Sunday, February 28, 2010

Pravda Gets It!

"But unlike the perpetrators of the Watergate scandal, who wound up looking at jail time, Geithner evidently has a golden parachute waiting at Goldman Sachs [GS], not coincidentally the largest recipient of the AIG bailout. ... Hank Paulson, Geithner's predecessor, was CEO of [GS] before coming to the Treasury. Geithner, who has come up through the ranks of government, could be walking through the revolving door in the other direction. ... Critics are calling the New York Fed's [FRBNY] decision a back-door bailout for the banks, which received 100 cents on the dollar for contract that would have been worth far less had AIG been put through bankruptcy proceedings in the normal way. ... The [FRBNY] is a quasi-governmental institution that isn't subject to citizen intrusions such as freedom of information requests, unlike the [Fed]. This impenetrability comes in handy since the bank is the preferred vehicle for many of the Fed's bailout progrqams. It's as though the [FRBNY] was a black-ops outfit for nation's central bank. ... Eevn after the GM autoworkers, bondholders and vendors all received a government-enforced haircut on their contracts, [Geithner] still had the audacity to claim the 'sanctity of contracts' in the dealings with these companies like AIG. ... The contention that the Fed had no choice is also belied by a recent holding in the Lehman Brothers bankruptcy, in which New York Bankruptcy Judge James Peck set aside the same type of onvestment contracts that Secretaries Paulson and Geithner repeatedly swore under oath had to be paid in full in the case of AIG", my emphasis, Ellen Brown (EB) at Pravda, 8 February 2010, link:

EB is a Los Angeles attorney. Why is this in Pravda? Is the American press afraid of the Vampire Squid (VS)? I disagree with one thing EB wrote. Timmy Boy will not leave Treasury for a VS position, but more likely BlackRock or Pimco. Timmy's joining VS would be too obvious.

Mike Nifong Does Texas

"A Texas nurse who was brought up on criminal charges for filing an anonymous complaint accusing a doctor of unethical conduct was acquitted by a jury Thurday in a case that watchdog groups warned could have a chilling effect on health care workers and patients. ... After the jury returned its verdict, [Anne] Mitchell siad her complaint 'had nothing to do with perosnal feelings,' and she would continue to report doctors if she believes they are not gicing patients proper care. ... Dozens of nurses filled the courtroom throughout this week's trial, and many wept when the verdict was announced. ... 'Whether Ms. Mitchell was convicted or exonerated, was largely irrelvant to the long-term impact her prosecution will have on Texas patients,' [Allen Winslow of Texas Watch] said in a statement. 'The very fact that she was prosecuted will make individuals who could have information that could save lives wuill think twice before speaking up, putting Texas patients at risk.' ... Mitchell's complaint filed in April acused [Rolando] Arafiles of improperly encouraging patients to buy herbal medicines and wanting to use hospital supplies to perform a procedure at a patient's home", Betsy Blaney at the Houston Chronicle, 12 February 2010, link:

"Now it's time for the sherriff who investigated her and the district attorney [DA] wwho prosecuted her to be brought to justice. We can only fantasize. ... The Medical Board [MB] already knew Arafiles. In 2007 it had placed him under certain restrictions for three years. Two days after receiving the anonymous letter, the board notified him of the complaint and some of its details. ... In addition, according to testimony at trial, he joined in pushing doc's $40 bottles of herbal supplement, even holding meeting at Pizza Hut to recruit other salesmen. ... [MB] offficials assumed he was investigating the doctor, according to a spokeswoman. In a letter to him, they said that under the law the letter could not be released except to a law enforcement official 'conducting a criminal investigation of a license holder of the TMB.' Nurses are not licensed by the [MB]. ... Instead of coorrecting the board's assumptions, the sherriff used the letter to identify the nurse who was over 50 and had been with the hospital since the 1980s. He obtained a search warrant of her computers and found a copy of the letter. ... Within weeks however, [DA] Mike Fostel offered a deal: The indictment would be dropped if the women agreed not to sue the county or its hospital. Smart man, but it didn't work. The nurses filed a federal lawsuit. ... Meanwhile the Texas [MB] has expressed its 'grave concern' about the indictments to Fostel and Tidwell. And national nursing organizations, outraged, raised $40,000 for the women's defense according to the [New York] Times", my emphasis, Rick Casey at the Houston Chronicle, 12 February 2010, link:

"A West Texas jury took but an hour Thursday to acquit a nurse who had been charged with a felony after alerting the state [MB] that a doctor at her hostpital was practising unsafe medicine. ... The jury foreman said the panel of six men and six women voted unanimously on the first ballot, and questioned why Mrs. Mitchell had ever been arrested. ... The prosecution has so polarized the small town of Kermit, where the hospital is located, that the judge moved the trial to a neighboring county. The case was investigated by Sherriff Robert L. Roberts Jr. a friend and admiring patient ot Dr. Arafiles, and tried by the county attorney, Scott M. Tidwell, a political ally of the sherriff and, according to testimony, Dr. Arafile's personal lawyer", Kevin Sack at the NYT, 12 February 2010:

This case shows why we need juries. The jury deliberated less than an hour to acquit Mitchell.

Amazing. A 2009 version of a "traveling medicine show". Well, how about an indictment of Fostel and Tidwell for "extortion under color of right", 18 USC 1951?

Quoted without comment.

Saturday, February 27, 2010

Crime and David Ricardo

"Yet the typical Los Angeles County [LAC] homicide isn't much at all like the glamorous murder mysteries seen on screen. Few killings take place in the Hollywood Hills or at the beach. Instead, homicides are concentrated in the vast urban plain south of Wilshire Boulevard. ... The good news: homicides in [LAC] have been declining. The bad news: the racial disparities in homicide victimization rates remain large, partly due to gang wars. ... Racial differences in crime rates are one of those fatcs that everybody is acutely aware of when looking for a place to live, but that you aren't supposed to discuss in print. To its great credit, the Homicide Report violates the media taboo on reporting ethnicity of victims and suspects. 'The Homicide Report departs from this rule in the interest of presenting the most complete and accurate demographic picture of who is dying in homicides in [LAC].' ... Although reporting on lesser crimes has improved due to the revolution in data-driven police department management introduced by William Bratton during his terms as chief of police in Boston, New York City, and LA, they are still open to inconsistency and manipulation. ... One way of getting around these various methodological problems in thinking about racial differences in crime: look closely at homicide victimization rates of 15-29 year-old males. This approach can seem unkind because it assumes there is some correlation between the odds of getting killed and the odds of causing trouble. But among young men, unfortunately, that assumption has some validity. ... Nationally, the ethnic gaps in crime probably aren't as huge as they are in [LAC]. ... Why are the racial disparities so bad in Southern California? ... The high cost of living, the poor public schools, and the low wages have driven out much of the white working class. The per capita income of white neighborhoods in [LAC] is more than twice that of Hispanic households", Steve Sailer at Vdare, 7 February 2010, link:

15-29 year-old African-American males by SS's calculation are 20.7 times as likely to be homicide victims in LAC as non-Hispanic whites. Nationally, the ratio is about 7 to 1. Of 1,257 such homicide victims since 2007, only 47 were non-Hispanic Caucasians, 380 were Black and 794 were Hispanic. LAC couldn't make enough homegrown criminals, so it had to "buy" them. Interesting. Apparently Mexico has a comparative advantage in creating murderers.

Goldman's Schtarkes-5

"A former Goldman Sachs [GS] computer programmer was indicted on charges he stole computer codes used for proprietary high-frequency trading programs. ... Prosecutors from the [SDNY] US Attorney's office alleged that [Sergey] Aleynikov, on his last day at [GS] transferred substantial portions of [GS's] proprietary computer code for its high-frequency trading platform to an outside computer server in Germany. ... The firm maintained strict confidentiality agreements that required Goldman employees to sign away the rights to 'any invention, discoveries, concepts, ideas or information' developed while on the firm's payroll, according to the indictment", Chad Bray and Jacob Bunge at the WSJ, 12 February 2010, link:

"A former [GS] computer programmer pleaded not guilty to charges that he stole computer codes used in the firm's high-frequency trading program. ... The case is set for trial beginning Nov. 29. ... At the plea hearing Assistant US Attorney Joseph Facciponti said a preliminary search didn't find any of Goldman's code on Teza's computers", Chad Bray at the WSJ, 18 February 2010 link:

Why is the SDNY US Attorney's office enforcing a Vampire Squid (VS) contract? Why ask, it's the VS after all. Why is the "non-compete" important to the SDNY US Attorney's office? What element of which count in the indictment does it fulfill?

Go Aleynikov!

Junior at Jr. Deputy Accountant has a related 12 February 2010 post:

Friday, February 26, 2010

China's a Bubble!

"China reported a surge in bank lending and sharply rising property prices last month, figures that reinforced growing worries that the world's fastest-growing major economy risks inflating a new bubble. ... The central bank also reported Thursday that the M1 measure of money supply surged 39% in January, its fastest increase in at least a decade. Economists say that shows households moving money out of long-term deposits in preparation for spending it, a signal of future inflation", Andrew Batson & Dinnt McMahon at the WSJ, 12 February 2010, link:

39%! Wow. China's real estate market looks like a bubble from here.

Cheap Gold?

