By building better cars….Imagine that.
<snark>That’s simply unAmerican. You are supposed to beat the competition by massaging revenue streams and balance sheets, or by using better PR, not by making focusing on the product and the consumer and better products. What is wrong with Alan Mulally?</snark>
It looks like the IRS has set up a new unit in the organization to go after the tax dodges of the wealthy:
A new Internal Revenue Service enforcement unit targeting the very wealthy will help the tax agency decode partnerships, offshore trusts and other complex techniques used to hide income, IRS Commissioner Doug Shulman said Monday.
Dubbed the Global High Wealth Industry group, the unit will launch “a small number” of audits of individuals with assets or income in the tens of millions of dollars, Mr. Shulman told an accountants’ trade group. An IRS official said the group would begin work on these initial audits in the next month.
The high-wealth group, housed in the IRS’s large- and medium-sized business division, marks a sharpening of the IRS approach to auditing the very wealthy. Its creation is a response to the complex web of entities and transactions many high-net-worth individuals use to manage their financial affairs.
This is good for a number of reasons:
Now what they need to do is go go criminal prosecution, with jail time, on the some of the worst offenders.
It appears that Jon Stewart is a super-being who is capable of doing things that violate the basic laws of this world, because he just forced Sean Hannity to admit that they were lying with the videos that he posted. (earlier post on this)
Sparta!!!!!!
H/t Pressing Issues
[Title changed after publication when I came up with a better one]
[Youtube taken down, replaced with a new one. Fox is apparently going after liberals who post clips from Fox with takedown notices.]
The American Medical Association has decided to reclassify marijuana.
It is currently a schedule 1 controlled substance, meaning dangerous, with no medical use, and the AMA, bowing to reality, has decided that it should be legal to at least test the stuff:
The American Medical Assn. on Tuesday urged the federal government to reconsider its classification of marijuana as a dangerous drug with no accepted medical use, a significant shift that puts the prestigious group behind calls for more research.
The nation’s largest physicians organization, with about 250,000 member doctors, the AMA has maintained since 1997 that marijuana should remain a Schedule I controlled substance, the most restrictive category, which also includes heroin and LSD.
In changing its policy, the group said its goal was to clear the way to conduct clinical research, develop cannabis-based medicines and devise alternative ways to deliver the drug.
Hopefully, the progress towards sanity involving THC will continue, and perhaps, I could then go back to one of the activities of my college days.
It appears that the Taliban is in the process of severing its ties with al Qaeda:
Such positions may put Omar’s Taliban at odds with al-Qaeda’s extremist Sunni agenda of overthrowing what it sees as corrupt Muslim governments and targeting Shiites. Analysts said that Omar, who leads a council of Taliban commanders based in or around the Pakistani city of Quetta, wants such countries as Saudi Arabia, the United Arab Emirates and Pakistan to recognize the Taliban as a legitimate government if it regains power and that he has little interest in fomenting war elsewhere.
“We assure all countries that the Islamic Emirate of Afghanistan, as a responsible force, will not extend its hand to cause jeopardy to others,” Omar said in a written statement in September.
The messages from the Taliban leadership since the spring amount to something of a “revolution,” said Wahid Mujda, a political analyst who was a Foreign Ministry official under the Taliban government. “Al-Qaeda’s path is now different from the Taliban’s path, and they are growing more separated.”
This ain’t a revolution.
Al Qaeda was never particularly popular in Afghanistan, where the people are, after all not Arabs, and they have about as much love for rich Arabs as we in the United States do.
Bin Laden was there because the Taliban wanted his money, not him.
When they were in control of Afghanistan, not only were they not fierce protectors of him, but they were trying to find a way for help the US make him dead in a way that gave them some plausible deniability.
The following congressmen, Ann Kirkpatrick, Harry Mitchell, Gabrielle Giffords, Dennis Moore, John Hall, Alan Grayson, Mark Schauer, Mike Arcuri, Steve Kagen, Jerry McNerney, Melissa Bean, Debbie Halvorson, Bill Foster, Tim Walz, Bill Owens, Carol Shea-Porter, Tim Bishop, Dina Titus, Mary Jo Kilroy, and Kurt Schrader all voted for healthcare reform and against the Stupak amendment, and they all have districts that imply a close election.
