Author: Matthew G. Saroff

It’s the Bankster’s World, We Just Live in It

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Case in point, Moberly Missouri, where the New York Times scolds them for not paying debts incurred through fraud and the corruption and/or incompetence of banks and regulators:

Residents of Moberly, Mo., got a shock last year when they discovered that their city had guaranteed $39 million in bonds, sold by an independent authority, to help a Chinese company build a plant to make sucralose, an artificial sweetener.

The project fell apart in a matter of months, and residents learned that they had been misled about the company’s track record in China — and that they were now expected to make the bond payments.

But municipal bond market participants say they were shocked, too, by how quickly the city of about 14,000 would walk away from a solemn promise to guarantee the debt payments through 2025, the life of the bonds.

Cities like Moberly that guarantee debts for entities that borrow for projects like parking garages and hockey arenas often “don’t understand that they are responsible for making these payments,” said Matt Fabian, managing director of Municipal Market Advisors, a research and consulting firm. However, he said, “It’s as if your kid runs up a $400 cellphone bill. You can’t get out of paying it by saying you didn’t authorize that.”

Moberly, where the biggest employer is a state prison, had responded eagerly to a pitch by the Missouri Department of Economic Development to host the project, hoping for hundreds of jobs. The company, Mamtek International, was said to have a sucralose plant in Fujian Province producing a sweetener called SweetO, for use in drinks, candy and pharmaceuticals. Most of the authority debt, to go toward building and equipping the plant, was issued under a federal stimulus program allowing private investors to use tax-exempt municipal financing.

But when a bond payment came due last August, with the building still unfinished, Mamtek officials said they didn’t have the money. Construction stopped; the handful of employees in Moberly were laid off. Weeks of confusion followed, with subpoenas from the Securities and Exchange Commission, rumors of a split between the Chinese company and its United States subsidiary, reports that the plant would be liquidated and fears that the bond proceeds were gone forever.

………

Investigators also learned that state development officials had learned — before the bonds were sold — that Mamtek’s sucralose plant in China had never opened, because of environmental concerns. But that information was not relayed to Moberly, according to a report by the Missouri House Interim Committee on Government Oversight and Accountability.

Let’s be clear here:  the good citizens of Moberly were swindled by Mamtek, state development officials, and likely whoever issued the bonds.

There were serious material discrepancies.

This is the very definition of odious debt, and it should be repudiated without penalty.

I Can Has Prosecushuns?

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The New York Bank of the Federal reserve has known since at least 2007, which means that current Treasury Secretary Timothy Geithner has known since at least 2007, that the banks were manipulating the LIBOR numbers:

The Federal Reserve Bank of New York may have known as early as August 2007 that the setting of global benchmark interest rates was flawed. Following an inquiry with British banking group Barclays Plc in the spring of 2008, it shared proposals for reform of the system with British authorities.

The role of the Fed is likely to raise questions about whether it and other authorities took enough action to address concerns they had about the way Libor rates were set, or whether their struggle to keep the banking system afloat through the financial crisis meant the issue took a backseat.

A New York Fed spokesperson said in a statement that “in the context of our market monitoring following the onset of the financial crisis in late 2007, involving thousands of calls and emails with market participants over a period of many months, we received occasional anecdotal reports from Barclays of problems with Libor.

“In the spring of 2008, following the failure of Bear Stearns and shortly before the first media report on the subject, we made further inquiry of Barclays as to how Libor submissions were being conducted. We subsequently shared our analysis and suggestions for reform of Libor with the relevant authorities in the UK.”

The Fed knew that any misstatement of LIBOR would have significant effects on Trillions of dollars of loans and derivatives, and that the manipulation of this rate would allow banks to steal money from their customers.

While the LIBOR is a matter for the British to regulate, it is, after all, the London Interbank Offered Rate, its use as a benchmark by American institutions in American markets, was a matter for the Federal Reserve.

