Friday, 9 November 2007
Kevin Rudd, thanks for joining us.
KEVIN RUDD, FEDERAL OPPOSITION LEADER: Thanks for having me on the program, Tony.
TONY JONES: Now, I'm betting when you took over as Labor leader you never thought in your wildest dreams that interest rates could actually help you win the election?
KEVIN RUDD: Well, all year, Tony, working families have been under financial pressure, whether it's through mortgage interest rates going up, whether it's through the impact on rents, whether it's food and grocery prices, the cost of child care, or the impact of WorkChoices on people's penalty rates and overtime. Working families have been under financial pressure all year. And the problem is Mr Howard has said to them all year that working families have never been better off and he promised them at the last election and misled them that interest rates wouldn't go up again. And that's why we're having this debate today. It's all about whether Mr Howard can be trusted on core things like interest rates and WorkChoices. 'Cause after the next election what we know is that when Mr Howard would hand over to Mr Costello as Prime Minister, Mr Costello's going to take WorkChoices further.
TONY JONES: Let's stick with interest rates for the moment, what's your assessment? Does the rate rise help your chances in the election, or does it boost the Government's case for not taking chances with people who are economically inexperienced?
KEVIN RUDD: Well, as we all know, interest rates are set independently by the Reserve Bank. We accept and respect the independence of the Reserve Bank and where Mr Howard got it fundamentally wrong last time was to mislead people that he could himself make a credible promise to the Australian people that those rates wouldn't go up.
TONY JONES: I'm sorry to interrupt you but the question I asked was essentially boiled down to this, is it a political plus for your chances or a political minus that interest rates have gone up?
KEVIN RUDD: The reason I referred at strength then to the independence of the Reserve Bank is that that is the core truth here. And the problem Mr Howard has got himself into at the last election was misleading people on the question of whether he could himself make that promise to keep interest rates at record lows and having got himself into that difficulty we now have the extraordinary situation of him apologising one moment and not apologising the next and playing word games with all of this. I mean, what it demonstrates overall to my mind is that Mr Howard has lost touch with working families and he's playing semantic games. When the truth is working families are under great financial pressure and he doesn't understand the impact of six interest rate rises on the go, that it's an extra $240 per month for a first home buyer with a mortgage, and on top of that something like nearly $3,000 a year. He doesn't get that. Instead he's playing semantic games in order to try and secure political power for himself one more time. I just think it shows...
TONY JONES: He's said tonight he's put the shoe on the other foot, he said it was Labor playing semantic games with the question of the apology?
KEVIN RUDD: Mr Howard says yesterday he's sorry. Today he says saying sorry is not an apology. I mean, where have we got to? In plain person's English in plain man's English, I mean, if you say you're sorry, you're apologising. What's all this about? I think what it goes to the core of is that Mr Howard is increasingly desperate when it comes to his political tactics. He'll say anything and do anything in order to secure political power. At the last election he judged it politically necessary for himself to make a misleading promise that he could keep interest rates at record lows and at this election he's making the same misleading promise about WorkChoices that Mr Costello won't take that further.
But for working families this is the double whammy. Interest rates going up six times and then WorkChoices, with its effect on wages. And frankly, Mr Howard's credibility as someone to be trusted on interest rates and WorkChoices in the future has been undermined by him engaging in this extraordinary game of semantics which we've seen him do today.
TONY JONES: OK, so to go back to my question, are you identifying the interest rise as a political plus for your campaign or a political minus?
KEVIN RUDD: Well, Tony, I don't engage in the business of political commentary. My objective is to put forward our policies for the future. Our positive plan for the country's future, including our plan to fight inflation for which Mr Howard has not articulated any plan of his own. How the Australian people judge that at the end of the day is a matter for them. But it is of deep and fundamental importance on this whether you can actually trust the person who puts himself up to be Prime Minister of the country when that person, in Mr Howard's case, has been so deeply misleading on the question of interest rates and is now deeply misleading on the future of WorkChoices. That's the core point here.
TONY JONES: When you hear a political question put to you about whether this is advantageous the interest rate rise to your campaign or otherwise, does a little warning bell go off in your head and a flashing light saying, "Stay on message, stay on message," because that's what appears to happen, is it something you can't actually answer, is it, how this effects your own campaign?
KEVIN RUDD: Tony, but I am answering by saying it goes to the question about Mr Howard's truthfulness about being misleading on the question of interest rates at the last election. And I don't as a matter of general principle engage in political commentary and analysis. I am up as the alternative Prime Minister of the country with policies to put to the Australian people. How people react to my policies and statements and how they react to Mr Howard's and his statements is a matter for them. My job is to argue our case, our alternative plans for the country's future as is Mr Howard's responsibility and also note that he as a matter of general principle doesn't seek to engage in what he would describe as political analysis either.
TONY JONES: You evidently were mobbed today by supporters in an Adelaide shopping centre, but the question being asked tonight is why did you leave Nicole Cornes standing by the side of the road to be mobbed by reporters with difficult questions at least for her to answer?
KEVIN RUDD: Well, I was out there campaigning with Nicole Cornes in her electorate of Boothby and we went through the shopping centre. We spoke to lots and lots of voters and we generally got a pretty positive reception. When it comes to dealing with journalists, obviously each candidate has to take that in their own stride. I had other commitments to attend to, not least of which was to find my way here.
TONY JONES: Alright, now you keep talking about new leadership as if voters can expect some big visionary changes and then you announce new policies which either mirror those of the Government or just cautious incremental changes, is that because you believe the electorate is fundamentally too conservative and that they will be scared off by big ideas?
KEVIN RUDD: New leadership means putting out a plan for Australia's future with fresh ideas. What are they? We stand for an education revolution up against a Prime Minister who's disinvested in education for most of his time in office, including early childhood education, including what we intend to do with trades training centres in schools. These are big plans.
Secondly on infrastructure we're out there with a big plan, $4.7 billion for broadband. Mr Howard has been fiddling around for the last 11 years and we're languishing down the bottom of the OECD table. We have big plans when it comes to the future of hospitals in this country. I can't think of anymore fundamental proposal than to say if we can't negotiate a co operative compact with the States in 18 months time we'll seek a mandate for the Commonwealth to take over long term funding responsibility for the nation's public hospitals.
On top of that WorkChoices, Mr Howard's recipe for the future which basically let's people out there to fend for themselves and to have their penalty rates and overtime stripped away, and our approach which is to restore fairness and balance to the workplace. These are fundamental differences before you even get to climate change, Kyoto ratification a 60 per cent target by 2050 on carbon reduction and beyond that a renewable energy target by 2020. These are core fundamental differences between myself and Mr Howard. His political interest, Tony, is to run around the place and to say that on climate change and things like that well, actually there's not so much of a difference. Well, he's a climate change sceptic and a climate change denier from central casting now trying to pass himself off as something else. This is my program, this is what your leadership's about.
TONY JONES: You promised an education revolution, then you gave away in tax cuts $30 billion of money that could have actually been spent on a real education revolution. There must have been a serious debate in the Labor Party about that?
KEVIN RUDD: Well, Tony, put together our proposals on education. You just referred to the tax cuts package. We took nearly $3 billion of that away from people like myself, that is earning $180,000 a year or more, taking that $3 billion away of tax cuts and investing it instead in an education tax rebate for working families to invest in their kids' education. $1500 a year, 50 per cent of those expenses for secondary school kids, $750 a year, 50 per cent of those expenses for primary school kids, particularly in the area of laptops and computer education. We've also got half a billion dollars on early childhood education. Nothing matching from the Government there. And $2.5 billion for trades training centres in each one of Australia's 2650 secondary schools. We have a multi billion dollar program when it comes to an education revolution which is chalk and cheese compared with what Mr Howard has done in ripping money out of the system for most of the time that he's been in office.
TONY JONES: Look, it's been calculated that you started this campaign with $60 billion to play with, now fully half of that has been spent. Extra money has gone, or half of that was spent, in fact, on tax cuts. Extra money went on other things. It's calculated there's about $20 billion left, is that right, is that how you see it?
