Category: Corruption

Economics Update (a Day Late) (Again!)

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Ambac share prices

MBIA Share price

We are Unbelievably Screwed, H/t The Big Picture


Job Turnaround? Perhaps the End of the Beginning, but Not the Beginning of the End

For a bit of Auld Lang Syne, let’s start with an update on the monoliner insurers…I’ve posted on them just once since May.

Ambac’s share price is collapsing on reports that it will file for bankruptcy, and MBIA posted a $728 million loss, which comes to about $3.50/share, and the shares are trading at about $3.69 right now….ouch.

The monoliner business model is that you create a company, get an AAA rating, and then make money by renting out that credit rating.

Among other things, it’s a way to soften the blow of the comparatively low credit ratings that states and municipalities get, and it allows for another revenue stream for the parasites on Wall Street to tap.

I think think that the entire business is essentially corrupt, and should be outlawed.

In any case, we do have news that might be a cause for optimism, with China’s industrial output and retail sales grew sharply in October, and the US Department of Labor’s Job Openings and Labor Turnover Survey rose slightly in both September and October.

On the down side are the continued fall in retail sales (see 3rd chart down), and the vacancy rate in housing is at a 44-year high.

The recent news does not seem to have effected the price of Treasurys, though which were basically flat.

In energy, we have weather, specifically the fact that Ida was pretty weak by the time that it hit oil producing areas, driving oil down, and China’s gangbuster economic report drove the US dollar down.

Breaking: Bear Stearn Fund Managers Not Guilty

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Graphic h/t Calculated Risk

It was clear that they were putting lipstick on a pig, but under the law at the time, it was not outrageous enough to justify a conviction, it appears that hawking their funds while dissing it privately, along with also, in one case, selling those said funds like a maniac, ain’t enough to prove guilt.

You see, the standard at the time was, “suitable,” which means that they cannot put a client in a clearly improper investment, but they can consider things like their sales commissions and bonuses as a part of the decision, as opposed to the “fiduciary” standard, which requires the agent to act solely in the best interest of the client:

“Buried in President Obama’s proposed regulatory overhaul is a change that could upend Wall Street: Brokers would be held to a higher “fiduciary” standard that would compel them to place their client’s interests ahead of their own.

Currently, brokers are only required to offer investments that are “suitable,” which means they can’t put clients in inappropriate investments, such as a highly risky stock for an 80-year-old grandmother. The move could change the way products are sold and marketed and even how brokers are compensated.”

…

But requiring brokers to operate under a fiduciary standard could force them to offer products that are less costly and more tax-efficient. They will have to disclose any potential conflicts of interest, such as any fees they may get for favoring one product over another. That could mean clients will be offered fewer proprietary products if the broker can find a lower-cost option elsewhere.

Unfortunately, at this point this:

  • Has not been implemented
  • Applies to a retail broker only
  • The proposal appears to continue to allow a firm to penalize a broker who acts in the best interest of their client: see Penalty Box.

In any case, I think that proving wrongdoing under a fiduciary standard will be much easier, as it should be.

These guys dicked with their clients mercilessly for their own personal benefit, they just didn’t quite, they just did not cross the line to illegal.

Under a fiduciary standard, it probably would.

Of Course They Don’t, The Wall Street Owns Them

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Note: These numbers are inflation adjusted

So, after Gordon Brown finally comes out in favor of a Tobin tax on financial transactions, Timothy “Eddie Haskell” Geithner comes out categorically against it:

A day-by-day financial transaction tax is not something we are prepared to support,” Geithner said in an interview with Sky News. In his concluding press conference, Geithner was asked repeatedly to say why he opposed such a tax on banks and indicated he doubted its effectiveness.

“This idea (of a bank transaction tax) has been around for a long time…I think frankly the experiences are mixed,” he said, expressing an American view that there was no widespread backing for such a tax.

The banks f%$#ed us all, we spent to bail them out than on, “WW1&2 (omitted from graphic), the moon shot, the New Deal, total NASA budgets (omitted from graphic), Iraq, Viet Nam and Korean wars — COMBINED,” but somehow it’s unreasonable to place a tax on speculation, to:

  • Reduce speculation.
  • Pay for their own bailout.

