Jesse's Question

Jesse at Jesse's Cafe Americain asks, "Who is buying all these US Treasuries (and can they keep it up in 2010)"?, 24 December 2009, link: http://jessescrossroadscafe.blogspot.com/2009/12/who-is-buying-all-these-us-treasuries.html.

Good question Jesse. And Merry (belated) Christmas. I'll answer a different question: Who shouldn't buy Treasuries? Answer: you!

Spitting in Russia's Face

"Why is it that NATO makes and breaks promises to Russia, encircles Russia by arming regimes which are hostile to Moscow after promising not to, and then asks for Russia's help when it gets itself into trouble? ... On the table is apparently the subject of logisitical support for NATO operations in Afghanistan, where after 8 years, casualties are at record levels and vast swatches of the country are under permanent control of the Taliban at a total cost to date of [$231.6 billion], ... where Hamid Karzai's government resembles a gaggle of gangsters and where ten per cent of the Pentagon's spending is paid to fund the Taliban not to attack. ... So after promising Russia time and time again that NATO would not expand eastwards if the Warsaw Pact were to be dismantled, then promptly placing its hand round Russia's throat with NATO presence along the northern and western borders, and then courting Georgia, whose regime launched a criminal and murderous savage cowardly and under-handed attack against Russia last Summer, Russia is now expected to help", Timothy Bancroft-Hinchey at Pravda, 17 December 2009, link: http://english.pravda.ru/russia/politics/111219-russianato-0.

What's going on here? I agree with Pravda? I again endorse Putin for President. Obama, step aside.

Encouraging Zimbabwe Ben

"There's a good chance that unemployment will rise, not fall, over the next year. But even if it does inch down, one has to ask: Why isn't the Fed trying to bring it down faster? ... You can't just look at the 8 million jobs that America has lost since the recession began, because the nation needs to keep adding jobs--more than 100,000 a month--to keep up with a growing population. And that means that we need really big job gains, month after month, if we want to see America return to anything that feels like full employment ... So if we're going to have any real good news, someone has to take additonal responsibility for creating a lot of additonal jobs. And at this point, that someone almost has to be the [Fed]. ... Joseph ... Gagnon urges the Fed to expand credit by buying a further $2 trillion in assets. Such a program could do a lot to promote faster growth, while having hardly any downside. So why isn't the Fed doing it? ... Meanwhile, a significant number of Fed officials, especially at the regional banks, are obsessed with the fear of 1970s-style inflation, which they see lurking just around the bend even though there's not a hint of it in the actual data", my emphasis, Paul Krugman (PK) at the NYT, 11 December 2009, link:

http://www.nytimes.com/2009/12/11/opinion/11krugman.html.

PK resurrects the Phillips Curve here. If Uncle Miltie proved anything it is: inflation is always a monetary phenonenom. PK wants Zimbabwe Ben (ZB) to double the monetary base again, which ZB more than doubled over the last 18 months! If you have US dollar bonds, sell. Imagine, PK holds a Nobel Prize. What a farce. PK, why is the US population growing? Could the US reduce its population growth? Hint: end illegal immigration.

Duke Discovers High IQ!

"You might think that a university whose students were victims of the most notorious fraudulent rape claim in recent history, and whose professors--88 of them--signed an ad implicity presuming guilt, and whose president came close to doing the same would have learned some lessons. ... They also suggest that Duke University's ugly abuse in 2006 and 2007 of its now-exonerated lacrosse players--white males accused by a black stripper and hounded by a mob hewing to political correctness--reflects a disregard of due process and a bias against white males that infect much of academia. ... Meanwhile, none of the 88 guilt-presuming professors has publicly apologized. ... And Ada Gregory, director of the Duke Women's Center, said that 'higher IQ' males, such as those at Duke, could be 'highly manipulative and coercive.' ... The disciplinary rules deny the accused any right to have an attorney at the hearing panel or to confront his accuser. The rules also give her--but not him--the right to be treated with 'sensitivity'; to make opening and closing statements; and to receive copies of investigative documents. ... Also in 2007, Chicago gave an endowed chair to Charles Payne, who as Duke's chairman of African and African-American studies had inappropriately authorized use of university funds to pay for the Group of 88 ad. ... Try imagining a white male professor who had smeared innocent black students enjoying a similar path of advancement in academia today", Stuart Taylor at National Journal, 19 December 2009, link: http://www.nationaljournal.com/njmagazine/print_friendly.php?ID=or_20091219_1261.