"It took John Paulson months to convince investors that housing would crumble. Now it's taking him awhile to get them excited about gold, his latest passion. ... Some gold traders expected Mr. Paulson's new fund, launched Jan. 1, to raise billions of dollars and even help push gold higher when it started buying this year. That hasn't happened. Despite months of investor meetings, Mr. Paulson has raised $90 million or so for his new gold fund, according to people close to the matter. Even the $250 million that Mr. Paulson himself placed in the fund hasn't persuaded many investors to get on board", Gregory Zuckerman at the WSJ, 10 February 2010, link:

This is great news. Gold is cheap. Hold on Paulson.

Lean Manufacturing's Dangers

"Born in the factories of Toyota Motor Corp. and adopted by manufacturers worldwide, 'lean manufacturing' reduces waste, creates efficiencies and helps companies continuously shave production costs. ... Such risks are magnified as companies expand globally and offer their products in greater volume. Also, the growing technological complexity of everything from cars to electronics makes it harder for manufacturers to diagnose problems in the early stages before the issue becomce more widespread", Daisuke Wakabayashi at the WSJ, 30 January 2010, link:

I have also been uncomfortable with "just-in-time" processes as in the real world all kinds of things go wrong. We need slack in the system to avoid major breakdowns. See my 23 July 2007 post:

Thursday, February 25, 2010

The Coming Currency Firestorm

"Already, the euro is counted as the dollar's dominant challenger, while China's central bank governor, among others, has suggested establishing an alternative (some might say, rival) 'super-sovereign reserve currency.' ... Will we witness a rapid coup (in currency time) occurring over the next ten years, as some commentators believe (see Chin and Frankel, 2008)? Or will we see a much more gradual process owing to the built-in inertia of the dollar's prominent role? ... We report new cross-country evidence of the determinants of substitution to dollar banknotes and find that in developing countries substitution hinges more on historical than an recent experience. ... While there is considerable interest in the determinants of currency substitution--defined as the use of multiple currencies in a given country--there are few established empirical results. The primary reason is that the amount of hard cash in circulation is often unkown. ... Our data come from the [Fed's] international cash distribution operations and include all wholesale shipments of dollars to and from the US between 1990 and 2007. ... We find that the demand for dollars is, above all, about memory. The highest inflation rate recorded over the past 30 years has significant explanatory power in our model--the demand for dollar banknotes goes up for a generation after an inflation shock--while the recent inflation rate has none. ... Assessing the country-level determinants of the use of dollar banknotes may also have important implications for the [Fed's] balance sheet going forward, as the seignorage it earns from currency in circulation is a major source of its revenue", my emphasis, Rebecca Hellerstein (RH) at Voxeu, 6 February 2010, link:

RH, Fed economist, welcome aboard. About 1830 Lord Overstone said it takes about two generations for all traces of financial folly to be wiped from the market's memory. That's about 50 years. Keep looking. RH's seignorage comment is a fancy way of saying the Fed's cost of capital is zero, my 31 January 2010 post: As long as the dollar is seen to hold its value better than other paper currencies, it will continue in use. When it and all other paper currencies are seen as no better than Venezuela's bolivar, worldwide hyperinflation will result. RH, we salute your exposing the source of Fed "profit". The coming inflationary storm will sweep away the euro too. The Fed has an opportunity here, i.e., to encourage other countries to increase their inflation rates, so more people overseas will hold "wealth" in the form of dollars.

No Pornography Viewers Stoneridge

"When Amy was a little girl, her uncle made her famous in the worst way: as a star in the netherworld of child pornography. ... Now, with the help of an inventive lawyer, the young woman known as Amy--her real name has been withheld in court to prevent harassmant--is fighting back. She is demanding that everyone convicted of possessing even a single Misty image pay her damages until her total claim of $3.4 million has been met. Some experts argue that forcing payment from people who do not produce such images but only possess them goes too far. ... For years, lawmakers (and some voters) have reasoned that virtually no punishment was too severe for such criminals; even statutory limits on sentencing were often exceeded. Now some courts have begun to push back, saying these heavy sentences are improper, and a new emphasis has arisen on making sex offenders pay monetary damages for their crimes. ... On Thursday, the California Supreme Court ruled 5 to 2 that a state ballot initiative allowing the indefinite extension of sentences for sexually violent predators might violate consitutional guarantees of equal protection; the court ordered a new hearing to explore the issues. On Monday, the court also asked for more study on a law that prohibits sexual predators from living within 2,000 feet of a school or park after their release from prison. The law, called Jessica's law, was approved by voters in 2006", John Schwartz at the NYT, 3 February 2010, link:

This ruling was absurd. Pornography viewers should not be liable to Amy under any vicarious liability concept I understand. Why? Because the "conspiracy" to film Amy ended years ago. This is like saying a stolen merchandise "fence" should be held under the felony-murder rule if one conspirator in a robbery conspiracy killed a bank guard during the robbery. Huh? See how the Supremes treated a similar concept in Stoneridge, my 26 January 2008 post: I guess pornography viewers need to hire Hogan & Hartson to get this type of liability thrown out.

Wednesday, February 24, 2010

He Don't Need No Law Degree

"Shon R. Hopwood ... spent much of that time in the prison law library, and it turned out he was better at understanding the law than breaking it. He transformed himself into something rare at the top levels of the American bar, and unheard of behind bars: an accomplished Supreme Court practitioner. ... The court received 7,209 petitions [in 2002] from prisoners and others too poor to pay the filing fee, and it agreed to hear just eight of them. One was Fellers v [US]. 'It was probably one of the best cert. petitions I have ever read,' said Seth P. Waxman, a former [US] solicitor general who has argued more than 50 cases in the Supreme Court. 'It was just terrific.' In January 2004, Mr. Waxman called Mr. Hopwood at the federal prison in Pekin, Ill. They had won a 9-to-0 victory. Justice O'Connor wrote the opinion. ... The law library changed Mr. Hopwood's life. ... By 2005, the Supreme Court had granted a second petition prepared by Mr. Hopwood, vacating a lower court decision and sending the case back for a fresh look. Mr. Hopwood has also helped inmates from Indiana, Michigan and Nebraska get sentence reductions of 3 to 10 years from lower courts. ... Mr. Hopwood now works for a leading printer of Supreme Court briefs, Cockle Printing in Omaha. ... Mr. Hopwood, who is 34, said he hoped to apply to law school next year", Adam Liptak at the NYT, 9 February 2010, link:

Hopwood wants to be a lawyer now That argues against his being rehabilitated. Does he want to work for Mary Jo White in New York? Look out!

Pravda on Vampire Squid

"I am a capitalist pig, and proud of it, thus you would not expect me to support government interference and more strenuous regulation of financial institutions--after all, capitalism (free markets) and tight regulation don't mix well. Well, at the risk of being kicked out of the Capitalist Pig Party, I am in support of tighter regulation of too-big-to-fail (TBTF) institutions--the likes of Citigroup, JPMorgan, Bank of America and (God forbid, after all, they are doing 'God's work' their CEO's words, not mine) Goldman Sachs. Lack of tight regulation in the TBTF space leads to the worst economic system of all: asymmetric socialism. The enormous gains are reaped by employees and shareholders, but losses are socialized and paid by taxpayers. That is simply immoral. Letting companies fail is at the core of capitalism's DNA, and I still stand by that", Vitaliy Katsenelson at Pravda, 30 January 2010, link:

More right-wing opinion from Pravda. Who would have believed this 20 years ago?

Tuesday, February 23, 2010

Bust 'em UP!

"But this year's bonus season has morphed into days of whine and poses. The Street, tin-eared, in whining about the people who are enraged by multibillion-dollar bonus pools are a time of 10% unemployment and public angst. It's trying to solve its problem by posing as a public-spirited operation (rather than Greedhead Central) by showing off charitable contributions and small-business-loan programs. That maneuver can't possibly work. ... Had the [Fed] and other central bankers not flooded the world with cheap cash, Goldman's and Morgan's counterparties--the ones on the other side of their market bets--would have failed. ... In an ideal world, this year the Street would acknowledge the public largesse by having the sense not to pay bonuses of more than six digits--hey, its worker bees need money in order to survive in the high-cost New York City area--and would like to make a nice voluntary contribution to the government that saved it. ... Washington ... whines about Wall Street and adopts symbolic poses--denunciations of 'obscene' bonuses and 'fat-cat bankers' by President Obama, for example--but doesn't do the substantive thing: breaking up those institutions so that they're not too big to be allowed to fail", Allan Sloan (AS) at Fortune, 8 February 2010.

I agree with AS and have advocated breaking up the TBTFs for years.

