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Fascism and the Dangers of Economic Concentration

Tech­nocrats march­ing in sup­port of aus­ter­ity, ready to slash gov­ern­ment spending.

A 1980 broad­cast high­lights eco­nomic con­cen­tra­tion and its his­tor­i­cal rela­tion­ship to fas­cism. The issue of the “1%” ver­sus the “99%” is not new.

After dis­cus­sion of the Amer­i­can cor­po­rate con­nec­tions to the Third Reich, this pro­gram con­cludes with analy­sis of the per­ils of the con­cen­tra­tion of eco­nomic power.

Sev­eral min­utes in length, the con­clu­sion of that pro­gram can be accessed here: Lis­ten.

Of para­mount sig­nif­i­cance,  is the pos­si­bil­ity that con­cen­tra­tion of eco­nomic power in the United States might even­tu­ally pro­duce for Amer­i­cans what it did for Ger­mans in  the 1930’s.

The fact that many of the most impor­tant U.S. com­pa­nies and indi­vid­u­als were deeply involved with Nazi indus­try and finance informs us that such a pos­si­bil­ity is not as remote a sit  might appear at first.

(These same inter­ests attempted to over­throw Franklin D. Roo­sevelt in a coup attempt in 1934, seek­ing to install a gov­ern­ment mod­eled on Mussolini’s “cor­po­rate state.” Mus­solini and his fascisti are pic­tured at right.)

With the very able assis­tance of co-host Mark Ortiz, Dave recorded the first of the archive shows, Uncle Sam and the Swastika (M11), on Memo­r­ial Day week­end of 1980 (5/23/80).

The pro­gram echoes at the dis­tance of thirty years the warn­ing that James Stew­art Mar­tin sounded in his 1950 book All Hon­or­able Men. Not­ing how attempts at break­ing up Hitler’s Ger­man eco­nomic power base had been foiled by the Ger­mans’ pow­er­ful Amer­i­can busi­ness part­ners, Mar­tin detailed the same pat­tern of con­cen­tra­tion of eco­nomic power in the United States that had led to the rise of Nazism in Germany.

In 2005, Uncle Sam and the Swastika was dis­tilled into For The Record #511. Since then, the Amer­i­can and global economies have tanked and may well get worse. The sig­nif­i­cance of an eco­nomic col­lapse for the imple­men­ta­tion of a fas­cist cabal fig­ures sig­nif­i­cantly in the sev­eral min­utes of this excerpt.

At more than 30 years’ dis­tance from the orig­i­nal record­ing of Uncle Sam and the Swastika, the ques­tions raised in this broad­cast loom large. Will the “calm judge­ment of busi­ness necessity”–fascism–that Mar­tin fore­saw in 1950 come to pass?

We should note that Mus­solini termed the fas­cist system–which he christened–“the cor­po­rate state.” Another way of con­cep­tu­al­iz­ing it would be to think of fas­cism as “cap­i­tal­ism on full auto.”


105 comments for “Fascism and the Dangers of Economic Concentration”

  1. Oh Henry, don’t you know you’re never, EVER, sup­posed to say this kind of stuff:

    Henry Blod­get, a for­mer (and for­merly dis­graced) Wall Street ana­lyst who has been res­ur­rected as one of the smartest writ­ers on busi­ness and pol­i­tics, agrees that the finan­cial class is strongly attached to its tax breaks. After his Wall Street friends have had a few drinks, he said, ‘‘they are cack­ling that they have fooled every­body into think­ing that there’s some jus­ti­fi­ca­tion for this.’’ ‘‘This’’ is the car­ried inter­est tax pro­vi­sion, which allows some pri­vate equity and hedge fund man­agers to pay tax at 15 percent.

    But the cack­ling may be com­ing to an end — and the hos­til­ity toward the pres­i­dent mount­ing — fol­low­ing his State of the Union speech on Tues­day. A cen­ter­piece of that address, and most likely a cen­tral theme on the cam­paign trail over the next nine months, was Obama’s insis­tence that the 1 per­cent must pay up.

    In case you’re won­der­ing what a cack­ling gag­gle of banksters looks like, this might help.

    Posted by Pterrafractyl | January 27, 2012, 8:57 am
  2. Here’s some more insider tid­bits and a look at why the pub­lic seems to keep falling back in love with socio­pathic par­a­sites:

    The Age of Enron

    by Thomas Frank

    Harper’s Mag­a­zine Easy Chair (August 2011)

    This sum­mer will mark ten years since the series of dis­clo­sures that led to the sud­den bank­ruptcy of the Enron Cor­po­ra­tion of Hous­ton. The col­lapse of the gas-and-power leviathan, then one of the largest com­pa­nies in the nation, was the start­ing gun for the mod­ern age of neolib­eral scan­dal, the cor­po­rate crime that set the pat­tern. It was not the first episode to fea­ture grotesque bonuses for insid­ers, or a fawn­ing press, or bought politi­cians, or aver­age peo­ple being fleeced by schem­ing preda­tors. But it was the first in recent mem­ory to bring together all those ele­ments in one glo­ri­ous fire­ball of fraud.

    And in the years since, we’ve seen many more fire­balls, each fol­low­ing the Enron pat­tern and all of them cul­mi­nat­ing in the finan­cial melt­down of 2008, along with the seem­ingly unend­ing reces­sion it trig­gered. It is fair to say that in some gen­uine, dis­may­ing sense, we are liv­ing in the Age of Enron.

    I remem­ber Enron’s col­lapse with a spe­cial vivid­ness, because in those days I was fas­ci­nated by the com­pany. I first came across the name in 1997. I lived in Chicago at the time, and Enron had been run­ning adver­tise­ments there call­ing for the dereg­u­la­tion of the region’s elec­tric util­i­ties. This was puz­zling to me, since Enron wasn’t a local out­fit. What did they care about the energy mar­ket in Illinois?

    As I soon dis­cov­ered, Enron was not merely a busi­ness – it was also an ide­o­log­i­cal endeavor. “We believe in the inher­ent wis­dom of open mar­kets”, read the first sen­tence on their vision-and-values web­page. The sec­ond sen­tence read: “We are con­vinced that con­sumer choice and com­pe­ti­tion lead to lower prices and inno­va­tion”. In pur­suit of that vision and those val­ues, Enron pushed dereg­u­la­tion across the land. They ran TV com­mer­cials derid­ing the fusty old politi­cians who reg­u­lated things and prais­ing open mar­kets with an almost reli­gious ven­er­a­tion. Early in 2001, Enron CEO Ken Lay actu­ally said, “I believe in God and I believe in free markets”.

    That was an out­ra­geous state­ment, maybe, but only by a mat­ter of degrees; market-worshipping lib­er­tar­i­an­ism was the order of the day back then, just as it is now. What intrigued me was the way the media always chose to describe the loom­ing dereg­u­la­tion of elec­tric­ity mar­kets: the change was sup­posed to be “inevitable”, as though his­tory itself were push­ing us to undo what our market-skeptical ances­tors had devised, with their old-fashioned con­cerns about fair­ness and monop­oly and fraud.

    These days, less jovial emo­tions pre­vail. We dereg­u­late not because we live in some enlight­ened “New Econ­omy” where the forces of his­tory love us and want us to pros­per; we do it because we are afraid. We do it because the John Gaits who rule us won’t have it any other way. If we want them to cre­ate jobs, we must do as they instruct.


    We can also be con­fi­dent that the next scan­dal will dis­play the dis­tinc­tively tru­cu­lent cul­ture of the trad­ing floor. This, too, we learned from the folks in Hous­ton. As Enron’s mis­sion state­ment insisted so long ago, finan­cial traders, act­ing in open mar­kets, would deliver extra­or­di­nary ben­e­fits to con­sumers. Dur­ing California’s elec­tric­ity cri­sis, how­ever, Enron’s traders behaved in a notably less altru­is­tic man­ner, fig­ur­ing out ways to send the state’s power else­where and even to shut down power plants dur­ing peak hours.

    Audio record­ings of these traders’ con­ver­sa­tions later emerged and were included in the 2005 doc­u­men­tary Enron: The Smartest Guys in the Room. The traders can be heard boast­ing about how a col­league “just steals money from Cal­i­for­nia”, cheer­ing for a wild­fire that has ignited under an impor­tant power-transmission line, and cack­ling with delight at the help­less idiocy of the non-trader world. “It weeds out the weak peo­ple in the mar­ket”, one trader says, pre­sum­ably refer­ring to high elec­tric­ity prices. “Get rid of ‘em and you know what? The peo­ple who are strong will stick around.” (Sev­eral of these Uber­men­schen even­tu­ally did prison time for their roles in the episode.)


    Since then, we have learned how Wash­ing­ton Mutual schemed to sell option adjustable-rate mort­gages – “our most prof­itable mort­gage loan” – even though option ARMs actu­ally sucked for most bor­row­ers. We found out that Angelo Mozilo, CEO of sub­prime lender Coun­try­wide, described one of his company’s own offer­ings thusly: “In all my years in the busi­ness, I have never seen a more toxic prod­uct”. We dis­cov­ered that Gold­man Sachs exec­u­tives viewed a par­tic­u­lar col­lat­er­al­ized debt oblig­a­tion as “one shitty deal” but sold it anyway.

    Ever since Enron, pugna­cious trader-talk of this sort has been a con­stant back­ground noise to Amer­i­can life. But like a kid­nap vic­tim with Stock­holm syn­drome, we love the lout in spite of it all. Though he slays our bank account, yet will we trust in him: aspir­ing to his lifestyle, emu­lat­ing his swag­ger­ing ways.

    And so, in 2009, as the con­se­quences of the finan­cial cri­sis were becom­ing appar­ent to every­one, Amer­ica fell in love with the Tea Party – a protest move­ment launched by a busi­ness reporter from the floor of the Chicago Board of Trade. And then we made a tow­er­ing best­seller of Atlas Shrugged, the 1957 novel whose most famous chap­ter insists on under­stand­ing traders as the most exalted spec­i­mens of humanity:

    We, who live by val­ues, not by loot, are traders, both in mat­ter and in spirit. A trader is a man who earns what he gets and does not give or take the unde­served … The mys­tic par­a­sites who have, through­out the ages, reviled the traders and held them in con­tempt, while hon­or­ing the beg­gars and the loot­ers, have known the secret motive of their sneers: a trader is the entity they dread – a man of jus­tice.


    The final fea­ture of the next Enron-style scan­dal – and the most impor­tant one – is that we will not get it. For most of us, the pol­i­tics of it all will remain as foggy as were the com­plex deriv­a­tives and Spe­cial Pur­pose Enti­ties themselves.

    Oh, some peo­ple will under­stand. Cer­tain business-school pro­fes­sors will recant, and politi­cians in places like Ice­land will recon­sider run­away bank dereg­u­la­tion. In the imme­di­ate after­math of the dis­as­ter, we will enact reforms like Sar­banes– Oxley and Dodd– Frank to replace the reforms we gut­ted the last time around.

    Yes, we will get mad when we first hear about what’s hap­pened. The finan­cial thieves of tomor­row will put it in our faces, just like the Enron bosses who cashed out as the com­pany sank and the bonus-grabbing AIG execs in 2009. Amer­i­cans will be infu­ri­ated. We will buzz like bees. We will scream for blood.

    Then we will pro­ceed to do exactly what Enron or AIG or Gold­man Sachs wanted us to do all along. We will con­vince our­selves that these ter­ri­ble things hap­pened to us because mar­kets aren’t free enough – that our only mis­take was in not car­ry­ing our cam­paigns for dereg­u­la­tion or tax cuts to their log­i­cal con­clu­sions. After Enron col­lapsed, let’s recall, the nation decided that Enron had been right all along: Cal­i­for­nia had such ter­ri­ble prob­lems because it was run by tree-hugging lib­er­als who sti­fled entre­pre­neur­ship with their pre­pos­ter­ous inter­fer­ing ways.

    And today, after one of the clear­est lessons in dereg­u­la­tory folly that his­tory is likely to pro­vide, we are once again on a national cru­sade against reg­u­la­tion. We have filled Con­gress with clear-eyed believ­ers who know that eco­nomic rules are an affront to free­dom itself. We have signed up by the mil­lions for Tea Party groups orga­nized by anti­reg­u­la­tory out­fits like Free­dom Works – which, in its ear­lier incar­na­tion as Cit­i­zens for a Sound Econ­omy, took some $20,000 in funds from none other than Enron.

    Or per­haps I’ve just mis­un­der­stood. Maybe what we’re so agi­tated about is the pos­si­bil­ity that some law-and-order killjoy might bring the Age of Enron to a close. Maybe, for all our fond talk of the untainted repub­lic of the Founders, the Texas of Ken Lay is where we really long to be. So let the next scan­dal ruin our neigh­bor, let it black out entire regions of the coun­try, let it throw mil­lions out of work – as long as we get a chance for our turn at the trough.

    The whole col­umn is worth a read. While I sus­pect that a large por­tion of the pop­u­lace is no longer entranced by the this gen­er­a­tion of free-market/deregulation ide­ol­ogy as we (hope­fully) emerge from the “Age of Enron”, it will be inter­est­ing to see what dif­fer­ence that awak­en­ing might make in “Age of Cit­i­zens United”. I guess there’s always hope!

    Posted by Pterrafractyl | January 27, 2012, 12:40 pm
  3. @Pterrafractyl: Yep, and with all the fas­cist bas­tards out there, attack­ing pro­gres­sives and democracy........(particularly by mak­ing the extremely ridicu­lous, and quite hon­estly fascis­tic, claim that Amer­ica was a “republic[i.e. South African or C.S.A. style tyran­ni­cal state run by wealthy crim­i­nals and thugs, that’s what they want], not a democ­racy”, when in fact, Amer­ica was wholly intended to be a demo­c­ra­tic repub­lic with pro­tec­tions for all cit­i­zens, as in the Bill of Rights. With­out demo­c­ra­tic val­ues, there would be no Bill of Rights. And, frankly, it goes vice versa as well)....and sadly, with a still grow­ing num­ber of idiots sup­port­ing this B.S. I do fear ter­ri­bly for the fate of this country.

    Posted by Steven L. | January 28, 2012, 4:10 am
  4. Again, let me repeat this: Amer­ica is not JUST a republic(like Rome), or JUST a democracy(like Athens), but BOTH. Any­one who thinks oth­er­wise has been deceived, or is lying to them­selves, and has been con­vinced to do so by an elite who have always hated demo­c­ra­tic val­ues and every­thing they stand for.

    Ladies and gen­tle­men, these same peo­ple demo­niz­ing democ­racy are the same elite who brought us Mus­solini and Hitler. Make no mistake.

    And, frankly, if any­one wants to troll this site and engage in anti-democracy pro­pa­ganda, then are they are absolutely unwel­come, regard­less of whether they claim to be on our side or not.
    We must be vig­i­lant of liars and deceivers in our midst, for there are many, as well as idiots & morons who are hold­ing us back and harm­ing our image.

    Dave, I can’t thank you and other good peo­ple like Ter­rafractyl here enough. It is peo­ple like you who are the shin­ing bea­con of light on a very dark coast­line. And I mean that sincerely. =)

    (Web­mas­ter: sorry if I sounded a lit­tle para­noid, but I can’t help but feel uneasy due to these ter­ri­ble times.)

    Posted by Steven L. | January 28, 2012, 4:18 am
  5. (And when I spoke of ‘these same peo­ple’ demo­niz­ing democ­racy, I meant folks like Pat Buchanan, David Duke, etc. Just wanted to clar­ify that.)

    Posted by Steven L. | January 28, 2012, 4:20 am
  6. Just when you thought the mask couldn’t drop a lit­tle more, there it goes. The folks at Davos are dis­cussing search­ing for soltions to the globe’s polit­i­cal and eco­nomic prob­lems. Their solu­tion? Make gov­ern­ing the Businessman’s Bur­den (they don’t want to do it but they feel the social oblig­a­tions):

    Are Com­pa­nies More Pow­er­ful Than Coun­tries?
    By Rana Foroohar | Jan­u­ary 27, 2012

    In 2008, after Lehman Broth­ers fell and the finan­cial cri­sis and global reces­sion began, the con­ven­tional wis­dom was that we were enter­ing an era in which gov­ern­ment would take back power from busi­ness. In fact, just the oppo­site has happened.

