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Shades of 1979 as another 'School Finance Authority' play begins?... Moody's drops Chicago's credit rating to 'junk', claiming it's the pensions' fault....

Challenging Chicago Mayor Rahm Emanuel's claim that he was the leader best qualified to deal with the city's financial affairs, Moody's Investors Services, one of three rating agencies, downgraded the bond rating of the City of Chicago to "junk." Like previous actions by the debt rating agencies, especially those that helped fuel the 2008 financial crisis, Moody's announcement was as political as it was based on some kind of objective analysis, despite pretenses. Ironically, Emanuel put it as clearly as anyone: This action by Moody's is not only premature, but it is irresponsible to play politics with Chicago's financial future by pushing the city to increase taxes on residents without reform, Emanuel told the press.

Both Illinois Governor Bruce Rauner and Chicago Mayor Rahm Emanuel have claimed that raising taxes to pay for needed public services is out of the question -- and that only austerity and cuts should be considered. The City of Chicago's debt rating is separate from the Chicago Board of Education's, but the two are clearly related. And the corporate press quickly blamed the escalation of the "crisis" on the May 8 decision of the Illinois Supreme Court upholding the right of public workers (including this reporter) to their pensions.

The Moody's decision also flies in the face of the overwhelming desire by lenders to loan money to the Chicago Board of Education, which sold bonds in April. Board of Education Chief Financial Officer Ginger Ostro told the April Board meeting that there had been plenty of bidders for the Board's bonds.

But for all the irresponsible talk by some Republicans and Governor Bruce Rauner that "bankruptcy" should be considered, there are other pushes which may be in line. For this reporter, who had been working at Chicago Public Schools when the ruling class forced the "School Finance Authority" on the city's public schools. The story of the SFA, which will be reported here as an accurate history (as opposed to the official version put out since 1980) in the weeks ahead. A major debate over the situation continues, with the Chicago Teachers Union noting again that the crisis has been imposed on the state, city, and schools by the policies of the ruling class.

CRAIN'S CHICAGO BUSINESS REPORT ON MAY 12, 2015...

May 12, 2015, Moody's cuts Chicago's credit rating to junk, By GREG HINZ and THOMAS A. CORFMAN SHARE

Chicago today became the first victim of the Illinois Supreme Court's ruling on pensions, as Moody's Investors Service reduced the city's credit rating to junk bond status.

In a statement that specifically cited the court's May 8 decision overturning cuts in state pensions, the credit rating agency said the city's options now have narrowed considerably.

The downgrade is a blow to Mayor Rahm Emanuel, who during the mayoral election stressed his expertise to deal with the city's financial challenges. Emanuel labeled Moody's decision irresponsible, but did not deny its impact.

The downgrade is also a major blow to taxpayers because the city's cost of borrowing will rise, perhaps a lot, even if other bond ratings agencies do not follow Moody's lead.

If Fitch Ratings and Standard & Poor's Financial Services follow suit, the city's financial position could spiral downward potentially forcing the city to come up with as much as $500 million quickly.

A couple of weeks ago, the Emanuel administration announced plans to unwind the city's financial swaps agreementshedges against interest rate changes and convert variable-rate debt to fixed rates. But only about half of the transactions required to meet that goal have been completed, city financial officials said.

'SIGNIFICANT STRAIN'

City officials say they still expect to complete those transactions. "The markets are still open to us," one official said.

But if they can't, and further downgrades prompt financial institutions to demand their money immediately, the city would have to pay $100 million in fees to terminate the swaps agreements and another $400 million to repay variable rate debt.

Neither Fitch nor S&P has advised the Emanuel administration of any pending action, though both agencies have the city on negative outlook a sign that a downgrade is likely.

Chicago is the only major city to carry a junk bond rating from Moody's, according to a report by Bond Buyer, which covers the municipal finance market.

Pittsburgh fell to junk bond status in 2004. Other cities have fallen below investment grade after defaults, such as Cleveland in 1978 and New York City in 1975, Bond Buyer said.

Moody's downgrade comes even before a ruling by Cook County Circuit Court judge in a case challenging a separate state law overhauling two city pension funds that was passed in 2013.

Whether or not the current statutes that govern Chicago's pension plans stand, we expect the costs of servicing Chicago's unfunded liabilities will grow, placing significant strain on the city's financial operations absent commensurate growth in revenue and/or reductions in other expenditures, the Moody's report says.

The magnitude of the budget adjustments that will be required of the city are significant, Moody's added. "Furthermore, Chicago's tax base is highly leveraged by the debt and unfunded pension obligations of the city, as well as those of overlapping governments.

PLAYING POLITICS

In a statement, Emanuel said, This action by Moody's is not only premature, but it is irresponsible to play politics with Chicago's financial future by pushing the city to increase taxes on residents without reform.

Moody's credit score for Chicago is lower than the grade given by the other major ratings agencies, Emanuel noted. Moreover, Moody's did not downgrade the rating on the state of Illinois even though the Supreme Court decision only directly applied to state retirement systems.

Moody's cut Chicago's rating two notches, to Ba1 from Baa2. The downgrade applies to $8.91 billion in city debt, including $8.1 billion in general obligation bonds. Chicago was planning to issue bonds as soon as next week, according to Bloomberg. Moody's action is likely to increase the interest rate the city would pay, assuming the bond issue goes ahead.

But Moody's action on Chicago's credit rating likely means a downgrade for Chicago Public Schools.



Comments:

May 13, 2015 at 6:11 PM

By: Rod Estvan

CPS bond rating in now at junk bond levels

Moodys issued a downgrade of the Chicago Board of Education a short while ago, it has downgraded it to Ba3 from Baa3 for all $6.2 billion of outstanding general obligation (GO) debt.

Things will be happening fast now, and they won't be good things either. The train has left the station.

Rod Estvan

May 13, 2015 at 8:21 PM

By: John Kugler

Moody's is a Crook

all these ratings, credit and other ruling class scams are just that scams and shams. Moody's is a crook organization that helps manipulate markets, governments and equity to the advantage of the ruling class. Remember Lehman Bros, Arthur Anderson and Enron.

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Justice Department Investigating Moodys Investors Service

Probe Looking Into Favorable Ratings on Mortgage Bonds Before the Financial Crisis

By TIMOTHY W. MARTIN

Updated Feb. 1, 2015 8:37 p.m. ET

With its case against Standard & Poors Ratings Services nearing the finish, the Justice Department has turned its attention to another credit-rating firm under fire for issuing rosy grades on mortgage deals in the buildup to the financial crisis.

