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Contents Bulletin Scripting in shell and Perl Network troubleshooting History Humor

Regulatory Capture: Systematic and Institutionalized Corruption of Regulators under Neoliberal Regime

Nonbarking Dogs of Neoliberal State

News Criminogenic effects of neoliberalism Recommended Links Audacioues Oligarchy and Loss of Trust

Cognitive Regulatory Capture

Corporatist Corruption: Systemic Fraud under Clinton-Bush-Obama Regime

Neoliberal corruption Corporatist Corruption: Systemic Fraud under Clinton-Bush-Obama Regime Elite [Dominance] Theory And the Revolt of the Elite The Iron Law of Oligarchy Amorality and criminality of neoliberal elite Lobbying and the Financial Crisis
Casino Capitalism Bulletin, 2008 Casino Capitalism Bulletin, 2009 Casino Capitalism Bulletin, 2010 Casino Capitalism Bulletin, 2011 Casino Capitalism Bulletin, 2012 Political Economy of Casino Capitalism
Corruption of Congress Corruption of SEC Corruption of FED Corruption of Treasury Corruption of CFTC Corruption of Office of Comptroller of currency
Glass-Steagall repeal Deregulation as crony capitalism Revolving Doors as Corruption Greenspan Lawrence Summers Helicopter Ben
Neoclassical Pseudo Theories and Crooked and Bought Economists Invisible Hand Hypothesys: The Theory of Self-regulation of the Markets Insider Trading Banking Bonuses as Money Laundering Brooksley Born and Three Marketeers Lack of transparency
In Goldman Sachs we trust Numbers racket Greenspan humor Financial Quotes Humor Etc
“Regulatory bodies, like the people who comprise them…mellow, and in old age…they become, with some exceptions, either an arm of the industry they are regulating or senile.”

John Kenneth Galbraith

Money! Backroom Deals! Secrecy! Political Power! Captured Government! Scandal! Suspicion! Major Money!

"Americans live in Russia, but they think they live in Sweden."

- Chrystia Freeland


Introduction

GS makes money by manipulating the system in a quasi-legal, morally corrupt manner. They challenge all the rules and use the Revolving Door between regulator and regulated to deliver legal bribes. Society needs better regulators and regulations to protect themselves from parasites like the GS Vampire Squid.

GS is one of the chief proponents of "Free Market" ideology. Free Market" is short for "Free to rip off the "Market" . The words "to rip off" are omitted when they sell the "Free Market" ideology and are reserved for the back rooms and jokes in private email. The rubes are too dim to get it or else think they are the scammers and not the scammed.

Comment at Economist's View
'Why the Fed Is So Wimpy'

Immanuel Wallerstein asked an interesting question: is the current iteration of global capitalism became so dysfunctional that it spells doom for the USA and it's role in the world as well as misery for American people? The current social system (aka " the current iteration of global capitalism') is called neoliberalism, or casino capitalism. It is both ideology and social practice. As Greenspan noted "an ideology is a conceptual framework with the way people deal with [social] reality." (in reply to REP. HENRY WAXMAN)

This second Gilded Age is characterized by rampant speculation and complete dominance of financial oligarchy over the rest of society  (Is There Capitalism After Cronyism The American Conservative) while the government regulators are intentionally (or "institutionally" -- "by design") asleep or looking the other way. In other words regulators are now completely captured by the big banks and are nothing more then stooges of financial oligarchy.  Often they are former staffers of big bands or supporting Wall Street law firms ("criminals with law degree"), or corrupt academicians on temporary assignment in the particular government body. We all remember  operation of  silencing of Brooksley Born in which prominent role was played by completely corrupt academician Lawrence Summers and Goldman Sacks' mole in the government -- Robert Rubin

Wallerstein and his colleagues tried to answer this question in the book Does Capitalism Have a Future? Thier line on thinking can be simplified to the following statement: When capital became unable of reaping large and fairly secure profits from manufacturing it like water tries to find other ways, and first of all criminal.  In other words it start criminalizing finance. From this point of view corruption of regulators is simply "the other way" of reaping large and fairly secure profits in new "permanent stagnation" condition of "Peak Capitalism", which entails less use of more expensive fossil fuels ("end of cheap oil"). Some economists even hypothesize that the US economy can expand only with oil prices below $60 per barrel.

From another point of view, as economist Joseph Schumpeter noted, capitalism is not a steady-state system. It is unstable system in which population constantly experience and then try to overcome one crisis after another. Joseph Schumpeter naively assumed that the net result is reimaging itself via so called “creative destruction".  But what we observe now it "uncreative destruction". In other words casino capitalism is devouring the host. We see that casino capitalism resort of non-creative, semi-criminal ways of maintaining the rate of profits. Actually this is what the US elite did with the country systematically since late 70th.

If we think about capitalism as a set of overlapping networks of power and influence at some point this destruction not only can be far less "creative" then Schumpeter expected. It can be outright criminal resembling the way organized crime operates (The City Of London Has Turned Britain Into A Civilized Mafia State).  For example, it can demonstrate itself in pre-planned, "on-purpose" destruction of the legal framework of the modern state via capture and corruption of regulators. In other words we see that human society can suffer from something like "social cancer", when social organism is destroyed in order for tumor sells to grow. And by tumor here I mean speculative finance and financial oligarchy.  Again this is a social system and as such it does not depend on particular people in power. As Prince Kropotkin observed about prison guards of Petropavlovsk jail in Sanct Petersburg "People are better then institutions". In a very deep way the ability to control speculation in the finance sector now became the central problem of any society that wants to survive in longer term. The idea that speculative behavior is entrepreneurial in nature and accelerates real economic growth is the fatal error of social judgment (Do Safer Banks Mean Less Economic Growth ) .  But as with cancer the key question is Can It Be Contained ?

While under casino capitalism all this "un-creative destruction" is done in order to preserve the level of profits which with end of cheap energy is impossible obtain via manufacturing. That does not exclude periods of "return of good times" when overinvestment in energy led to dramatic drop of oil prices: as soon as weaker players are eliminated the situation gradually returns to the "new normal". We observed two such periods since the neoliberalism became world dominant social system. One immediately after dissolution of the USSR and the second is the current period of low oil prices which started in late 2014.

If we think about capitalism as a set of overlapping networks of power and influence at some point this destruction can be far less "creative" then Schumpeter expected. For example it can demonstrate itself in pre-planned, "on-purpose" destruction of the legal framework of the modern state via capture and corruption of regulators. In other words we see that human society can suffer from something like "social cancel", when social organism is destroyed in order for tumor sells to grow. And by tumor seeks I mean speculative finance. In a very deep way the ability to control speculation in the finance sector now became the central problem of any society that wants to survive in longer term.

The idea that speculative behavior is entrepreneurial in nature and accelerates real economic growth is the fatal error of social judgment (Do Safer Banks Mean Less Economic Growth ) .

If we assume the big finance business model is somewhat similar to cancer, it is logical that they need to attack and immobilize the immune system in order to be able to grow fast. Corruption of regulators also can be viewed as a part of positive feedback loop created in the society by growth of financial sector. As such this is a systemic, institutional problem, not the problem of individual corrupt individuals. It is really an immanent, defining feature of neoliberalism as a social-economic system. In no way it is result of the action of few "bad apples". Much of is institutional and is related to the the structure of regulation of financial sector, which under neoliberalism is specifically designed to encourage capture.

As an immanent feature of neoliberal regimes it is also used as a universal "can opener" for more powerful neoliberal nations to get to the resources of weaker neoliberal nations, and, especially, countries governed by "resource nationalists". Accusations of widespread corruption are typical precursor to staging a neoliberal color revolution in such countries.

In a sense, the USA is probably most corrupt country in the world as neoliberal regime is strongest and the most mature in this country ( Why the Fed Is So Wimpy, by Justin Fox):

Regulatory capture — when regulators come to act mainly in the interest of the industries they regulate — is a phenomenon that economists, political scientists, and legal scholars have been writing about for decades. Bank regulators in particular have been depicted as captives for years, and have even taken to describing themselves as such.

The key feature of neoliberal regime is that large transnational corporation are the key political players which keep Congress and all regulatory agencies of short leash. Or, more correctly, government and top brass of internationals intermarry. The mixture of mechanisms used (revolving door, lobbyism, assigning cronies as heads of regulatory agency (Bush II favorite strategy)) can change with the time but the net result is always the same. As Senator Dick Durbin noted about the Congress Banks Frankly Own The Place. It's more correctly to say "transnationals own the country".

Started by Carter and continued by Reagan deregulation quickly exhausted its positive momentum of fighting excessive bureaucracy and government waste and become the way of stealth imposition of neoliberalism (also known as casino capitalism) on the society. Fundamentally, crony capitalism and corruption are two sides of the same neoliberal coin be it USA, or Russia, or Brazil.

Fundamentally, crony capitalism and corruption are two sides of the same neoliberal coin be it USA, or Russia, or Brazil.

The rampant deregulation implemented in the USA in 90th (dismantling Del Deal, immanent due to the growth of financial sector and its political influence) and "free market capitalism" (as if "free markets" ever existed; government always control the market via control of the currency; in turn large market players often control the government) is really side effect of a larger problem: systemic instability of financial sector. Old mechanisms of purging excessive size of financial sector via anti-Semitism and expulsion of Jews no longer work.

As soon as the political establishment became openly committed to laissez-faire, they essentially invite financial sector to hijack the political power in the society ("Quiet coup"). And financial sector tries to protect their political power by imposing a pretty draconian regime in the form of the National Security State, to exclude any chances of forming a meaningful opposition to their dominance. At this point mousetrap with cheese in form of "free market" propaganda is closed. After that banksters became completely immune from public scrutiny and prosecution, as 2008 events proved to the whole world. In a sense all three last US administrations (Clinton, Bush II and Obama) were/are essentially sock puppets of financial oligarchy.

Regulatory capture

The political appointees to federal regulators as the tool for blocking regulation was the key feature of Casino Capitalism, the variant of neoliberal regime established in the USA. And their actions are among of the most important contributions to the financial crisis. Due to this practice, the regulators were captured by the very businesses they were required to regulate. The chairperson of the Commodities Futures Trading Commission, for example, exempted important parts of Enron's business from regulation and, just weeks later, joined Enron' board. It has been the rule, not an exception, for retired regulators to get jobs as auditors of financial firms and become lobbyists. Incumbent regulators have difficulty in conducting effective supervision because of intensive lobbying from their former superiors.

This is not a new phenomenon . As Joy Key reminded us (Better a distant judge than a pliant regulator - FT.com, Nov 2, 2010):

In 1887, Congress passed an act to regulate the US railroad industry. The legislation originated in the demands of farmers and merchants for protection against the “robber barons”.

Despite this background, railroad interests supported the bill. Charles Adams, president of the Union Pacific Railroad, explained his reasoning to a sympathetic congressman, John D. Long. “What is desired,” he wrote, “is something having a good sound, but quite harmless, which will impress the popular mind with the idea that a great deal is being done, when, in reality, very little is intended to be done.”

On the whole, he got what he wanted. The Interstate Commerce Commission established by the act was chaired by a lawyer with experience of the railroad industry – acquired, naturally, by acting on behalf of his railroad clients. When, a decade later, the Supreme Court ruled that a rate-fixing agreement between railroads was illegal, the ICC was crestfallen: surely, the commission said, it should not be unlawful to confer, to achieve what the law enjoins – the setting of just and reasonable rates. Soon after, Congress approved legislation making it a criminal offence to offer rebates on tariffs the ICC had approved, and the commission thereafter operated as the manager of a railroad cartel.

One feature of regulatory capture is that the regulators of an industry start viewing it through the eyes of its principal actors, and to equate the public interest with the financial stability of these institutions. Sometimes such capture is clearly corrupt, as when regulators are directly or indirectly (via revolving door mechanism) are paid by the corporations they oversee. But the truth is that the largest contributors to congressional campaign funding are financial services industries, pharmaceuticals and energy. So they, by definition, have substantial political cloud in neoliberal state.

Sometimes the mechanism is more subtle and acts as "adverse selection" : new appointees are screened as for being "business-friendly", the prerequisite which also smells of corruption. Greenspan is a nice example of such political appointee; but Dugan, Cox (Our Corrupt Federal Regulator) and many others, who so far managed to escape jail, were equally destructive. Generally, bureaucratic institutions always try to preserve the problem to which they are the solution.

So efficiency of regulators is always less then desired. In other words there is no, and can never be in principle, an ideal regulator.

But institutions undermined by political appointees essentially became a turncoats and the part of the problem, not the part of the solution. In other words from regulators they became enablers of criminal behavior. As simple as that. All this was done under the smoke screen of neoliberalism, which starting from 70th became dominant ideology in the USA and elsewhere.

Simon Johnson, an MIT professor and former IMF chief economist has been a critic of the Bush/Obama bailout from the start, but his devastating essay in the May issue of the Atlantic, "The Quiet Coup," may be the clearest explanation of regulatory capture in the USA, the country that became just richer variant of a classic "banana republic":

Squeezing the oligarchs... is seldom the strategy of choice among emerging-market governments. Quite the contrary: at the outset of the crisis, the oligarchs are usually among the first to get extra help from the government, such as preferential access to foreign currency, or maybe a nice tax break, or — here’s a classic Kremlin bailout technique — the assumption of private debt obligations by the government.

Under duress, generosity toward old friends takes many innovative forms. Meanwhile, needing to squeeze someone, most emerging-market governments look first to ordinary working folk—at least until the riots grow too large.

Simon Johnson says:

So let's say that you have excessive regulation to start with, you bring that down to a sensible level, and then the guys making a ton of a money use that to undermine sensible regulation.

What he's describing is a "Peter Principle" of economics: in a classic cycle over-regulation is first reduced to meaningful regulation and then due to growth of influence (and profits) of financial oligarchy it inevitably reduced to a level of incompetence and at this point seize to effectively regulate the system. After spectacular crash excessive regulations are reinstalled and cycle starts again.
"Peter Principle" of economics: in a classic cycle over-regulation is first reduced to meaningful regulation and then due to growth of influence (and profits) of financial oligarchy it inevitably reduced to a level of incompetence and at this point seize to effectively regulate the system. After spectacular crash excessive regulations are reinstalled and the cycle starts again.

Here is relevant quote from Simon Johnson's paper:

The Bailout Proves the Banks Own the Politicians

The bailout proves the banks own the politicians. The only way we will ever get another Teddy Roosevelt would be to get a wealthy independent elected President who only wants one term and would use his elected mandate to push his agenda against the corporate power structure.

Here he forgot the possibility of repetition of the destiny of JFK. Also neoliberal ideology (like Marxism in the past in the USSR and its satellites) "infects" regulators making them organically unable to perform actions the contradicts it: in this case drastic anti-banks actions. This is a variant of Cognitive Regulatory Capture

It is interesting to note that the trend toward regulatory capture in the past was recognized by nobody else as Stalin, who instituted "purges" explicitly to prevent too complacent behaviour of government bureaucrats who with time forget about the goals of their institutions and are more and more driven by their own profit and privileges motives. While extremely cruel, this was pretty effective methods for keeping regulators in check.

Intellectual capture

An excellent definition of intellectual capture was given by Greenspan in 2009:

"Well, remember that what an ideology is a conceptual framework with the way people deal with reality. Everyone has one. You have to. To exist, you need an ideology. The question is whether it is accurate or not. "

That means that independence of regulators is not a panacea. They are influenced by dominant ideology like everybody else. So intellectual capture is prevalent even among the most nominally independent regulators, as to live in the society and be free of dominant ideology is very difficult or if want to be successful impossible. Under neoliberalism that gives rise to a very dangerous view: What’s good for Wall Street must be great for the real economy. For example independent central banks, will pursue neoliberal policies if top brass is captured by neoliberal ideology. The regulators may be independent at first, but if they share the ideology (and in this case this is a neoliberal ideology) they invariably fall under the spell —one way or another — of the people they are supposed to control.

Here is a pretty telling dialog reproduced in Democracy Now

So like Marxists pointed long ago "ideas became a material force, when they capture minds of people". That means that the virtues of independence become even more questionable once we factor in the politics. Will an independent regulator or central bank be less prone to political influence from powerful lobbies? That seems doubtful. In his famous article Simon Johnson tells a an interesting and pretty surprising at this time observation: the U.S. has been afflicted by a version of the crony capitalism that has been the scourge of so many emerging markets, except that Wall Street has bought its influence and power not by only and exclusively by bribery but more by financing and shaping the dominant ideology of our times -- neoliberalism (The Quiet Coup - Simon Johnson - The Atlantic, May 2009).

This process of ideological capture he called a Quiet coup. Here are some quotes from Dani Rodriks post (Dani Rodrik's weblog Simon Johnson's morality tale) which discusses the article and point out some questionable attribution of wisdom to IMF, which is an institution that is a key part of pushing neoliberalism to other countries:

In a primitive political system, power is transmitted through violence, or the threat of violence: military coups, private militias, and so on. In a less primitive system more typical of emerging markets, power is transmitted via money: bribes, kickbacks, and offshore bank accounts. Although lobbying and campaign contributions certainly play major roles in the American political system, old-fashioned corruption—envelopes stuffed with $100 bills—is probably a sideshow today, Jack Abramoff notwithstanding.

Instead, the American financial industry gained political power by amassing a kind of cultural capital—a belief system. Once, perhaps, what was good for General Motors was good for the country. Over the past decade, the attitude took hold that what was good for Wall Street was good for the country. The banking-and-securities industry has become one of the top contributors to political campaigns, but at the peak of its influence, it did not have to buy favors the way, for example, the tobacco companies or military contractors might have to. Instead, it benefited from the fact that Washington insiders already believed that large financial institutions and free-flowing capital markets were crucial to America’s position in the world.

The solution, to Simon, is equally clear. Finance needs to be cut down to size. What the U.S. needs is what the IMF would have told any country:

The challenges the United States faces are familiar territory to the people at the IMF. If you hid the name of the country and just showed them the numbers, there is no doubt what old IMF hands would say: nationalize troubled banks and break them up as necessary.

... ... ...

The second problem the U.S. faces — the power of the oligarchy — is just as important as the immediate crisis of lending. And the advice from the IMF on this front would again be simple: break the oligarchy.

As with any story built around clear villains easy solutions, there is something in this account that is quite unsatisfying. For one thing, I think it puts the blame too narrowly on the bankers. Yes, there can be little doubt that banks badly misjudged the risks they were taking on. But they were aided in all this by the broader economics and policymaking community -- not because the latter thought the policies in question were good for bankers, but because they thought these would be good for the economy. Simon himself says as much. So why pick on the bankers? Surely the blame must be spread much more widely.

And I find it astonishing that Simon would present the IMF as the voice of wisdom on these matters--- the same IMF which until recently advocated capital-account liberalization for some of the poorest countries in the world and which was totally tone deaf when it came to the cost of fiscal stringency in countries going through similar upheavals (as during the Asian financial crisis).

Intellectual capture can also occur on the level below ideology. Every regulatory agency is dependent for information on the businesses it regulates. Many of the people who run regulated companies would be affronted by any suggestion that their activities do not serve the public good. But the truth is that few members of the public ever make contact with a regulatory agency; almost always, they need to deal with the professionals from industries they regulate. It does not requires a considerable effort of imagination to understand that any industry tried to use this leverage. So even the regulator with the best intentions comes to see issues eventually start to see the issue from the prism of the framework that was formulated by the corporate officers and professional he deals with on daily basis.. You need to have pretty abrasive or independent type of personality and considerable intellectual curiosity to discount this influence. And these are not the qualities often sought, or found, in regulators.

Lobbying as institutionalized corruption

The IMF’s latest working paper — A Fistful of Dollars: Lobbying and the Financial Crisis (Deniz Igan, Prachi Mishra, and Thierry Tressel IMF, December 2009) — shows how the powerful mechanism of lobbing created the alliance between Wall Street and Washington policymakers. In other words it convert social system into corporatism. Like military industrial complex, financial oligarchy understands pretty well that money spend on lobbing are money well spend: the most aggressive, the most reckless banks have the greatest return in bailout monies.

Lobbyists are an important mechanism for silencing and subverting federal regulators. Existence of revolving door is a perfect tool for keeping regulators at bay. See Frank Partnoy famous book Infectious Greed that explains how and why large scale financial malfeasance happens. And why it is hardly ever punished. Here is one quote:

"In July 2005, Public Citizen published a report entitled "The Journey from Congress to K Street": the report analyzed hundreds of lobbyist registration documents filed in compliance with the Lobbying Disclosure Act and the Foreign Agents Registration Act among other sources. It found that since 1998, 43 percent of the 198 members of Congress who left government to join private life have registered to lobby.

A similar report from the Center for Responsive Politics found 370 former members were in the "influence-peddling business", with 285 officially registered as federal lobbyists, and 85 others who were described as providing "strategic advice" or "public relations" to corporate clients."

Tremendous resources in their disposal permit lobbyists to win the assignment of red state democrats to the banking committee, so they can get contributions from bankers and serve as Trojan horses which can break any attempt to reform the system. The IMF had shown that money channeled to lobbyists by banks naturally impose on the society riskier lending with less supervision and regulation:

“Our analysis establishes that financial intermediaries’ lobbying activities on specific issues are significantly related to both their mortgage lending behavior and their ex-post performance. Controlling for unobserved lender and area characteristics as well as changes over time in the macroeconomic and local conditions, lenders that lobby more intensively (i) originate mortgages with higher loan-to-income ratios, (ii) securitize a faster growing proportion of loans originated; and (iii) have faster growing mortgage loan portfolios.”

Our analysis of ex-post performance comprises two pieces of evidence: (i) faster relative growth of mortgage loans by lobbying lenders is associated with higher ex-post default rates at the MSA level in 2008; and (ii) lobbying lenders experienced negative abnormal stock returns during the main events of the financial crisis in 2007 and 2008.”

The authors identify six key goals that bank achieved by spending huge sums of money for lobbying:
  1. Prevent any tightening of lending laws or new laws aimed to reduce the benefits of short-termist bonus generating strategies
  2. Allow systematic underestimation of default probabilities by overoptimistic bankers;
  3. Not only originate loans that carry more risk, but to convince legislators that such lending is prudent;
  4. To kill bills directed in tightening of lax lending standards
  5. To restrict entry by others preventing competition;
  6. To increase the probability of receiving preferential treatment in a crisis.
In other word lobbying by banks is a systemically dangerous activity that mimics methods used by organized crime (and as such falling under RICO statute) that puts the entire society at risk. Any meaningful actions are now impossible without weakening political influence of the financial industry (the capture of regulators). Unfortunately, for the same reason it is unlikely to occur . . .

Elimination of funding as the way to eliminate regulations

Deregulation has been a big problem in areas of the economy where the beneficiaries of changes in the law purchased the deregulatory changes from the people who controlled the federal government. And even if they can't kill regulation they have another tool in their disposal. Budgets is where regulations are neutered by politicians who did not stop the regulations. Kind of the second line of defense for financial oligarchy:

Rusty:

Logically, regulations benefit those that have a hand in creating them - politicians and lobbyists who represent entrenched business interests. Certainly politicians will try with at least lip service towards some equitable aim in the public interest, but they must work with the entrenched interests to achieve anything and to maintain power. So it makes sense that often regulations serve entrenched interests and thereby increase inequality.

ilsm -> Rusty...

I did some consulting work years ago in the transport industry (did an brief excursion from the military industry complex).

No DoT (FAA, Highways, pipelines, etc) regulation is allowed without support from the industry, thus we see new regulations discussed after each transport related disaster.

Once a regulation is "set", policies for enforcement are devised by the responsible agency, which leads to plans for enforcement, then budgets. Budgets is where regulations are neutered by politicians who did not stop the regulations (keep the gumint off the back of the perps).

See last Sunday's train derailment, or any pipeline explosion.

I worry more about what happens during my colonoscopy, I am much more familiar with neglect in the aerospace world.

Banks as the foundation of the corruption pyramid

Banking corruption is the foundation of all corruption pyramid. We are used to talking about corruption at various levels of government, as well as legislative and judicial branches. We also used to facts of corruption in military-industrial complex, including public procurement. However, in most cases, the foundation of this corruption pyramid are large banks, without which the implementation of most of illegal business activities would be impossible.

Here we are talking about the banking corruption -- the fact that banks and other financial institutions in the context of financial globalization and development of cashless payments have become a major part of the infrastructure of the shadow economy. And are extremely interested in participation in shady activities as those provide much better profit margins then legal activities. Without their mediation and help in money laundering including laundering of criminal assets would be not have the scale it now has. They are also the central player in organizing illegal export of capital abroad to offshore jurisdictions, which, in essence, is just another form of money laundering.

However, the media and the economic mainstream try to dismiss this systemic behaviour of major financial players, creating an image of respectable bankers and respectable businessmen. With few bad apples. In reality many banks have shadow economy as the major source of their income and are committing illegal transactions in the financial market necessary for support of both "gray" and "black" economy.

It is clear that large banks in those condition are especially interested in emasculation of regulators both directly via financing of political campaigns and then forcing the appointment of cronies as heads of regulatory agencies and indirectly, providing "revolving door" for personnel in regulatory agencies.

The Real Regulatory Revolving Door

Corruption can be more subtle. A politician who looks to a career after political office knows that big companies can offer lucrative consultancies and directorships, but representing the public interest does not. Everyone who works in a regulatory agency knows that if they are well regarded in the industry, they are eligible for jobs in the private sector which are far more rewarding than employment in a public agency. At this point serving in government office became just a jumpstart for a career in private industry. And you no longer need to bribe such people. They will be willing accomplices without bribing.

A reader on Naked Vapitalism blog, who has first hand knowledge of some of the major US financial regulators wrote (Sep 2, 2009 | nakedcapitalism.com) about the problem with systemic corruption of lawyers who are working in regulatory agencies. Incentives to switch sides are way too strong and legal prohibitions for such behaviour are absent:

A reader who has first hand knowledge of some of the major US financial regulators flagged a CounterPunch article by Pam Martens as the best discussion of the “revolving door” problem that he had ever seen.

The interesting thing about this article is that it highlights a problem that is not widely recognized and therefore has no safeguards against it. As our correspondent explains:

The most important aspect of this is that the “revolving door” problem is most acute, not with the actual regulated firms, but with the professional firms that provide services to regulated entities, especially law firms (it is also a serious issue with compliance consulting firms, although that is something of a separate issue.)

One reason for that is that the standards are different for lawyers than for financial professionals. Financial professionals are forbidden from joining any company they have recently examined; but lawyers are forbidden only from working on cases they have had contact with –- there are no specific prohibitions on working for law firms that have cases that they have had contact with, as long as they don’t work on those cases (as if that could ever be enforced.)

That means that lawyers like Linda Thomsen, who as head of Enforcement would have been familiar with every case of significance, could go directly to work for a securities law firm already handling cases which she would most certainly have been familiar with, without Ethics making so much as a peep. I don’t know how that can be seen as anything other than a serious conflict of interest.

I strongly disagree with the argument that SEC lawyers have incentives to drop cases to curry favor with future employers. On the contrary; they have every incentive to break big cases, which is the stuff that careers are made of. And it is the law firms, not the financial firms, that will most likely be their future employers.

Where they do have an incentive, however, is to quickly settle those cases; they get credit for making the case, but the penalties inflicted are not enough to cripple the big Wall Street firms that (through the law firms they hire) will be the ultimate source of income for the lawyers after they move into the private sector. If they were to do nothing, they would be seen as incompetent, and nobody would hire them; but if they do too much, they disrupt the revenue stream that ultimately feeds the securities law industry.

A key section of the Martens article, which is worth reading in its entirety:

The team that produced this report on one of the most long-running and convoluted frauds [Madoff] in the history of Wall Street included Inspector General H. David Kotz who came to the SEC-IG post in December 2007 after five years as Inspector General and Associate General Counsel for the Peace Corps. The Deputy Inspector General, Noelle Frangipane, also came to the SEC from the Peace Corps where she had served as Director of Policy and Public Information.

This lack of Wall Street cronyism by the top two in the Inspector General’s office might have been refreshing to some in Congress and compensated for their not knowing the difference between puts and calls and peaks and troughs and the intricacies of Mr. Madoff’s split-strike conversion strategy (he splits with your money while converting you to a pauper). But the background of the member of the team heading up the Inspector General’s Office of Investigations, J. David Fielder, should have rang serious alarm bells to Congressional investigators.

For the ten years leading up to July 2007, J. David Fielder worked for the SEC as a Senior Counsel in the Division of Enforcement. In February 1999, he moved to the Division of Investment Management, first as Senior Counsel on the Task Force for Adviser Regulation, then as Advisor to the Director. In November 2000, SEC Chairman, Arthur Levitt, appointed Fielder Counsel to the Chairman.

In July 2007, Mr. Fielder was invited to join the corporate law firm, Haynes and Boone LLP, as a partner. In other words, Mr. Fielder’s government issue rolodex filled with the names, home numbers and email addresses of his colleagues at the SEC along with the investigatory matters in his head is deemed fungible currency among corporate law firms and can be freely exchanged for partner status, instantaneously moving one from the lowly wages and attendant lifestyle of public servant to the rarefied bracket and luxuriant trappings of corporate law firm partner.

But what happened next is where things get interesting. In March 2009, just as the SEC Inspector General was hot in pursuit of Madoff aiders and abettors, Mr. Fielder gave up his lucrative partner status at Haynes and Boone to accept the lowly post of Assistant Inspector General of Investigations, working under a boss from the Peace Corps. In other words, he gave up big bucks for a demotion at the SEC.

What Mr. Fielder did might not raise alarm bells were it not happening on a regular basis throughout the corridors of Washington and Wall Street. To understand the implications, this maneuver deserves an appropriate name. A revolving door is assumed to mean one gets all the right connections as a public servant and cashes them in to the highest bidder in private industry. That concept doesn’t typically entertain the door revolving back to public servant status. On Wall Street, they call a maneuver like that a round trip: you buy 100 shares and eventually sell the same 100 shares. You end up back where you started: a round trip.

Just how many lawyer round trippers are involved in the Madoff investigation? Enough to raise a strong stench of circular corruption.

Ina Pickle September 2, 2009 at 7:05 am

The correspondent may be right about a revolving door, but he is wrong about the ethical rules governing lawyers. You cannot work against the former client, not just on any cases you had before, but on any new cases. The client owns your loyalty for the rest of your professional life. The client can waive some conflicts, but not others.

So: the rules on lawyers are actually much stricter than the person thinks. Yes, you can SOMETIMES work for a firm that has the other side of a case or deal, provided that you are “chinese walled.” But that is really not common (probably more common in transactional law than litigation). Few lawyers and law firms are willing to take the risk of an accusation – these are career ending events if you were to break the confidence and accidentally share something that hurt the former client. Also, clients get royally pissed that you affiliated with somebody who works against them. What the correspondent doesn’t seem to realize is that the stricter rules tend to make you even more bound to the client because you can tend to be stuck to one large client in fields where competitors tend to sue each other. So in some fields, like oil and gas, a firm might work for several majors. In a field like investment banking, not so much.

With deals, companies will have their preferred lawyers and not change much. Also, the more you move your business around, the more you can block firms from helping your enemies. I have sometimes suspected that firms went on campaigns to sew up potential opposing counsel.

This is a little simplistic, but the person seems to have an overly negative idea of the ethics rules under which lawyers operate. Law firms take conflicts checks VERY seriously, as do individual lawyers. If practices around Wall Street have changed, it is out of necessity. Several investment banks *used* to be a hundred years old: that is a lot of conflicts history. And you would still have to get the clients’ consent.

I honestly believe in regulatory capture. But what you ought to ask yourself, perhaps, is how one can take graduates from the same two or three colleges and business schools, and expect different thinking from them if they are plopped into different work environments? They are still socializing with the same bunch educated at the same two schools, still living with those people, working with those people – but one group is supposed to be policing the other. If you ask me, take a look at everybody who went to Harvard over the past 25 years, and there is the start of your revolving door. The “elites” in all fields across the East Coast already have a lot in common before they start work.

LeeAnne September 2, 2009 at 7:17 am

So Felder has been rehired by the SEC after 2 years of orientation by the law firm Haynes and Boone LLP to become counter intelligence for the Madoff operation back at the SEC? Do we have an espionage thriller here?

A lawless industry fueled by political and regulatory capture would use more than just a few tools perfected by military and criminal organizations for covert activities.

I’m looking forward to an expose of the finance industry’s private investigation and para military organization hires with their personnel migration patterns.


DownSouth, September 2, 2009 at 7:43 am

Yves,

Reforming the polity at this point is more important than reforming the economy. If we attempt economic reform before political reform is accomplished, we’re just going to wind up with more disasters like the 2003 drug benefit for the elderly or the recent (and ongoing) bank bailout. What with Obama’s backroom deals with BigPharma that we already know about, plus heaven knows what else we don’t know about, the more astute observer can already see where healthcare reform is headed–huge benefits to powerful insiders, little benefit to the general good and huge cost to taxpayers.

I notice this post, along with a couple of other recent posts dealing with the Fourth Estate http://en.wikipedia.org/wiki/Fourth_Estate , deal more with political reform than with economic reform. I believe this is key, and I salute your efforts, as I am convinced that substantive economic reform is impossible without first achieving political reform.

The most radical creed of the American Revolution was that of the separation of Church and State. As Daniel Yankelovich put it, “the enemy was entrenched inherited privilege embodied in the church and in most branches of European royalty in collusion with each other.” Granted, the revolution was nominally against the British monarchy, but the Founding Fathers were acutely aware that the monarchy and the church were so inextricably interwoven as to be all but one and the same.

Today we face a similar problem, but instead of an unholy alliance between church and state, we have an equally pernicious alliance between major business corporations and state.

The first American revolution institutionalized the separation of church and state. I think we need a second American revolution that promulgates separation of big business and state.

You’ve already posted on a couple of the problem areas that require reform before the deathgrip that big business enjoys on the polity can be loosened. Let me repeat those and add a couple more (this is not meant to be a complete list):

• The Fourth Estate (the press, media)
• The Revolving Door
• Campaign Finance
• The Academe (and here I’m not just talking about the aberrant economics departments and their capture by business interests, but the equally perverse Nobel prize committee)

jake chase, September 2, 2009 at 1:05 pm

The truth about the SEC is not intuitive. One must have worked there as I did forty years ago (when, allegedly, it WAS enforcement minded) to understand that teh agency is a small army of bureaucrats who are simply biding their time either until retirement or escape to lucrative private practice. To the extent any enforcement takes place, it is directed against a fringle element of tin horn promoters, penny stock floggers, arrant confidence men whose pitches are so transparently idiotic that anyone falling for them really has only himself to blame. As for the top tier finaglers, they are strictly off limits. When a white shoe firm has a client with a problem, he calls the man at the top of the enforcement chain, who instructs the juniors accordingly.

Instead of this regulation tapdance, what we need to enforce honesty in business is integrity in the legal system. Unfortunately, we have defendant oriented federal judges who are universally hostile to shareholder interests, as well as state regulation which insulates management against liability in order to pile up franchise fees. Delaware is the leading culprit in this regard. The Congress could solve this problem by insisting upon federal charters for publicly traded corporations. They never will because the corporations will never permit it.

Back to the future

It looks like the USA is repeating all the mistake that were made in early XX century on a new level. During the 19th century, Washington was generally happy to do favors for Wall Street financiers. Railroad tycoons, who often used those railroads as vehicles of extravagant speculation, enjoyed subsidies, tax exemptions, loans, and a whole smorgasbord of financial fringe benefits supplied by pliable congressmen and senators (not to mention armadas of state and local officials).

But in 19th century when panic struck, the mighty, as well as the meek, went down with the ship. Washington felt no obligation to rush to the rescue. And there was blood on the floor.

By early in the 20th century, however, the savage anarchy of the financial marketplace had been at least partially domesticated under the reign of the greatest financier of them all, J P Morgan. Ever since the panic of 1907, the legend of Morgan's heroics in single-handedly stopping a meltdown that threatened to become worldwide, the iron discipline he imposed on more timorous bankers, has been told and re-told each time an analogous implosion looms. Back then, with Morgan performing his role as the nation's unofficial private central banker, president Teddy Roosevelt's administration continued to keep its distance from Wall Street, still unready to offer salvation to desperate financial oligarchs. Not normally sympathetic to Morgan and his crowd, Roosevelt did cheer from the sidelines as the uber-banker performed his rescue operation.

As it turned out, though, the days of Washington agnosticism about Wall Street were numbered. The economy had become too complex and delicate a mechanism and, in 1907, had come far too close to meltdown - even Morgan's efforts couldn't prevent several years of recession -- to leave financial matters entirely in the hands of the private sector. That's why Federal Reserve was established in 1913 under president Woodrow Wilson as a quasi-public authority meant to regulate the country's credit markets -- albeit one heavily influenced the country's principal bankers. That worked well enough until the Great Crash of 1929 and the Great Depression that followed and lasted until World War II.

President Franklin D Roosevelt's New Deal did, as a start, engage in some bail-out operations. The Reconstruction Finance Corporation, actually created by president Herbert Hoover, continued to rescue major railroads and other key businesses, while some of the New Deal's efforts to help homeowners also rewarded real estate interests. The main emphasis, however, switched to regulation. The Glass-Steagall Banking Act, the two laws of 1933 and 1934 regulating the stock exchange, the creation of the Securities and Exchange Commission, and other similar measures subjected the financial sector to fairly rigorous public supervision.

Actually, while Reagan administration get its due as as an initiator of the deregulatory binge, Clinton administration role in deregulation is often underestimated. For all practical purposes the OTC derivative dealers could be classified as RICO criminal enterprises since the early nineties. Frank Partnoy’s book, Infectious Greed provides an excellent summary up through 2002. Scot Griffin in his comment to “Wake Up, Gentlemen” ( The Baseline Scenario, Dec 15, 2009 noted:

The explanation for the perceived “flaw” is the recognition of the existence of regulatory capture. That is, the regulators were captured by the very businesses they were required to regulate. The regulators were puppets on a string dancing to the tune of the financial innovators. There was no separate regulatory innovation. It was lock-step by design.

Now, let’s assume there was no regulatory capture. What was the motivation for “regulatory innovation?” The answer is GDP growth.

There’s an argument that “It’s the economy, stupid!” the meme spawned by the first Clinton campaign, has had adverse consequences on the long term health of the economy by focusing government officials and regulators on an arbitrarily short cycle (e.g., 2 to 4 years) just as public corporations are. Again, extending the analogy (started above) of U.S. government as corporation, the voters are shareholders and they vote based on earnings growth. If you recognize that a lot of members of government have been involved in managing public corporations, it is easy to see how they can get caught up in this mentality.

Of course, one might argue correctly that this short-term focus existed long before Clinton.

Crisis of 2008 and disappearance of trust in Wall Street and government regulators

New Deal lasted for at least two political generations. When it was dismantles, the USA was on the sure path to step on the same rake again and again. And sure it stepped. Financial crisis of 2008 was a significant blow, that almost killed the American empire and set back the political influence of the USA almost to pre-WWII levels. The USA found itself almost in the USSR shoes when, like happened with communism in the USSR, the dominant ideology -- neoliberalism -- became a subject of nasty jokes.

In 2008 Wall Street, despite all the efforts of financial oligarchy, had been convicted in the court of public opinion of reckless, incompetent, self-interested, even felonious behavior with consequences so devastating for the rest of the country that government was licensed to make sure it didn't happen again.

In 2008 Wall Street, despite all the efforts of financial oligarchy, had been convicted in the court of public opinion of reckless, incompetent, self-interested, even felonious behavior with consequences so devastating for the rest of the country that government was licensed to make sure it didn't happen again.

Luckily for Wall Street, the financial oligarchy managed to replace Bush II with its Democratic copycat, right of the center senator Obama. Control of both Congress and presidency allowed them to avoid legal consequences of their actions.

But it is clear to everybody with IQ above 100 that the undoing of that New Deal regulatory regime, and its replacement, largely under Republican administrations (although Glass-Steagall was repealed on Bill Clinton's watch), with what some have called the "socialization of risk" has contributed in a major way to the mess we're in today.

Financial sector hypertrophy in the USA, while providing illusion of growth of GDP led to decimation of real economy, which has slipped into a coma as our resources and talents have gone into enriching the well-connected financiers. Jobless recoveries are natural side effect of this story. As Volker noted:

“I have found very little evidence that vast amounts of innovation in financial markets in recent years have had a visible effect on the productivity of the economy”.

In reality it was worse then Volker admitted. "Innovation" in the financial industry has had a negative effect on productivity because it sucks available investment money from socially productive, job creating sectors of the economy such as manufacturing. Another point is the intellectual capital “lost” to financial services. The outsize compensation has moved the best and the brightest to Wall Street, although you can argue whether they were really best and brightest based on the disastrous results of their activities. But the fact that physicians were leaving medicine for finance as well as physicists moving to hedge funds are undisputable.

Offloading of financial risk on taxpayers as a immanent feature on neoliberal regime in the USA

Neoliberal regime that was established in the USA in early 80th made the country legal framework (shredding New Deal regulations) and government behavior (corrupt administrations of Clinton and Bush II) extremely comfortable for financial oligarchy. Beginning with the massive bail-out of the savings and loan industry in the late 1980s, Washington committed itself, at least under conditions of acute crisis, to the policy of off-loading the risks taken by major financial institutions, no matter how irrationally speculative and wasteful, onto the backs of the American taxpaying public.

Beginning with the massive bail-out of the savings and loan industry in the late 1980s, Washington committed itself, at least under conditions of acute crisis, to off-loading the risks taken by major financial institutions, no matter how irrationally speculative and wasteful, onto the backs of the American taxpaying public.

Despite free market/anti-big-government rhetoric, real-life Washington has tacitly acknowledged the degree to which our national economy has become dependent on the financial sector (finance, insurance and real estate - or FIRE). And it will do whatever it takes to keep it afloat. The "socialization of risk" was accompanied by the "privatization of reward". This applies not only to particular institutions like Bear Stearns, or even to mortgage mega-firms like Fannie and Freddie, but to finance in general. When it seemed necessary, public monies were indeed funneled in the general direction of the banking/brokerage community to shore up the whole rickety structure. This allowed one burst bubble -- the dot-com debacle -- to be replaced by another, namely mortgage/collaterized-debt-obligation bubble. Blowing bubbles became substitute for real economy growth.

Backstopping the present bail-out is American taxpayer. Even while Washington was instituting the periodic "socialization" of bad debts, it was systematically abandoning the New Deal's commitment to regulation. That, of course, was in the very period when financial markets became more arcane due to introduction of computers.

It's time for a reversal of course. Stringent re-regulation of FIRE is not enough any more. Washington's mission may, at this late date, be an even more complex one than Roosevelt's faced when instituting New Deal. The government must figure out how to deploy its power to shift the flow of investment capital out of the minefields of speculative paper transactions back into productive channels. The attempt to ride the country of speculative activities of Wall Street, based on the role of dollar as the world reserve currency will fail. The country is just too big to be fed from this activities, and the other players will not be passive for long. Signs of activity in the direction of weakening of dollar role on international arena are visible both in Europe (despite its satellite status) and BRICS.

Instead of Conclusion: Not much hope


"I believe that the fraudulent nature of the GWOT (Global War on Terror) should be a key ingredient of any analysis of our political situation and it should be looked at as a part of the massive financial fraud of that period–the two are not separate. "

From comments, nakedcapitalism.com,
November 15, 2014 |

Current situation does not raise much hope. Looks like corruption of regulators will continue as a firmly established practice. As if it is a goal of the government to support it.

There is overwhelming evidence that those charged with regulating our financial system are simply in the bag of financial oligarchy, including our three most recent Presidents, nearly all Senators and Congressmen, as well as all prominent officials of the SEC, CFTC, Treasury Dept, Federal Reserve, and Agencies. All those revolving doors personalities. There appear to be individual exceptions (Ron Paul, Bernie Sanders), but they just confirm the rule.

Preserving regulatory capture seems to be one issue about which both parties are in complete agreement. Adopted after 2008 reforms are simply lipstick on the pig. The corruption is so deeply ingrained that no public official can be trusted to tell the truth about nation's real financial situation.

What will happen next? Nobody knows. But 401K investors had better understand this level of uncertainty, if not act on it, since now the safer an investment is advertized, the riskier it is likely turn to be. Recent bubble and then crash in TIPs is one telling example.

I think that due to systemic corruption of regulators stars are aligned against the US recovery, whatever it mean. As one commenter Econbrowser blog noted it might make sense to put money on the long term stagnation, Japanese style:

"The game is market manipulation to dilute the Hoi Polloi's credit holdings via interest rates below inflation. It is the same game as was played from the mid-1930's until the early 70's."


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[Apr 21, 2017] Elizabeth Warren on Big Banks and Their (Cozy Bedmate) Regulators - The New York Times

Apr 21, 2017 | www.nytimes.com

Wells Fargo 's board and management are scheduled to meet shareholders at the company's annual meeting Tuesday in Ponte Vedra Beach, Fla. With the phony account-opening scandal still making headlines , and the company's stock underperforming its peers, it's a good bet the bank's brass will have some explaining to do.

How could such pernicious practices at the bank be allowed for so long? Why didn't the board do more to stop the scheme or the incentive programs that encouraged it? And where, oh where, were the regulators?

Wells Fargo's management has conceded making multiple mistakes over many years; it also says it has learned from them. In a meeting this week with reporters at The New York Times, Timothy J. Sloan, Wells Fargo's chief executive, said the bank had made substantive changes to its structure and culture to ensure that dubious practices won't take hold again.

But there's a deeper explanation for why Wells Fargo's corrosive sales practices came about and continued for years. And it has everything to do with the bank-friendly regulatory regime in Washington and the immense sway that institutions like Wells Fargo have there. This poisonous combination contributes to a sense among giant banking institutions that they answer to no one.

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The capture of our regulatory and political system by big and powerful corporations is real. And it is a central and disturbing theme in the new book by Senator Elizabeth Warren , Democrat of Massachusetts.

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"This Fight Is Our Fight" contains juicy but depressing anecdotes about how our most trusted institutions have let us down. It also shows why, years after the financial crisis, big banks are still large, in charge and, basically, unaccountable for their actions.

"In too many of these organizations, there are rewards for cheating and punishments for calling out the cheaters," Ms. Warren said in an interview Wednesday. "As long as that's the case, the biggest financial institutions will continue to put their customers and the economy at risk."

Ms. Warren's no-nonsense views are bracing. But they are also informed by a thorough understanding of how dysfunctional Washington now is. This failure has cost Main Street dearly, she said, but has benefited the powerful.

Wells Fargo got a lot of criticism from Ms. Warren, both in her book and in my interview - and on live television during the Senate Banking Committee hearing on the account-opening mess in September. She was among the harshest cross-examiners encountered by John G. Stumpf, who was Wells Fargo's chief executive at the time. "You should resign," she told him , "and you should be criminally investigated." (Mr. Stumpf retired the next month.)

This week, Ms. Warren called for the ouster of the company's directors and a criminal inquiry into the bank.

"Yes, the board should be removed, but that's not enough," she told me. "There still needs to be a criminal investigation. The expertise is in the regulatory agencies, but the power to prosecute lies mostly with the Justice Department, and if they don't have either the energy or the talent - or the backbone - to go after the big banks, then there will never be any real accountability."

Banks are not the only targets in Ms. Warren's book. Others include Wal-Mart, for its treatment of employees; for-profit education companies, for the way they pile debt on unsuspecting students; the Chamber of Commerce, for battling Main Street; and prestigious think tanks, for their undisclosed conflicts of interest.

My favorite moments in the book involve the phenomenon of regulatory capture: the pernicious condition in which institutions that are supposed to police the nation's financial behemoths actually come to view them as clients or pals.

Photo

One telling moment took place in 2005, when Ms. Warren, then a Harvard law professor, was invited to address the staff at the Office of the Comptroller of the Currency, a top regulator charged with monitoring the activities of big banks.

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She was thrilled by the invitation, she recalled in the book. After years of tracking various problems consumers experienced with their banks - predatory lending, sky-high interest rates and dubious fees - Ms. Warren felt that, finally, she'd be able to persuade the regulators to crack down.

Her host for the meeting was Julie L. Williams, then the acting comptroller of the currency. In a conference room filled with economists and bank supervisors, Ms. Warren presented her findings: Banks were tricking and cheating their consumers.

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After the meeting ended and Ms. Williams was escorting her guest to the elevator, she told Ms. Warren that she had made a "compelling case," Ms. Warren writes. When she pushed Ms. Williams to have her agency do something about the dubious practices, the regulator balked.

"No, we just can't do that," Ms. Williams said, according to the book. "The banks wouldn't like it."

Ms. Warren was not invited back.

Ms. Williams left the agency in 2012 and is a managing director at Promontory , a regulatory-compliance consulting firm specializing in the financial services industry. When I asked about her conversation with Ms. Warren, she said she had a different recollection.

"I told her I agreed with her concerns," Ms. Williams wrote in an email, "but when I said, 'We just can't do that,' I explained that was because the Comptroller's office did not have jurisdiction to adopt rules to ban the practice. I told her this was the Federal Reserve Board's purview."

Interestingly, though, Ms. Warren's take on regulatory capture at the agency was substantiated in a damning report on its supervision of Wells Fargo, published by a unit of the Office of the Comptroller of the Currency on Wednesday.

The report cited a raft of agency oversight breakdowns regarding Wells Fargo. Among them was its failure to follow up on a slew of consumer and employee complaints beginning in early 2010. There was no evidence, the report said, that agency examiners "required the bank to provide an analysis of the risks and controls, or investigated these issues further to identify the root cause and the appropriate supervisory actions needed."

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Neither did the agency document the bank's resolution of whistle-blower complaints, the report said, or conduct in-depth reviews and tests of the bank's controls in this area "at least from 2011 through 2014." ( The agency recently removed its top Wells Fargo examiner, Bradley Linskens, from his job running a staff of 60 overseeing the bank.)

"Regulatory failure has been built into the system," Ms. Warren said in our interview. "The regulators routinely hear from the banks. They hear from those who have billions of dollars at stake. But they don't hear from the millions of people across this country who will be deeply affected by the decisions they make."

This is why the Consumer Financial Protection Bureau plays such a crucial role, she said. The agency allows consumers to sound off about their financial experiences, and their complaints provide a heat map for regulators to identify and pursue wrongdoing.

But this setup has also made the bureau a target for evisceration by bank-centric politicians.

"There was a time when everything that went through Washington got measured by whether it created more opportunities for the middle class," Ms. Warren said. "Now, the people with money and power have figured out how to invest millions of dollars in Washington and get rules that yield billions of dollars for themselves."

"Government," she added, "increasingly works for those at the top."

[Apr 06, 2017] Richmond Fed's Jeffrey Lacker Departs Due to Leak Defenestration as Coverup

Apr 06, 2017 | www.nakedcapitalism.com
From a trading perspective, the big news was at the top: "The minutes will show it will be unlikely that the labor market improvement will be substantial enough to stave off new Treasury purchases into 2013." And in the sixth paragraph it describes how the Fed was likely to vote as early as December to stop the part of its MBS buying designed to counter the bonds being paid off (due to foreclosures, home sales, refis) and buy roughly $45 billion a month of Treasuries instead.

The amount of granular detail was stunning. For instance:

The committee will attach a predictive timetable outlining the duration of these purchases The monthly MBS purchases of around $40 billion will continue along side the new program Tomorrow's minutes will reference a staff paper The minutes will show the dovish majority was ready .[to make] open ended MBS and Treasury purchases as early as last month.

This is so specific that it comes of as if Medley either got its hands on an advance draft of the FOMC minutes or someone read it to her.

The report also describes, again in depth, how the decision process prior to the September meeting departed from established norms as well as voyeristic tidbits, such as that finalizing the text of the policy recommendations kept staffers up until after midnight.

Given how extraordinarily revealing this note was, Lacker's departure is unsatisfactory. Specifically:

Either Lacker lied or the investigators aren't even close to getting to the bottom of this . Lacker has admitted only to taking a call from the Medley analyst, supposedly having her run insider detail by him, and indirectly confirming it by not getting off the phone. From his resignation letter, which was released by law firm McGuireWoods, not the Richmond Fed:

During that October 2, 2012 discussion, the [Medley] Analyst introduced into the conversation an important non-public detail about one of the policy options considered by participants prior to the meeting. Due to the highly confidential and sensitive nature of this information, I should have declined to comment and perhaps have ended the phone call. Instead, I did not refuse or express my inability to comment and the interview continued. Additionally, after that phone call, I did not, as required by the Information Security Policy, report to any FOMC personnel that the Analyst was in possession of confidential FOMC information. When Medley published a report by the Analyst the following day, October 3, 2012, it contained this important detail about one of the policy options and I realized that my failure to decline comment on the information could have been taken by the Analyst, in the context of the conversation, as an acknowledgment or confirmation of the information.

This reads like the equivalent of a plea bargain, that Lacker and his lawyers negotiated him to 'fess up to the most minimal breach possible provided he resign.

Alternatively, if Lacker is being truthful, it means that one or more additional people provided the information to the Medley analyst, Regina Schleiger.

[Apr 04, 2017] Lack Hawk Down

Apr 04, 2017 | jessescrossroadscafe.blogspot.com

The Richmond Fed's noted rate hawk and serial dissenter Jeffrey Lacker resigned today as a result of an investigation into a leak in 2012 of confidential information to an analyst that sells hard to get information to wealthy subscribers.

The guest commentators, talking heads, and spokesmodels were attributing this resignation, or faux pas if you will, to an inadvertent slip by one of their own who is burdened with managing the finances of the US.

They kept mentioning that they do not wish this incident to diminish the public's confidence in the FED. I guess fomenting serial asset bubbles and enabling historic financial inequality through hare-brained policies is not enough. LOL

[Apr 04, 2017] Richmond Fed president, Jeff Lacker Quits Today After Improper Disclosure of QE to analyst at firm selling research to hedge funds

Apr 04, 2017 | economistsview.typepad.com
BenIsNotYoda April 04, 2017 at 10:25 AM
https://www.bloomberg.com/news/articles/2017-04-04/fed-s-lacker-quits-today-after-improper-disclosure-ny-times

Fed's Lacker Quits Today After Improper Disclosure: NY Times
Richmond Fed president, Jeff Lacker, says he is resigning effective today after improperly disclosing confidential Fed information, NY Times said in tweet.

Fed President involved in disclosing future QE to analyst at firm selling research to hedge funds.

In other places, this is called insider information. At the Fed? I am shocked there is gambling at this establishment.

We need to clean house at the Fed. Starting at the top.

BenIsNotYoda , April 04, 2017 at 10:41 AM
Statement Of Dr. Jeffrey Lacker

During the past 13 years it has been my privilege to serve as President of the Federal Reserve Bank of Richmond. It has also been an honor to contribute to the development of our nation's monetary policy as a member of the Federal Reserve's Federal Open Market Committee ("FOMC").

While transparency of the monetary policy process is important, equally important are the confidentiality policies that protect the internal deliberations of the FOMC and ensure the integrity of our financial markets. The Federal Reserve's confidentiality policies seek to guide participants in maintaining the balance between transparency and confidentiality. The FOMC has had in place for many years two specific policies relating to confidentiality. the FOMC Policy on External Communications of Committee Participants (the "External Communications Policy-) and the Program for Security of FOMC Information (the "Information Security Policy").

In 2012, my conduct was inconsistent with those important confidentiality policies. Specifically, on October 2, 2012, I spoke by phone with an analyst ("the Analyst") concerning the September 2012 meeting of the FOMC. The Analyst authors reports on Federal Reserve matters on behalf of Medley Global Advisors ("Medley'). Medley publishes macro-economic policy intelligence for institutions such as hedge funds and asset managers and is owned by the Financial Times Limited.

During that October 2, 2012 discussion, the Analyst introduced into the conversation an important non-public detail about one of the policy options considered by participants prior to the meeting. Due to the highly confidential and sensitive nature of this information, I should have declined to comment and perhaps have ended the phone call. Instead, I did not refuse or express my inability to comment and the interview continued. Additionally, after that phone call I did not, as required by the Information Security Policy, report to any FOMC personnel that the Analyst was in possession of confidential FOMC information. When Medley published a report by the Analyst the following day, October 3, 2012, it contained this important detail about one of the policy options and I realized that my failure to decline comment on the information could have been taken by the Analyst, in the context of the conversation, as an acknowledgment or confirmation of the information.

I deeply regret the role I may have played in confirming this confidential information and in its dissemination to Medley's subscribers. In this episode, as in all of my communications with analysts, journalists and the public, it was never my intention to reveal confidential information. I further acknowledge that through this and other conversations with the Analyst, I may have contravened the External Communications Policy, which prohibits providing any profit-making person or organization with a prestige advantage over its competitors.

Following these events, I was interviewed on December 10, 2012, as part of an internal review conducted by the General Counsel of the FOMC. In advance of that interview, on December 6, 2012, I provided written responses to a questionnaire issued by the General Counsel seeking, among other things, all relevant information regarding my communications with the Analyst. Althoug it was my intention to cooperate fully with the internal review, I regret that I did not disclose to the General Counsel, either in my December 6, 2012 questionnaire or the December 10, 2012 interview, that the Analyst was in possession of confidential information during my conversation with her on October 2,2012.

In 2015, I was interviewed again as part of a separate investigation conducted by the United States Attorney's Office for the Southern District of New York, the Office of the Inspector General of the Federal Reserve Board, the Federal Bureau of Investigation, and the U.S. Commodity Futures Trading Commission. In this subsequent 2015 interview with law enforcement officials, I did disclose that the Analyst was in possession of confidential information during my October 2. 2012 conversation with her.

I apologize to my colleagues and to the public I have been privileged to serve. I have always strived to maintain the appropriate balance between transparency and confidentiality, but I regret that in this instance I crossed the line to confirming information that should have remained confidential. I previously announced my intention to retire as President of the Federal Reserve Bank of Richmond in October 2017, and in light of these matters I have decided to make my departure from the Federal Reserve effective today.

libezkova , April 04, 2017 at 11:26 AM
"Fed President involved in disclosing future QE to analyst at firm selling research to hedge funds."

"I am shocked there is gambling at this establishment."

That's good ! Thank you !

Now let me wear Anne hat :-). The proper quote is "I'm shocked, shocked to find that gambling is going on in here! "

http://www.imdb.com/title/tt0034583/quotes?ref_=tt_ql_trv_4

== quote ==
Rick: How can you close me up? On what grounds?

Captain Renault:
I'm shocked, shocked to find that gambling is going on in here!
[a croupier hands Renault a pile of money]

Croupier: Your winnings, sir.

Captain Renault: [sotto voce] Oh, thank you very much.

[aloud]

Captain Renault: Everybody out at once!

[Mar 09, 2017] DrDick

Mar 09, 2017 | profile.typepad.com
said... The ProMarket piece is interesting, but really misses the point. "Regulation" in itself is not what matters, but rather what kinds of regulations and how they work. Some regulations, favored by the industries themselves (like taxi licensing in most metropolitan areas) tend to act to reduce competition and enhance company profits. Others, like the background checks mentioned in the article, serve to protect the public interest. Reply Thursday, March 09, 2017 at 07:42 AM Youarecorrect said in reply to DrDick ... You are correct to point out that a catchall phrase like regulation disguises many intentions. But there is a tension between motivations of regulation. A regulation that is supposed to increase reliability (e.g. vetting of entrants), can be essentially a rent seeking tool in disguise. That's the point of the ProMarket article. Reply Thursday, March 09, 2017 at 11:27 AM DrDick said in reply to Youarecorrect... This is really a question of looking at who is proposing or favoring the regulation and how it is structured and thus whose interests are being protected. If it is coming from established businesses, it is about rent seeking. Reply Thursday, March 09, 2017 at 01:53 PM

[Feb 20, 2017] Problems of asymmetry in regulation: People who especially benefit from a particular regulation will be inclined to lobby or bribe government officials for it

Feb 20, 2017 | economistsview.typepad.com

Richard H. Serlin : February 18, 2017 at 07:51 PM

"Mr. Friedman underscored problems of asymmetry in regulation: People who especially benefit from a particular regulation will be inclined to lobby or bribe government officials for it. On the other hand, members of the general public, who might suffer from such regulations, will not be attentive to the many rules that affect them, each in a small way." -- Shiller article

This is the same Milton Friedman who assumed people had perfect information and expertise on everything in the market. They were all electrical engineers who knew the exact schematics of every toaster and refrigerator to know if it would burn down their house, but they had no idea what any government regulations or policies were -- Hey, it's ok, and so scientific, to just assume anything you want about human beings, as long as there's lots of math and internal consistency and microfoundations -- And, of course, it makes libertarianism look better.

[Dec 27, 2016] Class Struggle In The USA

Notable quotes:
"... Rich individuals (who are willing to be interviewed) also express concern about inequality but generally oppose using higher taxes on the rich to fight it. Scheiber is very willing to bluntly state his guess (and everyone's) that candidates are eager to please the rich, because they spend much of their time begging the rich for contributions. ..."
"... Of course another way to reduce inequality is to raise wages. Buried way down around paragraph 9 I found this gem: "Forty percent of the wealthy, versus 78 percent of the public, said the government should make the minimum wage "high enough so that no family with a full-time worker falls below the official poverty line." ..."
"... The current foundational rules embedded in tax law, intellectual property law, corporate construction law, and other elements of our legal and regulatory system result in distributions that favor those with capital or in a position to seek rents. This isn't a situation that calls for a Robin Hood who takes from the rich and gives to the poor. It is more a question of how elites have rigged the system to work primarily for them. ..."
"... the problem is incomes and demand, and the first and best answer for creating demand for workers and higher wages to compete for those workers is full employment. ..."
"... if you are proposing raising taxes on the rich SO THAT you can cut taxes on the non rich you are simply proposing theft. ..."
"... what we are looking at here is simple old fashioned greed just as stupid and ugly among the "non rich" as it is among the rich. ..."
"... you play into the hands of the Petersons who want to "cut taxes" and leave the poor elderly to die on the streets, and the poor non-elderly to spend their lives in anxiety and fear-driven greed trying to provide against desperate poverty in old age absent any reliable security for their savings.) ..."
"... made by the ayn rand faithful. it is wearisome. ..."
"... The only cure for organized greed is organized labor. ..."
"... A typical voice of American politics is the avoidance of saying anything real on real issues" ..."
Mar 29, 2015 | Angry Bear

Noam Scheiber has a hard hitting article on the front page of www.nytimes.com "2016 Candidates and Wealthy Are Aligned on Inequality"

The content should be familiar to AngryBear readers. A majority of Americans are alarmed by high and increasing inequality and support government action to reduce inequality. However, none of the important 2016 candidates has expressed any willingness to raise taxes on the rich. The Republicans want to cut them and Clinton (and a spokesperson) dodge the question.

Rich individuals (who are willing to be interviewed) also express concern about inequality but generally oppose using higher taxes on the rich to fight it. Scheiber is very willing to bluntly state his guess (and everyone's) that candidates are eager to please the rich, because they spend much of their time begging the rich for contributions.

No suprise to anyone who has been paying attention except for the fact that it is on the front page of www.nytimes.com and the article is printed in the business section not the opinion section. Do click the link - it is brief, to the point, solid, alarming and a must read.

I clicked one of the links and found weaker evidence than I expected for Scheiber's view (which of course I share

"By contrast, more than half of Americans and three-quarters of Democrats believe the "government should redistribute wealth by heavy taxes on the rich," according to a Gallup poll of about 1,000 adults in April 2013."

It is a small majority 52% favor and 47% oppose. This 52 % is noticeably smaller than the solid majorities who have been telling Gallup that high income individuals pay less than their fair share of taxes (click and search for Gallup on the page).

I guess this isn't really surprising - the word "heavy" is heavy maaaan and "redistribute" evokes the dreaded welfare (and conservatives have devoted gigantic effort to giving it pejorative connotations). The 52% majority is remarkable given the phrasing of the question. But it isn't enough to win elections, since it is 52% of adults which corresponds to well under 52% of actual voters.

My reading is that it is important for egalitarians to stress the tax cuts for the non rich and that higher taxes on the rich are, unfortunately, necessary if we are to have lower taxes on the non rich without huge budget deficits. This is exactly Obama's approach.

Comments (87)

Jerry Critter

March 29, 2015 10:40 pm

Get rid of tax breaks that only the wealthy can take advantage of and perhaps everyone will pay their fair share. The same goes for corporations.

amateur socialist

March 30, 2015 11:42 am

Of course another way to reduce inequality is to raise wages. Buried way down around paragraph 9 I found this gem: "Forty percent of the wealthy, versus 78 percent of the public, said the government should make the minimum wage "high enough so that no family with a full-time worker falls below the official poverty line."

I'm fine with raising people's taxes by increasing their wages. A story I heard on NPR recently indicated that a single person needs to make about $17-19 an hour to cover most basic necessities nowadays (the story went on to say that most people in that situation are working 2 or more jobs to get enough income, a "solution" that creates more problems with health/stress etc.). A full time worker supporting kids needs more than $20.

You double the minimum wage and strengthen people's rights to organize union representation. Tax revenues go up (including SS contributions btw) and we add significant growth to the economy with the increased purchasing power of workers. People can go back to working 40-50 hours a week and cut back on moonlighting which creates new job opportunities for the younger folks decimated by this so called recovery.

