Monday, January 25, 2010

Bank Accounting Gets Worse

"Can investors count on consistency when it comes to bank accounting? As many banks struggle with piles of bad loans, some auditors appear stricter than others when assessing their true value. ... Banks carry most loans on balance sheet at their original cost. But they must also disclose the loans' fair value, or current market value, in footnotes. ... The average gap among Ernst and Deloitte clients in the 25-bank group was about 6%; among clients of PriceWaterhouseCoopers and KPMG it was abo0ut 2%. ... But hits to the fair value of loans still matter to investors. Who audits a bank's books may have importance beyond whose name goes on the letter blessing the financial statements once a year", Michael Rapoport at the WSJ, 29 December 2009, link:

That E&Y and D&T clients had larger differences between their loans book and fair values may mean PWC and KPMG were more aggressive in making the banks write off loans! Remember, D&T is the firm that "audited" Zimbabwe Ben's financials.

Sunday, January 24, 2010

Pimco, the New Vampire Squid

"A switch in how state regulators size up insurers' risks will save the industry more than $5 billion in capital requirements, New York officials said Monday. ... In ditching the ratings firms, the regulators said they had lost faith in the ratings firms' ability to size up risk in insurers' big holdings of residential-mortgage bonds. In choosing Pimco for the high-profile assignment, they cited the rating firms' widely publicized shortcomings in initially rating many of the bonds as triple-A, the highest rating, then last year downgrading waves of the bonds to 'junk' status. ... Some have critcized the regulators for changing their methodology in a way that could lead to a more-lenient outcome for the insurance companies, saying the move could weaken protection for policy holders", Leslie Scism at the WSJ, 5 January 2010, link:

Apparently Pimco is our new Vampire Squid (VS) as old VS developed a foul odor since it claimed to do "God's work". Neal Kasksahri formerly of VS and Treasury recently went to work for Pimco. When will Hank Paulson and Robert Steel decamp to Pimco? Will this regulatory change do anything for insurance company policyholders? Why ask?

Si Se Puede

"It's getting to the point where the twin news stories more or less write themselves. ... But somehow the watch list, the tipoff, the many worried reports from colleagues and relatives, the placing of the name on 'a central repository of information' don't prevent the suspect from boarding a place, changing places, or bringing whatever he cares to bring onto a plane. ... So that's now more or less the routine for the guilty. ... (By the way, I make a safe prediction: Nobody in that embassy [Abuja, Nigeria] or anywhere else in our national security system will lose his or her job as a consequence of this most recent disgrace.) ... For some years after 9/11, passengers were forbidden to get up and use the lavatory on the Washington-New York shuttle. Zero tolerance! I suppose it must eventually have occurred to somebody that this ban would not deter a person who was willing to die, so the rule was scrapped. ... Why do we fail to detect or defeat the guilty, and why do we do so well at collective punishment of the innocent? The answer to the first question is: Because we can't or won't. The answer to the second question is: Because we can. The fault is not just with our endlessly incompetent security services, who give the benefit of the doubt to people who should have been arrested long ago or at least had their visas and travel rights revoked. It is also with a public opinion that sheepishly bleats to be made to 'feel safe'," my emphasis, Christopher Hitchens at Slate, 28 December 2009, link:

Why do we prosecute low-level drug offenders? Because we can! Why don't we prosecute sophisticated financial frauds? Because we dare not.

Saturday, January 23, 2010

California in Illinois

"Social-services agencies are worried about paying staff, and time is running short to address a huge budget deficit in Illinois amid a political fight between candidates in the race for governor. ... Concerns about the political impacts of tough choices are likely to hinder the ability of governors and legislatures to address deficits. Illinois is confronting an estimated $4.3 billion budget gap for its current fiscal year, which ends June 30. The shortfall equals 16.5% of the state's general-fund budget, the third-highest percentage gap in the US behind Oklahoma and Arizona, according to a November report from the National Conference of State Legislatures. ... 'In a tough recession like the one we're in ... we have to have a safety net to prevent human beings from falling into despair,' Mr. [Pat] Quinn said in an interview Wednesday. ... The state's budget problems have been persistent. The non-partisan Pew Center on the States pronounced Illinois in 'fiscal peril,' noting in a November report that the state has run deficits every year since the 2001 recession. ... The pension plan has unfunded liabilities of nearly $80 billion--among the worst in the nation, with no solution in place for catching up. ... In 2003, for example, Illinois under then-Gov. Rod Blagojevich sold $10 billion in 30-year bonds to cover two years' worth of payments to the pension fund. The proceeds from the bond sale went into an investment portfolio that included stocks; the expected profits haven't materialized, leaving Illinois far behind", Amy Merrick at the WSJ, 4 January 2010, link: http://online.wsj.com/article/SB126256615856614247.html.

