Year: 2010

It Was Drug Dealers Wot Saved the Banks.

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I’m shocked, shocked to find that gambling is going on here!

The head of the UN Office on Drugs and Crime is now saying that it was money from the drug cartels that kept the banks nominally solvent during the financial crisis:

Antonio Maria Costa, head of the UN Office on Drugs and Crime, said he has seen evidence that the proceeds of organised crime were “the only liquid investment capital” available to some banks on the brink of collapse last year. He said that a majority of the $352bn (£216bn) of drugs profits was absorbed into the economic system as a result.

This will raise questions about crime’s influence on the economic system at times of crisis. It will also prompt further examination of the banking sector as world leaders, including Barack Obama and Gordon Brown, call for new International Monetary Fund regulations. Speaking from his office in Vienna, Costa said evidence that illegal money was being absorbed into the financial system was first drawn to his attention by intelligence agencies and prosecutors around 18 months ago. “In many instances, the money from drugs was the only liquid investment capital. In the second half of 2008, liquidity was the banking system’s main problem and hence liquid capital became an important factor,” he said.

There is no question: If a banker can launder drug money, and make money themselves from doing so, they will launder drug money.

Cue Captain Renault (see pic), and I do not expect any substantive law enforcement resulting from this revelation.

Another Nail in the Lead System Integrator Concept Coffin

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As I have said before, with the LSI model, you have the contractor supervising their own performance, which is almost literally a fox in the henhouse:

Defense contractors developing the Army’s largest modernization program — the Future Combat System — also were paid $91 million in 2007 to report back to the Pentagon on how well the program was performing, according to a new inspector general report, adding fuel to demands for tougher conflict-of-interest rules.

The Nov. 24 Defense Department inspector general report, reviewed by POLITICO, was sparked by an anonymous tip. The probe found that the $100 billion FCS program contained numerous conflicts that went unreported and that, between 1987 and 2007, the Pentagon increased its reliance on contractors for quality assurance and other tests by 375 percent.

……………

For instance, SAIC, a prime contractor doing systems engineering along with Boeing, received $2.2 billion for development of the FCS program, but in 2007 it also received $25.8 million for testing the program. Computer Sciences Corp., General Dynamics, Lockheed Martin and Northrop Grumman also received money to create elements of the FCS at the same time they were helping to test it, according to the report.

(emphasis mine)

I worked with folks from the SAIC when I was at FCS, and got very little “L” from the LSIs: they simply did not provide direction to the contractors.

It’s no surprise that the inspector’s report was marked “For Official Use Only”, because the powers that be in the Pentagon want this buried, but someone, probably someone who actually thinks about the soldiers who use the product, leaked it.

Note that this is an artifact of a number of administrations:

In addition to pursuing specific allegations of conflicts of interest, the inspector’s report looked more broadly at the trend toward using services contracts for testing. The review found that before the 1990s — when the Pentagon embraced the trend of cutting government employees and instead contracting for services — the Pentagon spent about $8.9 million a year on contractors for testing. In 2007, it spent $42.6 million.

The Pentagon started doing this under Bush I SecDef Richard Bruce Cheney, though it is fair to say that it was expanded under Clinton, and went, as did defense procurement generally, completely haywire under Bush II.

The problem is that when you have contractors testing for you, they lie, they self-deal, and they cheat.

That’s capitalism, baby: Cheating is a profit opportunity.

Unfortunately, the capabilities that the government has shed over the past few years will take much longer, but if the development of new systems is curtailed until the internal governmental testing capabilities, it will result in a exodus of people in private testing, because their jobs will be gone, and return to government.

If She Were to Bear Keith Richard’s* Child

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It would be immortal, and might have super powers:

A Sturgis woman had a blood-alcohol level of .708 percent, possibly a state record, when she was found earlier this month behind the wheel of a stolen vehicle parked on Interstate 90, according to Meade County State’s Attorney Jesse Sondreal.

A South Dakota Highway Patrol trooper discovered Marguerite Engle, 45, on Dec. 1 passed out behind the wheel of a delivery truck reported stolen in Rapid City.

Her blood-alcohol level was almost nine times South Dakota’s legal limit of .08 percent.

Checks with local and state labs where blood-alcohol levels are tested suggest Engle’s reading may be the highest ever recorded in South Dakota, Sondreal said.

Sondreal said a state chemist recalled a sample that tested .53, but nothing higher, in his more than 30 years on the job.

By way of comparison, LD50 for alcohol, the number at which 50% of the subjects die, is 0.40% BAC.

