Category: Corruption

Why Would the USAF Buy French Mirages?

No Comments

Because they don’t want the planes sold to the Iraqi Air Force, and this would take them off the market, so the Iraqis could buy F-16s:

This is an interesting rumor. While the Mirage F-1 has almost reached the end of the line as an operational asset with the AdA, it remains a capable fighter and should stay in service for about another decade with a few other air forces (Ecuador, Morocco, and Iran). The Iraqis have recently requested that France delivers the 24 pre-embargo F-1s ordered at the time by the regime of Saddam Hussein in 1985. The Iraqi air force has a long, and relatively successful, history with the F-1 and is particularly looking forward to rebuilding its air defense capability with an aircraft it knows well. However, things are somewhat more complicated; there has been a long standing rumor of F-16s going to the Iraqi Air Force instead and lately, it would also appear that the UAE Mirage 2000-9s have entered the fray.

Sorry, but if this is true, and note that it only a rumor, some heads should roll.

While I understand how US Air Force officers might favor the F-16, it is something that they are familiar with, the idea that they would purchase the aircraft in order to clear the way for a defense contractor is over the top.

This appears to be a decision driven by a desire by some Air Force officers to secure a cushy gig at Lockheed-Martin in retirement, not a decision driven by the real needs and capabilities of the Iraqi military.

‘Phant Phamily Values

No Comments

The Majority (Republican) leader of the Utah House of Delegates has been forced to reveal that when he was 28, he went nude hot-tubbing with a 15 year old that worked for him in the warehouse that he managed.

What’s more, he paid $150,000 in hush money to her when he tried to run for Congress:

In the midst of his 2002 congressional campaign, Utah House Majority Leader Kevin Garn paid $150,000 to a woman threatening to go public with a past relationship.

………

Maher’s story is this: In 1985, then 15 years old, Maher worked for then 30-year-old Garn at his business, Pegasus Records and KSG Enterprises.

She said Garn, who was married, struck up a relationship with her and one night took her to a location in Salt Lake City where they hot-tubbed together nude.

It would be sleazy even if she weren’t 15. She was his employee, and this is sexual harassment.

And if that weren’t squicky enough, he is her, “onetime Sunday school teacher.”

One note: as far as I can tell, Kevin Garn is not related to former Utah Senator Jake Garn.

The Forensic Acountants Have Been Through Lehman’s Books

No Comments
And Maybe Some Water Boarding

And their analysis is that Lehman Brothers were insolvent for months, if not years before they finally collapsed, and that the firm use unethical, and possibly illegal tricks to conceal the amount of their debt:

But the examiner, Anton R. Valukas, also for the first time, laid out what the report characterized as “materially misleading” accounting gimmicks that Lehman used to mask the perilous state of its finances. The bank’s bankruptcy, the largest in American history, shook the financial world. Fears that other banks might topple in a cascade of failures eventually led Washington to arrange a sweeping rescue for the nation’s financial system.

That sounds like fraud to me, and I think that it warrants a criminal investigation.

What is even more interesting is that the Federal Reserve Bank of New York was aware of the accounting activities, and that they appear to be in violation of regulations.

Yves Smith, reading the 2200 page report so that yiours’s truly does not have to, makes this clear, and makes it clear that regulators were complicit:

Well, it is folks, as a newly-released examiner’s report by Anton Valukas in connection with the Lehman bankruptcy makes clear. The unraveling isn’t merely implicating Fuld and his recent succession of CFOs, or its accounting firm, Ernst & Young, as might be expected. It also emerges that the NY Fed, and thus Timothy Geithner, were at a minimum massively derelict in the performance of their duties, and may well be culpable in aiding and abetting Lehman in accounting fraud and Sarbox violations.

…………

But here is the part of the report that discussed how the Fed aided and abetted Lehman misconduct:

[T]he Examiner questioned Lehman executives and other witnesses about Lehman’s financial health and reporting, a recurrent theme in their responses was that Lehman gave full and complete financial information to Government agencies, and that the Government never raised significant objections or directed that Lehman take any corrective action.

I would note that at the time of the Lehman collapse, and for some time before it, the President of the Federal Reserve Bank of New York was one Timothy Geithner.

