George Osborne is defeated 26 to 1 on EU bonus caps

Britain has been defeated after being outnumbered 26 to one over controversial European Union proposals to impose caps on bonuses paid to bankers.

The EU finance ministers' meeting is George Osborne's first chance to challenge plans for the cap that is seen as popular with voters. Photo: Reuters

 

 

 

EU finance ministers overruled British opposition to the banking remuneration caps and "technical negotiations" over the detail of regulations to begin next week ahead of a final decision next month.

Michel Barnier, the European Commissioner for financial services, hailed a "crystal clear" deal on Tuesday, allowing the EU to impose a bonus limit of 100pc of salary, or a maximum 200pc after agreement with shareholders, from January 2014.

"The caps are fixed," he said. "These caps will be the basis of our work from now on. All the main points have been approved and will not change."

The caps will also apply to all European bankers working in New York, Hong Kong, Singapore or other overseas branches, again overriding British concerns.

Mr Barnier insisted that the EU was confident that the caps would survive the threat of legal challenges by banks because the legislation specified bonus ratios to existing salaries rather than setting precise ceiling figures for payments.

"I wish them good luck," he said. "We examined the treaty closely. I suggest they look into it clearly and the implications for their reputation."
George Osborne warned Tuesday's meeting of EU finance ministers that plans to set curbs on bonuses could push up salaries in the banking sector and make it more difficult to link pay for bankers to performance.
The Chancellor has effectively been defeated faces over the EU rules and is left pushing for minor technical arrangements that will discount up to 25pc of payments on bonuses agreed by shareholders if they are tied to a bankﾒs longer term performance.
"Our concern is that it may have a perverse effect, it may undermine responsibility in the banking system rather than promote it," he said.
"We all want to see what more we can do to increase the incentives for long-term bonus packages."
Mr Osborne expressed British concern that the banker remuneration proposals had not yet been discussed in detail by finance ministers after being added to regulations on bank capital requirements by the European Parliament but was outnumbered 26 to one by other EU countries.
The binding text agreed by EU finance ministers states: "Bonuses will be capped at a ratio of 1:1 fixed to variable remuneration, i.e. bonuses are equal to fixed salary. This ratio can be raised to a maximum of 2:1, if a quorum of shareholders representing 50pc of shares participates in the vote and a 66pc majority of them supports the measure."
"These provisions will also apply to the staff of subsidiaries of European companies operating outside the European Economic Area and the European Free Trade Area."
EU officials will now draft a legal text over the course of March, before a vote by MEPs in April and Britain is hoping that, with German support, they can present the limited linkage of bonuses to performance as evidence of a compromise.
"I can't support the proposal currently on the table but I hope that if we make progress over the next couple of weeks that we can have a package that we can all support, that the finance minister of the largest financial sector in Europe can support wholeheartedly," said Mr Osborne.
The text agreed by EU finance ministers gives limited room for negotiation on performance linkage but only in relation to the overall fixed bonus caps.
"For the purposes of applying this ratio, variable remuneration may include long-term deferred instruments that can be appropriately discounted. The European Banking Authority will prepare guidelines on the applicable discount factor, taking into account all relevant aspects," said the statement.
British officials have moved away from threats to use the 'Luxembourg Compromise', a convention that allows a country to block legislation in order to preserve "vital national interests" because it would sink a whole package of EU legislation on capital requirements for banks.
"We will have to see what happens. As the proposal currently stands the UK cannot support it. We are in the middle of the legislative process, we will see how it concludes," said an official.
Germany is backing the proposals for caps that are opposed by Britain but offered some limited relief to Mr Osborne by backing the limited linkage to long-term performance.
"It's in Europe's interest that Great Britain stays on board," said Wolfgang Schaeuble, the German finance minister.
Mr Barnier argued that the EU's banking remuneration proposal was "compatible with sound risk management" in the banking sector.
"We want to discourage excessive risk taking. This financial crisis started in the US and spread to Europe and there are examples in Europe in particular that some bankers took ever greater risks because they were being paid through an unlimited bonus pool," he said.
"When the risk became a crisis or indeed a disaster it was the taxpayers had to carry the can. Enough is enough. We have to put a stop to that."

