Goldman Sachs and the Financial “Factory Bank”

As banking continues to financialize the economies of the world, we will see more and more evidence of how the power that financializtion brings will be revealed; for example, when finance becomes the major player in the economy, then everything has a “bottom line” and profits will be the key motivation and all other economic activity, especially public activity,  will take second place.

When we know the rules of finance (Profit at all Cost), then we can better understand why other things, like public art become less important.  Agriculture and manufacturing become secondary also.  All Value is reduced “either into a financial instrument or a derivative of a financial instrument.”

“Workers, through a financial instrument such as a mortgage, could trade their promise of future work/wages for a home. Financialization of risk-sharing makes all insurance possible, the financialization of the U.S. Government‘s promises (bonds) makes all deficit spending possible. Financialization also makes economic rents possible.”  (Wikipedia). . . .

Michael Hudson described financialization as “a lapse back into the pre-industrial usury and rent economy of European feudalism” in a 2003 interview:[3]

“only debts grew exponentially, year after year, and they do so inexorably, even when–indeed, especially when–the economy slows down and its companies and people fall below break-even levels. As their debts grow, they siphon off the economic surplus for debt service (…) The problem is that the financial sector’s receipts are not turned into fixed capital formation to increase output. They build up increasingly on the opposite side of the balance sheet, as new loans, that is, debts and new claims on society’s output and income.

[Companies] are not able to invest in new physical capital equipment or buildings because they are obliged to use their operating revenue to pay their bankers and bondholders, as well as junk-bond holders. This is what I mean when I say that the economy is becoming financialized. Its aim is not to provide tangible capital formation or rising living standards, but to generate interest, financial fees for underwriting mergers and acquisitions, and capital gains that accrue mainly to insiders, headed by upper management and large financial institutions. The upshot is that the traditional business cycle has been overshadowed by a secular increase in debt. Instead of labor earning more, hourly earnings have declined in real terms. There has been a drop in net disposable income after paying taxes and withholding “forced saving” for social Security and medical insurance, pension-fund contributions and–most serious of all–debt service on credit cards, bank loans, mortgage loans, student loans, auto loans, home insurance premiums, life insurance, private medical insurance and other FIRE-sector charges. … This diverts spending away from goods and services. (Wikipedia)

We can see the effects that financialiation has on citizens as unemployent increases, wages and salaries decrease or stagnate and, finally, the rise of things like “factory banking” which is described below.  There will be more financial crises and disasters to come.

via Goldman Sachs: Information, Comments, Opinions and Facts.

via Goldman Sachs: Information, Comments, Opinions and Facts.

Families told to wait up to 10 months for welfare payment

FATHER-OF-THREE Stephen Kinsella spent two years out of work until he finally secured a job (on a three-month rolling contract) at a local factory in May 2012.

It was happy news, especially as his wife Mary was expecting their fourth child. However, the Carlow resident would still have money worries, despite the weekly income. As a result, he discovered that he is entitled to the Family Income Supplement and applied for the payment in June this year.

At the time of application he was told it would take up to 20 weeks for a decision to be reached.

This week, the Department of Social Protection said it would be March 2013 before the application is processed.

“I was hoping to have this extra financial aid in place by now so instead of being rewarded for working, my family and I are being punished,” he told TheJournal.ie. “I imagine lots of other families or single parents are in the same boat.”

They are.

The department confirmed that at the end of last month there were 15,131 applications awaiting decisions. This included 7,267 new FIS applications and 7,864 renewals.

The delay has been caused by the continued strong claim intake, according to a spokesperson.

A programme to try and eliminate the backlog has been devised, including the outsourcing of work to a Letterkenny office. It will also see the newest applications processed first.

A statement from the department outlined the procedure, which began on 5 November:

The first steps taken to permanently eliminate future backlogs in FIS are to put in place sufficient capacity and suitable structures and processes to deal with the weekly intake of work. The programme sees the normal weekly new claim and renewal intake processed without delay while the backlog is ring-fenced and a focused team assigned to this work with a clear plan for its elimination.

“A separate team including additional temporary resources has been identified and is already assigned and working on the backlog of claims. The Department is fully focussed on the elimination of the backlog of claims in the shortest possible timeframe, concentrating in the first instance on those claims which were previously in payment but where payment has expired.”

It is expected that the backlog will be fully eliminated by April 2013. Claims which are eventually approved will be backdated to the date of the application or the date of expiry of the previous claim. The department has issued assurances that all arrears due will be paid.

Families with low incomes are eligible for FIS if there are dependent children living in the household. The payment varies depending on salary and family size.

‘Not good enough’

TD for Roscommon and South Leitrim, Denis Naughten says the long waiting time being forced on low-income working families is “not good enough”.

“In the last 10 days I have been inundated with complaints from struggling families throughout the country who are relying on the approval of their social welfare top-up payment to meet Christmas bills,” he said.

He cited another family who had applied on 15 July for the payment. They will also have to wait until April 2013, he told TheJournal.ie.

Naughten believes this could force families into borrowing money they cannot afford.

“The Family Income Supplement is effectively a top up payment designed to assist families in getting off the dole by taking up low income work…[the delay] will have an enormous impact on the families involved…it also represents a significant failing on the part of the government when looked at in terms of their policies towards low and middle income households.

On one hand the Government say they are encouraging those on the dole to find work, but when they do, they are faced with this bureaucratic barrier of the Government’s own making.