Win Win Win Win. And the poor overburdened millionaires don't have to have their poor tax fee fees hurt.

Mark Jamison, March 30, 2015 8:09 pm

How about if we get rid of the "re" and call it what it is "distribution". The current foundational rules embedded in tax law, intellectual property law, corporate construction law, and other elements of our legal and regulatory system result in distributions that favor those with capital or in a position to seek rents.

This isn't a situation that calls for a Robin Hood who takes from the rich and gives to the poor. It is more a question of how elites have rigged the system to work primarily for them. Democrats cede the rhetoric to the Right when they allow the discussion to be about redistribution. Even talk of inequality without reference to the basic legal constructs that are rigged to create slanted outcomes tend to accepted premises that are in and of themselves false.

The issue shouldn't be rejiggering things after the the initial distribution but creating a system with basic rules that level the opportunity playing field.

coberly, March 30, 2015 11:03 pm

Thank You Mark Jamison!

An elegant, informed writer who says it better than I can.

But here is how I would say it:

Addressing "inequality" by "tax the rich" is the wrong answer and a political loser.

Address inequality by re-criminalizing the criminal practices of the criminal rich. Address inequality by creating well paying jobs with government jobs if necessary (and there is necessary work to be done by the government), with government protection for unions, with government policies that make it less profitable to off shore

etc. the direction to take is to make the economy more fair . actually more "free" though you'll never get the free enterprise fundamentalists to admit that's what it is. You WILL get the honest rich on your side. They don't like being robbed any more than you do.

But you will not, in America, get even poor people to vote to "take from the rich to give to the poor." It has something to do with the "story" Americans have been telling themselves since 1776. A story heard round the world.

That said, there is nothing wrong with raising taxes on the rich to pay for the government THEY need as well as you. But don't raise taxes to give the money to the poor. They won't do it, and even the poor don't want it except as a last resort, which we hope we are not at yet.

urban legend, March 31, 2015 2:07 am

Coberly, you are dead-on. Right now, taxation is the least issue. Listen to Jared Bernstein and Dean Baker: the problem is incomes and demand, and the first and best answer for creating demand for workers and higher wages to compete for those workers is full employment. Minimum wage will help at the margins to push incomes up, and it's the easiest initial legislative sell, but the public will support policies - mainly big-big infrastructure modernization in a country that has neglected its infrastructure for a generation - that signal a firm commitment to full employment.

It's laying right there for the Democrats to pick it up. Will they? Having policies that are traditional Democratic policies will not do the job. For believability - for convincing voters they actually have a handle on what has been wrong and how to fix it - they need to have a story for why we have seem unable to generate enough jobs for over a decade. The neglect of infrastructure - the unfilled millions of jobs that should have gone to keeping it up to date and up to major-country standards - should be a big part of that story. Trade and manufacturing, to be sure, is the other big element that will connect with voters. Many Democrats (including you know who) are severely compromised on trade, but they need to find a way to come own on the right side with the voters.

coberly, March 31, 2015 10:52 am

Robert

i wish you'd give some thought to the other comments on this post.

if you are proposing raising taxes on the rich SO THAT you can cut taxes on the non rich you are simply proposing theft. if you were proposing raising taxes on the rich to provide reasonable welfare to those who need it you would be asking the rich to contribute to the strength of their own country and ultimately their own wealth.

i hope you can see the difference.

it is especially irritating to me because many of the "non rich" who want their taxes cut make more than twice as much as i do. what we are looking at here is simple old fashioned greed just as stupid and ugly among the "non rich" as it is among the rich.

"the poor" in this country do not pay a significant amount of taxes (Social Security and Medicare are not "taxes," merely an efficient way for us to pay for our own direct needs . as long as you call them taxes you play into the hands of the Petersons who want to "cut taxes" and leave the poor elderly to die on the streets, and the poor non-elderly to spend their lives in anxiety and fear-driven greed trying to provide against desperate poverty in old age absent any reliable security for their savings.)

Kai-HK, April 4, 2015 12:23 am

coberly,

Thanks for your well-reasoned response.

You state, 'i personally am not much interested in the "poor capitalist will flee the country if you tax him too much." in fact i'd say good riddance, and by the way watch out for that tarriff when you try to sell your stuff here.'

(a) What happens after thy leave? Sure you can get one-time 'exit tax' but you lose all the intellectual capital (think of Bill Gates, Warren Buffet, or Steve Jobs leaving and taking their intellectual property and human capital with them). These guys are great jobs creators it will not only be the 'bad capitalists' that leave but also many of the 'job creating' good ones.

(b) I am less worried about existing job creating capitalists in America; what about the future ones? The ones that either flee overseas and make their wealth there or are already overseas and then have a plethora of places they can invest but why bother investing in the US if all they are going to do is call me a predator and then seize my assets and or penalise me for investing there? Right? It is the future investment that gets impacted not current wealth per se.

You also make a great point, 'the poor are in the worst position with respect to shifting their tax burden on to others. the rich do it as a matter of course. it would be simpler just to tax the rich there are fewer of them, and they know what is at stake, and they can afford accountants. the rest of us would pay our "taxes" in the form of higher prices for what we buy.'

Investment capital will go where it is best treated and to attract investment capital a market must provide a competitive return (profit margin or return on investment). Those companies and investment that stay will do so because they are able to maintain that margin .and they will do so by either reducing wages or increasing prices. Where they can do neither, their will exit the market.

That is why, according to research, a bulk of the corporate taxation falls on workers and consumers as a pass-on effect. The optimum corporate tax is 0. This will be the case as taxation increases on the owners of businesses and capital .workers, the middle class, and the poor pay it. The margins stay competitive for the owners of capital since capital is highly mobile and fungible.Workers and the poor less so.

But thanks again for the tone and content of your response. I often get attacked personally for my views instead of people focusing on the issue. I appreciate the respite.

K

coberly, April 4, 2015 12:34 pm

kai

yes, but you missed the point.

i am sick of the whining about taxes. it takes so much money to run the country (including the kind of pernicious poverty that will turn the US into sub-saharan africa. and then who will buy their products.

i can't do much about the poor whining about taxes. they are just people with limited understanding, except for their own pressing needs. the rich know what the taxes are needed for, they are just stupid about paying them. of course they would pass the taxes through to their customers. the customers would still buy what they need/want at the new price. leaving everyone pretty much where they are today financially. but the rich would be forced to be grownup about "paying" the taxes, and maybe the politics of "don't tax me tax the other guy" would go away.

as for the sainted bill gates. there are plenty of other people in this country as smart as he is and would be happy to sell us computer operating systems and pay the taxes on their billion dollars a year profits.

nothing breaks my heart more than a whining millionaire.

Kai-HK

April 4, 2015 11:32 pm

Sure I got YOUR point, it just didn't address MY points as put forth in MY original post. And it still doesn't.

More importantly, you have failed to defend YOUR point against even a rudimentary challenge.

K

coberly, April 5, 2015 12:45 pm

kai,

rudimentary is right.

i have read your "points" about sixteen hundred times in the last year alone. made by the ayn rand faithful. it is wearisome.

and i have learned there is no point in trying to talk to true believers.

William Ryan, May 13, 2015 4:43 pm

Thanks again Coberly for your and K's very thoughtful insight. You guys really made me think hard today and I do see your points about perverted capitalism being a big problem in US. I still do like the progressive tax structure and balanced trade agenda better.

I realize as you say that we cannot compare US to Hong Kong just on size and scale alone. Without all the obfuscation going Lean by building cultures that makes people want to take ownership and sharing learning and growing together is a big part of the solution Ford once said "you cannot learn in school what the world is going to do next".

Also never argue with an idiot. They will bring you down to their level then beat you with experience. The only cure for organized greed is organized labor. It's because no matter what they do nothing get done about it. With all this manure around there must be a pony somewhere! "

Last one.

coberly , May 16, 2015 9:57 pm

kai

as a matter of fact i disagree with the current "equality" fad at least insofar as it implies taking from the rich and giving to the poor directly.

i don't believe people are "equal" in terms of their economic potential. i do beleive they are equal in terms of being due the respect of human beings.

i also believe your simple view of "equality" is a closet way of guarantee that the rich can prey upon the poor without interruption.

humans made their first big step in evolution when they learned to cooperate with each other against the big predators.

Jerry Critter, May 17, 2015 12:10 am

it is mildly progressive up to about $75,000 per year where the rate hits 30%. But from there up to $1.542 million the rate only increases to 33.3%.

I call that very flat!

Jerry Critter, May 17, 2015 11:20 am

"i assume there are people in this country who are truly poor. as far as i know they don't pay taxes."

Read my reference and you will see that the "poor" indeed pay taxes, just not much income tax because they don't have much income. You are fixated on income when we should be considering all forms of taxation.

Jerry Critter, May 17, 2015 9:25 pm

Oh Kai, cut the crap. Paying taxes Is nothing like slavery. My oh my, how did we ever survive with a top tax rate of around 90%, nearly 3 times the current rate? Some people would even say that the economy then was pretty great and the middle class was doing terrific. So stop the deflection and redirection. I think you just like to see how many words you can write. Sorry, but history is not on your side.

[Dec 22, 2016] Regulatory Capture 101

It's not regulation per se is deficient, it is regulation under neoliberal regime, were government is captured by financial oligarchy ;-). But that understanding is foreign to WSJ with its neoliberal agenda :-(.
Notable quotes:
"... Impressionable journalists finally meet George Stigler. ..."
"... The secret recordings were made by Carmen Segarra, who went to work as an examiner at the New York Fed in 2011 but was fired less than seven months later in 2012. She has filed a wrongful termination lawsuit against the regulator and says Fed officials sought to bury her claim that Goldman had no firm-wide policy on conflicts-of-interest. Goldman says it has had such policies for years, though on the same day Ms. Segarra's revelations were broadcast, the firm added new restrictions on employees trading for their own accounts. ..."
"... On the recordings, regulators can be heard doing what regulators do-revealing the limits of their knowledge and demonstrating their reluctance to challenge the firms they regulate. At one point Fed officials suspect a Goldman deal with Banco Santander may have been "legal but shady" in the words of one regulator, and should have required Fed approval. But the regulators basically accept Goldman's explanations without a fight. ..."
"... The journalists have also found evidence in Ms. Segarra's recordings that even after the financial crisis and the supposed reforms of the Dodd-Frank law, the New York Fed remained a bureaucratic agency resistant to new ideas and hostile to strong-willed, independent-minded employees. In government? ..."
"... "as a rule, regulation is acquired by the industry and is designed and operated primarily for its benefit." ..."
"... Once one understands the inevitability of regulatory capture, the logical policy response is to enact simple laws that can't be gamed by the biggest firms and their captive bureaucrats. ..."
"... And it means considering economist Charles Calomiris's plan to automatically convert a portion of a bank's debt into equity if the bank's market value falls below a healthy level. ..."
Oct 05, 2014 | Casino Capitalism and Crapshoot Politics
Regulatory Capture 101

Impressionable journalists finally meet George Stigler.

The financial scandal du jour involves leaked audio recordings that purport to show that regulators at the Federal Reserve Bank of New York were soft on Goldman Sachs . Say it ain't so.

... ... ...

The secret recordings were made by Carmen Segarra, who went to work as an examiner at the New York Fed in 2011 but was fired less than seven months later in 2012. She has filed a wrongful termination lawsuit against the regulator and says Fed officials sought to bury her claim that Goldman had no firm-wide policy on conflicts-of-interest. Goldman says it has had such policies for years, though on the same day Ms. Segarra's revelations were broadcast, the firm added new restrictions on employees trading for their own accounts.

The New York Fed won against Ms. Segarra in district court, though the case is on appeal. The regulator also notes that Ms. Segarra "demanded $7 million to settle her complaint." And last week New York Fed President William Dudley said, "We are going to keep striving to improve, but I don't think anyone should question our motives or what we are trying to accomplish."

On the recordings, regulators can be heard doing what regulators do-revealing the limits of their knowledge and demonstrating their reluctance to challenge the firms they regulate. At one point Fed officials suspect a Goldman deal with Banco Santander may have been "legal but shady" in the words of one regulator, and should have required Fed approval. But the regulators basically accept Goldman's explanations without a fight.

The sleuths at the ProPublica website, working with a crack team of investigators from public radio, also seem to think they have another smoking gun in one of Ms. Segarra's conversations that was not recorded but was confirmed by another regulator. Ms. Seest means. For example, a company offering securities is exempt from some registration requirements if it is only selling to accredited investors, such as people with more than $1 million in net worth, excluding the value of primary residences.

The journalists have also found evidence in Ms. Segarra's recordings that even after the financial crisis and the supposed reforms of the Dodd-Frank law, the New York Fed remained a bureaucratic agency resistant to new ideas and hostile to strong-willed, independent-minded employees. In government?

***

Enter George Stigler, who published his famous essay "The Theory of Economic Regulation" in the spring 1971 issue of the Bell Journal of Economics and Management Science. The University of Chicago economist reported empirical data from various markets and concluded that "as a rule, regulation is acquired by the industry and is designed and operated primarily for its benefit."

Stigler knew he was fighting an uphill battle trying to persuade his fellow academics. "The idealistic view of public regulation is deeply imbedded in professional economic thought," he wrote. But thanks to Stigler, who would go on to win a Nobel prize, many economists have studied the operation and effects of regulation and found similar results.

A classic example was the New York Fed's decision to let Citigroup stash $1.2 trillion of assets-including more than $600 billion of mortgage-related securities-in off-balance-sheet vehicles before the financial crisis. That's when Tim Geithner ran the New York Fed and Jack Lew was at Citigroup.

Once one understands the inevitability of regulatory capture, the logical policy response is to enact simple laws that can't be gamed by the biggest firms and their captive bureaucrats. This means repealing most of Dodd-Frank and the so-called Basel rules and replacing them with a simple requirement for more bank capital-an equity-to-asset ratio of perhaps 15%. It means bringing back bankruptcy for giant firms instead of resolution at the discretion of political appointees. And it means considering economist Charles Calomiris's plan to automatically convert a portion of a bank's debt into equity if the bank's market value falls below a healthy level.

GS4

[Nov 19, 2016] What Did Draghi Know About Potential Loss And Abuses At Italys Largest Bank

Notable quotes:
"... Apparently lax and/or incompetent regulation of systemically important banks by bureaucrats, central bankers, and politicians may not be just a recent American phenomenon. ..."
"... He related how he was not only ignored by his bank, the Irish regulator but also all the major political parties. He then pointed out that the Irish regulator claims that it always – and it is the law after all – informs the regulator of the home country of banks which have subsidiaries in Ireland, about any serious problems. ..."
"... Mr Sugarman suggested Mr Draghi should be asked point-blank of he did or if he did not know . If he did not then the Irish regulator was at least incompetent, and may have lied, misled and perhaps even broken Irish laws. If he was told and did know, then Mr Draghi has serious questions to answer regarding his own dereliction of duty. ..."
Nov 19, 2016 | www.zerohedge.com
Via Jesse's Cafe Americain blog,

Apparently lax and/or incompetent regulation of systemically important banks by bureaucrats, central bankers, and politicians may not be just a recent American phenomenon.

As we read this, it could imperil the soundness of the financial system in Europe as well, as is still apparently the case with The Banks in the states, despite assurances to the contrary.

Golem XIV asks some very good questions in the article below, recently posted on his blog here.

Whistleblowers Testify in EU Parliament

Yesterday a very high-powered panel of international banking whistleblowers met and told their stories in the European parliament . The questions raised were important. Among them was the Irish Whistleblower, Jonathan Sugarman, who when UniCredit Ireland was breaking the law in very serious ways reported it to the Irish regulator.

He related how he was not only ignored by his bank, the Irish regulator but also all the major political parties. He then pointed out that the Irish regulator claims that it always – and it is the law after all – informs the regulator of the home country of banks which have subsidiaries in Ireland, about any serious problems.

In the case of UniCredit that would mean the Italian Central bank would have been told that Italy's largest Bank was in serious breach of Irish law in ways that could endanger the whole banking system. The head of the Italian Central Bank at the time was a certain Mr Mario Draghi.

Mr Sugarman suggested Mr Draghi should be asked point-blank of he did or if he did not know . If he did not then the Irish regulator was at least incompetent, and may have lied, misled and perhaps even broken Irish laws. If he was told and did know, then Mr Draghi has serious questions to answer regarding his own dereliction of duty.

Surely not I hear you say. Well perhaps someone might ask him? Or is he above the law?

http://www.guengl.eu/news/article/whistleblower-protection-what-must-be-done

[Nov 15, 2016] Suspected 5th Column blogger Streetwise Professor Defends Elites

Notable quotes:
"... Earning your living in finance or the related co-dependent fields such as economics, business management, certain areas of law and, most especially, information technology, you quickly pick up on the cult mentality that pervades it. ..."
"... When, like so many of us, you're desperate to try to cling onto some semblance of middle class status, you're an easy and, although I'd strongly qualify this statement, understandable, target for buying into the group-think. ..."
"... " Markets " do not " demand " anything. ..."
"... But a "market" can - at the very most, through the use of pricing signals - induce actors to consider entering into a transaction. ..."
"... They provided credit to low income customers because it was insanely profitable. The reason it was insanely profitable was that the loans to the low income customers could be securitised and the commissions the banks earned on the sale of those securities paid for massive bonus pools which directly benefitted bank employees. ..."
"... Yes, I'd always be the first to agree with the proverb "In Heaven you get justice, here on Earth we have the law". The law and our legal systems are not perfect. But they are not that shabby either. ..."
"... If it is regulatory interventions, rather than criminal indictments, that the Streetwise Professor is referring to, the banks can and do leave no political stone unturned in their efforts to water down, delay and neuter regulatory bodies. Look , if you can do so without wincing, at what has happened to the SEC. ..."
"... It wasn't a " pre-crisis political bargain " that caused the Global Financial Crisis. It was financial innovation that was supposed to "free" the financial services industry to allow it to soar to ever greater heights, heights that couldn't be reached with cumbersome "legacy" thinking. If that sounds a lot like Mike Hearn's Blockchain justifications, it's because it is exactly the same thing. ..."
"... Innovation must never be viewed only through separate, disconnected lenses of "technology", "politics", "ethics", "economics", "power relationships" and "morality". Each specific innovation is subject to and either lives or dies by the interplay between these forces." ..."
"... I agree - however, "I don't mind people doing dangerous things" should require a little elucidation. What you likely meant to say was you don't mind people doing dangerous things, WITHIN REASON. ..."
"... Also, there is the rank unwillingness on the part of regulators to, you know, actually do their jobs. I can no longer count the number of times Yellen has sat in front of the Senate banking committee like a deer in headlights ..."
"... Excellent points, I thought that the Bush Wars were initiated to alleviate an oncoming recession as well as ensure W's reelection ..."
"... It did take them a while to get the pieces in place, the Banksters Real Estate Fraud Appraisals were identified as early as 2000, then the Banksters Fraudulent Loans peaked in 2006, and then we had the Banksters Fraudulent Reps and Warranties . ..."
"... Ah, the neo-liberals and the libertarians make their arguments by redefining terms and eliding facts. Once the audience agrees that up is down, why then their arguments are reasonable, dispassionate, and offered in dulcet tones of humble sincerity and objectivity. ..."
"... What a pleasure, then, to read your cold water smack-down of their confidence game. Perhaps they believed their own nonsense. Who knows. ..."
"... A third consequence of modern-day liberals' unquestioning, reflexive respect for expertise is their blindness to predatory behavior if it comes cloaked in the signifiers of professionalism. ..."
"... The difference in interpretation carries enormous consequences: Did Wall Street commit epic fraud, or are they highly advanced professionals who fell victim to epic misfortune? modern day liberals pretty much insist on the later view . Wall Street's veneer of professionalism is further buttressed by its technical jargon, which the financial industry uses to protect itself from the scrutiny of the public ..."
Nov 15, 2016 | www.nakedcapitalism.com
Posted on November 14, 2016 by Clive

Earning your living in finance or the related co-dependent fields such as economics, business management, certain areas of law and, most especially, information technology, you quickly pick up on the cult mentality that pervades it.

When, like so many of us, you're desperate to try to cling onto some semblance of middle class status, you're an easy and, although I'd strongly qualify this statement, understandable, target for buying into the group-think. Or at least going along with it on the promise of continued employment. While I'm letting myself off the hook in the process, I think that's forgivable. I and others like me need the money. Besides, in our spare time, we might try to atone for our misdeeds by using whatever means we have available, such as contributing to Naked Capitalism in whatever way we can, to try to set the record straight.

Not quite so easily forgivable, though, are the members of an altogether different cadre who don't give the impression of having to live paycheck to paycheck. What is it that motivates them? Why do they willingly devise clever - and, I have to say it, some are exceptionally adept - ruses to defend and further the causes of our élites?

... ... ...

As readers with not-so-long memories will recall, in the run-up to the Global Financial Crisis, the TBTFs did indeed exercise the " FU Option ". As asset prices for the securities they held fell precipitously, they held more and more of those assets on their balance sheets, refusing to - or unable to - off-load them into a market that was shunning them. Eventually their capital cushions were so depleted because of this, they became insolvent. Staring catastrophe in the face, governments were put into a double-bind by the TBTFs: Rescue us through bail-outs or stand by and see our societies suffer major collateral damage (bank runs, a collapse of world trade, ruining of perfectly good and solvent businesses with the likelihood of mass unemployment and civil unrest).

In that situation, who was the " U " who was being " F "'ed? It was governments and the public.

Faced with an asymmetry of power, in a reverse of the scenario painted by the Streetwise Professor for OTC trading (where a notional seller tells a theoretical buyer they can go to Hell if they don't want to pay the price the seller is asking), governments - and us - found themselves on the buy-side of an " FU Option ". "F the-rest-of-us By Necessity" was a better description as we were turned into forced buyers of what no other "market participant" would touch.

My dear Professor, allow me to give you , if I may risk the label of being impudent, a lesson. If I am selling my prized Diana, Princess of Wales tea cups in a yard sale and you make me a offer for them, that - I'm sure we'd agree on this point - is an OTC transaction. There's no exchange (mercifully) for Diana, Princess of Wales tea cups. I put a price sticker on them. If you want them, you pay the price I'm asking. Or else, you make me a different offer. If you don't pay the price I want, or I don't accept the price you're offering, we do, indeed, have a genuine " FU Option " scenario. But if instead my mother-in-law threatens to saw your face off with her cheese grater if you don't buy my Diana, Princess of Wales tea cups at the price shown on the sticker, then we no longer have an OTC transaction. We have extortion. See the difference?

That's not all. The piece discusses the differences between a proposed smart-contract based settlement compared with a centralised counterparty which brings up some very valid points. But then it makes a serious blunder which is introduced with some subtly but is all the more dangerous because of it. I'll highlight the problem:

So the proposal does some of the same things as a CCP, but not all of them, and in fact omits the most important bits that make central clearing central clearing. To the extent that these other CCP services add value–or regulation compels market participants to utilize a CCP that offers these services–market participants will choose to use a CCP, rather than this service. It is not a perfect substitute for central clearing, and will not disintermediate central clearing in cases where the services it does not offer and the functions it does not perform are demanded by market participants , or by regulators.

Did you catch what is the most troubling thing in that paragraph? The technicalities of it are fine, but the bigger framing is perilous. "Market participants" is given agency. And put on the same level as actions taken by regulators. This is at best unintentionally misleading and at worse an entirely deliberate falsehood.

The fallacious thinking which caused it is due to a traditional economist's mind-set. But this mind-set is hopelessly wrong and every time we encounter it, we must challenge it. Regardless of what other progressive goodies it is being bundled up with.

" Markets " do not " demand " anything.

A regulator or central bank can demand that a bank hold more capital and open its books to check the underlying asset quality. The CFPB can demand that Wells Fargo stops opening fake accounts. Even I can demand a pony. The power structures, laws, enforcement and levels of trust (to name the main constraints) governing who is demanding what from whom determine how likely they will be to have their demands met.

But a "market" can - at the very most, through the use of pricing signals - induce actors to consider entering into a transaction. The pricing signal cannot make any potential actor participate in that transaction. Not, probably, that it would have helped her much, but Hillary Clinton could have created a market for left-wing bloggers to shill for Obamacare by offering Lambert $1million to start churning out pro-ACA posts on his blog. But that market which Hillary could create could not "demand" Lambert accept her offer. Lambert would not take that, or any other monetary amount, and would never enter such a transaction. Markets have limits.

Whether unintentionally or by design, we have a nice example of bait and switch in the Streetwise Professor's Blockchain article. If you run a critique of Blockchain, you'll likely attract an anti-libertarian audience. It's a classic example of nudge theory . If you can lure readers in with the promise of taking a swipe at disruptive innovation nonsense but then lead them to being suckered into a reinforcement of failed conventional free-market hogwash, that can be a powerful propaganda tool.

But perhaps the Blockchain feature was an aberration, just a one-off? No.

Take, for example, this feature on Deutsche Bank from earlier this month which I'll enter as Exhibit B - It's not the TBTFs Fault, the Regulators / Governments / Some Guy / Made Us Do It

I'll leave the worst 'til last, but for now let's start with this little treasure:

the pre-crisis political bargain was that banks would facilitate income redistribution policy by provide credit to low income individuals. This seeded the crisis (though like any complex event, there were myriad other contributing causal factors), the political aftershocks of which are being felt to this day. Banking became a pariah industry, as the very large legal settlements extracted by governments indicate.

No, Streetwise Professor, banks did not provide credit to low income individuals as part of some "political bargain". They provided credit to low income customers because it was insanely profitable. The reason it was insanely profitable was that the loans to the low income customers could be securitised and the commissions the banks earned on the sale of those securities paid for massive bonus pools which directly benefitted bank employees.

Almost unimaginable wealth could be generated by individuals (the Naked Capitalism archive details the full sordid story of the likes of Magnetar). The fact that this would all blow up eventually was certainly predicable and even known by many actors in the prevailing milieu but they didn't care. They knew they'd have already set themselves up for life financially even after just a few years in that "game". Politics, for once, had nothing to do with it, save perhaps that regulators, which are the politicians' responsibility, should have been better able to spot what was going on.

But the Streetwise Professor is only just getting started with the counterfactual misinformation:

It is definitely desirable to have mechanisms to hold financial malfeasors accountable, but the Deutsche episode illustrates several difficulties. The first is that even the biggest entities can be judgment proof, and imposing judgments on them can have disastrous economic externalities. Another is that there is a considerable degree of arbitrariness in the process, and the results of the process. There is little due process here, and the risks and costs of litigation mean that the outcome of attempts to hold bankers accountable is the result of a negotiation between the state and large financial institutions that is carried out in a highly politicized environment in which emotions and narratives are likely to trump facts. There is room for serious doubt about the quality of justice that results from this process.

A casual skim could leave the reader with the impression that the Streetwise Professor is lamenting, rightly, the persistency of the TBTF model. But there's something really dastardly being concocted here - the notion that in our societies, the rule of law is always and inevitably fallible and not fit for the purpose of bringing errant TBTFs to justice. And that, if a case is brought against a TBTF like Deutsche, then it can't help but become a political football.

Yes, I'd always be the first to agree with the proverb "In Heaven you get justice, here on Earth we have the law". The law and our legal systems are not perfect. But they are not that shabby either. Any quick parse through the judgments which the U.S. Supreme Court, the U.K. Supreme Court or the European Court of Justice (to name only a few) hand down on complex cases - often running to hundreds or even a thousand pages - demonstrates that courts can and do consider fairly and justly the evidence that prosecutors present and make balanced rulings. And banks can utilize the same legal safeguards that the law provides - they're not likely to be short of good legal advice options. Trying, as the Steetwise Professor does, to claim that the TBTFs can't get justice is an insult to our judicial systems and acceptance of this notion followed by any routine repetition serves to undermine faith in the rule of law.

If it is regulatory interventions, rather than criminal indictments, that the Streetwise Professor is referring to, the banks can and do leave no political stone unturned in their efforts to water down, delay and neuter regulatory bodies. Look , if you can do so without wincing, at what has happened to the SEC.

It wasn't a " pre-crisis political bargain " that caused the Global Financial Crisis. It was financial innovation that was supposed to "free" the financial services industry to allow it to soar to ever greater heights, heights that couldn't be reached with cumbersome "legacy" thinking. If that sounds a lot like Mike Hearn's Blockchain justifications, it's because it is exactly the same thing.

In summary, when you throw brickbats at a fellow blogger, it seems to me that you have a moral obligation to put your cards on the table, to explain your motivations. I don't have to write for a living ("just as well", I hear forbearing readers shout back). I don't take a penny from Naked Capitalism's hard-wrung fundraisers, although Yves has generously offered a very modest stipend in line with other contributors, I cannot conscientiously take anything for what I submit. I write in the hope that I have some small insights that would help to undo some of the damage which big finance has done to our cultures, our shared values and our aspirations for what we hope the future will be for us and others.

That's what motivates me, anyway. After reading his output, I'm really still not at all sure what is motivating the Streetwise Professor. Certainly there is nothing at all to suggest that he is interested in rebuking or revising any of the traditional thought-forms which pass for the so-called science of economics. Conventional economic theory is the ultimate in betrayal of the use of rational methodology to provide air-cover for élite power grabs. It'll take more than a refutation of Blockchain spin to convince me that the Streetwise Professor is ready to kick away the more odious ladders - like being a professional economist - that have given him the leg-ups to the lofty perch he enjoys occupying.

About Clive

Survivor of nearly 30 years in a TBTF bank. Also had the privilege of working in Japan, which was great, selling real estate, which was an experience bordering on the psychedelic. View all posts by Clive →

vlade November 14, 2016 at 7:15 am

I disagree on the first bit. Even at this blog, Yves mentiones not quite rarely the dangers of tight coupling. The central exchanges create exactly that. Yes, the FU option of OTC is dangerous. But then, everything is dangerous, and if I have to choose between tight coupling dangerous option and loose coupling one, I'll chose the lose coupling one.

The problem is that the regulators refused to recognise that the institutions gamed the regulations – moving stuff from trading to banking books. It is recognised now, under the new regulation, although I still have some doubts about its effectivness.

To me all the para says is: markets demand services, and CCP don't offer them – and don't have to. Regulators demand services (to be offered by CCP), and CCP deliver.

And sorry, I also disagree with your "markets participants demand". The text says "services [ ] are demanded [by potential clients and by regulators]". I can't honestly see what's the problem with that. Of course, regulatory demand, and a client demand are two different things – the former you ignore at your peril, the second you can ignore to your heart's content.

But markets (or, I'd say agents that want to purchase – or sell) _always_ demand something, and always offer something – otherwise there would not be any market or exchange of services (it doesn't have to be there even with offer and demand, but in the absence of one it definitely won't be there).

You could happily change the word to "require" "want" etc. and the meaning of the para would remain unchanged.

Clive Post author November 14, 2016 at 8:20 am

The problem I had with the notion that OTC reduces tight coupling is that it gives the appearance of reducing tight couple but doesn't actually do this. While "the market" is functioning within its expected parameters, OTC is less tightly coupled than an Exchange. But as we saw first-hand in the GFC, those markets function, right up until the point where they don't. By continuing to function, or certainly giving the appearances of continuing to be functioning, they hide the stresses which are building up within them but no-one can see. Unless you are deeply plumbed in to the day-to-day operational activities of the OTC market and can spot signs - and that's all they are, signs, you don't get to take a view of the whole edifice - you simply don't have a clue. There were, at most, only a couple of dozen people in the organisation itself and outside it who knew that my TBTF was a day away from being unable to open for business. That was entirely down to information asymmetry and that asymmetry was 100% down to OTC prevalence.

And all the while TBTF isn't fixed, then as soon as the OTC market(s) fall off a cliff, the public provision backstops can be forced to kick in. Yes, everything is dangerous. I don't mind people doing dangerous things. But I do mind an awful lot being asked to pick up the pieces when their dangerous things blow up in their faces and they expect me to sort the mess out. If that is the dynamic, and to me, it most definitely is, then I want the actors who are engaged in the dangerous things to be highly visible, I want them right where I can see them. Not hiding their high-risk activities in an OTC venue that I'm not privy to.

And I stick by my objection to the - what I can't see how it isn't being deliberate - fuzziness or obfuscation about who gets to "demand" and who is merely allowed "invite" parties to a transaction to either perform or not perform of their own volition. This isn't an incidental semantic about vocabulary. It goes to the heart of what's wrong with the Streetwise Professor's assessment of innovation.

Innovation must never be viewed only through separate, disconnected lenses of "technology", "politics", "ethics", "economics", "power relationships" and "morality". Each specific innovation is subject to and either lives or dies by the interplay between these forces. My biggest lambaste of the Streetwise Professor's commentaries is that he examines them only in terms of "technology" and "economics". In doing so, he reaches partial and inaccurate conclusions.

A 10 year old child might "demand", "require", "ask for", "insist", "claim a right to have" (use whatever word or phrase you like there) a gun and live ammunition. But they are not, and should not be, permitted to enter into a transaction to obtain the said gun and ammo based only on the availability of the technology and the economics that would allow them to satisfy the seller's market clearing sale price if they saved their pocket money for a sufficient amount of time. The other forces I listed in my above paragraph are also involved, and just as well.

Ulysses November 14, 2016 at 9:30 am

"Innovation must never be viewed only through separate, disconnected lenses of "technology", "politics", "ethics", "economics", "power relationships" and "morality". Each specific innovation is subject to and either lives or dies by the interplay between these forces."

Very well said. I would argue further that "power relationships" structure how all the other lenses actually operate. In the early sixteenth century the power relationship between the Church, and Martin Luther, was such that the latter had an opening to redefine "morality"– in such a way that the Pope's moral opinion was eventually no longer dispositive for Protestants.

In other words, the French invasion of Italy, late in the fifteenth century, weakened the papal states enough to allow for defiance.

Ulysses November 14, 2016 at 10:02 am

That last sentence, is of course a gross over-simplification! Anyone wishing to know the nitty-gritty details of how foreign domination over the Italian peninsula was established by the middle of the sixteenth century should read Machiavelli and Guicciardini.

The latter author's appeal to skepticism, when interpreting the actions and motivations of powerful people, rings very true five centuries later:

" perché di accidenti tanto memorabili si intendino i consigli e i fondamenti; i quali spesso sono occulti, e divulgati il più delle volte in modo molto lontano da quell che è vero."

( Storia d'Italia , XVI, vi)

animalogic November 15, 2016 at 5:12 am

"Yes, everything is dangerous. I don't mind people doing dangerous things. But I do mind an awful lot being asked to pick up the pieces when their dangerous things blow up in their faces".

I agree - however, "I don't mind people doing dangerous things" should require a little elucidation. What you likely meant to say was you don't mind people doing dangerous things, WITHIN REASON.

And let's face it, much of the prior GFC behaviour was unreasonably dangerous. As it turned out, not that dangerous to its perpetrators .

Danger, like risk, is a cost-benefit calculation. When that calculation ONLY includes benefits for its originator & suppresses any (real & calculatable) cost for the community it's already looking suspiciously like an unreasonable danger .

Uahsenaa November 14, 2016 at 9:04 am

The problem is that the regulators refused to recognise that the institutions gamed the regulations – moving stuff from trading to banking books. It is recognised now, under the new regulation, although I still have some doubts about its effectivness.

Also, there is the rank unwillingness on the part of regulators to, you know, actually do their jobs. I can no longer count the number of times Yellen has sat in front of the Senate banking committee like a deer in headlights as Warren tries to get her to give anything like a straight answer as to why, to this day, many if not most TBTFs have no rapid selloff/solvency plan (which is required by the Dodd-Frank law) or why those banks that fail their stress tests (again and again) suffer no consequences as a result.

How is any of this supposed to work when so many are clearly acting in bad faith?

bmeisen November 14, 2016 at 9:06 am

Bravo bravo encore encore! Especially the characterization of Sorkin and the account of the crisis at the start of exhibit B. Clive for President!

Synoia November 14, 2016 at 9:44 am

Earning your living in finance or the related co-dependent fields such as economics, business management, certain areas of law and, most especially, information technology, you quickly pick up on the cult mentality that pervades it.

If you do not subscribe to the "cult mentality," although I'd prefer to call it a dogma, because it is a unswerving belief in an unproven fact in the face of evidence the fact is not only unproven, but wrong, one is "not a team player" and then penalized.

If these libertarian want "open markets" and innovation they have to shed the human response to proof. In their behavior they are no better than the medieval pope, and his court, who did not want to believe a the earth travels around the sun.

WJ November 14, 2016 at 8:32 pm

Medieval popes were probably more open to Pythagorean/Copernican cosmologies than early 17th century Jesuits (i.e. Bellarmine); the opposition of the latter to Galileo had nothing to do with science and everything to do with Protestantism and Protestant biblical interpretation. Bellarmine was wrong and what happened to Galileo was shameful. But many of the best astronomers of the time were in fact Jesuits, and the traditional way the story is told is inaccurate on almost every level (and a product of late 19th century Italian nationalism).

susan the other November 14, 2016 at 12:02 pm

this was very interesting stuff. Since a lot of things were coming together in the 90s and 2000s that were all connected in a mess too big to understand simply as immoral banking (freeing up capital like that was crazy but there must have been a reason to try it besides windfall profiteering and flat-out gambling), I imagine the following: Greenspan and the TBTFs knew returns were diminishing and set out to do something about it. Because growth and expanding markets were the only thing that could keep up with a demand by pension funds (and then little Bush's idiotic war) for a minimum 8% return. But growth was slowing down so the situation required clever manipulations and incomprehensible things like financial derivatives. Makes sense to me. And if this is even partially true then there was a political mandate all mixed up with the GFC. The banks really did crazy stuff, but with the blessing of the Fed. Later when Bernanke said about QE and nirp: "now we are in uncharted territory" he was fibbing – the Fed had been in uncharted territory, trying to make things work, for almost 20 years. And failing.

madame de farge November 14, 2016 at 12:47 pm

Excellent points, I thought that the Bush Wars were initiated to alleviate an oncoming recession as well as ensure W's reelection

It did take them a while to get the pieces in place, the Banksters Real Estate Fraud Appraisals were identified as early as 2000, then the Banksters Fraudulent Loans peaked in 2006, and then we had the Banksters Fraudulent Reps and Warranties .

WORSE then a bunch of Used Car Salesman, but what else would you expect from people who KEEP the State Income taxes withheld from their employees checks

Lambert Strether November 15, 2016 at 12:00 am

> "how long does that take" and he said "minimum of ten years, 15 is better"

Via Extra, Extra – Read All About It: Nearly All Binary Searches and Mergesorts are Broken Google Research, 2006:

This bug can manifest itself for arrays whose length (in elements) is 230 or greater (roughly a billion elements). This was inconceivable back in the '80s, when Programming Pearls was written, but it is common these days at Google and other places. In Programming Pearls, Bentley says "While the first binary search was published in 1946, the first binary search that works correctly for all values of n did not appear until 1962." The truth is, very few correct versions have ever been published, at least in mainstream programming languages.

Sorting is, or ought to be, basic blocking and tackling. Very smart, not corrupt people worked on this. And yet, 2006 – 1946 = 60 years later, bugs are still being discovered.

The nice thing about putting your cash in a coffee can in the back yard is that it won't evaporate because some hacker gets clever about big numbers.

flora November 14, 2016 at 7:30 pm

Ah, the neo-liberals and the libertarians make their arguments by redefining terms and eliding facts. Once the audience agrees that up is down, why then their arguments are reasonable, dispassionate, and offered in dulcet tones of humble sincerity and objectivity.

What a pleasure, then, to read your cold water smack-down of their confidence game. Perhaps they believed their own nonsense. Who knows.

flora November 14, 2016 at 8:28 pm

What is the Streetwise Professor's (note the word "professor") real view? Has he thought much about it or simply imbibed his "owners'" views, making him a useful tool. I don't know.

From the book "Listen, Liberal."

" A third consequence of modern-day liberals' unquestioning, reflexive respect for expertise is their blindness to predatory behavior if it comes cloaked in the signifiers of professionalism. Take the sort of complexity we saw in the financial instruments that drove the last financial crisis. For old-school regulators, I am told, undue financial complexity was an indication of likely fraud. But for the liberal class, it is the opposite: an indicator of sophistication. Complexity is admirable in its own right. The difference in interpretation carries enormous consequences: Did Wall Street commit epic fraud, or are they highly advanced professionals who fell victim to epic misfortune? modern day liberals pretty much insist on the later view . Wall Street's veneer of professionalism is further buttressed by its technical jargon, which the financial industry uses to protect itself from the scrutiny of the public. "
-Thomas Frank

[Oct 25, 2016] Mergers Raise Prices, Not Efficiency

Oct 25, 2016 | economistsview.typepad.com

RC AKA Darryl, Ron : October 25, 2016 at 04:56 AM RE: Mergers Raise Prices, Not Efficiency

https://www.bloomberg.com/view/articles/2016-10-24/mergers-raise-prices-not-efficiency

[IMO, Noah muddles the message, but it is a important topic that gets muddled by everyone else too. Economists with a financial bent had no problem apparently with the bank mergers that started in the seventies and everyone loved the auto maker mergers of the first half of the 2oth century.

Efficiency itself is an amorphous term. Mergers can be an efficient use of capital since they deliver lower competition and higher profits. JP Morgan did not want to be in a industry that he could not dominate. Efficiency is different for a fish than a capital owner. Mergers are good for regulatory capture and ineffishient for fish. Mergers are inefficient for workers that want higher wages or the unemployed that want jobs. Market power and regulatory capture can be efficient vehicles for taking advantage of trade agreements to offshore production and increase returns to capital all while lowering both prices and quality as well as reducing domestic wages. Efficiency is in the eyeballs of the beholder especially if they make good soup.] Reply Tuesday, reason -> RC AKA Darryl, Ron... , October 25, 2016 at 06:58 AM

But Keynes was saying something quite different - he wasn't actually talking about policy but about economics (the task of economists). He was saying that understanding short term fluctuations was as important as predicting the long term. Still relevant in this age of irrelevant general equilibrium models.
RC AKA Darryl, Ron -> reason ... , October 25, 2016 at 09:56 AM
Sorry, I thought that the whole purpose of the study of macroeconomics was to guide policy decisions. I stand corrected.
RC AKA Darryl, Ron -> RC AKA Darryl, Ron... , October 25, 2016 at 10:02 AM
I always looked at Keynes as a fellow traveler, one who wrote obtusely at times for the express purpose of couching his meaning in sweetened platitudes that at a second glance were drenched in cynicism and sarcasm, at least when it came to his opinions of economists and politicians and the capital owning class that they both served.
RC AKA Darryl, Ron -> RC AKA Darryl, Ron... , October 25, 2016 at 10:39 AM
OK, "obtusely" was a poor choice of words, at least with regards to Keynes. Keynes realized WWI was a big mistake, the Treaty at Versailles was an abomination with regards to German restitution, and he was accused of anti-Semitism just for being honest about Jewish elites in the Weimar Republic. It was not that Keynes was insensitive, unpatriotic, or anti-Semitic, but that Keynes was just correct on all counts.
JohnH -> RC AKA Darryl, Ron... , -1
This is a good example of economists working in lock step with investors: "Economists with a financial bent had no problem apparently with the bank mergers that started in the seventies and everyone loved the auto maker mergers of the first half of the 2oth century."

I think it has been questioned for decades whether increased efficiency in banking actually materialized in the wake of industry consolidation. Local market oligopolies may well have generated higher profits and the appearance of more efficiency. And concentration certainly facilitated collusion as we have seen in many markets, including LIBOR.

What concentration indisputably caused was a dramatic increase in the political power of the Wall Street banking cartel, which owns not only the Federal Reserve but also a lot of powerful politicians...a subject on which 'liberal' economists are generally agnostic, since politics is outside their silo.

point -> RC AKA Darryl, Ron... , October 25, 2016 at 10:26 AM
The article ignored the effect of mergers on supplier relationships, often one of near monopsony (oligopsony?). DOJ seems to be focused on unit pricing to consumers(though perhaps not with cable) to the point that most managements understand that they have free rein to squeeze suppliers. And so they merge to do so.

It may be that more contribution to increasing margins is from purchase prices than selling prices.

RC AKA Darryl, Ron -> point... , October 25, 2016 at 10:41 AM
Doubly so with global supply chaining.

[Oct 20, 2016] This is the smoking gun behind the corruption of the Fed during the 2008 crisis

Oct 20, 2016 | www.moonofalabama.org

psychohistorian | Oct 19, 2016 8:29:29 PM | 99

I just read this posting at ZH and believe that this information when fully grokked will take the market down.

http://www.zerohedge.com/news/2016-10-19/never-seen-secret-memo-aig-bailout-feds-tarullo-obama-revealed-podesta-emails

This is the smoking gun behind the corruption of the Fed during the 2008 crisis. I want to see how they tell the world that this was all legal.

END PRIVATE FINANCE! The folks that own private finance also own the US and many other governments.....with or without vote rigging as one of their tools.

[Sep 15, 2016] Elizabeth Warren on Thursday requested a formal investigation into why the Obama administration did not bring criminal charges individuals and corporation involved in the 2008 financial crisis

www.nakedcapitalism.com
L

"Massachusetts Senator Elizabeth Warren on Thursday requested a formal investigation into why the Obama administration did not bring criminal charges individuals and corporation involved in the 2007-2008 financial crisis" [International Business Times]. Why now? Liz edging her hat toward the ring if Clinton comes up lame?

I can see two possible interpretations for this.

First, as much as I hate to draw the analogy, she could be positioning herself to take the reigns after a loss in the way that Richard Nixon, Paul Ryan, and later Bill Clinton did. Richard Nixon sat back and concentrated on building up credibility as Barry Goldwater melted down and then quietly stepped in to take over the party after the loss to set up his eventual run. Paul Ryan quietly permitted or perhaps aided the coup against Boehner. And Bill Clinton, through the DLC teed up his control of the party after Dukakis lost.

Second, with Wells-Fargo and bank fraud once again in the news she could be working to keep prior decisions current both to force better action this time or to nudge the Clinton and Trump into making promises of stronger action in the future.

Lambert Strether Post author

It seems to me that both those objectives would be served by continuing to hammer on Wells Fargo, so the question "Why now?" isn't really answered in your comment.

But if you wanted to take out an option on running a full-throated populist campaign - and throwing bankers in jail would be wildly popular across the entire political spectrum (except Clinton's 10%-ers on up) - in the unhappy event that the party's candidate came up lame, then calling for an account of regulatory decision making in 2009 would be one way to signal that. Note also that would call Obama's "legacy" into question, too; the whole "stand between you and the pitchforks" thing. This is a big deal.

[Sep 15, 2016] American Antitrust Is Having a Moment: Some Reactions to Commissioner Ohlhausen's Recent Views

Sep 14, 2016 | economistsview.typepad.com
Chris Sagers at ProMarket:
American Antitrust Is Having a Moment: Some Reactions to Commissioner Ohlhausen's Recent Views : Over the summer, Federal Trade Commissioner Maureen Ohlhausen took me and several others to task in a speech , subsequently published as a journal article ... The theme we'd all written about is whether we in the United States have a "monopoly problem," and whether federal policy should try to do something about it. ...

Commissioner Ohlhausen had some pretty strong words. ... Specifically, she implies a very strong presumption against public interference in private markets, as indicated by her argument that there is not yet sufficient evidence that we have a monopoly problem. The argument seems to be that we must wait until we are very, very sure, beyond any reasonable econometric doubt, apparently, that there's something wrong before we step in. ...

She is mistaken, and she ignores roughly a library-full of well-known..., sophisticated empirical work. ...

In the end, the irony of these remarks is captured in this point: Commissioner Ohlhausen is pretty witheringly dismissive of a certain kind of evidence of market power, and implies that it would not support increased enforcement unless it can overcome a high methodological bar. But for her own countervailing evidence that in fact American markets are "fierce[ly] competiti[ve]," she says this: "Consider the new economy, which is a hotbed of technological innovation. That environment does not strike me as one lacking competition."

In other words, the presumption against antitrust is so strong that evidence of harm must meet the most exacting standards of social science. To prove that markets are in fact competitive, however, needs nothing more than seat-of-the-pants anecdotes. Again, I mean no disrespect, and I think we have an honest difference of opinion. But this stance is not social science, and it is not good, empirically founded public policy. It is just ideology. ...

It's definitely true that the agencies have brought a bunch of challenges to a bunch of nasty mergers, and perhaps total enforcement numbers have gone up a bit. But that is because we are in the midst of a merger wave in which parties have been proposing breathtakingly massive, overwhelmingly consolidating horizontal deals. While there is a track record to be proud of in the administration's enforcement, especially, as the commissioner observes, in the Commission's campaign against hospital mergers, reverse-payment deals, SEP problems, and patent trolls, and who knows how many other matters, the fact remains that by and large the administration has mostly not taken action that any administration would not have taken, including the Reagan and both Bush administrations. ...

DrDick : , Wednesday, September 14, 2016 at 11:13 AM

If we were actually serious about antitrust, which we very much should be, we would not only block most of these mergers, but break up many of existing behemoths (like the big banks, the media giants, Comcast, and many others).
pgl -> DrDick... , Wednesday, September 14, 2016 at 11:18 AM
I'm all for breaking up the behemoths when they are indeed stifling competition. The Reagan Revolution to anti-trust was based on a contention that some mergers were about efficiency effects. I think this argument is sometimes overblown but it is not per se false. I do object (see below) to the weak evidence that goes like this. Collective shareholder value rose so ergo the merger is about efficiency effects. Anyone who argues that (see Don Luskin and the premium ice cream proposed merger) is not very bright.
DeDude -> pgl... , Wednesday, September 14, 2016 at 11:49 AM
Exactly. Corporations being able to suck more profit out of the costumers (and as a result share prices rising) is the proof that anti-trust has failed. In a fully functional competitive market companies do not make much profit.
pgl -> DeDude... , Wednesday, September 14, 2016 at 12:07 PM
Accounting profits? Maybe you should read that paper by the commissioner as she makes a very clear statement about what accounting profit would look like in a competitive market. And it is not zero. Return to capital? Hello?
DeDude -> pgl... , Wednesday, September 14, 2016 at 12:30 PM
No if it was zero the whole thing breaks down. However, a small return on capital is an indication that companies are forced to cut prices because of competition- and that is a healthy market. So yes there is (some but) not much profit in a fully functional competitive market.
pgl -> DeDude... , Wednesday, September 14, 2016 at 12:36 PM
Let's define "small return". Standard financial economics puts this at the risk-free rate plus a premium for bearing systematic risk. OK - the risk-free return now is quite small. Say 2%. But if the risk premium is say 4%, then we are talking about a 6% expected return to assets. If that is what you mean by small - cool.

Of course I have seen a lot of "professionals" argue for much higher returns. Of course these professionals would flunk a Finance 101 class.

DeDude -> pgl... , Wednesday, September 14, 2016 at 12:49 PM
I don't think the risk premium needs to be more than about 2% unless/until the economy enter a phase where demand outstrips supply (and more investment money needs to be attracted). If there is a glut of investment money then the price of it (=risk free returns) should go down.
pgl -> DeDude... , Wednesday, September 14, 2016 at 02:05 PM
This is the kind of thinking that got Hassett and Glassman to tell us about DOW 36000. Some people overestimate the risk premium but 2% is what a regulated utility or a leasing company gets. And neither bears commercial risk. Dude - you can make up whatever number your heart desires but there is market evidence on these things.
DeDude -> pgl... , Wednesday, September 14, 2016 at 06:25 PM
Exactly - even those are hugely overcompensated for this supposed risk.
Gibbon1 -> DeDude... , Wednesday, September 14, 2016 at 04:14 PM
Ability to better suck profit out of a captive base of customers is an efficiency of a sort. Instead of investing in risky new business processes or technologies one merely has to buy out your competitors. This is practically risk free.
pgl : , Wednesday, September 14, 2016 at 11:15 AM
A comment about this:

"Though she says that "[e]fficiencies are real"-citing no evidence for it in a speech critical of everyone else for failure to supply evidence-there is in fact no meaningful proof that consolidation generates social benefits. Especially in the case of mergers, a large and sophisticated empirical literature has been hunting for decades for evidence that mergers produce "efficiencies" or other benefits. The evidence has not been found. At least with respect to deals among publicly traded firms, the evidence tends to suggest that mergers do no good on average for shareholders of either acquiring or target firms, and if there were some efficiencies or larger social benefits, they should be measurable as benefits to shareholders. The empirical evidence has therefore confirmed the popular wisdom shared on Wall Street for years-that all this activity is not serving any good social purpose, though it might be helping executives and their bankers quite a lot."

The conservative (Reagan) approach to anti-trust did indeed ask DOJ and FTC to consider whether the merger was about beneficial efficiency effects v. anti-competitive effects. But let's suppose two firms merged and their collective value did rise benefiting shareholders. That does not prove the efficiency effects dominate. No – mergers that lead to less competition will often raise shareholder value even if there are no efficiency effects. Those mergers should be disallowed.

kurt : , Wednesday, September 14, 2016 at 11:21 AM
Proof of Monopoly Power - Verizon and ATT's pricing and apparent lack of any interest in maintaining or even knowing where their physical plant is installed. Also - see directTV's recent price increases.
pgl -> kurt... , Wednesday, September 14, 2016 at 12:07 PM
Can you hear me now? Oh wait - the Verizon dude now works for Sprint.
El Epicúreo Del Taco : , Wednesday, September 14, 2016 at 11:26 AM
American markets are "fierce[ly] competiti[ve]," she says this: "Consider the new economy, which is a hotbed of technological innovation. That environment does not strike me as one lacking competition."

In other words, the presumption against antitrust is so strong
"

You are assumed properly competing until proved monopoly-based. The burden of proof is on the victims. Tell me something!

Does the government always appear as crystal clear as the mirror of Alice? When we look at local, county, state, and federal rulers, do we always see ourselves? Our own bias? Our own agenda? The government apes its voters.

Do you see how today's polity is begging for less competition? Less free trade from our trading partners? Do you see how we want to make a monopoly out of America? Build a fence around it so that nobody is allowed to buy anything from anyone other than our monopoly?

" We have identified the enemy, ourselves. " ~~Pogo~

DeDude : , Wednesday, September 14, 2016 at 11:46 AM
Yes you need at least a dozen independent businesses delivering the same (substitutable) products to ensure that there is indeed a competitive market that will not be gamed against the consumers. This is not just needed to ensure that consumers will be offered a fair price, but also to ensure that companies will be forced to continue to innovate and offer better and better products. The oversight of mergers has been a scandal and needs to be tightened by new laws. Obviously we have to make the "dozen rule" a law rather than just common sense guidance.
pgl -> DeDude... , Wednesday, September 14, 2016 at 12:10 PM
The dozen rule? Where did that come from? Depends on the market but I would hope we have more than 12 suppliers of beer. BTW - it would be nice to have 12 health insurance companies but we could break up this oligopoly with such one more - the government aka the public option.
DeDude -> pgl... , Wednesday, September 14, 2016 at 12:34 PM
Yes some products can benefit from more variation, but at least with 12 suppliers you would not have anybody able to corner the market. The dozen rule is mine, that is how I get my eggs. If Ohlhausen can just make it up - so can I.
pgl -> DeDude... , Wednesday, September 14, 2016 at 12:37 PM
Do you remember the 1970's? Something called OPEC? But yea - I buy my eggs by the dozen too.
pgl -> DeDude... , Wednesday, September 14, 2016 at 12:39 PM
Speaking of breakfast, consider the maple syrup cartel:

http://fortune.com/2016/02/26/maple-syrup-cartel

DeDude -> pgl... , Wednesday, September 14, 2016 at 12:52 PM
Yes cartels (regardless of number of members) also have to be broken up - for markets and capitalism to work properly.
Tom aka Rusty : , Wednesday, September 14, 2016 at 12:59 PM
The FTC has ignored a many major health care mergers but has gone litigation guns a blazin' into small mergers in such less-than-major metro centers as Moscow Idaho and Toledo Ohio.

Is there a "too big to litigate" standard?

pgl -> Tom aka Rusty... , Wednesday, September 14, 2016 at 02:06 PM
Rusty calling for rational regulation as in the FTC doing its job. Stop the presses!
Tom aka Rusty said in reply to pgl... , Thursday, September 15, 2016 at 04:53 AM
I'm just asking for coherent policy, something often missing from the Obama administration.
Anon : , Wednesday, September 14, 2016 at 08:30 PM
The sad fact is that the right-wing Law and Economics scholars have literally been trained to believe that the only correct null hypothesis is "free markets are good". When the null is not rejected with a 95% confidence interval, they actually think they've won the argument, while you're sitting there scratching your head saying, but when the null hypothesis is "free markets are bad", we can't reject that either. I've never seen logic get much traction with this crowd, because they are literally willing to tell you that economics demonstrates that "free markets are good", so that's the correct null.

It's very sad, but also very common when talking to lawyers. In fact, I often wonder whether the right-wing didn't create the "Law and Economics" movement in order to slow the exposure of the legal profession to the actual tools of modern economic analysis.

reason : , -1
It would be a start if we would simply stop seeing hostile takeovers as something positive (you know ex-ante efficiency improvements) and start seeing them for the interference in natural selection that they actually are (no 40-40 foresight exists).

[Sep 14, 2016] Bill Black We Send Teachers to Prison for Rigging the Numbers, Why Not Bankers

Notable quotes:
"... By Bill Black, the author of The Best Way to Rob a Bank is to Own One and an associate professor of economics and law at the University of Missouri-Kansas City. Jointly published with New Economic Perspectives ..."
"... he's pursued abroad many also intuitively believe that there's no one who will hit back harder. There's some of that 'he may be a son-of-a-bitch but he's our son-of-a-bitch' quality to the president's support on national security issues. ..."
"... Hence teachers weren't divisive enough and therefore are/were seen as part of the "problem". ..."
Apr 02, 2015 | naked capitalism

Yves here. One has to wonder if the prosecutorial investment in bringing down a public school test-cheating ring has less to do with concern about the students and more to do with charter schools.

By Bill Black, the author of The Best Way to Rob a Bank is to Own One and an associate professor of economics and law at the University of Missouri-Kansas City. Jointly published with New Economic Perspectives

The New York Times ran the story on April Fools' Day of a jury convicting educators of gaming the test numbers and lying about their actions to investigators.

ATLANTA - In a dramatic conclusion to what has been described as the largest cheating scandal in the nation's history, a jury here on Wednesday convicted 11 educators for their roles in a standardized test cheating scandal that tarnished a major school district's reputation and raised broader questions about the role of high-stakes testing in American schools.

On their eighth day of deliberations, the jurors convicted 11 of the 12 defendants of racketeering, a felony that carries up to 20 years in prison. Many of the defendants - a mixture of Atlanta public school teachers, testing coordinators and administrators - were also convicted of other charges, such as making false statements, that could add years to their sentences.

This was complicated trial that took six months to present and required eight days of jury deliberations. It was a major commitment of investigative and prosecutorial resources. But it was not investigated and prosecuted by the FBI and AUSAs, but by state and local officials. In addition to the trial success, the prosecutors secured 21 guilty pleas.

Atlanta's public schools, of course, did not engage in "the largest cheating scandal in the nation's history." The big banks' cheating scandals left the Atlanta educators in the dust.

The two obvious questions are why the educators cheated and how they got caught. "High-stakes testing" cannot explain the scandal because we have had such tests for over 50 years. The article explains the real drivers – compensation, promotions, fear, and ego (aka "reputation").

"Officials said the cheating allowed employees to collect bonuses and helped improve the reputations of both Dr. Hall and the perpetually troubled school district she had led since 1999.

Investigators wrote in the report that Dr. Hall and her aides had 'created a culture of fear, intimidation and retaliation' that had permitted "cheating - at all levels - to go unchecked for years."

Any reader familiar with my work should be running over in their mind Citigroup's vastly larger cheating frauds that senior managers produced by using exactly the same tactics to produce hundreds of billions of dollars in fraud.

How did people become suspicious and decide to conduct a real investigation? They realized that the reported results were too good to be true. That too is directly parallel to Citi, where massive purchases of "liar's" loans known to be 90% fraudulent supposedly led to massive profits.

The dozen educators who stood trial, including five teachers and a principal, were indicted in 2013 after years of questions about how Atlanta students had substantially improved their scores on the Criterion-Referenced Competency Test, a standardized examination given throughout Georgia.

In 2009, The Atlanta Journal-Constitution started publishing a series of articles that sowed suspicion about the veracity of the test scores, and Gov. Sonny Perdue ultimately ordered an investigation.

Wow, a newspaper did a series of articles, and documented a scandal built on deceit. Imagine if the New York Times and the Wall Street Journal were to do an "unsparing" investigation into banking fraud – and into Attorney General Eric Holder's refusal to prosecute. What if they actually looked at culpability in the C-suites?

The inquiry, which was completed in 2011, led to findings that were startling and unsparing: Investigators concluded that cheating had occurred in at least 44 schools and that the district had been troubled by "organized and systemic misconduct." Nearly 180 employees, including 38 principals, were accused of wrongdoing as part of an effort to inflate test scores and misrepresent the achievement of Atlanta's students and schools.

The investigators wrote that cheating was particularly ingrained in individual schools - at one, for instance, a principal wore gloves while she altered answer sheets - but they also said that the district's top officials, including Superintendent Beverly L. Hall, bore some responsibility.

Dr. Hall, who died on March 2, insisted that she had done nothing wrong and that her approach to education, which emphasized data, was not to blame. "I can't accept that there's a culture of cheating," Dr. Hall said in an interview in 2011. "What these 178 are accused of is horrific, but we have over 3,000 teachers."

But a Fulton County grand jury later accused her and 34 other district employees of being complicit in the cheating. Twenty-one of the educators reached plea agreements; two defendants, including Dr. Hall, died before they could stand trial.

Of course, Hall's "approach to education" did not "emphasize data" – it emphasized faux data – like Citi's accounting alchemists under Robert Rubin who transmuted fraudulent net liabilities (liar's loans) into supposedly wondrously valuable assets that had zero risk (Super Senior CDO tranches).

A more general point is in order. Atlanta is the culmination of destructive national trends and failing to mention Houston in the story was unfortunate. First, the "reinventing government" movement decided the public sector was bad and the private sector was magnificent and said that the public sector should adopt private sector approaches including quite specifically "performance pay" based on quantitative measures. This brought to the public sector the perverse incentives that were ruining the private sector and about to bring on Enron-era fraud epidemic and then the most recent three fraud epidemics. Second, we were assured by proponents of the change that a concern for "reputation" would trump any perverse incentives. What the proponents failed to see, of course, was that in both the private and public sectors the way to create a superb reputation was to report inflated data.

Reputation, instead of the "trump" ensuring good conduct, was a leading motive to engage in bad conduct. Third, we were told that giving public administrators far more power to squash teachers was the key to success in education. Lord Acton warned that absolute power leads to absolute corruption whether in Atlanta or Citi's C-suite.

Houston should have been mentioned because the modern movement toward educational fraud began in Houston under Rod Paige – who became Secretary of Education based on massive fraudulent misrepresentation of data. Paige kicked off the testing insanity, claiming it would produce objective, fact-based policies based on what educational measures actually worked. As a famous takedown of Paige's claims ends – the lesson is that it was too good to be true. President Bush, however, bought it hook, line, sinker, bobber, rod, and the boat Paige rowed out in.

In any event, if Fulton County, Georgia can jail educators who lie and gimmick the data, Holder can send the elite bankers to prison on the same grounds.

lakewoebegoner, April 2, 2015 at 10:41 am

*** One has to wonder if the prosecutorial investment in bringing down a public school test-cheating ring has less to do with concern about the students and more to do with charter schools. ***

I believe it's even simpler than that…..prosecuting teachers is perfect fodder for the local 11 o'clock news-you're prosecuting publiclly paid low-hanging fruit, the crime is understandable (versus explaining accounting fraud or intentional misvaluation of assets) and of course-my gosh, think of the children!

NotTimothyGeithner, April 2, 2015 at 11:07 am

Local DAs have incentive to prosecute large cases, and Holder made sure to make token plea deals with the banks. A successful state AG who brought down a major financial player would destroy the Obama Administration just by existing two years into the first term because there would be no excuse. Plenty of loyal Team Blue voters if pressed will explain the lack of prosecution as a GOP plot, but with a counter example in the papers they would be more demoralized than they are.

RUKidding, April 2, 2015 at 12:11 pm

Neither Team Blue or Team Red voters want to confront reality and truly see and acknowledge what's going on. The crooks in the District of Criminals have perfected their Kabuki Show of "hiding" behind each other's skirts and blaming the other side for all kinds of ills and perfidy. Tribalistic authoritarians can be lazy and not have to think for themselves and really DO something; just pass the clicker; lets all watch some "reality" tv show instead. Talk about the matrix….

An example is my rightwing family members just recently celebrating quite a bit that Harry Reid has announced his retirement – as IF that'll be this amazingly good thing. Like: what will happen then? HOW, exactly, will "things get better" just bc they can't kick Harry Reid around anymore.

Disclaimer: no love lost on my part vis Harry Reid. He's as much of a crook and worthless waste of space as all of the others, no matter which Team Jacket they wear. My take? What possible difference will it make if Reid retires or stays in the Senate indefinitely?