    The high pro­file polit­i­cal fig­ures here at Davos dis­ap­pointed — Merkel was angry and depressed by turns, and Gei­th­ner was defen­sive. Europe remains a mess, the U.S. vul­ner­a­ble, and emerg­ing mar­kets — the only bright spot in the last three years — are slow­ing down. Politi­cians have few solu­tions to the huge prob­lems of the day — labor bifur­ca­tion, debt, and inequal­ity. Mar­kets want answers, but lead­ers can’t give them — in part because for them, nearly any sort of action poses polit­i­cal risk.

    Mean­while, the top com­pa­nies seem to exist in a world apart — they are boom­ing, and their exec­u­tives are pros­per­ing. If there is a meta theme to this year’s World Eco­nomic Forum in Davos, it is that the world’s largest com­pa­nies are mov­ing on and mov­ing ahead of gov­ern­ments and coun­tries that they per­ceive to be inept and ane­mic. They are fly­ing above them, oper­at­ing in a space that is increas­ingly dis­con­nected from local con­cerns, and the prob­lems of their home mar­kets. And if the con­ver­sa­tions here are any indi­ca­tion, they may soon take over much of what gov­ern­ment itself does.

    The prob­lem was nicely cap­tured in this week’s New York Times piece on Apple, look­ing at why the iPhone is mostly made out­side Amer­ica. As one of the company’s exec­u­tives put it, “We don’t have an oblig­a­tion to solve America’s prob­lems.” It’s a sen­ti­ment that was echoed on Time’s Board of Econ­o­mists’ panel, where busi­ness lead­ers blamed for not shar­ing the $2 tril­lion in wealth sit­ting on cor­po­rate bal­ance sheets argued that they did cre­ate jobs and pros­per­ity — just not in this country.


    Con­versely, many firms send­ing jobs abroad aren’t doing it because it’s cheaper — but because skills are bet­ter (at least in rela­tion to wages) in other coun­tries. It’s a scary trend, and one that speaks to the grow­ing bifur­ca­tion in West­ern labor mar­kets. A lot of peo­ple here in Davos — peo­ple like Nobel lau­re­ate Chris Pis­sarides, and a num­ber of high level investors I spoke with — say that we can’t inno­vate or edu­cate our way out of this prob­lem. It’s only going to get worse, par­tic­u­larly as a com­ing automa­tion rev­o­lu­tion starts to hol­low out white col­lar jobs in rich countries.

    So, where does that leave us? Do the peo­ple run­ning the world’s largest com­pa­nies, which are grow­ing fast and hold plenty of cash, have any respon­si­bil­ity to their home mar­kets? Should they even take on cer­tain roles that belea­guered and indebted states can’t han­dle any more — things like edu­ca­tion, health care and infra­struc­ture devel­op­ment? Here at Davos, there are unlikely alliances being made over these issues; peo­ple rang­ing from Bangladeshi micro finance founder Mohamed Yunus to finan­cial titans say yes, what we need isn’t less cap­i­tal­ism, but more. Let com­pa­nies pick up the slack from the state. The ideas being floated are rad­i­cal — GE and Microsoft should run edu­ca­tion in Amer­ica, mak­ing it more effi­cient and insur­ing U.S. work­ers have the skill set they need to get jobs in the future. (Yes, every­one also agreed that such solu­tions were freighted with social and polit­i­cal problems.)

    Amer­ica should get seri­ous about indus­trial pol­icy (tra­di­tion­ally a third rail word) and start sub­si­diz­ing and push­ing strate­gic indus­tries as hard as China does, as well as slap­ping tough tar­iffs on com­peti­tors’ goods (the cen­tral bankers in atten­dance are wring­ing their hands about com­ing trade and cur­rency wars that might result). Some say we should rad­i­cally raise min­i­mum wages for the 90 per­cent of peo­ple in rich coun­tries who’ll end up work­ing ser­vice jobs cater­ing to a small upper class of global rich. A two-tier class sys­tem is inevitable, they say. We just have to make it palat­able. Oth­ers, includ­ing a num­ber of uni­ver­sity pres­i­dents, believe we need to take a “by any means nec­es­sary” approach to keep­ing high-end jobs, par­tic­u­larly tech ori­ented ones, at home.

    On that, at least, politi­cians would agree. In her keynote open­ing speech at Davos, Angela Merkel said that unless the euro­zone cri­sis was solved, Europe risked becom­ing “just a nice place to take a vaca­tion.” The same could be said of all rich coun­tries. One thing that’s becom­ing clear at Davos is that the core idea of the Enlight­en­ment — that cap­i­tal­ism and democ­racy go hand in hand to cre­ate the best soci­ety — is under fire. And the strug­gle to cre­ate a new model may well pit nation against nation, cor­po­ra­tions against gov­ern­ment, poor against rich. The world, it turns out, isn’t flat – and it’s becom­ing bumpier all the time.

    At least now it’s clear why there’s so lit­tle uproar in the inter­na­tional lead­er­ship com­mu­nity over the direc­tion the euro­zone is going. It’s the plan for the planet. Palat­able two-tiered soci­eties for all! Huz­zah! It’s New Enlightenment.

    Posted by Pterrafractyl | January 30, 2012, 9:47 am
  7. This arti­cle includes a nice descrip­tion of what’s going on in the euro­zone. They’re try­ing to make Key­ne­sian­ism ille­gal:

    EU lead­ers strug­gle to rec­on­cile aus­ter­ity, growth
    By Jan Strupczewski and Luke Baker

    BRUSSELS | Mon Jan 30, 2012 2:31pm EST



    With Britain stand­ing aloof, most of the other 26 EU lead­ers were set to approve a fis­cal pact to write bal­anced bud­get rules into their national law, despite econ­o­mists’ doubts about the wis­dom of effec­tively out­law­ing deficit spending.

    To write into law a Ger­manic view of how one should run an econ­omy and that essen­tially makes Key­ne­sian­ism ille­gal is not some­thing we would do,” a British offi­cial said.


    Is the euro­zone pub­lic even aware of what its about to agree to or has real­ity TV rot­ted the brains of another continent?

    Posted by Pterrafractyl | January 30, 2012, 12:20 pm
  8. In keep­ing with the times, not extend­ing expir­ing tax-cuts is now appar­ently an impeach­able offense:

    Impeach Obama?
    Grover Norquist pre­dicts a rebel­lion if Pres­i­dent Obama wins reelec­tion and doesn’t extend the Bush tax cuts.

    By Nancy Cook
    Updated: Jan­u­ary 28, 2012 | 8:34 a.m.
    Jan­u­ary 26, 2012 | 2:00 p.m.

    While other Wash­ing­ton insid­ers are wring­ing their hands over the lack of action expected on Capi­tol Hill in this elec­tion year, Grover Norquist is study­ing his color-coded maps. The anti­tax advo­cate and pres­i­dent of Amer­i­cans for Tax Reform is tak­ing the long view on Con­gress and chart­ing the ways that Repub­li­cans could even­tu­ally con­trol the House, Sen­ate, and White House, along with state­houses across the coun­try (all while mak­ing sure politi­cians adhere to his anti­tax pledge).

    “The con­text for the next 12 months is that 2011 was sup­posed to be the ‘Year of the Tax Increase’—you know, like the ‘Year of the Woman’ or the ‘Year of the Dragon,’ ” he says with a smirk. But, last year was not marked by tax hikes at all, thanks to con­gres­sional grid­lock and the fail­ures of var­i­ous deficit-reduction efforts. For Norquist, that means 2012 could prac­ti­cally be a vaca­tion, or at least a fun year of dream­ing about future slashes in mar­ginal rates. He recently spoke to National Jour­nal. Edited excerpts from the inter­view follow.


    NJ At the end of 2012, a num­ber of major tax pro­vi­sions, includ­ing the Bush-era cuts, are set to expire. Do you have any predictions?

    NORQUIST We’re focused on the fact that there is this Damo­cles sword hang­ing over people’s head. What you don’t know is who will be in charge when all of this will hap­pen. I think when we get through this elec­tion cycle, we’ll have a Repub­li­can major­ity, [though] not nec­es­sar­ily a strong major­ity in the Sen­ate, and a major­ity in the House. The major­ity in the House will con­tinue to be a Rea­gan major­ity, a con­ser­v­a­tive major­ity. Boehner never has to talk his del­e­ga­tion going fur­ther to the right.

    If the Repub­li­cans have the House, Sen­ate, and the pres­i­dency, I’m told that they could do an early bud­get vote—a rec­on­cil­i­a­tion vote where you extend the Bush tax cuts out for a decade or five years. You take all of those issues off the table, and then say, “What do you want to do for tax reform?”

    Then, the ques­tion is: “OK, what do we do about repa­tri­a­tion and all of the inter­est­ing stuff?” And, if you have a Repub­li­can pres­i­dent to go with a Repub­li­can House and Sen­ate, then they pass the [Paul] Ryan plan [on Medicare].

    NJ What if the Democ­rats still have con­trol? What’s your sce­nario then?

    NORQUIST Obama can sit there and let all the tax [cuts] lapse, and then the Repub­li­cans will have enough votes in the Sen­ate in 2014 to impeach. The last year, he’s gone into this hud­dle where he does every­thing by exec­u­tive order. He’s made no effort to work with Congress.


    Posted by Pterrafractyl | January 30, 2012, 2:24 pm
  9. @Pterrafractyl: Thanks, man. It’s just another exam­ple of how far some Estab­lish­ment flunkies will go to B.S. their way out of telling the truth. Obama has tried to work with Congress.....it’s con­gress that won’t work with him, or more specif­i­cally, the Republicans.

    Of course, Norquist isn’t the only Estab­lish­ment flunky who’s guilty of B.S.ing peo­ple on what’s going on in Con­gress. Oh no, there’s far more liars than that, as we both prob­a­bly know by now.

    Posted by Steven L. | January 30, 2012, 5:30 pm
  10. @Steven L: Part of what makes Norquist such an inter­est­ing crit­ter is that it often seems like the Estab­lish­ment is his flunky. It’s sur­pris­ing that the far-right hasn’t found a more telegenic spokesman for their cause, though. The guy always looks like he wants to stran­gle the world (and not just metaphorically).

    Posted by Pterrafractyl | January 31, 2012, 3:49 pm
  11. The first para­graph of this arti­cle includes one of the many unspeak­able real­i­ties of our time (well, unspeak­able for the bulk of media shills) in the Age of Aus­ter­ity and Deficit hys­ter­ics. With some­one that’s the walk­ing embod­i­ment of social inequal­ity look­ing likely to get the nom­i­na­tion of the US rob­ber baron party, let’s hope this issues gets raised more and more while Mr. tax-haven hits the cam­paign trail:

    Robert Reich
    The great switch by the super rich

    Wealthy Amer­i­cans used to finance the gov­ern­ment through tax pay­ments. Now, they just lend it money.

    By Robert Reich, Guest blog­ger / May 18, 2011

    Forty years ago, wealthy Amer­i­cans financed the U.S. gov­ern­ment mainly through their tax pay­ments. Today wealthy Amer­i­cans finance the gov­ern­ment mainly by lend­ing it money. While for­eign­ers own most of our national debt, over 40 per­cent is owned by Amer­i­cans – mostly the very wealthy.

    This great switch by the super rich – from pay­ing the gov­ern­ment taxes to lend­ing the gov­ern­ment money — has gone almost unno­ticed. But it’s crit­i­cal for under­stand­ing the bud­get predica­ment we’re now in. And for get­ting out of it.

    Over that four decades, tax rates on the very rich have plum­meted. Between the end of World War II and 1980, the top tax bracket remained over 70 per­cent — and even after deduc­tions and cred­its was well over 50 per­cent. Now it’s 36 per­cent. As recently as the late 1980s, the cap­i­tal gains rate was 35 per­cent. Now it’s 15 percent.

    Not only are rates lower now, but loop­holes are big­ger. 18,000 house­holds earn­ing more than a half-million dol­lars last year paid no income taxes at all. In recent years, accord­ing to the IRS, the rich­est 400 Amer­i­cans have paid only 18 per­cent of their total incomes in fed­eral income taxes. Bil­lion­aire hedge-fund and private-equity man­agers are allowed to treat much of their incomes as cap­i­tal gains (again, at 15 percent).

    Mean­while, more and more of the nation’s income and wealth have gone to the top. In the late 1970s, the top 1 per­cent took home 9 per­cent of total national income. Now the top 1 percent’s take is more than 20 per­cent. Over the same period, the top one-tenth of one per­cent has tripled its share.

    Wealth is even more con­cen­trated at the top — more con­cen­trated than at any time since the Gilded Age of the late 19th cen­tury.


    Oh no!! He’s using his Jedi mind tricks:

    Rom­ney: Actu­ally, I Kind of Pay 50% Tax

    Josh Mar­shall Jan­u­ary 27, 2012, 7:20 PM

    I’m pretty sur­prised that Mitt Romney’s team let their guy go down this path. Or maybe it’s just him. Stung by the 13.9% tax rate story and goaded on by some con­ser­v­a­tive colum­nists, Mitt Rom­ney is now say­ing that his actual tax rate is “really closer to 45 or 50 percent.”

    Romney’s claims come pretty much right at the begin­ning of this inter­view below but he’s said it twice today. It’s got­ten pretty lit­tle press even though these were pub­lic inter­views; and kudos to Huffpo’s Jon Ward for putting together the story. [Video]

    Romney’s argu­ment is that even though he pays only 13.9%, he’s really pay­ing some­thing like 45% to 50% because the invest­ment income he lives on comes from cor­po­ra­tions. And those cor­po­rates also pay taxes. The nom­i­nal cor­po­rate tax rate is 35%, though of course many pay much lower. But if you add Romney’s rate together with this com­pletely unre­lated cor­po­rate tax he doesn’t pay, you get 50%, which Rom­ney is now say­ing is real tax rate. In other words, he’s claim­ing he pays both taxes.



    Posted by Pterrafractyl | January 31, 2012, 7:49 pm
  12. i really would not say there is much of a dif­fer­ence between Bush and Obama. As far as the ‘tax cuts’ mea­sure
    its just polit­i­cal pos­tur­ing dur­ing an elec­tion cycle

    2012 elec­tion cycle
    mitt rom­ney
    Gold­man Sachs $235,275
    Cit­i­group Inc $178,450
    Mer­rill Lynch $176,125
    Mor­gan Stan­ley $170,350
    Lehman Broth­ers $154,800
    UBS AG $125,150
    JPMor­gan Chase & Co $123,800

    barak obama
    Uni­ver­sity of Cal­i­for­nia $1,648,685
    Gold­man Sachs $1,013,091
    Har­vard Uni­ver­sity $878,164
    Microsoft Corp $852,167
    Google Inc $814,540
    JPMor­gan Chase & Co $808,799
    Cit­i­group Inc $736,771

    and for comaprison
    2004 bush
    Mor­gan Stan­ley $603,480
    Mer­rill Lynch $586,254
    Price­wa­ter­house­C­oop­ers $514,250
    UBS AG $474,325
    Gold­man Sachs $394,600
    Lehman Broth­ers $361,525
    MBNA Corp $350,350

    (source http://www.opensecrets.org)

    wow usb ag is one of those elu­sive swiss banks that dave is going on about

    What I find inter­est­ing is that ‘normal’media is start­ing to get these ideas thank­fully. (They never call it fas­cism or have a his­tor­i­cal per­spec­tive)
    Mr Moy­ers inter­views the archi­tect of Reaganomics and ‘the revolv­ing door’ two tiered class struc­ture Pter­rafractyl cited and count­less other ref­er­ences in this thread

    my point being it doesn’t seem to mat­ter who you vote for. As long as these fas­cist cor­po­ra­tions keep pulling the strings, its seems to have been born some time after the US civil war with the indus­trial era itself and is stuck on repeat. I would highly rec­om­mend George Seldes ‘You can’t do that’

    it almost reads like today

    But it con­tin­u­ally amazes me how Daves research is right on the money, when you fact check and cross reference.

