Wow. Telling it like it is. I have so much more to say about JTG, but for now, check these out.
I'm a man without a corporation. ~Paddy Chayefsky
Saturday, October 31, 2009
Thursday, October 29, 2009
Take My Freedom, Give Me Chains!
The following is more for tracking and documentation purposes.
Once again, uncle scam's up to his trickery. Anyone surprised?
Brother.
Washington Post, at: HERE
Stimulus dollars going to accused contractors
More than $1.2 billion awarded to firms on watchdog's list
By Kimberly Kindy
Washington Post Staff Writer
Thursday, October 29, 2009
President Obama and members of Congress told federal agencies earlier this year to avoid awarding funds under the American Recovery and Reinvestment Act to contractors with troubled histories of work for the federal government.
But that isn't happening at numerous agencies, a Washington Post analysis shows. So far, 33 federal departments and agencies have awarded more than $1.2 billion in stimulus contracts to at least 30 companies that are ranked by one watchdog group as among the most egregious offenders of state and federal laws.
Government records show that as a group, these contractors have sold defective products, manufactured safety tests, submitted false travel claims and padded contracts with fraudulent fees.
"Even a simple Google search could raise red flags about some contractors' performance," said Rep. Carolyn B. Maloney (D-N.Y.).
Honeywell International, for example, is defending itself against a Justice Department lawsuit accusing it of selling defective shields for bulletproof vests to the Defense and Homeland Security departments, costing the federal government tens of millions of dollars. But that did not prevent the company from winning $2.9 million in stimulus contracts from the Air Force.
On a larger scale, UT-Battelle, a partnership of the University of Tennessee and Battelle Memorial Institute, has been awarded 43 Recovery Act contracts worth more than $331 million by the Department of Energy for work at the Oak Ridge National Laboratory. In every instance, competitive bidding rules were waived, but officials said the contracts were largely extensions of competitively bid work that was already underway at the site.
Obama explicitly warned against awarding contracts without competitive bidding in a memo released to agency heads weeks after he signed the act, saying they create "a risk that taxpayer funds will be spent on contracts that are wasteful, inefficient, subject to misuse." (So far, half of the $16 billion awarded under the stimulus has gone to contractors that did not have to compete for the work.)
The administration followed up on Obama's memo Tuesday, instructing agencies to cut contract spending by 7 percent in the next two years and hire at least 5 percent more contracting officers in the next five years to manage the large contracts. Agencies must also cut 10 percent of their "high risk" or non-competitive contracts this fiscal year.
UT-Battelle was cited in 2005 for serious nuclear safety violations at the former Cold War site. And last year, the inspector general cited the company for using $600,000 in federal money for unapproved expenditures on cigars, wine and gifts, including a pen with a built-in USB flash drive, given to guests at a scientific conference. Officials said the firm has resolved past problems and believes the Recovery Act awards were appropriate.
"UT-Battelle has worked with the Department to address any previous concerns that have been raised about the company," Michael Bradley, a UT-Battelle spokesman, said in a statement.
The Project on Government Oversight, a government watchdog group, compiled data on Honeywell, Battelle and other contractors that have had legal or regulatory issues with federal agencies. For its analysis, The Post compared a list of companies receiving stimulus grants with POGO's data and examined reports from the Government Accountability Office, court records from the Justice Department and other public documents.
In an attempt to curtail contract awards to companies with prior problems, Maloney last year authored a law that requires creation of a government database to track past performance.
The database would include civil and criminal actions in which the contractor lost. None of this information, however, would be made publicly available, and government officials would have to only log and check information. Nothing in the law compels them to use it when awarding contracts.
Honeywell and other large government contractors said using such databases to shape decision-making is simplistic. Business relationships, they said, are uneven. "From time to time, as in all commercial relationships, there are misunderstandings or even disputes between parties that are inevitably resolved," said Honeywell spokesman Peter Dalpe.
Government contract officials said many factors must be considered when awarding work, including a company's expertise. Concerns over federal contracts are acute now because even before the stimulus bill passed, taxpayers in 2008 financed $500 billion in such work, a doubling of the amount spent in 2001.
That figure is expected to climb to at least $525 billion for 2009, and oversight of those dollars will heavily rely on whistleblower reports. With Recovery Act contracts in particular, the public is asked to report any abuse of funds by calling a hotline or filling out an anonymous online form.
Whistleblowers said that for the hotline to work, contractors need to feel a sharper sting when they are caught.
Judith Neal called a hotline and exposed Honeywell for fabricating tests on at least $7 million in ammunition it manufactured and sold in 1987, according to a court finding. She's watched as similar incidents have continued for two decades.
At the time, both Neal, who worked in the company's personnel department, and the Justice Department prevailed in court against Honeywell. However, the federal government secured $2 million from the company and $400,000 in ammunition, not even half the value of the faulty ammunition, records show. Such disparities in cost recoveries continue and are common.
"It is not punitive at all," said Neal, now director of the Tyson Center for Faith and Spirituality in the Workplace at the University of Arkansas. "When you talk about repeat offenders, there are too many profits involved to stop them from doing it again. They just get their hands slapped."
Database editor Dan Keating and staff writer Ed O'Keefe contributed to this report.
Once again, uncle scam's up to his trickery. Anyone surprised?
Brother.
Washington Post, at: HERE
Stimulus dollars going to accused contractorsMore than $1.2 billion awarded to firms on watchdog's list
By Kimberly Kindy
Washington Post Staff Writer
Thursday, October 29, 2009
President Obama and members of Congress told federal agencies earlier this year to avoid awarding funds under the American Recovery and Reinvestment Act to contractors with troubled histories of work for the federal government.
But that isn't happening at numerous agencies, a Washington Post analysis shows. So far, 33 federal departments and agencies have awarded more than $1.2 billion in stimulus contracts to at least 30 companies that are ranked by one watchdog group as among the most egregious offenders of state and federal laws.
Government records show that as a group, these contractors have sold defective products, manufactured safety tests, submitted false travel claims and padded contracts with fraudulent fees.
"Even a simple Google search could raise red flags about some contractors' performance," said Rep. Carolyn B. Maloney (D-N.Y.).
Honeywell International, for example, is defending itself against a Justice Department lawsuit accusing it of selling defective shields for bulletproof vests to the Defense and Homeland Security departments, costing the federal government tens of millions of dollars. But that did not prevent the company from winning $2.9 million in stimulus contracts from the Air Force.
On a larger scale, UT-Battelle, a partnership of the University of Tennessee and Battelle Memorial Institute, has been awarded 43 Recovery Act contracts worth more than $331 million by the Department of Energy for work at the Oak Ridge National Laboratory. In every instance, competitive bidding rules were waived, but officials said the contracts were largely extensions of competitively bid work that was already underway at the site.
Obama explicitly warned against awarding contracts without competitive bidding in a memo released to agency heads weeks after he signed the act, saying they create "a risk that taxpayer funds will be spent on contracts that are wasteful, inefficient, subject to misuse." (So far, half of the $16 billion awarded under the stimulus has gone to contractors that did not have to compete for the work.)
The administration followed up on Obama's memo Tuesday, instructing agencies to cut contract spending by 7 percent in the next two years and hire at least 5 percent more contracting officers in the next five years to manage the large contracts. Agencies must also cut 10 percent of their "high risk" or non-competitive contracts this fiscal year.
UT-Battelle was cited in 2005 for serious nuclear safety violations at the former Cold War site. And last year, the inspector general cited the company for using $600,000 in federal money for unapproved expenditures on cigars, wine and gifts, including a pen with a built-in USB flash drive, given to guests at a scientific conference. Officials said the firm has resolved past problems and believes the Recovery Act awards were appropriate.
"UT-Battelle has worked with the Department to address any previous concerns that have been raised about the company," Michael Bradley, a UT-Battelle spokesman, said in a statement.
The Project on Government Oversight, a government watchdog group, compiled data on Honeywell, Battelle and other contractors that have had legal or regulatory issues with federal agencies. For its analysis, The Post compared a list of companies receiving stimulus grants with POGO's data and examined reports from the Government Accountability Office, court records from the Justice Department and other public documents.
In an attempt to curtail contract awards to companies with prior problems, Maloney last year authored a law that requires creation of a government database to track past performance.
The database would include civil and criminal actions in which the contractor lost. None of this information, however, would be made publicly available, and government officials would have to only log and check information. Nothing in the law compels them to use it when awarding contracts.
Honeywell and other large government contractors said using such databases to shape decision-making is simplistic. Business relationships, they said, are uneven. "From time to time, as in all commercial relationships, there are misunderstandings or even disputes between parties that are inevitably resolved," said Honeywell spokesman Peter Dalpe.
Government contract officials said many factors must be considered when awarding work, including a company's expertise. Concerns over federal contracts are acute now because even before the stimulus bill passed, taxpayers in 2008 financed $500 billion in such work, a doubling of the amount spent in 2001.
That figure is expected to climb to at least $525 billion for 2009, and oversight of those dollars will heavily rely on whistleblower reports. With Recovery Act contracts in particular, the public is asked to report any abuse of funds by calling a hotline or filling out an anonymous online form.
Whistleblowers said that for the hotline to work, contractors need to feel a sharper sting when they are caught.
Judith Neal called a hotline and exposed Honeywell for fabricating tests on at least $7 million in ammunition it manufactured and sold in 1987, according to a court finding. She's watched as similar incidents have continued for two decades.
At the time, both Neal, who worked in the company's personnel department, and the Justice Department prevailed in court against Honeywell. However, the federal government secured $2 million from the company and $400,000 in ammunition, not even half the value of the faulty ammunition, records show. Such disparities in cost recoveries continue and are common.
"It is not punitive at all," said Neal, now director of the Tyson Center for Faith and Spirituality in the Workplace at the University of Arkansas. "When you talk about repeat offenders, there are too many profits involved to stop them from doing it again. They just get their hands slapped."
Database editor Dan Keating and staff writer Ed O'Keefe contributed to this report.
Sunday, October 25, 2009
A Quickie from Boldizar
Torb sent me this Tom Friedman article, pretentiously titled The New Untouchables, wherein, basically, Tommy boy argues for getting education back on track (whatever that means) along with all of the madness of EM08.
The piece has holes in it the size of George Foreman's head.
Eeeeeyeah, I've kinda given up on whatever enthusiasms I used to have for Tommy boy. He's on a case-by-case basis with me now. More to my pat yourself point, I beat him to the punch quite a while ago.
Now, one of the things I do so enjoy about net journalism, is the immediacy. And nowhere is that more evident than in reader comments. For the most part, the letters are the equivalent of the 405 (for those outside of LA freeway familiarity, probably the most traffic impacted highway in the states) at rush hour and all of the cars are Ford Pintos and Chevy Novas. Old ones.
Of course, it's pure odds and perseverance at work finding a good letter since there were over 400 comments. And find him I did, in Alexander Boldizar.
Boldizar's letter
I went from McGill (undergrad) to Harvard (law school) and was shocked at the difference in education culture. At McGill nobody cared if you came to class, the campus was licensed so you could buy a beer between classes, the bathrooms were co-ed, and the best you could do if you repeated what the professor had spouted was an A-. To get an A (the top grade), you had to add something new, creative, different, you had to prove the professor wrong somehow.
At Harvard, ostensibly a graduate school, attendance counted (voted in by the students, shockingly enough, while I was there), men and women were on separate floors, with the women's floors having combination locks, alcohol was served only at select functions and only with ID, and if you tried to argue against the professor you were generally penalized. If you wanted an A or A+, you had to repeat not only the substance of what the professor had taught, but learn to mimic his sentence structure.
This was Harvard, not some med-rank school, but its approach to education was what after ten years in the United States I now think of as typically American: obey the rules, don't question; succeed, don't think. The old America of the maverick individual is a myth, a hollow co-opted campaign slogan.
Surprising? Not really.
Turns out Boldizar's quite the accomplished writer; you can catch him at www.boldizar.com/blog
The piece has holes in it the size of George Foreman's head.
Eeeeeyeah, I've kinda given up on whatever enthusiasms I used to have for Tommy boy. He's on a case-by-case basis with me now. More to my pat yourself point, I beat him to the punch quite a while ago.
Now, one of the things I do so enjoy about net journalism, is the immediacy. And nowhere is that more evident than in reader comments. For the most part, the letters are the equivalent of the 405 (for those outside of LA freeway familiarity, probably the most traffic impacted highway in the states) at rush hour and all of the cars are Ford Pintos and Chevy Novas. Old ones.
