We have another credit union failure, the 12th of the year, Greater Abyssinia Federal Credit Union, of Cleveland, OH.
It was closed on December 1.
So, now we have 12 credit union failures, and 8 bank failures.
Not sure why there have been more credit union closings that bank closings this year.
In the highway bill, congress has significantly reduced dividends paid by the Federal Reserve to banks:
Big banks will lose a portion of a multibillion-dollar government handout they’ve enjoyed for over 100 years, thanks to a compromise highway bill released Tuesday. One estimate pegged the loss to the banks at $8 billion to $9 billion over a 10-year time frame.
The bill, as it emerged from a House-Senate conference committee, pays for roads, bridges, and mass transit projects in part by reducing what is currently a 6 percent annual dividend on stock that the big banks buy to become members of the Federal Reserve system.
Fed membership offers many perks, from access to processing payments to cheap borrowing. But the dividend could be the sweetest gift, because banks cannot ever lose money on the stock; they’re even paid out if their regional Fed bank disbands.
Despite the total lack of risk, member banks have received the 6 percent dividend payout every year since 1913.
So for example, JPMorgan Chase, which has held stock since then, has made back its investment six times over without risking any loss. And if the bank stock was in place before 1942, that dividend payment is tax-free.
Originally — that is, 100 years ago — the Fed offered the dividend to entice banks into the new Federal Reserve system. But nationally chartered banks are today required by law to become members, and all banks must abide by the standards of membership. So the dividend is just a vestigial sweetener that never went away, pumping billions of dollars in public money to the banks for no discernible reason.………
Senate Majority Leader Mitch McConnell, seeing no better option, stuck a version of it in the Senate highway bill. The provision called for cutting the dividend from 6 percent to 1.5 percent, eliminating $17 billion in big-bank subsidy over a 10-year period. It passed.
The banks freaked out, aided by Fed Chair Janet Yellen, who warned of unnamed “unintended consequences.” Through a well-worn lobbying strategy, they managed to get the House of Representatives to remove the dividend cut and replace it with a raid on the Fed’s capital surplus account, which is used to cover losses on the balance sheet.
In other words, Yellen and the Fed quietly preferred flushing their own surplus account over denying banks their full entitlement.
But when the final bill was released Tuesday, the dividend reduction remained in there, albeit with some modifications.
The reduction now applies only to banks with over $10 billion in assets, compared to the $1 billion threshold in the original bill. Instead of cutting the dividend to 1.5 percent, the rate will now match the interest rate of the highest-yield 10-year Treasury note at the point that the dividend is due. For context, the high yield at the last Treasury auction was 2.304 percent.
There are, however, some more giveaways to the banksters in the bill, including an attempt to exempt even more mortgage lenders from Consumer Financial Protection Bureau oversight.
It appears that Germany had combed through the data that it has managed to obtain from various tax havens, and has turned over to Greece the names of over 10,000 tax cheats:
Germany has handed Athens the names of more than 10,000 of its citizens suspected of dodging taxes with holdings in Swiss banks.
The inventory, which details bank accounts worth €3.6bn – almost twice the last instalment of aid Athens secured from creditors earlier this week – was given to the Greek finance ministry in an effort to help the country raise tax revenues.
They could have done this at the beginning of the whole crisis, and done a lot more to help both the Greek people and the Euro Zone.
The Germans wanted their pound of flesh, though, so it’s taken 3 years for them to turn over this data.
The “health insurance industry” is not, following Veblen, an industry; unlike health care, it creates no value; it is wholly parasitic and should not exist. “One does not improve a tapeworm; one removes it.”
The same characterization could quite easily apply to many segments of the finance industry.
The private equity group Blackstone is now the largest private owner of real-estate in the world:
Blackstone has grown its size nearly four-fold since its 2007 IPO.
But the biggest private equity firm on Wall Street has seen even greater growth in its real estate division, which has expanded from a $17.7 billion business when Steve Schwarzman took his company public to one that today manages nearly $100 billion worth of property.
Steve Schwarzman is America’s landlord, now, and he’s not afraid to acknowledge it.
“We’re now, we believe, the largest owner of real estate in the world,” he told Business Insider in an interview at his company’s Park Avenue headquarters in midtown Manhattan.