The fact that the Fed did not even issue a warning about this is criminally negligent.

I so want to see Tim Geithner frog marched out of the White House in handcuffs.

Whiskey Tango Foxtrot?

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Thanks Angela, things have gotten so bad in EU that Europeans engaging in sham marriages to get permanent residency visa in Brazil:

For Rafael and Mariana, their days are now dominated by final arrangements for their upcoming marriage. He wants to bring his clothes over to her place. Before he does it, she wants to rearrange her apartment to open more space. At first sight, they do not necessarily seem to be a good fit for each other. But when asked, their friends swear they are deeply in love.

Anxious, Rafael hopes to be married in two months at most. The ceremony will be simple, only civil. After signing all the documents, there will be a kiss: a good-bye kiss. He will move back home and wait until he finds the right person to be at his side —a guy, probably.

Mariana*, 36, is a Brazilian housemaid. Rafael*, 31, is a Spanish university student waiting for a permanent visa to stay in Brazil. Their union will be one more in the growing numbers of fake marriages that foreigners use to be able to gain residency here.

“I’m a bit afraid, but I know three Germans in Rio and an American in São Paulo who did the same,” he says. “I could look for a job in Germany, where I was before I lost my job. But Europe is getting worse and worse, while the situation here is just the opposite.”

It really is the goal of the austerians to make their societies 3rd world nations, and it appears that they are succeeding.

Verizon Sucks

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And I am speaking now as a Verizon customer (FIOS).

You see, they are claiming that they have a first amendment right to censor your internet access:

Last week, Verizon filed a brief with the U.S. Court of Appeals for the D.C. Circuit laying out their various and sundry complaints against the Federal Communications Commission’s Open Internet Order, which put net neutrality regulations in place for Internet service providers. The telecom giant is suing to have the FCC’s order thrown out, and one of their legal arguments is raising more than a few eyebrows. Verizon, per the court document, considers itself your Internet editor. Or your Internet editor-in-waiting.

It goes like this: the Open Internet Order says that Verizon, as a provider of broadband Internet, can’t block or slow access to (legal) online content because they disagree with its message or are being paid by an outside party to do so. This is essentially how the internet has operated since its inception, and the Open Internet Order is intended to prevent ISPs like Verizon from becoming gatekeepers. Verizon, however, argues that it has the constitutionally protected right to decide which content you, as a Verizon customer, can access — that it is no different from a newspaper editor:

Of course, when they are sued, they claim to be mere dumb pipes, and scream “safe harbor.”

C%$# sucking pig felching rat bastards.

Least Shocking News of the Day

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Wall Street executives believes that their employees cannot succeed without breaking the law:

If the ancient Greek philosopher Diogenes were to go out with his lantern in search of an honest man today, a survey of Wall Street executives on workplace conduct suggests he might have to look elsewhere.

A quarter of Wall Street executives see wrongdoing as a key to success, according to a survey by whistleblower law firm Labaton Sucharow released on Tuesday.

In a survey of 500 senior executives in the United States and the UK, 26 percent of respondents said they had observed or had firsthand knowledge of wrongdoing in the workplace, while 24 percent said they believed financial services professionals may need to engage in unethical or illegal conduct to be successful.

Sixteen percent of respondents said they would commit insider trading if they could get away with it, according to Labaton Sucharow. And 30 percent said their compensation plans created pressure to compromise ethical standards or violate the law.

Truth be told, I’m surprised the number is so low.

The cynic in me says that most of the roughly ¾ who disagreed were lying because that’s what they do.

The realist in me says that most of the roughly ¾ who disagreed able to deduce the purpose of the survey, and determine that their, and their companies’ needs were, and then gave an answer that served those interests.

The optimist in me says that most of the roughly ¾ who disagreed have access to some really good drugs.

Ouch!