Of course, it's pure odds and perseverance at work finding a good letter since there were over 400 comments. And find him I did, in Alexander Boldizar.
Boldizar's letter
I went from McGill (undergrad) to Harvard (law school) and was shocked at the difference in education culture. At McGill nobody cared if you came to class, the campus was licensed so you could buy a beer between classes, the bathrooms were co-ed, and the best you could do if you repeated what the professor had spouted was an A-. To get an A (the top grade), you had to add something new, creative, different, you had to prove the professor wrong somehow.
At Harvard, ostensibly a graduate school, attendance counted (voted in by the students, shockingly enough, while I was there), men and women were on separate floors, with the women's floors having combination locks, alcohol was served only at select functions and only with ID, and if you tried to argue against the professor you were generally penalized. If you wanted an A or A+, you had to repeat not only the substance of what the professor had taught, but learn to mimic his sentence structure.
This was Harvard, not some med-rank school, but its approach to education was what after ten years in the United States I now think of as typically American: obey the rules, don't question; succeed, don't think. The old America of the maverick individual is a myth, a hollow co-opted campaign slogan.
Surprising? Not really.
Turns out Boldizar's quite the accomplished writer; you can catch him at www.boldizar.com/blog
Cuts for Cooky: Dylan's "Like a Rolling Stone"
It was ten pages long. It wasn't called anything, just a rhythm thing on paper all about my steady hatred directed at some point that was honest. In the end it wasn't hatred, it was telling someone something they didn't know, telling them they were lucky. Revenge, that's a better word. I had never thought of it as a song, until one day I was at the piano, and on the paper it was singing, 'How does it feel?' in a slow motion pace, in the utmost of slow motion.
-Wiki
Brutal honesty and raw emotion overflow here. Mix with one of the greatest rolling riffs, "the great white blues hope," Mike Bloomfield, a very young (21!) Al Kooper, the delivery of a hall of famer, and you get this cut.
I was very young when I got Bob Dylan's Greatest Hits, but this song stood out even amongst all his other great ones. Jimi covered it, and when I looked on Jimi's Smash Hits and saw who'd penned All Along the Watchtower I felt validated about my instincts. [Interestingly, Jimi's cover of Like a Rolling Stone isn't as good, but his cover of All Along the Watchtower is the definitive standard, even by Dylan's admission. More on that song in another post.]
At six minutes, it had an episodic quality, and the narrative made me feel like I'd voyeuristically peeked into something very personal in Dylan's life. (For me, looking back [Ha. Don't Look Back.] makes me see how something so personal was, paradoxically, epic feeling because of the music...? Hmmm, gotta think about that one a bit more.) It was probably one of the first times I'd realized that highly personal interpretations of reality were the ones to look for.
I'm not a Springsteen fan, but on the Wiki for LaRS, he says:
The first time I heard Bob Dylan, I was in the car with my mother listening to WMCA, and on came that snare shot that sounded like somebody had kicked open the door to your mind.
Now, over forty years later, this song has lost nothing.
The Musicians:
Mike Bloomfield - guitar
Al Kooper - organ
Paul Griffin - piano
Joe Macho, Jr. - bass
Bobby Gregg - drums.
Produced by Tom Wilson
June 15–16, 1965, Studio A, Columbia Records, New York City.
Dylan invited Bloomfield to participate, and Wilson chose the other musicians. Gregg and Griffin had previously worked with Dylan and Wilson on Bringing It All Back Home.[19] Kooper, 21 years old at that time, was not originally supposed to play at all, but was a guest of Tom Wilson.[20] However, as Wilson was not present at the time, Kooper sat down with his guitar with the other musicians. By the time Wilson returned, Kooper, who had been intimidated by Bloomfield's guitar playing, was away in the control room. Wilson moved Griffin from Hammond organ to piano. Kooper then went to Wilson, saying that he had a good part for the organ. Wilson belittled Kooper's organ abilities but, as Kooper later said, "He just sort of scoffed at me....He didn't say 'no'—so I went out there." Wilson, surprised to see Kooper at the organ, nevertheless allowed him to play on the track. Upon hearing a playback of the song, Dylan, despite Wilson's protestations that Kooper was "not an organ player," insisted that Kooper's organ be turned up in the mix
-Wiki
Read the rest on the Wiki for LaRS - it really is interesting, such as how the Columbia marketing department hated it. Stupid suits.
Once upon a time you dressed so fine
You threw the bums a dime in your prime, didn't you?
People'd call, say, "Beware doll, you're bound to fall"
You thought they were all kiddin' you
You used to laugh about
Everybody that was hangin' out
Now you don't talk so loud
Now you don't seem so proud
About having to be scrounging for your next meal.
How does it feel
How does it feel
To be without a home
Like a complete unknown
Like a rolling stone?
You've gone to the finest school all right, Miss Lonely
But you know you only used to get juiced in it
Nobody has ever taught you how to live out on the street
And now you're gonna have to get used to it
You said you'd never compromise
With the mystery tramp, but now you realize
He's not selling any alibis
As you stare into the vacuum of his eyes
And say do you want to make a deal?
How does it feel
How does it feel
To be on your own
With no direction home
A complete unknown
Like a rolling stone?
You never turned around to see the frowns on the jugglers and the clowns
When they all did tricks for you
You never understood that it ain't no good
You shouldn't let other people get your kicks for you
You used to ride on the chrome horse with your diplomat
Who carried on his shoulder a Siamese cat
Ain't it hard when you discover that
He really wasn't where it's at
After he took from you everything he could steal.
How does it feel
How does it feel
To have you on your own
With no direction home
Like a complete unknown
Like a rolling stone?
Princess on the steeple and all the pretty people
They're all drinkin', thinkin' that they got it made
Exchanging all precious gifts
But you'd better take your diamond ring, you'd better pawn it babe
You used to be so amused
At Napoleon in rags and the language that he used
Go to him now, he calls you, you can't refuse
When you ain't got nothing, you got nothing to lose
You're invisible now, you got no secrets to conceal.
How does it feel
How does it feel
To be on your own
With no direction home
Like a complete unknown
Like a rolling stone?
Friday, October 23, 2009
Unnatural Selection
Shame on us.
The BBC, at:
http://news.bbc.co.uk/2/hi/business/8323565.stm
US bank failures hit 100 for year
The number of US bank failures this year has hit 100 after US federal regulators shut down the Florida-based Partners Bank.
The Federal Deposit Insurance Corporation (FDIC), which controls the banking sector, has taken over the bank that held $68.7m (£42.1m) in assets.
More US banks have now failed this year than in any year since 1992.
The number is expected to rise as banks continue to suffer from the bad loans that precipitated the financial crisis.
[Remember, the mortgage crisis is FAR from over.]
Savers' money is not in danger, as the FDIC, which is backed by the US government, insures deposits at failed banks for up to $250,000 per account.
Many of the banks that have failed have been small community banks, which were badly hit when loans to individuals and small businesses were not repaid after the onset of the crisis.
[BAH! Who gives a flyin' crap about "small community banks"???? I mean, seriously, kids don't go to Wharton to work at "Podunk Community Bank" or, gasp & god above forbid, a credit union!!!]
These were primarily deposit-taking banks, rather than investment banks that deal in complicated derivative products.
But these investment banks have also been hit hard, with the most high profile victim being Lehman Brothers, which collapsed in September last year.
[Yeah, how convenient - for Goldman-Sachs...]
Another of Wall Street's most famous banks, Merrill Lynch, was saved from collapse when it was bought out by Bank of America at the beginning of this year.
[Yeah, Ken Lewis was thrilled about that. here's a CNN headline from 8/30:
Bank of America CEO Ken Lewis to retire
Beleaguered chief executive Ken Lewis to leave after tumultuous tenure. Bank under fire for its merger with Merrill Lynch last year.
Wonder if the BBC called Kenny boy on this...
And to think: The government cares only about these shitheads, who in turn obviously don't care about us. So if the twist on the syllogism holds, the government therefore doesn't care about us, either. What a shock.]
The BBC, at:
http://news.bbc.co.uk/2/hi/business/8323565.stm
US bank failures hit 100 for year
The number of US bank failures this year has hit 100 after US federal regulators shut down the Florida-based Partners Bank.
The Federal Deposit Insurance Corporation (FDIC), which controls the banking sector, has taken over the bank that held $68.7m (£42.1m) in assets.
More US banks have now failed this year than in any year since 1992.
The number is expected to rise as banks continue to suffer from the bad loans that precipitated the financial crisis.
[Remember, the mortgage crisis is FAR from over.]
Savers' money is not in danger, as the FDIC, which is backed by the US government, insures deposits at failed banks for up to $250,000 per account.
Many of the banks that have failed have been small community banks, which were badly hit when loans to individuals and small businesses were not repaid after the onset of the crisis.
[BAH! Who gives a flyin' crap about "small community banks"???? I mean, seriously, kids don't go to Wharton to work at "Podunk Community Bank" or, gasp & god above forbid, a credit union!!!]
These were primarily deposit-taking banks, rather than investment banks that deal in complicated derivative products.
But these investment banks have also been hit hard, with the most high profile victim being Lehman Brothers, which collapsed in September last year.
[Yeah, how convenient - for Goldman-Sachs...]
Another of Wall Street's most famous banks, Merrill Lynch, was saved from collapse when it was bought out by Bank of America at the beginning of this year.
[Yeah, Ken Lewis was thrilled about that. here's a CNN headline from 8/30:
Bank of America CEO Ken Lewis to retire
Beleaguered chief executive Ken Lewis to leave after tumultuous tenure. Bank under fire for its merger with Merrill Lynch last year.
Wonder if the BBC called Kenny boy on this...
And to think: The government cares only about these shitheads, who in turn obviously don't care about us. So if the twist on the syllogism holds, the government therefore doesn't care about us, either. What a shock.]
Thursday, October 22, 2009
The Insider: Nomi Prins
As I've said, what's going on in terms of EM08 is sick but is the stuff of talk for forever. It really is unprecedented, and uncle scam has set new standards for theft.
One of the gratifying things about all this mess is discovering those that are getting down and telling it like it is, which here translates into seeing things as I do. Therefore, I must add to the list of recommendations I posted a bit ago, and add to it EM08's #1 draft pick, Nomi Prins.
I'm not excusing my unawareness of her, but I am an irregular listener to Pacifica Radio - apologies to my homeboy Don Bustany - where evidently she's held court a few times now with Amy Goodman on Democracy Now.
What makes people like Meredith Whitney so interesting to me are their bona fides, and Prins' cred is stellar in terms of this mess. Her econ blueblood is easily found on the web, with none other than Goldman under her belt.
Plus, her books have entertaining titles, a'la, It Takes a PIllage.
Right now, I can't think of much in filmmaking I'd rather do than assemble my dream team - David Cay Johnston, Meredith Whitney, Muhammad Yunus, Vinod Khosla, Prof. William Black, Matt Taibbi, Michael Lewis, and now, #1 draft pick Nomi Prins - take them to a resort for a month and have all kinds of discussions about EM08, from the run-up, the players both business & political, the companies, the machinations, and recommendations to the Obama administration for moving forward.
Of course, shoot everything.
Such a project would of course be massive, but would be great to have available via a site where updates and forums could be integrated into the process. And then, every year, have an annual confab of the participants, probably via webcam.
Oh well, the stuff of dreams and money; There's plenty of vid stuff of hers out there, which I may get to later, but I'm going to end this entry here with two articles in an inside/outside format, from that very smart gal, Nomi Prins.
Mother Jones, at:
http://www.motherjones.com/politics/2009/07/how-you-finance-goldman-sachs%E2%80%99-profits
How You Finance Goldman Sachs’ Profits
An insider’s view of Wall Street’s rebound.
—By Nomi Prins
Tue July 28, 2009 12:28 PM PST
This is perhaps the most important thing I learned over my years working on Wall Street, including as a managing director at Goldman Sachs: Numbers lie. In a normal time, the fact that the numbers generated by the nation's biggest banks can't be trusted might not matter very much to the rest of us. But since the record bank profits we're now hearing about are essentially created by massive federal funding, perhaps it behooves us to dig beneath their data. On July 27, 10 congressmen, led by Rep. Alan Grayson (D-Fla.), did just that, writing a letter to Federal Reserve Chairman Ben Bernanke questioning the Fed's role in Goldman's rapid return to the top of Wall Street.
