Globalisation debt & banking
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How the Ponzi was won
Derivatives: A Capital Markets Gong Show For Whom The Bell Tolls
-- Posted Friday, 1 July 2011 | | Source: GoldSeek.com
By Rob Kirby
Back in early March, 2011 – PIMCO’s Bill Gross were calling for much higher rates and telling the world that they were selling U.S. Government Bonds.
PIMCO's Bill Gross Says to Sell U.S. Treasuries Now
03/03/2011
.
As you can see, not only did the anticipated rise in interest rates NOT materialize – rates have actually fallen:
Remember folks, Bill Gross [PIMCO] is reputed to run the world’s largest bond fund. Not only was Gross wrong – in investment terms he was SERIOUSLY WRONG – a great many percentage points wrong. Not only did 10 yr. bond rates not go up by 150 basis points – they have indeed FALLEN by more than 50 basis points.
This illustrates a point; namely, that being the biggest in your space [and having former Fed Chairman Alan Greenspan acting as advisor to your company] doesn’t ensure that you NEVER, EVER make a poor market call and “lose-your-shirt” – so to speak.
Accordingly, it sure is a good thing that the world’s biggest derivatives player - J.P. Morgan - has “seemingly” NEVER, EVER made a bet even “1 % wrong” with their 80 Trillion derivatives book. The Morgue has a Market Cap of roughly $180 billion. A wrong bet of a mere 1% on their ‘book’ would translate to a loss of $800 billion dollars eviscerating their entire capital base more than four times over. The knock on effect from such an event would trigger multiple tsunamis reverberating through the global financial system. Sounds absurd, but it’s pure math.
Either J.P. Morgan NEVER makes a mistake or they get a pass if / when they do make a mistake. Back in early 2006, Business Week reported,
What that means folks, is: J.P. Morgan’s derivatives book constitutes national and international security and they along with other large derivatives player are NECESSARILY excused from wrong way bets. The obscenely large derivatives books of J.P. Morgan and other select money center banks are being used to execute U.S. monetary policy and to achieve other arbitrary financial market outcomes. This has been occurring since at least the mid 1990’s and severely ramped-up in the mid 2000’s.
Additionally, what can be said for J.P. Morgan can also be said for the likes of B of A, Citibank, Goldman Sachs – all with derivatives books [currently] ranging from 44+ to 79+ Trillion in size. Take note of the TOTAL derivatives for Commercial Banks at 243 Trillion:
TABLE 1 excerpted from: OCC Quarterly Derivatives Report Q1/11
Commercial Banks Vs. Bank Holding Companies
The Office of the Comptroller of the Currency [OCC] tells us, in the Executive Summary of the Q1/11 Report that derivative contracts remain concentrated in interest rate products, which comprise 82% of total derivative notional values. Credit derivatives, which represent 6.1% of total derivatives notionals, increased 5.3% to $14.9 trillion. It is the settlement of these interest rate derivatives – specifically int. rate swaps of duration between 3 and 10 years – that creates artificial scarcity of physical U.S. government bonds.
The OCC’s quarterly derivatives report is published three months in arrears and typically runs about 30 – 35 pages in length. All but one page of this reporting deals with data on the Commercial Bank level. Commercial Bank reporting falls under the purview of the Office of the Comptroller of the Currency. It’s in the Commercial Bank reportage ONLY where we get a glimpse of bank activity in precious metals:
excerpted from: OCC Quarterly Derivatives Report Q1/11
ONLY one page of the quarterly derivatives report [table 2] gives us a high level view of derivatives at the Holding Company Level. Bank Holding Com pany reporting falls under the purview of the Federal Reserve and DOES NOT INCLUDE any breakout or reveal on precious metals derivatives holdings. Take note how – at the Holding Company Level, Morgan Stanley’s Derivatives book swells to over 51 TRILLION – vaulting them from a rather insignificant 8th place on the Commercial Bank list into 4th place on the Holding Company list below. :
TABLE 2 excerpted from: OCC Quarterly Derivatives Report Q1/11
Historically it is VERY WELL DOCUMENTED that Central Banks the world over have illustrated a large propensity to hide / veil / obfuscate all their activities relating to precious metals and specifically gold. Note the disparity between the transparency offered by the OCC with their Commercial Bank reportage versus the Holding Company data with falls under the purview of the Federal Reserve. This amounts to 80 Trillion worth of derivatives that the public knows “sweet nothing” about.