RUKidding, April 2, 2015 at 10:59 am

Teachers have no money. Bankers have a TON of money. Sucks to be in the 99s.

Good comments. Right now, too, teachers have been deliberately painted to be the evilest of the vile because unions! get paid too much! can't be fired! blah de blah…. it's something easy for the masses to grasp – all those dreadful overpaid teachers who can't be fired "robbing" us of our taxes, while allegedly doing a totally shitty job. Yeah right. Of course privatized school teachers would most definitely do a "better" jawb.

It's all "look over there!!!!!" while the bankers are the ones robbing us blind deaf dumb stupid etc.

And yes, Charter Schools! Another way for the crooks at the top to rip off the 99s! woot!

And the beat down goes on…..

djrichard, April 2, 2015 at 12:09 pm

I remember back when the Supreme Court was debating W vs Gore, I put it to my neighbors that W would be under the influence of big oil and other powers that be. One of my neighbors countered that Gore would be under the influence of teachers. I was the minority opinion in that conversation.

RUKidding, April 2, 2015 at 12:14 pm

No love lost on my part vis Gore, but seriously??? LIke Gore is "under the influence" of teachers??? Yeah, unions, but really? Like it's just so ridiculous. Teachers v Big Oil. Uh, er, that's pretty much like David v Goliath, but in this case Goliath/BigOil has totally crushed David/the 99s.

djrichard, April 2, 2015 at 12:37 pm

I'm surprised I found this, but I think this captures it.

Bush's bully-boy campaign tactics play to his strengths, albeit unstated and unlovely ones. Many of the polls of the president have shown that while people don't necessarily agree with the specific policies he's pursued abroad many also intuitively believe that there's no one who will hit back harder. There's some of that 'he may be a son-of-a-bitch but he's our son-of-a-bitch' quality to the president's support on national security issues.

This was from W v Kerry days. But I think the same principle was operating during W v Gore. During 2004, the idea was to continue to inflict W on the middle east. During 2000, I think the idea was to inflict W on the "deserving elements" inside the US (whatever those deserving elements are/were at the time).

Teachers if anything represent a "big tent" mind-set, one in which there are no losers, or vice-versa one in which everyone is deserving of winning. Hence teachers weren't divisive enough and therefore are/were seen as part of the "problem".

[Aug 26, 2016] Lots of Smoke Here, Hillary

Notable quotes:
"... If Hillary Clinton wins, within a year of her inauguration, she will be under investigation by a special prosecutor on charges of political corruption, thereby continuing a family tradition. ..."
"... Of 154 outsiders whom Clinton phoned or met with in her first two years at State, 85 had made contributions to the Clinton Foundation, and their contributions, taken together, totaled $156 million. ..."
"... Conclusion: access to Secretary of State Clinton could be bought, but it was not cheap. Forty of the 85 donors gave $100,000 or more. Twenty of those whom Clinton met with or phoned dumped in $1 million or more. ..."
"... On his last day in office, January 20, 2001, Bill Clinton issued a presidential pardon to financier-crook and fugitive from justice Marc Rich, whose wife, Denise, had contributed $450,000 to the Clinton Library. ..."
Aug 26, 2016 | www.theamericanconservative.com

Prediction: If Hillary Clinton wins, within a year of her inauguration, she will be under investigation by a special prosecutor on charges of political corruption, thereby continuing a family tradition.

... ... ...

Of 154 outsiders whom Clinton phoned or met with in her first two years at State, 85 had made contributions to the Clinton Foundation, and their contributions, taken together, totaled $156 million.

Conclusion: access to Secretary of State Clinton could be bought, but it was not cheap. Forty of the 85 donors gave $100,000 or more. Twenty of those whom Clinton met with or phoned dumped in $1 million or more.

To get to the seventh floor of the Clinton State Department for a hearing for one's plea, the cover charge was high. Among those who got face time with Hillary Clinton were a Ukrainian oligarch and steel magnate who shipped oil pipe to Iran in violation of U.S. sanctions and a Bangladeshi economist who was under investigation by his government and was eventually pressured to leave his own bank.

The stench is familiar, and all too Clintonian in character.

Recall. On his last day in office, January 20, 2001, Bill Clinton issued a presidential pardon to financier-crook and fugitive from justice Marc Rich, whose wife, Denise, had contributed $450,000 to the Clinton Library.

The Clintons appear belatedly to have recognized their political peril.

Bill has promised that, if Hillary is elected, he will end his big-dog days at the foundation and stop taking checks from foreign regimes and entities, and corporate donors. Cash contributions from wealthy Americans will still be gratefully accepted.

One wonders: will Bill be writing thank-you notes for the millions that will roll in to the family foundation-on White House stationery?

[Jul 03, 2016] Thank you, Elizabeth Warren, for picking up untitrust mantle

Notable quotes:
"... I didn't just mean Walmart and the like, I explained. I also meant the monopolistic powers that aren't obvious to the general public. Such as wholesale suppliers and shippers. And such as Visa and Mastercard, which impacts very substantially the profitability of small retailers and franchisers. ..."
"... Which brought me then, and brings me again, to one of my favorite examples of how the Dems forfeit the political advantage on government regulation by never actually discussing government regulation, in this instance, what's known as the Durbin Amendment. It limits the amount that Visa and Mastercard-clearly critical players in commerce now-can charge businesses for processing their customers' credit card and ATM card transactions. ..."
"... Talk to any owner of a small retail business-a gas station franchise owner, an independent fast food business owner, an independent discount store, for example-about this issue, as I did back when the Durbin Amendment was being debated in Congress. See what they say. ..."
"... The Durbin Amendment was one of the (very) precious few legislative restrictions on monopolies, on anticompetitive business practices, to manage to become law despite intense lobbying of the finance industry or whatever monopolistic industry would be hurt by its enactment. To my knowledge, though, it was never mentioned in congressional races in 2010 or 2014, or in the presidential or congressional races in 2012. Antitrust issues have been considered too complicated for discussion among the populace. ..."
"... And also presumably, it's why the news media ignored Elizabeth Warren's speech on Wednesday entirely about the decisive, dramatic effects of the federal government's aggressive reversal over the last four decades of antirust regulation and the concerted failures of one after another White House administration (including the current one) to enforce the regulation that remains. ..."
"... Washington Monthly ..."
"... What amazed me yesterday was how Warren synthesized the main points of virtually everything we've published into a single speech that, while long and wonky, was Bill Clintonesque in its vernacular exposition. You can imagine average Americans all over the country listening, nodding, understanding . ..."
"... Though many in the press didn't notice the speech, you can best believe Hillary Clinton's campaign operatives were paying attention (Trump's too, I'll bet). That's why I think the speech has the possibility of changing the course of the campaign. The candidate who can successfully incorporate the consolidation message into their campaign rhetoric will an huge, perhaps decisive advantage. Hillary has already signaled, in an op-ed she published last fall, that she gets the larger argument. Yesterday, Elizabeth Warren showed her how to run on it. You can read the full prepared text below. ..."
"... I'm thrilled. Except for that parenthetical that says "even the "populist" candidates running president have shied away from it, which is inaccurate regarding Bernie Sanders. The link is to an article by Glastris in the November/December 2015 edition of Washington Monthly titled " America's Forgotten Formula for Economic Equality ," which regarding Sanders concludes based upon an answer to a question by Anderson Cooper at a then-recent televised debate in which Sanders asked the question about how he expected to win the presidency as a democratic socialist failed to mention the issue of antitrust, that Sanders did not campaign on the issue of the demise of antitrust law and enforcement. ..."
"... We already know from the DNC's public description of the latest draft of the platform that it includes things such as a general commitment to the idea of a $15-per-hour minimum wage; to expanding Social Security; to making universal health care available as a right through expanding Medicare or a public option; and to breaking up too-big-to-fail institutions. ..."
"... Eliminating conflict of interest at the Federal Reserve by making sure that executives at financial institutions cannot serve on the board of regional Federal Reserve banks or handpick their members. ..."
"... Banning golden parachutes for taking government jobs and cracking down on the revolving door between Wall Street and Washington. ..."
"... Prohibiting Wall Street from picking and choosing which credit agency will rate their product. ..."
"... Empowering the Postal Service to offer basic banking services, which makes such services available to more people throughout the country, including low-income people who lack access to checking accounts. ..."
"... Ending the loophole that allows large profitable corporations to defer taxes on income stashed in offshore tax havens to avoid paying less taxes. ..."
"... Using the revenue from ending that deferral loophole to rebuild infrastructure and create jobs. ..."
"... Okay, folks. While being credited to Sanders, this far more likely is a blunt-force impact of Warren, since every one of these points concerns Warren's particular area of interest: financial industry regulation. ..."
"... In other words, Warren is the intermediary between the Clinton and Sanders campaigns. And in exchange for her unbridled campaigning for and with Clinton has combined her own top priorities-precise legislative ones that Warren has the deep expertise to demand and to draft, e.g., items 1 and 3-with one very specific one of Sanders and with more generic ones of his as well, e.g., items 2 and 5. ..."
July 1, 2016 | angrybearblog.com
A detailed update follows the original post.

Is the window closing on Bernie Sanders's moment? A number of folks, your humble blogger included , have suggested as much. We've argued that with Democrats seeming to unite behind Hillary Clinton, it's possible that the longer Sanders withholds his endorsement for her in the quest to make the party platform more progressive, the less leverage he'll end up having.

But a new battleground state poll from Dem pollster Stan Greenberg's Democracy Corps suggests Sanders' endorsement could, in fact, still have a real impact, meaning he may still have some genuine leverage to try to win more concessions designed to continue pushing the party's agenda in a more progressive direction.

A Sanders endorsement of Clinton could still make a big difference , Greg Sargent, The Plum Line, Washington Post, yesterday at 3:24 p.m.

Paul Glastris reports that a speech Elizabeth Warren gave that was virtually ignored by the news media could provide a template for an argument about the economy that changes the course of the presidential election . - gs

– Greg Sargent, The Plum Line, Washington Post, yesterday at 6:21 p.m.

Just about exactly a year ago-early last summer-as Clinton was picking up the pace of her campaign appearances and formulating her substantive arguments, she said something that the news media caught onto immediately as really strange. In an attempt to woo aspiring and current small-business owners, she did her default thing: She adopted a Republican slogan and cliché, this one that government regulation and bureaucracy are the main impediments to starting and expanding small businesses, and are, well, just making the lives of small business owners miserable.

Federal regulations and bureaucracy, see.

It shouldn't take longer to start a business in America than it does to start one in France, she said, correctly. And it shouldn't take longer for a small-business owner to fill out the business's federal tax forms than it takes Fortune 500 corporations to do so. Also, correctly. And as president she will … something.

There were, the news media quickly noted, though, a few problems with this tack. One was that regulations that apply varyingly to other than a few types of small businesses-those that sell firearms and ammunition, for example-small-business regulations are entirely state and local ones and are not of the sort that the federal government even could address.

Another was that Clinton was relying upon a survey report that provided average times to obtain business licenses in various cities around the world, for companies that would employ a certain number of employees within a numerical, midsize range (or some such), and that cited Paris as the only French cities; showed that the differences in the time it took on average to obtain a business license there and in several American cities was a matter of two or three days, and that only Los Angeles (if I remember correctly) among the American cities had a longer average time than did Paris; and that the all the cities listed had an average of less than two weeks.

Some folks (including me, here at AB) also noted that the actual time it takes to open a small business depends mostly on the type of business, often the ease of obtaining a business loan, purchasing equipment such as that needed to open a restaurant, leasing space, obtaining insurance, and ensuring compliance with, say, local health department and fire ordinances.

And one folk (me, here at AB) pointed out that the relative times it takes to fill out a federal tax form for a business depends far more on whether your business retains Price Waterhouse Coopers to do that, or has in-house CPAs using the latest software for taxes and accounting, or relies upon the sole proprietor to perform that task.

But here's what I also said: Far, far more important to the ease of starting a business and making a profit in it than regulatory bureaucracy-state and local, much less and federal ones-is overcoming monopolistic practices of, well, monopolies.*

I didn't just mean Walmart and the like, I explained. I also meant the monopolistic powers that aren't obvious to the general public. Such as wholesale suppliers and shippers. And such as Visa and Mastercard, which impacts very substantially the profitability of small retailers and franchisers.

Which brought me then, and brings me again, to one of my favorite examples of how the Dems forfeit the political advantage on government regulation by never actually discussing government regulation, in this instance, what's known as the Durbin Amendment. It limits the amount that Visa and Mastercard-clearly critical players in commerce now-can charge businesses for processing their customers' credit card and ATM card transactions.

Talk to any owner of a small retail business-a gas station franchise owner, an independent fast food business owner, an independent discount store, for example-about this issue, as I did back when the Durbin Amendment was being debated in Congress. See what they say.

The Durbin Amendment was one of the (very) precious few legislative restrictions on monopolies, on anticompetitive business practices, to manage to become law despite intense lobbying of the finance industry or whatever monopolistic industry would be hurt by its enactment. To my knowledge, though, it was never mentioned in congressional races in 2010 or 2014, or in the presidential or congressional races in 2012. Antitrust issues have been considered too complicated for discussion among the populace.

Which presumably is why the news media never focused on the fact that Bernie Sanders discussed it regularly in his campaign. And that it resonated with millennials.

And also presumably, it's why the news media ignored Elizabeth Warren's speech on Wednesday entirely about the decisive, dramatic effects of the federal government's aggressive reversal over the last four decades of antirust regulation and the concerted failures of one after another White House administration (including the current one) to enforce the regulation that remains.

Here's what Glastris wrote in preface to his republishing of the full Warren speech:

Yesterday, straight off her high-profile campaign appearance Monday with Hillary Clinton, Sen. Elizabeth Warren gave a keynote address about industry consolidation in the American economy at a conference at the Capitol put on by New America's Open Markets program. Though the speech has so far gotten only a modicum of attention-the press being more interested in litigating Donald Trump's Pocahontas taunts-it has the potential to change the course of the presidential contest. Her speech begins at minute 56:45 in the video below.

Warren is, of course, famous for her attacks on too-big-to-fail banks. But in her address yesterday, entitled "Reigniting Competition in the American Economy," she extended her critique to the entire economy, noting that, as a result of three decades of weakened federal antitrust regulation, virtually every industrial sector today-from airlines to telecom to agriculture to retail to social media-is under the control of a handful of oligopolistic corporations. This widespread consolidation is "hiding in plain sight all across the American economy," she said, and "threatens our markets, threatens our economy, and threatens our democracy."

As our readers know, economic consolidation is a subject the Washington Monthly has long been obsessed with-see here , here , here , here , here , here , here , here , here , and here . In our current cover story , Barry Lynn (impresario of yesterday's event) and Phil Longman argue that antitrust was the true legacy of the original American Populists and a vital, under-appreciated reason for the mass prosperity of mid-20 th Century America. But this legacy, and the new Gilded Age economy that has resulted from its abandonment, is not a narrative most Americans have been told (one reason why even the "populist" candidates running president have shied away from it).

What amazed me yesterday was how Warren synthesized the main points of virtually everything we've published into a single speech that, while long and wonky, was Bill Clintonesque in its vernacular exposition. You can imagine average Americans all over the country listening, nodding, understanding .

Though many in the press didn't notice the speech, you can best believe Hillary Clinton's campaign operatives were paying attention (Trump's too, I'll bet). That's why I think the speech has the possibility of changing the course of the campaign. The candidate who can successfully incorporate the consolidation message into their campaign rhetoric will an huge, perhaps decisive advantage. Hillary has already signaled, in an op-ed she published last fall, that she gets the larger argument. Yesterday, Elizabeth Warren showed her how to run on it. You can read the full prepared text below.

I'm thrilled. Except for that parenthetical that says "even the "populist" candidates running president have shied away from it, which is inaccurate regarding Bernie Sanders. The link is to an article by Glastris in the November/December 2015 edition of Washington Monthly titled " America's Forgotten Formula for Economic Equality ," which regarding Sanders concludes based upon an answer to a question by Anderson Cooper at a then-recent televised debate in which Sanders asked the question about how he expected to win the presidency as a democratic socialist failed to mention the issue of antitrust, that Sanders did not campaign on the issue of the demise of antitrust law and enforcement.

But as it happens, I knew that was incorrect. One of my fondest memories of the Sanders campaign dates back to a detailed first-person report by a journalist covering the Sanders campaign in Iowa last summer, who attended a rally not as journalist but instead from the cheap seats in the midst of the attendees. I can't remember the journalist or the publication, and was unable to find it just now in a search. But I remember this: He sat next to a young woman, blond, cheerleadery-looking, who whenever Sanders said a word or phrase referencing one of his favorite topics, would stand up, thrust her arm up in a punch-the-air motion, and shout the word or phrase. Cheerleader-like, the reporter said.

One of the words? Antitrust. Or, as the young woman said it, "ANTITRUSSSTTT!"

In searching for that article, which as I said I couldn't find, I did find a slew of references by Sanders to antitrust-the economic and political power of unchecked and ever-growing monopolies-in reports about his rallies. One, about a rally in Iowa, for example, quoted Sanders as saying that Agribusiness monopoly has reduced the prices human farmers receive for their products well below their market value in a competitive economy.

Other statements made clear the critical reason that Sanders has so focused on the call to break up the big banks: their huge economic and political power. Including the resultant demise of community banks of the sort that made America great when America was great-for obtaining small-business loans and mortgages, anyway.

So here's my point: If you click on the link to that Democracy Corps poll, you'll see what so many people whose heads are buried in the sands of the pre-2015 political era (including the ones who constantly trash me in the comments threads to my posts like my last one ) don't recognize. All that the Democrats need do in order to win a White House and down-ballot landslide is to campaign on genuinely progressive issues, and genuinely explain them.

Which is why Warren is so valuable to the Dems up and down the ballot. And why Sanders is, too.

Warren endorsed Clinton last week, and on Tuesday campaigned with her in a speech introducing her, singing her praises, and trashing Donald Trump. Headline-making stuff. But not the stuff that will matter most. When she goes on the road and repeats her Wednesday speech, not her Tuesday one, and then asks that people vote Democratic for the White House on down, it will matter far more.

And that is true also for Sanders. But I don't expect many politicos over the age of 40 to recognize that.

Glastris's piece yesterday in titled " Elizabeth Warren's Consolidation speech Could Change the Election. " Yes. Exactly. Consolidation . As in, monopolies . And monopolistic economic practices and political power .

Antitrusssttt!

Surprisingly, apparently in response to the release of the Democracy Corp poll yesterday, hours after suggesting that Clinton was about to begin campaigning as a triangulator because Sanders was refusing to endorse her, and anyway that's what some Clinton partisans have been urging, someone in the Clinton campaign rescinded that , indirectly. Presumably, it was someone under the age of 40.

Or someone who reads Angry Bear . Probably someone who's under 40 and reads Angry Bear.

Rah-rah! Sis-boom-bah!

* Sentence edited slightly or clarity. 7/2 at 10:43 a.m.

UPDATE: Greg Sargent is reporting now:

The latest draft of the Democratic Party platform, which is set to be released as early as this afternoon, will show that Bernie Sanders won far more victories on his signature issues than has been previously thought, according to details provided by a senior Sanders adviser.

The latest version of the platform, which was signed off on recently by a committee made up of representatives for the Sanders and Clinton campaigns and the DNC, has been generally summarized by the DNC and characterized in news reports. Sanders has hailed some of the compromises reached in it, but he has vowed to continue to fight for more of what he wants when the current draft goes to a larger Democratic convention platform committee in Orlando coming weeks, and when it goes to the floor of the convention in Philadelphia in late July.

But the actual language of the latest draft has not yet been released, and it will be released as early as today. It will show a number of new provisions on Wall Street reform, infrastructure spending, and job creation that go beyond the victories that Sanders has already talked about. They suggest Sanders did far better out of this process thus far than has been previously thought. Many of these new provisions are things that Sanders has been fighting for for years.

We already know from the DNC's public description of the latest draft of the platform that it includes things such as a general commitment to the idea of a $15-per-hour minimum wage; to expanding Social Security; to making universal health care available as a right through expanding Medicare or a public option; and to breaking up too-big-to-fail institutions.

Warren Gunnels, the chief policy adviser to the Sanders campaign, is Sargent's source. Gunnels listed six additions to the platform draft:

  1. Eliminating conflict of interest at the Federal Reserve by making sure that executives at financial institutions cannot serve on the board of regional Federal Reserve banks or handpick their members.
  2. Banning golden parachutes for taking government jobs and cracking down on the revolving door between Wall Street and Washington.
  3. Prohibiting Wall Street from picking and choosing which credit agency will rate their product.
  4. Empowering the Postal Service to offer basic banking services, which makes such services available to more people throughout the country, including low-income people who lack access to checking accounts.
  5. Ending the loophole that allows large profitable corporations to defer taxes on income stashed in offshore tax havens to avoid paying less taxes.
  6. Using the revenue from ending that deferral loophole to rebuild infrastructure and create jobs.

Okay, folks. While being credited to Sanders, this far more likely is a blunt-force impact of Warren, since every one of these points concerns Warren's particular area of interest: financial industry regulation.

But there are, I believe, clear Sanders hallmarks in there, too: particularly item 4, empowering the Postal Service to offer basic banking services, which makes such services available to more people throughout the country, including low-income people who lack access to checking accounts.

In other words, Warren is the intermediary between the Clinton and Sanders campaigns. And in exchange for her unbridled campaigning for and with Clinton has combined her own top priorities-precise legislative ones that Warren has the deep expertise to demand and to draft, e.g., items 1 and 3-with one very specific one of Sanders and with more generic ones of his as well, e.g., items 2 and 5.

This will be an unbeatable platform and team. During the campaign, and in the four years that follow.

Game on.

[Jun 18, 2016] Greenspan Shocked Disbelief

Greenspan phony "Shocked disbelief" reminds classic "...I am shocked - shocked, there is gambling going on in this establishment...." "...here are your winnings..." exchange between Humphrey Bogart & Claude Rains in Casablanca. Compare with "... "Those of us who have looked to the self-interest of lending institutions to protect shareholders' equity, myself included, are in a state of shocked disbelief," he said. ..."
Notable quotes:
"... "Those of us who have looked to the self-interest of lending institutions to protect shareholders' equity, myself included, are in a state of shocked disbelief," ..."
"... Greenspan spurned the Republican acolytes trying desperately to defend the faith and blame the crisis on the Community Reinvestment Act and the powerful lobby of poor people who forced powerless banks to do reckless things. ..."
"... Private greed, not public good, caused this catastrophe: "The evidence now suggests, but only in retrospect, that this market evolved in a manner which if there were no securitization, it would have been a much smaller problem and, indeed, very unlikely to have taken on the dimensions that it did. It wasn't until the securitization became a significant factor, which doesn't occur until 2005, that you got this huge increase in demand for subprime loans, because remember that without securitization, there would not have been a single subprime mortgage held outside of the United States, that it's the opening up of this market which created a huge demand from abroad for subprime mortgages as embodied in mortgage-backed securities. ..."
"... But having admitted the failure of his faith, Greenspan could not abandon it. Credit default swaps had to be "restrained," he admitted. Those who create mortgages should be mandated to retain a piece of them to insure responsible lending. Otherwise, the old faith still applied. No new regulations were needed, because the markets "for the indefinite future will be far more restrained than would any currently contemplated new regulatory regime." ..."
"... The only Guantanamo that the United States has any business running is a concentration camp for the hundreds of wall street executives and their cronies in Bushland that conspired to defraud the American people from their hard earned dollar. ..."
"... There are no free markets in America, any more than there is free lunch. ..."
"... So it wasn't the military-industrial complex that did us in after all . . . ..."
"... It's clear from comments on this contribution that few readers of Truthout believe Alan Greenspan's sorry testimony before Congress. What has faith in something to do with enforcing the policies of fiduciary responsibility already on the books? All these so-called "experts" on capitalism are now coming out to say "I'm sorry." Well, I won't be sorry for them until they are held monetarily and criminally responsible for their actions, inept or not. ..."
"... If it looks like class warfare, as David Harvey, author of Neoliberalism, has stated, call it class warfare and act accordingly. ..."
"... it doesn't take a genius to understand that when financial instruments are created based on crap (subprime mortgages), that eventually problems will occur with those instruments. In fact, Greenspan and his cronies knew that, which is why they resisted these instruments being regulated by the SEC or even the CFTC. ..."
"... Sounds like the "maestro" hit a flat note in his orchestra of greed and deregulation. ..."
"... Did anybody even bother to consult the Math PhDs who created these instruments to run possible scenarios -- just in case? why bother when you know you can scare congress, the president and the treasury and ultimately the people into bailing your ass out of worldwide collapse? ..."
"... Shocked Disbelief is a ploy. When they were all riding high, they didn't give a crap. They were going to come out richer than hell anyway. ..."
"... Where's Ayn Rand when you need her? Give me a break Mr Greenspan. Never let history and reality get in the way of the big unregulated celebration of greed like we have had since "Saint Ronald Wilson Reagan", and the other "Free Market" "government is the problem" ideologues ..."
"... What about the 1994 Act of Congress that required the Fed to monitor and regulate derivatives? The Act Greenspan ignored? ..."
"... "...I am shocked - shocked, there is gambling going on in this establishment...." "...here are your winnings..." exchange between Humphrey Bogart & Claude Rains in Casablanca ..."
Oct 24, 2008 | truthout.org

by: Robert Borosage, The Campaign for America's Future

On October 23, former Federal Reserve Chairman Alan Greenspan testified before a House Oversight and Government Reform Committee hearing on the role of federal regulators in the current financial crisis.

It marks the end of an era. Alan Greenspan, the maestro, defender of the market fundamentalist faith, champion of deregulation, celebrator of exotic banking inventions, admitted Thursday in a hearing before Rep. Henry Waxman's House Committee and Oversight and Government Reform that he got it wrong.

"Those of us who have looked to the self-interest of lending institutions to protect shareholders' equity, myself included, are in a state of shocked disbelief," he said.

As to the fantasy that banks could regulate themselves, that markets self-correct, that modern risk management enforced prudence: "The whole intellectual edifice, however, collapsed in the summer of last year."

Greenspan spurned the Republican acolytes trying desperately to defend the faith and blame the crisis on the Community Reinvestment Act and the powerful lobby of poor people who forced powerless banks to do reckless things. Greenspan dismissed that goofiness in response to a question from one of its right-wing purveyors, Rep. Todd Platts, R-Pa., noting that subprime loans grew to a crisis only as the unregulated shadow financial system securitized mortgages, marketed them across the world, and pressured brokers to lower standards to generate a larger supply to meet the demand. Private greed, not public good, caused this catastrophe:

"The evidence now suggests, but only in retrospect, that this market evolved in a manner which if there were no securitization, it would have been a much smaller problem and, indeed, very unlikely to have taken on the dimensions that it did. It wasn't until the securitization became a significant factor, which doesn't occur until 2005, that you got this huge increase in demand for subprime loans, because remember that without securitization, there would not have been a single subprime mortgage held outside of the United States, that it's the opening up of this market which created a huge demand from abroad for subprime mortgages as embodied in mortgage-backed securities.

But having admitted the failure of his faith, Greenspan could not abandon it. Credit default swaps had to be "restrained," he admitted. Those who create mortgages should be mandated to retain a piece of them to insure responsible lending. Otherwise, the old faith still applied. No new regulations were needed, because the markets "for the indefinite future will be far more restrained than would any currently contemplated new regulatory regime."

Now hung over from their bender, the banks could be depended upon to remain sober "for the indefinite future." Or until taxpayers' money relieves their headaches, and they are free to party once more.


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Comments

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The only Guantanamo that the

Sun, 10/26/2008 - 23:37 - Captain America (not verified)

The only Guantanamo that the United States has any business running is a concentration camp for the hundreds of wall street executives and their cronies in Bushland that conspired to defraud the American people from their hard earned dollar.

What they did dwarfs the damage caused to this country by 911, (no disrespect for the many innocents who died). However, here, every single citizen is a victim of fraud and corruption on a scale that was heretofore inconceivable. Greenspan, Bush and now Paulson have done more than Bin Laden and his hordes could do in a 100 years.

By the way, if you protest YOU wind up locked up for being un-American. What happened America ?

There are no free markets in

Sun, 10/26/2008 - 19:27 - pink elephant (not verified)

There are no free markets in America, any more than there is free lunch. The game was always fixed and Greenspan was the ultimate shill for the fixers. The past thirty years have been an orgy of greed with common sense shoved aside for the sake of uncommon expediency. Americans became infatuated by arcane formulas and dense incomprehensible mathematics to the point that they forget simple arithmetic. America wake up it was only a dream, and a bad one at that.

So it wasn't the

Sun, 10/26/2008 - 19:07 - Anonymous (not verified)

So it wasn't the military-industrial complex that did us in after all . . .

It's clear from comments on

Sun, 10/26/2008 - 15:40 - afrothethics (not verified)

It's clear from comments on this contribution that few readers of Truthout believe Alan Greenspan's sorry testimony before Congress. What has faith in something to do with enforcing the policies of fiduciary responsibility already on the books? All these so-called "experts" on capitalism are now coming out to say "I'm sorry." Well, I won't be sorry for them until they are held monetarily and criminally responsible for their actions, inept or not. The truth is as plain as the nose on your face: Greenspan, the Federal Reserve, the investment banks, the Bush administration and several members of Congress unobtrusively acted to consciously and knowingly to rob the national treasury for the sake of capitalism's sacred cow: capital accumulation on behalf of the nation's political and economic elite. If it looks like class warfare, as David Harvey, author of Neoliberalism, has stated, call it class warfare and act accordingly.

We have heard statements

Sun, 10/26/2008 - 10:11 - DJK (not verified)

We have heard statements like "the mathematical models used for knowing the behavior of derivatives based on subprime mortgages were too difficult to understand", etc. But it doesn't take a genius to understand that when financial instruments are created based on crap (subprime mortgages), that eventually problems will occur with those instruments. In fact, Greenspan and his cronies knew that, which is why they resisted these instruments being regulated by the SEC or even the CFTC. And this is why they turned a blind eye to many of the rating agencies giving many of these instruments AAA ratings. I am sure that a real investigation will reveal numerous instances of fraudulent activity in conjunction with this debacle. Those perpetrators must be identified and brought to justice. While this will not fix our current problem, it hopefully should serve as a deterrent to those who would in the future attempt to again engage in such activities.

Well here you have it a

Sun, 10/26/2008 - 08:13 - Robert Iserbyt (not verified)

Well here you have it a confessional lie from the biggest fraud perpetrator in the history of American finance Why the markets ever listened to this criminal in the first place is evidence that our entire nation should be required to take a full year of real unfettered economics just in case they don't understand what is going on now. All the pundits on MSNBC and all the talking heads should be removed from the airwaves. The Bailout what will that do? the answer lies before you.

Sounds like the "maestro"

Sun, 10/26/2008 - 02:02 - Anonymous (not verified)

Sounds like the "maestro" hit a flat note in his orchestra of greed and deregulation. Come on, do you really think we are all so stupid to buy into the story that you couldn't predict a melt down knowing that those writing the subprimes held no responsibility for their actions? That's like giving a "get out of jail card" to someone who just created a felony! Did anybody even bother to consult the Math PhDs who created these instruments to run possible scenarios -- just in case? why bother when you know you can scare congress, the president and the treasury and ultimately the people into bailing your ass out of worldwide collapse?

I'm a former real estate

Sun, 10/26/2008 - 00:24 - two7five7one (not verified)

I'm a former real estate broker and my son is a mortgage broker. From about 2004 through the beginning of this "greatest financial crisis since '29", we frequently talked on the phone about the disaster which would ensue when the real estate value appreciation stopped, and people were no longer fueling the economy with money borrowed against their equity, and the sub-prime loan fiasco would end. We knew it would be disastrous, and both of us were astonished that neither the FED nor congress was willing to say or do anything about it. Anyone who has witnessed over the years the cycle of boom/bust/boom/bust in the real estate market knew that after eleven years of unprecedented "boom" -- '96 through '2007 -- the "bust" would be like an earthquake. Paulson and Greenspan and their ilk now denying that they suspected this is just is just their lying to protect the GOP which was benefitting from the booming economy. They should both end up in prison, with all of the GOP members of congress who have had their hands in the cash register.

Dance clown, dance. First

Sat, 10/25/2008 - 23:48 - mysterioso (not verified)

Dance clown, dance. First you were against the FED until you became head of the FED. Then you were for trickle down economics and letting the "system" regulate itself until you saw the inevitable destruction it caused. Dance clown, dance. You should be the first one sent to prison under the "Un-American activities act". The arrogance of your testimony before the committee was appalling. You honestly couldn't believe you were wrong !!!

Shocked disbelief, my foot.

Sat, 10/25/2008 - 23:35 - slw (not verified)

Shocked disbelief, my foot. Many of us predicted EXACTLY this outcome.

This is like telling the Fox

Sat, 10/25/2008 - 22:43 - topview (not verified)

This is like telling the Fox to watch the Hens and then walking away and trusting him to do the right thing. Government has to return to regulation and see that there is no hanky, Banky going on anymore. Monopolies have to be busted up, like the Communication industry's, the Drug industries and any other Corporations that control to much of the way the Country operates. No more Outsourcing any Government duties.

Shocked Disbelief is a ploy.

Sat, 10/25/2008 - 22:00 - radline9 (not verified)

Shocked Disbelief is a ploy. When they were all riding high, they didn't give a crap. They were going to come out richer than hell anyway.

Where's Ayn Rand when you

Sat, 10/25/2008 - 20:53 - anglohistorian (not verified)

Where's Ayn Rand when you need her? Give me a break Mr Greenspan. Never let history and reality get in the way of the big unregulated celebration of greed like we have had since "Saint Ronald Wilson Reagan", and the other "Free Market" "government is the problem" ideologues. We can spend trillions on war and corporate bailouts, but we can't have a single payer health system? We can't rebuild our infrastructure? Say it again- give me a break!

What about the 1994 Act of

Sat, 10/25/2008 - 20:41 - Jtmonrow (not verified)

What about the 1994 Act of Congress that required the Fed to monitor and regulate derivatives? The Act Greenspan ignored?

"...I am shocked - shocked,

Sat, 10/25/2008 - 20:29 - Anonymous (not verified)

"...I am shocked - shocked, there is gambling going on in this establishment...." "...here are your winnings..." exchange between Humphrey Bogart & Claude Rains in Casablanca

This would be the same

Sat, 10/25/2008 - 19:50 - dtroutma (not verified)

This would be the same "shocked disbelief" expressed by Willie Sutton's mother?

shouldn't Greenspan give his

Sat, 10/25/2008 - 18:06 - Anonymous (not verified)

shouldn't Greenspan give his salary and bonus back to taxpayers?

[May 01, 2016] Why I (Belatedly) Blew the Whistle on the SECs Failure to Properly Investigate Goldman Sachs

Notable quotes:
"... By James A. Kidney, former SEC attorney. Originally published at Watch the Circus ..."
"... Pro Publica ..."
"... Pro Publica's ..."
"... The New York Times ..."
"... The New York Times ..."
"... The New York Times ..."
"... The New York Times ..."
"... Dodd-Frank at best imposes generalized rules about bank size and other generic issues, rather than addressing the kinds of fraudulent actions that actually occurred. It is appropriate for the SEC or Federal Reserve to impose narrower changes in corporate practice to address specific kinds of fraud. They are called "undertakings" and are often imposed by civil settlements with the SEC or in litigated relief. It did not happen with the Big Bank frauds. ..."
"... The only reason to keep the information secret is to prevent embarrassment to the SEC or to those people who made decisions for the agency. Most of them left the SEC years ago. For public consumption, I have tried to redact all names of the non-supervisory personnel in the Division of Enforcement who worked on Goldman. I also must add that, as the emails show, for a period of time those dedicated investigators were excited about the notion of bringing at least a slightly broader action than their supervisors wanted. As is the case with much of the Division of Enforcement, the worker bees try hard and usually are fearless. It is their bosses who frequently suppress their enthusiasm for policy, political, or personal reasons. ..."
"... The author is trying very hard to be nice to the point of being delusional. This is criminality and corruption through and through, and it didn't end in '08. Don't be sad… get mad. ..."
"... This man has risked a lot to do what he did. He's lost more than many of you will realize. If he can't just crap on the old life and the old profession, please, cut the man a little slack. You don't want to be him. ..."
"... James A. Kidney, former trial attorney with the Securities and Exchange Commission, retired from the SEC in 2014 at the age of 66 after 24 years working there. Looks like he had a full career, although had to put up with a lot of bullshit, and possibly soured some relationships on his way out. ..."
"... Very similar situation here. Going on 50, unemployed in my chosen field, etc. And yes, its hard to just walk away sometimes… I have to keep my mind focused ahead instead of looking back. ..."
"... I know other whistleblowers and internal dissenters who wound up losing their jobs who initially blame themselves, than come to accept that the system in which they operated was fundamentally corrupt, that even if some people locally really were trying to do the right thing, it was bound to either 1. go nowhere, 2. be allowed to proceed to a more meaningful level if it was cosmetic or served some larger political purpose or 3. got elevated because the organization was suddenly in trouble and they needed to burnish their cred in a big way (a variant of 2, except with 3, you might have a something serious take place by happenstance of timing). ..."
"... (other whistleblowers) ..."
"... (other whistleblowers) ..."
"... (other whistleblowers) ..."
"... (other whistleblowers) ..."
"... the system in which they operated ..."
"... (some employees) ..."
"... 'investigating fraud' ..."
April 24, 2016

Yves here. Two things struck me about Jim Kidney's article below. One is that he still wants to think well of his former SEC colleagues. I know other whistleblowers and internal dissenters who wound up losing their jobs who initially blame themselves, than come to accept that the system in which they operated was fundamentally corrupt, that even if some people locally really were trying to do the right thing, it was bound to either 1. go nowhere, 2. be allowed to proceed to a more meaningful level if it was cosmetic or served some larger political purpose or 3. got elevated because the organization was suddenly in trouble and they needed to burnish their cred in a big way (a variant of 2, except with 3, you might have a something serious take place by happenstance of timing). Kidney does criticize corrosive practices, particularly the SEC stopping developing its own lawyers and becoming dependent on the revolving door, but his criticisms seem muted relative to the severity of the problems.

Number two, and related, are the class assumptions at work. The SEC does not want to see securities professionals at anything other than bucket shops as bad people. At SEC conferences, agency officials are virtually apologetic and regularly say, "We know you are honest people who want to do the right thing." Please tell me where else in law enforcement is that the underlying belief.

By James A. Kidney, former SEC attorney. Originally published at Watch the Circus

The New Yorker and Pro Publica websites today posted an article by Pro Publica's Jesse Eisinger about the de minimis investigation by the Securities and Exchange Commission into the conduct of Goldman Sachs in the sale of derivatives based on mortgage-backed securities during the run-up to the Great Recession of 2008. The details of the SEC's failure to aggressively pursue Goldman in the particular investigation, Abacus, and its refusal to investigate fully misconduct by Goldman and other "Too Big to Fail" banks, stands not only as a historic misstep by the SEC and its Division of Enforcement, but undermines the claim that the Obama Administration has been "tough on Wall Street." The Pro Publica version contains links to a few of the documents I provided.

No one in authority who was involved in the Goldman investigation ever gave me an explanation for why the effort was so slight. Mr. Eisinger's article doesn't offer any explanation from the one investigation participant brave enough to comment. The details of the investigation into Abacus at my level as trial counsel, which I provided to Pro Publica earlier this year, compels the conclusion that the SEC, its chairman at the time, Mary Schapiro, and the leadership of the Division of Enforcement were more interested in a quick public relations hit than in pursuing a thorough investigation of Goldman, Bank of America, Citibank, JP Morgan and other large Wall Street firms.

Although the emails and documents I produced to Pro Publica stemming from my role as the designated (later replaced) trial attorney for the Division of Enforcement are excruciatingly boring to all but the most dedicated securities lawyer, even a lay person can observe that the Division of Enforcement was more anxious to publicize a quick lawsuit than to follow the trail of clues as far up the chain-of-command at Goldman as the evidence warranted. Serious consideration also never was given to fraud theories in any of the Big Bank cases stemming from the Great Recession that would better tell the story of how investors were defrauded and who was responsible, due either to dereliction or design.

Instead, the SEC restricted its investigation to the narrowest theory of liability, had to be pressed (by me) to go even one short rung above the lowest level Goldman supervisor in its investigation (which took months to push through, though investigative subpoenas are frequently issued on far less in far smaller cases) and finally dropped other investigations of Goldman in return for a $550 million settlement announced July 15, 2010. To my knowledge (I retired in March 2014), the SEC never again pursued Goldman for its mortgage securities fraud or other major fraud. There is no evidence on the SEC website that it did so.

Nearly six years later, long after the statute of limitations for securities fraud expired and individuals, pension funds and corporate entities are no longer able to bring private actions against the Big Banks, the Department of Justice announced another settlement with Goldman for its deceptive conduct in the sale of mortgage-backed securities. In this one, Goldman agreed to pay more than $5 billion "in connection with its sale of residential mortgage-backed securities."

At a minimum, it can be said that the SEC left 90 percent of the money on the table at a time when a more aggressive investigation of the company, as well as others, could have counted for something by disclosing, in a detailed court complaint, Wall Street wrongs that might have helped policy makers better address the subject and allow damaged individuals and entities to bring their own lawsuits.

It is very important to emphasize emphatically several points. First, I have zero evidence, and would be very surprised, if any of the individuals at the Division of Enforcement, including senior supervisors or the SEC chairman or associate commissioners, acted unlawfully or were motivated principally to protect Goldman and other big banks. All of these people appeared well-intentioned from their point of view, even they never really explained, to me, or to many others at the Commission, their motives in limiting investigations. The most senior level supervisors left more lucrative jobs in the private sector to head the Division of Enforcement, taking plum jobs but at significant personal sacrifice. (They then returned to even more lucrative employment or even more high-profile public positions.) All of them were gentlemen. These factors make it all the more surprising that I never got a clear answer as to why the investigation was so constipated, as it obviously was. Its range was clearly limited from the outset: we will sue the bank and not look hard for evidence of individual participation beyond the lowest levels.

By the same token, it is unfair to assume as a fact that any of the individuals at Goldman not sued, or anyone at Paulson & Co., violated the securities laws, civilly or criminally. Like any citizen, they are entitled to a day in court. Absent such opportunity, they are innocent of any wrongdoing. Arguments in my internal correspondence that evidence was sufficient to sue should be viewed only as that - arguments.

So my point in releasing these documents to Pro Publica is not to chastise or hold up to public criticism those involved at the SEC, Paulson & Co. or Goldman, though criticism of the process and of the underlying financial conduct certainly is inevitable. All of these institutions have substantial influence in the investment industry. Rather, it is to bring to light the actual conduct of one of several SEC investigations into Big Bank fraud leading up to the 2008 financial crisis.

As I told Mr. Eisinger when I met him, I hoped he would go to the individuals in charge of the SEC investigation at the time and find out why the investigation was so limited. I have spent six years wondering what is the true answer to that question. Perhaps there were sound reasons, other than the urge to get out a quick press release, which led experienced criminal prosecutors with histories in Wall Street to smother a major investigation by limiting it to the lowest level employee possible, to express total resistance to even investigating further up the chain of command, and ignoring without serious explanation and analysis what I and others, including my own immediate supervisors, viewed as the more appropriate theory for civil prosecution. I hope there are such reasons. As a trial attorney at the SEC for over 20 years, I bled SEC blue. I believed that the agency usually tried to do the best it could, using analog era procedures and processes to combat fraud in a digital age. I am saddened to release this information. But the notion that "the Administration was tough on Wall Street" must be addressed by facts, not press releases and self-serving interviews, else the system's problems cannot be adequately addressed and repaired to deal with the next financial crisis.

Not only is the issue of how the financial sector enforcement agencies handled the wrongs of the Great Recession an important political issue, but it is important to history. It is important that the facts not be shielded from the public so that we can all learn for the future. And it is a melancholy thought that, presented with the opportunity for a rigorous investigation and airing of facts in civil or criminal proceedings gone, history will be denied a fairer story of both the financial crisis itself and how the government responded.

As many news organizations have noted , the taxpayer and Goldman shareholders will pay the combination of penalties and repayments in the DOJ settlement. No individual was named as liable in the civil settlement with Goldman nor in any of the other similar, and even larger, financial settlements entered into with the Department of Justice, all of which are vastly greater than what the SEC obtained in its "quick hit, one and done" enforcement actions. DOJ must be credited with what appears to have been a far more thorough investigation of wrongdoing than the SEC performed, but the public is properly mystified that no individuals were charged, criminally or civilly, although the DOJ press releases contains the usual caveat that "the investigation continues."

The settlements with Goldman and other Big Banks were resolved under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA), which allows the Feds to ignore the normal five-year statute of limitations for fraud, but does not permit suit by private party victims. As has been the practice with DOJ when dealing with Wall Street, no criminal charge was brought. In fact, no complaint was filed in any of these cases. Instead, DOJ entered into contractual arrangements with the banks. Failing to fulfill their obligations under the contract would subject them to civil enforcement as a breach of contract matter, not a contempt charge in federal District Court.

Contrary to claims by politicians, it is clear that the Obama Administration has not been hard-hitting on Wall Street fraudsters. The large fines obtained by the Department of Justice, while a short-term pinch, are simply a cost of doing business. Relying on fines to penalize rich Wall Street banks, which, after all, specialize in making money and do it well, if not always honestly, is like fining Campbell Soup in chicken broth. It costs something, but doesn't change anything in the way of operations or personnel.

Despite billions in fines representing many more billions in fraud, the enforcement agencies of the United States have been unable to find anyone responsible criminally or civilly for this huge business misconduct other than a janitor or two at the lowest rung of the companies. Nor have they sought to impose systemic changes to these banks to prevent similar frauds from happening again.

Yessir, according to the Obama administration, Goldman Sachs, JP Morgan, Bank of America, Citibank and other institutions made their contributions to tearing down the economy, but no one was responsible. They are ghost companies. And nothing needs to be done to prevent such intent or dereliction in the future.

Law enforcement by contract? Clearly, the banks made it a condition of settlement that no complaint, civil or criminal, be filed. That might gum up the works by requiring state regulators to take action under their own rules, or cause other collateral consequences.

Ah, say the defenders of the status quo, don't forget about Dodd-Frank, the unwieldy legislation passed by feckless Democrats influenced by big money contributors and their own fear of appearing too aggressive (a particular Democratic Party contagion). Dodd-Frank was and is a virtual chum pool for Wall Street lawyers and lobbyists, leaving most of the substance to regulatory agencies such as the SEC and the Federal Reserve, who for years have been significantly captured by those they are supposed to regulate. The private sector lawyers and lobbyists have open doors to these places to "help" write the rules and add complexity, which they later complain about in court, challenging those same rules as too complex.

Dear citizen, just remember this: complexity favors fraud, and certainly favors Wall Street and corporate America. You can't understand the rules and neither can Congress or all but the most dedicated experts. That's a lot of room to disguise misdeeds. To take a current example, which came to my attention just before completing this post, Congress is trying to use sentencing reform, generally thought of as intending to remove inequities from the criminal justice system, to also make it even tougher to prosecute and punish white-collar crime. Is this why the Koch Brothers suddenly show such public attention to the poor and needy by favoring such legislation? See this discussion of adding the "mens rea" requirement to such legislation. Burying an important but legalistic issue in otherwise liberal leaning legislation is a current example of disguising lax enforcement of white-collar crime in a complicated package. As one Democratic congressman suggested, how can a liberal vote against sentencing reform? The explanation of the badger buried in the woodpile is too complicated for the average voter.

Not coincidentally, adding a requirement to the law that it is a defense to either the crime itself or to sentencing that "I didn't know my acts were against the law" is a get out of jail free card as the complexity of laws addressed to ever more sophisticated business misconduct grows. Wall Street clearly has shown no shame in using the defense that "no one knew". Can't blame them. It has worked so far. Maybe they don't even need new legislation.

I was told repeatedly when I entered the Goldman investigation that synthetic CDOs were just too complex for me to understand. Of course, it appeared to be plain vanilla fraud selling a product designed to fail but nicely packaged for chumps to buy. Claims of complexity hide many easily understood sins.

At least for the major sins, we don't need even more complex regulations. Instead, put leadership in place who will aggressively enforce the laws we have already. That would raise plenty of eyebrows and put some bums in prison, or at least make them pay civil and criminal penalties personally. As many have noted, prison or, at least, personal financial liability, beats corporate concessions every time and pays back in future reluctance to break the law. The country should try it sometime.

So back to little me, a small and ineffective cog in the larger system. Why is this release of documents so long after the investigation?

My friends know that I have been upset since 2010 about the way the SEC handled the Goldman case and, in my view (confirmed by other trial lawyers), that it became a template for other SEC civil suits against the Big Banks. In 2011 I wrote an anonymous letter to The New York Times complaining about the lack of investigative effort by the Division of Enforcement and the impact of the "revolving door" bringing Wall Street defense lawyers into the highest reaches of the SEC. This is a practice that Obama has continued at most departments and agencies having to do with the financial system, following in Bill Clinton's footsteps. The New York Times letter was based entirely on publicly available information.

I was dismayed to not find any follow-up to my letter in The New York Times . I gave up trying to bring attention to the investigative lassitude of the agency. Interest appeared to be over.

A year after I retired, I sent a copy of the letter to The Times , under a cover letter identifying myself. One of the addressees on the original letter called and told me the original letter never was received. The caller suggested that was because I misaddressed it to the old location of The New York Times . I felt foolish, of course, but I guess that in 2014, when the letter was finally received, The Times didn't see fit to follow-up the information even knowing its source. This was another indication to me that the time for debate over the law enforcement treatment of wrong doers on Wall Street had passed.

Once, years earlier and only for a brief time, the SEC was an agency that was at least sometimes fearless of Wall Street institutions. In those days, the directors of the Division of Enforcement were home-grown, not imported from Wall Street law firms. After 1996, that ended. Every director since has been nurtured as a Wall Street defense lawyer. The decline in performance has followed an expected arc. No one has seemed bothered by this. It seems the phrase "lawyers represent client interests" is sufficient explanation to insulate this practice from critics. In this view (pushed by lawyers), lawyers are the only people in America who are not influenced by their work experience, including friendships and defense of client practices. They are SO exceptional! So give it up, Jim, I finally told myself. It's the nature of Washington to put foxes in hen houses and claim they are protecting the fowl.

But in April 2015, Sen. Bernie Sanders announced his presidential candidacy, based principally on anger over how Wall Street has escaped being held seriously responsible for its misdeeds. If you credit Sanders with nothing else, praise him for not letting go of the notion of justice for those who suffered and those who caused pain and anger for millions. Yes, the banks are not solely responsible for the Great Recession, but they contributed more than their fair share and leveraged immensely the damage initially caused by others.

Sanders was not treated seriously. The publications I read made it clear that Sanders was, like Donald Trump, a flash in the pan. Jeb Bush and Hillary Clinton would be nominated. Anger against Wall Street and inequality were issues, but not worthy vehicles for a political campaign. Nothing here. Move on.

It turns out that the ravages caused by Wall Street are the gift that keeps on giving. As Sanders campaigned with far more success than predicted, and Secretary of State Clinton defended President Obama as "tough on Wall Street," it was evident that my small contribution to correcting the record might be timely.

So here it is.

Do I think Obama is responsible for the ineffective and embarrassing lay downs at the SEC and DOJ? Yes, I do. I have no idea if the President communicated to his law enforcement appointees that they should "go easy on Wall Street." Rarely is such overt instruction necessary in Washington. But it is not hard to believe that in some fashion he did send such signals, since he came into office with a mantra of letting bygones be bygones, including in the far more important arena of the false narratives for invading Iraq.

In any event, the chairman of the SEC and the attorney general are appointed by the President. At a minimum, we can say with certainty that Obama was satisfied with their performance. It is difficult to conceive that, as a Harvard educated lawyer who also taught law at the University of Chicago, it never crossed his mind how massive civil or criminal misconduct could go on without the supervision or knowledge of at least mid-level executives. Certainly, the public criticism was brought to his attention. His response was to create a joint task force on the subject of fraud in general. Its main visible public function is to collect all the press releases on fraud prosecutions, including small-time fraud, on one website . It also offers advice to "elders" on how to avoid fraudulent scams. The pro forma mention of the task force in DOJ's announcement of the Goldman settlement signals that the Task Force doesn't do much. Again, law enforcement by press release.

The alternative possibility, never mentioned because it is preposterous, is that big Wall Street firms so lack supervision of their lower level employees that fraud on a huge scale can be conducted without the knowledge of even mid-level executives. At the SEC, at least, such a conclusion should call for application of its "regulatory" function to impose supervisory conditions on the banks. No such action was ever undertaken. Instead, it was "pay up some money and nevermind."

Dodd-Frank at best imposes generalized rules about bank size and other generic issues, rather than addressing the kinds of fraudulent actions that actually occurred. It is appropriate for the SEC or Federal Reserve to impose narrower changes in corporate practice to address specific kinds of fraud. They are called "undertakings" and are often imposed by civil settlements with the SEC or in litigated relief. It did not happen with the Big Bank frauds.

I believe that the American public is entitled to accurate information about how their government works, including the important regulatory agencies. One way to do this is to fully disclose how the sausage is made, especially when the process is defective. Self-promoting press releases swallowed by a fawning business press is not sufficient. I knew I would not disclose any non-public information about the Goldman investigation while the lawsuit against Fabrice Tourre was pending. He was the one guy at Goldman the SEC sued personally. In fact, I think he was the only guy employed by any of the big banks sued personally. (Another fellow who worked with the banks - not for the banks - was sued in another case. He was found not liable, with the jury asking how come higher-ups were not in the dock and urging the investigation to continue. It wasn't.) The Tourre case concluded a few years ago with a verdict against the defendant. All appeals are exhausted. The statute of limitations has expired for private actions. Disclosure of the information I had can do no harm to the public or to pending litigation.

The only reason to keep the information secret is to prevent embarrassment to the SEC or to those people who made decisions for the agency. Most of them left the SEC years ago. For public consumption, I have tried to redact all names of the non-supervisory personnel in the Division of Enforcement who worked on Goldman. I also must add that, as the emails show, for a period of time those dedicated investigators were excited about the notion of bringing at least a slightly broader action than their supervisors wanted. As is the case with much of the Division of Enforcement, the worker bees try hard and usually are fearless. It is their bosses who frequently suppress their enthusiasm for policy, political, or personal reasons.

As final egotistical end note, I must say that, despite all of my personal reservations about his dedication to effective law enforcement in the financial sector, I voted for the President twice. I will vote for whoever is the Democratic nominee. But I ask myself: Is this the best that two political parties given de facto monopoly over selection of presidential candidates can do?

Whoever is nominated and elected, Republican or Democrat, I hope that he or she will recognize the need to end the practice of hiring Wall Street personnel to run our financial enforcement agencies. They should begin by looking to home-trained personnel to lead the major departments and agencies, such as Treasury, the SEC and the Department of Justice, including the chief of the Antitrust Division. These are the people who are responsible for these institutions on a daily basis and also understand the nature and importance of their mission. They have a career stake in doing an effective job. Outsiders are, in general, more interested in resume polishing for the next private job. Additionally, much great talent leaves these agencies for their own more lucrative private careers when they see their own chances for advancement blocked by outsiders or their energies trying to fairly but aggressively enforce the law sapped by timid leadership.

One party has chastised our government on every occasion for nearly 40 years and shows no intention of reining in Big Business or Wall Street. Directly or by implication, these attacks tarnish government employees in general, making a public service career less attractive to our most talented citizens. The other party has been indifferent or ineffective in its defense of civil service and has addressed financial sector wrongs by adding to the complexity of the system rather than cutting through it. As a result, some of our businesses are above the law.

Something has got to change. It will. The question is, will it be for the better?

Gaylord , April 24, 2016 at 4:40 am

The author is trying very hard to be nice to the point of being delusional. This is criminality and corruption through and through, and it didn't end in '08. Don't be sad… get mad.

James Levy , April 24, 2016 at 6:24 am

When it's your career, you get sad.

A little history: I was hired, first as an adjunct, then a tenure-track professor, by the interdisciplinary Freshman teaching unit at my old university. Two years before I would have come up for tenure (and gotten it) they axed the program and switched me, against its will, to the History Department. And they reset my tenure clock to zero. Long story short, they were never going to tenure me. So I slogged on and earned my pay and got my two kids through high school. By then, my wife wanted out of the suburbs and said she was leaving, preferably with me, but leaving. So we moved to the country. This cut me off from the academic life (and nice $72,000 a year paycheck) that I had struggled for years to enter and excel in.

So what? So, It's gone. I'm cut off. My intended life's work is ruined. At 51 I'm an unemployed naval historian with two books and seven refereed journal articles and I can't get an interview for a full-time job at a community college. How painful is this? It's murder. Hurts all the time. No more exciting lectures to give. No more university library at my beck and call. No more access to journals. No more conferences. It's an occasional one-off course and driving a delivery van.

This man has risked a lot to do what he did. He's lost more than many of you will realize. If he can't just crap on the old life and the old profession, please, cut the man a little slack. You don't want to be him.

H. Alexander Ivey , April 24, 2016 at 6:58 am

Mr Levy, I am very sympathetic to your situation – long story short, I was in the forefront of the late 70s to the present, layoffs in various industries where I found myself game-fully employed. I too, no longer believe I will ever be employed full time at any job.

But I argue that it is not that the gods do not favour us; it is that we are the outcome of bad gov't policies and unregulated (regulated for the consumer) businesses practices. Hence, my lack of sympathy or willingness to tolerate breast beating (see my April 24, 2016 at 6:44 am posting) by those who put us here.

ahimsa , April 24, 2016 at 7:48 am

@James Leavy

Not sure I follow you?

James A. Kidney, former trial attorney with the Securities and Exchange Commission, retired from the SEC in 2014 at the age of 66 after 24 years working there. Looks like he had a full career, although had to put up with a lot of bullshit, and possibly soured some relationships on his way out.

From Bloomberg: SEC Goldman Lawyer Says Agency Too Timid on Wall Street Misdeeds

inode_buddha , April 24, 2016 at 7:57 am

Very similar situation here. Going on 50, unemployed in my chosen field, etc. And yes, its hard to just walk away sometimes… I have to keep my mind focused ahead instead of looking back.

Are there any yacht clubs nearby you? There is like 4 of them within 10 minutes of me (I'm on the Great Lakes) You could teach sailing and rigging no doubt. Bonus: Union crane operators are required to know their rigging – they may need teachers too.

Norb , April 24, 2016 at 10:54 am

More than ever, I am convinced the capitalist system needs to be rejected as the means determining how goods and services are delivered. The injustice and inequality generated are too great. Finding a positive expressive outlet for this dissatisfaction will require leadership- and a new vision for the future.

The amount of social damage being inflicted by the elite is almost beyond comprehension. Since they have successfully insulated themselves form the consequences of their actions, they remain aloof and uncaring for the plight of ordinary people, not to mention the health of the planet. This system will continue to cut more and more people off from the benefits of collective social action and effort. The work of the many, supporting the desires of the few cannot stand.

We all have to decide the level of inequality we are willing to live with. How people answer this question will naturally sort them into common communities. Leave the isolated gated communities to the elite. Careerism, like capitalism, is a dead end if your position cannot be guaranteed. The amount of talent and passion for work wasted under the current system is another undercounted fact. Sustainability and democracy are not compatible with capitalism.

Getting mad is only the beginning. The anger must be directed in some productive fashion. Any resistance to the current order must have broad social support and that support only has strength if self-reliant. Building these self-reliant structures is what the future will hold. If the plutocrats can build a world for themselves, why can't the common man. It only takes work,discipline, and control over the means of production.

Workers without power, influence, and the means to obtain life necessities are slaves. Is the best the human mind can conceive a life of benevolent serfdom?

By the way, I believe I would enjoy sitting in on one of your lectures. I'm sure I would learn much- and be a better man for it.

local to oakland , April 24, 2016 at 11:43 am

@James Levy … sorry to hear. I know a few who have been chewed up by the academic meat grinder. I hope you can find a productive outlet for your scholarship. Exile is hard.

I have been helped by the stoics, and Dante.

Ben , April 24, 2016 at 10:01 am

And now GS is caught in the middle of 1MDB bond issue scandal using fraudulent and information.

H. Alexander Ivey , April 24, 2016 at 6:44 am

"The explanation of the badger buried in the woodpile is too complicated for the average voter."

That's it! Stop right there! I will not let you (speaking to the author) BS your guilty conscience over my internet link. The average voter clearly knows they are getting screwed, that Wall Street and the voter's own bank is ripping the voter off, and most clearly, that the justice department, from state and local to federal, is enabling this injustice.

You sir, are swimming with sharks. Your morality is "is it legal?", your justification is "for the shareholder". Therefore, you refuse to see the mendacity and instead excuse it for ignorance.

JACK SKWAT , April 24, 2016 at 7:39 am

I know other whistleblowers and internal dissenters who wound up losing their jobs who initially blame themselves, than come to accept that the system in which they operated was fundamentally corrupt, that even if some people locally really were trying to do the right thing, it was bound to either 1. go nowhere, 2. be allowed to proceed to a more meaningful level if it was cosmetic or served some larger political purpose or 3. got elevated because the organization was suddenly in trouble and they needed to burnish their cred in a big way (a variant of 2, except with 3, you might have a something serious take place by happenstance of timing).

Wow, that's a mouthful – and it's only one sentence. Whilst I love your pieces, I've noticed that many of the articles – at least the run up summation to the articles – tend to be written in a stream-of-consciousness style that, frankly, is hard to digest. This seems to be the case more now than in the past. I don't know if you're harried or on an impossible schedule, but could you please make your syntax easier to read? Thanks from a long-time reader and donator.

readerOfTeaLeaves , April 24, 2016 at 3:18 pm

Because it's a Sunday and I have time to goof off, one potential revision - b/c I believe what Mr Kidney has to say is important enough for me to spend a few minutes on one potential suggestion. I've amended and added what I hope are accurate meanings:

----
Focusing on these as the key subject /verb pairs:
I know (other whistleblowers)
(other whistleblowers) [lost their jobs]
(other whistleblowers) [blamed themselves – initially]

(other whistleblowers) [finally… accept]
the system in which they operated … [was corrupt]
… even if… (some employees) tried to [be competent]

(It - there's a problem with 'it' as the subject, because we are unclear what 'it' refers back to - I'll interpret 'it' as 'investigating fraud' ) was bound to…
-------------–

I know other whistleblowers and internal dissenters. They wound up losing their jobs.
Initially, they blamed themselves, until they finally came to accept that the system in which they operated was so fundamentally corrupt that they could not retain a sense of their own integrity while working within the organization.

Despite the fact that some people really were trying to do the right thing, for reasons that I will explain, investigating fraud was bound to go in one of only three directions:
1. fraud would not be investigated at all,
2. fraud investigation would serve the agency's need for better public relations - in other words, the appearance of fraud investigation would be allowed to proceed, but only if it was merely cosmetic (or served some larger political purpose), or else
3. fraud investigation became temporarily elevated, but only because the organization* was suddenly in trouble – and consequently, needed to burnish its credibility by actually investigating fraud.

(Although 3 is a variant of 2, in the third option, credible fraud investigation could occur if, and only if, political necessity enabled competent SEC employees to actually investigate fraud in order to maintain the reputation of the SEC).

[NOTE: *It's not entirely clear here whether 'the organization' is the target business, or whether it is the SEC (which would need to burnish it's cred in the face of bad publicity)]
------------

Not sure how close I came to the author's intended meanings, but I thought that I'd give it a shot.

Yves Smith Post author , April 24, 2016 at 4:25 pm

The sentence parses correctly even though it is long. Stream of consciousness often does not parse correctly, plus another characteristic is the jumbling of ideas or observations. The point is to try to recreate the internal state of the character.

For instance, from David Lodge's novel "The British Museum Is Falling Down":

It partook, he thought, shifting his weight in the saddle, of metempsychosis, the way his humble life fell into moulds prepared by literature. Or was it, he wondered, picking his nose, the result of closely studying the sentence structure of the English novelists? One had resigned oneself to having no private language any more, but one had clung wistfully to the illusion of a personal property of events. A find and fruitless illusion, it seemed, for here, inevitably came the limousine, with its Very Important Personage, or Personages, dimly visible in the interior. The policeman saluted, and the crowd pressed forward, murmuring 'Philip', 'Tony', 'Margaret', 'Prince Andrew'.

More generally:

The Stream of Consciousness style of writing is marked by the sudden rise of thoughts and lack of punctuations.

The sentence may be longer than you like but this is not stream of consciousness. A clear logical structure ("first, second, third") is the antithesis of stream of consciousness.

fiscalliberal , April 24, 2016 at 8:13 am

I fail to see why fraud is not prosecuted. We can get cute with fancy words but fraud is clear and simple. Also – Enron results in SARBOX which seems to be clearly ignored. Yves – do we know of any SARBOX prosecutions? Clinton started deregulation, Bush implemented deregulation and Obama maintains it. No wonder the kids are mad. The financial industry makes the Koch brothers look like pikers.

Yves Smith Post author , April 24, 2016 at 4:30 pm

There is actually a high legal bar to prosecuting fraud.