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I am not sure that I want to win an IP case with this verdict:

Samsung won a victory over Apple in the UK high court as part of its world-spanning battle over intellectual property and design after a judge ruled the design of its Galaxy Tab isn’t cool enough to be confused with an iPad.

The ruling, by Judge Colin Birss, means that Apple cannot stop the import or sale of the Galaxy Tab 10 under claims it has made that the designs are too close to those of the iPad.

Instead, Judge Birss ruled that Samsung’s designs did not have the same understated and extreme simplicity which is possessed by the Apple design: “They are not as cool.”

He noted distinctions such as the thickness and details on the backs of the devices in his ruling. “The informed user’s overall impression of each of the Samsung Galaxy Tablets is the following,” he said in his ruling. “From the front they belong to the family which includes the Apple design; but the Samsung products are very thin, almost insubstantial members of that family with unusual details on the back. They do not have the same understated and extreme simplicity which is possessed by the Apple design. They are not as cool. The overall impression produced is different.”

This is a definition of a “win” of which I was previously unaware.

H/t Kevin Drum

Here We Go Again

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MF Global, meet PFGBest:

More than $200 million in customer funds appears to be missing from the accounts of U.S. futures broker PFGBest, regulators said on Monday just hours after the firm’s founder attempted suicide outside the company’s Iowa headquarters.

The suicide attempt and missing money renewed anxiety over the stability of the brokerage industry less than a year after the collapse of much larger MF Global. PFGBest told customers their funds had been frozen and clients would be allowed to liquidate open trading positions, but would not be able to withdraw funds or make new trades until further notice.

The National Futures Association (NFA), an industry group that also plays a regulatory role, said it had issued an emergency order to effectively freeze PFGBest’s operations after finding that a U.S. bank account the broker said contained $225 million in customer funds actually held only $5 million.

“It appears that PFG does not have sufficient assets to meet its obligations to its customers,” the NFA said.

The disclosure came hours after owner Russell Wasendorf Sr., a 40-year veteran of futures markets, was found in his car near the company’s new headquarters, having apparently attempted suicide. He is in critical condition at the University of Iowa Hospitals, according to local news reports.

(emphasis mine)

I’m wondering if I’m a bad person for thinking that Wassendorf’s attempt to top himself shows a little bit more common decency and remorse than we got from Jon Corzine in the MF Global matter.

I’m beginning to wonder if your money might actually be safer invested in Nigerian 419 scams than it is with financial professionals.

And In the Role of Enron, JP Morgan Chase

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Remember the California Energy Crisis in 2001? When Enron was found to be manipulating the energy market.

Well, now it’s JP Morgan:

JPMorgan Chase & Co. (JPM)’s refusal to turn over e-mails in a federal probe of potential energy-market manipulation is the latest challenge for Chief Executive Officer Jamie Dimon as the bank faces multiple investigations.

The U.S. Federal Energy Regulatory Commission sued JPMorgan July 2 to release 25 e-mails in an investigation of possible manipulation of power markets in California and the Midwest by J.P. Morgan Ventures Energy Corp., according to court filings by the Washington-based agency. FERC opened the probe in August after complaints from California and Midwest grid operators that JPMorgan’s bidding practices were abusive, the documents show.

The real lesson here is that these energy markets are rife for abuse, as are most “market based” alternatives to regulation.

Market based solutions, in effect if not in intent, are about the elites in government throwing cash to their old school chums in finance.

We Are Not Looking at the Collapse of the Euro Zone

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We are looking at a collapse of the whole European.

If the Euro goes titsup in Greece, UK Prime Minister David Cameron intends to ban Greek immigrants if the country leaves the Euro:

David Cameron is prepared to override Britain’s historic obligations under EU treaties and impose stringent border controls that would block Greek citizens from entering the United Kingdom, if Greece is forced out of the single currency.

The prime minister told MPs that ministers have examined legal powers that would allow Britain to deprive Greek citizens of their right to free movement across the EU, if the eurozone crisis leads to “stresses and strains”.