“We have a performance record that is… pretty much in a league of our own, we’ve compounded [returns of] around 18% after fees. We’ve had almost no losses of any type.”
They went into real estate after the crash, which was the bottom of the market.
They have been making insane margins, which means insane risk, though they probably do not realize this,
Then this game of Jenga ends with a crash comes tumbling down, and it will, Blackstone will be too big to fail.
It’s already too big to fail.
And the rest of us are going to have to bail them out.
I missed the last Democratic debate, and what I think probably does not matter, I am not an undecided voter.
I will review it later.
That being said, what the pundits say does typically make a difference, so the OP/ED from the Times criticizing Hillary’s answers on her relationship with Wall Street is significant:
Hillary Clinton should have seen that Wall Street shot coming. Instead, she compounded the damage.
The former secretary of state was off to a sound outing in Saturday night’s debate against Senator Bernie Sanders of Vermont and former Gov. Martin O’Malley of Maryland. Friday’s terrorist attacks in Paris dominated at first, allowing her to highlight her superior experience in world affairs. But it was those attacks that made her badly muffed response to questions about her fealty to Wall Street all the more jarring. Here’s the exchange:Mr. Sanders: “I have never heard a candidate, never, who has received huge amounts of money from oil, from coal, from Wall Street, from the military-industrial complex, not one candidate say, oh, these campaign contributions will not influence me. I’m going to be independent. Well, why do they make millions of dollars of campaign contributions? They expect to get something. Everybody knows that. Once again, I am running a campaign differently than any other candidate. We are relying on small campaign donors, 750,000 of them, 30 bucks apiece. That’s who I’m indebted to.”
Mrs. Clinton: “Well John, [John Dickerson, the moderator] wait a minute. Wait a minute, he has basically used his answer to impugn my integrity. Let’s be frank here.”
Mr. Sanders: “No, I have not.”
Mrs. Clinton: “Oh, wait a minute, senator. You know, not only do I have hundreds of thousands of donors, most of them small. And I’m very proud that for the first time a majority of my donors are women, 60 percent. So, I represented New York, and I represented New York on 9/11 when we were attacked. Where were we attacked? We were attacked in downtown Manhattan where Wall Street is. I did spend a whole lot of time and effort helping them rebuild. That was good for New York. It was good for the economy and it was a way to rebuke the terrorists who had attacked our country.”………
Her effort to tug on Americans’ heartstrings instead of explaining her Wall Street ties — on a day that the scars of 9/11 were exposed anew — was at best botched rhetoric. At worst it was the type of cynical move that Mrs. Clinton would have condemned in Republicans.
She should make a fast, thorough effort to explain herself by providing a detailed plan for how she would promote measures protecting middle-class Americans from another financial crisis.
This has to be the lamest invocation of 911 for a bad policy since Bush invaded Iraq. (Which Hillary voted for, BTW)
Her attempts to don the mantle of anti-Wall Street populism are unconvincing, and this is something that her opponents should focus on with a laser like focus.
Neel Kashkeri, one of the mismanagers appointed by Hank Paulson to bail out the banksters, has been named to the presidency of the Minneapolis Federal Reserve:
Neel T. Kashkari, who oversaw the government’s bailout of the banking industry as a Treasury official in the George W. Bush and Obama administrations, was named the next president of the Federal Reserve Bank of Minneapolis on Tuesday.
Mr. Kashkari, 42, will succeed Narayana R. Kocherlakota in that post in January. He will also take Mr. Kocherlakota’s place as the youngest of the 17 members of the Fed’s policy-making committee, the Federal Open Market Committee.
“Mr. Kashkari is an influential leader whose combined experience in the public and private sectors makes him the ideal candidate to head the Minneapolis Fed,” MayKao Hang, a Minneapolis Fed board member who was co-chairwoman of the search committee, said in a statement.
Mr. Kashkari is the third person this year appointed to lead a regional reserve bank, and all three of the new presidents previously worked at Goldman Sachs. The Philadelphia Fed in March appointed Patrick Harker, a former Goldman trustee, as its new president. The Dallas Fed in August selected Robert S. Kaplan, a former Goldman vice chairman.
Mr. Kashkari will join a minority of Fed officials who do not have advanced degrees in economics, but he has expressed strong views on monetary policy.