Justice Department officials in recent months have quietly met with multiple former executives of Moodys Investors Service to discuss ratings of complex securities before the crisis, according to people familiar with the situation.

The Justice Department lawyers probing Moodys are still in the early stages of their investigation, according to people familiar with the matter. It isnt yet clear whether it will result in a lawsuit, the people said.

A Moodys spokesman declined to comment.

In the recent wave of meetings, Justice Department officials, citing internal company emails, have pressed former Moodys executives on whether the firm compromised standards to win business, according to people familiar with the matter. The main focus, as with the S&P case, has been on residential-mortgage deals from around 2004 to 2007, the people said.

Moodys, a division of Moodys Corp., and S&P, a unit of McGraw Hill Financial Inc., gave triple-A ratings to those mortgage deals, making it possible for even conservative investors to buy securities backed by subprime loans that later turned out to be risky. When the housing market collapsed, losses on those bonds spread everywhere and deepened the crisis, costing investors billions of dollars.

The Justice Department began looking into Moodys as far back as 2010, the people said. But government lawyers held off on a Moodys case as they pursued a lawsuit against S&P that eventually was filed in February 2013.

continued................

http://www.wsj.com/articles/justice-department-investigating-moodys-investors-service-1422822296

May 14, 2015 at 12:03 PM

By: Rod Estvan

Re: Dr Kugler

I find it interesting that when Moody's is being investigated for lack of due diligence in relationship to Mortgage bonds and then they lower the ratings of shakey CPS bonds they are criticized for being crooks. Maybe the CPS bond rating should have been at junk levels years ago due to the lack of revenue the district is recieving?

The up side of this is the CTPF will now be prohibited by rule from investing in CPS bond because they are no longer investment grade.

Rod Estvan

May 14, 2015 at 8:30 PM

By: John Kugler

Flimflam Con-Artists

Seems absolutely outrageous that CPS vendor spending has increased by $1 trillion (with a "T") dollars and now we are bankrupt and have a junk status credit rating. When teachers "fail" we are fired. Yet in our society when politicians and big business bankrupt our governments they go free. Even crazier yet, in Chicago they get re-elected and corruption is validated.

The ratings agencies are known to manipulate markets and businesses for the self-interest of the ruling class. The financial meltdown of 2008 is direct evidence of the collusion of credit agencies and the manipulation of ratings and equity available to small businesses and individuals. Imagine now for almost ten years the interest rates for borrowing money by the biggest banks and funds has been zero, but the interest rates for individuals. Small businesses and students has gone up by leaps and bounds.

As a point of personal privilege, I do not criticize, I tell facts from my observations on how the economy is manipulated to justify the privatization of public assets and pass legislation that is friendly to corporations and big business.

These actions are not accidents. Read the Senate Report on the 2008 financial collapse.

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The U.S. Senate's LevinCoburn Report concluded that the crisis was the result of "high risk, complex financial products; undisclosed conflicts of interest; the failure of regulators, the credit rating agencies, and the market itself to rein in the excesses of Wall Street."

"Senate Financial Crisis Report, 2011" (PDF). Retrieved April 22, 2011.

http://hsgac.senate.gov/public/_files/Financial_Crisis/FinancialCrisisReport.pdf

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The financial crisis was triggered by a complex interplay of policies that encouraged home ownership, providing easier access to loans for (lending) borrowers, overvaluation of bundled subprime mortgages based on the theory that housing prices would continue to escalate, questionable trading practices on behalf of both buyers and sellers, compensation structures that prioritize short-term deal flow over long-term value creation, and a lack of adequate capital holdings from banks and insurance companies to back the financial commitments they were making.

"Money, Power and Wall Street, Part 1". PBS. Retrieved August 4, 2012.

Michael Simkovic, "Secret Liens and the Financial Crisis of 2008" American Bankruptcy Law Journal, Vol. 83, p. 253, 2009.

Ivry, Bob (September 24, 2008). "quoting Joshua Rosner as stating "It's not a liquidity problem, it's a valuation problem.". Bloomberg. Retrieved June 27, 2010.

Keller, Christopher; Stocker, Michael. "Executive Compensation's Role in the Financial Crisis". The National Law Journal. Retrieved January 7, 2014.

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There is enough data and evidence that even the credit agencies are corrupt and have hidden agendas. all it takes is a few clicks of the mouse and there is everything you need to read......

http://en.wikipedia.org/wiki/Financial_crisis_of_2007%E2%80%9308

May 14, 2015 at 8:59 PM

By: john kugler

masters of market manipulation

Do not have to have a PhD to figure who is a crook. Just have to be able to read and be honest with who is hurting our society.

It is not the working class, immigrants or working poor. It is the ruling class that manipulates the media and economic infrastructure to produce profits. These are not capitalists they are criminals that destroy everything and everyone that stands in the way of making money.

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In the second week of July 2007, S&P and Moodys initiated the first of several mass rating downgrades, shocking the financial markets. On July 10, S&P placed on credit watch, the ratings of 612 subprime RMBS with an original value of $7.35 billion, and two days later downgraded 498 of these securities.1021 On July 10, Moodys downgraded 399 subprime RMBS with an original value of $5.2 billion. By the end of July, S&P had downgraded more than 1,000 RMBS and almost 100 CDO securities. This volume of rating downgrades was unprecedented in U.S. financial markets.

The downgrades created significant turmoil in the securitization markets, as investors were required to sell off RMBS and CDO securities that had lost their investment grade status, RMBS and CDO securities in the investment portfolios of financial firms lost much of their value, and new securitizations were unable to find investors. The subprime RMBS secondary market initially froze and then collapsed, leaving financial firms around the world holding suddenly unmarketable subprime RMBS securities that were plummeting in value.

Neither Moodys nor S&P produced any meaningful contemporaneous documentation explaining their decisions to issue mass downgrades in July 2007, disclosing how the mass downgrades by the two companies happened to occur two days apart, or analyzing the possible impact of their actions on the financial markets. When Moodys CEO, Raymond McDaniel, was asked about the July downgrades, he indicated that he could not recall any aspect of the decision making process. He told the Subcommittee that he was merely informed that the downgrades would occur, but was not personally involved in the decision.

