Year: 2011

Remember when Obama ran these f%$#ers over the coals? Remember when BP execs were clapped in irons and given life sentences for crimes against humanity?

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Me neither.*

In case you are wondering, why yes, the Deepwater Horizon is spilling oil again:

Oil is once again fouling the Gulf of Mexico around the Deepwater Horizon well, which was capped a little over a year ago.

Tuesday afternoon, hundreds of small, circular patches of oily sheen dotted the surface within a mile of the wellhead. With just a bare sheen present over about a quarter-mile, the scene was a far cry from the massive slick that covered the Gulf last summer.

Floating in a boat near the well site, Press-Register reporters watched blobs of oil rise to the surface and bloom into iridescent yellow patches. Those patches quickly expanded into rainbow sheens 4 to 5 feet across.

Each expanding bloom released a pronounced and pungent petroleum smell. Most of the oil was located in a patch about 50 yards wide and a quarter of a mile long.

Because playing nice with the least safety conscious energy company in the western world is such a winning strategy.

Not feeling that “Audacity of Hope”.

There is a difference between dealing with people who merely disagree with you, and dealing with evil ratf%$#s who will destroy everything for a few pennies.

BP’s upper management is clearly the latter, and dealing with them as the former just makes things worse.

*H/T JR at the Stellar Parthenon BBS for the title and the first line.

Interesting Point

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Harold Feld (Full disclosure, he’s a friend, we were at his son’s Bar Mitzvah reception) explains why BART shutting down its cellular service in its stations to prevent a flash protest is more than a 1st amendment issue, but that it is a flagrant violation of the law:

I suppose I am really a telecom lawyer at heart. My reaction to the news that the Bay Area Rapid Transit (BART) police shut down cellphone networks in a number of stations on August 11 had nothing to do with democracy, the First Amendment, Tahrir Square, etc. With all deference to the importance of these concerns, my reaction was WHAT DO YOU MEAN THESE IDIOTS MESSED WITH THE PHONE SYSTEM? From my perspective, and the perspective of traditional telecom law, BART could just as well have turned off the local central office and all this chatter about whether or not BART is a public forum is just a distraction.

Obviously, however, no one at BART thinks of cell phones as the phone system. In BART’s open letter explaining what they did and why it was cool, BART focuses on the First Amendment /public forum issue and completely skips the fact that they shut off a phone system. Mind you, I suppose I can’t blame them – much. A number of folks are asking if there is a right to cell phone service as if this were a novel question rather than something settled by decades of telecom law.

………

In California, where this took place, the governing case is People v. Brophy, 120 P.2d 946 (Cal. App. 1942). In Brophy, the California Court of Appeals held that yes, residents of California have a right to phone service. The federally protected right to access the phone network derives from the duty of common carriage imposed by Sections 201 and 202 of the Act. The California Court of Appeals further found that Earl Warren, then the California Attorney General, could not order the phone company to discontinue service to a person the Attorney General suspected of running a gambling operation by use of the telephone. The court explicitly found that only the California Railroad Commission (predecessor to the California Public Utilities Commission) can give an order in California to suspend phone service.

………

Like the Attorney General in Brophy, the BART is an instrumentality of the State of California. As in Brophy, the mere allegation that someone (or some group of someones) may use their phone for illegal purposes most emphatically does not confer authority to unilaterally shut off access to the phone network – even if that phone network is physically located within the BART. Why? Because the BART is an instrumentality of the state of California and is geographically in California. There is no BARTistahn, and the Directors do not get to decide this on their own.

………

We will savor the irony that the most eloquent annunciation of the right of individuals to access phone service without interference from law enforcement (absent due process) takes us from Earl Warren to Eugene “Bull” Connor.

(emphasis original)

And yes, part of the case law here does involve “Bull” Connor, and BART is taking his side in this.

It’s a good read, and clear and informative to the layman.

Wanker of the Jay

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New York Times Columnist Joe Nocera, who writes that by enforcing the law against illegal retaliation against unions, the Democrats are anti-job.

This is about the Boeing case, where Boeing executives publicly bragged about moving an assembly line to South Carolina specifically because of legal labor actions taken by the union.

Somehow or other, all the “Very Serious People” out there stem to feel that blatant law breaking by large corporations must be tolerated, because they count more than the rest of us.

Just Read This

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It’s an article, from Forbes of all places, which explains how our zeal to become a “knowledge economy” is razing our economy to the ground.