In 2012, Mr. Kashkari criticized the Fed’s decision to start a second round of bond-buying.
“At the end of the day, this is not going to lead to real economic growth,” he told CNBC at the time. “Unfortunately, it likely leads to an inflationary outcome.”
He also has compared bond-buying to dosing the economy with morphine — “Makes u feel better but doesn’t cure,” he posted on Twitter in 2013 — and suggested that financial markets would resist weaning.
Those views suggest Mr. Kashkari will break with his predecessor. Mr. Kocherlakota began his term at the Minneapolis Fed as a vocal skeptic of the Fed’s ability to improve economic conditions but underwent a battlefield conversion and became a leading proponent of the Fed’s efforts. He is now the only Fed official pushing to expand its stimulus campaign.
So, he’s been wrong on everything, he f%$#ed up the bank bailout, and now he is President of the Minneapolis Fed.
And another Vampire Squid alumni gets to decide the winners and losers in our economy.
Paul Krugman also observes that Neel is supremely unqualified for anything resembling banking regulation or monetary policy as well:
So, if the Minneapolis Fed felt the need to maintain conservation of NK, they could have chosen to replace Narayana Kocherlakota with a New Keynesian. Instead, they chose Neel Kashkari. Brad DeLong isn’t happy, and this Twitter exchange suggests that he has good reason to worry.
I’ve written before about the all-too-common fallacy of confusing demand with supply, of arguing that because we had a bubble — so that some component of aggregate demand was unsustainable — the economy as a whole was somehow producing more than its potential. Let me just repeat what I said then:
………
In the words of Charlie Brown, AAUGH!
That word “artificially” is the real telltale, as is Kashkari’s description of Japanese monetary stimulus as “morphine.” It’s straight out of the liquidationist playbook, e.g. Hayek denouncing the use of “artificial stimulants” to fight the Great Depression.
So, great: we now have a liquidationist in a senior position in the Fed system.
She loves her some charter schools, even when they illegally exclude disabled students:
Good news! Democratic Presidential candidate Hillary Clinton just admitted there are significant problems with the nation’s charter schools!
Bad news! She has no interest in solving them! In fact, she thinks charters are just great.
Here’s Clinton criticizing charter schools:Most charter schools — I don’t want to say every one — but most charter schools, they don’t take the hardest-to-teach kids, or, if they do, they don’t keep them. And so the public schools are often in a no-win situation, because they do, thankfully, take everybody, and then they don’t get the resources or the help and support that they need to be able to take care of every child’s education.
………
In short, most charter schools stink. Clinton admits we have a problem. But how do we solve it?
Clinton:I have for many years now, about 30 years, supported the idea of charter schools, but not as a substitute for the public schools, but as a supplement for the public schools. And what I have worked on through my work with the Children’s Defense Fund and my work on education in Arkansas and through my time as first lady and senator is to continue to say charter schools can have a purpose, but you know there are good charter schools and there are bad charter schools, just like there are good public schools and bad public schools.
So I want parents to be able to exercise choice within the public school system — not outside of it — but within it because I am still a firm believer that the public school system is one of the real pillars of our democracy and it is a path for opportunity. …the original idea… behind charter schools was to learn what worked and then apply them in the public schools.So Clinton’s solution to the charter school crisis is what exactly? She seems to be saying that charter schools have major problems, but the best way to fix them is to redouble our belief in this flawed and failing system.
Sanders has been dubious of charters, though he has not explicitly opposed them, and while Governor of Maryland, has presided over one of the most tightly regulated systems for charter schools in the nation.
Hillary, on the other hand, is big into Charters, which is not surprising, given that Wall Street is got its larcenous hooks well and fully into the whole process.
This hearkens back to the Borgia Papacy.
We now have allegations that Vatican official took bribes to move “facilitate” cannonization:
There is nothing like a good old Vatican scandal to bring Rome to its knees.
Never mind that the city government is already in complete shambles on the eve of the Vatican’s Holy Jubilee, which could double the many millions of visitors to the Eternal City over the next year. No, instead of finalizing preparations for what should be a feather in the pope’s mitre, the Vatican is bracing itself for the release on Thursday of two books that seek to expose the sinister side of everything from saint-making to the very sanctity of the Holy See.
