News: Real Estate, Risk, Economics. Feb. 12, 2016

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Table of Contents
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1) Marco Rubio Tax Plan Extreme – The Atlantic

2) Porter Ranch Gas Leak Is Temporarily Plugged : The Two-Way : NPR

3) California insurance regulators probing Zenefits

4) New Zenefits shocker: CEO admits company 'may have' used software to bypass California insurance licensing laws – New York Business Journal

5) Zenefits Under Investigation In California | TechCrunch

6) Zenefits Software Helped Brokers Cheat On Licensing Process – BuzzFeed News

7) 'Shame' real estate website targets banks handling stalled foreclosures – Business – The Buffalo News

8) New Orleans Home Prices Went Up 14 Percent Last Year – Studies – Curbed NOLA

9) Racked Markets Hand Verdict to Central Banks on Sub-Zero Rates – Bloomberg Business

10) China Economic Watch | How the Yuan Crisis Could Forge a New Currency Order

11) Seeking infrastructure: Aerotropolis challenges & opportunities by Champoux – NYREJ

12) Do Economists Actually Believe "Greed is Good"? – Evonomics

13) Fed Yet To Fully Embrace A New Policy Path – Tim Duy's Fed Watch

14) On Economic Stupidity – The New York Times

15) Stumbling and Mumbling: Should we nationalize banks?

16) UPDATED: Cleanup plan approved for asbestos-contaminated Montana town | Montana & Regional | missouliancom

17) Asia's Rich Advised to Buy Yen as BOJ's Negative Rates Backfire – Bloomberg Business

18) Bank of Japan loses control as QE hits the limits – Telegraph

19) Buildings, Tractors Burn in Louisiana Wildfires

  1.    Marco Rubio Tax Plan Extreme – The Atlantic

    Derek Thompson:

    It's time to dispel the fiction that mainstream Republicans don't know what they're doing when it comes to tax policy. …

    To be fair, Bernie Sanders' would raise taxes by an amount that is similarly unprecedented. Although TPC has not provided its own detailed estimate of the cost, his proposal clearly exists on a separate plane from political feasibility. But Sanders is an avowed socialist who's so far outside the norm of the Democratic Party that he's not even a member.

    I'm sorry, but that's a nonsensical statement.

    First of all, political feasibility isn't determinable this far out in advance of the election. Sanders' rise in the public opinion polls has been meteoric, and that's after people have had a real chance to hear him and the Clinton criticisms of him. If the trend continues, which it could, he could provide huge coattails to those who want to run on his same platform. Congress could be dramatically altered such that a new New Deal era could be ushered in.

    Second, Bernie Sanders' positions are not to the left of the New Deal or to FDR. Sanders' definition of "socialism" is prefaced by "democratic" in such a way that he really means a system or ideology where it is acceptable for the voters to vote in a greater role for the public sector but definitely quite short of converting the US government into a socialist government and the US into a socialist state. He's just a liberal in his speeches, and he's only advocating a strong welfare state, not a socialist state. There's a huge difference.

    As for the Republican approach, it's been well known for decades that they want to cut taxes to create a deficit to then cut spending so that privatizers can sweep in to reap profits off providing inferior services.

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  2.    Porter Ranch Gas Leak Is Temporarily Plugged : The Two-Way : NPR

    "After the leak is permanently sealed, the company's troubles won't be over," Karson reports. "It's getting slapped with almost a dozen lawsuits from families, businesses and regulators claiming negligence."

    Let's hope the sealing job will be permanent: won't break.

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  3.    California insurance regulators probing Zenefits

    … allegations from state regulators that the startup failed to properly license its salespeople ….


    Add your comment.

  4.    New Zenefits shocker: CEO admits company 'may have' used software to bypass California insurance licensing laws – New York Business Journal

    Kenneth Baer, a Zenefits spokesman, said the company is cooperating fully with regulators on "this issue that we discovered and self-reported to them."