Remember folks, it was none other than former Federal Reserve Vice Chairman Alan Blinder – while appearing on the Nightly Business Report back in 1994 – issued these prescient words,
“the last duty of a central banker is to tell the public the truth”
By comparing Total Derivatives in TABLE 1 [Commercial] versus TABLE 2 [Holding Co.] we can identify that Morgan Stanley’s derivatives book stands as a 50 TRILLION BLACK HOLE where reporting of precious metals are concerned; Goldman’s 5+ TRILLION, B of A’s 20 TRILLION, J.P. Morgue’s about 1 TRILLION.
Now everyone should appreciate the fact that Morgan Stanley’s “book” grew from 42.1 Trillion at Dec. 31/10 to 51.2 Trillion at Mar. 31/11 – THAT’S an increase of 9.1 TRILLION in three months at an institution with a market capitalization of 35 billion. Even if you’re asleep and have your head buried in the sand, you’ve got to admit that 9.1 TRILLION ramp in business in 3 months for a company with a 35 billion market cap is quite a feat, eh? Remember folks, interest rate derivates – BY THEIR VERY NATURE, DO HAVE 2-WAY CREDIT / COUNTERPARTY RISK.
The feat performed by Morgan Stanley, outlined above, becomes even more unbelievable when you stop and consider that – according to the OCC – there are virtually NO DECLARED or IDENTIFIABLE END USERS [counterparties] for these products:
excerpted from: OCC Quarterly Derivatives Report Q1/11
Now we must ask who Morgan Stanley did their impressive 9.1 TRILLION trade in 3 months with? Just because they remain anonymous doesn’t mean they don’t exist – but they are certainly known to the Federal Reserve because the Fed has purview, as regulator, over Bank Holding Companies. So, by extension – the Fed is comfortable [from a credit standpoint] with “whoever it is” that Morgan Stanley is doing this mind boggling business with. What we can say about the nature of this business is this: in the absence of identifiable end users [counterparties], this trade creates artificial demand for U.S. Government bonds.
So who would Morgan Stanley [and the Fed by extension] accept as a secretive counterparty on this scale - in credit sensitive transactions that serve to create artificial demand for U.S. government securities? Embodied in the answer to this question IS THE REASON why the world’s largest bond fund – Bill Gross/ PIMCO – got it ALL [counter-intuitively] WRONG on interest rates. It also happens to be the EXACT same reason why Amaranth got it ALL [counter-intuitively] WRONG with Natural Gas back in 2006.
How many ways can you say Exchange Stabilization Fund? [edit by BB, see next post below on the ESF] It’s the Exchange Stabilization Fund acting through the New York Fed – utilizing agents J.P. Morgan, Citibank, B of A, Goldman Sachs and Morgan Stanley as proxies to implement imperialist U.S. monetary policy.
Let us forget for a moment that natural gas trades in Europe for 2 – 3 times what it trades for in North America – with the reasoning most often given by mainstream pundits that “natural gas is a local market” and let’s move on to crude oil and specifically let’s take a closer look at the price spread between North Sea [Brent] Crude @ 108.30 and West Texas Intermediate [WTI] @ 91.72:
Crude Truth
Historically and until VERY recently, WTI has traded at a premium to North Sea Brent Crude. This historic relationship has now “flipped” and grown to PERVERTED inverted-ness [today to the tune of 16.58 per barrel] and we have been fed a line by “officialdom” for the past couple of years that this is mainly due to storage constrains or “a glut of crude” centered on Cushing, Oklahoma.
Well guess what folks? The BIG LIE that the perversion of global crude oil prices were due to a “glut” at Cushing, Oklahoma were laid bare by a PANICKING U.S. administration last week when they announced that 60 million barrels of crude were to be released from the Strategic Petroleum Reserve. If there truly was a “glut” of any kind – which according to the lies told to the world by officialdom there must be with Brent trading at a 16.58 premium to WTI – there would be no release of crude from the Strategic Petroleum Reserve.