I’m beginning to think that this is more than incompetence, I’m beginning to think that a criminal investigation should include our current Treasury Secretary.

Barack Obama, you need to fire Timothy Geithner. If the ‘Phants filibuster, then you recess appoint his successor.

Felix Salmon Has A Talk with Treasury Officials

No Comments

And determines that they are still the banks bitches, working for them, rather than the citizenry.

In truth, Mr. Salmon did not say that Geithner and His Evil Minions™ see themselves as nothing more than a way to support the banksters, but that is the basic take away that I see here:

Well done to Shahien Nasiripour, who did the best job of anybody, at the Treasury blogger meeting yesterday, at getting Treasury’s officials to commit news. Specifically, he asked about Sheila Bair’s sensible idea that mortgage principal write-downs can help keep homeowners in their homes while also maximizing the value of the mortgage to the issuing bank. And he was told, quite clearly, that Treasury has been talking to Bair about this idea, and that if it makes sense at the bank level, it probably makes sense at the federal level, too, as part of the HAMP program to make mortgages affordable.

Except that once the meeting was over, its main architect, Treasury flack Andrew Williams, emailed Nasiripour to walk that particular idea back, saying that Treasury was NOT (his all caps) going to do anything “major” in terms of principal write-downs, and that any moves in that direction would be no more than “tweaks”.

………

It seems to me that insofar as Treasury has a problem with principal write-downs, that’s clearly a function of the fact that it’s worried about the consequences for banks’ balance sheets. We’re prosecuting a muddle-through strategy right now, where the government artificially props up house prices by providing substantially all of the mortgage finance in the country, in the hope that with economic recovery will come enough of a natural rebound in house prices to let the government slowly remove its support without them falling dramatically again.

(emphasis mine)

Unless the Treasury is banking on 6% inflation a year for the next 8 or 9 years, this is not going to happen.

House prices are still over valued, whether you use price to income, or rent to own (and rents are dropping too), and we are not going to see a recovery until house prices

This is complete regulatory capture, pure and simple.

Europe Moves To Ban the Naked CDS

No Comments

Everyone says it’s like insurance, only with insurance, at least since 1746, it has been illegal to take out insurance on anything that you do not have, “an interest in the continued existence of the insured property,” but anyone can take out a Credit Default Swap (CDS) on anything.

All they need to do is find a counter-party.

Well, this may be coming to an end, since European regulators are looking at taking steps to forbid the practice:

José Manuel Barroso, European commission president, said it was “not justified” to buy credit default swaps “by unseen interventions on a risk, on a purely speculative basis”. Photograph: Vincent Kessler/Reuters

The European commission announced moves today to shore up the euro and ward off market pressure on Greece by considering a ban on complex derivatives allegedly being used to undermine the single currency.

The draconian move suggested by José Manuel Barroso, commission president, follows a joint campaign by the German chancellor, Angela Merkel, and the French president, Nicolas Sarkozy, for a prompt clampdown on credit default swaps (CDS).

I’m sure that Timmy “Naked CDS is Essential for Price Discovery” Geithner hates this, but who cares what he thinks: The only reason he’s still Secretary of the Treasury is because Barack Obama knows that the Republicans would filibuster his successor out of spite.

What MinistryOfTruth Said

No Comments
Click for full size


Only Homer Actually Votes ‘Phant

I think that, “the Democratic Establishment can kiss my DFH* a$$ too.”

She* muses on mad scramble to support Blanche Lincoln in her primary bid, despite the fact that she has absolutely no chance of winning in the general, most notably one William Jefferson Clinton:

Instead of working to support the current President against the Corporatist lies from the right what does Bill Clinton do? He throws his support behind one of President Obama’s chief roadblocks within his own party. Of course.

Note here that Blanche Lincoln has made a habit of lying through her teeth during the election, and then knifing those who supported her, as with labor and the EFCA, she lied about her support for the public option, and her reversals on abortion have been so blatant that one of the most establishment political organizations in the Women’s movement, Blanche Lincoln, has decided not to support her in the election, as evidenced by the following statement from the Chair of the organization:

As I travel around the country, I’ve been asked repeatedly about Senator Lincoln’s political troubles and what, if anything, EMILY’s List will be doing to help her win a third term in 2010.

