Fold/Spindle/Mutilate 2.1

By Jim Hightower, Hightower Lowdown

Change. That’s what Americans want. We the People–a.k.a. the body politic, the majority, the great unwashed, the hoi polloi, “us”–have made it clear that we want real, substantive change in the way Washington works, and for whom it works. We’re sick of a “jobless recovery,” rampant banksterism, collapsing bridges, corporate-owned elections, tinkle-down economics, oil dependency, made-in-China everything, mountaintop “removal,” corporate welfare, falling wages, skyrocketing tuition, the demise of the middle class, and on and on. Enough! Ya basta! Stop it–change, dammit, CHANGE!

But where’s the change? It’s in subcommittees, in negotiations, in limbo, in transition, in purgatory, in trouble, in Never Never Land, in the trash can.

Why? Right-wing pundits and corporate-funded tea-party groups want you to blame Washington. Well, yes, Obama seems to lack convictions, much less courage; Senate Democrats tend to be five-watt bulbs sitting in 100-watt sockets; and congressional Republicans are…well, contemptible and pathetic. But these characters are the public face of the problem, not the source. Progressives need to focus on those shadowy players who’re pulling the strings from behind the scenes to kill the will of the people and impose their special interest over America’s public interest.

Who are they? Let’s start by running some numbers on them:

• 11,195. That’s the number of corporate lobbyists who are presently plying their nefarious trade day and night in Washington’s hallways and back rooms.
• $2.95 billion. That’s the amount that corporations spent on lobbyists last year alone (a sum more than six times greater than the total spent by all consumer,environmental, worker, and other non-corporate groups combined).
• $473 million. That’s the sum of money that corporate executives and lobbyists have slipped into Washington’s many political pockets–so far–for the 2010 election cycle, including donations to candidates, leadership PACS, and party committees. We are still seven months from the 2010 elections, and already corporate spending has reached the record-breaking total of $475 million shelled out for the entire 2008 cycle.

This unrelenting lobbying force is so tightly wired into every part of our political and governmental systems and so omnipresent in Washington decision making that it refers to itself as “the industry.” It has become such a permanent part of America’s “democratic” power structure that several universities now offer four-year degrees in lobbying! And, as a measure of how entrenched this powerhouse industry has become, note that it has its own lobbying firm: the American League of Lobbyists (ironically, its acronym is ALL). The league works to fend off legislative, regulatory, and ethical restrictions on influence peddling–a reform that nearly all Americans would support.

As if that’s not enough power behind the narrow agenda of America’s economic elite, consider this number: 300. That’s roughly how many former members of Congress are currently in harness to corporate lobbying firms.

Ever wonder what happened to such once-powerful-and-prominent lawmakers as Dick Armey, John Ashcroft, Tom Daschle, Tom Foley, Dick Gephardt, Newt Gingrich, Phil Gramm, Dennis Hastert, Jack Kemp, Bob Livingston, Trent Lott, Bob Packwood, Richard Pombo, Rick Santorum, Bud Shuster, Billy Tauzin, Fred Thompson, and John Warner?

(Read the article)

Comments(0) |  Print This Post

Richard (RJ) Eskow
Consultant, Writer, Policy Analyst

What we’ve been witnessing in Washington isn’t just political positioning by one party looking to deny the other a victory, although it’s certainly that. We’re also seeing the death struggle of a dying ideology. This ideology provided intellectual cover to business and political elites for decades, but events have proved conclusively that it doesn’t work. What’s more, people are beginning to see that it’s inconsistent with the country’s traditional values of competition and free enterprise.

The ideology was cooked up in think tanks and boardrooms, then packaged and sold under a variety of conservative and libertarian guises. While the theories and rationalizations varied wildly, the conclusions were always the same: Deregulation was always the right approach, even (especially) for the most concentrated and rapacious businesses. Consumer regulations should be avoided because they hurt everybody, especially (somehow) consumers. And cutting taxes for the rich magically made things better for everybody else.

The arguments changed but the results were consistent: greater upward distribution of wealth, and more concentration of power, delivered by those the special interests funded and placed into positions of influence.

While the ideology was traditionally a Republican one, it had willing enablers in the Democratic Party who pushed for the same goals: Less regulation. More “unfettered” innovation in financial products, with “unfettered” a code word for “untested.” Less transparency. More centralization of financial products through growth and acquisition, as if the world had never seen oligopolies before.

Now the ideology lies in ruins. The world has seen its fruits in a worldwide economic collapse, massive structural unemployment, and revelations of dirty dealings by our largest and most respected financial institutions. The two most prominent architects of the New Economic Order, Alan Greenspan and Robert Rubin, are publicly discredited by the collapse of the edifice they built. And, as we’ve discussed before, Greenspan’s philosophy was particularly colored by his extreme ideological leanings and Ayn Rand worship (the money quote for Greenspan: “Parasites who persistently avoid either purpose or reason perish as they should.”)