I have written at length re Sarbox and the answer is no. And under Sarbox, you don't need to prosecute, you can start with a civil case and flip it to criminal if you get strong enough evidence in discovery. There was only one case (IIRC, with Angelo Mozilo) where the SEC filed Sarbox claims, one in which it also filed securities law claims. The judge threw out the Sarbox claims with no explanation. I assume it was because the judge regarded that as doubling up: you can do Sarbox or securities law (the claims to have some similarity) but not both. But the SEC as it so often does seems to have lost its nerve after that one.

afisher , April 24, 2016 at 9:22 am

Interestingly, the SEC has been warned about more of the same type of fraud: https://www.sec.gov/comments/s7-16-15/s71615-60.pdf

I don't know if an election would have consequences and if a new administration headed by Sanders would make it the SEC more responsible to the taxpayers and not the investors / banks.

It only took a decade for Markopolos to have his ponzi scheme information read by SEC.

diptherio , April 24, 2016 at 9:48 am

I want to like this guy, I really do. But then he goes and says stuff like this:

The most senior level supervisors left more lucrative jobs in the private sector to head the Division of Enforcement, taking plum jobs but at significant personal sacrifice. (They then returned to even more lucrative employment or even more high-profile public positions.) All of them were gentlemen. These factors make it all the more surprising that I never got a clear answer as to why the investigation was so constipated, as it obviously was.

So he doesn't understand how the revolving door works…or he does but he's being purposefully obtuse about it. Sacrifice my ass! Gentleman my heiny! And claiming that there's no proof of criminality when, as is pointed out above, Sarbanes-Oxley was obviously violated isn't helping things either.

Listen dude, pick a side. It's either the American people or Wall Street crooks and their abettors in government. You don't get to have it both ways. This kind of minimization and wishy-washyness is only helping the crooks. More disappointing than I exepected.

diptherio , April 24, 2016 at 9:59 am

I mean, at least he lays blame at Obama's feet, and calls the fraud what it is: fraud. Good on him!

…But then he pulls out the "vote for Dems no matter what they do!" line and I just shake my head….

polecat , April 24, 2016 at 1:37 pm

diptherio……. excuse me for a momen--BARFFFF!!!!!!-- Whew ……… that felt better !! ……….

yes …I agree….these kinds of articles are nothing more than defensive measures against a growing public rage !!!

bu…bu…but Just Us !!

diptherio , April 24, 2016 at 5:18 pm

these kinds of articles are nothing more than defensive measures against a growing public rage !!!

I don't actually agree. I think the guy feels a little guilty for not doing more, now he's trying to salve his conscience. Still, he can't quite bring himself to admit that the people he was working for may well have been criminals. They were just so nice!

Self-reflection is not comfortable, and most people don't have much tolerance for it. I think this guy's legitimately trying to do the right thing (not cover up for criminality) it's just that it's really psychologically difficult to admit certain aspects of reality. It's not like he's the only one.

polecat , April 24, 2016 at 6:07 pm

I find it telling that suddenly now (within the last year or so) that all these people ( people in high finance, their underlings, traders, hedge funders, and other assorted enablers of massive fraud upon the general public, are suddenly having a 'come to hayzeus' epiphany! I'm not buying whatever faux sincerity they're trying to project…….

They've screwed millions of trusting people with their fraudulent grifting!

reslez , April 24, 2016 at 7:09 pm

> I find it telling that suddenly now (within the last year or so) that all these people […], are suddenly having a 'come to hayzeus' epiphany!

Especially when it comes after a fat retirement and a lengthy career of going along. I have much more respect for people who really did put their daily bread on the line, and there are plenty of those people, a lot of whom Obama sent to jail. So, yeah, great, you finally told the truth… but where were you when the country needed you to speak out?

perpetualWAR , April 24, 2016 at 11:32 am

How about where the guy said "until proven guilty, they are innocent." Hahahahahahaha

Crooks, the lot of them.

diptherio , April 24, 2016 at 12:59 pm

Couldn't we use civil forfeiture to go after them regardless of whether we can prove any actual crime? What's good for the average citizen is surely good for the elite banker…

polecat , April 24, 2016 at 1:42 pm

…but you just might need some of those 'Yehadis' to back you up ;-)

reslez , April 24, 2016 at 7:06 pm

It's a good thing they're gentlemen. I don't know if I could handle all the looting and self-dealing if it came from common ruffians. Truly we are fortunate to be in such hands, my fellow countrymen!

ChrisPacific , April 26, 2016 at 12:36 am

Yes, I had trouble getting past that line as well. Either he is being ironic or he has a massive blind spot on that point.

Lars Jorgensen , April 24, 2016 at 10:00 am

According to Bill Black in a ted talk 2014. After the Savings and loans debacle, where the regulators went after the worst of the worst criminals, they made 30.000 criminal referrals and 1000 procecutions with a 90% succes rate.

Now after the 2008 crisis, which was 70 times bigger causing 10 million job losses and costing 11 trillion dolllars, the Obama administration has not made one single criminal referral. https://www.youtube.com/watch?v=-JBYPcgtnGE

Today I fell over some information about the IMF, that the organization is exempt from legal prosecutions and taxes. Can this be true?

From the article: "The employees who bare the IMF badge are pretty much exempt from all forms of government intervention. And, according to LisaHavenNews, the IMF "law book," the Articles of Agreement lists the reasons and requirements for exclusion from government mandate."

http://www.truthandaction.org/revealed-imf-granted-complete-immunity-form-legal-prosecution-taxation/

polecat , April 24, 2016 at 1:45 pm

…..criminals are, as criminals do, as criminals take…..

Steve in Dallas , April 24, 2016 at 2:35 pm

Thank you, I was hoping someone would mention Bill Black.

I'm a software/hardware product/business development engineer. In 2008, after 20 years of reading the WSJ and stunned by the sellout to Murdoch, I went to the internet independent media (IM) to follow the 'economic crisis'. Within a few months it was clear to me 1) I had learned nothing of substance reading the WSJ, 2) the U.S. MSM, education system, and government are thoroughly captured/corrupt.

Being a 'reader' (note: I don't know anyone who reads non-fiction) for me this 'worldview transition' was quite natural, nothing really surprised me, and it was a big relief to discover such good information/analysis so easily available on the internet. However, eight years later, I have yet to meet a single person who has rejected the MSM or tuned in to what's happening, via the IM or otherwise. In fact, after leaving the university in 1990, I have yet to meet a single person with any basic understanding of (or the slightest interest in, or concern about) the extreme institutional criminality of the the Savings & Loan Crisis, Asian Economic Crisis, Technology Bubble, the 2008 crisis, or the many economic/military wars-of-aggression methodically destroying one government/economy/country after another.

To me, nothing made the global/economic/organized/mafia criminality more clear than the 2008/2009 articles by Bill Black. Back then I again foolishly assumed people would rally behind Dr. Black to reestablish basic law enforcement against yet another obvious largest-ever "epidemic" of organized crime. Looking back, the highly organized (and very successful) criminality of the Paulson/Obama/Geithner/Bernanke/etc. cabal was truly an amazing operation to behold. Perhaps the most shocking news came in 2010 when numerous studies confirmed that the top 7% of Americans had already "profited" from the economic crisis, that the criminally organized upper class had not only increased their net wealth but, more importantly, had increased their rate of wealth accumulation relative to the bottom 93%. Still, to me, infinitely more amazing, the bottom 93% didn't, and still don't, seem to care, or if they do, they've done absolutely nothing to even start to fight back.

Today, when reading these articles, I'm astounded how completely meek and 'unorganized' the bottom 93% are compared to the extremely vicious and organized top 7%. Year after year the wealthy elite, who's core organizing philosophy is "take or be taken, kill or be killed", increasingly wallow in dangerously high and unprecedented levels of wealth accumulated by blatant/purposeful/methodical/criminal/vicious looting while their victims, the bottom 93% 'working class', do absolutely nothing (what are they doing?…. other than playing with their phone-toys, facebook, video games, movies?). At this point, the main (only?) reason I continue to 'read' is to perhaps someday 'behold' the working class 93% attempting to educate themselves and consequently 'organize' to defend themselves.

lightningclap , April 24, 2016 at 4:48 pm

+1

diptherio , April 24, 2016 at 5:21 pm

Dude, you need to move to Austin, stat!

lyman alpha blob , April 24, 2016 at 10:11 am

I sympathize with Mr. Kidney and applaud him for doing what he can to try to rectify this abhorrent situation. I also applaud him for placing the blame squarely on Obama and his reasons for doing so are solid.

What I find much harder to understand is why he would vote for Obama even in 2012 after it became apparent that Obama was ultimately responsible for stonewalling his investigation, and his complete willingness to vote for the corrupt Democrat party no matter what going forward.

As long as enough people continue to have that attitude things will never change until the whole system comes crashing down. I'd much rather see an FDR-type overhaul of the system rather than a complete collapse as I'm rather fond of civilization. But I've come to expect the latter rather than the former so I'll be reading my weekly Archdruid report for the foreseeable future.

Carolinian , April 24, 2016 at 10:25 am

The most senior level supervisors left more lucrative jobs in the private sector to head the Division of Enforcement, taking plum jobs but at significant personal sacrifice. (They then returned to even more lucrative employment or even more high-profile public positions.) All of them were gentlemen. These factors make it all the more surprising that I never got a clear answer as to why the investigation was so constipated, as it obviously was.

Yes poor babies for that "significant personal sacrifice" that resulted in "even more lucrative" private employment. The author explains the problem then scratches his head over what it might be.

In a rational world there would be a strict separation between the regulated and the regulators. The government would hire professional experts at decent salaries and they never ever would be allowed to then move on to jobs with the regulated. Clearly the assumption underlying our current–irrational–system is that these high status technocrats are "gentlemen" with a code of honor. Welcome to the 19th century. Those long ago plutocrats in their stately English mansions were all gentlemen and therefore entitled to their privileges by their superior breeding. They were the better sort.

Meanwhile for lesser mortals it seems totally unsurprising when laws are ignored because you hire your police from the ranks of the criminal gangs. No head scratching needed.

Alex morfesis , April 24, 2016 at 12:31 pm

Reid Muoio (boss of kidney @ $EC) has a brother at a major tall bldg law firm whose job is to help fortune 500 companies deal with D & O insurance issues…so when in the article Muoio says "He" did not go thru the revolving door…it was fraud by omission…his brother sits on the opposite side of these private settlement agreements…

so is Kidney unaware…leaving us to maybe accept he was never much of an investigator…or just forgot to point it out for us…

The world is full of govt types who tell us TINA…

The wealthy Elliott Spitzer told us he would have loved to help "the little people" but the OCC and then scotus with waters v wachovia…except scotus ruled only direct subsidiaries get protection and the OCC specifically said the trustee operations of OCC regulated entities are also not covered/protected…

A really big shoe
as Ed used to remind us….

susan the other , April 24, 2016 at 1:25 pm

Does anyone else think this was insider demolition – not just the failure to prosecute, but the whole financial implosion in the first place? Who writes up nothing but "shitty deals" – all the while saying to each other: IBGYBG and survives to slink away? They must have had a heads up that the financial system as we had known it in the 20th c. was done. They had a heads up and then they got free passes. My only question is, Wasn't there a better way to bring down the system, an honest way that protected us all? By the end of the cold war money itself had become an inconvenience because of diminishing returns. And now the stuff is just plain dangerous because everyone who got screwed (99%) wants their fair share still. It is paralyzing our thinking. Obama maintains he personally "prevented another depression". I honestly think he might be insane. What we need is a recognition that the old system was completely irrational and it isn't coming back. And most of us are SOL. Somebody is going to figure out how to maintain both the value and usefulness of money very soon, because we've got work to do.

cnchal , April 24, 2016 at 2:03 pm

The GFC was the first great financial crime of this millenium, and Goldman Sachs was at the epicenter. A heist of gargantuan proportions, they didn't even need a safecracker after Bernanke spun the dials and opened the door wide.

Imagine if the FBI and the Mafia exchanged their top leaders every few months. That's what we have here with the SEC and Wall Street.

Bernie Sanders: The business of Wall Street is fraud and greed.
We can add to that. The business of the SEC is to provide cover.

polecat , April 24, 2016 at 2:10 pm

It's all about 'their protection'….not ours!

and Obama………..

He's a f#cking psychopathic peacock!

KYrocky , April 24, 2016 at 2:17 pm

In Yves intro she shares her views, first, that Kidney still wants to think well of his former SEC colleagues and his criticisms seem muted relative to the severity of the problems, and second, that there are class assumptions at work.

The first is obvious, as the SEC is an utter failure in its responsibility to investigate and prosecute financial criminals. While Mr. Kidney devotes a fair amount of his passages pondering how it can be that no individuals within these financial institutions bear personal responsibility, Mr. Kidney fails to see the SEC through that same lens. To say Kidney's criticism of his coworkers is muted is an understatement. The individuals at the SEC are corrupt. The individuals at the Justice Department are corrupt. Probably all nice people: husbands, wives, fathers, mothers, friends, etc. Just like those folks at the financial institutions. Mr. Kidney cuts them slack because of his personal relationships with them. Mr. Kidney chooses to give them the benefit of doubt when the totality of their professional performance at the SEC make clear this cannot be true.

With respect to class assumptions at work, Yves illustrates with the deference shown by SEC officials and investigators toward these financial criminals and their presumption that these individuals are honest. Mr. Kidney does share some of his disappointment in President Obama and Obama's administration but fails to properly connect the dots. In short, the lack of financial crime prosecutions is the result of a deliberate, planned and orchestrated effort.

Mr. Kindney's investigations were prevented in going forward by his superiors. He was never given an explanation for this despite his asking. But Kidney believes his superiors are all good people.

No, they are not. They are compromised people who have placed their career employment above their sworn duty. The fact that their bosses have done the same, as have those in the Justice Department as well as President Obama, should not diminish this fact. The phrase "class assumptions" is too euphemistic when describing a system where there is no justice for the victims of financial crimes, a system where the Justice Department and Administration coordinate to shield financial criminals based on where they work.

This is America. In today's America the fact is certain individuals are above the law because our elected officials at all levels accept that this is okay. Victims of these individuals will be prevented access to their legal recourse, and that these criminals are protected from the highest level of our government down. This goes way, way beyond class assumptions.

readerOfTeaLeaves , April 24, 2016 at 3:31 pm

Yves has written extensively about how corporate interests have funded academic sinecures, as well as continuing legal education seminars attended by attorneys and judges. This is part of the fallout; if you want more, check out her section of ECONned where she explains how legal thinking was perverted by business interests.

flora , April 24, 2016 at 2:37 pm

Thanks for this post. Glad to see the SEC story is still alive. I'm sure the SEC and Obama would prefer it quietly go away.

dk , April 24, 2016 at 2:55 pm

As someone who has fallen on their sword more than once (and again recently), I just want to say that "placed their career employment above their sworn duty" is accurate but also oversimplifies the situation.

People with families tell themselves that they balance performance of most (some?) of those duties, while shirking the balance in order to protect their families (a "good" (as in, expensive) college for the kids)… this actually comes down to sustaining their social status, in a culture (political as well as corporate) where loyalty is valued equal to and above performance, and honorable action is diminished, trivialized, even ridiculed; and not just within the context of the financial industry.

This is not at all a defense of the choice, but the choice is made in a very class-stratified social context, and arises in that general context. People take out loans to buy cars and houses, they squirrel earnings away into investments (to avoid taxes) which they are reluctant to draw from… they feel less ready to abandon their addictive income streams for honor, and fudge their responsibilities. It's not isolated to regulators, or government, or even finance. It occurs so constantly and on so many fronts that addressing specific cases doesn't make a dent in the compromise of the entire culture. And that compromise is fueled and maintained by a very twisted set of ideas about money, and career, and social status (not to mention compromises in journalism, education, science, you name it).

Synoia , April 24, 2016 at 3:37 pm

I read Mr kidney as being very sarcastic. I could not write this with a serious sarcastic (Lawsuit Avoiding) view:

The most senior level supervisors left more lucrative jobs in the private sector to head the Division of Enforcement, taking plum jobs but at significant personal sacrifice. (They then returned to even more lucrative employment or even more high-profile public positions.)

taking plum jobs but at significant personal sacrifice

Oh really? Must have hurt. And from a legal point of view does not appear libelous.

polecat , April 24, 2016 at 6:12 pm

Yeah…stubbed toes only…….

[Mar 23, 2016] Cruz Seeks Economic Wisdom in the Wrong Place

Notable quotes:
"... Gramm seems pretty firmly in free market ideologue territory. Cruz deciding to bring him in as an economic advisor is certainly noteworthy. ..."
"... The short version: the Glass Steagall repeal allowed the banks to become "Too Big To Fail" and gave them enormous political leverage. It's the political leverage - the ability to count on Uncle Sam to come to the rescue, and provide easy terms for rent-seeking - that GLB provided. If they were separated, and only the investment banks could make risky investments, we would let the investment banks fail while protecting the boring old payments system. You won't get an argument on CFMA, however: it was worse. And that has Gramm's fingerprints all over it. And it might not have passed if the SIFIs were smaller. ..."
"... When I think of the villains of the Great Recession, Phil Gramm is always Public Enemy #1. ..."
"... The Glass Steagall repeal was not my biggest problem with Phil Gramm. My big problem is he wanted to have a completely deregulated financial sector. Sort of like when Newt Gingrich talked about "rational regulation" which was code for no regulation. But anyone who understands financial economics and our financial system knows that no regulations whatsoever is a recipe for a complete melt down. Which is what happened. ..."
economistsview.typepad.com
Barry Ritholtz:

Cruz Seeks Economic Wisdom in the Wrong Place :

Some people look at subprime lending and see evil. I look at subprime lending and I see the American dream in action. -- former U.S. Senator Phil Gramm, Nov. 16, 2008

...Gramm has been brought on as a senior economic adviser to Republican presidential candidate Ted Cruz. This isn't a promising development for Cruz... Not to put too fine a point on it, but I believe -- as do many others -- that Gramm was one of the major figures who helped set the stage for the crisis. ...

Gramm was a key sponsor of the ... Gramm-Leach-Bliley Act , which effectively repealed the piece of the Glass-Steagall Act... The damage caused by rolling back Glass-Steagall pales compared with ... the Commodity Futures Modernization Act of 2000 . Gramm was a co-sponsor of the legislation, which exempted many derivatives and swaps from regulation. Not only was the law problematic, but it veered into potential conflict-of-interest territory. ...

We got a chance to see those consequences a few years later when American International Group failed, thanks in part to swaps ... on $441 billion of securities that turned out to be junk. AIG wasn't required to put up much in the way of collateral, set aside capital or hedge its risk on the swaps. Why would it, when the law said it didn't have to? The taxpayers were then called upon to bailout AIG to the tune of more than $180 billion.

Maybe it isn't too surprising that Cruz would seek advice from Gramm. Cruz, after all, seems to want to hobble modern economic policy by returning to the gold standard. ... We have seen these movies before, and they end in tragedy and tears.

He also talks about Gramm's sad performance in his brief appearance as one of McCain's advisors in 2008.

pgl :

Phil Gramm says he got his economic degree from the University of Georgia. Well - it was from the Terry College of Business which is a business school. Not the graduate program of economics of the University of Georgia. I guess this makes Gramm one notch above Stephen Moore, Donald Luskin, and Lawrence Kudlow (aka the three stooges).

pgl :

The LA Times on Gramm's record on economics:

http://www.latimes.com/business/hiltzik/la-fi-hiltzik-cruz-gramm-20160321-snap-htmlstory.html

"Gramm's most notable moment in that position came on July 10, 2008, when he dismissed the developing economic crisis as "a mental recession" in an interview -- and video -- released by the conservative Washington Times. "We've never been more dominant," he said. "We've never had more natural advantages than we have today. We've sort of become a nation of whiners." McCain immediately disavowed the remarks, and a few days later Gramm stepped down as his campaign co-chairman."

OK that was July. Menzie Chinn always notes that Luskin was saying the same thing as late as September 2008.

sanjait :
Gramm seems pretty firmly in free market ideologue territory. Cruz deciding to bring him in as an economic advisor is certainly noteworthy.

Though I'm still struck by how determined some people seem to lump Graham Leach Bliley in as a cause/major contributor to the crisis.

The CFMA very plausibly serves that purpose. If we want to mark Gramm as a villain, his sponsorship of that bill should be sufficient, as well as his abject refusal to acknowledge the crisis in real time.

But for whatever reason people have picked up Glass Steagall as a Very Important rule, and seem to be pushing to rationalize that by claiming it is a big part of the crisis story.

Ritholtz, to his credit, is qualified and nuanced about this. He notes that CFMA is the big story, and says GLB wasn't didn't "cause" the crisis.

But following through the links to his WaPo piece, he still looks like he is reaching for a reason to label it a major contributor to the crisis.

He claims that removing G-S restrictions caused the major banks to in turn cause the shadow banking entities like AIG, Bear, etc. to "bulk up" their holdings of subprime, based on ... nothing that I can see.

Sure, the major banks were customers and counterparties for those shadow banks, but Ritholtz seems to assume that if G-S weren't in place that demand would somehow have been less. Why?

Take a major bank with mixed commercial and investment banking activity and split the parts. Would that have changed their activities? Not much. The commercial banking side still would have held MBS (and purchase insurance on them) and the I-banks would still make speculative investments of various types.

No one, as far as I've seen, ever bothers to tell a complete story where the structural incentives in the financial sector changed as a result of Glass Steagall in a way that materially impacted the depth or serverity of the housing crisis. How would splitting megabanks into separate big C- and I-banks have changed anything? Bueller?

Instead I see a great many people, including well credentialed economists, just assume or hand waive the claim that it made a big impact without bothering to model or specify it. I'm not saying such an explanation couldn't exist that I'm not aware of ... but at this point I do see the absence of explanation as evidence of absence.

pgl -> sanjait...
Gramm dismissing the concern over a recession in the summer of 2008 is the kicker for me!
Charlie Baker -> sanjait...
sanjait:

"But for whatever reason people have picked up Glass Steagall..."

No need to speculate: Simon Johnson and James Kwak wrote a whole book about it. It's called 13 Bankers:

https://13bankers.com/

The short version: the Glass Steagall repeal allowed the banks to become "Too Big To Fail" and gave them enormous political leverage. It's the political leverage - the ability to count on Uncle Sam to come to the rescue, and provide easy terms for rent-seeking - that GLB provided. If they were separated, and only the investment banks could make risky investments, we would let the investment banks fail while protecting the boring old payments system. You won't get an argument on CFMA, however: it was worse. And that has Gramm's fingerprints all over it. And it might not have passed if the SIFIs were smaller.

When I think of the villains of the Great Recession, Phil Gramm is always Public Enemy #1.

pgl -> Charlie Baker ...
The Glass Steagall repeal was not my biggest problem with Phil Gramm. My big problem is he wanted to have a completely deregulated financial sector. Sort of like when Newt Gingrich talked about "rational regulation" which was code for no regulation. But anyone who understands financial economics and our financial system knows that no regulations whatsoever is a recipe for a complete melt down. Which is what happened.
The Rage :
Cruz just wants to make money for his buddies while waving the bible. JDR was there 100+ years before that "Ted".

[Dec 13, 2015] Deregulation of exotic financial instruments like derivatives and credit-default swaps and corruption of Congress and government

Notable quotes:
"... Can you list all of the pro- or anti- Wall Street reforms and actions Bill Clinton performed as President including nominating Alan Greenspan as head regulator? Cutting the capital gains tax? Are you aware of Greenspans record? ..."
"... Its actually pro-neoliberalism crowd vs anti-neoliberalism crowd. In no way anti-neoliberalism commenters here view this is a character melodrama, although psychologically Hillary probably does has certain problems as her reaction to the death of Gadhafi attests. The key problem with anti-neoliberalism crowd is the question What is a realistic alternative? Thats where differences and policy debate starts. ..."
"... Events do not occur in isolation. GLBA increased TBTF in AIG and Citi. TBTF forced TARP. GLBA greased the skids for CFMA. Democrats gained majority, but not filibuster proof, caught between Iraq and a hard place following their votes for TARP and a broader understanding of their participation in the unanimous consent passage of the CFMA, over objection by Senators James Inhofe (R-OK) and Paul Wellstone (D-MN). ..."
"... It certainly fits the kind of herd mentality that I always saw in corporate Amerika until I retired. The William Greider article posted by RGC was very consistent in its account by John Reed with the details of one or two books written about AIG back in 2009 or so. I dont have time to hunt them up now. Besides, no one would read them anyway. ..."
"... GS was one of several actions taken by the New Deal. That it wasnt sufficient by itself doesnt equate to it wasnt beneficial. ..."
"... "Today Congress voted to update the rules that have governed financial services since the Great Depression and replace them with a system for the 21st century," said then-Treasury Secretary Lawrence Summers. "This historic legislation will better enable American companies to compete in the new economy." ..."
"... The repeal of Glass Steagal was a landmark victory in deregulation that greased the skids for the passage of CFMA once Democrats had been further demoralized by the SCOTUS decision on Bush-v-Gore. The first vote on GLBA was split along party lines, but passed because Republicans had majority and Clinton was willing to sign which was clear from the waiver that had been granted to illegal Citi merger with Travelers. Both Citi and AIG mergers contributed to too big to fail. The CFMA was the nail in the coffin that probably would have never gotten off the ground if Democrats had held the line on the GLBA. Glass-Steagal was insufficient as a regulatory system to prevent the 2008 mortgage crisis, but it was giant as an icon of New Deal financial system reform. Its loss institutionalized too big to fail ..."
"... Gramm Leach Biley was a mistake. But it was not the only failure of US regulatory policies towards financial institutions nor the most important. ..."
"... It was more symbolic caving in on financial regulation than a specific technical failure except for making too big to fail worse at Citi and AIG. It marked a sea change of thinking about financial regulation. Nothing mattered any more, including the CFMA just a little over one year later. Deregulation of derivatives trading mandated by the CFMA was a colossal failure and it is not bizarre to believe that GLBA precipitated the consensus on financial deregulation enough that after the demoralizing defeat of Democrats in Bush-v-Gore then there was no New Deal spirit of financial regulation left. Social development is not just a series of unconnected events. It is carried on a tide of change. A falling tide grounds all boats. ..."
"... We had a financial dereg craze back in the late 1970s and early 1980s which led to the S L disaster. One would have thought we would have learned from that. But then came the dereg craziness 20 years later. And this disaster was much worse. ..."
"... This brings us to Lawrence Summers, the former Treasury Secretary of the United States and at the time right hand man to then Treasury Security Robert Rubin. Mr. Summers was widely credited with implementation of the aggressive tactics used to remove Ms. Born from her office, tactics that multiple sources describe as showing an old world bias against women piercing the glass ceiling. ..."
"... According to numerous published reports, Mr. Summers was involved in. silencing those who questioned the opaque derivative product's design. ..."
"... The Tax Policy Center estimated that a 0.1 percent tax on stock trades, scaled with lower taxes on other assets, would raise $50 billion a year in tax revenue. The implied reduction in trading revenue was even larger. Senator Sanders has proposed a tax of 0.5 percent on equities (also with a scaled tax on other assets). This would lead to an even larger reduction in revenue for the financial industry. ..."
"... Great to see Bakers acknowledgement that an updated Glass-Steagall is just one component of the progressive wings plan to rein in Wall Street, not the sum total of it. Besides, if Wall Street types dont think restoring Glass-Steagall will have any meaningful effects, why do they expend so much energy to disparage it? Methinks they doth protest too much. ..."
"... Yes thats a good way to look it. Wall Street gave the Democrats and Clinton a lot of campaign cash so that they would dismantle Glass-Steagall. ..."
"... Slippery slope. Ya gotta find me a business of any type that does not protest any kind of regulation on their business. ..."
"... Yeah, but usually because of all the bad things they say will happen because of the regulation. The question is, what do they think of Clintons plan? Ive heard surprisingly little about that, and what I have heard is along these lines: http://money.cnn.com/2015/10/08/investing/hillary-clinton-wall-street-plan/ ..."
"... Hillary Clinton unveiled her big plan to curb the worst of Wall Streets excesses on Thursday. The reaction from the banking community was a shrug, if not relief. ..."
"... Iceland's government is considering a revolutionary monetary proposal – removing the power of commercial banks to create money and handing it to the central bank. The proposal, which would be a turnaround in the history of modern finance, was part of a report written by a lawmaker from the ruling centrist Progress Party, Frosti Sigurjonsson, entitled "A better monetary system for Iceland". ..."
economistsview.typepad.com

RGC said...

Hillary Clinton Is Whitewashing the Financial Catastrophe

She has a plan that she claims will reform Wall Street-but she's deflecting responsibility from old friends and donors in the industry.

By William Greider
Yesterday 3:11 pm

Hillary Clinton's recent op-ed in The New York Times, "How I'd Rein In Wall Street," was intended to reassure nervous Democrats who fear she is still in thrall to those mega-bankers of New York who crashed the American economy. Clinton's brisk recital of plausible reform ideas might convince wishful thinkers who are not familiar with the complexities of banking. But informed skeptics, myself included, see a disturbing message in her argument that ought to alarm innocent supporters.

Candidate Clinton is essentially whitewashing the financial catastrophe. She has produced a clumsy rewrite of what caused the 2008 collapse, one that conveniently leaves her husband out of the story. He was the president who legislated the predicate for Wall Street's meltdown. Hillary Clinton's redefinition of the reform problem deflects the blame from Wall Street's most powerful institutions, like JPMorgan Chase and Goldman Sachs, and instead fingers less celebrated players that failed. In roundabout fashion, Hillary Clinton sounds like she is assuring old friends and donors in the financial sector that, if she becomes president, she will not come after them.

The seminal event that sowed financial disaster was the repeal of the New Deal's Glass-Steagall Act of 1933, which had separated banking into different realms: investment banks, which organize capital investors for risk-taking ventures; and deposit-holding banks, which serve people as borrowers and lenders. That law's repeal, a great victory for Wall Street, was delivered by Bill Clinton in 1999, assisted by the Federal Reserve and the financial sector's armies of lobbyists. The "universal banking model" was saluted as a modernizing reform that liberated traditional banks to participate directly and indirectly in long-prohibited and vastly more profitable risk-taking.

Exotic financial instruments like derivatives and credit-default swaps flourished, enabling old-line bankers to share in the fun and profit on an awesome scale. The banks invented "guarantees" against loss and sold them to both companies and market players. The fast-expanding financial sector claimed a larger and larger share of the economy (and still does) at the expense of the real economy of producers and consumers. The interconnectedness across market sectors created the illusion of safety. When illusions failed, these connected guarantees became the dragnet that drove panic in every direction. Ultimately, the federal government had to rescue everyone, foreign and domestic, to stop the bleeding.

Yet Hillary Clinton asserts in her Times op-ed that repeal of Glass-Steagall had nothing to do with it. She claims that Glass-Steagall would not have limited the reckless behavior of institutions like Lehman Brothers or insurance giant AIG, which were not traditional banks. Her argument amounts to facile evasion that ignores the interconnected exposures. The Federal Reserve spent $180 billion bailing out AIG so AIG could pay back Goldman Sachs and other banks. If the Fed hadn't acted and had allowed AIG to fail, the banks would have gone down too.

These sound like esoteric questions of bank regulation (and they are), but the consequences of pretending they do not matter are enormous. The federal government and Federal Reserve would remain on the hook for rescuing losers in a future crisis. The largest and most adventurous banks would remain free to experiment, inventing fictitious guarantees and selling them to eager suckers. If things go wrong, Uncle Sam cleans up the mess.

Senator Elizabeth Warren and other reformers are pushing a simpler remedy-restore the Glass-Steagall principles and give citizens a safe, government-insured place to store their money. "Banking should be boring," Warren explains (her co-sponsor is GOP Senator John McCain).
That's a hard sell in politics, given the banking sector's bear hug of Congress and the White House, its callous manipulation of both political parties. Of course, it is more complicated than that. But recreating a safe, stable banking system-a place where ordinary people can keep their money-ought to be the first benchmark for Democrats who claim to be reformers.

Actually, the most compelling witnesses for Senator Warren's argument are the two bankers who introduced this adventure in "universal banking" back in the 1990s. They used their political savvy and relentless muscle to seduce Bill Clinton and his so-called New Democrats. John Reed was CEO of Citicorp and led the charge. He has since apologized to the nation. Sandy Weill was chairman of the board and a brilliant financier who envisioned the possibilities of a single, all-purpose financial house, freed of government's narrow-minded regulations. They won politically, but at staggering cost to the country.

Weill confessed error back in 2012: "What we should probably do is go and split up investment banking from banking. Have banks do something that's not going to risk the taxpayer dollars, that's not going to be too big to fail."

John Reed's confession explained explicitly why their modernizing crusade failed for two fundamental business reasons. "One was the belief that combining all types of finance into one institution would drive costs down-and the larger institution the more efficient it would be," Reed wrote in the Financial Times in November. Reed said, "We now know that there are very few cost efficiencies that come from the merger of functions-indeed, there may be none at all. It is possible that combining so much in a single bank makes services more expensive than if they were instead offered by smaller, specialised players."

The second grave error, Reed said, was trying to mix the two conflicting cultures in banking-bankers who are pulling in opposite directions. That tension helps explain the competitive greed displayed by the modernized banking system. This disorder speaks to the current political crisis in ways that neither Dems nor Republicans wish to confront. It would require the politicians to critique the bankers (often their funders) in terms of human failure.

"Mixing incompatible cultures is a problem all by itself," Reed wrote. "It makes the entire finance industry more fragile…. As is now clear, traditional banking attracts one kind of talent, which is entirely different from the kinds drawn towards investment banking and trading. Traditional bankers tend to be extroverts, sociable people who are focused on longer term relationships. They are, in many important respects, risk averse. Investment bankers and their traders are more short termist. They are comfortable with, and many even seek out, risk and are more focused on immediate reward."

Reed concludes, "As I have reflected about the years since 1999, I think the lessons of Glass-Steagall and its repeal suggest that the universal banking model is inherently unstable and unworkable. No amount of restructuring, management change or regulation is ever likely to change that."

This might sound hopelessly naive, but the Democratic Party might do better in politics if it told more of the truth more often: what they tried do and why it failed, and what they think they may have gotten wrong. People already know they haven't gotten a straight story from politicians. They might be favorably impressed by a little more candor in the plain-spoken manner of John Reed.

Of course it's unfair to pick on the Dems. Republicans have been lying about their big stuff for so long and so relentlessly that their voters are now staging a wrathful rebellion. Who knows, maybe a little honest talk might lead to honest debate. Think about it. Do the people want to hear the truth about our national condition? Could they stand it?

http://www.thenation.com/article/hillary-clinton-is-whitewashing-the-financial-catastrophe/

EMichael said in reply to RGC...
"She claims that Glass-Steagall would not have limited the reckless behavior of institutions like Lehman Brothers or insurance giant AIG, which were not traditional banks."

Of course this claim is absolutely true. Just like GS would not have affected the other investment banks, whatever their name was. And just like we would have had to bail out those other banks whatever their name was.

Peter K. said in reply to EMichael...
Can you list all of the pro- or anti- Wall Street "reforms" and actions Bill Clinton performed as President including nominating Alan Greenspan as head regulator? Cutting the capital gains tax? Are you aware of Greenspan's record?

Yes Hillary isn't Bill but she hasn't criticized her husband specifically about his record and seems to want to have her cake and eat it too.

Of course Hillary is much better than the Republicans, pace Rustbucket and the Green Lantern Lefty club. Still, critics have a point.

I won't be surprised if she doesn't do much to rein in Wall Street besides some window dressing.

sanjait said in reply to Peter K....
"Can you list all of the pro- or anti- Wall Street "reforms" and actions Bill Clinton performed..."

That, right there, is what's wrong with Bernie and his fans. They measure everything by whether it is "pro- or anti- Wall Street". Glass Steagall is anti-Wall Street. A financial transactions tax is anti-Wall Street. But neither has any hope of controlling systemic financial risk in this country. None.

You guys want to punish Wall Street but not even bother trying to think of how to achieve useful policy goals. Some people, like Paine here, are actually open about this vacuity, as if the only thing that were important were winning a power struggle.

Hillary's plan is flat out better. It's more comprehensive and more effective at reining in the financial system to limit systemic risk. Period.

You guys want to make this a character melodrama rather than a policy debate, and I fear the result of that will be that the candidate who actually has the best plan won't get to enact it.

likbez said in reply to sanjait...

"You guys want to make this a character melodrama rather than a policy debate, and I fear the result of that will be that the candidate who actually has the best plan won't get to enact it."

You are misrepresenting the positions. It's actually pro-neoliberalism crowd vs anti-neoliberalism crowd. In no way anti-neoliberalism commenters here view this is a character melodrama, although psychologically Hillary probably does has certain problems as her reaction to the death of Gadhafi attests. The key problem with anti-neoliberalism crowd is the question "What is a realistic alternative?" That's where differences and policy debate starts.

RGC said in reply to EMichael...
"Her argument amounts to facile evasion"

Fred C. Dobbs said in reply to RGC...

'The majority favors policies to the left of Hillary.'

Nah. I don't think so.

No, Liberals Don't Control the Democratic Party http://www.theatlantic.com/politics/archive/2014/02/no-liberals-dont-control-the-democratic-party/283653/
The Atlantic - Feb 7, 2014

... The Democrats' liberal faction has been greatly overestimated by pundits who mistake noisiness for clout or assume that the left functions like the right. In fact, liberals hold nowhere near the power in the Democratic Party that conservatives hold in the Republican Party. And while they may well be gaining, they're still far from being in charge. ...

Paine said in reply to RGC...

What's not confronted ? Suggest what a System like the pre repeal system would have done in the 00's. My guess we'd have ended in a crisis anyway. Yes we can segregate the depository system. But credit is elastic enough to build bubbles without the depository system involved

EMichael said in reply to Paine ...

Exactly.

Most people think of lending like the Bailey Brothers Savings and Loan still exists.

RC AKA Darryl, Ron said in reply to EMichael...

Don't be such a whistle dick. Just because you cannot figure out why GLBA made such an impact that in no way means that people that do understand are stupid. See my posted comment to RGC on GLBA just down thread for an more detailed explanation including a linked web article. No, GS alone would not have prevented the mortgage bubble, but it would have lessened TBTF and GS stood as icon, a symbol of financial regulation. Hell, if we don't need GS then why don't we just allow unregulated derivatives trading? Who cares, right? Senators Byron Dorgan, Barbara Boxer, Barbara Mikulski, Richard Shelby, Tom Harkin, Richard Bryan, Russ Feingold and Bernie Sanders all voted against GLBA to repeal GS for some strange reason and Dorgan made a really big deal out of it at the time. I doubt everyone on that list of Senators was just stupid because they did not see it your way.

RC AKA Darryl, Ron said in reply to EMichael...
I ran all out of ceteris paribus quite some time ago. Events do not occur in isolation. GLBA increased TBTF in AIG and Citi. TBTF forced TARP. GLBA greased the skids for CFMA. Democrats gained majority, but not filibuster proof, caught between Iraq and a hard place following their votes for TARP and a broader understanding of their participation in the unanimous consent passage of the CFMA, over "objection" by Senators James Inhofe (R-OK) and Paul Wellstone (D-MN). We have had a Republican majority in the House since the 2010 election and now they have the Senate as well. If you are that sure that voters just choose divided government, then aren't we better off to have a Republican POTUS and Democratic Congress?

sanjait said in reply to RC AKA Darryl, Ron...

"I ran all out of ceteris paribus quite some time ago. Events do not occur in isolation. GLBA increased TBTF in AIG and Citi. TBTF forced TARP. GLBA greased the skids for CFMA. "

I know you think this is a really meaningful string that evidences causation, but it just looks like you are reaching, reaching, reaching ...

RC AKA Darryl, Ron said in reply to sanjait...

Maybe. No way to say for sure. It certainly fits the kind of herd mentality that I always saw in corporate Amerika until I retired. The William Greider article posted by RGC was very consistent in its account by John Reed with the details of one or two books written about AIG back in 2009 or so. I don't have time to hunt them up now. Besides, no one would read them anyway.

I am voting for whoever wins the Democratic nomination for POTUS. Bernie without a like-minded Congress would not do much good. But when we shoot each other down here at EV without offering any agreement or consideration that we might not be 100% correct, then that goes against Doc Thoma's idea of an open forum. Granted, with my great big pair then I am willing to state my opinion with no consideration for validation or acceptance, but not everyone has that degree of a comfort zone. Besides, I am so old an cynical that shooting down the overdogs that go after the underdogs is one of the few things that I still care about.

RGC said in reply to Paine ...

GS was one of several actions taken by the New Deal. That it wasn't sufficient by itself doesn't equate to it wasn't beneficial.

RC AKA Darryl, Ron said in reply to RGC...

[Lock and load.]

http://www.occasionalplanet.org/2015/05/13/glass-steagall-one-democratic-senator-who-got-it-right/

Glass-Steagall: Warren and Sanders bring it back into focus

Madonna Gauding / May 13, 2015

Senators Bernie Sanders and Elizabeth Warren are putting a new focus on the Glass-Steagall Act, which was, unfortunately, repealed in 1999 and led directly to the financial crises we have faced ever since. Here's a bit of history of this legislative debacle from an older post on Occasional Planet published several years ago :

On November 4, 1999, Senator Byron Dorgan (D-ND) took to the floor of the senate to make an impassioned speech against the repeal of the Glass-Steagall Act, (alternately known as Gramm Leach Biley, or the "Financial Modernization Act") Repeal of Glass-Steagall would allow banks to merge with insurance companies and investments houses. He said "I want to sound a warning call today about this legislation, I think this legislation is just fundamentally terrible."

According to Sam Stein, writing in 2009 in the Huffington Post, only eight senators voted against the repeal. Senior staff in the Clinton administration and many now in the Obama administration praised the repeal as the "most important breakthrough in the world of finance and politics in decades"

According to Stein, Dorgan warned that banks would become "too big to fail" and claimed that Congress would "look back in a decade and say we should not have done this." The repeal of Glass Steagall, of course, was one of several bad policies that helped lead to the current economic crisis we are in now.

Dorgan wasn't entirely alone. Sens. Barbara Boxer, Barbara Mikulski, Richard Shelby, Tom Harkin, Richard Bryan, Russ Feingold and Bernie Sanders also cast nay votes. The late Sen. Paul Wellstone opposed the bill, and warned at the time that Congress was "about to repeal the economic stabilizer without putting any comparable safeguard in its place."

Democratic Senators had sufficient knowledge about the dangers of the repeal of Glass Steagall, but chose to ignore it. Plenty of experts warned that it would be impossible to "discipline" banks once the legislation was passed, and that they would get too big and complex to regulate. Editorials against repeal appeared in the New York Times and other mainstream venues, suggesting that if the new megabanks were to falter, they could take down the entire global economy, which is exactly what happened. Stein quotes Ralph Nader who said at the time, "We will look back at this and wonder how the country was so asleep. It's just a nightmare."

According to Stein:

"The Senate voted to pass Gramm-Leach-Bliley by a vote of 90-8 and reversed what was, for more than six decades, a framework that had governed the functions and reach of the nation's largest banks. No longer limited by laws and regulations commercial and investment banks could now merge. Many had already begun the process, including, among others, J.P. Morgan and Citicorp. The new law allowed it to be permanent. The updated ground rules were low on oversight and heavy on risky ventures. Historically in the business of mortgages and credit cards, banks now would sell insurance and stock.

Nevertheless, the bill did not lack champions, many of whom declared that the original legislation - forged during the Great Depression - was both antiquated and cumbersome for the banking industry. Congress had tried 11 times to repeal Glass-Steagall. The twelfth was the charm.

"Today Congress voted to update the rules that have governed financial services since the Great Depression and replace them with a system for the 21st century," said then-Treasury Secretary Lawrence Summers. "This historic legislation will better enable American companies to compete in the new economy."

"I welcome this day as a day of success and triumph," said Sen. Christopher Dodd, (D-Conn.).

"The concerns that we will have a meltdown like 1929 are dramatically overblown," said Sen. Bob Kerrey, (D-Neb.).

"If we don't pass this bill, we could find London or Frankfurt or years down the road Shanghai becoming the financial capital of the world," said Sen. Chuck Schumer, D-N.Y. "There are many reasons for this bill, but first and foremost is to ensure that U.S. financial firms remain competitive."

Unfortunately, the statement by Chuck Schumer sounds very much like it was prepared by a lobbyist. This vote underscores the way in which our elected officials are so heavily swayed by corporate and banking money that our voices and needs become irrelevant. It is why we need publicly funded elections. Democratic senators, the so-called representatives of the people, fell over themselves to please their Wall Street donors knowing full well there were dangers for the country at large, for ordinary Americans, in repealing Glass-Steagall.

It is important to hold Democratic senators (along with current members of the Obama administration) accountable for the significant role they have played in the current economic crisis that has caused so much suffering for ordinary Americans. In case you were wondering, the current Democratic Senators who voted yes to repeal the Glass-Steagall act are the following:

Daniel Akaka – Max Baucus – Evan Bayh – Jeff Bingaman – Kent Conrad – Chris Dodd – Dick Durbin – Dianne Feinstein – Daniel Inouye – Tim Johnson – John Kerry – Herb Kohl – Mary Landrieu – Frank Lautenberg – Patrick Leahy – Carl Levin – Joseph Lieberman – Blanche Lincoln – Patty Murray – Jack Reed – Harry Reid – Jay Rockefeller – Chuck Schumer – Ron Wyden

Former House members who voted for repeal who are current Senators.

Mark Udall [as of 2010] – Debbie Stabenow – Bob Menendez – Tom Udall -Sherrod Brown

No longer in the Senate, or passed away, but who voted for repeal:

Joe Biden -Ted Kennedy -Robert Byrd

These Democratic senators would like to forget or make excuses for their enthusiastic vote on the repeal of Glass Steagall, but it is important to hold them accountable for helping their bank donors realize obscene profits while their constituents lost jobs, savings and homes. And it is important to demand that they serve the interests of the American people.

*

[The repeal of Glass Steagal was a landmark victory in deregulation that greased the skids for the passage of CFMA once Democrats had been further demoralized by the SCOTUS decision on Bush-v-Gore. The first vote on GLBA was split along party lines, but passed because Republicans had majority and Clinton was willing to sign which was clear from the waiver that had been granted to illegal Citi merger with Travelers. Both Citi and AIG mergers contributed to too big to fail. The CFMA was the nail in the coffin that probably would have never gotten off the ground if Democrats had held the line on the GLBA. Glass-Steagal was insufficient as a regulatory system to prevent the 2008 mortgage crisis, but it was giant as an icon of New Deal financial system reform. Its loss institutionalized too big to fail.]

pgl said in reply to RC AKA Darryl, Ron...

Gramm Leach Biley was a mistake. But it was not the only failure of US regulatory policies towards financial institutions nor the most important. I think that is what Hillary Clinton is saying.

RC AKA Darryl, Ron said in reply to pgl...

It was more symbolic caving in on financial regulation than a specific technical failure except for making too big to fail worse at Citi and AIG. It marked a sea change of thinking about financial regulation. Nothing mattered any more, including the CFMA just a little over one year later. Deregulation of derivatives trading mandated by the CFMA was a colossal failure and it is not bizarre to believe that GLBA precipitated the consensus on financial deregulation enough that after the demoralizing defeat of Democrats in Bush-v-Gore then there was no New Deal spirit of financial regulation left. Social development is not just a series of unconnected events. It is carried on a tide of change. A falling tide grounds all boats.

pgl said in reply to RC AKA Darryl, Ron...

We had a financial dereg craze back in the late 1970's and early 1980's which led to the S&L disaster. One would have thought we would have learned from that. But then came the dereg craziness 20 years later. And this disaster was much worse.

I don't care whether Hillary says 1999 was a mistake or not. I do care what the regulations of financial institutions will be like going forward.

RC AKA Darryl, Ron said in reply to pgl...

I cannot disagree with any of that.

sanjait said in reply to RC AKA Darryl, Ron...

"Deregulation of derivatives trading mandated by the CFMA was a colossal failure and it is not bizarre to believe that GLBA precipitated the consensus"

Yeah, it is kind of bizarre to blame one bill for a crisis that occurred largely because another bill was passed, based on some some vague assertion about how the first bill made everyone think crazy.

RC AKA Darryl, Ron said in reply to sanjait...
Democrats did not vote for GLBA until after reconciliation between the House and Senate bills. Democrats were tossed a bone in the Community Reinvestment Act financing provisions and given that Bill Clinton was going to sign anyway and that Republicans were able to pass the bill without a single vote from Democrats then all but a few Democrats bought in. They could not stop it, so they just bought into it. I thought there was supposed to be an understanding of behaviorism devoted to understanding the political economy. For that matter Republicans did not need Democrats to vote for the CFMA either, but they did. That gave Republicans political cover for whatever went wrong later on. No one with a clue believed things would go well from the passage of either of these bills. It was pure Wall Street driven kleptocracy.
likbez said in reply to sanjait...
It was not one bill or another. It was a government policy to get traders what they want.

See

Bruce E. Woych | August 6, 2013 at 5:45 pm |

http://www.imackgroup.com/mathematics/989981-the-untold-story-brooksley-born-larry-summers-the-truth-about-unlimited-risk-potential/

The Untold Story: Brooksley Born, Larry Summers & the Truth …
http://www.imackgroup.com/mathematics/989981-the-untold-story-brooksley-born-larry...
Oct 5, 2012 … Larry Summers is attempting to re-write history at the expense of … and they might just find one critical point revealed in Mr. Cohan's article.
[PERTINENT EXCERPT]: Oct 5, 2012

"As the western world wakes to the fact it is in the middle of a debt crisis spiral, intelligent voices are wondering how this manifested itself? As we speak, those close to the situation could be engaging in historical revisionism to obfuscate their role in the design of faulty leverage structures that were identified in the derivatives markets in 1998 and 2008. These same design flaws, first identified in 1998, are persistent today and could become graphically evident in the very near future under the weight of a European debt crisis.

Author and Bloomberg columnist William Cohan chronicles the fascinating start of this historic leverage implosion in his recent article Rethinking Robert Rubin. Readers may recall it was Mr. Cohan who, in 2004, noted leverage issues that ultimately imploded in 2007-08.

At some point, market watchers will realize the debt crisis story will literally change the world. They will look to the root cause of the problem, and they might just find one critical point revealed in Mr. Cohan's article.

This point occurs in 1998 when then Commodity Futures Trading Commission (CFTC) ChairwomanBrooksley Born identified what now might be recognized as core design flaws in leverage structure used in Over the Counter (OTC) transactions. Ms. Born brought her concerns public, by first asking just to study the issue, as appropriate action was not being taken. She issued a concept release paper that simply asked for more information. "The Commission is not entering into this process with preconceived results in mind," the document reads.

Ms. Born later noted in, the PBS Frontline documentary on the topic speculation at the CFTC was the unregulated OTC derivatives were opaque, the risk to the global economy could not be determined and the risk was potentially catastrophic. As a result of this inquiry, Ms. Born was ultimately forced from office.

This brings us to Lawrence Summers, the former Treasury Secretary of the United States and at the time right hand man to then Treasury Security Robert Rubin. Mr. Summers was widely credited with implementation of the aggressive tactics used to remove Ms. Born from her office, tactics that multiple sources describe as showing an old world bias against women piercing the glass ceiling.

According to numerous published reports, Mr. Summers was involved in. silencing those who questioned the opaque derivative product's design. "

RC AKA Darryl, Ron said in reply to Paine ...

TBTF on steroids, might as well CFMA - why not?

Bubbles with less TBTF and a lot less credit default swaps would have been a lot less messy going in. Without TARP, then Congress might have still had the guts for making a lesser New Deal.

EMichael said in reply to RC AKA Darryl, Ron...

TARP was window dressing. The curtain that covered up the FED's actions.

pgl said in reply to RGC...

Where have I heard about William Greider? Oh yea - this critique of something stupid he wrote about a Supreme Court decision:

www.washingtonpost.com/news/volokh-conspiracy/wp/2014/06/06/how-many-errors-can-william-greider-make-in-two-sentences-describing-lochner-v-new-york/

pgl said in reply to RGC...

"Exotic financial instruments like derivatives and credit-default swaps flourished, enabling old-line bankers to share in the fun and profit on an awesome scale."

These would have flourished even if Glass-Steagall remained on the books. Leave it to RGC to find some critic of HRC who knows nothing about financial markets.

RGC said in reply to pgl...

Derivatives flourished because of the other deregulation under Clinton, the CFMA. The repeal of GS helped commercial banks participate.

RGC said in reply to pgl...

The repeal of GS helped commercial banks participate.

Fred C. Dobbs said in reply to pgl...

Warren Buffet used to rail about how risky derivative investing is, until he realized they are *extremely* important in the re-insurance biz, which is a
big part of Berkshire Hathaway.

Peter K. said...

http://cepr.net/blogs/beat-the-press/hillary-clinton-bernie-sanders-and-cracking-down-on-wall-street

Hillary Clinton, Bernie Sanders, and Cracking Down on Wall Street
by Dean Baker

Published: 12 December 2015

The New Yorker ran a rather confused piece on Gary Sernovitz, a managing director at the investment firm Lime Rock Partners, on whether Bernie Sanders or Hillary Clinton would be more effective in reining in Wall Street. The piece assures us that Secretary Clinton has a better understanding of Wall Street and that her plan would be more effective in cracking down on the industry. The piece is bizarre both because it essentially dismisses the concern with too big to fail banks and completely ignores Sanders' proposal for a financial transactions tax which is by far the most important mechanism for reining in the financial industry.

The piece assures us that too big to fail banks are no longer a problem, noting their drop in profitability from bubble peaks and telling readers:

"not only are Sanders's bogeybanks just one part of Wall Street but they are getting less powerful and less problematic by the year."

This argument is strange for a couple of reasons. First, the peak of the subprime bubble frenzy is hardly a good base of comparison. The real question is should we anticipate declining profits going forward. That hardly seems clear. For example, Citigroup recently reported surging profits, while Wells Fargo's third quarter profits were up 8 percent from 2014 levels.

If Sernovitz is predicting that the big banks are about to shrivel up to nothingness, the market does not agree with him. Citigroup has a market capitalization of $152 billion, JPMorgan has a market cap of $236 billion, and Bank of America has a market cap of $174 billion. Clearly investors agree with Sanders in thinking that these huge banks will have sizable profits for some time to come.

The real question on too big to fail is whether the government would sit by and let a Goldman Sachs or Citigroup go bankrupt. Perhaps some people think that it is now the case, but I've never met anyone in that group.

Sernovitz is also dismissive on Sanders call for bringing back the Glass-Steagall separation between commercial banking and investment banking. He makes the comparison to the battle over the Keystone XL pipeline, which is actually quite appropriate. The Keystone battle did take on exaggerated importance in the climate debate. There was never a zero/one proposition in which no tar sands oil would be pumped without the pipeline, while all of it would be pumped if the pipeline was constructed. Nonetheless, if the Obama administration was committed to restricting greenhouse gas emissions, it is difficult to see why it would support the building of a pipeline that would facilitate bringing some of the world's dirtiest oil to market.

In the same vein, Sernovitz is right that it is difficult to see how anything about the growth of the housing bubble and its subsequent collapse would have been very different if Glass-Steagall were still in place. And, it is possible in principle to regulate bank's risky practices without Glass-Steagall, as the Volcker rule is doing. However, enforcement tends to weaken over time under industry pressure, which is a reason why the clear lines of Glass-Steagall can be beneficial. Furthermore, as with Keystone, if we want to restrict banks' power, what is the advantage of letting them get bigger and more complex?

The repeal of Glass-Steagall was sold in large part by boasting of the potential synergies from combining investment and commercial banking under one roof. But if the operations are kept completely separate, as is supposed to be the case, where are the synergies?

But the strangest part of Sernovitz's story is that he leaves out Sanders' financial transactions tax (FTT) altogether. This is bizarre, because the FTT is essentially a hatchet blow to the waste and exorbitant salaries in the industry.

Most research shows that trading volume is very responsive to the cost of trading, with most estimates putting the elasticity close to one. This means that if trading costs rise by 50 percent, then trading volume declines by 50 percent. (In its recent analysis of FTTs, the Tax Policy Center assumed that the elasticity was 1.5, meaning that trading volume decline by 150 percent of the increase in trading costs.) The implication of this finding is that the financial industry would pay the full cost of a financial transactions tax in the form of reduced trading revenue.

The Tax Policy Center estimated that a 0.1 percent tax on stock trades, scaled with lower taxes on other assets, would raise $50 billion a year in tax revenue. The implied reduction in trading revenue was even larger. Senator Sanders has proposed a tax of 0.5 percent on equities (also with a scaled tax on other assets). This would lead to an even larger reduction in revenue for the financial industry.

It is incredible that Sernovitz would ignore a policy with such enormous consequences for the financial sector in his assessment of which candidate would be tougher on Wall Street. Sanders FTT would almost certainly do more to change behavior on Wall Street then everything that Clinton has proposed taken together by a rather large margin. It's sort of like evaluating the New England Patriots' Super Bowl prospects without discussing their quarterback.

Syaloch said in reply to Peter K....

Great to see Baker's acknowledgement that an updated Glass-Steagall is just one component of the progressive wing's plan to rein in Wall Street, not the sum total of it. Besides, if Wall Street types don't think restoring Glass-Steagall will have any meaningful effects, why do they expend so much energy to disparage it? Methinks they doth protest too much.

Peter K. said in reply to Syaloch...

Yes that's a good way to look it. Wall Street gave the Democrats and Clinton a lot of campaign cash so that they would dismantle Glass-Steagall. If they want it done, it's probably not a good idea.

EMichael said in reply to Syaloch...

Slippery slope. Ya' gotta find me a business of any type that does not protest any kind of regulation on their business.

Syaloch said in reply to EMichael...

Yeah, but usually because of all the bad things they say will happen because of the regulation. The question is, what do they think of Clinton's plan? I've heard surprisingly little about that, and what I have heard is along these lines: http://money.cnn.com/2015/10/08/investing/hillary-clinton-wall-street-plan/

"Hillary Clinton unveiled her big plan to curb the worst of Wall Street's excesses on Thursday. The reaction from the banking community was a shrug, if not relief."

pgl said in reply to Syaloch...

Two excellent points!!!

sanjait said in reply to Syaloch...

"Besides, if Wall Street types don't think restoring Glass-Steagall will have any meaningful effects, why do they expend so much energy to disparage it? Methinks they doth protest too much."

It has an effect of shrinking the size of a few firms, and that has a detrimental effect on the top managers of those firms, who get paid more money if they have larger firms to manage. But it has little to no meaningful effect on systemic risk.

So if your main policy goal is to shrink the compensation for a small number of powerful Wall Street managers, G-S is great. But if you actually want to accomplish something useful to the American people, like limiting systemic risk in the financial sector, then a plan like Hillary's is much much better. She explained this fairly well in her recent NYT piece.

Paine said in reply to Peter K....

There is absolutely NO question Bernie is for real. Wall Street does not want Bernie. So they'll let Hillary talk as big as she needs to . Why should we believe her when an honest guy like Barry caved once in power

Paine said in reply to Paine ...

Bernie has been anti Wall Street his whole career . He's on a crusade. Hillary is pulling a sham bola

Paine said in reply to Paine ...

Perhaps too often we look at Wall Street as monolithic whether consciously or not. Obviously we know it's no monolithic: there are serious differences

When the street is riding high especially. Right now the street is probably not united but too cautious to display profound differences in public. They're sitting on their hands waiting to see how high the anti Wall Street tide runs this election cycle. Trump gives them cover and I really fear secretly Hillary gives them comfort

This all coiled change if Bernie surges. How that happens depends crucially on New Hampshire. Not Iowa

EMichael said in reply to Paine ...

If Bernie surges and wins the nomination, we will all get to watch the death of the Progressive movement for a decade or two. Congress will become more GOP dominated, and we will have a President in office who will make Hoover look like a Socialist.

Syaloch said in reply to EMichael...

Of course. In politics, as they say in the service, one must always choose the lesser of two evils. https://www.youtube.com/watch?v=e4PzpxOj5Cc

pgl said in reply to EMichael...

You should like the moderate Democrats after George McGovern ran in 1972. I'm hoping we have another 1964 with Bernie leading a united Democratic Congress.

EMichael said in reply to pgl...

Not a chance in the world. And I like Sanders much more than anyone else. It just simply cannot, and will not, happen. He is a communist. Not to me, not to you, but to the vast majority of American voters.

pgl said in reply to EMichael...

He is not a communist. But I agree - Hillary is winning the Democratic nomination. I have only one vote and in New York, I'm badly outnumbered.

ilsm said in reply to Paine ...

I believe Hillary will be to liberal causes after she is elected as LBJ was to peace in Vietnam. Like Bill and Obomber.

pgl said in reply to ilsm...

By 1968, LBJ finally realized it was time to end that stupid war. But it seems certain members in the State Department undermined his efforts in a cynical ploy to get Nixon to be President. The Republican Party has had more slime than substance of most of my life time.

pgl said in reply to Peter K....

Gary Sernovitz, a managing director at the investment firm Lime Rock Partners? Why are we listening to this guy too. It's like letting the fox guard the hen house.

sanjait said in reply to Peter K....

"The piece is bizarre both because it essentially dismisses the concern with too big to fail banks and completely ignores Sanders' proposal for a financial transactions tax which is by far the most important mechanism for reining in the financial industry."

This is just wrong. Is financial system risk in any way correlated with the frequency of transactions? Except for market volatility from HFT ... no. The financial crisis wasn't caused by a high volume of trades. It was caused by bad investments into highly illiquid assets. Again, great example of wanting to punish Wall Street but not bothering to think about what actually works.

Peter K. said...

Robert Reich to the Fed: this is not the time to raise rates.

https://www.facebook.com/video.php?v=1116088268403768

RGC said...

Iceland's Radical Money Plan

Iceland, too, is looking at a radical transformation of its money system, after suffering the crushing boom/bust cycle of the private banking model that bankrupted its largest banks in 2008. According to a March 2015 article in the UK Telegraph:

Iceland's government is considering a revolutionary monetary proposal – removing the power of commercial banks to create money and handing it to the central bank. The proposal, which would be a turnaround in the history of modern finance, was part of a report written by a lawmaker from the ruling centrist Progress Party, Frosti Sigurjonsson, entitled "A better monetary system for Iceland".

"The findings will be an important contribution to the upcoming discussion, here and elsewhere, on money creation and monetary policy," Prime Minister Sigmundur David Gunnlaugsson said. The report, commissioned by the premier, is aimed at putting an end to a monetary system in place through a slew of financial crises, including the latest one in 2008.

Under this "Sovereign Money" proposal, the country's central bank would become the only creator of money. Banks would continue to manage accounts and payments and would serve as intermediaries between savers and lenders. The proposal is a variant of the Chicago Plan promoted by Kumhof and Benes of the IMF and the Positive Money group in the UK.

Public Banking Initiatives in Iceland, Ireland and the UK

A major concern with stripping private banks of the power to create money as deposits when they make loans is that it will seriously reduce the availability of credit in an already sluggish economy. One solution is to make the banks, or some of them, public institutions. They would still be creating money when they made loans, but it would be as agents of the government; and the profits would be available for public use, on the model of the US Bank of North Dakota and the German Sparkassen (public savings banks).

In Ireland, three political parties – Sinn Fein, the Green Party and Renua Ireland (a new party) - are now supporting initiatives for a network of local publicly-owned banks on the Sparkassen model. In the UK, the New Economy Foundation (NEF) is proposing that the failed Royal Bank of Scotland be transformed into a network of public interest banks on that model. And in Iceland, public banking is part of the platform of a new political party called the Dawn Party.

December 11, 2015
Reinventing Banking: From Russia to Iceland to Ecuador

by Ellen Brown

http://www.counterpunch.org/2015/12/11/reinventing-banking-from-russia-to-iceland-to-ecuador/

pgl said in reply to RGC...

"Banks would continue to manage accounts and payments and would serve as intermediaries between savers and lenders."

OK but that means they issue bank accounts which of course we call deposits. So is this just semantics? People want checking accounts. People want savings accounts. Otherwise they would not exist. Iceland plans to do what to stop the private sector from getting what it wants?

I like the idea of public banks. Let's nationalize JPMorganChase so we don't have to listen to Jamie Dimon anymore!

sanjait said in reply to pgl...

I don't know for sure (not bothering to search and read the referenced proposals), but I assumed the described proposal was for an end to fractional reserve banking. Banks would have to have full reserves to make loans. Or something. I could be wrong about that.

Syaloch said...

Sorry, but Your Favorite Company Can't Be Your Friend

http://www.nytimes.com/2015/12/13/upshot/sorry-but-your-favorite-company-cant-be-your-friend.html?partner=rss&emc=rss&_r=0

To think that an artificial person, whether corporeal or corporate, can ever be your friend requires a remarkable level of self-delusion.

A commenter on the Times site aptly quotes Marx in response:

"The bourgeoisie, wherever it has got the upper hand, has put an end to all feudal, patriarchal, idyllic relations. It has pitilessly torn asunder the motley feudal ties that bound man to his "natural superiors", and has left remaining no other nexus between man and man than naked self-interest, than callous "cash payment". It has drowned the most heavenly ecstasies of religious fervour, of chivalrous enthusiasm, of philistine sentimentalism, in the icy water of egotistical calculation. It has resolved personal worth into exchange value, and in place of the numberless indefeasible chartered freedoms, has set up that single, unconscionable freedom - Free Trade. In one word, for exploitation, veiled by religious and political illusions, it has substituted naked, shameless, direct, brutal exploitation.