(page 264, US Senate, "Senate Financial Crisis Report, 2011")

http://hsgac.senate.gov/public/_files/Financial_Crisis/FinancialCrisisReport.pdf

May 15, 2015 at 4:42 PM

By: Rod Estvan

who owns bonds?

The idea that the manner S&P, Moody's, and Fitch rates is a loaded game in favor of the ruling class is simply disconnected from reality. Insurance companies are the largest holders of corporate bonds followed by Mutual Funds and Banks. Pension Funds hold only 7% of those bonds, individuals hold about 15% of corporate bonds and they are overwhelmingly wealthy.

Municipal bonds like those CPS issues are similarly held except foreign ownership is a more significant and a growing sector of ownership. As you can imagine its not Chinese peasants who are the foreign interests buying these muni bonds up.

The rating agency corruption and lack of due diligence is not done for the benefit of the "ruling class," when it is intentional. It's more normally done by a specific entity issuing the bonds paying off or corrupting the rating agency and those who get screwed first are normally other very wealthy people.

The Chicago Public Schools could have been rated at junk bond levels during the Daley administration. The problems CPS faces are based on the primary source of revenue for schools in Chicago other than federal and state dollars which are property tax dollars. Chicago has an extremely low tax rate, its actually the lowest in Cook County for education according to data from David Orr's office.

According to Orr's data CPS in 2013 taxed at a rate of 3.671%. Someone living in Barrington is taxed for k-8 schools at a rate of 7.580% for k-8 schools and another 3.197% for high schools. Here is another example, Evanston where k-8 education taxes at 3.671% and the high school another 2.689%. Even if all the TIF funds went back to CPS, all the corruption ended, the district is under funded from its property tax base.

I would add that those of us in Chicago with more expensive homes have seen repeated property tax increases, in part based on the EAV on our homes going up, and in part by the levy by the taxing entities. My single family home on the north side of the City is taxed around $2,000 less a year than a comparable house in Evanston on a comparable lot. That is a big part of the fiscal problem the City and school district faces.

Rod Estvan

May 15, 2015 at 8:05 PM

By: John Kugler

Moody's Self-Interest

I guess a US Senate Investigation and the evidence gathered is bullshit that should be ignored. Its silly to think the ruling class do not plan and execute long term destabilization agendas to create revenue streams for themselves. American history alone has hundreds of instances of the manipulation of policy, markets, equity and even events for the sake of profit.

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Inadequate Resources (p304)

negatively impacted the quality of the ratings and their surveillance.

In addition to operating with conflicts of interest, models containing inadequate performance data, subjective and inconsistent rating criteria, and a policy against using improved models to retest outstanding RMBS and CDO securities, and despite the increasing numbers of ratings issued each year and record revenues as a result, neither Moodys nor S&P hired sufficient staff or devoted sufficient resources to ensure that the initial rating process and the subsequent surveillance process produced accurate credit ratings.

Instead, both Moodys and S&P forced their staffs to churn out new ratings and conduct required surveillance with limited resources. Over time, the credit rating agencies profits became increasingly connected to issuing a high volume of ratings. By not devoting sufficient resources to handle the high volume of ratings, the strain on resources negatively impacted the quality of the ratings and their surveillance.

http://hsgac.senate.gov/public/_files/Financial_Crisis/FinancialCrisisReport.pdf

May 16, 2015 at 8:22 AM

By: Rod Estvan

When was the last meeting of the ruling class

The way John discusses the functioning of the ruling class is Far to simple. The evolution of policies supporting the most wealthy in our country isn't decided by the collective decision of the board of directors of the ruling class, it's a highly mediated process that share a self interest in keeping the rich, well rich.

Some of the most wealthy people in America believe inherited wealth is terrible for the functioning of a dynamic capitalist system, others believe the most wealthy are the elite that must guide the nation and it is best done through the passing down of values within families along with vast wealth.

There is indeed a 1% in America, that is a fact of sociology. But it does not fully manipulatie things like how bonds are rated or whether public school systems go broke. They do like however low taxes and that value is shared, although even among the 1% there are those who support greater taxation of themselves. This support for lower taxation has been ideologically transferred to the mass of Americans, hense the election of Governor Rauner and the take over of Congress by the Republicans nationally.

The root of the problem CPS is facing is the taxation system which relies on property taxes and our flat state income tax. We have tried to attack this problem and been defeated. Let's recall the CTU and most not for profits created a coalition for a fair tax and we were defeated by the rise of Rauner and the fear of anti-taxation sentiment in Illinois among elected Democrats.

For the moment there is only one option to stabilize CPS and the future of the CTPF and that will be a significant increase in the property tax rate inside the City. To do this what is called the Property Tax Extension Limitation Law will have to be revised to allow to such a rate increase. That will not be easy.

Rod Estvan

May 16, 2015 at 12:20 PM

By: John Kugler

Moody's Fraud & Racism CoverUp

Moody's is complicit to the issues at CPS because it misidentifies and ignores the problems that exist in the system.

It's too bad individuals minimize and satirize systemic mendacity by conjuring up hyperbolized images of backroom deals by cigar smoking fat white men. To answer directly without hesitation, yes there are many meetings on an ongoing basis where the ruling class not only meet, but disseminate instructions and dogma to expand personal power and profit. Some are publicized such as think tanks, conferences, institutes, symposiums or study groups. Other meetings are held in secret: some we find out about and some we never do.

Its interesting that two high schools in the same city, such as, a Northside Prep has certain resources and yet a Juarez HS has no toilet paper; they are both the same micro-system (inner-city High School) getting funding from the same pool of macro-resources (CPS Budget). From these simple facts, it can be concluded that there is either a distribution issue or a management issue. The problem is that the source of the inequity at the macropoliticial level is not being addressed, which is systemic racism and classism, and so continues the parable of the RED BEADS as Deming calls it.

