Year: 2010

Put a Steak* Through It’s Heart

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We See the problem here

The good folks at Bloomberg, no group of raving socialists have some graph pr0n.

What they are showing is something very basic: That when profits (and not stated, remuneration) in the financial industry skyrocket, this is not a sign of health in the economy, this is a sign of sickness.

It means that enormous amounts of resources are being redistributed to non-productive activities, essentially bankers shafting their customers and pocketing the difference:

In July 2008, [Deutsche Bank AG strategist Jim] Reid said that U.S. banks had made “excess profits” of about $1.2 trillion in the previous decade, compared with how much they should have made based on economic growth, and that those excesses would be wiped out. Since then, U.S. financial firms have written down the value of their assets by about $1.15 trillion, according to Bloomberg data.

“We are now all well aware that rather than overhaul a financial system that arguably contributed to the problems of the last two to three years, the authorities have created the conditions for the industry to thrive,” Reid wrote this week. “Only time will tell how the regulators and politicians will decide to address these imbalances.”

In any case, I spotted it on Kevin Drum’s blog, and he found it at Paul Kedrosky’s blog, but he begs to differ with Mr. Kedrosky’s analysis.

You see, Mr. Kedrosky’s thesis is that with rates at 0%, and the finance industry still not supplying the lubricant that keeps the economy moving particularly well, that even bad bankers can make a profit.

Mr. Drum, and I agree, sees the role of the bankers somewhat differently :

Wall Street is only full of bad bankers if you think the role of bankers is to provide efficient financial services to the rest of the economy. If you adopt the more correct attitude that the role of bankers is to make lots of money for bankers, then America has the best bankers in the world. And they’re proving it yet again.

(emphasis mine)

This is, of course the problem: What is good for the banks is increasingly bad for the country, which is why the finance industry, and all of the FIRE sector (Finance, Insurance, and Real Estate) needs to be shrunk back to historic levels of society.

Until one of the goals of regulation is a recognition that the FIRE sector is basically parasitic once it expands much beyond the bare minimum required, then part of the solution is to shrink it, and this needs to be an explicit goal of any new regulatory regime.

*It’s a reference to Damon Knight’s (very) short story eripmaV. Read the story, or buy the T-shirt with the story printed in full on it.

Saroff’s Rule, Once Again

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Saroff’s rule: If a financial transaction is complex enough to require that a news organization use a cartoon to explain it, its purpose is to deceive

The New York Times has a description of how Lehman Brothers used a front company to obtain credit and conceal debt:

It was like a hidden passage on Wall Street, a secret channel that enabled billions of dollars to flow through Lehman Brothers.

In the years before its collapse, Lehman used a small company — its “alter ego,” in the words of a former Lehman trader — to shift investments off its books.

The firm, called Hudson Castle, played a crucial, behind-the-scenes role at Lehman, according to an internal Lehman document and interviews with former employees. The relationship raises new questions about the extent to which Lehman obscured its financial condition before it plunged into bankruptcy.

While Hudson Castle appeared to be an independent business, it was deeply entwined with Lehman. For years, its board was controlled by Lehman, which owned a quarter of the firm. It was also stocked with former Lehman employees.

None of this was disclosed by Lehman, however.

Not surprised about their doing this, though I am surprised that this is, at least nominally, legal.

Quote of the Day

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This man should spend the rest of his life digging coal a mile below the earth with his bare hands

Crusiing the innerwebz, a member of the by invitation only Stellar Parthenon BBS discovered the following video of Massey CEO Don Blankenship’s.

It’s short, but you will note that he thinks that agencies attempting to make coal mines safer are as “silly as global warming.”

Well, one of the users, Jolly Reaper, on said the following:

If he doesn’t get whacked by a miner, this nation really is full of pussies.

It’s true.

One of the great tragedies of US culture is that when disgruntled employees go on shooting sprees, they target their coworkers, as opposed to upper management, which should then be followed by a few acquittals.

While any loss of life is tragic, if there was a real fear of death among upper management as to their safety, we would see better management.

It seems that even workers going postal give too much deference to the MBA/Banker types.

A Coda on “Collateral Murder”

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A soldier whose unit was involved in the incident captured on video is saying that these actions were business as usual and were fully in accord with the rules of engagement.

The full statement is after the break, but his basic point is that this is an inevitable part of war.

Certainly this is true to some degree, but the incident is also a reflection of some real issues with US doctrine, particularly with the aggressive use of air power, and rules of engagement.