To understand this particular giveaway, look back to September 21, 2008. It was a frenzied night for Goldman Sachs and the only other remaining major investment bank, Morgan Stanley. Their three main competitors were gone. Bear Stearns had been taken over by JPMorgan Chase in March, 2008, Lehman Brothers had just declared bankruptcy due to lack of capital, and Bank of America had been pushed to acquire Merrill Lynch because the firm didn't have enough cash to survive on its own. Anxious to avoid a similar fate, hat in hand, they came to the Fed for access to desperately needed capital. All they had to do was become bank holding companies to get it. So, without so much as clearing the standard five-day antitrust waiting period for such a change, the Fed granted their wish.
Bank holding companies (which all the biggest financial firms now are) come under the regulatory purview of the Fed, the Office of the Comptroller of the Currency, and the FDIC. The capital they keep in reserve in case of emergency (like, say, toxic assets hemorrhaging on their books, or credit derivatives trades not being paid) is supposed to be greater than investment banks'. That's the trade-off. You get access to federal assistance, you pony up more capital, and you take less risk.
Goldman didn't like the last part. It makes most of its money speculating, or trading. So it asked the Fed to be exempt from what's called the Market Risk Rules that bank holding companies adhere to when computing their risk.
Keep in mind that by virtue of becoming a bank holding company, Goldman received a total of $63.6 billion in federal subsidies (that we know about—probably more if the Fed were ever forced to disclose its $7.6 trillion of borrower details). There was the $10 billion it got from TARP (which it repaid), the $12.9 billion it grabbed from AIG's spoils—even though Goldman had stated beforehand that it was protected from losses incurred by AIG's free fall, and if that were the case, would not have needed that money, let alone deserved it. Then, there's the $29.7 billion it's used so far out of the $35 billion it has available, backed by the FDIC's Temporary Liquidity Guarantee Program, and finally, there's the $11 billion available under the Fed's Commercial Paper Funding Facility.
Tactically, after bagging this bounty, Goldman asked the Fed, its new regulator, if it could use its old risk model to determine capital reserves. It wanted to use the model that its old investment bank regulator, the SEC, was fine with, called VaR, or value at risk. VaR pretty much allows banks to plug in their own parameters, and based on these, calculate how much risk they have, and thus how much capital they need to hold against it. VaR was the same lax SEC-approved risk model that investment banks such as Bear Stearns and Lehman Brothers used, with the aforementioned results.
On February 5, 2009, the Fed granted Goldman's request. This meant that not only was Goldman getting big federal subsidies, but also that it could keep betting big without saving aside as much capital as the other banks. Using VaR gave Goldman more leeway to, well, accentuate the positive. Yes, Goldman is a more risk-prone firm now than it was before it got to play with our money.
Which brings us back to these recent quarterly earnings. Goldman posted record profits of $3.4 billion on revenues of $13.76 billion. More than 78 precent of those revenues came from its most risky division, the one that requires the most capital to operate, Trading and Principal Investments. Of those, the Fixed Income, Currency and Commodities (FICC) area within that division brought in a record $6.8 billion in revenues. That's the division, by the way, that I worked in and that Lloyd Blankfein managed on his way up the Goldman totem pole. (It's also the division that would stand to gain the most if Waxman's cap-and-trade bill passes.)
Since Goldman is trading big with our money, why not also use it to pay big bonuses? It's not like there are any strings attached. For the first half of 2009, Goldman set aside $11.4 billion for compensation—34 percent more than for the first half of 2008, keeping them on target for a record bonus year—even though they still owe the federal government $53.6 billion, a sum more than four times that bonus amount.
But capital is still key. Capital is the lifeblood that pumps through a financial organization. You can't trade without it. As of June 26, 2009, Goldman's total capital was $254 billion, but that included $191 billion in unsecured long-term borrowing (meaning money it had borrowed without putting up any collateral for it). On November 28, 2008 (4Q 2008), it had only $168 billion in unsecured long-term borrowing. Thus, its long-term unsecured debt jumped 14 percent. Though Goldman doesn't disclose exactly where all this debt comes from, given the $23 billion jump, we can only wonder whether some of it has come from government subsidies or the Fed's secret facilities.
Not only that, by virtue of how it's set up, most of Goldman's unsecured funding comes in through its parent company, Group Inc. (Think the top point of an umbrella with each spoke being a subsidiary.) This parent parcels that money out to Goldman's subsidiaries, some of which are regulated, some of which aren't. This means that even though Goldman is supposed to be regulated by the Fed and other agencies, it has unregulated elements receiving unsecured funding—just like before the crisis, but with more of our money involved.
As for JPMorgan Chase, its profit of $2.7 billion was up 36 percent for the second quarter of 2009 vs. the same quarter last year, but a lot of that also came from trading revenues, meaning its speculative endeavors are driving its profits. Over on the consumer side, the firm had to set aside nearly $30 billion in reserve for credit-related losses. Riding on its trading laurels, when its consumer business is still in deterioration mode, is not a recipe for stability, no matter how much cheering JPMorgan Chase's results got from Wall Street. Betting is betting.
Let's pause for some reflection: The bank "stars" made most of their money on speculation, got nearly $124 billion in government guarantees and subsidies between them over the past year and a half, yet saw continued losses in the credit products most affected by consumer credit problems. Both are setting aside top-dollar bonuses. JPMorgan Chase CEO Jamie Dimon mentioned that he's concerned about attracting talent, a translation for wanting to pay investment bankers big bucks—because, after all, they suffered so terribly last year, and he needs to stay competitive with his friends at Goldman. This doesn't add up to a really healthy scenario. It's more like bad déjà vu.
As a recent New York Times article (and many other publications in different words) said, "For the most part, the worst of the financial crisis seems to be over." Sure, the crisis may appear to be over because the major banks of Wall Street are speculating well with government subsidies. But that's a dangerous conclusion. It doesn't mean that finance firms could thrive without the artificial, public-funded assistance. And it certainly doesn't mean that consumers are any better off than they were before the crisis emerged. It's just that they didn't get the same generous subsidies.
Additional research by Clark Merrefield.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Mother Jones, at:
http://www.motherjones.com/politics/2009/09/obama-banking-too-much-banks
Obama Banking Too Much On Banks
In his Wall Street speech, the president outlines reforms—but they don’t go deep enough.
—By Nomi Prins
Mon September 14, 2009 8:53 AM PST
On Monday—one year after the once-mighty Lehman Brothers collapsed in the nation’s biggest bankruptcy—President Obama addressed the state of the economy and again outlined his proposals for what he calls reform. The location—Federal Hall at 26 Wall Street, near the New York Stock Exchange and New York Federal Reserve Bank—was fitting. George Washington took his presidential oath there, a precursor for how intertwined Washington and Wall Street would become. And Obama’s speech indicates that he’s still making the grave error of mistaking the health of Wall Street for the health of the American economy.
Obama chose not to deliver his speech on, say, the streets of Bend, Oregon, or Fresno, California, which provide different indicators of our economic predicament. That’s because Washington’s approach to the crisis has been to focus on the banking system, throw a few crumbs to citizens, and hope everything else will magically work itself out.
The problem with concentrating on the banking system is that it allows the administration to present an overly optimistic assessment of its actions. "The storms of the past two years are beginning to break," Obama pronounced, attributing this to a government that "moved quickly on all fronts, initializing a financial stability plan to rescue the system from the crisis and restart lending for all those affected by the crisis." He continued: "By taking aggressive and innovative steps in credit markets, we spurred lending not just to banks, but to folks looking to buy homes or cars, take out student loans, or finance small businesses. Our home ownership plan has helped responsible homeowners refinance to stem the tide of lost homes and lost home values."
Those steps were certainly aggressive. Under both the Bush and Obama administrations, the government, from the Federal Reserve to the Treasury Department, has flushed the banking systems and other components of the financial markets with $17.5 trillion worth of loans, guarantees, and other forms of support. About another $1 trillion has been provided to citizens through the recovery package, first-time homeowner tax benefits, auto purchase credits, and approximately $800 billion to help guarantee the loans of certain lenders—which somewhat helps borrowers, but helps lenders more.
But these measures have hardly brought the economy back from the brink. They brought Wall Street back from capital starvation and prevented the possibility of more big banks going bankrupt—instead of the slew of smaller and mid-size ones that have since met the same fate as Lehman Brothers. Taking credit for stabilizing the financial system after feeding it with massive amounts of federal money is like a teacher bragging about turning around the academic performance of a failing student after handing them all the answers to the big tests.
Here’s how the economy is really faring (and how Washington is failing to take adequate steps to fix it):
* National unemployment is at 9.7 percent, higher than last year’s 5.8 percent, with double digit jobless rates in 139 metropolitan areas this July, compared to 14 last July.
* The number of foreclosures is greater than last year: nearly 2 million new foreclosure filings occurred in the first half of 2009, up 15 percent from the same period in 2008.
* While homes in some areas have begun to slowly sell again, they are doing so at deeply depressed prices, in many instances below their mortgage value.
* Wall Street bonuses are back to pre-crisis levels. For some firms, such as Goldman Sachs, they are even higher.
* Bank leverage, or excessive borrowing on the back of risky assets—a major cause of the meltdown—is rising again.
* Geithner recently reported that his program to enable private financial firms to buy up toxic assets with government help will wind up costing less than the $1 trillion he had first envisioned. However, he did not mention that there are less toxic assets available to buy partly because the Fed has allowed banks to use some toxic assets as collateral in return for cheap loans.
* Big banks are bigger than they were last year. Since the Fed blessed more mergers last fall, the nation’s three largest banks—Bank of America, JPMorgan Chase and Wells Fargo—hold the maximum percentage of legally permissable US deposits or more.
* Mid-size and smaller banks keep closing. This year, the Federal Deposit Insurance Corporation (FDIC) has closed 92 banks and depleted its deposit insurance money in the process.
* We still don’t have detailed information on the trillions of dollars of loans the Fed handed out to the banking sector or about the quality of the collateral banks provided in return.
Obama did acknowledge that the picture isn’t entirely rosy. He also outlined his ideas for avoiding another catastrophe: reshuffle the decks of regulatory agencies, slap a few trading constraints on some derivatives, and create a Consumer Financial Protection Agency (CFPA). But while Obama's rhetoric was stern—"normalcy cannot lead to complacency," he vowed—the proposals themselves are hardly sweeping.
Obama’s plan calls for eliminating the Office of Thrift Supervision and providing greater oversight by the Fed of “systemically important” institutions. The Senate is trying to water that down, in part because some members of both parties in Congress remain skeptical about the power of the Fed itself. The Senate also wants to consolidate regulatory authority into fewer entities, but leave oversight to a council of regulators. Of course, consolidating regulatory oversight only works if regulators are doing their jobs and the banking system is transparent enough to allow them to do so.
The last leg of Obama’s proposal would be establishing the CFPA, which would monitor financial products in an effort to protect consumers from risky instruments such as subprime mortgages. Legislation to create such an agency is expected to be taken up this year by the House Financial Services Committee, chaired by Rep. Barney Frank (D-Mass).
A strong CFPA is a sensible plan. Right now there is no other body imbued with the power not just to protect consumers but also to foster the general economic stability that would be achieved by closely monitoring the integrity of financial products. This proposal has drawn the most ire from the banking community, so you know it’s good. The Chamber of Commerce launched a $2 million ad campaign to convince people that a CFPA would mean that local butcher couldn’t extend credit to his customers without government interference.
But Obama's reforms do not strike deeply enough. The banking crisis has been subdued, not fixed, because of enormous amounts of government assistance. Ignoring that fact, and failing to overhaul the sector, leaves us open to another crisis. And the next round will be worse, because there is now so much more federal money invested in the banks.
Simply funding the banking system without reforming it is an expensive and dangerous game. Obama is capable of truly fixing things—by dividing up the Wall Street mega-banks with a new Glass Steagall Act, thereby enabling the success of more extensive regulatory reforms. Or, he could introduce a set of cosmetic changes that allow banks to keep doing what they did before last year’s crisis and that put us on the path for the next one.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Nomi Prins is an economist and frequent contributor for Mother Jones. Her most recent book is It Takes a Pillage: Behind the Bailouts, Bonuses, and Backroom Deals from Washington to Wall Street. To read more articles by Nomi Prins, click here.