    Posted by leif | January 31, 2012, 8:24 pm
  13. @Leif: The way I look at the US two-party options, it’s like you’re dri­ving a con­vert­ible with no breaks and two godaw­ful pas­sen­gers. You’ve been alter­nat­ing between fol­low­ing their direc­tions (which seemed like a bad idea because of them seem rather loopy) and, sur­prise sur­prise, you’re lost and head­ing for a cliff. Pas­sen­ger #1 appears to have the same brain injury as the guy from Memento. He always thinks its 1999 and dereg­u­la­tion and tax cuts are totally the thing to do, but he’s also cov­ered in tat­toos warn­ing him of lessons he’s expe­ri­enced over the years, even if he can’t quite remem­ber them (“don’t repeal Glass-Steagall!”/“Mortgage-fraud!!!”/“Unregulated deriv­a­tives destroyed us!”, etc.). Pas­sen­ger #1 sug­gests veer­ing left, no right, no maybe left was the right way to go...nah, go right. He gen­er­ally seems unsure and con­fused but at least with all those tat­toos he occa­sion­ally makes a sound choice.

    Pas­sen­ger #2 is Darth Vader wear­ing a jet­pack. He has cat­a­strophic insur­ance cov­er­age on the car thinks point­ing it towards the cliff and putting the pedal to the metal sounds like a great plan. Also, Darth is using the Force to keep your seat belt stuck so there’s no jump­ing out.

    If you keep on lis­ten­ing to both pas­sen­gers you’ll end up fly­ing off the cliff no mat­ter what, but one passenger’s advice is going to get you there a lot faster and he’s got a jet­pack and you don’t. At the end of the day, I’d pre­fer veer­ing back and forth another time....maybe it’ll jos­tle the seat belt loose.

    Of course, the opti­mal solu­tion would be for the metaphor­i­cal dri­ver to stop lis­ten­ing to either pas­sen­ger and just turn the car around but that’s the beauty of our sys­tem and the game-theory dynam­ics it gen­er­ates: choos­ing the lesser of two evils often seems like a lesser evil, itself, when com­pared to the option of vot­ing for the 3rd party can­di­date you’d actu­ally pre­fer. That’s why, if you use the phrase “instant runoff vot­ing” in front of either of your pas­sen­gers, you get the impres­sion they might both blow the car up.

    Posted by Pterrafractyl | February 1, 2012, 11:46 am
  14. @ Pter­rafractyl

    I dont quite see it clear and sim­ple like that as such, although i think its more like a bus float­ing down a river with Mus­solini and Darth Vader at the wheel. A lot of other fish are going to join the swarm because there is always strength in masses.
    Money talks no mat­ter what side of the aisle your on.
    Out­sourc­ing was a clear plan to break labors polit­i­cal back.
    Heck i would vote for either party as long as they didn’t stink of cor­po­rate fish.

    Posted by leif | February 1, 2012, 8:28 pm
  15. @Leif: Def­i­nitely agree with you on the out­sourc­ing issue. Sad thing is, though, the ‘con­ser­v­a­tives’ will blame it all on pro­gres­sives or ‘ille­gal’ immi­grants, etc.

    Posted by Steven L. | February 2, 2012, 10:08 am
  16. @Leif: I’d agree that an informed, uncor­rupted indi­vid­u­als from either party could eas­ily find com­mon ground on find awful law that need to be over­turned. It would be like shoot­ing fish in a bar­rel and most of those laws prob­a­bly had huge sup­port from both parties.

    It’s on the ques­tion of “where do we go from here” where I find a pretty big split between the two because I don’t see the “small government/free-market/no-regulation/you’re on your own” par­a­digm as being even remotely fea­si­ble for a mod­ern tech­no­log­i­cally inten­sive econ­omy in this day and age unless we revert to a 19th cen­tury social con­tract of just allow­ing death via poverty. The Dem party’s lack of ide­o­log­i­cal purity on eco­nomic pol­icy, as schizo as it seems, is sort of its sav­ing grace because we need to fig­ure out new ways to gov­ern­ment our­selves in a way that main­tains real free­dom while not run­ning the bios­phere into the ground and cre­at­ing mass unem­ploy­ment. I’m just guess­ing that some mix of a mar­ket econ­omy, strong (but not stu­pid) reg­u­la­tion, a social safety net, seri­ous envi­ron­men­tal, labor, and vot­ing rights pro­tec­tions, and a gen­eral recog­ni­tion that we’re no longer liv­ing in an end­less growth sit­u­a­tion are just some of fea­tures that are going to be required for a future that doesn’t totally suck for 99% of our grand­chil­dren. Unfor­tu­nately, I don’t see a par­a­digm that includes those fea­tures emerg­ing from the GOP’s base, although I can only barely imag­ine it emerg­ing from the Dem’s base, FWIW. And yeah, I’d vote for either party if they had a believ­able vision for the future that doesn’t seem to con­tin­ued adher­ence to the same psy­chotic poli­cies and ide­olo­gies that are turn­ing the planet into a giant poi­soned plantation.

    Posted by Pterrafractyl | February 2, 2012, 2:56 pm
  17. And our bankster elites won­der why so many peo­ple think they’re reck­less par­a­sites:

    S.E.C. Is Avoid­ing Tough Sanc­tions for Large Banks

    Pub­lished: Feb­ru­ary 3, 2012

    WASHINGTON — Even as the Secu­ri­ties and Exchange Com­mis­sion has stepped up its inves­ti­ga­tions of Wall Street in the last decade, the agency has repeat­edly allowed the biggest firms to avoid pun­ish­ments specif­i­cally meant to apply to fraud cases.

    By grant­ing exemp­tions to laws and reg­u­la­tions that act as a deter­rent to secu­ri­ties fraud, the S.E.C. has let finan­cial giants like JPMor­gan­Chase, Gold­man Sachs and Bank of Amer­ica con­tinue to have advan­tages reserved for the most depend­able com­pa­nies, mak­ing it eas­ier for them to raise money from investors, for exam­ple, and to avoid lia­bil­ity from law­suits if their finan­cial fore­casts turn out to be wrong.

    An analy­sis by The New York Times of S.E.C. inves­ti­ga­tions over the last decade found nearly 350 instances where the agency has given big Wall Street insti­tu­tions and other finan­cial com­pa­nies a pass on those or other sanc­tions. Those instances also include waivers per­mit­ting firms to under­write cer­tain stock and bond sales and man­age mutual fund portfolios.

    JPMor­gan­Chase, for exam­ple, has set­tled six fraud cases in the last 13 years, includ­ing one with a $228 mil­lion set­tle­ment last sum­mer, but it has obtained at least 22 waivers, in part by argu­ing that it has “a strong record of com­pli­ance with secu­ri­ties laws.” Bank of Amer­ica and Mer­rill Lynch, which merged in 2009, have set­tled 15 fraud cases and received at least 39 waivers.

    Only about a dozen com­pa­nies — Dell, Gen­eral Elec­tric and United Rentals among them — have felt the full force of the law after issu­ing mis­lead­ing infor­ma­tion about their busi­nesses. Cit­i­group was the only major Wall Street bank among them. In 11 years, it set­tled six fraud cases and received 25 waivers before it lost most of its priv­i­leges in 2010.

    By grant­ing those waivers, the S.E.C. allowed Wall Street firms to have pow­er­ful advan­tages, secu­ri­ties experts and for­mer reg­u­la­tors say. The insti­tu­tions remained pro­tected under the Pri­vate Secu­ri­ties Lit­i­ga­tion Reform Act of 1995, which makes it eas­ier to avoid class-action share­holder lawsuits.


    The com­mis­sion has fre­quently turned the other cheek when the com­pa­nies again set­tle sim­i­lar fraud cases. S.E.C. offi­cials have defended that prac­tice by say­ing they do not have the resources to take cases to court rather than set­tle. They recently asked Con­gress to toughen laws and to raise finan­cial penal­ties for fraud violations.

    ¶ But the repeated grant­ing of waivers sug­gests that the agency does in fact have tools it often does not use, crit­ics say. Close to half of the waivers went to repeat offend­ers — Wall Street firms that had set­tled pre­vi­ous fraud charges by agree­ing never again to vio­late the very laws that the S.E.C. was now say­ing that they had broken.


    JPMor­gan­Chase is among the big Wall Street firms that have been granted mul­ti­ple waivers with nearly every set­tle­ment of S.E.C. fraud charges. Last July, it agreed to pay $228 mil­lion to set­tle civil and crim­i­nal charges that it cheated cities and towns by rig­ging bids with other Wall Street firms to invest the money raised by sev­eral munic­i­pal­i­ties for cap­i­tal projects.

    JPMor­gan received three waivers related to that case for priv­i­leges that it oth­er­wise would have lost. But the S.E.C. said the company’s fraud­u­lent actions didn’t involve mis­lead­ing investors about JPMorgan’s business.

    “That dis­tinc­tion doesn’t do it for me,” said Richard W. Painter, a cor­po­rate law pro­fes­sor at the Uni­ver­sity of Min­nesota and the co-author of a case­book on secu­ri­ties lit­i­ga­tion and enforce­ment. “If a com­pany has trou­ble telling the truth to investors in one batch of secu­ri­ties it is under­writ­ing, I would not have con­fi­dence that it would tell the truth to investors about its own securities.”

    Despite six secu­ri­ties fraud set­tle­ments in 13 years, JPMor­gan rarely if ever lost any spe­cial priv­i­leges. It has been awarded at least 22 waivers since 2003, with most of its S.E.C. set­tle­ments gen­er­at­ing two or more. In seek­ing the reprieves, lawyers for JPMor­gan stated in let­ters to the S.E.C. that it should grant a waiver because the com­pany has “a strong record of com­pli­ance with the secu­ri­ties laws.” The com­pany declined to com­ment for this arti­cle.


    Posted by Pterrafractyl | February 3, 2012, 8:08 am
  18. I won­der if the SEC can waive this too (it’s a NY state law­suit) or if the big boys have to some state-specific get-out-of-jail-free card. I guess we’ll find out:

    New York Suing 3 Banks Over Mort­gage Data­base
    Pub­lished: Feb­ru­ary 3, 2012

    Attor­ney Gen­eral Eric T. Schnei­der­man of New York sued three major banks on Fri­day, accus­ing them of fraud in their use of an elec­tronic mort­gage data­base that he said resulted in decep­tive and ille­gal prac­tices, includ­ing false doc­u­ments in fore­clo­sure proceedings.

    Mr. Schnei­der­man, co-chairman of a new mort­gage cri­sis unit under Pres­i­dent Obama, filed a law­suit against Bank of Amer­ica, Wells Fargo and JPMor­gan Chase in New York State Supreme Court in Brooklyn.

    The data­base, called the Mort­gage Elec­tronic Reg­is­tra­tion Sys­tem or MERS, was cre­ated in the mid-1990s for track­ing mort­gage own­er­ship. It is a col­lab­o­ra­tion of top mort­gage ser­vicers, mort­gage insur­ers and Fan­nie Mae and Fred­die Mac, the gov­ern­ment enti­ties that hold many of the country’s mortgages.

    “The mort­gage indus­try cre­ated MERS to allow finan­cial insti­tu­tions to evade county record­ing fees, avoid the need to pub­licly record mort­gage trans­fers and facil­i­tate the rapid sale and secu­ri­ti­za­tion of mort­gages en masse,” Mr. Schnei­der­man said.

    “By cre­at­ing this bizarre and com­plex end-around of the tra­di­tional pub­lic record­ing sys­tem,” Mr. Schneiderman’s law­suit asserts, the banks saved $2 bil­lion in record­ing fees.

    More than 70 mil­lion mort­gage loans, includ­ing mil­lions of sub­prime loans, have been reg­is­tered in the MERS sys­tem, rather than in local county clerks’ offices, accord­ing to the lawsuit.

    The law­suit asserts the data­base is inac­cu­rate and seeks to stop the banks from fil­ing fore­clo­sure actions through MERS and exe­cut­ing false or defec­tive mort­gage assign­ments in New York fore­clo­sure proceedings.

    Mr. Schnei­der­man also is seek­ing all prof­its obtained through fraud­u­lent and decep­tive prac­tices and other dam­ages, includ­ing $5,000 for each vio­la­tion of gen­eral busi­ness law.

    Posted by Pterrafractyl | February 3, 2012, 1:48 pm
  19. So how exactly is the “troika” going to force a 25% wage cut across the pri­vate sec­tor in Greece? Is it just a law that gets passed where everyone’s wages/salary must drop by exactly 25%? That should do won­ders for the econ­omy:


    Patience with Greek politi­cians has evap­o­rated among its cred­i­tors. Dur­ing a con­fer­ence call on Sat­ur­day, euro­zone finance min­is­ters bluntly told Athens to deliver on its promises and agree to reforms or face default next month.

    Jean-Claude Juncker, head of the euro­zone group of finance min­is­ters, told Der Spiegel at the week­end that the pos­si­bil­ity of bank­ruptcy should encour­age Athens to “get mus­cles” when it comes to imple­ment­ing reforms.

    “If we were to estab­lish that every­thing has gone wrong in Greece, there would be no new pro­gramme and that would mean that in March they have to declare bank­ruptcy,” he warned.

    Mr Sama­ras last week threat­ened to veto the pack­age unless con­ces­sions were made on pri­vate sec­tor wages, claim­ing the cuts would pro­long a reces­sion already in its fifth year. Mr Karatzaferis also opposes fur­ther aus­ter­ity measures.

    The two sides were still far apart over pro­jected cuts of 25 per cent in pri­vate sec­tor wages, 35 per cent in sup­ple­men­tary pen­sions and the clo­sure of about 100 state-controlled organ­i­sa­tions with thou­sands of job losses.

    These are part of a €4.4bn pack­age of sav­ings the troika has said should be imple­mented at once.

    Euro­zone offi­cials are delib­er­ately refus­ing to allow Greece to sign off on a €200bn bond restruc­tur­ing plan because the threat of default is the lever­age they have to con­vince recal­ci­trant Greek min­is­ters to imple­ment nec­es­sary cuts.

    Posted by Pterrafractyl | February 6, 2012, 9:22 am
  20. Posted by Pterrafractyl | February 7, 2012, 2:17 pm
  21. Ok, this is start­ing to take on an S&M qual­ity, and it doesn’t look like any­one told Greece the safe word:

    Greece deal fails to con­vince, EU demands more

    By Jan Strupczewski and Renee Mal­te­zou | Reuters


    BRUSSELS/ATHENS (Reuters) — Greek polit­i­cal lead­ers said they had clinched a deal on eco­nomic reforms needed to secure a sec­ond EU bailout, but euro zone finance min­is­ters demanded more steps and a par­lia­men­tary seal of approval before pro­vid­ing the aid.

    The EU and the Inter­na­tional Mon­e­tary Fund are exas­per­ated by a string of bro­ken promises by Athens and weeks of dis­agree­ment over the terms of a 130 bil­lion euro ($172 bil­lion) bailout, with time run­ning out to avoid a default.

    Finance min­is­ters of the 17-nation euro zone meet­ing in Brus­sels warned there would be no imme­di­ate approval for the res­cue pack­age and said Athens must prove itself first.

    Jean-Claude Juncker, who chairs the Eurogroup, set three con­di­tions, say­ing the Greek par­lia­ment must rat­ify the pack­age when it meets on Sun­day and a fur­ther 325 mil­lion euros of spend­ing reduc­tions needed to be iden­ti­fied by next Wednes­day, after which euro zone finance min­is­ters would meet again.

    “Thirdly, we would need to obtain strong polit­i­cal assur­ances from the lead­ers of the coali­tion par­ties on the imple­men­ta­tion of the pro­gram,” Juncker told a news con­fer­ence after six hours of talks in Brus­sels. “Those ele­ments needs to be in place before we can take decisions.”

    “In short, no dis­burse­ment before implementation.”

    Fac­ing elec­tions as soon as April, Greece’s party lead­ers have been loath to accept the lenders’ tough con­di­tions, which are cer­tain to be unpop­u­lar with increas­ingly angry voters.



    Greece has fallen deeper into reces­sion since it received a first bailout in May 2010. Lat­est unem­ploy­ment fig­ures showed the job­less rate hit a record 20.9 per­cent in Novem­ber, with youth unem­ploy­ment a stag­ger­ing 48 percent.

    The sharper-than-forecast con­trac­tion has opened a fund­ing gap of about 15 bil­lion euros in the bailout pack­age agreed last Octo­ber to bring Greece’s debt down to about 120 per­cent of gross domes­tic prod­uct from nearly 160 per­cent today.