"The bourgeoisie has stripped of its halo every occupation hitherto honoured and looked up to with reverent awe. It has converted the physician, the lawyer, the priest, the poet, the man of science, into its paid wage labourers."

https://www.marxists.org/archive/marx/works/1848/communist-manifesto/ch01.htm

[Dec 07, 2015] The key prerequisite of casino capitalism is corruption of regulators

Economist's View

likbez said...

When capital became unable of reaping large and fairly secure profits from manufacturing it like water tries to find other ways. It starts with semi-criminalizing finance -- that's the origin of the term "casino capitalism" (aka neoliberalism). I see casino capitalism as a set of semi-criminal ways of maintaining the rate of profits.

The key prerequisite here is corruption of regulators. So laws on the book does not matter much if regulators do not enforce them.

As Joseph Schumpeter noted, capitalism is not a steady-state system. It is unstable system in which population constantly experience and then try to overcome one crisis after another. Joseph Schumpeter naively assumed that the net result is reimaging itself via so called "creative destruction". But what we observe now it "uncreative destruction". In other words casino capitalism is devouring the host, the US society.

So all those Hillary statements are for plebs consumption only (another attempt to play "change we can believe in" trick). Just a hot air designed to get elected. Both Clintons are in the pocket of financial oligarchy and will never be able to get out of it alive.

GeorgeK said...

I believe I'm the only one on this blog that has actually traded bonds, done swaps and hedged bank portfolios with futures contracts. Sooo I kinda know something about this topic.

Hilary is a fraud; her daughter worked at a Hedge fund where she met her husband Marc Mezvinsky, who is now a money manager at the Eaglevale fund. Oddly many of the Eaglevale investors are investors in the Clinton Foundation and have also given money to Hilary's campaign. The Clinton Foundation gets boat loads of money from Hedge funds and will not raise taxes on such a rich source of funding.

The grooms mother is Marjory Margolies (ex)Mezvinsky, she cast the final vote giving Clinton the winning vote to raise taxes. She subsequently lost her run for reelection to congress, then her husband was convicted of fraud and they divorced.

This speech is an attempt to pry people away from Bernie, it won't work with primary voters but might with what's left of rational Republicans in the general election.

[Dec 07, 2015] Hillary Clinton How I'd Rein In Wall Street

Economist's View

likbez said...

When capital became unable of reaping large and fairly secure profits from manufacturing it like water tries to find other ways. It starts with semi-criminalizing finance -- that's the origin of the term "casino capitalism" (aka neoliberalism). I see casino capitalism as a set of semi-criminal ways of maintaining the rate of profits.

The key prerequisite here is corruption of regulators. So laws on the book does not matter much if regulators do not enforce them.

As Joseph Schumpeter noted, capitalism is not a steady-state system. It is unstable system in which population constantly experience and then try to overcome one crisis after another. Joseph Schumpeter naively assumed that the net result is reimaging itself via so called "creative destruction". But what we observe now it "uncreative destruction". In other words casino capitalism is devouring the host, the US society.

So all those Hillary statements are for plebs consumption only (another attempt to play "change we can believe in" trick). Just a hot air designed to get elected. Both Clintons are in the pocket of financial oligarchy and will never be able to get out of it alive.

GeorgeK said...

I believe I'm the only one on this blog that has actually traded bonds, done swaps and hedged bank portfolios with futures contracts. Sooo I kinda know something about this topic.

Hilary is a fraud; her daughter worked at a Hedge fund where she met her husband Marc Mezvinsky, who is now a money manager at the Eaglevale fund. Oddly many of the Eaglevale investors are investors in the Clinton Foundation and have also given money to Hilary's campaign. The Clinton Foundation gets boat loads of money from Hedge funds and will not raise taxes on such a rich source of funding.

The grooms mother is Marjory Margolies (ex)Mezvinsky, she cast the final vote giving Clinton the winning vote to raise taxes. She subsequently lost her run for reelection to congress, then her husband was convicted of fraud and they divorced.

This speech is an attempt to pry people away from Bernie, it won't work with primary voters but might with what's left of rational Republicans in the general election.

[Dec 04, 2015] Congressional Aid to Multinationals Avoiding Taxes

EconoSpeak

The OECD's Base Erosion and Profit Shifting (BEPS) initiative is an effort by the G20 to curb the abuse of transfer pricing by multinationals. Senator Hatch is not a fan:

Throughout this process we have heard concerns from large sectors of the business community that the BEPS project could be used to further undermine our nation's competitiveness and to unfairly subject U.S. companies to greater tax liabilities abroad. Companies have also been concerned about various reporting requirements that could impose significant compliance costs on American businesses and force them to share highly sensitive proprietary information with foreign governments. I expect that we'll hear about these concerns from the business community and others during today's hearing.
Indeed we heard from some lawyer representing The Software Coalition who was there to mansplain to us how BEPS is evil. I learned two startling things. First – Bermuda must be part of the US tax base. Secondly, if Google is expected to pay taxes in the UK, it will take all those 53,600 jobs which are mainly in California and move them to Bermuda:
in particular how the changes to the international tax rules as developed under BEPS will significantly reduce the U.S. tax base and create disincentives for U.S. multinational corporations (MNCs) to create R&D jobs in the United States
Yes – I find his testimony absurd at so many levels. Let's take Google as an example. When they say foreign subsidiaries – think Bermuda. Over the past three year, Google's income has average $15.876 billion per year but its income taxes have only average $2.933 billion for an effective tax rate of only 18.5%. How did that happen? Well – 55% of its income is sourced to these foreign subsidiaries and the average tax rate on this income is only 6.5%. Nice deal! Google's tax model is not only easy to explain but is also a very common one for those in the Software Coalition. While all of the R&D is done in the U.S. and 45% of its sales are in the U.S. – U.S. source income is only 45% of worldwide income. Very little of the foreign sourced income ends up in places like the UK even 11% of Google's sales are to UK customers. Only problem is that income ends up on Ireland's books with the UK getting a very modest amount of the profits. Now you might be wondering how Google got to the foreign taxes to be only 6.5% of foreign sourced income since Ireland's tax rate is 12.5%. But think Double Irish Dutch Sandwich and you'll get how the profits ended up in Bermuda as well as perhaps a good lunch! But what about that repatriation tax you ask. Google's most recent 10-K proudly notes:
"We have not provided U.S. income taxes and foreign withholding taxes on the undistributed earnings of foreign subsidiaries".
In other words, they are not paying that repatriation tax. Besides the Republicans want to eliminate. Let's be honest – Congress has hamstringed the IRS efforts to enforce transfer pricing. The BEPS initiative arose out of this failure. And now the Republicans in Congress are objecting to even these efforts. And if Europe has the temerity of expecting its fair share of taxes, U.S. multinationals will leave California and relocate in Bermuda? Who is this lawyer kidding? Myrtle Blackwood
The development model in nation after nation is dependent upon global corporations. What is happening is simply a byproduct of this.
Jack
Would the problem of transfer mythical corporate location and the resulting lost taxes be resolved if taxes were based on point of revenue? Tax gross income where it is earned instead of taxing profits where they are not earned.

[Nov 21, 2015] Hillary Clinton Appeal to 9-11 to Defend Wall Street Donations Was Bad, But This Was Worse

Notable quotes:
"... Come on people, what is the point of wasting energy and time talking about the two political parties participating in the charade that is called Democracy in the US? In reality there is only one political party ..."
"... Hellary or Chump- do you really believe the choice of figurehead will change the machinery of permanent warfare or diversion of wealth to the favored few? ..."
"... IMO she "put the last nail in her coffin", so to speak, when she brought up AIG Lehman, showing her ignorance to what really happened. (Or was she just "playing dumb" in an attempt to distance herself from her big contributors on Wall St?) ..."
"... Yeah, that 9/11 rift was bad, but the "60% of my contributors are women" was worse. I'd love to see this claim fact checked. What a tidy number. Not too big to make her campaign a women's movement, but big enough to throw the guys off their game and make her nomination a foregone conclusion. Meanwhile, corporations make up probably 90% of her actual contributions. ..."
"... WaPo fact checked Hillary Clinton's claim that most of her donors are small donors. Only 17% donated less than $200 ..."
"... So corporations have genders now? ..."
"... We had one neoliberal Trojan horse get elected twice and if you questioned his policies you were at best a "bad Democrat" and at worst some version of racist…why not try it again? Anyone who questions her bought-and-paid for corruption will be painted as a card-carrying member of the he-man woman-haters club. ..."
"... Some of us, however, just dislike her since she's an enemy of the working class: http://mattbruenig.com/2015/11/06/my-beef-with-hillary-is-mainly-that-she-is-an-enemy-of-the-poor/ ..."
"... I agree that the remark was cynical and false and typical of Clinton's disdain for both facts and the intelligence of the voters. ..."
"... I loved that Bernie Sanders was willing to drop the "F-bomb" (fraud) on Wall Street but he needs to swing much harder at Clinton. Clinton was quick to zing O'Malley as a hypocrite by noting he appointed a former hedge-fund manager to some state regulatory position when given the chance, but yet neither Sanders or O'Malley hit back with the fact that her only child and Clinton Foundation board member, Chelsea Clinton, worked for the hedge fund of a Clinton family pal and mega-donor in 2006. ..."
"... I thought O'Malley had one of the best lines of the night when he said "I think it may be time for us to quit taking advice from economists" but it seemed to go mostly unnoticed and unappreciated. ..."
"... Sanders did a relatively good job of deflecting and not getting zinged by the 'gotcha' question but a full-frontal assault would have been much better. Stronger, more Presidential and with the added bonus of giving neo-liberal economists under the pay of plutocrats a black eye. Another missed opportunity. The questioner set it up perfectly for him. I would have loved to see the expression on her corn-fed face when Bernie turned her 'gotcha' question that she had spent so much time and thought crafting into the home-run answer of the evening. Perhaps it could happen in a debate in the near future. ..."
"... The GOP engages in phony baloney food fights much to the tingling excitement of their base. I'd like to see some REAL debate from the Dems. Not just make nice phony baloney bullshit. ..."
"... Again, I've never expected Sanders to be anything more than someone who'll sound populist and then tell his followers to vote for Clinton… as he's already SAID anyway. ..."
"... Yeah maybe, but I believe that was the price of admission to the Clinton / Wasserman-Shultz ball for a life-long socialist who sometimes caucuses with Democrats. The more damage Sanders inflicts on Clinton in the primaries the less sincere and effective any possible Sanders endorsement of Clinton will be later. ..."
"... Sanders has the right message, the right record and popular support on his side in a year when people are fed-up with the entire Washington establishment and sick of pedigreed, legacy politicians like Clinton. ..."
"... If there's ever been a moment when Bernie Sanders could win the nomination this is it. If you really think Sanders is the "pick of liter" as you say perhaps you could stop calling him things like "window dressing" and "a distraction". While it may protect your feelings from future disappointment to speak confidently of Clinton as the inevitable nominee it clearly helps her campaign objectives, so…. maybe just try tempering your cynicism just a wee bit unless you are out to help Hillary win the nomination. ..."
"... Bernie's campaign never in a million years thought he would get this far. In the beginning, it was calculated to draw attention to income inequality, big money in politics, and other issues that likely would get ignored if the coronation went ahead unopposed. ..."
"... As you point out, Sanders is a senator. He never expected to get this far. He won't win the nomination. He has to think of his post-2016 career. If he goes after Clinton hammer and tongs, he will be (more of) a pariah in the Senate, effectively ruining any chance for him to accomplish anything. ..."
"... Honestly I can see the Democrats collapsing before the Republicans. The South and Midwest are just batshit crazy and they'll stick with the Republicans as long as the evangelicals dominate their culture. Does anyone here know anything about previous "great awakenings" in American culture? ..."
"... For all her vomit-inducing disingenuousness about how she would be the toughest on the financial industry as a whole (really, how does she say that with a straight face?), and her basically sounding like a smarter, saner business as usual neocon on the middle east, I thought her worst moment by far was when she tried to describe single payer as "dismantling" Medicare, Medicaid, etc ..."
"... I'm at a complete loss to understand why Dems, the media, and in fact anyone with two brain cells to rub together, can fail to see or acknowledge that HRC is a liar, a crook, and a generally mean-spirited individual who's only in it for herself and will do and say anything and accept money from anyone as long as it helps her to win. ..."
"... Sadly, the only difference between Hillary and Obama, is that Barack is a better shape-shifter and, when he lies, he can do so with greater eloquence and charm. Hillary can never manage to completely hide her forked tongue and her poisonous lizard personality. ..."
"... After Obama's behavior, and the documentation of Gilens Page, can anyone believe that campaign speeches have anything to do with post-electoral policies? The nomination process is beyond dysfunctional: everyone knows Hillarity's positions are synthetic, yet she successfully campaigns with the grossest political impunity and she is taken seriously enough for analysis. I don't understand why. The only political power remaining to democracy is resistance, either by voting for a third party, or else by total abstinence. I personally prefer the former, as it's a bit harder to sweep under the media carpet. This keeps me outside the grasp of helplessness. ..."
"... Family Guy *exactly* predicted Hillary's 9/11 tragedy-distraction strategy way back in 2008: Life imitating art: http://youtu.be/Rm3d43HLyTI ..."
November 16, 2015 | naked capitalism
RedHope November 16, 2015 at 3:20 am

She will say anything to win and not care about meaning bc she knows the Democratic base will accept anything.

If you read, at least anecdotally, about the responses of base voters, it seems to be similar to what the GOP does: brush off the discussion as boring, irrelevant, a conspiracy or some combo.

The Democratic base is solely focused on Denial, delusion and hating the Republicans. She will survive this and will likely win with people defending her bat shit extremism.

crittermom November 16, 2015 at 6:34 am

I completely agree with you in that she will say anything to win. Like a pinball, she will take to whatever side necessary to keep from falling into that hole of defeat.

But please, please let's not give any energy toward thoughts of her winning!

She showed her true colors during the debate, & I still wanna believe–despite being continuously proven wrong, that most folks are smarter than that & were able to see through her. (Probably the only transparency in this current govt?)

oho, November 16, 2015 at 8:53 am

she knows the Democratic base will accept anything.

If you read, at least anecdotally, about the responses of base voters, it seems to be similar to what the GOP does: brush off the discussion as boring, irrelevant, a conspiracy or some combo.

just because the GOP 'accept anything' doesn't make it right if the 'good guys' are dogmatic too.

and my hunch is that right now everyone on in the Democratic Beltway is feeling smug cuz of the GOP clown car. But my gut is that in 2016 if HRC wins the nomination, HRC's load of manure is gonna stink a lot more than the GOP clown car's.

on election night I'll be sitting at home cheering on the makers of humble pie.

Crazy Horse, November 16, 2015 at 11:40 am

Come on people, what is the point of wasting energy and time talking about the two political parties participating in the charade that is called Democracy in the US? In reality there is only one political party - the Oligarch Fascist Party - and the National Election Circus is played out to keep people who mistake it for democracy divided and confused.

Hellary or Chump- do you really believe the choice of figurehead will change the machinery of permanent warfare or diversion of wealth to the favored few?

Malcolm MacLeod, MD , November 16, 2015 at 7:21 pm

Crazy Horse: You speak the unvarnished truth, which is always rather confusing in this day and age.

jgordon , November 16, 2015 at 4:29 am

Any serious analysis of the central drivers of the crisis necessarily lead you to the largest banks as the focal point for the interconnection and risk buildup.

Well if we're concerned about serious analysis it seems a bit odd that we aren't starting with the largest bank of all: the Federal Reserve. If not for the deliberate policy of the Fed to inflate the housing bubble in the early 2000s after the dotcom crash, certainly 2007/2008 wouldn't have been such a mess. Though admittedly government corruption (and for all intents and purposes the Fed is a government appendage) certainly played a part.

The main problem is that there are just way too many zombies and criminals infesting the financial system right now, and they are all being lovingly coddled by the Fed with ZIRP and QE. The only way to slay these undead legions is to end the ceaseless Fed-facilitated blood transfusions from the exhausted living to the dead parasites.

Well I suppose one could claim that its thanks to the zombies that our economy is able to function at all. But come on, is it really a good idea to live in a world ruled by zombies? They eat brains you know.

crittermom, November 16, 2015 at 6:01 am

Excellent article. I watched the debate. I found it very telling that when Wall St was mentioned, the only thing she could seem to equate to it was 9/11.
I found it disgusting that she even brought up 9/11 in an obvious attempt to steer the debate away from the corruption by 'her friends' on Wall St while trying to encourage the voters to give her a pat on the back for 'all she did' after 9/11. Pathetic, cheap, transparent tactic IMO.

I found it sad, however, as mentioned in the article "Only when mentioned by a Twitter user later in the debate did the full recognition of the strangeness of that comment shine through." Far too many "trained seals" outside the convention center, as well?

IMO she "put the last nail in her coffin", so to speak, when she brought up AIG & Lehman, showing her ignorance to what really happened. (Or was she just "playing dumb" in an attempt to distance herself from her big contributors on Wall St?)

fresno dan, November 16, 2015 at 8:42 am

I agree. The tendentious quibbling about the definition of "banks" when everyone uses that as shorthand for "excessively large under regulated, corrupt, and stupid financial institutions who have completed co-opted the regulators and politicians who are suppose to oversee them and enforce the rules, regulations and laws" is just deflection from the real issue.

As Bernie said in response: NOT GOOD ENOUGH

dk, November 16, 2015 at 9:05 am

I think you underestimate "most" voters. Don't mistake them for the political media echo chamber that pretends to articulate their subconscious (via absurd polling). Except for the extremes, voters tend to be a taciturn bunch, it's true. One ends up having to pick from an imperfect selection, that's representative democracy; a fact of the circumstance, and voters know it. They play along, don't kid yourself that they actually like it that much.

Comforting stories play well for the comfortable, and when no other stories are being told. The wage disparity issue was almost non-existent in 2008 and got small play in 2012. The BLM narrative is in part a counter-shock to the (granted, naive) assumption that having a black president would have (or indicated) a significant impact on day-to-day racism. The street-level economy has kept sputtering for too many years for that to be passed off as "normal". Too many cats got out of the bag this time around.

Take a look here:
http://www.bloomberg.com/politics/graphics/2015-october-fec-filings/charts/

In the last quarter, Hillary collected 5.19 mil from under-$200 donors, Bernie collected 20.19 mil. That's just shy of four times as much money, and arguably on the order of four times as many people. Whether Hillary is changing these people's minds at any appreciable rate remains to be seen, but this many people backing a Dem candidate in this way is a new thing (not so new for the Tea Party brand).

Not saying Bernie is a slam dunk by any means, but numerically, in dollars and voters, he can't be dismissed as an impossibility (see also, Corbyn). Political media hacks hate voters, they still can't predict them (and they know it too). Sometimes elections occur in a near vacuum of clear indicators and issues (2012), sometimes the indicators and issues are bigger than even a "big" candidate (2008, Obama would not have won without the financial collapse, which suppressed and fractured Rep voting).

Voters aren't smarter than anybody else, but they're not dumber either. What they are is shy (especially the Dems). But think of Bernie's small donor base as a bunch of wallflowers reacting to something they haven't seen before. That wasn't in anybody's narrative.

Ulysses, November 16, 2015 at 9:09 am

You provide a very astute description, of how the MSM Wurlitzer works to concoct narratives that disempower people. Yet I think that Chris Hedges is also on to something when he observes:

"The frustration, mounting across the country, is bringing with it a new radicalism."

http://www.truthdig.com/report/page2/pray_with_your_feet_20151115

We teeter on a knife's edge, close to societal collapse. My hope is that we will shake off our chains and begin to replace systematic oppression and exploitation with a more humane society. My fear is that the people, who currently benefit from the status quo, will go full-bore totalitarian/repressive in a desperate attempt to cling to their ill-gotten wealth and power.

RUKidding, November 16, 2015 at 12:00 pm

I'm afraid that the impetus is more towards the latter than the former. The PTB haven't spent decades/centuries brainwashing the masses to be good little authoritarians wanting Big Daddy/Momma to "take care" of them for nothing.

Dino Reno, November 16, 2015 at 8:18 am

Yeah, that 9/11 rift was bad, but the "60% of my contributors are women" was worse. I'd love to see this claim fact checked. What a tidy number. Not too big to make her campaign a women's movement, but big enough to throw the guys off their game and make her nomination a foregone conclusion. Meanwhile, corporations make up probably 90% of her actual contributions.

JaaaaayCeeeee, November 16, 2015 at 11:52 am

WaPo fact checked Hillary Clinton's claim that most of her donors are small donors. Only 17% donated less than $200 (she did donation drives asking for a dollar even to get to 17% and most of her donations from women were big donations, too):

https://www.washingtonpost.com/news/fact-checker/wp/2015/11/15/fact-checking-the-second-democratic-debate/

Code Name D, November 16, 2015 at 12:41 pm

So corporations have genders now?

nigelk, November 16, 2015 at 1:49 pm

We had one neoliberal Trojan horse get elected twice and if you questioned his policies you were at best a "bad Democrat" and at worst some version of racist…why not try it again? Anyone who questions her bought-and-paid for corruption will be painted as a card-carrying member of the he-man woman-haters club.

Some of us, however, just dislike her since she's an enemy of the working class: http://mattbruenig.com/2015/11/06/my-beef-with-hillary-is-mainly-that-she-is-an-enemy-of-the-poor/

Pat, November 16, 2015 at 9:47 am

I agree that the remark was cynical and false and typical of Clinton's disdain for both facts and the intelligence of the voters. (And knowledgable in that she knew she would not get fact checked on this in any manner that would make her look like Ben Carson talking about pyramids.) I truly do not think it is as important as you do, as she had already lost that battle.

The people know the great never ending bank bailout of 2008 did not translate to bailing out the economy. There are still foreclosed homes in neighborhoods across America rotting. If they didn't lose a job and are still looking for a decent one they have a parent, a kid, another family member, or multiple friends who are still un or underemployed. They know their bills are going up but their paychecks aren't. And they get to hear about Jamie Dimon becoming a billionaire. They may not know which bank he heads, but they know a whole lot of those billions came from their taxes while they are still struggling. None of this may get into the details of what happened or what went wrong, but they know they got taken. And her response tells them she would take them again. The only people who don't hear that, are the ones who think 60% of my donations are from women makes Clinton a feminist and tribal loyalists. You know the Democratic equivalent of the Bush supporters who never wavered.

Trying to understand the ins and outs of the financial industry shenanigans is deep, dense, and takes way too much time for most folk. I happened to be out on workmen's comp when it went down. This is not my area, I read and read and read and got deeply angry. I still don't understand it all, and I have more facts at my fingertips then probably at least 75% of the population. My point on this, is that sometimes you don't need to know the details to smell the bullshit. And it reeked of manure.

Vatch November 16, 2015 at 10:10 am

Today is November 16, which is a deadline for the Clinton Foundation to refile some documents, according to this article to which Water Cooler linked on Oct. 28:

https://100r.org/2015/10/clinton-foundation-faces-revisions-and-possible-reckoning/

Here's an article published today about this, although nothing has been resolved yet:

http://www.forbes.com/sites/robertwood/2015/11/16/tracking-hillarys-speech-fees-clinton-foundation-or-pocket/

Still, the Clintons have not defined how they decide to designate their speaking fees as income versus charity work. Earlier this year, the Bill, Hillary, and Chelsea Clinton Foundation admitted collecting $26.4 million in previously unreported speaking fees from foreign governments and foreign and U.S. corporations. For tax purposes, who should be treated as the recipient of that money? It is not a silly question.

Jerry Denim, November 16, 2015 at 11:46 am

I couldn't believe my eyes and ears during the debate when Sanders impugned Clinton's integrity for taking Wall Street super PAC money and she seemed to successfully deflect the accusation by going full-bore star-spangled sparkle eagle. She played the vagina card then quickly blurted out "9/11 New York" for applause while attempting conflate aiding and abetting Wall Street with the 9/11 attacks and patriotism. I couldn't believe people were clapping and I couldn't believe Clinton had the audacity to pull such a illogical and juvenile stunt on live television, but yet CBS reported her highest approval scores of the debate were registered during her confusing but emotionally rousing (for some people apparently) "vagina, 9/11" defense.

I loved that Bernie Sanders was willing to drop the "F-bomb" (fraud) on Wall Street but he needs to swing much harder at Clinton. Clinton was quick to zing O'Malley as a hypocrite by noting he appointed a former hedge-fund manager to some state regulatory position when given the chance, but yet neither Sanders or O'Malley hit back with the fact that her only child and Clinton Foundation board member, Chelsea Clinton, worked for the hedge fund of a Clinton family pal and mega-donor in 2006. Neither candidate mentioned that her son-in-law and the father of her grandchild who she is so fond of mentioning, just so happens to be an extremely rich hedge fund manager who benefits handsomely from the Clinton's political connections and prestige. This isn't mud, this is extremely germane, factual material already on the public record. It gets to the core of who Hillary is and where her loyalties lie. Hillary herself chose to identify unregulated derivatives and the repeal of Glass-Steagall as the primary causes of the financial crisis. She either claimed directly or insinuated that she would address these issues as President, but surprisingly no one pointed out that it was her husband's administration that blocked Brooksley Born from regulating derivatives in the 1990's and it was her husband's administration that effectively repealed Glass-Steagal with the signing of Gramm-Leach-Billey act in 1999. It's not a stretch to say the Clinton's deregulation of Wall Street paved the way for the crisis of 2008 and the extreme income inequality of today. Wall Street is deeply unpopular and Bernie Sanders has built a candidacy on two main issues: attacking Wall Street and addressing income inequality. These are punches he can't afford not to throw at his rival when she holds a commanding lead in the polls plus the support of the DNC and media establishment. Clinton is deeply corrupt and beholden to Wall Street. She needs to be beaten with this stick hard and often. Attempting to deflect this very accurate, very damaging criticism by wrapping herself in the flag and invoking feminism is a cheap stunt that will only work so many times before people notice what she is doing. Bernie needs to swing harder and keep at it, he already has the right message and Clinton is highly vulnerable on his pet topics.

I thought O'Malley had one of the best lines of the night when he said "I think it may be time for us to quit taking advice from economists" but it seemed to go mostly unnoticed and unappreciated. I would have loved a frontal assault on the validity and integrity of economists when the bespectacled lady in blue attempted to nail down Sanders with a 'gotcha' question implying raising the minimum wage would be catastrophic for the economy because "such-and-such economist" said so. There is so much disdain for science and academic credentials in the heartland right now, it seems crazy not to harness this anti-academic populist energy and redirect it to a deserving target like neo-liberal economists instead of climate scientists. " How's that Laffer curve working out for ya Iowa? Are you feeling the prosperity 'trickle down' yet?" Sanders did a relatively good job of deflecting and not getting zinged by the 'gotcha' question but a full-frontal assault would have been much better. Stronger, more Presidential and with the added bonus of giving neo-liberal economists under the pay of plutocrats a black eye. Another missed opportunity. The questioner set it up perfectly for him. I would have loved to see the expression on her corn-fed face when Bernie turned her 'gotcha' question that she had spent so much time and thought crafting into the home-run answer of the evening. Perhaps it could happen in a debate in the near future.

RUKidding, November 16, 2015 at 11:58 am

I think what happened there is that Bernie is showing his true colors, unfortunately. While I'm more than OK with Bernie's attitude towards Benghazi & the emails, he really does not confront HRC on her egregious attitudes towards unfettered War, Inc, and most esp not on Wall St and the Banks.

I have no serious expectations of Sanders, however, and never did.

Jerry Denim, November 16, 2015 at 12:15 pm

Perhaps you are correct but Sanders did say Wall Street's business model is greed and fraud. Strong language for a Presidential candidate and unmistakably clear terms. When it comes to attacking Clinton I feel like something is holding Sanders back. Maybe it's his campaign advisors because he's been told his anger scares voters and people don't like negative attacks. Maybe the DNC and Clinton are holding some threat over his head regarding ballot access, debate cancellation or some other punishment if he doesn't play by certain rules. Perhaps he's been warned certain topics are off limits during debates. Seems fishy to me, but maybe it's just as simple as you say.

RUKidding, November 16, 2015 at 1:27 pm

Yes, Sanders has been outspoken about Wall St, greed, fraud and tightening up regulations, etc. That's why it's disappointing and beyond annoying when he clams up vis Clinton and her relationship with and money from Wall St.

The GOP engages in phony baloney food fights much to the tingling excitement of their base. I'd like to see some REAL debate from the Dems. Not just make nice phony baloney bullshit.

Again, I've never expected Sanders to be anything more than someone who'll sound populist and then tell his followers to vote for Clinton… as he's already SAID anyway.

We're told allegedly that "poll after poll" shows Clinton in a double digit lead. I really question that, as well, but clearly no one's showing me the factual data. It is what is. HRC is the anointed one, so get used to it.

To me, Sanders is just window dressing & a distraction, even though, clearly, he's the pick of "both" (or the combined, if you will) litters. Whatever…

JerryDenim, November 16, 2015 at 2:51 pm

"Again, I've never expected Sanders to be anything more than someone who'll sound populist and then tell his followers to vote for Clinton… as he's already SAID anyway"

Yeah maybe, but I believe that was the price of admission to the Clinton / Wasserman-Shultz ball for a life-long socialist who sometimes caucuses with Democrats. The more damage Sanders inflicts on Clinton in the primaries the less sincere and effective any possible Sanders endorsement of Clinton will be later. I too share your distrust of polls and given that distrust it's hard for me to write off a guy who has had every disadvantage in his Presidential bid but is still polling pretty darn well against a extremely well-known political juggernaut early in the primary season.

Sanders has the right message, the right record and popular support on his side in a year when people are fed-up with the entire Washington establishment and sick of pedigreed, legacy politicians like Clinton. Look at how poorly Bush has fared so far against outsider, blow-hard Donald Trump and unknown-nobody Ben Carson. Even conservatives are sick of dynasties.

If there's ever been a moment when Bernie Sanders could win the nomination this is it. If you really think Sanders is the "pick of liter" as you say perhaps you could stop calling him things like "window dressing" and "a distraction". While it may protect your feelings from future disappointment to speak confidently of Clinton as the inevitable nominee it clearly helps her campaign objectives, so…. maybe just try tempering your cynicism just a wee bit unless you are out to help Hillary win the nomination. If you are out to help Hillary then carry on, you're doing a fine job of tarring and feathering Sanders as a loser on behalf of her campaign.

3.14e-9, November 16, 2015 at 2:53 pm

Bernie's campaign never in a million years thought he would get this far. In the beginning, it was calculated to draw attention to income inequality, big money in politics, and other issues that likely would get ignored if the coronation went ahead unopposed. Within that context, it would have been very easy for him to promise the few votes he thought he would get to Clinton.

I have a feeling that his campaign is regretting he ever said that as much as we are. He has a huge number of supporters who, like jgordon above, would write in "Dog Turd" before voting for Hillary (although I don't know why we couldn't write in Bernie). These people are going to be extremely angry if he throws his support behind her, and they have demonstrated well already that they are very vocal. I've commented on NC before that I think there will be hell to pay if and when that happens.

I also suspect that the DNC didn't make a big fuss about his running as a Democrat because no one there thought he'd get this far, either, and they probably thought he would be useful. For all we know, he agreed to that. And then, suddenly, all the unexpected crowds.

Sanders is the ranking minority member on the Senate Budget Committee, which means he definitely could challenge Clinton on economic issues, and competently. So I agree that something has to be holding him back. Yet another consideration is that he might be keeping the most damaging counts against her until later in the campaign. If he showed his hand now, the Clinton machine would kick into gear overtime, get her off the hook, and drag him down into the mud.

Cassandra, November 16, 2015 at 4:10 pm

No need to think of conspiracies, etc. As you point out, Sanders is a senator. He never expected to get this far. He won't win the nomination. He has to think of his post-2016 career. If he goes after Clinton hammer and tongs, he will be (more of) a pariah in the Senate, effectively ruining any chance for him to accomplish anything. As he said in the debate, the VA bill wasn't all he wanted, but it was something. Many think incrementalism is a fool's game, but I believe Sanders is willing to fight for crumbs.

Lambert Strether, November 16, 2015 at 4:14 pm

I think Sanders did pretty well, especially considering the primaries haven't started. He pushed Clinton into two horrible responses, at least: (1) 9/11 and Wall Street and (2) Sanders single payer vs. ObamaCare. Both will be gifts that keep on giving. My thought would is that the opportunity cost of spending a lot of time reverse engineering whatever number of dimensions of chess Sanders is playing failing to use the very powerful ammo he gave - both of which are about policy.

RUKidding, November 16, 2015 at 4:17 pm

I'm willing to be wrong about Sanders, and in fact, hope I am. Time will tell. I agree that he's done better than the odds called for. Willing to listen to him but wish he'd speak up more about HRC's bs. But he is a politician after all and is playing a long game.

3.14e-9, November 16, 2015 at 6:14 pm

Well, he has to be very careful about that. Clinton's people immediately jump on the least bit of truth from Sanders as "negative campaigning" and then call up their friends in the MSM to back them up:

http://blogs.wsj.com/washwire/2015/11/05/clinton-campaign-fires-back-at-bernie-/bernie_sanders.

Anyway, thanks for being open.

Jim Haygood, November 16, 2015 at 12:10 pm

'AIG's largest counter-party was Goldman Sachs.'

Thus, the Federal Reserve's "Sunday night special" waiver of the 30-day application period for Goldman Sachs and Morgan Stanley to become bank holding companies, and to get their sticky mitts (or tentacles, as the case may be) into "free money" at the discount window. News story from 22 Sep 2008:

http://www.cnbc.com/id/26828495

Having essentially zero consumer deposit-taking business, then or now, these two investment banks resemble ordinary commercial banks like mangy wolves dressed in ill-fitting sheep costumes.

Investment banking is a high-risk, high-reward business with some of the most highly compensated employees in the country. Subsidizing GS and MS with Federal Reserve free money is a rank disgrace. It vexeth me greatly, comrades. But changing it is not even on the menu.

TimmyB, November 16, 2015 at 12:35 pm

What really hasn't been discussed is Sander's motivation for breaking up too big to fail financial institutions. Sanders on his website states he wants to break them up because they have too much economic and political power. Sanders says that breaking them up, in and by itself, will provide a benefit.

So when Clinton starts discussing how her plan will be more effective in preventing another financial collapse, she has changed the subject from how breaking up our banks will benefit our democratcy to whether or not breaking them up will prevent another 2008 crisis.

What Sanders needs to do is bring the discussion on breaking up TBTF banks back around to their having too much economic and political power. For example, he could say he wants to break them up because they have too much power and that Clinton want them to continue to hold that power. Clinton has no real response to that claim.

Michael, November 17, 2015 at 11:44 am

Bernie is not running to win. I'm not sure why he is running. If he does not start to hit Hillary then I think it is primarily to keep the left wing of the Democratic Party inside the party instead of seeking a new home elsewhere. The Justice Party is interesting but a third party has no chance unless the Democrats implode.

Honestly I can see the Democrats collapsing before the Republicans. The South and Midwest are just batshit crazy and they'll stick with the Republicans as long as the evangelicals dominate their culture. Does anyone here know anything about previous "great awakenings" in American culture?

MojaveWolf , November 16, 2015 at 1:01 pm

For all her vomit-inducing disingenuousness about how she would be the toughest on the financial industry as a whole (really, how does she say that with a straight face?), and her basically sounding like a smarter, saner business as usual neocon on the middle east, I thought her worst moment by far was when she tried to describe single payer as "dismantling" Medicare, Medicaid, etc and letting Republican administrations decide who gets health care, and playing up that the ACA as better and more comprehensive. She is not stupid. She is one of the smartest people in politics from a pure short term IQ standpoint. And she has studied and once advocated for single payer so she KNOWS what it does. Think about this for a minute.

Hillary KNOWS single payer EXPANDS on what Medicaid and Medicare provide.

Hillary KNOWS Bernie's single payer plan would not allow states to opt out, unlike the ACA she is touting, while she was claiming the exact opposite. She knowingly bald-faced lied on national TV & radio (I was driving and listening, not watching) in a way to equal anything Dick Cheney or Mitch McConnell or Newt Gingrich ever did, and she lied about a matter she KNOWS will result in millions of people NOT getting adequate medical care with ripple effects ranging from constant illness and misery to job performance to not seeking treatment until emergency to actual death. People can't pay 3k or 5k deductibles. We already have news reports of people not going for this reason. We paid the penalty on our taxes last year because the only affordable plans that were actually usable required us to make a 2 hr one way drive (over 90% hwy, this is a long way) to the closest hospital/doctor that was included in it. One of my acquaintances who is covered took a taxi to what was supposedly the only local doctor who took her plan (after calling everyone in town), waited over an hr, and was told that whoever she spoke to on the phone made a mistake and she is not covered, and they have no idea where she should go, plus she's out the time and a r/t taxi ride. You think Hillary hasn't studied this and doesn't know things like this happen? You think she doesn't know Bernie's single payer plan (and probably all single payer plans) wouldn't prevent these sorts of situations?

She KNOWS we could cut out the insurance companies, have free single payer, pay for it by taxing the most well off, and people on the whole would get much better service, with much better outcomes, and without having to freak out if the ambulance took them to a hospital outside of their plan or a visiting specialist at the hospital their plan said go to was outside the plan and billed them five or six figures or what have.

But she clearly doesn't care. She just cares about people donating money to her campaign and getting elected as a resume stuffer. She doesn't want to change how things are done more than minor tinkering, even when she KNOWS the changes will make everything better off. She will be the same on climate change, even tho she isn't stupid and knows both what we are doing now and what she is recommending are leading us to a planet of the jellyfish in the long run and a state of neverending crises and mass extinction in the short and medium run.

(I am not saying she knows the misery her foreign policy position has and will cause because I actually fear she might believe in what she's saying there; tho whether she believes it or not she clearly intends to continue the same policies that have led us to destabilize the middle east and are starting to destabilize the entire world; the only reason I'm not thinking this is her worst moment is because she was more hinting at than saying things, and I'm less sure of her actual positions)

She is willing to sacrifice millions of lives to get herself elected and continue enriching her already rich family who doesn't need any more money. She is, basically, a Republican on everything but social issues (yes, these matter, and good for her, tho past cowardly statements on abortion and votes on marriage equality should not be disregarded when compared with her opponents).

i guess people think nothing of this, just as they think nothing of her lies on regulating the financial industry, because they think that sort of flat out lie and distortion is just politics as usual, and more important to be good at lying than good on substance?

And that is why really do need a political revolution. Almost all of the current political class, including the political media, really need to go.

RUKidding, November 16, 2015 at 1:37 pm

AKA, there's very little difference bet HRC and whomever barking lunatic the GOP coughs up… other than HRC isn't such a barking lunatic. She's just mired in pure unfettered greed and imperialistic hubris.

Actually the GOP should be kissing the ground that HRC walks on bc she's probably the biggest War Hawk in the whole amalgamated group, and she's way more for BigIns getting their hugely giant sucking cut out of "health" insurance scams than almost any other candidate.

The GOP puts on a dog 'n pony show constantly wasting time and all taxpayer money on voting against ACA. They do that bc they know their phony baloney bills will never ever pass. The GOP doesn't want ACA to ever go away bc the politicians are getting rich rich rich off of it as much as the Dems are. They just have to play a Kabuki show to appease their utterly stupid base.

Such a waste of time all of this is. Such a monumental waste of money. ugh.

nothing will change. authoritarian USians like Big Daddy/Mommy too much to let ever let go of this system.

Vatch, November 16, 2015 at 3:33 pm

There are at least two advantages to breaking up the giant banks:

1. If one of the fragments gets into financial trouble, we won't have to fear a complete economic collapse.

2. Sure, the owners of the banks will continue to own as much as before (and some of their stock might even rise in value). But the CEOs of the big banks will lose influence, because they will suddenly be the bosses of much smaller corporations. Currently, people like Jamie Dimon have far too much power.

Bob Stapp, November 16, 2015 at 2:17 pm

I'm at a complete loss to understand why Dems, the media, and in fact anyone with two brain cells to rub together, can fail to see or acknowledge that HRC is a liar, a crook, and a generally mean-spirited individual who's only in it for herself and will do and say anything and accept money from anyone as long as it helps her to win.

Sadly, the only difference between Hillary and Obama, is that Barack is a better shape-shifter and, when he lies, he can do so with greater eloquence and charm. Hillary can never manage to completely hide her forked tongue and her poisonous lizard personality.

Our country and, in fact, the entire world is at a crossroads and yet there has never been such a lack of selfless, skilled leadership stepping up to help us get to some version of the common good. Meanwhile, Bernie Saunders and Jeremy Corbyn get pilloried daily for even suggesting that we are all in this together and had better get to fixing things right quick. I guess it's the fate of truth-tellers.

I plan to attend my state's caucus and when I say that if we insist on pursuing the political process as we have always done, we are condemning ourselves to disaster. Going out and working for a person, a personality, or a hoped-for savior, is merely repeating the same kind of insanity that has produced the rotten system we have today. Bernie's right. It's going to take all of us standing up together, not to get Bernie or anybody else elected, but for what we know is right. And we'd better do it soon. Then, when I'm shut down by the party operatives, I'll go home and continue to watch the slow-motion train-wreck.

Lambert Strether, November 16, 2015 at 3:21 pm

"It depends upon what the meaning of the word 'bank' is."

cassandra, November 16, 2015 at 7:11 pm

After Obama's behavior, and the documentation of Gilens & Page, can anyone believe that campaign speeches have anything to do with post-electoral policies? The nomination process is beyond dysfunctional: everyone knows Hillarity's positions are synthetic, yet she successfully campaigns with the grossest political impunity and she is taken seriously enough for analysis. I don't understand why. The only political power remaining to democracy is resistance, either by voting for a third party, or else by total abstinence. I personally prefer the former, as it's a bit harder to sweep under the media carpet. This keeps me outside the grasp of helplessness.

Telee, November 16, 2015 at 7:38 pm

The refusal of HRC to be for reinstating Glass-Steagall to separate investment banks and commercial banks is a sure sign that she will be a lap dog for the fraudsters on Wall Street. More of the same or worse.

Another point. My readings has lead me to believe that she played a large role in the destabilization o Libya. In her 11 hours before the Benghazi committee she was never asked why she was so hell-bent for a military solution when there were negotiations which would have led to a more peaceful solution.

1 kings, November 16, 2015 at 9:39 pm

"We came, we saw, he died". HRC

aliteralmind, November 16, 2015 at 10:21 pm

Family Guy *exactly* predicted Hillary's 9/11 tragedy-distraction strategy way back in 2008: Life imitating art: http://youtu.be/Rm3d43HLyTI

[Nov 21, 2015] On the Lack of Courage in Regulators

Notable quotes:
"... Can courage trump careerism? I believe that for the forseeable future the answer is "No". People are highly incentivized to take the path of least resistance and simply go along to get along. ..."
"... It would be wrong to excuse the inaction of the Obama DOJ and SEC crews as being the result of some larger "corrosion of our collective values." The capos in those crews are the people doing the corroding, and not one of them was forced to (not) do what they did. Notice that every last one of the initial bunch is presently being paid, by Wall Street, to the tune of millions of dollars per year. They opted to cover up crimes and take a pay-off in exchange. And they are owed punishment. ..."
Nov 21, 2015 | naked capitalism
I'm embedding the text of a short but must-read speech by Robert Jenkins, a former banker, hedge fund manager, and regulator (Bank of England) who is now a Senior Fellow at Better Markets. If nothing else, be sure to look at the partial list of bank misconduct and activities currently under investigation.

Jenkins points out that regulatory reform has fallen short on multiple fronts, and perhaps the most important is courage. Readers may understandably object to him giving lip service to the idea that Bernanke acted courageously during the crisis (serving the needs of banks via unconventional means is not tantamount to courage), but he is a Serious Person, and making a case against Bernanke would detract from his bigger message about the lack of guts post-crisis.

Now there have been exceptions, like Benjamin Lawsky, Sheila Bair, Gary Gensler, Kara Stein, and in a more insider capacity, Danny Tarullo. Contrast their examples with the typical cronyism and lame rationalizations for inaction, particularly by the Department of Justice and the SEC. It's not obvious how to reverse the corrosion of our collective values. But it is important to remember than norms can shift much faster than most people think possible, with, for instance, the 1950s followed by the radicalism and shifts in social values of the 1960s, which conservative elements are still fighting to roll back.

Michael G

A link to a text version of the speech for those with uncooperative computers
http://www.ianfraser.org/why-well-all-end-up-paying-for-the-feeble-response-to-the-banking-crisis/
Worth reading

James Levy

We do not live in an economy or a polity that breeds or rewards the kind of public-mindedness and civic virtue that gives you courage. The author thinks the system needs courageous people, but posits no conception of where they would come from and how they would thrive in the current system (news flash: they won't). So this is a classic "I see the problem clearly but can't see that the solution is impossible under the current system" piece.

TMock

Agreed.

For those who desire real solutions, try this…

The Universal Principles of Sustainable Development

http://www.triplepundit.com/2011/02/universal-principles-sustainable-development/

Norb

In Tavis Smiley's book, My Journey with Maya Angelou, he recounts an ongoing discussion the two of them entertained throughout the years concerning which trait, Love or Courage, was more important in realizing a full life. Angelou argued that acting courageously was the most important. Smiley saw love as the moving force. While important and moving, the discussion has the dead-end quality of not being able to move past the current system of injustice. I say this because in the end, both support incremental change to the existing system as the means to bring about social justice. The powerful elite have perfected the manipulation of incremental change to render it powerless.

When trying to change a social system, courage is needed. Courage to form a vision of the future that is based on public-mindedness and civic virtues that bring justice into the world. Our current leaders are delivering the exact opposite of civic justice. Its time to call them out on their duplicity, and ignore their vision of the future.

The courage that is needed today is not the courage to stand up to the criminals running things and somehow make them change. It is the courage to make them irrelevant. Change will come from the bottom up, one person at a time.

cnchal

And when one shows up, look what happens.

The disturbing fact is that laws have been broken but law breaking has not touched senior management.

If they knew, then they were complicit. If they did not, then they were incompetent. Alternatively, if the deserving dozens have indeed been banned from the field let the list be known – that we might see some of that "professional ostracism" of which Governor Carney speaks. One person who did lose his position and quite publicly at that was Martin Wheatley, the UK's courageous conduct enforcer.

Meanwhile the chairman of Europe's largest bank, Douglas Flint at HSBC, remains in situ – despite having been on the board since 1995; despite having signed off on the acquisition of Household Finance; and despite having had oversight of tax entangled subsidiaries in Switzerland and money laundering units in Mexico. Oh, and you'll love this: the recently retired CEO of Standard Chartered is reportedly an advisor to Her Majesty's Government. Standard Chartered was among the first to be investigated for violations of rogue regime sanctions. The bank was fined heavily and may be so again.

Courageous people get fired, which leads to no courageous people left.

GlassHammer

Can courage trump careerism? I believe that for the forseeable future the answer is "No". People are highly incentivized to take the path of least resistance and simply go along to get along.

susan the other

By extreme necessity (created by total dysfunction) we will probably wind up with planned and coordinated economies that do not rely on speculation & credit to come up with the next great idea. Those ideas will be forced to come from the top down. And the problems of unregulated capitalism frantically chumming for inspiration and extreme profits will shrink back down from a world-eating monster to just a fox or two.

Oliver Budde

It would be wrong to excuse the inaction of the Obama DOJ and SEC crews as being the result of some larger "corrosion of our collective values." The capos in those crews are the people doing the corroding, and not one of them was forced to (not) do what they did. Notice that every last one of the initial bunch is presently being paid, by Wall Street, to the tune of millions of dollars per year. They opted to cover up crimes and take a pay-off in exchange. And they are owed punishment.

Malcolm MacLeod, MD

Oliver: I believe that you hit the nail on the head, and
I wholeheartedly agree.

[Oct 17, 2015] Tobin Project Book on Regulatory Capture By James Kwak

The basic idea was that you can observe the same outcomes that you get with traditional regulatory capture without there being any actual corruption.
January 25, 2013 | baselinescenario.com | 70 Comments

One of the last things I did in law school was write a paper about the concept of “cultural capture,” which Simon and I discussed briefly in 13 Bankers as one of the elements of the “Wall Street takeover.” The basic idea was that you can observe the same outcomes that you get with traditional regulatory capture without there being any actual corruption. The hard part in writing the paper was distinguishing cultural capture from plain old ideology—regulators making decisions because of their views about the world.

Anyway, the result is being included in a collection of papers on regulatory capture organized by the Tobin Project. It will be published by Cambridge sometime this year, but for now you can download the various chapters here. It features a lineup including many authors far more distinguished than I, including Richard Posner, Luigi Zingales, Tino Cuéllar, Richard Revesz, David Moss, Dan Carpenter, Nolan McCarty, and others. Enjoy.

[Sep 26, 2015] The City Of London Has Turned Britain Into A Civilized Mafia State

"... Property in this country is a haven for the proceeds of international crime. The head of the National Crime Agency, Donald Toon, notes that "the London property market has been skewed by laundered money. Prices are being artificially driven up by overseas criminals who want to sequester their assets here in the UK." ..."
"... The City is a semi-offshore state, a bit like the UK's crown dependencies and overseas territories, tax havens legitimised by the Privy Council. Britain's financial secrecy undermines the tax base while providing a conduit into the legal economy for gangsters, kleptocrats and drug barons. ..."
"... Yep. Socialism for us. Feudalism for the people. Because.....we're too big to fail. "They gotcha by the balls ! " - George Carlin ..."
"... London is an independent city-state, with mafia owners going back 1000+ years. Website admits it's a corporation http://www.cityoflondon.gov.uk/Pages/default.aspx ..."
"... assassination politics: http://www.forbes.com/sites/andygreenberg/2013/11/18/meet-the-assassinat... ..."
"... I'm not sure that author actually knows what he is talking about. "The City" has nothing do with domestic UK money laundering in real estate, because no one with money actually lives in "the City." They generally live in the West End or on country estates- that's the real estate that is being used to launder money. And the City is hardly the UK's only tax haven for corporations -- Jersey, Guernsey and Isle of Man are all short puddle jumper flights from LCY, and if you want to use long haul flights out of Heathrow- the list of Crown dependencies and overseas territories serving as tax havens is almost endless... the Cayman Islands, British Virgin Islands and the Bermuda Triangle being the most familiar to Americans trying to lose fiat in boating accidents. ..."
"... "What Do You Think of Western Civilization?" "I Think It Would Be a Good Idea" -- Gandhi
"...London is now the global money-laundering centre for the drug trade, says crime expert ..."
"... It's a big club and we ain't in it...... R.I.P. George Carlin ..."
"... "The City" = croupier and enforcer of the global casino. ..."
"... The lesson - a financial sector without a commensurate sized industrial base will rapidly evolve into organised crime. ..."
Sep 10, 2015 | Zero Hedge
Submitted by Mike Krieger via Liberty Blitzkrieg blog,

While an earlier post related to the likely bursting of the London real estate bubble, this one highlights a blistering critique of the role the City of London has played in transforming Great Britain into what George Monbiot calls a "civilized mafia state." But that's just an appetizer. This extremely well written and information article is a must read for anyone still in the dark regarding London's central role within the global financial crime syndicate.

Here are a few excerpts from the Guardian:

To an extent unknown since before the first world war, economic relations in this country are becoming set in stone. It is not just that the very rich no longer fall while the very poor no longer rise. It's that the system itself is protected from risk. Through bailouts, quantitative easing and delays in interest-rate rises, speculative investment has been so well cushioned that – as the Guardian economics editor, Larry Elliott, puts it – financial markets are "one of the last bastions of socialism left on Earth".

Public services, infrastructure, the very fabric of the nation: these too are being converted into risk-free investments. Social cleansing is transforming central London into an exclusive economic zone for property speculation. From a dozen directions, government policy converges on this objective.

Property in this country is a haven for the proceeds of international crime. The head of the National Crime Agency, Donald Toon, notes that "the London property market has been skewed by laundered money. Prices are being artificially driven up by overseas criminals who want to sequester their assets here in the UK."

It's hardly surprising, given the degree of oversight. Private Eye has produced a map of British land owned by companies registered in offshore tax havens. The holdings amount to 1.2m acres, including much of the country's prime real estate. Among those it names as beneficiaries are a cast of Russian oligarchs, oil sheikhs, British aristocrats and newspaper proprietors. These are the people for whom government policy works – and the less regulated the system that enriches them, the happier they are.

The speculative property market is just one current in the great flow of cash that sluices through Britain while scarcely touching the sides. The financial sector exploits an astonishing political privilege: the City of London is the only jurisdiction in the UK not fully subject to the authority of parliament. In fact, the relationship seems to work the other way. Behind the Speaker's chair in the House of Commons sits the Remembrancer, whose job is to ensure that the interests of the City of London are recognised by the elected members. (A campaign to rescind this privilege – Don't Forget the Remembrancer – will be launched very soon.)

The City is a semi-offshore state, a bit like the UK's crown dependencies and overseas territories, tax havens legitimised by the Privy Council. Britain's financial secrecy undermines the tax base while providing a conduit into the legal economy for gangsters, kleptocrats and drug barons.

Even the more orthodox financial institutions deploy a succession of scandalous practices: pension mis-selling, endowment mortgage fraud, the payment protection insurance con, Libor rigging. A former minister in the last government, Lord Green, ran HSBC while it engaged in money laundering for drug gangs, systematic tax evasion and the provision of services to Saudi and Bangladeshi banks linked to the financing of terrorists. Sometimes the UK looks to me like an ever so civilised mafia state.

The government also insists that there is no link between political donations and seats in the House of Lords. But a study by researchersat Oxford University found that the probability of so many major donors arriving there by chance is 1.36 x 10-38: roughly "equivalent to entering the National Lottery and winning the jackpot 5 times in a row". Why does the Lords remain unreformed? Because it permits plutocratic power to override democracy. Both rich and poor are kept in their place.

Governed either by or on behalf of the people who fleece us, we cannot be surprised to discover that all public services are being re-engineered for the benefit of private capital. Nor should we be surprised when governments help to negotiate, without public consent, treaties such as the Transatlantic Trade and Investment Partnership and the Comprehensive Economic and Trade Agreement, which undermine the sovereignty of both parliament and the law. Aesop's observation, that "we hang the petty thieves and appoint the great ones to public office", remains true in spirit, though hanging has been replaced by community payback.

Wherever you sniff in British public life, something stinks: I could fill this site with examples. But, while every pore oozes corruption, our task, we are told, is merely to trim the nails of the body politic.

To fail to confront this system is to collaborate with it.

Most people don't want to face this, but it's undeniably true.

umbotron

Yep. Socialism for us. Feudalism for the people. Because.....we're too big to fail. "They gotcha by the balls ! " - George Carlin

JoeSexPack

London is an independent city-state, with mafia owners going back 1000+ years. Website admits it's a corporation http://www.cityoflondon.gov.uk/Pages/default.aspx

Short vid explains.

https://www.youtube.com/watch?v=LrObZ_HZZUc

Why matters? The square mile is home to Bank of England (private corp), HQ of Freemasons & branch offices of all major banks on Earth. It is center of world finance, & has been for centuries. Privately-owned Bank of E was model later replicated with FED, ECB, WB, IMF & most others.

US revolutionary War was fought to fee US from having to use Bank of E's debt notes. Sound familiar? We're back there now. Same struggle against same institutions.

KnuckleDragger-X

If you read about the history of London, you'll notice it has always been a very bizarre and screwed up place. They are now reaching their Nirvana of fucked uppedness.....

two hoots

What they can no longer do with their Dutch East India Company and with the by-gone reach of the Empire they do in the M A Rothschild tradition with their global financial tenacles

Chuck Knoblauch

Civilized assassins needed.

sleigher

assassination politics: http://www.forbes.com/sites/andygreenberg/2013/11/18/meet-the-assassinat...

lawyer4anarchists

Of course the author is right. And of course this has always been the case, it is not new. The problem we have in this country is that the people have the laughable notion that there is some magical time to "go back to" where the "constitution and it's rights" were the law. lol. The people are so lost. The constitution is not what people think. It is there to enslave you. It was never a source of freedom. Until they wake up and realize this fact, well... they will keep getting what they are getting. http://www.thetruthaboutthelaw.com/the-peoples-case-for-what-happened-at...

Urban Redneck

I'm not sure that author actually knows what he is talking about. "The City" has nothing do with domestic UK money laundering in real estate, because no one with money actually lives in "the City." They generally live in the West End or on country estates -- that's the real estate that is being used to launder money. And the City is hardly the UK's only tax haven for corporations -- Jersey, Guernsey and Isle of Man are all short puddle jumper flights from LCY, and if you want to use long haul flights out of Heathrow -- the list of Crown dependencies and overseas territories serving as tax havens is almost endless... the Cayman Islands, British Virgin Islands and the Bermuda Triangle being the most familiar to Americans trying to lose fiat in boating accidents.

Peribanu

Unlike the Yanks, we Brits don't have a constitution written down from first principles. Our "constitution" is the body of laws of the country, but it goes back so far that any contemporary changes are minor, superficial, and irrelevant. Many of the formal institutional powers in the country are the unfortunate but necessary result of a compromise between landowning aristocrats of old and the bourgeoisie who wanted a slice of the cake. The workers are merely tolerated. The internal mafia are the oh-so-very-refined aristocracy, whose heads were never cut off unlike in France, together with the rather uncouth capitalists and self-made money men, who are also tolerated, since someone has to provide one with an income, ideally by devising ways to get the workers to pay 90%-100% of their income back to us as rent. The other mafia are the rich foreigners -- Russian oligarchs, and the "persecuted" rich of the world, who are allowed to reside in Britain on condition that: a) they bring in lots of lovely "investments"; and b) don't get involved, at least publicly, in any of that unnecessary "politics" that goes on overseas. In Britain we long ago abolished politics. The commoners come and go with their naive belief that they can actually change things, while the core institutions of the country are unchanging and eternal: Eton, Oxford, Cambridge, the Civil Service, MI5, MI6, the BBC, and, of course, the Monarchy. God Save the Queen! (Or should I call her the Godmother?)

q99x2

The scum of the world all located in one place. How convenient is that. Won't be long before they start going after one another. Then poof.

JustObserving

Re: The City Of London Has Turned Britain Into A "Civilized Mafia State"

Civilized?

"What Do You Think of Western Civilization?" "I Think It Would Be a Good Idea" -- Gandhi

London is now the global money-laundering centre for the drug trade, says crime expert

The City of London is the money-laundering centre of the world's drug trade, according to an internationally acclaimed crime expert.

UK banks and financial services have ignored so-called "know your customer" rules designed to curb criminals' abilities to launder the proceeds of crime, Roberto Saviano warned. Mr Saviano, author of the international bestseller Gomorrah, which exposed the workings of the Neapolitan crime organisation Camorra, said: "The British treat it as not their problem because there aren't corpses on the street."

http://www.independent.co.uk/news/uk/crime/london-is-now-the-global-mone...

London: A giant washing machine for the filthy cash of a corrupt elite: http://www.ibtimes.co.uk/london-giant-washing-machine-filthy-cash-corrup...
Calculus99

London: The money laundering capital of the world.

Fear not though because Prime Minister Cameron has said he's going to stamp down on it especially the offshore companies that are buying up all the property. BWHAHAHAHAHA.

ThroxxOfVron

...& Obama's new Affirmative Action figurehead at the DOJ has agreed with her underlings that since it is now well past the Statute Of Limitations for prosecuting anything even vaguely related to the fraud-induced economic disaster which culminated in the interbank and equities markets implosions that it is time 'to get touch on White Collar Crime.'

Dr. Engali

It's a big club and we ain't in it...... R.I.P. George Carlin

Salah

Been that way since their founders escaped from the Pope & the King of France, 10/13/1307

https://lordmayorsshow.london/history/gog-and-magog

Jonathan Living...

I'm fascinated by The City - so much of British law seems so weird ~ even just the status of Wales, which is in some ways its own country within the UK, some ways just part of England, but they have their own Parliament.

Anyway there's always google, but if anyone has come across any particularly good articles or books on the subject of the City's history and status, please share the wealth.

I wonder if, like our Electoral college, most people would agree it should be abolished but most people simply dont know about it.

22winmag

Let's dismantle Miami and sell it off in order to fund the criminal prosecution and incarceration of the CIA scum and drug runners who built that city thanks to decades of drug smuggling and money laundering. Then we move on to D.C.

Salah

No, make NYC & Long Island a US "City-State", but with no US Congressional representation, or taxation, or US financial insurance guarantees or citizenship.

1 crash later, they'll clean-up mightily and be a little Dubai.

jcdenton

We do have $100 BILLION for that on the way ..

http://www.veteranstoday.com/2015/01/11/another-thwarted-attempt-to-hija...

Another major disbursement scheduled is 100 Billion USD to set up an ongoing special Task Force to investigate and prosecute organized crime and government and corporate corruption at any level.

... Funds were disbursed on December 15, 2014 ...

https://app.box.com/s/hfgvcqg7gqh7i27at6sv53ywu87lwarp (see file with interview dated Dec. 3, 2014)

youngman

Well they still have a Royal Family...go figure......and remember any news or numbers that come out of London are probably wrong... Faked...or just fixed....they cheat well there

rufus66

Meanwhile in the news today, Revenue Canada uncovers something fishy regarding between kpmg's Great Britain connection and rich clients ......

http://www.cbc.ca/news/business/kpmg-offshore-sham-deceived-tax-authorit...

Solio

"So it just means that more of the tax burden is borne by the middle class."

What middle class?!!

Calculus99

The difference between Miami and London is Miami knows it's bent. London likes to hide/forget and think/preach it's honest.

homebody

This will be fixed by adding 800,000 economic refugees from Syria and Africa

XRAYD

London has always been thus ... from the age of Dickens, and the Colonial Empire Head Office - now masquerading as the "Commonwealth"!

NotApplicable

Indeed.

It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to heaven, we were all going direct the other way - in short, the period was so far like the present period, that some of its noisiest authorities insisted on its being received, for good or for evil, in the superlative degree of comparison only.

Salah

"The City" = croupier and enforcer of the global casino.

1. Look for things to "break apart", i.e. Ottoman Empire, Hapsburg Empire, Russian Empire, Spanish Empire, USSR, et al

2. Look for things to "put together", i.e. USA, Chile (sans Bolivia on the Pacific), South Africa, Rhodesia, Oz, NZ, Hong Kong, Singapore, et al

They've been working this biz-model since the North Sea Knights Templars escaped the big deception in 1307

JessieSharpton

Ah the knights templar, the prototypical pre Rothschild banking mafia incarnation.

SillySalesmanQu...

Just my own personal observation here, but what do these three things have in common, why and who created them in the first place?

Most bad shit that happens to average people seem to emanate from:

1. Vatican City

2. City of London

3. Washington D.C.

Chosenpeople

Britain has become a classic dystopian state. They have cameras everywhere, and I mean everywhere. The state runs and controls everything. The place is swarming with foreigners, it is difficult to find a white Englishman in London. Britain is dead.

ajax

London became the mega-city in "Blade Runner" instead of L.A.

umblemore

Before the banking mafia looted Britain's industrial base and shipped it offshore industry was the dominant power and although the City was part crooked it was also kept part functional as a utility for industry.

Over the last 30 years or so since they offshored all the industry the financial power has become completely dominant and completely criminal. To a certain extent the London branches of the Wall St banks are where they do their dirtiest deeds because it's easier to get away with in London.

The lesson - a financial sector without a commensurate sized industrial base will rapidly evolve into organised crime.

MSimon

For several Centuries Brit banks have been running the dope racket.

You might recall "Opium Wars" or if you want to be modern - NATO in Afghanistan.

jcdenton

Next, we will have the courage to write about Dachau?

http://www.veteranstoday.com/2015/05/04/neo-so-much-more-than-nukes/

MSimon

Since 1840 - at least

http://www.zerohedge.com/news/2015-09-07/bed-despotic-house-saud#comment...

MSimon

The Brits have been at it for a long time: http://www.zerohedge.com/news/2015-09-07/bed-despotic-house-saud#comment...

[Sep 25, 2015] Paul Krugman Dewey, Cheatem Howe

The point is we should be trying to make our regulation more intelligent (making it encourage not discourage innovation - cheaper and easier to police - less subject to regulatory capture etc.
"... So what has been happening lately is an attempt to redress that imbalance, to replace knee-jerk opposition to regulation with the judicious use of regulation where there is good reason to believe that businesses might act in destructive ways. Will we see this effort continue? Next year's election will tell. ..."
"... That is brilliant - so Turing Pharmaceuticals is a classical - wait for it - parasitic infection! ..."
"... The point is we should be trying to make our regulation more intelligent (making it encourage not discourage innovation - cheaper and easier to police - less subject to regulatory capture etc.). ..."
"... The reality is that, in the absence of effective regulation with substantial penalties, all of the incentives are to lie, cheat, and steal. In consequence, it really is the norm, if only in more minor ways than the ones that make the headlines. Wage theft, fraud, knowingly selling defective merchandise, and many other abuses are clearly rampant. This is exactly why markets cannot exist in the absence of effective government regulation to provide trust. ..."
"... Economic idealists have popularized the notion that the world can work without much regulations because their models tell them so. Unless they are behavioral economists, they often fail to include fraud, scams & information asymmetry into their models. This produces garbage like efficient markets that only exist in an idealistic dream world. The real world markets are filled with fraud, scams and disreputable agents. Failure to account for bad behavior is the bane of many a model. ..."
"... But I love Obama because he has created a wonderland of money for lawyers and consultants, a river of chocolate and honey to make Willy Wonka jealous. Go Barry go! ..."
"...