My answer? Nothing.

In 1998, EMILY’s List helped elect Lincoln to the U.S. Senate. We believed her when she told us that that, if and when the Senate took up right-wing Senator Rick Santorum’s bill to ban what he called “partial birth” abortion, she would insist on a health exception that protects women.

Our members gave generously to her campaign, believing that she would steadfastly stand by the pledge she made to us to protect women’s reproductive freedom.

She took our members’ hard-earned money to get elected. Unfortunately, when the Santorum bill came up for a vote, Lincoln voted for it even though it provided no exception to protect women’s health.

EMILY’s List members are deeply committed to electing pro-choice Democratic women whom we trust to stand up for our rights, treat us honestly, and make us proud. Our candidates fight for us every day. Blanche Lincoln failed to hold up her end of the bargain.

Since she wasn’t there for us, we won’t be there for her.

You know, she has a charismatic primary challenger, and Emily’s List dumped her, and right now she’s polling horribly, so I guess that it sucks to be her.

Of course, it sucks worse to be represented by her, which is why she is losing right now.

And then while we’re at it, the DSCC is continues to do their best to discourage candidates who actually inspire people, such as Rodney Glassman in Arizona, even though there appears no other Dem interested in running right now, because, I guess no one actually knows him, even though the Arizona Democratic Party chairman asked him to run.

As MoT notes, the imperative in the Democratic Party establishment is, “PUNCH THE HIPPIES.”

</rant>

*Dirty F%$#ing Hippy

[on edit]My bad, MOT is a he, not a she. No offense was intended.

Icelanders Overwhelmingly Defeat Extortion Deal

No Comments

And by overwhelmingly, I mean that the vote against the referendum was 93.2 percent, with about 1% of the votes being spoiled.

As Dean Baker so profoundly notes, the entire bailout is predicated on the idea that bankers can, and should, be allowed to gamble and that the rest of us should be left on the hook:

It should also point out how the Iceland makes a mockery of anyone who claims to support leaving financial activities to the market. In almost all cases, actors in financial markets assume that governments will stand behind banks at the end of the day. Therefore when they say want the government to leave things to the market they are lying. They just want to be able to take risks with taxpayers money, without being fettered by regulations limiting the extent of these risks. In short, the finance boys want a free lunch, not a free market.

In the case of Iceland, this hook is about about €13,000 for every man, woman child on the small island.

We need our bankers, and stockbrokers to be stupid and dull again, because these smart guys are killing us.

OK, This is Now Officially Insubordination

No Comments

The Secretary of Defense decided to cancel it, the President agreed, and forwarded the termination onto Congress, which approved, and still the US Air Force is looking at ways to preserve F-22 production tooling:

Five months after the US Congress approved the cancellation of the Lockheed Martin F-22, the air force is still deciding whether to preserve or scrap the production tooling.

The options under discussion include preserving at least the core of Lockheed’s ability to build F-22 components and systems, although restarting production is not the USAF leadership’s intent, says acquisition chief Lt Gen Mark Shackelford.

Rather, USAF officials are considering the cost of preserving tooling to sustain the F-22, which could include a service life extension programme in several years. The same tooling could also be used to repair or replace damaged Raptors.

What part of, “Your bosses told you that the program was terminated don’t you get?”

You don’t get to build new aircraft, and your continued activities are insubordinate.

OK, This is Freaky

No Comments

So, Eric Massa (D-NY-29) will resign Monday, following an ethics investigation regarding sexual harassment of a male staffer. He claims that it was simply, “Salty language,” and that the main reason was his diagnosis of Cancer, but this is decidedly odd.

One of the odd things here is that his resignation makes passing healthcare reform easier, because he is a conservative, though not officially a Blue Dog, Democrat, who voted against healthcare reform the first time around, so his exit removes a “no” vote.

Not Enough Bullets: AIG Again

No Comments

After bankrupting AIG, and nearly taking the world financial system, employees at AIG’s Financial Products division whined about the possibility that they would not get their lucrative bonuses for nearly destroying civilization:

During the national furor that erupted last year after American International Group paid more than $165 million in bonuses, the voices of those vilified for receiving the payments remained silent, at least in public.