One of the gratifying things about all this mess is discovering those that are getting down and telling it like it is, which here translates into seeing things as I do. Therefore, I must add to the list of recommendations I posted a bit ago, and add to it EM08's #1 draft pick, Nomi Prins.
I'm not excusing my unawareness of her, but I am an irregular listener to Pacifica Radio - apologies to my homeboy Don Bustany - where evidently she's held court a few times now with Amy Goodman on Democracy Now.
What makes people like Meredith Whitney so interesting to me are their bona fides, and Prins' cred is stellar in terms of this mess. Her econ blueblood is easily found on the web, with none other than Goldman under her belt.
Plus, her books have entertaining titles, a'la, It Takes a PIllage.
Right now, I can't think of much in filmmaking I'd rather do than assemble my dream team - David Cay Johnston, Meredith Whitney, Muhammad Yunus, Vinod Khosla, Prof. William Black, Matt Taibbi, Michael Lewis, and now, #1 draft pick Nomi Prins - take them to a resort for a month and have all kinds of discussions about EM08, from the run-up, the players both business & political, the companies, the machinations, and recommendations to the Obama administration for moving forward.
Of course, shoot everything.
Such a project would of course be massive, but would be great to have available via a site where updates and forums could be integrated into the process. And then, every year, have an annual confab of the participants, probably via webcam.
Oh well, the stuff of dreams and money; There's plenty of vid stuff of hers out there, which I may get to later, but I'm going to end this entry here with two articles in an inside/outside format, from that very smart gal, Nomi Prins.
Mother Jones, at:
http://www.motherjones.com/politics/2009/07/how-you-finance-goldman-sachs%E2%80%99-profits
How You Finance Goldman Sachs’ Profits
An insider’s view of Wall Street’s rebound.
—By Nomi Prins
Tue July 28, 2009 12:28 PM PST
This is perhaps the most important thing I learned over my years working on Wall Street, including as a managing director at Goldman Sachs: Numbers lie. In a normal time, the fact that the numbers generated by the nation's biggest banks can't be trusted might not matter very much to the rest of us. But since the record bank profits we're now hearing about are essentially created by massive federal funding, perhaps it behooves us to dig beneath their data. On July 27, 10 congressmen, led by Rep. Alan Grayson (D-Fla.), did just that, writing a letter to Federal Reserve Chairman Ben Bernanke questioning the Fed's role in Goldman's rapid return to the top of Wall Street.
To understand this particular giveaway, look back to September 21, 2008. It was a frenzied night for Goldman Sachs and the only other remaining major investment bank, Morgan Stanley. Their three main competitors were gone. Bear Stearns had been taken over by JPMorgan Chase in March, 2008, Lehman Brothers had just declared bankruptcy due to lack of capital, and Bank of America had been pushed to acquire Merrill Lynch because the firm didn't have enough cash to survive on its own. Anxious to avoid a similar fate, hat in hand, they came to the Fed for access to desperately needed capital. All they had to do was become bank holding companies to get it. So, without so much as clearing the standard five-day antitrust waiting period for such a change, the Fed granted their wish.
Bank holding companies (which all the biggest financial firms now are) come under the regulatory purview of the Fed, the Office of the Comptroller of the Currency, and the FDIC. The capital they keep in reserve in case of emergency (like, say, toxic assets hemorrhaging on their books, or credit derivatives trades not being paid) is supposed to be greater than investment banks'. That's the trade-off. You get access to federal assistance, you pony up more capital, and you take less risk.
Goldman didn't like the last part. It makes most of its money speculating, or trading. So it asked the Fed to be exempt from what's called the Market Risk Rules that bank holding companies adhere to when computing their risk.
Keep in mind that by virtue of becoming a bank holding company, Goldman received a total of $63.6 billion in federal subsidies (that we know about—probably more if the Fed were ever forced to disclose its $7.6 trillion of borrower details). There was the $10 billion it got from TARP (which it repaid), the $12.9 billion it grabbed from AIG's spoils—even though Goldman had stated beforehand that it was protected from losses incurred by AIG's free fall, and if that were the case, would not have needed that money, let alone deserved it. Then, there's the $29.7 billion it's used so far out of the $35 billion it has available, backed by the FDIC's Temporary Liquidity Guarantee Program, and finally, there's the $11 billion available under the Fed's Commercial Paper Funding Facility.
Tactically, after bagging this bounty, Goldman asked the Fed, its new regulator, if it could use its old risk model to determine capital reserves. It wanted to use the model that its old investment bank regulator, the SEC, was fine with, called VaR, or value at risk. VaR pretty much allows banks to plug in their own parameters, and based on these, calculate how much risk they have, and thus how much capital they need to hold against it. VaR was the same lax SEC-approved risk model that investment banks such as Bear Stearns and Lehman Brothers used, with the aforementioned results.
On February 5, 2009, the Fed granted Goldman's request. This meant that not only was Goldman getting big federal subsidies, but also that it could keep betting big without saving aside as much capital as the other banks. Using VaR gave Goldman more leeway to, well, accentuate the positive. Yes, Goldman is a more risk-prone firm now than it was before it got to play with our money.
Which brings us back to these recent quarterly earnings. Goldman posted record profits of $3.4 billion on revenues of $13.76 billion. More than 78 precent of those revenues came from its most risky division, the one that requires the most capital to operate, Trading and Principal Investments. Of those, the Fixed Income, Currency and Commodities (FICC) area within that division brought in a record $6.8 billion in revenues. That's the division, by the way, that I worked in and that Lloyd Blankfein managed on his way up the Goldman totem pole. (It's also the division that would stand to gain the most if Waxman's cap-and-trade bill passes.)
Since Goldman is trading big with our money, why not also use it to pay big bonuses? It's not like there are any strings attached. For the first half of 2009, Goldman set aside $11.4 billion for compensation—34 percent more than for the first half of 2008, keeping them on target for a record bonus year—even though they still owe the federal government $53.6 billion, a sum more than four times that bonus amount.
But capital is still key. Capital is the lifeblood that pumps through a financial organization. You can't trade without it. As of June 26, 2009, Goldman's total capital was $254 billion, but that included $191 billion in unsecured long-term borrowing (meaning money it had borrowed without putting up any collateral for it). On November 28, 2008 (4Q 2008), it had only $168 billion in unsecured long-term borrowing. Thus, its long-term unsecured debt jumped 14 percent. Though Goldman doesn't disclose exactly where all this debt comes from, given the $23 billion jump, we can only wonder whether some of it has come from government subsidies or the Fed's secret facilities.
Not only that, by virtue of how it's set up, most of Goldman's unsecured funding comes in through its parent company, Group Inc. (Think the top point of an umbrella with each spoke being a subsidiary.) This parent parcels that money out to Goldman's subsidiaries, some of which are regulated, some of which aren't. This means that even though Goldman is supposed to be regulated by the Fed and other agencies, it has unregulated elements receiving unsecured funding—just like before the crisis, but with more of our money involved.
As for JPMorgan Chase, its profit of $2.7 billion was up 36 percent for the second quarter of 2009 vs. the same quarter last year, but a lot of that also came from trading revenues, meaning its speculative endeavors are driving its profits. Over on the consumer side, the firm had to set aside nearly $30 billion in reserve for credit-related losses. Riding on its trading laurels, when its consumer business is still in deterioration mode, is not a recipe for stability, no matter how much cheering JPMorgan Chase's results got from Wall Street. Betting is betting.
Let's pause for some reflection: The bank "stars" made most of their money on speculation, got nearly $124 billion in government guarantees and subsidies between them over the past year and a half, yet saw continued losses in the credit products most affected by consumer credit problems. Both are setting aside top-dollar bonuses. JPMorgan Chase CEO Jamie Dimon mentioned that he's concerned about attracting talent, a translation for wanting to pay investment bankers big bucks—because, after all, they suffered so terribly last year, and he needs to stay competitive with his friends at Goldman. This doesn't add up to a really healthy scenario. It's more like bad déjà vu.
As a recent New York Times article (and many other publications in different words) said, "For the most part, the worst of the financial crisis seems to be over." Sure, the crisis may appear to be over because the major banks of Wall Street are speculating well with government subsidies. But that's a dangerous conclusion. It doesn't mean that finance firms could thrive without the artificial, public-funded assistance. And it certainly doesn't mean that consumers are any better off than they were before the crisis emerged. It's just that they didn't get the same generous subsidies.
Additional research by Clark Merrefield.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Mother Jones, at:
http://www.motherjones.com/politics/2009/09/obama-banking-too-much-banks
Obama Banking Too Much On Banks
In his Wall Street speech, the president outlines reforms—but they don’t go deep enough.
—By Nomi Prins
Mon September 14, 2009 8:53 AM PST
On Monday—one year after the once-mighty Lehman Brothers collapsed in the nation’s biggest bankruptcy—President Obama addressed the state of the economy and again outlined his proposals for what he calls reform. The location—Federal Hall at 26 Wall Street, near the New York Stock Exchange and New York Federal Reserve Bank—was fitting. George Washington took his presidential oath there, a precursor for how intertwined Washington and Wall Street would become. And Obama’s speech indicates that he’s still making the grave error of mistaking the health of Wall Street for the health of the American economy.
Obama chose not to deliver his speech on, say, the streets of Bend, Oregon, or Fresno, California, which provide different indicators of our economic predicament. That’s because Washington’s approach to the crisis has been to focus on the banking system, throw a few crumbs to citizens, and hope everything else will magically work itself out.
The problem with concentrating on the banking system is that it allows the administration to present an overly optimistic assessment of its actions. "The storms of the past two years are beginning to break," Obama pronounced, attributing this to a government that "moved quickly on all fronts, initializing a financial stability plan to rescue the system from the crisis and restart lending for all those affected by the crisis." He continued: "By taking aggressive and innovative steps in credit markets, we spurred lending not just to banks, but to folks looking to buy homes or cars, take out student loans, or finance small businesses. Our home ownership plan has helped responsible homeowners refinance to stem the tide of lost homes and lost home values."
Those steps were certainly aggressive. Under both the Bush and Obama administrations, the government, from the Federal Reserve to the Treasury Department, has flushed the banking systems and other components of the financial markets with $17.5 trillion worth of loans, guarantees, and other forms of support. About another $1 trillion has been provided to citizens through the recovery package, first-time homeowner tax benefits, auto purchase credits, and approximately $800 billion to help guarantee the loans of certain lenders—which somewhat helps borrowers, but helps lenders more.
But these measures have hardly brought the economy back from the brink. They brought Wall Street back from capital starvation and prevented the possibility of more big banks going bankrupt—instead of the slew of smaller and mid-size ones that have since met the same fate as Lehman Brothers. Taking credit for stabilizing the financial system after feeding it with massive amounts of federal money is like a teacher bragging about turning around the academic performance of a failing student after handing them all the answers to the big tests.
Here’s how the economy is really faring (and how Washington is failing to take adequate steps to fix it):
* National unemployment is at 9.7 percent, higher than last year’s 5.8 percent, with double digit jobless rates in 139 metropolitan areas this July, compared to 14 last July.
* The number of foreclosures is greater than last year: nearly 2 million new foreclosure filings occurred in the first half of 2009, up 15 percent from the same period in 2008.
* While homes in some areas have begun to slowly sell again, they are doing so at deeply depressed prices, in many instances below their mortgage value.
* Wall Street bonuses are back to pre-crisis levels. For some firms, such as Goldman Sachs, they are even higher.
* Bank leverage, or excessive borrowing on the back of risky assets—a major cause of the meltdown—is rising again.
* Geithner recently reported that his program to enable private financial firms to buy up toxic assets with government help will wind up costing less than the $1 trillion he had first envisioned. However, he did not mention that there are less toxic assets available to buy partly because the Fed has allowed banks to use some toxic assets as collateral in return for cheap loans.
* Big banks are bigger than they were last year. Since the Fed blessed more mergers last fall, the nation’s three largest banks—Bank of America, JPMorgan Chase and Wells Fargo—hold the maximum percentage of legally permissable US deposits or more.
* Mid-size and smaller banks keep closing. This year, the Federal Deposit Insurance Corporation (FDIC) has closed 92 banks and depleted its deposit insurance money in the process.
* We still don’t have detailed information on the trillions of dollars of loans the Fed handed out to the banking sector or about the quality of the collateral banks provided in return.
Obama did acknowledge that the picture isn’t entirely rosy. He also outlined his ideas for avoiding another catastrophe: reshuffle the decks of regulatory agencies, slap a few trading constraints on some derivatives, and create a Consumer Financial Protection Agency (CFPA). But while Obama's rhetoric was stern—"normalcy cannot lead to complacency," he vowed—the proposals themselves are hardly sweeping.