And yet privilege rewards its own. The same elites are being drafted into service, this time to recommend slashing benefits for older Americans in service of the wealthy. The Economic Night of the Living Dead that is Pete Peterson’s “deficit summit” is the perfect example of this. (See Dean Baker’s reaction here.)

(Read the article)

Comments(0) |  Print This Post

Huffington Post Investigative Fund |  David Heath

As congressional partisans wrangle over financial reform, neither side is grappling with a fundamental lesson learned from an investigation into the causes of the financial crisis.

A recent Senate inquiry offered a rare peek into the secret world of bank examiners. What it revealed was that regulators had stopped regulating.

In the case of Washington Mutual, regulators found all sorts of trouble, from lax lending standards to high delinquency rates on loans, and yet failed to prevent the biggest bank failure in history.

Starting in 2003, examiners for the Office of Thrift Supervision found 545 problems at the bank. But the agency left it up to WaMu to track its own compliance with examiners’ recommendations, and took no formal action against the bank until it was too late.

Even when problems grew so severe that the OTS should have taken strong enforcement action — and let the public know — the agency did nothing. In a revealing e-mail to WaMu’s CEO, Kerry Killinger, agency director John Reich said of OTS’ failure to demand remedies that “if someone were looking over our shoulders, they would probably be surprised.”

A central lesson from the failure of Washington Mutual was that a system set up to prevent what happened utterly failed. For all the talk of reform, Congress isn’t addressing the problem of regulators who fail to do their job.

Regulators routinely deferred to bankers and market forces and engaged in petty squabbles over who had authority over the bank. So the question now is: Can Congress fix ineffective regulators themselves?

“It’s not only feeble enforcement, it is pitiful enforcement,” Sen. Carl Levin, (D-Mich.), chairman of the subcommittee on permanent investigations said at an April 16 hearing when scolding Reich, who has since retired from the OTS.

In a bipartisan moment, Sen. Tom Coburn (R-Okla.) took it even further.

“I have concluded that investors would have been better off had there been no OTS,” Coburn said. “OTS said everything was fine when, in fact, OTS knew everything wasn’t fine and wasn’t getting it changed.”

(Read the article)

Comments(0) |  Print This Post

Marc Ambinder

Serious thinkers on the right have finally gotten around to a full and open debate on the epistemic closure problem that’s plaguing the conservative movement. The issue, to put it in terms that even I can understand, because I didn’t study philosophy much in college: has the conservative base gone mad?

This matters to journalists, because I really do want to take Republicans seriously.  Mainstream conservative voices are embracing theories that are, to use Julian Sanchez’s phrase, “untethered” to the real world.

Can anyone deny that the most trenchant and effective criticism of President Obama today comes not from the right but from the left? Rachel Maddow’s grilling of administration economic officials. Keith Olbermann’s hectoring of Democratic leaders on the public option. Glenn Greenwald’s criticisms of Elena Kagan. Ezra Klein and Jonathan Cohn’s keepin’-them-honest perspectives on health care. The civil libertarian left on detainees and Gitmo. The Huffington Post on derivatives.

I want to find Republicans to take seriously, but it is hard. Not because they don’t exist — serious Republicans — but because, as Sanchez and others seem to recognize, they are marginalized, even self-marginalizing, and the base itself seems to have developed a notion that bromides are equivalent to policy-thinking, and that therapy is a substitute for thinking.

It is absolutely a condition of the age of the triumph of conservative personality politics, where entertainers shouting slogans are taken seriously as political actors, and where the incentive structures exist to stomp on dissent and nuance, causing experimental voices to retrench and allowing a lot of people to pretend that the world around them is not changing. The obsession with ACORN, Climategate, death panels, the militarization of rhetoric, Saul Alinsky, Chicago-style politics, that TAXPAYERS will fund the bailout of banks – these aren’t meaningful or interesting or even relevant things to focus on. (The banks will fund their own bailouts.)

(Read the article)

Comments(0) |  Print This Post

Matthew Cardinale

ATLANTA, Georgia, 31 Mar (IPS) – As citizens, businesses and non-profit organisations seek to transition to cleaner power sources like solar and wind, some big energy firms whose business models rely on polluting sources are standing in the way.

In Georgia, the energy company Georgia Power has lobbied for favourable public policies at the Public Service Commission (PSC) and State legislature that are making it difficult for the state’s residents to transition to solar power.

IPS learned that the Dekalb County school system wanted to put solar panels on their schools, but could not do it because of state policies like the Territorial Electric Service Act of 1973 which gives Georgia Power a monopoly over the purchase of energy.

“In Georgia, we have about a dozen state policies preventing creation of solar energy,” James Marlow, vice chair of the Georgia Solar Energy Association, told IPS. “One of those is the Territorial Act.”

“If you’re looking at a school, one of the common ways [of setting up solar panels] is using a power purchase agreement or PPA,” Marlow said.

Typically, one of the biggest obstacles for businesses and organisations to switch to solar energy is the initial cost of obtaining and installing the panels. A PPA allows a school system, for example, to obtain the panels for no cost from a solar installation company which finances the panels.

