NewGeography.com blogs

Billionaire investor, Warren Buffett, is hosting the Berkshire Hathaway shareholder meeting “Capitalist Woodstock” in Omaha this weekend. Every news truck this side of Kansas City has been moved into town to cover the event.

While using words like “evil”, “folly” and “demented” to describe the activities that generated the global financial meltdown, Buffett’s partner, Charlie Munger, told CNBC in an interview that credit default swaps (CDS) should be outlawed completely. I have said clearly that Buffett’s strategy on CDS has gotten him in too deep. His strategy requires “new money” coming into the system regularly at a time when investors are pulling back.

Munger also says that “the people who make a lot of money out of the system as it is have a lot of political power and they don't want it changed." We think he must be speaking about Buffett here, too. Berkshire Hathaway is a financial company that benefits from the bailout of financial companies. Buffett must also be aware that the government will continue to make bailout payments, that will be passed along to CDS holders, just like the approximately $50 billion Uncle Sam passed out through AIG during the fall of 2008.

According to a report from Reuters, Berkshire Hathaway will not report their 1st quarter financial results on Friday and no new date or reason for the delay has been given. According to Bloomberg, the results will be delayed until six days after the meeting. There is some speculation at CNBC that Buffett may want to avoid some “terrifically worried” investors at the meetings this weekend. The stock price closed down $1,995 per share on Friday, May 1.

Jo Becker and Gretchen Morgenson (she reported on the lack of mortgages behind mortgage-backed securities) did a long piece on Treasury Secretary Timothy F. Geithner in the New York Times. They paint a stark picture of Secretary Geithner’s brand of “Collusive Capitalism”: lunch at the Four Seasons restaurant with execs from Citigroup, Goldman Sachs and Morgan Stanley; private dinners at home with the head of JPMorgan Chase.

Most importantly, Becker and Morgenson raise the question of why – with all that frequent contact – Geithner never sounded the alarm about these banks? Indeed, as I’ve pointed out before, Geithner took no steps to prevent $2 trillion in US Treasury bond trades go unsettled for 7 months – until it was over, when he called a meeting of the same bankers that caused the problem to have them do a study, take a survey, make some suggestions, etc. The one action that needed to be taken – to enforce finality of settlement – was never on the table.

When the banks behaved recklessly in lending, trading, issuing derivatives and generally fueling the Bonfire of their Vanities, according to Becker and Morgenson, Geithner’s idea was to have the federal government “guarantee all the debt in the banking system.” As Martin Weiss asks in his ads for Money and Markets, “Has U.S. Treasury Chief Geithner LOST HIS MIND?”

Since 1998, most major American metropolitan areas have seen a decline in employment located close to the city center as jobs have moved farther into the suburbs.

A recent report by the Brookings Institution determined that this “job sprawl” threatens to undermine the long-term regional and national prosperity.

The report analyzes the spatial distribution of jobs in large metropolitan regions and how these trends differ across major industries, in addition to ranking cities according to their amount of job sprawl.

The report found that only 21 percent of employees work within three miles of downtown. Using the period before the current recession, the report found that while the number of jobs has increased, 95 of 98 metro areas analyzed saw a shift of jobs away from the central core.

The Brookings Institute argues that “allowing jobs to shift away from city centers hurts economic productivity, creates unsustainable and energy inefficient development and limits access to underemployed workers.” Yet this may be more a matter of Brookings ideology than a likely far more complex reality.

Job sprawl is greatest both in areas that have clearly declined – such as Detroit – as well as growing regions like Dallas-Fort Worth. Nor does concentration guarantee success, as can be seen by the mediocore performance of the more concentrated New York region. Yet virtually everywhere jobs continue to sprawl, in many cases faster than even population. Maybe it’s time to learn how to adjust to the emerging future rather than yearn for a return to the economic and geographic structure of the last century.

The Illinois state budget is on life support, with a $4 billion shortfall projected for this year and even more in 2010. So what’s a state to do?

In a move that has some scratching their heads, Governor Pat Quinn has proposed an increase on the tax rate for both personal and corporate income tax.

For a state ranked 48th in overall economic performance and 44th in economic outlook, such a tax hike seems questionable. Corporate and personal income is lagging. According to a recent study, non-farm payroll employment has only risen 3.6 percent and the growth of per capita income ranks 39th in the nation.

The state’s private sector is largely responsible for fueling a well-funded public sector. Such a tax increase could further suffocate growth, which in turn will impact the public sector as well.

Along with its persistent corruption, Illinois’ poor economic showing may become yet another embarrassment to an administration whose top leadership comes from the increasingly bedraggled Land of Lincoln.

It also wasn’t that long ago that Congress held hearings on the bonuses paid to AIG employees after the bailout. Now, according to New York Times reporter Louise Story Wall Street compensation is rising back to where it was in 2007 – the last year that these firms made oodles of money with investment strategies that turned toxic the next year.

And, yeah, we get it – there is a theoretic connection between compensation and performance. But we also know that there’s a difference between theory and practice. Too many of the same employees who either perpetrated the events leading to the meltdown or stood idly by while it happened are still in place.

When AIG finally revealed what they did with the bailout money, we found out that a big chunk of it went overseas. Now, New York Post reporter John Aidan Byrne tells us that the bailout recipients are bailing out – on U.S. workers! Story found that Bank of New York Mellon, Bank of America and Citigroup, all recipients of billions of bailout dollars, are shifting more jobs overseas. The explanation, that nothing in TARP prohibits them from moving jobs out of the US, is so lame I’m surprised Story even bothered to mention it.

The initial indicators of the current financial meltdown were visible in mid-2007. The deeper, underlying causes were recognized, talked about in Washington and then ignored as far back as 2004. The collective memory is short. Nobody wants to hear the bad news, especially when it’s this bad and it goes on for this long. The morning you wake up and wish the financial meltdown would just go away is your most dangerous moment – wishing won’t make it so.