Many market pundits wrongly refer to or reference the derivatives complex as a “DEBT” that the world has been stuffed with. This is WRONG. What the derivatives complex really is – it’s a price control grid which enables its handlers to harvest the fruits of the world’s labor at arbitrary prices.
The reality – the U.S. Fed and Treasury have become increasingly desperate to make their lies about low inflation believable and provide cover for their increasing monetary debasement by attacking and rigging the most visible, go-to alternatives to failing fiat currency.
In doing so, global financial stewardship provided by America has turned our global capital markets into a sleazy GONG SHOW.
-- Posted Friday, 1 July 2011 | | Source: GoldSeek.com
By Rob Kirby
Back in early March, 2011 – PIMCO’s Bill Gross were calling for much higher rates and telling the world that they were selling U.S. Government Bonds.
PIMCO's Bill Gross Says to Sell U.S. Treasuries Now
03/03/2011
……To wit, he predicts that when the Fed’s QE2 bond-buying binge ends at the end of June, there will be nobody to take the Fed’s place as last-resort buyer of U.S. Treasuries at artificially low rates. Treasury yields will need to ramp up sharply by 1.5 percentage points to attract private buyers. Given that the ten-year U.S. Treasury is currently yielding only 3.5%, a 1.5 percentage point jump would equal a 43% increase in interest rates (1.5/3.5). That’s a big move in interest-rate land and would have a significantly negative effect on bond prices
As you can see, not only did the anticipated rise in interest rates NOT materialize – rates have actually fallen:
Remember folks, Bill Gross [PIMCO] is reputed to run the world’s largest bond fund. Not only was Gross wrong – in investment terms he was SERIOUSLY WRONG – a great many percentage points wrong. Not only did 10 yr. bond rates not go up by 150 basis points – they have indeed FALLEN by more than 50 basis points.
This illustrates a point; namely, that being the biggest in your space [and having former Fed Chairman Alan Greenspan acting as advisor to your company] doesn’t ensure that you NEVER, EVER make a poor market call and “lose-your-shirt” – so to speak.
Accordingly, it sure is a good thing that the world’s biggest derivatives player - J.P. Morgan - has “seemingly” NEVER, EVER made a bet even “1 % wrong” with their 80 Trillion derivatives book. The Morgue has a Market Cap of roughly $180 billion. A wrong bet of a mere 1% on their ‘book’ would translate to a loss of $800 billion dollars eviscerating their entire capital base more than four times over. The knock on effect from such an event would trigger multiple tsunamis reverberating through the global financial system. Sounds absurd, but it’s pure math.
Either J.P. Morgan NEVER makes a mistake or they get a pass if / when they do make a mistake. Back in early 2006, Business Week reported,
President George W. Bush has bestowed on his intelligence czar, John Negroponte, broad authority, in the name of national security, to excuse publicly traded companies from their usual accounting and securities-disclosure obligations. Notice of the development came in a brief entry in the Federal Register, dated May 5, 2006,
What that means folks, is: J.P. Morgan’s derivatives book constitutes national and international security and they along with other large derivatives player are NECESSARILY excused from wrong way bets. The obscenely large derivatives books of J.P. Morgan and other select money center banks are being used to execute U.S. monetary policy and to achieve other arbitrary financial market outcomes. This has been occurring since at least the mid 1990’s and severely ramped-up in the mid 2000’s.
Additionally, what can be said for J.P. Morgan can also be said for the likes of B of A, Citibank, Goldman Sachs – all with derivatives books [currently] ranging from 44+ to 79+ Trillion in size. Take note of the TOTAL derivatives for Commercial Banks at 243 Trillion:
TABLE 1 excerpted from: OCC Quarterly Derivatives Report Q1/11
Commercial Banks Vs. Bank Holding Companies
The Office of the Comptroller of the Currency [OCC] tells us, in the Executive Summary of the Q1/11 Report that derivative contracts remain concentrated in interest rate products, which comprise 82% of total derivative notional values. Credit derivatives, which represent 6.1% of total derivatives notionals, increased 5.3% to $14.9 trillion. It is the settlement of these interest rate derivatives – specifically int. rate swaps of duration between 3 and 10 years – that creates artificial scarcity of physical U.S. government bonds.