They use Dell Computer as an example:

ASUSTeK started out making the simple circuit boards within a Dell computer. Then ASUSTeK came to Dell with an interesting value proposition: “We’ve been doing a good job making these little boards. Why don’t you let us make the motherboard for you? Circuit manufacturing isn’t your core competence anyway and we could do it for 20% less.”

Dell accepted the proposal because from a perspective of making money, it made sense: Dell’s revenues were unaffected and its profits improved significantly. On successive occasions, ASUSTeK came back and took over the motherboard, the assembly of the computer, the management of the supply chain and the design of the computer. In each case Dell accepted the proposal because from a perspective of making money, it made sense: Dell’s revenues were unaffected and its profits improved significantly. However, the next time ASUSTeK came back, it wasn’t to talk to Dell. It was to talk to Best Buy and other retailers to tell them that they could offer them their own brand or any brand PC for 20% lower cost.

It’s an evocative example, and one which is easily understand, but the problem is that it invites the criticism that it’s just another mindless “Yellow Peril” argument.

The meat of the argument, at least to me as an engineer, is further down:

So the decline of manufacturing in a region sets off a chain reaction. Once manufacturing is outsourced, process-engineering expertise can’t be maintained, since it depends on daily interactions with manufacturing. Without process-engineering capabilities, companies find it increasingly difficult to conduct advanced research on next-generation process technologies. Without the ability to develop such new processes, they find they can no longer develop new products. In the long term, then, an economy that lacks an infrastructure for advanced process engineering and manufacturing will lose its ability to innovate.

One of the arguments made by what used to be called “Atari Democrats” in the 1980s was that we could dump all the manufacturing, and then we could all sit behind desks and create the ideas for the lesser (i.e. non-white) people to manufacture.

It’s simply wrong.  When you no longer make stuff, you no longer know how to make stuff, and when you no longer know how to make stuff, you can no longer come up with viable ideas.

The question is whether we want to have the German economy, or the Mexican one, and increasingly, it appears that we are trying to achieve the latter, since by making everyone else poorer, it makes the people at the top of the pyramid comparatively richer, and they are the ones who make the big campaign donations.

Read all 4 parts.

H/t DC on Stellar Parthenon BBS.

Philly Phed Phail

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The Map Pr0n

and the Graph Pr0n

Calculated Risk looks at the quarterly change in the Philadelphia Fed’s 50 state coincident index, and the map, and the graph and the map is getting redder (worse).

The idea that this is going to a meaningful recovery with a significant fiscal push from the government, which ain’t happening, because the ‘Phants are tanking the economy deliberately for political gain, is pure panglossian delusion.

I Thought That I Had Already Posted This

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Former Luzerne County Court Judge Mark A. Ciavarella Jr., who took bribes from private prison companies to send kids to jail, was sentenced to 28 years in jail:

As his moment of sentencing drew near Thursday, former Luzerne County Court Judge Mark A. Ciavarella Jr. was still trying to minimize his crimes. No way, he said, had he sold “kids for cash.”

The prosecutor would have none of it.

“In essence, Mr. Ciavarella’s argument is, ‘I was not selling kids retail,’ ” Assistant U.S. Attorney Gordon A.D. Zubrod said. “We agree with that. He was selling them wholesale.”

Minutes later, U.S. District Judge Edwin M. Kosik slammed Ciavarella, 61, with 28 years in prison. It appeared to be the longest federal prison sentence ever given in a U.S. political corruption case.

In the Scranton area, Ciavarella was a key target among many in a sweeping and still-ongoing federal corruption probe. Prosecutors have brought charges against nearly 30 officials, including two other judges, numerous court officials, a former state senator, school board members, and county officials.

(emphasis mine)

It may be a record long sentence, but it is not long enough.

His partner in crime, county president judge Michael T. Conahan, has already pled guilty, and is awaiting sentencing.

Hopefully, he gets a sentence of similar length.

While We Are On the Subject of Bank of America

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When you offer a bribe, make sure that the mic is not live

Look at the video for this gem. A representative of Bank of America walks up to Rick Perry, and says, “Bank of America… We will help you out”.

It turns out that be Bank Of America’s director of public policy, James Mahoney.

Nope, no quid pro quo here, BoA has released a statement saying that, “Bank of America does not endorse Presidential candidates. The reference was about following up on the substance of the speech about job creation and economic growth.”