KEVIN RUDD: We'll make our position plain at the end of the period, the electoral period in terms of what our overall spending commitment will be. I've said repeatedly that we will not be matching Mr Howard dollar for dollar. We've also put forward savings of something in the order of $3 billion and Lindsay Tanner and the expenditure review committee of our Shadow Cabinet's been hard at work at that and Mr Howard's mob haven't put anything forward. In terms of new spending commitments something in the order of $6 billion to $7 billion all focused primarily in the areas of education and hospitals. And these are core areas for the future.
TONY JONES: My point is, is there roughly $20 billion, theoretically left that you could spend on other programs between now and the end of the election?
KEVIN RUDD: Tony, I'm not going to use Lateline to telegraph my punches to Mr Howard, what we're going to spend in the period ahead and to put some sort of number around that. That will be revealed in due season and Mr Howard would not do the same if you had him on this program at the moment. We know exactly what we intend to, we intend to be fiscally responsible about it and we've indicated how much we are responsible by virtue of the savings package of some $3 billion plus we've already put on the table and Senator Minchin the Finance Minister has not done anything of the same for the Government.
TONY JONES: Kevin Rudd, let's look at the main instrument of Government, the public service. As a former professional public servant, what do you think of the culture of the Federal bureaucracy now and are you working on plans to change it?
KEVIN RUDD: Tony, I believe and I'm pretty passionate about this, and you're right I've spent a fair bit of time in the Federal public service as a diplomat in the Department of Foreign Affairs, I'm pretty concerned about the incremental politicisation of the show and I think one of the problems is, and if you look at that pretty thoughtful speech given by Mr Podger, a former senior bureaucrat under the Howard Government, he's concerned particularly about what happens with the independence of the public service.
We are particularly concerned about the impact incrementally over time of performance pay for senior executives in the public service. Because what it does, it tends to push together the short term political agenda of the party in power with what should be the independent professional advice of the public service long term. I'm on about a core proposition, which is the restoration of Westminster. And I would like to see a public service which has within it the best traditions of independence and professionalism and that means that we'll be moving away if we're elected to form the next government from this whole, I think excessive notion of performance pay, which I think incrementally politicises senior public servants.
TONY JONES: You're arguing performance pay, these bonuses actually draw people into the political process who should be independent of it, is that what you're saying?
KEVIN RUDD: I'm concerned about that long term. I think we've got to look at other ways by which we provide incentives of people of talent and ability to be recruited to the public service and to stay there, to be our best advisers into the future.
When I look at the likes of, you know, Ken Henry and those sort of guys and Ken runs the Treasury, he was a good Treasury officer also when Labor was last in office. Finding the calibre of the Ken Henrys of the future is what worries me as a former public servant. Get those people into the system and keep them there and to cause them to conclude that their careers will flourish on the basis of the calibre of the advice they provide, not that they're going to politically accommodate the government of the day. If I look, for example, at the way in which this Government currently has abused things like taxpayer funded advertising, $2 billion worth of ads in their period of office, I just wonder how the public service, for example, can co-exist with a system like that. I think we're getting the system quite wrong.
TONY JONES: It sounds like you're saying heads will roll because senior public servants were involved in those advertisements?
KEVIN RUDD: Actually, I'm not. Part of the restoration of Westminster means ensuring that you don't have some Knight of the long knives of the type that Mr Howard had when he was elected in 1996. I actually believe in the independence of the public service. It's very important. I've seen other models at work and I've worked in other models which are slight variations of it.
My firm belief is that the nation's interests long term is served by a highly professional, independent public service and the best traditions of Westminster. And I believe that that is also in the interest of good government. That's why if we are forming the next government of the country if we're elected, what I want to see is the best mandate possible out there providing us with the best ideas and best tempering of the disciplines of public administration which become necessary when it comes to implementing Labor's program.
TONY JONES: Finally, Kevin Rudd, many people are still trying to work out what sort of a Prime Minister you would be, the comparison with Tony Blair is often brought up, do you shy away from that?
KEVIN RUDD: People make their own judgments about who I'm like and not like, Tony. They'll sort that out in due season or they've made their judgments already. I'm a Labor moderniser. Always have been, always will be and what that's on about is good evidence based policy in terms of producing the best outcomes for this nation, carving out its future in a pretty uncertain century where things fundamentally are changing. The rise of China, the radical changes in the Asia Pacific region, the globalisation of the economy, great fundamental technological challenges like the digital revolution, the future of broadband, to be part and parcel of all that as a Labor moderniser, and to be serious about what I would describe as enabling our community through an education revolution. And through the proper provision of basic services like health and hospitals to be part and parcel of the country's future.
TONY JONES: Let me ask you this, what Australian Prime Minister do you most identify with?
KEVIN RUDD: Oh, I take bits and pieces out of them all. You know, I'm a Queenslander...
TONY JONES: John Howard, as well?
KEVIN RUDD: (laughs) That's drawing a long bow, Tony. Andrew Fischer, I'm a Queenslander, there's a great guy who was an Australian Nationalist who came to this country from Scotland and grew up I think in the Ayrshire Miners' Union and taught himself to read by going to Presbyterian primary school. These guys all had their levels of inspiration. Curtin, saving the nation the dark days of World War II and also you draw inspiration from the likes of Whitlam and Hawke and Keating in their engagement with China and anticipating well ahead of the curve the emergence of the Asia Pacific century and the great reforms of the Hawke and Keating Government when it came to internationalising the Australian economy and paying a political price for it. But that's reformist, modernising Labor leadership and it set up this economy with an ability to survive the Asian financial crisis and I see no such parallel reform effort by Mr Howard or Mr Costello who frankly on the reform agenda, micro-economic reform in particular, has gone asleep at the world.
TONY JONES: John Howard used the phrase "comfortable and relaxed" to explain what Australia would be like under his leadership. What would you like to say Australia should be like if you become Prime Minister?
KEVIN RUDD: Competitive, internationally competitive, in a very difficult and changing world, but never, ever throwing the fair go out the back door. That's the ethos of Labor. That's what I stand for as a Labor moderniser, as well.
TONY JONES: Kevin Rudd, we will have to leave you there. We thank you very much for taking the time. Hopefully we'll see you again before the end of the campaign. Thank you.
KEVIN RUDD: Thanks for having me on the program, Tony.
Thursday, 8 November 2007
1 Dramatically improve the energy efficiency of electrical goods
Let’s face it, not many of us are likely to ditch the telly to help save the planet. So if we must have a wealth of white goods, a heap of hi-fi and a profusion of PCs, we have to cut their energy use down to size. Tony Juniper sums it up nicely. ‘All electrical products to embody the most energy efficient technology,’ he says. Penney Poyzer sees a world in which all white goods go to the top of the class, having to meet a minimum ‘A rating’. Government could also encourage the super efficient with a scheme that meant ‘purchasers of A++ and Triple A rated appliances, eco kettle etc could claim back tax.’ This could include things like induction hobs, which use around 50 per cent less electricity than a conventional hob. Ian Christie agrees, suggesting we vary VAT on consumer goods ‘according to CO2 emissions and energy efficiency rating’. And it’s goodbye to stand-by. It should be banned, say Penney and others. She tells us about a great little gadget called Bye Bye Standby, ‘a brand new energy saving solution designed to reduce the daily energy consumption of electrical devices. With the equivalent of two power stations of electricity being wasted by equipment left on standby in the UK each year simple, gadgets like this can help. It costs £19.00 and can pay for itself in a year.’ And while we’re at it, ‘ban patio heaters now,’ says Ian Christie. So remember, when it comes to saving this lovely old planet of ours, less is definitely more.