    Two sources said the gov­ern­ment would promise spend­ing cuts and tax rises worth 13 bil­lion euros from 2012 to 2015, almost dou­ble the seven bil­lion orig­i­nally pledged.


    This is turn­ing out to be a be bril­liant ploy to drive Greece into the ground:
    1. Have end­less talks about a bailout to cover a fis­cal “gap”.
    2. Tie the bailout to aus­ter­ity mea­sures that are cer­tain to dec­i­mate the econ­omy.
    3. Make obscene demands in “aus­ter­ity” cuts, tar­get­ing the most vul­ner­a­ble pop­u­la­tions (the young and old) that ensure that the talks will take for­ever because it forces Greece into national sui­cide to accept the cuts.
    4. Keep threat­en­ing to kill the coun­try imme­di­ately via threat of with­hold­ing funds and default­ing (“default”, BTW, is the S&M safe word).
    5. Once you blud­geon Greece’s “lead­ers” into accept­ing your terms, point out that the econ­omy has got­ten unex­pect­edly worse and now even larger cuts are required.
    6. Repeat steps 1–5 as needed.
    7. Apply steps 1–6 as needed to addi­tional euro­zone coun­tries.
    8. Even­tu­ally roll out the plan you had all along but couldn’t quite admit (even though it was talked about in the inter­na­tional press):

    Feb­ru­ary 9, 2012 7:44 pm
    Ger­many and Europe: A very fed­eral formula

    By Quentin Peel

    Angela Merkel’s plans for a shift in power from EU mem­bers to Brus­sels would gen­er­ate con­sti­tu­tional prob­lems within Ger­many and wor­ries among allies, writes Quentin Peel

    The 20th anniver­sary of the sign­ing of the Maas­tricht treaty passed largely unre­marked on Tues­day as the cri­sis in the euro­zone pre­oc­cu­pied gov­ern­ments and the finan­cial mar­kets. Yet even as nego­ti­a­tions in Athens edged towards Thursday’s agree­ment on resched­ul­ing the Greek debt bur­den, the pact that laid the foun­da­tions for Europe’s sin­gle cur­rency was her­alded by Chan­cel­lor Angela Merkel in a speech to students.

    In an unusu­ally appro­pri­ate set­ting – sur­rounded by Greek antiq­ui­ties in the recon­structed Neues Museum in the cen­tre of Berlin – Germany’s nor­mally cau­tious leader spelt out ele­ments of her vision on how to solve the euro­zone cri­sis long-term.

    Much was famil­iar. Euro­zone coun­tries needed both bud­get aus­ter­ity to reduce their debts and struc­tural reforms to boost their com­pet­i­tive­ness and employ­ment, she said. They needed to recre­ate trust in their finances and in each other. Then she turned to the con­struc­tion of the EU. “With­out doubt, we need more and not less Europe,” Ms Merkel declared. “That’s why it’s nec­es­sary to cre­ate a polit­i­cal union, some­thing that wasn’t done when the euro was launched.”

    She went on to sug­gest that this polit­i­cal union – “there will still be a lot of argu­ment about it” – would be organ­ised around the exist­ing bod­ies of the soon to be 28-nation bloc. The Euro­pean Com­mis­sion, the Brussels-based exec­u­tive arm, would – with com­pe­tences trans­ferred to it by nation states – act as a gov­ern­ment report­ing to a strong Euro­pean par­lia­ment. The Euro­pean Coun­cil of national heads of state and gov­ern­ment would func­tion as a sec­ond leg­isla­tive cham­ber; the Euro­pean Court of Jus­tice would be the high­est author­ity. “We believe that we will stand bet­ter together if we are ready to trans­fer com­pe­tences step by step to Europe,” she said.

    “That is just about as fed­er­al­ist as you can get,” says Hen­rik Ender­lein of the Her­tie School of Gov­ern­ment in Berlin. “Is she seri­ous? That is the real ques­tion. She is very good at the rhetoric. But I do take it seri­ously that she wants to move towards polit­i­cal union.”


    Close advis­ers con­firm that the chan­cel­lor has indeed been think­ing long and hard about reforms of the EU that go far beyond the recent “fis­cal com­pact” of bud­getary rules agreed as an inter­gov­ern­men­tal treaty last month by 25 of the 27 members.

    At a recent meet­ing with three fel­low Euro­pean lead­ers at Schloss Mese­berg, her baroque gov­ern­ment retreat out­side Berlin, she urged them to spell out their ideas of how the EU should look in 10 years’ time. To her obvi­ous frus­tra­tion, they were all much more focused on the present cri­sis. Yet she gave only hints of her own think­ing in a series of state­ments and speeches. “She is quite clever in not spelling it out,” says Joachim Fritz-Vannahme of the Europe’s Future pro­gramme at the Ber­tels­mann foun­da­tion. “She is play­ing chess. She knows what she has to do. She knows it will take time. And she knows it will be very controversial.”

    It is, he adds, “a vision for the trans­for­ma­tion of the EU – or at least the euro­zone – in a very short time frame: three to five years. Polit­i­cal union is not a very clear con­cept. She doesn’t dare speak about a United States of Europe, but she is think­ing about what has to be in it.

    Con­ver­sa­tions with senior offi­cials and polit­i­cal ana­lysts in Berlin reveal a lot more detailed think­ing than Ms Merkel has demon­strated publicly.

    The “fis­cal com­pact” is seen as just a first step to make the rules of bud­get dis­ci­pline gen­uinely bind­ing on all euro­zone mem­bers: they must put a com­mit­ment to bal­anced bud­gets into their national con­sti­tu­tions, or equiv­a­lent leg­is­la­tion. In exchange, Ger­many pro­posed and is the prin­ci­pal financier of the per­ma­nent Euro­pean Sta­bil­ity Mech­a­nism, due to start oper­at­ing in July. It is in effect a €500bn Euro­pean mon­e­tary fund to deal with debt crises in the 17-member mon­e­tary union.

    The rules agreed would set ceil­ings for national spend­ing and bor­row­ing but would not inter­fere with tax and spend­ing choices. But the next phase con­tem­plated in Berlin would be more intru­sive: co-ordinating or even har­mon­is­ing taxes, with bud­gets super­vised by the Com­mis­sion and all euro­zone finance min­is­ters. They would be able to insist on cer­tain spend­ing pri­or­i­ties, to ensure com­pet­i­tive­ness and growth tar­gets were met and that ade­quate funds were devoted to areas such as edu­ca­tion. It would mean a big trans­fer of sov­er­eignty away from national cap­i­tals and parliaments.

    At that stage, many lead­ing Ger­man offi­cials and politi­cians pri­vately con­cede, the intro­duc­tion of jointly guar­an­teed eurobonds might be pos­si­ble, even irre­sistible. The con­cept would pro­vide cheaper financ­ing for the most indebted euro­zone states. It is still fiercely resisted in Ms Merkel’s CDU and by the lib­eral Free Democ­rats, junior part­ner in the coali­tion. The chan­cel­lor her­self sounds scep­ti­cal. But Wolf­gang Schäu­ble, her pas­sion­ately pro-European finance min­is­ter, has always said “not yet” rather than “never” to the bonds. (Both the main oppo­si­tion par­ties, the centre-left Social Democ­rats and the envi­ron­men­tal­ist Greens, are in favour.)


    Sooo....is the rest of the euro­zone even pay­ing atten­tion to this or does the world have to spend the next 5 years watch­ing the rest of the euro­zone blindly stum­bled into a giant sovereignty-grab scam that’s not even a pub­lic secret? Granted, there should be no short­age of politi­cians in coun­try more than happy to sell out their nations into some sort of 21st vas­sal state union, but after see­ing what’s being done to Greece it’s stun­ning that the pub­lic in the non-PIIGS coun­tries could really be ready to just sub­mit to the whim of a group of lead­ers that are behav­ing like an abu­sive sugar-daddy.

    And now that we know what Merkel has planned, and know that we know that Merkel knows that her plans are very con­tro­ver­sial and can’t be pub­licly voiced and go much fur­ther than the even the bal­anced bud­get amend­ments that she just got 25 EU mem­bers to sign up for (good luck with that guys! *snicker*), one really has to won­der what sort of man­u­fac­tured cri­sis (or crises) are being planned for the the next stage of the for­ma­tion of the United States of Europe. One these you can bet on...it’s going to be big!

    Posted by Pterrafractyl | February 9, 2012, 9:05 pm
  22. Given all the media shots of Greek riot police clash­ing with street pro­tes­tors today, note that the police are pissed too:

    Greek police union wants to arrest EU/IMF officials

    ATHENS | Fri Feb 10, 2012 8:10am EST

    (Reuters) — Greece’s largest police union has threat­ened to issue arrest war­rants for offi­cials from the country’s Euro­pean Union and Inter­na­tional Mon­e­tary Fund lenders for demand­ing deeply unpop­u­lar aus­ter­ity measures.

    In a let­ter obtained by Reuters Fri­day, the Fed­er­a­tion of Greek Police accused the offi­cials of “...black­mail, covertly abol­ish­ing or erod­ing democ­racy and national sov­er­eignty” and said one tar­get of its war­rants would be the IMF’s top offi­cial for Greece, Poul Thomsen.

    The threat is largely sym­bolic since legal experts say a judge must first autho­rize such war­rants, but it shows the depth of anger against for­eign lenders who have demanded dras­tic wage and pen­sion cuts in exchange for funds to keep Greece afloat.

    Since you are con­tin­u­ing this destruc­tive pol­icy, we warn you that you can­not make us fight against our broth­ers. We refuse to stand against our par­ents, our broth­ers, our chil­dren or any cit­i­zen who protests and demands a change of pol­icy,” said the union, which rep­re­sents more than two-thirds of Greek policemen.

    “We warn you that as legal rep­re­sen­ta­tives of Greek police­men, we will issue arrest war­rants for a series of legal vio­la­tions ... such as black­mail, covertly abol­ish­ing or erod­ing democ­racy and national sovereignty.”


    A police union offi­cial said the threat to ‘refuse to stand against’ fel­low Greeks was a sym­bolic expres­sion of sol­i­dar­ity and did not mean police would halt their efforts to stop protests get­ting out of hand.

    With a wave of cab­i­net res­ig­na­tions (includ­ing the far-right Karatzaferis), the ques­tion arises of who is still sup­port­ing the Greek gov­ern­ment in Greece?

    Posted by Pterrafractyl | February 10, 2012, 1:00 pm
  23. Dave,
    I was going to put this into a pri­vate email but, what the hell, every­body could use a lit­tle pub­lic praise now and again. I’m a par­si­mo­nious per­son with both money and per­sonal acco­lades but I’m send­ing you a small dona­tion and say­ing just what I think of you. If you never do another show you’ve done more than enough to edu­cate us all about ‘how the world really works’. It’s a damned shame that Mae’s work is being used for profit and so is less acces­si­ble than it should be. You do what you do and it has cost you money and much else. I can’t imag­ine the focus and moral com­mit­ment it has taken to labor as you have done for these decades and to do it because it was the right thing. Thank you so much, my man.
    To all Dave’s read­ers and lis­ten­ers — kick in a bit if you can.

    Posted by Dwight | February 10, 2012, 7:13 pm
  24. inter­est­ing inter­view with Soros over at Der Spiegel

    “Soros: I know it sounds as though we are repeat­ing exactly the same mis­take. But let’s com­pare the sit­u­a­tion on the global finan­cial mar­kets to a car that is skid­ding. When a car is skid­ding, you must first turn the wheel in the same direc­tion as the skid. And only when you have regained con­trol can you then cor­rect the direc­tion. We went through a 25-year boom in the global econ­omy. Then came the crash in 2008. The finan­cial mar­kets actu­ally col­lapsed, and they had to be put on arti­fi­cial life sup­port through mas­sive state inter­ven­tion. The euro cri­sis is a direct con­tin­u­a­tion or con­se­quence of the 2008 crash. This cri­sis isn’t over yet and we will have to spend more state money in order to stop the skid­ding. It is only after­ward that we can change the direc­tion. Oth­er­wise we will repeat the mis­takes that plunged Amer­ica into the Great Depres­sion in 1929. Angela Merkel sim­ply doesn’t under­stand that.”

    “Soros: Peo­ple like Schäu­ble don’t seem to under­stand that the heav­ily indebted coun­tries are now at a severe dis­ad­van­tage, because they have basi­cally become heav­ily indebted in a for­eign cur­rency, the euro. They do not con­trol it, and so they are in the same posi­tion as third world coun­tries in Latin Amer­ica were in at the begin­ning of the 1980s, where the coun­tries became indebted in dol­lars. It was a sit­u­a­tion that led to a lost decade there. Europe now faces a lost decade. That is the rea­son we need euro bonds and a new EU fis­cal compact.”

    Posted by leif | February 13, 2012, 8:34 am
  25. Well, I’m not going to com­plain if folks want to call the col­lapse of national sov­er­eignty and impo­si­tion of “aus­ter­ity only” eco­nomic poli­cies , “Europe’s Supply-Side Rev­o­lu­tion”:

    FEBRUARY 17, 2012

    Europe’s Supply-Side Rev­o­lu­tion
    Fol­low­ing Germany’s lead, euro-zone nations are pur­su­ing pro-growth reforms that Rea­gan and Thatcher would admire.


    Look­ing beyond the lat­est head­lines about Greece’s debt cri­sis, the long-term ques­tion for the Euro­pean Union is: Can it grow? The con­ven­tional answer is that it’s too scle­rotic, too social­ist, too indebted. Not so.

    Ger­many is the largest econ­omy in Europe, and it’s been the first to recover and the best-performing devel­oped econ­omy since the start of the Great Reces­sion. Since bot­tom­ing in 2009’s first quar­ter, Ger­man out­put has grown at an annual rate of 2.8%, com­pared with 2.4% for the U.S. since its bot­tom in 2009’s sec­ond quar­ter. Germany’s unem­ploy­ment rate is an aston­ish­ingly low 5.5%. Ger­man youth unem­ploy­ment is lower than U.S. over­all unemployment.

    Skep­tics point to Germany’s suc­cess not as proof that Europe can grow, but as a rea­son why it can’t. They worry about the imbal­ances of Ger­man com­pet­i­tive­ness ver­sus the large south­ern economies of Italy and Spain. They argue that the euro—the com­mon cur­rency of Europe—rules out deval­u­a­tion by less com­pet­i­tive nations, which they hold out as the surest path to rebal­anc­ing.

    But this is the bless­ing of the euro, not its curse. The com­mon cur­rency pre­vents politi­cians from fan­ta­siz­ing that they can devalue—and inflate—their way to pros­per­ity. Instead, as Italy’s new prime min­is­ter, Mario Monti, put it, growth “will have to come from struc­tural reforms or supply-side measures.”


    Today’s chan­cel­lor, Angela Merkel, who replaced Mr. Schroeder, has praised him for his “courage and deter­mi­na­tion.” She is now spear­head­ing the effort to repeat his Agenda 2010 tem­plate through­out Europe. Surely if Ger­many could start with the wreck­age of a com­mu­nist slave-state and make itself into the most dynamic devel­oped econ­omy in the world, its tem­plate could trans­form slug­gish and over-indebted economies like Italy and Spain.

    Prime Min­is­ter Monti in Italy, and Spain’s new prime min­is­ter, Mar­i­ano Rajoy, are deeply com­mit­ted to this vision, and they are well on their way to imple­ment­ing it. It won’t be easy. They’re up against what Mr. Monti calls “the block­ing pow­ers of lob­bies and spe­cial inter­ests.” Read: unions.


    The trans­for­ma­tion of Europe is being made possible—as seri­ous reform is every­where and always—by cri­sis. For all the strikes and protests and back­lash (which Rea­gan and Mrs. Thatcher faced), Europe seems to know now that its tax-spend-borrow-and-protect social demo­c­ra­tic past can­not be its future.

    The dis­ci­pline of debt is dri­ving Europe to closer polit­i­cal inte­gra­tion, too. And this, in turn, feeds back into Europe’s growth poten­tial. It’s not just that closer inte­gra­tion would real­ize economies of scale, accel­er­at­ing those already begun by adopt­ing a com­mon cur­rency. It’s that if Europe’s squab­bling nations could only erase their polit­i­cal bound­aries, its debt prob­lems would vanish.