*Richards’ abuse of a myriad of substances is legendary, and his continued survival therefore puzzling. This led the comic Bill Hicks to say that, “I picture nuclear war and two things surviving: Keith and cockroaches!“

Security Theater

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Bruce Schneier, once again, is all over it:

Our current response to terrorism is a form of “magical thinking.” It relies on the idea that we can somehow make ourselves safer by protecting against what the terrorists happened to do last time.

Unfortunately for politicians, the security measures that work are largely invisible. Such measures include enhancing the intelligence-gathering abilities of the secret services, hiring cultural experts and Arabic translators, building bridges with Islamic communities both nationally and internationally, funding police capabilities — both investigative arms to prevent terrorist attacks, and emergency communications systems for after attacks occur — and arresting terrorist plotters without media fanfare.

It’s very clear that many of the so-called security measures do not enhance security, but exist to create an appearance of security.

Just go read it.

Another Endorsement from Your’s Truly

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Marcy Winograd, who is running against Blue Dog Jane Harman in CA-36. I got an email from them, which means that they are hitting the “Q-list” blogs, which is a low cost high reward strategy.

After all, if you want someone’s support, sending an email is a virtually free way of asking them for it.

It should be noted she ran against Harman in 2006, and scored a respectable 37.5% of the vote, and Harman has actually improved as a result of that challenge.

It should be noted though that Harman ran in the 1998 Gubernatorial primary as being, “the best Republican in the Democratic Party,” so improvement is not difficult to achieve.

She is, and remains, a Blue Dog puke.

In any case, she is now on my Act Blue page, as well as having a direct donation page her web site.

Text of letter after break:

Marcy Winograd For Congress


Dear Friends,Marcy Winograd For Congress

If you’re like me, one of your hopes for 2010 is that our government accomplishes a great deal more than it did in 2009.

Frustration has become the norm. Yet as we close out the year, you have a very specific choice to make: Do you allow that frustration to become apathy or action?

Will you support the status quo or those that believe better decisions can and should be made in 2010?

Please help me end 2009, literally and figuratively, by donating to my June 2010 campaign against Blue Dog Democrat Jane Harman in CD 36.

I have been a community activist for decades, fighting for education funding, affordable access to health care, worker and consumer protections, and the environment.

Nothing, however, is more pressing than the issue of jobs. We can and must reinvest in America – converting an economy currently based on making war overseas into one that makes better schools, roads, bridges, railways, and new Green Industries at home.

As we come to the end of the year – you can take action right where you’re sitting by making a decision to end Jane Harman’s 12 year effort to become the Lieberman of the House, largely serving the interests of large corporations and military contractors.

Contribute before January 1 to elect a true Democrat – not one who proudly accepted the label of “best Republican in the Democratic party.”

As I campaign up and down the 36th congressional district (West LA to San Pedro), I hear the same question over and over: “How are you going create jobs?”

I tell people we must fight for a Green New Deal, modeled after the New Deal of the Great Depression.

There is 200-billion left over from TARP (Troubled Assets Relief Program) that we can use not to bail out corrupt banks – but for common good: the creation of a sustainable economy.

While some banks may be reticent to accept the TARP funds, the aerospace industry is not. Its association has explicitly asked for 6-billion in TARP to create new jobs.

We can immediately contract with regional aerospace companies, not to build more bombs, but to create jobs in the New Green Economy. We need their engineering know-how and skilled workforce to build rapid transit and develop solar and wind resources that will make us strong and energy independent.

Jane Harman has spent too many years lobbying for weapons contracts, failing to expand the reach of aerospace beyond a permanent war economy.

We have only until Thursday at midnight to show people sitting on the fence that 2010 can be very different.

Help elect a REAL Democrat – a teacher, an anti-war leader, an environmentalist – in California’s June 8, 2010, Democratic Party primary. Contribute before midnight Thursday.

With great thanks for your support,


Marcy Winograd

To donate, please click here.
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Yet Another Artifact of the Bush Tax Cuts

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If some rich guy dies in the next few days, it could get very ugly for his wife:

Spouses of those wealthy who die this year might find themselves with nothing if the family will isn’t revised—a major wrinkle that could follow Friday’s repeal of the federal estate tax.

As started on Jan. 1, estate taxes will be repealed for 2010 only. That means unless Congress acts otherwise, there is no limit to the wealth that can be passed on to heirs without incurring federal estate taxes through the end of the year.

But wills have often been written on the expectation that estate taxes were a fact of life for years to come, estate planners say. As a result, wills typically direct assets not subject to the tax be passed on to children—for 2009, up to $3.5 million—with the rest directed to the spouse.