2 Religious leaders to make the environment a priority for their followers
The appeal comes through loud and clear from our panel religious leaders need to make the planet their priority. ‘The world’s faith groups have been silent for too long on the environment,’ says Nick Reeves. ‘It is time that they fulfilled their rightful collective role in reminding us that we have a duty to restore and maintain the ecological balance of the planet.’ Penney Poyzer puts it rather more graphically. ‘Organised religion of all denominations, PLEASE get your congregations to make caring for our rapidly decomposing, landfill site of a planet the utmost priority,’ she says. Chris Goodall agrees, urging different faith groups to come together. ‘They need to form a coalition to encourage their followers to set an example to the rest of the population,’ he says. Paul Brown argues that Christians, Muslims, Hindus and others already believe that it is morally wrong to damage the environment. The problem is that many people simply choose to ignore this. And it’s not just religious leaders that need to do their bit, says Dr Mark Everard. ‘Human responsibility for the future of our world calls for a reverence for what is natural that is deep enough to provoke proportionate action to protect it.’ (Also see entry no. 24.)
3 Encourage the widespread use of solar power throughout the world
So many of our panel singled out solar power as the big renewable energy winner of the future that we were compelled to give it its own entry. In some cases, this would simply mean going large, says Jonathan Porritt. He calls it ‘Concentrated solar power in other words, very big solar panels’. Paul Brown takes up the theme, saying we should be ‘using giant mirrors in tropical and desert regions to direct the sun’s rays onto a liquid so it boils and turns turbines to make electricity. This could power the whole of Europe from the Sahara desert.’ This kind of technology already exists, there’s one such solar thermal power plant already operating near Seville in Spain and another in the desert of California. But little will also go a long way, says Chris Goodall. ‘Solar electricity has been held back by the very high cost of producing large slabs of silicon. Advances in nanotechnology seem likely to hugely cut the cost of the raw material. We can expect very thin layers of photovoltaic material to cover large parts of buildings at a reasonable price.’ (Also see entry no. 5.) Fred Pearce agrees, saying that mass production of construction material incorporating solar panels offers a ‘viable global solution to built environment energy needs’.
4 Secure a meaningful post-Kyoto treaty on reducing the emissions that contribute to global warming
As a means of getting a large number of countries serious about reducing carbon emissions, the Kyoto Protocol was a landmark agreement. But it’s just a start, and a pretty modest one at that. Many of our panel of experts recognise that, when it comes to Kyoto’s successor, it’s crunch time. Dr Robert Watson says it needs to be ‘a long-term, equitable, regulatory framework to limit human-induced climate change to two degrees centigrade above pre-industrial levels’. Ian Christie argues that this means agreeing tougher targets than most have so far envisaged – we need to aim at an 80 per cent cut in CO2 by 2050, and include USA, China, India and others. This has to be based on support from citizens, businesses, local authorities, NGOs and faith groups, ‘with associated behaviour change pledges,’ he says. It also means using every mechanism available, adds Tony Juniper – including emissions trading, tax incentives, regulations and public awareness campaigns. And what happens if the targets are too soft? Paul Brown warns that anything less than firm political commitment, and that means legally binding agreements, ‘spells disaster for the Earth’.
5 Encourage households to generate much more of their own power
The energy revolution starts at home, say our experts. It’s what David Boyle describes as de-centralised energy – ‘every lamp-post, every home, a net producer’. But how? First of all, says Noel Wheatley, EC member states need to accept that electricity production and distribution can be owned separately – known in the business as ‘unbundling’. Then, says Paul Brown, we need small scale electricity generation that is costeffective and works well, particularly wind turbines and solar panels. These must include combined heat and power and heat pumps, he says. Technology is moving fast in this area, so we shouldn’t have long to wait. Paul and Penney Poyzer argue that people need more help and incentives to fit these kinds of appliances. The government should also invest properly in low income communities and train local people to construct and install low cost renewables. Penney and Ian Christie say we should copy the Germans, who have made energy companies commit to purchasing domestically generated electricity from solar panels at four times the market rate. This has resulted in massive take up by the public. And we should embrace whizzy technology – like Power Paint. ‘Scientists from New Mexico State University have used nanotechnology to create a film that uses plastic to form solar cells so thin, they can be applied like paint,’ says Penney. ‘This material can be formed around any shape. It could revolutionise the market.’
6 Introduce tax incentives to "buy green"
Death and green taxes – perhaps the only things we can be certain of in future. And what may be punitive to some are to others simply an incentive to do the right thing. Taxes and incentives could phase out damaging technologies where better ones exist, says Matt Georges – light bulbs, cars and electrical goods being obvious candidates. ‘Every product that reduces the nation’s carbon dioxide footprint (for example insulation) should be zero rated for VAT and clearly labelled as such,’ suggests Paul Brown. Making green stuff cheap and bad things expensive will mean that people will buy better whether or not they’re interested in the environment, says Pete Bailey. Other ideas to help us swallow any bitter little green pills include eco reward cards and employee incentives. And how about this for a novel idea from David Boyle – local, city and regional currencies. ‘They mean we use resources more efficiently,’ he says – something people have already started doing in Totnes.
7 Tackle the rapid growth in aviation emissions
It’s become the environmental battleground of our times, with protestors at Heathrow stealing the headlines for weeks in the summer and political parties ramping up their policies as far as they dare. For starters we’ll need to fly less. Again, trading could be the answer, says Chris Goodall. ‘In the UK, I’d give everybody a voucher for perhaps 2,000km of air travel a year. If you want to travel more, you’d have to buy other people’s vouchers.’ Or simply make it a good old fashioned case of the polluter pays – ‘at least doubling the price of aviation fuel immediately with steep increases thereafter,’ recommends Paul Brown. ‘Additional airport taxes for short haul flights where alternative public transport is available would also be helpful,’ he says. Stopping airport expansion will also help – Ian Christie calls for an ‘immediate moratorium’ in the EU. We’ll also need to fly better. Tony Juniper says a new low carbon passenger aircraft design will help. The day of the ecojet has arrived.
8 Wean ourselves off dependency on petroleum
‘Our love affair with fossil fuels is killing the planet,’ says Nick Reeves ‘And it is set to continue as the arctic polar ice cap melts to reveal new sources of fossil fuels that will harm the planet further.’ Mark Everard agrees, saying the addiction will only lead to a painful bout of cold turkey if we don’t get the alternatives sorted out. This will include wars, as ‘emerging economies out-compete us economically for black gold’. One place to start these preparations is locally. Penney Poyzer takes her hat off to Transition Towns (see feature in YE16) – ‘a way for rural and urban communities to work positively together to face a world beyond oil. It was “unleashed” in Totnes and we recently started a group in Nottingham. We are not wild-eyed survivalists, just ordinary men and women with an eye to a potentially difficult future.’ For Fred Pearce, kicking the habit means just that – he wants to see burning coal ‘banned worldwide’.
9 Encourage individuals to buy less non-essential "stuff "
If we have to buy, buy well. ‘For example, only purchase products that are packaging free and that were made or produced under fair labour conditions,’ says Nick Reeves. Paul Brown takes this idea a step further. ‘Fairtrade has now become a highly successful international network. This needs to be extended to look at the damage that some trading practices do to the environment. This is already taking place with international environment groups and aid agencies exposing the bad practices of businesses in developing countries. This must be expanded.’ And backed up by a new corporate accountability convention negotiated in the UN, says Tony Juniper – involving binding sustainability rules for businesses. Or avoid new stuff and buy a second hand alternative, says Chris Goodall. Better still, don’t buy at all. ‘My hope is that we come to see consumption as slightly naff, something you only do when you have to,’ he says. Finally, let’s hear it for co-ops. Penney Poyzer sees the future in a a type of company ‘democratically managed by members, with principles rooted in climate change and reduction of resources.’
10 Dramatically improve public transport
Not so much goodbye car and aeroplane as hello a bunch of irresistible alternatives. For Paul Brown this means high speed trains replacing short haul air flights, and encouraging freight back onto the rails using taxes. For Ian Christie it’s investment in new routes for light rail, trams and bicycles. And double decker alternative fuel buses in all UK cities over 100,000 people, to be funded via revenues from subsequent road pricing. And Julie Foley wants road user charging in congested urban areas. Finally Chris Baines is fed up with waiting for buses, not knowing when one (or three) will arrive or where exactly they’re going – all of which could be resolved by intelligent, real-time information displays.