Then, the school can purchase the energy from the solar installation company, which would own the panels, for a 20-year period. Marlow said that a PPA client typically pays for the panels after the first five years and then saves money on energy for the next 15, all the while avoiding the use of dirty energy.

However, because of Georgia’s Territorial Act, individuals, organisations, and businesses with solar panels can only sell their energy to Georgia Power. This means they cannot enter a PPA with a solar installation company and may have difficulty affording the panels in the first place.

Other states like Colorado have taken a different approach to encourage the use of solar panels. They charge all energy customers 50 cents a month, a very low amount, to support the purchase of solar energy from producers.

According to the Morning News, the Tennessee Valley Authority has enrolled 13,000 green-power customers and has no cap on the annual amount of green energy it will buy from producers. Florida Power & Light “is building three solar facilities that combined will generate 110 megawatts of electricity… Duke Energy in North Carolina plans to invest 50 million in rooftop installations.”

(Read the article)

Comments(0) |  Print This Post

E-mails show Goldman traders rushed to bet against the mortgage market as crisis spread

By DANIEL WAGNER
The Associated Press

As the U.S. housing turned downward in January 2007, a Goldman Sachs trader wrote in e-mails to a woman he apparently was courting that investments he had sold were “like Frankenstein turning against his own inventor.”

“I’m trading a product which a month ago was worth $100 and today is only worth $93,” wrote Fabrice Tourre, who was charged along with the bank in a civil complaint filed this month by the Securities and Exchange Commission. “That doesn’t seem like a lot but when you take into account … (the investments) are worth billions, well it adds up to a lot of money.”

Tourre was talking about investment products like the one at the heart of a federal complaint against his firm. For Tourre, the investments were like an invention gone awry: He had started arranging them when the market was on the upswing. But he continued selling them after the market turned — now with Goldman betting against them, in one case allegedly misleading investors about a deal’s origin.

Goldman Sachs Group Inc. released that e-mail and 25 other internal documents Saturday in response to a Senate panel’s release of messages in which Goldman executives boast about money they were making as the market imploded later in 2007.

When credit rating agencies downgraded many billions of dollars of mortgage-backed investments in October 2007, Goldman executive Donald Mullen was unabashedly pleased.

“Sounds like we will make serious money,” Mullen wrote to Michael Swenson, another executive, in one of the e-mails released by the Senate Permanent Subcommittee on Investigations.

(Read the article)

Comments(0) |  Print This Post

Teri Buhl and John Carney

The German bank on the losing end of the Goldman Sachs derivatives deals that have attracted the ire of the Securities and Exchange Commission was so absorbed in the pursuit of high-yield returns from financial instruments linked to the U.S. housing market that it preferred to lose one of its top executives rather than change course.

This single-minded pursuit of yield provides an important context for the SEC’s case against Goldman. In hindsight, it can appear that Goldman must have been committing some kind of fraud in order to sell subprime CDOs that performed so badly. But at the time, the buyers of these instruments were actively seeking exposure to subprime risk.

In 2002, IKB Deutsche Industriebank, the German bank, named as a victim in the SEC’s complaint against Goldman, launched an off-balance sheet, off-shore “conduit” called the Rhineland fund to buy up mortgage bonds and derivatives linked to the bonds. But by 2006, when Goldman and others began to see trouble ahead in the US mortgage market, and AIG had largely stopped writing credit insurance on subprime debt, the founder of the fund was attempting to chart a course away from the coming mortgage storm.

“I made several proposals for a more sophisticated portfolio management to address expected negative market developments,” Rhineland portfolio manager Dirk Rothig wrote in an e-mail to Fortune magazine in 2007. “These risk-management proposals were not accepted by IKB.”

Rothig left the Rhineland fund in 2006.

After the loss of its star portfolio manager, IKB continued to buy mortgage bonds and collateralized debt obligations through both the Rhineland fund and a similar fund called Rhinebridge. They were focused on the riskiest end of the market — subprime bonds.

“IKB was still buying strong in early 2007, but they were very specific about the collateral they wanted in the CDO’s. They had a big research team of 20 guys and would inspect the asset quality outside of what any rater was saying about the bond. They wanted subprime paper,” said a trader at Deutsche Bank who worked with IKB. Other Deutsche Bank employees who requested anonymity confirmed IKB’s hunger for subprime collateral.

IKB would approach banks with a request for a specially tailored CDO that matched their investment strategy of seeking out exposure to the riskiest bonds, because these came with the highest yields. And according to bank staffers involved in these transactions, which included not only Goldman but its German rival Deutsche Bank, they paid tens of millions of dollars in fees to get into these deals.

(Read the article)

Comments(0) |  Print This Post

NORFOLK, VIRGINIA (The Borowitz Report) – Eleven indicted Somali pirates dropped a bombshell in a U.S. court today, revealing that their entire piracy operation is a subsidiary of banking giant Goldman Sachs.

There was an audible gasp in court when the leader of the pirates announced, “We are doing God’s work. We work for Lloyd Blankfein.”