    Well, the self-reporting aspect is certainly a good sign. If the leadership there takes ethics seriously, and that self-reporting appears to indicate that it does, then I hope this whole thing blows over and that they are able to get a strong handle on middle management and move forward.

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  5.    Zenefits Under Investigation In California | TechCrunch

    The brokers still had to take, and pass, a broker exam.

    The Macro did not advance through the required material or quizzes in the education course — the Macro only kept the person logged in. The Macro only pertained to the prelicensing education course and did not affect the broker exam taken later. Use of the Macro enabled — but did not cause — a person to spend less than the 52 hours of required time in the prelicensing course.


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  6.    Zenefits Software Helped Brokers Cheat On Licensing Process – BuzzFeed News

    The San Francisco—based Zenefits, an intermediary in the health insurance business, opened an internal investigation after BuzzFeed News reported last fall that it repeatedly failed to enforce legal requirements that anyone selling a health insurance policy have an appropriate state license. That was how executives discovered the macro, which Conrad had created based on a belief that 52 hours was too long to spend in training, the lawyer for Sacks said.

    If that properly characterizes Conrad's decision, I wonder how many of their trainees failed the license exam on the first sitting, how many more sittings on average it took for them to get licensed, and how many just gave up.

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  7.    'Shame' real estate website targets banks handling stalled foreclosures – Business – The Buffalo News

    The new website,, is the latest push by Assemblyman Michael Kearns, D-Buffalo, and the Western New York Law Center to draw attention to incomplete foreclosures. Kearns said stalled foreclosures create eyesores, damage neighbors' property values, and spawn other problems.

    Kearns' "shame" campaign calling for banks to act is not new, but he hopes the website will bring greater visibility to the properties and the problem.

    I also covered this one in one of our earlier editions: 2016/01/30/kearns-zombie-homes-hsbc-bank s-foreclosed-properties.html

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  8.    New Orleans Home Prices Went Up 14 Percent Last Year – Studies – Curbed NOLA

    Data from the end of 2015 continues to roll in, and a report from the New Orleans Metropolitan Association of Realtors provides more proof that New Orleans home prices are skyrocketing.

    I guess buyers are confident that the hurricane risk has been sufficiently mitigated.


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  9.    Racked Markets Hand Verdict to Central Banks on Sub-Zero Rates – Bloomberg Business

    Fueling the turmoil is fear that negative rates will slam the world's banks. In theory, they could be the panacea to cure sluggish global growth: by charging lenders fees for parking money at central banks, policy makers hope banks will use that cash to make loans, jump-starting their economies. In practice, investors worry it may squeeze bank profits and rattle money markets.

    This whole debate is so myopic.

    Monetarism is currency wars. The winner is the one who fights the hardest, but the others catch on to that (already have) and simply up their game. That's the point, it's a game.

    Yes, it does provide liquidity where that's needed. However, spending is typically woefully misdirected. That's where fiscal policy must come in.

    Governments need to spend debt-free (non-Federal Reserve) money into the system and on truly productive investments that will more than match the increase in circulating money with increased supply meeting the increased demand.

    It's purely a numbers game that is reducible to controllable equations, provided the money system is properly redesigned. That's the solution and the problem at the same time.

    The current banking system, which is complaining about being potentially squeezed, has too much political and other power. It won't do the right thing. It won't back proper reforms that would radically alter our economic system, cutting them off from the undeserved gravy train while we would see the complete elimination of poverty in fairly short order.

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  10.    China Economic Watch | How the Yuan Crisis Could Forge a New Currency Order

    Avinash Persaud:

    The market unrest has puzzled many. China's reserves are still over $3 trillion, and they dwarf short-term external debt, which is approximately $625 billion. The slowdown in the Chinese economy was well flagged. I suspect the shattering of the market's previous confidence that the Chinese government was omnipotent in matters such as exchange rates has played an intangible but powerful role in increasing risk aversion by Chinese corporates and residents.

    Add your comment.