11 Aim for a "zero waste" culture
We’re getting a lot better at recycling in the UK, but we’re still pretty rubbish. That has to change. It would help if we encouraged markets for recycled materials, says Martin Bigg. It would also help if manufacturers had to take back more products at the end of their life, says Tony Juniper – recyclability would become part of design. We also had two nominations for a zero waste culture – an excellent but longerterm aspiration – and a plug from Penney we couldn’t ignore. ‘If you are not a member of Freecycle, I urge you to join. It is simple. Say you have 20 white bathroom tiles you can’t bear to chuck out. You put them up on the site for free, someone locally wants them and comes to fetch them. Keeps usable items out of landfills.’
12 Install "smart energy" meters in all homes
When it comes to our energy consumption, with our electricity meters stashed away showing readings that don’t mean much without a calculator, out of sight is generally out of mind. That’s why Jonathan Porritt and others want us to have ‘smart meters – making the connection between electricity consumption, the bills we pay, and emissions of C02’. Penney Poyzer recommends forking out £60-80 on Electrisave – ‘it makes how much energy is being used tangible and it is quite addictive to see how many things you can switch off!’ Paul Brown says it would help if every house had an energy audit, including ‘subsidies for those not able to afford effective measures to reduce carbon emissions.’
13 Introduce a measure of economic success that includes the environment
It can’t buy you love, and it can’t buy you happiness either, according to many studies. So let’s stop seeing it as the one big measure of success. Instead, says Tony Juniper, we need a ‘new ecological economics in which the value of nature is reflected in how national accounts are calculated and which seeks to improve human wellbeing, not just increase GDP’. Nick Reeves agrees. ‘Economic benefits must be measured in terms of improved quality of life and care for the environment.’ If this sounds like wishful thinking, Fred Pearce predicts that such a shift will be forced upon us: ‘Catastrophic collapse of West Antarctic ice sheet and three-metre rise in sea levels triggers collapse of global insurance system and revolution in finance system on “sustainable” model.’ Grim, but effective.
14 Fully harness Britain's huge potential for generating renewable energy
The winds of change may be blowing through our energy industry, but not hard enough. We have some of the world’s best renewable energy resources on our doorstep, including 40 per cent of Europe’s wind power. But it’s the sea that really floats our panel’s boats. Paul Brown and Chris Goodall are particularly keen on undersea turbines to harness tidal power while Penney Poyzer says the UK’s potential for energy generated from waves around our coastline is ‘massive’. And how about ocean energy conversion – ‘using the difference in temperature between surface ocean water and deep sea to extract heat and turn turbines’, says Paul Brown. ‘It’s being developed by the Japanese and is useful for all tropical countries with an ocean coast.’
15 Seek alternative, less damaging sources for biofuels
‘Conventional biofuels are a complete disaster, financially and environmentally,’ says Chris Goodall. ‘We are capturing only a fraction of the energy value of crops, and then we are using a lot of fossil fuels to process this energy into a liquid fuel. We may see cost competitive technologies for breaking up the cellulosic material of plants within ten years or so. This means that we will be able to use most organic wastes to make fuels much more efficiently.’
16 Bury carbon dioxide from power stations underground
Carbon capture and storage (CCS) involves trapping CO2 and storing it underground, for example in porous rocks under the sea. Chris Luebkeman says this should be mandatory for all new coal-fired power stations, ‘together with an aggressive programme to convert existing coal-fired power stations.’ Chris Goodall says that economics are holding this back. ‘At the moment, CCS approximately doubles the cost of producing electricity from fossil fuels. A global price of carbon should eventually make it economic to invest in CCS facilities at all power stations. Without this, we really are in a mess.’
17 Encourage hydrogen fuel cell technology in cars
Does our love affair with the motor car have to come to a screeching halt? Not necessarily. Tipped by many to take over from oil, hydrogen fuel cells could be powering many forms of transport within the next decade. Inside each cell, there is a chemical reaction between hydrogen and oxygen that creates electricity. The only emission from this process is water. Full speed ahead, then? Not quite. We have to produce the hydrogen in a way that doesn’t involve using fossil fuels. Then we’ve got to get the stuff to the vehicles with hydrogen fuel cells, a massive infrastructure challenge. But with the US serious about this technology and major car companies developing plenty of prototypes, fuel cell vehicles are on their way.
18 Implement government policies to control global population growth
Population growth – it’s environmentalists’ elephant in the room. But we ignore it at our peril, says Nick Reeves. ‘Global population is now six billion and is projected to be 11 billion by 2050. Scratch the surface of any environmental problem and it reveals population growth, and the way we live our lives, as the root cause. The need for a population policy has never been more urgent. While governments continue to see big populations as an indicator of economic strength, with a place at the top table of the UN guaranteed, the population problem will escalate and lead to environmental catastrophe.’
19 Reach international agreement on preserving rainforests
The rainforest – for many greenies, that’s how it all started. But we still haven’t brought the alarming rate of deforestation under control, which means we’re still losing one of the big things regulating CO2 levels. Tony Juniper says we need a new accord to do the job. But according to Chris Goodall, it won’t come cheap. ‘The rich northern countries are going to have to pay for poorer countries to retain their forests,’ he says. ‘Without an economic incentive to keep trees, they will disappear.’ And it will help if we stop buying products made out of wood from these precious forests. Ian Christie calls for a ban on all such timber imports.
20 Create better incentives to improve energy efficiency in the home
You don’t have to live in a BedZed (see entry no. 46) to live the green dream. In fact your current dwelling will do nicely. ‘In the home, retrofit water and energy saving devices,’ says Nick Reeves. And make it cosy. ‘Rather than buying a cheap offset when you go on holiday by air, spend £100 improving your home insulation,’ says Chris Goodall. ‘It will have much more effect.’ Ian Christie says we could really make this happen if government provides incentives for cavity wall insulation. He’d also like to see increased use of straw, hemp, tyres and cob for buildings with high insulation performance.
21 Create sustainable trade agreements
David Boyle and Fred Pearce have the World Trade Organisation in their sights. David suggests turning it into ‘a watchdog for making trade fairer and greener’ whereas Fred recommends creating ‘a World Environment Organisation’ to counterbalance it. Tony Juniper says we should scrap environmentally destructive “free” trade agreements in favour of ‘a new sustainable trade agreement’.
22 Encourage the use of greener cars
Hammer the gas guzzlers? You bet, say Paul Brown and Julie Foley. And the converse should apply too. ‘Small economical cars should have progressively lower taxes in accordance with their carbon footprint, and those using alternative fuels should be free of tax,’ says Paul. But we should also force manufacturers to make greener cars, says Chris Goodall. ‘Better still, people should start to share low emission cars between households. It is absurd that huge weights of metal spend 95 per cent of their time sitting unused in the driveway.’
23 Grow your own fruit & vegetables
‘Growing your own food, foraging for wild food in season and composting what’s left will not only reconnect you with the land in which you live but will also have a massive impact on your carbon footprint,’ says Donna Armstrong. ‘Eating apples from New Zealand wrapped in clingfilm on a polystyrene tray when it is apples season in England is crazy!’ But what if we have nowhere to grow our own? Penney Poyzer with another brainwave. ‘Central government should pass a law that requires that all public parks should allow a minimum of 30 per cent of land to be converted to public fruit and nut orchards and community held allotments producing organic produce for local sale.’
24 Work together with the Earth's natural systems
Gaia, hippies and home made clothing? Well, not exactly. A ‘stronger spiritual connection with the Earth’, as Tony Juniper describes it, doesn’t have to be an organic muesli-crunching experience. It’s about working with natural systems, rather than against them. ‘In a modest way this has been the theme of the wildlife gardening movement over the past 30 years,’ says Chris Baines. ‘But it needs to extend to all land and water management, to waste management and to energy production’. Chris Luebkeman calls it permaculture – ‘living and designing in cooperation with nature, putting back more into the Earth than we take.’
