SEC vs. Cuban, Round 2

"Like the adage, 'beware of Greeks bearing gifts,' perhaps the [SEC] should consider whether to beware of litigating against billionaires. Its insider-trading suit against Mark Cuban, the billionaire owner of the Dallas Mavericks basketball team, has turned into a pitched battle that is being fouight in two federal district courts and one federal appeals court. ... Having won an order dismssing the SEC case against him in 2009, he did not simply take his ball and go home--especially after the commission appealed. Instead, Mr. Cuban went on the offensive. ... The legal fees in the various cases have undoubtedly exceeded the amount at issue [$750,000] in the insider-trading case. but this seems to more of a grudge match in which money is no object. ... Judge Sidney A. Fitzwater of Federal district Court in Dallas found that the SEC did not have the authority to adopt the rule and that the SEC had not alleged that Mr. Cuban agreed not to trade in the information while maintaining its confidentiality. ... Mr. Cuban's appellate brief argues that the SEC is improperly attempting to convert an alleged breach of contract into a federal securities fraud' because any agrrement he might have made did not impose an obligation to refrain from selling his shares. Without a fiduciary duty to Mamma.com, there can be no insider trading liability, despite the SEC's attempt to create one in Rule 10b5-2. ... Judge Fitzwater allowed discovery of the SEC' conduct in pursuing the case", Peter Henning at the NYT, 3 April 2010, link:

http://dealbook.blogs.nytimes.com/2010/04/03/mark-cubans-grudge-match-with-the-s-e-c/.

Go Cuban! The SEC has shown time and time again, it cannot, or will not, distinguish breach of contract from securities fraud cases. It has also been vindicative to those who expose its incompetence, ever since 1973's Ray Dirks fiasco.

More WSJ Propaganda

"The [Fed] has acquired more than $1 trillion of mortgage-backed securities in the past 15 months. At their policy meeting next week, Fed officials will decide how and when to get rid of them without jarring financial markets and the nascent economic recovery. ... The more challenging issue will be agreeing on a long-term plan to shrink a balance sheet of $2.38 trillion, or more than double the pre-crisis levels, according to Fed insiders. ... It is also possible that the Fed won't signal its intentions on the matter in its post-meeting statement on Wednesday. But markets are on edge because its mortgage-bond holdings are so large. ... Fed staff next week will present models to forecast how different approaches to reducing the portfolio might play in markets. ... But Fed Chairman Ben Bernanke made his preferences clear. 'I currently do not anticipate that the [Fed] will sell any of its security holdings in the near term, at least until after policy tightening has gotten under way and the economy is clearly in a sustainable recovery,' he said in February testimony before Congress", Jon Hilsenrath at the WSJ, 24 April 2010, link:

http://online.wsj.com/article/SB10001424052748704388304575202413074193720.html.

When will Zimbabwe Ben (ZB) sell these fine securities? Try 2110! This is just more Fed smoke screening. If ZB sells this crap, it's true value might be exposed along with the Fed's insolvency.

Go Blago!-2

"With his trial on corruption charges weeks away, former Illinois Gov. Rod Blagojevich [Blago] sought an unusual witness for the defense: President Barack Obama. ... Spokesmen for the White House and federal prosecutors declined to comment. ... At a news conference this week, he called US Attorney Patrick Fitzgerald a coward. Mr. Fitzgerald brought the corruption charges against [Blago]. ... Mr. Obama has said no representative of his had anything to do with the alleged deals for the Senate seat, according to the motion. [Blago] argues that those statements 'contradict the testimony of an important government witness'," Douglas Belkin & Joe Barrett at the WSJ, 23 April 2010, link:

http://online.wsj.com/article/SB10001424052748703876404575200322230424714.html.

"[Blago] finally made good on a promise. He put President Barack Obama right in the middle of [Blago's] own political corruption case. And now it's finally clear why, from the moment of [Blago's] arrest in December 2008, White House spinners loudly portrayed our former Gov. Dead meat as some drooling, raving lunatic. ... But raving lunatics care little for their own survival. And in an amazing defense motion filed Thursday, [Blago] proved once again that he is quite sane. ... Obama's former patron and real estate fairy, the convicted influence peddler Tony Rezko, is a key player in the government's case. [Blago's] aim is to undercut what Rezko has told investigators. ... It is no secret that some in journalism get offended when anyone dares mention that the president was involved in Chicago politics. But the filing is not only a legal document, it's a political message from [Blago] to Obama. So allow me to translate the Chicago Way. 'Dear Barack, my old friend. I want you to use all your powers, all your skills, to make me an offer I can't refuse. I'm Mr. Celebrity-get-me-out-of-here, and you better get me out of here. Thanks, Rod.' ... US District Judge James Zagel surely isn't happy", John Kass at the Chicago Tribune, 23 April 2010, link: http://www.chicagotribune.com/news/columnists/ct-met-kass-friday-20100423,0,983180.column.