The Obama administration has its tongue so far up Wall Street’s ass that it is tasting tonsils.

Not Enough Bullets: Fat Cat Tax Evader Edition

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Floyd Norris documents the latest outrage, that Goldman Sach is looking at buying tax credits from Fannie Mae.

The idea here is that Fannie Mae is losing money, and is federally owned now, so it can’t use the tax credits, so it sells them to GS for something like 80¢ on the dollar, screwing the taxpayer.

Goldman, you may recall, was saved with taxpayer money when the panic spread last year. A naïve person might think such a company would see a patriotic virtue in paying taxes.

Fannie Mae is currently a ward of the government. So this boils down to a proposal to pay Uncle Sam perhaps 15 cents to avoid paying 20 cents to Uncle Sam. The gall involved in even proposing such a thing is awesome.

It also points out one reason companies pay so little in taxes. These tax credits exist as a nonbudgetary way of stimulating investment in low-income housing. It would be a lot cheaper for the government to simply subsidize that, but instead it offers tax credits so there is no “expenditure” for foes of big government to criticize.

Seriously, we need someone to move in and break heads, but the Obama/Geithner/Summers troika has no interest in challenging the excesses of Wall Street.

Here’s The Deal, Because You’re Sorry, You Get a Better Cell*

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John Reed, who was the architect of the merger between Citicorp and Travelers Group, has now admitted that he was wrong:

John S. Reed, who helped engineer the merger that created Citigroup Inc., apologized for his role in building a company that has taken $45 billion in direct U.S. aid and said banks that big should be divided into separate parts.

“I’m sorry,” Reed, 70, said in an interview yesterday. “These are people I love and care about. You could imagine emotionally it’s not easy to see what’s happened.”

He then makes a very good analogy:

“I would compartmentalize the industry for the same reason you compartmentalize ships,” Reed said in the interview in his office on Park Avenue in New York. “If you have a leak, the leak doesn’t spread and sink the whole vessel. So generally speaking you’d have consumer banking separate from trading bonds and equity.”

(emphasis mine)

I am tempted to quote Admiral David Beatty, “There seems to be something wrong with our bloody ships today,” when the Invincible and Queen Mary blew up in short order at Jutland

*Originally, I was going to say a nice long drop and a tight knot to ensure that your end is quick, but then I remembered that I oppose the death penalty….Drat.

Not Enough Bullets

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With the H1N1 vaccine in short supplies , it now appears that there will be priority will be given pregnant women, infants and children and those up to 24 years, those who care for infants, health and emergency services personnel, adults with compromised immune systems or other chronic health problems, and the employees of large Wall Street banks:

CREW ASKS FOR INVESTIGATION INTO WHY WALL STREET IS GETTING H1N1 VACCINE AHEAD OF THOSE WHO MOST NEED IT

November 5, 2009

Contact: Naomi Seligman // 202.408.5565

5 Nov 2009 // Washington, D.C. – Today, Citizens for Responsibility and Ethics in Washington (CREW) asked Health and Human Service (HHS) Secretary Kathleen Sebelius to investigate why the Center for Disease Control (CDC) approved the distribution of the H1NI vaccine to Wall Street firms at a time when the vaccine is unavailable to most Americans.

Recent news reports indicate 13 companies, including Citigroup, Goldman Sachs, JP Morgan Chase and Time Warner, have been cleared to receive the vaccine.

The CDC is distributing the much sought-after vaccine to Wall Street firms despite reports of vast shortages. In fact, just yesterday CDC Director Thomas Frieden informed Congress that only 32.3 million doses are available, far less than the 159 million needed to cover those at the highest risk. Given the scarce supply, the CDC has recommended the vaccine be directed only to those at highest risk: pregnant women, infants and children and those up to 24 years, those who care for infants, health and emergency services personnel, and adults with compromised immune systems or other chronic health problems.

(emphasis mine)
Kathleen Sebelus should be fired for this, but Geithner needs to go first.

And you that little Timmy Geithner had a say in doing this. It smells of Geithner.

The rest of the press release after the flip.