    Con­sider Italy and Spain. Italy has a lot of debt, but the sec­ond low­est deficit-to-GDP ratio in Europe, after Ger­many. Spain has a large deficit, but the low­est debt-to-GDP ratio of the large Euro­pean economies, even Ger­many. If Spain and Italy were to become a sin­gle country—let’s call it Spitaly—its fis­cal pro­file would be almost iden­ti­cal to that of France. If all the 17 coun­tries that use the euro were to com­bine into a sin­gle nation—call it Europa—its fis­cal pro­file would be bet­ter than that of the U.S.

    This is more than a thought exper­i­ment. Already Ger­many and France have bilat­er­ally nego­ti­ated the begin­ning of a fis­cal part­ner­ship, with har­mo­nized tax rates and joint bud­get­ing. And there are mul­ti­lat­eral treaty changes being for­mal­ized now, among all 27 Euro­pean Union mem­bers except for the recal­ci­trant U.K. and Czech Repub­lic, that will enshrine stronger joint fis­cal dis­ci­pline and oversight.

    In the 1970s, con­ven­tional wis­dom held that the U.S. couldn’t com­pete against Japan and, yes, Europe. But fear clar­i­fied our minds, and the supply-side rev­o­lu­tion we dared to under­take in the 1980s restored America’s growth and com­pet­i­tive­ness. Con­ven­tional wis­dom today holds that Europe is doomed. To the con­trary. It is, bravely, start­ing its own supply-side revolution.

    Mr. Luskin is chief invest­ment offi­cer and Mr. Roche Kelly is chief Europe strate­gist at Trend Macrolyt­ics LLC.

    An inter­est­ing aspect of this whole almost-balanced-budget-only euro­zone exper­i­ment is that it sort of cre­ates a bar­rier to the euro ever becom­ing a reserve currency...there just won’t be enough eurobonds out there because they can only grow be 2–3% each year (or what­ever Europe’s power elites allow on a given year). That may not enough of a sup­ply of new eurobonds to cover expir­ing ones and account for growth in a global econ­omy with a still explod­ing population.

    Some­what iron­i­cally, if the new “austerity-only” model actu­ally works, the euro would be such a hot com­mod­ity that the lim­ited sup­ply of eurobonds could have a strength­en­ing effect on the value of the euro, plac­ing pres­sure on the eurozone’s export-oriented growth strat­egy. It’s a sit­u­a­tion anal­o­gous to what Ger­many seemed like it was try­ing to avoid by join­ing a mon­e­tary union with eco­nom­i­cally weaker neigh­bors except now the currency-valuation issue is taken to the whole euro­zone. This whole weird eco­nomic exper­i­ment is look­ing more and more like a “damned if you do damned if you don’t” mid­dle class death trap(that will be cel­e­brated as a grand tri­umph once an eco­nomic recov­ery inevitably gets underway).

    It’s too bad because the idea of a more united Europe some day would is great goal and so many of the hur­dles in cre­at­ing a mon­e­tary union have already been over­come by the euro­zone. Sadly, it could be that lin­ger­ing national iden­ti­ties in a united Europe and resent­ment over “pay­ing for those lazy ” is just too large a hur­dle to over­come the need for wealth trans­fers from the wealth­ier coun­tries to the weaker ones (e.g. Greece gets sub­si­dized, in part to cover its loss of export power by being on the euro).

    If that transna­tional cama­raderie isn’t polit­i­cally fea­si­ble (indef­i­nitely, although over time that could change), and the the loss of sov­er­eignty and impo­si­tion of a “supply-side”-oriented troika is the only other way to cover the wealth trans­fers, this is look­ing rather grim. A future Europe where the mid­dle class has been mostly oblit­er­ated and it’s just a big sea of crap­tac­u­lar right-wing economic/social poli­cies (through “pol­icy har­mo­niza­tion”) in every coun­try is going to really suck for its pub­lic. What an awful tragedy and waste of effort and resources to see the euro­zone turned into a con­ti­nen­tal sovereignty-stripping “supply-side revolution”.

    Posted by Pterrafractyl | February 17, 2012, 11:28 pm
  26. There’s a lot of thought-provoking ideas and valu­able memes in this piece. Def­i­nitely worth a read...

    Posted by Pterrafractyl | March 8, 2012, 12:27 pm
  27. One more mis­sion accom­plished:

    OpenEu­rope Ver­dict On Greek PSI — Pyrrhic Vic­tory Sow­ing Seeds Of A Polit­i­cal And Eco­nomic Cri­sis In Europe
    Sub­mit­ted by Tyler Dur­den on 03/09/2012 — 07:35

    Min­utes ago we pre­sented Goldman’s twisted and con­flicted take on Greece in a post PSI world. Need­less to say, vir­tu­ally every­thing gold­man says is to be faded. Which is why not sur­pris­ingly, the next analy­sis, a far more accu­rate and real­is­tic one, does pre­cisely that. In a just released report from Europe think tank OpenEu­rope, the con­clu­sion is far less opti­mistic: “The deal sets the euro­zone up for a polit­i­cal row involv­ing Triple-A coun­tries. At the start of this year, 36% of Greece’s debt was held by taxpayer-backed insti­tu­tions (ECB, IMF, EFSF). By 2015, fol­low­ing the vol­un­tary restruc­tur­ing and the sec­ond bailout, the share could increase to as much as 85%, mean­ing that Greece’s debt will be over­whelm­ingly owned by euro­zone tax­pay­ers – putting them at risk of large losses under a future default. This deal may have sown the seeds of a major polit­i­cal and eco­nomic cri­sis at the heart of Europe, which in the medium and long term fur­ther threat­ens the sta­bil­ity of the euro­zone.“

    Posted by Pterrafractyl | March 9, 2012, 9:48 am
  28. And the US’s sov­er­eign debt cri­sis chugs along. Oh look, forced pub­lic asset sales by a state-appointed emer­gency finan­cial czar:

    Buy­ers show­ing inter­est in Harrisburg’s assets
    9:44 PM, Mar. 1, 2012

    HARRISBURG, Pa. (WTW) — The state-appointed finan­cial cus­to­dian over­see­ing Pennsylvania’s deeply indebted cap­i­tal told a judge Thurs­day there is broad inter­est in buy­ing, leas­ing or man­ag­ing Harrisburg’s munic­i­pal trash incin­er­a­tor, park­ing garages and water and sewer sys­tem as the city tries to scrape up money to pay cred­i­tors who are suing it.

    Cus­to­dian David Unkovic said par­ties have signed five to 10 con­fi­den­tial­ity agree­ments on each of the three sets of city-owned assets, allow­ing them to get a bet­ter look at the facil­ity oper­a­tions to help them deter­mine if they want to pay for them.


    “This is not going to be a fire sale, and I’m com­ing back to the court for approval” before sign­ing off on a trans­ac­tion, he said under ques­tion­ing by a lawyer work­ing for him. “I don’t think the court would approve a fire sale.”

    The star-crossed ren­o­va­tion of the incin­er­a­tor left Har­ris­burg on the hook for about $300 mil­lion in debt, about six times the size of the city’s oper­at­ing bud­get, and city offi­cials have no plan to pay it off. In addi­tion, the incin­er­a­tor does not gen­er­ate enough money to pay off the debt — although that was the premise under which much of the money, if not all, was borrowed.

    It is not the city’s only finan­cial prob­lem, but it is per­haps the largest and it prompted some City Coun­cil mem­bers to unsuc­cess­fully seek fed­eral bank­ruptcy court pro­tec­tion last fall.

    Unkovic’s plan to force the city to pay the debt must be approved by a Com­mon­wealth Court judge under an unprece­dented, four-month-old state law that allowed Gov. Tom Cor­bett, with court approval, to take sub­stan­tial finan­cial con­trol from city officials.

    Unkovic is test­ing inter­est in buy­ing or leas­ing the incin­er­a­tor and park­ing garages, and in man­ag­ing the water and sewer sys­tem, which is in need of tremen­dously expen­sive improve­ments to meet envi­ron­men­tal standards.

    Still, Unkovic said all the money in Har­ris­burg is not enough to pay off its oblig­a­tions, sug­gest­ing that he will insist on con­ces­sions from cred­i­tors, includ­ing Dauphin County, which backed part of the debt, and bond insurer Assured Guar­anty Munic­i­pal Corp.


    The day­long hear­ing in Com­mon­wealth Court became testy when a lawyer for sev­eral city offi­cials cross-examined Unkovic. Pres­i­dent Judge Bon­nie Brig­ance Lead­bet­ter had to repeat­edly step in to warn the lawyer, Mark Schwartz, or ver­bally sep­a­rate Schwartz and Unkovic’s lawyer, Mark Kaufman.

    Schwartz repeat­edly sought to ques­tion Unkovic about whether he had tried other options to raise money before sell­ing assets.

    At one point, Schwartz asked whether Unkovic had asked Cor­bett for money in lieu of the prop­erty tax pay­ments that the state does not make on the sub­stan­tial sec­tion of down­town Har­ris­burg that the Capi­tol and var­i­ous other state office build­ings occupy.

    Unkovic replied that he had spo­ken with law­mak­ers, but not Cor­bett, who appointed Unkovic and signed the law autho­riz­ing the state’s takeover of Harrisburg.

    This is a reminder that one man’s aus­ter­ity is another man’s firesale...at least when state-appointed emer­gency finan­cial czars demand it.

    Posted by Pterrafractyl | March 9, 2012, 11:48 pm
  29. @Pterrafractyl: Pri­va­ti­za­tion sucks, man. No two ways about it. =(

    Posted by Steven L. | March 10, 2012, 9:26 am
  30. @Steven L.: Yeah, while pri­va­ti­za­tion isn’t an inher­ently bad con­cept (there are plenty of pos­si­ble cir­cum­stances where it might make sense to pri­va­tize some state assets or ser­vice), some­how when­ever one learns about pri­va­ti­za­tions in prac­tice it seems to end up either involv­ing the sale of juicy land at fire sale prices or the sale of a pub­lic util­ity or ser­vice provider that will have to be pro­vided one way or another. The lat­ter case is effec­tively just indef­i­nitely out­sourc­ing the ser­vice to pri­vate con­trac­tors which has worked out so well over the years.

    Posted by Pterrafractyl | March 10, 2012, 9:33 pm
  31. @Pterrafractyl: I see what you’re say­ing. Too bad much of it here in Amer­ica hasn’t been of the good kind, though......=(

    Posted by Steven L. | March 11, 2012, 6:04 am
  32. Oh look, Florida’s gov­er­nor is about to extend his family’s state-wide drug-testing empire: Florida is about to start ran­domly drug test­ing all their state employ­ees.

    Well, to be fair, not ALL the state employees...

    Posted by Pterrafractyl | March 11, 2012, 7:33 pm
  33. It’s good to be in the top 1% of the top 1%:

    The rich­est get richer
    By David Cay John­ston

    March 15, 2012

    The after­maths of the Great Reces­sion and the Great Depres­sion pro­duced sharply dif­fer­ent changes in U.S. incomes that tell us a lot about tax and eco­nomic policy.

    The 1934 eco­nomic rebound was widely shared, with strong income gains for the vast major­ity, the bot­tom 90 percent.

    In 2010, we saw the oppo­site as the vast major­ity lost ground.

    National income gained over­all in 2010, but all of the gains were among the top 10 per­cent. Even within those 15.6 mil­lion house­holds, the gains were extra­or­di­nar­ily con­cen­trated among the super-rich, the top one per­cent of the top one percent.

    Just 15,600 super-rich house­holds pock­eted an aston­ish­ing 37 per­cent of the entire national gain.


    Saez shows that the top one percent’s share of real income growth is increas­ing with each eco­nomic expan­sion and it mat­ters not whether the pres­i­dent is a Demo­c­rat or Repub­li­can. The top one per­cent enjoyed 45 per­cent of Clinton-era income growth, 65 per­cent of Bush-era growth and 93 per­cent of Obama-era growth, though that is only through 2010.

    While mar­kets are a fac­tor, I think the evi­dence makes clear that gov­ern­ment pol­icy is at the core of the dif­fer­ing for­tunes of the vast major­ity and the super-rich.

    Inau­gural addresses of Franklin Roo­sevelt and Barack Obama bring this into sharp focus. Both spoke of the need for restor­ing con­fi­dence, while denounc­ing greed and irre­spon­si­ble con­duct. Roo­sevelt in 1933 spec­i­fied “cal­lous and self­ish wrong­do­ing” by bankers abus­ing a “sacred trust.” Obama vaguely referred to the “con­se­quence of greed and irre­spon­si­bil­ity on the part of some.”

    Roo­sevelt said that “our great­est pri­mary task is to put peo­ple to work.” Obama, again less spe­cific, spoke of gov­ern­ment that “helps fam­i­lies find jobs at a decent wage.”

    Roo­sevelt brought in trust­busters, reform­ers and even an expert at Wall Street manip­u­la­tions to imple­ment poli­cies ben­e­fit­ing the vast majority.


    By con­trast, while Obama called Wall Street exec­u­tives “fat cats,” he sur­rounded him­self with finan­cial insid­ers with the excep­tion of Eliz­a­beth War­ren, the Har­vard bank­ruptcy expert now seek­ing elec­tion to the U.S. Sen­ate. His admin­is­tra­tion has failed to pros­e­cute the cen­tral fig­ures in the frauds that cre­ated our eco­nomic distress.


    Posted by Pterrafractyl | March 15, 2012, 10:54 am
  34. Posted by Pterrafractyl | March 18, 2012, 3:31 pm
  35. The Ice­man cometh..car­ry­ing cash:

    Updated March 22, 2012, 7:21 a.m. ET
    Texas Bil­lion­aire Doles Out Election’s Biggest Checks


    DALLAS—Few peo­ple want to defeat Pres­i­dent Barack Obama more than bil­lion­aire Harold Clark Sim­mons, who is will­ing to spend many mil­lions of dol­lars in the quest. As it hap­pens, cam­paign rules now give him the opportunity.

    Watch­ing a TV news report that Repub­li­can pres­i­den­tial can­di­date Rick San­to­rum was ris­ing in polls last month, Mr. Sim­mons won­dered about the prospects of the for­mer Penn­syl­va­nia sen­a­tor. He called his per­sonal polit­i­cal muse, Repub­li­can strate­gist Karl Rove.

    “Is he worth invest­ing into his super PAC?” Mr. Sim­mons asked. He rose from his leather recliner in the den and stood at a bay win­dow over­look­ing swans glid­ing on a lake encir­cled by 17,000 tulips. “Does he have a chance?”

    “Yes, I wouldn’t count him out,” Mr. Rove said. Mr. Simmons’s wife, Annette, who was keen on Mr. San­to­rum, promptly donated $1 mil­lion to his super PAC, cash badly needed for an ad blitz ahead of the Super Tues­day primaries.

    The 80-year-old Texan, who heads Con­tran Corp., a chem­i­cals and met­als con­glom­er­ate, gave hefty dona­tions to the super PACs sup­port­ing other GOP can­di­dates dur­ing sim­i­lar moments in the spot­light: Rick Perry’s opti­mistic entry into the race last sum­mer, and after the debate-driven surge of Newt Gin­grich. Mr. Sim­mons has so far given $800,000—including $500,000 this week—to super PACs back­ing for­mer Mass­a­chu­setts Gov. Mitt Rom­ney, who won the Illi­nois pri­mary Tues­day and con­tends no rival can catch him in the GOP del­e­gate race.

    It isn’t par­tic­u­larly impor­tant which man wins the nom­i­na­tion, for Mr. Sim­mons sim­ply wants to defeat the pres­i­dent and reduce the reach of gov­ern­ment. “Any of these Repub­li­cans would make a bet­ter pres­i­dent than that social­ist, Obama,” said Mr. Sim­mons dur­ing two days of rare inter­views at his Dal­las home and office. “Obama is the most dan­ger­ous Amer­i­can alive…because he would elim­i­nate free enter­prise in this country.”

    The tall, lanky, soft-spoken indus­tri­al­ist has given more than $18 mil­lion to con­ser­v­a­tive super PACs so far, mak­ing him the 2012 election’s sin­gle largest contributor—ahead of bil­lion­aires Shel­don Adel­son, Mr. Gingrich’s finan­cial patron, and Fos­ter Friess, Mr. Santorum’s biggest donor.