The OCC’s quarterly derivatives report is published three months in arrears and typically runs about 30 – 35 pages in length. All but one page of this reporting deals with data on the Commercial Bank level. Commercial Bank reporting falls under the purview of the Office of the Comptroller of the Currency. It’s in the Commercial Bank reportage ONLY where we get a glimpse of bank activity in precious metals:
excerpted from: OCC Quarterly Derivatives Report Q1/11
ONLY one page of the quarterly derivatives report [table 2] gives us a high level view of derivatives at the Holding Company Level. Bank Holding Com pany reporting falls under the purview of the Federal Reserve and DOES NOT INCLUDE any breakout or reveal on precious metals derivatives holdings. Take note how – at the Holding Company Level, Morgan Stanley’s Derivatives book swells to over 51 TRILLION – vaulting them from a rather insignificant 8th place on the Commercial Bank list into 4th place on the Holding Company list below. :
TABLE 2 excerpted from: OCC Quarterly Derivatives Report Q1/11
Historically it is VERY WELL DOCUMENTED that Central Banks the world over have illustrated a large propensity to hide / veil / obfuscate all their activities relating to precious metals and specifically gold. Note the disparity between the transparency offered by the OCC with their Commercial Bank reportage versus the Holding Company data with falls under the purview of the Federal Reserve. This amounts to 80 Trillion worth of derivatives that the public knows “sweet nothing” about.
Remember folks, it was none other than former Federal Reserve Vice Chairman Alan Blinder – while appearing on the Nightly Business Report back in 1994 – issued these prescient words,
“the last duty of a central banker is to tell the public the truth”
By comparing Total Derivatives in TABLE 1 [Commercial] versus TABLE 2 [Holding Co.] we can identify that Morgan Stanley’s derivatives book stands as a 50 TRILLION BLACK HOLE where reporting of precious metals are concerned; Goldman’s 5+ TRILLION, B of A’s 20 TRILLION, J.P. Morgue’s about 1 TRILLION.
Now everyone should appreciate the fact that Morgan Stanley’s “book” grew from 42.1 Trillion at Dec. 31/10 to 51.2 Trillion at Mar. 31/11 – THAT’S an increase of 9.1 TRILLION in three months at an institution with a market capitalization of 35 billion. Even if you’re asleep and have your head buried in the sand, you’ve got to admit that 9.1 TRILLION ramp in business in 3 months for a company with a 35 billion market cap is quite a feat, eh? Remember folks, interest rate derivates – BY THEIR VERY NATURE, DO HAVE 2-WAY CREDIT / COUNTERPARTY RISK.
The feat performed by Morgan Stanley, outlined above, becomes even more unbelievable when you stop and consider that – according to the OCC – there are virtually NO DECLARED or IDENTIFIABLE END USERS [counterparties] for these products:
excerpted from: OCC Quarterly Derivatives Report Q1/11
Now we must ask who Morgan Stanley did their impressive 9.1 TRILLION trade in 3 months with? Just because they remain anonymous doesn’t mean they don’t exist – but they are certainly known to the Federal Reserve because the Fed has purview, as regulator, over Bank Holding Companies. So, by extension – the Fed is comfortable [from a credit standpoint] with “whoever it is” that Morgan Stanley is doing this mind boggling business with. What we can say about the nature of this business is this: in the absence of identifiable end users [counterparties], this trade creates artificial demand for U.S. Government bonds.
So who would Morgan Stanley [and the Fed by extension] accept as a secretive counterparty on this scale - in credit sensitive transactions that serve to create artificial demand for U.S. government securities? Embodied in the answer to this question IS THE REASON why the world’s largest bond fund – Bill Gross/ PIMCO – got it ALL [counter-intuitively] WRONG on interest rates. It also happens to be the EXACT same reason why Amaranth got it ALL [counter-intuitively] WRONG with Natural Gas back in 2006.