Newton on Economics

"Economic concepts have strong relationships similar to heat flow. Thermodynamics is to physics as accounting is to economics, the inexorable and indefatigable bookkeeper. ... Remember that the government had nothing to do with the ending the Enron scandal; they did not discover, report or stop it. ... Energy and accounting are governed by rigorous mathematical relationships. Thermodynamics is relentless in accounting for energy flow, unflinching, the purest of truths. ... The starting point for most thermodynamic considerations are the laws of thermodynamics, which postulate that energy can be exchanged between physical systems such as heat or work. ... A law of physics is a thing of beauty. It exists for all people, all cultures, all colors, and all creeds. it is the most undiscriminating thing possible. ... Unlike mathematics which has the concept of proof, a law of physics is only postulated to be true. It is accepted as true if it has been verified by sufficient experimentation. As long as is has never been shown not to be true, that is to be false, it will be accepted as a 'law.' ... Primitive man tied a variety of tricks to get around the binding of the Creator's will which made real physical law. Magic was postulated. Magic was simply physical law subject to change based on some social rule that was subordinated to the will of man. Magic would give us magicians, sorcerers, demons, et al. That would be abhorrence to the Creator, and thus is not allowed. ... Back to the physics: thermodynamics was one of the first scientific products of the industrial age. ... The inexorable nature of this energy accounting system or balance sheet is that matter and energy can neither be created nor destroyed. They are equivalent thanks to Einstein's famous formula. The first law is what Milton Friedman canonized with his famous 'there is no free lunch' statement. ... Physics is the same everywhere. Mars, Andromeda, Iran and North Korea. It does not respect ideology. This puts constraints on the state. Austrian Economics [AE] is where these constraints are applied. Like Thermodynamics, [AE] is a qualitative theory, that is, it is expressed in inequalities, not exactitudes. It bounds behavior but does not proscribe details, it provides limits. ... The [Fed] has only one tool: currency creation. When they perform this magic act at the behest of the political elite it is called a stimulus. When you and I do this it is called a crime: counterfeiting. ... Thermodynamics bounds the work done by physcial processes. [AE] bounds the work done by economic processes. Life exists on Earth because the Sun continually pumps energy into the physcial world we live in. This provides the thermodynamic input into all the biological systems that transform the energy into physical work, chemical work (metabolism and excretion) all running downhill and increasing entropy. The contninuous input from the Sun more than compensates for the entropic loss which is why biological systems persist over long periods of time. ... The net result of a Central Bank, fractional reserve banking system, and a fiat currency is an entropic--based reordering of the system in favor of the elite and against the masses. They get more useful work and we get more entropy. ... Socialist societies continually misallocate resources by the use of rationing coupons instead of money. Rational calculation cannot occur since there is no meaningul pricing mechanism. Entropy increases until eventually no work is done at all", George Giles at Lew Rockwell, 26 January 2010, link:

Ludwig Von Mises and Oskar Lange debated this in about 1930. Economic calculation is impossible under socialism. CV Myers also wrote about money as if it was congealed human effort.

Monday, February 22, 2010

Argentina's Continuing Crisis

"For the better part of a decade, overseas investors have viewed Argentina as a pariah: After a currency collapse in 2001, the country suspended payments on some $95 billion in foreign debt--the largest sovereign default in history. Then in 2005, the government offered creditors, ranging from Italian pensioners and American teachers' unions to Wall Street hedge funds, just 30 cents on the dollar if they agree to swap their old bonds for new notes. about three-quarters of the debt holders grudgingly accepted the deal. ... The goal is to resore [Kirchner's] government's access to financing and tap into the global demand for debt that pays higher yields than US and European treasury bonds. ... Kirchner has lavished billions of dollars on subsidies for food, fuel, and electricity, sending state expenditures up by some 30% annually since she took office two years ago. The problem is, tax revenues have been rising just 12% annually, so a comfortable fiscal surplus has become a deficit equivalent to 2.5% of [GDP] over the past two years. To make up the shortfall, Kirchner tried in 2008 to raise export taxes sharply on soybeans and other grains", Geri Smith at Businessweek, 25 January 2010, link:

Obama, are you watching?

True Islam?

"So what the heck is true Islam? If you listen to the CAIR talking heads on TV, it's that feel-good religion of smiling people and little children holding hands in a field of flowers. ... First of all, you'd buy some of the books, and I don't mean Islam for Dummies. Whatever you do, don't listen the line that in order to understand Islam, you have to be able to read Arabic. This is balderdash, because 80% of the world's Muslims don't read Arabic, and many of those are well-educated in their religions. In fact, English is now the most-used language for disseminating the Islamic faith. ... But before you can argue about Islamic law with success, you need to understand the ''doctrine of abrogation', which is a principle that is considered authoritative under Islamic law. Once you've got that down, it's simple to makle coherent argumates about what true Islam consists of. ... If the Koran, the authoritative hadith, and the four schools of Islamic jurisprudence agree, then you can take it to the bank: that's Islam. ... The truth of Islam can be found in the point of the knife at the infidel's throat. All the rest can be jettisoned", Baron Bodissey at Gates of Vienna, 12 January 2010, link:

As it is written, "By their fruits you will know them". How many Christians can read the Bible in Greek? The notion that only Arabic readers can know the Koran is absurd.

Sunday, February 21, 2010

SEC On-Mission

"Mary Schapiro never uttered the word 'Madoff' a year ago, in her first public speech as Chairman of the [SEC]. Now Ms. Schapiro is once again forcing investors to ask whether she understands her mission. ... The agency that spent more than a decade ignoring evidence of Bernard Madoff's $50 billion fraud; the agency that spent even longer constructing a credit-ratings oligopoly that still threatens investors; the agency that in 2004 encourage Wall Street firms to increase leverage and then failed to monitor them--this agency now has spare time to mediate on climate science. ... And it is pure coincidence that Ms. Schapiro works for a President seeking to limit carbon emissions administratively, as his cap-and-tax bill dies in the Senate. if this was an order from the White House or House Speaker's office, Ms. Schapiro may have had little leverage to push back, as Congress ponders whether financial reform will leave her jurisdiction intact. ... Imagine the burden if, for example, one year ago health-care companies had been given new guidance on disclosing the risks of ObamaCare", WSJ Editorial, 29 January 2010, link:

Quoted without comment.

Wilson's Continuing Failure

"'America is losing the Free World,' was the arresting headline over the Financial Times column by Gideon Rachman. His Thesis: 'The largest democracies of South America, the Middle East and Asia--South Africa, Turkey, India--are all moving out of America's orbit. (T)he assumption that the democracies would stick together is proving unfounded.' ... The ruling parties in all four were democratically elected. Yet, in all four, democratic solidarity is being trumped by an older solidarity--of Third World people of color against a 'white, rich Western world.' ... What makes this frightening,' says [Geoffrey] Wheatcroft, 'is that many American politicians and commentators ... have yet to grasp this reality. Such ignorance is evident in the bizarre notion--current even before George W. Bush took the oath of office--that America not only can and should spread democracy, but that this would be in the American national interest. Why did anyone think this?' ... What, then, is the rationale for the National Endowment for Democracy to continue tax dollars to promote such elections? ... When colonialism ended in East Africa, Indians were massacred. The Chinese suffered a horrible pogrom in Indonesia in 1965, when the dictator Sukarno fell--and another when Sukarto fell. Picked clean, two-thirds of the 250,000 whites in Rhodesia when Robert Mugabe took powwer are gone. ... If racial and religious bonds and ancient animosities against the West trump any democratic solidarity with the West, of what benefit to America is democracy in the Third World? ... Is democratism our salvation--or an ideology of Western suicide?", Pat Buchanan at Vdare, 7 January 2010, link:

Hitler was elected too. So? Consider this article's implications for American and European immigration policies.

Saturday, February 20, 2010

Ken Lewis-Scapegoat-2

"The bank bailouts of the last two years have been 'about as popular as a root canal,' as President Obama noted in his State of the Union address. ... So it was probably inevitable that New York Attorney General Andrew Cuomo would file civil fraud charges against Bank of America, its former CEO Ken Lewis, and its former CFO Joe Price, as he did this week. Everyone assumes Mr. Cuomo is running for governor this year, and BofA is conveniently based in Charlotte, not Wall Street. .... The Martin Act is a prosecutorial bludgeon that forces most defendants to settle out of court rather than risk being convicted merely for having been wrong on some facts. ... When Mr. Lewis told Treasury Secretary Hank Paulson and [Fed] Chairman Ben Bernanke that he was considering invoking this clause and scotching the deal, they insisted he buy the faltering trading house and later announced an additional taxpayer investment in BofA to allow the bank to digest Merrill. Mr. Lewis swallowed hard and went ahead with the merger. Mr. Cuomo says this was all a bluff by Mr. Lewis in order to trick the regulators into providing more TARP money. Never mind that Mr. Lewis had a contractual right to pull out of the deal if he felt material facts had changed. ... Mr. Cuomo's logic boils down to this: Mr. Lewis is guilty for not telling his shareholders about rising losses at Merrill, but he's also guilty for trying to protect his shareholders from the rising losses at Merrill. ... On the public evidence so far, Mr. Cuomo should be thanking Mr. Lewis, not suing him", my emphasis, WSJ Editorial, 6 February 2010, link:

I'm with the WSJ. Cuomo's case against the BofA and Lewis was announced the same day as the SEC's new BofA settlement. Are Cuomo and the SEC engaging Lewis in a tag-team wrestling match? Cuomo apparently wants to run for NY Governor over Lewis corpse. I hope Lewis and the BofA take this one to the mat. That BofA is not headquartered in NY may be the reason Cuomo is pursuing this case to the Vampire Squid's applause.

Paging General Stanley

"As strange as it seems, the [US] is fighting a war in Afghanistan, though Afghanistan is on the other side of the world, a landlocked country. Stranger still, American troops must trace their line of supply through territory controlled by enemies or potential enemies. This situation is unprecendented. Only an American general of the present generation would think it acceptable to deploy so many troops into a battle where they could be so easily cut off. Barack Obama ... went on to describe himself as a Christian sprung from generations of Muslims, without realizing the Muslim implications of this stated apostasy. ... Bush could not win over the Muslim world, and neither can President Obama. ... The logic of war is the logic of history. People want to kill you, so you must fight", my emphasis, Jeffrey Nyquist (JN) at Financial Sense, 4 January 2010, link:

It's simple, the UN's existence notwithstanding. I always believed our Afghanistan adventure a waste of blood and treasure. JN has classified information General Stanley does not, i.e., Afghanistan is landlocked.