See this ActBlue link.
You can donate to them all at once at the link, or separately, as, for example, Grayson has already raised over $400,000 on act blue, and Melissa Bean is way too friendly with the banking industry, though she is good on other things.
As Dave Barry would say, I am not making this up.
It appears that former Bush Secretary of State Condoleeza Rice and former National Security Council Advisor Stephen Hadley have decided to open up a consulting firm .
Their specialty, “Strategic consulting,” since, I guess the strategy in Iraq worked so tremendously well.
In any case, attempting to look at RiceHadley.com gets the following, which, given the record of both Rice and Hadley, and of Bush’s Evil Minions™ generally, seems to be me to be a remarkably apropos statement.
I’m not a gold bug, but Rolf Winkler’s graph pr0n is interesting. It could imply that gold has further up to go, or that the stock market is overvalued. Your call.
Slow news day today, with biggest news that the People’s Bank of China has modified the language it uses to describe its position on the Yuan, which implies that the currency will be allowed to appreciate over the near term.
In Australia employment increased by 24,500 in September, s not inconsiderable number for a country with a total population in the 22 million range.
Meanwhile, Japan appears to continue to be in a deflationary mode, with producer prices falling for the 10th month, down 6.7% year over year.
In currency, driven partly by the Bank of China statements, the dollar weakened to more than $1.50:€1.00, though it settled at $1.4961 when trading ended.
In either case, it appears that people are still betting on a recovering economy, as crude oil rose again today.
And for you gold bugs, as well as for the graph pr0n, gold hit a new record in trading today, $1,121.9/oz (troy).
The real problem here for CNN was that Lou Dobbs has gone completely around the bend, but crazy motherf$#@ers bring in ratings, (see O’Reilly, Bill), but it also means a hit to his credibility.
His exit was certainly abrupt, he announced today that this was his last show, and the reason that he gave, “some leaders in media, politics and business have been urging me to go beyond the role here at CNN and to engage in constructive problem solving as well as to contribute positively to the great understanding of the issues of our day,” implies to me that he was pushed.
It sounds a lot like, “Spending more time with his family.”
He’ll probably end up on Fox.
I’ve been holding off talking about this, news has been coming out in dribs and drabs, but now that Dodd has released his version, I think that things will move forward more quickly, so here is what we has happened so far.
First, in both the House (Rep. Barney Frank) and Senate (Sen. Chris Dodd), we have changes to allow for resolution authority for the banking mega-giants (I prefer Sen. Bernie Sanders’ alternative of breaking them up into small and manageable pieces to both bills, but that’s just me), and for a consumer financial protection agency. (CFPA)
First, the CFPA, and it should be noted that the House bill has moved further along the legislative process, and as such, it has incorporated more bad ideas as amendments, such as sunsetting the Home Valuation Code of Conduct (HVCC), which was proposed by Rep. Gary Miller (R-Realtor).
The objection to the HVCC is not that it is inaccurate, but that it is accurate, and so it makes more difficult to move homes, because it shows that a lot of people overpaid, and are now under water.
Freddie Mac has issued a report saying that HVCC has substantially improved loan quality, which, since the taxpayers back up Freddie, and Fannie, and the FHA, means that Miller won one for his realtor friends at the expense of the taxpayers.
Additionally, we have another amendment that would remove the ability of the CFPA to regularly audit the products of about 98% of the banks in the United States. They could still write the regs, but they could not regularly check to see if they were actually followed at the smaller banks, or enforce them.
As Felix Salmon says, it’s a bloody mess:
So the CFPA can write rules for small banks, and can investigate complaints at small banks, but can’t examine small banks, or enforce its own regulations at small banks? It all seems like a horrible mess to me.
He suggests that perhaps an online clearing house of complaints, basically “crowd sourcing” them to send to the CFPA would be a way of dealing with this.
Additionally, we have an amendment from Rep. Melissa Bean (DINO-Finance industry) that would allow the Office of the Comptroller of the Currency to preempt state consumer protection regulations, though, it must be noted they have to promise that it’s because, they “have found that the state law ‘significantly’ interfered with federal regulatory policies.”