………
The most damning of the two is Merchants in the Temple—to be released as Via Crucis in Italian on Thursday and in English a week later—by Gianluigi Nuzzi, the journalist who was the recipient of the butler’s stolen files, which Nuzzi published in his best-selling 2012 book, His Holiness. In his new book, he focuses on Francis and finance, all the while weaving an intricate story between the popular pontiff’s promises and what Nuzzi tries to prove are his failings. Along the way, he also reveals through stolen documents, hidden taped conversations, and meeting minutes just who he believes Francis really is.
“The Pope, so sweet and affable in public appearances, but steadfast and firm before his closest collaborators,” Nuzzi writes. “Francis of the big smiles and kind words shows himself to be absolute in his goals and intolerant of the Curia’s ‘human ambition to power.’”
………
But among the biggest scams the Vatican elite apparently make money from is the high price of sinister saint-making, which runs those trying to push their saintly cause even to be considered around €50,000 to cover the costs of the expert theologians, physicians, and bishops who examine the cause. The process of saint-making also involves postulators, or those in charge of pushing the causes forward.
When the special commission in charge of cleaning up the Vatican’s finances found out that there were essentially no records at all of where donations for the causes of saints went, they froze the accounts of almost everyone involved in the holy work of choosing saints, including a postulator, who had more than €1 million spread out among three Vatican bank accounts. No wrongdoing was determined, and the postulator was left to enjoy his tax-free haven, but apparently no accounting has yet been produced.
………
Any profits from donations meant to lift up would-be saints are supposed to go to the Fund for the Causes of the Poor, but that fund remained stagnant despite several banner years in saint-making revenue, writes Nuzzi, who recalls that Pope John Paul II alone beatified 1,338 blesseds in 147 rites and 482 saints in 51 celebrations. “This raised the Commission’s suspicions,” he writes. “No documents. No justification and bookkeeping for an activity involving tens of millions of euros. Yet these are huge sums of money for which Vatican regulations demand proper bookkeeping.”
It’s clear that the current Pontiff is trying to unravel this ball of yarn, but he is fighting 1000 years of how business has been done, though my guess is that the whole sainthood thing is largely an artifact of John Paul II, who made more saints during his reign than every other Pope combined.
I think that it is going to be very difficult for Francis to deal with this.
The Vatican is bigger than any pope.
A high frequency trader has been convicted of stock fraud for spoofing:
Panther Energy trader Michael Coscia has been found guilty in a high-profile market-manipulation trial in Chicago.
His crime? Spoofing.
It’s a funny-sounding term for the practice of making and cancelling bets in a way that can push prices around.
It’s what alleged “Flash Crash” trader Navinder Singh Sarao was accused of earlier this year.
Spoofing investigations have actually become quite a trend at the Justice Department, the Securities and Exchange Commission, and other regulators.
But Coscia is the first person to be found guilty of spoofing since it was forbidden under the 2010 Dodd-Frank Act, and his conviction shows that a key defense against the charge may not be effective.
Coscia was indicted last year and charged with multiple counts of commodities fraud and spoofing. Prosecutors say the Chicago-based high-frequency commodities trader defrauded the market to make some $1.6 million in illegal profits.
His lawyers tried to prove that the anti-spoofing law is “hopelessly vague, and its criminal enforcement would violate Michael Coscia’s right to due process of law.”
They didn’t succeed.
………
The tactic was outlawed in the 2010 Dodd-Frank regulation, but, as with other forms of fraud, it’s hard to prove the trader’s intent — in this case, the intent to cancel the order. Prosecutors must prove the trader didn’t change his or her mind for legitimate reasons after placing the trade.
High-frequency-trading technology has made it even easier than before.
“They are truly done in the blink of an eye, and it’s designed to take advantage of the algorithms that look for price disparities in the market,” said Henning. “Spoofing is signaling. I put in a small order and then a real big one, and I’m hoping the big one attracts you, and then you’ll throw my small one. And then I just dump the big one.”
Spoofing is when a trader puts in an order for a massive trade, and then they bet on the other side of the market move that it generates, and then they cancel the bid, making a small profit. ……… over ……… and over ……… and over again.
One does wonder why it has taken them 5 years to actually convict someone under the “new” law.
