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Can Oil and Water Mix?

Oil drilling in some parts of Texas is replacing ranching, as ranchers, farmers,  city and industrial water users vie with a growing oil shale fracking  industry for access to water, an increasingly scare resource.  One rancher compared the economic value of water used for irrigation with the same amount used for shale ‘fracking’ – a relatively new process the flushes high-pressured water deep within the earth to  unleash oil and natural gas found (and stuck!) in underground rock formations.

…it takes 407 million gallons to irrigate 640 acres and grow about $200,000 worth of corn on the arid land. The same amount of water, he says, could be used to frack enough wells to generate $2.5 billion worth of oil. “No water, no frack, no wealth,” says Mr. Brownlow, who has leased his cattle ranch for oil exploration.

It took only three years for one oil field to support 12,000 jobs and account for 6% of South Texas economic output.  Those are a lot of jobs, and in fact, are a big component of Governor Perry’s claim to have created one million jobs during his administration.

Texas and other states are experiencing mini-oil booms.  Once considered much too expensive to support a commercial extraction industry, with oil hovering between $80-100, fracking has become economically feasible.  In fact, experts predict there is enough oil to be ‘fracked’ to help reduce US dependence on outside sources.

I worked on water issues and water rights in California during most of the ’90s when the water wars between farmers and cities were waging.   The dynamics prevailed:  farmers selling water rights to supply growing cities and water tables that needed to be replenished.  New technologies to recyle and reuse water abounded.

It seems the shale extraction industry is already working on ways to recycle the water it uses or to use non-potable and highly saline water for their processes.

The oil industry has long believed that its thirst for water could cause problems. The American Petroleum Institute, a Washington-based industry trade association, warned against using fresh water for fracking in its 2010 best-practices advice. In an email, the institute said the industry should consider nonpotable water “whenever practicable,” but decisions must be made on a “case-by-case basis.”

Some companies are taking steps to use less potable water. Corp. says it is exploring whether it could extract water from a deep, salty aquifer unfit for people or crops. Corp. has begun recycling a small percentage of the water it uses for fracking

The key problem will be who doesn’t get the water that the shale industry uses.  People all over Texas, including farmers and ranchers, are selling rights to the minerals underneath their property to shale companies.  My cousins in Forte Worth sold the rights to minerals under their suburban home two years ago.

While it looks attractive to farm the upper layers of soil and ‘moonlight’ by selling mineral rights, that does not always solve the problem.  Some farmers sell their land for water wells to feed the fracking as well.   Some accuse the oil industry of poaching off municipal water aquifers and drawing down water tables throughout a watershed area.

Ranchers and the oil industry fought fiercely in the original oil boom.  That was mainly on how to use the land.  Those fights were popularized with “Dallas”, “Giant” and other era classics.

But the competition for water usage may become an even larger conflict with shale fracking than the proliferation of oil rigs on former ranch land was in the ’40s and 50s.

So far, however, it seems that nobody wants the fracking industry to leave Texas.  All seem to want to figure out how to use water efficiently and with the least harm to the key water resources themselves.

(Much of this information is from the , which charges for access.)

 

 

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Payroll Tax Cut vs. Small Business?

Supporting the payroll tax cut should be a no-brainer even for the most ideologically tilted GOP members.  But conservatives are complaining it will hurt small business.  Most politicians, from both parties, consider any legislation that hurts small business to be toxic.  Small business is as American as apple pie and motherhood.  Rightfully so.  Small business creates jobs; small business owners take huge risks and work hard to make their companies successful.

has an analysis that says most, except a tiny minority of small businesses will benefit not be hurt by President Obama’s proposal:

that a to extend and expand the payroll tax cut and pay for it through a surtax on incomes over $1 million would hurt small businesses and thus weaken job growth.

This claim overlooks the benefit of the payroll tax cut not only for working families but for small businesses as well.  It also greatly overstates the impact that the millionaire surtax would have on a relatively tiny number of small businesses.

The bill’s payroll tax cut would not only boost workers’ paychecks by hundreds of dollars or more in 2012 but also cut the taxes of every small business.  Employers would receive a tax holiday on fully half of their 2012 Social Security taxes on the first $5 million in payroll.  If employers create jobs, they would pay no Social Security taxes on the first $50 million in increased taxable payroll.

The millionaire surtax, in contrast, wouldn’t take effect until 2013 and would hit only a tiny fraction of small businesses.

With unemployment finally dropping, now is the time to rally around Obama’s job proposals.  Expect partisanship to intensify in relation to the economy picking up.  The Republicans are counting on the bad economy the justify their ‘refusnik’ strategy of the last three years by defeating the President in 2012.