Melanie Sloan, executive director of CREW said today, “Although CREW has been unable to uncover the demographic makeup of Goldman Sachs, Citigroup, and JP Morgan Chase, it seems safe to assume the vast majority of their employees are not pregnant women, infants and children, young adults up to 24 years old, and healthcare workers.”

State officials are concerned about the shortages. The head of Alabama’s Department of Public Health testified that 62% of the vaccines ordered by the state will not be available until after December 1, 2009 and the director of Minnesota’s St. Paul Ramsey County Department of Public Health said he is expecting only 7,800 doses for more than 20,000 children. Los Angeles County’s three public hospitals ordered 110,000 vaccines, but have received only about 18,000 doses, and UCLA’s two hospitals received 1,000 doses for 10,000 staff and 35,000 patients.

This situation is echoed around the country, leaving most of those seeking the vaccine unable to receive it with no remedy in sight. Frieden admitted, “It is quite likely the current wave of influenza will peak, crest and begin to decline before there are ample supplies of the vaccine.”

Sloan said, “In what world do Wall Street employees deserve to be vaccinated ahead of high-risk children, pregnant women and health care workers? Unfortunately, for the thousands being turned away in clinics across America, the CDC has decided to prioritize the millionaires over the masses. The public has a right to know how and why this has happened and when it will stop.” Sloan continued, “First, the bailout, then the bonuses, now the vaccine. When will Washington start putting the needs of Main Street above those of Wall Street?”

Italian Conviction of CIA Kidnappers Means Nothing

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The fact that Judge Oscar Magi convicted 23 Americans in absentia for kidnapping Hassan Mustafa Osama Nasr really has very little meaning, even with sentences of up to 8 year in prison.

It sounds significant, until you realize that the senior Italian officials who were in on this were acquitted by reason of state security:

Charges were also dropped against five Italians, including the former head of the Sismi military intelligence service, Nicolo Pollari, because evidence against them violated state secrecy rules.

So the senior people in the Italian state security apparatus, the ones who could say no, get off Scott free.

Some lower level operatives, however, got hung out to dry for following orders:

However, the judge sentenced two more junior Sismi agents to three years in prison as accomplices, indicating Italian authorities were aware of the abduction.

How is “Lynndie England” spelled in Italian?

The Galleon Insider Trading Scandal Spreads

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So now, we are seeing more prominent people tied into this.

This time it’s, “Richard Grodin, formerly of SAC, one of the country’s most well-respected and largest hedge funds.”

What is going on here is that authorities used wire taps, a change in the area of securities fraud, and it looks like a double digit percentage of Wall Street was in it at some level.

My guess is that this sort of behavior is in fact endemic to the street, and that this is the tip of the iceberg.

My concern is that the wire taps might not be the part of a securities investigation, but instead were a result of a investigation of Raja Rajaratnam’s ties to the LTTE terrorists.

Considering the level of damage to our country done by the bankers, we should be going full PATRIOT act on them, because they make Osama bin Laden look like “My Little Pony”.

Breaking: Bernard Kerik Pleads Guilty

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So, the man who Rudy Giuliani mentored to the position of New York City Police Commissioner has copped a plea deal, and pled guilty to on 8 counts, “two counts of tax fraud, one count of making a false statement on a loan application — the most serious — and five separate counts of making false statements to the federal government,” and is likely to be sentenced to 27 to 33 months.

The false statements are in connection to his statements to federal agents when he was being vetted to be head of DHS by Bush and His Evil Minions™.

Basically, he got a $¼ million in renovations for his apartment from a mob tied contractor that he later recommended for city business.

Basically, Giuliani’s right hand man was mobbed up.

This guy was pretty low level until Giuliani decided to smile on him, and it says something about Rudy’s judgment, and could, and should be an issue if he chooses to run for governor.

Zimbabwe Update

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It’s been about 3 weeks, so it’s time to update everyone on the hell hole that Bobby Mugabe made again.

On the bright side, the UK is saying that they will give Zimbabwe $100 million in aid, though I wonder if recent developments (see below) may interfere with this.