But behind closed doors, employees at AIG’s Financial Products division — the very unit whose trading had hastened the insurance giant’s collapse — were defiant, saying they were merely getting what they were due, recoiling at public accusations that they were behind their capitalizing on the company’s massive taxpayer bailout.

“I will stand behind every action I have taken in this company from Day One,” one employee said, according to a newly obtained transcript of a conference call the division’s head held last March with some of his staff.

But it turns out that, they are getting obscene amounts money now:

Yet they did see that money, at least most of it. Last month, under a deal in which employees agreed to take a cut in their upcoming retention bonuses in return for an accelerated payment, AIG paid out about $100 million to employees at the firm. AIG is scheduled to pay the last of the bonuses this month.

Seriously, these arrested development, self absorbed frat boys will never do the right thing, and they should never, ever be allowed near other people’s money ever again.

Worst of All Possible Worlds

No Comments

Charlie Rangel taking a temporary leave from his position as Chairman of the Ways and Means Committee.

While it’s unlikely that he will be back, and he does have ethical issues, the Democrats have split the baby again.

They could have faced down the Republicans, and maybe dug up a few of the skeletons in their closets, or they could have stripped him of his committee chairmanship, but by allowing the fig leaf of a temporary leave, they both knuckle under and leave the issue on the table for Republicans to talk about.

Worst of all possible worlds.

When Your Sellout to the Banks Offends Chuck Schumer………

No Comments

So Chris Dodd has come up with a “bipartisan” proposal for protecting consumers from predatory financial institutions, he wants to make it the Federal Reserve’s job:

The chairman of the Senate banking committee is seeking Democratic support for a Republican proposal to house a new consumer-protection regulator inside the Federal Reserve, a compromise that could clear the way for bipartisan legislation on financial reform, according to sources familiar with the negotiations.

Embracing the proposal marks a turnaround for Sen. Christopher J. Dodd (D-Conn.), who has lambasted the Fed repeatedly over the past year for not protecting borrowers from lender abuse. It is unclear whether other Fed critics, both Democrats and Republicans, will follow suit. The Fed already is responsible for writing consumer-protection rules, but it did not prohibit some of the most abusive mortgage and credit card lending practices during the housing boom.

The proposal by Sen. Bob Corker (R-Tenn.) would place a presidential appointee inside the Fed with an independent budget and a mandate to write rules protecting consumers. Those rules, however, would be enforced by existing banking regulators.

Of course, the Fed is already the consumer protection agency, and they failed, and they don’t provide information to Congress, or to anyone else.

Even Chuck Schumer (D-NY) thinks that this is a bad idea, and Schumer’s career is largely based on raising campaign money from Wall Street fatcats:

Chairman Dodd is to be commended for working so diligently to come up with a bipartisan compromise on financial services reform, which demands urgent attention. But in my 20 years of trying to get the Federal Reserve to properly protect consumers, it has been an uphill, and very often unsuccessful, battle. I am very leery of any consumer regulator being placed inside the Fed.

You know, if you’ve lost Chuck Schumer on this idea, it’s time to tell the Republicans to go Cheney themselves, and jam them up and make them vote against financial reform, over, and over, and over again.

The regional Federal Reserve banks are literally owned by the banks, and the presidents of these regional banks hold a lot of sway, and 5 of these bankers sit on the FOMC, and we are to expect an organization that has already shown itself to be both hostile to consumer protection and unresponsive to consumer complaints to somehow protect consumers?

I know that Mr. Dodd wants to make sure that he has a source of income when he leaves office in 2011, but he has a pension coming to him of something in excess of $120,000/year, so he should be fine.

Stop sucking up to the banks, sir.

From that Communist Rag The Financial Times

No Comments

Wolfgang Münchau proposes an outright ban on naked credit default swaps: (CDS)

I generally do not like to propose bans. But I cannot understand why we are still allowing the trade in credit default swaps without ownership of the underlying securities. Especially in the eurozone, currently subject to a series of speculative attacks, a generalised ban on so-called naked CDSs should be a no-brainer.