Both of these problems contribute, and continue to contribute to, a situation where we are creating an environment where we create more insurgents, and, in the long run, more dead American soldiers.

Statement follows:

FOR IMMEDIATE RELEASE
April 9, 2010 10:45 AM
CONTACT: Media Advisory

Veteran of “Collateral Murder” Company Speaks Out

WASHINGTON – April 9 – Josh Stieber, who is a former soldier of the “Collateral Murder” Company, says that the acts of brutality caught on film and recently released via Wikileaks are not isolated instances, but were commonplace during his tour of duty.



“A lot of my friends are in that video,” says Stieber. “After watching the video, I would definitely say that that is, nine times out of ten, the way things ended up. Killing was following military protocol. It was going along with the rules as they are.”



Stieber deployed to Baghdad with Bravo Company 2-16, whose members were involved in the incident captured in Wikileaks’ “Collateral Murder” video, which has made international headlines by depicting a July 2007 shooting incident outside of Baghdad in which over a dozen people, including two Reuters employees, were killed. Although he was not present at the scene of the video, he knows those who were involved and is familiar with the environment. Stieber, who now works to promote peace and alternatives to war, is speaking publicly about his time in Iraq and the incident captured in this video.



“If these videos shock and revolt you, they show the reality of what war is like,” says Stieber. “If you don’t like what you see in them, it means we should be working harder towards alternatives to war.”



Stieber currently lives in Washington, D.C.




BACKGROUND ON JOSH STIEBER:
Branch of service: United States Army (USA)

Unit: 1st ID

Rank: Spc.

Home: Laytonsville, Maryland

Served in: Baghdad (Rustamiyah) 07-08 Fort Riley, KS 06-07, 08-09



###

No Outrage From Me At All

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Developing nations are threatening to cut aid to poorer nations that do not sign onto to greenhouse gas reductions:

Rich countries have threatened to cut vital aid to the developing nations if they do not back the deal agreed at the UN climate summit in Copenhagen, it has emerged.

The pressure on poor countries to support the US, EU and UK-brokered Copenhagen accord came as 190 countries resumed UN climate talks in Bonn in an atmosphere of mutual suspicion.

“The pressure to back the west has been intense,” said a senior African diplomat. “It was done at a very high level and nothing was written down. It was made very clear by the EU, UK, France and the US that if they did not back them then they would suffer.”

My heart bleeds borscht for them.

The idea that LDC’s, which for some reason includes two of the industrial powerhouses of the world, India and China, should get a free ride, and basically be allowed to destroy the world is complete crap.

If you want to piss in the punch bowl, don’t expect to be invited to the party.

Not only is such arm twisted to be expected, it is the right thing to do.

The damage that was done by the Kyoto protocols, where the LDC’s were left off the hook, giving polluting industries an incentive to move there and continue to pollute, is huge and ongoing.

We want more of this arm twisting, not less.

Economics Update

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Business orders returning

Well, it’s kind of a slow news day, as the big news was the Euro loans to Greece, but we do have another sign of a recovery, which is that business orders are on an upswing worldwide.

All in all, I think that we are truly in recovery, unless another shoe drops in high end finance, but I’m kind of expecting another shoe to drop there, causing another panic and another bailout.

The National Bureau of Economic Research (NBER) continues to take a conservative approach, saying that, “The determination of the trough date on the basis of current data would be premature.”

This is not surprising. The folks at the NBER typically take more than a year after the trough bottom to announce that they have determined a trough date.

In energy, gasoline is up nearly 4¢/gallon this over the last three weeks, to $2.85/gallon, and it’s not unreasonable to assume that it will break $3/gallon by the start of the summer driving season.

As to oil, it fell today, as and so did the dollar, largely in reaction to the Greek bailout.

Magnetar: Why a Criminal Pursuit of the Finance Industry Is Necessary

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Criminality as a Broadway musical

Pro Publica, along with the radio folks at Planet Money, have investigated the activities of a hedge fund called Magnetar, which appears to have bankrolled the creation of mortgage backed securities so that they could bet against them.

Note that there are 8 chapters, so you may want to link to the This American Life broadcast, (about 40 minutes) which is less encyclopedic, but rather more streamlined.

Basically, at the end of 2005, it appeared that the housing bubble was moderating, which made people were less interested in investing in the mortgage backed security known as the CDO, because without double digit increases in home prices, the risk levels were higher, and the potential rewards were less.

What Magnetar did was to get banks to write more CDOs by agreeing to buy the worst tranches, the riskiest 3-5% of these instruments, and then everyone else, seeing as how the scum at the bottom of the barrel was taken, would snap up the “higher quality” stuff.