My guess is that the fact that Eric “Place” Holder is no longer attorney general might have something to do with the five years of inaction.
It appears that a Goldman Sachs funded charter school program cheated to get bonuses for so-called success:
It was, in the vernacular of corporate America, a win-win: a bond that paid for preschool for underprivileged children in Utah while also making money for investors.
Goldman Sachs announced last month that its investment in a Utah preschool program had helped 109 “at-risk” kindergartners avoid special education. The investment also resulted in a $260,000 payout for the Wall Street firm, the first of many payments that is expected from the investment.
Gov. Gary R. Herbert of Utah hailed the program as a model for a new way of financing public projects. Such so-called social impact bonds are a new kind of public-private partnership, promising financing from Wall Street and imposing a goal on local governments.
Yet since the Utah results were disclosed, questions have emerged about whether the program achieved the success that was claimed. Nine early-education experts who reviewed the program for The New York Times quickly identified a number of irregularities in how the program’s success was measured, which seem to have led Goldman and the state to significantly overstate the effect that the investment had achieved in helping young children avoid special education.
Goldman said its investment had helped almost 99 percent of the Utah children it was tracking avoid special education in kindergarten. The bank received a payment for each of those children.
The big problem, researchers say, is that even well-funded preschool programs — and the Utah program was not well funded — have been found to reduce the number of students needing special education by, at most, 50 percent. Most programs yield a reduction of closer to 10 or 20 percent.
The program’s unusual success — and the payments to Goldman that were in direct proportion to that success — were based on what researchers say was a faulty assumption that many of the children in the program would have needed special education without the preschool, despite there being little evidence or previous research to indicate that this was the case.
When one takes a a central government function, like education, and hands it to Corporate America, corruption invariably results, whether it is military contractors, intelligence outsourced to private firms, or new House Speaker Paul Ryan.
The 11th credit union of the year got closed last week, when the Helping Other People Excel Federal Credit Union was closed on September 16.
BTW, I think that I’ve figured out why more credit unions have failed this year than commercial banks.
Many of these credit unions are tiny by the standards of commercial banks, the money quote from the above link is, describes the institution as, “A federally insured credit union with 96 members and assets of $290,927.”
At those sizes, one bad house loan can take the institution down.
Hell, a bad car loan can take down the institution for a somewhat expensive car.
When juxtaposed with a structure that tends to mitigate against mergers, it means that there will simply be a lot more institutions.
With commercial banks, you’ve seen a lot of M&A activity, meaning that there are far fewer banks, with remaining institutions less vulnerable to the failure of an individual customer.
In a Greenspanesque attempt to rehabilitate his reputation, Ben Bernanke is now saying that we should have jailed more (really any) bankers following the financial meltdown:
………
With publication of his memoir, The Courage to Act, on Tuesday by W.W. Norton & Co., Bernanke has some thoughts about what went right and what went wrong. For one thing, he says that more corporate executives should have gone to jail for their misdeeds. The Justice Department and other law-enforcement agencies focused on indicting or threatening to indict financial firms, he notes, “but it would have been my preference to have more investigation of individual action, since obviously everything what went wrong or was illegal was done by some individual, not by an abstract firm.”
If he had said this in 2009, maybe some of the big name banksters would have seen the inside of a prison cell, and maybe the industry, and the Congress, would have made meaningful reforms to prevent a repeat of the orgy of fraud and greed that led to the last meltdown.
Too late, dude.
The Deputy Governor of the People’s Bank of China, their central bank, is calling for the the imposition of a financial transactions tax:
China should take measures, such as the so-called Tobin tax, to deter currency speculators, according to central bank Deputy Governor Yi Gang.
The steps could include a punitive levy on foreign-exchange trades and the imposition of “handling” fees to counter short-term capital flows aiming for arbitrage, Yi wrote in an article in China Finance magazine, a People’s Bank of China publication. He is revisiting the Tobin tax idea after mentioning it more than a year ago.
His comments suggest the PBOC take greater control of the currency at a time when China is looking to satisfy the International Monetary Fund’s condition that the yuan be more freely usable before it can be admitted into the agency’s Special Drawing Rights basket. While the nation is opening up the interbank bond and currency markets to foreign central banks, it has introduced measures against bets on yuan declines after a surprise devaluation in August triggered the biggest monthly slide since 1994.