 

Japanese PM prepares for war: Links Falklands conflict with Senkaku

Japanese Prime Minister Shinzo Abe, whose country is in conflict with China over islets in the East China Sea, cited former British Prime Minister Margaret Thatcher’s reflections on the 1982 Falkland Islands war to stress the importance of the rule of law at sea. The Japanese Prime Minister, who took office in December, quoted Thatcher’s memoirs reflecting the Falkland Islands war, in which she said Britain was defending the fundamental principle that international law should prevail over the use of force, according to Reuters.

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Nearly 1m protesters stage rally against austerity in Portugal

Source: OT
LISBON Hundreds of thousands of people took to the streets of Lisbon and other Portuguese cities on Saturday to protest against the government’s austerity measures aimed at rescuing the debt-hit eurozone nation.
The rallies were organised by a non-political movement which claimed 500,000 marched in the country’s capital and another 400,000 in the main northern city of Porto. There have been no official estimates of the crowds.
But the mood of the crowd was clearly political, calling for new elections with banners declaring “Portugal to the polls!” and “If you fall asleep in a democracy, you wake up in a dictatorship”.
Another banner showed a picture of centre-right Prime Minister Pedro Passos Coelho with the caption “Today I am in the street, tomorrow it will be you.”
Portugal was granted a financial rescue package worth 78 billion euros ($103 billion) in May 2011, in exchange for a pledge to straighten out its finances via austerity measures and economic reforms.
Lisbon has to reduce its public deficit to 4.5 per cent of GDP this year, but the government recently conceded it may be impossible for it to reach that target given the continued recession.
Finance Minister Vitor Gaspar has said the economy is expected to contract around two per cent this year, double an earlier forecast.
The organisers of Saturday’s march are galvanised by their opposition to the so-called troika of public creditors — the European Union, the European Central Bank and the International Monetary Fund — who bailed out Portugal.
“This demonstration is a clear sign that ‘the troika’ and the government are not wanted in this country,” said Joao Semedo, the leader of a far-left bloc.
The march included groups of teachers, healthcare workers and pensioners who have been especially hard hit by the budget cuts.
After cutting salaries and pension benefits in 2012, the government this year has declared a general tax increase and expects to impose further cuts of some four billion euros.

PAPER: Dow Jones Speeding On Fed Steroids, SocGen: Markets Set For ‘Watershed Moment’ When Investors Frontrun Fed Exit, Mark Hulbert: Too Many Investors Are Getting Carried Away And Overlooking A Depressing Fact, CNN: America’s Middle Class Is Losing Ground

PAPER: Dow Jones speeding on Fed steroids

Like all good things, the performance-enhancing policies must come to an end.
Four years after the stock market hit bottom, it is flirting with an all-time high. On Monday, the Dow Jones industrial average enjoyed its second highest close ever and was just 37 points away from a new record — more than double its level during the dark days of March 2009.
The turnabout is testament to healthy corporate profits and the resilience of America’s free enterprise system. And it’s a huge relief to workers whose 401(k) plans are tied to equities. But the risky little secret of the rebound is that it is powered in significant part by the easy-money policies of the Federal Reserve, which must one day end…..

Markets set for ‘watershed moment’ when investors frontrun Fed exit: SocGen

Markets are headed for a ”watershed moment,” in which investors realize the economy “is finally breaking away from trend growth and the days of [quantitative easing] are numbered,” analysts at Societe Generale said in a lengthy and detailed note that delves into the ramifications for that realization for everything from the dollar to commodities to risk assets.
The impact across asset classes, however, may depend on whether bond investors gradually push yields higher or panic over the implications of the Fed’s eventual exit from its ultra-easy monetary policy, they said.
A 1994 Redux?

60% Of Americans Are Convinced We’re In A Recession

The IBD/TIPP Economic Optimism Index fell 10.8 percent in March to 42.2, down from 47.3 in February.

A reading below 50 indicates net pessimism.
“Americans across-the-board think that the economic outlook is grim,” said Raghavan Mayur, president of TIPP.
“The big slide in our economic outlook sub-index perhaps signals a turning point and an impending entry into a recession. This month sixty percent believe that the economy is in a recession.”

 MARK HULBERT: What’s the big deal about the 2007 highs?

CHAPEL HILL, N.C. (MarketWatch) — Too many investors are getting carried away in their excitement about the Dow Jones Industrial Average’s return to the vicinity of its all-time high from late 2007— and therefore overlooking a depressing fact:

Even though the Dow (DJI:DJIA)   succeeded in eclipsing that high, it still provided investors with a zero return over the last five and one-half years. Coupled with the bursting of the Internet bubble at the turn of the century, this means that even the market’s longer term returns are well below average: Over the last 15 years, for example, equities have produced a total return of less than half their historical norm. Read Market Snapshot “U.S. stocks rally to lift Dow to new heights.”