It should be noted that this is the same office of the OCC that fought Eliot Spitzer tooth and nail when he saw evidence of banks were engaging in predatory lending against minorities. (Thankfully, while Spitzer lost this suit at the appellate court level, his successor, Andrew Cuomo, continued to pursue the litigation, and won at the Supreme Court).
Note that these are all problems because the House bill is further along, and as such, has been put through the sausage machine, and as Bismark noted, it resembles the making of sausage.
Dodd’s bill is “clean” at this point, which means that it covers all banks, and that it does not allow agencies to preempt stricter state laws, so I think that it clearly better here.
Next we have the issues of systemic risk and resolution authority, and while the Dodd and Frank bills are different, Dodd calling for after-the-fact payments in the event of a resolution/bankruptcy, and Frank calling for a before-the-fact insurance fund like the FDIC.
What has happened here, I think, is that the initial proposal, put forward by Timothy “Eddie Haskell” Geithner was that the big banks be required to pay after the fact, and as more comments came in, most notably FDIC Chairman Sheila Bair’s blistering criticisms of the idea (also here and here) in favor of an FDIC style system.
Geithner does not like an FDIC style system, thinking that it, “would encourage risky behavior by ‘creating an expectation of explicit insurance.'”
The word for this is “bullsh&^“. As Luis Gutierrez (D-IL) noted in when Geithner testified before Congress:
Let’s create the fund, just like the FDIC, so when we need to resolve [a financial institution], it stands. Your argument is, ‘oh, but Luis, moral hazard’…I don’t see banks racing to the precipice of destruction and bankruptcy because the FDIC exists. Nor do I go to an insurance company and take out a life insurance policy on myself, and the next day decide, wow, maybe I’ll just start smoking. Maybe I’ll start drinking, maybe I’ll start driving my car in a crazy manner. Maybe I really don’t care whether I live or die. I’ve got life insurance, what the hell if I die, everything is taken care of. No, that’s not the way it works.
The reason the Timothy Geithner thinks that there is a “moral hazard” problem with a prepaid insurance because, “That great vampire squid wrapped around the face of humanity,”* Goldman Sachs, told him to say this. Geithner is a poster boy for regulatory capture.
There is also another problem, one which has led Barney Frank to take Bair’s side in all this:
“If you wait until after the fact, you would then have to go to the taxpayer first and get the assessment to repay it and some people are afraid that would never happen,” said Frank, a Democratic representative from Massachusetts.
Which is what happened this time. If, after Lehman had gone down, we had demanded that the rest of the industry pay the costs of liquidation of the firms, it would have driven into bankruptcy too, so when there is a need, the money will never be collected. Goldman Sachs, of course, knows this, which is why they want a phony reimbursement plan.
Frank/Bair are right here, and Dodd/Geithner are wrong, but I think that we will end up with the FDIC type plan when everything settles out, because it is so clearly the best solution.†
A big surprise, to me at least, is the fact that Geithner, and by extension Obama, is actually calling for some restrictions of the power of the Federal Reserve, specifically he wants the legislation to strip the Federal Reserve of the power to make AIG type bailouts of insolvent firms:
Geithner, in testimony to the U.S. House of Representatives Financial Services Committee, said the Fed should keep its ability to act as an emergency lender of last resort, but only to solvent firms in times of severe stress in financial markets — with Treasury consent.
“Any firm that puts itself in a position where it cannot survive without special assistance from the government must face the consequences of failure,” Geithner said. “The proposed resolution authority would not authorize the government to provide open-bank assistance to any failing firm.”
I guess that no one can be wrong all the time, not even Timmeh.
So, Dodd’s bill is out now, and, at least in its current “virgin” state, it’s much bigger overhaul of the regulatory framework, it:
Note here that in stripping regulatory authority from the Fed, and leaving the monetary policy there, Dodd is not moving to an untried model: The UK does this, with the Bank of England controlling monetary policy, and the Financial Services Authority doing regulation of the financial markets, and it a little (very little) bit better than our current layout.