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Secret Ruling Class Meeting Caught on Tape

(2006) Chicago School Board president Michael Scott sat down for breakfast with CPS chief Arne Duncan, Congressman Danny Davis, and state senator Rickey Hendon in the back room of a soul food restaurant on the west side.

http://www.chicagoreader.com/Bleader/archives/2009/11/19/cps-pres-michael-scotts-backroom-meeting-at-ednas

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MOODY'S Fraud Cover Up (2011)

Published reports, as well as internal emails, demonstrate that analysts within both Moodys and S&P were aware of the serious mortgage fraud problem in the industry. Despite being on notice about the problem and despite assertions about the importance of loan data quality in the ratings process for structured finance securities,neither Moodys nor S&P established procedures to account for the possibility of fraud in its ratings process.(p311)

http://hsgac.senate.gov/public/_files/Financial_Crisis/FinancialCrisisReport.pdf

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District Level Corruption (2015)

"No-bid contracts should be reserved for extraordinary circumstances that demand highly specific skills in a short time frame. $20.5 million no-bid contract awarded to a development academy for principals and other school officials by CPS in 2013. Byrd-Bennett had worked as a coach for SUPES until she was hired at CPS and theres some evidence that she continued to consult with related companies after she was on CPS payroll. In June 2013, the School Board quietly awarded SUPES the $20 million contract, which was the largest no-bid contract in the district's recent history, according to Catalysts review of board reports.

http://catalyst-chicago.org/2015/04/feds-investigate-20-million-supes-contract-byrd-bennett-ties/

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Shock policy -- the term was coined by economist Milton Friedman. In time, it became absorbed into the group of ideas about economics, that are sometimes referred to as economic liberalism. The economist Jeffrey Sachs coined the expression of shock therapy. The alleged difference between the two shock expressions lies only in the degree of economic liberalisation. Sachs' ideas were based on studying historic periods of monetary and economic crisis and noting that a decisive stroke could end monetary chaos, often in a day.

The first instance of shock therapy were the neoliberal pro-market reforms of Chile in 1975, carried out after the military coup by Augusto Pinochet. The reforms, dubbed a shock policy at the time by Milton Friedman, were based on the liberal economic ideas centred on the University of Chicago.

http://en.wikipedia.org/wiki/Shock_therapy_(economics)

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May 17, 2015 at 12:14 PM

By: Neal Resnikoff

Oppose a property tax increase

Oppose a property tax increase

There have been several calls in the Comments section to deal with the "financial crisis" of the schools and city by increasing property taxes.

Why should any of us be in favor of increasing the taxes of homeowners when, as Substance and others have pointed out so well, there is a false or manufactured fiscal crisis in Chicago? This is also true of the Illinois and the federal government--a false or manufactured fiscal crisis.

If we want to look for revenue for the city, shouldn't we look elsewhere than increasing property taxes?

For example, shouldn't we look continue calling to repatriate the TIF money taken from schools and and other social programs, the elimination of assistants at the Board of Education with 6-figure salaries, having serious oversight of CPS spending and their no-bid contracts, etc etc.?

Shouldn't we be for having the corporations pay full taxes on their profits? Shouldn't we be for having the rich pay much more than they have been paying?

Shouldn't we be for taking the 62c of every federal tax dollar now being used for the military and redirecting this to schools; redirecting this for installing renewable energy and eliminating oil, coal, and nuclear energy sources to forestall the global warming crisis and risky nuclear fallout; and paying for needed social programs and free, quality health care for all?

To say a call for the rich to pay will not pass the currently constituted State Legislature begs the question about what we should be aiming for. To agree to the calls by the Establishment for raising our property taxes avoids the struggle needed for equity and justice.

May 19, 2015 at 2:54 PM

By: Rod Estvan

responding to Neil

If the left, liberals, and progressives in Chicago could not even elect Commissioner Garcia who did propose some of the same tax solutions you discuss what chance in the current context it there that these proposals will pass the IL General Assembly?

The reality is Neil you write as if Chicagoans who do not have high value homes are paying massive property taxes now. They are paying less in total dollars than some do for comparable $50,000 or $100,000 homes in rural towns in Illinois.

In fact lower and moderate income African American home owners in Hazel Crest, IL pay far more in property taxes than do similar situated lower property value African American home owners in the City. Median real estate property taxes paid for housing units with mortgages in 2012 in Hazel Crest for example was $3,415. Median real estate property taxes paid for housing units in Chicago with mortgages in 2012 was $3,663.

But Neil here is the kicker the median home value in Chicago in 2012 was $211,700, in Hazel Crest it was only $118,110. Chicago has very low property taxes like it or not Neil. Members of the Illinois General Assembly black caucus, including Rep Will Davis (chair of the House Education Appropriation Committee, have talked about Chicago's low property tax rate for years now in relation to CPS. It isn't only Republicans or Democrats from the north shore discussing this.

Also there have been several attempts in Springfield to reform the existing TIF laws that I have been involved in, they all have failed. Not just because of Rahm Emanuel either, the construction trades (AFL-CIO) lobbyists opposed it, as did the contractors, as did the Illinois Municipal League. We were totally outgunned, it is not going to happen for the foreseeable future Neil. I don't like it at all, but it is what it is and we owe our children an education.

Moreover Neil why should I or Senator Heather Steans who lives close by me pay thousands less a year in property taxes for our higher value home than if they were located in Evanston or Oak Park. Is that fair?

Rod Estvan

May 19, 2015 at 3:21 PM

By: Rod Estvan

responding to John

Your argument that the rating decline was driven by racism is very strange. Because the racial composition of Chicago was the same under the prior administration as it is today and the rating remained investment grade under Daley. It seems the driver here is the failure of CPS to pay its pension obligations for years and the Supreme Court decision which will not allow CPS to just walk away from that obligation.

I won't argue that the whole of our State's dependence on property taxes isn't both race and social class driven, I think it is. I and many others including the CTU have tried for years to change that dependence with alternative taxation proposals in Springfield, we have failed every time.

In order to pay its pension obligations CPS with its low property tax rate would have had to pay its teachers less over the last six years, pay less to administrators at all levels, pay less tuition to charter schools, pay less to outside contractors, and lose little or no money to corruption at various levels. If every TIF dollar was applied to the pension obligation even then CPS would have a pension payment obligation of significance. Another possibility which no one likes to think about would be significantly larger class sizes and few teachers at both traditional and charter schools.

There were very real reasons why CPS did not appropriately pay the CTPF what it should have, even the CTU at one point supported legislation in the IL General Assembly for yet another pension payment holiday that the retired members effectively blocked in the Assembly even though it was supported by Speaker Madigan and the Democrat leadership.

Right now a property tax increase for City residents to pay for the education of all our children is the best option to keep CPS functional to any reasonable degree. But getting the tax cap lifted to do that will be very difficult and may require the situation to get far worse for CPS than it is right now.

