living increases in their plans.

In Illinois, the Chicago Tribune is reporting that Gov. Pat Quinn (D) has planned to issue mass layoff notices this week, on the grounds that the state will otherwise run out of money completely by next Spring. Quinn is reportedly set to announce the closing of several state facilities, including a prison, a juvenile detention center, and homes for the mentally ill and developmentally disabled. Despite the fact that this puts him in violation of an agreement with the state chapter of the AFSCME union, and may end him up in court, the governor is arguing that he has no choice.

Regional Fed Presidents Oppose Bernanke's QE3 Insanity

Sept. 6 (EIRNS)—Federal Reserve chief Ben Bernanke is preparing for his "extended" two-day Federal Open Market Committee (FOMC) meeting on Sept. 20-21, where he intends to break the arms of recalcitrant regional Fed presidents to get the helicopters flying over Wall Street and London with QE3 money. But several opponents within the Fed are campaigning to stop him. Minneapolis Fed president Narayana Kocherlakota, one of several Fed chiefs who publicly opposed Bernanke's pledge to keep interest rates near zero through mid-2013, told a Minneapolis audience on Sept. 6, that "The data in August did not justify the additional accommodation provided by the central bank on Aug. 9.

Unfortunately, the FOMC's two-year conditional commitment will be nearly impossible to undo in the near term." He said he would oppose further financial easing, warning of inflation: "I assess FOMC actions in light of the incoming data and the Committee's communicated objective of keeping inflation at 2% or a bit under."

At the same time, Richmond Fed president Jeffrey Lacker told a Financial Times reporter that "more monetary stimulus at this time would likely show up almost entirely in higher inflation with very little constructive influence on growth."

Lacker also opposed Bernanke's pledge to keep rates near zero, as did Charles Plosser of the Philadelphia Fed and Richard Fisher of the Dallas Fed. The dissension within the Fed mirrors the total lack of agreement in Europe on what to do about the crash.

All rights reserved © 2011 EIRNS