25 Protect flood plains
Summer reminded us that floods, like we’ve never known before, are here to stay. So we’d better get used to dealing with them. Nick Reeves thinks that making a little more room for them will go a long way. ‘Designate flood plain as “Blue Belt” ,’ he says, ‘a planning device to protect flood plain from inappropriate development and to protect people and property from flooding.’ Nick also implores us to ditch the decking. ‘Domestic gardens account for around 500,000 hectares of green space and are important for absorbing water runoff.’ Penney Poyzer has a rather different solution in mind – ‘the floating Dutch house, a clever solution that is half house, half boat! When sea levels rise, so do the houses as they are built on a platform that can rise up to two meters.’
26 Local, State/Provincial governments to show climate change leadership
If nations can’t sign up to big binding CO2 targets, look instead to the cities. Ian Christie says that if they step up the pace promoting radical climate action, they could ‘out-do national governments and pressure them into showing real leadership’. It’s something we may already have witnessed in the US and, as John Sauven points out, it can be done through networks. ‘By sharing the best practise initiatives on reducing greenhouse gas emissions and learning from each other, the C40 Climate Leadership Group of cities has the opportunity to act as a catalyst for change globally. Given that 75 per cent of greenhouse gas emissions come from our cities this initiative is crucial.’
27 Become part of your community
Chris Goodall recalls the words of an Anglican bishop. ‘He said that a satisfying life is one at the heart of a community. More of our time needs to be spent locally, more of the things we buy should come from the people we live among. People needed to be rooted in a physical location, not transient consumers moving from place to place.’ Penney Poyzer puts her finger on exactly why. ‘The spirit of co-operation is what makes our communities strong; it is the glue that enables groups of people to share work, to make the most of resources and above all to care for each other.’
28 Protect Biological Diversity
People need to wake up to wildlife, says Mark Everard. ‘Without it we have no life, health, profitability or quality of life. It ain’t just altruism about fluffy bunnies!’ Tony Juniper says we need to back up the hearts and minds stuff with some good old fashioned legislation and calls for ‘clearer binding targets to be incorporated into the Convention on Biological Diversity’.
29 Significant penalties for environmental crimes
Here’s an entry we couldn’t possibly comment on – what Tony Juniper describes as ‘fully resourced environmental protection agencies with sufficient powers to make a far bigger difference’. Paul Brown is on the same wavelength, wanting us and others to publish details of all infringements, enforcement notices and levels of pollution. ‘This “naming and shaming” is done but not enough,’ he says.
30 Better education on environmental issues
Penney Poyzer wants us to stop dissing teenagers and instead help them get to grips with their environment. ‘The education system does not provide our young population with the skills necessary to face the world now – let alone a world that will be very different as they approach their middle years,’ she says. Ian Christie has a cunning plan for what he describes as disaffected urban youth: ‘sponsored reconnection to nature programmes and radical urban greening plans.’
31 Ride a bicycle
The bicycle has never been a more potent icon of environmentalism. And it’s not just the zero-emission ride to work that gives it a special place in our affections. It’s a great way to explore places, to get to know your environment better. You won’t hear much birdsong or catch site of many fluffy things (unless you count dead ones) thundering down an A-road at 50 mph.
32 Protect our oceans
The UK Government is considering better ways to look after our seas right now. They’re badly needed, says Ian Christie, and could become a model for the EU and beyond. Part of the solution will lie in outright fishing bans – for ‘particular zones and on vulnerable species’ and ‘on most damaging net types and deep dredging equipment.’ Some of the damage could be repaired by those responsible, argues Chris Baines. ‘Oil and coal should be taxed at source, through the relatively small number of extraction companies, and the tax hypothecated to reverse marine pollution. At present this is an environmental issue that falls between national jurisdictions.’
33 Introduce a personal carbon footprint allowance
‘Every family should be asked to consider its carbon footprint and how it can be reduced by means of a personal carbon footprint allowance,’ says Paul Brown. David Miliband floated just such an idea last year, recommending personal swipe cards to store our carbon points on. And the points can be traded, says Paul, ‘so that old age pensioners on low incomes that do not travel anywhere can financially benefit from those wishing to use cheap air travel.’ Clever stuff. And fair.
34 Community led decision making on environmental impacts
‘Those who feel environmental impacts tend not to be the ones making decisions about them,’ says Matt Georges. Give ordinary folk more say in how their local environment should be improved and they’ll take much more care of it themselves. And it doesn’t have to end there. ‘All UK Government-funded science and technology research councils’ work should be driven by inputs from citizens panels,’ says Judy Jones. This would mean a ‘community led approach, not a top down, imposition of target-driven corporate organisations with huge budgets to burn.’
35 More durable, less consumable products
What do most of us do when our toaster or TV packs up? Chuck it. A new one’s far cheaper than a repair job. Tony Juniper and Chris Goodall have had enough – it’s time to make things that last, and then look after them. ‘Durability and longevity must become more valued,’ says Chris. ‘We must see the goods that last as more beautiful than those that do not.’
36 Make people aware of climate change impact on their own environment
People will only start to really care about climate change when its impacts are plonked on their kitchen table, says Penney Poyzer. ‘Local impacts, rather than global pictures are what will enable people to focus on what they need to plan for,’ she says. Judy Jones suggests a version of Google Earth, showing how people’s environment could change, might do the trick – ‘so that anyone can tap in their postcode to access forecasts of what their local area might actually look, sound and feel like’.
37 Use algae as a biofuel
Nothing like a bit of primordial soup to calm things down, say Chris Goodall and Paul Brown. ‘Isaac Berzin, a rocket scientist at Massachusetts Institute of Technology, is using algae to clean up power-plant exhaust,’ explains Paul. ‘He bolted onto the exhaust stacks of a 20 MW power plant rows of clear tubes with green algae soup inside. The algae grew happily, gobbling up 40 per cent of the carbon dioxide for photosynthesis. The algae is harvested daily and its oil extracted to make biodiesel for transport use, leaving a green dry flake that can be further processed to ethanol, also a transport fuel’.
38 Get all sustainability knowledge into the public sphere
Let’s not keep a grasp of green all to ourselves – if you love the planet, set your knowledge free. Tony Juniper says Government can do plenty more to ‘mainstream sustainability ideas across all functions of national administrations’. And he has a cracking suggestion for going global with the spread of sustainability – use ‘officially-sponsored sustainability excellence academies’ to share best practice.
39 Environmental social networking
If the internet can spawn a social revolution (think Facebook and MySpace), why not an environmental one? ‘Green blogs and websites, such as the US-based Treehugger site, are a rapidly expanding phenomenon that shares information on every aspect of greener living and working,’ says Penney Poyzer. ‘Local groups can easily share information – such as car sharing networks – and develop local trading schemes that encourage sharing of resources and skills.’
40 Downsize where possible
In an era when everything is super, extra, hyper and mega, it’s time we stopped belittling little. ‘For most services, there is very little evidence of any economies of scale coming from huge and energy inefficient buildings,’ says Chris Goodall. ‘Schools of 3,000 pupils need to be replaced with ones of 300. Hospitals need to be smaller and more under the control of their local communities with only rare diseases treated in regional centres.’ Penney Poyzer reminds us that EF Schumacher would surely have agreed.
41 Global carbon price must be implemented
‘Without a global carbon price, the planet is finished’ says Chris Goodall. ‘Getting agreement is going to be ferociously difficult, but at an international level getting everybody to agree to a figure of about $60 a tonne of CO2 is the world’s major public policy challenge. With this price, it should make sense for every fossil fuel power station around the world to capture its carbon. It would need to be very much higher to get substantial changes in motor and aviation fuel use.’
42 Choose less packaging
‘Packaging has become a blight on society and requires regulation to control its use and to encourage much less of it,’ says Nick Reeves. It’s a viewpoint the supermarkets have some sympathy for – many have committed to making voluntary reductions. Are the days of the gratuitous cardboard sleeve numbered? We certainly hope so.
43 Continue to phase-out of ozone depleters and greenhouse gases
Jonathon Porritt urges us not to forget the Montreal Protocol – ‘still securing the phase-out of ozone depleters and greenhouse gases, and absolutely relevant as an exemplar of what we could be doing on other issues.’ Wise words – a few days after Jonathon sent this, top UN environment officials highlighted how mutually supportive the Protocol is with climate change goals.