The pirate, who said he earned a bonus of $48 million in dubloons last year, elaborated on the nature of the Somalis’ work for Goldman, explaining that the pirates forcibly attacked ships that Goldman had already shorted.

“We were functioning as investment bankers, only every day was casual Friday,” the pirate said.

The pirate acknowledged that they merged their operations with Goldman in late 2008 to take advantage of the laxer regulations governing bankers as opposed to pirates, “plus to get out share of the bailout money.”

In the aftermath of the shocking revelations, government prosecutors were scrambling to see if they still had a case against the Somali pirates, who would now be treated as bankers in the eyes of the law.

“There are lots of laws that could bring these guys down if they were, in fact, pirates,” one government source said. “But if they’re bankers, our hands are tied.” More here.

Comments(0) |  Print This Post

The government’s case against Goldman Sachs barely begins to target the depths of Wall Street’s criminal sleaze

By  Matt Taibbi

On the day the Securities and Exchange Commission filed suit against Goldman Sachs for securities fraud, shares in the company plunged 12.8 percent, closing at $160.70. The market, it seemed, was finally passing judgment on a decade of high-stakes Wall Street scammery that left America threatening Nigeria, Indonesia and Belarus on the list of the world’s most corrupt economies.
A few days later, Goldman announced its first-quarter numbers. Profits were up 91 percent, to a staggering $3.4 billion.

Compensation and bonuses soared to $5.5 billion, up from $4.7 billion in the first quarter of 2009. Battered in the press, Goldman was raking up on the bottom line. So investors once again leapt into Goldman’s arms, pushing the stock as high as $166.50, not far from where it was even before news of the SEC suit broke.

Goldman isn’t dead – far from it. But this new SEC suit officially places it at the center of a raging national discussion about the hopelessly fucked state of American business ethics. As a halting, first-step attempt at financial regulatory reform makes its way toward a vote in the Senate, the government has finally thrown open the door and let a few of the rottener skeletons tumble out.

On the surface, the failure-to-disclose rap being leveled at Goldman feels like a niggling technicality, the Wall Street equivalent of a tax-evasion charge against Al Capone. The bank will try and – who knows – might even succeed in defending itself in a court of law against these charges. But in the court of public opinion it was doomed the instant the SEC decided to put this ghastly black comedy of a fraud case on the street for everyone to see. Just as Pittsburgh Steeler Ben Roethlisberger will never recover from the image of him (allegedly) waving his dick at a scared 20-year-old coed in the darkened hallway of a Georgia nightclub, Goldman may never bounce back from the SEC’s brutal blow-by-blow account of how the bank conspired with a hedge-fund magnate to bend one gullible business partner after another over the edge of the subprime housing market.

(Read the article)

Comments(0) |  Print This Post

How the nation’s biggest banks are ripping off American cities with the same predatory deals that brought down Greece

By  Matt Taibbi

If you want to know what life in the Third World is like, just ask Lisa Pack, an administrative assistant who works in the roads and transportation department in Jefferson County, Alabama. Pack got rudely introduced to life in post-crisis America last August, when word came down that she and 1,000 of her fellow public employees would have to take a little unpaid vacation for a while. The county, it turned out, was more than $5 billion in debt — meaning that courthouses, jails and sheriff’s precincts had to be closed so that Wall Street banks could be paid.

As public services in and around Birmingham were stripped to the bone, Pack struggled to support her family on a weekly unemployment check of $260. Nearly a fourth of that went to pay for her health insurance, which the county no longer covered. She also fielded calls from laid-off co-workers who had it even tougher. “I’d be on the phone sometimes until two in the morning,” she says. “I had to talk more than one person out of suicide. For some of the men supporting families, it was so hard — foreclosure, bankruptcy. I’d go to bed at night, and I’d be in tears.”

Homes stood empty, businesses were boarded up, and parts of already-blighted Birmingham began to take on the feel of a ghost town. There were also a few bills that were unique to the area — like the $64 sewer bill that Pack and her family paid each month. “Yeah, it went up about 400 percent just over the past few years,” she says.

The sewer bill, in fact, is what cost Pack and her co-workers their jobs. In 1996, the average monthly sewer bill for a family of four in Birmingham was only $14.71 — but that was before the county decided to build an elaborate new sewer system with the help of out-of-state financial wizards with names like Bear Stearns, Lehman Brothers, Goldman Sachs and JP Morgan Chase. The result was a monstrous pile of borrowed money that the county used to build, in essence, the world’s grandest toilet — “the Taj Mahal of sewer-treatment plants” is how one county worker put it. What happened here in Jefferson County would turn out to be the perfect metaphor for the peculiar alchemy of modern oligarchical capitalism: A mob of corrupt local officials and morally absent financiers got together to build a giant device that converted human shit into billions of dollars of profit for Wall Street — and misery for people like Lisa Pack.

Comments(0) |  Print This Post

by John Cassidy

Writing a Comment for this week’s magazine about the S.E.C.’s lawsuit against Goldman Sachs got me thinking again about the underlying reasons for the subprime crisis. Was it primarily driven by Wall Street greed? Stupidity? Mendacity? Overoptimism? All of these things?