What’s all the excitement about?

I concede that it may be poor form to remind everyone of these historical realities just days before the bull market will be celebrating the fourth anniversary of its birth. But that’s the job of a contrarian. If everyone were instead depressed and complaining that stocks are a worthless investment, a contrarian would instead be celebrating the market’s many impressive achievements. Hedge-fund legend Stan Druckenmiller says this will “end very badly.”

But that’s definitely not the case now….

The Last Time The Dow Was Here…

“Mission Accomplished” – “we all know it’s going to end badly, but in the meantime we can make some money” – ZH translation: “just make sure to sell ahead of everyone else.”

Why America’s middle class is losing ground

When Debbie Bruister buys a gallon of milk at her local Kroger supermarket, she pays $3.69, up 70 cents from what she paid last year.

Getting to the store costs more, too. Gas in Corinth, Miss., her hometown, costs $3.51 a gallon now, compared to less than three bucks in 2012. That really hurts, considering her husband’s 112-mile daily round-trip commute to his job as a pharmacist.
Bruister, a mother of four, received a $1,160 raise this school year at her job as an eighth-grade computer teacher. The extra cash — about $97 a month, before taxes and other deductions — isn’t enough for her and her husband to keep up with their rising costs, especially after the elimination of the payroll tax break. Its loss shrunk their paychecks by more than $270 a month.
“If you look at how much prices are going up, you get in the hole really quick,” Bruister said. “It’s a constant squeeze.”
In the wake of the Great Recession, millions of middle-class people are being pinched by stagnating incomes and the increased cost of living. America’s median household income has dropped by more than $4,000 since 2000, after adjusting for inflation, and the typical trappings of middle-class life are slipping out of financial reach for many families.
….


Medicine Wears Off – Is the Euro Crisis About to Return?
specter of the return of the euro crisis is never far away. Not a single problem in the currency zone has been definitively resolved & some are questioning if the European Central Bank might have to intervene again.

The Fed Has Cancelled All Market Signals And Manipulating The Most Important Price In All of Free Markets. It Will End Badly!!

JPMORGAN: The ‘Slowdown In Consumer Spending Has Arrived’

Last week’s release of personal spending data revealed that spending rose 0.2 percent in February, at the same pace as in January.
When adjusted for inflation, though, the data are less encouraging.
In a note to clients, JPMorgan economist Robert Mellman declares that the “consumer spending slowdown is here,” saying consumers are beginning to feel the effects of the payroll tax cut expiry and rising gas prices.
Mellman writes:
Slowdown in consumer spending has arrived: The first-round effects of the tax increases should mainly affect consumer spending, and the forecast looks for real consumer spending to slow to only 1.0% growth at a seasonally adjusted monthly rate this quarter. This forecast appears to be tracking. Real consumer rose only 0.1% at a seasonally adjusted annualized rate in January following a downward-revised 0.1% increase in December as well.
…
Why America’s middle class is losing ground

Is A Market Sell-Off Imminent Or A New Bull Run?

from Gregory Mannarino:

“Dead Money” about to come alive?

CLICK ON CHART TO ENLARGE


Back in the mid-1960′s the popular investment theme was….”buy and hold the “NIFTY 50!”   Investors were encouraged to buy & hold 50 quality growth stocks and they would be fine in the years to come!  If you bought the Nifty 50 in 1966 what would your portoflio look like by the early 1980′s?  Pretty much ”Dead Money” and investors would have lost a great deal of capital… plus even more to the high inflation period of the 1970′s!
…

Car Buyers Taking Out Bigger Loans, Set New Record
Italian Services PMI Falls — Sees Its Steepest Decline In 7 Months

Druckenmiller: “When You Get This Kind Of Rigging, It Will End Badly”

When even Home Depot’s Ken Langone is questioning the reality of this rally (CEO of one of the best performing stocks since the Dow last traded here), you have to be a little concerned. However, it is Duquesne’s Stanley Druckenmiller’s point that with QE4EVA it is impossible to know when this will end but warns that “all the lobsters are in the pot” now as he notes that “if you print enough money, everything is subsidized – bonds, stocks, real estate.” He dismisses the notion of any sell-off in bonds for the same reason as the Fed is buying $85 bn per month (75-80% all off Treasury issuance). The Fed has cancelled all market signals (whether these are to Congress or market participants) and just as we did in the 1970s, we will find out about all the mal-investments sooner or later. “This is a big, big gamble,” he notes, “manipulating the most important price in all of free markets,” that ends one of only two ways, a mal-investment bust (as we saw in 2007-8) or full debt monetization and “off we go into inflation.”