Nobel Laureate economist James Tobin first proposed the levy in 1972 after U.S. President Richard Nixon’s decision to abandon the dollar’s peg with gold pushed up global volatility. The tax has in the past been rejected by economies from Europe to South Korea because of the risk investors will simply take their business elsewhere.
That last bit is false, of course.
The British financial center, the City of London, has been a major financial center even though it has a ½% transaction tax.
This suggestion is largely a statement of self interest: China is experiencing, or will soon experience, a downturn, and when that happens they would be whipsawed by destructive capital flows.
Setting this up before a panic would be beneficial.
Setting this up now and forever, on all financial transactions to discourage unproductive speculation would be a very good thing.
Barack Obama’s educational privatizer in chief, Arne Duncan, has announced that he is stepping down at the end of the year:
U.S. Education Secretary Arne Duncan plans to step down from his Cabinet position by the end of the year, leaving the Obama administration more than a year before the president’s term will end.
“He’s done more to bring our educational system, sometimes kicking and screaming, into the 21st century than anyone else,” President Obama said as he announced Duncan’s resignation at the White House on Friday afternoon. “America will be better off for what he has done.”
OK, as is made clear by Obama’s statements, the Cossacks work for the Czar.
As anti-public education and anti-teacher as he has been, it is clear that he has been executing a pro-Wall Street, anti-Teacher, and anti-Student* agenda at Obama’s behest.
Still, I am sure that he will get a 7 figure jackpot at the end of the rainbow.
*As I have asked many times, “Is there anything that big finance can’t make destructive and evil?”†
†If the goal is to involve Wall Street in a public service, the effect will harm that service. QED.
And here they are, ordered, and numbered for the year so far.
First Activity in 2½ month. I’m not sure if it means anything, but when juxtaposed with recent anemic job growth, it’s another marker that our already anemic recovery is slowing down.
So, here is the graph pr0n with last few years numbers for comparison (FDIC only):
In an insider trading scandal, a judge has ruled that prosecutors cannot force suspects to unlock their phones.
Basically, he said that the prosecution was asking for it “Just Because”, and that was not sufficient reason:
The Fifth Amendment right against compelled self-incrimination would be breached if two insider trading suspects were forced to turn over the passcodes of their locked mobile phones to the Securities and Exchange Commission, a federal judge ruled Wednesday.
“We find, as the SEC is not seeking business records but Defendants’ personal thought processes, Defendants may properly invoke their Fifth Amendment right,” US District Judge Mark Kearney of Pennsylvania wrote.
………
In the latest case, the SEC is investigating two former Capital One data analysts who allegedly used insider information associated with their jobs to trade stocks—in this case, a $150,000 investment allegedly turned into $2.8 million. Regulators suspect the mobile devices are holding evidence of insider trading and demanded that the two turn over their passcodes.
The defendants balked at supplying their passcodes, saying the Fifth Amendment protected them. The judge agreed and said that the government was going on a fishing expedition:Here, the SEC proffers no evidence rising to a “reasonable particularity” any of the documents it alleges reside in the passcode protected phones. Instead, it argues only possession of the smartphones and Defendants were the sole users and possessors of their respective work-issued smartphones. SEC does not show the “existence” of any requested documents actually existing on the smartphones. Merely possessing the smartphones is insufficient if the SEC cannot show what is actually on the device.
The prosecution is not looking for evidence here.
What they are looking for is statements that impeach the defendants, and force them to cut a plea deal.
They want to find texts where these guys call their clients morons, or some such, knowing that they can then present this to a jury in order to make the jury hostile to their defense.
I wholeheartedly approve of this ruling.
And here they are, ordered, and numbered for the year so far.
Here is the Full NCUA list.
So, another Credit Union.
I am not sure why, even as bank failures continue to fall, credit unions are on a pace to exceed last year.
Admittedly, the sample size is small, but this is atypical.
Martin Shkreli, the hedge fund pharma executive who generated outrage when he bought a drug for rare diseases and boosted its price by over 5555%, has backed down after he got called out by the New York Times:
“Yes it is absolutely a reaction — there were mistakes made with respect to helping people understand why we took this action, I think that it makes sense to lower the price in response to the anger that was felt by people,” Shkreli, 32, said.