Illinois is following California. Cut spending.

Moscow's DOJ Extortion Racket

"What happened next was less typical: Her case was dropped, the 38-year-old is now campaigning to change a Russian justice system she says let bribe-seeking offficials pressure her and other executives by throwing them in jail. ... On Tuesday, President Dmitry Medevedev signed a law banning pretrial jailing of suspects in first-offense tax cases. The move is the latest legal change that removes one of the levers that critics say police and regulators have used against executives. Russia has also recently made it more difficult for investigators to call surprise audits of businesses or bring criminal charges aganist tax offenders who have already paid their debts. ... On Monday, the independent Moscow Public Oversight Commission characterized Mr. [Sergei] Magnitsky's pretrial detention as a campaign of neglect and torture by police and jailers. ... Change has been slow, however, and it is unclear how much momentum remains. Ms. [Yana] Yakovleva and other activists estimate that tens of thousands of people in pretrial detention are charged with white-collar crimes, though official statistics aren't available. Almost none are acquitted, but many receive sentences that don't involve prison time. ... Ms. Yakovleva says her own problems with the law started in 2006, after she and her partner turned down an offer from an officer of the antidrug police to pay kickbacks on sales of diethyl ether, an industrial solvent that can also be used in illicit-drug production. ... Ms. Yakovleva says she was arrested as she left her health club. 'It's so nice to detain decent people,' she recalls one officer telling her. ... Officials at the antidrug police publicly defended the prosecution. But ultimately they dropped the charges when a court struck down the rule that had made ether a controlled substance. Ms. Yakovleva filed a complaint alleging official corruption. Officials denied the allegations. No charges were filed", my emphasis, Gregory White at the WSJ, 30 December 2009, link:

Moscow's authorities need to learn how we do it in the US. These Russians are amateurs. Study say my 17 January 2008 post: http://skepticaltexascpa.blogspot.com/2008/01/justice-department-extortion-racket.html. Russia's legal system may be better than ours. Could Moscow's Public Oversight Commission look at the SDNY US attorney's office for us?

Friday, January 22, 2010

June 1941, Again?

