Can Illinois' Bruce Rauner Turn Around Nation's Worst Fiscal Mess?

Investor's Business Daily ^ | January 14. 2014 | IBD EDITORIALS

[raptor22]

State Government: Bruce Rauner became Illinois' 42nd governor on Monday, the first Republican since 2003. He inherits a state that's been dubbed "America's Greece," but it's another opportunity to show what a GOP chief executive can do.

A big part of the GOP tsunami in 2014 occurred at the state level, with Republicans expanding their hold on governors' mansions and legislatures with wins in blue states such as Maryland, Massachusetts and President Obama's Illinois.

The number of GOP governors has grown to 31 from 21, control of legislatures has expanded to 68 of 98 partisan legislative chambers, and Republicans now have total control of some two dozen states.

There's a reason for this success, and it's the fact that GOP governors tend to promote a free-market economy with lower taxes, less regulation and a generally friendlier business climate that emphasizes wealth creation rather than redistribution.

[Iron Munro]

Not the worse but perhaps a distant second place?

The O’conomy and the Emperor’s $17 Trillion debt is certainly the worst of all.

[detective]

A new Captain for a sinking ship with a corrupt dysfunctional crew.

In Chicago the corruption is so entrenched that it is almost impossible to improve things without sending most of the incumbent politicians to prison.

[RayChuang88]

It would require a complete overhaul of the entire pension system in Illinois--especially Cook County, where Chicago is located!--to bring Illinois out of a possible financial disaster.

Illinois is a state with a potentially strong agricultural sector and very strong transportation sector, thanks to Chicago being the biggest rail transportation hub in the USA. An overhaul of the pension system, a simplified Illinois state income tax, and more business-friendly regulations could revive the state very quickly.

[raptor22]

OBAMA’S ILLINOIS PING

[Yollopoliuhqui]

Anticipating Glass-Steagall restoration to be introduced into the 114th Congress, financial columnist Pam Martens wrote an excellent, Jan. 12 column destroying the primary lie deployed against Glass-Steagall during the past three years. And, Martens revealed that when she first exposed this lie in 2012 in letters to the New York Times, which had published the lie in a column by its financial reporter Andrew Ross Sorkin, the Times refused to retract, or to print a word from her.

Sorkin first circulated the sophistry that “since Lehman, Bear Stearns, Merrill Lynch and AIG were not commercial banks, Glass-Steagall was irrelevant to how the 2007-08 crash could have been avoided.” That lie became Tim Geithner’s line in browbeating Congress against restoring Glass-Steagall; Obama’s line; and the line of the neocon American Enterprise Institute’s Peter Wallison, which was used to confuse Republicans. Now it is repeated in a new book by a radical Keynesian economist which is being given great play and is momentarily No. 1 on the non-fiction best-seller list — Hall of Mirrors, by UC Berkeley economics professor Barry Eichengreen.

Martens’s facts, which the Times refused to print and “experts” like Professor Eichengreen prefer to overlook, are worth presenting in detail:

“Lehman Brothers owned two FDIC insured banks, Lehman Brothers Bank FSB and Lehman Brothers Commercial Bank. Together, they held $17.2 billion in assets as of June 30, 2008, 75 days before Lehman went belly up. Lehman Brothers Bank FSB is where Lehman handled its mortgage loan originations. When the FDIC approved the Lehman Brothers Commercial Bank application in 2005, it specifically noted that the FDIC insured bank ‘anticipates acting as a derivatives intermediary’...”

“Merrill Lynch also owned three FDIC insured banks. At an FDIC symposium held at the National Press Club in 2003, Merrill Senior VP, John Qua, explained the banking side of Merrill as follows: ‘Merrill Lynch conducts banking in the United States through two depository institutions — Merrill Lynch Bank USA, a Utah industrial loan corporation; and Merrill Lynch Bank and Trust, a New Jersey state non-member bank. We also own a federal savings bank that offers personal trust services to our clients’....”

“Bear Stearns owned Bear Stearns Bank Ireland, which is now part of JPMorgan and called JPMorgan Bank (Dublin) PLC. According to JPMorgan,... “It has also been added to the JPMorgan Jumbo issuance programs to issue structured securities for distribution outside the United States.”