First, we have the case of deputy agriculture minister-designate Roy Bennett, who has been imprisoned on what are clearly trumped up charges, with an improperly filed indictment for, “possessing weapons for the purposes of insurgency and banditry,” a crime that carries the death sentence. (See also here)

While he was finally granted bail, this was one of the proximate causes of Tsvangirai and his MDC-T
disengaging from the ZANU-PF, which means that they are no longer attending cabinet meetings.

It should be noted that Deputy Prime Minister Arthur Mutambara and his MDC-M are also participating in the boycott of cabinet meetings.

Tsvangirai is Trying to get the Southern African Development Community (SADC) to intervene on what has increasingly become a phony power sharing arrangement.

Meanwhile, ZANU-PF harassment of the MDC and human rights activists continues apace with raids on MDC offices in Harare (also here) claiming that they were looking for arms…..Shades of Bennett’s kangaroo court.

Inter party talks between the MDC and ZANU-PF have broken off without a resolution, and the human rights situation in the country has gone straight into the twilight zone with Mugabe detaining, and then expelling the “UNHRC special rapporteur on torture and other cruel, inhuman or degrading treatment” Manfred Nowak.

Meanwhile, the Marange diamond fields, which are one of the few sources of hard currency available to Mugabe to keep his supporters paid off, are under a Kimberly process investigation for widespread torture, forced labor, and smuggling, which could lead to ban on the export of their gems.

The reports are that, once again, the Kimberly process will wimp out and do nothing , even after members of the Zimbabwe delegation to the meeting threatened and harassed witnesses at the meeting.

Finally, we have the ZANU-PF ordering the state run media to stop covering any MDC activities.

Geithner is not Incompetent, or Captured by the Street, He is Corrupt

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Dylan Ratigan and Senator Maria Cantwell wonder why he still has a job.
I wonder why he hasn’t been arrested

Is I mentioned earlier, small business lender CIT went bankrupt, and cost the taxpayers $2.3 billion.

It now appears that this happened because Timothy “Eddie Haskell” Geithner completely screwed the pooch on the lend of TARP money:

But here’s the bad news: While senior debt holders will only lose 30% of their investment, we, the U.S. taxpayer, will lose the entire $2.3 billion we lent the company this summer.

William Black, professor at the University of Missouri-Kansas City School of Law is dumbfounded. “We put ourselves on the hook in a completely inept way where we lose first. We lose entirely as the taxpayers.”

….

The government was in no way obligated to lend the struggling CIT money and, in fact, initially refused to provide it bailout funds. More importantly, being the lender of last resort, the government should have guaranteed we’d be the first to get paid if CIT eventually filed Chapter 11. By failing to do so, “it’s like he [Geithner] burned billions of dollars again in government money, our money, gratuitously,” says Black.

I think that this has gone beyond mere incompetence.

Timothy Geithner is a mole for Wall Street in general, and for Goldman Sachs in particular. First, we have him making AIG pay its swaps at 100¢ on the dollar, and now this.

This is not incompetence. This is regulatory capture. This is deliberate corruption to favor people who have mentored him throughout his career, and it’s happening because Geithner knows that when he leaves, he will get a senior executive position at one of those Wall Street firms for millions of dollars a year.

Burying the Lede

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Yves Smith of Naked Capitalism was called in, along with a number of other prominent financial bloggers to a meeting with Treasury Department officials.

Aside from the, not particularly earth shattering observation that the bloggers and the T-men talked past each other, and this was the general sense of the bloggers there, Ms. Smith makes the most notably observation far down in her post:

My bottom line is that the people we met are very cognitively captured, assuming one can take their remarks at face value. Although they kept stressing all the things that had changed or they were planning to change, the polite pushback from pretty all the attendees was that what Treasury thought of as major progress was insufficient. It was instructive to observe that Tyler Cowen [he’s a relatively sane Libertarian economist], who is on the other side of the ideological page from yours truly, had pretty much the same concerns as your humble blogger does.

(emphasis mine)

The people running the Treasury Department have been thoroughly captured by Wall Street.

To my mind, this has gone well beyond a cultural problem, and straight into outright corruption.

This needs to change.

Update on Plame Cheney

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Marcy Wheeler is all over this, see here, here, and here, and her conclusion, and mine, is that Cheney told people to out Valerie Plame as a covert operative in order to hurt her husband, Joe Wilson (the non-shouting one).