..."

Sep 25, 2015 | Economist's View
Republicans can't help but side with business, but there are very good reasons for the recent increase in regulatory oversight:
Dewey, Cheatem & Howe, by Paul Krugman, Commentary, NY Times: Item: The C.E.O. of Volkswagen has resigned after revelations that his company committed fraud on an epic scale, installing software on its diesel cars that detected when their emissions were being tested, and produced deceptively low results.

Item: The former president of a peanut company has been sentenced to 28 years in prison for knowingly shipping tainted products that later killed nine people and sickened 700.

Item: Rights to a drug used to treat parasitic infections were acquired by Turing Pharmaceuticals, which specializes not in developing new drugs but in buying existing drugs and jacking up their prices. In this case, the price went from $13.50 a tablet to $750. ...

There are, it turns out, people in the corporate world who will do whatever it takes, including fraud that kills people, in order to make a buck. And we need effective regulation to police that kind of bad behavior... But we knew that, right?

Well, we used to know it... But ... an important part of America's political class has declared war on even the most obviously necessary regulations. ...

A case in point: This week Jeb Bush, who has an uncanny talent for bad timing, chose to publish an op-ed article in The Wall Street Journal denouncing the Obama administration for issuing "a flood of creativity-crushing and job-killing rules." Never mind his misuse of cherry-picked statistics, or the fact that private-sector employment has grown much faster under President Obama's "job killing" policies than it did under Mr. Bush's brother's administration. ...

The thing is, Mr. Bush isn't wrong to suggest that there has been a move back toward more regulation under Mr. Obama, a move that will probably continue if a Democrat wins next year. After all, Hillary Clinton released a plan to limit drug prices at the same time Mr. Bush was unleashing his anti-regulation diatribe.

But the regulatory rebound is taking place for a reason. Maybe we had too much regulation in the 1970s, but we've now spent 35 years trusting business to do the right thing with minimal oversight — and it hasn't worked.

So what has been happening lately is an attempt to redress that imbalance, to replace knee-jerk opposition to regulation with the judicious use of regulation where there is good reason to believe that businesses might act in destructive ways. Will we see this effort continue? Next year's election will tell.

reason

"Item: Rights to a drug used to treat parasitic infections were acquired by Turing Pharmaceuticals, which specializes not in developing new drugs but in buying existing drugs and jacking up their prices. In this case, the price went from $13.50 a tablet to $750. ..."

That is brilliant - so Turing Pharmaceuticals is a classical - wait for it - parasitic infection!

reason

"So what has been happening lately is an attempt to redress that imbalance, to replace knee-jerk opposition to regulation with the judicious use of regulation where there is good reason to believe that businesses might act in destructive ways. Will we see this effort continue? Next year's election will tell."

Personally, I don't think this is really addressing the key point. You can't actually avoid regulation (the alternative to public regulation - as pushed by say Milton Friedman - ends up being private regulation - which is just as subject to regulatory capture). The point is we should be trying to make our regulation more intelligent (making it encourage not discourage innovation - cheaper and easier to police - less subject to regulatory capture etc.). The policy discussions about this a difficult enough with good faith - but bad faith politics makes this impossible. We need to throw the Gingrich revolution in the dustbin as soon as possible.

RC AKA Darryl, Ron said in reply to reason...

YEP!

What politicians can get away with is an artifact of the limited toolset that the electorate has to express its informed will. We need a well educated democracy and the democratic part of that requires Constitutional electoral reforms (e.g., gerrymandering, campaign finance). A bit of the educational aspect of a voting actually democratic republic would naturally work itself out with a more engaged and empowered electorate participating ACTIVELY.

With the system as it is then it takes a shock wave through the electorate for them to throw the bums out, but there is no follow through. There is a failsafe reaction function, but no more than that except on specific social issues that get overwhelming support where politicians can move with the electoral majority at zero cost while reactionary politicians can triangulate and pander some votes from the minority opinion of those too old or set in their ways to participate in the social sea change.

ilsm said in reply to RC AKA Darryl, Ron...

The threat is "faith voters", dogma developed by billionaires' propaganda to plunder the world.

DrDick said in reply to reason...

Krugman is far too kind to the businessmen. The reality is that, in the absence of effective regulation with substantial penalties, all of the incentives are to lie, cheat, and steal. In consequence, it really is the norm, if only in more minor ways than the ones that make the headlines. Wage theft, fraud, knowingly selling defective merchandise, and many other abuses are clearly rampant. This is exactly why markets cannot exist in the absence of effective government regulation to provide trust.

DeDude said in reply to reason...

Exactly; what we need is a detailed debate on each specific regulation. What it intends to accomplish, whether that could be accomplished in a less burdensome way, and whether the accomplishment is sufficient to justify the burden. However, that is not something that can happen in the 15 second soundbite that appears to be the attention span of the average voter.

Lee A. Arnold said in reply to Second Best...

Second Best: "Markets work if allowed to self regulate."

No. Never happened, except in local instances. For self-regulation you need proper prices, and for proper prices you need proper supply and demand.

For proper supply you need perfect competition, so there must be numerous competitors entering the same market, and this requires, among other things, almost no intellectual protection.

For proper demand, you need perfectly informed consumers, and this is not only impossible, but it is getting far far worse, because the complexity of the world is increasing.

The problem with state regulation is that it also falls prey to the same objections, although at a slower rate. We use votes not prices, but the same imperfection of information and lack of flexibility causes problems with the voting system.

When you combine this problem with the increase in inequality (which was masked temporarily by World War II and the subsequent spurt of blue-collar jobs productivity), we are headed into an accelerated amelioration of the market system by greater public ownership.


RC AKA Darryl, Ron said in reply to Lee A. Arnold...

"Peanut butter does not kill people, people kill people."

[If you can read a opening sentence like that and not recognize it as satirical parody, then you might want to look around to find the sense of humor that you lost. When the will of the people is no more than a euphemism for dollar democracy then parody, satire, sarcasm, and a healthy dose of cynicism are called for.]

JF said in reply to RC AKA Darryl, Ron..

Lee A Arnold - Think Jonathan Swift and his piece about the way to reduce subsidies for the orphaned poor infants, it is to reduce their number so we feel good about the fact that we help the few poor infants left alive.

I reacted a few times to Second Best's comments before I recognized the satire.

But I also have used his comments as a way to bring out the more logical, real-world of facts and rationality - so commentary helps either way. I suppose that serves 2nd Best's interests too.

JF said in reply to JF...

I believe the Jonathan Swift recommendations are the preferred republican-party approach to Social Security too. Really need fewer claimants, that will solve the accounting problems.

RC AKA Darryl, Ron said in reply to Second Best...

"Peanut butter does not kill people, people kill people. Car emissions do not kill people ... high drug prices do not kill people ... people do."

[This is an economics blog. You cannot be that "subtle (???)" and expect people to recognize your satire. Maybe there is a humorous math equation that economists can understand. I guess economics graduate school is so boring that most people lose all sense of humor. I am glad that Krugman has kept his.]

Richard H. Serlin said...

"Then there's for-profit education, an industry wracked by fraud — because it's very hard for students to assess what they're getting — that leaves all too many young Americans with heavy debt burdens and no real prospect of better jobs. But Mr. Bush denounces attempts at a cleanup."

And worse, wasting their incredibly valuable and rare young years, quite possibly their only chance before age and children make it extremely hard, not getting an education. Such a big thing. You don't do it when you're young, with the power and freedom and lack of dependents of youth, the opportunity may easily be gone forever. Such a brutal cost these predators and their Republican allies extract.

RC AKA Darryl, Ron said in reply to Richard H. Serlin...

https://en.wikipedia.org/wiki/College_tuition_in_the_United_States

Cost shifting and privatization

One cause of increased tuition is the reduction of state and federal appropriations to state colleges, causing the institutions to shift the cost over to students in the form of higher tuition. State support for public colleges and universities has fallen by about 26 percent per full-time student since the early 1990s.[10] In 2011, for the first time, American public universities took in more revenue from tuition than state funding.[9][11] Critics say the shift from state support to tuition represents an effective privatization of public higher education.[11][12] About 80 percent of American college students attend public institutions...

bakho said...

Economics Professors of the "free market" bent for years have indoctrinated youth with the misguided notion that "regulations are bad" and market methods, no matter how RubeGoldberg, are always better. " You don't need to regulate pollution, just put a tax on it," as an example. Even cap and trade would not work without stiff emissions regulations.

Economic idealists have popularized the notion that the world can work without much regulations because their models tell them so. Unless they are behavioral economists, they often fail to include fraud, scams & information asymmetry into their models. This produces garbage like efficient markets that only exist in an idealistic dream world. The real world markets are filled with fraud, scams and disreputable agents. Failure to account for bad behavior is the bane of many a model.

ilsm said in reply to bakho...

Sanctity of the "market"......

I got a jar of this snake oil here too!

The market they sell is the one that runs in Honduras

Tom aka Rusty said...

A couple of random observations:

Last time I looked about 150 Dodd-Frank regs had not been written yet, some of the key ACA regs are three years late.

Obama-ites have written some of the most complex, convoluted regs of the past 40 years, the health EMR regs have practically guaranteed a windfall for IT companies and a failure for EMR/EHR.

No mention of the Obama-Holder "too big to prosecute doctrine."

The new overtime regs will likely be in the "driving thumb tacks with a sledge hammer" mode.

But I love Obama because he has created a wonderland of money for lawyers and consultants, a river of chocolate and honey to make Willy Wonka jealous. Go Barry go!

pgl said in reply to kthomas...

Rusty wants us to believe he is the only one who understands health care so he is a persistent critic of ObamaCare. But now he wants to pretend he's the expert on financial markets too? Seriously? Dodd-Frank is complicated only because the Jamie Dimons of the world milk every opportunity to game financial markets. If Rusty thinks letting Jamie Dimon evade any financial market regulation is a good idea - he is the most clue person ever.

DrDick said in reply to pgl...

He was just trying to do us a favor and demonstrate exactly what is meant by "knee-jerk opposition to regulation ."

JF said in reply to Tom aka Rusty...

Have you ever looked at the multi-party derived hedging instruments in play now - they can hardly get more complex, and indeed most didn't understand them when they were made, and these are still complex now.

So I have to say, that the 'marketplace' makes Krugman's point about complexity. It comes from humans cunningly doing stuff that serves their interests at the time as they see it. Not always wisdom at work here.

But it is complex, and so regulation of such complexity, if the generally applicable rules seek some fairness (classes of people are usually affected differently) and stands a test of due process too - the regulations will also need to be complex. The complexity came first, the regulations come afterwards (after society learns of the stupidity the hard way).

Railing about this is a form of misleading sophistry, a rhetorical device to reverse the causality.

We can think with more foresight and regulate before the stupid complexity arises, but it does take a rational policy making environment for this exploration, discussion and policy-making to occur with good foresight - I am waiting for the new Congress in 2017.

If the Warren-Sanders people have any influence then, we may see a whole lot less complex financial system (it's a riot when you think how the Efficient Market Hypothesis, a theoretical justification for the marketplace's range of instruments in fact led to more complexity, less real efficiency and effectiveness, and ossification of the system when it needed to be resilient but stable as a well-behaved system can be).

We will probably be better off after the 2017 debates. After all, this community of actors are only intermediaries on behalf of real productive outcomes truly needed by society - right, they are just intermediaries? How much inter-mediation does the economy need?

david s said...

The Obama Administration has been friendlier to corporate America than W's was.

http://theweek.com/speedreads/454963/matt-taibbi-bush-far-tougher-than-obama-corporate-america

im1dc said...

While it was Ronald Reagan and his Republican Party that called for deregulation not much was done until Alan Greenspan, then Chairman of the Federal Reserve, gave federal deregulation his blessing in speeches from NY to Aspen to California in which he said "the market" will reign in excesses and regulate itself b/c of competition acting egregiously would create.

Oopsie, Old Alan got it ALL WRONG again!

I thought a little history would help in this thread.

likbez said...

My impression is that regulation always reflects the needs of who is in power today. One the key ingredients of political power is the ability to push the laws that benefit particular constituent. And to block laws that don't.

If we assume that financial oligarchy is in power today, then it is clear that there can be no effective regulation of financial services and by extension regulation of derivatives. And if on the wave of public indignation such regulation is adopted, it will be gradually watered down and then eliminated down the road.

And you can always hire people who will justify your point of view.

In this sense neither Milton Friedman nor Greenspan were independent players. They sold themselves for money and were promoted into positions they have for specific purpose. I am not sure the either of them believed the crap they speak or wrote.


[Jul 24, 2015] Though the Heavens May Fall

"...As we have seen, in the latter part of the 20th century, people had forgotten, or more properly had been persuaded to disregard, the lessons of history and the reforms put in place in the 1930's. And to our regret the conmen and their enablers were able to get their hands in our pockets, and grab hold of our wallets. And we have not been able to get their slimy hands out of pockets yet. "
Jul 24, 2015 | jessescrossroadscafe.blogspot.com

There was intraday commentary titled The Epicenter of the Next Financial Crisis and overnight commentary on the precious metals, Free Markets at Work.

I get the feeling sometimes that we have become a nation of conmen and their servants, who plague the great mass of people who are preoccupied with raising families and just getting by.

As we have seen, in the latter part of the 20th century, people had forgotten, or more properly had been persuaded to disregard, the lessons of history and the reforms put in place in the 1930's. And to our regret the conmen and their enablers were able to get their hands in our pockets, and grab hold of our wallets. And we have not been able to get their slimy hands out of pockets yet.

How fitting that in the next election we can once again consider voting for a Bush or a Clinton. Some choice.

[Jul 22, 2015] Financial Regulation Which Reform Strategy is Best

Economist's View

...in the WSJ two days ago, there was an opinion piece with the title "After Five Years, Dodd-Frank Is a Failure," and the sub-header "The law has crushed small banks, restricted access to credit, and planted the seeds of financial instability."

There is a problem with small banks. Here's an email I received earlier this year (last March, in response to an article of mine at CBS MoneyWatch on the decline in the number of small banks and how that could harm smaller buinesses):

Mr. Thoma,
I am a regular reader of your columns, and lean more to the left than virtually any banker I know, but I have to tell you that you are on to something with the decline in the number of small banks, and regulations. As the Chairman of a small bank in [state omitted], the shear amount of regulations that have come out since the banking crisis started are incredible. I know of banks in the area which have simply had to hire a full time staff person to help with compliance. Our bank has had to hire the CPA firm [omitted] to have them come in once a quarter to help us keep up with the compliance. Obviously, this crimps our profits, as does the ZLB which we have had to deal with for six years now, through no fault, at all, of our own.
Don't get me wrong, I understand why all these regulations have been put in place, but unfortunately for us, most of these have little to do with our small bank. They seem to be designed to keep the behemoths out of trouble, and we got dragged along. There needs to be a different set of rules for banks under a certain size. Banks like ours, who keep all our loans in house, and aren't a threat to the economy as a whole, have never been ones to "screw" our customers, or write "bogus" loans, and sell them. Our loan losses since 2008 have been minimal to say the least, because we try very hard to make loans that are going to be repaid. Our total losses over the last six or seven years are not any worse than, and probably, better than they were before the banking crisis arrived.
We, as a board of the bank, have talked on numerous occasions in the last few years on what to do about this problem, and have brought it up with the federal regulators at our last two exams, but have really gotten no where as far as coming up with any ideas on what to do to try and alleviate these burdens on small banks. Any suggestions, or publicity regarding the issue, would be greatly appreciated.

The point I'm trying to make is this. There are two choices when trying to fix a financial system after a crisis. The first is to move fast while the politics are supportive, and put as many of the needed rules and regulations in place as possible. Then, over time, *carefully* adjust the rules to overcome unforeseen problems (while resisting attempts to rollback needed legislation, a delicate balance). The second is to proceed slowly and deliberately and "consider the regulatory moves carefully" before implementing legislation. But by the time this deliberate procedure has been completed, it may very well be that the politics have changed and nothing will be done at all. So I'd rather move fast, if imperfectly, and then fix problems later instead of waiting in an attempt to put near perfect legislation in place and risk doing very little, or nothing at all.

RC AKA Darryl, Ron said...

For starters, Glass-Steagall.

Then put a high tax on capital gains and an even higher tax on short term capital gains partially offset by lower taxes on interest and dividends. Rather than regulate corporate buyouts and derivatives then just tax them to death. Fire sale buyouts are done at a capital loss so would continue unaffected to rescue the good wood left in insolvent firms.

RC AKA Darryl, Ron said in reply to pgl...

https://en.wikipedia.org/wiki/Capital_gains_tax_in_the_United_States

...From 1934 to 1941, taxpayers could exclude percentages of gains that varied with the holding period: 20, 40, 60, and 70 percent of gains were excluded on assets held 1, 2, 5, and 10 years, respectively...

*

[Starting with a high tax rate then I kind of like that. Make the tax rate on capital gains so that either the 5 year exclusion is on parity with current long term capital gains rates or even parity with the 10 year effective tax rate if we give them inflation adjustment to the basis. SSA annual COLA inflation index works fine for me. If the rich want chained CPI then let them share in the losses benefits :) ]

pgl

The thing that gets me is that the issues with lax regulation of financial institutions were basically clear 80 years ago and were crystal clear 30 years ago. And fixing them would not require complex regulations. Real capital adequacy rules, avoiding conflicts of interest, addressing the issue of adverse selection even as we give deposit insurance, and avoiding too big to fail are all things any good economist knows about and how to address. And with Dodd and Frank being center stage after the financial crisis - this could have gotten done. Ah but the political interests of the megabanks did not want this done so they undermined the efforts. Of course we also see some stupid taxi service known as Uber playing this game too. But that is more of a personal rant as I'm really beginning to get sick of their dishonest attacks on my mayor.
bakho
That is what happened. As much as was done happened right away.
Now it is being rolled back.
DeDude said...
Yes we need to loosen up on the small banks. There is naturally less concern for banks below a certain size. It should be possible to say that banks below size X who does not do any of risky transactions Y,Z and W do not need to comply with certain regulations. We give regulatory relief to other small businesses; fair enough to also do it with the banks. However, this is a difficult process since the regulators are likely to resist "deregulation" as much as the big banks are resisting regulations.

[Jul 10, 2015]200PM Water Cooler 7-9-15

Jul 09, 2015 | naked capitalism
Anon July 9, 2015 at 2:18 pm

Maybe there's some formatting goodness still going on behind the scenes, but shouldn't that be New Hampshire? Reading the tweets from the bettermarkets account, brought me to this article by Taibbi:

Eric Holder: Double Agent.

What I especially love about this is that it really makes you realize how milquetoast Holder was during his stint as AG, with moments like this:

One is that he failed to win a single conviction in court for any crimes related to the financial crisis. The only trial of any consequence brought by his Justice Department for crimes related to the crisis involved a pair of Bear Stearns nimrods named Ralph Cioffi and Matthew Tannin, who confided in each other via email that the subprime markets were "toast" but told their clients something very different to keep them invested.

After a jury acquitted both in early 2009, the Holder Justice Department turtled. Sources inside the DOJ told me over the years that both Holder and his deputy, fellow Covington & Burling alum Lanny Breuer, were obsessed with winning and refused to chance any case where they felt a jury might go sideways on them. Thus the Cioffi-Tannin case was the last financial crisis case they dared to bring into to a criminal courtroom – virtually every other case ended in settlements.

It sure must be nice to be rich – I can utterly fail at the main responsibility of my job AND land a cushy job with no real effort on my part! Going on that tangent reminds me of that PBS parody video with Lanny Bruce.

[Jun 29, 2015] Top Private Equity Reporter CalPERS is Either Lying or Has a Massive Breakdown in Financial Controls

Jun 29, 2015 | naked capitalism
Tom Stone June 29, 2015 at 7:12 am

These are not mutually exclusive categories, dishonesty and incompetence are frequent companions.

Demeter June 29, 2015 at 7:44 am

plus, it's California. What more does one expect?

Rhondda June 29, 2015 at 7:37 am

"The general partners have managed to convince even powerful investors like CalPERS that they must play nicely with the general partners or they'll be late on the list to be solicited for investment, which in theory could mean they'd miss being in a hot fund (in practice, this theory is absurd since private equity fund outperformance does not persist)."

To my eyes it seems that "play nicely" really just means looks the other way while we skim off your participants' money.

diptherio June 29, 2015 at 8:48 am

Can't you be sued for dereliction of fiduciary duty? Can't someone be held personally accountable for being so willfully stupid? Most of the CalPERS board, for instance, seems liable…

flora June 29, 2015 at 9:15 am

If Yves earlier case is any indication, the CA courts seem CalPERS friendly. So a suit by pensioners would have an extra hill to climb. my opinion. But, yes, this situation does call for remedial action.

Sluggeaux June 29, 2015 at 11:47 am

The California Judicial Retirement System, JRS, is wholly administered by CalPERS. The state judiciary has a powerful incentive to keep CalPERS solvent, and I can assure you that the scores of California judges with whom I am personally acquainted are very aware of where their retirement contributions are going.

TheCatSaid June 29, 2015 at 9:39 am

Yves, the quote from Phalippou in the endnote seems very important. I don't have enough familiarity to understand what the impact would be of the various scenarios he mentions.

Please consider posting a table with worked out simple examples for the sample scenarios, showing how the different fine-print calculation methods impact fees and/or the billed cost & return paid out to investors such as CalPERS. (And also a table showing how the various calculation methods might impact the financials of the PE firm. So we can understand what terms are in their best interest.)

Without understanding the implications of the various fee methods, it's hard to ask questions or read a contract with sharp enough eyes to spot crucial terminology and understand what is or isn't in a pensioner's or investor's best interest.

Such a table could be of immeasurable value to NC readers, allowing people to ask smarter questions and apply pressure more effectively on PE firms, pension fund board members, etc.

Sluggeaux June 29, 2015 at 10:01 am

I just love the phrase so often used here at NC: "It's a feature, not a bug."

I've been a CalPERS contributor for over 30 years, and hope to become an annuitant in a couple of years hence. I also have colleagues who have left government employment to work with firms that place or invest CalPERS money. A dozen years ago I came to the realization that campaign contributions from placement agents and PE firms to the various Governors, Senators, and Assembly-members is the grease that lubricates the wheels at CalPERS. Staff have no intention of answering JJ Jelincic's questions — obscuring the over-paying of fees is how the graft works here in California. Investments always just happen to go to the "friends" of those in political power in Sacramento.

Unfortunately, in the Age of ZIRP there is no more "slop" left in the system like there was during the various bubbles blown by Wall Street's looting of the economy over the past 40 years. Historic rates of return can no longer be realized. I just hope that I can draw my pension for a while before graft gets turned off and those politicians who have been living off of the corruption turn into looters themselves.

[Jun 19, 2015] United States of Amnesia

May 19, 2015 | jessescrossroadscafe.blogspot.com
"We are the United States of Amnesia, we learn nothing because we remember nothing." -- Gore Vidal
Stocks backed off their exuberant rally high from last Friday after that 'goldilocks' job number.

The 'global bond rout' has investors nervous, and well they might be.

We are led by narcissists and sociopaths, in a most unwholesome partnership between the public and private sector.

And the most feral, counterproductive response of self-proclaimed 'reformers' is to eliminate government, to nullify it, so that in their very deluded and romantic imaginations the monied interests can refrain from acting as lawbreakers, since at their core these most selfish and cunning of predators and sociopaths are really yearning to be, think, and act like angels.

And what will we do, having deregulated our markets, freed them from restraint, and eliminated the laws so that none may be lawbreakers. What will we do when the very heart of darkness has a freer reign to blow the winds of plunder and power over the lands, with nothing to provide us a foothold or an anchor, the laws which are the pillars of justice having been all overturned?

Have a pleasant evening.

[Jun 07, 2015] I'm so, so tired of political journalists by Beverly Mann

June 2, 2015 | Angry Bear

Politico's top article today is titled "Did Elizabeth Warren go too far this time?" But it's subtitled "The Massachusetts senator's attack on Securities and Exchange Commission Chair Mary Jo White causes backlash on Wall Street." The article, which is lengthy, discusses a 13-page letter Warren sent this morning to SEC Chairwoman Mary Jo White, absolutely ripping White for … well, you should read the article, all the way to the end.

By the end of the article, you'll wonder why somewhere in the middle of it, it says that Warren's influence seems to be on the wane and that the letter probably will hasten the waning. The article has two co-authors, and the headline would not have been written by either of them. So that might be why the article is part details and background, and part what Wall Street and the White House want as the media's take on the letter's contents and fallout. I did a double-take when I read this sentence: "The backlash against Warren was the latest indication that populist firebrand's efforts to push for tougher financial regulation may be losing some momentum."

The backlash against Warren is from Wall Street, the SEC, Mary Jo White's office, and the CEOs and lobbyists who want the TPP treaty ratified and are selling it as a trade agreement even though, mostly, it's not. Warren (and others) object not to the actual trade provisions but to parts of it that do not concern trade as such. And the SEC rules under Dodd-Frank that Warren angrily says the SEC keeps delaying concern transparency of corporations concerning the CEO's pay as compared to that of the company's ordinary employees, and concern disclosure of the identities of the tax-exempt organizations that receive corporate donations, and the amounts of the donations.

The public backlash against this has begun, the Politico article says. Just call JPMorgan's corporate offices and lobbying firms. They'll tell ya!

As for Wall Street's public relations offering on it, the part of it that the article discusses with specificity sounds to me ridiculous:

"I don't understand Sen. Warren's criticism of White for recusing herself where there is a conflict of interest," said Wayne Abernathy, a top lobbyist for the American Bankers Association, referring to Warren's criticism that White isn't involved in SEC actions when her husband's law firm represents the companies involved. "Is it that she would prefer that the chairman go forward and participate in enforcement cases despite the conflict of interest?"

No, actually, it's that because her husband is a partner in one of the premier New York law firms that represent the biggest financial institutions against the SEC and Justice Department during investigations and in civil and criminal litigation. And that her recusal means that the SEC is routinely deadlocked about whether to bring charges in such cases because the remaining SEC commissioners are equally divided between Republicans and Democrats. How convenient.

Relatedly, Roger Cohen has a terrific column today in the New York Times. But you have to read to the end to get the relation.

[Jun 01, 2015] Fischer Says Bankers Should Be Punished for Financial Crimes

Jun 01, 2015 | finance.yahoo.com/ Bloomberg

Federal Reserve Vice Chairman Stanley Fischer said bankers who have engaged in wrongdoing should be punished, and he chided the industry for pushing back against financial regulations adopted to prevent another conflagration.

"Individuals should be punished for any misconduct they personally engaged in," Fischer said in a speech to bankers Monday in Toronto. While massive fines are being imposed on banks, "one does not see the individuals who were responsible for some of the worst aspects of bank behavior, for example in the Libor and foreign-exchange scandals, being punished severely."

Some of the world's biggest banks, including Citigroup Inc., JPMorgan Chase & Co., and Barclays Plc, have agreed to pay more than $10 billion to U.S., U.K. and Swiss authorities to settle probes into rigging of foreign-exchange rates.

Financial firms have also paid about $9 billion to settle allegations they were involved in rigging the London interbank offered rate, a benchmark used in more than an estimated $300 trillion of securities, from interest-rate swaps to mortgages and student loans.

Fischer, who leads a committee to avoid the emergence of asset-price bubbles, also said central bankers shouldn't rule out using interest rates to maintain financial stability. Policy makers want to ensure that six years of near-zero rates don't lead to a repeat of the U.S. housing boom and subsequent financial crisis.

"I don't at present see a major financial crisis on the horizon, but whenever you say that you know you're looking for trouble," Fischer said in response to an audience question after his speech.

With the costs of the crisis still being felt in the form of persistently slow growth, Fischer warned central bankers against complacency about the risks of another crisis.

"There is now growing evidence that recessions lead not only to a lower level of future output, but also to a persistently lower growth rate," Fischer, 71, said in a speech that surveyed the lessons of financial crises over the past 20 years.

He cited a "lively discussion" led by former Treasury Secretary Lawrence Summers, who has argued the U.S. could face a period of "secular stagnation." Others, including economists Carmen Reinhart and Kenneth Rogoff, say the U.S. and other economies are slow to recover from crises fueled by debt.

"It may take many years until we know the answer to the question of whether we are in a situation of secular stagnation or a debt supercycle," Fischer said to the International Monetary Conference.

Fischer criticized efforts to roll back financial regulation.

Banker Complaints

"Often when bankers complain about regulations, they give the impression that financial crises are now a thing of the past, and furthermore in many cases, that they played no role in the previous crisis."

Fischer joined the Fed a year ago. He led the Bank of Israel from 2005 to 2013. He was the International Monetary Fund's No. 2 official from 1994 to 2001, years that encompassed the Asian crisis, and the World Bank's chief economist from 1988 to 1990.

Fischer didn't comment on the outlook for monetary policy. Fed officials led by Chair Janet Yellen are considering when to raise their benchmark lending rate, with the next meeting scheduled for June 16-17.

Yellen said on May 22 that the central bank plans to raise interest rates at some point this year, even though the economy contracted in the first quarter. She said that "the pace of normalization is likely to be gradual."

Growth Potential

A slowdown in the long-run potential growth rate of the economy has lowered the bar that gross domestic product must clear for the central bank to increase rates, according to Fed watchers including Michael Feroli of JPMorgan Chase & Co. Feroli estimated the long-term growth rate at 1.75 percent, which is lower than Fed estimates.

Gross domestic product shrank at a 0.7 percent annualized rate in the first quarter. Since the recession ended in June 2009, GDP has grown at an average annual pace of 2.2 percent.

[May 31, 2015] This Is How Little It Cost Goldman To Bribe America's Senators To Fast Track Obama's TPP Bill

Notable quotes: "...Concerning TPP...this filthy whoring could be called a perverted form of collective bargaining. These big corporations seem to have formed a union against the sheep."
May 31, 2015 | Zero Hedge
It took just a few days after the stunning defeat of Obama's attempt to fast-track the Trans Pacific Partnership bill in the Senate at the hands of his own Democratic party, before everything returned back to normal and the TPP fast-track was promptly passed. Why? The simple answer: money. Or rather, even more money.

Because while the actual contents of the TPP may be highly confidential, and their public dissemination may lead to prison time for the "perpetrator" of such illegal transparency, we now know just how much it cost corporations to bribe the Senate to do the bidding of the "people." In the Supreme Court sense, of course, in which corporations are "people."

According to an analysis by the Guardian, fast-tracking the TPP, meaning its passage through Congress without having its contents available for debate or amendments, was only possible after lots of corporate money exchanged hands with senators. The US Senate passed Trade Promotion Authority (TPA) – the fast-tracking bill – by a 65-33 margin on 14 May. Last Thursday, the Senate voted 62-38 to bring the debate on TPA to a close.

Those impressive majorities follow months of behind-the-scenes wheeling and dealing by the world’s most well-heeled multinational corporations with just a handful of holdouts.

Using data from the Federal Election Commission, the chart below (based on data from the following spreadsheet) shows all donations that corporate members of the US Business Coalition for TPP made to US Senate campaigns between January and March 2015, when fast-tracking the TPP was being debated in the Senate.

The result: it took a paltry $1.15 million in bribes to get everyone in the Senate on the same page. And the biggest shocker: with a total of $195,550 in "donations", or more than double the second largest donor UPS, was none other than Goldman Sachs.

The summary findings:

The amounts given rise dramatically when looking at how much each senator running for re-election received.

Two days before the fast-track vote, Obama was a few votes shy of having the filibuster-proof majority he needed. Ron Wyden and seven other Senate Democrats announced they were on the fence on 12 May, distinguishing themselves from the Senate’s 54 Republicans and handful of Democrats as the votes to sway.

“It’s a rare thing for members of Congress to go against the money these days,” said Mansur Gidfar, spokesman for the anti-corruption group Represent.Us. “They know exactly which special interests they need to keep happy if they want to fund their reelection campaigns or secure a future job as a lobbyist.

How can we expect politicians who routinely receive campaign money, lucrative job offers, and lavish gifts from special interests to make impartial decisions that directly affect those same special interests?” Gidfar said. “As long as this kind of transparently corrupt behavior remains legal, we won’t have a government that truly represents the people.”

In other news, following last week's DOJ crackdown on now openly criminal FX market manipulation and rigging by the big banks, in which precisely zero bankers have been arrested, we are happy to announce that "transparently corrupt behavior" in the Senate, and everywhere else, will remain not only legal, but very well funded.

But what is truly scariest, is just how little it costs corporations to bribe America's "elected" politicians, and make them serve the best interests of a few billionaire shareholders over the grave of what once used to be America's middle class.

chunga

ORI you're quite a musician. Give this a try, simple chords but you must bring attitude (funk) with the right hand.

https://www.youtube.com/watch?v=mGCFhW_M6Vo

Concering TPP...this filthy whoring could be called a perverted form of collective bargaining. These big corporations seem to have formed a union agaisnt the sheep. They usually hate that.

Tell me Walmart...do you fucking assholes have an internal video about this? Before TPP is over, plebs are going to be issued a temporary federal license to possess cash.

[May 23, 2015] Former Fed Governor Says Fed Lost Credibility To Stay On Top Of Ticking Monetary Bomb

05/21/2015 | Zero Hedge

Submitted by Wolf Richter via WolfStreet.com,

Lawrence Lindsey, a Governor of the Federal Reserve from 1991 to 1997, was right before. And got fired for it. Reality was too inconvenient.

In December 2002, as George W. Bush's economic adviser and Director of the National Economic Council at the White House, he fretted out loud that the invasion of Iraq would be a lot more expensive than supporters of it were claiming. Clearly he'd failed to drink the Kool-Aid. Instead of peanuts, it would cost as much as $200 billion, he said. It shook the White House at its foundations, the fact that he had the temerity to say this.

The Atlantic explains:

Bush instead stood by such advisers as Paul Wolfowitz, who said that the invasion would be largely "self-financing" via Iraq's oil, and Andrew Natsios, who told an incredulous Ted Koppel that the war's total cost to the American taxpayer would be no more than $1.7 billion.

As it turns out, Lawrence Lindsey's estimate was indeed off — by a factor of 10 or more, on the low side.

So maybe people should listen to him. And maybe, if his record repeats itself, the disaster he warns about is going to be a lot more costly in the end than the worst-case scenario he is now predicting.

Lindsey was speaking during a panel discussion on Fed policy at an event sponsored by the Peterson Foundation, MarketWatch reported. And once again, he dared to say what everyone already knew, but what the financial establishment on Wall Street fights tooth and nail:

The Fed has dragged out the normalization of interest rates "way beyond what is prudent."

He explained that in graduate school, if you suggested that the federal funds rate should be kept at zero while the unemployment rate is 5.4%, which is exactly what the Fed has been doing, "you would have been laughed out of the classroom."

"At some point we're going to get a series of bad numbers, showing a little higher inflation, and the market is going to say 'on my god, we're so far behind the curve' and force an adjustment that is going to be wrenching," he said.

According to his calculus, when this "wrenching" adjustment kicks in, it would turn into a market disruption at a level "seven or eight" on a scale of 10, with 10 being the worst.

But that's the guy that warned that the total cost of the Iraq invasion would be $200 billion, instead of peanuts, and later it turns out to amount to $2 trillion. So by how much is he underestimating the ultimate debacle with his prediction of a "wrenching" adjustment of "seven or eight" on a scale of 10? Maybe we're better off not knowing the answer.

So what should the Fed do to mitigate the risk of this sort of bone-chilling bond market? Start hiking rates. Start with modest hikes. But start in June.

But it may already be too late.

He said the Fed "has almost no credibility" with his clients about its ability to "stay on top of ticking monetary bomb."

Stocks are at all-time highs. The party is just too fun to walk away from. Money is once again flooding into even distressed energy-related junk-rated companies that are once again able to sell bonds on a wing and a prayer because yield-starved investors, brainwashed by the Fed's interest-rate repression, are chasing yield wherever they can find it, no matter what the risks.

Times are good, and everyone is having fun now. But it won't last: "the market is going to take the Fed and the Treasury curve to task in a very painful way," he warned.

Rate hikes would have a long way to go: If the Fed raised rates by a quarter percentage point at every other meeting starting this June – oh my, can you see the tantrum already? – monetary policy would not actually be restrictive until December 2016, he said.

Going that far, ever, though it would only mean going back to "normal," would be plain unthinkable for Wall Street hype mongers that have conniptions every time the Fed contemplates raising rates just once, and just a quarter point, just to show that it's still there, even if it has no intention whatsoever of staying on "top of the ticking monetary bomb."

A disturbing scenario is already playing out for folks fretting about "financial instability," as it's called in central-bank jargon. Read… "Buyers beware": Capital Markets "Completely Backwards"

[May 23, 2015] The Children of the Abyss

May 20, 2015 | Jesse's Café Américain
"He shows you how to become as gods. Then he laughs and jokes with you, and gets intimate with you; he takes your hand, and gets his fingers between yours, and grasps them, and then you are his."

J.H.Newman, The Times of Antichrist

People do not wake up one day and suddenly decide to become monsters, giving birth to unspeakable horrors.

And yet throughout history, different peoples have done truly monstrous things. The Americans were pioneers in forced sterilization and state propaganda. The British invented concentration camps, and were masters of predatory colonization. They even turned a large portion of the capital of their Empire into a festering ghetto through the Darwinian economics of neglect. None have clean hands. No one is exceptional.

What do they have in common? They all take a walk down a long and twisted path, one cold-hearted and 'expedient' decision at a time, shifting responsibility by deflecting the choice for their actions on their leaders.

There is always some crackpot theory. some law of nature, from scientists or economists to support it. What else could they do? It is always difficult, but necessary.

They cope with their actions by making their victims the other, objectified, different, marginalized. And what they marginalize they cannot see. What they cannot see, by choice, is easily ignored.

And so they destroy and they kill, first by neglect and then by more efficient and decisive actions.

They walk slowly, but almost determinedly, into an abyss of their own creation.

But they all seem to have one thing in common. First they come for the old, the weak, the disabled, and the different, in a widening circle of scapegoats for their plunder.

"There is one beautiful sight in the East End, and only one, and it is the children dancing in the street when the organ-grinder goes his round. It is fascinating to watch them, the new-born, the next generation, swaying and stepping, with pretty little mimicries and graceful inventions all their own, with muscles that move swiftly and easily, and bodies that leap airily, weaving rhythms never taught in dancing school.

I have talked with these children, here, there, and everywhere, and they struck me as being bright as other children, and in many ways even brighter. They have most active little imaginations. Their capacity for projecting themselves into the realm of romance and fantasy is remarkable. A joyous life is romping in their blood. They delight in music, and motion, and colour, and very often they betray a startling beauty of face and form under their filth and rags.

But there is a Pied Piper of London Town who steals them all away. They disappear. One never sees them again, or anything that suggests them. You may look for them in vain amongst the generation of grown-ups. Here you will find stunted forms, ugly faces, and blunt and stolid minds. Grace, beauty, imagination, all the resiliency of mind and muscle, are gone. Sometimes, however, you may see a woman, not necessarily old, but twisted and deformed out of all womanhood, bloated and drunken, lift her draggled skirts and execute a few grotesque and lumbering steps upon the pavement. It is a hint that she was once one of those children who danced to the organ-grinder. Those grotesque and lumbering steps are all that is left of the promise of childhood. In the befogged recesses of her brain has arisen a fleeting memory that she was once a girl. The crowd closes in. Little girls are dancing beside her, about her, with all the pretty graces she dimly recollects, but can no more than parody with her body. Then she pants for breath, exhausted, and stumbles out through the circle. But the little girls dance on.

The children of the Ghetto possess all the qualities which make for noble manhood and womanhood; but the Ghetto itself, like an infuriated tigress turning on its young, turns upon and destroys all these qualities, blots out the light and laughter, and moulds those it does not kill into sodden and forlorn creatures, uncouth, degraded, and wretched below the beasts of the field.

As to the manner in which this is done, I have in previous chapters described it at length; here let Professor Huxley describe it in brief:-

"Any one who is acquainted with the state of the population of all great industrial centres, whether in this or other countries, is aware that amidst a large and increasing body of that population there reigns supreme . . . that condition which the French call la misere, a word for which I do not think there is any exact English equivalent. It is a condition in which the food, warmth, and clothing which are necessary for the mere maintenance of the functions of the body in their normal state cannot be obtained; in which men, women, and children are forced to crowd into dens wherein decency is abolished, and the most ordinary conditions of healthful existence are impossible of attainment; in which the pleasures within reach are reduced to brutality and drunkenness; in which the pains accumulate at compound interest in the shape of starvation, disease, stunted development, and moral degradation; in which the prospect of even steady and honest industry is a life of unsuccessful battling with hunger, rounded by a pauper's grave."

In such conditions, the outlook for children is hopeless. They die like flies, and those that survive, survive because they possess excessive vitality and a capacity of adaptation to the degradation with which they are surrounded. They have no home life. In the dens and lairs in which they live they are exposed to all that is obscene and indecent. And as their minds are made rotten, so are their bodies made rotten by bad sanitation, overcrowding, and underfeeding. When a father and mother live with three or four children in a room where the children take turn about in sitting up to drive the rats away from the sleepers, when those children never have enough to eat and are preyed upon and made miserable and weak by swarming vermin, the sort of men and women the survivors will make can readily be imagined."

Jack London, The People of the Abyss

[May 21, 2015]Consistent With

May 21, 2015 | Economist's View
Chris Dillow:
"Consistent with": ...Peter Dorman criticizes economists' habit of declaring a theory successful merely because it is "consistent with" the evidence. His point deserves emphasis. ...
This is a point which some defenders of inequality miss. Of course, you can devise theories which are "consistent with" inequality arising from reasonable differences in choices and marginal products. Such theories, though, beg the question: is that how inequality really emerged?... And the answer, to put it mildly, is: only partially. It also arose from luck, inefficient selection, rigged markets, rent-seeking and outright theft. ...
Quite often, the facts are consistent with either theory. For example, the well-attested momentum anomaly - the tendency for assets that have risen in price recently to continue rising - is "consistent with" both a cognitive bias (under-reaction) and with rational behaviour; fund managers' desire to avoid benchmark risk.
My point here should be well-known. The Duhem-Quine thesis warns us that facts under-determine theory: they are "consistent with" multiple theories. ...
So, how can we guard against the "consistent with" error? One thing we need is history: this helps tell us how things actually happened. And - horrific as it might seem to some economists - we also need sociology: we need to know how people actually behave and not merely that their behaviour is "consistent with" some theory. Economics, then, cannot be a stand-alone discipline but part of the social sciences and humanities...

[May 19, 2015]How To Spot Groupthink Among Economists

May 19, 2015 | Zero Hedge

As GMO's James Montier says in his latest white paper today "it seems one can hardly open a financial newspaper or read a blog these days without tripping over some academic-cum-central banker talking about the once arcane notion of the equilibrium real interest rate."

Sure enough, it is the laughable concept of the equilibrium real interest rate (laugable because if it can be quantified and put into an equation, it becomes tangible and central banks are convinced they can recreate it, perfect it and implement it to "fix the economy"... usually with disastrous results) that is the topic of his latest must read piece "The Idolatry of Interest Rates Part I: Chasing Will-o'-the-Wisp", which not only makes a mockery of central planners but also the intellectual conceits they all hold so dear, and which they will all hold dear all the way until the now inevitable collapse of "New Keynesian" economics.

And while there is much to discuss in his full 13 page paper, the following excerpt discussing how to spot groupthink in crowds (of economists) is what we found most relevant and amusing, perhaps because the entire world is now caught in a groupthink mode, and what's worse, a groupthink that is peddling the wrong solution to the worldwide problem that can be summarized as simply as "$200 trillion in debt."

From Jim Montier:

Wisdom of crowds or groupthink extraordinaire?

One could take the view that so many bright individuals all coalescing around a single framework was evidence of the wisdom of crowds. However, rather than representing the power of consensus, it appears to me to be evidence of extreme groupthink – it is very telling that not one of the aforementioned luminaries has questioned the framework itself.

One of the preconditions for the wisdom of crowds to hold is that people must be independent. This clearly isn't the case with the above coterie of economists, many of whom trained at the same university under the same teacher. As Steve Keen pointed out, "If I were describing a group of thoroughbred horses, alarm bells would already be ringing about a dangerous level of in-breeding."

The term "groupthink" was coined by Irving Janis in 1972. In his original work, Janis cited the Vietnam War and the Bay of Pigs invasion as prime examples of the groupthink mentality. However, modern examples are all too prevalent.

Groupthink is often characterised by:

Perhaps it is just me, but these traits seem to pretty much capture the nature of mainstream economics these days.

SMG

Groupthink among economists only? Heck most of Western Civilization is in groupthink. Everything is Awesome! TM Remember.

NoDebt

Guys, again, let's think a little deeper here. It's not so much that they all believe it to be true, it's because they all NEED it to be true.

First off, the alternative to the current "low interest rates will stimulate the economy" (i.e. throw money at anything that moves) is what, exactly? Either it doesn't stimulate the economy or has no effect. Leaving them in a heluva lurch.

But this is small beans. Here's what really matters: their own self-interest.

If this argument (fairy tale) is shown not to be true or correct, their little ivory tower crashes down, their plum positions get vacated for another, their friends experience similar catastrophe and their self-supporting power network will be swept away and replaced with another, including their buddies in "academia" from which they sprang.

Given that even the slowest-witted among them must by now realize this fantasy of money printing stimulating the economy didn't work and is NEVER going to work, they have no choice but to either circle the wagons and close ranks or start getting picked off one by one. They are a union, a cabal, a society and, as such, must provide a united front, unassailable by mere facts.

The word has already been spread: hang together or hang separately. For this and other reasons they MUST have groupthink.

[May 13, 2015] What is neoliberalism

"...Neoliberalism is a small-state economic ideology based on promoting "rational self-interest" through policies such as privatisation, deregulation, globalisation and tax cuts."
"...Neoliberalism is certainly a form of free-market neoclassical economic theory, but it quite difficult to pin down further than that, especially since neoliberal governments and economists carefully avoid referring to themselves as neoliberals and the mainstream media seem to avoid using the word at all costs (think about the last time you saw a BBC or CNN news reporter use the word "neoliberal" to describe the IMF or a particularly right-wing government policy)."
"...The economic model that the word "neoliberalism" was coined to describe was developed by Chicago school economists in the 1960s and 1970s based upon Austrian neoclassical economic theories, but heavily influenced by Ayn Rand's barmy pseudo-philosophy of Übermenschen and greed-worship. "
"...One of the most transparent of these neoliberal justification narratives is the one that I describe as the Great Neoliberal Lie: The fallacious and utterly misleading argument that the global economic crisis (credit crunch) was caused by excessive state spending, rather than by the reckless gambling of the deregulated, neoliberalised financial sector. "
"...one of the main problems with the concept of "neoliberalism" is the nebulousness of the definition. It is like a form of libertarianism, however it completely neglects the fundamental libertarian idea of non-aggression. In fact, it is so closely related to that other (highly aggressive) US born political ideology of Neo-Conservatism that many people get the two concepts muddled up. A true libertarian would never approve of vast taxpayer funded military budgets, the waging of imperialist wars of aggression nor the wanton destruction of the environment in pursuit of profit. "
anotherangryvoice.blogspot.com

Neoliberalism is a very important, yet often misunderstood concept. To give a short, oversimplified definition: Neoliberalism is a small-state economic ideology based on promoting "rational self-interest" through policies such as privatisation, deregulation, globalisation and tax cuts.

People often boggle at the use of the word "neoliberal" as if the utterer were some kind of crazed tinfoil hat wearing conspiracy theorist raving about insane lizard-man conspiracies, rather than someone attempting to concisely define the global economic orthodoxy of the last three decades or so.

One of the main problems we encounter when discussing neoliberalism is the haziness of the definition. Neoliberalism is certainly a form of free-market neoclassical economic theory, but it quite difficult to pin down further than that, especially since neoliberal governments and economists carefully avoid referring to themselves as neoliberals and the mainstream media seem to avoid using the word at all costs (think about the last time you saw a BBC or CNN news reporter use the word "neoliberal" to describe the IMF or a particularly right-wing government policy).

The economic model that the word "neoliberalism" was coined to describe was developed by Chicago school economists in the 1960s and 1970s based upon Austrian neoclassical economic theories, but heavily influenced by Ayn Rand's barmy pseudo-philosophy of Übermenschen and greed-worship.

The first experiment in applied neoliberal theory began on September 11th 1973 in Chile, when a US backed military coup resulted in the death of social-democratic leader Salvador Allende and his replacement with the brutal military dictator General Pinochet (Margaret Thatcher's friend and idol).

Thousands of people were murdered by the Pinochet regime for political reasons and tens of thousands more were tortured as Pinochet and the "Chicago boys" set about implementing neoliberal economic reforms and brutally suppressing anyone that stood in their way. The US financially doped the Chilean economy in order to create the impression that these rabid-right wing reforms were successful. After the "success" of the Chilean neoliberal experiment, the instillation and economic support of right-wing military dictatorships to impose neoliberal economic reforms became unofficial US foreign policy.

The first of the democratically elected neoliberals were Margaret Thatcher in the UK and Ronald Reagan in the US. They both set about introducing ideologically driven neoliberal reforms, such as the complete withdrawal of capital controls by Tory Chancellor Geoffrey Howe and the deregulation of the US financial markets that led to vast corruption scandals like Enron and the global financial sector insolvency crisis of 2007-08.

By 1989 the ideology of neoliberalism was enshrined as the economic orthodoxy of the world as undemocratic Washington based institutions such as the International Monetary Fund (IMF), the World Bank and the US Treasury Department signed up to a ten point economic plan which was riddled with neoliberal ideology such as trade liberalisation, privatisation, financial sector deregulation and tax cuts for the wealthy. This agreement between anti-democratic organisations is misleadingly referred to as "The Washington Consensus".

These days, the IMF is the most high profile pusher of neoliberal economic policies. Their strategy involves applying strict "structural adjustment" conditions on their loans. These conditions are invariably neoliberal reforms such as privatisation of utilities, services and government owned industries, tax cuts for corporations and the wealthy, the abandonment of capital controls, the removal of democratic controls over central banks and monetary policy and the deregulation of financial industries.

Neoliberal economic policies have created economic disaster after economic disaster, virtually wherever they have been tried out. Some of the most high profile examples include:

South Africa: When the racist Apartheid system was finally overthrown in 1994, the new ANC government embraced neoliberal economic theory and set about privatising virtually everything, cutting taxes for the wealthy, destroying capital controls and deregulating their financial sector. After 18 years of neoliberal government, more black South Africans are living in extreme poverty, more people are unemployed and South Africa is an even more unequal society than it was under the racist Apartheid regime. Between 1994 and 2006 the number of South Africans living on less than $1 a day doubled from 2 million to 4 million, by 2002, eight years after the end of Apartheid 2002 the unemployment rate for black South Africans had risen to 48%.*
Russia: After the fall of communism, neoliberal economists flooded into Russia to create their free-market utopia, however all they managed to do was massively increase levels of absolute poverty, reduce productivity and create a few dozen absurdly wealthy oligarchs who siphoned their $trillions out of Russia to "invest" in vanity projects such as Chelsea FC. Within less than a decade of being one of the world's two great super-powers, the neoliberal revolution resulted in Russia defaulting on their debts in 1998.

Argentina: Praised as the poster-boys of neoliberalism by the IMF in the 1990s for the speed and scale of their neoliberal reforms, the Argentine economy collapsed into chaos between 1999-2002, only recovering after Argentina defaulted on their debts and prioritised repayment of their IMF loans, which allowed them to tear up the IMF book of neoliberal dogma and begin implementing an investment based growth strategy which boosted the Argentine economy out of their prolonged recession. The late Argentine President Néstor Kirchner famously stated that the IMF had "transformed itself from being a lender for development to a creditor demanding privileges".

The Eurozone: The right-wing love to drivel on about how the EU is a "leftie" organisation, but the unelected technocrats that run the EU (the European commission and the European Central Bank) are fully signed up to the neoliberal economic orthodoxy, where economic interests are separated from democratic control. Take the economic crisis in Greece: The EC and the ECB lined up with the neoliberal pushing IMF to force hard line neoliberal reforms onto the Greek economy in return for vast multi-billion "bailouts" that flowed directly out of Greece to "bail out" their reckless creditors (mainly German and French banks). When the neoliberalisation reforms resulted in further economic contraction, rising unemployment and worsening economic conditions the ECB, EC, IMF troika simply removed the democratic Greek government and appointed their own stooge, an economic coup trick they also carried out in Italy. Spain and Ireland are other cracking examples of neoliberal failure in the Eurozone. These two nations were more fiscally responsible than Germany, France or the UK in terms of government borrowing before the neoliberal economic meltdown, however their deregulated financial sectors inflated absurd property bubbles, leaving the Irish and Spanish economies in ruins once the bubbles burst around 2007-08.

The United Kingdom: Here is a short article summarising how three decades of neoliberal policy have undone many of the gains made during the mixed-economy era.
Despite this litany of economic failures, neoliberalism remains the global economic orthodoxy. Just like any good pseudo-scientific or religious orthodoxy the supporters of neoliberal theory always manage to come up with a load of post-hoc rationalisations for the failure of their theories and the solutions they present for the crises their own theories induced are always based upon the implementation of even more fundamentalist neoliberal policies.

One of the most transparent of these neoliberal justification narratives is the one that I describe as the Great Neoliberal Lie: The fallacious and utterly misleading argument that the global economic crisis (credit crunch) was caused by excessive state spending, rather than by the reckless gambling of the deregulated, neoliberalised financial sector.

Just as with other pseudo-scientific theories and fundamentalist ideologies, the excuse that "we just weren't fundamentalist enough last time" is always there. The neoliberal pushers of the establishment know that pure free-market economies are as much of an absurd fairytale as 100% pure communist economies, however they keep pushing for further privatisations, tax cuts for the rich, wage repression for the ordinary, and reckless financial sector deregulations precicely because they are the direct beneficiaries of these policies. Take the constantly widening wealth gap in the UK throughout three decades of neoliberal policy. The minority of beneficiaries from this ever widening wealth gap are the business classes, financial sector workers, the mainstream media elite and the political classes. It is no wonder at all that these people think neoliberalism is a successful ideology. Within their bubbles of wealth and privilege it has been. To everyone else it has been an absolute disaster.

Returning to a point I raised earlier in the article; one of the main problems with the concept of "neoliberalism" is the nebulousness of the definition. It is like a form of libertarianism, however it completely neglects the fundamental libertarian idea of non-aggression. In fact, it is so closely related to that other (highly aggressive) US born political ideology of Neo-Conservatism that many people get the two concepts muddled up. A true libertarian would never approve of vast taxpayer funded military budgets, the waging of imperialist wars of aggression nor the wanton destruction of the environment in pursuit of profit.

Another concept that is closely related to neoliberalism is the ideology of minarchism (small stateism), however the neoliberal brigade seem perfectly happy to ignore the small-state ideology when it suits their personal interests. Take the vast banker bailouts (the biggest state subsidies in human history) that were needed to save the neoliberalised global financial sector from the consequences of their own reckless gambling, the exponential growth of the parasitic corporate outsourcing sector (corporations that make virtually 100% of their turnover from the state) and the ludicrous housing subsidies (such as "Help to Buy and Housing Benefits) that have fueled the reinflation of yet another property Ponzi bubble.

The Godfather of neoliberalism was Milton Friedman. He made the case that illegal drugs should be legalised in order to create a free-market drug trade, which is one of the very few things I agreed with him about. However this is politically inconvenient (because the illegal drug market is a vital source of financial sector liquidity) so unlike so many of his neoliberal ideas that have consistently failed, yet remain incredibly popular with the wealthy elite, Friedman's libertarian drug legalisation proposals have never even been tried out.

The fact that neoliberals are so often prepared to ignore the fundamental principles of libertarianism (the non-aggression principle, drug legalisation, individual freedoms, the right to peaceful protest ...) and abuse the fundamental principles of small state minarchism (vast taxpayer funded bailouts for their financial sector friends, £billions in taxpayer funded outsourcing contracts, alcohol price fixing schemes) demonstrate that neoliberalism is actually more like Ayn Rand's barmy (greed is the only virtue, all other "virtues" are aberrations) pseudo-philosophical ideology of objectivism than a set of formal economic theories.

The result of neoliberal economic theories has been proven time and again. Countries that embrace the neoliberal pseudo-economic ideology end up with "crony capitalism", where the poor and ordinary suffer "austerity", wage repression, revocation of labour rights and the right to protest, whilst a tiny cabal of corporate interests and establishment insiders enrich themselves via anti-competitive practices, outright criminality and corruption and vast socialism-for-the-rich schemes.

Neoliberal fanatics in powerful positions have demonstrated time and again that they will willingly ditch their right-wing libertarian and minarchist "principles" if those principles happen to conflict with their own personal self-interest. Neoliberalism is less of a formal set of economic theories than an error strewn obfuscation narrative to promote the economic interests, and justify the personal greed of the wealthy, self-serving establishment elite.

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[May 09, 2015] Ten questions that Ben Bernanke needs to learn how to not answer

Medium

When I heard that Ben Bernanke was taking a second advisory role, at PIMCO, as well as his first job out of the Fed, at Citadel, I kind of nearly dropped my morning latte in surprise. If I was PIMCO, I would not be wanting an advisor to Citadel to be coming within a hundred yards of my trading floor.

Why not? Well, the way that PIMCO works, as Felix Salmon explained a few years ago, is very dependent on their ability to execute changes in their view in a very, very efficient manner — quickly, and without too much impact on the market price. Given that, if I was PIMCO, I would be super super paranoid about allowing anyone near me who was also going to be talking to one of the world’s sharpest and most aggressive hedge funds.

Obviously, Bernanke is a) a man of pretty unquestioned integrity, b) aware of the clear potential for conflict of interest and c) neither a spring chicken nor a pushover. He will be aware of the danger of having one of his two clients out-traded by the other. So, although I doubt that will stop the Citadel traders trying, he will already be pretty resistant to questions of the following kind:

“So, what do they think up in Newport?”

“What’s Andrew Balls saying?”

“Do your other guys like the ten year linked?”

“What’s PIMCO holding? Come on, tell me, what have they got? What are we f**king paying you for anyway? Come, you bearded f**k, tell me? No, f**k your Chinese Wall, I’ve got Ken on my ass here. What are they holding? What are they holding? What are they f**king …” (repeat ad infinitum, some of them can be very persistent and/or aggressive).

In any case, it’s unlikely that Bernanke, as an outside consultant, will be reviewing portfolios or directly advising on trades. It’s more likely that he’ll be a sounding board for general discussions, and/or a brand ambassador, meeting clients of PIMCO for pitch or review meetings. That sounds like less of a problem of conflict of interest, except …

Except that if anything, information about client attitudes to PIMCO is more valuable to a competitor than information about PIMCO’s attitude to the market. After all, PIMCO’s positions are generally well-known — they’re too big and too public for it to be otherwise. But if you ever got a hint that they had received a big redemption or gained a big mandate — well, that would be very useful information indeed because you would know them to be potentially forced buyers or sellers.

At a lower level, traders are always sniffing for information about possible changes of view — whether the holders of a security are confident in their decision and happy to add more, or whether they’re doubting themselves and thinking about changing their minds. A fly on the wall at a general sounding board for PIMCO PMs could learn all sorts of useful information simply by being aware of what they were thinking about.

And furthermore, hedge fund traders are in the business of extracting “soft” information and understanding its implications. Being a human antenna for other people’s sentiment toward the market is what they do. The best ones — and Citadel doesn’t employ many lemons — can make a guess about your positioning and recent performance from the way you say “Good morning”. That’s why so many of them are poker players, and particularly why they often do well in the big face-to-face tournaments. So the questions that Bernanke really needs to look out for are things like:

“How’s California, my man? Still sunny?”

“Jeez, another tour of Asia? Working you pretty hard aren’t they?”

“What do you mean you can’t do the 15th? Frankfurt *again*?”

“Lighten up, Ben! Looks like someone’s been giving you a hard time?”

“Tell me, if we wanted to shift a big block trade in[security] who do we call at PIMCO?”

“Seen the Journal? Brutal. Rather have my performance numbers than PIMCO’s huh?”

Even with the best will (and the best poker face) in the world, this dual role looks to me like a possible conduit of information. Bernanke is experienced in keeping his mouth shut, but he’s going into a whole new world now, and he’s doing so without the benefit of a staff and a press office to protect him. If I was PIMCO, I wouldn’t have taken this risk.

Dan Davies is Senior Research Advisor at Frontline Analysts

[May 08, 2015] Brood of Vipers

May 07, 2015 | jessescrossroadscafe.blogspot.com
"The power and influence of the financial sector threatens a continuation of the regulatory capture that contributed to the financial crisis. Financial firms, too often, have significant say in the appointment of high regulatory officials.

The tendency of some former government officials to obtain highly lucrative positions in the financial sector after leaving government may well act as an inducement to those remaining in government to serve the interest of the financial sector rather than those of the public."

Brooksley Born, Finance & Society Conference, May 5, 2015


The Western Banks are all over these markets, from commodities to equities. They are creating huge amounts of money debt, and providing it to the financial industry as top down stimulus. What results is little aggregate or 'organic' growth and a series of paper asset bubbles. They should be ashamed but they are too busy plundering to feel any twinge of conscience. They are like a herd of swine, racing for the abyss.

I had to chuckle when the pampered princesses and giggling jackals were talking about the jobs report tomorrow, and said that the ideal situation would be 'a strong jobs number with no wage growth,' a true 'goldilocks' scenario.

I have given up any expectation of reform from within. There will have to be some eye-opening incidents to shake the complacency of the fortunate few.

Non-Farm Payrolls tomorrow.

Have a pleasant evening.

[May 08, 2015] Capitalizing on Crisis The Political Origins of the Rise of Finance by Greta R. Krippner

August 31, 2014 | Amazon.com
Stephen Thompson on August 31, 2014

an attempt to understand financialization without applying class analysis

Krippner defines financialization as "the growing importance of financial activities as a source of profits in the economy." The excellent second chapter of Capitalizing on Crisis makes clear that a process of significant financialization has indeed occurred in the United States. The share of total corporate profits made by financial corporations rose from around 15% in the 1950s to about 45% (!) in 2000. At the same time, for nonfinancial corporations, the ratio of portfolio income to total cash flow increased sharply. These changes mark a structural change in the US economy, with corporations apparently channeling more of their retained earnings toward the finance of consumer credit and other unproductive activities, rather than fixed capital investment. It is also worth noting that by driving up rentier incomes, financialization has played a major role in making the distribution of income more regressive. Obviously there are a number of questions one could ask about all this. Krippner focusses on one of the most fundamental: why did financialization occur?

Krippner's answer goes essentially as follows. Starting in the late 1960s, various social movements (especially groups of women, African Americans, and unionized workers) in the United States became more powerful and demanded a larger share of national income for their members. The government responded by offering a bunch of expensive new public programs. At the same time, the government was ramping up military spending for the Vietnam war. This "guns and butter" policy, when coupled with the declining growth rate of the US economy, was highly inflationary. At the same time, since, under the New Deal regulatory system, the *nominal* interest rates on both bank deposits and mortgages were essentially fixed, the high rate of inflation drove the corresponding *real* rates of interest to low or negative levels, leading to a massive reallocation of credit in the economy. On the one hand, money flowed out of mortgage financing, so many middle-income people suddenly could not buy homes; on the other hand, banks lost deposits and were at risk of becoming insolvent. All of this set off a wave of financial innovation and political lobbying that undermined, and eventually destroyed, the policy of fixed interest rates that was at the heart of the New Deal bank-regulation system; this set off the process of financialization.

I think several aspects of the above account are correct; it explains why *some* powerful social groups would be willing to support and agitate for financial deregulation. The problem comes when Krippner tries to explain why policy makers ultimately supported the interests of these particular social groups over the others, which had strong reasons to oppose deregulation. For example, Krippner describes in the book how early experiments (during the mid-1970s) with adjustable-rate mortgages were met with fierce public opposition, and quickly fell apart as a result. But then this opposition seems to simply disappear by the end of the 1970s, when interest rates were completely deregulated. What happened? And why did policy makers ultimately deregulate interest rates?

The answer, according the Krippner, is that the deregulation of interest rates was part of a larger package of reforms, which allowed policy makers to avoid dealing with the conflict over income distribution that boiled over in the 1970s. It is argued that the expanded supply of credit in the US economy after the 1970s – which would not have been forthcoming without the deregulation of interest rates – made it possible to appease the various social groups that were demanding a better standard of living, and to do so without squeezing profits, increasing taxes or feeding inflation. The argument is that, by borrowing the money from abroad to finance social programs, and by increasing the amount of credit available to consumers, policy makers did not have to choose between different social priorities. Thus Krippner writes in the concluding chapter that financialization deferred "questions that first confronted U.S. society in the late 1960s and 1970s regarding which social actors should bear the burden of a fading prosperity."