Friday, February 19, 2010

Buchanan on Bernanke

"Should Bernanke be rejected, it is said, the effect on Europe's markets will be like that on Europe's monarchs when news arrived that Louis XIV had gone to the guillotine. ... But if rejection of Bernanke would cause turmoil in US and world markets, what does that say about the real stability of the system? And is it not time we stopped treating the Fed as a holy of holies? ... Under the Fed's custody, the US dollar has lost 98 percent of its value. ... Every monetary crisis is a result of Fed action or inaction, for the Fed controls the money supply", my emphasis, Pat Buchanan at Vdare, 26 January 2010, link:

I have said similar things for 30 years. Kill the Fed.

On Elites

"In 1995 Christopher Lasch came out with The Revolt of the Elites and the Betrayal of Democracy. The introduction was titled 'The Democratic Malaise' and included chapters like 'Does Democracy Deserve to Survive?' and 'The Lost Art of Argument.' The threat to our civilization, said Lasch, does not come from the masses. The threat comes from the elite. ... Those of us who are not part of the elite's fashionable revoluton are 'racist, sexist and homophobic.' We are fit objects for extermination or re-education because, in the end, we just don't get it. 'Simultaneously arrogant and insecure,' wrote Lasch, 'the new elites, the professional classes in particular, regard the masses with mingled scorn and apprehension. In the [US], 'Middle America'--a term that has both geographical and social implications--has come to symbolize everything that stands in the way of progress: "family values," mindless patriotism, religious fundamentalism, racism. ...' According to Lasch, there are far worse problems facing America than racism: 'the crisis of competence; the spread of apathy and a suffocating cynicism; the moral paralysis of those who value 'openess' above all.' Lasch saw an intellectual softening underway. ... The information revolution, he said, has not raised the level of public intelligence. It is no secret, he continued, 'that the public knows less about public affairs than it used to know.' ... In terms of a general incompetence for living (1) It may be said that people are no longer literate. ... What is shocking to discover, however, is that all of these things have been encouraged by the purveyors of (2) the would-be managers of society who rail against the market, against fatherhood, against punishment and discipline, and against the necessities of war. 'A lust for immediate gratification pervades American society from top to bottom,' noted Lasch. 'There is a universal concern with the self--with 'self-fulfillment' and more recently 'self-esteem,' slogans of a society incapable of generating a cense of civic obligation.' ... In CS Lewis's The Weight of Glory we find a chapter titled 'Why I Am Not a Pacifist.' In this chapter Lewis wrote that pacifism consists 'In assuming that the great permament miseries in human life must be curable if only we can find the right cure.' Here in America we have an elite that is pathologically imbued with finding the right cure. ... Today's elite does not possess intellectual excellence. Arguably, they do not know what excellence is, because their whole education has come out of third-rate minds--or worse. ... As Lasch correcly noted, 'History has given way to an infantilized verison of sociology, in obedience to the misconceived principle that the quickest way to engage chldren's attention is to dwell on what is closest to home: their families, their neighborhoods; the local industries; the technologies on which they depend. ... It is not that President Bush was incompetent in manging the war in Iraq. The entire elite was incompetent, and Bush made this discovery, and was forced into a position of sorting out a mess caused by his underlings (and by himsef)", Jeffrey Nyquist at Financial Sense, 15 January 2010, link:

"There is, yet again, something very Romanesque about the state of the Americans, their empire and their collapse. As the US continues to sink in its co-UK created economic armageddon, the ruling regime enjoys the fruits of its labor and swindling. This is the great 'Democracy' they sell us, overseas. ... Sure, reading the official Ministry of Propaganda (so called free press) reports showed only a mere another 85,000 Americans as losing jobs, or rather the work force shrinking by that amount, so it takes the UK Telegraph (America slides deeper into recession as Wall Street revels) to report the real situation, that 650,000 unemployed were moved into a category named 'No Longer Searching For Jobs.' ... After all, judging by the headlines out of DC, for the Haitians there is money, for their own unemployed, shelters and bread lines. This category has been growing by nearly half a million every month for the last year. ... Equally, the evils of Wall Street, the pack of hyenas, the cabal of withces who brought us the lovely Soviet Revolution, the Great Depression, the Nazi takeover, the rape of post Soviet Russia, the Asian Flu ... are now paying themselves $146 BILLION in bonuses, 8% more than the 2007 record, after stealing $700 BILLION from the American tax serfs. through bought and paid for farce of their so called 'Democracy.' That is some 20,000 people will be splitting $146 BILLION, or an average of $7.3 million each, for the people who are still laughing at all the Luciferian death and misery they caused by starting the lovely Great Depression II. But best of all, it has not been brought out that the Obama Regime, much like Nero or Caligula, has been partying hard, with over 170 parties, receptions and big dinners, entertaiing over 50,000 guests, flying in speciality chefs from around the world, all in this one year of power. That is, one party every two days. And the American serfs? They just bare [sic] it, grumble and pay their taxes, it is what they have been trained for", Stanislav Mishin & Mat Rodina (M&R) at Pravda, 26 January 2010, link:

"We do not expect or want elitists and moral supremacists who believe that they know so much more about justice, the market, and how we should live. In his recent book Intellectuals and Society, Thomas Sowell explains how the 'anointed' believe that their advanced education and depth of knowledge in one filed automatically makes them an authority on any field in which they wield an opinion. Thus Noam Chomsky, a noted scholar in linguistics, has written dozens of books condeming America's and Israel's foreign policy with only the illusion of authority. Sowell further explains that the most educated among us know only the smallest fraction of what is to be known. That these highly educated people may know so much more than any one of us does not mean that they know a fraction as much as do all of us. ... When prices a re-determined by central planning or anointed experts, shortages and gluts appear. ... Yet we often see intellectuals commit major logical errors even in the fields where they do have expertise. ... Even the brilliant Ben Bernanke, the most noted modern scholar on the Great Depression of 1929, stood before audiences only a few years ago and explained that the effect of subprime loans would be limited and that the financial system was sound", Henry Oliner at American Thinker, 30 January 2010, link:

Iraq has been a disaster. We lost. Iran won. Why? Watching Mr. Affirmative Action act as president may yield one good thing: discreding the Ivy League as a source of future presidents. More and more people can see "He" was pushed along despite his mediocre intellect, disagreeing with Michael Beschloss, who on 11 November 2008 said Obama's IQ is "off the charts". I doubt it's over 125. The Left is amazing. IQ bad except if you want to execute someone, then if it's below 70, good. I doubt Obama is anymore intelligent than George Bush II. Really!

Disagreeing with M&R, the Obamites look more like 1785's Bourbons. I await Michelle in a $3,000 dress, announcing, "Let them eat cake" as she serves Hors D'ouevres to Lloyd Antoinette Blankfein. The Obama Administration is a joke.

Amazing. Stalin couldn't run the Soviet economy with central planning. Why does the US need centrally planned interest rates? Kill the Fed. Our elites know less than they think.

Thursday, February 18, 2010

Affirmative Action White House

"But we have allowed the profoundly irrational liberal media to persuade the American public that we are supposed to pick a US president by affirmative action. Obama was elected to universal Hosannas because he is black. It wasn't a secret. That's why the Left around the world went into ecstacies when Obama ran and got elected. ... We've had a generation of affirmative action agitprop 24/7/365. Hillary Clinton was going to dictate racial and gender preferences for medial school admissions under HillaryCare. You can bet that reverse-racism is all over the 2,200 pages of ObamaCare. It's reverse-racism forever. In America today, comptence is suspect, and incompetence gets all the attention. Yet competence is what keeps us alive. ... It has now been about forty years, and the goal posts have just moved farther and farther Left. Today it's not just blacks--it's women, homosexuals, and illegal aliens. And it's no longer equality of opportunity, but equality of outcome, which was the goal of Communism for seventy years in the Soviet Union, until the whole Soviet Empire collapsed. ... Nobody can point to Obama's anti-terrorist policies and say that's wildly incompetent--without fearing they will be accused of racism. .... Meanwhile, blacks are still suffering from the pervasive social pathology of the inner city--almost all self-inflicted, with the help of the welfare state. Europe shows exactly the same results, except that the victims of welfarism aren't black, but mostly white and Muslim immigrants. ... The guy in the White House today is potentially the most dangerous, mentally fixated, and irresponsible demagogue we have ever known", James Lewis at American Thinker, 28 January 2010, link:

It was always about equality of outcome. Martin Luther King, our secular saint, said whatever he had to to further his goals, knowing 1964 America would not accept explicit quotas. How different things were 52 years ago when Hyman Rickover was a "rock star" and the US pushed "gifted kids" education.