Rod Estvan

May 21, 2015 at 1:23 AM

By: John Kugler

No Ruling Class? Funny!

Everyday the news increases with financial fraud, and yet individuals promote raising taxes and fees because government is broke. We are broke as the result of all the greed and theft of individuals and now again in the news today there are groups of institutions rigging the market in their favor. Interesting about this story is they do not know how much was actually stolen.

Raising taxes is not the answer. There needs to be a paradigm shift away from the idea that the working class should support and finance the ruling class agenda and wealth accumulation.

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Banks admit guilt, fined $5B to settle foreign currency probe

May 20, 2015

Traders from the five banks, who dubbed themselves the cartel, were part of a chat room group that colluded to manipulate exchange rates and rip off clients.

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The banking cartel is busted.

JPMorgan Chase, Citigroup, Barclays and Royal Bank of Scotland on Wednesday agreed to plead guilty to manipulating global currency markets and will pay more than $5 billion in fines.

The Department of Justice also ripped up a deferred prosecution agreement with UBS for violating the terms of an earlier settlement tied to rate-rigging.

Traders from the five banks, who dubbed themselves the cartel, were part of a chat room group that colluded to manipulate exchange rates and rip off clients.

The extent of the fraud was widespread and affected rates around the world, federal prosecutors said Wednesday.

This Department of Justice will vigorously prosecute all of those who tilt the economic system in their favor, US Attorney General Loretta Lynch said during a news conference.

Barclays paid the biggest penalty of $2.4 billion to UK and US regulators, including the DOJ, the Federal Reserve and New Yorks Department of Financial Services. The Britain-based bank, which also fired eight employees, was at the center of much of the rigging, regulators said.

If you aint cheating, you aint trying, one Barclays trader said, according to transcripts of the chat room messages.

The Barclays employees used tough-guy language and even had an initiation process, prosecutors allege.

Overall, six banks will pay nearly $6 billion in penalties. Citi ($1.27 billion), JPMorgan ($892 million) RBS ($669 million) and UBS ($545 million) paid fines and pleaded guilty to charges. Bank of America will pay $205 million without admitting guilt.

Nevertheless, Wall Street yawned with the US-based banks stock largely unchanged on Wednesday.

The firms were able to secure waivers from regulators in order to keep doing business with pension funds and other investors, said Glenn Schorr, an analyst at Evercore.

For the most part, investors took it as a non-event, he said in a note to investors.

http://nypost.com/2015/05/20/five-banks-in-rate-rigging-cartel-hit-with-criminal-charges-fines/

May 21, 2015 at 7:28 AM

By: Rod Estvan

While we wait for the shift

John unfortunately on a world scale, with the possible exception of Greece, the paradigm shift you correctly call for have been going in the wrong direction. Politically the right is asending and what historically been called the working class have often voted for the right. Believe me I am dismayed at this evolution.

There are endless stories of financial manipulation and corruption in the history of capitalism going back to the foundation of our country, this is not a revelation. Ever hear of the Teapot Dome scandal that took place in the United States from 1921 to 1924, during the administration of President Warren G. Harding? How about stock manipulation during the 1920s, there is nothing new in what you are posting John nor is it very relevant to the fiscal disaster which is facing our children's future education.

Possibly Speaker Madigan's millionare tax, that would have individual income over $1 million taxed at 6.75 percent with earnings under $1 million being taxed at 3.75 percent, will be the start of the shift. But somehow I doubt it, but none the less I would vote for the Speaker's constitutional amendment if gets to the ballot stage.

The millionaires tax would potentially generate statewide about $1 billion more a year for K-12 education. Chicago's share would be about $220 million if it was based on the number of students in the State. That would be helpful, but the CTPF FY 2016 payment alone for CPS was projected last year to be $717 million. Even with the millionare tax additional revenue is needed. The math is what it is.

Rod Estvan

May 21, 2015 at 8:02 AM

By: John Kugler

Abusive Relationship

Pretending, hoping and dreaming that one day things will change, will never fix the fundamental problems we face on a daily basis of resource allocation and massive financial corruption by the ruling class.

The case I cited last night would wipe out all the debt in Chicago. Instead the government taxes the criminal activity ($5 Billion dollars) and then again redistributes the fines back into the ruling class hands.

Its like the woman always hoping her husband will stop beating her and stop gambling the family money away. Not until the woman leaves the abusive relationship will she every be able to be free from the person who hurts her. Saying he is ok and he will change, just give him another $20 is never the answer, it just enables teh abuser to do more harm. With more tax increase we are only enabling the wealthy and the politicians to steal more of our money.

May 22, 2015 at 11:33 AM

By: Rod Estvan

The case John cited

John you cite a US DOJ case against numerous banks that has been well publicized were there was a settlement agreement for $6 billion in penalities to be shared between the USA and UK. How exactly is CPS supposed to get a cut of that money?

Rod Estvan

May 24, 2015 at 12:55 AM

By: John Kugler

Exactly the Wrong Attitude

The attitude that everything is alright and ok for ruling class to steal money is exactly why we are in the fiscal mess we are in. The problem is the wealth gap not taxation. Too many people at the top; rampant corporate and white collar theft that diverts money from public services and small businesses. Laws and decriminalization need to change. Instead of locking up a black man for 10 years in a $100 dollar robbery, maybe we should put into prison some of these bankers and take all their assets including from their extended families. then redistribute all that money into the economy (I wonder what race all those bankers are? Billions stolen and no prison time). In a few years the theft of public assets and economy will change from taxation of the working class to people feeling less pressure from the perpetual budget deficits and service cuts.

Did you read the story we just posted?

We have reached a tipping point. Inequality in OECD countries is at its highest since records began, said OECD Secretary-General Angel Gurra, launching the report in Paris with Marianne Thyssen, European Commissioner for Employment, Social Affairs, Skills and Labour Mobility. The evidence shows that high inequality is bad for growth. The case for policy action is as much economic as social. By not addressing inequality, governments are cutting into the social fabric of their countries and hurting their long-term economic growth."