Yeah, we believe you, and we believe it when you say that MERS properly recorded mortgages, and that you f%$#s didn’t pay off the ratings agencies to rate your garbage as AAA,

H/t Cthulhu.*

*No, not the unspeakably malevolent super-being, the contributor to the Stellar Parthenon BBS.†
†OK, I’ve never seen the two of them together, so Cthulhu might actually be the Cthulhu, but the mere fact that he is on a BBS, interacting with humans‡ would seem to mitigate against this.
‡Yes, I know, this is the internet, where no one knows if you are a dog.

Obama Admin Pressuring NY AG Schneiderman to Drop Bank Investigations

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We are getting leaks that the Obama administration is going full bore to prevent New York State Attorney General from doing a thorough and diligent investigation of the banksters mortgage fraud:

Eric T. Schneiderman, the attorney general of New York, has come under increasing pressure from the Obama administration to drop his opposition to a wide-ranging state settlement with banks over dubious foreclosure practices, according to people briefed on discussions about the deal.

In recent weeks, Shaun Donovan, the secretary of Housing and Urban Development, and high-level Justice Department officials have been waging an intensifying campaign to try to persuade the attorney general to support the settlement, said the people briefed on the talks.

Mr. Schneiderman and top prosecutors in some other states have objected to the proposed settlement with major banks, saying it would restrict their ability to investigate and prosecute wrongdoing in a variety of areas, including the bundling of loans in mortgage securities.

But Mr. Donovan and others in the administration have been contacting not only Mr. Schneiderman but his allies, including consumer groups and advocates for borrowers, seeking help to secure the attorney general’s participation in the deal, these people said. One recipient described the calls from Mr. Donovan, but asked not to be identified for fear of retaliation.

So, not only are they pressuring Schneiderman, but they are trying to gin up an AstroTurf response to further intimidate him.

I’m with what Yves Smith said, “It is high time to describe the Obama Administration by its proper name: corrupt.” (emphasis mine)

What’s more, he’s also catching flack from the in the person of Kathryn Wylde, Deputy Chair of the New York Bank of the Federal Reserve, who accosted him at a memorial service

Representatives for the four big banks declined to comment. Mr. Schneiderman has also come under criticism for objecting to a settlement proposed by Bank of New York Mellon and Bank of America that would cover 530 mortgage-backed securities containing Countrywide Financial loans that investors say were mischaracterized when they were sold.

The deal would require Bank of America to pay $8.5 billion to investors holding the securities; the unpaid principal amount of the mortgages remaining in the pools totals $174 billion. Lawyers representing 22 institutional investors, including the Federal Reserve Bank of New York, BlackRock and Pimco, contended that the deal was favorable.

This month, Mr. Schneiderman sued to block that deal, which had been negotiated by Bank of New York Mellon as trustee for the holders of the securities. The lawsuit contends that the deal could “compromise investors’ claims in exchange for a payment representing a fraction of the losses” experienced by investors and that it had been negotiated without the knowledge of all of the holders of the securities.

The lawsuit angered Bank of New York Mellon, and as Mr. Schneiderman was leaving the memorial service last week for Hugh Carey, the former New York governor who died Aug. 7, an attendee said Mr. Schneiderman became embroiled in a contentious conversation with Kathryn S. Wylde, a member of the board of the Federal Reserve Bank of New York who represents the public. Ms. Wylde, who has criticized Mr. Schneiderman for bringing the lawsuit, is also chief executive of the Partnership for New York City. The New York Fed has supported the proposed $8.5 billion settlement.

Other investors in the Countrywide mortgage pools who were not part of the settlement talks between Bank of New York Mellon and Bank of America have called the terms inadequate.

Characterizing her conversation with Mr. Schneiderman that day as “not unpleasant,” Ms. Wylde said in an interview on Thursday that she had told the attorney general “it is of concern to the industry that instead of trying to facilitate resolving these issues, you seem to be throwing a wrench into it. Wall Street is our Main Street — love ’em or hate ’em. They are important and we have to make sure we are doing everything we can to support them unless they are doing something indefensible.”

(emphasis mine)

Defrauding investors and home buyers is defensible?

I’m with Barry Ritholtz, who has called for Wylds’s resignation:

If the Times report is accurate, and the quote below [it;s the last paragraph above quote] represents Ms. Wylde’s comments, than that position is a laughable mockery, and Ms. Wylde should resign effective immediately.

