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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 as it  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.”


110 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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