At one point, Magnetar was covering about ½ of the CDO market, and betting against everything that they could get their hands on with credit default swaps (CDS).

And the financial industry noticed their moves into the field, even if they did not know of the CDS bets, to the degree that Business Week predicted that they would be, “shredded”.

The folks at Pro Publica have uncovered emails where they were aggrissively pressuring the agents that they set up for the funds to make them as risky as possible, which makes sense, if you are betting against them.

For what it’s worth, it wasn’t only people like pension funds and municipalities who got burnt by this. J.P. Morgan lost billions by holding onto senior tranches of CDOs that they created for Magnetar, even though it was clear by that time the game that they were playing.

So, why did Morgan do it anyway? Because the people who bought the CDOs generated commissions at the front end, and were then given huge bonuses based on this, so by the time it all went pear shaped, the individual traders had a few tens of millions of dollars in the bank.

By the end of their run, it was so bad that even Moody’s refused to rate their CDOs.

This is deeply and perfidiously corrupt and well organized, and I cannot see why RICO isn’t being applied to anyone who touched this.

But seriously, read the whole thing. It is stunning in its scope and corruption, but this boggles the mind.

This is not taking out insurance on your neighbor’s house and burning it down. Paying for the road out to a sub development so that people will buy houses, and then using a squadron of B-52s to firebomb that development, only that development is our economy.

The Ever Reliable Joseph Lieberman

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Remember when I said that Joe Lieberman would be preening to get his face on the Teevee with regard to the new START Treaty?

Well, I was right. He is now calling for what appears to be a massive buildup in European missile defenses and a his desire for an unprovoked nuclear strike on Iran as a condition for his support:

Appearing on “Fox News Sunday,” [big shocker there] the Connecticut Independent suggested that he himself would oppose ratification of the START II Treaty that Obama signed in Prague this past week, in part because, he reasoned, the language left America vulnerable to a nuclear Iran.

“I don’t believe that there will be 67 votes to ratify the treaty unless the administration does two things,” Lieberman said. “First: commit to modernize our nuclear stockpile, so as we have less nuclear weapons we know that they are capable if, God forbid, we need them. And secondly, to make absolutely clear that the statements by Russian president [Dmitry] Medvedev at the signing in program, that seemed to suggest that if we continue to build ballistic missile defense in Europe they may pull out of this treaty, is just not acceptable to us. We need that defense to protect our allies and ourselves from Iran.”

Basically, Lieberman is saying that unless Obama threatens Iran with nuclear attack, and promises to build up the ill-conceived European missile defense system, he’ll vote no.

Yes, he’s with on everything but Iraq, thanks for keeping him in the tent and pissing in, Harry and Barack.

This is all about Joe Lieberman getting his ego stroked, and the solution to this problem is to make it clear that there will be consequences if he f%$#s with this, not to stroke his ego: that only makes him worse.

Here is hoping that he gets caught buggering an underage hamster and will be forced to resign.

OMFG!!!!! Epic Fail!!!!

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Fighting the Kha’ak, who lack staying power

You know, it’s not, “All Your Base Are Belong To Us,” but in naming the alien race in X3: Reunion the Kha’ak, pronounced “kawk”, it appears that someone has seriously jumped the shark.

The developers are German, and the dialogue, which explains why they don’t understand when a native English speaker might find it amusing when a character in the game says that, “The Kha’ak are not interested in dialogue,” though it does ring true.

I’m sure that this mirrors my wife’s, as well as my XGF’s experience.

Plane Crash Kills Polish President

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It appears that his plane crashed in a heavy fog, while attempting to land in Smolensk, killing Poland’s president, Lech Kaczynski.

He was on his way to the Katyn Woods, where Polish and Russian authorities were to have a memorial service for the Polish officers and politicians murdered by the NKVD in 1940, which is kind of ironic:

Russian emergency officials said 97 people were killed. They included Poland’s deputy foreign minister and a dozen members of Parliament, the chiefs of the army and the navy, and the president of the national bank. They included Anna Walentynowicz, 80, the former dock worker whose firing in 1980 set off the Solidarity strike that ultimately overthrew Polish Communism, as well as relatives of victims of the massacre that they were on their way to commemorate.