Simply put, we cannot afford another Randroid nut-job like, Alan “Bubbles” Greenspan to be in the position he held, where he controlled all of monetary policy, and was simultaneously the most powerful person in the United States (world) in terms of financial regulation, for 18½ years….It Damn near destroyed us.
I like Dodd’s bill more than Frank’s, and I think that the concerns of people that I generally agree with, like Felix Salmon, about the curtailing of the powers of the Fed, are misplaced.
Cutting the Federal Reserve down to size is a feature, not a bug, and one of the best features, at that.
The Wonk Room’s nickel tour comparison, as well as foot notes, are after the break:
| Provision | Senate Bill | House Bills |
| Consumer Financial Protection Agency (CFPA) | Includes a CFPA with rule-writing authority, with no federal preemption of state law. All financial institutions are subject to examination by the CFPA. | Includes a CFPA with rule-writing authority, and bank regulators can preempt state law on a case-by-case basis. Financial institutions with less than $10 billion in assets are not subject to CFPA examinations. |
| Consolidated Regulators | Consolidates all existing federal bank regulators into one super-regulator, the Financial Institutions Regulatory Authority (FIRA). Removes bank supervisory powers from the Federal Reserve and the FDIC. | Merges the Office of Thrift Supervision (OTS) and the Office of the Comptroller of the Currency (OCC), leaves other regulators in place. |
| Resolution Authority | Includes resolution authority, funded by an after-the-fact assessment on institutions with more than $10 billion in assets. Institutions must draw up a “living will,” to be used in the event they must be unwound. | Includes resolution authority, pre-funded by an assessment on institutions with more than $10 billion assets. Institutions must draw up a “living will,” to be used in the event they must be unwound. |
| Systemic Risk | Creates a new Agency for Financial Stability, composed of the federal bank regulators and two independent councilors appointed by the President. The council will make decisions regarding systemically risky firms. | A systemic risk council, composed of the federal bank regulators, will make decisions, to be carried out by the Federal Reserve. The Fed would be empowered to conduct “on site” examinations of any systemically risky firm. |
| Breaking up risky firms. | Gives federal regulators the authority to break up systemically risky firms on a case-by-case basis. | Gives federal regulators the authority to break up systemically risky firms on a case-by-case basis. |
*Alas, I cannot claim credit for this bon mot, it was coined by the great Matt Taibbi, in his article on the massive criminal conspiracy investment firm, The Great American Bubble Machine.
†Why yes, I am sounding like I have the political acumen of Little Orphan Annie, why do you ask?
The New York Times is now reporting that mercenary corporation Blackwater (now Xe) approved over a million dollars in bribes to Iraqi officials in order to continue to operate in Iraq:
Top executives at Blackwater Worldwide authorized secret payments of about $1 million to Iraqi officials that were intended to silence their criticism and buy their support after a September 2007 episode in which Blackwater security guards fatally shot 17 Iraqi civilians in Baghdad, according to former company officials.
Blackwater approved the cash payments in December 2007, the officials said, as protests over the deadly shootings in Nisour Square stoked long-simmering anger inside Iraq about reckless practices by the security company’s employees. American and Iraqi investigators had already concluded that the shootings were unjustified, top Iraqi officials were calling for Blackwater’s ouster from the country, and company officials feared that Blackwater might be refused an operating license it would need to retain its contracts with the State Department and private clients, worth hundreds of millions of dollars annually.
So they violated the Foreign Corrupt Practices Act, and, if you go down further, it looks like they were paying off victims and witnesses in order to secure their silence during the FBI investigation.
Srsly, prosecushuns, now!
Ambac share prices
MBIA Share price
We are Unbelievably Screwed, H/t The Big Picture
Job Turnaround? Perhaps the End of the Beginning, but Not the Beginning of the End
For a bit of Auld Lang Syne, let’s start with an update on the monoliner insurers…I’ve posted on them just once since May.
Ambac’s share price is collapsing on reports that it will file for bankruptcy, and MBIA posted a $728 million loss, which comes to about $3.50/share, and the shares are trading at about $3.69 right now….ouch.
The monoliner business model is that you create a company, get an AAA rating, and then make money by renting out that credit rating.
Among other things, it’s a way to soften the blow of the comparatively low credit ratings that states and municipalities get, and it allows for another revenue stream for the parasites on Wall Street to tap.