…………

But what is surprising is the utterly inappropriate behavior of Kathryn S. Wylde. She is not only a member of the board of the Federal Reserve Bank of New York, but occupies the seat supposedly reserved for the representing the public.

If the Times report is accurate, and the quote below represents Ms. Wylde’s comments, than that position is a laughable mockery, and Ms. Wylde should resign effective immediately.

(emphasis mine)

In any case, if you want to contact the AG and tell him not to back off, you can call (800) 771-7755 or at (212) 416-8000) or use his e-mail form.

This is particularly recommended.

BTW, if you live in Delaware, you might want to drop a dime on Beau Biden, the VP’s son, and Delaware’s AG, who has joined with Schneiderman in opposing the BoA deal.

If the Fed and the Obama administration are dead set on any sort of meaningful reform or accountability for the banks, then we need back up the State Attorneys General to pursue the banksters.

[on edit]

The AGs or Massachusetts and Nevada are also balking on the settlement offer, and considering that Nevada has probably the worst foreclosure problems in the nation, it makes any settlement even more problematic.

Thorstein Veblen is Back

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Not the historical figure, but rather the nom de blog of the principal of Economic Policy Advice for Barack Obama, formerly called Economists for Firing Larry Summers, has returned to posting after taking a few months off because life (Grad School, my guess) got in the way.

I still use the old name in my blogroll, because I think that it is a better name.

His posts are uniformly good, but rather too infrequent for the medium of a blog.

It Looks Like Gaddafi is Out

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Or will be in a matter of hours.

I was listening to NPR, and they were hoping that the rebels would not go medieval on former Gaddafi loyalists, but that is a pipe dream.

They have no credibility, because they were installed largely as the result of direct military action by NATO, which requires the widespread application of violence against any potential opposition.

Additionally, because they are effectively clients of big oil and finance NATO, they will have to aggressively implement “free market reforms”, which means the end of their publicly financed healthcare and education systems, as well as signing sweetheart deals with big oil, which will not be supported by the general populace.

It’s good that Gaddafi is gone, but because he was removed through what was essentially a colonial intervention, the new regime will for the foreseeable future be a colonial administration, which may in the long run prove worse for the average Libyan.

Unsurprising News About the Ratings Agencies

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

A former senior VP at Moody’s has written a detailed layer to the SEC alleging that the ratings agency systematically pressured analysts to uprate crappy derivatives:

A former senior analyst at Moody’s has gone public with his story of how one of the country’s most important rating agencies is corrupted to the core.

The analyst, William J. Harrington, worked for Moody’s for 11 years, from 1999 until his resignation last year.

From 2006 to 2010, Harrington was a Senior Vice President in the derivative products group, which was responsible for producing many of the disastrous ratings Moody’s issued during the housing bubble.

Harrington has made his story public in the form of a 78-page “comment” to the SEC’s proposed rules about rating agency reform, which he submitted to the agency on August 8th. The comment is a scathing indictment of Moody’s processes, conflicts of interests, and management, and it will likely make Harrington a star witness at any future litigation or hearings on this topic.

His specific allegations:

  • Moody’s ratings often do not reflect its analysts’ private conclusions. Instead, rating committees privately conclude that certain securities deserve certain ratings–but then vote with management to give the securities the higher ratings that issuer clients want.
  • Moody’s management and “compliance” officers do everything possible to make issuer clients happy–and they view analysts who do not do the same as “troublesome.” Management employs a variety of tactics to transform these troublesome analysts into “pliant corporate citizens” who have Moody’s best interests at heart.
  • Moody’s product managers participate in–and vote on–ratings decisions. These product managers are the same people who are directly responsible for keeping clients happy and growing Moody’s business.
  • At least one senior executive lied under oath at the hearings into rating agency conduct. Another executive, who Harrington says exemplified management’s emphasis on giving issuers what they wanted, skipped the hearings altogether.

(emphasis original)

The fact that no senior manager on Wall Street has been indicted over this sort of behavior, and they continue to work, and continue to be criminally overpaid, fills me with despair.

We Are All The Simpsons

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Cthulhu* posted this, and I felt that it had to be shared:

With the plethora of archetypes in the animated series, I’m beginning to think that this might be some sort of modern Gilgamesh for our day.