Obama’s plan calls for eliminating the Office of Thrift Supervision and providing greater oversight by the Fed of “systemically important” institutions. The Senate is trying to water that down, in part because some members of both parties in Congress remain skeptical about the power of the Fed itself. The Senate also wants to consolidate regulatory authority into fewer entities, but leave oversight to a council of regulators. Of course, consolidating regulatory oversight only works if regulators are doing their jobs and the banking system is transparent enough to allow them to do so.
The last leg of Obama’s proposal would be establishing the CFPA, which would monitor financial products in an effort to protect consumers from risky instruments such as subprime mortgages. Legislation to create such an agency is expected to be taken up this year by the House Financial Services Committee, chaired by Rep. Barney Frank (D-Mass).
A strong CFPA is a sensible plan. Right now there is no other body imbued with the power not just to protect consumers but also to foster the general economic stability that would be achieved by closely monitoring the integrity of financial products. This proposal has drawn the most ire from the banking community, so you know it’s good. The Chamber of Commerce launched a $2 million ad campaign to convince people that a CFPA would mean that local butcher couldn’t extend credit to his customers without government interference.
But Obama's reforms do not strike deeply enough. The banking crisis has been subdued, not fixed, because of enormous amounts of government assistance. Ignoring that fact, and failing to overhaul the sector, leaves us open to another crisis. And the next round will be worse, because there is now so much more federal money invested in the banks.
Simply funding the banking system without reforming it is an expensive and dangerous game. Obama is capable of truly fixing things—by dividing up the Wall Street mega-banks with a new Glass Steagall Act, thereby enabling the success of more extensive regulatory reforms. Or, he could introduce a set of cosmetic changes that allow banks to keep doing what they did before last year’s crisis and that put us on the path for the next one.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Nomi Prins is an economist and frequent contributor for Mother Jones. Her most recent book is It Takes a Pillage: Behind the Bailouts, Bonuses, and Backroom Deals from Washington to Wall Street. To read more articles by Nomi Prins, click here.
Wednesday, October 21, 2009
Watch Your Waste
As usual, Frisco is ahead of LA.
NPR, at:
http://www.npr.org/templates/story/story.php?storyId=113969321
October 21, 2009
Tossing food scraps in your garbage can is a crime — at least in San Francisco.
A brand-new city law requires residents to discard food waste in a separate bin.
It's the first program of its kind in the nation, and so far, it's a mandate San Franciscans seem to relish. In fact, many residents and landlords began implementing the law before it took effect, using their city-provided food recycling bins to separate waste.
Cutting Down On (Stinky) Refuse
After enforcing a food waste rule, the garbage room in the basement of the Cathedral Hill Plaza apartments in San Francisco is longer a malodorous sty.
"It doesn't smell so bad," says Linda Corso, the apartment manager. "Our trash room doesn't stink like it used to."
That's because none of the wet garbage, the food waste, goes down there anymore, Corso says. Instead, food scraps go into sealed compost bins that get picked up by the city. Corso says the program has significantly trimmed the building's garbage costs.
"We used to have two bins picked up every day," she says. "Now we're down to one bin every day. So we've cut that in half."
Garbage officials in the city have been stunned and heartened by the tons and tons of food waste that is already streaming in.
After picking up curbside food scraps, garbage trucks head to the south of the city to the Organics Annex, the heart of the citywide food waste operation.
Jared Blumenfeld, the city's environmental officer, says the Organic Annex is already processing about half of the city's food waste, which is more than 500 tons per day.
"You can see a lot of lettuce, tomatoes, old apples, rotten cabbages," Blumenfeld says. "You get a kind of vivid picture here of what's being thrown away."
San Francisco turns all of that food refuse into compost, which is then sold to Bay Area farms and vineyards. The program is the latest effort in one of the most aggressive recycling campaigns in the nation. San Francisco currently keeps 72 percent of its garbage stream out of the landfill by recycling cans, bottles, construction material and cooking oil. Blumenfeld says that even though the program officially launches Wednesday, he's not surprised by how many people are already fully participating.
'Not Rocket Science'
"We hear a lot about climate change, and what we can do and should do, and what's happening in Congress," Blumenfeld says. "But people want to know what they can, practically, do every single day, and composting your food scraps is probably the single most effective thing you can do as a citizen in the United States today."
Blumenfeld says composting is simpler than it may seem.
"This is not rocket science," he says. "This is putting some food scraps into a different pile and then turning it into compost. If we can't do that, then I really worry about our ability to do some of those more complex things."
The city can fine people for noncompliance, but officials say they are unlikely to use that power except in extreme cases. San Francisco's ultimate and fairly lofty goal — according to Blumenfeld — is to get to zero waste, meaning no garbage at all going into landfills, by the year 2020.
Tristram Stewart, Waste
Monday, October 19, 2009
Recovery Shmovery: The Economic Meltdown of 2008 is FAR from Over
I was talking about EM08 (“Economic Meltdown 2008”) with my friend Torben recently, and among the things he said were, "The idiocy of the financial reporting on this is insane." I couldn’t agree more and it is absolutely amazing how even the word "recovery" can be hinted at in the midst of:1. Record debt.
2. Record deficit.
3. Record trade deficits.
4. Record debt on borrowing, primarily from china whose bitch we are now.
5. The largest heist in history – TARP - to the tune of a trillion is still playing out.
6. Runaway war budgets.
7. Over THIRTY states now headed toward bankruptcy.
8. Related to #7, California - the giant elephant in the room NO ONE is talking about and (depending upon who you’re talking to) the 6-8th largest economy in the world, is in financial ruin with a record debt AND deficit. Related to this; someone please tell me how “The Governator” keeps his job...? Seriously, we had a referendum on Gray Davis and the debt at that time was $4.5 billion – now it’s closing in on $50 billion. I for one am mystified.
9. TRUE unemployment probably around 20%.
10. 50 million uninsured for healthcare and a system so broken and controlled by elite interests it will never in our lifetime be affordable CARE and PREVENTION. This will and can only get worse as tens of millions of boomers are now headed toward old age, retirement and Medicare. It is a ticking time bomb that is not going away, no matter what, like it or not.
11. Credit card debt is now at a trillion. I agree with Meredith Whitney, who thinks it’s a bubble ready to burst.
12. The mortgage crisis is FAR from over. Those "exotic mortgages" that I wrote about almost a year ago when I learned about them via 60 Minutes are about to raise their nasty heads again. If you've been paying attention, no, they're not the generic "sub-primes" but the sub-prime's cousins, the option-ARMs, and they are about to unleash their fury. The absolutely scariest aspect - if you haven't thrown up by now - is that not even the option-ARMS are the end of this madness of exotic mortgages. Stay tuned for the Alt-As….
Sigh. That all of the above is happening and getting worse by the minute – remember the time value of money – is something so absurd and gigantic that it’s like an ant trying to comprehend a mountain. We are in uncharted waters.
A basic strategy in sports is, for example, if you're playing zone and getting whipped, you’ve gotta try man to man. In other words, DO SOMETHING DIFFERENT! By playing to money interests, Obama, Paulson, Geithner, Summers, Dodd … have, once again as in so many before them such as the previous administration - coddled the economic elite by giving them the people’s money which was stolen through fear against our will.
So much for America turning a corner by electing a black president. Back to reality.
This article was first published by The New Technorati
Saturday, October 17, 2009
Da Yanks Ain't Nuttin'
Murderer's Row, EM08, or,
Shitheads Who Don't Care about YOU.
Face it, a Pimple on their Ass Gets More Attention than You.
(click to enlarge or open in a new tab)
NYT at:
http://www.nytimes.com/2009/10/17/business/economy/17wall.html?th&emc=th
Bailout Helps Fuel a New Era of Wall Street Wealth
By GRAHAM BOWLEY
[with my wise ass remarks, cogent commentary and always insightful views here added for entertainment]
Published: October 16, 2009
Even as the economy continues to struggle, much of Wall Street is minting money — and looking forward again to hefty bonuses.
[Christian Bale! Christian Bale! Paging Christian Bale!]
Many Americans wonder how this can possibly be. [Now THAT is indeed a tragedy, that "many Americans" don't even have a clue as to how we got here.] How can some banks be prospering so soon after a financial collapse, even as legions of people worry about losing their jobs and their homes?
It may come as a surprise that one of the most powerful forces driving the resurgence on Wall Street is not the banks but Washington. Many of the steps that policy makers took last year to stabilize the financial system — reducing interest rates to near zero, bolstering big banks with taxpayer money, guaranteeing billions of dollars of financial institutions’ debts — helped set the stage for this new era of Wall Street wealth.
Titans like Goldman Sachs and JPMorgan Chase are making fortunes in hot areas like trading stocks and bonds, rather than in the ho-hum business of lending people money. They also are profiting by taking risks that weaker rivals are unable or unwilling to shoulder — a benefit of less competition after the failure of some investment firms last year.
[CUE: Christian Bale replete with dripping sarcasm meltdown voice, pumped through a pa and directed at Lloyd Blankfein and Jamie Diamond but for the public to hear - "Hey, everybody, the entire country's in a meltdown, but who receives a 'benefit'? The criminals! Oooooooh GOOD FOR YOU!!!!]
So even as big banks fight efforts in Congress to subject their industry to greater regulation — and to impose some restrictions on executive pay — Wall Street has Washington to thank in part for its latest bonanza. [Substitute "theft" for bonanza. Also, given these shitheads have raped the economy and then been monetarily rewarded, OF COURSE logic dictates that they should be less regulated.]
“All of this is facilitated by the Federal Reserve and the government, who really want financial institutions to get back to lending,” said Gary Richardson, a research fellow at the National Bureau of Economic Research. “But we have just shown them that they can have the most frightening things happen to them, and we will throw trillions of dollars to protect them. I have big concerns about that.”
[Welcome to slavery, EM08 style. Here's something for the geniuses in American mass media to ponder; why is it that when we give/lend bailout billions to auto companies, we OWN them, but if it's TARP bailout money somehow it's different and we don't own anything of the superbanks...? At least if the freshly conglomerated superbanks are going to be raking it in and able to do so with MY money, then I get a piece of it. Gamblers are all-too familiar with this principle that's as old as casinos - it's called "staking."]
Not all banks are doing so well. Giants like Citigroup and Bank of America, whose fortunes are tied to the ups-and-downs of ordinary consumers, are struggling to turn themselves around, as are many regional banks. [Citigroup deserves every bit of flame from hell it gets. Karma? My guess is that some kind of a deal will go down - possibly TARP Part Deux; Vegas has TARP 2 at 7 to 5, o&e's @ 3/31/09 cuz they wanna see how the Xmas season does - that will alleviate the pressure on BofA that the Merril fiasco brought. And I'm not just talking getting rid of John Thane's office accoutrement....]
But the decline of certain institutions, along with the outright collapse of once-vigorous competitors like Lehman Brothers, has consolidated the nation’s financial power in fewer hands. The strong are now able to wring more profits from the financial markets and charge higher fees for a wide range of banking services. [THERE'S THE BOTTOM LINE IN PLAIN ENGLISH - A BIT LATE BUT...]
“They are able to charge more for all kinds of services because companies need banks and investment banks more now, and there are fewer strong ones to help them,” said Douglas J. Elliott of the Brookings Institution.
[Huh. The country's on its knees, and you charge MORE. And how many puppies did you kill today?]
A year after the crisis struck, many of the industry’s behemoths — those institutions deemed too big to fail — are, in fact, getting bigger, not smaller. Why are you copying me...? Guess it's true what they say about flattery.] For many of them, it is business as usual. Over the last decade the financial sector was the fastest-growing part of the economy, with two-thirds of growth in gross domestic product attributable to incomes of workers in finance. [In all seriousness, that is an astounding figure]
Now, the industry has new tools at its disposal, courtesy of the government.
[AND OUR MONEY]
With interest rates so low, banks can borrow money cheaply and put those funds to work in lucrative ways, whether using the money to make loans to companies at higher rates, or to speculate in the markets. Fixed-income trading — an area that includes bonds and currencies — has been particularly profitable. [Courtesy of uncle scam, the superbanks not only have conglomerated, they go into action based upon a weakened market due to competitor elimination. They don't think about lending and investing in the sense of what's good for the economy, they think about it in terms of margin - strictly. Happy now?]