I think think that the entire business is essentially corrupt, and should be outlawed.
In any case, we do have news that might be a cause for optimism, with China’s industrial output and retail sales grew sharply in October, and the US Department of Labor’s Job Openings and Labor Turnover Survey rose slightly in both September and October.
On the down side are the continued fall in retail sales (see 3rd chart down), and the vacancy rate in housing is at a 44-year high.
The recent news does not seem to have effected the price of Treasurys, though which were basically flat.
In energy, we have weather, specifically the fact that Ida was pretty weak by the time that it hit oil producing areas, driving oil down, and China’s gangbuster economic report drove the US dollar down.
So, the cut a deal between the President of Honduras, and the leaders of the coup that ousted him.
It’s a fairly simple deal, a power sharing arrangement, but then the coup leaders decide that they can’t hold a vote to approve this until after the elections, meaning that they will be in complete control of the electoral process, and doubtless engaging in fraud, and the response of the Obama administration is, “Sounds good to me”:
Under fire from allies in Latin America and on Capitol Hill, the Obama administration moved Tuesday to try to salvage the American-brokered agreement that had been billed as paving the way for a peaceful end to the coup in Honduras. Instead, the accord seems to have provided the country’s de facto government with a way to stay in power until a presidential election scheduled for the end of this month.
The State Department sent Deputy Assistant Secretary of State Craig Kelly to Honduras on Tuesday for meetings with Manuel Zelaya, who was ousted from power as president more than four months ago, and with the head of the de facto government, Roberto Micheletti.
The problem here is that when bad people seize power, they like to hold onto it, and the Obama administration took a cowardly position, because they just did not want to be bothered with little things like the principle of democracy and free elections:
The deal began to unravel last week when the Congress announced it would postpone a vote on Mr. Zelaya’s return to power until after the election. In protest, Mr. Zelaya then refused to submit names for the coalition government. And the United States, breaking with its allies in Latin America, announced it would recognize the results of the coming presidential election, even if Mr. Zelaya were not reinstated.
A hint that this move on their part was a completely boneheaded move that gave succor to tyrants? This:
While the announcement was celebrated by Republicans as a “reversal” of the administration’s policy, it ignited a storm of criticism from Mr. Obama’s allies at home and across Latin America.
If you are getting cheers from the ‘Phants, you are on the wrong side of the argument.
What happened here is that it was pressure from other Latin American nations that forced the State Department to start talking about sanctions against the coup leaders, and the Treasury started talking about possible restrictions on remittances, which created an agreement.
The problem was that once the agreement was signed, signals were sent indicating that the US no longer had any interest in the matter.
This is a big deal for a number of reasons.
First, it is a reversal on the progress toward democracies in Latin America, and second it has some very real implications for US foreign policy in the region, because, unlike the US (and Canada), the rest of this hemisphere takes a very dim view on green lighting coups, because they all remember the bad old days when the overthrow of a legitimately elected government, sometimes at the request of US corporate interests, was the rule, rather than the exception.
China and Russia are both making significant efforts in the region, both in terms of securing raw materials and making military sales, and this, along with out completely boneheaded policies on Cuba, are likely to make Latin American countries much more receptive to their overtures.
Obama at Ft. Hood.
OK, I don’t generally follow the comings and goings of newspaper personnel, though I do read Romenesko, a kind of gossip central for the news gathering biz.
So, when there was sudden and abrupt bloodletting at the Moonie Washington Times, fired senior editorial staff, including the right wing hack John Solomon, I figured that this is simply an artifact of some bizarre family thing with the Moon Family, patriarch Sun Myung Moon will be 90 in January, and there was some sort of weird family thing.
After all, many family owned businesses are dysfunctional family owned businesses, and without a board of directors, any institution under private ownership can pretty do whatever they want.
Well, so I snickered, and then moved on, until I read that armed security guards had been stationed on the 3rd floor, where senior management works, and that staff had been told that they could not use the elevators.
When you are using armed guards to keep out editorial staff, it’s odd.
There are rumors that the paper will be shut down, though considering the nature of its management, they could be constructing a giant statue of papa Moon out of Brie cheese too.