How many ways can you say Exchange Stabilization Fund? [edit by BB, see next post below on the ESF] It’s the Exchange Stabilization Fund acting through the New York Fed – utilizing agents J.P. Morgan, Citibank, B of A, Goldman Sachs and Morgan Stanley as proxies to implement imperialist U.S. monetary policy.
Let us forget for a moment that natural gas trades in Europe for 2 – 3 times what it trades for in North America – with the reasoning most often given by mainstream pundits that “natural gas is a local market” and let’s move on to crude oil and specifically let’s take a closer look at the price spread between North Sea [Brent] Crude @ 108.30 and West Texas Intermediate [WTI] @ 91.72:
Crude Truth
Historically and until VERY recently, WTI has traded at a premium to North Sea Brent Crude. This historic relationship has now “flipped” and grown to PERVERTED inverted-ness [today to the tune of 16.58 per barrel] and we have been fed a line by “officialdom” for the past couple of years that this is mainly due to storage constrains or “a glut of crude” centered on Cushing, Oklahoma.
Well guess what folks? The BIG LIE that the perversion of global crude oil prices were due to a “glut” at Cushing, Oklahoma were laid bare by a PANICKING U.S. administration last week when they announced that 60 million barrels of crude were to be released from the Strategic Petroleum Reserve. If there truly was a “glut” of any kind – which according to the lies told to the world by officialdom there must be with Brent trading at a 16.58 premium to WTI – there would be no release of crude from the Strategic Petroleum Reserve.
Many market pundits wrongly refer to or reference the derivatives complex as a “DEBT” that the world has been stuffed with. This is WRONG. What the derivatives complex really is – it’s a price control grid which enables its handlers to harvest the fruits of the world’s labor at arbitrary prices.
The reality – the U.S. Fed and Treasury have become increasingly desperate to make their lies about low inflation believable and provide cover for their increasing monetary debasement by attacking and rigging the most visible, go-to alternatives to failing fiat currency.
In doing so, global financial stewardship provided by America has turned our global capital markets into a sleazy GONG SHOW.
Last edited by breakfastburrito; 17th Jul 2011 at 21:46.
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THE ESF AND ITS HISTORY (Part 1-5)
Source: marketskeptics.com
Part 1
Part 2
Part 3
Part 4
Part 5
All the evidence is meticulously documented on Eric deCarbonnel's ESF page
*****What I have been afraid to blog about: THE ESF AND ITS HISTORY (Part 1-5)*****
June 3, 2011 by Eric deCarbonnel
The video series about the ESF’s history is finally finished! I especially recommend watching the first (explains the basics about the ESF), fourth, and fifth videos (Part 4 and 5 really deal with the material that I have been “afraid to blog about”.)
June 3, 2011 by Eric deCarbonnel
The video series about the ESF’s history is finally finished! I especially recommend watching the first (explains the basics about the ESF), fourth, and fifth videos (Part 4 and 5 really deal with the material that I have been “afraid to blog about”.)
Part 1
Part 2
Part 3
Part 4
Part 5
All the evidence is meticulously documented on Eric deCarbonnel's ESF page
The biggest threat to greenback hegemony took another leap forward in the past week as Iran commenced trading sweet crude oil priced in
Euros/Yuan/Rial/Roubles bit NOT in USD.
Cause for war? Of course not, but those fictitious nukes sure are. Standby for another manufactured rationale for western intervention and the subtle elevation of the SDR.
Euros/Yuan/Rial/Roubles bit NOT in USD.
Cause for war? Of course not, but those fictitious nukes sure are. Standby for another manufactured rationale for western intervention and the subtle elevation of the SDR.
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The biggest threat to greenback hegemony took another leap forward in the past week as Iran commenced trading sweet crude oil priced in
Euros/Yuan/Rial/Roubles bit NOT in USD.
Euros/Yuan/Rial/Roubles bit NOT in USD.