Can't: Read, Watch or Comprehend

Thomas Bertonneau, who I've cited before has three new posts about today's college students, 28 January, 4 and 11 February 2010. Here's the links:

The Fed's Cross of Paper

"If you're a retiree who relies on interest income, you know that the tap is running dry. In fact, many investors in certificates of deposits, savings accounts and money market accounts are losing money once taxes and inflation are subtracted from today's extremely low yields. Less well known is that measly savings yields are central to the government effort to buy time for the banks to earn their way back to health. It is important to rebuild the banks. But more attention must be paid to the collateral damage from that effort. Here's what's happening: By lowering the short-term interest rate it controls to virtually zero and creating lending programs, the [Fed] has enabled banks to borrow cheaply. ... The result is presumably healthier banks and certainly poorer savers", NYT Editorial, 18 January 2010, link:

Fed policy is: "Crucify savers on a cross of paper". Where is a William Jennings Bryan today to challenge the banksters and their apologists in the US government?

Wednesday, February 17, 2010

Up the Ivy League

"Last year at about this time, David Brooks of the New York Times anticipated an enormous intellectual dividend for our country. After cataloging the Obama administration's numerous Ivy League JDs and PhDs, and with no mention of their real-world experience, he went on to write, "Already the culture of the Obama administration is coming into focus. Its members are twice as smart as the poor reporters who have to cover them, three times if you include the columnists.' While Mr. Brooks was pleased to finally see intellectual meat on the Washington bone, many others were dismayed to see this Ivory Tower culture reaching critical mass in our government. ... The country needs more than a narrowly focused intellectual dividend. Take away this administration's heap 'o seepskin and you have a group of people lacking the qualifications to do anything other than mouth obscure intentions and display self-esteem. Note that those are traits shared, according to a Scientific American article, by many inhabiting our country's finer penal institutions. ... The very fact, as the article stated, that degreed sociologists and psychologists had erroneously assumed that criminals have general low self-esteem is an indicator that the former depended heavily on pure speculation. The moat surrounding their intellectual castle was deep and wide. ... The contemporary American univeristy, academics' home turf, is the fountainhead of politically correct thought. PC has become like a physical constant, as is gravity. it is balanced into every academic discussion. ... The natural tendency of academics in government may be to transfer the modus operandi of their native institution to governance, leading them to insist rather than request, demand rather than serve, and scold rather than listen. Citizens may be seen as undergraduates, who when becoming too noisy and contrary can be threatened with demotions and fines", John Kelly at American Thinker, 3 February 2010, link:

I remember Kennedy's administration. It was full of Harvard graduates. It turns out they didn't know what they were doing. They brought us the: Berlin Wall, Bay of Pigs and Vietnam.

Saudi Arabia-World Hypocrite

"In one of the supreme acts of chutzpah of our new decade, Saudi Arabia [SA] has just accused Israel of behaving like a 'spoilt child,' getting away with 'war crimes' ... and 'violations of international law'. ... 'When they violate international law, other countries get punished, but not Israel ... Israel has become like the spoilt child of the international communtiy,' declared Saudi Foreign Minsiter Price Saud al-faisal at a meeting with Palestinian Acuthority President Mahmoud Abbas on Janaury 2. 'It ... gets away with anything it does without accountability or punishement,' he added. Orwellian Newspeak can only take hold if the population stops protesting when the language is misused. The Saudi minister's declaration easily qualifies as Newspeak, and I'm calling him on it. ... Every day, I bear witness to the extraordinary free speech in Israel. My students are Jewish, Druze, and Muslim. ... On the other hand, if there is a spoilt child in the international community, Saudi Arabia ... easily qualifies for the epithet ... [SA] is a primitive embarassment to the world", Michael Krauss at American Thinker, 5 January 2010, link:

15 of the 19 9/11 highjackers were Saudis. Why didn't we invade SA instead of Iraq and Afghanistan? What's going on here? Did you know a non-Moslem cannot go to SA to view the Hajj? Did you know only Moslems can be citizens of SA? That SA ended slavery in 1961? That SA executes Islamic apostates? Why not? SA's oil is more valuable to the world than Joo blood. That's the bottom line. Anthing else you've been fed is nonsense.

Tuesday, February 16, 2010

Schooling as Fraud

"Almost predictably, he now falls back on the apple pie and motherhood issue of education to elicit a legislative consensus and maybe, if lucky, enact something tangible. It's admittedly a tough sell in today's debt-ridden, frozen-budget times, but who can oppose a world-class education for American kids? ... Murky implementation details aside, Secretary Duncan assured everyone that key congressional Democrats and Republicans plus mayors and governors from both parties were on board. ... This budget-bloating money will not fix our educational woes; it will instead reward a dysfunctional educational establishment. This is yet one more dubious make-work jobs bill--or to use a little barnyard humor, a pig-in-a-poke wrapped in a sheepskin. America is addicted to educational largess. Between 1900 and 2008, our total government spending on education rose from 1% of GDP to 7% in 2008. In 1919-20, the cost per pupil in constant (2005-06) dollars was $668; by the beginning of WWII, it had risen to $1,404. Upward movement continued, so in 1949-50, it was $2,188, and by 1959-60, it was $3,190 per pupil. By the end of the 20th cebtury, it hit $10,000, and by 2003-05, it was $11,100. Education munificence has even outstripped health care appetities. We are also spending more on buildings and facilities. The enterprise is also incredibly labor-intensive. ... Schools with 'at-risk' students can rival luxury resorts where attendants outnumber guests. In 1949-50, the ratio of pupil to school staff members was 19.3 to 1; by 2004, it had fallen to 8 to 1. ... New York City's education bureaucracy illustrates the jobs creation machine at work, where positions are typically available to those with modest training or an easy-to-get high school equivalence certificate. Job titles include 'Teaching Assistant,' four distinct levels of 'Eduational Assistant,' three levels of 'Education Associate.,' and two types of 'Auxuliary Trainer,' plus varied 'Family Assistants.' ... And what were the proposed solutions? ... Instead, these 'probing and unflinching' experts demanded community partnerships, more role models and mentors, and 'wraparound' servies. Never heard of 'wraparound services'? ... None of this has ever worked, or at least not significantly, and if any of it had succeeeded, the original Great Society would have done the trick decades ago. ... Build the failure, and the job seekers will come", my emphasis, Robert Weissberg (RW) at American Thinker, 3 February 2010, link:

Education is a scam. Nothing can close the "achievement gap". That's the bottom line. The various assistants are in make-work programs, just like our penal system, with its parole boards. In the days of the dinosaurs, when I was in grammar school, we had classes of 30-40. So? The vast majority, possibly 75% of our education dollars are wasted.

Pension Funding

"Public pension funds needing to boost their returns but frustrated with hedge funds and private-equity investments are turning to one of the oldest investment strategies--using borrowed money to boost performance. The strategy calls for leveraging pension funds' safest asset--government or other high-grade bonds--while reducing exposure to stocks. ... Low interest rates make it impossible to meet those targets with simple bond investments. ... That public pensuion funds would contemplate the use of borrowed money so soon after a credit crisis stoked by financial leverage is setting off alarms for some in the industry. ... In previous years, consultants pitched a strategy called portable alpha, an aggresive bet involving leverage and hedge funds that magnified returns when the stock market was surging but aggravated losses when the market turned down", Craig Kramin at the WSJ, 27 January 2010, link:

Depending on the rates the pension funds issue debt, this may turn out better for them than the skeptics think. That pension funds, like Wisconsin's, resort to this shows many pension funds are insolvent in substance. Do you still want to buy muni bonds?

Monday, February 15, 2010

Exxon Invests

"Hardly known as a wildcatter, Exxon Mobil Corp. is searching for oil in most of the world's regions where high-risk exploration is under way, even as other bog pil companies are being more selective and cutting capital spending. ... Exxon said capital spending reached $27.1 billion last year, up 3.6% from a year earlier. Fourth-quarter spending reached $8.3 billion, Exxon's highest three-month total ever. Exploration expenses charged to income, which capture spending on unsuccessful wells, rose 39% last year. ... Exxon is exploring in eight of the 'hot,' high-risk exploration regions around the world identified by Sanford C. Bernstein and is attempting to invest in a ninth. Aside from Royal Dutch Shell PLC, which is nearly as active, most other oil companies have interests in only half as many such areas, at most", Russell Gold at the WSJ, 2 February 2010, link:

Exxon is better off putting dollars in the ground than holding them. Exxon apparently believes $75 oil is cheap. So do I.