“AIG owned, in 2008 at the time of the crisis, the FDIC insured AIG Federal Savings Bank. On June 30, 2008, it held $1 billion in assets. AIG also owned 71 U.S.-based insurance entities and 176 other financial services companies throughout the world, including AIG Financial Products which blew up the whole company selling credit default derivatives.” [AIG’s cross-ownerships would have been barred by both Glass-Steagall and the 1956 Bank Holding Company Act, which was also gutted by the 1999 Gramm-Leach-Bliley Act, which repealed Glass-Steagall.-ed.]

“AIG’s annuities ... represent a significant source of income to retirees. Had AIG been allowed to fail, state guaranty funds for insurance products could have been wiped out....”

As to our situation today, Martens notes: “According to the Office of the Comptroller of the Currency which oversees national banks, as of December 31, 2011, inside the insured banks — not their broker-dealer components — were the following derivative holdings: $70.1 trillion at JPMorgan Chase; $52.1 trillion at Citibank; $50.1 trillion at Bank of America; $44.2 trillion at Goldman Sachs Bank USA.”

[Zakeet]

It would require a complete overhaul of the entire pension system in Illinois--especially Cook County, where Chicago is located!--to bring Illinois out of a possible financial disaster. ... An overhaul of the pension system, a simplified Illinois state income tax, and more business-friendly regulations could revive the state very quickly.

It's not going to happen. Nobody is going to turn that place around until the cesspool in the northeastern corner of the state is cleaned out ... that will not happen until someone defeats the unions, crony capital and corrupt democrat machines ... and that's not going to take place in our lifetime!

[Wuli]

With the Dims running the state legislature, his chances are slim to none.

[roofgoat]

“with a corrupt dysfunctional crew”

Rev James Meeks at Board of Ed Administrator. Why not Jesse Jackson.

[neocon1984]

The Feds can print money to ease debt. We pay with inflation and poor investment returns. Illinois has to borrow money and pay to service the debt.

As a life-long (now -ex) Chicagoan, I am not optimistic that Rauner will make much difference. As a “moderate” he cares too much about what the newspapers say. They will relentlessly criticize any cuts in public employment and welfare spending. The problem will only get worse.

The state will declare bankruptcy in less than 10 years. You heard it here first.

[Celtic Conservative]

True enough, but to have a state that is 100 billion in the hole is nothing to sneeze at. As much as people like to beat up on Michigan, it has a balanced budget amendment and its total debt is currently zero.

CC

[facedown]

No. Next?

[raptor22]

Obama’s Illinois Ping

[RayChuang88]

Sadly, I have to agree. :-( It’s going to take the entire state of Illinois declaring bankruptcy under Chapter 9 rules to finally clean up the mess in Cook County—a bankruptcy that could drive the US economy into a potentially serious recession until the reorganization is complete.

[JackOfVA]

Chapter 9 is only for cities, counties and similar sub-divisions. There is no mechanism in the bankruptcy law for a state.

I’m confident, however, that the ultimate game plan is for the deeply indebted states such as IL, CA, NY, to push their liabilities off on the rest of the country via a Federal Government bailout. Grossly unfair to those states that run prudent finances, but he who has the most votes wins.

[raptor22]

OBAMA ILLINOIS PING

[RayChuang88]

I think California will do okay because of the technology and entertainment sectors and New York will do okay because of Wall Street (though there could be trouble if we have another 2008-style economic meltdown).

The solution for Illinois is to use Chapter 9 for Cook County (where Chicago is located) if things in Chicago get out of control. That's probably where most of the economic problems of that state come from.

[SunkenCiv]

• Meeks says Rauner Administration to implement Common Core curriculum
• Illinois Governor Backs Away From No Tax Hike Pledge
• New Illinois GOP governor to deal with worst fiscal mess in the nation
• Governor's Race in FL, MI, IL all Toss Ups
• Obama's Illinois: Food Stamp Growth Exceeds New Jobs
• The Biggest Election of 2014: Bruce Rauner may take the governorship of America's worst run state.
• Il GOP Candidate Rauner ditches GOP dinner, fears link to pastor's conservative views
• Republicans see chance to seize Illinois governor's seat
• Illinois governor's race showcases union fears
• What's behind Illinois' employment collapse?

[DaveA37]

Might be time to get friendly with the neighbor, Scott Walker who bailed Wisconsin out.

[Carry_Okie]

I think California will do okay because of the technology and entertainment sectors

It's been slowly losing the former for twenty years and the latter for the last ten.