Redistribution via taxes and transfers is also an effective way to reduce inequality. In recent decades, the effectiveness of redistribution mechanisms has been weakened in many countries. To address this, policies need to ensure that wealthier individuals, but also multinational firms, pay their share of the tax burden.

http://www.oecd.org/social/reducing-gender-gaps-and-poor-job-quality-essential-to-tackle-growing-inequality.htm

May 24, 2015 at 9:33 AM

By: Rod Estvan

It is not about attitude it's about money

John condemnation of capitalism does not provide money to pay for pensions, teachers salaries, money to pay union dues, and on and on. The manipulation of the Libor rate for example is just a varartion on the manipulation of the prices of tulips in the 1630s in Europe. Historically any benchmark price or exchange rate can be manipulated, and now because the massive use of electronic transactions such now illegal collusion between investors are both easily done and eventually tracked by various oversight authorities if they are not part of the scam.

In my own case after having been a teacher, for 14 years I was a commodity trader and brokerage firm officer at the CBOT, before I went back into eduction. In 1978 and into late 1979 I became an investor in the silver bullion futures market and made a huge amount of money because of the then legal market manipulation of a guy named Nelson Hunt and his brother who tried and eventually failed to corner that market.

Millions and millions of dollars of their trades were transacted through the firm I worked for through a dummy firm the brothers had set up. I and a few others were able to front run their trades and make a lot of money in the process. Front running is the now illegal practice of a broker or firm employee is executing orders on a security for its own account while taking advantage of advance knowledge of pending orders from its customers. But it wasn't illegal when I was involved in it and became so years later.

The Commodities Futures Trading Commission closed that form of manipulation, but many others are conceived and carried out every bussiness day. Any major investor in markets knows these market manipulation happen including the investment consultants for the CPTF which John and many others who read this site have collectively millions of dollars in retirement funds sitting (here is the list of current advisers to the fund http://www.ctpf.org/general_info/Investments_lists.htm).

I don't think that John is suggesting that teachers in mass pull their money out of CTPF and hide it in cash or precious metals or gems. It is a reality teachers have to accept. Similarly the reality of CPS finances are heavily driven by property taxes and the rate of those taxes are critical to the fiscal survival of CPS.

Rod Estvan

May 24, 2015 at 1:54 PM

By: John Kugler

Punish Corporate Theft

Take all the money and assets from anyone that steals and manipulates "markets." Second, stop corporate welfare. 3rd,strip the ruling class of their wealth if it's associated with creating and perpetuating inequity across the social strata. Last, long prison sentences for anyone associated with corporate or government theft and manipulations. In some cases public executions to make the message clear not to steal or manipulate public money assets.

May 24, 2015 at 5:19 PM

By: Rod Estvan

The death sentence for financial corruption?

"In some cases public executions to make the message clear not to steal or manipulate public money assets." John are you trying to be a modern day Jackobin, or is it Lavrentiy Beria?

By the way the Republican Nebraska' state legislature just voted to abolish the death penalty, but it still might be vetoed by the Republican Governor.

Rod Estvan

May 25, 2015 at 11:16 AM

By: John Kugler

Apples to Apples

Black man gets shot in the streets of Missouri for stealing cigars. White banker man steals billions of dollars go free to steal more. people who steal from our pensions, savings, investments and tax dollars should pay the highest penalty for abusing the trust we gave them. In teh string of responses it is now clear the sense of entitlement and white right to steal opposed to the black stick up man who gets life for getting $100.

May 25, 2015 at 3:52 PM

By: Bob Busch

blame

John

What are we going to do with Union and Pension leaders who allowed this to happen?

Who were the fiduciary in all this?

As far as people getting screwed how about all the thousands of dollars we paid in union dues only to find out AFTER we need help that the union has no power, according to law. And the CTU contract is an absolute joke, that bosses in CPS are covered by state laws that our union never talks about granting them immunity. I never saw a disclaimer published by the CTU.

May 25, 2015 at 5:40 PM

By: John Kugler

Curveball

Most people at this point of the game, I figure, would have read up on labor law, and how weak unions really are after the NLRB was established. Labor has more power without contracts and laws. Our power is our labor not what is in a contract or what a judge decides.

But getting back to the discussion here, which is weather the ruling class collaborate to establish conditions favorable to profit making and the widening of the wealth gap.

The last point was that a white banker stealing g $1 billion dollars will do less time than a black man stealing cigars from a liquor store. In the case of Mike Brown he was gunned down like a dog in the street for no reason except resisting the orders of a white police officer. Then you read from news out of the DoJ, two days ago, that bankers collided to defraud billions of dollars from investors, yet not one individual was charged and banks were fined a miniscule $5 billion. So then the question is clearly the disparate treatment of white bankers vs. black youth as it relates to the privatization schemes of government services.

No one yet, has postulated any responses that are able to refute current findings of the widening of the social strata in our society and that raising taxes is not the answer to the funding problems in our municipalities.

May 25, 2015 at 7:17 PM

By: Bob Busch

labor lsw

"Most people at this point of the game, I figure, would have read up on labor law, and how weak unions really are after the NLRB was established. Labor has more power without contracts and laws. Our power is our labor not what is in a contract or what a judge decides."

Good point ,how about putting your quote on page one of the contract? A sort of disclaimer.

On a personal note would the teachers of Chicago not be better off dumping the CTU and forming a professional organization

modeled on the AMA or Bar associations?

As long as we act like labor why not treat us as such?

May 25, 2015 at 8:30 PM

By: John Kugler

Ball Two

No idea what desertification and the National Industrial Recovery Act have to do with Moody's and the ruling class.

But let me try to figure out the chain of thought:

The last idea was that to fight the ruling class labor should de-certify its own organizations to be stronger. When it does so, teachers should re-organize themselves into another entity called an association and then they will be stronger. No idea how this makes teachers stronger. Seems just like a shuffle game that reverses over 100 years of organizing in Chicago education, seems more reactionary than progressive.

On the issue of the ruling class activity to privatize and profit from public assets; I guess the idea is that unions under NLRB enforcement are weak therefore should create new entities to have more power against the ruling class. I am just guessing here, since this idea is contrary to the recorded history of the Chicago Teacher Revolt- of 1933 that directly attacked the ruling class. Chicago teachers were always militant and concerned over issues that caused austerity to be imposed on the workers in the public schools. Its seems in recent years the Union has figured out how to leverage litigation, organizing and bargaining to reverse the damage done by baby boomers who became comfortable with their positions as they looked forward to their golden years, in essence allowing the ruling class to become stronger thereby eroding the Unions collective power.