Indeeed. The Left discovers IQ when it applies to white males who may be manipulative. Might this also apply to Duke's female students? Or its professors? Duke has become an academic travesty. Chicago should be ashamed of itself for picking up a clown like Payne.

Asking Stanley

"But not a single lawmaker appers to have ventured one question about these dangerously disarming ROEs, which in Gen. McChrystal's controversial view, are key to the success of his 'counterinsurgency' strategy. What kind of a commander puts his forces' lives at risk for a historically unsuccessful theory that depends not on winning battles against enemies, but on winning the 'trust,' or as we used to say (and as Gen. David Petreus put in in Iraq), the 'hearts and minds' of a primitive people immersed in the anti-Western traditions of Islam. ... How long does Gen. McChrystal think troops can hold their fire and maintain healthy morale? And how about a progress report on the investigation into that deadly disaster at Ganjgal? Congress wasn't interested in any of these questions. ... Final question: Are such leaders, civilian and military, doing their duty when they send the nation to war with a strategy that totally ignores jihad, the war doctrine of the enemy", Diana West at Townhall, 12 December 2009, link:

http://townhall.com/columnists/DianaWest/2009/12/11/questions_no_one_wants_to_ask_gen_mcchrystal.

Stanley is to warfighting as Zimbabwe Ben (ZB) is to central banking. No less an "expert" than Time said so. Time's 28 December 2009 issue has ZB as man of the year. Stanley was first runner-up. I kid you not.

Why Only 5-4?

"Virginia Hernandez Lopez admitted to knocking back two shots of tequila with Sprite chasers on an August night in Julian, Calif., a couple of years ago. But she said she was not drunk when her Ford Explorer collided with an oncoming Toyota pickup truck later that night, killing the driver. In May, a California appeals court affirmed Ms. Lopez's conviction for vehicular manslaughter. Her blood-alcohol level two hours after the accident was, according to a report presented to the jury, just over the legal limit of .08 percent. But the appeals court reconsidered the case after a decision in June from the [US] Supreme Court that prohibited prosecutors from introducing crime lab reports without testimony from the analysts who prepared them ... But now, in an unusual move, the Supreme Court will hear arguments on Jan. 11 in a new case that raises questions about how lower courts may carry out its six-month-old precedent. Many state attorneys general and prosecutors are hoping the court will overrule its decision in the earlier case, Melendez-Diaz v. Massachusetts, before it can take root, saying it is a costly, disruptive and dangerous misstep. ... Since the Melendez-Diaz case, the State of Massacusetts told the [US] Supreme Court last month that it now faces 'daunting volumes of cases to manage'," my emphasis, Adam Liptak at the NYT, 20 December 2009, link: http://www.nytimes.com/2009/12/20/us/20scotus.html.

This is a disgrace, the case should have been a 9-0 no-brainer. The Sixth Amendment seems clear enough to me. Prosecutors don't like having their "oath helpers", sorry, "experts" cross examined. Why? "Costly, disruptive and dangerous" boo-hoo. No one should believe anything a prosecutor's expert says. Roberts and Alito apparently have reading comprehension problems. But they went to Ivy League law schools. So did Obama. Hahahahahahaha.