As I explained in my book “How Markets Fail: The Logic of Economic Calamities,” my quick answer is none of the above. Of course, these things were all present during the housing boom, but, to some extent, they are always present. As a theorist would say, they are primitives of the capitalist model. The interesting question is what other factors allowed them to run riot, creating an unprecedented real estate and credit bubble that could only end in disaster?

My candidates are incentive problems, poor policy decisions, and misguided economic theorizing. From the beginning of the mortgage chain, where lenders such as Countrywide and New Century lent recklessly, through the Wall Street R.M.B.S. and C.D.O. factories, to the other end of the chain, where banks, pension funds, and other investors ended up buying a lot of toxic junk—individual decision-makers acted in what they perceived to be their own interest, and in ways they expected to work out well. In short, they “optimized” subject to the financing and compensation constraints they faced.

Looking back, the decisions taken by many homeowners, mortgage lenders, investment bankers, and credit-ratings analysts turned out to be personally damaging and socially disastrous. But unlike George Akerlof, Bob Shiller, and others, I don’t think that, in order to explain their behavior, we need to resort to behavioral economics or theories of irrationally. Most of those involved faced a collective action problem that I have referred to as “rational irrationality.” As long as their neighbors, colleagues, and rivals were behaving in a certain way, it made eminent sense to follow their lead. In fact, deviating from the herd was often punished severely.

As I’ve said before, rational irrationality isn’t a new concept. Keynes used it as the basis of his “beauty contest” theory of investing. Charles Mackay pithily summed it up as long ago as 1841. In his classic book “Extraordinary Delusions and the Madness of Crowds,” Mackay quoted an English banker during the South Sea Bubble of 1719-1720 thus: “When the rest of the world is mad, we must imitate them in some measure.”

(Read the article)

Comments(0) |  Print This Post

Comments(0) |  Print This Post

Researchers hope the 30-year study will yield definitive answers on whether the use of mobile handsets is linked to brain cancer or other disorders.

By Nicole Lewis,  InformationWeek

The most comprehensive study to date on whether mobile phones pose a health threat has been launched.

Known as the Cohort Study of Mobile Phone Use and Health (COSMOS) the study will last for up to 30 years, which is double the amount of time other studies took to complete their findings. The study will question 200,000 mobile phone users living in five countries: Britain, Finland, the Netherlands, Sweden, and Denmark.

The COSMOS study forms part of the Mobile Telecommunications and Health Research Programme (MTHR), a UK body funded by numerous industry and government sources and run by independent experts, mostly university academics.

Researchers say they hope to find a definitive answer on whether the use of mobile phones is linked to long-term health effects such as brain cancer as well as other disorders including Alzheimer’s and Parkinson’s Diseases, which have not previously been examined in other research studies focused on mobile phone use.

“This is the industry’s way to kill the specter, hopefully once and for all, that there is a link between cell phones and cancer,” said Ramon Llamas, senior research analyst with IDC Mobile Devices Technology and Trends.

According to Llamas, people use their mobile phones much more now than they did 10 years ago and they use them in different ways. Today people watch movies, TV shows, and surf the Web with the devices.

“This study should add importantly to our understanding of whether there are significant long-term health risks from use of mobile phones. The parallel collection of similar data in several European countries will give added value,” Professor David Coggon, chairman of the MTHR Programme Management Committee said in a statement.

Over the years, several studies have concluded that there is a link between cell phone use and cancer. In 2009, reports surfaced from the World Health Organization that its research uncovered long-term mobile phone users were at a higher risk of developing cancer later in life.

(Read the article)

Comments(0) |  Print This Post

by: Michael Winship, t r u t h o u t | Op-Ed

Goldman Sachs is the Blackwater of finance, the latest in a long line of companies you love to hate, like AIG and the Dallas Cowboys.

Or, as Rolling Stone’s Matt Taibbi infamously characterized it last year, the financial behemoth is “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.” Honestly, Matt has to cut down on his couch time watching The Discovery Channel.

Nevertheless, hit “refresh” on any financial news Web site and you’re likely to get yet another revelation of the firm’s colossal and impressively varied shenanigans. On Friday, Susan Pulliam reported on the front page of The Wall Street Journal that, “A Goldman Sachs Group Inc. director tipped off a hedge-fund billionaire about a $5 billion investment in Goldman by Warren Buffett’s Berkshire Hathaway Inc. before a public announcement of the deal at the height of the 2008 financial crisis, a person close to the situation says.”

As the Journal notes, the Buffet deal came at a key point in the Wall Street collapse, restoring confidence in the markets and lifting Goldman’s stock from a 40 percent slide to a 45 percent surge. The hedge-fund billionaire in question is Raj Rajaratnam, whose Galleon Group currently is embroiled in one of the biggest insider trading scandals in history: 21, including Rajaratnam, have been charged; 11 already have pled guilty.

The same day’s Financial Times reports a potential conflict of interest surrounding Goldman’s role in the refinancing of Lloyds Banking Group, 41 percent of which is owned by the British government – an arrangement made to rescue Lloyd’s from the financial meltdown.