  11.    Seeking infrastructure: Aerotropolis challenges & opportunities by Champoux – NYREJ

    Barbara Champoux:

    cities are extremely congested, largely driven by jobs, creating an intense burden on city housing and infrastructure, which must be effectively addressed. More than 50% of humanity currently lives in cities (higher in developed countries), and is expected to nearly double within 40 years to over 6B people. The size of cities' footprints is expected to increase twice as fast as a result of the influx. Yet, the infrastructure serving those cities is dangerously inadequate, and the dearth of affordable housing is increasingly problematic.

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  12.    Do Economists Actually Believe "Greed is Good"? – Evonomics

    As my readers know, I come down firmly on the side of cooperation. I have no qualms in saying that greed is a mental illness. In the end, cooperation is self-interest.

    The whole article is well worth reading. This is how it ends.

    … self-interested businessmen who acquire great wealth will also have an incentive and the means (since wealth is power) to change the laws in ways that will suit them. They can buy, and in some cases intimidate or simply murder (as in Russia during the 1990s) regulators, judges, and politicians. In other words, they, or a substantial proportion of them, will use their power to corrupt the moral foundations of the society as a whole. There is no impenetrable, unbreakable glass wall between economy and society. We use these concepts for analytical purposes, but we should not forget that it's just a convenience, not reality.

    It is interesting that you are right now in Moscow, attending the Gaidar Forum. Yegor Gaidar, of course was one of the most important architects of the Russian economic collapse during the 1990s. Russia provides a good illustration of the general principles that we are discussing.

    Russian transition to market economy was managed by some of the best and brightest Western economists. Instead of an economic miracle that the Russians were promised, the result was the fall of GDP by more than a half, immiseration of the 99 percent of the population, and huge wealth windfall for 1 percent (as well as for the Western advisers, I might add). The reasons are undoubtedly complex, but the most important one was the introduction of the dominant economic ideology. Everybody in power—former party bosses, organized criminals, new entrepreneurs (little different from mafia thugs), and the Western economists pursued their private interests. Those few who retained morals were either killed, or made completely powerless. Of course, a lot of self-interested guys got killed, too. The result was economic collaps e and social dissolution—Russia was a failed state by the mid-1990s. It was an example of failure of cooperation on a large scale, and massive production of public "ills."

    Now this is just an illustration. My main argument is logical, not empirical. You cannot have a well-functioning society in which everybody, or even a majority, are pursuing solely self-interest. This applies to the whole society, and to its parts, including the economy. Good institutions are not going to work in the absence of internalized prosocial values held by a sufficient number of people. Telling anybody to pursue their naked self-interest is not a recipe for greater social good. It's a recipe for social dissolution.

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  13.    Fed Yet To Fully Embrace A New Policy Path – Tim Duy's Fed Watch

    The more I read Tim, the more I think he'd make a really good Fed governor.

    The Fed has yet to fully embrace the change in financial conditionals and the implications for the path of policy. To be sure Yellen gave enough this week to take March off the table. That said, policymakers will hesitate to dramatically change their general policy outlook focused on higher rates. Consequently, I anticipate Fedspeak with seemingly unrealistic hawkish undertones. Essentially, they will leave the fear of policy error simmering on the back-burner.

    Tim has really good reasons to believe that. I hope he's wrong. I'm sure he'd like to be.

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  14.    On Economic Stupidity – The New York Times

    … Mr. Sanders argues that the financial industry has too much influence on the Fed, which is surely true. But his solution is more congressional oversight — and he was one of the few non-Republican senators to vote for a bill, sponsored by Rand Paul, that called for "audits" of Fed monetary policy decisions. (In case you're wondering, the Fed is already audited regularly in the normal sense of the word.)