Now that the grand jury information is out, even mainstream sources, like CBS News, are making it clear that they know that Dick Cheney lied through his teeth to investigators, though it would be nice if they called him a liar, as opposed to being so oblique:

Vice President Dick Cheney told the FBI he had no idea who leaked to the news media that Valerie Plame, wife of a Bush administration critic, worked for the CIA.

An FBI summary of Cheney’s interview from 2004 reflects that the vice president had deep concern about Plame’s husband, Joseph Wilson, a former U.S. ambassador in Africa who said the administration had twisted prewar intelligence on Iraq.

…

The vice president said he probably discussed Wilson with Bush’s top political adviser, Karl Rove, but told the FBI he would not have talked to Rove about Wilson’s wife.

Cheney’s denials that he talked about Plame are among the few things in the lengthy interview with the FBI that Cheney appeared certain about. He repeatedly said he could not recall key events. Among them, he said he did not recall discussing Wilson’s wife with Libby before her CIA employment was publicly revealed by conservative columnist Robert Novak in mid-July 2003.

Evidence at Libby’s criminal trial showed that Cheney had told Libby about Wilson’s wife in mid-June 2003.

(emphasis mine)

Unfortunately, there is no appetite for pursuing actions that border on treason.

Unfortunately, we have to deal with the Washington, DC we have, not the Washington, DC you might want or wish to have at a later time.

Requiem for a Quack: Hulda Clark

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I am quoting Orac, the pseudonymous blogger at Respectful Insolence, on the death of Hulda Clark, author of The Cure for All Cancers, who, ironically enough, died of cancer.

As Orac notes, she was a quack’s quack:

In that post, I listed a number of Clark’s claims, as documented by Quackwatch:

  • The adult liver fluke — which she misspells as Faciolopsis buskii — “stays stuck to our intestine, (or liver, causing cancer, or uterus, causing endometriosis, or thymus, causing AIDS, or kidney, causing Hodgkin’s disease).” Or the pancreas, causing diabetes; the brain, causing Alzheimer’s disease; the prostate (causing prostatitis; or the skin if you have Kaposi’s sarcoma.
  • As soon as there are adults in the liver. . . . a growth factor, called ortho-phospho-tyrosine appears. Growth factors make cells divide. Now YOUR cells will begin to divide too! Now you have cancer. . . . Having propyl alcohol in your body allows the fluke to develop outside of the intestine.
  • When the fluke and all its stages have been killed, the ortho-phospho-tyrosine is gone! Your cancer is gone.
  • Clearly, you must do 3 things: (1) Kill the parasite and all its stages; (2) stop letting propyl alcohol into your body; and (3) flush out the metals and common toxins from your body so you can get well.
  • It is not unusual for someone to have a dozen (or more) of the parasites I have samples of. You can assume that you, too, have a dozen different parasites.
  • Three herbs, used together, can rid you of over 100 types of parasites: black walnut hulls, wormwood, and common cloves. But the amino acids ornithine and arginine improve this recipe.
  • Use of these five products will kill the cancer-causing fluke in the first five days and the remaining parasites in another two weeks.
  • It takes 5 days to be cured of cancer regardless of the type you have. Surgery, radiation, or chemotherapy can be canceled because, after Clark’s recipe cures the cancer, it cannot come back.
  • All metal (fillings, crowns, bridges, etc.) should be removed from the mouth, and all teeth with root canals should be extracted, because their presence damages the immune system.
  • To prevent recurrence, stay on a maintenance program of killing parasites and give yourself a high-dose program at least twice a year. Also treat all family members and household pets.
  • The method is 100% effective in stopping cancer regardless of the type of cancer or how terminal it may be. It follows that this method must work for you, too, if you are able to carry out the instructions.
  • No matter what kind of cancer you have (or HIV or pains or weakness), a complete program of lifting the burdens on your immune system will miraculously clear it up.

(emphasis mine)

Ms. Clark made a good living shortening the lives of thousands of people.