“Robust trading results led the way,” said Howard Chen, a banking analyst at Credit Suisse, describing the latest profits.
To prevent a catastrophic financial collapse that would have sent shock waves through the economy, [I'M CURIOUS, WHAT DO YOU CALL WHAT WE HAVE NOW, TEA AND CRUMPETS...?!?!?!] the government injected billions of dollars into banks. Some large institutions, like Goldman and Morgan, have since repaid their bailout money. [SEE: Christian Bale voice quote above] But most of the industry still enjoys other forms of government support, which is helping to stoke profits.
Goldman Sachs and its perennial rival Morgan Stanley were allowed to transform themselves into old-fashioned bank holding companies. That switch gave them access to cheap funding from the Federal Reserve, which had been unavailable to them. [Wow...]
Those two banks and others like JPMorgan were also allowed to issue tens of billions of dollars of bonds that are guaranteed by the Federal Deposit Insurance Corporation, which insures bank deposits. With the F.D.I.C. standing behind them, the banks could borrow the money on highly advantageous terms. While some have since issued bonds on their own, they nonetheless enjoy the benefits of their cheap financing.
[What a concept; raising capital while someone gives you 100% insurance. That's not even gambling, it's... a no-lose situation.]
Granted, banks are also benefiting from a stabilizing economy. Stocks, corporate bonds, even risky corporate i.o.u.’s — have all rallied from their bear market lows, some spectacularly so. The Dow Jones industrial average has soared 50 percent this year, and touched 10,000 this week for the first time since the crisis.
["Stabilizing." What kind of moron says this economy's "stabilizing???] The fear that gripped the markets earlier this year, when doomsayers predicted a second Great Depression, has largely dissipated. ["The markets." Listen, since when were "the markets" the key to figuring out economics? In fact, as we've seen with John Stossel's dart throwing monkey who beat the pundits, it's in some ways a very bad measure.]
Banks that had marked down the value of the assets on their books during the dark days of the crisis are now enjoying a rebound in the value of many of those assets.
[And the taxpayers who had their money stolen so that banks could even be in the position to enjoy a "rebound"... besides holding the bag and left in the dust, when's their rebound coming...?]
“Confidence has returned,” said Shubh Saumya, a financial services specialist at the Boston Consulting Group. “Some of the assets that bankers wrote down last year in the midst of the crisis, now they have got some of that back.”
[Substitute "confidence" for "rebound in the quote above, re-word to fit grammar, insert here.]
As the number of banks has dwindled, the survivors are moving into the void left by rivals that are either dead or limping and unwilling to take risks.
A big reason for Goldman Sachs’s blowout profits this year has been the willingness of its traders to take big risks — they have put more money on the line while other banks that suffered last year have reined in such moves. Executives say there are big strategic gaps opening up between banks on Wall Street that are taking on more risks, and those that are treading a safer path.
["Christian Bale! Paging Christian Bale!"]
Banks that have waded back into the markets have been able to exploit large gaps in the prices of various investments, a feature of the postcrisis financial markets. The so-called bid-ask spreads — the difference between the price at which banks are willing to buy things like bonds, and the price at which they are willing to sell — are roughly twice what they were two years ago.
Still, the newfound success is largely limited to the big securities houses on Wall Street. [WOW - WHAT A SHOCK...] This week, Citigroup and Bank of America reported losses from credit card delinquencies and mortgage defaults — a sign of the lingering pain on Main Street.
Shitheads Who Don't Care about YOU.
Face it, a Pimple on their Ass Gets More Attention than You.
(click to enlarge or open in a new tab)
NYT at:
http://www.nytimes.com/2009/10/17/business/economy/17wall.html?th&emc=th
Bailout Helps Fuel a New Era of Wall Street Wealth
By GRAHAM BOWLEY
[with my wise ass remarks, cogent commentary and always insightful views here added for entertainment]
Published: October 16, 2009
Even as the economy continues to struggle, much of Wall Street is minting money — and looking forward again to hefty bonuses.
[Christian Bale! Christian Bale! Paging Christian Bale!]
Many Americans wonder how this can possibly be. [Now THAT is indeed a tragedy, that "many Americans" don't even have a clue as to how we got here.] How can some banks be prospering so soon after a financial collapse, even as legions of people worry about losing their jobs and their homes?
It may come as a surprise that one of the most powerful forces driving the resurgence on Wall Street is not the banks but Washington. Many of the steps that policy makers took last year to stabilize the financial system — reducing interest rates to near zero, bolstering big banks with taxpayer money, guaranteeing billions of dollars of financial institutions’ debts — helped set the stage for this new era of Wall Street wealth.
Titans like Goldman Sachs and JPMorgan Chase are making fortunes in hot areas like trading stocks and bonds, rather than in the ho-hum business of lending people money. They also are profiting by taking risks that weaker rivals are unable or unwilling to shoulder — a benefit of less competition after the failure of some investment firms last year.[CUE: Christian Bale replete with dripping sarcasm meltdown voice, pumped through a pa and directed at Lloyd Blankfein and Jamie Diamond but for the public to hear - "Hey, everybody, the entire country's in a meltdown, but who receives a 'benefit'? The criminals! Oooooooh GOOD FOR YOU!!!!]
So even as big banks fight efforts in Congress to subject their industry to greater regulation — and to impose some restrictions on executive pay — Wall Street has Washington to thank in part for its latest bonanza. [Substitute "theft" for bonanza. Also, given these shitheads have raped the economy and then been monetarily rewarded, OF COURSE logic dictates that they should be less regulated.]
“All of this is facilitated by the Federal Reserve and the government, who really want financial institutions to get back to lending,” said Gary Richardson, a research fellow at the National Bureau of Economic Research. “But we have just shown them that they can have the most frightening things happen to them, and we will throw trillions of dollars to protect them. I have big concerns about that.”
[Welcome to slavery, EM08 style. Here's something for the geniuses in American mass media to ponder; why is it that when we give/lend bailout billions to auto companies, we OWN them, but if it's TARP bailout money somehow it's different and we don't own anything of the superbanks...? At least if the freshly conglomerated superbanks are going to be raking it in and able to do so with MY money, then I get a piece of it. Gamblers are all-too familiar with this principle that's as old as casinos - it's called "staking."]
Not all banks are doing so well. Giants like Citigroup and Bank of America, whose fortunes are tied to the ups-and-downs of ordinary consumers, are struggling to turn themselves around, as are many regional banks. [Citigroup deserves every bit of flame from hell it gets. Karma? My guess is that some kind of a deal will go down - possibly TARP Part Deux; Vegas has TARP 2 at 7 to 5, o&e's @ 3/31/09 cuz they wanna see how the Xmas season does - that will alleviate the pressure on BofA that the Merril fiasco brought. And I'm not just talking getting rid of John Thane's office accoutrement....]
But the decline of certain institutions, along with the outright collapse of once-vigorous competitors like Lehman Brothers, has consolidated the nation’s financial power in fewer hands. The strong are now able to wring more profits from the financial markets and charge higher fees for a wide range of banking services. [THERE'S THE BOTTOM LINE IN PLAIN ENGLISH - A BIT LATE BUT...]
“They are able to charge more for all kinds of services because companies need banks and investment banks more now, and there are fewer strong ones to help them,” said Douglas J. Elliott of the Brookings Institution.
[Huh. The country's on its knees, and you charge MORE. And how many puppies did you kill today?]
A year after the crisis struck, many of the industry’s behemoths — those institutions deemed too big to fail — are, in fact, getting bigger, not smaller. Why are you copying me...? Guess it's true what they say about flattery.] For many of them, it is business as usual. Over the last decade the financial sector was the fastest-growing part of the economy, with two-thirds of growth in gross domestic product attributable to incomes of workers in finance. [In all seriousness, that is an astounding figure]
Now, the industry has new tools at its disposal, courtesy of the government.
[AND OUR MONEY]
With interest rates so low, banks can borrow money cheaply and put those funds to work in lucrative ways, whether using the money to make loans to companies at higher rates, or to speculate in the markets. Fixed-income trading — an area that includes bonds and currencies — has been particularly profitable. [Courtesy of uncle scam, the superbanks not only have conglomerated, they go into action based upon a weakened market due to competitor elimination. They don't think about lending and investing in the sense of what's good for the economy, they think about it in terms of margin - strictly. Happy now?]
“Robust trading results led the way,” said Howard Chen, a banking analyst at Credit Suisse, describing the latest profits.
To prevent a catastrophic financial collapse that would have sent shock waves through the economy, [I'M CURIOUS, WHAT DO YOU CALL WHAT WE HAVE NOW, TEA AND CRUMPETS...?!?!?!] the government injected billions of dollars into banks. Some large institutions, like Goldman and Morgan, have since repaid their bailout money. [SEE: Christian Bale voice quote above] But most of the industry still enjoys other forms of government support, which is helping to stoke profits.
Goldman Sachs and its perennial rival Morgan Stanley were allowed to transform themselves into old-fashioned bank holding companies. That switch gave them access to cheap funding from the Federal Reserve, which had been unavailable to them. [Wow...]
Those two banks and others like JPMorgan were also allowed to issue tens of billions of dollars of bonds that are guaranteed by the Federal Deposit Insurance Corporation, which insures bank deposits. With the F.D.I.C. standing behind them, the banks could borrow the money on highly advantageous terms. While some have since issued bonds on their own, they nonetheless enjoy the benefits of their cheap financing.
[What a concept; raising capital while someone gives you 100% insurance. That's not even gambling, it's... a no-lose situation.]
Granted, banks are also benefiting from a stabilizing economy. Stocks, corporate bonds, even risky corporate i.o.u.’s — have all rallied from their bear market lows, some spectacularly so. The Dow Jones industrial average has soared 50 percent this year, and touched 10,000 this week for the first time since the crisis.
["Stabilizing." What kind of moron says this economy's "stabilizing???] The fear that gripped the markets earlier this year, when doomsayers predicted a second Great Depression, has largely dissipated. ["The markets." Listen, since when were "the markets" the key to figuring out economics? In fact, as we've seen with John Stossel's dart throwing monkey who beat the pundits, it's in some ways a very bad measure.]
Banks that had marked down the value of the assets on their books during the dark days of the crisis are now enjoying a rebound in the value of many of those assets.
[And the taxpayers who had their money stolen so that banks could even be in the position to enjoy a "rebound"... besides holding the bag and left in the dust, when's their rebound coming...?]
“Confidence has returned,” said Shubh Saumya, a financial services specialist at the Boston Consulting Group. “Some of the assets that bankers wrote down last year in the midst of the crisis, now they have got some of that back.”
[Substitute "confidence" for "rebound in the quote above, re-word to fit grammar, insert here.]
As the number of banks has dwindled, the survivors are moving into the void left by rivals that are either dead or limping and unwilling to take risks.
A big reason for Goldman Sachs’s blowout profits this year has been the willingness of its traders to take big risks — they have put more money on the line while other banks that suffered last year have reined in such moves. Executives say there are big strategic gaps opening up between banks on Wall Street that are taking on more risks, and those that are treading a safer path.
["Christian Bale! Paging Christian Bale!"]
Banks that have waded back into the markets have been able to exploit large gaps in the prices of various investments, a feature of the postcrisis financial markets. The so-called bid-ask spreads — the difference between the price at which banks are willing to buy things like bonds, and the price at which they are willing to sell — are roughly twice what they were two years ago.
Still, the newfound success is largely limited to the big securities houses on Wall Street. [WOW - WHAT A SHOCK...] This week, Citigroup and Bank of America reported losses from credit card delinquencies and mortgage defaults — a sign of the lingering pain on Main Street.
Friday, October 16, 2009
Cuts for Cooky: Donny Hathaway's "Someday We'll All Be Free"
One of the greatest songs about the hope of hopes; freedom for all.
Donny was in that category with Marvin; he was, as we used to say, deep. Before I heard Extension of a Man he'd had success with Roberta Flack on some pop hits (Where is the Love the most well-known) and I just thought he was good, not great. The one exception that made me take note from the album with Roberta Flack was, For All We Know.
When I heard this cut I was a young man, and spinning out of control. It's safe to say that music let alone one song didn't turn me around, but it did mean a lot to me.
Today I listen to this and think about that time, the early 70's... a lot was happening besides me being crazy... Donny sounds even more relevant, powerful now, and, like Jimi and Marvin, deep.
