Jun 8, 2012 19:56 UTC

California shows way through tricky pension mess

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By Agnes T. Crane

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

San Jose and San Diego want current public workers to make sacrifices for their pensions, like contributing up to 16 percent more of salaries to fund retirement schemes. The proposals, overwhelmingly backed by voters in elections this week, look to be a sensible way forward in the thorny thicket of pension reform.

COMMENT

I say this as a liberal, and as someone who’s strongly against any further increases to Social Security’s retirement age, but I don’t think we can afford to let people retire at age 55. Barring disability, at least.

The previous commenter says that the city shouldn’t do anything to existing contracts, and it should just accept reduced services. You can only go so far with that. Remember, the city covers education and public safety. How much less of that is acceptable?

In addition, younger adults, of which I am one, won’t go into public service if there’s a huge disparity in benefits between the younger workers and a grandfathered class of older ones. There’ll be resentment. We’ll go into the private sector.

In any case, this is an issue bigger than just San Diego and San Jose. Pensions in general are hard to fund. The sponsor is taking on some very long-term financial liabilities. In addition, you ideally need people paying into the plan as well as drawing from it, and if the sponsor goes into hard times (like state budget cutbacks or the industry declines), then so does the pension.

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Jun 6, 2012 20:05 UTC

BofA reject wins Fannie Mae booby prize

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By Daniel Indiviglio and Agnes T. Crane
The authors are Reuters Breakingviews columnists. The opinions expressed are their own.

No good deed goes unpunished. Fannie Mae has chosen Timothy Mayopoulos, its general counsel, as its new chief executive. His promotion won’t improve already tense relations with Bank of America – the mega-bank fired him in 2008 after he questioned mounting losses. But his integrity and background make him a decent fit for the job.

Apr 30, 2012 21:08 UTC

U.S. mortgage lessons lost in student debt policy

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By Daniel Indiviglio
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

The lessons of the U.S. mortgage crisis seem to be lost on policymakers tackling student debt. A decade ago, government subsidies and guarantees helped expand the “dream” of homeownership to many Americans who would have been better off renting. Today, it’s college education being made more accessible with cheap funding provided by Uncle Sam.

Apr 30, 2012 21:02 UTC

The rupee looks vulnerable

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By Jeff Glekin
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

India’s ballooning trade deficit means it has to run just to stand still. Without steady capital inflows, the currency will collapse. But without a steady currency, it is hard to attract foreign capital. The rupee’s 19 percent fall against the dollar over the past year is worrying.

During most of the last decade, the current account deficit has been funded without great difficulty. Foreign direct investment, portfolio investments and about $60 billion a year of remittances have usually exceeded the shortfall in trade. India has accumulated around $300 billion of foreign currency reserves, equivalent to 17 percent of GDP.

Apr 10, 2012 17:24 UTC

Wobbly markets face second-quarter correction

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By Ian Campbell

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Markets are wobbling on renewed fears about global growth. Rising yields on Italian and Spanish bonds add to the alarm. And it would be wrong to assume that central bankers will ride to markets’ rescue this time – because oil prices and inflation are part of the global gloom.

Apr 3, 2012 21:10 UTC

Europe unrecognizable from U.S. Republican rhetoric

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By Martin Hutchinson

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Europe is mostly unrecognizable from the U.S. Republican rhetoric. Presidential hopefuls Mitt Romney, Rick Santorum and Newt Gingrich, who face off again in Tuesday’s trio of primaries, often accuse Barack Obama of leading America to “European-style socialism.” The monolithic pejorative works to a point but conveniently overlooks the many economic achievements throughout the continent. On this matter, voters shouldn’t take the candidates seriously, and the candidates might do well to consider Europe more so.

COMMENT

Wasn’t recovery under Reagan, from Carter, over 7%, so why would we be joyous with even 4.3% growth? Our best days are not behind us, but our current leadership seems to think so.

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Mar 27, 2012 21:01 UTC

Ally’s mortgage misery needs a clean ending

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By Agnes T. Crane and Antony Currie
The authors are Reuters Breakingviews columnists. The opinions epxressed are their own.

Ally Financial finally seems to have woken up to the need to get rid of ResCap, its ailing mortgage unit. Once the jewel in the former GM finance unit’s crown, the home lending and servicing operation has been a prime candidate for the bankruptcy court for years. ResCap has been on U.S. taxpayer-funded life support since 2008 – sucking up most of the $17.2 billion in aid the U.S. Treasury funneled to Ally. Now a Chapter 11 restructuring may finally be on the cards. But Ally needs to ensure its mortgage misery comes to a clean ending.

Mar 21, 2012 20:36 UTC

Student debt may land double whammy on US growth

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By Daniel Indiviglio
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Student loans could be the next asset class to school the United States about poor debt management. Graduates are now forking over more of their disposable income in repayments than 10 years ago, defaults are rising and with Uncle Sam now directly holding $450 billion of student debt, taxpayers are on the hook again. That could put U.S. higher education in the embarrassing position of hindering, rather than helping to fuel, economic growth.

Here’s how: first, the size of the student loan market has mushroomed. Bachelor-degree debt at graduation has grown 250 percent over the past decade, according to finaid.org. At $867 billion, it exceeds both credit-card and auto debt in the United States, according to a study by the New York Federal Reserve. If this trend continues, by 2021 it’ll be equivalent to 1.3 percent of GDP, triple its current level, assuming GDP cleaves to its 4.5 percent 15-year average nominal growth.

COMMENT

You have to have a job to pay off debt!!!STOP supporting red china!!!Made in America is the only answer!!Be American and Buy American goods!!!

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Mar 16, 2012 17:35 UTC

Dollars everywhere – so where’s the inflation?

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By Martin Hutchinson and Christopher Swann
The authors are Reuters Breakingviews columnists. The opinions expressed are their own.

Money supply is rising fast, so where is the inflation? U.S. consumer prices rose 0.4 percent in February, but that was mostly gasoline. Year-on-year, inflation is above the Fed’s 2 percent target but not by much. Yet money supply is going through the roof. Either inflation is on the way, or Milton Friedman should lose his Nobel prize.

Friedman argued that “inflation is always and everywhere a monetary phenomenon.” He proposed that central banks should increase money supply at a constant annual rate, ignoring economic cycles, so as to minimize self-reinforcing bouts of inflation and deflation.

COMMENT

Confusious say, “He who flirts with inflation will soon end up marrying her”. It’s on the way folks. Like a tsunami, first the water draws back revealing the sand sea bed, then the 50 foot high wave rushes in at the speed of a train. And then the wreckage. Fasten your seat belts.

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Mar 15, 2012 21:04 UTC

U.S. market rumblings point to revved up growth

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By Agnes T. Crane
The author is a Reuters Breakingviews columnist. The opinions expressed are her own.Rising oil prices and interest rates are election-year bait for U.S. politicians. But in reality – along with higher stock markets – they suggest a long-awaited strengthening of the economy. But sticker-shock at the pump and more expensive debt could yet knock confidence.

This week, even bearish bond traders seem to have conceded that growth prospects look brighter. U.S Treasury yields, which had been stuck in a narrow, low range since October, rose substantially, with the 10-year yield adding more than 0.3 percentage points to 2.35 percent before settling back a bit on Thursday. Stocks have been on a tear for more than five months, with the S&P 500 Index breaching 1,400 this week for the first time since 2008.