“The fact of the matter is these delays are leaving vulnerable working families under increasing financial pressure and facing an uncertain future. The families affected are not asking for special treatment or extra protection, instead they have shown huge dedication by enter the workforce at this time only to be let down by the Departmental bureaucracy.”

Kinsella echoed this sentiment. “What I find hard to believe is a man in my situation is better off on the dole but I am happy to work. Another ironic thing is if my contract is not renewed in the new year, I may be unemployed again when this application gets sorted.”

Deputy Naughten also passed on details of another father affected by the delays. Here is his letter in full:

I am writing to you in desperation. I am a 54-year-old public servant with a wife and six children. As the sole earner in my household I have a weekly income of €538. As such, I am entitled to claim FIS to top up my income. I received my last FIS payment on 20 September: eight weeks ago. It is currently under annual review.

Whilst waiting for a decision I have received some support from the Community Welfare Officer but still am short €150 a week.

As it was, at the end of each month, I literally had nothing left – but at least I could manage. Last week, I exceeded my overdraft limit with my bank by €48. Little did I realise that €48 was the price of my independence and dignity. At 54 years of age I have had to turn to a relative for €48 to put my account back under its limit and to a friend for €10 to put diesel in my car so I can get home from work this evening.

I drive 32 miles to work and will have to ask someone else to loan me diesel money to come to work tomorrow and Wednesday which at least is pay day, but as I have already overdrawn half of my fortnightly wages I do not know how I can keep going into the future.

I have just contacted the Department of Social Protection’s FIS section and been informed that the backlog in processing renewal claims means that my claim will not be dealt with before the end of December! This situation occurs every year in relation to FIS but this year’s delay is the longest yet. In the past I have been able to manage and simply go without but never to the point where I could not put fuel in my car and go to work.

I have never had to ask anyone for help in my life, and whilst I appreciate that the waiting list is the same for everyone, €48 it seems is the cost of my pride and I am therefore asking you, is there anything you can do to help me in this matter?

FIS can be claimed if weekly income is less than €506 per week for families with one child. The limit increases for each extra child.

via Families told to wait up to 10 months for welfare payment.

via Families told to wait up to 10 months for welfare payment.

VHI prices to increase next month –

VHI HEALTHCARE is increasing its prices by up to 3 per cent next month, the fourth price rise in two years.

The increase will add about €100 a year to the cost of health insurance for the average family.

The company said yesterday it was putting up its prices because it needed to price policies “in order to ensure that we can continue to cover the healthcare needs of our customers”.

It blamed the latest price rise on the fact that people were living longer with long-term illnesses. This was contributing to increased demand and use of health services, a spokesman said.

The cost of claims for private hospitals has gone down but public hospital costs continue to rise, according to the insurer.

The increase will take effect from November 22nd. With 57 per cent of the market, VHI is the largest health insurer and has 1.3 million customers.

Last March it increased prices by between 6 per cent and 12.5 per cent, on top of a 1.9 per cent rise last November.

Other insurers have also increased their prices this year. Aviva premiums went up by up to 7 per cent for policy renewals from last week, the fifth increase in less than two years. Laya Healthcare, formerly Quinn Healthcare, has had two price rises this year.

The insurance companies met Department of Health officials last Friday over the department’s plans to modify risk equalisation rules to make insurance more expensive for treatment in private hospitals.

via VHI prices to increase next month – The Irish Times – Mon, Oct 22, 2012.

via VHI prices to increase next month – The Irish Times – Mon, Oct 22, 2012.

Irish Life posts €96m in first half profits, ‘wrong’ time to sell company – Irish, Business – Independent.ie

RISH Life Assurance, the state-owned life assurer, said it is the wrong time to sell the company.

The insurer said today that “market conditions are not current conducive for a sale” but added that its priority is to return to private ownership and repay the state’s investment.

Irish Life is the largest private payer of pensions in the country with a market share of 29pc of the life and pensions market and more than 1m customers.

The company annouced today that pre-tax profits increased six-fold to €96m last year under International Financial Reporting Standards. The group’s embedded value, an estimate of a life assurer’s worth based on future profits of existing policyholders, was €1.8bn at the end of June.

Kevin Murphy, Irish Life chief executive officer, said the assurer is “very conscious” of its taxpayer support “and we are determined to ensure that this can be repaid fully as soon as practicable,” he said. He added that the Irish life and pensions market is likely to remain tough for a number of years.

– Thomas Molloy

via Irish Life posts €96m in first half profits, ‘wrong’ time to sell company – Irish, Business – Independent.ie.

via Irish Life posts €96m in first half profits, ‘wrong’ time to sell company – Irish, Business – Independent.ie.

State will face €324bn shortfall over pensions – The Irish Times – Wed, Sep 12, 2012

THE GAP between the State’s future pension and social welfare liabilities and revenues to fund them stands at €324 billion, according to an unpublished report commissioned by the Government, which has been seen by The Irish Times. That figure is almost twice the size of the national debt as it currently stands.

The review of the Social Insurance Fund – the pot into which about €8 billion in pay-related social insurance contributions (PRSI) go to fund a range of benefits – was commissioned by the Department of Social Protection. Last year the fund’s annual shortfall stood at €1.5 billion, or 1.1 per cent of gross national product.

via State will face €324bn shortfall over pensions – The Irish Times – Wed, Sep 12, 2012.

via State will face €324bn shortfall over pensions – The Irish Times – Wed, Sep 12, 2012.