*No, not the unspeakably malevolent super-being, the contributor to the Stellar Parthenon BBS.†
†OK, I’ve never seen the two of them together, so Cthulhu might actually be the Cthulhu, but the mere fact that he is on a BBS, interacting with humans‡ would seem to mitigate against this.
‡Yes, I know, this is the internet, where no one knows if you are a dog.

It’s Bank Failure Friday!!!! (I Smell a Felony Indictment Edition)

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Something odd on the FDIC failed bank page, do you notice it?

Do you see it? Public Savings Bank, of Huntingdon Valley, PA was closed yesterday, a Thursday.

The only other time I remember the FDIC closing a bank on a not-Friday, it was when senior bank executives were facing a criminal indictment as well.

That’s my guess anyway.  These non-Friday closings tend to be associated with breaking news of some sort of criminality.

In any case, here are the bank failures, ordered, and numbered for the year so far.

  1. Public Savings Bank, Huntingdon Valley, PA
  2. Lydian Private Bank, Palm Beach, FL
  3. First Southern National Bank, Statesboro, GA
  4. First Choice Bank, Geneva, IL

Full FDIC list

So, here is the graph pr0n with last years numbers for comparison (FDIC only):

DOJ, SEC Investigate S&P, EE-I-EE-I-O

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It’s not just S&P, it’s Moody’s too:

The U.S. Justice Department is probing Moody’s Investors Service and Standard & Poor’s over ratings of mortgage-backed securities, according to three former employees who said they were interviewed by investigators.

Washington-based lawyers from the Justice Department spoke to former employees as recently as last month about whether the companies raised their grades for the complex investments in order to win business, said the former employees, who asked for anonymity because the investigation is ongoing. The inquiry is a civil matter, two of them said.

The probe is the latest of dozens of government investigations and investor lawsuits targeting Moody’s and S&P, a unit of McGraw-Hill Cos., all based in New York, over the top grades they assigned to bonds backed by subprime mortgages. Even as the Financial Crisis Inquiry Commission called them “key enablers of the financial meltdown,” the raters avoided legal liability, according to Benchmark Co.’s Edward Atorino.

Note there that the DoJ being involved means that this is some sort of criminal investigation.

Here’s hoping that Eric “Place” Holder doesn’t decide to look forward instead of backward.

It’s Probably Just a Bait and Switch…

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But as a part of the joint announcement by Sarkosy and Merkel on greater EU integration to fix the current series of debt crises they have proposed to impliment a Tobin tax on financial transactions:

The French president, Nicolas Sarkozy, and German chancellor, Angela Merkel, announced the dramatic proposals after a two-hour mini-summit. They also called for the imposition of tighter restrictions on member country’s deficits and announced a synchronising of the tax policies of their own two countries. Sarkozy has also secured the support of Merkel for a Tobin tax – a financial tax on all international transactions – to raise funds to ease the crisis engulfing the European economy.

The amount of money generated by a Tobin tax would actually be smaller than generally anticipated, because much of the financial activity is pure short speculation, where extremely short term bets with payoffs of a fraction of a percent, create profits for doing nothing.

The banks suggest that such a tax is a bad idea because it would discourage such activity, but I consider it to be an even more valuable feature than any potential revenue raised.

Much of the unproductive rent seeking that occurs in our economy is an artifact of just such a behavior.

So, to paraphrase this xkcd cartoon, Mission F%$#ing Accomplished:

Of course, in reality, it’s just smoke and mirrors:  The Tobin Tax proposal is just a way to sell their idea for a European balanced budget amendment, and at the end of the day, the Tobin Tax will go away, and the Banksters will get what they want, because that’s how the game is played.

Mark Thoma has a good analysis of the tax, and you can also check out the Wiki page.

Philly Phed Phalls

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H/t Calculated Risk for the Chart Pr0n

The Federal Reserve Bank of Philadelphia’s index of economic activity just fell off a cliff:

Optimists on the U.S. economy have conceded that things are weak, but they’ve argued we’re not falling off a cliff.

But on Thursday, Wall Street got a hint that a cliff dive could be imminent.

Philly The Philadelphia Federal Reserve Bank’s index of economic activity in the mid-Atlantic region plummeted to a negative 30.7 this month, down from a positive 3.2 in July and the lowest since a negative 30.8 reading in March 2009 — in the depths of the last recession.

Get ready for President Bachmann and similar disasters.