Thursday, October 15, 2009
Greenspan: "Can't Truss it!"
No less than A to da G has come out and said the super banks should be broken up - waaaaaaaay after the fact, of course, but I still give props even though he himself must shoulder responsibility for some of the hyper-valuation in the run-up to EM08.
Once again, it's amazing that the press has evidently lost all sense of irony; the Obama administration's hit team very plainly created the game in which the banks stole our money and further conglomerated - despite the "too big to fail" buzz word fear-mongering. To date, I've heard no media outlet, from WSJ to HuffPo cite this.
Bloomberg, at:
http://www.bloomberg.com/apps/news?pid=email_en&sid=aJ8HPmNUfchg
Greenspan Says U.S. Should Consider Breaking Up Large Banks
By Michael McKee and Scott Lanman
Oct. 15 (Bloomberg) -- U.S. regulators should consider breaking up large financial institutions considered “too big to fail,” former Federal Reserve Chairman Alan Greenspan said.
Those banks have an implicit subsidy allowing them to borrow at lower cost because lenders believe the government will always step in to guarantee their obligations. That squeezes out competition and creates a danger to the financial system, Greenspan told the Council on Foreign Relations in New York.
“If they’re too big to fail, they’re too big,” Greenspan said today. “In 1911 we broke up Standard Oil -- so what happened? The individual parts became more valuable than the whole. Maybe that’s what we need to do.”
At one point, no bank was considered too big to fail, Greenspan said. That changed after the Treasury Department under then-Secretary Hank Paulson effectively nationalized Fannie Mae and Freddie Mac, and the Treasury and Fed bailed out Bear Stearns Cos. and American International Group Inc.
“It’s going to be very difficult to repair their credibility on that because when push came to shove, they didn’t stand up,” Greenspan said.
Fed officials have suggested imposing a tax or requiring higher capital ratios on larger banks to ensure the firms’ safety and reduce some of the competitive advantage from the implied subsidy. Greenspan said that won’t work.
“I don’t think merely raising the fees or capital on large institutions or taxing them is enough,” Greenspan said. “I think they’ll absorb that, they’ll work with that, and it’s totally inefficient and they’ll still be using the savings.”
‘Really Arbitrarily’
The former Fed chairman said while “just really arbitrarily breaking down organizations into various different sizes” goes against his philosophical leanings, something must be done to solve the too-big-to-fail issue.
“If you don’t neutralize that, you’re going to get a moribund group of obsolescent institutions which will be a big drain on the savings of the society,” he said.
“Failure is an integral part, a necessary part of a market system,” he said. “If you start focusing on those who should be shrinking, it undermines growing standards of living and can even bring them down.”
To contact the reporter on this story: Michael McKee in New York at mmckee@bloomberg.net; Scott Lanman in Washington at slanman@bloomberg.net
Last Updated: October 15, 2009 10:50 EDT
Once again, it's amazing that the press has evidently lost all sense of irony; the Obama administration's hit team very plainly created the game in which the banks stole our money and further conglomerated - despite the "too big to fail" buzz word fear-mongering. To date, I've heard no media outlet, from WSJ to HuffPo cite this.
Bloomberg, at:
http://www.bloomberg.com/apps/news?pid=email_en&sid=aJ8HPmNUfchg
Greenspan Says U.S. Should Consider Breaking Up Large Banks
By Michael McKee and Scott Lanman
Oct. 15 (Bloomberg) -- U.S. regulators should consider breaking up large financial institutions considered “too big to fail,” former Federal Reserve Chairman Alan Greenspan said.
Those banks have an implicit subsidy allowing them to borrow at lower cost because lenders believe the government will always step in to guarantee their obligations. That squeezes out competition and creates a danger to the financial system, Greenspan told the Council on Foreign Relations in New York.
“If they’re too big to fail, they’re too big,” Greenspan said today. “In 1911 we broke up Standard Oil -- so what happened? The individual parts became more valuable than the whole. Maybe that’s what we need to do.”
At one point, no bank was considered too big to fail, Greenspan said. That changed after the Treasury Department under then-Secretary Hank Paulson effectively nationalized Fannie Mae and Freddie Mac, and the Treasury and Fed bailed out Bear Stearns Cos. and American International Group Inc.
“It’s going to be very difficult to repair their credibility on that because when push came to shove, they didn’t stand up,” Greenspan said.
Fed officials have suggested imposing a tax or requiring higher capital ratios on larger banks to ensure the firms’ safety and reduce some of the competitive advantage from the implied subsidy. Greenspan said that won’t work.
“I don’t think merely raising the fees or capital on large institutions or taxing them is enough,” Greenspan said. “I think they’ll absorb that, they’ll work with that, and it’s totally inefficient and they’ll still be using the savings.”
‘Really Arbitrarily’
The former Fed chairman said while “just really arbitrarily breaking down organizations into various different sizes” goes against his philosophical leanings, something must be done to solve the too-big-to-fail issue.
“If you don’t neutralize that, you’re going to get a moribund group of obsolescent institutions which will be a big drain on the savings of the society,” he said.
“Failure is an integral part, a necessary part of a market system,” he said. “If you start focusing on those who should be shrinking, it undermines growing standards of living and can even bring them down.”
To contact the reporter on this story: Michael McKee in New York at mmckee@bloomberg.net; Scott Lanman in Washington at slanman@bloomberg.net
Last Updated: October 15, 2009 10:50 EDT
Wednesday, October 14, 2009
Cuts for Cooky: Jimi's "Little Wing"
Taking a cue from the late great Man in Black, who left his daughter a list of 100 songs he felt she should be familiar with, this is your list, Renee.
This is the perfect song to lead off with because it reminds me of you.
Tuesday, October 13, 2009
Meredith Whitney on Small is Beautiful
Barack needs to kick his econ team to Pluto. He needs to listen up and make the following the econ generals leading the fight:
David Cay Johnston
Meredith Whitney
Muhammad Yunus
Vinod Khosla
Prof. William Black
Under them should be Matt Taibbi and Michael Lewis as special advisors or whatever fancy junior cabinet sounding names you want.
Meanwhile back in reality, EM08 continues to barf all over us, but one of the key things for Americans to keep their eyeballs glued on is the mass-media (mis)handling of it. It is absolutely nuts the way they are shooting Krugman and Roubini blanks everywhere. Oh wait, this is Bizarro world.
Right on time, here's Meredith Whitney breakin' it down on the credit crunch, small business, small banking, and the crucial role both should be playing at this turning point, with chirps from yours truly.
Before I turn you over to Meredith, I'll make the point that one of the important things completely absent in mass media coverage of EM08 are the messages that are being sent out to Americans. Think about the TARP, GM & Chrysler bailouts, AIG bailouts, and the utter madness of banks who, with public money, didn't help the public but instead helped themselves. The executive/management bonuses while reprehensible are just mis-direction by mass media; the TRUE damage is in the further conglomeration the banking system has undergone. Thus, welcome to the era of the super banks, led by JP Morgan/Chase and Goldman Sachs. As I've said but will say again until everyone knows, if you think mass-media conglomeration is bad, think about the unprecedented power these super banks now wield.
Is the irony of "too big to fail" lost on you...?
Meredith Whitney's following take makes me think about those small banks and community oriented credit unions that didn't buy into all of the toxic mortgages much less the ultra high risk gambling committed by the banks and AIG (Well, it was risky... for TAXPAYERS).
Then these law-abiding small banks and community oriented credit unions had to stand by and be humiliated as the government dumped free money on these criminals in the biggest heist in history.
Here're the questions;
How do you think those banks and credit unions feel?
As an American, how do you feel about that?
What kind of message is that to be sending?
Why isn't the mass media addressing this?
Will you continue to bank at a large bank? (Disclosure; I don't anymore. I bank at my local credit union exclusively now)
One more thing I'll say about Whitney's take; I stand and applaud her, because it's easy to see that she's sticking up for the little people and, lest we forget, sounder economic practices. But in her own way, she's really talking about communities. I believe that is one of the things Americans desperately need to get back to.
I said it before and here again; That Meredith Whitney - she's one smart gal.
Meredith Whitney
* The Wall Street Journal
* OPINION
* OCTOBER 1, 2009, 6:58 P.M. ET
The Credit Crunch Continues
Taxpayer dollars have supported institutions that are 'too big to fail.' Small business has been left out in the cold.
By MEREDITH WHITNEY
Anyone counting on a meaningful economic recovery will be greatly disappointed. How do I know? I follow credit, and credit is contracting. Access to credit is being denied at an accelerating pace. Large, well-capitalized companies have no problem finding credit. Small businesses, on the other hand, have never had a harder time getting a loan.
jp: Emphasis mine. In textbook journalistic inverted pyramid form, there's the theme, in perfect accord with TARP strategy. In Bonzo Ronnie's time it was "trickle down" economics. Today it's "too big to fail."
Since the onset of the credit crisis over two years ago, available credit to small businesses and consumers has contracted by trillions of dollars, and that phenomenon is reflected in dismal consumer spending trends. Equally worrisome are the trends in small-business credit, which has contracted at one of the fastest paces of any lending category. Small business loans are hard to find, and credit-card lines (a critical funding source to small businesses) have been cut by 25% since last year.
Unfortunately for small businesses, credit-line cuts are only about half way through. Home equity loans, also historically a key funding source for start-up small businesses, are not a source of liquidity anymore because more than 32% of U.S. homes are worth less than their mortgages.
Why do small businesses matter so much? In the U.S., small businesses employ 50% of the country's workforce and contribute 38% of GDP. Without access to credit, small businesses can't grow, can't hire, and too often end up going out of business. What's more, small businesses are often the primary source of this country's innovation. Apple, Dell, McDonald's, Starbucks were all started as small businesses.
What's especially disturbing is how taxpayer dollars have supported "too big to fail" businesses yet left small businesses unassisted and at a significant disadvantage. Small businesses do not have the same access to government guarantees on their debt. After all, most of these small businesses don't issue public debt. [Emphasis mine]
As is true in most recessions, banks' commercial lending portfolios shrink as creditworthy customers pay down their debts and the less-worthy borrowers are simply denied loans. Banks, in other words, want to lend only to those that don't want to borrow. Challenging as that may be, in the last cycle small businesses at least had access to their credit cards.
Small businesses primarily fund themselves through credit cards and loans from local lenders. In the past two years, credit-card lines have been cut by over $1.25 trillion. During the same time, 10% of all credit-card accounts have been cancelled. According to the most recent Federal Reserve data, small business lending is down 3%, or $113 billion, from fourth-quarter 2008 peak levels—the first contraction since 1993. Credit cards are the most common source of liquidity to small businesses, used by 82% as a vital portion of their overall funding. Thus, it is of merit when 79% of small businesses surveyed tell the Small Business Association that credit-card lending standards have tightened drastically and their access to credit lines has decreased materially.
Incentives should be provided to smaller banks to step up small-business loans on a greater scale. Smaller banks could not only bridge gaps created by the shut down in the securitization market but also gaps being created by a massive contraction in credit-card lines. Arguably credit would perform better with these types of loans as they would reintroduce and reinforce the most important rule in banking: "Know Your Customer." [Emphasis mine]
I believe that we are only in the early stages of the second half of this credit cycle. I expect another $1.5 trillion of credit-card lines to be removed from the system by the end of 2010. This includes not only the large lenders reducing exposure but also the shuttering of several major subprime credit-card lenders. Beginning in the fourth quarter of 2007, lenders began reducing available credit by zip code. During the past four quarters, lenders have cut "inactive" accounts (whether or not the customer viewed the account as a liquidity vehicle).
The next phase will likely be credit-line cuts as lenders race to pre-emptively protect themselves from regulatory changes associated with the Credit Card Accountability, Responsibility and Disclosure Act, passed in May of this year, and the 2008 Unfair and Deceptive Acts and Practices Act.
Regulators should be mindful that regulatory change during the midst of a credit crisis often ends with unintended consequences. Those same consumers that regulators are trying to help are actually being hurt by a vast reduction in available credit.
Main Street represents the foundation of this country. Reviving it should take priority over any regulatory reform or systemic overhaul. [Emphasis mine]
David Cay Johnston
Meredith Whitney
Muhammad Yunus
Vinod Khosla
Prof. William Black
Under them should be Matt Taibbi and Michael Lewis as special advisors or whatever fancy junior cabinet sounding names you want.