    Sip­ping lemon­ade iced tea made with lemons grown on his Cal­i­for­nia estate east of Santa Barbara—next door to Oprah Winfrey’s place in Montecito—Mr. Sim­mons said he planned to spend $36 mil­lion before the Novem­ber election.

    Unlike some big donors—including Mr. Adelson—Mr. Sim­mons isn’t dri­ven by an attrac­tion to a spe­cific can­di­date or pol­icy. His moti­va­tion is broader: to elect Repub­li­cans up and down the line in the hopes they will change the over­all U.S. tax and reg­u­la­tory approach.


    He is a long­time polit­i­cal donor; he was fined by the Fed­eral Elec­tion Com­mis­sion for sur­pass­ing con­tri­bu­tion lim­its in 1988 and 1989, which he said was inad­ver­tent. When politi­cians call his office now, his sec­re­tary runs an Inter­net search to ensure they are “pro-business, antigov­ern­ment,” he said. He isn’t inter­ested in such con­ser­v­a­tive social issues as abor­tion. “I’d prob­a­bly be pro-choice,” he said. “Let peo­ple make deci­sions on their own bodies.”

    Long­time friend and oil man T. Boone Pick­ens described Mr. Sim­mons as a man who backs up his beliefs with his bucks. “Harold isn’t doing this for atten­tion,” the fel­low Repub­li­can said. To the con­trary, while mega-donors Mr. Adel­son and Mr. Friess have gone on TV to tout big gifts to their can­di­dates, Mr. Sim­mons rarely speaks pub­licly. He agreed nonethe­less to talk with The Wall Street Jour­nal on a range of sub­jects, includ­ing money, pol­i­tics and his appetite for sweet potatoes.


    To rem­edy that, Mr. Sim­mons bought his first busi­ness in 1960, a drug­store across the street from South­ern Methodist Uni­ver­sity, using $5,000 in sav­ings and a $95,000 loan. He kept buy­ing another and another, even­tu­ally get­ting a pilot’s license to visit them all. In 1973, he sold his 100-store chain for $50 mil­lion. Mr. Sim­mons used the pro­ceeds to buy stock of under­per­form­ing pub­lic com­pa­nies, turn­ing into a cor­po­rate raider in the 1970s and 1980s with the nick­name “Ice Man.”

    Mr. Sim­mons said his polit­i­cal activism was sparked in 1983, when the Labor Depart­ment accused him of mis­han­dling pen­sion fund assets. A fed­eral judge found he invested an exces­sive por­tion of the pen­sion in a takeover tar­get, Amal­ga­mated Sugar Co. The judge awarded no cash dam­ages because the fund earned 50% on its invest­ment. Mr. Sim­mons agreed not to use pen­sion funds in takeover bids for 10 years, accord­ing to a con­sent decree that set­tled the case.

    “That’s when I started con­tribut­ing to politi­cians with free-market and anti­reg­u­la­tion agen­das,” he said. “If the Labor Depart­ment hadn’t sued, that pen­sion would be as rich as me.”

    His cor­po­rate empire, under the Con­tran hold­ing com­pany, includes large stakes in multi­na­tional con­glom­er­ates NL Indus­tries, Tita­nium Met­als Corp., Valhi Inc., Kro­nos World­wide Inc. and Key­stone Con­sol­i­dated Indus­tries Inc. These diverse inter­ests include the heav­ily reg­u­lated waste-control and nuclear-waste dis­posal busi­nesses, as well as some of the world’s biggest man­u­fac­tur­ers of chem­i­cals, com­po­nents and tita­nium for mil­i­tary and com­mer­cial aircraft.

    Many of these com­pa­nies bear the weight of gov­ern­ment reg­u­la­tory deci­sions, mak­ing Mr. Simmons’s polit­i­cal inter­est more than sim­ple patriotism. “We live with a smoth­er­ing of gov­ern­ment,” said Steven Wat­son, Contran’s No. 2 exec­u­tive. He listed over­sight by the Envi­ron­men­tal Pro­tec­tion Agency, bank­ing reg­u­la­tors, the Labor Depart­ment and Secu­ri­ties and Exchange Com­mis­sion, as well as “friv­o­lous law­suits” brought by state attor­neys general.


    Mr. Sim­mons was a key donor for the Swift Boat vet­er­ans’ attack ads against Demo­c­ra­tic pres­i­den­tial can­di­date John Kerry in 2004, as well as the 2008 cam­paign ads tout­ing ties between Mr. Obama and Bill Ayers, co-founder of the rad­i­cal Weather Under­ground. “If we had run more ads,” he said, “we could have killed Obama.”

    Mr. Sim­mons rel­ishes his chance to give freely in this year’s elec­tion, par­tic­u­larly in con­junc­tion with Mr. Rove, the top polit­i­cal adviser to for­mer Pres­i­dent George W. Bush. “Karl is the best polit­i­cal mind out there,” he said.

    In early 2010, Mr. Rove gath­ered a hand­ful of big Texas donors for lunch at a pri­vate club in Dal­las, includ­ing Mr. Pick­ens, real-estate mag­nate Har­lan Crow and Mr. Sim­mons. Mr. Rove explained how the fledg­ling group Amer­i­can Cross­roads would work to defeat Mr. Obama and get GOP con­trol of Con­gress. “All of us are respon­si­ble for the kind of coun­try we have,” Mr. Rove recalled saying.

    After Mr. Rove paused, Mr. Sim­mons spoke first. “I’m in,” he said. Mr. Rove said Mr. Simmons’s early nod helped give the group instant credibility.

    Mr. Sim­mons said he relies on Mr. Rove’s advice on the prospects and posi­tions of can­di­dates. Aside from his con­tri­bu­tions to pres­i­den­tial con­tenders, Mr. Sim­mons and his pri­vate hold­ing com­pany have, since 2010, donated almost $20 mil­lion to Amer­i­can Cross­roads, which plans with its sis­ter orga­ni­za­tion to spend as much as $300 mil­lion to defeat Democ­rats in the Novem­ber election.


    Posted by Pterrafractyl | March 22, 2012, 11:28 am
  36. Ah, the ol’ democracy-death-panel death-threat double-bind play...just hand over the author­ity vol­un­tar­ily or else:

    Michi­gan Panel Gives Detroit 10 Days to Reach Finance Deal
    By Chris Christoff — Mar 26, 2012 5:11 PM CT

    Detroit has 10 days to agree to a finan­cial recov­ery plan that would fore­stall the appoint­ment of an emer­gency man­ager by Michi­gan Gov­er­nor Rick Sny­der, a state review panel decided.

    Sny­der said he’s close to a deal with the city that would avoid a man­ager. He said he had “fruit­ful” dis­cus­sions with six of nine City Coun­cil mem­bers today. A final agree­ment is pos­si­ble by March 30, said state Trea­surer Andy Dil­lon, who led the review team.


    Stressed Out

    The 10-member panel declared the city — Michigan’s largest and home of Gen­eral Motors Co. (GM) — in severe finan­cial stress. That gives Sny­der time to nego­ti­ate with Bing on a way to give the mayor broader power to reduce costs, and buys time to solve the city’s fis­cal cri­sis, which deep­ens daily.

    Detroit’s oper­at­ing deficit might bal­loon to $270 mil­lion by June 30, accord­ing to a Feb­ru­ary City Coun­cil report. It will run out of cash by the end of May, accord­ing to Dillon.

    Still to be resolved is how much author­ity an appointed board would have over Detroit’s finances, said Den­nis Much­more, Snyder’s chief of staff.


    An emer­gency man­ager would have author­ity under a 2011 law to cut spend­ing, sell assets and nul­lify union con­tracts. Bing and the coun­cil rejected Snyder’s plan to con­trol the city’s finances with a nine-member board appointed jointly by Sny­der and the city.

    City offi­cials derided Snyder’s plan as a vir­tual takeover. Sny­der and Dil­lon are con­sid­er­ing Bing’s coun­ter­pro­posal, in which he and the coun­cil would retain finan­cial author­ity with state oversight.

    Con­ces­sions by city employee unions may not be enough to allay the cri­sis, said Terry Stan­ton, spokesman for Dillon.

    Thirty unions rep­re­sent­ing about 6,000 of the 11,000 munic­i­pal employ­ees rat­i­fied three-year agree­ments that include 10 per­cent pay cuts and reduc­tions in pen­sion and health-care benefits.
    Time to Unwind

    That will save the city $60 mil­lion over three years, said Ed McNeil, assis­tant to the pres­i­dent of AFSCME Coun­cil 25, which led bar­gain­ing for the unions.

    Yet to be rat­i­fied are con­ces­sions by the police and firefighters.

    Detroit must cut spend­ing by $360 mil­lion through June 2013, Bing has said, and he began fir­ing 1,000 employ­ees in Feb­ru­ary. He told Bloomberg News last week the city has an esti­mated $200 mil­lion in uncol­lected income taxes, which he said the state could help collect.

    Bing said he’ll try to nego­ti­ate with banks to reduce $350 mil­lion in fees the city owes to unwind interest-rate swaps trig­gered by last week’s down­grade of more than $2.5 bil­lion of debt by Moody’s Investors Service.

    Posted by Pterrafractyl | March 27, 2012, 11:28 am
  37. Oh look, pri­va­ti­za­tion is actu­ally sav­ing a city some money. Santa Clarita cut their library bud­get from $5.1 mil­lion to $3.8 mil­lion fol­low­ing their 2010 pri­va­ti­za­tion of their libraries. So what were the inno­v­a­tive solu­tions that brought about these cost savings...?

    The Atlantic
    Are Pri­va­tized Pub­lic Libraries So Bad?
    Amanda Erick­son
    8:10 AM ET

    I’ll admit, to me, the idea of a pri­va­tized pub­lic library has a cer­tain dystopian ring to it, the ulti­mate pub­lic space cor­rupted for a profit. That image was not much aided by my first (and sec­ond and third) call to Library Sys­tem and Ser­vices Inc., the only library pri­va­ti­za­tion com­pany in the United States. LSSI now runs at least 15 library sys­tems in Cal­i­for­nia, Ore­gon, Ten­nessee, and Texas. This means it is, effec­tively, the fifth largest library sys­tem in the country.

    Time and again, I ran through an auto­mated response sys­tem with­out find­ing a real per­son. A week’s worth of emails went unan­swered. And then, there’s the mes­sage at one of LSSI’s libraries, which directs you press two for “cos­tumer service.”

    Is this the future of the ref­er­ence desk, I won­dered? Not exactly the library sys­tem of my child­hood, where each call about books on hold was answered by the same librar­ian I had known since I started attend­ing kid’s cor­ner book readings.

    But then, there’s the exam­ple of Santa Clarita, Cal­i­for­nia. In 2010, the city decided to pull their three libraries out of the Los Ange­les County Library sys­tem. Offi­cials had con­sid­ered run­ning the sys­tem locally, but ulti­mately, the coun­cil voted (4 to 1) to turn the sys­tem over to LSSI to run. More than 100 res­i­dents protested the change at acri­mo­nious meet­ings with “keep our libraries pub­lic” signs and t-shirts embla­zoned with the slo­gan, “I love L.A. County Libraries.”


    When Santa Clarita began con­sid­er­ing pri­va­ti­za­tion, the deci­sion drew national atten­tion. It was, accord­ing to the New York Times, the first finan­cially vibrant city to make the switch.

    Deputy City Man­ager Dar­ren Her­nan­dez is care­ful to stress that this deci­sion was made because of LSSI’s “exper­tise” — “we didn’t have expe­ri­ence oper­at­ing libraries,” he says — though he acknowl­edges that cost did play a role. The city thought they could run their sys­tem for $5.1 mil­lion a year; LSSI gets $3.8 million.

    This sav­ings means the city has been able to bud­get $4.8 mil­lion a year for libraries, with the extra $1 mil­lion going to buy­ing new books and a new, LEED-certified building.

    The bulk of the lower costs, both for the city and LSSI, comes from cut­ting the ben­e­fits pre­vi­ously afforded to librar­i­ans. Santa Clarita’s library staff has been removed from the state’s pen­sion plan, and must instead con­tribute to a 401K. Accord­ing to the Amer­i­can Libraries Asso­ci­a­tion, this is the main rea­son library staffs tend to oppose privatization.

    It also has some unions up in arms. A new Cal­i­for­nia law requires all cities to “clearly demon­strate” that a con­tract with a pri­vate firm will result in “actual over­all cost sav­ings,” and it requires cities to hear at least three bids before mak­ing a deci­sion, was pushed for­ward, in a large part, by the SEIU.

    But LSSI says there’s no other way. In a 2010 New York Times arti­cle, then-LSSI chief Frank A. Pez­zan­ite argued that pub­lic libraries are “all about job secu­rity. That’s why the pro­fes­sion is ner­vous about us. You can go to a library for 35 years and never have to do any­thing and then have your retire­ment. We’re not run­ning our com­pany that way.”

    “Pen­sions crushed Gen­eral Motors, and it is crush­ing the gov­ern­ments in Cal­i­for­nia,” he told the Times.

    Then there’s the ques­tion of prof­itabil­ity: how much is LSSI really mak­ing from these deals?

    No one quite knows the answer. LSSI, which got its start devel­op­ing soft­ware for gov­ern­ment use in the 1980s, will not dis­close that infor­ma­tion. It’s owned by a pri­vate equity firm in Boston and has about $35 mil­lion in annual rev­enue and 800 employees.

    “It’s a closely-guarded secret,” says Jane Jer­rard, who wrote a book on the issue for the ALA. Jer­rard com­pared pri­va­tized libraries with sim­i­lar pub­licly run facil­i­ties in the same state, look­ing at how library vis­its, mate­ri­als held and cir­cu­la­tion changed after LSSI took over.


    Posted by Pterrafractyl | March 28, 2012, 10:28 am
  38. JP Mor­gan, Credit Suisse, and Deutsche Bank are about to get a big, prof­itable boost from Moody’s...

    JPMor­gan Lead Over Mor­gan Stan­ley Widen­ing on Rat­ing Cuts
    By Michael J. Moore on April 02, 2012

    Poten­tial down­grades of banks includ­ing Mor­gan Stan­ley (MS) (MS) and UBS AG, which could have their credit rat­ings cut by Moody’s Investors Ser­vice to the low­est level ever, threaten to shake up Wall Street’s bal­ance of power.

    Mor­gan Stan­ley and UBS may be low­ered three grades, Moody’s said Feb. 15, and Cit­i­group Inc. © © and Bank of Amer­ica Corp. (BAC) could join Mor­gan Stan­ley at Baa2, two lev­els above junk. The cuts would raise fund­ing and col­lat­eral costs, mak­ing the low­est– rated firms less desir­able coun­ter­par­ties in over-the-counter deriv­a­tives trades, accord­ing to ana­lysts and executives.

    That may push more busi­ness to JPMor­gan Chase & Co. (JPM) (JPM) and Deutsche Bank AG, which would be the highest-rated firms among the top nine global invest­ment banks if Moody’s goes through with its max­i­mum reduc­tions. Those two firms already have the high­est mar­ket share in fixed-income trad­ing and had the biggest gains in share last year as investors grap­pled with fears about global con­ta­gion from Europe’s debt crisis.

    “The win­ners are JPMor­gan and Gold­man Sachs, who rel­a­tively will have stronger rat­ings, and the losers will be Citi, Bank of Amer­ica and Mor­gan Stan­ley,” said Brad Hintz, an ana­lyst at San­ford C. Bern­stein & Co. in New York and a for­mer trea­surer at Mor­gan Stan­ley. “Lower rat­ings hurt the will­ing­ness of play­ers to take my name as a deriv­a­tives coun­ter­party, and it is in deriv­a­tives where I get some of the highest-margin busi­nesses in fixed income.“
    Three Tiers

    If Moody’s cuts each of the 17 banks it placed on review by the most lev­els cited in Feb­ru­ary, the sep­a­ra­tion between the top and bot­tom tiers of global invest­ment banks would widen. JPMor­gan, Frankfurt-based Deutsche Bank and Credit Suisse Group AG would have a rat­ing of A2, five lev­els above junk. Gold­man Sachs Group Inc. (GS) (GS), Bar­clays Plc and UBS would be one level below them at A3. Mor­gan Stan­ley, Cit­i­group and Bank of Amer­ica would be three grades below the top group, mak­ing the spread between JPMor­gan and Mor­gan Stan­ley the biggest ever.