“You could be in a situation now where everything would go into a trust downstream to the kids and nothing is left to the spouse,” …………

So, in addition to giving heirs a motive to bump you off, you could leave your spouse without anything when you die, and if the taxes go back into effect, which is a highly likely scenario, you have lawsuits to claw it back.

It ain’t just the Supreme Court where the misdeeds of Bush and His Evil Minions™ will be felt for years.

How Quaint

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The 9th Court of Appeals has ruled that the police do not have the right to torture citizens they find inconvenient with Tasers:

A federal appeals court on Monday issued one of the most comprehensive rulings yet limiting police use of Tasers against low-level offenders who seem to pose little threat and may be mentally ill.

In a case out of San Diego County, the 9th U.S. Circuit Court of Appeals criticized an officer who, without warning, shot an emotionally troubled man with a Taser when he was unarmed, yards away, and neither fleeing nor advancing on the officer.

(emphasis mine)

I’m sure that some will find this an outrage. After all, aren’t police supposed to use potentially lethal force on people who don’t comply immediately, like the kid who did not obey orders to get up because he had a broken back?

Hoocoodanode?

Needless to say, this cop still has his job, because, after all, law enforcement investigates itself in such instances.

Economics: Year End Data Points

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H/t The Big Picture

The stock market is up significantly for the year, but note that the picture is for the Dow Jones Industrial Average, which is at best an imperfect gauge.

Also note that rents fell 3.5% in 2009, once you factor in things like months of free rent and flat screen TVs (!) for signing a lease.

That means that home prices need to fall an additional 3.5% to hit historical rent-own ratios.

But if the real estate news presages deflation, then the fact that commodities posted their biggest annual gain since 1971, which indicates that once a real recovery starts, prices may go up significantly.

Since, I actually favor inflation as a way to get out of this mess, people repay loans in devalued currency, and hence are better able to pay off those loans, I’m hoping for significant (6-10%) inflation in the near future.

The State Department Cover-Up of Blackwater Succeeds

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Basically, the State Department used the Oliver North option, so by immunizing and debriefing them, they made a trial almost impossible, and the judge, U.S. District Judge Ricardo Urbina, was forced to dismiss the case.

Obviously, part of the problem is that the prosecution screwed up, though they can refile, but the real crux of the matter here is that the Bushies in the State Department intended this result. They wanted to protect Bush supporter Eric Prince and his company, now called Xe.

Republican Congressmen did this at the Iran-Contra hearings, because they feared that North would rat out Reagan if he actually ended up in prison.

Economics Update (For the Week)

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Yes, it does appear that the seasonal adjustment for the week after Christmas is whack

The lede for the week is obviously that first time unemployment claims fell to the lowest level in 17 months, down 22K to 432K, though, as Brad Delong notes, this is likely because of problems with the seasonal adjustment for this week. (See graph pr0n).

Continuing claims, as well as the 4 week average fell too, but emergency claims, for people (like me shortly) who exhausted their regular benefits (i.e. out of work more than 6 months), rose sharply, by 199 thousand to 4.82 million, a 4.1% jump in one week. (!)

Earlier this week, the Institute for Supply Management released its Chicago index, aka the Purchasing Managers’ Index (PMI), and it unexpectedly jumped to 60 in December from 56.1 in November………Only they just revised it, and oops, it the PMI was only 58.7, largely on a downward revision on employment…………Happy, happy, joy, joy.

That’s not to say that the numbers aren’t better, they are better, much like the ATA Truck Tonnage Index November numbers, and the ShopperTrak year over year retail sales for last week, though the latter saw a drop in traffic.

In real estate, the 30-year fixed mortgage rate rose to a 4 month high, 5.14%, which is still at a level which is historically low, and the recent uptick in housing prices seems to have petered out, with the Case-Shiller index showing flat prices in October, following 4 straight months of price increases.

This is unsurprising, as home price subsidy new home buyer tax credit was supposed to end in November, and homes needed to close by November 30, which meant that there were a lot of sellers who knew that they had to move their houses quickly, or not at all.

Houses are still well above trend, both in terms of rent to own price to income ratio, though you still have claims that housing affordability is better than the historical numbers, because the mortgage rates are still incredibly (see above) low.

If rates return to their historical levels, about 9% for the 30-year fixed, we have a downward pressure on house prices of roughly 1/3, because people buy houses on monthly payment, not price.

We do have some good international news, with South Korean exports rising rapidly, and Chinese manufacturing growing at a 20-month high, though I wonder how much of the latter is the result of provincial bureaucrats goosing the numbers, or encouraging local industries to over produce, in order to score brownie points with Beijing.