44 Don't waste energy, reuse it
All waste incinerators to be linked to CHP [combined heat and power] for local electricity and heating,’ says Ian Christie. If we are going to burn our rubbish, then we should reap the benefits. In South East London one such incinerator was designed to supply community heating to 10,000 homes. It never happened, although the plant can generate up to 35MW of electricity.
Basically we’re talking eco-communities, with a little help from World Wide Fund for Nature and BioRegional. Imagine tomorrow’s new housing developments all resembling Beddington’s Zero Energy Development with all the glitches smoothed out. No waste, no carbon, no hassle. Bring it on.
46 Renewable energy boom in China and India
‘Import cheap renewable energy technology from China,’ says Penney Poyzer. ‘We need to encourage this kind of positive trade.’ Quite right, as long as it’s manufactured greenly. In YE14, Jonathon Porritt even conceived of a world ‘where China and India will be leading us on a journey to a more sustainable future’. And why not.
47 More eco-learning centres
So iconic, so many visitors, so vital for rare plant species – so let’s see more inspiring centres of eco-learning built around the globe. And, like the Eden Project, make them functional, useful places, not just somewhere to gawp and get the t-shirt.
48 Replace polar albedo
If we must have ‘climate engineering’ technofixes, then forget about seeding oceans with iron and deflecting sunlight via space shields, says Ian Christie. ‘Instead, replace lost polar albedo and lost ice cover by creating artificial floating reflective “floes” (which will help the polar bears too)’.
49 More clothing, less heating
‘We need to stop the inexorable rise in home temperatures in the winter,’ says Chris Goodall. ‘This is a cultural issue; how do we persuade people to adapt to the seasons by adjusting the number of layers, not the setting on the thermostat?’ How about a brisk winter walk around the block – it makes 18C in your living room seem pretty toasty.
50 Make environmentalism popular
I’m not a plastic bag, Howies, Thom Yorke – green is pretty hip right now. And, ignoring some of the hypocrisy and muddled thinking, that must mean it’s finding new devotees. Of course the more its coolness becomes mainstream, the less cool it becomes. But so long as it’s here to stay, from high street to Hollywood, we’ll settle for that.
The Associated Press said today that AP, Reuters, and Agence France-Press will not cover the first cricket Test match between Australia and Sri Lanka in Australia because of a dispute with Cricket Australia (CA) over the terms and conditions CA is requiring for media credentials.
The test match starts Thursday and the wire services have agreed today to tell their clients that they will not be covering it, creating a print news blackout of the event.
Dave Tomlin, the associate general counsel for news for The Associated Press, said the main issue in the dispute is CA's insistence that news agencies pay CA for the right to license photos of CA events to editorial users, rights to distribute news and images from CA events to online news publishers, and the assertion by CA of an intellectual property interest in stories and images produced by journalists at CA events.
"We want very much to cover Cricket Australia, and were still hoping that things will work out, Tomlin said. "But CA is making demands it would be wrong for us to give in to."
Gianni Merlo, the president of AIPS, an international organization of sports journalists, told the Sports Journalists' Association that "It is of crucial important that the media stands together to oppose the increasing number of attempts to dictate the way the press does its job."
Today Monique Villa, the managing director of media for Reuters, released the following statement to clients of the news service:
Reuters is suspending its coverage of the Australian Cricket team's activities in Australia with immediate effect. Starting with the first test against Sri Lanka in Brisbane which opens on November 8, Reuters will not be covering matches, press conferences nor other activities involving the Australian team across text, pictures and TV.
Reuters regrets this course of action. However, press freedom and protecting the interests and coverage rights of our global client base is of key importance to Reuters. Faced with unacceptable accreditation terms imposed by Cricket Australia, including the payment of a license fee to distribute news from matches and events, Reuters is unable to continue reporting as planned.
Reuters will continue discussions with Cricket Australia in the hope of reaching a resolution as a part of the News Media Coalition. Reuters would like to resume coverage of Australian cricket, to provide the world's media with premium, timely text, photographs and TV. However, freedom of the press and our editorial integrity are at the core of our business, and these must be respected.
Villa told the British newspaper The Guardian that she was hopeful the dispute would be resolved in time for Thursday's match but she cited several points of contention.
"The accreditation terms are still unacceptable to us because they still state that all intellectual property rights for text, data and photos will be owned by Cricket Australia. This is totally unacceptable," she told The Guardian. "We never give intellectual property rights to anybody."
"If we have not found a solution on Thursday, which is the day of the first game between Australia and Sri Lanka it's a disiater for Sri Lanka because they will not have access to our pictures," Villa said.
Reuters, AP, and AFP said the decision by CA to control the rights and demand payment for credentials threatens the wire services' integrity. News agencies do not pay sports organizations for the right to cover sporting events or news. CA says they own the rights to images taken at their matches and have demanded payment from the wire services and agencies to license the photographs for editorial use. More than 30 media organizations have come together to fight CA's attempt to control a free press.
The Australian newspaper The Age reports that CA had hired a private company to take photographs for them and sell the images to the media. The story did not name the company, but it is believed to be Getty Images.
Getty Images today confirmed that they are the official photographic agency for Cricket Austrailia, but Getty Images has also joined with the wire services in the editorial boycott. "We will continue to fulfill our commercial photographic obligations," Getty's Alison Crombie told News Photographer magazine today from London. "However, until this dispute is resolved, Getty Images will not cover any Cricket Australia events from an editorial perspective." Crombie is the senior director for public relations for Getty Images for the European, Middle East, Asian, and Asian Pacific regions.
"This is another sad example of a growing worldwide trend to derive financial gain from sporting events while at the same time controlling the news," NPPA general counsel Mickey H. Osterreicher said today from Buffalo, NY. "Whether it be a local scholastic athletic association or an international sports league, the result is the same – managed news going to the highest bidder. I am glad to see these news organizations continuing to hold fast against the type of power grab that attempts to undermine a free and unfettered press in favor of increased profits and image control."
At one news organization, a veteran editor says that some of Australia's sports leagues have been trying to partner with one of Australia's major newspapers to "lock up" coverage, keeping others out.
In September a similar incident happened with the International Rugby Board tried to impose restrictions on the media, limiting photographs and video published on the Internet. More than 40 media organizations came together to resist the attempt and threatened to boycott the Rugby World Cup and an agreement was reached only hours before the opening match, which was also set in Australia.
Wednesday, 7 November 2007
Steve Price, the conservative supporting 2UE Broadcaster yesterday hurried back to Sydney armed with what he believed was ammunition to sink Labor's chances at the impending Federal Election.
Only hours prior, Price had introduced himself to the former Midnight Oil front man in a Qantas Chairman's lounge at Melbourne Airport.
Interrupting the conversations of both Mr Garrett and Nine Network's Entertainment presenter Richard Wilkins, the discussion turned to a potential Labor Government.
Asked about the "me-too" policy of Labor, Garrett "jokingly" responded by saying that all that would change under an elected Rudd Government.
That was all Price needed to hear. Hours later he was broadcasting on 2UE, claiming that Labor would back flip on all its promises, and was simply copying to inherit the powers of a Federal Government.
What wasn't disclosed by much of the media, with the exception of The Age and a couple of others, is that Price's own wife, Wendy Black, is in fact an advisor to Liberal MP and Workplace Relations Minister Joe Hockey.
The conflict of interest was glossed over by most media agencies, including the Australian Associated Press (AAP), who this morning notably delivered news text to this very site (scopical.com.au), with the glaring exception.
AAP, 45% owned by conservative backing media magnate Rupert Murdoch also yesterday failed to include comments of Nine's Richard Wilkins, who dismissed Garrett's comments as "off the cuff".
Black's association with the Howard led Government was today confirmed by the office of Mr Hockey, however Mr Price was unable to be contacted.
Is it possible that Price would prefer to keep a second income to his own home, hence allowing the Government to continue its power and therefore the continuing advice of his own wife?
Scarcity could dictate the terms of international relations, according to Leon Fuerth of George Washington University, one of the report's authors.