Naked CDSs are the instrument of choice for those who take large bets against European governments, most recently in Greece. Ben Bernanke, the chairman of the Federal Reserve, said last week that the Fed was investigating “a number of questions relating to Goldman Sachs and other companies in their derivatives arrangements with Greece”. Using CDSs to destabilise a government was “counter-productive”, he said. Unfortunately, it is legal.

As I have noted for some time, the Credit Default Swap is insurance, and there is a very good reason that the British Parliament passed the Marine Insurance Act of 1746, which required, “anyone seeking to collect on an insurance contract to have an interest in the continued existence of the insured property,” as well as, “precluding a buyer from insuring property for more than it’s worth.”

This should not be SEC slap on the wrist stuff. This should be illegal unenforceable contracts, and you go to jail stuff.

This is a Case to Watch

No Comments

Sergey Aleynikov, a senior programmer for Goldman Sach’s high frequency trading software, has been indicted for software theft.

It’s alleged that he took the software, and sent copies of it to a server in Germany.

This case is odd.

First, the entire high frequency trading thing smells of corruption: The idea is that by having servers colocated in the market, you pick up a few milliseconds speed, and so can execute trades between when someone else requests a buy, and when their transaction is actually executed.

To my, admittedly untrained, gut this sounds identical to front-running, which is illegal.

Additionally, the twists and turns of the trial, where Aleynikov’s lawyers made some fairly routing requests for things like his personnel file to show that he was not a disgruntled employee, had the squid’s* lawyers seriously freaking out, and suggesting that charges should be dropped.

I think that there are some very real bits of corruption that might be uncovered in the trial, though the prosecution, defense, and judge might very well find a way to suppress that, because, after all, it’s Goldman Sachs, and rule number 1 of Goldman Sachs is that Goldman Sachs has friends in high places, so it always gets what it wants.

My prior posts are here.

*Alas, I cannot claim credit for the bon mot describing Goldman Sachs as a, “great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.” This was coined by the great Matt Taibbi, in his article on the massive criminal conspiracy investment firm, The Great American Bubble Machine.

Christopher Dodd Continues to Sell Out

No Comments

So Senator Dodd, to be former Senator Dodd in January, continues to audition for his next job as a bank lobbyist:

Senate Banking Committee chairman Christopher Dodd, D-Conn., is expected to introduce new financial reform legislation next week that excludes applying a fiduciary standard to brokers offering investment advice.

The provision was circulated two weeks ago by Sen. Tim Johnson, D-S.D., a Banking Committee member. Rather than classifying certain brokers as registered investment advisers, Mr. Johnson’s proposal would require the Securities and Exchange Commission to conduct a study of regulatory standards for brokers and advisers, then propose rules on the issue.

“Fiduciary standard” means that they are required to act in the best interest of their clients, as opposed to the current standard, which is basically that you have to use lube when you anally rape your clients.

Fried in Greece

No Comments

So, now it’s time to look at the mess that is Greece.

Greece has been a mess for a very long time, and of the Nato members who joined the Euro, it’s probably the one that should not have joined.

John Mauldin notes, correctly, that the core of the problem is that the terms of joining the Euro block were excessively generous for the less well off nations, basically Germany and France successfully created a mechanism which over valued their national currencies.

This served to both minimize their labor cost advantages with regard to Northern Europe and to provide a market for northern European products:

First, we need to go back to the creation of the euro. Most of the Mediterranean countries that are now in trouble were allowed into the union with an exchange rate that overvalued their currencies relative to the northern countries, but especially to Germany. That meant that Greek consumers could buy products and services that previously may have been out of their reach. Plus, with government debt at low rates, the Greek government could borrow more to finance deficit spending, without the threat of higher interest rates. And Greece began to increase its debt with abandon.

Of course, there was the problem that the debt, and deficits, were exceeding the Euro Zone mandates, but with the use of some clever financial instruments it traded with about 15 banks, most notably that great vampire squid wrapped around the face of humanity,* Goldman Sachs, it concealed this debt from regulators:

The bankers, led by Goldman’s president, Gary D. Cohn, held out a financing instrument that would have pushed debt from Greece’s health care system far into the future, much as when strapped homeowners take out second mortgages to pay off their credit cards.