Meanwhile back in reality, EM08 continues to barf all over us, but one of the key things for Americans to keep their eyeballs glued on is the mass-media (mis)handling of it. It is absolutely nuts the way they are shooting Krugman and Roubini blanks everywhere. Oh wait, this is Bizarro world.
Right on time, here's Meredith Whitney breakin' it down on the credit crunch, small business, small banking, and the crucial role both should be playing at this turning point, with chirps from yours truly.
Before I turn you over to Meredith, I'll make the point that one of the important things completely absent in mass media coverage of EM08 are the messages that are being sent out to Americans. Think about the TARP, GM & Chrysler bailouts, AIG bailouts, and the utter madness of banks who, with public money, didn't help the public but instead helped themselves. The executive/management bonuses while reprehensible are just mis-direction by mass media; the TRUE damage is in the further conglomeration the banking system has undergone. Thus, welcome to the era of the super banks, led by JP Morgan/Chase and Goldman Sachs. As I've said but will say again until everyone knows, if you think mass-media conglomeration is bad, think about the unprecedented power these super banks now wield.
Is the irony of "too big to fail" lost on you...?
Meredith Whitney's following take makes me think about those small banks and community oriented credit unions that didn't buy into all of the toxic mortgages much less the ultra high risk gambling committed by the banks and AIG (Well, it was risky... for TAXPAYERS).
Then these law-abiding small banks and community oriented credit unions had to stand by and be humiliated as the government dumped free money on these criminals in the biggest heist in history.
Here're the questions;
How do you think those banks and credit unions feel?
As an American, how do you feel about that?
What kind of message is that to be sending?
Why isn't the mass media addressing this?
Will you continue to bank at a large bank? (Disclosure; I don't anymore. I bank at my local credit union exclusively now)
One more thing I'll say about Whitney's take; I stand and applaud her, because it's easy to see that she's sticking up for the little people and, lest we forget, sounder economic practices. But in her own way, she's really talking about communities. I believe that is one of the things Americans desperately need to get back to.
I said it before and here again; That Meredith Whitney - she's one smart gal.
Meredith Whitney
* The Wall Street Journal
* OPINION
* OCTOBER 1, 2009, 6:58 P.M. ET
The Credit Crunch Continues
Taxpayer dollars have supported institutions that are 'too big to fail.' Small business has been left out in the cold.
By MEREDITH WHITNEY
Anyone counting on a meaningful economic recovery will be greatly disappointed. How do I know? I follow credit, and credit is contracting. Access to credit is being denied at an accelerating pace. Large, well-capitalized companies have no problem finding credit. Small businesses, on the other hand, have never had a harder time getting a loan.
jp: Emphasis mine. In textbook journalistic inverted pyramid form, there's the theme, in perfect accord with TARP strategy. In Bonzo Ronnie's time it was "trickle down" economics. Today it's "too big to fail."
Since the onset of the credit crisis over two years ago, available credit to small businesses and consumers has contracted by trillions of dollars, and that phenomenon is reflected in dismal consumer spending trends. Equally worrisome are the trends in small-business credit, which has contracted at one of the fastest paces of any lending category. Small business loans are hard to find, and credit-card lines (a critical funding source to small businesses) have been cut by 25% since last year.
Unfortunately for small businesses, credit-line cuts are only about half way through. Home equity loans, also historically a key funding source for start-up small businesses, are not a source of liquidity anymore because more than 32% of U.S. homes are worth less than their mortgages.
Why do small businesses matter so much? In the U.S., small businesses employ 50% of the country's workforce and contribute 38% of GDP. Without access to credit, small businesses can't grow, can't hire, and too often end up going out of business. What's more, small businesses are often the primary source of this country's innovation. Apple, Dell, McDonald's, Starbucks were all started as small businesses.
What's especially disturbing is how taxpayer dollars have supported "too big to fail" businesses yet left small businesses unassisted and at a significant disadvantage. Small businesses do not have the same access to government guarantees on their debt. After all, most of these small businesses don't issue public debt. [Emphasis mine]
As is true in most recessions, banks' commercial lending portfolios shrink as creditworthy customers pay down their debts and the less-worthy borrowers are simply denied loans. Banks, in other words, want to lend only to those that don't want to borrow. Challenging as that may be, in the last cycle small businesses at least had access to their credit cards.
Small businesses primarily fund themselves through credit cards and loans from local lenders. In the past two years, credit-card lines have been cut by over $1.25 trillion. During the same time, 10% of all credit-card accounts have been cancelled. According to the most recent Federal Reserve data, small business lending is down 3%, or $113 billion, from fourth-quarter 2008 peak levels—the first contraction since 1993. Credit cards are the most common source of liquidity to small businesses, used by 82% as a vital portion of their overall funding. Thus, it is of merit when 79% of small businesses surveyed tell the Small Business Association that credit-card lending standards have tightened drastically and their access to credit lines has decreased materially.
Incentives should be provided to smaller banks to step up small-business loans on a greater scale. Smaller banks could not only bridge gaps created by the shut down in the securitization market but also gaps being created by a massive contraction in credit-card lines. Arguably credit would perform better with these types of loans as they would reintroduce and reinforce the most important rule in banking: "Know Your Customer." [Emphasis mine]
I believe that we are only in the early stages of the second half of this credit cycle. I expect another $1.5 trillion of credit-card lines to be removed from the system by the end of 2010. This includes not only the large lenders reducing exposure but also the shuttering of several major subprime credit-card lenders. Beginning in the fourth quarter of 2007, lenders began reducing available credit by zip code. During the past four quarters, lenders have cut "inactive" accounts (whether or not the customer viewed the account as a liquidity vehicle).
The next phase will likely be credit-line cuts as lenders race to pre-emptively protect themselves from regulatory changes associated with the Credit Card Accountability, Responsibility and Disclosure Act, passed in May of this year, and the 2008 Unfair and Deceptive Acts and Practices Act.
Regulators should be mindful that regulatory change during the midst of a credit crisis often ends with unintended consequences. Those same consumers that regulators are trying to help are actually being hurt by a vast reduction in available credit.
Main Street represents the foundation of this country. Reviving it should take priority over any regulatory reform or systemic overhaul. [Emphasis mine]
Saturday, October 10, 2009
The Party's Over
I just want to ask a question
Who really cares?
To save a world in despair
Who really cares?
There'll come a time,
when the world won't be singin'
Flowers won't grow,
bells won't be ringin'
Who really cares?
Who is willing to try
to save a world
that is destined
to die?
When I look at the world
it fills me with sorrow
Little children today
really gonna suffer tomorrow
Oh what a shame
such a bad way to live
-Marvin Gaye, Save the Children
William Goldman said it about Hollywood: No one knows anything.
I think that holds true for the American public when it comes to EM08; it's so far-fetched, convoluted and rooted in history, the history of conglomerated corporate America, or ccA. ccA however, has the edge, and have gamed the casino in ways that make Steve Wynn look like a baby.
There's one prime reason, though, that ccA doesn't want you to know anything of the real truth as to its inner workings; as the late Tanta at Calculated Risk was fond of saying, and I paraphrase:
There's truth in the saying, "Knowledge is power."
That's why they never give you any.
This explains why a young person can emerge from 12 years of public or private schooling - and I'd bet in most cases even college/post-grad - and be economically illiterate, along with illiterate in terms of language, politics, art, history, other cultures....
My writing on the subject of EM08 had one angle on what I called the refs. At various times in our system of so-called "checks and balances," there are supposed to be standards enforced - checks - regardless of power and authority, much less image and reputation. So, the SEC are one team of refs; there's another for commodities, one for M & A, and so on. (Get this, sometimes there are multiple refs!)
When it comes to investing, one team of refs - the ratings agencies - played a crucial role in the so-called sub-prime mortgage disaster that led to EM08's first domino otherwise known as Fannie Mae & Freddie Mac being toppled. On a side note, isn't it interesting how we never hear anything about "Fannie Mac" anymore in the conglomerated mass-media?
That great young lion of a writer, Matt Taibbi, cited the rating agencies in a lengthy Rolling Stone piece deconstructing the history of economic bubbles, which I commented upon in July. In it, he said:
Take one $494 million issue that year, GSAMP Trust 2006S3. Many of the mortgages belonged to second mortgage borrowers, and the average equity they had in their homes was 0.71 percent. Moreover, 58 percent of the loans included little or no documentation — no names of the borrowers, no addresses of the homes, just zip codes. Yet both of the major ratings agencies, Moody's and Standard & Poor's, rated 93 percent of the issue as investment grade. Moody's projected that less than 10 percent of the loans would default. In reality, 18 percent of the mortgages were in default within 18 months. [emphasis, mine]
So, that Diana Golobay's article below talks about the option ARM loans about to reset is correct but nothing new, as I pointed out last December, despite the conglomerated mass-media's willful ignorance of the subject. The salient point is how Golobay never cites the irony of her source: Fitch.
The punchline? Fitch's was one of the refs - a ratings agency - in on the fix.
Housingwire.com, at:
http://www.housingwire.com/2009/09/08/134bn-of-option-arms-to-recast-by-2011-fitch/
$134bn of Option ARMs to Recast by 2011: Fitch
By DIANA GOLOBAY
September 8, 2009 11:46 AM CST
Option adjustable-rate mortgages (ARMs) are due to affect performance of US residential mortgage-backed securities (RMBS) in the next two years, according to Fitch Ratings.
Fitch Ratings determined $134bn of loans within US option ARM RMBS will recast in 2011.
Option ARMs historically present concerns over negative amortization, a process through which the loan balance essentially grows each month as borrowers elect to repay the minimum amount due.
An option ARM recasts when it reaches a balance cap typically ranging from 110%-125% of the original mortgage or 60 months of age, according to Fitch. The monthly payment obligation then increases from the minimum amount to a fully amortizing principle and interest payment.
This “payment shock,” a hike often 63% higher than the minimum payment, indicates a greater risk of default, Fitch said.
“Having not demonstrated their ability to make payments at the full rate, option ARM borrowers are at the greatest risk of default resulting from payment shock,” said Huxley Somerville, group managing director and US RMBS group head.
The majority of option ARMs Of $189bn of securitized option ARM loans outstanding, 88% have yet to recast. Of those, 94% negatively amortized through the use of minimum monthly payments.
Performance is already troubled among option ARMs. Serious delinquencies — loans more than 90 days past due, in foreclosure or real estate-owned proceedings — rose to 37% from 16% in the past year.
The risks associated with payment shock drove Fitch to rate a small number of option ARM transactions, approximately 5% of all option ARM transactions.
Friday, October 09, 2009
Just a Big Kid: Tex Avery
One of the ironies of LA being the film capitol of the world is that we've never had a world class film festival. In all my years of asking people why this was, I've never received a satisfactory answer; the closest I got was that the buyers want to get out of town. Thus, Europe (Cannes, Berlin) and North America (Montreal, Sundance) have come to dominate mass distribution. But I digress.
The closest LA came to a world class fest was Gary Essert's Filmex. Through all of its faults - and there were many - Filmex was a special time in LA, dominating the westside and the now gone Century Plaza Theaters, next to the Shubert. It was through Filmex's animation sections that I first realized that animation was more than cartooning. Among those I remember; Paul Driessen (who worked on The Beatles' "Yellow Submarine"), Ian Emes's "French Windows" (which I saw either at Filmex or "The Fantastic Animation Festival" in Laguna Beach), Marv Newland's "Bambi Meets Godzilla" (which made us laugh every time probably because we were stoned each viewing), Frank Zappa's, "Baby Snakes" which featured the claymation of Bruce Bickford who was superior to Will Vinton, and Mike Jittlov, whose "Wizard of Speed and Time" was always a showstopper but which I found really corny. As usual, they're probably all on you-know-where-tube.
It was this reckoning that made me re-assess classic studio animation, and the capper was when I read about the reverence for which the Surrealists held Tex Avery. As a kid I loved Tex. His cartoons usually had a level of lunacy beyond anything else that more often than not peaked in delirium. One of his classics, "King Size Canary," cracked me up as a kid.
Another of my favorite Avery characters was Droopy, a laconic, slow talking lil hound dawg who pulled some of the most outrageous stunts. Like being able to appear anywhere...
Droopy the foil takes a back seat here to the two main characters, placed in a tough situation...
Another Avery favorite, Chilly Willy the penguin who, like Droopy, is a foil full of trickery.
Tex Avery, much like Hitch's "Vertigo" is proof that even the studio system back in the day couldn't suppress personal visions. He still makes me laugh.
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