Goldman Sachs was both an investor and underwriter in the Lloyds refinancing. According to the FT’s sources, Goldman got last-minute changes made that increased interest on bonds being exchanged in the deal, and was involved in discussions determining which bonds would receive highest priority in the exchange. Top ranked was a bond in which Goldman had invested, perhaps, one source said, buying as much as half of the issue. Goldman insisted its position was “not substantial.”

(Read the article)

Comments(0) |  Print This Post

By David Edwards and Gavin Dahl

Senate Minority Leader Mitch McConnell has said that the financial regulation reform bill would institutionalize bank bailouts. The New York Times‘ Paul Krugman slammed the top-ranking Senate Republican’s rhetoric Sunday, saying it was “possibly the most dishonest argument ever made in the history of politics.”

On Fox News Sunday, McConnell threatened that a Republican filibuster is on the horizon this week because of what he called “the partisan bill.” He insisted that Democrats are unwilling to work with Republicans on reforms of Wall Street.

“The fifty billion dollar bailout fund needs to come out,” insisted McConnell. “We need to have a system in there under which the creditors can expect that they’re going to be treated fairly somewhat similar to the bankruptcy laws and we need to have enhanced capital requirements. None of that is currently in the bill that the Majority Leader would try to have us take up on Monday, which came out of committee on a strictly party-line vote.”

Pointing to McConnell’s distortions of what Democrats intend to do with their bill, Krugman tore apart McConnell’s political positioning on ABC Sunday morning.

“Anyone who says we need to be bipartisan should bear in mind that for the last several weeks, Mitch McConnell has been trying to stop reform with possibly the most dishonest argument ever made in the history of politics, which is the claim that having regulation of the banks is actually bailing out the banks,” Krugman asserted. “Basically the argument boiled down to saying that what we really need to do to deal with fires is abolish the fire department, because then people will know that they can’t let their building burn.”

(Read the article)

Comments(0) |  Print This Post

Shahien Nasiripour
shahien@huffingtonpost.com | HuffPost Reporting

As homeowners were falling behind on their subprime mortgages, wreaking havoc for investors that owned slices of their mortgages in securities peddled by Wall Street, Goldman Sachs was “well positioned,” according to internal company emails from top executives.

The firm had “the big short,” declared chief financial officer David Viniar — Goldman Sachs was making money off the souring of the very securities it had peddled to the market.

The internal emails released Saturday by the Senate Permanent Subcommittee on Investigations paint a picture long known by most of the country, yet never before so vividly and explicitly articulated by Goldman officials. (Scroll down to see the full text of the emails.) As early as May 2007, as homeowners were being crushed under the weight of subprime mortgages, the most profitable firm on Wall Street had long taken out a form of insurance on those delinquencies.

The firm made money on the upside — originating, securitizing and selling subprime mortgage-based securities to investors — and on the downside, thanks to the insurance.

“Bad news,” a May 17, 2007, email began from one Goldman employee to another. A security the firm had underwritten and sold had just lost value, costing Goldman about $2.5 million.

Further down in the email, the employee, Deeb Salem, wrote “Good news…we own 10mm protection…we make $5mm.”

The firm made $5 million betting against the very securities it had underwritten and sold.

In a July 25 email that year, Gary Cohn, the firm’s chief operating officer, wrote Viniar to update him on the firm’s mortgage market activities. The firm lost about $322 million on residential mortgages — but it made $373 million on its bets against the market, bets that increased in value as the market tanked.

About 25 minutes later, Viniar wrote back, “Tells you what might be happening to people who don’t have the big short.” The firm made $51 million that day.

(Read the article)

Comments(0) |  Print This Post

By Andrew McLemore

Goldman Sachs’ top executives were aware that the company made money by playing against the US housing market, according to internal e-mails released Saturday.

The bank’s chief executive Lloyd Blankfein wrote in November 2007 that the firm “didn’t dodge the mortgage mess,” but “made more than we lost” by betting against the housing market, the Associated Press reported.

The e-mail was one of several company documents subpoenaed by a Senate investigations panel. In many of the e-mails, Goldman executives brag about money they were making as the market crashed around them.

One Goldman Sachs trader wrote in e-mails to a woman he apparently was courting that investments he had sold were “like Frankenstein turning against his own inventor.” In another e-mail, the same trader dismissed the debts created for the bank as “pure intellectual masturbation.”

“I’m trading a product which a month ago was worth $100 and today is only worth $93,” wrote Fabrice Tourre, who was charged along with the bank in a civil complaint filed this month by the Securities and Exchange Commission. “That doesn’t seem like a lot but when you take into account … (the investments) are worth billions, well it adds up to a lot of money.”

The documents seem to contradict Goldman’s denials that it profited from the subprime mortgage meltdown by secretly betting that housing prices would fall. At the same time, Goldman was selling tens of billions of dollars in risky mortgage securities.

Goldman Sachs, the world’s largest investment bank, was the only major Wall Street firm to escape much of the subprime crash that triggered a world-wide economic meltdown.