Obama can voluntarily appear and potentially look bad. Or he can resist appearing and look worse. Apparently, Obama chose the latter course.

Who does Obama think he's fooling with? Terry Hodge, my 5 March 2010 post; http://skepticaltexascpa.blogspot.com/2010/03/two-state-legislator-criminals.html. My translation of Blago's action adds, "Or else you can follow Richard Nixon. I know where the bodies are buried."

Khuzami and and CDOs

"[SEC] enforcement chief Robert Khuzami oversaw a group of lawyers at his old firm, Deutsche Bank AG [DB], that was closely involved in developing collateralized debt obligations, the same product in the agency's fraud lawsuit against Goldman Sachs Group In., according to people familiar with the matter. ... As part of that job he worked with lawyers who advised on the CDOs issued by the German bank and how details about them should be disclosed to investors. ... Liek Goldman, [DB] has faced allegations of inadequate control over its creation of CDOs. It isn't clear if Mr. Khuzami personally reviewed any sturctured-finance deal documents in his role at the bank, and outside law firms were also involved in CDO work. ... Because of Mr. Khuzami's old job and his financial interest in the company, he has recused himself from any matters related to [DB], according to an SEC spokesman. ... SEC officials say Mr. Khuzami's resume is a nonissue, adding thjat the agency will go after illegal conduct wherever it occurs. ... Mr. Khuzami has vowed to pursue wrongdoing against Wall Street firms in high-profile areas such as subprime mortgages and CDOs. ... Mr. Khuzami is the first SEC enforcement director in recent history to come directly from an investment bank. ... Some securities lawyers say Mr. Khuzami's high-level position at [DB] could have given him insight into structured-finance products, an area where the SEC has been criticized for a shortage of expertise", Aaron Lucchetti & Kara Scannell at the WSJ, 24 April 2010, link: http://online.wsj.com/article/SB10001424052748704388304575202562283283500.html.

Khuzami's appointment did nothing for me. It still doesn'. See my 20 February 2009 post:

http://skepticaltexascpa.blogspot.com/2009/02/sec-at-large.html.

What 13th Amemdment?

"In October 2008, polls showed that the majority of the American people, 56 percent, were opposed to the $700 billion TARP bill that funded the bank bailouts at the cost of $2,334 to each and every 300 million of them. ... Unlike the unfortunate Americans, the people of Iceland were given the chance to exert their will directly on a similar banking bailout in the form of a referendum. As the US Congress had done before them, the politicians in the Icelandic parliament approved legislation covering the losses of a private Icelandic bank, a bill that would have cost every Icelander $16,400. But thanks to the brave resistance of their president, the Icelandic people took full advantage of their more democratic system to vote down the Icesave bailout on March. A full 93 percent of them voted against handing over $5.3 billion, nearly half their annual GDP, to repay the Dutch and British governments ... President Grimsson is the first true hero of the current financial crisis, which is far from over regardless of how many economic green shoots are spotted by keen-eyed central bankers or created by governement statisticians. In direct contrast to John McCain and Barack Obama, who didn't hesitate to throw over the American people on behalf of the bankers, President Grimsson personally intervened in the political process and, by forcing the referendum, gave the Icelandic people the opportunity to make a genuinely democratic decision on their financial future. ... It should be clear that what is much more dangerous to the economy of Iceland and every other country in the world is a political system that permits politicians such as Haarde, Sigurdardottir, Sigfusson, Brown, Bush, McCain and Obama to turn entire nations into unwilling serfs of a small number of short-sighted and woefully incompetent bankers. There is no one road to serfdom, and given their woeful performance over the last five decades, it would appear that the banking oligarchy would make for a de facto ruling class that is even less effective than the communist apparachiks, fascist bureaucrats, inbred aristocrats and clueless kings who preceded them", Vox Day at World Net Daily, 8 March 2010, link: http://www.worldnetdaily.com/index.php?pageId=127206.

Well said Day. Eventually we will have an American president who is not owned by the banksters. When he is elected, woe to them.