"Don't assume that Russia and America will be adversaries forever. Given the nature and the magnitude of the negativity marking the current stage of the American-Russian relations, the very thought of an alliance between the two countires looks outright absurd to many people. Regardless of the presence of seemingly insurmountable obstacles, American-Russian relations could offer a dramatic U-turn to a stunned world. Why? The answer to this question is both logical and simple: The spread of radical Islam thoughout the Muslim world and the quickly advancing Islamization of Europe could bring to life this unlikely and, according to many experts, even impossible scenario. ... The main problem from the Russian side is the hysterical anti-Americanism which has become the essence of Russian foreign policy. ... Maybe the most important among them is the negative image of the [US] created by totalitarian propaganda during the Soviet era. The image in question has been powerfully reinforced by the chaos and corruption that plagued Russia in place of the long-expected triumph of Democracy. ... How exactly would Russia benefit from a Vietnam-style American withdrawal from Afghanistan? In fact, an American abandonment of Afghanistan will trigger nothing short of a disaster for Russia. ... And let's not ignore a very important fact: Those Muslim neighbors share an almost 1,900-mile-long border with Afghanistan, which is as porous as the border between Afghanistan and Pakistan. A Taliban victory would represent a huge boost to the activities of radical Islamists whose influence is growing in Central Asia. ... Given the magnitude of that danger, the changing demography of the country as a result of the reduction of the Russian component of the country's population provides grounds for a lot of sobering thoughts. Another important factor influencing the Russian policymakers is the proximity of the dramatically underpopulated Russian Far East to the overpopulated border areas of China. ... Of course, the old rule stipulating that 'it takes two to tango' is fully applicable to the area of foreign policy. Undoubtedly, within US corridors of power, Russia is regarded not only as a former enemy, but also as a current and future rival. American policymakers committed a huge mistake by not taking advantage of the positive attitude of Mr. Putin's government to the [US] in the immediate aftermath of 9/11. ... World public opinion supported the American action designed to terminate the ethnic cleansing of the Albanian community committed by the Milosevic regime. At the same time, however, the [US] did not protect the Serbian residents of Kosovo when they too became victims of ethnic cleansing. The inconsistency brought about a powerful negative reaction in Russia, a traditional Serbian ally and protector. What matters the most today, however, is that fact that America needs Russia to the same degree that Russia needs America. ... Well, looking back in time, those differences didn't prevent the emergence of the WWII-era American-Soviet alliance that buried all of Hitler's dreams and ambitions. ... The new relationship between the [US] and Russia would open the door for the creation of a brand-new system of international relations by including Europe, China, and India, all targeted and coverted by radical Islam, into the alliance. The emergence of such a structure would increase the chances of finding the correct approach to separting the majority of the world's Muslim community from the radical minority trying to establish world domination", my emphasis, Georgy Gourney (GG) at American Thinker, 26 December 2009, link:

GG got a PhD from the Moscow Institute of Foreign Relations. I oppose our antagonistic policy toward Russia. Our 1998 actions in Serbia did not ingratiate us to the Moslem world, but furthered the jihad. I believe Ralph Peters shortly after 9/11 suggested the: US, Russia, India, Israel and China form an alliance to fight Jihadism. Imagine had this happened, the US and Russia could have presented Iran an ultimatum, replete with pictures of Dresden and Berlin: stop all nuclear activities or this is your fate, that of Germany in 1945. My guess, within a few weeks, Iran's military will have slaughtered its Mullahs and given US-Russian teams free reign to look at anything in Iran. Instead, the US kisses Saudi Arabia's arse. The US should try to avoid a Moslem-controlled Russia with 6,500 "deliverables". I infintely prefer Putin's Russia to that. I disagree with GG as to what prevents the alliance: it's current US policy in Georgia, Poland, Serbia, etc. We offer Russia no "quid pro quo" for its support. I agree with GG, our Afghanistan war is Russia's fight. Look at a map. The US need not worry about "world public opinion". How many divisions has the world? I wonder what the alumni of Princeton's Wilson and Harvard's Kennedy Schools think of this? See my 24 and 28 August 2008 posts:

CPAs, ACFE and 404

"A measure by the House Financial Services Committee that would exempt small and midsized companies from Sarbanes-Oxley audit requirements has drawn fire from a number of organizations, including the [AICPA], the Center for Audit Quality and the Association of Certified Fraud Examiners [ACFE]. ... The exemption comes despite a plea from [SEC] Chair Mary Schapiro, who wrote to lawmakers on the committee opposing the carve-out. ... The accounting profession supports the Sarbanes-Oxley Act and we believe that the Section 404(b) internal control provisions should apply to all public companies, not just large ones,' said AICPA president and chief executive Barry Melancon [BM]. ... The exemption provision also raised the ire of ACFE president James D. Ratley, who said that lawmakers need to consider the impact of potential fraud losses on organizations, investors, employees and taxpayers when weighing the cost of anti-fraud controals prescribed by SOX. ... In a report issued last year on fraud statistics, the Austin, Texas-based ACFE found that the implementatiion of anti-fraud controls has a measurable impact on an entity's exposure to fraud. ... Meanwhile, Cindy Forelli, executive director at the CAQ, wrote a letter to the leaders of the congressional committe also criticizing the amendment: 'We believe the reforms under SOX have contributed significantly to restoring investor confidence, and in particular, that Section 404 has played a critical role in promoting high-quality financial reporting, which is vital to the successful operation of our capital markets", Accounting Today, 14 December 2009, link:

BM, shut up. You don't speak for me. I'm a CPA, or didn't you notice? Why does the American Institute of Craven, Pilfering Accountants favor keeping SOX section 404 for small companies? Because the Big 87654-controlled AICPA wants to help the Big 87654 sell SOX 404 internal control audits. I view anything from the ACFE with suspicion ever since Joe Wells founded it in 1988, It too wants more business for its members. The CAQ is a bigger joke than the AICPA, of which it was a part. The CAQ was the AICPA's SEC Practice Section until SOX created the PCAOB which now does inspections, which replaced peer review. The SECPS did nothing to improve Big 87654 practice and the CAQ is just a Big 87654 lobbying organization. Kill SOX! See my 29 August 2009 post:

Thursday, January 21, 2010

Blackwater's Black Hats?

"So much of federal prosecutions depend on the Court being able to rely on the credibility of federal prosecutors. There's no reason for courts to do that any longer and we all will suffer because of the unethical behavior of a series of [DOJ] lawyers who simply refuse to follow their professional responsibility", Clarice Feldman at American Thinker, 1 January 2010, link:

"The sudden blow to the case against the former Blackwater security guards over a shooting that killed 17 Iraqis and wounded at least 20 may have come as a surprise to the public in Iraq and the [US], but the legal problem that the judge cited Thursday when he threw out the indictments was obvious to American government lawyers within days of the shooting. The issue was that the guards, as government contractors, were obligated to give an immediate report of what they had done, but the Constitution prevents the government from requiring a defendant to testify against himself, so those statements could not be used in a prosecution. ... The prosecutors were also concerned, even when using qwhat they called a 'taint team' to try to prevent information in the guards' compulsory statements from influencing the investigation, according to the 90-page ruling by Judge Ricardo M. Urbina of the Federal District Court in Washington. The judge said the prosecutors had failed to take 'coomon sense precautions' to avoid the problem. The ruling led to disappointment in the [US] as in Iraq. ... Judge Urbina's decision would make it difficult for prosecutors to reinstate the original charges. Information that the guards were required to give immediately after the shootings was deeply woven into the governments effort to secure the indictments, he wrote. ... Investigators did not find physical evidence of an attack by Iraqis, the judge's decision said. ... But in their presentations to the second grand jury, the prosecutors also edited out evidence that suggested that the guards were firing in self-defense, the judge said, and those omissions were improper", my emphasis, Matthew Wald at the NYT, 2 January 2010: http://www.nytimes.com/2010/01/02/us/02legal.html.

"Iraqis seeking justice for 17 people shot dead at a Baghdad intersection responded with bitterness and outrage Friday at a US judge's decision to throw out a case against a Blackwater security team accused in the killings. The Iraqi government vowed to pursue the case, which became a source of contention between the US and the Iraqi government", my emphasis, Rebecca Santana at the Houston Chronicle, 2 January 2010.

"The dismissal of charges against five Blackwater Worldwide security guards accused by the [DOJ] of recklessly shooting in a Baghdad traffic circle in 2007 potentially strains US-Iraqi relations at a critical moment and raises new questions for the Obama administration about effective legal ovesight of battlefield contractors. ... 'Investigations conducted by specialized Iraqi authorities confirmed unequivocally that the Blackwater guards committed the crime of murder and broke the rules by using arms without the existence of any threat obliging them to use force, Iraqi government spokesman Ali al-Dabbagh said in a statement, the AP reported", my emphasis, August Cole at the WSJ, 2 January 2010, link: http://online.wsj.com/article/SB126229226969112429.html.

The DOJ's Blackwater Five (BF) case stank from the start. It had problems with: evidence, chain of custody, crime scene control and witness statements. Lastly, any statement by a Moslem with respect to non-Moslem matters must be viewed through the lens of takiwa and Sharia's blood money concept. My conclusion: the DOJ brought this case for political purposes to ingratiate the Bush administration with Iraq. What would the DOJ have done if the case was tried and the BF were acquitted? Call the jurors stupid?