The company now says that it only bet against the market for the sake of its clients.

(Read the article)

Comments(0) |  Print This Post

By Emily Elert, Environmental Health News

In a photograph from a 1947 newspaper advertisement, a smiling mother leans over her baby’s crib. The wall behind her is decorated with rows of flowers and Disney characters. Above the photo, a headline reads “Protect Your Children From Disease Carrying Insects.”

The ad, for wallpaper impregnated with DDT, captures a moment of historical ignorance, before the infamous insecticide nearly wiped out many birds and turned up inside the bodies of virtually everyone on Earth.

The story of DDT teaches a lesson about the past. But experts say it also provides a glimpse into the future.

Thirty-eight years after it was banned, Americans still consume traces of DDT and its metabolites every day, along with more than 20 other banned chemicals. Residues of these legacy contaminants are ubiquitous in U.S. food, particularly dairy products, meat and fish.

Their decades-long presence in the food supply underscores the dangers of a new and widely used generation of chemicals with similar properties and health risks. “They’re manmade, and they’re toxic, and they bio-accumulate,” said Arnold Schecter, a professor at the University of Texas School of Public Health who has been studying human exposure to chemicals for more than 25 years. “So the fact that they’re still around a long time after they’ve been banned isn’t surprising.”

Recent studies sketch a complex profile of legacy contaminants in U.S. food – a profusion of chemicals in trace amounts, pervasive but uneven across the food supply, occurring sometimes by themselves, but more often in combination with others. Included are DDT and several lesser-known organochlorine pesticides as well as industrial chemicals such as polychlorinated biphenyls, or PCBs, which were used until the late 1970s in electrical equipment.

This picture raises a host of equally complicated questions: Are small amounts of these chemicals dangerous, by themselves or in mixtures? Why are they still around and how are they getting into our food?

(Read the article)

Comments(0) |  Print This Post

By Bill Moyers, Bill Moyers Journal

The following is a transcript taken from Bill Moyers’ recent interview with Simon Johnson and James Kwak on Bill Moyers Journal.

So even if the Tea Party folks saw the light, what can ordinary Americans do?

That’s the question I want to put to my guests, Simon Johnson and James Kwak. They have written this new book, 13 Bankers: The Wall St. Takeover and the Next Financial Meltdown. It’s a must read – already a best seller — and it couldn’t have come at a better time. This book could change the debate over financial reform by tipping it in favor of the public.

Simon Johnson is a former chief economist at the International Monetary Fund. He now teaches at MIT’s Sloan School of Management and is a Senior Fellow at the Peterson Institute for International Economics.

James Kwak is studying law at Yale Law School – a career he decided to pursue after working as a management consultant at McKinsey & Company and co-founding the successful software company, Guidewire. Together James Kwak and Simon Johnson run the indispensable economic website BaselineScenario.com

Welcome to you both.

Let me get to the blunt conclusion you reach in your book. You say that two years after the devastating financial crisis of ‘08 our country is still at the mercy of an oligarchy that is bigger, more profitable, and more resistant to regulation than ever. Correct?

Simon Johnson: Absolutely correct, Bill. The big banks became stronger as a result of the bailout. That may seem extraordinary, but it’s really true. They’re turning that increased economic clout into more political power. And they’re using that political power to go out and take the same sort of risks that got us into disaster in September 2008.

Bill Moyers: And your definition of oligarchy is?

Simon Johnson: Oligarchy is just- it’s a very simple, straightforward idea from Aristotle. It’s political power based on economic power. And it’s the rise of the banks in economic terms, which we document at length, that it’d turn into political power. And they then feed that back into more deregulation, more opportunities to go out and take reckless risks and– and capture huge amounts of money.

Bill Moyers: And you say that these this oligarchy consists of six megabanks. What are the six banks?

James Kwak: They are Goldman Sachs, Morgan Stanley, JPMorgan Chase, Citigroup, Bank of America, and Wells Fargo.

Bill Moyers: And you write that they control 60 percent of our gross national product?

James Kwak: They have assets equivalent to 60 percent of our gross national product. And to put this in perspective, in the mid-1990s, these six banks or their predecessors, since there have been a lot of mergers, had less than 20 percent. Their assets were less than 20 percent of the gross national product.

Bill Moyers: And what’s the threat from an oligarchy of this size and scale?

Simon Johnson: They can distort the system, Bill. They can change the rules of the game to favor themselves. And unfortunately, the way it works in modern finance is when the rules favor you, you go out and you take a lot of risk. And you blow up from time to time, because it’s not your problem. When it blows up, it’s the taxpayer and it’s the government that has to sort it out.

Bill Moyers: So, you’re not kidding when you say it’s an oligarchy?

James Kwak: Exactly. I think that in particular, we can see how the oligarchy has actually become more powerful in the last since the financial crisis. If we look at the way they’ve behaved in Washington. For example, they’ve been spending more than $1 million per day lobbying Congress and fighting financial reform. I think that’s for some time, the financial sector got its way in Washington through the power of ideology, through the power of persuasion. And in the last year and a half, we’ve seen the gloves come off. They are fighting as hard as they can to stop reform.