In an appearance before senior MPs on the cross-party House of Commons liaison committee, the prime minister confirmed that ministers have drawn up contingency plans for “all sorts of different eventualities”.

Angela Merkel is not just threatening the Euro, she is putting the whole European Experiment is at risk.

So, Here I Am in the Jury Room

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They are showing the Sandra Bullock movie, The Blind Side, which is technically a public showing in violation of the law.

I will not be live blogging my jury duty because:

  • I don’t want to post anything that I shouldn’t.
  • It’s pretty f%$#ing dull unless I get called to sit on a jury, and then I am prohibited from discussing anything until the trial is over.

Another Defense Procurement Fail

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The US Navy’s Littoral Combat Ship (LCS) was billed as a modern replacement for the frigate.

It combines the size of a frigate with the firepower of the (smaller) corvette, with the (alleged) advantages of greater flexibility, through the use of swappable mission modules, and a smaller crew. (They also go like scorched cats, topping out at over 40 kts)

As I’ve noted earlier, the mission modules don’s fit as well as they should, and now the navy has realized that they cannot run the ships at their current crewing levels, and they are increasing crewing levels by 50%:

Years after sailors and planners realized the crew size of littoral combat ships was too small, the U.S. Navy has decided to increase the number of sailors on the ships.

The changes will be made on the first LCS, the Freedom, starting in July — in time to beef up the crews for next year’s 10-month deployment to Singapore.

Twenty additional berths will be permanently installed onboard Freedom — two for officers, two for chief petty officers and 16 for other enlisted — but the final manning plan has yet to be decided, Rear Adm. Thomas Rowden, the director of surface warfare, said during a June 26 interview at the Pentagon. The ship right now has a core crew of 40, but because there is no manning plan, it’s still unclear how many sailors will be added to the crews.

The added billets “will run the gamut, from support to engineering to operations to boatswain’s mates,” Rowden said. “We’ve got to get the right skill set and the right seniority.”

Among the known manning deficiencies is the need for more junior sailors, Rowden said. LCS crews tend to be more senior, reflecting the need for sailors with multiple qualifications in a small ship.

So, the latest whiz bang navy idea appears to have failed to achieve every one of its goals.

Yes, This is Worth Breaking My Embargo of HuffPo

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The invaluable Dan Froomkin looks at Patrick Fitzgerald’s record as a prosecutor, and concludes that he went out of his way to avoid a serious investigation of the people at the top of the pyramid:

U.S. Attorney Patrick Fitzgerald’s prosecution of former CIA officer John Kiriakou for talking to journalists about the Bush/Cheney torture program has at least one thing in common with his conviction of I. Lewis (“Scooter”) Libby in 2007.

In both cases, Fitzgerald went for the little fish. But the big fish got away. (See related story on the Kiriakou case.)

In the Plame case, Fitzgerald prosecuted Libby, then-vice president Dick Cheney’s chief of staff, for perjury and obstruction of justice related to the leak of Valerie Plame Wilson’s identity as a covert CIA operative. But he stopped short of charging Cheney or top presidential adviser Karl Rove — both of whom had been targets of his investigation.

It appears that FBI investigators thought that they had Rove completely nailed, and that Cheney was at significant risk of indictment, but that Fitzgerald backed off.

Well, he was appointed by a Republican president on the recommendation of a Republican senator.

Economy Suckage Continues

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Click for full size


It’s the cuts in government employment, stupid!

Yes, yesterday initial claims improved a bit yesterday , but today’s monthly job figures are horrible, with unemployment (U-3) staying at 8.2%, and only 80K jobs, less than needed to match population growth.

As Felix Salmon notes, the real problem is that government payrolls have been slashed for the past year or so, as people make invocations to the austerity fairy.

BTW, while the U-3 unemployment rate was flat, but the less conservative, and to my mind more representative, U-6 unemployment rate rose to 14.9%.

Not good news.