 

 

 

 

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Jobless Rate Drops to 8.6%

The US economy added 120,000 jobs in November, as more jobs were filled in September and October than previously reported.  According to :

The reduction in the jobless rate, which stood at 9.0% in October, stemmed in large part from a decline in the size of the labor force. Some 315,000 people stopped looking for jobs last month, which is usually not a good sign.

Yet the decline in the labor force is belied by other evidence showing that companies continue to add workers at a modest pace. The increase in hiring in November was accompanied by revisions in the October and September data that show an additional 72,000 jobs were created.

What’s more, the labor force had increased by nearly 1 million people in the three months before November, suggesting that more jobs are available. People tend to reenter the labor force when they think they have a better chance of finding a job.

 

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Why Wall Street ‘Gets Away with Murder’

A against Citigroup:

Securities law experts say there are ways that the S.E.C. might be able to strengthen its enforcement efforts and make Wall Street fearful of penalties that sting. Jill Gross, a law professor and director of the Investor Rights Clinic at Pace University, said that as a result of the judge’s decision, companies were now likely to have to admit some kind of fault in their settlements.

“It doesn’t need to be a full admission of all culpability,” Ms. Gross said, “but they are going to need some type of admission that something went awry.”

Goldman Sachs did so last year when it settled S.E.C. charges similar to the case against Citigroup that Judge Rakoff rejected. Both firms were charged with selling a mortgage bond investment without telling investors that the people assembling the portfolio were betting that it would drop in value.

In its S.E.C. settlement, Goldman acknowledged that its marketing materials “contained incomplete information,” and that it committed “a mistake” in leaving the full disclosures out of its marketing documents.

I don’t know what the New York Times meant to say in this piece but it only underscored that, while bankers are complaining about the burden of anti-business regulation, the S.E.C. enforcement regime is actually a farce. Not that the two aren’t related.  If the S.E.C. legal and enforcement regime had teeth, lawmakers would not have to keep making new laws to hide the fact the first ones didn’t work and CEOs could play golf instead of complain

What is the difference between Citigroup giving no examples of what it did that brought about the settlement and Goldman Sachs offering excuses like its materials ‘contained incomplete information’ or we made a ‘mistake’ not giving full disclosure in marketing documents.

Neither company made a ‘mistake.’ They knew what they were doing.  Goldman and otherinvestment houses had clients who wanted to ‘short’ (sell the home mortgage securities market by betting that it would collapse.  So they got busy putting together some of the worst mortgages they found and selling them ‘long’ to other investors betting that the market would go up.  Goldman had clients betting against each other and not knowing it.

In Las Vegas, this would be called a rigged game.  It is illegal.  The action go farther than making mistakes in marketing materials or even in tiny prospectus print.  Transparency and disclosure are touted are guards against fraud and phony schemes like this.  The errors here were only a symptom of a much larger transgression.  Not only should Goldman be punished for disclosure errors, it should be openly found guilty of violating security laws.

People all over the country are asking why Wall Street officials haven’t been charged indicted like bankers were in the late 1980s S&L scandal.  The derivative market has functioned on private contracts between firms and individuals.  Wall Street believes the investors who buy these products are savvy and wealthy enough to handle negative consequences.  However, this time the consequences went far beyond a clubby group of financiers on Wall Street, bringing down the global financial system, robbing retirement funds of years of returns, aggravating unemployment and diverting financing from innovation, entrepreneurs and small business.

Goldman can’t seriously believe Americans will believe that the company’s near collapse resulted from a few ‘marketing errors’?

Then again, the Republican Party has diligently hyped up a strange meme saying liberal politics are worse for Wall Street than bankers lying.

 

 

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Judge Overturns S.E.C. Deal

He should be. We all should be. On Monday, the Federal District Court judge rightly by the Securities and Exchange Commission to settle a securities fraud case against Citigroup, saying that was “neither fair, nor reasonable, nor adequate, nor in the public interest.”It’s not only that the money was not enough, though it certainly seems puny compared with the damage done. The S.E.C. charged that Citigroup had not adequately disclosed to investors its role and interest in creating and selling — and betting against — a mortgage-backed investment that was intended to fail. When the investment did, indeed, tank, the bank made $160 million, according to the S.E.C., while investors lost $700 million. – New York Times

The Judge found that the deal did not properly disclose what Citigroup did.  The SEC routinely allows banks and other financial institutions to pay a fine while admitting no wrong-doing.  And the puny fine of $250 million is a drop in the bucket for Citigroup, certainly far below the punishment needed to keep them from withholding information from investors again.