I see two major problems with that argument.

The first problem is that the questions about "which social actors should bear the burden of a fading prosperity" were NOT deferred. In a process that started in the late 1970s (under Carter!) and accelerated in the 1980s, politicians and wealthy people initiated an onslaught of new policies that were clearly intended to both redistribute income upward and also crush the social movements which had been working to redistribute income downward in the 1960s and 1970s. Various forms of aid to the poor were cut, the tax system became much more regressive, huge sums of money flowed to right-wing advocacy groups and think tanks, the Fed implemented a tight-money policy which drove the unemployment rate sharply upward, there was an all-out assault on unions, government and foundation support for community activist groups was cut, etc. (For a detailed account of all this, I recommend the book Right Turn by Ferguson and Rogers). The success of this project is evidenced by the sharp change in the income distribution trends after the 1970s. In fact, far from *deferring* the conflict over income distribution, the financialization of the US economy seems to have actually been one of the biggest factors which helped to *settle* the conflict in favor of the upper socio-economic strata (see the paper "Financialization and US Income Inequality, 1970—2008" by Lin and Tomaskovic-Devey, published March 2013 in the American Journal of Sociology).

Second, it is far from clear that the increased availability of consumer credit did much of anything to compensate for the stagnating incomes received by the poor and working-class people after the 1970s. I have read, for example, that the consumption-fueled boom during the 1990s was financed entirely by loans taken out by *upper-income households* – the people who saw their share of income RISE during the era of financialization. And even if consumer credit did become significantly more available to the poor and working people in the 1980s (and I am not convinced this is true), why would they passively accept this as an alternative to the rising incomes they were demanding in the 1970s? I think the obvious explanation is that increased flows of credit were not what resolved the crisis of the 1970s; policy makers resolved the crisis of the 1970s by curtailing the political power of poor and working people, and by crushing progressive social movements.

Thus Krippner's argument that financialization, rather than being a class project, was simply an inadvertent result of policy makers' attempts to make voters happy, seems unconvincing to me. And I could go on much longer; I think Krippner's refusal to apply class analysis creates unnecessary problems throughout the book. Nevertheless, Capitalizing on Crisis is interesting and informative, and should be read by anyone who wants to better understand financialization. I found the chapter on Fed policy, in particular, to be illuminating. And like I said above, chapter 2 is excellent. But there are better books on financialization. I particularly recommend the work of Dumenil and Levy.

[May 05, 2015] Ben Bernanke's Bad Example

It's a pay off for doing what Big Finance wants. It's ironic that Bernanke, who didn't recognize the biggest bubble in financial history until it popped is being paid millions of dollars for uncovering economic trends.
Economist's View

At MoneyWatch:

Ben Bernanke's bad example, by Mark Thoma: The recent announcements that former Federal Reserve Chairman Ben Bernanke has accepted a position as a senior adviser at Pimco and a similar position at hedge fund Citadel have raised questions about whether the "revolving door" between government and private sector jobs ought to be restricted.

Perhaps, for example, Federal Reserve officials should be subject to a five-year waiting period before they can take jobs in the financial sector. The idea would be to reduce the chance that bank regulators could be influenced through formal and informal ties to previous Fed officials.

My concern is somewhat different: The incentive for Federal Reserve Board members to step down before their terms are up and accept lucrative private sector positions has the potential to damage the Fed as an independent institution...

Syaloch -> pgl...

"For 2014, the Chairman's annual salary is $201,700. The annual salary of the other Board members (including the Vice Chairman) is $181,500."

http://www.federalreserve.gov/faqs/about_12591.htm

$201,700 isn't a good salary? Sure, maybe it's peanuts to someone working on Wall Street, but doesn't that kinda go to the point that Thoma was making?

"[Bernanke's] stepping down isn't the main problem. It's the idea that it's OK for a former Fed member -- and its chair, no less -- to take these kinds of jobs once you leave. If Bernanke had returned to academia or limited himself to his position at the Brookings Institution, that wouldn't be a problem.

"However, if the chair can cash out, then other board members will also have an incentive to resign their positions as Fed governors after a few years to pursue financial interests in the private sector. Bernanke's acceptance of positions at Citadel and Pimco sets a bad precedent because it encourages other board members to do the same."

pgl -> Syaloch...

Where on earth did I say he made minimum wages? I said he did a good job and $200,000 a year was a bargain even if it was not slave wages.

DrDick -> pgl...

It is much more than most academic economists make. It is, in fact, a very good salary by any reasonable standard. The fact that people on Wall Street are paid obscene amounts for no useful product is beside the point.

am -> Syaloch...

US$200,000 is about GBP133,333.

Now here is the salary for the BOE equivalent.

http://blogs.marketwatch.com/thetell/2014/06/17/mark-carneys-salary-at-the-bank-of-england-is-four-times-what-janet-yellen-is-paid-at-the-fed/

Kind of puts U$200,000 in perspective. Anyone who takes the FED job sure ain't doing it for the money. Must be for prestige or future earnings when they retire or resign.

Bit of a shock to a European to see how poorly paid some US civil servants are.

Ellis

It's a pay off for doing what Big Finance wants.

It's ironic that Bernanke, who didn't recognize the biggest bubble in financial history until it popped is being paid millions of dollars for uncovering economic trends.

pgl -> Ellis...

Pray tell - who did foresee this bubble and its busting? Robert Lucas even in 2009 was arguing no one could have foreseen it as he was supposed to be the Dean of Macroeconomics back then.

supersaurus -> pgl...

uhhh...http://www.nytimes.com/2005/08/08/opinion/08krugman.html . that's "dr. nobody", right?

Ellis -> pgl...

Dean Baker and Nouriel Roubini, off the top of my head.

You could see it coming a mile away, especially given the worsening financialization and boom-bust pattern over the last four decades.

Of course, Bernanke said the exact opposite, that we were in the middle of the Great Moderation. Like most politicians, he's a liar, covering for the banks that made a fortune off the bubble, and then insulated from the catastrophe by the government and Fed.

Ellis -> pgl...

Dean Baker and Nouriel Roubini, off the top of my head.

You could see it coming a mile away, especially given the worsening financialization and boom-bust pattern over the last four decades.

Of course, Bernanke said the exact opposite, that we were in the middle of the Great Moderation. Like most politicians, he's a liar, covering for the banks that made a fortune off the bubble, and then insulated from the catastrophe by the government and Fed.

pgl -> Ellis...

The trio was also mocked by many at the time. Yes - they got it right and they deserve credit for doing so. But none of them have ever attacked Bernanke for not being as fore sighted.

But hey - I guess it is beat up on Ben day so have at it!

DrDick -> pgl...

While I think he could have done better at the Fed, I think he was decent in that position. He should not be allowed to take this job, however.

Ellis -> pgl...

Yes, they were mocked -- which is not surprising, given the financial and career advancement incentives -- which is exactly the point. Have you seen the documentary "Inside Job"? It has a good section on corruption among top economists.

Your wrong on your second point: Check out the post by Dean Baker in Beat the Press, April 30, "The Man Who Completely Missed the Housing Bubble and Was Convinced Financial Disruption Would be Restricted to the Subprime Market Deserves Two Seven-Figure Sinecures?"

Sorry for being so "mean and nasty" about Bernanke. But compare that to all those who lost everything, as a result of the crisis that he oversaw? His big salaries, of course, are little more than a tip from the big boys, who made out so well.

Roger Gathmann -> pgl...

You really see no difference between economic journalists and the head of the FED? Uh, that is pretty incredible.

How could Bernanke have found out more? Well, maybe he could have operated a bit more like Steve Eisman at frontpoint who did the math, as reported by Michael Lewis in The Big Short.
Really, to pretend that the FED has the same capacities as a newspaper columnist or economics professor, that the voices, and there were more than two or three, in the financial industry warning that there was something deeply wrong, is to apologize for Bernanke by saying, hey, he was a complete doofus, but he did all right after he sank the ship.
Greenspan and Bernanke were the worst FED chairmen in the Fed's history. The record, which should be read in terms of the health of the general economy, bears this out. Granted, after three crashes that seemed not to result in Depressions, Greenspan might not seem as bad, but it was his spirit and ideas that created the de-regulatory box and the market can do no wrong ethos at the Fed, which Bernanke continued. Bernanke even got a second chance after Bear Stearns fell. But no, between May and September, 2008, the Fed pretty much sat on its hands.

Roger Gathmann

Bernanke served the hedge fund sector well during his reign of terror at the Fed. Who can forget the loans to even a semi-criminal hedge fund like Yorkville from the ever understanding Fed, once the roof fell in? Or to all the other moneyed interests?
And who can forget the prophet Bernanke? The one who, in 2005, looked about and said yeah, there is no housing bubble, and anyway, housing prices don't decline:
http://www.washingtonpost.com/wp-dyn/content/article/2005/10/26/AR2005102602255.html

"U.S. house prices have risen by nearly 25 percent over the past two years, noted Bernanke, currently chairman of the president's Council of Economic Advisers, in testimony to Congress's Joint Economic Committee. But these increases, he said, "largely reflect strong economic fundamentals," such as strong growth in jobs, incomes and the number of new households."
I like the strong increase in incomes remark particularly. No wonder Bush, who had shown an eye for characters like Bernanke - Wolfowitz, Rumsfeld and Cheney shared a similar bogus confidence in their "facts" - appointed him. And he didn't disappoint. This is the guy who said that the Fed shouldn't be second guessing on the price of assets - free market, don't you know? - whose response to Stock market declines in 2006 and 2007 with a series of cuts was all about - keeping up the price of assets. But these were special assets, the kind of assets mainly held by the upper 20 percent income group. Not the tawdry assets held by the lower 80 with their homes.

Here he is, in his speech on the state of the economy in March, 2007, giving us more prophetic Ben:

http://www.federalreserve.gov/newsevents/testimony/bernanke20070328a.htm

Although the turmoil in the subprime mortgage market has created severe financial problems for many individuals and families, the implications of these developments for the housing market as a whole are less clear. The ongoing tightening of lending standards, although an appropriate market response, will reduce somewhat the effective demand for housing, and foreclosed properties will add to the inventories of unsold homes. At this juncture, however, the impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained. In particular, mortgages to prime borrowers and fixed-rate mortgages to all classes of borrowers continue to perform well, with low rates of delinquency."

Bear Stearns collapsed two months after everything was contained, in May. Now, did Mr Bernanke think maybe there needed to be some urgent work done to make sure other big banks weren't at risk? Were he and his friend in Treasury in firefighing mode? Of course not. That would not be serving the hedge fund community well.

Not that he was without ideas. Obviously, you wouldn't want to regulate a market in CDOs - it would be irresponsible to suggest such things! - but you could recommend that the bottom 80 percent be better informed about the risks they were taking.

Ace idea. Maybe even the top 1 percent should have been informed about the risks they were running? oh, but they have the computers and the smarts, of course. No need to rush right in. Of course, I'm just a crazy leftist with these views. And the crazy leftists who issued the Financial Crisis Inquiry report in 2011 echoed them.

"The majority report finds fault with two Fed chairmen: Alan Greenspan, who led the central bank as the housing bubble expanded, and his successor, Ben S. Bernanke, who did not foresee the crisis but played a crucial role in the response. It criticizes Mr. Greenspan for advocating deregulation and cites a “pivotal failure to stem the flow of toxic mortgages” under his leadership as a “prime example” of negligence.

It also criticizes the Bush administration’s “inconsistent response” to the crisis — allowing Lehman Brothers to collapse in September 2008 after earlier bailing out another bank, Bear Stearns, with Fed help — as having “added to the uncertainty and panic in the financial markets.”

Like Mr. Bernanke, Mr. Bush’s Treasury secretary, Henry M. Paulson Jr., predicted in 2007 — wrongly, it turned out — that the subprime collapse would be contained, the report notes."

Bernanke like his companeros in the Bush administration was smug, incompetent, and a key player in a disaster that impacted negatively on most Americans and the world at large. The result of his continuation of Greenspan's policies and his reaction to the onset of the crisis contributed to the reduction of the median net worth of American households by a third:

http://www.nytimes.com/2014/07/27/business/the-typical-household-now-worth-a-third-less.html

Salut, Ben! You deserve every penny.

Roger Gathmann

I mentioned rather cryptically the Yorkville hedge fund that was helped out by the ever hedge friendly Ben Bernanke. In the dark winter of 2008 - 2009, some people thought of the retirement funds that were evaporating, the foreclosures, the unemployment. But the Fed was thinking in larger terms about who should get premium loans at Uncle Ben's We loan for less window. Yorkville was one of them.

“A Jersey City, N.J., hedge fund under Securities and Exchange Commission investigation received more than $230 million in federal loans as part of a government bailout program.

Yorkville Advisors has been part of the Term Asset-Backed Securities Loan Facility Program since last year. Under TALF, the Federal Reserve Bank of New York has up to $1 billion to lend as part of an effort to inject liquidity into the ABS market.
Yorkville received some $233 million of that financing, using it to buy $253 million in securities last year for its flagship, YA Global Investments. The TALF deals were made via a subsidiary of the fund, New Earthshell Corp., and placed with a special-purpose entity called YA TALF Holdings, Forbes reports. The hedge fund still owes the Fed $162 million.”

http://www.finalternatives.com/node/13981

This is of course a pennyante amount. You, my friend, may not be able to get one cent from the Fed even if you write them and ask pretty please and include pics of your starving kids, but to other of the higher players in the Wallfare world, that loan is pocket change.

Since it isn’t pocket change to me, though (if I and one thousand of my clones worked one thousand years at the rate in which I make money, we would not have collected anything near 230 million dollars), I figure that it might be a good idea to poke around Yorkville Associates, and see what they are about.

So what does Yorkville do, and why would we want to loan it money?

Here’s a good summary of one of Yorkville’s big money makers:

“Yorkville Advisors, founded by 38-year-old Mark Angelo in 2001, is one of the largest hedge fund firms specializing in investing in thinly-traded and often illiquid outfits by making private investments in public equities, also known as PIPEs. The hedge fund firm reported nearly $1 billion in assets as recently as 2008. Angelo’s variation on PIPEs is a structured product called a standby equity distribution agreement, which like most PIPEs often causes the stock of the company receiving the investment to drop because it results in Yorkville’s funds collecting discounted shares.

A report prepared by Sagient Research’s PlacementTracker shows that Yorkville has entered into $762 million in PIPE deals since 2001, causing the underlying stocks to drop 38% on average in the first year. Most of those investments were made by Yorkville’s Cornell Capital Partners, which later changed its name to YA Global Investments.
YA Global Investments reported a total return of 6.04% in 2009 and 6.22% in 2008, its financial statements say. It reported a net investment loss of 0.09% in 2009 and net investment income of 5.43% in 2008.

According to the one-page independent auditor’s report prepared on August 13 by McGladrey & Pullen, YA Global Investments’ consolidated financial statements include investments valued at $804 million, representing 94% of its partners’ capital plus the amounts due to certain Yorkville special purpose vehicles, “whose fair values have been estimated” by Yorkville Advisors “in the absence of readily ascertainable fair values.”

Now, that seems a bit curious. We gave this outfit money so that it could use the money to mount a play to make selected stock prices drop, which made it money.

Hmm, how is this possible? Well, here’s an explanation of PIPE action as it pertains to another fund, the NIR group, written by Matthew Goldstein at Reuters:

"But what’s surprising to me is why the SEC is just looking into the NIR funds now, given that it has been a dominant player in so-called “death spiral” convertible market. These securities have gotten a bad rap over the years because they include a trigger that permits bonds to be converted into common shares whenever there is a precipitous drop in the prices of a company’s stock.

Roger Gathmann -> pete...

The accusation is that the loose set up of Talf was Bernanke's baby, not that he was personally on the phone to Yorkville associates.

The Bureau of Mine head wasn't personally in contact with BP when Deep Horizon blew, he had simply helped produced the regulatory environment that made it possible.

Carola Binder said...

A few weeks ago I blogged about Bernanke's decision to join Citadel, hoping the move will catalyze a change in Fed governance: http://carolabinder.blogspot.com/2015/04/on-bernanke-and-citadel.html

Interesting WSJ article on Fed's links to Citadel and Pimco: http://blogs.wsj.com/economics/2015/04/29/ben-bernanke-signs-on-with-pimco-another-firm-not-regulated-by-the-fed-but-with-deep-ties/

Roger Gathmann

Checking out Citadel's history of tax avoidance and taking advantage of loopholes in regulation, Bernanke obviously saw a corporate culture he could admire. As early as 2007, the NYT featured an article about their innovative program of helping employees avoid tax through a system of off shore accounts.

One of the flagship funds at Citadel, a $13.5 billion hedge fund, for example, has deferred at least $1.7 billion since it was founded at the end of 1990. And that does not count what might have been taken out already. Citadel declined to comment.

“We pile advantage on advantage for these managers and there doesn’t seem to be any economically logical basis for it,” said John C. Bogle, the founder of the Vanguard Group. “It’s a very well-gilded lily to allow these tax deferrals.”

This tax advantage is now coming under scrutiny in Washington, where Congress is looking for ways to reduce the budget deficit, to pay for the Iraq war and to help cover the exploding retirement and health care costs of aging baby boomers.

For now, many hedge fund managers are enjoying not only extraordinary profits but the extra benefit of a system almost encouraging them to set up offshore accounts.

Most hedge funds are private partnerships; managers are usually paid 2 percent of the money they manage plus 20 percent of the profits the partnership earns. If the fund operates in the United States, any deferral of the pay of the managers means investors lose the tax deduction associated with the compensation expense. As a result, deferred compensation in domestic funds is very uncommon.

By setting up an offshore fund, though, hedge fund managers avoid socking their investors with extra taxes. At the same time, it serves to attract tax-exempt investors like pension funds and endowments, as well as foreign investors, two of the most active groups investing in hedge funds today."

At the end of 2008, things did look bad for Citadel. But they got some help at least from the Government, as did any household who had experienced a bad year - NOT! Just joking. That is when Citadel got a 200 million dollars from the payout of AIG with money loaned from the Fed. http://www.huffingtonpost.com/2009/03/17/aig-bailout-chicago-based_n_175748.html?

Life is sweet. True, what's 200 million between friends? after all, citadel's ceo made 900 million dollars in 2009. That's how they roll.

Roger Gathmann

After the senate report on the financial meltdown, Bernanke, in a country where the elite were more vulnerable to shame, would have stepped down. Actually, if a cashier at a grocery store had a record that was comparably as bad as Bernanke's at the Fed, that cashier would have been fired, with no reference.

But cashiers are peons and proles - they have to take responsibility for what they do. Sweetly enough, our elite has liquidated that notion as far as it refers to themselves. America is such a lovely place to live in like that - if you have an income of above 500 thou a year.

For the rest, well, in an ownership society you gotta take your risks, suckers.

[Apr 20, 2015] Stop The Presses Nobel-Prize Winning Economist Slams QE

Apr 20, 2015 | Zero Hedge
Whether it is due to pervasive groupthink, a chronic lack of vision, the perpetuation of failed ideas, or just because the alternative casts grave doubts about the value of their very existence, conventional economists and their media lackeys have almost without exception been supportive of the Fed's "recovery" efforts, be it ZIRP or QE. After all, neoclassical economics demands it, and if the Fed is wrong about its response to the second great depression, then the value of every single economist likewise goes out the window.

... ... ...

... Nobel-prize winning economist Robert Merton (of expanded Black-Scholes fame) with Arun Muralidhar as co-author, released an Op-Ed in Pensions and Investments magazine titled "Monetary policy: It's all relative", in which they slammed not only the current monetary policy response to economic ills (as observed through the prism of pension math and the adverse impact of low rates), but question if instead of leading to an improvement, QE isn't in fact making the situation even worse.

Here are the key excerpts from the op-ed:

... while QE has increased absolute wealth, it has simultaneously lowered relative wealth for a large class of investors. This could lead to the opposite of the desired effect for this group of investors. Lower relative wealth means investors need to save more to improve their funded status, especially where regulations are strict, and it results in less consumption and investment, and may not remove the deflationary overhang.

...

An alternate, more sophisticated approach to explaining why QE may not work to stimulate aggregate consumption is, perhaps, because the demographic mix of the U.S. (and most parts of the developed world) has shifted toward older people. Unlike 30 or 40 years ago, the enormous baby boomer generation, and even retirees, are much wealthier (including human capital) than in the past, and they are wealthier than current generations earlier in their life cycle. So the wealth effect does not lead to an increase in consumption and, potentially, has the opposite outcome.

When baby boomers were in the sweet spot for housing needs, expenditures on children and cars, etc. 30 to 40 years ago, the effect the central banks were expecting from QE might have worked better, as they expected it would, but that need not be a reliable prediction under the changed current demographic and wealth distribution.

...

We believe it is imperative for central banks and academia to examine this perspective immediately and develop a new monetary policy toolkit, because it would be tragic if the central banks' attempts to improve economic security with the current orthodoxy leads, instead, to less consumption, less investment and greater retirement insecurity.

And the punchline:

A recent study by the Center for American Progress shows that millions of Americans (as high as 50% of households) are in danger of retiring with insufficient money to maintain the standard of living to which they are accustomed, and the problem is getting progressively worse. Your previous editorial argues that QE by the central bank may impose unintended costs on pensions, at both the institutional and retail level. This suggests more research needs to be conducted to examine how monetary policy affects relative wealth, not just absolute wealth, and whether traditional approaches are outdated given the current retirement landscape. This may call for central banks to use a different set of policy tools than manipulating long-term rates, and may even argue for the Fed to actually raise long-term rates faster than what is recommended by traditional monetary policy.

Alas, with central banks now proudly owning $22 trillion in "assets", it is far too late. The best one can hope for is that the social collapse the results after QE's failure is finally accepted by all, and that includes all other economists, will be somewhat contained.

Needless to say, all it would take for the Fed to "lose credibility" (if only among its "very serious" peers; it has long since lost all credibility across the broader population) is for a few more economists to have a comparable epiphany and declare that the money-printing emperor is naked, and then all bets - at least for the current failed economic and monetary regime - are off.

NoDebt

Yes, I have a nail gun. You can borrow it at any time. Just wash the blood off before you give it back.

And, just FYI, I am an economist by training (but I'm feeling much better now). I never throught QE was a good idea and have stated bluntly many times why I always thought QE was a bad idea, sounding somewhat similar to the points made in this article. But, sadly, with no PhD, nobody gives a crap what I think. Fortunately, I never ran a well known financial company up on the rocks 20 years ago, either.

NOT ALL ECONOMISTS THINK ENDLESS MONEY PRINTING IS GOING TO SOLVE ANYTHING OR EVEN "WORK" IN ANY MEANINGFUL WAY. Dissenting opinions are regularly filtered out of the discussion by the media, much like climate change 'deniers' opinions are filtered out in discussions of the environment, or the way no 'environmentalist' ever mentions anything bad about radiation leaking from Fukushima. I could go on and on, but the basic point is, not every economist is a clueless moron worshipping at the altar of stimulating aggregate demand.

Ham-bone

Somebody should write a book about this stuff...oh, er...somebody did and all major publishers rejected it??? Shocker...

http://econimica.blogspot.com/2015/02/fundamentally-flawed-chapter-1-advanced.html

http://econimica.blogspot.com/2015/02/fundamentally-flawed-outline-how-us-eu.html

williambanzai7

Yes the same Long Term Capital Management Merton

Blankenstein

Why is anyone listening to this guy? He blew his credibility back in the 90s.

"Members of LTCM's board of directors included Myron S. Scholes and Robert C. Merton, who shared the 1997 Nobel Memorial Prize in Economic Sciences for a "new method to determine the value of derivatives".[3] Initially successful with annualized return of over 21% (after fees) in its first year, 43% in the second year and 41% in the third year, in 1998 it lost $4.6 billion in less than four months following the 1997 Asian financial crisis and 1998 Russian financial crisis requiring financial intervention by the Federal Reserve, with the fund liquidating and dissolving in early 2000."

http://en.wikipedia.org/wiki/Long-Term_Capital_Management

kchrisc

"They lie even when they are telling the truth." Hence this scumbag's statement.


My belief is that they are preparing to kill off the dollar, which is why it is "up." As part of the setup they need to prepare a fall-guy, and that is to be the FedRes.

Of course, part of the plan is to not allow their fiat-dollar debts to evaporate, but be converted to SDRs--"Pay us now in gold or euros." (Remember, they own the courts.)

Liberty is a demand. Tyranny is submission.

Is the dollar up on "exit," or "strength?"

kchrisc

I personally think that instead of another QE, which they may still do, the goal is to assure those so connected and the Amongst be permitted a golden exit to the euro, shekel, or other. They will then "pull it" and lay it all at the feet of the FedRes so as to prepare the sheeple for their worldwide central bank and SDRs.

Fits in with the Saudis price war collaboration as well. As a reward for their cooperation, they can be permitted the ability to reapportion their assets while their Zionist friends prop the "markets" up and the "exit" open, and be spared when they "pull it."

We shall see. At any rate, the dollar is doomed.

Liberty is a demand. Tyranny is submission.

"When did daylight get a train whistle?"

economessed

We don't need more mathematical models. We need to embrace common sense.

It was excessive borrowing and casual accounting standards that caused the problem. QE didn't counter-act those situations -- it embraced them. The only question left to ask is "when will this experiment arrive at the inflection point of impact?"

divedivedive

QE (and ZIRP) really pushed this retirement couple out of the US. Gosh - I remember years(as savers) when we were making more money on the interest from our savings than our actual earnings. Personally - I think monetary policy in the US today is all about trying to maximize the tax base. The longer ZIRP continues the fewer retiree aged people can walk away from their jobs, the more tax revenues coming in.

MEFOBILLS

Keen had forecast debt deflation prior to 2008. Hudson also knew it was coming.

http://www.debtdeflation.com/blogs/#PIX&kdntuid=1&p=52041&s=undefined&a=undefined

MMT theorists have analyzed the problem ad-infinitum.

It takes a Nobel prize winner, when others have been yelling the answers from the rooftops for 7 years?

It is simple, those that are in the back pocket of banking will always promulgate banker solutions. For example, QE swapping fresh FED keyboard money for debt instruments. All this does is change composition of the money supply from less debt to more money, and the money in turn channels into finance or gets caught up in banker reserve loops. If in finance, it finances yet more debt. This particular type of financialized debt has no connection to the real economy other than being extractive. QE money in banker reserve channels gets stuck because cash reserves now get FED interest, to then prevent rate collapse to zero on overnight market. You heard right, cash - which is not a debt instrument - gets paid interest and thus it gets stuck, with banks enjoying being fully capitalized.

But, bankers don't really own monetary policy, even though as a parasite they have usurped money creation, to then loan their credit into existence, Bankers certainly don't own fiscal (taxation) policy. For them to give up their pretender control over monetary policy, they will have to admit that money is actually law, and not private credit.

To admit that, their entire market theory of credit money will have to be shoved into history's trash bin, and they will also lose their easy rentier lifestyles. Better to keep peddling lies and keep humanity hypnotized.

Like Tyler's often say, 12T of QE money already spent, would have paid off all mortgages in U.S. If 12T had been SPENT into existence and channeled into mortgages, debt depression most certainly would be over. Effectively, mortgage debt instruments would have been erased, especially as the new money would have vanished into ledger as it bought down principle.

People's future labor (which is now) would then have had extra wallet money to buy from their producing neighbors, rather than having their output vector to credit destruction on banker ledger. This action would have created a wealth cycle as people work with each other to create and produce. Debt depression also pays banker usury, thus further draining credit money supply. Finance has an upper loop where they trade debt instruments and do financial games, and real economy has a lower loop that is in constant drain.

A land tax via fiscal policy would have been required to prevent a new debt bubble against land though -so had we paid off mortgages, it would have had to come with new fiscal stipulations.

Did Obama ever hear this from Geithner, Bernanke or any other members of the tribe and their sayanim fraternity? Its highly doubtful; parasitism runs deep when money creation power is so lucrative and ordained by God. It is especially good to be self chosen and have operative control methods on humanity.

Owning and holding debts on the people, to then gain usury and do Magic swaps, is the parasites control method.

falak pema

Having robbed the future we now rob the present which only leads to a tomorrow which will rob the past; the core baby boomer generation THAT OPTED OUT AND SURRENDERED TO EASY, SLEAZY REAGANOMICS...

The Bushes, the Clintons, the Blairs, the Muttis the Sarkos and the Browns...They should have fought the legacy of Dear Henry and the Cold War CiA/MIC scam that had gotten us into Nam and had shown its corruption in Watergate et al. No, they just bought into it and screwed the welfare productive state!

What a sell out of western values. Now its multiplied and this new millennium generation cannot tell an Apple from a Google big data scam.

Its all Facebook to them !

stilletto

This guy is as dumb as Krugman. He's basically saying that QE should be good but might not be because of the weather - or rather that people are a bit older. He doesnt understand economics either. QE fails because the system is debt saturated. The economy is like a sponge, when debt free it quickly absorbs the extra money but as it gets soaked it becomes less effective until the economy / sponge just oozes and fails. The problem that all these brain-dead morons don't understand is that the economy is soaked with too much debt.

Never found an economist who understood reality -- but then i trained as an Economic Historian. Economists don't read history therefore they are doomed to repeat past failures. Just like statisticians - another voodoo outfit.

[Apr 16, 2015] Matt Taibbi Obama's Big Sellout

Unfortunately, cognitive regulatory capture leads to crony capitalism just as outright corruption would do.
December 11, 2009 | naked capitalism
By Edward Harrison of Credit Writedowns

Matt Taibbi is one of the few commentators in the mainstream media who is not worried about ‘access’ and has, therefore, been free to write much more critically about the economic crisis and reform efforts on Wall Street.

His first piece was a polemic against Goldman Sachs, which triggered a backlash against the venerated Wall Street firm due to its incestuous relationship with Washington. Afterwards, he took on health care reform. Now, he is taking on the Obama Administration and its status quo bias. I have an excerpt below and a link to the full article. But, first, let me say a few words.

As you probably know, I have been quite disappointed with this Administration’s leadership on financial reform. While I think they ‘get it,’ it is plain they lack either the courage or conviction to put forward a set of ideas that gets at the heart of what caused this crisis.

It was clear to many by this time last year that the President may not have been serious about reform when he picked Tim Geithner and Larry Summers as the leaders of his economic team. As smart and qualified as these two are, they are rightfully seen as allied with Wall Street and the anti-regulatory movement.

At a minimum, the picks of Geithner and Summers were a signal to Wall Street that the Obama Administration would be friendly to their interests. It is sort of like Ronald Reagan going to Philadelphia, Mississippi as a first stop in the 1980 election campaign to let southerners know that he was friendly to their interests.

I reserved judgment because one has to judge based on actions. But last November I did ask Is Obama really “Change we can believe in?” because his Administration was being stacked with Washington insiders and agents of the status quo.

Since that time it is obvious that two things have occurred as a result of this ‘Washington insider’ bias. First, there has been no real reform. Insiders are likely to defend the status quo for the simple reason that they and those with whom they associate are the ones who represent the status quo in the first place. What happens when a company is nationalized or declared bankrupt is instructive; here, new management must be installed to prevent the old management from covering up past mistakes or perpetuating errors that led to the firms demise. The same is true in government.

That no ‘real’ reform was coming was obvious, even by June when I wrote a brief note on the fake reform agenda. It is even more obvious with the passage of time and the lack of any substantive reform in health care.

Second, Obama’s stacking his administration with insiders has been very detrimental to his party. I imagine he did this as a way to overcome any worries about his own inexperience and to break with what was seen as a major factor in Bill Clinton’s initial failings. While I am an independent, I still have enough political antennae to know that taking established politicians out of incumbent positions (Joe Biden, Janet Napolitano, Hillary Clinton, Rahm Emanuel, Kathleen Sebelius or Tim Kaine) jeopardizes their seat. So, the strategy of stacking his administration has not only created a status quo bias, but it has also weakened his party.

That’s it. I’ve said my piece. Here is the Taibbi excerpt now. I don’t agree with everything Taibbi says and his tone is a lot more apoplectic than mine; but that is mostly stylistic. On the major point – that the Obama Administration is more of the same – he is right.

Here he talks about the Citi bailout

“Just look at the timeline of the Citigroup deal," says one leading Democratic consultant. "Just look at it. It’s fucking amazing. Amazing! And nobody said a thing about it."

Barack Obama was still just the president-elect when it happened, but the revolting and inexcusable $306 billion bailout that Citigroup received was the first major act of his presidency. In order to grasp the full horror of what took place, however, one needs to go back a few weeks before the actual bailout — to November 5th, 2008, the day after Obama’s election.

That was the day the jubilant Obama campaign announced its transition team. Though many of the names were familiar — former Bill Clinton chief of staff John Podesta, long-time Obama confidante Valerie Jarrett — the list was most notable for who was not on it, especially on the economic side. Austan Goolsbee, a University of Chicago economist who had served as one of Obama’s chief advisers during the campaign, didn’t make the cut. Neither did Karen Kornbluh, who had served as Obama’s policy director and was instrumental in crafting the Democratic Party’s platform. Both had emphasized populist themes during the campaign: Kornbluh was known for pushing Democrats to focus on the plight of the poor and middle class, while Goolsbee was an aggressive critic of Wall Street, declaring that AIG executives should receive "a Nobel Prize — for evil."

But come November 5th, both were banished from Obama’s inner circle — and replaced with a group of Wall Street bankers. Leading the search for the president’s new economic team was his close friend and Harvard Law classmate Michael Froman, a high-ranking executive at Citigroup. During the campaign, Froman had emerged as one of Obama’s biggest fundraisers, bundling $200,000 in contributions and introducing the candidate to a host of heavy hitters — chief among them his mentor Bob Rubin, the former co-chairman of Goldman Sachs who served as Treasury secretary under Bill Clinton. Froman had served as chief of staff to Rubin at Treasury, and had followed his boss when Rubin left the Clinton administration to serve as a senior counselor to Citigroup (a massive new financial conglomerate created by deregulatory moves pushed through by Rubin himself).

Incredibly, Froman did not resign from the bank when he went to work for Obama: He remained in the employ of Citigroup for two more months, even as he helped appoint the very people who would shape the future of his own firm. And to help him pick Obama’s economic team, Froman brought in none other than Jamie Rubin, a former Clinton diplomat who happens to be Bob Rubin’s son. At the time, Jamie’s dad was still earning roughly $15 million a year working for Citigroup, which was in the midst of a collapse brought on in part because Rubin had pushed the bank to invest heavily in mortgage-backed CDOs and other risky instruments.

Now here’s where it gets really interesting. It’s three weeks after the election. You have a lame-duck president in George W. Bush — still nominally in charge, but in reality already halfway to the golf-and-O’Doul’s portion of his career and more than happy to vacate the scene. Left to deal with the still-reeling economy are lame-duck Treasury Secretary Henry Paulson, a former head of Goldman Sachs, and New York Fed chief Timothy Geithner, who served under Bob Rubin in the Clinton White House. Running Obama’s economic team are a still-employed Citigroup executive and the son of another Citigroup executive, who himself joined Obama’s transition team that same month.

So on November 23rd, 2008, a deal is announced in which the government will bail out Rubin’s messes at Citigroup with a massive buffet of taxpayer-funded cash and guarantees. It is a terrible deal for the government, almost universally panned by all serious economists, an outrage to anyone who pays taxes. Under the deal, the bank gets $20 billion in cash, on top of the $25 billion it had already received just weeks before as part of the Troubled Asset Relief Program. But that’s just the appetizer. The government also agrees to charge taxpayers for up to $277 billion in losses on troubled Citi assets, many of them those toxic CDOs that Rubin had pushed Citi to invest in. No Citi executives are replaced, and few restrictions are placed on their compensation. It’s the sweetheart deal of the century, putting generations of working-stiff taxpayers on the hook to pay off Bob Rubin’s fuck-up-rich tenure at Citi. "If you had any doubts at all about the primacy of Wall Street over Main Street," former labor secretary Robert Reich declares when the bailout is announced, "your doubts should be laid to rest."

It is bad enough that one of Bob Rubin’s former protégés from the Clinton years, the New York Fed chief Geithner, is intimately involved in the negotiations, which unsurprisingly leave the Federal Reserve massively exposed to future Citi losses. But the real stunner comes only hours after the bailout deal is struck, when the Obama transition team makes a cheerful announcement: Timothy Geithner is going to be Barack Obama’s Treasury secretary!

Geithner, in other words, is hired to head the U.S. Treasury by an executive from Citigroup — Michael Froman — before the ink is even dry on a massive government giveaway to Citigroup that Geithner himself was instrumental in delivering. In the annals of brazen political swindles, this one has to go in the all-time Fuck-the-Optics Hall of Fame.

Wall Street loved the Citi bailout and the Geithner nomination so much that the Dow immediately posted its biggest two-day jump since 1987, rising 11.8 percent. Citi shares jumped 58 percent in a single day, and JP Morgan Chase, Merrill Lynch and Morgan Stanley soared more than 20 percent, as Wall Street embraced the news that the government’s bailout generosity would not die with George W. Bush and Hank Paulson. "Geithner assures a smooth transition between the Bush administration and that of Obama, because he’s already co-managing what’s happening now," observed Stephen Leeb, president of Leeb Capital Management.

Taibbi assumes intent and damns the actors as a result. He writes as if Froman and Geithner openly colluded in some way to favour Citi. But you don’t need to prove intent, you only need to prove motive. I don’t care if Froman or Geithner ‘intended’ to favour Citi over other institutions; I care whether they were mentally predisposed to helping Citi and other large institutions at the expense of others because they ascribed unwarranted and disproportionate importance to them. Unfortunately, cognitive regulatory capture leads to crony capitalism just as outright corruption would do.

There is a lot more at the link below.

Obama’s Big Sellout – Matt Taibbi, Rolling Stone

[Apr 14, 2015] The Message from the 22 Year Old Suicide at the Nation's Capitol

Apr 14, 2015 | Jesse's Café Américain

Suicide is a prohibited form of violence in my own belief, as are all other forms of murder. Therefore I would not hold this type of protest up as an example to anyone.

However, an even worse offense would be to completely ignore the message which this young man delivered, as most of the mainstream media has done in the US.

I did not even know what really happened until I read this article below from Wall Street On Parade today. The police and media referred to it as a 'social protest.'

Before he killed himself, the young man held up a sign that said "Tax the One Percent."

Perhaps an even more pointed message might be 'shut down the loopholes for the Top .01%.' Those who make their money from wages and ordinary income pay fairly significant taxes.

However, the uber-rich have so many loopholes and tax avoidance schemes that they often pay much lower percentage than even those in the lowest income levels. The top .01% use the upper middle class as shields for their antics.

You may read the entire article about this here.

Rather than one young light be extinguished and quickly overlooked by the powerful, perhaps it would be better if a million people were to march on the Capitol, and effective shut it down in protest this Summer. That might get their attention. Alas, the apathy in the people is pervasive, at least for now.

Wall Street On Parade

22-Year Old Commits Suicide at Capitol to Send Congress a Message

By Pam Martens: April 14, 2015

At approximately 1:07 p.m. on Saturday afternoon, April 11, during the annual Cherry Blossom Festival celebrating springtime in the Nation's Capitol, a 22-year old man took his own life with a gun on the Capitol grounds with a protest sign taped to his hand. According to the Washington Post, the sign read: "Tax the one percent."

Yesterday, the Metropolitan Police Department released the young man's name. He was Leo P. Thornton of Lincolnwood, Illinois. Based on what is currently known, the young man had traveled to Washington, D.C. for the express purpose of making a political statement with his sign and then ending his young life.

The Chicago Tribune reported that "Thornton's parents filed a missing persons report on the morning of April 11 after he never came home from work on April 10, Lincolnwood Deputy Police Chief John Walsh said."

Those are the tragic facts of the incident itself. But there is a broader tragedy: the vacuous handling of this story by corporate media. The Washington Post headlined the story with this: "Rhythms of Washington Return after Illinois Man's Suicide Outside Capitol." The message he delivered to his Congress – tax the one percent – has yet to be explored by any major news outlet in America in connection with this tragedy.

Was the message of Leo P. Thornton of Lincolnwood, Illinois a critical piece of information for this Congress to hear at this moment in American history. You're damn right it was. Outside of Wall Street's wealth transfer system, provisions in the U.S. tax code are the second biggest wealth transfer system to the one percent. Together, these two systems have created the greatest income and wealth inequality since the economic collapse in the Great Depression. They threaten a repeat of the 2008 financial collapse because the majority of Americans do not have the wages or savings to support the broader economy...

Profiles In Hypocrisy, In the Garden of Beasts

08 April 2015 | Jesse's Café Américain

"The only vice that cannot be forgiven is hypocrisy. The repentance of a hypocrite is itself hypocrisy."

William Hazlitt

"The U.S. went off the gold standard in August 1971. With no benchmark, central banks could print money and debase currencies. That opened the door for huge bailouts after big banks screwed up in a big way. Taxpayers—not incompetent bankers—paid the price.

By [the late 1980's], the Federal Reserve Bank and large U.S. banks had established a pattern to control the public relations damage each time banks had a major screw-up: accountants and regulators let banks lie about the size of the problem to stall for time; the Federal Reserve blew smoke at the media; finally, the Fed would bail out the banks in a way that most taxpayers would not understand.

Banks didn't have to get smarter or more competent. The Fed trained the banks that uninformed taxpayers would eat the losses, and fake accounting would let bank officers keep their positions and their money."

Janet Tavakoli, Decisions: Life and Death on Wall Street

Gold and silver were pushed back to their assigned round numbers, with gold barely holding above 1200 and silver pushed well below the 17 handle.

Ted Butler has a rather striking piece about the rigging in the silver market which you can read here.

Speaking of silver it appears that Turkey had record imports of silver bullion in March. You can read about that here. I am not sure how significant that is. We can certainly keep an eye on it to see if this is a one time thing or a trend.

Thoughts of silver drachmas and dirhams come to mind, but it is most likely improbably premature. Still, this is a currency war and things seem to be building to a reckoning of sorts. Who can say what desperate people might do to end repression?

Nothing really happened at the Bucket Shop on the Hudson. A few contracts of silver were claimed, and inventory was shoved around the plate in the warehouses. The real action is taking place in the Mideast and Asia.

We have become a coarse and careless people, smugly confident in our 'Exceptionalism.' We are no longer shocked about lies, but instead critique the style and performance of the liars, and try to emulate them in our own professions.

How can we not cringe at some of the more shocking abuses that pass for generally acceptable behavior in public figures these days? And we encourage it, by both our silence and our acceptance.

Oh yes, we recoil in horror at any kind of sex, at the human form, with great puritanical umbrage, but stealing and cheating, and abusing the poor and the defenseless in even the most petty and vicious ways is looked upon with admiration, because we are in love with power.

Power is our new golden calf. Even some so-called 'reformers' are falling all over themselves at a chance to move near the circles of power, to have influence, to be seen as connected. All we seem to want is to get paid, to get ahead, to 'win.'

Hypocrites!

And the example of our cultural and societal icons are certainly leading to a general corrosion of all morals and civilities. And that is a shame, which eventually will have significant repercussions and consequences for us as a people and a society.

Where will we finally draw the line and come to our senses? How far are we willing to go? How many crimes and abuses, how much theft and torture are we willing to overlook? Why do we allow our society to be defined by sociopaths?

When will we finally look about, and see that we too, despite all our smug superiority, have created our own garden of beasts?

[Apr 10, 2015] 'The Floating Kilogram' The Editor of the Sun Talks About His New Book On the Dollar Crisis

The New York Sun

By DAWN BENNETT, Adapted From Financial Myth Busting | April 5, 2015

http://www.nysun.com/national/the-floating-kilogram-the-editor-of-the-sun-talks/89117/

The following is adapted from an interview by Dawn Bennett, host of the radio show "Financial Myth Busting," with the editor of The New York Sun, Seth Lipsky. The broadcast aired March 8:

* * *

Ms. Bennett: Seth Lipsky is the author of a book titled "The Floating Kilogram and Other Editorials on Money from The New York Sun." Before the Sun, he spent 20 years at the Wall Street Journal where he served on the editorial board and helped launch the Asian Wall Street Journal as well as the Wall Street Journal Europe. Recently, Seth authored a column in the New York Post titled "Why does the Federal Reserve Fear a Real Audit," which is a question much on my mind. Seth, welcome.

Mr. Lipsky: Thanks, Dawn. It's nice to be with you.

Ms. Bennett: To put it charitably, Janet Yellen appears to be very alarmed that some members of Congress want to conduct a comprehensive audit of the Federal Reserve for the first time since it was created. If the Federal Reserve is doing everything correctly, why should Mrs. Yellen be alarmed and what does she have to hide?

Mr. Lipsky: Well, that's a great question. The Federal Reserve is already audited, in the sense that an accountant comes in and goes over its books. But what the Congress is talking about is a much broader look by the Governmental Accountability Office of how the central bank forms our monetary policy and what its relations are with foreign banks. The Fed has been fighting this tooth and nail as an intrusion on its independence. What Congress knows is that the Constitution gave the monetary power precisely to Congress.

Congress has a constitutional obligation and power to establish the American monetary system and regulate it, to coin money, regulate its value and that of foreign coinage. This has become a big issue where we have not taken a really systematic look at how the Fed operates in the hundred years that it's been in existence. We're starting the second century, and there is growing sentiment in the Congress to take a look at this. The audit of the Fed measure passed the House as recently as of September by a vote of 333 to 92, with 109 Democrats joining the Republicans. So the Fed is certainly growing concerned.

Ms. Bennett: The only reason Janet Yellen has the power to coin money is because Congress delegated its own power to the Federal Reserve in 1913. Isn't congressional oversight of that power something that should be considered commonsensical by the Federal Reserve?

Mr. Lipsky: The Fed was created in 1913. The Coinage power was first acted on in 1792, and coinage was given not to any Federal Reserve but to the United States Mint. When the second central bank came up to the Supreme Court it was really the tax and the borrowing power that the courts were looking at when they okayed the authority of the central bank.

Ms. Bennett: We are all accountable to someone or something, so what is wrong about the Federal Reserve being accountable to Congress?

Mr. Lipsky: Nothing whatsoever. Even Chairman Yellen acknowledges that Congress has the power. She's just pleading and warning that it not interfere. Why is Congress growing concerned about this in the first place? It's because the Great Recession has lasted six years and we still do not feel like we've recovered. What is the Fed's role in this? Could the reason that the Great Recession lasted so long be attributable to monetary policy? The value of the dollar has been allowed to collapse below one 1,100th of an ounce of gold. It was a 265th of an ounce of gold when George W. Bush was sworn in. These are huge questions, and somebody needs to ask them.

Ms. Bennett: It is quite clear to me that the Federal Reserve doesn't want the rest of us to actually be able to see what they really up to. If we did know what they're doing, do you think most Americans would just want it shut down? To your point, since 1913, the dollar has actually lost over 97% of its purchasing power. And of course, the economy has been subjected to one painful depression and a series of what I call Fed-created recessions. Despite the poor track record, we continue to support them. At the end of the day, does it matter if we even have a Federal Reserve?

Mr. Lipsky: I think the monetary questions do matter to every American in all positions. My favorite statistic is that between 1947 and 1971 the average unemployment rate was below 5%. From 1971 until today it was above 6%. What happened in 1971, when the unemployment rate began souring? What happened is we abandoned the Bretton Woods Gold Exchange System, under which the dollar was linked to gold, and the money began flowing not in the productive enterprises, but into the money markets and hedge funds and all these sorts of things and not so much into the kind of investment that created the great industrial base in America.

Ms. Bennett: Let's talk about that type of investment. According to a government report I've read, the Federal Reserve made $16.1 trillion in loans to big banks during that financial crisis. In my opinion, [it once] created the dotcom bubble and the housing bubble. Now, I think it has created the financial bubble that our markets are experiencing.

Mr. Lipsky: Asset inflation. The debate over inflation is one of the most important debates in the country. The left wing likes to say there is no inflation, but the dollar is worth only a tiny amount of the constitutional specie, which is gold and silver, compared to what it used to be worth. This is what people feel when they hear the government say there's no inflation but they try to go to the grocery store and they spend $50 or $100 on a tiny plastic bag with a few items in it.

Ms. Bennett: Yes, I know shelf inflation is huge, but I want to talk about commodities for a bit. The Department of Justice has recently said again that they're going after the big banks that have been, on an ongoing and continuous basis, manipulating gold and silver. What are your thoughts on that? Will it work this time? And, if so, is there a simple solution to stop them from doing this? They seem to get their hands slapped, apologize, and then come back and do it again, and again.

Mr. Lipsky: The news that the Justice Department is looking at something like ten or twelve major banks for possibly rigging the price of gold broke the same week that Mrs. Yellen was up on Capitol Hill testifying against an audit of the Fed.

Ms. Bennett: That's right.

Mr. Lipsky: One of the questions that The New York Sun raised is what is she afraid of then? Is it the danger that the Fed has been meddling in the gold market the way the Justice Department is alleging commercial banks have been doing it? It's the Fed that regulates commercial banks after all. I don't want to carry that argument too far. I asked it then in an editorial more in the nature of a question. But there is a movement in Congress to open up what is called a Centennial Monetary Commission that after the first hundred years of the Fed, would just take a look at how the whole system is working.

We've been in a period of fiat money, meaning dollars that have no connection in law to any gold or silver or other constitutional money. We've been in a fiat system since 1971. Previously, our dollars were always defined in terms of gold and silver, suddenly they're not. The unemployment average is much higher; the bankruptcy rate is much higher; the inequality rate has been much higher since the mid 1970's. Could this be related to the fact that we abandoned sound money in the mid 1970s?

Ms. Bennett: De-dollarization has been going on now for the last few years, and I think it's because the dollar is continuing to get weaker. Our political system and economic system aren't what they used to be. Do you think it's possible that if China, for example, standardizes the renminbi it will start taking power away from the U.S. dollar?

Mr. Lipsky: The abandonment of sound money by the U.S. has brought forth a whole chain of foreign governments that are alarmed and wonder whether a new system should be set up. China. There is talk of Russia going on a gold standard; the European Union is having its own catastrophe with the Euro, and it's wondering whether the dollar ought to be replaced as the international reserve. The United Nations, for crying out loud, has gotten involved in this.

One of my favorite moments happened in 1965, when the President of France, Charles de Gaulle, called a thousand reporters into the presidential palace sat them down and addressed them on the importance of restoring gold as the international standard. His argument was that it puts all countries on the same basis: America, France, England, China, little countries, and it takes a lot of the partisanship out of the monetary question internationally, or it takes the politics out of money. It's ironic that Fed loves to talk about how we shouldn't politicize the monetary system. If one really wants to de-politicize the monetary system, restoring a gold standard or something like it is exactly the way to do it.

Ms. Bennett: Mrs. Yellen claims that opening the Fed to an outside audit would "politicize" — her word — monetary policy.

Mr. Lipsky: Right.

Ms. Bennett: Isn't it political when Senator Schumer, for example, tells her to keep rates low every time she testifies before the Senate Banking Committee? Isn't it already happening?

Mr. Lipsky: You're exactly right. Why is it always the conservatives that are doing the politicizing and not the liberals? The big politicization of monetary policy happened in 1978 with the passage of Humphrey-Hawkins, which said that the Fed has to have a second mandate of increasing the employment rate or decreasing unemployment, in addition to affecting the value of our dollar. That opened the door to an enormous political interference in monetary policy.

Ms. Bennett: I know you're not a gold trader or silver trader...

Mr. Lipsky: I'm a newspaperman.

Ms. Bennett: There you go. But I'm certain you follow the markets. What do you think would be a simple solution to fix the ongoing and continuous manipulation of gold and silver so that we can get more stability? It does seem, whether it's a Federal Reserve or some other central bank, that they're interfering with it in order to make the fiat currency look stronger than it really is.

Mr. Lipsky: I favor a definition by law, enacted by Congress under its constitutional powers to coin money and regulate its value, and fix the standards of weights and measures — a law passed by Congress defining the dollar as a fixed amount of gold or silver. Silver was the main specie used in early years of our republic. The debate over whether gold or silver was better went on through the 19th century, and we basically decided in 1900, with the passage of the Gold Standard Act, to make gold the true national money. I think that would go a long way toward solving this problem. There are a lot of questions as to exactly how to do it, whether there should be a system like Bretton Woods, which said dollars had to be redeemed in gold if they were held by foreign governments.

Ms. Bennett: In physical gold, not paper gold. In physical gold.

Mr. Lipsky: Right.

Ms. Bennett: There's a big difference there.

Mr. Lipsky: Therefore the price at which one fixes the dollar, the value, the amount of gold, has to be carefully worked out. But the gold standard is not some flaky thing. This was believed in by George Washington, Thomas Jefferson, James Madison, Alexander Hamilton, and almost every president since, up until Richard Nixon. John Kennedy, Woodrow Wilson, Grover Cleveland — they all believed in it.

Ms. Bennett: Seth, "The Floating Kilogram and other Essays on Money from The New York Sun." For any listeners not familiar with the Sun, can you bring them up to speed?

Mr. Lipsky: The New York Sun is an online newspaper that I edit. We published in print until several years ago. It's a leading voice in journalism for a sound dollar. It supports a sound dollar, limited government, and a restoration of constitutional dollar based on gold or silver. This is the first radio interview about the book.

Ms. Bennett: Thank you.

Mr. Lipsky: This book contains on this issue 130 editorials that have been issued in the Sun in recent years. Steve Forbes calls them "brilliant," "irrefutable," and "the Federalist Papers for the gold standard." James Grant calls the book both "persuasive" and "unfailingly entertaining." It's a book for every person, not just the experts, and it's available on Amazon.com, the online bookstore, and you'll have a copy in a day or two if you place your order. "Pure gold" is the way the economist Judy Shelton described this book. The title, Dawn, comes from the discovery that the kilogram, which is the last metric weight measure based on a physical object, has been losing mass — atom by atom. The Sun in one of its editorials said, "Why don't we float the kilogram just like we float the dollar?" That's from where the title of the book comes.

Ms. Bennett: If President Obama, or our next president, were to become motivated to make reforms, what do you think the takeaway from this book would to be? Definitely a gold standard?

Mr. Lipsky: So I think the takeaway is going to be that in our monetary system at some point, the dollar has to be defined in terms of something real rather than just another dollar. At the moment, if you take your dollar to the central bank to redeem it, they'll give you another dollar. There's no reference to anything real and no classical measure of value. We have what Jim Grant likes to call the Ph.D. standard, and I think we need to move away from that to the kind of standard that sustained our country during its periods of greatest growth and strongest employment.

Ms. Bennett: We always seem to make changes in the United States when things break down, but not beforehand. What is going to be the instigator to standardize our currency?

Mr. Lipsky: People say things could become a disaster. The last six years have been a disaster.

Ms. Bennett: Exactly.

Mr. Lipsky: Huge amounts of unemployment, not just for a short period, but for six years. It's consumed almost the entire Obama presidency. People are still trying to figure out their homes, still trying to figure out how the price of college got more than halfway to $100,000 a year — you know, all these things. We've been living through this, and I think events have energized Congress to start looking at this. The Sound Dollar Act, or Centennial Monetary Commission Act, or Audit the Fed Act, or Free Competition in Currency Act. This is why Janet Yellen — to bring it back to where we came in — is fighting so hard against the Congress doing this. We're in a constitutional moment here where Congress is going to take a look at this, I predict.

Ms. Bennett: Do you think they're going to have the guts to do it?

Mr. Lipsky: I think the American people have a lot of guts.

Ms. Bennett: Me, too.

Mr. Lipsky: And at the end of the day, the Congress has to listen to the American people.

[Apr 10, 2015] The Government's Revolving-est Doors

Apr 07, 2015 | Zero Hedge

Former employees of federal agencies can often find good (and lucrative) jobs as lobbyists, capitalizing on the connections that they forged while in public service. As OpenSecrets exposes, the numbers of revolving-door-enthusiasts is reminiscent of the Ebola epidemic as this deadly-to-democracy disease spreads from department to department ripping away 'hope and change' wherever it appears. "Revolvers" include those as powerful - and well connected - as secretaries of state and as far from Washington as Peace Corps volunteers... but The Department of Commerce tops the list...

The agencies shown here have employed the greatest number of former lobbyists - or sent the greatest number of former employees to lobbying firms and interest groups.

Agency Number of revolving door people profiled
Dept of Commerce 1736
Dept of Defense 1688
Dept of State 1452
Dept of Health & Human Services 1225
White House 1216
Dept of Agriculture 1112
Dept of Army 1080
US House of Representatives 876
Dept of Justice 864
Dept of Energy 840
Dept of Transportation 750
Dept of Interior 700
Dept of Labor 555
Dept of Housing & Urban Development 530
Dept of Homeland Security 520
Dept of the Treasury 444
Dept of Navy 428
Dept of Education 412
Dept of Air Force 312
US Senate 256

Source: OpenSecrets.org

[Apr 10, 2015] Rahm Emanuel and Rick Perry Hold Public in Bipartisan Contempt by Lambert Strether

April 7, 2015 | nakedcapitalism.com

Lambert here: This post is short and sweet. It's worth reminding ourselves that on some axes of evaluation, Republicans and Democrats are far more alike than different.

By PEU Report. Originally posted on their blog, Private Equity Report.

Holding the public in contempt is a bipartisan effort. Consider the following stories. The first involves Republican Governor Rick Perry of Texas:

Information contained in a blistering state audit shows that at least five of the recipients… which got tens of millions of dollars from the fund — never actually submitted formal applications. At issue are at least five recipients of Texas Enterprise Fund money: Vought Aircraft…

Texas Governor Rick Perry gave Vought, a Carlyle Group affiliate, $35 million for fifteen years. Ten years later it's unclear if Vought provided even one additional new job. Governor Perry's job number is fanciful and the recent audit gives no overall job number. In 2010 Carlyle sold Vought for $1.44 billion but not one penny was returned to Texas taxpayers.

Chicago's Democratic Mayor Rahm Emanuel is as free with taxpayer money for his political benefactors and purposely evasive about those relationships:

Emanuel's administration has for weeks blocked the release of correspondence between his administration and one of the Democratic mayor's top donors, Michael Sacks. The administration has also refused to release details about tens of millions of dollars in shadowy no-bid city payments to some of Emanuel's largest campaign contributors.

Rahm's top donor is a private equity underwriter (PEU):

The CEO of the Chicago private equity firm Grosvenor, Sacks has been described as Emanuel's closest ally in the private sector, and has been called Emanuel's "go-to guy" and his "top troubleshooter."

PEU sponsored politicians are above the law:

Illinois' open records law mandates that communications to and from public officials like Emanuel be made available for public inspection.

Back to how Rahm rewards his donors:

…firms that have received tens of millions of dollars' worth of shadowy "direct voucher payments" (DVPs) from the Emanuel administration have given more than $775,000 worth of campaign contributions to the mayor's political organizations.

Chicago's DVP process is permitted thanks to loopholes in Illinois' procurement law that allow municipal officials to circumvent the traditional contracting process. Unlike standard government contracts, DVP payouts do not require any type of public documentation. Emanuel appointees retain substantial discretionary authority to approve DVPs. The payments are not required to go to the lowest bidder; vendors receiving the payments do not have to list their qualifications and never need to document the services they provide to the city in return for the money. The DVPs appear to have been used for everything from phone service to interest payments to financial firms, but unlike the George W. Bush administration's no-bid contracts, DVP payments do not even require a formal contract, so it is impossible to verify what the money purchased.

No application, no contract and no accountability. It's our PEU world, where politicians Red and Blue love PEU.

[Apr 07, 2015] Decisions Life and Death on Wall Street

Apr 07, 2015 | Jesse's Café Américain

I have just started reading a new book by Janet Tavakoli called Decisions: Life and Death on Wall Street.

There is also a paperback version of it available in the US and Canada here.

This is a non-fiction story of her travels in the world of finance that asks the question, 'What would you be willing to do for money and power?'

As usual Janet does not pull her punches. The description on Amazon is rather intriguing.

In New York, the Federal Reserve Bank hides damaging information about too-big-too-fail banks from the public eye. A prominent bank CEO seems on the verge of a nervous breakdown.

In Washington D.C., a former Wall Street regulator checks into a hotel using the name of a hedge fund manager for an illicit meeting with a prostitute. In a D.C. suburb, the CFO of a beleaguered mortgage giant chooses a drastic personal end to "relentless pressure".

In a picturesque suburb of Zug, Switzerland, the CFO of a major insurance company decides to end his life. In London, a financier kills himself in a way he once said he never would.

In her new memoir, Janet Tavakoli shines a bright light on the money-driven culture of Wall Street and Washington, and the life and death consequences of our decisions that put profit above all.

"The U.S. went off the gold standard in August 1971. With no benchmark, central banks could print money and debase currencies. That opened the door for huge bailouts after big banks screwed up in a big way. Taxpayers—not incompetent bankers—paid the price.

By [the late 1980's], the Federal Reserve Bank and large U.S. banks had established a pattern to control the public relations damage each time banks had a major screw-up: accountants and regulators let banks lie about the size of the problem to stall for time; the Federal Reserve blew smoke at the media; finally, the Fed would bail out the banks in a way that most taxpayers would not understand.

Banks didn't have to get smarter or more competent. The Fed trained the banks that uninformed taxpayers would eat the losses, and fake accounting would let bank officers keep their positions and their money."

If 'rule under law' were more than just a slogan in the United States, men who occupied the senior-most positions in too-big-to-fail banks would have been disgraced, prosecuted, and jailed. But no bank executive was held accountable."

[Mar 31, 2015] Generous Welfare Benefits Make People More Likely To Want to Work, Not Less

Mar 31, 2015 | Economist's View

Not so sure this is conclusive -- it seems like the survey question could have been sharpened:

Generous welfare benefits make people more likely to want to work, not less: Survey responses from 19,000 people in 18 European countries, including the UK, showed that "the notion that big welfare states are associated with widespread cultures of dependency, or other adverse consequences of poor short term incentives to work, receives little support."

Sociologists Dr Kjetil van der Wel and Dr Knut Halvorsen examined responses to the statement 'I would enjoy having a paid job even if I did not need the money' put to the interviewees for the European Social Survey in 2010.

In a paper published in the journal Work, employment and society they compare this response with the amount the country spent on welfare benefits and employment schemes, while taking into account the population differences between states.

The researchers, of Oslo and Akershus University College, Norway, found that the more a country paid to the unemployed or sick, and invested in employment schemes, the more its likely people were likely to agree with the statement, whether employed or not. ...

The researchers also found that government programmes that intervene in the labour market to help the unemployed find work made people in general more likely to agree that they wanted work even if they didn't need the money. In the more active countries around 80% agreed with the statement and in the least around 45%. ...

"This article concludes that there are few signs that groups with traditionally weaker bonds to the labour market are less motivated to work if they live in generous and activating welfare states.

"The notion that big welfare states are associated with widespread cultures of dependency, or other adverse consequences of poor short term incentives to work, receives little support.

"On the contrary, employment commitment was much higher in all the studied groups in bigger welfare states. ..."

Darryl FKA Ron said...

When surveyed Bill Clinton responded "I did not have sexual relations with that woman, Miss Lewinsky. I never told anybody to lie, not a single time; never. These allegations are false. And I need to go back to work for the American people."

Bill's statement established strong precedents for both the validity of survey information and the work ethic :<)

Personally I would stick with correlations of prime working age LFPR to employment insurance and re-employment benefits among nations with various levels of support for unemployment.

Support can be either too weak or too strong perhaps, but too weak would be the obvious mistake. Unemployment has high costs for individuals and prolonged unemployment makes re-employment more difficult for several social reasons as well as possible skills erosion. Employers generally avoid hiring the long term unemployed. The long term unemployed may lack the living conditions to present themselves at their best for job interviews (clothes and appearance) or to even show up (transporation or childcare). Necessity may place them into the grey or black markets for employment that become increasingly difficult to separate from.

I am unable to find anywhere support for the unemployed is too strong; i.e., where high levels of support correlate to high levels of unemployment. The unemployment rate in Qatar was 0.30% in 2013. The maximum unemployment rate in Qatar during this century to date was 3.9% in 2012. You can hardly be more supportive than Qatar.

This survey analysis is an example of discrediting the obvious truth of the veracity of support for unemployment and re-employment with a ridiculous and unconvincing approach. It is more about how to provide employment for inadequate social scientists than how to prove that the general wage working population benefits greatly from support during unemployment without any overall increase in the tendency to freeload.

Lafayette said in reply to Darryl FKA Ron...

Confucius say: "When employing tongue-in-cheek, be careful not to bite ..." ;^)

Darryl FKA Ron said in reply to Lafayette...

Not exactly sure which part you were referring to, but my comments were admittedly a rushed bunch of snark. Generally I believe sociologists have a lot to add to the economics discussion, but in this case the economists already had it covered and did not need their "help."

Lafayette said in reply to Darryl FKA Ron...

{Generally I believe sociologists have a lot to add to the economics discussion, but in this case the economists already had it covered and did not need their "help."}

Which is what I have been trying to get across in this forum as well for a long, long time.