    Now, the idea of making the Fed accountable sounds good. But Wall Street isn't the only source of malign pressure on the Fed, and in the actually existing U.S. political situation, such a bill would essentially empower the cranks — the gold-standard-loving, hyperinflation-is-coming types who dominate the modern G.O.P., and have spent the past five or six years trying to bully monetary policy makers into ceasing and desisting from their efforts to prevent economic disaster. Given the economic risks we face, it's a very good thing that Mr. Sanders's support wasn't enough to push the bill over the top.

    That's way overstated and assumes that Bernie had the same reasons Rand Paul had.

    Yes, Bernie was, and remains, interested in undue influence of the banking sector. It is interesting to note here that Paul Krugman has openly stated that he thinks the Fed is looking to raise rates so the banks can make greater profits charging higher rates. He reiterates it here:  /12/the-political-economy-of-interest-r ates-revisited/ It's something I had written before he did and was glad he saw it as I did. It's also that very type of "doing the bankers' bidding" that Bernie wants to be able to weed out of the system. How's he going to do it while the Fed is so "independent" and secretive? Please note that the Fed was not nearly as transparent as it has become (somewhat) until relatively recently.

    I was for the "audit the Fed" movement and not for Ron or Rand Paul's exact reasons but for Bernie's (and Paul Krugman's, if he'd have the consistency of mind to be for it).

    Anyway, Paul's right about the Republican's bad economic ideas that would only serve to enrich the bankers and others at the top while destroying the safety net for everyone else (dog-eat-dog style; greed-is-good style, etc.).

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  15.    Stumbling and Mumbling: Should we nationalize banks?

    … when banks are nationalized, their losses would create only a very minor problem for the public finances as governments borrow money to recapitalize them*. That needn't generate the fears of a credit crunch or financial crisis that we've seen recently. In this sense, nationalization would act as a circuit-breaker, preventing blow-ups at banks from damaging the rest of the economy. (Given that countries are exposed to financial crises overseas, the full benefit of this requires that banks be nationalized in all countries).

    You might reply that the same effect could be achieved by demanding that banks were better capitalized, as Anat Admati and Martin Hellwig have argued: calls for 100% reserve banking are to a large extent just an extreme version of this.

    However, the former would require massive share issues, which would themselves hurt stock markets. And the transition to the latter — as even its advocates acknowledge – would be complex: in fact, Frances has argued that it would kill off commercial banking. Nationalizing banks would be simpler.

    However, governments don't have to borrow and shouldn't. Furthermore, as I started writing many years ago, the US central bank ought to be the US Treasury. I've seen that idea picked up here and there, but it needs to become a reality.

    We do not need the Federal Reserve System. We do not need monetarism. We can have real full-employment, no inflation, and massive and sustainable growth all without borrowing a dime.

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  16.    UPDATED: Cleanup plan approved for asbestos-contaminated Montana town | Montana & Regional |

    The U.S. Environmental Protection Agency granted final approval Monday to a costly cleanup program for a Montana community where health officials say hundreds of people have been killed by asbestos poisoning.

    Add your comment.

  17.    Asia's Rich Advised to Buy Yen as BOJ's Negative Rates Backfire – Bloomberg Business

    Bank of Japan Governor Haruhiko Kuroda's Jan. 29 decision to adopt negative interest rates has failed to rein in the currency's advance.

    Yes, and I had said that they were being way too timid, should reverse the sales-tax hike, and readopt their war-footing economic system they mistakenly abandoned at the behest of neoliberals.

    Add your comment.

  18.    Bank of Japan loses control as QE hits the limits – Telegraph

    Ultimately, the BoJ and its peers in Europe and the US may have to resort to variants of "helicopter money" and the blanket funding of New Deal programmes to counter the next recession. None is yet ready to cross the Rubicon, and the markets know it.

    What the h___ are they waiting for?

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  19.    Buildings, Tractors Burn in Louisiana Wildfires

    Firefighters were dispatched to the scene after a building fire spread into a wooded area.

    Earlier this week about 871 acres, four buildings, two tractors and one truck burned in a wildfire near the Gorum/Flatwoods communities.

    Add your comment.

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