Banks mostly fear consumer/investor lawsuits

For too long the SEC has said it does not have the money or staff to go forward with trials involving complicated financial dealings, especially since the financial institutions being sued have big pockets that can hire a phalanx of lawyers.

This is the problem with the government and Congress.  Congress could either allocate more money to these cases or allow Federal prosecutors to ‘hire’ big law firms on a contingency basis.  Or the SEC could detail their investigations to meet Judge Rakoff’s standards (at least).

The SEC isn’t going to take the chance.  A ruling that finds Citigroup engaged in fraud would be a savior for investors who lost money on a deal full of secret agreements and want to sue Citibank themselves.

Obviously, a negative SEC finding could cause a run on Citibank’s money or incur so many liabilities that the company falls into bankruptcy. The financial institutions have effectively neutered regulation that is supposed to prevent malpractice and fraud in the financial sector.

Or maybe it’s another example of Citigroup being ‘to big to fail’.  If so, it is too big to be in business.

 

 

 

 

 

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Think Budget Will Get Resolved: Think Again

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Europe Stunned as Greece Calls For Referendum

UPDATE:  Amid charges from the political opposition of being a liar and blackmailer, PM Popandreou called off the Greek referendum on the EU bail out of Greece.  The Free Democracy Party leader Antonis Samaras backed the plan.  Although he denied an interest, observers say Popandreou may try to establish a unity governmment if he passes a ‘no confidence’ vote in Parliament Friday.

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Financial markets and those who run them are on fire today regarding Greek PM Popandreou’s decision to hold a referendum on whether Greece should accept Europe’s bail-out proposal, including dramatic austerity measures.

The call for a referendum, particularly if presented as a question of euro or no euro, is a risky bet. Should the referendum fail, Greece would come unmoored from the euro zone and likely default on its €350 billion ($480 billion) of debt—sending a giant shock wave that could test the resilience of other weakened euro-zone countries. But should it succeed, the Greek government would have a strong mandate to push through austerity measures and proceed with the European Union’s plan.  – Wall Street Journal

Greek citizens have been demonstrating and rioting against the EU austerity plan of spending cuts and tax increases.  The crisis could reach a new level if the PM loses a vote of confidence Friday and has to dissolve his government.

Analysts say the referendum idea was a Hail Mary pass by the increasingly isolated premier, aimed at gaining a popular mandate for his overhauls of the Greek state and economy and putting opponents on the spot.

Meanwhile, Germany, providing the lion’s share of bail-out funds,  refuses to put any more money into the pot for Greece and wants to see the political crisis is under control before the next quarterly payment to Greece from the European Financial Stabilization Facility.

Money is being supplied by the EU and the IMF under a €110 billion program agreed to last year. That aid is distributed in quarterly tranches, and the next tranche was expected to be paid imminently. But that was before the referendum call, and it is now clear that aid is contingent on resolving the political crisis.

Failure to make the next aid payment, valued at some €8 billion, would likely mean the country running out of money in December, officials said, potentially causing an unplanned default on bonds that come due that month.

A spokesman for the German Finance Ministry said Greece doesn’t need urgent bailout payments now and won’t require the next chunk of aid until mid-December.

Well, at least this is a better way for Europe to solve its problems than WW1 or WW2.

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ATMS Were Installed To Save $ on Tellers!

Guess why ATMs were invented in the first place?  No, they were not developed so consumers could get to their money more easily, although that was a side benefit.  ATMs were heralded as a brilliant cost-saving feature of late 20th century banking.   ATMs’ magic was to do the jobs of tens of thousands of tellers, who were laid-off when ATMs took over and saving banks hundreds of millions of dollars in labor costs.

That is why Bank of America’s attempts to charge customers for using ATMs is so infuriating.  First, customers were pushed to use ATMs as much as possible to replace trips to the bank teller.  Then, after ATMs saved billions of dollars for the banks, banks turn around and want to impose a charge on consumers for relying on the ATMs that the banks, not too long ago, begged their customers to use.

The same productivity vs. job Catch-22 happens everyday as service industries bring automatic technologies into their fields.  Those self-check outs at Home Depot and other stores eliminate cashiers.  Movie theaters encourage customers to purchase tickets on-line or at DIY kiosks in their lobbies.   Those truly obnoxious pay machines at garages allows them to handle the same number of cars with fewer workers. (BTW, do they care about long-lines and broken machines that often greet customers?)

It goes on and on.  That’s one of the structural pillars of job loss in American and discrepancies between job openings and workers’ skills to fill them.

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