Debt Bomb

"Kyle Bass has bet the house against Japan--his own house, that it. ... 'Japan is the most asymmetric opportunity I have ever seen,' he says, 'way better than subprime.' ... If 2008 was the year of the subprime meltdown, 2010, he thinks, will be the year entire nations start going broke. ... National governments will issue an estimated $4.5 trillion in debt this year, almost triple the average for mature economies over the preceeding five years. ... Whether or not you believe the spending spree was morally justified, you have to be concerned about the prospect of a dismal, debt-burdened fiscal future. More debt weighs heavily on GDP, says Carmen Reinhart, a University of Maryland economist. ... America is a nation of spendthrifts, addicted to easy credit and dependent on the kindnesss of savers overseas to keep us comfortable. ... The personal savings rate has climbed from negative 0.4% in 2006 to a positive 4.5% rate now, but that it still a pathetic figure for a nation whose government is un-saving all that and more with its budget deficit. ... If the GDP doesn't expand at 'normal' rates of 3% to 5% coming out of this recession, wrestling down the debt will be very tough, indeed--perhaps impossible without drastic cuts in spending and higher taxes of many fronts. ... US corporate tax receipts were down 55% in the year ended Sept. 30, 2009 to $138 billion. ... If Congress and the Obama Administration don't trim spending [Benn Steil] says, 'we will get to the point where credit is much more expensive in the US than it has been in the past.' ... 'US states are like emerging markets,' says Reinhart. 'They spent a lot during the boom years and then were forced to retrench during the down years.' ... But Brian Coulton, head of global economics at Fitch Ratings in London, warns that once rock-solid economies like the US and UK could join shakier nations like Japan and Ireland in losing their AAA ratings if they don't get their bad habits under control. ... Most investors seem to believe, as the late Citibank chairman Walter Wriston put it, that 'countries don't go bust.' The opposite is true. ... Even if countries don't stiff creditors outright, they can sometimes accomplish the same thing through inflation", Daniel Fisher at Forbes, 8 February 2010, link:

"In 2009 investors were warned about bubbles: a bubble in Treasuries, a gold bubble, and, finally, warnings of a rapidly expanding bond mutual fund bubble forming. It's brought to us by the [Fed's] 0% interest rate policy. Whether the flood into bond funds of all types was an intended consequence or not, it's now a flood that could go just as quickly the other way. ... There is a lot of unsophisticated money in bonds now, and I'm not sure investors understand how miserable things can get when the low interest rate party ends", Marilyn Cohen at Forbes, 8 February 2010:

If you have any type of bonds, no matter in what currency, sell! As for Walter Wriston, see my 30 October 2008 post:

I agree, the bond market is a disaster waiting to happen.

Sunday, February 14, 2010

Sentencing Stupidity

"Judges are looking skeptically at prosecutors' requests to give 15- to 25-year sentences for viewing sexual images of minors, handing down more sentences of five to 10 years, or in some cases probation. The movement has been gaining steam over the past two years even as the Justice Department has made child pornography and other child-exploitation prosecutions a top priority, leading to more than 2,300 cases last year, the highest figure since the department began tracking the statistic. ... The shift has upset advocates of abused children who say the sentences won't deter future misconduct. ... Ernie Allen, president of the National Center for Misisng & Exploited Children ... says the dissemination of such images encourages behavior that hurts children, not least the production of those images. Some child-porn viewers still get sentences of 15 or 20 years from judges who follow the guidelines. That's greater than punishments meted out to some child molesters and other violent criminals", my emphasis, Amir Efrati at the WSJ, 20 January 2010, link:

Absurd! 15+-year sentences for viewing child pornography? Hasn't the DOJ anything important to do? AUSAs love these cases. Why? They almost invariably result from sting operations, true no-brainers. I would repeal the laws against child pornography. Viewing an existing film is not making it, disagreeing with the DOJ. Making the film would almost invariably be criminal. California penal code (PC) section 266j provides 15-years to life for sexual battery on a child. California PC section 311.11 gives up to one year for child porn possession. Federal law is absurb! Allen, get lost. Grow up. No judge should sentence anyone to prison for viewing child porn. The more time the DOJ spends on these cases, the less time it has to prosecute the Vampire Squid. Even if reading about murders "encourages" committing them, doesn't the First Amendment say read?

Who do I blame for this? Those who brought us: prohibition and the drug laws, i.e., groups like the Women's Christian Temperance Union. After all, the Master said, ""You have heard that it was said to the people long ago, 'Do not murder, and anyone who murders will be subject to judgment.' But I tell you that anyone who is angry with his brother will be subject to judgment", Matt 5:21-22 (NIV). He also said, "You have heard that it was said, 'Do not commit adultery,' But I tell you that anyone who looks at a woman lustfully has already committed adultery with her in his heart'." Matt 5:27-28 (NIV). Here's the Christian-Jewish rub. Judaism focuses on acts; Christianity on thoughts. Jesus may have meant: since the thought preceeds the act, guard your thoughts. If so, much Christian doctrine collapses.

WSJ on Chavez

"To the short and brutal list of life's certainties, let us add that socialism invariably leads nations to economic ruin. ... Behind the crack-up of Mr. Chavez's utopia is the fact that he's running out of money because Venezeula's oil production is plunging", WSJ Editorial, 30 January 2010, link:

No. Chavez's problem is that of Arnold Schwarzenegger and David Patterson, i.e., neither controls the world's reserve currency. Chavez can print all the money he wants, but it is only usable in Venezeula.

The Bloodless Coup Continues-8

"BlackRock, Inc. is adding a former US Treasury official and well-known investment banker to its executive team as it seeks to digest a major acquisition and manage $3.3 trillion of client assets. Kendrick R. Wilson, 63 years old, will join the New York-based money manager Feb. 1 as vice chairman and will have a broad role supporting client relationships and adivisng the management team, BlackRock said on Friday. ... He previously held senior investment-banking roles at Goldman Sachs Group Inc. and Lazard Freres & Co. Mr. Wilson will be 'a valued adviser to BlackRock's management team as we evolve our operating and governance models,' Laurence Fink, BlackRock chairman and chief executive said in a statement", Eleanor Laise at the WSJ, 30 January 2010, link:

Quoted without comment.

Saturday, February 13, 2010

Another SEC Nothingburger-2

"A reinsurance firm owned by Warren Buffet's Berkshire Hathaway Inc. reached a $92 million settlement with the federal government that will allow the firm to avoid prosecution for its role in a fraud scheme involving [AIG]. As part of the deal, Berkshire agreed to several coporate-governance concessions. ... It will also pay $12.2 million to settle charges by the [SEC] in connection with the fraud and for helping another company falsify its reported financial reults. ... Several former GenRe executives, including Ronald Ferguson, the former chief executive, and Elizabeth Monrad, the former chief financial officer, were convicted in 2008 on charges that in 2000 and 2001 they helped AIG--which was then a client--improperly inflate its loss reserves, a key indicator of financial health, by $500 million", Amir Efrati at the WSJ, 21 January 2010:

Corporate governance is a scam. This is another joint SEC-DOJ failure to enforce the law.

Wall Street Control of DOJ Continues

"The White House announced on Wednesday that President Obama would nominate Loretta E. Lynch as the [US] attorney for the Eastern District of New York, setting her up for a return to a post she held at the end of the Clinton administration. ... Ms. Lynch, who could not be reached for comment, has held a range of positions in the Eastern District, where she began working in 1990. During her tenure as the head of the office, from 1999 to 2001, she oversaw the Abner Louima police brutality case and its aftermath. ... Ms. Lynch is a partner at Hogan & Hartson [H&H], a private law firm that focuses on commercial litigation, white-collar criminal defense and corporate compliance issues. She is also a member of the New York State Commission on Public Integrity, an ethics and lobbying oversight body", AG Sulzberger at the NYT, 21 January 2010, link:

Lynch is another Mary Jo White, a "ping-pong ball" Fed. Do we know H&H? Sure. John Roberts is a H&H "alumnus". Do NY Biglaws has a secret oath like I assume Vampire Squid does, which means the only way you leave a NY Biglaw is by death?

Friday, February 12, 2010

Fig Leaf Justice

"Corporations facing criminal prosecution could face reduced penalties if they meet standards for tackling white-collar crime at their companies, under chnages proposed by the US Sentencing Commission. Under the proposal, corporations could receive credit during sentencing if they have corporate compliance programs designed to combat white-collar crime. To qualify, a company's compliance officer must have direct access to the board of directors and be responsible for detecting criminal activity. ... The proposal, which the commission has released for public comment, would reduce fines and penalties even if company officers were involved in the criminal activity", Gary Fields at the WSJ, 29 January 2010, link:

Another joke. Another sales opportunity for "former" AUSAs consulting and compliance services to companies for very nice fees. I'm sure John Ashcroft favors this.

Leijonhufvud's Modest Proposal

Axel Leijonhufvud (AL), UCLA economics professor's "Modest Proposal" is to better align bank managers' risks and rewards and limit the public damage they can do at VoxEU, 23 January 2010, link: I believe it's too modest. AL should have had banks' senior managers getting bailouts commit suicide, eat their children as Swift suggested the Irish do in his Modest Proposal, 1729, or at the least surrender all their assets. My proposal which I feel would be more difficult to game is on 7 July 2008:

AIG's Washington Follies

"Will regulators ever coherently explain why AIG could not be allowed to go bankrupt in September of 2008? ... This topic probably deserves another hearing on its own. Remember, the Federal Reserve Bank of New York, where Mr. Geithner was president, had by that time already seized AIG. We're guessing that a ratings agency is pretty comfortable with the credit-worthiness of a firm 79.9%-owned by Uncle Sam. ... In Washington's original telling, the company's insurance subsidiaries, heavily regulated by states, were safely segregated from the mess. ... Geither and Paulson['s] ... testimony directly contradicts that offered to Congress by former New York Insurance Superintendent Eric Dinallo, who was AIG's principal insurance regulator at the time. ... He was so confident in the health of the AIG subsidiaries, before the federal bailout, he was working on a plan to transfer $20 billion of their excess reserves to the parent company. ... This raises some serious issues for financial reform. The Geithner and Paulson story now is essentially that the system of heavy state insurance regulation was a sham. When push came to shove, policyholders were not protected from a default by the parent company. ... The real risk was closer to an implosion of AIG that would have jeopardized millions of insurance policies. ... We're not sure that the policyholders were really in danger, but Mr. Dinallo and other state regulators deserves a chance to respond on the record, and under oath", WSJ Editorial, 28 January 2010, link:

If AIG's real problem was that of AIG's policyholders and not AIG's counterparties, I am sure Zimbabwe Ben et. al., would have let AIG file bankruptcy. I don't accept anything these guys say.