It had worked before. In 2001, just after Greece was admitted to Europe’s monetary union, Goldman helped the government quietly borrow billions, people familiar with the transaction said. That deal, hidden from public view because it was treated as a currency trade rather than a loan, helped Athens to meet Europe’s deficit rules while continuing to spend beyond its means.

Athens did not pursue the latest Goldman proposal, but with Greece groaning under the weight of its debts and with its richer neighbors vowing to come to its aid, the deals over the last decade are raising questions about Wall Street’s role in the world’s latest financial drama.

Note also that this was a mess that the Panhellenic Socialist Movement inherited from the right wing New Democracy party:

George Alogoskoufis, who became Greece’s finance minister in a political party shift after the Goldman deal, criticized the transaction in the Parliament in 2005. The deal, Mr. Alogoskoufis argued, would saddle the government with big payments to Goldman until 2019.

Mr. Alogoskoufis, who stepped down a year ago, said in an e-mail message last week that Goldman later agreed to reconfigure the deal “to restore its good will with the republic.” He said the new design was better for Greece than the old one.

It sounds a lot like the mess that Bush and His Evil Minions™ left for us.

One of the problems in dealing with this is that the Germans, remembering the hyper-inflation of Wiemar Germany as if it were yesterday, are suggesting that austerity measures are the way to go, and there are rumblings from them that they want Greece expelled from the Euro and losing voting rights in the EU Parliament.

In response, Greece is accusing Germany of not providing compensation for the stuff that they stole from Greece in WWII:

Athens has accused Germany of failing to meet its World War II compensation obligations following the Nazi occupation of Greece in 1941, a claim Berlin has firmly rejected.

In a radio interview on Wednesday (24 February), Greek Deputy Prime Minister Theodoros Pangalos criticised Germany’s attitude towards the ongoing Greek debt crisis, adding that Athens had never received adequate war reparations.

“They took away the Greek gold that was at the Bank of Greece, they took away the Greek money and they never gave it back. This is an issue that has to be faced sometime in the future,” Mr Pangalos told the BBC World Service.

<sarcasm>It’s so nice when you have mature people solving problems.</sarcasm>

One of the problems here is that the prescription by the central bankers is more austerity for Greece, but the reality is that Greece has among the most austere social safety net, and spending in the Euro zone.

The real problem is that because of endemic tax evasion and systemic corruption throughout the bureaucracy, their tax collections are truly pathetic.

One bright side to all this is that a number of people are starting to realize that Goldman Sachs is not simply a banker, but that all roads on most of this corruption lead to the Squid*, most notably those in the European Commission, who are, if Simon Johnson is correct, going to execute a detailed audit of Goldman’s dealings in Europe.

It doesn’t help that Goldman Sachs engaged in similar maneuvers with other European governments:

Greece’s 2001 deal to swap some of its debt using currency derivatives was in line with what other euro-zone countries were doing, Yiannos Papantoniou, the country’s finance and economy minister when the deal was made, told CNBC.com Wednesday.

………

“We took a loan that was to be repaid in 2019,” he said in a telephone interview. “It was public. I know that what we’ve done then was consistent with what was done by many euro zone countries.”

………

Italy, France and Spain were among the euro zone members doing such swaps at the time, he added. Eurostat, the European Union’s statistics office, has asked Greece for explanations on these debt swaps by Feb. 19.

What’s more it appears that these transactions may have been a part of a fraud perpetrated by the banks on these governments, which is why law enforcement officials in Milan have frozen accounts of a number of banks, “UBS AG, Deutsche Bank AG, JPMorgan Chase & Co. and Depfa Bank Plc,” as a part of an investigation.

BTW, while we are at it, it should be noted that Bank of Italy Governor, and dark horse candidate for ECB president, Mario Draghi used to work with the Vampire Squid.*

As it stands right now though, it appears that Greece should be able to do its required borrowing for the next 2-3 weeks.

*Alas, I cannot claim credit for this bon mot, it was coined by the great Matt Taibbi, in his article on the massive criminal conspiracy investment firm, The Great American Bubble Machine.