Graphic h/t Calculated RiskIt was clear that they were putting lipstick on a pig, but under the law at the time, it was not outrageous enough to justify a conviction, it appears that hawking their funds while dissing it privately, along with also, in one case, selling those said funds like a maniac, ain’t enough to prove guilt.
You see, the standard at the time was, “suitable,” which means that they cannot put a client in a clearly improper investment, but they can consider things like their sales commissions and bonuses as a part of the decision, as opposed to the “fiduciary” standard, which requires the agent to act solely in the best interest of the client:
“Buried in President Obama’s proposed regulatory overhaul is a change that could upend Wall Street: Brokers would be held to a higher “fiduciary” standard that would compel them to place their client’s interests ahead of their own.
Currently, brokers are only required to offer investments that are “suitable,” which means they can’t put clients in inappropriate investments, such as a highly risky stock for an 80-year-old grandmother. The move could change the way products are sold and marketed and even how brokers are compensated.”
…
But requiring brokers to operate under a fiduciary standard could force them to offer products that are less costly and more tax-efficient. They will have to disclose any potential conflicts of interest, such as any fees they may get for favoring one product over another. That could mean clients will be offered fewer proprietary products if the broker can find a lower-cost option elsewhere.
Unfortunately, at this point this:
In any case, I think that proving wrongdoing under a fiduciary standard will be much easier, as it should be.
These guys dicked with their clients mercilessly for their own personal benefit, they just didn’t quite, they just did not cross the line to illegal.
Under a fiduciary standard, it probably would.
It turns out that there is a significant inaccuracy in GDP figures, it has to do with the way that imports are accounted for in GDP:
The fundamental shortcoming is in the way imports are accounted for. A carburetor bought for $50 in China as a component of an American-made car, for example, more often than not shows up in the statistics as if it were the American-made version valued at, say, $100. The failure to distinguish adequately between what is made in America and what is made abroad falsely inflates the gross domestic product, which sums up all value added within the country.
American workers lose their jobs when carburetors they once made are imported instead. The federal data notices the decline in employment but fails to revalue the carburetors or even pinpoint that they are foreign-made. Because it seems as if $100 carburetors are being produced but fewer workers are needed to do so, productivity falsely rises — in the national statistics.
“We don’t have the data collection structure to capture what is happening in a real time way, or what is being traded and how it is affecting workers,” said Susan Houseman, a senior economist at the W.E. Upjohn Institute for Employment Research in Kalamazoo, Mich., who has done pioneering research in the field. “We have no idea how to measure the occupations being offshored or what is being inshored.”
In terms of GDP, this is, for now at least, a pretty small part of the picture, well under 1%, which makes it a small story.
On the other hand, one of the arguments for offshoring is that by shipping jobs to China, where worker and environmental protections are weak, and an under valued currency further subsidizes these imports, is that it allows us to focus on what we are good at, and thus boost productivity and GDP.
The bottom line is, as William Alterman, the assistant commissioner for international prices at the BLS notes, “What we are measuring as productivity gains may in fact be changes in trade.”
This is a big part of the story, because the argument for free trade is that it creates, or at least increases, overall well being in our society.
The problem is that the delta from free trade may be grossly overstated, or not exist at all.
A while back This Sunday, 60 Minutes did a piece on how hackers created a massive blackout in Brazil.
Only it wasn’t any sort of computer problem, it was poorly maintained power lines, where soot (carbon is conductive) created short circuits which took down the line:
Brazil’s independent systems operator group later confirmed that the failure of a 345-kilovolt line “was provoked by pollution in the chain of insulators due to deposits of soot” (.pdf). And the National Agency for Electric Energy, Brazil’s energy regulatory agency, concluded its own investigation in January 2009 and fined Furnas $3.27 million (.pdf) for failing to maintain the high-voltage insulators on its transmission towers.
Also look at their additional links:
So, as it stands right now, the only people claiming this have no proof, but are likely to get contracts, if they are private, or additional government money, if they are public.
The issue here is the vulnerability of the grid, see the 2003 blackout, and the problem is that since privatizing electric utilities, they have skimped on infrastructure, leaving no margin for error.