It’s Called Lipstick on a Pig, and It is Illegal

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McClatchy, just finished an investigation of some of Goldman Sachs’ behavior, and the lede says it all:

In 2006 and 2007, Goldman Sachs Group peddled more than $40 billion in securities backed by at least 200,000 risky home mortgages, but never told the buyers it was secretly betting that a sharp drop in U.S. housing prices would send the value of those securities plummeting.

You know, being a bit more optimistic in public than being in private is a fuzzy line. This ain’t it.

Later in the article, it is discussed how Goldman, and hedge fund operator John Paulson, bought billions in Credit Default Swaps (CDS) on mortgage backed bonds to profit on the collapse.

Note that Paulson is in a different boat from Goldman, because he didn’t sell those bonds in the first place, but once again it shows how the lessons of the South Sea Bubble, which led to the Marine Insurance Act of 1746 have been forgotton and so it is no longer required that people who buy insurance, including swaps, must have a material interest in the underlying asset.

H/t Atrios.

Update on Saab Bribery Donations in Korea

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The allegations are rather different from the run of the mill bribery cases, where someone pays a government official to buy their products.

Instead, it is alleged that Saab paid bribes to get information on Korea’s indigenous fighter program, so as better to compete for business.

SAAB is denying this.

The core of the allegations is that the president of the Security Management Institute (SMI), a private research company, was invited to a trade seminar in Sweden, and that SAAB covered his expenses, to the tune of $17,200.

Me, I’m just confused.

Earlier post.

Here’s a Shocker

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It appears that Bank of America and its subsidiary Countrywide Home Loans are routinely destroying mortgage documents:

Bank of America and Countrywide Home Loans destroyed mortgage documents, and “recreate” them by “insert(ing) data as they see fit,” to cover up their own failure to keep records – or their fraud – according to a federal RICO class action.

“To cover up the servicing mistakes and fraud and misrepresentation in the servicing of a consumer escrow, Defendants ‘recreate’ letters, insert data as they see fit, and fail to produce the entire HUD complaint form. This way, a consumer is left in the dark about the fraud that occurred to them,” the complaint states.

Lead plaintiff Kim Gorham says that when she sent a letter seeking information about her escrow account, she was informed that it had been “destroyed by a letter opener.”

After repeated requests, Gorham, who is blind, received her purported escrow analysis, but it was “100 percent illegible,” according to the complaint. The defendants knew that Gorham was legally blind, the complaint states.

She says that getting a “clear and concise” statement from the defendants has been an “impossible task.”

Countrywide routinely responded to customers’ requests for records by claiming they were “unavailable or destroyed,” according to the complaint.

The lawsuit alleges that the records were destroyed, “in an attempt to suppress damaging information.”

While not every lawsuit has merit, and a defendant should be presumed innocent, this certainly justifies a hearty, “Hoocoodanode?”

BoA will be paying for acquiring Countrywide for decades to come.

This is Not a Business Lunch

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So, after Mark Sanford “hiking the Appalachian Trail,” Joe Wilson heckling a presidential speech, and those Republican County Chairman going on about how good Jews are with watching their money, one wonders what other shoe will drop from the South Carolina Republican party to as they continue the program to help employment by making Stewart’s, Colbert’s, O’Brien’s, Letterman’s, and Leno’s Job easier.

Well, wait no more. There is Assistant Attorney General Roland Corning, who wages a war on the business lunch that makes the fictional “war on Christman” look like an arcade game.

It appears that Corning, age 66, was hanging out in his car at a graveyard with an 18 year old stripper, along with Viagra and sex toys, and when police officer Michael Wines showed up in a marked car, Corning, “attempted to make a hasty retreat, spinning the tires in the driveway and accelerating rapidly.”

It gets better. When finally apprehended, the police verify who he is by calling the Attorney General’s office, where his wife answers the phone, and then rats him out to the notifies Attorney General, who fires his flabby white ass.

The high point of the police report:

The search revealed a sex enhancement drug and some sex toys. According to the report, Corning told Wines he had a prescription for the medication and the other items were always in the car “just in case.“

(emphasis mine)

Just in case….Yeah sure….I always carry sex toys and Viagra in my car….Why do you think that they call them “Jumper Cables.”