Maybe I am reading the wrong history, if so someone needs to correct my mistakes. And maybe change some of the books, newspapers and other documents that tell another story of teachers who fought the ruling class here in Chicago.

This is where [below] I am basing some of my foundational knowledge as it relates to the Chicago Teachers Union fighting the ruling class. I was taught by my professors to make arguments based on fact and history: Empirical knowledge, not emotions, personal beliefs or passing fashion.

On April 15, [1933] teachers received a partial payment of back wages, but that did not stop 8000 teachers who marched to visit Charles Dawes, former US vice-president and head of City National Bank and Trust Co. The teachers wanted to know why the bank had just been bailed out to the tune of $90 million by the new Reconstruction Finance Corporation, but could not help the teachers get paid.

All hell broke loose on April 24 [1933] when 5000 teachers converged on five of Chicagos largest banks who had refused to buy the tax warrants that were needed to pay the teachers. Once inside teachers confronted the bankers with chants of Pay us! Pay us, as they trashed the offices by turning over desks, smashing windows and throwing ink on the walls. A week later there was a similar demonstration at the Chicago Title and Trust Company that involved a pitched battle with mounted Chicago police.

The violence got the attention of Chicago Mayor Ed Kelly and representatives of the major banks who hastily promised relief. The VEC announced that the teachers would receive 4 months of the nine months owed to them at a huge rally in Grant Park on May 13 . Then on June 9, the last day of school, there was another confrontation with police as 5000 people protested in the Loop against the banks.

Most of the marches were organized by a new group called the Volunteer Emergency Committee (VEC). The VEC was led by a charismatic PE teacher named John Fewkes who belonged to the Mens Teachers Union (MTU), one of the four Chicago teachers unions of the time. Even Margaret Haley of the Chicago Teachers Federation (CTF), who was very sparing in her praise of rival teacher union leaders, called him,...a fine specimen of physical manhood, well built, and he had a demeanor that was impressive. Fewkes [the founding president of the Chicago Teachers Union (1937)] made it clear that the VEC was a one issue group focused solely on teachers pay.

Chicagos business community had also been organizing, with the Citizens Committee on Public Expenditures (CCPE) as the result. With the support of the CCPE, the banks had consistently refused to lend any more money to the hard pressed Chicago schools. It was essentially a bankers coup with even the CCPE admitting they had taken charge. But even after their downtown offices were wrecked, the banks continued to arrogantly set school policy.

On July 12, 1933, the Chicago Board of Education approved a budget that stunned the packed meeting room with cuts so drastic that School Superintendent William Bogan, who had not been consulted, was seen holding his head in his hands in shocked silence. Helen Hefferan, a Board member whom the others suspected would oppose the cuts, was not even invited to the meeting. After the fateful July 12 meeting, the Board steadfastly refused all requests for an audit, presumably to protect financial irregularities and the many political patronage employees. The US Commissioner on Education called the cuts a return to the dark ages.

That evening the VEC joined the new Citizens Schools Committee(CSC) made up initially of teachers, the PTA and the citys leading womens organizations. The following week the CSC held a rally at the Chicago Stadium that drew more than 30,000 followed by renewed lobbying efforts. The first day of school in September was chaos as a result of the financial carnage, so the Board, on the defensive, effectively rescinded the worst of the cuts by October. Then in 1934, with federal money, the teachers finally got all their back pay.

1933 history continued @

http://www.dailykos.com/story/2012/08/02/1116048/-The-Chicago-Teacher-Revolt-of-1933#

Fewkes Obituary from the Tribune @

http://articles.chicagotribune.com/1992-07-25/news/9203060964_1_chicago-teachers-union-strike-merit-system

May 26, 2015 at 6:35 AM

By: Bob Busch

Class

We are the ruling class class to most of the city. But I would like to address this:

" Its seems in recent years the Union has figured out how to leverage litigation, organizing and bargaining to reverse the damage done by baby boomers who became comfortable with their positions as they looked forward to their golden years, in essence allowing the ruling class to become stronger thereby eroding the Unions collective power."

The only thing our union has figured out is how to retreat.Where was the union in 1989 with the prohibited list of negotiation?

Why after 41 years did nobody in out union ever tell me a principal is immune from almost everything. One thing we baby boomers did do was pay exorbitant dues to a virtually useless union that has been selling it's members down the river for at least 50 years.

PS as a retired teacher I want everyone to know your union no longer can pretend to represent me and mine.And we are not going to support the CTU on our backs any longer

May 26, 2015 at 10:08 PM

By: John Kugler

Ball Three

Hate to burst anyone's bubble but 41 years ago, I was only six years old so that ain't on me!

From reading a little CTU history the people that set up the formal structure of the union were all male white Irish/Anglo teachers back then:

John M. Fewkes 1937-41 and from 1947-66

John E. Desmond (UPC) 1966-1972

Robert Healy (UPC) 1972-1984

Psst all white dudes, if you did not get that from their names and the above caption.

Now back to the future.........

Unless the New York Times is a hack operation seems like they give the current union credit for messing with one of the strongest Mayors around.

New York Times Credits CTU organizing and leadership for being one of the only labor organizations in recent history fighting back against neo-liberal privatization agenda.

Here is just a snippet from the times article few months ago, back in March 2015.

A study by the University of Chicago Consortium on Chicago School Research found that 93 percent of the nearly 11,000 displaced elementary students wound up in schools with better ratings. About one in five ended up in schools the district has deemed in its top tier. More than a third of the students, though, remained in schools in the lowest tier, leading the researchers to conclude that while most students had gone to better schools, in many cases the schools were only marginally better.

Chicago Teachers Union leaders urged Jess G. Garcia, a county commissioner known as Chuy, to enter a wide field of candidates in the first balloting last week against Mr. Emanuel. And they said they would be pressing efforts on behalf of Mr. Garcia, who finished second to Mr. Emanuel, forcing him into the runoff election on April 7.

Teachers groups, including national unions like the American Federation of Teachers, have donated at least $500,000 to elect Mr. Garcia, though Mr. Emanuel has raised far more. In one sign of the environment Mr. Emanuel faces, advisory measures calling for the school board to be elected instead of appointed by the mayor won overwhelming support from Chicagoans on ballots last week.

Thats a pretty strong message to Rahm about what people thought about his education agenda, said Randi Weingarten, president of the American Federation of Teachers. His education agenda is based on sanctions and punishing and tests in lieu of the professional judgment of educators.