Jakarta On the Hudson

"They have long worked illegally in the shadows of Indonesia's police stations, attorney general's office and courts, the common link in what is called Indonesia's 'judicial mafia.' Called 'markuses,' they are middlemen who can persuade corrupt police officers, prosecutors and judges to drop a case against a client for the right amount of money. ... President Susilo Bambang Tudhoyno said he would make eradicating the judicial mafia of markuses and corrupt officals a priority of his second term. ... But lawyers, officials and watchdog groups warn that uprooting the so-called judicial mafia wll require an overhaul of the country's law enforcement and justice systems. They say that Mr. Yudhoyno, who shies away from confrontation, is unlikely to push through changes inside the nation's powerful police force, attorney general's office and courts, institutions that are considered among Indonesia's most corrupt. ... Kuntoro Mangkusubroto [KM], the leader of a new presidential task force to reform the justice system, said Indonesia's criminal justice system was fertile ground for middlemen representing moneyed clients. 'We want to have a system that is fair for everybody, not dependent on whether he or she has power or money,' [KM] said in an interview, adding that cleaning up the current system would take years. ... Last month, wiretapped conversations revealed a plot by a prominent businessman, along with police officials and prosecutors, to fabricate a case against officals at the Corruption Eradication Commission, the nation's chief anticorruption agency. ... What shocked most Indonesians was not the brazenness of the speakers but the fact that the practices mentioned in the wiretaps seemed routine. By contrast, Indonesians without money have seemed increasingly at the mercy of a legal system that metes out severe punishment for seemingly harmless offenses. ... In dealing with the police, the markuses--who are typically relatives of police officials, lawyers, journalists or anyone with contacts in law enforcement agencies--bribe police officials on behalf of a client in trouble with the law. With money, they persuade the police to change evidence or drop a case, according to watchdog groups, police officials and lawyers. ... So far, attempts to reform or monitor the police, prosecutors and judges have been largely cosmetic, experts say. ... Indonesia's Supreme Court, which oversees the conduct of all the nation's courts, has mostly ignored the commission's recommendations, choosing instead to protect colleagues, Mr. [Busyro] Muqoddas said", my emphasis, Norimitsu Onishi at the NYT, 20 December 2009, link: http://www.nytimes.com/2009/12/20/world/asia/20indo.html.

Welcome to Jakarta on the Hudson. Look at some of the sweetheart deals we've seen: Ashcroft, Deloitte, Debevoise, my 31 December 2008 and 17 May December 2009 posts, links: http://skepticaltexascpa.blogspot.com/2009/05/ashcroft-exposed.html http://skepticaltexascpa.blogspot.com/2008/12/justice-department-extortion-racket-4.html. US markuses are "former" SEC and DOJ officials. We do things differently here.

Another SEC Nothingburger

"In 2002, worried about growing financial scandals, the audit firm of Ernst & Young [E&Y] set out to identify its riskiest clients and force them to comply with accounting rules. The effort backfired. On Thursday, the firm agreed to pay an $8.5 million fine to the [SEC] for its work in auditing the books of Bally Total Fitness. The firm agreed to an order that it cease and desist from violating securities laws. ... 'It is deeply disconcerting that partners, even at the highest levels of E&Y, failed to fulfill their basic obligations to the investing public by not conducting proper audits,' said Robert Khuzami, director of the SEC's enforcement division. 'This is a sharp reminder to outside auditors that they must carry out their duties with due diligence,' he added. The $8.5 million settlement, one of the highest ever paid by an accounting firm,' 'reflects the seriousness of their misconduct.' ... A veteran SEC official, speaking on condition he not be named because he had not checked records for the entire history of the commission said he knew of no previous enforcement cases in which a partner of a major firm was cited for his actions as head of a national office", Floyd Norris at the NYT, 18 December 2009, link: http://www.nytimes.com/2009/12/18/business/18audit.html.

Junior at Junior Deputy Accountant, 18 December 2009, notes, "shouldn't [E&Y] have already identified their riskiest clients": http://www.jrdeputyaccountant.com/2009/12/ernst-young-gets-its-audit-clients-in.html. Of course E&Y did. So? Who cares if a client is "risky"? I've never understood the concern. If a CPA knows what he is doing and is thorough, what difference does it make if a client is "risky"? The issue is: are you willing to tell the client, "go to hell. Take your business somewhere else". What E&Y calls "risky" clients are likely those E&Y knew had "cooked books" and E&Y lacked the cojones to "rat 'em out". Few if any clients are "risky" to a competent CPA, despite the nonsense the Big 87654 and academics peddle. This settlement is just part of the SEC's continuing Big 87654 protection racket.