Oil, Currency,gold & Central banking are inextricably intertwined Gold, Oil and Money in the Free Market, with two followups, It's the Flow, Stupid & Flow Addendum.
Another interesting concept is the ‘The Central Bank of Benghazi’
War with Iran would appear to be a dead certainty
Last edited by breakfastburrito; 22nd Jul 2011 at 21:34. Reason: additional links added.
Iran Opens Oil Bourse - Harbinger of Trouble for New York and London? | Oil Price.com
Interesting article about Iran above.
Libya - nothing to do with protecting civilians and everything to do with slowing the push by oil producing nations to introduce a new global currency on their terms. Also, a money grab. Several hundred billion dollars of Libyan wealth fund "seized" by a broke west.
Interesting article about Iran above.
Libya - nothing to do with protecting civilians and everything to do with slowing the push by oil producing nations to introduce a new global currency on their terms. Also, a money grab. Several hundred billion dollars of Libyan wealth fund "seized" by a broke west.
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You guys need to take a chill pill.
Maybe Wall Street is more to your liking.
Conspiracy theorists maybe?
Maybe Wall Street is more to your liking.
Conspiracy theorists maybe?
Last edited by Normasars; 23rd Jul 2011 at 10:44.
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Perhaps Troopy we could counteract with a philosphy on Socialism. "Socialism is a philosphy of failure, the creed of ignorance and the gospel of envy. Its inherit virtue is the equal sharing of misery". Does not give us much to pick from does it?
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You guys need to take a chill pill.
Maybe Wall Street is more to your liking.
Conspiracy theorists maybe?
Maybe Wall Street is more to your liking.
Conspiracy theorists maybe?
Chill pill - Very chilled actually. No large wads of worthless bank notes sitting in my vault. When cash is dead I will be doing just fine.
Conspiracy theorist - No chance. Conspiracies like Roswell, 911 blah blah are not my poison. Conspiracies are normally either unproven, or have no proof/real evidence attached.
Was GFC 2008 a conspiracy ? Impossible.
Look at the current economic woes globally, countries are going bankrupt. By August 2 the USA will either default on its debt immediately or raise their debt ceiling which will only delay the inevitable bankrupcy by a couple of years. As was stated earlier they are raiding foreign countries and seizing billions to prop up their own problems back at home. NASA has come to a virtual stop and troops are being recalled from war. Why ? Simple, the USA cant afford it any more. THEY ARE BROKE. This is hard evidence, not a conspiracy. Read/watch the news every day. Even Obama was on the box tonight pleading with Congress to come to the table. Desperate times and desperate measures.
I still cannot believe that people have their heads in the sand and actually believe that everything is ok ?? Now that is scary.
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Bankers
most of those grubby bankers will become part of history.
Yep it's all coming to a grinding halt the FAA is being shutdown if they don't get this through congress. I certainly would not want to be be holding shares or currency if the USA defaults.
FAA shutdown would cost government $200 million a week
The government will lose about $200 million a week in airline-ticket taxes and $2.5 billion in airport-construction projects will halt if the Federal Aviation Administration is forced to shut down, Transportation Secretary Ray LaHood said Thursday.
By JOAN LOWY
The Associated Press
WASHINGTON — The government will lose about $200 million a week in airline-ticket taxes and $2.5 billion in airport-construction projects will halt if the Federal Aviation Administration (FAA) is forced to shut down, Transportation Secretary Ray LaHood said Thursday.
A partial shutdown looks increasingly likely because Congress hasn't been able to come to an agreement on legislation to extend the FAA's operating authority, which expires at midnight Friday.
The main obstacle is a provision sought by House Republicans and the airline industry that would make it more difficult for airline and railroad workers to unionize. The provision was added to a long-term FAA funding bill this year, but negotiations on that bill have stalled. Without long-term legislation, an extension bill is necessary to keep the agency operating.
If FAA authority were to expire, airlines would no longer have authority to collect federal ticket taxes. About 4,000 FAA workers whose jobs are funded with ticket-tax revenues will also be furloughed, LaHood said at a news conference.
Air traffic controllers, however, would remain on the job and safety would be maintained, he said. Overall, the FAA has more than 47,000 workers.