Thursday, February 11, 2010

No Fed Exit

"[Fed] Chairman Ben Bernanke has explained his exit strategy to prevent future inflation. ... The exit strategy is incomplete. Proponents are guilty of practising economics without prices. They never say what the interest rate on reserves must be to get banks to hold the approximately $1 trillion of reserves above the minimum they're legally required to hold. That's the critical question. ... No economist doubts that the Fed can induce banks to hold some more reserves by paying interest. But how much? ... When will inflation start? The date is uncertain. But the triggering event will be either a sustained increase in bank lending or a large increase in Fed purchases of government debt. Perhaps both. Either one would trigger a sustained increase in money growth", Alan Meltzer (AM) at the WSJ, 28 January 2010, link:

AM, a professor at Carnegie-Mellon, is our leading monetarist now that Milton Friedman is gone. I agree with AM, the Fed has no exit. You've been warned.

FRBNY Negotiations?

"Internal documents provided to Congress shed further light on how the Federal Reserve Bank of New York [FRBNY] approached its unsuccessful and now controversial negotiations with large US and European banks for concessions in the bailout of [AIG]. ... James Bergin, the [FRBNY] lawyer, also wrote that 'we've given up on concessions' and banks would be compensated for full value of assets they insured with AIG in exchange for cancelling contracts written on them. ... [FRBNY] officials felt that their power existed to keep institutions safe, not to get a better deal for the government, and requiring firms to take losses would have eroded certainty in a broad array of insurance contracts, further damaging AIG when it was already being propped up by the government", my emphasis, Serena Ng & Michael Crittenden (N&C) at the WSJ, 25 January 2010, link:

"'There were too many people involved in the deals ... to keep a determined Congress from the information,' a New York Fed in-house lawyer James Bergin wrote to a colleague on March 6, 2009. ... Mr. [Henry] Paulson in prepared testimony said he believes that he, Mr. Geithner and Fed Chairman Beb Bernanke 'acted properly and in the best interests of our country.' He said he was 'confident' that the congressional review would show 'they sought to make appropriate decisions.' ... Staffers within the [FRBNY] have been taken aback by the recent assault on their decisions. 'We did everything we could for the right reasons. We were living in our offices, sleeping on the floow and trying to get through this financial crisis,' said Thomas Baxter, the [FRBNY's] general counsel, in an interview this week. ... Another downgrade would force AIG to pay out billions more to the counterparties and could give banks the right to terminate contracts and keep the collateral--moves that would likely send the insurer spiraling toward bankruptcy. On Nov. 5., the [FRBNY] received a presentation, a 44-page analysis put together by a unit of BlackRock Inc., saying that the banks had significant bargaining power with AIG and had little incentive to cancel the contracts unless they received par, or 100 cents, on the dollar", my emphasis, N&C at the WSJ, 27 January 2010, link:

Quoted without comment.

BlackRock again? What nonsense. Would Vampire Squid (VS) have preferred all of its AIG dealings to have been exposed in bankruptcy court's public forum? VS had no leverage to do anything. I'm sure everything he did was "appropriate" from the VS's perspective.

Wednesday, February 10, 2010

Fisher's Folly

"The behavior of Congress this week, however, has added another obstacle to our economic recovery: The risk that elected officials will now politicize the [Fed] and compromise its independence. ... The impulse to use Mr. Bernanke as a political punching bag raises the specter that, instead of doing the right thing, Congress may seek to pressure the Fed to print its way out of this crisis. We know from history that when fiscal authorities attempt to monetize their debts, the result in inevitably inflation. ... Other congressional initiatives put forward would make the presidents of the country's 12 Federal Reserve banks--and even the chairman of their boards--subject to presidential appointment and Senate confirmation. ... We are hired and fired by nine-member boards of directors that represent the financial institutions and stakeholders of our respective districts. ... In my capacity as president of the Dallas Fed, I represent Main Street--not Wall Street", my emphasis, Richard Fisher (RF) at the WSJ, 26 January 2010, link:

"[RF] raises important issues regarding efforts by some to influence [Fed] policy ... . But he must understand the political backlash against the central bank is partly of its own making. ... Ben Bernanke ... has given the appearance of making the Fed a division of the Treasury. That has politicized the Fed more than anything its critics could do. The only protection from political interference is a monetary rule. The gold standard was one such rule", Gerald O'Driscoll letter to the WSJ, 30 January 2010. Mr. Fisher indicates that he doesn't know that the Fed is already politicized", Don Crook letter to the WSJ, 30 January 2010, link:

RF is Dallas Fed president. This is nonsense. Congress created the Fed and can kill it. RF talks of "independence". From who? For what? "Nine-member boards of directors" hire and fire Fed heads. Do the Fed heads "represent the financial institutions ... of their respective districts"? Who represents the public? Kill the Fed.

Yes O'Driscoll and Crook.

Remake the SEC?

"To protect the financial system from the next potentially toxic innovation or the next Bernard Madoff, the [SEC] has turned to a college professor who warned back in 1993 that derivatives could cause major financial problems for financial firms. ... 'It's the low-probability catastrophic event that can kill a bank,' said [Henry] Hu in an interview. ... But the professor's out-of-the-box thinking is what attracted SEC Chairman Mary Schapiro to recruit him to run the agency's first new division in 37 years. ... His job, she said in an interview, is 'to help us really rethink risk management and help us attract different skill sets to the agency as we try to remake the organization.' ... In the back of everyone's mind are the twin breakdowns at the SEC that emerged in 2008. The agency was caught flat-footed in oversight of Wall Street firms that made risky bets on mortgage securities and missed the decades-long Madoff fraud. ... Mr. Hu is also advising Ms. Schapiro as the SEC plans for a possible regulatory overhaul by Congress that would give it more power to regulate derivatives. Mr. Hu is pushing for strong steps, saying the legislation should 'prevent a gaming of rules that really should apply to everybody.' ... When financiers dream up new products, he wrote, they have an incentive to downplay the risks and use them to generate short-term profits--as well as big bonuses", my emphasis, Kara Scannell at the WSJ, 25 January 2010, link:

Even when the SEC appears to do right, I've learned don't trust it. Does anyone remember Howard Rubin's $377 million 1987 bath at Merrill Lynch? Why didn't the SEC learn from it? What's happening here? The SEC is bringing Hu aboard to "expert up" in its turf war with other federal regulatory agencies to determine which will regulate derivatives. I don't favor their regulation! Make it a felony for an institution holding federally insured deposits to use or issue derivatives. Further, no FDIC-insured institution should be permitted to lend to an entity using derivatives. If say, a Barrick wants to borrow money, let it issue bonds or commercial paper. Disagreeing with professor Hu, it's not the "low-probability catastrophic event that can kill a bank". It's the event whose probability is unknown. No economic event's probability is known ex ante. It is hubris to think otherise.

Tuesday, February 9, 2010

Odd Hobby

"I have an odd hobby--namely, collecting terrible ideas intended to solve our educational woes. Most, I admit, are pretty run-of-the-mill, but a few are truly museum quality. ... An especially promising candidate for curator acquisition is the proposal that first-rate teachers should be encouraged or even forced to ply their trade in bad schools so as to uplift struggles. This cure' is a permanent no-brainer item on today's reform menu. ... And what was it about these shunned schools that made them so unattractive to superior teachers? These schools, according to [Nancy] Schwartz, suffered from poor leadership or a poor professional culture. Send in the A-team to fix the culture, and test scores will climb. Unfortunately, this glittering solution fails to survive even the most rudimentary inspection. Experts like Nancy Schwartz totally ignore ccost accounting. ... That is, the anticipated uptick in, say remedial arithmetic at Hobbes will outweigh a possible decline on advanced calculus for the Einstein nerds. Schwartz also glibly assumes that the financial incentives necessary to entice gifted teachers represent the superior allocation of scarce resources (opportunity costs). Conceivably, but not acknowledgewd , the bribe money might be better spent on, say, smaller clasess or better remedial coursework; and taken as a whole across every school district in America, this shifting of resources yields a net loss, In any case, calculating gains or losses is extremely complicated, and Ms. Schwartz and her minions seem oblivious to the obligation. ... If this interchangability of human talent theory were correct, then the massive court-ordered racial integration schemes of the last forty years should have long ago narrowed educational gaps. Instead, they have clearly failed. This was the 'hostage theory' of racial integration--transfer underachieving blacks from resource-starved schools with poorly trained teachers so superior whit teachers would be 'forced' to educate the new arrivals. ... These 'most in need' schools are typically physically dangerous, especially for women, and with talented teachers always in demand, why risk life and limb for a modest 'combat pay' bonus? ... This racial element in discouraging top teachers to relovate to under-performing school (which are usually black or Hispanic) is the truth that dare not speak its own name. ... If sending the best to the worst becomes official policy and includes coercive measures, educational disaster is inevitable. Skilled teachers will shun school districts with large minority populations lest they get conscripted for troubled, possibly life-threatening schools", Robert Weissberg (RW) at American Thinker, 20 January 2010, link:

When you don't know what you are talking about, deliver platitudes like CPAs "Tone at the top" or "Internal Control Environment". RW notes shifting "better" teachers to heavily NAM schools to improve them is reminiscent of the 1960s' "skip zoning" concept. Good luck. What is an under-performing school anyway, my 18 September 2008 post:

WSJ Slips Up

"America's population growth makes it a notable outlier among the advanced industrialized countries. The country boasts a fertility rate 50% higher than that or Russia, Germany or Japan and well above that of China, Italy, Singapore, North Korea and virtually all of eastern Eurpoe. Add to that the even greater impact of continued large-scale immigration to America from around the world. By the year 2050, the US population will swell by roughly 100 million, and the country's demographic vitality will drive its economic resilience in the coming decades. This places the US is a radically different position from that of its historic competitors, particularly Europe and Japan, whose populations are stagnant. The contrast between the US and Russia, America's onetime primary rival for world power, is particularly dramatic. ... Today, even with its energy riches, Russia's low birth and high mortality rates suggest that its population will drop to less than one-third of that of the US by 2050. Russian Prime Minister Vladimir Putin has spoken of 'the serious threat of turning into a decaying nation.' ... The differing demographic trajectories create a diverse set of issues for 21st-century American than those facing its rivals. The key challenges the European Union, Japan and Korea will contend with in the coming decades involve coping with a rapidly aging population, filling labor shortages and finding ways to invest in growing economies. In contrast, the US's greatest priority will be to create opportunities for its ever-expanding population. ... Entrepreneuralism and America's flexible business culture--including the harnessing of entrepreneurial skills of aging baby boomers--will be critical to meeting this challenge. ... You can see this in the resurgence of once-declining Great Plains cities like Fargo, ND, where high-tech now joins agriculture and manufacturing to form one of the country's strongest local economies. Or you can visit the emerging immigrant hotbeds, such as the San Gabriel Valley east of Los Angeles or the Sugarland area, just west of Houston, withg their plethora of new churches, temples, companies and ethnic shiopping malls. ... The millennials also will help shape an increasingly culturally diverse Amerca which by 2050 will be roughly half made up of ethnic minorities. This emerging post-ethnic future contrasts dramatically with the ethnic politics common among the nation's chief global rivals. ... The very diversity of the emerging America makes many wonder what ultimately will hold the country together", my emphasis, Joel Kotkin (JK) at the WSJ, 23 January 2010, link:

The pro-immigration WSJ outdid itself here. To answer one of JK's questions, the US likely will fall apart as Igor Panarin wrote, my 11 January 2009 post:
America's growth is no outlier compared to third world countries. The 2050 US of 408 million, will include about 125 million Hispanics. JK's growth is not the US's, but Mexico north of the Rio Grande. Look at what "growth" did to California since 1970. "Demographic vitality", means what? Look at say Santa Ana, CA. Is it a vital enough city? The San Gabriel Valley and Sugarland are both full of NAMs, largely Chinese, not Mexican! If you want some wonderful Chinese seafood, go to Monterey Park, CA. Why worry about finding an increasing population jobs? Why let it increase? American Caucasians total fertility rate is about 1.85, higher than Russia, but less that the 2.11 "replacement level". What is JK talking about? JK's choice of Fargo is revealing. Fargo is 94% Caucasian reports Wikipedia. Am I racist to note that? I agree, JK, the US now has a new group of peer countries: Mexico, Argentina, Somalia and Afghanistan.

Monday, February 8, 2010

Blackwater's Black Hats-2

"The scandal is that the [DOJ's] case against five former security guards for the military contractor unravelled late last week in what appears to be another instance of gross prosecutorial misconduct, as abusive Justice lawyers went after an unsympathetic political target. ... Because of prior contact with the compelled statements, the [DOJ's] entire criminal division had recused itself from the case, which was handed over to national-security prosecutors and later to Assistant US Attorney for the District of Columbia, Kenneth Kohl. ... The judge goes on to say that Justice's 'inconsistent, extraordinary explanations' for its conduct 'smack of post hoc rationalization and are simply implusible,' and ultimately 'lacking in credibility.' ... Something is rotten in the culture of Justice, leading ambitious government crusaders to think they can get away with flouting due process when the political winds are blowing hot", WSJ editorial, 4 January 2010:

The DOJ prosecutors must have thought they were operating under Iraqi criminal procedure. They apparently didn't realize they are still in the US. This case stank.

UBS Deal Collapses?

"A Swiss court ruled Friday that Swiss authorities may not disclose the account details of a wealthy American who used UBS's private bank to evade American taxes. The ruling, by the Swiss federal administrative court, threatens to open fresh legal challenges from American prosecutors of the Swiss banking giant UBS in what has become a protracted dispute between the two countries. It threatens to topple an agreement reached last August between Switzerland and the [DOJ] that requires Swiss tax authorities to disclose to the [IRS] the names of 4,450 American clients of UBS suspected of evading [US] taxes. ... Should the suit be revived, it could also jeopardize a separate deal last February in which UBS averted indictment by agreeing to pay $780 million to the [US] government and admitting criminal wrongdoing in the offshore private banking services it sold to wealthy Americans. ... In a statement, the IRS said Friday that 'We have every expectation that the Swiss government will continue to honor the terms of the agreement.' ... Friday's ruling is the second by a Swiss court to challenge the disclosure of client names. On Thursday, Swiss regulators said they would appeal a separate ruling by a Swiss court that said the Swiss regulators broke secrecy laws when they authorized UBS to hand over the names of 255 clients as part of the $780 million deal last February. The Swiss regulatory agency, Finma, said Thursday that it handed over the names because the possibility of an indictment of UBS 'would have threatened its existence'," Lynnley Browning (LB) at the NYT, 23 January 2010, link:

"The Swiss government on Wednesday backed off an agreement with the [US] that required it to hand over the names of wealthy American clients of the Swiss bank UBS who were suspected of tax evasion. ... The Swiss cabinet said it might put the disclosure of the names up for approval before the Swiss parliament--but only if if received detailed information from the [IRS] on how many UBS clients had come forward under a voluntary disclosure program that ended in November. ... IRS officials said Wednesday that Switzerland needed to hew to the August deal. 'We expect the Swiss government ot continue to honor the terms of the agreement,' the agency said in a statement. The [DOJ] declined to comment. ... Kevin E. Packman, a tax lawyer at Holand & Knight in Miami, said that the Swiss courts 'have put UBS and, so some extent the Swiss government in an uncomfortable position. I suspect that if the courts don't cooperate with the government to find a solution, things are going to get really ugly for UBS", LB at the NYT, 28 January 2010, link:

The Swiss buckle to the IRS, when they wouldn't to Adolph Hitler. Wow. That's clout. The Swiss should have told the IRS, "Indict UBS. Fair enough. We'll indict Citigroup and raise you a Vampire Squid (VS). Your turn".

No problem. Invade Switzerland! Wait, even Hitler didn't do that. I have a better idea for the Swiss. Threaten to indict Citigroup and VS for violating Swiss banking laws. I'm sure if the Swiss regulators look, they'll find something.

Sunday, February 7, 2010

Fed Rift?

"New documents submitted to Congressional investigators examining the 2008 rescue of the [AIG] show that officials at the [Fed] were deeply divided over the structure of the bailout and its long-term implications. At the same time, regulators had to contend with major banks that were AIG's trading partners and were unwilling to accept a discount from the government when closing out the contracts the banks had struck with the insurance giant. ... The Fed's decision to pay AIG's trading partners in full on tens of billions of dollars in contracts has been controversial because many analysts say they believe the government could have negotiated a price for a fraction of that amount, reducing taxpayer funds used in the rescue. Similar contracts were being settled at heavy discounts in other deals where the government was not involved. ... 'We asked for concessions, and they said no,' according to the notes. 'I wonder why we even bothered.' Mr. [Thomas] Baxter also said that Mr. [Timothy] Geithner verbally approved the decison to pay full price to the banks. ... According to a 13-page slide show prepared by the asset management firm BlackRock that was submitted to the committee, Merrill Lynch [ML] and French bank, Societe Generale, were 'resistant to deep concessions' on their AIG contracts. Goldman Sachs, another trading partner, was willing to accept only 'a small concession' on its contracts", my emphasis, Louise Story and Gretchen Morgenson at the NYT, 23 January 2010, link:

This is laughable. Imagine Vampire Squid (VS) told the Fed what it would accept. How many divisions has VS? Kill the Fed. Roll out that CNC guillotine and set it to work in front of 85 Broad Street. The correct response Zimbabwe Ben (ZB) was, "Well VS, ML recently settled some CDOs for 22 cents on the dollar. If you want more, put AIG's CDOs up for bid. By the way, I prepared a press release of the substance of your demands. If you do not do as you were told, I will hold a press conference at 9:00 AM tomorrow morning and tell 306 million Americans of your demands. What will you do if they respond and within 48 hours our 535 legislators are hit with 50 million e-mails and faxes saying "No bailout. No hell no way"? ZB isn't evil. Just cowardly. Now ZB, do us a favor, return to Princeton, play pinochle with Krugman and Blinder and leave us peasants alone. You are less capable negotiating with the VS than a 42nd Street three-card monte dealer. "Divided over ... implications"? How incompetent are the Fed's economists? "Unwilling to accept a discount"? When the alternative was AIG's bankruptcy? In July 2008 ML sold some CDOs for 22 cents on the dollar. ZB should have told ML, "The burden is yours. Why are the AIG CDSs worth more? Make me a believer. Show me"!