Good Question Pat

"With the support of 70 percent of its citizens, Arizona has ordered sheriffs and police to secure the border and remove illegal aliens, half a million of whom now reside there. ... 'We in Arizona have been more than patient waiting for Washington to act,' said Gov. Jan Brewer. 'But decades of inaction and misguided policy have created an unacceptable situation.' ... Barack Obama ... is siding with the law-breakers. He is pandering to the ethnic lobbies. He is not berating a Mexican regime that aids and abets the invasion of the country of which he is commander in chief. Instead, he attacks the government of Arizona for trying to fill a gaping hole in law enforcement left by his own deriliction of duty. ... He has called on the Justice Department to ensure that Arizona's sheriffs and police do not violate anyone's civil rights. But he has said nothing about the rights of the people of Arizona who must deal with the costs of having hundreds of thousands of lawbreakers in their midst. ... The state has a fiscal crisis caused in part by the burden of providing schooling and social welfare for illegals and their families, who consume far more in services than they pay in taxes and who continue to pour in. Even John McCain is now calling for 3,000 troops on the border. ... If Arizona does not get control of the border and stop the invasion, US citizens will stop coming to Arizona and will begin to depart, as they are already fleeing California. ... Whose country is this, anyway?," Pat Buchanan at Vdare, 26 April 2010, link:

http://www.vdare.com/buchanan/100426_whose_country.htm.

Well said Pat. As far as Obama is concerned, non-Minority Americans are just cows to be milked for money to be given to "his" people.

CPAs and the F-22

"The debate over the F-22 Raptor has been carried out at the customary level of simplemindedness we've become used to with Congress handling military questions. Since the early 60s, the favored method of killing a military program has been to come up with an argument easily expressed in a sound bite and stick with it. This time, the sound bite was, 'Why do we need two fighter planes, anyway?' The answer is even simpler: we need two fighters because we need two fighters. The historical record clearly reveals this: every air campaign carried out with two distinct and particularly formulated fighter designs has been a success, and every attempt to do otherwise has resulted in disaster. US Air Force doctrine on fighter procurement is known as the high/low mix. The 'high' component consists of a dedicated air superiority fighter, utlizing the latest aeronautical technology, fitted with state-of-the-art electronics, and carrying the most advanced air-to-air weapons. These aircraft have one mission--to kill enemy airplanes. This is the paramount goal of a fighter force. Without it, nothing else can be accomplished. That being the case, the high-end fighter is the more expensive and complex part of the mix. They are rare assets, to be utlized accordingly. ... The swing-role fighter is cheaper and more easily and quickly constructed than its haughtier brother, so there tend to be larger numbers of them. The high-low mix was pioneered in WW II. ... Following the war, the high/low mix was carried on into the jet age. .... Together, the F-15 and F-16 stand as the most effective fighter team on record. ... To the battle cry of who needs two fighters anyway!' the US is dropping the high end of the equation--the F-22 Raptor--in the mistaken conviction that the low end--the F-35 Lightning II--can cover all the bases. ... Even as the F-22 debate winds down, Sukhoi, Russia's premier aircraft company, is preparing to produce its own fifth-generation fighter, the PAK-FA. ... The Russians and the Chinese, on the other hand, have a slaphappy habit of making more weapons than they actually need. Suppose, if things get hot, our 120 planes are facing 500, 1,000, or even more fifth-generation enemy fighters? ... American voters and politicians simply cannot grasp that actions taken today can have consequences years and decades down the line, and that, in a majority of cases, there will be no second chances", my emphasis, JR Dunn at American Thinker, 4 March 2010, link:

http://www.americanthinker.com/2010/03/vanishing_american_air_superio.html.

I agree with Dunn. What's most shocking is our SecDef's role in this. President Bush squandered real American assets in Iraq and Afghanistan, places of no strategic significance, as opposed to spending money to procure modern weapons and update our strategic forces. What stupidity. Analysis of military affairs is carried out at such a low level, even George Stephanapolous should be able to understand it. Or does he think it's not important enough to understand?

Even Bolton Wan't Say It

"Benjamin Netenyahu's first term as Israeli prime minister collapsed in 1999 in part because he had an unhappy relationship with President Bill Clinton. It is understandable then that Mr. Netenyahu's current government had, until last week, strived to stay close to President Barack Obama. ... But Mr. Obama is different. He is our first post-American president. He looks beyond American exceptionalism and believes our role on the world stage should be merely one nation among many. Mr. Netenyahu's strategy is therefore out-of-date and flawed. Israel has sought to accommodate Mr. Obama on two critical issues: negotiations with Palestinians and Iranian nuclear weapons. ... But now the suppressed conflicts and fully visible and will either be resolved or cause a serious collision between Israel and the US. ... Mr. Obama almost certainly believes that the real obstacle to peace is not new housing or unfortunate timing but so-called Israeli intransigence. ... As time passes, Israel's military option grows more difficult and the chances for succes shrink as Iran seeks new air-defense systems and further buries and hardens nuclear facilities. Mr. Netenyahu's mistake has been to assume that Mr. Obama basically agrees that we must prevent Iran from acquiring nuclear weapons. But the White House likely believes that a nuclear Iran, though undesirable, can be contained and will therfore not support using military force to thwart Iran's nuclear ambitions. ... We are moving inexorably toward, and perhaps have now reached, and Israeli crisis with Mr. Obama. American's must realize that allowing Iran to obtain nuclear weapons is empowering an existential threat to the Israeli state, to Arab governments in the region that are friendly to the US, and to long-term global peace and security", my emphasis, John Bolton at the WSJ, 17 March 2010, link:

http://online.wsj.com/article/SB10001424052748703734504575125433891508788.html.