“Brilliant” Congresswoman explains how many jobs could be lost from the “sequester” – 108% of all jobs!!!

Horror Care: How Private Health Care Is Shortening Our Lives

Steven Brill's article in Time Magazine about the cost of private health care is likely to make most of his readers very angry. Angry about the prices we pay, about the lives that are devastated, and about the fact that we're one of the few developed countries without adequate health care for its citizens.

Pat Bagley / Salt Lake Tribune, Cagle Cartoons

Economists have told us that the profit motive of privatization comes with an "invisible hand" that automatically corrects inequities in the market. It hasn't worked that way for health care. The personal stories recounted below, and some additional facts to complement them, make it clear that an essential human need has been turned into a product that benefits a few people at the expense of many others. $15,000 for Blood Tests
Brill's article begins with the story of a 42-year-old Ohio man named Sean Recchi, who traveled to MD Anderson Cancer Center in Houston for treatment of non-Hodgkin's lymphoma. He and his wife Stephanie had paid $469 a month, or about 20% of their income, for insurance that covered $2,000 per day of hospital costs. His financial troubles started when MD Anderson told him, "We don't take that kind of discount insurance."
But he had to go to the hospital. His wife recalled that he was "sweating and shaking with chills and pains. He had a large mass in his chest that was..growing. He was panicked."
Stephanie asked her mother to write a check for $48,900.
Sean waited for 90 minutes while the hospital confirmed that the check had cleared. He was also required to advance MD Anderson $7,500 from his credit card. The total cost for the initial treatment and chemotherapy was $83,900, including a $15,000 charge for lab tests for which a Medicare patient would have paid a few hundred dollars, $283 for an x-ray that Medicare categorizes as a $20 charge, and $1.50 for a generic version of a Tylenol pill.
Hospital Boss $1,845,000 -- Medicare Boss $170,000
MD Anderson provided this statement in its defense: "The issues related to health care finance are complex...[our] billing and collection practices are similar to those of other major hospitals and academic medical centers." The company made $531 million in profits in 2010, on total revenues of about $2 billion. That 26 percent profit margin was, in the author's words, "an astounding result for such a service-intensive enterprise."
It's true. A PayUpNow.org analysis of Medical Services providers showed that from 2008 to 2010, Humana had a profit margin of about 5 percent, United Health Group just under 7 percent, and WellPoint about 8 percent.
Last year's salary for Ronald DePinho, the president of MD Anderson, was $1,845,000. That's over twice the compensation paid to the president of the University of Texas medical complex that includes MD Anderson. It's about ten times the compensation of the federal Medicare Administrator in 2010.
Privatization Has Failed Us: The Deadly Facts
Our private health care system has indeed failed us. We have by far the most expensive system in the developed world. The cost of common surgeries is anywhere from three to ten times higher in the U.S. than in Great Britain, Canada, France, or Germany.
Everyone has their hand in the money pot: insurance companies, pharmaceutical firms, physicians, hospitals, equipment suppliers, the AMA. Steven Brill notes that the medical industry has spent $5.36 billion on lobbying in the past 15 years, compared to $1.53 billion spent by the defense/aerospace industry and $1.3 billion spent by oil and gas interests.
As reported by the Census Department, 50 million Americans can't afford the price of health insurance. According to a study by the American Journal of Public Health, nearly 45,000 annual deaths are associated with lack of health insurance. A 2001 survey revealed that, because of cost, forty-two percent of sick Americans skipped doctor's visits and/or medication purchases. Even careseekers with insurance can end up uncovered, as in California, where a survey found that one out of four claims were denied by private insurers, even when treatment was recommended by the patient's physician. The after-effects can be disastrous. A 2007 study at the Harvard Medical School found that 62 percent of US bankruptcies were a result of medical expenses.
Meanwhile, the evidence for incompetence in the private sector is overwhelming. Data from the Congressional Budget Office (CBO) and the Center for Medicare and Medicaid Services (CMS) shows that since 1997 private insurance costs have risen much faster than Medicare costs. According to the Council for Affordable Health Insurance, medical administrative costs as a percentage of claims are about three times higher for private insurance than for Medicare. A study by researchers at Harvard Medical School and Public Citizen found that health care bureaucracy last year cost the United States $399.4 billion. The U.S. Institute of Medicine reports that the for-profit system wastes $750 billion a year on waste, fraud, and inefficiency. As a percent of GDP, we spend almost twice the OECD average.