    The Moody’s cuts could accel­er­ate the sep­a­ra­tion between banks with ris­ing mar­ket shares and those that are falling. JPMor­gan, led by Chief Exec­u­tive Offi­cer Jamie Dimon, 56, is the only one of the nine banks whose trad­ing rev­enue last year was greater than in 2006, while Bank of Amer­ica had the biggest decline, accord­ing to fig­ures com­piled by Chris Kotowski, an ana­lyst at Oppen­heimer & Co. in New York. Kotowski’s 2006 fig­ures included the rev­enue of firms later acquired by the banks, such as Bear Stearns Cos. and Mer­rill Lynch & Co.

    JPMor­gan gained clients because it was seen as one of the strongest coun­ter­par­ties, Jes Sta­ley, 55, CEO of the New York– based firm’s invest­ment bank, said at a Feb­ru­ary presentation.

    “We had a sig­nif­i­cant swing in our client fran­chise com­ing out of the finan­cial cri­sis because we were the safe har­bor,” Sta­ley said.

    The bank gen­er­ates 25 per­cent of its fixed-income trad­ing in a given quar­ter from just 0.14 per­cent of trades, includ­ing some long-dated deriv­a­tives, Sta­ley said. Those are the trades most likely to be affected by the dif­fer­ence in banks’ credit rat­ings, ana­lysts includ­ing Citigroup’s Keith Horowitz said.


    I’m quite curi­ous to get a clar­i­fi­ca­tion about the state­ment that JP Mor­gan gen­er­ates 25% of its fixed-income trad­ing in a given quar­ter from just 0.14 of trades, espe­cially when those are appar­ently the trades that get impacted the most from a rat­ings change. That sounds like some rel­e­vant info for under­stand­ing our fun new nor­mal.

    Posted by Pterrafractyl | April 2, 2012, 9:42 pm
  39. Here’s one of the fun bonus effects of the recent Moody’s down-grading of nearly all the big banks: a sud­den jump in munic­i­pal bond rates. This is because the banks had sell­ing their “variable-rate demand bonds” guar­an­teed coun­ter­party ser­vices to munic­i­pal­i­ties, where the banks agree to pur­chase the variable-rate demand bonds from cur­rent or future bond if no other buy­ers can be found(the abil­ity to sell the bonds at any point is one of their fea­tures). It’s one more exam­ple of how the fate of nations can become sys­tem­i­cally inter­twined with the fate of their elite finan­cial insti­tu­tions via the increas­ing use of the very “struc­tured finance” that was sup­posed to reduce the over­all sys­temic risk...it’s sort of the def­i­n­i­tion of “too big to fail”:

    Bank-Supported Muni Mar­ket Faces ‘Head­winds,’ Moody’s Says
    By Mar­tin Z. Braun and Greg Chang — Apr 4, 2012 4:38 PM CT

    The mar­ket for bank-supported munic­i­pal debt, includ­ing variable-rate demand bonds, may face “head­winds” this year because of pos­si­ble cuts in bank rat­ings, Moody’s Investors Ser­vice said.

    Top short-term rat­ings for both Bank of Amer­ica Corp. and Cit­i­group Inc. © are under review for a down­grade, accord­ing to the credit-rating com­pany. Los­ing the top grade may cause inter­est rates on $34.7 bil­lion of munic­i­pal bonds to spike as money-market funds redeem the debt and deal­ers can’t resell it, Moody’s said in an e-mailed statement.

    “Issuers whose remar­ket­ings fail or who are unable to arrange exten­sions or replace­ments for expir­ing sup­port facil­i­ties may face severe cash-flow pres­sure as they con­front higher inter­est cost and accel­er­ated amor­ti­za­tion,” Moody’s said in the report.

    Dur­ing the credit cri­sis, inter­est rates on so-called variable-rate demand bonds, often owned by tax-exempt money– mar­ket funds, surged after bond insur­ers and some banks lost their top-credit rat­ings. The increase in bor­row­ing costs hit already cash-strapped cities, hos­pi­tals and schools.
    Standby Agreement

    Variable-rate demand bonds are long-term secu­ri­ties offer­ing short-term inter­est rates because investors can demand their money on short notice and turn the bonds in for sale to another buyer. To assure investors there will be money avail­able, gov­ern­ments hire banks to pro­vide standby bond pur­chase agree­ments or let­ters of credit.


    Posted by Pterrafractyl | April 5, 2012, 12:45 pm
  40. Huh, it turns out the ‘invis­i­ble hand of the mar­ket’ for deriv­a­tives that are sup­pose to track the finan­cial health of North Amer­i­can com­pa­nies is attached to one of JPMorgan’s pro­pri­etary trader’s arms:

    JPMor­gan Trader’s Posi­tions Said to Dis­tort Credit Indexes
    By Stephanie Ruhle, Bradley Keoun and Mary Childs — Apr 5, 2012 10:30 PM CT

    A JPMor­gan Chase & Co. (JPM) trader of deriv­a­tives linked to the finan­cial health of cor­po­ra­tions has amassed posi­tions so large that he’s dri­ving price moves in the $10 tril­lion mar­ket, traders out­side the firm said.

    The trader is London-based Bruno Iksil, accord­ing to five coun­ter­parts at hedge funds and rival banks who requested anonymity because they’re not autho­rized to dis­cuss the trans­ac­tions. He spe­cial­izes in credit-derivative indexes, a mar­ket that dur­ing the past decade has over­taken cor­po­rate bonds to become the biggest forum for investors bet­ting on the like­li­hood of com­pany defaults.

    Investors com­plain that Iksil’s trades may be dis­tort­ing prices, affect­ing bond­hold­ers who use the instru­ments to hedge hun­dreds of bil­lions of dol­lars of fixed-income hold­ings. Ana­lysts and econ­o­mists also use the indexes to help gauge per­cep­tions of risk in credit markets.

    Though Iksil reveals lit­tle to other traders about his own posi­tions, they say they’ve taken the oppo­site side of trans­ac­tions and that his orders are the biggest they’ve encoun­tered. Two hedge-fund traders said they have seen unusu­ally large price swings when they were told by deal­ers that Iksil was in the market.

    Joe Evan­ge­listi, a spokesman for New York-based JPMor­gan, declined to com­ment on Iksil’s spe­cific trans­ac­tions. Iksil didn’t respond to phone mes­sages and e-mails seek­ing com­ment.
    Most-Active Index

    The credit indexes are linked to the default risk on a group of at least 100 com­pa­nies. The newest and most-active index of investment-grade credit rose the most in almost four months yesterday.

    The Markit CDX North Amer­ica Invest­ment Grade Index of credit-default swaps Series 18 (IBOXUMAE) climbed 4.4 basis points to a mid-price of 97 basis points at 5:13 p.m. in New York. The price of the index is quoted in yield spreads, which rise along with the per­ceived like­li­hood of increased cor­po­rate defaults.

    A credit-default swap is a finan­cial instru­ment that investors use to hedge against losses on cor­po­rate debt or to spec­u­late on a company’s creditworthiness.

    Iksil may have “bro­ken” some credit indexes — Wall Street lingo for cre­at­ing a dis­par­ity between the price of the index and the aver­age price of the credit-default swaps on the indi­vid­ual com­pa­nies, the peo­ple said. The per­sis­tence of the price dif­fer­en­tial has frus­trated some hedge funds that had bet the gap would close, the peo­ple said.


    Iksil prob­a­bly traded under close super­vi­sion at JPMor­gan, said Paul Miller, an ana­lyst at FBR Cap­i­tal Mar­kets in Arling­ton, Virginia.

    “The issue is how much cap­i­tal they’re putting at risk,” said Miller, a for­mer exam­iner for the Fed­eral Reserve Bank of Philadelphia.

    Vol­cker Rule

    A U.S. curb on pro­pri­etary trad­ing at banks, meant to reduce the odds they’ll make risky invest­ments with their own cap­i­tal, is sup­posed to take effect in July. Reg­u­la­tors are still deter­min­ing how the so-called Vol­cker rule will make excep­tions for instances where firms are hedg­ing to cur­tail risk in their lend­ing and trad­ing businesses.

    Wall Street banks includ­ing JPMor­gan, Gold­man Sachs Group Inc. and Mor­gan Stan­ley have sub­mit­ted com­ment let­ters and met with reg­u­la­tors to dis­cuss their com­plaints about the rule.

    “Sev­eral agen­cies claim­ing juris­dic­tion over the Vol­cker rule have pro­posed reg­u­la­tions of mind-numbing com­plex­ity,” JPMor­gan Chief Exec­u­tive Offi­cer Jamie Dimon said in his annual let­ter to share­hold­ers released this week. “Even senior reg­u­la­tors now rec­og­nize that the cur­rent pro­posed rules are unwork­able and will be impos­si­ble to implement.”


    I’m sure JP Mor­gan will use its dom­i­nance of a index that’s used as a barom­e­ter for the health of North Amer­i­can cor­po­ra­tions for purely noble pur­poses. Too big to fail? Naaahh...there’s just more of them to love.

    Posted by Pterrafractyl | April 6, 2012, 9:34 am
  41. One man’s con­spic­u­ous obfus­ca­tion of vast wealth and power is another man’s “Eth­i­cal excep­tion”. Don’t you just love Newspeak?

    Posted by Pterrafractyl | April 6, 2012, 10:52 am
  42. Go ahead, take the money...you earned it.

    Posted by Pterrafractyl | April 8, 2012, 7:50 pm
  43. One more round, now with work­ing links!

    Go ahead, take to money...you earned it.

    Posted by Pterrafractyl | April 8, 2012, 8:52 pm
  44. The future is now, only more so. Just walk it off, pro­les.

    Posted by Pterrafractyl | April 10, 2012, 8:35 pm
  45. I love that we can now sort of cal­cu­late the odds of bad gov­ern­ment by ran­dom chance.

    Lob­by­ing for tax breaks: The gentleman’s invest­ment:

    Sun­light Foun­da­tion
    Lobby more, pay less in taxes
    Lee Drut­man
    April 16, 2012, 12:01 a.m.

    If you think you wound up pay­ing too much in taxes this year, maybe you ought to hire a lob­by­ist. Or two. Or 20. After all, it’s a strat­egy that seems to be work­ing well for some of the nation’s biggest corporations.

    As Amer­i­cans pre­pare for tax day 2012, a new Sun­light analy­sis of lob­by­ing and cor­po­rate tax rates finds that among 200 of the largest U.S. com­pa­nies, the com­pa­nies that spent the most on lob­by­ing most effec­tively reduced their reported tax rates between 2007 and 2010.

    On aver­age, com­pa­nies we exam­ined reported pay­ing a slightly lower over­all tax rate in 2010 than in 2007 (aver­age tax rate of 29.3 per­cent in 2010 as com­pared to 29.9 per­cent in 2007), with a decline in the median reported tax rate from 31.8 per­cent to 31.6 per­cent. Fifty-five per­cent of the com­pa­nies paid a lower rate in 2010 than in 2007.

    But the eight com­pa­nies that spent the most on fed­eral lob­by­ing between 2007 and 2009 all decreased their over­all tax rate between 2007 and 2010. Six of the Big Eight enjoyed a decrease of at least seven per­cent­age points.


    Com­pared to what their taxes would have been if their 2007 tax rates were applied to their 2010 income, we esti­mate that these eight com­pa­nies saved a com­bined $11.2 bil­lion on $120 bil­lion in reported 2010 prof­its. If we assume that the entire reduc­tion was due to their lob­by­ing, the return on invest­ment would be 2,069%. Of course, this is prob­a­bly not the case. With­out a detailed analy­sis of these com­pa­nies’ taxes, it would be impos­si­ble to tell why their rates fell. But we can observe that it is very unlikely that the eight com­pa­nies that lob­bied the most between 2007 and 2009 all would have seen such sig­nif­i­cant drops in their tax rates by ran­dom chance alone.

    Sta­tis­ti­cally, the like­li­hood of the eight firms that ran up the biggest lob­by­ing tabs all low­er­ing their reported tax rates by chance alone is just under one per­cent (assum­ing we take the over­all prob­a­bil­ity of an indi­vid­ual com­pany low­er­ing its taxes at 55 per­cent). More­over, only 19 of the nation’s 200 high­est earn­ing com­pa­nies reduced their tax rate by more than seven per­cent­age points. Within this uni­verse of com­pa­nies, the like­li­hood of six of the Big Eight low­er­ing their rates by at least seven per­cent­age points purely by ran­dom chance is less than 1 in 100,000.


    At this point it’s worth empha­siz­ing that $$$ = Free Speech. Really really per­sua­sive free speech.

    Posted by Pterrafractyl | April 19, 2012, 8:23 am
  46. There is no escape:

    RNC Spokes­woman: Repub­li­can Eco­nomic Plat­form Will Be The Bush Pro­gram, ‘Just Updated’

    By Pat Garo­falo on Apr 23, 2012 at 10:45 am

    Dur­ing an inter­view last week on The Fer­nando Espuelas Show, Alexan­dra Franceschi, Spe­cialty Media Press Sec­re­tary of the Repub­li­can National Com­mit­tee, said that the Repub­li­can party’s eco­nomic plat­form in 2012 is going to be the same as it was dur­ing the Bush years, “just updated”:

    ESPUELAS: What do you mean by eco­nomic secu­rity? Regard­less of who the ulti­mate nom­i­nee is, what’s the gen­eral idea that the RNC, or the Repub­li­can party in gen­eral, has in terms of this message?

    FRANCESCHI: Well, it’s a mes­sage of being able to attain the Amer­i­can dream. It’s less gov­ern­ment spend­ing, which a Tar­rance Group poll, came out last week actu­ally, shows that the major­ity of His­pan­ics believe that less gov­ern­ment spend­ing is the way out of this deficit cri­sis. It’s low­er­ing taxes so small busi­nesses can grow and they can employ more peo­ple, because we under­stand that the pri­vate sec­tor is the engine of the econ­omy. It’s not the government. [...]

    ESPUELAS: Now, how dif­fer­ent is that con­cept from what were the poli­cies of the Bush admin­is­tra­tion? And the rea­son I ask that is because there’s some analy­sis now that is being pub­lished talk­ing about the Bush years being the slow­est period of job cre­ation since those sta­tis­tics were cre­ated. Is this a dif­fer­ent pro­gram or is this that pro­gram just updated?

    FRANCESCHI: I think it’s that pro­gram, just updated.

    Posted by Pterrafractyl | April 24, 2012, 10:54 am
  47. When is a $1 bil­l­lion fine just the cost of doing busi­ness? When it’s a fine over the monop­o­lis­tics prac­tices of a busi­ness that cre­ated the rich­est man in the world:

    Mex­ico reg­u­la­tors to vote on $1 bil­lion fine vs tycoon Slim

    By Cyn­tia Barrera

    MEXICO CITY | Sun Apr 29, 2012 3:56pm EDT

    (Reuters) — Reg­u­la­tors are due to vote on Mon­day on one of Mexico’s biggest antitrust cases, a $1 bil­lion fine for tycoon Car­los Slim, which has been bogged down in court appeals and dis­putes for a year.

    Fed­eral com­pe­ti­tion com­mis­sion Cofeco slapped Tel­cel, the cash cow of Slim’s giant tele­coms com­pany Amer­ica Movil, with the record sanc­tion in April 2011 after rul­ing the com­pany charged exces­sive prices to wire­less and wire­line com­peti­tors to con­nect to its network.

    Tel­cel appealed the fine and even man­aged to ban Cofeco’s Pres­i­dent Eduardo Perez Motta from tak­ing part in a sec­ond vote, where the agency will decide if it rat­i­fies, drops or mod­i­fies the fine against Slim, the world’s rich­est man.

    Perez Motta got into trou­ble last year with com­ments he made about the agency’s crack­down on Telcel.

    The Slim com­pany com­plained of unfair treat­ment by Cofeco’s chief reg­u­la­tor, fil­ing a motion that cut Perez Motta out of that sec­ond vote, which was orig­i­nally expected in September.

