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: http://english.pravda.ru/business/finance/112085-aig_gate-0.

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:

http://www.chron.com/disp/story.mpl/headline/metro/6862938.html.

"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: http://www.chron.com/disp/story.mpl/metropolitan/casey/6863319.html

"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: http://www.nytimes.com/2010/02/12/us/12nurses.html.

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.

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: http://www.vdare.com/sailer/100207_diversity.htm.

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: http://online.wsj.com/article/SB10001424052748703382904575059660427173510.html.

"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: http://online.wsj.com/article/SB10001424052748703444804575071453563822806.html.

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: http://www.jrdeputyaccountant.com/2010/02/goldman-rats-go-after-hft-program-thief.html.

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:

http://online.wsj.com/article/SB10001424052748704140104575058121514846134.html.

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:

http://online.wsj.com/article/SB10001424052748703615904575053793439062452.html.

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:

http://online.wsj.com/article/SB10001424052748704343104575032910217257240.html.

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:

http://skepticaltexascpa.blogspot.com/2007/07/just-in-time-inventory.html.

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: http://voxeu.org/index.php?q=node/4565.

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:

http://skepticaltexascpa.blogspot.com/2010/01/junior-on-fed-profit.html. 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: http://www.nytimes.com/2010/02/03/us/03offender.html.

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:

http://skepticaltexascpa.blogspot.com/2008/01/supreme-injustice.html. I guess pornography viewers need to hire Hogan & Hartson to get this type of liability thrown out.

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:

http://www.nytimes.com/2010/02/09/us/09bar.html.

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!