School Agenda Bedevils Chicago Mayor in Race

MARCH 3, 2015

http://www.nytimes.com/2015/03/04/us/rahm-emanuels-record-on-schools-proves-a-defining-point-for-chicago-runoff.html?_r=0

---------------------------------------

By-the-way all this stuff is only off the internet, quick searches. I am not talking about or using any serious research work like going into archives or interviewing the people that actually were part of the CTU political structure. Maybe that is something I should do over the summer to get at the real truth of who got us into this mess in the first place!!!

I think it has something to do with bowling I heard, but who knows?

May 27, 2015 at 7:01 AM

By: Bob Busch

history

What about Jackie Vaughn, did you forget her?

I like this:

"Unless the New York Times is a hack operation seems like they give the current union credit for messing with one of the strongest Mayors around."

Ya and he closed 50 schools while the CTU did what? That is what I call real power alright.

May 27, 2015 at 8:11 AM

By: John Kugler

Ball Four

Funny poeple who attack others personally for standing up for working class and minorities not once cite any sources in any comments to back themselves up. Seems clear through white entitlement they create a sense of authority to their comments.

Then once it is revealed that the same race as was responsible for the creation of an entity the blame goes automatically to black women.

Yes it happened right in front of everyone's eyes.

May 27, 2015 at 9:07 AM

By: Rod Estvan

The CTU played different roles at different times

The local civic elite of the Chicago metropolitan area has at times integrated the CTU leadership into it. Bob Healy who George ran against for CTU president was taken into the confidence of local civic leaders when the 1980 CPS bailout plan was devised and he even pushed the pension fund to buy School Finance Authority bonds.

But the civic elite is not a ruling class in any true sense, it's a monied group of people interested in maintaining order and structure in major cities across the nation. Many do not live in cities, but rather in collar suburbs, and even many have their primary economic interests located in suburban areas. Politicans like Mayor Emanuel, and Cook County Board President Toni Preckwinkle talk with members of this elite in a wide variety of ways.

This elite creates numerous tentacles like leadership for greater Chicago, the Metropolitan Planning Council, the Civic Federation, and a wide variety of clubs and civic organizations. Some times local politicans listen to what they have to say which is not always uniform in perspective and other times they ignor what they say.

As I have said before John your discussion of the ruling class is far too simplistic and does not help teachers and parents in the complex fiscal situation we are entering.

The entire idea that white collar crime and punishment can be compared to what amounts to the regulation of Chicago's poor is ridiculous. As we all know CPS teachers make on average around $70,000 a year, at least for the moment. Their average household incomes are significantly above those of most residents of the City and overwhelmingly they support a strong police presence in the poor communities where they teach.

The presumption that unionized CPS teachers in mass agree with the radical critique of police control in poor communities may be delusional. In fact public school teachers and charter school teachers are part of a process of control of poor populations in America, like it or not. They are integral to the sorting process that picks the small group that will be effectively saved. Teachers are forced into this role whether it be done by the common core standards, the prior Illinois Learning Standards, or accepted grading practices.

Teachers in mass recognize children in poor communities are not provided the resources to compete effectively with non poor children, including their own children, yet they are still forced to sit in academic judgement of those kids and sort them as best as they can. But teachers also want to maintain their current standard of living and retirement benefits.

Turning a union like the CTU into a left wing force on the political level is a hard thing to do. President Lewis and the CORE leadership has done an amazing job up to now, but things are going to get much more difficult in the years ahead. Bob's perspective reflects the need for balance between social justice unionism and bread and butter unionism. John your class war thinking in the current context if it is reflective of the thinking of the CORE leadership could spell the doom of the CTU as a progressive force in this City.

Rod Estvan

May 27, 2015 at 11:13 AM

By: George N. Schmidt

CTU and CORE members who voted for Rahm...

One of the ironies of the most recent power struggle is that Rahm and his side of things learned a lot more a lot faster than "our" side. While "we" were playing the municipal election game and virtually ignoring Springfield, as if the election of ABR (ANYBODY BUT RAHM) would solve the problems we're facing now, the other side was determined to (a) re-elect Rahm and (b) continue their attack on the power of the CTU (or the perceived power of part of the CTU). Last night (May 26, 2015), I was talking with some people before the CORE meeting began and one of them told me that she voted for Rahm because he was "better for the city..." When that provoked a gasp from another friend there, I was glad we had gotten such candor. Later in the same meeting, the question was why if Elected School Board and Lower Class Size are so massively important CTU's "PAC-LEG" leaders hadn't prepared legislative language to get one of our "friends" to introduce in Springfield. The answer I got, from one of the major PAC-LEG leaders, was "You can't do everything." I responded that we need to be like ALEC and have our legislative language ready. But we didn't, and the General Assembly is continuing, while we push for HB 306 (a lovely bill, but so what; my family has been opting out for a decade without legislation!) we do not have the right to negotiate for class size in the contract. Among other things. And once again, many "activist" teachers are talking about lower class size (in some cases, sounding like that would be instead of a raise) and nobody in the leadership is telling them the truth: That we can't restore enforceable class size into the contract (as we had for more than 20 years, and which I enforced vigorously when a delegate) until we win legislation restoring our bargaining rights. In full. It's a very dangerous thing for leaders to lead with half-truths and platitudes (another "mobilization"), or with false directions ("we" could have won City Hall only to discover that our mayor had all along been a "progressive" Democrat while on the Cook County Board) rather than with a focus on where our power must be in order for us to win in the legislatures...

May 27, 2015 at 2:54 PM

By: Bob Busch

Cease Fire

I have not written anything attacking anyone,I hope. My point has been better explained by others and it is this: The CTU has become a paper tiger due to state laws, and nobody is trying to fix that state of affairs,or explaining its impact on the members.

As to my other point this was written;

"John M. Fewkes 1937-41 and from 1947-66

John E. Desmond (UPC) 1966-1972

Robert Healy (UPC) 1972-1984"

I wondered aloud why Jackie Vaughn

was ignored.If you want to make a point

about White Males I guess forgetting Jackie,

Ms Stewart, and even Debbie Lynch might help.And remember the president now is Ms Lewis.

May 27, 2015 at 4:46 PM

By: John Kugler

Dtente

I have never served in the military but maybe we all should have a course on artillery , so we all direct our fire at the right target.

Maybe they got an online class on aiming the cannon!

In Solidarity

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