Turing Pharmaceuticals of New York bought the drug from Impax Laboratories in August for $55 million and raised the price. Shkreli said Tuesday the price would be lowered to allow the company to break even or make a smaller profit.
Daraprim fights toxoplasmosis. The infection is particularly dangerous for people who have weakened immune systems, like AIDS patients, as well as for pregnant women, according to the Centers for Disease Control and Prevention.
………
Democratic presidential candidate Hillary Clinton was among those who expressed outrage over the price increase. On Tuesday she outlined a plan she said would limit how much patients have to pay out of pocket for medications each month.
As I noted last night, after Glaxo Smith Kline sold the drug market rights and before Shkreli bought the drug, the price was raised by 1350%, from $1.00 to $13.50 a pill, but since it wasn’t going from $13.50 to $750.00 a pill, nobody batted an eyelash.
Notwithstanding the protestations of contemptible greedheads like Martin Shkreli, generating unearned profits through financial engineering and exploitation of monopoly power benefits no one but contemptible greedheads like Martin Shkreli.
You know the story, hedge fund puke buys a pharmaceutical firm, takes an out of patent drug that costs a few bucks, changes the distribution method to make analysis by potential competitors more difficult, and then raise the price by 5555%: (No, this is not a decimal place error)
Specialists in infectious disease are protesting a gigantic overnight increase in the price of a 62-year-old drug that is the standard of care for treating a life-threatening parasitic infection.
The drug, called Daraprim, was acquired in August by Turing Pharmaceuticals, a start-up run by a former hedge fund manager. Turing immediately raised the price to $750 a tablet from $13.50, bringing the annual cost of treatment for some patients to hundreds of thousands of dollars.
“What is it that they are doing differently that has led to this dramatic increase?” said Dr. Judith Aberg, the chief of the division of infectious diseases at the Icahn School of Medicine at Mount Sinai. She said the price increase could force hospitals to use “alternative therapies that may not have the same efficacy.”
………
The Infectious Diseases Society of America and the HIV Medicine Association sent a joint letter to Turing earlier this month calling the price increase for Daraprim “unjustifiable for the medically vulnerable patient population” and “unsustainable for the health care system.” An organization representing the directors of state AIDS programs has also been looking into the price increase, according to doctors and patient advocates.
Daraprim, known generically as pyrimethamine, is used mainly to treat toxoplasmosis, a parasite infection that can cause serious or even life-threatening problems for babies born to women who become infected during pregnancy, and also for people with compromised immune systems, like AIDS patients and certain cancer patients.
………
This is not the first time the 32-year-old Mr. Shkreli, who has a reputation for both brilliance and brashness, has been the center of controversy. He started MSMB Capital, a hedge fund company, in his 20s and drew attention for urging the Food and Drug Administration not to approve certain drugs made by companies whose stock he was shorting.
In 2011, Mr. Shkreli started Retrophin, which also acquired old neglected drugs and sharply raised their prices. Retrophin’s board fired Mr. Shkreli a year ago. Last month, it filed a complaint in Federal District Court in Manhattan, accusing him of using Retrophin as a personal piggy bank to pay back angry investors in his hedge fund.
………
With the price now high, other companies could conceivably make generic copies, since patents have long expired. One factor that could discourage that option is that Daraprim’s distribution is now tightly controlled, making it harder for generic companies to get the samples they need for the required testing.
The switch from drugstores to controlled distribution was made in June by Impax, not by Turing. Still, controlled distribution was a strategy Mr. Shkreli talked about at his previous company as a way to thwart generics.
………
Dr. Aberg of Mount Sinai said some hospitals will now find Daraprim too expensive to keep in stock, possibly resulting in treatment delays. She said that Mount Sinai was continuing to use the drug, but each use now required a special review.
“This seems to be all profit-driven for somebody,” Dr. Aberg said, “and I just think it’s a very dangerous process.”
You can read the details of his looting the last firm he ran here.
I would note that Mr Shkreli is not alone in this behavior: When Glaxo Smith Kline sold the marketing rights to the drug to CorePharma, the price of the drug was $1 a pill,
Is there anything that big finance can’t make destructive and evil?