This settlement is another joke. The SEC fined Joe Jett $8.4 million for complying with Kidder Peabody's accounting manual while E&Y pays $8.5 million. See my 12 September 2007 post on Jett and 20 February 2009 comments on Khuzami's appointment: http://skepticaltexascpa.blogspot.com/2007/09/gross-injustice.html and http://skepticaltexascpa.blogspot.com/2009/02/sec-at-large.html.

SEC Waivers

"Forget too big to fail. In the eyes of federal regulators, many Wall Street firms are too big to punish. ... Despite these findings, these financial giants got, sometimes repeatedly, special exemptions from the [SEC] that have saved them from a regulatory death penalty that could have decimated their lucrative mutual fund business. ... However, on Friday, the SEC said it has expanded its probe of Bank of America to include the bank's possible failure to disclose mounting losses at Merrill Lynch. ... While the companies were punished in other ways, they were spared from what some claimed would be 'severe and irreparable hardships.' In fact, the last time the SEC's staff could recall a waiver being turned down was 1978. The SEC, however, declined to comment in detail in its decisions. ... The Goverment Accountability Office, Congress' investigative arm, reported this year that SEC enforcement workers have felt overwhelmed by their caseloads and undermined by SEC leaders hesitant to levy heavy punishment. ... Securities experts think companies wouldn't apply for waivers if they didn't think their applications would be granted. At the same time, the fact that the SEC could someday deny one is a major weapon in its arsenal, experts said. ... In 2003, Citigroup settled a case after the SEC accused it of manipulating stock research. The settlement 'permanently restrained and enjoined' Citigroup from violating a specific section of federal securities laws. Then in 2006, Citigroup and other companies were cited for improperly marketing 'auction rate securities,' bonds issued by municipalities, student loan entities and corporations. The SEC censured Citigroup and fined it $1.5 million", Chris Adams at the Houston Chronicle, 14 December 2009, link: http://www.chron.com/disp/story.mpl/headline/biz/6768581.html.

$1.5 million for Citigroup and Craig Gile goes to prison, my 25 June 2008 post: http://skepticaltexascpa.blogspot.com/2008/06/citigroups-joe-jett.html. The SEC and SDNY US attorney's office are sick jokes. Some threat, that a waiver might be denied.

More Bank Accounting Flexibility

"Facing political pressures to abandon 'fair value' accounting for banks, the chairman of the board that sets American accounting standards will call Tuesday for the 'decoupling' of bank capital rules from normal accounting standards. His proposal would encourage bank regulators to make adjustments as they determine whether banks have adequate capital while still allowing investors to see the current fair value--often the market value--of bank loans and other assets. ... 'Handcuffing regulators to GAAP or distorting GAAP to always fit the needs of regulators is inconsistent with the different purposes of financial reporting and prudential regulation,' Mr. [Robert] Herz said in a prepared text. 'Regulators should have the authority and appropriate flexibility they need to effectively regulate the banking system,' he added. 'And conversely, in instances in which the needs of regulators deviate from the informational requirements of investors, the reporting to investors should not be subordinated to the needs of regulators. ... Mr. Herz said that Congress, after the [S&L] crisis, had required bank regulators in 1991 to use GAAP as the basis for capital rules, but said the regulators could depart from such rules", my emphasis, Floyd Norris at the NYT, 8 December 2009, link: http://www.nytimes.com/2009/12/08/business/08account.html.

The banks want "flexibility" to conceal insolvency. I'll say it: the PCAOB and Big 87654 either aid and abet securities fraud or are so incompetent they should be sent back to Accounting 101. These cowards sit and do nothing while insolvent entities like Citibank march on consuming public funds. Bank "regulators" conceal what they want. But the BIG 87654! I'm shocked. Like Captain Renault in "Casablanca", 1942, "Round up the usual suspects". That's it PCAOB, put obscure CPA firms out of business which audit less than $1 billion of client market cap. The appropriate response Herz was, "You regulators do what you want. But the FASB will not help you conceal what you are doing".