    Get­ting Slim to pay such a large sum would be a major vic­tory for Cofeco, whose abil­ity to enforce the rules in a coun­try where many major indus­tries are con­cen­trated in the hands of a few pow­er­ful fam­i­lies is seen as weak.

    Cofeco “must rat­ify last year’s fine to Tel­cel due to mul­ti­ple vio­la­tions to the com­pe­ti­tion law by engag­ing in monop­o­lis­tic prac­tices on inter­con­nec­tion,” IDET, a telecom­mu­ni­ca­tions think-tank based in Mex­ico City, said in a writ­ten state­ment to Reuters on Sunday.

    A loss, or a sig­nif­i­cantly reduced fine for Tel­cel, would strengthen the view that reg­u­la­tors in Mex­ico lack enough mus­cle to reign in the mas­sive influ­ence of busi­ness­men like Slim.

    “Any pos­si­ble changes should be based on facts unknown at the time of impos­ing the fine and Cofeco is required to explain the rea­son­ing,” IDET added.

    In a bizarre twist on Sun­day, Cofeco’s web­site was hacked. Instead of the agency’s home page open­ing, the image of scowl­ing green pirate skull with a cut­lass in its teeth appeared on a black screen beneath the words “Hacked by Nob0dy.”

    Amer­ica Movil con­trols some 70 per­cent of the mobile mar­ket in Mex­ico, where it had 66.7 mil­lion sub­scribers as of March, and is the lead­ing provider of mobile ser­vices in Latin America.


    I have to say, that will be pretty impres­sive if Mexico’s reg­u­la­tors can pull this off.

    Posted by Pterrafractyl | April 30, 2012, 7:09 pm
  48. JPMor­gan just dropped a bomb on the mar­kets today although, to their credit, the tim­ing was won­der­ful. They had to announce an unfor­tu­nate $2 bil­lion loss from their mys­te­ri­ous “Chief Invest­ment Office” (CIO), the giant arm of the firm that’s allegedly ded­i­cated to mak­ing trades to REDUCE the firms over­all risk. Instead we now have bil­lions mys­tery losses and claims of “egre­gious” risk tak­ing by the CIO’s man­agers Hence the won­der­ful tim­ing. That’s because there’s been a big push by the big banks in the last month against the upcom­ing ‘Vol­cker Rule’ and var­i­ous other new reg­u­la­tions intended to reduce the odds of one of our many too-big-to-fail insti­tu­tions from, well, fail­ing. Amaz­ingly, the banks were argu­ing that reg­u­la­tor lacked evi­dence of the need for the tougher rules. JPMor­gan just handed the world that evi­dence on a sil­ver plat­ter (not that it was actu­ally needed).

    Recall that the Vol­cker rule is one of parts of the Frank-Dodd 2010 finan­cial reform act that the banks have been push­ing back against the most. The Vol­cker rule places a num­ber of restric­tions on the ‘too-big-to-fail’ banks from engag­ing in ‘pro­pri­etary trad­ing’, i.e. trad­ing done with the firm money FOR the firm’s own prof­its instead of for its clients. Pro­pri­etary trad­ing was unleashed in a big way fol­low­ing the 1999 repeal of the Glass-Steagall act and played a big role in the lead of to facil­i­tat­ing the 2008 finan­cial col­lapse (e.g. the banks lose so much money on their own bets that they can’t cover their clients’ oblig­a­tions). And start­ing on July 21, 2012, the Vol­cker Rule comes into effect for the big banks and all the proprietary-trading fun of the last 13 years finally comes to an end. Except not really because, like cer­tain Mayan-related 2012 pre­dic­tions, the pre­dic­tions that the banksters’s worlds will change for­ever on July 21, 2012, don’t appear to be very con­vinc­ing. For one thing, accord­ing to Bernanke the rules might not even be ready by the July 21, 2012 dead­line. But more impor­tantly, the Vol­cker Rule is poised to be filled with so many exemp­tions and future amend­ments that it is unlikely to really close the reg­u­la­tory wholes left from the repeal of Glass-Steagall.

    Bank­ing on Vol­cker: Big Cri­sis, Big Rule
    By Guest Con­trib­u­tor
    Octo­ber 19, 2011

    By Thom­son Reuters Accelus staff

    NEW YORK, Oct. 19 (Busi­ness Law Cur­rents) — Bank­ing lawyers should be for­given if they’re not return­ing calls right away: they’re busy try­ing to digest the Vol­cker Rule (or “the rule”). The pro­posed rule’s 298-page doorstop rep­re­sents the col­lec­tive efforts of the Trea­sury Depart­ment, Fed, FDIC and SEC to imple­ment §619 of the Dodd-Frank Act, which itself added a new §13 to the Bank Hold­ing Com­pany Act of 1956 (the BHC Act). The intent of the Vol­cker Rule is to “gen­er­ally pro­hibit any bank­ing entity from engag­ing in pro­pri­etary trad­ing or from acquir­ing or retain­ing an own­er­ship inter­est in, spon­sor­ing, or hav­ing cer­tain rela­tion­ships with a hedge fund or pri­vate equity fund (“cov­ered fund”), sub­ject to cer­tain exemptions.”

    So does the Vol­cker Rule sat­isfy its man­date? To para­phrase ‘The Simp­sons’: yes with an “if,” no with an “unless.” The rule carves out sig­nif­i­cant exemp­tions from the pro­scrip­tion against pro­pri­etary trad­ing, but each of these excep­tions has a num­ber of cri­te­ria required to take advan­tage of the exemp­tion. More­over, a num­ber of the rule’s mea­sures pro­vide for rebut­table pre­sump­tions of non-compliance for cer­tain types of trad­ing activity.

    The Vol­cker Rule carves out sig­nif­i­cant exemp­tions in the fol­low­ing areas: under­writ­ing and market-making related activ­i­ties; risk-mitigating hedg­ing; and “exemp­tions for trad­ing in cer­tain gov­ern­ment oblig­a­tions, trad­ing on behalf of cus­tomers, trad­ing by a reg­u­lated insur­ance com­pany, and trad­ing by cer­tain for­eign bank­ing enti­ties out­side the United States.” In addi­tion, the rule imposes report­ing and record-keeping require­ments, and addresses some nar­rower appli­ca­tions in the con­text of spe­cific trans­ac­tions with cov­ered funds.


    Note the Vol­cker Rule exemp­tion for “risk-mitigating hedging”...that’s exactly the kind of activ­ity that’s at the heart of JPMorgan’s lat­est “whoopsy!” dis­clo­sure:

    JPMor­gan Loses $2 Bil­lion as ‘Mis­takes’ Trounce Hedges
    By Dawn Kopecki, Michael J. Moore and Chris­tine Harper — May 10, 2012 11:34 PM CT

    JPMor­gan Chase & Co. (JPM) Chief Exec­u­tive Offi­cer Jamie Dimon said the firm suf­fered a $2 bil­lion trad­ing loss after an “egre­gious” fail­ure in a unit man­ag­ing risks, jeop­ar­diz­ing Wall Street banks’ efforts to loosen a fed­eral ban on bets with their own money.

    The firm’s chief invest­ment office, run by Ina Drew, 55, took flawed posi­tions on syn­thetic credit secu­ri­ties that remain volatile and may cost an addi­tional $1 bil­lion this quar­ter or next, Dimon told ana­lysts yes­ter­day. Losses mounted as JPMor­gan tried to mit­i­gate trans­ac­tions designed to hedge credit expo­sure.

    “There were many errors, slop­pi­ness and bad judg­ment,” Dimon said as the company’s stock fell in extended trad­ing. “These were griev­ous mis­takes, they were self-inflicted.”

    The chief invest­ment office was thrust into the debate over U.S. efforts to ban pro­pri­etary trad­ing when Bloomberg News reported last month that the unit had taken bets so big that JPMor­gan, the largest and most prof­itable U.S. bank, prob­a­bly couldn’t unwind them with­out los­ing money or roil­ing finan­cial mar­kets. Dimon, 56, had trans­formed the unit in recent years to make big­ger and riskier spec­u­la­tive trades with the bank’s money, five for­mer employ­ees said.


    The chief invest­ment office’s push into risk-taking was led by Achilles Macris, 50, accord­ing to three for­mer employ­ees, Bloomberg News reported on April 13. He was hired in 2006 as its top exec­u­tive in Lon­don and led an expan­sion into cor­po­rate and mortgage-debt invest­ments with a man­date to gen­er­ate prof­its for the New York-based bank, they said. Dimon closely super­vised the tran­si­tion from its pre­vi­ous focus on pro­tect­ing JPMor­gan from risks inher­ent in its bank­ing busi­ness, such as interest-rate and cur­rency move­ments, they said.
    ’Wall Street Hubris’

    “I wouldn’t call it ‘more aggres­sive,’ I would call it ‘bet­ter,’” Dimon told ana­lysts yes­ter­day. “We added dif­fer­ent types of peo­ple, tal­ented peo­ple and stuff like that.” Until recently, they were care­ful and suc­cess­ful, he said.

    “It’s clas­sic Wall Street hubris, which we’ve seen so many times before,” said Simon John­son, a for­mer chief econ­o­mist at the Inter­na­tional Mon­e­tary Fund who now teaches at the Mass­a­chu­setts Insti­tute of Tech­nol­ogy. “What’s par­tic­u­larly ironic here is that Jamie presents him­self, and is believed by oth­ers to be, the king of risk management.”

    Bloomberg News first reported April 5 that London-based JPMor­gan trader Bruno Iksil had amassed posi­tions linked to the finan­cial health of cor­po­ra­tions that were so large he was dri­ving price moves in the $10 tril­lion mar­ket.

    So the pro­pri­etary trad­ing activ­ity that JPMor­gan claimed it was using to reduce its over­all risk in other bank­ing activ­ity (part of the jus­ti­fi­ca­tion for get­ting the Vol­cker Rule expemp­tion) was ACTUALLY being used to aggres­sively make bets for the banks pri­vate prof­its, implicitely putting client money at risk by risk­ing the health of the firm. That by be why the Vol­cker Rule pro­po­nents view this dis­clo­sure as fur­ther evi­dence of the need for the Vol­cker Rule :

    Vol­cker Rule Pro­po­nents Say JPMor­gan Loss Bol­sters Case
    By Phil Mat­tingly and Bradley Keoun — May 10, 2012 9:00 PM CT

    U.S. law­mak­ers and inter­est groups favor­ing tighter restric­tions on pro­pri­etary trad­ing said JPMor­gan Chase & Co. (JPM)‘s $2 bil­lion loss on syn­thetic credit secu­ri­ties bol­sters their case.

    Sen­a­tor Carl Levin, the co-author of the so-called Vol­cker rule and chair­man of the Per­ma­nent Sub­com­mit­tee on Inves­ti­ga­tions, said the New York-based bank’s dis­clo­sure yes­ter­day served as a “stark reminder” to reg­u­la­tors draft­ing the proprietary-trading ban required by the 2010 Dodd-Frank Act.

    “The enor­mous loss JPMor­gan announced today is just the lat­est evi­dence that what banks call ‘hedges’ are often risky bets that so-called ‘too-big-to-fail’ banks have no busi­ness mak­ing,” Levin, a Michi­gan Demo­c­rat, said in a statement.

    The Fed­eral Reserve, Secu­ri­ties and Exchange Com­mis­sion and Fed­eral Deposit Insur­ance Corp. are among reg­u­la­tors draft­ing the so-called Vol­cker rule to limit bets banks can make with their own funds. JPMor­gan, with other Wall Street banks includ­ing Gold­man Sachs Group Inc. (GS) and Mor­gan Stan­ley (MS), have lob­bied reg­u­la­tors to expand exemp­tions included in a draft pro­posal released last year.


    Hedg­ing Exemption

    Dimon said on the con­fer­ence call that the orig­i­nal premise of the trades by the chief invest­ment office was for the firm’s hedg­ing. Syn­thetic credit prod­ucts are deriv­a­tives that gen­er­ate gains and losses tied to credit per­for­mance with­out the owner buy­ing or sell­ing actual debt.

    Levin and Merkley, in their Feb­ru­ary com­ment let­ter, pushed reg­u­la­tors to tighten the exemp­tion for hedg­ing, call­ing some of what may be allowed a “major weak­ness” in the rule.

    JPMorgan’s dis­clo­sure “shows the need for finan­cial reform, espe­cially a strong Vol­cker rule, to limit such risky bet­ting,” Den­nis Kelle­her, pres­i­dent of Bet­ter Mar­kets, a non– profit group that advo­cates for tighter finan­cial rules, said in a state­ment. “Too-big-to-fail banks like JPMor­gan, with tril­lions in assets and tril­lions more in high-risk invest­ments and trad­ing, require reg­u­la­tion and transparency.”

    Posted by Pterrafractyl | May 10, 2012, 11:36 pm
  49. Beyond the impli­ca­tions for the Vol­cker Rule, JPMorgan’s dis­clo­sure today of $2 bil­lion in ‘mis­takes’ could have seri­ous impli­ca­tions for the actual finan­cial mar­kets in com­ing weeks and months. That’s because the ‘mis­takes’ that led to this loss took place in the CIO, and as you may recall, the CIO was the source of much sur­prise in the finan­cial mar­kets last month when the firm dis­closed to the world that JPMor­gan had spent the last four years or so turn­ing the CIO into the a $360 bil­lion behe­moth (See the April 6th com­ment above for more on that). $360 bil­lion is so much money that it has appar­ently allowed the CIO traders to move the prices of the $10 tril­lion cor­po­rate deriv­a­tives mar­ket. It’s THAT BIG. And THAT is the divi­sion of JPMor­gan that just lost $2 bil­lion. Or maybe it’s $4 bil­lion. We’re still in the “let’s all guess how big the losses will even­tu­ally be” phase of the scan­dal and, unfor­tu­nately, this is mas­sive impli­ca­tions because JPMor­gan CAN’T UNWIND its mas­sive posi­tions in these deriv­a­tives mar­kets with­out seri­ously impact­ing the prices. And now all of the other par­tic­i­pants in those mar­kets know that JPMor­gan might be forced to unwind those unwind­able posi­tions. Next week should be an inter­est­ing one on Wall Street.

    Posted by Pterrafractyl | May 10, 2012, 11:39 pm
  50. Today’s les­son in “How the world works 101″:

    Why Don’t We Know More About the ‘Lon­don Whale’?
    By Dashiell Ben­nett | The Atlantic Wire — 05/11/2012

    Per­haps the most sur­pris­ing thing about a man who was able to move tril­lion dol­lar mar­kets in a sin­gle bet, is that we know so lit­tle about him. Espe­cially when every­one has known what he was up to for weeks.

    Brunio Iksil’s name first started to show up on newswires almost exactly a month ago, when Bloomberg first reported on April 6 that the JPMor­gan trader had estab­lished such a mas­sive posi­tion in credit deriv­a­tives that he was sin­gle hand­edly dis­tort­ing mar­ket prices, a near impos­si­ble task in a mar­ket of that size. He was so over­ex­posed that hedge funds and other big investors were lin­ing up against him, tak­ing the other side of his bets and wait­ing for him to inevitably fail. As Busi­ness Insider pointed out, those “rivals’ may have been the impe­tus for the news sto­ries. Draw­ing more atten­tion to his unsta­ble posi­tion cer­tainly wouldn’t have hurt their fortunes.

    Despite all the atten­tion from the media and author­i­ties, no one seemed to fig­ure out much about who Iksil is, and how one trader was able to con­trol such a mas­sive amount of funds in this way. Over $100 bil­lion in a sin­gle index, by most esti­mates. Even now, a month later, no one seems to know any­thing about him except that he has two cool nick­names — the “Lon­don Whale” and “Lord Volde­mort” — and that he appar­ently doesn’t spend a lot of time on the Inter­net. There appears to be almost no pub­lic trace of him before April. A Lexis-search turned up noth­ing. There are no pic­tures of him online. Bloomberg couldn’t even find out his exact age. (A co-worker says he’s in his late 30s.)


    So we’re to believe that secret hoards of cash at major insti­tu­tions are man­aged by peo­ple no one has ever heard of and used to qui­etly con­trolled major mar­kets for years? Naaahhh..that’s just impossible.

    Posted by Pterrafractyl | May 11, 2012, 2:22 pm

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