…………

Among them, the Polish government said, were Mr. Kaczynski; his wife, Maria; Ryszard Kaczorowski, who led a government in exile during the Communist era; the deputy speaker of Poland’s Parliament, Jerzy Szmajdzinski; the head of the president’s chancellery, Wladyslaw Stasiak; the head of the National Security Bureau, Aleksander Szczyglo; the deputy minister of foreign affairs, Andrzej Kremer; the chief of the general staff of the Polish Army, Franciszek Gagor; the president of Poland’s national bank, Slawomir Skrzypek; and the commissioner for civil rights protection, Janusz Kochanowski.

My condolences to the victims families.

Note that President is a mostly ceremonial position under the Polish system, though a quick search through my archives seems to indicate that he was a bit of a euro-skeptic.

Guess What?

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All of the big banks used Lehman style accounting tricks to goose their numbers before quarterly reporting deadlines:

Major banks have masked their risk levels in the past five quarters by temporarily lowering their debt just before reporting it to the public, according to data from the Federal Reserve Bank of New York.

A group of 18 banks—which includes Goldman Sachs Group Inc., Morgan Stanley, J.P. Morgan Chase & Co., Bank of America Corp. and Citigroup Inc.—understated the debt levels used to fund securities trades by lowering them an average of 42% at the end of each of the past five quarterly periods, the data show. The banks, which publicly release debt data each quarter, then boosted the debt levels in the middle of successive quarters.

Excessive borrowing by banks was one of the major causes of the financial crisis, leading to catastrophic bank runs in 2008 at firms including Bear Stearns Cos. and Lehman Brothers. Since then, banks have become more sensitive about showing high levels of debt and risk, worried that their stocks and credit ratings could be punished.

Seriously, “business as usual” is better described as an “ongoing criminal enterprise.”

Breaking: Stupak Retiring

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Bummer of a birth mark, Bart

So, after making a bid for national prominence by grandstanding on a woman’s right to choose, and getting a primary challenger, the Teabaggers are still hating on him, and Rachel Maddow uncovered the fact that he was getting bribed with below market rents while he was living at “C Street,” so he will not run for reelection:

Representative Bart Stupak of Michigan, who played a central role with fellow anti-abortion Democrats in negotiating a compromise in the final hours of debate that allowed the health care overhaul bill to pass, said on Friday that he would not seek re-election.

Mr. Stupak, a nine-term incumbent, has been under intense pressure from anti-abortion groups and others since the health care bill passed last month. At his request, President Obama signed an executive order outlining the prohibitions against the use of federal funds for abortion. But anti-abortion groups dismissed the executive order and pledged to defeat Mr. Stupak, whom they had once championed.

Let’s be clear here: The Teabaggers would always have supported a Republican in the general, because they are a Republican movement.

In fact, it could be argued that they have captured the Republican party.

And when you never had the Teabaggers, or the Republican party, and you’ve just told the Democratic party to go Cheney yourself, you do not have much left to win an election with.

BTW, here is his challenger, and now putative nominee, Connie Saltonstall’s Act Blue page.

Give generously, to keep the idiots at the DCCC and DNC from trying to anoint a Conservadem between now and the primary.

Justice Stevens to Retire

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Just Announced.

Obviously, the question now is who Obama will nominate to succeed him.

My predictions:

  • They will be Protestant
    • Stevens is the only Protestant on the court, the rest are Catholic or Jewish.
  • They will be a woman and/or a minority.
    • Because it will be his way to pander to the base when he chooses a basically conservative nominee.
  • They will be tepid, at best, on Roe v. Wade and a woman’s right to choose in general.
    • Since Barack Obama has always been tepid, at best, on Roe v. Wade and a woman’s right to choose in general.
  • They will generally favor a very expansive definition of the powers of the Presidency.
    • Since Barack Obama has aggressively asserted a very expansive definition of the powers of the Presidency.
  • They will generally be rather pro corporate, though not as much as Scalia, Thomas, Alito, Roberts, and Kennedy.
    • Since Barack Obama is ……… You get the picture.
  • They will not be particularly pro organized labor.
    • Obama has clearly been tepid on labor issues, as shown by his efforts to soft pedal the EFCA (Card Check).

What I would like to see, beyond ideology, is that:

  • They not have worked as a prosecutor, which tends to set people off on a legal path that is hostile to the rights of the accused.
  • That they not, and have not been, a sitting Federal Judge, which is increasingly the norm, and we need more diversity of experience in there.
  • Nominating someone who is publicly an atheist.

Things that could make this amusing, but will not happen:

  • Nominating Bill Clinton, just to make the ‘Phant’s heads explode.
  • Nominating a Muslim.
  • Nominating Hillary Clinton, just to make the ‘Phant’s heads explode.

But these will not happen.