Private Health Care Has Shortened Our Lives
When we look beyond industry malfeasance to the effects on human life, we find that Americans are paying the ultimate price. We now have a shorter life expectancy than almost all other developed countries. A National Research Council study placed the United States LAST among 17 high-income countries.
It wasn't always this way. Since 1960 there has been a close parallel between worsening life expectancy and increased health care costs as a percentage of GDP. Most disturbing is our growing infant mortality rate relative to other countries. A UNICEF study places the U.S. 22nd out of 24 OECD countries in "children's health and well-being."
In startling contrast, Americans covered by Medicare INCREASED their life expectancy by 3.5 years from the 1960s to the turn of the century.
Another Horror Story
Janice S., a 64-year-old woman in Connecticut, was rushed to the hospital in what turned out to be heartburn. She was charged $995 for the ambulance ride, $3,000 for the doctors, and $17,000 for the hospital - $21,000 for a three-hour precautionary checkup.
Part of the hospital bill was a special stress test, employing radioactive dye and a CT scan, which cost $7,997.54, about six times more than the hospital's regular stress test. Medicare would have paid the hospital $554 for the special test.
For many of the lab tests, Janice was charged about ten to fifteen times more than the Congress-supervised Medicare rate. The hospital's own filings to the Department of Health and Human Services showed that lab tests in 2010 brought in $293 million from patients, while costing the hospital just $28 million.
When confronted with the details, a hospital spokesperson said, "Those are not our real rates.. It's a list we use internally in certain cases, but most people never pay those prices."
And More..
Emilia Gilbert was 62 when she fell at home and bloodied her face, spent six hours (most of it waiting) at the at the Bridgeport, CT Hospital emergency room, and received a bill for over $9,000. She even got charged for bandages and tubing, which are supposed to be part of the $900 emergency room charge. The hospital sued her for the money.
Steve H. went to Mercy Hospital in Oklahoma City for back treatment. He had $45,181 remaining on the $60,000 annual payout limit from his union's health insurance plan. For basic medical and surgical supplies he was billed about $8,000, including charges for a surgical gown, a blanket warmer and a marking pen. The most significant cost was the Medtronic stimulator that was implanted in his back, which cost the hospital $19,000, but cost Steve almost $50,000. His total bill at the institution run by the Sisters of Mercy ended up at nearly $87,000.
Steven D. (a pseudonym) was diagnosed with lung cancer in January 2011. When he died eleven months later, his wife Alice was left with a bill for over $900,000.
Many of the patients, or their family members, interviewed by Mr. Brill took advantage of a growing industry called medical billing advocacy, by which outlandish bill totals can be negotiated downward. The initial hospital bill is apparently an attempt by the hospital to get all they can from a patient. Steven D's $900,000 bill for cancer treatment was dramatically reduced, to about $170,000, but Alice was forced to literally sell the family farm to pay off most of her debt.
Human Need as a Product For Sale
An underlying theme through the Brill article was the vulnerability of patient's spouses or other relatives, who were not in the appropriate state of mind to challenge, or even consider, the excessive costs of treatment. As the wife of a terminally ill patient stated, "Are you kidding? I'm dealing with a husband who had just been told he has Stage IV cancer. That's all I can focus on...You think I looked at the items on the bills? I just looked at the total."
By treating the essential human need of health care as a product, the hospitals and doctors and drug companies and insurance companies and equipment suppliers are lured toward a pot of money, with little regard for the effects of their profit-making on average Americans.
The solution, of course, is Medicare for all. If, that is, the invisible hand of the market ever reaches out to average Americans.

Paul Buchheit is a college teacher, an active member of US Uncut Chicago, founder and developer of social justice and educational websites (UsAgainstGreed.org, PayUpNow.org, RappingHistory.org), and the editor and main author of "American Wars: Illusions and Realities" (Clarity Press). He can be reached at paul@UsAgainstGreed.org.