Obama, who Michael Beschless said has an "IQ off the charts", pushes his policy in the hope Iran destroys Israel. Once Israel ceases to exist all Middle Eastern problems will be solved. I believe Obama believes this. I can't believe double-Ivy League Obama is so stupid he doesn't see where his policies are leading.

The Vampire Squid's Serfs

"Mike Mayo is a veteran of six Wall Street [WS] banks. In the wake of the street's disaster, he found refuge at a boutique brokerage and has lately taken to startling his peers with the question 'What part of Goldman Sachs is good for the country?' Regular people will be tempted to answer, 'None of it,' but the question reminds us that, at least in theory, [WS] serves society (not the other way around). And as opposed to Harrah's, Trump Casino and their ilk, [WS] is endorsed and regulated--with marked restraint--so as to let it perform an important task. Because some people have savings and others need capital, some unifying force must bring the two together. ... [WS] privatized this function, aggregating the savings of disparate individuals through the sale of stocks and bonds. ... These instruments, in the main, did not involve selling bonds so that a DuPont could build new factories; they were rearrangements--new permutations, new alignments of risk--on flows of cash that already existed. ... The point of these and many other new financial instruments was to charge a hefty fee and to furiously trade them, and no one was in a bettter position to do that than their [WS] creators. If trading was, for society, a zero-sum game (someone wins, someone loses), it was, for the street, a gold mine. ... For much of [WS], capital-raising is now a sideshow", Roger Lowenstein at the NYT, 21 March 2010, link: http://www.nytimes.com/2010/03/21/magazine/21FOB-WWLN-t.html.

Decades ago WS performed a useful service as a "dating service" for capitalists. Now by and large, it's just a big fee-generating paper shuffle.

Gold and Conservatives

"Within the American conservative movement, opponents of the gold standard--any form of gold standard--have always dominated the leadership. Newcomers may be unaware of this. ... Debates are usually limited to whether the FED is wise in holding to, or changing, the federal funds rate. Few readers of the '[WSJ]' or viewers of CNBC could tell you exactly what the federal funds rate is, why it is important, or how the [Fed] controls it. ... No one raises the fundamental issue of why and how it posses the legal authority to set the federal funds rate, enforce banking rules, and control the money supply--sort of. No one argues that the [Fed] is the most powerful private agency that is covered by a veneeer of public accountability. ... Ron Paul for the first time in American history made the [Fed] an issue in a Presidential campaign. He called for the re-establishment of the gold standard. ... The early years of the Great Depression were a time of monetary deflation. ... One economist who predicted this was Ludwig von Mises. he warned in the late 1920's about the coming contraction. He was opposed by an American economist, Irving Fisher of Yale, who announced a plateau for the American stock market in September 1929. ... Mises argued that the gold standard has arisen as a market phenomenon becasue gold is the most marketable commodity. ... In sharp contrast, Fisher in Chapter XII dismissed the gold standard as an historical accident. he said the gold standard would be difficult to dislodge, but someday people would abandon it. Why? Because gold 'is a substance, of which the supply is excessive.' The most famous advocate of Fisher's monetary theory was Milton Friedman. Through Friedman, the academic free market economics community became committed to fiat money after 1950. Friedman was the dominant free market spokesman after 1960. He held a position at the University of Chicago There was not a single gold standard proponent in the economics department in 1950 or later. ... Critics of the FED have long been segregated out of the movement by the leadership. ... Only in the last decade have pro-gold standard economists appeared on the scene through http://www.mises.org/. ... Friedman viewed gold as just another commodity. ... in 1986 ... [Freidman] admitted that his advocacy of a fixed rules for the expansion of central bank-created money had been a waste of time. Such restraint was not in the self-interest of central-banking officals. ... The [Fed] has been the problem ever since 1914", Gary North at Lew Rockwell, 25 February 2010, link:

http://www.lewrockwell.com/north/north817.html.

Chicago had no gold standard advocates when I was there in the early 1970s. If I recollect correctly, Uncle Miltie's gestalt was when he realized the Fed must lie to the public to influence the economy.