Global cooperation based on a resource-rich world could give way to a regime where vital commodities are scarce, Fuerth said at a forum to release "The Age of Consequences."
"Some of the consequences could essentially involve the end of globalization as we have known it ... as different parts of the Earth contract upon themselves in order to try to conserve what they need to survive," said Fuerth, who was national security adviser to former Vice President Al Gore.
Rich countries could "go through a 30-year process of kicking people away from the lifeboat" as the world's poorest face the worst environmental consequences, which he said would be "extremely debilitating in moral terms."
"It also suggests the kinds of hatreds that build up between different groups will be accentuated as these groups attempt to move to more clement locations on the planet," Fuerth said.
Published by the Center for Strategic and International Studies, the report offers three scenarios for security implications of climate change, starting with the middle-ground estimate by the Intergovernmental Panel on Climate Change.
This scenario, which the report said could be expected, forecasts global warming of 2.3 degrees F (1.3 degrees C), with sea level rise of about 9 inches (.23 metres) by 2040.
"We predict a scenario in which people and nations are threatened by massive food and water shortages, devastating natural disasters and deadly disease outbreaks," said John Podesta, President Bill Clinton's former chief of staff and now president of the Center for American Progress think tank.
Podesta called this outcome inevitable, even if the United States -- the world's biggest emitter of climate-warming carbon dioxide -- enters immediately into an international system to cap and trade credits for the potent greenhouse gas.
This is unlikely, though a bill to limit carbon emissions is up for debate, possibly as soon as this week, in the Senate's Environment and Public Works Committee. President George W. Bush has opposed mandatory caps on emissions, saying they would hurt the U.S. economy.
Climate change will force internal and cross-border migrations as people leave areas where food and water are scarce. They will also flee rising seas and areas devastated by the droughts, floods and severe storms that are also forecast consequences of climate change.
South Asia, Africa and Europe will be particularly vulnerable to these mass migrations, notably from countries where Islamic fundamentalism has grown, Podesta said.
In the Middle East, he said, the politics of water will hold sway, with the Jordan River creating a physical link to the interests of Syria, Lebanon, Jordan, Israel and the Palestinian Authority.
Monday, 5 November 2007
As a result of mounting defaults and delinquencies, one of the largest subprime lenders, New Century Financial Corporation, filed for bankruptcy on 2 April 2007. With the industry rapidly contracting, many other lenders have since followed suit, or simply exited the subprime market altogether. Consequently, many lenders, borrowers, and investors have filed lawsuits.
To address these matters from an economic perspective, NERA's Securities and Finance Practice has created NERA Insights: Subprime Lending Series, a series of papers dedicated to the analysis of the subprime lending crisis. In Part I of the series, "The Subprime Meltdown: A Primer," NERA Vice President Dr. Faten Sabry and Consultant Dr. Thomas Schopflocher provide a brief overview of the subprime mortgage industry and the process of securitization. The authors examine the economic factors leading to the deterioration of the US subprime mortgage industry; identify factors that differ between the current crisis and the 1998 crisis; and discuss pending and potential litigation issues arising from the current industry difficulties.
Forthcoming topics in the NERA Insights: Subprime Lending Series will include finance and accounting aspects of a securitization, the anatomy of a fraudulent conveyance, and the economics of complex mortgage transactions. To learn more about the series, please contact Dr. Sabry.
This paper has been published in the American Bankruptcy Institute Journal, September 2007, Vol. XXVI, No. 7.
They whooped and hollered and asked for a bail-out from the Federal Reserve Bank even while denying that's what they were getting. And the Fed complied, first by "injecting" billions into the financial system Guess what? That didn't work.
So then they cut the interest rates once and on Wednesday this week they did it again. At the time, it looked good. At least on Wednesday:. But even as the market shot up, the panic and fear in financial circles shot up too. One day later--just one day---the market dropped by over three hundred points. So it didn't work.
This was Wednesday's news:
CNN: Fed cuts rates to 4.5%
Citing turmoil in the housing market, Bernanke and Co. lower a key short-term rate by a quarter of a point to keep the economy on track. But the central bank also said it's worried about inflation - news that spooked the markets.
Bloomberg News noted:
"The second reduction in as many months should help the U.S. economy withstand the fallout from August's credit collapse, the Federal Open Market Committee said in a statement after meeting today in Washington. ``After this action, the upside risks to inflation roughly balance the downside risks to growth.''
The language "has all the sublety of a sledgehammer,'' said Stephen Stanley, chief economist at RBS Greenwich Capital in Greenwich, Connecticut. "The FOMC has just stated unequivocally that `we think we are done easing.' Whether they are or not remains to be seen, but the message is loud and clear.''
Hours earlier, the Commerce Department reported that economic growth accelerated to an annual pace of 3.9 percent in the third quarter, the fastest in more than a year. The Fed statement also warned that higher energy and commodity prices may spur faster inflation."
The excerpts below from an article in the WSJ summarizes the supply issues for crude oil. Assuming no severe economic downturn that would reduce the demand for oil, supply will continue to be the primary constraint in the market. This coupled with a falling dollar basically means that prices in excess of $100/barrel will be in the norm in the near future. People have done all sorts of predictions about what "Peak Oil" looks like, well this is what if looks like..... Several leading oil experts, gathered here yesterday for an annual energy conference, sketched a near-term future in which mounting global demand and shrinking supplies push oil prices well past the $100-a-barrel mark.
GREENPAN; WARNS AGAINST FEAR IN SPEECH
And that's because fear is pervasive on Wall Street.
The former Fed chairman also warned of the strain the baby boomers will place on the economy over the next 25 years as they age and retire.
Closing his discussion, Mr. Greenspan added that the markets are subject to emotion, not rationale, so exuberance can give way to "primordial" fear.
"Will we have another crash? Yes. Will we have another credit crisis? Yes. Can we do anything about it? No," he said.
Are you following me? Wednesday's cheers turned quickly into Thursday's tears--which shows that the problem is much deeper. This was the news on Thursday:
CNN: The Dow industrials, a day after rallying on an interest rate cut by the Federal Reserve, suffered one of its biggest declines of the year on Thursday after a Citigroup downgrade reminded Wall Street that the crisis plaguing the credit crisis markets is lingering.
CNN: The prospect of rating downgrades on complex debt instruments, along with massive writedowns at big banks, are raising fears that the credit crisis may deepen. Collateralized debt obligations backed by mortgage securities are triggering another wave of worry on Wall Street. Banks have been hard-hit by a decline in the value of these securities, and investors and traders worry that more losses could result if prices fall further.
ANOTHER SCANDAL IN THE WINGS
The Securities & Exchange Commission is looking into whether Goldman Sachs cheated its way to enormous profits - even as the rest of the financial industry was suffering through a massive downturn.... (Remember, our Treasury Secretary Paulson ran this firm!.
So there you go, the market solutions everyone wanted to work is not working. Stay tuned--this can get a whole lot nastier.
AMBROSE EVANS-PRITCHARD: THE SKY HAS FALLEN
"Over the last three months we have seen a rolling collapse of speculative debt and real estate across half the global economy, yet friends still come over to my desk at the Telegraph, with that maddening look of commiseration on their faces, and jab: "so when is the sky going to fall then, eh"?
Well, excuse me. The sky has fallen"
THEY ARE FREAKING OUT OVERSEAS
I was in Austria last week talking about my film IN DEBT WE TRUST at a conference on democracy. On the way to the meeting inside a mountain used by the Nazis as a bomb shelter and weapons factory employing slave laborers, in WW 2, I passed an Austrian Bank, Bawag that suffered $1 billion in losses in connection with a wall street scandal involving the looting of a firm named REFCO. (Refco was connected to that controversial investment by Hillary Clinton in Arkansas in 1978. She put up, if you recall, $1000 that turned into $100,000 in a year.) The Bank has since been sold while court cases continue.
I was talking about the subcrime scandal touched on in my film. The press there is very aware of it and worry about its fall off. The International Herald Tribune in Paris put the story as its lead on page one. This was the headline: "EUROPE FEELS CHILL OF SUBPRIME FIASCO. Economic Forecasts Show Continent Still Vulnerable."