The numbers help formulate policy decision making, towards helping us understand where we are going. But the end-results depend upon implementing those policies towards specific goals.

That aint happinin.

cm said...

The doubt comes from people apparently assuming that in the European "welfare states", somebody who doesn't want to work can just apply for no questions asked welfare and then hang out on their hammock.

The reality is that the amount and duration of UE benefits is based on one's history of (UE insured) employment and past benefits receipt - more or less, so much UE for that much work; and there are very stringent income and asset hurdles to qualifying for welfare, depending on circumstances you may not be allowed to keep a car or live in larger square footage than deemed necessary.

And anybody on benefits not of advanced and "unemployable" age will be strongly "encouraged" with an array of "measures" to take work or "job market integration" programs. But in the end there are still too few jobs.

Darryl FKA Ron said in reply to cm...

Yep. And also the benefits really are not all that great for someone that might have been working and paying their mortgage each month before the 2008 crises. The benefit maximums here in the US are such that a lot of people would lose their homes if they lost their jobs.

anne said in reply to anne...

The employment-population ratios for men and women 25 to 54 in the Nordic countries and the United States were 86.1, 84.1, 82.1 80.6 and 76.8 at the close of 2014.

Guess which ratio belongs to the US.

Richard H. Serlin said in reply to 400 ppm...

Welfare payments are very poor. There's still a huge incentive to get a job, when any job will be a huge increase in income. You're saying that if someone gets $10,000/year there's no incentive to get a job paying $25,000 or 50. And besides, job search, and going to training classes, etc. can just be required to still get the welfare.

[Mar 31, 2015] Four TBTF Banks Threaten To Withhold Funds To Democrats Over Elizabeth Warren's Wall Street Rants

Mar 31, 2015 | zeroh edge.com

Having already proven that their institutions are above the law in the aftermath of the financial crisis, executives at the "Too Big to Fail and Jail" banks have decided it's time to teach Senate Democrats a lesson.

Not being content with trillions in taxpayer backed bailouts to protect and further consolidate virtually all wealth within their oligarch fiefdoms, these bankers are irate at the notion that a commoner would dare criticize their unassailable crony privilege.

What Wall Street wants is one hundred Chucky Schumers in the Senate.

[Mar 30, 2015] Elizabeth Warren Strikes Back as Citigroup Tries to Blackmail the Democratic Party by Yves Smith

March 29, 2015 | naked capitalism

An unusual move by a thin-skinned too big to fail bank, Citigroup, to slap down the finance-skeptic faction of the Democratic party appears to be backfiring.

Reuters reported on Friday that Citigroup was making clear its displeasure with the way Elizabeth Warren had been calling to its overly-cozy relationship with the Administration by threatening to withhold its customary bribe, um, donation to the Democratic party:


Big Wall Street banks are so upset with U.S. Democratic Senator Elizabeth Warren's call for them to be broken up that some have discussed withholding campaign donations to Senate Democrats in symbolic protest, sources familiar with the discussions said.

Representatives from Citigroup, JPMorgan, Goldman Sachs and Bank of America, have met to discuss ways to urge Democrats, including Warren and Ohio Senator Sherrod Brown, to soften their party's tone toward Wall Street, sources familiar with the discussions said this week.

The story noted that the amount at issue was only $15,000 per bank, so this scheme is more a warning shot that a serious move, particularly since it is aimed at the Senate, and thus pointedly steers clear of the Big Finance stalwarts, the Clintons. But if you widen the frame a bit, there is more at stake here than you might think. Warren has declared war on the Wall Street wing of the Democratic party, including the powerful network of proteges and fundraisers affiliated with former Treasury secretary, former Goldman partner, and more recently, vice chairman of Citigroup Bob Rubin. One politically-savvy financial analyst calls this cadre "the Rubino crime syndicate".

Warren fingered Citigroup's extensive connections to the Executive branch when she fought the addition of a rider to a must-pass spending bill that would eliminate a Dodd Frank provisions to force banks to stop trading certain derivatives in taxpayer-backstopped entities (the so-called swaps pushout rule). As you'll see below, not only did Warren have the bad taste to point out that the current Treasury secretary is a Citigroup alum, and that Sandy Weill, Citigroup chairman, had offered Timothy Geithner the opportunity to run the bank, she also said that Dodd Frank had come up short by not forcing Citigroup's breakup. If you've not seen this speech, you need to watch it. You'll understand why Citigroup is desperate to find a way to leash and collar Warren.

https://www.youtube.com/watch?v=DJpTxONxvoo

participant-observer-observed, March 29, 2015 at 3:55 am

I wonder how many of the American public know the Citigroup shareholder status of Saudi Prince Alwaleed bin Talal?

Keep interfering in legislative affairs, Citigroup, and lets get more and more daylight exposing all the dark alley ways you have over there!

How many DoD checks get processed through Citi to pay for the new Saudi front end to the US war economy? I bet that balance sheet is interesting, and may show that Citi has already moved its wares from the Dems into the Cheney/Halliburton/Xe (or whatever it is they call themselves now) camp. Must make the billions of HSBC cartel drug money look like monopoly game money! In that case, making a public show of crying over spilled milk is just hankering after more legislative give – aways and is more a call to GOP than dems.

Aren't we well into the oligarchy titan demigod wars? Prince bin Talal vs Rubin ? We have Ted Cruz's wife on leave from Goldman. Where's JR (Dallas fans)?

nat scientist, March 29, 2015 at 8:54 am

Not to mention the "sanctions" which pump up the jam for the "blessed" alternate route AKA economic warfare and Holy smoke.

John, March 29, 2015 at 9:40 am

Remember how the American taxpayer saved the majority of Saudi Prince Alwaleed bin Talal 's fortune that was invested in Citigroup when we bailed out Wall Stree ? About 11 billion at the time.

Then he went on the Charlie Rose Show about a year later after trillions of taxpayer money was extorted from us and given to Wall Street and said that America's debt and deficit were unacceptable and "entitlements" needed to be cut.

Every time he tours America since then he feels free to tell us that our debt and deficit are unacceptable and demand that the government do something about cutting "entitlements"

Jim Haygood, March 29, 2015 at 10:51 am

Citibank was a dynamic, rapidly-growing financial innovator … half a century ago. Lord, don't we miss ol' Wally Wriston.

Now Citi and its peers resemble the U.S. steel industry in its latter days, when its only edge was government handouts and using political influence to crassly bend the rules in its favor.

It didn't work for Big Steel. It wouldn't work for Big Banking, except that now the political corruption goes far deeper, and a banking cartel called the Federal Reserve has gotten itself installed as a quasi-governmental agency.

Abolish the freaking Fed.

Yves Smith, March 29, 2015 at 1:50 pm

Um, that innovation under Wriston brought us the Latin American debt crisis. It was Wriston who said countries don't go bankrupt.

flora, March 29, 2015 at 6:38 pm

Wally Wriston? Why not Charlie Mitchell, "Sunshine Charley" from the 1920's at National City Bank (later Citi)? Sen. Carter Glass – of Glass-Steagall regulation – said, "Mitchell more than any fifty men is responsible for this stock crash." (1929 crash).
Pretty devastating article about Citi in the April 2015 issue of Harper's Magazine by Andrew Cockburn. Plus ça change, plus c'est la même chose. Especially at Citi, aka National City Bank. Mr. Clinton, eliminating Glass-Steagall banking regulations, helped create the the current Citi monster.

cnchal, March 29, 2015 at 6:00 am

The story noted that the amount at issue was only $15,000 per bank . . .

The banks would like to bribe Democratic senators, and are only offering $15K each? That's on a similar scale as Apple or Walmart paying it's Chinese slaves $2.00 per day. The senators will need a much bigger bribe for the banks to be successful. The greed and the gall of the banks. They won't share their stolen money with anyone.

Ned Ludd, March 29, 2015 at 9:41 am

While in office, corporations give a taste to hook politicians. The luxurious lifestyle comes after a politician leaves office.

After leaving (or being thrown) from office, politicians who were loyal to the wealthy get to fulfill all of their desires; which entices the next generation of political opportunists to put themselves up for sale. They become advisers or lobbyists, earning six figures per speech, while traveling around the world and vacationing at resorts under the guise of "ideas" conferences, which are simply venues to discuss new ways to fleece the rest of us.

For the most talented, most ambitious, or most connected politicians; the media then works to erase their past misdeeds; giving them (or members of their family) the ability to enter elected office again, for a new cycle of deceive-betray-and-profit.

bh2, March 29, 2015 at 10:31 am

Huey Long once commented that an honest politician is one who, once bought, stays bought.

Most do, regardless of party.

The banksters fund all sides and could care less which side "wins". Hence they always come out on the "winning" side.

OpenThePodBayDoorsHAL, March 29, 2015 at 6:03 am

The pathetic idea that Elizabeth Warren's softball questioning of the BankerState's absolute right to absolute rule is somehow seen as a glimmer of hope is…pathetic.

Read your history books for real opposition that has been mounted in the past, Andrew Jackson, William Jennings Bryan.

These are criminal enterprises and must continually be brought down by a (non-somnolent) population. Yes yes blah blah "oh oh but they perform a critical function in credit creation etc etc and if they failed it would be really disruptive" blah blah blah. It has become blatantly obvious to all but the infested presstitutes that their game of ever-expanding credit and new ways to steal from the poor is teetering as badly today as it was 7 years ago when they first began gifting money from taxpayers and savers to pay off their gambling debts.

I know we'd like to have at least a little hope with someone like Warren but I think we all need to grow a pair (girls too), get mad, and start screaming and educating people about much much more radical solutions than just a kindly lady being a little impolite.

Yves Smith, March 29, 2015 at 6:40 am

It's spurious to compare what a President can to do what a Senator can accomplish; we were against Warren running for the Senate for that very reason. But she has made remarkably effective use of the very constrained bully pulpit a modern Senator commands.

Rhetoric was more heated in the 19th century than now. And pray tell, what did William Jennings Bryan actually accomplish? Remarkably little. And unlike Warren, he spent his entire career in politics and had effective control of the Democratic party. It was Roosevelt, and not failed three time presidential candidate Byran, who broke up the trusts.

Warren has repeatedly called for prosecutions of bankers. You can criticize her on other fronts, but you are really off base here.

Code Name D, March 29, 2015 at 12:12 pm

I am not so sure.

Politics, like war, has a lot of angels in operation. One may think they are taking the enemy on and holding their own, only to discover the real force has snuck past you and cut off your supply line.

Today the political strategy is to not fall for the appearance of victory. I am not sure Warren has figured that out. Her speech here still makes it appear she thinks that Republicans and Democrats can still be reasoned with, hence her conciliatory tone.

Where dose she think she can go with this? If she gets the provision pulled out… what has she actually won? It's not like there aren't already plenty of other provisions insure the banks won't get bailed out already enshrined in policy. The very term "too big to fail" is predicated on the idea that we can not afford to let Citi Bank fail. So even if Warren is able to get all of these provisions removed, once City gets into trouble again, panic will rain in Congress and they will pass an emergency act granting just such power.

The reason why reformers were firebrands in the 30s was because they understood the balance of power. When politicians are bought off, you can't reason with them – but you can turn his political base against them for their decisions and cause them to lose re-election. And you don't do that from the congressional podium, but by going directly to the people. You don't so that by being calm and consolatory, but by pounding the podium and expressing the outrage that the events deserve.

Sorry, but Warren is going after small fry and working for tiny victories. Her heart is in the right place, but her strategy is still too little, too late.


hunkerdown, March 29, 2015 at 6:06 pm

The balance of power has shifted. Now that a Senator never really *needs* to see or set foot in their state again for any reason, they have six whole years to complete their grifting project and decamp. The act of voting cannot discipline a system, especially not one that depends on it for its legitimacy. Maybe the peasants get off on the whole fantasy of judgment day and the arrogance to believe their childish electoral games are actually an exercise of meaningful power, not just giving them a father without which most Americans are too scared to think independently, let alone venture out at night.

Also, now that the political class has equated cheap pathos with deliberation and cheap ethos with common interest, the whole stupid, half-assed performance of caring on the part of the upper class depends on the willingness of the populace to suspend disbelief every time they venture out-of-doors and see something incongruous with their personal Matrix that they "earned" by "paying their dues", which is only a gross euphemism for systematic hazing and, like any other scheme of deferred compensation you can't enforce, religious nuttery.

participant-observer-observed, March 29, 2015 at 8:56 pm

I believe that you are correct that we need to be skeptical of another Hopium-for-change delerium pipe smoke and mirrors show putting the electorate back to sleep, and that the populace must be engaged to make real change. Something must be learned from the Obama presidency on that front (Clinton 2.0 'used-car salesman,' 'go back to bed, kids, everything will be fine' talk)

But given an engaged populace (for the sake of argument, since we don't have one), why not have Warren as bankster watch-dog too?

Having a skeptical, watch-dog voting public and a senator both together is not to be discounted! (And throw in Alan Grayson too, for fearless watch dog track record)

We cannot afford to wait around for 1-size fits all. Coalitions (L-R alliances in Nader-speak) have to be found to fight issue by issue, AND where they converge (War economy + Wall St together). Perhaps YOU can show E Warren where the Israeli+Saudi war economy implicates US banking and enlighten her!

Code Name D, March 29, 2015 at 10:05 pm

I love this place because of questions like these.

Let me go over these one at a time for both hunkerdown and participate-observer-observed.

1) The balance of power has shifted?

Has it? I am curious how you might present an argument for this assertion. I certainly do not see it. (As is my point, I must admit.)

2) The act of voting cannot discipline a system.

I completely agree with one caveat. The act of voting ALONE can not discipline a system. Voting can only place or remove certain people from power. But the system we have now is either random (where voters can not make informed decision on who or what they are voting for) or pointless (where the all of the options presented will produce the same outcome.)

But I suspect you would agree that a substantive political sea-change can not be legitimate if it takes place without the consent of the governed. And voting is the only formal way of registering the will of the people. At some point, you must go to the polls.

But an election is actually one of the later stages in the process. Delegitimizing the current system is among the first steps.

3) Why not have Warren as backster watch-dog too?

I actually agree with you. Why not have her as a watch-dog? Now show me how she is an effective watch-dog?

I am not calling into question the quality of Warren's intentions or even her competence. I am calling into question the soundness of her strategy, assuming that it can be argued that she actually has one.

4) We cannot around to wait around for 1-sice fits all.

I am going to assume you meant that we can not wait around for a singular savior. (Do correct me if I am reading that wrong.) I would agree actually. But then I wonder why it is that this seems to be our strategy most of the time, because right now there are plenty of people who are latching onto Warren for precisely this reason.

But I have also come to suspect that change won't come from grass-roots activism either. That strategy has had more than sufficient time to show results and thus far we have very little success we can point to.

A real push for reform will likely require something between the two, involving the participation of singular leadership as well as an active popular movement to skeptically review such ideas and act on them. It is often said that the mark of a great leader is one who inspires, calls upon, and depends on the leadership of those he pretends to lead,

I have great difficulty imagining Warren as being that kind of leader.

Adam Eran, March 29, 2015 at 12:54 pm

While I'll second the notion that Warren's "victory" is pretty weak tea, I'd suggest admiring someone besides Andrew Jackson. He's the fellow responsible for the Trail of Tears genocidal Indian relocation (*after* the Georgia supreme court validated the Cherokees' title to their land in Georgia).

For bonus points, he paid off the entire national "debt" in 1835, for which the U.S. was rewarded with the panic of 1837, the worst of its seven Great Depressions. Such Depressions follow major "debt" reductions, so the praise for the "fiscally responsible" Clintons, who ended welfare as we know it, is at least misplaced too.

susan the other, March 29, 2015 at 1:46 pm
The Saudis are the key. Together with the right wing Israelis, they are determined to create a war, however chronic it is, and luke-warm, to maintain control over the energy resources in the Middle East. The Gulf War has long since become an oxymoron because in siphoning off the money to perpetuate the war, the USA was impoverished. Just like the Cherokee had to be stripped of their land, the middle class became the goat. So busting up City is a red herring. Since our nation has been hollowed out by this modern imperialism, the only thing that will fix the mess is to assert national superiority over the clowns who can't quite ever end a war. Nationalize the banks. And take control of the military as if we were a democracy.
Ulysses, March 29, 2015 at 7:57 pm

"Nationalize the banks. And take control of the military as if we were a democracy."

If I thought someone could actually accomplish that simple 2 step program, he or she would have my vote for POTUS in a heartbeat!!

Yves Smith, March29, 2015 at 1:52 pm
Straw man. I never said Warren scored a major victory. I said she was creating the perception that the banks were vulnerable, which is an important shift given the power they wield in DC.

And fer Chrissakes, she's been a Senator for all of two years. Readers are comparing her to people who have had much longer careers in politics.

susan the other, March 29, 2015 at 3:50 pm
You are right. I confess I want her to barnstorm the whole political scene. Because I see her as a very inspired person with an understanding of the whole situation which is beyond most of us.

And because I fear that letting it go on with small fixes, is dangerous. But then it is a dangerous world.

Code Name D, March29, 2015 at 5:39 pm
What point are baby-steps when you are trying to compete with corporations that have a stride that spans the globe itself? Go big, or go home.
Code Name D, March 29, 2015 at 5:38 pm
That is what is bothering me. She is showing the banks are venerable – when we have the argument that they are indispensable and can't fail left in tact, or worse, may actually be true at this point.

And the "venerability" of the banks is an elusion, a honey pot that they want her to go after. It makes her waster her time while they find a way to outflank her politically. I don't think the banks are vulnerable in this way.

She needs to undermine the authority of the banks to have power in congress before she can point out that the banks have too much power within congress.

The average American knows intuitively that the banks are corrupt and have too much influence on congress. But they have few facts to support that intuition. When cooler heads prevail, the rational argument will currently side with the banks every time.

Meanwhile, congress operates under the concusses that the bank's power within congress is proper and justified. The banks are what create the money supply and jobs. They are responsible for growing the economy, a task that government is ill-suited to manage even with the best of intentions. I have seen nothing from Warrant to lead me to think she is skeptical of this dynamic, let alone critical.

The secret to propaganda resides in the truth that remains undisclosed – not in the lies that they would have you believe. The fact that we have a revolving door between the administration and the banking industry is hardly undisclosed and is actually outside the point. Even if she did manage to lock down the revolving door, ideas and "economic theory" that favor the banks is already in place and well established in academic curricula.

What she needs to go after are the consequences of the decisions that are made and the reasoning behind those decisions. Even the deliberative process for those decisions is a proper target. Who makes those decisions is and will continue to be a red haring.

Comparing her with more established politicians is fair game when she is repeating their mistakes and repeating their narratives.

GuyFawkesLives, March29, 2015 at 8:44 pm
Where were you when we were getting beaten up and maced in the streets? People successfully laughed like the banks wanted you to at Occupy Wall Street. And then once again the populace remains obedient.

I think I need to begin building that guillotine in my front yard.

Ulysses, March29, 2015 at 7:08 am

"Warren has repeatedly called for prosecutions of bankers."

I do agree that Elizabeth Warren is to be commended for her pushing back against the power of the banksters. Yet she could go much further than her vague calls for accountability of the "too big to jail" fraudsters.

She could use her "bully pulpit" to outline specific crimes committed, by specific criminal banksters, and insist that there will be no business as usual until these named individuals are hauled into criminal court by the DOJ.

Holding up legislation, appointments etc., is all well and good -- but we have an intensely criminogenic atmosphere today on Wall Street, and we desperately need an Elliot Ness to start putting these fraudsters behind bars!!

DanB, March29, 2015 at 8:25 am
Where Warren will go from here, if she's not engaging in a Machiavellian veal pen ruse, is to openly challenge and expose Obama, the Clintons and the entire DLC corrupt enterprise.

She's my senator and when some friends and I met her in August 2011 we told her she'd one day have to face the contradiction between the real interests the Democratic Party serves -- the 1% -- and her commitment to average Americans.

And I wish she'd knock off that "Middle class Americans" rhetoric that ignores the working poor and the dispossessed. On the other hand, maybe she's sincere and is unconsciously playing the role of "the first pancake" of -dare I still hope?- a citizens awakening to the class loyalty inspired depredations of both parties.

Carla, March29, 2015 at 11:18 am
"She could use her "bully pulpit" to outline specific crimes committed, by specific criminal banksters, and insist that there will be no business as usual until these named individuals are hauled into criminal court by the DOJ."

For that matter, Senators Sherrod Brown and Bernie Sanders could back her up. Wouldn't kill 'em.

Vatch, March29, 2015 at 12:07 pm
Excellent point about Brown and Sanders, Carla. For those Naked Capitalism readers who live in Vermont or Ohio, here's their contact information:

Brown, Sherrod – (D – OH)
713 Hart Senate Office Building
Washington DC 20510
http://www.brown.senate.gov/contact/
(202) 224-2315
Ohio:
Toll Free: 1-888-896-OHIO (6446) or
Cincinnati: (513) 684-1021
Cleveland: (216) 522-7272
Columbus: (614) 469-2083
Lorain: (440) 242-4100

Sanders, Bernard – (I – VT)
332 Dirksen Senate Office Building
Washington DC 20510
http://www.sanders.senate.gov/contact/
(202) 224-5141
(800)-339-9834 (toll-free in Vermont) or
(802) 862-0697 (calling in the Burlington area)

Yves Smith, March29, 2015 at 2:00 pm
Are you crazy? If you want her to become irrelevant pronto and hand the banks a huge PR win, that's just the way to do it.

Warren has no subpoena powers and all of maybe a half a dozen staffers. She'd be accused of shooting from the hip, just making stuff up to raise money and get headlines, when Federal prosecutors and regulators, who have vastly more access to what really happened at the banks investigated for years and found virtually nothing criminal (the little they have involves money laundering).

She'd become the new Joe McCarthy, circa July 1954.

Code Name D, March29, 2015 at 5:49 pm
Irrelevant in what regard? To the banks and politicians that they bought off perhaps. If she tried to take these accusations to a court of law, you might be right.

But the court of public opinion is a different theater. Here she doesn't have to bring chargers; all she really needs to do is demand answers to hard questions. It will be the justification the bank apologists that will do them in because they will completely believe the bat-crazy excuses they throw out. When they back-fire, they will change there tune with a completely new theory that will still not answer the original question yet still be crazier than the first.

Ulysses, March29, 2015 at 8:09 pm

"When Federal prosecutors and regulators, who have vastly more access to what really happened at the banks investigated for years and found virtually nothing criminal (the little they have involves money laundering)."

And these prosecutors and regulators are honest??!??

So you have just been pulling our leg all these years when you have written, again and again, that these banksters have committed all sorts of control fraud and other crimes? Now your tune has changed to "nothing to see here, move along, don't make waves??!!" Please say it ain't so!!

jonboinAR, March29, 2015 at 8:45 pm
Yeah, that didn't quite make sense to me either. The message I have been getting from Yves for these several years has been that the regulators and government attorneys had never found anything prosecutable because they weren't really interested in doing so. The reply above sounds like a changing of that tune to that there may be nothing illegal to find. If so, this would support Obama's statement of several years ago to the same effect, which statement was roundly jeered by frequenters of this board and many others. But the Yves' reply is probably just slightly carelessly worded, or I'm not understanding something.
participant-observer-observed, March29, 2015 at 9:18 pm
Go back and read Bill Black's past years' of comments comparing GFC to S&L investigations, prosecutions, and convictions.

I recall that one significant factor is lack of prosecutor numbers. Don't you remember the White House calling all of the state AGs down to trade in their pitchforks for apple pie crumbs from the WH linens? (Go back and read Harris or Schneiderman from 5 years ago vs now)

Warren's prospects re Wall St regulation are a matter of pragmatism and realism. Her work is a necessary but insufficient condition! She seems to understand her limitations and to make best use of what resources she has.

JS Bach, March29, 2015 at 8:27 am
Until we elect a President who will appoint a US Attorney General who will prosecute criminal conduct by Wall Street, nothing will change. Neither Holder nor Loretta Lynch have pursued criminal prosecutions; fines by Wall Street are simply considered a cost of doing business passed along to the shareholders in the form of a temporary "hit" to the stock price.
roadrider, March29, 2015 at 8:56 am
If the Dim-o-craps had any integrity they would have told the banksters to stick their campaign contributions where the sun doesn't shine a long time ago.

But, of course, they won't.

BudinPA, March29, 2015 at 8:56 am
Please tell me, who could have removed the push-out amendment from the CR bill before the vote but didn't.
craazyboy, March29, 2015 at 9:02 am
Time is money. It's the age of ZIRP. Politicians get ZIRP for their time-money.

We must all tighten our belts for the good of the banking system.

Yves Smith, March29, 2015 at 2:03 pm
IIRC, only five Senators voted against cloture, which was the vote that mattered. The threat was Warren filibustering a must-pass bill, so holding it up would have been a big deal.
Henry Carraro, March 29, 2015 at 9:59 am
Bless her heart. Elizabeth Warren makes a hell of case, but all of this is smoke and mirrors. Bailing out the banks again the next time will be impossible.

The total U.S.A. debt is about 18 trillion dollars. But when you roll in unfunded liabilities like for example the one trillion in unfunded military retirement benefits for generals who can retire with 30% more annual income than the earned while on active duty.

The Federal Reserve hiding trillions and trillions of fictitious bond sales to no one. Paying governments to buy worthless paper. There is over 75 trillion dollars in unfunded liabilities. Yeah with a capital "T".

But wait there is more.

Last count there is nearly 625 trillion dollars in derivatives that are totally unfunded. Say what? The biggest banks are leveraged beyond my ability to fathom what could happen in case of a default. We the tax payers are liable to clean up this mess too. My question is how? And with what?

The question I leave you with is how can the U.S.A. be responsible for nearly 800 trillion dollars in unfunded liabilities. How did we allow this to happen?

Yves Smith, March29, 2015 at 1:46 pm
*Sigh*

The derivatives number is notional, and not the economic value. And of the global banks that are major derivatives players, only about 1/3 are American. Most of that number is really plain vanilla stuff like interest rate swaps. It also includes huge markets that are exchange traded, like Treasury futures and S&P futures, which are not risks to the banks at all. If you want to worry, worry about the economic risk of credit default swaps or OTC energy derivatives.

The US will never go bankrupt. It can create too much inflation. The banks most assuredly will be bailed out. Remember, the TARP made money!

JEHR, March29, 2015 at 10:05 am
The story noted that the amount at issue was only $15,000 per bank, so this scheme is more a warning shot that [sic] a serious move, particularly since it is aimed at the Senate, and thus pointedly steers clear of the Big Finance stalwarts, the Clintons.
Expat, March29, 2015 at 11:44 am
Warren is not a threat. She is the token populist. Obama can point to her to show how his administration and party are tough on banks. The banks can use her as their bogeyman and garner sympathy. The right can use her as a lightning rod and avoid having to address the issues.

In short, Warren is perfect. The rest, however….

TimmyB, March29, 2015 at 12:15 pm
It is much too early to proclaim that Warren is "the token populist." If more populist candidates get elected, and/or more elected officials embrace populism, Warren will never be a token. If she keeps up the fight, even if she is not joined by additional elected populists, she will still retain the power of her "bully pulpit" to shine a light on Wall Street wrongdoing. To become a token populist, she will need to shut her mouth and go along with the rest of the corporate Democrats. Frankly, I don't see that happening.

While Obama might be able to point out to the public that Warren is a fighting

TimmyB, March29, 2015 at 12:34 pm
While Obama might be able to point out to the public that Warren is a fighting Democrat, to the people who really rule this country, the big money doners, pointing to Warren doesn't help at all. As this article highlights, Wall Street wants Warren neutered. If she were merely a token populist, instead of a real threat, Wall Street would have no need to neuter her. Token populists come already neutered.
Yves Smith, March29, 2015 at 2:08 pm
Warren stymied the Administration on Antonio Weiss, and they pulled out all stops to try to get him, including repeated articles attacking Warren in the Washington Post, the New York Times, and the Wall Street journal. She won a real David v. Goliath fight. And she and two other Senators stopped the Administration privately from another bank-boosting move that would have hurt large swathes of homeowners. I'm not at liberty to say more. But if I heard of one incident where a private talking-to stopped the Administration, there may be others. And more to the point, the fact that a mere tea and cookies conversation would make the Administration back down says they fear and respect her, and want to take her on only when they are confident they will win.

I see her as systematically taking on bigger and bigger targets, demonstrating that she can do damage and moving up to bigger and more important issues.

OpenThePodBayDoorsHAL, March29, 2015 at 6:04 pm
Yves I always appreciate it when you chime in. Yes Bryan didn't accomplish much. Yes A. Jackson genocided some folks (to use a current idiom). But we are very far from the point when tiny incremental wins like Antonio Weiss can make any difference at all, we are at the "hair-on-fire" stage across the board and need some true firebrands not just to speak truth to power but to inflame, enrage, inspire, and overthrow. Our Constitution says it is our right and indeed our duty to overthrow tyranny…and that's what this is by any definition of the term. The entire relationship between the citizen and the state is completely screwed up, we don't need to tinker, we need to reboot. I would call America in 1969 a reboot: we stopped a war, we threw out a crook president, and we completely changed the society. We can do it again…and boy do we need to.
jonboinAR, March29, 2015 at 9:02 pm
Warren doesn't appear so far to be the firebrand type. Will it be enough for her to be dogged and incorruptible? As Yves seems to be suggesting, biting off a little at a time, but ina relentless fashion?
Felix_47, March29, 2015 at 11:56 am
The Saudis and the Israelis figured out how cheap our politicians are long ago. I would love someone to investigate just how much mid east money was involved in the Citigroup meltdown and how much was saved for them. I suppose the bigger fees have to go to the conduits of these funds…..the Harvard/Yale lobbyist lawyers….who make money both ways. If one wants to know how the USG is going to do something simply figure out the course that would benefit Israeli and Saudi billionaires.
DJG, March29, 2015 at 12:18 pm
"The Administration (remember that Obama is still very much the party leader) again got too clever by half." I recall reading an article that Obama originally favored breaking up Citi, but somehow, Tim Geithner ignored his wishes. This seems to be a self-exonerating story, too clever by half indeed. Poor Obama, all tactics, no strategy. That applies to the article posted today about TPP as well.
Blurtman, March29, 2015 at 1:34 pm
President Obama stated on the Leno show, a few months into his first term, having conducted absolutely no investigations, that the banks had committed no crimes. He is merely a tool.
DJG, March29, 2015 at 12:20 pm
"Rubino crime family"? Talk about too clever by half. "Rubin crime family" will do. Rectification of names. There is no ethnic propensity toward crime. (And as always these are the sort of stray data and little Rubino lapses that make me wonder what people are talking about when they talk "identity politics.")
Yves Smith, March29, 2015 at 2:12 pm
Wow, are we being precious. The Mafia has a distinctive style of how it runs its crime operations. That's why we had a whole series of Godfather movies, and lots of other about treatments in novels and movies.
Fool, March29, 2015 at 3:08 pm
Yeah but let's face it: the Jewish financiers* are better than the Italian Mafia at this game. Consider this twee leverage-and-loot operation; good strategy but just a few billion short of the kind of leveraged buyout that would make it onto Dealbook. The Mafia's style isn't so distinctive — I believe Bill Moyers drew the comparison between financial advisory of IRA's' to protection rackets.

The truth is, facetious Italian suffixes are socially acceptable. And yet, had you written the "Rubinowitz crime family", by Monday morning David Brooks would place you on the neo-Nazi watchlist.

*Jewish guy, so acceptable user of the term "Jewish financiers"

Yves Smith, March29, 2015 at 3:48 pm
Oh, I dunno. The scene in The Departed where Jack Nicholson crushes Leonardo DiCaprio's hand and then throws cash at him to get it fixed is memorable. And it echoes Scorsese's scene in the Godfather where Sonny smashed a photographer's camera and then throws money on the ground.
DJG, March29, 2015 at 4:02 pm
Ahh, it's a witticism based on the mob's management style. Maybe you should have cited "Bob 'Meyer Lansky' Rubin."
timbers, March29, 2015 at 2:11 pm
Milton Friedman said a shift in intellectual view from one policy mostly universally accepted as "correct" towards another policy takes decades and happens slowly, but once it takes hold it becomes powerful. He notes the Socialist Party in America was the most influential party not because it held office but because other parties in power adopted a good part of it's program, because that was the dominate view of intellectuals of the time.

So Liz might be the early signs of that shift taking place now, and not just a Democratic Hood Ornament.

If she is, the bad news we will all be dead in the long run before any of us derive much if any benefit from this shit. Which brings us to John Keynes.

Chauncey Gardiner, March29, 2015 at 2:42 pm
Thank you for the clip of Senator Warren's speech and your related article. It is outrageous that Citigroup's lobbyists slipped that provision into the Omnibus "Must Pass" spending bill at the last minute misleadingly titled "Prohibition Against Federal Government Bailouts of Swaps Entities" that once again puts the American people on the hook for bailing out the biggest banks on their speculative derivatives trades.

Senator Warren's observations about Citigroup's grip over monetary and economic policy through their extensive network of former executives in the Executive branch of the U.S. government was enlightening to me. The amounts they have spent on lobbying, and the funds they have diverted to think tanks to influence public policy is particularly galling in light of the fact that Citigroup received over half a trillion dollars in bailout money under TARP, FDIC and the Fed. It is noteworthy that their constant lobbying pressure to pass legal loopholes has disappeared off the corporate media's radar screens along with all the other accounting, legal and regulatory forbearances, waivers, and the hidden subsidies and transfers of wealth to them over the past seven years. When does the statute of limitations expire on fraud?

I agree with Senator Warren regarding the need to pass the Brown-Kaufman amendment to the Dodd-Frank Act. It is clear that they have too much concentrated political power. That Citi and the other TBTFs are holding the entire country hostage is simply unacceptable.

Fool, March29, 2015 at 2:54 pm
I don't really understand the conflation of Obama with the Democrat "base" of limousine liberals. The limousine liberals hate Obama. For all you know, he's played a part in empowering Warren's ascent.
Yves Smith, March29, 2015 at 3:55 pm
Huh? Obama's New York City fundraiser have all been at the homes of private equity firm partners, the epitome of limousine liberals.
Fool, March29, 2015 at 8:05 pm
I grew up at the very core of limousine liberalism — and, if I were to guess, among the highest concentration of private equity firm partners' homes — and in my experience the dissatisfaction with Obama is almost unanimous (among people who voted for him). It's ironic that you would use his ties to the PE industry as an example: in theory, they should love him!…given how cheap credit is — for them to buy — and how high the public market is — for them to sell. But again, my impression is otherwise…

What I find more interesting though is the vague terms with which this sentiment among the limousine liberal class is articulated, e.g. "he does nothing," "he let me down," and so forth. So the right we know hates him, the neoliberals don't like him, and NC's linkfeed — which I arrive at daily — indicates to me that the left doesn't like him as well. It wouldn't be so strange if he wasn't doing an OK job, at least in superficial terms (buoyant stock market, reduced unemployment, etc.).

Perhaps come 2016 -- we'll have better perspective on his legacy. In any case, the ubiquitous dissatisfaction with Obama is odd, if unprecedented (indeed, at least the Carter administration was quantifiably bad). Personally, I have no read on Obama; put differently, where his ideological motives lie. However, I do think that for the President of the United States, in 2015, a transparently leftist agenda (gov't spending, progressive tax reform, etc.) would preclude the ability to get anything done. The tragedy of politics, in my view, is the paradox in which a politician cannot genuinely serve the people's interests and achieve them while at the same time acquire the accolades for having done so. That is to say: she cannot remain a politician! For that reason, I'm not quite as ready as you are to so definitively write Obama off as a neoliberal tool.

Ned Ludd, March29, 2015 at 7:35 pm
Money Chooses Sides

In a barn-burning, record-smashing fund-raising campaign season, Barack Obama tapped a new breed of Manhattan donors and won the expectations game.

— By John Heilemann, Published Oct 24, 2007, in New York

pelham, March29, 2015 at 3:55 pm
The fact that a bank would come out — publicly — and threaten to refrain from bribing Democratic senators suggests that it believes (perhaps correctly) that our mainstream political culture is so far gone that it's literally safe and acceptable to make such an admission. Even worse, Citi apparently thinks that the public will go a big step further and sympathize with it. Maybe Citi believes that the absence of its contribution to a Senate campaign will raise questions in the public mind, that the broad public will think that if a big, prestigious institution like Citi is holding back on a donation, then maybe the candidate and the party are a little sketchy after all. Better to stick with Citi-approved Republicans.

On the face of it, it appears Citi's announcement is an own goal. But it's hard to believe they didn't do some focus groups on this.

But to respond effectively, every Dem and his or her dog should be howling WE DON'T WANT YOUR STINKIN' MONEY — not just Elizabeth Warren. Where's the indignation?

hunkerdown, March29, 2015 at 7:03 pm
"Your money's no good here" is the antithesis of neoliberalism, i.e. the modern Democratic Party.

Remember, some Black people couldn't dine out over a half century ago because of the concept that everything isn't for sale to everyone, therefore, those who have money now should be able to buy their way into anything. Perfectly logical!

thom, March29, 2015 at 4:47 pm
Pure fascism — the merger of corporation and state (Mussolini) is not good enough for Citi and the Rubino Crime Syndicate.

They have 96, 97 of the 100 Senators, and all but three or four House members and the Fed and Treasury and the Supreme Court but that is Just Not Enough. They gotta have it all.

They just gotta have it all.

Pure fascism strikes any form of dissonance let alone dissent, wipes it out, exterminates it. That is why there are no more than three or four independent-minded, critically thinking, non-ideological US senators.

Authentic democracy would require more. Ten or 15? Maybe 34? It is too bad that Congressman Paul is no longer Congressman Paul.

Democracy should rule capitalism but capitalism should NEVER rule democracy.

hunkerdown, March29, 2015 at 7:41 pm
With due respect, you're fighting about five wars ago. Authentic democracy, by definition, requires that *final* say lay in the hands of the people. If in some system the people en masse are not the final deciders, then you, sir or madam, are committing violence against democracy itself by equating Potemkin popular suffrage with the ability to produce facts on the ground. Authentic democracy requires that the three branches of government be *subordinate* to the people; mere accountability has been proven ineffective when a single six-year term, sold to the right people, more than pays for any losses or embarrassment from the plebes who no longer provide you with any utility (watch Sen. Reid on trade promotion authority to see this in action). It's such an infantilizing conceit that choosing one's sovereign master by committee is *self-rule* in any meaningful fashion that I'm surprised people still want to be seen falling for it.

What's more, you should consider tokenism, classical conditioning and diminishing returns in your analysis. Tokenism is more or less a dishonest signal on the part of a group of approval or participation of some selected out-group. Classical conditioning finds that intermittent reward is more effective in conditioning the desired response to a stimulus than predictable reward or non-reward. In light of those, just what advantage would *being seen* owning the lot be? The engine that starts, lopes and shudders to a halt is more "fixable", and thus subjectively more worthy of time, effort and attention, than the one that won't even turn over. Thus, they are best served by a system that delivers the outcomes that suit their interests and pretends to respond to the efforts and interests of others while doing so in fact to the minimum extent possible. Hence the portrayal of a functioning representative government via distractions such as the culture war and affiliated kayfabe.

Finally, we should be able to read our labels for meaning and not just slap Mr. Yuk on everything. Roger Griffin's three traits of fascism: "(i) the rebirth myth, (ii) populist ultra-nationalism and (iii) the myth of decadence". Liberalism seems to negate all three of those traits: an evangelical myth that merely uttering the (for those properly indoctrinated) "self-evidently" correct answer will unlock and coalesce stunted potentials, more flowering than rebirth; anti-populist (i.e. anti-democratic) globalism under the public-private partnership; and the broad veneration of carefully circumscribed deviance (not dissent!) from tradition for its own sake. The "managed" mob rule of the creative class might arguably count as a form of faux-populist ultranationalism, but I'm not nearly convinced yet.

Ulysses, March29, 2015 at 8:27 pm
"Potemkin popular suffrage"

I think I'll have to start using that!!

Our world is fast becoming one big Potemkin village!
http://uk.reuters.com/article/2013/06/03/uk-irish-g8-fakeshops-idUKBRE9520Z520130603

Chris Grimley, March29, 2015 at 10:03 pm
Actually, Bryan was worse than that. For becoming Secretary of State he sold out to the banker interests promoting Woodrow Wilson. The banker interests also provided the money for Roosevelt against Taft (who was against a Federal Reserve) to split the Republican vote. This put their puppet, Wilson, into the White House under the careful tutelage of banker Colonel House.

I suspect the Secretary of State position was also a sop to Hillary Clinton for being gentle with Obama

[Jan 11, 2015] Links for 01-11-15

Economist's View

Fred C. Dobbs

Kicking Dodd-Frank in the Teeth http://nyti.ms/1yPrNa2
NYT - Gretchen Morgenson - Jan 11

The 114th Congress has been at work for less than a week, but a goal for many of its members is already evident: a further rollback of regulations put in place to keep markets and Main Street safe from reckless Wall Street practices.

The attack began with a bill that narrowly failed in a fast-track vote on Wednesday in the House of Representatives. It is scheduled to come up again in the House this week.

The bill, introduced by Representative Michael Fitzpatrick, a Pennsylvania Republican who is a member of the House Financial Services Committee, has three troublesome elements. First, it would let large banks hold on to certain risky securities until 2019, two years longer than currently allowed. It would also prevent the Securities and Exchange Commission from regulating private equity firms that conduct some securities transactions. And, finally, the bill would make derivatives trading less transparent, allowing unseen risks to build up in the system.

Of course, you wouldn’t know any of this from the name of the bill: the Promoting Job Creation and Reducing Small Business Burdens Act (#). Or from the mild claim that the bill was intended only “to make technical corrections” to the Dodd-Frank legislation of 2010.

Here’s the game plan for lawmakers eager to relax the nation’s already accommodating financial regulations: First, seize on complex and esoteric financial activities that few understand. Then, make supposedly minor tweaks to their governing regulations that actually wind up gutting them.

“We’re going to see repeated attempts to go in with seemingly technical changes that intimidate regulators and keep them from putting teeth in regulations,” predicted Marcus Stanley, policy director at Americans for Financial Reform, a nonpartisan, nonprofit coalition of more than 200 consumer and civic groups across the country. “If we return to the precrisis business as usual, where it’s routine for people to accommodate Wall Street on these technical changes, they’re just going to unravel the postcrisis regulation piece by piece. Then, we’ll be right back where we started.” ...

#- http://docs.house.gov/billsthisweek/20150105/MWB_600_xml.pdf

[Jan 07, 2015] The Republican Strategy To Repeal Dodd-Frank by Simon Johnson

January 7, 2015 | The Baseline Scenario | 32 Comments

Bruce E. Woych | January 8, 2015 at 12:43 am

Russian Roulette: Taxpayers Could Be on the Hook for Trillions in Oil Derivatives

Posted on December 19, 2014 by Ellen Brown

[excerpt]

“The sudden dramatic collapse in the price of oil appears to be an act of geopolitical warfare against Russia. The result could be trillions of dollars in oil derivative losses; and depositors and taxpayers could be liable, following repeal of key portions of the Dodd-Frank Act signed into law on December 16th.

On December 11th, Senator Elizabeth Warren charged Citigroup with “holding government funding hostage to ram through its government bailout provision.” At issue was a section in the omnibus budget bill repealing the Lincoln Amendment to the Dodd-Frank Act, which protected depositor funds by requiring the largest banks to push out a portion of their derivatives business into non-FDIC-insured subsidiaries.

Warren and Representative Maxine Waters came close to killing the spending bill because of this provision. But the tide turned, according to Waters, when not only Jamie Dimon, CEO of JPMorgan Chase, but President Obama himself lobbied lawmakers to vote for the bill.

It was not only a notable about-face for the president but represented an apparent shift in position for the banks. Before Jamie Dimon intervened, it had been reported that the bailout provision was not a big deal for the banks and that they were not lobbying heavily for it, because it covered only a small portion of their derivatives. As explained in Time:”

http://ellenbrown.com/2014/12/19/russian-roulette-taxpayers-could-be-on-the-hook-for-trillions-in-oil-derivatives/

Bruce E. Woych | January 8, 2015 at 12:49 am

Jamie Dimon Got What He Wanted in the US Budget

“It may well be that the head of JPMorgan Chase, the President’s personal banker, wanted his losses covered and that’s what he got when the budget was passed. Jamie Dimon got the public to pay again.” http://www.w-t-w.org/en/23098/
Posted on December 28, 2014 by Frederica Stein

“Under Dodd Frank, FDIC-insured banks were not allowed to put depositor funds at risk for their bets on derivatives, with certain broad exceptions. At FDIC insured banks, interest rate, currency, gold/silver, credit derivatives referencing investment-grade securities, and hedges werepermissible activities within an insured depositary institution. Those not permitted included “equity, some credit and most commodity derivatives.”

A fraction, but a critical fraction, as it included the banks’ bets on commodities. Five percent of $280 trillion is $14 trillion in derivatives exposure – close to the size of the existing federal debt. $3.9 trillion of this speculation is on the price of commodities.

Among the banks’ most important commodities bets are oil derivatives.

…The drop in the price of oil by over $50 a barrel was completely unanticipated and outside the predictions covered by the banks’ computer models. The drop could cost the big banks trillions of dollars in losses. And with the repeal of the Lincoln Amendment, taxpayers could be picking up the bill.”

http://www.w-t-w.org/en/23098/

Posted on December 28, 2014 by Frederica Stein

Bruce E. Woych | January 8, 2015 at 12:53 am

Presenting The $303 Trillion In Derivatives That US Taxpayers Are Now On The Hook For

Submitted by Tyler Durden on 12/13/2014 00:52 -0400

http://www.zerohedge.com/news/2014-12-12/presenting-303-trillion-derivatives-us-taxpayers-are-now-hook

“Courtesy of the Cronybus(sic) last minute passage, government was provided a quid-pro-quo $1.1 trillion spending allowance with Wall Street’s blessing in exchange for assuring banks that taxpayers would be on the hook for yet another bailout, as a result of the swaps push-out provision, after incorporating explicit Citigroup language that allows financial institutions to trade certain financial derivatives from subsidiaries that are insured by the Federal Deposit Insurance Corp, explicitly putting taxpayers on the hook for losses caused by these contracts.”

Bruce E. Woych | January 8, 2015 at 1:01 am

by Karolina (courtesy of Thom Hartmann Program)
Dec. 13, 2014 12:40 pm
“Obama’s and Wall Street’s treason was brought home on Dec. 11, when JP Morgan’s Jamie Dimon, Barack Obama, and GOP Speaker of the House John Boehner joined hands to “whip” the omnibus spending bill (which they dubbed “cromnibus”) through the Congress with its poison pill that bails out Wall Street’s credit swaps derivatives by repealing the only “fig leaf” of Dodd Frank—Section 716 (which had been put in in 2010 by then Sen. Blanche Lincoln [d-ar]). The bill passed at about 9:45 PM on Dec. 11, only after Boehner had shut down the House for a 7-hour recess because he and Obama and Wall Street did not have the votes to pass the $1.1 trillion spending bill.”
—————————————————————————-
Thom Hartmann Program:

http://www.thomhartmann.com/forum/2014/12/obama-and-jamie-dimon-team-whip-swap-derivatives-poisoned-appropriations-bill-democrat

—————————————————————————–
Also (courtesy of Thom Hartmann Program
Quote LPAC:
Elizabeth Warren: “The American People
Did Not Elect Us To Stand Up for Citigroup.”
Saturday, December 13, 2014
Sen. Elizabeth Warren delivered an eight-minute speech on the floor of the Senate on Dec. 10, urging the House, and especially its Democratic members, to refuse to vote for the budget deal until its provision guaranteeing government support for financial derivatives were repealed. She posted the video of her remarks to her Senate webpage, and urged people to share it with their friends “right now.” The transcript of those remarks, slightly shortened, follows:

Mr. President, I come to the floor today to ask a fundamental question: Who does Congress work for? Does it work for the millionaires, the billionaires, the giant companies with their armies of lobbyists and lawyers? Or does it work for all of us?

…And now the House of Representatives is about to show us the worst of government for the rich and powerful. The House is about to vote on a budget deal — a deal negotiated behind closed doors that slips in a provision that would let derivatives traders on Wall Street gamble with taxpayer money and get bailed out by the government when their risky bets threaten to blow up our financial system.

These are the same banks that nearly broke this economy in 2008 and destroyed millions of jobs. The same banks that got bailed out by taxpayers and are now raking in record profits. The same banks that are spending a whole lot of time and money trying to influence Congress to bend the rules in their favor.

You will hear a lot of folks say that the rule that will be repealed in the Omnibus is technical and complicated, and that you shouldn’t worry about it because smart people who know more than you about financial issues say that it’s no big deal. Don’t believe them.

Actually, the rule is pretty simple. Here’s what it’s called — the rule that the House is about to repeal — and I’m quoting from the text of Dodd-Frank: “PROHIBITION AGAINST FEDERAL GOVERNMENT BAILOUTS OF SWAPS ENTITIES.” What does it do? The provision that’s about to be repealed requires banks to keep separate a key part of their risky Wall Street speculation so that there’s no government insurance for that part of their business….

We put this rule in place after the collapse of the financial system because we wanted to reduce the risk that reckless gambling on Wall Street could ever again threaten jobs and livelihoods on Main Street. We put this rule in place because people of all political persuasions were disgusted at the prospects of future bailouts. And now, no debate, no discussion, Republicans in the House of Representatives are threatening to shut down the government if they don’t get a chance to repeal it.

…Wall Street spends a lot of time and money on Congress. Public Citizen and the Center for Responsive Politics found that in the run-up to Dodd-Frank, the financial services sector employed 1,447 former federal employees to carry out their lobbying efforts — including 73 former Members of Congress. And according to a report by the Institute for America’s Future, by 2010, the six biggest banks and their trade associations employed 243 lobbyists who once worked in the federal government, including 33 who had worked as chiefs of staff for members of Congress and 54 who had worked as staffers for the banking oversight committees in the Senate and the House. That’s a lot of former government employees — and senators and Congressmen — pounding on Congress to make sure the big banks get heard. No surprise that the financial industry spent more than $1 million a day lobbying Congress on financial reform….

And now we see the fruits of those investments…. According to documents reviewed by the New York Times, the original bill that is being incorporated into the House’s spending legislation today was literally written by Citigroup lobbyists, who “redrafted” the legislation, “striking out certain phrases and inserting others.”

It’s been opposed by current and former leaders of the FDIC, including Sheila Bair — a Republican who formerly chaired the agency, and Thomas Hoenig, the current vice-chairman of the agency. For those who are keeping score, this is the agency that will be responsible for bailing out Wall Street when their risky bets go sour….

But this provision goes too far. Citigroup is large, and it is powerful. But it is a single, private company. It shouldn’t get to hold the entire government hostage — to threaten a government shutdown — in order to roll back important protections that keep our economy safe. This is a democracy, and the American people didn’t elect us to stand up for Citigroup. They elected us to stand up for all of the people.

I urge my colleagues in the House — particularly my Democratic colleagues, whose votes are essential to moving this package forward — to withhold support from it until this risky giveaway is removed from the legislation. We all need to stand and fight this giveaway to the most powerful banks in the country.

Bruce E. Woych | January 8, 2015 at 1:18 am

The Insidious persistence of conspicuous consumption…and ….megalomaniacs in action…

——————————————————————————

“After Dodd-Frank’s passage, lobbyists for the big banks and industry trade groups divided themselves into eighteen working groups, each organized around a different element of the new law. “That’s when the real work began,” Talbott tells me. One working group focused on derivatives reform, including the requirement that these complex financial instruments now be sold on open exchanges in the fashion of stocks and bonds. Another focused on efforts to hammer out the so-called Volcker Rule, which would limit the ability of federally insured banks to wager on risky ventures. A third tackled the new Consumer Financial Protection Bureau (CFPB), created to protect ordinary consumers from Wall Street deceptions involving mortgages, credit cards and other major profit centers for the banks.”

http://www.thenation.com/article/174113/how-wall-street-defanged-dodd-frank

How Wall Street Defanged Dodd-Frank
Battalions of regulatory lawyers burrowed deep in the federal bureaucracy to foil reform .
Gary Rivlin April 30, 2013

Bruce E. Woych | January 8, 2015 at 1:27 am

A Window Into Washington in an Effort to Undo a Dodd-Frank Rule
By Jonathan Weisman
December 15, 2014
“The “push out” provision reversed a piece of the 2010 Dodd-Frank law that prohibited banks from trading some of their most exotic financial instruments in units covered by the Federal Deposit Insurance Corporation or the Federal Reserve. The idea was to make sure trades in derivatives, credit-default swaps and other instruments that helped spur the financial crisis of 2008 would not be insured by taxpayers if they went bad.
The nation’s biggest banks have been trying to reverse the provision ever since. A stand-alone bill to repeal the measure was drafted nearly word for word by Citigroup.”
“….How Representative Kevin Yoder’s “push out” provision survived is not, as many have suggested, a tale of dark favors done in back rooms at the last minute. Instead, it is how powerful lobbies work their will, slowly, persistently, bit by bit — in other words, how Washington works.” http://dealbook.nytimes.com/2014/12/15/in-push-out-provision-example-of-how-congress-does-its-job/

Bruce E. Woych | January 8, 2015 at 1:33 am

by Robert Lenzner

“I’m trying to wise up 300 million people about money & finance”

“Wall Street banks like Citigroup and JP Morgan Chase have flexed the power of their influence to pressure Congress and the White House into a key change in the law that will allow the trading of risky financial derivatives in bank operations that are insured by the Federal Deposit Insurance Corp.

This means the nation’s largest banks used the deadline for passing the Omnibus spending bill as pressure to reverse a key section of the Dodd-Frank bill of 2010 that was meant to prohibit a federal government bailout of swaps entities.”

12/13/2014 @ 12:35PM
A Christmas Present For The Banks From The Omnibus Bill

http://www.forbes.com/sites/robertlenzner/2014/12/13/wall-street-reverses-ban-on-trading-derivatives-backed-by-uncle-sam/

Bruce E. Woych | January 8, 2015 at 1:36 am

“Warren, the prominent liberal bank critic, said on the Senate floor that House Republicans were threatening to shut down the government if they didn’t get a chance to repeal part of the 2010 Dodd-Frank law.”

http://www.washingtonexaminer.com/warren-tells-democrats-to-oppose-spending-bill-over-dodd-frank-change/article/2557211

[Dec 27, 2014] Don’t Repeal Swaps Push-Out Requirements (Section 716 of Dodd-Frank) by Simon Johnson

May be this is a need to cover oil derivatives ?
Dec 10, 2014 | baselinescenario.com
Posted on December 10, 2014 | 12 Comments

By Simon Johnson

Section 716 of the Dodd-Frank financial reform act requires that some derivative transactions be “pushed-out” from those part of banks that have deposit insurance (run by the Federal Deposit Insurance Corporation) and other forms of backstop (provided by the Federal Reserve). This is a sensible provision that, if properly implemented, would help keep our financial system safer, protect taxpayers and reduce the likely need for bailouts.

Now, at the behest of the biggest Too Big To Fail banks and as part of the House’s spending bill (to be voted on tomorrow or in coming days), this “push out” requirement is on the verge of being repealed. Democrats and Republicans should refuse to vote for the spending bill as long as it contains this requirement.

This is not a left vs. right issue. It is a fundamental systemic risk issue, on which people across the political spectrum who want to lower those risks can agree – Section 716 should not be repealed. In fact, some of the sharpest voices on this issue come from the right.

In a statement on Tuesday, Thomas Hoenig, appointed by the Republicans to be Vice Chair of the FDIC, said:

“In 2008 we learned the economic consequences of conducting derivatives trading in taxpayer-insured banks. Section 716 of Dodd-Frank is an important step in pushing the trading activity out to where it should be conducted: in the open market, outside of taxpayer-backed commercial banks. It is illogical to repeal the 716 push out requirement.”

And on Tuesday evening, Senator David Vitter (R., Louisiana) put the issue in its proper broader context,

“Ending too big to fail is far from over. Before Congress starts handing out Christmas presents to the megabanks and Wall Street – we need to be smart about this. Removing these risky derivatives that aren’t even necessary for normal banking purposes is important, and Members of Congress need to rethink repealing this critical provision.”

The effort to repeal Section 716 comes primarily from the largest banks (and some say from Citigroup), who claim that these restrictions are somehow onerous or unreasonable. These arguments have no merit.

Under Section 716, interest rate swaps, foreign exchange derivatives, and cleared credit derivatives can remain on the balance sheet of the insured bank. This is almost all derivatives. And hedging of risks by banks using derivatives is most definitely allowed.

The push out applies most notably to uncleared credit default swaps (CDS), equity derivatives, and commodity derivatives. (See Tom Hoenig’s statement for a succinct and precise statement of the issues.)

The point of the push out is to get these potentially high risk swaps away from the insured part of the bank – and away from the explicit backstop provided by deposit insurance (and ultimately by the taxpayer).

The big banks (such as JP Morgan Chase and Citi) are actually a complex collection of separate companies – only one of which is typically an insured bank. That insured bank is regarded as a better credit (i.e., lower risk) by people in the market precisely because of the federal government-run deposit insurance. Like all better credits, those banks get to borrow at lower costs.

If these swaps are pushed out from the insured part of the bank, these speculative derivative positions will be priced by the market based on their actual risk – not mispriced due to the backing of taxpayers. Thus the derivative activities of these four banks, conducted by their uninsured subsidiaries, will become more expensive to fund.

Really this is just taking the state out of subsidizing some of these particularly high risk derivatives. That would be no more than reintroducing the market and market pricing of credit risk.

The four largest banks (according to the Office of the Comptroller of the Currency, OCC) conduct more than 93% of all derivatives activities in the US. (That is using “total banking industry notional amounts”; if you prefer net current credit exposure, NCCE, the same banks are 82% of the industry.) The repeal of section 716 is for them.

Remember when JP Morgan Chase lost more than $7 billion in its so-called “London Whale” trade? That was a high risk, highly leveraged proprietary bet involving complex Credit Default Swap indices. And JP Morgan Chase’s bet, which reportedly had a notional value of more than $1 trillion, was funded in part with insured deposits. (Publicly available information indicates that JP Morgan Chase – just like Citigroup – has the vast majority of its derivatives activities run out of the insured bank.)

So the vote this week is simple. Democrats and Republicans should vote to, at least partially, bring back the market forces – by rejecting the repeal of Section 716. End state subsidies for these megabanks’ derivatives activities.

This is not what Citigroup, JP Morgan, Bank of America, or Goldman Sachs wants, of course. They want government insurance and their derivatives dealing to be subsidized by taxpayers, on the most favorable terms possible: it lowers their costs and increases their profits. As a result, Too Big To Fail banks’ executives and traders get the upside when things go well; and when things go badly, the downside is someone else’s problem.

Or, as Dennis Kelleher of Better Markets puts it,

“If Wall Street gets the upside in big bonuses from its high-risk derivatives deals, then it should also have to pay the downside for any losses.”

Remember that Citi’s lobbyists and their colleagues worked long and hard during the 1990s to relax all meaningful limits on their ability to take big risks. And the firm subsequently hired top Clinton-era officials to guide their economic and political strategy in the 2000s. This ended very badly – with the near-failure of Citigroup, multiple taxpayer bailouts, and a deep recession from which, six years later, we have not yet fully emerged. Citigroup was at the epicenter of what went wrong on Wall Street in 2007-08 and received more bailouts than any other single institution, almost $500 billion.

In the 1990s there was a Citigroup-inspired consensus in favor of deregulation. That legislative push proved to be a mistake, but at least it was done in the open. Now similar forms of deregulation – encouraging excessive risk-taking – are being pursued through back-room deals, with no hearings, and no debate.

To start again down the same path – and at the instigation of the same set of banks – is pure folly.

And to do it through this underhand process shows you that the big banks have no intellectual arguments left on their side. All they have to offer now is the prospect of large campaign contributions.

Per Kurowski | December 11, 2014 at 10:52 pm

Anonymouse writes: “Per nothing should be rated AAA unless it can live a thousand years, where it all went bad is anyone guess”

Forget it! It was clear what was going to happen when regulators decided that the capital (equity) requirements for banks were to be based on credit ratings.

In January 2003, more than one year before Basel II was approved, in a letter in the Financial Times I wrote “Everyone knows that, sooner or later, the ratings issued by the credit agencies are just a new breed of systemic error to be propagated at modern speeds”

The problem was though that although everyone knew, or should have known… few really cared.

tonyforesta | December 12, 2014 at 2:42 am

Sad, but predictable. Mr. Johnson’s deep and well resourced admonition of this “underhanded”, and blatant giveaway to the four major TBTF oligarchs, was ignored by our socalled politicians, who despicably – yet again, – acted against and contrary to the peoples best interests, and instead advanced and protected the best interests of the predatorclass and predatorclass oligarchs they obediently worship and serve.

Unspoken in this tragic episode by the paid spaniels and parrots of the socalled MSM is the why? Why would shaitans in the gop underhandedly sneak this pernicious giveaway to the predatorclass, and predatorclass oligarchs and basically extort this perfidy into the strange and aptly named “cromnibus” appropriations bill. Words like extortion, collusion, profiteering are never mentioned. All parties are painted and pretty lights and nice language, insipidly ignoring and excusing the horror of this action, and the nefarious purposes behind it’s implementation. .

Forgive me for using this tragedy for commentary on a much larger, though perhaps off topic admonition. Amerika is the great satan. The people have no voice in the conduct of socalled government.

Said government is owned, controlled, and obedient to the interests and individuals of the predatorclass, and predatorclass oligarchs alone, exclusively, and singularly.
The pigs – I mean our socalled law enforcement are militarized, anti minority, anti poor, anti dissent thugs and mass murderers, unaccountable, immune, and above and beyond the socalled rule of law.

Amerika is 17 Trillon dollars in debt! Divide that number by a population of 350+ mlllion, and get back to me on the future of Amerika’s children. There has never been a wider divide between thehaves, and havenots, in any nation anywhere on earth, in the history of the world.

1% of Amerika’s fascists, the predatorclass, and predatorclass oligarchs own and control, 80% of America’s wealth and resourcess.
Fascists and shaitans have commandeered every structure of our once more perfect union and shapeshifted what was America, and American principles, and that thing we call the Constitution into a shredded, tattered, piece of worthless trash.

These fascists glorify and defend torture. (Any creature that would argue or defend the perverted, and freakish barbarism, and psychopathic degeneracy and sexual depravity of Amerika’s torture policies is below human) What kind of human being would even think of this level of depravity and sexually perverted behavior for any reason?

Then we are all subjected to the embarrassing travesty of perverted freaks, massmurdering psychopaths, pathological warmongers and liars, warcriminals, and sexually depraved, shaitans, and freaks, like that slithering reptile, and satanic beast dick cheney, and equally criminal fascists and nazi’s like hayden, brennan, bushtheidiot, and all the slithering slimy creeps, and apologists for, and defenders of torture, including the arch betrayor obama. There is no painting lipstick on the disgusting pig that is torture. Feeble attempts to prettify this evil by terming it EIT, and conjuring and bruting a putrid litany of naked lies to justify this nefarious, sexually perverted, and inhuman, depraved behavior and policy sanctioned by the highest overlords in our socalled government is futile and repulsive It’s sickening.

Amerika spends more money on defense than the next ten nations on earth combined on socalled defense, actually warmaking, and warprofiteering More a trillion dollars in defense, blackworld, and contractor taxpayers dollars are absconded yearly – and the worlds hypersuperior military must resort to depravities sexual perversions that would embarrass inquisitors, and inspire Vlad the Impaler??? This in the shady light of neverending wars that were deceptively conjured, by the office of special plans, and other warprofiteering projectforthenewamerikancentury covens, pimping and bruting, Amerikan supremacy, newworldorder, and totalspectrumdomination.

Amerika is the great satan. We deserve, and will get, what ever fiery pit and hell we sheepishly and silently allow our perverted, fascists, and psychopathic massmurdering warmongering, warprofiteering socalled leaders hurl us into.

Back on topic. The total exposure of the derivatives market, by my understanding is 3/4 of a quadrillion dollars? Asked numerous times for our erudite economists and financial experts to reject or validate this number, but that is my understanding. Though the numbers are nebulous due to the lack of disclosure, and any regulation, – the total exposure of the derivatives markets is around $750 Trillion. 3/4 of a quadrillion. Quadrillion is number not even imagined nor comprehended outside of the most brilliant scientists working on astronomic or particle physics.

How is this ponzi scheme, – a ponzi scheme the shaitans in the gop, slithered, and extorted into the budget, and the rank cowards in the democratic party – just sanctioned, and advanced, – ever reconciled? The entire global GDP is less the $80 Trillion. Is no one on this wild and weird at heart earth capable of simple math? How can these gargantuan, and absurd numbers ever be reconciled? How can there be any justification for torture? How can we tolerate systemic criminality and the greatest, largest theft in the history of the world, by the den of vipers and thieves on wallstreet? How can and do we allow psychopaths, warmongers, warprofiteers, satanic beasts (dick cheney) massmurders, warcriminals, tyrants, perverts, freaks, shaitans, pathological liars, and a den of vipers and thieves to walk free, immunized, unaccountable, above and beyond the socalled ruleo