Did the DOJ immediately dispatch CSI NY's incorruptible Gary Sinese to Iraq to "control the crime scene" and collect evidence? There was no "physical evidence of an attack by Iraqis". So? The Iraqi investigators destroyed it. In my opinion. A decent defense attorney would have made mincemeat of the DOJ's case if it went to trial. This was a political prosecution. That's my bottom line. The State Department saw the BF as "expendibles". My surprise was that Urbina had the cojones to throw the indictment out. I wouldn't have, but forced the case to trial and ruled against the DOJ on evidence issue after evidence issue. Then empanel the jury and let the DOJ's case collapse. In public. Urbina did the DOJ a favor by dismissing the indictment. It kept the DOJ's dirty laundry from the public. In some schools of Islamic jurisprudence a kaffir may not even testify against a Moslem! Why should we credit anything an Iraqi says? "This declaration defines human rights according to Islamic law, which prohibits critcism of Islam. Indeed, Iraq's US-enabled 2004 constitution enshrines Islamic law above all. Little wonder Iraq consistently votes at the United Nations with the OIS and against the [US] on this key ideological divide between Islam and the West, most recently in November. ... Guess we're supposed to look the other way. But that's like applauding the Status of Force Agreement (SOFA) between the [US] and Iraq without noticing that the agreement prohibits the [US from attacking Iran (or any other country) from Iraq", Diana West at Townhall, 29 December 2009, link:

http://townhall.com/columnists/DianaWest/2009/12/29/the_surge_and_success,_part_ii. Until you understand Sharia, you can't understand what really happened here. Iran won our war with Iraq. Brilliant.

Big deal. Outrage. What is outrageous is that this case was ever brought.

Who were these "specialized" authorities? Iraq's answer to Saudi Arabia's mutwain, operating under Sharia's rules of evidence? Our Iraq "excursion" has been a total failure. That we would concern ourselves with relations with Iraq shows we wasted $700 billion and 5,000 lives. It is inconceivable to Iraqis that dhimmi could ever be justified to shoot Moslems. Get over it.

Natural Gas Hedging-2

"In a sign that low natural-gas prices are probably here to stay, big US energy companies are pushing to sign long-term contracts with electric utilities and other customers. Major producers such as Chesapeake Energy Corp. and Devon Energy Corp. are trying to reach multiyear deals--likely five or 10 years--that would guarantee them buyers for their gas but would deny them the benefits from any sudden price increases. ... But huge new gas fields in Texas, Lousiana, Pennsylvania and elsewhere have led to a surge in US natural-gas producrtion, glutting the market even as the recession has sapped demand for all forms of energy. ... 'The days of double-digit gas prices in the US are over,' said Chesapeake Chairman and Chief Executive Aubrey McClendon", my emphasis, Ben Casselman & Rebecca Smith at the WSJ, 30 December 2009, link:

$5.57 natural gas looks cheap to me. I suspect McClendon will ultimately do as well with his advance gas sales as Barrick did with its advance gold sales, see my 21 December 2009 post: http://skepticaltexascpa.blogspot.com/2009/12/barrick-rings-bell.html. I agree with Exxon, see my 2 January 2009 post: http://skepticaltexascpa.blogspot.com/2010/01/exxons-acquisition.html.

Wednesday, January 20, 2010

Flying Foolishness

"As Phyllis Chester plaintively asks, 'Are we all going to be subjected to underwear checks before boarding our flights? If so, Al-Qaeda will soon secrete explosives in body cavities. Will we all be searched there as well?' In other words, because US security agencies refuse to take the sensible precaution of concentrating their resources on the small target pool of suspects, namely Muslims, about 1 percent of the population, hundreds of millions of passengers must bear the burden of extra cost, inconvenience, and loss of privacy", Daniel Pipes at Frontpagemagazine, 28 December 2009, link:

Body cavity searches? I've got it. The TSA should recruit registered sex offenders. They won't even need any training! They'll work for peanuts! The TSA is a joke, See my 16 December 2009 post: http://skepticaltexascpa.blogspot.com/2009/12/uncle-sam-protects-you.html. I now give "Him" a new name, Obamanero. Obama fiddles while the people burn.