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What We Read Today 28 June 2015

Econintersect: Every day our editors collect the most interesting things they find from around the internet and present a summary "reading list" which will include very brief summaries (and sometimes longer ones) of why each item has gotten our attention. Suggestions from readers for "reading list" items are gratefully reviewed, although sometimes space limits the number included.

This feature is published every day late afternoon New York time. For early morning review of headlines see "The Early Bird" published every day in the early am at GEI News (membership not required for access to "The Early Bird".).


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Most of the current news below is about the Greek crisis.

Articles about events, conflicts and disease around the world


  • DWP to unveil plan to capture storm runoff (LA Times)  The idea is to capture rain water as it falls rather allow it all to drain into the ocean and use it to slowly recharge aquifers that the LA basin is currently depleting.  The depletion rates would be reduced (not eliminated) by as much as 5% (or possibly even more) at a cost of $10 - $15 per household user per year. (Numbers in the preceding sentence estimated by Econintersect form data given in the LA Times article.) 
  • State Trooper Is Said to Have Shot David Sweat, the Surviving Prison Escapee (The New York Times)  David Sweat, one of two inmates who escaped from a prison in upstate New York earlier this month, has been shot near the village of Constable, NY which is less than 5 miles from the Canadian border.  Police report he was captured wounded but alive just days after his accomplice, Richard Matt, was killed by police about 12 miles to the south.
  • Why Did FDR’s Bank Holiday Succeed? (New York Fed)  On Sunday, 05 March 5 1933, after a month-long run on American banks, the newly inaugurated President of the United States, Franklin Delano Roosevelt, proclaimed a fourday suspension of all banking transactions, beginning the following day. The nation’s stock exchanges also closed, even though they were not mentioned in the President’s executive order. On Thursday, 09 March, Roosevelt did not reopen the banks as planned; rather, he extended the closure for three days. Americans should have reacted in horror to the President’s proclamation and his decision to abandon his original schedule. Instead, they waited to hear his plan.  Sunday evening, 12 March 12 (his first Fireside Chat) FDR informed the public that only sound banks would be licensed to reopen by the U.S. Treasury: “I can assure you that it is safer to keep your money in a reopened bank than under the mattress.”  Within two weeks, Americans had redeposited more than half of the currency that they had squirreled away before the suspension.  The key was the  Emergency Banking Act of 1933, passed by Congress on 09 March, which established a de facto quarantee for deposits by the Fed, later formally replaced by the FDIC (Fedreal Deposit Insurance Corporation).


Eurozone leaders ooze confidence that Greece’s financial collapse could be easily weathered by the rest of the currency bloc. No one really knows how the chaos, likely if Tsipras wins his referendum on Sunday, will affect the rest of the zone economically and financially. But it is political poison.

For Europe’s leaders, five years of failure in Greece mean that everyone’s a loser.


  • Greece To Close Banks, Impose Capital Controls Amid Looming Default (NPR)  Greek President Alexis Tsipras blamed the European Central Bank for the latest crisis after it decided not to increase the amount of ELA (emergency liquidity assistance) amid a run on the banks that saw people lined up at ATMs, many of which ran dry.
  • Greek crisis: Banks shut for a week as capital controls imposed - live updates (The Guardian)  This is an interesting Twitter log.
  • Greek debt crisis: What are capital controls? (BBC News)  Basically, a capital control is when the government tells you that you are no longer allowed to move your money around freely.  Capital controls can be used to order its banks to impose strict limits on daily withdrawals and overseas transfers of cash. It can also impose other measures such as limiting foreign exchange transactions.  The purpose now in Greece is to prevent euros flowing out of Greek banks - to overseas banks, into a different currency, or to be stashed under the mattress.
  • Social divisions laid bare as Tsipras move pits rich against poor (Financial Times)  The article has interviews with a few Greeks and it seems more like youth (under 40) vs. older Greeks in that non-statistical sample.
  • Greek Capital Controls Could Buy Time But Will Not Change Mood Nor Vote (Forbes)  This is a severe condemnation of the Tsipras government for not reaching a deal: "Greece is asking a lot and offering nothing, screaming loudly about its treatment."  But the column equivocates:  "The European Union, European Central Bank and IMF may perhaps be too strict in their attitude and there is ground for a debate about their role."  This strange essay concludes with:

Nobody can blame Tsipras or Syriza for the mess Greece is in, but they risk going down into history as turning the country’s problems into a historic disaster.

  • Greek debt crisis: Banks to stay shut, capital controls imposed (BBC News)  Greek banks are expected to stay shut until 7 July, two days after Greece's planned referendum on the terms it had been offered by international creditors for receiving fresh bailout money.  A maximum of €60 (£42; $66) can be withdrawn from an account in one day, if one can find an ATM with cash.  Reportedly 60% were not operating (no cash) Sunday.  The Athens stock exchange will also be closed on Monday.  Econintersect:  What can the Greek government do to successfully reopen the banks?  Fior reference. see article above (under US) about the FDR bank holiday in 1933.


The U.S. Stands Out on Labor Force Participation Rates (David Harrison, The Wall Street Journal)  Among eight major advanced economies, all but one — the United States — show gains in labor force participation over the past 15 years, according to a new study by Maximiliano Dvorkin and Hannah Shell of the Federal Reserve Bank of St. Louis.  Econintersect:  American exceptionalism?


June 2015: Unofficial Problem Bank list declines to 309 Institutions, Q2 2015 Transition Matrix (Bill McBride, Calculated Risk)  This is a list actually maintained by a CR contributor named surferdude.  It was first published on 07 August 2009 with 389 institutions.  This was well after the financial crisis crested almost a year earlier and represents a number of problem banks far above the pre-crisis level; so it is not a complete record of banks that could have been included for the entire financial crisis period had the count started a couple of years earlier.  The list certainly would include all FDIC managed bank closures before 07 August 2009 at least back for a year (67 banks) and possibly back to the beginning of 2008 (an additional 34 banks).  For all of 2007 there were only 3 bank failures and an average of less than 4 per year for 2000 through 2006 (average of 3 per year if 2002 with 11 failures is not included).  Here is a summary from this CR post (complete, easy to read tabulation display with the article):

 Since the Unofficial Problem Bank List was first published on August 7, 2009 with 389 institutions, a total of 1,694 institutions have appeared on the list at some point. There have been 1,385 institutions have come and gone on the list. Departure methods include 760 action terminations, 392 failures, 219 mergers, and 14 voluntary liquidations.


Of the 389 institutions on the first published list, 40 still remain nearly six years later. The 392 failures are 23.1 percent of the 1,694 institutions that have appeared on the list. This failure rate is well above the 10-12 percent rate frequently cited in media reports on the failure rate of banks on the FDIC's official list. [Econintersect:  This is reflective of the inadequate status of the FDIC official list.]


Other Economics and Business Items of Note and Miscellanea

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