Simon Johnson: I know people react a little negatively when you use this term for the United States. But it means political power derived from economic power. That’s what we’re looking at here. It’s disproportionate, it’s unfair, it is very unproductive, by the way. Undermines business in this society. And it’s an oligarchy like we see in other countries.

Bill Moyers: And you say they continue to hold the global economy hostage?

James Kwak: Exactly. Because what’s happened- what we learned in 2008 were certain institutions are so big and so interconnected that if they were to fail, they would cause systemic shocks throughout the economy. That’s essentially what happened in September 2008 when Lehman Brothers collapsed. And what’s remarkable, and I think what essentially proves the point of our book is that almost two years later, nothing has changed.

Or the only thing that has changed is that these banks have gotten larger, more powerful, both economically and politically. And they’ve been flexing their muscles in Washington for the last year and a half. So Neal Wolin, the Deputy Treasury Secretary gave a blistering speech to the U.S. Chamber of Commerce in which he said, look, the financial sector has been spending more than one million dollars per day lobbying against the reforms we need to fix the financial system. Now, Simon and I think those reforms that the Administration has proposed do not go far enough. But we think they’re certainly better than nothing. What Wall Street wants is they want nothing. They want to stop this in its tracks and go back to where we were five years ago.

Simon Johnson: It’s amazing, Bill. But this is this is politics and this is money. And you know, there’s a ground game, which is campaign contributions, which are surging in. I’m sure on both sides of the aisle. And there’s also the ideological space. It’s amazing. The Chamber of Commerce that claims to represent the broad cross section of American business is siding with six big banks, who favor policies that are directly contrary to the interests of most of the membership of the Chamber of Commerce. And that’s just not just me saying that. That’s Neal Wolin. That’s Treasury. That’s the White House saying that now. Calling fortunately, they’ve come to the point where they’re willing to call the Chamber of Commerce on that. But I don’t know if that message is getting through to people.

James Kwak: You see what the bankers have done is they have taken a basic principle which is more or less true. Which is that free financial markets do enable money to go to the places where people need it. But on top of that, they’ve erected a system that is indescribably complex. And gives many opportunities to make money at the expense of their customers, at the expense of their counterparties. Even at the expense of their own employers. So, one of the things that has happened has been that Wall Street finance has become so complex and the internal systems of Wall Street banks has become so complex that if you are a smart banker, who is out to maximize your own income, you can find the loopholes in the system and you can exploit them, even if it means taking money from your own– from your own company

Bill Moyers: You’ve been writing this week on your website– about this hedge fund in Chicago that’s made a lot of money. In effect, betting against the American Dream. What was that?

James Kwak: Magnetar is a hedge fund which means that other people gave them money to invest. And their job is to make as much money as possible. And these were the smart guys in the room. They saw that the system was broken. And they found a specific way to exploit it. And they knew that they could go for example, they could go to Wall Street banks and the banks would collaborate in making these extremely toxic securities. Because they knew what the bankers incentives were. They knew that the banker’s incentives were to do the deal, to do the transaction, to get the fees up front. And they knew that there was nobody watching out for the investors. There was nobody watching out to make sure that securities they manufactured were actually good securities. But essentially what they were doing is they wanted to short the housing market. And they shorted the market in such a way that they actually made the problem worse, because what they did is they encouraged they tried to create these very toxic securities explicitly so that they could then short those securities. And that’s why in a sense, they were they were shorting the American Dream. But what the real story of Magnetar, I think, is that they were exploiting a system that was deeply broken.

(Read the article)

Comments(0) |  Print This Post

By Stephen C. Webster

AT BOTTOM: California survey shows legalization winning out 56-42 percent

As with many instances in politics, actuality can often be obscured behind the wrong frame: ask a question just the right way and results can be wildly tilted, one way or another.

Take the case of an Associated Press/CNBC poll released on April 20, 2010, detailing Americans’ opinions on legalizing marijuana. The poll was widely reported as declaring that 55 percent in the U.S. are opposed to ending prohibition.

Make no mistake, “oppose” is exactly what 55 percent of the people said when asked: “Do you favor, oppose or neither favor nor oppose the complete legalization of the use of marijuana for any purpose?”

However, a more nuanced probing of the issue, carried out by the polling firm but almost entirely unmentioned in the media on April 20th, found that when stacked next to alcohol, often a more debilitating and addictive substance, statistical support for drug law reforms skyrocketed.

Appearing on page four of the 22-page document, poll workers asked respondents whether or not the U.S. should treat marijuana and alcohol similarly. While 43 percent wanted rules more strict than those applied to alcohol, 44 percent wanted the two handled equally. Another 12 percent wanted less strict rules for pot over alcohol.

“… [Meaning] that a full 56 percent support the policy change — perhaps the highest number ever recorded in favor of legalization,” Huffington Post’s Ryan Grim noted.

(Read the article)

Comments(0) |  Print This Post