SQUEEZE LIKE A DISASTER MOVIE
The Financial Times published in London, went further in editorial titled "CREDIT SQUEEZE-THE DISASTER MOVIE." They compared the credit "squeeze" (does that term sound familiar) to "the plot of a hundred disaster movies." They said, "the longer this goes on, the greater the risk to the real economy." I enjoyed this because months ago, CNN Money compared In Debt We Trust to the horror Movie Carrie commenting my documentary is 'even scarier." The Economist compared the subprime scandal to a "toffee apple with a maggot at its core." All of these news outlets say this scandal is not going away anytime soon.
Paul Krugman commented in the New York Times, "Maybe the subprime disaster will be enough to remind us why financial regulation was introduced in the first place." Interesting that he--a Princeton economist as well as an op-ed columnist calls this crisis a "disaster"
ELSEWHERE: (BBC) Personal debt levels in Northern Ireland are spiralling out of control, the Irish League of Credit Unions has said.
Debt-ridden Britons owe Â£216billion on credit cards and unsecured loans but are refusing to rein in their spending, new figures show.
NEW YORK (MarketWatch) -- Merrill Lynch, the nation's largest broker, on Tuesday reported its first loss in about six years, saying bad judgment and weak risk management strategies forced it to write down almost $8 billion of mortgage and related assets, well above its own previous estimate. (Merill's CEO was then forced to resign because of thse losses))
Note: Merrill did another write down a week later of $4.5 billion. The Financial Times commented: "The sense that valuation is still matter of "pick a number and divide by the chief trader's golf handicap" seems to be pervasive. Can you believe this? Even Hollywood couldn't make up something as fiip as that golf handicap comment---as sign of how arbitrary these people are.). At least Merrill confessed to "bad judgment."
GREED GONE WILD
Somehow I think it was more than that. It think this is another instance of "Greed Gone Wild" to quote former Congresswoman Cynthia McKinney who also spoke at the Elevate Democracy conference I took part in.
BANKS TO CUSTOMERS: DROP DEAD
SO NOT OVER BUT MANY AMERICANS HAVE NOT YET FELT THE PAIN
Agora Financial Reports:
"Despite record levels of both national and personal debt - and the dwindling value of the dollars that must make the repayments - American consumers don't seem overly fussed about the whole situation. Last week we reported that, according to Bankrate.com, "9 out of 10 American's said credit card debt had never been a significant source of worry."
You wouldn't listen to the local drunk's advice on the safe level of moonshine consumption...so why gauge the strength of the national economy on the fickle caprices of 300 million consumers armed with little more than a quiver full of maxed out credit cards?"
COUNTRYWIDE CAVES TO CONSUMER BOYCOTT
Countrywide and NACA Announce Groundbreaking Initiative to Help Borrowers Preserve Homeownership (See NACA.COM)
Washington, DC (October 24, 2007) -- Countrywide Financial Corporation (NYSE:CFC) and the Neighborhood Assistance Corporation of America (NACA) announce a joint initiative aimed at their common goal of preserving homeownership. NACA will assist Countrywide borrowers facing financial difficulties in communities across the country to identify solutions to help them save their homes.
While there is a lot of talk about the at-risk homeowners, NACA and Countrywide have met and developed an effective solution for some borrowers facing a crisis. Under this program, homeowners have a "waterfall" of options, from a payment plan, to modification, to refinancing and finally to restructuring. Homeowners will be able to achieve a mortgage program that provides a payment they can afford over the long-term.
The agreement leverages Countrywide's market leading home retention programs and NACA's unique model for counseling borrowers. The program is based on NACA's comprehensive Home Save approach that includes individual counseling and development of a documented Affordability Budget. NACA will work with Countrywide borrowers who come to NACA for assistance to develop the most effective plan to save their homes, then submit the plan to Countrywide for approval and implementation.
"NACA's Home Save approach provides unprecedented options to working people at risk of foreclosure." states NACA CEO Bruce Marks. "The Countrywide agreement has already had a huge impact with homeowners having their loans restructured to as low as five percent."
BENEFITED WITH AN INTEREST RATE AS LOW AS 5%,
CONGRESS PLANNING A REFORM BILL
Reps. Brad Miller (D-NC), Mel Watt (D-NC) and Barney Frank (D-MA) introduced a mortgage reform act into the US House of Representatives, according to a joint press statement issued by the House Financial Services Commitee. The "Comprehensive Mortgage Reform and Anti-Predatory Lending Act of 2007" is said to be the most comprehensive legislation to combat abuses in the mortgage lending market, and to provide basic protections to mortgage consumers and investors.
The reform legislation comes after recent market turmoil and the decline of the housing market in the United States. Nearly $600 billion in adjustable-rate subprime mortgages are expected to reset to a higher monthly payment by the end of next year. Credit market problems led to a slew of forecloses and losses at Wall Street banks and investment firms.
The bill is set to reform mortgage practices in three areas. First, the representatives' bill will establish a federal duty of care, prohibit steering, and call for licensing and registration of mortgage originators, including brokers and bank loan officers.
Second, the new legislation will set a minimum standard for all mortgages which states that borrowers must have a reasonable ability to repay.
Third, the legislation attaches limited liability to secondary market securitizers who package and sell interest in home mortgage loans outside of these standards. However, it was noted that individual investors in these securities would not be liable.
Finally, the bill will attempt to expand and enhance consumer protections for "high-cost loans" under the Home Ownership and Equity Protection Act and include important protections for renters of foreclosed homes.
Let The Battle Begin!
COMMENT BY Diana Olick on ML-IMPLODE.COM
The bill also makes securitizers responsible for bad loans; yup, that's you Wall St. Not totally responsible, of course, but there would be "assignee liability" to ensure that folks like Bear Stearns and the like are really making sure those new underwriting standards are enforced. The idea is that borrowers should not be given loans they can't afford (did we need a law for that?? Guess so.)
Reaction? Mixed. The Fed Chairman, Ben Bernanke, has given a thumbs up in the past to limited assignee liability, but the Treasury Secretary, Hank Paulson has expressed concern that this would make investors slightly skittish.
TRANSLATION: This Administration Wants To Protect The Lenders:
THE SUBCRIME CRISIS AND THE WAR ON IRAQ
Leave it to that truthsmith/wordsmith Lewis H. Lapham to see a parallel between the collapse of the Housing Bubble and the War in Iraq that has eluded most commentators. Writing in Harper's Magazine, he notes, ' I was struck by the resemblances between the speculation floated on the guarantee of easy money on Wall Street and the one puffed up in the premise of an easy victory in Iraq.
He compares the NINJA LOANS in the US to the freedom loving Sheiks in Iraq, THE NEUTRON LOAN that removes occupants but leaves the property intact to the massive displacement of people by the tens of thousands in Baghdad, The TEASER LOAN that gets people in mortgages at a low rate and quickly escalates to the rising costs of the war which was "originally priced" at $50 billion and is now estimated at $2 TRILLION. This is a brilliant comparative analysis that shows how the suspension of reality by politicians or bankers has the same result: DISASTER.
OAKLAND FIGHTS PREDATORY LENDING
REUTERS: WORLD BANKERS WORRY ABOUT "INFLECTOION POINT
WASHINGTON (Reuters) - World credit markets "have lived through an earthquake" and the question is now whether the global economy has reached a turning point after five years of strong growth, the head of the International Monetary Fund said on Monday.
Addressing the IMF's 185 member countries, IMF Managing Director Rodrigo Rato warned of aftershocks in markets, saying the full effects of the credit crunch, which began in the U.S. subprime mortgage market, were still not fully understood.
"We already know that we should not try to regulate crises out of existence: that would be like trying to ban earthquakes," he said. "But the weaknesses in our infrastructure that have been exposed need to be addressed."
Rato added: "The question is now whether the global economy is at an inflection point."
For many bankers, this is the TERROR ERA, An era of fear--not of terrorists--but of the implications of their own decicions.