"This is no way to run the best aviation system in the world," LaHood said. "Congress needs to do its work."
He declined to answer questions about the possible consequences of a prolonged shutdown. But Sen. Jay Rockefeller, D-W.Va., chairman of the Senate committee that oversees the FAA, said the agency "estimates that it could only operate air traffic and support services through mid-August."
The situation could be a financial boon for airline passengers. Barring an agreement, the taxes will disappear from airline and ticket-selling websites at midnight Friday.
The federal tax on a $300 round-trip airfare is about $61, according to the Air Transport Association. Airlines would still collect airport fees.
"The airlines have been alerted to the potential to need to make this change, and are working on it," Jean Medina, a spokeswoman for the association, said in an email.
Long-term authority for the FAA expired in 2007. Unable to agree on long-term funding legislation for the agency, Congress has kept the FAA operating through a series of 20 short-term extension bills.
Previous extensions have been routine. But this time House Republicans added a provision to what would be the 21st extension bill that eliminates government subsidies for airline service to 13 rural communities. Senate Democrats say the provision, which would save about $16 million, is unacceptable.
The government will lose about $200 million a week in airline-ticket taxes and $2.5 billion in airport-construction projects will halt if the Federal Aviation Administration is forced to shut down, Transportation Secretary Ray LaHood said Thursday.
By JOAN LOWY
The Associated Press
WASHINGTON — The government will lose about $200 million a week in airline-ticket taxes and $2.5 billion in airport-construction projects will halt if the Federal Aviation Administration (FAA) is forced to shut down, Transportation Secretary Ray LaHood said Thursday.
A partial shutdown looks increasingly likely because Congress hasn't been able to come to an agreement on legislation to extend the FAA's operating authority, which expires at midnight Friday.
The main obstacle is a provision sought by House Republicans and the airline industry that would make it more difficult for airline and railroad workers to unionize. The provision was added to a long-term FAA funding bill this year, but negotiations on that bill have stalled. Without long-term legislation, an extension bill is necessary to keep the agency operating.
If FAA authority were to expire, airlines would no longer have authority to collect federal ticket taxes. About 4,000 FAA workers whose jobs are funded with ticket-tax revenues will also be furloughed, LaHood said at a news conference.
Air traffic controllers, however, would remain on the job and safety would be maintained, he said. Overall, the FAA has more than 47,000 workers.
"This is no way to run the best aviation system in the world," LaHood said. "Congress needs to do its work."
He declined to answer questions about the possible consequences of a prolonged shutdown. But Sen. Jay Rockefeller, D-W.Va., chairman of the Senate committee that oversees the FAA, said the agency "estimates that it could only operate air traffic and support services through mid-August."
The situation could be a financial boon for airline passengers. Barring an agreement, the taxes will disappear from airline and ticket-selling websites at midnight Friday.
The federal tax on a $300 round-trip airfare is about $61, according to the Air Transport Association. Airlines would still collect airport fees.
"The airlines have been alerted to the potential to need to make this change, and are working on it," Jean Medina, a spokeswoman for the association, said in an email.
Long-term authority for the FAA expired in 2007. Unable to agree on long-term funding legislation for the agency, Congress has kept the FAA operating through a series of 20 short-term extension bills.
Previous extensions have been routine. But this time House Republicans added a provision to what would be the 21st extension bill that eliminates government subsidies for airline service to 13 rural communities. Senate Democrats say the provision, which would save about $16 million, is unacceptable.
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Excellent thread.
A year or two back, mentioning this would have raised the term "conspiracy nut", but alas, economic pain has opened up peoples eyes to the baseless and corrupt Fiat paradigm.
In fact, three things rule the world: G.O.D: Gold, Oil, Drugs.
All controlled by governments / Banks for the most part.
A year or two back, mentioning this would have raised the term "conspiracy nut", but alas, economic pain has opened up peoples eyes to the baseless and corrupt Fiat paradigm.
In fact, three things rule the world: G.O.D: Gold, Oil, Drugs.
All controlled by governments / Banks for the most part.
